Smart Grid Costs Continue to Skyrocket

Latest rate increase charges all Colo. customers for Boulder’s grid

By Laura Snider Camera Staff Writer

Xcel Energy has begun charging customers across the state to recoup some of the skyrocketing costs the company has incurred building its smart grid project in Boulder.

In response, the Colorado Public Utilities Commission has decided to take a larger role in regulating Xcel’s “SmartGridCity,” which commissioners say will increase the transparency of the project.

The smart grid already allows Xcel to read meters in Boulder remotely, route power around bottle-necked lines and detect power outages without relying on people calling in. Ultimately, the finished system will also allow customers to see real-time data reflecting their energy use and then make energy-conserving decisions about how household appliances draw power and when.

When Boulder was chosen for the smart grid project in March 2008, Xcel Energy projected that capital expenditures for the SmartGridCity would be about $15.3 million. By May 2009, Xcel had changed its projected cost to $27.9 million, and now the company believes the total bill will reach $42.1 million, not including the costs of operating and maintaining the new grid.

A large part of the increased price tag is associated with the unanticipated difficulty of constructing the system’s fiber network.

“The company had to install far more underground fiber than initially projected, substantially increasing the cost …” Xcel officials wrote in a document filed with the utilities commission last May. “We also ran into unexpected construction conditions such as having to drill through granite with diamond-tipped drill bits and remove large boulders with cranes and dump trucks … .”

On Dec. 4, the Public Utilities Commission approved Xcel Energy’s request to raise customers’ rates 6.5 percent. The majority of the increase will be used to pay for Comanche 3, Xcel’s new coal-fired unit at its power plant outside of Pueblo.

But $11 million from the rate increase — which went into effect Jan. 1 — is earmarked to cover costs associated with Boulder’s smart grid, including capital investment, taxes and operation and maintenance fees for 2009 and 2010, according to Karen Hyde, Xcel’s vice president for rates and regulatory affairs.

And though the commission approved the rate increase, the fact that Xcel was asking for permission to charge all of its Colorado customers for part

of the smart grid’s costs — which was not part of the company’s original plan — was a red flag for some of the commissioners. They were concerned that Xcel had not clearly outlined all the funding sources for the project, among other things.

Daily Camera