Enstar wants to extend surcharge 30 years to pay Homer gas extension balance

Feb 11, 2019

Credit Courtesy of Enstar

After roughly three years, Enstar Natural Gas is returning to the Regulatory Commission of Alaska, which regulates utility rates in the state, to potentially solve a growing problem on the southern Kenai Peninsula. The gas company is trying to restructure how a surcharge on customers’ bills is paying back money it spent to bring natural gas to Homer in 2013.

When Enstar extended its natural gas network to Homer and Kachemak City, the state funded the majority of the project. Enstar invested roughly $3.6 million, but that money was in essence a loan to customers, which was approved by the Regulatory Commission of Alaska.

Enstar customers south of Anchor Point were supposed to pay back that money with interest through an additional charge on their bills over 10 years.

That charge is tied to customers’ gas consumption, but Enstar vastly overestimated how much gas Homer area residents would consume. That means that loan is growing rather than shrinking. As of December, roughly $2.2 million worth of interest had accrued since late 2013.

Enstar asked the regulatory commission back in 2015 if it could spread the growing balance for the Homer service area across its entire customer base, but the commission denied that request.

According to documents filed with the commission Wednesday, Enstar now wants to reduce its rate of return, which acts as an interest rate, from roughly 11 percent to about 6 percent. Enstar also wants to collect the $5.9 million customers currently owe through the same monthly surcharge it’s using now, but over the next 30 years.

According to Enstar’s 2017 annual report with the regulatory commission, it collected roughly $1.1 million through the Homer surcharge as of December of that year. According to Wednesday’s filing, it expects to take in roughly $600,000 via the surcharge by the end of 2021.

According to Enstar’s estimates, the majority of that money during that three-year period would go toward the interest Homer customers owe. However, Enstar expects gas consumption to increase and claims the current surcharge will be enough to eliminate the Homer service area balance by 2049.  

Enstar’s latest filing does not detail how much its customers in the Homer area would pay in interest by the end of its 30-year proposal. The deadline for stakeholders to comment on Enstar’s plan is March 11. The commission will consider the proposal later that month.

The City of Homer has questioned Enstar’s transparency surrounding the matter. City officials declined to comment for this story, but they did say the city is paying close attention to the issue.

Enstar has also requested to speak with the Homer City Council during its meeting Monday.