|
Testimony filed for Enstar rate rise Utility is seeking approval for fees to accommodate investments in new facilities in its transmission and distribution system ALAN BAILEY Petroleum News
In response to Enstar Natural Gas Co.’s application last summer for a raise in its gas shipment rates, multiple filings have been made with the Regulatory Commission of Alaska challenging the gas utility’s rate increase. The commission earlier suspended the new rates pending a hearing into the rate rise.
Enstar operates as a gas transportation company, moving gas through its pipeline system from delivery points from gas producers to the gas meters of gas consumers. Consumers’ gas bills consist of the sum of Enstar’s transportation fees and the cost of the gas that comes from the producers. Commercial customers who simply use Enstar’s network to ship gas just pay transportation fees.
4.6 percent increase The utility wants to raise the revenue it recovers from its transportation rates by $11.8 million, a move that Enstar says would raise a typical residential bill by 4.6 percent per year or $5.47 per month. Enstar told the commission that the rate rise is needed to achieve an acceptable rate of return following some substantial new investments in its transmission and distribution system.
Given those new investments, the utility has proposed increasing its fees to achieve a rate of return of 12.55 percent on its equity. Enstar has told the commission that has invested $70.5 million in new capital assets and has seen a $3.7 million increase in its annual operating expenses. Enstar is subject to what is referred to as cost-plus regulation, an arrangement that enables the utility to earn some reasonable return above its cost of doing business, to enable the utility to be financially viable and attract investment. The cost of doing business consists, essentially, of the cost of the capital invested in the business and the business’s operating cost.
In a series of complex and detailed filings, Enstar’s commercial customers and the state attorney general’s office, on behalf of Alaska residents, have challenged various aspects of Enstar’s proposed tariff changes, including the capital items and costs included in its “rate base,” the cost of doing business used to calculate the return that the utility requires for the fees that it charges its customers. Enstar’s proposed rate of return on its equity has also been challenged, with some customers and the state arguing that the rate of return is unreasonably high.
Several of Enstar’s commercial customers have questioned the technique that Enstar uses to allocate its costs among different classes of customer, taking into account the cost of maximizing the size of the gas transmission lines to accommodate high pipeline throughput for customers that can experience particularly high peak gas demand.
Matanuska Electric Association has questioned a major increase in the fees that Enstar charges for the firm transportation of large volumes of gas. MEA has also commented that, because its power station at Eklutna is dual fuel, able to use diesel as an alternative to gas, the relative interruptibility of the gas supplies to the facility should be reflected in the rates that Enstar charges for gas delivery.
Power pool tariff Other questions revolve around, for example, tariff arrangements for the new shared power pool that Chugach Electric Association, Municipal Light & Power and Matanuska Electric Association have agreed for their service areas in Southcentral Alaska. Under the pooling arrangement, the utilities need to be able to flexibly direct their fuel gas supplies through the Enstar pipeline network to the most efficient gas-fired power stations - the tariff needs to recognize this need for flexibility in the destinations for the gas supplies. Enstar has proposed a new class of service and associated fee structure to accommodate this. ML&P, for example, has proposed that this new aspect of the tariff should be not be given final approval until the utilities have gained some experience of operating the pool and hence better understand how the pool will actually operate.
A perhaps more minor issue concerns the recovery from rates of the fees that Enstar has to pay to credit card companies for customers’ use of credit cards to pay their gas bills. Businesses who only use Enstar’s pipeline network for gas transmission argue that they should not have to pay for these expenses.
| 