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Dec. 21, 2013

Alaska agency chooses Interior Gas Utility as natural gas distributor

FAIRBANKS — The Interior Gas Utility, the municipal utility formed by the three local governments, will be in charge of delivering natural gas to North Pole and the medium-density areas of the borough.

The Regulatory Commission of Alaska selected the municipal utility over the privately owned Fairbanks Natural Gas in the hotly contested dispute to deliver gas to the expanded territory of the borough.

FNG and IGU had both filed to earn the commission’s blessing of sole rights to distribute natural gas to the area stretching from North Pole to Farmer’s Loop and parts of Chena Ridge. Service is estimated to begin sometime in late 2015 or early 2016 depending on first delivery of trucked natural gas. Fairbanks Natural Gas holds a service area in the boundaries the city of Fairbanks, where it has roughly 1,100 residential and business customers.

The certificate is conditioned with the requirement that IGU maintain a five-day supply of natural gas for its customers.

The denial of FNG’s application chiefly landed on the private utility’s reliance on Golden Valley Electric Association as a buyer of its gas. FNG said it would require GVEA take some 3 billion cubic feet of gas per year, but GVEA CEO Cory Borgeson said they wouldn’t be able to take that much.

“We find that the build-out plan proposed by FNG relies on GVEA as an industrial customer taking 3 Bcf of natural gas on an annual basis. We find that GVEA has no plan to be an industrial customer of FNG and that GVEA has no need for 3 Bcf at its power plant, particularly beyond 2015,” the order reads. “Accordingly, we find that FNG has not demonstrated that it has a viable build-out plan for the proposed expanded service area. Therefore, FNG has failed to demonstrate that it meets the threshold level of fitness, willingness, and ability to expand its service area. We deny FNG’s application to expand its service area.”

GVEA told the Alaska Industrial Development and Export Authority that its need for gas is closer to 1.5 or 2.5 Bcf per year.

A separate statement penned by Commissioner Robert Pickett said the shortcoming “seriously damaged the overall credibility of FNG’s application.”

The commission continued to say that it doesn’t make any negative findings on anything else FNG presented during the multiple weeks of hearings it held on the matter.

The order goes on to grant IGU the certificate for public convenience and necessity for the area, saying it “has demonstrated sufficient levels of fitness, willingness, and ability for issuance of a certificate of public convenience and necessity to provide natural gas utility service in the FNSB.”

The order filed by the commission was less than complimentary of the applications filed by both IGU and FNG. One section begins with the underlined statement: “The Applications Were Not Complete Until the Close of the Hearing.”

It goes on to say that both applications “changed or supplemented in a substantive fashion” and “continued to evolve until the close of the hearing.” Both parties amended numbers, cost estimates and the number of potential customer they could reach.

The commission notes that these changes were tough on the commission and they “were forced to begin evaluation anew each time the applications changed before and during the hearing. Consequently, our evaluation of the applications took place in a much shorter timeframe than the six months contemplated by statute.”

Pickett also commented on the nasty attacks lobbied between the two parties, particularly at FNG by IGU’s witnesses.

“The time for sloganeering and scurrilous statements must end,” he said. “Now is the time for the Fairbanks North Star Borough and its utility to deliver on its commitments to the residents of the Borough.”

When reached shortly after the release of the order, IGU’s board president Bob Shefchik said he had already read through the 35-page report and was pleased with the commission’s ruling.

“We’re pleased and appreciative,” he said. “There’s a lot of work to do and I expect we’ll start next Thursday.”

Representatives from FNG were sought for comment but have not yet responded.

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