Daviess County Judge-Executive Al Mattingly has opted out of supporting Kenergy’s Kenect internet initiative.
Kenect is a proposed for-profit corporation branch of Kenergy that would allow the nonprofit electric cooperative to theoretically provide/sell internet services to Kenergy customers in Daviess, Hancock, Henderson, Hopkins, McLean, Muhlenberg, Ohio, Webster, Breckinridge, Union, Crittenden, Caldwell, Lyon and Livingston counties.
To get Kenect up and running, Kenergy needs to receive a waiver of KRS 278.2201 from the Kentucky Public Service Commission. The statute prohibits the subsidy of non-regulated activity by regulated utilities. All of the judge-executives in the aforementioned counties have signed on in support, with Mattingly choosing to opt out, he said.
“What we have here is an example of a nonprofit who wants to get into a for-profit business, which is why they have to set up a subsidiary,” he said. “In reality, Kenergy does not need a PCS waiver. They do not need that waiver to provide internet service; they need the PCS to waive a state law that keeps them from subsidizing that service. In this case, the subsidy is $3 million paid through the capital credit return that would traditionally go to Kenergy members that they want to put into Kenect as startup capital.”
Mattingly is not opposed to the idea of Kenect and said he is always supportive of initiatives geared toward expanding internet access in Daviess or any other rural county.
Mattingly, however, said he was never given the feasibility report compiled by Kansas City, Missouri-based consultant Conexon that Kenergy is basing its PCS waiver and business plan on.
“When I found out about their plan early on, I was supportive and encouraged them to partner with and take over the operations of ConnectGRADD,” he said. “If they were going to provide fiber optic, it made sense to me that they could add the wireless service that ConnectGRADD has provided and extend their reach, especially in our undeserved communities. What concerns me is that ConnectGRADD will lose half of its customers and have to close, leaving many without any internet whatsoever. There is also no guarantee that Kenergy will provide internet to all of its customers. My fear is that they will only provide to the low-hanging fruit and leave those areas that only have one-to-three people every mile for service as opposed areas with 20 or 30 customers each mile, where they are now, without service. There is no guarantee that every Kenergy customer will get access, and that is concerning.”
While Kenergy President and CEO Jeff Hohn declined to comment, Kenergy did state that due to its application for funding through the Federal Communications Commission’s Rural Digital Opportunity Fund Phase I Auction, Kenergy was not allowed to publicly share information regarding the study or specifics of Kenect’s business model in fear of losing out on potential federal funds.
In fact, as part of its application, Kenergy requested full confidentiality of the very materials that Mattingly was not provided when asked for his support in their waiver application to the PSC.
Another concern for Mattingly is if Kenergy rates will increase to continue to subsidize Kenect, a question Kentucky Attorney General Daniel Cameron asked regarding the relationship between Kenergy and Kenect and whether “this relationship could in any way impact electrical rates to be paid by Kenergy customers.”
Kenergy’s response to Cameron, according to the PSC waiver case filings for Case 2020-00215, is redacted.
“I understand a blackout period of confidentiality as they attempt to gain federal funding,” Mattingly said. “However, whether or not Kenergy customer’s rates will be impacted by subsidizing Kenect is a straightforward question that requires a simple answer, yes or no. I respect the other judges but I have to be a little more skeptical as I look out for the best interest of Owensboro-Daviess County and myself and other rate payers. If this is such a great opportunity, why hasn’t a private entity come in and reaped those profits? Before COVID-19, they were scheduled to present to the General Assembly where they would have presented publicly. Now, they are attempting to gain a waiver through an agency. I find it funny that so much of what they are doing with the PSC is redacted.”
While numerous Kenergy customers have signed petitions to the PSC in support of Kenect, Mattingly worries that they don’t know the whole story and that if the waiver is granted it could be harmful for Kenergy customers in the future while doing little in the long run to truly address the issue of providing affordable internet access to those communities without, he said.
“They hoped I would follow the lead of the other judges without ever having seen their study and what the consultant said or the data that was presented,” he said. “I am a member and I want to see them succeed. I want broadband throughout our county where everyone can afford it. There is no guarantee, especially in our more rural areas, that even if you are a Kenergy member that you will have access. None. I don’t fault the judges, but I will not sign or support anything until I know everything there is to know. Aside from the $3 million, Kenergy would also have to maintain 50% equity in Kenect. To me, it sounds like Kenect is a private subsidiary taking advantage of a nonprofit utility company’s customer’s low rates. Until I know the whole picture, I can’t be sure that it is in the best interest of Daviess County or the rate payers.”
For the full breakdown of Kenergy’s waiver request, visit psc.ky.gov/ and search for Case Number 2020-00215.
Jacob Mulliken, 270-228-2837, email@example.com