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Department of State : Delaware Public Service Commission

NATURAL GAS REGULATION IN DELAWARE

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ROLE OF THE COMMISSION

The Delaware Public Service Commission regulates only the distribution of natural gas to Delaware consumers. The delivery and administrative costs associated with natural gas distribution are determined in base rate proceedings before the Commission. The recovery of costs associated with the natural gas used by customers is determined annually as part of fuel adjustment proceedings. As a result of this process, rates for natural gas will typically change at least once a year. Fuel adjustment rates for natural gas may also change during the annual recovery period when the projected recovery of gas costs exceeds limits set for the over or under-collection of gas costs. Occasionally, natural gas distribution companies are permitted by their tariff to collect additional fees, often called 'riders', to recover unanticipated or extraordinary expenses. For instance, both regulated natural gas distribution companies have an 'environmental rate rider' to recover costs associated with the clean up of pollution from old manufactured gas sites. These rider rates are determined in separate proceedings before the Commission.

The Commission does not regulate the costs charged by propane gas providers: questions related to propane costs should be directed to the specific provider. The Commission does administer the Natural Gas Pipeline Safety Program for the U.S. Department of Transportation's Office of Pipeline Safety which relates to the operation of both propane and natural gas distribution systems.

REGULATED UTILITIES

CONSUMER INFORMATION

IMPORTANT OR PENDING CASES

A complete list of all natural gas related cases filed with the Commission is available on the Commission's Regulated Utility Filings page.

Following is a list of cases that have, or are likely to, generate a significant amount of public interest. To assist the public with participation in these matters, links to the application or formal complaint, the procedural schedule (if applicable), and Commission Orders entered in a case are provided here. In limited cases, additional documents are available for viewing from the website.

All case related documents are available for review by appointment at the Commission Office in Dover, Delaware, or at the Office of the Public Advocate in Wilmington, Delaware.

CHESAPEAKE UTILITIES CORPORATION - DELAWARE DIVISION

PSC Docket No. 11-384F(Filed September 1, 2011)
IN THE MATTER OF THE APPLICATION OF CHESAPEAKE UTILITIES CORPORATION FOR APPROVAL OF A CHANGE IN ITS GAS SALES SERVICE RATES ("GSR") TO BE EFFECTIVE NOVEMBER 1, 2011 - Chesapeake Utilities Corporation - Delaware Division's September 1, 2011 application to establish its annual GSR for the period November 1, 2011 through October 31, 2012. The proposed GSR is a decrease from $1.035 per Ccf to $1.027 per Ccf. Consequently, a residential heating customer using 120 Ccf in a winter month would experience a decrease of approximately $1.00 or 1% in the total natural gas bill. The rate is subject to refund pending review. View Application.

  • The Public Comment Session for this case occurred at the Commission's Dover Office on December 1, 2011 at 7:00 pm.
  • Order No. 8042 opening the docket and directing public notice of the filing and evidentiary hearing was signed on September 20, 2011.
  • Pre-filed Testimony of Staff's Susan Neidig dated Feb. 23, 2012.
  • Pre-filed Testimony and Appendix A of Public Advocate's Andrea Crane dated Feb. 24, 2012
  • The EVIDENTIARY HEARING occured on Thursday, May 3, 2012 at 10 a.m. at the Commission's office in Dover. The notice is attached hereto. At the hearing, the parties presented a Settlement Agreement to the Hearing Examiner.

DELMARVA POWER & LIGHT

PSC Docket No. 11-381F - (filed August 31, 2011)
IN THE MATTER OF THE APPLICATION OF DELMARVA POWER & LIGHT COMPANY FOR APPROVAL OF MODIFICATIONS TO ITS GAS COST RATES - This is Delmarva's annual filing proposing natural gas demand and commodity charges effective November 1, 2011.

  • Orders
    • Order No. 8040 opening the docket and assigning matter to a Hearing Examiner was signed on September 20, 2011.
    • Order No. 8113 replacing Ruth Ann Price and assigning Vincent Ikwuagwu as Hearing Examiner was signed on February 23, 2012.
    • Order No. 8116 approving Delmarva's request for a waiver of the requirement to file for an interim increase in the GCR was signed on March 6, 2012.
  • Public Notices
    • The public comment session for this case was held on Tuesday, October 25, 2011. Please see the public notice for more information.
    • The evidentiary hearing for this case was held on Monday, April 30, 2012. Please see the public notice for more information.
  • Settlement Agreement
    • The parties presented a settlement agreement to the Hearing Examiner during the evidentiary hearing held on April 30, 2012 .


On December 21, 2010 Order No. 7882 was approved by the Commission. The order grants Delmarva Power & Light Company's Motion to consolidate PSC Docket No. 09-277T, the Company's application to institute a modified fixed variable rate design for gas customers, and 10-237, its gas base rate case. Documents related to the dockets can be found below.

PSC Docket No. 10-237 - (filed July 2, 2010)
IN THE MATTER OF THE APPLICATION OF DELMARVA POWER & LIGHT FOR AN INCREASE IN GAS BASE RATES - On July 2, 2010, Delmarva Power & Light Company filed with the Commission an application seeking approval of: (a) an increase in its natural gas base rates; (b) a proposed revenue decoupling rate design, and (c) miscellaneous tariff changes.

  • Commission Orders
    • Order No. 7808 - Suspending Delmarva Power & Light Company's rates and revised tariff sheets pursuant to 26 Del. C &306(a) (1) and subject to the implementation of itnerim rates as authorized herein, shall not be placed into force or effect except pursuant to law or further Order of the Commission, and then only to the extent such law or further Commission Order may permit or allow. Suspending proposed non-rate modifications to its tariffs until such time as a final Order in this proceeding is issued. Suspending proposed revenue decoupling rate design until such time as a final Order in this proceeding is issued. Delmarva's request to implement interim rates intended to produce an annual increase of $2.5 million in intrastate operating revenues, effective August 31, 2010 with proration and subject to refund, is granted.
    • Order No. 7904 (January 27, 2011) - Commission approval for Delmarva Power & Light Company to place into effect their full-proposed rate increase on February 2, 2011 subject to refund with interest, pending the Commission's final decision.
    • Order No. 7990 (June 21, 2011) - Adopting the Findings of Fact, Conclusions of Law and Recommendations of the Hearing Examiner and approving the Proposed Settlement Agreement, in its entirety, submitted by Delmarva Power & Light Company, the Commission Staff and the Attorney General's office for usage on or after July 1, 2011. Delmarva Power & Light Company is authorized a return on equity of ten percent (10%) to produce an overall rate of return of 7.56 percent.
  • Public Notice

Workshop August 29th, 10:00am at the Delaware Public Service Commission Hearing room (see PSC calendar for more information). The purpose of this workshop is to participate in discussion related to the development of the Modified Fixed Variable Rate Design also known as Revenue Decoupling for Delmarva's natural gas customers.

PSC Docket No. 09-277T (Filed June 25, 2009)
IN THE MATTER OF THE APPLICATION OF DELMARVA POWER & LIGHT COMPANY FOR APPROVAL OF A MODIFIED FIXED VARIABLE RATE DESIGN FOR NATURAL GAS RATES - On September 9, 2009, the Commission entered Order No. 7619, thereby opening a docket to examine the adoption of a modified fixed/variable rate design for Delmarva Power's natural gas business. See Order No. 7731 for more information.

Direct Testimony of:

Settlement Agreement

Hearing Examiner's Report



PSC REGULATION DOCKET NO. 63 - IN THE MATTER OF THE ADOPTION OF REGULATIONS GOVERNING ADMINISTRATION OF THE WATER UTILITY DISTRIBUTION SYSTEM IMPROVEMENTS CHARGE AND THE UTILITY FACILITY RELOCATION CHARGE PROVIDED FOR IN 26 DEL.C. SECTIONS 314 AND 315 (OPENED JANUARY 31, 2012)- Order No. 8103 approving for publication and comment new regulations to implement and administer the Distribution System Improvement Charge and Utility Facility Relocation Charge was approved by the Commission on January 31, 2012. A copy of Order No. 8013, as published in the March 2012 Delaware Register of Regulations, can be found here.

LOCAL, REGIONAL, AND NATIONAL ISSUES

  • Revenue Decoupling: On March 20, 2007, by Order No. 7153 the Commission initiated Regulation Docket No. 59 to consider whether to implement a revenue decoupling mechanism for the electric and natural gas distribution utilities subject to its jurisdiction, consistent with the provisions of the settlement of Delmarva Power & Light Company's ("Delmarva") gas base rate case approved in Order No. 7152 (Mar. 20, 2007) in which it proposed a Bill Stabilization Adjustment ("BSA"). Simultaneously, the Commission opened Docket No. 07-28 to consider the "Blueprint For the Future Application and Plan" ("Blueprint"), submitted by Delmarva on February 6, 2007, that proposed, among other initiatives, demand-side management ("DSM"), advanced metering, and energy efficiency plans (see Order No. 7154. After a number of public workshops and meetings in each proceeding, Staff raised concerns regarding duplication in the examination of issues in Regulation Docket No. 59 and Docket No. 07-28 (together "the Dockets") in light of the close relationship between DSM proposals and revenue decoupling mechanisms. On March 17, 2008, the parties from both dockets convene to discuss common issues and the viability of continuing both dockets, and later submitted comments and recommendations to the Hearing Examiner regarding the path forward in consideration of Delmarva's Blueprint and revenue decoupling. After holding additional workshops and accepting additional written comment, the Hearing Examiner issued a report of Findings of Fact, Conclusions of Law, and Recommendations ("Report") to the Commission. During its meeting of August 19, 2008, the Commission heard oral argument regarding the Hearing Examiner's Report and filed Exceptions. Order No. 7420 (Sep. 16, 2008) memorializes the Commission's deliberations and decision.


  • Why natural gas bills are not following the decline in natural gas prices: While the price of natural gas on the spot market has dropped considerably in recent months, both of the natural gas utilities regulated by the Delaware Public Service Commission, Delmarva Power & Light Company and the Delaware Division of Chesapeake Utilities Corporation, purchase natural gas for their customers through a portfolio approach. Some of the gas purchased is at the current spot market price, but the companies also rely on storage injections and a hedging program to fill out the gas supply portfolio. Most natural gas companies draw down on the natural gas in storage each winter for peak day needs, and consequently they buy gas during the spring and summer months to replenish the storage. The price of gas in storage reflects the prices paid in previous months, not the current market rate. When that gas is withdrawn from storage for use this winter season, it is one element of the higher gas cost rates being passed on to consumers now. Both Delmarva's Gas Cost Rate and Chesapeake's Gas Sales Rate are set for the upcoming 2011-2012 determination period that runs from November 1 through October 31 each year.
    Turning to the hedging program, this aspect of each Company's supply portfolio enables them to hedge in the natural gas futures and physical gas markets on a monthly basis. Gas is bought for both the short term and long term at the market price for the month. Under the Commission approved hedging plan for Delmarva, there are guidelines for how much of the Company's needs should be hedged at different time intervals (6 months, 1 year and further out). The goal of the hedging programs is to manage the market price volatility and avoid customer rate shocks. Therefore, natural gas hedge transactions may not result in the lowest prices. Chesapeake's hedging program operates in a similar way. The hedges placed earlier this year reflect the natural gas prices at the time. The storage, hedges and current spot purchases, in addition to some other elements, all combine to make up the total gas costs for recovery on a dollar for dollar basis through the GCR and GSR mechanisms for the 2011-2012 GCR period. Neither Delmarva nor Chesapeake make a profit on the gas costs, it is a straight dollar for dollar pass through.
    Costs associated with the CGR and GSR include the cost to purchase fuel, fuel storage costs, market transaction costs, and pipeline costs associated with transportation of natural gas.


  • Price volatility - Due largely in part to fluctuations in demand for natural gas by residential customers and use of natural gas for electric generation, natural gas prices are predicted to continue to be volatile for the unforeseeable future. Factors such as the economy, increases in production and storage levels, weather patterns, use of alternative fuel sources, and enhanced environmental regulations also play a vital part in volatility. The Commission will continue to examine the hedging programs of both of its regulated natural gas utilities. Hedging programs allow regulated natural gas utilities, with oversight and approval, to structure their supply portfolios to include not only purchases of natural gas at current market prices, but to also use various financial and physical supply hedges to mitigate the volatility of the natural gas market. By structuring the supply portfolio so that purchases and commitments are made for periods of time at present and long-term prices, the goal is to balance prices paid by the utilities so that they are not as exposed to sudden swings in the natural gas markets. The Commission Staff also works to encourage increased efficiency and conservation through market-oriented initiatives and consumer education.


  • Liquefied Natural Gas ("LNG") - With the increase in natural gas prices and pressure on existing domestic supplies, the use of Liquefied Natural Gas is increasingly viewed as a viable alternative. Historically, LNG has been significantly higher in cost than natural gas, which has hampered efforts to make it available in large commercial quantities. Increasing natural gas prices have narrowed the pricing gap and new import facilities, such as Cove Point in Virginia and a proposed site at Crown Landing in New Jersey, are bringing permitting, siting, and safety issues to the forefront as pressure increases for fuel supplies. To find out more about LNG, visit the Center for Liquefied Natural Gas.


  • Natural Gas Choice - Beginning in May of 1999, a natural gas choice pilot program was initiated for a limited number of residential and general (small commercial) customers. Five third party suppliers were certified to participate in the program and approximately 7,000 customers enrolled in the program. Due to rising natural gas prices in the latter part of 2000 and the subsequent withdrawal of the third party suppliers, the Commission and Delmarva Power through a settlement agreement, terminated the program as of October 31, 2001. Interested parties continued to meet quarterly through April 2002 to review the status of natural gas choice; however, there are no proposals pending by either natural gas company.


  • The National Association of Regulatory Utility Commissioners ("NARUC") has two committees dedicated to addressing issues faced by the natural gas industry: the Natural Gas Committee and the Natural Gas Subcommittee. The Delaware Public Service Commission is represented on both committees.
Last Updated: Wednesday, 14-Mar-2012 07:11:05 EDT
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