The two main electric utilities serving Anchorage are asking state regulators to approve their plans to purchase a portion of a Cook Inlet gas field, and they want that decision made quickly so Chugach Electric can qualify for a state oil and gas tax credit that could be worth $10 million.
But the request last week for speedy approval from the Regulatory Commission of Alaska is raising concern among consumer advocates in the Alaska Department of Law, and the deal itself may face tough questions from big electricity users.
In a separate matter, commission last week accepted a request from Anchorage Municipal Light & Power to use some of its savings to slightly lower electric bills for one year starting this summer.
The utility is trying to satisfy all its ratepayers — big and small, said Mark Johnston, ML&P general manager.
"We're trying to balance everyone's needs and allow them to save money over an extended period of time," Johnston said.
On Friday, ML&P and Chugach Electric asked the commission to approve their deal with ConocoPhillips, announced in February, to buy the oil giant's one-third stake in the Beluga River Gas Unit for $152 million.
ML&P has owned one-third of the unit since 1996. Gas sales and other benefits over the years have allowed the utility to save at least $100 million it now wants to use to pay for its portion of the deal in cash. Field ownership has also saved ratepayers $239 million because production costs have been less than the market price of gas, officials have said.
Now, Chugach Electric wants to be an owner, too, with an eye on saving its ratepayers money as well.
In the deal with ConocoPhillips, ML&P would pay $106 million to boost its overall field ownership to 57 percent, officials have said. Chugach Electric would pay $46 million and own 10 percent of the field, using debt to cover its costs. Oil and gas producer Hilcorp Alaska would continue to own the remaining third. It would be in a position to take over field operations from ConocoPhillips.
But the deal has far-reaching consequences.
In another case before the commission, some of ML&P's biggest customers are seeking lower rates. To accomplish that goal, Providence Medical Center and Federal Executive Agencies, which handles the business of military bases, have asked RCA to investigate how ML&P can best use at least $88 million of its savings.
In that ongoing case, Providence said in November the savings could in part be used to pay for operational costs "to mitigate the rate shock" ML&P customers are suffering. They could also be used to reduce steep rate increases planned for 2017 and 2019, Providence said.
"Battered by collapsing oil prices, and with no rebound in sight, the last thing Anchorage needs is higher-than-necessary electricity costs," wrote Michael Jungreis and Craig Gannett, attorneys representing Providence.
Providence and Federal Executive Agencies want to intervene in the gas-field case involving the ConocoPhillips acquisition. If allowed to participate, their filings suggest they may raise questions about whether ML&P should use its savings to directly pay down rates instead of expanding its stake in the gas field.
Officials with both entities did not respond to requests for comment.
The utilities contend the chance to buy out ConocoPhillips is an "extraordinary opportunity" to reduce gas costs and "pass the savings on" to ratepayers. ConocoPhillips had announced plans to sell the field in July after the drop in oil prices cut into its bottom line.
The deal is expected to save ML&P's 30,000 customers about $4 million to $6 million a year in the next several years, officials have said. Chugach's 68,000 ratepayers would save about $2 million to $3 million a year.
Not enough is known about the deal to conclude whether or not its the best path for ratepayers, said Ed Sniffen, supervisor of the state's Regulatory Affairs and Public Advocacy division in the Department of Law.
Sniffen said his division plans to participate in the case.
"We want to review the agreement (with ConocoPhillips) to make sure the terms are in the public interest," he said. "One thing to look at is the price of gas under this agreement versus what they could get for gas under the open market."
Another concern is the unusually rapid timeline the utilities are seeking, said Sniffen. They'd like a decision from RCA by April 21, leaving little time for his division to gather information.
The utilities are in a rush in part because Chugach Electric wants to take advantage of a small producer tax credit created by the state in 2006. The credit isn't available after May 1. The credit will be worth an additional $10 million to Chugach, and save ratepayers about $500,000 a year, the utilities argue.
The RCA is expected to decide soon whether it will accept the quick timeline proposed by the utilities.
In another matter that will lower ML&P bills for one year starting July 1, RCA last week approved a 2015 request from the utility to spend $2.4 million of its savings to directly lower rates. In the decision, RCA noted it had allowed ML&P to purchase a portion of the Beluga River Unit two decades ago to benefit ratepayers.
The use of that money will lower customers' bills by about 1.5 percent
Residential customers will save about $13 from an average annual bill of $895, said Johnston, ML&P general manager. Commercial customers will save about $275 from an average annual bill of about $16,000.
Johnston said he hopes the deal with ConocoPhillips will satisfy the large ratepayers who want ML&P's savings used to lower rates.
"We believe this accomplishes what they want to do," Johnston said. "It lowers rates not just immediately, but over 15 years."