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PUD Ready to Start Electrical Talks with Puget Sound Energy by Jeff Chew Peninsula Daily News, June 8, 2009

PORT HADLOCK -- Jefferson County Public Utility District commissioners have directed the utility's general manager to start formal discussions with Puget Sound Energy officials about the costs of acquiring PSE's facilities in Jefferson County.

"I would say this thing is moving at nano-speed," said PUD Commissioner Wayne King of Gardiner.

Last November, voters granted the utility, which now serves more than 4,000 water and community septic system customers, the authority to provide electrical power in east Jefferson County.

PUD General Manager Jim Parker on Friday said he hopes to begin talks with PSE within two weeks.

"The PUD is now moving into the phase where it will critically examine the costs and benefits associated with Jefferson County operating a community-based electric utility," Parker said.

"We're at the point where we want to talk to PSE. Now we want to know what's it going to cost to acquire."

Steady progress

PUD Commissioner Dana Roberts of Port Townsend said the utility was making steady progress toward providing service.

"I would say it's putting it into more formal gear," Roberts said of the commissioners' action Wednesday at PUD's Port Hadlock offices.

The PUD has budgeted $200,000 this year to pursue power authority, which could lead to acquisition of PSE's East Jefferson County facilities.

PSE, which now has nearly 17,900 customers in Jefferson County, has served the county for more than 100 years. Its consultant has estimated it would cost PUD at least $100 million to acquire PSE's Jefferson County power delivery system.

No specific price for the PSE Jefferson County facilities has been discussed, said Karl Karzmar, who PSE appointed to conduct initial talks with PUD.

"It probably will be a long time before we talk price,"Karzmar said.

"We will be prepared to respond to however the PUD proceeds."

Karzmar said he was disappointed that PUD would talk with PSE officials only if their attorneys were present.

"It just frustrates the process," Karzmar said. "If they have to have representation, we do, too."

Karzmar said PSE was willing to continue to meet with PUD representatives.

"We're very willing to talk," he said.

Next phase

Roberts said the PUD would use its team of advisors during the next phase of its investigation.

"We have a mandate from the people of Jefferson County to fully consider this and we will not drag our feet," he said.

The PUD commissioners earlier this year hired a consultant, Phil Otness of Port Ludlow, to work with Bonneville Power Administration, which by law can provide discount power to new PUDs.

Most recently, the PUD commissioners hired attorney Kirk Gibson and two associates with Ater Wynne LLP Attorneys at Law of Seattle to represent them through the facilities negotiation process.

The firm, which has an office in Portland, represents Columbia River People's Utility District, a customer-owned utility providing electric service in Columbia County and northern Multnomah County, Oregon, that the Jefferson PUD commissioners recently visited Columbia PUD's facilities.

"They started [in 1989] with nothing and just paid their bonds early," King said of Columbia PUD.

"They are almost identical in size and area as Jefferson PUD."

King said he learned that the Bonneville-powered Columbia PUD has 54 employees and charged $7 million less than PSE for the same amount of energy used last year.

With an attorney, King said the PUD can move ahead to secure an appraiser to put a value on Puget Sound Energy's facilities in Jefferson County.

PUD commissioners also have met with bond attorney Nancy Neraas of Seattle, who told them that new entities can borrow money on the bond market, but that bonding agencies do want to know that the PUD has a system in place.

A bond rating will be necessary for long-term bonds worth $2 million or more, she said, and the PUD can go to a firm that is favorable to electric utilities.

Acquiring BPA wholesale power would take up to three years. The PUD must prove that it owns the needed power transmission system and can pay for the power BPA delivers.

Under state law, the PUD has 10 years to exercise its authority.

PSE, which falls under the jurisdiction of Washington Utility and Transportation Commission, does not qualify for Bonneville Power Administration discount rates as a private corporation.

PUD would work as a nonprofit government power provider.

The purchase price could be negotiated between PUD and PSE, established through court condemnation proceedings, or PUD could choose to build its own facilities.