No active electrical PUDs formed since 1940s

Supporters have long been praising the success of other public utility districts in Washington as they try to convince Whidbey voters to get behind the ballot measure to establish a Whidbey-based utility this November. However, it appears that most of the successful examples have had upward of 60 years to become established and pass on lower rates to their customers.

In more than 59 years, no new PUD has been formed to serve residential customers with electricity.

Washington voters gave themselves the right to form public utility districts in 1930 when they passed Initiative No. 1. Private power companies refused to bring electricity to farms and rural communities early in the 20th century, so the Washington State Grange led the effort to give counties the right to form PUDs.

Island County voters struck down PUD proposals four times between the law’s implementation and the 1940 general election, according to The Whidbey Record archives. The newspaper stories said that voters were mostly concerned about the PUD’s taxing authority and funding. Puget Power fought the effort, claiming in a massive ad campaign that a PUD would have trouble accessing Bonneville power and saying the PUD law wasn’t sound.

However, many other counties did form PUDs that grew into successful businesses, but in recent years no new PUDs have formed to serve customers with power.

The last public utility district to get into electric service was the Asotin PUD, initially founded in 1984 as a water utility. It acquired the facilities of Clarkston General Water Supply, a subsidiary of New Jersey-based General Waterworks, an investor-owned company.

It became an electric utility in 1994, buying a three-mile underground distribution line serving the Quail Ridge Golf Course from the Clearwater Power Company.

“The purchase qualified Asotin to buy power from the Bonneville Power Administration,” said Dean Boyer, a spokesman for the Washington Public Utilities Association.

“At this point, however, Asotin doesn’t provide residential electric service; it provides electricity for its own needs and its one commercial customer. That is similar to Whatcom PUD, which has, I believe, two large commercial customers.”

However, the last public utilities district that was formed to serve more than a handful of customers was the Snohomish County PUD. It was started in 1936, but not activated until September 1949, when it purchased Puget Power facilities in the county for $16.5 million, Boyer said.

Snohomish PUD has more than 312,000 customers.

“I believe the last PUDs voted into existence prior to Asotin were the Kitsap and Clallam PUDs, both formed in 1940,” Boyer said. “Kitsap is a water utility. Clallam is both water and power, and began providing electric service in 1944.”

Boyer said the Clallam PUD is a full Bonneville Power Administration customer, and purchases all of its power from the BPA.

It has about 30,000 electric customers/meters, so it is comparable in size to the proposed Whidbey Island PUD.

Clallam’s general manager, Doug Nass, said the PUD has a credit rating of A and charges about 6.2 cents a kilowatt-hour for residential use.

Puget Sound Energy charges 7.4 cents per kilowatt hour for residential use and currently has the second highest rates in Washington and has a credit rating of B-.

“We’re considerably lower than Puget Sound Energy,” Nass said.

And he added that the PUD was a success from the start.

“We did take our territory over from Puget Sound Energy back then. From all I heard, we were successful from the get-go,” he added.

However, the Puget Sound Energy experts could not explain why there haven’t been any successful new attempts in years.

“There have been efforts along the way for existing PUDs to get into the provision of electric service, including Skagit PUD in the 1970s, but they were fought off by Puget Sound Energy,” Boyer said.

Thurston PUD, a water utility, has also considered taking over Puget Sound Energy’s territory in Thurston County on a couple of occasions, he added.

“But don’t forget, there have also been several municipal utilities, also public power, established or expanded during that period, including 1951 when Seattle City Light bought out Puget Power’s service area in the city,” he said.

Given that many of the successful PUDs have been in existence for 60 or 70 years, critics have stressed that these districts were formed in simpler and cheaper times and had decades to achieve their high credit ratings.

Boyer disagreed.

“PUDs have solid credit ratings because they are well-run organizations and can issue tax-free municipal bonds, secured by revenues from the services they provide. It has to do with how they are run and how they are structured, not long histories,” Boyer said.

A study paid for by the Washington Public Utilities Association conducted by EES Consulting has concluded that a PUD would be able to beat Puget Sound Energy rates by 20 percent within a few years.

However, a study funded by Puget Sound Energy has said a takeover could lead to a rate increase of 20 percent.

South Whidbey Record Langley Michaela Marx Wheatley can be reached at mmarxwheatley@southwhidbeyrecord.com or (360) 221-5300.

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