Economic Significance of Power Cost Equalization Program - Full Report and Summary

Abstract

The PCE program is designed to pay a portion, currently 95 percent, of the legitimate electric generation costs between a floor and a ceiling, for a basic level of electric service for residential and commercial customers (including public schools) and community facilities. The floor is set at a level equal to the cost for electricity generation in urban areas, 9.5 cents in 1996, and the ceiling is set at the level of reasonable maximum cost for a small utility, 52.5 cents. In recent years PCE budget restrictions have kept payments to eligible utilities below 95 percent of legitimate costs. The assistance provided to the utilities is primarily targeted toward residential customers in the PCE communities. The average income ofPCE households is $49,825 compared to $65,054 for non PCE conununities. (Although the average income in the typical PCE community is considerably less, $35,203, because average incomes are higher in the larger PCE communities.) The unemployment rate among PCE households is 15 percent compared to 8 percent for non PCE communities. 18 percent of families in PCE communities have incomes below the poverty level compared to 6 percent in non PCE communities.

The state which has paid for much of the investment in the public infrastructure in rural Alaska also has an interest in its continued ability to provide the services to sustain rural communities. Loss or deterioration of these services would be detrimental to the physical and psychological well being of rural Alaskans and responding to the problems this would create would put an additional burden on state financial resources.