Delaware
Frequently Asked Questions
New Gas Cost Rate Effective November 1, 2008
Overview: Delmarva Power is filing its annual Gas Cost Rate adjustment on August 29, 2008 to go into effect with gas usage on and after November 1, 2008, resulting in an overall bill increase for most natural gas customers. A decrease to the gas Environmental Surcharge was filed the same day, also to take effect on November 1. Details of the changes are outlined below in the FAQ section.
Overall
What is the combined effect of these two changes?
The combined effect of these two changes (Gas Cost Rate increase and Environmental Surcharge decrease) will result in an overall monthly bill increase of $25.17, or about 14.8 percent for residential customers who use roughly 120 CCF of natural gas per month during the heating season, taking the bill from $170.37 to $195.54. The effects will vary, based on your usage.
GAS COST RATE INCREASE (Supply)
What is the effect of this change on the gas cost rate portion of my bill?
- Effective November 1, 2008 residential customers that use roughly 120 ccf of natural gas per month during the heating season will see an overall bill increase of approximately 14.8 percent or $25.25 per month, from $170.37 to $195.62.
- The rate increase for commercial and industrial customers, as a percent of their total bill, ranges from less than one percent up to 22.3 percent, depending on load and usage characteristics.
Why are you requesting a natural Gas Cost Rate increase?
The increase in natural gas prices reflects the high wholesale costs for natural gas. The tight balance between natural gas supply and demand continues to push prices up all over the country. Despite significant onshore production growth, the natural gas market continues to be pressured by high oil prices, low imports and lower-than-normal storage. In addition, summer cooling demand has been strong, which increases the amount of natural gas used in the electric power sector. The actual Gas Cost Rate is based on forecasts for the coming year and the company makes an adjustment to the Gas Cost Rate through an annual process of hearings before the Public Service Commission to establish the need for any rate change.
Does Delmarva Power profit on the sale of the natural gas commodity they acquire on behalf of their customers?
No. Delmarva Power purchases gas in the wholesale market to meet expected customer needs. The company does not make a profit on the gas it purchases for its customers. It simply passes the cost of the natural gas on to the customer without adding on any profit. When the cost of buying the gas for our customers goes down, we pass the savings directly on to our customers.
When will the GCR increase take effect?
The gas cost rate increase will take effect with usage on and after November 1, 2008.
What can customers do to offset the rate increase?
- Enroll in our popular budget billing option, which helps to prevent wide variations in monthly heating bills by spreading the costs of winter heating across 12 months.
- Monitor your monthly energy usage and learn how to save on your energy costs using “My Account”, a free service available at www.delmarva.com.To get started, you will need a copy of your bill.
- Visit www.delmarva.com. for energy conservation tips. Using energy wisely can help manage energy costs. For customers without access to the internet, we can provide a copy of the brochure “85 Ways to Save Money and Energy”.
- Take advantage of all federal, state and local energy assistance programs.
If the wholesale market prices rise or fall significantly, will you adjust your supply rates in between annual adjustments?
As a regulated gas utility, Delmarva Power has a gas adjustment clause mechanism that changes as prices rise or fall. It is periodically adjusted to reflect market prices. If market prices rise significantly higher or fall significantly lower than expected, Delmarva Power is required to adjust rates accordingly. Such changes must be approved by the Delaware Public Service Commission.
How can Delmarva Power assure customers that they are not victims of price gouging?
The rates are determined and approved in proceedings before the Delaware Public Service Commission. The Commission is an independent body that works to ensure safe, reliable and reasonably priced natural gas. Delmarva Power does not profit from the gas cost rate adjustment which is filed annually.
Do you have to wait for the final approval of the Delaware Public Service Commission before instituting the rate increase?
The company has requested that the increase go into effect with usage on and after November 1, 2008 as allowed under the company’s tariff and the Commission’s rules; however, the Commission always reviews the increase. If the Commission determines that the increase is too high, customers will receive a refund in the form directed by the Commission, which could include a credit on their bills or a reduction in the following year’s Gas Cost Rate.
What impact does the weather have on natural gas prices?
WWeather is often the biggest factor in how much residential customers pay for natural gas during the winter. Natural gas prices remain quite sensitive to weather for three main reasons:
- Heating demand: The weather is a major factor in how much energy people use to heat their homes. If it’s colder, people tend to use more energy. So, even if the wholesale price of energy stays the same from one winter to the next, consumers will receive higher bills if they consume more energy than they did the year before.
- Cooling demand: An increasing amount of natural gas is being used to generate electricity. Many of the newer “peaker” power plants that generate electricity during periods of peak demand- such as during summer heat waves- run on natural gas.
- Natural gas production:As we saw during Hurricanes Rita, Katrina and Ivan, major weather events can disrupt natural gas production in the Gulf of Mexico, constraining market supplies and driving up prices paid for gas supplies that are not already under contract.
ENVIRONMENTAL SURCHARGE DECREASE
What is the Environmental Surcharge?
Manufactured gas plants were used in the 19th and 20th centuries to provide natural gas to customers and utilities across the nation are now cleaning up those sites. Delmarva Power plants were retired in the mid-20th century, after more than 100 years of making and distributing manufactured gas. The Environmental Surcharge is a very small charge per unit of gas purchased that is intended to recoup costs associated with environmental remediation at Delaware sites where manufactured gas plants once operated. The company does not make a profit on the environmental remediation costs.
How much will the Environmental Surcharge decrease?
The Environmental surcharge will decrease from $0.00238 to $0.00175 per centi-cubic feet (CCF) of gas used. This change will result in an overall monthly bill decrease of 8 cents or less than 0.1 percent for residential customers who use roughly 120 CCF of natural gas per month during the heating season. The effect of this charge will vary, based on your usage.
When will the increase in the Environmental Surcharge take effect?
The Environmental Surcharge decrease will take effect with usage on and after November 1, 2008.
Why did the rate go down (decrease) this year?
Each year, the Company works with DNREC (the Department of Natural Resources and Environmental Control) to develop clean-up plans. During the last 12-month reporting period, only a small amount was spent on clean-up activities. The expenses are amortized over a 5-year period, so high expenditures in one year are spread across the 5 following years. With a decrease, the 5-year amortization period also applies, which resulted in a small decrease for the new recovery year starting 11/1/08.
