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Enstar aims for lower 4th-quarter gas bills, fewer rate fluctuations

Sean Doogan
An overflow crowd waits at the doorway of the RCA hearing room in downtown Anchorage as the Regulatory Commission of Alaska takes public comment on an Enstar gas cost adjustment on July 23. Enstar has asked the RCA for permission to take steps to control the fluctuation of gas costs for Southcentral Alaska customers. Marc Lester

Enstar, the state's largest natural gas utility, said Wednesday it expects gas cost rates charged to consumers will go down in the fourth quarter of this year. 

Enstar said it will be filing the new rate on Friday and will be asking the Regulatory Commission of Alaska to approve a fourth-quarter gas cost adjustment of $7.15 per cubic thousand feet (Mcf) of natural gas. If the five-member commission approves Enstar's rates, its Southcentral customers -- more than 137,000 residences and businesses -- will be paying about 52 cents less per Mcf than they do now.

News of the proposed decrease comes after a 48 percent increase of the gas cost adjustment in July. During the three-month period before that, Enstar's rates decreased by almost the same factor.

At a Wednesday RCA meeting, Enstar representatives discussed how the utility plans to avoid the wildly fluctuating prices, caused by quarterly adjustments and unpredictable weather. At a meeting on July 23, more than 100 people packed the small RCA hearing chamber to voice frustration over the second-quarter increase.

"We have spent a considerable amount of time and effort over the last few weeks to address our customers' concerns," Enstar President Colleen Starring said Wednesday.

Enstar does not make money from the sale of natural gas to its customers. The utility makes its revenue from the delivery of that gas. The rates for the gas itself are established using a complex equation that balances the contracts Enstar has with Cook Inlet producers.

Like most gas utilities, Enstar has to predict, at least a month and a half ahead of time, what customer demand will be in any given quarter. The difference between Enstar's predictions, which are reflected in the GCA, and the actual use and cost of gas is currently balanced, or "trued up," once per quarter. But the GCA rates have varied widely this year, from $7.52 per Mcf in the first quarter, down to just $4.45 per McF in the second quarter, then back up to $7.67 in the third quarter. And while the price has varied from quarter to quarter, it has increased only about 1.9 percent since the beginning of the year.

On Wednesday, Enstar said it has come up with its preferred solution to the price fluctuations: adjusting the books annually, instead of doing it every three months.

"We believe that going back to an annual revision (of the GCA) will reduce the volatility our customers are seeing," said Dan Dieckgraeff, Enstar's director of regulatory affairs.

Before 2011, Enstar did the "true-up" or gas cost adjustment calculation once per year, with the changed rate hitting customers' mailboxes in January. Enstar said it went to a quarterly revision because it hoped customers would see more stable prices, but it has found that the opposite has been true.

But Enstar said that, unlike before 2011, it won't be implementing new GCA rates on Jan. 1 of each year. If the RCA approves Enstar's plans, Dieckgraeff said, the company would be issuing the GCA each July 1.

Dieckgraeff said the proximity to the holidays, high gas usage during winter and other pressures made the annual January rate change  unpopular among customers.

"People did not like when we did it on Jan. 1," Dieckgraeff said. "I polled our customer service managers and they said, 'Please don't do it in January.' "

If approved, the new GCA rates would go into effect in October, with the change to annual rates made on July 1, 2015.