HomeMy WebLinkAboutAEA Power Cost Equalization Program Guide Updated August 2013ALASKA
ENERGY AUTHORITY
Power Cost
Equalization
Program Guide
Updated August 2013
[=ALASKACE™ENERGY AUTHORITY
We're on the web at:
www.akenergyauthority.org
Regulatory Commission of Alaska
PCE Program Regulations
3 AAC 52.600
Applicability,purposes,and waiver.
3 AAC 52.610
Computation of power cost equalization.
3 AAC 52.620
Generation efficiency and line loss standards.
3 AAC 52.630
Standards for non-fuel costs.
3 AAC 52.640
Adjustments to power cost equalization.
3 AAC 52.650
Processing of power cost equalization requests.
3 AAC 52.660
Annual filing requirements.
3 AAC 52.670
Other requirements.
3 AAC 52.680
Effect on power cost equalization for non-
compliance.
3 AAC 52.690
Definitions.
34
Section 42.45.160
Adjustments to power cost equalization.
Section 42.45.170
Equalization assistance to unregulated utilities.
Alaska Energy Authority
PCE Program Regulations
3 AAC 107.200
Technical requirements;metering.
3 AAC 107.210
Overpayments.
3 AAC 107.220
Power cost equalization pro-rata reduction.
3 AAC 107.230
Exclusions from power cost equalization.
3 AAC 107.240
Reporting and recordkeeping requirements.
3 AAC 107.250
Power cost equalization and the commission.
3 AAC 107.260
Standards for customer eligibility.
3 AAC 107.270
Definitions.
33
Published by:
Alaska Energy Authority
813 West Northern Lights Blvd.
Anchorage,Alaska 99503
907-771-3000
907-771-3044 Fax
1-888-300-8534 (toll free in Alaska)
akenergyauthority.org
Throughout this publication,the following abbrevi-
ations and terms are used:
AEA:Alaska Energy Authority
RCA:Regulatory Commission of
Alaska
kWh:Kilowatt-hour
PCE:Power Cost Equalization
PCE Level:Amount payable per eligible
kWh,expressed in cents.
Updated August 2013
State of Alaska Statute
Power Cost Equalization Program
Section 42.45.070
Power cost equalization endowment fund es-tablished.
Section 42.45.080
Powers and duties of the commissioner of
revenue.
Section 42.45.085
Use of the power cost equalization fund.
Section 42.45.099
Definition.
Section 42.45.100
f ower cost equalization and rural electricund.
Section 42.45.110
Entitlement to power cost equalization.
Section 42.45.115
Exclusion from eligibility.
Section 42.45.120
Notice to customers.
Section 42.45.130
Cost minimization.
Section 42.45.140
Customer petitions.
Section 42.45.150
Definitions for AS 42.45.100-42.45.150
32
TRAINING
Is training available to utilities participating
in the PCE program or utilities that have
previously participated but are currently in-
active?
AEA,may provide training to staff of a partici-
pating utility and take part in workshops that
address all aspects of the PCE program.Indi-
viduals or utilities interested in training should
contact AEA for further information.
Are there other training opportunities avail-
able through AEA?
Yes.AEA participates in a variety of other
training opportunities for rural utility bookkeep-
ers,managers and operators.There are also
training programs available to bulk fuel tank
operators and hydro facility operators.Further
information in these training programs can also
be obtained from AEA.
31
Table of Contents
Program Inception
Program Funding/Endowment Fund
Implementing Pro-Rata Reductions
PCE Program Goal
Eligible Utilities &Customers
Roles of the State Agencies
Alaska State Map
Utility/Community Listing
Participation in PCE Program
Regulated vs.Unregulated
Acceptable Costs of Utility
Calculation of PCE Level
Efficiency Standards
Customer Rates/PCE Credit
Community Facility Customers
Approval of PCE Levels and Payments
Filing Requirements
Changes in PCE Levels
Training
Statutes and Regulations
19-23
23-26
27-28
28-29
29-30
30
31
32-34
PCE Program Inception
The PCE program was established in 1985 as one
of the components of a statewide energy plan,
providing economic assistance to customers in
rural areas of Alaska.Prior to the PCE program,
there was the Power Production Assistance Pro-
gram and the Power Cost Assistance Program.
The PCE program provides economic assistance
to communities and residents in rural areas of
Alaska where,in many instances,the kilowatt-
hour charge for electricity can be three to five
times higher than the average kWh rate of 14.06¢
(7/13)in Anchorage,Fairbanks or Juneau.
The PCE program was established to assist rural
residents at the same time state funds were used
to construct major energy projects to assist more
urban areas.Most urban and road connected
communities benefit from major state-subsidized
energy projects such as the Four Dam Pool,Brad-
ley Lake,and the Alaska Intertie.
Rural communities not on the road system that
are dependent on diesel fuel do not benefit from
the large subsidized energy projects,and PCE is
a cost-effective alternative to provide comparable
rate relief to rural residents.
Under what other situations may AEA with-
hold PCE payments?
3 AAC 107.240 (f)states that "An eligible elec-
tric utility shall make its records available to the
authority and the commission within 60 days
after receipt of a request to do so.”
AEA may also withhold payment,at the request
of RCA,if the utility has not submitted its annu-
al update filing.Payment will resume when the
required filing is received by the RCA.
How doesa utility's PCE level change?
A regulated utility must obtain RCA's approval
to change any rate it charges to its customers.
Its PCE level may be adjusted when a change
to the utility's rates are approved by RCA.
An unregulated utility does not have to have
approval by RCA to change any of its rates.In
addition to providing financial information to jus-
tify changes in its PCE level,an unregulated
utility must file information annually with RCA to
support that its existing PCE level is correct.
The utility is also required to send a fuel price
change form to RCA by the prescribed due
date set by RCA.The utility must also report
to the RCA,any change in its rates,30 days
prior to implementing the new rates.
30
must submit a copy of its monthly records sup-
porting the eligible kWh usage.This back-up
data documents in summary for each customer:
the kWh consumption,gross billed,kWh eligi-
ble for PCE credit;the dollar amount of PCE
credit given,the net amount due for that month,
payments made by the customer during that
month and the total amount due.
The information provided with the monthly re-
port is used to verify compliance with the pro-
gram requirements.
What happens if a utility does not submit
all the information needed by AEA to au-
thorize payment?
If a utility does not submit all the information in
the monthly report required to authorize pay-
ment,or if AEA believes there are reasons to
question some of the information provided,
AEA will work with the utility to resolve the
problem.However,if the utility does not provide
evidence to support its claim,AEA may sus-
pend payment of PCE assistance in full or in
part,as applicable,until the problem is re-
solved.
29
PCE Program Funding
Power Cost Equalization Fund and Rural Elec-
tric Capitalization Fund:
This fund is administered by the Alaska Energy
Authority and is composed of:
1.Appropriations by the State Legislature.
2.Appropriations from the NPRA.
3.Gifts,bequests,and contributions from other
sources.
4.Interest earned on the fund balance.
PCE Endowment Fund:
The PCE Endowment Fund was created and capi-
talized in FY 2001 with Funds from the Constitu-
tional Budget Reserve and the Four Dam Pool
Project sale proceeds,and further capitalized in
FY 2007 and FY 2012 with General Funds.The
PCE Endowment Fund is an Alaska Energy Au-
thority Fund managed by the Department of Reve-
nue;it is invested to earn 7%over time.7%of the
PCE Endowment Fund's three-year monthly aver-
age market value may be appropriated to the PCE
Rural Electric Capitalization Fund for annual PCE
program costs.
The June 30,2013 PCE Endowment Fund bal-
ance was 840,214,875.
PCE Program Funding (continued)
Program cost and pro-rata reductions:
42.45.110 (i)
The authority shall review the report required
under (h)of this section.After review and ap-
proval of the report,the authority shall,subject
to appropriation,pay to each eligible electric
utility an amount equal to the power cost
equalization per kilowatt-hour determined un-
der (a)and (c)of this section,multiplied by the
number of kilowatt-hours eligible for power
cost equalization that were sold during the
preceding month to all customers of the utility
under (b)of this section.Payment shall be
made by the authority within 30 days after re-
ceipt from the utility of the report required un-
der (h)of this section./f appropriations that
have been made for the purpose by July 1
of a fiscal year are insufficient forpayment
in full,the amount paid to each electric
utility shall be reduced on a pro rata basis.
In making the pro rata reductions required
by this subsection,the authority may not
consider any potential supplemental ap-
propriation until the appropriation has
been enacted.
Example:
If the total kWh usage of all community facili-
ties in one community is 5,000 kWh in one month,
And there are 50 residents in the community.
Then the utility would receive PCE for only
3,500 kWh
(70 kWh x 50 residents -3,500 kWh).
The remaining 1,500 kWh are not eligible for
PCE,and would be charged the full rate.
What happens after RCA approves a PCE
level?
RCA notifies the utility and AEA of the PCE lev-
el.Then the utility computes the customer's bill
for the total electricity used during the month,
subtracts the amount to be paid by the PCE
program,and charges the customer the differ-
ence.The PCE statute requires that the cus-
tomer is notified of the PCE credit with every
bill.
How does the utility receive PCE payments
from AEA?
The utility files a PCE Utility Monthly Report
with AEA which shows the kWhs eligible for
PCE payments.This report also contains other
utility data as required by AEA.The utility also
28
What is a community facility customer?
The PCE statute defines a community facility
as a water,sewer or charitable educational fa-
cility,public outdoor lighting,or a community
building whose operation is not paid for by the
State or Federal government or by a private
commercial organization.A community building
is further defined as a community facility that is
not operated for profit,and that is open to the
general public.AEA determines the community
buildings that may be included in this class of
customers based upon information provided by
the utility and the facility owner.
Does a community facility customer receive
PCE for all the kilowatt hours is uses?
Yes,in most cases.For customers designated
as community facilities,the statute sets a total
limit on the number of kilowatt hours eligible for
PCE within each community.The monthly limit
for all community facilities in a community is
calculated by multiplying the number of resi-
dents in the community,determined by the De-
partment of Community and Economic Devel-
opment,by 70 kWh.In most communities,the
group monthly limit is not reached.
27
Implementing a Pro-Rata Reduction in PCE
Levels
If there are not enough funds to pay for the cost of
the program in a given fiscal year,the PCE levels
must be reduced.
AEA notifies RCA that it has been determined that
there is not enough money to fund the program,
identifies the pro-rata reduction needed,and when
it must be implemented.The RCA then recalcu-
lates the PCE levels for each utility in the pro-
gram,applying the new funding level,and notifies
the utilities of the change.
For Example:
In February,AEA determines that PCE mon-
ies will not last through the fiscal year (June
30).It notifies RCA that,to keep some level
of funding for the entire year for all partici-
pating utilities,a reduction of 10%in all PCE
levels must take place effective in May.RCA
then recalculates the PCE levels and issues
a notice to all participating utilities that in-
cludes the new PCE level and its effective
date.
PCE Program Goal
The program goal is to attempt to "equalize”
high costs of electricity in rural communities
with the lower costs in more urban areas.
Communities in areas that are not served by
road experience very high costs of producing
electricity,usually by diesel,due to high trans-
portation costs and high diesel prices.These
high costs must be recovered from the limited
number of customers with limited disposable
income associated with generally low econom-
ic development.
PCE is the core element to ensure the finan-
cial viability of centralized power generation in
rural communities.
Reliable lower cost energy enhances the quali-
ty of life,standard of living and economic
strength of the communities.
Economic development and affordable power
go hand-in-hand in the effort to grow healthy
economies in rural Alaska.
What part of a residential customer's bill is
eligible for PCE credit?
A residential customer will only receive PCE
credit for up to 500 kWh per month.
/example:\
If a customer used 400 kWh in one month,and the utility
charges 50¢/kWh,and the approved PCE level is 35¢/kWh;
Then the customer's bill would be calculated as follows:
400 kWh x 50 cents/kWh =$200.00
minus PCE credit:
400 kWh x 35 cents/kWh =$140.00
the customer pays $60.00
Another example is:
If a customer used 800 kWh in one month,and the utility
charges 50¢/kWh,and the approved PCE level is 35¢/kWh;
Then the customer's bill would be calculated as follows:
_800 kWh x 50 cents/kWh =$400.00
minus PCE credit:
500 kWh x 35 cents/kWh =$175.00
\the customer pays $225.00 /
26
Are all utility customers eligible to receive
PCE credit?How much?
The statute excludes from PCE,State and Fed-
eral offices and facilities,as well as commercial
customers,including schools.All other utility
customers are generally eligible to receive PCE
credits,within the following statutory limits:
e Residential customers are eligi-
ble for PCE credit up to 500 kil-
owatt hours per month per cus-
tomer;
e Community facilities,as a
group,can receive PCE credit
for 70 kWh per month multiplied
by the number of residents in
the community.
All eligible customers,including community facili-
ties,must pay to the utility at least *14.06¢for
every kWh eligible for PCE credit,plus any
difference between the PCE level!per kWh and
the rate charged by the utility.Customers must
also pay to the utility the full rate for all kWh used
in excess of those eligible for PCE.Customers
receiving donated or unbilled power are not
eligible for PCE.
*Base may vary on annual basis,per AS 42.45.110(c)(2).
25
Eligible Utilities
The Railbelt electric utilities,the electric utility in
Juneau and those utilities that receive electric
power from the Four Dam Pool facilities
(Ketchikan,Wrangell,Petersburg,Kodiak,Glen-
nallen,and Valdez)are not eligible for PCE assis-
tance.
Eligible Customers
e Aneligible residential customer may receive
PCE credit on up to the first 500 kWhs con-
sumed each month.
e Community facilities are also eligible to re-
ceive PCE credit on up to a maximum of 70
kWh per month x the community population.
For example,a community of 100 would re-
ceive credit on up to 7,000 kWhs for its com-
munity facilities combined.
e State and Federal customers,as well as com-
mercial customers,including schools,are not
eligible for PCE credit.
Refer to page 25 for more details on eligible cus-
tomers of the PCE program.
State Agency Roles In the Administration
of the PCE program
The Regulatory Commission of Alaska determines
the PCE level for each utility based on:
e Fuel expenses such as the cost of fuel,trans-
portation;and,
e Non-fuel expenses such as salaries,insur-
ance,taxes,parts and supplies,interest and
other reasonable costs.
The Alaska Energy Authority administers the PCE
Fund based on:
e Fiscal appropriation by the Legislature,
e Monthly reports submitted by the participating
utilities,and,
e Determination of eligibility for residential and
community facility customers.
Different approaches to designing rates mean
that two utilities with the same costs per kWh
may charge different rates to their customers.
Since PCE levels are based on a utility's rates
or costs,whichever is less,two utilities with the
same costs could receive the same PCE level
for each kWh even if they had different rates.
Some utilities charge all customers the same
amount for each kilowatt hour sold.
Example:
Some utilities divide their customers into
"classes,”such as residential and commer-
cial,and charge different rates to each class.
In some instances different rates are charged
within a class.
Utilities may further divide a customer class
into subclasses,determined by electric us-
age.However,each customer in each sub-
class is charged the same rate.
Ne yy
24
What assistance is available to a utility to
meet these standards?
Efficiency improvement assistance such as
general engineering and technical support for
system upgrades,including the analysis of sys-
tems to determine appropriate efficiency im-
provements is available through AEA.Funding
may be available through the Power Project
Fund,Rural Power System Upgrade &Bulk
Fuel System upgrade programs or a variety of
other programs.To receive more information
on these programs,contact the Alaska Energy
Authority.
If the rate of one utility is higher than the
rate of another utility,will their PCE levels
be different?
Probably,but not necessarily.In general,the
higher the costs to produce electricity,the high-
er the utility's rates.However,there are many
different ways a utility may charge its custom-
ers for electricity,and each utility's PCE level is
calculated on reasonable and verifiable costs
submitted to the Regulatory Commission of
Alaska,along with generation and fuel infor-
mation.
23
The following pages list the utilities/
communities that are currently,or have
previously participated in the PCE Program.
For specific information or current
status,please contact AEA.
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Utilities/Communities
Adak ElectricUtility
Akhiok,City of
Akiak,City of
Akutan Electric Utility
Alaska Power Company
Allakaket/Alatna Klawock
Bettles/Evansville Mentasta
Chistochina Naukati
Coffman Cove Northway/
Craig Northway Village
Dot Lake Skagway
Eagle/Eagle Village Slana
Haines Tetlin
Healy Lake Thorne Bay/Kassan
Hollis Tok
Hydaburg Whale Pass
Alaska Village Electric Cooperative
Alakanuk New Stuyahok
Ambler Nightmute
Anvik Noatak
Brevig Mission Noorvik
Chevak Nulato
Eek Nunapitchuk
Ekwok Old Harbor
Elim Pilot Station
Emmonak Pitka's Point
Gambell Quinhagak
Goodnews Bay Russian Mission
9
Alaska Village Electric Cooperative
Grayling Savoonga
Hooper Bay Scammon Bay
Huslia Shageluk
Kaltag Shaktoolik
Kasigluk Shishmaref
Kiana Shungnak
Kivalina St.Mary's/Andreafsky
Kobuk St.Michael
Kotlik Stebbins
Koyuk Teller
Lower Kalskag Togiak
Marshall Toksook Bay
Mekoryuk Tununak
Minto Upper Kalskag
Mt.Village Wales
Aniak Light &Power
Arctic Village Electric
Atka,City of
Atmautluak Joint Utilities
Beaver Joint Utilities
Bethel Utilities Corporation
Bethel/Oscarville
Birch Creek Village Elec.Utilities
Buckland,City of
Central Electric,Inc.
Chenga Bay IRA Village Council
(D)1,000,000 -9,999,999 kilowatt-hours annually
using diesel fuel,the minimum efficiency standard
is 12 kilowatt-hours generated per gallon of diesel
fuel consumed;or
(E)10,000,000 kilowatt-hours or more annually
using diesel fuel,the minimum efficiency standard
is 13 kilowatt-hours generated per gallon of diesel
fuel consumed.
Minimum efficiency standards for a utility that uses diesel fuel
to generate 80%or more of total kWhs generated,and that gen-
erates:
Less Than 100,000 to 500,000 to 1,000,000 to More Than
100,000 499,999 999,999 9,999,999 10,000,000
9.5 10.5 11.5 12.5 13.5
Minimum efficiency standards for a utility that uses diesel fuel
to generate less than 80%of total kWhs generated,and that gen-
erates:
Less Than 100,000 to 500,000 to 1,000,000 to More Than
100,000 499.999 999,999 9,999,999 10,000,000
8.5 10.0 11.0 12.0 13.0
22
10.5 kilowatt-hours generated per gallon of diesel
fuel consumed;
(C)500,000 -999,999 kilowatt-hours annually us-
ing diesel fuel,the minimum efficiency standard is
11.5 kilowatt-hours generated per gallon of diesel
fuel consumed;
(D)1,000,000 -9,999,999 kilowatt-hours annually
using diesel fuel,the minimum efficiency standard
is 12.5 kilowatt-hours generated per gallon of die-
sel fuel consumed;or
(E)10,000,000 kilowatt-hours or more annually
using diesel fuel,the minimum efficiency standard
is 13.5 kilowatt-hours generated per gallon of die-
sel fuel consumed;
(2)for a utility that uses diesel fuel to generate
less than 80 percent of total kilowatt-hours gener-
ated,and that generates
(A)less than 100,000 kilowatt-hours annually us-
ing diesel fuel,the minimum efficiency standard is
8.5 kilowatt-hours generated per gallon of diesel
fuel consumed;
(B)100,000 -499,999 kilowatt-hours annually us-
ing diesel fuel,the minimum efficiency standard is
10 kilowatt-hours generated per gallon of diesel
fuel consumed;
(C)500,000 -999,999 kilowatt-hours annually us-
ing diesel fuel,the minimum efficiency standard is
11 kilowatt-hours generated per gallon of diesel
fuel consumed;
21
Utilities/Communities
Chignik Electric
Chignik Lake Electric Utility,Inc.
Chitina Electric Inc.
Circle Electric Utility
Cordova Electric Co-op
Diomede Joint Utilities
Egegik Light and Power
Elfin Cove Electric Utility
False Pass Electric Association
G&K
Cold Bay
Galena,City of
Golovin Power Utilities
Gustavus Electric Company
Gwitchyaa Zhee Utilities
Ft.Yukon
Hughes Power &Light
Igiugig Electric Company
I-N-N Electric Cooperative
Iliamna Nondalton
Newhalen
Inside Passage Electric Co-op
Angoon Kake
Chilkat Valley Klukwan
Hoonah
10
Ipnatchiagq Electric Company
Deering
King Cove,City of
Kipnuk Light Plant
Kokhanok Village Council
Koliganek Village Council
Kotzebue Electric Association
Koyukuk,City of
Kwethluk,Inc.
Kwig Power Company
Kwigillingok
Larsen Bay Utility Company
Levelock Electric Cooperative
Lime Village Electric Cooperative
Manley Utility Company
Manokotak Power Company
McGrath Light &Power
Middle Kuskokwim Elec.Co-op.
Chuathbaluk Sleetmute
Crooked Creek Stony River
Red Devil
Naknek Electric Association
Naknek/South Naknek/King Salmon
Utilities/Communities
Napakiak Ircinrag
Napaskiak Electric Utility
Naterkaq Light Plant
Chefornak
Nelson Lagoon Electric Cooperative
Nikolai Light &Power
Nome Joint Utility System
North Slope Borough
Anaktuvuk Pass Point Hope
Atqasuk Point Lay
Kaktovik Wainwright
Nuiqsut
Nunam Iqua Electric Company
Nushagak Electric Cooperative
Dillingham Aleknagik
Ouzinkie,City of
Pedro Bay Village Council
Pelican Utility Company
Perryville,City of
Pilot Point Electrical
Platinum,City of
Port Heiden,City of
Puvurnaq Power Company
Kongiganak
Rampart Village
Ruby,City of
11
Sand Point Electric Company
St.George Muni.Elec.Utility
St.Paul Muni.Electrical Utility
Takotna Comm.Assoc.Utilities
Tanalian Electric Cooperative
Port Alsworth
Tanana Power Company
Tatitlek Electric Utility
Tenakee Springs,City of
Tuluksak Power Utility
Tuntutuliak Comm.Sve.Assoc.
Twin Hills Village Council
Umnak Power Company
Nikolski
Unalakleet Valley Elec.Co-op.
Unalaska Electric Utility
Ungusraq power Company
Newtok
Venetie Village Electric
White Mountain,City of
Yakutat,City of
The current standards established by regula-
tion are:
3 AAC 52.620.Generation efficiency and line
loss standards
(a)Generation efficiency and line loss standards
are established to encourage efficient and eco-
nomical generation,transmission,and distribution
of electricity.The standards represent the mini-
mum acceptable level of performance by a partici-
pating electric utility.
(b)A line loss standard of 12 percent applies to all
electricity sold,and is measured as all kilowatt-
hours generated or purchased,from whatever
source,minus kilowatt-hours sold,divided by all
kilowatt-hours generated or purchased.
(c)The following generation efficiency standards
apply only to the utility's diesel generation,are
measured in kilowatt-hours generated per gallon
of fuel consumed,and are based on the annual
number of kilowatt-hours of diesel generation:
(1)for a utility that uses diesel fuel to generate 80
percent or more of total kilowatt-hours generated,
and that generates
(A)less than 100,000 kilowatt-hours annually us-
ing diesel fuel,the minimum efficiency standard is
9.5 kilowatt-hours generated per gallon of diesel
fuel consumed;
(B)100,000 -499,999 kilowatt-hours annually us-
ing diesel fuel,the minimum efficiency standard is
20
Are there established standards for utility
expenses?
Yes.RCA has established minimum generation
efficiency standards.The standards require that
a utility's fuel expense be calculated as if the
generation system produced at least the mini-
mum number of kWh for each gallon of fuel.
As stated in regulations on the following pages,
and demonstrated in the example below,the
standards are based on size.Larger utilities
that sell more kilowatt hours have higher stand-
ards than smaller utilities that sell less kilowatt
hours.
For Example:
For a utility that relies on all diesel generation that
produced fewer than 100,000 kWh annually and
produced 7.5 kWh for each gallon of fuel con-
sumed:In calculating the PCE level for this utility,
RCA would calculate fuel costs as if the utility
generated 9.5 kWh for each gallon of fuel con-
sumed.This means the PCE level would be lower
than a level based on actual fuel costs because
the utility did not meet the fuel efficiency standard
set out in regulation.
19
Participation in the PCE Program
How do electric utilities start participating in
the PCE program?
An electric utility sends a request to RCA to
participate in the PCE program.If RCA deter-
mines that a utility is eligible,the utility provides
information to RCA for determination of the
PCE level.RCA's staff assists the utilities in
locating and identifying the required infor-
mation.
What information must a utility provide to
RCA to determine the PCE level?
The utility must provide the RCA its costs for a
specific time period,usually a year.The utility
must also report how many kilowatt hours have
been generated and sold during the same time
period,as well as how many gallons of fuel it
took to produce the kilowatt hours generated,
and the cost of that fuel.
12
What happens if a utility does not submit all
the information needed by RCA to deter-
mine the PCE level?
If a utility does not submit all the information
required to determine the PCE level,including
Annual Filings and Fuel Price Changes,or if
RCA believes there are reasons to question
some of the financial information provided,
RCA will recommend suspension from the pro-
gram until the information has been received
and processed by RCA.
In the event that a utility fails to report a change
in its rates to RCA,the utility's PCE level will
become interim and refundable.Once RCA
has recalculated the PCE level using the new
rates,anew permanent PCE level will be es-
tablished.
If RCA approves a permanent PCE level that is
lower than the Interim &Refundable PCE level,
the utility will have to refund the excess PCE
payments it received back to AEA.It is up to
the utility as to whether or not they collect back
from its customers,any overpayment that was
made.
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How is the PCE level determined?
PCE is computed on a kWh basis for each rate
schedule.Different classes of customers,such
as residential and community facilities,may
have different PCE levels.
e A formula is used to determine PCE levels:
95%of a utility's costs between *14.06¢/
kWh and $1.00/kWh are used to calculate
the PCE level.If costs are below *14.06¢/
kWh,they are not eligible for PCE.If the
eligible costs are more than $1.00/kWh,the
maximum PCE level is 81.64¢/kWh
$1.00 -*14.06¢/kWh =85.94¢/kWh
85.94¢/kWh x 95%=81.64¢/kWh
*Base may vary on annual basis,per AS 42.45.110(c)(2).
EXAMPLE OF COST BASED PCE LEVEL:
RCA has approved the following cost for a utility thatsold300,000 kWh during the reporting period.
The PCE calculation would look something like this:
Fuel Cost for 25,000 (gal)x $2.90 =$72,500.00
Non-Fuel cost of the utility =$70,000.00
$142,500.00
$142,500 +300,000 kWh Sold =47.50¢/kWh
47.50¢-*14.06¢=33.44 x 95%=31.77¢PCE Level
A Rate based PCE level is set if the Average ClassRate(Residential Rate minus 14.06¢)is less than theCostbasedrate.
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What does RCA consider to be reasonable
costs when it determines the PCE level?
The PCE level is determined by using only nec-
essary and reasonable costs that can be veri-
fied by RCA.The program statutes require the
RCA to eliminate any duplicative or unneces-
sary costs from the PCE level calculation.The
utility's profit is not included when determining
the PCE level.
There are two categories of costs used in de-
termining the PCE level:
e Fuel expenses:the costs of fuel,including
transportation.
e Non-fuel expenses:costs such as salaries,
insurance,taxes,power plant parts and
supplies,interest and other reasonable
costs.
For Example:
A utility may not include in its eligible costs,depreciation
expenses on facilities unless those facilities have been
purchased by the utility.If a utility has been provided with a
generator purchased with grant money,the depreciation
expense for that generator is not allowed to be included in the
calculation of the PCE level for that utility.
Ne
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If a utility receives other kinds of assis-
tance,is the PCE calculation affected?
Yes.The program legislation requires that if a
utility receives other assistance that reduces its
rates on a kWh basis,the cost calculation to
determine the PCE level will be reduced by that
amount.
Are there other requirements that a utility
must meet in order to participate in the PCE
program?
An electric utility is required to install and main-
tain necessary metering equipment.The statute
also requires a utility to use energy conserva-
tion measures when and where possible,and
to determine if it can generate electricity with
fuel other than diesel.
3 AAC 107.240 (E)states that "An eligible elec-
tric utility shall organize and maintain,in ac-
cordance with standard accounting practices,
the accounts of its electric fund as a separate
accounting entity in a self-balancing set of ac-
count that includes the assets,liabilities,bal-
ance,revenue,and expenses of the electric
fund.”
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Additional requirements that a utility must
meet in order to be in the PCE program?
The utility must file monthly reports with AEA in
order to receive payment;it must maintain good
administrative practices and keep records of its
costs and revenues,and upon request,the rec-
ords of the utility are to be made available to
AEA and RCA.
lf a utility participates in the PCE program,
does this mean RCA will also regulate the
rates the utility charges its customers?
Not necessarily.If a utility has annual revenues
of more than $50,000,it may be subject to rate
regulation.Non-regulated utilities are not sub-
ject to rate regulation.Both regulated and non-
regulated utilities will need a Certificate of Pub-
lic Convenience and Necessity from RCA in
order to operate and charge customers for its
services.
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Are regulated and unregulated utilities treat-
ed the same when calculating the PCE lev-
els?
The procedures followed by RCA to establish
PCE levels for regulated or unregulated utilities
are comparable.
e Fora regulated utility,the costs allowed to
determine the PCE level are the same,ex-
cept for profit,as those used to determine
the utility's rate.
e Foran unregulated utility,RCA does not
establish the utility's rates.However,to de-
termine the PCE level,it allows expenses
comparable to those included in rates of
regulated utilities.
Reporting requirements vary between regulated
and unregulated utilities and more information
about this topic can be obtained from RCA.
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