SEATTLE – The Public Counsel Section of the Washington State Attorney General’s Office today recommended that the state Utilities and Transportation Commission (UTC) not approve a settlement that would allow acquisition of Puget Sound Energy by a consortium of private equity investors. Section Chief Simon ffitch said expert testimony filed today by Public Counsel shows the settlement provisions do not do enough to address public interest concerns with the sale.
“Puget customers and Washington’s economy are better off with what they have now – a publicly-traded, investment-grade utility with improving financial health and low business risk,” ffitch said.
“Puget Sound Energy has not shown that it makes sense to burden this company with a dramatic increase in debt and financial risk,” he continued, “especially at a time when national and international economic conditions are so shaky.
“The company has successfully been able to raise capital for its infrastructure needs and doesn’t even claim that this deal will make capital more affordable. If that’s the case, from the public interest perspective, what is the need for this transaction?
“Simply put, the acquisition of Puget as detailed in the settlement is an inferior choice,” ffitch said.
Bellevue-based PSE, Washington’s oldest and largest energy utility, serves more than 1 million electric customers and 725,000 gas customers in Western Washington. PSE asked the UTC in December 2007 to approve the sale of PSE and its parent company, Puget Energy, to a consortium of private equity investors led by the Macquarie Group, an international banking and investment firm.
Public Counsel, which represents residential and small business customers in utility rate cases, recommended the UTC not approve the acquisition, as proposed, and filed detailed supporting testimony from expert witnesses on June 18.
Puget Energy, UTC staff, the Macquarie-led investment consortium and other interveners reached a settlement, filed July 23 with the UTC. Puget agreed to several provisions in order to win approval by commissioners, who have the final word on whether to approve the deal. Public Counsel actively participated in the settlement negotiations, but chose not to sign on after concluding that the proposal did not adequately address the problems its experts and other parties had previously identified.
As part of the settlement, the proposed buyers offered to inject an additional $200 million in equity into the $7.4 billion acquisition to reduce Puget Energy's debt level. But that offer would have a negligible effect on the overall percentage of debt in the transaction, according to new expert testimony filed today by Public Counsel.
Puget also proposed rate credits for customers spread out over 10 years, or about $10 million annually. That amounts to approximately $10 per year per customer.
“The proposed rate credits would save customers less than $1 per month and would have minimal impact when weighed against the revenue increases that Puget anticipates seeking over the next few years,” ffitch said. “PSE’s current rate increase request alone is asking for more than $200 million in additional annual revenues from hikes in electric and gas rates.”
The UTC staff’s recommendation to approve the settlement is not binding on the commission, which is expected to issue a decision on the acquisition in October or November. Because of the high public interest in the case and the filing of the settlement proposal, the UTC has added a public hearing and extended the time customers can send written comments.
- Evening Public Comment Hearing: Members of the public can comment on the proposed acquisition during a public hearing at 6:30 – 8 p.m. Tuesday, Aug. 26, at the Utilities and Transportation Commission, Richard Hemstad Building - Room 206, 1300 S. Evergreen Park Dr. S.W., Olympia.
- Written Comments: Alternatively, customers have until Aug. 26 to submit comments to the UTC via e-mail at email@example.com, online at www.utc.wa.gov/comment or call toll-free 1-800-562-6150. Include your name and mailing address, the name of the company (PSE), and docket no. U-072375. Customers can also write to Washington Utilities and Transportation Commission, Attn: CPC (Docket No. U-072375), PO Box 47250, Olympia, WA 98504.
- Evidentiary Hearing: The UTC will hold hearings Aug. 25 – 27 at the UTC in Olympia to hear expert witnesses for and against the settlement and will examine the testimony and evidence presented by Public Counsel and other parties.
- Rate Case: The UTC is considering the rate increase request separately from the sale and will issue a decision in that case by November. Hearings to cross-examine expert witnesses begin Sept. 2.
The Public Counsel Section advocates for the interests of consumers on major rate cases, mergers and other rulemakings before the UTC. Public Counsel also advocates for consumers in court appeals, through technical study groups and before the Legislature and other policy makers. The office maintains contact with the public through a citizen advisory committee, community organizations, public hearings and personal contact with consumers in major cases. More information about Public Counsel’s work is available online athttp://atg.wa.gov/Utilities.aspx.
Simon ffitch, Public Counsel Section Chief, (206) 389-2055
Kristin Alexander, Media Relations Manager - Seattle, (206) 464-6432
Editor’s Note: The spelling of Simon ffitch is correct – the surname begins with two lowercase f’s.