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, 2021 and 2020.

	Spire				Spire Missouri				Spire Alabama
September 30	2021		2020		2021		2020		2021		2020
Regulatory Assets:
Current:
Pension and postretirement benefit costs	$	31.1	$	30.6	$	21.9	$	21.9	$	8.2	$	7.7
Unamortized purchased gas adjustments		243.5		5.5		242.8		—		—		5.5
Other		31.9		33.4		11.6		10.2		10.6		7.2
Total Current Regulatory Assets		306.5		69.5		276.3		32.1		18.8		20.4
Noncurrent:
Future income taxes due from customers		132.9		123.5		124.2		114.6		2.2		2.2
Pension and postretirement benefit costs		313.8		439.3		226.0		332.6		82.9		98.2
Cost of removal		431.9		395.6		34.9		7.1		397.0		388.6
Unamortized purchased gas adjustments		—		12.1		—		12.1		—		—
Energy efficiency		47.6		39.6		47.6		39.6		—		—
Other		67.3		59.3		50.4		42.7		1.2		0.9
Total Noncurrent Regulatory Assets		993.5		1,069.4		483.1		548.7		483.3		489.9
Total Regulatory Assets	$	1,300.0	$	1,138.9	$	759.4	$	580.8	$	502.1	$	510.3
Regulatory Liabilities:
Current:
Pension and postretirement benefit costs	$	5.8	$	5.8	$	3.6	$	3.6	$	2.2	$	2.2
Unamortized purchased gas adjustments		11.0		73.1		—		72.3		10.2		—
Other		17.8		34.1		13.5		27.3		1.0		1.7
Total Current Regulatory Liabilities		34.6		113.0		17.1		103.2		13.4		3.9
Noncurrent:
Deferred taxes due to customers		127.5		138.8		110.2		121.4		—		—
Pension and postretirement benefit costs		159.3		157.6		131.4		140.4		19.8		14.8
Accrued cost of removal		36.2		28.6		4.9		—		—		—
Unamortized purchased gas adjustments		284.3		4.4		284.3		4.4		—		—
Other		13.6		14.3		8.0		8.6		3.6		3.7
Total Noncurrent Regulatory Liabilities		620.9		343.7		538.8		274.8		23.4		18.5
Total Regulatory Liabilities	$	655.5	$	456.7	$	555.9	$	378.0	$	36.8	$	22.4

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 recovery period for the PGA assets is normally about one year, but a portion will be three years 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.

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, as well as the difference between the actual amount of off-system sales and capacity release revenues allocated to customers and the estimated amount assumed in PGA rates, 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 the subsequent November. The balance in the current account is amortized as amounts are reflected in customer billings. At September 30, 2021, the current asset balance was primarily the result of higher gas prices, while the noncurrent liability primarily reflects over $192 of Operational Flow Order penalties not yet collected, as discussed later in this note, and net gains on hedges applicable to purchases beyond the current PGA filing period.

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 allowed 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. Spire Missouri filed an appeal of portions of the MoPSC’s order, including the disallowance of certain pension costs. On February 9, 2021, the Missouri Supreme Court issued its decision, reversing the MoPSC’s order with respect to certain pension costs and affirming the MoPSC’s order in all other respects. The case was remanded back to the MoPSC with directions that $9.0 in pension assets that accrued between 1994 and 1996 be added to the Company’s prepaid pension asset. Based on the court’s decision, the Company increased its noncurrent regulatory asset for “Pension and postretirement benefit costs” and reduced operation and maintenance expense for the three months ended March 31, 2021. Like the original write-down in 2018, this adjustment is excluded for the net economic earnings financial measure. Spire Missouri and MoPSC Staff agreed that the remand issue should be considered as part of Spire Missouri’s ongoing general rate case (discussed below), and on July 14, 2021, the MoPSC entered an order approving that procedural treatment.

The Infrastructure System Replacement Surcharge (ISRS) allows Spire Missouri expedited recovery for its investment to replace its worn out or deteriorated infrastructure without the necessity of a formal rate case. 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. As a result, Spire Missouri recorded a $12.2 provision for fiscal year 2019, which was excluded for the net economic earnings financial measure. This matter was settled by the end of fiscal 2020.

In September 2020, Spire Missouri, the MoPSC staff and the Office of Public Counsel (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 for the period of March 1, 2020 through March 31, 2021. As part of the rate case order discussed below, the settled balance of deferred costs, including foregone late payment fees and reconnect/disconnect fees that Spire Missouri was authorized to defer, totaled $6.2 and will be recovered through a five-year amortization. Accordingly, Spire Missouri recorded a regulatory asset of that amount as of September 30, 2021.

On December 11, 2020, Spire Missouri filed tariffs to initiate a general rate case before the MoPSC, with a requested base rate increase of $111.5, $47.3 of which was already being recovered through ISRS. Those tariffs were suspended to allow for interventions, discovery and an evidentiary hearing on the matter, which occurred in August 2021. Following the hearing, the MoPSC issued a report and order, and an amended report and order directing the Company to file new tariffs implementing a base rate increase of $72.2, including re-basing of the $47.3 of prior period ISRS charges. The Company filed tariffs to implement those rates, and other program and tariff changes, on November 10, 2021, with an effective date of December 10, 2021. The decision in this case diverged from prior MoPSC precedent in that it (1) included short-term debt in the Company’s capital structure for the first time and (2) revised its long-standing interpretation, approved in prior cases as far back as we could identify, of Spire Missouri’s compliance with the FERC Uniform System of Accounts (USOA) on the capitalization of prudently incurred non-operational overheads. The order requires Spire Missouri to cease capitalization of these overhead costs at the time new rates go into effect until a MoPSC staff audit of their revised interpretation of compliance with the USOA framework can be completed. The Company filed a motion for rehearing on the overheads issue, and the OPC filed a motion for rehearing on capital structure and other issues decided in the case. Those motions have been mooted by the amended report and order, and on November 19, 2021 the Company filed an additional motion for rehearing of the amended report and order on various issues. The amended order on capitalized overheads lacks clarity needed to quantify the impact of the issue with adequate precision. The Company is working with the MoPSC staff to facilitate the ordered audit of capitalized overheads on an expedited basis, including the quantification of the overheads subject to the order, and interpretation of what portion of these costs may be deferred into a regulatory asset until capitalization resumes. However, unless the MoPSC’s order is amended further or we gain more assurance on recovery through a regulatory asset, the Company anticipates that the change in overhead capitalization methods ordered by the MoPSC will have a material adverse impact on its net income in 2022 and future periods until the completion of a future rate case. The estimated pre-tax impact is in the range of $20 to $30 annually, shifting prudently incurred overhead costs from capital to O&M expense.

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, including $3.2 collected to date, will be an offset to cost of natural gas for firm utility customers through the PGA and Actual Cost Adjustment (ACA). 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. Those suits remain pending. Some marketers have filed complaints with the MoPSC requesting review of the transactions between them and Spire; at this time, the Company has no reason to believe the MoPSC will not follow the tariff and has determined collection is probable. Evidentiary hearings of those complaints are scheduled for March 2022. The MoPSC has also opened a working case to investigate the effects of Winter Storm Uri on all Missouri utilities. Spire Missouri is not subject to any upstream OFO penalties on any interstate pipelines.

Spire Missouri’s net deferred gas costs and average inventory cost in the second quarter of fiscal 2021 increased by approximately $110 primarily due to Winter Storm Uri, including projected offsets of off-system sales and tariff-based OFO penalties. Spire Missouri filed for and received MoPSC approval for an adjustment to the PGA tariff to increase a Filing Adjustment Factor (FAF) credit for three years. This credit will allow the company 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.

Spire Missouri is able to sell excess natural gas supply and capacity to third parties off-system, resulting in significant savings to its firm utility customers through the gas incentive mechanisms of its PGA as described above. Spire Missouri retains 25% and passes 75% through to its customers as gas cost savings. During Winter Storm Uri, Spire Missouri had an unusually large off-system sale resulting in $100.0 of incremental gross revenue. Due to the nature and magnitude of this particular transaction, Spire Missouri initially deferred recognition of its 25% share and established a regulatory liability to allow time to assess the transaction in light of the open rate proceeding. When the regulatory treatment became clear in the fourth quarter of fiscal 2021, the Company reversed the liability and recorded the amount in operating revenues.

In October 2018, the APSC approved the renewal of its Rate Stabilization and Equalization (RSE) rate-setting process for Spire Alabama through September 30, 2022, limiting equity as a percent of total capitalization to a range of 56.5% to 55.5%. Under RSE, the APSC conducts quarterly reviews to determine whether Spire Alabama’s return on average common equity (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. Spire Alabama’s allowed range of ROE is 10.15% to 10.65% with an adjusting point of 10.4%.

On November 30, 2020, Spire Alabama filed an increase for rate year 2021 of $8.3, which became effective December 1, 2020. On October 26, 2021, Spire Alabama made its annual 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 ROE.

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 increase effective December 1, 2021, primarily attributable to higher natural gas prices.

The inflation-based Cost Control Measure (CCM) established by the APSC, allows for annual changes in operation and maintenance (“O&M”) expense per customer relative to an index range. 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%. 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. As of September 30, 2021, Spire Alabama recorded an RSE point of test giveback of $2.2 and a CCM benefit of $8.8 for rate year 2021, which will both be reflected in rates effective December 1, 2021. The CCM benefit was $5.2 for rate year 2020 and $5.9 for rate year 2019.

The APSC approved an Enhanced Stability Reserve (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 (issued December 15, 2020).

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. Its RSE rate-setting mechanism was renewed in September 2021 for a four-year term through September 2025. The RSE allowed ROE range was 10.45% to 10.95% with an adjusting point of 10.70% in fiscal 2021, while the ROE range is 9.70% to 10.30% with an adjusting point of 9.95% for fiscal 2022 through fiscal 2025. The CCM has similar evaluation and 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, for fiscal 2021. The base year O&M index for fiscal 2022 through fiscal 2025 will be the 2021 O&M level. Additionally, Spire Gulf has a Cast Iron Main Replacement Factor (CIF) 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. Capital expenditures recovered under the CIF have not increased since fiscal 2019 pursuant to applicable tariff provisions although the Company is continuing to recover costs of service associated with accumulated expenditures under the CIF. 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. Spire Gulf 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 CCM benefit for rate year 2021 of $2.3 to revenues, resulting in a net income benefit of $1.6. On October 26, 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%, reflecting an increase in annual revenue of $2.0, pending APSC review.

Spire Mississippi utilizes a formula rate-making process under the Rate Stabilization Adjustment Rider (RSA). An allowed return on equity (currently 10.03%) is computed annually and compared to the actual return on equity based on a rate year ending June 30. If the actual equity return on an end of period rate base is beyond the allowed return on equity by 1.0%, then 75% of any shortfall is recovered through a rate increase and 50% of any excess results 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 Mississippi Public Service Commission (MSPSC) by January 15 of the following year. 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 the annual revenues. New rates became effective December 11, 2019. On January 12, 2021, the MSPSC approved an agreement between Spire Mississippi and the MPUS settling its RSA filing that was made on August 28, 2020, resulting in a $0.3 increase in annual revenue. New rates became effective January 13, 2021. On August 23, 2021, Spire Mississippi filed its RSA for the rate year ended June 30, 2021, which reflected an increase to annual revenue totaling $1.1. This RSA filing is being reviewed by the MPUS. A Supplemental Growth Rider (SGR) provides recovery of certain system expansion projects to serve qualified economic development projects.

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. 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. Spire STL Pipeline filed on July 26, 2021 with the FERC for a Temporary Emergency Certificate. On September 14, 2021, the FERC issued a Temporary Certificate to allow the pipeline to continue operating through December 13, 2021 while it considers Spire STL Pipeline’s Temporary Emergency Certificate application. The commissioners’ statements at the November 18, 2021 FERC open meeting suggest that they do not intend to allow the pipeline’s authorization to lapse in a manner that causes service to be interrupted this winter; however, they have not yet issued an order to extend the temporary authorization through the end of the 2021-2022 winter, and there is no assurance the FERC will act to do so. Spire STL Pipeline and Spire Missouri, as the foundation shipper, will each 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, which requests authorization to expand capacity and increase pipeline connectivity at certain of Spire Storage’s natural gas storage facilities in Wyoming, remains pending.