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The Anchorage-based utility is also proceeding with permitting on the planned $100 million southern intertie, a new electric transmission line connecting Anchorage with the Kenai Peninsula, Bjornstad said.
The new transmission line will replace an existing transmission line that has less capacity and is prone to damage from avalanches, he said.
Chugach Electric, which sells surplus power to other electric utilities in the Railbelt grid, has contracts for gas with producers in the Beluga gas field west of Anchorage and on the Kenai Peninsula with Marathon Oil Co.
At current rates of gas demand, the contract with Marathon will need to be renewed after 2008 and after 2012 in the Beluga producers, Bjornstad told the RDC.
John Lau, vice president for engineering at ENSTAR Natural Gas Co., told the RDC that prices for Southcentral Alaska gas sold under new contracts will be higher.
ENSTAR's new contract with producers allows gas to be purchased at prices linked to gas trading prices in the Lower 48 states. That means ENSTAR, as well as Chugach Electric and other gas purchasers, will be paying more for natural gas in the future.
Southcentral Alaska has some of the lowest natural gas prices in the country, Lau said, but that will change as the effects of the new gas contracts are felt.
Higher natural gas prices are needed to spur exploration for new reserves, he said. The new ENSTAR contract has resulted in a spurt of new exploration activity by Unocal Corp., Marathon Oil and others, Lau said.
Gas is still a bargain compared with other fuels, he said.
Residential consumers pay $4.26 per million British thermal units compared with $10.72 per million Btus for fuel oil, or $17.25 per million Btus for someone heating with electricity.
Bjornstad also said the utility's experiments with alternative energy are proceeding. Chugach is operating an experimental 1-megawatt fuel cell to power the U.S. Postal Service facilities at Ted Stevens Anchorage International Airport as well as experimental microturbines at facilities of Alaska Village Electric Cooperative in Anchorage.
The systems are performing well but are still costly compared with conventional energy systems, Bjornstad said.
Work with wind energy is also under way in response to surveys of Chugach members indicating some would be willing to pay a premium for "green" energy. Potential wind energy sites at Portage and the closed Nike missile site on mountains overlooking Fort Richardson have been surveyed, and Chugach is now looking at the feasibility of a wind energy site on Fire Island in Cook Inlet near Anchorage.
Echoes of the fight on the board at Chugach Electric regarding extending labor contracts with the International Brotherhood of Electrical Workers to 2006 were also heard at the RDC meeting.
Chugach's board voted 4-3 to extend the contracts April 17.
Ray Kreig, an Anchorage businessman and former Chugach Electric board president who leads Chugach Consumers, an advocacy group, asked Bjornstad if Chugach would be able to meet its goal, set in 1995, of joining utilities within the top 10 percent of efficiency in the nation, given the extended labor contracts.
Bjornstad said he didn't know when Chugach would be able to meet that goal, "given the variables of climate, labor, natural gas prices and labor costs," he said.
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