3000 Spenard Road
P.O. Box 190288
Anchorage, AK 99519-0288
www.enstarnaturalgas.com
September 19, 2016
Regulatory Commission of Alaska
701 West Eighth Avenue, Suite 300
Anchorage, Alaska 99501
Subject: Tariff Advice Letter 288-4
Dear Commissioners:
The tariff filing described below is transmitted to you for filing in compliance with the
Alaska Public Utilities Commission Act, Sections 3 AAC 48.200 – 3 AAC 48.430 of the Alaska
Administrative Code, and Section 708f of ENSTAR Natural Gas Company’s Tariff. It affects
the following tariff sheets:
Number
87
89
221
Tariff Sheet
Revision
Fourth
26th
45th
Cancels Sheet
Number
Revision
87
Third
89
25th
221
44th
Schedule or Rule Number
Section 708c
Section 708e
Section 2301 Determination of
Gas Cost Adjustment
APPROVAL(S) REQUESTED
In this tariff filing, ENSTAR Natural Gas Company (“ENSTAR”) requests approval to
include the cost of interruptible storage service (“ISS”) as a new cost element in its Gas Cost
Adjustment (“GCA”) provision. Under the Commission’s regulations, storage costs are properly
recoverable in the GCA rate.
As required by 3 AAC 48.270(a), this filing is not for a new service, it will not increase
any rate or charge, it will not result in the termination of an existing service, or conflict with any
other schedule or rate, and will not in any other way adversely affect customers, shippers, or the
public. The revisions are to the GCA provisions that could relate to any of ENSTAR’s
approximately 142,000 gas sales customers and any potential customers. If approved, any fees
and costs resulting from the agreement will be recovered via ENSTAR’s GCA mechanism.
Anchorage: 907-277-5551 • Kenai Peninsula Office: 907-262-9334 • Mat-Su Office: 907 376-7979
TA 288-4
September 19, 2016
Page 2 of 5
BACKGROUND/REASON FOR FILING
ENSTAR’s Firm Storage Service (“FSS”) Agreement permits ENSTAR to store a
Maximum Storage Quantity (“MSQ”) of 8.5 Bcf in the Cook Inlet Natural Gas Storage Alaska,
LLC (“CINGSA”) storage facility. Due to several years of record-breaking warm weather in
Southcentral Alaska, ENSTAR is approaching its MSQ. ENSTAR is committed under several
Commission-approved, long-term “take or pay” gas supply agreements, to continue to purchase
gas. As shown in the chart below, under the anticipated “normal” weather—average
temperatures based on historical weather data—ENSTAR would not approach its MSQ.
However, the continuing trend of unforeseeably warm weather means that ENSTAR must either
mitigate additional quantities entering CINGSA under its FSS agreement or risk violating its
MSQ and being subject to an excess charge of $0.1026 per Mcf per day under CINGSA’s tariff.1
As of today’s date, ENSTAR’s balance in CINGSA is 8.43 Bcf.
In order to protect its customers against the undesirable outcome of paying for but not
taking gas, and in order to continue to fulfill its obligations under its Commission-approved gas
supply agreements, ENSTAR has entered into an Interruptible Storage Service (“ISS”)
agreement (“ISS Agreement”) with CINGSA (see Attachment 1).2 This ISS Agreement will
provide ENSTAR with additional storage space on a temporary basis if it becomes necessary and
it is more cost effective than incurring CINGSA’s excess charges. ENSTAR is hopeful that, if
and when normal temperatures return, and based on its gas supply commitments, it can draw
down its CINGSA balance to below its MSQ.
1
CINGSA Tariff Section 35.1a, Sheet 75.
2
See informational filing TA25-733, filed by CINGSA on September 19, 2016.
2
TA 288-4
September 19, 2016
Page 3 of 5
CINGSA’s current tariff provides for an “ISS Rate” of $0.3625 per Mcf3 on “the
maximum quantity of which is stored for the Customer for the month.”4 There is also an “ISS
Injection/Withdrawal Commodity Rate” that is identical to the FSS Injection/Withdrawal
Commodity Rate.
The Commission approved the inclusion of storage costs as an approved cost element in
ENSTAR’s gas cost adjustment (GCA) provision (Section 708) in Letter Order L1100562 dated
October 26, 2011 that approved TA 214-4. ENSTAR proposed a revision to the methodology
used for certain storage costs in the GCA provision as part of TA 285-4 filed on June 1, 2016,
which has been suspended into docket U-16-066 and is pending before the Commission.
Qualification for Recovery in Adjustment Clause
3 AAC 52.502(a) lists three criteria to determine whether costs are eligible for inclusion
in an adjustment clause. Costs must be:
(1)
subject to change at a rate that would cause financial harm to the utility if the
costs were recovered exclusively in base rates;
(2)
beyond the control of the utility; and
(3)
easily verifiable.
Any potential costs incurred under the ISS Agreement would meet all three of these criteria and
thus they should be included in ENSTAR’s gas cost adjustment rate:
1.
As noted above, the ISS tariff rate will be applied to the maximum quantity of gas
that is stored in ENSTAR’s ISS account each month, which is approximately
$40,000 for each 100,000 Mcf stored a month. It will vary monthly and annually
based upon ENSTAR’s need to utilize the service. The service is part of a larger set
of storage costs that are already approved for recovery through the GCA, rather than
through base rates. For this reason, these ISS costs should also qualify under this
standard. Failure to recognize ISS costs through the GCA provision will have a
direct impact (either positive or negative) on ENSTAR’s financial results due to the
variability and delay between when the cost is incurred and when it is recovered in
rates. Further, the extent of the impact would depend on the ISS costs that may be
incurred during any given period in relation to the cost levels that would be included
in base rates.
3
CINGSA Tariff Section 35.2a, Sheet 78.
4
CINGSA Tariff Section 5.3a, Sheet 21.
3
TA 288-4
September 19, 2016
Page 4 of 5
2.
The ISS costs ENSTAR will incur are beyond ENSTAR’s control. ENSTAR’s
storage usage will vary from month-to-month and year-to-year, and will be dictated
by purchase requirements under its Commission approved take-or-pay contracts,
customer requirements, and weather conditions. ENSTAR does not control these
factors.
3.
The ISS costs incurred by ENSTAR will be easily verifiable. CINGSA will bill
ENSTAR monthly for ENSTAR’s storage costs incurred under the ISS Agreement,
which ENSTAR will cross-check with its own data.
Overview of Proposed Tariff Revisions
The limited revisions to the GCA tariff provisions proposed in this filing are shown as
modifications to the revised tariff sheets included in Attachment G to TA 285-4 as are described
below:


Subsection 708c(1)(c) on Sheet 87 has been revised to include subsections for
FSS fees and related RCC charges, and ISS fees and related RCC charges.
Subsections 708c(1)(d)(iii) and (iv) have been modified to refer to both FSS and
ISS.

Line (4) of Section 708e (Determination of Gas Cost Adjustment) on Sheet 89
and Line (4) of Section 2301 on Sheet 221 have been modified to make it clear
that it relates to FSS Service.

A new Line (5) has been added to Section 708e (Determination of Gas Cost
Adjustment) on Sheet 89 and Section 2301 on Sheet 221 for ISS Fees. All the
subsequent lines on both Sheets have been renumbered as a result.
There is no change in the dollar amount on Line (4) of Section 2301 on Sheet 221, and
ENSTAR is not proposing to revise the Weighted Average Cost of Gas or the Gas Cost
Adjustment at this time.
Given the weather thus far in September and the short-term forecast, ENSTAR could
have to use the ISS agreement immediately to avoid incurring the more expensive CINGSA
excess charges.
4
TA 288-4
September 19, 2016
Page 5 of 5
CONCLUSION
ENSTAR respectfully requests that the Commission approve this tariff revision at the
conclusion of the standard notice and review period, however, it does request that the ISS rate
costs be approved as a cost element effective September 19, 2016, the date of the ISS agreement.
Sincerely,
ENSTAR Natural Gas Company
A Division of SEMCO Energy, Inc.
Daniel M. Dieckgraeff
Director of Rates and Regulatory Affairs
[email protected]
Enclosures:
ISS Agreement
Revised Tariff Sheets
5