Rural Alaska awaits court decision on energy subsidy with $1B on the line

Generators in a room
Generators at the Bethel power plant in 2016. (Courtesy of Lenny Welch/AVEC)

Alaska lawmakers will meet in special session — currently planned for Aug. 2. — to develop a budget with pots of state money, including a $1 billion endowment fund built up over decades for the Power Cost Equalization program, which subsidizes the cost of electricity in rural Alaska.

Urban Alaskans received state support in the form of the large-scale energy projects such as Dam Pool, Bradley Lake and the Alaska Intertie. Rural Alaskans received comparably few benefits from such projects — and the endowment was a cost-effective alternative to provide rate relief to rural residents.

Gov. Mike Dunleavy is the first governor to allow that endowment to be “swept” into the general funds available for spending by the Legislature. 

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Alaska Village Electric Cooperative President and CEO Bill Stamm said without the endowment, the cost of electric power for consumers in much of rural Alaska, including the Yukon-Kuskokwim Delta, will increase by around 100% or more.

“It’ll be a little bit different for each community and each user,” he said. “AVEC serves, I think, 23 communities in the Y-K Delta, and the average cost for electricity for residential service with PCE is about half of what it would be without it. There are parts of the state where fuel costs are higher, and the loss of PCE would have an even more dramatic effect.”

Reversing the sweep allowed by the governor would take a three-quarters vote of both the House and the Senate, unless the courts rule in favor of the Alaska Federation of Natives, AVEC and 16 other organizations who have filed a suit challenging the governor’s action.

RELATED: AFN, others sue Dunleavy over cuts to rural energy program

They claim Dunleavy overstepped his authority when he allowed the endowment fund to be swept into the pot of money available to use for general state spending.

“At the end of every fiscal year, basically appropriated funds that have not been spent get swept back into the Constitutional Budget Reserve. But we feel that the PCE Endowment is a separate fund that has already been appropriated, and that its earnings is what can be considered for how they are spent,” said Stamm.

If the court rules in favor of the plaintiffs, the endowment fund will stand. But lawmakers can still vote to eliminate the endowment or use the money it generates for other programs than Power Cost Equalization. 

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