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NEWS BULLETIN

May 18, 2010 --- Vol. 16, No. 41May 2010

RCA approves Chugach-Marathon supply contract

The Regulatory Commission of Alaska has approved a short-term natural gas supply contract between Chugach Electric Association and Marathon Oil Co.

The May 17 ruling found that “the public interest is served” by approving the contract, which Chugach said would supply its unmet needs from April 2011 to December 2014.

The contract establishes prices for natural gas using futures on the New York Mercantile Exchange, with an inflation-adjusted floor and ceiling, and premiums during increased demand.

The RCA approved the contract without a formal investigation and hearing.

During a comment period, the state Attorney General’s office questioned the pricing provisions in the contract — specifically how Chugach reached specific floors, collars, premiums and adjustments — but said the need for gas supplies outweighed its concerns.

In 2009, the RCA approved a contract between Chugach and ConocoPhillips, also without an investigation and hearing. Previously, though, the RCA conducted extensive hearings on proposed Enstar Natural Gas contracts with Marathon and ConocoPhillips.

Enstar recently proposed a new contract with Marathon that uses similar pricing provisions to those in the Chugach contract. The RCA has not yet ruled on that case.

Chugach is the largest power provider in Alaska, and the second largest natural gas user, after Enstar. The cooperative makes 90 percent of its electricity from natural gas.

Editor’s note: See full story in the May 23 issue of Petroleum News, available online at noon Alaska-time on Friday, May 21.

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