Smart Grid City Prudence is a Cruel Mistress

It all started so innocently.  Let’s make a big splash on our smart grid initiatives by using Boulder, Colorado as a showcase for smart meter installation.  Boulder will love it—it’s so-o-o green!

So Xcel Energy issues its press releases and got politicians and activists involved.  It’s the Boulder way, you know.  It fast tracked the efforts and cut a few corners.  Everything was going so well—until. . .

Smart Grid City Costs went up—and up—and up some more nearly tripling to $44.8 million from its original $15.3 million.  Since Xcel speeded up the project by going outside its usual and customary budget process it also did not conduct the ‘red flag’ reviews of costs increases for the project. And it did not go back to the Colorado Public Utilities Commission, as a result, to get a certificate of public convenience and necessity.  That’s the regulatory equivalent of a building permit to construct Smart Grid City.

So when the cost increases started hitting the fan, Xcel Energy found itself hanging out in Boulder and hanging out at the Colorado PUC.[1] The Colorado Commission launched a formal prudence review of the Smart Grid City certificate of public convenience and necessity.[2] The beatings and torment continue to this day designed to assure that the public does not blame either city officials or state regulators for Xcel’s cost overrun sins.

Why?

Because electric rates are going up and everyone knows it.

Xcel added gasoline to the Smart Grid City fire by filing a rate increase with the Commission which only added to ratepayer anger.  Its proposed tiered rate structure—similar to the one used here in California for years—begins a steady process of encouraging energy efficiency and demand response by raising the price signals for customers as their usage levels increase.

It is exactly the kind of green energy policies Boulder should love, except, it’s happening to them.  Not only does smart grid cost more, so does all that renewable energy, and the phasing out of coal to reduce emissions that will cost more too.

Holy Boulderado!

Recently, the formal prudence review of Smart Grid City at the Colorado PUC took another step forward with the release of the financial analyst’s testimony in the proceeding. The state analyst said in his testimony that it was uncertain whether costs for Smart Grid City would continue to grow, but he recommended that the Commission approve the CCN nonetheless.  Without such approval Xcel Energy will be forced to refund to customers any amounts charged to them for the project to date with interest.

So what?

No good deed goes unpunished—the old proverb tells us.  And so it will be with Xcel Energy.

Smart Grid City is a very solid demonstration project that turned out to cost more—a lot more—for the fiber optic cable needed to make it work.  The good news is that Xcel did this as a small scale demo instead of rolling out the plan system wide.  The bad news is that in cutting corners and not getting its CCN and budget approved in advance by the Commission and taking its lumps as the costs increased, Xcel will be embarrassed and subjected to regulatory lashes until the project is completed.

This is the price Xcel Energy will pay for embarrassing state utility regulators. It will not be life threatening for the utility, but the lesson will be learned and the scars on the utility’s backside will leave a lasting impression.


[1] http://www.dailycamera.com/news/ci_15594606

[2] https://www.dora.state.co.us/pls/efi/efi_p2_v2_demo.show_document?p_dms_document_id=39795

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One thought on “Smart Grid City Prudence is a Cruel Mistress

  1. According to public testimony submitted to the CPUC non-fiber related IT was $16.7M of the $29.4M increase. $13.5M of that was just software purchase and integration. Why are we blaming fiber? Over 50% of this increase was because of poor IT project management. Classic stuff. I think the fiber is a not such a bad thing. Much less bad than poor partner coordination and requirements planning.

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