Electric ratepayers will pay for Chelan PUD’s decision to write-off fiber debt

This opinion-editorial from Fair Competition Alliance was published in the Wenatchee World on April 28, 2012

Ratepayers will carry the load, (Wenatchee World)

Chelan County PUD commissioners voted April 16 to approve a $99 million write-off of internal loans, essentially giving electric ratepayer funds to fiber users and doubling down on an ill-conceived venture that threatens the future of the county’s broadband communications.

Analysts have long reported that the PUD’s fiber system is financially unsustainable. Even with the write-off tactic, the PUD’s own analysts paint a dim picture, with fiber system losses anticipated well into 2014 and beyond. This means PUD electric ratepayers remain very much at risk.

Meanwhile, consultants rightly assume:

“The current system serves customers that might otherwise have fiber network services through private providers,” and

“Schools, hospitals, and most businesses would have had (private) fiber network connections in absence of the PUD’s investments.”

The best estimates indicate between 91 and 95 percent of Chelan County residents have access to broadband providers like Charter or Frontier. These two companies currently offer 100 megabytes per second (mbps) and 7 mbps download speeds with 5 mbps and .768 mbps uploads, respectively.

In this context the PUD’s decision to pursue its fiber strategy is, at best, puzzling.

Let’s recap:

  • Key county institutions would have received services regardless of PUD fiber.
  • The 21 percent (30 percent of the 70 percent) of the county who subscribe to PUD fiber could have received broadband from private providers.
  • PUD electric customers are going to eat $99 million or more — funds that could otherwise have lowered electric rates, and
  • Analysts agree the system is financially precarious under the most optimistic scenario.

Nonetheless, the PUD persists.

The unfortunate truth here is the PUD cannot operate a financially viable system without resorting to predatory pricing and other cross-subsidized tactics to take business from existing private providers.

If such tactics succeed in luring customers from private providers, county residents should prepare for these providers to pack up their jobs, investment dollars, franchise fees, taxes, and charitable contributions and take them to some other community where they can compete on a level playing field.

Then customers who were promised a competitive broadband environment will instead be left with a public monopoly. With no other source of funding to pay for future expansions, repairs, capital replacement, and operations, the PUD monopoly will wring its hands, apologize, and repeatedly raise rates. And customers, who by then will have no other choice, will pay.

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