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Group fights
By Anthony Sommer
planned takeover
of Kauai Electric
Star-BulletinLIHUE -- A coalition highly critical of the proposed takeover of Kauai Electric by a cooperative created by local business leaders took its case to the Kauai County Council yesterday.
The Kauai Island Utility Co-op has an application pending before the state Public Utilities Commission for approval of its $270 million purchase of Kauai Electric from Citizens Utilities Co. Opponents say the purchase price is too high and the group that created the co-op has set up by-laws that virtually guarantees it perpetual control of the power company.
"This is no cabal of tree-huggers, anti-business and anti-development people," said Ray Chuan, a retired physicist from Hanalei who led the delegation of opponents. While Chuan has been one of the most visible opponents of development on Kauai, he was joined by retired corporate attorney Walter Lewis and financial analyst Charles Lanphier, both of Princeville.
They asked the county to fight the purchase, but so far county officials have been noncommittal.
There are no electric co-operatives -- which technically are owned by their customers -- in Hawaii and no state laws governing them.
The co-op's purchase of the power company has created a debt of $300 million for the island's residents without ever asking for a vote of approval, Lewis told the Council.
"That's $5,000 for every man, woman and child on Kauai. I'd call that taxation without representation," he said.
Lanphier said he highly doubts the co-op will be able to keep its promise of no rate hikes. He noted its loan from the National Rural Utilities Cooperative Financing Corporation is on a variable rate tied to the prime lending rate and each half-point change in the prime rate will add or subtract $1.2 million to the co-op debt.
The co-op paid $100 million more than the book value of Kauai Electric, the value placed on the company by the Public Utilities Commission for rate-making purposes. Lanphier said the purchase price should have been at or slightly above the book value.
"When I saw that $100 million premium the bells went off -- and the lights. The debt is so overpowering, they have lost all financial flexibility," Lanphier said.
Gregg Gardiner, a Lihue tourist-magazine publisher and president of the co-op's board, said a private company made an even higher bid but Citizens chose to sell to the co-op. That, he said, shows the co-op did not pay too much.
