Exelon 2014 Annual Report Download - page 28

Natural Gas
BGE’s natural gas sales are derived pursuant to a MBR mechanism that applies to customers who buy their gas from BGE. Under
this mechanism, BGE’s actual cost of gas is compared to a market index (a measure of the market price of gas in a given period).
The difference between BGE’s actual cost and the market index is shared equally between shareholders and customers. BGE must
secure fixed price contracts for at least 10% but not more than 20% of forecasted system supply requirements for flowing (i.e. non-
storage) gas for the November through March period. These fixed price contracts are recovered under the MBR mechanism and are
not subject to sharing.
Customer choice program activity affects revenue collected from customers related to supplied natural gas; however, that activity
has minimal impact on BGE’s gas revenue net of purchased power expense or financial position. At December 31, 2014, there were
40 competitive natural gas suppliers serving BGE customers. At December 31, 2014, the number of retail customers purchasing fuel
from a competitive natural gas supplier was approximately 161,000 representing 25% of total retail customers. Retail deliveries
purchased from competitive natural gas suppliers represented approximately 53% of BGE’s retail mmcf sales for the year ended
December 31, 2014.
BGE meets its natural gas load requirements through firm pipeline transportation and storage entitlements. BGE’s current pipeline
firm transportation entitlements to serve its firm loads are 354 mmcf per day.
BGE’s current maximum storage entitlements are 312 mmcf per day. To supplement its gas supply at times of heavy winter
demands and to be available in temporary emergencies affecting gas supply, BGE has:
• a liquefied natural gas facility for the liquefaction and storage of natural gas with a total storage capacity of 1,055 mmcf and a
daily capacity of 332 mmcf,
• a liquefied natural gas facility for natural gas system pressure support with a total storage capacity of 6 mmcf and a daily
capacity of 6 mmcf, and
• a propane air facility and a mined cavern with a total storage capacity equivalent to 546 mmcf and a daily capacity of 85 mmcf.
BGE has under contract sufficient volumes of propane for the operation of the propane air facility and is capable of liquefying
sufficient volumes of natural gas during the summer months for operations of its liquefied natural gas facility during peak winter
periods. BGE historically has been able to arrange short-term contracts or exchange agreements with other gas companies in the
event of short-term disruptions to gas supplies or to meet additional demand.
BGE also participates in the interstate markets by releasing pipeline capacity or bundling pipeline capacity with gas for off-system
sales. Off-system gas sales are low-margin direct sales of gas to wholesale suppliers of natural gas. Earnings from these activities
are shared between shareholders and customers. BGE makes these sales as part of a program to balance its supply of, and cost of,
natural gas.
Natural Gas Distribution Rate Case. On July 2, 2014, and as amended on September 15, 2014, BGE filed for a gas base rate
increase with the MDPSC, ultimately requesting an increase of $68 million. On October 17, 2014, BGE filed with the MDPSC the
Settlement Agreement reached with all parties to the case under which it would receive an increase of $38 million in gas base rates.
The Settlement Agreement establishes new depreciation rates which have the effect of increasing annual gas depreciation expense
by approximately $2 million. On December 14, 2014, the Public Utility Law Judge issued a proposed order approving the Settlement
Agreement without modification, which became a final order on December 12, 2014. The approved gas distribution rate became
effective for services rendered on or after December 15, 2014.
See Note 3—Regulatory Matters of the Combined Notes to Consolidated Financial Statements for additional information.
Construction Budget
BGE’s business is capital intensive and requires significant investments primarily in electric and natural gas distribution and electric
transmission facilities to ensure the adequate capacity, reliability and efficiency of its system. BGE, as a transmission facilities
owner, has various construction commitments under PJM’s RTEP as discussed in BGE’s most recent estimate of capital
expenditures for plant additions and improvements for 2015 is approximately $700 million.
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