Gasline meeting draws crowd, concerns

• Safety and supply concerns also discussed
By Carey Restino
Special to the Homer Tribune

Photos by Carey Restino - (ABOVE) Homer residents talk with city planners about the proposed special assessment district, which would bring natural gas to the town in two years. (ABOVE RIGHT) Bill Smith presents his analysis of the cost of heating a home with natural gas versus electricity, propane and heating oil at last Wednesday's meeting on the proposed special assessment district. Homer City Manager Walt Wrede (RIGHT) explains the proposed special assessment district to area residents. A third meeting will be held  Oct. 29 from 5-7 p.m. at the Homer High School Commons.

Photos by Carey Restino - (ABOVE) Homer residents talk with city planners about the proposed special assessment district, which would bring natural gas to the town in two years. (ABOVE RIGHT) Bill Smith presents his analysis of the cost of heating a home with natural gas versus electricity, propane and heating oil at last Wednesday's meeting on the proposed special assessment district. Homer City Manager Walt Wrede (RIGHT) explains the proposed special assessment district to area residents. A third meeting will be held Oct. 29 from 5-7 p.m. at the Homer High School Commons.

The 60 or so people gathered for the second City of Homer public meeting about a proposal to bring natural gas to the entire city by 2014 had a few questions. How much would it cost? What if they couldn’t afford it or didn’t want it? And what were the chances of entire neighborhoods blowing up because of ruptured lines?
These and other topics were covered, as people got up to speed on an ambitious plan to lay natural gas lines through the area over the next two years. Enstar will be building a trunk line through Homer to Kachemak City next summer, and the Homer City Council has offered residents a choice. If more than 50 percent of lot owners in the city are in favor, a special assessment district will be formed and the cost of bringing natural gas to the doorstep of each lot in Homer will be spread among some 3,855 lots.
The cost for each lot owner? $3,283.
“The council hears over and over about the cost of living in this town being too high,” said Walt Wrede, Homer city manager. “This is an effort to try to address that, to lower the cost of living and make Homer more attractive for businesses.”
Lot owners have until Jan. 25 to object if they don’t approve of the city’s plan. Each lot gets one chance to object, so if a landowner owns multiple lots, he or she gets multiple votes. But those who do not file a formal objection are considered in favor of the plan.
If the assessment district is rejected, neighborhoods could propose their own districts, or homeowners could work directly with Enstar to hook up from its trunk line, paying all the expense of the line initially, and being reimbursed for some of that investment when neighbors got on board with the natural gas hookup. Depending on the proximity to Enstar’s trunk line, the property owner might pay more or less to the private company that it would to the city. The citywide cost, for example, spreads among all lot owners the expense of running natural gas all the way to the end of the Homer Spit. While city officials considered leaving the Spit out of the plans, they opted to include it, given the area’s role as an economic engine in Homer.

Is it worth it?
If the assessment district is approved, lot owners will have the option of spreading their line installation payments to the city over 10 years for a cost of $400 per year per lot. Lot owners must still pay for the installation of a line from their lot line to the house, as well as converting to natural gas.
While several people raised the question of what happens if the installation cost comes in over Enstar’s projected $12 million cost, the city made it clear that a contract between the company and the city is based on a “not-to-exceed” number. If Enstar goes over its projected cost, it will be “on the hook,” Wrede said, for the extra cost. Lot owners are guaranteed not to pay more than the $3,000-plus figure. They might, however, pay less. Enstar’s figure has been intentionally high, Wrede said, and if the cost comes in lower, that will be passed on to residents. The city has written into its proposed contract a requirement that Enstar share its actual cost figures with the city.
According to a price comparison prepared by Bill Smith for the city, natural gas would cost the average homeowner $134 per month, compared to $383 for those burning fuel oil, $586 for those using electricity to heat their homes, and $706 for propane users. So with that savings, how long would it take to recoup your investment on the conversion?
Homeowners have to convert their home to burn natural gas. While most ranges can be easily converted, replacing oil monitor stoves or boiler systems with natural gas heaters will cost a bit more. In another document prepared by Smith, 10 homes were compared. Some were estimated to recoup their investment in less than two years, while others, with an estimated investment of $7,000 to $9,000, would take six years or more to get in the black.
Another consideration for city taxpayers is the city’s intent to borrow $12 million to contract with Enstar for the across-the-board installation. While lot owners will start paying the city once the line is installed to their home, the city would likely have to make at least one bond payment prior to that.
“That may limit the other things that we can do,” said Wrede.

Safety and supply concerns
More than one meeting participant questioned the safety of the natural gas lines, given Homer’s proximity to the “ring of fire.” While Enstar wasn’t present at the meeting to answer specific questions, and city officials were cautious of getting too technical, some at the meeting cited what they had heard was a 40-year lifespan of the new flexible natural gas line. It’s better, many conceded, than the old solid metal lines, which were prone to failure, sometimes with disastrous results.
“We’ve all seen the fantastic conflagrations, these massive fires that take out whole city blocks,” said Ken Landfield. “I’ve got to tell you, that’s a concern.”
Others questioned recent reports that natural gas supply in Southcentral Alaska is running low. Wrede said while the city can’t guarantee a supply of natural gas in Alaska, he noted those looking for gas are “quite bullish” about the prospects that more will be found, either in Cook Inlet or from the North Slope.

A voice of dissent
While many in the audience were impressed with the potential savings, which could reduce the city’s energy costs by an estimated $200,000 a year, others had concerns about subsidizing a private enterprise, and at least one speaker called foul on Enstar’s plans to charge Homer residents more than its customers elsewhere on the peninsula to help pay for the trunk line.
Judith Eckert read a letter from her husband Rick Eckert, the former interim CEO of Homer Electric Association, who was involved with HEA’s failed Alaska Public Utilities Commission bid to serve natural gas in Homer. He said Enstar’s winning petition, which it received in 1994, included the provision that Homer customers would pay the same price for gas as the rest of Enstar’s customers. Now, Enstar, which is receiving an $8.15 million grant from the state to build the 22-mile line from Anchor Point to Kachemak City, will charge Homer ratepayers a $1 per thousand cubic foot surcharge for approximately 10 years.
“I wonder if future new customers in Anchorage, Kenai, Soldotna and the MatSu valleys will ever have to worry about such a charge,” Eckert wrote. “Homer should pay its fair share, not a discriminately higher cost.”
City officials said they would need to review the information in the letter before commenting, but remained positive on the potential impact of lower fuel costs for businesses, residents and the economy of Homer.
“It’s really a big, bold idea and has the possibility of being one of the biggest things we can do for economic development in this area that I’ve seen in a long time,” Wrede said.
For more information on the proposed special assessment district, visit the city’s web page on the issue,, which includes information about costs, conversion, maps of the areas, and other publications.
You can also call 435-3198 or email A third public meeting will be held Oct. 29 from 5-7 p.m. at the Homer High School Commons.

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Posted by on Oct 24th, 2012 and filed under Headline News. You can follow any responses to this entry through the RSS 2.0. Both comments and pings are currently closed.

3 Responses for “Gasline meeting draws crowd, concerns”

  1. Just Wondering says:

    Exactly how much will it cost individual lot owners to bring gas to their lots? The cost Mr Wrede is quoting is only to bring the gas line into Homer…but who is going to pay for the cost of running it to every street in town.

    Remember, this cost analysis is from the same City Manager and City Finance Director who several years ago went on the radio pleading for an extra 1% increase in sales tax to run the city (a special election was held and voters passed the tax) then two years later, they said the city had enough money to make $800,000 plus loand payments for a new City Hall. Can we really trust city officials to make correct cost estimates for the gas lines?

  2. The cost for Homer property owners to have natural gas service is broken into two parts:
    Transmission line – This is the big line that brings gas from the source to the boundary of the HSAD. A substantial portion is being paid for by a state grant with the remainder paid by a $1 per Mcf surcharge.

    Distribution buildout – This part is paid for through the HSAD and comprises the significantly larger part of total cost.

    The transmission line has been one of two major problems expressed by Enstar in serving Homer, the other being a dwindling supply of gas in the Cook Inlet. Though Enstar did not raise the cost of this line as an issue when the Alaska Public Utilities Commission (APUC) gave it the Certificate of Public Convenience and Necessity (CPCN), Enstar would not build a line to the HSAD without being paid the entire cost. While Enstar’s approach is troubling, the State assistance is valuable. The Governor and Legislature deserve our thanks.

    Now for the HSAD. It is unclear how the cost of building the distribution system will be calculated and managed. In reviewing Enstar’s tariff, the Sponsoring Government Body (City of Homer) is due a Free Allowance for the embedded cost of service to each property owner. The ultimate HSAD cost should be equal to the cost of construction less Free Allowances. Are Free Allowances accounted for in the estimated cost of $3,283 per property owner?

    Homer is including 3,289 property owners in the HSAD. If hypothetically, 10 are large commercial users, 150 are small commercial users and the rest are residential, the total Free Allowance would be a little over $2.1 million.

    We need to see how the cost recovered in the HSAD is calculated and how Enstar’s tariff is applied. This may be seen as wonky but a white board presentation by Enstar or the City would be handy. Also, a confirmation of Enstar’s receiving competitive construction costs is necessary. If possible, the City of Homer should ask Enstar for alternative scenarios using steel pipe for the main line to Homer and different pipeline routes. Probably, Homer property owners’ main concern is the substantial cost of the HSAD.

    Many years have passed since Enstar received the authority to serve gas in Homer. Enstar has received a lot of latitude in doing so in variance from the expectations of the APUC eighteen years ago. The Regulatory Commission of Alaska (RCA) has allowed this latitude so for better or worse, clinically Homer residents and businesses have a consumer advocate.

    If Homer property owners are treated fairly, meaning the same as all of Enstar’s other customers, then the City of Homer is to be commended for moving to the step of forming the HSAD and financing the buildout for Enstar and Homer’s property owners.

    Rick Eckert

  3. deb says:

    Ask your neighbors in Anchor Point how wonderful Natural Gas is. Do not listen to the bad information and what ifs… call a firend in AP and they will tell you how cheap it was to convert and how cheap it is to heat… it is WONDERFUL… some folks went from 500 a month propane billls to 50 a month heating bills… and the assessment for them was around 2300 or so… and then depending on who did the work and how much people were hooked up for 1200 to 3000 grand. You can convert an oil boiler… you can get a new rhinnia … lots of options… ALL GOOD.

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