OUR VIEW: Too many questions to empower PUD

Voters in Thurston County will decide in the next few weeks on Proposition No. 1, whether or not to turn over the distribution of electric power to the Thurston Public Utility District. The Olympian editorial board advises against its passage. Voters should unequivocally vote no for the wide variety of reasons we have outlined on this page. Approval of the proposition could have devastating, unintended consequences for Thurston County that will last for decades. Taxpayers could be saddled, for example, with enormous long-term debt, and will almost certainly see an increase in property taxes. There is no guarantee of lower, or even equal, electric rates to current Puget Sound Energy rates. There is a long list of unanswered questions that includes whether it is even legally possible for the TPUD to proceed with scenarios in its preliminary study. The expense of answering these questions, or fighting them in court, has the potential to bury a cash-poor small water utility. The PUD’s study doesn’t bother to address any legal issues. There are wider questions, too, about whether approving the proposition would adversely shift property taxes, with serious negative impacts on the county’s junior taxing entities, such as fire districts.

PSE is Thurston County’s second largest property taxpayer, so this is a critical uncertainty. Neither the PUD nor the Thurston Public Power Initiative that put the proposition on this fall’s ballot have given voters enough information to warrant the trust they are seeking from voters.

There is no plan, and the current PUD commissioners do not have the expertise to jump from a small water utility to running a complex, major electrical company.

Competent leadership would have done its homework before running a campaign sullied with rhetoric. The TPPI leadership appears motivated by ideological principles (corporate profits are bad) rather than based on facts supporting the best interests of Thurston County taxpayers.

When asked what problem the ballot measure is trying to solve, TPPI chairman John Pearce started by telling the editorial board that Puget Sound Energy is taking profits and paying its executives high salaries.

Pearce later added that PSE rates are high and that it didn’t perform well during last winter’s historic snow and ice storm. But there is no assurance that electric rates would be lower under the PUD or that it could provide any better service during extreme conditions.

There are simply too many unknowns that will have financial and legal sequences for generations to come. For these reasons, and the others presented on this page, we recommend rejecting Proposition 1.

More reliable study needed

Voters tend to approve school bonds and other ballot measures when it is clear how much they will have to pay and precisely how the money will be spent.

Proposition 1 reverses that process. It says, give the PUD the authority to take on debt and spend your money, but we can’t tell you how much more you will have to pay or for how long – “just trust us.”

Voters deserve better. Part of the argument for Proposition 1 is that Thurston PUD will do an expensive comprehensive study once it gets voter approval to move forward. If the math doesn’t work, they say, the idea will be shelved.

That’s backward.

Instead of Proposition 1, the PUD could have run a ballot measure asking voters to approve funding to undertake such a study before seeking irreversible authority.

If that study proved favorable, the PUD could have presented voters with a detailed implementation plan that included precise estimates on rate projections, acquisition or construction costs, thorough research and discussion of legal issues, and estimates of start-up costs, among other issues.

Instead, the PUD hired a firm – well-known for promoting public power – to do a skin-deep study, which turned out to be eerily similar to its Jefferson County study, which turned out to be completely and wildly inaccurate. The PUD and the public power advocates have put the cart before the horse.

No guarantee on power rates

Proponents of Proposition 1 say public utility districts can provide electricity less expensively than a private corporation, such as Puget Sound Energy.

It is true that public utility districts in Washington charge rates equal to or less than PSE. But the proposition’s promoters leave out important facts. All of the state’s electric PUDs were formed 60 to 80 years ago and no longer have debt associated with their formation.

The most relevant comparison is with Jefferson County, which passed a similar proposition several years ago. The Jefferson PUD may start providing power next year and says it just hopes to match PSE rates.

While the Jefferson PUD hopes to end its reliance on property taxes some day, it has had to increase tax collections to get into the power business.

Any significant savings to PUD electric customers is not guaranteed and is unlikely to materialize until decades down the road. Proposition supporters base their claims for lower PUD electric rates on receiving less expensive Tier 1 power from the Bonneville Power Authority.

But there are questions about whether Thurston PUD could get Tier 1 rates for anything beyond its initial service area. If it has to purchase Tier 2, or market-rate power, as PSE does, for future added service areas, the rates would presumably be blended and everyone would pay more.

Regular rate increases are common, even to public utilities. Thurston PUD for example, has raised its rates to water customers by 37 percent since 2005 and is budgeting about a 5 percent increase for next year. Voters have been given too little information to know whether they’ll pay less or more for electricity.

Legal questions unanswered

One key area missing from the PUD’s preliminary study is the legal questions resulting from a strategy of servicing only selected geographical areas of Thurston County.

The TPPI initially claimed the Thurston PUD would acquire all of PSE assets and service the entire county. But they quickly backed off that promise when it became obvious that it was financially impractical.

They have since adopted an incremental strategy, providing electricity only to selected regions that would require less repairs and maintenance than the more rural and forested parts of the county.

But that has raised questions about whether a countywide PUD can provide service to some taxpayers and not others, especially if those not receiving service are supporting the PUD through property taxes. It opens a door for a serious legal challenge.

There is also a question whether the PUD would violate state law by duplicating infrastructure – poles and wires – as it proposes to do in some of the scenarios outlined in its preliminary study.

These are questions that a more comprehensive study would have settled, but under Proposition 1 could turn into expensive legal battles.

Those legal costs could not be financed by revenue bonds, and the PUD doesn’t have extensive cash reserves – only about $113,000 in 2012 and $99,000 projected in 2013. That would likely mean the PUD would have to turn to property tax increases or some other revenue source to pay its legal bills.

Could Thurston stay green?

Critics of Puget Sound Energy point to its reliance on coal-fired generating plants for 32 percent of its power. But would a small public utility be any greener?

Initiative 937, passed by voters in 2006, requires power providers servicing 25,000 customers or more to acquire at least 15 percent of its power from renewable sources by 2020.

The requirement began this year at 3 percent and jumps to 9 percent in 2016. In Washington, power from hydroelectric dams does not qualify as a renewable source.

Many public utility districts in the state have supported a repeal or mitigation of 937’s requirements, because generating power from alternate sources is expensive.

Puget Sound Energy has met its requirement by investing heavily in wind power over the last seven years. It now generates four times as much power from wind as all of the state’s PUDs combined. That is another reason the Thurston PUD study focused on servicing a small selection of the county.

All three scenarios include fewer than 25,000 customers, exempting it from providing any power from renewable resources.

According to the Northwest Energy Coalition, PSE is the state’s leader in energy efficiency. The company has extensive energy conservation programs available.

Other electric PUDs in the state also do well on energy efficiency, but Thurston County would be trading down.

Coal will eventually go away for PSE and other power providers. The much larger question is how the United States will generate its future power needs, not comparing PSE with a small PUD.

Confidence in the PUD?

To a certain extent, the outcome of the vote on Proposition 1 will represent voters’ confidence in the three commissioners of the Thurston Public Utility District.

If the proposition passes, these three individuals will have the authority to put Thurston taxpayers under unprecedented debt, perhaps as much as 10 times what the county owes for the vacant Accountability and Restitution Center.

They will also be charged with the responsibility of managing a complex electric utility, with no oversight. Under state law, the Utilities and Transportation Commission regulates private utilities.

There is no similar agency overseeing public utility districts. Proposition 1 supporters say that voters provide that oversight.

If commissioners aren’t doing their job, voters can toss them out of office when their six-year term ends. Of course, voters can change commissioners, but no future vote can reverse a commitment to hundreds of millions of public debt.

Most voters probably don’t know the names of the PUD commissioners, much less have any idea about their competency.

Those who have attended a Thurston PUD meeting, however, can attest that it is a largely chaotic experience. Commissioners do not appear to follow any formal rules of order.

Thurston voters would feel more confident in public officials who exhibit decorum and professionalism, and who were proposing to take a cautious approach to managing taxpayers’ money and electrical assets.