PORT HADLOCK — Jefferson County Public Utility District has applied for a loan that will enable it to purchase Puget Sound Energy’s East Jefferson County system and begin functioning as an electricity provider.
The $115.5 million application to the federal Department of Agriculture’s Rural Utilities Service program was approved by PUD commissioners at a special meeting Friday.
Despite the poor economy and threat of federal cutbacks, PUD officials are optimistic that the loan will be approved.
“Our chances of receiving the funding are very good,” said PUD Commissioner Barney Burke.
“Power systems are a good investment for those who provide the funding because everyone uses power and everyone is on the grid.”
While Burke is confident about the loan approval, he is less certain about its interest rate.
“We will be paying whatever the interest rate is when the money comes through,” he said.
Current rates for the loan are 3.375 percent but it could go up to as high as 5 percent, he said.
“Even at 5 percent the deal is still doable,” he said.
The loan would have an approximate maturity duration of 32 years and would be repaid through utility fees.
Burke said the USDA loan could be approved as soon as September 30 but that will not change the projected 2013 date to begin operation.
Getting the USDA loan will help the PUD get the $30 million needed for other equipment and services such as buying trucks and operating the system until the first bills are collected.
Burke expects the utility to bring in about $33 million annually from revenue generated by utility bills from 18,000 customers.
The expected annual revenue is figured from the rates that customers pay now.
Bellevue-based PSE and its predecessor companies have provided East Jefferson County electricity since power was brought to Port Townsend and environs in the late 19th century.
But in November 2008, motivated in part because of PSE’s acquisition by foreign companies, Jefferson County voters granted PUD the authority to get into the electrical business.
Last August, the PUD reached agreement with the Bonneville Power Authority which means that the PUD qualifies for the federal agency’s lowest power rates, known as Tier 1, beginning in 2013.
The agreement is expected to provide electricity at a lower cost than what is offered by PSE, although other costs could drive up customer bills to their current level.
The PUD purchase of the PSE’s East Jefferson’s electrical system makes it the state’s first public utility to buy out a private utility’s franchise since 1949.
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Jefferson County Reporter Charlie Bermant can be reached at 360-385-2335 or charlie.bermant@peninsuladailynews.com.