A burning issue: Bush energy costs rising: utility costs now amount to more than a third of income among low-income households in remote places.

As the promise of spring blooms on the horizon, Alaska residents statewide sigh in the relief of managing yet another winter-one that somehow seemed longer due to periods of occasional plunging temperatures and the high cost of household utilities. Although global oil prices have dropped since the highs of last summer-when most remote communities purchased their winter fuel stores-Alaskans and government officials have learned to recognize energy prices as chronically fickle. So even though Alaskans may get some temporary relief in their energy costs this spring, the overall trend is a general upward sweep since 2000, with some rural residents paying utility costs 50 percent higher than six years ago.

KEEPING WARM AND THE LIGHTS ON

On Jan. 9 of this year, the National Weather Service report summarized the Interior simply: "Once again temperatures across the Interior were very cold indeed." With Arctic Village at minus 44, Chandalar Lake at minus 56, and Tanana at minus 49, the cost of simply staying warm and keeping the lights on was no doubt on the minds of area residents. That even though long-term research shows that Alaska temperatures may actually be increasing. The Alaska Climate Research Center presents data indicating that, if considering a linear trend of mean annual temperatures, the state has actually warmed 3.5 degrees since 1949, according to analysis presented on its Web site. Researchers acknowledge, however, that viewing the data in such light does not tell the whole story. And regardless of such an incremental shift, heat and electricity will remain winter staples until the state warms a whole lot more. So while residents accept the volatility of weather trends and global energy fluctuations, they nonetheless still have to write out a check for monthly utility bills. There is little debate that those have increased, as well.

HOT TOPIC

Utility costs became such a hot topic last summer that two Alaska entities issued high-level reports regarding the impact of rising energy costs to Alaska residents. Both painted a serious, if not dire, picture.

"Households in remote rural places face utility costs 50 percent higher now than in 2000," write researchers Ben Saylor and Sharman Haley in an October report of the University of Alaska Anchorage (UAA)'s Institute of Social and Economic Research. The report, titled "Effects of Rising Utility Costs on Alaska Households," divides the state into three categories: Anchorage, other large or road-system communities, and remote communities; and defines "utilities" as heat, electricity, water and sewer.

The first two demographic categories also didn't fare well in the report's long-term analysis. "In Anchorage, those (utility) costs are up 35 percent and in other large or road-system communities about 39 percent."

Viewed another way, the scenario continues to show the impact of rising energy costs. "The share of household income going to utilities is also up," according to Saylor and Haley. "Utility costs in urban and rural areas are now anywhere from about 3 percent to 10 percent of income for a typical household." In other words, Alaskans are both paying more and it's consuming a larger share of their monthly household budget to heat and light their houses. Given that the figures reflect the median, the scenario is even grimmer for those low-income households across the state. "Utility costs now amount to more than a third of income among low-income households in remote places," according to the report.

The Institute's report also revealed other facts and trends. Alaskans are heating with either diesel or natural gas, the latter of which is available only in select areas like Anchorage. Although the time of the survey prices for both diesel and natural gas were up, those households using diesel paid "on average four times more for diesel than for gas in 2005." That said, the summary also revealed that Alaskans in remote locations "use less household energy-roughly half as much per person as places with natural gas."

While heating costs (natural gas for Anchorage and diesel for remote communities) increased at a similar percentage rate in the survey period-2000 to 2006-the overall impact is considerable. "Anchorage households paid nearly twice as much for natural gas in early 2006 as in 2000.... Diesel prices increased 83 percent in remote areas from fall 2000 through winter 2005."

A second report was issued in October, this one from the state Department of Commerce, Community, and Economic Development's Division of Community Advocacy. In the report to the governor, former commissioner Bill Noll acknowledged the state's dilemma as one of "an increasingly complex energy scenario." He also noted that while energy prices had dropped even during the period of the report's production, Alaskans should not be fooled into complacency. "The cost of energy is a moving target and is unpredictable ... economics predict energy prices will remain relatively high, and we should plan that way."

Noll acknowledged the inherent Catch-22 of a state that both benefits and suffers from rises in energy cost. "When the price of energy is high, Alaskans benefit through more money to the State of Alaska's treasury. On the other hand, most Alaska industries and individuals are burdened by high prices," Noll writes.

The 2006 report, which serves as a follow-up to a larger-scale November 2005 report, surveyed fuel costs in 29 Alaska communities from Sept. 1 through Sept. 5, with the intent of creating a useful snapshot of comparison, rather than a forecast. Nonetheless, the report does address short- and long-term strategies. Short-term responses to fuel needs include the following:

* Municipalities Energy Assistance Program (MEAP), with funds to defray increased energy and other costs.

* Alaska Energy Authority's (AEA) Bulk-Fuel Revolving Loan Fund (BFRLF)--offering loans "to communities, utilities or fuel retailers in rural communities to purchase emergency, semi-annual, or annual bulk-fuel supplies," according to the report.

* Bulk-Fuel Bridge Loan-Established in 2004 to help those rural communities that are unable to finance fuel purchases. The intent is a nine-month payment program to "bridge" the need, allowing communities to resolve credit issues and eventually return to traditional finance methods. In December, then-Gov. Frank Murkowski announced the U.S. Department of Agriculture awarded the state $500,000 toward the program. Over the past two years, the program issued loans to 10 communities.

Though such short-term solutions are in place, the long-term scenario is a challenge, energy researchers say. The state's report suggests a mix of greater fuel supply and establishing an infrastructure for efficient transportation and storage. Bulk-Fuel farms are aging and should be addressed. The state also poses alternative energy development, pointing to the Denali Commission and Denali Training Fund as resources.

In addressing both the short- and long-term needs of the state, the report holds up the formation of the Rural Energy Action Council (REAC), which itself released several strategies. To address short-term needs, REAC suggests 11 strategies:

1. Fully fund the Power Cost Equalization (PCE) program.

2. Front-load the PCE endowment.

3. Develop a bulk-fuel operator technical assistance program.

4. Incorporate downstream tanks and pipes into bulk-fuel infrastructure upgrades.

5. Support the development of regional bulk-fuel cooperatives.

6. Recommend higher loan limits for Bulk-Fuel Revolving Loan Program single and cooperative applicants.

7. Improve power plant operational efficiencies and remote capabilities.

8. Increase support for development of alternative energy sources, including coal, in-stream, wind, and gas projects.

9. Accelerate renewable energy programs and implement energy conservation measures.

10. Continue low-income home energy assistance program funding.

11. Create a new line item for school district energy funding.

In the long-range perspective, the REAC offered six recommendations:

1. Study the direct impacts of high fuel cost in rural Alaska.

2. Develop regional energy centers on rural campuses.

3. Support a feasibility study to examine links with the Railbelt Energy Grid.

4. Develop a fuel price reporting system for "non-PCE" communities.

5. Divest the state of rural energy infrastructure.

6. Improve transportation and distribution systems.

DAILY GRIND 

But to residents across the state who struggle to pay their utility bills and juggle the simple survival priorities of food and warmth, a solution can come none too soon. Some commodities watchers say that oil prices will continue to drop, posing an ironic quandary for industry player Alaska and its residents. In mid-January, The Houston Chronicle reported a current bear market for oil and quoted spectators predicting even lower prices. "I've already said last year that oil prices should be going toward $40 a barrel, so there's nothing special. It's no surprise to see it drop below $55," the newspaper quoted Tetsu Emori, chief commodities strategist at Mitsui Bussan Futures in Toyko.

Regardless how things play out on the world market, it's the local scene in places like Chevak, population 916 and located 17 miles east of Hooper Bay in the Yukon-Kuskokwim Delta. That community couldn't afford a bulk-fuel purchase, so in the fall was buying from a local vendor at higher cost, the city administrator told state researchers. With outstanding fuel bills from the previous year, the city was forced to close several buildings then, including the town Laundromat. Though the city did receive state funding in 2006, that money went to pay back fuel bills, posing a dilemma for winter and spring purchases-a growing challenge for hard-hit communities across the state.

How Naturak Gas is Used
in the U.S. Today

RESIDENTIAL                     25%

COMMERCIAL                      16%

ELECTRIC POWER GENERATION       25%
(includes electric utilities,
independent power producers
and industrial electricity
sold back to grid)

INDUSTRIAL                      35%
(incldues manufacturing)

Source: U.S. Energy Information Administration (2005)

Note: Table made from pie chart.