Update: This story has been updated to correctly summarize Assemblyman John Davies' statements on natural gas rates. He said revenue bonds and rate flexibility will help ensure customers throughout the system pay the same rate, not different rates as originally stated.
FAIRBANKS — The Fairbanks North Star Borough Assembly roundly rejected an ordinance that would have given it more control over how the municipal Interior Gas Utility can raise money for its planned natural gas distribution system.
The ordinance would have required the borough assembly sign off on bonds that would be repaid by ratepayers, known as revenue bonds. It was authored by Assemblyman Lance Roberts and failed 7-1, with Roberts being the lone “yes” vote.
Revenue bonds, unlike the general obligation bonds typically issued by municipalities, are repaid solely through the utility’s income — the rates paid by its natural gas customers — and not through taxes.
Roberts said it wasn’t his goal to slow or jeopardize IGU’s project. Instead, he felt that sending the issue to the borough assembly would give borough residents better input on any proposed revenue bonds in the hopes of ensuring more stable utility bills for customers.
“There’s no way that the assembly is going to turn down something. No, it’s not going to work that way,” he said. “Yes, they’re going to approve it, but it will give the sense of stability. The need is that stability.”
He said that it’s not enough for prices to be initially low to encourage people to convert to natural cost, but that for them to feel secure that prices will stay low.
The Interior Gas Utility opposed the ordinance, with board member Steve Haagenson delivering a board-
approved letter to the assembly. He said revenue bonds and process of issuing them already helps guarantee stability in price.
He said that the board opposed the change because it could delay the utility, which is already exploring revenue bonds in anticipation of construction starting next year. The IGU is subject to the same open public meetings laws and requirements for public notices that the assembly works under.
Assemblywoman Diane Hutchison said she appreciated Roberts’ concern, but said that she was concerned that the assembly is not well-suited to review financial issues critical to the development of a gas distribution system.
“I disagree that having the assembly approve it will improve rate stability,” she said. “We are not the ones who are immersing ourselves in it day to day. I appreciate what he (Assemblyman Roberts) is doing, but I don’t think it’s going to be the avenue for rate stability.”
Assemblyman John Davies added that he felt the issue of rate flexibility, a term Roberts was taking issue with, doesn’t mean IGU will fluctuate rates, but instead can initially offer a rate that takes into consideration future expansion into areas that are less densely populated.
That, he said, would ensure that customers who sign up early, when grant money is available, don’t get cheaper rates than those who sign up years after gas gets to Fairbanks.
The Interior Gas Utility was formed by the Borough Assembly and the Fairbanks and North Pole city councils in 2012 and has the mission of providing low-cost natural gas to the most consumers in the borough’s medium and low density areas of the borough as soon as possible.
The utility’s service area includes North Pole, parts of Chena Hot Springs Road, Farmers Loop and Chena Ridge. First gas to customers is anticipated for mid to late 2016.
The city of Fairbanks is served by the private Fairbanks Natural Gas.
Contact staff writer Matt Buxton at 459-7544. Follow him on Twitter: @FDNMpolitics.