In 2001, Citizens Utilities Co. decided it would sell its utilities holdings to orient its activities to the communications industry. One of its positions was Kauai Electric (KE), Kauai’s electric utility. A group of inexperienced Kauai citizens, headed by Mr.
In 2001, Citizens Utilities Co. decided it would sell its utilities holdings to orient its activities to the communications industry. One of its positions was Kauai Electric (KE), Kauai’s electric utility.
A group of inexperienced Kauai citizens, headed by Mr. Gregg Gardner, discovered that the cooperative form of ownership was being used elsewhere for electric utilities and decided to try to acquire KE. Citizens manipulated the Kauai citizen group into making a grossly excessive bid of $300 million for KE. KE’s financial statement net worth at the time was about $175 million.
When the proposed transaction was submitted for Hawaii Public Utilities Commission approval, it was denied as the Commission properly found that the cooperative group, calling itself KIUC, could not make the acquisition at that price without increasing electric rates.
While this initial bid was excessive, it regrettably framed the issue for a 2002 KIUC effort for approval. When KIUC presented its second buy proposal at $220 million it argued that it could pay that price and also avoid rate increases. The Commission accepted that contention and approved the transaction, but the issue that should have been the controlling one — what is a fair price — was never resolved.
As a result, KIUC paid about $45 million too much and that amount enriched the citizens shareholders and has become part of the burden of KIUC customers.
From its outset, KIUC management (its officers and directors) abused the rights of its owners — the customers — by adopting by laws and other procedural rules that sheltered the management and deprived the owners of rights properly theirs.
While KIUC is not subject to regulations that have been set by the Securities and Exchange Commission for corporate democracy to protect the rights of shareholders in publicly held corporations, they would have been far better than the draconian rules KIUC management imposed on its members so that the management would have virtually absolute control over the conduct of KIUC’s affairs.
When KIUC set about to create arrangements that would comply with the state’s mandate to diversify away from reliance on fossil fuel for its power-generating facilities, KIUC resurrected the criteria it had successfully employed in its initiation — would the transaction result in increased customer electric rates.
Again the Commission meekly acquiesced and did not adequately examine the better question — whether the transaction would optimize the interests of the KIUC members. Several transactions were made on terms that should have been more favorable.
So when the KIUC management concluded it would be advantageous for its customers to have smart meters, it had its game plan all worked out. Misinform the customers about the costs and benefits of smart meters, turn to the federal government to obtain subsidies for its program and follow its pattern about offering deceptive choices.
It seems apparent that KIUC was determined to initiate usage of smart meters, at least in part, because it believed that obtaining customer usage information with smart meters would be less costly than getting such information from conventional meters.
While we have no more reason to trust KIUC’s computations than say those of our federal government relating to Obamacare, the KIUC management now is proposing to charge those of its customers who wish to retain their conventional meters $10.57 per month ostensibly because that amount is claimed to be the differential in cost between conventional and smart meters.
But the 3,000 or so KIUC customers who want to retain conventional meters have done nothing to justify their costs being increased except to displease KIUC for wanting to keep the meters they were given by KIUC or its predecessor.
KIUC is again following its propensity to offer a false choice. What KIUC should have done is to offer those customers who are willing to accept smart meters a reduction in their charges corresponding to the savings KIUC realizes. If the 27,000 KIUC customers now with smart meters had their charges reduced by the differential claimed it would reduce KIUC revenues by up to $3 million per year. However, that would be unthinkable to a management concerned more about growing its revenues than serving its customers.
The latest episode concerning smart meters is not a matter of key financial significance, but it illustrates an ongoing characteristic that seems to permeate the mentality of KIUC management.
Their motivation is misdirected. Instead of seeking to serve their members who are incurring costs for electric service among the highest in our country by reducing their rates wherever reasonably possible, they want higher KIUC revenues.
With the impotent Public Utilities Commission seemingly unable or unwilling to provide a corrective influence, it is deeply disturbing that the management of an organization that is owned by the people of our county provides misinformation and inappropriate choices to them.
Walter Lewis writes a regular column for The Garden Island.
