RCA gives go ahead for FNG purchase
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AIDEA now has commission approval to proceed with its takeover of the Fairbanks gas utility as part of the Interior Energy Project
ALAN BAILEY Petroleum News
The Regulatory Commission of Alaska said Aug. 13 that it is approving an application by the Alaska Industrial Development and Export Authority to acquire gas utility Fairbanks Natural Gas. AIDEA is in process of taking over the Fairbanks utility as part of the Interior Energy Project, a project to bring affordable energy to the city of Fairbanks and to the surrounding area of the Alaska Interior.
With Fairbanks Natural Gas holding a certificate of public convenience and necessity for supplying gas in the central part of Fairbanks, AIDEA needs permission from RCA to acquire the utility. However, since AIDEA is a political subdivision of the state of Alaska, the utility will become exempt from regulation once the AIDEA takeover is complete. After that point the AIDEA board will be responsible for setting the rates that Fairbanks Natural Gas charges its customers, with the agency using a typical rate-setting model, the commission said in its approval notice.
Reduce cost of gas AIDEA has said that it anticipates being able to reduce the cost of gas for Fairbanks Natural Gas customers, because the agency’s business costs will be lower than those of a privately owned utility. The agency also wants to use its position as utility owner to facilitate the integration of the two existing Fairbanks gas utilities, Fairbanks Natural Gas and the Interior Gas Utility. Integration would enable greater efficiency and lower costs for the distribution of gas in Fairbanks, AIDEA has said.
The eventual aim is to spin off the integrated utility, to be operated by some third party company, with AIDEA ultimately making a financial return for the state through the deal.
In its approval order, RCA said that it has reviewed the finances, the management organization and technical capabilities of both AIDEA and Fairbanks Natural Gas. The agency said that it has concluded that FNG has a strong financial position and that, given AIDEA’s intent to retain the utility’s existing management team, the utility will be able to continue to provide its services after the change of ownership. AIDEA is fit, willing and able to obtain a controlling interest in Fairbanks Natural Gas - granting AIDEA’s application for the takeover is “consistent with the public interest,” the commission said.
Pentex acquisition AIDEA is acquiring Fairbanks Natural Gas though the purchase of Pentex Natural Gas Co, the company that owns the Fairbanks utility, a small liquefied natural gas plant near Point MacKenzie, and a trucking operation for shipping LNG from the plant to Fairbanks. The Pentex purchase is scheduled to complete on Oct. 15. RCA, in issuing its approval order for the Fairbanks Natural Gas acquisition, has also granted a request from AIDEA for expedited processing of the approval application, prior to the closing date. The commission requires AIDEA to issue an announcement of the closing of the Pentex deal within five business days of the deal completing.
Harvest Alaska LLC, a subsidiary of Cook Inlet gas producer Hilcorp Energy, had planned to buy the LNG plant and trucking operation from Pentex, thus leaving AIDEA with ownership of just Fairbanks Natural Gas. However, the Alaska attorney general, concerned about the LNG pricing arrangements in the deal with Harvest, has said that he will not allow the sale to Harvest to proceed. In response to the attorney general’s ruling, AIDEA has said that the LNG plant would be owned by AIDEA for a period of time, as part of Pentex, but that agency expects its ownership of Pentex to be temporary.
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