The Forum article last week by Bob Mullins (“If not the co-op, then what?” TGI 6/26/00) about KIUC is an effort to prop up a fatally flawed project. While he faithfully recites the usual points used to justify cooperatives, which
The Forum article last week by Bob Mullins (“If not the co-op, then what?” TGI
6/26/00) about KIUC is an effort to prop up a fatally flawed project. While he
faithfully recites the usual points used to justify cooperatives, which are not
in dispute, he fails to address the real concerns.
The facts are that an
inexperienced small group who failed to use the resources which are regularly
employed in complex transactions of this nature, were induced to enter into an
agreement to purchase Kauai Electric at an excessive price and on terms which
were imprudent.
The three KIUC organizers, not realizing that they were
being manipulated in a rigged and perhaps collusive bidding process, committed
to future costs which will prevent KIUC from achieving their objective of
avoiding rate increases.
Mullins complains about “erroneous concerns
about the financial details” but he clearly has not studied the materials
in the PUC docket. The reality is that KIUC must be profitable at existing
rates to be able to maintain them. KIUC projects slight profits in its first
year, but its supporting data is not credible. Although KIUC is taking over the
KE personnel, its commitments and its methods of operations, it rashly contends
that it will cut KE’s operating costs in that year by $12 million. In addition
it erroneously understates interest costs by $2 million. Should KIUC results
approximate KE’s real life experience and interest costs are corrected, KIUC
would lose almost $14 million in the first year and substantial rate increases
would be on the way. Even if KIUC were to manage some cost savings, rates would
still climb, due to the pass through costs of $2 million from the KIUC’s
accepted new KPP plant in 2002.
The cause of these dreary expectations is,
of course, the huge interest costs KIUC will incur because of the unwise level
of the purchase price. (In spite of their putting off principle payments for 2
and 4 years on the CFC and RUS loans, each $113.25 million.)
Bob maintains
that it is a good idea to transition from fossil fuels to alternative energy
sources and says that KIUC is the best way to achieve this. He fails to take
into account that with the new massive costs in a fossil facility, KIUC will
need to amortize its investment and this factor will restrain it from pursuing
alternative energy ideas.
Bob says that there is no way it could be left to
the ratepayers to determine whether they approve the deal negotiated by the
three organizers. Obviously he feels that it is perfectly all right to
involuntarily thrust a $300 million commitment on people without giving them a
democratic voice in the matter. Will it take a class action lawsuit for these
fundamental rights to be protected?
Bob then raises his contention that
there is no alternative to the KIUC deal. Nonsense. The best thing that could
happen to the people and businesses on Kauai is to have the PUC reject the
deal. Citizens Utilities will still want to sell KE and KIUC would have the
opportunity to profit from the very considerable mistakes it has made and
negotiate a new deal, with a substantially reduced price and better terms. It
would have little or no competition, as the phantom bidder, Cap Rock Energy,
appears overcommitted elsewhere.
Finally Bob says, “we should trust” the
KIUC organizers. We have heard this type of request before, and we know that
trust needs to be earned not bestowed where it is not. People should look
beyond the perception that a cooperative is a good form for an electric utility
and view thoughtfully the shoddy negotiation, the misrepresentations made and
the abuses to members rights the organizers have imposed. This present
transaction will be a disaster for Kaua’i and we should not allow it to
occur.
P. Neil
Princeville