PSE says Whidbey takeover could cost residents $130 million

Puget Sound Energy released a study today by the consulting firm UtiliPoint International that says a proposed takeover of PSE’s infrastructure on Whidbey Island would cost residents of Whidbey Island more than $130 million and lead to an average of 20 percent higher electric rates. Backers of a Whidbey-based PUD, however, said the study was nothing but a scare tactic and said the cost estimate is too high.

By Michaela Marx Wheatley • August 12, 2008 12:48 pm

Let the numbers game begin.

Puget Sound Energy released a study today by the consulting firm UtiliPoint International that says a proposed takeover of PSE’s infrastructure on Whidbey Island would cost residents of Whidbey Island more than $130 million and lead to an average of 20 percent higher electric rates.

Backers of a Whidbey-based PUD, however, said the study was nothing but a scare tactic and said the cost estimate is too high.

But PSE’s consultant maintains that his estimate is realistic.

“The price tag, I find, is no scare tactic. It’s on the lower end. It’s actually conservative,” said Bob Bellemare, CEO of UtiliPoint, who authored the report.

PSE’s consultant said he reviewed the utility’s inventory, dollar figures from comparable transactions, standard valuation in condemnation processes and more. And he has come to the conclusion that a potential public utility district and takeover of PSE’s electric system on the island “is an inefficient use of public monies.”

“Creating a new public utility from scratch does not make economic sense for the residents of Island County in this day and age,” Bellemare said.

The total of $130 million includes $85 million for distribution infrastructure such as poles and lines, $3 million to $5 million for legal costs and the condemnation process, and roughly $10 million for the start-up of a public utility district including a billing system, staff and offices.

But it doesn’t include compensation for severance and damages from stranded cost, which are long-term investments by PSE into the local system.

It also does not include the costs for PSE’s 10 substations or transmission system – the 115 kilovolt transmission lines that serve the Island – or other forms of compensation that may be owed PSE.

Bellemare said if any of these factors would be paid for the number could easily skyrocket.

Ed Jenkins, a spokesman for “Yes For People for Yes on Whidbey PUD,” called the study irrelevant and immaterial. Jenkins had not yet seen the report.

“How much value does this study have aside from hopefully scaring you? Nothing at all,” Jenkins said, adding that the study is part of PSE’s public relations campaign against the local public utilities district.