Northwest Renewable News

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State Approves sale of PSE to foreign investment group January 7, 2009

Filed under: Legal/Courts,Utility Companies,Washington — nwrenewablenews @ 1:21 pm
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The sale of Puget Sound Energy to a foreign investment group — Puget Holdings LLC — was approved Dec. 30 by the Washington Utilities and Transportation Commission for an estimated value of $7.4 billion.
The trio of commissioners voted 2-1 to approve the transaction of the Bellevue-based company, despite opposition from the Public Counsel Section of the state Attorney General’s office and ratepayers.
Opposition groups said that the purchasing group — led by the Australian bank Macquarie Group — would be forced to take on too much debt and likely would need to raise rates as it took PSE private.
Commissioner Philip Jones, casting the vote against the sale, wrote a dissenting view of the decision.
“The settlement agreement in its current form creates too much risk, and potential harm, for ratepayers and stakeholders,” Jones wrote. “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.”
He went on to add that he feared the commission would be forced to approve “large and frequent rate increases on a consistent basis” in order to keep the company afloat.
Commission Chairman Mark Sidran and Commissioner Patrick Oshie approved the sale, saying it was “consistent with the public interest” and will not harm ratepayers, the legal standard for approval.
The sale was being supported by Industrial Customers of Northwest Utilities, Northwest Industrial Gas Users, The Kroger Company, The Energy Project (representing low-income customers) and Northwest Energy Coalition.
“The commission will continue to regulate PSE’s natural gas and electric rates, services, facilities and practices just as it does today,” UTC Chairman Mark Sidran and Commissioner Patrick Oshie said in their written majority opinion. “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.”
The two commissioners also said they didn’t feel the sale “leveraged” the purchasers too much and said that there is “substantially less leverage” (20 percent) in this transaction than others the commission has approved.
They added that the investors were largely government and private pension funds and endowments, which can provide “assured access to a highly stable source of significant amounts of … capital” to help fund the billions of dollars of infrastructure investment PSE requires in the next few years, during a period of uncertainty and turmoil in the financial markets relied upon by PSE.
The 78 commitments and conditions detailed in the order protect customer service, safety, reliability, resource adequacy including energy efficiency and conservation, support for low-income customers and environmental stewardship.
PSE will also maintain its regional headquarters and local management.
The commission also said that while the sale isn’t popular with the public, it does not harm the public interest.
The sale had already received approval from federal commissions and the PSE board of directors and shareholders.
Puget Holdings will buy all the outstanding common stock of Puget Energy for $30 per share. Puget Energy common stock will no longer be publicly traded. The transaction is funded with $3.4 billion in cash, $2.6 billion of assumed debt held by PSE and $1.45 billion of newly issued debt, approximately $600 million of which is used to replace or refinance existing debt held by PSE and $850 million of which is net new debt held by Puget Energy (from which PSE ratepayers are shielded by commitments in the transaction).
The Canada Pension Plan Investment Board and British Columbia Investment Management Corp. join Macquarie as the main investors.
PSE is the state’s largest electric and natural gas utility, serving more than one million electric and 737,000 natural gas customers, primarily in Western Washington and including Whatcom County.


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