Skip to Page Content Image: Official Website for the First State Photo: Featured Delaware Image
Visit the Governor |  General Assembly |  Courts |  Elected Officials |  State Agencies
State Phone Directory |  Help |  Search
Citizen Services |  Business Services |  Tourism Info.

Department of State : Delaware Public Service Commission

NATURAL GAS REGULATION IN DELAWARE

 PSC logo

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

Visit the Regulated Utility Filings page for a listing of dockets, grouped by year and service type, opened by the Commission. Cases of significant importance or interest, such as rate cases, are also highlighted below.

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

PSC REGULATION DOCKET NO. 59: IN THE MATTER OF THE INVESTIGATION OF THE PUBLIC SERVICE COMMISSION INTO REVENUE DECOUPLING MECHANISMS FOR POTENTIAL ADOPTION AND IMPLEMENTATION BY ELECTRIC AND NATURAL GAS UTILITIES SUBJECT TO THE JURISDICTION OF THE PUBLIC SERVICE COMMISSION (OPENED MARCH 20, 2007)

Delmarva Power

  • Environmental Surcharge Rider (ESR) - PSC Docket No. 08-267: This is Delmarva's annual filing to update their Environmental Surcharge Rider (ESR) for charges effective November 1, 2008. 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 a decrease from $0.00238 per ccf to $0.00175 per ccf for all firm delivery customers. Case filings and additional information...
  • Gas Cost Rate Application (GCR) - PSC Docket No. 08-266F: This is Delmarva's annual filing proposing natural gas demand and commodity charges effective November 1, 2008. 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 increase of 14.8 percent, or $25.25 per month. Most commercial and industrial customers would see their natural gas rates increase between 8.7 percent and 22.3 percent depending on their load and usage characteristics. Case filings and additional information...

Chesapeake Utilities Corporation

  • Investigation into the termination of natural gas service to residential customers - PSC Docket 352-08: On January 22, 2008, the Commission Staff opened an investigation to determine if Chesapeake had terminated natural gas service to residential customers in violation of the Commission's rules. During the course of this proceeding, the parties have conducted substantial written discovery and held numerous discussions and, as a result, have entered into a Proposed Settlement Agreement. A public evidentiary hearing will be held on August 11, 2008 at 10 AM at the Commission's Office in Dover regarding the Proposed Settlement Agreement. After the Senior Hearing Examiner has entered her Findings and Recommendations, the matter will be brought before the Commission for final determination.
  • Gas Sales Rate Application (GSR) - PSC Docket No. 08-269F (Filed Sept. 2, 2008): This is Chesapeake's annual filing proposing natural gas demand and commodity charges effective November 1, 2008. Under the proposed rate change, a typical residential customer who uses 120 ccf of natural gas per month during the heating season will see an overall increase of 10.81% percent, or $21.49 per month since the Company made an out-of-cycle filing for rates effective August 1, 2008. When compared to the rates effective November 1, 2007 (i.e. last annual filing), that same customer will see an overall increase of 18.08% or $33.73 per month. Most commercial and industrial customers will see their natural gas rates increase between 16.6% percent and 26.3% percent respectively, since the last annual filing effective November 1, 2007. Calculations for the GSR rates include changes resulting from Chesapeake's most recent base rate proceeding, Docket 07-186. Case filings and additional information...
  • Application For An Increase In Natural Gas Rates And Services And For Approval Of Certain Other Changes To Its Natural Gas Tariff - PSC Docket No. 07-186: On July 6, 2007, Chesapeake Utilities Corporation filed a base rate application that includes extensive proposed changes to its existing rate design and a depreciation study. The proposed base rate increase is $1,895,668 or 3.25% of existing revenues based on the test period of the twelve months ending March 31, 2007. The test year is the twelve months ending December 31, 2006. The primary reasons cited by the Company for the requested increase are related to the return requirement for gas utility plant investments, increases in taxes other than income and fees, and a decline in fixed margin from the Company's various firm customer classes. Case filings and additional Information...
  • Environmental Rider Rate Application (ER) - PSC Docket No. 07-299 (Filed November 1, 2007): This is Chesapeake's annual filing to update their Environmental Surcharge Rider (ESR) for charges effective December 1, 2007. The ESR is a surcharge that allows the Company to recover appropriate costs associated with the remediation of its Manufactured Gas Plants sites. Chesapeake is proposing a credit to its ESR rate this year. Case filings and additional information...

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.
  • The Energy Policy Act of 2005 Signed into Law - President Bush signed the Energy Policy Act into law on August 8, 2005, which will have broad implications for the entire energy sector, as well as the various state and Federal regulatory entities that oversee the energy industry. The Energy Policy Act contains a number of key provisions affecting the natural gas industry. The law clarifies the Federal Energy Regulatory Commission's (FERC) jurisdiction over the siting, construction, expansion, and operation of any facility that imports or processes liquefied natural gas (LNG). A provision in the law provides $1 billion of new coastal impact assistance for fiscal years 2007 through 2010 from outer continental shelf (OCS) revenues, which will be shared annually among the 6 coastal energy-producing States: Alabama, Alaska, California, Louisiana, Mississippi, and Texas. Each State will be allocated a share based on the ratio of OCS revenues generated off the State's coastline to total OCS revenues. Royalties from onshore Federal production are shared equally with the State where the production occurs, prior to deducting administrative costs. The bill requires the Minerals Management Service (MMS) to conduct an inventory and analysis of offshore oil and gas resources beneath the U.S. OCS, including the moratoria areas, using any available technology including seismic data, with the exception of drilling. The Act also establishes MMS with management and oversight of alternative energy uses of the OCS, including wind, wave, and solar energy. The Department of the Interior now has the authority to reduce royalty payments to maintain or stimulate oil and gas development offshore and for marginal wells. Tax depreciation of natural gas distribution lines has been reduced from 20 years to 15 years for property placed in service between April 11, 2005 and April 11, 2011. (Source: Energy Information Administration, Natural Gas Weekly Update, August 11, 2005)
  • 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, 09-Dec-2008 09:40:35 EST
site map   |   about this site   |    contact us   |    translate   |    delaware.gov

The Official Website of the First StateState of DelawareLink to Delaware Facts and Symbols