|
KBPL asks tariff increase
Would go up 23%; return of rate adjustment also requested; rising costs cited
Kristen Nelson Petroleum News
Kenai Beluga Pipeline LLC has filed with the Regulatory Commission of Alaska for a tariff increase for its single rate of service, interruptible transportation, for moving natural gas on the KBPL. The increase is $0.0824 per million cubic feet, increasing from the current rate of $0.3639 to $0.4463. The requested rate increase is based on a 2023 test year, and the Oct. 10 filing asks that the revised rate become effective Nov. 9.
The tariff is a postage stamp rate -- one rate applying to all shipments on the pipeline system by any shipper from any receipt point to any delivery point. Six shippers should be affected.
The current rate is based on a 2016 settlement agreement.
KBPL said its operating costs have grown since then, due to high inflation which has impacted costs.
The 2016 settlement, which was terminated in 2022, allowed for rate adjustments if the throughput rate increased or decreased by 8%. KBPL is also asking for a reinstatement of the mandatory volume adjustment, which ended when the settlement agreement was terminated.
"These changes in cost and throughput volumes have impacted KBPL's ability to recover its revenue requirement and, thus, mean that KBPL's existing postage-stamp rate is no longer compensatory," the company told RCA in its Oct. 10 tariff filing.
The 2023 study year "demonstrates a substantial annual revenue deficiency," the company said, some $4 million under the last approved rate.
KBPL is asking for an interim but refundable rate, which it said protects "shippers in the event that the permanent rate approved is less than the interim rate."
Pre-filed testimony Company officials provided details in pre-filed testimony to the commission.
Andrew Limmer is vice president of Harvest Alaska LLC, the owner of Kenai Beluga Pipeline LLC.
He said the 2016 settlement provided for an initial rate of $0.3705 per million cubic feet based on a stipulated revenue requirement of $16,489,002 and annual throughput volumes of 44,500,000 million cubic feet.
KBPL was formed from consolidation of the Kenai Nikiski Pipeline system, the Beluga Pipeline system, the Kenai Kachemak Pipeline System and the Cook Inlet Gas Gathering System.
Limmer discussed the adjustments included in the settlement, based on assessment of throughput at six-month intervals -- with adjustments to be made to the tariff if the volumes varied by 8% or more.
Enstar Natural Gas Co. challenged KBPL's rates in 2022, a filing which terminated the settlement agreement, Limmer said.
Harvest Alaska employees reviewed the rate over the last two years, he said, and concluded the current rates didn't adequately cover KBPL's "operating expenses, depreciation, reserves, and the opportunity to earn a return under basic ratemaking principles."
The rate increase sought is a 23% increase over the 2016 rate, Limmer said.
Limmer said the KBPL's customers include natural gas and electric utilities along the Railbelt
Future need Clay Beethe, business development manager for Harvest Alaska, spoke to the future need for KBPL.
He described the working group assessment which was a result of Hilcorp Alaska warning in 2022 that the future of Cook Inlet natural gas supplies was uncertain. Enstar, Chugach Electric, Interior Gas Utility, Matanuska Electric, Homer Electric and Golden Valley Electric, working with the Alaska department of Natural Resources and Alaska Energy Authority, commissioned the assessment by Berkeley Research Group. The conclusion was that Cook Inlet gas may no longer meet demand between 2026 and 2030. Ten alternatives were considered, eight of which, Beethe said, "would likely utilize the KBPL system in one way or another to move gas around the Cook Inlet and distribute to end users."
He said without KBPL there would be no way to transport gas produced in Cook Inlet to market, and the system could also potentially move gas coming into the system from beyond Cook Inlet.
KBPL system Christopher Ori, area operations manager for Harvest Alaska, said the KBPL system operates bi-directionally, extending some 137 miles from the Ninilchik unit south of the Kenai gas field to Nikiski, then across Cook Inlet to Granite Point and from there to two west side terminal points at the Trading Bay Production Facility and at Beluga Point.
KBPL unified four pipelines into a system, is a common carrier pipeline and charges a single rate for a single class of service, Ori said.
The line has four pipeline connections with the Alaska Pipeline Co. LLC, whose sole customer is Enstar.
Postage stamp rate Brandi Rose, a finance associate for Harvest Alaska, said KBPL favors continuation of the postage stamp design because the pipeline has "so many potential routes and destinations that attempting to determine which facilities are used for which route is impractical, inherently imprecise, and ultimately very likely to be contentious and the source of ongoing disputes."
Use of the postage stamp rate avoids "spending a lot of the shippers' money developing and litigating over a rate design that all of the parties will likely still be unhappy with," she said.
The termination of the settlement in 2022, Rose said that has left "KBPL exposed to volume risk," and the company wants the rate provision adjustment from the previous settlement reinstated "to avoid significant under- or overcollection."
The new rate is based on annual throughput for 2023 of 48,099,879 million cubic feet, she said.
Christopher Ori, area operations manager for Harvest Alaska, said the KBPL system operates bi-directionally, extending some 137 miles from the Ninilchik unit south of the Kenai gas field to Nikiski, then across Cook Inlet to Granite Point and from there to two west side terminal points at the Trading Bay Production Facility and at Beluga Point.
KBPL unified four pipelines into a system, is a common carrier pipeline and charges a single rate for a single class of service, Ori said.
The line has four pipeline connections with the Alaska Pipeline Co. LLC, whose sole customer is Enstar.
Postage stamp rate Brandi Rose, a finance associate for Harvest Alaska, said KBPL favors continuation of the postage stamp design because the pipeline has "so many potential routes and destinations that attempting to determine which facilities are used for which route is impractical, inherently imprecise, and ultimately very likely to be contentious and the source of ongoing disputes."
Use of the postage stamp rate avoids "spending a lot of the shippers' money developing and litigating over a rate design that all of the parties will likely still be unhappy with," she said.
The termination of the settlement in 2022, Rose said that has left "KBPL exposed to volume risk," and the company wants the rate provision adjustment from the previous settlement reinstated "to avoid significant under- or overcollection."
The new rate is based on annual throughput for 2023 of 48,099,879 million cubic feet, she said.
| 