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RCA to rule on FNG compensation claim Fairbanks gas utility wants direct refund out of the compensation that Aurora Gas paid to Enstar for the suspension of gas supplies Alan Bailey Petroleum News
The Regulatory Commission of Alaska has agreed to hear a petition from Fairbanks Natural Gas, claiming that FNG is due compensation from the settlement agreement between Aurora Gas and Enstar Natural Gas Co. over Aurora’s suspension of gas supplies to Enstar in 2006.
After the gas supply suspension Enstar sued Aurora for breach of contract — the two companies reached a settlement in April 2008. Under the terms of the settlement Aurora agreed to pay Enstar about $11 million as compensation for the increased cost of gas that Enstar incurred up to May 2008 as a consequence of the loss of Aurora supplies. Enstar said that it would use the approximately $10 million in net proceeds to reduce the gas cost adjustment that it charges to its customers.
Enstar supplied gas to FNG during the period from which the compensation was determined. But because FNG is no longer an Enstar customer, FNG will not received any benefit from future adjustments to what Enstar charges its customers for gas. So, instead, FNG wants $56,000 in direct compensation from Enstar for gas that FNG purchased from Enstar after the suspension of Aurora gas deliveries.
In an order reopening the Aurora Gas-Enstar case for consideration of FNG’s request, RCA said that Enstar does not oppose a direct refund to FNG, provided that the refund does not create a precedent for other claims.
Out of scope RCA approval of the settlement between Aurora Gas and Enstar came in the form of a ruling on an Enstar tariff revision, and in its ruling the commission said that approval of a direct refund to FNG would fall outside the scope of the tariff case.
The commission also expressed concern that direct compensation to FNG would open the gate for similar claims from an unknown quantity of other previous Enstar customers. Moreover, the Aurora Gas supply contract that the dispute and settlement related to extends to 2016, thus raising the specter of people who become Enstar customers in the future claiming compensation, the commission said.
“For example, a customer not coming onto the system until 2011 will pay higher gas costs due to the loss of the (Aurora Gas) gas contract, but will not share in the pass-through under the gas cost adjustment,” RCA said.
But FNG has said that it is in a unique position because of the size of its claim and because Enstar had refused service to FNG after 2008. Other customers who leave Enstar would do so voluntarily, FNG said in asking RCA to consider its petition.
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