Expert Study Says Takeover of PSE’s Electric Service by Thurston PUD Would Cost More than One-Half Billion Dollars
Cost is Critical to Understanding Ballot Measure’s Potential Financial Risk for Thurston Residents
BELLEVUE, Wash. (Aug. 30, 2012) – A new study by a nationally recognized energy-research firm says the cost to Thurston County residents to takeover Puget Sound Energy’s local electric facilities and real estate would exceed $650 million – or more than $5,000 for every electric customer in the county. Additional costs of forming a new electric company were not included in the study’s cost estimates and would need to be added to any take over costs.
Thurston County voters will vote in November on Proposition 1, which would give the Thurston Public Utility District authority to forcibly acquire PSE’s local electric system.
PSE commissioned UtiliPoint International, a consulting firm recognized for its accuracy in valuing electric systems, to perform a study so that voters would have objective, credible information about the takeover proposal.
“Our customers deserve to have all the facts before voting in November,” said Ken Johnson, a Yelm resident and Director of State Government Affairs at PSE. “Our crews and customer service team in Olympia are proud to serve Thurston County and want to continue working for our community.”
Johnson went on to explain that while proponents of the proposition have suggested take-over plans that target only a few select neighborhoods in order to keep the initial acquisition costs low, Proposition 1 would give the PUD full authority to act anywhere in the county, without restrictions or any additional public votes for 10 years. “Our customers are being asked to make a half-billion dollar commitment and will have no additional input if the PUD changes course or the costs turn out to be higher than the PUD has promised,” he noted.
The study covers only one aspect of the cost of taking over PSE’s electric-system holdings in the county. “The preliminary asset valuation is just the starting point,” states Bob Bellemare, a certified business appraiser and chief operating officer of UtiliPoint International and author of the report.
In addition to the $650 million for PSE’s electric facility assets and real estate, the PUD’s decision could force residents to pay for stranded costs, severance damages, separation costs, going concern value, financing and legal expenses and start-up costs for a new electric PUD – hiring line crews, engineers and office staff; purchasing a fleet of utility vehicles; buying and setting up billing, accounting and communications systems; and so on. These additional costs could drive the total cost to nearly $1 billion.
In 2008, a UtiliPoint study predicted the cost of forming an electric PUD in Jefferson County (which is about one-seventh the size of Thurston County) would be more than $100 million – an estimate the Jefferson PUD’s general manager later told the Port Townsend Leader (May 5, 2010) was “spot on,” and which was further confirmed when the Jefferson PUD borrowed $115 million from the federal government for the acquisition and utility start-up. In contrast, a feasibility study performed by D. Hittle & Associates (the same firm now hired by Thurston County PUD), seriously under-estimated the cost at $47.2 million.
PSE has more than 90 Thurston County-based employees and contractors at its Olympia Service Center and Customer Business Office, and provides electricity to about 120,000 Thurston County homes and businesses. The PUD is currently the county’s fourth-largest water provider, serving about 3,000 water customers in the county. It has no electrical utility operations at this time.
About Puget Sound Energy
Washington state’s oldest local energy company, Puget Sound Energy serves 1.1 million electric customers and more than 750,000 natural gas customers in 11 counties. A subsidiary of Puget Energy, PSE meets the energy needs of its customers, in part, through cost-effective energy efficiency, procurement of sustainable energy resources, and far-sighted investment in energy-delivery infrastructure. PSE employees are dedicated to providing great customer service that is safe, dependable and efficient. For more information, visit www.PSE.com.
Grant Ringel/Gretchen Aliabadi