Kauai business
owners to bid on
power company

They plan to form a rural
utility co-op like those that operate
in parts of the mainland

Also: Big Isle rates may increase

By Anthony Sommer
Star-Bulletin

LIHUE -- A group of Kauai business owners is racing the clock and apparently several major power companies to prepare a bid for the purchase of Kauai Electric by Nov. 12.

That's the date Citizens Energy Services, Kauai Electric's current owner, has set for a "preliminary nonbinding bid." After cutting the field to a short list, Citizens will ask for formal bids and hopes to choose a buyer by the end of this year.

According to recent data from Public Utilities Commission rate cases, Kauai Electric's property is valued at $180 million. Its sale price expected to be in the neighborhood of $200 million.

Although not in itself a major acquisition for large energy companies, analysts see Kauai Electric as a possible toehold for conglomerates looking to establish themselves in the Pacific Rim.

The business group -- which has no official name and is working unpaid -- plans to borrow money from the federal government to create a co-op that would be owned by all of Kauai Electric's customers.

It would keep the existing Kauai Electric management and employees in place.

"Our goal is to provide a dependable electrical source at the lowest possible price," said Gregg Gardiner, publisher of the "101 Things To Do" tourist magazines and spokesman for the group.

At 19.4 cents per kilowatt hour plus fuel cost adjustments, Kauai Electric peddles by far the most pricey electricity in the United States. The Big Island is a distant second at 17.6 cents per kilowatt hour.

Other companies and groups that may be interested are either not commenting or can't be reached.

At least one other citizens' group was formed by Bill Chase of Kilauea with the aim of heading the company toward more alternative energy sources, but its interest in bidding appears to have faded.

Hawaii Electric Industries, which owns all the other electric companies in the state, twice has tried and failed to acquire Kauai Electric. Although the company is considered a contender, chief executive officer Bob Clark issued only a "no comment."

Enron Corp., a Houston-based energy and telecommunications conglomerate, and Spokane-based Avista Corp., until recently the Washington Water Power Company, both are considered suitors but neither is talking.

Neither is Kauai Power Partners, chosen by Kauai Electric to build and operate its next power plant. Kauai Power Partners is a wholly owned subsidiary of Consolidated Natural Gas, a multibillion-dollar energy company headquartered in Pittsburgh.

Earlier this year, Citizens put all of its utility holdings except telecommunications companies on the block. In Hawaii, that includes Kauai Electric and the Gas Co.

In addition to Kauai Electric with its 30,000 customers, Citizens is selling electric companies in Arizona with 65,000 customers and Vermont with 21,000 customers. It has indicated a willingness to sell them piecemeal or as a package.

Gardiner noted Hawaii is one of only three states without any rural electric cooperatives.

The group probably would seek two 30-year loans from the National Rural Utility Cooperative Finance Corp. at 8 percent and the Rural Utility Services at 5 percent. The loans would be repaid through the sale of electricity.

Less clear is who would control the policy decisions of the cooperative, a decision Gardiner said has not been made. He said only that the board of directors would be representative of the island.

Big Isle rates may increase by 9.6 percent Star-Bulletin staff HILO -- Big Island electricity customers would see their rates go up 9.6 percent under a request filed this week with the state Public Utilities Commission, the Hawaii Electric Light Co. announced. The increase would be phased in, with a 4 percent increase in May, another 4 percent in July and a final 1.6 percent increase in November, the company said. For typical households using 500 kilowatt hours per month, the increase in the monthly bill would be $11 by November. The proposed increase is needed to cover the cost of paying for power from a new 60-megawatt power plant to be built in Honokaa by Encogen Hawaii L.P., the cost of upgrading a power line from Honokaa to Waimea, and the cost of a five-year contract extension with the Hilo Coast Power Co. The company said 44 percent of the requested increase would go to federal, state, and county taxes. Helco's last increase was 4.77 percent in 1996.