Enstar: Prices headed north

Posted: Thursday, November 16, 2006

With arctic winds howling outside Paradiso’s Restaurant where the Kenai Chamber of Commerce was meeting Wednesday, Enstar’s public relations executive told business leaders to open their doors and crack their windows because natural gas prices won’t be lower than they are now anytime soon.

“This is the time of year we get to tell you there’s going to be a price adjustment — and, it’s going northward,” said Curtis Thayer, Enstar director of government and public affairs.

Enstar has filed a tariff revision request with the Regulatory Commission of Alaska proposing to increase its gas cost adjustment (GCA) rate from $5 per thousand cubic feet of gas to $7.03 per thousand, effective for billings issued on or after Jan. 3.

Thayer explained that the price hike is directly related to the supply of gas Enstar buys from gas producers, primarily Marathon and Chevron.

Enstar does not profit from increases in the GCA rate, he said, adding that the gas company makes its money from the transmission of gas to its customers.

“We’re rewarded on the amount of gas you use. We are paid for the volume that goes across our transmission line,” Thayer said.

In fact, he said, when the price of gas is high, people do what they can to use less, resulting in Enstar earning less money.

What the proposed rate hike means to the average residential customer is a $30 per month jump in their gas bill next year.

Next year’s price increase is tied to Enstar’s gas supply, 45 percent of which will come from older contracts priced in relation to crude-oil market prices.

The increase also reflects purchases under a Chevron (formerly Unocal) contract that uses a Lower 48 market-based price.

The projected cost of gas to residential users as of January 2007 will be $8.73 per thousand cubic feet in Alaska, Thayer said. “We still have the lowest price for gas in the country.”

Thayer also said Enstar, which serves 340,000 Alas-kans, had anticipated putting natural gas into storage this month, but because November has been “22 percent colder than a year ago, the company is actually pulling gas out of storage.”

The gas company executive said Enstar’s gas suppliers have committed to meeting the company’s needs through 2008, and if the Alaska Regulatory Commission approves a new contract just signed by Enstar, its needs will be met through 2010.

“We are working to identify and evaluate options to meet future demand,” Thayer said.

During a question and answer period following his formal remarks, Thayer said that in addition to encouraging more gas exploration and development in Cook Inlet, “ideally we would like a spur line (from a natural gas pipeline from the North Slope) off of Fairbanks.”

Kenai United Methodist Church of the New Covenant Pastor Jon Walters asked if Enstar has projected how many low-income customers will be “no-pay or slow-pay customers” when faced with the projected rate hike.

“We do have projections,” Thayer said, adding that Enstar has a consumer fact sheet available at its offices and on its Web site, with information about the price hike and how people can obtain assistance in paying for home heating.

“On a day like this, we are not going to shut anyone off, but we need to know if they’re not going to be able to pay their bill. They need to call our office and let us know,” Thayer said.

The State of Alaska Heating Assistance Program toll-free number is 1-800-470-3058.

Phil Hermanek can be reached at phillip.hermanek@peninsulaclarion.com.

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