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Chelan County PUD reviews options for Fiber-Optic Network

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Chelan County PUD reviews options for Fiber-Optic Network

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March 20, 2012

(Wenatchee, WA) Three alternatives for Chelan PUD’s fiber-optic network were presented at a special PUD meeting Monday evening, including:

  • Sell the network to another entity to operate
  • Keep the network and continue to operate it more efficiently without expanding at this time; concentrate on adding customers within the areas where fiber access is already available
  • Resume expanding the network, recognizing that it will require an increase in electric rates to all PUD customers to pay for it if the PUD is to meet requirements of its Strategic Plan

Approximately 30 people came to the first of four community meetings where the alternatives were explained by PUD General Manager John Janney, Chief Financial/Risk Officer Kelly Boyd and Chris Church, managing director of Engineering Services who is serving as the interim director of the fiber system. Twelve people spoke, most in favor of trying to find a way to extend the fiber system to unserved areas. But some said the PUD should not extend service without requiring those customers to pay the additional cost instead of raising everyone’s electric rates.

Janney summarized customer research done by the PUD the past three years to understand what most customers prefer. He said it’s clear based on what the PUD has heard so far that customers want to keep electric rates low, keep them stable and predictable, maintain electric reliability of the system and try to avoid having the electric system subsidize non-electric services.

Janney explained the PUD’s investment of nearly $120 million so far since 1999 to build and operate the fiber system, and he said it is now losing about $8 million per year. He said the PUD is asking for public comment to help find a preferred alternative that can be sustainable. After the four community meetings this week in Wenatchee, Chelan, Leavenworth and Cashmere, respectively, PUD staff will present a recommendation to commissioners on April 9 and anticipate a Board decision on April 16 after continued discussion.

Church said customer research has shown:

  • Customers prefer not to raise electric rates to pay for expanding the fiber network
  • They believe the fiber network is a success and provides value to the county
  • They want the fiber network to be well managed

Boyd presented the financial outlook for alternatives. She said an increase in electric rates could be as high as 17 percent if it were intended to cover the estimated $126 million to $157 million that it could cost to extend the system to most of the county. If the PUD were to sell the system now, it’s estimated it might be worth $13 million to $17 million. Building the fiber system has required internal PUD loans of about $99 million. If that existing debt is considered as a contribution from the entire electric system that does not need to be repaid, the fiber system may be able to generate positive cash flow relatively soon and use that income to pay for gradual improvements over time.

The staff presentation and the audio recording of the meeting are both posted on the PUD website.

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