Business Context and Reporting Period
This Form 8-K filing by Spire Inc. and Spire Missouri Inc. is dated November 19, 2021. The report addresses a regulatory decision by the Missouri Public Service Commission (MoPSC) regarding Spire Missouri's rate case (GR-2021-0108), with rates scheduled to become effective in December 2021.
Key Financial Metrics and Regulatory Outcomes
- Revenue Increase: The MoPSC granted a revenue increase of $72 million, inclusive of $47 million in Infrastructure System Replacement Surcharge revenues already being recovered.
- Rate Base: The allowed rate base was set at $2.9 billion, approximately $900 million higher than the 2018 case completion.
- Capital Structure: Equity 49.86%, Long-term debt 41.99%, Short-term debt 8.15%.
- Return on Equity (ROE): Set at 9.37%.
- Overall Rate of Return: Set at 6.37%.
Material Changes and Unusual Items
The Commission ordered Spire Missouri to cease the capitalization of non-operational overhead costs pending an audit. The filing states that the amended order lacks clarity to quantify the impact with adequate precision. However, management anticipates a material adverse impact on net income for fiscal year 2022 and future periods until a future rate case is completed.
The estimated pre-tax impact is in the range of $20-30 million annually, resulting from shifting prudently incurred overhead costs from capital to operation and maintenance expense.
Management Commentary and Outlook
Spire Missouri intends to file an additional request for reconsideration on several elements of the case on November 19, 2021. The company is working with MoPSC staff to facilitate an expedited audit of capitalized overheads to determine what portion of these costs may be deferred into a regulatory asset. Unless the order is amended or recovery assurance is gained, the change in overhead capitalization methods will negatively affect net income.
Investor Verification Checklist
- Verify the final outcome of the request for reconsideration filed on November 19, 2021.
- Monitor the status of the MoPSC audit regarding non-operational overhead costs.
- Assess the potential for the $20-30 million annual pre-tax expense impact to materialize in fiscal 2022 earnings.
- Confirm the effective date of the new rates scheduled for December 2021.