Gas Pipeline Rates in Maryland

The Maryland Public Service Commission provided notice that the Federal Energy Regulatory Commission (FERC) has approved a settlement agreement in a pipeline rate case involving Eastern Shore Natural Gas (ESNG).

The state commission observed that ESNG is an interstate natural gas pipeline subsidiary of Chesapeake Utilities Corporation which transports natural gas across the Delmarva Peninsula. The Maryland commission said that the development is important to retail natural gas consumers in the state because ESNG had initially proposed a steep cost-of-service increase as well as a new rate design that would have been very burdensome to Maryland customers on the southern end of the pipeline.

According to the commission, however, the settlement significantly scales back the amount of the rate increase assigned to Maryland customers and contains other benefits as well. Among the favorable terms identified by the Maryland commission was a provision preventing ESNG from filing another rate case for at least three years. Additionally, the commission noted that the stipulation requires ESNG to further reduce the rates set forth in the agreement to reflect its new federal income tax rate, which will be lower by virtue of the federal Tax Cuts and Jobs Act of 2017.

According to the Maryland commission, ESNG had originally proposed a zoned rate design that would have imposed a disproportionately high rate increase on gas transportation customers served at the southern end of the pipeline, including the Easton Utilities Commission, Elkton Gas, Chesapeake Utilities, Sandpiper Energy, and Calpine Energy Services. As an example, the state commission reported that Easton Utilities had projected that its transportation rates would have increased by 93% if FERC had accepted ESNG’s initial filing. Instead though, the settlement limits Easton’s transportation rate increase to just 19%, going from $19.58 per dekatherm per month to $23.36. And, the commission stressed, that figure was calculated before the benefits of the federal tax reduction are passed through.