Alaska raises rural power subsidy floor, cutting support $3M

Rural Alaska communities stand to lose about $3 million in electricity subsidies under a change proposed by the Regulatory Commission of Alaska — a downstream effect of rising power costs in the state's urban centers.

On May 1, the RCA opened the door to raise the Power Cost Equalization base rate from 20.38 to 22.11 cents per kilowatt-hour, an increase of nearly 10 percent.

Power Cost Equalization (PCE) is a decades-old state program — created in the 1980s — that helps people in rural Alaska afford electricity, which can cost several times what city residents pay because remote villages often run on expensive diesel.

PCE helps eligible rural communities, where electricity is far costlier, by covering part of residents' power bills above a baseline. Because that baseline is a weighted average of residential costs in Anchorage, Fairbanks, and Juneau, urban rate hikes shrink the rural subsidy. The Alaska Energy Authority, which runs the program, says each one-cent increase cuts support by $1.5 million. Anchorage and Fairbanks drive about 80 percent of the calculation.

Those urban costs are climbing. Chugach Electric rose more than two cents to 23.4 cents/kWh, the largest single driver. Matanuska Electric Association reached 24.5 cents after agreeing to a 15 percent gas price increase with Hilcorp to secure another year of firm supply — about $1.30 more per customer. Fairbanks now pays 31.6 cents, running 54 percent of its power on diesel after losing Southcentral gas supply, according to administration policy advisor Andrew Jensen.

Governor Mike Dunleavy highlighted the increase Friday at a press conference on natural gas pipeline legislation, framing it as evidence of where the state is headed without a gas line. "You just heard that the RCA said that we need to increase the charge … that it's going to impact rural Alaska," he said. "This is not going to get better."