Alaska Legislature passes bill to expand rural power subsidy program

The Alaska Legislature passed a bill at the end of the session to expand a rural power subsidy program.
Published: May. 31, 2022 at 7:55 PM AKDT
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JUNEAU, Alaska (KTUU) - The Alaska Legislature passed a bill at the end of the legislative session to expand by 50% the amount of power that could be subsidized each month for over 80,000 rural Alaska residents in close to 200 communities.

Gov. Mike Dunleavy will need to decide whether to sign the bill, let it pass into law without his signature, or veto it. His office did not respond to a request for comment on Tuesday about his plans for Senate Bill 243.

In the meantime, the Alaska Energy Authority — which manages the power cost equalization program — is acting like SB 243 will come into effect on July 1. There are expected to be “pretty dramatic increases” to energy costs across rural Alaska this year.

The idea behind the power cost equalization payments is to help reduce high power bills in the Bush, and to match energy infrastructure investments made on the Railbelt that never happened in rural Alaska. The payments come from the $1.1 billion Power Cost Equalization Fund.

Currently, eligible households can have 500 kilowatt-hours of electricity subsidized each month, but SB 243 would expand that to a maximum of 750 kilowatt-hours.

“This is going to make a huge, dramatic difference in rural Alaska,” said Curtis Thayer, executive director of the AEA.

He explained that energy usage differs from community to community across the state, but the expansion would meet some of the current energy demands in rural Alaska. Supporters say it could also allow power usage to grow in these communities in areas like broadband.

The power cost equalization program began in the 1980s, using the 750 kilowatt figure. That was cut down to 500 kilowatt-hours in 2000 when the endowment was created over concerns that the higher amount was unaffordable.

Thayer says the fund is stable enough to pay out the higher payments for the long term, which are estimated to cost an extra $16 million per year. Part of SB 243 will be to direct the fund’s managers to invest more aggressively in a similar way to the Permanent Fund.

The fiscal success of the PCE Fund has meant that it has been used since 2016 to disburse $30 million a year to local governments through the community assistance program. Those payments help pay for services, but they are only made if the fund has earned enough to subsidize rural power bills first. Three years ago, the fund was unable to pay for the community assistance program for the first time.

Nils Andreassen, executive director of the Alaska Municipal League, told the House Finance Committee that those payments could be as much as 80% of a small, rural community’s budget. He said he was between “a rock and hard place” in deciding which payment program to prioritize.

The Senate Finance Committee heard that legislators would need to put an additional $320 million into the PCE Fund to provide certainty for community assistance in the long-term. The Legislature adjourned without doing that.

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