Sale subject to 78 commitments and conditions
State regulators have approved the sale of Puget Energy and its wholly-owned electric and natural gas utility subsidiary, Puget Sound Energy (PSE), to New York-based Puget Holdings LLC. The transaction has an estimated value of $7.4 billion.
The sale is subject to 78 commitments and conditions the state says will protect customers and the public interest.
In a 2-1 opinion, the Washington Utilities and Transportation Commission (UTC) approved a multi-party settlement, concluding the, sale of PSE is “consistent with the public interest” and will not harm ratepayers, the legal standard for approval of such sales.
The settlement was supported by the commission’s staff, Industrial Customers of Northwest Utilities, Northwest Industrial Gas Users, The Kroger Company, The Energy Project (representing low-income customers) and Northwest Energy Coalition. It was opposed by the Public Counsel Section of the Attorney General’s Office.
“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.
Commissioner Philip Jones opposed the sale, and filed a separate dissent.
Jones said, “The settlement agreement in its current form creates too much risk, and potential harm, for ratepayers and stakeholders. 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.”
Jones said he was concerned that the proposed agreement “sets forth a capital structure with excessive debt for Puget Energy and PSE, and creates a privately-held investor consortium that lacks sufficient transparency compared to the status quo.”
Sidran and Oshie countered, saying “this is an almost entirely inaccurate description of the transaction under the settlement.”
The two said the buyout isn’t “highly leveraged” and that there is “substantially less leverage” (20 percent) in this transaction than in others that have been approved by the commission.”
Sidran and Oshie noted that the investors buying PSE are comprised “overwhelmingly [of] 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.”
The 78 commitments and conditions detailed in the order deal with customer service, safety, reliability, resource adequacy including energy efficiency and conservation, support for low-income customers, and environmental stewardship.
In its order, the commission acknowledged the substantial public opposition to the sale but said it would not be appropriate to let that consideration drive its decision considering the judicial nature of its decision making process. The majority determined that “the clear weight of the evidence, precedent cases and applicable law compel us to conclude that the settling parties are correct – the transaction does not harm the public interest.”
Bellevue-based 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.
Puget Holdings is a Delaware limited liability company, with its principal offices in New York, privately held by a group of investment companies and fund managers.
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.
