Anyone have info on fighing the Puget Sound Energy takeover?

[eridani]

Are there any groups in other parts of the Western Washington who are working on stopping the Puget Sound Energy take over? I am trying to build a website and cannot find any other groups who are openly working on the take over. Does anyone know of groups that have website in Seattle or other places that I can link to? If you know other groups could you give me the names and if they have websites their links. It seems the progressives have not talked about this corporate buy out that will affect us all, Erna

Here is the link that was in insert in your energy bill. http://www.pse.com/SiteCollectionDocuments/mediaKit/MergerHearings_MarApr2008.pdf

Here is a link to an article about the Macquarie Bank Story in FORTUNE Magazine http://www.savepse.org/Macquarie%20Bank%20Story%20(Fortune%20Mag).pdf

Please contact Erna Berghuys <elm.berghuys {at} verizon.net if you have relevant info.

[eridani]

1. Public opposition is starting to get organized

www.savepse.org

B R E A K I N G N E W S

UTC to hold an "informational" meeting
6:30 p.m. | Wednesday May 28th
Carol Edwards Center, Madrona Room
17401 133rd Ave. N.E.
Woodinville



Should PSE customers be concerned about Macquarie's financial situation?


STOCKS DROP LIKE A ROCK TODAY


"Macquarie Bank lost 12% after its veiled warning about the 2009 financial year's outlook and ... Babcock and Brown was also sold off sharply: the shares losing 18% in value to close at $12.72. Babcock & Brown Power Ltd (BBP) was the worst performer in the ASX 200 last week with the securities in the power group losing more than 40% in two days amid increasing concerns about its debt position and sloppy disclosure from its management which rattled already shaken investors."
< source: http://www.aireview.com.au/index.php?act=view&catid=8&id=8681 >

__________________________

from The Australian 5.24.08
< SOURCE: http://www.theaustralian.news.com.au/story/0,25197,23748550-20501,00.html >

+ STOCK DOWN 40%

"The Macquarie share price closed down 58c yesterday at $58.40, a remarkably long way down from its $97.10 high."


+ CEO MOSS BAILED LAST WEEK WITH $80 MILLION

"Moss walked out the glass door with about $80 million worth of farewell presents, for example, and Moore's remuneration dropped slightly this year -- but it was still $27 million."

+ 'MAQUARIE FORMULA' OUT OF STYLE

"Clearly the market is disenchanted with what it understands as the Macquarie formula. Financial services, particularly those specialising in complex products and tax-driven, highly leveraged structures, are seen as yesterday's market fashion."

___________________________

see Australia STOCK MARKET CHART HERE
http://finance.google.com/finance?q=ASX:MQG

________________________

for MORE INFO about the PSE takeover, go to www.savepse.org

[eridani]

2. Skagit County Dems resolution just passed

A RESOLUTION OF THE KING COUNTY DEMOCRATIC PARTY SUPPORTING PUBLIC OWNERSHIP OF ELECTRICAL ENERGY INFRASTRUCTURE

WHEREAS public utility infrastructure provides basic requirements for the existence of a modern, civil and just society;

WHEREAS the long-term viability of critical public utility infrastructure is very important and should be viewed by our community’s leaders as a long-term, multi-generational investment in the public trust;

WHEREAS critical public utility infrastructure over the past several decades has increasingly been placed under the control of private investors with little connection to our community: its values, goals and objectives; and

WHEREAS public ownership enhances local government’s capacity to pursue the goals of security, justice, equity, environmental objectives and community service obligations;

WHEREAS public ownership ensures against a focus on short-term profits at the expense of long-range investment that will benefit our community’s future;

WHEREAS public ownership ensures against the creation of private monopolies, and prevents undue political influence in a manner contrary to the public trust; and

WHEREAS greater public ownership strengthens community involvement in decision making;

WHEREAS public ownership can guarantee services at reasonable prices in rural as well as urban areas, a matter of high concern given Skagit County’s geographical diversity;

WHEREAS electricity generated by the nation’s rivers should benefit the public, and, in particular, the communities located within those river systems;

WHEREAS climate change will increasingly place a premium on our community’s water and sustainable energy resources, amplifying pressure by foreign corporate interests to secure those resources for their own profit-making opportunities;

WHEREAS it is in our interest to ensure that our community maintains adequate oversight and control over our water resources, our river systems, and our sources of sustainable energy;

WHEREAS numerous public utility districts within the State of Washington have safely and reliably provided hydroelectric power to their communities for many decades, at rates far more competitive than the national average;

WHEREAS the Democratic Party has historically supported public ownership of critical public utility infrastructure for many of the reasons described above.

THEREFORE, BE IT RESOLVED THAT the King County Democratic Party supports a feasibility study to look at the possibility of public (state or local) ownership of Puget Sound Energy infrastructure.

THEREFORE, BE IT FURTHER RESOLVED THAT Governor Christine Gregoire direct the Utilities Commission to conduct such study and stop the sale until the completion of the feasibility study

[eridani]

3. Comment from Sedro-Wooley

This aint no laughing matter. Pardon my grammar, but this is not a good time to be asleep at your citizenship wheel. Now is the time to speak up. You are looking at an Enron-style fiasco in the making and you will be paying the bill – literally – if you don’t educate yourself, express your opinion and grind this scam to a halt. Check it out: http://www.savepse.org/

This isn’t really my gig – others are working much, much harder on this – but hardly anyone knows that our power company, PSE, is at risk of being taken over for foreign investors, specifically the Macquarie Group, which focuses on infrastructure investments – including toll roads, bridges, water companies and airports – around the world. Macquarie has an alarmingly horrific reputation of gutting and running and their debt loads are so high (over 85%) that they will likely immediately start selling off parts of PSE if they succeed in the takeover (and in fact I’ve been told that they are already in conversation with FERC regarding selling some of PSE’s assets).

What does this likely mean to you? Well, people that know way more than I are estimating that there will be additional rate increases of 30-40% over the next 5 years if this takeover occurs. The current request for a 12% rate increase is just for now, and future increases under Macquarie control are likely to be much larger than they would be if PSE were under public PUD control. (PSE ratepayers already pay some of the highest electricity rates on the west coast.) The takeover would almost certainly result in much less responsive service as well, as the rich guys sitting in their armchairs thousands of miles away aren’t likely to be too concerned about Washingtonians. And who knows what the takeover means to the management and maintenance of our Baker River dams, which actually could be sold again in the near future.

The best answer is for our local Public Utility Districts (PUDs) to buy PSE and then our power becomes a PUBLIC RESOURCE, not something for investors to manage for maximized profit and minimized service. Skagit PUD is taking a poll – and I encourage you link to their website via the Save PSE website (scroll part way down the page) and take the poll, or call them directly.

I STRONGLY encourage you to take a look at the website, http://www.savepse.org/, get educated and decide if this issue is worth a few minutes of your time. I know that everyone is busy, but so often it’s just a few that fight the battles for the benefit of all. And it’s not clear that this battle will be won unless more people become engaged.


Nan Laney
Sedro-Woolley

[eridani]

4. URGENT - Comments Due This Week!!!

Is the UTC staff listening to corporate interests and ignoring 10,000+ PSE customers who are opposed to the so-called PSE/Macquarie merger?

Please direct your comments to the UTC (docket # U-072375) by calling toll-free to the UTC office: 1-800-562-6150.


Also, direct your comments to Simon Fitch
Attorney General's office of Public Counsel
phone [phone] or submit comments online at:

https://fortress.wa.gov/atg/formhandler/ago/ComplaintForm.aspx

Puget Energy wins over some critics

The commission's staff, which had strongly opposed the deal because it would increase the utility's debt burden, has agreed to the settlement. But not all parties that objected to the merger ... agreed to the settlement. The Attorney General's Public Counsel office, which represents Washington ratepayers, is not expected to sign on to the agreement, the letter says ... terms of the proposed settlement were not disclosed, but the changes, compared with what was originally proposed ... were 'substantial,' said Ron Roseman of the Energy Project. Details will be filed today or Wednesday with the Utilities and Transportation Commission (UTC), which must review the settlement and has the final word on the acquisition.

http://seattletimes.nwsource.com/html/businesstechnology/2008065128_pse220.html >

SKAGIT VALLEY HERALD article:
http://www.goskagit.com/home/article/pse_says_wutc_staff_other_parties_agree_to_merger/

www.SavePSE.org

[eridani]

5. Important! August 26th hearing coming up!

Our thanks to retired State Senator Diane H. Woody
for this summation of the rebuttal testimony
of Steven Hill, expert witness for the
State Attorney General's office

____________________________________________
IF YOU NEED HELP WITH YOUR COMMENTS TO THE UTC
FOR THE AUG 26th HEARING ... THERE'S
LOTS OF MATERIAL HERE!

____________________________________________


This is a summation of many of the points made by the Attorney General expert witness Steven Hill, in evaluating the proposed Settlement Agreement signed by the UTC staff, the investment consortium, and most of the registered interest parties to this proposed sale of Puget Sound Energy (PSE).

This rebuttal testimony was submitted to the UTC on August 5 by the Attorney General. A hearing to examine and cross examine responding party testimony regarding the Settlement Agreement will be held at the UTC building in Olympia on August 25. A public hearing regarding the Settlement Agreement will be held in Olympia on August 26. The UTC Commissioners are expected to reach a decision on the proposed merger/sale of PSE sometime after September 1st.

The Rebuttal

1.) In his written testimony to the UTC, Mr. Hill states that, "This transaction is not necessitated by the public interest generally or the interests of Puget’s customers. Instead it appears to benefit the private interests of an investor group that seeks, through the use of leverage and increases in financial risk, to earn a very high rate of return—much higher than is available in the public market for utility stocks.

The Joint Applicants have shown neither a financial nor an operational need for this acquisition. There is no demonstration that Puget is unable to raise the capital necessary to fulfill its public service obligations."

2) He further finds, "Allowing an investor consortium to take the Company private, to issue significant amounts of five-year term debt to finance both the acquisition and projected capital expenditures over the next ten years, remains an inferior choice for the interests of Puget’s customers, even considering the concessions offered in the settlement process."

3.) In the Settlement Agreement, the Macquarie Consortium agreed to increase their equity investment by 200 million and reduce the loan to purchase PSE by that same amount. However, it is not clear if this "equity" would be borrowed (a loan) from Macquarie that would have to be paid back and would suck up future revenues from PSE, or be true investment capital.

Mr. Hill points out that, "even if the capital injected into the transaction actually represents original investor equity capital and not just more debt, the commitment does not include a timing requirement that the equity be in place at the time the transaction is completed. Also, there is no penalty included in the commitment if Macquarie elects ultimately not to add the equity."

4.) The Macquarie Consortium also agreed to contribute up to 100 million over 10 years (10 million per year) as energy credits to ratepayers. Up to 1.2 million dollars per year potentially would be forthcoming from cost savings, and 8.8 million per year would be set aside by PSE for energy credits. This would reduce PSE revenue per year by 8..8 million (which could potentially affect future rate increase demands).

Mr. Hill discusses the effect of this 8.8 million on investor rate of return and finds that, "Even with that reduction, the expected rate of return is well above current utility returns, and at the upper end of the expected returns in the Investor Consortium's investment portfolios. This rate reduction offer can only be characterized as a modest proposal and, again, one that does not substantially change the underlying nature of the deal".

5.) There was an attempt in the Settlement Agreement to restrict cash distributions out of PSE and Puget Energy in order to improve it's financial condition. Mr. Hill found these restrictions would be ineffective, "it is most important to realize that a dividend restriction commitment by the Joint Applicants is necessary only because of the large amounts of debt that accompany the proposed transaction and the resulting increased potential for bond rating downgrades. Under the "status quo," this concern about bond ratings and retaining cash in the operating company is a non-issue. That is because Puget Energy, prior to the announcement of the proposed acquisition, was on a path of improving financial health. It is only because of the change in directiion anticipated with this transaction, i.e., the use of significant amounts of debt capital to facilitate the transaction and to finance capital expenditures, that the bond rating of Puget is in question."

While restricting cash distributions out of PSE is meant to improve it’s financial situation and bond rating as impaired by this merger, increased costs above what is estimated by the very optimistic Macquarie 10 year revenue model could wipe out this cash reserve, (potential debt interest rate increases, as well as increases in the cost of wages, fuel, construction, inflation, etc.), "the increased costs of capital as well as other associated cost increases could well negate any financial strength benefit afforded by the dividend restriction. As I noted in my Direct Testimony in this proceeding, a loss of investment grade bond rating would increase costs forPuget for all of the following reasons:

** Higher long-term borrowing costs on long-term debt, preferred stock, hybrid securities, etc.;

** Higher short-term borrowing costs as reflected in credit facility pricing grids and lkely higher spreads on commercial paper issuances;

** Potential loss of access to the commercial paper markets;

** Possible inability to renew credit facilities;

** Potential collateral calls from energy credit counter parties

** The demand for collateral or up-front payments by those providing new energy resources to PSE;

** Counter parties may no longer provide trade credit for energy hedging activities;

** Energy supply trading and hedging counter parties may no longer be willing to conduct business with PSE

6.) The Settlement Agreement attempts to put restrictions on dividend payments to investors in an effort to protect PSE from the gouging common in other Macquarie managed Funds. These restriction are not likely to be effective since Macquarie management could easily take dividends out of other capital rather than operating cash flow, etc., "on the topic of dividend restrictions, one of the fundamental reasons for requiring this commitment is to limit the cash distributions to the equity investors in the event of a bond rating downgrade, thereby providing a direct incentive for the equity investors to manage the Company to avoid that situation. However, as reported in the Risk Metrics white paper provided as an exhibit in my Direct Testimony, a feature of the Macquarie model is the payment of cash distributions that are greater than the operating cash flow of the infrastructure investment to its investment partners. If that occurs in this instance, then a dividend restriction commitment offers little incentive for the equity investors to assiduously avoid a bond rating downgrade. Providing cash distributions out of other capital rather than operating cash flow would thwart the attempt to shore up the financial position of PE by creating additional responsibility for the cash flow stream of Puget Energy."

7.) The Settlement Agreement requires the Joint Applicants to maintain a 44 percent common equity ratio at PSE prior to any dividend distributions to Puget Energy to help protect the public interest, however, Mr. Hill found this provision to be unenforceable; "Puget Energy and its parent companies are able to control the capital structure of Puget Sound Energy by issuing debt and injecting that capital as equity into PSE, and, therefore, can maintain any capital structure it wishes at the operating company. The requirement that PSE have a 44 percent common equity ratio prior to issuing dividends to PE does not protect the public interest."

I also believe that Macquarie management could revalue PSE (as they have often done with other asset companies) and tinker with both equity and debt ratios to additionally get around dividend restrictions.

8.) The provisions requiring PSE and PE to provide financial information as required by the NYSE and SEC are limited by the phrase "to the extent practicable". Additionally, the complexity of the Macquarie holding companies and the interconnections between Macquarie funds could make it very difficult to track PSE/Macquarie loan and equity transactions regardless of the "reporting" requirements stipulated in the Settlement Agreement.

9.) What is the value of the "Good Will" potentially created by this merger?

"This subject of the goodwill that would be created by the proposed transaction provides an apt illustration of why the entire transaction is not in the public interest. By paying $30 per share price for Puget Energy, a price approximately 25 percent higher than the then-current market price, and by financing the acquisition with $1.425 billion in new debt issued by Puget Energy, the Macquarie-led investors, if this transaction proceeds, will have created an intangible $1.6 billion goodwill asset on the books of Puget Energy that is currently non-existent.

This means, very simply, that because Puget Energy is currently in sound financial shape, the cash flow stream of Puget Energy is able to support an additional $1.425 billion in debt capital. However, what that additional debt essentially winds up financing in the proposed transaction is a hypothetical goodwill asset of $1.6 billion—simply a result of the very high price paid by the investor consortium for Puget stock. Puget Energy would be much better off and the public interest would be better served if Puget Energy, absent the proposed transaction, issued $1.425 billion of additional debt, incurring the attendant financial risk, but used those monies to finance and build actual tangible assets such as transmission lines and power plants, rather than creating the hypothetical goodwill asset that will result from this proposed transaction. While the additional debt would add a similar amount of financial risk as the proposed transaction, the public interest would be better served by having those monies available to finance tangible utility assets rather than financial assets that appear only on the holding company balance sheet."

10.) Mr. Hill warns that the UTC should see "a brightly flashing danger sign regarding the Macquarie debt-based business plan for Puget.". One of the UTC staff expert witnesses, Mr. Schmidt, is quoted as warning that the world debt markets are currently under stress and volitile, "in some portions of the private equity market, particularly those exposed to energy markets, the high leverage position of many private equity investments coupled with a move to fair value accounting can force write-downs of equity and further increases leverage. This could hold the seeds of a future tidal wave of funds fleeing the sector. If this were to occur, private equity funds would face a sudden lack of liquidity that is evidenced in today's mortgage debt markets, and that could hamper their ability to refinance debt and continue to reinvest in their holdings."

This merger is predicated on the long-term availability of substantial amounts of debt capital, however Mr. Hill points out that the near failures and government bail-outs of major financial institutions, along with bank closings, very high commodity prices, rising inflation, and a poor national and world economic environment suggest that this is not the time to bet on the stability of the world debt market.

Mr. Hill concludes: "It would not be in the public interest, especially in the current uncertain economic environment, to reverse Puget’s long-term financial improvement by approving the transaction proposed by Macquarie and the Investment Consortium.

The conditions and commitments set out in the Settlement Stipulation do not sufficiently address the level of financial risk created by the proposed acquisition."

The link to the PDF file for the complete Steven Hill Settlement Agreement Rebuttal testimony is:
http://www.wutc.wa.gov/rms2.nsf/177d98baa5918c7388256a550064a61e/0c1e805269e20f578825749c0075c7c1!OpenDocument

This document is also available in non PDF form on the UTC Docket page for that document:
http://www.wutc.wa.gov/rms2..nsf/vw2005OpenDocket/04FCCB4C41D8EB2A8825749C00758465

The UTC complete listing of online documents and fillings regarding the PSE merger proposal can be seen here:
http://www.wutc.wa.gov/rms2.nsf/frm2005VwDSWeb!OpenForm&vw2005L1DktSh=072375-Documents&NAV999999

http://www.savepse.org/

[eridani]

6. Comment period extended

UTC HAS EXTENDED THE COMMENT PERIOD TO

SEPT. 5th

Do you believe a thorough feasibility study of the terms of the PSE/Macquarie "settlement agreement" should be conducted before the Utilities Commissioners make their decision on the takeover? If so, please take a moment to tell these gentlemen how you feel about it:

UTC Commissioners

Mark Sidran, chairman
Patrick Oshie
Philip Jones

comments {at} utc.wa.gov
1-800-562-6150

Also, the AG's office is doing a good job of representing the public in this case but they really need to hear from as many people as possible to show the strength of ratepayer opposition to the takeover. Please speak up now!



Simon ffitch
Assistant Attorney General, Section Chief
Public Counsel
Washington Attorney General
800 Fifth Avenue, Suite 2000
Seattle Washington 98104-3188
Office: [phone]
FAX: [phone]
Email: simonf {at} atg.wa.gov


www.savepse.org/

DO NOT UNDERESTIMATE

THE POWER OF THE PEOPLE

FINAL DEADLINE FOR YOUR COMMENTS . . . SEPTEMBER 5TH

~ SEE CONTACT INFO BELOW ~


August 31, 2008

Public comments objecting to censorship of an 80-page report submitted to the UTC apparently helped the AG's Office of Public Counsel make its argument at the hearings last week. Hopefully new public comments about the merger will be helpful when they make their final written arguments to the UTC on Sept. 19.

During last week's three days of testimony, UTC Commissioner Jones had the more analytical and critical questions. Chairman Sidran seemed to want to know how to make the proposal better, while Commissioner Oshie wanted more clarification and understanding of terms and conditions.

The proposal is not something that can be "fixed." If the Commissioners approve this buyout of PSE with some betterment of terms and conditions, it will be a disaster for PSE and Washington State. The Macquarie team of experts will fly in and tighten up operations till they squeak. And every penny saved will go into the pockets of Macquarie and its investor partners ... not to the benefit of PSE customers.

This transaction will impose a huge debt on PSE and will drive up rate increases over the next decade. The unforeseen consequence of large annual rate increases and growing dissatisfaction with PSE would be more incentive for PSE's industrial and private customers to go off the grid. The PUD movement would be strengthened and legislation would be supportive of that movement. At the same time, alternative energy (geo, wind, solar, etc.) would become cost effective and attractive alternatives to high PSE energy costs.

At the UTC hearing a Macquarie Consortium attorney said the new multi-billion dollar PSE debt is not important because the PSE customer base would grow, reducing per capita costs. One of the primary tenets of Macquarie strategy pushing this merger is that PSE has a "captive" customer base. Maybe it's not so captive. Washington State has powerful PUD laws which could become even more favorable as PSE rates and public outcry increase and legislators react.

If the Macquarie Consortium is wrong, and the PSE customer base actually shrinks over time (due to high prices, customer dissatisfaction and cheaper energy alternatives), then a smaller PSE customer base would have to pay for the large and growing PSE debt. This could lead to a PSE default on those loans, creating huge problems for PSE customers and the state.

If Macquarie wins and the sale is ratified they will fight, tooth and nail, any attempt by PUDs to reduce "their" customer/revenue base. That means expensive legal battles, no holes barred; tons of money for Olympia lobbyists, etc. Eventually PSE customers will suffer for this and there will be even more pressure to raise rates.

PSE ratepayers should probably be researching PUD laws and talking to state legislators and their staffs about making changes. It would be easier to implement them now rather than later when the Macquarie machine has had time to get entrenched and start influencing our politicos.

Apparently Las Vegas has 9/4 odds in favor of this merger passing. Unless our elected leaders get involved, they may be right.

Dianne Woody (retired State Senator)

[eridani]

7. Do we want this corporate wreck running our electric utility?

Macquarie's share plunge prompted a query from the Australian Securities Exchange. Macquarie Group shares have lost 38 per cent of their value this week, after the collapse of US investment bank Lehman Brothers and the US government takeover of insurance giant American International Group spooked investors over holding stock in companies that carry considerable debt. As Macquarie Group's shares plunged, its five-year credit default swap spreads ballooned to 730.5 basis points from 653 a day earlier, according to Bloomberg. The higher the spread, the greater the perceived risk of default. The yield on Macquarie's five-year subordinated debt has more than doubled in the past few days as investors became nervous about companies carrying big levels of debt.
(see complete story & Scott Murdoch's video editorial at this website)
http://www.theaustralian.news.com.au/story/0,25197,24368232-643,00.html >

___________________________________

Macquarie shares have lost as much as 65% this year and are far from its level of near $97 a share in May last year.

"The direction of Macquarie's price is telling us Macquarie is broken," said JPMorgan analyst Brian Johnson. "With the hedge funds driving the agenda, it is hard to identify a catalyst to turn Macquarie's price direction around."
http://business.theage.com.au/business/macquarie-shares-slammed-as-world-financial-markets-grind-to-a-halt-20080918-4jfh.html

http://www.savepse.org/
http://www.sceanow.org/

[eridani]

8. Final decision next month?

Looks like we are getting down to the wire. A final decision could be reached within the next month.

I have summarized most of the cost and risk factors identified in the AG brief. There are other objections in that brief to the proposed PSE "merger", all dismissed or ignored in the UTC staff and PSE briefs.

New to me and of great interest (and discussed at length in the brief), is the Attorney General finding that international ownership of PSE could make it difficult or impossible for the UTC to adequately regulate PSE, call witnesses, etc. Policing these folks could be a full time job.

Dianne

The final Briefs regarding the proposed Puget Sound Energy (PSE) merger have been submitted to the UTC for Commissioner consideration and decision.

Briefs were submitted by major interested parties including the UTC Staff, Industrial Customers, Puget Sound Energy and the Macquarie Investor Consortium, and the Attorney General Public Counsel, representing PSE customers/ratepayers.

Public Counsel Conclusions

The strong preponderance of the evidence in the record shows that Puget is able to raise capital necessary to meet its projected capital expenditure requirements, and that the Joint Applicants do not offer a superior or more cost-effective alternative.

Approval of this acquisition will increase the business and financial risk of Puget to the detriment of its over one million customers and the Company's own financial health...

Ratepayers are left as the ultimate guarantor to absorb the increased costs and risks of the (sale of) Puget. The proposed transaction is not in the public interest and should be rejected.

No Harm to the Public Interest

RCW 80.12 sets no explicit standard to determine how the Utility and Transportation Commission should evaluate ownership transfers such as the PSE proposal. In WAC and rulings over time, the UTC has established standards which are generally that a proposed transaction "should not harm customers by causing rates or risks to increase".

The Investment Consortium argues that the UTC has also found that a purchaser need only be "qualified to take over management" of a utility.

Clearly, the Legislature should address this issue to limit litigation and to provide clear direction to the UTC and potential utility purchasers in the future.

Would Rates Increase?

The UTC Staff Brief states that the UTC standard of Do No Harm by causing risks or rates to increase is the yardstick by which the UTC must decide this issue. At the same time, they say that under Consortium ownership, PSE rates would NOT increase over the existing ownership since PSE would have to raise more capital in the future anyway. What the UTC staff ignores is the effect of the magnitude and purpose of the proposed loans arranged by the Macquarie Consortium.

**Over a Billion dollars of those loans ($1.225 Billion) would simply finance the sale of PSE (leverage) and will be of no benefit to PSE ratepayers at all.

**The Brief from PSE and the Investor Consortium says the investor members "have Billions of dollars of Capital to Invest". However, in the same breath, the Consortium Brief argues against
reducing the $1.225 Billion leverage loan (thus increasing their equity) by even $500 Million.

Regardless of the Billions of dollars that leverage loan alone would cost Puget Sound Energy customers over time, the Attorney General points out the leverage loan is vital to the Consortium because it would provide high leveraged (increased) rates of return to the Consortium investors.

**In total, this proposed PSE transfer of ownership would cost approximately $145 million in attorney fees, executive awards, etc. While the UTC has stipulated that this amount cannot be recovered in rate cases, it will be paid for from the "equity money pool" and approximately 26% of that is from the $1.225 leverage loan, and PSE customers will pay for that.

**The Attorney General Brief also finds that the Macquarie Consortium's plan to refinance approximately $375 Million of existing PSE debt would increase costs to PSE and ratepayers. Refinancing that loan would cost PSE $19 Million of pre-payment penalties, plus higher finance charges in the current credit market.

**Even the $1.4 Billion portion of the total $3.4 Billion loan committments, which has been purported to be for future PSE Capital Constuction needs, turns out to be only a "plan". The Attorney General points out that when Commissioner Jones ask if the $1.4 Billion was a firm committment, he was told it was a "commercial intent".

Even if used for PSE capital construction needs, this $1.4 Billion loan committment is burdened with onerous conditions that could leave some PSE construction projects ineleigable for funds, and other projects vulnerable to "loan lock ups" which could put the UTC under pressure to raise rates to complete construction projects.

**The Consortium would have to refinance the total $3.4 Billion loan package (plus $375 Million of current debt) in 5 years at unknown refinance cost.

Would Risks Increase?

Some of the risk factors identified by the Attorney General are:

**PSE is on credit watch by two major rating agencies due to the proposed high debt levels, and may be downgraded below investment grade if the proposal to sell PSE is approved. If downgraded, future credit for PSE would be much more expensive, if available at all.

**There is the risk that ring fensing provisions designed to protect PSE from external financial conditions and bankruptcy, could fail in a time of crisis.

**The Attorney General also found that cash flow and revenue projections estimated by the Consortium are best case, and unrealistic by historical standards. In a period of volatile revenue, PSE could violate its debt covenants and risk default of its debt agreements. The ownership of PSE could fall to the banks that provided debt capital to Puget Energy.

**The Macquarie finance model for PSE assumes annual rate increase requests which would unrealistically be 100% approved. The Attorney General Brief also points out that Consortium financial projections for investors and lenders show PSE revenue "growing nearly twice as fast as its expenses" in the next 5 years. The Attorney General is concerned that the Macquarie lead Consortium does not adequately understand that a regulated utility in Washington State raises customer rates to recover actual costs as necessary, not to generate increasing profits for investors.

There is also a concern that constant rate increase expectations from Consortium investors and lenders would put unrelenting pressure on the UTC to raise rates, especially if the conditions placed on loans result in repeated cash lock ups.

**Macquarie has promised investors dividends that exceed 100% of PSE earnings. The difference would have to be made up from operating cash flow, shortfalls would again put pressure on the UTC to raise rates.

**All of the debt expected to be issued by Puget Energy (transaction debt as well as capital expenditure debt) is five-year term debt and would have to be refinanced at risk of higher cost.

**Because the Consortium would depend on financing from the private equity market, there is a risk of major loss of investor confidence from market-driven shocks. Higher leveraged entities also have greater exposure to interest rate risk.

**The AG finds there is considerable risk that foreign ownership of PSE and the complicated legal and management structure of the Macquarie Group would make it difficult for the UTC to regulate PSE.

Further, Puget Holdings has refused to commit to be bound by RCW 80.08.020, or any other provision of Title 80, and it appears that witnesses (Consortium international management, etc) from beyond the borders of Washington State or the United States, cannot be compelled to testify at UTC or court hearings. The Attorney General Brief states, "If the ability to regulate is harmed, then the transaction is not in the public interest and must be rejected."

The Public Interest

The Attorney General Brief identifies many other problems, and potential problems, with the proposed sale of PSE to the Macquarie Consortium.

However, it would seem that any one of the above rate increase or riskfactors would violate the UTC merger standard of "should not harm customers by causing rates or risks to increase".

Dianne Woody


The Attorney General Brief can be found on this page in both Document & PDF form:

http://www.wutc.wa.gov/rms2..nsf/vw2005OpenDocket/9FBDD3FD61FF954B882574CF0072AB96

The UTC online Docket Page for all of the PSE Merger Proposal filings is:

http://www.wutc.wa.gov/rms2.nsf/frm2005VwDSWeb!OpenForm&vw2005L1DktSh=072375-Documents&NAV999999

[eridani]

9. Further reading

PSE Chief Says His Decision to Sell PSE to Macquarie Wasn't Such a "Brilliant Move" After All


"Had he known, Reynolds said, that foreign ownership of PSE would become a primary issue for ratepayers' regard of PSE, he said he would have worked harder to find a reliable U.S. investor instead of the Macquarie Group."

Read the rest of the story at

http://www.ptleader.com/main.asp?sectionID=36&SubSectionID=55&ArticleID=22019&TM=44365.43

www.savepse.org

[eridani]

10. Final AG review of PSE Merger limited by censorship

submitted by Wash. State Senator (retired) Dianne H. Woody

A round of "Reply Briefs" was approved by the State Utilities & Transportation Commission (UTC) to enable

the contesting parties to respond to points raised in the September 24th major argument briefs regarding the Puget Sound Energy (PSE) Merger Proposal. Wherever possible, respondents were asked not to argue their Brief positions again, but to respond to points raised in opposing Briefs.


Censorship

Like most of the documents filed with the UTC regarding this Merger proposal, major points in this Brief have been struck from public view. This has rendered some important Public Counsel objections to the proposed sale of PSE ununderstandable or illegible. This makes it difficult for the public or the press to understand the totality of the possible impact this transaction could have on PSE and PSE customers.


Some Issues Rebutted and Discussed in the AG Reply Brief (10/24/08)


1.) The Public Counsel brief maintains that it is important for the Public Counsel and the Commission to compare the benefits to shareholders (investors) with the benefits and harm to customers, when judging the "Public Interest" Standard. For example, in the Verizon/MCI Order:


"In summary, the Commission determines whether the transaction is consistent with the public interest, balancing the costs and benefits for the public and for affected customers. If the costs outweigh the benefits, the result is harm, and the Commission should deny or condition the approval so no net harm results." (p.4)


2.) The proposed Merger relies on excessive leverage (debt) and reducing that debt by adding $200 million more in equity (per the Settlement Agreement) does not adequately reduce the risk of this transaction. The remaining leverage loan of $1.225 billion would be used to help the Investment Consortium pay for the purchase of PSE stock, but PSE (ratepayers) would end up being responsible for paying off this debt.

"The buyers use significant leverage to complete this transaction, but that leverage creates no incremental value for the public's benefit whatsoever." (p.8)


3.) Moving significant portions of the approximate $3.4 billion proposed new PSE debt to the parent Puget Energy Holding Company puts PSE at risk. While this move makes the PSE books look better, Public Counsel maintains that no "ring fencing" provisions could protect PSE assets with certainty from the default and/or bankruptcy of Puget Energy, if Puget Energy failed to make scheduled debt payments.

4.) The continuing global Financial Crisis has important implications for this merger proposal.

"The root cause of the financial crisis is excessive leverage, which is also the primary concern with the proposed acquisition of Puget." (p.11)


It is pointed out that the debt-heavy financial structure of the Macquarie Model has contributed to eroding investor confidence in Macquarie Funds, and spurs continuing Macquarie Fund stock price declines. The Commission as well should be wary of the risks inherent in the high-debt, high-fee, Macquarie Model as applied to PSE.


5.) The UTC Staff and Investment Consortium Briefs tout the "bird-in-the-hand" nature of the loans obtained for PSE pending merger approval. Those loan commitments were entered into last year.

Public Counsel questions whether the proposed approximate $3.4 Billion in loan commitments are still available considering the current credit market turmoil and weakened condition of lenders. If that funding is still available, have the costs and terms changed?

"...the information in the record at this point is not sufficiently current to know whether or not the committed financing will actually be provided, and on what terms." (p.14)


6.) Both the UTC Staff and the Joint Applicants briefs argue that PSE "will be better off under the proposed transaction than trying to meet capital needs in the current market." Public Counsel claims that companies that will most easily and cost effectively be able to raise capital in this market are those (like PSE) that are not debt-heavy and have better credit ratings and cites this October 2008 editorial from the Public Utility Fortnightly

"Investor owned utilities offer an amazingly attractive investment in the current market. Where else can investors place huge amounts of money and get total shareholder returns exceeding 20 percent a year, including rate-regulated equity returns in the 10 percent range. Compared with other investments in today's volatile and bearish market, utility stocks are a no-brainer investment." (p.15)


7.) There is a significant refinancing risk associated with this proposed merger.

"All of the debt must be refinanced during the next five years. Puget has very significant exposure to the risk that interest rates could be much higher than at present, costlier than the assumptions in the financial model...debt refinancing may not be available to Macquarie, or only available at a very high cost. This is a new risk that Puget does not currently face..." (p. 16)

8.) The UTC Staff contend that the Commission can refuse to pass on higher capital costs to consumers per the Settlement Agreement. Public Counsel responds that,

"It seems unlikely that the Commission would decline to take corrective action in response to financial circumstances that would negatively impact the long-term viability of a Washington utility...in other words, if the financial situation is bad enough, the Commission cannot insulate ratepayers from it.


The key point is that this transaction increases the risk that this will occur, as compared to the status quo." (p.19)

9.) Public Counsel contends that the UTC Staff Brief places too much reliance on the "safety net" of Ring Fencing. (p. 17-21)

If ring fencing fails to protect PSE from the high debt levels of Puget Energy, or a parent company, in a time of "dire financial circumstance", default and bankruptcy, steep rate increases, forced sale of PSE, etc., could result. (see worst case example, p. 21-23)

10.) Contrary to the UTC Staff Brief, there is NO new equity capital provided to PSE by this transaction.



"By glossing over the distinction between equity and debt capital in this fashion, Staff's brief obscures one of the major issues in this case. No fiscally responsible manager of a business would ignore the reality that the new Puget would be relying on (censored) financing, at the parent company level , with the cash flow generated by the operating company ultimately obligated to pay for that debt." (p. 26-27)

11.) One of the consistent arguments between Public Counsel and UTC Staff/Joint Applicants has been ... are the Investment Consortium long-term investors? Will they be "patient capital" which is often given as a reason to approve this Merger?

Public Counsel points out that the Fund is structured as a (?) year closed end Fund (probably 10 years) at which time, in spite of extension options, the Fund could be closed, and PSE sold. Furthermore, this Fund ending point was only discovered as a result of Public Counsel research, perhaps because it does not help make the argument of "long-term investment".

Public Counsel reports that the Oregon Public Utility Commission has examined the same issue and found:

"The evidence was that Texas Pacific Group would hold Portland General Electric for up to 12 years. The Oregon Commission reviewed the range of factors and incentives resulting from this "short term ownership" plan and concluded: "we find that PGE's customers may be harmed by the proposed acquisition, in that short-term ownership makes it somewhat more likely that they will be exposed to the effects of poor spending and investment decisions." (p. 29)

The argument is not only over the definition of "long term" and "patient capital". Public Counsel is also concerned about the effect selling and reselling PSE will have, "the potential impact that any sale transaction inevitably has on the company, with the potential disruptions in management, financial structure, transaction costs, and regulatory review." (p.29)


This is the link to the PDF document for the above Reply Brief:
http://www.wutc.wa.gov/rms2.nsf/177d98baa5918c7388256a550064a61e/d1af8f307142b22e882574ec006284a2!OpenDocument
The doc. version of this Reply Brief can be accessed here:
http://www.wutc.wa.gov/rms2.nsf/vw2005OpenDocket/262D5B75A6B3F7DB882574EC00624339

This is the link to the UTC Docket Page listing links to all of the documents filed on the proposed PSE Merger case:
http://www.wutc.wa.gov/rms2.nsf/frm2005VwDSWeb!OpenForm&vw2005L1DktSh=072375-Documents&NAV999999

[pscot]

11. Sounds like it's a done deal

I heard on the news yesterday that the state has approved the sale. I wonder why they waited util New Years Eve to make the announcement. You don't suppose they were trying to bury it?

[eridani]

12. Email to me from a local activist

We can keep the pressure on the attorney General. He is the only one that can stop this deal but I do not know if he will be able to. I do not know where you live. The best other option is to get your PUD involved in making an electric power PUD. It failed in Skagit and Whidbey County (Whidbey county had some very difficult problems as it needed to make a PUD in the first place. But we are already working under the radar on doing the next 2010 elections again. When most people have a better grasp on the problem and we have more time to organize against all the Money that was put out. We also had the local Paper against us.

We would like to see all Puget Sound Energy costumers involved in making their own PUD. Whatcom County all they have to do is organize and get their PUD to provide electricity, which many activist are busy with right now.

Sorry, I have not responded to your invitation yet. We are working on get reorganized in the 40th legislative district. This website explains what happened in Skagit County……

http://www.sceanow.org/ and keep up to date with this site: http://www.savepse.org/ when we know what our next step is… Yes, I am a lot on the computer as all the websites are build by me and maintained…. and have several other sites to maintain that I also created . Like the 40th site.


I will try and get involved on Obama’s website….blog. I keep thinking he said the change had to come from us……. So maybe I better get to work on this also… Take care, Erna

[pscot]

13. I live on Whidbey

PSE put on a charm offensive up here, and advertized heavily in the South Whidbey Record, perhaps the sorriest example of small town press in the NW. I would like to believe that some of the locals who voted against the PUD might be having second thoughts, but I have no evidence for that. It's frighteningly easy to induce people to vote against their own self-interest.

[eridani]

14. Approval given, but citizens' groups still fighting

Puget Sound Energy Successfully Completes
$250 Million Debt Financing
Friday January 23, 2009, 12:18 pm EST
http://www.businesswire.com/portal/site/google/?ndmViewId=news_view&newsId=20090123005531&newsLang=en >
Fifteen months ago, PSE was claiming poverty and eagerly welcoming Macquarie's takeover bid, saying it couldn't raise capital.

Now the same corporate principals are bragging about their latest feat, while Macquarie chiefs scramble to raise capital by dumping American assets.

http://www.businesswire.com/portal/site/google/?ndmViewId=news_view&newsId=20090113006238&newsLang=en


PSE's stock is far outperforming that of Macquarie Infrastructure

Company which plummeted from about $40/share in Feb/08 to under $4 this month.

(PSE stock has risen 38% since Oct/08.)


Meanwhile, the Washington State Utilities Commission is standing
on its 2-1 decision to allow the PSE sale to go forward ...

without giving due consideration to current conditions.

WATCH FOR MOR INFORMATION IN THE COMING WEEKS

http://www.savepse.org/

Pondering recent events

surrounding the PSE/Puget Holdings Merger Report

A Most Important Decision

PSE is the largest investor-owned utility in Washington State. It provides power to millions of citizens in almost two million households, as well as hundreds of state buildings and facilities. A decision regarding the ownership structure and management of PSE is of vital importance as PSE strives to meet the future energy demands of our growing state.

In a split decision, the Washington Utilities and Transportation Commission (UTC) has approved the sale of PSE to the Macquarie Investment Consortium. Two Commissioners approved the sale; a third rejected it. The State Attorney General's public counsel section (charged with protecting the public interest) is vehemently opposed.

This dissention over who will control PSE operations into the future raises a red flag and should be of vital concern to Governor Gregoire and the Legislature.

The Law

Washington Administrative Code 480-143-170 ... "If, upon the examination of any application and accompanying exhibits, or upon a hearing concerning the same, the commission finds the proposed transaction is not consistent with the public interest, it shall deny the application."


There are no standards established in the Revised Code of Washington to guide the UTC in evaluating change of control (sale, merger, etc.) of regulated companies. The WAC and precedent (decisions over time), are the guidelines. Precedent generally dictates that "a transaction should not harm customers by causing rates or risks to increase, or by causing service quality and reliability to decline, compared with what reasonably could be expected to have occurred in the absence of the transaction." However, as in the current case, the UTC has the authority to broadly interpret the WAC and the "public interest" language.

There is no requirement in law that major UTC decisions be unanimous, or subject to review by the Joint Agency Rules Review Committee, or other Legislative oversight.

PSE For Sale
A PSE Board member testified to the UTC that PSE's Board of Directors had decided that selling PSE with a $6-per-share profit over the October 2007 share price was better for PSE stockholders than waiting 5 years or so for the stock to naturally increase to that point. PSE's Chief Executive Officer will net approximately $20 million from the proposed sale. Board members and major stockholders will also reap millions of instant profits. Investors around the world are looking for infrastructure assets with captive ratepayers like PSE.

PSE is clearly for sale to the highest bidder.

PSE Debt
Currently there is no debt at the Puget Energy (PE) holding company level. There is $2.6 billion in debt held by the Puget Sound Energy (PSE) operating company. The merger proposal would add $3.6 billion of debt (via loan commitments) to PE/PSE. Approximately $3 billion would be new debt (approximately $600 million would be used to retire old debt). This is all short-term debt that would have to be renegotiated in five years at further cost and interest rate risk.

Much of this new debt is of no benefit to PSE or it's ratepayers. The $850 million of new debt will be used to simply help the new owners pay off current stockholders; $400 million will be used to fund hedging guarantees; $1.4 billion is for PSE Capital Construction needs, though a Consortium representative testified that this was a "plan" rather than a "commitment." The approximate $350 million remaining is proposed for "working capital." When the credit facilities (loan commitments) of the Consortium are drawn down, there will be approximately $3.7 billion of debt at PSE and approximately $2.2 billion of debt at PE.

This high level of debt raises the risk that the current PSE/PE credit rating of BBB- will fall at least one level to "junk" grade status. Certainly, the unsecured debt at PE will be in that category. The PSE 6-year Plan will require additional future financing for PSE from $2 to $2.5 billion. This will be expensive money to borrow if PE has a "junk" credit rating.

In his dissent, UTC Commissioner Jones concludes that, "this large amount of debt will place unnecessarily large pressure on the company to file frequent and large rate increases to generate cash flow to service the increased debt. And it will place great pressure on the commission to approve the necessary large and frequent rate increases on a consistent basis."

UTC staff and the Macquarie Consortium attempt to fuzzy the debt issue by splitting the new debt between PE and PSE and saying that PSE ratepayers will not be "liable" for the debt at PE. As the Public Counsel has pointed out, the fact is that the only revenue source available to pay off debt at PE is from PSE ratepayers.

Ring Fencing
"Ring fencing" provisions (agreements) are supposed to protect the operating company (PSE) from legal liability for any action, debt, claim, etc., made by the holding company (PE) or the Investment Consortium partners. The UTC staff maintains that the ring fencing provisions in this PSE merger agreement are sufficient to protect PSE from bankruptcy, lawsuit, or other problems that might occur at operating levels above PSE. However, the Public Counsel claims that these provisions are not court tested and that the UTC would be under great pressure to raise rates to protect PSE from potential harm from activities it has no control over.

The ring fencing philosophy can be argued endlessly by either side, adding yet another "risk" to this transaction.

Financial Markets and the Investment Consortium
Since the UTC record was closed on September 22, 2008, the US stock market has fallen approximately 3,100 points and financial markets around the globe are in chaos. Facing the worst economic crisis in living memory, governments in Europe, Asia and elsewhere have spent hundreds of billions of dollars supporting failing financial institutions and "critical" businesses.
Both the Public Counsel and Commissioner Jones have questioned the lack of record, testimony, and analysis of these momentous happenings which could have a direct effect on the ability of the Consortium to adequately support PSE's financial needs in the future, as well as on the viability of the investors themselves.

Commissioner Jones concludes: "We must either ignore events that occurred after the close of the record or rely merely on anecdotal evidence of which we may only take official notice....My conclusion is that risk exists of harm to the public interest and that it is of a magnitude that demands rejection of this proposed settlement agreement and the admission of further evidence and expert analysis."

Macquarie as Major Investor and Manager of PSE
The Macquarie Group has growing reputational problems. Scathing reports by Fortune Magazine, Risk Management and other analysts disparage the "Macquarie Model" as unsustainable and harmful to the companies they acquire and manage.

The Macquarie Model is described as buying an asset company (often with high leverage, or loans, that are then put on the asset company books, not Macquarie's), reappraising the value of the company so more debt can be levied against it, and incorporating in Bermuda so that borrowed money can be used to pay above market dividends to investors and enormous management and other fees to Macquarie.

The asset companies are cash cows or "fee trees" for Macquarie. Every transaction within a company, or within a fund, generates fees to Macquarie: management, performance, underwriting, consulting, percentage of profit, deal fees, etc.. They all flow back to Macquarie. Churning assets, or selling part or all of an interest in an asset company between Macquarie Funds, is common. Every deal or transaction sends money upstream to the Macquarie Group.

This business model relies on easy access to cheap money, the willingness of lenders to write loan agreements on "sub-prime" terms, and frequent short term loans focused on rolling the loan over rather than paying it off. For example, in the 2007 Fortune Magazine article: "...on both the Indiana Toll Road and the Chicago Skyway, interest payments are very low in the early years, which increases cash flow at first but leads to much higher interest in out years - akin to a mortgage with a low teaser rate. In 2007 the Skyway will pay interest of just $129,000 on $961 million of debt. But the interest payment for 2018 is to be $480 million - that's not a typo."

The Macquarie Model requires constant new acquisitions known as "deal flow" as older asset companies become debt ridden, over valued and tapped out.

Since the close of the UTC record in September, The Macquarie Group has faced considerable challenges. Macquarie Bank stock has fallen from a 52 week high of $71 to close this week at $28.17. All of the Macquarie listed Funds are in similar or worse shape. Fund asset valuations have been reduced, billions of dollars of loans need to be renegotiated (or paid), and lenders are increasingly leery of lending money for assets which are over valued and highly leveraged (debt-ridden). For example, Macquarie just sold a $1.5 billion stake in it's margin lending company for $43 Million in stock, rather than cash. This stock must be held for terms of 30, 60 and 90 days. By then, it could be worthless.

During testimony on the the PSE merger, Macquarie and the other consortium investors styled themselves as long term "patient" investors with deep pockets who did not sell their assets, had ready access to the world capital markets, and would be able to easily take care of PSE's future funding needs.

However, since December, Macquarie has sold approximately $12 billion worth of assets, with an additional $3 billion to be liquidated by March. Hundreds of employees have been let go, Macquarie funds have been closed or reduced in size, and almost $4 billion has had to be raised through bond offerings.

Last week, Macquarie warned that conditions in the December quarter were "exceptionally challenging for almost all of Macquarie's businesses", adversely affecting "business activity and profitability" and those conditions would continue into the next quarter. ABN AMRO analyst John Heagerty wrote: "Unfortunately for Macquarie we see various negative catalysts on the horizon, including an escalation of write-downs as asset prices continue to slide, a more pronounced downturn in investment banking, and a contraction in Asia as growth in China and the region slows."

Conclusion
Both the Public Counsel and Commissioner Jones urge that these and other issues of this proposed sale be examined further by the UTC.

In it's Final Order, however, the UTC majority opinion wrote: "There is nothing to be gained by further litigation to explore the future markets, or PSE's future viability as a stand-alone entity, because for the foreseeable future the future will remain unforeseeable."

Regardless of how "unforeseeable" the "foreseeable" future might be, there are more than enough questions raised about this sale by Public Counsel and Commissioner Jones to merit the alarm of both the Legislature and the Governor.


It is not too late for this issue to be Reheard before the UTC in light of unfolding events, and with the realization that this decision could profoundly effect the cost and availability of future PSE power for millions of Washington State residents.

-Author unidentified http://www.savepse.org/

[eridani]

15. State legislature getting into the act

House petitions UTC for a re-hearing concerning the sale of PSE to Macquarie et al.



http://apps.leg.wa.gov/billinfo/summary.aspx?bill=4007&year=2009



H-1215.1 _____________________________________________

HOUSE JOINT MEMORIAL 4007

_____________________________________________

State of Washington 61st Legislature 2009 Regular Session

By Representatives Chase, Hasegawa, Liias, and Hudgins

Read first time 01/28/09. Referred to Committee on Technology, Energy

& Communications.



1 TO THE WASHINGTON STATE UTILITIES AND TRANSPORTATION COMMISSION:

2 We, your Memorialists, the Senate and House of Representatives of

3 the State of Washington, in legislative session assembled, respectfully

4 represent and petition as follows:

5 WHEREAS, Puget Sound Energy is the largest investor-owned utility

6 in the State of Washington, serving approximately 1.7 million

7 households and hundreds of state agencies and facilities in 11

8 counties; and

9 WHEREAS, Puget Sound Energy provides essential services to millions

10 of Washington State residents with no other means of light, power, or

11 heat; and

12 WHEREAS, A decision to approve the sale of Puget Sound Energy to an

13 Australian and Canadian Investment Consortium was narrowly approved by

14 the Washington State Utilities and Transportation Commission on

15 December 30, 2008; and

16 WHEREAS, Only two Commissioners approved this sale, with one

17 Commissioner and the Assistant Attorney General Public Counsel charged

18 with protecting the Public Interest, vigorously opposing this sale; and

19 WHEREAS, The public has a vital long-term interest in the integrity

1 and financial strength of the owners of utilities, as well as the

2 owners' responsiveness to the public and its government; and

3 WHEREAS, Escalating financial and credit market turmoil and other

4 issues raised during and after the record was closed in September 2008,

5 raise questions about the ability of members of the investment

6 consortium to adequately financially support Puget Sound Energy's need

7 for future funding, and the financial viability of the investors

8 themselves; and

9 WHEREAS, There are unanswered questions about the huge new Puget

10 Sound Energy debt imposed by this sale, and its future impact on

11 ratepayers and the State General Fund; and

12 WHEREAS, The Public Counsel has found, "The strong preponderance of

13 the evidence in the record shows that Puget is able to raise capital

14 necessary to meet its projected capital expenditure requirements, and

15 that the Joint Applicants do not offer a superior or more cost-

16 effective alternative. Approval of this acquisition will increase the

17 business and financial risk of Puget to the detriment of its over one

18 million customers and the Company's own financial health...

19 Ratepayers are left as the ultimate guarantor to absorb the

20 increased costs and risks of the (sale of) Puget. The proposed

21 transaction is not in the public interest and should be rejected."; and

22 WHEREAS, In his dissent, Commissioner Jones concluded that, "this

23 particular settlement agreement should be rejected. If adopted, it

24 will lead to increased financial risk of harm for PSE and its

25 ratepayers. Because of that harm, the settlement is not shown to be

26 consistent with the public interest and should be returned to a full

27 adjudicative hearing."; and

28 WHEREAS, WAC 480-07-870 says that "Any person affected by a final

29 order may file a petition for rehearing."; and

30 WHEREAS, If this issue is not reheard before the Washington State

31 Utilities and Transportation Commission, that the Public Counsel be

32 urged to litigate this matter to the fullest extent possible;

33 NOW, THEREFORE, Your Memorialists respectfully pray that the

34 Washington State Utilities and Transportation Commission Rehear the

35 Puget Sound Energy/Puget Holdings merger issue; Docket U-072375.

36 BE IT RESOLVED, That copies of this Memorial be immediately

1 transmitted to the Washington State Utilities and Transportation

2 Commission.

--- END ---

[eridani]

16. Too late?

First the State Utilities Commission, and now the Attorney General's office.

PSE ratepayers have been sold down the river.

Path cleared for Puget Energy to be bought by consortium
Deal could close next week
http://seattlepi.nwsource.com/business/398040_puget30.html


http://www.savepse.org/

[eridani]

17. If you are a PSE customer, please send emails

Forward to people in that service area also.

LAST CHANCE TO TURN THE TIDE!
IMMEDIATE ACTION REQUESTED

I've been assured that the House petition is still alive in Olympia. To make sure the UTC understands that the sponsors have the support of PSE customers, please send an email IMMEDIATELY (example below) to the following individuals:


David Danner [e-mail]
Mark Sidran [e-mail]
Phillip Jones [e-mail]
Patrick Oshie [e-mail]


-- SAMPLE EMAIL --

I am served by Puget Sound Energy (PSE). The responsible ownership of that utility is of vital importance to me.

Events occurring in the world financial markets after UTC closed the record on Docket #U073275 lead me to be concerned about the financial stability of the investment consortium seeking to buy PSE, and their ability to finance the long term investments so necessary to PSE. I feel that these and other issues related to this transaction will affect service reliability and pose a significant harm to PSE customers.

I'm asking you to exercise your authority to re-open the #U073275 record and rehear this case as provided by WAC 480-07-870.

[eridani]

18. Another hearing with new commissioner

GREGOIRE APPOINTS NEW UTC COMMISSIONER

Thanks to all of you who participated in our campaign for another hearing by the UTC!

________________________________________

Gov. Gregoire announces new UTC chairman
From the Governor's Office
February 3, 2009

OLYMPIA – Gov. Chris Gregoire today announced her appointment of Jeffrey D. Goltz as chairman of the Washington Utilities and Transportation Commission (UTC). The UTC protects consumers by ensuring that utility and transportation services are fairly priced, available, reliable and safe.

“I have no doubt that Jeff has the leadership and strong ethical background that is required to successfully manage this dynamic and complex agency,” said Gregoire. “Jeff brings an incredible passion for public service and constructive approach to any challenge. I look forward to working with him in this important role.”

Just this week, Washington’s Attorney General Rob McKenna presented Jeff with his 30-year plaque, recognizing a long and distinguished career serving the public under four attorneys general.

During his tenure at the Attorney General’s Office, Jeff has worked not only in the Ecology Division as an Assistant Attorney General and as Division Chief, but also in the Revenue Division and in the Utilities and Transportation Division, where he served as Division Chief for 11 years.

Jeff has been honored with the Outstanding Leader Award twice, and has been recognized as a Washington Law & Politics Super Lawyer many times.

“I am excited to take on this new endeavor,” Goltz said. “As the former Division Chief for the Attorney General’s Office Utilities and Transportation Division for 11 years, I am well-acquainted with the UTC’s long history of excellent service both to the state and to the public. In my new role, I look forward to carrying on that tradition and working with an extraordinary group of talented and dedicated commissioners and staff.”

This UTC appointment comes at a critical time for important energy, transportation and water issues. Utilities regulation must strike a balance between ensuring affordable rates and adequate supplies to customers and the reasonable investment-backed expectations of those who build and maintain utilities.

The commission regulates companies responsible for roughly 10 percent of the state’s economy in terms of total business revenue. Approximately 8,000 utilities and carriers, many with annual revenues totaling in the hundreds of millions of dollars, must operate under the commission’s umbrella.

< source: http://www.governor.wa.gov/news/news-view.asp?pressRelease=1125&newsType=1 >

www.savepse.org/