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What changed in RGC RESOURCES INC's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of RGC RESOURCES INC's 2022 and 2023 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 2023 report.

+248 added−304 removedSource: 10-K (2023-12-01) vs 10-K (2022-12-02)

Top changes in RGC RESOURCES INC's 2023 10-K

248 paragraphs added · 304 removed · 166 edited across 5 sections

Item 1. Business

Business — how the company describes what it does

20 edited+1 added−2 removed17 unchanged
Biggest changeThe 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 78,606 DTH per day.
Biggest changeThe 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.
Industrial customers include primarily 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 requirements directly from a supplier other than the Company and utilize Roanoke Gas’ natural gas distribution system for delivery to their operations.
CPCNs, issued by the SCC, are generally of perpetual duration and subject to compliance with regulatory standards. 7 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. 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.
Roanoke Gas also provides certain non-regulated services which account for less than 1% of consolidated revenues. In July 2015, the Company formed Midstream for the purpose of becoming a 1% investor in Mountain Valley Pipeline, LLC. The LLC was created to construct and operate interstate natural gas pipelines.
Roanoke Gas also provides certain non-regulated services which account for less than 1% of consolidated revenues. In July 2015, the Company formed Midstream for the purpose of becoming an investor in Mountain Valley Pipeline, LLC. The LLC was created to construct and operate interstate natural gas pipelines.
The current Sequent contract was extended to 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 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 tables above indicate that residential customers represent over 91% of the Company’s customer total; however, they represent less than 40% of the total gas volumes delivered and more than half of the Company’s consolidated revenues and margin.
The tables above indicate that residential customers represent over 91% of the Company’s customer total; however, they represent less than 35% of the total gas volumes delivered and more than half of the Company’s consolidated revenues and margin.
Roanoke Gas is directly 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 balance. The rates paid for interstate natural gas transportation and storage services are established by tariffs approved by FERC.
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.
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, 2022, Resources had 96 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, 2023, Resources had 100 full-time employees.
Most of the revenue billed for these customers relates only to transportation service, and not to the purchase of natural gas, causing total revenues generated by these deliveries to be less than 10%, although they represent more than 30% of total natural gas volumes and approximately 11% of margin for the years presented. 6 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.
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.
For the fiscal year ended September 30, 2022, approximately 62% of the Company’s total DTH of natural gas deliveries and 74% of the residential and commercial deliveries were made in the five-month period of November through March.
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.
The current pipeline and storage contracts expire at various times from 2023 to 2028. The Company anticipates being able to renew these contracts or enter into other contracts to meet customers’ existing demand for natural gas.
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.
For the purposes of this schedule, margin for the utility operations is defined as revenues less cost of gas. 2022 Customers Volume Revenue Margin Residential 91.3 % 35 % 57 % 63 % Commercial 8.6 % 29 % 35 % 24 % Industrial 0.1 % 36 % 7 % 11 % Other Utility 0.0 % 0 % 1 % 2 % Other Non-Utility 0.0 % 0 % 0 % 0 % Total Percent 100.0 % 100.0 % 100.0 % 100.0 % Total Value 62,001 10,325,336 $ 84,165,222 $ 41,640,041 2021 Customers Volume Revenue Margin Residential 91.3 % 37 % 58 % 63 % Commercial 8.6 % 31 % 34 % 25 % Industrial 0.1 % 32 % 7 % 11 % Other Utility 0.0 % 0 % 1 % 1 % Other Non-Utility 0.0 % 0 % 0 % 0 % Total Percent 100.0 % 100.0 % 100.0 % 100.0 % Total Value 62,623 9,909,529 $ 75,174,779 $ 39,969,380 Roanoke Gas’ regulated natural gas distribution business accounted for more than 99% of Resources total revenues for fiscal years ending September 30, 2022 and 2021.
For 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.
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. Nevertheless, the Company continues to see a demand for natural gas.
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.
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 franchise agreements were renewed for a 20-year term, set to expire December 31, 2035.
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.
In 2019, the SCC issued a final order granting a CPCN to furnish gas to all of Franklin County. Unlike the CPCNs for the other counties served by Roanoke Gas, the Franklin County CPCN will terminate within five years of the date of the order if Roanoke Gas does not furnish gas service to the designated service area.
Unlike the CPCNs for the other counties served by Roanoke Gas, the Franklin County CPCN was scheduled to terminate within five years of the date of the order if Roanoke Gas did not furnish gas service to the designated service area. In November 2023, the SCC granted Roanoke Gas a three-year extension on the CPCN.
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.
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.
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 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.
Growth in residential and commercial service has been steady as the Company continues to grow its customer base through a combination of extending distribution service and converting other energy users to natural gas. 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.
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.
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
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 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 103,606 DTH on a single winter day.
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.
Removed
Greater demand for natural gas for electric generation and other uses can provide upward pressure on the price of natural gas. Increased demand, including off-shore LNG shipments, and lower storage levels are placing upward pressure on the price of natural gas.
Added
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.
Removed
With respect to the COVID-19 pandemic, the Company continues to evaluate and implement its pandemic plan to ensure the continuation of safe and reliable service to customers and to maintain the safety of the Company's employees. Website Access to Reports The Company’s website address is www.rgcresources.com .

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

40 edited+15 added−40 removed24 unchanged
Biggest changeThe success of the Company's investment in the LLC is predicated on several key factors including but not limited to the ability of all investors to meet their capital calls when due, timely state and federal approvals and resolving legal challenges to same and completing the construction of the pipeline.
Biggest changeHowever, 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.
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; or compromise the safety of our distribution, transmission and storage systems.
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.
Operational risks could result in, among other things, lost revenues due to prolonged outages, increased expenses due to monetary penalties or fines for compliance failures, liability to third parties for property and personal injury damage, a failure to perform under applicable sales agreements and associated loss of revenues from terminated agreements or liability for liquidated damages under continuing agreements.
Operational risks could result in, among other things, lost revenues due to prolonged outages, increased expenses due to monetary penalties or fines for compliance failures, liability to third parties for property damage and personal injury, a failure to perform under applicable sales agreements and associated loss of revenues from terminated agreements or liability for liquidated damages under continuing agreements.
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 the Company has in place. With respect to interest rate risk, there has been significant upward movement in interest rates.
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.
The risk factors below are categorized by operational, regulatory, financial and general: 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.
The 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.
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. Pandemic outbreak.
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.
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 taxes 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 will record any additional income tax expenses as may be required including any interest and penalties that might result. Exposure to market risks.
Several federal and state legislative and regulatory initiatives have been proposed and passed in recent years in an attempt to limit the effects of climate change, including greenhouse gas emissions such as those created by the combustion of fossil fuels, including natural gas.
In addition, several federal and state legislative and regulatory initiatives have been proposed and enacted in recent years in an attempt to limit the effects of climate change, including greenhouse gas emissions such as those created by the combustion of fossil fuels, including natural gas.
The failure of these or other similarly important technologies, or the Company’s inability to have these technologies supported, updated, expanded, or integrated into other technologies, could hinder its business operations and adversely impact its financial condition and results of operations.
Issues in the implementation or the failure of these or other similarly important technologies, or the Company’s inability to have these technologies supported, updated, expanded, or integrated into other technologies, could hinder its business operations and adversely impact its financial condition and results of operations.
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. The cost of providing health care benefits and 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. 12 Table of Contents The cost of providing post-retirement benefits.
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 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.
Future legislation could also place limitations on the amount of natural gas used by businesses and homeowners to reduce the level of emissions, resulting in reduced deliveries and earnings or provide incentives to customers to utilize alternative energy sources not associated with fossil fuels. Increased compliance and pipeline safety requirements and fines.
Future legislation could also place limitations on the amount of natural gas used by businesses and homeowners to reduce the level of emissions, resulting in reduced deliveries and earnings or provide incentives to customers to utilize alternative energy sources not associated with fossil fuels.
Passage of new environmental legislation or implementation of regulations that mandate 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 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.
Threats of terrorism and catastrophic events resulting from terrorism, cyber-attacks, or individuals and/or groups attempting to disrupt the LLC’s business, or the businesses of third parties, may materially adversely affect the LLC’s business, financial condition, results of operations and prospects. Access to capital to maintain liquidity.
Threats of terrorism and catastrophic events resulting from terrorism, sabotage, cyber-attacks, or individuals and/or groups attempting to disrupt the LLC’s business, or the businesses of third parties, may materially adversely affect the LLC’s business, financial condition, results of operations and prospects.
The LLC’s business, financial condition, results of operations and prospects can be materially adversely affected by weather conditions, including, but not limited to, the impact of severe weather.
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.
Resources maintains cyber-insurance coverage, which does not protect the Company from cyber incidents but does provide some level of protection to mitigate 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.
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.
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.
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.
Although the Company has soft-frozen both plans to limit future growth in each plan's liabilities, ongoing funding obligations and expenses could have a material impact on the Company's financial position, results of operation and cash flows should there be a material reduction in the amount of the recovery of these costs through rates currently charged to customers or significant delays in the timing of the recovery of such costs. 13 Obligations for income taxes that may arise from examinations by taxing authorities.
Although the Company has soft-frozen both plans to limit future growth in each plan's liabilities, ongoing funding obligations and expenses could have a material impact on the Company's financial position, results of operation and cash flows should there be a material reduction in the amount of the recovery of these costs through rates currently charged to customers or significant delays in the timing of the recovery of such costs.
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. Impact of weather conditions and related regulatory mechanisms.
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.
Increasing demand from other areas, including electricity generation, combined with other factors, are placing upward pressure on natural gas commodity prices.
Increasing demand from other areas, including electricity generation, combined with other factors, have placed upward pressure on natural gas commodity prices in the past.
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.
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.
In order to serve new customers or expand service to existing customers, the Company needs to install new pipeline facilities and maintain, expand or upgrade its existing distribution, transmission and/or storage infrastructure.
In order to serve new customers or expand service to existing customers, the Company installs new pipeline facilities and maintains, expands or upgrades its existing distribution, transmission and/or storage infrastructure.
The Company’s tax returns are subject to examination by the IRS and state tax authorities. 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.
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.
If these factors 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 Supply disruptions due to weather or other forces.
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.
These tools and systems support critical functions including, scheduling and dispatching of service technicians, automated meter reading systems, customer care and billing, operational plant logistics, and external financial reporting.
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.
Frequent or prolonged failure could lead customers to switch to alternative energy sources. 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.
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.
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.
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.
Any of these factors could adversely affect earnings. 10 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.
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.
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. Compliance with and changes in tax laws. The Company is subject to extensive tax laws and regulations.
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.
The Company is subject to domestic income taxes as prescribed by the laws of 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.
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.
Hurricanes, floods, fires and other natural or man-made disasters could damage or inhibit production and/or pipeline transportation facilities, which could result in decreased natural gas supplies. Decreased supplies could result in an inability to meet customer demand, service new franchise areas or lead to higher prices and/or service disruptions.
Frequent or prolonged failure could lead customers to switch to alternative energy sources. Hurricanes, floods, fires and other natural or man-made disasters could damage or inhibit production and/or pipeline transportation facilities, which could result in decreased natural gas supplies.
Ongoing obstacles as discussed above have in the past caused and new future obstacles may cause delays in construction, and may further result in significantly higher projected costs and an extended targeted in-service date for the pipeline.
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.
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. Any failure to negotiate successful project development agreements for new facilities with third parties could have similar results.
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.
Price considerations could also inhibit customer and revenue growth if builders and developers do not perceive natural gas to be a better value than other energy options and elect to install heating systems that use an energy source other than natural gas. Inability to renew or obtain new franchise agreements or certificates of public convenience.
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.
There are inherent risks that may be beyond the Company’s control, including third party actions, which could result in damage to pipeline facilities, injury and even death. Such incidents could subject the Company to lawsuits, large fines, increased scrutiny and loss of customers, all of which could have a significant effect on the Company’s financial position and results of operations.
Such incidents could subject the Company to lawsuits, large fines, increased scrutiny and loss of customers, all of which could have a significant effect on the Company’s financial position and results of operations. Regulatory actions or failure to obtain timely rate relief. The Company’s natural gas distribution operations are regulated by the SCC.
New or extended regulatory, legislative or judicial actions or challenges could lead to additional delays and even higher costs, which could affect future returns for the LLC 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 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.
The Company is committed to the safe and reliable delivery of natural gas to its customers. Working in concert with this commitment are numerous federal and state laws and regulations. Failure to comply with these laws and regulations could result in the levy of significant fines.
Working in concert with this commitment are numerous federal and state laws and regulations. Failure to comply with these laws and regulations could result in the levy of significant fines. There are inherent risks that may be beyond the Company’s control, including third-party actions, which could result in damage to pipeline facilities, injury and even death.
In its most recent assessment, due to increasing uncertainty concerning the ultimate completion of the pipeline, and the decision by the LLC's managing partner to record a further impairment of its investment in the joint venture, the Company recorded an additional $15.3 million pre-tax impairment concluding an other-than-temporary decline in fair value existed as of September 30, 2022.
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.
As the Company expects key personnel to retire over the next several years, the failure to transition the skills and knowledge of the departing employees to qualified existing or new employees could increase operating costs and expose the Company to other operational, reputational and financial risks.
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.
Public perception resulting from, among other things, climate change, gas and other hydrocarbon leaks, the explosive nature of natural gas, erosion and sedimentation issues, unpopular expansion projects, environmental justice concerns, and general concerns raised by activists about hydraulic fracturing and pipeline projects has led to, and may in the future lead to, increased regulatory scrutiny, which may, in turn, lead to new local, state and federal safety and environmental laws, regulations, guidelines, enforcement interpretations and/or adverse judicial rulings or regulatory action.
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.
Removed
Disasters could increase costs to repair damaged facilities and result in delays to restore service to interrupted customers as well as lead to additional governmental regulations that may limit production activity and/or increase production and transportation costs. Inability to attract and retain professional and technical employees.
Added
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.
Removed
The Company’s revenues and earnings are primarily dependent upon weather conditions. The Company’s rate structure currently has a WNA factor that results in either a recovery or refund of revenues due to variation from the 30-year average for heating degree-days.
Added
In addition, advocacy groups, both domestically and internationally, have campaigned for governmental and private action to influence change in the business strategies of oil and gas companies, including through the investment and voting practices of investment advisers, public pension funds, universities and other members of the investing community.
Removed
If the WNA mechanism were removed from its rate structure, the Company would be exposed to a much greater risk related to weather variability resulting in earnings volatility. Geographic concentration of business activities. The Company's business activities are concentrated in the Roanoke Valley and surrounding areas.
Added
These activities include increasing attention and demands for action related to climate change and energy transition matters, such as promoting the use of substitutes to fossil fuel and encouraging the divestment of investments in the oil and gas industry, as well as pressuring lenders and other financial services companies to limit or curtail activities with oil and gas companies.
Removed
Roanoke Gas holds either franchises or CPCNs to provide natural gas to customers in its service territory. The franchises are granted by the local municipalities and the CPCNs are granted by the SCC.
Added
If investors or financial institutions shift funding away from companies in the oil and gas industry, the Company’s access to and costs of capital or the market for the Company’s securities may be adversely impacted. Increased compliance and pipeline safety requirements and fines. The Company is committed to the safe and reliable delivery of natural gas to its customers.
Removed
The ability to renew such agreements is important to the long-term operations of the Company and the ability to obtain new franchises or CPCNs is fundamental to expanding the Company’s service territory.
Added
The project’s operator has publicly conveyed the LLC’s target for completing construction of the project as the first quarter of calendar 2024.
Removed
Failure to renew these agreements could result in significant impact to future earnings and the inability to obtain new franchises or CPCNs for new service areas could negatively impact future earnings growth. REGULATORY RISKS Environmental laws or regulations associated with climate change.
Added
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
Regulatory actions or failure to obtain timely rate relief. The Company’s natural gas distribution operations are regulated by the SCC. The SCC approves the rates that the Company charges its customers.
Added
Moreover, new factors, such as the operational matters described above, could drive adverse operational and financial impacts.
Removed
New tax laws and regulations and changes in existing tax laws and regulations are continuously being enacted that could result in increased tax expenditures in the future. 11 Many of these tax liabilities are subject to audits by the respective taxing authority. These audits may result in additional taxes as well as interest and penalties.
Added
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
FINANCIAL RISKS Investment in Mountain Valley Pipeline, LLC. On January 25, 2022, the Fourth Circuit vacated and remanded on specific issues certain permits issued by the Bureau of Land Management and the U.S. Forest Service to the LLC in respect to the Jefferson National Forest.
Added
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
On February 3, 2022, the Fourth Circuit vacated and remanded on specific issues the Biological Opinion and Incidental Take Statement issued by the U.S. Fish and Wildlife Service for MVP. Due to the greater uncertainty of the ultimate completion and commercial operation of MVP, the in-service target of summer 2022 was withdrawn.
Added
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
Additionally, the Company, after assessing the fair value of its investment in the project, using probability-weighted scenarios of ultimate completion and commercial operation, including discounted future cash flows, concluded that an other-than-temporary decline in fair value existed as of February 22, 2022. The resulting $39.8 million pre-tax impairment loss was recorded in the Company’s fiscal 2022 second quarter financial statements.
Added
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
The Company re-assesses its equity investment at least quarterly.
Added
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
After the subsequent impairment loss, recorded in the Company's fiscal fourth quarter, the total pre-tax loss totaled $55.1 million for the year ended September 30, 2022.
Added
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
Future circumstances, including but not limited to significant construction delays, further denials of necessary permits and approvals, changes in the probability of ultimate completion, 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.
Added
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
Any significant delay, cost over-run or the failure to receive the requisite approvals on a timely basis, or at all, could have a significant effect on the Company's earnings and financial position.
Added
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.
Removed
Although the LLC initially received the necessary federal and state permits to construct the pipeline, progress on MVP has been hindered by several legal and regulatory obstacles as the Fourth Circuit, FERC and other governmental agencies have vacated certain agency actions and issued stays, stop orders or delayed authorizations affecting portions or all of the project pending resolution of issues or concerns raised as the project has progressed.
Removed
In addition to needing to address the matters referenced above regarding the Jefferson National Forest and Biological Opinion and Incidental Take Statement, other regulatory and legal matters continue to affect the project.
Removed
These cost overruns may not be approved for recovery or be recovered through other regulatory mechanisms, and the LLC could be obligated to make delay or termination payments or be responsible for other contractual damages.
Removed
The LLC could also experience the loss of tax incentives, or delayed or diminished returns, and could be required to write-off all or a portion of its investment in the project.
Removed
There is no guarantee that the LLC will ultimately (or timely) receive all necessary authorizations or that such authorizations will be maintained in effect following challenge, or even after MVP is placed in service. 12 In addition, there are numerous risks facing the LLC, which can adversely affect the Company's earnings and financial performance through its investment.
Removed
The LLC's ability to retain contract crews to complete construction of the pipeline, the inability to obtain or renew ancillary licenses, rights-of-way, permits or other approvals and opposition from pipeline opponents and environmental groups could all influence the successful completion of the pipeline.
Removed
Once in operation, the LLC’s gas infrastructure facilities are subject to many operational risks.
Removed
The consequences of these risks could have a material adverse effect on the LLC’s business, financial condition, results of operations and prospects.
Removed
The Company provides health care benefits to its employees and covers a portion of the total cost. The cost of providing these and other benefits to active employees could significantly increase over time due to rapidly increasing health care inflation and any future legislative changes related to providing such benefits. The Company also provides certain post-retirement benefits.
Removed
A pandemic event such as COVID-19 or other similar diseases could cause a significant economic restriction or recession negatively impacting the Company’s financial position, results of operations and cash flows.

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Item 2. Properties

Properties — owned and leased real estate

2 edited+1 added−0 removed3 unchanged
Biggest changeThe Company is not known to be a party to any pending legal proceedings. Item 4. Mine Safety Disclosures. Not applicable. 16 PART II
Biggest changeThe Company is not known to be a party to any pending legal proceedings. Item 4. Mine Safety Disclosures. Not applicable. 14 Table of Contents PART II
Item 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 1,168 miles of transmission and distribution pipeline with transmission and distribution plant representing 89% of the total utility property investment.
Item 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.
Added
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.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

2 edited+0 added−0 removed2 unchanged
Biggest changeRange of Bid Prices Cash Dividends Year Ending September 30, 2022 High Low Declared First Quarter $ 25.00 $ 21.32 $ 0.195 Second Quarter 23.84 20.25 0.195 Third Quarter 22.00 18.01 0.195 Fourth Quarter 23.35 19.18 0.195 Year Ending September 30, 2021 First Quarter $ 27.40 $ 22.82 $ 0.185 Second Quarter 25.60 22.08 0.185 Third Quarter 25.60 21.32 0.185 Fourth Quarter 26.02 22.33 0.185 As of November 18, 2022, there were 992 holders of record of the Company’s common stock.
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.
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, 2022: (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 34,500 $ 18.69 411,547 Equity compensation plans not approved by security holders — — — Total 34,500 $ 18.69 411,547
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

Item 6. [Reserved]

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

102 edited+65 added−96 removed33 unchanged
Biggest changeThe table below summarizes the significant components operating cash flow: Years Ended September 30, Increase Cash Flows From Operating Activities: 2022 2021 (Decrease) Net Income (Loss) $ (31,732,602 ) $ 10,102,062 $ (41,834,664 ) Non-cash adjustments: Depreciation 9,182,751 8,669,977 512,774 Equity in earnings (73,327 ) (1,667,554 ) 1,594,227 AFUDC (75,154 ) (55,981 ) (19,173 ) Allowance for doubtful accounts 129,260 (461,130 ) 590,390 Impairment of unconsolidated affiliates 55,092,303 — 55,092,303 Changes in working capital and regulatory assets and liabilities: Accounts receivable (532,630 ) (1,084,726 ) 552,096 Gas in Storage (9,049,181 ) (2,158,709 ) (6,890,472 ) Prepaid income taxes 17,195 (2,457,327 ) 2,474,522 Accounts payable and accrued expenses 310,700 2,862,861 (2,552,161 ) Deferred Taxes (14,258,294 ) 106,188 (14,364,482 ) Change in over (under) collection of gas costs 3,731,584 (3,314,446 ) 7,046,030 WNA (185,414 ) (609,888 ) 424,474 Supplier refunds 2,484,992 — 2,484,992 Non-current regulatory liabilities 507,116 2,367,512 (1,860,396 ) Other 2,377 (730,731 ) 733,108 Net cash provided by operating activities $ 15,551,676 $ 11,568,108 $ 3,983,568 Recovery of the prior year under-collection of gas costs and receipt of supplier refunds, net of the impact of the continuing rise in natural gas commodity prices, accounted for much of the nearly $4 million increase in operating cash flows.
Biggest changeThe table below summarizes the significant components operating cash flow: Years Ended September 30, Increase Cash Flows From Operating Activities: 2023 2022 (Decrease) Net income (loss) $ 11,299,282 $ (31,732,602 ) $ 43,031,884 Non-cash adjustments: Depreciation 9,993,206 9,182,751 810,455 Equity in earnings (2,084,990 ) (73,327 ) (2,011,663 ) AFUDC (362,685 ) (75,154 ) (287,531 ) Allowance for credit losses (216,106 ) 129,260 (345,366 ) Impairment of unconsolidated affiliates — 55,092,303 (55,092,303 ) Changes in working capital and regulatory assets and liabilities: Accounts receivable 1,374,442 (532,630 ) 1,907,072 Gas in storage 5,731,050 (9,049,181 ) 14,780,231 Prepaid income taxes (139,789 ) 17,195 (156,984 ) Accounts payable, accrued expenses and customer credit balances (91,522 ) 310,700 (402,222 ) Deferred taxes 38,241 (14,258,294 ) 14,296,535 Change in over (under) collection of gas costs (66,760 ) 3,731,584 (3,798,344 ) Rate refund 652,018 — 652,018 Supplier refunds (2,209,343 ) 2,484,992 (4,694,335 ) Other (120,344 ) 324,079 (444,423 ) Net cash provided by operating activities $ 23,796,700 $ 15,551,676 $ 8,245,024 The primary driver for the increase in operating cash flows was the change in gas storage balance.
Furthermore, these assumptions are based on the facts and circumstances at the date of the evaluations and are subject to change. See the Equity Investment in Mountain Valley Pipeline section for additional information regarding the LLC valuation and impairment. Regulatory accounting - The Company’s regulated operations follow the accounting and reporting requirements of ASC 980, Regulated Operations .
Furthermore, these assumptions are based on the facts and circumstances at the date of the evaluations and are subject to change. See the Equity Investment in Mountain Valley Pipeline section for additional information regarding the LLC valuation. Regulatory accounting - The Company’s regulated operations follow the accounting and reporting requirements of ASC 980, Regulated Operations .
As required under the provisions of ASC 980, the Company recognizes billed revenue related to SAVE projects and from the WNA to the extent such revenues have been earned under the provisions approved by the SCC. The Company bills its regulated natural gas customers on a monthly cycle.
As required under the provisions of ASC 980, the Company recognizes billed revenue related to SAVE projects, RNG and from the WNA to the extent such revenues have been earned under the provisions approved by the SCC. The Company bills its regulated natural gas customers on a monthly cycle.
Therefore, authorized non-gas rates may not keep pace with the rising costs during inflationary periods. Management regularly evaluates the Company's operations, economic conditions and other factors to assess the need to apply for a non-gas rate adjustment.
Therefore, authorized non-gas base rates may not keep pace with rising costs during inflationary periods. Management regularly evaluates the Company's operations, economic conditions and other factors to assess the need to apply for a non-gas base rate adjustment.
The cost of natural gas, which includes commodity price, transportation, storage, injection and withdrawal fees with any increase or decrease offset by a correlating change in revenue through the PGA, is passed through to customers at the Company's cost.
The cost of natural gas, which includes commodity price, transportation, storage, injection and withdrawal fees, with any increase or decrease offset by a correlating change in revenue through the PGA, is passed through to customers at cost.
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 authorized by the SCC.
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.
In order to mitigate the effect of weather variations and other factors not provided for in the Company's base rates, Roanoke Gas has certain approved rate mechanisms in place that help provide stability in earnings, adjust for volatility in the price of natural gas and provide a return on qualified infrastructure investment.
In order to mitigate the effect of weather variations and other factors not provided for in the Company's base rates, Roanoke Gas has certain approved rate mechanisms in place that help provide stability to customer bills and earnings, adjust for volatility in the price of natural gas and provide a return on qualified infrastructure investment.
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 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, investment in the LLC, the seasonal funding of its natural gas inventories and accounts receivables, debt service and payment of dividends to shareholders.
The determination of fair value of the Company's investment in the LLC is a significant estimate. Management has conducted quarterly evaluations of its investment in the LLC, with the assistance of a valuation specialist, to determine the fair value utilizing an income approach and probability scenarios of discounted cash flows.
The determination of fair value of the Company's investment in the LLC is a significant estimate. Management has conducted quarterly evaluations of its investment in the LLC, with the assistance of a valuation specialist as needed, to determine the fair value utilizing an income approach and probability scenarios of discounted cash flows.
Increasing natural gas prices, especially in relation to other energy options, may lead to reductions in energy consumption through customer conservation or fuel switching in addition to the potential for higher bad debts related to customers inability to pay higher natural gas bills.
Increasing natural gas prices, especially in relation to other energy options, may lead to reductions in energy consumption through customer conservation or fuel switching in addition to the potential for higher bad debts related to customers' inability to pay higher natural gas bills.
Item 6. [Reserved] . 17 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 62,000 residential, commercial and industrial customers in Roanoke, Virginia, and the surrounding localities, through its Roanoke Gas subsidiary.
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.
With the arrival of COVID-19 and the unprecedented widespread impact deriving from the pandemic, including the 17 month disconnection moratorium which ended August 30, 2021, the estimation of the Company's allowance for credit losses has become more subjective with greater reliance on qualitative assessments and judgment rather than historical patterns.
With the arrival of COVID-19 and the unprecedented widespread impact deriving from the pandemic, including the 17-month disconnection moratorium which ended August 30, 2021, the estimation of the Company's allowance for credit losses was more subjective with greater reliance on qualitative assessments and judgment rather than historical patterns.
The Company had five interest-rate swaps outstanding at September 30, 2022 related to its variable rate notes. See Notes 1 and 7 to the consolidated financial statements for additional information regarding the swaps. 33 Item 7A. Quantitative and Qualitative Disclosures About Market Risk. Not applicable.
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.
The number of heating degree days used to determine normal will 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.
The current SAVE Plan is focused on the replacement of pre-1973 first generation plastic pipe in addition to other SAVE related infrastructure. Furthermore, Roanoke Gas’ capital expenditures included costs to extend natural gas distribution mains and services to 544 c ustomers in fiscal 2022, compared to 480 customers in fiscal 2021.
The current SAVE Plan is focused on the replacement of pre-1973 first generation plastic pipe in addition to other SAVE related infrastructure. Furthermore, Roanoke Gas’ capital expenditures included costs to extend natural gas distribution mains and services to 430 c ustomers in fiscal 2023, compared to 544 customers in fiscal 2022.
In August 2022, Roanoke Gas filed an application with the SCC seeking approval of a rate adjustment clause under which the Company will recover the costs associated with constructing, owning, operating and maintaining the renewable natural gas facility. The application was filed under Chapter 30 of Title 56 of the Code of Virginia.
In August 2022, Roanoke Gas filed an application with the SCC seeking approval of a rate adjustment clause to recover the costs associated with constructing, owning, operating and maintaining the renewable natural gas facility. The application was filed under Chapter 30 of Title 56 of the Code of Virginia.
The WNA allows the Company to recover from its customers the lost margin, excluding gas costs, from the impact of weather that is warmer than normal and correspondingly requires the Company to refund to its customers the excess margin earned for weather that is colder than normal.
The WNA allows the Company to recover from customers the lost margin, excluding gas costs, from the impact of warmer than normal weather and correspondingly requires the Company to refund to customers the excess margin earned for colder than normal weather.
Fiscal Year 2022 Compared with Fiscal Year 2021 The table below reflects operating revenues, volume activity and heating degree days.
Fiscal Year 2023 Compared with Fiscal Year 2022 The table below reflects operating revenues, volume activity and heating degree days.
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 nearly $4 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 increased by $8.2 million from the prior year.
The Company recovers non-gas related costs through the non-gas portion of its tariff rates, which are adjusted through a non-gas rate application. Unlike the rate adjustments for the gas portion of rates which are done administratively, the non-gas rate application results 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 can result in an inherent lag in non-gas expense recovery.
The consolidated financial statements include unbilled revenue of $1,585,062 and $1,191,227 as of September 30, 2022 and 2021, respectively. Under the provisions of ASU 2014-09, Revenue from Contracts with Customers, the Company recognizes revenues when natural gas is delivered to customers (the performance obligation) based on SCC approved tariff rates (the transaction price).
The consolidated financial statements include unbilled revenue of $1,240,097 and $1,585,062 as of September 30, 2023 and 2022, respectively. Under the provisions of ASU 2014-09, Revenue from Contracts with Customers, the Company recognizes revenues when natural gas is delivered to customers (the performance obligation) based on SCC approved tariff rates (the transaction price).
At September 30, 2021, Roanoke Gas was in a net under-collected gas cost position of more than $5 million due to timing in adjusting the PGA factor for rising gas costs. During fiscal 2022, Roanoke Gas collected, through customer billings, nearly $3.6 million of the prior year under-collection.
At September 30, 2021, Roanoke Gas was in a net under-collected gas cost position of more than $5 million due to timing in adjusting the PGA factor for rising gas costs. During fiscal 2022, Roanoke Gas collected from customers, through the ACA mechanism, nearly $3.6 million of the prior year under-collection.
These mechanisms include the SAVE Rider, WNA, ICC and PGA. 18 The SAVE Rider provides the Company with a mechanism through which it recovers costs related to SAVE qualified infrastructure investments on a prospective basis, until a formal rate application is filed to incorporate these investments in non-gas base rates.
These mechanisms include the SAVE Rider, WNA, ICC, RNG and PGA. The SAVE Plan and Rider provides the Company with a mechanism through which it recovers costs related to SAVE qualified infrastructure investments on a prospective basis, until such time a formal rate application is filed incorporating these investments in non-gas base rates.
As a result of adding recent warmer than normal years to replace historical colder years, the number of heating degree days that defines normal has trended downward over the last several years. The Company also has an approved rate structure in place that mitigates the impact of financing costs of its natural gas inventory.
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.
This rate component, referred to as the PGA, allows the Company to pass along to its customers increases and decreases in natural gas costs based on a quarterly filing, or more frequent if necessary, with the SCC. Once administrative approval is received, the Company adjusts the gas cost component of its rates to reflect the approved amount.
This rate component, referred to as the PGA, allows the Company to pass along to its customers increases and decreases in natural gas costs through a quarterly filing (or more frequent if necessary) with the SCC. Once SCC approval is received, the Company adjusts the gas cost component of its rates.
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 professional judgments. Actual results may differ significantly from these estimates and assumptions.
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.
If necessary, the amount and timing of any further impairment would be dependent on the specific circumstances, including changes to probabilities of completion, and changes in the assumed future cash flows, and discount rate at the time of evaluation. Midstream had borrowing capacity of $23 million under its non-revolving credit facility, which matures in December 2023.
The amount and timing of further impairment, if any, would be dependent on the specific circumstances, including changes to probabilities of completion, changes in the assumed future cash flows and discount rate at the time of evaluation. Midstream fully borrowed $23 million under its non-revolving credit facility, which matures in December 2024.
These rates are designed to provide the Company with the opportunity to recover its gas and non-gas expenses and to earn a reasonable rate of return for shareholders based on normal weather. These rates are determined based on the filing of a formal non-gas rate application with the SCC.
These rates are designed to provide the Company with the opportunity to recover its gas and non-gas expenses and to earn a reasonable rate of return for shareholders based on normal weather. These rates are determined based on various rate applications filed with the SCC.
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 increased by approximately $3.4 million in fiscal 2022 compared to $1.2 million in fiscal 2021.
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.
Since January 2017 when the pension plan froze access to new employees, the asset allocation has transitioned from a 60% equity and 40% fixed income allocation to a 30% equity and 70% fixed income allocation.
Since January 2017, when the pension plan froze access to new employees, the asset allocation has transitioned from 60% equity and 40% fixed income to 25% equity and 75% fixed.
Under the pension plan, the portion of the liability attributable to active eligible employees continuing to accrue benefits has declined from 56% of the liability as of the date of the soft freeze to 39% in fiscal 2022. The remaining 61% of the 2022 liability is set subject to variability due to changes in the discount rate and mortality adjustments.
Under the pension plan, the portion of the liability attributable to active eligible employees continuing to accrue benefits has declined from 56% of the liability as of the date of the soft freeze to 38% in fiscal 2023. The remaining 62% of the 2023 liability is set, subject to variability in the discount rate and mortality adjustments.
This greater focus on qualitative assessments continued into fiscal 2022 as the residual impact of COVID and the availability of federal financial assistance through the CARES Act and ARPA that were incorporated into fiscal 2021 credit loss estimates continue to have an effect on customer payment patterns as well as the effect of higher natural gas prices reflected on current customer bills.
This greater focus on qualitative assessments continued into fiscal 2022 as the residual impact of COVID and the availability of federal financial assistance through the CARES Act and ARPA that were incorporated into fiscal 2021 credit loss estimates continued to have an effect on customer payment patterns.
The increase in financing cash flows was primarily attributable to Resources' $27 million equity offering in March 2022 of which $12 million was invested in Roanoke Gas and $10 million in Midstream.
The decrease in financing cash flows was primarily attributable to Resources' $27 million equity offering in March 2022 of which $12 million was invested in Roanoke Gas and $10 million in Midstream. The remaining $5 million in equity was invested in Midstream in fiscal 2023.
Capital expenditures are expected to be around $20 million annually over the next few years as Roanoke Gas continues to focus on its SAVE Plan, completion of the RNG project, as well as system improvements and customer growth.
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.
Cash Flows Provided by Financing Activities: Financing activities generally consist of borrowings and repayments under credit agreements, issuance of stock and the payment of dividends. Net cash flows provided by financing activities were $18.4 million and $15.5 million in fiscal 2022 and 2021, 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 $200,000 and $18.4 million in fiscal 2023 and 2022, respectively.
The effective tax rate was 26.5% for fiscal 2022 compared to 24.1% for fiscal 2021. The effective tax rate for the current fiscal year exceeded the combined federal and state statutory rate of 25.74% due to the combination of moving to a taxable loss position combined with additional deductions related to the amortization of the R&D tax credits.
The effective tax rate was 23.6% for fiscal 2023 compared to 26.5% for fiscal 2022. The effective tax rate for the prior fiscal year exceeded the combined federal and state statutory rate of 25.74% due to the combination of moving to a taxable loss position combined with deductions related to the amortization of the R&D tax credits.
Actuarial Assumptions - Pension Plan Change in Assumption Increase in Pension Cost Increase in Projected Benefit Obligation Discount rate -0.25 % $ 90,000 $ 888,000 Rate of return on plan assets -0.25 % 68,000 N/A Rate of increase in compensation 0.25 % 33,000 153,000 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 % $ 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 - Postretirement Plan Change in Assumption Increase (Decrease) in Postretirement Benefit Cost Increase in Accumulated Postretirement Benefit Obligation Discount rate -0.25 % $ (19,000 ) $ 378,000 Rate of return on plan assets -0.25 % 39,000 N/A Medical claim cost increase 0.25 % 22,000 371,000 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 % $ (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.
Due to these cash infusions from the equity issue and the issuance of Roanoke Gas' $15 million and $10 million unsecured notes and Midstreams' $8 million note, Roanoke Gas was able to pay down its line-of-credit balance and maturing $7 million note and Midstream applied $18 million against its non-revolving credit facility and $125,000 related to an amortizing note.
Due to these cash infusions from the equity issue and the issuance of Roanoke Gas' $15 million and $10 million unsecured notes and Midstream's $8 million note, Roanoke Gas was able to pay down its line-of-credit balance and maturing $7 million note and Midstream applied $18 million against its non-revolving credit facility during fiscal 2022.
The Company expects to utilize its credit facilities, as well as consider additional equity capital, to meet the funding requirements of these planned expenditures. Investing cash flows also reflect the fiscal 2022 funding of $5.3 million for Midstream's participation in the LLC.
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.
Dividends declared per share of common stock were $0.78 in fiscal 2022 compared to $0.74 in fiscal 2021.
Dividends declared per share of common stock were $0.79 in fiscal 2023 compared to $0.78 in fiscal 2022.
Management conducted an assessment of its investment in the LLC in accordance with the provisions of ASC 323, Investments - Equity Method and Joint Ventures . This assessment included a third-party valuation.
As a result of the halt in construction in 2022, management conducted an assessment of its investment in MVP in accordance with the provisions of ASC 323, Investments - Equity Method and Joint Ventures . This assessment included a third-party valuation.
See the Regulatory section for more information. 20 Results of Operations The analysis on the results of operations is based on the consolidated operations of the Company, which is primarily associated with the utility segment. Additional segment analysis is provided in areas where Midstream's investment in affiliates represents a significant component of the comparison.
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.
The Company used a discount rate of 5.15% and 5.16%, respectively, for valuing its pension plan liability and postretirement plan liability at September 30, 2022. These discount rates represent an increase from the 2.73% and 2.70% rates used for valuing the corresponding liabilities at September 30, 2021.
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 cost of natural gas is a pass-through cost and is independent of the non-gas rates of the Company. 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.
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.
In the event of a cyber incident, the Company will execute its Security Incident Response Plan. 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 61% of fiscal 2022 total operating expenses.
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.
As the Company's non-gas rates are established based on the 30-year temperature average, monthly fluctuations in temperature from the 30-year average could result in the recognition of more or less revenue than for what the non-gas rates were designed.
As authorized by the SCC, the Company adjusts billed revenues monthly through the application of the WNA model. As the Company's non-gas rates are established based on the 30-year temperature average, monthly fluctuations in temperature from the 30-year average could result in the recognition of more or less revenue than for what the non-gas rates were designed.
See the Equity Investment in Mountain Valley Pipeline section for additional information. 22 Impairment of Unconsolidated Affiliates - The $55,092,303 impairment is due to two other-than-temporary write-downs of the Company's investment in the LLC that were made during the second and fourth quarters of fiscal 2022.
See the Equity Investment in Mountain Valley Pipeline section below for additional information. 19 Table of Contents Impairment of Unconsolidated Affiliates - The $55,092,303 impairment was due to two other-than-temporary write-downs of the Company's investment in the LLC that were made during the second and fourth quarters of fiscal 2022 as a result of the Company's valuation assessment during the prior year.
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.
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 recorded approximately $1,973,000 and $1,196,000 in additional revenue from the WNA for weather that was approximately 13% and 8% warmer than normal for the fiscal years ended September 30, 2022 and 2021, respectively.
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.
Roanoke Gas can recover rising natural gas costs through the PGA mechanism as noted above; however, in times of rapidly increasing costs, 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.
The following table summarizes the categories of sources and uses of cash: Cash Flow Summary Years Ended September 30, 2022 2021 Net cash provided by operating activities $ 15,551,676 $ 11,568,108 Net cash used in investing activities (30,615,878 ) (25,849,237 ) Net cash provided by financing activities 18,444,799 15,508,380 Net increase in cash and cash equivalents $ 3,380,597 $ 1,227,251 23 Cash Flows Provided by Operating Activities: The seasonal nature of the natural gas 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, 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.
Roanoke Gas' expenditures were approximately $25.5 million and $20.0 million in fiscal 2022 and 2021, respectively. Roanoke Gas renewe d 8.3 miles of main and 605 service lines and 7.8 miles of m ain a nd 620 service lin es in fiscal years 2022 and 2021, respectively.
Roanoke Gas' expenditures were approximately $25.3 million and $25.5 million in fiscal 2023 and 2022, respectively. Roanoke Gas renewe d 5.7 miles of main and 452 service lines and 8.3 miles of main and 605 service lines in fiscal years 2023 and 2022, respectively.
Income Taxes - Income tax expense decreased by $14,614,707, moving from a tax expense of $3,204,062 in fiscal 2021 to a net tax benefit of $11,410,645 due to a net deferred tax benefit of $14,180,759 in fiscal 2022 corresponding to the recognition of the impairment of the Company's investment in the LLC.
Income Taxes - Income tax expense increased by $14,902,556, moving from a tax benefit of $11,410,645 in fiscal 2022 to tax expense of $3,491,911 in fiscal 2023. The net tax benefit in fiscal 2022 was attributable to a net deferred tax benefit of $14,180,759 corresponding to the recognition of the impairment of the Company's investment in the LLC.
Such differences may result in a material impact on the amount of expense recorded in future periods or the value of the obligations on the consolidated balance sheet. 31 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 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.
During the same period, the fixed income portion of the plan was transitioned to an LDI approach with the fixed income assets invested in securities with a duration that corresponds to the duration of the corresponding liability for benefits to be paid.
During the same period, the fixed income portion of the plan was transitioned to an LDI approach, with the fixed income assets invested in securities with a duration that corresponds to the duration of the corresponding liability. This synchronization of the pension assets with the pension liabilities has reduced volatility in the funded status of the plan.
Management lowered the long-term rate of return assumption from 4.75% in fiscal 2022 to 4.50% in fiscal 2023 based on evaluation by the Company's investment advisor and management's assessment of the current market environment.
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 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.
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.
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 continued investment in the LLC.
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.
Accordingly, management plans to file a non-gas rate application in early December 2022 to incorporate the increased expense levels and additional rate base, including both SAVE and Non SAVE related plant, since the last non-gas base rate application.
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.
ATM Program Resources issued 4,872 shares of common stock for $112,500, net of $2,813 in fees, under the ATM program for the year ended September 30, 2022. For the year ended September 30, 2021, Resources issued 142,726 shares of common stock for $3,400,443, net of $85,221 in fees, under the ATM program.
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.
The Company also bills customers through a SAVE Rider that provides a mechanism to recover on a prospective basis the costs associated with the Company’s expected investment related to the replacement of natural gas distribution pipe and other qualifying projects. As authorized by the SCC, the Company adjusts billed revenues monthly through the application of the WNA model.
Once a final order is issued by the SCC, the Company will refund the excess billings to its customers. 25 Table of Contents The Company also bills customers through a SAVE Rider that provides a mechanism to recover on a prospective basis the costs associated with the Company’s expected investment related to the replacement of natural gas distribution pipe and other qualifying projects.
Excluding the impairment, the effective tax rate for fiscal 2022 would have been 23.2% representing a decline from 24.1% in the prior year. Earnings Per Share and Dividends - Basic and diluted loss per share were $3.48 in fiscal 2022 compared to $1.22 earnings per share in fiscal 2021.
Excluding the impairment, the effective tax rate for fiscal 2022 would have been 23.2%. See Note 8 for the impact of tax credits on the effective tax rate. Earnings Per Share and Dividends - Basic and diluted earnings per share were $1.14 in fiscal 2023 compared to $3.48 loss per share in fiscal 2022.
On May 16, 2022, Roanoke Gas announced a cooperative agreement under which Roanoke Gas and the Western Virginia Water Authority will produce commercial quality renewable natural gas, or RNG, from biogas produced at the regional water pollution control plant.
On August 31, 2023, the SCC approved the new SAVE Plan and Rider with rates effective October 1, 2023. On May 16, 2022, Roanoke Gas announced a cooperative agreement under which Roanoke Gas and the Western Virginia Water Authority would produce commercial quality RNG from biogas produced at the regional water pollution control plant.
There is risk associated with unauthorized access of this information with a malicious intent to corrupt data, cause operational disruptions or compromise information. Management continuously monitors access to these systems and believes it has security measures in place to protect these systems from cyber attacks and similar incidents; however, there can be no guarantee that an incident will not occur.
Management continuously monitors access to these systems and believes it has security measures in place to protect these systems from cyber attacks and similar incidents; however, there can be no guarantee that an incident will not occur. In the event of a cyber incident, the Company will execute its Security Incident Response Plan.
As the number of participants in the postretirement plan continue to decline through attrition, management will continue to monitor and evaluate the asset allocation and adjust as warranted. 32 A summary of the funded status of both the pension and postretirement plans is provided below: 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 Funded status - September 30, 2021 Pension Postretirement Total Benefit Obligation $ 37,654,468 $ 16,796,849 $ 54,451,317 Fair value of assets 38,914,107 15,882,342 54,796,449 Funded status $ 1,259,639 $ (914,507 ) $ 345,132 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, 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.
Corporate bond rates experienced a larger increase as credit spreads appear to have widened. 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 was the primary factor in the reduction of the benefit obligations for both the pension and the postretirement plan.
Midstream's interest expense increased by $256,225, or 21%, as the average interest rate on Midstream's total debt increased from 2.23% to 2.59% related to rising interest rates on the variable rate credit facility combined with a $2,600,000 increase in total average debt outstanding during the period.
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.
The long-term rate of return for the postretirement plan declined from 4.25% in fiscal 2022 to 3.95% in fiscal 2023 for the same reasons as the pension plan. Management will continue to re-evaluate the return assumptions and asset allocation and adjust both as market conditions warrant. Management estimates that the Company will have no minimum funding requirements next year.
Management will continue to re-evaluate the return assumptions and asset allocation and adjust both as market conditions warrant. 27 Table of Contents Management estimates that the Company will have no minimum funding requirements next year.
Under this application, the Company requested the approval to acquire such facilities at five separate apartment complexes, located in the Company’s service territory, that were under housing authority management. Under the proposed plan, the housing authority would renew existing natural gas distribution facilities to include mains, services and meter installations and then transfer ownership of these facilities to Roanoke Gas.
Under the proposed plan, the housing authority would renew existing natural gas distribution facilities to include mains, services, and meter installations and then transfer ownership of these facilities to Roanoke Gas.
Each of these strategies have served to limit liability growth and reduce volatility. The Company also has focused on its asset investment strategy. With the soft freeze of both the pension and postretirement plans, future liability growth associated with participant service and compensation has been limited.
This soft freeze mirrored the strategy in 2000 when the Company implemented a similar freeze in its postretirement plan. Each of these strategies have served to limit liability growth and reduce volatility. The Company also has focused on its asset investment strategy.
This shelf agreement is scheduled to expire on December 6, 2022; however, management expects to reach an agreement to extend the term of the agreement. The second agreement provides for the issuance of up to $70 million in unsecured notes during its current term, which expires September 30, 2025.
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 SAVE Plan and Rider were last reset effective January 1, 2019, when the recovery of all prior SAVE Plan investment was incorporated into the current non-gas rates.
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.
Mortality assumptions were based on the PRI-2012 Mortality Table with generational mortality improvements using Projection Scale MP-2021 for the current year valuation. Management has continued to focus on reducing risk in the Company's defined benefit plans with a greater emphasis on pension plan risk.
Mortality assumptions were based on the PRI-2012 Mortality Table with improvements projected generational using Projection Scale MP-2021 for the current year valuation. 26 Table of Contents Management has focused on reducing risk in the Company's defined benefit plans through different means including offering lump sum payouts to vested terminated participants and implementing a "soft freeze" on the plans.
As a wholly-owned subsidiary of Resources, Midstream is a more than 1% investor in the MVP and a less than 1% investor in Southgate. More information regarding the investment in MVP is provided below and under the Equity Investment in Mountain Valley Pipeline section.
Midstream, a wholly-owned subsidiary of Resources, is a less than 1% investor in the MVP and Southgate, respectively.
Depreciation covered approximately 36% and 43% o f the current and prior year's capital expenditures, respectively, with the balance provided from other operating cash flows and financing activities.
The RNG project, which went into service in March 2023, also accounted for $3.9 million and $3.1 million in expenditures for fiscal 2023 and 2022, respectively. Depreciation covered approximately 39% and 36% o f the current and prior year's capital expenditures, respectively, with the balance provided from other operating cash flows and financing activities.
Employees hired prior to that date continue to accrue benefits based on compensation and years of service. This "soft freeze" mirrored the strategy in 2000 when the Company implemented a similar freeze in its postretirement plan.
In 2017, the Company implemented a soft freeze to the pension plan whereby employees hired on or after January 1, 2017 would not be eligible to participate. Employees hired prior to that date continue to accrue benefits based on compensation and years of service.
Roanoke Gas recorded these assets and recognized a pre-tax gain of approximately $219,000 during the Company’s fiscal fourth quarter. The housing authority expects to complete the upgrade and subsequent asset transfer at one more apartment complex in fiscal 2023. The authority is awaiting future funding to complete two additional apartment complexes.
Roanoke Gas recorded these assets and recognized a pre-tax gain of approximately $219,000 during the fourth quarter of fiscal 2022. On September 29, 2023, the housing authority transferred the assets from one additional apartment complex to Roanoke Gas and the Company recorded a pre-tax gain of approximately $311,000 during the fourth quarter of fiscal 2023.
Furthermore, the Company currently does not expect to make contributions to its pension plan and postretirement plan in fiscal 2023 due to other financing considerations. The Company will continue to evaluate its benefit plan funding levels in light of funding requirements and ongoing investment returns and make adjustments, as necessary, to avoid benefit restrictions and minimize PBGC premiums.
The Company will continue to evaluate its benefit plan funding levels in light of funding requirements and ongoing investment returns and make adjustments, as necessary, to avoid benefit restrictions and minimize PBGC premiums. The following schedule reflects the sensitivity of pension costs to changes in certain actuarial assumptions, assuming that the other components of the calculation remain constant.
Additional information regarding the SAVE Plan and Rider is provided under the Regulatory section below. The WNA mechanism reduces the volatility in earnings due to the variability in temperatures during the heating season.
The WNA mechanism reduces the volatility in earnings due to the variability in temperatures during the heating season.

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