REGULATORY MATTERS

As explained in Note 1, Summary of Significant Accounting Policies, the Utilities account for regulated operations in accordance with FASB ASC Topic 980, Regulated Operations. The following regulatory assets and regulatory liabilities, including purchased gas adjustments, were reflected in the balance sheets of the Company, Spire Missouri and Spire Alabama as of March 31, 2018, September 30, 2017, and March 31, 2017.



	March 31,		September 30,		March 31,
Spire	2018		2017		2017
Regulatory Assets:
Current:
Pension and postretirement benefit costs	$	43.0	$	42.2	$	41.7
Unamortized purchased gas adjustments	32.6		102.6		61.0
Other	22.1		30.7		23.1
Total Current Regulatory Assets	97.7		175.5		125.8
Noncurrent:
Future income taxes due from customers	113.0		170.5		159.7
Pension and postretirement benefit costs	358.2		404.7		461.8
Cost of removal	125.0		123.3		133.9
Unamortized purchased gas adjustments	—		9.9		1.1
Energy efficiency	31.3		29.0		27.0
Other	46.1		53.7		44.2
Total Noncurrent Regulatory Assets	673.6		791.1		827.7
Total Regulatory Assets	$	771.3	$	966.6	$	953.5
Regulatory Liabilities:
Current:
Rate Stabilization and Equalization (RSE) adjustment	$	—	$	1.4	$	1.1
Unbilled service margin	—		—		13.5
Refundable negative salvage	5.3		8.2		8.1
Unamortized purchased gas adjustments	1.5		1.0		1.6
Other	15.4		12.0		7.0
Total Current Regulatory Liabilities	22.2		22.6		31.3
Noncurrent:
Deferred taxes due to customers	170.7		—		—
Pension and postretirement benefit costs	30.8		32.2		27.6
Refundable negative salvage	0.6		4.1		4.9
Accrued cost of removal	71.0		83.8		75.3
Unamortized purchased gas adjustments	50.3		1.9		2.0
Other	29.7		35.2		34.3
Total Noncurrent Regulatory Liabilities	353.1		157.2		144.1
Total Regulatory Liabilities	$	375.3	$	179.8	$	175.4



	March 31,		September 30,		March 31,
Spire Missouri	2018		2017		2017
Regulatory Assets:
Current:
Pension and postretirement benefit costs	$	34.9	$	34.9	$	34.8
Unamortized purchased gas adjustments	13.5		57.4		17.1
Other	3.3		3.3		3.4
Total Current Regulatory Assets	51.7		95.6		55.3
Noncurrent:
Future income taxes due from customers	111.4		170.5		159.7
Pension and postretirement benefit costs	279.0		322.7		358.3
Unamortized purchased gas adjustments	—		9.9		1.1
Energy efficiency	31.3		29.0		27.0
Other	24.9		25.7		23.3
Total Noncurrent Regulatory Assets	446.6		557.8		569.4
Total Regulatory Assets	$	498.3	$	653.4	$	624.7
Regulatory Liabilities:
Current:
Other	$	2.7	$	2.7	$	2.7
Total Current Regulatory Liabilities	2.7		2.7		2.7
Noncurrent:
Deferred taxes due to customers	152.6		—		—
Accrued cost of removal	48.7		54.5		55.6
Unamortized purchased gas adjustments	50.3		1.9		2.0
Other	20.9		24.8		26.9
Total Noncurrent Regulatory Liabilities	272.5		81.2		84.5
Total Regulatory Liabilities	$	275.2	$	83.9	$	87.2



	March 31,		September 30,		March 31,
Spire Alabama	2018		2017		2017
Regulatory Assets:
Current:
Pension and postretirement benefit costs	$	7.1	$	7.2	$	6.8
Unamortized purchased gas adjustments	19.0		45.2		43.9
Other	6.0		12.2		4.4
Total Current Regulatory Assets	32.1		64.6		55.1
Noncurrent:
Pension and postretirement benefit costs	71.2		72.6		94.4
Cost of removal	125.0		123.3		133.9
Other	2.7		1.1		1.0
Total Noncurrent Regulatory Assets	198.9		197.0		229.3
Total Regulatory Assets	$	231.0	$	261.6	$	284.4
Regulatory Liabilities:
Current:
RSE adjustment	$	—	$	1.4	$	1.1
Unbilled service margin	—		—		13.5
Refundable negative salvage	5.3		8.2		8.1
Other	5.5		2.4		2.4
Total Current Regulatory Liabilities	10.8		12.0		25.1
Noncurrent:
Pension and postretirement benefit costs	30.8		32.2		27.6
Refundable negative salvage	0.6		4.1		4.9
Other	3.6		3.3		3.4
Total Noncurrent Regulatory Liabilities	35.0		39.6		35.9
Total Regulatory Liabilities	$	45.8	$	51.6	$	61.0

A portion of the Company’s and Spire Missouri’s regulatory assets are not earning a return, as shown in the table below:



	Spire						Spire Missouri
	March 31,		September 30,		March 31,		March 31,		September 30,		March 31,
	2018		2017		2017		2018		2017		2017
Future income taxes due from customers	$	113.0	$	170.5	$	159.7	$	111.4	$	170.5	$	159.7
Pension and postretirement benefit costs	185.8		198.5		241.0		185.8		198.5		241.0
Other	11.0		11.3		11.8		11.0		11.3		11.8
Total Regulatory Assets Not Earning a Return	$	309.8	$	380.3	$	412.5	$	308.2	$	380.3	$	412.5

Like all the Company’s regulatory assets, these regulatory assets are expected to be recovered from customers in future rates. The recovery period for the future income taxes due from customers and pension and other postretirement benefit costs could be 20 years or longer, based on current Internal Revenue Service (IRS) guidelines and average remaining service life of active participants, respectively. The other items not earning a return are expected to be recovered over a period not to exceed 15 years, consistent with precedent set by the MoPSC. Spire Alabama does not have any regulatory assets that are not earning a return.

On April 11, 2017, Spire Missouri East filed a general rate case docketed as GR-2017-0215, and concurrently, Spire Missouri West filed general rate case GR-2017-0216. On March 7, 2018, the MoPSC issued an Amended Report and Order, approving a base rate revenue requirement increase of $18.0 for Spire Missouri East and $15.2 for Spire Missouri West. The annualized Infrastructure System Replacement Surcharge (ISRS) amounts of $32.6 for Spire Missouri East and $16.4 for Spire Missouri West were reset to zero, resulting in a net decrease in revenues of $14.6 and $1.2, respectively. These net amounts reflect decreases totaling approximately $33.0 resulting from the federal income tax rate reduction from the Tax Cuts and Jobs Act (see Note 11, Income Taxes) and a related allowance to return excess accumulated deferred income taxes to customers in accordance with IRS normalization requirements. Tariffs reflecting the MoPSC’s Amended Report and Order went into effect on April 19, 2018.

Included in the rate order were updates to the treatment of pension and other postretirement benefits. Effective April 19, 2018, the pension cost for Spire Missouri West included in customer rates was reduced from $9.9 to $5.5 per year, the pension cost included in the Spire Missouri East customer rates was increased from $15.5 to $29.0 per year, and the annual allowance for health care postretirement plans for Spire Missouri East was reduced from $9.5 to $8.6. Over an amortization period of eight years, Spire Missouri East rates will also include the amortization of $173.0 of assets for pension and other postretirement benefits, and Spire Missouri West rates will be reduced by the amortization of a $26.2 net liability for pension and other postretirement benefits.

Certain provisions of the MoPSC’s Amended Report and Order allow less future recovery of particular costs than previously estimated. Regulatory assets related to pension costs were reduced by $28.8 because the MoPSC has indicated that certain amounts established before 1997 are not recoverable. They also ordered that certain incentive compensation costs totaling $6.9 and $1.8 of assets related to buildings sold in 2014 be excluded from rate base. Rate case expenses totaling $0.9 were also disallowed. Though appeals are pending, management determined that the related assets should be written down or off in connection with the preparation of the financial statements for the second quarter of 2018. For both Spire Missouri and Spire, the charges totaled $38.4 for the three and six months ended March 31, 2018, and are included primarily in operation and maintenance expense on the statements of income and in other cash flows from operating activities on the statements of cash flows. The after-tax reduction to net income and earnings per share was $23.6 and $0.49, respectively. The charges related to the long-standing pension and building assets, totaling $30.6, are excluded in the determination of net economic earnings, as shown in Note 9, Information by Operating Segment.