Chesapeake Utilities eyes Lewes expansion

Chesapeake Utilities is eying an expansion that would eventually make natural gas service available in much of Lewes.

Bill O'Brien, director of pricing and regulatory affairs, said his company has targeted areas within the city it hopes to add to its customer base in 2014 and 2015.

Chesapeake has 57 customers within city limits, more than 30 in Bay Breeze Estates, off Kings Highway, which is close to the company's main distribution line. That main line is one of the determining factors in the timeline for future growth, he said.

“The order that we go through in terms of developments or streets in the city has a lot to do with where the existing distribution main is,” he said. “But it also has a lot to do with the level of interest we're getting from that community or that area.”

The company has targeted the ferry terminal area for 2014, including Cape Shores and Port Lewes. Further expansion is eyed for Pilottown Village and Pilottown Park in 2015. There has been a lot of interest from the Pilottown communities' residents.

“If you can get the pipe over there, you're going to get a large number of people signing up because many of us have been chomping at the bit for several years now,” said resident Ric Moore at a June 9 city council meeting.

O'Brien said it isn't that simple. To offer services to a specific area, he said, infrastructure and other related upfront costs must be weighed against the revenue that will be received from new customers in the intended service area. Building a line out to the Pilottown communities would be too costly at this time, O'Brien said.

“The model determines whether the rate structure we have will support that investment we have in that community. If it does, we're allowed to go forward,” he said. “In most states, when a utility wants to expand its service territory or expand its system, a project needs to pay for itself so other customers don't end up paying for that project.”

With that approach, Chesapeake will continue to solicit interest in areas close to its distribution lines and continue building infrastructure over time, a policy that protects the company from a bad investment.

“If that growth doesn't show up, then we have some stranded assets on our books,” he said.

There are unique challenges in Lewes, O'Brien said, specifically the seasonality of the Lewes community. When the Public Service Commission approved the utility's rate structure, seasonality was specifically addressed, he said.

“They didn't want to use an annual usage based on a typical customer because those customers are there year round,” he said. “In this area, many of the customers are only here part of the year.”

Seasonality has also made it more difficult to stir up enough interest to expand to some areas. If a potential community does not have enough willing customers, Chesapeake will not move forward. To help capture the entire audience, city officials have agreed to include information in mailings that are sent to many homeowners permanent addresses.

Chesapeake also faces the barrier of upfront costs to new customers. In order to move to natural gas, all appliances have to be converted. O'Brien said the payback can be as low as 2.5 or 3 years, but that extra cost often deters people from moving forward.

For more information about Chesapeake Utilities, go to www.chpkgas.com or call Dorrie Moore at 302-734-6797 ext. 6173.