The accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim financial information with the instructions to Form 10-Q and Rule 10-01 of Regulation S‑X. Accordingly, they do not include all the disclosures required for complete financial statements. In the opinion of management, the accompanying unaudited financial statements include all adjustments necessary for the fair presentation of the results of operations for the periods presented. This Form 10-Q should be read in conjunction with the Notes to Financial Statements contained in Spire, Spire Missouri and Spire Alabama’s combined Annual Report on Form 10-K for the fiscal year ended September 30, 2022.
The consolidated financial position, results of operations, and cash flows of Spire include the accounts of the Company and all its subsidiaries. Transactions and balances between consolidated entities have been eliminated from the consolidated financial statements of Spire. In compliance with GAAP, transactions between Spire Missouri and Spire Alabama and their affiliates, as well as intercompany balances on their balance sheets, have not been eliminated from their separate financial statements.
Certain information is presented by reportable segment, as described below. Effective during the first quarter of fiscal 2023, the Company changed its reportable segments to reflect changes in the way its chief operating decision maker evaluates the performance of its operations, develops strategy and allocates capital resources. Specifically, Midstream, which was formerly included in Other is now reported separately. The Company's historical segment disclosures have been recast to be consistent with the current presentation.
Nearly all the Company’s earnings are derived from its Gas Utility segment. Due to the seasonal nature of the Utilities’ business and the volumetric Spire Missouri rate design, earnings are typically concentrated during the heating season of November through April each fiscal year. As a result, the interim statements of income for Spire, Spire Missouri and Spire Alabama are not necessarily indicative of annual results or representative of succeeding quarters of the fiscal year.
As authorized by the Missouri Public Service Commission (MoPSC), the Mississippi Public Service Commission (MSPSC) and the Alabama Public Service Commission (APSC), 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 liabilities related to the PGA clauses and the GSA riders are both labeled Unamortized Purchased Gas Adjustments herein. See additional information about regulatory assets and liabilities in Note 4, Regulatory Matters.
Gross receipts taxes associated with the Company’s natural gas utility services are imposed on the Company, Spire Missouri, and Spire Alabama and billed to its customers. The expense amounts (shown in the table below) are reported gross in the “Taxes, other than income taxes” line in the statements of income, and corresponding revenues are reported in “Operating Revenues.”
3. EARNINGS PER COMMON SHARE
|
|
Three Months Ended December 31, |
|
|
|
2022 |
|
|
2021 |
|
Basic Earnings Per Common Share: |
|
|
|
|
|
|
|
|
Net Income |
|
$ |
91.0 |
|
|
$ |
55.7 |
|
Less: Provision for preferred dividends |
|
|
3.7 |
|
|
|
3.7 |
|
Income allocated to participating securities |
|
|
0.1 |
|
|
|
0.1 |
|
Income Available to Common Shareholders |
|
$ |
87.2 |
|
|
$ |
51.9 |
|
Weighted Average Common Shares Outstanding (in millions) |
|
|
52.4 |
|
|
|
51.6 |
|
Basic Earnings Per Common Share |
|
$ |
1.66 |
|
|
$ |
1.01 |
|
|
|
|
|
|
|
|
|
|
Diluted Earnings Per Common Share: |
|
|
|
|
|
|
|
|
Net Income |
|
$ |
91.0 |
|
|
$ |
55.7 |
|
Less: Provision for preferred dividends |
|
|
3.7 |
|
|
|
3.7 |
|
Income allocated to participating securities |
|
|
0.1 |
|
|
|
0.1 |
|
Income Available to Common Shareholders |
|
$ |
87.2 |
|
|
$ |
51.9 |
|
Weighted Average Common Shares Outstanding (in millions) |
|
|
52.4 |
|
|
|
51.6 |
|
Dilutive Effect of Restricted Stock and Restricted Stock Units (in millions)* |
|
|
0.2 |
|
|
|
0.1 |
|
Weighted Average Diluted Common Shares (in millions) |
|
|
52.6 |
|
|
|
51.7 |
|
Diluted Earnings Per Common Share |
|
$ |
1.66 |
|
|
$ |
1.01 |
|
|
|
|
|
|
|
|
|
|
* Calculation excludes certain outstanding common shares (shown in millions by period at the right) attributable to stock units subject to performance or market conditions and restricted stock, which could have a dilutive effect in the future |
|
|
0.2 |
|
|
|
0.2 |
|
4. REGULATORY MATTERS
As explained in Note 1, Summary of Significant Accounting Policies, the Utilities account for regulated operations in accordance with FASB ASC Topic 980, Regulated Operations. The following regulatory assets and regulatory liabilities were reflected in the balance sheets of the Company, Spire Missouri and Spire Alabama as of December 31, 2022, September 30, 2022, and December 31, 2021.
| | December 31, | | | September 30, | | | December 31, | |
Spire | | 2022 | | | 2022 | | | 2021 | |
Regulatory Assets: | | | | | | | | | | | | |
Current: | | | | | | | | | | | | |
Unamortized purchased gas adjustments | | $ | 238.9 | | | $ | 322.2 | | | $ | 242.4 | |
Other | | | 30.2 | | | | 33.2 | | | | 23.3 | |
Total Current Regulatory Assets | | | 269.1 | | | | 355.4 | | | | 265.7 | |
Noncurrent: | | | | | | | | | | | | |
Pension and postretirement benefit costs | | | 277.3 | | | | 294.5 | | | | 335.9 | |
Cost of removal | | | 506.1 | | | | 493.7 | | | | 444.5 | |
Future income taxes due from customers | | | 138.6 | | | | 137.8 | | | | 135.5 | |
Energy efficiency | | | 59.1 | | | | 57.2 | | | | 52.0 | |
Unamortized purchased gas adjustments | | | 107.9 | | | | — | | | | 27.3 | |
Other | | | 131.7 | | | | 129.2 | | | | 94.7 | |
Total Noncurrent Regulatory Assets | | | 1,220.7 | | | | 1,112.4 | | | | 1,089.9 | |
Total Regulatory Assets | | $ | 1,489.8 | | | $ | 1,467.8 | | | $ | 1,355.6 | |
Regulatory Liabilities: | | | | | | | | | | | | |
Current: | | | | | | | | | | | | |
Other | | $ | 3.7 | | | $ | 3.7 | | | $ | 4.1 | |
Total Current Regulatory Liabilities | | | 3.7 | | | | 3.7 | | | | 4.1 | |
Noncurrent: | | | | | | | | | | | | |
Deferred taxes due to customers | | | 140.9 | | | | 145.3 | | | | 155.5 | |
Pension and postretirement benefit costs | | | 156.6 | | | | 172.6 | | | | 172.2 | |
Accrued cost of removal | | | 33.7 | | | | 32.9 | | | | 35.3 | |
Unamortized purchased gas adjustments | | | — | | | | 53.0 | | | | 155.0 | |
Other | | | 13.7 | | | | 14.4 | | | | 13.8 | |
Total Noncurrent Regulatory Liabilities | | | 344.9 | | | | 418.2 | | | | 531.8 | |
Total Regulatory Liabilities | | $ | 348.6 | | | $ | 421.9 | | | $ | 535.9 | |
| | December 31, | | | September 30, | | | December 31, | |
Spire Missouri | | 2022 | | | 2022 | | | 2021 | |
Regulatory Assets: | | | | | | | | | | | | |
Current: | | | | | | | | | | | | |
Unamortized purchased gas adjustments | | $ | 181.2 | | | $ | 275.1 | | | $ | 235.2 | |
Other | | | 10.0 | | | | 13.0 | | | | 1.7 | |
Total Current Regulatory Assets | | | 191.2 | | | | 288.1 | | | | 236.9 | |
Noncurrent: | | | | | | | | | | | | |
Future income taxes due from customers | | | 130.1 | | | | 129.2 | | | | 126.9 | |
Pension and postretirement benefit costs | | | 197.4 | | | | 222.9 | | | | 241.6 | |
Energy efficiency | | | 59.1 | | | | 57.2 | | | | 52.0 | |
Unamortized purchased gas adjustments | | | 107.9 | | | | — | | | | 27.3 | |
Cost of removal | | | 23.9 | | | | 25.2 | | | | 34.9 | |
Other | | | 116.3 | | | | 113.1 | | | | 77.8 | |
Total Noncurrent Regulatory Assets | | | 634.7 | | | | 547.6 | | | | 560.5 | |
Total Regulatory Assets | | $ | 825.9 | | | $ | 835.7 | | | $ | 797.4 | |
Regulatory Liabilities: | | | | | | | | | | | | |
Current: | | | | | | | | | | | | |
Other | | $ | — | | | $ | — | | | $ | 0.2 | |
Total Current Regulatory Liabilities | | | — | | | | — | | | | 0.2 | |
Noncurrent: | | | | | | | | | | | | |
Deferred taxes due to customers | | | 124.6 | | | | 127.9 | | | | 138.2 | |
Pension and postretirement benefit costs | | | 127.4 | | | | 143.6 | | | | 142.6 | |
Accrued cost of removal | | | — | | | | — | | | | 3.3 | |
Unamortized purchased gas adjustments | | | — | | | | 53.0 | | | | 155.0 | |
Other | | | 7.0 | | | | 7.3 | | | | 8.1 | |
Total Noncurrent Regulatory Liabilities | | | 259.0 | | | | 331.8 | | | | 447.2 | |
Total Regulatory Liabilities | | $ | 259.0 | | | $ | 331.8 | | | $ | 447.4 | |
| | December 31, | | | September 30, | | | December 31, | |
Spire Alabama | | 2022 | | | 2022 | | | 2021 | |
Regulatory Assets: | | | | | | | | | | | | |
Current: | | | | | | | | | | | | |
Unamortized purchased gas adjustments | | $ | 54.5 | | | $ | 43.8 | | | $ | 4.1 | |
Other | | | 12.8 | | | | 13.1 | | | | 10.5 | |
Total Current Regulatory Assets | | | 67.3 | | | | 56.9 | | | | 14.6 | |
Noncurrent: | | | | | | | | | | | | |
Future income taxes due from customers | | | 2.1 | | | | 2.2 | | | | 2.2 | |
Pension and postretirement benefit costs | | | 75.1 | | | | 66.5 | | | | 88.7 | |
Cost of removal | | | 482.2 | | | | 468.5 | | | | 409.6 | |
Other | | | 1.0 | | | | 1.0 | | | | 1.2 | |
Total Noncurrent Regulatory Assets | | | 560.4 | | | | 538.2 | | | | 501.7 | |
Total Regulatory Assets | | $ | 627.7 | | | $ | 595.1 | | | $ | 516.3 | |
Regulatory Liabilities: | | | | | | | | | | | | |
Current: | | | | | | | | | | | | |
Other | | $ | — | | | $ | — | | | $ | 0.8 | |
Total Current Regulatory Liabilities | | | — | | | | — | | | | 0.8 | |
Noncurrent: | | | | | | | | | | | | |
Pension and postretirement benefit costs | | | 18.7 | | | | 19.4 | | | | 21.6 | |
Other | | | 3.5 | | | | 3.6 | | | | 3.7 | |
Total Noncurrent Regulatory Liabilities | | | 22.2 | | | | 23.0 | | | | 25.3 | |
Total Regulatory Liabilities | | $ | 22.2 | | | $ | 23.0 | | | $ | 26.1 | |
A portion of the Company’s and Spire Missouri’s regulatory assets are not earning a return, as shown in the table below:
| | December 31, | | | September 30, | | | December 31, | |
| | 2022 | | | 2022 | | | 2021 | |
Spire | | | | | | | | | | | | |
Pension and postretirement benefit costs | | $ | 127.0 | | | $ | 152.9 | | | $ | 163.4 | |
Future income taxes due from customers | | | 136.4 | | | | 135.6 | | | | 133.3 | |
Unamortized purchased gas adjustments | | | 289.1 | | | | 275.1 | | | | 262.5 | |
Other | | | 122.9 | | | | 122.7 | | | | 107.4 | |
Total Regulatory Assets Not Earning a Return | | $ | 675.4 | | | $ | 686.3 | | | $ | 666.6 | |
| | | | | | | | | | | | |
Spire Missouri | | | | | | | | | | | | |
Pension and postretirement benefit costs | | $ | 127.0 | | | $ | 152.9 | | | $ | 163.4 | |
Future income taxes due from customers | | | 130.1 | | | | 129.2 | | | | 126.9 | |
Unamortized purchased gas adjustments | | | 289.1 | | | | 275.1 | | | | 262.5 | |
Other | | | 122.9 | | | | 122.7 | | | | 107.4 | |
Total Regulatory Assets Not Earning a Return | | $ | 669.1 | | | $ | 679.9 | | | $ | 660.2 | |
Like all the Company’s regulatory assets, these regulatory assets as of December 31, 2022 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 less than two years. 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, except for certain debt costs expected to be recovered over the related debt term, up to 35 years. Spire Alabama does not have any regulatory assets that are not earning a return.
Spire Missouri
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 MoPSC-approved OFO tariff, Spire Missouri invoiced the cost of gas and associated penalties totaling $195.8 to non-compliant marketers and recorded accounts receivable. Recoveries collected are an offset to cost of natural gas for firm utility customers through the Purchased Gas Adjustment (PGA) and Actual Cost Adjustment (ACA), so are net income neutral to Spire Missouri. 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. In late February 2022, the parties to the OFO waiver suits agreed to a settlement in principle, pursuant to which marketers will reimburse Spire Missouri for the actual cost of its incremental gas purchases to serve marketers’ customers during Winter Storm Uri, so Spire Missouri reduced revenue, accounts receivable, cost of gas and regulatory liabilities by approximately $150 in the second quarter of fiscal 2022. The settlement, which reduced the total amount due from the three marketers to approximately $42, was approved by the MoPSC in late May 2022, and the marketers are making payments to Spire Missouri.
The MoPSC approved compliance tariffs with an effective date of December 23, 2021, in Spire Missouri’s general rate case GR-2021-0108. These new tariffs were designed to increase Spire Missouri’s aggregate annual gross base rate revenues by $72.2, which includes $24.9 incremental and $47.3 already being collected through the Infrastructure System Replacement Surcharge (ISRS). The decision, as reflected in the amended report and order dated November 12, 2021, revised the MoPSC’s long-standing position regarding Spire Missouri’s compliance with the Federal Energy Regulatory Commission (FERC) Uniform System of Accounts (USOA) on the capitalization of prudently incurred non-operational overheads. The amended report and order required Spire Missouri to cease capitalization of these overhead costs at the time new rates went into effect until a MoPSC staff audit of their revised interpretation of compliance with the USOA framework could be completed. MoPSC staff completed this audit and filed its audit report on March 18, 2022. The report recommended changes to Spire Missouri’s overhead capitalization rates based upon its new time study and the results of the audit. On April 13, 2022, the MoPSC issued an Order Authorizing Accounting Treatment clarifying that Spire Missouri may defer all non-operational overheads from December 23, 2021 forward into a regulatory asset for future review by the MoPSC in an appropriate proceeding. The total amount deferred under this order was $42.8 through September 30, 2022, comprising:
• | $19.0 in accordance with new capitalization rates determined by the study and audit; |
• | $18.8 of prudent costs which are in excess of the capitalization rates determined by the study and audit; and |
• | $5.0 of prudent costs related to an April 2022 ISRS settlement. |
On April 1, 2022, Spire Missouri filed tariff sheets to initiate a new general rate case proceeding intended to address the deferred amounts, along with other matters. The parties reached a Full Unanimous Stipulation and Agreement (the “Stipulation”) to resolve all issues in the case, which was filed with the MoPSC on November 4, 2022. On November 18, 2022, the Stipulation was approved, including authorization of $78.0 in new base rate revenue and recovery of deferred overheads through amortization of the related regulatory assets discussed in the previous paragraph. New base rates became effective on December 26, 2022.
The ISRS allows Spire Missouri expedited recovery for its investment to replace qualifying components of its infrastructure without the necessity of a formal rate case. On December 27, 2022, Spire Missouri filed an ISRS case seeking accelerated recovery of $8.8 in annual revenue for eligible pipe replacement from October 2022 through February 2023. The MoPSC staff has been ordered to file its recommendation regarding this request by March 27, 2023. All prior ISRS revenues have been reset to zero as of December 26, 2022 as a result of Spire Missouri's most recent base rate case.
On May 27, 2022, the MoPSC staff filed an ACA Review Recommendation and Report for the ACA period that first includes transportation charges incurred by Spire Missouri for service on the Spire STL Pipeline. That report concluded that the transaction complied with Missouri affiliate transaction rules and was prudent, and it recommended no disallowance of any Spire STL Pipeline related costs from the ACA mechanism. On July 11, 2022, Spire Missouri filed its response comments in support of the recommendation. The Missouri Office of the Public Counsel and Environmental Defense Fund filed comments on July 29 and August 1, 2022, respectively, raising concerns about the Spire STL Pipeline transaction, the ACA process itself, and other matters. The MoPSC has entered a scheduling order in the matter which includes an evidentiary hearing on July 25-26, 2023. On January 6, 2023, Spire Missouri filed a Partial Stipulation and Agreement resolving all other issues raised by the MoPSC staff in its Recommendation and Report. The partial stipulation was approved by the MoPSC on January 25, 2023, and will result in a $0.6 disallowance from the ACA balance. Issues relating to Spire STL Pipeline costs remain contested.
The MoPSC has initiated their annual ACA dockets (GR-2022-0135 and GR-2022-0136) to audit gas commodity and transportation costs for the 2020-2021 heating season, which includes the impact of Winter Storm Uri on Spire Missouri's natural gas portfolio. On December 15, 2022, the MoPSC staff filed its Reports and Recommendations in these cases. Spire Missouri filed its responses to these Reports and Recommendations on January 19, 2023. The MoPSC has not yet taken any further action in these dockets.
The Utilities purchase the natural gas to be delivered to their customers and typically defer the recovery of this expense thereby lessening the immediate impact on customers’ bills of higher realized commodity costs. These deferred gas balances are expected to be recovered over the next 12-18 months pursuant to tariff adjustments effective in Missouri (and Alabama). Spire Missouri filed Purchase Gas Adjustment (PGA) changes to its tariff in November and January which were approved and became effective November 29, 2022 and January 19, 2023, respectively.
Spire Alabama
On October 26, 2022, Spire Alabama made its annual Rate Stabilization and Equalization (RSE) rate filing with the APSC, presenting the utility’s budget for the fiscal year ending September 30, 2023, including net income and a calculation of allowed return on average common equity (ROE). The budget reflected the start of amortization of the accumulated deferred income tax (ADIT) adjustment related to the Tax Cuts and Jobs Act of 2017 (TCJA). Following a regulatory review, adjusted rates became effective January 1, 2023.
Spire Alabama filed GSA rate increases effective December 1, 2022, and January 1, 2023, primarily attributable to higher natural gas prices.
Spire
In addition to those discussed above for Spire Missouri and Spire Alabama, Spire is affected by the following regulatory matters.
In October 2022, Spire Gulf made its annual RSE rate filing with the APSC based on its budget for fiscal 2023 and an allowed ROE of 9.95%. The budget reflected the start of amortization of the excess ADIT from the TCJA. New rates designed to provide increased annual revenues of $2.5 became effective January 1, 2023.
On September 14, 2022, Spire Mississippi filed its Rate Stabilization Adjustment Rider with the Mississippi Public Service Commission (MSPSC) for the rate year ended June 30, 2022, which reflected an increase to annual revenues of $1.3. The MSPSC, by its order dated December 6, 2022, approved a stipulation agreement between the Mississippi Public Utility Staff and Spire Mississippi that provides for increased annual revenues of $0.8 through rates that became effective on January 1, 2023.
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 (“DC Circuit”). On June 22, 2021, the DC Circuit issued an order vacating the Certificate of Public Convenience and Necessity and remanding the matter back to the FERC for further action. On September 14, 2021 and December 3, 2021, the FERC issued temporary certificates to allow the Spire STL Pipeline to continue operating indefinitely while it considers approval of a new permanent certificate. Certain parties in the temporary certificate proceedings sought rehearing of the FERC’s December 3, 2021 temporary certificate. The FERC denied rehearing by operation of law on February 3, 2022 and by substantive order on February 17, 2022. On March 7, 2022, one group of the rehearing parties filed in the DC Circuit a petition for review of the FERC’s December 3, 2021 temporary certificate order limited to whether the temporary certificates carry eminent domain authority. On June 29, 2022, the DC Circuit issued an order holding the appeal of the December 3, 2021 temporary certificate in abeyance, and this proceeding remains in abeyance. On December 15, 2022, the FERC issued its order on remand reissuing a permanent certificate of public convenience and necessity for the continued operation of Spire STL Pipeline. Such order is subject to rehearing or potential appeal, and on January 17, 2023, the Environmental Defense Fund filed for rehearing.
5. FINANCING
Short-term
Spire, Spire Missouri and Spire Alabama have a syndicated revolving credit facility pursuant to a loan agreement with 12 banks, which was amended July 22, 2022, to increase the commitment and sublimits and extend the agreement through July 22, 2027. The amended loan agreement has an aggregate credit commitment of $1,300.0, including sublimits of $450.0 for the Spire holding company, $575.0 for Spire Missouri and $275.0 for Spire Alabama. These sublimits may be reallocated from time to time among the three borrowers within the $1,300.0 aggregate commitment, with commitment fees and interest margins applied for each borrower relative to its credit rating, as well as sustainability rate adjustments based on Spire's DART (“Days Away Restricted or Transferred”) rate and methane emissions reductions. The Spire holding company may use its line to provide for the funding needs of various subsidiaries. The agreement also contains financial covenants limiting each borrower's consolidated total debt, including short-term debt, to no more than 70% of its total capitalization. As defined in the line of credit, on December 31, 2022, total debt was less than 65% of total capitalization for each borrower. There were no borrowings against this credit facility as of December 31, 2022.
Spire utilizes a commercial paper program (“CP Program”) pursuant to which Spire may issue short-term, unsecured commercial paper notes. Amounts available under the CP Program may be borrowed, repaid and re-borrowed from time to time, with the aggregate face or principal amount of the notes outstanding under the CP Program at any time not to exceed $1,300.0. The notes may have maturities of up to 365 days from date of issue.
In March 2021, Spire Missouri entered into a loan agreement with several banks for a $250.0, 364-day unsecured term loan with an interest rate based on LIBOR plus 65 basis points. The loan was repaid in March 2022.
After quarter end, on January 5, 2023, Spire Missouri entered into a loan agreement with several banks for a $250.0 unsecured term loan due October 5, 2023. Interest accrues at either, as selected by the Company, a base rate or an adjusted forward-looking secured overnight financing rate (“SOFR”). Adjusted SOFR is based on one- or three-month term SOFR, as selected by the Company, plus a SOFR adjustment of 0.10% per annum plus a margin of 0.80% per annum.
Information about short-term borrowings, including Spire Missouri’s and Spire Alabama’s borrowings from Spire, is presented in the following table. As of December 31, 2022, $843.4 of Spire’s CP Program borrowings was used to support lending to the Utilities.
|
|
Spire (Parent Only) |
|
|
Spire Missouri |
|
|
Spire Alabama |
|
|
Spire |
|
|
|
CP |
|
|
Term |
|
|
Spire |
|
|
Spire |
|
|
Consol- |
|
|
|
Program |
|
|
Loan |
|
|
Note |
|
|
Note |
|
|
idated |
|
Three Months Ended December 31, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Highest borrowings outstanding |
|
$ |
1,230.0 |
|
|
$ |
— |
|
|
$ |
651.2 |
|
|
$ |
274.0 |
|
|
$ |
1,230.0 |
|
Lowest borrowings outstanding |
|
|
829.5 |
|
|
|
— |
|
|
|
439.6 |
|
|
|
76.7 |
|
|
|
829.5 |
|
Weighted average borrowings |
|
|
1,071.3 |
|
|
|
— |
|
|
|
529.6 |
|
|
|
138.3 |
|
|
|
1,071.3 |
|
Weighted average interest rate |
|
|
4.4 |
% |
|
|
n/a |
|
|
|
4.3 |
% |
|
|
4.2 |
% |
|
|
4.4 |
% |
As of December 31, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings outstanding |
|
$ |
1,227.0 |
|
|
$ |
— |
|
|
$ |
651.2 |
|
|
$ |
145.8 |
|
|
$ |
1,227.0 |
|
Weighted average interest rate |
|
|
4.9 |
% |
|
|
n/a |
|
|
|
4.9 |
% |
|
|
4.9 |
% |
|
|
4.9 |
% |
As of September 30, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings outstanding |
|
$ |
1,037.5 |
|
|
$ |
— |
|
|
$ |
445.3 |
|
|
$ |
260.9 |
|
|
$ |
1,037.5 |
|
Weighted average interest rate |
|
|
3.3 |
% |
|
|
0.0 |
% |
|
|
3.3 |
% |
|
|
3.3 |
% |
|
|
3.3 |
% |
As of December 31, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings outstanding |
|
$ |
596.0 |
|
|
$ |
250.0 |
|
|
$ |
180.4 |
|
|
$ |
173.7 |
|
|
$ |
846.0 |
|
Weighted average interest rate |
|
|
0.4 |
% |
|
|
0.7 |
% |
|
|
0.4 |
% |
|
|
0.4 |
% |
|
|
0.5 |
% |
Long-term
The long-term debt agreements of Spire, Spire Missouri and Spire Alabama contain customary financial covenants and default provisions. As of December 31, 2022, there were no events of default under these financial covenants.
Interest expense shown on the statements of income is net of the capitalized interest amounts shown in the following table.
|
|
Three Months Ended December 31, |
|
|
|
2022 |
|
|
2021 |
|
Spire |
|
$ |
1.6 |
|
|
$ |
1.1 |
|
Spire Missouri |
|
|
0.5 |
|
|
|
— |
|
Spire Alabama |
|
|
0.7 |
|
|
|
0.8 |
|
On October 13, 2022, Spire Alabama issued $90.0 of notes due October 15, 2029, bearing interest at 5.32% and $85.0 of notes due October 15, 2032, bearing interest at 5.41%. Interest is payable semi-annually. The notes are senior unsecured obligations and rank equal in right to payment with all other senior unsecured indebtedness of Spire Alabama. Also on October 13, 2022, Spire Gulf issued $30.0 of first mortgage bonds due October 15, 2037, bearing interest at 5.61% payable semi-annually. The bonds rank equal in right to payment with the other first mortgage bonds issued by Spire Gulf. The bonds were issued under a supplemental indenture with collateral fall away provisions whereby, under certain conditions, Spire Gulf may elect to exchange the bonds, which are secured, for unsecured notes.
6. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of cash and cash equivalents, notes receivable, and short-term debt approximate fair value due to the short maturity of these instruments. The fair values of long-term debt are estimated based on market prices for similar issues. Refer to Note 7, Fair Value Measurements, for information on financial instruments measured at fair value on a recurring basis.
The carrying amounts and estimated fair values of financial instruments not measured at fair value on a recurring basis are shown in the following tables, classified according to the fair value hierarchy. There were no such instruments classified as Level 3 (significant unobservable inputs) as of December 31, 2022, September 30, 2022, and December 31, 2021.
|
|
|
|
|
|
|
|
|
|
Classification of Estimated Fair Value |
|
|
|
Carrying Amount |
|
|
Fair Value |
|
|
Quoted Prices in Active Markets (Level 1) |
|
|
Significant Observable Inputs (Level 2) |
|
Spire |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
4.8 |
|
|
$ |
4.8 |
|
|
$ |
4.8 |
|
|
$ |
— |
|
Notes payable |
|
|
1,227.0 |
|
|
|
1,227.0 |
|
|
|
— |
|
|
|
1,227.0 |
|
Long-term debt, including current portion |
|
|
3,412.9 |
|
|
|
3,083.7 |
|
|
|
— |
|
|
|
3,083.7 |
|
As of September 30, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
6.5 |
|
|
$ |
6.5 |
|
|
$ |
6.5 |
|
|
$ |
— |
|
Notes payable |
|
|
1,037.5 |
|
|
|
1,037.5 |
|
|
|
— |
|
|
|
1,037.5 |
|
Long-term debt, including current portion |
|
|
3,239.7 |
|
|
|
2,851.8 |
|
|
|
— |
|
|
|
2,851.8 |
|
As of December 31, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
8.2 |
|
|
$ |
8.2 |
|
|
$ |
8.2 |
|
|
$ |
— |
|
Notes payable |
|
|
846.0 |
|
|
|
846.0 |
|
|
|
— |
|
|
|
846.0 |
|
Long-term debt, including current portion |
|
|
3,238.0 |
|
|
|
3,594.4 |
|
|
|
— |
|
|
|
3,594.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Spire Missouri |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes payable – associated companies |
|
$ |
651.2 |
|
|
$ |
651.2 |
|
|
$ |
— |
|
|
$ |
651.2 |
|
Long-term debt, including current portion |
|
|
1,638.1 |
|
|
|
1,497.7 |
|
|
|
— |
|
|
|
1,497.7 |
|
As of September 30, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes payable – associated companies |
|
$ |
445.3 |
|
|
$ |
445.3 |
|
|
$ |
— |
|
|
$ |
445.3 |
|
Long-term debt, including current portion |
|
|
1,637.7 |
|
|
|
1,473.9 |
|
|
|
— |
|
|
|
1,473.9 |
|
As of December 31, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes payable |
|
$ |
250.0 |
|
|
$ |
250.0 |
|
|
$ |
— |
|
|
$ |
250.0 |
|
Notes payable – associated companies |
|
|
180.4 |
|
|
|
180.4 |
|
|
|
— |
|
|
|
180.4 |
|
Long-term debt |
|
|
1,637.0 |
|
|
|
1,830.5 |
|
|
|
— |
|
|
|
1,830.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Spire Alabama |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes payable – associated companies |
|
$ |
145.8 |
|
|
$ |
145.8 |
|
|
$ |
— |
|
|
$ |
145.8 |
|
Long-term debt |
|
|
745.6 |
|
|
|
674.5 |
|
|
|
— |
|
|
|
674.5 |
|
As of September 30, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
2.4 |
|
|
$ |
2.4 |
|
|
$ |
2.4 |
|
|
$ |
— |
|
Notes payable – associated companies |
|
|
260.9 |
|
|
|
260.9 |
|
|
|
— |
|
|
|
260.9 |
|
Long-term debt |
|
|
571.5 |
|
|
|
485.0 |
|
|
|
— |
|
|
|
485.0 |
|
As of December 31, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes payable – associated companies |
|
$ |
173.7 |
|
|
$ |
173.7 |
|
|
$ |
— |
|
|
$ |
173.7 |
|
Long-term debt, including current portion |
|
|
571.3 |
|
|
|
653.6 |
|
|
|
— |
|
|
|
653.6 |
|
7. FAIR VALUE MEASUREMENTS
The information presented in the following tables categorizes the assets and liabilities in the balance sheets that are accounted for at fair value on a recurring basis in periods subsequent to initial recognition.
The mutual funds included in Level 1 are valued based on exchange-quoted market prices of individual securities.
Derivative instruments included in Level 1 are valued using quoted market prices on the New York Mercantile Exchange (NYMEX) or the Intercontinental Exchange (ICE). Derivative instruments classified in Level 2 include physical commodity derivatives that are valued using broker or dealer quotation services whose prices are derived principally from, or are corroborated by, observable market inputs. Also included in Level 2 are certain derivative instruments that have values that are similar to, and correlate with, quoted prices for exchange-traded instruments in active markets. Derivative instruments included in Level 3 are valued using generally unobservable inputs that are based upon the best information available and reflect management’s assumptions about how market participants would price the asset or liability. There were no Level 3 balances as of December 31, 2022, September 30, 2022, and December 31, 2021. The Company’s and the Utilities’ policy is to recognize transfers between the levels of the fair value hierarchy, if any, as of the beginning of the interim reporting period in which circumstances change or events occur to cause the transfer.
The mutual funds are included in “Other Investments” on the Company’s balance sheets and in “Other Property and Investments” on Spire Missouri’s balance sheets. Changes in their recurring valuations are recorded as unrealized gains or losses in the corresponding income statement. Derivative assets and liabilities, including receivables and payables associated with cash margin requirements, are presented net in the balance sheets when a legally enforceable netting agreement exists between the Company, Spire Missouri, or Spire Alabama and the counterparty to a derivative contract.
Spire
| | Quoted Prices in Active Markets (Level 1) | | | Significant Observable Inputs (Level 2) | | | Effects of Netting and Cash Margin Receivables /Payables | | | Total | |
As of December 31, 2022 | | | | | | | | | | | | | | | | |
ASSETS | | | | | | | | | | | | | | | | |
Gas Utility: | | | | | | | | | | | | | | | | |
U.S. stock/bond mutual funds | | $ | 19.5 | | | $ | — | | | $ | — | | | $ | 19.5 | |
NYMEX/ICE natural gas contracts | | | 0.4 | | | | — | | | | (0.4 | ) | | | — | |
Gasoline and heating oil contracts | | | 0.2 | | | | — | | | | (0.2 | ) | | | — | |
Gas Marketing: | | | | | | | | | | | | | | | | |
NYMEX/ICE natural gas contracts | | | 52.0 | | | | — | | | | (52.0 | ) | | | — | |
Natural gas commodity contracts | | | 92.9 | | | | — | | | | (13.2 | ) | | | 79.7 | |
Other: | | | | | | | | | | | | | | | | |
U.S. stock/bond mutual funds | | | 28.3 | | | | — | | | | — | | | | 28.3 | |
Interest rate swaps | | | 61.4 | | | | — | | | | — | | | | 61.4 | |
Total | | $ | 254.7 | | | $ | — | | | $ | (65.8 | ) | | $ | 188.9 | |
LIABILITIES | | | | | | | | | | | | | | | | |
Gas Utility: | | | | | | | | | | | | | | | | |
NYMEX/ICE natural gas contracts | | $ | 35.7 | | | $ | — | | | $ | (35.7 | ) | | $ | — | |
Gasoline and heating oil contracts | | | 0.2 | | | | — | | | | (0.2 | ) | | | — | |
Gas Marketing: | | | | | | | | | | | | | | | | |
NYMEX/ICE natural gas contracts | | | 58.4 | | | | — | | | | (58.4 | ) | | | — | |
Natural gas commodity contracts | | | 71.1 | | | | — | | | | (13.2 | ) | | | 57.9 | |
Other: | | | | | | | | | | | | | | | | |
Interest rate swaps | | | 0.8 | | | | — | | | | — | | | | 0.8 | |
Total | | $ | 166.2 | | | $ | — | | | $ | (107.5 | ) | | $ | 58.7 | |
| | Quoted Prices in Active Markets (Level 1) | | | Significant Observable Inputs (Level 2) | | | Effects of Netting and Cash Margin Receivables /Payables | | | Total | |
As of September 30, 2022 | | | | | | | | | | | | | | | | |
ASSETS | | | | | | | | | | | | | | | | |
Gas Utility: | | | | | | | | | | | | | | | | |
U.S. stock/bond mutual funds | | $ | 19.1 | | | $ | — | | | $ | — | | | $ | 19.1 | |
NYMEX/ICE natural gas contracts | | | 57.8 | | | | — | | | | (57.8 | ) | | | — | |
Gas Marketing: | | | | | | | | | | | | | | | | |
NYMEX/ICE natural gas contracts | | | 91.8 | | | | — | | | | (91.8 | ) | | | — | |
Natural gas commodity contracts | | | 56.6 | | | | — | | | | (4.0 | ) | | | 52.6 | |
Other: | | | | | | | | | | | | | | | | |
U.S. stock/bond mutual funds | | | 29.3 | | | | — | | | | — | | | | 29.3 | |
Interest rate swaps | | | 63.6 | | | | — | | | | — | | | | 63.6 | |
Total | | $ | 318.2 | | | $ | — | | | $ | (153.6 | ) | | $ | 164.6 | |
LIABILITIES | | | | | | | | | | | | | | | | |
Gas Utility: | | | | | | | | | | | | | | | | |
NYMEX/ICE natural gas contracts | | $ | 30.7 | | | $ | — | | | $ | (30.7 | ) | | $ | — | |
Gas Marketing: | | | | | | | | | | | | | | | | |
NYMEX/ICE natural gas contracts | | | 82.3 | | | | — | | | | (82.3 | ) | | | — | |
Natural gas commodity contracts | | | 65.5 | | | | — | | | | (4.0 | ) | | | 61.5 | |
Total | | $ | 178.5 | | | $ | — | | | $ | (117.0 | ) | | $ | 61.5 | |
| | | | | | | | | | | | | | | | |
As of December 31, 2021 | | | | | | | | | | | | | | | | |
ASSETS | | | | | | | | | | | | | | | | |
Gas Utility: | | | | | | | | | | | | | | | | |
U.S. stock/bond mutual funds | | $ | 24.8 | | | $ | — | | | $ | — | | | $ | 24.8 | |
NYMEX/ICE natural gas contracts | | | 2.4 | | | | — | | | | (2.4 | ) | | | — | |
Gas Marketing: | | | | | | | | | | | | | | | | |
NYMEX/ICE natural gas contracts | | | — | | | | 67.0 | | | | (67.0 | ) | | | — | |
Natural gas commodity contracts | | | — | | | | 40.4 | | | | (2.3 | ) | | | 38.1 | |
Other: | | | | | | | | | | | | | | | | |
U.S. stock/bond mutual funds | | | 24.6 | | | | — | | | | — | | | | 24.6 | |
Interest rate swaps | | | 9.4 | | | | — | | | | (5.6 | ) | | | 3.8 | |
Total | | $ | 61.2 | | | $ | 107.4 | | | $ | (77.3 | ) | | $ | 91.3 | |
LIABILITIES | | | | | | | | | | | | | | | | |
Gas Utility: | | | | | | | | | | | | | | | | |
NYMEX/ICE natural gas contracts | | $ | 8.6 | | | $ | — | | | $ | (8.6 | ) | | $ | — | |
Gas Marketing: | | | | | | | | | | | | | | | | |
NYMEX/ICE natural gas contracts | | | — | | | | 40.2 | | | | (40.2 | ) | | | — | |
Natural gas commodity contracts | | | — | | | | 77.9 | | | | (2.3 | ) | | | 75.6 | |
Other: | | | | | | | | | | | | | | | | |
Interest rate swaps | | | 7.3 | | | | — | | | | (5.6 | ) | | | 1.7 | |
Total | | $ | 15.9 | | | $ | 118.1 | | | $ | (56.7 | ) | | $ | 77.3 | |
Spire Missouri
| | Quoted Prices in Active Markets (Level 1) | | | Significant Observable Inputs (Level 2) | | | Effects of Netting and Cash Margin Receivables /Payables | | | Total | |
As of December 31, 2022 | | | | | | | | | | | | | | | | |
ASSETS | | | | | | | | | | | | | | | | |
U.S. stock/bond mutual funds | | $ | 19.5 | | | $ | — | | | $ | — | | | $ | 19.5 | |
NYMEX/ICE natural gas contracts | | | 0.4 | | | | — | | | | (0.4 | ) | | | — | |
Gasoline and heating oil contracts | | | 0.2 | | | | — | | | | (0.2 | ) | | | — | |
Total | | $ | 20.1 | | | $ | — | | | $ | (0.6 | ) | | $ | 19.5 | |
LIABILITIES | | | | | | | | | | | | | | | | |
NYMEX/ICE natural gas contracts | | $ | 35.7 | | | $ | — | | | $ | (35.7 | ) | | $ | — | |
Gasoline and heating oil contracts | | | 0.2 | | | | — | | | | (0.2 | ) | | | — | |
Total | | $ | 35.9 | | | $ | — | | | $ | (35.9 | ) | | $ | — | |
| | | | | | | | | | | | | | | | |
As of September 30, 2022 | | | | | | | | | | | | | | | | |
ASSETS | | | | | | | | | | | | | | | | |
U.S. stock/bond mutual funds | | $ | 19.1 | | | $ | — | | | $ | — | | | $ | 19.1 | |
NYMEX/ICE natural gas contracts | | | 57.8 | | | | — | | | | (57.8 | ) | | | — | |
Total | | $ | 76.9 | | | $ | — | | | $ | (57.8 | ) | | $ | 19.1 | |
LIABILITIES | | | | | | | | | | | | | | | | |
NYMEX/ICE natural gas contracts | | $ | 30.7 | | | $ | — | | | $ | (30.7 | ) | | $ | — | |
| | | | | | | | | | | | | | | | |
As of December 31, 2021 | | | | | | | | | | | | | | | | |
ASSETS | | | | | | | | | | | | | | | | |
U.S. stock/bond mutual funds | | $ | 24.8 | | | $ | — | | | $ | — | | | $ | 24.8 | |
NYMEX/ICE natural gas contracts | | | 2.4 | | | | — | | | | (2.4 | ) | | | — | |
Total | | $ | 27.2 | | | $ | — | | | $ | (2.4 | ) | | $ | 24.8 | |
LIABILITIES | | | | | | | | | | | | | | | | |
NYMEX/ICE natural gas contracts | | $ | 8.6 | | | $ | — | | | $ | (8.6 | ) | | $ | — | |
8. PENSION PLANS AND OTHER POSTRETIREMENT BENEFITS
Pension Plans
Spire and the Utilities maintain pension plans for their employees.
Spire Missouri and Spire Alabama have non-contributory, defined benefit, trusteed forms of pension plans covering the majority of their employees. Qualified plan assets are comprised of mutual and commingled funds consisting of U.S. equities with varying strategies, global equities, alternative investments, and fixed income investments.
The net periodic pension cost includes components shown in the following tables. The components other than the service costs and regulatory adjustment are presented in “Other Income, Net” in the income statement, except for Spire Alabama’s losses on lump-sum settlements. Such losses are capitalized in regulatory balances and amortized over the remaining actuarial life of individuals in the plan, and that amortization is presented in “Other Income, Net.”
| | Three Months Ended December 31, | |
| | 2022 | | | 2021 | |
Spire | | | | | | | | |
Service cost – benefits earned during the period | | $ | 4.1 | | | $ | 5.4 | |
Interest cost on projected benefit obligation | | | 6.4 | | | | 5.1 | |
Expected return on plan assets | | | (6.4 | ) | | | (8.2 | ) |
Amortization of prior service credit | | | (1.1 | ) | | | (1.1 | ) |
Amortization of actuarial loss | | | 1.6 | | | | 3.7 | |
Loss on lump-sum settlements | | | 8.6 | | | | — | |
Subtotal | | | 13.2 | | | | 4.9 | |
Regulatory adjustment | | | 1.8 | | | | 10.6 | |
Net pension cost | | $ | 15.0 | | | $ | 15.5 | |
| | | | | | | | |
Spire Missouri | | | | | | | | |
Service cost – benefits earned during the period | | $ | 2.8 | | | $ | 3.9 | |
Interest cost on projected benefit obligation | | | 4.5 | | | | 3.5 | |
Expected return on plan assets | | | (4.5 | ) | | | (6.0 | ) |
Amortization of prior service credit | | | (0.5 | ) | | | (0.5 | ) |
Amortization of actuarial loss | | | 1.5 | | | | 2.8 | |
Subtotal | | 3.8 | | | | 3.7 | |
Regulatory adjustment | | | 8.1 | | | | 8.5 | |
Net pension cost | | $ | 11.9 | | | $ | 12.2 | |
| | | | | | | | |
Spire Alabama | | | | | | | | |
Service cost – benefits earned during the period | | $ | 1.1 | | | $ | 1.4 | |
Interest cost on projected benefit obligation | | | 1.3 | | | | 1.1 | |
Expected return on plan assets | | | (1.1 | ) | | | (1.4 | ) |
Amortization of prior service credit | | | (0.6 | ) | | | (0.6 | ) |
Amortization of actuarial loss | | | 0.1 | | | | 0.9 | |
Loss on lump-sum settlements | | | 8.6 | | | | — | |
Subtotal | | | 9.4 | | | | 1.4 | |
Regulatory adjustment | | | (6.5 | ) | | | 1.9 | |
Net pension cost | | $ | 2.9 | | | $ | 3.3 | |
Pursuant to the provisions of Spire Missouri’s and Spire Alabama’s pension plans, pension obligations may be satisfied by monthly annuities, lump-sum cash payments, or special termination benefits. Lump-sum payments are recognized as settlements (which can result in gains or losses) only if the total of such payments exceeds the sum of service and interest costs in a specific year. Special termination benefits, when offered, are also recognized as settlements which can result in gains or losses. For the three months ended December 31, 2022, two Spire Alabama plans met the criteria for settlement recognition. The lump-sum payments recognized as settlements for the remeasurement were $27.5 for the Spire Alabama plans. The lump-sum settlement resulted in a loss of $8.6 for Spire Alabama. For the remeasurement, the discount rate for both of the Spire Alabama plans was updated to 5.6%, from 5.7% for one plan and 5.65% for the other plan, at September 30, 2022. The Spire Alabama regulatory tariff requires that settlement losses be amortized over the remaining actuarial life of the individuals in the plan — in this case, 13.4 years for one plan and 12.4 years for the other plan. Therefore, no lump sum settlement expense was recorded in the quarter ended December 31, 2022. For the quarter ended December 31, 2021, no plans met the criteria for settlement recognition.
Effective December 23, 2021, the pension cost for Spire Missouri’s western territory (Missouri West) included in customer rates was reduced from $5.5 to $4.4 per year, the pension cost included in Spire Missouri’s eastern territory (Missouri East) customer rates was increased from $29.0 to $32.4 per year. The difference between these amounts and pension expense as calculated pursuant to the above and that otherwise would be included in the statements of income and statements of comprehensive income is deferred as a regulatory asset or regulatory liability.
Also effective December 23, 2021, Missouri East prepaid pension assets and other postretirement benefits that were previously being included in rates at $21.6 per year for eight years were reduced to $11.0 per year, with the amortization period being reset for another eight years. Missouri West net liability for pension and other postretirement benefits that were previously reducing rates by $3.3 per year for eight years were reduced to a $1.1 reduction in rates per year, with the amortization period being reset for another eight years.
The funding policy of the Utilities is to contribute an amount not less than the minimum required by government funding standards, nor more than the maximum deductible amount for federal income tax purposes. Fiscal 2023 contributions to Spire Missouri’s pension plans through December 31, 2022 were $16.7 to the qualified trusts and none to non-qualified plans. Fiscal 2023 contributions to the Spire Alabama pension plans through December 31, 2022 were $0.8. Contributions to the qualified trusts of Spire Missouri’s pension plans for the remainder of fiscal 2023 are anticipated to be $27.8. Contributions to Spire Alabama’s pension plans for the remainder of fiscal 2023 are anticipated to be $13.0.
Other Postretirement Benefits
Spire and the Utilities provide certain life insurance benefits at retirement. Spire Missouri plans provide for medical insurance after early retirement until age 65. For retirements prior to January 1, 2015, certain Spire Missouri plans provided medical insurance after retirement until death. The Spire Alabama plans provide medical insurance upon retirement until death for certain retirees depending on the type of employee and the date the employee was originally hired.
The net periodic postretirement benefit cost includes components shown in the following tables. The components other than the service costs and regulatory adjustment are presented in “Other Income, Net” in the income statement, except in the event Spire Alabama incurs losses on lump-sum settlements. Any such losses are capitalized in regulatory balances and amortized over the remaining actuarial life of individuals in the plan, and that amortization is presented in “Other Income, Net.”
| | Three Months Ended December 31, | |
| | 2022 | | | 2021 | |
Spire | | | | | | | | |
Service cost – benefits earned during the period | | $ | 1.2 | | | $ | 1.9 | |
Interest cost on accumulated postretirement benefit obligation | | | 2.1 | | | | 1.5 | |
Expected return on plan assets | | | (3.9 | ) | | | (4.2 | ) |
Amortization of prior service cost | | | 0.1 | | | | 0.3 | |
Amortization of actuarial gain | | | (1.0 | ) | | | (0.6 | ) |
Subtotal | | | (1.5 | ) | | | (1.1 | ) |
Regulatory adjustment | | | 0.1 | | | | 3.2 | |
Net postretirement benefit (income) cost | | $ | (1.4 | ) | | $ | 2.1 | |
| | | | | | | | |
Spire Missouri | | | | | | | | |
Service cost – benefits earned during the period | | $ | 1.0 | | | $ | 1.6 | |
Interest cost on accumulated postretirement benefit obligation | | | 1.6 | | | | 1.1 | |
Expected return on plan assets | | | (2.6 | ) | | | (2.8 | ) |
Amortization of prior service cost | | | 0.2 | | | | 0.2 | |
Amortization of actuarial gain | | | (0.8 | ) | | | (0.5 | ) |
Subtotal | | | (0.6 | ) | | | (0.4 | ) |
Regulatory adjustment | | | 0.6 | | | | 3.6 | |
Net postretirement benefit cost | | $ | — | | | $ | 3.2 | |
| | | | | | | | |
Spire Alabama | | | | | | | | |
Service cost – benefits earned during the period | | $ | 0.2 | | | $ | 0.3 | |
Interest cost on accumulated postretirement benefit obligation | | | 0.4 | | | | 0.4 | |
Expected return on plan assets | | | (1.2 | ) | | | (1.3 | ) |
Amortization of prior service (credit) cost | | | (0.1 | ) | | | 0.1 | |
Amortization of actuarial gain | | | (0.1 | ) | | | — | |
Subtotal | | | (0.8 | ) | | | (0.5 | ) |
Regulatory adjustment | | | (0.5 | ) | | | (0.5 | ) |
Net postretirement benefit income | | $ | (1.3 | ) | | $ | (1.0 | ) |
Missouri and Alabama state laws provide for the recovery in rates of costs accrued pursuant to GAAP provided that such costs are funded through an independent, external funding mechanism. The Utilities have established Voluntary Employees’ Beneficiary Association (VEBA) and Rabbi Trusts as external funding mechanisms. The assets of the VEBA and Rabbi Trusts consist primarily of money market securities and mutual funds invested in stocks and bonds.
Effective December 23, 2021, the $8.6 allowance for recovery in rates for Spire Missouri’s postretirement benefit plans was discontinued. The difference between no recovery in rates and pension expense as calculated pursuant to the above and that otherwise would be included in the statements of income and statements of comprehensive income is deferred as a regulatory asset or regulatory liability.
The Utilities’ funding policy is to contribute amounts to the trusts equal to the periodic benefit cost calculated pursuant to GAAP as recovered in rates. There have been no contributions to the postretirement plans through December 31, 2022 for Spire Missouri or Spire Alabama, and none are expected to be required for the remainder of the fiscal year.
9. INFORMATION BY OPERATING SEGMENT
The Company has three reportable segments: Gas Utility, Gas Marketing, and Midstream. The Gas Utility segment is the aggregation of the operations of the Utilities. The Gas Marketing segment includes the results of Spire Marketing, a subsidiary engaged in the non-regulated marketing of natural gas and related activities, including utilizing natural gas storage contracts for providing natural gas sales. The Midstream segment includes Spire STL Pipeline, a subsidiary of Spire providing interstate natural gas pipeline transportation services, and Spire Storage, a subsidiary of Spire providing interstate natural gas storage services. Other components of the Company’s consolidated information include Spire's subsidiaries engaged in the operation of a propane pipeline and risk management, among other activities, and unallocated corporate items, including certain debt and associated interest costs.
Accounting policies are described in Note 1, Summary of Significant Accounting Policies. Intersegment transactions include sales of natural gas from Spire Marketing to Spire Missouri, Spire Alabama and Spire Storage, sales of natural gas from Spire Missouri to Spire Marketing, propane transportation services provided by Spire NGL Inc. to Spire Missouri, and natural gas transportation services provided by Spire STL Pipeline to Spire Missouri.
Management evaluates the performance of the operating segments based on the computation of net economic earnings. Net economic earnings exclude from reported net income the after-tax impacts of fair value accounting and timing adjustments associated with energy-related transactions, the impacts of acquisition, divestiture and restructuring activities, and the largely non-cash impacts of impairments and other non-recurring or unusual items such as certain regulatory, legislative, or GAAP standard-setting actions.
| | Gas Utility | | | Gas Marketing | | | Midstream | | | Other | | | Eliminations | | | Consolidated | |
Three Months Ended December 31, 2022 | | | | | | | | | | | | | | | | | | | | | | | | |
Operating Revenues: | | | | | | | | | | | | | | | | | | | | | | | | |
Revenues from external customers | | $ | 733.0 | | | $ | 74.1 | | | $ | 6.8 | | | $ | 0.1 | | | $ | — | | | $ | 814.0 | |
Intersegment revenues | | | — | | | | — | | | | 8.4 | | | | 3.9 | | | | (12.3 | ) | | | — | |
Total Operating Revenues | | | 733.0 | | | | 74.1 | | | | 15.2 | | | | 4.0 | | | | (12.3 | ) | | | 814.0 | |
Operating Expenses: | | | | | | | | | | | | | | | | | | | | | | | | |
Natural gas | | | 401.6 | | | | 26.0 | | | | — | | | | — | | | | (8.4 | ) | | | 419.2 | |
Operation and maintenance | | | 119.9 | | | | 6.3 | | | | 5.8 | | | | 4.0 | | | | (3.9 | ) | | | 132.1 | |
Depreciation and amortization | | | 59.7 | | | | 0.3 | | | | 1.9 | | | | 0.2 | | | | — | | | | 62.1 | |
Taxes, other than income taxes | | | 49.9 | | | | 0.1 | | | | 0.4 | | | | — | | | | — | | | | 50.4 | |
Total Operating Expenses | | | 631.1 | | | | 32.7 | | | | 8.1 | | | | 4.2 | | | | (12.3 | ) | | | 663.8 | |
Operating Income (Loss) | | $ | 101.9 | | | $ | 41.4 | | | $ | 7.1 | | | $ | (0.2 | ) | | $ | — | | | $ | 150.2 | |
Net Economic Earnings (Loss) | | $ | 62.9 | | | $ | 25.7 | | | $ | 3.8 | | | $ | (7.3 | ) | | $ | — | | | $ | 85.1 | |
| | Gas Utility | | | Gas Marketing | | | Midstream | | | Other | | | Eliminations | | | Consolidated | |
Three Months Ended December 31, 2021 | | | | | | | | | | | | | | | | | | | | | | | | |
Operating Revenues: | | | | | | | | | | | | | | | | | | | | | | | | |
Revenues from external customers | | $ | 503.5 | | | $ | 47.9 | | | $ | 3.8 | | | $ | 0.2 | | | $ | — | | | $ | 555.4 | |
Intersegment revenues | | | — | | | | — | | | | 9.1 | | | | 3.5 | | | | (12.6 | ) | | | — | |
Total Operating Revenues | | | 503.5 | | | | 47.9 | | | | 12.9 | | | | 3.7 | | | | (12.6 | ) | | | 555.4 | |
Operating Expenses: | | | | | | | | | | | | | | | | | | | | | | | | |
Natural gas | | | 210.2 | | | | 48.0 | | | | — | | | | — | | | | (9.0 | ) | | | 249.2 | |
Operation and maintenance | | | 107.3 | | | | 2.7 | | | | 5.8 | | | | 4.2 | | | | (3.6 | ) | | | 116.4 | |
Depreciation and amortization | | | 54.6 | | | | 0.3 | | | | 1.9 | | | | 0.1 | | | | — | | | | 56.9 | |
Taxes, other than income taxes | | | 37.0 | | | | — | | | | 0.6 | | | | — | | | | — | | | | 37.6 | |
Total Operating Expenses | | | 409.1 | | | | 51.0 | | | | 8.3 | | | | 4.3 | | | | (12.6 | ) | | | 460.1 | |
Operating Income (Loss) | | $ | 94.4 | | | $ | (3.1 | ) | | $ | 4.6 | | | $ | (0.6 | ) | | $ | — | | | $ | 95.3 | |
Net Economic Earnings (Loss) | | $ | 67.2 | | | $ | 0.5 | | | $ | 2.5 | | | $ | (7.6 | ) | | $ | — | | | $ | 62.6 | |
The following table reconciles the Company’s net economic earnings to net income.
| | Three Months Ended December 31, | |
| | 2022 | | | 2021 | |
Net Income | | $ | 91.0 | | | $ | 55.7 | |
Adjustments, pre-tax: | | | | | | | | |
Fair value and timing adjustments | | | (7.8 | ) | | | 3.7 | |
Income tax adjustments | | | 1.9 | | | | 3.2 | |
Net Economic Earnings | | $ | 85.1 | | | $ | 62.6 | |
The Company’s total assets by segment were as follows:
| | December 31, | | | September 30, | | | December 31, | |
| | 2022 | | | 2022 | | | 2021 | |
Total Assets: | | | | | | | | | | | | |
Gas Utility | | $ | 8,355.1 | | | $ | 8,042.8 | | | $ | 7,882.1 | |
Gas Marketing | | | 492.4 | | | | 638.7 | | | | 424.4 | |
Midstream | | | 466.6 | | | | 446.0 | | | | 421.7 | |
Other | | | 2,882.8 | | | | 2,449.2 | | | | 1,995.9 | |
Eliminations | | | (1,869.2 | ) | | | (1,493.0 | ) | | | (1,073.6 | ) |
Total Assets | | $ | 10,327.7 | | | $ | 10,083.7 | | | $ | 9,650.5 | |
10. COMMITMENTS AND CONTINGENCIES
Commitments
The Company and the Utilities have entered into contracts with various counterparties, expiring on dates through calendar 2039, for the storage, transportation, and supply of natural gas. Minimum payments required under the contracts in place at December 31, 2022, are estimated at $1,445.0, $1,027.3, and $244.6 for the Company, Spire Missouri, and Spire Alabama, respectively. Additional contracts are generally entered into prior to or during the heating season of November through April. The Utilities recover their costs from customers in accordance with their PGA clauses or GSA riders.
A consolidated subsidiary of Spire is a limited partner in an unconsolidated partnership focusing on sustainability initiatives largely tied to the natural gas utility sector. Spire committed to contribute a total of $10.0 of capital to the partnership as and when requested by the general partner. As of December 31, 2022, Spire has contributed $1.9.
Contingencies
The Company and the Utilities account for contingencies, including environmental liabilities, in accordance with accounting standards under the loss contingency guidance of ASC Topic 450, Contingencies, when it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated.
In addition to matters noted below, the Company and the Utilities are involved in other litigation, claims, and investigations arising in the normal course of business. Management, after discussion with counsel, believes the final outcome will not have a material effect on the statements of income, balance sheets, and statements of cash flows of the Company, Spire Missouri, or Spire Alabama. However, there is uncertainty in the valuation of pending claims and prediction of litigation results.
The Company and the Utilities own and operate natural gas distribution, transmission, and storage facilities, the operations of which are subject to various environmental laws, regulations, and interpretations. While environmental issues resulting from such operations arise in the ordinary course of business, such issues have not materially affected the Company’s or Utilities’ financial position and results of operations. As environmental laws, regulations, and their interpretations change, the Company or the Utilities may incur additional environmental liabilities that may result in additional costs, which may be material.
In the natural gas industry, many gas distribution companies have incurred environmental liabilities associated with sites they or their predecessor companies formerly owned or operated where manufactured gas operations took place. The Utilities each have former manufactured gas plant (MGP) operations in their respective service territories, some of which are discussed under the Spire Missouri and Spire Alabama headings below. To the extent costs are incurred associated with environmental remediation activities, the Utilities would request authority from their respective regulators to defer such costs (less any amounts received from insurance proceeds or as contributions from other potentially responsible parties (PRPs)) and collect them through future rates.
To date, costs incurred for all Spire MGP sites for investigation, remediation and monitoring have not been material. However, the amount of costs relative to future remedial actions at these and other sites is unknown and may be material. The actual future costs that Spire Missouri and Spire Alabama may incur could be materially higher or lower depending upon several factors, including whether remediation will be required, final selection and regulatory approval of any remedial actions, changing technologies and government regulations, the ultimate ability of other PRPs to pay, and any insurance recoveries.
In 2020, Spire retained an outside consultant to conduct probabilistic cost modeling of its former MGP sites in Missouri and Alabama. The purpose of this analysis was to develop an estimated range of probabilistic future liability for each of their MGP sites. That analysis, completed in March 2021, provided a range of demonstrated possible future expenditures to investigate, monitor and remediate the former MGP sites. Spire Missouri and Spire Alabama have recorded their best estimates of the probable expenditures that relate to these matters. The amount remains immaterial, and Spire Missouri, Spire Alabama and the Company do not expect potential liabilities that may arise from remediating these sites to have a material impact on their future financial condition or results of operations.
Spire Missouri
Spire Missouri has identified three former MGP sites in the city of St. Louis, Missouri (the “City”) where costs have been incurred and claims have been asserted. Spire Missouri has enrolled two of the sites in the Missouri Department of Natural Resources (MoDNR) Brownfields/Voluntary Cleanup Program (BVCP). The third site is the result of an assertion by the United States Environmental Protection Agency (EPA).
In conjunction with redevelopment of the Carondelet Coke site, Spire Missouri and another former owner of the site entered into an agreement (the “Remediation Agreement”) with the City development agencies, the developer, and an environmental consultant that obligates one of the City agencies and the environmental consultant to remediate the site and obtain a No Further Action (NFA) letter from the MoDNR. The Remediation Agreement also provides for a release of Spire Missouri and the other former site owner from certain liabilities related to the past and current environmental condition of the site and requires the developer and the environmental consultant to maintain certain insurance coverage, including remediation cost containment, premises pollution liability, and professional liability. The operative provisions of the Remediation Agreement were triggered on December 20, 2010, on which date Spire Missouri and the other former site owner, as full consideration under the Remediation Agreement, paid a small percentage of the cost of remediation of the site. The property was divided into seven parcels, and MoDNR NFA letters have been received for six of the parcels. Remediation is ongoing on the last parcel.
In a letter dated June 29, 2011, the Attorney General for the State of Missouri informed Spire Missouri that the MoDNR had completed an investigation of the second site, Station A. The Attorney General requested that Spire Missouri participate in the follow up investigations of the site. In a letter dated January 10, 2012, Spire Missouri stated that it would participate in future environmental response activities at the site in conjunction with other PRPs. Accordingly, Spire Missouri entered into a cost sharing agreement for remedial investigation with other PRPs. MoDNR never approved the agreement, so no remedial investigation took place.
Additionally, in correspondence dated November 30, 2016, Region 7 of the EPA has asserted that Spire Missouri is liable under Section 107(a) of the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA) for alleged coal gas waste contamination at a third site, Station B. Spire Missouri and the site owner notified the EPA that information and data provided by the EPA to date does not rise to the level of documenting a threat to the public health or environment. As such, in March 2017 Spire Missouri requested more information from the EPA. Spire Missouri never received a response from the EPA.
Spire Missouri has notified its insurers that it seeks reimbursement for costs incurred in the past and future potential liabilities associated with these MGP sites. While some of the insurers have denied coverage and reserved their rights, Spire Missouri retains the right to seek potential reimbursements from them.
On March 10, 2015, Spire Missouri received a Section 104(e) information request under CERCLA from EPA Region 7 regarding the former Thompson Chemical/Superior Solvents site in the City. In turn, Spire Missouri issued a Freedom of Information Act (FOIA) request to the EPA on April 3, 2015, to identify the basis of the inquiry. The FOIA response from the EPA was received on July 15, 2015, and a response was provided to the EPA on August 15, 2015. Spire Missouri has received no further inquiry from the EPA regarding this matter.
In its western service area, Spire Missouri has six owned MGP sites enrolled in the BVCP, including Joplin MGP #1, St. Joseph MGP #1, Kansas City Coal Gas Station B, Kansas City Station A Railroad area, Kansas City Coal Gas Station A, and Independence MGP #2. Source removal has been conducted at all the owned sites since 2003 with the exception of Joplin. On September 15, 2016, a request was made with the MoDNR for a restrictive covenant use limitation with respect to Joplin. Remediation efforts at the six sites are at various stages of completion, ranging from groundwater monitoring and sampling following source removal activities to the aforementioned request for the Joplin site. As part of its participation in the BVCP, Spire Missouri communicates regularly with the MoDNR with respect to its remediation efforts and monitoring activities at these sites. On May 11, 2015, MoDNR approved the next phase of investigation at the Kansas City Station A Railroad area.
Spire Alabama
Spire Alabama is in the chain of title of nine former MGP sites, four of which it still owns, and five former manufactured gas distribution sites, one of which it still owns. All are located in the state of Alabama.
In 2011, a removal action was completed and an NFA letter was received at the Huntsville MGP site pursuant to an Administrative Settlement Agreement and Order on Consent among the EPA, Spire Alabama and the current site owner.
In 2012, Spire Alabama responded to an EPA Request for Information Pursuant to Section 104 of CERCLA relating to the 35th Avenue Superfund Site located in North Birmingham, Jefferson County, Alabama. Spire Alabama was identified as a PRP under CERCLA for the cleanup of the site or costs the EPA incurs in cleaning up the site. At this point, Spire Alabama has not been provided information that would allow it to determine the extent, if any, of its potential liability with respect to the 35th Avenue Superfund Site and vigorously denies its inclusion as a PRP.
Assessments were performed by the EPA of the former MGP sites in Gadsden and Anniston, and NFA letters were received after each assessment.
Spire
In addition to those discussed above for Spire Missouri and Spire Alabama, Spire is aware of the following contingent matters.
Spire Marketing, along with many natural gas industry participants, faced the unprecedented effects of Winter Storm Uri in February 2021. Numerous natural gas producers and midstream operators were unable to deliver natural gas to market as they experienced wellhead freeze-offs, power outages and equipment failure due to the extreme weather. These events resulted in supply curtailments, and related notices of force majeure to excuse performance, from and to certain counterparties. Further, these events have made Spire Marketing subject to various commercial disputes (including regarding force majeure). As such, Spire Marketing has recorded an estimate of potential liabilities for damages based on communications with counterparties and the facts and circumstances surrounding each transaction. These estimates are adjusted as new facts emerge or settlement agreements are reached, and it is possible that final settlement amounts may materially differ from the current estimate.