Broadband: Members Asked, We Looked into It
Unfortunately, areas within the EnerStar service territory have limited broadband internet access. At the 2023 annual meeting, concerned members inquired about ways EnerStar could provide to meet this need. Based on these discussions, the EnerStar board of directors engaged a firm to develop a professional broadband feasibility study.
The firm chosen was one with an extensive cooperative background. And to be honest, the results were discouraging. While not surprising, one of the most significant findings was that the capital investment for a broadband project would far exceed the investment in our electric plant. Substantial grant funds may be available but will not cover the initial investment or associated operating costs. That “gap” in funding would need to be met with higher broadband rates or subsidization of the project through higher electric rates.
Understanding EnerStar's service territory is helpful in this discussion. EnerStar is Illinois's third most rural cooperative, with just 3.5 accounts per mile of line. That means fewer accounts to pay for a mile of line. Compare that to numbers in town, where there are 50-60 accounts per mile of line. Low density and many poles and wires between accounts mean higher costs. It is simple economics.
When considering a broadband project, we also need to consider that a significant number of our accounts are non-residential. We serve many barns and grain bins; most would not require broadband service. Further complicating the situation is that the more densely populated of our service territory already have varying levels of broadband.
Assumptions within the study were based on other projects' subscriber saturation and price points. Based on the study results, while broadband MAY be feasible under a best-case scenario, the EnerStar board and management team regrettably determined the financial risk is too significant for our small co-op and not economically viable at this time. Other complicating factors for this decision are:
- A project of this magnitude would threaten electric rate stability and jeopardize EnerStar's mission of providing our members with safe, reliable, and affordable electric service. We remain committed to our core business.
- Co-op members, whether they subscribed to broadband service or not, would likely subsidize the debt from the project through their electric rates, especially during the startup years.
- This broadband project would compromise our long-term financial goal for further debt reduction, which EnerStar believes is critical for long-term economic viability.
- Based on our utility experience, rising construction costs will make the project more expensive than forecasted. These projects almost always have unforeseen price increases that someone, most likely our electric ratepayers, will need to absorb.
- There is an additional risk of economic obsolescence, considering technology is constantly changing. New options exist for wireless and satellite-provided broadband service. Additionally, broadband vendors are expanding along main fiber corridors every day.
While this is not what many wanted to hear, EnerStar remains committed to improving the quality of life in the communities we serve. Improving access to broadband internet would provide members with opportunities and enhance their quality of life. So, while the project is not feasible now, we will continue exploring partnerships and other opportunities to make broadband available to rural residents in underserved areas.