Homer Alaska - News

Story last updated at 4:30 PM on Wednesday, January 25, 2012

Enstar to council: Make a plan on gas line

Staff Writer

Even with a $1 per million cubic feet tariff on natural gas service, heating with gas pencils out to be a cost savings, Homer City Manager Walt Wrede told the Homer City Council on Monday night.

The council also needs to come up with a plan for building out the gas line from the main line and a way to pay for it, Wrede said. "That's what we can do," he said. "I think that would be very influential with the governor."

In its third attempt to get a grant from the Legislature and Gov. Sean Parnell's approval, Enstar, local officials, Rep. Paul Seaton, R-Homer, and Sen. Gary Stevens, R-Kodiak, have been urging a new approach that's being called "putting some skin in the game."

For the past two years, the Legislature has approved a grant to build a gas line to Homer from Anchor Point, only to see Parnell spike it. In 2010 Parnell vetoed all but $455,000. That paid for a pressure reduction plant and a short gas line from the North Fork Road near the Sterling Highway to Chapman Elementary School. Parnell vetoed the entire request last year and did not include the grant in his budget for 2012.

Rather than ask the state to pay the full cost of an estimated $10.55 million to build a gas line from Anchor Point to Homer, if consumers paid a $1 mcf tariff, that would drop the grant request to $8.05 million. Enstar would front the $2.5 million difference and recover it in the tariff over 10 years.

"The commitment from Enstar and from legislative representatives and you folks here, I think I'm seeing an alignment," said Enstar Natural Gas Company Southern Division Manager Charlie Pierce. "I think the sooner you can demonstrate a willingness and a strong desire from this group and this community would weigh a decision on this line."

Wrede presented the council with new figures on the cost savings of natural gas, even with the $1 mcf tariff. The comparison looks like this, based on annual fuel oil use of 1,200 gallons a year and its equivalent in propane, natural gas and electricity:

• Natural gas with no tariff, $122 a month

• Natural gas with tariff, $134 a month

• Fuel oil, $383 a month

• Propane, $706 a month

• Electricity, $586 a month.

Even with the tariff, the city would save $167,000 a year and the Kenai Peninsula Borough would save $346,000 a year in energy costs. Adding in other public buildings like Kachemak Bay Campus and the Alaska Islands and Ocean Visitor Center, the annual savings would be $1 million.

For some, the cost savings figures sounded like an iTunes play list stuck on the same song.

"Hearing one more time the benefits is not something I need to do," said council member Barbara Howard. "Let's move on."

That was Wrede's point. If the city also showed the Legislature and Parnell it would bear the cost of bringing gas from the main line to neighborhoods, that would demonstrate Homer's commitment to a partnership in gas expansion.

At Monday night's meeting, Pierce delivered a letter with estimates for that build out. For a core area with 37 miles of pipeline covering downtown, the cost would be $6.1 million.

The big issue is how to fund that capital project. An increase in property taxes would mean exempt properties like South Peninsula Hospital, churches and nonprofits wouldn't pay the cost.

However, in a Local Improvement District, all property owners would pay, Wrede said. An LID with 2,400 lots would be daunting, he said. Would people pay by the lot, per square foot of lot or by lot frontage where the line passed? Maybe the gas line build out could be paid by eliminating the food tax holiday, Wrede suggested.

Mayor James Hornaday said he had heard from seniors on fixed incomes worried about an increase in their monthly bills to pay for a build out.

"Those are the kind of things we need to talk about," Wrede said.

"Now is the time to do this," Pierce told the council in urging it to come up with a plan. "I encourage you to do your best. We're ready to come help you build this system."

Michael Armstrong can be reached at michael. armstrong@homernews.com.