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RCA holds workshop on gas storage issues Cook Inlet Natural Gas Storage, Enstar, electric utilities, wrestle with how third-party storage should be regulated, role of RCA Kristen Nelson Petroleum News
Regulation of third-party natural gas storage is an issue which could hold up construction of such a facility in Southcentral Alaska. Third-party gas storage, with gas injected during warmer months and drawn down in colder months, would help manage the area’s seasonal swing in natural gas use.
Utilities that would use the service want to know that the Regulatory Commission of Alaska would allow them to pass through storage charges to their customers.
Without that assurance the utilities won’t commit to use of the storage facility.
And without the commitment of customers to use the facility the company proposing to build it, ANR Pipeline Co., a subsidiary of TransCanada, won’t begin construction. Cook Inlet Natural Gas Storage LLC is the entity formed by ANR for the Southcentral storage project.
RCA is in the middle. Assuming the commission has the authority to regulate a gas storage facility, it would have to complete its work before next summer if construction is to begin in time to allow storage for use in the winter of 2011-12.
That was what brought local utilities, ANR-CINGS officials and other stakeholders to the table at a Dec. 8 RCA workshop on natural gas storage.
Enstar spearheading effort Enstar Natural Gas Co., the Southcentral Alaska gas distribution utility, said in August that it was working with Houston-based ANR Pipeline Co. to develop storage.
ANR formed CINGS in October to develop a Cook Inlet gas storage facility, company representatives said at the workshop, including surface facilities and wells at a depleted Cook Inlet reservoir. Natural gas would be injected and stored and would be available to CINGS’ customers when needed. The facility would be some 20 acres and does not include pipelines.
ANR — operating as CINGS — would fund, build and operate the storage facility as a third-party operator. Enstar and other utilities would pay for storage space.
CINGS officials said they would be offering fixed levelized rates for a 20-year period. Base gas in the facility, which stays in the reservoir, is owned by the storage facility owner, while customers provide storage gas.
The tariff for storage is in two parts: the amount of space and the withdrawal rate. Customers pay based on the volume of storage capacity they reserve and also based on the deliverability rate they want, with faster withdrawal rates costing more.
CINGS officials said the company did an exhaustive search in Southcentral for usable reservoirs and pared it down to the top prospects. If more storage was required in the future CINGS would first look at expanding its initial facility but then could look at other reservoirs.
Enstar biggest user While Municipal Light & Power, Chugach Electric Association and Matanuska Electric Association were among those present at the workshop, Enstar is expected to be the largest user of the service.
Nan Thompson, Enstar’s vice president and general counsel, said Enstar asked for the RCA workshop because storage is essential to Enstar’s ability to continue to service customers and Enstar, as a regulated utility, needs to know what the commission will do.
The goal of the workshop was to try to identify issues the commission would face and what timeline would be required for RCA to make a decision on third-party storage in advance of this summer’s construction season, since CINGS’ goal is to have the storage facility complete and gas stored available for use in the winter of 2011-12.
Issues included how third-party storage would be regulated and what existing statutes pertain to third-party storage.
Blythe Marston, the RCA administrative law judge who facilitated the workshop, said at one point that she was hearing that the deal doesn’t go forward without agreement from the utilities — and the utilities won’t go forward without assurance the commission will approve the storage charge in the tariff.
The timeline One of the issues RCA would need to consider is whether it has the authority to regulate gas storage, an issue workshop participants said could be put before the commission early on.
January was a target for filings with the commission.
To get RCA approval in time for next summer’s construction season workshop participants discussed an application by CINGS for a certificate of public convenience and necessity, which would put CINGS’ information in front of the commission, and filings by the utilities proposing to use the service of their agreements with CINGS for approval.
If the commission determined it did not have authority to regulate CINGS as a utility, then the CINGS information would be available to the commission as it considered filings by the utilities for approval to include their costs of storage in their rates.
The goal was to find a way forward which would get to a decision by summer.
A lot is required to get started with RCA in January: The utilities are still negotiating with CINGS and would have to complete that process before RCA could review those contracts.
Regulatory Affairs and Public Advocacy, which represents the public interest in utility matters before RCA, is in the process of formulating views on storage regulation, but an assistant attorney general with RAPA said his personal view is that there would be two inquiries: a determination that gas storage was valuable and needed by the market, with just and reasonable rates, leading to a certificate of public convenience and necessity for the storage facility if it were regulated as a utility; then a determination of whether it was reasonable and prudent for a utility to acquire storage vs. other measures it could take to encourage conservation and reduce peak demand.
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