Mayors warn of increased utility costs as Southcentral Alaska natural gas shortage becomes more ‘urgent’

Depending on the severity of the upcoming winter, some Southcentral Alaska utilities may run low on natural gas, and elected officials this week said they believe the proposed Alaska LNG megaproject would help stabilize the region’s energy grid.

Anchorage Mayor Suzanne LaFrance and Southcentral Alaska utility representatives have expressed a growing worry that declining natural gas production in the Cook Inlet will cause an eventual local surge in utility costs and decrease the reliability of electricity.

“Energy costs hit every single household budget in our community,” LaFrance said during a Tuesday press conference at City Hall. “And (for) families who are already struggling with the cost of living, higher heating and electric bills can be the last straw.”

LaFrance said the municipality has taken steps to make Anchorage more “energy resilient” and to create buffers against rising utility costs.

Last week, the municipality announced a proposed site for a “waste-to-energy” plant that could be finished as early as 2032. According to the estimates from the city, the waste incinerator system could potentially generate enough electricity to power as many as 20,000 homes. The municipality is also expanding its solar rooftop arrays, and began a comprehensive energy assessment at city-operated facilities, LaFrance said.

Despite these local projects, the municipality cannot solve the energy crisis alone, she said.

Many leaders, including LaFrance, said they believed the proposed Alaska LNG project will give Alaska customers access to reliable gas supplies. Earlier this year, the Anchorage Assembly passed a March 3 resolution recognizing the “potential benefits” of a long-term natural gas supply for Anchorage as gas is the primary fuel source for electric generation.

The Alaska LNG project from developer Glenfarne is viewed by many lawmakers and Alaskans as a critical part of addressing the shortfall of local gas production from Cook Inlet. The $55 billion project moving long-stranded North Slope gas to Southcentral Alaska could provide most of the state with natural gas for heat and power as soon as 2029.

The developer has yet to secure a final investment decision required to approve construction, which would take years of work before the first phase delivered gas to Alaskans.

Lawmakers have been unable to reach a consensus on property tax cuts that Glenfarne says are necessary to make the 800-mile pipeline financially viable. At the same time, state regulators earlier this month rejected a request from Enstar Natural Gas Co. that could have allowed it to develop a new Cook Inlet gas storage facility.

Regardless of the pace of the Alaska LNG project, representatives from Enstar, the main natural gas supplier for the region, have said the utility may run low on gas as soon as this winter.

“We can’t wait until we have blackouts and that we do not provide for energy for our citizens,” Matanuska-Susitna Borough Mayor Edna DeVries, who is also running for governor, said Tuesday. “And so I urge people to realize how serious this is.”

Hilcorp is drilling 27 new wells this year to meet its existing contractual obligations, said Enstar President John Sims. Texas-based BlueCrest Energy’s plans are not coming to fruition this year, and Alaska-owned HEX is delivering less than half of what the utility expected, Sims said.

“There is a sense of urgency that has to take place, not just for the utilities, but for the state to understand, recognize that we have to deal with this problem now,” Sims said.

Enstar has spent more than $4.5 million on LNG import alternatives, but it will come at a cost, he said. In the coming years, customers could experience cost increases as high as 50%. By 2030 and beyond, the utility is looking at a 100% increase due to high LNG import prices, Sims said.

It’s not an “economically sustainable” way to move forward as a state, he said.

“There is only one (solution) that reduces the price of energy in the state of Alaska, and that is the AK LNG project,” he said.

To get an idea of what the current energy crisis looks like, Tony Izzo, CEO of Matanuska Electric Association, suggested looking north. Fairbanks residents served by Golden Valley Electric Association pay some of the highest electric rates in Alaska.

With a declining gas production in Cook Inlet, there is no more available gas for power generation that can be shipped north, Izzo said. Golden Valley Electric Association recently announced it will use as many as 300,000 gallons of diesel per day as a substitute, he said.

It’s a much more expensive alternative. Customers in the Fairbanks area have already experienced a 60% increase in the cost of power, he said.

For the first time in his career, Izzo said, he cannot guarantee reliable power to his customers during periods of normal operation. Over the last year, he has been asked by the regulatory commission, along with other utilities, to prepare for and create what he called “interruption plans.”

This could mean rolling blackouts for Matanuska Electric Association members on 30-minute cycles.

“That is unprecedented,” Izzo said. “We’re not talking about 40-below (temperatures) and some big storm, or a combination of an earthquake. It could be as soon as this November where that just becomes the norm. It’s cold, gas pressure is declining and we don’t have enough gas available.”

Chugach Electric Association representatives have said the utility is confident it has enough gas to meet its own demand this winter. Chugach Electric has also offered to make additional natural gas available to Enstar if needed, spokesperson Julie Hasquet said Wednesday.

Roughly 80% of Chugach Electric’s current energy portfolio is gas, she said. But the electric utility relies on diverse portfolio of energy generation resources, including hydropower, solar and wind, that provides flexibility if natural gas supplies become constrained.

She said she does not expect prices to rise this year.

“Chugach has estimated that when we start importing LNG, electric bills could go up between 12% and 24%,” she said. “That’s our best estimate right now. But we’re not there yet.”

[As winter approaches, Southcentral Alaska utilities are worried about running short of gas]

The urgency of the natural gas shortage will largely be driven by the weather, Sims said. If Southcentral Alaska experiences a winter similar to last year with frequent, sustained cold snaps, it will bring “significant challenges” and likely rolling blackouts, he said.

Enstar is also evaluating whether it’s prudent to add new customers into its system, especially when considering a proposed Joint Base Elmendorf-Richardson housing expansion and rising interest in data center development.

“We need help to make sure that we have a long-term plan in place so that we can have low-priced energy,” Sims said. “That’s going to require some work. And it’s not something that you can punt down the road. We need to do it today.”