CEA extends contract with AIX Energy

Chugach Electric Association has asked the Regulatory Commission of Alaska for approval of an extension to the natural gas supply agreement between the Southcentral electric utility and AIX Energy LLC, the operator of the Kenai Loop gas field in the city of Kenai. The utility uses gas as a fuel for power generation and, thus, requires commission approval for its gas supplies.

The utility’s existing agreement with AIX Energy expires on March 31, 2016 - the new agreement would commence on April 1, 2016, and continue to March 31, 2024, with the possibility of an extension to March 31, 2029. The contract enables Chugach Electric to purchase gas from AIX Energy, but does involve any commitment to gas purchases by the utility or to gas sales by AIX. Under the terms of the contract, individual gas sales transactions would be negotiated on a case-by-case basis, but with total gas sales each year capped at 3 billion cubic feet.

The gas price would be individually negotiated for each sales transaction, but with the price capped according to a price schedule documented in the proposed contract extension. Maximum prices rise by about 2 percent per year, ranging from $6.13 per thousand cubic feet in 2016-17 to $8.07 in 2028-29. Chugach Electric told the commission that the AIX Energy contract diversifies the utility’s gas supply portfolio at prices below existing supplier prices. The utility commented that the price cap of $7.17 in 2022-23 in the contract extension is lower than the price under a recent amendment to the utility’s gas sales agreement with Hilcorp Alaska.

The delivery point for the gas is the junction between AIX Energy’s pipeline from the Kenai Loop and the Kenai Beluga Pipeline, near Kenai. Chugach Electric is responsible for the cost of shipping the gas from the delivery point to the utility’s power stations.

Although Chugach Electric is not obliged to purchase gas under the terms of its gas sales agreement with AIX Energy, the utility’s records show that during the quarter ending September 2015 the utility purchased about 10 million cubic feet of gas from the Kenai Loop field.

- ALAN BAILEY