PUD to settle with Benton REA
Utility will get $450,000 over improper payments
EPHRATA — Benton Rural Electric Association will pay the Grant County Public Utility District $450,000 for allegedly accepting improper payments for telecommunications related services as part of a finalized settlement agreement the district's board of commissioners approved yesterday.
This joint agreement ends all future litigation between the two major partners in a relationship that cost the PUD $1.2 million in paid illegal contracts for Internet, telephone and video services.
The PUD filed suit against Benton REA in 2004 in an effort to recover dollars paid to contracts to provide Internet and telephone service over the PUD's Zipp fiber network. According to Benton REA General Manager Chuck Dawsey, Benton REA was approached by then-PUD General Manager Don Godard about providing those services in 2001.
Included in the lawsuit were accusations that Benton REA and its subsidiary, PowerTelnet, conspired together to violate federal racketeering charges.
The contracts were then declared illegal by independent investigator James Austin and a state auditor's report in 2003.
PUD Attorney Ray Foianini later wrote in court papers filed with the Grant County Superior Court that, "Benton REA knew, or should have known, that the District did not have legal authority to make payments to Benton REA for that which applicable law did not authorize."
State law says that the PUD has authority to sell telecommunications service only to service providers, before being sold to the public to prevent the creation of an unfair environment for competing local Internet service providers. Investigators and auditors said that the PUD paid $15,000 per month plus hourly rates to Benton REA to help it sell video and telephone services over the PUD's fiber network.
According to a joint news release yesterday from Benton REA and the PUD, neither party admits to any wrong doing in the settlement and both parties will save money on continued litigation which would have cost their ratepayers more money.
"Both parties support the settlement and are disappointed that the issue resulted in litigation, in which there are no winners," the statement read.
PUD Commissioner Randy Allred, who voted in favor of the settlement, said after the commission meeting that avoiding litigation and attorney's fees factored into his decision to settle out of court.
PUD Commissioner Bill Bjork, who didn't vote as commission president, said yesterday that he would have voted in favor of the agreement given an opportunity. He predicted that a victory in court for the PUD would have still left them with attorney's expenses that would have put them in the same position as yesterday's settlement.
Critics, however, say that going to court is the only way there will never be cross examination or statements on the record that may be challenged that would ultimately lead to more accountability.
"I think it's more important to get to the bottom of this than it is to get the money," said Craig Jungers, owner of Network Essentials, an Internet service provider based in Moses Lake. "Because I think we would have gotten the money anyway."
PUD Commissioner Greg Hansen voted against the settlement again, as he did when he attended the court ordered mediation with Benton REA in Yakima on June 21. That vote was not legally binding because it didn't occur in an open meeting setting.
Tuesday's vote, along with approval by the Washington State Attorney General, Washington State Auditor and Benton REA's board of trustees will now end the lawsuits.
"I voted against the agreement for two reasons," Hansen said after the board of commissioner's meeting. "One, there was not enough money. The ratepayers deserve more than about 37 percent of their money back. Second, ratepayers deserved to know the facts of the case that would have been brought out during a trial where blame would have been placed accordingly."