Kachemak City OKs contract with Enstar

In a short — less than 45 minutes — meeting of the Kachemak City Council on Monday, the council reviewed a contract with Enstar Natural Gas to distribute natural gas to city residents.

With a unanimous vote, the council approved Resolution 2013-02, giving Mayor Phil Morris the OK to sign the 13-page document for $1,514,018.

The amount of the contract is based on:

• Enstar’s labor costs for pre-construction, construction and management activities, not to exceed $192,000;

• A non-binding estimate for the cost of materials of $175,000; and

• Surveying and pipe installation to be performed by a third-party contractor in the nonbinding estimate of $1,147,018.

Enstar plans to construct a trunk line to bring natural gas from Anchor Point to the cities of Homer and Kachemak, with work to begin before spring. Similar to Kachemak, Homer also is considering a city wide distribution system to deliver natural gas from the trunk line to city residents.

Supporting Kachemak’s resolution were council members Tammy Ackerman, Bill Fry, Tamara Hopkins and Emil “Ted” Heuer, Jr. Council members not in attendance were Bill Overway and David Weber. 

Morris anticipates some of the costs, such as the surveying and piping, can be done “for a lot less. And that’s where a big savings is.”

Recalling objections to Homer’s portion of the project voiced by Homer Mayor Beth Wythe, speaking as a private citizen at the Homer City Council’s Jan. 14 meeting, Fry asked how dependent the Kachemak portion of the project was on Homer’s decision to proceed or not proceed with its city-wide distribution system.

“Not,” was Morris’ one word reply.

The passage of Ordinance 2012-05(S) last year created the Kachemak Natural Gas Distribution Local Improvement District, provided for assessment costs of the improvement to be equally divided among the properties in the district and granted Morris the authority “to proceed with the improvement, execute and deliver” an agreement for the project’s design and construction. It also authorized Morris to negotiate the sale of a special assessment bond or similar financing for the council’s approval and “to do and perform all things and determine all matters not determined by this ordinance, to accomplish the design and construction of the improvement.” There are 380 properties within Kachemak’s local improvement district. Each property will be assessed an estimated $3,900.

Following passage of that ordinance, the city hired Ken Castner to negotiate a contract with Enstar.

“Now that we have a satisfactory contract, we’re taking it to the council,” said Morris.

While most of the contract was reviewed without question, Kachemak resident Will Files asked about a $500 rebate he heard was available to those who signed up for service with Enstar.

“The intent is when you go down to sign up with Enstar to get a service line, you have to pay $1,290, and at that time you bring your paperwork to Kachemak City and we reimburse you $500,” said Morris.

The rebates are paid back through Enstar’s Free Main Allowance, which is based on the estimated amount of annual consumption.

“Essentially, based on the typical size house, we can estimate the annual consumption based on appliances hooked up. … Enstar gives the developer a credit based on the estimated annual load that ultimately reduces the cost,” said John Sims, Enstar’s manager for corporate communications and customer service. 

The city of Homer has chosen another use for its anticipated credit, according to Katie Koester, Homer’s community and economic development coordinator. 

“What Homer will do with it is basically collect all the funds received in an account and, when it comes to enough, make the final payment on the loan (to build the distribution system),” said Koester.

Either way, it benefits Enstar customers on the southern peninsula, according to Morris.

“In our case, we’re doing it up front,” said Morris. “In Homer’s case, if they pay the debt back quicker, it’s a way to get it back to the customer.”

Another way the project cost may be reduced is if property owners outside the city boundaries apply with Enstar for service.

“If other lots are hooking up, it makes the cost for everyone less,” said Morris.

Anticipating a rush to purchase appliances and install wiring and plumbing as the project gains momentum and as services lines are requested Morris urged property owners not to wait.

“The sooner the better,” he said.

McKibben Jackinsky can be reached at mckibben.jackinsky@homernews.com.