RCA opens an investigation of KBPL shipping tariff increases

In a June 30 order the Regulatory Commission of Alaska opened a docket to investigate a proposal by Kenai Beluga Pipeline to increase the rate it charges for shipping gas through its pipeline system. The pipeline company has requested approval of an increase it its rate from 29.15 cents to 63.98 cents per thousand cubic feet of gas, a more than doubling of the shipping fees. A number of businesses and the state of Alaska have questioned the rate increase, which will impact the cost of gas used by Southcentral Alaska power and gas utilities. The commission is allowing the new rate to go into effect until the investigation is completed, with the proviso that appropriate refunds will need to be made if the final approved rate differs from the rate that KBPL wants to charge.

The commission has invited the state attorney general to participate in the investigation and has given other parties with an interest in the case until July 15 to request to intervene. KBPL has requested an alternative dispute resolution procedure, a procedure that would enable some form of mediated resolution to a dispute over the proposed rate - the commission has said that, with responses to this request not required until July 11, the commission cannot yet make a ruling on the request. In the absence of a mediated solution, the commission would make a ruling in the rate case after gathering appropriate evidence regarding the rate increase.

The pipeline, a core component of the Southcentral Alaska gas pipeline infrastructure, connects gas fields in the southern Kenai Peninsula to Enstar Natural Gas Co.’s gas transmission system in the northern part of the peninsula, to the Cook Inlet Natural Gas Storage Alaska, or CINGSA, storage facility near Kenai and, by running under the waters of Cook Inlet, to the gas transmission network on the west side of the inlet.

As previously reported in Petroleum News, KBPL has said that it needs to more than double its rate to cover its cost of upgrades to the pipeline system and to cover an anticipated fall in pipeline throughput. The pipeline company has installed new gas compression on the Kenai Peninsula to increase the capacity of the pipeline for shipping gas east to west under the Cook Inlet during periods of peak winter utility gas demand.

The pipeline system has a postage stamp rate, a rate that remains the same regardless of how far a shipper wants to transport gas through the line. This arrangement eliminates the transportation cost from decisions over gas transportation routes through the pipeline network but works to the disadvantage of shippers that use only short sections of the pipeline. KBPL has told the commission that it anticipates a significant drop in pipeline throughput because some shippers have built or are planning pipelines to bypass short sections of the KBPL, to avoid shipment fees for short shipment distances. KBPL also says that a suspension of liquefied natural gas exporting from ConocoPhillips’ Nikiski LNG facility is impacting pipeline throughput.

- ALAN BAILEY