LIHU‘E — The Kaua‘i Island Utility Cooperative took another step toward its proposed rate hike on Tuesday when the Board of Directors unanimously passed a plan to increase revenue by 10.47 percent. Chief Financial Officer David Bissell, who was traveling
LIHU‘E — The Kaua‘i Island Utility Cooperative took another step toward its proposed rate hike on Tuesday when the Board of Directors unanimously passed a plan to increase revenue by 10.47 percent.
Chief Financial Officer David Bissell, who was traveling Tuesday and not at the board meeting, said in a Friday phone interview that a 10.47 percent increase in revenue would require a similar hike “across the board” in user electricity rates. An increase of that size would push KIUC’s Times Interest Earned Ratio toward 2.5, a TIER Bissell described as “within the industry standard for cooperatives.”
In order to make good on its covenant with lenders, KIUC needs to maintain an average TIER of 1.25 for the best two years of every three-year rolling period. Bissell said the co-op’s TIER last year was just under 2.0, meaning KIUC needs to achieve a TIER of no worse than 0.5 — which represents about a $2.5 million loss — this year or next.
Bissell said a TIER ratio that bad this year was “not beyond the realm of possibility but very unlikely,” meaning the rate increase is designed to stabilize the co-op’s finances and not necessarily prevent imminent doom.
“We request what’s a reasonable amount; there’s no bottom line we absolutely need,” he said. “We come in with a reasonable amount and we hope that they (the Public Utilities Commission) grant it.”
If the rate increase granted by the PUC ends up being larger than necessary and puts KIUC further into the black than is currently anticipated, the extra money could remain valuable to members either through patronage funds (a refund) or reinvestment in capital projects and renewable projects, something Bissell said was part of the benefit of having a co-op rather than an investor-owned company.
The Tuesday vote was the second official move made by the KIUC board toward the hike. On April 28, the body approved the Equity Management Plan, which “addresses future capital projects and addresses the co-op’s financial needs over the next 10 years as it seeks to pay off loans and build up equity,” according to the KIUC Web site.
However, Bissell said the board has not yet taken the step of officially approving the filing; he said that could happen at a Board of Directors meeting on June 23.
The paperwork would likely be filed with the PUC within about a week of board approval. The PUC’s ruling on the case, which will weigh testimony from consumer advocacy groups and others, could come up to a year later and could grant the full rate increase or some portion thereof.
The public will have an opportunity to learn more about the proposal and ask questions of KIUC at the co-op’s third rate increase informational meeting from 6-8 p.m., Wednesday, at the War Memorial Convention Hall in Lihu‘e. Previous sessions were held March 19 and April 21.
For more information, call KIUC at 246-4383 or visit www.kiuc.coop and click “KIUC Rate Information Update.”
•Michael Levine, assistant news editor, can be reached at 245-3681 (ext. 252) or mlevine@kauaipubco.com
