Co-op ownership of KE is still the best answer

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


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


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


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.





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