Macquarie Purchase of Puget Sound Energy

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The announcement of the potential purchase of Puget Sound Energy by Macquarie Infrastructure Partner has opened up a new debate on electricity. The difficulty of the discussion is that there are really two issues at play. The first is the actual purchase of PSE by a foreign company, which has some people rightfully concerned. The second issue is that many Public Utility Districts are now taking the opportunity to explore competing against PSE. The Whatcom County PUD has primarily provided water to customers, but does have an electricity customer at Cherry Point. Other PUD’s in Skagit and Island County are thinking about entering the electricity distribution business. In many ways these are separate issues; however, it does open up an interesting debate on appropriate governance structures to deal with public utilities.

First, a definition of governance structures as this is one of the most critical issues missing from any discussion of social and economic issues. Governance is the planning, influencing and conducting of organizational policy ([url=][/url]). How and who sets policies, what drives decision-making, and to what degree stakeholders have influence are all determined by the governance structure of the organization. The governance system has a significant influence on the outcome of any organization, whether they are government, business, or non-profit. Problems in health care, education, and energy can be traced back to having the wrong governance system to accomplish what we need.

PSE is currently a public company with thousands of shareholders and a board of directors. Public companies are one form of governance structure, often used with large corporations. The buyout by Macquarie would create a private company, although the same size and performing the same services. There would be no public shareholders and Macquarie would have complete ownership and control. One debate is which of these two governance structures are in the best interest of the customers. Macquarie provides access to capital for improvements, but does little to change the fundamental operating principles of the company. It may make things a little better or worse, but fundamentally the issues of size and centralization of the power remains unchanged. In effect, neither one significantly changes the overall governance structure so little will change in terms of output.

The other option is to have local PUD’s provide utility services instead of PSE. This is the more interesting conversation because of the dramatic change in the governance model, primarily driven by a decentralization of power. Instead of decisions made in Seattle or Australia, decisions would be made by Whatcom County citizens, impacting Whatcom County dollars. PUD’s are local entities, regulated by law, but has local decision-makers and are much smaller in size. Under the PUD model, the local PUD would either generate their own power locally, or buy power from Bonneville Power Administration (reality is it would be a combination of both). Decisions would be made locally, instead of Seattle or Australia. Much of the money would remain local, except for the amount that goes to buy power from BPA. From a governance standpoint, making decisions locally instead of somewhere else changes the dynamics. Local decision-makers are oftentimes more approachable, more willing to deal with customers, have less bureaucracy, prioritizes local interests first, and are more likely to make changes. Large public and private companies tend to be less approachable, more bureaucratic, primarily driven by non-local issues, and more desirous to maintain the status quo.

Local decision-making is always preferable; unless economies of scale make it highly uneconomically (you would not want an automobile manufacturer in every county). In the case of energy you have two separate issues, the creation of power and the distribution of power. There are some economies of scale in the creation of power, but not in the distribution of power. The PUD’s are predominantly a distributor of power, so therefore are not going to be at an economic disadvantage. In terms of the creation of power, we want to have more renewable energy, but local renewable energy projects are preferable to those far away. PUD’s would find more creative ways to create renewable energy here in Whatcom County, PSE (or Macquarie) have no interest in creating power or jobs in Whatcom County.

If the long-term goal is more renewable energy, lower cost, and better service, a governance system that is driven by local people and local dollars will yield better results than a governance system of public or private corporations ran somewhere else. A significant change in the governance system will yield dramatically different results, and in this case there are far more upsides than downsides. Hopefully, local PUD’s will take the opportunity to have serious conversations about redesigning our energy infrastructure. It will never happen at the Federal, State or PSE level as their primary interest is to maintain the status quo, and it will have to be done locally if we want to make a significant change.

About Craig Mayberry

Closed Account • Member since Jan 17, 2008

While writing his articles from 2008 to 2011, Craig lived near Lynden and taught at both Whatcom Community College and Western Washington University. He was active in politics and ran for public [...]

Comments by Readers

Scott Wicklund

Oct 28, 2008

Craig,  Some interesting points, but they are obscured by the burning question:  “How is Palin working out?”  Is the “Alaska model” appropriate to consider here?


Craig Mayberry

Oct 28, 2008


You will be really thrilled with my next post that I am writing, should be ready later this week. 

By the way, at some point in time you will have to stop thinking in terms of stereotypes, when you do you might learn something.


Scott Wicklund

Oct 28, 2008

“Stereotypes?”  Do you mean something like “maverick outsider anti-elitist” or “real Americans”???  Now you are playing me for a fool!

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