In an order that took many by surprise, the Colorado Public Utilities Commission slashed $14.8 million in cost recovery from the Public Service Company of Colorado’s (“PSC”) smart grid pilot. PSC is a subsidiary of the trailblazer Xcel Energy. This reduction is in spite of a settlement where parties agreed to, and ALJ G. Harris Adams recommended approval of, a recovery of $44.5 million for the much-heralded pilot project called “SmartGridCity” (SGC) in Boulder, Colorado.  

In its written decision issued last week, the Commission signaled its unease over the lack of a detailed, strategic plan for the use of SGC investment and whether the projected benefits would be actualized. However, the $14.8 million is not completely lost. PSC can recover the costs upon demonstrating “the credible promise of consumer and utility benefits” and “the ability of customers to make practical use of SGC on their side of the meter through in-home devices.” 

The SGC, which began in 2008 for 24,000 customers and includes plugs for electric vehicles, smart substations and feeder automation enabled by fiber-optic broadband internet, was projected to cost Colorado ratepayers $15.3 million. But the cost shot up to $27.9 million in early 2009, and by 2010 when the estimate nearly tripled to $44.5 million, public criticism mounted quickly and loudly.

Xcel and the Colorado Governor’s Energy Office note that SmartGridCity has already produced clear benefits, such as preventing outages, but many of those benefits have yet to be assigned dollar figures.

Triple cost-overruns would raise eyebrows in any business venture. But in grasping this cost-mismanagement episode, one should take into account the pioneering nature of this pilot project. Industry analysts note that a key goal of this pilot project is acquiring knowledge for future applications, not just guaranteed savings. 

“It’s going to be easier for other people to do cost-benefit analyses because of the data [PSC] gathered,” – Katherine Hamilton, GridWise Alliance

When you consider that the project began before smart grid initiatives became a national priority, I wonder whether Xcel should be given some slack for being a Smart Grid pioneer.