Anchorage judge rules energy subsidy program for rural Alaska was not unfunded

The governor’s administration will not appeal the ruling
 Alaska State Capitol in Juneau, Alaska (KTUU)
Alaska State Capitol in Juneau, Alaska (KTUU) (KTUU)
Published: Aug. 11, 2021 at 4:51 PM AKDT|Updated: Aug. 12, 2021 at 5:10 PM AKDT
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ANCHORAGE, Alaska (KTUU) - An Anchorage Superior Court judge has sided with plaintiffs and ruled that a fund that subsidizes power bills in rural Alaska was not defunded when the Alaska Legislature failed to pass a procedural budget vote this year.

During each budget cycle, certain state accounts are subject to being “swept” or emptied into the state’s Constitutional Budget Reserve unless the Alaska Legislature votes to prevent that, known as the “reverse sweep.” This year, the Power Cost Equalization Endowment Fund was initially thought to be at risk because the Legislature failed to pass the reverse sweep by the end of the last fiscal year.

The Alaska Federation of Natives and several local governments and electric cooperatives sued Gov. Mike Dunleavy’s administration in July over the issue, challenging the idea that the Power Cost Equalization Endowment Fund should be subject to the budget sweep at all.

In her order released Wednesday, Judge Josie Garton ruled that the Power Cost Equalization Endowment Fund “is not subject to the sweep provision.” The Legislature established the PCE endowment fund as a separate fund outside of the state’s general fund, the order states.

The state is prohibited from sweeping the PCE into the Constitutional Budget Reserve, Garton concluded.

“Very nice to know that the court sided in our favor and that the PCE endowment won’t be swept every year,” Bill Stamm, CEO of Alaska Village Electric Cooperative said on Thursday.

With the $1 billion endowment fund preserved, subsidies can go out to utility companies to help lower the cost of electricity for approximately 200 rural villages and communities and about 84,000 Alaskans that participate in the program.

Stamm said the power cost equalization program is “very vital” for rural Alaska “to keep water and sewer facilities running and keep people able to stay in their homes out there.”

“Everything in rural Alaska is more expensive,” Stamm said. “Housing, food, heating oil, transportation, and electricity is a component of all that.”

Power cost equalization began in the mid-1980s as an annual appropriation, which was turned into the endowment in 2000. Former Alaska Attorney General Kevin Clarkson wrote to legislators in 2019 arguing that the endowment fund was subject to the sweep.

Some legislative candidates last year suggested turning the endowment fund into an annual appropriation, an idea that worried rural legislators who felt that would be an initial step toward ending the power subsidies.

Dunleavy has since pushed a plan to put the PCE into the constitutionally protected part of the state’s Permanent Fund and protect in in the Alaska Constitution. The governor’s office said it welcomed the lawsuit from AFN when it was filed.

“I have authorized my administration to pursue an expedited judgement on the future of the Power Cost Equalization Endowment Fund,” Dunleavy said in a press release at the time. “This issue is too important to delay any further.”

A request for comment from the Alaska Department of Law was not returned by the time of publication.

On Thursday, the governor’s office said in a press release that his administration will not appeal the decision. According to the release, the case “sought clarity” as to whether the endowment fund was subject to the annual reverse sweep.

“The Superior Court also ruled that payments for the PCE program, which were authorized by the legislature and signed into law by Governor Dunleavy, can go out immediately to the utilities that provide electricity to the 90,000 residents in rural Alaska,” the release states.

Dunleavy said in the release that the ruling did not address an “important political challenge.”

“At any point, the PCE fund can be raided by the legislature with a simple majority vote,” he said in the release. “That is why my proposed constitutional amendment that enshrines and protects the PCE endowment must pass this year.”

Editor’s note: This article has been updated with additional information.

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