Fairbanks utility mulling regulation

Fairbanks Natural Gas LLC recently began talks with the Parnell administration that could lead to the return of full economic regulation for the Interior natural gas utility.

In a statement, the company said it told the state Attorney General’s office it “might be willing to accept full economic regulation by the RCA, if the new regulatory status were subject to a reasonable phase-in, and if certain other agreements could be reached.”

In the Fairbanks Daily News-Miner, Fairbanks Natural Gas President Dan Britton described the discussions as “preliminary,” but said he hoped an agreement could be reached by the end of the year. Britton connected the discussions with state evaluations of a natural gas plant on the North Slope, saying his company might be willing to accept rate regulation voluntarily if it improved its chances of distributing the resource locally.

Fairbanks Natural Gas began its life in 1997 as a fully regulated utility, but the Regulatory Commission of Alaska exempted it from rate regulation in 2003 to help it compete against the unregulated fuel oil market that dominates Interior Alaska.

The RCA has revisited the matter often in the decade since.

To end one such proceeding, Fairbanks Natural Gas and the Attorney General reached an agreement in April 2009 where the utility would accept a voluntary price cap to protect customers who couldn’t easily switch back to oil if natural gas became too expensive.

(While residential rates nearly tripled between 2003 and 2008, occasionally topping heating oil prices on an energy equivalent basis, they haven’t changed since 2008.)

The settlement required all the parties to revisit the matter this year, to check on the effectiveness of the price cap and to decide how to proceed on regulation going forward.

Although Fairbanks Natural Gas is not economically rate regulated, it often notes it must still file tariffs and is currently operating under limitations to its rate structure.

Fairbanks Natural Gas currently serves more than 1,100 residential and commercial customers and operates more than 70 miles of underground distribution pipeline.

—Eric Lidji