Funding for Kit Carson Electric Cooperative’s broadband installation has been frozen, halting work on the $64 million stimulus project.
Kit Carson was awarded a $19 million loan and $45 million grant in 2010 to bring fiber optic broadband service to every home and business it serves. The money was part of the federal stimulus bill, and the project is being overseen by the Rural Utilities Service (RUS). Construction on the project began in July.
Last September, the Public Regulation Commission (PRC) issued an order requiring the co-op to spin-off its Internet company as part of a ruling on a co-op electric rate increase. The PRC was asking that the Internet business be separated in order to protect electric ratepayers from potential losses in the telecom company.
The federal government now says it was not made aware of that order.
A recent letter from RUS to the co-op states that RUS was suspending funding because the agency "did not receive official nor timely written notice from Kit Carson of the order of the Public Regulation Commission requiring Kit Carson to divest its broadband assets into a separate subsidiary."
The letter said that separating the Internet business from the electric utility would clearly create an “adverse material effect” on the project, compromising the terms of the co-op's contract with the government.
The letter states that, in order for funding to be reinstated, Kit Carson must show that it will challenge the order to divest the Internet company and win, or show that it can successfully spin-off the subsidiary without threatening the loan.
The letter said that failing to meet those goals could end the entire project.
A spokesman for RUS in Washington, D.C. confirmed that the government had “suspended further advances of the award” pending the resolution of the issue. The spokesman said the agency continues to support the project.
Co-op CEO Luís Reyes was out of town Thursday. The Taos News is scheduled to speak with Reyes about the situation Friday morning (Oct. 12).
Pat Lyons, chairman of the Public Regulation Commission, told The Taos News Thursday that he is in full support of the broadband project and has asked that the issue be on the agency’s Tuesday agenda (Oct. 16). Lyons said he hoped the commission would vote that day to nix the divestment requirement in the September order so that RUS would restore funding for the project.
The PRC is scheduled to hold a hearing in Taos next Wednesday (Oct. 17) on the issue of divestment. If the PRC votes to throw out its requirement to spin-off the Internet company on Tuesday, the meeting in Taos would likely be cancelled, Lyons said.
Commissioners Doug Howe and Jason Marks have also voiced support for the co-op’s broadband project and have said they will take no action to impede the success of the project. Marks has said he has some concerns about transparency in how funds are handled, and he hoped those issues would be cleared up through public hearings, including the one in Taos.
The co-op sent an “urgent” email to members Thursday afternoon asking them to voice their support of the project. Arthur Bishop, a spokesman for the PRC, confirmed that the agency has received several comments from co-op members in favor of the project.
In its email to members, the co-op said that a small minority of co-op members were trying to stall or stop the broadband project. The co-op's most outspoken critics have countered that the have no intention of derailing the project, but want to see the co-op follow the PRC's order.
According to a co-op press release, the funding freeze means the immediate loss of 100 jobs and the loss of 300 future jobs. If the project is scrapped altogether, the co-op could be on the hook for $12 million in expended funds, the release said.
Thomas "Chuby" Tafoya is among the local contractors that have been hired to work on the broadband project. Tafoya told The Taos News that the co-op held a meeting Thursday morning to notify contractors of the funding issue. Tafoya said all contractors, including his nine-man crew, had been ordered to stop work as of Thursday evening.
Tafoya, who also sits on the Taos Municipal School Board, said broadband was an important tool for local students, and he was worried that the community could lose out on a great opportunity if funding were revoked.
"The biggest losers in all this aren't me and my employees, it's the children of Taos County," Tafoya said.