Regulatory Matters

12 Months Ended

Sep. 30, 2022

Regulatory Assets and Liabilities, Other Disclosure [Abstract]

Regulatory Assets and Liabilities

The Company has recorded the following regulatory assets and liabilities:


	At September 30
	2022		2021
	(Thousands)
Regulatory Assets(1):
Pension Costs(2) (Note K)	$	11,677	$	21,655
Post-Retirement Benefit Costs(2) (Note K)	6,814		10,075
Recoverable Future Taxes (Note G)	106,247		121,992
Environmental Site Remediation Costs(2) (Note L)	3,646		7,256
Asset Retirement Obligations(2) (Note E)	18,517		16,799
Unamortized Debt Expense (Note A)	8,884		10,589
Other(3)	47,805		33,566
Total Regulatory Assets	203,590		221,932
Less: Amounts Included in Other Current Assets	(21,358)		(29,206)
Total Long-Term Regulatory Assets	$	182,232	$	192,726


	At September 30
	2022		2021
	(Thousands)
Regulatory Liabilities:
Cost of Removal Regulatory Liability	$	259,947	$	245,636
Taxes Refundable to Customers (Note G)	362,098		354,089
Post-Retirement Benefit Costs(5) (Note K)	167,305		213,112
Pension Costs(4) (Note K)	8,242		—
Amounts Payable to Customers (See Regulatory Mechanisms in Note A)	419		21
Other(6)	44,549		48,391
Total Regulatory Liabilities	842,560		861,249
Less: Amounts included in Current and Accrued Liabilities	(31,712)		(60,881)
Total Long-Term Regulatory Liabilities	$	810,848	$	800,368

(1)The Company recovers the cost of its regulatory assets but generally does not earn a return on them. There are a few exceptions to this rule. For example, the Company does earn a return on Unrecovered Purchased Gas Costs and, in the New York jurisdiction of its Utility segment, earns a return, within certain parameters, on the excess of cumulative funding to the pension plan over the cumulative amount collected in rates.

(2)Included in Other Regulatory Assets on the Consolidated Balance Sheets.

(3)$21,358 and $29,206 are included in Other Current Assets on the Consolidated Balance Sheets at September 30, 2022 and 2021, respectively, since such amounts are expected to be recovered from ratepayers in the next 12 months. $26,447 and $4,360 are included in Other Regulatory Assets on the Consolidated Balance Sheets at September 30, 2022 and 2021, respectively.

(4)Included in Other Regulatory Liabilities on the Consolidated Balance Sheets.

(5)$5,800 and $30,000 are included in Other Accruals and Current Liabilities on the Consolidated Balance Sheets at September 30, 2022 and 2021, respectively, since such amounts are expected to be passed back to ratepayers in the next 12 months. $161,505 and $183,112 are included in Other Regulatory Liabilities on the Consolidated Balance Sheets at September 30, 2022 and 2021, respectively.

(6)$25,493 and $30,860 are included in Other Accruals and Current Liabilities on the Consolidated Balance Sheets at September 30, 2022 and 2021, respectively, since such amounts are expected to be passed back to ratepayers in the next 12 months. $19,056 and $17,531 are included in Other Regulatory Liabilities on the Consolidated Balance Sheets at September 30, 2022 and 2021, respectively.

If for any reason the Company ceases to meet the criteria for application of regulatory accounting treatment for all or part of its operations, the regulatory assets and liabilities related to those portions ceasing to meet such criteria would be eliminated from the Consolidated Balance Sheets and included in income of the period in which the discontinuance of regulatory accounting treatment occurs.

Cost of Removal Regulatory Liability

In the Company’s Utility and Pipeline and Storage segments, costs of removing assets (i.e. asset retirement costs) are collected from customers through depreciation expense. These amounts are not a legal retirement obligation as discussed in Note E — Asset Retirement Obligations. Rather, they are classified as a regulatory liability in recognition of the fact that the Company has collected dollars from customers that will be used in the future to fund asset retirement costs.

New York Jurisdiction

Distribution Corporation's current delivery rates in its New York jurisdiction were approved by the NYPSC in an order issued on April 20, 2017 with rates becoming effective May 1, 2017. The order provided for a return on equity of 8.7%, and directed the implementation of an earnings sharing mechanism to be in place beginning on April 1, 2018. The order also authorized the Company to recover approximately $15 million annually for pension and OPEB expenses from customers. Because the Company’s future pension and OPEB costs were projected to be satisfied with existing funds held in reserve, in July, Distribution Corporation made a filing with the NYPSC to effectuate a pension and OPEB surcredit to customers to offset these amounts being collected in base rates effective October 1, 2022. On September 16, 2022, the NYPSC issued an order approving the filing. With the implementation of this surcredit, Distribution Corporation will no longer be funding the pension from its New York jurisdiction and it will not be funding its VEBA trusts in its New York jurisdiction.

Pennsylvania Jurisdiction

Distribution Corporation’s current delivery rates in its Pennsylvania jurisdiction were approved by the PaPUC on November 30, 2006 as part of a settlement agreement that became effective January 1, 2007. On October 28, 2022, Distribution Corporation made a filing with the PaPUC seeking an increase in its annual base rate operating revenues of $28.1 million with a proposed effective date of December 27, 2022. The Company is also proposing, among other things, to implement a weather normalization adjustment mechanism and a new energy efficiency and conservation pilot program for residential customers. The filing will be suspended for seven months by operation of law unless directed otherwise by the PaPUC.

Effective October 1, 2021, pursuant to a tariff supplement filed with the PaPUC, Distribution Corporation reduced base rates by $7.7 million in order to stop collecting OPEB expenses from customers. It also began to refund customers overcollected OPEB expenses in the amount of $50.0 million. Certain other matters in the tariff supplement were unresolved. These matters were resolved with the PaPUC’s approval of an Administrative Law Judge’s Recommended Decision on February 24, 2022. Concurrent with that decision, the Company discontinued regulatory accounting for OPEB expenses and recorded an $18.5 million adjustment during the quarter ended March 31, 2022 to reduce its regulatory liability for previously deferred OPEB income

amounts through September 30, 2021 and to increase Other Income (Deductions) on the consolidated financial statements by a like amount. The Company also increased customer refunds of overcollected OPEB expenses from $50.0 million to $54.0 million. All refunds specified in the tariff supplement are being funded entirely by grantor trust assets held by the Company, most of which are included in a fixed income mutual fund that is a component of Other Investments on the Company’s Consolidated Balance Sheet. With the elimination of OPEB expenses in base rates, Distribution Corporation is no longer funding the grantor trust or its VEBA trusts in its Pennsylvania jurisdiction.

FERC Jurisdiction

Supply Corporation’s 2020 rate settlement provides that no party may make a rate filing for new rates to be effective before February 1, 2024, except that Supply Corporation may file an NGA general Section 4 rate case to change rates if the corporate federal income tax rate is increased. If no case has been filed, Supply Corporation must file for rates to be effective February 1, 2025.

Empire’s 2019 rate settlement provides that Empire must make a rate case filing no later than May 1, 2025.