CPUC considers picking up prevailing wage tab for FTTH project

by Steve Blum • , , , ,

Overruns on a fiber to the home build in San Bernardino County offer a glimpse into the cost of a 2014 law that imposed union wage and work rules on broadband infrastructure projects subsidised by the California Advanced Services Fund (CASF). Assembly bill 2272 ended an ongoing dispute over whether CASF-funded projects are subject to California’s so-called prevailing wage law, which generally applies to public works projects.

Historically, the requirement to pay the prevailing wage in any given region for work done with public money has been interpreted by state labor regulators to mean workers have to be paid and projects have to be managed as if a typical union contract was in place, even if no union is involved. In some cases, it can double labor costs.

As it turned out, most CASF grant applicants assumed the worst and factored prevailing wage rules into their project budgets, even before AB 2272 passed. But not everyone got the message. In December of 2014, after AB 2272 had been signed into law, Ultimate Internet Access, Inc. (UIA) applied for CASF grants for two FTTH projects, in Wrightwood and Helendale, in southern San Bernardino County (the Wrightwood project area also includes Los Angeles County).

The company did not know about the prevailing wage rules, or at least did not factor them into its budget. The California Public Utilities Commission reviewed and approved both grants – $1.4 million for the Helendale project – likewise without considering prevailing wage implications. UIA began work in Helendale, and apparently had largely completed it before finding out that it owned an additional $714,000, “mainly in retroactive pay for work already completed, to comply with the prevailing wage requirements”, according to a draft decision now in front of the CPUC.

Presumably, a similar request to cover higher labor costs for the Wrightwood project is also on the way.

As written, the draft decision approves paying an extra $428,000 from CASF for the Helendale project. That represents 60% of the overrun, which is the standard subsidy percentage for this kind of project. That’s a 31% increase in the project’s cost to taxpayers, completely due to California’s prevailing wage law, according to the draft.

The CPUC is scheduled to vote in March on whether or not to pick up the tab.