Alaska spent $46.9 million to lower electric bills in 186 communities in FY2025, covering 148.5 million kWh, where rural power costs can be far higher

Alaska spent about $46.9 million in fiscal year 2025 to keep electric bills low in some of the most remote parts of the country. That money went to 186 communities and covered 148.5 million kilowatt-hours (kWh) of eligible power, according to the Alaska Energy Authority's Power Cost Equalization Program Statistical Report FY2025. Fiscal year 2025 ran from July 1, 2024, to June 30, 2025. The program is called Power Cost Equalization, or PCE, and it began in 1984. The figures showed how much power bills can vary depending on where you live.

Why electricity costs more in remote Alaska

A 2015 U.S. Energy Information Administration (EIA) analysis explained how Alaska was adding wind power capacity in utility-scale and distributed-scale projects. Many remote Alaska communities rely on local diesel generators for electricity. The analysis also noted that about a third of the state's population was off the grid, and that in 2013 Alaska's average retail rates were second only to Hawaii's. The EIA put the cost of building transmission lines at $200,000 to $2 million per mile because of rough terrain, ice, melting permafrost, and a lack of roads. A University of Pennsylvania Kleinman Center commentary titled 'Tensions in Renewable Policy Development in Alaska' notes that diesel reaches isolated towns by truck, plane, boat, or some combination of the three. As a result, the commentary says, diesel-generated power in rural communities is typically three to five times more expensive than power delivered along the Railbelt, the main grid that runs from south-central Alaska to Fairbanks.

The AEA report shows how those costs affect utilities. On average, the participating utilities spent about 50 cents on operating costs per kWh sold, including fuel and non-fuel costs. Fuel oil averaged $4.31 per gallon in FY2025. Diesel generators produced some 404 million kWh, while hydro, wind, solar, and natural gas combined produced some 46 million kWh.

How does the discount work

The AEA report states that utilities apply PCE credits to eligible bills, and the state reimburses them. The goal is to bring rural rates down to the levels paid in Anchorage, Fairbanks, and Juneau. The Regulatory Commission of Alaska determines the credit amount for each utility based on fuel and non-fuel costs. Under the formula, PCE pays 95 percent of eligible costs between 19.92 cents and $1.00 per kWh. That leaves the top credit at 76.08 cents per kWh.

However, there are limits. Homes can earn credits of up to 750 kWh per month. The average eligible home used an estimated 334 kWh per month. Community buildings as a class may receive credit for 70 kWh per month times the population of the town. Commercial customers and public schools, as well as state and federal offices, do not qualify. The 148.5 million kWh is only for the eligible part. Utilities in the program sold some 459 million kWh in all.

What the FY2025 numbers show

The report says that PCE served about 80,000 people through 81 utilities. Payments were made at the full 100 percent level for all 12 months, supported by endowment earnings. Reimbursements to utilities totaled $46,896,190, an increase of approximately 3.7 percent from $45.2 million in FY2024. The state's appropriation to cover those reimbursements was $47.7 million, unchanged from the prior year. The number of communities served decreased from 187 to 186. Eligible kWh also decreased about 1.5 percent to 148.5 million from 150.8 million. Average monthly eligible use per home also fell about 2.1 percent, from 341 to 334 kWh.

A lifeline with a catch

The Kleinman Center commentary calls the program a necessity. It also notes that PCE is effectively subsidizing diesel-based energy, which could affect the local economics of renewable microgrids. But change is possible in some places. In the EIA analysis, Kodiak's petroleum-fired generation declined from 20 percent of the electricity before 2009 to 0.4 percent in 2014. Customers of the Kodiak Electric Association got more than 80 percent of their power from hydroelectricity. The analysis also found the best wind potential is along remote coastlines, while most of the interior is rated fair, low, or poor.

For readers outside Alaska, the takeaway is simple. Power prices are based on fuel, distance, and infrastructure, not volume. In FY2025, the state spent about $46.9 million to close that gap for 186 communities. Whether those towns keep relying on diesel or build cheaper local power remains an open question.