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Whidbey PUD issue polarizes Whidbey Island

The power struggle on Whidbey Island is heading into the home stretch. But despite thousands of dollars spent to inform voters about the measure to create a Whidbey-based utility and numerous and debates, many people on Whidbey say they still haven’t heard enough to make up their minds on the PUD question.

Voters will decide on Nov. 4 if they want to form a locally-owned and operated electric utility on the island, or if they want to remain with Puget Sound Energy as their provider.

The push to create a public agency for electrical services has sparked a vigorous debate between advocates of local control and supporters of private, regulated utilities like Puget Sound Energy.

At the center of the debate is the question of which approach would provide the best rates and service to the citizens. Each side has commissioned studies to promote its view, and these studies have come to different conclusions regarding the cost and availability of power.

“People For Yes on Whidbey PUD,” the group that started the effort for a Whidbey-based power company, has quoted $57 million for the takeover of Puget Sound Energy’s assets and an initial property tax increase of between $2.57 and $5.78 for a $300,000 home to get the PUD started, saying that customers will eventually see savings in their bills of 20 percent.

Puget Sound Energy and its consultants have said that the takeover could cost between $130 million and $200 million and could lead to 20-percent higher rates.

Taking on the big guys

“People For Yes on Whidbey PUD” burst onto the political scene in spring with the announcement that they were trying to get a measure to form a PUD on the November ballot. They collected thousands of signatures in three months and qualified for the ballot.

From the start, Dave Metheny, the campaign director, and Bob Kuehn, the treasurer, expected that Puget Sound Energy would not hand over its assets without a fight, pointing toward the utility’s long history of fighting PUDs since the 1930s.

But six months later they marvel at the magnitude of opposition.

“There is such a high amount of money involved,” Kuehn said, alluding to the $268,514 the company has contributed to the anti-PUD effort on Whidbey. “It makes so much noise it’s deafening. People can’t hear what we’re saying.”

The PUD proponents have only raised $20,952 to date.

What supporters are saying is that a PUD will provide lower rates, better reliability and create local jobs, and they point to the proposed sale of Puget Sound Energy to a foreign-based investor group as a high risk for local customers.

“A PUD is not foreign ownership. It’s not only U.S. ownership, it’s Whidbey ownership,” Metheny said.

PUD proponents stress the vote will not give the commissioners — who are elected at the same time — a blank check to raise property taxes to pay for start-up costs. Instead, it would allow them to advance the effort.

A yes vote only guarantees a feasibility study, Metheny said.

He also said that the initial investment by taxpayers would be fairly short-lived.

“That is not high taxes, even if it takes three years,” Metheny said.

The group also promises that the process to take over Puget Sound Energy’s assets on the island won’t be long and complicated.

“I’ve talked to the top condemnation litigation lawyers in Washington. Washington law is increasingly defined. In the worst case scenario it would be two years,” Metheny said.

“PSE can’t delay the settlement forever,” Kuehn said. “That’s why they are fighting so hard now.”

The group also claims that its $57 million estimate for the buyout of Puget Sound Energy is valid.

Mary Hollen, a supporter and accountant who has worked for the Bonneville Power Association, said the number is based on research, applicable case law and the company’s tax records, calling Puget Sound Energy’s $200 million estimate a negotiation ploy.

“Frankly, we have a hard time getting our lowest as low as it should be,” she said.

Hollen also said that the case law cited in the UtiliPoint study, the analysis funded by Puget Sound Energy, came up with the amount is outdated and not local.

Critics have said the PUD commissioners would have too much power, however, and point to their ability to raise taxes without a public vote after they are seated. Metheny said that’s simply not true.

Besides public participation at meetings, residents have the option of recalling commissioners or voting them out of office.

The group has also designed a number of other safeguards. They have come up with a ratepayers bill of rights and a citizen advisory board.

Hollen said if Puget Sound Energy is sold to the investor group, residents will have no control whatsoever.

She pointed to the possibility that a foreign-owned company may be no longer regulated by the Washington Transportation and Utilities Commission.

“There is a potential for NAFTA (North American Free Trade Agreement) to circumvent and they could change whatever they want,” she said. “They could use NAFTA to block condemnation.”

Critics have also doubted that the PUD would get the Bonneville Power allotment that the “People For Yes” study was based on.

“We will get the lower rates,” Metheny promised.

There are 250 average megawatts of low-cost electricity reserved for newly-formed PUDs, otherwise known as BPA’s cheaper Tier 1 power.

The electricity is part of the federal Columbia River hydroelectric system and has enough power to meet the needs of more than 250,000 residential customers. To qualify, PUDs must fulfill certain standards such as being able to pay for wholesale power and be in possession of the system by the time the PUD applies for the power.

Metheny said that the system would generate enough revenue to pay for improvements, investments into renewable energy or even undergrounding power lines.

“The possibilities exist. It’s based on what the community wants,” he said.

Keeping Whidbey

Puget Sound Energy wants to keep its 34,000 customers on the island.

“The residents of Whidbey Island have an important decision on election day regarding their electric utility,” said Gretchen Aliabadi, a spokeswoman for Puget Sound Energy. “PSE has served the Whidbey community for over 80 years and we plan to serve Whidbey for another 80 years plus.

“Are we perfect? No, but we strive every day to improve our customer service, distribution infrastructure system and investments in renewable generation,” she added.

Aliabadi said the company is fighting the effort because company officials believe that forming a new electric PUD is too costly and too risky for the citizens of Whidbey Island.

Initial estimates of the cost to Whidbey Island residents range between $82 million and $200 million for a new PUD to take over the company’s electric system.

“Even with initial estimates, Whidbey Island residents will not know the true cost of the PUD takeover until a court rules on the cost — several years after you take your vote in November,” Aliabadi said. “Residents will not get another vote. Whidbey Island residents will not get the opportunity to vote again if the price is too high.”

Karen Waters, a spokeswoman for Strategies 360, the company that runs the “Whidbey Consumers for Affordable Energy” campaign, also took issue with the claims from “People For Yes.”

“The supporters of Whidbey PUD would have you believe that this is simply an informational or advisory vote,” she said. “The reality is that state law says there is no informational vote.”

If voters approve Whidbey PUD, the PUD is empowered to condemn Puget Sound Energy’s electric system, determine a purchase price, launch a legal battle that will cost millions of dollars, raise property taxes, create public debt and raise electric rates, Waters noted.

“All without another vote by the people,” Waters said.

“And what are we approving? Where is the plan? Isn’t fair to ask proponents of Whidbey PUD the following questions: What will it cost us? How much will our rates and taxes go up? How much debt will we have?” she asked.

“‘Whidbey Consumers for Affordable Energy’ is 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,” she added.

Aliabadi said that one advantage of keeping Puget Sound Energy is the company’s extensive support structure. It offers its customers access to a 24-hour call center, green power, solar schools program, net metering, automated meter reading system, online billing, energy efficiency services and low-income assistance.

“None of these services were factored in the PUD’s cost study,” Aliabadi said.

“Currently, costs are shared by all of PSE’s 1.1 million electric customers and shareholders,” she added. “With a PUD, all costs will be paid for by just 34,000 customers on Whidbey Island.”

She also said that the Bellevue-based utility has already invested in reliability on Whidbey.

“We have a multi-year, multimillion dollar project,” Aliabadi said. “After the winter storms of 2006 we focused on existing transmission line corridors, focused on the number one cause of outages — trees — and developed a reliability plan for the south end of Whidbey.”

She also pointed to the $12 million substation upgrade and related transmission lines under construction off Coles Road.

“The transmission line between the new substation and our Langley substation will be completely rebuilt,” she said.

And the company has opened a new customer service office in Freeland.

Aliabadi also said that the company is leading in renewable generation.

“The proposed PUD does not have a plan and has not accounted for the costs of meeting its state-mandated renewable requirements,” she said.

“While a new PUD may have access to low-cost federal hydro power, the amount set aside for new PUDs is limited. A new PUD may not have enough to meet its load and would not have access to low-cost federal power for five to eight years.”

She said islanders may be left paying for expensive market-based power — causing rate increases upward of 58 percent in 2010.

The anti-PUD movement has found a number of outspoken supporters, including the largest chamber of commerce on the island. The Oak Harbor Chamber of Commerce urged its members to vote no on the PUD measure in September, calling it too risky for small businesses.

Report disagrees

Earlier this month, the Washington Policy Center weighed in. The group describes itself as a non-partisan independent policy research organization based in Seattle and Olympia.

After reviewing the ballot measures on Whidbey Island and in Jefferson and Skagit counties, the researchers came out against the PUD proposal.

The center concluded that Puget Sound Energy has a consistent record of providing reliable power to customers and at regulated rates.

Researchers also criticized that PUD rate increases are not subject to review and approval by the state Utilities and Transportation Commission, while Puget Sound Energy is regulated by the state agency.

They also wrote in their report that ratepayers under a PUD are exposed to more political risk and financial burden than ratepayers of a private utility.

“Often Washington citizens have accepted public power based on promises from public officials that they would receive low-cost power from a nonprofit public agency, only to find they are paying about the same as their neighbors who are served by a for-profit private company,” the report said.

Start-up costs for a new PUD, including eminent domain taking of Puget Sound Energy’s property or building new infrastructure, litigation costs, consultant fees and feasibility studies, will be high, the report added.

The center analysts also warned that new PUDs will not have guaranteed access to Bonneville Power Administration power at the best rates, and the new PUDs would have to wait three years before they could apply to receive BPA’s best rate.

“In the past, voters created government-owned utilities when experience showed that private companies were failing to provide reliable electrical service at a reasonable price,” the report said. “In the modern regulated environment, however, the power provided by private utilities is highly reliable and favorably compares with the prices charged by public utilities.”

“Taking all the considerations discussed in this study together, it appears that creating new PUDs in Jefferson, Island and Skagit counties would not result in significant cost savings to homeowners and businesses,” the report concluded.

“It is possible that rates could increase, as the new PUDs take on the costs of litigation, property acquisitions, consultant fees and securing wholesale power sources. It is also possible residents in the three counties could receive lower-quality service, at least in the initial years, as managers of the new county PUDs get their operations up and running,” the study said.

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