UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
☒ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September2022
or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period fromto
Commission File
UNITIL CORPORATION
(Exact name of registrant as specified in its charter)
New Hampshire | 02-0381573 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
6 Liberty Lane West, Hampton, New Hampshire | 03842-1720 | |
(Address of principal executive office) | (Zip Code) |
Registrant’s telephone number, including area code: (603) 772-0775
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol | Name of each exchange of which registered | ||
Common Stock, no par value | UTL | New York Stock Exchange |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation(§ (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such file
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
Large accelerated filer | ☒ | Accelerated filer | ☐ | |||
Non-accelerated | ☐ | Smaller reporting company | ☐ | |||
Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Class | Outstanding at July 28, 2023 |
Common Stock, no par value | 16,092,469 Shares |
UNITIL CORPORATION AND SUBSIDIARY COMPANIES
FORM 10-Q
For the Quarter Ended June 30, 2023
Table of Contents
UNITIL CORPORATION AND SUBSIDIARY COMPANIES
FORM 10-Q
For the Quarter Ended September 30, 2022
Table of Contents
Page No. | ||||||
2-3 | ||||||
Part I. Financial Information | ||||||
Item 1. | Financial Statements—Unaudited | |||||
Consolidated Statements of Earnings—Three and | 14 | |||||
Consolidated Balance Sheets, June 30, 2023, June 30, 2022 and | 15-16 | |||||
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Consolidated Statements of Cash Flows— | 17 | |||||
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Item 2. | Management’s Discussion and Analysis (MD&A) of Financial Condition and Results of Operations |
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Item 3. | 41 | |||||
Item 4. | ||||||
41 | ||||||
Part II. Other Information | ||||||
Item 1. | 41 | |||||
Item 1A. | 41 | |||||
Item 2. |
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Item 3. | Defaults Upon Senior Securities | Inapplicable | ||||
Item 4. | Mine Safety Disclosures | Inapplicable | ||||
Item 5. | 42 | |||||
Item 6. |
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44 |
CAUTIONARY STATEMENTCautionary Statement
This report and the documents incorporated by reference into this report contain statements that constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the Securities Act), Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act), and the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical fact, included or incorporated by reference into this report, including, without limitation, statements regarding the financial position, business strategy and other plans and objectives for the Company’s future operations, are forward-looking statements.
These statements include declarations regarding the Company’s beliefs and current expectations. In some cases, forward-looking statements can be identified by terminology such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of such terms or other comparable terminology. These forward-looking statements are subject to inherent risks and uncertainties in predicting future results and conditions that could cause the actual results to differ materially from those projected in these forward-looking statements. Some, but not all, of the risks and uncertainties include those described in Part II, Item 1A (Risk Factors) and the following:
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increases in interest rates, which could increase the Company’s interest expense;
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Many of these risks are beyond the Company’s control. Any forward-looking statements speak only as of the date of this report, and the Company undertakes no obligation to update any forward-looking statements to reflect events or circumstances after the date on which such statements are made or to reflect the occurrence of unanticipated events, except as required by law. New factors emerge from time to time, and it is not possible for the Company to predict all such factors, nor can the Company assess the effect 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.
PART I. FINANCIAL INFORMATION
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
See Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Unitil Corporation’s 20212022 Annual Report on Form 10-K for additional information.
OVERVIEW
Unitil Corporation (Unitil or the Company) is a public utility holding company headquartered in Hampton, New Hampshire. Unitil and its subsidiaries are subject to regulation as a holding company system by the Federal Energy Regulatory Commission (FERC) under the Energy Policy Act of 2005.
Unitil’s principal business is the local distribution of electricity and 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:
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Unitil Energy, Fitchburg and Northern Utilities are collectively referred to as the “distribution utilities.” Together, the distribution utilities serve approximately 107,700108,100 electric customers and 86,60087,500 gas customers.
In addition, Unitil is the parent company of Granite State Gas Transmission, Inc. (Granite State), an interstate gas transmission 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 major gas pipelines and access to domestic gas supplies in the south and Canadian gas supplies in the north.
Unitil had an investment in Net Utility Plant of $1,303.8 million$1.4 billion at SeptemberJune 30, 2022.2023. Earnings from Unitil’s utility operations are derived primarily from the return on investment in the utility assets of the three distribution utilities and Granite State. Unitil’s total operating revenue includes revenue to recover the approved cost of purchased electricity and 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 gas.
Unitil Resources is the Company’s wholly-owned, non-regulated subsidiary. The Company’s other subsidiaries include Unitil Service Corp., which provides, at cost, a variety of administrative and professional services to Unitil’s affiliated companies; Unitil Realty Corp., which owns and manages Unitil’s corporate office building and property located in Hampton, New Hampshire; and Unitil Power Corp., which formerly functioned as the full requirements wholesale power supply provider for Unitil Energy. Unitil’s consolidated net income includes the earnings of the holding company and these subsidiaries.
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RATES AND REGULATION
Regulation
Unitil is subject to comprehensive regulation by federal and state regulatory authorities. Unitil and its subsidiaries are subject to regulation as a holding company system by the FERC under the Energy Policy Act of 2005 with regard to certain bookkeeping, accounting and reporting requirements. Unitil’s utility operations related to wholesale and interstate energy business activities are also regulated by the FERC. Unitil’s distribution utilities are subject to regulation by the applicable state public utility commissions with regard to their rates, issuance of securities and other accounting and operational matters: Unitil Energy is subject to regulation by the New Hampshire Public Utilities Commission (NHPUC); Fitchburg is subject to regulation by the Massachusetts Department of Public Utilities (MDPU); and Northern Utilities is regulated by the NHPUC and the Maine Public Utilities Commission (MPUC). Granite State, Unitil’s interstate gas transmission pipeline, is subject to regulation by 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.
Unitil’s distribution utilities deliver electricity and/or 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 historical test years, and earn a return on their capital investment in utility assets. The Company’s distribution utilities and its gas transmission pipeline company also may recover certain base rate costs, including capital project spending, qualifying storm expenses and enhanced reliability and vegetation management programs, through annual step adjustments or cost tracking rate mechanisms.
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Revenue decoupling is the term given to the elimination of the dependency of a utility’s distribution revenue on the volume of electricity or 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 and NHPUC. Fitchburg has been subject to revenue decoupling since 2011. Unitil Energy is subject to revenue decoupling as of June 1, 2022. As a result of Unitil Energy now being subject to revenue decoupling, as of June 1, 2022, revenue decoupling now applies to substantially all of Unitil’s total annual electric sales volumes. As a result of the recently received final order in Northern Utilities’ base rate case in New Hampshire, substantially all of Northern Utilities’ gas sales volumes in New Hampshire are subject to decoupling as of August 1, 2022. As of August 1, 2022, the Company estimates that revenue decoupling applies to approximately 43% of Unitil’s total annual gas sales volumes. The Company's electric and gas sales in New Hampshire and Massachusetts are now largely decoupled. The following table shows the estimated percentages of electric and gas sales that are subject to revenue decoupling for the periods presented.
Revenue Decoupling | |
Estimated Percentage of Decoupled Sales | |
For Periods Presented | |
Electric | |
Before June 1, 2022 | 27% |
After June 1, 2022 | Substantially All |
Gas | |
Before August 1, 2022 | 11% |
After August 1, 2022 | 43% |
RESULTS OF OPERATIONS
The following section of MD&A compares the results of operations for each of the two fiscal periods ended SeptemberJune 30, 20222023 and SeptemberJune 30, 20212022 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).
The Company continues to respond to the coronavirus pandemic by taking steps to mitigate the potential risks posed by its spread. The Company’s electric and gas utility distribution operating systems have continued to provide service to customers without disruption due to the coronavirus pandemic through the date of this filing. The Company has implemented its Crisis Response Plan to address specific aspects of the coronavirus pandemic. The Crisis Response Plan guides emergency response, business continuity, and the precautionary measures being taken on behalf of employees and the public. The Company has initiated extra precautions to protect employees who work in the field and for employees who continue to work in operations, distribution and corporate facilities. The Company has implemented social distancing and work from home policies, where appropriate. The Company continues to implement strong physical and cyber-security measures to ensure that its systems remain functional in order to serve both operational needs with a remote workforce and to help ensure uninterrupted service to customers.4
The extent to which the coronavirus pandemic affects the Company’s financial condition, results of operations, and cash flows will depend on future developments, that are highly uncertain and cannot be predicted with confidence, including the duration of the outbreak, new information that may emerge concerning the severity of the coronavirus pandemic, and the actions to contain the coronavirus pandemic or treat its effect, among others. In particular, the continued spread of the coronavirus could adversely affect the Company’s business, by (i) disrupting the Company’s employees and contractors ability to provide ongoing services to the Company, (ii) reducing customer demand for electricity or gas, or (iii) reducing the supply of electricity or gas, each of which could have an adverse effect on the Company’s financial condition, results of operations, and cash flows.
The Company’s results of operations historically have reflected the seasonal nature of the gas business. Annual gas revenues are substantially realized during the heating season as a result of higher sales of 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 results of operations. Sales of electricity are generally less sensitive to weather than gas sales, but also may be affected by the weather conditions in both the winter and summer seasons. As a result of recent rate cases, the Company’s electric and gas GAAP gross margins and electric and gas adjusted gross margins (a non-GAAP financial measure) are derived from a higher percentage of fixed billing components, including customer charges. As of June 1, 2022, substantially all of Unitil’s total annual electric sales volumes are decoupled and changes in sales to existing customers do not affect GAAP gross margin and adjusted gross margin. As a result of the recently received final order in Northern Utilities’ base rate case in New Hampshire, substantially all of Northern Utilities’ gas sales volumes in New Hampshire are subject to decoupling as of August 1, 2022. As of August 1, 2022, the Company estimates that revenue decoupling applies to approximately 43% of Unitil’s total annual gas sales volumes.
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On August 6, 2021, the Company issued and sold 800,000 shares of its common stock at a price of $50.80 per share in a registered public offering (Offering). The Company’s net increase to Common Equity and Cash proceeds from the Offering was approximately $38.6 million. The proceeds were used to make capital contributions to the Company’s regulated utility subsidiaries, to repay debt and for other general corporate purposes.
As part of the Offering, the Company granted the underwriters a 30-day option to purchase additional shares. The underwriters exercised the option and purchased an additional 120,000 shares of the Company’s common stock on September 8, 2021. The Company’s net increase to Common Equity and Cash proceeds from the exercise of the option was approximately $5.9 million. The proceeds were used to make equity capital contributions to the Company’s regulated utility subsidiaries, to repay debt and for other general corporate purposes. Overall, the results of operations and earnings for the three and nine months ended September 30, 2022 reflect the higher number of average shares outstanding.
The Company analyzes operating results using Electric and Gas Adjusted Gross Margins, which are non-GAAP financial measures. Electric Adjusted Gross Margin is calculated as Total Electric Operating Revenue less Cost of Electric Sales. Gas Adjusted Gross Margin is calculated as Total Gas Operating Revenues less Cost of Gas Sales. The Company’s management believes Electric and Gas Adjusted Gross Margins provide useful information to investors regarding profitability. Also, the Company’s management believes Electric and Gas Adjusted Gross Margins are important financial measures to analyze revenue from the Company’s ongoing operations because the approved cost of electric and gas sales are tracked, reconciled and passed through directly to customers in electric and gas tariff rates, resulting in an equal and offsetting amount reflected in Total Electric and Gas Operating Revenue.
In the following tables the Company has reconciled Electric and Gas Adjusted Gross Margin to GAAP Gross Margin, which we believe to be the most comparable GAAP financial measure. GAAP Gross Margin is calculated as Revenue less Cost of Sales, and Depreciation and Amortization. The Company calculates Electric and Gas Adjusted Gross Margin as Revenue less Cost of Sales. The Company believes excluding Depreciation and Amortization, which are period costs and not related to volumetric sales, is a meaningful measure to inform investors of the Company’s profitability from electric and gas sales in the period.
Three Months Ended September 30, 2022 ($ millions) | ||||||||||||||||||||||||||||||||
Three Months Ended June 30, 2023 (millions) | Three Months Ended June 30, 2023 (millions) |
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Electric | Gas | Non- Regulated and Other | Total |
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Total Operating Revenue | $ | 75.7 | $ | 34.5 | $ | — | $ | 110.2 |
| $ | 64.5 |
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Less: Cost of Sales | (47.3 | ) | (14.1 | ) | — | (61.4 | ) |
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Less: Depreciation and Amortization | (6.9 | ) | (9.5 | ) | (0.2 | ) | (16.6 | ) |
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| (6.4 | ) |
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| (9.9 | ) |
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GAAP Gross Margin | 21.5 | 10.9 | (0.2 | ) | 32.2 |
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| 17.8 |
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| 19.4 |
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| 36.9 |
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Depreciation and Amortization | 6.9 | 9.5 | 0.2 | 16.6 |
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| 9.9 |
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Adjusted Gross Margin | $ | 28.4 | $ | 20.4 | $ | — | $ | 48.8 |
| $ | 24.2 |
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| $ | 29.3 |
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| $ | — |
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| $ | 53.5 |
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Three Months Ended June 30, 2022 (millions) |
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| Electric |
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| Total |
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Total Operating Revenue |
| $ | 54.3 |
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| $ | 44.6 |
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| $ | 98.9 |
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Less: Cost of Sales |
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| (30.7 | ) |
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| (16.4 | ) |
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Less: Depreciation and Amortization |
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| (5.7 | ) |
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| (8.9 | ) |
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| (0.2 | ) |
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| (14.8 | ) |
GAAP Gross Margin |
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| 17.9 |
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| 19.3 |
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| (0.2 | ) |
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| 37.0 |
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Depreciation and Amortization |
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| 5.7 |
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| 8.9 |
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| 0.2 |
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| 14.8 |
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Adjusted Gross Margin |
| $ | 23.6 |
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| $ | 28.2 |
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| $ | — |
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| $ | 51.8 |
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Six Months Ended June 30, 2023 (millions) |
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| Electric |
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| Total |
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Total Operating Revenue |
| $ | 172.7 |
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| $ | 150.9 |
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| $ | — |
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| $ | 323.6 |
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Less: Cost of Sales |
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| (121.8 | ) |
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| (66.7 | ) |
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| — |
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| (188.5 | ) |
Less: Depreciation and Amortization |
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| (12.9 | ) |
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| (19.9 | ) |
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| (0.5 | ) |
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| (33.3 | ) |
GAAP Gross Margin |
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| 38.0 |
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| 64.3 |
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| (0.5 | ) |
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| 101.8 |
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Depreciation and Amortization |
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| 12.9 |
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| 19.9 |
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| 0.5 |
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| 33.3 |
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Adjusted Gross Margin |
| $ | 50.9 |
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| $ | 84.2 |
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| $ | — |
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| $ | 135.1 |
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Six Months Ended June 30, 2022 (millions) |
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| Electric |
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| Other |
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| Total |
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Total Operating Revenue |
| $ | 143.5 |
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| $ | 148.0 |
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| $ | — |
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| $ | 291.5 |
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Less: Cost of Sales |
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| (95.3 | ) |
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| (67.8 | ) |
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| — |
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| (163.1 | ) |
Less: Depreciation and Amortization |
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| (12.4 | ) |
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| (17.4 | ) |
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| (0.5 | ) |
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| (30.3 | ) |
GAAP Gross Margin |
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| 35.8 |
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| 62.8 |
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| (0.5 | ) |
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| 98.1 |
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Depreciation and Amortization |
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| 12.4 |
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| 17.4 |
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| 0.5 |
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| 30.3 |
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Adjusted Gross Margin |
| $ | 48.2 |
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| $ | 80.2 |
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| $ | — |
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| $ | 128.4 |
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Three Months Ended September 30, 2021 ($ millions) | ||||||||||||||||
Electric | Gas | Non- Regulated and Other | Total | |||||||||||||
Total Operating Revenue | $ | 65.5 | $ | 32.6 | $ | — | $ | 98.1 | ||||||||
Less: Cost of Sales | (40.1 | ) | (13.2 | ) | — | (53.3 | ) | |||||||||
Less: Depreciation and Amortization | (6.5 | ) | (8.1 | ) | (0.2 | ) | (14.8 | ) | ||||||||
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GAAP Gross Margin | 18.9 | 11.3 | (0.2 | ) | 30.0 | |||||||||||
Depreciation and Amortization | 6.5 | 8.1 | 0.2 | 14.8 | ||||||||||||
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Adjusted Gross Margin | $ | 25.4 | $ | 19.4 | $ | — | $ | 44.8 | ||||||||
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Nine Months Ended September 30, 2022 ($ millions) | ||||||||||||||||
Electric | Gas | Non- Regulated and Other | Total | |||||||||||||
Total Operating Revenue | $ | 219.2 | $ | 182.5 | $ | — | $ | 401.7 | ||||||||
Less: Cost of Sales | (142.6 | ) | (81.9 | ) | — | (224.5 | ) | |||||||||
Less: Depreciation and Amortization | (19.3 | ) | (26.9 | ) | (0.7 | ) | (46.9 | ) | ||||||||
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GAAP Gross Margin | 57.3 | 73.7 | (0.7 | ) | 130.3 | |||||||||||
Depreciation and Amortization | 19.3 | 26.9 | 0.7 | 46.9 | ||||||||||||
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Adjusted Gross Margin | $ | 76.6 | $ | 100.6 | $ | — | $ | 177.2 | ||||||||
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Nine Months Ended September 30, 2021 ($ millions) | ||||||||||||||||
Electric | Gas | Non- Regulated and Other | Total | |||||||||||||
Total Operating Revenue | $ | 182.2 | $ | 151.3 | $ | — | $ | 333.5 | ||||||||
Less: Cost of Sales | (108.8 | ) | (59.1 | ) | — | (167.9 | ) | |||||||||
Less: Depreciation and Amortization | (19.4 | ) | (24.5 | ) | (0.6 | ) | (44.5 | ) | ||||||||
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GAAP Gross Margin | 54.0 | 67.7 | (0.6 | ) | 121.1 | |||||||||||
Depreciation and Amortization | 19.4 | 24.5 | 0.6 | 44.5 | ||||||||||||
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Adjusted Gross Margin | $ | 73.4 | $ | 92.2 | $ | — | $ | 165.6 | ||||||||
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Electric GAAP Gross Margin was $21.5 million and $57.3$17.8 million in the three and nine months ended SeptemberJune 30, 2022, respectively, increases2023, a decrease of $2.6$0.1 million and $3.3 million, respectively compared to the same periodsperiod in 2021. For2022. Electric GAAP Gross Margin was $38.0 million in the six months ended June 30, 2023, an increase of $2.2 million compared to the same period in 2022. The decrease in the three month period was driven by higher depreciation and amortization expense of $0.7, partially offset by higher rates and customer growth of $0.6 million. The increase in the increasesix month
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period was driven by higher rates and customer growth of $3.0$2.7 million, partially offset by higher depreciation and amortization expense of $0.4$0.5 million. The increase in the nine month period was driven by higher rates and customer growth of $3.7 million and lower depreciation and amortization expense of $0.1 million, partially offset by the unfavorable effect on sales from cooler spring weather of $0.5 million when rates were not yet decoupled.
Gas GAAP Gross Margin was $10.9$19.4 million in the three months ended SeptemberJune 30, 2022, a decrease2023, an increase of $0.4$0.1 million compared to the same period in 2021.2022. Gas GAAP Gross Margin was $73.7$64.3 million in the ninesix months ended SeptemberJune 30, 2022,2023, an increase of $6.0$1.5 million compared to the same period in 2021. The decrease in the three month period was primarily driven by higher depreciation and amortization expense of $1.4 million, partially offset by higher rates of $1.0 million. The increase in the nine month period was driven by higher rates of $7.0 million and the favorable effect on sales from customer growth and colder weather of $1.4 million, partially offset by higher depreciation and amortization expense of $2.4 million.
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Earnings Overview
The Company’s Net Income was $0.5 million, or $0.03 in Earnings Per Share (EPS) for the third quarter of 2022, an increase of $0.5 million in Net Income, or $0.03 in EPS, compared to the third quarter of 2021. The Company’s earnings in the third quarter of 2022 reflect higher Electric and Gas Adjusted Gross Margins (a non-GAAP financial measure), partially offset by higher operating expenses.
For the nine months ended September 30, 2022, the Company reported Net Income of $26.9 million, or $1.68 per share, an increase of $5.3 million, or $0.26 per share, compared to the same nine month period in 2021. The Company’s earnings in the first nine months of 2022 reflect higher Electric and Gas Adjusted Gross Margins (a non-GAAP financial measure), partially offset by higher operating expenses.
Electric Adjusted Gross Margin (a non-GAAP financial measure) was $28.4 million and $76.6 million in the three and nine months ended September 30, 2022, respectively, increases of $3.0 million and $3.2 million, respectively, compared with the same periods in 2021.2022. The increase in the three month period was driven by higher rates and customer growth.growth of $3.5 million, partially offset by higher depreciation and amortization of $1.0 million and the recognition, in the second quarter of 2022, of $2.4 million in higher rates resulting from the Company's base rate case in New Hampshire. The increase in the ninesix month period was driven by higher rates and customer growth of $3.7$7.5 million, partially offset by the unfavorable effect on sales from cooler springeffects of warmer winter weather in 2023 of $0.5$1.1 million, when rates were not yet decoupled.
Total electric kilowatt-hour (kWh) sales increased 1.0%higher depreciation and 0.4%amortization of $2.5 million, and the recognition, in the three and nine month periods ended September 30,second quarter of 2022, respectively,of $2.4 million in higher rates resulting from the Company's base rate case in New Hampshire.
Earnings Overview
The Company’s Net Income was $4.2 million, or $0.25 in Earnings Per Share (EPS) for the second quarter of 2023, a decrease of $0.7 million in Net Income, or $0.05 in EPS, compared to the same periods in 2021. Sales to Residential customers increased 1.0% and sales to C&I customers increased 1.0%second quarter of 2022. The Company’s earnings in the three month period ended September 30, 2022,second quarter of 2023 reflect higher Electric and Gas Adjusted Gross Margins (a non-GAAP financial measure), offset by higher depreciation and amortization expense and higher interest expense, net.
The Company’s Net Income was $28.3 million, or $1.76 in Earnings Per Share (EPS) for the first six months of 2023, an increase of $1.9 million in Net Income, or $0.11 in EPS, compared to the same periodfirst six months of 2022. The Company’s earnings in 2021. For the nine month period ended September 30, 2022, sales to Residential customers decreased 0.6% while sales to C&I customers increased 1.1%, compared to the same period in 2021. The changes in sales to Residentialfirst six months of 2023 reflect higher Electric and C&I customers reflect warmer summer weather in 2022 compared to 2021, and customer growth,Gas Adjusted Gross Margins (a non-GAAP financial measure), partially offset by cooler spring weatherhigher operating expenses and higher interest expense, net.
The Company’s three and six months results for 2022, including Electric and Gas GAAP Gross Margins, reflect the effects of base rate case orders in 2022 compared to 2021. Based on weather data collectedNew Hampshire, which were issued in the Company’s electric service areas, on average there were 1.4% fewer Cooling Degree Days (CDD) in the first nine monthssecond quarter of 2022 compared(See Note 6, Regulatory Matters, to the same period in 2021. As of September 30, 2022, the number of electric customers increased by 734 over the previous year.accompanying Consolidated Financial Statements).
GasElectric Adjusted Gross Margin (a non-GAAP financial measure) was $20.4$24.2 million and $100.6$50.9 million in the three and ninesix months ended SeptemberJune 30, 2022,2023, respectively, increases of $1.0$0.6 million and $8.4$2.7 million, respectively, compared to the same periods in 2021.2022. These increases reflect higher rates of $1.0 million and $7.0 millioncustomer growth.
Total electric kilowatt-hour (kWh) sales decreased 5.4% and 5.0% in the three and nine month periods,six months ended June 30, 2023, respectively, while the remainder of the increase in the nine month period is attributablecompared to the favorable effect on sales of customer growthsame periods in 2022. Sales to Residential and colder weather.
Gas therm salesCommercial and Industrial (C&I) customers decreased 1.8%7.2% and 4.3%, respectively, in the three month periodmonths ended SeptemberJune 30, 2022,2023, compared to the same period in 2021.2022, reflecting lower average usage, partially offset by customer growth. Sales to Residential and C&I customers decreased 6.5% and 4.0%, respectively, in the six months ended June 30, 2023, compared to the same period in 2022, reflecting warmer winter weather in 2023 compared to 2022 and lower average usage, partially offset by customer growth. As of June 30, 2023, the number of electric customers increased by approximately 200 over the previous year.
Gas Adjusted Gross Margin (a non-GAAP financial measure) was $29.3 million and $84.2 million in the three and six months ended June 30, 2023, respectively, increases of $1.1 million and $4.0 million, respectively, compared to the same periods in 2022. These increases reflect higher rates and customer growth of $3.5 million and $7.5 million for the three and six month periods, respectively, partially offset by the recognition, in the second quarter of 2022, of $2.4 million in higher rates resulting from the Company's base rate case in New Hampshire and, for the six month period, the unfavorable effects of warmer winter weather in 2023 of $1.1 million.
Gas therm sales increased 0.2% and decreased 5.1% in the three and six months ended June 30, 2023, respectively, compared to the same periods in 2022. In the thirdsecond quarter of 2022,2023, sales to Residential customers decreased 1.2% and sales to C&I customers increased 0.5%, compared to the same period in 2022. In the first six months of 2023, sales to Residential and C&I customers decreased 3.8%7.7% and 1.6%4.4%, respectively, compared to the same period in 2021,2022, reflecting lower average usage. Total gas therm sales increased 2.5% in the nine month period ended September 30, 2022, compared to the same period in 2021. For the nine months ended September 30, 2022, sales to Residential and C&I customers increased 2.3% and 2.5%, respectively, compared to the same period in 2021. The increase in gas therm sales for the first nine months of 2022 reflects colderwarmer winter weather in the first quarter of 20222023 compared to the same period in 2021, and2022, partially offset by customer growth. Based on weather data collected in the Company’s gas service areas, on average there were 3.9% more9.2% fewer Effective Degree Days (EDD) in the first ninesix months of 20222023 compared to the same period in 2021, although 2.4% fewer EDD compared to normal.2022. The Company estimates weather-normalized gas therm sales excluding decoupled sales,for Northern Utilities’ Maine division, the Company’s only non-decoupled gas service area, increased 0.7%2.1% in the first ninesix months of 20222023 compared to the same period in 2021.2022. As of SeptemberJune 30, 2022,2023, the number of gas customers increased by 1,154approximately 800 over the previous year.
8
Operation and Maintenance (O&M) expenses increased $1.9decreased $0.1 million or 11.4%, and $4.3$0.5 million or 8.4%, in the three and ninesix months ended SeptemberJune 30, 2022,2023, respectively, compared to the same periods in 2021.2022. The increasedecrease in the three month period reflects lower labor costs of $0.5 million, partially offset by higher utility operating costs of $1.0 million, higher$0.4 million. The decrease in the six month period reflects lower labor costs of $0.8 million
6
and higher professional fees of $0.1 million. The increase in the nine month period reflects higher labor costs of $2.5$1.1 million, higher professional fees of $1.3 million andpartially offset by higher utility operating costs of $0.5$0.6 million. The lower labor costs primarily reflect lower service costs for retirement benefits and lower restricted stock compensation.
Depreciation and Amortization expense increased $1.8 million and $2.4$3.0 million in the three and ninesix months ended SeptemberJune 30, 2022,2023, respectively, compared to the same periods in 2021,2022, reflecting additional depreciation associated with higher levels of utility plant in service and higher amortization of rate case and other deferred costs.
Taxes Other Than Income Taxes increased $0.3$0.1 million and $1.4$0.6 million in the three and ninesix months ended SeptemberJune 30, 2022,2023, respectively, compared to the same periods in 2021. The increase in the three month period reflects higher local property taxes on higher utility plant in service. The increase in the nine month period reflects2022, reflecting higher local property taxes on higher utility plant in service and higher payroll taxes.
Interest Expense, Net increased $0.1$0.7 million and $1.6 million, in the three and six months ended SeptemberJune 30, 2022,2023, respectively, compared to the same periodperiods in 2021,2022, primarily reflecting higher interest expense on short-term borrowings, partially offset by lower interest expense on long-term debt. For the nine months ended September 30, 2022, Interest Expense, Net decreased $0.4 million compared to the same period in 2021, primarily reflecting lower interest expense on long-term debt and higher interest income on regulatory assets, partially offset by higher interest expense on short-term borrowings.assets.
Other Expense (Income), Net decreased $0.4$0.7 million and $1.5$1.4 million, in the three and ninesix months ended SeptemberJune 30, 2022,2023, respectively, compared to the same periods in 2021,2022, reflecting lower retirement benefit costs.
Federal and State Income Taxes for the three and six months ended SeptemberJune 30, 2022 decreased $0.22023 increased $0.6 million and $1.5 million, respectively, compared with the same periodperiods in 2021, primarily resulting from the2022, reflecting higher flow back, in 2022, of excess Accumulated Deferred Income Taxes. ForTaxes per regulatory orders in New Hampshire, and, for the nine months ended September 30, 2022, Federal and State Income Taxes increased $0.1 million compared to the samesix month period, in 2021, reflecting higher pre-tax earnings in the current period, partially offset by the flow back of excess Accumulated Deferred Income Taxes.2023.
At its January 2022,2023, April 2022,2023 and July 2022 and October 20222023 meetings, the Unitil Corporation Board of Directors declared quarterly dividends on the Company’s common stock of $0.39$0.405 per share. These quarterly dividends result in a current effective annualized dividend rate of $1.56$1.62 per share, representing an unbroken record of quarterly dividend payments since trading began in Unitil’s common stock.
Electric Sales, Revenues and Adjusted Gross Margin
Kilowatt-hour Sales - Unitil’s total electric kWh sales increased 1.0%decreased 5.4% and 0.4%5.0% in the three and nine month periodssix months ended SeptemberJune 30, 2022,2023, respectively, compared to the same periods in 2021.2022. Sales to Residential customers increased 1.0% and sales to C&I customers increased 1.0%decreased 7.2% and 4.3%, respectively, in the three month periodmonths ended SeptemberJune 30, 2022,2023, compared to the same period in 2021. For the nine month period ended September 30, 2022, salesreflecting lower average usage, partially offset by customer growth. Sales to Residential customers decreased 0.6% while sales toand C&I customers increased 1.1%decreased 6.5% and 4.0%, respectively, in the six months ended June 30, 2023, compared to the same period in 2021. The changes in sales to Residential and C&I customers reflect2022, reflecting warmer summerwinter weather in 20222023 compared to 2021,2022 and customer growth,lower average usage, partially offset by cooler spring weather in 2022 compared to 2021. Based on weather data collected in the Company’s electric service areas, on average there were 1.4% fewer CDD in the first nine months of 2022 compared to the same period in 2021.customer growth. As of SeptemberJune 30, 2022,2023, the number of electric customers increased by 734approximately 200 over the previous year. Sales margins derived from decoupled unit sales are not sensitive to changes in electric kWh sales. As of June 1, 2022, substantially all of the Company’s electric kWh sales volumes are decoupled. Prior to June 1, 2022, approximately 27% of the Company’s total annual electric kWh sales volumes were decoupled.
9
The following table details total kWh sales for the three and ninesix months ended SeptemberJune 30, 20222023 and 20212022 by major customer class:
kWh Sales (millions) | kWh Sales (millions) | kWh Sales (millions) |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, |
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2022 | 2021 | Change | % Change | 2022 | 2021 | Change | % Change |
| 2023 |
|
| 2022 |
|
| Change |
|
| % Change |
|
| 2023 |
|
| 2022 |
|
| Change |
|
| % Change |
| |||||||||||||||||||||||||||||||||
Residential | 201.7 | 199.7 | 2.0 | 1.0 | % | 538.2 | 541.4 | (3.2 | ) | (0.6 | %) |
|
| 133.4 |
|
|
| 143.7 |
|
|
| (10.3 | ) |
|
| (7.2 | )% |
|
| 314.7 |
|
|
| 336.5 |
|
|
| (21.8 | ) |
|
| (6.5 | %) | |||||||||||||||||||||
Commercial / Industrial | 261.4 | 258.7 | 2.7 | 1.0 | % | 722.6 | 714.6 | 8.0 | 1.1 | % |
|
| 214.3 |
|
|
| 224.0 |
|
|
| (9.7 | ) |
|
| (4.3 | )% |
|
| 442.8 |
|
|
| 461.2 |
|
|
| (18.4 | ) |
|
| (4.0 | )% | ||||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total | 463.1 | 458.4 | 4.7 | 1.0 | % | 1,260.8 | 1,256.0 | 4.8 | 0.4 | % |
|
| 347.7 |
|
|
| 367.7 |
|
|
| (20.0 | ) |
|
| (5.4 | )% |
|
| 757.5 |
|
|
| 797.7 |
|
|
| (40.2 | ) |
|
| (5.0 | )% | ||||||||||||||||||||||
|
|
|
|
|
|
7
Electric Operating Revenues and Electric Adjusted Gross Margin - The following table details Total Electric Operating Revenues and Electric Adjusted Gross Margin for the three and nine month periods ended September 30, 2022 and 2021:
Electric Operating Revenues and Electric Adjusted Gross Margin ($ millions) | ||||||||||||||||||||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||||||||
2022 | 2021 | $ Change | % Change | 2022 | 2021 | $ Change | % Change | |||||||||||||||||||||||||
Electric Operating Revenue: | ||||||||||||||||||||||||||||||||
Residential | $ | 44.2 | $ | 37.6 | $ | 6.6 | 17.6 | % | $ | 129.5 | $ | 105.3 | $ | 24.2 | 23.0 | % | ||||||||||||||||
Commercial / Industrial | 31.5 | 27.9 | 3.6 | 12.9 | % | 89.7 | 76.9 | 12.8 | 16.6 | % | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Total Electric Operating Revenue | $ | 75.7 | $ | 65.5 | $ | 10.2 | 15.6 | % | $ | 219.2 | $ | 182.2 | $ | 37.0 | 20.3 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Cost of Electric Sales | $ | 47.3 | $ | 40.1 | $ | 7.2 | 18.0 | % | $ | 142.6 | $ | 108.8 | $ | 33.8 | 31.1 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Electric Adjusted Gross Margin | $ | 28.4 | $ | 25.4 | $ | 3.0 | 11.8 | % | $ | 76.6 | $ | 73.4 | $ | 3.2 | 4.4 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
Electric Adjusted Gross Margin (a non-GAAP financial measure) was $28.4 million and $76.6 million in the three and ninesix months ended SeptemberJune 30, 2022, respectively, increases of $3.0 million2023 and $3.2 million, respectively, compared with the same periods in 2021. The increase in the three month period was driven by higher rates and customer growth. The increase in the nine month period was driven by higher rates and customer growth of $3.7 million, partially offset by the unfavorable effect on sales from cooler spring weather of $0.5 million when rates were not yet decoupled.2022:
Electric Operating Revenues and Electric Adjusted Gross Margin (millions) |
| |||||||||||||||||||||||||||||||
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
| |||||||||||||||||||||||||||
| 2023 |
|
| 2022 |
|
| $ Change |
|
| % Change |
|
| 2023 |
|
| 2022 |
|
| $ Change |
|
| % Change |
| |||||||||
Electric Operating Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Residential |
| $ | 37.4 |
|
| $ | 30.5 |
|
| $ | 6.9 |
|
|
| 22.6 | % |
| $ | 106.0 |
|
| $ | 85.3 |
|
| $ | 20.7 |
|
|
| 24.3 | % |
Commercial / Industrial |
|
| 27.1 |
|
|
| 23.8 |
|
|
| 3.3 |
|
|
| 13.9 | % |
|
| 66.7 |
|
|
| 58.2 |
|
|
| 8.5 |
|
|
| 14.6 | % |
Total Electric Operating |
|
| 64.5 |
|
|
| 54.3 |
|
|
| 10.2 |
|
|
| 18.8 | % |
|
| 172.7 |
|
|
| 143.5 |
|
|
| 29.2 |
|
|
| 20.3 | % |
Cost of Electric Sales |
|
| 40.3 |
|
|
| 30.7 |
|
|
| 9.6 |
|
|
| 31.3 | % |
|
| 121.8 |
|
|
| 95.3 |
|
|
| 26.5 |
|
|
| 27.8 | % |
Electric Adjusted Gross Margin |
| $ | 24.2 |
|
| $ | 23.6 |
|
| $ | 0.6 |
|
|
| 2.5 | % |
| $ | 50.9 |
|
| $ | 48.2 |
|
| $ | 2.7 |
|
|
| 5.6 | % |
Total Electric Operating Revenue increased $10.2 million, or 18.8%, and $37.0$29.2 million, or 20.3%, in the three and ninesix months ended SeptemberJune 30, 2022,2023, respectively, compared to the same periods in 20212022, reflecting higher costs of electric sales, which are tracked and reconciled to costs that are passed through directly to customers, and higher saleselectric distribution rates.
Electric Adjusted Gross Margin (a non-GAAP financial measure) was $24.2 million and $50.9 million in the three and six months ended June 30, 2023, respectively, increases of electricity.$0.6 million and $2.7 million, respectively, compared to the same periods in 2022. These increases reflect higher rates and customer growth.
Gas Sales, Revenues and Adjusted Gross Margin
Therm Sales - Unitil’s total gas therm sales increased 0.2% and decreased 1.8%5.1% in the three month periodand six months ended SeptemberJune 30, 2022,2023, respectively, compared to the same periods in 2022. In the second quarter of 2023, sales to Residential customers decreased 1.2% and sales to C&I customers increased 0.5%, compared to the same period in 2021.2022. In the third quarterfirst six months of 2022,2023, sales to Residential and C&I customers decreased 3.8%7.7% and 1.6%4.4%, respectively, compared to the same period in 2021,2022, reflecting lower average usage. Total gas therm sales increased 2.5% in the nine month period ended September 30, 2022, compared to the same
10
period in 2021. For the nine months ended September 30, 2022, sales to Residential and C&I customers increased 2.3% and 2.5%, respectively, compared to the same period in 2021. The increase in gas therm sales for the first nine months of 2022 reflects colderwarmer winter weather in the first quarter of 20222023 compared to the same period in 2021, and2022, partially offset by customer growth. Based on weather data collected in the Company’s gas service areas, on average there were 3.9% more9.2% fewer EDD in the first ninesix months of 20222023 compared to the same period in 2021, although 2.4% fewer EDD compared to normal.2022. The Company estimates weather-normalized gas therm sales excluding decoupled sales,for Northern Utilities’ Maine division, the Company’s only non-decoupled gas service area, increased 0.7%2.1% in the first ninesix months of 20222023 compared to the same period in 2021.2022. As of SeptemberJune 30, 2022,2023, the number of gas customers increased by 1,154approximately 800 over the previous year. Sales margins derived from decoupled unit sales (currently representing approximately 43% of total annual therm sales volume) are not sensitive to changes in gas therm sales.
The following table details total firm therm sales for the three and ninesix months ended SeptemberJune 30, 20222023 and 2021,2022 by major customer class:
Therm Sales (millions) | Therm Sales (millions) | Therm Sales (millions) |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, |
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2022 | 2021 | Change | % Change | 2022 | 2021 | Change | % Change |
| 2023 |
|
| 2022 |
|
| Change |
|
| % Change |
|
| 2023 |
|
| 2022 |
|
| Change |
|
| % Change |
| |||||||||||||||||||||||||||||||||
Residential | 2.5 | 2.6 | (0.1 | ) | (3.8 | %) | 35.1 | 34.3 | 0.8 | 2.3 | % |
|
| 8.2 |
|
|
| 8.3 |
|
|
| (0.1 | ) |
|
| (1.2 | )% |
|
| 30.1 |
|
|
| 32.6 |
|
|
| (2.5 | ) |
|
| (7.7 | %) | |||||||||||||||||||||
Commercial / Industrial | 24.3 | 24.7 | (0.4 | ) | (1.6 | %) | 136.0 | 132.7 | 3.3 | 2.5 | % |
|
| 37.4 |
|
|
| 37.2 |
|
|
| 0.2 |
|
|
| 0.5 | % |
|
| 106.8 |
|
|
| 111.7 |
|
|
| (4.9 | ) |
|
| (4.4 | )% | |||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total | 26.8 | 27.3 | (0.5 | ) | (1.8 | %) | 171.1 | 167.0 | 4.1 | 2.5 | % |
|
| 45.6 |
|
|
| 45.5 |
|
|
| 0.1 |
|
|
| 0.2 | % |
|
| 136.9 |
|
|
| 144.3 |
|
|
| (7.4 | ) |
|
| (5.1 | )% | |||||||||||||||||||||
|
|
|
|
|
|
Gas Operating Revenues and Adjusted Gross Margin - The following table details Total Gas Operating Revenues and Gas Adjusted Gross Margin for the three and ninesix months ended SeptemberJune 30, 20222023 and 2021:2022:
Gas Operating Revenues and Gas Adjusted Gross Margin ($ millions) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Gas Operating Revenues and Gas Adjusted Gross Margin (millions) | Gas Operating Revenues and Gas Adjusted Gross Margin (millions) |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, |
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2022 | 2021 | $ Change | % Change | 2022 | 2021 | $ Change | % Change |
| 2023 |
|
| 2022 |
|
| $ Change |
|
| % Change |
|
| 2023 |
|
| 2022 |
|
| $ Change |
|
| % Change |
| |||||||||||||||||||||||||||||||||
Gas Operating Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||||||||
Residential | $ | 12.1 | $ | 12.0 | $ | 0.1 | 0.8 | % | $ | 72.3 | $ | 61.4 | $ | 10.9 | 17.8 | % |
| $ | 15.7 |
|
| $ | 17.4 |
|
| $ | (1.7 | ) |
|
| (9.8 | )% |
| $ | 62.2 |
|
| $ | 60.2 |
|
| $ | 2.0 |
|
|
| 3.3 | % | ||||||||||||||||
Commercial / Industrial | 22.4 | 20.6 | 1.8 | 8.7 | % | 110.2 | 89.9 | 20.3 | 22.6 | % |
|
| 23.2 |
|
|
| 27.2 |
|
|
| (4.0 | ) |
|
| (14.7 | )% |
|
| 88.7 |
|
|
| 87.8 |
|
|
| 0.9 |
|
|
| 1.0 | % | ||||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total Gas Operating Revenue | $ | 34.5 | $ | 32.6 | $ | 1.9 | 5.8 | % | $ | 182.5 | $ | 151.3 | $ | 31.2 | 20.6 | % |
|
| 38.9 |
|
|
| 44.6 |
|
|
| (5.7 | ) |
|
| (12.8 | )% |
|
| 150.9 |
|
|
| 148.0 |
|
|
| 2.9 |
|
|
| 2.0 | % | ||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cost of Gas Sales | $ | 14.1 | $ | 13.2 | $ | 0.9 | 6.8 | % | $ | 81.9 | $ | 59.1 | $ | 22.8 | 38.6 | % |
|
| 9.6 |
|
|
| 16.4 |
|
|
| (6.8 | ) |
|
| (41.5 | )% |
|
| 66.7 |
|
|
| 67.8 |
|
|
| (1.1 | ) |
|
| (1.6 | )% | ||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Gas Adjusted Gross Margin | $ | 20.4 | $ | 19.4 | $ | 1.0 | 5.2 | % | $ | 100.6 | $ | 92.2 | $ | 8.4 | 9.1 | % |
| $ | 29.3 |
|
| $ | 28.2 |
|
| $ | 1.1 |
|
|
| 3.9 | % |
| $ | 84.2 |
|
| $ | 80.2 |
|
| $ | 4.0 |
|
|
| 5.0 | % | ||||||||||||||||
|
|
|
|
|
|
8
Total Gas Adjusted Gross Margin (a non-GAAP financial measure) was $20.4Operating Revenue decreased $5.7 million, or 12.8%, and $100.6increased $2.9 million, or 2.0%, in the three and ninesix months ended SeptemberJune 30, 2022, respectively, increases of $1.0 million and $8.4 million,2023, respectively, compared to the same periods in 2021. These increases reflect higher rates of $1.0 million and $7.0 million2022. The decrease in the three and nine month periods, respectively, while the remainder of the increase in the nine month period is attributable to the favorable effect on sales of customer growth and colder weather.
11
The increases in Total Gas Operating Revenue of $1.9 million and $31.2 million in the three and nine months ended September 30, 2022, respectively, compared to the same periods in 2021, reflect higherreflects lower costs of gas sales, which are tracked and reconciled costs that are passed through directly to customers, partially offset by higher gas distribution rates. The increase in the six month period reflects higher gas distribution rates, partially offset by lower costs of gas sales, which are tracked and reconciled costs that are passed through directly to customers.
Gas Adjusted Gross Margin (a non-GAAP financial measure) was $29.3 million and $84.2 million in the three and six months ended June 30, 2023, respectively, increases of $1.1 million and $4.0 million, respectively, compared to the same periods in 2022. These increases reflect higher rates and customer growth of $3.5 million and $7.5 million for the three and six month periods, respectively, partially offset by the recognition, in the second quarter of 2022, of $2.4 million in higher rates resulting from the Company's base rate case in New Hampshire and, for the ninesix month period, higher gas sales volumes.the unfavorable effects of warmer winter weather in 2023 of $1.1 million.
Operating Expenses
Cost of Electric Sales- Cost of Electric Sales includes the cost of electric supply and spending on energy efficiency programs. Cost of Electric Sales increased $7.2$9.6 million, or 18.0%31.3%, and $33.8$26.5 million, or 31.1%27.8%, in the three and ninesix months ended SeptemberJune 30, 2022,2023, respectively, compared to the same periods in 2021.2022. These increases reflect higher wholesale electricity prices, and higherpartially offset by lower sales of electricity.electricity and an increase in the amount of electricity purchased by customers directly from third-party suppliers. Because the Company reconciles and recovers the approved Cost of Electric Sales in its rates at cost on a pass-through basis, changes in approved expenses do not affect earnings.
Cost of Gas Sales - Cost of Gas Sales includes the cost to supply the Company’s total gas requirements and spending on energy efficiency programs. Cost of Gas Sales increased $0.9decreased $6.8 million, or 6.8%41.5%, and $22.8$1.1 million, or 38.6%1.6%, in the three and ninesix months ended SeptemberJune 30, 2022,2023, respectively, compared to the same periods in 2021. These increases reflect higher2022. The decrease in the three month period reflects lower wholesale gas commodity prices, and,partially offset by higher gas sales. The decrease in the ninesix month period higherprimarily reflects lower gas sales, partially offset by a decrease in the amount of gas.gas purchased by customers directly from third-party suppliers. Because the Company reconciles and recovers the approved Cost of Gas Sales in its rates at cost on a pass-through basis, changes in approved expenses do not affect earnings.
Operation and Maintenance (O&M) - O&M expense includes electric and gas utility operating costs, and the operating cost of the Company’s corporate and other business activities. O&M expense increased $1.9decreased $0.1 million, or 11.4%0.5%, and $4.3$0.5 million, or 8.4%1.4%, in the three and ninesix months ended SeptemberJune 30, 2022,2023, respectively, compared to the same periods in 2021.2022. The increasedecrease in the three month period reflects lower labor costs of $0.5 million, partially offset by higher utility operating costs of $1.0 million, higher$0.4 million. The decrease in the six month period reflects lower labor costs of $0.8 million and higher professional fees of $0.1 million. The increase in the nine month period reflects higher labor costs of $2.5$1.1 million, higher professional fees of $1.3 million andpartially offset by higher utility operating costs of $0.5$0.6 million. The lower labor costs primarily reflect lower service costs for retirement benefits and lower restricted stock compensation.
Depreciation and Amortization - Depreciation and Amortization expense increased $1.8 million, or 12.2%, and $2.4$3.0 million, or 5.4%9.9%, in the three and ninesix months ended SeptemberJune 30, 2022,2023, respectively, compared to the same periods in 2021,2022, reflecting additional depreciation associated with higher levels of utility plant in service and higher amortization of rate case and other deferred costs.
Taxes Other Than Income Taxes- Taxes Other Than Income Taxes increased $0.3$0.1 million, or 4.9%1.5%, and $1.4$0.6 million, or 7.6%4.4%, in the three and ninesix months ended SeptemberJune 30, 2022,2023, respectively, compared to the same periods in 2021. The increase in the three month period reflects higher local property taxes on higher utility plant in service. The increase in the nine month period reflects2022, reflecting higher local property taxes on higher utility plant in service and higher payroll taxes.
Other Expense (Income), Net - Other Expense (Income), Net decreased $0.4$0.7 million or 40.0%, and $1.5$1.4 million, or 44.1%, in the three and ninesix months ended SeptemberJune 30, 2022,2023, respectively, compared to the same periods in 2021,2022, reflecting lower retirement benefit costs.
Provision for Income Taxes- Federal and State Income Taxes for the three and six months ended SeptemberJune 30, 2022 decreased $0.22023 increased $0.6 million and $1.5 million, respectively, compared with the same periodperiods in 2021, primarily resulting from the2022, reflecting higher flow back, in 2022, of excess Accumulated Deferred Income Taxes. ForTaxes per regulatory orders in New Hampshire, and, for the nine months ended September 30, 2022, Federal and State Income Taxes increased $0.1 million compared to the samesix month period, in 2021, reflecting higher pre-tax earnings in the current period, partially offset by the flow back of excess Accumulated Deferred Income Taxes.2023.
12
Interest Expense, Net - Interest expense is presented in the Consolidated Financial Statements net of interest income. Interest expense is mainly comprised of interest on long-term debt and short-term borrowings. In addition, certain reconciling rate mechanisms used by the Company’s distribution operating utilities give rise to regulatory assets and regulatory liabilities on which interest is accrued.
Unitil’s utility subsidiaries operate a number of reconciling rate mechanisms to recover specifically identified costs on a pass-through basis. These reconciling rate mechanisms track costs and revenue on a monthly basis. In any given month, this tracking and
9
reconciling process will produce either an under-collected or an over-collected position. In accordance with the distribution utilities’ rate tariffs, interest is accrued on these balances and will produce either interest income or interest expense. Consistent with regulatory precedent, interest income is recorded on an under-collection of costs which creates a regulatory asset to be recovered in future periods when rates are reset. Interest expense is recorded on an over-collection of costs, which creates a regulatory liability to be refunded in future periods when rates are reset.
Interest Expense, Net ($ millions) | Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||||||||||||||||
Interest Expense, Net |
| Three Months Ended |
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| Six Months Ended |
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2022 | 2021 | Change | 2022 | 2021 | Change |
| 2023 |
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| 2022 |
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| Change |
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| 2023 |
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| 2022 |
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| Change |
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Interest Expense |
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Long-term Debt | $ | 6.2 | $ | 6.5 | $ | (0.3 | ) | $ | 18.6 | $ | 19.8 | $ | (1.2 | ) |
| $ | 6.0 |
|
| $ | 6.2 |
|
| $ | (0.2 | ) |
| $ | 12.0 |
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| $ | 12.4 |
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| $ | (0.4 | ) | ||||||||||
Short-term Debt | 1.0 | 0.2 | 0.8 | 1.7 | 0.5 | 1.2 |
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| 2.3 |
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| 0.4 |
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| 1.9 |
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| 4.4 |
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| 0.7 |
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| 3.7 |
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Regulatory Liabilities | 0.1 | 0.1 | — | 0.3 | 0.3 | — |
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| 0.2 |
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| 0.1 |
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| 0.1 |
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| 0.3 |
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| 0.2 |
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| 0.1 |
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Subtotal Interest Expense | 7.3 | 6.8 | 0.5 | 20.6 | 20.6 | — |
|
| 8.5 |
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| 6.7 |
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| 1.8 |
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| 16.7 |
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| 13.3 |
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| 3.4 |
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Interest (Income) |
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Regulatory Assets | (0.2 | ) | — | (0.2 | ) | (0.6 | ) | (0.4 | ) | (0.2 | ) |
|
| (0.9 | ) |
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| (0.2 | ) |
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| (0.7 | ) |
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| (1.5 | ) |
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| (0.4 | ) |
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| (1.1 | ) | |||||||||||||
AFUDC(1) and Other | (0.5 | ) | (0.3 | ) | (0.2 | (0.9 | ) | (0.7 | ) | (0.2 | ) |
|
| (0.6 | ) |
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| (0.2 | ) |
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| (0.4 | ) |
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| (1.1 | ) |
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| (0.4 | ) |
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| (0.7 | ) | |||||||||||||
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Subtotal Interest (Income) | (0.7 | ) | (0.3 | ) | (0.4 | ) | (1.5 | ) | (1.1 | ) | (0.4 | ) |
|
| (1.5 | ) |
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| (0.4 | ) |
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| (1.1 | ) |
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| (2.6 | ) |
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| (0.8 | ) |
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| (1.8 | ) | ||||||||||||
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Total Interest Expense, Net | $ | 6.6 | $ | 6.5 | $ | 0.1 | $ | 19.1 | $ | 19.5 | $ | (0.4 | ) |
| $ | 7.0 |
|
| $ | 6.3 |
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| $ | 0.7 |
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| $ | 14.1 |
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| $ | 12.5 |
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| $ | 1.6 |
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Interest Expense, Net increased $0.1$0.7 million, or 1.5%11.1%, and $1.6 million, or 12.8%, in the three and six months ended SeptemberJune 30, 2022,2023, respectively, compared to the same periodperiods in 2021,2022, primarily reflecting higher interest expense on short-term borrowings, partially offset by lower interest expense on long-term debt. For the nine months ended September 30, 2022, Interest Expense, Net decreased $0.4 million, or 2.1%, compared to the same period in 2021, primarily reflecting lower interest expense on long-term debt and higher interest income on regulatory assets, partially offset by higher interest expense on short-term borrowings.assets.
CAPITAL REQUIREMENTSCapital RequirementS
Sources of Capital
Unitil requires capital to fund utility plant additions, working capital and other utility expenditures recovered in subsequent periods through regulated rates. The capital necessary to meet these requirements is derived primarily from internally generated funds, which consist of cash flows from operating activities. The Company initially supplements internally generated funds through short-term bank borrowings, as needed, under its unsecured revolving Credit Facility. Periodically, the Company replaces portions of its short-term debt with long-term debt financings more closely matched to the long-term nature of its utility assets. Additionally, from time to time the Company accesses the public capital markets through public offerings of equity securities. The Company’s utility operations have a seasonal component and therefore are subject to seasonal fluctuations in cash flows. The amount, type and timing of any future financing will vary from year to year based on capital needs and maturity or redemptions of securities.
13
On August 6, 2021, the Company issued and sold 800,000 shares of its common stock at a price of $50.80 per share in a registered public offering (Offering). The Company’s net increase to Common Equity and Cash proceeds from the Offering was approximately $38.6 million and was used to make equity capital contributions to the Company’s regulated utility subsidiaries, to repay debt and for other general corporate purposes.
As part of the Offering, the Company granted the underwriters a 30-day over-allotment option to purchase additional shares. The underwriters exercised the over-allotment option and purchased an additional 120,000 shares of the Company’s common stock on September 8, 2021. The Company’s net increase to Common Equity and Cash proceeds from the over-allotment sales was approximately $5.9 million and was used to make capital contributions to the Company’s regulated utility subsidiaries, to repay debt and for other general corporate purposes.
The Company and its subsidiaries are individually and collectively members of the Unitil Cash Pool (Cash Pool). The Cash Pool is the financing vehicle for day-to-day cash borrowing and investing. The Cash Pool allows for an efficient exchange of cash among the Company and its subsidiaries. The interest rates charged to the subsidiaries for borrowing from the Cash Pool are based on actual interest costs from lenders under the Company’s revolving Credit Facility (as defined below). At SeptemberJune 30, 2022, September2023, June 30, 20212022 and December 31, 2021,2022, the Company and all of its subsidiaries were in compliance with the regulatory requirements to participate in the Cash Pool.
On September 29, 2022, the Company entered into a Third Amended and Restated Credit Agreement with a syndicate of lenders (collectively, the “Credit"Credit Facility”), which amended and restated in its entirety the prior credit facility. Unitil may borrow under the Credit Facility until September 29, 2027, subject to two one-year extensions under certain circumstances. The Credit Facility terminates and all amounts outstanding thereunder are due and payable on September 29, 2027, subject to the potential extension discussed in the prior sentence.
The Credit Facility has a borrowing limit of $200 million, which includes a $25 million sublimit for the issuance of standby letters of credit. Unitil may increase the borrowing limit under the Credit Facility by up to $75 million under certain circumstances. The Credit Facility generally provides Unitil with the ability to elect that borrowings under the Credit Facility bear interest under several options, including a daily fluctuating rate equal to (a) the forward-looking secured overnight financing rate (as administered by the Federal Reserve Bank of New York) term rate with a term equivalent to one month beginning on that date, plus (b) 0.1000%, plus (c) a margin of 1.125% to 1.375% (based on Unitil’s credit rating). As of the close of business on September 29, 2022, Unitil’s aggregate borrowings under the Credit Facility were approximately $65.5 million at an interest rate per annum of approximately 4.272% (which interest rate was based on the lowest end of the margin range discussed above).
14
10
The Company usesutilizes the Credit Facility for cash management purposes related to its short-term operating activities. Total gross borrowings were $214.0$193.6 million for the ninesix months ended SeptemberJune 30, 2022.2023. Total gross repayments were $206.1$177.9 million for the ninesix months ended SeptemberJune 30, 2022.2023. The following table details the borrowing limits, amounts outstanding and amounts available under the Credit Facility as of SeptemberJune 30, 2023 and December 31, 2022 and for the prior credit facility as of September 31, 2021 and December 31, 2021:June 30, 2022:
Revolving Credit Facility ($ millions) |
| Revolving Credit Facility ($ millions) |
| |||||||||||||||||||||
September 30, | December 31, |
| June 30, |
|
| December 31, |
| |||||||||||||||||
2022 | 2021 | 2021 |
| 2023 |
|
| 2022 |
|
| 2022 |
| |||||||||||||
Limit | $ | 200.0 | $ | 120.0 | $ | 120.0 |
| $ | 200.0 |
|
| $ | 120.0 |
|
| $ | 200.0 |
| ||||||
Short-Term Borrowings Outstanding | 72.0 | 30.5 | 64.1 |
|
| 131.7 |
|
|
| 46.2 |
|
|
| 116.0 |
| |||||||||
|
|
| ||||||||||||||||||||||
Available | $ | 128.0 | $ | 89.5 | $ | 55.9 |
| $ | 68.3 |
|
| $ | 73.8 |
|
| $ | 84.0 |
| ||||||
|
|
|
The Credit Facility contains customary terms and conditions for credit facilities of this type, including affirmative and negative covenants. There are restrictions on, among other things, Unitil’s and its subsidiaries’ ability to incur liens or incur indebtedness, and restrictions on Unitil’s ability to merge or consolidate with another entity or change its line of business. The affirmative and negative covenants under the Credit Facility shall apply to Unitil until the Credit Facility terminates and all amounts borrowed under 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 Unitil’s Funded Debt to Capitalization (as each term is defined in the Credit Facility) cannot exceed 65% tested on a quarterly basis. At SeptemberJune 30, 2022, September2023, June 30, 20212022 and December 31, 2021,2022, the Company was in compliance with the covenants contained in the Credit Facility or the prior credit facility, as applicable, in effect on those dates.
The Company is monitoring
On July 6, 2023, Fitchburg issued $12.0 million of Notes due July 6, 2033 at 5.70% and $13.0 million of Notes due July 6, 2053 at 5.96%. Fitchburg used the coronavirus pandemic, including any effect on planned capital expenditures. The Company does not believe the pandemic will adversely affect its accessnet proceeds from these offerings to capital and funding sources. The Company believes its future operating cash flows, its available borrowing capacity, and its access to private and public capital markets for the issuance of long-termrefinance existing debt and equity securitiesfor general corporate purposes. Approximately $0.2 million of costs associated with this issuance will be sufficient to meet its working capital and capital investment needs.recorded as a reduction of Long-Term Debt for presentation purposes on the Consolidated Balance Sheet in the third quarter of 2023.
Unitil Corporation and its utility subsidiaries, Fitchburg, Unitil Energy, Northern Utilities, and Granite State currently are rated “BBB+” by Standard & Poor’s Ratings Services. Unitil Corporation and Granite State currently are rated “Baa2”, and Fitchburg, Unitil Energy and Northern Utilities are currently rated “Baa1” by Moody’s Investors Services.
The continued availability of various methods of financing, as well as the choice of a specific form of security for such financing, will depend on many factors, including, but not limited to: security market conditions; general economic climate; regulatory approvals; the ability to meet covenant issuance restrictions; the level of earnings, cash flows and financial position; and the competitive pricing offered by financing sources.
The Company provides limited guarantees on certain energy and gas storage management contracts entered into by the distribution utilities. The Company’s policy is to limit the duration of these guarantees. As of SeptemberJune 30, 2022,2023, there were approximately $1.6 million ofno guarantees outstanding with a duration less than one year.outstanding.
Northern Utilities enters into asset management agreements under which Northern Utilities releases certain gas pipeline and storage assets, sells to an asset manager and subsequently repurchases the gas over the course of the gas heating season at the same price at which it sold the gas to the asset manager. There was $23.4 million, $9.7 million and $8.3$8.7 million of natural gas storage inventory and corresponding obligations at SeptemberJune 30, 2022, September 30, 2021 and December 31, 2021, respectively,2023 related to these asset management agreements. The amount of natural gas inventory released in September 2022 andJune 30, 2023, which was payable in October 2022 is $0.3 million and is recorded in Accounts Payable at September 30, 2022. The amount of gas released in September 2021 and payable in October 2021July 2023, was less than $0.1 million and was recorded in Accounts Payable at SeptemberJune 30, 2021. The amount of gas released in December 2021 and payable in January 2022 was $1.6 million and was recorded in Accounts Payable at December 31, 2021.2023.
15
Off-Balance Sheet Arrangements
The Company and its subsidiaries do not currently use, and are not dependent on the use of, off-balance sheet financing arrangements such as securitization of receivables or obtaining access to assets or cash through special purpose entities or variable interest entities. Unitil Corporation’s subsidiaries conduct a portion of their operations in leased facilities, and lease some of their vehicles, machinery and office equipment under both capital and operating lease arrangements. As of September 30, 2022, there were approximately $1.6 million of guarantees on certain energy and 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 POLICIESCritical Accounting Policies
The preparation of the Company’s financial statements in conformity with generally accepted accounting principles in the United States of America requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. In making those estimates and assumptions, the Company sometimes is required to make difficult, subjective and/or complex judgments about the effect of matters that are inherently uncertain and for which different estimates that could reasonably have been used could have resulted in material differences in its financial statements. If actual results
11
were to differ significantly from those estimates, assumptions and judgment, the financial position of the Company could be materially affected and the results of operations of the Company could be materially different than reported. As of SeptemberJune 30, 2022,2023, the Company’s critical accounting policies and estimates had not changed significantly from December 31, 2021.2022. See Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies” in the Company’s 20212022 Annual Report on Form 10-K for additional information.
EMPLOYEES
Unitil’s commitment to excellence begins with its employees. As of SeptemberJune 30, 2022,2023, the Company and its subsidiaries had 517527 employees. The Company considers its relationship with employees to be good and has not experienced any major labor disruptions. Unitil’s employees are focused on the Company’s mission to safely and reliably deliver “energy for life” and provide customers with affordable and sustainable energy solutions.
The Company strives to be the employer of choice in the communities it serves – serves—regardless of race, religion, color, gender, or sexual orientation. The Company works diligently to attract the best talent from a diverse range of sources to meet the current and future demands of our business.
To attract and retain a talented workforce, Unitil provides employee wages that are competitive and consistent with employee positions, skill levels, experience, knowledge and geographic location. All employees are eligible for health insurance, paid and unpaid leave, educational assistance, retirement plan and life and disability/accident coverage.
Feedback from employees is collected annually in the Company’s Employee Opinion survey. This feedback helps create action plans to improve the engagement of employees consistent with the Company’s culture of continuous improvement.
16
As of SeptemberJune 30, 2022,2023, a total of 171178 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 SeptemberJune 30, 2022:2023:
Employees Covered | CBA Expiration | |||||||
Fitchburg | 47 | 05/31/2027 | ||||||
Northern Utilities NH Division | 37 | 06/07/2025 | ||||||
Northern Utilities ME Division | 38 | 03/31/2026 | ||||||
Granite State | 5 | 03/31/2026 | ||||||
Unitil Energy | 41 | 05/31/ | 2028 | |||||
Unitil Service – Gas Control | 5 | 03/31/2024 | ||||||
Unitil Service | 5 | 05/31/ | 2028 |
The CBAs provide discrete salary adjustments, established work practices and uniform benefit packages. The Company expects to negotiate new agreements prior to their expiration dates.
12
INTEREST RATE RISK
Unitil meets its external financing needs by issuing short-term and long-term debt. The majority of debt outstanding represents long-term notes or bonds bearing fixed rates of interest. Changes in market interest rates do not affect interest expense resulting from these outstanding long-term debt securities. However, the Company periodically repays its short-term debt borrowings through the issuance of new long-term debt securities. Changes in market interest rates may affect the interest rate and corresponding interest expense on any new issuances of long-term debt securities. In addition, short-term debt borrowings bear a variable rate of interest. As a result, changes in short-term interest rates will increase or decrease interest expense in future periods. For example, if the average amount of short-term debt outstanding was $25 million for the period of one year, a change in interest rates of 1% would result in a change in annual interest expense of approximately $250,000. The average interest rates on the Company’s short-term borrowings and intercompany money pool transactions for the three months ended SeptemberJune 30, 2023 and June 30, 2022 were 6.3% and September 30, 2021 were 3.6% and 1.2%2.1%, respectively. The average interest rates on the Company’s short-term borrowings and intercompany money pool transactions for the ninesix months ended SeptemberJune 30, 2023 and June 30, 2022 were 6.1% and September 30, 2021 were 2.4% and 1.2%1.7%, respectively. The average interest rate on the Company’s short-term borrowings for the twelve months ended December 31, 20212022 was 1.2%3.3%.
COMMODITY PRICE RISK
Although Unitil’s three distribution utilities are subject to commodity price variations as part of their traditional operations, the current regulatory framework within which these companies operate allows for full collection of electric power and 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. As discussed in Note 6 (Regulatory Matters), the Company has divested its long-term power supply contracts and therefore, further reduced its exposure to commodity risk.
REGULATORY MATTERSRegulatory Matters
Please referRefer to Note 6 to the Consolidated Financial Statements in Part I, Item 1 of this report for a discussion of Regulatory Matters.
ENVIRONMENTAL MATTERS
Please referRefer to Note 7 to the Consolidated Financial Statements in Part I, Item 1 of this report for a discussion of Environmental Matters.
17
13
UNITIL CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Millions except per share data)
(UNAUDITED)
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
Operating Revenues | ||||||||||||||||
Electric | $ | 75.7 | $ | 65.5 | $ | 219.2 | $ | 182.2 | ||||||||
Gas | 34.5 | 32.6 | 182.5 | 151.3 | ||||||||||||
Total Operating Revenues | 110.2 | 98.1 | 401.7 | 333.5 | ||||||||||||
Operating Expenses | ||||||||||||||||
Cost of Electric Sales | 47.3 | 40.1 | 142.6 | 108.8 | ||||||||||||
Cost of Gas Sales | 14.1 | 13.2 | 81.9 | 59.1 | ||||||||||||
Operation and Maintenance | 18.6 | 16.7 | 55.5 | 51.2 | ||||||||||||
Depreciation and Amortization | 16.6 | 14.8 | 46.9 | 44.5 | ||||||||||||
Taxes Other Than Income Taxes | 6.4 | 6.1 | 19.9 | 18.5 | ||||||||||||
Total Operating Expenses | 103.0 | 90.9 | 346.8 | 282.1 | ||||||||||||
Operating Income | 7.2 | 7.2 | 54.9 | 51.4 | ||||||||||||
Interest Expense, Net | 6.6 | 6.5 | 19.1 | 19.5 | ||||||||||||
Other Expense (Income), Net | 0.6 | 1.0 | 1.9 | 3.4 | ||||||||||||
Income (Loss) Before Income Taxes | — | (0.3 | ) | 33.9 | 28.5 | |||||||||||
Provision (Benefit) for Income Taxes | (0.5 | ) | (0.3 | ) | 7.0 | 6.9 | ||||||||||
Net Income | $ | 0.5 | $ | — | $ | 26.9 | $ | 21.6 | ||||||||
Net Income Per Common Share (Basic and Diluted) | $ | 0.03 | $ | — | $ | 1.68 | $ | 1.42 | ||||||||
Weighted Average Common Shares Outstanding – (Basic and Diluted) | 16.0 | 15.5 | 16.0 | 15.2 |
| Three Months Ended |
|
| Six Months Ended |
| |||||||||||
| 2023 |
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| 2022 |
|
| 2023 |
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| 2022 |
| |||||
Operating Revenues |
|
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|
|
|
|
|
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| ||||
Electric |
| $ | 64.5 |
|
| $ | 54.3 |
|
| $ | 172.7 |
|
| $ | 143.5 |
|
Gas |
|
| 38.9 |
|
|
| 44.6 |
|
|
| 150.9 |
|
|
| 148.0 |
|
Total Operating Revenues |
|
| 103.4 |
|
|
| 98.9 |
|
|
| 323.6 |
|
|
| 291.5 |
|
Operating Expenses |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Cost of Electric Sales |
|
| 40.3 |
|
|
| 30.7 |
|
|
| 121.8 |
|
|
| 95.3 |
|
Cost of Gas Sales |
|
| 9.6 |
|
|
| 16.4 |
|
|
| 66.7 |
|
|
| 67.8 |
|
Operation and Maintenance |
|
| 18.3 |
|
|
| 18.4 |
|
|
| 36.4 |
|
|
| 36.9 |
|
Depreciation and Amortization |
|
| 16.6 |
|
|
| 14.8 |
|
|
| 33.3 |
|
|
| 30.3 |
|
Taxes Other Than Income Taxes |
|
| 6.8 |
|
|
| 6.7 |
|
|
| 14.1 |
|
|
| 13.5 |
|
Total Operating Expenses |
|
| 91.6 |
|
|
| 87.0 |
|
|
| 272.3 |
|
|
| 243.8 |
|
Operating Income |
|
| 11.8 |
|
|
| 11.9 |
|
|
| 51.3 |
|
|
| 47.7 |
|
Interest Expense, Net |
|
| 7.0 |
|
|
| 6.3 |
|
|
| 14.1 |
|
|
| 12.5 |
|
Other (Income) Expense, Net |
|
| (0.1 | ) |
|
| 0.6 |
|
|
| (0.1 | ) |
|
| 1.3 |
|
Income Before Income Taxes |
|
| 4.9 |
|
|
| 5.0 |
|
|
| 37.3 |
|
|
| 33.9 |
|
Provision for Income Taxes |
|
| 0.7 |
|
|
| 0.1 |
|
|
| 9.0 |
|
|
| 7.5 |
|
Net Income |
| $ | 4.2 |
|
| $ | 4.9 |
|
| $ | 28.3 |
|
| $ | 26.4 |
|
Net Income Per Common Share (Basic and Diluted) |
| $ | 0.25 |
|
| $ | 0.30 |
|
| $ | 1.76 |
|
| $ | 1.65 |
|
Weighted Average Common Shares Outstanding – (Basic and Diluted) |
|
| 16.0 |
|
|
| 16.0 |
|
|
| 16.0 |
|
|
| 16.0 |
|
(The accompanying notes are an integral part of these consolidated unaudited financial statements.)
14
UNITIL CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
(Millions)
(UNAUDITED)
September 30, | December 31, | |||||||||||
2022 | 2021 | 2021 | ||||||||||
ASSETS: | ||||||||||||
Current Assets | ||||||||||||
Cash and Cash Equivalents | $ | 7.9 | $ | 8.8 | $ | 6.5 | ||||||
Accounts Receivable, Net | 51.7 | 46.3 | 66.9 | |||||||||
Accrued Revenue | 46.9 | 38.6 | 61.2 | |||||||||
Exchange Gas Receivable | 25.1 | 10.5 | 7.4 | |||||||||
Gas Inventory | 1.7 | 0.9 | 1.0 | |||||||||
Materials and Supplies | 10.1 | 8.6 | 8.6 | |||||||||
Prepayments and Other | 7.2 | 7.3 | 8.1 | |||||||||
Total Current Assets | 150.6 | 121.0 | 159.7 | |||||||||
Utility Plant: | ||||||||||||
Electric | 612.7 | 581.0 | 602.4 | |||||||||
Gas | 995.7 | 932.8 | 972.6 | |||||||||
Common | 66.7 | 64.8 | 66.4 | |||||||||
Construction Work in Progress | 81.9 | 84.8 | 47.5 | |||||||||
Utility Plant | 1,757.0 | 1,663.4 | 1,688.9 | |||||||||
Less: Accumulated Depreciation | 453.2 | 426.1 | 431.7 | |||||||||
Net Utility Plant | 1,303.8 | 1,237.3 | 1,257.2 | |||||||||
Other Noncurrent Assets: | ||||||||||||
Regulatory Assets | 105.5 | 132.4 | 108.9 | |||||||||
Operating Lease Right of Use Assets | 4.6 | 5.1 | 4.7 | |||||||||
Other Assets | 14.4 | 13.2 | 9.8 | |||||||||
Total Other Noncurrent Assets | 124.5 | 150.7 | 123.4 | |||||||||
TOTAL ASSETS | $ | 1,578.9 | $ | 1,509.0 | $ | 1,540.3 | ||||||
| June 30, |
|
| December 31, |
| |||||||
| 2023 |
|
| 2022 |
|
| 2022 |
| ||||
ASSETS: |
|
|
|
|
|
|
|
|
| |||
Current Assets: |
|
|
|
|
|
|
|
|
| |||
Cash and Cash Equivalents |
| $ | 6.8 |
|
| $ | 5.1 |
|
| $ | 9.0 |
|
Accounts Receivable, Net |
|
| 59.5 |
|
|
| 54.3 |
|
|
| 73.8 |
|
Accrued Revenue |
|
| 60.4 |
|
|
| 45.6 |
|
|
| 72.8 |
|
Exchange Gas Receivable |
|
| 9.4 |
|
|
| 13.4 |
|
|
| 18.0 |
|
Gas Inventory |
|
| 1.0 |
|
|
| 1.0 |
|
|
| 1.8 |
|
Materials and Supplies |
|
| 12.9 |
|
|
| 9.7 |
|
|
| 11.4 |
|
Prepayments and Other |
|
| 11.3 |
|
|
| 10.0 |
|
|
| 8.0 |
|
Total Current Assets |
|
| 161.3 |
|
|
| 139.1 |
|
|
| 194.8 |
|
Utility Plant: |
|
|
|
|
|
|
|
|
| |||
Electric |
|
| 638.4 |
|
|
| 610.1 |
|
|
| 627.5 |
|
Gas |
|
| 1,060.9 |
|
|
| 988.9 |
|
|
| 1,043.6 |
|
Common |
|
| 68.9 |
|
|
| 66.7 |
|
|
| 67.6 |
|
Construction Work in Progress |
|
| 64.2 |
|
|
| 56.2 |
|
|
| 52.6 |
|
Utility Plant |
|
| 1,832.4 |
|
|
| 1,721.9 |
|
|
| 1,791.3 |
|
Less: Accumulated Depreciation |
|
| 474.6 |
|
|
| 442.8 |
|
|
| 459.6 |
|
Net Utility Plant |
|
| 1,357.8 |
|
|
| 1,279.1 |
|
|
| 1,331.7 |
|
Other Noncurrent Assets: |
|
|
|
|
|
|
|
|
| |||
Regulatory Assets |
|
| 51.5 |
|
|
| 106.6 |
|
|
| 47.8 |
|
Operating Lease Right of Use Assets |
|
| 5.2 |
|
|
| 4.4 |
|
|
| 4.3 |
|
Other Assets |
|
| 19.5 |
|
|
| 17.9 |
|
|
| 11.8 |
|
Total Other Noncurrent Assets |
|
| 76.2 |
|
|
| 128.9 |
|
|
| 63.9 |
|
TOTAL ASSETS |
| $ | 1,595.3 |
|
| $ | 1,547.1 |
|
| $ | 1,590.4 |
|
(The accompanying notes are an integral part of these consolidated unaudited financial statements.)
15
UNITIL CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS (Cont.)
(Millions, except number of shares)
(UNAUDITED)
September 30, | December 31, | |||||||||||
2022 | 2021 | 2021 | ||||||||||
LIABILITIES AND CAPITALIZATION: | ||||||||||||
Current Liabilities: | ||||||||||||
Accounts Payable | $ | 35.2 | $ | 29.5 | $ | 52.4 | ||||||
Short-Term Debt | 72.0 | 30.5 | 64.1 | |||||||||
Long-Term Debt, Current Portion | 8.2 | 10.1 | 8.2 | |||||||||
Regulatory Liabilities | 20.8 | 13.1 | 9.5 | |||||||||
Energy Supply Obligations | 29.8 | 16.1 | 14.5 | |||||||||
Interest Payable | 6.5 | 6.7 | 4.8 | |||||||||
Environmental Obligations | 0.6 | 0.7 | 0.5 | |||||||||
Other Current Liabilities | 20.5 | 19.9 | 19.5 | |||||||||
Total Current Liabilities | 193.6 | 126.6 | 173.5 | |||||||||
Noncurrent Liabilities: | ||||||||||||
Retirement Benefit Obligations | 135.2 | 166.2 | 133.9 | |||||||||
Deferred Income Taxes, net | 136.1 | 115.7 | 127.7 | |||||||||
Cost of Removal Obligations | 115.4 | 108.2 | 107.5 | |||||||||
Regulatory Liabilities | 37.9 | 42.9 | 42.6 | |||||||||
Environmental Obligations | 2.2 | 1.7 | 2.2 | |||||||||
Other Noncurrent Liabilities | 6.6 | 6.8 | 6.6 | |||||||||
Total Noncurrent Liabilities | 433.4 | 441.5 | 420.5 | |||||||||
Capitalization: | ||||||||||||
Long-Term Debt, Less Current Portion | 493.1 | 501.3 | 497.8 | |||||||||
Stockholders’ Equity: | ||||||||||||
Common Equity (Authorized: 25,000,000 and Outstanding: 16,039,141 15,971,962 and 15,977,766 Shares) | 334.4 | 331.6 | 332.1 | |||||||||
Retained Earnings | 124.2 | 107.8 | 116.2 | |||||||||
458.6 | 439.4 | 448.3 | ||||||||||
Preferred Stock | 0.2 | 0.2 | 0.2 | |||||||||
Total Stockholders’ Equity | 458.8 | 439.6 | 448.5 | |||||||||
Total Capitalization | 951.9 | 940.9 | 946.3 | |||||||||
Commitments and Contingencies (Notes 6 & 7) | ||||||||||||
TOTAL LIABILITIES AND CAPITALIZATION | $ | 1,578.9 | $ | 1,509.0 | $ | 1,540.3 | ||||||
| June 30, |
|
| December 31, |
| |||||||
| 2023 |
|
| 2022 |
|
| 2022 |
| ||||
LIABILITIES AND CAPITALIZATION: |
|
|
|
|
|
|
|
|
| |||
Current Liabilities: |
|
|
|
|
|
|
|
|
| |||
Accounts Payable |
| $ | 36.7 |
|
| $ | 34.3 |
|
| $ | 68.6 |
|
Short-Term Debt |
|
| 131.7 |
|
|
| 46.2 |
|
|
| 116.0 |
|
Long-Term Debt, Current Portion |
|
| 6.9 |
|
|
| 8.2 |
|
|
| 6.7 |
|
Regulatory Liabilities |
|
| 18.4 |
|
|
| 25.9 |
|
|
| 15.0 |
|
Energy Supply Obligations |
|
| 13.9 |
|
|
| 16.6 |
|
|
| 24.1 |
|
Interest Payable |
|
| 5.2 |
|
|
| 4.8 |
|
|
| 5.0 |
|
Environmental Obligations |
|
| 0.6 |
|
|
| 0.6 |
|
|
| 0.6 |
|
Taxes Payable |
|
| 2.3 |
|
|
| 0.1 |
|
|
| 0.4 |
|
Other Current Liabilities |
|
| 22.3 |
|
|
| 18.3 |
|
|
| 23.7 |
|
Total Current Liabilities |
|
| 238.0 |
|
|
| 155.0 |
|
|
| 260.1 |
|
Noncurrent Liabilities: |
|
|
|
|
|
|
|
|
| |||
Retirement Benefit Obligations |
|
| 44.3 |
|
|
| 135.9 |
|
|
| 46.8 |
|
Deferred Income Taxes, net |
|
| 171.3 |
|
|
| 136.4 |
|
|
| 163.4 |
|
Cost of Removal Obligations |
|
| 123.2 |
|
|
| 112.4 |
|
|
| 116.1 |
|
Regulatory Liabilities |
|
| 35.5 |
|
|
| 38.9 |
|
|
| 36.9 |
|
Environmental Obligations |
|
| 4.1 |
|
|
| 2.2 |
|
|
| 3.8 |
|
Other Noncurrent Liabilities |
|
| 8.3 |
|
|
| 6.9 |
|
|
| 6.6 |
|
Total Noncurrent Liabilities |
|
| 386.7 |
|
|
| 432.7 |
|
|
| 373.6 |
|
Capitalization: |
|
|
|
|
|
|
|
|
| |||
Long-Term Debt, Less Current Portion |
|
| 486.2 |
|
|
| 495.1 |
|
|
| 489.1 |
|
Stockholders’ Equity: |
|
|
|
|
|
|
|
|
| |||
Common Equity (Authorized: 25,000,000 and Outstanding: |
|
| 336.5 |
|
|
| 334.1 |
|
|
| 334.9 |
|
Retained Earnings |
|
| 147.7 |
|
|
| 130.0 |
|
|
| 132.5 |
|
Total Common Stock Equity |
|
| 484.2 |
|
|
| 464.1 |
|
|
| 467.4 |
|
Preferred Stock |
|
| 0.2 |
|
|
| 0.2 |
|
|
| 0.2 |
|
Total Stockholders’ Equity |
|
| 484.4 |
|
|
| 464.3 |
|
|
| 467.6 |
|
Total Capitalization |
|
| 970.6 |
|
|
| 959.4 |
|
|
| 956.7 |
|
Commitments and Contingencies (Notes 6 & 7) |
|
|
|
|
|
|
|
|
| |||
TOTAL LIABILITIES AND CAPITALIZATION |
| $ | 1,595.3 |
|
| $ | 1,547.1 |
|
| $ | 1,590.4 |
|
(The accompanying notes are an integral part of these consolidated unaudited financial statements.)
16
UNITIL CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Millions) (UNAUDITED)
Nine Months Ended September 30, | ||||||||
2022 | 2021 | |||||||
Operating Activities: | ||||||||
Net Income | $ | 26.9 | $ | 21.6 | ||||
Adjustments to Reconcile Net Income to Cash Provided by Operating Activities: | ||||||||
Depreciation and Amortization | 46.9 | 44.5 | ||||||
Deferred Tax Provision | 6.4 | 5.5 | ||||||
Changes in Working Capital Items: | ||||||||
Accounts Receivable | 15.2 | 15.7 | ||||||
Accrued Revenue | 14.3 | 12.3 | ||||||
Exchange Gas Receivable | (17.7 | ) | (5.6 | ) | ||||
Regulatory Liabilities | 11.3 | 7.6 | ||||||
Accounts Payable | (17.2 | ) | (3.7 | ) | ||||
Other Changes in Working Capital Items | 0.3 | 2.7 | ||||||
Deferred Regulatory and Other Charges | (8.3 | ) | (8.0 | ) | ||||
Other, net | 4.6 | 3.3 | ||||||
Cash Provided by Operating Activities | 82.7 | 95.9 | ||||||
Investing Activities: | ||||||||
Property, Plant and Equipment Additions | (82.5 | ) | (81.5 | ) | ||||
Cash (Used in) Investing Activities | (82.5 | ) | (81.5 | ) | ||||
Financing Activities: | ||||||||
Proceeds from (Repayment of) Short-Term Debt, net | 7.9 | (24.2 | ) | |||||
Repayment of Long-Term Debt | (4.9 | ) | (20.3 | ) | ||||
Net Increase in Exchange Gas Financing | 16.4 | 5.2 | ||||||
Decrease in Capital Lease Obligations | (0.1 | ) | (0.1 | ) | ||||
Dividends Paid | (18.9 | ) | (17.5 | ) | ||||
Proceeds from Issuance of Common Stock | 0.8 | 45.3 | ||||||
Cash Provided by (Used in) Financing Activities | 1.2 | (11.6 | ) | |||||
Net Increase in Cash and Cash Equivalents | 1.4 | 2.8 | ||||||
Cash and Cash Equivalents at Beginning of Period | 6.5 | 6.0 | ||||||
Cash and Cash Equivalents at End of Period | $ | 7.9 | $ | 8.8 | ||||
Supplemental Cash Flow Information: | ||||||||
Interest Paid | $ | 17.7 | $ | 17.9 | ||||
Income Taxes Paid | $ | 1.2 | $ | 1.4 | ||||
Payments on Capital Leases | $ | 0.1 | $ | 0.2 | ||||
Non-cash Investing Activity: | ||||||||
Capital Expenditures Included in Accounts Payable | $ | 5.4 | $ | 4.2 | ||||
Right-of-Use | $ | 1.2 | $ | 0.9 |
| For the Six Months |
| ||||||
| 2023 |
|
| 2022 |
| |||
Operating Activities: |
|
|
|
|
|
| ||
Net Income |
| $ | 28.3 |
|
| $ | 26.4 |
|
Adjustments to Reconcile Net Income to Cash Provided by Operating Activities: |
|
|
|
|
|
| ||
Depreciation and Amortization |
|
| 33.3 |
|
|
| 30.3 |
|
Deferred Tax Provision |
|
| 8.8 |
|
|
| 7.2 |
|
Changes in Working Capital Items: |
|
|
|
|
|
| ||
Accounts Receivable |
|
| 14.3 |
|
|
| 12.6 |
|
Accrued Revenue |
|
| 12.4 |
|
|
| 15.6 |
|
Exchange Gas Receivable |
|
| 8.6 |
|
|
| (6.0 | ) |
Regulatory Liabilities |
|
| 3.4 |
|
|
| 16.4 |
|
Accounts Payable |
|
| (31.9 | ) |
|
| (18.1 | ) |
Other Changes in Working Capital Items |
|
| (6.1 | ) |
|
| (7.6 | ) |
Deferred Regulatory and Other Charges |
|
| (13.6 | ) |
|
| (10.2 | ) |
Other, net |
|
| 4.9 |
|
|
| 4.4 |
|
Cash Provided by Operating Activities |
|
| 62.4 |
|
|
| 71.0 |
|
Investing Activities: |
|
|
|
|
|
| ||
Property, Plant and Equipment Additions |
|
| (57.6 | ) |
|
| (45.3 | ) |
Cash (Used in) Investing Activities |
|
| (57.6 | ) |
|
| (45.3 | ) |
Financing Activities: |
|
|
|
|
|
| ||
Proceeds from (Repayment of) Short-Term Debt, net |
|
| 15.7 |
|
|
| (17.9 | ) |
Repayment of Long-Term Debt |
|
| (2.8 | ) |
|
| (2.8 | ) |
Net (Decrease) Increase in Exchange Gas Financing |
|
| (7.6 | ) |
|
| 5.8 |
|
Increase (Decrease) in Capital Lease Obligations |
|
| 0.2 |
|
|
| (0.1 | ) |
Dividends Paid |
|
| (13.1 | ) |
|
| (12.6 | ) |
Proceeds from Issuance of Common Stock |
|
| 0.6 |
|
|
| 0.5 |
|
Cash (Used in) Financing Activities |
|
| (7.0 | ) |
|
| (27.1 | ) |
Net (Decrease) in Cash and Cash Equivalents |
|
| (2.2 | ) |
|
| (1.4 | ) |
Cash and Cash Equivalents at Beginning of Period |
|
| 9.0 |
|
|
| 6.5 |
|
Cash and Cash Equivalents at End of Period |
| $ | 6.8 |
|
| $ | 5.1 |
|
Supplemental Cash Flow Information: |
|
|
|
|
|
| ||
Interest Paid |
| $ | 15.5 |
|
| $ | 12.8 |
|
Income Taxes Paid |
| $ | — |
|
| $ | 1.1 |
|
Payments on Capital Leases |
| $ | 0.1 |
|
| $ | 0.1 |
|
Non-cash Investing Activity: |
|
|
|
|
|
| ||
Capital Expenditures Included in Accounts Payable |
| $ | 5.3 |
|
| $ | 3.9 |
|
Right-of-Use Assets Obtained in Exchange for Lease Obligations |
| $ | 1.8 |
|
| $ | 0.5 |
|
(The accompanying notes are an integral part of these consolidated unaudited financial statements.)
17
UNITIL CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF CHANGES IN COMMON STOCK EQUITY
(Millions, except number of shares)
(UNAUDITED)
Common Equity | Retained Earnings | Total | ||||||||||
Three Months Ended September 30, 2022 | ||||||||||||
Balance at July 1, 2022 | $ | 334.1 | $ | 130.0 | $ | 464.1 | ||||||
Net Income | 0.5 | 0.5 | ||||||||||
Dividends on Common Shares ($0.39 per share) | (6.3 | ) | (6.3 | ) | ||||||||
Stock Compensation Plans | 0.1 | 0.1 | ||||||||||
Issuance of 4,506 Common Shares | 0.2 | 0.2 | ||||||||||
Balance at September 30, 2022 | $ | 334.4 | $ | 124.2 | $ | 458.6 | ||||||
Three Months Ended September 30, 2021 | ||||||||||||
Balance at July 1, 2021 | $ | 286.8 | $ | 113.8 | $ | 400.6 | ||||||
Net Income | — | — | ||||||||||
Dividends on Common Shares ($0.38 per share) | (6.0 | ) | (6.0 | ) | ||||||||
Stock Compensation Plans | 0.1 | 0.1 | ||||||||||
Issuance of 925,493 Common Shares | 44.7 | 44.7 | ||||||||||
Balance at September 30, 2021 | $ | 331.6 | $ | 107.8 | $ | 439.4 | ||||||
| Common |
|
| Retained |
|
| Total |
| ||||
Three Months Ended June 30, 2023 |
|
|
|
|
|
|
|
|
| |||
Balance at April 1, 2023 |
| $ | 336.1 |
|
| $ | 150.1 |
|
| $ | 486.2 |
|
Net Income |
|
|
|
|
| 4.2 |
|
|
| 4.2 |
| |
Dividends ($0.405 per Common Share) |
|
|
|
|
| (6.6 | ) |
|
| (6.6 | ) | |
Stock Compensation Plans |
|
| 0.1 |
|
|
|
|
|
| 0.1 |
| |
Issuance of 5,189 Common Shares |
|
| 0.3 |
|
|
|
|
|
| 0.3 |
| |
Balance at June 30, 2023 |
| $ | 336.5 |
|
| $ | 147.7 |
|
| $ | 484.2 |
|
Three Months Ended June 30, 2022 |
|
|
|
|
|
|
|
|
| |||
Balance at April 1, 2022 |
| $ | 333.7 |
|
| $ | 131.4 |
|
| $ | 465.1 |
|
Net Income |
|
|
|
|
| 4.9 |
|
|
| 4.9 |
| |
Dividends ($0.39 per Common Share) |
|
|
|
|
| (6.3 | ) |
|
| (6.3 | ) | |
Stock Compensation Plans |
|
| 0.2 |
|
|
|
|
|
| 0.2 |
| |
Issuance of 4,352 Common Shares |
|
| 0.2 |
|
|
|
|
|
| 0.2 |
| |
Balance at June 30, 2022 |
| $ | 334.1 |
|
| $ | 130.0 |
|
| $ | 464.1 |
|
| Common |
|
| Retained |
|
| Total |
| ||||
Six Months Ended June 30, 2023 |
|
|
|
|
|
|
|
|
| |||
Balance at January 1, 2023 |
| $ | 334.9 |
|
| $ | 132.5 |
|
| $ | 467.4 |
|
Net Income |
|
|
|
|
| 28.3 |
|
|
| 28.3 |
| |
Dividends ($0.81 per Common Share) |
|
|
|
|
| (13.1 | ) |
|
| (13.1 | ) | |
Stock Compensation Plans |
|
| 1.0 |
|
|
|
|
|
| 1.0 |
| |
Issuance of 10,524 Common Shares |
|
| 0.6 |
|
|
|
|
|
| 0.6 |
| |
Balance at June 30, 2023 |
| $ | 336.5 |
|
| $ | 147.7 |
|
| $ | 484.2 |
|
Six Months Ended June 30, 2022 |
|
|
|
|
|
|
|
|
| |||
Balance at January 1, 2022 |
| $ | 332.1 |
|
| $ | 116.2 |
|
| $ | 448.3 |
|
Net Income |
|
|
|
|
| 26.4 |
|
|
| 26.4 |
| |
Dividends ($0.78 per Common Share) |
|
|
|
|
| (12.6 | ) |
|
| (12.6 | ) | |
Stock Compensation Plans |
|
| 1.5 |
|
|
|
|
|
| 1.5 |
| |
Issuance of 9,863 Common Shares |
|
| 0.5 |
|
|
|
|
|
| 0.5 |
| |
Balance at June 30, 2022 |
| $ | 334.1 |
|
| $ | 130.0 |
|
| $ | 464.1 |
|
(The accompanying notes are an integral part of these consolidated unaudited financial statements.)
18
UNITIL CORPORATION AND SUBSIDIARY COMPANIES
Common Equity | Retained Earnings | Total | ||||||||||
Nine Months Ended September 30, 2022 | ||||||||||||
Balance at January 1, 2022 | $ | 332.1 | $ | 116.2 | $ | 448.3 | ||||||
Net Income | 26.9 | 26.9 | ||||||||||
Dividends on Common Shares ($1.17 per share) | (18.9 | ) | (18.9 | ) | ||||||||
Stock Compensation Plans | 1.5 | 1.5 | ||||||||||
Issuance of 14,369 Common Shares | 0.8 | 0.8 | ||||||||||
Balance at September 30, 2022 | $ | 334.4 | $ | 124.2 | $ | 458.6 | ||||||
Nine Months Ended September 30, 2021 | ||||||||||||
Balance at January 1, 2021 | $ | 285.3 | $ | 103.7 | $ | 389.0 | ||||||
Net Income | 21.6 | 21.6 | ||||||||||
Dividends on Common Shares ($1.14 per share) | (17.5 | ) | (17.5 | ) | ||||||||
Stock Compensation Plans | 1.0 | 1.0 | ||||||||||
Issuance of 936,512 Common Shares | 45.3 | 45.3 | ||||||||||
Balance at September 30, 2021 | $ | 331.6 | $ | 107.8 | $ | 439.4 | ||||||
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
The Company’s earnings historically have been seasonal and typically higher in the first and fourth quarters when customers use gas for heating purposes.
Unitil’s principal business is the local distribution of electricity in the southeastern seacoast and capital city areas of New Hampshire and the greater Fitchburg area of north central Massachusetts and the local distribution of gas in southeastern New Hampshire, portions of southern Maine to the Lewiston-Auburn area and in the greater Fitchburg area of north central Massachusetts. Unitil has three distribution utility subsidiaries, including Unitil Energy, which operates in New Hampshire; Fitchburg, which operates in Massachusetts; and Northern Utilities, which operates in New Hampshire and Maine (collectively referred to as the “distribution utilities”).
Granite State is an interstate gas transmission 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 three major gas pipelines and access to domestic gas supplies in the south and Canadian gas supplies in the north. Granite State derives its revenues principally from transportation services provided to Northern Utilities and, to a lesser extent, third-party marketers.
A fifth utility subsidiary, Unitil Power, formerly functioned as the full requirements wholesale power supply provider for Unitil Energy. In connection with the implementation of electric industry restructuring in New Hampshire, on May 1, 2003 Unitil Power ceased being the wholesale supplier of Unitil Energy and divested of its long-term power supply contracts through the sale of the entitlements to the electricity associated with various electric power supply contracts it had acquired to serve Unitil Energy’s customers. In the period since, Unitil Power continued to flow revenues and expenses from remaining contracts to Unitil Energy under the Amended Unitil System Agreement. The last of those contracts expired October 31, 2020, and the Company no longer has material revenues or expenses associated with them.
Unitil also has three other wholly-owned subsidiaries: Unitil Service, Unitil 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-ownedsubsidiary.
Basis of Presentation -
Utility Revenue Recognition -
19
Revenue is recorded when service is rendered or energy is delivered to customers. However, the determination of energy sales to individual customers is based on the reading of their meters, which occurs on a systematic basis throughout the month. At the end of each calendar month, amounts of energy delivered to customers since the date of the last meter reading are estimated and the corresponding unbilled revenues are calculated. These unbilled revenues are estimated 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.
A majority of the Company’s revenue from contracts with customers continues to be recognized on a monthly basis based on applicable tariffs and customer monthly consumption. Such revenue is recognized using the invoice practical expedient, which allows an entity to recognize revenue in the amount that directly corresponds to the value transferred to the customer.
The Company’s billed and unbilled revenue meets the definition of “revenues from contracts with customers” as defined in Accounting Standards Codification (ASC) 606. Revenue recognized in connection with rate adjustment mechanisms is consistent with the definition of alternative revenue programs in ASC
In the following tables, revenue is classified by the types of goods/services rendered and market/customer type.
| Three Months Ended June 30, 2023 |
| ||||||||||
Electric and Gas Operating Revenues (millions): |
| Electric |
|
| Gas |
|
| Total |
| |||
Billed and Unbilled Revenue: |
|
|
|
|
|
|
|
|
| |||
Residential |
| $ | 39.8 |
|
| $ | 17.9 |
|
| $ | 57.7 |
|
Commercial and Industrial |
|
| 28.1 |
|
|
| 26.4 |
|
|
| 54.5 |
|
Other |
|
| 1.9 |
|
|
| 1.0 |
|
|
| 2.9 |
|
Total Billed and Unbilled Revenue |
|
| 69.8 |
|
|
| 45.3 |
|
|
| 115.1 |
|
Rate Adjustment Mechanism Revenue |
|
| (5.3 | ) |
|
| (6.4 | ) |
|
| (11.7 | ) |
Total Electric and Gas Operating Revenues |
| $ | 64.5 |
|
| $ | 38.9 |
|
| $ | 103.4 |
|
| Three Months Ended June 30, 2022 |
| ||||||||||
Electric and Gas Operating Revenues (millions): |
| Electric |
|
| Gas |
|
| Total |
| |||
Billed and Unbilled Revenue: |
|
|
|
|
|
|
|
|
| |||
Residential |
| $ | 33.8 |
|
| $ | 18.1 |
|
| $ | 51.9 |
|
Commercial and Industrial |
|
| 25.7 |
|
|
| 28.0 |
|
|
| 53.7 |
|
Other |
|
| 4.6 |
|
|
| 3.5 |
|
|
| 8.1 |
|
Total Billed and Unbilled Revenue |
|
| 64.1 |
|
|
| 49.6 |
|
|
| 113.7 |
|
Rate Adjustment Mechanism Revenue |
|
| (9.8 | ) |
|
| (5.0 | ) |
|
| (14.8 | ) |
Total Electric and Gas Operating Revenues |
| $ | 54.3 |
|
| $ | 44.6 |
|
| $ | 98.9 |
|
| Six Months Ended June 30, 2023 |
| ||||||||||
Electric and Gas Operating Revenues (millions): |
| Electric |
|
| Gas |
|
| Total |
| |||
Billed and Unbilled Revenue: |
|
|
|
|
|
|
|
|
| |||
Residential |
| $ | 99.9 |
|
| $ | 67.0 |
|
| $ | 166.9 |
|
Commercial and Industrial |
|
| 62.9 |
|
|
| 95.6 |
|
|
| 158.5 |
|
Other |
|
| 4.6 |
|
|
| 4.6 |
|
|
| 9.2 |
|
Total Billed and Unbilled Revenue |
|
| 167.4 |
|
|
| 167.2 |
|
|
| 334.6 |
|
Rate Adjustment Mechanism Revenue |
|
| 5.3 |
|
|
| (16.3 | ) |
|
| (11.0 | ) |
Total Electric and Gas Operating Revenues |
| $ | 172.7 |
|
| $ | 150.9 |
|
| $ | 323.6 |
|
20
| Six Months Ended June 30, 2022 |
| ||||||||||
Electric and Gas Operating Revenues (millions): |
| Electric |
|
| Gas |
|
| Total |
| |||
Billed and Unbilled Revenue: |
|
|
|
|
|
|
|
|
| |||
Residential |
| $ | 83.0 |
|
| $ | 63.6 |
|
| $ | 146.6 |
|
Commercial and Industrial |
|
| 56.7 |
|
|
| 92.7 |
|
|
| 149.4 |
|
Other |
|
| 9.1 |
|
|
| 7.0 |
|
|
| 16.1 |
|
Total Billed and Unbilled Revenue |
|
| 148.8 |
|
|
| 163.3 |
|
|
| 312.1 |
|
Rate Adjustment Mechanism Revenue |
|
| (5.3 | ) |
|
| (15.3 | ) |
|
| (20.6 | ) |
Total Electric and Gas Operating Revenues |
| $ | 143.5 |
|
| $ | 148.0 |
|
| $ | 291.5 |
|
Three Months Ended September 30, 2022 | ||||||||||||
Electric and Gas Operating Revenues ($ millions): | Electric | Gas | Total | |||||||||
Billed and Unbilled Revenue: | ||||||||||||
Residential | $ | 42.5 | $ | 8.8 | $ | 51.3 | ||||||
Commercial and Industrial | 30.2 | 17.8 | 48.0 | |||||||||
Other | 5.1 | 0.8 | 5.9 | |||||||||
Total Billed and Unbilled Revenue | 77.8 | 27.4 | 105.2 | |||||||||
Rate Adjustment Mechanism Revenue | (2.1 | ) | 7.1 | 5.0 | ||||||||
Total Electric and Gas Operating Revenues | $ | 75.7 | $ | 34.5 | $ | 110.2 | ||||||
Three Months Ended September 30, 2021 | ||||||||||||
Electric and Gas Operating Revenues ($ millions): | Electric | Gas | Total | |||||||||
Billed and Unbilled Revenue: | ||||||||||||
Residential | $ | 35.0 | $ | 7.9 | $ | 42.9 | ||||||
Commercial and Industrial | 26.8 | 14.4 | 41.2 | |||||||||
Other | 3.2 | 0.8 | 4.0 | |||||||||
Total Billed and Unbilled Revenue | 65.0 | 23.1 | 88.1 | |||||||||
Rate Adjustment Mechanism Revenue | 0.5 | 9.5 | 10.0 | |||||||||
Total Electric and Gas Operating Revenues | $ | 65.5 | $ | 32.6 | $ | 98.1 | ||||||
Nine Months Ended September 30, 2022 | ||||||||||||
Electric and Gas Operating Revenues ($ millions): | Electric | Gas | Total | |||||||||
Billed and Unbilled Revenue: | ||||||||||||
Residential | $ | 125.5 | $ | 72.4 | $ | 197.9 | ||||||
Commercial and Industrial | 86.9 | 110.5 | 197.4 | |||||||||
Other | 14.3 | 7.7 | 22.0 | |||||||||
Total Billed and Unbilled Revenue | 226.7 | 190.6 | 417.3 | |||||||||
Rate Adjustment Mechanism Revenue | (7.5 | ) | (8.1 | ) | (15.6 | ) | ||||||
Total Electric and Gas Operating Revenues | $ | 219.2 | $ | 182.5 | $ | 401.7 | ||||||
Nine Months Ended September 30, 2021 | ||||||||||||
Electric and Gas Operating Revenues ($ millions): | Electric | Gas | Total | |||||||||
Billed and Unbilled Revenue: | ||||||||||||
Residential | $ | 104.0 | $ | 60.5 | $ | 164.5 | ||||||
Commercial and Industrial | 78.2 | 86.2 | 164.4 | |||||||||
Other | 6.9 | 7.6 | 14.5 | |||||||||
Total Billed and Unbilled Revenue | 189.1 | 154.3 | 343.4 | |||||||||
Rate Adjustment Mechanism Revenue | (6.9 | ) | (3.0 | ) | (9.9 | ) | ||||||
Total Electric and Gas Operating Revenues | $ | 182.2 | $ | 151.3 | $ | 333.5 | ||||||
Revenue decoupling is the term given to the elimination of the dependency of a utility’s distribution revenue on the volume of electricity or gas sales. The difference between distribution revenue amounts billed to customers and the targeted revenue decoupling amounts is recordedrecognized 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 resultof rate cases and other authorized adjustments that the Company files with the Massachusetts Department of Public Utilities (MDPU) and the New Hampshire Public Utilities Commission
Revenue Decoupling | |
Estimated Percentage of Decoupled Sales | |
For Periods Presented | |
Electric | |
Before June 1, 2022 | 27% |
After June 1, 2022 | Substantially All |
Gas | |
Before August 1, 2022 | 11% |
After August 1, 2022 | 43% |
Income Taxes -
Provisions for income taxes are calculated in each jurisdiction in which the Company operates, for each period for which a statement of earnings is presented. The Company accounts for income taxes in accordance with the FASB Codification guidance on Income Taxes, which requires an asset and liability approach for the financial accounting and reporting of income taxes. Significant judgments and estimates are required in determining the current and deferred tax assets and liabilities. The Company’s 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.
Cash and Cash Equivalents -
21
30, 2023, June 30, 2022 September 30, 2021 and December 31, 2021,2022, the Unitil subsidiaries had deposited
Allowance for Doubtful Accounts -
The Allowance for Doubtful Accounts as of SeptemberJune 30, 2022, September2023, June 30, 20212022 and December 31, 2021,2022, was as follows:
|
| June 30, |
|
| December 31, |
| ||||||
(millions) |
| 2023 |
|
| 2022 |
|
| 2022 |
| |||
Allowance for Doubtful Accounts |
| $ | 2.2 |
|
| $ | 2.7 |
|
| $ | 2.6 |
|
($ millions) | ||||||||||||
September 30, | December 31, | |||||||||||
2022 | 2021 | 2021 | ||||||||||
Allowance for Doubtful Accounts | $ | 2.4 | $ | 4.3 | $ | 3.3 | ||||||
Accounts Receivable, Net includes $2.4$2.2 million, $4.2$2.6 million, and $3.1$2.5 million of the Allowance for Doubtful Accounts at SeptemberJune 30, 2023, June 30, 2022 September 30, 2021 and December
Accrued Revenue -
| June 30, |
|
| December 31, |
| |||||||
Accrued Revenue (millions) |
| 2023 |
|
| 2022 |
|
| 2022 |
| |||
Regulatory Assets – Current |
| $ | 56.8 |
|
| $ | 41.4 |
|
| $ | 66.5 |
|
Unbilled Revenues, net |
|
| 3.6 |
|
|
| 4.2 |
|
|
| 6.3 |
|
Total Accrued Revenue |
| $ | 60.4 |
|
| $ | 45.6 |
|
| $ | 72.8 |
|
September 30, | December 31, | |||||||||||
Accrued Revenue ($ millions) | 2022 | 2021 | 2021 | |||||||||
Regulatory Assets – Current | $ | 44.0 | $ | 30.6 | $ | 47.4 | ||||||
Unbilled Revenues, net | 2.9 | 8.0 | 13.8 | |||||||||
Total Accrued Revenue | $ | 46.9 | $ | 38.6 | $ | 61.2 | ||||||
Exchange Gas Receivable -
| June 30, |
|
| December 31, |
| |||||||
Exchange Gas Receivable (millions) |
| 2023 |
|
| 2022 |
|
| 2022 |
| |||
Northern Utilities |
| $ | 8.7 |
|
| $ | 12.5 |
|
| $ | 16.3 |
|
Fitchburg |
|
| 0.7 |
|
|
| 0.9 |
|
|
| 1.7 |
|
Total Exchange Gas Receivable |
| $ | 9.4 |
|
| $ | 13.4 |
|
| $ | 18.0 |
|
September 30, | December 31, | |||||||||||
Exchange Gas Receivable ($ millions) | 2022 | 2021 | 2021 | |||||||||
Northern Utilities | $ | 23.1 | $ | 9.7 | $ | 6.7 | ||||||
Fitchburg | 2.0 | 0.8 | 0.7 | |||||||||
Total Exchange Gas Receivable | $ | 25.1 | $ | 10.5 | $ | 7.4 | ||||||
Gas Inventory
| June 30, |
|
| December 31, |
| |||||||
Gas Inventory (millions) |
| 2023 |
|
| 2022 |
|
| 2022 |
| |||
Natural Gas |
| $ | 0.6 |
|
| $ | 0.5 |
|
| $ | 1.0 |
|
Propane |
|
| 0.3 |
|
|
| 0.4 |
|
|
| 0.4 |
|
Liquefied Natural Gas & Other |
|
| 0.1 |
|
|
| 0.1 |
|
|
| 0.4 |
|
Total Gas Inventory |
| $ | 1.0 |
|
| $ | 1.0 |
|
| $ | 1.8 |
|
September 30, | December 31, | |||||||||||
Gas Inventory ($ millions) | 2022 | 2021 | 2021 | |||||||||
Natural Gas | $ | 1.1 | $ | 0.4 | $ | 0.5 | ||||||
Propane | 0.4 | 0.4 | 0.4 | |||||||||
Liquefied Natural Gas & Other | 0.2 | 0.1 | 0.1 | |||||||||
Total Gas Inventory | $ | 1.7 | $ | 0.9 | $ | 1.0 | ||||||
Utility Plant -
22
asset depreciation rates, which are periodically reviewed as part of its ratemaking proceedings, cost of removal amounts to provide for future negative salvage value. At SeptemberJune 30, 2022, September2023, June 30, 20212022 and December 31, 2021,2022, the cost of removal amounts, which are recorded on the Consolidated Balance Sheets in Cost of Removal Obligations, were estimated to be $115.4$123.2 million, $108.2$112.4 million, and $107.5$116.1 million, respectively.
Leases -
Regulatory Accounting -
| June 30, |
|
| December 31, |
| |||||||
Regulatory Assets consist of the following (millions) |
| 2023 |
|
| 2022 |
|
| 2022 |
| |||
Retirement Benefits |
| $ | 27.2 |
|
| $ | 86.9 |
|
| $ | 29.1 |
|
Energy Supply and Other Rate Adjustment Mechanisms |
|
| 54.0 |
|
|
| 38.2 |
|
|
| 63.0 |
|
Deferred Storm Charges |
|
| 8.5 |
|
|
| 2.9 |
|
|
| 3.4 |
|
Environmental |
|
| 6.1 |
|
|
| 4.5 |
|
|
| 5.9 |
|
Income Taxes |
|
| 1.5 |
|
|
| 2.2 |
|
|
| 1.8 |
|
Other Deferred Charges |
|
| 11.0 |
|
|
| 13.3 |
|
|
| 11.1 |
|
Total Regulatory Assets |
|
| 108.3 |
|
|
| 148.0 |
|
|
| 114.3 |
|
Less: Current Portion of Regulatory Assets(1) |
|
| 56.8 |
|
|
| 41.4 |
|
|
| 66.5 |
|
Regulatory Assets – noncurrent |
| $ | 51.5 |
|
| $ | 106.6 |
|
| $ | 47.8 |
|
| June 30, |
|
| December 31, |
| |||||||
Regulatory Liabilities consist of the following (millions) |
| 2023 |
|
| 2022 |
|
| 2022 |
| |||
Income Taxes (Note 8) |
| $ | 39.6 |
|
| $ | 42.6 |
|
| $ | 41.0 |
|
Rate Adjustment Mechanisms |
|
| 14.3 |
|
|
| 22.2 |
|
|
| 10.9 |
|
Total Regulatory Liabilities |
|
| 53.9 |
|
|
| 64.8 |
|
|
| 51.9 |
|
Less: Current Portion of Regulatory Liabilities |
|
| 18.4 |
|
|
| 25.9 |
|
|
| 15.0 |
|
Regulatory Liabilities – noncurrent |
| $ | 35.5 |
|
| $ | 38.9 |
|
| $ | 36.9 |
|
September 30, | December 31, | |||||||||||
Regulatory Assets consist of the following ($ millions) | 2022 | 2021 | 2021 | |||||||||
Retirement Benefits | $ | 87.4 | $ | 107.0 | $ | 86.4 | ||||||
Energy Supply and Other Rate Adjustment Mechanisms | 40.9 | 27.3 | 44.1 | |||||||||
Deferred Storm Charges | 2.7 | 3.4 | 3.3 | |||||||||
Environmental | 4.5 | 4.8 | 4.6 | |||||||||
Income Taxes | 2.0 | 2.8 | 2.6 | |||||||||
Other Deferred Charges | 12.0 | 17.7 | 15.3 | |||||||||
Total Regulatory Assets | 149.5 | 163.0 | 156.3 | |||||||||
Less: Current Portion of Regulatory Assets (1) | 44.0 | 30.6 | 47.4 | |||||||||
Regulatory Assets – noncurrent | $ | 105.5 | $ | 132.4 | $ | 108.9 | ||||||
September 30, | December 31, | |||||||||||
Regulatory Liabilities consist of the following ($ millions) | 2022 | 2021 | 2021 | |||||||||
Income Taxes (Note 8) | $ | 42.1 | $ | 44.6 | $ | 44.3 | ||||||
Rate Adjustment Mechanisms | 16.6 | 11.3 | 7.7 | |||||||||
Other | — | 0.1 | 0.1 | |||||||||
Total Regulatory Liabilities | 58.7 | 56.0 | 52.1 | |||||||||
Less: Current Portion of Regulatory Liabilities | 20.8 | 13.1 | 9.5 | |||||||||
Regulatory Liabilities – noncurrent | $ | 37.9 | $ | 42.9 | $ | 42.6 | ||||||
Generally, the Company receives a return on investment on its regulatory assets for which a cash outflow has been made. Included in Regulatory Assets as of SeptemberJune 30, 20222023 are $5.8$5.5 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 effect 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’sCompany’s opinion, its regulated operations will be subject to the FASB Codification provisions for Regulated Operations for the foreseeable future.
23
Derivatives -
Fitchburg has entered into power purchase agreements for which contingencies exist (see Note 6, Regulatory Matters—Fitchburg—Massachusetts Request for Proposal (RFPs)). Until these contingencies are satisfied, these contracts will not qualify for derivative accounting. The Company believes that the power purchase obligations under these long-term contracts will have a material effect on the contractual obligations of Fitchburg.
Investments in Marketable Securities
At SeptemberJune 30, 2023, June 30, 2022 September 30, 2021 and December 31, 2021,2022, the fair value of the Company’s investments in these trading securities, which are recorded on the Consolidated Balance Sheets in Other Assets, was $5.6$5.8 million, $5.6$5.4 million and $5.7$5.8 million, respectively, as shown in the following table. 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,Expense, Net.
| June 30, |
|
| December 31, |
| |||||||
Fair Value of Marketable Securities (millions) |
| 2023 |
|
| 2022 |
|
| 2022 |
| |||
Money Market Funds |
| $ | 5.8 |
|
| $ | 5.4 |
|
| $ | 5.8 |
|
Total Marketable Securities |
| $ | 5.8 |
|
| $ | 5.4 |
|
| $ | 5.8 |
|
September 30, | December 31, | |||||||||||
Fair Value of Marketable Securities ($ millions) | 2022 | 2021 | 2021 | |||||||||
Money Market Funds | $ | 5.6 | $ | 5.6 | $ | 5.7 | ||||||
Total Marketable Securities | $ | 5.6 | $ | 5.6 | $ | 5.7 | ||||||
The Company also sponsors the Unitil Corporation Deferred Compensation Plan (the “DC Plan”). The DC Plan is a
At SeptemberJune 30, 2023, June 30, 2022 September 30, 2021 and December 31, 2021,2022, 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 $0.6$1.1 million, $0.5$0.8 million and $0.6$0.6 million, respectively, as shown in the following table. 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,
| June 30, |
|
| December 31, |
| |||||||
Fair Value of Marketable Securities (millions) |
| 2023 |
|
| 2022 |
|
| 2022 |
| |||
Equity Funds |
| $ | 1.0 |
|
| $ | 0.4 |
|
| $ | 0.5 |
|
Money Market Funds |
|
| 0.1 |
|
|
| 0.4 |
|
|
| 0.1 |
|
Total Marketable Securities |
| $ | 1.1 |
|
| $ | 0.8 |
|
| $ | 0.6 |
|
24
September 30, | December 31, | |||||||||||
Fair Value of Marketable Securities ($ millions) | 2022 | 2021 | 2021 | |||||||||
Equity Funds | $ | 0.5 | $ | 0.1 | $ | 0.2 | ||||||
Money Market Funds | 0.1 | 0.4 | 0.4 | |||||||||
Total Marketable Securities | $ | 0.6 | $ | 0.5 | $ | 0.6 | ||||||
Energy Supply Obligations -
| June 30, |
|
| December 31, |
| |||||||
Energy Supply Obligations (millions) |
| 2023 |
|
| 2022 |
|
| 2022 |
| |||
Current: |
|
|
|
|
|
|
|
|
| |||
Exchange Gas Obligation |
| $ | 8.7 |
|
| $ | 12.5 |
|
| $ | 16.3 |
|
Renewable Energy Portfolio Standards |
|
| 5.2 |
|
|
| 4.1 |
|
|
| 7.8 |
|
Total Energy Supply Obligations |
| $ | 13.9 |
|
| $ | 16.6 |
|
| $ | 24.1 |
|
September 30, | December 31, | |||||||||||
Energy Supply Obligations ($ millions) | 2022 | 2021 | 2021 | |||||||||
Current: | ||||||||||||
Exchange Gas Obligation | $ | 23.1 | $ | 9.7 | $ | 6.7 | ||||||
Renewable Energy Portfolio Standards | 6.7 | 6.4 | 7.8 | |||||||||
Total Energy Supply Obligations | $ | 29.8 | $ | 16.1 | $ | 14.5 | ||||||
Exchange Gas Obligation
Renewable Energy Portfolio Standards
Fitchburg has entered into long-term renewable contracts for the purchase of clean energy and/or 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 ten of these contracts have been constructed and are now operating. Three approved contracts are currently under development. These include two long-term contracts filed with the MDPU in 2018, one for offshore wind generation and one for imported hydroelectric power and associated transmission, both of which were approved in 2019, and another for offshore wind generation contracts filed with the MDPU during the first quarter of 2020 and approved in 2021. In compliance with An Act to Promote a Clean Energy Future (2018), in 2021, in coordination with the other electric utilities in Massachusetts, the Company issued its most recent long-term renewable solicitation seeking up to an additional 1,600 megawatts (MW) of offshore wind generation. In December 2021, a portfolio of projects comprising 1,600 MW of offshore wind capacity was selected for negotiation. Those contracts were filed for approval withapproved by the MDPU on May 25, 2022, and remain pending.December 30, 2022. Fitchburg recovers the costs associated with long-term renewable contracts on a fully reconciling basis through a MDPU-approved cost recovery mechanism, and has received remuneration for entering into them.
Power Supply Contract Divestitures -
Subsequent Events -
25
Note 2 - Dividends Declared Per Share
Declaration |
| Date |
| Shareholder of |
| Dividend |
| |
07/26/23 |
| 08/28/23 |
| 08/14/23 |
| $ | 0.405 |
|
04/26/23 |
| 05/30/23 |
| 05/15/23 |
| $ | 0.405 |
|
01/25/23 |
| 02/28/23 |
| 02/14/23 |
| $ | 0.405 |
|
10/26/22 |
| 11/28/22 |
| 11/14/22 |
| $ | 0.390 |
|
07/27/22 |
| 08/26/22 |
| 08/12/22 |
| $ | 0.390 |
|
04/27/22 |
| 05/27/22 |
| 05/13/22 |
| $ | 0.390 |
|
01/26/22 |
| 02/25/22 |
| 02/11/22 |
| $ | 0.390 |
|
Date | Paid (Payable) | Record Date | Amount | |||
note 3 - SEGMENT INFORMATION
The following table provides significant segment financial data for the three and ninesix months ended SeptemberJune 30, 20222023 and SeptemberJune 30,
| Electric |
|
| Gas |
|
| Other |
|
| Total |
| |||||
Three Months Ended June 30, 2023 (millions) |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Billed and Unbilled Revenue |
| $ | 69.8 |
|
| $ | 45.3 |
|
| $ | — |
|
| $ | 115.1 |
|
Rate Adjustment Mechanism Revenue |
|
| (5.3 | ) |
|
| (6.4 | ) |
|
| — |
|
|
| (11.7 | ) |
Total Operating Revenues |
|
| 64.5 |
|
|
| 38.9 |
|
|
| — |
|
|
| 103.4 |
|
Segment Profit (Loss) |
|
| 3.6 |
|
|
| 0.9 |
|
|
| (0.3 | ) |
|
| 4.2 |
|
Capital Expenditures |
|
| 13.4 |
|
|
| 22.0 |
|
|
| — |
|
|
| 35.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Three Months Ended June 30, 2022 (millions) |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Billed and Unbilled Revenue |
| $ | 64.1 |
|
| $ | 49.6 |
|
| $ | — |
|
| $ | 113.7 |
|
Rate Adjustment Mechanism Revenue |
|
| (9.8 | ) |
|
| (5.0 | ) |
|
| — |
|
|
| (14.8 | ) |
Total Operating Revenues |
|
| 54.3 |
|
|
| 44.6 |
|
|
| — |
|
|
| 98.9 |
|
Segment Profit (Loss) |
|
| 3.9 |
|
|
| 1.3 |
|
|
| (0.3 | ) |
|
| 4.9 |
|
Capital Expenditures |
|
| 7.9 |
|
|
| 22.0 |
|
|
| — |
|
|
| 29.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Six Months Ended June 30, 2023 (millions) |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Billed and Unbilled Revenue |
| $ | 167.4 |
|
| $ | 167.2 |
|
| $ | — |
|
| $ | 334.6 |
|
Rate Adjustment Mechanism Revenue |
|
| 5.3 |
|
|
| (16.3 | ) |
|
| — |
|
|
| (11.0 | ) |
Total Operating Revenues |
|
| 172.7 |
|
|
| 150.9 |
|
|
| — |
|
|
| 323.6 |
|
Segment Profit (Loss) |
|
| 8.9 |
|
|
| 19.9 |
|
|
| (0.5 | ) |
|
| 28.3 |
|
Capital Expenditures |
|
| 24.0 |
|
|
| 33.5 |
|
|
| 0.1 |
|
|
| 57.6 |
|
Segment Assets |
|
| 610.5 |
|
|
| 961.9 |
|
|
| 22.9 |
|
|
| 1,595.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Six Months Ended June 30, 2022 (millions) |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Billed and Unbilled Revenue |
| $ | 148.8 |
|
| $ | 163.3 |
|
| $ | — |
|
| $ | 312.1 |
|
Rate Adjustment Mechanism Revenue |
|
| (5.3 | ) |
|
| (15.3 | ) |
|
| — |
|
|
| (20.6 | ) |
Total Operating Revenues |
|
| 143.5 |
|
|
| 148.0 |
|
|
| — |
|
|
| 291.5 |
|
Segment Profit (Loss) |
|
| 7.3 |
|
|
| 19.8 |
|
|
| (0.7 | ) |
|
| 26.4 |
|
Capital Expenditures |
|
| 14.2 |
|
|
| 31.0 |
|
|
| 0.1 |
|
|
| 45.3 |
|
Segment Assets |
|
| 593.0 |
|
|
| 936.0 |
|
|
| 18.1 |
|
|
| 1,547.1 |
|
Electric | Gas | Non- Regulated | Other | Total | ||||||||||||||||
Three Months Ended Sept. 30, 2022 ($ millions) | ||||||||||||||||||||
Revenues: | ||||||||||||||||||||
Billed and Unbilled Revenue | $ | 77.8 | $ | 27.4 | $ | — | $ | — | $ | 105.2 | ||||||||||
Rate Adjustment Mechanism Revenue | (2.1 | ) | 7.1 | — | — | 5.0 | ||||||||||||||
Other Operating Revenue – Non-Regulated | — | — | — | — | — | |||||||||||||||
Total Operating Revenues | $ | 75.7 | $ | 34.5 | $ | — | $ | — | $ | 110.2 | ||||||||||
Segment Profit (Loss) | 5.9 | (5.3 | ) | — | (0.1 | ) | 0.5 | |||||||||||||
Capital Expenditures | 8.3 | 28.9 | — | — | 37.2 | |||||||||||||||
Three Months Ended Sept. 30, 2021 ($ millions) | ||||||||||||||||||||
Revenues: | ||||||||||||||||||||
Billed and Unbilled Revenue | $ | 65.0 | $ | 23.1 | $ | — | $ | — | $ | 88.1 | ||||||||||
Rate Adjustment Mechanism Revenue | 0.5 | 9.5 | — | — | 10.0 | |||||||||||||||
Other Operating Revenue – Non-Regulated | — | — | — | — | — | |||||||||||||||
Total Operating Revenues | $ | 65.5 | $ | 32.6 | $ | — | $ | — | $ | 98.1 | ||||||||||
Segment Profit (Loss) | 4.4 | (4.1 | ) | — | (0.3 | ) | — | |||||||||||||
Capital Expenditures | 10.1 | 28.5 | — | 0.4 | 39.0 | |||||||||||||||
Nine Months Ended Sept. 30, 2022 ($ millions) | ||||||||||||||||||||
Revenues: | ||||||||||||||||||||
Billed and Unbilled Revenue | $ | 226.7 | $ | 190.6 | $ | — | $ | — | $ | 417.3 | ||||||||||
Rate Adjustment Mechanism Revenue | (7.5 | ) | (8.1 | ) | — | — | (15.6 | ) | ||||||||||||
Other Operating Revenue – Non-Regulated | — | — | — | — | — | |||||||||||||||
Total Operating Revenues | $ | 219.2 | $ | 182.5 | $ | — | $ | — | $ | 401.7 | ||||||||||
Segment Profit (Loss) | 13.2 | 14.5 | — | (0.8 | ) | 26.9 | ||||||||||||||
Capital Expenditures | 22.5 | 59.9 | — | 0.1 | 82.5 | |||||||||||||||
Segment Assets | 590.9 | 967.5 | — | 20.5 | 1,578.9 | |||||||||||||||
Nine Months Ended Sept. 30, 2021 ($ millions) | ||||||||||||||||||||
Revenues: | ||||||||||||||||||||
Billed and Unbilled Revenue | $ | 189.1 | $ | 154.3 | $ | — | $ | — | $ | 343.4 | ||||||||||
Rate Adjustment Mechanism Revenue | (6.9 | ) | (3.0 | ) | — | — | (9.9 | ) | ||||||||||||
Other Operating Revenue – Non-Regulated | — | — | — | — | — | |||||||||||||||
Total Operating Revenues | $ | 182.2 | $ | 151.3 | $ | — | $ | — | $ | 333.5 | ||||||||||
Segment Profit | 10.7 | 12.1 | 0.1 | (1.3 | ) | 21.6 | ||||||||||||||
Capital Expenditures | 28.8 | 51.7 | — | 1.0 | 81.5 | |||||||||||||||
Segment Assets | 583.6 | 906.2 | — | 19.2 | 1,509.0 |
26
Note 4 - DEBTDebt AND FINANCING ARRANGEMENTS
Details on long-term debt at SeptemberJune 30, 2022, September2023, June 30, 20212022 and December 31, 20212022 are shown below.
(millions) |
| June 30, |
|
| December 31, |
| ||||||
| 2023 |
|
| 2022 |
|
| 2022 |
| ||||
Unitil Corporation: |
|
|
|
|
|
|
|
|
| |||
3.70% Senior Notes, Due August 1, 2026 |
| $ | 30.0 |
|
| $ | 30.0 |
|
| $ | 30.0 |
|
3.43% Senior Notes, Due December 18, 2029 |
|
| 30.0 |
|
|
| 30.0 |
|
|
| 30.0 |
|
Unitil Energy First Mortgage Bonds: |
|
|
|
|
|
|
|
|
| |||
8.49% Senior Secured Notes, Due October 14, 2024 |
|
| — |
|
|
| 1.5 |
|
|
| — |
|
6.96% Senior Secured Notes, Due September 1, 2028 |
|
| 12.0 |
|
|
| 14.0 |
|
|
| 12.0 |
|
8.00% Senior Secured Notes, Due May 1, 2031 |
|
| 12.0 |
|
|
| 13.5 |
|
|
| 13.5 |
|
6.32% Senior Secured Notes, Due September 15, 2036 |
|
| 15.0 |
|
|
| 15.0 |
|
|
| 15.0 |
|
3.58% Senior Secured Notes, Due September 15, 2040 |
|
| 27.5 |
|
|
| 27.5 |
|
|
| 27.5 |
|
4.18% Senior Secured Notes, Due November 30, 2048 |
|
| 30.0 |
|
|
| 30.0 |
|
|
| 30.0 |
|
Fitchburg: |
|
|
|
|
|
|
|
|
| |||
6.79% Senior Notes, Due October 15, 2025 |
|
| 2.0 |
|
|
| 6.0 |
|
|
| 2.0 |
|
3.52% Senior Notes, Due November 1, 2027 |
|
| 10.0 |
|
|
| 10.0 |
|
|
| 10.0 |
|
7.37% Senior Notes, Due January 15, 2029 |
|
| 7.2 |
|
|
| 8.4 |
|
|
| 8.4 |
|
5.90% Senior Notes, Due December 15, 2030 |
|
| 15.0 |
|
|
| 15.0 |
|
|
| 15.0 |
|
7.98% Senior Notes, Due June 1, 2031 |
|
| 14.0 |
|
|
| 14.0 |
|
|
| 14.0 |
|
3.78% Senior Notes, Due September 15, 2040 |
|
| 27.5 |
|
|
| 27.5 |
|
|
| 27.5 |
|
4.32% Senior Notes, Due November 1, 2047 |
|
| 15.0 |
|
|
| 15.0 |
|
|
| 15.0 |
|
Northern Utilities: |
|
|
|
|
|
|
|
|
| |||
3.52% Senior Notes, Due November 1, 2027 |
|
| 20.0 |
|
|
| 20.0 |
|
|
| 20.0 |
|
7.72% Senior Notes, Due December 3, 2038 |
|
| 50.0 |
|
|
| 50.0 |
|
|
| 50.0 |
|
3.78% Senior Notes, Due September 15, 2040 |
|
| 40.0 |
|
|
| 40.0 |
|
|
| 40.0 |
|
4.42% Senior Notes, Due October 15, 2044 |
|
| 50.0 |
|
|
| 50.0 |
|
|
| 50.0 |
|
4.32% Senior Notes, Due November 1, 2047 |
|
| 30.0 |
|
|
| 30.0 |
|
|
| 30.0 |
|
4.04% Senior Notes, Due September 12, 2049 |
|
| 40.0 |
|
|
| 40.0 |
|
|
| 40.0 |
|
Granite State: |
|
|
|
|
|
|
|
|
| |||
3.72% Senior Notes, Due November 1, 2027 |
|
| 15.0 |
|
|
| 15.0 |
|
|
| 15.0 |
|
Unitil Realty Corp.: |
|
|
|
|
|
|
|
|
| |||
2.64% Senior Secured Notes, Due December 18, 2030 |
|
| 4.1 |
|
|
| 4.4 |
|
|
| 4.2 |
|
Total Long-Term Debt |
|
| 496.3 |
|
|
| 506.8 |
|
|
| 499.1 |
|
Less: Unamortized Debt Issuance Costs |
|
| 3.2 |
|
|
| 3.5 |
|
|
| 3.3 |
|
Total Long-Term Debt, net of Unamortized Debt Issuance |
|
| 493.1 |
|
|
| 503.3 |
|
|
| 495.8 |
|
Less: Current Portion |
|
| 6.9 |
|
|
| 8.2 |
|
|
| 6.7 |
|
Total Long-term Debt, Less Current Portion |
| $ | 486.2 |
|
| $ | 495.1 |
|
| $ | 489.1 |
|
($ millions) | September 30, | December 31, | ||||||||||
2022 | 2021 | 2021 | ||||||||||
Unitil Corporation: | ||||||||||||
3.70% Senior Notes, Due August 1, 2026 | $ | 30.0 | $ | 30.0 | $ | 30.0 | ||||||
3.43% Senior Notes, Due December 18, 2029 | 30.0 | 30.0 | 30.0 | |||||||||
Unitil Energy First Mortgage Bonds: | ||||||||||||
8.49% Senior Secured Notes, Due October 14, 2024 | 1.5 | 3.0 | 1.5 | |||||||||
6.96% Senior Secured Notes, Due September 1, 2028 | 12.0 | 14.0 | 14.0 | |||||||||
8.00% Senior Secured Notes, Due May 1, 2031 | 13.5 | 15.0 | 15.0 | |||||||||
6.32% Senior Secured Notes, Due September 15, 2036 | 15.0 | 15.0 | 15.0 | |||||||||
3.58% Senior Secured Notes, Due September 15, 2040 | 27.5 | 27.5 | 27.5 | |||||||||
4.18% Senior Secured Notes, Due November 30, 2048 | 30.0 | 30.0 | 30.0 | |||||||||
Fitchburg: | ||||||||||||
6.79% Senior Notes, Due October 15, 2025 | 6.0 | 10.0 | 6.0 | |||||||||
3.52% Senior Notes, Due November 1, 2027 | 10.0 | 10.0 | 10.0 | |||||||||
7.37% Senior Notes, Due January 15, 2029 | 8.4 | 9.6 | 9.6 | |||||||||
5.90% Senior Notes, Due December 15, 2030 | 15.0 | 15.0 | 15.0 | |||||||||
7.98% Senior Notes, Due June 1, 2031 | 14.0 | 14.0 | 14.0 | |||||||||
3.78% Senior Notes, Due September 15, 2040 | 27.5 | 27.5 | 27.5 | |||||||||
4.32% Senior Notes, Due November 1, 2047 | 15.0 | 15.0 | 15.0 | |||||||||
Northern Utilities: | ||||||||||||
3.52% Senior Notes, Due November 1, 2027 | 20.0 | 20.0 | 20.0 | |||||||||
7.72% Senior Notes, Due December 3, 2038 | 50.0 | 50.0 | 50.0 | |||||||||
3.78% Senior Notes, Due September 15, 2040 | 40.0 | 40.0 | 40.0 | |||||||||
4.42% Senior Notes, Due October 15, 2044 | 50.0 | 50.0 | 50.0 | |||||||||
4.32% Senior Notes, Due November 1, 2047 | 30.0 | 30.0 | 30.0 | |||||||||
4.04% Senior Notes, Due September 12, 2049 | 40.0 | 40.0 | 40.0 | |||||||||
Granite State: | ||||||||||||
3.72% Senior Notes, Due November 1, 2027 | 15.0 | 15.0 | 15.0 | |||||||||
Unitil Realty Corp.: | ||||||||||||
2.64% Senior Secured Notes, Due December 18, 2030 | 4.3 | 4.5 | 4.5 | |||||||||
Total Long-Term Debt | 504.7 | 515.1 | 509.6 | |||||||||
Less: Unamortized Debt Issuance Costs | 3.4 | 3.7 | 3.6 | |||||||||
Total Long-Term Debt, net of Unamortized Debt Issuance Costs | 501.3 | 511.4 | 506.0 | |||||||||
Less: Current Portion | 8.2 | 10.1 | 8.2 | |||||||||
Total Long-term Debt, Less Current Portion | $ | 493.1 | $ | 501.3 | $ | 497.8 | ||||||
Fair Value of Long-Term Debt
(millions) |
| June 30, |
|
| December 31, |
| ||||||
| 2023 |
|
| 2022 |
|
| 2022 |
| ||||
Estimated Fair Value of Long-Term Debt |
| $ | 446.2 |
|
| $ | 477.3 |
|
| $ | 455.3 |
|
($ millions) | September 30, | December 31, | ||||||||||
2022 | 2021 | 2021 | ||||||||||
Estimated Fair Value of Long-Term Debt | $ | 458.3 | $ | 598.2 | $ | 584.9 | ||||||
On September 29, 2022, the Company entered into a Third Amended and Restated Credit Agreement with a syndicate of lenders (collectively, the “Credit"Credit Facility”), which amended and restated in its entirety the prior credit facility. Unitil may borrow under the Credit Facility until September 29, 2027, subject to two
27
terminates and all amounts outstanding thereunder are due and payable on September 29, 2027, subject to the potential extension discussed in the prior sentence.
The Credit Facility has a borrowing limit of $200$200 million, which includes a $25$25 million sublimit for the issuance of standby letters of credit. Unitil may increase the borrowing limit under the Credit Facility by up to $75$75 million under certain circumstances. The Credit Facility generally provides Unitil with the ability to elect that borrowings under the Credit Facility bear interest under several options, including a daily fluctuating rate equal to (a) the forward-looking secured overnight financing rate (as administered by the Federal Reserve Bank of New York) term rate with a term equivalent to one month beginning on that date, plus (b) 0.1000%0.1000%, plus (c) a margin of 1.125%1.125% to 1.375%1.375% (based on Unitil’s credit rating). As of the close of business on September 29, 2022, Unitil’s aggregate borrowings under the Credit Facility were approximately $65.5 million at an interest rate per annum of approximately 4.272% (which interest rate was based on the lowest end of the margin range discussed above).
The Company usesutilizes the Credit Facility for cash management purposes related to its short-term operating activities. Total gross borrowings were $214.0$193.6 million for the ninesix months ended SeptemberJune 30, 2022.2023. Total gross repayments were $206.1$177.9 million for the ninesix months ended SeptemberJune 30, 2022. 2023. The following table details the borrowing limits, amounts outstanding and amounts available under the Credit Facility as of SeptemberJune 30, 2023 and December 31, 2022 and for the prior credit facility as of September 31, 2021 and December 31,June 30, 2022:
| Revolving Credit Facility (millions) |
| ||||||||||
| June 30, |
|
| December 31, |
| |||||||
| 2023 |
|
| 2022 |
|
| 2022 |
| ||||
Limit |
| $ | 200.0 |
|
| $ | 120.0 |
|
| $ | 200.0 |
|
Short-Term Borrowings Outstanding |
|
| 131.7 |
|
|
| 46.2 |
|
|
| 116.0 |
|
Available |
| $ | 68.3 |
|
| $ | 73.8 |
|
| $ | 84.0 |
|
Revolving Credit Facility ($ millions) | ||||||||||||
September 30, | December 31, | |||||||||||
2022 | 2021 | 2021 | ||||||||||
Limit | �� | $ | 200.0 | $ | 120.0 | $ | 120.0 | |||||
Short-Term Borrowings Outstanding | 72.0 | 30.5 | 64.1 | |||||||||
Available | $ | 128.0 | $ | 89.5 | $ | 55.9 | ||||||
The Credit Facility contains customary terms and conditions for credit facilities of this type, including affirmative and negative covenants. There are restrictions on, among other things, Unitil’s and its subsidiaries’ ability to incur liens or incur indebtedness, and restrictions on Unitil’s ability to merge or consolidate with another entity or change its line of business. The affirmative and negative covenants under the Credit Facility shall apply to Unitil until the Credit Facility terminates and all amounts borrowed under 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 Unitil’s Funded Debt to Capitalization (as each term is defined in the Credit Facility) cannot exceed 65%65% tested on a quarterly basis.basis. At SeptemberJune 30, 2022, September2023, June 30, 20212022 and December 31, 2021,2022, the Company was in compliance with the covenants contained in the Credit Facility or the prior credit facility, as applicable, in effect on those dates.
The average interest rates on all short-term borrowings and intercompany money pool transactions were 3.6%6.3% and 1.2%2.1% for the three months ended SeptemberJune 30, 20222023 and SeptemberJune 30, 2021,2022, respectively. The average interest rates on all short-term borrowings and intercompany money pool transactions were 2.4%6.1% and 1.2%1.7% for the ninesix months ended SeptemberJune 30, 20222023 and SeptemberJune 30, 2021,2022, respectively. The average interest rate on all short-term borrowings for the twelve months ended December 31, 20212022 was 1.2%3.3%.
On July 6, 2023, Fitchburg issued $12.0 million of Notes due July 6, 2033 at 5.70% and its utility subsidiaries,$13.0 million of Notes due July 6, 2053 at 5.96%. Fitchburg Unitil Energy, Northern Utilities,used the net proceeds from these offerings to refinance existing debt and Granite State currently are rated “BBB+” by Standard & Poor’s Ratings Services. Unitil Corporation and Granite State currently are rated “Baa2”, and Fitchburg, Unitil Energy and Northern Utilities are currently rated “Baa1” by Moody’s Investors Services.
Northern Utilities enters into asset management agreements under which Northern Utilities releases certain gas pipeline and storage assets, sells to an asset manager and subsequently repurchases the gas over the course of the gas heating season at the same price at which it sold the gas to the asset manager. There was $23.4 million, $9.7 million and $8.3$8.7 million of natural gas storage inventory and corresponding obligations at SeptemberJune 30, 2022, September 30, 2021 and December 31, 2021, respectively,2023 related to these asset management agreements. The amount of natural gas inventory released in September 2022 andJune 30, 2023, which was payable in October 2022 is $0.3 million and is recorded in Accounts Payable at September 30, 2022. The amount of gas released in September 2021 and payable in October 2021July 2023, was $0.1less than $0.1 million and was recorded in Accounts Payable at SeptemberJune 30, 2021. The amount of gas released in December 2021 and payable in January 2022 was $1.6 million and was recorded in Accounts Payable at December 31, 2021.
Guarantees
The Company provides limited guarantees on certain energy and gas storage management contracts entered into by the distribution utilities. The Company’s policy is to limit the duration of these guarantees. As of SeptemberJune 30, 2022,2023 there were approximately $1.6 million ofno guarantees outstanding with a duration less than one year.
Leases
Unitil’s subsidiaries lease some of their vehicles, machinery and office equipment under both capital and operating lease arrangements.
Total rental expense under operating leases charged to operations for the three months ended SeptemberJune 30, 2023 and June 30, 2022 and 2021 amounted to $0.5$0.5 million and $0.5$0.5 million, respectively. Total rental expense under operating leases charged to operations for the ninesix months ended SeptemberJune 30, 2023 and June 30, 2022 and 2021 amounted to $1.4$1.0 million and $1.4$0.9 million, respectively.
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The balance sheet classification of the Company’s lease obligations was as follows:
| June 30, |
|
| December 31, |
| |||||||
Lease Obligations (millions) |
| 2023 |
|
| 2022 |
|
| 2022 |
| |||
Operating Lease Obligations: |
|
|
|
|
|
|
|
|
| |||
Other Current Liabilities (current portion) |
| $ | 1.7 |
|
| $ | 1.5 |
|
| $ | 1.5 |
|
Other Noncurrent Liabilities (long-term portion) |
|
| 3.5 |
|
|
| 2.9 |
|
|
| 2.8 |
|
Total Operating Lease Obligations |
|
| 5.2 |
|
|
| 4.4 |
|
|
| 4.3 |
|
Capital Lease Obligations: |
|
|
|
|
|
|
|
|
| |||
Other Current Liabilities (current portion) |
|
| 0.1 |
|
|
| 0.1 |
|
|
| 0.1 |
|
Other Noncurrent Liabilities (long-term portion) |
|
| 0.3 |
|
|
| 0.1 |
|
|
| 0.1 |
|
Total Capital Lease Obligations |
|
| 0.4 |
|
|
| 0.2 |
|
|
| 0.2 |
|
Total Lease Obligations |
| $ | 5.6 |
|
| $ | 4.6 |
|
| $ | 4.5 |
|
September 30, | December 31, | |||||||||||
Lease Obligations ($ millions) | 2022 | 2021 | 2021 | |||||||||
Operating Lease Obligations: | ||||||||||||
Other Current Liabilities (current portion) | $ | 1.6 | $ | 1.6 | $ | 1.6 | ||||||
Other Noncurrent Liabilities (long-term portion) | 3.0 | 3.5 | 3.1 | |||||||||
Total Operating Lease Obligations | $ | 4.6 | $ | 5.1 | $ | 4.7 | ||||||
Capital Lease Obligations: | ||||||||||||
Other Current Liabilities (current portion) | $ | 0.1 | $ | 0.2 | $ | 0.1 | ||||||
Other Noncurrent Liabilities (long-term portion) | 0.1 | 0.2 | 0.2 | |||||||||
Total Capital Lease Obligations | $ | 0.2 | $ | 0.4 | $ | 0.3 | ||||||
Total Lease Obligations | $ | 4.8 | $ | 5.5 | $ | 5.0 | ||||||
Cash paid for amounts included in the measurement of operating lease obligations for the ninesix months ended SeptemberJune 30, 2023 and June 30, 2022 and September 30, 2021 was $1.4$1.0 million and $1.4$0.9 million and was included in Cash Provided by Operating Activities on the Consolidated Statements of Cash Flows.
Assets under capital leases amounted to approximately $0.6$0.8 million, $0.7$0.7 million and $0.7$0.6 million as of SeptemberJune 30, 2022, September2023, June 30, 20212022 and December 31, 2021,2022, respectively, less accumulated amortization of $0.3$0.4 million, $0.3$0.4 million and $0.3$0.4 million, respectively and are included in Net Utility Plant on the Company’s Consolidated Balance Sheets.
The following table is a schedule of future operating lease payment obligations and future minimum lease payments under capital leases as of Lease Payments ($000’s) Operating Capital Year Ending December 31, Leases Leases Rest of 2023 $ 1,040 $ 71 2024 1,761 118 2025 1,189 86 2026 890 74 2027 613 70 2028 - 2032 238 2 Total Payments 5,731 421 Less: Interest 484 24 Amount of Lease Obligations Recorded on Consolidated $ 5,247 $ 397 SeptemberJune 30, 2022.2023. The payments for operating leases consist of $1.6$1.7 million of current operating lease obligations, which are included in Other Current Liabilities and $3.0$3.5 million of noncurrent operating lease obligations, which are included in Other Noncurrent Liabilities, on the Company’s Consolidated Balance Sheets as of SeptemberJune 30, 2022.2023. The payments for capital leases consist of $0.1$0.1 million of current capital lease obligations, which are included in Other Current Liabilities and $0.1$0.3 million of noncurrent capital lease obligations, which are included in Other Noncurrent Liabilities, on the Company’s Consolidated Balance Sheets as ofSeptember June 30, 2023.
Balance Sheets
Lease Payments ($000’s) Year Ending December 31, | Operating Leases | Capital Leases | ||||||
Rest of 2022 | $ | 457 | $ | 36 | ||||
2023 | 1,655 | 114 | ||||||
2024 | 1,325 | 59 | ||||||
2025 | 759 | 26 | ||||||
2026 | 456 | 6 | ||||||
2027-2031 | 291 | 3 | ||||||
Total Payments | 4,943 | 244 | ||||||
Less: Interest | 329 | 9 | ||||||
Amount of Lease Obligations Recorded on Consolidated Balance Sheets | $ | 4,614 | $ | 235 | ||||
Operating lease obligations are based on the net present value of the remaining lease payments over the remaining lease term. In determining the present value of lease payments, the Company used the interest rate stated in each lease agreement. As of SeptemberJune 30, 2022,2023, the weighted average remaining lease term is 3.43.7 years and the weighted average operating discount rate used to determine the operating lease obligations was 3.7%4.5%. As of SeptemberJune 30, 2021,2022, the weighted average remaining lease term was 3.73.3 years and the weighted average operating discount rate used to determine the operating lease obligations was 4.0%3.6%.
Note 5 – COMMON STOCK AND PREFERRED STOCK
Common Stock
The Company’s common stock trades on the New York Stock Exchange under the symbol, “UTL.”
The
29
Dividend Reinvestment and Stock Purchase Plan -
Stock Plan -
The maximum number of shares available for awards to participants under the Stock Plan is 677,500.677,500. The maximum number of shares that may be awarded in any one calendar year to any one participant is 20,000.20,000. In the event of any changecertain changes in capitalization of the Company, the Compensation Committee is authorized to make an equitable adjustment to the number and kind of shares of common stock that may be delivered under the Stock Plan and, in addition, may authorize and make an equitable adjustment to the Stock Plan’s annual individual award limit.
Time Restricted Shares
Outstanding awards of Time Restricted Shares fully vest over a period of four years at a rate of 25%25% each year. During the vesting period, dividends on Time Restricted Shares underlying the award may be credited to a participant’s account. The Company may deduct or withhold, or require a participant to remit to the Company, an amount sufficient to satisfy any taxes required by federal, state, or local law or regulation to be withheld with respect to any taxable event arising in connection with an award. For purposes of compensation expense, Restricted Shares vest immediately upon a participant becoming eligible for retirement, as defined in the Stock Plan.
Prior to the end of the vesting period, the restricted sharesTime Restricted Shares are subject to forfeiture if the participant ceases to be employed by the Company other than due to the participant’s death.
On January 25, 2022, 36,77024, 2023, 18,770 Time Restricted Shares were issued in conjunction with the Stock Plan with an aggregate market value at the date of issuance of approximately $1.7$1.0 million. There were 72,42864,243 and 57,408shares Time Restricted Shares under the Stock Plan as of SeptemberJune 30, 20222023 and 2021,2022, respectively. The weighted average grant date fair value of these shares was $47.46$48.02 and $49.61,$47.44 per share, respectively. The
Performance Restricted Shares
Outstanding awards of Performance Restricted Shares vest after a performance period of three years based on the attainment of certain goals set by the Compensation Committee at the beginning of the performance period. If goals are met, awards of Performance Restricted Shares may vest fully; if goals are exceeded, awards of Performance Restricted Shares may vest fully and additional shares of common stock may be awarded; if goals are not met, a portion of the Performance Restricted Shares may vest and/or all or a portion of the Performance Restricted Shares may be forfeited. During the performance period, dividends on Performance Restricted Shares underlying the award may be credited to a participant’s account. The Company may deduct or withhold, or require a participant to remit to the Company, an amount sufficient to satisfy any taxes required by federal, state, or local law or regulation to be withheld with respect to any taxable event arising in connection with an award.
Prior to the end of the performance period, the Performance Restricted Shares are subject to forfeiture if the participant ceases to be employed by the Company other than due to the participant’s death, disability or retirement. Initial awards of Performance Restricted Shares were granted January 24, 2023. No Performance Restricted Shares were awarded in 2022. On January 24, 2023, there were 18,770 Performance Restricted Shares issued under the Stock Plan with an aggregate market value of $1.0 million. There were 18,770 non-vested Performance Restricted Shares under the Stock Plan as of June 30, 2023. The weighted average grant date fair value of these shares was $51.83 per share. The compensation expense associated with the issuance of Performance Restricted Shares under the Stock Plan is being recognized over the vesting period and was $0.2 million for the six months ended June 30, 2023. At June 30, 2023, there was approximately $1.0 million of total unrecognized compensation cost for Performance Restricted Shares under the Stock Plan which is expected to be recognized over approximately 2.5 years. During the six months ended June 30, 2023 there were zero
30
Performance Restricted Shares forfeited and zero Performance Restricted Shares cancelled under the Stock Plan.
Restricted Stock Units
Non-management
Restricted Stock Units (Equity Portion) |
|
|
|
|
|
| ||
| Units |
|
| Weighted |
| |||
Restricted Stock Units as of December 31, 2022 |
|
| 43,799 |
|
| $ | 40.17 |
|
Restricted Stock Units Granted |
|
| — |
|
| $ | — |
|
Dividend Equivalents Earned |
|
| 669 |
|
| $ | 53.24 |
|
Restricted Stock Units Settled |
|
| — |
|
| $ | — |
|
Restricted Stock Units as of June 30, 2023 |
|
| 44,468 |
|
| $ | 40.37 |
|
Restricted Stock Units (Equity Portion) | ||||||||
Units | Weighted Average Stock Price | |||||||
Restricted Stock Units as of December 31, 2021 | 49,182 | $ | 41.67 | |||||
Restricted Stock Units Granted | — | — | ||||||
Dividend Equivalents Earned | 932 | $ | 53.60 | |||||
Restricted Stock Units Settled | (10,236 | ) | $ | 51.28 | ||||
Restricted Stock Units as of September 30, 2022 | 39,878 | $ | 39.48 | |||||
There were 44,22439,595 Restricted Stock Units outstanding as of SeptemberJune 30, 20212022 with a weighted average stock price of $41.49.$39.37. Included in Other Noncurrent Liabilities on the Company’s Consolidated Balance Sheets as of SeptemberJune 30, 2022, September2023, June 30, 20212022 and December 31, 20212022 is $0.8$1.0 million, $0.8$1.0 million and $1.0$1.0 million, respectively, representing the fair value of liabilities associated with the portion of fully vested RSUs that will be settled in cash.
Preferred Stock
There were $0.2$0.2 million, or 1,8611,727 shares, of Unitil Energy’s 6.00%6.00% Series Preferred Stock outstanding as of SeptemberJune 30, 2022, September2023. There were $0.2 million, or 1,861 shares, Unitil Energy’s 6.00% Series Preferred Stock outstanding as of June 30, 20212022 and December 31, 2021.2022. There were less than $0.1$0.1 million of total dividends declared on Preferred Stock in each of the three month periods ended SeptemberJune 30, 2023 and June 30, 2022, and September 30, 2021, respectively.
note 6 - REGULATORY MATTERS
Unitil’s Regulatory matters are described in Note 8 TO THE FINANCIAL STATEMENTS IN ITEMto the Financial Statements in Item 8 OF PARTof Part II OF UNITIL CORPORATION’S FORMFOR DECEMBER for December 31, 2021 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 1, 2022.
Rate Case Activity
Northern Utilities - Base Rates - Maine
Northern Utilities - Targeted Infrastructure Replacement Adjustment (TIRA) - Maine
Northern Utilities - Base Rates - New Hampshire
31
the Settlement Agreement, in addition to authorizing an increase to permanent distribution rates of $6.1$6.1 million, effective August 1, 2022, the Order (1) approves a revenue decoupling mechanism and (2) allows for a step adjustment effective September 1, 2022 covering the additional revenue requirement resulting from changes in Net Plant in Service associated with On June 8, 2022, the Company filed for its first step increase of approximately $1.6 million of annual revenue, for rates effective as of September 1, 2022, to recover eligible 2021 capital investments. On August 31, 2022, the NHPUC approved the Company’s filing. The increase in permanent rates will be reconciled back to October 1, 2021, the effective date of temporary rates previously approved in this docket. This distribution base rate case reflects the Company’s operating costs and investments in utility plant for a test year ended December 31, 2020 as adjusted for known and measurable changes. The Order provides for a return on equity of 9.3%9.3% and a capital structure reflecting 52%52% equity and 48%48% long-term debt. In light of the Step Adjustment, the Company shall not file a distribution rate case with the Commission before January 1, 2024 (the“Stay-OutPeriod”) Period). However, during the term of the$200,000.
Unitil Energy - Base Rates
Fitchburg - Base Rates - Electric
On April 17, 2020, the MDPU approved a settlement agreement entered into by the Company and the Massachusetts Office of the Attorney General providing for a distribution increase of $1.1$1.1 million, effective November 1, 2020. The Company’s subsequent Compliance Filing reflected an adjusted distribution increase of $0.9$0.9 million, a decrease of $0.2$0.2 million from the original settlement amount.amount due to the finalization of actual rate case expenses. On May 21, 2020, the MDPU approved the Company’s Compliance Filing. The agreement provides for a Return on Equity of 9.7%9.7% and a capital structure reflecting 52.45%52.45% equity and 47.55%47.55% long-term debt. Under the agreement, the Company will not increase or redesign base distribution rates to become effective prior to November 1, 2023, though the Company may seek cost recovery for certain exogenous events that meet a revenue threshold of $0.1$0.1 million. The agreement also provides for the implementation of a major storm reserve fund, whereby the Company may recover the costs of restoration for qualifying storm events. In addition, the agreement provides for the extension of the annual capital cost recovery mechanism, modified to allow the recovery of property tax on the cumulative net capital expenditures.
On September 22, 2022, Fitchburg filed a petition with the MDPU to adjust its base distribution rates by $0.7
32
incurred from July 2021 through December 2022 through a reconciling mechanism over a 24 month period, beginning January 1, 2023. The Massachusetts Department of Revenue has determined that the “net book value” or “NBV” of utility plant is no longer the basis of valuation for utility property. Most of the municipalities that levy property taxes on UnitilFitchburg have adopted a hybrid valuation approach that increases property tax expense over and above what it would be if NBV was used as the basis of valuation. The change in valuation is a regulatory change that is outside the Company’s control and it uniquely affects the electric and gas industries, thus it is an exogenous event. As of SeptemberOn December 30, 2022, the Company hasMDPU approved the Company’s request to adjust its base distribution rates effective January 1, 2023 and to recover deferred $1.5costs of $1.1 million related this exogenous eventincurred from July 2021 through December 2022 through a reconciling mechanism over a 24 month period, also beginning January 1, 2023.
On June 30, 2023, Fitchburg filed a notice of intent to file a base rate case with the MDPU on or after July 31, 2023 to implement a general increase in rates and believes recoverymaking other changes effective July 1, 2024. Under MDPU precedent, a utility company is required to provide no less than a 30 day advance notice of this amount is probable. This matter remains pending.
Fitchburg - Base Rates - Gas
On February 28, 2020, the MDPU approved a settlement agreement between the Company and the Massachusetts Office of the Attorney General. The agreement provides for an annual distribution revenue increase of $4.6$4.6 million to be phased in over two years:years: (1) an increase of $3.7$3.7 million, which became effective on March 1, 2020; and (2) an increase of $0.9$0.9 million, which became effective on March 1, 2021. Under the agreement, the Company will not increase or redesign base distribution rates to become effective prior to March 1, 2023, though the Company may seek cost recovery for certain exogenous events that meet a revenue effect threshold of $40,000.$40,000. The agreement provides for a Return on Equity of 9.7%9.7% and a capital structure reflecting 52.45%52.45% equity and 47.55%47.55% long-term debt.
On June 30, 2023, Fitchburg filed a notice of intent to file a base rate case with the MDPU on or after July 31, 2023 to implement a general increase in rates and making other changes effective July 1, 2024. Under MDPU precedent, a utility company is required to provide no less than a 30 day advance notice of its intent to file for a base rate increase.
Fitchburg - Gas System Enhancement Program
Granite State - Base Rates
On August 24, 2021, the FERC accepted Granite State’s first limited Section 4 rate adjustment pursuant to the Settlement Agreement, for an annual revenue increase of $0.1$0.1 million, effective September 1, 2021. On July 28,August 19, 2022, the FERC accepted Granite State filed itsState’s second limited Section 4 rate adjustment pursuant to the Settlement Agreement, for an annual revenue increase of $0.3$0.3 million,
33
effective September 1, 2022. On August 19, 2022,July 27, 2023, Granite State filed its third and final limited Section 4 rate adjustment pursuant to the FERC approved this filing.
Other Matters
Unitil Energy - Proposal to Construct Utility-Scale Solar Facility
Fitchburg - Grid Modernization
On April 24, 2023, Fitchburg submitted its 2022 Grid Modernization Plan Annual Report to the MDPU. On May 31, 2023, the MDPU issued an Order on Fitchburg’s 2023 GMF filing, allowing proposed rates to take effect on June 1, 2023 subject to the further investigation and reconciliation.
Fitchburg - Grid Modernization Cost Recovery Factor
Fitchburg - Investigation into the role of gas LDCs to achieve Commonwealth 2050 climate goals -
34
Fitchburg Unitil Energy and Northern Utilities are active participants in these proceedings, and are in full compliance with all regulatory orders governing serviceshut-offmoratoriums and other customer service protection measures. – Electric Vehicle (EV) Proceeding – On December 31, 2020, in docket DPU20-58,which, among other provisions, allowsapproving Fitchburg’s five-year EV program with a $1.0 million budget consisting of: (1) public infrastructure offering ($0.5 million); (2) Electric Vehicle Supply Equipment (EVSE) incentives for residential segment ($0.3 million); and (3) marketing and outreach ($0.2 million). The Company may shift spending between program segments and between years over the utilityfive-year term of its program, subject to a 15 percent cap. Any spending above the approved EV program budget or above the 15 percent cap for each program segment is not eligible for targeted cost recovery through the GMF and, instead, may be recovered in a base distribution rate proceeding subsequent to a prudency finding by the MDPU. Further, the MDPU has convened an EV stakeholder process to finalize EV program performance metrics. On April 3, 2023, the electric companies filed comments on the MDPU’s proposed metrics. Once performance metrics are finalized, the MDPU will require the electric companies to deferdevelop a joint state-wide program evaluation plan for future recovery of bad debt expense in excess of a baseline. On July 7, 2021,MDPU approval and stakeholder input and will determine next steps at that time. The MDPU directs the NHPUC issued an order which declinedCompanies to authorize New Hampshire’s rate-regulated utilities’ establishment of a regulatory asset for incremental bad debt or waived late payment fees related to theCOVID-19pandemic. The NHPUC statedsubmit annual reports that document their performance and these costsreports will be addressed indue on or before May 15th of each utility’s nextyear. The first EV annual report is due May 15, 2024. The Company shall file annual rate case. On September 7, 2021, the NHPUC clarified its July 7 Order, determining that it has not foreclosed rate-regulated utilities from utilizing accounting mechanisms to defer costs in order to seek recovery in a future rate proceeding,adjustment and that Unitil Energy’s and Northern Utilities’ respective pending rate cases are the appropriate venue to address incremental bad debt and/reconciliation filings on or waived late payment fees resulting from theCOVID-19public health emergency orders and directives. Consistentbefore April 15, with the authorization provided in that Order, the Settling Parties agreed in Unitil Energy’s rate case that Unitil Energy be permitted to recover $386,957 inCOVID-19related costs relating to expenses from calendar year 2020 by including those costs in its next Schedule EDC through the External Delivery Charge (EDC), a uniform rate per kWh, inrates effective June 1. The MDPU accepted the Company’s next scheduled EDC rate change effective AugustDemand Charge Alternative proposal and directed implementation within six months. The Demand Charge Alternative is offered for a ten-year period beginning July 1, 2022. This provision was approved by the NHPUC Order issued May 3, 2022 on the rate case Settlement Agreement. In Northern Utilities case, the Settling Parties agreed that Northern Utilities shall be permitted2023 with tiered rates to recover $68,061 inCOVID-19related costs relating to expenses from calendar year 2020 by including those costs in its Regulatory Assessment Adjustment Mechanism (RAAM), a uniform rate per therm, inseparately-metered EV general delivery service customers. The MDPU accepted the Company’s next scheduled RAAMproposed residential EV TOU rate, change effective NovemberApril 1, 2022. This provision was approved by the NHPUC Order, issued July 20, 2022, on the rate case Settlement Agreement.
Northern Utilities / Granite State - Firm Capacity Contract
Reconciliation Filings
Fitchburg - Massachusetts Request for Proposals (RFPs)
The EDCs issued the RFP for Section 83D Long-Term Contracts for Qualified Clean Energy Projects in March 2017, and after selection of final projects and negotiation, final contractspower purchase agreements (PPAs) for 9,554,940 MWh of Qualified Clean Energyhydroelectric generation and associated Environmental Attributesenvironmental attributes from Hydro-Quebec Energy Services (U.S.), Inc. for hydroelectric generation were filed in July 2018 for approval by the MDPU. On June 25, 2019, the MDPU approved the power purchase agreements,PPAs, including the EDCs’ proposal to sell the energy procured under the contract into thedetermined thatapproved the EDCs’ request for remuneration equal to 2.75%2.75% of the contract payments, is reasonable and in the public interest and approvedas well as the EDCs’ proposal to amend their respective tariffs to include the recovery ofrecover costs associated with the contracts. On January 13, 2023, NECEC Transmission LLC (“NECEC”), the company with which Fitchburg and the other EDCs entered into transmission service agreements (“TSAs”) for the delivery of the Hydro-Quebec energy, provided a letter to the EDCs purporting to give notice of a “change in applicable law” related to a Maine ballot initiative and requesting a negotiated amendment to the TSAs. On June 27, 2023, NECEC sent a letter to the EDCs seeking schedule relief also in accordance with their “change in law” determination. The Massachusetts Supreme Judicial Court upheld the MDPU’s approval in an opinion dated September 3, 2020. The Company believes the power purchase obligations under these long-term contracts will have a material effect on the contractual obligations of Fitchburg, once certain conditions and contingenciesEDCs are met.
The EDCs issued thean initial RFP pursuant to Section 83C for Long-Term Contracts for Offshore Wind Energy Generation in June 2017. The EDCs selected an 800 MW project submitted by Vineyard Wind in May 2018, contracts were signed in July 2018 and onOn July 23, 2018, the EDCs, including Fitchburg, filed two long-term contracts with Vineyard Wind, each for 400 MW of offshore wind energy generation, withfor approval by the MDPU for approval.MDPU. On April 12, 2019, the MDPU approved the offshore wind energy generation power purchase agreements,PPAs, including the EDCs’ proposal to sell the energy procured under the contract into theThe MDPU also determined that the EDCs’ request for remuneration equal to 2.75% of the
35
wind energy generation, was made onin February 10, 2020. On November 5, 2020, the MDPU approved the Offshore Wind Energy Generation power purchase agreements. Thesecond RFP PPAs. In both cases, the MDPU also determined thatapproved the EDCs’ request for remuneration equal to 2.75% is reasonable and in2.75% of the public interest. The Company believescontract payments, as well as the power purchase obligations under these long-term contracts will have a material effect onEDCs’ proposal to recover costs associated with the contractual obligations of Fitchburg, once certain conditions and contingencies are met.
In accordance with the requirement of Chapter 227 of the Acts of 2018, An“An Act to Advance Clean Energy, signed August 9, 2018,Energy” (2018) the Massachusetts Department of Energy Resources (MDOER) prepared a report on the necessity, benefits and costs of requiring(DOER) recommended that the EDCs solicit up to competitively conduct1,600 MW in additional offshore wind generation RFPsin 2022 and 2024. On May 7, 2021, the EDCs issued a third RFP for up to an additional 1,600 MW. The MDOER filed its report with the Legislature in May, 2019, recommending that, “the EDCs should proceed with additional offshore wind solicitations for up to 1,600 MW of offshore wind in 2022 and 2024 and only enter into contracts if found to be cost-effective.” On March 10, 2021, Fitchburg, along with the other EDCs, filed a petition with the MDPU for approval of a proposed timetable and method of solicitation and execution of long-term contracts for up to an additional 1,600 MW of off shore wind generation. On May 5, 2021,25, 2022, the DPU approved the proposed timetableEDCs sought approval of PPAs with Commonwealth Wind for 1,200 MW and methodwith South Coast Wind (formerly Mayflower Wind) for the solicitation, and the RFP was issued on May 7, 2021.400 MW. On December 17, 2021,16, 2022, Commonwealth Wind filed a motion requesting that the MDPU dismiss proceedings related to the approval of its contract, arguing that, due to various economic conditions, its contracts with the EDCs selected a 1,600 MW portfoliowould no longer facilitate the financing of offshore wind generation that includesenergy generation. On December 30, 2022, the MDPU denied Commonwealth’s motion and approved the PPAs. The MDPU also approved the EDCs’ request for remuneration equal to 2.25% as reasonable and in the public interest. On January 19, 2023, Commonwealth Wind filed a 1,200 MW projectPetition for Appeal with the Massachusetts Supreme Judicial Court seeking to set aside and vacate the MDPU’s Order approving the PPAs. This appeal is pending. On the same day, Mayflower Wind submitted by Vineyard Wind and a 400 MW project submitted by Mayflower Wind. Contract negotiations were completed in early April 2022 and the contracts were submitted for approvalmotion to the MDPU requesting that it extend the period for filing an appeal (which otherwise expired on May 25, 2022. This matter remains pending.
In 2021, to increase the aggregate amount ofMA legislature increased the total solicitation target (including future solicitations) for offshore wind capacity to be procuredenergy generation to 5,600 MW not later thanby June 30, 2027. After considering the two approved offshore wind contracts of 800 MW each and the most recent selection of 1,600 MW there is another2027; an additional 2,400 MW of offshore wind capacity remains to be procured in the future.
Section 82 of the Acts of 2022 authorizes DOER to coordinate with other New England states to consider projects for long-term clean energy generation, transmission or capacity for the benefit of residents of the Commonwealth and the region. If DOER, in consultation with the Attorney General, determines that a project would satisfy all of the benefits listed in Section 82, then pursuant to Section 82 the EDCs shall enter into cost-effective long-term contracts with a maximum term of twenty years upon such a finding. On October 26, 2022, the Maine PUC announced its selection of a Transmission Project and a Generation Project to promote renewable energy development in northern Maine. On December 30, 2022, the DOER made a positive determination that the selected projects would have benefits to Massachusetts and the region and Massachusetts would procure up to 40% of the projects. Fitchburg is in the process of evaluating potential contractual commitments under Section 82. Negotiations for Section 82 have not yet begun.
FERC Transmission Formula Rate Proceedings
Legal Proceedings
The Company is involved in legal and administrative proceedings and claims of various types, including those which arise in the ordinary course of business. The Company believes, based upon information furnished by counsel and others, that the ultimate resolution of these claims will not have a material effect on its financial position, operating results or cash flows.
36
note 7 – ENVIRONMENTALeNVIRONMENTAL MATTERS
Unitil’s Environmental matters are described in Note 8 TO THE FINANCIAL STATEMENTS IN ITEMto the Financial Statements in Item 8 OF PARTof Part II OF UNITIL CORPORATION’S FORMFOR DECEMBER for December 31, 2021 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 1, 2022.
The Company’s past and present operations include activities that are generally subject to extensive and complex federal and state environmental laws and regulations. The Company is in material compliance with applicable environmental and safety laws and regulations and, as of SeptemberJune 30, 2022,2023, has not identified any material losses reasonably likely to be incurred in excess of recorded amounts. However, the Company cannot assure that significant costs and liabilities will not be incurred in the future. It is possible that other developments, such as increasingly stringent federal, state or local environmental laws and regulations could result in increased environmental compliance costs. Based on its current assessment of its environmental responsibilities, existing legal requirements and regulatory policies, the Company does not believe that these environmental costs will have a material adverse effect on the Company’s consolidated financial position or results of operations.
Northern Utilities Manufactured Gas Plant Sites
Northern Utilities has worked with the Maine Department of Environmental Protection and New Hampshire Department of Environmental Services (NH DES) to address environmental concerns with these sites. Northern Utilities or others have completed remediation activities at all sites; however, on site monitoring continues at several sites which may result in future remedial actions as directed by the applicable regulatory agency.
In July 2019, the NH DES requested that Northern Utilities review modeled expectations for groundwater contaminants against observed data at the Rochester site. In June 2020, the NH DES coupled the submittal of the review to a proposed extension of the gas distribution system by Northern Utilities. Northern Utilities submitted the review in January 2022, and the NH DES directed that soil treatability studies as part of a Remedial Action Plan (RAP) be developed in June 2022. The Company anticipates submittal of thesesubmitted the studies and RAPlater to the NH DES infourth quarter of 2022.agency; the RAP included three remediation alternatives for consideration by NH DES. In anticipation of the probable NH DES acceptanceapproval of one of the RAPremediation alternatives and subsequent request for project design, the Company has accrued $0.8$2.5 million for estimated costs to complete the remediation at the Rochester site, which is included in Environmental Obligations.
The NHPUC and MPUC have approved regulatory mechanisms for the recovery of MGP environmental costs. For Northern Utilities’ New Hampshire division, the NHPUC has approved the recovery of MGP environmental costs over succeeding seven-year periods. For Northern Utilities’ Maine division, the MPUC has authorized the recovery of environmental remediation costs over succeeding five-year periods.
The Environmental Obligations table shows theincludes amounts accrued for Northern Utilities related to estimated future cleanup costs associated with Northern Utilities’ environmental remediation obligations for former MGP sites. Corresponding Regulatory Assets were recorded to reflect that the future recovery of these environmental remediation costs is expected based on regulatory precedent and established practices.
Fitchburg’s Manufactured Gas Plant Site
In August 2021, the Mass DEP issued a Notice ofFGEFitchburg following a November 2020 audit of the September 2015 Response Action Outcome on the MGP site. Mass DEP directed Fitchburg to further define the extent of MGP site contaminants in the sediment and riverbank of an abutting watercourse. Fitchburg began the investigation in November 2021 with the Mass DEP expanding the scope in June 2022 to include an observed river seep. FGE anticipates completionFitchburg submitted the results of theits investigation by the end of 2022, while remedial action onand an Immediate Response Action (IRA) plan associated with the river seep may occur before that time.to the Mass DEP in December 2022. The Mass DEP has review and approval authority over the IRA plan’s recommendations, and Fitchburg continues to anticipate a limited remediation effort associated with the seep in 2023. In June 2023, the IRA plan transitioned to a Mass DEP-required public risk characterization of the
37
site. The Company does not believe this investigationrisk characterization will have a material adverse effect on its financial condition, results of operations or cash flows.
Fitchburg recovers the environmental response costs incurred at this former MGP site in gas rates pursuant to the terms of a cost recovery agreement approved by the MDPU. Pursuant to this agreement, Fitchburg is authorized to amortize and recover environmental response costs from gas customers over succeeding seven-year periods.
Unitil Energy - Kensington Distribution Operations Center
The following table sets forth a summary of changes in the Company’s liability for Environmental Obligations for the ninesix months ended SeptemberJune 30, 20222023 and 2021.2022.
Environmental Obligations (millions) |
| |||||||
| June 30, |
| ||||||
| 2023 |
|
| 2022 |
| |||
Total Balance at Beginning of Period |
| $ | 4.4 |
|
| $ | 2.7 |
|
Additions |
|
| 0.5 |
|
|
| 0.3 |
|
Less: Payments / Reductions |
|
| 0.2 |
|
|
| 0.2 |
|
Total Balance at End of Period |
|
| 4.7 |
|
|
| 2.8 |
|
Less: Current Portion |
|
| 0.6 |
|
|
| 0.6 |
|
Noncurrent Balance at End of Period |
| $ | 4.1 |
|
| $ | 2.2 |
|
Environmental Obligations ($ millions) | ||||||||
September 30, | ||||||||
2022 | 2021 | |||||||
Total Balance at Beginning of Period | $ | 2.7 | $ | 2.1 | ||||
Additions | 0.4 | 0.6 | ||||||
Less: Payments / Reductions | 0.3 | 0.3 | ||||||
Total Balance at End of Period | 2.8 | 2.4 | ||||||
Less: Current Portion | 0.6 | 0.7 | ||||||
Noncurrent Balance at End of Period | $ | 2.2 | $ | 1.7 | ||||
Note 8: INCOME TAXES
The differences between the Company’s provisions for Income Taxes and the provisions calculated at the statutory federal tax rate, expressed in percentages, are shown in the following table:
| For the Six Months Ended June 30, |
| ||||||
| 2023 |
|
| 2022 |
| |||
Statutory Federal Income Tax Rate |
|
| 21 | % |
|
| 21 | % |
Income Tax Effects of: |
|
|
|
|
|
| ||
State Income Taxes, net |
|
| 6 |
|
|
| 6 |
|
Utility Plant Differences |
|
| (3 | ) |
|
| (5 | ) |
Effective Income Tax Rate |
|
| 24 | % |
|
| 22 | % |
Nine Months Ended September 30, | ||||||||
2022 | 2021 | |||||||
Statutory Federal Income Tax Rate | 21 | % | 21 | % | ||||
Income Tax Effects of: | ||||||||
State Income Taxes, net | 6 | 6 | ||||||
Utility Plant Differences | (6 | ) | (3 | ) | ||||
Effective Income Tax Rate | 21 | % | 24 | % |
Under the Company’s Tax Sharing Agreement (the Agreement) which was approved upon the formation of Unitil as a 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 has evaluated its tax positions at SeptemberJune 30, 20222023 in accordance with the FASB Codification, and has concluded that no adjustment for recognition,
Income tax filings for the year ended December 31, 2021 have been filed with the IRS, Massachusetts Department of Revenue, the Maine Revenue Service, and the New Hampshire Department of Revenue Administration. In the Company’s federal tax returns for the year ended December 31, 2021, which were filed with the IRS in October 2022, the Company utilized federal Net Operating Loss Carryforward (NOLC) assets of $2.4
38
In March 2020, the Coronavirus Aid, Relief and Economic Security (CARES) Act was signed into law. The CARES Act included several tax changes as part of its economic package. These changes principally related to expanded Net Operating Loss carryback periods, increases to interest deductibility limitations, and accelerated Alternative Minimum Tax refunds. Additionally, the CARES Act enacted the Employee Retention Credit (ERC) to incentivize companies to retain employees. The ERC is a
In December 2020, the Consolidated Appropriations Act, 2021 (CAA) was signed into law. The CAA included additional funding through tax credits as part of its economic package for 2021. These changes include the temporary removal of deduction limitations on business meals through December 2022 and additional funding for the ERC with expanded benefits extended through June 30, 2021. The expanded ERC is a 70%70% credit on employee wages for employees that are retained and cannot perform their job duties at 100%100% capacity as a result of coronavirus pandemic restrictions.
In March 2021, the American Rescue Plan Act of 2021 (ARPA) was signed into law. The ARPA included certain provisions that provide economic relief for the
In August 2022, the Inflation Reduction Act of 2022 (IRA) was signed into law. The IRA includesincluded new taxes on corporations, such asincluding the Corporate Alternative Minimum Tax (AMT) and the Excise Tax on Repurchase of Corporate Stock. The AMT is equal to 15%15% of a corporation’s adjusted financial statement income (AFSI) and. The AMT applies to companies that have a 3 year average AFSI of greater than $1$1 billion. The IRA also extendsextended and modifiesmodified certain tax incentives for investments in clean and renewable energy projects.
The Company has evaluated each of the CARES, CAA ARPA, and IRA provisions and determined that they do not have a material effect on the Company’s financial statements as of SeptemberJune 30, 2022.
In December 2017, the Tax Cuts and Jobs Act (TCJA), which included a reduction to the corporate federal income tax rate to 21%21% effective January 1, 2018, was signed into law. In accordance with FASB Codification Topic 740, the Company revalued its Accumulated Deferred Income Taxes (ADIT) at the new 21%21% tax rate at which the ADIT will be reversed in future periods. Based on communications received by the Company from its state regulators in rate cases and other regulatory proceedings in the first quarter of 2018 and as prescribed in the TCJA, FERC guidance and IRS normalization rules, the benefit of protected excess ADIT amounts will be subject to flow back to customers in future utility rates according to the Average Rate Assumption Method (ARAM). ARAM reconciles excess ADIT at the reversal rate of the underlying book/tax temporary timing differences. The Company estimates the ARAM flow back period for protected and unprotected excess ADIT to be between fifteen and twenty 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$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. As of SeptemberJune 30, 2022,2023, the Company flowed back $5.4$7.8 million to customers in its Massachusetts, Maine, New Hampshire, and federal jurisdictions.
Note 9: RETIREMENT BENEFIT OBLIGATIONS
The CompanyPlease seeRefer to Note 109 to the Consolidated Financial Statements in the Company’s Form20212022 as filed with the SEC on February 1, 202214, 2023 for additional information regarding these plans.
The following table includes the key weighted average assumptions used in determining the Company’s benefit plan costs and obligations:
Used to Determine Plan Costs |
| 2023 |
|
| 2022 |
| ||
Discount Rate |
|
| 5.25 | % |
|
| 2.85 | % |
Rate of Compensation Increase |
|
| 3.00 | % |
|
| 3.00 | % |
Expected Long-term rate of return on plan assets |
|
| 7.50 | % |
|
| 7.50 | % |
The health care cost trend rate used to determine benefit plan costs for 2023 for pre-65 retirees is 8.00%, with an ultimate rate of 4.50% in 2030, and for post-65 retirees, the health care cost trend rate is 6.25%, with an ultimate rate of 4.50% in 2030. The health care cost trend rate used to determine benefit plan costs for 2022 for both pre-65 and post-65 retirees is 6.20%, with an ultimate rate 4.50% in 2029.
39
Used to Determine Plan Costs | 2022 | 2021 | ||||||
Discount Rate | 2.85 | % | 2.50 | % | ||||
Rate of Compensation Increase | 3.00 | % | 3.00 | % | ||||
Expected Long-term rate of return on plan assets | 7.50 | % | 7.50 | % | ||||
Health Care Cost Trend Rate Assumed for Next Year | 6.20 | % | 6.60 | % | ||||
Ultimate Health Care Cost Trend Rate | 4.50 | % | 4.50 | % | ||||
Year that Ultimate Health Care Cost Trend Rate is reached | 2029 | 2029 |
The following tables provide the components of the Company’s Retirement plan costs ($000’s):
| Pension Plan |
|
| PBOP Plan |
|
| SERP |
| ||||||||||||||||
For the Three Months Ended June 30, |
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||||
Service Cost |
| $ | 523 |
|
| $ | 791 |
|
| $ | 373 |
|
| $ | 722 |
|
| $ | 63 |
|
| $ | 68 |
|
Interest Cost |
|
| 1,870 |
|
|
| 1,371 |
|
|
| 725 |
|
|
| 799 |
|
|
| 188 |
|
|
| 118 |
|
Expected Return on Plan Assets |
|
| (2,672 | ) |
|
| (2,720 | ) |
|
| (852 | ) |
|
| (854 | ) |
|
| — |
|
|
| — |
|
Prior Service Cost Amortization |
|
| 88 |
|
|
| 89 |
|
|
| 199 |
|
|
| 273 |
|
|
| 14 |
|
|
| 14 |
|
Actuarial Loss Amortization |
|
| — |
|
|
| 1,377 |
|
|
| (366 | ) |
|
| 255 |
|
|
| — |
|
|
| 199 |
|
Sub-total |
|
| (191 | ) |
|
| 908 |
|
|
| 79 |
|
|
| 1,195 |
|
|
| 265 |
|
|
| 399 |
|
Amounts Capitalized and Deferred |
|
| 366 |
|
|
| (309 | ) |
|
| 112 |
|
|
| (622 | ) |
|
| (82 | ) |
|
| (119 | ) |
Net Periodic Benefit Cost Recognized |
| $ | 175 |
|
| $ | 599 |
|
| $ | 191 |
|
| $ | 573 |
|
| $ | 183 |
|
| $ | 280 |
|
| Pension Plan |
|
| PBOP Plan |
|
| SERP |
| ||||||||||||||||
For the Six Months Ended June 30, |
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||||
Service Cost |
| $ | 1,046 |
|
| $ | 1,582 |
|
| $ | 746 |
|
| $ | 1,444 |
|
| $ | 125 |
|
| $ | 136 |
|
Interest Cost |
|
| 3,740 |
|
|
| 2,742 |
|
|
| 1,450 |
|
|
| 1,598 |
|
|
| 377 |
|
|
| 236 |
|
Expected Return on Plan Assets |
|
| (5,344 | ) |
|
| (5,440 | ) |
|
| (1,704 | ) |
|
| (1,708 | ) |
|
| — |
|
|
| — |
|
Prior Service Cost Amortization |
|
| 177 |
|
|
| 178 |
|
|
| 397 |
|
|
| 546 |
|
|
| 28 |
|
|
| 28 |
|
Actuarial Loss Amortization |
|
| — |
|
|
| 2,754 |
|
|
| (732 | ) |
|
| 510 |
|
|
| — |
|
|
| 399 |
|
Sub-total |
|
| (381 | ) |
|
| 1,816 |
|
|
| 157 |
|
|
| 2,390 |
|
|
| 530 |
|
|
| 799 |
|
Amounts Capitalized and Deferred |
|
| 864 |
|
|
| (464 | ) |
|
| 333 |
|
|
| (1,133 | ) |
|
| (164 | ) |
|
| (238 | ) |
Net Periodic Benefit Cost Recognized |
| $ | 483 |
|
| $ | 1,352 |
|
| $ | 490 |
|
| $ | 1,257 |
|
| $ | 366 |
|
| $ | 561 |
|
Pension Plan | PBOP Plan | SERP | ||||||||||||||||||||||
Three Months Ended September 30, | 2022 | 2021 | 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||
Service Cost | $ | 792 | $ | 868 | $ | 723 | $ | 759 | $ | 69 | $ | 89 | ||||||||||||
Interest Cost | 1,372 | 1,250 | 798 | 685 | 118 | 114 | ||||||||||||||||||
Expected Return on Plan Assets | (2,722 | ) | (2,422 | ) | (853 | ) | (627 | ) | — | — | ||||||||||||||
Prior Service Cost Amortization | 89 | 76 | 273 | 302 | 14 | 14 | ||||||||||||||||||
Actuarial Loss Amortization | 1,376 | 2,021 | 255 | 260 | 196 | 372 | ||||||||||||||||||
Sub-total | 907 | 1,793 | 1,196 | 1,379 | 397 | 589 | ||||||||||||||||||
Amounts Capitalized and Deferred | (345 | ) | (944 | ) | (655 | ) | (904 | ) | (117 | ) | (178 | ) | ||||||||||||
Net Periodic Benefit Cost Recognized | $ | 562 | $ | 849 | $ | 541 | $ | 475 | $ | 280 | $ | 411 | ||||||||||||
�� |
Pension Plan | PBOP Plan | SERP | ||||||||||||||||||||||
Nine Months Ended September 30, | 2022 | 2021 | 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||
Service Cost | $ | 2,374 | $ | 2,604 | $ | 2,167 | $ | 2,275 | $ | 205 | $ | 266 | ||||||||||||
Interest Cost | 4,114 | 3,752 | 2,396 | 2,055 | 354 | 343 | ||||||||||||||||||
Expected Return on Plan Assets | (8,162 | ) | (7,268 | ) | (2,561 | ) | (1,881 | ) | — | — | ||||||||||||||
Prior Service Cost Amortization | 267 | 226 | 819 | 906 | 42 | 42 | ||||||||||||||||||
Actuarial Loss Amortization | 4,130 | 6,065 | 765 | 784 | 595 | 1,117 | ||||||||||||||||||
Sub-total | 2,723 | 5,379 | 3,586 | 4,139 | 1,196 | 1,768 | ||||||||||||||||||
Amounts Capitalized and Deferred | (810 | ) | (2,544 | ) | (1,788 | ) | (2,358 | ) | (354 | ) | (534 | ) | ||||||||||||
Net Periodic Benefit Cost Recognized | $ | 1,913 | $ | 2,835 | $ | 1,798 | $ | 1,781 | $ | 842 | $ | 1,234 | ||||||||||||
Employer Contributions
As of SeptemberJune 30, 2022,2023, the Company had made $3.8contributions of $1.9 million and $2.0$0.6 million, of contributions to its Pension Plan and PBOP Plan, respectively, in 2022.2023. The Company, along with its subsidiaries, expects to continue to make contributions to its Pension and PBOP Plans in 20222023 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.
As of SeptemberJune 30, 2022,2023, the Company had made $0.5$0.3 million of benefit payments under the SERP Plan in 2022.2023. The Company presently anticipates making an additional $0.1$0.3 million of benefit payments under the SERP Plan in 2022.
40
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Reference is made to the “Interest Rate Risk” and “Market Risk” sections of Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” (above).
Item 4. Controls and Procedures
Management of the Company, under the supervision and with the participation of the Company’s Chief Executive Officer, Chief Financial Officer, and Chief Accounting Officer, carried out an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of SeptemberJune 30, 2022.2023. Based upon this evaluation, the Company’s Chief Executive Officer, Chief Financial Officer and Chief Accounting Officer concluded as of SeptemberJune 30, 20222023 that the Company’s disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15(d)-15(e)) are effective.
There have been no changes in the Company’s internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15(d)-15(f)) during the fiscal quarter covered by this Form 10-Q that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company is involved in legal and administrative proceedings and claims of various types, which arise in the ordinary course of business. Certain specific matters are discussed in Notes 6 and 7 to the Consolidated Financial Statements. In the opinion of Management, based upon information furnished by counsel and others, the ultimate resolution of these claims will not have a material effect on the Company’s financial position.
Item 1A. Risk Factors
There have been no material changes to the risk factors disclosed in the Company’s Form 10-K for the year-ended December 31, 20212022 as filed with the SEC on February 1, 2022.14, 2023.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Recent Sales of Unregistered Securities
There were no sales of unregistered equity securities by the Company for the fiscal period ended SeptemberJune 30, 2022.2023.
Issuer Purchases of Equity Securities
Pursuant to the Company’s written trading plan under Rule 10b5-1 under the Exchange Act, adopted and announced by the Company on MayJune 1, 2022,2023, the Company will periodically repurchase shares of its Common Stock on the open market related to fulfill the stockrequired equity portion of the Directors’ annual retainer for those Directors who elected to receive common stock. There is no pool or
41
maximum number of shares related to these purchases; however, the trading plan will terminate when $587,000$614,000 in value of shares have been purchased or, if sooner, on May 1, 2023.31, 2024.
51
The Company may suspend or terminate this new trading plan at any time, so long as the suspension or termination is made in good faith and not as part of a plan or scheme to evade the prohibitions of Rule 10b-5 under the Exchange Act, or other applicable securities laws.
The following table provides information regarding repurchases by the Company of shares of its common stock pursuant to the trading plan for each month in the quarter ended SeptemberJune 30, 2022.2023.
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 | |||||||||||||
7/1/22 – 7/31/22 | — | — | — | $ | 587,000 | |||||||||||
8/1/22 – 8/31/22 | — | — | — | $ | 587,000 | |||||||||||
9/1/22 – 9/30/22 | — | — | — | $ | 587,000 | |||||||||||
|
|
|
| |||||||||||||
Total | — | — | — | |||||||||||||
|
|
|
|
| Total |
|
| Average |
|
| Total Number of |
|
| Approximate Dollar |
| |||||
4/1/23 – 4/30/23 |
|
| — |
|
|
| — |
|
|
| — |
|
| $ | 145,027 |
|
5/1/23 – 5/31/23 |
|
| — |
|
|
| — |
|
|
| — |
|
| $ | — |
|
6/1/23 – 6/30/23 |
|
| — |
|
|
| — |
|
|
| — |
|
| $ | 614,000 |
|
Total |
|
| — |
|
|
| — |
|
|
| — |
|
|
|
|
Item 5. Other Information
(a) On NovemberAugust 1, 2022,2023, the Company issued a press release announcing its results of operations for the three and ninesix month periods ended SeptemberJune 30, 2022.2023. The press release is furnished with this Quarterly Report on Form 10-Q as Exhibit 99.1.
(c) During the quarter ended June 30, 2023, no director or officer (as defined in Rule 16a-1(f) promulgated under the Securities Exchange Act of 1934) adopted or terminated a Rule10b5-1 trading arrangement (as defined in Item 408(a)(1)(i) of Regulation S-K promulgated under the Securities Exchange Act of 1934) or any non-Rule 10b5-1 trading arrangement (as defined in Item 408(c) of Regulation S-K promulgated under the Securities Exchange Act of 1934).
Item 6. Exhibits
(a) Exhibits
Exhibit No. | Description of Exhibit |
| ||
4.1 (1) | Exhibit 4.1 to Form 8-K dated | |||
4.2(2) |
| Exhibit 4.2 to Form 8-K dated | ||
4.3(2) | Exhibit 4.3 to Form 8-K dated | |||
31.1 |
52
Certification of Chief Executive Officer Pursuant to Rule 13a-14 of the Exchange Act, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | ||||
31.2 | ||||
31.3 |
42
Exhibit No. | Description of Exhibit | Reference* | ||
32.1 | ||||
99.1 | ||||
101.INS | Inline XBRL Instance Document. The instance document does not appear in the interactive data file because its XBRL tags are embedded within the Inline XBRL document. | Filed herewith | ||
101.SCH | Inline XBRL Taxonomy Extension Schema Document. | Filed herewith | ||
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document. | Filed herewith | ||
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | Filed herewith | ||
101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document. | Filed herewith | ||
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document. | Filed herewith | ||
104 | Cover Page Interactive Data File – The cover page interactive data file does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document. | Filed herewith |
|
53
* The exhibits referred to in this column by specific designations and dates have heretofore been filed with or furnished to the Securities and Exchange Commission under such designations and are hereby incorporated by reference.
(1) In accordance with Item 601(a)(5) of Regulation S-K, this exhibit omits certain of its schedules and exhibits. This exhibit’s table of contents includes a brief description of the subject matter of all of its schedules and exhibits, including the omitted schedules and exhibits. The Registrant acknowledges that it must provide a copy of any omitted schedules or exhibits to the Securities and Exchange Commission or its staff upon request.
(2) This note is substantially identical in all material respects to other notes that are otherwise required to be filed as exhibits, except as to the registered payee of such note, the identifying number of such note, and the principal amount of such note. In accordance with instruction no. 2 to Item 601 of Regulation S-K, the Registrant has filed a copy of only one of such notes, with a schedule identifying the other notes omitted and setting forth the material details in which such notes differ from the note that was filed. The Registrant acknowledges that the Securities and Exchange Commission may at any time in its discretion require filing of copies of any notes so omitted.
43
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| ||||||
UNITIL CORPORATION | ||||||
(Registrant) | ||||||
Date: August 1, 2023 | /s/ Daniel J. Hurstak | |||||
Daniel J. Hurstak | ||||||
Chief Financial Officer |
Date: | /s/ | |||||
Todd R. Diggins | ||||||
Chief Accounting Officer |
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