| Item 7.01 | Regulation FD Disclosure. |
A historic winter weather storm impacted supply, market pricing and demand for natural gas in service territories of Atmos Energy Corporation (the “Company”) beginning February 11 and continuing through the date of this disclosure. On February 12, 2021, the Governor of Texas declared a state of disaster for all 254 counties in the State in response to the then-forecasted weather conditions. The declaration certified that severe winter weather posed an imminent threat due to prolonged freezing temperatures, heavy snow, and freezing rain statewide.
Also, on February 12, 2021, the Railroad Commission of Texas (the “RRC”) issued an Emergency Order to temporarily implement a statewide utilities curtailment program intended to protect residences, hospitals, schools, churches, and other human needs customers in the State of Texas.
On February 13, 2021, the RRC issued a Notice to Local Distribution Companies that acknowledged that, due to the demand for natural gas during this winter weather event, natural gas utility local distribution companies may be required to pay extraordinarily high prices in the market for natural gas and may be subjected to other extraordinary expenses when responding to the winter weather event. The RRC also encouraged natural gas utilities to continue to work to ensure that the citizens of the State of Texas are provided with safe and reliable natural gas service. To partially defer and reduce the impact on customers for these costs that ultimately are reflected in customer bills, the RRC authorized local distribution companies to record a regulatory asset to account for the extraordinary expenses associated with this winter weather event, including but not limited to gas cost and other costs related to the procurement and transportation of gas supply. These expenses will be fully subject to review for reasonableness and accuracy in future regulatory proceedings. As a reminder, Atmos Energy buys gas at a wholesale rate and passes that price on to customers without any markup.
On February 14, 2021, the Governor of Kansas issued a State of Disaster Emergency due to wind chill warnings and stress on utility and natural gas providers caused by the significantly colder than normal weather. The executive order also urged Kansas citizens to conserve energy to help ensure a continued supply of natural gas and electricity and keep their own personal costs down. The declaration also noted that due to increased energy demand and natural gas supply constraints caused by sub-zero temperatures, utilities are currently experiencing wholesale natural gas prices anywhere from 10 to 100 times higher than normal.
On February 15, 2021 the State Corporation Commission of the State of Kansas issued an Emergency Order (the “Order”) directing all jurisdictional natural gas and electric utilities to coordinate efforts and take all reasonably feasible, lawful, and appropriate actions to ensure adequate delivery of natural gas and electricity to interconnected, non-jurisdictional utilities in Kansas. The Order also requires jurisdictional natural gas and electric utilities to do all things possible and necessary to ensure natural gas and electricity utility services continue to be provided to their customers in Kansas. Finally, the Order allows those electric and natural gas distribution utilities who incur extraordinary costs to ensure its customers and other interconnected customers continue to receive utility service during this unprecedented cold weather event to defer those costs to a regulatory asset account. Once this weather event is over, each jurisdictional utility will be required to file a compliance report detailing the extent of such costs incurred and present a plan to minimize the financial impacts of this event on ratepayers over a reasonable time frame.
Due to the historic nature of this winter storm, the Company experienced unforeseeable and unprecedented market pricing for gas costs, most notably in our Colorado, Kansas, and Texas jurisdictions, which resulted in aggregated natural gas purchases during this period of approximately $2.5 to $3.5 billion for these jurisdictions. These purchases are generally payable at the end of March 2021.
As of February 18, 2021, the Company had approximately $3.0 billion in total liquidity, including approximately $800 million in total cash assets.
The Company is evaluating a number of financing alternatives including available cash, short-term debt, long-term debt, and equity. The Company intends to finance its incremental natural gas purchases using one or more of these financing alternatives in a manner that will maintain strong investment grade credit ratings.
