JUNEAU -- Subsidies paid for the high cost of power in some rural communities would be reduced under a bill approved in the Senate on Wednesday.
The bill changes the formula used to assist about 77,600 rural energy customers, many of whom still rely on expensive diesel generators for their electricity.
About $2.9 million in annual funding from the state's Power Cost Equalization program could be eliminated with the formula change, passed on a party-line 14-6 vote in the GOP-controlled Senate.
Democrat Gov. Tony Knowles is opposed to the measure that alters the state's Power Cost Equalization program, said Knowles' spokesman Bob King.
''We have serious concerns regarding the PCE bill passed out of the Senate. It raises everybody's bill,'' King said.
The state began subsidizing rural power in Alaska in 1985 due to the high cost of electricity there. Rural customers can pay as much as five times that of residents in Anchorage, Fairbanks or Juneau.
The Legislature created a $187 million endowment in 2000 to provide a steady stream of money for the program. The endowment was intended to help to spawn about $15.7 million for rural subsidies annually.
But the program hasn't always worked as advertised -- the endowment lost $6 million last year in earnings-- and the state has contributed general fund money to help make up the difference.
This year, House Republicans approved a budget that uses $12.8 million from the fund and makes up the difference in state funds.
That budget is pending in the Senate, where the bill passed on Wednesday would eliminate the state contribution.
Sen. Dave Donley, R-Anchorage, proposed the bill on behalf of the Senate Finance Committee that he co-chairs. He said the measure is a more rational approach to subsidizing power to rural areas.
The current program subsidizes a portion of monthly electric costs up to the first 500 kilowatt hours of use. It pays 95 percent of electricity costs that exceed a 12-cent per kilowatt hour ''floor'' created under the program.
The idea is to reduce the cost of electricity to rural consumers in more than 180 communities to near the average 9-cent per kilowatt hour cost in Anchorage, Fairbanks and Juneau.
But Donley said that's unrealistic since the cost of electricity is more expensive in areas outside Alaska's three largest cities. The bill would raise this so-called ''floor'' to 16.7 cents per kilowatt hour to mirror the cost to residential customers in such areas where subsidies aren't offered.
The effect would be to increase the bill for rural residents who now receive subsidized power, said Eric Yould, executive director of the Alaska Rural Electric Cooperative Association, which is opposed to the bill.
The Senate plan also limits the subsidy to include 450 kilowatt hours in the winter months and 350 kilowatt hours in the summer.
''The amount of disposable income in rural Alaska is about half that of urban Alaska, so they are really getting the double whammy by this particular bill,'' Yould said.
The bill is Senate Bill 185.
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