Enstar moves closer to Homer service

Posted: Tuesday, August 26, 2003

Enstar Natural Gas Company took another step closer to supplying residents in Homer with natural gas when the company filed a rate proposal with the Regulatory Commission of Alaska earlier this month.

The company, which today serves more than 112,000 customers in Anchorage, the Matanuska-Susitna Borough and central Kenai Peninsula, has requested commission approval of a 20-year supply contract with NorthStar Energy Group Inc., which has gas leases in the hills north of Homer.

Enstar would pay a base price of $3 per thousand cubic feet, a figure that would be adjusted by one-half the rate of inflation, plus taxes and transportation fees.

Enstar, in turn, would charge its consumers a price competitive with that of fuel oil, according to Dan Deickgraeff, a spokesperson for Enstar.

"It would be about 60 percent of the cost of fuel oil (for an equivalent amount of heat)," he said.

A gallon of No. 2 fuel oil in Homer on Aug. 25 (for volumes under 50 gallons) cost $1.46 delivered.

Enstar also proposes to add a surcharge to consumers' bills of $1 per thousand cubic feet to offset construction costs on a pipeline from Anchor Point to Homer.

A 30-day public comment period on Enstar's RCA filing began Aug. 15.

"We're excited about this opportunity to extend a reliable, efficient energy source to Homer and to form a solid relationship with the residents of the lower Kenai Peninsula," said Tony Izzo, president of Enstar.

Enstar first got the authority to provide natural gas in the Homer area nearly six years ago. At that time, however, a reliable and economical supply was not available, according to an Enstar press release announcing the rate filing.

Since late 1997, NorthStar has acquired leases on the lower peninsula and completed tests on wells drilled in 1965. NorthStar is the first producer to offer sufficient, reasonably priced gas supplies close enough to Homer to make a project feasible, Enstar said.

To put the pieces together and begin supplying Homer residents and businesses with an alternative to electrical power, oil or propane, several things must happen, Enstar said. NorthStar must drill an additional production well to prove its gas reserves and provide what is known as peak day delivery redundancy. In other words, NorthStar must demonstrate it can supply gas to the Homer area for 20 years and that each well would be capable of serving alone should one fail.

That must happen before Enstar would be required to buy gas or build the transmission and distribution system, Enstar said.

Enstar also needs the RCA's approval of its proposed tariff.

Charlie Pierce, division manager of Enstar's Southern Division, which covers the peninsula, said if everything goes perfectly, it might be 2004 or 2005 before a distribution system could be completed and gas made available to Homer consumers. But predicting exactly when gas would be available is hard because so much depends on NorthStar's second well. If that well failed, the deal would be dead, he said.

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