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Rates and Other Regulatory Activities
9 Months Ended
Sep. 30, 2017
Regulated Operations [Abstract]  
Rates and Other Regulatory Activities
Rates and Other Regulatory Activities
Our natural gas and electric distribution operations in Delaware, Maryland and Florida are subject to regulation by their respective PSC; Eastern Shore, our natural gas transmission subsidiary, is subject to regulation by the FERC; and Peninsula Pipeline, our intrastate pipeline subsidiary, is subject to regulation by the Florida PSC. Chesapeake Utilities' Florida natural gas distribution division and FPU’s natural gas and electric distribution operations continue to be subject to regulation, as separate entities, by the Florida PSC.
Delaware
Rate Case Filing: In December 2015, our Delaware Division filed an application with the Delaware PSC for a base rate increase and certain other changes to its tariff. The Delaware Division, Delaware PSC Staff, the Division of the Public Advocate and other intervenors met and reached a settlement agreement in November 2016. The terms of the settlement agreement included an annual increase of $2.3 million in base rates. The order became final in December 2016, and the new rates became effective January 1, 2017. Amounts collected through interim rates in excess of the respective portion of the $2.3 million increase through December 31, 2016 were accrued as of that date. In January 2017, we filed our proposed refund plan with the Delaware PSC and subsequently issued refunds to customers in March 2017.
Maryland
There were no material rates and other regulatory activities for our Maryland division during the period.
Sandpiper
There were no material rates and other regulatory activities for Sandpiper during the period.
Florida
Cost Recovery for the Electric Interconnect Project: In September 2015, FPU’s electric division filed to recover the cost of the proposed Florida Power & Light Company interconnect project through FPU's annual Fuel and Purchased Power Cost Recovery Clause filing. The interconnect project would enable FPU's electric division to negotiate a new power purchase agreement to mitigate fuel costs for its Northeast division. FPU's proposal was approved by the Florida PSC at its Agenda Conference held in December 2015. In January 2016, however, the Office of Public Counsel filed an appeal of the Florida PSC's decision with the Florida Supreme Court. The Florida Supreme Court reversed the Florida PSC decision in March 2017, after consideration of the parties' legal briefs and oral arguments. As a result, FPU excluded the recovery of these costs from its 2018 Fuel and Purchased Power Cost Recovery Clause and included the costs for recovery in the limited proceeding filing described below.
Surcharge Associated with Modernization of Electric Distribution System Project: In February 2017, FPU’s electric division filed a petition with the Florida PSC requesting a temporary surcharge mechanism to recover costs and generate an appropriate return on investment associated with an essential reliability and modernization project for its electric distribution system. We requested approval to invest approximately $59.8 million, over a five-year period, associated with the modernization project. In February 2017, the Office of Public Counsel intervened in this petition. The Florida PSC requested that FPU file a limited proceeding to include these investments in base rates instead of seeking approval of a temporary surcharge. In April 2017, FPU voluntarily withdrew its petition and subsequently filed the limited proceeding described in the next paragraph.
Electric Limited Proceeding: In July 2017, FPU’s electric division filed a petition with the Florida PSC, requesting approval to include $15.2 million of certain capital project expenditures in its rate base and to adjust its base rates accordingly. These expenditures are designed to improve the stability and safety of the electric system while enhancing the capability of FPU’s grid. Included in the $15.2 million is the interconnection project with Florida Power & Light Company, which enables FPU to mitigate fuel costs for its electric customers. This petition is scheduled for the Florida PSC's December 2017 Agenda.
Northwest Florida Expansion Project: Peninsula Pipeline and FPU's natural gas division are constructing a pipeline in Escambia County, Florida that will interconnect with FGT's pipeline. The project consists of 33 miles of 12-inch transmission line from the FGT interconnect that will be operated by Peninsula Pipeline and 8 miles of 8-inch lateral distribution lines that will be operated by Chesapeake Utilities' Florida natural gas division. We have entered into agreements to serve two large customers and are marketing to other customers close to the facilities.

New Smyrna Beach, Florida Project: Peninsula Pipeline is constructing a pipeline in Volusia County, Florida that will interconnect with FGT's pipeline. The project consists of 14 miles of transmission line from the FGT interconnect that will be operated by Peninsula Pipeline and will serve FPU natural gas distribution customers.
Eastern Shore
White Oak Mainline Expansion Project: In July 2016, Eastern Shore received FERC authorization to construct, own and operate certain expansion facilities designed to provide 45,000 Dts/d of firm transportation service to an electric power generator in Kent County, Delaware ("White Oak Mainline Project"). Eastern Shore constructed approximately 5.4 miles of 16-inch diameter pipeline looping in Chester County, Pennsylvania and increased compression capability at Eastern Shore’s existing Delaware City compressor station in New Castle County, Delaware. At the end of March 2017, the entire project was placed into service. The total cost to complete the project was approximately $42.0 million.
System Reliability Project: In September 2016, the FERC approved Eastern Shore's application to construct, own and operate approximately 10.1 miles of 16-inch pipeline looping and auxiliary facilities in New Castle and Kent Counties, Delaware, and a new compressor at its existing Bridgeville compressor station in Sussex County, Delaware. Eastern Shore further proposed to reinforce critical points on its pipeline system. Previously, in July 2016, the FERC granted Eastern Shore’s pre-determination of rolled-in rate treatment absent any significant change in circumstances.
As of June 2017, the entire project was placed into service. The total cost to complete the project was approximately $38.0 million. We began to recover the project's costs in August 2017, coinciding with the proposed effectiveness of new rates, subject to refund, pending final resolution of the base rate case described below.
2017 Expansion Project: In May 2016, Eastern Shore submitted a request to the FERC to initiate the pre-filing review procedures for Eastern Shore's 2017 expansion project (the “2017 Expansion Project”). The 2017 Expansion Project's facilities include approximately 23 miles of pipeline looping in Pennsylvania, Maryland and Delaware; upgrades to existing metering facilities in Lancaster County, Pennsylvania; installation of an additional compressor unit at Eastern Shore’s existing Daleville compressor station in Chester County, Pennsylvania; approximately 17 miles of new mainline extension and two pressure control stations in Sussex County, Delaware. In May 2016, the FERC approved Eastern Shore’s request to commence the pre-filing review process. Eastern Shore entered into Precedent Agreements with seven existing customers, including three affiliates of Chesapeake Utilities, for a total of 61,162 Dts/d of additional firm natural gas transportation service on Eastern Shore’s pipeline system with an additional 52,500 Dts/d of firm transportation service at certain Eastern Shore receipt facilities.
In December 2016, Eastern Shore submitted an application for a CP seeking authorization to construct the expansion facilities. Six of Eastern Shore's existing customers timely intervened to become parties. In February and March 2017, Eastern Shore submitted responses to the FERC staff's data requests.
In October 2017, FERC issued a CP authorizing Eastern Shore to construct and operate the proposed 2017 Expansion Project. The estimated cost of the 2017 Expansion Project is approximately $115.0 million
Eastern Shore is preparing its implementation plan, which will be filed with the FERC, addressing the actions Eastern Shore will undertake to meet the Environmental Conditions set forth in the FERC's order. Eastern Shore anticipates placing certain facilities into service by the end of the year and completing the entire project in 2018.
2017 Rate Case Filing: In January 2017, Eastern Shore filed a base rate proceeding with the FERC, as required by the terms of its 2012 rate case settlement agreement. Eastern Shore's proposed rates were based on the mainline cost of service of approximately $60.0 million resulting in an overall requested revenue increase of approximately $18.9 million and a requested rate of return on common equity of 13.75 percent. The filing includes incremental rates for the White Oak Lateral Project and White Oak Mainline Expansion Project, which benefits a single customer. Eastern Shore also proposed to revise its depreciation rates and negative salvage rate based on the results of independent, third-party depreciation and negative salvage value studies. In March 2017, the FERC issued an order suspending the tariff rates for the usual five-month period.
On August 1, 2017, Eastern Shore implemented new rates, subject to refund based upon the outcome of the rate proceeding.  Eastern Shore recorded incremental revenue of approximately $1.0 million for the three and nine months ended September 30, 2017, and established a regulatory liability to reserve a portion of the total incremental revenues generated by the new rates until the rate case is resolved. Settlement discussions continue among the other parties to the case.