In a proceeding that has seen its share of unexpected twists, the final day of the Colorado Public Utilities Commission's extended hearing on the city of Boulder's municipalization effort provided another startling moment. On Aug. 7, after almost nine days of testimony, it briefly seemed that PUC staff might present an entirely new proposal for the city's divorce from incumbent utility Xcel Energy Inc.

Commission Chief Engineer Gene Camp and Senior Engineer Sharon Podein had been "brainstorming" ahead of testifying, Podein said on the stand, and their position had "evolved." That admission elicited exasperation from Commissioner Frances Koncilja, whose comments during the hearing have often been caustic.

"I find this very bizarre," said Koncilja. "To throw this proceeding open at the last minute to this sort of new thinking ... is very troubling to me."

"There's just nothing about this case that's normal," Xcel Energy counsel Judy Matlock said.

Indeed, the most striking takeaway from the hearing, which concluded Aug. 7, was just how little clarity there is about the details of Boulder's plan to separate from Xcel Energy, which does business in Colorado as Public Service Co. of Colorado and provides power to 1.4 million customers in the state, and create its own municipal utility.

The case, which has dragged on for nearly seven years since voters approved a municipalization referendum in 2011, is being closely watched by cities and towns across the U.S. as local governments vow to obtain 100% of their power from renewable energy and the cost of power from distributed generation resources continues to fall. According to the American Public Power Association, 50 municipal utilities have been formed in the last three decades; one of the most recent, Jefferson County, Wash., reached an agreement to purchase the local electricity grid from incumbent utility Puget Sound Energy Inc. a year after the initial vote to municipalize.

2 rejections

Boulder's path has been longer, and rockier. The city's original application, filed in July 2015, sought to include transmission assets beyond the city limits, but the PUC rejected it. Boulder cannot take over assets Xcel Energy uses to serve its own customers outside the city, the commission ruled. The latest plan was given a thumbs-down by the PUC's chief engineer in February.

"The separation plan as filed lacks sufficient detail for the commission to make findings with regard to the system's effectiveness, reliability, and safety," Camp wrote in testimony filed with the agency Feb. 17.

After the second rejection, Xcel Energy offered the city two options that would end litigation over the municipalization effort. The utility offered to renew the franchise agreement with the city and create a "partnership" to help Boulder reach its goal of 100% renewable energy by 2030; otherwise, the city could pay hundreds of millions of dollars to buy out Xcel Energy's assets that currently serve Boulder residents.

In April, after more than 80 residents spoke at a public meeting to consider the offers, the city council voted to turn down the Xcel Energy proposals and proceed with the long struggle to form a municipal utility. In their public hearings on the matter, the state commissioners have expressed grave doubts about the legality and the viability of Boulder's plan.

'Figure it out'

Those doubts came out repeatedly during the most recent hearing. Koncilja has been the most outspoken member of the three-person PUC, often voicing scorn for the city's presentations. Commissioner Wendy Moser has also been skeptical, although at times she has expressed a willingness to consider Boulder's arguments as well, while Commission Chairman Jeffrey Ackermann has seemed the most sympathetic to the city's constitutional right to form a utility.

With testimony concluded, the commissioners are expected to issue a ruling in mid-September. They have essentially three options: Boulder's latest plan could be approved, allowing the city to start the process of condemning and acquiring the utility assets; it could be rejected outright; or the PUC could give Xcel Energy and the city guidelines and a deadline to reach an agreement. That would effectively kick the whole mess back to the utility and the city, further prolonging litigation that now consumes about $2 million a year in taxpayer and ratepayer money.

If that does not work, it would be up to the regulators to devise a solution. "You either figure it out," Ackermann said, "or we're deciding." (Colorado PUC Docket No. 15A-0589E)