By Chris Greacen, Chom Greacen
No doubt that better and faster internet would bring economic, educational and communication benefits.
Speaking personally, it is frustrating to pay Centurytel for 1.5 Mbps of download speed only to get as low as 0.02 Mbps or no internet at all. But we have grave concerns about OPALCO’s current business plan to venture into broadband business.
OPALCO has 75-year experience running electricity distribution as a monopoly business, with relatively little technological innovation and with extensive federal subsidies (priority access to discounted wholesale electricity from BPA, and having BPA cover the extremely high cost of delivering power underwater to Lopez).
Even in the field of its expertise, OPALCO has been slow to adapt to and capitalize on the new challenges of changing electricity market. For example, OPALCO is letting slip precious opportunities to restructure tariffs and to proactively invest in energy efficiency and local energy generation in response to the threat of more costly Tier 2 electricity and diminishing low-cost supplies.
Is OPALCO well-suited to dive into an entirely new and competitive business of telecommunications with very fast changing and complicated technology and no federal subsidies? We have seen examples of other co-ops and municipal utilities having made similar decisions to venture into telecom and fail miserably.
Chelan County Public Utility District decided in early 2000s to take advantage of its fiber optic backbone and invested in expanding its network to provide internet to its rural customers. A decade later, it was losing $8 million/year and faced with the difficult choice of having to sell its network to cut its losses, coughed up about $100 million to cover outstanding debt, or hike electricity rates significantly to stay afloat.
And Chelan had one thing OPALCO doesn’t: deep pockets. Chelan PUD got in deep financial trouble with broadband even though it had the financial advantage of revenues from owning three hydro-power projects totaling over 2000 MW.
The City of Ashland’s municipal electric utility got into a similar mess a decade ago and had to pay off $15.5 million in debt and raise rates, hurting low and middle-income residents. Utilities in Utah and Connecticut also suffered similar predicaments as a result of technological advances, stiff competition and lack of experience.
What specific measures does OPALCO propose to avoid the fate that fell to these utilities? Is OPALCO confident it has the expertise, experience, resources and nimbleness to survive and thrive in such a cut-throat competitive industry? What financial-firewall provisions are OPALCO putting in place to protect its $60 million in assets if the plan goes rotten?
When OPALCO asks its members to underwrite, through a regressive $15 per month fee, a $34 million investment (assuming no cost over-runs) that could put its core business and members’ capital credit at risk, it is naturally expected that financial information on the broadband investment be made available to its members.
We have attended/followed several board meetings in hope of learning more about the financial details. But, while board meetings are normally open to members, the board discussions on broadband were exclusive (members not allowed to observe).
The most information OPALCO has offered so far is a 15-page summary document with very little detail on financial analysis. With lack of transparency, it is difficult for members to properly evaluate the risks and economics of the broadband venture and make an informed decision on whether to sign up or opt out.
Cutthroat industry. Little experience. Apparently no financial firewalls to protect a public service we rely on. Lack of transparency in information available to members. This doesn’t look good.
Let’s look at other options for getting fast internet, like maybe leasing bandwidth on OPALCO’s existing fiber optic lines to someone else better poised to take these risks.
— Editor’s note: Lopez Island’s Chris and Chom Greacen work internationally in the field of energy, ranging from policy, legal and regulatory framework to small-scale system design and installation.