LIHU’E — A Kaua’i group urged a County Council committee yesterday to recommend the state Public Utilities Commission scuttle Kaua’i Island Utility Cooperative’s $270 million proposal to buy Kaua’i Electric. Led by North Shore Ray Chuan, a community ad hoc
LIHU’E — A Kaua’i group urged a County Council committee yesterday to
recommend the state Public Utilities Commission scuttle Kaua’i Island Utility
Cooperative’s $270 million proposal to buy Kaua’i Electric.
Led by North
Shore Ray Chuan, a community ad hoc group said the PUC should reject the sale
because chiefly for these reasons:
* The sale price is too high.
* The
KIUC bylaws don’t adequately represent members of the group.
* KIUC hasn’t
fully explored an alternative energy generation technologies that could produce
electricity more inexpensively than fossil fuel-burning machinery currently
used by Citizens Utilities Company.
“We want the PUC to reject the sale,
start from scratch and have Citizens Utilities put it up for sale again, “
Chuan said after a meeting of the Council’s Public Safety &
Services/Intergovernmental Relations Committee.
But if the PUC doesn’t
approve the sale, Kaua’i electrical users can expect to be hit with higher
electricity bills, KIUC Board Chairman Gregg Gardiner said after the
meeting.
If Citizen Utility decides to keep the company, it will petition
the PUC for a rate increase, Gardiner said.
“They aren’t earning the 9.23
percent the PUC allows,” Gardiner said. “They have put in roughly $30 million
in improvements since 1995 and they haven’t recovered that.”
If Citizen
Utilities sells the company, the new owner will petition the PUC for a rate
increase to recover the cost for the purchase, Gardiner said.
The PUC’s
approval of the sale of the utility to KIUC is Kaua’i’s best bet, Gardiner
said.
“It is a way for Kaua’i to take control of its destiny.”
Some of
the 15 or so Kauaians who attended the Council meeting disagreed and complained
the $270 million sale was a bad one.
Chick Lanphier, a registered
investment advisor and member of the ad hoc committee, said the $270 million
price tag is too high, considering the blue book value of the company is $180
million.
“The proposed purchased price of $100 million over the book value
got my attention,” Lanphier said.
Gardiner said KIUC didn’t have many
purchase options and bought the utility at the asking price of $270 million.
The market also determined the price, Gardiner said.
Seven business
interests initially bid for the utility, with four making it through the final
bidding stages. Two bidders emerged, with KIUC wining the nod and buying the
utility from Citizens in February this year, Gardiner said.
The finalist,
Caprock from Texas, bid higher than KIUC, but Citizens selected KIUC because
it felt the nonprofit group’s finances were in better order, Gardiner
said.
If PUC approves the KIUC sale, Kauaians will have to pay higher
electricity bills to keep the utility going, said Kauaian Glenn
Mickens.
“There is no way this huge debt can be handled without raising
rates,” he said.
Lanphier said it was “stretch” for KIUC to say it can
borrow and operate the facility with no rate increases to
customers.
Gardiner has stated publicity he doesn’t anticipate rates being
increased for at least 10 years should the PUC sale go through.
Stiff
opposition to the PUC approval also came from ad hoc members Walter Lewis, a
retied corporate attorney, Michael Edwards and Lanphier and other critics.
They complained:
* KIUC, Lewis said, committed itself to the sale without
support of any members from the group.
“It’s true,” Gardiner said.
But
he noted any user of electricity can become a member after the PUC sale is
approved.
* Saying the $270-plus million purchase amounts to about $5,000
for “each man, woman and child on Kaua’i, Lewis complained such a huge
commitment made by KIUC board members without approval by residents amounts to
“taxation without representation.”
Gardiner responded by saying all
electricity users will pay the same rate, but those who do become members will
gain equity or ownership in KIUC.
* Lewis complained the KIUC board adopted
bylaws which have curtailed the rights of its members.
Gardiner said Lewis’
complaint was based on bylaws that were in effect in April.
To accommodate
public concerns that bylaw clauses are restrictive and don’t benefit the
community at large, the KIUC board ratified new bylaws on June 14, after the
County Council offered input, Gardiner said.
* Some people complained the
nonprofit board seemed reluctant to make changes in the bylaws.
Gardiner
said KIUC has made changes and will continue to make changes, based on issues
raised by residents, the Consumer Advocate, the state PUC, the IRS, which to
approves bylaws for organizations with nonprofit status, and state and county
agencies.
* Lewis complained the bylaws conflicted with the requirements of
the Securities and Exchange Commission, a federal agency that regulates
publicly owned corporations.
* Lewis also complained that bylaw clauses are
amended only by the KIUC board.
Because there are no members yet, changes
in the bylaws “will have to stay in the control of the board of directors,”
Gardiner said.
The board members have no special interests in the sale and
were selected to sit on the board because of their expertise, Gardiner said.
The board includes bankers, engineers and lawyers, he said.
* Lewis
complained the bylaws call for 20,000 members to be in attendance in order for
KIUC to conduct business.
Gardiner said the bylaws have been revised to
require a quorum of only 2,000 members for action and that they can vote on
issues by ballot.
* Lewis complained a 6-year term for a board member is
too long.
Gardiner said the 6-year term will enable board members to
continue to serve the community.
“You need continuity and corporate
knowledge forward,” Gardiner said. The term of the KIUC board member is
patterned after that of a U.S. senator.
* Lewis said KIUC board should
allow all KIUC members a chance to voice their concerns.
“Those interests
demand that members shall have a reasonable opportunity to participate in the
corporate affairs of KIUC and to be able to meaningfully act to select its
directors,” Lewis wrote in a statement.
Gardiner said KIUC has held 13
community meetings over the last two months and “took careful note of what the
community wanted.” The state Consumer Advocate also attended all the meetings,
he said.
* Edwards complained KIUC would be engaging in a discriminatory
practice by charging some KIUC members a fee and not charging other
members.
Gardiner dismissed the complaint, saying current users would
automatically become members at no charge if they are current users of
electricity.
Under a resolution passed by the KIUC board, any users who
wishes to join KIUC after the PUC sale is approved would pay a fee of $10,
Gardiner said.
A bylaw provision saying fees could be assessed at up to
$100 will cover future administrative costs for new members, Gardiner
said.
* Kilauea resident Blake Drolson said the Kaua’i Electric facility is
outdated and buying it can be likened to “buying an “old mainframe computer,
right before personal computers became widely available.”
Gardiner said
only a few components of the Kaua’i Electric’s energy generating system at Port
Allen are old.
The rest of the system functions efficiently because it is
maintained, Gardiner said.
“The two largest units are turbine units, and
they are overhauled on a regular basis,, just like airplane engines are,”
Gardiner said.
Drolson said KIUC should not settle for a facility that is
reliant on fossil fuel and should open its eyes to alternative energy
generation technologies that will down the cost of producing
electricity.
Fuel cells, he said, is a battery-like device which uses
hydrogen gas to produce electricity inexpensively.
All auto manufacturers
have fuel cell cars in the works, and the technology can be used on Kaua’i to
generate electricity, Drolson said.
Gardiner said the fuel cell technology
is “great, but we don’t have natural gas to drive them and propane is too
expensive.”
Others suggested KIUC set up a new system altogether, using
solar, wind or hydropower.
It is a suggestion well taken, Gardiner said,
and KIUC will consider them at a later date, but only to complement the
Citizens Utilities’ fossil-fuel equipment at the Port Allen facility.
