3. Revenue Recognition

We recognize revenue when our performance obligations under contracts with customers have been satisfied, which generally occurs when our businesses have delivered or transported natural gas, electricity or propane to customers. We exclude sales taxes and other similar taxes from the transaction price. Typically, our customers pay for the goods and/or services we provide in the month following the satisfaction of our performance obligation.

The following table displays our revenue by major source based on product and service type for the three months ended September 30, 2018:



(in thousands)	Regulated Energy			Unregulated Energy			Other and Eliminations			Total
Energy distribution
Florida natural gas division	$	6,282		$	—		$	—		$	6,282
Delaware natural gas division	7,010			—			—			7,010
FPU electric distribution	23,830			—			—			23,830
FPU natural gas distribution	17,390			—			—			17,390
Maryland natural gas division	2,463			—			—			2,463
Sandpiper	3,561			—			—			3,561
Total energy distribution	60,536			—			—			60,536

Energy transmission
Aspire Energy	—			5,750			—			5,750
Eastern Shore	16,189			—			—			16,189
Peninsula Pipeline	3,404			—			—			3,404
Total energy transmission	19,593			5,750			—			25,343

Energy generation
Eight Flags	—			4,044			—			4,044

Propane delivery
Delmarva Peninsula propane delivery	—			13,172			—			13,172
Florida propane delivery	—			4,166			—			4,166
Total propane delivery	—			17,338			—			17,338

Energy services
PESCO	—			51,619			—			51,619

Other and eliminations
Eliminations	(7,359		)	(3,185		)	(8,668		)	(19,212		)
Other	—			476			135			611
Total other and eliminations	(7,359		)	(2,709		)	(8,533		)	(18,601		)

Total operating revenues⁽¹⁾	$	72,770		$	76,042		$	(8,533	)	$	140,279

⁽¹⁾ Includes other revenue (revenues from sources other than contracts with customers) of $546,000 and $91,000 for our Regulated and Unregulated Energy segments, respectively. The sources of other revenues include revenue from alternative revenue programs related to revenue normalization for Maryland division and Sandpiper and late fees.

The following table displays our revenue by major source based on product and service type for the nine months ended September 30, 2018:



(in thousands)	Regulated Energy			Unregulated Energy			Other and Eliminations			Total
Energy distribution
Florida natural gas division	$	18,462		$	—		$	—		$	18,462
Delaware natural gas division	50,963			—			—			50,963
FPU electric distribution	60,933			—			—			60,933
FPU natural gas distribution	58,885			—			—			58,885
Maryland natural gas division	17,136			—			—			17,136
Sandpiper	16,892			—			—			16,892
Total energy distribution	223,271			—			—			223,271

Energy transmission
Aspire Energy	—			23,682			—			23,682
Eastern Shore	46,289			—			—			46,289
Peninsula Pipeline	8,469			—			—			8,469
Total energy transmission	54,758			23,682			—			78,440

Energy generation
Eight Flags	—			12,652			—			12,652

Propane delivery
Delmarva Peninsula propane delivery	—			73,907			—			73,907
Florida propane delivery	—			15,741			—			15,741
Total propane delivery	—			89,648			—			89,648

Energy services
PESCO	—			181,976			—			181,976

Other and eliminations
Eliminations	(25,362		)	(11,679		)	(34,643		)	(71,684		)
Other	—			1,475			521			1,996
Total other and eliminations	(25,362		)	(10,204		)	(34,122		)	(69,688		)

Total operating revenues⁽¹⁾	$	252,667		$	297,754		$	(34,122	)	$	516,299

⁽¹⁾ Includes other revenue (revenues from sources other than contracts with customers) of $(399,000) and $246,000 for our Regulated and Unregulated Energy segments, respectively. The sources of other revenues include revenue from alternative revenue programs related to revenue normalization for Maryland division and Sandpiper and late fees.

Regulated Energy segment

The businesses within our Regulated Energy segment are regulated utilities whose operations and customer contracts are subject to rates approved by the respective state PSC or the FERC.

Our energy distribution operations deliver natural gas or electricity to customers and we bill the customers for both the delivery of natural gas or electricity and the related commodity, where applicable. In most jurisdictions, our customers are also required to purchase the commodity from us, although certain customers in some jurisdictions may purchase the commodity from a third-party retailer (in which case we provide delivery service only). We consider the delivery of natural gas or electricity and/or the related commodity sale as one performance obligation because the commodity and its delivery are highly interrelated with two-way dependency on one another. Our performance obligation is satisfied over time as natural gas or electricity is delivered and consumed by the customer. We recognize revenues based on monthly meter readings, which are based on the quantity of natural gas or electricity used and the approved rates. We accrue unbilled revenues for natural gas and electricity that have been delivered, but not yet billed, at the end of an accounting period to the extent that billing and delivery do not coincide.

Revenues for Eastern Shore are based on rates approved by the FERC. The FERC has also authorized Eastern Shore to negotiate rates above or below the FERC-approved maximum rates, which customers can elect as an alternative to the FERC-approved maximum rates. Eastern Shore's services can be firm or interruptible. Firm services are offered on a guaranteed basis and are available at all times unless prevented by force majeure or other permitted curtailments. Interruptible customers receive service only when there is available capacity or supply. Our performance obligation is satisfied over time as we deliver natural gas to the customers' locations. We recognize revenues based on capacity used or reserved and the fixed monthly charge.

Peninsula Pipeline is engaged in natural gas intrastate transmission to third-party customers and certain affiliates in the State of Florida. Our performance obligation is satisfied over time as the natural gas is transported to customers. We recognize revenue based on rates approved by the Florida PSC and the capacity used or reserved. We accrue unbilled revenues for transportation services provided and not yet billed at the end of an accounting period.

Unregulated Energy segment

Revenues generated from the Unregulated Energy segment are not subject to any federal, state, or local pricing regulations. Aspire Energy primarily sources gas from hundreds of conventional producers and performs gathering and processing functions to maintain the quality and reliability of its gas for its wholesale customers. Aspire Energy's performance obligation is satisfied over time as natural gas is delivered to its customers. Aspire Energy recognizes revenue based on the deliveries of natural gas at contractually agreed upon rates (which are based upon an established monthly index price and a monthly operating fee, as applicable). For natural gas customers, we accrue unbilled revenues for natural gas that has been delivered, but not yet billed, at the end of an accounting period to the extent that billing and delivery do not coincide with the end of the accounting period.

Eight Flags' CHP plant, which is located on land leased from Rayonier, produces three sources of energy: electricity, steam and heated water. Rayonier purchases the steam (unfired and fired) and heated water, which is used in Rayonier’s production facility. Our electric distribution operation purchases the electricity generated by the CHP plant for distribution to its customers. Eight Flags' performance obligation is satisfied over time as deliveries of heated water, steam and electricity occur. Eight Flags recognizes revenues over time based on the amount of heated water, steam and electricity generated and delivered to its customers.

For our propane delivery operations, we recognize revenue based upon customer type and service offered. Generally, for propane bulk delivery customers (customers without meters) and wholesale sales, our performance obligation is satisfied when we deliver propane to the customers' locations (point-in-time basis). We recognize revenue from these customers based on the number of gallons delivered and the price per gallon at the point-in-time of delivery. For our propane delivery customers with meters, we satisfy our performance obligation over time when we deliver propane to customers. We recognize revenue over time based on the amount of propane consumed and the applicable price per unit. For propane delivery metered customers, we accrue unbilled revenues for propane that has been delivered, but not yet billed, at the end of an accounting period to the extent that billing and delivery do not coincide with the end of the accounting period.

PESCO provides natural gas supply and asset management services to customers (including affiliates of Chesapeake Utilities) located primarily in Florida, the Delmarva Peninsula, and the Appalachian Basin. PESCO's performance obligation is satisfied over time as natural gas is delivered to its customers. PESCO recognizes revenue over time based on customer meter readings, on a monthly basis. We accrue unbilled revenues for natural gas that has been delivered, but not yet billed, at the end of an accounting period to the extent that billing and delivery do not coincide with the end of the accounting period.

Contract balances

The timing of revenue recognition, customer billings and cash collections results in trade receivables, unbilled receivables (contract assets), and customer advances (contract liabilities) in our consolidated balance sheets. The balances of our trade receivables, contract assets, and contract liabilities as of December 31, 2017 and September 30, 2018 were as follows:




	Trade Receivables			Contract Assets (Non-current)		Contract Liabilities (Current)
(in thousands)
Balance at 12/31/2017	$	74,962		$	1,270	$	407
Balance at 9/30/2018	50,937			2,331		583
Increase (decrease)	$	(24,025	)	$	1,061	$	176

Our trade receivables are included in trade and other receivables in the condensed consolidated balance sheets. Our non-current contract assets are included in other assets in the condensed consolidated balance sheet and relate to operations and maintenance costs incurred by Eight Flags that have not yet been recovered through rates for the sale of electricity to our electric distribution operation pursuant to a long-term service agreement.

At times, we receive advances or deposits from our customers before we satisfy our performance obligation, resulting in contract liabilities. At September 30, 2018 and December 31, 2017, we had a contract liability of $583,000 and $407,000, respectively, which was included in other accrued liabilities in the condensed consolidated balance sheet, and which relates to non-refundable prepaid fixed fees for our Delmarva Peninsula propane delivery operation's retail offerings. Our performance obligation is satisfied over the term of the respective retail offering plan on a ratable basis. For the three and nine months ended September 30, 2018, we recognized revenue of $48,000 and $384,000, respectively.

Practical expedients

For our businesses with agreements that contain variable consideration, we use the invoice practical expedient method. We determined that the amounts invoiced to customers correspond directly with the value to our customers and our performance to date.

For our long-term contracts, the revenue we recognize corresponds directly to the amount we have the right to invoice, which corresponds directly to our performance obligation. Our performance obligations under our long-term contracts are satisfied over time. As a practical expedient, we do not disclose information about remaining, or unsatisfied, performance obligations for these long-term contracts since the revenue recognized corresponds to the amount we have the right to invoice.