• RCA to ENSTAR: Find a better way to bill customers
By Naomi Klouda
Utility bills usually go up when frosty temperatures push the mercury lower in Alaska.
The opposite happened for natural gas utility Enstar after a warmer-than-usual winter. To recoup costs from a fickle winter’s first quarter of 2014, the bill was passed on to Enstar’s 137,000 customers. Among them were the 800-900 new Homer natural gas hook ups who opened their July bills to find a 48 percent increase.
That increase was passed along with an initial nod of approval from the state’s Regulatory Commission of Alaska.
But after hearing heated testimony in a packed Enstar conference room last week in Anchorage, the RCA has asked the natural gas monopoly to present new options for how it adjusts customers’ bills when actual costs conflict with estimated costs in the future.
“The RCA requires a couple of proposals on what or how we can do things different,” Enstar Spokesman John Sims said Monday morning. “They want us to look at other utilities across the nation, how they handle cost adjustments. Some make an annual adjustment. Some do a monthly adjustment, and others use a deferral method. We will be looking at how the different ways would impact our contract with buyers and how they would impact customers.”
In part because of an unusually warm Southcentral spring, Enstar’s customers used far less natural gas than the utility had budgeted for. That meant Enstar had to pay unexpectedly more for the gas it used in the second quarter, said Sims. The extra cost – 32 cents per 100 cubic feet of natural gas used – is being passed on to customers.
Testimony July 23 before the RCA centered on the unfairness of the utility’s process for reckoning bills after having miscalculated the cost of doing business.
Sims was one of the officials who responded to the complaints before the RCA. “Our estimates turned out to be too high,” he said.
Based on estimates for how much consumers will use, Enstar purchases natural gas from Conocco Philips, Buccaneer Energy, Cook Inlet Energy and Hilcorp, Sims said.
“If you look at the cost of gas throughout the year, and look at the annual basis, in 2014 customers will pay about what they did in 2013. There may be a quarterly jump, but ultimately the yearly average will be consistent,” Sims said.
Sim’s own July bill came out less than the previous month’s gas billing, he said. Other customers also likely saw a drop.
“This wasn’t a rate hike; it’s an adjustment on a commodity and that fluctuates based on contract terms,” Sims said.
Gas bill fluctuations came after Enstar had filed a revision for the Gas Cost Adjustment in April with the RCA for the third quarter of 2014. The company pays Cook Inlet producers for gas and that cost is passed on to customers with a markup. Enstar increased the GCA by $0.32191, from $0.44547 to 0.76738 per ccf from the second quarter in 2014.
For Homer, new to natural gas bills, this impacts about 800-900 homes in the first phases of the completed construction project. There should be about 2,500 homes when the entire city of Homer gasline project is completed, Sims said.
When the Homer Area Natural Gas Line was under hot debate among local citizens, one selling point for embracing natural gas was its relative price stability over stove heating oil. Homer residents had long lived with some of the highest heating costs on the road system, hit with per gallon oil increases with no warning in the course of many winters.
Normally, natural gas isn’t subject to the highs and lows of market-priced crude and gasoline. What is less stable is the ability to predict an Alaska winter’s weather, Sims said. That’s a role that keeps Enstar guessing its customers’ needs.
At the RCA public hearing on July 23, RCA commissioners wanted Enstar officials to explain their methodolology and give the historical precedent for their rates. The RCA oversees rates levied by utilities in Alaska, since most are monopolies, such as Enstar, a Canadian company.
“We were asked if we would take a look at ways to smooth out increases over two quarters, or over a different time frame,” Sims said. “I can’t predict what a commodity’s costs are going to do, but there are protections in our contract and hopefully we’ll see predictability in the future.
“These fluctuartions in gas costs are not something we’re taking lightly. They are a challenge for Enstar. They are a challenge for our customers and a challenge for the commission,” he said.
Enstar’s response to the RCA’s questions are due before fall.
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