Council Approves Enstar Contract


     Homer city officials have approved a construction contract with Enstar Natural Gas Company to build a natural gas trunk line and distribution system.

     The price tag for construction is set at a cost-not-to-exceed $12.1 million. The agreement with Enstar was initially put on hold because the city was trying to negotiate what’s called a “Free Main Allowance”.

     Enstar Corporate Communications and Customer Service Director John Sims said that essentially allows for a rebate that will be given to the city as more customers hook up to the distribution system in town for natural gas service.

     City Manager Walt Wrede said he and City Attorney Thomas Klinkner met with Enstar officials against last week. He said the city was negotiating whether or not the trunk line could be included in the “Free Main Allowance” rebate as well. He said there are 375 lots that would be affected in that scenario.

     The current refund rate for this year is about $575 and Wrede said the amount changes each year. Enstar contends the trunk line cannot technically be included in that agreement because of the wording of their tariff filed with the Regulatory Commission of Alaska.

     “Tom’s advice was that our chances of success there were pretty slim given the barriers you’d have to overcome with redoing the tariff and some other factors. And that it was likely that construction would have to be put off for a whole year to deal with that because we would have to file a formal complaint with the Regulatory Commission,” Wrede said. “So, we heard enough in that meeting to give us comfort that there was a pretty good chance that Enstar was correct and that we would not succeed.” 

     Wrede said the estimated amount of rebates would total more than $1 million if all 3,280 lots included in the Homer Special Assessment District, or HSAD, connect to natural gas service. He said the city council will decide if the money will be used to pay down the debt of the loan used for construction on the natural gas expansion or provide a rebate to individual property owners.

     Wrede said at this point the council is leaning toward applying the funds to the loan debt, but members will decide that at a later time. He also introduced two legal opinions dealing with the city’s assessment of condos. As part of the HSAD the city is assessing condos as individual lots as opposed to a single lot. That has frustrated condo owners and lead city officials to seek another opinion to make sure it was interpreting state law correctly.

     “Both of these attorneys are very well-known experts in this area of law. One of them, Sally Kusko, is with Groh Eggers. She actually represents condominium associations and has worked with them for over 20 years. The other attorney is James McCollum, who has also worked in this area of law for well over 20 years,” he said. 

     Wrede said both attorneys agreed with Klinkner’s interpretation. All three legal opinions are available on the City of Homer website.