RCA OKs Hilcorp gas contract with CEA

The Regulatory Commission of Alaska has approved a gas supply contract between Hilcorp Alaska and Chugach Electric Association that will ensure that Chugach Electric can obtain all of the gas that it needs to operate its gas-fired power plants until the end of the first quarter of 2018. The commission has already approved a similar contract between Hilcorp and Enstar Natural Gas Co.

In a letter order issued on Sept. 10 the commission said that it approves Chugach Electric’s ability to recover the cost of the gas through the rates that it charges its customers.

The contract, which goes into operation in 2015, specifies prices ranging from $7.13 to $8.03 for regular “base load” gas supplies, with price markups of 25 and 50 percent for gas needed to meet peak demand and to meet emergency needs.

Commissioner Norman Rokeberg, while concurring with the commission’s decision, has raised concerns about the potential difficulty for Cook Inlet gas explorers in finding markets for newly discovered gas, given the manner in which Hilcorp’s contracts have tied up the utility gas market until 2018.

Chugach Electric, saying that it is concerned about providing a gas market for independent producers, has now submitted a gas supply contract with Cook Inlet Energy Inc. to the commission for approval. Cook Inlet Energy is an oil producer and active oil and gas explorer in the Cook Inlet basin.

The prices in the contract, ranging from $6.12 to $7.31 per thousand cubic feet, are 10 percent lower than those in Chugach Electric’s approved contract with Hilcorp. But the Cook Inlet Energy contract makes no firm commitment, either for Cook Inlet Energy to supply gas or for Chugach Electric to purchase any gas that Cook Inlet energy may offer for sale.

—Alan Bailey