Note 4 - Regulatory Matters

3 Months Ended

Dec. 31, 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 December 31, 2022, September 30, 2022, and December 31, 2021.

	December 31,		September 30,		December 31,
Spire	2022		2022		2021
Regulatory Assets:
Current:
Unamortized purchased gas adjustments	$	238.9	$	322.2	$	242.4
Other		30.2		33.2		23.3
Total Current Regulatory Assets		269.1		355.4		265.7
Noncurrent:
Pension and postretirement benefit costs		277.3		294.5		335.9
Cost of removal		506.1		493.7		444.5
Future income taxes due from customers		138.6		137.8		135.5
Energy efficiency		59.1		57.2		52.0
Unamortized purchased gas adjustments		107.9		—		27.3
Other		131.7		129.2		94.7
Total Noncurrent Regulatory Assets		1,220.7		1,112.4		1,089.9
Total Regulatory Assets	$	1,489.8	$	1,467.8	$	1,355.6
Regulatory Liabilities:
Current:
Other	$	3.7	$	3.7	$	4.1
Total Current Regulatory Liabilities		3.7		3.7		4.1
Noncurrent:
Deferred taxes due to customers		140.9		145.3		155.5
Pension and postretirement benefit costs		156.6		172.6		172.2
Accrued cost of removal		33.7		32.9		35.3
Unamortized purchased gas adjustments		—		53.0		155.0
Other		13.7		14.4		13.8
Total Noncurrent Regulatory Liabilities		344.9		418.2		531.8
Total Regulatory Liabilities	$	348.6	$	421.9	$	535.9

	December 31,		September 30,		December 31,
Spire Missouri	2022		2022		2021
Regulatory Assets:
Current:
Unamortized purchased gas adjustments	$	181.2	$	275.1	$	235.2
Other		10.0		13.0		1.7
Total Current Regulatory Assets		191.2		288.1		236.9
Noncurrent:
Future income taxes due from customers		130.1		129.2		126.9
Pension and postretirement benefit costs		197.4		222.9		241.6
Energy efficiency		59.1		57.2		52.0
Unamortized purchased gas adjustments		107.9		—		27.3
Cost of removal		23.9		25.2		34.9
Other		116.3		113.1		77.8
Total Noncurrent Regulatory Assets		634.7		547.6		560.5
Total Regulatory Assets	$	825.9	$	835.7	$	797.4
Regulatory Liabilities:
Current:
Other	$	—	$	—	$	0.2
Total Current Regulatory Liabilities		—		—		0.2
Noncurrent:
Deferred taxes due to customers		124.6		127.9		138.2
Pension and postretirement benefit costs		127.4		143.6		142.6
Accrued cost of removal		—		—		3.3
Unamortized purchased gas adjustments		—		53.0		155.0
Other		7.0		7.3		8.1
Total Noncurrent Regulatory Liabilities		259.0		331.8		447.2
Total Regulatory Liabilities	$	259.0	$	331.8	$	447.4

	December 31,		September 30,		December 31,
Spire Alabama	2022		2022		2021
Regulatory Assets:
Current:
Unamortized purchased gas adjustments	$	54.5	$	43.8	$	4.1
Other		12.8		13.1		10.5
Total Current Regulatory Assets		67.3		56.9		14.6
Noncurrent:
Future income taxes due from customers		2.1		2.2		2.2
Pension and postretirement benefit costs		75.1		66.5		88.7
Cost of removal		482.2		468.5		409.6
Other		1.0		1.0		1.2
Total Noncurrent Regulatory Assets		560.4		538.2		501.7
Total Regulatory Assets	$	627.7	$	595.1	$	516.3
Regulatory Liabilities:
Current:
Other	$	—	$	—	$	0.8
Total Current Regulatory Liabilities		—		—		0.8
Noncurrent:
Pension and postretirement benefit costs		18.7		19.4		21.6
Other		3.5		3.6		3.7
Total Noncurrent Regulatory Liabilities		22.2		23.0		25.3
Total Regulatory Liabilities	$	22.2	$	23.0	$	26.1

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

	December 31,		September 30,		December 31,
	2022		2022		2021
Spire
Pension and postretirement benefit costs	$	127.0	$	152.9	$	163.4
Future income taxes due from customers		136.4		135.6		133.3
Unamortized purchased gas adjustments		289.1		275.1		262.5
Other		122.9		122.7		107.4
Total Regulatory Assets Not Earning a Return	$	675.4	$	686.3	$	666.6
Spire Missouri
Pension and postretirement benefit costs	$	127.0	$	152.9	$	163.4
Future income taxes due from customers		130.1		129.2		126.9
Unamortized purchased gas adjustments		289.1		275.1		262.5
Other		122.9		122.7		107.4
Total Regulatory Assets Not Earning a Return	$	669.1	$	679.9	$	660.2

Like all the Company’s regulatory assets, these regulatory assets as of December 31, 2022 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. The recovery period for the PGA assets is less than two years. 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, except for certain debt costs expected to be recovered over the related debt term, up to 35 years. Spire Alabama does not have any regulatory assets that are not earning a return.

Spire Missouri

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 MoPSC-approved OFO tariff, Spire Missouri invoiced the cost of gas and associated penalties totaling $195.8 to non-compliant marketers and recorded accounts receivable. Recoveries collected are 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. 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, which reduced the total amount due from the three marketers to approximately $42, was approved by the MoPSC in late May 2022, and the marketers are making payments to 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 Federal Energy Regulatory Commission (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 recommended 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. The total amount deferred under this order was $42.8 through September 30, 2022, comprising:

  • $19.0 in accordance with new capitalization rates determined by the study and audit;

  • $18.8 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 an  April 2022 ISRS settlement.

On April 1, 2022, Spire Missouri filed tariff sheets to initiate a new general rate case proceeding intended to address the deferred amounts, along with other matters. The parties reached a Full Unanimous Stipulation and Agreement (the “Stipulation”) to resolve all issues in the case, which was filed with the MoPSC on November 4, 2022. On November 18, 2022, the Stipulation was approved, including authorization of $78.0 in new base rate revenue and recovery of deferred overheads through amortization of the related regulatory assets discussed in the previous paragraph. New base rates became effective on December 26, 2022.

The ISRS allows Spire Missouri expedited recovery for its investment to replace qualifying components of its infrastructure without the necessity of a formal rate case. On December 27, 2022, Spire Missouri filed an ISRS case seeking accelerated recovery of $8.8 in annual revenue for eligible pipe replacement from October 2022 through February 2023. The MoPSC staff has been ordered to file its recommendation regarding this request by March 27, 2023. All prior ISRS revenues have been reset to zero as of December 26, 2022 as a result of Spire Missouri's most recent base rate case.

On May 27, 2022, the MoPSC staff filed an 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 it 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 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 entered a scheduling order in the matter which includes an evidentiary hearing on July 25-26, 2023. On January 6, 2023, Spire Missouri filed a Partial Stipulation and Agreement resolving all other issues raised by the MoPSC staff in its Recommendation and Report. The partial stipulation was approved by the MoPSC on January 25, 2023, and will result in a $0.6 disallowance from the ACA balance. Issues relating to Spire STL Pipeline costs remain contested.

The MoPSC has initiated their annual ACA dockets (GR-2022-0135 and GR-2022-0136) to audit gas commodity and transportation costs for the 2020-2021 heating season, which includes the impact of Winter Storm Uri on Spire Missouri's natural gas portfolio. On December 15, 2022, the MoPSC staff filed its Reports and Recommendations in these cases. Spire Missouri filed its responses to these Reports and Recommendations on January 19, 2023. The MoPSC has not yet taken any further action in these dockets.

The Utilities purchase the natural gas to be delivered to their customers and typically defer the recovery of this expense thereby lessening the immediate impact on customers’ bills of higher realized commodity costs. These deferred gas balances are expected to be recovered over the next 12-18 months pursuant to tariff adjustments effective in Missouri (and Alabama). Spire Missouri filed Purchase Gas Adjustment (PGA) changes to its tariff in November and January which were approved and became effective November 29, 2022 and January 19, 2023, respectively.

Spire Alabama

On October 26, 2022, 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, 2023, including net income and a calculation of allowed return on average common equity (ROE). The budget reflected the start of amortization of the accumulated deferred income tax (ADIT) adjustment related to the Tax Cuts and Jobs Act of 2017 (TCJA). Following a regulatory review, adjusted rates became effective January 1, 2023.

Spire Alabama filed GSA rate increases effective December 1, 2022, and January 1, 2023, primarily attributable to higher natural gas prices.

Spire

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

In October 2022, Spire Gulf made its annual RSE rate filing with the APSC based on its budget for fiscal 2023 and an allowed ROE of 9.95%. The budget reflected the start of amortization of the excess ADIT from the TCJA. New rates designed to provide increased annual revenues of $2.5 became effective January 1, 2023.

On September 14, 2022, Spire Mississippi filed its Rate Stabilization Adjustment Rider with the Mississippi Public Service Commission (MSPSC) for the rate year ended June 30, 2022, which reflected an increase to annual revenues of $1.3. The MSPSC, by its order dated December 6, 2022, approved a stipulation agreement between the Mississippi Public Utility Staff and Spire Mississippi that provides for increased annual revenues of $0.8 through rates that became effective on January 1, 2023.

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, the DC Circuit 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 Spire STL Pipeline to continue operating indefinitely while it considers approval of a new permanent certificate. Certain parties in the temporary certificate proceedings sought rehearing of the FERC’s December 3, 2021 temporary certificate. The FERC denied rehearing by operation of law on February 3, 2022 and by substantive order on February 17, 2022. On March 7, 2022, one group of the rehearing parties filed in the DC Circuit a petition for review of the FERC’s December 3, 2021 temporary certificate order limited to whether the temporary certificates carry eminent domain authority. On June 29, 2022, the DC Circuit issued an order holding the appeal of the December 3, 2021 temporary certificate in abeyance, and this proceeding remains in abeyance. On December 15, 2022, the FERC issued its order on remand reissuing a permanent certificate of public convenience and necessity for the continued operation of Spire STL Pipeline. Such order is subject to rehearing or potential appeal, and on January 17, 2023, the Environmental Defense Fund filed for rehearing.