Regulation

9 Months Ended

Jun. 30, 2024

Accounting principles generally accepted in the United States require cost-based, rate-regulated entities that meet certain criteria to reflect the authorized recovery of costs due to regulatory decisions in their financial statements. As a result, certain costs are permitted to be capitalized rather than expensed because they can be recovered through rates. We record certain costs as regulatory assets when future recovery through customer rates is considered probable. Regulatory liabilities are recorded when it is probable that revenues will be reduced for amounts that will be credited to customers through the ratemaking process. Substantially all of our regulatory assets are recorded as a component of other current assets and deferred charges and other assets and our regulatory liabilities are recorded as a component of other current liabilities and deferred credits and other liabilities. Deferred gas costs are recorded either in other current assets or liabilities.

Regulatory assets and liabilities as of June 30, 2024 and September 30, 2023 included the following:


	June 30, 2024		September 30, 2023
	(In thousands)
Regulatory assets:
Pension and postretirement benefit costs	$	14,033	$	20,629
Infrastructure mechanisms (1)	209,609		229,996
Winter Storm Uri incremental costs	12,549		32,115

Deferred gas costs	68,296		148,297
Regulatory excess deferred taxes (2)	50,462		47,549
Recoverable loss on reacquired debt	3,112		3,238
Deferred pipeline record collection costs	42,454		54,008
APT annual System Safety and Integrity Rider	35,721		—


Other	15,288		19,096
	$	451,524	$	554,928
Regulatory liabilities:
Regulatory excess deferred taxes (2)	$	283,073	$	384,513

Regulatory cost of removal obligation	605,449		582,867
Deferred gas costs	20,188		23,093

APT annual adjustment mechanism	48,544		49,894
Pension and postretirement benefit costs	199,838		215,913
Other	30,280		28,054
	$	1,187,372	$	1,284,334

(1)Infrastructure mechanisms in Texas, Louisiana and Tennessee allow for the deferral of all eligible expenses associated with capital expenditures incurred pursuant to these rules, including the recording of interest on deferred expenses until the next rate proceeding (rate case or annual rate filing), at which time investment and costs would be recoverable through base rates.

(2)Regulatory excess deferred taxes represent changes in our net deferred tax liability related to our cost of service ratemaking due to the enactment of Tax Cuts and Jobs Act of 2017 (the "TCJA") and a Kansas legislative change enacted in fiscal 2020. See Note 12 to the condensed consolidated financial statements for further information.

Securitization

Kansas

See Note 9 to the condensed consolidated financial statements for securitization and other information related to Atmos Energy Kansas Securitization I, LLC (AEK).

Texas

In March 2023, the Texas Natural Gas Securitization Finance Corporation (the Finance Corporation), with the authority of the Texas Public Finance Authority (TPFA), 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. We began collecting the customer rate relief

charges on October 1, 2023, and any such property collected is solely owned by the Finance Corporation and not available to pay creditors of Atmos Energy.

Additionally, we deferred $32.4 million in carrying costs incurred after September 1, 2022. Effective October 1, 2023, we began recovering a portion of these carrying costs. We have recorded $6.1 million and $21.2 million as a current asset in other current assets as of June 30, 2024 and September 30, 2023. We anticipate recovering the remaining $6.4 million in future regulatory filings and have recorded this amount as a long-term asset in deferred charges and other assets as of June 30, 2024.