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What changed in RGC RESOURCES INC's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of RGC RESOURCES INC's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+194 added−259 removedSource: 10-K (2024-12-05) vs 10-K (2023-12-01)

Top changes in RGC RESOURCES INC's 2024 10-K

194 paragraphs added · 259 removed · 141 edited across 5 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeFor the purposes of this schedule, margin for the utility operations is defined as revenues less cost of gas. 2023 Customers Volume Revenue Margin Residential 91.3 % 33.7 % 58.1 % 62.6 % Commercial 8.6 % 29.2 % 34.7 % 24.7 % Industrial 0.1 % 37.1 % 5.9 % 10.0 % Other utility 0.0 % 0.0 % 1.0 % 2.5 % Other non-utility 0.0 % 0.0 % 0.3 % 0.2 % Total percent 100.0 % 100.0 % 100.0 % 100.0 % Total value 62,221 10,185,005 $ 97,439,765 $ 45,671,443 2022 Customers Volume Revenue Margin Residential 91.3 % 34.5 % 57.3 % 62.6 % Commercial 8.6 % 29.2 % 34.9 % 24.3 % Industrial 0.1 % 36.3 % 6.7 % 10.9 % Other utility 0.0 % 0.0 % 0.8 % 2.0 % Other non-utility 0.0 % 0.0 % 0.3 % 0.2 % Total percent 100.0 % 100.0 % 100.0 % 100.0 % Total value 62,001 10,325,336 $ 84,165,222 $ 41,640,041 Roanoke Gas’ regulated natural gas distribution business accounted for more than 99% of Resources total revenues for fiscal years ending September 30, 2023 and 2022.
Biggest changeFor the purposes of this schedule, margin is defined as revenues less cost of gas. 2024 Customers Volume Revenue Margin Residential 91.3 % 32.7 % 58.5 % 63.1 % Commercial 8.6 % 29.5 % 34.0 % 25.3 % Industrial 0.1 % 37.8 % 6.4 % 9.8 % Other 0.0 % 0.0 % 1.1 % 1.8 % Total percent 100.0 % 100.0 % 100.0 % 100.0 % Total value 62,510 10,048,770 $ 84,533,101 $ 48,565,114 2023 Customers Volume Revenue Margin Residential 91.3 % 33.7 % 58.1 % 62.8 % Commercial 8.6 % 29.2 % 34.8 % 24.8 % Industrial 0.1 % 37.1 % 5.9 % 10.0 % Other 0.0 % 0.0 % 1.2 % 2.4 % Total percent 100.0 % 100.0 % 100.0 % 100.0 % Total value 62,221 10,185,005 $ 97,325,307 $ 45,582,589 Roanoke Gas’ regulated natural gas distribution business accounted for more than 99% of Resources total revenues for fiscal years ending September 30, 2024 and 2023.
These franchises generally extend for multi-year periods and are renewable by the municipalities, including exclusive franchises in the cities of Roanoke and Salem and the Town of Vinton, Virginia. All three franchises are set to expire December 31, 2035. In 2019, the SCC issued an order granting a CPCN to furnish gas to all of Franklin County.
These franchises generally extend for multi-year periods and are renewable by the municipalities, including exclusive franchises in the cities of Roanoke and Salem and the Town of Vinton, Virginia. All three franchises are set to expire December 31, 2035. In 2019, the SCC issued an order granting a CPCN to furnish gas to all of Franklin County, Virginia.
Industrial customers primarily include transportation customers that purchase their natural gas requirements directly from a supplier other than the Company and utilize Roanoke Gas’ natural gas distribution system for delivery to their operations.
Industrial customers primarily include transportation customers that purchase their natural gas directly from a supplier other than the Company and utilize Roanoke Gas’ natural gas distribution system for delivery to their operations.
Item 1. Business . General and Historical Development Resources was incorporated in the Commonwealth of Virginia on July 31, 1998 and, effective July 1, 1999, its subsidiaries were reorganized into the Resources holding company structure. Resources is currently composed of the following subsidiaries: Roanoke Gas, Midstream and Diversified Energy.
Item 1. Business . General and Historical Development Resources was incorporated in the Commonwealth of Virginia on July 31, 1998 and, effective July 1, 1999, its subsidiaries were reorganized into the Resources holding company structure. Resources is currently composed of the following subsidiaries: Roanoke Gas and Midstream.
Roanoke Gas relies on multiple interstate pipelines, including those operated by Columbia Gas Transmission Corporation, LLC and Columbia Gulf Transmission Corporation, LLC (together “Columbia”), and East Tennessee Natural Gas, LLC (“East Tennessee”), Tennessee Gas Pipeline, Midwestern Gas Transmission Company and Saltville Gas Storage Company, LLC ("Saltville"), to transport natural gas from the production and storage fields to Roanoke Gas’ distribution system.
Roanoke Gas relies on multiple interstate pipelines, including those operated by Columbia Gas Transmission Corporation, LLC and Columbia Gulf Transmission Corporation, LLC (together “Columbia”), East Tennessee Natural Gas, LLC (“East Tennessee”), Tennessee Gas Pipeline, Midwestern Gas Transmission Company, Saltville Gas Storage Company, LLC ("Saltville") and Mountain Valley Pipeline, LLC ("Mountain Valley"), to transport natural gas from production and storage fields to Roanoke Gas’ distribution system.
Regulation In addition to the regulatory requirements generally applicable to all companies, Roanoke Gas is also subject to additional regulation at the federal, state and local levels. At the federal level, the Company is subject to pipeline safety regulations issued by the Department of Transportation's Pipeline and Hazardous Materials Safety Administration.
Regulation In addition to the regulatory requirements generally applicable to all companies, Roanoke Gas is also subject to additional regulation from federal, state and local authorities. At the federal level, the Company is subject to pipeline safety regulations issued by the Department of Transportation's Pipeline and Hazardous Materials Safety Administration.
At the local level, Roanoke Gas is further regulated by the municipalities and localities that grant franchises for the placement of gas distribution pipelines and the operation of gas distribution networks within their jurisdictions. Human Capital Resources At September 30, 2023, Resources had 100 full-time employees.
At the local level, Roanoke Gas is further regulated by the municipalities and localities that grant franchises for the placement of gas distribution pipelines and the operation of gas distribution networks within their jurisdictions. Human Capital Resources At September 30, 2024, Resources had 104 full-time employees.
CPCNs, issued by the SCC, are generally of perpetual duration and subject to compliance with regulatory standards. 7 Table of Contents Although Roanoke Gas has exclusive rights for the distribution of natural gas in its service area, the Company competes with suppliers of other forms of energy such as fuel oil, electricity, propane, coal, wind and solar.
CPCNs, issued by the SCC, are generally of perpetual duration and subject to compliance with regulatory standards. Although Roanoke Gas has exclusive rights for the distribution of natural gas in its service area, the Company competes with suppliers of other forms of energy such as fuel oil, electricity, propane and coal.
For the fiscal year ended September 30, 2023, approximately 59% of the Company’s total DTH of natural gas deliveries and 71% of the residential and commercial deliveries were made in the five-month period of November through March.
For the fiscal year ended September 30, 2024, approximately 60% of the Company’s total DTH of natural gas deliveries and 72% of the residential and commercial deliveries were made in the five-month period of November through March.
Management anticipates that the Company will be able to renew all of its franchises prior to their current expiration date; however, there can be no assurance that a given jurisdiction will not refuse to renew a franchise or will not, in connection with the renewal of a franchise, attempt to impose restrictions or conditions that could adversely affect the Company’s business operations or financial condition.
Roanoke Gas is now serving the Franklin County area with natural gas delivered through the MVP. 7 Table of Contents Management anticipates that the Company will be able to renew all of its franchises prior to their current expiration date; however, there can be no assurance that a given jurisdiction will not refuse to renew a franchise or will not, in connection with the renewal of a franchise, attempt to impose restrictions or conditions that could adversely affect the Company’s business operations or financial condition.
Roanoke Gas is currently served by two pipelines, Columbia and East Tennessee. Columbia historically has delivered more than 65% of the Company’s required gas supply, with East Tennessee delivering the remainder. The rates paid for interstate natural gas transportation and storage services are established by tariffs approved by FERC.
Roanoke Gas is directly served by Columbia, East Tennessee and Mountain Valley. Columbia historically has delivered more than 65% of the Company’s required gas supply, with East Tennessee delivering the remainder. The Mountain Valley Pipeline began operations in June 2024. The rates paid for interstate natural gas transportation and storage services are established by tariffs approved by FERC.
Most of the revenue billed for these customers relates only to transportation service, and not to the purchase of natural gas, resulting in total revenues generated by these deliveries to be less than 10%, although they represent more than 35% of total natural gas volumes and approximately 10% of margin for the years presented. 6 Table of Contents The Company’s revenues are affected by changes in gas costs, changes in consumption volume due to weather and economic conditions and changes in the non-gas portion of customer billing rates.
Transportation customers account for more than 35% of total natural gas volume deliveries and approximately 10% of margin for the years presented. 6 Table of Contents The Company’s revenues are affected by changes in gas costs, changes in consumption volume due to weather and economic conditions and changes in the non-gas portion of customer billing rates.
Greater demand for natural gas for electric generation and other uses can provide upward pressure on the price of natural gas. Competition from renewable energy sources, such as solar and wind, is likely to increase as the political environment currently favors these energy sources through incentives or by placing restrictions on emissions from the burning of fossil fuels.
Competition from renewable energy sources for generating electricity, such as solar and wind, is likely to increase as the political environment currently favors these energy sources through incentives or by placing restrictions on emissions from the burning of fossil fuels.
The current pipeline and storage contracts expire at various times from calendar 2024 to 2028. The Company anticipates being able to renew these contracts or enter into other contracts to meet customers’ existing demand for natural gas. In March 2023, Roanoke Gas began operation of its RNG facility.
The current pipeline and storage contracts expire at various times from calendar 2027 to 2044. The Company anticipates being able to renew these contracts or enter into other contracts to meet customers’ existing demand for natural gas.
Nevertheless, the Company continues to see a demand for natural gas. Growth in residential and commercial service has been steady as the Company continues to expand its customer base through a combination of extending distribution service and converting other energy users to natural gas.
However, the demand for all forms of energy, including natural gas, is being driven by consumers using more digital platforms and expanding their use of artificial intelligence. Growth in residential and commercial service has been steady as the Company continues to expand its customer base through a combination of extending distribution service and converting other energy users to natural gas.
A copy of this annual report, as well as other recent annual and quarterly reports, are available on the Company's website or through the SEC. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding the Company’s filings at www.sec.gov. 8 Table of Contents
The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding the Company’s filings at www.sec.gov. 8 Table of Contents
The Company’s residential and commercial sales are primarily seasonal and subject to temperature sensitivity as the majority of the gas sold by Roanoke Gas to these customers is used for heating.
Increases or decreases in the cost of natural gas are passed on to customers through the PGA mechanism as explained in Note 1 of the consolidated financial statements. The Company’s residential and commercial sales are primarily seasonal and subject to temperature sensitivity as the majority of the gas sold by Roanoke Gas to these customers is used for heating.
Website Access to Reports The Company’s website address is www.rgcresources.com . Information appearing on this website is not incorporated by reference in and is not a part of this annual report. The Company files reports with the SEC.
Information appearing on this website is not incorporated by reference in and is not a part of this annual report. The Company files reports with the SEC. A copy of this annual report, as well as other recent annual and quarterly reports, are available on the Company's website or through the SEC.
The maximum daily winter capacity available for delivery into Roanoke Gas’ distribution system from the current interstate pipelines is 78,606 DTH per day. The LNG facility is capable of storing up to 200,000 DTH of natural gas in a liquid state for use during peak demand.
The LNG facility is capable of storing up to 200,000 DTH of natural gas in a liquid state for use during peak demand. Combined, the pipelines and LNG facility may provide up to 118,606 DTH on a single winter day.
Services Roanoke Gas maintains an integrated natural gas distribution system to deliver natural gas purchased from suppliers to residential, commercial and industrial users in its service territory. The schedule below is a summary of customers, delivered volumes (expressed in DTHs), revenues and margin as a percentage of the total for each category.
The schedule below is a summary of customers, delivered volumes (expressed in DTHs), revenues and margin as a percentage of the total for each category.
Additional information regarding this investment is provided under Note 5 of the Company's annual consolidated financial statements and under the Equity Investment in Mountain Valley Pipeline section of Item 7. Diversified Energy is currently inactive.
Additional information regarding this investment is provided under Note 5 of the Company's annual consolidated financial statements and under the Equity Investment in Mountain Valley Pipeline section of Item 7. Services Roanoke Gas maintains an integrated natural gas distribution system to deliver natural gas purchased from suppliers to residential, commercial and industrial users in its service territory.
Total volume produced from RNG is expected to be less than 1% of current system needs. The Company manages its pipeline contracts and LNG facility in order to provide for sufficient capacity to meet the current natural gas demands of its customers.
The Company manages its pipeline contracts and LNG facility in order to provide for sufficient capacity to meet the current natural gas demands of its customers. The maximum daily winter capacity available for delivery into Roanoke Gas’ distribution system from the current interstate pipelines is 93,606 DTH per day.
The balance of the Company’s annual natural gas requirements are met primarily through market purchases made by its asset manager. Competition The Company’s natural gas utility operates in a regulated, monopolistic environment. Roanoke Gas currently holds the only franchises and/or CPCNs to distribute natural gas in its Virginia service areas.
Total volume produced from RNG is expected to be less than 1% of current system demand. Competition The Company’s natural gas utility operates in a regulated, monopolistic environment. Roanoke Gas currently holds the only franchises and/or CPCNs to distribute natural gas in its Virginia service areas.
The current Sequent contract expires March 31, 2025. The Company uses summer storage programs to supplement heating season gas supply requirements. The Company has contracted for 2.4 million DTH of storage capacity from Columbia, Tennessee Gas Pipeline and Saltville in addition to the capacity available at the Company's LNG facility.
The Company has contracted for 2.4 million DTH of storage capacity from Columbia, Tennessee Gas Pipeline and Saltville in addition to the capacity available at the Company's LNG facility. The balance of the Company’s annual natural gas requirements are met primarily through market purchases made by its asset managers. In March 2023, Roanoke Gas began operation of its RNG facility.
This is particularly relevant as the Company continues to face retirements of key personnel over the next several years. Like many employers, Resources has been challenged at filling key positions, but has been successful in engaging the necessary qualified personnel to fill vacancies by reviewing and adjusting its compensation package to remain competitive in the current market environment.
As the Company's workforce transforms, including departures and retirements, the Company has been successful in engaging the necessary qualified personnel to fill vacancies by reviewing and adjusting its compensation package to remain competitive in the current market environment. Website Access to Reports The Company’s website address is www.rgcresources.com .
Prior to the expiration of the contract, 16 employees were represented by the Union. Employees had been represented by a union since 1952. The Company’s business strategy and ability to serve customers relies on employing talented professionals and attracting, training, developing and retaining a skilled workforce.
The Company’s business strategy and ability to serve customers relies on employing talented professionals and attracting, training, developing and retaining a skilled workforce. This is particularly relevant as the Company continues to project retirements of key personnel over the next several years.
Removed
Increases or decreases in the cost of natural gas are passed on to customers through the PGA mechanism as explained in Note 1 of the Company’s annual consolidated financial statements.
Added
Most of the revenue billed for these customers, which is less than 10% of total revenues, relates only to transportation service, and not to the purchase of natural gas.
Removed
Combined, the pipelines and LNG facility may provide up to 103,606 DTH on a single winter day. Once in service, the MVP will provide Roanoke Gas with additional pipeline capacity to help meet current and future customer energy requirements.
Added
The current Sequent contract expires March 31, 2025. The Company also contracts with Tenaska Marketing Ventures to manage its pipeline transportation and deliveries on Mountain Valley Pipeline. The current Tenaska contract also expires March 31, 2025. The Company uses summer storage programs to supplement heating season gas supply requirements.
Removed
Roanoke Gas plans to serve the Franklin County area with natural gas delivered through the MVP, once MVP is placed into service.
Added
Greater demand for natural gas for electric generation and other uses can exert upward pressure on the price of natural gas.
Removed
During fiscal 2022, Roanoke Gas notified the United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied-Industrial International Union, Local No. 515 (the "Union") representing Company employees of its intent to withdraw recognition of the Union upon expiration of the current agreement.
Removed
Effective August 1, 2022, the collective bargaining agreement between the Union and Roanoke Gas expired and the Union, due to the sustained lack of majority support by bargaining unit members, accepted the Company's withdrawal of recognition and disclaimed its interest in serving as the exclusive collective-bargaining representative of employees of Roanoke Gas.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

35 edited+3 added−16 removed28 unchanged
Biggest changeThe risk factors below are categorized by operational, regulatory and financial: OPERATIONAL RISKS Availability of sufficient and reliable pipeline capacity. The Company is currently served directly by two interstate pipelines. These two pipelines carry 100% of the natural gas transported to the Company’s distribution system.
Biggest changeIf the Company is unable to attract and/or retain qualified employees, the Company could experience increased operating costs and expose the Company to other operational, reputational and financial risks. 9 Table of Contents Availability of sufficient and reliable pipeline capacity. The Company is currently served directly by three interstate pipelines.
Passage of new environmental legislation or implementation of regulations that mandate the use of electric rather than gas appliances, or reductions in greenhouse gas emissions or other similar restrictions could have a negative effect on the Company’s core operations and its investment in the LLC.
Passage of environmental legislation or implementation of regulations that mandate the use of electric rather than gas appliances, or reductions in greenhouse gas emissions or other similar restrictions could have a negative effect on the Company’s core operations and its investment in the LLC.
The SCC approves the rates that the Company charges its customers. During periods of enhanced inflationary pressure or the incurrence of significant additional costs, if the SCC did not timely authorize rates that provided for the recovery of such costs including a reasonable rate of return on investment in natural gas distribution facilities, earnings could be negatively impacted.
The SCC approves the rates that the Company charges its customers. During periods of enhanced inflationary pressure or the incurrence of significant additional costs, if the SCC did not timely authorize rates that provide for the recovery of such costs including a reasonable rate of return on investment in natural gas distribution facilities, earnings could be negatively impacted.
Depending on weather conditions and the level of customer demand, failure of one or both of these interstate transmission pipelines could have a major impact on the Company’s ability to meet customer demand for natural gas and adversely affect the Company’s earnings as a result of lost revenue and the cost of service restoration.
Depending on weather conditions and the level of customer demand, failure of one or more of these interstate transmission pipelines could have a major impact on the Company’s ability to meet customer demand for natural gas and adversely affect the Company’s earnings as a result of lost revenue and the cost of service restoration.
Price considerations could also inhibit customer and revenue growth if builders and developers do not perceive, or are regulatorially prevented from installing, natural gas as a better value than other energy options and elect to install heating systems that use an energy source, including those perceived as more environmentally friendly. 10 Table of Contents REGULATORY RISKS Laws or regulations associated with ESG matters.
Price considerations could also inhibit customer and revenue growth if builders and developers do not perceive, or are regulatorially prevented from installing, natural gas as a better value than other energy options and elect to install heating systems that use energy sources, including those perceived as more environmentally friendly. 10 Table of Contents REGULATORY RISKS Laws or regulations associated with ESG matters.
Such an attack or cyber-security incident on the Company’s information technology systems could result in corruption of the Company’s financial information; disruption of services to our customers; the unauthorized release of confidential customer, employee or vendor information; the interruption of natural gas deliveries to our customers; and/or compromise the safety of our distribution, transmission and storage systems.
Such an attack or cybersecurity incident on the Company’s information technology systems could result in corruption of the Company’s financial information; disruption of services to our customers; the unauthorized release of confidential customer, employee or vendor information; the interruption of natural gas deliveries to our customers; and/or compromise the safety of our distribution, transmission and storage systems.
The LLC’s business, financial condition, results of operations and prospects potentially could be adversely affected by weather conditions, including, but not limited to, the impact of severe weather.
The LLC’s business, cash flows, financial condition, results of operations and prospects potentially could be adversely affected by weather conditions, including, but not limited to, the impact of severe weather.
Access to a line-of-credit is essential to provide seasonal funding of natural gas operations and provide capital budget bridge financing. Access to capital markets and other long-term funding sources is important for capital outlays and funding of the LLC investment. The ability of the Company to maintain and renew its line-of-credit and to secure longer-term financing is critical to operations.
Access to a line-of-credit is essential to provide seasonal funding of natural gas operations and provide capital budget bridge financing. Access to capital markets and other long-term funding sources is important for refinancing and capital outlays. The ability of the Company to secure longer-term financing and to maintain and renew its line-of-credit is critical to operations.
Security incident or cyber-attacks on the Company ’ s computer or information technology systems. The Company’s business operations and information technology systems may be vulnerable to an attack by individuals or organizations intending to disrupt the operations of the Company.
Security incident or cyber-attacks on the Company ’ s computer or information technology systems. The Company’s business operations and information technology systems are targets of cyber attack, and they may be vulnerable to an attack by individuals or organizations intending to disrupt the operations of the Company.
As the Company expects key personnel to retire over the next several years, failure to hire and adequately train replacement employees, including the transfer of significant internal historical knowledge and skills to new employees, or future availability and cost of contracted labor may adversely affect the ability to manage and operate the Company.
As the Company expects key personnel to retire over the next several years, as well as higher mobility trends, failure to hire and adequately train replacement employees, including the transfer of significant internal historical knowledge and skills to new employees, or future availability and cost of contracted labor may adversely affect the ability to manage and operate the Company.
The Company is subject to market risks that are beyond the Company’s control, such as commodity price volatility and interest rate risk. The Company is generally isolated from commodity price risk through the PGA mechanism. With respect to interest rate risk, there has been significant upward movement in interest rates.
Exposure to market risks. The Company is subject to market risks that are beyond the Company’s control, such as commodity price volatility and interest rate risk. The Company is generally isolated from commodity price risk through the PGA mechanism. With respect to interest rate risk, there has been significant movement in interest rates in recent years.
Enhanced focus on ESG matters related to, among other things, concerns raised by advocacy groups about climate change, social issues and corporate governance may lead to increased regulatory review, which may, in turn, lead to new state and federal safety and laws, regulations, guidelines, and enforcement interpretations. The social and corporate governance initiatives have gained prominence in recent years.
Focus on ESG matters related to, among other things, concerns raised by advocacy groups about climate change, social issues and corporate governance may lead to increased regulatory review, which in turn may lead to new state and federal safety and laws, regulations, guidelines, and enforcement interpretations. Social and corporate governance initiatives retain prominence.
Price is a significant competitive factor. Higher natural gas costs or decreases in the price of other energy sources may enhance competition and encourage customers to switch to alternative energy sources, thus lowering natural gas deliveries and earnings.
Higher natural gas costs or decreases in the price of other energy sources may enhance competition and encourage customers to switch to alternative energy sources, thus lowering natural gas deliveries and earnings.
The ability to implement the Company’s business strategy and serve customers is dependent upon employing talented professionals and attracting, training, developing and retaining a skilled workforce.
Inability to attract and retain professional and technical employees. The ability to implement the Company’s business strategy and serve customers is dependent upon employing talented professionals and attracting, training, developing and retaining a skilled workforce.
Risks associated with the operation of a natural gas distribution pipeline and LNG storage facility. Numerous potential risks are inherent in the operation of a natural gas distribution system and LNG storage facility, including unanticipated or unforeseen events that are beyond the control of the Company.
The risk factors below are categorized by operational, regulatory and financial: OPERATIONAL RISKS Risks associated with the operation of a natural gas distribution pipeline and LNG storage facility. Numerous potential risks are inherent in the operation of a natural gas distribution system and LNG storage facility, including unanticipated or unforeseen events that are beyond the control of the Company.
Any adverse developments, such as significant delay or cost over-run, could have a significant effect on the LLC and the Company's earnings and financial position and materially impact Resources consolidated financial position and results of operations, including Resources ability to pay shareholder dividends at the current level or remain in compliance with credit agreement covenants.
Any adverse developments, such as those noted above, could have a significant effect on the LLC and the Company's earnings, cash flows and financial position, and materially impact Resources' consolidated financial position and results of operations, including Resources' ability to pay shareholder dividends at the current level or remain in compliance with credit agreement covenants.
Resources maintains cyber-insurance coverage, which does not protect the Company from cyber incidents but does provide some potential mitigation of the financial impacts resulting from such attacks. Volatility in the price and availability of natural gas. Natural gas purchases represent the single largest expense of the Company.
The Company maintains cyber-insurance coverage, which does not protect the Company from cyber incidents but does provide some potential mitigation of the financial impacts resulting from such attacks. See Item 1C of this Form 10-K for additional discussion. Volatility in the price and availability of natural gas. Natural gas purchases represent the single largest expense of the Company.
Much of the Company's outstanding debt is comprised of fixed rate notes or have interest rate swaps in place. However, these higher interest rates will impact the Company through higher borrowing costs on Roanoke Gas' line-of-credit and Midstream's variable rate credit facility as well as any future borrowings by the Company.
Much of the Company's outstanding debt is comprised of fixed rate notes or have interest rate swaps in place. However, higher interest rates do impact the Company through higher borrowing costs on Roanoke Gas' line-of-credit and Midstream's variable rate credit facilities as well as any future borrowings by the Company. 12 Table of Contents Item 1B. Unresolved Staff Comments. None.
The consequences of these risks, if realized, could adversely affect the LLC’s business, financial condition, results of operations and prospects. Uncertainties and risks inherent in operating and maintaining the LLC's facilities include, but are not limited to, risks associated with facility start-up operations, such as whether the facility will achieve projected operating performance on schedule and otherwise as planned.
Uncertainties and risks inherent in operating and maintaining the LLC's facilities include, but are not limited to, risks associated with facility start-up operations, such as whether the facility will achieve projected operating performance on schedule and otherwise as planned.
Additionally, the Company expects to upgrade to new financial and customer information systems in fiscal 2024. These tools and systems support critical functions including, scheduling and dispatching of service technicians, automated meter reading systems, customer care and billing, revenue recognition, operational plant logistics, and external financial reporting.
These tools and systems support critical functions including, scheduling and dispatching of service technicians, automated meter reading systems, customer care and billing, revenue recognition, operational plant logistics, and external financial reporting.
If the ultimate determination from an examination results in additional taxes above the amount reflected in its financial statements, the Company will record any additional income tax expenses as may be required including any interest and penalties that might result. Exposure to market risks.
If the ultimate determination from an examination results in additional taxes above the amount reflected in its financial statements, the Company may record any additional income tax expenses as may be required including any interest and penalties that might result. The cost of providing post-retirement benefits. The Company provides certain pension and post-retirement benefits.
Furthermore, issuance of debt and equity by Roanoke Gas is also subject to SCC regulation and approval. Delays or lack of approvals could inhibit the ability to access capital markets and negatively impact liquidity or earnings. FINANCIAL RISKS Investment in Mountain Valley Pipeline, LLC. The Company re-assesses its equity investment at least quarterly.
Furthermore, issuance of debt and equity by Roanoke Gas is also subject to SCC regulation and approval. Delays or lack of approvals could inhibit the ability to access capital markets and negatively impact liquidity or earnings. FINANCIAL RISKS Access to capital to maintain liquidity.
In such an event, the Company may not be able to refinance or repay all of its indebtedness, pay dividends or have sufficient liquidity to meet operating and capital expenditure requirements. Any such acceleration would cause a material adverse change in the Company's financial condition. 12 Table of Contents The cost of providing post-retirement benefits.
In such an event, the Company may not be able to refinance or repay all of its indebtedness, pay dividends or have sufficient liquidity to meet operating and capital expenditure requirements. Any such acceleration would cause a material adverse change in the Company's financial condition. Obligations for income taxes that may arise from examinations by taxing authorities.
Capacity limitations on existing pipeline and storage infrastructure could impact the Company’s ability to obtain additional natural gas supplies, thereby limiting its ability to add new customers or meet increased customer demand and thereby limiting future earnings potential. The concerns over capacity limitations should be partially mitigated assuming the MVP becomes operational.
Capacity limitations on existing pipeline and storage infrastructure could impact the Company’s ability to obtain additional natural gas supplies, thereby limiting its ability to add new customers or meet increased customer demand thereby limiting future earnings potential. Inability to complete necessary or desirable pipeline expansion or infrastructure improvement projects.
Noncompliance with any of these covenants could result in an event of default which, if not cured or waived, could accelerate payment on outstanding debt obligations or cause prepayment penalties.
Failure to comply with debt covenant requirements. The Company's long-term debt obligations and bank line-of-credit contain financial covenants. Noncompliance with any of these covenants could result in an event of default which, if not cured or waived, could accelerate payment on outstanding debt obligations or cause prepayment penalties.
Although the Company has, when possible, developed alternative sources of technology and built redundancy into its computer networks and tools, there can be no assurance that these efforts would protect against all potential issues related to the loss of any such technologies. Inability to complete necessary or desirable pipeline expansion or infrastructure improvement projects.
Although the Company has, when possible, developed alternative sources of technology and built redundancy into its computer networks and tools, there can be no assurance that these efforts would protect against all potential issues related to the loss of any such technologies. Geographic concentration of business activities. The Company's business activities are concentrated in the Roanoke Valley and surrounding areas.
The Company's business activities are concentrated in the Roanoke Valley and surrounding areas. Changes in the local economy, politics, regulations and weather patterns or other factors limiting demand for natural gas could negatively impact the Company's existing customer base, leading to declining usage patterns and financial condition of customers.
Changes in the local economy, politics, regulations and weather patterns or other factors limiting demand for natural gas could negatively impact the Company's existing customer base, leading to declining usage patterns and financial condition of customers. Furthermore, these changes could also limit the Company's ability to serve its customers or add new customers within its service territory.
Furthermore, these changes could also limit the Company's ability to serve its customers or add new customers within its service territory. Any of these factors could adversely affect earnings. Competition from other energy providers. The Company competes with other energy providers in its service territory, including those that provide electricity, propane, coal, fuel oil, wind and solar.
These factors could adversely affect earnings. Competition from other energy providers. The Company competes with other energy providers in its service territory, including those that provide electricity, propane, coal, fuel oil, wind and solar. Price is a significant competitive factor.
Although the Company utilizes the assistance of tax professionals in the preparation of its tax returns, there can be no assurance as to the outcome of these examinations.
The Company’s tax returns are subject to examination by the IRS and state tax authorities as disclosed in Note 9 of the consolidated financial statements. Although the Company utilizes the assistance of tax professionals in the preparation of its tax returns, there can be no assurance as to the outcome of these examinations.
In preparing its tax provisions and returns, the Company must make calculations and assumptions regarding tax treatment of various transactions including the applicability of tax credits. The Company’s tax returns are subject to examination by the IRS and state tax authorities.
The Company is subject to federal and state income taxes as prescribed by the laws within the United States. Significant judgments are required in determining the provisions for income taxes. In preparing its tax provisions and returns, the Company must make calculations and assumptions regarding tax treatment of various transactions including the applicability of tax credits.
Increased dependence on technology may hinder the Company ’ s business operations and adversely affect its financial condition and results of operations if such technologies fail. Over the last several years, the Company has implemented or acquired a variety of technological tools including both Company-owned information technology and technological services provided by outside parties.
Over the last several years, the Company has implemented or acquired a variety of technological tools including both Company-owned information technology and technological services provided by outside parties. Additionally, the Company is currently upgrading its new financial and customer information systems.
If these factors return and continue for an extended period of time, higher natural gas prices could result in declining sales as well as increases in bad debt expense and increased competition from other energy providers. 9 Table of Contents Inability to attract and retain professional and technical employees.
Increasing demand from other areas, including electricity generation, combined with other factors, have placed upward pressure on natural gas commodity prices in the past. If these factors return and continue for an extended period of time, higher natural gas prices could result in declining usage as well as increases in bad debt expense and increased competition from other energy providers.
Adverse market trends, market disruptions or deterioration in the financial condition of the Company could increase the cost of borrowing, restrict the Company's ability to issue additional shares of its common stock or otherwise limit the Company’s ability to secure adequate funding. Failure to comply with debt covenant requirements. The Company's long-term debt obligations and bank line-of-credit contain financial covenants.
Adverse market trends, market disruptions or deterioration in the financial condition of the Company could increase the cost of borrowing, restrict the Company's ability to issue additional shares of its common stock or otherwise limit the Company’s ability to secure adequate funding. 11 Table of Contents Investment in Mountain Valley Pipeline, LLC. The MVP went into service in June 2024.
In addition, certain specialized knowledge is required of the Company’s technical employees for construction and operation of the natural gas distribution facilities. If the Company is unable to attract and/or retain qualified employees, the Company could experience increased operating costs and expose the Company to other operational, reputational and financial risks.
In addition, certain specialized knowledge is required of the Company’s technical employees for construction and operation of the natural gas distribution facilities.
As a result, the Company may not be able to adequately serve existing customers or expand its distribution system to support customer growth. This could include any potential customer growth or system reliability enhancement resulting from connection to the MVP. Any of these factors could negatively impact earnings. Geographic concentration of business activities.
As a result, the Company may not be able to adequately serve existing customers or expand its distribution system to support customer growth. These factors could negatively impact earnings. Increased dependence on technology may hinder the Company ’ s business operations and adversely affect its financial condition and results of operations if such technologies fail.
Removed
Increasing demand from other areas, including electricity generation, combined with other factors, have placed upward pressure on natural gas commodity prices in the past.
Added
These pipelines carry 100% of the natural gas transported to the Company’s distribution system.
Removed
In 2022, due to increasing uncertainty concerning the ultimate completion of the pipeline, the Company recorded pre-tax impairments totaling $55.1 million concluding that an other-than-temporary decline in fair value existed. Legislative action, as well as actions taken by various jurisdictions and courts, in 2023, as discussed in Note 5, have allowed the construction of the MVP to resume.
Added
The LLC’s gas infrastructure facilities are subject to many operational risks.
Removed
The project’s operator has publicly conveyed the LLC’s target for completing construction of the project as the first quarter of calendar 2024.
Added
The consequences of these risks, if realized, could adversely affect the LLC’s business, cash flows, financial condition, results of operations and prospects.
Removed
However, future circumstances and any attendant effects on the probability of ultimate completion, as well as changes in future cash flow assumptions or changes in the discount rate, could lead to further and possibly full impairment of the Company's investment in the LLC. 11 Table of Contents The success of the Company's investment in the LLC is predicated on several key factors including but not limited to the ability of contributing members in the LLC to meet their capital calls when due, timely state and federal approvals, completing the construction of the pipeline and achieving in-service.
Removed
In addition, there are numerous factors relevant to the LLC in constructing and operating the project, which can adversely affect the Company's earnings and financial performance through its investment, including, among others, as it relates to construction, continued availability of contract crews to complete construction of the pipeline, physical construction conditions, including steep slopes and any further unexpected geological impediments, the ability to obtain or renew ancillary licenses, rights-of-way, permits or other approvals, productivity during the winter season, and opposition from pipeline opponents.
Removed
Should the LLC be unable to adequately address these issues, the LLC’s business, financial condition, results of operations and prospects could be adversely affected, which could materially impact the financial condition and results of operations of the Company. Once in operation, the LLC’s gas infrastructure facilities are subject to many operational risks.
Removed
Certain obstacles discussed above, as well as other factors, such as legal and regulatory setbacks, have in the past caused delays in construction, and to the extent obstacles are realized, such obstacles may further result in, among other things, significantly higher project costs and an extended targeted in-service date for the pipeline.
Removed
Moreover, new factors, such as the operational matters described above, could drive adverse operational and financial impacts.
Removed
There is no guarantee that the LLC, and relatedly the Company and Resources, will not be subject to any adverse developments and related impacts. Access to capital to maintain liquidity.
Removed
Obligations for income taxes that may arise from examinations by taxing authorities. The Company is subject to federal and state income taxes as prescribed by the laws within the United States. Significant judgments are required in determining the provisions for income taxes.
Removed
Global pandemics have previously, continue to, and may in the future adversely impact the Company ’ s business, financial condition, and results of operations, the global economy, and the demand for and prices of natural gas.
Removed
Global pandemics and actions taken by third parties, including, but not limited to, governmental authorities, businesses and consumers, in response to such pandemics, including the COVID-19 pandemic, have adversely impacted and may from time to time in the future adversely impact the global, national and local economies, resulting in significant volatility in the financial markets.
Removed
Previous business closures, restrictions on travel, “stay-at-home” or “shelter-in-place” orders, and other restrictions on movement within and among communities have impacted demand for, and the prices of, natural gas, and such restrictions may be reintroduced at any time.
Removed
A continued, prolonged period or a renewed period a pandemic outbreak could significantly affect demand for natural gas, increase operational costs and limit the ability to provide natural gas service to customer. Governmental intervention could result in additional requirements and costs to the Company in response to a pandemic.
Removed
The failure to develop or reformulate adequate treatments, including the emergence of new variants, and other adverse impacts from a pandemic may adversely affect the Company’s business, financial condition, cash flows, and results of operations. The Company’s operations rely on its workforce having access to its structures, offices and facilities.
Removed
If a significant portion of the Company’s workforce cannot effectively perform their responsibilities, whether resulting from a lack of physical or virtual access, quarantines, illnesses, governmental actions or restrictions (including vaccine mandates and the reactions thereto), or other restrictions or adverse impacts resulting from a pandemic, the Company’s business, financial condition, cash flows, and results of operations may be adversely affected.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Properties. Included in “Utility Property” on the Company’s consolidated balance sheet are storage plant, transmission plant, distribution plant and general plant of Roanoke Gas as categorized by natural gas utilities. The Company has approximately 1,179 miles of transmission and distribution pipeline with transmission and distribution plant representing 90% of the total utility property investment.
Biggest changeItem 2. Properties. Included in “Utility Property” on the Company’s consolidated balance sheet are storage plant, transmission plant, distribution plant and general plant of Roanoke Gas consistent with other natural gas utilities. The Company has approximately 1,180 miles of transmission and distribution pipeline representing 91% of the total utility property.
These stations are located at various points throughout the Company’s distribution system. Roanoke Gas also owns a liquefied natural gas storage facility located in its service territory that has the capacity to store up to 200,000 DTH of natural gas.
These stations are located at various points throughout the Company’s distribution system. Roanoke Gas owns a liquefied natural gas storage facility located in its service territory that has the capacity to store up to 200,000 DTH of natural gas.
The transmission and distribution pipelines are located on or under public roads and highways or private property for which the Company has obtained the legal authorization and rights to operate. Roanoke Gas currently owns and operates six metering stations through which it measures and regulates the gas being delivered by its suppliers.
The transmission and distribution pipelines are located on or under public roads, highways or private property for which the Company has obtained the legal authorization and rights to operate. Roanoke Gas currently owns and operates eleven metering stations through which it measures and regulates the gas being delivered by its suppliers.
The Company’s executive, accounting and business offices, along with its maintenance and service departments, are located on Kimball Avenue in Roanoke, Virginia. Although the Company considers its present properties to be adequate, management continues to evaluate the adequacy of its current facilities as additional needs arise. Item 3. Legal Proceedings.
The Company’s executive, accounting and business offices, along with its operations departments, are located on Kimball Avenue in Roanoke, Virginia. Although the Company considers its present properties to be adequate, management continues to evaluate the adequacy of its current facilities as additional needs arise. Item 3. Legal Proceedings.
Roanoke Gas also began operation of an RNG facility during fiscal 2023 as part of a cooperative agreement with the local water authority to produce commercial quality biogas at the regional pollution control facility. The Company leases the land upon which the RNG facility is located.
Roanoke Gas also began operation of an RNG facility, that it owns, during fiscal 2023 as part of a cooperative agreement with the local water authority to produce commercial quality biogas at the regional pollution control facility. The Company leases the land upon which the RNG facility is located.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeRange of Bid Prices Cash Dividends Year Ending September 30, 2023 High Low Declared First Quarter $ 24.54 $ 20.70 $ 0.1975 Second Quarter 24.45 22.10 0.1975 Third Quarter 23.84 18.12 0.1975 Fourth Quarter 20.40 16.70 0.1975 Year Ending September 30, 2022 First Quarter $ 25.00 $ 21.32 $ 0.1950 Second Quarter 23.84 20.25 0.1950 Third Quarter 22.00 18.01 0.1950 Fourth Quarter 23.35 19.18 0.1950 As of November 20, 2023, there were 950 holders of record of the Company’s common stock.
Biggest changeRange of Bid Prices Cash Dividends Year Ending September 30, 2024 High Low Declared First Quarter $ 21.69 $ 15.42 $ 0.2000 Second Quarter 21.34 18.08 0.2000 Third Quarter 21.51 18.90 0.2000 Fourth Quarter 22.92 19.20 0.2000 Year Ending September 30, 2023 First Quarter $ 24.54 $ 20.70 $ 0.1975 Second Quarter 24.45 22.10 0.1975 Third Quarter 23.84 18.12 0.1975 Fourth Quarter 20.40 16.70 0.1975 As of November 29, 2024, there were 927 holders of record of the Company’s common stock.
This number does not include all beneficial owners of common stock who hold their shares in “street name." A summary of the Company’s equity compensation plans follows as of September 30, 2023: (a) (b) (c) Plan category Number of securities to be issued upon exercise of outstanding options, warrants and rights Weighted-average exercise price of outstanding options, warrants and rights Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) Equity compensation plans approved by security holders 22,000 $ 20.23 589,984 Equity compensation plans not approved by security holders — — — Total 22,000 $ 20.23 589,984
This number does not include all beneficial owners of common stock who hold their shares in “street name." A summary of the Company’s equity compensation plans follows as of September 30, 2024: (a) (b) (c) Plan category Number of securities to be issued upon exercise of outstanding options, warrants and rights Weighted-average exercise price of outstanding options, warrants and rights Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) Equity compensation plans approved by security holders 28,000 $ 18.98 495,729 Equity compensation plans not approved by security holders — — — Total 28,000 $ 18.98 495,729

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

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Biggest changeOperating Revenues Year Ended September 30, 2023 2022 Increase (Decrease) Percentage Gas utility $ 97,325,307 $ 84,035,644 $ 13,289,663 16 % Non utility 114,458 129,578 (15,120 ) (12 )% Total operating revenues $ 97,439,765 $ 84,165,222 $ 13,274,543 16 % Delivered Volumes Year Ended September 30, 2023 2022 Increase (Decrease) Percentage Regulated natural gas (DTH) Residential and commercial 6,408,436 6,577,369 (168,933 ) (3 )% Transportation and interruptible 3,776,569 3,747,967 28,602 1 % Total delivered volumes 10,185,005 10,325,336 (140,331 ) (1 )% HDD 3,290 3,398 (108 ) (3 )% Total gas utility operating revenues for the year ended September 30, 2023 increased by 16% from the year ended September 30, 2022 primarily due to higher natural gas commodity prices during the first half of fiscal 2023, the implementation of a non-gas base rate increase, net of a reduction in SAVE revenues, higher ICC revenues and the implementation of the RNG Rider, slightly offset by lower deliveries due to warmer weather.
Biggest changeOperating Revenues Year Ended September 30, 2024 2023 Increase / (Decrease) Percentage Gas utility $ 84,533,101 $ 97,325,307 $ (12,792,206 ) (13 )% Non utility 108,131 114,458 (6,327 ) (6 )% Total operating revenues $ 84,641,232 $ 97,439,765 $ (12,798,533 ) (13 )% Delivered Volumes Year Ended September 30, 2024 2023 Increase / (Decrease) Percentage Regulated natural gas (DTH) Residential and commercial 6,252,546 6,408,436 (155,890 ) (2 )% Transportation and interruptible 3,796,224 3,776,569 19,655 1 % Total delivered volumes 10,048,770 10,185,005 (136,235 ) (1 )% HDD 3,094 3,290 (196 ) (6 )% 18 Table of Contents Total gas utility operating revenues for the year ended September 30, 2024 decreased by 13% from the year ended September 30, 2023 primarily due to significantly lower natural gas commodity prices and lower deliveries due to warmer weather more than offsetting the implementation of a non-gas base rate increase and increases in WNA and RNG revenues.
As actual costs will differ from the projections used in establishing the PGA rate, the Company will either over-recover or under-recover its actual gas costs during the period. The difference between actual costs incurred and costs recovered through the application of the PGA is recorded as a regulatory asset or liability.
As actual costs and usage will differ from the projections used in establishing the PGA rate, the Company will either over-recover or under-recover its actual gas costs during the period. The difference between actual costs incurred and costs recovered through the application of the PGA is recorded as a regulatory asset or liability.
The Company recovers non-gas related costs through the non-gas portion of its tariff rates, which are adjusted through a non-gas base rate application. Unlike the rate adjustments for the gas portion of rates which are done administratively, the non-gas base rate application can result in an inherent lag in non-gas expense recovery.
The Company recovers non-gas related costs through the non-gas portion of its tariff rates, which are adjusted through a non-gas base rate application. Unlike the rate adjustments for the gas portion of rates which are done administratively, the non-gas base rate application process can result in an inherent lag in non-gas expense recovery.
In March 2023, Roanoke Gas began the operation of the RNG facility to produce commercial quality RNG for delivery into its distribution system through a cooperative agreement with the Western Virginia Water Authority.
In March 2023, Roanoke Gas began the operation of the RNG facility to produce commercial quality biogas for delivery into its distribution system through a cooperative agreement with the Western Virginia Water Authority.
Accordingly, management believes that gross utility margin, a non-GAAP financial measure defined as utility revenues less cost of gas, is a more useful and relevant measure to analyze financial performance.
Accordingly, management believes that gross utility margin , a non-GAAP financial measure defined as utility revenues less cost of gas, is a useful and relevant measure to analyze financial performance.
In selecting the discount rate to be used in determining the benefit liability, the Company utilized the FTSE Pension Discount Curve, which incorporates the rates of return on high-quality, fixed-income investments that corresponded to the length and timing of benefit streams expected under both the pension plan and postretirement plan.
In selecting the discount rate to be used in determining the benefit liability, the Company utilized t he FTSE Pension Discount Curve, which incorporates the rates of return on high-quality, fixed-income investments that corresponded to the length and timing of benefit streams expected under both the pension plan and postretirement plan.
The expenses and liabilities associated with these plans, as disclosed in Note 9 to the consolidated financial statements, are based on numerous assumptions and factors, including provisions of the plans, employee demographics, contributions made to the plan, return on plan assets and various actuarial calculations, assumptions and accounting requirements.
The expenses and liabilities associated with these plans, as disclosed in Note 12 of the consolidated financial statements, are based on numerous assumptions and factors, including provisions of the plans, employee demographics, contributions made to the plan, return on plan assets and various actuarial calculations, assumptions and accounting requirements.
After peaking in December 2022, natural gas commodity prices decreased significantly through the remainder of fiscal 2023. The decline in prices was primarily due to improved supply availability resulting from a warm winter season.
After peaking in December 2022, natural gas commodity prices decreased significantly through the remainder of fiscal 2023 and fiscal 2024. The decline in prices was primarily due to improved supply availability resulting from a warm winter season.
Capital Resources and Liquidity Due to the capital intensive nature of the utility business, as well as the impact of weather variability, the Company’s primary capital needs are the funding of its capital projects, investment in the LLC, the seasonal funding of its natural gas inventories and accounts receivables, debt service and payment of dividends to shareholders.
Capital Resources and Liquidity Due to the capital intensive nature of the utility business, as well as the impact of weather variability, the Company’s primary capital needs are the funding of its capital projects, the seasonal funding of its natural gas inventories and accounts receivables, debt service and payment of dividends to shareholders.
Item 6. [Reserved] . Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations . Overview Resources is an energy services company primarily engaged in the regulated sale and distribution of natural gas to approximately 62,200 residential, commercial and industrial customers in Roanoke, Virginia, and the surrounding localities, through its Roanoke Gas subsidiary.
Item 6. [Reserved] . 15 Table of Contents Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations . Overview Resources is an energy services company primarily engaged in the regulated sale and distribution of natural gas to approximately 62,500 residential, commercial and industrial customers in Roanoke, Virginia, and the surrounding localities, through its Roanoke Gas subsidiary.
This is evidenced by the relative stability of the funded status of the pension plan at September 30, 2023 and 2022 with a funded ratio of 100% and 103%, respectively. The 25% allocation to equity investments provides asset growth potential to offset increases in the pension liability related to those employees continuing to accrue benefits.
This is evidenced by the relative stability of the funded status of the pension plan at September 30, 2024 and 2023 with a funded ratio o f 104 % and 100%, respectively. The 25% allocation to equity investments provides asset growth potential to offset increases in the pension liability related to those employees continuing to accrue benefits.
The Company anticipates funding these items through its operating cash flows, credit availability under short-term and long-term debt agreements and proceeds from the sale of its common stock. Cash and cash equivalents decreased by approximately $3.4 million in fiscal 2023 compared to a $3.4 million increase in fiscal 2022.
The Company anticipates funding these items through its operating cash flows, credit availability under short-term and long-term debt agreements and proceeds from the sale of its common stock. Cash and cash equivalents decreased by approximately $618,000 in fiscal 2024 compared to $3.4 million in fiscal 2023.
The amounts of assets, liabilities, revenues and expenses reported in the Company’s financial statements are affected by accounting policies, estimates and assumptions that are necessary to comply with generally accepted accounting principles. Estimates used in the financial statements are derived from prior experience, statistical analysis and management and professional judgments.
The amounts of assets, liabilities, revenues and expenses reported in the Company’s financial statements are affected by accounting policies, estimates and assumptions that are necessary to comply with generally accepted accounting principles. Estimates used in the financial statements are derived from prior experience, statistical analysis and management and professional judgments. Actual results may differ significantly from these estimates and assumptions.
Cash Flows Provided by Financing Activities: Financing activities generally consist of borrowings and repayments under credit agreements, issuance of common stock and the payment of dividends. Net cash flows provided by financing activities were $200,000 and $18.4 million in fiscal 2023 and 2022, respectively.
Cash Flows Provided by Financing Activities: Financing activities generally consist of borrowings and repayments under credit agreements, issuance of common stock and the payment of dividends. Net cash flows provided by financing activities were approximately $4.0 million and $200,000 in fiscal 2024 and 2023, respectively.
Capital expenditures are expected to be at least $20 million annually over the next few years as Roanoke Gas continues to focus on its SAVE Plan, as well as system improvements and customer growth.
Capital expenditures are expected to be approximately $22 million annually over the next few years as Roanoke Gas continues to focus on its SAVE Plan, as well as system improvements and customer growth.
During the first and fourth fiscal quarters, operating cash flows generally decrease due to the combination of increasing natural gas storage levels and rising customer receivable balances. Cash flows from operating activities increased by $8.2 million from the prior year.
During the first and fourth fiscal quarters, operating cash flows generally decrease due to the combination of increasing natural gas storage levels and rising customer receivable balances. Cash flows from operating activities decreased by $6.4 million from the prior year.
Nearly all of the Company’s revenues, excluding equity in earnings of MVP, are derived from the sale and delivery of natural gas to Roanoke Gas customers based on rates and fees authorized by the SCC.
Nearly all of the Company’s revenues are derived from the sale and delivery of natural gas to Roanoke Gas customers based on rates and fees authorized by the SCC.
Actuarial Assumptions - Postretirement Plan Change in Assumption Increase (Decrease) in Postretirement Benefit Cost Increase in Accumulated Postretirement Benefit Obligation Discount rate -0.25 % $ (9,000 ) $ 323,000 Rate of return on plan assets -0.25 % 29,000 N/A Medical claim cost increase 0.25 % 21,000 316,000 Derivatives - The Company may hedge certain risks incurred in its operation through the use of derivative instruments.
Actuarial Assumptions - Postretirement Plan Change in Assumption Increase (Decrease) in Postretirement Benefit Cost Increase in Accumulated Postretirement Benefit Obligation Discount rate -0.25 % $ 11,000 $ 291,000 Rate of return on plan assets -0.25 % 37,000 N/A Medical claim cost increase 0.25 % 37,000 281,000 Derivatives - The Company may hedge certain risks incurred in its operation through the use of derivative instruments.
The Company recorded approximately $3,005,000 and $1,973,000 in additional revenues under the WNA for weather that was approximately 16% and 13% warmer than normal for the fiscal years ended September 30, 2023 and 2022, respectively.
The Company recorded approximately $3,761,000 and $3,005,000 in additional revenues under the WNA for weather that was approximately 20% and 16% warmer than normal for the fiscal years ended September 30, 2024 and 2023, respectively.
Actuarial Assumptions - Pension Plan Change in Assumption Increase in Pension Cost Increase in Projected Benefit Obligation Discount rate -0.25 % $ 79,000 $ 825,000 Rate of return on plan assets -0.25 % 66,000 N/A Rate of increase in compensation 0.25 % 29,000 132,000 The following schedule reflects the sensitivity of postretirement benefit costs from changes in certain actuarial assumptions, while the other components of the calculation remain constant.
Actuarial Assumptions - Pension Plan Change in Assumption Increase in Pension Cost Increase in Projected Benefit Obligation Discount rate -0.25 % $ 106,000 $ 981,000 Rate of return on plan assets -0.25 % 76,000 N/A Rate of increase in compensation 0.25 % 46,000 212,000 The following schedule reflects the sensitivity of postretirement benefit costs from changes in certain actuarial assumptions, while the other components of the calculation remain constant.
See the Regulatory section below for more information on RNG. The cost of natural gas is a pass-through cost and is independent of the Company's non-gas rates. Accordingly, the Company's approved billing rates include a component designed to allow for the recovery of the cost of natural gas used by its customers.
The cost of natural gas is a pass-through cost and is independent of the Company's non-gas rates. Accordingly, the Company's approved billing rates include a component designed to allow for the recovery of the cost of natural gas used by its customers.
The Company expects to utilize its operating cash flows and credit facilities, as well as consider additional equity capital, to meet the funding requirements of these planned expenditures. Investing cash flows also reflects the fiscal 2023 funding of $2.1 million for Midstream's participation in the LLC, down from the $5.3 million in fiscal 2022.
The Company expects to utilize its operating cash flows and credit facilities, as well as to consider additional long-term debt and equity capital, to meet the funding requirements of these planned expenditures. 22 Table of Contents Investing cash flows also reflects the fiscal 2024 funding of approximately $18,000 for Midstream's participation in the LLC, down from the $2.1 million in fiscal 2023.
The Company used a discount rate of 5.63% for valuing both its pension plan and postretirement plan liabilities at September 30, 2023. These discount rates represent an increase from the 5.15% for the pension plan and 5.16% for the postretirement plan used for valuing the corresponding liabilities at September 30, 2022.
The Company used a discount rate of 4.83% for valuing both its pension plan and postretirement plan liabilities at September 30, 2024. These discount rates represent a decrease from the 5.63% for the pension plan and postretirement plan used for valuing the corresponding liabilities at September 30, 2023.
See the Regulatory section below for more information. 17 Table of Contents Results of Operations The analysis on the results of operations is based on the consolidated operations of the Company, which are primarily associated with the utility segment. Additional segment analysis is provided when Midstream's investment in affiliates represents a significant component of the comparison.
Results of Operations The analysis on the results of operations is based on the consolidated operations of the Company, which are primarily associated with the utility segment. Additional segment analysis is provided when Midstream's investment in affiliates represents a significant component of the comparison.
Cash out flows for dividend payments reached $7.8 million as the annualized dividend rate increased from $0.78 to $0.79 per share and total outstanding shares increased as a result of the stock activity. The Company’s consolidated capitalization was 44.4% equity and 55.6% long-term debt at September 30, 2023, exclusive of unamortized debt expense.
Cash outflows for dividend payments were $8.0 million as the annualized dividend rate increased from $0.79 to $0.80 per share and total outstanding shares increased as a result of the stock issuance activity. The Company’s consolidated capitalization was 44.1% equity and 55.9% long-term debt at September 30, 2024, exclusive of unamortized debt expense.
As the Company’s business is seasonal in nature, volatility in winter weather and the commodity price of natural gas can impact the effectiveness of the Company’s rates in recovering its costs and providing a reasonable return for its shareholders.
See the Equity Investment in Mountain Valley Pipeline section for additional information on the MVP. As the Company’s business is seasonal in nature, volatility in winter weather and the commodity price of natural gas can impact the effectiveness of the Company’s rates in recovering its costs and providing a reasonable return for its shareholders.
Interest Expense - Total interest expense increased by $1,120,876, or 25%, primarily due to higher interest rates on the Company's variable rate debt and, to a lesser extent, higher borrowing levels. The weighted-average interest rate on the Company's total debt increased from 3.06% during fiscal 2022 to 3.83% during fiscal 2023, representing a 25% increase in the average rate.
Interest Expense - Total interest expense increased by $886,080, or 16%, primarily due to higher interest rates on the Company's variable rate debt and, to a lesser extent, higher borrowing levels. The weighted-average interest rate on the Company's total debt increased from 3.83% during fiscal 2023 to 4.27% during fiscal 2024, representing a 12% increase in the average rate.
Actual results may differ significantly from these estimates and assumptions. 24 Table of Contents The Company considers an estimate to be critical if it is material to the financial statements and requires assumptions to be made that were uncertain at the time the estimate was made and changes in the estimate are reasonably likely to occur from period to period.
The Company considers an estimate to be critical if it is material to the financial statements and requires assumptions to be made that were uncertain at the time the estimate was made and changes in the estimate are reasonably likely to occur from period to period. The Company considers the following accounting policies and estimates to be critical.
Beginning January 1, 2023, Roanoke Gas implemented new, non-gas base rates designed to provide $8.55 million in additional annual non-gas revenues in response to higher operating costs and to recover its investment in non-SAVE related projects since the last non-gas base rate increase in fiscal 2019.
In addition, Roanoke Gas is subject to other regulations which are not necessarily industry specific. Beginning January 1, 2023, Roanoke Gas implemented interim, non-gas base rates designed to provide $8.55 million in additional annual revenues in response to higher operating costs and to recover its investment in non-SAVE related projects since the prior non-gas base rate increase in fiscal 2019.
All of Roanoke Gas' long-term debt carry fixed rates either due to fixed rate notes or with variable rate debt that has a corresponding swap agreement. See Note 6 and 7 for more information on the Company's debt.
The average interest rate increased slightly from 3.51% in fiscal 2023 to 3.72% in fiscal 2024. All of Roanoke Gas' long-term debt carry fixed rates either due to fixed rate notes or with variable rate debt that has a corresponding swap agreement. See Note 6 and 7 of the consolidated financial statements for more information on the Company's debt.
The following table summarizes the categories of sources and uses of cash: Cash Flow Summary Years Ended September 30, 2023 2022 Net cash provided by operating activities $ 23,796,700 $ 15,551,676 Net cash used in investing activities (27,402,118 ) (30,615,878 ) Net cash provided by financing activities 218,935 18,444,799 Net increase (decrease) in cash and cash equivalents $ (3,386,483 ) $ 3,380,597 20 Table of Contents Cash Flows Provided by Operating Activities: The seasonal nature of the natural gas distribution business causes operating cash flows to fluctuate significantly during the year, as well as from year to year.
The following table summarizes the categories of sources and uses of cash: Cash Flow Summary Years Ended September 30, 2024 2023 Net cash provided by operating activities $ 17,433,625 $ 23,796,700 Net cash used in investing activities (22,033,632 ) (27,402,118 ) Net cash provided by financing activities 3,981,761 218,935 Net decrease in cash and cash equivalents $ (618,246 ) $ (3,386,483 ) 21 Table of Contents Cash Flows Provided by Operating Activities: The seasonal nature of the natural gas distribution business causes operating cash flows to fluctuate significantly during the year, as well as from year to year.
The SAVE Plan and Rider reset effective January 1, 2023, when the recovery of all prior SAVE Plan investment was incorporated into the new non-gas base rates, and accordingly, SAVE Plan revenue decreased by approximately $2,182,000 from the prior year.
The SAVE Plan and Rider were reset effective January 1, 2023, when the recovery of all prior SAVE Plan investment was incorporated into the new non-gas base rates.
Inflation, due to supply chain delays, labor shortages and limited availability of critical supplies among other factors, affects the Company through increases in non-gas expenses such as labor, employee benefits, materials and supplies, contracted services, corporate insurance and other areas.
In addition, there is potential for higher bad debts related to customers' inability to pay higher natural gas bills. 17 Table of Contents Inflation, due to supply chain delays, labor shortages and limited availability of critical supplies, among other factors, affects the Company through increases in non-gas expenses such as labor, employee benefits, materials and supplies, contracted services, corporate insurance and other areas.
With the soft freeze of both the pension and postretirement plans, future liability growth associated with participant service and compensation has been limited.
The Company has focused on minimizing the financial risk associated with these plans. With the soft freezes of both the pension and postretirement plans, future liability growth associated with participant service and compensation has been limited.
The term gross utility margin is not intended to represent or replace operating income, the most comparable GAAP financial measure, as an indicator of operating performance and is not necessarily comparable to similarly titled measures reported by other companies. The following results of operations analyses will reference gross utility margin.
The term gross utility margin is not intended to represent or replace gross margin, t he most comparable GAAP financial measure, as an indicator of operating performance and is not necessarily comparable to similarly titled measures reported by other companies. A reconciliation between gross utility margin and gross margin is presented under the Gross Utility Margin section below.
ATM Program Resources issued 127,852 shares of common stock for $2,713,020, net of $69,565 in fees, under the ATM program for the year ended September 30, 2023. For the year ended September 30, 2022, Resources issued 4,872 shares of common stock for $112,500, net of $2,813 in fees, under the ATM program.
ATM Program Resources issued 129,164 shares of common stock for $2,635,200, net of $67,569 in fees, under the ATM program for the year ended September 30, 2024. For the year ended September 30, 2023, Resources issued 127,852 shares of common stock for $2,713,020, net of $69,565 in fees, under the ATM program.
The billing cycle for most customers does not coincide with the accounting periods used for financial reporting. The Company accrues revenue for estimated natural gas delivered to customers but not yet billed during the accounting period. The following month, the unbilled estimate is reversed, the actual usage is billed and a new unbilled estimate is calculated.
Unbilled revenue recognition - The Company bills its regulated natural gas customers on a monthly cycle. The billing cycle for most customers does not coincide with the accounting periods used for financial reporting. The Company accrues revenue for estimated natural gas delivered to customers but not yet billed during the accounting period.
Construction on the MVP resumed immediately and completion is currently expected during the first quarter of calendar 2024. The utility operations of Roanoke Gas are regulated by the SCC, which oversees the terms, conditions and rates charged to customers for natural gas service, safety standards, extension of service and depreciation.
The utility operations of Roanoke Gas are regulated by the SCC, which oversees the terms, conditions and rates charged to customers for natural gas service, safety standards, extension of service and depreciation.
A summary of the funded status of both the pension and postretirement plans is provided below: Funded status - September 30, 2023 Pension Postretirement Total Benefit obligation $ 26,747,624 $ 11,248,448 $ 37,996,072 Fair value of assets 26,878,661 13,019,313 39,897,974 Funded status $ 131,037 $ 1,770,865 $ 1,901,902 Funded status - September 30, 2022 Pension Postretirement Total Benefit obligation $ 27,268,456 $ 12,416,546 $ 39,685,002 Fair value of assets 28,017,797 12,138,119 40,155,916 Funded status $ 749,341 $ (278,427 ) $ 470,914 The Company annually evaluates the long-term rate of return on its targeted investment allocation model, as well as the overall asset allocation of its benefit plans, and reviews both plans' potential long-term rate of return with its investment advisors to determine the rates used in each plan's actuarial assumptions.
A summary of the funded status of both the pension and postretirement plans is provided below: Funded status - September 30, 2024 Pension Postretirement Total Benefit obligation $ 29,873,428 $ 10,842,455 $ 40,715,883 Fair value of assets 31,054,138 15,078,281 46,132,419 Funded status $ 1,180,710 $ 4,235,826 $ 5,416,536 Funded status - September 30, 2023 Pension Postretirement Total Benefit obligation $ 26,747,624 $ 11,248,448 $ 37,996,072 Fair value of assets 26,878,661 13,019,313 39,897,974 Funded status $ 131,037 $ 1,770,865 $ 1,901,902 25 Table of Contents The Company annually evaluates the long-term rate of return on its targeted investment allocation model, as well as the overall asset allocation of its benefit plans, and reviews both plans' potential long-term rate of return assumptions with its investment advisors to determine the rates used in each plan's actuarial calculations.
Roanoke Gas recovers natural gas costs through the PGA mechanism as noted above; however, in times where commodity prices rapidly increase, the timing of recovery may lag.
Roanoke Gas recovers natural gas costs through the PGA mechanism as noted above; however, in times where commodity prices rapidly increase, the timing of recovery may lag. Increasing natural gas prices, especially in relation to other energy options, may lead to reductions in energy consumption through customer conservation or fuel switching.
Roanoke Gas filed and received approval from the SCC for a new SAVE Plan and Rider with new rates placed into effect on October 1, 2023 that will result in approximately $366,000 in SAVE related revenues during fiscal 2024. Additional information regarding the SAVE Plan and Rider is provided under the Regulatory section below.
Roanoke Gas filed and received approval from the SCC for a new SAVE Plan and Rider with new rates placed into effect on October 1, 2023, and as a result, SAVE Plan revenues declined to approximately $461,000 in fiscal 2024 from approximately $1,104,000 in fiscal 2023.
The number of heating degree days used to determine normal can change annually as a new year is added to the 30-year period and the oldest year is removed.
The number of heating degree days used to determine normal can change annually as a new year is added to the 30-year period and the oldest year is removed. As a result of adding warmer than normal years to replace colder years, the number of heating degree days that defines normal has trended downward over the last several years.
Midstream's interest expense increased by $906,582, or 61%, as the average interest rate on Midstream's total debt increased from 2.59% to 4.32% related to rising interest rates on the variable rate credit facility, net of an approximate $1,900,000 decrease in total average debt outstanding during the period.
Midstream's interest expense increased by $401,626, or 17%, as the average interest rate on Midstream's total debt increased from 4.32% to 5.21% related to higher interest rates on the variable rate credit facilities that were refinanced in 2024, net of an approximate $1,600,000 decrease in total average debt outstanding during the period.
During fiscal 2023, the Company realized $3.9 million from the issuance of stock through the ATM program, DRIP activity and the exercise of stock options compared to the $2.0 million received from those same activities during the prior year, in addition to the $27 million from the equity offering.
During fiscal 2024, the Company realized $4.7 million from the issuance of 234,645 shares through the ATM program and DRIP activity compared to $3.9 million received from the issuance of 194,719 shares from those same activities, as well as the exercise of stock options, during the prior year.
Off-Balance Sheet Arrangements The Company has no off-balance sheet arrangements as defined in Regulation S-K, Item 303(a)(4)(ii). Equity Investment in Mountain Valley Pipeline The Company has a less than 1% interest in the MVP, which is accounted for as an equity investment, and a less than 1% interest in the Southgate pipeline, which is contemplated to interconnect with the MVP.
Off-Balance Sheet Arrangements The Company has no off-balance sheet arrangements as defined in Regulation S-K, Item 303(a)(4)(ii). 23 Table of Contents Equity Investment in Mountain Valley Pipeline Midstream owns a less than 1% equity investment in the LLC that owns and operates the MVP.
The impairments on the Company's investment in the LLC resulted in significant swings in net income, deferred taxes and the recognition of impairment charges; however, the net effect of the impairments did not have an impact to operating cash flow. 21 Table of Contents Cash Flows Used in Investing Activities: Investing activities primarily consist of expenditures related to investment in Roanoke Gas' utility property, which includes replacing aging natural gas pipe with new plastic or coated steel pipe, improvements to the LNG plant and gas distribution system facilities and expansion of its natural gas system to meet the demands of customer growth, as well as Midstream's investment in the LLC.
Cash Flows Used in Investing Activities: Investing activities primarily consist of expenditures related to Roanoke Gas' utility property, which includes replacing aging natural gas pipe with new plastic or coated steel pipe, improvements to the LNG plant and gas distribution system facilities and expansion of its natural gas system to meet the demands of customer growth.
Dividends declared per share of common stock were $0.79 in fiscal 2023 compared to $0.78 in fiscal 2022.
Earnings Per Share and Dividends - Basic and diluted earnings per share were $1.16 in fiscal 2024 compared to $1.14 per share in fiscal 2023. Dividends declared per share of common stock were $0.80 in fiscal 2024 compared to $0.79 in fiscal 2023.
The Company currently does not expect to make contributions to its pension plan and postretirement plan in fiscal 2024 due to other financing considerations and the funded position of the plans.
Management estimates that the Company will have no minimum funding requirements next year. The Company currently does not expect to make contributions to its pension plan and postretirement plan in fiscal 2025 due to the funded position of the plans.
This shelf agreement was extended in December 2022 and is scheduled to expire on December 6, 2025. The second facility provides for the issuance of up to $70 million in unsecured notes during its current term, which expires September 30, 2025. Roanoke Gas may also adjust capital spending as necessary if such a need would arise.
The first shelf facility provides for the issuance of up to $40 million in unsecured notes in addition to the $28 million previously issued. This shelf agreement is scheduled to expire on December 6, 2025. The second facility provides for the issuance of up to $70 million in unsecured notes during its current term, which expires September 30, 2025.
However, as natural gas commodity prices declined significantly during the summer storage injection period, the average price of gas in storage at September 30, 2023 declined by 37% compared to the same period last year. Accordingly, fiscal 2024 ICC revenues are expected to decline from current year levels.
The average price of gas in storage at September 30, 2024 declined by 23% compared to the same period last year. Accordingly, fiscal 2025 ICC revenues are expected to continue to remain below the prior year's levels.
Midstream, a wholly-owned subsidiary of Resources, is a less than 1% investor in the MVP and Southgate, respectively.
Midstream, a wholly owned subsidiary of Resources, is a less than 1% investor in both the MVP and Southgate. More information regarding the investment in MVP is provided below and under the Equity Investment in Mountain Valley Pipeline section.
The increase in discount rates corresponds to the market reactions to the continuing inflationary pressures on the financial markets and economy. The yield on the 30-year Treasury increased from 2.08% at September 30, 2021 to 3.79% at September 30, 2022 and to 4.73% at September 30, 2023. Corporate bond rates experienced a smaller increase as credit spreads have narrowed.
The decrease in discount rates reflect the Federal Reserve's easing of interest rates in 2024 and general long-term rate decline. The yield on the 30-year Treasury increased from 3.79% at September 30, 2022 to 4.73% at September 30, 2023 and decreased to 4.14% at September 30, 2024. Corporate bond rates experienced a smaller increase as credit spreads have narrowed.
Roanoke Gas' interest expense increased by $214,294, or 7%, as total average debt outstanding increased by approximately $2,500,000 associated with net borrowings under the Company's line-of-credit. The average interest rate increased slightly from 3.38% in fiscal 2022 to 3.51% in fiscal 2023.
Total average debt outstanding during fiscal 2024 increased by 3% from fiscal 2023. Total borrowing levels were mitigated by equity issues through the ATM in fiscal 2024. Roanoke Gas' interest expense increased by $484,454, or 15%, as total average debt outstanding increased by approximately $5,600,000 associated with net borrowings under the Company's line-of-credit.
The non-gas base rate increase implemented in January 2023 contributed to an approximate $3.0 million increase in non-gas volumetric revenues, net of lower delivered volumes, and $1.2 million increase in customer base charge revenue. SAVE revenues declined due to the inclusion of the cumulative SAVE investment in the new non-gas base rates.
The non-gas base rate increases implemented in 2023 and 2024 were the main contributing factors to an approximate $1.7 million increase in non-gas volumetric revenues, net of lower delivered volumes, and a $522,000 increase in customer base charge revenue.
Similar to the pension plan, the revision to the asset allocation will seek to reduce the volatility in funded status while still providing the opportunity for asset growth through the equity portion of the portfolio. The funded status for the postretirement plan was 116% and 98% as of September 30, 2023 and 2022, respectively.
This revision to the investment targets is in response to a greater proportion of participants that have transitioned to retirement. Similar to the pension plan, the revision to the asset allocation will seek to reduce the volatility in funded status while still providing the opportunity for asset growth through the equity portion of the portfolio.
Fiscal Year 2023 Compared with Fiscal Year 2022 The table below reflects operating revenues, volume activity and heating degree days.
The following results of operations analyses will reference gross utility margin. Fiscal Year 2024 Compared with Fiscal Year 2023 The tables below reflect operating revenues, volume activity and heating degree days.
Management believes Roanoke Gas has sufficient financing resources to meet its cash requirements for the next year, including the line-of-credit and the two private shelf facilities. The first shelf facility provides for the issuance of up to $40 million in unsecured notes in addition to the $28 million previously issued.
Resources maintains the ability to raise equity capital through its ATM program, private placement or other public offerings. Management believes Roanoke Gas has access to sufficient financing resources to meet its cash requirements for the next year, including the line of credit and the two private shelf facilities.
Natural gas commodity prices for fiscal 2023 purchases declined from the prior year by approximately 9% per DTH; however, the total commodity component of gas costs increased by 37% per DTH due to the withdrawal of higher priced storage gas during the winter heating season.
Natural gas commodity prices for fiscal 2024 purchases declined by 43% per DTH from the prior year and the total commodity component of gas costs decreased by 44% per DTH from the prior year.
With current projections by the LLC's managing partner of MVP completion date during the first quarter of calendar 2024 and the subsequent operation of the pipeline, management believes that they will be able to negotiate extensions or refinancing options on the maturing debt and Midstream will meet its cash requirements over the ensuing 12 month period. 22 Table of Contents Notes 6 and 7 provide details on the Company's line-of-credit and borrowing activities.
Management believes that it will be able to meet Midstream's cash requirements over the ensuing 12-month period with its quarterly cash distributions from MVP. Notes 6 and 7 of the consolidated financial statements provide details on the Company's line-of-credit and borrowing activities.
This compares to 40.4% equity and 59.6% long-term debt at September 30, 2022. The current interest rate environment is expected to continue to result in higher interest costs associated with the Company's variable rate debt or on the issuance of any new debt.
This compares to 44.4% equity and 55.6% long-term debt at September 30, 2023. The current interest rate environment may result in lower interest costs associated with the Company's variable rate debt. Management regularly evaluates the Company’s liquidity through a review of its available financing resources and its cash flows.
Accordingly, management filed a non-gas rate application in early December 2022 to incorporate increased expense levels and additional rate base, including both SAVE and non SAVE related plant investment, since the last non-gas base rate application. These new non-gas base rates were implemented effective January 1, 2023 subject to refund.
Accordingly, management filed a non-gas rate application in February 2024 to incorporate increased expense levels from continued inflationary pressures since the last non-gas base rate application. These new non-gas base rates were implemented effective July 1, 2024, subject to refund. See Note 4 of the consolidated financial statements for more information, including reaching settlement with SCC staff.
The rise in the discount rates was the primary factor in the reduction of the benefit obligations for both the pension and the postretirement plan.
The rise in the discount rates through 2023 was the primary factor in the reduction of the benefit obligations for both the pension and the postretirement plan. Mortality assumptions were based on the PRI-2012 Mortality Table with improvements projected generational using Projection Scale MP-2021 for the curr ent year valuation.
The WNA mechanism reduces the volatility in earnings due to the variability in temperatures during the heating season.
See Note 4 of the consolidated financial statements for additional information regarding the SAVE Plan and Rider. 16 Table of Contents The WNA mechanism reduces the volatility in earnings due to the variability in temperatures during the heating season.
As a result of adding warmer than normal years to replace colder years, the number of heating degree days that defines normal has trended downward over the last several years. 16 Table of Contents The Company also has an approved rate structure that mitigates the impact of financing costs of its natural gas inventory.
The Company also has an approved rate structure that mitigates the impact of financing costs of its natural gas inventory.
Pension and Postretirement Benefits - The Company offers a pension plan and a postretirement plan to eligible employees.
Because the process is performed monthly, the Company routinely ensures its methodology continues to provide a reasonable estimate. 24 Table of Contents Pension and Postretirement Benefits - The Company offers a pension plan and a postretirement plan to eligible employees.
Revenues from the SAVE Plan and Rider were incorporated into the new non-gas base rates. In September 2023, Roanoke Gas and SCC staff reached a settlement agreement for $7.45 million in additional annual non-gas revenues pending final approval by the SCC.
Revenues from the SAVE Plan and Rider were incorporated into the interim, non-gas base rates. On December 19, 2023, the SCC issued a final order approving a non-gas base rate increase of $7.45 million. The order also directed Roanoke Gas to refund the excess revenues collected during the time the interim rates were in effect with interest.
The Company had five interest-rate swaps outstanding at September 30, 2023 related to its variable rate notes. See Notes 1 and 7 to the consolidated financial statements for additional information regarding the swaps. Item 7A. Quantitative and Qualitative Disclosures About Market Risk. Not applicable.
A 25 basis point decrease and increase on the yield curve would result in a $228,248 decrease and $226,748 increase, respectively, in the fair value of the interest rate swaps on the balance sheet. See Notes 1 and 8 to the consolidated financial statements for additional information regarding the swaps. Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
The Company maintains cyber insurance to mitigate financial costs that may result from a cyber incident. Inflation and Rising Prices Natural gas commodity, delivery and storage capacity costs constitute the single largest expense of the Company, representing 65% of fiscal 2023 total operating expenses.
At the end of the annual deferral period, the balance is amortized over an ensuing 12-month period as amounts are reflected in customer billings. Inflation and Rising Prices Natural gas commodity, delivery and storage capacity costs constitute the single largest expense of the Company, representing 53% of fiscal 2024 total operating expenses.
Management maintained the long-term rate of return assumption at 4.50% for fiscal 2023 based on evaluation by the Company's investment advisor and management's assessment of the current market environment. The long-term rate of return for the postretirement plan increased slightly from 3.95% in fiscal 2023 to 4.24% for fiscal 2024.
The long-term rates of return increased slightly from 4.50% in fiscal 2024 to 4.95% for fiscal 2025 for the pension plan and from 4.21% in fiscal 2024 to 4.95% for fiscal 2025 for the postretirement plan. Management will continue to evaluate the return assumptions and asset allocation and adjust both as market conditions warrant.
Total ICC revenues increased from approximately $657,000 in fiscal 2022 to $967,000 in fiscal 2023 as a result of the higher cost of gas in storage at the beginning of the fiscal year. Monthly average inventory balances, used to calculate ICC revenues, increased by 46%.
Total ICC revenues decreased from approximately $967,000 in fiscal 2023 to $728,000 in fiscal 2024 due to lower natural gas commodity prices during the 2023 summer storage injection season resulting in a lower average cost of natural gas in storage.
Residential and commercial deliveries decreased by 3% corresponding to a comparable decline in heating degree days, while transportation and interruptible volumes, primarily driven by business activity rather than weather, increased by 1%. 18 Table of Contents Gross Utility Margin Year Ended September 30, 2023 2022 Increase Percentage Gas utility revenues $ 97,325,307 $ 84,035,644 $ 13,289,663 16 % Cost of gas - utility 51,742,718 42,496,055 9,246,663 22 % Gross utility margin $ 45,582,589 $ 41,539,589 $ 4,043,000 10 % Gross utility margin increased over the prior fiscal year prima rily as a result of the implementation of higher non-gas base rates, net of the reduction in SAVE revenues, combined with higher ICC revenues and the addition of RNG revenues.
Gross Utility Margin Year Ended September 30, 2024 2023 Increase Percentage Gas utility revenues $ 84,533,101 $ 97,325,307 $ (12,792,206 ) (13 )% Cost of gas - utility 35,967,987 51,742,718 (15,774,731 ) (30 )% Gross utility margin $ 48,565,114 $ 45,582,589 $ 2,982,525 7 % Gross utility margin increased over the prior fiscal year primarily as a result of the implementation of new non-gas base rates, net of SAVE, WNA and RNG revenue, offset by the reductions in ICC revenues.
The improvement in the funded status was due to the higher equity allocation and shorter duration of the fixed income portion of the portfolio compared to the duration of the corresponding plan liabilities. Management will continue to monitor and evaluate the asset allocation and adjust as warranted.
M anagement will continue to monitor and evaluate the asset allocation and adjust as warranted.
In the fourth quarter of fiscal 2023, the Company reached a settlement with the SCC staff on all outstanding issues in the case. Under the terms of the settlement, the Company agreed to an incremental revenue requirement of $7.45 million. The Company agreed to begin billing the new rates effective October 1, 2023.
The new interim non-gas base rates went into effect for customer billings on or after July 1, 2024, subject to refund. On October 16, 2024, the Company reached a settlement with the SCC staff on all outstanding issues in the case.
Removed
More information regarding the investment in MVP is provided below and under the Equity Investment in Mountain Valley Pipeline section. 15 Table of Contents Following extended periods of delay due to actions by the Fourth Circuit, Congress passed and the President signed into law legislation to expedite the completion of the MVP.
Added
Refunds to customers, which were accrued in fiscal 2023 and reflected in regulatory liabilities, were made in February 2024. On February 2, 2024, primarily in response to continued inflationary pressures, Roanoke Gas filed for a non-gas base rate increase of $4.33 million. The filing also reflected an increase in the Company's authorized return on equity from 9.44% to 10.35%.
Removed
The Fourth Circuit continued to stay the necessary permits to complete the pipeline. Following a petition filed by the LLC to request relief from the stays issued by the Fourth Circuit, on July 27, 2023, the SCOTUS granted the relief requested and vacated the stays.
Added
Under the terms of the settlement, the Company agreed to an annual incremental revenue requirement increase of $4.08 million based on a return on equity of 9.90%.
Removed
In addition, Roanoke Gas is subject to other regulations which are not necessarily industry specific.
Added
Following extended periods of regulatory and judicial delays, as well as receipt of authorization from the FERC, the MVP entered into service on June 14, 2024 and became available for interruptible or short-term firm transportation service. On July 1, 2024, the MVP commenced long-term firm capacity obligations.
Removed
Roanoke Gas placed the new non-gas base rates into effect on October 1, 2023 and has established a reserve for the difference between the rates implemented on January 1, 2023 and the new rates in the settlement agreement.

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