Two parties approve utility sale to co-op
By Jan TenBruggencate
Advertiser Kaua'i Bureau
LIHU'E, Kaua'i — The state consumer advocate and the Navy have signed off on Kaua'i Electric's purchase by a local cooperative, leaving only Kaua'i County as an opposing party.
The state Division of Consumer Advocacy and the Department of the Navy yesterday filed with the state Public Utilities Commission a stipulation that they support an amended proposed purchase agreement.
The new agreement calls for utility owner Citizens Communications to make a payment of $3 million to Kaua'i Electric customers within a year of the deal's closing. Additionally, it calls on the new owners to refund to consumers 25 percent of company net income starting in 2004.
Kaua'i Electric manager Alton Miyamoto said the $3 million payment represents interest savings to Citizens Communications from an early closing of the sale. It will be distributed to utility customers based on how much they have paid in electric bills in the previous 12 months.
If the sale goes through as laid out in the stipulation, the check should amount to roughly 3.5 percent of what a consumer has paid in the year's period, said Gregg Gardiner, chairman of the Kaua'i Island Utility Co-op.
The annual refunds, the $3 million and low-cost financing were important factors in persuading the state Division of Consumer Advocacy to support the deal, said Cheryl Kikata, the office's utilities administrator.
"We were able to get some concessions from the joint applicants. ... In our office's opinion, it is a reasonable proposal," Kikata said.
Gardiner said the cooperative is asking the PUC to approve the sale by Sept. 17, which would let the company gain approval for federal low-cost financing by the end of the federal fiscal year Sept. 30.
The co-op expects to borrow the full $215 million sales price from the federal Rural Utilities Service at a blended rate of roughly 4.5 percent, Gardiner said.
County officials, who were not party to the agreement, declined to comment yesterday, said mayoral administrative assistant Wallace Rezentes Sr. "We're working on an official response," Rezentes said.
Attorney Bill Milks, the county's special counsel on the case, said one major county concern is that rates would remain among the highest in the nation.
"The system is in jeopardy of being non-economic. Major industrial users have a pretty strong economic incentive to generate their own electricity, and that could put the whole company at risk," Milks said.
An earlier purchase offer by the co-op of $270 million was rejected by the Public Utilities Commission as too expensive, and leaving the company without enough revenue to cover unexpected expenses.
Miyamoto said that the co-op has arranged for lines of credit from the National Rural Utilities Cooperative Finance Corp. of $25 million for operating costs and $60 million for disasters, but he said that neither line of credit will be tapped except in extraordinary circumstances.
Gardiner conceded that the sale, if approved as proposed, would leave existing electric rates in place. But he said those rates would also quickly allow the co-op to build equity in the company, and that the equity would be placed in individual accounts for co-op members. All Kaua'i Electric customers would automatically become co-op members unless they opt out, he said.
Reach Jan TenBruggencate at jant@honoluluadvertiser.com or (808)245-3074.
