BOULDER - Saying it didn't have enough information, the Federal Energy Regulatory Commission on Monday denied the city of Boulder's request for a declaratory order confirming that Boulder could mitigate its stranded costs in forming a municipal electric utility by buying at least some of its energy from Xcel Energy Inc.

The FERC ruling didn't, however, slam the door on Boulder's hopes of mitigating such costs.

Boulder voters in 2011 passed a ballot initiative granting the city of Boulder power to break away from Xcel and create a municipal electric utility. Xcel has said it is not a willing seller. On top of the costs of acquiring Xcel's distribution system, the company has contended that it also would be owed stranded costs of as much as $255 million - costs compensating Xcel for investments it made in supplying power to city of Boulder customers.

Boulder has pointed toward a case in which the city of South Daytona, Florida, was able to avoid paying stranded costs because it purchased all of its power from its former supplier for the first 10 years of its municipal utility.
 
"We deny Boulder's petition for declaratory order without prejudice, finding that we have insufficient facts before us to determine that upon becoming a retail-turned-wholesale customer, Boulder will have no stranded cost obligation for the portion of its wholesale power requirements that it purchases from its former retail supplier, PSCo," the FERC ruling stated, referring to Public Service Co. of Colorado.

The ruling went on to say that a municipal utility did not need to purchase all of its power from its former supplier in order to mitigate stranded costs, and that its stranded costs "would be determined by the application of a formula set forth in the Commission's regulations." But, the ruling continued, "the extent of Boulder's stranded cost obligation would be a fact-specific determination that could only be made when the terms of a future partial requirements contract with PSCo are known."

Monday's ruling, while not a total loss for Boulder, certainly muddies the water a bit as the city council prepares for the second reading of an ordinance directing city officials to move forward with acquisition of Xcel's distribution system, even if that means taking Xcel to condemnation court. The council passed the ordinance on first reading on July 24, and the city had hoped to have a definitive ruling from FERC before the second reading on Aug. 6. If it passes again Aug. 6, the ordinance would likely go to a third reading on Aug. 20 for final approval.

In its ruling Monday, FERC stated that it had no facts regarding the length of a partial purchase contract with Xcel, nor did it know the length of time for which Xcel had reasonably expected to provide service to Boulder customers. Both of those, FERC said, are key components in determining the amount of Boulder's stranded cost obligations and the amount it would be able to mitigate by purchasing some of its power from Xcel. So while Boulder might be able to mitigate some of those costs, it might not know how much until well after the city has set condemnation from Xcel in motion.