Utilities want tighter run rural subsidy

Posted: Monday, January 13, 2003

ANCHORAGE (AP) -- A statewide group of utilities wants state regulators to take a hard look at an electric-power subsidy for rural Alaskans and the rural power producers that receive it.

The group, which has members that benefit from the Power Cost Equalization program, has asked the Regulatory Commission of Alaska to demand lower administrative expenses and more electricity for every dollar spent by the program.

Eric Yould, executive director of ARECA, Alaska's Electric Utility, said the annual subsidy is crucial for Bush communities and should continue. In recent years the program has averaged about $17 million. But because Power Cost Equalization is frequently questioned by legislators, it should be made as bulletproof as possible, he said.

''If the program is abused, it's going to go away. That's what we're trying to stop,'' Yould told the Anchorage Daily News. ''We can't afford to have people taking advantage of the system.''

Power Cost Equalization began in 1984 as the state was spending millions of dollars on hydroelectric dams and electric interties that served mostly urban areas. Yould said the subsidy ensures that rural Alaskans pay rates comparable to those of Railbelt residents.

After years of wrangling over appropriations, a blue-ribbon panel in 2000 suggested the Alaska Legislature create a $235 million endowment whose earnings would fund the program forever. The Legislature eventually agreed but put only $181 million into the endowment, according to the Alaska Energy Authority.

Because of the fund's size and the stock market's decline, earnings have fallen short of the $15.7 million annual goal, Yould said, sparking new legislative battles over funding the shortfall. Also, the endowment has declined in value to $153 million, according to the Department of Revenue.

But even with the subsidy, electricity prices in the Bush are as much as five times higher than in Anchorage, according to the RCA. Rural power is expensive because utilities use diesel fuel to run their generators, while Anchorage gets its electricity from cheap natural gas and hydroelectric dams.

But ARECA, whose members include rural and urban utilities, believes it's reasonable to ask rural power producers to wring more electricity out of every gallon of diesel and to ensure that distribution lines aren't losing too much power. Technology has improved, Yould said, and Power Cost Equalization utilities should be required to upgrade.

ARECA also wants state regulators to require on-site financial audits. Another suggestion is to let rural utilities write off fewer unpaid bills.

The ARECA resolution, adopted unanimously in December, also suggests regulators draw the line on fuel costs.

Utilities that fail to meet the stricter standards would have to absorb additional costs, raising their customers' bills.

But the best reason for the RCA to revise its standards is to protect the subsidy that benefits 189 communities, Kohler said. ''We want the RCA to stand up and say, 'No, there is no abuse going on because we've made sure it isn't happening.' ''

The commission is expected to consider the ARECA proposal at its Jan. 29 meeting.

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