Enstar request would mean increase in bills

Posted: Tuesday, December 02, 2003

Residential and commercial customers of Enstar Natural Gas Co. could be paying higher energy bills come January, if the Regulatory Commission of Alaska approves a rate increase sought by the gas utility.

Enstar filed a tariff revision request late last month proposing to increase its gas cost adjustment rate from $2.5575 per thousand cubic feet of gas to $3.1123 per thousand, effective for billings issued on or after Jan. 5.

The gas cost adjustment is a mechanism that allows the utility to adjust its rates in response to the fluctuating cost of natural gas, the regulatory commission said in a press release. A public comment period closes Dec. 19.

In its filing, Enstar said the average residential customer would see about a 13 percent increase, while the average small commercial user would see a 12 percent rise. The average large commercial gas customer would see a 14 percent increase.

According to the regulatory commission, if the proposed increase is approved, the current average residential customer's monthly bill of $65 would jump $8.50 to $73.50, while the average small commercial user would see his monthly bill of $152 climb by $18.90 to $170.90. A large commercial bill of $1,441.85 would increase about $200 to $1,641.85.

Enstar has requested to adjust its rates in direct proportion to the cost of natural gas. "The increase reflects the overall increase in energy prices in general, and crude oil prices in particular, per Enstar's established contracts with its suppliers," the regulatory commission said.

The commission may approve a rate or classification that varies from what Enstar has proposed.

Dan Dieckgraeff, Enstar's manager of finance and rates, said gas cost adjustment rate changes are done annually and go into effect each Jan. 1. This time, two things were about equally responsible for the rate increase request.

Enstar's "legacy contracts," that is, its older gas contracts that will deliver about 70 percent of the gas the company expects to buy in 2004, use a crude oil pricing index, which registered a 15 percent increase over the past year.

Meanwhile, Enstar will begin purchasing gas under its new contract with Unocal starting Jan. 1, under which Enstar will pay a higher rate, Dieckgraeff said. That contract uses a Lower-48 market-based price, a 36-month average of the natural gas futures prices, which have averaged about $4.39 during that period, according to details of the filing available on Enstar's Web site.

Unocal has committed to supplying gas to Enstar and has been successfully drilling for gas on the Kenai Peninsula in recent years.

"The bad news is prices are going up," Dieckgraeff said. "The good news is we've got gas."

The annual cost adjustment rate change isn't the only thing affecting gas prices recently.

"We have had several changes to rates over the last year or so," Dieckgraeff said.

In September 2002, Enstar underwent a general rate review that resulted in an across-the-board rate reduction of about 2 percent, he said.

A subsequent cost of service study determined residential customers were overpaying for gas and commercial customers were underpaying, resulting in another adjustment in May. Residential customers saw a slight decrease in gas costs, while commercial users a slight increase.

A few years ago, the annual gas cost adjustment rate change actually decreased prices, Dieckgraeff added. However, as Enstar's older contracts become less influential on overall costs and new contracts start representing a larger portion of Enstar's gas supply, future gas cost adjustment rate changes are likely to rise, not fall, he said.

People wishing to comment on the proposed rate adjustment may file written comments with the commission at: Regulatory Commission of Alaska, 701 W. Eighth Ave., Suite 300, Anchorage, AK, 99501. Copies of the comments also must be sent to Enstar at P.O. Box 190288, Anchorage, AK 99519-0288.

More details of the requested tariff change can be found at www.enstargas.com.



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