5/9/2008 8:22:00 AM Activists plan end run around power company sale
By Sue Ellen White For the Examiner
If some local users have a say, the interests of Whidbey Island's electricity consumers won't be controlled by the Australian and Canadian investment consortium that is set to take over Puget Sound Energy.
People for Yes on Whidbey PUD plans to gather signatures on an initiative petition to replace Puget Sound Energy with a local public utility district as soon as it gets the go-ahead on petition language from the state and county. If 2,400 signatures are collected by early July, the proposal will go before voters in the November election.
"It's about local control of a vital infrastructure on the island; it's about economic development; it's about energy security for the island," said Dave Metheny of Clinton, the group's campaign coordinator. "PUDs have a long history in this state and laws allow citizens through initiative to get local control of our utilities."
Lower power rates, jobs for island residents, voter-approved utility commissioners, more responsive emergency service and development of renewable energy and conservation are some benefits of a local PUD, Metheny said.
The group formed this spring in response to the buyout of Puget Sound Energy, which provides the Island with electricity and is the largest investor-owned utility in the state. They have researched state laws, met with the director of the state PUD association and are ramping up their campaign.
PSE has had public-relations difficulties on Whidbey in recent years with numerous and lengthy outages in the winter of 2006-07, user demands for burying power lines underground, conflicts over tree removal and rate hikes. The most recent rate increase of $237 million is set for hearings this month before the Washington Utilities and Trade Commission.
But those problems were not what prompted the decision to seek voter approval of a PUD, according to Bob Kuehn of People for Yes on Whidbey PUD. Rather, it was PSE's sale to an international investment group, Macquarie Infrastructure Partners.
Public hearings for the sale and for the rate increase will be held at the same time - May 15 in Bellevue, May 20 in Bellingham and June 4 in Olympia. The group says it does not plan to attend the hearings, but intends to focus on getting petition signatures.
Lower rates possible
Public utility districts buy their power for less than a corporate utility, said Kuehn.
"Under federal law, the Bonneville Power Administration is required by law to provide PUDs with power and at their lowest rate tier. PSE does not have this advantage. We would get significantly better rates. That's the reason that the PUDs in the state have lower rates than the private power companies," Kuehn said.
"One of the concerns is that PSE owns a number of dams and water rights; potentially a new international company that has no ties to local folks could sell off these assets," Kuehn said.
The group said that selling off water rights and power generation plants would mean much higher rates. The Pacific Northwest generates most of its electric power though dams and rates are less than in other areas of the nation.
They are also concerned that PSE's bond rating will make it more expensive for the company to borrow money and that this expense will be passed on to consumers. Currently the utility's bond rating is BBB- with a negative credit watch.
Kuehn added that if the current request for a rate increase is approved, PSE will have the state's highest electric rates. If approved the hike would add nearly 12 percent to average residential electricity bills.
The buyout
The state attorney general's office has objected to an add-on of $5.8 million in the rate hike request that would affect only electricity customers. Their Public Counsel division, which represents customers of state-regulated investor-owned utilities, also is reviewing the main rate increase and the proposed sale. No recommendations have been issued yet, but the chief counsel, Simon ffitch, says his office has concerns.
"One of the big questions of the Macquarie sale is that it is a leveraged buyout, so debt is being used to pay for the company," ffitch said. "The purchaser uses the assets of the acquisition to pay for the acquisition. After the transaction, PSE will be more in debt than it is now. It could create financial burden on the ratepayers. A very significant rate burden."
Other issues that ffitch is looking at include a request to increase the percentage of shareholder profit, the company's service record and emergency preparedness, a rate increase of the basic rate, executive salaries and the relationship between the sale and the requested rate increase.
Puget Sound Energy's vice president and treasurer, Don Gaines, disagreed that the purchase was a leveraged buyout, saying that the sale will actually increase the assets of the utility and that the holding company that owns PSE will take on debt, but since it is currently debt free, there will be no negative long term effects on rate payers.
"The company has made a pledge that it will not ask customers to pay a higher rate as a result of the merger," Gaines said. "[Macquarie] likes that PSE has growth potential in Western Washington. They like the way the company is being run. They want to retain the existing employees."
If the measure gets to the ballot, Kuehn said, at the same time there will be an election of three PUD district commissioners. If the PUD passes muster with voters, PSE's Whidbey Island equipment would become the property of the PUD, an arbitrator would determine a fair market value and the new PUD would raise the money to pay for the purchase with long-term tax-exempt bonds.
The law allowing citizens to create a public utility district was passed in 1930 as a result of a initiative headed by the state Grange and the electrical workers union.
