(Jan. 23, 2015) In the end, a few winters of inconvenience probably won’t be too big a price for not having flammable gas leaking under Coastal Highway.
Ongoing replacement of underground gas lines, which has caused intermittent lane closures on Coastal Highway for the past several weeks, is expected to continue during the off-season for the next two years.
“We’ll be in Ocean City working pretty much from Labor Day to Memorial Day,” said Leonard Heavner, manager of Gas Operations for Chesapeake Utilities. “We’re looking to sometime in 2017 to have all the bare steel replaced in Ocean City.”
Two years ago, Chesapeake bought out the Eastern Shore Gas Company, creating a new subsidiary dubbed Sandpiper Energy. Since then, Chesapeake has gone about replacing much of the former ESG infrastructure.
“Bare steel” refers to underground gas lines that are made of plain metal, and not the high-strength plastic that has been used in gas mains for several years. Sandpiper is working on three separate stretches of line beneath Coastal Highway, where the steel lines date from the late 1960s or early 1970s, according to Heavner.
“The new lines have a much longer life and are less prone to corrosion,” he said.
Chesapeake’s ultimate goal is to convert the Ocean City area from propane to natural gas, a significantly cheaper fuel source given the recent shale gas discoveries and hydrofracking development.
Most of the company’s infrastructure can accommodate either fuel, Heavner said. Interfacing with appliances in individual homes and businesses constitutes the majority of the work.
“What will have to be done is conversion of appliances inside the residences,” Heavner said. “On our end, there’s not too much that we have to do to make our current system compatible with natural gas. It’s going to be primarily the individual appliances.”
Under the auspices of the Maryland Public Service Commission, which enforces price protection on all public utilities, customers will not have to pay out-of-pocket for conversions. Rather, Sandpiper’s Service Improvement Rate (SIR) includes the cost of all infrastructure depreciation and replacement. The SIR is an additional charge, on top of the base rate of the fuel itself, that appears on customer bills.
“The company will pay for the conversion propane appliances to natural gas,” said Bill O’Brien, Chesapeake’s director of pricing and regulatory affairs. “That cost has already been built into the rates.”
Sandpiper recently came to a rate agreement with the PSC for an interim SIR to cover the depreciation of the former ESG assets. The SIR per cubic foot of natural gas is now $0.116, and $0.291 for propane.
Sandpiper is operating under an interim agreement with the PSC that came with the approval of the ESG buy-out. By Dec. 1, 2015, the company will be required to file for a full rate case that will re-evaluate all of Sandpiper’s costs, not just those associated with infrastructure replacement.