Winter Storm Uri

6 Months Ended

Mar. 31, 2023

Unusual or Infrequent Items, or Both [Abstract]

Winter Storm Uri

Winter Storm Uri

Overview

As described in Note 9 to the consolidated financial statements in our Annual Report on Form 10-K for the fiscal year ended September 30, 2022, a historic winter storm impacted supply, market pricing and demand for natural gas in our service territories in mid-February 2021. During this time, the governors of Kansas and Texas each declared a state of emergency, and certain regulatory agencies issued emergency orders that impacted the utility and natural gas industries, including statewide

utilities curtailment programs and orders encouraging or requiring jurisdictional natural gas utilities to work to ensure customers were provided with safe and reliable natural gas service.

Due to the historic nature of this winter storm, we experienced unforeseeable and unprecedented market pricing for gas costs, which resulted in aggregated natural gas purchases during the month of February of approximately $2.3 billion. These gas costs were paid using funds received from a public offering of debt securities completed in March 2021 of $2.2 billion. On March 3, 2023, we entered into a term loan agreement for a $2.02 billion senior unsecured term loan facility and used the proceeds, along with cash on hand, to repay at maturity the outstanding $2.2 billion senior notes that matured on March 9, 2023.

Regulatory Asset Accounting

Our purchased gas costs are recoverable through purchased gas cost adjustment mechanisms in each state where we operate. Due to the unprecedented level of purchased gas costs incurred during Winter Storm Uri, the Kansas Corporation Commission (KCC) and the Railroad Commission of Texas (RRC) issued orders authorizing natural gas utilities to record a regulatory asset to account for the extraordinary costs associated with the winter storm. Pursuant to these orders, we recorded a regulatory asset for incremental costs, including certain carrying costs, incurred in Kansas and Texas. As of March 31, 2023, we have recorded an $89.1 million regulatory asset related to costs incurred in Kansas. The regulatory asset that was recorded related to costs incurred in Texas was relieved in March 2023 as a result of securitization proceedings in Texas as discussed below. Additionally, pursuant to a separate regulatory order issued by the RRC, we have deferred $32.4 million in carrying costs incurred after September 1, 2022, which we anticipate recovering in future regulatory filings. We have recorded the regulatory asset for Texas as a long-term asset in deferred charges and other assets as of March 31, 2023.

Securitization Proceedings

To minimize the impact on the customer bill by extending the recovery periods for these unprecedented purchased gas costs, the Kansas and Texas State Legislatures each enacted securitization legislation during fiscal 2021, as described in further detail in Note 9 to the consolidated financial statements in our Annual Report on Form 10-K for the fiscal year ended September 30, 2022.

Kansas

The KCC issued a financing order on October 25, 2022, which authorizes us to securitize, through the issuance of bonds, $118.5 million, which includes the carrying costs and estimated interest related to the securitization over a time period not to exceed 12 years. We currently expect the issuance of bonds to take place during fiscal 2023. Because we intend to recover these costs over several years, we have recorded the regulatory asset for Kansas as a long-term asset in deferred charges and other assets as of March 31, 2023.

Texas

On February 8, 2022, the RRC issued a Financing Order that authorizes the Texas Public Financing Authority (TPFA) to issue customer rate relief bonds to securitize the costs that were approved in the Final Determination over a period not to exceed 30 years. The TPFA authorized the creation of the Texas Natural Gas Securitization Finance Corporation (the Finance Corporation) as an issuing financing entity for the purpose of issuing customer rate relief bonds. On March 23, 2023, the Finance Corporation issued $3.5 billion in customer rate relief bonds with varying scheduled final maturities from 12 to 18 years. The bonds are obligations of the Finance Corporation, payable from the customer rate relief charges and other bond collateral, and are not an obligation of Atmos Energy. When we begin collecting the customer rate relief charges, such property shall be solely owned by the Finance Corporation and not available to pay creditors of Atmos Energy.

On March 23, 2023, we received proceeds from the Finance Corporation in the amount of $2.02 billion, and we relieved $2.02 billion in regulatory assets related to costs incurred in Texas. U.S. GAAP does not provide comprehensive recognition and measurement guidance for many forms of government assistance received by business entities. Accordingly, we have accounted for the proceeds received from the Finance Corporation by analogy to International Accounting Standards No. 20, "Accounting for Government Grants and Disclosure of Government Assistance" consistent with a grant related to income. The proceeds received and the corresponding derecognition of the deferred regulatory asset have been reflected in purchased gas cost and interest charges in our condensed consolidated statements of comprehensive income. As the proceeds reflect the recovery of the regulatory asset, there was no impact to earnings. The proceeds are reflected in our condensed consolidated statements of cash flow as an increase in operating cash flow. As discussed in Note 6, we used the proceeds from the Finance Corporation to repay a term loan facility.