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Summary of Significant Accounting Policies (Tables) | 12 Months Ended
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Dec. 31, 2012
Summary of Property, Plant and Equipment by Classification | A summary of property, plant and equipment by classification as of December 31, 2012 and 2011 is provided in the following table:
|  | December 31, |  |  | December 31, |
(in thousands) |  | 2012 |  |  | 2011 |
Property, plant and equipment |  |  |  |  |  |  |  |
Regulated Energy |  |  |  |  |  |  |  |
Natural gas distribution – Delmarva |  | $ | 149,558 |  |  | $ | 140,800 |
Natural gas distribution – Florida |  |  | 170,943 |  |  |  | 158,341 |
Natural gas transmission |  |  | 202,968 |  |  |  | 173,810 |
Electric distribution – Florida |  |  | 61,960 |  |  |  | 55,839 |
Unregulated Energy |  |  |  |  |  |  |  |
Propane distribution—Delmarva |  |  | 53,156 |  |  |  | 51,250 |
Propane distribution – Florida |  |  | 16,823 |  |  |  | 15,839 |
Other unregulated energy |  |  | 239 |  |  |  | 238 |
Other |  |  | 20,067 |  |  |  | 19,988 |
Total property, plant and equipment |  |  | 675,714 |  |  |  | 616,105 |
Less: Accumulated depreciation and amortization |  |  | (155,378 | ) |  |  | (137,784 | )
Plus: Construction work in progress |  |  | 21,445 |  |  |  | 9,383 |
Net property, plant and equipment |  | $ | 541,781 |  |  | $ | 487,704 |
Average Depreciation Rates | The following table shows the average depreciation rates used during the years ended December 31, 2012, 2011 and 2010:
|  | 2012 |  |  | 2011 |  |  | 2010 |
Natural gas distribution – Delmarva |  |  | 2.6 | % |  |  | 2.5 | % |  |  | 2.5 | %
Natural gas distribution – Florida |  |  | 3.5 | % |  |  | 3.5 | % |  |  | 3.2 | %
Natural gas transmission |  |  | 2.5 | % |  |  | 2.6 | % |  |  | 2.7 | %
Electric distribution – Florida |  |  | 4.2 | % |  |  | 4.2 | % |  |  | 3.8 | %
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 |  |  | 7-40 years |
Liquified petroleum gas equipment |  |  | 5-40 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 |  |  | 3-20 years |
Structures and improvements |  |  | 3-45 years |
Other |  |  | Various |
Schedule of Regulatory Assets and Liabilities | These assets and liabilities will be recognized as revenues and expenses in future periods as they are reflected in customers’ rates.
|  | December 31, |  |  | December 31, |
|  | 2012 |  |  | 2011 |
(in thousands) |  |  |  |  |  |
Regulatory Assets |  |  |  |  |  |  |  |
Underrecovered purchased fuel costs (1) |  | $ | 2,219 |  |  | $ | 911 |
Deferred post retirement benefits (2) |  |  | 17,755 |  |  |  | 15,640 |
Deferred transaction and transition costs (3) |  |  | 1,035 |  |  |  | 1,600 |
Deferred conversion and development costs (1) |  |  | 842 |  |  |  | 1,143 |
Environmental regulatory assets and expenditures (4) |  |  | 5,432 |  |  |  | 6,131 |
Acquisition adjustment (5) |  |  | 48,724 |  |  |  | 50,546 |
Loss on reacquired debt (6) |  |  | 1,484 |  |  |  | 1,576 |
Other |  |  | 2,653 |  |  |  | 3,555 |
Total Regulatory Assets |  | $ | 80,144 |  |  | $ | 81,102 |
Regulatory Liabilities |  |  |  |  |  |  |  |
Self insurance (10) |  | $ | 1,212 |  |  | $ | 1,010 |
Overrecovered purchased fuel costs (1) |  |  | 218 |  |  |  | 4,664 |
Conservation cost recovery (1) |  |  | 356 |  |  |  | 12 |
Rate Refund (7) |  |  | — |  |  |  | 1,250 |
Storm reserve (10) |  |  | 2,742 |  |  |  | 2,812 |
Accrued asset removal cost (9) |  |  | 38,096 |  |  |  | 36,584 |
Deferred gains (8) |  |  | 1,977 |  |  |  | — |
Other |  |  | 526 |  |  |  | 469 |
Total Regulatory Liabilities |  | $ | 45,127 |  |  | $ | 46,801 |
(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 related to its regulated operations. See Note 15, “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. The balances at December 31, 2012 and 2011 include 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 18, “Environmental Commitments and Contingencies,” for additional information on our environmental contingencies.
(5) | The Florida PSC approved the inclusion of approximately $1.3 million of the premium paid by FPU for an acquisition of another natural gas utility in 2002 (prior to Chesapeake’s acquisition of FPU) in its rate base and the recovery of it in rates. The Florida PSC also approved the inclusion of approximately $34.2 million of the premium paid by Chesapeake in its acquisition of FPU in the rate base and the recovery of it in rates. During 2012, we reclassified to a regulatory asset that portion of the goodwill related to the FPU acquisition, which was approved for recovery in future rates, along with the related gross-up for income taxes. See Note 17, “Rates and Other Regulatory Activities,” for additional information.
(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) | Eastern Shore refunded this amount to customers in February 2012 as a result of a rate case settlement. See Note 17, “Rates and Other Regulatory Activities,” for additional information.
(8) | Deferred gains represent: (i) a one-time contingency gain and a tax gross-up related to FPU’s income tax liability, which originated prior to the acquisition by Chesapeake from excess tax depreciation on vehicles (see Note 17, “Rates and Other Regulatory Activities,” for additional information); and (ii) a deferral of a curtailment gain related to FPU’s postretirement medical benefit associated with a change in plan provisions that became effective January 1, 2012 (see Note 15, “Employee Benefit Plans,” for additional information).
(9) | In accordance with regulatory treatment our depreciation rates are comprise 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.
(10) | 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.

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