Nowhere in Alaska is the high cost of energy felt more than in rural communities. While all Alaskans endure high energy costs, the impact is especially burdensome on our rural neighbors.
For 45 years, the Alaska Energy Authority (AEA) has played a significant role in reducing the cost of energy in rural Alaska. AEA is an essential partner with all of rural Alaska. Its policies emphasize community-based project management. Through innovation and collaboration, AEA provides the tools and the guidance necessary for all rural communities to embrace a better energy future.
AEA’s most visible rural energy effort is the Power Cost Equalization (PCE) program. The program provides economic assistance to ratepayers of rural electric utilities. The program and its Endowment Fund are topics of great interest this time of year while thermostats are turned up. Many Alaskans are aware of the importance of the program and how it keeps the lights on and enables commerce in rural villages. Almost no one who has studied the program disputes its importance to rural Alaska. AEA, along with the Regulatory Commission of Alaska, administers the program that serves 84,000 Alaskans in 194 communities that are largely reliant on diesel fuel for power generation. The Regulatory Commission of Alaska reviews eligible fuel and nonfuel costs information submitted by each participating utility. These costs, along with an annually calculated base rate cost per kilowatt-hour (kWh) are used to calculate each community’s PCE levels. This annual base rate is a weighted average charge per kWh in Anchorage, Fairbanks and Juneau. In fiscal 2019, the residents of participating rural communities were credited with $28 million in program disbursements.
AEA also administers a Bulk Fuel Upgrade program. Many rural bulk fuel tank farms were constructed more than 20 years ago and are in poor condition. Since 2000, AEA has constructed or upgraded more than 100 bulk fuel tank farms. There remain approximately 300 tank farms, which need attention. Most tank farm projects have been cooperatively funded by AEA and the Denali Commission. AEA has been assisted in assessments of major deficiencies in rural tank farms by the United States Coast Guard. As a result, AEA has documented and estimates $800 million will be required to fund the total deferred maintenance costs for tank farms throughout rural Alaska.
There is also the Rural Power Systems Upgrade program, in which AEA builds and retrofits power system facilities. AEA has constructed or upgraded more than 80 powerhouses in rural Alaska. There remain approximately 114 powerhouses requiring some degree of attention, retrofit, or complete replacement. Powerhouses recently constructed incorporate technological advances and may employ modular powerhouse construction, marine manifolds on diesel engines to maximize heat recovery, and used-oil blending systems to reduce cost and the risk of environmental contamination. Again, cooperative participation between AEA and the Denali Commission makes these projects possible. The deferred maintenance need costs for RPSU is estimated at more than $300 million.
AEA also delivers technical assistance to rural utilities. This assistance is provided to ensure infrastructure lasts a full economic life and minimizes the risks of catastrophic electrical emergencies. And, while there are circumstances when equipment fails and when life-threatening emergencies occur, AEA, through its Electrical Emergency Assistance protocols, helps assure the soonest possible response to and restoration of reliable rural electrical service so that communities are once again safe.
Whether distributing PCE funding, building modern and code-compliant bulk fuel tank farms, upgrading rural powerhouses to utilize energy-efficient lower emission generators, or incorporating renewable energy in rural power systems, the need to maintain rural energy services is greater now than ever. Gov. Mike Dunleavy’s proposed fiscal 2022 budget support’s AEA’s mission in rural Alaska.
It is imperative that as Alaskans pursue projects that provide safe, reliable, affordable clean energy that the state has an agency working every day toward a lower cost of energy. Energy is the backbone of economic development and healthy communities.
Curtis W. Thayer serves as the Executive Director of AEA, a public corporation of the State of Alaska governed by a board of directors with the mission to “reduce the cost of energy in Alaska.”
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