On May 3rd, 2000, the Legislature adjourned on a high note by providing for a permanent funding source for the Power Cost Equalization (PCE) program. PCE serves Alaskans in 193 rural communities who are faced with some of the highest energy costs in the nation.

Previous efforts at finding a permanent funding source had failed requiring the Legislature to provide temporary funding fixes in supplemental budgets. This session, the Legislature and the Administration took a serious look at finding a permanent resolution to this problem. The result was the introduction and passage of House Bills 446 and 447.

From the Legislature's standpoint, the difficulty in providing for PCE was finding a revenue source in a time where declining state revenues and budgetary constraints make increased funding to existing state programs problematic.

Part of the solution was found in the Four Dam Pool hydroelectric facilities. Four Dam Pool consists of four energy facilities located in Kodiak, Valdez, Wrangell-Petersburg, and Ketchikan. These were state-owned facilities built in the 1980s that were intended to provide cheap, reliable power to south central and coastal Alaskan communities.

For a considerable period of time, the people in these communities and legislators had been looking at a way to sell these utilities to the communities they serve. This idea had growing momentum because it would allow the local communities to have control over these facilities and selling these utilities would provide substantial cost savings to the state.

On December 13, 1999, the Commission on Privatization and Delivery of Government Services issued several formal recommendations to the Legislature and the Administration for reducing state expenses. One of these recommendations was to sell the Four Dam Pool for fair market value.

HB 446 takes this recommendation into account by making the finding that to sell the project provides the state with fair value for the Four Dam Pool facilities for the two-fold purpose of relieving the state of significant financial risks and obligations associated with running this project and to provide a long-term, stable financing source for power cost equalization.

This was only part of the solution as the proceeds of the sale of these facilities falls short of providing the necessary amount to assist in paying for the estimate $16 million annual cost of the PCE program.

The Legislature completed the task of finding a funding source by passing HB 447, which provides for a draw from the Constitutional Budget Reserve of $100 million. The sales proceeds and the CBR draw collectively will be placed into an endowment in the Permanent Fund's earnings reserve account. The interest accruing from this endowment will provide the revenues necessary to permanently fund the PCE program.

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