Natural Gas Conversion To Begin In OC Much Sooner

OCEAN CITY – During discussions over the neighborhood of Little Salisbury’s gas infrastructure being extended in the near future, city officials learned natural gas will be coming to the island much earlier than expected.

According to Public Works Director Hal Adkins, Chesapeake Utilities is proposing to make application to the Public Service Commission (PSC) for a System Improvement Rate (SIR) adjustment, specific to the Ocean City customer base, to cover the capital cost of expanding infrastructure to areas that are currently uneconomically feasible based on anticipated revenues.

“One of the projects our Construction Division has been working on over the last nine months deals with the Little Salisbury neighborhood located on the bayside between 87th and 94th streets. In addition to infrastructure improvements we normally do ourselves, such as water, sewer and storm drainage, we have been working with Delmarva Power who has done a number of electrical upgrades throughout the neighborhood at their expense for system improvements,” Adkins explained. “An issue came about relative to gas infrastructure … it is Public Works’ desire to pipe the entire neighborhood with gas infrastructure for future potential of redevelopment in that area.”

Adkins furthered, Sandpiper Energy of Chesapeake Utilities is regulated by the PSC.

“Whenever faced with an improvement project of this sort they have to do their own cost estimates, outreach to the neighborhood to not only look at who the current customers are but future gas customers. They do an analysis based on what that property is whether it is a residence or commercial entity to determine what the anticipated revenue may be, and compare the expense of the project to the anticipated revenues the PSC requires. When you are a developer requesting the work, or in this case a municipality, a contribution is made to make sure the project is in fact economic,” Adkins said.

Based on the interest in the area, Sandpiper Energy estimates that the required contribution in order to render the project economic would be $412,000 out of the total construction cost of $507,000. This estimate includes the installation of 126 stubs to be located between every other lot in Little Salisbury to facilitate future connections. The stubs are estimated to cost $241,000 out of the total cost of $507,000.

If Sandpiper were to roll the $412,000 contribution into the SIR for Ocean City customers, Adkins said the SIR would increase by approximately $0.022 per propane ccf (volume of 100 cubic feet), which equates to about $3 per year for the average residential customer in Ocean City. The current SIR is $0.295 per propane ccf, system wide, and is associated with steel main replacement and conversions from propane to natural gas.

“I certainly support this and one main reason is public safety,” Councilman Dennis Dare said as he made a motion to support the SIR adder for the Little Salisbury project. “When the big storm hits Ocean City, and one day there is no doubt that will happen … one of the scariest hazards is these floating propane tanks that become projectiles and bombs, so moving towards expanding underground distribution system whether it is propane or hopefully in the near future natural gas takes away that danger in the future.”

Adkins confirmed the materials used for the extension of gas infrastructure would be appropriate to transfer from propane into natural gas, which will be sooner than expected.

“Other discussions we are having with the gas company as recently as yesterday is we are working on the logistics of boring the bay to bring natural gas to the island, and if all goes well it will be as early as this coming fall,” Adkins said. “They will be boring from Hooper’s Crab House to the 1st Street area and commence conversions from propane to natural gas starting with the south end of town.”

According to Adkins, the original plan was to start with conversions from the north gate of Ocean Pines to the south gate, and once that was complete the project was to move to West Ocean City and then to Ocean City.

“Something fell apart with Ocean Pines. I think it is still under negotiation, so they just headed into West Ocean City and they’re done. They are anxious to start on the next location, which is Ocean City,” he said.

Public Works has started meeting with the Fire Marshal’s Office and Plumbing Inspections Office discussing the course in what direction gas conversions will take place working its way up the island from the southern end.

“That is really good news,” Mayor Rick Meehan said. “That is a much accelerated schedule than what we have talked about before.”

The council voted unanimously to support the SIR for the Little Salisbury project and send a letter of support to the PSC in support of Chesapeake Utilities filing for PSC approval.