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Co-op still
wants to buy
Kauai Electric

The co-op persists despite
a rejection by the Public
Utilities Commission

---

By Anthony Sommer
Kauai correspondent

LIHUE -- Even though the Hawaii Public Utilities Commission has rejected the Kauai Island Utility Co-op's proposal to buy Kauai Electric for $270 million, the co-operative's chairman says the issue is still very much alive.

Gregg Gardiner, who heads the group of businessmen who formed the co-op, said late yesterday that new terms have been negotiated with Citizens Utilities, current owner of Kauai Electric, and talks are continuing.

"We made tremendous strides last weekend during meetings in San Francisco," Gardiner said. "Unfortunately, PUC ruled before we could present them with anything new."

The commission sided with all three intervenors in the case -- Kauai County, the U.S. Defense Department and the state Consumer Advocate -- who said the co-op was paying too much and incurring too much debt.

The commission also said the co-op was operating under the false assumption that it would allow the co-op to charge rates based on the full $270 million it was paying for the purchase. Of that, $93 million is a "premium," or money above the value placed on the company by the PUC at its last rate case.

"The commission has never permitted acquisition premiums or transaction costs to be recovered from ratepayers, and there was no compelling reason to permit recovery under the facts presented," the commission said.

Jenny Fujita, spokeswoman for Kauai Electric, said federal securities regulations strictly limit what either Citizens Utilities or its Kauai subsidiary can say.

"We are disappointed. We can say that," Fujita said.

Citizens Utilities is required under law to continue to operate it until it can find a buyer that can be approved by the PUC. The company has been selling off its utility companies and shifting its focus to telecommunications.

Kauai mayor Maryanne Kusaka has hired a consultant to conduct an appraisal of the utility. The county stopped short of saying it plans to buy Kauai Electric if it goes back on the market.

Yesterday, Kusaka's office issued a statement saying only that "the mayor will confer with her staff to discuss the action of the PUC. Following these sessions, she plans to meet with the Council to determine future courses of action."

Kauai Electric customers pay the highest rates of any regulated electric company in the country, about 24 cents per kilowatt hour. Still unanswered is whether Citizens Utilities, if the sale is drawn out, will seek a rate increase next year as it planned before it put Kauai Electric up for sale.