Municipality of Anchorage, Mat-Su Borough and Utility Leaders Call for Urgent Action on Railbelt Electric Reliability

Today regional leadership and key utility partners have come together to address Southcentral Alaska's urgent natural gas deficit and discuss solutions. You'll hear remarks today from Mayor Suzanne LaFrance, Matsu Borough Edna DeVries, ENSTAR Natural Gas President John Sims, and Matanuska Electric Association CEO Tony Izzo. After their remarks, we'll open it up for questions. With that, I'll turn it over to Mayor Suzanne LaFrance.

Is that okay? Can you hear me okay?

Okay. Hello, everyone. Thank you so much for being here today, and I'm happy to be joined by Mat-Su Borough Mayor Edna DeVries, Enstar Natural Gas Company President John Sims, and also MEA CEO Tony Izzo. So we're coming together today representing local governments and utility partners from across our region because we face a shared reality. Southcentral Alaska is still facing a natural gas shortage.

It will hurt our community, our businesses, and frankly Anchorage taxpayers We've been here before. This does seem like an unfortunate replay of previous press conferences, some of them right here in this same room, that we have had for decades. As mayor of Alaska's largest municipality, it's my job to look out for our residents, our businesses, and our local budget. And right now I'm deeply concerned about what a natural gas shortage and rising energy prices mean for our community. From Girdwood to Eklutna and everywhere in between.

Energy costs hit every single household budget in our community, and families who are already struggling with the cost of living, higher heating and electric bills can be the last straw. For local businesses, higher energy costs squeeze profits and threaten jobs, and for the municipality, Higher energy bills strain our operating costs, putting pressure on our budget, which impacts municipal service delivery and our taxpayers. So we've come together today because we can't stand by and let Alaskans foot the bill for an energy crisis that we all saw coming. For years, we've been talking about a natural gas shortage in Cook Inlet. The time for talking is over.

It is time to get serious, take action, and future-proof our communities. In Anchorage, we aren't waiting around. We're doing everything we can within municipal control to make Anchorage more energy resilient, to cut waste and help buffer our taxpayers against rising costs. At the municipal level, we are advancing plans for a local waste-to-energy facility to transform municipal waste into local power. We are expanding solar installations across municipal rooftops to directly offset operating costs.

We recently began a comprehensive energy assessment across municipal facilities to find immediate savings. For our residents, we are pushing for weatherization programs to help homeowners and renters cut energy consumption and keep money in their pockets. We're driving a housing strategy that ensures new, more efficient homes are getting built while supporting redevelopment efforts to upgrade aging housing stock. All of these local steps matter. They help protect ratepayers.

But we at the municipal level can't solve this crisis. Earlier this year, I cosponsored a resolution with the Anchorage Assembly sending a clear message on behalf of our community. Our message to state leaders and regional partners is simple: Access to reliable, affordable energy is essential to the health, safety, and economic survival of South Central Alaska. We formally recognize and support ongoing state efforts to secure long-term reliable gas supply solutions, including the Alaska LNG gas line. This is about the big picture.

It's about energy security, economic resiliency, and infrastructure readiness. Responsible energy policy isn't an either-or choice. We can and we must integrate near-term fuel reliability with long-term energy efficiency and renewable energy investments. But we must ensure Alaskans have heat in their homes and power in the grid today, tomorrow, and for decades to come. Anchorage is ready to collaborate with the state, our utility partners, Labor and neighboring boroughs to get this done.

Now I'd like to hand the mic to Matsu Borough Mayor Edna DeVries, followed by NStar CEO John Sims and then MEA CEO Tony Izzo to discuss what this energy reality looks like across our broader region. Thank you.

Yes, I'm Edna De Vries, mayor of the Mat-Su Borough, and I come to you with an urgent cry for our citizens in the valley. Things are going very well in the valley, as you know. It has been increasing with people, but with people that brings energy needs, and we must have this pipeline. We cannot stand back and wait for it another year or for another time. It is now.

We can't wait until we have blackouts and that we do not provide for energy for our citizens. And so I urge people to realize how serious this is. Um, 22% of the pipeline will be in my borough, but over half of my citizens do not have natural gas right now to heat their homes. And all of the time we turn away people that want to invest in our port, want to invest in our communities, but there is no energy. And so I want people to realize that we are staring it in the eye and we are not going to blink.

We are going to push forward. I, as well as our assembly, is standing for our people, and we want to see it done now.

Good afternoon, everyone. Uh, John Sims. I just want to start off by thanking the mayors for hosting this really, really important event. Um, so for the past 3 years, you've heard from the utilities talking about the potential for high prices, um, how the Cook Inlet is less reliable than it was before. Were there.

You know, we're seeing already in the Fairbanks area, they had a 60% increase in their cost of power. Here we have customers that are struggling with, you know, the cost of energy. When you look at the Cook Inlet, it is not as reliable as it once was. We have Hilcorp that is drilling 27 wells this year to meet existing contractual obligations. Bluecrest, who's down in the Cosmopolitan area.

Uh, it does not look like their plans, uh, are going to be coming forward here this year. And HEX, uh, is now delivering less than half of what we expected for this year to fill in our storage balances. So the problem is now there is a sense of urgency that has to take place, not just for the utilities, but for the state to understand and recognize that we have to deal with this problem now. Now we are working on an LNG import solution, but let me tell you, as I've said many times before, This means a significant increase in the price of the gas. We're looking at potentially 30, 40, uh, to 50% increases, uh, just in the initial years.

And then when we get to 2030 and beyond, we're looking at the potential for 100% increases. Right now, LNG import prices are right around $22 per MCF. What we're paying today is $10.80. So that is not an economically sustainable way to move forward as a state. So I know that the work is hard.

Trust me, we've been dealing with it as a utility group for years now. The work is hard, but it is extremely valuable, and we just appreciate everyone and their attention to this issue. And, you know, like always, we try to be as open and communicative as possible. So please, if you want real facts, the utilities are providing it on a daily basis. On what the options are.

We've spent over $4.5 million looking at all of the possible solutions out there. That includes worldwide RFPs for this solution, and there is only one that reduces the price of energy in the state of Alaska, and that is the AK LNG project. Thank you.

Good morning. My name is Tony Izzo. I should say good afternoon. I'm John Madsen, the CEO of Madanouska Electric. Thank you, Mayor LaFrance, Mayor De Vries, for hosting this press conference today.

Appreciate the opportunity to speak on what I think in a 45-year career is the most critical issue I have faced. As MEA's CEO, I'm responsible for providing reliable power that is safe and affordable. Affordable is certainly a term by which you could have different definitions. When I first came to Alaska in 1999, I was buying gas at that time briefly for 17 cents and then 25 cents, and then we saw prices go to $2, $3, $4, $5 so that we could facilitate additional investment in the Cook Inlet. For the first time in my career, I cannot go to my customers or members and guarantee reliable power during normal— during periods of normal operation.

What does the current energy reality look like? I think the first sign would be to look north. Golden Valley Electric. The state invested some years ago in the northern intertie. They built the transmission line from the valley north to Healy, connecting in the Fairbanks region.

That line, up until a year or so ago, was saving consumers of power in that region approximately $40 million per year. Matanuska Electric is the third largest buyer of gas in the Cook Inlet, and our annual bill is in the $45 to $50 million. So to be able to save $40 million a year on fuel costs was very significant. Those days are over. There is no more gas to move, uh, uh, to locally for power generation that can be shipped north.

Golden Valley recently, uh, announced that they're moving 250,000 to 300,000 gallons of diesel per day north as a substitute. That is the canary in the coal mine. We've already seen prices increase here significantly. Currently, MEA is paying about $9 per million BTU or per MCF. We have a new storage agreement where we're putting gas into storage.

And luckily, we have dual fuel capability. So instantaneously, we can switch to diesel fuel to provide power to our members. The economic impact, though, is significant. Uh, we recently had a fuel cost surcharge go up as much as 20%. That might temporarily come down in the fall, but as prices go up, there's an inverse relationship with the negative impacts to the economy, and reliability is clearly being challenged.

I could easily see a situation— and we work very closely, uh, with the other utilities, especially NSTAR. We are fully prepared to divert our gas to maintain the gas pressure system that NSTAR operates because keeping homes heated is critical. You also need power, and we have recently in the last year been asked by the regulatory commission along with other utilities to prepare and put into our tariffs interruption plans. And what does that mean? That means rolling blackouts.

Madanouska Electric will be prepared to roll blackouts to its members on a 30-minute cycle. This will not include critical installations like hospitals, but on a 30-minute cycle because that's a heating cycle. That is unprecedented. We're not talking about 40 below and some big storm or a combination of an earthquake. It could be as soon as this November where that just becomes the— the norm.

It's cold. Gas pressure is declining. We don't have enough gas available, and that includes diverting our supplies from the electric side to the natural gas side. I'd like to provide maybe a little bit of history I think that is relevant. I go back to 1999, and in that time, I recall being at Enstar and having a gas contract at 17 cents per MCF.

There was one that was 25 cents. They shortly rose to $1, $2, and then producers said in around 2001, all that gas that was discovered with oil is— it's gone, it's committed. We're going to need to invest. We can't sell it anymore at those prices. And so we did something unusual.

We entered into a large gas contract. I think it was 400 billion cubic feet or so at the max, at a trailing average of Henry Hub prices. And at that time in 2006, almost 20 years ago in October, the regulatory commission denied that contract, or denied a contract that followed that. It was based on a 12-month trailing average of the Henry Hub. I was told by the producers that I was involved with in negotiating that contract Alaska is closed for business.

And by 2009, we will be gone. And guess what? They did exactly that. I'm thinking of Marathon specifically. So we resulted at some point with the Cook Inlet Recovery Act.

And that brought up to 19, if I recall, new players to the Cook Inlet. And approximately 11 years ago, during that period, we had tax credits. All the new players. We had— knew where gas was. We were negotiating a 10-year deal for multiple utilities at $5.

And unintended consequence, during the signing of those agreements, the governor vetoed tax credit payments and the deal went away. This was never made public. It was under confidentiality agreements. But that was it. They were gone.

And so thankfully, Hilcorp has come in. Hilcorp came in and has over-delivered on every single promise. They took over a situation that they did not create. We as a state created the uncertainty, which is the enemy of energy security. And here we are today.

As John mentioned, the Cook Inlet, it's done. We can't rely on it anymore. So we're going to need a bold decision.. And I would urge the legislature to do so. Thank you.

Okay. Um, it's now time for— we have about 10 minutes for questions. Um, I'd ask reporters in the room to please state your name, what outlet you're with, and then who you're directing your question to, and then we'll go to reporters online. And reporters online, if you could just please raise your hand and we'll flag you. All right.

Lauren. Hi, I'm Lauren Maxwell from KTUU. I think it might be an Enstar question. The LNG pipeline at best 2, 3, 4 years away. What can we expect in South Central this winter next until that possibly comes online?

Yeah, that's a great, great question. And one of the things we've been talking about for the last couple years is up until we get a long-term plan in place, it is going to be extremely challenging. There have to be a couple things that are, that are set into place. We need additional storage. That is unanimous across not only the utilities but the producers.

We have to have more storage to be able to store gas so that when we get into those colder temperatures, we can pull it from there because the production in the Cook Inlet isn't high enough to meet the demands of everyone. And then, you know, we need to get to that long-term solution as quickly as possible. And that is why we're, you know, we've been so in favor of the AK LNG project, not only because we view it as a long-term solution, but because it can provide the lowest cost of energy possible. Up until that time, we're working into— we're working to LNG imports. The soonest we think we can get that in is 2029.

So from now until then, we have to continue to collaborate. We have to hope that the producers are successful in their activity. Hilcorp is drilling 27 wells this year to meet existing contractual obligations. The next producer is drilling 2 wells. So we need activity in the Cook Inlet, and that's what we're not seeing.

And we're not seeing that because it's no longer viable to do so. So we've shifted our focus. We're now looking for more reliable supplies at the best price possible. And unfortunately, those are fluctuating with the world market today. So we have a massive and enormous challenge.

And the longer we can have that long-term solution in place, the sooner we can eliminate some of this, quite honestly. But just as a follow-up, specifically for this winter, I mean, are we looking as well at possible rolling blackouts, limiting gas to any entities, that sort of thing? This is the hardest part about being a utility. It's largely driven by the weather. So if we have a winter like we did last year, we are going to have significant challenges and likely see rolling blackouts, pulling gas from MEA, like he was discussing.

Right now, we're evaluating whether or not it's prudent to be adding new customers onto the system. That's something that the regulator has asked us a couple times. You know, is it prudent for you guys to continue to grow as a customer base? So we're evaluating that. Large customers, large consumers, we're already telling no.

There have been a couple where they've called me and said, hey, I need to set up for service. We don't have the gas for them. So as we look at what's possible across the state, we look at the potential expansion of the Jay Bear facility, of data farms. It all requires energy. So we have to look at all those things and consider what we're doing as a state to make sure that there's an opportunity for new business to come here, because that's the only way we're going to thrive as a community.

Hi, what's the early— Public Media. Kind of following up on that, um, for existing ratepayers, uh, considering that the earliest, uh, we would get a gas line would be like 3, 4 years from now, do we anticipate that, uh, ratepayers for the next 3, 4 years are going to see higher gas bills? Uh, yes, and they are just for that extended period of time. Yeah, let me, let me elaborate on that. So, you know, one of the unfortunate realities of the Cook Inlet market today is that there are very few firm contracts.

I have a firm contract with Hilcorp that requires them to deliver a certain amount of gas at a certain time for a set price. I have a smaller contract with Fury that has a small firm amount, and then the rest is interruptible. And what that means is I'll give you gas if I have it, if I want to, and we'll talk about the price. So one of the things that I'm concerned about is the opportunity for producers to say, you know, I'm not going to give it today, today to you for that price, but maybe I'll give it to you tomorrow at a higher price. What protections are in there for the customer for cooking with gas on those interruptible bases?

Because right now, we don't have anywhere else to turn for the next 3 or 4 years. So I think that's definitely something that needs to be looked at from a legislative perspective. It's what's going to help ensure that we're getting gas at a reasonable price. What would help you in the next 3 or 4 years? Besides gas?

Sure. We need activity in in the Cook Inlet for the next 2 to 3 years. And trust me, our system is built around the Cook Inlet, so we want to buy gas from there. I just— 2 weeks ago, I asked a producer, can you sell me gas? And this is almost a direct quote: It does not matter what the price is you offer me, it's not worth the risk.

So it is not about price. I've heard comments about there's 200 years of gas out there. If that was the case, I wouldn't be here in front of you all right now. So we have a challenge. We need activity in Cook Inlet.

We need long-term planning. And I hate to ask this, and for those in the legislature that are listening to me, they know how much this is going to hurt me. I need help. I need help from them. And so that's what I'm looking for.

We need help to make sure that we have a long-term plan in place so that we can have low-price energy. And that's going to require some work. And it's not something that you can punt down the road. We need to do it today.

Jeff, go ahead. I'm just curious how you all feel about the attacks by many legislators on Hilcorp who have invested almost $2 billion in the inlet. And meanwhile, there's handouts being given to Hex and Fury, ADA loans, royalty reductions. And as you said, they're producing almost no gas. So Hilcorp's the ones producing all the gas, investing all the money, but they're openly attacked by many legislators.

I'm curious what your thoughts are about that. Yeah, thanks for that question, Jeff. So, you know, there's no question that Hilcorp has come in and invested billions. I mean, the facts show it's like $1.5 billion, I think, is in the Cook Inlet. So they're definitely investing in the Cook Inlet.

They are drilling 27 wells. You look at what they've done over the last 12 years, I think it's 192 2 wells that they've drilled. So that's the activity that's necessary to ensure that supply can meet demand. As far as the tax structure, I wish I could give, you know, a definitive statement on whether I thought those were valid or not. I think it requires process.

I think there's a lot of information that needs to get out there to understand what the implications of. We're not just talking about Hillcorp, we're talking about S corps, right? So it's definitely called the, you know, the Hill Corp bill, I don't know what that impacts. But I haven't been paying attention to it either. The main problem I have with kind of how this has gone down is we were advancing on a pipeline bill that, from my perspective, was helping to meet the long-term energy supply, and that piece got attached to it, which I think is a problem.

I would love for the debate to happen. The legislature needs to do their job. They're dealing with a lot more information than I am. But it's a tough one, for sure, because they are investing.

This might be for the Mayor's office. Are there any utility relief programs in Anchorage? What resources are available in the next couple of years for residents that might not be able to— these utility bills. Thank you for the question. So what relief is available to residents of the municipality to help with increasing fuel prices?

Um, and this, as we have heard, is a really alarming situation and something that we really need to figure out. We need reliable, firm power. And at the municipal level, there— we do have a weatherization program offered through the Health Department. We are also doing an assessment of our energy, um, uses here at the municipality because we want to be as efficient as possible and save taxpayers' money, recognizing that this is really going to hit folks hard in their pocketbooks. And we are also very focused on our 10,000 homes in 10 years, which includes building and rehabbing existing homes to ensure that they're also at a higher level of insulation, weatherization, to save money.

And then we are continuing to explore ways in which we can connect our folks, our residents here, with resources., and we are actively in connection with partners and utilities as this situation develops and more scenario planning and what that will look like comes to light, which of course, as we know, depends on what kind of winter we will have this year. More to come on that. Any more questions in the room? Okay. Joe?

Question for Tony. Why aren't more people talking about Watahna Dam? Wouldn't that solve all of this?

The question, Jeff, was why are more people talking about Watahna? Yeah, it's way cheaper. So, yeah, I've noticed quite an uptick in conversation around Sisseton Watahna. It was— my understanding is back in 2014, the funding was pulled from the licensing. There are discussions around funds to potentially complete that licensing.

The Governor's Security Energy Task Force, I was a co-chair on the rail belt subcommittee. The recommendation was that that study get dusted off and the economics be updated to determine if there was a— a viable option to go forward or not. Recent trip to Washington, D.C. regarding funding for other energy infrastructure in the state, what we heard is that for hydro, the tax credits up to 50% are in play up until, I want to say, around 2032 if a project breaks ground. And so the narrative, this is not My narrative— this is not MEA's official position, my board hasn't taken a position on this, but the narrative that I'm hearing is with these tax credits that even if the price estimates from 2014 have doubled, that the— after the tax credits, the price for that project would be lower than it was in 2014. So I believe that's the reason why there's an uptick in conversations in that area.

All right. We'll go to reporters online. James, if you have a question, go ahead. Yes. For Mr. Izzo, the question I have is I'm curious what your thoughts are on Terra Energy's coal project out in Swetna.

We've seen the Trump administration give that several tens of millions of dollars in recent months. Is that a— do you see that as a possible solution to the energy issues there, and how does that fit into what MEA is seeing?

From MEA's perspective, there are a number of potential long-term solutions. TERRA being one of them. Previously, he was asked a question about Sisseton Wahpetonah. That's another.

No matter what project we look at, we're 7 to 10 years out from knowing much regarding any certainty of a timeline. And so right now, we're in a position where we had up until maybe a year or so ago a number of renewable projects—large-scale wind, long-term energy storage, doubling of solar farm in, in our service area—that we had counted on supported, being developed by others that would have put downward pressure on our need for natural gas. Combine that with the availability of gas storage now, which we have only recently entered into, we thought that the future would look like a mix of stored gas, available interruptible gas, with the ability to burn diesel if we had to in a crisis while some of these other things were planned to come online in the next, say, 2, 3, 4 years. At this point, none of them that I'm aware of are viable. Those developers have— are not in conversations with us nor anyone else.

Maybe that has something to do with the tax credits. So our perspective ultimately is that— is leave no stone unturned. We are looking at all options. But frankly, what we need is a vision that we can focus on and with PENSTAR not having an alternative, we're very much in support of the gas pipeline because we know that even at 50% renewable, if we can achieve that kind of diversification in the next 15 to 25 years, we still need 50% of the gas that we use today. So natural gas is, is critical, and one of the things that the pipeline does is takes advantage of the very large significant infrastructure in South Central that was able to reduce Golden Valley bills by $40 million a year, serve all of NCSTAR's customers and the majority of power generation on the Kenai up through MEA service territory.

And just briefly to follow up on that because I've heard some— something that I think contradicts what I was hearing from other folks in the room there was that action is needed now from the legislature, but any solution will take years and there's problems this winter. And so, can somebody in the room please help me connect the dots here? If action is needed to now to solve a problem this winter? I mean, what are you asking the legislature to do to fix problems this winter, or is there anything they can do? Yeah, James, John Sims.

So that— I think that's one of the biggest challenges, that question you just articulated there, is it, it is very confusing. We are, we are dealing with a short-term challenge, we're dealing with the midterm challenge, and then the long-term problem that we all see. And so I'm not sure there's anything the legislature can do this year. What the legislature can do is try to expedite the long-term solution so that it's here as quickly as possible, so that we're not constantly dealing with this. We are going to have a problem with deliverability from gas supply out of the Cook Inlet for the next couple years.

And when you, when you think about how projects develop, it takes time, right? And so we are, we are dealing with those problems. Whether it's additional storage, whether it's collaboration with utilities, you know, encouraging as much drilling as possible, increasing the prices we're paying to cook in the producers to try and spur that activity. So those are the kind of things that we're doing on the short term. But decisions that are made today down in Juneau can expedite the process as far as that long-term, midterm solution.

And so that's, that's And that's what we're asking today, and that's a very good question that you just asked right there, because the challenges that we're dealing with are multifaceted, and it is challenging.

Thanks, everybody, for coming today.

Thank you, Mayor. Appreciate it. Thank you. Great delivery there, Mayor. We'll see you soon.

Yes. And then we'll see you soon also, because we're going to discuss this again.