NJUS tags Vitus to ferry fuel at a savings

The Nome Joint Utility System Board of Directors has OK’d a 3-year contract with Vitus Energy of Anchorage to barge fuel to feed Nome’s power generators. The contract pared transportation expenses set by a previous three-year contract.

A consortium of Western Alaska utilities belonging to the Western Alaska Fuel Group solicited bids as a unit and selected Vitus Energy, but WAFG members will contract individually with the marine transportation firm to barge fuel to their storage.

Nome Joint Utility System could realize a savings over last year’s price for fuel to run its generators, John K. Handeland, utility manager, predicted at the Feb. 18 board meeting. The contract sets the terms for delivery of 1.6 million to 2.2 million gallons, depending on fuel inventory remaining in NJUS the tank farm. The contract price per gallon depends on an average price over a set number of days in the calendar period around the time barges load fuel plus an additional lump sum added per gallon for the barge company’s transportation fee that includes profit, insurance and cost of a pour-point additive.

The pour-point additive maintains fluidity of the fuel at Nome’s lower winter temperatures.

“The contract locks in the transportation ‘adder’ at 27.7 cents for the next three years,” Handeland told the board members, “compared to 33.85 cents per gallon set in the previous contract.”  

In signing the contract early in the year, the utility and the supplier use the oil price effective the day of signing as a placeholder, then dink with the numbers adding or subtracting fractions of cents in a tug fuel cost adjustment based on the up or down price per gallon settled later when the product goes onto barges.

Again, the full contract price per gallon will equal an average daily price for the month in mid-summer in which the loading is completed, plus the 27.7 cents per gallon. The price per gallon, according to the contract, can be altered a fraction of a cent for a tug fuel adjustment, tied to market prices. The contract also allows the price to be lowered if tests show the gross heating value per gallon measures below 137,000 BTUs per gallon.

The contract requires NJUS to pay normal wharfage, dockage and port charges including any charge by the port for clearing the pipeline.

Handeland provided a data sheet to directors that showed the price per gallon on the Oil Price Index at 91 cents at the end of December, but having risen to about $1.10 in mid-February. The utility would have to look at lowering the current fuel surcharge if the price remained low at loading time, Handeland told the NJUS Board recently.

The members of the Western Alaska Fuel Group include Kotzebue Electric Association, Unalakleet Valley Electric Coop, Nushigak Electric Association, Buckland and Nome.

NJUS sent a letter to Norton Sound Economic Development Corp requesting special consideration to participate in their 2016 bulk fuel program, according to Handeland. NJUS, based on the volume needed, and its status as a member of WAFG, does not fit NSEDCs standard bulk fuel purchasing program. However, NSEDC Finance Committee recommended to the NJUS Board that Nome be lined up for a rebate on its fuel loan interest again this year.

Last year NSEDC assisted Nome’s utility service with rebate of $107,724 against interest incurred by commercial financing of the summer 2015 fuel purchase. The NJUS Board unanimously passed a resolution of appreciation for the assistance NSEDC extended to consumers of Nome.