State comments on CEA Beluga gas pricing

The public advocacy section of the state attorney general’s office has commented to the Regulatory Commission of Alaska on Chugach Electric Association’s proposed internal pricing for the utility’s natural gas from the Beluga gas field. Chugach Electric, in conjunction with Municipal Light & Power, bought a portion of the field from ConocoPhillips as a source of gas for fueling the utility’s power stations. The utility has asked for commission approval of an internal pricing formula for the gas, as a basis for building the cost of the gas into the price that the utility charges its customers for electricity. Chugach Electric hopes that it can save money for its customers by pricing the gas at below market rates.

Chugach Electric has proposed a price of $5.57 per thousand cubic feet for the gas, a price that the utility says will cover its share of the operating costs of the Beluga gas field.

The attorney general’s office has suggested some issues that the commission should consider before deciding on whether to approve the gas price. The commission should both ensure that the benefits of the lower gas pricing are passed through to Chugach Electric’s ratepayers and that the rationale behind the pricing is appropriate, the attorney general’s office suggested.

Issues to be considered include the validity of the projected gas field operation and maintenance costs that Chugach Electric has used in determining the gas price, and whether those costs should be allowed to include any of the utility’s own internal administrative costs - Hilcorp Alaska operates the field on behalf of the field owners. The attorney general’s office also wants the commission to verify the field depreciation expenses that Chugach Electric has built into its field cost calculations. The office also questions the manner in which Chugach Electric proposes to estimate and recover the costs associated with the eventual abandonment and dismantlement of the field. And the office questions Chugach Electric’s parameter for calculating the money earned on the gas, to cover the debt incurred to purchase the utility’s share of the gas field.

- ALAN BAILEY