Regulatory Matters

12 Months Ended

Sep. 30, 2023

Regulatory Assets and Liabilities, Other Disclosure [Abstract]

Regulatory Assets and Liabilities

The Company has recorded the following regulatory assets and liabilities:


	At September 30
	2023		2022
	(Thousands)
Regulatory Assets(1):
Pension Costs(2) (Note K)	$	20,459	$	11,677
Post-Retirement Benefit Costs(2) (Note K)	2,536		6,814
Recoverable Future Taxes (Note G)	69,045		106,247
Environmental Site Remediation Costs(2) (Note L)	—		3,646
Asset Retirement Obligations(2) (Note E)	19,384		18,517
Unamortized Debt Expense (Note A)	7,240		8,884
Other(3)	66,132		47,805
Total Regulatory Assets	184,796		203,590
Less: Amounts Included in Other Current Assets	(36,373)		(21,358)
Total Long-Term Regulatory Assets	$	148,423	$	182,232


	At September 30
	2023		2022
	(Thousands)
Regulatory Liabilities:
Cost of Removal Regulatory Liability	$	277,694	$	259,947
Taxes Refundable to Customers (Note G)	268,562		362,098
Post-Retirement Benefit Costs(5) (Note K)	159,760		167,305
Pension Costs(4) (Note K)	—		8,242
Amounts Payable to Customers (See Regulatory Mechanisms in Note A)	59,019		419
Environmental Site Remediation Costs(4) (Note L)	619		—
Other(6)	43,167		44,549
Total Regulatory Liabilities	808,821		842,560
Less: Amounts included in Current and Accrued Liabilities	(97,124)		(31,712)
Total Long-Term Regulatory Liabilities	$	711,697	$	810,848

(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)$36,373 and $21,358 are included in Other Current Assets on the Consolidated Balance Sheets at September 30, 2023 and 2022, respectively, since such amounts are expected to be recovered from ratepayers in the next 12 months. $29,759 and $26,447 are included in Other Regulatory Assets on the Consolidated Balance Sheets at September 30, 2023 and 2022, respectively.

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

(5)$5,800 is included in Other Accruals and Current Liabilities on the Consolidated Balance Sheets at both September 30, 2023 and 2022, since such amounts are expected to be passed back to ratepayers in the next 12 months. $153,960 and $161,505 are included in Other Regulatory Liabilities on the Consolidated Balance Sheets at September 30, 2023 and 2022, respectively.

(6)$32,305 and $25,493 are included in Other Accruals and Current Liabilities on the Consolidated Balance Sheets at September 30, 2023 and 2022, respectively, since such amounts are expected to be passed back to ratepayers in the next 12 months. $10,862 and $19,056 are included in Other Regulatory Liabilities on the Consolidated Balance Sheets at September 30, 2023 and 2022, 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 ("2017 Rate Order"). The 2017 Rate 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. On October 31, 2023, Distribution Corporation made a filing with the NYPSC seeking an increase of $88.8 million in its total annual operating revenues for the projected rate year ending September 30, 2025, with a proposed effective date of October 1, 2024 that includes the maximum suspension period permitted under the New York Public Service Law ("2023 Rate Filing"). The Company is also proposing, among other things, to continue its leak prone pipe replacement program and to implement a number of initiatives that will facilitate achievement of the emissions reduction goals of the Climate Leadership and Community Protection Act.

The 2017 Rate Order 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 2022, Distribution Corporation made a filing with the NYPSC to effectuate a temporary 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 ceased funding the Retirement Plan and its VEBA trusts in its New York jurisdiction. The 2023 Rate Filing proposes to keep the rate recovery of pension and OPEB costs at zero in the rate year and reflect the $15 million of savings in new base delivery rates.

On August 13, 2021, the NYPSC issued an order extending the date through which qualified pipeline replacement costs incurred by the Company can be recovered using the existing system modernization tracker for two years (until March 31, 2023). On December 9, 2022, the Company filed a petition with the NYPSC to effectuate a system improvement tracker through which qualified pipeline replacement costs through September 30, 2024 would be tracked and recovered, and to recover certain deferred costs associated with the existing system modernization tracker, effective April 1, 2023. The NYPSC approved the petition by order dated March 17, 2023 contingent on the Company not filing a base rate case that would result in new rates becoming effective prior to October 1, 2024. The 2023 Rate Filing proposes to stop accruing and collecting revenues under its current system modernization and system improvement trackers and shift those revenues into the Company’s new base delivery rates. In the absence of a multi-year rate plan settlement, the Company is requesting that it be allowed to reinstate a tracking mechanism similar to the existing system modernization tracker.

Pennsylvania Jurisdiction

Distribution Corporation’s delivery rates effective through July 31, 2023 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. A settlement involving all active parties to the proceeding was reached and filed with the PaPUC on April 13, 2023. The settlement provided for, among other things, an increase in Distribution Corporation’s annual base rate operating revenues of $23 million. The PaPUC approved the settlement in full, without modification or correction, on June 15, 2023 and new rates went into effect on August 1, 2023.

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 to customers overcollected OPEB expenses in the amount of $50.0 million. All matters with respect to this tariff supplement were finalized on February 24, 2022 with the PaPUC’s approval of an Administrative Law Judge’s Recommended Decision. 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 filed a NGA Section 4 rate case at FERC on July 31, 2023 proposing rate increases to be effective February 1, 2024. The proposed rates reflect an annual cost of service of $385.4 million, a rate base of $1.32 billion and a proposed cost of equity of 15.12%. If the proposed rate increases finally approved at the end of the proceeding exceed the rates that were in effect at July 31, 2023, but are less than rates put into effect subject to refund on February 1, 2024, Supply Corporation would be required to refund the difference between the rates collected subject to refund and the final approved rates, with interest at the FERC-approved rate. If the rates approved at the end of the proceeding are lower than the rates in effect at July 31, 2023, such lower rates will become effective prospectively from the effective date provided by the applicable FERC order, and refunds with interest will be limited to the difference between the rates collected subject to refund and the rates in effect at July 31, 2023.

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