What Click’s expansion to ‘all-in’ will cost Tacoma Power customers

Tacoma Power customers are paying a little more than $3 a month each to help fund Click Cable TV as it transitions into also selling retail internet and phone service directly to customers.

It’s almost $1 more per month on average than they had been paying to help support Click’s cable operations, but less than what was originally envisioned when Mayor Marilyn Strickland proposed a plan last summer to have ratepayers chip in for Click’s expansion.

Click is predicted to lose about $14.7 million during the first two years of that expansion as it works to upgrade to gigabit internet service speeds and to gain market share in Tacoma, where Comcast and CenturyLink are competitors.

That gap will be covered by Tacoma Power’s electric ratepayers, who already foot some of the bill for the cable system’s network because it assists with power equipment management.

The Tacoma Public Utilities board decided to distribute that predicted $14.7 million loss evenly among its 178,850 meters, equaling roughly $3.43 per month per customer. The charge won’t appear as a separate line item on a customer’s bill, but rather will be included in power rates, said Tacoma Power superintendent Chris Robinson.

The alternative would be to divvy up that $14.7 million proportionally by charging Tacoma Power customers who use more electricity more for Click’s “under-recovery.” That method could have resulted in hundreds of thousands of dollars in annual charges for the largest industrial customers, Robinson said. Instead, utility board members directed staff to spread the loss evenly among ratepayers.

During 2015 and 2016, Click’s “under-recovery” was about $11.2 million, which averaged to roughly $2.60 per customer per month. Power customers won’t be paying much more to support Click as it transitions to its new business model, because the $13 million in capital costs for upgrading to gigabit internet speeds as part of Click’s transition is being amortized over a period of seven years.

Utility staff is working on developing a fleshed-out business plan for Click’s transition to a municipally owned and operated cable, internet and phone service provider.

Separately, work is expected to start this week on a two-part audit of Click that the City Council requested in November. NewGen Strategies and Solutions, a Texas firm, has been hired to look at the actual value of Click’s coaxial and fiber network to Tacoma Power and examine whether the allocation of costs between Click and Tacoma Power is fair, said city attorney Elizabeth Pauli.

Another firm, CTC Technology & Energy of Maryland, will analyze Click’s planned expansion to what’s been called the “all-in” model, selling internet, cable and phone service. Pauli said that study could get at whether the all-in business plan makes sense, “or are there alternatives that would work better with the market and infrastructure and so forth that we have.”

Members of the City Council, led by Strickland, have championed the all-in plan, arguing that it would be easier to control costs and keep the internet affordable for low-income residents if Click is publicly-owned and operated.

But critics of the plan say the city shouldn’t ask Tacoma Power ratepayers, some of whom can’t even get access to Click, to subsidize the expansion. Mark Bubenik, a retired former TPU attorney who has argued that having power ratepayers support Click is illegal, said the extra charge will hurt the very people the City Council wants to help: Those living on low and fixed incomes.

“I don’t think the council fully appreciates the impact on the low income,” he said. “They’re good-intending people on the City Council and the utility board, and they think that keeping Click’s rates low will help.”

Pauli said she did not know how long the consultants’ work on Click would take. According to the contracts, CTC expects its analysis to cost up to $50,000. NewGen’s work could cost up to $70,000. The council authorized spending up to $100,000, costs that it expects Click to eventually pick up.

This story was originally published January 17, 2017 at 9:06 AM with the headline "What Click’s expansion to ‘all-in’ will cost Tacoma Power customers."