Proposed legislation eliminates politics from PCE

by Maisie Thomas

The Alaska State Legislature is considering a bill that would make Power Cost Equalization Fund payments automatic, as well as a bill that would require energy audits for public buildings receiving PCE funds. 

Power Cost Equalization (PCE) is a subsidy that provides monthly energy credits for rural households and communities, paid from a $1 billion endowment fund that Nome Representative Neal Foster, a Democrat, said is a “popular target” for urban legislators. Foster introduced House Bill 56, which would eliminate the need for PCE funds to be appropriated by the legislature.

Currently, it requires a supermajority (a 75 percent vote) to preserve the PCE in the budget each year. Should the bill pass, the PCE fund would work similarly to payments made from the public education fund and the community revenue sharing fund, neither of which require appropriation. “This takes politics out of it,” Foster said.

Nome Joint Utilities (NJUS) Manager and Mayor John Handeland said that each year the PCE is a “fight, or at least a bargaining chip” in the legislature. NJUS does not often directly lobby for the PCE (particularly since in-person lobbying is currently impossible due to COVID-19), but it is a priority that Nome’s lobbyist follows closely. In Nome, the credit amounts to approximately $800 per household per year. The City of Nome also receives PCE funds for services such as streetlights.

Handeland explained that the PCE was created for rural Alaska in response to hydroelectric projects that reduced the cost of energy in urban areas of the state. Rural legislators, he said, supported funding projects in urban areas with the guarantee that the PCE would reduce the cost of energy in remote regions. “We should not have to fight for what is rightfully ours every year,” Handeland said.

Meera Kohler, president and CEO of Alaska Village Electric Cooperative, said that while the bill itself does not directly impact AVEC, the lack of the PCE would have an enormous impact on both AVEC and its customers. 

If the PCE program is eliminated, AVEC’s rates would remain the same; however, customers would be responsible for the entire electric bill. “This would cause financial hardship,” Kohler said, particularly for community facilities, some of whose rates would double or even triple. This, in turn, would “absolutely” impact AVEC, because it is likely that customers would be unable to pay their utility bills. 

According to Kohler, PCE credits account for roughly 20 percent of AVEC’s total revenue. The cooperative includes 58 villages (including several in the Bering Strait region) and receives nearly 40 percent of the PCE funds the state distributes each year. Although AVEC’s total revenue technically should not change without the PCE, it is likely that it would decrease as customers failed to pay their substantially increased energy bills. “The PCE is our number one priority because it is so important to our customers,” Kohler explained. AVEC customers, she said, would be “economically crippled” if the PCE program was no longer funded. 

To protect the program and rural Alaskans, Kohler explained that she is always “front and center” during discussions about the PCE. She follows statute changes particularly closely, because any changes could have negative consequences for those who benefit from the PCE. Kohler added that because it is such a complicated topic, she gives presentations to organizations and new legislators to help them understand why the program is so important. “I’m very involved with all things PCE,” she said, calculating that about ten percent of her time each year is devoted to the program. However, Kohler sees this as a worthwhile investment, adding that “the PCE is so important that I would never want to minimize my attention to it.”

Should the program be protected by HB 56, some of this time and energy would no longer be needed and rural legislators could focus their attention on other issues their constituents face. 

Energy Audits for public buildings receiving PCE

Another piece of legislation would require energy audits of community buildings receiving PCE funds. Introduced by Senator Tom Begich (D-Anchorage), Senate Bill 17 would, among other things, mandate that the Alaska Energy Authority conduct energy audits every seven years and retrofit public facilities in order to promote energy saving and reduce energy costs to the State of Alaska. 

“It is the intent of the legislature that those entities be able to capitalize on the abundant cost-saving potential afforded by energy upgrades, while avoiding an upfront cost to the state, that will ultimately result in reduced costs to building owners, the state, and the power cost equalization program…,” the bill reads. 

“We wholeheartedly support efforts to curb wasteful use of energy of all kinds – whether it be electricity or heat,” Kohler said. She added that this is not a new concept; the state has been attempting to conduct energy audits and retrofits on public buildings for years. For instance, in 2010, House Bill 306, which implemented a state energy policy, passed. The fundamental tenets of the legislation include promoting energy efficiency and conservation; according to the text, the state must achieve a 15 percent increase in per capita energy efficiency between 2010 and 2020. To work toward this goal, the Alaska Energy Authority focused on making commercial buildings, rural public buildings, industrial facilities more energy efficient. 

Another effort, according to Kohler, was in 2008: the legislature appropriated $360,000,000 for efficiency improvements that mandated energy audits before and after. The Home Energy Rebate Program refunds homeowners part of what they spent to make their houses more energy-efficient and thus less expensive to heat. Kohler added that she spent $14,000 and got $8,500 back through the program.

While there have been some successes, Kohler said the idea--good in theory--is in practice expensive and difficult to actualize. Most efforts toward energy efficiency do lead to reduced heat consumption, but “‘low lying fruit’ have already been harvested.”