LETTER TO THE EDITOR: PSE buyout will means rate hikes

Published 11:53 am Wednesday, October 1, 2008

To the editor:

As we consider the various costs of forming a PUD we must also consider the costs ratepayers will absorb should Puget Sound Energy be acquired by a consortium of six Canadian and Australian pension funds, led by Macquarie Bank of Australia.

Macquarie Bank has built its reputation by privatizing government assets like bridges, toll roads and airports. Macquarie’s deals are always leveraged buyouts financed with debt that uses the cash flow of the asset purchased to pay related debt service.

In the case of the Macquarie/Puget Sound Energy leveraged buyout, Puget Sound Energy cash flow will be used to service the $3.5 billion debt associated with the purchase. This will likely result in diminished service, as is usually the case in leveraged buyouts.

The fees Macquarie will earn and the stock options Puget Sound Energy execs will garner could reach $350 million or more. Debt service on $3.5 billion at 6 percent per year means ratepayers would absorb $2.1 billion if Macquarie finances with a 10-year bond issue. Fees and interest of $2.45 billion together with the $5.7 billion in needed infrastructure upgrades for Puget Sound Energy means huge rate increases over the coming years.

When the bond issue used to finance this deal matures it is likely that the consortium of pension funds that own Puget Sound Energy will sell, beginning the whole expensive buyout process again. We can put a stop to unending acquisitions by forming a PUD now.

In the long run, forming a PUD that ends the cycle of leveraged buyouts is our least expensive option. When the purchase is completed, we will have access to clean hydropower from the

Bonneville Power District like the other 23 PUDs in Washington state that all provide service at better rates than Puget Sound Energy.

Fred Geisler

Langley