Puget Sound Energy was approved for sale to a consortium of private investors, in an announcement by state regulators Tuesday.

The utility was sold to Puget Holdings LLC of New York, which is held by investors in Australia and Canada. The Washington Utilities and Transportation commission approved the settlement in a 2-1 decision.

Bellevue-based PSE is the state’s largest private utility, with 37,000 customers on Whidbey Island and 737,000 throughout the state. The sale was proposed in 2007.

It was opposed by the Attorney General’s Public Counsel Section, which advocates for consumers on major rate cases. Their statement was released Tuesday.

“Our initial review leads to disappointment,” Public Counsel Section Chief Simon ffitch said. “We believe the thousands of Puget Sound Energy customers who voiced their opposition to this sale will feel the same.”

The Public Counsel Section had repeatedly expressed worry that the settlement did not do enough to address public interest concerns with the sale.

“Our office presented evidence that the sale did not pass the ‘no harm’ test. We remain concerned that a transaction that increases the financial risk for PSE and its customers is the wrong choice, particularly in this economic climate and particularly because it offers no tangible benefits to customers,” the release stated.

However, the majority in the 2-1 decision disagreed with such concerns. In a news release, they said the deal assures PSE access to capital “to help fund the billions of dollars of infrastructure investment PSE requires in the next few years.”

Local public power advocates were also troubled by the news, and predict large rate increases, although such increases are still subject to state approval.

The initial proposal of the sale sparked the formation of “People for Yes on Whidbey PUD” in early 2008, a group determined to create a local power company by taking over PSE’s assets.

Their ballot measure to authorize a public utility district was rejected by voters in November by a two-to-one margin. They vowed to try again in two years.