Regulatory Matters

Rate Regulated Basis of Accounting

Regulatory assets and liabilities in the Condensed Consolidated Balance Sheets as of January 31, 2016 and October 31, 2015 are as follows.



In thousands	January 31, 2016		October 31, 2015
Regulatory Assets:
Current:
Unamortized debt expense on reacquired debt	$	238	$	238
Amounts due from customers	22,956		—
Environmental costs	1,522		1,513
Deferred operations and maintenance expenses	860		847
Deferred pipeline integrity expenses	3,470		3,470
Deferred pension and other retirement benefit costs	2,757		2,757
Robeson liquefied natural gas (LNG) development costs	382		381
Derivatives - gas supply contracts held for utility operations	28,300		—
Other	1,330		1,730
Total current	61,815		10,936
Noncurrent:
Unamortized debt expense on reacquired debt	4,607		4,666
Environmental costs	4,587		5,107
Deferred operations and maintenance expenses	3,777		3,997
Deferred pipeline integrity expenses	29,767		29,824
Deferred pension and other retirement benefit costs	18,887		17,861
Amounts not yet recognized as a component of pension and other retirement benefit costs	113,197		114,854
Regulatory cost of removal asset	19,363		19,087
Robeson LNG development costs	32		127
Derivatives - gas supply contracts held for utility operations	127,000		—
Other	1,093		1,203
Total noncurrent	322,310		196,726
Total	$	384,125	$	207,662



Regulatory Liabilities:
Current:
Amounts due to customers	$	5,680	$	13,367
Noncurrent:
Regulatory cost of removal obligations	526,299		521,478
Deferred income taxes	64,019		68,738
Amounts not yet recognized as a component of pension and other retirement benefit costs	82		85
Total noncurrent	590,400		590,301
Total	$	596,080	$	603,668

Rate Oversight and Rate and Regulatory Actions

North Carolina

In November 2015, we filed a petition with the NCUC seeking authority, under the approved integrity management riders (IMR) settlement agreement and procedural schedule, to change our rates effective December 1, 2015 to collect a total of $40.9 million in annual IMR margin revenues, representing an additional $13.4 million in annual IMR margin revenues from rate adjustments approved by the NCUC in its January 2015 order. The rate adjustment was based on $161.9 million of IMR-eligible capital investments in integrity and safety projects over the eleven-month period ended September 30, 2015. In December 2015, the NCUC approved the requested IMR rate increase. In February 2016, the NCUC Public Staff filed their IMR audit report for the capital investment period through September 30, 2015, proposing an immaterial reduction in IMR margin for refund to customers over December 2015 through May 2016, which we began recording in our first quarter 2016.

In November 2015, the NCUC approved our accounting of gas costs for the twelve months ended May 31, 2015. We were deemed prudent on our gas purchasing policies and practices during this review period and allowed 100% recovery.

In January 2016, we and Duke Energy filed a joint application with the NCUC seeking regulatory approval of the Acquisition. A hearing has been scheduled for July 18, 2016 on this matter.

South Carolina

In June 2015, we filed with the Public Service Commission of South Carolina (PSCSC) a quarterly monitoring report for the twelve months ended March 31, 2015 and a cost and revenue study as permitted under the Natural Gas Rate Stabilization Act requesting a change in our rates from those approved by the PSCSC in its October 2014 order. In October 2015, the PSCSC issued an order approving a settlement agreement between the Office of Regulatory Staff and us that resulted in a $1.65 million annual increase in margin based on a stipulated allowed return on equity of 10.2%, effective November 1, 2015.

In January 2016, we and Duke Energy discussed the Acquisition of Piedmont by Duke Energy with the PSCSC pursuant to its procedures for an allowable ex-parte communication briefing in accordance with state statute. The PSCSC's approval of the Acquisition is not required.

Tennessee

In August 2015, we filed an annual report with the TRA reflecting the shared gas cost savings from gains and losses derived from gas purchase benchmarking and secondary market transactions for the twelve months ended June 30, 2015 under the Tennessee Incentive Plan (TIP). We are waiting on a ruling from the TRA at this time.

In November 2015, we filed an annual report for the twelve months ended June 30, 2014 with the TRA that reflected the transactions in the deferred gas cost account for the Actual Cost Adjustment (ACA) mechanism. In February 2016, the TRA approved the deferred gas cost account balances and issued its written order.

In November 2015, we filed a petition with the TRA seeking authority to collect an additional $1.7 million in annual margin revenue, effective January 2016, based on $18.4 million of IMR-eligible capital investments in integrity and safety projects over the twelve-month period ended October 31, 2015. In December 2015, the TRA approved the IMR rate increase to be effective January 2016 and issued its written order in February 2016.

In February 2014, we filed a petition with the TRA to authorize us to amortize and refund $4.7 million to customers for recorded excess deferred taxes. We proposed to refund this amount to customers over three years. In November 2015, we filed a settlement agreement with the Tennessee Consumer Advocate stipulating that we refund the $4.7 million to customers over a twelve-month period. In December 2015, the TRA approved the settlement agreement, and we began refunding the $4.7 million to customers through a rate decrement over the twelve-month period beginning January 2016. In February 2016, the TRA issued its written order on this matter.

In January 2016, we and Duke Energy filed a joint application with the TRA seeking approval on or before April 30, 2016 of a transfer of Piedmont's Tennessee operating license effective at the closing of the Acquisition pursuant to state statute due to the change in control. We are waiting on a ruling by the TRA at this time.

In February 2016, we filed an annual report for the twelve months ended June 30, 2015 with the TRA that reflected the transactions in a deferred gas cost account for the ACA mechanism. We are waiting on a ruling from the TRA at this time.