The Kaua’i Island Utilities Cooperative board continues to negotiate with Citizens Communications, trying to buy Kaua’i Electric. We, and our county government, should support them. A cooperative is still the best answer for Kaua’i. Looking back, it is true that
The Kaua’i Island Utilities Cooperative board continues to negotiate with
Citizens Communications, trying to buy Kaua’i Electric. We, and our county
government, should support them. A cooperative is still the best answer for
Kaua’i.
Looking back, it is true that some mistakes have been made. We
should learn from them and go forward. One important lesson is that the Public
Utilities Commission is unlikely to approve a sale of KE at a price anywhere
near $270 million. The commission decision handed down seems to indicate that
they would only approve the sale at a price much closer to the book value of
$180 million.
Looking forward, there are several possible alternatives
for KE:
* Citizens may elect to keep KE, request an increase in rates and
treat KE as a cash cow. Apparently they already qualify for higher rates. As
oil prices soar (and there is no way to stop them in the short run), we will be
hit with a double whammy.
* Citizens may stick to their plan of getting
out of the electric power business and invite new offers from private power
companies. The commission would probably approve a price somewhat higher than
book value and we would certainly face immediate rate increases similar to
those if Citizens keeps KE.
* Citizens may yet sell to the co-op. The
utilities commission approval would depend on the price being substantially
less than $270 million and on other modifications in the original offer to
better protect interests of the ratepayers. Compared to continued ownership by
Citizens or some other private company, the co-op would charge lower rates
because it would save on taxes, would not need to generate profits, and would
save on insurance because of the FEMA coverage.
* The county may persist
in attempting a so-called unfriendly takeover of KE in order to “buy” KE at a
low price. Unless they offer a price close to what Citizens could get from a
private company or the co-op, the county faces a long court battle, and we will
pay for it, with the outcome uncertain. We think it likely they would end up
paying about the same as either a private company or the co-op. The county
would have to charge rates similar to the co-op’s rates.
Given these four
alternatives, the co-op clearly offers the best hope for rate relief. In
theory, the county might offer similar relief. In the real world, taking on KE
would pose a number of new management challenges for the county. We all know
the county’s plate is already full when it comes to management challenges. Need
we mention junk cars, landfills, garbage processing, recycling, lifeguards,
park maintenance, and solving traffic problems, to name a few? The county is
making slow progress on these. Would not adding KE to the list tend to break
the bank?
At least two spurious issues have been raised regarding the KE
sale. One is the matter of selection of the co-op board of directors. True, the
public had no say in selecting the current group of volunteers. However, if the
sale to the co-op goes through, ratepayers will begin selecting directors in
two years and will have had the opportunity to have replaced the entire current
board in six years. In the meantime, remember that no ratepayer has ever had
any violence in selecting the Citizens board of directors without first buying
stock. Nor will we have more of a voice in selecting the board of any other
private company.
Second, there are those who think we can and should
seize this opportunity to scrap the old and switch to alternative energy
sources. Even if viable alternatives were available, it would take years and
major capital investments to replace the equipment KE already has. This is a
moot point because, unfortunately, no viable alternatives do exist that can
provide reliable 24/7 power and are cost-competitive with KE’s current
technology.
This is not to say that there are not interesting new
technologies coming along. They just aren’t germane to the sale of KE at this
time.
In closing, we urge that both the county government and the
knowledgeable critics in our communities join forces with Kaua’i Island Utility
Cooperative to help resolve the admitted problems with the original bid and
gain utilities commission approval for the co-op’s purchase of KE.
JOHN
LOVE
Kapa’a