PUC approves sale
of Kauai Electric

Customers will have a chance
to become the utility's part owners

By Anthony Sommer

LIHUE >> The state Public Utilities Commission approved the sale of Kauai Electric Co. to a business cooperative, a first for a utility in Hawaii.

The approval, issued yesterday, means the Kauai Island Utility Co-op will buy the utility from Citizens Communications Corp. for $215 million. When the sale closes in late October, every Kauai Electric customer who chooses to become a cooperative member will become a part owner of the island's only electric company.

Kauai Electric customers will receive a small rate decrease the first year the cooperative operates. They also will share 25 percent of the cooperative's net revenues in following years.

At least since Hurricane Iniki in 1992, when the company was forced to replace the equipment destroyed in the storm, Kauai Electric has had the highest rates of any regulated U.S. electric company. Customers pay about 24 cents a kilowatt hour.

The PUC approval came despite months of hand-wringing by the Kauai County Council and a opposition from Mayor Maryanne Kusaka.

The federal government is lending the cooperative the money to buy the electric company.

An election will be conducted late this year to name a new board of directors.

The PUC adopted in its entirety an agreement between the cooperative, Citizens Communications and two of the three intervenors in the case: the Hawaii consumer advocate and the U.S. Navy.

Kauai County, the only other intervenor, agreed to support the sale only last week and only under restrictions that the cooperative said would kill the sale.

In its order, the PUC flatly rejected a series of recommendations hammered out between Kusaka and the Kauai County Council, which refused to take a strong position on it during lengthy closed-door sessions over the past month.

The PUC said the county failed to provide any evidence to support its recommendations that Kauai Electric rates should be reduced an additional 6 percent after the sale. It also rejected a county suggestion that part of the sale proceeds be held in escrow for five years. If the Kauai Island Utility Co-op did not meet its financial goals, Citizens Communications would not have received the money.

The PUC rejected a sale to the same cooperative two years ago, saying the $285 million price agreed on in that deal was too high.

Kauai County paid for an appraisal which found the value of the company was $190 million. However, it was discovered last week that the mayor's office kept secret another appraisal, which had set the price at $214.5 million, almost exactly what the cooperative is paying.

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