The state office charged with looking out for utility ratepayers is urging against approval of the proposed sale of Puget Sound Energy to a consortium dominated by foreign investors.

The state Attorney General’s Public Counsel Section said Wednesday the proposed transaction is “not in the public interest” and recommended that the state Utilities and Transportation Commission reject the $7.4 billion acquisition.

The Public Counsel, which represents Washington consumers in utility cases, filed comments recommending that the commission not approve the deal because it brings too much risk to customers, including those in Skagit County, where PSE provides electricity.

“Based upon our review, this sale, as proposed, simply exposes PSE’s customers to an undue level of financial risk by undertaking too much debt,” said Simon ffitch, Public Counsel chief, in a written news release. “Consumers appear to get little or nothing in return for the increased financial risk.”

PSE officials maintain that the sale is necessary to provide the utility with the $5 billion in capital that it requires for much-needed improvements to its electricity and natural gas systems. By taking the publicly traded company private, PSE can make those upgrades while avoiding the pressures of keeping Wall Street happy.

But ffitch thinks that PSE has successfully funded its capital needs in the past by issuing stock or borrowing funds, and it has not made the case it could not do so in the future. He would also like to see evidence that PSE’s new owners would provide capital in a more cost-effective manner than the public markets.

His office is also concerned that the transaction depends on “substantial” amounts of debt, which represents a significant departure from PSE’s current financial strategy. In recent years, the utility has worked to reduce what was once considered an excessive debt load.

PSE ratepayers would ultimately shoulder the additional risk associated with the transaction-related debt, according to the Public Counsel’s office.

PSE spokeswoman Martha Monfried disagreed, saying that the company has addressed its debt load, and now it needs capital.

“Steve Reynolds and his management team have spent the last six years improving our balance sheet,” she said. “We feel the merger will allow us to have access to the capital we need to execute our business plans.”

The acquisition is being led by a New York-based investment fund affiliated with the Macquarie Group, an Australian investment bank with more than $50 billion invested in infrastructure, like toll roads, utilities and airports. Macquarie is joined by several Canadian investment groups in the proposed acquisition.

The proposed sale isn’t sitting well with some of PSE’s electric customers in Skagit County. Those customers are concerned about putting local energy infrastructure in the hands of foreign owners.

The pending sale has even led the Skagit County Public Utilities District to explore the possibility of providing electricity itself.

The PUD expects to release the findings of a feasibility study on such a venture Monday.

David Johnson, the PUD’s general manager, believed that the Public Counsel’s findings reflected many of the concerns being raised locally.

“The issues brought up in this press release are issues that have been on everybody’s minds,” he said.

* Josh Lintereur can be reached at 360-416-2141 or at .