Utility Regulatory Assets and Liabilities and Regulatory Matters

3 Months Ended

Dec. 31, 2019

Utility Regulatory Assets and Liabilities and Regulatory Matters

Note 8 — Utility Regulatory Assets and Liabilities and Regulatory Matters

For a description of the Company’s regulatory assets and liabilities other than those described below, see Note 9 in the Company’s 2019 Annual Report. Other than removal costs, UGI Utilities currently does not recover a rate of return on its regulatory assets listed below. The following regulatory assets and liabilities associated with UGI Utilities are included on the Condensed Consolidated Balance Sheets:



	December 31, 2019		September 30, 2019		December 31, 2018
Regulatory assets:
Income taxes recoverable	$	121.2	$	115.2	$	115.2
Underfunded pension and postretirement plans	175.2		178.6		85.3
Environmental costs	57.5		59.5		58.5
Removal costs, net	26.7		28.3		31.3
Other	9.9		14.0		8.5
Total regulatory assets	$	390.5	$	395.6	$	298.8
Regulatory liabilities (a):
Postretirement benefit overcollections	$	14.1	$	14.5	$	17.3
Deferred fuel and power refunds	6.3		6.1		22.2
State tax benefits — distribution system repairs	26.3		25.0		23.5
PAPUC Temporary Rates Order	25.0		31.3		24.8
Excess federal deferred income taxes	278.1		279.5		280.9
Other	1.4		2.4		4.8
Total regulatory liabilities	$	351.2	$	358.8	$	373.5


(a)	Regulatory liabilities are included in “Other current liabilities” and “Other noncurrent liabilities” on the Condensed Consolidated Balance Sheets.

Deferred fuel and power refunds. Gas Utility’s and Electric Utility’s tariffs contain clauses that permit recovery of all prudently incurred purchased gas and power costs through the application of PGC rates in the case of Gas Utility and DS tariffs in the case of Electric Utility. These clauses provide for periodic adjustments to PGC and DS rates for differences between the total amount of purchased gas and electric generation supply costs collected from customers and recoverable costs incurred. Net undercollected costs are classified as a regulatory asset and net overcollections are classified as a regulatory liability.

Gas Utility uses derivative instruments to reduce volatility in the cost of gas it purchases for retail core-market customers. Realized and unrealized gains or losses on natural gas derivative instruments are included in deferred fuel and power costs or refunds. Net unrealized (losses) gains on such contracts at December 31, 2019, September 30, 2019 and December 31, 2018 were $(2.9), $(2.2) and $0.8, respectively.

Other Regulatory Matters

Base Rate Filings. On January 28, 2020, Gas Utility filed a request with the PAPUC to increase its base operating revenues for residential, commercial and industrial customers by $74.6 annually. The increased revenues would fund ongoing system improvements and operations necessary to maintain safe and reliable natural gas service and to continue funding programs designed to promote and reward customers’ efforts to increase efficient use of natural gas. Gas Utility requested that the new gas rates become effective March 28, 2020. However, the PAPUC typically suspends the effective date for general base rate proceedings for a period not to exceed nine months after the filing date to allow for investigation and public hearings. UGI Utilities cannot predict the timing or the ultimate outcome of the rate case review process.

On January 28, 2019, Gas Utility filed a rate request with the PAPUC to increase the base operating revenues for residential, commercial, and industrial customers throughout its Pennsylvania service territory by an aggregate $71.1. On October 4, 2019, the PAPUC issued a final Order approving a settlement that permits Gas Utility, effective October 11, 2019, to increase its base distribution revenues by $30.0 under a single consolidated tariff, approved a plan for uniform class rates, and permits Gas Utility to extend its Energy Efficiency and Conservation and Growth Extension Tariff programs by an additional term of five years. The PAPUC’s final Order approved a negative surcharge, to return to customers $24.0 of tax benefits experienced by Gas Utility over the period January 1, 2018 to June 30, 2018, plus applicable interest, in accordance with the May 17, 2018 PAPUC Order, which became effective for a twelve-month period beginning on October 11, 2019, the effective date of Gas Utility’s new base rates.

On October 25, 2018, the PAPUC approved a final order providing for a $3.2 annual base distribution rate increase for Electric Utility, effective October 27, 2018. As part of the final PAPUC Order, Electric Utility provided customers with a one-time $0.2 billing credit associated with 2018 TCJA tax benefits. On November 26, 2018, the Pennsylvania Office of Consumer Advocate filed an appeal to the Pennsylvania Commonwealth Court challenging the PAPUC’s acceptance of UGI Utilities’ use of a fully projected future test year and handling of consolidated federal income tax benefits. On January 15, 2020, the Pennsylvania Commonwealth Court affirmed the PAPUC Order adopting UGI Utilities’ position on both issues. The Office of Consumer Advocate has the right to seek an appeal of the Pennsylvania Commonwealth Court Order to the Pennsylvania Supreme Court.