PSE, PUD butt heads at community forum
September 22, 2008 · Updated 4:24 PM
Elected officials raise questions
At Thursday’s special session of government officials, debate sizzled as Puget Sound Energy and People for Yes on Whidbey PUD, the group attempting to oust the company from the island, made their cases for and against local control of power.
While both parties agreed the cost of PSE’s assets was partly a numbers game, the issue was nevertheless at the forefront of elected leaders’ minds.
The Island County commissioners and city officials from Oak Harbor, Coupeville and Langley attended the meeting.
PSE released a study by consultants UtiliPoint International Aug. 12 that found a proposed takeover of PSE’s electric utility business on Whidbey Island would cost $130 million and lead to an average 20 percent higher electric rates.
Bob Bellemare, CEO of UtiliPoint, explained his analysis to forum attendees at the Coupeville High School Commons.
“When I did the study, I assumed the best economic forecast for a public utility district,” Bellemare said. “I expect a PUD to argue much lower figures than what I came up with and I assume PSE would argue much higher.”
The estimate includes the company’s hard assets, which include 10 substations, offices, transmission feeds and startup costs.
“People for Yes” began their time at the podium by listing their grievances with the Bellevue-based company, such as a request for an 8 percent rate increase and an upcoming merger with foreign investors.
Dave Matheny, campaign director for “People for Yes,” said a study they commissioned showed an estimated cost of condemnation at $80 to $85 million.
Each group attacked the other’s methodology, by using a “buying a car” metaphor.
“If you were buying a 1955 Ford, you would want to pay original cost plus depreciation, which is how we conducted our study,” Georgia Gardner, who is running as a PUD commissioner, said. “You don’t want to base it on a 2009 model, the way PSE did.”
“We factor that in. If buying a 1955 Ford, we determine what the cost is today and then account for its age,” said Phil Bussey, senior vice president of corporate affairs for PSE.
Exact cost of a company’s assets is determined in legal proceedings; before a judge, and with the help of expert witnesses.
Bob Severns Oak Harbor City Council member, asked “People for Yes” if it would take seven years to establish a PUD, as PSE projected.
“We project three years,” Steve Johnson, executive director of the Washington Public Utilities Districts Association, said. “Part of figuring this out is if PSE cranks up their legal machine to try to thwart the people’s’ democratic process.”
Johnson was referring to a measure on the November ballot where citizens can vote to authorize a PUD. Once established, PUD commissioners could move forward with condemnation of PSE assets without an additional public vote.
“We are not a willing seller,” Bussey responded. “We’ve been here for 80 years and we want to be here another 80 years. We’d also have an obligation to get a thorough and fair price for our company.”
Bellemare added that in the years before a PUD is operable, commissioners would use a property tax to pay for its survey of PSE assets and to pay for legal challenges from the deposed company. Then, commissioners could apply for bonds.
To avoid the court battles, Johnson said the group was strongly considering building new power facilities alongside existing PSE facilities.
After the session, Bellemare said he was shocked by this new scenario, admitting he did not consider this move in his survey. He expected the “best case scenario” for a PUD would be to rent PSE’s system.
“Building a duplicate system would cost so much more. It is roughly $1 million a mile for transmission lines and there are about 120 miles of it. Plus, it’s about $12 million just to build one substation. That was a real eye opener for me,” Bellemare said.
Coupeville City Council member Bob Clay commended PUD proponents for their passion. But said the average person isn’t concerned about whether they rent or own their power system, they want to know the monthly cost.
“We need to know exactly what it costs. And if we don’t, I don’t think you have a chance,” Clay said.
“People for Yes” responded by promising a more solid study after the PUD is established, and when they have more money to hire expert surveyors. Their recent study was paid for by the state PUD organization with the help of consultants.
“This is also about trust. Do you trust the home team? Or do you trust Sydney?” proponents asked, referring to PSE’s pending merger with an Australian investment group.
“Who do you trust?” PSE’s Bussey quipped. “Will you give $80 to $200 million to a group of volunteers? They are asking you to vote blind. They don’t know their plan, how to pay for it or who will lead.”
Bellemare echoed these words in PSE’s closing statement, calling the “People for Yes” plans “up in the air.” Most PUD’s, he said, were formed before 1950 and are rare today. However, other efforts to form PUDs are now under way in Skagit and Jefferson counties.
Metheny ended his side’s argument in more of a “call to action” style.
“It is time to decentralize power in this nation. These monopolies aren’t serving us like they should,” he said.
After the session and in the parking lot adjacent to the school, Mayor Jim Slowik and Oak Harbor City Council member Jim Palmer said they were happy to get more information but don’t feel they have all the answers yet. Slowik, acting as emcee, said he often had to redirect the parties back to the original questions.
“One side seems very emotional. And to me, this is a judgement vote,” Slowik said.
“I will have to mull this around more,” Palmer said. “I don’t think you can make a decision until you hear the whole issue. We can expect a lot of campaigning coming up on television and in print very soon.”