What Sale of Puget Sound Energy Will Mean to You
By John Dodge, The Olympian, Olympia, Wash.
May 25–By year’s end, Puget Sound Energy customers could be paying their electricity and natural-gas bills to a utility owned by an Australian investment bank and Canadian pension funds.
Regardless of whether the sale is approved, subscribers could be in store for a double-digit electric-rate increase and a more than 5 percent boost in natural-gas rates.
The state Utilities and Transportation Commission will decide the fate of the $7.4 billion utility sale and rate case, but not before the public has a chance to comment at a June 4 public hearing in Olympia.
PSE is the state’s oldest and largest investor-owned utility, with 1 million electric and 721,000 natural-gas customers in 11 counties, including Thurston.
Arguing on behalf of the sale and rate increase, utility officials paint a picture of a business strapped for cash and facing growth in the number of customers equivalent to two Seattle-size cities in the next 20 years.
The new consortium, led by Macquarie, an investment bank based in Sydney, Australia, and the Canadian Pension Plan Investment Board, has agreed to buy the utility and provide $5 billion in capital in the next five years. “What it really boils down to is access to capital,” said Tom DeBoer, PSE’s director of rates and regulatory affairs.
But the proposed sale has raised concerns that a loss of local control is not in the best interests of customers.
“Personally, I’m deeply concerned about PSE being bought out by a consortium of foreign corporations,” Thurston Public Utility District commissioner Paul Pickett said.
About the deal
Question: PSE is regulated by the Utility and Trade Commission, which has final say on rate increases, customer complaints, service reliability, etc. What changes under the buyout?
Answer: Rate increases, rate of return on investments and consumer complaints will continue to be handled by the three-member board, whose members are appointed by the governor. In addition, the utility still must abide by state and federal laws to build power plants, increase its reliance on green power, promote energy conservation and curb greenhouse-gas emissions. The utility’s corporate headquarters and officers would remain in the region, as would the PSE logo on utility bills and communications. “Customers are not going to notice a difference,” DeBoer said.
Q: Wouldn’t financial scrutiny of the utility be more difficult? The stock would go from publicly traded to privately held, reducing the oversight of the federal Securities and Exchange Commission.
A: “The UTC needs that financial information to properly regulate the company,” said Simon ffitch, who represents consumers as chief of public counsel in the state Attorney General’s Office. The commission could make continued SEC filings a condition of the sale. “I’d be shocked if they didn’t require it,” DeBoer said.
Q: The consortium of buyers is borrowing about $4.2 billion. Doesn’t that raise a red flag about the financial stability of the utility?
A: Yes, ffitch said. That much debt financing could put pressure on the company to ask for future rate increases. While the amount of debt financing could be a concern, PSE faces the same sorts of challenges as a stand-alone company, DeBoer said.
Q: Who are the buyers?
A: Three branches of the Macquarie Group, which has been described as the Australian equivalent of Goldman Sachs, control more than 50 percent of the holding company. Macquarie manages assets valued at more than $200 billion, including five toll roads in the United States and Canada, the water company serving London, two Canadian port terminals and Duquesne Light, a regulated electric utility in Pittsburgh.
Q: What assurances do customers have that the new ownership won’t harm utility customers?
A: No harm to consumers is the standard the utility commission must use to approve, reject or create conditions of the sale.
Q: What has been the reaction to the proposed sale since it was announced in October?
A: The buyout has triggered grassroots initiatives on Whidbey Island and in Skagit and Jefferson counties to study the feasibility of public utilities taking over electrical service there. Puget officials have said they would take legal action to halt such moves. In addition, opposition to the utility sale and rate increase is running about 95 percent from the more than 8,000 public comments received by the UTC, commission spokeswoman Marilyn Meehan said.
Q: What about the rate increase?
A: PSE has asked for an average 11.8 percent residential electric-rate increase. Residential-gas customers would see an average 5.73 percent increase. The $174.5 million in new revenue from the total electric-rate increase would pay for new power supplies and transmission lines, increased power costs, returns on shareholder investments and past storm damage, DeBoer said. The total gas-rate increase would raise $56.8 million. “This is Puget’s ninth rate-hike request since 2001,” ffitch said. “Customers are feeling the pain of rising costs for fuel, food and other items, and energy is no exception.”
Q: What’s the timeline and approval process for the sale and rate increase?
A: The deal has been approved by the Federal Energy Regulatory Commission. The UTC is the last major hurdle. The company filed the rate increase request in December 2007 and expects a decision by November.
Q: What’s next?
A: UTC staff, public counsel and other parties have until Friday to file their recommendations with the commission on the rate increase and June 18 on the buyout.
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Copyright (c) 2008, The Olympian, Olympia, Wash.
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