Matt Buxton

January 2, 2017

FAIRBANKS — The municipal Interior Gas Utility announced last week that it’s close to a deal to take ownership of Fairbanks Natural Gas.

The Interior Gas Utility announced it’s close to signing an agreement with the Alaska Industrial Development and Export Authority to consolidate the utilities under local control and chart the course for its development for the next decade.

The agreement will be discussed at the Interior Gas Utility’s 6 p.m. board meeting tonight at the Fairbanks City Council chambers and again at the Fairbanks North Star Borough Assembly’s Thursday meeting. It’s expected to be approved by the Interior Gas Utility and AIDEA boards by the end of the month, IGU general manager Jomo Stewart  said.

“Right now, we have two utilities serving the broader Fairbanks community in the borough, and this agreement lays the groundwork for it to be consolidated into local control,” Stewart said. “It lays out the financing for that to happen, but also to expand the system for more service at a lower cost to more people.”

The agreement would also set the groundwork for the distribution system’s integration and expansion for the next 12 years. It puts into play some $330 million of grants, bonds and loans the Legislature approved for the project in 2013 to expand the distribution system to make natural gas available to some 17,000 residences and businesses.

The price estimate included in the agreement is $15.50 per thousand cubic feet of natural gas, which provides a heating equivalent to a $2.06 gallon of heating oil.

“This is real, tangible progress,” Stewart said.

The proposed expanded service would be a combination of expanded availability in the city of Fairbanks — where Fairbanks Natural Gas currently serves about 1,000 customers — as well as the first three phases of the Interior Gas Utility’s initial proposed expansion, which covers the city of North Pole and Badger Road.

The Interior Gas Utility estimates some 8,800 customers would take advantage of the new heating source based on current conversion rate estimates. The agreement also calls for a conversion program to help households convert from heating oil to natural gas.

The Interior Gas Utility was formed by municipal governments in late 2012 to oversee the development of a distribution network to serve North Pole and other medium-density areas of the borough. Early on, it sparred with Fairbanks Natural Gas over service areas.

The Alaska Industrial Development and Export Authority purchased Fairbanks Natural Gas and its sister companies in 2015 for $52.5 million to lower energy costs, reducing rates by about 13.5 percent at the start of 2016.

Stewart said negotiations between the state and local utility have been ongoing for the past few months. While the seemingly slow progress has frustrated some local leaders, Stewart said the negotiations have been complicated but have produced solid progress.

“This is a multi-hundred-million-dollar enterprise trying to coordinate and accommodate multiple entities with multiple interests,” he said. “To bring that all in alignment has been challenging, but we’re really, really close.”