First phase of project hit by rising expenses
The Okanogan County Electric Cooperative (OCEC) has been awarded $5 million in state funding to deliver fiber optic internet service to 244 users in the Methow Valley.
The award was announced by the Washington State Public Works Board last week. OCEC requested the funding to build 42 miles of fiber as part of its initiative to eventually make high-speed internet available to all customers in its service area.
The funding was requested by OCEC to build fiber optic internet to areas southeast and north of Winthrop, including the North Cascades Smokejumper Base, Lower Bear Creek and Upper Bear Creek roads, Davis Lake, Pearrygin Lake State Park, Twisp-Winthrop Eastside Road from milepost 5-7, East Chewuch Road from milepost 4 to the end, and Cub Creek Road north to Eightmile Ranch.
The state funding provides a grant of $1.5 million, and a $3.5 million low-interest loan. OCEC needs to study the terms of the loan before accepting the money, said Gregg Mendonca, OCEC general manager.
“This is not a done deal. We have to negotiate a contract and make sure it works within our broader scope,” Mendonca said.
This project would be a second phase of a project that OCEC calls “Okanogan County Connect,” which received federal funding last year to bring internet service to the upper Methow Valley. While the state funding is good news, OCEC has had to contend with some not-so-good news about its first phase plans.
Scaling back
OCEC launched an initiative more than two years ago to bring high-speed fiber optic internet to the approximately 3,500 users in its electric service area. (Fiber optic internet uses small strands of glass to send light signals over great distances, and is the fastest and most reliable way to send data.)
OCEC partnered with Methownet, the private internet service provider in Winthrop, to conduct a feasibility study on building out a high-speed fiber optic network.
They developed a project proposal and last year OCEC was awarded $12 million in federal funds and $500,000 from Okanogan County to build a fiber optic “backbone” extending north from Winthrop, bringing high-speed internet to many areas where internet service is currently unreliable or nonexistent.
The fiber optic backbone, or “middle mile” fiber construction, will act like a transmission line does for electric service, allowing delivery of internet to individual hookups.
That project is the first phase of OCEC’s fiber-to-the-premise plans. When the project budget was developed a couple years ago, the project was expected to bring high-speed internet, with no connection costs, to about 2,600 end users in the upper Methow Valley.
However, economic realities have forced OCEC to “scale (the project) back quite a bit in terms of scope,” Mendonca said. “The initial budget … was beaten to a pulp by inflation and labor cost increases. The cost from the time we put the budget together to when we went with a RFP (request for proposal) increased significantly.”
As a result, new internet services are expected to reach only about half as many customers as OCEC had originally estimated — about 1,366 homes and businesses instead of approximately 2,600 that the utility had hoped to serve.
“It was not fun … to wrestle with the reality of the cost it takes to construct something like that. It was surprising and disappointing that we weren’t able to do what we thought we were going to do,” Mendonca said.
The project still includes construction of the “backbone” up the valley, a critical piece of the new fiber optic network. However, that aspect of the project has also been scaled back to meet available funding, from 185 miles planned originally, to 116 miles (56 miles of underground cable and 60 miles carried on power poles).
It will extend up the valley from the Twisp substation to Winthrop and north to Lost River at the upper end of the valley.
The total project budget has increased from $13.2 million to $14.8 million. The additional costs would be covered by increased borrowing from Methow Fiber, the wholesale fiber division of OCEC, Mendonca said. “We would obviously continue to search for additional grant funds to offset any potential borrowing,” he said.
Some areas of the valley that had been included for service in the original project plans will have to wait until future funding is secured, Mendonca said. They include Twin Lakes, Studhorse, Rendezvous and west Wolf Creek, he said.
OCEC has requested bids for design and construction for this first phase of its fiber optic network, and will open bids on June 6. Mendonca said he expects a contract to be signed at the end of June.
“We had over 20 regional and national contractors at our pre-bid meeting at the Winthrop Library on May 9. The contractors listened to our presentation, asked questions, and then were provided a tour of the key areas in this first phase,” Mendonca said.
“The goal is to get some fiber put up and connected this calendar year, and … make a strong push in 2025,” he said.
“When we get detailed design back, we will be able to go out and do some ‘make ready’ work, like increasing the height of poles” to accommodate stringing new fiber-optic cables, Mendonca said.
Before any work can begin on the ground, however, OCEC needs to get approval from the state Department of Archaeological and Historical Preservation, which has been reviewing OCEC’s project for a year. “We’re not allowed to turn over a rock” without that approval, Mendonca said. “It’s not unusual for environmental and other permitting to take up to a third of the planned timeline for completed construction,” he said.
New funding
Last year, interested OCEC customers had an opportunity to sign up for free connections to new internet service. About 2,400 people responded, Mendonca said. OCEC will continue actively working to secure new funding to build out a fiber optic network throughout its electric service area. He estimated that it would cost $40 million-$50 million to bring high-speed internet to all interested users.
Mendonca said a new source of funding may be available soon through a federally funded program called Broadband Equity, Access and Deployment (BEAD), part of the Biden administration’s “Internet for All” initiative. The program recently announced that Washington state will receive more than $1.2 billion in BEAD funding for projects serving areas with inadequate or nonexistent internet service.
The areas that were cut from OCEC’s first phase plans could be included in requests for BEAD funding, he said.
“Our hope is we would be able to access BEAD funding … to build out to our electric membership,” Mendonca said.
As a result of the partnership between Methownet and OCEC, an agreement was reached last year that provides for OCEC to purchase Methownet. The target closing date is July 1, and Mendonca said the parties are working to finalize details.
Under terms of the agreement, Methownet will continue to operate as an independent entity, much like the co-op’s propane subsidiary. Methownet will retain its downtown Winthrop office and keep its current employees. Owners Jeff Hardy and Maria Converse will continue with the company for a time during the transition.
OCEC will operate both the wholesale and retail sides of the business as a nonprofit, as it does for electric services.
Like OCEC, the Okanogan County Public Utility District also received state funding this month from the Public Works Board. The PUD project would expand 22 miles of middle mile fiber infrastructure from Conconully to the PUD’s existing fiber network, bringing service to 367 end users.
