Alaska Legislature OKs increase to rural power subsidy

people in a meeting room
Rep. Dan Ortiz, I-Ketchikan, awaits a vote within the Alaska House of Representatives on Sunday, May 15, 2022 in Juneau, Alaska. (James Brooks/Alaska Beacon)

Residents of 194 rural Alaska cities and villages will get extra of their month-to-month energy invoice sponsored by the state if Gov. Mike Dunleavy indicators laws permitted Monday by the Alaska House of Representatives. 

On Monday, the state House voted 38-2 to extend the utmost subsidy allowed underneath the state’s Power Cost Equalization program. The invoice handed the Senate on May 3. 

With the governor’s approval, the utmost quantity of sponsored residential energy will enhance from 500 kilowatt-hours to 750 kilowatt-hours monthly.

In 2020, the typical American home consumed 893 kilowatt-hours monthly, in line with the U.S. Energy Information Administration. 

In PCE-eligible communities, electrical firms scale back the price of energy for houses, then apply to the Alaska Energy Authority for credit that convey the general value of energy nearer to the typical of electrical energy in Juneau, Anchorage and Fairbanks.

The dimension of the subsidy has pressured rural residents to drastically preserve energy or threat a significant hike of their electrical invoice in the event that they go over the sponsored quantity.

“You go to the communities at Christmas and you wonder why there’s not that many lights on. It’s not because they don’t believe in Christmas or don’t have holiday spirit,” stated Sen. Bert Stedman, R-Sitka.

Return to unique compromise

When created in 1984, PCE was supposed to function a part of a grand compromise: Southeast Alaska would get state-funded dams, Southcentral Alaska would get sponsored pure fuel and rural Alaska would get PCE.

The program initially sponsored as much as 750 kilowatt-hours monthly, however the Alaska Legislature decreased that determine in 2000 due to value considerations. 

“We just want to get back to where we were on the program that was negotiated back in 1984,” stated Sen. Lyman Hoffman, D-Bethel.

After the 2000 lower, the Legislature created an endowment to fund this system in perpetuity, and that endowment has grown to $1.1 billion. 

The PCE extension would enhance spending from the endowment by as a lot as $15.6 million per yr, however the endowment’s funding earnings are giant sufficient to cowl the fee, in line with estimates offered by the Legislature.

Squeeze on neighborhood help

The downside is that different packages may endure. State legislation says that cash not used for PCE — as much as 5% of the endowment’s worth yearly — could also be used on the state’s neighborhood help program, which offers general-purpose grants for native governments. 

Expanding PCE means much less cash out there for that program and others, together with a renewable power grant program that additionally depends on additional PCE earnings.

“I feel a little bit like I’m between a rock and a hard place on this one,” Nils Andreassen, director of the Alaska Municipal League, informed the House Finance Committee earlier this month.

Andreassen represents cities that depend on PCE, native governments that depend on neighborhood help and municipalities that want each.

Members of the Senate Finance Committee had been informed in April that an extra $320 million deposit into the PCE endowment could be wanted to remove the danger to neighborhood help packages if PCE subsidies had been raised.

“If we don’t make those endowments, then this would also take away the earnings for those additional programs,” stated Sen. David Wilson, R-Wasilla.

Neither the House nor the Senate proposed an extra deposit into the PCE fund to handle the issue.

More aggressive investing

The invoice does comprise a provision that permits PCE fund managers to take a position the fund extra aggressively, which may enhance funding earnings and over time enhance the sum of money out there to spend. It would additionally enhance the danger of losses in any given yr. 

Previously, managers had been informed to focus on 4% returns; they are going to now be capable of pursue all “prudent” investments, much like the method employed by the Alaska Permanent Fund.

Many legislators, together with Sen. Donny Olson, D-Golovin, stated this system’s enlargement will assist rural residents as they anticipate considerably increased residence heating and gasoline prices. 

“People can no longer live in rural Alaska where they were born and raised,” he stated.

“Those people that can’t afford to live in rural Alaska … are going to be forced to move, and where are they going to move? They’re going to move to the cities. So if you think the homeless population in the metropolitan areas is bad now, you ought to wait,” he stated.

Alaska Beacon is a part of States Newsroom, a community of stories bureaus supported by grants and a coalition of donors as a 501c(3) public charity. Alaska Beacon maintains editorial independence. Contact Editor Andrew Kitchenman for questions: Follow Alaska Beacon on Facebook and Twitter.

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