Traverse City energy customers may be liable for ballooning broadband costs

A federal loan program meant to lower rural utility rates would have the opposite effect on northern Michigan city

Residents of Traverse City may see their energy bills increase to cover the costs of a public broadband system created by the municipality in partnership with its energy provider, Traverse City Light & Power.

The original $4.2 million project, which city leaders touted as lowering internet costs and spreading access, has ballooned to $28.2 million, with subscription rates comparable to what was already available in the private sector.

Michigan Capitol Confidential reported in 2019 that the city-owned energy company was pursuing a loan through the United States Department of Agriculture. The USDA loan program is meant to “help program recipients in rural areas lower their energy bills and fund energy efficiency measures.”

The $14.7 million loan is being used, however, as part of a broadband expansion project, according to The Ticker.

The Ticker’s story notes that the municipal utility’s plans for financial investment in public broadband include “a $14.7 million USDA loan.”

During a recent board meeting, Karla Myers-Beman, chief financial officert of Traverse City Light & Power, said she is confident that more people will sign up than what is currently reported. If there are not enough customers to recoup the money invested, Myers-Beman says, electricity rates would go up.

In other words, the USDA loan, which is designed to lower utility rates for rural residents is not being used for that purpose. In fact, energy rates may increase to cover the broadband project’s financial obligations, which will need to be repaid, regardless of how many residents sign up for the service.

Traverse City Light & Power did not respond to a request for comment.

Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.