A former Tacoma mayor, former city attorney and a former Tacoma Public Utilities director are among those who filed a lawsuit against the city Thursday, asking that Tacoma Power and its ratepayers be reimbursed for more than $21 million in subsidies they contend the utility has given to Click Cable TV over the last several years.
The lawsuit says Tacoma Power and its customers have been illegally subsidizing Click by using electric ratepayer revenues to pay for capital, operating and maintenance expenses for the telecommunications network, which provides retail cable TV and wholesale internet service.
The lawsuit filed in Pierce County Superior Court quotes from a 2015 memo from former city attorney (now city manager) Elizabeth Pauli.
“Electric utility revenues may not be used to pay for costs directly associated with providing commercial telecommunications services (such as cable television and internet service) to the public, because such costs are not sufficiently related to providing electricity to electric utility customers and thus must be paid for from non-utility revenues such as rates or charges to the telecommunication services customers or general government tax dollars,” Pauli’s memo states.
A precursor to the lawsuit was filed in February, and since then Tacoma has hired Seattle law firm K&L Gates to defend it in the case, according to city attorney Bill Fosbre.
Click has been losing millions of dollars a year, according to TPU management. Click general manager Tenzin Gyaltsen has said that the cable system’s costs exceeded revenues by $8.9 million in 2015 and 2016. Because Click is a subsidiary of Tacoma Power, it doesn’t have its own separate funds or reserves, so when it loses money, those losses are made up by power revenues.
The lawsuit appears to have been spurred by Tacoma Public Utilities board’s vote last fall on a funding plan for Click’s expansion into also selling retail phone and broadband internet service directly to customers. That plan assumes Click won’t be able to cover its expenses initially as it works to gain market share and directs Tacoma Power to support Click with $6-10 million in annual subsidies until it gets on its feet. Those subsidies would be illegal, the suit claims.
Click’s infrastructure does provide some benefit to Tacoma Power, which uses it to communicate with substations and the utility’s smart meters. But there is disagreement about how much Click’s wires aid the electric utility and how much Tacoma Power should have to fund Click as a result. That debate is part of the reason for a pair of audits the City Council ordered of the Click network last fall — but those audits are on hold, pending the outcome of the lawsuit, Fosbre said.
The lawsuit says Tacoma Power is contributing more toward Click than it gets in legitimate benefit, said Seattle-based attorney Dave Jurca, who filed the claim on behalf of former TPU attorney Mark Bubenik, former mayor Mike Crowley and former TPU director Ted Coates, among others.
Jurca has pointed to the fact that some Tacoma Power ratepayers can’t even get Click internet or TV because of where they live, yet still are paying to fund Click through their electric rates.
Jurca has argued similar cases in the past.
He won a 2003 case that was cited in the legal memo sent from Pauli to the City Council and utility board about the funding of Click.
In Okeson v. The City of Seattle, the state Supreme Court ruled unanimously that operating street lights was a general government function and not directly related to providing electricity to power customers. The city had unlawfully been charging ratepayers for the operation of the city’s streetlights, the court ruled.
Jurca represented Rud Okeson, a former Seattle City Light manager who sued Seattle over the street lights.