County-funded report favors county LIHU’E – Nancy Heller Hughes, a senior director from the Seattle office of R.W. Beck, presented the results of the consulting firm’s study of future Kaua’i Electric ownership to the County Council and a roomful of
County-funded report favors county
LIHU’E – Nancy Heller Hughes, a senior director from the Seattle office of R.W. Beck, presented the results of the consulting firm’s study of future Kaua’i Electric ownership to the County Council and a roomful of interested citizens Wednesday morning.
Beck was hired by the county to do a feasibility study of potential financial results under different ownership scenarios.
Hughes said she considered investor, cooperative and county ownership.
The review, according to Hughes, identifies the financial impacts of various ownership scenarios but does not define the “fair market value of the electric system” or “recommend who the system owner should be.”
Despite the fact that Kaua’i Electric and its mainland-based owner, Citizens Communications, “declined to cooperate” with the Beck study, Hughes said there was more than enough data available with the state Public Utliities Commission to do the review.
She reported continued current ownership of the utility would force customer rates, already among the highest in the country, to go even higher.
Hughes projected a rate of increase of 10 percent or more “will likely be needed before 2004.”
Further, Hughes predicted that purchase of the system by an investor equal to or above net book value (approximately $174 million) would result in higher rate increases than the 10 percent projected under current ownership.
According to Hughes, a cooperative could pay a purchase price of $185 million and not have to increase rates for five years.
Hughes further noted that county ownership could “offer rates approximately 4.5 percent less than a cooperative” at the same purchase price.
Hughes, who was introduced Wednesday by Mayor Maryanne Kusaka, said the appraisal Beck is doing for the county, due to be completed by November, “should help with establishing the utility’s fair market value.”
Kaua’i Island Utility Co-op appears to be the frontrunning potential buyer of Kaua’i Electric in Citizens Communications’ eyes. During a conference call last week with analysts to the company’s financial performance, chief executive officer Rudy Graf said Citizens plans to file an application with the Public Utilities Commission to sell the utility to the co-op for $215 million.
The commission rejected a proposed sale to the co-op last year, when the price was $270 million. Federal, state and county officials objected to the deal.
The general results of Beck’s sstudy were announced last month, but Wednesday was the first time Hughes spoke publicly about the study to the council.
Council man Daryl Kaneshiro asked Hughes about the possible complications if the county gets involved in condemnation proceedings to obtain Kaua’i Electric.
“Any costs associated with condemnation proceedings are not included” in any studies, Hughes replied. “We haven’t done an operational analysis” or considered “environmental risk.”
She said the county must “be prepared ultimately to exercise the right of condemnation, but if you can avoid doing it, avoid all that litigation. I usually like to see a negotiated settlement. It’s quicker” and less costly.
Hughes repeatedly reminded the council and the assembled citizens that:”the feasibility analysis is not an appraisal of the Kaua’i Electric system to be used for purposes of valuation. R.W. Beck has been retained by the county to perform an independent appraisal to determine the estimated fair market value of Kaua’i Electric.”
Staff writer Dennis Wilken can be reached at 245-3681 (ext. 252) and mailto:dwilken@pulitzer.net
