At the state Public Utilities Commission’s public hearing Wednesday the Kaua’i Island Utility Cooperative found widespread support for the group’s proposal to buy Kaua’i Electric for $215 million. Opponents to the sale of Kaua’i Electric to the cooperative speaking before
At the state Public Utilities Commission’s public hearing Wednesday the Kaua’i Island Utility Cooperative found widespread support for the group’s proposal to buy Kaua’i Electric for $215 million.
Opponents to the sale of Kaua’i Electric to the cooperative speaking before the commission were well outnumbered by proponents among the about 90 speakers who signed up to state their views.
The hearing began at 4:30 p.m. and ran for over five hours. About 300-400 people attended the meeting.
Among the first 20 people testifying at the Kaua’i War Memorial Convention Hall, only Mayor Maryanne Kusaka lodged objections.
She contended KICU’s proposal does not conform to recommendations from her “governance committee” on the management of the utility and the utility’s purchase price.
The committee, which studied the issue, proposed an independent power authority to manage the utility.
Kusaka also said KIUC failed to uphold certain parts of an agreement the county and KIUC reached in September, 2000.
One agreement became null and void when it became “clear to us that KIUC didn’t have the authority to make certain assertions on behalf of Citizens Utilities (the name Citizens Communications previously used),” Kusaka said.
Until these “concerns and breaches are meaningfully addressed,” Kusaka said she will withhold support for the sale.
But supporters, including business and community leaders, and representatives of most of the heaviest users of electricity on Kaua’i, said KIUC’s purchase price is below the market value, would allow ratepayers more control over electricity rates and would allow KIUC to apply for federal assistance for repairs after natural disasters.
Other critics contented that the sale price is too high and that KIUC will not able to produce savings for ratepayers because of the high cost involved in paying back loans for the utility’s purchase.
Residents voicing support for the sale to KIUC included:
– Ralph Santasieno of Kapa’a, who said a utility owned either by a private company or Kaua’i County will not serve the best interest of the public.
The public should “count ourselves fortunate to have KIUC…To help bail us out,” Santasieno said.
– Andrew Nickles, a Lihu’e developer and contractor. He said he was impressed by KICU’s tenacity in pursuing the completion of the utility purchase.
“They have taken the fight for 34 months,” Nickles said. “This is the type of energy I would want running a utility company.”
– Ray Paler, a Kaua’i businessman and a declared candidate for the Kaua’i County in this year’s election, said he survived four hurricanes, including Hurricane ‘Iniki, which severely damaged the power system and required extensive private funding for repairs.
With KIUC running the utility, the nonprofit group could apply for federal repair funds.
– Rod Lau of the Kaua’i Marriott Hotel said his hotel and the Marriott Waiohai Hotel, which is under construction, will be among the biggest electricity users on the island collectively.
Hundreds of employees and the community will benefit from the takeover of the utility by KIUC, he said.
– Jim Hill of the Outrigger Kiahuna Plantation Resort said PUC’s approval of the sale means residents have a chance “at local control.”
In addition, the likelihood of a rate reduction and “future direction” will come from “a proven entity” like KIUC.
Hill said he has reviewed KICU’s business plan knows some of the people who put together the deal together and feels confident that they have put together a product that will benefit the island.
– Geno Beltrane of the Lihue Theater Senior Apartments said that because senior citizens live on fixed incomes, they face a difficult time of paying for basic necessities. Paying higher electricity rates is the last thing they want, said Beltrane, adding “KIUC is the only option to control rates.”
– John Bertrand, a retiree, said KIUC is the best option for operating the utility and that he wouldn’t want the county to run it because “there is too much bureaucracy.”
Kaua’i County has not had much success in running solid waste programs or recreational projects. If the county government failed in such projects, it is likely to do the same in running a power utility, he suggested.
– In a written text, Margy Parker of the Poipu Beach Resort Association, said the sale, as it relates to controlling rates, puts “citizens back in the drivers seat.”
– In other text material, Mamo Cummings of the Kaua’i Chamber of Commerce said “I personally know, and professionally trust the members of the KIUC board. KIUC is a good deal for Kaua’i.”
The fact that so many people showed up in support of the proposal – many wore green T-shirts urging support for the sale – didn’t bother Walter Lewis of Princeville, an ardent critic of the sale.
“KIUC made a significant effort to bring people to this meeting, and many more people will come,” he said. “People who haven’t solicited public attendance are fewer. But the important thing is we listen to what is said.”
The PUC is expected to review the public comments before it reaches a decision on whether to approve the sale of the utility between KIUC, the buyer, and Citizens Communications of Stamford, Conn., the seller.
The buyer and the seller need the approval of PUC to complete the sale.
By law, the hearing didn’t have to be held, but the PUC, apparently initiated by PUC Chairman and Kaua’i resident Dennis Yamada, decided to hold it because of the importance of the issue to island residents.
At this time, Kaua’i County and the U.S. Department of Navy, apparently because they are among the largest electricity users on the island, have been allowed by the PUC to intervene in the sale proposal.
By July 19, the county and the Navy must submit to the PUC “intervenor position statements.” By Sept. 19, the PUC is tentatively scheduled to render a decision on the proposed sale.
KIUC has distributed to the community its viewpoints on the benefits of the sale to the cooperative. The list includes:
– Electric co-ops like KIUC are a tried and proven product in the United States. Co-ops serve 35 million people in 48 states and provide 43 percent of the electrical distribution lines in the nation.
– KIUC will employ the same union and management employees that run Kaua’i Electric today.
– The purchase price negotiated by KIUC is below the fair market value of the utility that was determined by a Kaua’ County consultant.
– The purchase price is $24 million less than the depreciated replacement cost of the utility determined by the county consultant.
– KIUC will not pay federal income tax, opening the way for savings to be used for the utility’s operation.
– KIUC will not have to pay profits to investors.
– The purchase will result in free cash flow of between $20.5 million to $26.6 million in the first three years of ownership and ultimately reach a maximum of $110 million over the first ten years. The extra funds can be set aside to make KIUC financially sound.
– Some of the cash flow can be used to reduce high rates through dividends and reduce dependence on fossil fuel.
– Within 120 days after the sale of the utility, co-op members will hold an election to select new KIUC board members.
In opposing the sale, Kusaka said KIUC has accused the county of trying to undermine its efforts to close the sale.
Another critic, Glenn Mickens, of Kapa’a said if the “$215 million were the right price,” there would be many other parties interested in buying the utility.
“Is there a demand for this? Is there somebody beating the woods to buy this thing?” Mickens said.
Mickens also challenged claims by KIUC that its purchase of the utility will help save money for ratepayers in the long run.
“The figures don’t add up,” Mickens said. “How can they save the ratepayers money if they have to pay off a huge debt loan.”
Mickens also said rates will increase if hotels or other large users develop systems to generate their own electricity and stop buying power from Kaua’i Electric.
“It means that whoever is left on the grid will be paying the debt. That is the rate payers, you and me,” Mickens said.
Another critic, David Seielstad said that the only way KICU can recoup on its $2.5 million expense for the sale transition and transition costs is to charge ratepayers more money.
The Ho’ike public access cable TV station plans to broadcast a replay of the hearing tonight at 6 p.m.
Staff writer Lester Chang can be reached at 245-3681 (ext.225) and mailto:lchang@pulitzer.net
