The article in The Garden Island issue of June 22nd on the County Council Committee meeting on the preceding day regarding the proposed takeover by Kaua’i Island Utility Co-op (KIUC) of Kaua’i Electric (KE) contained comments by Mr. Gregg Gardiner,
The article in The Garden Island issue of June 22nd on the County Council Committee meeting on the preceding day regarding the proposed takeover by Kaua’i Island Utility Co-op (KIUC) of Kaua’i Electric (KE) contained comments by Mr. Gregg Gardiner, KIUC chairman, who did not attend the meeting.
The article states correctly that the ad hoc community group believes that the price KIUC agreed to pay for the KE properties is greatly in excess of any reasonable valuation and because of this KIUC cannot, as it has represented to Kaua’i’s rate payers, avoid a substantial rate increase. Gregg Gardiner is said to have stated that if the PUC doesn’t approve the sale Kauai’s users can expect to be hit with higher electricity bills. In earlier statements he has asserted he doesn’t anticipate that rates would be increased by KIUC for ten years. While he is making these claims to allay concerns, the reality is that the excessive price which KIUC was induced to pay will preclude its ability to maintain rates and his denial of this virtual certainty is a critical disservice to our people. KIUC could not have even considered the outrageous price it was maneuvered into except for the financial support from lenders who were either tax exempt or taxpayer subsidized, or both.
Mr. Gardiner argues that KIUC did not have many options and bought the business at the asking price. His inexperience betrayed him. An option that KIUC had was to refuse to be suckered into a transaction where KIUC could not keep its commitment to retain current rates. He then contends if Citizens Utilities retains ownership it will raise rates as would any new owner. Maybe he is right if the new owner is as foolish about what it pays as was KIUC. Under the analysis we have made, at the price agreed to by KIUC it will not only be able to maintain current rates, but the increases it will be forced to make will likely exceed the changes which might occur if the deal fails. Our findings are publicly available.
Not only was Mr. Gardiner mistaken about the financial effects of KIUC’s vast overcommitment, he was irresponsibly cavalier about its methods.
His commentary showed a lack of concern about the fact that KIUC made the binding arrangements for borrowing over $300 million and paying the huge purchase price it accepted without ever consulting or seeking the approval of the people who will bear the burden of these terms. The only party likely to prosper from the deal is the seller, Citizens Utilities who will take its over $100 million profit smilingly to the bank.
Gardiner is quoted as saying that all electricity users will pay the same rate and that those who become KIUC members will gain equity or ownership in KIUC. This is patently false as larger users will continue to enjoy rates which are considerably less than residential rates and any equity value associated with KIUC membership is dependent on its profitability, a prospect which is essentially foreclosed if KIUC tries to maintain current rates.
The hard fact is that despite the slick sales effort KIUC has mounted it has stifled democratic rights which usually exist in cooperatives and the price bargain it unwisely made will capsize its ability to hold current rates and to keep its representation to the people of Kaua’i.
Rejecting the deal negotiated is not an easy choice, but a fierce price will be paid for stubbornly seeking its adoption. A clearly better alternative is to abandon the present transaction and if Citizens continues to wish to dispose of KE to negotiate a new transaction, perhaps with KIUC, which reflects the real value and the risks inherent in carrying on the business of providing Kaua’i with electric power.
