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RCA OKs CEA/Hilcorp gas supply settlement Agreement allows Chugach Electric to buy gas for generating Fairbanks power provided supply priorities in Southcentral are met Alan Bailey Petroleum News
The Regulatory Commission of Alaska, or RCA, has approved a settlement between Alaska Railbelt utilities and the state attorney general that spells out stipulations for a new contract between Hilcorp Alaska and Chugach Electric Association for the supply of Cook Inlet gas, to enable Chugach Electric to generate electricity for Fairbanks utility Golden Valley Electric Association.
After Chugach Electric announced the new gas supply contract in November, Matanuska Electric Association expressed concern about the impact that the delivery of gas under the contract might have on already tight gas supplies for other Railbelt utilities.
Chugach Electric had said that the contract would enable the generation of much-needed gas-fueled power for Fairbanks, where a high dependence on oil-fueled generation has greatly increased the cost of electricity. Chugach Electric, which has been supplying some power to Fairbanks for a number of years, does not guarantee the delivery of power to Golden Valley, reserving the right to curtail supplies should that prove necessary as a consequence of gas supply constraints in Southcentral.
Priority contracts Under the terms of the settlement that RCA has now approved, the utilities and the attorney general have agreed that the new gas supply contract with Hilcorp should proceed, provided that certain other contracts take precedence. One of those contracts is an agreement among Railbelt utilities that addresses emergency actions should there be a shortage of natural gas in Southcentral Alaska. The other contracts are Hilcorp’s priority contracts, as specified in the new contract between Hilcorp and Chugach Electric and consisting of all of Hilcorp’s existing contractual commitments.
The agreement also requires Chugach Electric and Golden Valley to eliminate a clause in their power supply contract that gives Chugach Electric the right of first offer of economy or firm power sales to Golden Valley.
In addition, the agreement waives the need for power load forecasts with Golden Valley as a perquisite of RCA approval of the contract between Chugach Electric and Hilcorp.
And all parties to the settlement have agreed that, overall, the sale of power by Chugach Electric to Golden Valley represents a net benefit to Chugach Electric’s customers by improving the economics of Chugach Electric’s power generation and thereby reducing the utility’s electricity rates.
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