Considering the recent decline in natural gas prices, why hasn't my natural gas bill also decreased?

While the price of natural gas on the spot market has dropped considerably, 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 When that gas is withdrawn from storage for use this winter season, it is one element of the higher gas cost rates being passed on to consumers now.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.

Why is my electric bill going up?

Since the passage of electric restructuring legislation in 1999, electricity prices have been capped for customers of Delmarva Power and the Delaware Electric Cooperative. In accordance with the legislation, Delmarva Power residential customers received a 7.5 percent rate reduction. In 2003, the PEPCO/Conectiv (now Delmarva Power) merger settlement increased rates about 1 percent system-wide, but extended the rate freeze for Delmarva Power customers until May 2006. Several minor adjustments to rates have been permitted since then pursuant to the settlement agreement, but rates for Delmarva Power residential customers are still about 4.5 percent lower today than they were prior to the passage of the legislation in 1999. Under the rate caps, consumers in all rate classes have saved an estimated $1 billion since restructuring took place.

Rate caps were lifted for customers of the Delaware Electric Cooperative in March 2005, and will be lifted for Delmarva Power in May 2006. We know that rates will increase for Delmarva Power customers when the caps are lifted because the cost of producing electricity has increased significantly since 1999, and because of the substantial rate increases experienced in neighboring states when their rate caps were lifted. Rates for Delaware Electric Cooperative customers have increased about 6-8 percent since their rate freeze was lifted, and are expected to increase further once long-term power purchasing contracts expire in 2007. At that time, new rate structures will have to be examined and costs could be higher, or lower, depending on market conditions at the time.

What are "current market rates" and why do they affect my electric bill?

"Current market rates" are the rates charged by wholesale companies that sell electric power to utility companies. Delmarva Power and the Delaware Electric Cooperative solicit bids from competitive electricity suppliers and then purchase electricity from one or more of those suppliers. These costs are passed along to customers, along with some administrative costs and fees (called a retail margin).

What factors affect the price of energy?

Market prices change depending on a number of factors, including the amount of supply and demand for electricity. In fact, the short and mid-term outlook for energy costs is not positive due to a number of reasons, including increasing energy consumption worldwide, the lack of moderately priced alternative energy products, world political events, and two severe hurricanes which continue to have an impact on oil and natural gas production and availability. These prices rise and fall the way home heating oil, gasoline and some grocery prices change.

How much will my electric bill increase?

An accurate estimate is difficult because, beginning May 2006, electric supply rates (rates for generating electricity) for Delmarva Power customers will be determined by current market rates. While increases are likely to be substantial, work is underway to keep rates as low as possible. Electric supply rates for Delaware Electric Cooperative customers are now subject to market fluctuations. More information should be available during the next few months.

The rates for distribution (delivery) services continue to be regulated by the Public Service Commission.

Will I be affected if I am not a Delmarva Power or Delaware Electric Cooperative customer?

Customers who receive electricity from municipalities were not affected by the restructuring legislation. Municipalities that provide electricity are: Clayton, Dover, Lewes, Middletown, Milford, Newark, Seaford, Smyrna and the city of New Castle. Some of these municipalities have power contracts that are now in effect, but when these contracts expire, they will be subject to market conditions, much as Delmarva Power is now.

I received notice that my electric will be disconnected for non-payment. What can I do?

Specific rules regarding service disconnection for non-payment can be found in the tariffs of the Delaware Electric Cooperative and Delmarva Power. Additionally, 26 Del. C. Section 117(d) states: "In no event shall such termination occur if any occupant of any dwelling unit shall be so ill that the termination of such sale or service shall adversely affect his or her health or recovery, which has been so certified by a signed statement from any duly licensed physician, physician assistant or advanced nurse practitioner, of this State or of a state with similar accreditation and received by any employee or officer of such person engaging in the distribution or sale of gas, water or electricity. Signed statements from a licensed physicia n, physician assistant or advanced nurse practitioner, obtained pursuant to this section are effective for 120 days. Signed statements may be renewed by means of a new signed statement to prevent termination only if a customer makes a good faith effort to make payments towards the utilty service being provided." Finally, the Commission, by PSC Order No. 6325 (adopted December 9, 2003), promulgated Regulations Governing Termination Of Residential Electric Or Natural Gas Service By Public Utilities For Non-Payment During Extreme Seasonal Temperature Conditions. These regulations establish uniform procedures which must be followed prior to termination of service for non-payment during the heating or cooling season, and sets forth limitations on when service may be disconnected during the heating or cooling season. It is important to note that the PSC does not have any authority over the operations of utility companies when it comes to disconnections, other than what is mentioned above. Delmarva Power does have the right to collect all outstanding debts, and any payment arrangements on these debts are at the discretion of Delmarva. In addition, Delmarva Power may also require a deposit from customers who have outstanding debts.

I can't pay my heating bill. Who can I contact for help?

Whenever you have problems paying your bill, you should first contact your utility service provider who can often work with you in establishing payment arrangements, or provide a listing of community resources that may be able to help. If you are still in need of financial assistance, the Delaware Helpline (1-800-464-4357) can provide information on state government agencies and referrals to community resources.

I received a Landowner Notification from a water company by certified mail. What does it mean?

In order for a water utility to expand its water service territory, it must apply for and be granted a Certificate of Public Convenience and Necessity ("CPCN") by the Commission. By PSC Order No. 5730 (adopted June 5, 2001) the Commission established Regulations Concerning Water Utilities Including the Public Service Commission's Jurisdiction to Grant and Revoke Certificates of Public Convenience and Necessity. These rules, in unison with 26 Del. C. Section 203C set forth the procedures water utilities (including, in certain circumstances, municipal water utilities) must follow in order for the Commission to grant a CPCN. One of the requirements is that the water utility send the Landowner Notification by certified mail to all landowners in a proposed service territory prior to the filing of an application for a CPCN. The purpose of the Landowner Notification is to inform landowners that their property has been identified for inclusion in a water service territory, and to inform them of the options available to them under law. If you received a Landowner Notification by certified mail and you want your property included in a service territory, even though you did not sign a request for the utility's water services, then you need not take any action and your property will be included in an area where the utility is authorized to serve. Otherwise, you may exercise one or more of the following options:

(a) You have the right to "opt-out" and have your property removed from the utility's service area. You can do this even though others in your area might desire water service from the utility. You should understand that being included in a utility's service area does not mean that public water service will be immediately available to your property or that, when available, you will be required to hook-up to the public water system. However, if your property is included in the utility's water service territory and the well serving your drinking water needs becomes unusable, the Water Supply Section of the Department of Natural Resources and Environmental Control might deny you a permit for a new well if there is public water available to your property. On the other hand, if you now elect to "opt-out" of the utility's service area, but later change you mind and to connect to the utility's public water system, you could be charged additional fees to be included in a new CPCN service area. Finally, you cannot "opt-out" after the Commission has granted the CPCN to the utility.

(b) You can also file an objection to the utility's application. If a majority of the landowners in the utility's proposed service territory object to the utility providing water services, the PSC might deny the utility the right to serve in such area. An objection does not automatically remove your property from the service territory; it simply reflects that you do not want the utility to provide services in the area. If you want to make sure your property is not included in the utility's service territory, you should file the "opt-out" request described above.

(c) You can also request that the Commission hold a public hearing on the utility's request for a CPCN to serve the proposed service territory. At the hearing, you can show that the utility has not met the legal requirements for obtaining a CPCN to serve in the area. You should review the statute and Commission Regulations about what a utility must provide in order to obtain a CPCN. If you request a hearing, you will need to tell the Commission why the utility has not met the law's requirements for a CPCN. Again, a request for a hearing will not remove your property from a proposed service area. To remove your property from the service territory, you must request to "opt-out."

The Commission has created a form that any landowner who has received a Landowner Notification by certified mail may complete and send to the Commission exercising one or more of the above options. Any action described above must be taken within sixty days of the receipt of the Landowner Notification.