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Power Cost Equalization Report and Recommendations of the Governor's Blue Ribbon Com 1999
POWER COST EQUALIZATION Report and Recommendations of the Governor's Blue Ribbon Committee February 1,1999 POWER COST EQUALIZATION Report and Recommendations of the Governor's Blue Ribbon Committee February 1,1999 TABLE OF CONTENTS Page Introduction 1 Summary of Recommendations 3 Discussion of Recommendations Extend Rate Support Program 5 Limit Support to Lifeline Residential Usage and Essential Community Facilities 9 Program Funding from 60%of Four Dam Pool Debt Service,$20 Million Swan-Tyee Loan,and Universal Service Fund 12 Statewide Utility Operating Standards 16 Discussion of Alternative Options 16 Attachment Committee Ballot and Ballot Results 1 Options for Reducing Rural Power Costs 2 Executive Summary -ISER Report 3 Residential Consumption -Southern Railbelt 4 How 326 kWh Might Be Used in a Village Home 5 Impact of Lifeline Rate Options on Electric Utilities 6 Option 1A Spreadsheet (Universal Svc Fund /150%)7 Option 1B Spreadsheet (Universal Sve Fund /100%)8 Option 2 Spreadsheet (Modified PCE /GF Endowment)9 Option 3 Spreadsheet (Modified PCE /Declining Approp)10 Blue Ribbon Committee Power Cost Equalization INTRODUCTION The Power Cost Equalization program has paid a portion of the electrical bills of rural consumers since 1985.During this period,the PCE budget has averaged about $17.5 million per year.In 1993,the State legislature established a Power Cost Equalization and Rural Electric Capitalization Fund (the "PCE Fund”)with an appropriation of $66.9 million,and also enacted the following policy statement: Ch.18,SLA 1993,Sec.1."FINDINGS AND INTENT.(a)The legislature finds that adequate,reliable,electric service at affordable rates is a necessary ingredient of a modern society and a prosperous developing economy.The legislature further finds at the current stage of social and economic development in the state,direct participation by the state is necessary to assist in the development of a regional electric transmission infrastructure and to assist in holding rates in high cost service areas to affordable levels. (b)The legislature recognizes the high cost of electric power in rural Alaska and intends that funding for power cost equalization from the general fund and from the power cost equalization and rural electric capitalization fund remain at a minimum of $17,000,000 annually through the year 2013.The legislature further intends that this long-term commitment to the power cost equalization program will permit and encourage the electric utility industry and its lenders to develop the plans, make the investments,and take other actions that are necessary or prudent to meet the utility needs of residents in rural Alaska.” Over the last several years,PCE outlays have been drawn exclusively from the PCE Fund,which will be nearly exhausted by the end of FY99.For PCE to © continue beyond FY99,a renewed commitment will be needed by the 1999 legislature and by the Governor. In anticipation of this pivotal legislative session,the Governor convened a Blue Ribbon Committee to consider and recommend an overall policy on the future of PCE as weil as specific proposals to implement that policy.The Committee membership was designed to reflect a variety of institutional perspectives by including members from the legislature,the public utilities commission,the Anchorage chamber of commerce,rural consumers,rural utilities,and the State's industrial development agency.The Committee membership (in alphabetical order)is as follows: Blue Ribbon Committee Power Cost Equalization Blue Ribbon Committee Membership The Honorable Al Adams Alaska State Senator Mr.Robert Beans,Chairman Alaska Village Electric Cooperative,Inc. Mr.Sam Cotten,Chairman Alaska Public Utilities Commission Mr.Joe Griffith,Chairman Anchorage Chamber of Commerce Ms.Nancy James Consumer representative from Ft.Yukon Mr.Robert Martin Jr.,(former)General Manager Tlingit &Haida Regional Electrical Authority The Honorable Drue Pearce Alaska State Senator Mr.Walter Sapp,representative Four Dam Pool Project Management Committee Mr.Randy Simmons,Executive Director Alaska Industrial Development and Export Authority Mr.Dewey Skan,President Rural Alaska Community Action Program,Inc. Mr.Eric Yould,Executive Director Alaska Rural Electric Cooperative Association.Inc. Beginning in January 1998,the Committee reviewed the history,structure,and impact of PCE,the organizational and cost structure of rural electric utilities,and proposals that have been made to reduce rural power costs.The Committee then returned to the task of developing policy and program recommendations with respect to the PCE program. Blue Ribbon Committee Power Cost Equalization SUMMARY _OF RECOMMENDATIONS The Committee has adopted the following recommendations: 1.PCE or an alternative rate support program for high cost service areas should be extended into the future. Such rate support should be available only for: A.A "lifeline”supply of electric power for residential consumers.A lifeline supply is defined as one-half of the statewide average consumption per household each month.While this amount varies over the course of a year,the average monthly lifeline supply would be approximately 350 kWh. B.Electric power for community facilities that are directly related to public health and safety. A stable source of funding for PCE or an alternative rate support program should be established with the following major components: A.60%of the annual debt service paid to the State by the Four Dam Pool -this would include the 40%now allocated to PCE plus the 20%now allocated to the Power Project Fund loan program. B.$20 million appropriated by the 1993 legislature as a loan for the Swan/Tyee intertie,based on a proposal from Ketchikan Public Utilities to forego the loan in exchange for State bonding of Swan/Tyee intertie costs. C.Proceeds of a universal service fund to be created from a surcharge on all electricity sold statewide by public utilities. A statewide organization or agency should be designated to establish standards for rural electric utilities with respect to financial management, physical plant,and system operations.No rural electric utility should continue to receive rate support or capital project grants from the State unless it is in compliance with these standards,is making clear and continuing progress in attaining compliance,or has entered into an agreement with an existing utility or utility organization whose operation is consistent with the standards. Blue Ribbon Committee Power Cost Equalization All Committee members recognize the challenge in gaining a consensus on future program funding as well as the amount of future benefits.For this reason, several options are presented in this report for consideration by the Governor and the legislature: OPTION 1:Universal service fund. 1A.A lifeline supply of power is made available at 150% of the statewide average residential rate.(The 150% level is estimated at 17.0 cents per kWh.) 1B.Same as 1A except the lifeline rate is set at 100%of the statewide average residential rate.(The 100% level is estimated at 11.3 cents per kWh.) OPTION 2:General Fund endowment /extend modified PCE through 2013. OPTION 3:Declining general fund appropriations /extend modified PCE through 2010. OPTION 4:Further explore the potential for federal funding of PCE or an alternative rate support program. The potential funding options were debated at length by the Committee and ultimately put to a vote.Included in Attachment 1 are the questions included on the Committee ballot and the ballot results.Key results are as follows: .A majority of Committee members recommend the creation of a universal service fund to provide limited rate relief in high cost service areas. °Of the 7 members favoring a universal service fund,a majority would set the lifeline rate at 150%of the statewide average residential rate. .Each of the options listed above is believed by a majority of the Committee members to be worthy of further consideration by the Governor and legislature. Blue Ribbon Committee Power Cost Equalization DISCUSSION OF RECOMMENDATIONS Recommendation #1 -PCE or an alternative rate support program for high cost service areas should be extended into the future. A.Economic growth and development in rural Alaska. For many years and in many different ways,both the State and federal government have consistently carried out a policy of helping to build up and improve the basic infrastructure of Alaska's rural villages.Examples of this commitment include continuing investments in local schools,water and sanitation facilities,housing,airports,harbors,roads,health care, bulk fuel storage,communications,and a host of other public facilities. These financial commitments make sense only on the belief that rural communities will be economically viable and self-sustaining in the future. This has been the basis of State and federal policy with respect to ruralAlaskaformanyyears.(To abandon PCE at this stage of development inruralAlaskawouldbecontrarytothelong-standing State and federal policy of helping rural Alaska during its difficult transition to a modern,self- sustaining economy. Affordable power is a necessity. The Committee believes that electric power is a necessity which should be available and reasonably affordable to everyone living in an established community.For example,new housing units financed by the federal Department of Housing and Urban Development (HUD),which are increasingly common throughout rural Alaska,are essentially uninhabitable without electric power to keep pipes from freezing,to run fans and pumps for space heat,and to operate other housing essentials such as refrigerators,freezers,and lights.In addition,new public infrastructure projects financed by State and federal governments are equally dependent on electric power -pumps for water and sewer facilities,pumps for fuel transfers and dispensing,or heating and lighting systems for local schools.Very little of this makes sense if electric power is not available and affordable throughout the expected life of these facilities. But in most of rural Alaska,electricity is not reasonably affordable because the cost of service is high while average cash incomes are low. There are three approaches the State can take to help make rural power more affordable: Blue Ribbon Committee Power Cost Equalization 1.Increase personal income through economic development or increased transfer payments.The Committee assumes,however, that a major advance in economic development on a broad scale is not something that the State can quickly bring about and that significant increases in transfer payments are not likely to occur. 2.Reduce rates directly through PCE or an alternative rate support program. 3.Reduce the actual cost of generating and distributing power. Among the possible cost reduction strategies are the following: a.Utility mergers to create economies of scale. b.Consolidated fuel purchasing to reduce fuel costs. c.Increase the efficiency of diesel generators. d.Upgrade distribution systems to reduce line losses. e.Replace diesel with alternative energy where warranted. f.End use conservation. Aworking paper prepared for the Panel entitled "Options for Reducing Rural Power Costs'is included as Attachment 2.A number of these options continue to hold promise for long-term reduction in power costs,and the Committee believes that aggressive efforts to pursue them should accompany any extension of a rate support program. The Committee is also aware,however,that none of these cost reduction strategies are new and that all have practical limitations. For example: °Utility mergers.The data suggest that electricity rates for a single-village utility are likely to go up initially rather than down if it merges with a multi-village system,despite the benefit of administrative economies of scale.This is because the multi-village utility is more likely to budget for such fundamentals as plant depreciation,preventive maintenance,and insurance.In addition,the multi-village utility is more likely to finance needed investments in physical plant,and to recover the associated debt service in its rates,while the single-village utility is more likely to obtain 6 Blue Ribbon Committee Power Cost Equalization government grants when equipment replacement can no longer be postponed. °Consolidated fuel purchasing.If this were to reduce delivered fuel costs for a given utility by 25 cents per gallon -a generous assumption on fuel cost savings -and if the diesel generating efficiency for the utility were 12 kWh per gallon -roughly the average for all PCE utilities -then the reduction in the cost of power would be about 2 cents per kWh.While certainly valuable,savings of this magnitude would have a relatively small impact on the power cost differential between urban and rural Alaska. °Alternative energy.While established alternatives such as small hydro should be pursued where favorable prospects exist,and while developing technologies such as wind and fuel cells should be further tested and improved,there is little evidence that these alternatives will reduce power costs in the near future on an unsubsidized basis.In those limited cases where alternative energy projects can result in lower rates,the reason can most often be traced to the use of government grants or other favorable project financing. -The Committee concludes that there is no utility cost reduction program that can begin to provide the near-term impact that PCE has on utility rates.For power to be widely affordable in rural Alaska within the foreseeable future,there is no practical alternative to direct rate reduction through PCE or an alternative rate support program. C.Eliminating PCE would create financial hardship. There is an additional reason for the Committee's basic recommendation: eliminating PCE would create financial hardship for many rural families.If further budget reductions are needed to match sustainable revenues,the State should avoid targeting the population that,overall,is least able to afford it.At the present time,the average PCE benefit per residential customer is about $550 per year. The Committee retained Prof.Scott Goldsmith of ISER to examine the likely impact on rural consumers,rural utilities,and village economies if PCE were eliminated and no other program were established to take its place.The Executive Summary of his report,"The Economic Significance of the Power Cost Equalization Program,”is included in Attachment 3,and the full report is available under separate cover.Key findings from the report are as follows: Blue Ribbon Committee Power Cost Equalization °All but 8 of the 190 communities that receive PCE have populations below 1,000.The median population size is 264. °For the median (or "typical”)community,average household income is $35,203 compared with $65,054 for non-PCE communities. °The cost of electricity in the typical PCE community is $.42 per kWh compared with about $.10 per kWh in Anchorage.After accounting for PCE assistance,residential customers in PCE communities still pay about $.20 per kWh -roughly twice the Anchorage cost. °Average residential consumption in the typical PCE community is 3,921 kWh per year,or 51%of the Anchorage average. °Eliminating PCE would immediately result in higher electricity prices. Higher prices would cause a reduction in electricity usage.Lower usage would lead,in turn,to additional rate hikes as utilities try to cover fixed costs with a smaller sales base. °For a representative village like Elim -population 281 -eliminating PCE would be expected to have the following impacts: i.The residential price of electricity would increase 190 percent - from $.19 to $.55. ii.Average residential consumption would fall by 38 percent -from 4,202 kWh per year to 2,608 kWh per year. iil,The average monthly residential bill would increase by 80%-from $66 to $119. °The financial viability of rural electric utilities without PCE depends on how sensitive electricity sales are to price increases: i.If doubling the price led to a 20%decrease in consumption,most rural utilities are projected to survive although with much higher prices and lower sales. ii.If doubling the price led to a 30%decrease in consumption,utilities in half the communities now served by PCE are projected to become financially insolvent. Blue Ribbon Committee Power Cost Equalization Recommendation #2 -Limit rate support to "lifeline”residential usage equal to one-half of the statewide average consumption per household each month,and to community facilities that are directly related to public health and safety. The Committee recommends that future rate support be limited only to the most essential uses of electric power.The reasons for this are both philosophical and practical: °Although electric power is a necessity that should be affordable in every established community,a key principle of economic efficiency and of utility regulation is that prices should vary in proportion to actual costs. Excessive rate support sends the wrong price signals to consumers and reinforces dependence on continuing subsidy. Limiting rate support to essential usage cuts a middle path between these two objectives:power is available at a lower price for necessities but is otherwise priced at its full cost.Because consumers will more often be faced with full cost power at the margin of use,incentives will be strengthened both for end-use conservation by consumers and for cost reduction by utility management. °In view of the expected decline in oil revenues,it will be increasingly difficult to obtain rate support funding for discretionary electrical usage.It is the Committee's judgment that continued funding for PCE or an alternative rate support program will require that all such assistance be focused on the most basic power requirements in high cost service areas. Implementing this recommendation would require the following changes to the existing PCE program: Estimated Annual Reduction In PCE Requirement °Remove commercial customers from program eligibility.$2.6 million .Reduce the monthly cap for eligible usage from 700 kWh $3.7 million to one-half of the statewide average consumption per household each month. °Limit the definition of community facilities to those that $1.0 million are directly related to public health and safety. Total Estimated Reduction $7.3 million Blue Ribbon Committee Power Cost Equalization Remove commercial customers PCE benefits are currently paid for residential customers,commercial customers,and community facilities that are owned and operated by local government.The Committee believes that residential customers and community facilities should have priority: Residential customers are the core of the program,representing about 70%of ail electrical consumption that is presently eligible for PCE assistance.Affordable power for lights,heating systems,and refrigeration in residential housing is the most basic need that the program addresses. When costs such as the electrical bill go up,most commercial customers can try to increase revenue by raising prices.However, residential customers in rural villages do not have a comparable method to raise household income.Local governments with no taxing authority have some options to raise revenue by adjusting prices and fees for local services,but still fall short of the revenue- raising capability of commercial entities. Because schools are typically not owned and operated by the local government,they are considered "commercial facilities”for purposes of the PCE program and account for about 10%of the PCE-eligible electrical consumption in the commercial category. Like all such institutions,rural schools are always facing budget limitations.But relative to other institutions in rural Alaska,schools operate with relatively large budgets and have greater capability than most to absorb an increase in electricity prices.Schools are not heavily dependent on continuation of PCE benefits since PCE now provides assistance for only the first 700 kWh per month, which is much less than schools typically consume.On average, school districts are presently entitled to approximately $100 per month in PCE benefits per community. For other commercial customers,FY97 statistics indicate an average PCE benefit of about $34 per month (or about $400 per year).The Committee does not minimize the significance of this benefit to many rural businesses but concludes that,overall, commercial customers can tolerate a cut-off of PCE benefits with less difficulty than either residential customers or local governments. 10 Blue Ribbon Committee Power Cost Equalization B.Reduce the monthly cap for residential customers from 700 kWh to one- half of the statewide average consumption per household each month. While this amount would vary each month,the average monthly limit over the course of a year would be approximately 350 kWh. Program statistics indicate that residential customers received PCE assistance for an average of 340 kWh per month in FY96.This is about half of the average monthly residential consumption in the southern Railbelt region.The Committee believes that a major reduction in the monthly cap for PCE eligibility is a key measure to ensure that PCE benefits are paid only for a very basic level of usage. Although it is difficult to define where "necessary”power consumption leaves off and "discretionary”begins,adopting this recommendation would clearly address any concern that PCE is subsidizing discretionary usage.The program would no longer purport to equalize power costs for residential consumers in urban and rural Alaska -it would focus on providing affordable power for a much lower level of consumption than is typical in Anchorage,Fairbanks,and Juneau. Included in Attachment 4 is recent monthly data on residential electricity usage in southcentral Alaska.Based primarily on this data,the following estimates are provided on the monthly kWh limits that would initially define a lifeline supply of power under the Committee's proposal: January 461 kWh February 419 March 376 April 343 May 312 June 284 July 301 August 277 September -290 October 318 November 358 December 394 These limits average 344 kWh per month over the course of an entire year.The Committee's concept is intended to ensure that households have access to a "lifeline”supply of affordable power -i.e.enough to run essential lights,heating pumps,refrigeration,and other basic elements of household maintenance.Attachment 5 shows how 326 kWh could be used in a typical village home in an average month. 14 Blue Ribbon Committee Power Cost Equalization C.Limit community facilities to public health and safety. Only those community facilities that are directly related to health and safety are proposed to remain eligible for rate subsidy,including water and sewer projects,health clinics,public safety office,street lights,and washeteria.Other community facilities such as community halls or recreation halls would no longer be eligible.This measure is expected to reduce rate support for community facilities by roughly 25%overall. Recommendation #3 -Program funding from 60%of Four Dam Pool debt service,$20 million Swan-Tyee intertie loan,and enactment of universal service fund. Rural electric utilities need financial stability before long-term planning and investment can succeed on a broad scale.Financial stability will depend,in turn, on a stable source of funding for an effective rate support program. The Committee believes that continued reliance on State general fund appropriations is inconsistent with this need for long-term financial stability.As a result,the Committee's recommended option is based on alternative sources of revenue: A..60%of Annual Four Dam Pool Debt Service The starting point is the revenue stream that has already been established for the PCE program.The 1993 legislature enacted a revenue allocation plan whereby the annual debt service paid to the State by the Four Dam Pool is used as follows: °40%for PCE. °40%for the "Southeast Energy Fund,”the initial purpose of which is to help fund the Tyee-Swan intertie. °20%for the "Power Project Fund,”a loan fund administered by the Division of Energy to help finance small power projects,bulk fuel storage facilities,and potable water supply. In a typical year and for the remaining term of the existing power sales agreement,annual Four Dam Pool debt service is estimated at $11.0 - $11.5 million.Of this amount,the existing 40%allocation would supply roughly $4.4 million per year for PCE.Four Dam Pool debt service is scheduled to be paid to the State annually through the year 2030. 12 Blue Ribbon Committee Power Cost Equalization The Committee is aware of the vulnerability of these funds to the "self- help”provision of the Four Dam Pool power sales agreement.That provision allows the utilities to withhold debt service that would otherwise be due the State if the funds are needed to repair certain project deficiencies.It is presently expected that $1.6 million will be withheld by the utilities in FY2000 under this provision,and unknown additional amounts could be withheld after that. Despite the uncertainty in any given year created by the "self-help” provision of the power sales agreement,Four Dam Pool debt service still provides an important long-term source of recurring energy revenues. The Committee proposes to re-allocate to PCE,or to an alternative rate support program,the 20%share of these revenues that now goes to the Power Project Fund loan program.This would add approximately $2.2 million per year to the revenue stream allocated to rate support,bringing the total annual contribution from Four Dam Pool debt service to about $6.6 million. The Power Project Fund was converted to a revolving loan fund in 1993 legislation,with principal and interest payments from prior loans now coming back to the Fund where they augment the balance available for new loans.At present,these repayments are sufficient to meet the demand for new loans.While loan demand may increase in the future, the Committee believes that continuing rate support for essential needs serves a more critical purpose. B.$20 Million Swan-Tyee Intertie Loan The 40%allocation of Four Dam Pool debt service to the Southeast Energy Fund was enacted by the legislature in 1993 as part of an overall, statewide "package”on energy projects,policies,and funding,and must be understood in that context.The Committee does not recommend altering this percentage -however,the Committee does recommend that $20.0 million appropriated by the 1993 legislature as a 3%loan for the Swan/Tyee intertie be re-appropriated to the PCE Fund.The City of Ketchikan,which is the primary intertie proponent,has suggested that it is willing to forgo the $20.0 million loan in exchange for State bonding of Swan/Tyee intertie costs.Depending on the final project cost,most or all of the debt service associated with such bonds would be paid from the 40%share of Four Dam Pool debt service allocated to the Southeast Energy Fund. 13 Blue Ribbon Committee Power Cost Equalization C.Universal Service Fund The Committee recommends that the legislature enact a universal service fund for electric utility service,similar to the universal service fund already authorized for telephone service.Funding would be provided by a monthly surcharge on all electric utility bills statewide.The proceeds of the fund would be used solely to ensure that a lifeline supply of power will be available in all established communities at a designated "lifeline rate.” The Committee considered setting the lifeline rate at either 100%or 150% of the statewide average residential rate.At 100%,a lifeline supply of power would be made available at approximately 11.3 cents per kWh.At 150%,a lifeline supply would be made available at approximately 17.0 cents per kWh. The financial implications of these alternatives are as follows: °At 150%,the estimated cost of the lifeline program is $14.7 million per year.With 60%of Four Dam Pool debt service providing $6.6 million in program revenue during a typical year,the annual amount needed from the universal service fund is estimated at $8.1 million. Based on estimated electric utility sales of 5.0 billion kWh per year statewide,the required surcharge would be about 0.16 cents per kWh.This would cost an average residential customer in the Railbelt about $14 per year. The $14.7 million estimated program cost is comparable to the estimated cost of PCE given the program changes recommended above.The estimated PCE cost net of recommended changes is as follows: $23,000.0 Preliminary estimate -full funding of PCE in FY 2000. -2,600.0 Remove commercial customers from eligibility. -3,700.0 Cut eligible kWh (residential)from 700 per month to one-half the monthly statewide average. -1,000.0 Limit community facilities to public health and safety. $15,700.0 FY 2000 PCE cost following proposed amendments. Spreadsheets included in Attachment 6 show the estimated annual payments to utilities under three scenarios: 14 Blue Ribbon Committee Power Cost Equalization i.The "lifeline rate”program benchmarked at 17.0 cents per kWh (i.e.150%of the statewide average residential rate). ii.The "lifeline rate”program benchmarked at 11.3 cents per kWh (i.e.100%of the statewide average residential rate). iif.The existing PCE program. At the 17.0 cent per kWh benchmark,the lifeline rate program would cost an estimated $14.7 million per year.A summary spreadsheet of Option 1A (the "150%option')is included in Attachment 7. Only one additional community would be added to the program that is not currently eligible for PCE -Glennallen.A lower benchmark rate would add more communities. °If the lifeline rate were set at 100%of the statewide average (11.3 cents rather than 17.0 cents),the initial year program cost would be approximatley $22.9 million,$16.3 million of which would come from the universal service fund.This would require a surcharge of about 0.32 cents per kWh on all electric utility bills statewide,and would cost an average residential consumer in the Railbelt about $27 per year. The "100%option”would add several communities to the list of those receiving benefits under the rate support program - communities which are not presently eligible for PCE but whose residential rates exceed 11.3 cents.One or more of these communities could be relatively large and might therefore be entitled to a relatively large payment for community facilities. (Presently,the maximum kWhs each month that can be claimed for community facilities is equal to the community population times 70.) If the 100%option were adopted,the Committee would recommend limiting the community population to 1,000 for purposes of this calculation based on the premise that the local tax base of larger communities can better support the operating costs of public facilities. The concept of the 100%option more closely approximates the original concept of the PCE program,which was to "equalize”rural power costs with average rates in Anchorage,Fairbanks,and Juneau.In actual practice,however,PCE has not equalized rates -average rural rates for PCE-eligible usage are still about twice as 15 Blue Ribbon Committee Power Cost Equalization high as urban rates.A summary spreadsheet of Option 1B (the "100%option”)is included in Attachment 8. The Committee is aware of the natural resistance that will develop to any proposal that will increase rates.However,there are many precedents for cost pooling in which the benefits of lower cost enjoyed by some consumers are shared to a limited extent with those whose cost of service is higher.It occurs within any service territory that has standard rates and occurs on a larger scale within such structures as the Four Dam Pool. The Committee believes that the proposed level of surcharge,particularly at the 150%level,is an acceptable amount to ensure that a lifeline supply of power is available to all households and essential public facilities at a reasonably affordable price. Recommendation #4 -A statewide organization or agency should be designated to establish rural utility operating standards.State support should be withheld from rural utilities unless the standards are met or are in the process of being met. The Committee resolved that,in exchange for continuing public support of rural electricity lifeline rates,effective measures must be taken to ensure that small, single-village utilities are properly managed and that they become,as much as possible,self-reliant.This will require a combination of operating standards, assistance in meeting these standards,and enforcement of sanctions if utility management does not make satisfactory progress.An enforceable commitment to improved utility management must be part of any recommendation to continue providing public financial support. DISCUSSION OF ALTERNATIVE OPTIONS As noted at the outset,the Committee believes that other options to fund PCE or an alternative rate support program should also be brought to the attention of the Governor and legislature.These options are as follows: OPTION 2 Option 2 would extend the modified PCE program through 2013,consistent with legislative intent enacted in 1993 to fund PCE for 20 years.In addition to the funding sources that all of the options have in common -the 60%share of Four Dam Pool debt service and the re-appropriation of the $20 million Swan/Tyee intertie loan -Option 2 requires a $75 million State general fund endowment in FY 2000 to carry the program the rest of the way.A summary spreadsheet showing Option 2 is included in Attachment 9. 16 Blue Ribbon Committee Power Cost Equalization To keep the size of the endowment from escalating higher,Option 2 also incorporates a $17 million annual cap on PCE expenditures: °Since its inception,the cost of the PCE program has averaged about $17 million per year.Continuing the program at this level is therefore consistent with the State's historical level of program support. °Although the statement of "Findings and Intent”enacted by the legislature in 1993 established $17 million per year as the minimum level of PCE funding,the Committee believes that a maximum level is what is needed as the basis for a general fund commitment.The population of rural Alaska continues to grow as does the full funding requirement for the PCE program as presently structured.The Committee believes that an open- ended funding commitment for PCE is unrealistic and unlikely to be obtained.The $17 million benchmark has already been accepted by the legislature as a reasonable level of program funding. OPTION 3 Option 3 seeks to extend the same modified PCE program for a significant length of time without recourse to a large general fund endowment or enactment of a universal service fund.Its main features are as follows: A.Annual PCE outlays are capped at $15 million per year. B.General fund appropriations are required beginning with $15 million for FY 2000.These appropriations can then be reduced by $2.5 million per year,reaching zero in FY 2006.These appropriations are in addition to: °60%of Four Dam Pool debt service,and °Re-appropriation of the $20 million Swan/Tyee intertie loan. C.Given these funding sources and expenditure caps,PCE can be extended through the year 2010. A summary spreadsheet showing Option 3 is included in Attachment 10. OPTION 4 The Committee investigated the possibility of obtaining federal funds to support PCE ora similar program.Although the indications to date have not been promising,the Committee suggests that discussions continue in the event that some measure of federal contribution can be obtained. 17 Blue Ribbon Committee Power Cost Equalization Option 1A -Transitional Funding The spreadsheet provided in Attachment 7 shows how the Committee would envision implementation of Option 1A (Universal Service Fund /150% benchmark).Provision for transitional funding and other explanatory notes are as follows: A.The Committee anticipates that more than one year will be required for approval and implementation of the recommended program.As a result, the spreadsheet projections allow for a two-year transitional period (FY 2000 and 2001)during which a modified PCE program would remain in place.The recommended lifeline program would begin in FY 2002. B.The PCE modifications recommended earlier in this report would reduce the cost of PCE to $15.7 million in FY 2000,and to $16.0 million in FY 2001 assuming 2%annual growth. C.The modified PCE program is funded during the two-year transition period by a combination of the following three revenue sources: I.The PCE Fund is presently expected to have a $3.2 million balance to carry forward into FY 2000. ii.60%of Four Dam Pool debt service revenues are allocated to PCE starting in FY 2000. iii.The $20 million Swan-Tyee loan could be re-appropriated to PCE if other elements of Swan-Tyee intertie financing are resolved. 18 ATTACHMENT 1 COMMITTEE BALLOT AND BALLOT RESULTS POWER COST EQUALIZATION BLUE RIBBON COMMITTEE BALLOT RESULTS (see note 1) (see note2) 1. "f _Include in Committee Report Designate As Best Option-r :a Declining |Further ||Declining |Further1UniversalServiceFund;GF oF -:Explore .Universal Service Fund |GF 7 GE 'ExploreYES©150 &&100 |150 only ,100 only Endowment Approp.|FedFunds |YES 150 |100 {Endowment Approp.|Fed Funds:|asTo -Sep ee MW.USE PRISE |Se Do Senator Adams |xX of Xx XX {|xX KX ||xX |Robert Beans xX x 4 -Xx PX Fo ee ee _;_|Sam Cotten to Xx xX ot X a xX X ee eee Z :JoeGrifith ==XX,JX|XK PKNancyJamesX|X |X |XxX XxX Xx KX. 'Robert Martin Xx |Xx :xX |X X x XxX 3) |Senator Pearce X xX :;of _X _WalterSapp es |X Xx X |fe Xx Z Randy Simmons_|x |a KX ft eK xX.KX |XxX.'Dewey Skan X |a,4 XxX |XxX Xf.X- Eric Yould ij.a |a X X Xo es ee a | woe TOTALS 9 j;6 |2 |1 8 7 10 7 4 3 1 1 i ||i |wef |!NOTES --The following messages were added by Committee members to their ballots:Senator Adams notes 'that,in his view,community centers and city officesshould not 7 oO be excluded from the definition of "community facilities"under a revised PCE program. |i an woe dee --eo'Robert Beans does not designate a single "best option,"but suggests thata =-;ee'combination of options may turn out to be best.ee ee to _|Lo en cn woe[Senator Pearce indicates that the Universal Service Fund benchmarked at 150%of the 7 _|statewide average residential rate is an option:worth considering but only for residential a a -iservice,not for community facilities.ft 2/3/99 POWER COST EQUALIZATION c/o Division of EnergyPhone:269-4630 BLUE RIBBON COMMITTEE Fax:269-4645 January 21,1999 The Honorable Al Adams DELIVERY BY FAX ONLY Alaska State Senator State Capitol Building,Room 417 Juneau,AK 99801-1182 Subject:Ballot on Options and RecommendationsBlueRibbonCommitteeonPowerCostEquaiization Dear Senator Adams: The PCE Blue Ribbon Committee met on January 15 to consider and vote on thefinalsetofoptionsandrecommendationstobepresentedtotheGovernor.Anumberoftheserecommendationswereunanimouslyapprovedbythemembers in attendance,specifically: 1.PCE or an alternative rate support program for high cost service areas should be extended into the future. 2.Such rate support should be available only for: A.A "lifeline”supply of electric power for residential consumers -alifelinesupplyisdefinedasone-half of the statewide averageconsumptionperhouseholdeachmonth;and B.Electric power for community facilities that are directly related to public health and safety. 3.A stable source of funding for the program should include among its components: A.60%of the annual debt service paid to the State by the Four DamPool-this would include the 40%now allocated to PCE plus the 20%now allocated to the Power Project Fund loan program. B.$20 million appropriated by the 1993 legislature as a loan for theSwan/Tyee intertie,based on a proposal from Ketchikan PublicUtilitiestoforegotheloaninexchangeforStatebondingof Swan/Tyee intertie costs. PCE Blue Ribbon Committee January 21,1999Page2 4.A statewide organization or agency should be designated to establish standards for rural electric utilities with respect to financial management, physical plant,and system operations.No rural electric utility shouldcontinuetoreceiveratesupportorcapitalprojectgrantsfromtheState unless it is in compliance with these standards,is making clear and continuing progress in attaining compliance,or has entered into anagreementwithanexistingutilityorutilityorganizationwhoseoperation is consistent with the standards. Since four of the eleven Committee members were absent from the meeting,the voting was inconclusive with regard to broader PCE options on which there issignificantdisagreement.For this reason,the Committee decided to solicit the votes of all members by means of the enclosed ballot.There are two separateissuesthatremaintobedecided: 1.Of the options listed on the ballot,which do you believe should be included in the Committee's report as worthy of consideration by the Governor and legislature?You may vote for all of the options if you wish, or any number of them. Any option receiving 6 or more votes in response to Question 1 will be included in the Committee's report. 2.If you believe that one of these options should be recommended by the Committee as the single best option to pursue,which one do you support? A single option receiving 6 or more votes in response to Question 2 will bedesignatedastheCommittee's recommended option. All of the options on the ballot are summarized in the attachment to this letter and are further discussed in the 12/31/98 draft report circulated to Committee members earlier this month.Please call me at 276-6222 if you would like further explanation of any of these options before casting your vote. Since we are up against the start of the legislative session.please complete andsignyourballotassoonaspossible.Your completed ballot should be faxed toIreneTomoryattheDepartmentofCommunityandRegionalAffairs-fax #269-4645.The Department will ensure that the ballots are properly counted and filed,and will notify all members of the results. Sincerely, Cotten,Chairman Blue Ribbon Committee on PCE BLUE RIBBON COMMITTEE POWER COST EQUALIZATION JANUARY 21,1999 BALLOT QUESTION 14 QUESTION 2 Include in Committee Report Designate As Worthy of Best Option? Consideration?(check no more Option (check up to 4)than 1) 1.Universal service fund. A._|f a universal service fund should beincludedintheCommitteereportas worthy of consideration,please check only one of the following: O Both options should be included - lifeline power benchmarked at 150%and at 100%of statewide average residential rate. O Only the 150%option should be included. O Only the 100%option should be included. B.If a universal service fund should be designatedasthebestoption,please check only one of the following: O The 150%benchmark is recommended. O The 100%benchmark is recommended. 2.General Fund endowment /extend modified PCE through 2013. 3.Declining General Fund appropriations / extend modified PCE through 2010. 4.Further explore the potential for federal funding of PCE or an alternative rate support program. Senator Al Adams Committee Member Signature Please fax completed ballot to Irene Tomory (DCRA):fax #269-4645 January 21,1999 SUMMARY OF OPTIONS The following summary is based on the subcommittee report dated December24,1998,that was included in the January 15,1999 Blue Ribbon Committee packet: OPTION 1 would create the equivalent of an electric utility "universal servicefund”with the following characteristics: A.Similar to the universal service fund authorized for telephone service,it would be funded by a surcharge assessed on all electric utility bills statewide. In combination with 60%of Four Dam Poo!debt service,the universal service fund would provide enough annual revenue tosupportan"Electric Lifeline”program statewide without tapping the State General Fund. The purpose of the Electric Lifeline program would be to provideaffordablepowerforresidentialconsumersandcommunityfacilities within the following limits of eligibility: °For each residential customer in a high cost service area, rate support would be provided for up to one-half of thestatewideaverageconsumptionperhouseholdeachmonth. °For community facilities in high cost service areas,ratesupportwouldbelimitedtothosefacilitiesdirectlyrelated to public health and safety. Creation of a universal service fund is anticipated to require atransitionalperiodoftwoyearsduringwhichamodifiedPCE program would continue to be administered: °Gaining legislative approval of a universal service fundconceptwouldprobablyrequiremorethanonesession. °For FY 2000 and 2001,the 60%share of Four Dam Pool debt service combined with re-appropriation of the $20 million Swan/Tyee intertie loan would be enough to fundPCEwithoutadditionaldrawsfromtheGeneralFund. For eligible electrical usage,rate support would lower the price of power toaselected"benchmark”level.Two alternatives are presented for the benchmark price: A.100%of the statewide average residential rate,which in 1985 was11.3 cents per kWh.In other words,this alternative would make alifelinesupplyofpoweravailableatapproximately11.3 cents perkWh. The initial year program cost under this alternative is estimated at$22.9 million,$16.3 million of which would come from the universal Summary of OptionsJanuary21,1999Page2 service fund.This would require a surcharge of about 0.32 cents/kWh on all electric utility bills statewide.and would cost anaverageresidentialcustomerintheRailbeltabout$27 per year. B.150%of the statewide average residential rate,or about 17.0 centsperkWh.In other words,this alternative would make a lifelinesupplyofpoweravailableatapproximately17.0 cents per kWh. The initial year program cost under this alternative is estimated at$14.7 million,$8.1 million of which would come from the universal service fund.This would require a surcharge of about 0.16 cents/kWh on all electric utility bills statewide.and would cost anaverageresidentialcustomerintheRailbeltabout$14 per year. OPTION 2 would extend the PCE program through 2013,consistent withlegislativeintentenactedin1993tofundPCEfor20years.In addition to thefundingsourcesthatalloftheoptionshaveincommon-the 60%share of Four Dam Pool debt service and the re-appropriation of the $20 million Swan/Tyee intertie loan -Option 2 requires an estimated $75 million General Fund endowment in FY 2000 to carry the program the rest of the way. To keep the size of the endowment from escalating higher.Option 2 alsoincorporatesa$17 million annual cap on PCE expenditures.This is approximately equal to the average annual outlay for PCE since its inception in 1985. OPTION 3 seeks to extend the same modified PCE program for a significant length of time without recourse to a large General Fund endowment or enactment of a universal service fund.Its main features are as follows: A.Annual PCE outlays are capped at $15 million per year. B.General Fund appropriations are required beginning with $15millionforFY2000.These appropriations can then be reduced by$2.5 million per year,reaching zero in FY 2006.These appropriations are in addition to: °60%of Four Dam Pool debt service,and °Re-appropriation of the $20 million Swan/Tyee intertie loan. C.Given these funding sources and expenditure caps,PCE can be extended through the year 2010. OPTION4 is a recommendation to further explore the potential for federalfundingofPCEoranalternativeratesupportprogram,and was added to the list at the Committee's January 15,1999 meeting. ATTACHMENT 2 OPTIONS FOR REDUCING RURAL POWER COSTS WORKING PAPER -PCE BLUE RIBBON COMMITTEE FEBRUARY 1998 OPTIONS FOR REDUCING RURAL POWER COSTS WORKING PAPER --PCE BLUE RIBBON COMMITTEE FEBRUARY 1998 The primary options can be organized into three categories: 1.Reduce non-fuel operating costs. 2.Reduce fuel costs. 3.Replace diesel generation with alternative energy. Reduce non-fuel operating costs Significant measures to reduce non-fuel operating costs per kWh involve either switching to a different mode of power generation such as hydro,or enhancing economies of scale.Alternative energy strategies are discussed in a later section of this paper.Economies of scale may be sought in either of the following ways: 1.Increase power sales.The problem is that this is not a realistic option in most rural villages. 2.Utility mergers.For example,a single-village utility could join a multi- village utility.Savings could be realized in administration,billing,and volume purchasing of parts,equipment,and fuel.Scale economies also allow for the employment of technical staff whose cost and expertise can be shared throughout the multi-village utility,and whose contribution can result in improved maintenance,longer equipment life,and fewer costly emergencies. As noted during our initial meeting,the multi-village utilities generally do not have a record of lower rates.For example,AVEC residential rates throughout their 50-village system exceed 40 cents/kWh.Residential rates in the 6 villages served by Tlingit-Haida Regional Electrical Authority exceed 30 cents/kWh although all 6 are located in the relatively low cost region of southeast Alaska. It may be that the main effect of joining a multi-village system is not to reduce consumer rates but rather to improve reliability,safety,and environmental protection.Further,it may be that operating cost economies are realized but that the savings are then used to "purchase”a safer and more reliable system. Overall: Options for Reducing Rural Power Costs Working Paper -PCE Blue Ribbon Committee Page 2 1.Joining a multi-village utility to enhance economies of scale is not likely to produce significant rate reductions for the consumer. 2.Joining a multi-village utility could lead to development of a power system that is more reliable,better built,and better maintained.It is a difficult strategy to implement,however,since single-village utilities typically exist where the desire for local control is relatively high. 3.Joining a multi-village utility could lead to lower overall costs of operation and greater self-reliance even if such cost reduction is not reflected in consumer rates.Single-village utilities are more likely to seek and obtain government grants for plant replacement and emergency repairs,while multi-village utilities are more likely to finance their plant requirements and recover the associated debt service through consumer rates and PCE. Reduce fuel costs As discussed in the Committee's initial packet of materials,fuel costs are one reason for high rates in rural villages although the impact of fuel costs is less important than often assumed: 1.The average price of diesel fuel in 1995 for utilities in the Power Cost Equalization program was $1.01 per gallon,and the average efficiency of diesel generators for these same utilities was 12.9 kWh per gallon.The average fuel cost per kWh was therefore 7.8 cents. Because the price of Cook Inlet natural gas is very favorable,the fuel cost per kWh for Anchorage area utilities is approximately 2.0 cents. Therefore,the cost of fuel accounts for roughly 5.8 cents per kWh of the difference in power costs between Anchorage and the average rural Alaska community.When trying to explain power cost differentials of 20 to 30 cents or more per kWh,the fuel cost issue is important but is not a dominant factor. Options for reducing the fue!cost component can be grouped in the following categories:increase the efficiency of power generation,increase the efficiency of power distribution,and look for ways to reduce the delivered price of fuel. 1.Increasing the fuel efficiency of power generation is typically accomplished by purchasing new diesel units that are more efficient than the old ones,by carefully matching the size of the new units with the Options for Reducing Rural Power Costs Working Paper -PCE Blue Ribbon Committee Page 3 village demand for power,and by operating the units so that each one operates as close to maximum load as possible. a.Like the gradual substitution of more fuel efficient cars in the nation's vehicle fleet,the widespread installation of fuel efficient diesel generators in rural Alaska has most likely been aided by government regulation but is also pushed by market forces as old equipment is periodically replaced by new. In the case of motor vehicles,the "corporate average fuel efficiency”standards imposed by the federal government appears to have hastened the move to more fuel efficient cars.Fuel efficiency standards have also been adopted in PCE regulations.If the actual efficiency of a PCE utility is less than the standard,then the PCE subsidy rate is calculated as though the efficiency standard were met. These standards,which have been in effect since 1993,range from 8 kWh sold per gallon for the smallest utilities to 12 kWh sold per gallon for the largest.By tying the efficiency standard to kWh sold (rather than kWh generated),the regulation encompasses both generation and distribution efficiency.Somewhat different standards pertain to those few PCE utilities that do not rely entirely on diesel generation. A question that the Committee may wish to consider is whether any change is now warranted in the PCE efficiency standard. When the opportunity arises to replace a diesel generator,it is already the policy of most utilities and of the State to select a generator size that is best matched to the power requirements of the community.This makes sense because diesel generators are most efficient when operated at or near the top of their output range. An emerging development is the production of diesel generators designed to maintain a high level of fuel efficiency throughout a wide range of output levels.AVEC is one utility known to the Division that has been working with a manufacturer on these units and is continuing to purchase them.To the extent they are successful,the importance of carefully matching generator size with community load and the importance of operating units as close as possible to maximum load,will both decline. Options for Reducing Rural Power Costs Working Paper -PCE Blue Ribbon Committee Page 4 2.Increasing the efficiency of power distribution means upgrading distribution systems to reduce line losses,i.e.energy lost in transit between the power plant and the consumer.Because the useful life of a distribution system can often be extended for many years with periodic repairs and piecemeal replacements,upgrades resulting in higher efficiency are not as "automatic”as they tend to be with generator equipment.There are still substantial opportunities in rural Alaska to improve fuel efficiency by upgrading distribution systems,upgrades that might not occur for many more years in the absence of government funding. 3.While the base price of fuel is largely unaffected by the actions of individual consumers,there are purchasing strategies that electric utilities can adopt to help keep the delivered price as low as possible.The key principle that operates in favor of the consumer is competition among fuel suppliers which can be encouraged as follows: a.By pooling together the fuel requirements of multiple consumers, the purchase order volume is increased.Higher purchase volumes generate greater competitive interest among fuel suppliers. b.Bids are widely and aggressively solicited for the combined purchase order. However,as noted by the AVEC representative at the initial Committee meeting,consolidated purchasing must not be taken so far as to eliminate suppliers from the market and end up reducing competition rather than enhancing it.AVEC's approach is to package enough of its villages in combined fuel orders to gain advantage from higher volumes without driving fuel supply competitors out of the market. Fuel purchasing cooperatives can be formed among electric utilities and other fuel purchasers who presently arrange for their fuel supplies independently: a.The "Western Alaska Fuel Group”is an informal alliance of the following electric utilities: Kotzebue Electric Association Nome Joint Utilities Naknek Electric Cooperative Nushagak Electric Cooperative (Dillingham) Options for Reducing Rural Power Costs Working Paper -PCE Blue Ribbon Committee Page 5 lliamna-Newhalen-Nondalton (INN)Electric Cooperative Attached is a chart showing: 1.Average fuel prices paid by each member over the last 7 years,and 2.Average fuel prices paid by a selection of other,roughly comparable rural utilities over the same period. Within each group,coastal communities and interior communities are shown separately to provide a somewhat better comparison. Because a number of factors determine the fuel price paid by any single utility,the average price difference between the Western Alaska Fuel Group and the selected utilities in the comparison group cannot be taken as proof that cooperative buying works. Probably the best evidence in its favor is that all of the utilities in the Western Alaska Fuel Group have chosen to remain a part of it for over 10 years. In FY95 the combined fuel usage of the members of the Western Alaska Fuel Group was just over 6.0 million gallons.Assuming for illustration a savings from coordinated purchasing of $0.05 per gallon,the total savings are about $300,000 per year. Although Nunat Uquutiit Cooperative,Inc.(NUCI)presently owns only two operational tank farms,it has 42 members located in 26 villages.In 1996 NUCI bundled together the volume requirements of about half its members and purchased fuel on their behalf at $1.27 per gallon. Although the level of savings from the 1996 purchase is difficult to judge,the consolidated purchase was apparently viewed as a success by NUCI members since,in 1997,39 of the 42 members chose to participate in the joint purchase.The average price obtained by NUCI in 1997 was $1.20 per gallon. Replace diesel generation with alternative energy Most alternative energy concepts are unproven in rural Alaska in terms of durability,reliability,and cost.For example: Options for Reducing Rural Power Costs Working Paper -PCE Blue Ribbon Committee Page 6 1.Wind energy.There were many experiments with wind generators in rural Alaska 10-15 years ago,none of which were successful on a utility scale or over a significant period of time.We are experimenting now with the latest generation of wind technology in Kotzebue and Wales,but it will be several years of testing and evaluation before the Division of Energy could recommend wind energy for rural utilities on a broad scale. Small-scale natural gas development.Economic and geophysical assessments carried out by the State on natural gas or coal bed methane development in rural Alaska have not been promising.Our information suggests that suitable deposits are not likely to be found in close proximity to rural communities,and that the cost of development for gas that is found is not likely to be competitive.While exceptions may yet be found, there is no basis to predict that natural gas will emerge as a competitive fuel source for a significant number of rural villages. The Division has evaluated power plants fueled with biomass in various forms but we have yet to identify a rural community in which this option appears to be competitive. The two main alternative energy technologies with a proven track record in rural Alaska are small hydro and electric energy conservation: a.Hydro prospects are limited in number and unevenly distributed: most are found near the arc that extends from southeast Alaska to the Aleutians.Still,undeveloped prospects remain that could serve rural Alaska communities.The Division is presently involved in the following: i.Pyramid Creek in Unalaska and Old Harbor on Kodiak Island.Federal grant funds have already been appropriated to help finance the Old Harbor project. ii.Power Creek near Cordova.The Division is financing preconstruction costs of licensing and design.Federal grant funds have also been provided to help finance Power Creek. It is unusual to find a rural hydro project that can support market financing and still result in rate reductions for the affected community.Most of the financial benefit of these projects is therefore tied to the amount of grant or low interest loan financing they are able to attract from the State and federal government.As an alternative for reducing rural power costs,small hydro can often Options for Reducing Rural Power Costs Working Paper -PCE Blue Ribbon Committee Page 7 be effective not because its actual!cost is low relative to diesel energy but because it can serve as a tangible,one-time vehicle for attracting government subsidy that can then reduce consumer costs throughout the extended life of the project. Electric energy conservation is a form of alternative energy that can pay for itself when the cost to conserve a unit of energy is less than the cost to produce it.The following are among the relevant issues when considering conservation in rural Alaska: Because the cost to produce a kWh of energy is relatively high,electric energy conservation should be exceptionally cost-effective in this environment. Because the present level of electricity consumption in rural villages is already very low,the remaining opportunities for conservation may be limited. While the cost of energy for residential consumers is often considered to be the highest priority,it is most difficult to design and implement an effective energy conservation program for this segment of consumers because there are so many of them,each consuming a relatively small amount of power. Rural utilities are typically not supportive of energy conservation programs except for the purpose of customer relations.Because much of the utility's cost is fixed,lower _power sales often means upward pressure on rates.The conserving customer may still benefit,but the utility and its other customers may be left to share higher fixed costs. From the rural utility's perspective,conservation goes in the opposite direction of the utility's effort to increase sales and thereby enhance economies of scale. AVERAGE FUEL PRICES (PCE Statistical Reports) FY FY FY FY FY FY FY 7-Year Pop.1991 1992 1993 1994 1995 1996 1997 Average” 2,952 Kotzebue Electric Association 0.77 0.81 0.90 0.93 0.86 0.85 0.86 0.85 4,184 Nome Joint Utilities 0.75 0.76 0.73 0.77 0.75 0.71 0.83 0.76 1,482 Naknek Electric Cooperative 0.73 0.74 0.73 0.79 0.71 0.71 0.79 0.74 2,232 Nushagak Electric Cooperative 0.75 0.74 0.73 0.79 0.70 0.71 0.89 -0.76 423 _INN Electric Cooperative 1.00 1.09 1.09 1.18 1.12 1.14 1.45 1.10* 1,461 Haines Light &Power 0.89 0.70 0.75 0.70 0.65 0.75 0.92 0.77 519 Yakutat,City of 1.19 0.97 1.01 1.00 0.99 0.97 0.99 1.02 2,735 Cordova Electric Cooperative.1.01 0.88 0.88 0.80 0.83 0.86 1.12 0.91 4,317 |Unalaska Electric Utility 0.97 0.75 0.81 0.75 0.69 0.70 0.87 0.79 818 King Cove,City of 0.98 0.80 0.77 0.78 0.74 0.76 0.87 0.81 564 Aniak Light &Power 1.24 1.39 1.39 1.35 1.17 1.24 1.25 1.29 524 McGrath Light &Power 1.24 1.37 1.26 1.27 1.30 1.37 1.47 1.33 Kotzebue,Nome,Naknek,Nushagak,and INN electric utilities constitute the Western Alaska Fuel Group. *6-year average price computed for INN Electric Cooperative (FY91-96).High price in FY97 due to air delivery /low water. Group Average W 1.31 ATTACHMENT 3 EXECUTIVE SUMMARY "THE ECONOMIC SIGNIFICANCE OF THE POWER COST EQUALIZATION PROGRAM” Prof.Scott Goldsmith,ISER THE ECONOMIC SIGNIFICANCE OF THE POWER COST EQUALIZATION PROGRAM EXECUTIVE SUMMARY WHAT IS THE PROGRAM ? In FY 1996 the Power Cost Equalization (PCE)Program provided $19.202 million of financial assistance to electric utilities in 190 rural Alaska communities where the cost of electric power is greater than urban Alaska because of small market size,dependence on expensive fuel oil for generation,and the high cost of doing business in remote areas. 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 cornmercial customers (including public schools)and community facilities.The floor is set at a level equalto 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. Thus rural utility customers pay at least as much as urban consumers for their electricity, but a portion of the extra cost of generation is covered by the PCE program.Furthermore only the first 700 kwh per month of use by each residential or commercial customer is eligible for the program,and only 70 kwh per month for each community member for community facilities iseligible.As a result,only38 percent of all electricity sold in PCE communities in 1996 qualified for assistance.In addition only legitimate costs are covered,as determined by Alaska Public Utilities Commission (APUC). WHO DOES IT SERVE ? The typical (median)community served by PCE has a population of 264.Bethel,with a population of 5,195,is the largest,and only 8 other communities (Unalaska,Nome,Kotzebue, Cordova,Dillingham,Craig,Naknek,and Haines)have a population greater than 1,000.The total population served is 75,767. The assistance provided to the utilities is primarily targeted toward residential customers in the PCE communities.The average income of PCE households is $49,825 compared to $65,054 for non PCE communities.(Although the average income in the typical PCE (pcerep2.wpd)November 16,1998 i 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 typical PCE utility generates about 652,000 kwh annually,about the amount that Chugach Electric Association,the largest electric utility in the state,sells in a typical 6 hour period.The 9 largest utilities that serve the communities of greater than 1,000 population account for just over 50 percent of the generation of all the PCE utilities which in 1996 totaled 369 million kwh.The cost of electricity provided by the typical PCE utility is $.42 per kwh. This is the amount per kwh the residential customer would need to pay to cover all costs of production.Because of differences in size and location,some utilities have a lower cost, although none are as low as Anchorage where the average cost is about $.10 per kwh.At the other extreme some utilities report an average cost in excess of $.60 per kwh. WHAT BENEFIT DOES IT PROVIDE ? The typical community gets $71 thousand per year in financial assistance through the PCE program,and this covers about 31 percent of the total costs of providing electricity. About 68 percent of the total,$13.092 million,in FY 1996 supported sales to residential customers.Financial assistance under the PCE program reduces each eligible kwh of electricity to residential customers by an average of $.22.(87 percent of residential sales are eligible for PCE.)Residential customers in PCE communities still pay twice the urban average for electricity after the PCE assistance--$.20 for the average kwh.This is because not all consumption is eligible,not all reported costs are approved by the APUC,the program pays only 95%of legitimate costs between the floor and the ceiling,some utilities have costs above the ceiling,and the program has not been fully funded in recent years.The range of residential rates after application of the PCE assistance is from $.10 to $.35 per kwh. Because of the high cost of electricity,even with PCE assistance,and the low household income,the average residential customer in the PCE communities uses 4,933 kwh of electricity in a year,about 65 percent as much as the typical customer in Anchorage,who uses 7,619.(The average in the typical PCE community is less,3,921 kwh per year,because average consumption is higher in the larger PCE communities.) In spite of lower consumption,residential monthly bills are higher in PCE communities, even with PCE.The average residential customer of a PCE utility has a monthly bill of $75, after receiving assistance,compared to $61 for Anchorage.(The average in the typical PCE community is less,$66,because average consumption is higher in the larger PCE communities.) Without PCE the monthly bill would have been $121. If the PCE residential customer used as much electricity as the average household in Anchorage,the typical utility average monthly residential bill would be $125 with PCE.In the (pcerep2.wpd)November 16,1998 ii absence of PCE the monthly bill at the Anchorage rate of use with all utility costs paid by the customer would be $264,433 percent of the Anchorage bill. About 19 percent of PCE assistance,$3.683 million in FY 1996,went to support electricity use in community facilities in PCE communities--an average of $2,537 per facility per year.This assistance reduced the cost of 98 percent of the electricity used for this purpose. Since local residents bear the cost of electricity used by these facilities,the savings for the average PCE household from this assistance was $158 per year. The remaining 13 percent of PCE assistance,$2.407 million in FY 1996,helped pay for about 10 percent of the electricity used by the commercial sector,including the public schools. WHAT WOULD HAPPEN IF PCE DISAPPEARED ? The typical PCE utility receives about $71 thousand of PCE financial assistance annually which accounts for about 31 percent of the total cost of the providing electricity to the community.Elimination of that assistance would put many small utilities at financial risk and require electricity users to pay substantially higher electricity bills at the same time that it reduced the amount of electricity they used. Without PCE the utilities would be forced to raise their rates substantially,and the resulting drop in sales would require further rate increases to generate sufficient revenues to cover all costs.Although reduced sales would lower costs because less fuel would be needed,a large share of utility costs are fixed.This results in the potential for a utility to fall into a "death spiral”,in which continuously rising rates are never able to generate enough revenue to cover costs.A utility caught in a death spiral cannot survive without an external source of financial assistance. The likelihood that a utility would fall into a death spiral is a function of how sensitive electricity sales are to the higher electricity prices necessitated by the elimination of PCE.Ifa doubling of the price paid by customers reduced sales by 20 percent,death spirals would be unlikely.But if a doubling of the price reduce sales by 30 percent,utilities in half the communities served by PCE would be unable to cover their costs through higher rates. The burden of the loss of PCE financial assistance to utilities would fall primarily on the residents of the communities currently served by PCE.This burden would be a combination of higher electricity bills and less electricity use.Customers would be spending more for less electricity and have less income available for other needs.For a representative community like Elim,the residential price of electricity would increase 190 percent--from $.19 to $.55.Average annual consumption would fall by 38 percent--from 4,202 to 2,608 kwh.The average monthly residential bill would increase by 80 percent--from $66 to $119.Without PCE the average residential customer would be devoting 4.4 percent of household income directly to paying for electricity.Including payments in support of community facility electricity use,6.1 percent of household income would be devoted to payments for electricity. (pcerep2.wpd)November 16,1998 iii Most of the remaining financial burden of the loss of PCE would fall on commercial users of electricity,and the higher costs imposed on them would be passed on to customers as higher prices and back onto workers as lower wages.Some of the burden would thus fall on local residents and some would be shifted outside the PCE communities.Since the public schools are included in this category for purposes of PCE,some of the burden,estimated at about $1.406 million would fall on the state treasury. The remainder of the financial burden would fall on state and federal government agencies operating in PCE communities.These government agencies do not qualify for PCE assistance so the rate they are charged covers the full cost of providing their electricity.However since elimination of PCE combined with reduced sales would drive up the average cost of electricity for the PCE utilities,the rates charged to all customer classes would rise.State government agencies would pay about $.290 million in additional charges for electricity. In addition to the quantifiable direct financial burden on local residents,utilities,and state government from the elimination of the PCE program,there are indirect burdens both for the PCE communities and for the state. The public and private physical infrastructure necessary to deliver the educational, sanitation,health,transportation,and communication services to sustain rural Alaska communities,and enhance their opportunities for economic development,depends directly on the availability of a reliable and affordable source of electricity.Furthermore there are some special uses of electricity in rural areas that enhance the quality of life in ways urban residents often overlook,such as refrigeration for preserving subsistence harvested food and streetlights for additional safety during the long hours without sunlight in the winter. 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. WHAT IS THE ECONOMIC SIGNIFICANCE OF PCE ? Elimination of PCE assistance would draw $19.202 million out of the rural Alaska economy.This loss of purchasing power translates into a loss of $4.908 million in wages and 210 jobs (annual average)throughout Alaska.Because most of the PCE communities are too small to support much business activity locally,a large share of this loss would occur in urban Alaska. (pcerep2.wpd)November 16,1998 iv ATTACHMENT 4 RESIDENTIAL CONSUMPTION SOUTHERN RAILBELT 4 ' AVERAGE USE PER CUSTOMER SOUTHCENTRAL UTILITIES --RESIDENTIAL CUSTOMERS BY MONTH Anchorage ML&P Chugach Electric Matanuska Electric Homer Electric weighted one half weighted one half ave wtd ave aveX1.05 wtave X 1.05 Jan-98 720 Jan-98 854 Jan-97 1009 Jan-97 929 878 439 922 461 Feb-98 563 Feb-98 906 Feb-97 830 Feb-97 695 798 399 838 419 Mar-98 509 Mar-98 755 Mar-97 ©827 Mar-97 659 716 358 751 376 Apr-98 527 Apr-98 759 Apr-97 553 Apr-97 645 653 326 685 343 May-98 474 May-98 635 May-97 638 May-97 542 594 297 624 312 Jun-98 431 Jun-98 541 Jun-97 613 Jun-97 556 541 271 568 284 Jul-98 419 Jul-98 644 Jul-97 554 Jul-97 573 573 286 601 301 Aug-98 460 Aug-98 547 Aug-97 546 Aug-97 518 527 264 554 277 Sep-98 446 Sep-98 548 Sep-97 694 Sep-97 458 553 276 580 290 Oct-98 449 Oct-98 590 Oct-97 683 Oct-97 714 605 302 635 318 Nov-98 585 Nov-98 619 Nov-97 875 Nov-97 665 681 340 715 358 Dec-98 581 Dec-98 687 Dec-97 955 Dec-97 818 751 376 789 394 #of Res.Cust:53 393 58,931 31,912 18,544 --132,780 328 689 344 (1997) Explanatory Notes: 1.The "weighted average"is weighted by the number of customers.For example,use per customer for Chugach Electric is given approximately three times the weight of Homer Electric,since Chugach has approximately three times as many residential customers. 2.One-half the average residential usage of these four utilities is 439 kWh in January and 271 kWh in June.Over the entire year,one-half the average monthly use is 328 kWh. 3.These figures are multiplied by 1.05 (5.0%)to account for the fact that use per customer is slightly higher statewide than for these four utilities,and to account for load growth. Source:Alaska Public Utilities Commission 1/27/99 ATTACHMENT 5 HOW 326 KWH MIGHT BE USED IN A VILLAGE HOME EXCERPT FROM: AFFORDABLE POWER IN RURAL ALASKA EXECUTIVE SUMMARY ARECA RURAL ISSUES FORUM REPORT 1996 Electricity Use in Rural and Urban Alaska Rural Alaskans use electricity conservatively because it is expensive.Average usage varies between communities and in different seasons.Overall,an average of 326 kilowatt-hours (kwh)used per residential and commercial customer were eligible for PCE credit in 1995. How 326 kwh might be used in a village home: "Refrigerator (1,000 watt,14 cu ft.frostless)100 *Freezer (1,000 watt,15 cu ft.frostless)100 Coffee Maker 15 Toaster 3 Hair Dryer 2 Clock 2 Television 20 VCR 4 *Indoor Lighting 60 _Outdoor Lighting 20 TOTAL 326 Urban homes typically have a number of other appliances that may or may not be present in rural homes.Below are examples of the estimated range of usage for additional appliances that might be in an Anchorage home:** kk Electric Range (Stove)30-60 Heat Tape or Deicer Cable 10-150 Dishwasher 20-50 Stereo 1-5 Slow Cooker 3-12 Video Games 1-4 Garbage Disposal 2-5 Computer 2-35 Vacuum Cleaner 4-6 Washing Machine 4-12 Sewing Machine 1-4 Clothes Dryer 50-150 Car Engine Heater 30-150 Water Heater 150-550 Actual kwh used depends on appliance efficiency and use patterns.A highly efficient refrigerator or freezer opened rarely might draw 40 kwh per month while an older, less efficient model opened often could draw 200 or more kwh per month.The lighting example is based on four 100-watt bulbs on for five hours per day,though the same kwh would be used by fewer lights on for a longer period or more lights of lower wattage used for the same period. From Sometimes The House That Costs More,Costs Less,a publication of Chugach Electric Association,based in Anchorage. ATTACHMENT 6 IMPACT OF LIFELINE RATE OPTIONS ON ELECTRIC UTILITIES State of Alaska Department of Community &Regional Affairs Division of Energy FY96 -Power Cost Equalization Program Statistics by Utility/\Community Average monthly Utility's Avg.||Power Cost EffectiveResi-Eligible kwh per Residential [Equalization]Residential 11.3 cents 11.3 cents 17.0 cents 17.0 cents Total PCE Total Total Utility/Community Popu-dential Residential Community Rate (based Rate Rate residential com fac residential com fac Payment /Payment /Payment/ lation Customers Customer Fac./Pop.on 500 kwh)Existing 11.3 cent 17.0 cent (kwh)(kwh){cents'kwh)J (cents/kwh)|(cents/'kwh)$/vear $/year S/year S/year Formula "Lifeline "Lifeline” Akhiok,City of 80 33 219 62 38.0 77 30.3 23,140 15,877 18,200 12,488 12,024 39,017 30,688 Akiachak Native Community Electric Co.483 143 175 0 50.0 32.60 17.4 116,137 81 99,031 69 108,998 116,218 99,101 Akiak Power Utilities 320 79 165 0 39.0 15.8 23.2 43,373 169 34,448 134 25,166 43,542 34,582 Akutan Electric Utility ql)----0 -- Alaska Power &Telephone ----0 .. Bettles 34 22 311 18 51.8 34.3 17.6 33,215 2,894 28,541 2,487 54,311 36,109 31,027 Chistochina 60)26,307 16 36.8 19.7 17.1 24,408 2,877 18,952 2,234 27,904 27,285 21,186 Craig 1,946 622 427 43 18.3 76 10.7 182,868 70,560 33,961 13,104 344,200 253,428 47,065 Dot Lake -See Tok ----0 -- Healy Lake 47 1 138 9 48.2 35.1 13.1 6,714 1,864 5,677 1,576 13,774 8,578 7,253 Hollis 150 $1 310 0 18.3 7.6 10.7 13,276 -2,466 -15,814 13,276 2,466 Hydaburg 406)144!424 36 18.3 76 10.7 42,336 12,165 7,862 2,259 66,817 54,501 10,122 Mentasta 96;29 135 62 28.6 144 14.2 8,132 12,371 5,453 8,295 20,510 20,502 13,747 Skagway 881 484 349 62 15.6 3.1 12.5 87,282 27,988 --124,873 115,270 - Tetlin 87 39 212 29 28.3 17.7 10.6 16,897 5,196 11,232 3,454 26,582 22,094 14,686 Tok 988 $85 380 7 22.1 9.6 12.6 265,356 8,871 125,307 4,189 283,028 274,227 129,496 Alaska Village Electric Cooperative (AVEC)----0 -- Alakanuk 604 12%227 15 42.0 24.9 17.1 107,795 33,302 87,781 27,119 129,644 141,097 114,900 Ambler 309 83;33)40 $1.3 33.7 17.6 131,984 59,508 113,176 51,028 180,040 191,492 164,204 Anvik 96)45 229 31 42.6 25.5 71 38,764 11,314 31,705 9,254 49,661 50,078 40,958 Brevig Mission 265 53 222 16 426 25.5 17.1 44,144 16,395 36,105 13,409 58,117 60,539 49,514 Chevak 682:1384 268 13 40.5 23.5 17.0)129,404 30,548 104,144 24,585 151,214 159,952 128,729 Eek 293 831 253 13 42.9 25.8 17.1 79,541 14,759 65,193 12,097 81,521 94,300 77,291 Elim 281 75 320 39 41.3 24.2 17.1 86,390 39,353 69,976 31,876 112,901 125,744 101,852 Emmonak 762 194:323 45 44.1 26.9 17.2 246,373 134,307 203,558 110,967 311,426 380,679 314,525 Gambell 628 131 293 29 43.8 26.6 17.2 149,877 70,924 123,591 58,485 184,508 220,802 182,077 Goodnews Bay 254 73 253 23 40.4 23.4 17.0)64,405 20,037 51,790 16,112 79,381 84,442 67,902 Grayling 212 53 292 44 40.5 23.5 17.0 54,257 32,357 43,665 26,041 82,864 86,613 69,706 Holy Cross 285 761 342 27 43.6 26.5 {7.1 100,659 30,346 82,896 24,991 115,194 131,005 107,887 Hooper Bay 9961 212 258 10 43.4 26.2 17.2 210,357 36,816 173,004 30,278 206,162 247,173 203,282 Huslia 255 80:275 14 416 24.6 17.1 79,998 12,731 64,949 10,336 89,503 92,730 75,285 Kaltag 257 67!300 4l 36.6 19.8 16.8 61,021 31,971 47,273 24,768 90,656 92,993 72,042 Kasigluk 456!97 343 8 42.7 25.6 71 125,383 14,365 102,622 11,757 124,326 139,748 114,380 Kiana 417,412 359 25 477 35.0 12.7 171,226 45,384 144,413 38,277 189,297 216,609 182,690 Kivahina 349 67 376 19 416.9 29.6 174 100,178 28,662 84,139 24,073 117,976 128,840 108,211 RKoyuk 27%72 313 30 42.1 25.0 t7.1 83,247 30,668 67,841 24,992 100,536 113,915 92,833 Page 1 12/31/98 Average monthly Utility's Avg.J Power Cost EffectiveResi-Eligible kwh per Residential ]Equalization {©Residential 11.3 cents 11.3 cents 17.0 cents 17.0 cents Total PCE Total Total Utility/Community Popu-dential Residential Community Rate (based Rate Rate residential com fac residential com fac Payment /Payment /Payment / lation Customers Customer Fac./Pop.on 500 kwh).Existing 11.3 cent 17.0 cent (kwh)(kwh){cents/kwh)J (cents/kwh)|(cents/kwh)S/year $/year S/year $/year Formula "Lifeline”"Lifeline" Lower Kalskag 308 74 278 23 42.3 25.2 7.1 76,565 26,800 62,487 21,873 90,122 103,365 84,360 Marshall 298!86 280 50 41.7 24.7 (7.1 87,940 53,977 71,451 43,857 122,723 141,917 115,308 Mekoryuk 2 12!78 250 19 43.5 26.3 17.2 75,476 15,303 62,116 12,594 82,503 90,780 74,710 Minto 218}72 377 44 39.2 22.2 (7.0 84,370 31,890 67,133 25,375 104,208 116,260 92,508 Mountain Village 7581 176:329 31 44.5 27.3 17.2 230,533 92,393 190,953 76,531 269,390 322,926 267,484 New Stuyahok 421 103 333 I4 423 25.2 17.1 127,515 21,524 104,069 17,566 126,520 149,039 121,635 Noatak 333 86 372 57 46.3 29.0 173 126.420 79,788 105,832 66,794 199,845 206,208 172,626 Noorvik 586s 1271 378 30 47.2 29.91'17.4 191,491 75,557 161,087 63,560 245,685 267,048 224,647 Nulato 35%102 306 51 41.9 24.9 17.0)114,580 66,960 93,237 54,487 156,460 181,541 147,724 Nunapitchuk 456)104!300 12 42.7 25.6 7.1 117,601 20,104 96,253 16,455 125,980 137,706 112,708 Old Harbor 310!99)289 32 42.4 25.3 17.1 106,652 36,573 '87,105 29,870 129,716 143,225 116,975 Pilot Station 523,113}321 20 4.9 24.8 17.1 133,399 38,771 108,550 31,549 145,852 172,170 140,099 Pitkas Point 135;38 269 28 418 24.5 17.3 37,440 13,792 30,443 11,215 41,899 $1,232 41,658 Quinhagak 549 134 282 17 41.9 24.8 17.1 138,598 33,572 112,781 27,319 153,940 172,170 140,099 Russian Mission 295 53 317 4 417 24.6 7.1 61,347 4,506 49,844 3,661 62,880 65,853 53,505 Savoonga 604 129 259 id 44.6 24.7 19.9 133,466 34,446 110,620 28,550 147,539 167,912 139,170 Scammon Bay 434 97 324 i 42.3 24.9 17.4 116,812 18,268 95,334 14,909 120,683 135,081 110,243 Selawik 648)175!254 21 46.6 29.2 17.4 188,162 58,069 157,779 48,692 226,742 246,231 206,472 Shageluk 144)37,275 29 37.1 20.2 16.9 31,518 12,898 24,554 10,049 55,984 44,416 34,603 Shaktoolik 199,53 406 35 43.1 26.0 17.2 70,787 26,815 58,099 22,009 97,942 97,602 80,107 Shismaref 536 143 285 25 45.7 28.5 17.2 168,173 54,649 140,307 45,594 193,380 222,823 185,901 Shungnak 242 56 387 46 51.4 33.8 17.6 94,315 $2,987 80,909 45,455 137,65}147,303 126,364 St.Mary's 479 170 315 48 415 24.5 17.0 194,107 83,379 157,471 67,642 256,456 277,486 225,013 St.Michael 341 84!266 27 418 24.7 17.1 81,901 33,291 66,595 27,069 104,050 115,192 93,665 Stebbins 475 109;247 22 419 24.8 Wt 98,984 38,077 80,546 30,984 124,331 137,060 111,530 Togiak 745 193)314 23 41.0 24.0 17.1 216,191 60,066 174,700 48,538 242,957 276,257 223,238 Tooksook Bay 520)95;362 19 42.3 25.2 17.128,898 36,242 105,197 29,578 150,165 165,140 134,776 Tununak 3161 80:267 23 41.2 24.1 17.4 76,763 25,842 62,129 20,916 99,438 102,605 83,045 Upper Kalskag 184:44 308 4 42.3 25.2 17.1 50,479 2,554 41,198 2,084 59,546 53,033 43,282 Wales 173:53:267 42 448 27.6 17.2 56,887 29,302 47,208 24,317 77,206 86,190 71,525 Total ----0 -- Alatna -See Allakaket ::--0 :- Allakaket Energy Systems 157,73 222 39 39.1 27.5 11.6 54,076 20,199 42,988 16,057 71,850 74,275 $9,046 Alutiig Power Company (Karluk)}(1)----0 :- Andreanof Electric Corporation (Atka)OT 28 198 29 38.0 20.5 17.5 17,772 9,163 13,978 7,207 23,796 26,935 21,185 Aniak Light &Power Company.Inc.581 164 404 9 43.0 26.0 17.0 218,350 19,55]179,088 16,035 263,243 237,900 195,123 Atinautluak Joint Utilities 273 5%339 3 46.8 16.4 30.4 85,318 3,874 71,619 3,252 53,441 89,192 74,871 Beaver Joint Utilities 102!62!102 26 40.0 30.3 9.7 21,842 9,137 17,504 7,323 41,104 30,979 24,827 Bethel Wilities Corp Inc.5,195!1744 351 21 23.3 94 13.9 878,976 157,578 461,462 82,729 813,312 1,036,554 544,191 Buckland,City of (ht)----0 -- Chenega Bay (I)----0 -- Chigmik Plectrie 1661 73 218 47 280 137 {44 31,846 15,702 20,976 10,343 41,1607 47,548 31,319 CineDake Plectnc ttlity.Ine 141 37 1291 2 43.7 295 162 53.458 12.690 44,600 10,587 82.016 66,148 55,187 Page 2 12/31/98 Average monthiy Utility's Avg.|)Power Cost EffectiveResi-Eligible kwh per Residential |Equalization]Residential 11.3 cents 11.3 cents 17.0 cents 17.0 cents Total PCE Total Total Utility/Community Popu-dential Residential Community [|Rate (based Rate Rate residential com fac residential com fac Payment /Payment /Payment / lation Customers Customer Fac./Pop.on 500 kwh)Existing 11.3 cent 17.0 cent (kwh)(kwh)(cents/kwh)|(cents/'kwh)§(cents/kwh)$/year $/year $/year S/year Formula "Lifeline""Lifeline” Chitina Electric Inc.49 31 248 26 33.6 14.0 19.6 20,597 3,423 15,332 2,548 26,300 24,020 17,88) Circle Utilities 107 34 261 22 48.0 25.9 22.1 39,130 10,593 33,053 8,948 52,654 49,724 42,001 Platinum Power Plant qd)----0 -- Coffman Cove Utility Association ----0 -- Coffman Cove 254 1005 393 20 23.0 12.3 10.7 49,140 6,979 25,200 3,579 75,602 56,119 28,779 Whale Pass 92 20 359 3 23.0 12.3 10.7 9,828 421 5,040 216 16,259 10,249 5,256 Cordova Electric Cooperative,Inc.2,5681 920 432 65 21.0 98 1.2 374,808 193,677 154,560 79,867 714,178 568,485 234,427 Diomede Joint Utilities 154 44 275 26 43.0 26.8 16.3 46,067 15,463 37,784 12,683 61,470 61,530 50,467 Eagle Power Company 146)129 198 6 39.0 28.9 10.1 84,802 2,929 67,352 2,326 115,879 87,731 69,678 Egegik Light &Power Co.143 65 259 32 50.0 19.5 30.5 78,145 20,976 66,635 17,887 60,790 99,121 84,522 Ekwok Electric 102)56 243 15 40.0 10.6 29.4 46,857 5,245 37,551 4,203 25,447 52,102 41,754 Elfin Cove Electric Utility 65 30}297 23 26.2 15.8 10.4 15,940 2,710 9,842 1,673 27,384 18,649 T1515 False Pass Electric Association 87,28 279 28 42.0 16.2 25.9 28,742 8,903 23,405 7,250 22,527 37,645 30,655 Far North Utilitities (Central)161 69 168 2 43.1 24.9 18.2 44,272 1,419 36,337 1,165 63,595 45,692 37,502 ”G&K,inc.(Cold Bay)2201 35 363 40 37.7 24.2 13.5 38,808 27,584 30,429 21,629 75,060 66,392 52,058 Galena,City of 527 209 277 42 30.4 10.2 20.2 132,667 50,759 93,075 35,611 113,984 183,426 128,687 Golovin Power Utilities 156!52!229 31 38.0 211 17.0 38,236 15,682 30,073 12,334 51,263 53,918 42,407 Gustavus Electric Company si 254)256 16 46.5 33.1 13.4 274,924 9,959 230,405 8,346 344,161 284,883 238,751 Gwitchyaa Zhee Utilities (Fort Yukon)663}258}231 27 30.9)*16.2 14.7 139,873 42,110 99,196 29,863 171,102 181,983 129,059 Haines Light &Power 1,394 76%404 41 16.3 6.1 10.2 161,490 34,549 --235,103 196,039 - Hughes Power &Light 78:21 183 36 51.0 28.6 22.4 18,259 13,531 15,638 11,588 25,073 31,790 27,226 I-N-N Electric Cooperative 416 212 285 35 46.4 31.2 15.3 254,281 61,047 212,987 $1,133 330,049 315,328 264,120 Igiugig Electric Company 33!171 196 58 58.3 24.5 33.8 18,749 10,812 16,475 9,501 23,060 29,562 25,976 Ipnatchiaq Electric Company (Deering)153 39 339 30 38.5 27.1 14.5 43,201 14,895 34,148 11,774 62,470 58,096 45,922 King Cove,City of 879)179 278 48 20.0 64 13.6 51,890 44,470 17,893 15,335 75,244 96,360 33,228 Kipnuk Light Plant 470 121 379 40 27.4 13.2 14.2 81,820 35,988 52,853 23,247 128,284 117,808 76,100 Kobuk Vailey Electric Company (1)----0 -- Kokhanok Village Council 152 43 217 16 55.1 30.2 24.9 49,060 12,897 42,675 11,219 55,035 61,957 53,894 Koliganek Village Council 181 64 249 0 50.0 13.6 36.4 74,066 -63,157 -62,868 74,066 63,157 Kotlik Electric Services 548:123 282 13 30.0 18.7 11.3 77,762 15,930 54,059 11,074 100,507 93,692 65,134 Kotzebue Electric Association 2,947!799 459 40 21.8 8.4 13.4 352,359 147,943 161,078 67,631 486,204 500,302 228,709 Koyukuk,City of qa).::-0 -- Kwethluk,Inc.688;135 252 6 44.0 17.1 26.9 133,270 15,790 110,039 13,038 84,315 149,060 123,077 Kwig Power Company (Kwigillingok)278 73 351 5 50.0 26.7 23.3 118,654 6,681 101,178 5,697 80,476 125,335 106,875 Larsen Bay Utility Company 130 46 292 21 40.0 18.2 21.8 46,270 9,423 37,081 7,552 51,564 55,693 44,632 Levelock Electric Cooperative 105:44 311 6)44.2 27.0 17.2 54,090 25,081 44,719 20,736 60,611 79,172 65,455 Manley Utilitity Company 96 69 140 3 61.0 40.7 20.3 57,574 1,818 50,971 1,609 71,188 59,392 $2,580 Manokotak Power Company 410 99 289 14 35.0 15.4 19.6 81,364 16,161 61,795 12,274 67,403 97,525 74,070 McGrath Light &Power 479 170;396 51 37.2 24.0 13.2 184,926 76,108 144,228 59,358 291,121 261,034 203,586 Middle Kuskokwim Electric Cooperative ----0 -- Chuathbaluk 125 3]199 8 62.5 40.7 21.8 37,844 6,090 33,631 5,412 43,468 43,934 39,043 Crooked Creek 106 30 255 9 62.5 40.7 21.8 47,051 5.879 41.813 $,225 56,261 52,930 47,037 Red Devil 53 n 251 l 62.5 40.7 21.8)13,872 166 12,328 148 22,234 14,039 12,476 Page 3 12/31/98 Average monthly Utility's Avg.|)Power Cost EffectiveResi-Eligible kwh per Residentia!|Equalization]Residential 11,3 cents 11.3 cents 17.0 cents 17.0 cents Total PCE Total Total Utility/Community Popu-dential Residential Community Rate (based Rate Rate residential com fac residential com fac Payment /Payment /Payment / lation Customers Customer Fac./Pop.on 500 kwh)4 Existing (1.3 cent 17.0 cent {kwh)(kwh)(cents/'kwh)}(cents/'kwh)J (cents/kwh)S/year S/year $/year $/year Formula "Lifeline”"Lifeline” Sleeetmute 106 33 175 2 62.5 40.7 21.8 35,440 1,326 31,494 1,178 38,367 36,765 32,672 Stony River 51 16 180 8 62.5 40.7 21.8 17,720 2,445 15,748 2,173 26,218 20,166 17,921 Total ----0 -- Naknek Electric Association,Inc.1,482:657 372 59 20.5 8.8 11.7 253,865 96,244 96,579 36,615 338,127 350,109 133,194 Napakiak Ircinrag Power Company 326 84 288 12 56.1 36.9 19.2 129,834 21,622 113,315 18,871 120,522 151,456 132,186 Napaskiak Electric Utility 404 88 265 1 45.0 21.7 23.3 94,142 1,360 78,219 1,130 59,116 95,502 79,349 Naterkaq Light Plant (Chefornak)361 75 368 4 34.0 12.5 21.5 71,505 4,363 53,550 3,267 46,448 75,868 56,817 Nelson Lagoon Electric Cooperative,Inc.86 42 335 18 42.0 25.4 16.6 $1,800 5,829 42,182 4,747 53,714 57,629 46,929 Nightmute Power Plant 18 361 264 2 30.5 18.9 Iho 21,871 768 15,378 540 26,898 22,639 15,938 Nikolai Light &Power 125 40 226 67 50.0 21.6 28.4 42,034 38,879 35,843 33,152 55,372 80,912 68,995 Nome Joint Utility System 3,984 1417,362 36 19.6 5.0 14.6 493,966 141,565 154,736 44,346 398,880 635,531 199,082 North Slope Borough Power &Light ----0 -- Anaktuvuk Pass 292 79 375 7 15.0 5.3 9.7 12,277 912 --34,336 13,188 - Atqasuk 2331 53 474 15 15.0 5.3 97 8,236 1,563 --28,891 9,800 . Kaktovik 2101 7h 404 15 15.0 5.3 97 11,033 1,421 --28,672 12,454 - Nuigsut 410 88 388 13 15.0 5.3 97 13,675 2,309 --37,598 15,984 - Point Hope 723 157 438 9 15.0 5.3 9.7 24,398 3,043 --57,105 27,441 - Point Lay 139 53 371 9 15.0 5.3 97 8,236 557 --22,753 8,794 - Wainwright 543)127 393 13 15.0 5.3 9.7 19,736 3,168 .-48,281 22,904 - Total ----0 -- Northway Power &Light 113 $03 318 46 26.5 16.8 9.7 59,690 9,393 37,306 5,870 84,506 69,083 43,177 Nushagak Electric Cooperative,Inc.(Dillingha 2,243 902 412 3I 217 79 13.8 393,994 86,704 178,055 39,183 492,979 480,697 217,238 Ouzinkie,City of 25%72:344 28 30.0 16.8 13.2 55,503 16,131 38,585 11,214 67,933 71,633 49,798 Pedro Bay Village Council 42!27 216 48 60.0 26.6 33.4 34,104 11,725 30,112 10,353 31,024 45,829 40,465 Pelican Utilitiy Company 209;18]178 49 15.1 1.9 13.3 14,724 4,680 --11,442 19,405 - Perryville,City of 108 36 241 0 30.0 9.2 20.8 19,469 -13,534 -11,214 19,469 13,534 Pilot Point Village Council 94 44 279 0 31.7 17.0 14.7 30,069 -21,668 -32,181 30,069 21,668 Port Heiden,City of 126 52 178 2 30.0 8.2 218 20,774 688 14,442 478 12,031 21,462 14,920 Puvurnaq Power Company (Kongiganak)(1)----0 .. Ruby,City of 2108 89 179 56 54.0 17.0 37.0 81,704 60,284 70,798 52,237 64,915 141,988 123,034 Sand Point Electric Company 98%274!378 43 29.9 17.7 12.2 214,049 95,829 148,453 66,462 370,486 309,878 214,915 Sheldon Point,City of 163}38 181 37 29.0 20.9 8.1 14,580 12,663 9,885 8,585 30,559 27,243 18,470 St.George Municipal Electric Utility 195;52 406 $2 31.5 19.7 11.8 44,117 24,535 31,668 17,612 70,750 68,652 49,280 St.Paul Municipat Electrqic Utility 767.150 498 63 35.0 9.5 25.5 149,310 136,455 113,400 103,637 121,142 285,765 217,037 Stevens Village Energy Systems 102 401 101 37 55.0 7.1 37.9 21,161 19,610 18,401 17,052 18,495 40,771 35,453 Takotna Community Association 62 3h 192 65 48.1 21.7 26.4 26,228 17,709 22,166 14,966 33,265 43,937 37,132 Tanalian Electric cooperative,Inc.6%53!262 0 33.7 16.5 17.2 37,363 -27,855 -38,469 37,363 27,855 Tanana Power Company 351 105 231 28 42.7 17.3 25.4 91,532 37,357 74,917 30,575 86,851 128,889 105,492 Tatitlek Electric Utility 14 39 176 18 39.0 15.4 23.6 22,769 6,873 18,084 5.459 14,708 29,643 23,543 Telida Village Utility (i)--..0 .. Feller Power Company 274 79,192 20 53.8 35.8 18.0 77,535 28.018 67,136 24,260 110,892 105,553 91,396 fenakee Springs Ww 86 184 23 340 183 15.7 43,150 7.027 32,315 5,263 50,042 50,178 37,578 Home Bay Pablo t adit .63501 20 313 80 2501 62 18.8]103,396 53,179 60,377 31.054 68,150 156,575 91,431 Page 4 12/31/98 Average monthly Utility's Avg.|)Power Cost EftectiveResi-Eligible kwh per Residential |Equalization}Residential 11.3 cents 11.3 cents 17.0 cents 17.0 cents Total PCE Total Total Utility/Community Popu-dential Residential Community Rate (based Rate Rate residential com fac residential com fac Payment /Payment /Payment / lation Customers Customer Fac./Pop.on 500 kwh)Existing 11.3 cent 17.0 cent (kwh)(kwh)(cents/'kwh)[|(cents/kwh)FF (cents/kwh)$/year $/year S/year $/year Fonnula "Lifeline""Lifeline Tlingit-Haida Regional Electrical Authority ----0 :- Angoon 601 174 439 26 33.9 18.0 15.9 165,161 41,736 123,505 31,209 214,998 206,896 154,715 Chilkat Valley 129 SI 250 0 33.9 18.0 15.9 61,728 -46,159 -53,920 61,728 46,159 Hoonah 903 298)440 51 33.9 18.0 15.9)282,862 123,793 211,520 92.571 413,613 406,654 304,091 Kake 696 255;460 37 33.9 18.0 15.9 242,046 69,245 180,999 51,780 335,507 311,291 232,779 Kasaan 41 23,361 1 33.9 18.0 15.9 23,832 78 16,325 58 21,615 21,909 16,384 Klawock 759 336 394 8 33.9 18.0 15.9]318,931 15,683 238,493 11,728 338,214 334,614 250,221 Total --- .0 -- Tuluksak Traditional Power Utility 375 671 102 !35.0 17.5 17.5 19,369 1,440 14,710 1,094 15,661 20,808 15.804 Tuntutuliak Community Service Assn.300:73 277 i0 46.0 24.0 22.0 $4,281 12,039 70,436 10,062 71,772 96,320 80,498 Umnak Power Company (Nikolski)35!15)197 39 45.0 23.1 21.9 11,960 5,477 9,937 4,551 17,578 17,437 14,488 Unalakleet Valikey Electric Cooperative 764)250;333 49 24.9 11.4 13.5 135,665 60,796 78,805 35,315 178,455 196,461 114,120 Unalaska Electric Utility 4,083,440,422 45 20.0 6.1 13.9 160,776 192,146 55,440 66,257 227,131 352,922 121,697 Unqusraq Power Company (Newtok)262 49 320 5 54.0 31.5 22.5 80,316 6,48)69,594 5,616 71,539 86,797 75,210 Venetie Village Electric (1)----0 -- White Mountain Utilities 209 67!188 42 48.0 21.8 26.2 $5,334 38,237 46,740 32,298 61,512 93,571 79,038 Yakutat Power 801 257 432 28 22.2 76 14.6 117,655 29,685 56,129 14,162 139,047 147,340 70,291 ----0 -- Akutan Electric Utility (8)436 43,317 21 32.3 15.8 16.5 34,356 23,430 25,031 17,071 35,420 $7,786 42,101 Alutiiq Power Company (Karluk)(11)71 13 318 9 53.3 34.3 22.0 20,846 3,154 18,017 2,726 20,581 24,000 20,743 Buckland,City of (10)415 80s 328 33.0 14.8 18.2 68,287 -50,350 -28,001 68,287 50,350 Chenega Bay (9)95 2%317 8 29.5 18.8 10.7;20,098 1,637 13,803 1,124 12,574 21,734 14,928 Kobuk Valley Electric Company (10)80 34 181 57 53.0 3n1 21.9 30,710 22,766 26,512 19,654 40,186 53,476 46,166 Koyukuk,City of (6)125:56 107 6 45.0 18.1 26.9 24,304 3,240 20,193 2,692 7,467 27,544 22,885 Platinum Power Plant (7)q)44 21 74 4 $0.0 26.0 24.0 7,191 840 6,132 716 6,277 8,031 6,848 Puvurnaq Power Company (Kongiganak)(11)294 68 307 18 45.0 20.9 24.1 84,384 21,731 70,111 18,056 64,490 106,115 88,167 Telida Village Utility (11)-:--5,467 -- Venetie Village Electric (11)182 63 181 37 51.0 13.2 37.8 $4,387 31,764 46,578 27,203 29,623 86,151 73,782 16,095,297 4,916,680 11,212,889 3,373,261 19,201,515 21,011,977 14,586,150 21,011,977 14,586,150 Page 5 12/31/98 Additional Communities Lifeline Rate Program Residential Only --No Community Facility Estimates (Source:1995 Alaska Electric Power Statistics) Resid.Rates above - 11.3 cents Glennallen 19.5 Kodiak 16.2 Matanuska Electric 11.5 Seward 12.2 Valdez 16.9 Resid.Rates above 17.0 cents 19.5 Number of resid. customers 993 4,150 29,848 1,511 1,423 "Rates"are based on 500 kWh per month and include fixed charges. Resid. Payment / 11.3 cents 341,989 854,070 250,723 57,116 334,690PHAHAHA&H3 1,838,588 $ $ Resid. Payment / 17.0 cents 104,265 104,265 12/31/98 ATTACHMENT 7 OPTION 1A UNIVERSAL SERVICE FUND 150%OF STATEWIDE AVERAGE RESIDENTIAL RATE OPTION 1A Power Cost Equalization/Universal Service Fund Projection of Revenues and Expenditures (FY 2000 -2013) Revenues 60%of Four Dam Pool Debt Service Contribution from PCE Fund Contribution from Universal Service Fund Total Expenditures PCE Expenditure Lifeline Rate Expenditure (17.0 cent benchmark) PCE Fund FY 2000 Appropriation of SE Loan FY 2000 Appropriation of General Funds Beginning of year balance Interest earnings (6%of average balance) Expenditure from PCE Fund End of year balance Universal Service Fund Required Cents/kWh at 5.0 Billion kWh/year Projected Four Dam Poo!Debt Service: Notes: All dollars in thousands. PCE Fund balance =$3.2 million at end of FY99. 2000 2001 2002 2003 2004 2005 2006 5,527 6,551 6,626 6,700 6,775 6,850 6,862 10,173 9,463 8,074 8,000 7,925 7,850 7,838 15,700 16,014 14,700 14,700 14,700 14,700 14,700 15,700 16,014 14,700 14,700 14,700 14,700 14,700 20,000 0 23,200 14,114 1,087 563 10,173 9,463 14,114 5,214 0.16 0.16 0.16 0.16 0.16 9,212 *10,918 11,043 11,167 11,292 11,417 11,436 *(Estimate =$10.8 million debt service minus $1.6 million "self-hetp") 1/27/99 OPTION 1A Power Cost Equalization /Universal Service Fund Projection of Revenues and Expenditures Revenues 60%of Four Dam Pool Debt Service Contribution from PCE Fund Contribution from Universal Service Fund Total Expenditures Lifeline Rate Expenditure (17.0 cent benchmark) Universal Service Fund Required Cents/kWh at 5.0 Billion kWh/year Projected Four Dam Pool Debt Service:11,549 2007 2008 2009 2010 2011 2012 2013 6,872 6,884 6,895 6,906 6,917 6,929 6,941 7,828 7,816 7,805 7,794 7,783 7,771 7,759 14,700 14,700 14,700 14,700 14,700 14,700 14,700 14,700 14,700 14,700 14,700 14,700 14,700 14,700 0.16 0.16 0.16 0.16 0.16 0.16 0.16 11,454 11,473 11,494 11,510 11,529 11,568 1/27/99 ATTACHMENT 8 OPTION 1B UNIVERSAL SERVICE FUND 100%OF STATEWIDE AVERAGE RESIDENTIAL RATE OPTION 1B Power Cost Equalization /Universal Service Fund Projection of Revenues and Expenditures (FY 2000 -2013) Revenues 60%of Four Dam Pool Debt Service Contribution from PCE Fund Contribution from Universal Service Fund Total Expenditures PCE Expenditure Lifeline Rate Expenditure (11.3 cent benchmark) PCE Fund FY 2000 Appropriation of SE Loan FY 2000 Appropriation of General Funds Beginning of year balance Interest earnings (6%of average balance) Expenditure from PCE Fund End of year balance Universal Service Fund Required Cents/kWh at 5.0 Billion kWh/year Projected Four Dam Pool Debt Service: Notes: All dollars in thousands. PCE Fund balance =$3.2 million at end of FY99. 2000 2001 2002 2003 2004 2005 2006 5,527 6,551 6,626 6,700 6,775 6,850 6,862 10,173 9,463 16,274 16,200 16,125 16,050 16,038 15,700 16,014 22,900 22,900 22,900 22,900 22,900 15,700 16,014 22,900 22,900 22,900 22,900 22,900 20,000 0 23,200 14,114 1,087 563 10,173 9,463 14,114 5,214 0.33 0.32 0.32 0.32 0.32 9,212 *10,918 11,043 11,167 11,292 11,417 11,436 *(Estimate =$10.8 million debt service minus $1.6 million "self-help”) 1/27/99 OPTION 1B Power Cost Equalization /Universal Service Fund Projection of Revenues and Expenditures Revenues 60%of Four Dam Pool Debt Service Contribution from PCE Fund Contribution from Universal Service Fund Total Expenditures Lifeline Rate Expenditure (11.3 cent benchmark) Universal Service Fund Required Cents/kWh at 5.0 Billion kWh/year Projected Four Dam Pool Debt Service: 2007 2008 2009 2010 2011 2012 2013 6,872 6,884 6,895 6,906 6,917 6,929 6,941 16,028 16,016 16,005 15,994 15,983 15,971 15,959 22,900 22,900 22,900 22,900 22,900 22,900 22,900 22,900 22,900 22,900 22,900 22,900 22,900 22,900 0.32 0.32 0.32 0.32 0.32 0.32 0.32 11,454 11,473 11,491 11,510 11,529 11,549 11,568 1/27/99 ATTACHMENT 9 OPTION 2 MODIFIED PCE GENERAL FUND ENDOWMENT OPTION 2 Power Cost Equalization /Modified and Capped Projection of Revenues and Expenditures (FY 2000 -2013) 2000 2001 2002 2003 2004 2005 2006 Revenues 60%of Four Dam Pool Debt Service 5,527 6,551 6,626 6,700 6,775 6,850 6,862 Contribution from Endowment . 10,173 9,463 9,708 9,961 10,219 10,150 10,138 Total 15,700 16,014 16,334 16,661 16,994 17,000 17,000 Expenditures , PCE Expenditure Capped at $17 Million per Year 15,700 16,014 16,334 16,661 16,994 17,000 17,000 Endowment FY 2000 Appropriation of SE Loan 20,000 FY 2000 Appropriation of General Funds 75,000 Beginning of year balance 98,200 93,614 89,484 84,853 79,685 73,940 67,922 Interest earnings (6%of average balance)5,587 5,333 5,078 4,792 4,475 4,132 3,771 Expenditure from Endowment 10,173 9,463 9,708 9,961 10,219 10,150 10,138 End of year balance 93,614 89,484 84,853 79,685 73,940 67,922 61,555 Projected Four Dam Pool Debt Service:9,212 *10,918 11,043 11,167 11,292 11,417 11,436 *(Estimate =$10.8 million debt service minus $1.6 million "self-help") Notes: All dollars in thousands. PCE Fund balance =$3.2 million at end of FY99. Four Dam Pool "self-help"estimated only for FY 2000. 1/27/99 OPTION 2 Power Cost Equalization /Modified and Capped Projection of Revenues and Expenditures 2007 2008 2009 2010 2011 2012 2013 Revenues 60%of Four Dam Pool Debt Service 6,872 6,884 6,895 6,906 6,917 6,929 6,941 Contribution from Endowment , 10,128 10,116 10,105 10,094 10,083 10,071 10,059 Total 17,000 17,000 17,000 17,000 17,000 17,000 17,000 Expenditures PCE Expenditure Capped at $17 Million per Year 17,000 17,000 17,000 17,000.17,000 17,000 17,000 Endowment Beginning of year balance 61,555 54,817 47,686 40,139 32,150 23,694 14,743 Interest earnings (6%of average balance)3,389 2,986 2,558 2,106 1,627 1,120 583 Expenditure 10,128 10,116 10,105 10,094 10,083 10,071 10,059 End of year balance 54,817 47,686 40,139 32,150 23,694 14,743 5,267 Projected Four Dam Pool Debt Service:11,454 11,473 11,491 11,510 11,529 11,549 11,568 1/27/99 ATTACHMENT 10 OPTION 3 MODIFIED PCE DECLINING GENERAL FUND APPROPRIATIONS OPTION 3 Power Cost Equalization /Modified and Capped Projection of Revenues and Expenditures (FY 2000 -2013) Revenues 60%of Four Dam Pool Debt Service Contribution from PCE Fund Total Expenditures PCE Expenditure Capped at $15 Million per Year PCE Fund FY 2000 Appropriation of SE Loan General Fund appropriations Beginning of year balance interest earnings (6%of average balance) Expenditure from PCE Fund End of year balance Projected Four Dam Pool Debt Service: Notes: All dollars in thousands. PCE Fund balance =$3.2 million at end of FY99. Four Dam Pool "self-help"estimated only for FY 2000. 2000 2001 2002 2003 2004 2005 2006 5,527 6,551 6,626 6,700 6,775 6,850 6,862 9,473 8,449 8,374 8,300 8,225 8,150 8,138 15,000 15,000 15,000 15,000 15,000 15,000 15,000 15,000 15,000 15,000 15,000 15,000 15,000 15,000 20,000 15,000 12,500 10,000 7,500 5,000 2,500 0 38,200 43,235 47,126 48,829 48,210 45,131 39,444 2,008 2,341 2,576 2,681 2,646 2,463 2,122 9,473 8,449 8,374 8,300 8,225 8,150 8,138 30,735 37,126 41,329 43,210 42,631 39,444 33,428 9,212 *10,918 11,043 11,167 11,292 11,417 11,436 *(Estimate =$10.8 million debt service minus $1.6 million "self-help") 1/27/99 OPTION 3 Power Cost Equalization /Modified and Capped Projection of Revenues and Expenditures Revenues 60%of Four Dam Pool Debt Service Contribution from PCE Fund Total Expenditures PCE Expenditure Capped at $15 Million per Year PCE Fund General Fund appropriations Beginning of year balance Interest earnings (6%of average balance) Expenditure from PCE Fund End of year balance Projected Four Dam Pool Debt Service: 2007 2008 2009 2010 2011 2012 2013 6,872 6,884 6,895 6,906 6,917 6,929 6,941 8,128 8,116 8,105 8,094 8,083 8,071 8,059 15,000 15,000 15,000 15,000 15,000 15,000 15,000 15,000 15,000 15,000 15,000 15,000 15,000 15,000 0 0 0 0 0 0 0 33,428 27,062 20,327 13,198 5,653 (2,333)(10,786) 1,762 1,380 976 549 97 (382)(889) 8,128 8,116 8,105 8,094 8,083 8,071 8,059 27,062 20,327 13,198 5,653 (2,333)(10,786)(19,734) 11,454 11,473 11,491 11,510 11,529 11,549 11,568 1/27/99