228 research outputs found
Determinants of the Cost of Electricity Service in PCE Eligible Communities
This report is one of two companion reports ISER prepared for the Alaska Energy Authority. The other
report, “True Cost of Electricity in Rural Alaska and True Cost of Bulk Fuel in Rural Alaska,” is dated
October 26, 2016. That report estimates the full costs of providing electricity in rural Alaska, including
the costs of subsidies provided to lower the price consumers pay. This second report assesses how the
costs of electric generation in Power Cost Equalization (PCE) communities are or might be affected by
three factors that are not related to the differences in electricity generation costs. Those three factors
are the organizational structures of utilities, postage stamp rate design, and managerial information
available on energy subsidy programs.
1. Organizational Structures of Utilities
Electric utilities in PCE communities are organized as cooperatives, are run by local villages and
municipalities, or are investor-owned utilities. The scale of these utilities varies widely, and includes
regional utilities that manage separate electric grids in multiple communities. A review of those
organizational structures indicates that:
1.1. There are significant differences in distribution, customer service, and general and
administrative costs (DCG&A) across utilities. These differences are correlated with the utility
size and organizational structure, with the smallest utilities having significantly higher DCG&A
costs per kWh.
1.2. Small local utilities that have merged with larger regional utilities have benefited from reduced
costs and professional management. Incentives to encourage small local utilities to join
larger, more efficient regional utilities should be considered.
1.3. The cost of borrowing for large local and regional electric coops remains low compared with
that for stand-alone local villages, municipalities, and investor-owned utilities.
1.4. The state government should consider allowing a return on equity as an allowable expense
within the PCE cost of service [AS 42.45.110(a)] to enable utilities to build equity, enhance debt
coverage and facilitate the expanded use of private capital, and reduce dependency on limited
public capital resources. This private capital may take the form of investor capital for
investor-owned utilities or member capital for cooperatives.
2. Postage Stamp Rate Designs
2.1. Postage stamp rate designs—a single rate for electricity for some set of customers—can help
reduce costs and improve affordability in smaller, remote communities through an implicit cost
subsidization from customers in larger communities.
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2.2. The subsidies in postage stamp rates may decrease incentives for utilities to manage their
costs, because higher costs may be subsidized by postage stamp rate-making.
2.3. The increase in cost in subsidy-providing communities risks inefficient bypass by large
commercial or government users. This could increase the total cost of electric service and
leave the remaining customers with higher rates and diminished affordability. Separating
communities into rate groups according to their cost structure may mitigate, but not eliminate,
the risk of self-generators bypassing the local electric utility.
3. Efficiency in Governance of Energy Subsidy Systems
3.1. To assess whether the PCE program is achieving its goals, transparent information about the
allocation of the subsidies and about the operation of the subsidized utilities is required. The
companion report to this one identified some issues about reliability of information generated
under the current reporting system. Improvements in the reporting requirements could
address these issues. A common issue is inconsistency in accounting for capital that state and
federal agencies contribute to utilities. Those capital contributions include both grants or
low-interest loans to finance capital projects as well as sources of short-term government
financing, such as annual fuel loans, emergency loans, and write-offs of operating loans for
troubled utilities. If capital investments for generation were separated from other capital,
investments to reduce fuel costs (such as wind power) could be assessed more directly.
3.2. The PCE program is one of several programs that subsidize energy costs in rural Alaska, and an
understanding of the interaction among these programs is required. An annual compilation of
all state and federal heating and electrical subsidy support systems by community would
enable better understanding of both individual program impact and also the collective
programmatic impact of the subsidies on energy affordability.
3.3. Information on system reliability, usually measured as outage hours, is required to fully assess
utility performance.
3.4. Currently, there is no information on how well the PCE program and other energy subsidy
programs in rural Alaska target families and communities that face the greatest energy
affordability challenges. Because of limitations on income data in small rural Alaska
communities, assessing how well subsidies are targeted may be challenging. However, in light
of general information that energy subsidies are often inefficient at poverty reduction, this is an
important question.
3.5. The environmental impact of energy subsidies for rural Alaska, including the PCE program,
through CO2 emissions and PM 2.5 emissions, has not been assessed.Alaska Energy AuthorityExecutive Summary / Background / Impact of Alternative Utility Organizational Structures on Cost / Postage Stamp Rate Design Issues for PCE Communities / Energy Subsidy Administration / Summar
America has no enemies in Asia! : popular rumors from Asia are very alarming, analyzed and compared facts are not
48 pageshttps://digitalrepository.trincoll.edu/moore/1047/thumbnail.jp
Income and the School Funding Formula: A Contrary View
School funding in Maine remains a controversial and complex issue. Economist Ralph Townsend provides one perspective on this issue in his commentary
Options for Managing Maine’s Fisheries: Traditional Fisheries Management
Ralph Townsend discusses the historic evolution of fisheries management as well as more current trends toward co-management in Maine’s groundfisheries. Looking at successful experiences with co-management, he wonders whether current efforts in Maine’s lobster industry will be successful without tackling the tough issue of access limitation
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