Lewes signs gas agreement with Chesapeake Utilities

Commercial customer on line by year's end
September 23, 2011

Lewes is getting gas. City of Lewes and Chesapeake Utilities Corp. officials have signed a franchise agreement giving the company rights to provide natural gas service to residential and commercial customers.

Lewes Mayor Jim Ford said the company has installed its gas line up to the city limit and has waited for the agreement to be signed before continuing. The company began providing natural gas in Milton in 2005, in Georgetown and Millsboro in 2006 and in Harbeson last year.

Chesapeake Utilities has run its pipeline along Route 9 through Five Points, along Savannah Road, cutting to Clay Road. The pipeline runs along Clay Road and turns to run along Kings Highway where it will shift to Freeman Highway and continue to Cape Henlopen Drive.

The company used jack-and-bore equipment to install the line, which has eliminated needing an open trench.

Jeff Tietbohl, Chesapeake Utilities vice president, thanked the city for working with the company to negotiate the agreement.

“We’re looking forward to serving our customers in Lewes,” Tietbohl said.

Ford, Lewes City Council Secretary Fred Beaufait, Tietbohl and Chesapeake Utilities secretary Beck Cooper signed the agreement after the mayor and city council’s Sept. 12 meeting.

Ford said Lewes city solicitor Glenn Mandalas and Chesapeake Utilities representatives negotiated a unique franchise agreement.

The initial franchise term is for 20 years with an option to renew for 20 years on mutually acceptable conditions. Failure to agree on renewal terminates the agreement at expiration of the initial term.

If the company fails to start construction of the distribution system within three months of the agreement date or fails to begin delivering gas to customers within 36 months, the city has the right to cancel the agreement, purchase and take over operation of the gas-distribution system.

The company is committed to serving the city in a timely manner and as quickly as permitted under terms and conditions of tariffs on file with the Delaware Public Service Commission, the agreement states.

The franchise fee is based on the volume of gas delivered to customers during the agreement. As an advance against future fees, the utility company will pay the city $25,000 within 30 days of the agreement date.

A year after the effective date, Chesapeake will pay the city an additional $20,000. Before paying the city additional money, the company will keep franchise fees collected from customers until it has recovered $45,000.

Chesapeake Utilities would then pay the city fees based on the volume of gas delivered to customers during the remaining terms of the agreement.

Volume gas fees will be paid to the city quarterly based on gas delivered at the end of each calendar quarter.

Within 15 years of the agreement the company must serve 100 percent of the city’s qualified residential customers

At its expense, Chesapeake Utilities has agreed to conduct at least three public workshops during the first year of the agreement to inform residential and commercial property owners of the opportunity and requirements to obtain natural gas service.

Chesapeake utilities will provide gas service to Beebe Medical Center on Savannah Road and SPI Pharma on Cape Henlopen Drive. The company would also provide service to City Hall on 114 E. Third St.

The company plans to begin providing service to SPI Pharma and Beebe before the end of the year.

Delaware Public Utility Service Commission, or any other state or federal authority will determine service rates.

The city has the right to cancel the agreement 10 years after the effective date, and before the 20-year expiration date. The city may elect to purchase the gas distribution system within city limits, including any annexed areas.

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