Alaska House doubles bulk fuel loan cap to $1.5 million

The Alaska House of Representatives voted unanimously Wednesday to double the bulk fuel loan cap for rural communities, raising the limit from $750,000 to $1.5 million as lawmakers responded to soaring energy costs and supply uncertainty in remote villages.

House Bill 388 addresses fuel price spikes lawmakers attributed to a war in Iran and the coldest winter the Yukon-Kuskokwim Delta has seen in 15 years. The bill also raises the cap for communities that pool fuel orders, allowing $1.5 million per community rather than a flat $1.8 million total.

The program serves small communities with populations under 2,000 people. Loans must be repaid. The program's default rate is 0.5 percent, lower than the roughly 2.6 percent default rate on conventional loans, according to floor testimony.

Representative Holland, speaking in support of the bill, emphasized the timing. "The timeliness of this is important because these communities need to be making commitments now to be able to secure their supply that will not be delivered until later this summer or early fall," he said. "But in securing that supply, they have the responsibility to be able to pay for that fuel up front ahead of when they will actually be generating the revenue from this fuel through sales and through utility rates."

The House Energy Committee heard testimony on April 23 from communities and fuel companies about the urgency of raising the cap. Remote villages paying $6.63 per gallon for unleaded gasoline face potential shortages if they cannot secure fuel orders now for delivery later this summer or early fall, according to committee testimony.

Holland warned that an estimated $400 million in additional fuel costs will drain money from rural communities that might otherwise pay for food, housing or other utilities.

The House adopted the Finance Committee substitute before advancing the bill to final passage. The bill passed 39-0 and now heads to the Senate.