Katie Espeseth

EPB’s directors Friday approved a $26.4 million loan of electric system revenue to launch fiber to the home, the first direct outlay the utility has made to finance what would be the nation’s largest municipal telecommunications service.

“Today’s decision is a turning point for this project,” said Katie Espeseth, vice president of EPB’s communications division.

Once the loan becomes effective, EPB can finish negotiating contracts for telecom software and hardware, and start hiring telecom employees, Ms. Espeseth said.

The loan will become available for use on July 1, the start of the utility’s new fiscal year, said Chief Financial Officer Greg Eaves.

Around the end of April, EPB received $219.8 million in bond revenue for the smart grid, a fiber-optic network that is currently being built to allow the utility to better control the electric system. Although the smart grid will form the backbone of fiber to the home, EPB officials are earmarking its benefits to the electric system and are accounting for the funds through the electric division.

The smart grid will be completed by the end of summer, and the first residential customers could start receiving telephone, cable and Internet service in early 2009, Ms. Espeseth said.

On Friday, EPB’s board of directors also approved the utility’s fiscal year 2008-09 budget, which starts July 1. Electric system revenue is expected to be $458.1 million, up from $448.6 million in this fiscal year, according to EPB. Next year’s operating income is expected to be $8.5 million, versus $13.3 million in this year’s budget.

The communications division, founded in 2001, has provided telephone and Internet services to some commercial clients, Ms. Espeseth said. The division will have more than $16 million in revenue for this fiscal year, she said, and next year’s projected revenue is $17.5 million.

The Tennessee Cable Telecommunications Association has a court hearing scheduled for next Friday in Davidson County Chancery Court. A judge threw out the cable group’s lawsuit seeking to block fiber to the home, but the industry is appealing the decision.

Hamilton County Chancery Court Judge Frank Brown last week heard motions on a Comcast of the South lawsuit against EPB. No date has been announced for a decision.