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Rural Alaskans brace for impact as Power Cost Equalization funds disappear

Jul 25, 2019

The sun sits low in the sky on July 13, 2019 in Unalakleet. The local electric utility will send out notices to residents that their power costs are set to go up as it prepares to lose funds from the state’s Power Cost Equalization program. (Photo by Rashah McChesney/Alaska’s Energy Desk)

It’s salmon fishing and berry picking season in Unalakleet. It’s also the first month of the new operating budget year for the state.

Right now, when residents get together to swap stories about fishing, salmonberry pie recipes and the unseasonable heat, they are also talking about the impacts of a decades-old accounting quirk that could have far-reaching impacts in rural Alaska.

Most people call it “the sweep.” It’s an automatic transfer of money from dozens of the state’s bank accounts into one big savings account that happens at the end of each fiscal year.

And each year for 28 years, the Alaska Legislature has voted to put all of that money back into the accounts it came from. But this year, that didn’t happen.

Typically, that sweep goes unnoticed. But this year, it’s the talk of the town in Unalakleet, where residents who get their power from the Unalakleet Valley Electric Cooperative are about to get their monthly bill.

“Yeah, it’s pretty much everybody. We have two residents who are off-grid, totally,” said Reese Huhta of the Unalakleet Valley Electric Cooperative.

He said everyone else in town — that’s about 270 homes, 40 businesses and 22 community facilities — will be getting a bill. And along with it, they’ll get a notice that next month’s bills are going to go up — in some cases by thousands of dollars a month.

That’s because this year, for the first time, the annual sweep of funds included a $1 billion account that is used to subsidize rural energy costs. That means that two weeks ago, when the new budget year started, all of that money essentially disappeared.

In Unalakleet, Huhta said homeowners’ bills will go up an average of $80 a month.

“I think we will see more shutoff notices. Some members that work seasonally that don’t have the ability to just go work more overtime or get a second job, that’s not an option. We have a lot of members that are on fixed incomes, and there’s just not a lot of money trees to shake,” he said.

The city’s power bill will go up, too. The rate it pays for everything — from streetlights to getting water for residents to pumping sewage away from homes — will double.

“Annually they’ll spend, in our models, $55,000 to $70,000 more,” Huhta said.

Currently, the city is the electric utility’s largest customer that receives Power Cost Equalization credits.

Huhta said his utility hasn’t gotten a formal notice yet from the state about the fact that there is no money available to reimburse it for power costs. But he said the utility can’t afford to issue billing credits to customers without getting paid back for long.

For now, the utility will bridge the gap from savings.

“So we want our members to at least have the courtesy of 30 days’ (notice). It’s something we would have loved to have had, rather than being notified after the fact,” he said.

The Legislature is still meeting in special session through the beginning of August, and it’s possible there will be some funding for the program. Both the governor’s office and the Legislature included funding for the program in their budgets — but they didn’t agree on where the money should come from.

So for now, Huhta said everything is in limbo.