PORT HADLOCK — Jefferson County Public Utility District commissioners on Monday unanimously voted to go into the public power business, agreeing in a nonbinding letter of intent with Puget Sound Energy to purchase PSE’s electrical system for $103 million.
The PUD commissioners, after a 50-minute closed executive session with their attorneys, announced plans to begin operating the Puget Sound Energy’s system — which PSE has owned for about 100 years in East Jefferson County — within three years.
The letter of intent outlines the basic terms of the agreement, another step in the process, with much work remaining, and an estimated 18- to 36-month transition to public power.
Meeting Wednesday
More details about the deal will be presented to the public at 5 p.m. Wednesday, when the commissioners will meet in the Chimacum Grange Hall at 9572 Rhody Drive.
The venue, larger than the commissioners’ regular meeting room in Port Hadlock, was chosen to accommodate more people, commissioners said.
PUD’s Portland, Ore., attorney Kirk Gibson is expected to attend to address details of the deal.
Gibson, Commissioner Wayne King and General Manager Jim Parker have been the chief negotiators for PUD.
PUD now serves more than 3,500 water customers in East Jefferson County but has never provided electrical power service. PSE’s power system serves more than 18,000 East County customers.
King said Monday it was better not to enter into potentially costly court condemnation proceedings, and Karl Karzmar, who facilitated the talks on behalf of PSE, agreed.
“We had hoped we could sit down and talk about this over a cup of coffee,” King said Monday before the commissioners voted 3-0 to proceed.
The non-binding agreement says that if the PUD can’t come up with the financing, it can back out of the deal.
However, if both parties commit to all terms and one reneges on the deal after its effective date, it is agreed that a $2.5 million penalty would have to be paid to cover expenses.
The final purchase and sale agreement is to be considered after PUD secures financing, which the commissioners said likely would come from a long-term, low-interest loan from the U.S. Department of Agricultures’s Rural Utility Service and take up to two years to secure.
PUD would apply for Bonneville Power Administration discount power rates — which King called “a really good deal for the people of East Jefferson County” — by July, with the transition period beginning in August.
King, Commission President Ken McMillen and appointed Commissioner Barney Burke — who fills the seat of the late Commissioner Dana Roberts, who was a supporter of the public power move — agreed that was the best way to approach getting into the power business.
McMillen called PSE executives such as Chief Executive Officer Steve Reynolds and Karzmar “very cooperative” during the year-long negotiations.
First step
“This is an important day for Jefferson County,” McMillen said. “While much work remains to be done, we have taken the first step toward bringing community-based power to Jefferson County.”
In agreeing to work with PUD, PSE’s Karzmar said, “We were being respectful of the vote of the people.”
He said working together would lead to a smooth “hand-off” from PSE service to PUD service.
Karzmar said PSE will continue all the services it now offers until that happens.
He said the letter of intent opens the door to PUD and PSE coming to a “definitive agreement.”
“The company is appreciative of all the work that the commissioners and their advisers did over the past year,” he said.
Next, he said, comes the “due diligence” period in which PSE releases its detailed documents about the company within the next 120 days.
Price of facilities
PUD’S $103 million offer to PSE is not far off of PSE’s original asking price of $100 million or more.
PUD consultant D. Hittle & Associates Inc. nearly two years ago estimated a cost of PSE’s facilities ranging from $35 million to $70 million.
In November 2008, Jefferson County voters granted the PUD the authority to get into the electrical business.
Steve Hamm, who helped lead the Citizens for Public Power campaign for approval of the measure, lauded PSE executives for working with PUD to reach an agreement.
“This could be a real win-win situation,” Hamm said.
“I wanted to thank you guys for doing your damnedest to do the best by the voters.”
Roberts’ widow
The decision was made with tearful recollections of Roberts. His widow, Carol Anne Modena, said her late husband would have been proud of the commissioners’ actions to make electrical service a public service.
“Tonight your actions are taking that momentum, and Dana would have not missed this vote for anything, and I think you have done the right thing and have done him proud,” she said.
Burke, who invited Modena to attend the meeting in honor of Roberts, choked back tears as he said it was an honor to fill Roberts’ seat.
Burke said the PUD will form advisory committees to assist in looking into customer-related and energy-related issues.
“We’re looking for public input on both the start-up and ongoing operation of the utility,” Burke said.
McMillen said he envisioned a public utility with up to 40 family-wage positions, all of which would be hired from a local pool.
PUD commissioners, as a prerequisite to opening and maintaining negotiations with Puget Sound Energy executives — including Chief Executive Officer Steve Reynolds and Karzmar — were required to sign a confidentiality agreement.
“We’re anxious to share once we get a deal,” Burke has said.
For more information, see the PUD’s Web site at http://pud.co.jefferson.wa.us.
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Port Townsend-Jefferson County Editor Jeff Chew can be reached at 360-385-2335 or at jeff.chew@peninsuladailynews.com.
