KAUAI, Hawaii, Sept. 18, 2002 — The Hawaii Public Utilities Commission recently issued its Decision and Order approving the purchase of Kauai Electric by Kauai Island Utility Co-Op, a consumer-owned electric cooperative.
The purchase agreement between KIUC and Citizens Communications Company of Stamford, Connecticut, KE’s parent company, was signed on March 5, 2002. On March 15, 2002, Citizens and KIUC filed a joint application with the Commission asking it to approve the sale.
The Hawaii Division of Consumer Advocacy (Consumer Advocate) and the Department of the Navy, both intervening parties in the Commission process, along with KE and KIUC, entered into a Stipulation Agreement on July 18, 2002 supporting the transaction with terms that provide for refunds to consumers to lower their electric bills.
On July 31, 2002, the Commission issued a preliminary indication of support for the sale in order to preserve access to low-cost government financing from the U.S. Department of Agriculture Rural Utilities Service that must be committed by September 30th, the end of the government’s fiscal year.
The interest rate savings attributable to this low-cost financing is a significant benefit to Kauai consumers and is a major contributor to the projected $26 million of rate relief over the first ten years of KIUC’s operations.
Final position statements were filed on September 10, 2002, by the parties to the Commission’s process. The Consumer Advocate, Department of the Navy, KE and KIUC reaffirmed their support for the transaction with the Stipulation Agreement terms, and the County of Kauai filed a position statement recommending approval of the sale with additional terms attached.
“Over the next ten years, we expect that ratepayers will see over $26 million in rate relief — money returned to their pocketbooks — while the co- op, which will be 100% owned and controlled by the people it serves, will build up a solid financial cushion,” said Fran Brennan, KIUC board member.
“Even after providing this rate relief, we expect that KIUC will build up nearly $80 million of equity belonging to co-op members and generate over $91 million of free cash flow over this same ten-year period. As a consumer owned co-op, these financial resources will enable the people of Kauai to have a meaningful voice in their future energy decisions.”
Former Kauai Mayor and KIUC board member JoAnn Yukimura said that another benefit of co-op ownership of KE is that KIUC will be eligible for FEMA disaster assistance. “This assures us of our ability to withstand another disaster like Iniki, and with FEMA reimbursement for about 75% of the cost of restoration, we would not face the same likelihood of having to raise rates as was the case after Iniki.”
Information will soon be sent to all electric customers on the island explaining the privileges of co-op membership and allowing anyone who chooses not to be a member to opt out. Members will be entitled to vote and receive money back in the form of checks for their patronage capital credits, which are in effect a rate rebate paid by a cooperative.
Board member Mary Thronas said it is important to understand that cooperative membership in no way, shape, or form obligates any business or individual to repay the co-op’s debt.
KIUC has been working for the past 39 months to gain public and regulatory support to purchase Kauai Electric and make it a co-op utility. More than 930 customer-owned co-op utilities exist around the country, and offer local control and more personalized service.
KIUC would become Hawaii’s first electric co-op. KIUC’s mission is to provide reliable, low cost electric service in an environmentally responsible manner, consistent with sound business practices.
Source: National Rural Electric Cooperative Association