State and Navy back
Kauai Electric deal

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By Anthony Sommer
tsommer@starbulletin.com

LIHUE >> In a turnabout from their positions of two years ago, both the state consumer advocate and the U.S. Navy told the Public Utilities Commission yesterday that they now endorse the purchase of Kauai Electric by a group of Kauai business leaders.

The surprise announcement leaves Kauai Mayor Maryanne Kusaka the only intervenor opposed to the sale, and there is a question whether the County Council, which has been reluctant to back the mayor, will provide the funds to continue paying lawyers and expert witnesses.

If the PUC approves the sale to what is called the Kauai Island Utility Co-op, all of its existing customers will be invited to become co-op members at no cost.

Those who choose to remain customers but not members will not be able to vote in co-op board elections and will be ineligible for any refunds.

The existing Kauai Electric management would continue to run the company. The International Brotherhood of Electrical Workers contract, which runs through next year, would be adopted by the co-op.

Two years ago, the PUC rejected the sale of Kauai Electric to the co-op for $270 million. Since then the co-op and Kauai Electric's owner, Citizens Communications Corp. of Stamford, Conn., renegotiated the $215 million deal that is now back before the PUC.

In the first case, the consumer advocate, the Navy and Kauai County all opposed the sale, arguing it would lead to higher utility rates.

Kauai Electric already has the highest rates of any regulated electric company in the United States at about 23 cents per kilowatt-hour.

The Navy's Pacific Missile Range and Kauai County are among Kauai Electric's largest customers.

According to the document filed yesterday with the PUC, the consumer advocate, the Navy and Kauai Island Utility Co-op worked out the agreement during negotiations on July 11.

The agreement contains two major new provisions:

>> If the PUC approves the sale and the deal is closed by the end of October, Kauai Electric's 30,000 customers would share a $3 million refund. That would work out to about $45 for the average residential customer. It represents a 3.5 percent rate reduction in 2003. If the sale closes later, the rebate will be reduced.

>> Beginning in 2004, 25 percent of the co-op's net income will be refunded annually for the next 10 years. The refund would average about $2.1 million and amount to a 2 percent rate reduction (below 2002 rates) each year.

Kauai County declined to participate in those negotiations, according to the background in the agreement.

Once a compromise was reached, it was sent to Kauai County to join or reject, but the county has not filed a response.

As the sole remaining intervenor, Kauai County is required to file its preliminary position statement with the PUC today.

William Milks, attorney for Kauai County, said he has not discussed the matter with his client, but he believes that since the county is the only remaining opponent, it has an obligation to continue questioning the deal.