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RCA considering new natural gas pricing regulations Regulatory Commission of Alaska has scoping document out for public comment; regulations docket to follow; standard contracts, common in Lower 48, could guide future gas supply cases Eric Lidji Petroleum News
After a decade of debates over how to price Cook Inlet natural gas, state regulators are considering new regulations to govern pricing provisions in future gas supply contracts.
Those regulations could include a standardized contract setting out terms for pricing and other provisions to allow regional utilities to enter into supply arrangements with natural gas producers without requiring a hearing before the Regulatory Commission of Alaska.
“The problem, as I see it, is there is great uncertainty among public utilities and gas suppliers in trying to agree upon gas supply contracts,” Commissioner Jan Wilson said during a March 25 meeting, adding the RCA might be able to alleviate that uncertainty.
“Standard form contracts” are relatively common in Lower 48 gas markets, where the abundance of buyers and sellers is conducive to short-term contracts made quickly.
But the idea could be used to encourage shorter-term contracts in Alaska, or could be modified to accommodate the longer-term contracts that are the norm here, Wilson said.
In addition to setting up a methodology for pricing gas supplies, the contract could include provisions related to other issues, like deliverability or durations, Wilson said.
“The pricing provisions are very important, but the other provisions of the contract are equally important,” Wilson said.
At minimum, the contract could guide future supply cases, which have been hampered by a scarcity of information on the record, according to Commissioner Tony Price.
“We may never see somebody come in with a standard form contract with the pricing, but at least we have established something on a broad record,” Price said.
Hoping for more participation Before opening a docket to craft new regulations, the commission is putting the issue before the public, looking for a wide range of thoughts about Cook Inlet gas supplies.
The commission uses different classifications to handle different issues. A regulations docket like the type being considered allows anyone to put information on the record, as opposed to other dockets that restrict who can participate and how they can participate.
“Our knowledge of the Cook Inlet market is very small compared to the knowledge that there is out there in the community,” Wilson said.
A regulations docket also does not include a “discovery” phase, where parties in a case can request information and documents from each other. Several commissioners believe not having that phase could help expand the parties willing to participate in the matter.
ConocoPhillips and Marathon, for instance, did not participate last year in a case over whether regulators should approve contracts between those companies and Enstar Natural Gas. The State of Alaska has not been a party in any supply case over the past decade.
The call for public comment will determine if a standard contract is feasible, Wilson said.
“I think getting some feedback from those people that have negotiated gas contracts, as to whether they believe that it’s possible to come down with some kind of standard form contract would also be helpful,” Wilson said.
More contracts on the horizon Since coming into existence in July 1999, replacing the Alaska Public Utilities Commission, the RCA has considered four natural gas supply contracts, approving two conditionally and rejecting the other two outright.
The most recent case came last year, when Enstar sought, but failed to get commission approval for a pair of natural gas supply contracts with ConocoPhillips and Marathon.
The case stretched on for months and generated thousands of pages of documents, but Enstar ultimately had to use a back door to guarantee it would have enough gas this year.
The decision to consider new regulations came as the commission prepares for several new supply contract cases in the near future from Enstar, Chugach Electric Association and two newcomers: Homer Electric Association and Matanuska Electric Association, which both currently buy electricity from Chugach but intend to start producing their own in the years to come.
Wilson brought up several other ideas beside the standard contract for addressing the gas supply dilemma. Those ideas range from continuing the current policy of waiting for contracts to come before the commission, to delaying commission approval of new gas supplies until a utility tries to change its rates, to seeking a legislative change to statutes.
Wilson called the standard contract idea “the most feasible at this time.”
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