By - Jim Vess

Colorado Utilities Commission approves Xcel grid modernization plan and revenue decoupling

Energize Weekly, June 28, 2017

The Colorado Public Utilities Commission (PUC) took two steps toward modernizing the state’s electricity system June 21 by “decoupling” Xcel Energy revenues from the sale of kilowatt-hours and approving a $612 million grid modernization program.

The commission endorsed a five-year decoupling pilot under which the PUC will set an annual revenue target for Xcel, the state’s largest electricity provider with 1.6 million customers. If Xcel exceeds the target, it would give back the extra money in reduced rates the following year. If it falls short of the target, it will be able to add a surcharge.

The pilot will focus on residential customers, an area where Xcel says it has seen revenue erosion from energy efficiency programs and the growth of rooftop solar installations.

“This should remove any disincentives the company has to promote energy efficiency, rooftop solar or any other distributed energy system,” said Howard Geller, executive director of the Southwest Energy Efficiency Project, which supports the pilot.

The commission also approved a unanimous settlement agreement for grid upgrades between Xcel and 10 intervenors representing consumer, environmental, energy efficiency and cleantech industry interests.

One part of the upgrade focuses on grid voltage management through Integrated Volt/Var Optimization or IVVO. Fluctuations of voltage, or a flat-out collapse leading to a blackout, cause grid inefficiency. By placing two-way sensors on the grid linked to computers, Xcel will be able to see and manage voltage in real time. The cost of IVVO is set at $193.7 million.

The second part of the upgrade will be the installation of Advanced Metering Infrastructure (AMI), or so-called smart meters, which record energy real-time use and can communicate with the utility. The rollout of the meters, under the settlement, was extended three years to 2024 to soften rate impacts. The cost of the AMI portion of the upgrade is $418.7 million.

AMI is key to developing new rate structures, such as time-of-use-rates, which utility executives say are an effective way to manage peak demand. Energy efficiency advocates like them because they give price signals that encourage consumers to manage and reduce their electricity use. The PUC also approved a time-of-use rate pilot for Xcel.

As part of the settlement, Xcel also agreed to add “Home Area Network,” or HAN, software to all smart meters. HAN will let a household control and monitor electric usage of various appliances and activities within the home. Xcel also agreed to provide customers with their energy data through a web portal and have that data in a standardized, nationally-used format called Green Button Connect My Data (CMD). This will make it easier for consumers to use the data.

Commissioner Frances Koncilja said she wanted to make sure Xcel provides programs to enable customers to make the best use of their smart meters.

“What I am concerned about is that the meters are going to be a good deal for the company and not for the customers,” Koncilja said.

PUC Chairman Jeff Ackermann said that these changes are part of the effort to address an evolving electricity market, particularly in residential use, where in the past customers and their electricity demands were seen as homogenous. Now with the advent of electric vehicles, battery storage, solar panels and energy efficient appliances, residential customers are a much more varied class.

“We are in a rare spot when it comes to the electricity market,” Ackermann said. “There is a substantial change to that one-size-fits-all approach.”

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