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Alaska electricity price hikes loom, officials say

Mike Dunham

Prepare to pay more for your lights. That was the message from officials with the three biggest electric utilities in Southcentral Alaska at an Anchorage Chamber of Commerce forum on Monday.

"Take the bill you got last year and budget to pay from 5 to 10 percent more next year," Phil Steyer, director of government relations and corporate communications for Chugach Electric Association told the noontime crowd at the Egan Center.

"There'll be a rate increase before the end of this year and another increase in 2014," said Jim Posey, director of Municipal Light and Power.

Speakers listed several reasons for the imminent increases, including construction of new facilities, replacement of aging equipment and recovering costs incurred in the September storms. But all stressed that the major factor in the increase would be the higher cost of natural gas.

Almost all of Southcentral's electricity is generated by natural gas from wells within about 100 miles of Anchorage. Chugach, for example, gets 88 percent of its power from natural gas, with another 10 percent from hydroelectric projects and a tiny amount from wind.

The aging gas wells are in steep decline. It is estimated that locally produced gas will fall short of demand by at least 10 percent next year and as much as a third by 2014.

Electric companies have anticipated the shortfall by storing gas at the recently completed 11 billion-cubic-foot Cook Inlet Natural Gas Storage, Alaska facility on the Kenai Peninsula.

"I guarantee (the stored gas) will be used this winter," said Posey. "More than once -- twice, three times."

"Beginning this winter, our suppliers won't meet daily needs," Steyer said. He displayed slides illustrating supply and demand and observed, "It's really fortunate that this facility came on line this year."

Maintaining adequate local natural gas supplies would require producers to drill 18½ successful new wells each year, Steyer said. "Instead, we've been drilling five or six."

Posey said he thought ML&P would be able to manage the available resources this year, "But we will have to have some kind of new gas by the winter of 2015-16."

That new gas could come from Cook Inlet, where exploration is on the upswing. However, even big strikes might take a couple of years to come on line. In the meantime, the most viable option is to import liquid natural gas from out of state.

Joe Griffith, general manager of Matanuska Electric Association, estimated that the cost of importing liquid gas would be 30 percent or 40 percent higher than using gas from Cook Inlet. Posey pointed to price spikes in Japan after last year's tsunami as a case where prices jumped 100 percent for a while.

However, he noted, from a global perspective, gas supplies are good and prices are generally down at the moment. If it became necessary to import gas over a 15- to 20-year period, "You could get a good price break," he said.

 

Contact Mike Dunham at mdunham@adn.com or 257-4332.

 

 


By MIKE DUNHAM
mdunham@adn.com