PUD accused of driving down Internet prices

EPHRATA - A federal lawsuit filed in June against Grant County PUD by three Internet service providers was dismissed earlier this month.

The lawsuit accused the utility of violating a federal racketeering law by using PUD money in a "scheme" to pay for Internet service.

State law doesn't allow public utility districts to provide retail Internet service.

The lawsuit states it was wrong for Grant PUD to give money to another business to do so.

"It's just because they're a municipal corporation they are given an exemption from criminal actions," said the providers' Moses Lake attorney Luke McKean about Grant PUD. "That's why I had to agree with a dismissal."

Providers Craig Jungers, Ed Baxter and Alan Cain alleged the utility drove the retail price of Internet service down or below cost, McKean said.

The lawsuit claims that in return for Grant PUD allegedly paying all operating costs and 10 percent profit, Benton REA and its affiliate, PowerTelNet, reportedly agreed to sell their Internet access fees at an "artificially" low price named by the PUD.

"I think their entire intent was to drive everyone out of business," Jungers said.

Benton REA declined to comment.

"We really never thought there was standing for this lawsuit in the first place," Grant PUD Commissioner Tom Flint said. "The court just reaffirmed what we thought all along. It just didn't seem to have the teeth in it that I've seen other lawsuits had that were a lot more challenging."

But McKean said the lawsuit continues against Benton REA and Grant PUD's former managers, Don Godard, Harry Williams and Coe Hutchison.

A state auditor's draft report from 2003 found a contract between Benton REA and Grant PUD was allegedly intended to set up Benton REA as a retail Internet provider, according to the lawsuit.

The agreement that was used was reportedly an apparently a "behind-the scenes" agreement, according to an opinion letter written by Seattle attorney James Austin, who was hired by the PUD to conduct an independent investigation.

The contract allegedly went beyond the PUD's authority under state law and used public money to establish a non-profit business, PowerTelNet, the suit claims.

After a state auditor's draft report was released in 2003, Grant PUD commissioners demoted and eventually fired Williams and Hutchison.

Godard, then the PUD's general manager, later resigned.