The Colorado Public Utilities Commission has approved Xcel Energy's plans to create a more advanced electric distribution grid, and implement a pilot rate structure that will “decouple” the utility’s incentive to sell more electricity from its ability to cover its fixed costs.
In one decision, the PUC approved a settlement supported by a broad spectrum of parties that will allow Xcel to install advanced metering infrastructure (AMI) and associated components of an advanced communications network for all of its Colorado customers. The advanced metering and other new technologies will boost power reliability, allow for better integration of distributed generation on to the electric grid, and provide customers with more information to control and track their energy usage.
The settlement manages deployment and costs of the meters to limit impacts to ratepayers. It also enhances reporting requirements and adds additional metrics to evaluate the impacts of the improvements, specifically on low-income customers.
The PUC noted that Xcel’s existing automated meters were nearing replacement age, and installing AMI would be a reasonable and efficient next step in the transition to a more modern electric grid. The settlement granted Xcel a “presumption of prudence” in spending up to $612 million on the improvements, but emphasized that specific costs can be challenged in future rate cases.
In a separate decision, the PUC approved with modifications a recommended decision by an administrative law judge that authorizes the company to implement a Revenue Decoupling Adjustment (RDA) on a trial basis for the next five years. The PUC modified the trial to include small commercial customers as well as residential customers.
Xcel Energy currently recovers a substantial amount of its fixed costs through per unit sales to customers. New rate structures or customer programs that have the potential to reduce energy sales also have the effect of reducing the company’s ability to recover all of its fixed costs.
Under a decoupling structure, the PUC establishes a target level of revenue (or sales) for the company. The PUC then compares actual revenue (or sales) to the target level. Any over- collection is refunded to customers through a bill credit. If the company under-collects on its authorized level, it adds a surcharge on customer bills.