House proposes larger endowment for rural power rates

Posted: Sunday, April 16, 2000

JUNEAU (AP) -- An endowment fund proposed for lowering electric rates in rural communities may get a huge infusion of state cash under a bill changed in the House on Friday.

The House adopted for amendment purposes a version of the bill that would appropriate $100 million from the Constitutional Budget Reserve to endow the Power Cost Equalization program. Added to money earned from the sale of four state-owned hydroelectric projects and other sources, the PCE endowment fund would contain about $200 million under the plan.

That's projected to be enough to earn $15.7 million annually, the estimated cost of subsidizing electric rates to about 78,000 Alaskans in 193 villages.

Finding a stable source of funding to lower rural power rates has been a top issue for rural legislators. Without subsidies, some villagers pay at least five times the electric rates of communities whose utilities have access to cheap power from hydroelectric projects, natural gas or coal. Rural utilities use generators that burn expensive diesel fuel.

PCE lowers electric rates to roughly double the rate paid in Alaska's cities. The discount applies only to the first 500 kilowatts of power in Bush homes. That's less than the statewide average consumption in homes of 700 kilowatt hours.

Gov. Tony Knowles on Tuesday announced a plan to underwrite the PCE program with a $120 million endowment fund. Both plans count on $73 million from the sale of hydroelectric projects in the Four Dam Pool, serving Ketchikan, Wrangell, Petersburg, Kodiak, Valdez and Glennallen, to utilities in those communities. A reclaimed loan, the projects' insurance fund and debt payments from the projects were to provide the rest of the $120 million.

But Rep. Alan Austerman said the governor's plan provided just ''half a loaf'' because interest earnings were projected at $7 million to $8 million. To pay for the rest of PCE, Knowles called for spending up to $9 million from earnings of the Alaska Industrial Development and Export Authority, a state agency that encourages economic growth and diversification through loans and assistance to businesses.

Austerman and five other Finance Committee members amended the bill to dip into the Constitutional Budget Reserve instead of using AIDEA earnings. When the bill reached the House floor, members adopted their version for consideration.

Austerman said finding additional money for rural power rates would continue to be an annual political fight under the governor's plan if legislators had to debate spending the AIDEA dividend every year.

''Creating this endowment fund puts it off the table,'' Austerman said.

The Constitutional Budget Reserve contains $2.6 billion and was just supplemented with a $416 million tax settlement paid to the state by BP Exploration (Alaska).

''It's not like we don't have the money to do it,'' Austerman said.

But Rep. Gene Therriault, R-North Pole, said PCE funding will continue to be an annual discussion if the number of customers in rural Alaska grows or the price of generating electricity in rural Alaska goes up because of high diesel prices. That will mean more than $15.7 million will be needed.

Rep. Scott Ogan, R-Palmer, questioned how majority legislators could support the measure after promising to lower state spending by $30 million this year as the last installment of a five-year budget reduction plan.

''I'm just kind of curious what kind of spin we're going to put on this,'' Ogan said.

But Rep. Bill Hudson, R-Juneau, said legislators are merely shifting the $100 million from one endowment fund to another.

''We're not really spending it,'' Hudson said. ''We don't have to put a spin on it.''

A proposed amendment to revert back to the original version of the bill was rejected 34-6. The measure will need bipartisan support to win approval in the House. Spending money from the Constitutional Budget Reserve requires a three-fourths majority, or 30 votes.

The bill, along with the sale of the hydroelectric projects, is scheduled for a final vote on the House floor Saturday.

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