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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. 09-398F (filed September 4, 2009)
IN THE MATTER OF TEH APPLICATION OF CHESAPEAKE UTILITIES CORPORATION FOR APPROVAL OF A CHANGE IN ITS GAS SALES SERVICE RATES ("GSR") TO BE EFFECTIVE NOVEMBER 1, 2009 - Chesapeake Utilities Corporation - Delaware Division's September 4, 2009 application to establish its annual GSR for the period November 1, 2009 through October 31, 2010. The proposed GSR is a decrease from $1.013 per ccf to $0.645 per ccf. For a residential heating customer using 120 ccf in a winter month this would result in a decrease in the total natural gas bill of approximately $34.00 or 18%. View Application

  • Order No. 7665 (October 6, 2009) - Commission reassigning matter to Senior Hearing Examiner Ruth Ann Price and permitting proposed changes to the Gas Sales Service rates, firm balancing rates and interruptible balancing rate of Chesapeake Utilities Corporation and the accompanying proposed tariff revisions are permitted to become effective for natural gas usage on or after November 1, 2009, subject to refund, pending the Commission's final decision.

PSC Docket No. 08-269F Phase II - (filed September 2, 2008)
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, 2008 - Determination of whether Chesapeake Utilities Corporation - Delaware Division's provision of capacity to its affiliate Peninsula Energy Services Corporation ("PESCO") is being provided on terms and conditions that are consistent with applicable law, rules, and/or regulations and to what extent asymmetric pricing principles apply for any capacity released to PESCO to serve former Off System Sales customers.

  • On January 7. 2010, the Hearing Examiner issued his Report of Findings and Recommendations in Phase II of this proceeding regarding legal issues involving PESCO. Exceptions to the Hearing Examiner's REport are due on or before February 5th. The Commission will then consider the matter during it February 18, 2010 public meeting.
  • Order No. 7607 (July 7, 2009) - Commission adopting Findings and Recommendations of the Hearing Examiner, approving Proposed Settlement, and Chesapeake Utilities Corporation's proposed rates per Ccf.

Delmarva Power and Light

PSC Docket No. 09-385F (filed August 31, 2009)
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, 2009. Under the proposed rate change, a typical residential customer, who uses 120 ccf of natural gas per month during the heating season, will get an overall decrease of 14.4 percent in the level of the GCR, or $19.02 per month. Most commercial and industrial customers would see their natural gas rates decrease between 6.2 percent and 16.1 percent depending on their load and usage characteristics. View Application

  • Order No. 7664 (October 6, 2009) - designating Ruth Ann Price as Hearing Examiner.
  • Order No. 7642 (September 9, 2009) - permitting the Company's proposed changes to its Gas Cost Service rates, and the accompanying proposed tariff revision set forth in the application filed by Delmarva Power & Light Company on August 31, 2009, to become effective for natural gas usage on or after November 1, 2009, with proration, pending a final decision of the Commission. Such rates shall be subject to refund depending upon such final decision.

PSC Docket No. 09-384 (filed August 31, 2009)
IN THE MATTER OF THE APPLICATION OF DELMARVA POWER & LIGHT COMPANY FOR AN ANNUAL UPDATE IN THE GAS ENVIRONMENTAL SURCHARGE RIDER RATE - This is Delmarva's annual filing to update their Environmental Surcharge Rider (ESR) for charges effective November 1, 2009. The ESR is a surcharge that allows the Company to recover appropriate costs associated with the remediation of their Manufactured Gas Plants sites. Delmarva is proposing an increase from $0.00175 per ccf to $0.00206 per ccf for all firm delivery customers.

  • Order No. 7663 (October 6, 2009) - Commission designating Ruth Ann Price as Hearing Examiner.
  • Order No. 7643 (September 9, 2009) - Approving Environmental Surcharge Rider Rate with effective date of November 1, 2009.

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.

LOCAL, REGIONAL, AND NATIONAL ISSUES

  • Why natural gas bills are not following the decline in natural gas prices during the fall of 2008: While the price of natural gas on the spot market has dropped considerably in recent weeks, both of the natual 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. Since the cost of gas was at historic highs this past spring and summer when the injections were taking place for the upcoming 2008-2009 winter season, the price of gas in storage reflects the prices paid at that time, 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, as the both Delmarva’s Gas Cost Rate and Chesapeake’s Gas Sales Rate are set for the upcoming 2008-2009 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 volatility, and as such this does not always mean that natural gas hedge transactions will result in the lowest price. Chesapeake’s hedging program operates in a similar way. The hedges placed earlier this year reflect the higher 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 2008 – 2009 GCR period. Neither Delmarva nor Chesapeake make a profit on the gas costs – it is a straight dollar for dollar pass through.
  • Price volatility - Due largely in part to increased 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. Rising costs lead to higher natural gas bills for all natural gas customers. To help alleviate the problem, the Commission will be examining 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: Tuesday, 12-Jan-2010 15:20:35 EST
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