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Fairbanks Natural Gas defends rates; objects to cost study

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Posted: Tuesday, November 27, 2012 12:11 am | Updated: 12:07 pm, Mon Jan 21, 2013.

Fairbanks Natural Gas says it wants the Regulatory Commission of Alaska to prevent the Fairbanks North Star Borough from turning a rate regulation proceeding into an examination of its costs, profits and expansion plans.

In a filing last Tuesday with the Regulatory Commission of Alaska, FNG branded the borough as a competitor, a reference to the recent creation of a municipal natural gas authority.

FNG said it was harmed when the RCA allowed the borough to be a participant in the process and asked the RCA to reconsider that decision.

The company wants the RCA to prevent the borough from expanding the scope of the proceeding beyond a narrow question of whether an exemption from rate regulation should continue.

The company said it “relied on the good faith and public interest motivations” of the attorney general’s office when it agreed to a schedule, “but has no such illusions about FNSB, an announced competitor.”

Fairbanks Natural Gas objected to many of the 19 questions posed by the borough to the company during discovery.

It said several of the questions asked for “information regarding FNG’s customers and the expansion of FNG’s service area,” but the company said it would not respond because those are not relevant to this case.

The only question is whether a 2009 RCA agreement exempting FNG from rate regulation should continue, according to FNG.

RCA said last summer the focus of the review would be “to determine if the conditions to protect consumers from monopoly practices are effective.”

Fairbanks Natural Gas says its costs are “entirely irrelevant” to the question of whether its rates are reasonable.

FNG said its customers pay 18.3 percent less for energy than customers who buy heating oil, which it cited as the proof that its rates are reasonable and the 2009 stipulation is working as intended.

The company says the size of its service area and its ability to serve more customers is also irrelevant.

“FNSB alleges that discovery relating to potential customers not served by FNG is relevant, but FNSB fails to articulate any link between FNG’s economic deregulation and FNG service area and served customers,” the utility said.

FNG says its rates are reasonable and a rate investigation is not needed to show that they are.

In a separate document, a borough witness has asserted that FNG has had a $2 million annual decline in what it pays for natural gas since 2008, but it has not lowered rates in response. It spent $6 million to acquire gas in 2011, down from $8 million in 2008.

Witness Gary Grasso said the borough requests for information were reasonable and relevant to the case, though FNG “refused to recognize the clear relevance of evaluating its excessive returns within the context of a reasonable cost-based return to ensure that the consumers in the Fairbanks community are not currently being subject to excess rates.”

Dermot Cole can be reached at cole@newsminer.com or 459-7530.

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