Weather impacts Enstar’s gas storage

Several years of exceptionally warm weather in Southcentral Alaska and the associated drop in gas demand are giving Enstar Natural Gas Co. a headache over its gas storage arrangements. The volume of gas that the company stores in the Cook Inlet Natural Gas Storage Inc. facility on the Kenai Peninsula to cover peak demand is approaching a contracted maximum level. In a Sept. 19 tariff advice filed with the Regulatory Commission of Alaska the utility has asked for commission approval of a new gas storage contractual arrangement that will accommodate the excess gas.

Enstar’s contract with CINGSA specifies a maximum storage quantity of 8.5 billion cubic feet, which, if exceeded, triggers fees for excess use. While that maximum volume was derived from historic weather patterns, the recent warm weather is causing Enstar to store more gas than the utility had anticipated, so that the storage volume is now approaching its contractual maximum. And, because the utility is purchasing gas through “take-or-pay” supply agreements, presumably also based on projected gas demand, if Enstar were to limit its gas storage requirements by reducing its gas supplies, the utility would end up having to pay for gas that it would not actually take, the utility told the commission.

As a consequence, Enstar has negotiated a new interruptible storage service agreement with CINGSA, under which Enstar can temporarily obtain additional storage space, as necessary, at a lower cost than would be incurred from the triggering of excess storage fees. Enstar has asked the commission to allow the inclusion in its gas cost adjustment of any storage fees associated with the interruptible service. Given the weather so far in September, Enstar anticipates needing to use the interruptible service in the immediate future, the utility told the commission.

- ALAN BAILEY