PSC authorizes Chesapeake Utilities to track $4.3M of ERP-related costs as a regulatory asset; requires annual reports and allocation analysis

The Public Service Commission on Nov. 5 authorized Chesapeake Utilities of Maryland to establish a regulatory asset to track certain noncapitalizable costs associated with a new enterprise resource planning (ERP) system, subject to future review in a base rate case and with reporting and documentation requirements.

Staff (Erwin Clifford) summarized Chesapeake’s 10/01/2025 filing, saying the company estimates the ERP project at $122,000,000 in total and that accounting rules would ordinarily prohibit capitalization of certain development costs. Staff said noncapitalizable costs are estimated at $4,300,000 with $249,000 attributable to Chesapeake’s Maryland operations and recommended authorization to establish a regulatory asset to track those costs until they can be examined for prudence in a rate case.

The Office of People's Counsel (OPC) told the commission it did not oppose the request but asked for three safeguards: immediate filing of Chesapeake’s Distrigas allocation analysis and that OPC be copied on it; periodic reports tracking project cost estimates, schedule changes, and implementation details; and an explicit statement in the order that prudence and any return of costs will be determined in the next base rate case. Alexis Lewis for OPC said the filings would help OPC “better understand the process in which the allocation was decided and just ensure that the correct entities and customers are allocated the various costs.”

Brian Quinn, representing Chesapeake, said the company would provide allocation spreadsheets informally or by filing if the commission prefers and that it disagreed with OPC on the utility of interim periodic reports, noting prior regulatory-asset approvals had been reviewed in a later rate case without periodic reporting. Quinn did agree with stating in the order that recovery and prudence are matters for a rate case.

After discussion among commissioners about frequency and burden of reporting, the commission adopted a motion authorizing Chesapeake to implement the regulatory asset as described in its filing, conditioned on Chesapeake filing its Distrigas allocation analysis and providing annual reports (rather than quarterly) that include cost estimates, actual expenses incurred to date, forecasted expenses, schedule changes, and project implementation and troubleshooting details. Commissioners voted unanimously in favor. Commissioner Suchman emphasized that approval to track costs as a regulatory asset is not a determination of prudency or cost recovery, which will be resolved in a future rate case.

Next steps: Chesapeake must file the Distrigas allocation analysis and comply with the annual reporting requirement; prudency and rate recovery will be decided in a subsequent base rate case.