RCA OKs Enstar storage recovery change

The Regulatory Commission of Alaska has approved a change to the way in which Enstar Natural Gas Co., the main Southcentral Alaska gas utility, recovers the cost of storing gas in the Cook Inlet Natural Gas Storage Alaska facility on the Kenai Peninsula. Enstar stores excess gas in the facility during periods of low gas demand and then withdraws the gas to bolster its gas supplies when demand is high.

The utility pays to reserve storage capacity in the CINGSA facility, and to inject and withdraw gas. Enstar adds these storage costs to the cost of the gas for its customers. Essentially, while making a return on the fees it charges for shipping gas through its pipeline network, Enstar simply passes through the cost of its gas supplies, including the storage costs, in the form of what is called a gas cost adjustment, or GCA.

Enstar has been accumulating records of its storage expenses in a “gas stored account,” and then recovering these costs retrospectively by allocating the costs proportionately across gas withdrawals, at the time the gas is pulled from the storage facility. The consequence is to defer some portion of the storage costs from one year to the next, since not all gas stored in a given year is used during that year.

Under the new arrangement, which Enstar requested and RCA has now approved, the storage costs will instead factor into each year’s GCA calculation, regardless of whether the gas has been withdrawn from storage. This will, in effect, eliminate the deferral of the recovery of any of the storage costs. The overall impact will be to increase the immediate cost of the gas that Enstar sells while reducing the cost of the gas that Enstar holds in storage, with the average cost of gas declining over time, the commission says.

The commission says that the other Southcentral utilities that use CINGSA already employ the same type of cost recovery mechanism that Enstar had requested and that nobody had objected to the proposed tariff change.

- ALAN BAILEY