Puget Sound Energy (PSE) last Monday said it had reached a settlement with parties that stood in the way of the acquisition of the Bellevue, WA-based utility by a group of private investors. The state of Washington Utilities and Transportation Commission (WUTC) must review the settlement. and other factors before deciding on the merger.
In a separate development, PSE has drawn takeover interest from one of the counties in Washington state in which it serves electricity and operates two generation facilities. Skagit County earlier in July unveiled its consultant's report on the potential value of PSE's electric infrastructure in the county, and the utility last week countered with its own consultant's assessment.
In the midst of the merger case, the utility filed a settlement stipulation with the WUTC outlining the provisions of the deal. The proponents will request that state regulators suspend the ongoing merger proceeding to hold a separate proceeding on the new settlement.
PSE's holding company, Puget Energy, and the investor consortium's holding company, Puget Holdings LLC, said they had reached a settlement "to resolve all issues with several of the parties" involved in the merger proceeding at the WUTC. Skagit County was not one of the parties.
PSE said the settlement includes WUTC staff, the Industrial Customers of Northwest Utilities, Northwest Industrial Gas Users, the Energy Project, the Northwest Energy Coalition and the Kroger Co. In addition, the Cogeneration Coalition has indicated it won't oppose the deal, the utility said.
"The parties have notified the administrative law judge at the WUTC via letter," PSE said. "In the settlement stipulation, the parties intend to request that the WUTC suspend the current procedural schedule and set a prehearing conference as soon as possible to determine a schedule for hearing the settlement." Under the current proceedings, the WUTC was expected to make a decision by September.
PSE earlier in July filed with the state regulatory commission to commit to 10 years of benefits totaling $100 million for PSE utility customers from a proposed merger with the private consortium led by Australia-based Macquarie Capital Group and including Australian and Canadian investors.
PSE and its prospective suitors have an ongoing case at the WUTC reviewing the proposed $7.4 billion deal to take the utility private. The utility and its proposed new backers said they made the filing to "correct inaccuracies" that might have been created by some of the intervenors in the case, along with further outlining what they see as the immediate customer benefits of the merger, which include substantial infrastructure investment.
In the county takeover skirmishes, PSE's consultant, UtiliPoint, has set the potential value of the assets in Skagit County at more than $1 billion in making what the utility called an "apples-to-apples" assessment as opposed to the county government's assessment that Puget characterizes as "undervalued." Hittle & Associates Inc., a Pacific Northwest-based electrical engineering and consulting firm, did a takeover feasibility study.
Skagit operates a public utility district (PUD) for its county water and sewage systems, and the proposal being explored is to add the PSE electrical operations to the PUD, known as Skagit PUD No.1. Hittle's feasibility study that was released in June drew what PSE called "significantly different conclusions" on both the total cost and financial feasibility of the proposed takeover. UtiliPoint concluded in its recently released study that the county consultant underestimated the PSE system value by more than $400 million.
"The costs are appropriately and conservatively estimated at nearly $1 billion," said UtiliPoint CEO Bob Bellemare. "When we adjust Hittle's model for these new assumptions, we forecast rate increases starting in 2010 at 46% with continued increases for the next five years." UtiliPoint maintains that its numbers show a potential takeover would not financially benefit Skagit PUD or its customers.
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