All-Alaska Rate Electric Power Pricing Structure

Abstract

Economists at the Institute of Social and Economic Research, University of Alaska Anchorage were asked to research the potential options and impacts of establishing an All-Alaska Rate as an alternative to the current Power Cost Equalization (PCE) program funding formula. We were asked to provide a history of the PCE program and information on electricity rates and patterns of consumption across regions of Alaska. This report provides the results of this analysis. Alaska is unique in many ways, including its consumption and pricing of electricity. There are large regional differences in consumption and prices that result from proximity to different types and quantities of resources. Differences in remoteness and population size also influence costs. Urban areas in the southern Railbelt benefit from larger economies of scale and access to natural gas and hydroelectric resources; the majority of hydroelectric facilities are located in Southcentral and Southeast Alaska. Most communities in rural Alaska depend on volatile and high price fossil fuels for the generation of electricity. The Alaska statewide weighted average residential rate for electricity (17.6 cents per kilowatt (kWh) in CY2011) is higher than the U.S. average of 11.8 cents per kWh (U.S. EIA, 2012). Alaska now trails behind Hawaii (34.5 cents), New York (18.4 cents) and Connecticut (18.1 cents) based on ranking of average residential price per kWh. Hidden in the Alaska statewide average is considerable variation with some communities paying less than the national average and some paying considerably more.