PSE change of ownership will benefit the region

AS independent board members of Puget Sound Energy who will continue to serve on the new board if the proposed merger with Puget Holdings LLC is approved, we believe there are a number of reasons why the change of ownership will benefit the Puget Sound region.

We're not alone in coming to the conclusion that the merger is in the public interest. This summer, we gained support for the merger with all but one of the nine concerned parties who know and respect the process, including the Washington Utilities and Transportation Commission (UTC) staff, industrial customers, environmental groups and others.

A decision by the experts responsible for determining the merits of the merger is in the homestretch of an almost yearlong review by the UTC, with the commissioners scheduled to rule sometime in the next few months.

So why is it in the public interest? The population of Western Washington is expected to more than double in size over the next two decades. PSE will need to improve and grow its infrastructure over the same period to serve this growing region.

This year alone, we are investing $421 million in service-area infrastructure improvements to build or upgrade 13 distribution stations, replace power lines and 800 poles, install 200 miles of new natural-gas mains, and more. That's a hectic pace and it won't let up; in fact, it's going to increase.

In addition, there are growing needs for renewable energy to stem greenhouse gases and reduce our dependence on foreign oil. We've already made progress in this area, but we need to do more and the Puget Holdings investors are committed to supporting PSE in this endeavor.

All of this will require a tremendous amount of capital over the coming years. So why not continue as a publicly traded company? The main reason is the volatility of financial markets, which doesn't look to let up anytime soon. Given the turmoil, access to large amounts of future capital at reasonable costs is a dubious proposition at best. And we must be able to plan projects years in advance if we're going to keep up with the energy needs of the region.

The Puget Holdings investors are here for the long haul. They include Canadian pension funds that invest to earn steady returns to support the retirement needs of their members. That's the reason they are willing to pay a premium for the purchase of the stock of PSE's holding company. The other investors, under the Macquarie Capital Group Ltd. umbrella, are respected around the world and have been successful because they consistently demonstrate sensitivity to local needs and concerns.

Puget Holdings will infuse PSE with capital to benefit our customers. They demonstrated this in December by investing $296 million at a time when it was challenging to raise such large sums of equity in public markets. They will also invest $5 billion over the next five years for local infrastructure improvements. This includes $100 million in rate credits and reduced costs for customers, and an increase in the fund that helps low-income customers pay their energy bills.

All of this will be done while maintaining local control. For instance, the two of us and PSE CEO Steve Reynolds will remain on the PSE board. We all take our responsibility seriously to ensure that customer interests are represented. Our current local management and headquarters in Bellevue will remain.

In addition, the state UTC will continue to regulate rates and services. The Federal Energy Regulatory Commission will continue to regulate our hydroelectric facilities, wholesale power and transmission activity. And, the company has agreed to continue reporting to the Securities and Exchange Commission so our financial condition will remain transparent to all stakeholders.

We have structured the merger to meet state standards even greater than those approved by the UTC in other mergers, such as PacifiCorp and Scottish Power in 2004, PacifiCorp and MidAmerican Holdings in 2006, and MDU Resources and Cascade Natural Gas last year.

The future of energy in our region is full of challenges: keeping up with a growing population, providing green energy, improving storm protection and maintaining our very high service standards. With the new investors to back us, we believe PSE will be best positioned to meet these challenges and to serve our customers long into the future.

Considering all of these facts, we have taken great care to ensure that this transaction is in the best interest of the public. We are confident the UTC commissioners will represent the public interest as well.