PORT HADLOCK — It’s official.
The Jefferson County Public Utility District commissioners on Friday signed a definitive agreement to pay Puget Sound Energy $103 million for its electrical facilities in East Jefferson County, with the expectation that the switch — probably in 2013 — will create an additional $33 million in PUD revenue.
The public utility, which now provides water and sewer service, must take over as electrical power provider for PSE’s present 18,000 customers in East Jefferson County within 18 to 36 months, if all conditions of the agreement are satisfied.
“This is what’s best for the citizens of Jefferson County,” said PUD Board President Ken McMillen on Friday. “We’ve spent the last 18 months making sure that everything pencils out.”
PUD Commissioner Wayne King said the agreement was a significant event for local utility customers.
“In the future, the people of Jefferson County will look back at what we did today and say, ‘those old guys were pretty smart,'” he said.
The agreement is firm but for two caveats, said PUD Commissioner Barney Burke.
Those deal with financing and environmental issues.
“If we’re unable to get financing to our satisfaction, at our sole discretion we can walk away without penalty,” Burke said.
The PUD also can back out without penalty if it finds environmental hazards connected with the PSE facilities, Burke said.
“We don’t believe there are any, but we are going to do a thorough examination of the facilities,” he said.
Once the PUD waives its two contingencies, then it can’t back out of the agreement without paying a $2.5 million penalty, he said.
The agreement lists no caveats for PSE. If the public company wants to renege on the agreement, then the PUD can either demand $2.5 million or go to court to argue that the private utility must honor the contract, Burke added.
The next step in the process is to apply to Bonneville Power Administration for electrical power.
That is expected to happen this week, Burke said. The deadline for the application is June 30.
The PUD hopes to hear an answer from BPA within a couple of months.
“We’ve met with them and they are very encouraging,” Burke said.
Once a contract with BPA is in place, the PUD will seek financing.
That will be a combination of private and federal sources, he said, with the largest chunk, about 70 percent, expected to come from the U.S. Department of Agriculture.
After the PUD has secured financing, it will owe PSE a down payment of $20 million, with the balance to be paid soon after, Burke said.
“We as ratepayers will pay [the loans] over 30 years,” Burke said.
“That’s figured into the electric rate.”
Burke said that the public utility can offer rate-payers savings in several ways.
PUDs can borrow money at lower rate than private companies, he said, and eventually they can get the lowest possible price for electricity from BPA, an option that also is not available to private firms.
However, public utilities must be BPA customers for three years before they can get the lowest rate, Burke said.
That could mean about six months of power at market rates rather than the lowest “tier one” rates, he said.
“Right now, market rate and tier one aren’t that different, but have to look at the long term . . . and pass on the lowest possible rate for customers,” Burke said.
Burke doesn’t think that rates will drop once the PUD takes over, but he said it is likely they will not increase as much as customers would have paid had PSE continued service.
The expected annual revenue of $33 million is figured from the rates that customers pay now.
The switch also is expected to both create jobs and improve service, Burke said.
He did not know how many jobs will be added.
The jobs would be skilled positions for linemen and linewomen.
Service would improve because they would live near the facilities.
“When we need service, we no longer will have to wait for someone to come over the Hood Canal Bridge, which can be difficult in bad weather,” Burke said.
After the meeting, Burke was congratulated by Steve Hamm, the co-facilitator of Citizens for Local Power.
That grass roots organization successfully campaigned to get Proposition 1 on the 2008 ballot. Voters approved the proposition, which granted the PUD the authority to become the electrical power provider for East Jefferson County.
“This is a real step forward,” Hamm said.
“But I won’t smile inside until they flip that switch.”
To read the full agreement go to http://pud.co.jefferson.wa.us/index.htm and click the first link under the “What’s New” section.
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Jefferson County reporter Charlie Bermant can be reached at 360-385-2335 or at charlie.bermant@peninsuladailynews.com.