Post # 38 - Apparent Xcel Victory in Boulder

According to press reports, as part of settlement reached yesterday, staff of the Colorado Public Utilities Commission will not contest $44.5 million in costs associated with Xcel Energy's SmartGridCity project in Boulder. The Governor’s Energy Office also signed off on the settlement.

At issue was whether ratepayers or shareholders should foot the costs of the Boulder-based pilot project, which had tripled in price from initial estimates. Xcel Energy, the state’s largest utility, has attributed the cost overruns (from the initially estimated $15 million to the actually incurred $44.5 million) to unanticipated problems arising from laying fiber optic cable to 23,000 homes and related software expenses.

Overall, Xcel Energy serves approximately 1.1 million customers throughout the state. Despite the overruns and the fact that the improvements in power distribution and metering systems will be limited to 23,000 Boulder homes, Xcel argues that all ratepayers ultimately will benefit and should thus share the costs.

The PUC already had approved the costs as part of broad rate increases that went into effect at the beginning of this year, but had opened a separate case to consider getting back the money. Friday’s settlement apparently ends that challenge as far as PUC staff and the Governor's Energy Office are concerned.

However, the settlement will not apply to any expansions of the SmartGridCity project. Moreover, other parties to the PUC proceeding – Colorado's Office of Consumer Counsel, the community organization ArapaHOPE Community Team and a citizen intervenor, Leslie Glustrom – still will contest the rate increases for SmartGridCity at a hearing scheduled for August 31^st.

So the full implications of the settlement remain unclear, at least at this writing. But at this point, it looks like a potential victory for Xcel.

Post # 37 - GIS and Smart Grid

A “geographic information system,” or GIS, integrates hardware, software, and data for capturing, managing, analyzing, and displaying all forms of geographically referenced information. Many information technology experts believe that successful utility integration of GIS technology is essential to smart grid development.

But according to a new study by Ersi, a software development and services company providing GIS software, there currently is a wide range of GIS capability among utilities, with the largest often being the least smart grid ready. Ersi finds that data accuracy is spotty and often either incomplete or not GPS accurate. Interestingly, according to Ersi, the larger a utility’s size, the less likely it is to be “smart grid ready.”

Although Ersi obviously is not a disinterested bystander, its study contains interesting data about utility integration of GIS technology. In the last quarter of 2009, Ersi conducted what it calls a “smart-grid-readiness survey” of electric utilities around the world (though primarily located in the United States). About 60 percent of the 226 responding companies had fewer than 100,000 customers (what Ersi terms “mid-size”), 30 percent had from 100,000 to 2 million customers (“large”), and the remaining 10 percent had more than 2 million customers. (“very large”). Over 70 percent of the respondents view GIS technology as strategic to the smart grid; the remaining 29 percent believe GIS plays a significant role.

But with respect to accuracy and integration, only one-third of the responding utilities say they update their GIS data within ten working days of completion. Overall, the study finds that utilities report a lag time of up to 90 days to move data from the field into the GIS. Moreover, the study found a strong inverse relation between company size and the time it takes before completed work is reflected in the GIS data base. The larger the company, the longer it takes -- although the difference is considerably greater between the “very large” and “large” utilities than between the “large” and “mid-size” utilities.

Twenty-five percent reported that there is information older than six months that is not reflected in their GIS. Perhaps most significantly, only 15 percent report “high confidence” – defined as an error rate of less than 2 percent – in their GIS data. And, as noted above, Ersi concludes that the larger the utility the less likely it was to be among the most “smart grid ready” companies.

Post # 36 - BGE Across the Finish Line? (UPDATE)

UPDATE, 8/16/2010: Having taken the weekend to think it over, BGE this morning announced it will accept the conditions imposed by the Maryland PSC's 8/13/2010 decision and move forward with its smart meter installation -- without upfront authorization to pass through the costs to ratepayers. In its announcement this morning, BGE noted that the MPSC found that the project itself was in the public interest and that the PSC assured the company that it could expect to recover "prudently incurred [project-related] costs." The company also asserts that, at the end of the day, the project will allow for at least $2.5 billion in savings for its 1.2 million customers.

The combination of the MPSC's conditional approval on Friday and BGE's acceptance today of the conditions also means that BGE has secured the $200 million grant for the project approved by the U.S. Department of Energy. BGE will now move forward and, following periodic reviews, seek incremental cost recovery from the PSC.

So, after some major stumbling blocks this summer, BGE's smart meter roll out begins. And so does continued MPSC review and oversight.
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8/14/2010 POST: Following up on my August 12th post, late yesterday (Friday, August 13th), the Maryland Public Service Commission issued an order conditionally approving Baltimore Gas & Electric's smart meter roll out. Assuming BGE accepts the MPSC's conditions, this will allow BGE to retain its $200 million grant for the project for the U.S. Department of Energy. As I noted in the prior post, DOE reportedly had set a August 16th deadline for BGE to receive necessary PSC approval.

But BGE's acceptance of the conditions is not necessarily a done deal, because the new order still appears to fall short of BGE's hopes.

Last June, of course, the MPSC rejected a BGE plan that would have recovered all costs in excess of the $200 million (an estimated additional $635 million) though a consumer surcharge. BGE also sought to impose mandatory "time-of-use" or "dynamic" pricing schedule during the summer months, based on time-of-day and time-of-week usage. As related in Post # 25, the MPSC rejected the proposal, holding that BGE had not established sufficient rate payer benefits to justify mandatory cost recovery.

In July, BGE returned to the MPSC with a modified proposal, under which the company would recover only 25 percent of the project costs through the surcharge. For the remaining 75 percent, BGE would seek cost recovery through traditional rate recovery mechanisms over the life of the project. In other words, BGE would have to ask for cost recovery on a periodic basis, with the PSC saying "yea" or "nae" after reviewing each application. In addition, under the proposal, BGE would no longer make time-of-use rates mandatory -- customers instead would choose whether to go the dynamic pricing route. See Post # 29.

However, in the August 13th order, the MPSC ruled that BGE may recover costs only though regular rate increases and apparently only after the company has completed its smart meter network. In other words, no surcharges. If BGE moves forward, it apparently will have to do so without any guarantee of cost recovery. At the same time, the MPSC seemed favorably impressed with the technical aspects of BGE's proposal. The order concludes by saying that "[i]f the project goes as BGE predicts, or anything like it, BGE should have no trouble proving in its future distribution rate cases that it has delivered the benefits to consumers that make the project cost effective. . . .'

We should know shortly whether BGE is prepared to move forward on that basis.

Post # 35 - BGE’s Smart Meters: Down to the Wire?

BGE’s smart meter problems with the Maryland PSC (see post nos. 25 and 29) are coming to a head. The PSC last week held hearings on BGE’s revised plan, and August 16, 2010 (this Monday) effectively is the date for the PSC’s decision. This is because BGE’s plans are predicated not only on MPSC approval of its cost-recovery mechanisms, but also on a $200 million stimulus grant from the U.S. Department of Energy.

As noted in a recent Special Report by DOE’s inspector general, the 2009 federal stimulus legislation provided DOE with over $36 billion for various environmental programs and initiatives. Approximately $4.5 billion of that was targeted to smart grid projects like BGE’s smart meter program, see here.

The inspector general’s report notes that approximately $32.7 billion of DOE’s stimulus grant funds have been “obligated,” i.e., awarded to projects that are going forward. But the report also notes that, under the terms of the stimulus legislation, the remaining $3.4 billion, including BGE’s $200 million grant, must be obligated by September 30, 2010 – or the grants expire.

While not addressing BGE by name, the report expressly singles out BGE’s situation (emphasis added):

Regulatory approval is needed for a number of previously awarded Recovery Act projects to move forward. As the Department's programs have no control over the outcome of regulatory reviews, it is possible that some obligations could fall through in the coming months, not allowing the Department sufficient time to re-obligate funds. For example, a local public service commission recently denied approval of an application submitted by a Recovery Act recipient to install equipment provided through the Smart Grid Investment Grant Program. OE [DOE’s Office of Electricity Delivery and Energy Reliability] officials stated that while the recipient’s efforts to obtain regulatory approval are ongoing, OE may need to quickly re-obligate $200 million in Recovery Act funds if approval is not received.

Press reports indicate that DOE has agreed to wait until August 16 – this Monday – to decide whether the agency will revoke BGE’s funding and send the money elsewhere. There is no indication where DOE will send the money if the PSC turns down BGE again. Either way, we (and BGE) will have to wait and see. But not for very long, apparently.

Post # 34 - Smart Meters Pass a Test in Texas

As of July 1 of this year, the Texas Public Utility Commission says that 1,574,774 smart meters have been installed in Texas. When the rollout is complete, approximately 6.5 million customers will be upgraded from mechanical meters to smart meters with a digital display.

However, as with PG&E’s smart meter rollout in California, Oncor’s and Centerpoint’s Texas rollouts triggered consumer complaints about meter accuracy and alleged overpricing, (see Post #6). Oncor has said that the expensive bills many customers complained of were due to a record cold winter. However, in response to hundreds of complaints, the Texas PUC last spring mandated that Oncor and Centerpoint fund independent smart meter testing (see Post #15).

The results are now in, and they support Oncor’s and Centerpoint’s claims that the meters were operating accurately. The report, prepared by Navigant Consulting under the direction of the PUC, revealed a smart meter accuracy rate of 99.96 percent. Only two were found to measure electric usage inaccurately of the 5,627 that were tested. This compares favorably with the 96 percent accuracy of older mechanical meters. Upon reviewing these results, Texas PUC Chairman Barry Smitherman said that the "extraordinary and comprehensive study clearly shows the superiority of smart meters compared to traditional, electromechanical meters." For more on the results, see here and here. To read the full Navigant report, click here and then click on document no. 38053.

This certainly doesn’t answer other questions that smart meter critics have been raising, such as the role of dynamic pricing (see Post ## 11, 26), overall costs (see Post ## 25, 28, 29 and 33) or whether smart meters represent the best means of promoting efficient energy usage (see Post # 27).

Nevertheless, the Navigant study clearly is a boost for supporters of smart metering as an advanced technology. On that level, at least, the Navigant study is evidence of smart metering's superiority to traditional mechanical meters.

Post # 33 - Surf's (Not) Up -- Smart Meter Problems in Hawaii

Another speed bump has appeared on the road to “a smart meter in every home” – this time, in Hawaii. Once again, a state public service commission has decided to go slow on the question of imposing smart meter installation costs on consumers.

In December 2008, Hawaiian Electric Co. (HECO), the state’s primary utility, sought approval from the Hawaii Public Utilities Commission to install smart meters at approximately 451,000 locations -- at a cost of approximately $115 million. HECO proposed to install 293,000 meters on Oahu, 92,000 on the island of Hawaii (or “the Big Island”), and 66,000 on Maui (see discussion at pp. 38-39 of the company’s 2009 annual report).

To date, HECO has installed approximately 9,400 meters as part of a pilot project. Last May, HECO petitioned the PUC to expand the pilot by installing 5,000 additional meters on Oahu at a cost of approximately $1.35 million. HECO stated that additional pilot testing would be necessary to yield a more detailed understanding of how advanced metering would interoperate with a new customer information system (CIS). The utility also told the PUC that the project would offer better insight into cybersecurity concerns.

Last week the PUC denied the request – and, in so doing, cast doubt on the entire project. In particular, the PUC indicated concern about the cost-effectiveness of the extended pilot, particularly in light of criticism the project has drawn. For example, the state’s Division of Consumer Advocacy argued that the new CIS had not proven itself viable - let alone shown that it could be successfully integrated with the AMI system. The Hawaii Solar Energy Association, questioned whether smart meters are even practical.

But in addition to nixing expansion of the pilot program, the Hawaii PUC also ruled that HECO now cannot proceed with the plans outlined in its original 2008 application The PUC said HECO should create a comprehensive plan for upgrading the electric grid before it makes another attempt to use ratepayer money to put advanced electric meters in homes and businesses.

As with the Maryland Public Service Commission's treatment of Baltimore Gas and Electric’s smart meter project (see Post Nos. 25 and 29), the Hawaii PUC has not necessarily killed the project. Rather, it told HECO to go back to the drawing board.

Nonetheless, the Hawaii PUC’s action is one more example of increasing state regulator sensitivity that the costs of smart meter installation may outweigh the benefits to the consumers being asked to shoulder the costs.

For more on the Hawaii PUC’s action, see here, here, and here.