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, 2019 and 2018. Unamortized Purchased Gas Adjustments are also included below, which are reported separately in the current assets and liabilities sections of each balance sheet.

	Spire				Spire Missouri				Spire Alabama
September 30	2019		2018		2019		2018		2019		2018
Regulatory Assets:
Current:
Pension and postretirement benefit costs	$	30.1	$	30.2	$	21.9	$	21.9	$	7.3	$	7.3
Unamortized purchased gas adjustments		18.2		8.2		—		1.0		17.7		6.4
Other		30.3		34.4		7.5		7.8		8.9		12.5
Total Current Regulatory Assets		78.6		72.8		29.4		30.7		33.9		26.2
Noncurrent:
Future income taxes due from customers		108.8		96.3		102.9		94.4		—		—
Pension and postretirement benefit costs		416.6		364.9		333.3		292.5		77.2		64.8
Cost of removal		150.9		133.4		—		—		150.9		133.4
Unamortized purchased gas adjustments		9.1		—		9.1		—		—		—
Energy efficiency		35.0		32.8		35.0		32.8		—		—
Other		47.2		42.4		27.2		21.4		3.1		3.3
Total Noncurrent Regulatory Assets		767.6		669.8		507.5		441.1		231.2		201.5
Total Regulatory Assets	$	846.2	$	742.6	$	536.9	$	471.8	$	265.1	$	227.7
Regulatory Liabilities:
Current:
Pension and postretirement benefit costs	$	5.8	$	—	$	3.6	$	—	$	2.2	$	—
Refundable negative salvage		—		2.2		—		—		—		2.2
Unamortized purchased gas adjustments		26.2		2.9		25.4		1.9		—		—
Other		28.8		30.6		23.3		14.8		1.2		5.4
Total Current Regulatory Liabilities		60.8		35.7		52.3		16.7		3.4		7.6
Noncurrent:
Deferred taxes due to customers		179.8		178.3		162.5		161.1		—		—
Pension and postretirement benefit costs		142.3		27.8		119.1		—		19.1		27.8
Accrued cost of removal		41.6		63.6		15.7		39.8		—		—
Unamortized purchased gas adjustments		—		4.7		—		4.7		—		—
Other		35.3		80.2		29.2		69.3		3.9		3.5
Total Noncurrent Regulatory Liabilities		399.0		354.6		326.5		274.9		23.0		31.3
Total Regulatory Liabilities	$	459.8	$	390.3	$	378.8	$	291.6	$	26.4	$	38.9

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 as long as 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. 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, and Spire Missouri requested review by the Missouri Supreme Court, which recently decided to take the case. 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 July 15, 2019, Spire Missouri filed Infrastructure System Replacement Surcharge (ISRS) applications which were ultimately approved by the MoPSC for a total of $8.8 of additional annual ISRS revenue related to investments made to replace worn out or deteriorated infrastructure. ISRS rates reflecting these additional revenues became effective November 16, 2019, bringing total authorized future annualized ISRS revenues for Spire Missouri to $29.2. For more information about ISRS proceedings, see Note 18, Subsequent Event.

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.

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.

The RSE reduction for the September 30, 2017 quarterly point of test was $2.7 to bring the expected ROE at the end of the year to within the allowed range of return, effective December 1, 2017. As part of the annual update for RSE, on November 30, 2017, Spire Alabama filed an increase for rate year 2018 of $8.5, which also became effective December 1, 2017. There was no RSE reduction in 2018 for the January 31, April 30, July 31 or September 30 quarterly points of test. Effective February 1, 2018, Spire Alabama rates were reduced by $12.8 to reflect the impact of tax reform under the TCJA on current income taxes. On November 30, 2018, Spire Alabama filed an increase for rate year 2019 of $8.7, which became effective December 1, 2018. There was no RSE reduction in 2019 for the January 31, April 30, July 31 or September 30 quarterly points of test. On October 24, 2019, Spire Alabama made its annual RSE rate filing with the APSC, presenting the utility’s budget for the fiscal year ending September 30, 2020, 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 2019 and accordingly filed for a 10.5% ROE for fiscal 2020.

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. Spire Alabama expects the mechanism to be effective with the establishment of new rates on December 1, 2019.

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, 2019, Spire Alabama recorded a CCM benefit of $5.9 for rate year 2019, which will be reflected in rates effective December 1, 2019. The CCM benefit was $9.7 for rate year 2018 and $10.7 for rate year 2017.

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, 2018, and 2017, NSR amounts returned to customers were approximately $4.2, $7.2, and $6.3, 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. 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. On October 2, 2018, the APSC approved an application for up to $90.0 of long-term debt financing (issued January 15, 2019), and on July 9, 2019, the APSC approved Spire Alabama’s application for $100.0 of additional long-term financing.

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 for miles over 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 September 30, 2019 point of test refund under the RSE rate mechanism for approximately $0.9 and also recorded a CCM benefit for rate year 2019 of $1.5. On October 25, 2019, Spire Gulf made its annual RSE rate filing with the APSC based on its budget for fiscal 2020 and an allowed ROE of 10.7%.

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 10.36%), 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 back to the midpoint being put into a rate increase and 50% of any excess back to the midpoint 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, 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 Mississippi Public Utility Staff 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.

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, and in November 2018, FERC issued a Notice to Proceed, allowing construction to begin. In October 2019, FERC approved an increase in Spire STL Pipeline’s initial recourse rate. Accordingly, under the terms of the January 2017 Precedent Agreement between Spire STL Pipeline and Spire Missouri, Spire Missouri’s negotiated rate automatically increased by two cents per dekatherm per day. In November 2019, Spire STL Pipeline received final authorization from FERC and placed the STL Pipeline into service.

On January 25, 2019, FERC approved the Company’s application to combine its two adjacent natural gas storage facilities in Wyoming under one FERC certificate with a market-based tariff. 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.