Arguing that SmartGridCity now is a fully installed, integral part of the power distribution system in Boulder —and that the total $44.5 million in project costs “were prudently incurred”—Denver-based Xcel Energy Services Inc. filed documents on December 14 with the Public Utilities Commission of the State of Colorado for cost recovery on the project of an additional $16.6 million.

In February, the commission withheld compensation of the funds in question, on the basis that there still were “unfinished aspects" of the project and that the value of SmartGridCity “to ratepayers who are footing the bill” had yet to be documented in a satisfactory manner.

Xcel's filings include testimony by many of the utility’s employees, as well as a third-party vendor in support of the cost recovery. The vendor, MetaVu Inc., a leading sustainability and environmental performance consulting firm, also based in Denver, delivered to a 123-page report in October, SmartGridCity Demonstration Project Evaluation Summary, which currently is on file with the Public Utilities Commission.

Launched in December 2007, SmartGridCity is a technology demonstration pilot in Boulder, Colorado, which was intended to enable Xcel Energy “to explore smart-grid tools in a real-world setting.”

By 2009 Xcel Energy had installed sensing and communications equipment to monitor the Boulder distribution grid, covering over 45,000 homes. To date, more than 20 disparate software applications and 95 new data integration interfaces have been commissioned in support of SmartGridCity, along with 4,500 grid condition sensors and 24,000 smart meters.

However, by 2010, costs had tripled over the original budget for the program, driven by expenses involved in laying fiber-optic cable to 23,000 homes and for software, according to the company filing with the commission. Indeed, by  August 2010, David Eves, president and CEO of Xcel Energy’s Public Service Co. of Colorado told The Denver Post that the smart-grid experiment would” not be repeated or expanded,” adding, “We would not do that again over the whole service area."

However, Eves pointed out that SmartGridCity was a first-of-its-kind experiment that is already producing benefits in managing blackouts, voltage surges, and maintenance. What’s more, the utility still maintains that its investment will reap actionable data for years, helping to determine:

• Which energy-management and conservation tools customers want and prefer;
• Which technologies are the most effective at improving power delivery;
• How best to incorporate smart-grid technology into a utility’s business operations to improve efficiency, reduce carbon emissions, and modernize the energy delivery system; and
• How to roll out the most promising smart-grid components on a wider scale.

Adding to the controversy, Xcel attempted to work with the Colorado Public Utility Commission on a proposed rate increase to recover the costs, but the City of Boulder withdrew its initial support for this bid, saying it could not reach a “clear consensus” on the value of the project. In summer 2010, Boulder's city council voted against renewing a 20-year franchise agreement with Xcel Energy.

What’s more,  two major groups came out in opposition to funding  —one saying that Xcel should receive no capital above the amount originally requested, and one saying that the utility should receive no reimbursement at all.

The Office of Consumer Counsel said Xcel should be able to get $27.9 million — the amount the company said in 2009 would cover the cost. The Arapahope Community Team, a nonprofit public-interest group, opposed any cost recovery, opining that the pilot program is a research-and-development project that should be funded by shareholders, not customers.

Last month, Boulder voters approved two measures that could lead to the creation of a municipally owned electric utility. Boulder's city manager, Jane Brautigam told Electric Light & Power the vote does not automatically mean municipalization, adding that a final decision is still as far off as a half decade into the future.

Xcel Energy said that the vote is merely one step in a long process, adding that Boulder might not be able to meet the rate parity measures mentioned in the ballot initiative's language. Before a municipal utility can be arranged, rate parity is one condition that must be satisfied to protect consumers from price fluctuations, according to Xcel.

"We remain skeptical that Boulder will be able to meet the terms of the initiative and match our rates, let alone match the level of renewables we provide," the utility said in a released statement.

What will the outcome be? Most likely, the commission and the utility will have to take their cases before the Federal Energy Regulatory Commission to determine who is responsible for the money spent so far. Boulder and Xcel reportedly already have submitted their findings to FERC.