The cost of rural power: Alaska's Power Cost Equalization program offers affordable electricity to rural residents, but does it bring the costs down too much?

• Author: Campbell, Melissa
• Position: Alaska Native Business News

Winter is coming and the electricity bills tend to rise as the temperatures drop. The lights are on longer and the furnace kicks on more often. As the mercury falls well into the negative numbers, people pass the time away with more indoor activities, like watching television, reading or surfing the Internet.

When the electric bill comes, many of us don't bat an eye when we write the check. But many living in rural Alaska cringe. State Rep. Carl Morgan lives in Aniak, a small village outside Bethel in the Yukon-Kuskokwim Delta. During the summer months, Morgan pays about $250 a month for electricity. When winter comes, his bill jumps another $150 to $250 monthly. That's up to $500 every month for about half the year. And that's after a subsidy to help make electricity more affordable for Bush Alaskans.

Alaska's Power Cost Equalization program was established in the 1980s to help rural residents to better afford electricity by offering a state appropriation, and later an endowment fund, to subsidize the cost of power to rural residents. Some say the program currently isn't working well and fails to encourage energy conservation.

"The endowment was sold to the public as a way to ensure there would be money for PCE and it's been a total failure," said Sen. Dave Donley. "It's not generating the money it was supposed to."

But thousands of rural Alaskans rely on the subsidy to afford electricity, said Bob Poe, the former executive director of the Alaska Industrial Development and Export Authority, and the Alaska Energy Authority.

"PCE is an effective program that smooths out the high cost of power in rural Alaska," he said. "People can only afford so much."

Bush Alaskans pay three to five times more per kilowatt-hour than urban consumers do. According to the Alaska Energy Authority, the average electricity rate paid by residential customers in Anchorage, Fairbanks and Juneau in 2000 was 9.9 cents per kWh, compared to 46.4 cents per kWh in Cold Bay, 39.6 cents in Elim and 21.6 cents in Unalaska. The cost per kWh has since increased because the cost of diesel heating fuel has risen, said Poe.

Rural Alaskans on average use less electricity than those in urban areas-an average of 692 kWh in cities compared to 412 kWh in the Bush, according to the Energy Authority. Rural homes are generally smaller. Many don't have running water, thus eliminating the need for dishwashers, hot water tanks, and washers and dryers. And only a small percentage of those...