Gas transport fees set to increase by up to 30%

By James DeChene

The Public Service Commission (PSC) and the Delaware Public Advocate (DPA) have directed Delmarva Power & Light (DP&L) to modify the way in which they charge their gas transport fees, including what’s known as “balancing”, plus assessing user fees on infrastructure purchased from other companies. DP&L contends that the change is needed to more appropriately allocate the “balancing fee” to all customers the costs for storage and swing capacity and pressure support associated with the Eastern Shore contract (the 3rd party pipeline that DP&L uses to transport the resource to meet all its customer demand).

Simply put, the Public Service Commission (PSC) and Delaware Public Advocate (DPA) are urging DP&L to (1) increase the “balancing fee” for transport customers and (2) create a “pressure support fee”.

The “balancing” fee is both the overage and underage of usage a company is charged on their gas usage, and a company can lower this fee if they become better “guess-timators” or “predictors” on what their usage will be on a given day.  This is also known as ‘nominations’ or when a company predicts their usage for the following day or week. Transport customers can be industrial users, e.g., chemical companies, but also restaurants, apartment complexes and schools.  PSC staff and DPA are concerned that residential customers are presently subsidizing 150 transport customers in the amount of $2.3M/year.  The goal is to redistribute this $2.3M.

Via this regulatory change, the balancing fee is projected to increase from $0.34 per mcf to $0.55 per mcf.  Residential GCR customers create about 65% of the annual imbalance, but according to the report have been paying 90% of the balancing fee. Additionally, the user fee for transport on infrastructure will be a set rate of $.19 per mcf total used. The pressure support fee is associated with the support of the infrastructure for the Eastern Shore pipeline, which DP&L uses to transport gas.   All users must contribute to this maintenance.  The total bill spread across users is $4.3M/year.

DP&L indicated that transport customers can minimize the impact of the increase in balancing fees by more accurately predicting their nominations.

The State Chamber encourages all affected parties to attend a workshop on Tuesday, August 4th at PSC headquarters in Dover beginning at 9:30am.

In anticipation of next week’s workshop, companies can assess how this change will affect their bottom lines by utilizing the following formula:

1) Proposed $0.55 Balancing Rate X Company Balancing Volume (Can be found on utility bill)
PLUS
2) $0.19 Fixed Pressure Support Fee X Total Natural Gas Usage

Compared to current costs, you will get the total financial impact. We recommend that each member apply this formula to their own companies and share with the State Chamber their total overall impact so that we can reiterate the average impact to the PSC and DPA next Tuesday.