15 unchanged sentences
Since the Company operates an integrated business with assets being utilized for, and benefiting from, the production, transportation and consumption of natural gas, the Board and management consider physical and transitional climate risks, including policy and legal risks, technological developments, shifts in market conditions, including future natural gas usage, and reputational risks, and the impact of those risks on the Company’s business.
−Removed: In March 2022, the Company published its inaugural Climate Report, analyzing climate-related transitional and physical risks, and describing our strategy for addressing those risks, as well as the resiliency of that strategy under a carbon constrained scenario.
−Removed: The Company reviews and considers adjustments to its approach to capital investment in response to these transitional developments, with its long-term, returns-focused approach.
+Added: The Company reviews and considers adjustments to its approach to capital investment in response to these risks and developments, with its long-term, returns-focused approach.
The Company recognizes the important role of ongoing system modernization and efficiency in reducing greenhouse gas emissions and remains focused on reducing the Company’s carbon footprint, with these efforts positioning natural gas, and the Company’s related infrastructure, to remain an important part of the energy complex.
17 unchanged sentences
A discussion of changes in the Company’s results of operations from fiscal 2021 to fiscal 2022 has been omitted from this Form 10-K, but may be found in Item 7, MD&A, of the Company’s Form 10-K for the fiscal year ended September 30, 2022, filed with the SEC on November 18, 2022.
−Removed: On June 30, 2022, the Company completed the sale of Seneca’s California assets to Sentinel Peak Resources California LLC for a total sale price of $253.5 million, consisting of $240.9 million in cash and contingent consideration valued at $12.6 million at closing.
−Removed: The Company pursued this sale given the strong commodity price environment and the Company's strategic focus in the Appalachian Basin.
−Removed: Under the terms of the purchase and sale agreement, the Company can receive up to three annual contingent payments between calendar year 2023 and calendar year 2025, not to exceed $10 million per year, with the amount of each annual payment calculated as $1.0 million for each $1 per barrel that the ICE Brent Average for each calendar year exceeds $95 per barrel up to $105 per barrel.
−Removed: The sale price, which reflected an effective date of April 1, 2022, was reduced for production revenues less expenses that were retained by Seneca from the effective date to the closing date.
−Removed: Under the full cost method of accounting for oil and natural gas properties, $220.7 million of the sale price at closing was accounted for as a reduction of capitalized costs since the disposition did not alter the relationship between capitalized costs and proved reserves of oil and gas attributable to the cost center.
−Removed: The remainder of the sale price ($32.8 million) was applied against assets that are not subject to the full cost method of accounting, with the Company recognizing a gain of $12.7 million on the sale of such assets.
−Removed: The majority of this gain related to the sale of emission allowances.
−Removed: The Company has continued to pursue development projects to expand its Pipeline and Storage segment.
−Removed: One project on Supply Corporation's system, referred to as the FM100 Project, upgraded a 1950’s era pipeline in northwestern Pennsylvania and created approximately 330,000 Dth per day of additional transportation capacity in Pennsylvania from a receipt point with NFG Midstream Clermont, LLC in McKean County, Pennsylvania to the Transcontinental Gas Pipe Line Company, LLC ("Transco") system at Leidy, Pennsylvania.
−Removed: Construction activities on the expansion portion of the FM100 Project are complete and the project was placed into service in December 2021.
−Removed: This project will provide incremental annual transportation revenues of approximately $50 million.
−Removed: The FM100 Project is discussed in more detail in the Capital Resources and Liquidity section that follows.
−Removed: For further discussion of the Pipeline and Storage segment's revenues and earnings, refer to the Results of Operations section below.
−Removed: The Company's Exploration and Production segment continues to grow, as evidenced by an 8% growth in proved reserves from the prior year to a total of 4,172 Bcfe at September 30, 2022.
+Added: The Company's Exploration and Production segment continues to grow, as evidenced by a 9% growth in proved reserves from the prior year to a total of 4,536 Bcfe at September 30, 2023.
Production increased 19.9 Bcfe during the fiscal year ended September 30, 2023 to a total of 372.5 Bcfe, and is expected to increase again in fiscal 2024.
−Removed: The December 2021 commencement of service for Seneca’s 330,000 Dth per day of incremental pipeline capacity on the Leidy South Project, which was the companion project of the Company's FM100 Project, contributed to the production growth in fiscal 2022.
−Removed: This incremental pipeline capacity provides Seneca with the ability to reach premium Transco Zone 6 (Non-New York) markets.
−Removed: On February 28, 2022, the Company entered into a Credit Agreement (as amended from time to time, the "Credit Agreement") with a syndicate of twelve banks.
−Removed: The Credit Agreement replaced the previous Fourth Amended and Restated Credit Agreement and a previous 364-Day Credit Agreement.
−Removed: The Credit Agreement provides a $1.0 billion unsecured committed revolving credit facility with a maturity date of February 26, 2027.
−Removed: On June 30, 2022, the Company entered into a new 364-Day Credit Agreement (the "364-Day Credit Agreement") with a syndicate of five banks, all of which are also lenders under the Credit Agreement.
−Removed: The 364-Day Credit Agreement provides an additional $250.0 million unsecured committed delayed draw term loan credit facility with a maturity date of June 29, 2023.
+Added: On June 1, 2023, the Company completed its acquisition of certain upstream assets located primarily in Tioga County, Pennsylvania from SWN Production Company, LLC ("SWN") for total consideration of $124.8 million.
+Added: As part of the transaction, the Company acquired approximately 34,000 net acres in an area that is contiguous with existing Company-owned upstream assets.
+Added: This transaction was accounted for as an asset acquisition and, as such, the purchase price was allocated to property, plant and equipment.
+Added: The Company has continued to pursue development projects to expand its Pipeline and Storage segment.
+Added: One project on Supply Corporation's system, referred to as the Tioga Pathway Project, would allow for the transportation of 190,000 Dth per day of shale gas supplies from a new interconnection in northwest Tioga County, Pennsylvania to an existing Supply Corporation interconnection with Tennessee Gas Pipeline Company, LLC at Ellisburg and a new virtual delivery point into an existing Transcontinental Gas Pipe Line Company, LLC’s (“Transco”) capacity lease, providing access to Mid-Atlantic markets.
+Added: The Tioga Pathway Project has a target in-service date in late calendar 2026 and a preliminary cost estimate of approximately $90 million.
+Added: The Tioga Pathway Project is discussed in more detail in the Capital Resources and Liquidity section that follows.
+Added: From a rate perspective, Distribution Corporation, in its Pennsylvania jurisdiction, reached a settlement with the parties to its rate case proceeding.
+Added: On June 15, 2023, the PaPUC issued an order adopting the settlement in full.
+Added: The settlement authorized an increase in Distribution Corporation's annual base rate operating revenues of $23 million that became effective August 1, 2023.
+Added: Distribution Corporation also filed a rate case proceeding with the NYPSC in its New York jurisdiction on October 31, 2023 seeking an increase of $88.8 million in its total annual operating revenues for the projected rate year ending September 30, 2025, with a proposed effective date of October 1, 2024.
+Added: In addition, Supply Corporation filed a NGA Section 4 rate case at FERC on July 31, 2023.
+Added: For further discussion of Distribution Corporation and Supply Corporation rate matters, refer to the Rate Matters section below.
+Added: From a financing perspective, on June 30, 2022, the Company entered into a 364-Day Credit Agreement (the "364-Day Credit Agreement") with a syndicate of five banks, all of which are also lenders under a Credit Agreement (as amended from time to time, the "Credit Agreement").
+Added: The 364-Day Credit Agreement provided an additional $250.0 million unsecured committed delayed draw term loan credit facility with a maturity date of June 29, 2023.
The Company elected to draw $250.0 million under the facility on October 27, 2022.
−Removed: The Company is using the proceeds for general corporate purposes, which will include the redemption in November of a portion of the Company's outstanding long-term debt maturing in March 2023.
−Removed: The Company does not anticipate long-term refinancing for the $250.0 million drawn under the facility or the maturing long-term debt in March 2023.
+Added: The Company used the proceeds for general corporate purposes, which included using $150.0 million for the November 2022 redemption of a portion of the Company's outstanding long-term debt with a maturity date in March 2023.
+Added: In March 2023, the Company utilized short-term borrowings and cash on hand to redeem the remaining long-term debt that had maturity dates in March 2023, which included $350.0 million of 3.75% notes and $49.0 million of 7.395% notes.
+Added: On May 18, 2023, the Company issued $300.0 million of 5.50% notes due October 1, 2026.
+Added: The proceeds of this debt issuance were used for general corporate purposes, including to repay all indebtedness under the $250.0 million unsecured committed delayed draw term loan under the 364-Day Credit Agreement mentioned above.
+Added: The Company expects to use cash on hand, cash from operations, and short-term and long-term borrowings, as needed, to meet its financing needs for fiscal 2024.
+Added: The Company continues to evaluate these financing needs and options to meet them.
+Added: Given the current economic conditions, which include continued inflationary pressures and rising interest rates, the cost and/or availability of capital may be impacted, but the Company continues to expect to meet its financing needs as discussed above.
+Added: In early 2023, turmoil with certain financial institutions created uncertainty in the economy.
+Added: While the Company was not directly impacted, it continues to closely monitor any potential future impacts on the business.
+Added: The Company has a diverse group of twelve banks that participate in its multi-year credit facility.
+Added: All of these banks have solid investment grade credit ratings.
+Added: Additionally, the Company regularly reviews the credit quality of its hedging counterparties, those that provide credit support for customers, and any other material counterparties, and has not identified any material risks as a result of the current economic uncertainty.
CRITICAL ACCOUNTING ESTIMATES
20 unchanged sentences
The ceiling test, which is performed each quarter, determines a limit, or ceiling, on the amount of property acquisition, exploration and development costs that can be capitalized.
−Removed: The ceiling under this test
−Removed: represents (a) the present value of estimated future net cash flows, excluding future cash outflows associated with settling asset retirement obligations that have been accrued on the balance sheet, using a discount factor of 10%, which is computed by applying an unweighted arithmetic average of the first day of the month oil and gas prices for each month within the twelve-month period prior to the end of the reporting period (as adjusted for hedging) to estimated future production of proved oil and gas reserves as of the date of the latest balance sheet, less estimated future expenditures, plus (b) the cost of unproved properties not being depleted, less (c) income tax effects related to the differences between the book and tax basis of the properties.
+Added: The ceiling under this test represents (a) the present value of estimated future net cash flows, excluding future cash outflows associated with settling asset retirement obligations that have been accrued on the balance sheet, using a discount factor of 10%, which is computed by applying an unweighted arithmetic average of the first day of the month oil and gas prices for each month within the twelve-month period prior to the end of the reporting period (as adjusted for hedging) to estimated future production of proved oil and gas reserves as of the date of the latest balance sheet, less estimated future expenditures, plus (b) the cost of unproved properties not being depleted, less (c) income tax effects related to the differences between the book and tax basis of the properties.
The estimates of future production and future expenditures are based on internal budgets that reflect planned production from current wells and expenditures necessary to sustain such future production.
4 unchanged sentences
It should also be noted that a non-cash impairment to write down the book value of the reserves to their present value in any given period causes a reduction in future depletion expense.
−Removed: At September 30, 2022, the ceiling exceeded the book value of the oil and gas properties by approximately $3.2 billion.
+Added: At September 30, 2023, the ceiling exceeded the book value of the oil and gas properties by approximately $794.7 million.
The 12-month average of the first day of the month price for natural gas for each month during 2023, based on the quoted Henry Hub spot price for natural gas, was $3.42 per MMBtu.
(Note — because actual pricing of the Company’s producing properties vary depending on their location and hedging, the prices used to calculate the ceiling may differ from the Henry Hub price, which is only indicative of 12-month average prices for 2023.
−Removed: Actual realized pricing includes adjustments for regional market differentials, transportation fees and contractual arrangements.) In regard to the sensitivity of the ceiling test calculation to commodity price changes, if natural gas prices were $0.25 per MMBtu lower than the average prices used at September 30, 2022 in the ceiling test calculation, the ceiling would have exceeded the book value of the Company's oil and gas properties by approximately $2.9 billion (after-tax), which would not have resulted in an impairment charge.
+Added: Actual realized pricing includes adjustments for regional market differentials, transportation fees and contractual arrangements.) In regard to the sensitivity of the ceiling test calculation to commodity price changes, if natural gas prices were $0.25 per MMBtu lower than the average prices used at September 30, 2023 in the ceiling test calculation, the ceiling would have exceeded the book value of the Company's oil and gas properties by approximately $442.9 million (after-tax), which would not have resulted in an impairment charge.
This calculated amount is based solely on price changes and does not take into account any other changes to the ceiling test calculation, including, among others, changes in reserve quantities and future cost estimates.
−Removed: It is difficult to predict what factors could lead to future impairments under the SEC’s full cost ceiling test.
+Added: It is difficult to predict what factors could lead to future non-cash impairments under the SEC’s full cost ceiling test.
As discussed above, fluctuations in or subtractions from proved reserves, increases in development costs for undeveloped reserves and significant fluctuations in natural gas prices have an impact on the amount of the ceiling at any point in time.
3 unchanged sentences
The Company, in its Utility and Pipeline and Storage segments, has accounting policies which conform to the FASB authoritative guidance regarding accounting for certain types of regulations, and which are in accordance with the accounting requirements and ratemaking practices of the regulatory authorities.
−Removed: The application of these accounting principles for certain types of rate-regulated activities provide that certain actual or anticipated costs that would otherwise be charged to expense can be deferred as regulatory assets, based on the expected recovery from customers in future rates.
+Added: The application of these accounting principles for certain types of rate-regulated activities provides that certain actual or anticipated costs that would otherwise be charged to expense can be deferred as regulatory assets, based on the expected recovery from customers in future rates.
Likewise, certain actual or anticipated credits that would otherwise reduce expense can be deferred as regulatory liabilities, based on the expected flowback to customers in future rates.
Management’s assessment of the probability of recovery or pass through of regulatory assets and liabilities requires judgment and interpretation of laws and regulatory commission orders.
−Removed: If, for any reason, the Company ceases to meet the criteria for application of regulatory accounting treatment for all or part of its operations, the regulatory assets and liabilities related to those portions ceasing to meet such criteria would be eliminated from the balance sheet and included in the income statement for the period in which the discontinuance of regulatory
−Removed: accounting treatment occurs.
+Added: If, for any reason, the
+Added: Company ceases to meet the criteria for application of regulatory accounting treatment for all or part of its operations, the regulatory assets and liabilities related to those portions ceasing to meet such criteria would be eliminated from the balance sheet and included in the Consolidated Statement of Income for the period in which the discontinuance of regulatory accounting treatment occurs.
Such amounts would be classified as an extraordinary item.
3 unchanged sentences
The Company's earnings were $476.9 million in 2023 compared with earnings of $566.0 million in 2022.
−Removed: The increase in earnings of $202.4 million was primarily a result of higher earnings in all reportable segments, slightly offset by losses in the Corporate and All Other categories.
+Added: The decrease in earnings of $89.1 million was a result of lower earnings in all reportable segments, as well as losses in the Corporate and All Other categories.
In the discussion that follows, all amounts used in the earnings discussions are after-tax amounts, unless otherwise noted.
−Removed: Earnings were impacted by the following events in 2022 and 2021:
−Removed: • The reversal of a deferred tax valuation allowance of $24.9 million recorded in the Exploration and Production and Gathering segments.
−Removed: • A $28.4 million remeasurement of accumulated deferred income taxes, primarily in the Exploration and Production and Gathering segments, related to a reduction in the Pennsylvania state corporate income tax rate that was signed into law in July 2022.
+Added: Earnings were impacted by the following events in 2022:
+Added: • The reversal of a deferred tax valuation allowance of $24.9 million recorded in the Exploration and Production and Gathering segments, which increased earnings in 2022.
+Added: • A $28.4 million remeasurement of accumulated deferred income taxes, primarily in the Exploration and Production and Gathering segments, related to a reduction in the Pennsylvania state corporate income tax rate that was signed into law in July 2022, which increased earnings in 2022.
• A gain recognized on the sale of Seneca's California assets of $12.7 million ($9.5 million after-tax) recorded during 2022 in the Exploration and Production segment related to a portion of the sale price that was applied to assets that were not subject to the full cost method of accounting.
2 unchanged sentences
• The reduction of an OPEB regulatory liability that increased earnings by $18.5 million ($14.6 million after-tax) recorded during 2022 in the Utility segment in accordance with a regulatory proceeding in Distribution Corporation's Pennsylvania service territory.
−Removed: • Non-cash impairment charges of $76.2 million ($55.2 million after-tax) recorded during 2021 for the Exploration and Production segment's oil and gas producing properties.
−Removed: • A gain recognized on the sale of timber properties of $51.1 million ($37.0 million after-tax) recorded during 2021 in the Company's All Other category.
−Removed: • A loss of $15.7 million ($11.4.
−Removed: million after-tax) recorded in the Exploration and Production and Gathering segments during 2021 for the premium paid on early redemption of long-term debt.
Earnings (Loss) by Segment
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Appalachia $ 2.78 $ 5.03
−Removed: West Coast $ 10.03 $ 6.34
−Removed: Weighted Average $ 5.05 $ 2.49
+Added: West Coast(2) N/A $ 10.03
+Added: Weighted Average Before Hedging $ 2.78 $ 5.05
Weighted Average After Hedging(3) $ 2.55 $ 2.71
1 unchanged sentence
Appalachia $ 75.64 $ 97.82
−Removed: West Coast $ 94.06 $ 60.50
−Removed: Weighted Average $ 94.10 $ 60.49
+Added: West Coast(2) N/A $ 94.06
+Added: Weighted Average Before Hedging $ 75.64 $ 94.10
Weighted Average After Hedging(1)(3) $ 75.64 $ 70.80
1 unchanged sentence
This loss is presented in other revenue in the table above.
+Added: (2) Prices for the year ended September 30, 2023 are not applicable (N/A) as a result of the sale of Seneca's West Coast assets in June 2022.
(3) Refer to further discussion of hedging activities below under “Market Risk Sensitive Instruments” and in Note J — Financial Instruments in Item 8 of this report.
2023 Compared with 2022
−Removed: Operating revenues for the Exploration and Production segm ent increased $173.8 million i n 2022 as compared with 2021.
−Removed: Gas production revenue after hedging increased $224.8 million primarily due to a $0.46 per Mcf increase in the weighted average price of gas after hedging coupled with a 28.9 Bcf increase in gas production.
+Added: Operating revenues for the Exploration and Production segment decreased $52.0 million in 2023 as compared with 2022.
+Added: Gas production revenue after hedging increased $18.4 million primarily due to a 29.4 Bcf increase in gas production offset by a $0.16 per Mcf decrease in the weighted average realized price of gas after hedging.
The increase in gas production was largely due to new Marcellus and Utica wells in the Appalachian region.
−Removed: Oil production revenue after hedging decreased $12.8 million primarily due to a 631 Mbbl decrease in crude oil production, partially offset by a $14.26 per Bbl increase in the weighted average price of oil after hedging.
−Removed: The decrease in oil production is mainly attributed to the sale of California assets at June 30, 2022.
−Removed: In addition, other revenue decreased $38.8 million and plant revenue increased $0.6 million.
−Removed: The decrease in other revenue was primarily attributed to a loss on the discontinuance of crude oil cash flow hedges related to the sale of California assets combined with royalty shut-in payments made in accordance with lease agreements.
−Removed: These were partially offset by a temporary capacity release of Leidy South and TC Pipeline transportation contracts.
−Removed: Finally, other revenue also increased from Highland Field Services water treatment plants acquired at the end of fiscal 2021.
+Added: Oil production revenue after hedging decreased $111.3 million mainly attributable to the sale of California assets at June 30, 2022.
+Added: In addition, other revenue increased $43.3 million and plant revenue decreased $2.3 million.
+Added: The increase in other revenue was primarily attributable to the non-recurrence of a loss on the discontinuance of crude oil cash flow hedges as a result of the sale of California assets combined with the non-recurrence of royalty shut-in payments made in 2022 in accordance with lease agreements.
+Added: These increases to other revenue were partially offset by decreases to temporary capacity release revenue and a decrease in operating revenue from this segment's water treatment plants.
+Added: Finally, the decrease in gas processing plant revenues was mainly attributable to the sale of California assets combined with declining gas pricing.
Refer to further discussion of derivative financial instruments in the “Market Risk Sensitive Instruments” section that follows.
1 unchanged sentence
2023 Compared with 2022
−Removed: The Exploration and Production segment’s earnings for 2022 were $306.1 million, an increase of $204.2 million when compared with earnings of $101.9 million for 2021.
−Removed: The increase in earnings was primarily attributable to higher natural gas prices after hedging ($126.3 million), higher natural gas production ($51.3 million), and higher oil prices after hedging ($18.1 million).
−Removed: Additionally, a $55.2 million impairment was recorded during 2021 that did not recur during 2022.
−Removed: Certain deferred tax adjustments during 2022 also contributed to the earnings increase.
−Removed: The Exploration and Production segment reversed a valuation allowance ($28.6 million) on deferred tax assets related to certain state net operating loss and credit carryforwards as these deferred tax assets are now expected to be realized in the future.
−Removed: The Exploration and Production segment also recorded an income tax benefit ($16.2 million) from the remeasurement of deferred income taxes related to a state corporate income tax rate reduction in Pennsylvania that was signed into law in July 2022.
−Removed: reduces the Pennsylvania corporate income tax rate to 8.99% for fiscal 2024, and starting with fiscal 2025, the rate is further reduced by 0.5% annually until it reaches 4.99% for fiscal 2032.
−Removed: In addition to the factors discussed above, the Exploration and Production segment's earnings were also impacted by the following factors.
−Removed: Factors that increased earnings included a 2022 gain ($9.5 million) that was recognized on the sale of the Exploration and Production segment's California non-full cost pool assets as well as a 2021 loss ($10.7 million) recognized for this segment's share of the premium paid by the Company to redeem $500 million of the Company's 4.90% notes that were scheduled to mature in December 2021.
−Removed: Factors that reduced earnings included a loss related to the discontinuance of this segment's crude oil cash flow hedges ($33.3 million), which was driven by the sale of the California assets, lower crude oil production ($28.2 million), higher lease operating and transportation expenses ($13.1 million), higher depletion expense ($20.3 million), higher other operating expenses ($5.4 million), an unrealized loss on a derivative asset ($3.2 million), higher other taxes ($2.5 million) and a higher effective tax rate ($6.3 million).
−Removed: The Company also recorded transaction and severance costs ($7.2 million) during 2022 associated with the sale of the California assets.
−Removed: The increase in lease operating and transportation expenses was primarily due to increased gathering and transportation costs in the Appalachian region offset by lower costs in the West Coast region due to selling the assets on June 30, 2022.
+Added: The Exploration and Production segment’s earnings for 2023 were $232.3 million, a decrease of $73.8 million when compared with earnings of $306.1 million for 2022.
+Added: The sale of California assets on June 30, 2022 was a large factor in the earnings variance year over year.
+Added: As a result of the sale, 2023 earnings decreased due to lower oil production ($88.1 million) and the non-recurrence of a gain that was recognized on the sale of Seneca’s California non-full cost pool assets ($9.5 million).
+Added: However, these factors were partially offset by the non-recurrence of a 2022 loss related to the discontinuance of its crude oil cash flow hedges ($33.3 million) and 2022 transaction and severance costs associated with the sale ($7.2 million).
+Added: There was also a lower unrealized loss recognized in 2023 ($0.7 million) on contingent consideration received as part of the California asset sale as compared to the unrealized loss that was recognized in 2022 ($3.2 million) on that contingent consideration.
+Added: Other factors impacted by the sale included lower lease operating and transportation expenses ($24.0 million), lower other operating expenses ($11.1 million), and lower other taxes ($6.0 million).
+Added: Excluding the impact of the California sale, lease operating and transportation costs in the Appalachian region increased year over year.
+Added: Other operating costs were also impacted by the non-recurrence of abandonment costs recognized in 2022 for certain offshore Gulf of Mexico wells that were formerly owned by Seneca, and other taxes was also impacted by lower Impact Fees in the Appalachain region.
+Added: Aside from the earnings impact of these items, the earnings decrease reflected lower natural gas prices after hedging ($48.4 million), lower other revenue ($1.1 million) and lower gas processing plant revenue ($1.8 million), all of which are discussed above.
+Added: Other factors that decreased earnings included higher depletion expense ($26.1 million), higher interest expense ($0.7 million) and higher income tax expense ($3.4 million).
+Added: In 2022, the Exploration and Production segment reversed a valuation allowance ($28.6 million) on deferred tax assets related to certain state net operating loss and credit carryforwards as these deferred tax assets are now expected to be realized in the future.
+Added: The Exploration and Production segment also recorded an income tax benefit ($16.2 million) in 2022 from the remeasurement of deferred income taxes related to a state corporate income tax rate reduction in Pennsylvania that was signed into law in July 2022.
+Added: The law reduces the Pennsylvania corporate income tax rate to 8.99% for fiscal 2024, and starting with fiscal 2025, the rate is further reduced by 0.5% annually until it reaches 4.99% for fiscal 2032.
+Added: Partially offsetting these items, the Exploration and Production segment had higher natural gas production ($62.9 million), and higher other income ($2.7 million).
The increase in depletion expense was primarily due to the increase in production, combined with a $0.06 per Mcfe increase in the depletion rate.
−Removed: The increase in other operating expenses was primarily attributed to abandonment costs related to certain offshore Gulf of Mexico wells formally owned by the Company.
−Removed: In addition, the increase in other operating expenses was attributed to operating costs associated with the Highland Field Services water treatment plants acquired at the end of fiscal 2021.
−Removed: The unrealized loss on a derivative asset represents an adjustment to the contingent consideration received for the sale of the California assets.
−Removed: The increase in other taxes was mainly attributed to increased Impact Fees in the Appalachian region as a result of an increase in natural gas prices.
−Removed: The Impact Fees are calculated annually based on calendar year NYMEX natural gas prices.
−Removed: The increase in the effective tax rate was primarily driven by a reduction to the valuation allowance recorded in fiscal 2021.
+Added: The year over year increase in the depletion rate was mainly driven by higher capitalized costs and an increase in future development costs related to proved undeveloped wells.
+Added: The increase in interest expense can largely be attributed to higher average interest rates on short-term and long-term borrowings offset partially by lower intercompany long-term debt balances.
+Added: The increase in income tax expense was primarily driven by a prior-year benefit realized from the Enhanced Oil Recovery tax credit, which
+Added: did not recur in the current year as a result of the sale of the California assets.
+Added: The increase in other income was attributable to higher interest income, as well as non-service pension and post-retirement income in 2023 compared to non-service pension and post-retirement benefit costs in 2022.
PIPELINE AND STORAGE
16 unchanged sentences
Operating revenues for the Pipeline and Storage segment increased $2.1 million in 2023 as compared with 2022.
−Removed: The increase in operating revenues was primarily due to an increase in transportation revenues of $34.1 million and an increase in storage revenues of $1.5 million, partially offset by a decrease in other revenue of $2.1 million.
+Added: The increase in operating revenues was primarily due to an increase in transportation revenues of $1.3 million, an increase in storage revenues of $0.4 million and an increase in other revenues of $0.5 million.
The increase in transportation revenues was primarily attributable to new demand charges for transportation service from Supply Corporation's FM100 Project, which was placed into service in December 2021.
The increase from the FM100 Project includes the impact of a negotiated revenue step-up to Period 2 Rates that went into effect April 1, 2022, as specified in Supply Corporation's 2020 rate case settlement.
−Removed: This increase was partially offset by a decline in revenues associated with miscellaneous contract terminations and revisions.
−Removed: The increase in storage revenues was partially due to the Period 2 Rates that went into effect April 1, 2022 related to the FM100 Project, as discussed above.
−Removed: In addition, the Pipeline Safety and Greenhouse Gas Regulatory Costs (PS/GHG Regulatory Costs) surcharge that went into effect in November 2020 associated with Supply Corporation's 2020 rate case settlement also contributed to the increase in both transportation and storage revenues.
−Removed: The decrease in other revenue primarily reflects the non-recurrence of revenue associated with a contract buyout that occurred during the quarter ended December 31, 2020, combined with lower electric surcharge true-up revenues, partially offset by higher cashout revenues.
−Removed: Revenues collected through the electric surcharge mechanism are completely offset by electric power costs recorded in operation and maintenance expense.
−Removed: Cashout revenues are completely offset by purchased gas expense.
−Removed: Transportation volume increased by 24.3 Bcf in 2022 as compared with 2021, primarily due to incremental volume from the FM100 Project, which was brought online in December 2021, as well as an increase in short-term contracts.
−Removed: These were partially offset by lower capacity utilization with certain contract shippers.
+Added: An increase in short-term contracts also contributed to the increase in transportation revenues.
+Added: These increases were partially offset by a decline in revenues associated with miscellaneous contract expirations and revisions.
+Added: The increase in other revenues primarily reflects proceeds received during the quarter ended September 30, 2023 as a result of a contract buyout.
+Added: Transportation volume increased by 22.6 Bcf in 2023 as compared with 2022, primarily due to an increase in short-term contracts, as well as an increase in volume from the FM100 Project.
+Added: These increases were partially offset by certain contract expirations during fiscal 2023.
Volume fluctuations, other than those caused by the addition or termination of contracts, generally do not have a significant impact on revenues as a result of the straight fixed-variable rate design utilized by Supply Corporation and Empire.
The majority of Supply Corporation's and Empire's transportation and storage contracts allow either party to terminate the contract upon six or twelve months' notice effective at the end of the primary term and include "evergreen" language that allows for annual term extension(s).
−Removed: The amount of firm transportation capacity contracted on the Pipeline and Storage segment's facilities is expected to decrease in fiscal 2023, primarily due to the termination of two long-term contracts with a nonaffiliated party totaling 300 MDth per day.
−Removed: Lower contracted quantities at the time of a future rate proceeding would be taken into account and would be the basis for setting new rates.
−Removed: The timing of Supply Corporation's next rate filing is discussed below under Rate Matters.
+Added: The Pipeline and Storage segment's contracted transportation and storage capacity with both affiliated and unaffiliated shippers is expected to remain relatively constant in fiscal 2024.
2023 Compared with 2022
−Removed: The Pipeline and Storage segment’s earnings in 2022 were $102.6 million, an increase of $10.1 million when compared with earnings of $92.5 million in 2021.
−Removed: The increase in earnings was primarily due to the impact of higher operating revenues of $26.5 million, as discussed above, which was partially offset by an increase in depreciation expense ($4.2 million), higher property taxes ($0.8 million), an increase in operating expenses ($7.6 million) and higher income tax expense ($2.3 million).
−Removed: The increase in depreciation expense was primarily due to incremental depreciation from the FM100 Project going into service in December 2021.
−Removed: The increase in property taxes was primarily due to the first-time assessment of property taxes for the Empire North project's Farmington compressor station.
−Removed: The increase in operating expenses was primarily due to a decrease in the reserve for preliminary project costs recorded during fiscal 2021 that did not recur in fiscal 2022, as well as an increase in personnel and technology-related costs and higher vehicle fuel costs.
−Removed: This was partially offset by lower power costs related to Empire's electric motor drive compressor station.
−Removed: The Pipeline and Storage segment also experienced higher purchased gas costs ($0.7 million), largely related to Empire's natural gas-driven compressor stations.
−Removed: The electric power costs and purchased gas costs are offset by an equal amount of revenue, as discussed above.
−Removed: The increase in income tax expense was mainly due to a reduction in benefits associated with the tax sharing agreement with affiliated companies combined with higher state income tax expense due to higher pre-tax earnings for fiscal 2022.
+Added: The Pipeline and Storage segment’s earnings in 2023 were $100.5 million, a decrease of $2.1 million when compared with earnings of $102.6 million in 2022.
+Added: The decrease in earnings was primarily due to an increase in operating expenses ($5.2 million) and an increase in depreciation expense ($2.5 million).
+Added: The increase in operating expenses was primarily due to higher personnel costs, higher pipeline integrity costs and an increase in compressor maintenance costs.
+Added: The increase in depreciation expense was primarily due to incremental depreciation from the FM100 Project.
+Added: These earnings decreases were partially offset by the impact of higher operating revenues ($1.7 million), as discussed above, combined with higher other income ($3.6 million).
+Added: The increase in other income is primarily due to a higher weighted average interest rate on intercompany short-term notes receivables along with higher non-service pension and post-retirement benefit income.
+Added: This was partially offset by a decrease in allowance for funds used during construction (equity component) related to the construction of the FM100 Project along with an annual adjustment that was recorded during the current fiscal year.
Gathering Operating Revenues
5 unchanged sentences
2023 Compared with 2022
−Removed: Operating revenues for the Gathering segment increased $21.6 million in 2022 as compared with 2021, which was driven primarily by a 53.3 Bcf increase in gathered volume.
−Removed: The increase in gathered volume can be attributed primarily to an increase in natural gas production on the Covington, Wellsboro, Clermont and Trout Run gathering systems, which recorded increases of 17.9 Bcf, 11.7 Bcf, 10.1 Bcf and 13.6 Bcf, respectively.
−Removed: The increase in gathered volume can be attributed to the increase in gross natural gas production in the Appalachian region by producers connected to the aforementioned gathering systems.
+Added: Operatin g revenues for the Gathering segment increased $15.5 million in 2023 as compared with 2022, which was driven primarily by a 34.0 Bcf increase in gathered volume.
+Added: Gathered volume on the Tioga and Clermont gathering systems increased 36.3 Bcf and 7.1 Bcf, respectively, partially offset by a decrease of 9.4 Bcf on the Trout Run gathering system.
+Added: The net increase in gathered volume can be attributed to the increase in gross natural gas production in the Appalachian region by producers connected to the aforementioned gathering systems.
+Added: All references to the Tioga gathering system in this operating revenues discussion and the earnings discussion that follows include the revenues, volume and earnings of the gathering system owned by NFG Midstream Covington, LLC (Covington), which includes the gathering system previously owned by NFG Midstream Wellsboro, LLC (Wellsboro).
+Added: Wellsboro was merged into Covington effective August 31, 2023.
+Added: The merger of Wellsboro into Covington reflects the completion of a pipeline that connects the two systems.
2023 Compared with 2022
−Removed: The Gathering segment’s earnings in 2022 were $101.1 million, an increase of $20.8 million wh en compared with earnings of $80.3 million in 2021.
−Removed: The increase in earnings was primarily attributable to higher gathering revenues ($17.0 million) driven by the increase in gathered volume (discussed above).
−Removed: Additionally, the Gathering segment recorded an income tax benefit ($11.9 million) from the remeasurement of deferred income taxes related to a state corporate income tax rate reduction in Pennsylvania that was signed into law in July 2022 (as discussed above, in the Exploration and Production segment).
−Removed: Earnings also increased as a result of the Gathering segment's recognition of a loss during the quarter end March 31, 2021 ($0.7 million) for its share of the premium paid by the Company to redeem $500 million of the Company's 4.90% notes that were scheduled to mature in December 2021.
−Removed: However, the Gathering segment's earnings were negatively impacted by the recording of deferred income tax expense ($3.7 million) as an offset to the reversal of the valuation allowance recorded by the Exploration and Production segment during the quarter ended September 30, 2022.
+Added: The Gathering segment’s earnings in 2023 were $99.7 million, a decrease of $1.4 million when compared with earnings of $101.1 million in 2022.
+Added: Income taxes were a significant factor in the year over year variation.
+Added: First, earnings were negatively impacted by the non-recurrence of an income tax benefit ($11.9 million) during the quarter ended September 30, 2022 from the remeasurement of deferred income taxes related to a state corporate income tax rate reduction in Pennsylvania that was signed into law in July 2022 (as discussed above, in the Exploration and Production segment).
+Added: This segment also experienced an increase in income tax expense ($1.0 million) due to higher state income tax expense.
+Added: Partially offsetting these factors, earnings benefited from the non-recurrence of deferred income tax expense ($3.7 million) recognized during the quarter ended
+Added: September 30, 2022 as an offset to the Exploration and Production segment's reversal of the deferred tax asset valuation allowance.
This offset is a result of the Gathering and Exploration and Production segments' subsidiaries filing a combined state tax return.
−Removed: Earnings also decreased due to higher operating expenses ($3.2 million), higher depreciation expense ($1.3 million) and higher income tax expense ($0.6 million).
−Removed: The increase in operating expenses was largely due to higher costs for labor, major overhaul maintenance of compressor units at Trout Run gathering system compressor stations during fiscal 2022 and higher costs for material used to operate the compressor stations at the Trout Run, Covington and Clermont gathering systems.
−Removed: The increase in depreciation expense was largely due to higher plant balances associated with the Clermont and Covington gathering systems.
−Removed: The increase in income tax expense was primarily driven by a higher effective state income tax rate.
+Added: In addition to these income tax variations, earnings decreased due to higher operating expenses ($4.9 million) and higher depreciation expense ($1.4 million).
+Added: The increase in operating expenses was largely attributable to higher outside service costs associated with preventative maintenance overhauls on the Clermont, Tioga and Trout Run gathering systems, higher leased compression expense on the Trout Run and Tioga gathering systems and higher labor-related costs across all of the gathering systems.
+Added: The increase in depreciation expense was largely due to higher plant balances associated with the Tioga and Clermont gathering systems.
+Added: These earnings decreases were partially offset by the impact of higher gathering revenues ($12.2 million) driven by the increase in gathered volume (discussed above).
+Added: Additionally, earnings increased due to lower interest expense ($1.2 million) and higher other income ($0.6 million).
+Added: The decrease in interest expense was primarily due to higher capitalized interest and lower interest on intercompany long-term borrowings associated with the Company's redemption of $500.0 million of 3.75% notes during 2023.
+Added: The increase in other income is primarily due to lower non-service pension and post-retirement benefit expenses.
Utility Operating Revenues
24 unchanged sentences
(1) Percents compare actual degree days to normal degree days and actual degree days to actual prior year degree days.
+Added: (2) Normal degree days changed from the NOAA 30-year degree days to NOAA 15-year degree days with the implementation of new base rates in Pennsylvania in August 2023.
2023 Compared with 2022
Operating revenues for the Utility segment increased $44.1 million in 2023 compared with 2022.
−Removed: The increase resulted from a $226.8 million increase in retail gas sales revenues, which was primarily due to a significant increase in the cost of gas sold (per Mcf).
−Removed: In addition, there was a $2.9 million increase in transportation revenues and a $1.3 million increase in other revenues.
−Removed: The increase in transportation revenues, despite a small decrease in throughput, was largely due to an increase in marketer sales cashouts and an increase in the system modernization tracker allocation to transportation customers, which was partially offset by the migration of residential transportation customers previously served by marketers to retail service provided by the Utility segment.
−Removed: The increase in other revenues was primarily due to higher capacity release revenues and higher late payment charges billed to customers.
+Added: The increase resulted from a $47.5 million increase in retail gas sales revenue and a $4.4 million increase in other revenues, which were partially offset by a $7.8 million decrease in transportation revenue.
+Added: The increase in retail gas sales revenue was primarily due to an increase in the cost of gas sold (per Mcf), partially offset by a 2.9 Bcf decrease in throughput due to warmer weather during the winter months and a decrease in base rates.
+Added: The decrease in base rates is related to a tariff filing approved by the NYPSC, which created a surcredit that temporarily eliminates pension and OPEB cost recovery from base rates effective October 1, 2022.
+Added: Additional details related to the regulatory proceeding are discussed in Item 8 at Note F — Regulatory Matters.
+Added: The increase in other revenues was due to an increase in capacity release revenues and a smaller estimated refund provision from the income tax benefits resulting from the 2017 Tax Reform Act.
+Added: The decrease in transportation revenue resulted from a 3.0 Bcf decrease in throughput due to warmer weather and the decrease in base rates, as previously mentioned.
+Added: The decreases in gas retail sales revenue and transportation revenue were partially offset by an increase in revenues earned under the system modernization and system improvement tracker mechanisms in Distribution Corporation's New York jurisdiction, which allow for the recovery of investments in leak prone pipe replacement.
Purchased Gas
2 unchanged sentences
Distribution Corporation recorded $548.2 million and $498.0 million of Purchased Gas expense during 2023 and 2022, respectively.
−Removed: Under its purchased gas adjustment clauses in New York and Pennsylvania, Distribution Corporation is not allowed to profit from fluctuations in gas costs.
+Added: Under its purchased gas adjustment clauses in New York and Pennsylvania, Distribution Corporation does not profit from fluctuations in gas costs.
Purchased Gas expense recorded on the consolidated income statement matches the revenues collected from customers, a component of Operating Revenues on the consolidated income statement.
4 unchanged sentences
Distribution Corporation’s purchased gas adjustment clauses seek to mitigate this impact by adjusting revenues on either a quarterly or monthly basis.
−Removed: Distribution Corporation contracts for firm long-term transportation and storage capacity with rights-of-first-refusal from ten upstream pipeline companies including Supply Corporation for transportation and storage and Empire for transportation.
−Removed: Distribution Corporation contracts for firm gas supplies on term and spot bases with various producers, marketers and two local distribution companies to meet its gas purchase requirements.
+Added: Distribution Corporation contracts for firm long-term transportation and storage capacity services with rights-of-first-refusal from ten upstream pipeline companies including Supply Corporation for transportation and storage services and Empire, for transportation services.
+Added: Distribution Corporation contracts for firm spot
+Added: and term gas supplies with various producers, marketers and two local distribution companies to meet its gas purchase requirements.
Additional discussion of the Utility segment’s gas purchases appears under the heading “Sources and Availability of Raw Materials” in Item 1.
2023 Compared with 2022
−Removed: The Utility segment’s earnings in 2022 were $68.9 million, an increase of $14.6 million when compared with earnings of $54.3 million in 2021.
−Removed: The increase was primarily attributable to the conclusion of a regulatory proceeding by the PaPUC in February 2022, which resulted in the reduction of an OPEB-related regulatory liability that increased earnings ($14.6 million).
−Removed: While the regulatory proceeding reduced base rates in Pennsylvania by $5.6 million, this impact was more than offset by a decrease in non-service post-retirement benefit costs ($11.5 million) as Distribution Corporation's Pennsylvania service territory recognized OPEB income during fiscal 2022, compared to the prior year when it recognized OPEB expenses to match against the OPEB amounts collected in base rates.
−Removed: Additional details related to the regulatory proceeding are discussed in Note F — Regulatory Matters.
−Removed: Other factors contributing to the increase in earnings included the positive earnings impact of a system modernization tracker in New York ($3.6 million), which is a rate mechanism that provides recovery of qualified leak prone pipe replacement costs, higher usage and the impact of weather on customer margins ($2.9 million), and a decrease in income tax expense ($0.6 million).
−Removed: These increases were partially offset by higher operating expenses ($9.5 million), which were primarily the result of higher personnel costs, transportation fuel costs, and outside services partially offset by a decrease in the provision for uncollectible accounts.
−Removed: The decrease in the provision for uncollectible accounts reflects the recording of incremental expense in 2021 due to the potential for future customer non-payment as a result of the COVID-19 pandemic.
−Removed: In addition, earnings were negatively impacted by higher interest expense ($2.0 million), which was largely the result of a higher weighted average interest rate on intercompany short-term borrowings, and higher depreciation expense ($1.8 million), primarily due to higher plant balances.
+Added: The Utility segment’s earnings in 2023 were $48.4 million, a decrease of $20.5 million when compared with earnings of $68.9 million in 2022.
+Added: The decrease in earnings was due in part to the impact of a proceeding in the Utility's Pennsylvania service territory during the quarter ended March 31, 2022 that allowed for a favorable one-time adjustment of $14.6 million to recognize the cumulative amount of OPEB income, previously deferred as a regulatory liability in that jurisdiction, which did not recur in 2023.
+Added: In addition to the non-recurrence of this transaction, there was a decrease in OPEB income ($2.4 million) in the Utility's Pennsylvania service territory.
+Added: The earnings impact of the reduction in the New York jurisdiction's base rates in 2023 resulting from the NYPSC tariff filing related to pension and OPEB costs discussed above ($12.0 million), combined with an increase in operating costs ($2.0 million) associated with the elimination of fringe benefit credits being applied to service and non-service pension and OPEB costs, was offset by a decrease in other deductions associated with non-service pension and OPEB costs ($14.0 million).
+Added: With the elimination of pension and OPEB expenses in customer rates, Distribution Corporation’s New York service territory did not recognize any pension and OPEB expenses during 2023 compared to the prior year when it recognized pension and OPEB expenses to match against the pension and OPEB amounts collected in base rates.
+Added: Other factors that contributed to the earnings decrease in the Utility segment included higher operating expenses ($6.8 million) and higher interest expense ($8.6 million).
+Added: The increase in operating expenses was mainly due to higher personnel costs and outside services.
+Added: The increase in interest expense was largely the result of a higher weighted average interest rate on intercompany short-term borrowings combined with higher average short-term debt balances.
+Added: There were also several factors that helped to reduce the earnings decrease year over year.
+Added: The Utility segment's earnings benefited from the impact of the system modernization and system improvement trackers in New York ($3.8 million), lower income tax expense ($3.5 million) in New York and Pennsylvania, of which $1.7 million relates to a methodology change for the repair and maintenance tax deduction in Pennsylvania, higher capacity release revenues ($1.6 million), and a regulatory adjustment ($1.5 million).
+Added: The Utility's Pennsylvania service territory also benefited from new rates that went into effect August 1, 2023 ($0.8 million).
The impact of weather variations on earnings in the Utility segment's New York rate jurisdiction is largely mitigated by that jurisdiction's weather normalization clause (WNC).
1 unchanged sentence
In addition, in periods of colder than normal weather, the WNC benefits the Utility segment's New York customers.
−Removed: For 2022, the WNC contributed approximately $4.8 million to earnings, as the weather was
−Removed: warmer than normal.
−Removed: In 2021, the WNC contributed approximately $4.5 million to earnings, as the weather was warmer than normal.
+Added: For both 2023 and 2022, the WNC contributed approximately $4.8 million to earnings, as the weather was warmer than normal.
+Added: Effective October 2023, the weather impact on cash flow in the Utility segment will also be mitigated by a WNC in its Pennsylvania rate jurisdiction.
ALL OTHER AND CORPORATE OPERATIONS
−Removed: All Other and Corporate operations primarily includes the operations of Seneca’s Northeast Division and corporate operations.
−Removed: Seneca’s Northeast Division previously marketed timber from its New York and Pennsylvania land holdings.
−Removed: On December 10, 2020, the Company completed the sale of substantially all timber properties.
−Removed: Please refer to Item 8 at Note B — Asset Acquisitions and Divestitures for further discussion of the sale of timber properties.
2023 Compared with 2022
−Removed: All Other and Corporate operations recorded a loss of $12.7 million in 2022, a decrease of $47.3 million when compared with earnings of $34.6 million in 2021.
−Removed: The decrease was primarily attributable to the non-recurrence of a $51.1 million gain ($37.0 million gain after-tax) on the sale of timber properties recorded by Seneca’s Northeast Division in 2021.
−Removed: Changes in unrealized gains and losses on investments in equity securities also contributed to the decrease.
−Removed: In 2022, the Company recorded unrealized losses of $9.2 million, while in 2021, the Company recorded unrealized gains of $0.1 million.
+Added: All Other and Corporate operations had a net loss of $4.0 million in 2023, an improvement of $8.7 million when compared with a net loss of $12.7 million in 2022 .
+Added: The improvement was primarily attributable to changes in unrealized gains and losses on investments in equity securities.
+Added: In 2023, the Company recorded unrealized gains of $0.7 million, while in 2022, the Company recorded unrealized losses of $9.2 million.
+Added: Other contributing factors include an increase in the cash surrender value of life insurance policies ($1.3 million), an increase in interest income on temporary cash investments ($1.3 million) and lower non-service pension and post-retirement benefit costs ($2.1 million).
+Added: These changes were partially offset by a decrease in realized gains
+Added: from sales of investments in equity securities ($2.9 million), as well as an increase in operating expenses as a result of an increase in professional services ($2.7 million).
OTHER INCOME (DEDUCTIONS)
Although most of the variances in Other Income (Deductions) are discussed in the earnings discussion by segment above, the following is a summary on a consolidated basis (amounts below are pre-tax amounts):
−Removed: Net other deductions on the Consolidated Statement of Income decreased $13.7 million in 2022 as compared to 2021.
−Removed: This change is primarily attributable to non-service pension and post-retirement benefit income of $3.6 million for 2022 compared to non-service pension and post-retirement benefit costs of $31.3 million for 2021.
−Removed: As discussed above in the Utility segment, this is largely related to the February 2022 conclusion of the regulatory proceeding in Distribution Corporation's Pennsylvania service territory that addressed Distribution Corporation's recovery of OPEB expenses.
−Removed: In addition, there was an increase in other interest income of $1.7 million.
−Removed: This was partially offset by changes in unrealized gains and losses on investments in equity securities.
−Removed: During 2022, the Company recorded pre-tax unrealized losses of $13.8 million.
−Removed: During 2021, the Company recorded pre-tax unrealized gains of $0.2 million.
−Removed: Other income (deductions) was also impacted by a decrease in the cash surrender value of life insurance policies of $1.9 million, as well as a decrease in allowance for funds used during construction (equity component) of $2.5 million primarily as a result of the FM100 Project being placed into service in December 2021 .
−Removed: There was also a mark-to-market revaluation that decreased contingent consideration by $4.4 million from the sale of Seneca's California assets.
−Removed: For further discussion, refer to Note J — Financial Instruments.
+Added: Net other income on the Consolidated Statements of Income wa s $18.1 million in 2023 compared to net other deductions of $1.5 million in 2022, for a net increase of $19.6 million.
+Added: This was mostly due to changes in unrealized and realized gains and losses on investments in equity securities of $10.4 million, along with an increase in the cash surrender value of life insurance policies of $1.3 million.
+Added: Higher interest income of $5.0 million also contributed to the increase, which resulted from an increase in interest on temporary cash investments, an increase in interest on a larger undercollection of gas costs over the prior year in Distribution Corporation and an increase in interest income earned on investments.
+Added: The mark-to-market valuation adjustment for the contingent consideration received from the sale of Seneca's California assets in June 2022 was a loss of $0.9 million during 2023 as compared to a loss of $4.4 million during 2022.
+Added: There was also a $1.9 million increase in non-service pension and post-retirement benefit income year over year.
+Added: Offsetting these increases was a $2.3 million reduction in allowance for funds used during construction.
INTEREST CHARGES
1 unchanged sentence
Interest on long-term debt decreased $8.6 million in 2023 as compared to 2022.
−Removed: The Company redeemed $500.0 million of 4.90% notes in March 2021 and paid an early redemption premium of $15.7 million that was recorded as interest expense on long-term debt.
−Removed: The remaining decrease is due largely to a lower weighted average interest rate on long-term debt, stemming from the Company's issuance of $500.0 million of 2.95% notes in February 2021, which replaced $500.0 million of 4.90% notes that were retired in March 2021.
+Added: The Company redeemed $150.0 million of the $500.0 million 3.75% notes in November 2022.
+Added: In addition, $350.0 million of $500.0 million 3.75% notes and $49.0 million of 7.395% notes were redeemed in March 2023.
+Added: These redemptions were partially offset by the issuance of $300.0 million of 5.50% notes in May 2023.
Other interest expense increased $10.1 million in 2023 as compared to 2022.
−Removed: The increase was primarily due to higher average interest rates for 2022 combined with higher average short-term debt balances in 2022 compared to 2021.
+Added: The increase was primarily due to higher weighted average interest rates for 2023 partially offset by lower average short-term debt balances in 2023 compared to 2022.
CAPITAL RESOURCES AND LIQUIDITY
4 unchanged sentences
Net Proceeds from Sale of Oil and Gas Producing Properties — 254.4
−Removed: Net Proceeds from Sale of Timber Properties — 104.6
+Added: Acquisition of Upstream Assets (124.8) —
Sale of Fixed Income Mutual Fund Shares in Grantor Trust 10.0 30.0
1 unchanged sentence
Reduction of Long-Term Debt (549.0) —
−Removed: Change in Notes Payable to Banks and Commercial Paper (98.5) 128.5
Net Proceeds from Issuance of Long-Term Debt 297.3 —
+Added: Proceeds from Issuance of Short-Term Note Payable to Bank 250.0 —
+Added: Repayments of Short-Term Note Payable to Bank (250.0) —
+Added: Net Change in Other Short-Term Notes Payable to Banks and Commercial Paper 227.5 (98.5)
Net Repurchases of Common Stock (6.7) (9.6)
Dividends Paid on Common Stock (176.1) (168.1)
−Removed: Net Increase in Cash, Cash Equivalents, and Restricted Cash $ 17.6 $ 99.6
+Added: Net Increase (Decrease) in Cash, Cash Equivalents, and Restricted Cash $ (82.3) $ 17.6
The Company expects to have adequate amounts of cash available to meet both its short-term and long-term cash requirements for at least the next twelve months and for the foreseeable future thereafter.
−Removed: During 2023, cash provided by operating activities is expected to increase over the amount of cash provided by operating activities during 2022 and will be used to fund the Company's capital expenditures.
−Removed: There are two long-term debt maturities in March 2023, totaling $549 million.
−Removed: The Company expects to repay those securities through the use of cash on hand at the date of maturity and short-term borrowings.
−Removed: Looking at 2023 and 2024, based on current commodity prices, cash provided by operating activities is expected to exceed capital expenditures in each of those years.
−Removed: This is expected to provide the Company with the option to consider additional growth investments, further reductions in short-term or long-term debt, and increasing the amount of cash flow returned to shareholders, either through increases to the Company’s dividend or via repurchases of common stock.
+Added: During 2024, cash provided by operating activities is forecasted to be lower than 2023 largely due to a decrease in working capital sources, but is expected to be more than enough to fund the Company's capital expenditures.
+Added: Looking forward to 2025, based on current commodity prices, cash provided by operating activities is again expected to exceed capital expenditures.
+Added: The Company also has two long-term debt maturities in 2025, totaling $500.0 million, which the Company anticipates funding with cash on hand and short-term and long-term borrowings.
These cash flow projections do not reflect the impact of acquisitions or divestitures that may arise in the future.
4 unchanged sentences
In the Utility segment, supplier refunds, over- or under-recovered purchased gas costs and weather may also significantly impact cash flow.
−Removed: The impact of weather on cash flow is tempered in the Utility segment’s New York rate jurisdiction by its WNC and in the Pipeline and Storage segment by the straight fixed-variable rate design used by Supply Corporation and Empire.
+Added: The impact of weather on cash flow is tempered in the Pipeline and Storage segment by the straight fixed-variable rate design used by Supply Corporation and Empire.
+Added: Prior to October 2023, the weather impact on cash flow in the Utility segment was mitigated by a WNC solely in its New York rate jurisdiction.
+Added: However, effective October 2023, the weather impact on cash flow in the Utility segment will also be mitigated by a WNC in its Pennsylvania rate jurisdiction.
+Added: Refer to Item 8 at Note A — Summary of Significant Accounting Policies (Regulatory Mechanisms) for additional discussion.
Cash provided by operating activities in the Exploration and Production segment may vary from year to year as a result of changes in the commodity prices of natural gas as well as changes in production.
1 unchanged sentence
The Company, in its Utility segment and Exploration and Production segment, has entered into contractual commitments in the ordinary course of business, including commitments to purchase gas, transportation, and storage service to meet customer gas supply needs.
−Removed: Refer to Item 8 at Note L —
−Removed: Commitments and Contingencies under the heading “Other” for additional discussion concerning these contractual commitments as well as the amounts of future gas purchase, transportation and storage contract commitments expected to be incurred during the next five years and thereafter.
+Added: Refer to Item 8 at Note L — Commitments and Contingencies under the heading “Other” for additional discussion concerning these contractual commitments as well as the amounts of future gas purchase, transportation and storage contract commitments expected to be incurred during the next five years and thereafter.
Also refer to Item 8 at Note D — Leases for a discussion of the Company’s operating lease arrangements and a schedule of lease payments during the next five years and thereafter.
Net cash provided by operating activities totaled $1,237.1 million in 2023, an increase of $424.6 million compared with the $812.5 million provided by operating activities in 2022.
−Removed: The increase in cash provided by operating activities primarily reflects higher cash provided by operating activities in the Exploration and Production segment and the Gathering segment, partially offset by lower cash provided by operating activities in the Utility segment.
−Removed: The increase in the Exploration and Production segment and the Gathering segment was primarily due to higher cash receipts from natural gas production and gathering services in the Appalachian region.
−Removed: The decrease in Utility segment is primarily due to lower rates in the Utility segment's Pennsylvania service territory that went into effect October 1, 2021 combined with the timing of gas cost recovery, timing of gas receivables and other regulatory true-ups.
−Removed: The rates that went into effect included a one-time customer bill credit of $25 million in October 2021 for previously overcollected OPEB expenses and the beginning of a 5-year pass back of an additional $29 million in previously overcollected OPEB expenses.
−Removed: Please refer to the Rate Matters section that follows for additional discussion of this matter.
+Added: The increase in cash provided by operating activities primarily reflects higher cash provided by operating activities in the Exploration and Production segment and Utility segment.
+Added: The increase in the Exploration and Production segment is primarily due to higher cash receipts from natural gas production, net of royalty and working interests.
+Added: The increase in the Utility segment is primarily due to the timing of gas cost recovery and the timing of customer receivable balance collections.
INVESTING CASH FLOW
Expenditures for Long-Lived Assets
−Removed: The Company’s expenditures for long-lived assets, including non-cash capital expenditures, totaled $829.4 million and $769.9 million in 2022 and 2021, respectively.
+Added: The Company’s expenditures for long-lived assets, including non-cash capital expenditures, totaled $1.12 billion and $829.4 million in 2023 and 2022, respectively.
The table below presents these expenditures:
8 unchanged sentences
Capital Expenditures 0.8 1.3
−Removed: Eliminations — 0.2
Total Expenditures $ 1,123.6 $ 829.4
+Added: (1) The year ended September 30, 2023 includes $124.8 million related to the acquisition of upstream assets acquired from SWN.
+Added: The acquisition cost is reported as a component of Acquisition of Upstream Assets on the Consolidated Statement of Cash Flows.
(2) 2023 capital expenditures for the Exploration and Production segment, the Pipeline and Storage segment, the Gathering segment and the Utility segment include $43.2 million, $31.8 million, $20.6 million and $13.6 million, respectively, of non-cash capital expenditures.
1 unchanged sentence
Exploration and Production
−Removed: In 2022, the Exploration and Production segment capital expenditures were primarily well drilling and completion expenditures and included approximately $547.1 million for the Appalachian region (including $161.4 million in the Marcellus Shale area and $370.6 million in the Utica Shale area) and $18.7 million for the West Coast region.
+Added: In 2023, the Exploration and Production segment capital expenditures were primarily well drilling and completion expenditures in the Appalachian region and included $292.6 million in the Marcellus Shale area and $430.7 million in the Utica Shale area.
These amounts included approximately $342.0 million spent to develop proved undeveloped reserves.
−Removed: In 2021, the majority of the Exploration and Production segment capital expenditures were primarily well drilling and completion expenditures and included approximately $368.1 million for the Appalachian region (including $117.2 million in the Marcellus Shale area and $213.8 million in the Utica Shale area) and $13.3 million for the West Coast region.
+Added: On June 1, 2023, the Company completed its acquisition of certain upstream assets located primarily in Tioga County, Pennsylvania from SWN for total consideration of $124.8 million.
+Added: As part of the transaction, the Company acquired approximately 34,000 net acres in an area that is contiguous with existing Company-owned upstream assets.
+Added: This transaction was accounted for as an asset acquisition and, as such, the purchase price was allocated to property, plant and equipment.
+Added: Other 2023 acquisitions included the acquisition of certain upstream assets located in Lycoming County in Northeast Pennsylvania for total consideration of $11.5 million as well as the acquisition of undeveloped acreage in Tioga County, Pennsylvania for $13.6 million.
+Added: The acquisition in Lycoming County included 1,145 net acres and the acquisition in Tioga County included 4,222 net acres.
+Added: Both transactions were accounted for as asset acquisitions and, as such, the purchase price for each transaction was allocated to property, plant and equipment.
+Added: The cost of these acquisitions is reported as a component of Capital Expenditures on the Consolidated Statement of Cash Flows.
+Added: In 2022, the Exploration and Production segment capital expenditures were primarily well drilling and completion expenditures and included approximately $547.1 million for the Appalachian region (including $161.4 million in the Marcellus Shale area and $370.6 million in the Utica Shale area) and $18.7 million for the
+Added: West Coast region.
These amounts included approximately $154.3 million spent to develop proved undeveloped reserves.
1 unchanged sentence
The Pipeline and Storage segment’s capital expenditures for 2023 were primarily for additions, improvements and replacements to this segment's transmission and gas storage systems, which included system modernization expenditures that enhance the reliability and safety of the systems and reduce emissions.
+Added: The Pipeline and Storage segment’s capital expenditures for 2022 were primarily for additions, improvements and replacements to this segment's transmission and gas storage systems, which included system modernization expenditures that enhance the reliability and safety of the systems and reduce emissions.
In addition, the Pipeline and Storage segment capital expenditures for 2022 include expenditures related to Supply Corporation's FM100 Project ($25.2 million).
−Removed: The FM100 Project upgraded a 1950's era pipeline in northwestern Pennsylvania and created approximately 330,000 Dth per day of additional transportation capacity in Pennsylvania from a receipt point with NFG Midstream Clermont, LLC in McKean County to the Transcontinental Gas Pipe Line Company, LLC (“Transco”) system at Leidy, Pennsylvania.
−Removed: Supply Corporation and Transco executed a precedent agreement whereby Transco has leased this additional capacity as part of a Transco expansion project ("Leidy South"), creating incremental transportation capacity to Transco Zone 6 (Non-New York) markets.
−Removed: Seneca is an anchor shipper on Leidy South, which provides it with an outlet to premium markets from both its Eastern and Western development areas.
−Removed: Construction activities on the expansion portion of the FM100 Project are complete and the project commenced partial in-service on December 1, 2021, with full in-service on December 19, 2021.
−Removed: Abandonment activities on the project continue in calendar year 2022.
−Removed: As of September 30, 2022, approximately $211.3 million has been spent on the FM100 Project, all of which is included in Property, Plant and Equipment on the Consolidated Balance Sheet at September 30, 2022.
−Removed: The Pipeline and Storage segment’s capital expenditures for 2021 were primarily for expenditures related to Supply Corporation's FM100 Project ($179.0 million).
−Removed: In addition, the Pipeline and Storage segment capital expenditures for 2021 included additions, improvements and replacements to this segment's transmission and gas storage systems.
−Removed: The majority of the Gathering segment's capital expenditures for 2022 included expenditures related to the continued expansion of Midstream Company's Clermont, Covington, Trout Run and Wellsboro gathering systems, as discussed below.
+Added: The majority of the Gathering segment's capital expenditures for 2023 included expenditures related to the continued expansion of Midstream Company's Clermont, Tioga and Trout Run gathering systems, as discussed below.
+Added: The Tioga gathering system refers to the gathering system owned by NFG Midstream Covington, LLC (Covington), which includes the gathering system previously owned by NFG Midstream Wellsboro, LLC (Wellsboro).
+Added: Wellsboro was merged into Covington effective August 31, 2023.
+Added: The merger of Wellsboro into Covington reflects the completion of a pipeline that connects the two systems.
+Added: Midstream Company spent $20.7 million, $71.2 million and $10.8 million, respectively, in 2023 on the development of the Clermont, Tioga and Trout Run gathering systems.
+Added: These expenditures were largely attributable to the installation of new in-field gathering pipelines related to bringing new development online, as well as the continued development of centralized station facilities, including increased dehydration capacity and compression horsepower.
+Added: The majority of the Gathering segment's capital expenditures for 2022 included expenditures related to the continued expansion of Midstream Company's Clermont, Covington, Trout Run and Wellsboro gathering systems.
Midstream Company spent $20.9 million, $27.0 million, $4.9 million and $2.3 million in 2022 on the development of the Clermont, Covington, Trout Run and Wellsboro gathering systems, respectively.
These expenditures were largely attributable to the installation of new in-field gathering pipelines in the Clermont gathering system, as well as the continued expansion of centralized station facilities, including increased compression horsepower at the Clermont, Trout Run, and Wellsboro gathering systems.
−Removed: In the Tioga gathering system, which is part of Midstream Covington, expenditures were largely attributable to the installation of in-field gathering pipelines and upgraded station facilities related to new development.
−Removed: The majority of the Gathering segment's capital expenditures for 2021 included expenditures related to the continued expansion of Midstream Company's Clermont, Covington and Wellsboro gathering systems.
−Removed: Midstream Company spent $23.1 million, $4.4 million and $3.7 million in 2021 on the development of the Clermont, Covington and Wellsboro gathering systems, respectively.
−Removed: These expenditures were largely attributable to new Clermont gathering pipelines, a new tie-in between the legacy Covington gathering system and the midstream gathering assets acquired from SWEPI LP, a subsidiary of Royal Dutch Shell plc ("Shell"), which is now referred to as the Tioga gathering system, as well as the continued development of centralized station facilities, including increased compression horsepower at the Clermont and Wellsboro gathering systems and additional dehydration on the Clermont gathering system.
+Added: In Covington, expenditures were largely attributable to the installation of in-field gathering pipelines and upgraded station facilities related to new development.
The majority of the Utility segment’s capital expenditures for 2023 and 2022 were made for main and service line improvements and replacements that enhance the reliability and safety of the system and reduce emissions.
1 unchanged sentence
Other Investing Activities
−Removed: On December 10, 2020, the Company completed the sale of substantially all timber properties in Pennsylvania to Lyme Emporium Highlands III LLC and Lyme Allegheny Land Company II LLC for net proceeds of $104.6 million.
−Removed: After purchase price adjustments and transaction costs, a gain of $51.1 million was recognized on the sale of these assets ($37.0 million after-tax).
−Removed: The sale of the timber properties completed a reverse like-kind exchange pursuant to Section 1031 of the Internal Revenue Code, as amended (“Reverse 1031 Exchange”).
−Removed: On July 31, 2020, the Company completed its acquisition of certain upstream assets and midstream gathering assets in Pennsylvania from Shell for total consideration of $506.3 million.
−Removed: The purchase and sale agreement with Shell was structured, in part, as a Reverse 1031 Exchange.
−Removed: Refer to Item 8 at Note B — Asset Acquisitions and Divestitures for additional information concerning the Company’s acquisition of certain upstream assets and midstream gathering assets from Shell.
In October 2021, the Company sold $30 million of fixed income mutual fund shares held in a grantor trust that was established for the benefit of Pennsylvania ratepayers.
The proceeds were used in the Utility segment’s Pennsylvania service territory to fund a one-time customer bill credit of $25 million in October 2021 for previously overcollected OPEB expenses and the first year installment of a 5-year pass back of an additional $29 million in previously overcollected OPEB expenses in accordance with new rates that went into effect on October 1, 2021.
+Added: In October 2022, the Company sold an additional $10 million of fixed income mutual fund shares held in the grantor trust.
+Added: The proceeds from this sale were used to fund the second year installment of the 5-year pass back of overcollected OPEB expenses, as well as to diversify a portion of grantor trust investments into lower risk money market mutual fund shares.
Please refer to the Rate Matters section that follows for additional discussion of this matter.
3 unchanged sentences
Since the disposition did not significantly alter the relationship between capitalized costs and proved reserves of oil and gas attributable to the cost center, the Company did not record any gain or loss from this sale.
−Removed: On June 30, 2022, the Company completed the sale of Seneca’s California assets to Sentinel Peak Resources California LLC for a total sale price of $253.5 million, consisting of $240.9 million in cash and contingent consideration valued at $12.6 million at closing.
+Added: On June 30, 2022, the Company completed the sale of Seneca’s California assets, all of which were in the Exploration and Production segment, to Sentinel Peak Resources California LLC for a total sale price of $253.5 million, consisting of $240.9 million in cash and contingent consideration valued at $12.6 million at closing.
+Added: The fair value of the contingent consideration was $7.3 million at September 30, 2023.
The Company pursued this sale given the strong commodity price environment and the Company’s strategic focus in the Appalachian Basin.
21 unchanged sentences
Capital expenditures for the Pipeline and Storage segment in 2024 through 2026 are expected to include:
−Removed: the replacement and modernization of transmission and storage facilities, the reconditioning of storage wells, improvements of compressor stations and emissions reduction initiatives.
+Added: the replacement and modernization of transmission and storage facilities, the reconditioning of storage wells, improvements of compressor stations and emissions reduction initiatives, as well as capital expenditures related to system expansion.
In addition, due to the continuing demand for pipeline capacity to move natural gas from new wells being drilled in Appalachia, specifically in the Marcellus and Utica Shale producing areas, Supply Corporation and Empire have completed and continue to pursue expansion projects designed to move anticipated Marcellus and Utica production gas to other interstate pipelines and to on-system markets, and markets beyond the Supply Corporation and Empire pipeline systems.
−Removed: Capital expenditures in 2023 through 2025 include minimal capital expenditures related to system expansion and forecasted amounts will be adjusted in the future to incorporate any new projects that are expected to be developed by the Company.
+Added: An expansion and modernization project where the Company has forecasted a significant amount of investment in preliminary survey and investigation costs and/or capital expenditures in 2024 through 2026, and where a precedent agreement has been executed, is discussed below.
+Added: Supply Corporation concluded an Open Season on August 25, 2023, and based on post-open season discussions, has designed a project that would allow for the transportation of 190,000 Dth per day of shale gas supplies from a new interconnection in northwest Tioga County, Pennsylvania to an existing Supply Corporation interconnection with Tennessee Gas Pipeline Company, LLC at Ellisburg and a new virtual delivery point into an existing Transcontinental Gas Pipe Line Company, LLC’s (“Transco”) capacity lease, providing access to Mid-Atlantic markets (“Tioga Pathway Project”).
+Added: The Tioga Pathway Project involves the construction of approximately 19 miles of new pipeline and the replacement of approximately four miles of existing pipeline on the Supply Corporation system.
+Added: Supply Corporation has executed a Precedent Agreement with Seneca for 190,000 Dth per day of transportation capacity.
+Added: Supply Corporation expects to file a Section 7(c) application with the FERC in the second half of calendar 2024.
+Added: The Tioga Pathway project has a projected in-service date of late calendar year 2026 and an estimated capital cost of approximately $90 million.
+Added: The majority of these expenditures are included as Pipeline and Storage segment estimated capital expenditures in the table above.
+Added: As of September 30, 2023, less than $0.1 million has been spent to study this project, all of which has been included in Deferred Charges on the Consolidated Balance Sheet at September 30, 2023.
The majority of the Gathering segment capital expenditures in 2024 through 2026, included in the table above, are expected to be for construction and expansion of gathering systems, as discussed below.
The Gathering segment primarily invests capital to support Seneca's drilling and completion activity in their long-term development plan.
−Removed: Seneca has been in the process of shifting a larger share of its activity from its Western Development Area to Tioga County, Pennsylvania.
+Added: Seneca has shifted a larger share of its forward-looking activity from its Western Development Area to Tioga County, Pennsylvania.
As a result, the Gathering segment is expecting to see near-term increases in capital expenditures as it constructs the necessary infrastructure to support Seneca's activity in the region.
−Removed: NFG Midstream Covington, LLC, a wholly-owned subsidiary of Midstream Company, operates its Covington gathering system as well as the Tioga gathering system acquired from Shell on July 31, 2020, both in Tioga County, Pennsylvania.
−Removed: The current Covington gathering system consists of two compressor stations and backbone and in-field gathering pipelines.
−Removed: The Tioga gathering system consists of 16 compressor stations and backbone and in-field gathering pipelines.
−Removed: Estimated capital expenditures in 2023 through 2025 include anticipated expenditures in the range of $150 million to $180 million for continued expansion of the Tioga gathering system.
−Removed: NFG Midstream Clermont, LLC, a wholly-owned subsidiary of Midstream Company, continues to develop an extensive gathering system with compression in the Pennsylvania counties of McKean, Elk and Cameron.
−Removed: The Clermont gathering system was initially placed in service in July 2014.
−Removed: The current system consists of three compressor stations and backbone and in-field gathering pipelines.
−Removed: The total cost estimate for the continued buildout will be dependent on the nature and timing of Seneca's long-term plans.
−Removed: Estimated capital expenditures in 2023 through 2025 include anticipated expenditures in the range of $50 million to $70 million for the continued expansion of the Clermont gathering system.
−Removed: NFG Midstream Wellsboro, LLC, a wholly-owned subsidiary of Midstream Company, continues to develop its Wellsboro gathering system in Tioga County, Pennsylvania.
−Removed: The current system consists of one compressor station and backbone and in-field gathering pipelines.
−Removed: Estimated capital expenditures in 2023 through 2025 include anticipated expenditures in the range of $50 million to $60 million for the continued expansion of the Wellsboro gathering system.
−Removed: NFG Midstream Trout Run, LLC, a wholly-owned subsidiary of Midstream Company, continues to develop its Trout Run gathering system in Lycoming County, Pennsylvania.
−Removed: The Trout Run gathering system was initially placed in service in May 2012.
−Removed: The current system consists of three compressor stations and backbone and in-field gathering pipelines.
−Removed: Estimated capital expenditures in 2023 through 2025 include anticipated expenditures in the range of $15 million to $25 million for the continued expansion of the Trout Run gathering system.
−Removed: Capital expenditures for the Utility segment in 2023 through 2025 are expected to be concentrated in the areas of main and service line improvements and replacements and, to a lesser extent, the purchase of new equipment.
−Removed: Additionally, capital expenditures are expected to increase after 2023 largely due to the anticipated implementation of a Distribution System Improvement Charge (DSIC) mechanism in the Utility's Pennsylvania Division upon completion of the rate proceeding initiated on October 28, 2022.
+Added: Capital expenditures for the Utility segment in 2024 through 2026 are expected to be concentrated in the areas of main and service line improvements and replacements that will enhance the reliability and safety of the system, emission reduction initiatives and, to a lesser extent, the purchase of new equipment.
Project Funding
−Removed: Over the past two years, the Company has been financing capital expenditures with cash from operations, short-term and long-term debt, common stock, and proceeds from the sale of timber properties and the Company's California assets.
−Removed: During fiscal 2022, capital expenditures were funded with cash from operations, short-term debt and proceeds from the sale of the Company's California assets.
−Removed: The Company issued long-term debt and common stock in June 2020 to help finance the acquisition of upstream assets and midstream gathering assets from Shell.
−Removed: The financing of the asset acquisition from Shell was completed in December 2020 when the Company completed the sale of substantially all of its timber properties, through the completion of the Reverse 1031 Exchange discussed above.
−Removed: Going forward, the Company expects to use cash on hand, cash from operations and short-term borrowings to finance capital expenditures.
−Removed: The level of short-term borrowings will depend upon the amount of cash provided by operations, which, in turn, will likely be most impacted by the timing of gas cost recovery in the Utility segment.
−Removed: It will also depend on natural gas production, and the associated commodity price realizations, as well as the level of hedging collateral deposits in the Exploration and Production segment.
+Added: During fiscal 2023 and 2022, capital expenditures were funded with cash from operations and short-term debt.
+Added: Capital expenditures in fiscal 2022 were also funded with proceeds from the sale of the Company's California assets.
+Added: Going forward, the Company expects to use cash on hand, cash from operations and short-term or long-term borrowings, as needed, to finance capital expenditures.
+Added: The level of short-term and/or long-term borrowings will depend upon the amount of cash provided by operations, which, in turn, will likely be most impacted by natural gas production and the associated commodity price realizations in the Exploration and Production segment.
+Added: It will also likely depend on the timing of gas cost recovery in the Utility segment.
In the Exploration and Production segment, the Company has entered into contractual obligations to support its development activities and operations in Pennsylvania, including hydraulic fracturing and other well completion services, well tending services, well workover activities, tubing and casing purchases, production equipment purchases, water hauling services and contracts for drilling rig services.
2 unchanged sentences
The Company, in its Pipeline and Storage segment, Gathering segment and Utility segment, has entered into several contractual commitments associated with various pipeline, compressor and gathering system modernization and expansion projects.
−Removed: Refer to Item 8 at Note L — Commitments and Contingencies under the heading “Other” for the amounts of contractual commitments expected to be incurred during the next five years
−Removed: and thereafter associated with the Company’s pipeline, compressor and gathering system modernization and expansion projects.
+Added: Refer to Item 8 at Note L — Commitments and Contingencies under the heading “Other” for the amounts of contractual commitments expected to be incurred during the next five years and thereafter associated with the Company’s pipeline, compressor and gathering system modernization and expansion projects.
These amounts are a subset of the estimated capital expenditures for the Pipeline and Storage segment, Gathering segment and Utility segment that are shown above.
The Company continuously evaluates capital expenditures and potential investments in corporations, partnerships, and other business entities.
−Removed: The amounts are subject to modification for opportunities such as the acquisition of attractive natural gas properties, quicker development of existing natural gas properties, natural gas storage and transmission facilities, natural gas gathering and compression facilities and the expansion of natural gas transmission line capacities, regulated utility assets and other opportunities as they may arise.
−Removed: While the majority of capital expenditures in the Utility segment are necessitated by the continued need for replacement and upgrading of mains and service lines, the magnitude of future capital expenditures or other investments in the Company’s other business segments depends, to a large degree, upon market and regulatory conditions as well as legislative actions.
+Added: The amounts are subject to modification for opportunities such as the acquisition of attractive natural gas properties, accelerated development of existing natural gas properties, natural gas storage and transmission facilities, natural gas gathering and compression facilities and the expansion of natural gas transmission line capacities, regulated utility assets and other opportunities as they may arise.
+Added: The amounts are also subject to modification for opportunities involving emission reductions and/or energy transition including investments directly related to low- and no-carbon fuels.
+Added: While the majority of capital expenditures in the Utility segment are necessitated by the continued need for replacement and upgrading of mains and service lines, the magnitude of future capital expenditures or other investments in the Company’s business segments depends, to a large degree, upon market and regulatory conditions as well as legislative actions.
FINANCING CASH FLOW
−Removed: Consolidated short-term debt decreased $98.5 million, to a total of $60.0 million, when comparing the balance sheet at September 30, 2022 to the balance sheet at September 30, 2021.
+Added: Consolidated short-term debt increased $227.5 million, to a total of $287.5 million, when comparing the balance sheet at September 30, 2023 to the balance sheet at September 30, 2022.
The maximum amount of short-term debt outstanding during the year ended September 30, 2023 was $422.3 million.
−Removed: In addition to cash provided by operating activities, the Company continues to consider short-term debt (consisting of short-term notes payable to banks and commercial paper) an important source of cash for temporarily financing capital expenditures, gas-in-storage inventory, unrecovered purchased gas costs, margin calls on derivative financial instruments, other working capital needs and repayment of long-term debt.
+Added: In addition to cash provided by operating activities, the Company continues to consider short-term debt (consisting of short-term notes payable to banks and commercial paper) an important source of cash for temporarily financing capital expenditures, asset purchases, gas-in-storage inventory, unrecovered purchased gas costs, margin calls on derivative financial instruments, other working capital needs and repayment of long-term debt.
Fluctuations in these items can have a significant impact on the amount and timing of short-term debt.
−Removed: For example, elevated commodity prices relative to its existing portfolio of derivative financial instruments led to the Company posting margin of $91.7 million with a number of its derivative counterparties as of September 30, 2022.
−Removed: The maximum amount of margin posted during the year ended September 30, 2022 was $430.6 million.
−Removed: The Company's margin deposits are reflected on the balance sheet as a current asset titled Hedging Collateral Deposits.
−Removed: To meet these margin requirements and other near-term cash flow needs, the Company utilized short-term debt in the form of commercial paper and borrowings under its revolving credit facility.
−Removed: At September 30, 2022, the Company had outstanding short-term notes payable to banks of $60.0 million.
−Removed: The Company did not have any commercial paper outstanding at September 30, 2022.
−Removed: On February 28, 2022, the Company entered into the Credit Agreement with a syndicate of twelve banks.
+Added: During fiscal 2023, the Company repaid $549.0 million of long-term debt with maturity dates in March 2023 and issued $300.0 million of additional long-term debt in May 2023.
+Added: The net reduction in long-term debt resulted in an increase in the short-term debt balance.
+Added: As of September 30, 2023, the Company had outstanding commercial paper of $287.5 million.
+Added: The Company did not have any short-term notes payable to banks as of September 30, 2023.
+Added: On February 28, 2022, the Company entered into a Credit Agreement (as amended from time to time, the "Credit Agreement") with a syndicate of twelve banks.
The Credit Agreement replaced the previous Fourth Amended and Restated Credit Agreement and a previous 364-Day Credit Agreement.
The Credit Agreement provides a $1.0 billion unsecured committed revolving credit facility with a maturity date of February 26, 2027.
−Removed: On June 30, 2022, the Company entered into the 364-Day Credit Agreement with a syndicate of five banks, all of which are also lenders under the Credit Agreement.
−Removed: The 364-Day Credit Agreement provides an additional $250.0 million unsecured committed delayed draw term loan credit facility with a maturity date of June 29, 2023.
+Added: On June 30, 2022, the Company entered into a 364-Day Credit Agreement (the "364-Day Credit Agreement") with a syndicate of five banks, all of which are also lenders under the Credit Agreement.
+Added: The 364-Day Credit Agreement provided an additional $250.0 million unsecured committed delayed draw term loan credit facility with a maturity date of June 29, 2023.
The Company elected to draw $250.0 million under the facility on October 27, 2022.
−Removed: The Company is using the proceeds for general corporate purposes, which will include the redemption in November of a portion of the Company's outstanding long-term debt maturing in March 2023.
+Added: The Company used the proceeds for general corporate purposes, which included using $150.0 million for the November 25, 2022 redemption of a portion of the Company's outstanding long-term debt with a maturity date of March 1, 2023.
+Added: All indebtedness under the 364-Day Credit Agreement was repaid on May 18, 2023.
The Company also has uncommitted lines of credit with financial institutions for general corporate purposes.
5 unchanged sentences
The commercial paper program is backed by the Credit Agreement, which provides that the Company's debt to capitalization ratio will not exceed 0.65 at the last day of any fiscal quarter.
−Removed: For purposes of calculating the debt to capitalization ratio, the Company's total capitalization will be increased by adding back 50% of the aggregate after-tax amount of non-cash charges directly arising from any ceiling test impairment
−Removed: occurring on or after July 1, 2018, not to exceed $400 million.
+Added: For purposes of calculating the debt to capitalization ratio, the Company's total capitalization will be increased by adding back 50% of the aggregate after-tax amount of non-cash charges directly arising from any ceiling test impairment occurring on or after July 1, 2018, not to exceed $400 million.
Since July 1, 2018, the Company recorded non-cash, after-tax ceiling test impairments totaling $381.4 million.
−Removed: As a result, at September 30, 2022, $190.7 million was added back to the Company's total capitalization for purposes of the calculation under the Credit Agreement and 364-Day Credit Agreement.
+Added: As a result, at September 30, 2023, $190.7 million was added back to the Company's total capitalization for purposes of the calculation under the Credit Agreement.
On May 3, 2022, the Company entered into Amendment No.
2 unchanged sentences
Under the Credit Agreement, such unrealized losses will not negatively affect the calculation of the debt to capitalization ratio, and such unrealized gains will not positively affect the calculation.
−Removed: The 364-Day Credit Agreement includes the same debt to capitalization covenant and the same exclusions of unrealized gains or losses on derivative financial instruments as the Credit Agreement.
−Removed: At September 30, 2022, the Company’s debt to capitalization ratio, as calculated under the Credit Agreement and 364-Day Credit Agreement, was .49.
−Removed: The constraints specified in the Credit Agreement and 364-Day Credit Agreement would have permitted an additional $2.56 billion in short-term and/or long-term debt to be outstanding at September 30, 2022 (further limited by the indenture covenants discussed below) before the Company’s debt to capitalization ratio exceeded .65.
+Added: At September 30, 2023, the Company’s debt to capitalization ratio, as calculated under the Credit Agreement was 0.46.
+Added: The constraints specified in the Credit Agreement would have permitted an additional $3.17 billion in short-term and/or long-term debt to be outstanding at September 30, 2023 before the Company’s debt to capitalization ratio exceeded 0.65.
A downgrade in the Company’s credit ratings could increase borrowing costs, negatively impact the availability of capital from banks, commercial paper purchasers and other sources, and require the Company's subsidiaries to post letters of credit, cash or other assets as collateral with certain counterparties.
1 unchanged sentence
However, the Company expects that it could borrow under its credit facilities or rely upon other liquidity sources.
−Removed: The Credit Agreement and 364-Day Credit Agreement contain a cross-default provision whereby the failure by the Company or its significant subsidiaries to make payments under other borrowing arrangements, or the occurrence of certain events affecting those other borrowing arrangements, could trigger an obligation to repay any amounts outstanding under the Credit Agreement and 364-Day Credit Agreement.
+Added: The Credit Agreement contains a cross-default provision whereby the failure by the Company or its significant subsidiaries to make payments under other borrowing arrangements, or the occurrence of certain events affecting those other borrowing arrangements, could trigger an obligation to repay any amounts outstanding under the Credit Agreement.
In particular, a repayment obligation could be triggered if (i) the Company or any of its significant subsidiaries fails to make a payment when due of any principal or interest on any other indebtedness aggregating $40.0 million or more or (ii) an event occurs that causes, or would permit the holders of any other indebtedness aggregating $40.0 million or more to cause, such indebtedness to become due prior to its stated maturity.
−Removed: On February 24, 2021, the Company issued $500.0 million of 2.95% notes due March 1, 2031.
+Added: On May 18, 2023, the Company issued $300.0 million of 5.50% notes due October 1, 2026.
After deducting underwriting discounts, commissions and other debt issuance costs, the net proceeds to the Company amounted to $297.3 million.
2 unchanged sentences
A downgrade with a resulting increase to the coupon does not preclude the coupon from returning to its original rate if the Company's credit rating is subsequently upgraded.
−Removed: The proceeds of this debt issuance were used for general corporate purposes, including the redemption of $500.0 million of the Company's 4.90% notes on March 11, 2021 that were scheduled to mature in December 2021.
−Removed: The Company redeemed those notes for $515.7 million, plus accrued interest.
−Removed: The Current Portion of Long-Term Debt at September 30, 2022 consists of $500.0 million of 3.75% notes and $49.0 million of 7.395% notes, that each mature in March 2023.
−Removed: The Company does not anticipate long-term refinancing for these maturities.
+Added: The proceeds of this debt issuance were used for general corporate purposes, including to repay all indebtedness under the $250.0 million unsecured committed delayed draw term loan under the 364-Day Credit Agreement.
None of the Company's long-term debt as of September 30, 2023 had a maturity date within the following twelve-month period.
−Removed: As of September 30, 2022, the future contractual obligations related to aggregate principal amounts of long-term debt, including interest expense, maturing during the next five years and thereafter are as follows:
+Added: The Current Portion of Long-Term Debt at September 30, 2022 consisted of $500.0 million of 3.75% notes and $49.0 million of 7.395% notes, that each had maturity dates in March 2023.
+Added: The Company utilized short-term borrowings and cash on hand to repay $150.0 million of these maturities in November 2022 and the remaining $399.0 million in March 2023.
+Added: As of September 30, 2023, the future
+Added: contractual obligations related to aggregate principal amounts of long-term debt, including interest expense, maturing during the next five years and thereafter are as follows:
$111.9 million in 2024, $605.9 million in 2025, $565.4 million in 2026, $640.4 million in 2027, $327.9 million in 2028, and $535.7 million thereafter.
−Removed: Refer to Item 8
−Removed: at Note H — Capitalization and Short-Term Borrowings, as well as the table under Interest Rate Risk in the Market Risk Sensitive Instruments section below, for the amounts excluding interest expense.
+Added: Refer to Item 8 at Note H — Capitalization and Short-Term Borrowings, as well as the table under Interest Rate Risk in the Market Risk Sensitive Instruments section below, for the amounts excluding interest expense.
Principal payments of long-term debt are a component of cash used in financing activities while interest payments on long-term debt are a component of cash used in operating activities.
−Removed: The Company’s embedded cost of long-term debt was 4.48% at both September 30, 2022 and September 30, 2021.
+Added: The Company’s embedded cost of long-term debt was 4.69% at September 30, 2023 and 4.48% at September 30, 2022.
Refer to “Interest Rate Risk” in this Item for a more detailed breakdown of the Company’s embedded cost of long-term debt.
−Removed: Under the Company's existing indenture covenants at September 30, 2022, the Company would have been permitted to issue up to a maximum of approximately $2.0 billion in additional unsubordinated long-term indebtedness at then current market interest rates, in addition to being able to issue new indebtedness to replace existing debt.
+Added: Under the Company's existing indenture covenants at September 30, 2023, the Company would have been permitted to issue up to a maximum of approximately $3.43 billion in additional unsubordinated long-term indebtedness at then current market interest rates, in addition to being able to issue new indebtedness to replace existing debt (further limited by the debt to capitalization ratio constraint under the Company's Credit Agreement, as discussed above).
The Company's present liquidity position is believed to be adequate to satisfy known demands.
14 unchanged sentences
Supply Corporation, Empire and Seneca executed anchor shipper agreements for 350,000 Dth per day of firm transportation delivery capacity to Chippawa and 140,000 Dth per day of firm transportation capacity to a new interconnection with TGP's 200 Line on this project.
−Removed: The Company remains committed to the project and, on June 29, 2022, received an extension of time from FERC, until December 31, 2024, to construct the project.
−Removed: The Company will update the $500 million preliminary cost estimate and expected in-service date for the project when there is further clarity on the timing of receipt of necessary regulatory approvals.
−Removed: As of September 30, 2022, approximately $55.8 million has been spent on the Northern Access project, including $24.2 million that has been spent to study the project.
−Removed: The remaining $31.6
−Removed: million spent on the project is included in Property, Plant and Equipment on the Consolidated Balance Sheet at September 30, 2022.
+Added: Company remains committed to the project and, on June 29, 2022, received an extension of time from FERC, until December 31, 2024, to construct the project, which is the subject of an ongoing appeal at the U.S.
+Added: Court of Appeals for the D.C.
+Added: The Company will update the $500 million preliminary cost estimate and expected in-service date for the project when there is further clarity on the timing of receipt of necessary regulatory approvals, including the completion of ongoing litigation.
+Added: As of September 30, 2023, approximately $55.9 million has been spent on the Northern Access project, including $24.3 million that has been spent to study the project that is included in Deferred Charges on the Consolidated Balance Sheet.
+Added: The remaining $31.6 million spent on the project is included in Property, Plant and Equipment on the Consolidated Balance Sheet at September 30, 2023.
The Company has a tax-qualified, noncontributory defined-benefit retirement plan (Retirement Plan).
−Removed: The Company has been making contributions to the Retirement Plan over the last several years and anticipates that it may continue making contributions to the Retirement Plan in the future.
−Removed: During 2022, the Company contributed $20.4 million to the Retirement Plan.
−Removed: The Company anticipates that the annual contribution to the Retirement Plan in 2023 will be in the range of zero to $8.0 million.
+Added: During 2023, the Company did not make any contributions to the Retirement Plan.
+Added: Estimated contributions to the Retirement Plan in 2024 will be in the range of zero to $5.0 million.
For further discussion of the Company’s Retirement Plan, including actuarial assumptions, refer to Item 8 at Note K — Retirement Plan and Other Post-Retirement Benefits.
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However, this will be subject to future review.
−Removed: During 2022, the Company contributed $2.8 million to its VEBA trusts.
−Removed: In addition, the Company made direct payments of $0.3 million to retirees not covered by the VEBA trusts and 401(h) accounts during 2022.
+Added: During 2023, the Company did not make any contributions to its VEBA trusts.
+Added: However, the Company made direct payments of $0.2 million to retirees not covered by the VEBA trusts and 401(h) accounts during 2023.
The Company does not expect to make any contributions to its VEBA trusts in 2024.
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The Dodd-Frank Act required the CFTC, SEC and other regulatory agencies to promulgate rules and regulations implementing the legislation, and includes provisions related to the swaps and over-the-counter derivatives markets that are designed to promote transparency, mitigate systemic risk and protect against market abuse.
−Removed: Although regulators have issued certain regulations, other rules that may impact the Company have yet to be finalized.
−Removed: Rules developed by the CFTC and other regulators could impact the Company.
−Removed: While many of those rules place specific conditions on the operations of swap dealers and major swap participants, concern remains that swap dealers and major swap participants will pass along their increased costs stemming from final rules through higher transaction costs and prices or other direct or indirect costs.
−Removed: Additionally, given the enforcement authority granted to the CFTC on anti-market manipulation, anti-fraud and disruptive trading practices, it is difficult to predict how the evolving
−Removed: enforcement priorities of the CFTC will impact our business.
+Added: Although regulators have adopted
+Added: several final regulations, other rules that may impact the Company have yet to be finalized.
+Added: Rules adopted by the CFTC and other regulators could adversely impact the Company.
+Added: While many of those rules place specific conditions on the operations of swap dealers rather than directly on the Company, concern remains that swap dealers with whom the Company may transact will pass along their increased costs stemming from final rules through higher transaction costs and prices or other direct or indirect costs.
+Added: Some of those rules also may apply directly to the Company and adversely impact its ability to trade swaps and over-the-counter derivatives, whether due to increased costs, limitations on trading capacity or for other reasons.
+Added: Additionally, given the enforcement authority granted to the CFTC on anti-market manipulation, anti-fraud and anti-disruptive trading practices, it is difficult to predict how the evolving enforcement priorities of the CFTC will impact our business.
Should the Company violate any laws or regulations applicable to our hedging activities, it could be subject to CFTC enforcement action and material penalties and sanctions.
−Removed: The Company continues to monitor these enforcement and other regulatory developments, but cannot predict the impact that evolving application of the Dodd-Frank Act may have on its operations.
−Removed: The authoritative guidance for fair value measurements and disclosures require consideration of the impact of nonperformance risk (including credit risk) from a market participant perspective in the measurement of the fair value of assets and liabilities.
−Removed: At September 30, 2022, the Company determined that nonperformance risk associated with the price swap agreements, no cost collars and foreign currency contracts would have no material impact on its financial position or results of operation.
+Added: The Company cannot predict the impact that evolving application of the Dodd-Frank Act may have on its operations.
+Added: The authoritative guidance for fair value measurements and disclosures requires consideration of the impact of nonperformance risk (including credit risk) from a market participant perspective in the measurement of the fair value of assets and liabilities.
+Added: At September 30, 2023, the Company determined that nonperformance risk associated with its natural gas price swap agreements, natural gas no cost collars and foreign currency contracts would have no material impact on its financial position or results of operation.
To assess nonperformance risk, the Company considered information such as any applicable collateral posted, master netting arrangements, and applied a market-based method by using the counterparty's (assuming the derivative is in a gain position) or the Company’s (assuming the derivative is in a loss position) credit default swaps rates.
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Weighted Average Floor Price (per Mcf) $ 3.42 $ 3.59 $ 3.62 $ 3.62 $ 3.53
−Removed: At September 30, 2022, the Company would have had to pay an aggregate of approximately $270.5 million to terminate the natural gas no cost collars outstanding at that date.
+Added: At September 30, 2023, the Company would have received an aggregate of approximately $16.0 million to terminate the natural gas no cost collars outstanding at that date.
At September 30, 2022, the Company had no cost collars agreements covering 213.5 Bcf at a weighted average ceiling price of $4.24 per Mcf and a weighted average floor price of $3.40 per Mcf.
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Utility Operation
−Removed: Delivery rates for both the New York and Pennsylvania divisions are regulated by the states’ respective public utility commissions and typically are changed only when approved through a procedure known as a “rate case.” As noted below, the Pennsylvania division currently has a rate case on file.
+Added: Delivery rates for both the New York and Pennsylvania divisions are regulated by the states’ respective public utility commissions and typically are changed only when approved through a procedure known as a “rate case.” As noted below, the New York division currently has a rate case on file.
In both jurisdictions, delivery rates do not reflect the recovery of purchased gas costs.
−Removed: Prudently-incurred gas costs are recovered through operation of automatic adjustment clauses, and are collected primarily through a separately-stated “supply charge” on the customer bill.
+Added: Prudently-incurred gas costs are recovered through
+Added: operation of automatic adjustment clauses, and are collected primarily through a separately-stated “supply charge” on the customer bill.
New York Jurisdiction
−Removed: Distribution Corporation's current delivery rates in its New York jurisdiction were approved by the NYPSC in an order issued on April 20, 2017 with rates becoming effective May 1, 2017.
−Removed: The order provided for a return on equity of 8.7%, and directed the implementation of an earnings sharing mechanism to be in place beginning on April 1, 2018.
−Removed: The order also authorized the Company to recover approximately $15 million annually for pension and other post-employment benefit ("OPEB") expenses from customers.
−Removed: Because the Company's future pension and OPEB costs were projected to be satisfied with existing funds held in reserve, in July, Distribution Corporation made a filing with the NYPSC to effectuate a pension and OPEB surcredit to customers to offset these amounts being collected in base rates effective October 1, 2022.
−Removed: On September 16,
−Removed: 2022, the NYPSC issued an order approving the filing.
−Removed: With the implementation of this surcredit, Distribution Corporation will no longer be funding the pension from its New York jurisdiction and it will not be funding its VEBA trusts in its New York jurisdiction.
+Added: Distribution Corporation's current delivery rates in its New York jurisdiction were approved by the NYPSC in an order issued on April 20, 2017 with rates becoming effective May 1, 2017 ("2017 Rate Order").
+Added: The 2017 Rate Order provided for a return on equity of 8.7% and directed the implementation of an earnings sharing mechanism to be in place beginning on April 1, 2018.
+Added: On October 31, 2023, Distribution Corporation made a filing with the NYPSC seeking an increase of $88.8 million in its total annual operating revenues for the projected rate year ending September 30, 2025, with a proposed effective date of October 1, 2024 that includes the maximum suspension period permitted under the New York Public Service Law ("2023 Rate Filing").
+Added: The Company is also proposing, among other things, to continue its leak prone pipe replacement program and to implement a number of initiatives that will facilitate achievement of the emissions reduction goals of the Climate Leadership and Community Protection Act.
+Added: The 2017 Rate Order authorized the Company to recover approximately $15 million annually for pension and OPEB expenses from customers.
+Added: Because the Company's future pension and OPEB costs were projected to be satisfied with existing funds held in reserve, in July 2022, Distribution Corporation made a filing with the NYPSC to effectuate a temporary pension and OPEB surcredit to customers to offset these amounts being collected in base rates effective October 1, 2022.
+Added: On September 16, 2022, the NYPSC issued an order approving the filing.
+Added: With the implementation of this surcredit, Distribution Corporation ceased funding the Retirement Plan and its VEBA trusts in its New York jurisdiction.
+Added: The 2023 Rate Filing proposes to keep the rate recovery of pension and OPEB costs at zero in the rate year and reflect the $15 million of savings in new base delivery rates.
On August 13, 2021, the NYPSC issued an order extending the date through which qualified pipeline replacement costs incurred by the Company can be recovered using the existing system modernization tracker for two years (until March 31, 2023).
−Removed: The extension is contingent on the Company not filing a base rate case that would result in new rates becoming effective prior to April 1, 2023.
+Added: On December 9, 2022, the Company filed a petition with the NYPSC to effectuate a system improvement tracker through which qualified pipeline replacement costs through September 30, 2024 would be tracked and recovered, and to recover certain deferred costs associated with the existing system modernization tracker, effective April 1, 2023.
+Added: The NYPSC approved the petition by order dated March 17, 2023 contingent on the Company not filing a base rate case that would result in new rates becoming effective prior to October 1, 2024.
+Added: The 2023 Rate Filing proposes to stop accruing and collecting revenues under its current system modernization and system improvement trackers and shift those revenues into the Company’s new base delivery rates.
+Added: In the absence of a multi-year rate plan settlement, the Company is requesting that it be allowed to reinstate a tracking mechanism similar to the existing system modernization tracker.
Pennsylvania Jurisdiction
−Removed: Distribution Corporation’s current delivery rates in its Pennsylvania jurisdiction were approved by the PaPUC on November 30, 2006 as part of a settlement agreement that became effective January 1, 2007.
−Removed: On October 28, 2022, Distribution Corporation made a filing with the PaPUC seeking an increase in its annual base rate operating revenues of $28.1 million with a proposed effective date of December 27, 2022.
−Removed: The Company is also proposing, among other things, to implement a weather normalization adjustment mechanism and a new energy efficiency and conservation pilot program for residential customers.
−Removed: The filing will be suspended for seven months by operation of law unless directed otherwise by the PaPUC.
+Added: Distribution Corporation’s delivery rates effective through July 31, 2023 in its Pennsylvania jurisdiction were approved by the PaPUC on November 30, 2006 as part of a settlement agreement that became effective January 1, 2007.
+Added: On October 28, 2022, Distribution Corporation made a filing with the PaPUC seeking an increase in its annual base rate operating revenues of $28.1 million.
+Added: A settlement involving all active parties to the proceeding was reached and filed with the PaPUC on April 13, 2023.
+Added: The settlement provided for, among other things, an increase in Distribution Corporation’s annual base rate operating revenues of $23 million.
+Added: The PaPUC approved the settlement in full, without modification or correction, on June 15, 2023 and new rates went into effect on August 1, 2023.
Effective October 1, 2021, pursuant to a tariff supplement filed with the PaPUC, Distribution Corporation reduced base rates by $7.7 million in order to stop collecting OPEB expenses from customers.
It also began to refund to customers overcollected OPEB expenses in the amount of $50.0 million.
−Removed: Certain other matters in the tariff supplement were unresolved.
−Removed: These matters were resolved with the PaPUC's approval of an Administrative Law Judge's Recommended Decision on February 24, 2022.
−Removed: Concurrent with that decision, the Company discontinued regulatory accounting for OPEB expenses and recorded an $18.5 million adjustment during the quarter ended March 31, 2022 to reduce its regulatory liability for previously deferred OPEB income amounts through September 30, 2021 and to increase Other Income (Deductions) on the consolidated financial statements by a like amount.
+Added: All matters with respect to this tariff supplement were finalized on February 24, 2022 with the PaPUC's approval of an Administrative Law Judge's Recommended Decision.
+Added: Concurrent with that decision, the Company discontinued regulatory accounting for OPEB expenses and recorded an $18.5 million adjustment during the quarter ended March 31,
+Added: 2022 to reduce its regulatory liability for previously deferred OPEB income amounts through September 30, 2021 and to increase Other Income (Deductions) on the consolidated financial statements by a like amount.
The Company also increased customer refunds of overcollected OPEB expenses from $50.0 million to $54.0 million.
2 unchanged sentences
Pipeline and Storage
−Removed: Supply Corporation’s 2020 rate settlement provides that no party may make a rate filing for new rates to be effective before February 1, 2024, except that Supply Corporation may file an NGA general Section 4 rate case to change rates if the corporate federal income tax rate is increased.
−Removed: If no case has been filed, Supply Corporation must file for rates to be effective February 1, 2025.
+Added: Supply Corporation filed a NGA Section 4 rate case at FERC on July 31, 2023 proposing rate increases to be effective February 1, 2024.
+Added: The proposed rates reflect an annual cost of service of $385.4 million, a rate base of $1.32 billion and a proposed cost of equity of 15.12%.
+Added: If the proposed rate increases finally approved at the end of the proceeding exceed the rates that were in effect at July 31, 2023, but are less than rates put into effect subject to refund on February 1, 2024, Supply Corporation would be required to refund the difference between the rates collected subject to refund and the final approved rates, with interest at the FERC-approved rate.
+Added: If the rates approved at the end of the proceeding are lower than the rates in effect at July 31, 2023, such lower rates will become effective prospectively from the effective date provided by the applicable FERC order, and refunds with interest will be limited to the difference between the rates collected subject to refund and the rates in effect at July 31, 2023.
Empire’s 2019 rate settlement provides that Empire must make a rate case filing no later than May 1, 2025.
4 unchanged sentences
In 2022, the Company began measuring progress against these reduction targets.
−Removed: The Company's ability to estimate accurately the time, costs and resources necessary to meet emissions targets may change as environmental exposures and opportunities change and regulatory updates are issued.
+Added: The Company's ability to estimate accurately the time, costs and resources necessary to meet emissions targets may be impacted as environmental exposures, technology and opportunities change and regulatory and policy updates are issued.
For further discussion of the Company's environmental exposures, refer to Item 8 at Note L — Commitments and Contingencies under the heading “Environmental Matters.”
−Removed: While changes in environmental laws and regulations could have an adverse financial impact on the Company, legislation or regulation that sets a price on or otherwise restricts carbon emissions could also benefit the Company by increasing demand for natural gas, because substantially fewer carbon emissions per Btu of heat generated are associated with the use of natural gas than with certain alternate fuels such as coal and oil.
The effect (material or not) on the Company of any new legislative or regulatory measures will depend on the particular provisions that are ultimately adopted.
3 unchanged sentences
Legislation or regulation that aims to reduce greenhouse gas emissions could also include emissions limits, reporting requirements, carbon taxes, restrictive permitting, increased efficiency standards, and incentives or mandates to conserve energy or use renewable energy sources.
−Removed: For example, the Inflation Reduction Act of 2022 (IRA) legislation was signed into law on August 16, 2022.
+Added: For example, the federal Inflation Reduction Act of 2022 (IRA) legislation was signed into law on August 16, 2022.
The IRA includes a methane charge that is expected to be applicable to the reported annual methane emissions of certain oil and gas facilities, above specified methane intensity thresholds, starting in calendar year 2024.
This portion of the IRA is to be administered by the EPA and potential fees will begin with emissions reported for calendar year 2024.
−Removed: The EPA regulates greenhouse gas emissions pursuant to the Clean Air Act.
−Removed: The regulations implemented by the EPA impose more stringent leak detection and repair requirements, and further address reporting and control of methane and volatile organic compound emissions.
−Removed: The Company must continue to comply with all applicable regulations.
+Added: The EPA is the lead federal agency that regulates greenhouse gas emissions pursuant to the Clean Air Act.
+Added: The regulations implemented by the EPA impose stringent leak detection and repair requirements and address reporting and control of methane and volatile organic compound emissions.
+Added: The Company must
+Added: continue to comply with all applicable regulations.
Additionally, a number of states have adopted energy strategies or plans with aggressive goals for the reduction of greenhouse gas emissions.
Pennsylvania has a methane reduction framework with the stated goal of reducing methane emissions from well sites, compressor stations and pipelines.
−Removed: Pennsylvania's Governor also entered the Commonwealth into a cap-and-trade program known as the Regional Greenhouse Gas Initiative, however, the Commonwealth's participation is currently stayed due to ongoing litigation.
Federal, state or local governments may provide tax advantages and other subsidies to support alternative energy sources, mandate the use of specific fuels or technologies, or promote research into new technologies to reduce the cost and increase the scalability of alternative energy sources.
1 unchanged sentence
The CLCPA also requires electric generators to meet 70% of demand with renewable energy by 2030 and 100% with zero emissions generation by 2040.
+Added: In May 2023, New York State passed legislation that prohibits the installation of fossil fuel burning equipment and building systems in new buildings commencing on or after December 31, 2025, subject to certain exemptions.
These climate change and greenhouse gas initiatives could impact the Company's customer base and assets depending on the promulgation of final regulations and on regulatory treatment afforded in the process.
−Removed: Thus far, the only regulations promulgated in connection with the CLCPA are greenhouse gas emissions limits established by the NYDEC in 6 NYCRR Part 496, effective December 30, 2020.
−Removed: The NYDEC has until January 1, 2024 to issue further rules and regulations implementing the statute.
+Added: The NYDEC has until January 1, 2024 to issue further rules and regulations implementing the CLCPA.
+Added: The NYDEC, in conjunction with the New York State Energy Research and Development Authority, is also in the early phases of developing a cap-and-invest program in the state, which is anticipated to be effective in 2025.
The above-enumerated initiatives could also increase the Company’s cost of environmental compliance by increasing reporting requirements, requiring retrofitting of existing equipment, requiring installation of new equipment, and/or requiring the purchase of emission allowances.
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SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS
−Removed: The Company is including the following cautionary statement in this Form 10-K to make applicable and take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 for any forward-looking statements made by, or on behalf of, the Company.
+Added: The Company is including the following cautionary statement in this Annual Report on Form 10-K to make applicable and take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 for any forward-looking statements made by, or on behalf of, the Company.
Forward-looking statements include statements concerning plans, objectives, goals, projections, strategies, future events or performance, and underlying assumptions and other statements which are other than statements of historical facts.
2 unchanged sentences
Certain statements contained in this report, including, without limitation, statements regarding future prospects, plans, objectives, goals, projections, estimates of oil and gas quantities, strategies, future events or performance and underlying assumptions, capital structure, anticipated capital expenditures, completion of construction projects, projections for pension and other post-retirement benefit obligations, impacts of the adoption of new authoritative accounting and reporting guidance, and possible outcomes of litigation or regulatory proceedings, as well as statements that are identified by the use of the words “anticipates,” “estimates,” “expects,” “forecasts,” “intends,” “plans,” “predicts,” “projects,” “believes,” “seeks,” “will,” “may,” and similar expressions, are “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995 and accordingly involve risks and uncertainties which could cause actual results or outcomes to differ materially from those expressed in the forward-looking statements.
−Removed: The Company’s expectations, beliefs and projections are expressed in good faith and are believed by the Company to have a reasonable basis, but there can be no assurance that management’s expectations, beliefs or projections will result or be achieved or accomplished.
+Added: The Company’s expectations, beliefs and projections are expressed in good faith and are believed by the Company to have a reasonable basis, but there can be no
+Added: assurance that management’s expectations, beliefs or projections will result or be achieved or accomplished.
In addition to other factors and matters discussed elsewhere herein, the following are important factors that, in the view of the Company, could cause actual results to differ materially from those discussed in the forward-looking statements:
9 unchanged sentences
Increased costs or delays or changes in plans with respect to Company projects or related projects of other companies, as well as difficulties or delays in obtaining necessary governmental approvals, permits or orders or in obtaining the cooperation of interconnecting facility operators;
−Removed: The Company's ability to complete planned strategic transactions;
−Removed: The Company's ability to successfully integrate acquired assets and achieve expected cost synergies;
Changes in price differentials between similar quantities of natural gas sold at different geographic locations, and the effect of such changes on commodity production, revenues and demand for pipeline transportation capacity to or from such locations;
The impact of information technology disruptions, cybersecurity or data security breaches;
−Removed: Factors affecting the Company’s ability to successfully identify, drill for and produce economically viable natural gas reserves, including among others geology, lease availability and costs, title disputes, weather conditions, shortages, delays or unavailability of equipment and services required in drilling operations, insufficient gathering, processing and transportation capacity, the need to obtain governmental approvals and permits, and compliance with environmental laws and regulations;
+Added: Factors affecting the Company’s ability to successfully identify, drill for and produce economically viable natural gas reserves, including among others geology, lease availability and costs, title disputes, weather conditions, water availability and disposal or recycling opportunities of used water, shortages, delays or unavailability of equipment and services required in drilling operations, insufficient gathering, processing and transportation capacity, the need to obtain governmental approvals and permits, and compliance with environmental laws and regulations;
+Added: The Company's ability to complete strategic transactions;
Increasing health care costs and the resulting effect on health insurance premiums and on the obligation to provide other post-retirement benefits;
2 unchanged sentences
Negotiations with the collective bargaining units representing the Company's workforce, including potential work stoppages during negotiations;
−Removed: Uncertainty of gas reserve estimates;
+Added: Uncertainty of natural gas reserve estimates;
Significant differences between the Company’s projected and actual production levels for natural gas;
15 unchanged sentences
Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.