Vermont says
Kauai Electric parent
flouted regulations

Hawaii officials say it could
be an issue in the company's plans
to buy Gasco Inc.

By Peter Wagner
Star-Bulletin

Officials in Hawaii are keeping a close eye on alleged regulatory violations in Vermont by a division of Citizens Utilities Co., the parent of Kauai Electric.

The Vermont Department of Public Service -- the state's consumer advocate -- has recommended suspending the license of Citizens' Vermont electric utility unit, citing "a pattern of willful, continuing disregard" for rules and orders.

Among the allegations:

Building without permits

Failure to keep records.

Poor equipment maintenance.

Altering approved plans.

Evading regulatory review.

Hawaii's Consumer Advocate, Charles Totto, yesterday said the matter could affect the Stamford, Conn.-based company's efforts to buy Gasco Inc.

"We've got to look at the parent to see if that parent is responsible for problems in Vermont," said Totto.

Citizens Utilities in January announced plans to buy the gas company from BHP Hawaii Inc. for $100 million. The deal, which would nearly quadruple Citizens' customers in Hawaii, needs approvals from the state Public Utilities Commission and the Federal Trade Commission.

While Totto speaks highly of Kauai Electric, he plans to withhold his recommendation to the PUC on the merger until action is taken in Vermont. "What we're concerned about are the company's upper level management," he said.

Citizens Utilities operates telephone, sewage treatment, power, and other utilities in about 25 states.

J. Michael Love, who recently took over as vice president of Citizens' public service sector, admits "mistakes were made" in Vermont. But management changes have been made to assure regulatory compliance, he said.

"We ran thin on management talent in Vermont," he said, noting the utility there has 49 employees to serve 20,000 customers while Kauai has 134 employees and 28,000 customers.

Hurricane Iniki drew some of Vermont's top employees to help rebuild the island's devastated system, he added. "The people left in Vermont were not as in tune with the regulatory requirements in place," he said.

And Citizens, which grew from 400,000 customers to 1.8 million in the past five years, has had growing pains, Love said.

Denny Polosky, vice president of Kauai Electric, said happenings in Vermont should have no bearing on the company's operations on Kauai.

"We operate totally independently from Vermont," he said.