Matt Buxton,

January 4, 2017

FAIRBANKS — As a deal comes together to unite the Interior’s two natural gas distributors, the Interior Gas Utility’s board of directors met Tuesday night to discuss the remaining parts of the proposed deal.

The utility announced last week it is nearing an agreement with the Alaska Industrial Development and Export Authority to buy the once-private Fairbanks Natural Gas from the state and set another $330 million of project financing into motion.

“We are at the 1-yard goal line, we just need to push this across,” said Mike Meeks, the Interior Gas Utility’s chair of the board of directors.

Under the deal, the municipal Interior Gas Utility would take ownership of Fairbanks Natural Gas and merge the two into a single utility that serves the city of Fairbanks and the medium-density areas of the borough. The agreement also lays the framework for more than a decade of expansion funded by $330 million in a combination of state grants, bonds and loans approved by the Legislature in 2013.

Meeks said the biggest outstanding part of the agreement is the amount of time the utility has to pay back a $125 million state energy project loan, adding that it would impact rates paid by customers.

He said AIDEA and the Interior Gas Utility have agreed to a 15-year deferral on the loan and a 0.25 percent interest rate, but don’t agree on how long the municipal utility will have to pay it back.

Meeks said IGU asked for 50 years after the 15-year deferral, but AIDEA’s final offer was 35 years after the 15-year deferral.

“The difference is after 15 years, we’re going to have a $1.1 million increase every year that translates to 20 cents per thousand cubic feet of gas,” he said. “That increase means 15 years from now, your heating bill will go up $30 more per year under the AIDEA final plan than under the current IGU plan.”

Meeks said, however, he felt such an increase was acceptable to get the project moving forward. He said AIDEA’s offer was final, so it’s unclear what would happen if the Interior Gas Utility rejected it.

The board is set to reconvene Tuesday to take up the agreement, and the AIDEA board is expected to the same the next day.

“We’re looking for feedback,” Meeks said, encouraging members of the public to offer their input on the deal.

Some board members were curious if there was any ongoing negotiations with AIDEA on the length of the loan, and Meeks said there was not.

Meeks said he’ll recommend accepting AIDEA’s proposal for a 35-year term on the loan to get the project rolling now rather than sending the project back into uncertainty. He said the terms of the overall deal, a deferral and low interest rate were favorable.