Kaua'i Electric sale OK'd
By Jan TenBruggencate
Advertiser Kaua'i Bureau
LIHU'E, Kaua'i — The Public Utilities Commission yesterday approved the sale of Kaua'i Electric to a community cooperative.
The state commission, voting 2-0, essentially reaffirmed its preliminary approval filed a month ago. It rejected most of the recommendations made by Kaua'i County last week.
Those recommendations, which included an immediate 6 percent rate cut, were unsupported by the record before the commission, the panel said.
"We're examining the thing right now," Wallace Rezentes Sr., administrative assistant to Mayor Maryanne Kusaka, said yesterday. Rezentes said the county would have no official comment until today.
The county administration had opposed the sale until it agreed with the County Council last week to approve it with the proposed conditions attached.
The sale from Citizens Communications to the Kaua'i Island Utility Co-op was approved at $215 million. The cooperative hopes to lock up federal Rural Utilities Service financing for the full amount by the end of this month, which closes the federal fiscal year.
Additionally, the cooperative has arranged a $25 million line of credit for operating expenses and $60 million from the National Rural Utilities Cooperative Finance Corp. for emergency relief in case of a natural disaster.
The Public Utilities Commission approved spending $2.5 million of the $25 million line of credit to pay the costs of the acquisition. That includes attorneys fees, the costs of consultants and studies, office space, airfares for co-op executives and other fees.
For consumers, rates will remain as they are and there may be rebates: Citizens agreed to pay $3 million a year after the sale to be distributed among customers, although the commission asked that the money be placed in escrow at the time of closing; and Kaua'i Island Utility Co-op agreed to ask its financers to allow it to refund to consumers 25 percent of any profits each year.
"I am extremely pleased with the ruling. It shows that the commission examined the issues and the record very thoroughly," said Brian Hirai, special counsel for Kaua'i Island Utility Co-op.
The PUC gave itself a short time to make a decision in order to allow the cooperative to lock up federal financing before the end of the federal fiscal year. Some observers worried that the rush will hurt the consumer.
"I'd have liked to have seen it be more deliberative," said Lawa'i resident Andy Parks.
He expressed concern that there is oil and toxic chemical seepage into the ground under the utility's 'Ele'ele power plant and that cleanup costs could exceed the money that's available. Gregg Gardiner, Kaua'i Island Utility Co-op board chairman, has insisted that the environmental issues have been studied adequately.
"I know that there has not been a substantive environmental study. I don't know if there is a savings by rushing this," Parks said.
Gardiner, who was traveling yesterday, issued a statement calling the approval "a historic step that will give the people of Kaua'i more control over their island's energy future in addition to reducing the island's high cost of electricity." He noted earlier that Kaua'i Electric was scheduled to seek a rate increase soon and that the Kaua'i Island Utility Co-op sale means no increase will be necessary.
Gardiner said that according to the co-op's projections over the next 10 years, the firm will return $26 million directly to ratepayers and will build up $80 million in equity in the company.
"In years to come (the transaction) will keep tens of millions of dollars from leaving the island's economy," he said.
All Kaua'i Electric customers will become members of the cooperative immediately upon closing of the sale. The utility will have a nine-member board, and each consumer — no matter how much power is used — will have equal say in co-op elections.
"The beauty of a co-op is that it's one person, one vote. The retired person's vote counts just as much as the largest resort owner," said Peggy Cha, secretary of the interim board and provost of Kaua'i Community College.
