Homer Alaska - Business

Story last updated at 1:31 PM on Wednesday, October 19, 2011

Anchorage utility costs headed up

By Tim Bradner
Morris News Service - Alaska

Anchorage building owners and managers got the glum news recently that costs for most utilities will be going up almost across the board in the Anchorage area. Only Enstar Natural Gas Co. is unsure of its plans at this point.

At the monthly luncheon of the Buildings Owners and Managers Association, or BOMA, the five utilities serving Southcentral Alaska discussed their plans and 2012 rate increases.

Jim Posey, general manager of Municipal Light and Power, said the Anchorage municipal-owned utility will be asking for a 6.75 percent rate increase to help fund a major capital investment program. ML&P has a $457 million seven-year capital program that includes $274 million in new power generation projects.

ML&P is funding its 30 percent share of the $369 million new Southcentral Power Project now under construction, in a partnership with Chugach Electric Association.

ML&P's downtown and midtown Anchorage service area includes most of the major commercial and institutional buildings in the city.

The utility will benefit from lower natural gas costs, however. Posey said ML&P's cost for gas, which comes from its one-third ownership in the Beluga gas field, is $3 per thousand cubic feet.

Chugach Electric Association is funding its 70 percent share of the new power plant as well as other improvements and is projecting that electricity costs in its Southcentral Alaska service area will rise 3 percent to 5 percent in 2012. When the new power plant begins operation its higher efficiency will result in substantial savings of natural gas use, Arthur Miller, Chugach's regulatory affairs manager, told those at the BOMA meeting.

Chugach also will begin taking power generated by wind at Fire Island late in the year and while this will be more expensive in the near-term wind power costs will be stable over the long-term, Miller said.

Miller said Chugach's customers will likely be asked to pay 3 percent to 5 percent more for electricity in 2012, but that the final plan isn't set yet.

Enstar Natural Gas Co. can't project its 2012 rates now because the utility is in the middle of the "indexing" period on its gas contracts, according to John Sims, its public affairs manager.

Enstar is now benefiting from lower natural gas costs, however, under one of its contracts that is pegged to the Henry Hub gas trading index in Louisiana, where prices are very low, Sims said.

The utility expects to pay between $6 to $8 per thousand cubic feet for most of its gas in 2012, he said.

The utility is purchasing gas from major Cook Inlet producers Marathon Oil, ConocoPhillips and Chevron as well as independents Anchor Point Energy, Aurora Gas and Cook Inlet Energy. In December a fourth independent, Buccaneer Energy, will begin deliveries from a new gas well on the Kenai Peninsula.

Two other utilities will post rate increases, too. Anchorage Water and Wastewater Utility said it will seek a 6 percent increase for water service and an 11 percent increase in wastewater, or sewer, rates as the utility continues its ongoing capital improvements, which range from $30 million to $60 million per year, Beau Disbrow, its manager, said.

A big change the utility is dealing with is that in the past about half of its capital improvements were funded by federal and state grants.

That money is less available now so the annual capital program must be paid for by ratepayers, Disbrow said.

Alaska Waste also will seek a 3 percent to 5 percent increase this year to offset its higher costs, and the utility, which is privately owned, may have to impose fuel surcharges as well, Jeff Jessen, its manager, told those at the BOMA lunch.

Tim Bradner is a reporter for the Alaska Journal of Commerce.