The Public Utility Board passed a resolution at its Sept. 28 meeting that outlines a funding plan for Click! Network. The resolution will go to the City Council for consideration.

The Resolution

A RESOLUTION relating to Click! Network; approval of an All-In business and Tacoma Power funding plan to provide retail telecommunication services.

#1. WHEREAS the City Council of Tacoma delegated authority to the Public Utility Board and the Department of Public Utilities (“TPU”), Light Division (dba “Tacoma Power”), to implement and manage a broadband telecommunications system (“Click! Network” or “Click!”, as authorized through City Council Substitute Resolution No. 33668, approved April 8, 1997, and Public Utility Board Amended Substitute Resolution U-9258, approved April 9, 1997), and

#2. WHEREAS the 1997 business plan contemplated that the revenues associated with telecommunications services related to city government communications, cable television (“CATV”) service, transport of signals to service providers offering telecommunications services, and internet access services would pay for the costs of such services and would provide an additional revenue stream to Tacoma Power to help offset the construction and operations costs associated with the telecommunications system, and

#3. WHEREAS many of the functions of the telecommunications system envisioned in the 1997 business plan have been achieved in their entirety since the infrastructure improvements were completed in 1999 including: conventional substation communication functions, distribution automation, city government communications functions, CATV service, and transport of signals for service providers offering telecommunications services (the last three functions are “Click!”) and internet access services (through third-party providers), and

#4. WHEREAS other contemplated functions have been partially achieved for certain electric customers through the Gateway meter program, which include: remote turn on/off for electric customers, automated meter reading (electric), and provision of information to customers that is relevant to their energy purchasing decisions, and

#5. WHEREAS the customers of the fully implemented uses of the telecommunications system (city government communications functions (“I-Net”), CATV service, and transport of signals for service providers offering telecommunications services) have shared in part of the capital costs of constructing the telecommunications system as well as the operation and maintenance of the infrastructure to the benefit of electric customers who would have paid 100% of these costs, and

#6. WHEREAS the telecommunications system continues to provide interconnectivity, advanced control, and power management between electrical substations, which provide safe, reliable, and efficient use of electrical resources for the benefit of all Tacoma Power customers, and

#7. WHEREAS the existing business plan and current cost allocations for Click! functions do not generate sufficient revenues to fund current expenses and capital improvement costs related to these functions, and

#8. WHEREAS, on an ongoing basis, Tacoma Power will continue to use portions of the telecommunications system for conventional substation and other communications, distribution automation, etc., and

#9. WHEREAS, for a period of time, portions of the telecommunications system will continue to be utilized by Tacoma Power to support the Gateway meter program, which serves over 15,000 Tacoma Power customers, and

#10. WHEREAS future advanced meter infrastructure may use portions of the fiber network facilities of the telecommunications system and may, in part, rely on the hybrid fiber-coaxial (“HFC”) infrastructure to fully implement the remaining functions described in the 1997 business plan, and that if and when such future uses occur, Tacoma Power should pay a share of the costs of the telecommunications system related to such uses, and

#11. WHEREAS, following a nine-month review by the Click! Engagement Committee (a committee comprised of representatives of the City, TPU, and citizens appointed by the City), the Engagement Committee described the community benefits of an enhanced Click! telecommunications system and an outline of the features of such a system, and

#12. WHEREAS Tacoma Power has determined, in part as a result of the Click! Engagement Committee work, that to increase revenues, Click!’s retail products must be enhanced to include retail internet services and voice- over internet phone services that can be bundled with the current CATV services (Click! would continue offering wholesale data transport services and city governmental communications functions), and

#13. WHEREAS the studies by the Click! Engagement Committee and Tacoma Power’s financial analysis demonstrate that continuing to provide CATV services in support of retail internet services makes the sale of such services a more competitive overall product and improves the financial sustainability of Click!, with estimations that Click! customers cover over 90% of the cost of service, and

#14. WHEREAS the studies of the Click! Engagement Committee, Tacoma Power’s financial analysis, and industry experts conclude that high- speed internet access of 1 gigabit will be the standard for the next generation. Click! needs to make capital improvements to the current telecommunications system infrastructure to achieve these or greater speeds and to keep the competitiveness of Click! internet services in the community, and

#15. WHEREAS all financial models studied by the Click! Engagement Committee and Tacoma Power nonetheless show that the market price that can be charged for these enhanced Click! services and the market penetration that can be achieved will be insufficient to cover all of the costs associated with the operations and maintenance of the telecommunications system and the capital improvements necessary to update the HFC to allow for 1 gigabit service, and

#16. WHEREAS the internet-related uses of the current Click! telecommunications system and an enhanced Click! telecommunications system would provide Tacoma Power customers benefits by giving them access to advanced customer services options such as: power use monitoring, outage reporting, scheduling of services, bill paying, and electrical appliance control, and

#17. WHEREAS, in planning for an uncertain and unknown future, there may be other potential functions related to the supplying of electricity to customers not considered in the existing business plan that might also make use of the telecommunications system infrastructure including: cyber security, electric car charger locations and metering, and enhanced customer information products (power usage by time of day, behavior-based saving programs, outage communications, energy audits, and participation in Evergreen Options), and

#18. WHEREAS the Board has a duty to ensure that Tacoma Power ratepayers pay in their power rates only those costs that are directly and reasonably related to the provision of electric service, and

#19. WHEREAS the Board has a duty to ensure that Tacoma Power and Click! are in compliance with legal and statutory requirements, and

#20. WHEREAS Tacoma Power has excess power generation capacity within its service territory. In the past, Tacoma Power has benefited greatly by selling this excess capacity in the wholesale power markets to the benefit of all retail electric customers. Over the past few years, wholesale power prices and sales have dropped substantially. In support of Tacoma Power’s strategic business plan, Tacoma Power wants to make up this lost revenue by looking at ways to increase its retail power sales through economic growth in the community. Communities across the nation have benefited economically from competitive access to internet services in their communities. Tacoma Power’s continued operation and maintenance of the telecommunications system for internet access purposes assists in making the internet services competitive in Tacoma Power’s service area, which increases economic growth that leads to greater retail power sales, and

#21. WHEREAS, in order to preserve the functionality and value of the telecommunications system for the benefit of Power customers, the Board has determined there should be a supplemental level of funding from Power to the telecommunications system based on direct services reasonably related to the provision of electric services as enumerated herein, and

#22. WHEREAS the Board nonetheless finds it wasteful and unproductive to abandon or leave unutilized the HFC components, which are currently used to provide Click! functions (including CATV and internet access services) and, in order to preserve the functionality and value of the Click! telecommunications system, the Board determines it prudent to provide a supplemental level of funding from Tacoma Power to the telecommunications system for a limited period of time until a stable source of funding from an alternate source can be secured, and

#23. WHEREAS the Board has determined that along with enhanced product offerings, the new business plan should also grant Click! management flexibility to change product offerings, prices, and marketing strategies, excluding the leasing of the entire network, without prior Board or Council approval so as to effectively compete with private companies offering similar products and services, and

#24. WHEREAS the Board finds it to be in the best interests of its electric customers and the citizens of Tacoma that a new business plan be approved for Click! functions; Now, therefore,

BE IT RESOLVED BY THE PUBLIC UTILITY BOARD OF THE CITY OF TACOMA:

Sec. 1. Click!’s proposed high-level “All-In” business plan (the “Business Plan”), attached as Exhibit A to this resolution, is approved.

Sec. 2. The Clerk of the Board is directed to forward this Resolution and the Business Plan to the City Council for immediate consideration. The Board requests, due to budget timing constraints, that the City Council make its decision in a timely manner. Upon approval of the Business Plan, funding, and other provisions of this resolution by Council, TPU staff is directed to complete the more detailed aspects of the Business Plan and then implement that plan.

Sec. 3. TPU’s request that Click! management be delegated authority to make changes to products and service offerings, prices (within the limitations set forth in the Click! rates/charges ordinance approved by the Board and Council), and marketing strategies contained within the Business Plan without further approval by the Board and City Council is approved, and the Council is requested to concur in such approval. All significant material changes to the Business Plan that would remove TPU as the primary operator of Click! including, but not limited to, the sale or lease of telecommunications system equipment or capacity, outsourcing of work, permanent discontinuance of products or services, etc. shall be brought to the Board and City Council for approval. Such delegation includes approval of contracts allowing third parties to use surplus portions of the network to supply services to their customers so long as such use does not materially interfere with Click!’s operations of the network or Click!’s ability to implement its Business Plan and achieve its goals and objectives. Click! shall continue to bring contracts for the purchase of goods, services, and materials in excess of $200,000 to the Board for approval.

Sec. 4. Tacoma Power’s request to transfer an annual amount to the Click! fund from Tacoma Power electric revenues, to appropriately compensate Power’s past, current and future beneficial uses of the telecommunications system infrastructure, which shall be used to pay Click! operating, maintenance, taxes, capital costs and debt, is approved. Tacoma Power’s transfer from electric revenues under this Section 4 shall be a minimum of $6 Million annually, and in the event Click!’s costs exceed $6 Million for the year, Tacoma Power is approved to transfer additional funds not to exceed $10 Million per year. Click! may use these transferred funds to make capital improvements and purchase equipment as necessary to meet the objectives of the All-In Business plan.

Sec. 5. Staff will present, not less than annually, to the Board and Council on Click!’s status relative to its business plan objectives and any changes made to the business plan and business outlook for Click!. In 2020 and 2025, staff will prepare a report to the Board and Council detailing business plan objective achievements and financial status of Click! to determine any adjustments in future funding. Staff reports will describe the past, current, and future expected use of the telecommunications network by Tacoma Power.

Sec. 6. The Board directs staff to identify business efficiencies and savings that can be made through staff reorganization, looking at both represented and non-represented positions. Staff will negotiate with appropriate union representatives to collaboratively identify opportunities for efficiencies and savings.

Exhibit A