The three-member state Utilities and Transportation Commission has a high-stakes decision to make this fall when it rules on the proposed sale of Puget Sound Energy to foreign investors.
This is one the commissioners can’t afford to get wrong. Reliable service and reasonable power and natural gas rates for more than 1.7 million customers, most of them in the Puget Sound region, depend on it.
Macquarie Infrastructure Partners, a group of Australian investors, and three big Canadian pension funds want to buy the utility for $7.8 billion.
Approving the deal would make the utility’s shareholders and top executives very happy. Shareholders would get $30 per share, a 25 percent premium on the stock price the day of the offer last October.
Puget’s CEO, Steve Reynolds, could collect a $20 million payout whether he keeps his job or not, and other top executives could also cash in handsomely with payouts from $3 million to $5 million.
How about the ratepayers? Will they be better off? That’s the $7.8 billion question.
In a complex case rife with big numbers, one to focus on is $4.2 billion – the amount of debt PSE would be saddled with if the transaction is approved. The buyers would add $1.6 billion in new bank debt to the utility’s existing $2.6 billion debt obligations.
There is no small risk that should things go wrong, an onerous debt load could weigh down the utility’s finances and force it to seek higher power and gas rates than it ordinarily would.
In other words, a deal that’s sweet for everybody else could leave PSE customers holding the bag.
While PSE and the prospective buyers contend there are plenty of protections for ratepayers, the state Attorney General’s Office of Public Counsel strongly opposes the sale, contending it would expose PSE’s customers “to an undue level of financial risk by undertaking too much debt.” Public counsel Simon ffitch notes that PSE’s bond rating has already been lowered as a result of the proposal – “an indicator of the potential harm from the proposed transaction.”
We’re not capable of assessing the financial risks involved, but the public counsel’s stance raises red flags. PSE’s business customers seem to share those concerns; they call for the buyers to put $700 million more equity into the deal, reducing the debt burden for PSE.
In short, be careful, commissioners. Very, very careful.
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