PCE: What is it?

What is PCE? 

The Power Cost Equalization program, or PCE, is a program that was established by the legislature in 1984 to offset the high cost of electricity in rural communities. Rural electricity was tied to diesel, which is costly to transport, additionally, there isn’t as large of an economic base in the 200 rural communities for infrastructure investments to be cost-effective. Urban areas received billions of dollars in capital projects like hydroelectric dams and subsidies like in Cook Inlet – PCE was created to create that same sort of investment in rural areas where the state couldn’t do the same sort of projects. The legislature also created a separate fund for PCE – no state general fund dollars go towards this program – it was intended to be self-administering in perpetuity. It only costs about 30 million a year. It would take hundreds of years for PCE to equate to the money invested in other projects in urban areas. 

Who Benefits from PCE? 

PCE has benefited 80,000 – 90,000 residents in approximately 200 communities all the way from Tok to Teller to Tuntituliak. In addition to helping individuals offset their high electricity bills, PCE also offsets the high cost of electricity for certain community facilities, like washaterias and community buildings – schools and commercial customers are excluded from PCE credits, and there are additional parameters surrounding what community facilities are eligible. Rates may also go up for water and sewer service. 

What is happening to PCE this year? 

Prior to 2019, the PCE program was automatically paid from the fund to the program. However, the Dunleavy administration interpreted the program as being “sweepable” meaning that the funds need to be approved by the legislature yearly with a ¾ vote. AFN and many other leaders across the state are currently suing over this decision. The current legislature did not garner enough support to reach the vote threshold, and the PCE program is currently unfunded. 

How can I get involved? 

The legislature is scheduled to reconvene on August 16th to consider overriding Governor Dunleavy’s vetoes, a fiscal plan, and they can vote on “reversing the sweep” if they receive enough support from members. You can contact your legislator and tell them rural residents need PCE, write a letter to the editor on how PCE impacts you personally, and you can sign up for updates from NPA. 

Where can I find out more information about PCE? 

The latest report from the Alaska Energy Authority on PCE – http://www.akenergyauthority.org/Portals/0/About/Board%20Meetings/Documents/2020/FY20%20PCE%20Statistical%20Report%20-%20Community%20Version.pdf

Article on AFN and others suing the Dunleavy Administration – https://www.alaskapublic.org/2021/07/19/afn-others-sue-dunleavy-over-cuts-to-rural-energy-program/ 

Talking points

  • Alaska has some of the highest electric costs in the nation, most electricity is subsidized in one way or another to lower it. Billions were invested in: natural gas subsidies in Cook Inlet, hydroelectric dams in Southeast Alaska, and many other capital projects. 
  • Many parts of rural Alaska doesn’t have the consumer base to make construction projects cost effective, additionally, costs were already higher in rural areas with electricity being tied to diesel and the high costs of transportation.
  • The legislature established the current Power Cost Equalization program in 1984 to equalize high cost of energy in rural areas of the state to Fairbanks, Juneau, and Anchorage levels – a fiscally conservative approach to lower the costs of electricity without having to put billions and billions of dollars across each region in Alaska 
  • The Power Cost Equalization Fund – which the funding for the PCE program comes from – is house under AEA. No general fund dollars are used for PCE, it’s a self-funding program. The program only uses about 30 million a year and the Regulatory Commission of Alaska yearly calculates the rates of the PCE credits 
  • KWH are capped at 500 a month – most consumers in Anchorage use 700 a month, most PCE users consume an average of 400 a month 
  • Currently over 84,000 Alaskans in nearly 200 communities across the state benefit from PCE – from rural areas surrounding matsu to the Kusilvak Census Borough
  • Without PCE, many rural communities will see their electricity double or triple – the same renege cannot be done for the infrastructure projects that were invested in urban Alaska

Fact Sheet

  • The current PCE program was established by the legislature in 1984 to equalize the high cost of energy in rural Alaska. Other investments were made in different areas of the state to reduce energy costs. 
  • The PCE program funds were yearly appropriated by the legislature, this resulted in years of shortfalls. The fund was endowed in 2000 and housed under the Alaska Energy Authority in order to have the program fund itself in perpetuity – much like the infrastructure projects in other parts of the state. 
  • The state constitution prohibits “dedicated funds” – these are the funds that are not expended yearly and get “swept” into the Constitutional Budget Reserve Fund, the PCE funds weren’t part of this accounting quirk prior to the Dunleavy administration’s decision to make them “sweepable”

To learn more about the history of PCE, who benefits from it, and actions that you can take to support the PCE program, visit our website!

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