NEWS BULLETIN

December 22, 2008 --- Vol. 14, No. 118December 2008

RCA rejects Enstar contracts, but lets company buy gas

State regulators today decided not to approve a pair of gas supply contracts between Enstar and two Cook Inlet producers, but allowed Enstar to enter the contracts and pass the cost of the gas on to its customers on a temporary and possibly refundable basis.

The decision could possible stave off a gas supply crunch expected at the start of the year, but could also extend an already lengthy and heated debate over supply contracts.

In a three-page ruling, the Regulatory Commission of Alaska chose not to approve the contracts Enstar negotiated with ConocoPhillips and Marathon because the contracts did not include amendments the commission required in a ruling from the end of October.

Despite the ruling, Enstar can still enter the contracts.

Under the terms of the companyís tariff, Enstar does not need regulatory approval to purchase gas supplies that lower the average cost of gas for the company.

As such, the focus of the case will now shift to examine whether the two revised contracts in fact lower the average cost of gas, as Enstar and the producers claim.

If they donít, Enstar could be forced to issue refunds with interest to its customers.

Alongside the ruling, Commissioner Kate Giard issued a separate statement criticizing the Alaska Department of Natural Resources for commenting on the matter without being a party to the proceeding. The DNR comments, in part, referenced the issue of production costs in the Cook Inlet, a controversial detail as regulators try to determine fair pricing.

Editorís note: See full story in Dec. 28 issue of Petroleum News, which will be available online Dec. 26.


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