The cost of a new power plant along with a shortfall of natural gas under contract in south-central Alaska is going to cause electricity price increases in the region by early next year, according to Alaska utility officials.
Phil Steyer, director of government relations and corporate communications for Chugach Electric Association, said the company, in partnership with Anchorage Municipal Light & Power, is bringing a new natural-gas-powered plant online in the first quarter of 2013 – South Central Power Project. The cost of the project is projected to cause a 5 to 10 percent increase in the price of electric service in 2013.
But a longer-term concern is the shortfall of natural gas under contract.
“We forsee a shortfall between supply and demand of natural gas that will show up in 2014,” said Steyer. While the lower-48 states enjoy record supplies of natural gas, Alaska’s south-central utilities rely on natural gas from aging wells within about 100 miles of Anchorage. For instance, Chugach Electric Association gets 88 percent of its power from natural gas. But the locally produced gas is not enough to meet demand, and Chugach and other local utilities anticipate having to tap their gas storage facilities this winter, according to The Anchorage Daily News. And the utilities have not been drilling enough new wells to keep up with demand.
In contrast, according to a report released in August by the US Energy Information Administration (EIA), “The use of horizontal drilling and hydraulic fracturing in shale and other tight rock formations played an important role in the increase of oil and natural gas reserves.” Proved reserves of US oil and natural gas in 2010 rose by the highest amounts ever recorded since the EIA began publishing proved reserves estimates in 1977.
“Right now we have gas under contract through 2014, but unmet needs begin to show up in 2015. That has led a group of utilities to look at importing natural gas to meet the projected gap,” said Steyer.
The good news: natural gas supplies are plentiful and relatively cheap right now.