News-Miner opinion: Soon, the alphabet soup of acronyms involved in the Interior Energy Project could get a little simpler. The Interior Gas Utility is working out the final details of the purchase of Fairbanks Natural Gas, a move that would unify local gas supply under a single regulated utility. It’s a merger that has been coming for a year, one that could prove instrumental to progress on the Interior Energy Project. The utilities and the state should agree on terms and get down to the real work of putting the project’s other pieces in place.
The writing has been on the wall for a unification of the two local gas utilities since the state’s purchase of FNG parent company Pentex in 2015 for $52.5 million. With both Interior gas utilities in public hands, there was little reason for the two to remain separate, and state officials acknowledged that a merger would make sense. Having Pentex and its assets in public hands put the state in the odd position of owning an energy company while setting rates and lease agreements for others that could be its competitors or suppliers. With the IGU solely in charge of local gas rates, storage, distribution and other aspects of the Interior Energy Project, the logistics of bringing gas to local customers will be reduced, and the opportunity to achieve the project’s target price will be increased.
Before the state purchase of Pentex, the relationship between the two local gas utilities was contentious. In regulatory hearings to determine who would serve the borough’s gas needs outside the city of Fairbanks, lawyers for the IGU alleged FNG would extract undue profit from residents and harm the goal of the energy project to encourage as much conversion as possible to the cleaner-burning energy source. Lawyers for FNG, in response, countered that only their clients had on-the-ground experience delivering gas in the Fairbanks area; IGU did not.
With a merger, the state and the Interior should get the best of both — the infrastructure and operational knowledge of FNG paired with the lessened profit motive of IGU. What’s more, the merger should get the ball rolling on other aspects of the project, such as utilizing the $330 million in low-interest state loans allocated to the project for facets such as liquefaction, transport and storage. It should also make the expansion of gas availability in the city of Fairbanks an easier prospect, since only one utility will be doing planning and not two.
It’s worth recognizing the effort of both IGU officials and representatives of the Alaska Industrial Development and Export Authority in helping the project have its best chance at meeting its goals. In negotiations over loan interest rates and repayment schedules, the IGU wanted the 0.25 percent loans repaid over a 50-year term, while AIDEA did the best it could in offering a 35-year term. While a 50-year term would have been preferable for local customers in a perfect world, the reality is that the loan term will make a difference of approximately $2.50 per month on an average bill. It’s a difference, to be sure, but on balance, it’s more important to residents that energy relief come sooner than to wait through more rounds of negotiations wondering if the project will ever come to fruition.
The Interior has waited a long time for natural gas, and the merger of IGU and FNG is a logical step down the path to getting more gas to Fairbanks. The utilities and state should see their way clear to finalizing unification.