Completion of high-speed Internet networks for the north country may be impaired by a National Grid rate increase for preparing its utility poles for broadband.
Slic Network Solutions, the Development Authority of the North Country and Ion HoldCo, which want to build fiber networks to thousands of under-served rural areas, have filed a complaint with the state Public Service Commission. Overall, the rate increase would cost the three agencies $3.56 million more than they expected to pay.
"It definitely jeopardizes the size and scope of the project," said Philip J. Wagschal, president of Slic. "It's not clear to me at this point the total ramification of that. We've committed to build in a lot of places."
Slic secured grants of $5.3 million and $27.8 million through the federal American Recovery and Reinvestment Act to lay 660 miles of fiber-optic cable in St. Lawrence County and 136 miles in Franklin County.
To complete both projects, Slic needs to attach to 22,288 National Grid poles.
DANC and Ion, a coalition of telecommunication organizations, are working together on a fiber line from Boonville to Utica to complete a loop connecting Watertown and Syracuse. DANC also is extending its line from Star Lake through Piercefield to Tupper Lake.
Ion and DANC were awarded $39 million for the construction.
The estimates for the grant-funded work were based on specific pole attachment costs in effect when the applications were submitted.
The projects have nothing to do with National Grid's rate hike, spokesman Patrick D. Stella said.
"It's an expense we review periodically," he said. "We realized they needed to be adjusted. It's mainly labor and equipment. Prices have changed."
National Grid, formerly Niagara Mohawk Power Corp., last changed the rate in 2007. Before that, it was adjusted in 2005.
There are two types of charges that attachers pay to pole owners. One is an annual fee for the physical attachment, which is set at $11.13 per pole under a tariff approved by the PSC. The other fee, which is established by the utility, is called "make ready" and it can include application and engineering fees, equipment costs and surveys both before and after the work is completed.
National Grid notified its pole attachers of its new make-ready rates in January.
There were some reductions, but the number of increases exceeded the effect of the decreases, according to the complaint. The percent of decreases and increases from 2007 to 2011 rates varied widely, with some increases more than 1,000 percent.
Different fees apply to different situations, based on where poles are and what equipment is needed.
"The impact of these increases on the complainants, as well as other attachers, is devastating," the complaint says. "This is particularly true for Slic."
Slic's project costs could rise $2.3 million if the rate change remains. DANC's costs would increase $336,652. For Ion, the estimated increase is $923,656.
Their complaint notes National Grid has provided no justification for its figures and said it might be linked to a Nov. 17 recommended decision that the utility receive less than one-third of its proposed request for a general rate increase.
Because National Grid is a monopoly and telecommunication companies are forced to use its poles to do business, the make-ready cost should be the utility's actual out-of-pocket cost, Mr. Wagschal said.
Money paid to National Grid for pole attachment and use helps offset customer rates and charges, Mr. Stella said.
"If the PSC asks to look at our process for determining costs, we'll certainly share that with them," he said. "We'd certainly do a study."
Verizon and National Grid jointly own many poles. Verizon changed its make-ready rates last year.
"We filed a complaint and they withdrew their rate increase," Mr. Wagschal said.
Mr. Stella said he was unaware of Verizon's decision.