Alaska Gov. Mike Dunleavy signs bill increasing rural power subsidy

July 21, 2022

Up to 82,000 rural Alaskans will see lower power bills because of legislation signed this month by Gov. Mike Dunleavy.

By James Brooks

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

“I am pleased to sign HB 243 to assist those who live in rural Alaska and face extremely high utility rates,” the governor said in a prepared statement. “Raising the maximum kilowatt hour available for PCE relief will help lessen the burden on our rural residents.”

The bill, authored by Sen. Lyman Hoffman, D-Bethel, increases the maximum available PCE 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 Energy Information Administration.

Alaska’s average home electrical price 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.

As created in 1984, PCE was intended to serve as part of a grand compromise across the state: Coastal communities received money for hydroelectric projects, Southcentral Alaska received subsidized 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 was nearly drained twice. In 2019, the Dunleavy administration reclassified it and the Legislature initially failed to act to protect it, though lawmakers later reversed course. Last year, the Legislature again failed to act, but a state court ruling blocked that draining, and the endowment continues to operate.

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

“I think there’s more to do,” said Nils Andreassen, executive director of the Alaska Municipal League.

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.

“It’s still our hope that can be accomplished in this coming fiscal year,” Andreassen said.

Shannon Mason, the governor’s deputy press secretary, said the Dunleavy administration “will work closely with communities, stakeholders, and the 33rd Legislature should further statutory or budgetary action become necessary.”

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