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Customers Not Responsible For Xcel’s SmartGridCity Cost Overruns

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So ruled a judge yesterday, with which I agree.

I was very excited when Xcel first announced their SmartGridCity plans back in 2008Work on the project started shortly thereafter.  It quickly became apparent to me that something was amiss: their flagship project was woefully under-reported.  The project, by generous description, was mismanaged almost from the start.

A quick description of the project: Xcel Energy planned to hook up residential, commercial, and industrial properties in Boulder, CO to new technologies so that the utility could more easily see which parts of the grid were performing well or poorly and so customers had real-time access to their energy usage.  The latter feature was particularly intriguing to me since I’m a data junkie.  I look at my solar PV system’s website constantly to see how much energy its generating.  I would do backflips of joy if I had access to energy consumption by my appliances and outlets.

The initial cost of the project was reported to be $15 million, although Xcel said that collectively with its partners, $100 million might be spent to lay the infrastructure and get everything working.  Xcel’s publicly stated plan was to install digital meters in 15,000 homes Aug. 1 2008 and approximately 50,000 meters by year’s end.  Xcel targeted 1,850 installations of in-home energy devices.  They told Boulder’s mayor that they would not seek payment for customers for their grand experiment.  Their overall plan?  To revolutionize how power was monitored and controlled by stakeholders.  That’s about where the good news ends.

Due to the Great Recession as well as overall mismanagement, costs tripled: $44.5 million was the final price tag.  Xcel had a good idea a few months after their original announcement that costs would approximately double, but did not inform either the Public Utilities Commission (PUC) or the public.  As usually happens when a corporation has an epic fail, the customer was held financially responsible.  Xcel filed rate increase requests with the PUC that increased over time as they sought more and more money from all its ratepayers.  Customers throughout Xcel’s service region (not just Boulder customers) have already paid $27.9 million!

For what did ratepayers actually pay?  Today, only 23,000 meters are hooked up.  Customer’s with the meters can view 15-minute energy data, not up-to-the-minute data.  Only 101 homes have in-home energy devices (5.5% of the original number).  So fewer than half the original number of smart meters  and 5% of in-home energy devices were installed.  The service delivered does not match the service promised when the project was first proposed.  For all this, Xcel wants 3X the money they initially requested.

Which brings us to the judge’s decision.  In November 2008, Xcel filed a $15.3 million SmartGridCity (SGC) request with the PUC.  In May 2009, they re-filed for $27.3 million with the PUC for SGC.  In July 2009, they re-filed for $42 million.  Xcel included $44.5 million in a 2010 general rate increase, which the city of Boulder and the Colorado Office of Consumer Counsel challenged.  In January 2011, the PUC approved SGC and allowed Xcel to collect $27.9 million for the project (more than the 1st re-filing and almost 2X the original filing).  In December 2011, Xcel filed to collect the remaining $16.6 million.  Yesterday, the judge ruled that “The lack of information provided here regarding customer-facing benefits or justification of the cost overruns fails to meet the Company’s burden of proof.”  The PUC will consider the judge’s ruling at a future meeting, which means that customers still might have to pay for this folly of an experiment.

I could make a dozen analogies why I think this situation is so bad.  Suffice to say corporate experiments should not be paid for by customers, especially when the corporation hasn’t acted in good faith.  Moreover, I challenge anyone to find the local libertarians who take up space in the media railing against Xcel for this money grab.  They’ll complain long and loud about the Transportation District and its decisions regarding expansion of light rail across the Denver metro area.  Due to rising commodity prices and mismanagement, an entire line could be delayed until 2042 while every other line is built out by 2019 and some lines receive luxury stops because District personnel live by them.  There is a big difference, however, in a public agency issuing transit projections based on revenue projections which turned out to be more optimistic because they didn’t forsee the Great Recession and a corporation hiding ballooning costs from a public regulatory agency.  But while RTD is a governmental entity, Xcel is a corporate entity.  In these so-called libertarains’ minds, government can do little good while corporations can do little harm.  Hence, the only commentary on the topic was 3 paragraphs from Vincent Carroll back in August: “SmartGridCity delivered less consumer benefit than originally advertised. More to the point, however, it cost way more than Xcel estimated. Surely this sort of major miscalculation should cost Xcel more than a little bad publicity.”  That’s the same Carroll who has had plenty to say about FasTracks and little of it useful for discussion.

The PUC needs to tell Xcel to eat the costs because Xcel severely mismanaged their project.  Ratepayers already are responsible for twice the originally quoted amount.  Xcel should revamp their smart grid strategy.  The smart grid will be a valuable tool for higher energy awareness in the future.  Other utilities are implementing smaller but more reasonable portions of their smart grids.  A lesson a supervisor hammered into me years ago is apt: don’t go out and design the Cadillac version of something on your first try.  With all the mistakes that will occur with a ground-breaking venture, design something basic but solid first, from which you can add bells and whistles later.



One thought on “Customers Not Responsible For Xcel’s SmartGridCity Cost Overruns

  1. Pingback: CO Public Utilities Commission Rejects Xcel Energy’s Bid To Collect Remaining $16.6 Million in SmartGridCity Costs | Weatherdem's Weblog

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