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Financial crisis hits Bush power

Leaders struggle for ways to pay for rural electricity

Posted: Tuesday, February 15, 2000

A fiscal short circuit may soon dim the lights in the Bush.

The program that subsidizes the high cost of electricity in rural Alaska - called power cost equalization - is having a major money crisis just a year after it was revamped and retooled by the Legislature.

There was $15.7 million budgeted for the program for the fiscal year ending June 30. But about $8 million of that money hasn't shown up.

Randy Simmons, executive director of the Alaska Industrial Development and Export Authority, said unless some funds are found soon, it could be a matter of weeks until rural utility companies stop getting paid.

``There are still checks going out now,'' Simmons said. ``The checks will probably stop by the end of this month.''

Some 190 rural Alaska communities get those checks. The price people pay for power in those communities - including subsidies that come with power cost equalization - averages two to three times that of their urban counterparts.

In Gov. Tony Knowles' supplemental budget request, the Democrat is asking the Legislature to use a one-time, $8 million dividend from AIDEA to cover the program's impending shortfall.

The task of finding funding for the program this year and into the future has Pat Pourchot, Knowles' legislative director, mixing metaphors. ``We're working on it,'' he said. ``I have to tell you it's a tough nut and we don't have a silver bullet yet.''

Though concerned, he said the administration will find a way to fund the program through this year.

Last year, a rewriting of the legislation instituting power cost equalization brought the program's cost down from nearly $22 million in 1999 - a savings of more than $6 million. Some users, including schools and businesses, were disqualified from the program, and the base amount of electricity the subsidy would cover was reduced.

To pay for the smaller program, the Legislature used $2.3 million left in the program's capitalization fund and another $5.5 million from the sale of a state hydroelectric plant.

The remaining $8 million was supposed to come from community impact funds stemming from money made from leasing tracts of the National Petroleum Reserve-Alaska. About $40 million from that fund has been made available for grants for rural programs, but so many proposals were submitted that funding them all would cost nearly $70 million, according to Debby Sedwick, commissioner of the Department of Community and Economic Development.

``It's still under review at this point,'' Sedwick said today.

At this point, she said, she's not sure whether there will be any NPR-A money left for power cost equalization. She said she's not sure that even if there was money it would be spent for the program.

The department is doing what it can to come up with a workable solution, Sedwick said.

``We are, of course, internally trying to think of a creative way to fund it,'' she said.

Sen. John Torgerson, a Kasilof Republican and co-chairman of the Senate Finance Committee, said he thought a solution to the power cost equalization problem had been worked out last year.

The NPR-A fund was supposed to help for this year, he said. The GOP legislative majority was prepared to add money to the program over the short term until oil production started on the newlyleased North Slope land.

Torgerson said all the proposals for using the NPR-A fund show him that the Bush wants other programs more than power cost equalization.

``Now the communities are saying, `We have more important things,''' Torgerson said.

He said legislative approval for the money Knowles wants for this year is in doubt, as is funding in the future. Using AIDEA dividends or general fund money, he said, will cause ``great debate.''

Other ways of paying for power cost equalization have been proposed. A panel of political and electric company leaders suggested adding a charge to power bills statewide to cover program costs.

Such a universal charge ``will never fly,'' said Sen. Al Adams, a Kotzebue Democrat who served on the panel.

He's still looking for money, he said, and continues to hear from his constituents that high electricity and fuel costs are making it harder to get by in the Bush. Even if money is found for 2000, he said, there's next year to worry about, and the year after that.

``We still have not found a longterm provision for PCE,'' he said.

Without such a provision, he said, economic development of the Bush will be slowed or stymied. Businesses need to know how much it will cost to do business, he said.

Schools and businesses no longer qualify for power cost equalization, and Adams said that means some school districts will run into problems meeting funding restrictions.

This year, under the state's funding formula, schools are supposed to spend 65 percent of their money on instruction. This year, 16 districts have asked for, and received, waivers from the restriction, said Eddy Jeans, manager of the Department of Education's finance section.

Though higher power costs contribute to the cost of running rural schools, they aren't the main reason schools are asking for waivers, he said.

On Thursday, the AIDEA board of directors approved the $8 million increase in the quasi-public organization's dividend to the state. The extra money stems from accounting rule changes, which bumped up the dividend initially approved by the board in 1998.



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