By Elaine R. Davis, Special to the Tri-City Herald
There won't be much to celebrate in the Tri-Cities when electric ratepayers of the area's two PUDs discover how much they're paying for PUD and NoaNet broadband.
The Tri-City Herald reported July 10 that Governor Gregoire, local PUDs, and NoaNet are planning to celebrate the benefits of their government broadband expansion on July 26. Unfortunately, there's no mention of who is footing the bill or whether the expense is necessary.
The 2011 Annual Report on Broadband in Washington says that "... 98.9 percent of the people in Washington State have access to some form of broadband at speeds in excess of 3 Mbps download and 768 kbps upload."
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And yet the PUDs and NoaNet persist in their plans to spend public funds to build broadband.
As to who's footing the bill? PUD electric ratepayers. Here's how.
NoaNet -- Northwest Open Access Network, a consortium of Washington PUDs -- is financing the local match based on the credit worthiness of its member PUDs, including Benton and Franklin PUDs. According to audited financials, NoaNet has suffered losses annually since its inception in 2000 with member PUDs covering its losses.
Franklin PUD's share of NoaNet losses has averaged $173,000 a year from 2003 to 2010 ... Benton nearly $351,000 over the period.
In addition to covering NoaNet's losses, individual PUD fiber programs are also losing money. Franklin PUD's fiber losses were $480,000 in 2010, averaging nearly $600,000 a year between 2003 and 2010. At Benton PUD losses were $408,000 in 2010, averaging $490,000 a year over the period.
More than $300 million and counting has come from the electric ratepayers of PUDs and municipal utilities around the state. Benton and Franklin PUDs had cumulative capital investment in their fiber programs of $13 million and $12 million, respectively, by the end of 2010.
PUDs originally promised that their electric customers would be made whole when the fiber programs showed profits. It's not going to happen. Telecommunications experts early on cautioned PUDs that their fiber programs were financially unworkable. Now, with a decade's experience, the State Auditor writes of Grant PUD's program (which the Auditor used as an example) in a 2010 performance audit of the Mid-Columbia PUDs:
"The revenue this (broadband) service generates does not and will not cover the District's investment or cover ongoing operational costs. ... the original investment (in Grant PUDs fiber program) was not financially viable and results in ongoing losses. ... expanding the fiberoptics program will increase the District's financial losses."
Ratepayers are just now learning that their electric utilities will never recover the funds spent to date. Chelan and Grant PUDs -- the two largest PUD fiber programs -- have written off their programs' internal debt.
Finally, the Chelan and Douglas PUD commissions are the most recent of five PUDs to withdraw from NoaNet due to the financial risks associated with their membership. Grant PUD fiber staff recommended that their PUD also withdraw, but the resolution failed on a 2-2 tie vote.
Residents and electric ratepayers won't be celebrating their PUD's broadband decisions when they understand how their money has been squandered to so little purpose and with no expectation of repayment.
Elaine R. Davis is Executive Vice President of the Fair Competition Alliance, a non-profit organization committed to finding workable broadband solutions for communities throughout Washington state.