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UPDATE: PSE ups its spending to fight Whidbey PUD

Puget Sound Energy has thrown major money behind its effort to fight the creation of new public utility districts to take over the power company’s territory on Whidbey Island and in Jefferson and Skagit counties.

A review of campaign financing records on file with the Public Disclosure Commission shows that the Bellevue-based utility company has significantly increased its cash contributions to the anti-PUD groups “Whidbey Consumers for Affordable Energy,” “Skagit Committee for Reliable & Affordable Energy” and “Jefferson County Citizens Against

Prop 1.” Puget Sound Energy has now contributed more than half a million dollars to the three campaigns.

The campaigns are run by Seattle-based strategist firm Strategies 360, and the trio has been fighting attempts in the three counties to start locally-owned and operated utilities.

Puget Sound Energy gave another $95,000 to “Whidbey Consumers for Affordable Energy,” according to the Public Disclosure Commission documents filed Sept. 22. That’s on top of the $50,000 that the company donated last month, for a total of $145,000, plus $505 in staff time.

Puget Sound Energy tossed another $170,000 to the “Skagit Committee for Reliable & Affordable Energy,” for a total of $230,000, plus about $400 in in-kind staff time.

The $95,000 contribution was made on Sept. 16 and reported to the state on Sept. 22.

And Puget Sound Energy added another $100,000 to “Jefferson County Citizens Against Prop 1,” for a total of $140,000, plus $510 in-kind donations.

“Communicating with 34,000 customers is not cheap,” said Gretchen Aliabadi, a Puget Sound Energy spokeswoman. “It’s unfortunate elections just cost money.”

She said the PUD proposal has flaws and Puget Sound Energy is simply trying to educate voters.

“We have been on the island for 80 years and we want to continue to serve the island 80-plus years,” she said. “This one decision can affect service on the island for years to come. We’ve been asked by community members and our customers, and this is one way to get information out through the different vehicles that campaigns use.

“The alternative is that we don’t provide any information, and that would be a huge disservice to our customers. To make an educated decision, listen to one side, listen to the other and get out and vote this election — not just on this issue, but there are many important measures on the ballot. That’s the most important point.”

Aliabadi stressed that the donations are not funded with ratepayer money, but funds from shareholders.

Karen Waters of Strategies 360 said the PUD ballot measure is an important issues and the donations will make sure that “Whidbey Consumers for Affordable Energy” will get its message out.

“We have no idea how much our opponents will spend,” Waters said. “We’re working hard to run a campaign that ensures the residents of Whidbey Island are given the facts on how this proposal would impact both their utility rates and pocketbooks. This is an enormously important decision that will impact the families on Whidbey Island for generations to come.

“We have an obligation to those families to get them the information they need to make an informed decision,” she added.

Dave Metheny, campaign director of “People For Yes on Whidbey,” the group trying to create a Whidbey-based power company, was critical of the amount Puget Sound Energy has devoted to its campaigns.

“That’s more than $515,000 for the bogus grassroots groups to fight the real grassroots efforts,” Metheny said.

“Then there is what Puget Sound Energy is spending on its new ‘image’ advertising, the new customer service offices in Port Townsend and Freeland, new community reps and other efforts directly related to the campaign,” he added.

While Metheny continues to stress that Puget Sound Energy’s counter effort is nothing more than an artificial creation by a political strategist firm, some critics have said the “People For Yes” itself is not a grassroots organization, considering that it has accepted most of its funding from the Washington Public Utility Association, a trade organization based in Olympia.

With the most recent contribution, Puget Sound Energy and “Whidbey Consumers For Affordable Energy” is able to outspend “People for Yes on Whidbey PUD” by a 10-to-1 margin.

“People For Yes” has raised only $16,983, according to its latest filing with the Public Disclosure Commission on Sept. 9.

“We cannot compete with them financially,” Metheny said. “The system is certainly stacked against those without a lot of money.”

He added that “People For Yes” will throw all its energy into doorbelling, sign waving and other person-to-person contacts.

Puget Sound Energy has also invested in another study to counter the study recently released by “People For Yes” that gave a cost estimate for a takeover of the company’s assets.

UtiliPoint International, the same company that came up with Puget Sound Energy’s initial cost analyses, released a new study earlier this week. The report said the $57 million takeover estimate by “People For Yes” undervalues Puget Sound Energy’s assets by millions of dollars. And when that study is corrected, significant rate increases are forecast.

UtiliPoint concluded that under the PUD’s takeover proposal, the cost to Whidbey Island residents would exceed $200 million, or more than twice what “People For Yes” estimates it would cost island residents. The analysis also points out that PUD electric rates would be at least 48 percent higher during the PUD’s first three years of operation.

“There are some basic and fundamental inaccuracies in the study that take the cost of acquisition over $200 million,” said Bob Bellemare, CEO of UtiliPoint.

“The proponent study has incorrect valuations, incomplete cost estimates and contradictory conclusions. It uses valuation techniques that create unrealistically low estimates of the value of Puget Sound Energy’s assets and assumes low-cost power rates that do not exist today and may never exist tomorrow,” he added.

One example of the flawed calculations in the “People For Yes” report is the use of a system valuation that is inconsistent with condemnation actions around the country, he said.

The assessment of $200 million is consistent with the condemnation cases in the industry, including the cases referenced by the “People For Yes” study, Bellemare said.

He added that the “People For Yes” study is based on unrealistic figures and doesn’t take into account real-market costs for financing a takeover.

Metheny was quick to point out that Puget Sound Energy values its assets differently for tax purposes than in its study.

“Puget Sound Energy says its Whidbey distribution system is worth $130 million, yet Puget Sound Energy recently agreed that both the distribution and transmission system is worth only $41 million when negotiating a final valuation for 2007 with the Washington State Department of Revenue,” Metheny said. “I called the Department of Revenue about that and they confirmed it.”

Metheny added that Puget Sound Energy’s estimates are a highly inflated valuation based on replacement cost at today’s prices, but the system was built years ago.

“Indeed, the 40-percent depreciation on the entire electrical system has been financially captured by Puget Sound Energy and paid for by Whidbey Island ratepayers,” he said.

A judge is likely to have the final say in the matter, Metheny added.

“The courts or an arbitrator will ultimately decide the value of the electrical system on Whidbey Island,” he said.

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