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January 21, 2013

Court Rejects Xcel Bid to Recoup $16.6 Million for Boulder's 'SmartGridCity'



What was supposed to be a demonstration smart grid-enabled city in Colorado instead has turned into a model of cost over-runs, customer outrage, and ongoing litigation. In the latest development in the continuing public battle, on January 18, an administrative judge rejected a request from Xcel Energy to recover $16.6 million from the company’s SmartGridCity project in Boulder by charging Colorado ratepayers.

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Xcel Energy Inc. is a public utility company based in Minneapolis, Minnesota, serving more than 3.3 million electric customers and 1.8 million natural gas customers in eight states: Colorado, Michigan, Minnesota, New Mexico, North Dakota, South Dakota, Texas, and Wisconsin. Primary services are electricity and natural gas. Operating companies include Northern States Power Company, Public Service Company of Colorado and Southwestern Public Service Co.

In 2007, Boulder entered into an agreement with Xcel to enable the city to become the world’s first “smart city.” As part of the plan, the city and its ratepayers would receive a digital, high-speed broadband communication system; upgraded substations, feeders and transformers; smart meters; and in-home smart devices like wireless, two-way thermostats and smart plugs, as well as EV charging capability.

Initially, Xcel organized a consortium of partners that would share the financial the burden of the initiative, which was projected to cost a total of $100 million. At that time, the utility projected that its share of the tab would be about $15.3 million.

During the summer of 2008, after a great deal of rushed work, crews completed installation of much of the system so that they were able to unveil the “first SmartGridCity home” in time for the second day of the Democratic National Convention. The home included “integrated software, solar panels and an electric-car charger” and gave tours to media organizations like ABC’s Good Morning America.

About 23,000 automated smart electric meters were installed in Boulder as part of a new era in electricity grid management. However, as 2009 approached, some of Xcel’s partners began to back away from the project, shifting more and more of the costs onto Xcel itself.In April 2009, the board of Xcel set projected that the utility’s cost for the initiative had increased to $27.3 million. In May 2009, Xcel filed for a $132.5 million rate increase for Colorado that included $27 million allocated for SmartGridCity—generating outrage in the community.

 In addition, the utility shifted $16.6 million in SmartGridCity-related software costs from its Minneapolis headquarters office to the Colorado budget. The revised costs of the project had ballooned to $45.8 million.

In 2011, regulators approved $27.9 million in cost recovery for Xcel and its local subsidiary, Public Service of Colorado on the project—but withheld the extra $16.6 million, on grounds that Xcel had not sufficiently demonstrated that the project was complete and its value demonstrated.

After several rounds of argument, the utility’s case was rejected last week. According to Associated Press (News - Alert), the case now goes back to the Colorado Public Utilities Commission to make the final decision. Xcel officials say they may renew their request.

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Edited by Brooke Neuman
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