ANCHORAGE — ENSTAR Natural Gas Company is requesting approval for a significant increase in customer rates, filing a proposal with the Regulatory Commission of Alaska (RCA) that seeks to raise base rates by 26.79%. The utility says the increase is necessary to recover rising costs and secure a fair return on its investments.
In an order issued June 13, the RCA suspended the rate filing, TA354-4, for further investigation, citing multiple unresolved issues in the company’s proposal. However, the commission did approve ENSTAR’s request to implement a temporary 23.21% increase on an interim and refundable basis starting July 1, 2025. That means customers will begin paying higher rates next month, but could receive refunds—with 10.5% interest—if the final decision finds the increase was unjustified.
The rate case stems from a previous settlement in ENSTAR’s 2021 test year filing, which required the company to submit a new revenue requirement study in either 2025 or 2026. ENSTAR submitted its latest study in May, basing the request on 2024 financials. The company is asking the RCA to approve a $117.8 million revenue requirement, excluding the cost of gas, and supported its case with multiple technical studies and expert testimony.
The RCA received public comments from Hilcorp Alaska, Matanuska Electric Association, and JL Properties, all urging the commission to suspend the filing. In response, ENSTAR filed rebuttals and additional information addressing questions raised by RCA staff. Still, commissioners found the proposal raised serious concerns that warranted a full docketed proceeding.
Among the issues flagged for investigation are ENSTAR’s proposed 13% return on equity, which includes a 2.22% upward adjustment for business risk, and the use of a hypothetical capital structure rather than the company’s actual 58.57% equity ratio. Other questions include the fairness of a new Peak Reduction Credit for interruptible service customers, whether previously authorized regulatory asset costs were prudently incurred, and whether ENSTAR’s rate case expenses—now totaling $2.9 million—should be shared with shareholders.
The RCA also raised concerns about ENSTAR’s pro forma (projected future financials) adjustments, affiliate costs, proposed weatherization and rate case expense amortization methods, and year-end plant synchronization.
ENSTAR argues that its current rates are unreasonably low, with a normalized return on equity of just 4.57%, and that interim relief is necessary given the expected length of the regulatory process, potentially over 14 months. The RCA agreed the interim rate request met the legal threshold, noting that any over-collections would be refunded with interest or escrowed, depending on the company’s elected method.
ENSTAR must inform the commission of its choice by July 14, 2025.
The RCA also scheduled a prehearing conference for July 11, 2025, and invited the Attorney General to participate in the case. Interested parties have until June 27 to file petitions to intervene.
The RCA must issue a final order by July 24, 2026, under state statute. A panel of five commissioners has been assigned to the case, and Administrative Law Judge James L. Walker has been appointed to oversee proceedings.
As the case moves forward, the RCA has requested a briefing on key issues, including whether shareholders should bear a portion of escalating rate case expenses and whether ENSTAR’s proposed recovery of certain regulatory asset costs aligns with past commission precedent.
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