Customers of Enstar Natural Gas Co. were hit with a 30 percent increase in their gas bills, effective in January. It's the highest increase the utility has ever imposed.
Residential customers now pay $7.03 per million cubic feet of gas, up from $5 per mcf, an average of about $1 a day. Small commercial customers saw a 29 percent increase, while large commercial customers had a 31 percent jump.
Enstar's Curtis Thayer, director of corporate and external affairs, told business leaders that the increase is the result of higher oil prices worldwide, as well as the effect of a cold winter in the Lower 48 last year, which boosted the indexes used to calculate prices here.
Each January, Enstar adjusts its prices to coincide with annual price changes in its long-term gas supply contracts.
Speaking to the Anchorage Chamber of Commerce Jan. 8, Thayer assured the audience that Enstar isn't making any more money on the rate increase.
Thayer said part of the rate increase was because of high oil prices. Last year, Enstar's older gas contracts with producers were indexed against $59 a barrel oil. This year, prices were indexed against $72 a barrel oil.
Enstar's newer contracts are indexed on a 36-month trailing average of Lower 48 gas prices, known as the Henry Hub price. The high cost of gas last winter in the Lower 48 raised the three-year average.
Another issue was the October 2006 cancellation of a contract between Enstar and Aurora Gas LLC. Aurora said the prices paid under the contract were below what the company needed to maintain economic operations.
Enstar is suing Aurora, Thayer said, but in the meantime, the utility had to negotiate a deal with Chevron Corp. to make up the shortfall. Enstar purchases gas from Chevron and Marathon Oil Co.
Still, Enstar customers pay the lowest gas prices in America. Add on the overhead costs, and Alaskans pay about $8.73 per mcf, according to a U.S. Department of Energy statistics Thayer provided. New Englanders pay the top rate, at $15.88, while those in the Pacific states of Washington, Oregon and California, pay $12.94 per mcf.
Enstar, a natural gas distribution and transportation company, said its profits come from the delivery of natural gas, an expense that has gone unchanged since 2003.
Customers use 40 percent of Enstar's total gas supply. A fertilizer manufacturing plant, a liquefied natural gas (LNG) plant and electrical utilities use the rest.
All Cook Inlet fields expect a sharp decline after 2008, while demand is expected to continue on a slight, but steady, incline.
The current supply was discovered in the 1950s and 1960s, and is being depleted. New exploration and development is necessary to meet the needs in Southcentral Alaska.
Enstar has commitments with producers to meet the needs through 2008, and is working on contracts that, if approved by the Regulatory Commission of Alaska, would ensure supply through 2016.
Producers continue to search for new sources of gas in Cook Inlet. The utility is also looking to companies exploring outside Cook Inlet for its future supplies, Thayer said.
A gas line from the North Slope would help the situation if a spur line could be built to the Anchorage area. A field of known reserves near Fairbanks is becoming an economic possibility, Thayer said.
The utility is also investigating the potential to import LNG, he said.
Melissa Campbell can be reached at
melissa.campbell@alaskajournal.com.
