PORT HADLOCK — A Seattle bond attorney recommended that Jefferson County Public Utility District officials talk to an attorney about condemnation proceedings if the utility cannot reach an agreement with Puget Sound Energy to acquire its electrical system in East Jefferson County.
Voters in November gave the PUD, which now provides water and sewer service to about 3,000 customers, the authority to also offer electrical service throughout East Jefferson County.
PUD leaders are studying how it can acquire the infrastructure of PSE, which now provides electrical service to more than 17,000 East Jefferson County customers.
PSE estimates that the facilities will cost more than $100 million, while PUD’s consultants, D. Hittle and Associates, have valued PSE’s system in Jefferson County at about $47.1 million.
“A condemnation lawyer will be helpful to establish a time line and to learn what taxes you will pay,” Nancy Neraas told the PUD commissioners during a Wednesday workshop.
“This is an important consideration.”
She said such legal counsel could help the PUD determine the state of PSE’s Jefferson County facilities and whether the PUD would have to sink more money into facilities, thus increasing its debt.
“Legally, you should be on pretty good footing,” said Neraas, who helped the Port of Seattle secure bonding for SeaTac Airport runway construction.
Commissioner Wayne King has said he hopes to avoid condemnation proceedings, since he fears it would be a costly way to acquire PSE’s multimillion-dollar facilities in East Jefferson County.
The PUD commissioners have budgeted $200,000 for the power-service project in 2009, he said.
Opened talks
PUD officials recently opened talks with PSE’s Karl Karzmar and Tim Caldwell, PSE’s Port Townsend office manager. Both PSE representatives attended the PUD meeting Wednesday.
Neraas told the PUD commissioners that new entities can borrow money on the bond market but that bonding agencies “do want to know that you have a system in place.”
A bond rating will be necessary for long-term bonds worth $2 million or more, she said, and the PUD can go to a firm that is favorable to electric utilities.
She urged PUD officials to talk to a bank adviser or a bond investment attorney.
Agencies with an A bond rating can now lock into a less than 5 percent interest rate, she said, and can be financed on a tax-exempt basis.
She said the purchase of new facilities can be tax-exempt, but that buying existing facilities from a private company such as PSE is not. That means an interest rate difference of about 1.5 percent.
She said that bank loans were typically for smaller dollar amounts, “which is not the best way to do it.”
“It’s better to go to a market firm to sell bonds publicly,” she said.
Power system appraiser
PUD General Manager Jim Parker said that he will draft a request for proposals to seek a power system appraiser.
That will be brought back to the PUD commissioners to consider during their business meeting at 5 p.m. Wednesday at 230 Chimacum Road in Port Hadlock.
PUD Commissioner Dana Roberts urged the commissioners to conduct meetings around the county to keep the utility’s customers informed about their power authority efforts.
Commissioners King and Ken McMillen agreed that the PUD would have to improve its public relations efforts about power authority developments and post meeting minutes on the PUD’s Web site, pud.co.jefferson.wa.us/.
King also recommended that the PUD hire a writer to get out the word about the agency’s progress.
“It’s time that we start moving around and speaking to people,” King said.
Project manager
The PUD commissioners recently approved publishing requests for qualifications for a project manager and legal counsel who would help facilitate the agency on getting into the power utility business.
The part-time positions will be advertised in the Seattle Journal of Commerce, Parker said.
Parker has already met once with Bonneville Power Authority officials, telling them of PUD’s intentions to move forward on power authority.
D. Hittle and Associates has strongly urged PUD to fast-track obtaining wholesale power from Bonneville Power Administration.
Acquiring BPA wholesale power would take up to three years. The PUD must prove that it owns the needed power transmission system and can pay for the power BPA delivers.
Under state law, the PUD has 10 years to exercise its authority or go to another vote.
PSE, which falls under the jurisdiction of Washington Utility and Transportation Commission, does not qualify for BPA rates as a private corporation.
PUD would work as a nonprofit government power provider.
The purchase price could be negotiated between PUD and PSE, established through court condemnation proceedings, or PUD could choose to build its own facilities.
An appraiser team would be needed to determine the cost of the system and an engineer would have to sign off on the system.
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Port Townsend-Jefferson County Editor Jeff Chew can be reached at 360-385-2335 or at jeff.chew@peninsuladailynews.com.
