Kauai Island Utility Cooperative continues to be a source of controversy and concern for our community. Since its inception, questions have arisen as to its irresponsible claim that its first proposed purchase of the Kauai Electric business of Citizens Utilities
Kauai Island Utility Cooperative continues to be a source of controversy and concern for our community. Since its inception, questions have arisen as to its irresponsible claim that its first proposed purchase of the Kauai Electric business of Citizens Utilities for nearly $300 million was defensible. Defensible as to the justification of the price ultimately paid, as to KIUC’s lack of recognition about the effect on consumer rates of the steeply climbing fuel prices over recent years, as to its failure to implement increased power generation from non-fossil fuel sources and as to its failure to communicate to its members about its financial and operating problems.
The purchase of its business is now history and nothing can be done to change it. But the inadequate evaluation of the obsolete generating facilities at the time of the acquisition is an ongoing concern. The sad fact is that the useful life of the ‘Ele‘ele fossil fuel plant is essentially over, and its capacity needs to be replaced. The unwillingness of KIUC to act on this replacement for the over five years it has operated the business has reduced the options it should have had to put in place replacement facilities with other than fossil fuel power. While KIUC made an early and appropriate decision to acquire the Kapaia naptha plant to provide a dependable base for producing the major part of the electricity demand of its customers, its tentative steps thereafter are disturbing.
The financial position of KIUC has been a constraining reality for its management. At year end, 2006, KIUC had a remaining long-term debt of about $230 million owed from its purchase of the KE business and the Kapaia plant. The acquisition of any new generating facilities by purchase would raise this amount while a buying of the output only would over time prove more costly. As access to further credit may well determine what KIUC can do, the willingness of KIUC’s current lenders, principally the Federal Rural Utility Services, to provide further funding should have been more carefully investigated.
There is also a concern as to the nature and type of the replacement power facilities. Many of the sustainable sources do not provide continuing assured power. Wind and solar power, for example, both depend on weather conditions, and the power they generate cannot be stored. The discussions with Gay and Robinson about power from bagasse are promising, but seasonal shutdowns are a problem. Alternate power sources will require governmental approvals which are time consuming and uncertain. A great deal more should have been done.
Last year the KIUC Board of Directors adopted a plan calling for at least 50 percent of the power production to come from non-fossil fuel sources by 2023. The production goal is meritorious. While it cannot be achieved immediately, 15 years is far too long. The interests of Kaua‘i’s consumers who are suffering from critical power rates mandate that the contemplated conversion to sustainable power be achieved as early as practicable.
A different problem area for KIUC is the penchant that its staff and directors have for secrecy. KIUC is an organization that conducts its business in its own geographic area without competition. While most commercial enterprises have a need to have important aspects of their operations kept confidential because of competitive threats, that consideration is not a meaningful factor at KIUC.
What is critically needed is a thoughtful dialogue between KIUC and its community as to KIUC’s direction, the problems KIUC is facing and what are the potential solutions to them that would be in the best interests of the Kaua‘i power users who are, after all, the owners of the business.
Unfortunately, the attitude of the KIUC board seems to be to restrict discussion rather than engaging in it proactively. Under the pressure of the Sarbanes-Oxley law, KIUC 2006 financial information is now publicly furnished, but it is more than 15 months old, and no more current or other financial information has been made available.
The recent re-election of three incumbent KIUC directors has served to enhance the paranoia that the KIUC directors have. It is illustrated by their policy to restrict public statements by any director other than the chairman without his approval. Although this may well be an unlawful prior restraint on freedom of speech, more importantly it diminishes the opportunities for adequate consideration of the issues facing the cooperative. As many of the alternatives that KIUC will be examining will require public acceptance and governmental approvals, positive relationships and transparency are essential. KIUC is not unaware of its public relations needs, but to date its efforts have been mostly pie in the sky and trivia. A reorientation of its communication philosophies should occur.
The brutal reality is that Kaua‘i residents and businesses are being held captive to electric power charges that are the highest in the country and are adversely affecting family budgets and business profitabilities. This is a community wide dilemma. While the KIUC directors and staff must make the vital decisions, they will require community understanding and acceptance in order to implement at as early a date as may be feasible the programs that will mitigate these burdensome costs.
• Walter Lewis is a resident of Princeville and writes a bi-weekly column for The Garden Island.
