RCA orders hearing on CEA Beluga gas

The Regulatory Commission of Alaska has ordered a formal hearing, to investigate Chugach Electric Association’s proposed internal pricing for the utility’s natural gas supplies from the Beluga River field. Meanwhile, the commission has suspended the utility’s proposed tariff revision for the gas pricing - the pricing formula will go into effect on an interim basis, with the possibility of refunds to ratepayers if the commission ultimately rejects the pricing proposal. The gas price issue has arisen following Chugach Electric’s purchase of a 10 percent interest in the Beluga field - earlier this year Chugach Electric and Municipal Light & Power, the other Anchorage-based electric utility, completed their buyout of ConocoPhillips’ ownership interests in the field.

Chugach Electric is using its own gas from the field as part of its gas supplies for its gas-fired power stations. In doing this, the utility must set an internal price for its gas, referred to as a gas transfer price, or GTP. The GTP and gas volumes from Beluga are used in combination with the volumes and prices of gas from the utility’s gas suppliers to determine an overall of cost of the gas fuel that the utility uses. The cost of the gas then becomes a major factor in determining the price that Chugach Electric charges its customers for electricity.

The idea is to obtain Beluga gas at a cost below the prevailing market price in the Cook Inlet region, thus reducing the cost of the electricity that the utility supplies. The utility has proposed a pricing formula that results in an initial GTP of $5.57 per thousand cubic feet. Recent new Cook Inlet gas contracts have seen current pricing ranging from $6.50 to more than $7, although short-term interruptible supplies can be priced in the range $6 to $6.50.

- ALAN BAILEY