LIHU’E – There are at least three reasons why the state consumer advocate feels the state Public Utilities Commission shouldn’t approve the sale of Kaua’i Electric to a locally owned cooperative: “Debt, debt, debt.” Gregg Kinkley, new executive director of
LIHU’E – There are at least three reasons why the state consumer advocate feels
the state Public Utilities Commission shouldn’t approve the sale of Kaua’i
Electric to a locally owned cooperative: “Debt, debt, debt.”
Gregg Kinkley,
new executive director of the Division of Consumer Advocacy in the state
Department of Commerce and Consumer Affairs, yesterday told the Kaua’i County
Council’s Public Safety and Services/Intergovernmental Relations Committee that
he hates to be a naysayer.
But it is his job to say “no” when an idea
doesn’t make sense, and the Kaua’i Island Utility Co-op’s plan to buy Kaua’i
Electric for $270 million is “just not a good idea for the people of Kaua’i,”
Kinkley said.
He said the the two parties’ agreed-upon sale price-about $90
million over the estimated book value of KE-has been a major point of
discussion regarding the sale.
“This is very serious business. The people
of Kaua’i shouldn’t be saddled with this kind of debt,” Kinkley
said.
Kinkley, who worked as an attorney for 15 years in private practice
in Chicago-some of that period spent on advising financing packages for large
acquisitions-questions the feasibility of the KE-co-op deal.
“There are
several difficulties with the proposal,” including the fact that the co-op
proposes to finance the entire sale amount, he said. “This credit comes at a
price. The most potentially unnerving, unfair and out of control” aspect of the
proposed sale is the credit terms in the sales documents.
If those
financial covenants aren’t met, the whole deal could die, said Kinkley.
He
said the new ownership of the co-op being beholden to the mainland-based
National Rural Utilities Cooperative Finance Corp., would be similar to KE
being beholden to its mainland parent company, Citizens Communications.
The
Public Utilities Commission and his office have common clients in the people of
Hawaii, said Kinkley, adding that KE’s aging power-generating units and the
industry’s rapidly changing technology make the proposed sale suspect as
well.
“Clearly, you need to do something,” he told the council
committee.
Kinkley said the issue of setting a “fair price” for KE might be
discussed today in Honolulu at a meeting of the buyer, the seller, the
commission and the three parties that have been granted intervenor status and
earlier this month took formal positions against the sale: Kaua’i County,
Kinkley’s office, and the Navy (Department of Defense).
Co-op officials
have indicated the possibility of restructuring the initial deal into one that
the commission would approve.
Supporters of the proposed sale say it will
benefit Kaua’i by preventing any rate increases for at least five years,
creating jobs, providing financial protection against major disasters such as
hurricanes, saving money now paid to shareholders and for income tax, and
putting the utility under local control.
Several speakers at yesterday’s
meeting supported the Division of Consumer Advocacy’s opposition to the
sale.
Walter Lewis of Princeville noted the two options before the
commission are to deny the sale or approve a restructured sale at a lower
price. He said the co-op didn’t thoroughly examine the physical plant and other
assets of KE. He recommended further reviews by several neutral third-parties,
including:
* Investment bankers.
* Qualified consultants to place a
value on KE’s plant and assets, examine the quality and ability of KE’s
management to run the utility and take a fine-tooth comb to the purchase
agreement.
* Professionals to study urrent and future projected power
usage.
* Consultants to examine whether Kaua’i Power Partners’ agreement to
build an electric-generating unit near the road to Wailua Falls is an asset or
liability.
* And an accounting firm to establish a price for KE.
David
Seielstad, also of Princeville, said the current board of the co-op doesn’t
represent the people of Kaua’i. And he said the proposed purchase price will
make it hard, if not impossible, for the co-op to stabilize or reduce power
rates.
All the sale will do, Seielstad said, is line the pockets of
Citizens Communications.
Hanalei resident Ray Chuan said others who have
made presentations to the County Council could and should learn from Kinkley’s
“succinct” presentation, which included “no spin, no pr.”
The people of
Hawaii and Kaua’i are being served well by Kinkley, said Chuan, who offered a
presentation “to the point, not pulling the wool over our eyes.”
The
federal Environmental Protection Agency says oil-burning electric-generating
plants are the world’s greatest polluter this year, and that KE’s transformers,
potential fuel leaks, and PCBs (polychlorinated biphenyl, a potential
pollutant) are expensive environmental accidents waiting to happen, said
Michael Edwards, another citizen.
Councilman Bryan Baptiste, who requested
Kinkley’s briefing, said he hopes all involved parties can reach a workable
solution.
Councilmember Daryl Kaneshiro said he hoped the committee meeting
helped increase public knowledge about the sale issues.
Staff writer
Paul C. Curtis can be reached at 245-3681 (ext. 225) or pcurtis@pulitzer.net
