State subsidy will provide more help with high-cost rural electric bills

Up to 82,000 rural Alaskans will see lower electric bills because of legislation signed into law last month.

Senate Bill 243, passed by the Legislature this spring, raises the maximum subsidy under the state’s Power Cost Equalization program, which reduces the cost of electricity in rural Alaska. Gov. Mike Dunleavy signed the measure into law on July 14.

The bill, authored by Bethel Sen. Lyman Hoffman, increases the maximum available subsidy from 500 kilowatt-hours per month to 750 kilowatt-hours per month. The average Alaska home consumes 552 kilowatt-hours per month, according to figures from the U.S. Energy Information Administration.

Alaska’s average home electricity rate is 22.57 cents per kilowatt-hour, the third-highest rate in the country, according to the EIA, but prices in rural Alaska can be much higher.

In the Kuskokwim River town of McGrath, for example, a residential customer pays almost 58 cents per kilowatt-hour, according to figures from the Regulatory Commission of Alaska. With the PCE subsidy, that falls to 37.21 cents — still above average for the state, but almost 20 cents lower than the unsubsidized cost.

The subsidy covers homes, apartments and community facilities.

Residential customers in Wrangell, which is not covered by the rural subsidy program, generally pay between 12 cents and 14.5 cents per kilowatt-hour.

As created in 1984, PCE was intended to serve as part of a grand compromise across the state: Coastal communities, including Wrangell, received hundreds of millions of dollars for hydroelectric projects; Southcentral Alaska received cheap natural gas; and rural Alaska received PCE.

The program originally subsidized up to 750 kilowatt-hours per month, but legislators reduced that to 500 in 2000 because of the cost of the program.

Lawmakers subsequently created an endowment fund to pay for PCE in perpetuity, and cost estimates indicate that the endowment’s earnings are sufficient to pay for the 750 kilowatt-hour program.

The endowment also funds community assistance grants and renewable-energy project grants. Legislators were warned this spring that increased spending on PCE could mean insufficient money for those other programs.

Members of the Senate Finance Committee were told that an additional $320 million deposit into the PCE endowment was necessary to avoid the risk. No deposit was made.

The AlaskaBeacon.com is a donor-funded independent news organization in Alaska.