Socialized Energy?

[Bunz]

Id be curious as to what sort of comments anyone has about these proposals.

With energy costs skyrocketing the price of gas in my community just hitting $6.75 for unleaded, home heating fuel at $6.50 and higher in some places Alaska Governor Sarah Palin is proposing serious energy cost relief to Alaskans. Under her proposal, nearly a half a billion dollars would be used to offset electric costs for Alaskans. That money will largely be spent on the utility company/ co'ops level to offset the price of diesel used to generate power.

The more interesting proposal is the debit card for fuel system. Which would give Alaskans a debit card more or less, that could only be used to purchase fuel. Recipients would be based on those eligible to get the Permanent Fund Dividend.

Grants to utilities and energy debit cards.

Quote:
Governor Unveils Plan to Return Surplus to Resource Owners

Conservation and long-term solutions remain key focus

May 15, 2008, Anchorage, Alaska – Governor Sarah Palin today unveiled a short-term energy plan to address the skyrocketing costs of energy in Alaska. The package includes two parts – returning surplus funds through a grant to all electric utilities to reduce ratepayer bills and an Energy Debit Card for the next 12 months.

“Alaskans are feeling the pinch of high energy costs,” Governor Palin said. “The state treasury is swelling, while family checkbooks are evaporating. The right thing to do is to return surplus monies to the resource owners through energy relief. Instead of going to Washington, D.C. for relief, Alaskans should be independent enough to take care of this energy problem ourselves.”

Since coming into office, the Palin Administration has been focused on long-term solutions to Alaska’s energy crunch. In some of Alaska’s communities, consumers are faced with the nation’s highest energy costs. In 2007, a comprehensive energy supply inventory was initiated to identify alternatives to high-cost energy supplies.

Earlier this spring, Steve Haagenson was appointed as the State’s Energy Coordinator. In his capacity as the Executive Director of the Alaska Energy Authority, he is developing a statewide plan to reduce costs, promote conservation and secure long-term supply solutions for each part of the state. Results of that work are expected by year-end 2008.

“For instance, in Bush Alaska, the best solutions to high diesel prices are to use less and find alternatives,” Governor Palin said. “We cannot lose sight of the need for these long-term fixes, but as crude oil prices continue to set daily records, Alaska’s families, communities and businesses cannot afford to wait.”

Returning surplus funds through grants to electric utilities will result in a 60 percent reduction for all ratepayers. The benefit will flow to homeowners, renters, schools, governments and businesses. A review by the Department of Law has indicated that there should be no federal income tax consequence since the grants act to offset the revenue collected by the utilities themselves.

In addition, there will be conservation incentives for the utilities. For every 1 percent reduction in 2008 kilowatt hour sales from 2007 sales, the state will make a year-end contribution for capital energy projects to the utility.

The Energy Debit Card will go out to every qualifying Permanent Fund Dividend applicant. The benefit will be $100 per month per PFD recipient. The amount allocated for children’s benefits will accrue to the card of the sponsor on their PFD application. Money not used on the card one month will carry over to the next month. It is expected that the amount available to individuals through the card will be considered income by the IRS.

The temporary Energy Debit Card can be used for purchases from Alaska energy vendors, such as heating oil distributors, natural gas utilities, electric utilities, gas stations and other retail fueling stations.

 

[The Scotsman]

What you need to do is have some sort of "mutualisation" whereby all citizens can assist and proably the best way is to do it through the energy providers then you could cross-subsudies users cost and supply requirements in a efficient and effective manner. For example those living in Florida and Texas do not (I assume) need their heating on all the time thus if their was a very nominal additional charge put onto their bills then that amount could be used to "subsidies" their countrymen up north in frozen testicles land!

Effectively you could "even out" the disparrities in costs by those massively populated states in the hot South paying a very small additional charge to subsidize Bunz and his buddies so they can thaw out their testicles when coming in from a day's fishing or bear fighting or whatever it is they do in these god foresaken arctic wastelands

 

[Bunz]

You make some interesting points Scots, Ill attempt to address them.

What you need to do is have some sort of "mutualisation" whereby all citizens can assist and proably the best way is to do it through the energy providers then you could cross-subsudies users cost and supply requirements in a efficient and effective manner.

This is one aspect of the two part proposal. The power rate segment. But instead of it happening on a nation wide level, it is happening within the state.

For example those living in Florida and Texas do not (I assume) need their heating on all the time thus if their was a very nominal additional charge put onto their bills then that amount could be used to "subsidies" their countrymen up north in frozen testicles land!

The main issue here is that the differences in needs of the states is to vast. The folks in Texas would never support heating Alaskan houses at thier expense...because they choose to live where its cold.
Much the same as Alaskans(well Alaskans probably wouldnt mind because we are generous people) wouldnt want thier money to subsidize air conditions in Florida because they choose to live in an oven. It would be never ending.

Effectively you could "even out" the disparrities in costs by those massively populated states in the hot South paying a very small additional charge to subsidize Bunz and his buddies so they can thaw out their testicles when coming in from a day's fishing or bear fighting or whatever it is they do in these god foresaken arctic wastelands

The beauty of this, is that Alaska can do it on our own. We dont need the south to put fuel in our tanks. We can afford it ourselves. The issue here is that with the high energy prices, the state makes truckloads of cash. The state currently has 8billion in surplus funds. This is on top of the %35 that gets saved off the top and put into the http://en.wikipedia.org/wiki/Alaska_Permanent_Fund

In the meantime, Alaskans due to its location especially those in bush Alaska like myself where transportation costs are very high for oil products(well everything really) runs the price to $6.75 a gallon. Which is nearly double what the rest of the country makes. Anchorage the biggest city is well above $4 a gallon.

But bear fighting? Lets go, just go ahead and put this steak in your jacket

 

[Libsmasher]

Here's what I don't get: Why does Alaska get royalties on oil pumped there? Was the oil discovered on state or federal or private land?

 

[Bunz]

Here's what I don't get: Why does Alaska get royalties on oil pumped there? Was the oil discovered on state or federal or private land?

It is state land.

 

[SW85]

Here's what I don't get: Why does Alaska get royalties on oil pumped there? Was the oil discovered on state or federal or private land?

IIRC Alaska does not recognize subterranean property rights -- everything under the surface of the earth belongs to the state. The Alaska Permanent Fund is basically an ongoing eminent domain payment.

 

[Bunz]

IIRC Alaska does not recognize subterranean property rights -- everything under the surface of the earth belongs to the state. The Alaska Permanent Fund is basically an ongoing eminent domain payment.

The oil fields on the north slope are all state lands, surface, subsurface, the whole thing. As for other subterranean issues, that not entirely true. If it was, we would have drilled ANWR a decade ago from outside the refuge.

 

[SW85]

The oil fields on the north slope are all state lands, surface, subsurface, the whole thing. As for other subterranean issues, that not entirely true. If it was, we would have drilled ANWR a decade ago from outside the refuge.

I'm sure Alaskan government policy is probably that it would if the feds were not telling them they couldn't.

 

[Andy]

My first thought is to check constitutionality of the entire proposal. I'm not exactly sure how royalties from state owned lands, fits in. However since I don't know much more about that, in general a state can do with whatever money they have, whatever they choose to do with it.

Now, looking at it from a logical fiscal perspective, there are some possible problems. Before that, there is an issue with the Alaskan state government being $4 Billion in debt, and with budgets constantly in the red each year. My rule is, if you are in debt and leaking, you shouldn't be handing out money.

Nonetheless, the first possible issue is from a long term pay-out. As the population grows, as more people sign up for APF (Alaskan Perm Fund), the cost will undoubtedly skyrocket. At $100 a month, that's $1,200 a year, per person in the state. Plus 60% off electric bills, per house hold in the state, is going to be a sizable chunk of change. Each year the number of house holds, and number of PFD (Perm Fund Dividend) applicants will increase (unless the population shrinks).

Logically, at some point, the cost of this pay-out will over take the income from royalties. When this happens the fund will collapse, and the thousands of Alaskans, who by then will be dependent on the APF, will be stranded.

The second issue is not every oil well continues forever. While there are significant ones that have... the oil production in these wells has been decreasing. Also, there is no promise wholesale crude will remain high. Likely? yes. Guarantied? No. If either the production drops or the prices drop, or a combination, the fund could lose money, and very very quickly. (I am actually getting the strange feeling oil prices may crash)

However, in either case, you have a state legislature that can't balance it's own budget, in charge of the APF. This seems like a bad plan. I think if I lived, there, I'd vote against this.

On a final note, I find it just a tad funny that so many whine about how much the oil companies are earning, yet the APF has now over $40 Billion from oil royalties.

 

[Bunz]

My first thought is to check constitutionality of the entire proposal. I'm not exactly sure how royalties from state owned lands, fits in. However since I don't know much more about that, in general a state can do with whatever money they have, whatever they choose to do with it.

There are two issues here. Royalties from the oil pumped from state lands. But there is also a PPT or Petroleum Profits Tax. But the issue here royalties.

Now, looking at it from a logical fiscal perspective, there are some possible problems. Before that, there is an issue with the Alaskan state government being $4 Billion in debt, and with budgets constantly in the red each year. My rule is, if you are in debt and leaking, you shouldn't be handing out money.

Ah 4billion in debt since when? We have an 8billion surplus this year on top of already passing both capital and operating budgets, and the contribution to the APF and the CBR(contitutional budget reserve) This come out of the general fund and not the APF.

Nonetheless, the first possible issue is from a long term pay-out. As the population grows, as more people sign up for APF (Alaskan Perm Fund), the cost will undoubtedly skyrocket. At $100 a month, that's $1,200 a year, per person in the state. Plus 60% off electric bills, per house hold in the state, is going to be a sizable chunk of change. Each year the number of house holds, and number of PFD (Perm Fund Dividend) applicants will increase(unless the population shrinks).
Logically, at some point, the cost of this pay-out will over take the income from royalties. When this happens the fund will collapse, and the thousands of Alaskans, who by then will be dependent on the APF, will be stranded.

This is designed as a very short term(1-2 years proposal until relief comes in terms of energy prices through other means. As for the PFD, its growth has generally increased faster than the poppulation. Even though the poppulation is increasing steadily.

The second issue is not every oil well continues forever. While there are significant ones that have... the oil production in these wells has been decreasing. Also, there is no promise wholesale crude will remain high. Likely? yes. Guarantied? No. If either the production drops or the prices drop, or a combination, the fund could lose money, and very very quickly. (I am actually getting the strange feeling oil prices may crash)

The notion that oil wont always be here is exactly why we established the savings model we have. For the time when oil is not longer viable. As for the fund losing its value, it has grown steadily in the 3 decades or so it has existed. It is based on investment for its long term growth and the pricipal is designed to never go away until approved by the voters. Which failed miserably in 2000 when oil was 9-12$ a barrel range. Also at that point, Alaska was taxing pased on production. To they were getting them twice on the same barrel of oil in a way, but the formula is fairly complicated on how they did it then. Now it is based on profits generated from Alaskan oil.

However, in either case, you have a state legislature that can't balance it's own budget, in charge of the APF. This seems like a bad plan. I think if I lived, there, I'd vote against this.

Again, budget is fine, has been since 2001. No concerns whatsoever. Been surplus funds ranging into the billions since 2004. The Legs in Alaska are probably the most fiscally conservative on both sides of the aisle in the nation. The Permanent Fund is not controlled by the Legislature, it is controlled by a semi-public corportation known as the Alaska Permanent Fund Corporation. Just like we have the Alaska Rail Road Corporation.

On a final note, I find it just a tad funny that so many whine about how much the oil companies are earning, yet the APF has now over $40 Billion from oil royalties.

Well if you are going back to the Exxon thread and my opinions on that, it deals with two very separate issues. One is a state government taxes and royalties assessed. The other results from a class action lawsuit that was lost by Exxon after they dumped 11million gallons of oil. Two very different things.
As a side note, final decision on the Exxon Valdez is expected next month.

 

[Libsmasher]

Originally Posted by Bunz
The oil fields on the north slope are all state lands, surface, subsurface, the whole thing. As for other subterranean issues, that not entirely true. If it was, we would have drilled ANWR a decade ago from outside the refuge.

I'm sure Alaskan government policy is probably that it would if the feds were not telling them they couldn't.

Looks like Alaska could join OPEC.

 

[Andy]

There are two issues here. Royalties from the oil pumped from state lands. But there is also a PPT or Petroleum Profits Tax. But the issue here royalties.

Make me wonder a bit if at least part of the cause of high fuel prices in Alaska, might be your own taxation.

Ah 4billion in debt since when? We have an 8billion surplus this year on top of already passing both capital and operating budgets, and the contribution to the APF and the CBR(contitutional budget reserve) This come out of the general fund and not the APF.

To date, the general fund has amassed a debt of approximately $4 billion to the CBR in order to maintain a stable level of public spending.

Not only did the legislature vote to spend more money each of the last four years, but all of the above budgets also required "borrowing" from the Constitutional Budget Reserve (CBR) Fund.

Over the last eleven years the Legislature has borrowed $5.2 billion dollars from the CBR.

And in flipping around through the states online budget, I found Debt Service listing at $5.5, I assume million. So I wager you need to double check your governments finances. Looks to me they are at least $5 Billion in the hole or some legislatures wouldn't be running a campaign on paying $2.5 billion in debt down.

This is designed as a very short term(1-2 years proposal until relief comes in terms of energy prices through other means. As for the PFD, its growth has generally increased faster than the poppulation. Even though the poppulation is increasing steadily.

First, I never buy 'short term' plans. Short term has a nasty habit of becoming a long term. In 1898 the US government put in place a temporary luxury tax to pay for the Spanish-American War. The 'temporary' 3% tax on phone service was finely ended a mere 108 years after the war was over, in 2006. The US congress, literally vote to continue a 'temporary tax' every single year, for 108 years. It had to be voted on every year because it was 'temporary'.

Second, the PFD has grown faster than the population due to the way it is currently handled.

The current system, they take how much the fund earns over a year, increase the principal enough to offset inflation, and grow the fund... then they take out the maintenance cost of the fund... then with what is left over, they dole it out to the public. This secures the growth of the fund while paying out what is left over.

In short, no one knows for certain how much the PFD is going to be, because they only give out what is left after up-keeping the fund.

The new system is promising $1,200 per person, and 60% off electric bills state wide. This is regardless of how much the fund actually makes. What happens if the fund doesn't make enough to cover this? You lose principal, which will start a chain reaction, because as you lose principal, it will be harder to meet the pay-out demands for the next year, causing you to lose more principal... and on and on till the fund collapses.

But of course the biggest issue, which you actually brought up... is that this puts more control of the money in the hands of the legislature, which is exactly why the APF was placed in the hands of a separate corporation.

Well if you are going back to the Exxon thread and my opinions on that, it deals with two very separate issues. One is a state government taxes and royalties assessed. The other results from a class action lawsuit that was lost by Exxon after they dumped 11million gallons of oil. Two very different things.

No, had nothing to do with that at all. I was referring to some who say "blaw blaw big oil is making money on us!"... well it looks like the Alaskan public has made $40 billion on us.

 

[Bunz]

I'm sure Alaskan government policy is probably that it would if the feds were not telling them they couldn't.

It is no secret the State of Alaska wants ANWR opened, our Congressional delegation wants it opened...but Alaskans far and away want ANWR open. Including those few hundred people who live within the actual refuge. They are pro-onshore development and anti-offshore oil development.

 

[Bunz]

Looks like Alaska could join OPEC.

Yeah, dont think so. But it would be beneficial to have a vote there for sure. Alaskan oil by and large and through US code is for domestic use. Which rules out the exporting component of being in OPEC. But Alaska produces more oil than several members. Qatar, Indonesia and Ecuador.

 

[Bunz]

Hi Andy, the quotes in this post are yours for the record.

Make me wonder a bit if at least part of the cause of high fuel prices in Alaska, might be your own taxation.

Nah, just in my home town on the western coast of AK, our fuel supplies work out like this. Crude oil is pumped on the north slope. Travels for 3days IIRC, down 800miles of pipeline, onto a super tanker, and down to the lower 48 to be refined. Then it is loaded back onto a smaller barge and leaves(usually from WA or OR) and transits the Gulf of Alaska, around the Alaskan Peninsula and up to the small communities. So the transportation costs, and being small and isolated, the economy of scale works against us.

To date, the general fund has amassed a debt of approximately $4 billion to the CBR in order to maintain a stable level of public spending.

Quote:
Not only did the legislature vote to spend more money each of the last four years, but all of the above budgets also required "borrowing" from the Constitutional Budget Reserve (CBR) Fund.

Quote:
Over the last eleven years the Legislature has borrowed $5.2 billion dollars from the CBR.

I think you are not quite understanding what the CBR is, and what it is designed to to. Which is basically a cash based credit card. In leaner times, it allows short term borrowing. But it hasnt been drawn on since FY2004.
http://fin.admin.state.ak.us/dof/financial_reports/resource/cbr_status_for_website.pdf
This is the most current status of the CBR.

And in flipping around through the states online budget, I found Debt Service listing at $5.5, I assume million. So I wager you need to double check your governments finances. Looks to me they are at least $5 Billion in the hole or some legislatures wouldn't be running a campaign on paying $2.5 billion in debt down.

This link is the supplemental budget, we also have the capital and operating budget. I am not sure where you are getting this 5billion in debt number.

Second, the PFD has grown faster than the population due to the way it is currently handled.

The current system, they take how much the fund earns over a year, increase the principal enough to offset inflation, and grow the fund... then they take out the maintenance cost of the fund... then with what is left over, they dole it out to the public. This secures the growth of the fund while paying out what is left over.

In short, no one knows for certain how much the PFD is going to be, because they only give out what is left after up-keeping the fund.

Yes it does work brilliantly, a model that should be undertaken by more governments. Your writings on the formula and how the dividend is determined, it mostly accurate, except that it is based on the 5 year average of the revenues after the inflation proofing, fund maintenance and management etc.

First, I never buy 'short term' plans. Short term has a nasty habit of becoming a long term. In 1898 the US government put in place a temporary luxury tax to pay for the Spanish-American War. The 'temporary' 3% tax on phone service was finely ended a mere 108 years after the war was over, in 2006. The US congress, literally vote to continue a 'temporary tax' every single year, for 108 years. It had to be voted on every year because it was 'temporary'.

I dont disagree, and I will freely admit I am a bit skeptical of this whole thing. Its a novel idea, and offers solutions to a crisis. Which is something I appreciate in politicians.
I dont know how much legs this will have. But it is the focus of a special session here in a few weeks. It is expensive, unsustainable, and could be subject to some serious fraud. Those details still need to be worked out.

No, had nothing to do with that at all. I was referring to some who say "blaw blaw big oil is making money on us!"... well it looks like the Alaskan public has made $40 billion on us.

Geez dont cheapen yourselves. Its been way more than $40billion. $40billion is just the %25 that goes to the PF and the interest it has made minus the billions it has payed out in dividends. I heard a number somewhere in the $500billion range over the last 30 years.