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A $54 million project to begin construction of broadband fiber was approved by Northeast Louisiana Power Cooperative (NELPCO) Board of Directors in a special-called June 29 meeting.

The meeting was held at NELPCO’s Rayville office and was the second such called meeting. In the first June meeting, a resolution to go forward with the project was shot down.

Construction of the broadband network will be done in segments, starting with the most populated places, according to Board of Director’s plan.

“After many months of due diligence, discussions and deliberations, the Board of Directors of Northeast Louisiana Power Cooperative, Inc. voted on June 29, 2021 to bring high speed internet to its members through its wholly owned subsidiary, Volt Broadband, LLC,” according to a prepared board statement.

Board of Director members Thad Waters and Steve Pylant voted against the move saying the major investment was too risky.

In order to bankroll the venture, NELPCO has to put up $30 million of collateral, the majority of its capital credit, according to Waters.

Capital credits are retained margins left over at the end of the year at nonprofit electric cooperatives such as NELPCO. This is the most significant source of equity for most cooperatives, and capital credits reflect each member's ownership in the cooperative.

NELPCO pays the capital credit upon a member’s death.

“Depending upon the amount of electricity they use some maybe $25,000 or $30,000 or as little as $600” Pylant said. “It matters on how much electricity each customer consumes.”

Waters cried foul over the resolution.

“Northeast Power put 100 percent of assets to this venture” said Waters, who was past president of NELPCO Board of Directors. “I think it is illegal by doing this.”

Board of Director member Richard Strong asked Waters what was illegal?

“Most of what Mr. Waters has to say is his own opinion,” Strong said. “He never did answer his question. What have we done illegal?”

Waters did not answer Strong’s question.

NELPCO officials started looking into the expansion of broadband services after National Rural Electric Cooperative Association (NRCA) began pushing for the fast internet in rural areas.

NRCA represents more than 900 consumer-owned, nonprofit electric cooperatives throughout America.

Through NELPCO’s interest in broadband, a separate board was formed called Volt Broadband, LLC, according to Waters. Volt Broadband LLC is made up of five members who are also on NELPCO’s board.

On both NELPCO and Volt Broadband LLC are Weldon Fitch, Alton Welch, Charles Hixon, Ronald Pippin and Strong. Pylant and Waters were also  members of Volt Broadband LLC board at one time but resigned.

“We were doing some things we didn’t have (NELPCO) board approval to do,” Pylant said when asked why he was not on Volt Broadband’s board. “I kept telling them we are spending co-op money without their approval and that ultimately led to me getting off of the (Volt Broadband LLC) board. Nobody was thinking they were doing anything wrong, it is just the way different people look at different things.”

According to Pylant and Waters, Volt Broadband LLC board members spent approximately $190,000 in NELPCO money without approval from board members and the board does not keep minutes of their meetings.

“There is no record what they done,” Water said. “They have no assets whatsoever. The money they spend comes out of Northeast Power. They have not come the first time to the board.”

Jeff Churchwell, general manager of NELPCO, said notes were taken at Volt Broadband LLC meetings.

In 2020, Volt Broadband LLC board members participated in a Rural Digital Opportunity Fund (RDOF) reverse auction. 

RDOF uses $20.4 billion to bring high speed fixed broadband service to rural homes and small businesses that lack fast internet ability. RDOF divvies out funds by using two phases of reverse auctions. The funds were provided through the American Rescue Plan Act, which prioritized spending on internet infrastructure for local governments.

A reverse auction is a type of auction in which the traditional roles of buyer and seller are reversed.Thus, there is one buyer and many potential sellers. In a reverse auction, the sellers compete to obtain business from the buyer and prices will typically decrease as the sellers underbid each other.

The Phase I auction, which began on October 29, 2020, and ended on November 25, 2020, awarded support to bring broadband to over five million homes and businesses in census blocks that were entirely unserved by voice and broadband with download speeds of at least 25 Mbps.  Phase II will cover locations in census blocks that are partially served, as well as locations not funded in Phase I. 

There is a three-year window when companies have to complete 40 percent of the construction of internet services. At six years, census blocks are to be 100 percent complete, according to Waters.

If construction is not complete in the allotted time, companies can face penalties of up to $200,000, Waters said.

In the reverse auction, Volt Broadband LLC board members received two census blocks for $1.2 million while Conexon received 33 for $33 million. Volt and Conexon will be in direct competition in the Franklin Parish broadband market.

Conexon, from Kansas City, Missouri, builds fiber for broadband for rural electric cooperatives and has recently launched Conexon Connect which operates and manages fiber networks.

“We only won two census blocks and those were in sparsely populated areas,” Waters said.

According to Pylant, auction bidding was done with little communication from other vendors.

“We didn’t talk to Conexon personally,” Pylant said. “We had no idea who was bidding or when we were bidding in this reverse auction. We were surprised when they had won.”

Waters worries what a worst-case scenario would mean to NELPCO.

“Here’s is how I think it is going to play out,” Waters said. “We’ll start building and Conexon is going to start building. We’ll probably get two or three years down the road, maybe $15 million to $25 million into it, then new technology will come in and end up having to sell or get out of the market. We will have the sale of the assets that we have.”

When asked about the best-case scenario, Pylant answers, “The thing booms and goes.”

Waters suggested let Conexon build the network and “rent” NELPCO’s poles.

“Easy thing for Northeast Power to do is set back and let Connexon build it,” Waters said. “It would cost $12 - $15 million to upgrade poles and lines, so whoever gets contract has two options: go under ground or string it on our pole. String it on Northeast Power, and we would get approximately $1 million profit a year and pay $12 million to $15 million on upgrades.”

Fitch, NELPCO Board of Director president, said northeast Louisiana residents had waited long enough for broadband service and he thinks Conexon will back out of their contract to put broadband in northeast Louisiana.

“I’m going to do everything I can do be honest and open and forthcoming to everybody,” said Fitch. “I think (broadband) is needed for this community and this part of the state. It is my opinion that Conexon is not coming to this state, and you want to wait another year? This puts our people another year waiting with nothing happening.”

NELPCO services electric customers in Franklin, Madison, Richland, Tensas, East Carroll, West Carroll and Morehouse parishes.

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