Delaware natural gas: a pilot that ended

Two distributors, and one programme that ended

The Public Service Commission regulates two natural gas distributors in Delaware: Delmarva Power & Light and Chesapeake Utilities Corporation's Delaware division, which now files as Chesapeake Utilities of Delaware, Inc. The Commission regulates distribution only, sets delivery and administrative costs in base-rate proceedings, and leaves interstate transmission to federal jurisdiction. That division of labour explains most of what a Delaware buyer encounters: the utility's tariff governs how gas reaches the meter, and the commodity behind it is settled through a separate cost mechanism that the Commission reviews on its own calendar.

• Two regulated distributors, each with its own Delaware tariff and its own rate case history.
• The Commission's jurisdiction is distribution; pipeline transmission is a federal matter.
• Both utilities carry an environmental rate rider to recover manufactured-gas-site cleanup, set in separate proceedings.

The pilot Delaware actually ran

Delaware did try customer choice, and the Commission's own account is unusually specific. Beginning in May 1999 a pilot opened to a limited number of residential and general service, meaning small commercial, customers. Five third-party suppliers were certified and roughly seven thousand customers enrolled. Rising natural gas prices in the latter part of 2000 were followed by the withdrawal of those suppliers, and the Commission and Delmarva Power terminated the programme through a settlement agreement effective 31 October 2001. Interested parties kept meeting quarterly through April 2002, and the Commission records that neither gas company has a proposal pending to restart it.

• Five certified suppliers, about seven thousand enrolled accounts, and a life of roughly two and a half years.
• The stated cause was price-driven supplier withdrawal, not a finding that the programme was badly designed.
• Nothing has been filed to restart it since the quarterly review meetings ended in April 2002.

What replaced it: transportation, not supply choice

The route that survived is transportation. A non-residential customer arranges its own gas and the utility moves it, which is a different product from the retail choice the pilot offered: there is no certified supplier selling to the account and no supplier competing for the meter. Chesapeake's Delaware tariff states the shape precisely, describing its high-load-factor transportation schedule as aggregated transportation of customer-purchased gas from the company's city gate to the customer's service address. Eligibility, metering and balancing all sit in that tariff, and the same is true of Delmarva's, which carries its own sales and firm-transportation classes.

• Transportation means the customer owns the commodity; the utility's charge is for moving it.
• The utility remains the distributor of record either way, so safety, metering and emergency response do not change.
• Ask which schedule number the account qualifies for before discussing commodity at all.

Chesapeake's class lines are arithmetic, not adjectives

Chesapeake's Delaware tariff divides non-residential service into GS-1, GS-2 and GS-3 for sales, with GTS-1, GTS-2 and GTS-3 as the transportation mirrors, and GS-3 begins at an annual consumption of 15,535 therms. On top of that sits a load-factor pair: GS-HLFS for sales and GS-HLFTS for transportation, available to a customer that would otherwise qualify for the GS-2 or GS-3 family and whose January-to-March consumption is less than 35 per cent of its annual total, with gas used in at least eleven of twelve months and usage fairly evenly spread. That is a tariff written for a building that runs all year rather than one that heats.

• 15,535 therms a year is the GS-3 line; the high-load-factor schedules sit above it as a test rather than a size band.
• Thirty-five per cent winter share, eleven months of use, even distribution: three conditions, all measured over a review period.
• Transportation customers above 1,500 therms a day need electronic metering at their own expense, including the electric and telephone service it needs.

Gas cost resets on a filing, once a year

The Commission describes the mechanism plainly: delivery and administrative costs are set in base-rate proceedings, and the cost of the gas itself is recovered through fuel adjustment proceedings held annually, so rates typically change at least once a year. The fuel adjustment can also move inside the year when projected over- or under-collection exceeds the limits set for it. Chesapeake's gas sales service rate arrives as a docketed filing each autumn to take effect on 1 November, and Delmarva's gas cost rates follow the same annual logic through its own docket. A budget built on last winter's gas cost is therefore a budget built on a number with an expiry date.

• Base rates are delivery; the fuel adjustment is commodity. They are decided in different proceedings.
• Mid-year changes are permitted when the over- or under-collection passes the tariff's limit.
• Riders, including the environmental rider, are separate proceedings again.

Why a Delaware 'supplier' is really a transportation arrangement

Because there is no retail market, any offer presented as Delaware gas supply has to fit one of two shapes. It is either a transportation arrangement, where the buyer owns the commodity and someone schedules and balances it against the utility's tariff, or it is an advisory arrangement, where the utility remains the supplier of record and the adviser is paid for analysis rather than molecules. Chesapeake's tariff even provides pool manager schedules and defines aggregated transportation pools with cycle-read and daily-read variants, which is the mechanism a multi-site operator would use to have several accounts nominated together. None of that is a licensed retail supplier selling gas to the meter.

• Ask whether the counterparty is selling molecules or scheduling them; the answer changes the contract.
• Pool manager and aggregated transportation schedules are how several sites get nominated as one.
• A sales pitch that implies a competitive retail market in Delaware is describing something the state does not have.

What to establish before signing anything

Six things decide whether a Delaware gas arrangement works. The distributor and the schedule the account qualifies for, because that is where eligibility lives. Whether the arrangement is transportation or advisory. Who holds the transportation agreement and who nominates. What metering the tariff requires and who pays for it. What happens on imbalance, since a transportation customer that under-delivers is exposed to the utility's balancing provisions. And the date of the next fuel adjustment, because that is when the part of the bill nobody controls resets.

• Get the schedule letter and the effective date of the tariff sheet in writing.
• Confirm in writing whether the utility or the adviser is the counterparty for the commodity.
• Put the fuel-adjustment date and the imbalance terms in the same document as the term and the termination clause.

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