FNG settles rate re-regulation case
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Fairbanks utility claims to have reached an agreement with Attorney General, Fairbanks North Star Borough over ratemaking
Eric Lidji For Petroleum News
Although the details remain as yet unknown, Fairbanks Natural Gas LLC claims to have reached a settlement with the parties seeking to reinstate rate regulation on the utility.
The local distribution company for Fairbanks recently asked the Regulatory Commission of Alaska to vacate the hearing schedule arranged for the case, saying the parties met “informally” on Dec. 10 and “reached an agreement to amicably settle this docket.” The Attorney General and the Fairbanks North Star Borough are the other parties in the case.
While the RCA would need to approve any settlement before it went into effect, the commission agreed to drop the current hearing schedule, saying it would issue a revise schedule should the settlement prove inadequate. The settlement is due by Jan. 14, 2013.
Three parties to case The case grew out of a 2009 investigation into Fairbanks Natural Gas’ regulatory status, one of many the company has gone through since its creation in the late 1990s. At the time, the Attorney General favored a price cap over rate regulation, but suggested revisiting the matter again in 2012 to gauge the effectiveness of the protective measure.
While Fairbanks Natural Gas started life as a rate regulated utility, the RCA subsequently gave it the ability to change its rates up and down, at will, to better compete against the unregulated fuel oil companies that dominate the home heating market in the Interior.
In October 2012, Fairbanks Natural Gas suggested it might willingly accept rate regulation, under certain conditions, and said it had kicked off discussions with the Parnell administration. Asked why, Fairbanks Natural Gas President Dan Britton told Fairbanks officials that it saw rate regulation as an inevitability, given its plan to seek public financing for a North Slope liquefied natural gas plant and its expectation that it would eventually expand its market share in the home heating sector in Fairbanks.
Britton also said the cost of revisiting the issue was negating the benefits of exemption.
In November, an economist representing the Attorney General testified that Fairbanks Natural Gas had failed to compete against fuel oil prices and should be rate regulated.
In mid-December, the Parnell administration announced a $355 million financial package designed to spur construction of a North Slope LNG plant to supply Interior markets.
While the public conversations between Fairbanks Natural Gas and the state have mostly been cooperative, the utility has sparred some with the Fairbanks North Star Borough.
The Fairbanks North Star Borough also supported a return to rate regulation, but in the hope of lowering consumer prices by keeping rates tied to service costs. And it raised additional concerns about Fairbanks Natural Gas’ service area. In particular, it accused the company of not providing service to all the interested customers in its service area.
Fairbanks Natural Gas said both issues fell outside the intended scope of the docket. The company even asked the RCA to consider removing the borough as a party to the case.
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