Note 4 - Regulatory Matters

9 Months Ended

Jun. 30, 2022

Notes to Financial Statements

Public Utilities Disclosure [Text Block]

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 were reflected in the balance sheets of the Company, Spire Missouri and Spire Alabama as of June 30, 2022, September 30, 2021, and June 30, 2021.

	June 30,		September 30,		June 30,
Spire	2022		2021		2021
Regulatory Assets:
Current:
Pension and postretirement benefit costs	$	—	$	31.1	$	31.0
Unamortized purchased gas adjustments		123.4		243.5		0.5
Other		28.6		31.9		33.6
Total Current Regulatory Assets		152.0		306.5		65.1
Noncurrent:
Pension and postretirement benefit costs		317.5		313.8		377.3
Cost of removal		471.9		431.9		449.1
Future income taxes due from customers		140.4		132.9		130.2
Energy efficiency		54.1		47.6		45.6
Unamortized purchased gas adjustments		97.4		—		43.9
Other		124.3		67.3		73.3
Total Noncurrent Regulatory Assets		1,205.6		993.5		1,119.4
Total Regulatory Assets	$	1,357.6	$	1,300.0	$	1,184.5
Regulatory Liabilities:
Current:
Pension and postretirement benefit costs	$	—	$	5.8	$	5.8
Unamortized purchased gas adjustments		—		11.0		23.0
Other		3.2		17.8		18.0
Total Current Regulatory Liabilities		3.2		34.6		46.8
Noncurrent:
Deferred taxes due to customers		148.7		127.5		130.4
Pension and postretirement benefit costs		185.0		159.3		176.7
Accrued cost of removal		40.7		36.2		29.1
Unamortized purchased gas adjustments		—		284.3		42.2
Other		14.6		13.6		36.2
Total Noncurrent Regulatory Liabilities		389.0		620.9		414.6
Total Regulatory Liabilities	$	392.2	$	655.5	$	461.4

	June 30,		September 30,		June 30,
Spire Missouri	2022		2021		2021
Regulatory Assets:
Current:
Pension and postretirement benefit costs	$	—	$	21.9	$	21.9
Unamortized purchased gas adjustments		89.7		242.8		—
Other		0.2		11.6		14.7
Total Current Regulatory Assets		89.9		276.3		36.6
Noncurrent:
Future income taxes due from customers		131.8		124.2		121.5
Pension and postretirement benefit costs		238.5		226.0		287.3
Energy efficiency		54.1		47.6		45.6
Unamortized purchased gas adjustments		97.4		—		43.9
Cost of removal		34.9		34.9		29.4
Other		107.9		50.4		56.1
Total Noncurrent Regulatory Assets		664.6		483.1		583.8
Total Regulatory Assets	$	754.5	$	759.4	$	620.4
Regulatory Liabilities:
Current:
Pension and postretirement benefit costs	$	—	$	3.6	$	3.6
Unamortized purchased gas adjustments		—		—		9.0
Other		—		13.5		14.5
Total Current Regulatory Liabilities		—		17.1		27.1
Noncurrent:
Deferred taxes due to customers		131.3		110.2		113.0
Pension and postretirement benefit costs		154.5		131.4		157.0
Accrued cost of removal		7.3		4.9		—
Unamortized purchased gas adjustments		—		284.3		42.2
Other		7.7		8.0		30.6
Total Noncurrent Regulatory Liabilities		300.8		538.8		342.8
Total Regulatory Liabilities	$	300.8	$	555.9	$	369.9

	June 30,		September 30,		June 30,
Spire Alabama	2022		2021		2021
Regulatory Assets:
Current:
Pension and postretirement benefit costs	$	—	$	8.2	$	8.2
Unamortized purchased gas adjustments		31.6		—		—
Other		21.3		10.6		8.9
Total Current Regulatory Assets		52.9		18.8		17.1
Noncurrent:
Future income taxes due from customers		2.2		2.2		2.2
Pension and postretirement benefit costs		73.8		82.9		85.1
Cost of removal		437.0		397.0		419.7
Other		1.1		1.2		1.2
Total Noncurrent Regulatory Assets		514.1		483.3		508.2
Total Regulatory Assets	$	567.0	$	502.1	$	525.3
Regulatory Liabilities:
Current:
Pension and postretirement benefit costs	$	—	$	2.2	$	2.2
Unamortized purchased gas adjustments		—		10.2		13.1
Other		—		1.0		0.2
Total Current Regulatory Liabilities		—		13.4		15.5
Noncurrent:
Pension and postretirement benefit costs		20.4		19.8		13.9
Other		3.6		3.6		3.6
Total Noncurrent Regulatory Liabilities		24.0		23.4		17.5
Total Regulatory Liabilities	$	24.0	$	36.8	$	33.0

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

	June 30,		September 30,		June 30,
	2022		2021		2021
Spire
Pension and postretirement benefit costs	$	165.8	$	165.7	$	194.4
Future income taxes due from customers		138.2		130.7		128.0
Unamortized purchased gas adjustments		187.2		242.8		—
Other		130.9		86.0		130.5
Total Regulatory Assets Not Earning a Return	$	622.1	$	625.2	$	452.9
Spire Missouri
Pension and postretirement benefit costs	$	165.8	$	165.7	$	194.4
Future income taxes due from customers		131.8		124.2		121.5
Unamortized purchased gas adjustments		187.2		242.8		—
Other		130.9		86.0		130.5
Total Regulatory Assets Not Earning a Return	$	615.7	$	618.7	$	446.4

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 guidelines and average remaining service life of active participants, respectively. For the PGA assets, the recovery period is normally approximately one year, but it will be three years for a portion of these assets due to the Filing Adjustment Factor discussed below. 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.

Spire Missouri

The MoPSC approved compliance tariffs with an effective date of December 23, 2021, in Spire Missouri’s general rate case GR-2021-0108. These new tariffs were designed to increase Spire Missouri’s aggregate annual gross base rate revenues by $72.2, which includes $24.9 incremental and $47.3 already being collected through the Infrastructure System Replacement Surcharge (ISRS). The decision, as reflected in the amended report and order dated November 12, 2021, revised the MoPSC’s long-standing position regarding Spire Missouri’s compliance with the FERC Uniform System of Accounts (USOA) on the capitalization of prudently incurred non-operational overheads. The amended report and order required Spire Missouri to cease capitalization of these overhead costs at the time new rates went into effect until a MoPSC staff audit of their revised interpretation of compliance with the USOA framework could be completed. MoPSC staff completed this audit and filed its audit report on March 18, 2022. The report recommends changes to Spire Missouri’s overhead capitalization rates based upon its new time study and the results of the audit. On April 13, 2022, the MoPSC issued an Order Authorizing Accounting Treatment clarifying that Spire Missouri may defer all non-operational overheads from December 23, 2021 forward into a regulatory asset for future review by the MoPSC in an appropriate proceeding. Based on Spire Missouri’s assessment of recoverability, the total amount deferred under this order was $30.4 through June 30, 2022, comprising:

  • $12.5 in accordance with new capitalization rates determined by the study and audit;

  • $12.9 of prudent costs which are in excess of the capitalization rates determined by the study and audit; and

  • $5.0 of prudent costs related to the ISRS settlement discussed below.

On April 1, 2022, Spire Missouri filed tariff sheets to initiate a new general rate case proceeding which is intended to address the deferred amounts, along with other matters, and is expected to be resolved in nine to eleven months. The proposed tariff changes include revised rate schedules designed to produce an annual net increase in Spire Missouri’s gas revenues of approximately $151.9. Pursuant to the procedural schedule set by the MoPSC, intervenor direct testimony will be filed in late August and early September 2022. An evidentiary hearing is set to begin November 28, 2022. The MoPSC has set a test year ending September 30, 2021, adjusted for known and measurable rate base, revenue and expense items through May 31, 2022, with a true-up period through September 30, 2022.

In mid- February 2021, the central U.S. experienced a period of unusually severe cold weather (“Winter Storm Uri”), and Spire Missouri implemented an Operational Flow Order (OFO) to preserve the integrity of its distribution system. During this time, Spire Missouri was required to purchase additional natural gas supply, both to ensure adequate supply for its firm utility customers, and to cover the shortfall created when third-party marketers failed to deliver natural gas supply to its city gates on behalf of their customers. In accordance with its tariffs, Spire Missouri invoiced the cost of gas and associated penalties totaling $195.8 to non-compliant marketers pursuant to the MoPSC-approved OFO tariff and recorded accounts receivable. Recoveries collected will be an offset to cost of natural gas for firm utility customers through the Purchased Gas Adjustment (PGA) and Actual Cost Adjustment (ACA), so are net income neutral to Spire Missouri. The three largest counterparties did not remit payment when due, so Spire Missouri filed suit against them in federal court to recover the invoiced amounts. Some marketers filed complaints with the MoPSC requesting review of the transactions between them and Spire Missouri. Through the first quarter of fiscal 2022, the Company had no reason to believe the MoPSC would not follow the tariff and had determined collection was probable, so the entire amount was recognized. In late February 2022, the parties to the OFO waiver suits agreed to a settlement in principle, pursuant to which marketers will reimburse Spire Missouri for the actual cost of its incremental gas purchases to serve marketers’ customers during Winter Storm Uri, so Spire Missouri reduced revenue, accounts receivable, cost of gas and regulatory liabilities by approximately $150 in the second quarter of fiscal 2022. The settlement was approved by the MoPSC in late May 2022. Pursuant to the approved settlement, the marketers have begun making payments to Spire Missouri that will be credited to the PGA/ACA, the marketer complaints have been dismissed at the MoPSC, and Spire Missouri has dismissed its federal lawsuits against the marketers. Spire Missouri is not subject to any upstream OFO penalties on any interstate pipelines.

As a result of the significant net deferred gas costs and average inventory cost in the second quarter of fiscal 2021, primarily due to Winter Storm Uri, Spire Missouri filed for and received MoPSC approval for an adjustment to the PGA tariff to increase a Filing Adjustment Factor credit for three years. This credit will allow Spire Missouri to help mitigate rate impacts of Winter Storm Uri costs and the increased gas market from 2020 to 2021. All gas costs will eventually be recovered through the PGA or ACA mechanisms and carrying costs will be applied per the terms of the tariff.

On December 22, 2021, Spire Missouri filed an application with the MoPSC for approval of $800.0 in new financing authority over three years. On February 23, 2022, the MoPSC issued an order approving this request, subject to certain standard conditions.

On December 23, 2021, Spire Missouri filed a new ISRS case, its first under the ISRS statute amendments of 2020, seeking accelerated recovery of $11.3 in annual revenue for eligible pipe replacement from June through December 2021. On April 21, 2022, the MoPSC approved a settlement among the parties to resolve the ISRS case, resulting in $8.5 in incremental annual revenue effective in May 2022. On June 3, 2022, Spire Missouri filed a new ISRS case, its first with the inclusion of the "Contractor Bid" requirement identified in the ISRS statute amendments of 2020, seeking accelerated recovery of $11.9 in annual revenue for eligible pipe replacement from January through June 2022.

On May 27, 2022, the Staff of the MoPSC (the "Staff") filed its ACA Review Recommendation and Report for the ACA period that first includes transportation charges incurred by Spire Missouri for service on the Spire STL Pipeline. That report concluded that the transaction complied with Missouri affiliate transaction rules and was prudent, and recommended no disallowance of any Spire STL Pipeline related costs from the ACA mechanism. On July 11, 2022, Spire Missouri filed its response comments in support of the Staff's recommendation. The Missouri Office of the Public Counsel and Environmental Defense Fund filed comments on July 29 and August 1, 2022, respectively, raising concerns about the Spire STL Pipeline transaction, the ACA process itself, and other matters. The MoPSC has not yet taken any further action in the docket.

Spire Alabama

On October 26, 2021, Spire Alabama made its annual Rate Stabilization and Equalization (RSE) rate filing with the APSC, presenting the utility’s budget for the fiscal year ending September 30, 2022, including net income and a calculation of allowed return on average common equity (ROE). Following a regulatory review, adjusted rates became effective January 1, 2022.

Spire Alabama filed GSA rate increases effective December 1, 2021, April 1, 2022, and August 1, 2022, primarily attributable to higher natural gas prices.

On July 12, 2022, the APSC approved Spire Alabama's application for an intercompany revolving credit agreement allowing Spire Alabama to borrow from Spire in a principal amount not to exceed $275.0 (up from the previously approved $200.0) at any time outstanding in combination with its bank line of credit, and to loan to Spire in a principal amount not to exceed $25.0 (unchanged) at any time outstanding.

Spire

In addition to those discussed above for Spire Missouri and Spire Alabama, Spire is affected by the following regulatory matters.

In October 2021, Spire Gulf made its annual RSE rate filing with the APSC based on its budget for fiscal 2022 and an allowed ROE of 9.95%. New rates designed to provide increased annual revenues of $1.0 became effective January 3, 2022.

On August 23, 2021, Spire Mississippi filed its Rate Stabilization Adjustment Rider (RSA) for the rate year ended June 30, 2021, which reflected an increase to annual revenue totaling $1.1. The MSPSC, by its order dated January 18, 2022, approved a stipulation agreement between the Mississippi Public Utilities Staff and Spire Mississippi that provided for increased annual revenues of $0.8 through rates that became effective on February 1, 2022.

In August 2018, the FERC approved an order issuing a Certificate of Public Convenience and Necessity for the Spire STL Pipeline ( “August 2018 Order”). In November 2018, the FERC issued a Notice to Proceed, and in November 2019, Spire STL Pipeline received FERC authorization to place the pipeline into service. Also, in November 2019, the FERC issued an Order on Rehearing of the August 2018 Order dismissing or denying the outstanding requests for rehearing filed by several parties, dismissing the request for stay filed by one party, and noting the withdrawal of the request for rehearing by another party. In January 2020, two of the rehearing parties filed petitions for review of the FERC’s orders with the U.S. Court of Appeals for the District of Columbia Circuit (“DC Circuit”). On June 22, 2021, that court issued an order vacating the Certificate of Public Convenience and Necessity and remanding the matter back to the FERC for further action. On September 14, 2021, and December 3, 2021, the FERC issued temporary certificates to allow the pipeline to continue operating indefinitely while it considers approval of a new permanent certificate. Certain parties in the temporary certificate proceeding sought rehearing of the FERC’s December 3, 2021 temporary certificate. The FERC denied rehearing by operation of law on February 3, 2022. On March 7, 2022, one group of the rehearing parties filed a petition for review of FERC’s December 3, 2021 temporary certificate order in the DC Circuit limited to whether the temporary certificates carry eminent domain authority. On June 29, 2022, the DC Circuit issued an order holding the proceeding in abeyance pending the outcome of the FERC remand proceeding.

Meanwhile, on December 15, 2021, the FERC issued a notice of intent to prepare a supplemental environmental impact statement (EIS) regarding the Spire STL Pipeline. On June 17, 2022, the FERC staff issued its draft EIS, concluding that "impacts from the continued operation of the Spire STL [Pipeline] would be less than significant, with the exception of climate change impacts resulting from GHG [greenhouse gas] emissions that are not characterized as significant or insignificant." The final EIS is not anticipated until October 7, 2022.

Spire STL Pipeline will continue to pursue all legal and regulatory avenues to ensure access to reliable, affordable and safe delivery of energy for eastern Missouri. While there is no impairment at this time, if the pipeline is taken out of service, the Company’s financial condition and results of operations may be adversely impacted by impairment of Spire STL Pipeline’s assets, currently carried at over $270, and other effects. If Spire Missouri is unable to obtain sufficient pipeline capacity to meet its customers’ annual and seasonal natural gas demands, Spire Missouri’s financial condition and results of operations may be adversely impacted.

On October 9, 2020, Spire Storage West LLC (“Spire Storage”) filed with the FERC an Abbreviated Application for an Amendment of Certificate of Public Convenience and Necessity, Reaffirmation of Market-Based Rate Authority, and Related Authorizations pursuant to Section 7(c) of the Natural Gas Act. The application requests authorization to expand capacity and increase pipeline connectivity at certain of Spire Storage's natural gas storage facilities in Wyoming. On March 15, 2022, the FERC issued a final EIS for this project, concluding that construction and operation of the project would not result in significant environmental impacts and that project greenhouse gas emissions fall even below the FERC’s presumptive significance threshold for climate change impacts. On May 19, 2022, the FERC approved an order issuing certificates and granting abandonment as requested in the application. On June 21, 2022, following the submittal of an implementation plan, the FERC staff issued its limited notice to proceed with the project.