A group of Alaska Native and rural power associations filed a lawsuit against Gov. Mike Dunleavy’s office on Monday over 2019 changes to Power Cost Equalization funding. The program helps keep energy costs low for 84,000 Alaskans in nearly 200 rural communities.

The lawsuit, filed by the Alaska Federation of Natives, Alaska Village Electric Cooperative and several other Native groups and utilities, claims that Dunleavy violated the Alaska Constitution when he mandated the PCE Endowment Fund be swept back into the Constitutional Budget Reserve (CRB).

The PCE Endowment had more than $1.1 billion, according to the lawsuit. The Endowment Fund was established in 2000 by the state Legislature with the intention of keeping energy prices at a level consistent with communities that benefit from dam projects, such as Kodiak and Anchorage. 

The PCE program itself has existed since 1983.

The Legislature appropriated $32.35 million for the PCE program this fiscal year, which was also approved by the governor. However, the funding did not go into effect because the House failed to pass the three-fourths vote required for a “reverse sweep,” or sweeping funds back into the CRB. 

Moving the funding from the CRB will be a priority when the Legislature is called back into special session Aug. 2.

The Alaska Village Electric Cooperative, which provides power for nearly 60 rural villages, including Old Harbor in Kodiak, said in a Monday statement it should not be part of the sweep.

“PCE was established because the state spent huge sums of money to support electric costs in urban Alaska and areas with large hydropower potential — PCE tried to bring an equitable amount of state assistance to rural Alaska,” the organization said.

“As a result of the elimination of the PCE through the sweep, our residential members and communities will experience large increases in their monthly electric bills.”

AVEC is covering $800,000 in costs this month to its customers that normally would be covered by the state. If PCE isn’t funded after lawmakers return to Juneau in August, rural Alaskans will be on the hook for the full amount.

In Akhiok, which maintains its own power grid and utility service, it amounts to about $2,500 a month for the village, according to Akhiok Mayor Dan McCoy.

McCoy said without the PCE in effect, residents would be paying roughly 80 cents per kilowatt hour. The PCE provides about 37.5 cents/kwh up to the first 500 kwh, roughly half the cost.

“With the PCE not there, the residents will be paying the full amount, which is double the amount,” McCoy said. 

He added that just as in 2019 under similar scenarios, it has become a topic of concern to Akhiok, especially as it plans its budget. 

“How do you budget for that? You’re waiting up to the last second,” McCoy said. “It’s about the time that rural communities will be buying into their fuel supplies, and you also have to account for fuel change prices. Fifty cents a gallon means a lot to a community that burns 30,000 gallons.”

Akhiok’s power grid is based on diesel fuel, with home heating done through baseboards. The village just completed a $4.3 million overhaul of its power grid and power generator, thanks to grants from the Denali Commision, the U.S. Department of Agriculture and the state of Alaska. The new grid will effectively increase energy efficiency by 15-25%, with the potential to lower energy bills for the residents.

McCoy said the average home in Akhiok uses between 450 and 500 kwh a month, with most attempting to keep it below 500 kwh a month. Residents pay the full 80 cents for energy above 500 kwh.

“People are going to go from paying $250 and $300 a month to $500 and $600 a month,” McCoy said.

Dunleavy said in a written statement Monday that he has asked for an expedited decision in the lawsuit.

“This issue is too important to delay any further,” Dunleavy said.

“A decision by the court will help clarify what is in the General Fund and what is not to determine what gets swept into the Constitutional Budget Reserve to repay it. In order for us to fulfill our constitutional duties, both the executive and legislative branches need to know if the PCE is subject to the sweep.”

Dunleavy’s office also noted that the governor has proposed protecting the PCE, along with the Permanent Fund and the Permanent Fund dividend, in the Alaska Constitution through legislation.

The Alaska House Bush Caucus, composed of reps. Bryce Edgmon (I-Dillingham), Neal Foster (D-Nome), Josiah Patkotak (I-Utqiaġvik) and Tiffany Zulkosky (D-Bethel), issued a statement Tuesday in support of the lawsuit and the importance of not having it swept into the CBR.

“The PCE benefits are critical to the well-being of remote communities in Alaska and need to be preserved just as the Legislature has fought for natural gas tax credits, hydro funding, and other energy infrastructure items that have lowered the cost of residential energy bills in many communities throughout the state,” the Bush Caucus said. 

The caucus also assured rural residents that “rural legislators and others will continue to fight to get the program funding reinstated and strive for higher measures of protection for the PCE Endowment so we don’t have to go through this fight every year.”

But for villages such as Akhiok, it remains a “wait-and-see” scenario concerning whether lawmakers are successful in getting a two-thirds majority vote to authorize PCE funding.

McCoy added that if the trend continues, it could have a cumulative effect on rural villages such as Akhiok.

“One of the stressors of it is hanging by a thread at the last moment, but it would result in rural communities’ decline,” McCoy said. “People move out … and  our school could be on the chopping block if we don’t have enough kids. If the school closes, it contributes to decline.”

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