HOME PAGE SUBSCRIPTIONS, Print Editions, Newsletter PRODUCTS READ THE PETROLEUM NEWS ARCHIVE! ADVERTISING INFORMATION EVENTS PETROLEUM NEWS BAKKEN MINING NEWS

Providing coverage of Alaska and northern Canada's oil and gas industry
September 2010

Vol. 15, No. 38 Week of September 19, 2010

NGSC sees itself as a keystone

ANGDA-backed Natural Gas Supply Co. hopes to play many roles in the Cook Inlet energy market, could announce deal soon

Eric Lidji

For Petroleum News

Government and industry generated many ideas this year for fixing what ails the Cook Inlet energy market, but one hasn’t gotten much attention: the Natural Gas Supply Co.

The Alaska Natural Gas Development Authority formed the cooperative in 2009 as a vehicle for nonprofit utilities in the state to join forces when buying fuel and services.

The Natural Gas Supply Co. remains a name on a piece of paper, but its six members could enter their first business arrangement soon, according to Tony Izzo, hired by ANGDA to facilitate the cooperative. Izzo said the Natural Gas Supply Co. is “advancing on a number of options,” but can’t announce anything yet. “We are not just talking about opportunities,” he said. “The due diligence is being performed on some opportunities.”

The Natural Gas Supply Co. is a cooperative that currently has six members: Chugach Electric Association, Municipal Light & Power, Golden Valley Electric Association, Matanuska Electric Association, Homer Electric Association and ANGDA.

Whether the cooperative announces a business arrangement any time soon, it certainly has numerous roles to play in the maturing Cook Inlet energy market, where utilities are being urged to collaborate and new producers are entering the market.

As Izzo describes it, the Natural Gas Supply Co. could be a keystone in the region.

Izzo said the cooperative would not compete with the Greater Railbelt Energy and Transmission Company. Promoted by both the Palin and Parnell administrations and debated extensively by the Legislature, GRETC would combine the generation and transmission assets of the six Railbelt utilities to guide future spending on infrastructure.

The Natural Gas Supply Co. allows those same companies to pool their needs.

“It’s all service related, not asset related,” Izzo said.

Izzo said the cooperative also wouldn’t eat into the business of storage facilities proposed for Cook Inlet. He believes it would actually make life easier for those storage operators by creating a “one-stop shop” to sell natural gas back into the market.

Making all players big player

The Natural Gas Supply Co. could make Alaska utilities more like those in the Lower 48.

It’s not a coincidence that the first utilities to join up — Homer Electric Association and Matanuska Electric Association — are also the largest utilities in the Railbelt that do not generate their own power. Both companies currently buy electricity from Chugach Electric Association, although both also plan to start generating their own power by 2015.

“That’s a near-term issue. So gas supply for them is a high priority,” Izzo said.

The Natural Gas Supply Co. gives smaller electric utilities the ability to buy fuel, instead of power. Because the Railbelt electricity grid is integrated from Homer to Delta Junction, those producers could sell fuel to any power plant that offers the best deal.

That benefit is common in the Lower 48, where most utilities aren’t vertically integrated like the municipal utilities and cooperatives in Alaska, and often shuffle fuel and power around a region in search of cost savings from day to day. “You can leverage the benefits of being a larger player as a utility without having to be a larger player,” Izzo said.

That could also be a benefit for Golden Valley Electric Association, the Fairbanks utility that makes most of its power from diesel and coal, but could see cost savings from gas.

The cooperative could still be beneficial to power producers like Municipal Light & Power and Chugach, though, because joining with smaller players might let those utilities negotiate larger fuel purchases at better rates than individual utilities could get alone.

As a cooperative, the Natural Gas Supply Co. is a nonprofit, which is why Enstar Natural Gas, a private utility and the largest natural gas user in the state, isn’t a member.

If the Alaska Gasline Port Authority successfully acquires Fairbanks Natural Gas and makes the utility a nonprofit, it could join the cooperative. Izzo said that the Natural Gas Supply Co. could also partner with Enstar or military installations on fuel purchases.

Izzo also believes the cooperative could simplify regulatory approval by increasing the amount of weight behind each contract. However, since the Natural Gas Supply Co. would not be a certificated utility, each utility would still need to bring contracts to the Regulatory Commission of Alaska separately. Izzo doesn’t believe that will create complications, since utilities will use the cooperative to lower gas costs.

“There is potential for a number of different upsides in this thing,” Izzo said.

Supplies still needed

Of course, all that requires large supplies of natural gas to become available.

They won’t be available in the Cook Inlet basin in the future without more drilling, but would be abundant if natural gas from the North Slope is made available to the Southcentral market. ANGDA announced plans to bid in the open seasons planned for two pipeline projects this year, but is prohibited from discussing the details of that any bids it makes.

That said, for months before the open season, ANGDA talked about becoming an “aggregator” that helped small gas users join together to have more weight in the market.






Petroleum News - Phone: 1-907 522-9469 - Fax: 1-907 522-9583
[email protected] --- http://www.petroleumnews.com ---
S U B S C R I B E

Copyright Petroleum Newspapers of Alaska, LLC (Petroleum News)(PNA)©2013 All rights reserved. The content of this article and web site may not be copied, replaced, distributed, published, displayed or transferred in any form or by any means except with the prior written permission of Petroleum Newspapers of Alaska, LLC (Petroleum News)(PNA). Copyright infringement is a violation of federal law subject to criminal and civil penalties.