Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Sep. 30, 2014 |
Summary of Significant Accounting Policies [Abstract] | |
Principles of Consolidation and Presentation | (a) Principles of Consolidation and Presentation |
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In order to reorganize the regulated and unregulated businesses of the Company, Corning Natural Gas Holding Corporation (the “Holding Company”), a wholly-owned subsidiary of the Company at September 30, 2013, was incorporated under the laws of the State of New York on July 19, 2013. The Holding Company was formed to serve as the parent holding company of the Company, Appliance Corp and, directly or indirectly, the interests in the Leatherstocking Joint Venture Companies. The NYPSC approved the formation of the Holding Company and the reorganization of the Gas Company into a holding company structure on May 17, 2013. The reorganization into the holding company structure required approval of holders of at least 66 2/3rds of the Gas Company's common stock and the exchange of shares of common stock of the Gas Company for common stock of the Holding Company. On August 1, 2013, the Holding Company filed a Registration Statement/Proxy Statement on Form S-4 (the “Registration Statement”) with the U.S. Securities and Exchange Commission (“SEC”) to register the securities to be issued by the Holding Company in connection with the exchange and to file a proxy statement for a special meeting of the Gas Company's shareholders regarding the proposal to create the holding company structure and the exchange of shares of the Gas Company's common stock on a one-for-one basis for shares of the Holding Company's common stock. The Registration Statement was effective September 30, 2013. In a special shareholder meeting on November 6, 2013, the proposal was approved by more than two-thirds of shareholders of the Gas Company. The effective date of reorganization was November 12, 2013. Pursuant to the Agreement and Plan of Share Exchange, dated September 12, 2013, between the Holding Company and Corning Gas (the “Exchange Agreement”), and the Certificate of Exchange, on the Effective Date, each issued and outstanding share of Corning Gas' common stock, par value $5.00 per share, was converted into one share of the Holding Company's common stock, par value $0.01 per share. The effect of this share exchange has been reflected retroactively in all periods presented. This resulted in a reclassification between Common Stock and Additional Paid in Capital of $11,290,644 as of September 30, 2013. |
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The consolidated financial statements include the Holding Company and its wholly owned subsidiaries, Corning Gas and Corning Natural Gas Appliance Corporation (Appliance Corp.). All intercompany accounts and balances have been eliminated. |
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It is the Holding Company's policy to reclassify amounts in the prior year financial statements to conform to the current year presentation. |
Property, Plant and Equipment | (b) Property, Plant and Equipment |
Property, plant and equipment are stated at the historical cost of construction. Those costs include payroll, fringe benefits, materials and supplies and transportation costs. The Company charges normal repairs to maintenance expense. |
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Depreciation | (c) Depreciation |
The Company provides for depreciation for accounting purposes using a straight-line method based on the estimated economic lives of property as determined by the current rate plan based on the latest depreciation study. The depreciation rate used for utility plant, expressed as an annual percentage of depreciable property was 2.2% in 2014 and 3.7% in 2013. The NYPSC is allowing the Company recovery in revenues to offset our costs of building certain projects. At the time utility properties are retired, the original cost plus costs of removal less any salvage are charged to accumulated depreciation. |
Accounting for Impairment | (d) Accounting for Impairment |
The Financial Accounting Standards Board (FASB) ASC 360-10-15, “Accounting for the Impairment or Disposal of Long-Lived Assets” establishes accounting standards to account for the impairment of long-lived assets, and certain identifiable intangibles. Under FASB ASC 360-10-15 the Company reviews assets for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. FASB ASC 360-10-15 also requires that a rate regulated enterprise recognize an impairment when regulatory assets are no longer probable of recovery. No impairment losses were incurred for the years ended September 30, 2014 and 2013. |
Marketable Securities | (e) Marketable Securities |
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Marketable securities, which are intended to fund the Company's deferred compensation plan obligations, are classified as available for sale. Such securities are reported at fair value based on quoted market prices, with unrealized gains and losses, net of the related income tax effect, excluded from income, and reported as a component of accumulated other comprehensive income in stockholders' equity until realized. The cost of securities sold was determined using the specific identification method. For all investments in the unrealized loss position, none have been in an unrealized loss position for more than 12 months. None are other than temporary impairments based on management's analysis of available market research. In 2014 and 2013, the Company sold equity securities for realized gains (losses) included in earnings of $11,812 and $65,276, respectively. |
Fair Value of Financial Instruments | (f) Fair Value of Financial Instruments |
The Company has determined the fair value of debt and other financial instruments using a valuation hierarchy. The hierarchy, which prioritizes the inputs used in measuring fair value, consists of three levels. Level 1 uses observable inputs such as quoted prices in active markets; Level 2 uses inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, which is defined as unobservable inputs in which little or no market data exists, requires the Company to develop its own assumptions. The carrying amount of debt on the Consolidated Balance Sheets approximates fair value as a result of instruments bearing interest rates that approximate current market rates for similar instruments, and the carrying amounts for cash, accounts receivable and accounts payable approximate fair value due to their short-term nature. The assets used to fund the pension plan and marketable securities, which fund the Company's deferred compensation plan, are valued based on Level 1 inputs. |
The Company has determined the fair value of certain assets through application of FASB ASC 820 “Fair Value Measurements and Disclosures”. |
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Fair value of assets and liabilities measured on a recurring basis at September 30, 2014 and 2013 are as follows: |
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| | | | | | Fair Value Measurements at Reporting Date Using: | | |
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| | | | | | | Fair Value | Quoted Prices In Active Markets for Identical Assets/Liabilities (Level 1) | Level 2 | Level 3 |
| | | | | | 30-Sep-14 | | | | |
| | | | | | Available-for-sale securities | $2,308,138 | $2,308,138 | $- | $- |
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| | | | | | 30-Sep-13 | | | | |
| | | | | | Available-for-sale securities | $2,242,540 | $2,242,540 | $- | $- |
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Financial assets and liabilities valued using level 1 inputs are based on unadjusted quoted market prices within active markets. |
Cash and Cash Equivalents | (g) Cash and Cash Equivalents |
Cash and cash equivalents include time deposits, certificates of deposit, and all highly liquid debt instruments with original maturities of three months or less. Cash and cash equivalents at financial institutions may periodically exceed federally insured limits. |
Accounts Receivable | (h) Accounts Receivable |
Accounts receivable are stated net of an allowance for doubtful accounts. The Company estimates the allowance based on its analysis of specific balances, taking into consideration the age of past due accounts and relying on rules and guidelines established by the NYPSC regarding customer disconnects. On August 2, 2012, the Company received notice that a significant customer filed for protection under Chapter 11 of the United States Bankruptcy Code. That customer received funding from its principal lender to continue to operate and pay bills going forward. As of September 30, 2013, the Company had reserved 100% of the $252,456 outstanding at the time of the bankruptcy filing which is consistent with the Company's accounting policies. During the year ended September 30, 2014 the amount was written off. |
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Related party receivables are expenditures paid on behalf of the Holding Company's joint venture investments. We expect repayment on these amounts during the year ended September 30, 2015. |
Gas Stored Underground | (i) Gas Stored Underground |
Gas stored underground is carried at an average unit cost method as prescribed by the NYPSC. |
Materials and Supplies Inventories | (j) Materials and Supplies Inventories |
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Materials and supplies inventories are stated at the lower of cost or market, cost being determined on an average unit price basis. |
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Debt Issuance Costs | (k) Debt Issuance Costs |
Costs associated with the issuance of debt by the Company are deferred and amortized over the lives of the related debt. |
Regulatory Matters | (l) Regulatory Matters |
Certain costs are deferred and recognized as expenses when they are reflected in rates and recovered from customers as permitted by FASB ASC 980. These costs are shown as regulatory assets. Such costs arise from the traditional cost-of-service rate setting approach whereby all prudently incurred costs are generally recoverable through rates. Deferral of these costs is appropriate while the Company's rates are regulated under a cost-of-service approach. |
As a regulated utility, the Company deferred certain costs for future recovery. In a purely competitive environment, such costs might have been currently expensed. Accordingly, if the Company's rate setting were changed from a cost-of-service approach and the Company were no longer allowed to defer these costs under FASB ASC 980, certain of these assets might not be fully recoverable. However, the Company cannot predict the impact, if any, of competition and continues to operate in a cost-of-service based regulatory environment. Accordingly, the Company believes that accounting under FASB ASC 980 is appropriate. |
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Revenue and Natural Gas Purchased | (m) Revenue and Natural Gas Purchased |
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The Company records revenues from residential and commercial customers based on meters read on a cyclical basis throughout each month, while certain large industrial and utility customers' meters are read at the end of each month. Several meters are read at the end of each month to calculate local production revenues. The Company does not accrue revenue for gas delivered but not yet billed, as the NYPSC requires that such accounting must be adopted during a rate proceeding, which the Company has not done. The Company, as part of its currently effective rate plan, has a weather normalization clause as protection against severe weather fluctuations. This affects space heating customers and is activated when degree days are 2.2% greater or less than a 30 year average. As a result, the effect on revenue fluctuations of weather related gas sales is somewhat moderated. |
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In addition to weather normalization, starting in September 2009, the Company implemented a revenue decoupling mechanism (RDM). The RDM reconciles actual delivery service revenues to allowed delivery service revenues (which are based on the annual customer and volume forecasts in the last rate case) for certain residential customers. The Company will refund or surcharge customers for differences between actual and allowed revenues. The shortfall or excess after the annual reconciliation will be surcharged or refunded to customers over a twelve month period starting the next calendar year. |
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Gas purchases are recorded on readings of suppliers' meters as of the end of the month. The Company's rate tariffs include a Gas Adjustment Clause (GAC) which adjusts rates to reflect changes in gas costs from levels established in the rate setting process. In order to match such costs and revenue, the PSC has provided for an annual reconciliation of recoverable GAC costs with applicable revenue billed. Any excess or deficiency in GAC revenue billed is deferred and the balance at the reconciliation date is either refunded to or recovered from customers over a subsequent 12-month period. |
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Federal Income Tax | (n) Federal Income Tax |
The Holding Company uses the asset and liability method to establish deferred tax assets and liabilities for the temporary differences between the financial reporting basis and the tax basis of the Holding Company's assets and liabilities at enacted tax rates expected to be in effect when such amounts are realized or settled. In addition, such deferred tax assets and liabilities will be adjusted for the effects of enacted changes in tax laws and rates. |
Dividends | (o) Dividends |
A dividend of $.125 a share was paid on October 15, 2013 to shareholders of record on September 30, 2013 and on January 15, 2014 to shareholders of record on December 3, 2013. At its regular meeting on February 20, 2014, the board of directors approved an increase in the quarterly dividend to $.135 a share. This dividend was paid on April 15, 2014 to shareholders of record on March 31, 2014 and on July 15, 2014 for shareholders of record on June 30, 2104. For the quarter ended September 30, 2014, $327,819 has been accrued for dividends paid on October 15, 2014 to shareholders of record on September 30, 2014. |
Revenue Taxes | (p) Revenue Taxes |
The Company collects state revenue taxes on residential delivery rates. The amount included in Utility Operating Revenue and Taxes other than Federal Income Taxes was $168,900 and $153,346 in 2014 and 2013, respectively. |
Stock Based Compensation | (q) Stock Based Compensation |
The Holding Company accounts for stock based awards in accordance with FASB ASC 718. The Holding Company awards restricted shares as compensation to our directors. The shares awarded become unrestricted upon a director leaving the board. Directors who also serve as officers of Corning Gas are not compensated for their service as directors. Since these shares are restricted, in recording compensation expense, the expense incurred is 25% less than the closing price of the stock on the day the stock was awarded. Each director is awarded 375 shares for each quarter served. Six directors received a total of 13,500 shares during fiscal 2013 and 9,000 shares during fiscal 2014. On November 13, 2014, shares were issued for the quarter ended September 30, 2014 with the new director, Robert Johnston receiving 317 shares (accrued for his service during the quarter). |
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At its regularly scheduled meeting on December 11, 2012, the Compensation Committee of the Board of Directors of the Company made restricted stock awards of 600 shares each to the five officers of the Company in lieu of salary increases. Each restricted stock award vested 300 shares immediately and 300 shares on December 12, 2013 if the officer were still employed by the Company or one of its subsidiaries or affiliates on that date. Each award is subject to the terms and conditions of a restricted stock award agreement and the Holding Company's Amended and Restated 2007 Stock Plan. In addition, the Board of Directors authorized the sale on December 12, 2012, of 600 shares of the Holding Company's common stock to Carl T. Hayden in compensation for his past service as a director of the Holding Company's joint venture affiliate, Leatherstocking Gas Company, LLC and 75 shares each quarter thereafter until Leatherstocking Gas Company started serving customers at which point quarterly compensation increased to 112 shares for the quarter ended December 31, 2013. Mr. Hayden has received a total of 411 shares for his service. These shares are sold to Leatherstocking Gas Company from time to time at the fair market value determined as the closing price of the Holding Company's common stock on the 20th business day after quarter end. |
Earnings Per Share | (r) Earnings Per Share |
Basic earnings per share are computed by dividing income available for common stock by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflect the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. The only potentially dilutive securities the Holding Company has outstanding are stock options. The diluted weighted average shares outstanding shown on the Consolidated Statements of Income reflects the potential dilution as a result of these stock options as determined using the Treasury Stock Method. Stock options that are antidilutive are excluded from the calculation of diluted earnings per common share. |
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311 Transportation Agreement/Compressor Station | (s) 311 Transportation Agreement /Compressor Station |
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On January 11, 2010, the Company entered into a contract (311 Transportation Agreement) with a local gas producer that provided for the building of a compressor station as well as the transfer of a 6” pipeline owned by the gas producer to the Company for nominal consideration. The contract also sets forth the terms, rates and condition of the transport of the local producer gas to the interstate pipeline system. On May 21, 2010, the 311 Transportation Agreement was revised to reflect a change in the projected gas delivery schedule and delivery volumes. The previously agreed to transportation rates did not change. The contract's maximum daily delivery quantity remained the same. The schedule for attaining the maximum daily delivery quantity was altered to accommodate the project's construction schedule. The Company bought the $11 million compressor station and $2.1 million pipeline from the local producer for two dollars. The local producer has the right to repurchase these facilities for two dollars in ten years. This transaction became effective on May 12, 2011, when the station began operations. Although the Company has $13.1 million in plant available for use, only two dollars was recognized in accordance with the Uniform System of Accounts (313.2) which states that in the case of gas plant contributed to the utility, gas plant accounts shall be charged only with such expenses, if any, incurred by the utility. |
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Collective Bargaining Agreement | (t) Collective Bargaining Agreement |
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The Company had 58 employees as of September 30, 2014, and 56 as of September 30, 2013. Of this total, nearly half are union labor working under an agreement effective until April 2, 2015. |
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Leatherstocking Companies | (u) Leatherstocking Companies |
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The Holding Company has a 50% investment in Leatherstocking Gas Company, LLC (Leatherstocking Gas) and Leatherstocking Pipeline Company, LLC (Leatherstocking Pipeline). The investment and equity in both companies (collectively, “Joint Ventures”) has been recognized in the consolidated financial statements. The Holding Company has accounted for its equity investment using the equity method of accounting based on the guidelines established in FASB ASC 323. In applying the guidance of FASB ASC 323, the Holding Company recognized the investment in the Joint Ventures as an asset at cost. The investment will fluctuate in future periods based on the Holding Company's allocable share of earnings or losses from the Joint Ventures which is recognized through earnings. |
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Settlement of Lawsuits | (v) Settlement of Lawsuits |
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On August 30, 2012, counsel to Gas Natural, Inc. and Richard M. Osborne sent a letter to counsel representing the Company offering to settle and release, all claims related to Gas Natural Inc.'s previous offers to purchase the Company and other activities, including the Company's 2010 rights offering. On December 11, 2012, at its regularly scheduled meeting, the Board of Directors approved settling the claims for $200,000 in exchange for general releases and certain other consideration. On December 13, 2012, the Company was notified by counsel for Gas Natural, Inc. that Gas Natural, Inc.'s Board of Directors, Richard Osborne and the Osborne |
Trust had approved the settlement. The after tax expense that resulted from this agreement was $126,000 and was shown in other deductions, net for year ended September 30, 2013, on the Company's Consolidated Statement of Income and Comprehensive Income. The Company believes its actions in connection with the offers, the rights offering and other activities were in the best interest of the Company and its shareholders. |
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New Accounting Pronouncements Not Yet Adopted | (w) New Accounting Pronouncements Not Yet Adopted |
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In May 2014, the FASB issued new accounting guidance on revenue from contracts with customers. The new guidance requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods and services to customers. The updated guidance will replace most existing revenue recognition guidance in GAAP when it becomes effective and permits the use of either a retrospective or cumulative effect transition method. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. We have not yet selected a transition method and we are currently evaluating the effect the updated standard will have on our consolidated financial statements and related disclosures. |