PRC Commissioner Marks Writes KCEC

Dear Kit Carson Member:

Over the past week, I have received over 200 emails about Kit Carson’s broadband project. Virtually everyone writing these emails supports the project and the need for access to affordable, high-speed internet services in currently underserved Northern New Mexico communities. This email is to let you know I’ve received and will be reading your email, and to explain what the Commission is doing.

The Public Regulation Commission regulates rates and other aspects of Kit Carson’s electric utility service. The Commission does not regulate the rates or services of the Coop’s broadband or propane businesses. In late 2010, KCEC applied for an electric rate increase and the Commission held several days of public hearings. Concerns were raised by opponents of the rate increase about the use of electric revenues to subsidize the new businesses. In its final order in the rate case, issue in September 2011, the Commission indicated that the broadband operations should be put into a separate corporate subsidiary in order to provide a clear way to track the financial activities of the broadband business separate from electric utility operations (propane has already been organized this way). The Commission’s order required KCEC to complete the reorganization by this June or submit a report stating why it could not be accomplished.

In June, KCEC submitted a report stating that it was unable to reorganize its broadband operations into a separate corporate entity because the coop was in technical default on its federal Rural Utility Service (RUS) loans and thus, RUS would not authorize the reorganization. KCEC filed a supplemental report stating that RUS also told KCEC management that it would be unwilling to provide financing directly to a broadband-only subsidy, which would jeopardize the coop’s ability to complete the project. KCEC says that it can complete the reorganization after the build-out phase of the broadband project.

The PRC also received a filing in opposition to KCEC’s report, signed by over 100 individuals who indicated they were coop members. These members want the commission to conduct a hearing to examine KCEC’s claims about the RUS loans, and they want the Commission to affirm its earlier order requiring the reorganization. At least some of the persons asking the Commission to take this action say that they support the broadband project; they just want the financial accountability and transparency that would come from a formal reorganization.

The Commission unanimously adopted a Procedural Order last week directing that a hearing officer be appointed to conduct a hearing on KCEC’s report, the supplement, and the filing in opposition. I have asked our chief hearing officer to ensure that the hearing is set for this fall, so as to provide a final resolution before the end of the year. At Commissioner Doug Howe’s request, the hearing will be held in Taos in order to provide easier access to all interested persons. The time and place of the hearing will be announced publicly and all members of the public will be welcome to attend.

If the coop is able to make its case with strong testimony and evidence that the broadband project is in the public interest and that it can’t be completed if broadband is reorganized into a separate subsidiary now, then KCEC could get a new PRC order that explicitly delayed the reorganization to a date that makes sense and removed the uncertainty caused by the 2011 PRC order. In this case, the Commission could potentially order other measures to provide financial accountability and transparency during the interim, for example the filing of financial reports. Of course, if the coop can’t prove its case that the public interest and member interests will be served by a deferral, then the Commission can require reorganization to occur now.

When I started on the Commission in 2005, residential (and even small business) broadband access was a luxury. Just seven years later, it is a necessity of our modern life – but unfortunately not one that is equally available to all. People in Northern New Mexico are underserved by the private sector and need access to the services that the KCEC community broadband project will provide. I support the concept of community broadband and I am anxious for the project to be successful. But a fair and open hearing on how the project’s finances should interrelate with KCEC electric utility operations makes sense at this time in order to resolve the concerns that have been raised.

Jason Marks
Commissioner District 1