VIEWPOINT: PUD is a high cost and high risk venture

As some Whidbey Islanders campaign to create a government-run electric utility, those they are trying to convince on the Island to endorse their project would be well advised to look beyond the lofty promises of the proponents. The watchwords should be “buyer beware.”

  • Wednesday, July 16, 2008 11:55am
  • Opinion

As some Whidbey Islanders campaign to create a government-run electric utility, those they are trying to convince on the Island to endorse their project would be well advised to look beyond the lofty promises of the proponents. The watchwords should be “buyer beware.”

Promises of “lower rates” and “a boost to the local economy” are not based in fact. It’s expensive to take over and operate a local utility. Not only that, it would take years to accomplish.

Communities, governments and courts have found that the idealized views of groups that want to supplant private electricity providers with government-controlled utilities are not a reflection of reality and are not in the public interest.

Government takeover efforts have been rejected in other parts of the country this year.

In Iowa, five cities banded together to try to take over electrical service from a private utility. But the Iowa Utilities Board voted unanimously that it was not in the public interest due to “a lot of high-risk factors,” including concerns about operation and maintenance costs, future energy costs, and maintaining current levels of energy efficiency planning and programming.

Cost is indeed likely to be a major obstacle to creating a Whidbey government-run utility, especially without any semblance of an operating structure already in place. Financing the government takeover of PSE’s energy delivery system and related infrastructure, purchasing power, trucks and other equipment, and providing training, salaries and benefits for qualified line workers, electricians, power purchasers and other staff and then operating the system would all add up to a hundred million dollars or more.

And that’s just the beginning. Those who think they can do better than PSE also talk about development of renewable energy, which is much more expensive than traditional power sources, and conservation. Add millions of dollars more to the equation.

There may be some lower cost electricity available from the Bonneville Power Administration (BPA), but not soon and probably not nearly enough to meet all of the Island’s needs, so factor in more expensive market rate power.

There are major requirements that must be met before a PUD can even apply for a BPA chunk of power – requirements likely to take several years to meet – and BPA then requires three years advance notice before a utility may begin receiving power.

The government-run utility would need taxing authority, most likely through increased property taxes, and would probably incur a huge amount of debt through bonds. Have you looked at the municipal bond market lately? Financing costs would be exceedingly high. In addition, proponents suggest the government-run utility would only use its taxing authority for two or three years to “prime the pump,” but those taxes would be an open-ended commitment that could go on indefinitely.

Proponents of government takeover minimize all these and other risks, but the public should be aware of the exorbitant expense of acquiring electric distribution systems, the uncertainty of wholesale electricity markets, and the difficulty of reliably and safely managing a complex electric power system, especially on an island.

All other government-run electrical utilities have been around for at least 50 years. Why no new ones lately? The costs, and the risks, are sobering.

If something sounds too good to be true, it usually is. Buyer beware.

Michael Luis is executive director of the Fair Competition Alliance.

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