As discussed below for Spire Missouri and Spire Alabama, the Purchased Gas Adjustment (PGA) clauses and Gas Supply Adjustment (GSA) riders allow the Utilities to pass through to customers the cost of purchased gas supplies. Regulatory assets and regulatory liabilities related to the PGA clauses and the GSA rider are both labeled Unamortized Purchased Gas Adjustments herein.

The following regulatory assets and regulatory liabilities were reflected in the Balance Sheets as of September 30, 2020 and 2019.

	Spire				Spire Missouri				Spire Alabama
September 30	2020		2019		2020		2019		2020		2019
Regulatory Assets:
Current:
Pension and postretirement benefit costs	$	30.6	$	30.1	$	21.9	$	21.9	$	7.7	$	7.3
Unamortized purchased gas adjustments		5.5		18.2		—		—		5.5		17.7
Other		33.4		30.3		10.2		7.5		7.2		8.9
Total Current Regulatory Assets		69.5		78.6		32.1		29.4		20.4		33.9
Noncurrent:
Future income taxes due from customers		123.5		111.0		114.6		102.9		2.2		2.2
Pension and postretirement benefit costs		439.3		416.6		332.6		333.3		98.2		77.2
Cost of removal		395.6		150.9		7.1		—		388.6		150.9
Unamortized purchased gas adjustments		12.1		9.1		12.1		9.1		—		—
Energy efficiency		39.6		35.0		39.6		35.0		—		—
Other		59.3		45.0		42.7		27.2		0.9		0.9
Total Noncurrent Regulatory Assets		1,069.4		767.6		548.7		507.5		489.9		231.2
Total Regulatory Assets	$	1,138.9	$	846.2	$	580.8	$	536.9	$	510.3	$	265.1
Regulatory Liabilities:
Current:
Pension and postretirement benefit costs	$	5.8	$	5.8	$	3.6	$	3.6	$	2.2	$	2.2
Unamortized purchased gas adjustments		73.1		26.2		72.3		25.4		—		—
Other		34.1		28.8		27.3		23.3		1.7		1.2
Total Current Regulatory Liabilities		113.0		60.8		103.2		52.3		3.9		3.4
Noncurrent:
Deferred taxes due to customers		138.8		179.8		121.4		162.5		—		—
Pension and postretirement benefit costs		157.6		142.3		140.4		119.1		14.8		19.1
Accrued cost of removal		28.6		41.6		—		15.7		—		—
Unamortized purchased gas adjustments		4.4		—		4.4		—		—		—
Other		14.3		35.3		8.6		29.2		3.7		3.9
Total Noncurrent Regulatory Liabilities		343.7		399.0		274.8		326.5		18.5		23.0
Total Regulatory Liabilities	$	456.7	$	459.8	$	378.0	$	378.8	$	22.4	$	26.4

A portion of the Company’s regulatory assets are not earning a return and are shown in the schedule below:

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. 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.

As authorized by the MoPSC, the PGA clause allows Spire Missouri to flow through to customers, subject to prudence review by the MoPSC, the cost of purchased gas supplies. To better match customer billings with market natural gas prices, Spire Missouri is allowed to file to modify, on a periodic basis, the level of gas costs in its PGA. Certain provisions of the PGA clause are included below:

Pursuant to the provisions of the PGA clause, the difference between actual costs incurred and costs recovered through the application of the PGA clause are reflected as a deferred charge or credit at the end of the fiscal year. At that time, the balance is classified as a current asset or current liability and recovered from, or credited to, customers over an annual period commencing in November. The balance in the current account is amortized as amounts are reflected in customer billings.

The PGA clause also provides for the treatment of income from off-system sales and capacity release revenues. Pre-tax income from off-system sales and capacity release revenues is shared with customers, with an estimated amount assumed in PGA rates. The difference between the actual amount allocated to customers for each fiscal year and the estimated amount assumed in PGA rates is recovered from, or credited to, customers over an annual period commencing in the subsequent November. Before April 19, 2018, the customer share of such income ranged from 70% to 85%. In the latest rate cases (discussed in the following paragraphs), the multiple sharing tiers and percentages were eliminated in favor of a single sharing percentage under which customers receive 75% (and Spire Missouri receives 25%) of the net margins achieved as a result of such off-system sales and capacity releases.

On March 7, 2018, the MoPSC issued its order in two general rate cases (docketed as GR-2017-0215 and GR-2017-0216), approving new tariffs that became effective on April 19, 2018. Certain provisions of the order allow less future recovery of certain deferred or capitalized costs than estimated based upon previous rate proceedings, and management determined that the related regulatory assets should be written down or off in connection with the preparation of the financial statements for the second quarter of 2018. The charges totaled $38.4 for the year ended September 30, 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 real estate assets, totaling $30.6, were excluded in the determination of 2018 net economic earnings, as shown in Note 14, Information by Operating Segment. On April 25, 2018, Spire Missouri filed an appeal of the MoPSC’s order related to the disallowance of certain pension costs incurred prior to 1997 ($28.8), real estate sold in 2014 ($1.8), and rate case expenses ($0.9) to Missouri’s Southern District Court of Appeals. On March 15, 2019, the appeal was denied by the Southern District Court of Appeals, and Spire Missouri requested review by the Missouri Supreme Court, which agreed to take the case. Oral arguments were made before the Missouri Supreme Court on January 29, 2020. The case is awaiting a decision.

Spire Missouri filed Infrastructure System Replacement Surcharge (ISRS) applications which were approved by the MoPSC and the costs associated therewith were included in new tariffs that went into effect from its last general rate cases on April 19, 2018. Since then, ISRS filings became effective on October 8, 2018, May 25, 2019, November 16, 2019, and May 25, 2020, bringing total authorized future annualized ISRS revenues for Spire Missouri to $40.3 as of September 30, 2020. An incremental $7.0 annualized ISRS rate increase was approved by the MoPSC on November 12, 2020, this increase is expected to be effective in late November or early December 2020.

On November 19, 2019, the Missouri Western District Court of Appeals issued rulings (“ISRS rulings”) that determined certain capital investments in 2016 through 2018 were not eligible for recovery under the ISRS. The ISRS rulings upheld appeals by the OPC that contested recovery of portions of Spire Missouri’s ISRS and overturned the three prior MoPSC decisions. As a result of the rulings, Spire Missouri recorded a $12.2 provision for fiscal year 2019 and an additional $4.8 in the first half of fiscal year 2020. In the third quarter of fiscal 2020, Spire Missouri reached a settlement with the MoPSC staff and the OPC to resolve these cases, which was subsequently approved by the MoPSC. Pursuant to the settlement, Spire Missouri has made a customer refund in the total amount of $15.0 as a one-time bill credit issued in August 2020. The favorable difference between the total provision and the actual settlement was recorded to earnings in the third quarter.

Additional ISRS appeals were taken by Spire Missouri and the OPC relating to the January 2019 ISRS filings with annual authorized revenue of $12.4, as approved by the MoPSC effective May 25, 2019, and the July 2019 ISRS filings with annual authorized revenue totaling $8.8, which was approved by the MoPSC effective November 16, 2019. The January 2019 ISRS decision has been upheld by the Western District, resulting in no revenue change or customer refund. On October 20, 2020, the Western District issued its opinion in the July 2019 case upholding the MoPSC’s decision, resulting in no revenue change or customer refund.

House Bill 2120 was passed by the General Assembly on May 15, 2020, and signed into law by Missouri Governor Parson on July 2, 2020, clarifying which infrastructure investments qualify for ISRS recovery under the statute governing the ISRS mechanism. The provisions of the bill became effective August 28, 2020, and apply to new ISRS applications made on or after that date.

In September 2020, Spire Missouri, the MoPSC staff and the OPC reached a Unanimous Stipulation and Agreement regarding Spire Missouri’s request for an Accounting Authority Order (AAO) pertaining to certain costs and lost customer fee revenue related to the COVID-19 pandemic. In October 2020, the MoPSC issued an order approving that agreement and granting an AAO. Accordingly, Spire Missouri recorded a regulatory asset of $3.8 as of September 30, 2020, related to the deferral of applicable costs and is tracking lost customer fee revenue. All ratemaking treatment of the deferrals and any revenue recoveries is reserved for consideration in Spire Missouri’s next general rate case.

On October 8, 2020, Spire Missouri filed a Notice of Intended Rate Case Filing with the MoPSC, indicating its intention to initiate a general base rate case more than 60 days following the filing of the notice. The notice indicates Spire Missouri’s intention to seek rate recovery for investments made since its last general rate case, as well as a need to reset the ISRS cap which has been reached for its western operating unit. The notice further indicates Spire Missouri’s intention to further unify its operating units through the anticipated tariff filings.

Effective January 1, 2014, Spire Alabama’s allowed range of return on average common equity (ROE) was 10.5% to 10.95% with an adjusting point of 10.8%. Spire Alabama was eligible to receive a performance-based adjustment of 5 basis points to the ROE adjusting point, based on meeting certain customer satisfaction criteria. Under its Rate Stabilization and Equalization (RSE) rate-setting process, the APSC conducts quarterly reviews to determine whether Spire Alabama’s ROE at the end of the rate year will be within the allowed range of return. Reductions in rates can be made quarterly to bring the projected ROE within the allowed range; increases, however, are allowed only once each rate year, effective December 1, and cannot exceed 4% of prior-year revenues. In October 2018, the APSC approved the renewal of RSE through September 30, 2022, with several modifications. Effective October 1, 2018, Spire Alabama’s allowed range of ROE is 10.15% to 10.65% with an adjusting point of 10.4%. Spire Alabama is eligible to receive a performance-based adjustment of +/- 10 basis point to the ROE adjusting point, based upon the terms of the newly approved Accelerated Infrastructure Modernization (AIM) Program tariff. The 5-basis point adjustment for certain customer satisfaction criteria has been removed. Other modifications include an equity limitation as a percent of total capitalization from 56.5% to 55.5% and adjustments to the Cost Control Measure (CCM) as noted below.

On November 25, 2019, Spire Alabama filed an increase for rate year 2020 of $5.9, which became effective December 1, 2019. On October 26, 2020, Spire Alabama made its annual RSE rate filing with the APSC, presenting the utility’s budget for the fiscal year ending September 30, 2021, including net income and a calculation of allowed ROE. The AIM mechanism provides for a 10 basis-point increase in the allowed ROE each year if a prescribed number of pipeline miles are replaced. Spire Alabama exceeded the threshold for 2020 and accordingly filed for a 10.5% ROE for fiscal 2021.

Spire Alabama’s rate schedules for natural gas distribution charges contain a GSA rider which permits the pass-through to customers of changes in the cost of gas supply. Spire Alabama’s tariff provides a temperature adjustment mechanism, also included in the GSA rider, which is designed to moderate the impact of departures from normal temperatures on Spire Alabama’s earnings. The temperature adjustment applies primarily to residential, small commercial and small industrial customers. Other non-temperature weather-related conditions that may affect customer usage are not included in the temperature adjustment. In November 2019, the APSC approved Spire Alabama’s proposal to establish a mechanism under its GSA rider allowing the utility to create value through off-system sales of excess natural gas supply and capacity and to retain 25% of the value created while giving 75% of the value to customers. The mechanism was effective with the establishment of new rates on December 1, 2019. Spire Alabama filed a GSA rate decrease effective February 1, 2020, of approximately $13.9 (on an annual basis) primarily attributable to lower natural gas prices and results of the off-system sale and capacity release share program.

The inflation-based CCM, established by the APSC, allows for annual increases to operation and maintenance (“O&M”) expense. If rate year O&M expense falls within the index range, no adjustment is required. If rate year O&M expense exceeds the index range, three-quarters of the difference is returned to customers through future rate adjustments. To the extent rate year O&M is less than the index range, Spire Alabama benefits by one-half of the difference through future rate adjustments. Certain items that fluctuate based on situations demonstrated to be beyond Spire Alabama’s control may be excluded from the CCM calculation. Before fiscal 2019, the CCM index range was Spire Alabama’s 2007 actual rate year O&M expense inflation-adjusted based on the June Consumer Price Index For All Urban Consumers (CPI-U) each rate year, plus or minus 1.75%. Effective October 1, 2018, the CCM is calculated based upon O&M expense per customer and the index range is Spire Alabama’s actual 2018 O&M expense adjusted for inflation and adjusted by 2/3 and 1/3 of the 2018 CCM differential (amount below the CCM range in 2018) in 2019 and 2020, respectively, plus or minus 1.50%. As of September 30, 2020, Spire Alabama recorded an RSE point of test giveback of $3.0 and a CCM benefit of $5.2 for rate year 2020, which will both be reflected in rates effective December 1, 2020. The CCM benefit was $5.9 for rate year 2019 and $9.7 for rate year 2018.

On June 28, 2010, the APSC approved a reduction in depreciation rates, effective June 1, 2010, and a regulatory liability to be recorded for Spire Alabama. Refunds from such negative salvage liability were passed back to eligible customers on a declining basis through lower tariff rates through rate year 2019 pursuant to the terms of the Negative Salvage Rebalancing (NSR) rider. The total amount refundable to customers was subject to adjustments for charges made to the Enhanced Stability Reserve (ESR) and other APSC-approved charges. The refunds were due to a re-estimation of future removal costs provided for through the prior depreciation rates. For fiscal 2019 and 2018, NSR amounts returned to customers were approximately $4.2 and $7.2, respectively.

The APSC approved an ESR in 1998, which was subsequently modified and expanded in 2010. As currently approved, the ESR provides deferred treatment and recovery for the following: (1) extraordinary O&M expenses related to environmental response costs; (2) extraordinary O&M expenses related to self-insurance costs that exceed $1.0 per occurrence; (3) extraordinary O&M expenses, other than environmental response costs and self-insurance costs, resulting from a single force majeure event or multiple force majeure events greater than $0.3 and $0.4, respectively, during a rate year; and (4) negative individual large commercial and industrial customer budget revenue variances that exceed $0.4 during a rate year. Spire Alabama is tracking costs and other impacts of COVID-19 in anticipation that some of these items could be recoverable under its ESR, but no related changes to regulatory assets or liabilities have been recorded to date. Charges to the ESR are subject to certain limitations which may disallow deferred treatment and which prescribe the timing of recovery. Funding to the ESR is provided as a reduction to the refundable negative salvage balance over its nine-year term beginning December 1, 2010. Subsequent to the nine-year period and subject to APSC authorization, Spire Alabama expects to be able to recover underfunded ESR balances over a five-year amortization period with an annual limitation of $0.7. Amounts in excess of this limitation are deferred for recovery in future years.

Spire Alabama has APSC approval for an intercompany revolving credit agreement allowing Spire Alabama to borrow from Spire in a principal amount not to exceed $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 at any time outstanding. Borrowings may be used for the following purposes: (a) meeting increased working capital requirements; (b) financing construction requirements related to additions, extensions, and replacements of the distribution systems; and (c) financing other expenditures that may arise from time to time in the normal course of business. In fiscal 2019, the APSC approved Spire Alabama’s applications for $90.0 and $100.0 of long-term debt financing (issued January 15, 2019, and December 2, 2019, respectively). On March 24, 2020, the APSC approved an application for up to $150.0 of additional long-term debt financing for Spire Alabama.

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

Spire Gulf has similar rate regulation to Spire Alabama. The RSE allowed range of ROE is 10.45% to 10.95% with an adjusting point of 10.7%. The CCM has the same return and similar recovery provisions when expenses exceed or are under a band of +/- 1.50% around the CPI-U inflated O&M per customer expense level from 2017, excluding expenses for pensions and gas bad debt. Additionally, it has a Cast Iron Main Replacement factor that provides an enhanced return on the pro-rata costs associated with cast iron main replacement exceeding 10 miles per year based on a 75% weighting for the equity content. Spire Gulf also has an ESR for negative revenue variances over $0.1 or a force majeure event expense of $0.1 (or two events that exceed $0.15), a Self Insurance Reserve for general liability coverage, and an Environmental Cost Recovery Factor that recovers 90% of prudently incurred costs for compliance with environmental laws, rules and regulations. It also has an APSC-approved intercompany revolving credit agreement with Spire to borrow in a principal amount not to exceed $50.0, and to loan up to $25.0. Spire Gulf recorded a July 31, 2020, point of test refund under the RSE rate mechanism for approximately $1.4 and also recorded a CCM benefit for rate year 2020 of $1.8. On October 23, 2020, Spire Gulf made its annual RSE rate filing with the APSC based on its budget for fiscal 2021 and an allowed ROE of 10.7%, reflecting an increase in annual revenue of $1.1, pending APSC review.

Spire Gulf’s rates were reduced $1.9 effective February 1, 2018, to reflect lower income taxes resulting from the TCJA.

Spire Mississippi utilizes a formula rate-making process under the Rate Stabilization Adjustment (RSA) Rider. It is based on a formulaically derived return on equity (currently 9.79%), and is updated on an annual basis if the equity return on an end of period rate base is beyond the allowed return on equity by 1.0%, with 75% of any shortfall recovered through a rate increase and 50% of any excess resulting in a rate decrease. Updates may include known and measurable adjustments to historic costs from the 12 months ended June 30, submitted September 15 for an effective date of November 1, unless disputed by the Mississippi Public Utilities Staff (MPUS), with any disputes to be resolved by the MSPSC by January 15 of the following year. In December 2015, a Supplemental Growth Rider (SGR) was approved for a 3-year period to provide recovery of certain system expansion projects. On September 4, 2018, the SGR was extended to October 15, 2021. On February 5, 2019, the MSPSC approved an agreement between Spire Mississippi and the MPUS settling its Rates Stabilization and Adjustments filing that was made on September 14, 2018, resulting in a $0.7 increase in the annualized revenue requirement. New rates became effective March 1, 2019. On December 11, 2019, the MSPSC approved an agreement between Spire Mississippi and the MPUS settling its RSA filing that was made on August 30, 2019, resulting in a $0.3 increase in annual revenue. New rates became effective December 11, 2019. On August 28, 2020, Spire Mississippi filed its RSA for the rate year ended June 30, 2020, that reflected an increase to annual revenue totaling $0.6. This RSA filing is being reviewed by the MPUS.

In August 2018, the Federal Energy Regulatory Commission (FERC) approved an order issuing a Certificate of Public Convenience and Necessity for the Spire STL Pipeline (“August 2018 Order”), and in November 2018, the FERC issued a Notice to Proceed, allowing construction to begin. In November 2019, Spire STL Pipeline received FERC authorization to place the STL 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. On January 21, 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. Spire STL Pipeline and Spire Missouri have intervened and filed responsive briefs in this proceeding, which remains pending.

In August 2019, Spire Storage filed with the FERC two Prior Notice Applications of its intent to convert a total of six existing observation wells into injection/withdrawal wells and to install related gas flowlines, fuel gas lines and fiber optic communication. The applications cleared FERC authorization in October and November 2019, and both projects remain under development. On October 9, 2020, 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.