The state Washington Utilities and Transportation Commission has approved the $7.4 billion sale of Puget Sound Energy to a consortium of private investors.

The commission voted 2-1 Tuesday to approve a settlement on the sale of the Bellevue-based utility, which serves more than a million customers across the state, with roughly 34,000 on Whidbey Island.

In its decision, the commission said the sale was “strikingly similar in many respects to other transactions the commission has reviewed and approved in recent years.” But the three-member body also noted substantial public opposition to the sale.

Even so, the commission said the settlement included 78 commitments that were in the public’s interest, including a pledge to protect PSE customers from rate increases that might stem from the sale, plus commitments to protect PSE’s financial health, the provision of quality service, help for low-income customers, and efforts to provide renewable energy.

PSE officials said the sale to New York-based Puget Holdings, a privately held group of investment companies and fund managers which maintain portfolios of infrastructure investments in the U.S., Canada and Australia, would be funded with $3.4 billion in cash, $2.6 billion of assumed debt held by PSE and $1.45 billion of newly issued debt.

Commissioners said the state would continue to control rates after the sale is finalized.

“The commission will continue to regulate PSE’s natural gas and electric rates, services, facilities and practices just as it does today. The commission will continue to exercise all its power of oversight and authority to protect consumers and the company in order to ensure that PSE continues to provide safe, reliable service at reasonable rates and of the quality the public expects,” said Washington Utilities and Transportation Commission Chairman Mark Sidran and Commissioner Patrick Oshie in their opinion.

Commissioner Philip Jones opposed approval of the sale. In a separate dissent, he said the sale could force the commission to approve higher rates for customers in the future because of the way the takeover was structured.

“The settlement agreement in its current form creates too much risk, and potential harm, for ratepayers and stakeholders,” Jones said. “I believe the settlement has been overtaken by market conditions that require further exploration on a full record that carefully analyzes critical aspects of the proposal under the reality of extremely adverse financial conditions that exist today.”

“The proposed agreement sets forth a capital structure with excessive debt for Puget Energy and PSE, and creates a privately-held investor consortium that lacks sufficient transparency compared to the status quo. I believe this increased incremental debt load creates undue risk for ratepayers by requiring PSE to create sufficient cash flow to service the substantial amounts of new debt to be issued by the holding company and it will place great pressure on the commission to approve the necessary large and frequent rate increases on a consistent basis,” he said.

The state Attorney General’s Public Counsel Section, which represents consumers in Washington on major rate cases, said benefits to customers from the sale are far from certain.

“This is a lengthy order and we’re still reviewing the details, but our initial review leads to disappointment,” said Public Counsel Section Chief Simon ffitch. “We believe the thousands of Puget Sound Energy customers who voiced their opposition to this sale will feel the same.”

“The commission’s order concludes that certain conditions and clarifications stated on paper will be sufficient to protect customers. The question now is whether they will be enough in the real world,” he said.

ffitch said the Public Counsel Section remains worried that the sale will not benefit PSE customers.

“Our office presented evidence that the sale did not pass the ‘no harm’ test. We remain concerned that a transaction that increases the financial risk for PSE and its customers is the wrong choice, particularly in this economic climate and particularly because it offers no tangible benefits to customers,” ffitch added.

“The burden will now be on PSE and its new owners to honor their commitments to the commission and to PSE’s customers. At the same time, state regulators must be vigilant in their enforcement of the conditions, commitments and requirements that are contained in this deal.”

The proposed sale of the power company has been controversial since it was announced in October 2007, and led to a citizen’s initiative on Whidbey Island that put a public takeover of PSE on the November ballot.

The effort to create a new power company to replace PSE went down to defeat at the ballot box, however, but supporters have since said they would try to get the measure approved in 2010.