Note 5 - Regulatory Matters

9 Months Ended

Jun. 30, 2023

Notes to Financial Statements

Public Utilities Disclosure [Text Block]

5. 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 were reflected in the balance sheets of the Company, Spire Missouri and Spire Alabama as of June 30, 2023, September 30, 2022, and June 30, 2022.

	June 30,		September 30,		June 30,
Spire	2023		2022		2022
Regulatory Assets:
Current:
Unamortized purchased gas adjustments	$	66.2	$	322.2	$	123.4
Other		27.1		33.2		28.6
Total Current Regulatory Assets		93.3		355.4		152.0
Noncurrent:
Pension and postretirement benefit costs		268.8		294.5		317.5
Cost of removal		597.9		493.7		471.9
Future income taxes due from customers		140.1		137.8		140.4
Energy efficiency		55.8		57.2		54.1
Unamortized purchased gas adjustments		206.3		—		97.4
Other		152.3		129.2		124.3
Total Noncurrent Regulatory Assets		1,421.2		1,112.4		1,205.6
Total Regulatory Assets	$	1,514.5	$	1,467.8	$	1,357.6
Regulatory Liabilities:
Current:
Other	$	5.5	$	3.7	$	3.2
Total Current Regulatory Liabilities		5.5		3.7		3.2
Noncurrent:
Deferred taxes due to customers		131.8		145.3		148.7
Pension and postretirement benefit costs		165.3		172.6		185.0
Accrued cost of removal		107.7		32.9		40.7
Unamortized purchased gas adjustments		—		53.0		—
Other		23.3		14.4		14.6
Total Noncurrent Regulatory Liabilities		428.1		418.2		389.0
Total Regulatory Liabilities	$	433.6	$	421.9	$	392.2

	June 30,		September 30,		June 30,
Spire Missouri	2023		2022		2022
Regulatory Assets:
Current:
Unamortized purchased gas adjustments	$	32.9	$	275.1	$	89.7
Other		2.1		13.0		0.2
Total Current Regulatory Assets		35.0		288.1		89.9
Noncurrent:
Future income taxes due from customers		131.8		129.2		131.8
Pension and postretirement benefit costs		193.4		222.9		238.5
Energy efficiency		55.8		57.2		54.1
Unamortized purchased gas adjustments		206.3		—		97.4
Cost of removal		95.3		25.2		34.9
Other		136.5		113.1		107.9
Total Noncurrent Regulatory Assets		819.1		547.6		664.6
Total Regulatory Assets	$	854.1	$	835.7	$	754.5
Regulatory Liabilities:
Noncurrent:
Deferred taxes due to customers	$	118.1	$	127.9	$	131.3
Pension and postretirement benefit costs		137.9		143.6		154.5
Accrued cost of removal		72.3		—		7.3
Unamortized purchased gas adjustments		—		53.0		—
Other		17.8		7.3		7.7
Total Noncurrent Regulatory Liabilities		346.1		331.8		300.8
Total Regulatory Liabilities	$	346.1	$	331.8	$	300.8

	June 30,		September 30,		June 30,
Spire Alabama	2023		2022		2022
Regulatory Assets:
Current:
Unamortized purchased gas adjustments	$	30.9	$	43.8	$	31.6
Other		13.0		13.1		21.3
Total Current Regulatory Assets		43.9		56.9		52.9
Noncurrent:
Future income taxes due from customers		2.0		2.2		2.2
Pension and postretirement benefit costs		71.1		66.5		73.8
Cost of removal		502.6		468.5		437.0
Other		1.0		1.0		1.1
Total Noncurrent Regulatory Assets		576.7		538.2		514.1
Total Regulatory Assets	$	620.6	$	595.1	$	567.0
Regulatory Liabilities:
Noncurrent:
Pension and postretirement benefit costs	$	17.3	$	19.4	$	20.4
Other		3.5		3.6		3.6
Total Noncurrent Regulatory Liabilities		20.8		23.0		24.0
Total Regulatory Liabilities	$	20.8	$	23.0	$	24.0

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,
	2023		2022		2022
Spire
Pension and postretirement benefit costs	$	127.5	$	152.9	$	165.8
Future income taxes due from customers		138.0		135.6		138.2
Unamortized purchased gas adjustments		239.2		275.1		187.2
Other		102.2		122.7		130.9
Total Regulatory Assets Not Earning a Return	$	606.9	$	686.3	$	622.1
Spire Missouri
Pension and postretirement benefit costs	$	127.5	$	152.9	$	165.8
Future income taxes due from customers		131.8		129.2		131.8
Unamortized purchased gas adjustments		239.2		275.1		187.2
Other		102.2		122.7		130.9
Total Regulatory Assets Not Earning a Return	$	600.7	$	679.9	$	615.7

Like all the Company’s regulatory assets, these regulatory assets as of June 30, 2023 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 timely payments to Spire Missouri.

In the first quarter of fiscal 2022, the MoPSC approved Spire Missouri compliance tariffs with an effective date of December 23, 2021 consistent with its order in Spire Missouri's general rate case. 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 MoPSC required Spire Missouri to defer all non-operational overheads from December 23, 2021 through September 30, 2022 into a regulatory asset totaling $42.8. 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 (including $19.0 already being collected through ISRS) and recovery of deferred overheads through amortization of the related regulatory asset. 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. As noted above, all prior ISRS revenues were reset to zero as of December 26, 2022 as a result of Spire Missouri's most recent base rate case. On April 20, 2023, the MoPSC approved an incremental annual ISRS revenue increase of $7.7, effective May 6, 2023, reflecting eligible pipe replacement from October 2022 through February 2023. On June 20, 2023, Spire Missouri filed for an additional annual ISRS revenue increase of $14.2 based on actual replacements during March 2023 through May 2023 and estimates for June 2023 through August 2023. A decision on this application is required by December 17, 2023.

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 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.

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 (EDF) 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. 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, resulting in a $0.6 credit to the ACA balance, but issues relating to Spire STL Pipeline costs remained contested. On April 28, 2023, MoPSC Staff and its consultant filed direct testimony confirming their position that the transaction was prudent and in compliance with Missouri affiliate transaction rules. EDF also filed direct testimony arguing Spire Missouri imprudently changed the physical manner in which it receives supply and created risk for customers, and advocating for a disallowance of $27.7 in the case. No other parties filed direct testimony. MoPSC staff, Spire Missouri, and EDF have filed rebuttal and sur-rebuttal testimony. An evidentiary hearing on this matter was scheduled to be held  July 25-26, 2023; however, on July 21, 2023, MoPSC suspended the procedural schedule in recognition that the parties had reached an agreement in principle to resolve the matter via settlement stipulation. The settlement stipulation is anticipated to be filed in early August and will require approval by the MoPSC. We anticipate the stipulation to include non-monetary items and an increase in customer assistance program funding.

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 proposing various disallowances relating to imbalance cash-outs and an off-system sale. On July 12, 2023, the MoPSC entered a scheduling order in this matter which includes several rounds of pre-filed testimony prior to an evidentiary hearing to be held in early May 2024.

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). New rates designed to provide an annual revenue increase of $15.0 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 an annual revenue increase of $2.5 became effective January 1, 2023. Spire Gulf filed its RSE point of test as of April 30, 2023 with the APSC reflecting that its projected ROE exceeded the allowed ROE resulting in an annual refund of $1.8 that became effective July 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 an annual revenue increase of $0.8 through rates that became effective on January 1, 2023.

In August 2018, the FERC approved an order issuing Certificates of Public Convenience and Necessity (“FERC Certificates”) for the Spire STL Pipeline ( “August 2018 Order”). 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 FERC Certificates and remanding the matter back to the FERC for further action. On September 14, 2021 and December 3, 2021, the FERC issued temporary certificates for the continued authorized operation of the Spire STL Pipeline pending the outcome of its determination on remand. On December 15, 2022, the FERC issued its order on remand reissuing permanent FERC Certificates for the continued operation of Spire STL Pipeline. On January 17, 2023, EDF requested rehearing of the December 15, 2022 FERC order, but on February 17, 2023, that rehearing request was denied by operation of law. On April 20, 2023, the FERC issued an “Order Addressing Arguments Raised on Rehearing” in which it further clarified the rationale for denying EDF's rehearing request. No party filed a timely appeal of this denial in any federal appellate court. Accordingly, the FERC order reissuing permanent certificates for the Spire STL Pipeline is now final and unappealable.