Unitil Energy Systems, Inc. (Unitil Energy), which provides electric service in the southeastern seacoast and state capital regions of New Hampshire, including the capital city of Concord; Fitchburg Gas and Electric Light Company (Fitchburg), which provides both electric and Northern Utilities, Inc. (Northern Utilities), which provides On October 29, 2019, Fitchburg filed its cumulative revenue requirement of $1.1 million associated with the Company’s 2015-2018 capital expenditures. On December 16, 2019, the filing was approved, effective January 1, 2020, subject to further investigation and reconciliation. Final approval of the 2019 filing remains pending. MDPU. are tracked, reconciled and passed through directly to customers in gas and electric tariff rates; resulting in an equal and offsetting amount reflected in Total Gas and Electric Operating Revenue. same period in 2019. Electric Additionally, electric GAAP gross margin in the three months ended March 31, 2020 reflects lower depreciation and amortization expense of $0.2 million compared to the same period in 2019. The Company’s Massachusetts service area operates under a revenue decoupling mechanism and therefore the increased sales to the two large industrial customers do not impact electric adjusted gross margin. of 2019 and $0.2 million of higher retirement benefit costs in 2020. Therm Sales (millions) Residential Commercial / Industrial Total Gas Operating Revenues and Sales Margin – The following table details total Gas Operating Revenues and Sales Margin for the three months ended March 31, 2019 and 2018: Gas Operating Revenues and Sales Margin (millions) Gas Operating Revenues: Residential Commercial / Industrial Total Gas Operating Revenues Cost of Gas Sales Gas Sales Margin kWh Sales (millions) Residential Commercial / Industrial Total Electric Operating Revenues and Sales Margin (millions) Electric Operating Revenues: Residential Commercial / Industrial Total Electric Operating Revenues Total Cost of Electric Sales Electric Sales Margin 2020 compared to the same period in 2019, this increase was driven by two large industrial customers in the Company’s Massachusetts service area, which operates under a revenue decoupling mechanism and therefore these increases do not impact electric adjusted gross margin. Other Operating Revenue (Millions) Other Total Other Operating Revenue 2019: Labor costs in the first quarter of 2020 were on par with the same period in 2019, reflecting higher compensation costs offset by lower employee benefit costs. of 2019 and $0.2 million of higher retirement benefit costs in 2020. current period. Interest Expense, Net (millions) Interest Expense Long-term Debt Short-term Debt Regulatory Liabilities Subtotal Interest Expense Interest (Income) Regulatory Assets AFUDC and Other Subtotal Interest (Income) Total Interest Expense, Net Limit Short-Term Borrowings Outstanding Available 2019: 2019. 2019. subsidiaries conduct a portion of their operations in leased facilities and also lease some of their vehicles, machinery and office equipment under both capital and operating lease arrangements. Additionally, as of March 31, As of March 31, 2020, the Company’s critical accounting policies and estimates had not changed significantly from December 31, 2019. See Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies” in the Company’s 2019 Form Operating Revenues Gas Electric Other Total Operating Revenues Operating Expenses Cost of Gas Sales Cost of Electric Sales Operation and Maintenance Depreciation and Amortization Taxes Other than Income Taxes Total Operating Expenses Operating Income Interest Expense, Net Other (Income) Expense, Net Income Before Income Taxes Provision For Income Taxes Net Income Net Income Per Common Share (Basic and Diluted) Weighted Average Common Shares Outstanding – (Basic and Diluted) ASSETS: Current Assets: Cash and Cash Equivalents Accounts Receivable, Net Accrued Revenue Exchange Gas Receivable Gas Inventory Materials and Supplies Prepayments and Other Total Current Assets Utility Plant: Gas Electric Common Construction Work in Progress Total Utility Plant Less: Accumulated Depreciation Net Utility Plant Other Noncurrent Assets: Regulatory Assets Operating Lease Right of Use Assets Other Assets Total Other Noncurrent Assets TOTAL ASSETS LIABILITIES AND CAPITALIZATION: Current Liabilities: Accounts Payable Short-Term Debt Long-Term Debt, Current Portion Regulatory Liabilities Energy Supply Obligations Interest Payable Other Current Liabilities Total Current Liabilities Noncurrent Liabilities: Retirement Benefit Obligations Deferred Income Taxes, Net Cost of Removal Obligations Regulatory Liabilities Other Noncurrent Liabilities Total Noncurrent Liabilities Capitalization: Long-Term Debt, Less Current Portion Stockholders’ Equity: Common Equity (Authorized: 25,000,000 and Outstanding:14,916,044, 14,860,123 and 14,876,955 Shares) Retained Earnings Total Common Stock Equity Preferred Stock Total Stockholders’ Equity Total Capitalization Commitments and Contingencies (Notes 6 & 7) TOTAL LIABILITIES AND CAPITALIZATION Operating Activities: Net Income Adjustments to Reconcile Net Income to Cash Provided by Operating Activities: Depreciation and Amortization Deferred Tax Provision Gain on Divestiture, Net (See Note 1) Changes in Working Capital Items: Accounts Receivable Accrued Revenue Exchange Gas Receivable Regulatory Liabilities Accounts Payable Other Changes in Working Capital Items Deferred Regulatory and Other Charges Other, Net Cash Provided by Operating Activities Investing Activities: Property, Plant and Equipment Additions Proceeds from Divestiture, Net (See Note 1) Cash Provided by (Used in) Investing Activities Financing Activities: (Repayment of) Proceeds from Short-Term Debt, Net Repayment of Long-Term Debt Decrease in Capital Lease Obligations Net Decrease in Exchange Gas Financing Dividends Paid Proceeds from Issuance of Common Stock Cash (Used in) Financing Activities Net (Decrease) Increase in Cash and Cash Equivalents Cash and Cash Equivalents at Beginning of Period Cash and Cash Equivalents at End of Period Supplemental Cash Flow Information: Interest Paid Income Taxes Paid Payments on Capital Leases Non-cash Investing Activity: Capital Expenditures Included in Accounts Payable Right-of-Use Assets Obtained in Exchange for Lease Obligations Balance at January 1, 2019 Net Income Dividends on Common Shares Stock Compensation Plans Issuance of 5,939 Common Shares Balance at March 31, 2019 Balance at January 1, 2018 Net Income Dividends on Common Shares Stock Compensation Plans Issuance of 7,812 Common Shares Balance at March 31, 2018 Gas and Electric Operating Revenues ($ millions): Billed and Unbilled Revenue: Residential C&I Other Total Billed and Unbilled Revenue Rate Adjustment Mechanism Revenue Total Gas and Electric Operating Revenues Gas and Electric Operating Revenues ($ millions): Billed and Unbilled Revenue: Residential C&I Other Total Billed and Unbilled Revenue Rate Adjustment Mechanism Revenue Total Gas and Electric Operating Revenues The Company classifies penalty and interest expense related to income tax liabilities as income tax expense and interest expense, respectively, in the Consolidated Statements of Earnings. ($ millions) Allowance for Doubtful Accounts Allowance for Doubtful Accounts at March 31, 2020, March 31, 2019 and December 31, 2019, respectively. Unbilled Revenues, net (a component of Accrued Revenue, shown in the table below) includes $0.1 million of the Allowance for Doubtful Accounts at March 31, 2020. Accrued Revenue ($ millions) Regulatory Assets – Current Unbilled Revenues Total Accrued Revenue 2019. Exchange Gas Receivable ($ millions) Northern Utilities Fitchburg Total Exchange Gas Receivable 2019. Gas Inventory ($ millions) Natural Gas Propane Liquefied Natural Gas & Other Total Gas Inventory 2019. Regulatory Assets consist of the following ($ millions) Retirement Benefits Energy Supply & Other Rate Adjustment Mechanisms Deferred Storm Charges Environmental Income Taxes Other Deferred Charges Total Regulatory Assets Less: Current Portion of Regulatory Assets(1) Regulatory Assets – noncurrent Regulatory Liabilities consist of the following ($ millions) Income Taxes (Note 8) Energy Supply & Other Rate Adjustment Mechanisms Gas Pipeline Refund (Note 6) Other �� Total Regulatory Liabilities Less: Current Portion of Regulatory Liabilities Regulatory Liabilities – noncurrent Codification, have been elected as a normal purchase, or have contingencies that have not yet been met in order to establish a notional amount. 9). Fair Value of Marketable Securities ($ millions) Equity Funds Fixed Income Funds Money Market Funds Total Marketable Securities Fair Value of Marketable Securities ($ millions) Equity Funds Money Market Funds Total Marketable Securities Energy Supply Obligations ($ millions) Current: Exchange Gas Obligation Renewable Energy Portfolio Standards Power Supply Contract Divestitures Total Energy Supply Obligations – Current Long-Term: Power Supply Contract Divestitures Total Energy Supply Obligations the second quarter of 2019. Three Months Ended March 31, 2019 ($ millions) Revenues: Billed and Unbilled Revenue Rate Adjustment Mechanism Revenue Other Operating Revenue –Non-Regulated Total Operating Revenues Segment Profit (Loss) Identifiable Segment Assets Capital Expenditures Three Months Ended March 31, 2018 ($ millions) Revenues: Billed and Unbilled Revenue Rate Adjustment Mechanism Revenue Other Operating Revenue –Non-Regulated Total Operating Revenues Segment Profit (Loss) Identifiable Segment Assets Capital Expenditures ($ millions) Unitil Corporation: 6.33% Senior Notes, Due May 1, 2022 3.70% Senior Notes, Due August 1, 2026 Unitil Energy First Mortgage Bonds: 5.24% Senior Secured Notes, Due March 2, 2020 8.49% Senior Secured Notes, Due October 14, 2024 6.96% Senior Secured Notes, Due September 1, 2028 8.00% Senior Secured Notes, Due May 1, 2031 6.32% Senior Secured Notes, Due September 15, 2036 4.18% Senior Secured Notes, Due November 30, 2048 Fitchburg: 6.75% Senior Notes, Due November 30, 2023 6.79% Senior Notes, Due October 15, 2025 3.52% Senior Notes, Due November 1, 2027 7.37% Senior Notes, Due January 15, 2029 5.90% Senior Notes, Due December 15, 2030 7.98% Senior Notes, Due June 1, 2031 4.32% Senior Notes, Due November 1, 2047 Northern Utilities: 6.95% Senior Notes, Due December 3, 2018 5.29% Senior Notes, Due March 2, 2020 3.52% Senior Notes, Due November 1, 2027 7.72% Senior Notes, Due December 3, 2038 4.42% Senior Notes, Due October 15, 2044 4.32% Senior Notes, Due November 1, 2047 Granite State: 7.15% Senior Notes, Due December 15, 2018 3.72% Senior Notes, Due November 1, 2027 Total Long-Term Debt Less: Unamortized Debt Issuance Costs Total Long-Term Debt, net of Unamortized Debt Issuance Costs Less: Current Portion Total Long-term Debt, Less Current Portion ($ millions) Estimated Fair Value of Long-Term Debt Limit Short-Term Borrowings Outstanding Available 2019: Facility terminates and all amounts borrowed under the Credit Facility are paid in full (or with respect to letters of credit, they are cash collateralized). The only financial covenant in the Credit Facility provides that Funded Debt to Capitalization (as each term is defined in the Credit Facility) cannot exceed 65%, tested on a quarterly basis. At March 31, 2019. 2019. Lease Obligations ($ millions) Operating Lease Obligations: Other Current Liabilities (current portion) Other Noncurrent Liabilities (long-term portion) Total Operating Lease Obligations Capital Lease Obligations: Other Current Liabilities (current portion) Other Noncurrent Liabilities (long-term portion) Total Capital Lease Obligations Total Lease Obligations 2020. Year Ending December 31, Rest of 2019 2020 2021 2022 2023 2024-2028 Total Payments Less: Interest Amount of Lease Obligations Recorded on Consolidated Balance Sheets 2020. Year Ending December 31, 2019 2020 2021 2022 2023 2024-2028 Total Payments and preferred stock the Restricted Stock Units. The equity portion of Restricted Stock Units activity during the three months ended March 31, Restricted Stock Units (Equity Portion) Restricted Stock Units as of December 31, 2018 Restricted Stock Units Granted Dividend Equivalents Earned Restricted Stock Units Settled Restricted Stock Units as of March 31, 2019 2019 as filed with the Securities and Exchange Commission on january 30, 2020. On October 29, 2019, Fitchburg filed its cumulative revenue requirement of $1.1 MDPU. November 1, 2019 through October 31, 2020. On April 2, 2020, Northern submitted the annual information report for the period of November 1, 2020 through October 31, 2021. contracts. The Company believes that the power purchase obligations under these long-term contracts will have a material impact on the contractual obligations and regulatory assets of Fitchburg, once certain conditions and contingencies are met. the MDPU for approval of two long-term contracts, each for 400 MW of offshore wind energy generation, was made on February 10, 2020. formula rates. On April 14, 2017, the U.S. Court of Appeals for the D.C. Circuit issued an opinion vacating a decision of the FERC with respect to the ROE, and remanded it for further proceedings. The FERC had found that the Transmission Owners existing ROE was unlawful, and had set a new ROE. The Court found that the FERC had failed to articulate a satisfactory explanation for its orders. At this time, the ROE set in the vacated order will remain in place until further FERC action is taken. Separately, on March 15, 2018, the Transmission Owners filed a petition for review with the Court of certain orders of the FERC setting for hearing other complaints challenging the allowed return on equity component of the formula rates. On November 21, 2019 the FERC issued an order in 2019 as filed with the Securities and Exchange Commission on january 30, 2020. subject to approval by the NH DES, the Company has accrued $ Total Balance at Beginning of Period Additions Less: Payments / Reductions Total Balance at End of Period Less: Current Portion Noncurrent Balance at End of Period On November 21, 2019 the FERC issued a final order Docket No. 2020. Retirement Benefit obligations Used to Determine Plan Costs Discount Rate Rate of Compensation Increase Expected Long-term rate of return on plan assets Health Care Cost Trend Rate Assumed for Next Year Ultimate Health Care Cost Trend Rate Year that Ultimate Health Care Cost Trend Rate is reached Three Months Ended March 31, Service Cost Interest Cost Expected Return on Plan Assets Prior Service Cost Amortization Actuarial Loss Amortization Sub-total Amounts Capitalized and Deferred Net Periodic Benefit Cost Recognized 2020. January 30, 2019, except for the following, which was disclosed on a Current Report on Form 2020. 2020. 1/1/19 – 1/31/19 2/1/19 – 2/28/19 3/1/19 – 3/31/19 Total 2020.QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934☒ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Quarter Endedthe quarterly period ended March 31 2019☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 New Hampshire 02-0381573 (§ and, “smaller reporting company” and “emerging growth company” in Rule ☐ Non-accelerated filer ☐ Smaller reporting company☐ ☐ Class Outstanding at April 22, 201927, 2020 no 14,916,40514,959,262 Shares Page No. Item 1. 20-21 24-49Item 2. 4-18Item 3. 50Item 4. 50 Item 1. 50Item 1A. 50Item 2. 50Item 3. Item 4. Item 5. 51Item 6. 52 53CAUTIONARY STATEMENT which could affect the rates the Company is able to charge, the Company’s authorized rate of return, and the Company’s ability to recover costs in its rates;rates, the Company’s financial condition, results of operations and cash flows and the scope of the Company’s regulated activities;commoditysupply costs in its rates;the potential for disruption to the Company’s operations due to cyber-attacks, computer viruses, human errors, acts of war or terrorism or other reasons;the Company’s stranded electric generation and generation-related supply costs and the Company’s ability to recover stranded costs in its rates;counterparties’counterparty’s obligations (including those of its insurers and lenders);natural gas distribution services; natural gas distribution activities, which could result in accidents and other operating risks and costs;events.events, except as required by law. New factors emerge from time to time, and it is not possible for the Company to predict all of these factors, nor can the Company assess the impact of any such factor on its business or the extent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statements. natural gas throughout its service territory in the states of New Hampshire, Massachusetts and Maine. Unitil is the parent company of three wholly-owned distribution utilities: i) ii) natural gas service in the greater Fitchburg area of north central Massachusetts; and iii) natural gas service in southeastern New Hampshire and portions of southern and central Maine, including the city of Portland, which is the largest city in northern New England.105,600106,100 electric customers and 82,700 natural83,900 gas customers in their service territory.natural gas transmission pipeline company, operating 86 miles of underground gas transmissionnatural gas pipelines and access to domestic natural gas supplies in the south and Canadian natural gas supplies in the north.$1,037.8$1,125.1 million at March 31, 2019.2020. Unitil’s total operating revenue includes revenue to recover the approved cost of purchased electricity and natural gas in rates on a fully reconciling basis. As a result of this reconciling rate structure, the Company’s earnings are not directly affected by changes in the cost of purchased electricity and natural gas. Earnings from Unitil’s utility operations are primarily derived from the return on investment in the utility assets of the three distribution utilities and Granite State.natural gas transmission pipeline, is subject to regulation by the FERC with regard to its rates and operations. Because Unitil’s primary operations are subject to rate regulation, the regulatory treatment of various matters could significantly affect the Company’s operations and financial position. natural gas to all customers in their service territory, at rates established under cost of service regulation. Under this regulatory structure, Unitil’s distribution utilities recover the cost of providing distribution service to their customers based on a historical test year, and earn a return on their capital investment in utility assets. In addition, the Company’s distribution utilities and its natural gas transmission pipeline company may also recover certain base rate costs, including capital project spending and enhanced reliability and vegetation management programs, through annual step adjustments and cost tracker rate mechanisms. natural gas sales. The difference between distribution revenue amounts billed to customers and the targeted revenue decoupling amounts is recognized as an increase or a decrease in Accrued Revenue which forms the basis for resetting rates for future cash recoveries from, or credits to, customers. These revenue decoupling targets may be adjusted as a result of rate cases and other authorized adjustments that the Company files with the MDPU. The Company estimates that revenue decoupling applies to approximately 27% and 11% of Unitil’s total annual electric and natural gas sales volumes, respectively.21 percent,21%, effective January 1, 2018. Each state public utility commission, with jurisdiction over the areas that are served by Unitil’s electric and gas subsidiary companies, issued orders directing how the tax law changes were to be reflected in rates. Unitil has complied with these orders and has made the required changes to its rates as directed by the commissions. The FERC has opened a rulemaking proceeding on this matter which has been addressed in a rate settlement filing by Granite State. More recently, on November 15, 2018, the FERC issued a Notice of Proposed Rulemaking that would allow it to determine which pipelines under the Natural Gas Act may be collecting unjust and unreasonable rates in light of the corporate tax reduction. This matter has been resolved for Granite State in its May 2, 2018 uncontested rate settlement filing, which accounted for the effect of the TCJA.Policy Statementfinal rule on Public Utility Transmission Rate Changes to Address Accumulated Deferred Income Taxes. The new rule requires public utilities with formula transmission rates to revise their formula rates to include a transparent methodology to address the TCJA’s effectsimpacts of the TCJA and future tax law changes on thecustomer rates by accounting for “excess” or “deficient” Accumulated Deferred Income Taxes (ADIT) on. FERC also required transmission rates. Underproviders with stated rates to account for the proposed rules all public utilities with transmission formula rates, including Fitchburg, would be required to: (1) include mechanisms to deduct any excess ADIT from or add any deficient ADIT toimpacts of the TCJA in their next rate bases; (2) include mechanisms in those rates that would raise or lower their income tax allowances by any amortized excess or deficient ADIT; and (3) incorporate a new permanent worksheet into their rates that will annually track information related to excess or deficient ADIT.case. The Company believes that these matters are substantially resolvedis complying with the new rule and will not have athere is no material impact on its financial position, operating results, or cash flows.theUnitil Energy’s first step increase, effective May 1, 2018. The filing incorporatedOn April 22, 2019, the revenue requirement of $3.3 million for 2017 plant additions, a reduction of $2.2 million for the effect of the federal tax decrease pursuant to the TCJA, along with the termination of theone-year $1.4 million reconciliation adjustment which had recouped the difference between temporary rates and final rates. The net effect of the three adjustments resulted in a revenue decrease of $0.3 million. On February 28, 2019,NHPUC approved Unitil Energy filed itsEnergy’s second and final step adjustment, seekingproviding for a revenue increase of approximately $340,000. On April 22, 2019 this final step adjustment was approved by the NHPUC,$340,000, effective May 1, 2019.Fitchburg’s last base rate order from the MDPU, issued in April 2016, the MDPU approvedaddition, Fitchburg has an annual capital cost recovery mechanism to recover the revenue requirement associated with certain capital additions. On June 28, 2018, Fitchburg filed its compliance report of capital investments for calendar year 2017. On November 1, 2018, Fitchburg filed its cumulative revenue requirement of $0.9 million associated with the Company’s 2015, 2016 and 20172015-2017 capital expenditures and associated Capital Cost Adjustment Factors to becomeeffective on January 1, 2019.expenditures. On December 27, 2018, the Capital Cost Adjustment Factors werefiling was approved, effective January 1, 2019, subject to further investigation and reconciliation. On April 3, 2019, the MDPU issued a final order approving Fitchburg’s 2017 filing, which provides for the recovery of the sum of the revenue requirement and reconciliation adjustment of $0.4 million. Final approval of the 2018 filing remains pending.31;31 (the “GSEP Filing”); and a filing, submitted on or before May 1, of final project documentation for projects completed during the prior year, demonstrating substantial compliance with its plan in effect for that year and showing that project costs were reasonably and prudently incurred. While a number of the filings under the GSEP tariff may remain pending fromyear-to-year in any given year, theincurred (the “GREC Filing”). The Company considers these to be routine regulatory proceedings and there are no material issues outstanding. Under this tariff,$0.9$1.0 million that went into effect on May 1, 2018,annual cap, and reconciliation.$0.6 million, has been deferred to be recovered in a later proceeding. On October 31, 2018,May 1, 2019, the MDPU approved the Company’s request forCompany made its 2019 GREC Filing, seeking a waiver of the annual cap in order to recover its reconciliation adjustment of $0.4 million effective November 1, 2018 associated with its actual 2017 revenue requirement. On October 31, 2018, the Company filed to increase the annual cap for two years and is seeking recovery of a revenue increase of $0.8 million, subject to the annual cap and reconciliation, for effect May 1, 2019. This matter remains pending.Northern Utilities – Base Rates – Maine –On February 28, 2018, the MPUC issued its Final Order (Order) in Northern Utilities’ most recent base rate case.$1.0 million. The Order provided for an annual revenue increase of $2.1 million before a reduction of $2.2 million to incorporate the effect of the lower federal income tax rate under the TCJA. The MPUC Order approved a return on equity of 9.5 percent and a capital structure reflecting 50 percent equity and 50 percent long-term debt.Northern Utilities – Targeted Infrastructure Replacement Adjustment (TIRA) – Maine –The settlement in Northern Utilities’ Maine division’s 2013 rate case allowed the Company to implement a TIRA rate mechanism to adjust base distribution rates annually to recover the revenue requirements associated with targeted investments in gas distribution system infrastructure replacement and upgrade projects, including the Company’s Cast Iron Replacement Program (CIRP). The TIRA had an initial term of four years and covered targeted capital expenditures in 2013 through 2016. In its Order in the most recent base rate case (see above), the MPUC approved an extension of the TIRA mechanism, for an additional eight-year period, which will allow for annual rate adjustments through the end of the CIRP program. On May 7, 2018, the MPUCMDPU approved the Company’s request to increasein its Order issued October 31, 2019. On October 31, 2019, the Company made its annual base rates by 2.4%, or $1.1 million, to recover the revenue requirements for 2017 eligible facilities. On April 17, 2019, the MPUC approved the Company’s request to increase its annual base rates by 2.1%, or $1.0 million, to recover the revenue requirements for 2018 eligible facilities.Northern Utilities – Base Rates – New Hampshire –On May 2, 2018, the NHPUC approved a settlement agreement providingfiling for an annual revenue increase of $2.6 million, a reduction of annual revenue of $1.7 million to reflect the effect of the TCJA, and a step increase of $2.3 million to recover post-test year capital investments, allin revenues associated with 2020 GSEP investment for rates effective May 1, 2018 (with2020. On March 12, 2020, the revenue increase of $2.6 million reconcilingCompany made a revised GSEP filing to incorporate the date of temporary rates of August 1, 2017 and the revenue decrease for TCJA reconciling to January 1, 2018), for a net increase of approximately $3.2 million. Under the termsinclusion of the agreement, on February 27, 2019, the Company filed for a second step increase of approximately $1.4 million of annual revenue for effect May 1, 2019 to recover eligible capital2015 through 2018 GSEP investments in 2018.base rates effective March 1, 2020. This matter remains pending. According topending before the terms of the settlement agreement, Northern Utilities’ next distribution base rate case shall be based on an historic test year of no earlier than twelve months ending December 31, 2020. The settlement also provides that Granite State may not file a general (Section 4) rate case prior to April 30, 2019.20192020 and March 31, 20182019 and should be read in conjunction with the accompanying unaudited Consolidated Financial Statements and the accompanying Notes to unaudited Consolidated Financial Statements included in Part I, Item 1 of this report, which are prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). natural gas business. Annual gas revenues are substantially realized during the heating season as a result of higher sales of natural gas due to cold weather. Accordingly, the results of operations are historically most favorable in the first and fourth quarters. Fluctuations in seasonal weather conditions may have a significant effect on the result of operations. Sales of electricity are generally less sensitive to weather than natural gas sales, but may also be affected by the weather conditions in both the winter and summer seasons. Also, as a result of recent rate cases, the Company’s natural gas salesGAAP gross margins and gas adjusted gross margins (anatural gas revenues and gas adjusted gross margin will be less affected by the seasonal nature of the natural gas business. In addition, as previously discussed, approximately 27% and 11% of the Company’s total annual electric and natural gas sales volumes, respectively, are decoupled and changes in sales to existing customers do not affect GAAP gross margin and adjusted gross margin.margin. $ $ $ $ ) ) ) ) ) ) ) ) $ $ $ $ $ $ $ $ ) ) ) ) ) ) ) $ $ $ $ $26.5$15.2 million, or $1.78$1.02 in earnings per share (EPS), for the first quarter of 2019, an increase2020, a decrease of $10.9$11.3 million in Net Income, and $0.72 in Earnings Per Share,or $0.76 per share, compared to the first quarter of 2018.2019. In the first quarter of 2019;2019 the Company recognized aIn addition,The decrease in earnings was also driven by lower gas operating revenue, partially offset by lower cost of gas sales, reflecting warmer winter weather in 2020 compared to 2019. The Company estimates that the Company’s earningswarmer than normal winter weather negatively affected Net Income by approximately $3.1 million, or $0.20 per share, in the first quarter of 20192020.driven by higher natural gas$35.0 and electric sales margins, partially offset by higher utility operating expenses. Earnings for the Company’s utility operations were Net Income of $16.7$42.4 million, or $1.12 per share, for the first quarter of 2019, an increase of $1.1 million in Net Income, and $0.06 in EPS compared to the first quarter of 2018.Natural gas sales margins were $43.5 millionrespectively, in the three months ended March 31, 2019, an increase2020, decreases of $3.6$1.1 million and $1.1 million,2018. Gas2019. These decreases were driven by lower therm sales marginsof $3.2 million, partially offset by higher rates of $1.4 million and customer growth of $0.7 million. The higher rates include a revenue decoupling adjustment of $0.6 million in the first quarter of 2019 were positively affected by higher naturalperiod for the Company’s gas distribution rates of $2.6 million and $1.0 million from highersubsidiary in Massachusetts.reflecting customer growth.Natural gas therm sales increased 2.1%decreased 6.7% in the three months ended March 31, 20192020 compared to the same period in 2018.2019. The increasedecrease in gas therm sales in the Company’s service areas was driven by customer growth.reflects warmer winter weather in the first quarter of 2020 compared to the same period in 2019. Based on weather data collected in the Company’s gas service areas, there were 11.5% fewer Effective Degree Days (EDD) in the first quarter of 2020, on average, compared to the same period in 2019 and 13.2% fewer EDD compared to normal. The Company estimates that weather-normalized gas therm sales, excluding decoupled sales, were up 5.0%1.0% in the first quarter of 20192020 compared to the same period in 2018.2019. As of March 31, 2019,2020, the number of natural gas customers served has increased by 1,5331,082 over the previous year.prior year.sales margins wereadjusted gross margin (a2019, an increase of $0.8 million compared to2020, on par with the same period in 2018.2019. Electric sales margins in the first quarter of 2019GAAP gross margin and electric adjusted gross margin were positively affected by higher electric distribution rates of $1.2$0.6 million, partially offset by the impact of warmer winter weather and lower sales marginaverage usage of $0.4$0.6 million reflecting loweron kWh sales.decreased 4.3%increased 0.8% compared to the first quarter of 2018.2019. The decreaseincrease in kWh sales primarily reflects a shorter billing cyclecustomer growth and increased sales to two large industrial customers in the first quarter of 2019 combined with overall lower average usage, including reduced usage by industrial customers for production purposes,Company’s Massachusetts service area, partially offset by customer growth.the adverse impact of warmer winter weather in 2020 and lower average usage. As of March 31, 2019,2020, the number of electric customers served has increased by 549687 over the lastprevious year.increased $1.2 million in the three months ended March 31, 2019 compared to the same period in 2018. Excluding anon-recurring adjustment to decrease O&M expenses by $0.4 million in the first quarter of 2018 in connection with a then ongoing base rate case for the Company’s New Hampshire natural gas utility; O&M expenses increased $0.8 million. The change in O&M expenses reflects higher labor costs of $0.4 million and higher utility operating costs of $0.4 million.Depreciation and Amortization expense increased $1.5 million in the three months ended March 31, 2019 compared to the same period in 2018, reflecting higher utility plant in service partially offset by lower amortization.Taxes Other Than Income Taxes increaseddecreased $0.6 million in the three months ended March 31, 20192020 compared to the same period in 2018, primarily2019. The decrease in the first quarter of 2020 includes $0.4 million of lower labor and other costs related to Usource operations in the first quarter of 2019. The change in O&M expenses also reflects: lower utility operating costs of $1.0 million; higher bad debt expense of $0.6 million, which includes a provision for the impact of the coronavirus pandemic; and higher professional fees of $0.2 million. Labor costs in the first quarter of 2020 were on par with the same period in 2019, reflecting higher compensation costs offset by lower employee benefit costs. Expense,, Net changed from an expense of $1.7 million in the first quarter of 2018 to income of $12.1 million in the first quarter of 2019 to an expense of $1.5 million in the first quarter of 2020, a net change of $13.8$13.6 million. This change primarily reflects aitsnon-regulated business subsidiary, Usource. The Usource divestiture generated a capital gain to the Company and a $3.6 million provision is included in the Company’s first quarter income tax expense discussed below. increased $0.2 million in the three months ended March 31, 20192020 was on par compared to the same period in 2018,2019, primarily reflecting higher interest on long-term debt, offset by lower short-term interest rates on higherlower levels of short-term debt, partially offset by lower interest on long-term debt.Federal and Stateincreased $3.4decreased $3.5 million for the three months ended March 31, 20192020 compared to the same period in 2018, primarily2019, reflecting income taxes related tolowerCompany’s divestiturecurrent period.20192020 and April 20192020 meetings, the Unitil Corporation Board of Directors declared quarterly dividends on the Company’s common stock of $0.37$0.375 per share. These quarterly dividends result in a current effective annualized dividend rate of $1.48$1.50 per share, representing an unbroken record of quarterly dividend payments since trading began in Unitil’s common stock.20192020 is presented below.natural gas increased 2.1%decreased 6.7% in the three months ended March 31, 20192020 compared to the same period in 2018,2019, reflecting increasesdecreases of 0.8%7.9% and 2.6%6.2% in sales to Residential and Commercial and Industrial (C&I) customers, respectively. The increasedecrease in gas therm sales in the Company’s service areas was driven by customer growth.reflects warmer winter weather in the first quarter of 2020 compared to the same period in 2019. Based on weather data collected in the Company’s gas service areas, there were 11.5% fewer EDD in the first quarter of 2020, on average, compared to the same period in 2019 and 13.2% fewer EDD compared to normal. The Company estimates that weather-normalized gas therm sales, excluding decoupled sales, were up 5.0%1.0% in the first quarter of 20192020 compared to the same period in 2018.2019. As of March 31, 2019,2020, the number of natural gas customers served has increased by 1,533 compared to1,082 over the priorprevious year. As previously discussed, salesgas adjusted gross margin derived from decoupled unit sales (representing approximately 11% of total annual therm sales volume) is not sensitive to changes in gas therm sales.20192020 and 2018,2019, by major customer class: Three Months Ended March 31, 2019 2018 Change % Change 24.0 23.8 0.2 0.8 % 72.1 70.3 1.8 2.6 % 96.1 94.1 2.0 2.1 % Three Months Ended March 31, 2019 2018 $ Change % Change $ 35.8 $ 35.8 $ — — 50.6 51.2 (0.6 ) (1.2 %) $ 86.4 $ 87.0 $ (0.6 ) (0.7 %) $ 42.9 $ 47.1 $ (4.2 ) (8.9 %) $ 43.5 $ 39.9 $ 3.6 9.0 % The Company analyzes operating results using Gas Sales Margin, anon-GAAP measure. Gas Sales Margin is calculated as Total ) %) ) %) ) %) (See “Utility Revenue Recognition” in Note 1 to the accompanying Consolidated Financial Statements) less Cost ofand Gas Sales.Adjusted Gross MarginCompany believes Gas Sales Margin is an important measure to analyze profitability because the approved cost of sales are tracked and reconciled costs that are passed through directly to the customer, resulting in an equal and offsetting amount reflected in Totalfollowing table details total Gas Operating Revenue. SalesRevenues and Gas Adjusted Gross Margin for the three months ended March 31, 2020 and 2019: $ $ $ ) %) ) %) $ $ $ ) %) $ $ $ ) %) $ $ $ ) %) can be reconciled to Operating Income, a GAAP measure, by including Operation and Maintenance, Depreciation and Amortization and Taxes Other Than Income Taxes for each segment in the analysis.Natural gas sales margins were $43.5was $42.4 million in the three months ended March 31, 2019, an increase2020, a decrease of $3.6$1.1 million compared to the same period in 2018. Gas2019. The decrease in gas adjusted gross margin was driven by lower therm sales marginsof $3.2 million, partially offset by higher rates of $1.4 million and customer growth of $0.7 million. The higher rates include a revenue decoupling adjustment of $0.6 million in the first quarter of 2019 were positively affected by higher naturalperiod for the Company’s gas distribution ratessubsidiary in Massachusetts.$0.6$16.2 million in the first quarter of 20192020 reflects lower cost of gas sales, which are tracked and reconciled costs that are passed through directly to customers, partially offset by higher naturaland lower gas sales volumes.2019,2020, Unitil’s total electric kWh sales decreased 4.3%increased 0.8% compared to the first quarter of 2018.2019. Sales to Residential customers decreased 1.3% and sales to C&I customers decreased 3.7% and 4.8%, respectively,increased 2.5% in the first quarter of 20192020 compared to the same period in 2018, reflecting a shorter billing cycle2019. The decrease in the first quarter of 2019 combined with overallsales to Residential customers reflects warmer winter weather in 2020, discussed above, and lower average usage including reduced usage by industrial customers for production purposes,per customer due to energy efficiency initiatives and net metered distributed generation, partially offset by customer growth. The increase in sales to C&I customers primarily reflects increased sales to two large industrial customers in the Company’s Massachusetts service area and customer growth, partially offset by the adverse impact of warmer winter weather in 2020. As of March 31, 2019,2020, the number of electric customers served has increased by 549687 over the lastprevious year. As previously discussed, sales marginselectric adjusted gross margin derived from decoupled unit sales (representing approximately 27% of total annual kWh sales volume) are not sensitive to changes in electric kWh sales.20192020 and 20182019 by major customer class: Three Months Ended March 31, 2019 2018 Change % Change 181.5 188.5 (7.0 ) (3.7 %) 236.0 247.8 (11.8 ) (4.8 %) 417.5 436.3 (18.8 ) (4.3 %) ) %) % % SalesElectric Adjusted Gross MarginSalesElectric Adjusted Gross Margin for the three months ended March 31, 20192020 and 2018: Three Months Ended March 31, 2019 2018 $ Change % Change $ 38.8 $ 33.8 $ 5.0 14.8 % 26.0 23.7 2.3 9.7 % $ 64.8 $ 57.5 $ 7.3 12.7 % $ 41.7 $ 35.2 $ 6.5 18.5 % $ 23.1 $ 22.3 $ 0.8 3.6 % The Company analyzes operating results using 2019: $ $ $ ) %) ) %) $ $ $ ) %) $ $ $ ) %) $ $ $ Sales Margin, anon-GAAP measure. Electric Sales Margin is calculated as Total Electric Operating Revenues (See “Utility Revenue Recognition” in Note 1 to the accompanying Consolidated Financial Statements) less Cost of Electric Sales. The Company believes Electric Sales Margin is an important measure to analyze profitability because the approved cost of sales are tracked and reconciled costs that are passed through directly to the customer resulting in an equal and offsetting amount reflected in Total Electric Operating Revenues. Salesadjusted gross margin can be reconciled to Operating Income, a GAAP measure, by including Operation and Maintenance, Depreciation and Amortization and Taxes Other Than Income Taxes for each segment in the analysis.Electric sales margins werewas $23.1 million in the three months ended March 31, 2019, an increase of $0.8 million compared to2020, on par with the same period in 2018.2019. Electric sales marginsadjusted gross margin in the first quarter of 2019 were2020 was positively affected by higher electric distribution rates of $1.2$0.6 million, partially offset by the impact of warmer winter weather andmargindiscussed above. Although overall kWh sales increased 0.8% in the first quarter of $0.4 million, reflecting lower kWh sales.increasedecrease in Total Electric Operating Revenues of $7.3$4.6 million in the first quarter of 20192020 reflects higherlower cost of electric sales, which are tracked and reconciled costs that are passed through directly to customers, partially offset by lowerhigher sales of electricity.20192020 and 2018: Three Months Ended March 31, 2019 2018 $ Change % Change $ 0.9 $ 1.3 $ (0.4 ) (30.8 %) $ 0.9 $ 1.3 $ (0.4 ) (30.8 %) $ $ $ ) $ $ $ ) $0.4$0.9 million or 30.8% in the first quarter of 2019,2020, compared to the first quarter of 2018,2019, reflecting the Company’s divestiture of Usource in the first quarter of 2019 (See “Divestiture of natural gas purchased and manufactured to supply the Company’s total gas supply requirements and spending on energy efficiency programs. Cost of Gas Sales decreased $4.2$15.1 million, or 8.9%35.2%, in the three months ended March 31, 20192020 compared to the same period in 2019. This decrease reflects lower wholesale natural gas prices partially offset by higherand lower sales of natural gas. The Company reconciles and recovers the approved Cost of Gas Sales in its rates at cost on a pass-through basis and therefore changes in approved expenses do not affect earnings.increased $6.5decreased $4.6 million, or 18.5%11.0%, in the three months ended March 31, 20192020 compared to the same period in 2018.2019. This increasedecrease reflects higherlower wholesale electricity prices, and a decreasepartially offset by an increase in the amount of electricity purchased by customers directly from third-party suppliers partially offset by lowerand slightly higher sales of electricity. The Company reconciles and recovers the approved Cost of Electric Sales in its rates at cost on a pass-through basis and therefore changes in approved expenses do not affect earnings.increased $1.2decreased $0.6 million, or 6.9%3.2%, in the three months ended March 31, 20192020 compared to the same period in 2018. Excluding anon-recurring adjustment to2019. The decrease O&M expenses by $0.4 million in the first quarter of 20182020 includes $0.4 million of lower labor and other costs related to Usource operations in connection with a then ongoing base rate case for the Company’s New Hampshire natural gas utility; O&M expenses increased $0.8 million, or 4.6%.first quarter of 2019. The change in O&M expenses reflects higher labor costs of $0.4 million and higheralso reflects: lower utility operating costs of $0.4$1.0 million; higher bad debt expense of $0.6 million, which includes a provision for the impact of the coronavirus pandemic; and higher professional fees of $0.2 million. – -increased $1.5decreased $0.3 million, or 12.2%2.2%, in the three months ended March 31, 20192020 compared to the same period in 2018,2019, reflecting higher utility plant in service partially offset by lower amortization. – -$0.6$0.1 million, or 10.3%1.6%, in the three months ended March 31, 20192020 compared to the same period in 2018, primarily2019, reflecting higher local property tax rates on higher levels of utility plant assets in service.(Income) Expense (Income), Net – Expense,, Net changed from an expense of $1.7 million in the first quarter of 2018 to income of $12.1 million in the first quarter of 2019 to an expense of $1.5 million in the first quarter of 2020, a net change of $13.8$13.6 million. This change primarily reflects adiscussed above. The Usource divestiture generated a capital gain to the Company and a $3.6 million provision is included in the Company’s first quarter income tax expense discussed below.increased $3.4decreased $3.5 million for the three months ended March 31, 20192020 compared to the same period in 2018, primarily2019, reflecting income taxes related tolowerCompany’s divestiture of itsnon-regulated business subsidiary, Usource, discussed above. Three Months Ended March 31, 2019 2018 Change $ 5.7 $ 5.8 $ (0.1 ) 1.0 0.5 0.5 0.1 0.1 — 6.8 6.4 0.4 (0.2 ) (0.2 ) — (0.4 ) (0.2 ) (0.2 ) (0.6 ) (0.4 ) (0.2 ) $ 6.2 $ 6.0 $ 0.2
March 31, $ $ $ ) ) ) ) ) ) ) ) $ $ $ increased $0.2 million in the three months ended March 31, 20192020 was on par compared to the same period in 2018,2019, primarily reflecting higher interest on long-term debt, offset by lower short-term interest rates on higherlower levels of short-term debt, partially offset by lower interest on long-term debt.CAPITAL REQUIREMENTS2019,2020, March 31, 20182019 and December 31, 2018,2019, the Company and all of its subsidiaries were in compliance with the regulatory requirements to participate in the Cash Pool.$75.7$74.3 million for the three months ended March 31, 2019.2020. Total gross repayments were $92.7$61.3 million for the three months ended March 31, 2019.2020. The following table details the borrowing limits, amounts outstanding and amounts available under the Credit Facility as of March 30,31, 2020, March 31, 2019 March 30, 2018 and December 31, 2018: Revolving Credit Facility ($ millions) March 31, December 31, 2019 2018 2018 $ 120.0 $ 120.0 $ 120.0 $ 65.8 $ 45.3 $ 82.8 $ 54.2 $ 74.7 $ 37.2 $ $ $ $ $ $ 2019,2020, March 31, 20182019 and December 31, 2018,2019, the Company was in compliance with the covenants contained in the Credit Facility in effect on that date. (See also “Credit Arrangements” in Note 4.)November 30, 2018December 18, 2019, Unitil EnergyCorporation issued $30 million of First Mortgage BondsNotes due November 30, 20482029 at 4.18%3.43%. Unitil EnergyCorporation used the net proceeds from this offering to repay short-term debt and for general corporate purposes. Approximately $0.5$0.2 million of costs associated with these issuances have been netted against long-term debtLong-Term Debt for presentation purposes on the Consolidated Balance Sheets.TheThis capital lease matures on September 30, 2020. Aswas paid in full in the second quarter of March 31, 2019, there are $2.8 million of current and $1.6 million of noncurrent obligations under this capital lease on the Company’s Consolidated Balance Sheets. natural gas storage management contracts entered into by the distribution utilities. The Company’s policy is to limit the duration of these guarantees. As of March 31, 2019,2020, there were approximately $4.3$6.2 million of guarantees outstanding.natural gas pipeline and storage assets, resells the natural gas storage inventory to an asset manager and subsequently repurchases the inventory over the course of the natural gas heating season at the same price at which it sold the natural gas inventory to the asset manager. There was $2.5 million, $2.2 million $1.0and $6.5 million and $8.4 million of natural gas storage inventory at March 31, 2019,2020, March 31, 20182019 and December 31, 2018,2019, respectively, related to these asset management agreements. The amount of naturalgas inventory released in March 2020 and payable in April 2020 is $0.6 million and is recorded in Accounts Payable at March 31, 2020. The amount of gas inventory released in March 2019 and payable in April 2019 iswas $2.1 million and iswas recorded in Accounts Payable at March 31, 2019. The amount of natural gas inventory released in March 2018December 2019 and payable in April 2018January 2020 was $1.0 million and was recorded in Accounts Payable at March 31, 2018. The amount of natural gas inventory released in December 2018 and payable in January 2019 was $0.9 million and was recorded in Accounts Payable at December 31, 2018.2019,2020, there were approximately $4.3$6.2 million of guarantees on certain energy and natural gas storage management contracts entered into by the distribution utilities outstanding. See Note 4 (Debt and Financing Arrangements) to the accompanying Consolidated Financial Statements.CRITICAL ACCOUNTING POLICIESFor a complete discussion of the Company’s significant accounting policies, refer to Note 1 to the Consolidated Financial Statements in this quarterly report on Form10-Q and Note 1 to the Consolidated Financial Statements in the Company’s Annual Report on Form10-K, as filed with the Securities and Exchange Commission on January 31, 2019.LABOR RELATIONS508520 employees. The Company considers its relationship with employees to be good and has not experienced any major labor disruptions.2019,2020, a total of 164171 employees of certain of the Company’s subsidiaries were represented by labor unions. The following table details by subsidiary the employees covered by a collective bargaining agreement (CBA) as of March 31, 2019:2020:Employees CoveredCBA ExpirationFitchburg45 05/31/2022Northern Utilities NH Division34 06/05/2020 Northern Utilities ME Division 39 03/20212022 Granite State 4 03/31/2021 Unitil Energy 38 05/20232021 Unitil Service 20192020 and March 31, 20182019 were 3.7%2.6% and 2.9%3.7%, respectively. The average interest rate on the Company’s short-term borrowings for the twelve months ended December 31, 20182019 was 3.3%3.4%.natural gas supply costs in rates on a pass-through basis. Consequently, there is limited commodity price risk after consideration of the related rate-making.REGULATORY MATTERS Three Months Ended
March 31, 2019 2018 $ 86.4 $ 87.0 64.8 57.5 0.9 1.3 152.1 145.8 42.9 47.1 41.7 35.2 18.5 17.3 13.8 12.3 6.4 5.8 123.3 117.7 28.8 28.1 6.2 6.0 (12.1 ) 1.7 34.7 20.4 8.2 4.8 $ 26.5 $ 15.6 $ 1.78 $ 1.06 14.9 14.8 $ $ ) $ $ $ $ March 31, December 31, 2019 2018 2018 $ 4.3 $ 9.5 $ 7.8 73.9 74.4 66.8 40.2 45.1 54.7 0.4 0.2 8.1 0.5 0.4 0.8 7.8 7.8 7.0 6.8 7.1 7.0 133.9 144.5 152.2 778.6 706.7 760.6 511.3 478.8 500.1 61.1 69.1 83.1 26.1 32.1 25.5 1,377.1 1,286.7 1,369.3 339.3 314.3 332.5 1,037.8 972.4 1,036.8 97.9 111.2 99.0 3.9 — — 16.7 16.2 10.3 118.5 127.4 109.3 $ 1,290.2 $ 1,244.3 $ 1,298.3 $ $ $ $ $ $ March 31, December 31, 2019 2018 2018 $ 33.0 $ 30.1 $ 42.6 65.8 45.3 82.8 19.5 29.8 18.4 15.0 10.9 11.5 4.6 7.8 13.4 7.0 6.9 4.3 19.9 15.5 19.5 164.8 146.3 192.5 122.9 151.6 121.5 103.8 87.0 97.8 93.7 86.6 90.7 47.4 49.1 47.0 10.7 12.1 10.1 378.5 386.4 367.1 373.0 363.0 387.4 280.7 277.4 279.1 93.0 71.0 72.0 373.7 348.4 351.1 0.2 0.2 0.2 373.9 348.6 351.3 746.9 711.6 738.7 $ 1,290.2 $ 1,244.3 $ 1,298.3 $ $ $ $ $ $ Three Months Ended
March 31, 2019 2018 $ 26.5 $ 15.6 13.8 12.3 8.2 4.7 (13.4 ) — (7.1 ) (7.0 ) 14.5 8.2 7.7 5.6 3.5 1.7 (9.6 ) (11.4 ) 0.3 3.6 (6.9 ) (7.9 ) 0.3 3.0 37.8 28.4 (10.9 ) (10.1 ) 13.4 — 2.5 (10.1 ) (17.0 ) 7.0 (13.4 ) (13.4 ) (0.9 ) (0.8 ) (7.3 ) (5.4 ) (5.5 ) (5.4 ) 0.3 0.3 (43.8 ) (17.7 ) (3.5 ) 0.6 7.8 8.9 $ 4.3 $ 9.5 $ 3.6 $ 3.6 $ — $ 0.2 $ 0.8 $ 0.8 $ 0.7 $ 0.5 $ 3.9 $ — $ $ ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) $ $ $ $ $ $ $ $ $ $ $ $ Common
Equity Retained
Earnings Total $ 279.1 $ 72.0 $ 351.1 26.5 26.5 (5.5 ) (5.5 ) 1.3 1.3 0.3 0.3 $ 280.7 $ 93.0 $ 373.7 $ 275.8 $ 60.8 $ 336.6 15.6 15.6 (5.4 ) (5.4 ) 1.3 1.3 0.3 0.3 $ 277.4 $ 71.0 $ 348.4
Earnings $ $ $ ) ) $ $ $ $ $ $ ) ) $ $ $ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Usource Inc. and Usource L.L.C., which the Company sold in the first quarter of 2019, were wholly-owned subsidiaries of Unitil Resources.natural gas for heating purposes.state capital regionscity areas of New Hampshire and the greater Fitchburg area of north central Massachusetts and the local distribution of natural gas in southeastern New Hampshire, portions of southern and central Maine to the Lewiston-Auburn area and in the greater Fitchburg area of north central Massachusetts. Unitil has three distribution utility subsidiaries, Unitil Energy, which operates in New Hampshire,Hampshire; Fitchburg, which operates in MassachusettsMassachusetts; and Northern Utilities, which operates in New Hampshire and Maine (collectively referred to as the distribution utilities)“distribution utilities”).a naturalan interstate gas transportationtransmission pipeline company, operating 86 miles of underground gas transmission pipeline primarily located in Maine and New Hampshire. Granite State provides Northern Utilities with interconnection to three3 major natural gas pipelines and access to domestic natural gas supplies in the south and Canadian natural gas supplies in the north. Granite State derives its revenues principally from the transportation services provided to Northern Utilities and, to a lesser extent, third-party marketers.three3 other wholly-owned subsidiaries: Unitil Service;Service, Unitil Realty;Realty and Unitil Resources. Unitil Service provides, at cost, a variety of administrative and professional services, including regulatory, financial, accounting, human resources, engineering, operations, technology, energy management and management services on a centralized basis to its affiliated Unitil companies. Unitil Realty owns and manages the Company’s corporate office in Hampton, New Hampshire and leases this facility to Unitil Service under a long-term lease arrangement. Unitil Resources is the Company’s wholly-owned the divestiture of Usource20192020 are not necessarily indicative of results to be expected for the year ending December 31, 2019.2020. For further information, please refer to Note 1 of Part II2018,2019, as filed with the Securities and Exchange Commission (SEC) on January 31, 2019,30, 2020, for a description of the Company’s Basis of Presentation.Income (Expense)Expense (Income), Net on the Consolidated Statements of Earnings for the three months ended March 31, 2019, while the income taxes associated with this transaction of $3.6 million are included in the Provision For Income Taxes.calculatedestimated each month based on estimated customer usage by class and applicable customer rates, taking into account current and historical weather data, assumptions pertaining to metering patterns, billing cycle statistics, and other estimates and assumptions, and are then reversed in the following month when billed to customers.ASU2014-09.Accounting Standards Codification (ASC) 606.Accounting Standards Codification (ASC)ASC ASU2014-09The rate adjustment mechanisms meet the criteria within ASC Three Months Ended March 31, 2019 Gas Electric Total $ 38.7 $ 35.7 $ 74.4 54.0 24.7 78.7 6.5 2.3 8.8 99.2 62.7 161.9 (12.8 ) 2.1 (10.7 ) $ 86.4 $ 64.8 $ 151.2 Three Months Ended March 31, 2018 Gas Electric Total $ 35.8 $ 34.4 $ 70.2 50.6 24.1 74.7 5.0 3.1 8.1 91.4 61.6 153.0 (4.4 ) (4.1 ) (8.5 ) $ 87.0 $ 57.5 $ 144.5 $ $ $ ) ) ) $ $ $ $ $ $ ) ) $ $ $ natural gas sales. The difference between distribution revenue amounts billed to customers and the targeted revenue decoupling amounts is recorded as an increase or a decrease in Accrued Revenue, which forms the basis for resetting rates for future cash recoveries from, or credits to, customers. These revenue decoupling targets may be adjusted as a result of rate cases that the Company files with the MDPU.ofrevenueof current and deferred tax assets and liabilities reflect its best assessment of estimated future taxes to be paid. In accordance with the FASB Codification, the Company periodically assesses the realization of its deferred tax assets and liabilities and adjusts the income tax provision, the current tax liability and deferred taxes in the period in which the facts and circumstances which gave rise to the revision become known.Operator – Operator—New England2019,2020, March 31, 20182019 and December 31, 2018,2019, the Unitil subsidiaries had deposited $2.4 million, $3.0 million $3.3 million and $3.5$1.9 million, respectively to satisfy theireach month based uponthat reflects the Company’s experience in collectingestimate of expected credit losses for electric and gas utility service accounts receivable in prior years. At the end of each month, an analysis of the delinquent receivablesreceivable. The allowance for doubtful accounts is performedcalculated by applying a historical loss rate, which takes intois adjusted for current conditions, customer trends, or other factors such as macroeconomic conditions, to customer account an assumption about the cash recovery of delinquent receivables.balances. The analysisCompany also calculates the amount ofaccounts that are protected fromshut-off.accounts. Evaluating the adequacy of the Allowanceallowance for Doubtful Accountsdoubtful accounts requires judgment about the assumptions used in the analysis. ItThe Company’s experience has been the Company’s experience that the assumptions it has used in evaluating the adequacy of the Allowanceallowance for Doubtful Accountsdoubtful accounts have proven to be reasonably accurate.2019,2020, March 31, 20182019 and December 31, 2018, which are included in 2019, was as follows: $ $ $ onincludes $1.7 million, $1.7 million, and $1.0 million of the accompanying unaudited consolidated balance sheets, was as follows: March 31, December 31, 2019 2018 2018 $ 1.7 $ 1.6 $ 1.3 2019,2020, March 31, 20182019 and December 31, 2018. March 31, December 31, 2019 2018 2018 $ 29.4 $ 34.6 $ 41.3 10.8 10.5 13.4 $ 40.2 $ 45.1 $ 54.7 $ $ $ $ $ $ natural gas purchases during the months of April through October are delivered to a third party. The third party delivers natural gas back to the Company during the months of November through March. The exchange and storage gas volumes are recorded at weighted average cost. The following table2019,2020, March 31, 20182019 and December 31, 2018. March 31, December 31, 2019 2018 2018 $ 0.2 $ — $ 7.5 0.2 0.2 0.6 $ 0.4 $ 0.2 $ 8.1 $ $ $ $ $ $ natural gas inventory. The following table shows the components of Gas Inventory as of March 31, 2019,2020, March 31, 20182019 and December 31, 2018. March 31, December 31, 2019 2018 2018 $ — $ — $ 0.3 0.4 0.3 0.4 0.1 0.1 0.1 $ 0.5 $ 0.4 $ 0.8 $ $ $ $ $ capitalized.ca2019,2020, March 31, 20182019 and December 31, 2018,2019, the Company estimates that the cost of removal amounts, which are recorded on the Consolidated Balance Sheets in Cost of Removal Obligations are $98.8 million, $93.7 million, $86.6and $96.0 million, and $90.7 million, respectively.On January 1, 2019, theadopted ASUNo. 2016-02, “Leases (Topic 842)”. The new standard requires lessees to recordrecords assets and liabilities on the balance sheet for all leases with terms longer than 12 months. Leases will beare classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The Company elected the package of practical expedients permitted under the transition guidance within the new standard, which among other things, allows the Company to carryforward the historical lease classification. The Company also elected the practical expedient related to land easements, allowing the Company to carry forward its current accounting treatment for land easements on existing agreements. The Company made anCompany’s accounting policy election is to keep leases with an initial term of 12 months or less off of the balance sheet. The Company recognizes those lease payments in the Consolidated Statements of Earnings on a straight-line basis over the lease term. The adoption of the standard resulted in recognition of approximately $4.2 million of lease assets and lease liabilities as of January 1, 2019 on the Company’s Consolidated Balance Sheets. The Company’s adoption of the standard did not have a material effect on its Consolidated Statements of Earnings and Consolidated Statements of Cash Flows. See additional discussion below in the “Leases” section of Note 4 to the Consolidated Financial Statements. natural gas by the three distribution utilities: Unitil Energy, Fitchburg and Northern Utilities. Unitil Energy and Fitchburg are subject to regulation by the FERC. Fitchburg is also regulated by the Massachusetts Department of Public Utilities (MDPU), Unitil Energy is regulated by the New Hampshire Public Utilities Commission (NHPUC) and Northern Utilities is regulated by the Maine Public Utilities Commission (MPUC) and NHPUC. Granite State, the Company’s natural gas transmission pipeline, is regulated by the FERC. Accordingly, the Company uses the Regulated Operations guidance as set forth in the FASB Codification. The Company has recorded Regulatory Assets and Regulatory Liabilities which will be recovered from customers, or applied for customer benefit, in accordance with rate provisions approved by the applicable public utility regulatory commission. March 31, December 31, 2019 2018 2018 $ 72.4 $ 85.4 $ 72.0 25.1 31.9 38.4 5.9 8.0 6.3 7.6 9.0 7.9 4.7 6.3 5.7 11.6 5.2 10.0 127.3 145.8 140.3 29.4 34.6 41.3 $ 97.9 $ 111.2 $ 99.0 Reflects amounts included in Accrued Revenue, discussed above, on the Company’s Consolidated Balance Sheets. March 31, December 31, 2019 2018 2018 $ 48.2 $ 49.1 $ 47.0 13.6 10.3 11.5 — 0.6 — 0.6 — — 62.4 60.0 58.5 15.0 10.9 11.5 $ 47.4 $ 49.1 $ 47.0 $ $ $ $ $ $ (1) Reflects amounts included in the Accrued Revenue on the Company’s Consolidated Balance Sheets. $ $ $ $ $ $ regulated regulat20192020 are $5.9$7.5 million of environmental costs, rate case costs and other expenditures to be recovered over varying periods in the next seven years. Regulators have authorized recovery of these expenditures, but without a return. Regulatory commissions can reach different conclusions about the recovery of costs, which can have a material impact on the Company’s Consolidated Financial Statements. The Company believes it is probable that its regulated distribution and transmission utilities will recover their investments in long-lived assets, including regulatory assets. If the Company, or a portion of its assets or operations, were to cease meeting the criteria for application of these accounting rules, accounting standards for businesses in general would become applicable and immediate recognition of any previously deferred costs, or a portion of deferred costs, would be required in the year in which the criteria are no longer met, if such deferred costs were not recoverable in the portion of the business that continues to meet the criteria for application of the FASB Codification topic on Regulated Operations. If unable to continue to apply the FASB Codification provisions for Regulated Operations, the Company would be required to apply the provisions for the Discontinuation of Rate-Regulated Accounting included in the FASB Codification. In the Company’s opinion, its regulated operations will be subject to the FASB Codification provisions for Regulated Operations for the foreseeable future.none of its energy supply contracts either do not qualify as a derivative instrument under the guidance set forth in the FASB Codification.hasmaintains a trust through which it invests in a variety of equity and fixed income mutual funds. These funds aremoney market fund. This fund is intended to satisfy obligations under the Company’s Supplemental Executive Retirement Plan (SERP)SERP (See further discussion of the SERP in Note 9.2019,2020, March 31, 20182019 and December 31, 2018,2019, the fair value of the Company’s investments in these trading securities, which are recorded on the Consolidated Balance Sheets in Other Assets, were $5.1$5.5 million, $5.1 and $4.8$5.6 million, respectively, as shown in the table below. These investments are valued based on quoted prices from active markets and are categorized in Level 1 as they are actively traded and no valuation adjustments have been applied. Changes in the fair value of these investments are recorded in Other Expense, Net. March 31, December 31, 2019 2018 2018 $ — $ 1.9 $ — — 1.6 — 5.1 1.6 4.8 $ 5.1 $ 5.1 $ 4.8 $ $ $ $ $ $ 2019,2020, March 31, 20182019 and December 31, 2018,2019, the fair value of the Company’s investments in these trading securities related to the DC Plan, which are recorded on the Consolidated Balance Sheets in Other Assets, were $0.4 million, $0.1 million $0 and $0,$0.2 million, respectively, as shown in the table below. These investments are valued based on quoted prices from active markets and are categorized in Level 1 as they are actively traded and no valuation adjustments have been applied. Changes in the fair value of these investments are recorded in Other Expense, Net. March 31, December 31, 2019 2018 2018 $ — $ — $ — 0.1 — — $ 0.1 $ — $ — $ $ $ $ March 31, December 31, 2019 2018 2018 $ 0.2 $ — $ 7.5 4.1 7.5 5.6 0.3 0.3 0.3 4.6 7.8 13.4 0.5 0.8 0.6 $ 5.1 $ 8.6 $ 14.0 $ $ $ $ $ $ natural gas pipeline and storage assets, resells the natural gas storage inventory to an asset manager and subsequently repurchases the inventory over the course of the natural gas heating season at the same price at which it sold the natural gas inventory to the asset manager. The gas inventory related to these agreements is recorded in Exchange Gas Receivable on the Company’s Consolidated Balance Sheets while the corresponding obligations are recorded in Energy Supply Obligations.maintain accrued revenuedefer costs for RPS compliance which isare recorded in the Accrued Revenue with a corresponding liability in Energy Supply Obligations on the Company’s Consolidated Balance Sheets.renewable energy certificates (RECs)RECs pursuant to Massachusetts legislation, specifically, An Act Relative to Green Communities (“Green Communities Act”, 2008), An Act Relative to Competitively Priced Electricity in the Commonwealth (2012) and An Act to Promote Energy Diversity (“Energy Diversity Act”, 2016). The generating facilities associated with four of these contracts have been constructed and are now operating. Since 2017, the Company has participated in two major statewide procurements which resulted in contracts for imported hydroelectric power and associated transmission and for offshore wind generation. The contracts were filed withapproved by the MDPU in 2018 and approvals remain pending. natural gas supplies from third-party suppliers. In connection with the implementation of retail choice, Unitil Power, which formerly functioned as the wholesale power supply provider for Unitil Energy, and Fitchburg divested their long-term power supply contracts through the sale of the entitlements to the electricity sold under those contracts. Unitil Energy and Fitchburg recover in their rates all the costs associated with the divestiture of their power supply portfolios and have secured regulatory approval from the NHPUC and MDPU, respectively, for the recovery of power supply-related stranded costs. As of March 31, 2020, Fitchburg has fully-recovered its power supply-related stranded costs and Unitil Energy has $0.5 million remaining to recover. The obligations related to these divestitures are recorded in Energy Supply Obligations (current portion) and Other Noncurrent Liabilities (noncurrent portion) on the Company’s Consolidated Balance Sheets with corresponding regulatory assets recorded in Accrued Revenue (current portion) and Regulatory Assets (noncurrent portion).Recently Issued Pronouncements –In February 2016, the FASB issued ASUNo. 2016-02, “Leases (Topic 842)”. The new standard requires lessees to record assets and liabilities on the balance sheet for all leases with terms longer than 12 months. The Company adopted the standard as of January 1, 2019. See “Leases” above in Note 1.Other than the pronouncement discussed above, there are no recently issued pronouncements that the Company has not already adopted or that have a material impact on the Company.Statements.NOTEStatements, except for the order issued by the MDPU on April 17, 2020 approving a settlement agreement entered into by Fitchburg and the Massachusetts Office of the Attorney General (See Note 6 to the Consolidated Financial Statements). DIVIDENDS DECLARED PER SHAREDeclarationDate DatePaid(Payable) Shareholder ofRecord Date DividendAmount04/24/19 05/29/19 05/15/19 $ 0.37001/30/19 02/28/19 02/14/19 $ 0.37010/24/18 11/1820 11/15/18 $0.36507/25/18 08/29/18 08/15/18 $0.36504/25/18 05/29/18 05/15/18 $ 0.36501/30/18 02/28/18 02/14/18 0.3650.370NOTE SEGMENT INFORMATION20192020 and March 31, 2018: Gas Electric Non-
Regulated Other Total $ 99.2 $ 62.7 $ — $ — $ 161.9 (12.8 ) 2.1 — — (10.7 ) — — 0.9 — 0.9 $ 86.4 $ 64.8 $ 0.9 $ — $ 152.1 13.7 1.9 10.1 0.8 26.5 771.6 502.3 0.1 16.2 1,290.2 3.3 6.6 — 1.0 10.9 $ 91.4 $ 61.6 $ — $ — $ 153.0 (4.4 ) (4.1 ) — — (8.5 ) — — 1.3 — 1.3 $ 87.0 $ 57.5 $ 1.3 $ — $ 145.8 12.6 3.0 0.4 (0.4 ) 15.6 712.6 481.8 7.1 42.8 1,244.3 3.6 6.0 — 0.5 10.1 NOTE2019: $ $ $ $ $ ) ) ) $ $ $ $ $ ) ) DEBT AND FINANCING ARRANGEMENTS2019,2020, March 31, 20182019 and December 31, 20182019 are shown below: March 31, December 31, 2019 2018 2018 $ 20.0 $ 20.0 $ 20.0 30.0 30.0 30.0 5.0 10.0 10.0 6.0 7.5 6.0 20.0 20.0 20.0 15.0 15.0 15.0 15.0 15.0 15.0 30.0 — 30.0 5.7 7.6 5.7 10.0 10.0 10.0 10.0 10.0 10.0 12.0 12.0 12.0 15.0 15.0 15.0 14.0 14.0 14.0 15.0 15.0 15.0 — 10.0 — 8.2 16.6 16.6 20.0 20.0 20.0 50.0 50.0 50.0 50.0 50.0 50.0 30.0 30.0 30.0 — 3.3 — 15.0 15.0 15.0 395.9 396.0 409.3 3.4 3.2 3.5 392.5 392.8 405.8 19.5 29.8 18.4 $ 373.0 $ 363.0 $ 387.4 $ $ $ $ $ $ March 31, December 31, 2019 2018 2018 $ 418.0 $ 428.0 $ 422.0 Credit Arrangements $ $ $ $75.7$74.3 million for the three months ended March 31, 2019.2020. Total gross repayments were $92.7$61.3 million for the three months ended March 31, 2019.2020. The following table details the borrowing limits, amounts outstanding and amounts available under the Credit Facility as of March 31 2019,2020, March 31, 201830, 2019 and December 31, 2018: Revolving Credit Facility
($ millions) March 31, December 31, 2019 2018 2018 $ 120.0 $ 120.0 $ 120.0 $ 65.8 $ 45.3 $ 82.8 $ 54.2 $ 74.7 $ 37.2 $ $ $ $ $ $ 2019,2020, March 31, 20182019 and December 31, 2018,2019, the Company was in compliance with the covenants contained in the Credit Facility in effect on that date. (See also “Credit Arrangements” in Note 4.) Company believes the future operating cash flows of the Company, along with its existing borrowing availability and access to financial markets for the issuance of new long-term debt, will be sufficient to meet any working capital and future operating requirements, and capital investment forecast opportunities.The weighted average interest rates on all short-term borrowings and intercompany money pool transactions were 3.7%2.6% and 2.9%3.7% for the three months ended March 31, 20192020 and March 31, 2018,2019, respectively. The weighted average interest rate on all short-term borrowings for the twelve months ended December 31, 20182019 was 3.3%3.4%.November 30, 2018December 18, 2019, Unitil EnergyCorporation issued $30 million of First Mortgage BondsNotes due November 30, 20482029 at 4.18%3.43%. Unitil EnergyCorporation used the net proceeds from this offering to repay short-term debt and for general corporate purposes. Approximately $0.5$0.2 million of costs associated with these issuances have been netted against long-term debtLong-Term Debt for presentation purposes on the Consolidated Balance Sheets.TheThis capital lease matures on September 30, 2020. Aswas paid off in the second quarter of March 31, 2019, there are $2.8 million of current and $1.6 million of noncurrent obligations under this capital lease on the Company’s Consolidated Balance Sheets.natural gas pipeline and storage assets, resells the natural gas storage inventory to an asset manager and subsequently repurchases the inventory over the course of the natural gas heating season at the same price at which it sold the natural gas inventory to the asset manager.$1.0 million and $8.4 $6.5 natural gas storage inventory at March 31, 2019,2020, March 31, 20182019 and December 31, 2018,2019, respectively, related to these asset management agreements. The amount of naturalgas inventory released in March 2020 and payable in April 2020 isiswas recorded in Accounts Payable at March 31, 2019. The amount of natural gas inventory released in March 2018December 2019 and payable in April 2018 January 2020March 31, 2018. The amount of natural gas inventory released in December 2018 and payable in January 2019 was $0.9 million and was recorded in Accounts Payable at December 31, 2018. natural gas storage management contracts entered into by the distribution utilities. The Company’s policy is to limit the duration of these guarantees. As of March 31, 2019,2020, there were approximately $4.3$6.2 million of guarantees outstanding.20192020 and 20182019 amounted to $0.4 million and $0.5$0.4 million, respectively. March 31, December 31, 2019 2018 2018 $ 1.1 $ — $ — 2.8 — — $ 3.9 $ — $ — $ 3.0 $ 3.1 $ 3.1 1.9 4.9 2.7 $ 4.9 $ 8.0 $ 5.8 $ 8.8 $ 8.0 $ 5.8 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 20192020 was $0.4 million and was included in Cash Provided by Operating Activities on the Consolidated Statements of Cash Flows.$15.0 million and $15.0$1.2 million as of March 31, 2019,2020, March 31, 20182019 and December 31, 2018,2019, respectively, less accumulated amortization of $0.7 million, $1.8 million $1.1 million and $1.7$0.6 million, respectively and are included in Net Utility Plant on the Company’s Consolidated Balance Sheets.2019.2020. The payments for capital leases consist of $3.0$0.2 million of current capital lease obligations, which are included in Other Current Liabilities and $1.9$0.4 million of noncurrent capital lease obligations, which are included in Other Noncurrent Liabilities, on the Company’s Consolidated Balance Sheets as of March 31, 2019. $2.8 million of the current capital lease obligations and $1.6 million of the noncurrent capital lease obligations reflect amounts under a financing arrangement entered into in April 2014 for various information systems and technology equipment. The financing arrangement is structured as a capital lease obligation.$1.1$1.4 million of current operating lease obligations, which are included in Other Current Liabilities and $2.8$3.5 million of noncurrent operating lease obligations, which are included in Other Noncurrent Liabilities, on the Company’s Consolidated Balance Sheets as of March 31, 2019.Lease Payments ($000’s) Operating Capital Leases Leases $ 967 $ 2,369 1,141 2,576 972 96 691 33 391 15 119 — 4,281 5,089 426 122 $ 3,855 $ 4,967
Leases
Leases $ $ $ $ 2019,2020, the weighted average remaining lease term is 3.9 years and the weighted average operating discount rate used to determine the operating lease obligations was 5.3%4.9%.Disclosures Related to Periods Prior to the Adoption1).The payment amounts in the following table, which are as of December 31, 2018, would not differ substantially from the payment amounts as of March 31, 2018.Lease Payments ($000’s) Operating Capital Leases Leases $ 1,372 $ 3,069 1,138 2,535 969 93 689 32 390 14 120 — $ 4,678 $ 5,743 NOTE 5 COMMON STOCK AND PREFERRED STOCK14,860,123, 14,876,95514,916,044, 14,930,170 and 14,916,04414,963,444 shares of common stock outstanding at March 31, 2018,2019, December 31, 20182019 and March 31, 2019,2020, respectively.2019,2020, the Company sold 5,9394,644 shares of its common stock, at an average price of $52.98$61.16 per share, in connection with its Dividend Reinvestment and Stock Purchase Plan (DRP) and its 401(k) plans resulting in net proceeds of approximately $314,700.$284,000. The DRP provides participants in the plan a method for investing cash dividends on the Company’s common stock and cash payments in additional shares of the Company’s common stock. –29, 2019, 33,15028, 2020, 28,630 Restricted Shares were issued in conjunction with the Stock Plan with an aggregate market value at the date of issuance of approximately $1.6$1.8 million. There were 60,49656,813 and 90,88260,49620192020 and 2018,2019, respectively. The weighted average grant date fair value of these shares was $46.23$54.88 and $41.93,$46.23, respectively. The compensation expense associated with the issuance of shares under the Stock Plan is being recognized over the vesting period and was $1.7$1.8 million and $1.8$1.7 million for the three months ended March 31, 20192020 and 2018,2019, respectively. At March 31, 2019,2020, there was approximately $1.3$1.1 million of total unrecognized compensation cost under the Stock Plan which is expected to be recognized over approximately 3.0 years. During the three months ended March 31, 20192020 there were no forfeitures0 restricted shares forfeited and no cancellations0 restricted shares cancelled under the Stock Plan.20192020 in conjunction with the Stock Plan are presented in the following table: Units Weighted
Average
Stock
Price 61,789 $ 38.25 — — 417 $ 54.91 — — 62,206 $ 38.36 $ $ $ 52,67762,206 Restricted Stock Units outstanding as of March 31, 20182019 with a weighted average stock price of $36.27.$38.36. Included in Other Noncurrent Liabilities on the Company’s Consolidated Balance Sheets as of March 31, 2019,2020, March 31, 20182019 and December 31, 20182019 is $1.6 million, $1.4 million $1.0 million and $1.3$1.9 million, respectively, representing the fair value of liabilities associated with the portion of fully vested RSUs that will be settled in cash.2019, March 31, 2018 and December 31, 2018.2019. There were less than $0.1 million of total dividends declared on Preferred Stock in each of the three month periods ended March 31, 20192020 and March 31, 2018,2019, respectively.NOTEREGULATORY MATTERSUNITIL’S REGULATORY MATTERS ARE DESCRIBED IN NOTEREgulatory MattersTO THE FINANCIAL STATEMENTS IN ITEMto the Financial Statements in Item 8 OF PARTof Part II OF UNITIL CORPORATION’S FORMof Unitil Corporation’s Form 10-K FOR DECEMBER for December 31, 2018 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 31, 2019.21 percent,21%, effective January 1, 2018. Each state public utility commission, with jurisdiction over the areas that are served by Unitil’s electric and gas subsidiary companies, issued orders directing how the tax law changes were to be reflected in rates. Unitil has complied with these orders and has made the required changes to its rates as directed by the commissions. The FERC has opened a rulemaking proceeding on this matter which has been addressed in a rate settlement filing by Granite State. More recently, on November 15, 2018, the FERC issued a Notice of Proposed Rulemaking that would allow it to determine which pipelines under the Natural Gas Act may be collecting unjust and unreasonable rates in light of the corporate tax reduction. This matter has been resolved for Granite State in its May 2, 2018 uncontested rate settlement filing, which accounted for the effect of the TCJA.Policy Statementfinal rule on Public Utility Transmission Rate Changes to Address Accumulated Deferred Income Taxes. The new rule requires public utilities withTCJA’s effectsimpacts of the TCJA and future tax law changes on thecustomer rates by accounting for “excess” or “deficient” Accumulated Deferred Income Taxes (ADIT) on. FERC also required transmission rates. Underproviders with stated rates to account for the proposed rules all public utilities with transmission formula rates, including Fitchburg, would be required to: (1) include mechanisms to deduct any excess ADIT from or add any deficient ADIT toimpacts of the TCJA in their next rate bases; (2) include mechanisms in those rates that would raise or lower their income tax allowances by any amortized excess or deficient ADIT; and (3) incorporate a new permanent worksheet into their rates that will annually track information related to excess or deficient ADIT.case. The Company believes that these matters are substantially resolvedis complying with the new rule and will not have athere is no material impact on its financial position, operating results, or cash flows.theUnitil Energy’s first step increase, effective May 1, 2018. The filing incorporatedOn April 22, 2019, the revenue requirement of $3.3 million for 2017 plant additions, a reduction of $2.2 million for the effect of the federal tax decrease pursuant to the TCJA, along with the termination of theone-year $1.4 million reconciliation adjustment which had recouped the difference between temporary rates and final rates. The net effect of the three adjustments resulted in a revenue decrease of $0.3 million. On February 28, 2019,NHPUC approved Unitil Energy filed itsEnergy’s second and final step adjustment, seekingproviding for a revenue increase of approximately $340,000. On April 22, 2019 this final step adjustment was approved by the NHPUC,$340,000, effective May 1, 2019.Fitchburg’s last base rate order from the MDPU, issued in April 2016, the MDPU approvedaddition, Fitchburg has an annual capital cost recovery mechanism to recover the revenue requirement associated with certain capital additions. On June 28, 2018, Fitchburg filed its compliance report of capital investments for calendar year 2017. On November 1, 2018, Fitchburg filed its cumulative revenue requirement of $0.9 million associated with the Company’s 2015, 2016 and 20172015-2017 capital expenditures and associated Capital Cost Adjustment Factors to become effective on January 1, 2019.expenditures. On December 27, 2018, the Capital Cost Adjustment Factors werefiling was approved, effective January 1, 2019, subject to further investigation and reconciliation. On April 3, 2019, the MDPU issued a final order approving Fitchburg’s 2017 filing, which provides for the recovery of the sum of the revenue requirement and reconciliation adjustment of $0.4 million. Final approval of the 2018 filing remains pending.31;31 (the “GSEP Filing”); and a filing, submitted on or before May 1, of final project documentation for projects completed during the prior year, demonstrating substantial compliance with its plan in effect for that year and showing that project costs were reasonably and prudently incurred. While a number of the filings under the GSEP tariff may remain pending fromyear-to-year in any given year, theincurred (the “GREC Filing”). The Company considers these to be routine regulatory proceedings and there are no material issues outstanding. Under this tariff,$0.9$1.0 million that went into effect on May 1, 2018,2019, subject to reconciliation. The amount that exceeded the annual cap, and reconciliation.$0.6October 31, 2018,May 1, 2019, the MDPU approved the Company’s request forCompany made its 2019 GREC Filing, seeking a waiver of the annual cap in order to recover its reconciliation adjustment of $0.4 million effective November 1, 2018 associated with its actual 2017 revenue requirement. On October 31, 2018, the Company filed to increase the annual cap for two years and is seeking recovery of a revenue increase of $0.8 million, subject to the annual cap and reconciliation, for effect May 1, 2019. This matter remains pending.Northern Utilities – Base Rates – Maine –On February 28, 2018, the MPUC issued its Final Order (Order) in Northern Utilities’ most recent base rate case.$1.0 million. The Order provided for an annual revenue increase of $2.1 million before a reduction of $2.2 million to incorporate the effect of the lower federal income tax rate under the TCJA. The MPUC Order approved a return on equity of 9.5 percent and a capital structure reflecting 50 percent equity and 50 percent long-term debt.Northern Utilities – Targeted Infrastructure Replacement Adjustment (TIRA) – Maine –The settlement in Northern Utilities’ Maine division’s 2013 rate case allowed the Company to implement a TIRA rate mechanism to adjust base distribution rates annually to recover the revenue requirements associated with targeted investments in gas distribution system infrastructure replacement and upgrade projects, including the Company’s Cast Iron Replacement Program (CIRP). The TIRA had an initial term of four years and covered targeted capital expenditures in 2013 through 2016. In its Order in the most recent base rate case (see above), the MPUC approved an extension of the TIRA mechanism, for an additional eight-year period, which will allow for annual rate adjustments through the end of the CIRP program. On May 7, 2018, the MPUCMDPU approved the Company’s request to increasein its Order issued October 31, 2019. On October 31, 2019, the Company made its annual base rates by 2.4%, or $1.1 million, to recover the revenue requirements for 2017 eligible facilities. On April 17, 2019, the MPUC approved the Company’s request to increase its annual base rates by 2.1%, or $1.0 million, to recover the revenue requirements for 2018 eligible facilities.Northern Utilities – Base Rates – New Hampshire –On May 2, 2018, the NHPUC approved a settlement agreement providingfiling for an annual revenue increase of $2.6 million, a reduction of annual revenue of $1.7 million to reflect the effect of the TCJA, and a step increase of $2.3 million to recover post-test year capital investments, allin revenues associated with 2020 GSEP investment for rates effective May 1, 2018 (with2020. On March 12, 2020, the revenue increase of $2.6 million reconcilingCompany made a revised GSEP filing to incorporate the date of temporary rates of August 1, 2017 and the revenue decrease for TCJA reconciling to January 1, 2018), for a net increase of approximately $3.2 million. Under the termsinclusion of the agreement, on February 27, 2019, the Company filed for a second step increase of approximately $1.4 million of annual revenue for effect May 1, 2019 to recover eligible capital2015 through 2018 GSEP investments in 2018.base rates effective March 1, 2020. This matter remains pending. According topending before the terms of the settlement agreement, Northern Utilities’ next distribution base rate case shall be based on an historic test year of no earlier than twelve months ending December 31, 2020. The settlement also provides that Granite State may not file a general (Section 4) rate case prior to April 30, 2019.will issueissued its final report on January 31, 2020, which contained a number of observation and recommendations for the improvement of gas distribution safety. On February 28, 2020, the Company filed a response and plan to implement the Unitil specific recommendations as well as generic safety improvements.that will include, but not be limitedrequesting approval of apotential opportunitiesextend its contract for improvement in eachfirm transmission on its affiliate Granite State pipeline for another year, extending the current contract for the period of these areas. The investigation ison-going.natural gas incurred by each of the three companies. Fitchburg, Unitil Energy and Northern Utilities have been, and remain in full compliance with all directives and orders regarding these filings. The Company considers these to be routine regulatory proceedings and there are no material issues outstanding.long termlong-term contracts for at least 400 MW’s of offshore wind energy generation by June 30, 2017, as part of a total of 1,600 MW of offshore wind the EDCs are directed to procure by June 30, 2027. Under Section 83D of the Act, the EDCs are required to jointly seek proposals for cost effectivecost-effective clean energy (hydro, solar and land-based wind) long-term contracts via one or more staggered solicitations for a total of 9,450,000 megawatt-hours by December 31, 2022. Unitil’s pro rata share of each of these contracts is approximately one percent.Section 83D matter remains pendingMDPU also determined that the EDCs’ request for remuneration equal to 2.75% is reasonable and in the public interest.EDCs awaiting an approval.2.75 percent2.75% is reasonable and in the public interest. Also, the MDPU approved the EDCs’ proposal to amend their respective tariffs to include the recovery of costs associated with the contracts. The Company believes that the power purchase obligations under these long-term contracts will have a material impact on the contractual obligations of Fitchburg, once certain conditions and regulatory assets of Fitchburg.Northern Utilities Gas Supply Cost Investigation –contingencies are met.MPUC has openedEDCs issued an investigation into regulatory and rate setting approachesRFP pursuant to Section 83C for natural gas supply costs.Long-Term Contracts for Offshore Wind Energy Generation on May 23, 2019. This order is applicable to all LDCs in Maine, and Northern Utilities is the second solicitation pursuant to Section 83C and with the MDPU’s approval of the Vineyard Wind contracts for 800 MW of offshore wind energy generation as a result of the first company whose procurement practices are being examined. Northern Utilities has beensolicitation, the remaining obligation under 83C is to procure an additional 800 MW of offshore wind energy generation. The EDCs selected an 800 MW project submitted by Mayflower Wind and remains in full compliancecontracts were executed on January 10, 2020. A filing with all MPUC directives and orders with respect to gas procurement.remains pending.remanded the proceeding to the Chief Administrative Law Judge to resume hearing procedures. On May 24, 2019 the judge appointed a Dispute Resolution Facilitator to aid parties in settlement negotiations. The procedural schedule was suspended September 24, 2019 in order to allow participants to focus on settlement negotiations. On October 24, 2019, the NETO’s filed an unopposed motion to suspend the procedural schedule and waiver of answer period indicating that the NETO’s, Municipal PTF Owners and the Commission Trial Staff have reached agreement in principle on the terms of a settlement to resolve all open issues in the proceeding. Work towards a final settlement continues. Fitchburg and Unitil Energy are Participating Transmission Owners, although Unitil Energy does not own transmission plant. To the extent that these proceedings result in any changes to the rates being charged, a retroactive reconciliation may be required. The Company does not believe that these proceedings will have a material adverse impact on the Company’s financial condition or results of operations.NOTEENVIRONMENTALeNVIRONMENTAL MATTERSUNITIL’S ENVIRONMENTAL MATTERS ARE DESCRIBED IN NOTETO THE FINANCIAL STATEMENTS IN ITEMto the Financial Statements in Item 8 OF PARTof Part II OF UNITIL CORPORATION’S FORMof Unitil Corporation’s Form 10-K FOR DECEMBER for December 31, 2018 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 31, 2019. 2019,substantially completed remediation ofactivities at all sites, thoughsites; however, on site monitoring continues and itat several sites which may result in future remedial actions as directed by the applicable regulatory agency. In July 2019,possible that future activities may be required.seven-yearseven-year periods. For Northern Utilities’ Maine division, the MPUC has authorized the recovery of environmental remediation costs over succeeding five-yearfive-year periods.The Environmental Obligations table below shows the amounts accrued for Fitchburg related to estimated and periodic, regulatory review costs for the completed permanent remediation20192020 and 2018.Environmental Obligations ($ millions) Fitchburg Northern
Utilities Total Three months ended March 31, 2019 2018 2019 2018 2019 2018 $ — $ 0.1 $ 2.0 $ 2.0 $ 2.0 $ 2.1 — 0.1 0.1 0.1 0.1 0.2 — 0.1 0.1 0.1 0.1 0.2 — 0.1 2.0 2.0 2.0 2.1 — 0.1 0.6 0.5 0.6 0.6 $ — $ — $ 1.4 $ 1.5 $ 1.4 $ 1.5 NOTE2019.
Utilities $ $ $ $ $ $ $ $ $ $ $ $ (the Final rules are expected to be issued in the second quarter of 2019. years.years, over the remaining life of the related utility plant. Subject to regulatory approval, the Company expects to flow back to customers a net $47.1 million of protected excess ADIT created as a result of the lowering of the statutory tax rate by the TCJA over periods estimated to be fifteen to twenty years.above;above, as of December 31, 2018, there is $5.8 was $2.0 at December 31, 2017, created by the recognition of Net Operating Loss Carryforward assets (NOLC), discussed below, and related to the implementation of the new federal tax rate of the TCJA, which had not been previously included in utility rates. The Company is recognizing the benefit of this excess ADIT in accordance with the regulatory treatment of excess ADIT for each of jurisdiction. In 2018 the CompanyAs of December 31, 2019 there was $0.3 million remaining; of which, $0.2 million was recognized $2.4as of March 31, 2020. The remaining $0.1 million of this tax benefit provision due to the turning of book/tax temporary differences associated with this excess ADIT. The Company expects to recognize the remaining $3.4 million of this excess ADITwill be recognized in future periods, which is currently expected to be in 2019 and 2020, in accordance with regulatory guidance as discussed above. not yet received regulatory orders in all of its Massachusetts and Maine jurisdictions regarding the flow-back of excess deferred income taxes. The Company’s New Hampshire regulators are expected to issue additional ratemaking guidance in future periods that will determine the final disposition of thePUHC;public utility holding company; the Company files consolidated Federal and State tax returns and Unitil Corporation and each of its utility operating subsidiaries recognize the results of their operations in its tax returns as if it were a stand-alone taxpayer. The Agreement provides that the Company will account for income taxes in compliance with U.S. GAAP and regulatory accounting principles. The Company filed its tax returns for the year ended December 31, 20172018 with the Internal Revenue ServiceIRS in September 20182019 and generated additionalutilized federal NOLC assets of $3.7$5.7 million principally due to pension cost deductions, tax repair deductions, tax depreciation and research and development deductions. For the2018,2019, the Company calculatedused $3.5 million of the NOLC in calculating the 2019 federal current tax of $7.7 million and offset it with a decrease to the federal NOLC of $7.7 million, resulting in no federal current taxes payable for the period.provision. As of December 31, 2018,2019, the Company had recorded cumulative federal and state NOLC assets of $10.8$1.6 million to offset against taxes payable in future periods. If unused, the Company’s NOLC carryforward assets will begin to expire in 2029. The Company received $0.9 million of the Alternative Minimum Tax (AMT) credits in 2019 and will receive $0.9 million of the AMT credits in 20202017,2019, the Company had $3.5$1.9 million of cumulative alternative minimum tax credits, general business tax credit and other state tax credit carryforwards to offset future income taxes payable.20192020 prior to their expiration in 2029.In March 2018, Unitil Corporation received notice that its Federal Income Tax return filings for the years ended December 31, 2015 and December 31, 2016 are under examination by the IRS. Currently, the Company believes that the ultimate resolution of this examination will not have a material impact on the Company’s financial statements. The Company remains subject to examination by New Hampshire tax authorities for the tax periods ended December 31, 2015; December 31, 2016; and December 31, 2017. Income tax filings for the year ended December 31, 2017 have been filed with the New Hampshire Department of Revenue Administration. The State of Maine has concluded its review of the Company’s tax returns for December 31, 2014, December 31, 2015, and December 31, 2016 which resulted in a small additional refund to the Company.The Company evaluated its tax positions at March 31, 2019 in accordance with the FASB Codification, and has concluded that no adjustment for recognition,de-recognition, settlement and foreseeable future events to any tax liabilities or assets as defined by the FASB Codification is required. The Company remains subject to examination by Federal, Maine, Massachusetts, and New Hampshire tax authorities for the tax periods ended December 31, 2015; December 31, 2016; and December 31, 2017.NOTERETIREMENT BENEFIT OBLIGATIONS20182019 as filed with the SEC on January 31, 201830, 2020 for additional information regarding these plans. 2019 2018 4.25 % 3.60 % 3.00 % 3.00 % 7.75 % 7.75 % 7.00 % 7.50 % 4.50 % 4.50 % 2024 2024 % % % % % % % % % % Pension Plan PBOP Plan SERP 2019 2018 2019 2018 2019 2018 $ 776 $ 848 $ 576 $ 733 $ 60 $ 122 1,621 1,469 856 851 139 101 (2,119 ) (1,946 ) (411 ) (409 ) — — 80 81 303 327 3 47 1,081 1,447 57 346 158 122 1,439 1,899 1,381 1,848 360 392 (412 ) (720 ) (474 ) (742 ) (103 ) (113 ) $ 1,027 $ 1,179 $ 907 $ 1,106 $ 257 $ 279 $ $ $ $ $ $ ) ) ) ) ) ) ) ) ) ) $ $ $ $ $ $ 2019,2020, the Company had not made $1.3 million and $0.4 million ofany contributions to its Pension Plan and PBOP Plan, respectively, in 2019.2020. The Company, along with its subsidiaries, expects to continue to make contributions to its Pension and PBOP Plans in 20192020 and future years at minimum required and discretionary funding levels consistent with the amounts recovered in the distribution utilities’ rates for these Pension and PBOP Plan costs.2019,2020, the Company had made $0.1$0.2 million of benefit payments under the SERP Plan in 2019.2020. The Company presently anticipates making an additional $0.5 million of benefit payments under the SERP Plan in 2019.Item 3.Quantitative and Qualitative Disclosures About Market RiskChief Accounting Officer,Controller, carried out an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of March 31, 2019.2020. Based upon this evaluation, the Company’s Chief Executive Officer, Chief Financial Officer and Chief Accounting OfficerController concluded as of March 31, 20192020 that the Company’s disclosure controls and procedures (as defined in Exchange Act RulesItem 1A.Risk Factors20182019 as filed with the SEC on February 1, 2018.Item 2.Unregistered Sales of Equity Securities and Use of Proceeds2019.2018,2019, the Company will periodically repurchase shares of its Common Stock on the open market related to Employee Length of Service Awards and the stock portion of the Directors’ annual retainer for those Directors who elected to receive common stock. There is no pool or maximum number of shares related to these purchases; however, the trading plan will terminate when $92,700$195,000 in value of shares have been purchased or, if sooner, on May 1, 2019.2019. Total
Number
of Shares
Purchased Average
Price Paid
per Share Total Number of
Shares Purchased as
Part of Publicly
Announced Plans or
Programs Approximate Dollar
Value of Shares that
May Yet Be
Purchased Under the
Plans or Programs — — — $ 59,311 — — — $ 59,311 — — — $ 59,311 — — — Item 5.Other Information
Number
of Shares
Purchased
Price Paid
per Share
Shares Purchased as
Part of Publicly
Announced Plans or
Programs
Value of Shares that
May Yet Be
Purchased Under the
Plans or Programs $ $ $ 25, 2019,30, 2020 the Company issued a press release announcing its results of operations for the three-month period ended March 31, 2019.2020. The press release is furnished with this Quarterly Report on FormItem 6.Exhibits(a) Exhibits 11 31.1 31.2 31.3 32.1 99.1 101.INS 101.SCH 101.CAL 101.DEF 101.LAB 101.PRE 25, 201930, 2020 Christine L. VaughanLaurence M. Brock Christine L. Vaughan 25, 201930, 2020 Laurence M. BrockDaniel J. Hurstak Laurence M. Brock Chief Accounting Officer53