By - Jim Vess

Xcel grid modernization gets wary reception at Colorado utilities commission

Energize Weekly, May 24, 2017

A proposed $612 million grid modernization program by Xcel Energy for its Colorado system came under sharp questioning from the Colorado Public Utilities Commission (PUC) at a hearing May 16.

The plan is contained in a unanimous settlement agreement between Xcel and 10 parties, including the commission staff, big industrial customers, representatives of the solar and cleantech industries, as well as non-governmental groups focused on low-income energy issues, the environment and energy efficiency.

Despite the consensus, some commissioners voiced skepticism about the settlement and need for some of the upgrades.

“Is it wanted or necessary? What is the downside of not having it?” asked Commissioner Wendy Moser.

Commissioner Frances Koncilja said, “When I look at this, there could be huge rate shock in 2020 and 2021… On an evidentiary basis, there isn’t enough to show that this is in the best interest of the public.”

The settlement has extended the rollout period by three years, to 2024, to soften rate impacts, and it has added functions to give households more control over their data and the ability to improve their energy efficiency. That has bucked up the cost from Xcel’s initial $562 million price tag.

“For an additional $50 million,” Koncilja asked, “what do they get? There is no hard testimony that customers really want this.”

There is a push, led by the U.S. Department of Energy, for the modernization of the country’s electrical grid by adding improved monitoring, communications, data collection and management tools, including AMI or “smart meters,” which can record a customer’s usage in real time and transmit it.

The upgrading of the grid is seen as essential to handling increase distributed storage and generation, such as rooftop solar, as well as managing growing numbers of electric vehicles and improving energy efficiency.

“We see the grid as the enabler long term,” Alice Jackson, Xcel vice president for strategic revenue initiatives, testified. The upgrades will enable the utility to serve customer demands for rooftop solar, battery storage and electric vehicles. “Enhanced capabilities show price signals,” Jackson said, enabling customers “to manage their bills and lower their costs long term.”

California and New York have embarked on programs to get their utilities to overhaul their grids, and some states, such as Massachusetts and Illinois, have mandated the installation of smart meters.

Still, the push to upgrade the grid is not without its caveats. “Smart meter rollouts are something we’ve seen done, but we haven’t seen the value yet that was promised,” Michael O’Boyle, an analyst at Energy Innovation, a clean energy consultant, said in a recent interview with Greentech Media.

Xcel, the largest electricity provider in Colorado with about 1.4 million customers, has proposed a two-phase grid modernization.

The first part will focus on managing voltage on the grid 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, including contingencies.

“We have limited monitoring,” Xcel’s Jackson told the commission. “We often need three outage calls to triangulate.” IVVO, she said, will enable a faster response.

Better voltage management will also enable the utility to cut the kilowatt-hours it needs to put out on the system, creating an energy saving of about 1.8 percent a year. The settlement provides a mechanism for Xcel to gain an energy efficiency incentive for the reduction.

As part of the settlement, Xcel agreed to first install 13,000 AMI meters as the IVVO monitors, allowing for a slow rollout of the new technology. “This approach allows Xcel to get experience,” Paul Caldara, a commission staff engineer, said in testimony. “Walk before you run.”

Xcel had initially proposed making all the grid investments between 2016 and 2021, but as part of the settlement, the utility agreed to a longer implementation, stretching to 2024. This was done to spread out the impact on rates and also allow more time to deal with implementing the new technology.

“Like it or not, there will be glitches,” Caldara said. The longer rollout was key in getting PUC staff support, he said.

The second part of the upgrade calls for the installation of up to 1.6 million smart meters (the utility is including some growth in the customer base) by 2024.

The smart meters can keep track of energy consumption in real time. The current meters are read monthly. This would enable the imposition of new types of tariffs—such as time-of-use rates, which charge customers more for kilowatt-hours in peak-demand periods and less in low-demand periods.

Utility executives say that time-of-use rates 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.

Xcel is setting up two pilot programs, one using a peak-demand charge and a second using time-of-use rates for a total of 38,000 customers. As smart meters are installed the time-of-use program will expand. The cost of the AMI portion of the upgrade is $418.7 million.

Colorado AARP has criticized the plan, questioning whether the smart meter program was too costly and untested. “I would have preferred that AMI would only be installed after they were proven to be better and more economical than the current meters,” said Bill Levis, the former director of the Colorado Office of Consumer Counsel and an AARP consultant. “It is a compromise. The key is that Xcel’s push to force consumers to pay for AMI meters has been slowed down.”

Cindy Schonhaut, the current director of the consumer counsel’s office, has endorsed the settlement.

A key for getting environmental and energy efficiency groups to sign on was the inclusion for home area network (HAN) hardware and software in 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 that data.

“Without HAN and Green Button, Xcel was installing smart meters, but not in ways customers could use them,” Erin Overturf, an attorney with Western Resource Advocates, an environmental group that supports the settlement, said in an interview. “So customers were being asked to pay the costs, but were not going to get the benefits.”

Still, Commissioner Moser wondered, “What percentage of customers would take advantage of the technology?”

The settlement consensus, however, was that the grid needs to be updated. “All paths include additional costs,” said PUC Chairman Jeffrey Ackermann. “There is no zero-cost path to the future… The question is choosing a path.”

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