The Kaua’i Island Utility Co-op hoping to close the deal to buy Kauai Electric said announcement of its $215 million agreement with KE parent Citizens Communications Company yesterday marked a “historic day for the people of Kaua’i.” Kaua’i County Council
The Kaua’i Island Utility Co-op hoping to close the deal to buy Kauai Electric said announcement of its $215 million agreement with KE parent Citizens Communications Company yesterday marked a “historic day for the people of Kaua’i.”
Kaua’i County Council Chair Ron Kouchi, a candidate for mayor, has said that the sale of Kauai Electric and the island’s solid-waste woes are the top two issues facing the island.
Gregg J. Kinkley, state consumer advocate, agrees that the transfer of ownership of KE from an investor-owned to ratepayer-owned utility is “a big issue for Kaua’i.”
The “definitive agreement” between Citizens and KIUC was announced by both parties Wednesday, with KIUC saying it expects to file an application for ownership transfer with the state Public Utilities Commission within a few weeks.
The PUC, which by state law must approve of the sale before it can be finalized, took four months of deliberation nearly two years ago before rejecting the initial sale attempt.
But then the sale price was $270 million, and there was substantial opposition to the sale, from the public as well as county, state and federal entities.
In 2000, the U.S. Department of Defense, state consumer advocate and County of Kaua’i all intervened and opposed the sale, stating among other things that the sale price was too high to ensure Kaua’i ratepayers would not face further rate increases.
Kaua’i residents and businesses pay some of the highest electric rates in the country. Kaua’i Electric has 31,000 customers.
The cooperative is more hopeful of PUC approval this time around, in part because the renegotiated purchase price is $55 million less than the 2000 price.
“For now it is safe to say that, at the $215 million price, the financial picture for the cooperative is very encouraging in terms of rock-solid financial stability and using the buildup of equity over time to directly benefit KIUC’s member-owners,” said Gregg Gardiner, KIUC board chairman.
“This is a historic day for the people of Kaua’i,” he said. Converting KE to a customer-owned cooperative “will provide benefits to the residents of Kaua’i, the most important of which will be transitioning KE from investor ownership to a structure where all profits, totaling tens of millions of dollars over the next 10 years, will be owned by the customer-members of the cooperative,” he added.
The cooperative plans to keep KE’s employees and management team if the PUC approves the sale. “They have been doing a great job and deserve the support of everyone on the island during this time of transition,” he said.
“Once we have finalized and filed our application with the Public Utilities Commission, we will be able to discuss the details in more specifics,” Gardiner continued.
Financing could come from either the Rural Utilities Service of the U.S. Department of Agriculture, the nonprofit National Rural Utilities Cooperative Finance Corporation, or a combination of the two.
Either way, current interest rates continue to make it a borrower’s market.
“Based on today’s historically low interest-rate climate, we could not have picked a better time than right now to do this transaction,” said Gardiner.
In a cooperative model of utility ownership, revenue that comes in over and above cost is paid back to each customer, based on the customer’s percentage of electricity usage.
Once the cooperative reaches a level of adequate financial strength, it can begin making refunds to customers, called “patronage capital” payments.
There are over 930 electric cooperatives in the United States, serving 35 million people. As in other cooperatives, customers on Kaua’i will elect the board of directors and have “a significant say over their energy future,” Gardiner said.
Kinkley, the executive director of the state Department of Commerce and Consumer Affairs Division of Consumer Advocacy, said his office by law is charged with representing the public, the ratepayers, in cases like the proposed sale before the PUC.
The division is automatically authorized to intervene, but in some transportation cases simply offers to the PUC a short written opinion, as opposed to full-blown intervention when series of information requests are made of the buyer and seller, Kinkley explained.
Sometimes, when the consumer advocate prefers to simply offer a written opinion on an application, the PUC asks the consumer advocate to take a more active role in an application, he continued.
The PUC must vote to grant intervenor status before entities like the county and federal government would be allowed to intervene, he continued.
The governmental entities, as well as individuals and other interested parties, must show compelling interest or valid complaints before the PUC would grant them intervenor status, Kinkley said.
Just being a big electric customer, as both the Navy’s Pacific Missile Range Facility and County of Kaua’i are, is not enough to be granted intervenor status, he explained.
A key question the PUC would have to answer in the affirmative before granting others intervenor status, according to Kinkley, is would other intervenors ask different questions, or represent different interests, than the consumer advocate?
Wally Rezentes, Sr., administrative assistant to Mayor Maryanne Kusaka, said after the PUC filing is made, the administration will review the documents, decide whether or not to intervene, then make a recommendation to the County Council on which way the administration thinks the county should proceed.
The Navy’s rate intervention office in Washington, D.C. intervened in the last application. A spokesman from that office was not available for comment Wednesday.
Staff Writer Paul C. Curtis can be reached at mailto:pcurtis@pulitzer.net or 245-3681 (ext. 224).
