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UPDATE: PUD supporters say PSE takeover will cost $57 million
CLINTON — “People For Yes on Whidbey PUD” released its preliminary study of what it could cost to form an island-wide public utility district during The Exchange community forum earlier this week in Clinton.
The long-awaited cost estimate was much lower than expected.
“People For Yes” campaign chairman Dave Metheny said it would cost $57.5 million to take over Puget Sound Energy’s assets on the island and start up an island-owned utility. He also said the property tax burden would be between $2.57 and $5.78 per year for a $300,000 home. The initial property tax increase would pay for a professional feasibility study and initial legal costs. The system would be acquired with bonds that would be paid for with revenue from electrical rates.
The numbers are radically different from what Puget Sound Energy’s consultant UtiliPoint found; between $130 million and $200 million, or an average cost share of roughly $4,000 per resident over time.
Bob Bellemare, the author of the UtiliPoint study, called the PUD numbers unrealistic.
“The $57 million is laughable,” Bellemare said.
He said that substations and transmission lines alone will cost more than that. And he added that his evaluation is based on comparable cases that have been settled in Washington.
“You’re not going to get the system cheap or for free. This is not scare tactics. This is reality,” he said.
Metheny said that electric rates charged by a PUD would be initially higher than Puget Sound Energy’s current rates, but would go down over time, resulting in savings for Whidbey Island of $7.5 million in the first five years to $119 million at the end of 10 years.
“Our rates are based on cost. Puget Sound Energy’s rates are based on cost plus profit,” Metheny said.
Puget Sound Energy may also have to borrow $5 billion for infrastructure over the next five years that will be reflected in electric rates, Metheny said. The utility has also a pending rate increase request before the Washington Transportation and Utilities Commission, which, if approved, would make Puget Sound Energy rates the highest in the state.
Whidbey residents had long pressed PUD supporters to release firm dollar figures, but were told time and again that the group needed more time to complete its volunteer-written study.
However, once the numbers were out in the open, the audience at the forum turned its attention to the buyout of Puget Sound Energy by the Australian-based investment group Macquari.
Just one person in the audience of nearly 150 asked about property taxes. Many in the standing-room-only crowd at Clinton Community Hall on Tuesday night appeared eager to quiz Puget Sound Energy officials about the proposed sale.
Puget Sound Energy representatives may have felt a little like John McCain begging for votes at a Democrat convention during the forum, as speaker after speaker prefaced their comments with anti-Puget Sound Energy statements. Several Whidbey PUD supporters, including PUD commissioner candidate Marshall Goldberg, brought tape recorders to capture everything that was said. And many audience questions were geared toward the nature of the profit-driven corporation.
Bert Valdman, chief operating officer of Puget Sound Energy, told the crowd the Bellevue-based utility values its customers, and unintentionally scored the biggest laugh of the evening.
“We don’t have an incentive to sell,” Valdman said. “We have an incentive to do the right thing.”
The comment prompted a wave of chuckles and comments from the audience.
“They say they are not for sale,” said Steve Johnson, executive director of Washington Public Utilities Association. “Puget Sound Energy is for sale. It is just not for sale to you.”
While PUD supporters stressed that it is the company’s goal to maximize profits and Puget Sound Energy couldn’t care less about lower rates and power reliability on Whidbey, Puget Sound Energy officials said they would continue to be locally controlled, and that the sale was necessary to gain the investment money needed to upgrade its system.
“There is clearly a lot of passion in this room,” Valdman said. “When you consider this ballot measure in November, let logic prevail.”
Valdman also said that Puget Sound Energy, due to its size, can provide a broader choice of services and can run an electric system cheaper and more efficiently than a public utility district.
Metheny, who is heading the campaign to form a PUD, disagreed. He said the island has the brainpower to provide expertise and make wise choices.
“Electric service is not particularly rocket science,” Metheny said.
Metheny added that if locals controlled the utility, it would be more responsive.
“The outage rate on this island is the highest in their system,” Johnson added.
Puget Sound Energy officials countered that the outages were not system-related, but due to falling trees caused by storms.
“Forming a PUD won’t stop the wind from blowing,” Valdman said.
The statement didn’t seem to satisfy many.
Pat Harmon, a candidate for PUD commissioner, asked the audience if they were unsatisfied with service from Puget Sound Energy. Lots of hands shot in the air.
Then Harmon asked how many were happy customers. Roughly one third of the audience lifted their hands. Others looked around somewhat undecided.
“60-40,” one of the PUD supporters confidently announced.
Little time was spent discussing the new study prepared by PUD supporters. Valdman, though, criticized the PUD study because it was based on the assumption that the new Whidbey utility would get discounted power from the Bonneville Power Administration.
PUDs have to be in existence for three years to be eligible, he said, and the power is distributed only at increments of 50 megawatts. Whidbey needs
70 megawatts, however, which means more market-price power would need to be purchased, Valdman said.
He also added that it remained questionable if Whidbey would get a share of lower-cost Bonneville electricity.
Metheny told the audience that he has heard Bonneville Power Administration say it has enough power to serve the island.
Independent panelist Gary Saleba, of EES Consulting in Kirkland, said the discussion about the relatively inexpensive “Tier 1” power from Bonneville might be fruitless.
“Tier rates may be illegal altogether,” he said, adding that the system is currently under review. “The thing with Tier 1, Tier II is much ado about nothing.”
“It’s much ado everything,” Bellemare countered. “If you don’t get BPA Tier 1 power — it’s not feasible without it.”
Panelist Kit Maret, a Whidbey resident and a Puget Sound Energy engineer, said she was glad her company was fighting the proposal, protecting its customers and the jobs of its employees.
Metheny urged voters to give the PUD a chance.
“People have a right to lower rates and better service,” Metheny said.
The forum was sponsored by The South Whidbey Record and the Clinton Community Club.
Michaela Marx Wheatley can be reached at 221-5300 or mmarxwheatley@south