Power bills in rural Alaska will go up if Legislature doesn’t act to reinstate PCE fund
By Diana Haecker
Rural Alaskan energy consumers are most likely paying the price for a power struggle in Juneau that resulted in the Power Cost Equalization endowment fund not being “reverse swept” and thus leaving the account empty as of this week.
Power Cost Equalization, PCE for short, is a state program that aims to level the playing field in energy costs as urban and road system energy consumers pay less money per kilowatt hour than those living in rural Alaska off the road system. A distinct fund was created to offset high energy costs in rural Alaska and this PCE endowment is worth more than $1 billion. The PCE is applied to the first 500 kwh on a resident’s electric bill. A residential electricity bill in Nome, for example, gets a $37 PCE credit per month (for a consumption of 500 kwh). The PCE percentage is even greater in outlying communities that are served by the Alaska Village Electric Cooperative. According to a rate sheet from AVEC, the PCE generally cuts residents’ power bills in half. Teller residents, for example, pay a rate of $0.24 per kwh with PCE (for the first 500 kwh) and the rate would jump to $0.51 without PCE.
What caused the unavailability of PCE?
The short answer: Several Republican House and Senate legislators voted ‘no’ on the Constitutional Budget Reserve provisions of the budget. With that the legislature failed to create a three-quarter supermajority required for a so-called reverse sweep that deposits funds into subfunds, including the PCE account, in which the resided prior to June 30 when the sweep takes place. The sweep is a constitutional requirement dealing with the Constitutional Budget Reserve Fund, CBR for short, when the state basically dips into the budget reserve fund to loan money for state services until the loan is paid back. All money is swept on June 30 into the CBR and then, usually, reverse swept the following day into its original accounts. The reverse sweep is not constitutionally enshrined but a policy decision.
The budget that was passed in the House on June 15, included $32,355,000 from the power cost equalization endowment fund to the Dept. of Commerce, Community and Economic Development, Alaska Energy Authority, power cost equalization allocation for fiscal year ending in June 30, 2022. Simplified, the AEA then disburses the funds to rural utilities like Nome Joint Utilities and AVEC that then pass on the PCE savings and reflect them in monthly billing.
It also included $12,394,800 from the power cost equalization endowment fund into the community assistance fund. According to Nome City Manager Glenn Steckman, the City of Nome receives a PCE amount of $75,000 annually, as does NJUS, combined a PCE contribution of $150,000 per year. This money also hangs in the balance as the PCE fund sits empty at the moment.
This is not the first time that the PCE account has not been reverse swept. In Dunleavy’s first year in office, in 2019, the same scenario occurred, but the legislature initiated the reverse sweep and made it retroactive so that the month that the PCE was not applied was reimbursed to the consumers. Some utilities floated the cost, but others, like NJUS did not. AVEC’s CEO Bill Stamm said that in 2019, the issue was resolved before the bills went out for the next month. However, this year’s PCE upheaval causes much chagrin for all involved. Nome Joint Utilities’ assistant manager/utility engineer Ken Morton said the NJUS board will most likely address the issue in its upcoming board meeting. NJUS is a member of the Alaska Power Association, the trade organization for the state’s utilities. APA’s deputy director Michael Rovito said in an interview with the Nome Nugget that the group is advocating to reverse the sweep and impressed on the legislators of the immense financial impact the lack of PCE has on rural energy consumers. “We are urging the legislature to fix this,” he said. “About 82,000 Alaskans in 193 communities depend on the PCE.”
He said that before engaging in any larger conversations about balancing the budget, the PCE needs to be reverse swept. “It’s a lifeline program for rural Alaska,” he said.
Bill Stamm, CEO with the Alaska Village Electric Cooperative echoes the sentiment. “The PCE, in general terms, cuts the power bill of our customers in half,” Stamm said. He explained that the cooperative is in a difficult position to decide whether to float the costs in applying the PCE to the next billing cycles and gamble on the reinstatement and retroactive payment if the fund is restored and run the risk that it won’t be restored. Or should AVEC to go ahead and bill customers the full rate, without PCE. Software in the billing department needs to be adjusted and it can’t happen at short notice. He said floating the cost is going to be part of the discussion the AVEC board will have to have in a special session sometime next week. AVEC serves 59 villages with about 8,000 customers, including Brevig Mission, Elim, Gambell, Savoonga, Shaktoolik, Shishmaref, Stebbins, St. Michael, Teller and Wales.
In addition, the Governor has vetoed certain line items of the budget, including the entire appropriation for the PFD. “While most lawmakers voted to pass a budget that would have sent an $1,100 check to every man, woman, and child in our state, a minority in the Legislature blocked the vote necessary to fully fund the budget, reducing the PFD to $525. The governor went a step further by zeroing out the dividend,” said House Speaker Louise Stutes (R-Kodiak).
Legislators have recessed but a special session is called for August 2 to address the budget. In the meantime, the legislative leaders formed a bicameral, bipartisan Fiscal Policy Working Group, which met last week for an organizational meeting. The group consists of Senator Lyman Hoffman, D-Bethel (Senate Majority); Senator Shelley Hughes, R-Palmer (Senate Majority); Senator Scott Kawasaki, D-Fairbanks (Senate Minority); Senator Jesse Kiehl, D-Juneau (Senate Minority); Representative Jonathan Kreiss-Tomkins, D-Sitka (House Majority); Representative Calvin Schrage, I-Anchorage (House Majority); Representative Ben Carpenter, R-Nikiski (House Minority); Representative Kevin McCabe, R-Mat-Su Valley (House Minority).
The group’s recommendations will provide a much-needed framework to deliver a durable plan forward, said Senate President Peter Micciche, R-Soldotna.