Summary of Significant Accounting Policies (Tables)

12 Months Ended

Dec. 31, 2014

Summary of Property, Plant and Equipment by Classification

A summary of property, plant and equipment by classification as of December 31, 2014 and 2013 is provided in the following table:



	As of December 31,
(in thousands)	2014			2013
Property, plant and equipment
Regulated Energy
Natural gas distribution – Delmarva	$	193,071		$	179,724
Natural gas distribution – Florida	234,344			199,289
Natural gas transmission – Delmarva	243,560			226,244
Natural gas transmission – Florida	18,240			15,919
Electric distribution – Florida	77,640			70,346
Unregulated Energy
Propane distribution—Delmarva	60,877			54,865
Propane distribution – Florida	23,142			20,829
Other unregulated energy	754			573
Other	18,497			21,002
Total property, plant and equipment	870,125			788,791
Less: Accumulated depreciation and amortization	(193,369		)	(174,148		)
Plus: Construction work in progress	13,006			16,603
Net property, plant and equipment	$	689,762		$	631,246

Average Depreciation Rates

We compute depreciation expense for our regulated operations by applying composite, annual rates, as approved by the regulators. The following table shows the average depreciation rates used during the years ended December 31, 2014, 2013 and 2012:



	2014	2013	2012
Natural gas distribution – Delmarva	2.5%	2.5%	2.5%
Natural gas distribution – Florida	2.9%	3.4%	3.3%
Natural gas transmission – Delmarva	2.7%	2.7%	2.7%
Natural gas transmission – Florida	4.0%	4.8%	4.4%
Electric distribution – Florida	3.8%	3.6%	3.8%

During 2014, the Florida PSC approved new depreciation rates for our Florida natural gas distribution operations (see Note 18, Rates and Other Regulatory Activities, for additional information), which lowered their depreciation rates effective January 1, 2014.

Estimated Useful Lives of Assets

For our unregulated operations, we compute depreciation expense on a straight line basis over the following estimated useful lives of the assets:



Asset Description	Useful Life
Propane distribution mains	10-37 years
Propane bulk plants and tanks	10-40 years
Propane equipment	5-33 years
Meters and meter installations	5-33 years
Measuring and regulating station equipment	5-37 years
Office furniture and equipment	3-10 years
Transportation equipment	4-20 years
Structures and improvements	5-45 years
Other	Various

Schedule of Regulatory Assets

These assets and liabilities will be recognized as revenues and expenses in future periods as they are reflected in customers’ rates.



	As of December 31,
	2014		2013
(in thousands)
Regulatory Assets
Under-recovered purchased fuel and conservation cost recovery ⁽¹⁾	$	6,865	$	1,651
Under-recovered GRIP revenue ⁽¹⁾	1,491		—
Deferred post retirement benefits ⁽²⁾	19,762		8,578
Deferred transaction and transition costs ⁽³⁾	—		471
Deferred conversion and development costs ⁽¹⁾	3,745		1,320
Environmental regulatory assets and expenditures ⁽⁴⁾	4,452		5,170
Acquisition adjustment ⁽⁵⁾	45,607		47,478
Loss on reacquired debt ⁽⁶⁾	1,372		1,486
Other	3,809		2,866
Total Regulatory Assets	$	87,103	$	69,020
Regulatory Liabilities
Self insurance ⁽⁷⁾	$	1,003	$	1,000
Over-recovered purchased fuel and conservation cost recovery ⁽¹⁾	2,936		2,869
Over-recovered GRIP revenue ⁽¹⁾	—		518
Storm reserve ⁽⁷⁾	2,982		2,875
Accrued asset removal cost ⁽⁸⁾	39,583		39,510
Deferred gains ⁽⁹⁾	—		783
Other	183		514
Total Regulatory Liabilities	$	46,687	$	48,069


⁽¹⁾	We are allowed to recover the asset or are required to pay the liability in rates. We do not earn an overall rate of return on these assets.


⁽²⁾	The Florida PSC allowed FPU to treat as a regulatory asset the portion of the unrecognized costs pursuant to ASC Topic 715, Compensation - Retirement Benefits, related to its regulated operations. See Note 16, Employee Benefit Plans, for additional information.


⁽³⁾	The Florida PSC approved the inclusion of the FPU merger-related costs in our rate base and the recovery of those costs in rates through October 2014. The balance at December 31, 2013 includes the gross-up of this regulatory asset for income tax because a portion of the merger-related costs is not tax-deductible.


⁽⁴⁾	All of our environmental expenditures incurred to date and current estimate of future environmental expenditures have been approved by various PSCs for recovery. See Note 19, Environmental Commitments and Contingencies, for additional information on our environmental contingencies.

⁽⁵⁾

We are allowed to include the premiums paid in various natural gas utility acquisitions in Florida in our rate bases and recover them over a specific time period pursuant to the Florida PSC approvals. Included in these amounts are $1.3 million of the premium paid by FPU, $34.2 million of the premium paid by Chesapeake in 2009, including the gross up of the amount for income tax, because it is not tax deductible, and $746,000 of the premium paid by FPU in 2010.


⁽⁶⁾	Gains and losses resulting from the reacquisition of long-term debt are amortized over future periods as adjustments to interest expense in accordance with established regulatory practice.


⁽⁷⁾	We have self-insurance and storm reserves that allow us to collect through rates amounts to be used against general claims, storm restoration costs and other losses as they are incurred.

⁽⁸⁾

In accordance with regulatory treatment, our depreciation rates are comprised of two components – historical cost and the estimated cost of removal, net of estimated salvage, of certain regulated properties. We collect these costs in base rates through depreciation expense with a corresponding credit to accumulated depreciation. Because the accumulated estimated removal costs meet the requirements of authoritative guidance related to regulated operations, we have accounted for them as a regulatory liability and have reclassified them from accumulated depreciation to accumulated removal costs in our consolidated balance sheets.


⁽⁹⁾	Pursuant to the Florida PSC order, we were required to defer and amortize, until 2014, certain gains identified during the FPU merger integration.

Schedule of Regulatory Liabilities



	As of December 31,
	2014		2013
(in thousands)
Regulatory Assets
Under-recovered purchased fuel and conservation cost recovery ⁽¹⁾	$	6,865	$	1,651
Under-recovered GRIP revenue ⁽¹⁾	1,491		—
Deferred post retirement benefits ⁽²⁾	19,762		8,578
Deferred transaction and transition costs ⁽³⁾	—		471
Deferred conversion and development costs ⁽¹⁾	3,745		1,320
Environmental regulatory assets and expenditures ⁽⁴⁾	4,452		5,170
Acquisition adjustment ⁽⁵⁾	45,607		47,478
Loss on reacquired debt ⁽⁶⁾	1,372		1,486
Other	3,809		2,866
Total Regulatory Assets	$	87,103	$	69,020
Regulatory Liabilities
Self insurance ⁽⁷⁾	$	1,003	$	1,000
Over-recovered purchased fuel and conservation cost recovery ⁽¹⁾	2,936		2,869
Over-recovered GRIP revenue ⁽¹⁾	—		518
Storm reserve ⁽⁷⁾	2,982		2,875
Accrued asset removal cost ⁽⁸⁾	39,583		39,510
Deferred gains ⁽⁹⁾	—		783
Other	183		514
Total Regulatory Liabilities	$	46,687	$	48,069


⁽¹⁾	We are allowed to recover the asset or are required to pay the liability in rates. We do not earn an overall rate of return on these assets.


⁽²⁾	The Florida PSC allowed FPU to treat as a regulatory asset the portion of the unrecognized costs pursuant to ASC Topic 715, Compensation - Retirement Benefits, related to its regulated operations. See Note 16, Employee Benefit Plans, for additional information.


⁽³⁾	The Florida PSC approved the inclusion of the FPU merger-related costs in our rate base and the recovery of those costs in rates through October 2014. The balance at December 31, 2013 includes the gross-up of this regulatory asset for income tax because a portion of the merger-related costs is not tax-deductible.


⁽⁴⁾	All of our environmental expenditures incurred to date and current estimate of future environmental expenditures have been approved by various PSCs for recovery. See Note 19, Environmental Commitments and Contingencies, for additional information on our environmental contingencies.

⁽⁵⁾


⁽⁶⁾	Gains and losses resulting from the reacquisition of long-term debt are amortized over future periods as adjustments to interest expense in accordance with established regulatory practice.


⁽⁷⁾	We have self-insurance and storm reserves that allow us to collect through rates amounts to be used against general claims, storm restoration costs and other losses as they are incurred.

⁽⁸⁾