UPDATE: Lawyers from Attorney General’s Office say PSE should not be sold

State lawyers hired to represent the public interest have asked the Washington Utilities and Transportation Commission to reject the proposed sale of Puget Sound Energy to a foreign-based consortium.

Puget Sound Energy, a Bellevue-based utility, provides electricity to Whidbey Island and more than a million customers in Western Washington.

PSE asked the commission to approve the sale in December 2007.

Macquarie Group, an Australian-based international banking and investment firm, is leading the group of investors that are trying to buy PSE.

The Public Counsel Unit of the Attorney General’s Office, the group of lawyers who represent residential and small business customers in utility rate cases, submitted expert witness testimony earlier this week and asked utility commissioners to reject the sale.

“Based upon our review, this sale, as proposed, simply exposes PSE’s customers to an undue level of financial risk by undertaking too much debt,” said Public Counsel Chief Simon ffitch.

“At the same time, customers have no assurance that capital for infrastructure will be any more available or affordable than without the merger. Consumers appear to get little or nothing in return for the increased financial risk,” ffitch said.

State lawyers said the sale should be rejected because the transaction needs substantial amounts of debt financing, including $1.6 billion of new bank debt that would be added to PSE’s $2.6 billion of existing debt.

Those attorneys also said the sale does not balance the interests of rate-payers and shareholders, and said rate-payers will get no direct benefit from the sale but would shoulder the additional financial risk associated with the transaction.

Further, they warned the sale would make PSE a privately-held company, and detailed quarterly and annual financial information will no longer be publicly available.

PSE spokeswoman Martha Monfried said she is not concerned about the request.

“There have been two previous mergers approved in Washington that have gone through the same process with intervenors submitting testimony: Cascade Natural Gas and PacifiCorp,” she said. “We hope to join them.”

The intervenor testimony filing deadline is one more step in the Washington Utilities and Transportation Commission’s rigorous regulatory review process, she said.

“We anticipate that most of the nine registered intervenors will submit testimony. All will have varying levels of concern,” Monfried said.

“Some will be for the merger with caveats; some will be against it for various reasons that correspond to their vested interests.”

She added that differences can be worked out.

“It’s been months since we announced the merger. Now that everyone has their cards on the table, we are hopeful we will be able to address their concerns and move forward on getting the merger approved to give Puget Sound Energy the access to capital we need to carry on our business plans to serve our growing customers in this vibrant region,” Monfried said.

Hearings that will include the cross-examination of expert witnesses will begin in late July.

The commission is expected to issue a decision by September 2008.

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