RGC RESOURCES INC

YEARS ENDED September 30, 2024 AND 2023

Principles of Consolidation—RGC Resources, Inc. is an energy services company primarily engaged in the sale and distribution of natural gas. The consolidated financial statements include the accounts of Resources and its wholly owned subsidiaries: Roanoke Gas and Midstream. Roanoke Gas is a natural gas utility, which distributes and sells natural gas to approximately 62,500 residential, commercial and industrial customers within its service areas in Roanoke, Virginia and the surrounding localities. The Company’s business is seasonal in nature as a majority of natural gas sales are for space heating during the winter season. Roanoke Gas is regulated by the SCC. Midstream is a wholly owned subsidiary created primarily to invest in the LLC.

The Company follows accounting and reporting standards established by the FASB and the SEC, including certain provisions allowed under the smaller reporting company exceptions.

Rate Regulated Basis of Accounting—The Company’s regulated operations follow the accounting and reporting requirements of ASC980, Regulated Operations. The economic effects of regulation can result in a regulated company deferring costs that have been or are expected to be recovered from customers in a period different from the period in which the costs would be charged to expense by an unregulated enterprise. When this situation occurs, costs are deferred as assets in the consolidated balance sheet (regulatory assets) and recorded as expenses when such amounts are reflected in rates. Additionally, regulators can impose liabilities upon a regulated company for amounts previously collected from customers and for current collection in rates of costs that are expected to be incurred in the future (regulatory liabilities). In the event the provisions of ASC980 no longer apply to any or all regulatory assets or liabilities, the Company would write off such amounts and include them in the consolidated statements of income and comprehensive income in the period which ASC980 no longer applied.

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Regulatory assets and liabilities included in the Company’s consolidated balance sheets as of* September 30, 2024* and2023 are as follows:

Amortization of $116,085 and $213,450 of regulatory assets for the years ended* September 30, 2024and2023*, respectively, is included in operations and maintenance expense on the consolidated statements of income. Amortization of $211,863 and $237,911 of regulatory assets for the years ended* September 30, 2024and2023,* respectively, is included in other income, net on the consolidated statements of income. Amortization of $114,187 of regulatory assets for both years ended* September 30, 2024and2023* is included in interest expense on the consolidated statements of income.

As of* September 30, 2024*, the Company had regulatory assets in the amount of $9,548,954 on which the Company didnot earn a return during the recovery period.

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Utility Property and Depreciation—Utility property is stated at original cost and includes direct labor and materials, contractor costs, and all allocable overhead charges. The Company applies the group method of accounting, where the costs of like assets are aggregated and depreciated by applying a rate based on the average expected useful life of the assets. In accordance with Company policy, expenditures for depreciable assets with a life greater thanone year are capitalized, along with any upgrades or improvements to existing assets, when such upgrades or improvements significantly improve or extend the original expected useful life. Expenditures for maintenance, repairs, and minor renewals and betterments are expensed as incurred. The original cost of depreciable property retired is removed from utility property and charged to accumulated depreciation. The cost of asset removals, less salvage, is charged to “regulatory cost of retirement obligations” or “asset retirement obligations” as explained under Asset Retirement Obligations below.

Utility property is composed of the following major classes of assets:

Provisions for depreciation are computed principally at composite straight-line rates over a range of periods. Rates are determined by depreciation studies, which are required to be performed at least every 5 years on the regulated utility assets of Roanoke Gas. The most recent depreciation study was completed and approved by the SCC staff in fiscal2024. The composite weighted-average depreciation rate was 3.26% and 3.30% for the years ended* September 30, 2024* and2023, respectively.

The composite rates are composed oftwo components,one based on average service life andone based on cost of retirement. As a result, the Company accrues the estimated cost of retirement of long-lived assets through depreciation expense. These retirement costs arenot a legal obligation but rather the result of cost-based regulation and are accounted for under the provisions of ASC980. Such amounts are classified as a regulatory liability.

The Company reviews long-lived assets and certain identifiable intangibles for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset* may**not* be recoverable. These reviews havenot identified any impairments which would have a material effect on the results of operations or financial condition.

In fiscal2020, Roanoke Gas implemented the application of AFUDC related to infrastructure investments associated withtwo gate stations that interconnect with the MVP. Both gate stations were placed in service in fiscal2024 upon MVP becoming operational. In fiscal2022, the SCC approved the application of AFUDC on the RNG project during its construction phase. This treatment allowed capitalizing both the equity and debt financing costs during the construction phases. For the year ended* September 30, 2023,the Company capitalized $76,785 of debt financing costs and $285,900 of equity financing costs related to the RNG project thereby affecting interest expense and other income, net on the consolidated statements of income. The RNG project was completed and placed in service in March 2023,thus the Company didnot* capitalize any financing costs related to these projects for the year ended* September 30, 2024.See Note4* for further information.

Asset Retirement Obligations—ASC410, Asset Retirement and Environmental Obligations, requires entities to record the fair value of a liability for an ARO when there exists a legal obligation for the retirement of the asset. When the liability is initially recorded, the entity capitalizes the cost, thereby increasing the carrying amount of the underlying asset. In subsequent periods, the liability is accreted, and the capitalized cost is depreciated over the useful life of the underlying asset. The Company has recorded AROs for its future regulatory obligations related to purging and capping its distribution mains and services upon retirement, although the timing of such retirements is uncertain.

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The following is a summary of the AROs:

Cash, Cash Equivalents and Short-Term Investments—From time to time, the Company will have balances on deposit at banks in excess of the amount insured by the FDIC. The Company hasnot experienced any losses on these accounts and doesnot consider these amounts to be at risk. For purposes of the consolidated statements of cash flows, the Company considers all highly liquid debt instruments purchased with an original maturity ofthree months or less to be cash equivalents.

Customer Receivables and Allowance for Credit Losses—Accounts receivable include amounts billed to customers for natural gas sales and related services and gas sales occurring subsequent to normal billing cycles but before the end of the period. The Company provides an estimate for losses on these receivables by utilizing historical information, current account balances, account aging and current economic conditions. Customer accounts are charged off annually when deemed uncollectible or when turned over to a collection agency for action.

A reconciliation of changes in the allowance for credit losses is as follows:

Lease Accounting—The Company leases certain assets including office space and land classified as operating leases. The Company determines if an arrangement is a lease at inception of the agreement based on the terms and conditions in the contract. The operating lease ROU assets and operating lease liabilities are recognized as the present value of the future minimum lease payments over the lease term at commencement date. As most of the leases donot provide an implicit rate, the Company uses an estimate of its secured incremental borrowing rate based on the information available at commencement date in determining the present value of future payments. The incremental borrowing rate is determined by management aided by inquiries of athird party. The operating lease ROU asset also is adjusted for any lease payments made and excludes lease incentives and initial direct costs incurred. The Company’s lease terms* mayinclude options to extend or terminate the lease at certain dates, typically at the Company’s own discretion. The Company regularly evaluates the renewal options and when they are reasonably certain of exercise, the Company includes the renewal period in its lease term. Lease expense for minimum lease payments is recognized on a straight-line basis over the term of the agreement. The Company made an accounting policy election that payments under agreements with an initial term of12* months or less willnot be included on the consolidated balance sheet but will be recognized in the consolidated statements of operations on a straight-line basis over the term of the agreement.

Financing Receivables—Financing receivables represent a contractual right to receive money either on demand, or on fixed or determinable dates, and are recognized as assets on the entity’s balance sheet. Trade receivables, resulting from the sale of natural gas and other services to customers, are the Company's primary type of financing receivables. These receivables are short-term in nature with a provision for credit losses included in the consolidated financial statements.

Inventories—Natural gas in storage and materials and supplies inventories are recorded at average cost. Natural gas storage injections are priced at the purchase cost at the time of injection and storage withdrawals are priced at the weighted average cost of gas in storage. Materials and supplies are removed from inventory at average cost.

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Unbilled Revenues—The Company bills its natural gas customers on a monthly cycle; however, the billing cycle for most firm customers doesnot coincide with the accounting periods used for financial reporting. As the Company recognizes revenue when gas is delivered, an accrual is made to estimate revenues for natural gas delivered to customers butnot billed during the accounting period. The amounts of unbilled revenue receivable included in accounts receivable on the consolidated balance sheets at* September 30, 2024* and2023 were $1,294,798 and $1,240,097, respectively.

Income Taxes—Income taxes are accounted for using the asset and liability method. Under the asset and liability method, deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the years in which those temporary differences are expected to be recovered or settled. A valuation allowance against deferred tax assets is provided if it is more likely thannot the deferred tax asset willnot be realized. The Company and its subsidiaries file consolidated state and federal income tax returns.

Debt Expenses—Debt issuance expenses are deferred and amortized over the lives of the debt instruments. The unamortized balances are offset against the carrying value of long-term debt.

Over/Under-Recovery of Natural Gas Costs—Pursuant to the provisions of the Company’s PGA clause, the SCC provides the Company with a method of passing along to its customers increases or decreases in natural gas costs incurred by its regulated operations, including gains and losses on natural gas derivative hedging instruments, if utilized. On at least a quarterly basis, the Company files a PGA rate adjustment request with the SCC to increase or decrease the gas cost component of its rates, based on projected price and activity. Once administrative approval is received, the Company adjusts the gas cost component of its rates to reflect the approved amount. As actual costs and usage will differ from the projections used in establishing the PGA rate, the Company* mayeither over-recover or under-recover its actual gas costs during the period. Any difference between actual costs incurred and costs recovered through the application of the PGA is recorded as a regulatory asset or liability. At the end of the deferral period, the balance of the net deferred charge or credit is amortized over an ensuing12*-month period as amounts are reflected in customer bills.

Fair Value—Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between willing market participants at the measurement date. The Company determines fair value based on the following fair value hierarchy which prioritizes each input to the valuation methods intoone of the followingthree broad levels:

The fair value hierarchy gives the highest priority to unadjusted quoted prices in active markets (Level1) and the lowest priority to unobservable inputs (Level3). All fair value disclosures are categorized withinone of thethree categories in the hierarchy based on the lowest level that is significant to the valuation. See fair value disclosures below and in Notes8 and12.

Use of Estimates—The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Excise and Sales Taxes—Certain excise and sales taxes imposed by the state and local governments in the Company’s service territory are collected by the Company from its customers. These taxes are passed through to the state and local governments and included within accounts payable on the Company's consolidated balance sheets.

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Earnings Per Share—Basic EPS and diluted EPS are calculated by dividing net income by the weighted-average common shares outstanding during the period and the weighted-average common shares outstanding during the period plus potential dilutive common shares, respectively. Potential dilutive common shares are calculated in accordance with the treasury stock method, which assumes that proceeds from the exercise of all options are used to repurchase common stock at market value. The amount of shares remaining after the proceeds are exhausted represents the potentially dilutive effect of the securities. The computation of diluted EPS for the years ended* September 30, 2024and2023* excludes potentially dilutive shares of 2,542 and 1,880, respectively, because to include them would be antidilutive for the period. However, these shares could potentially dilute EPS in the future. A reconciliation of basic and diluted EPS is presented below:

Business and Credit Concentrations—The primary business of the Company is the distribution of natural gas to residential, commercial and industrial customers in its service territories.

No sales to individual customers accounted for more than 5% of total revenue in any period. No individual customer amounted to more than 5% of total accounts receivable at* September 30, 2024and2023.*

Roanoke Gas currently holds the only franchises and/or CPCNs to distribute natural gas in its service area. These franchises generally extend for multi-year periods, are renewable by the municipalities and are intended for perpetual duration, including exclusive franchises in the cities of Roanoke, Salem and the Town of Vinton. All franchises are set to expire* December 31, 2035.*

Roanoke Gas is currently served bythree primary pipelines that provide the natural gas supplied to the Company’s customers. Depending upon weather conditions and the level of customer demand, failure ofone or all of these transmission pipelines could have a major adverse impact on the Company.

Derivative and Hedging Activities—ASC815, Derivatives and Hedging, requires the recognition of all derivative instruments as assets or liabilities in the Company’s consolidated balance sheet and measurement of those instruments at fair value.

The Company’s hedging and derivatives policy allows management to enter into derivatives for the purpose of managing the commodity and financial market risks of its business operations. The Company’s hedging and derivatives policy specifically prohibits the use of derivatives for speculative purposes. The key market risks that the Company* may*hedge against include the price of natural gas and the cost of borrowed funds.

From time to time, the Company has entered into collars, swaps and caps for the purpose of hedging the price of natural gas in order to provide price stability during the winter months. The fair value of these instruments is recorded in the consolidated balance sheets with the offsetting entry to either under- or over-recovery of gas costs. Net income and other comprehensive income arenot affected by the change in market value as any cost incurred or benefit received from these instruments is recoverable or refunded through the PGA as the SCC allows for full recovery of prudent costs associated with natural gas purchases. At* September 30, 2024* and2023, the Company hadno outstanding derivative instruments for the purchase of natural gas.

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The Company hasfour interest rate swaps associated with certain of its variable rate debt. Roanoke Gas hastwo variable rate term notes in the amounts of $15 million and $10 million, with corresponding swap agreements to convert the variable interest rates into fixed rates of 2.00% and 2.49%, respectively. Midstream hastwo swap agreements corresponding to the $14 million and $8 million variable rate term notes. The swap agreements convert thesetwo notes into fixed rate instruments with effective interest rates of 3.24% and 2.443%, respectively. The swaps qualify as cash flow hedges with changes in fair value reported in other comprehensive income.No portion of the swaps were deemed ineffective during the periods presented.

See Notes7 and8 for additional information on the swaps and fair value.

Other Comprehensive Income (Loss)—A summary of other comprehensive income is provided below:

The amortization of actuarial gains or losses are included as a component of net periodic pension and postretirement benefit costs under other income, net in the consolidated statements of income.

Composition of AOCI:

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Recently Issued Accounting Standards

In* March 2020,the FASB issued ASU2020*-04, Reference Rate Reform (Topic848*) - Facilitation of the Effects of Reference Rate Reform on Financial Reporting.In combination with ASU2021*-01 and ASU2022-06, the ASU provides temporary optional guidance to ease the potential burden in accounting for and recognizing the effects of reference rate change on financial reporting. The new guidance applies specifically to contracts and hedging relationships that reference LIBOR, or any other referenced rate that is expected to be discontinued due to reference rate reform. The new guidance is effective for the Company through* December 31, 2024.The Intercontinental Exchange Benchmark Administration, the administrator for LIBOR and other inter-bank offered rates, announced that the LIBOR rates forone*-day,one-month,six-month andone-year would cease publication in* June 2023and thatno* new financial contracts* mayuse LIBOR after December 31, 2021.Subsequent to June 30, 2023,theone*-day,one-month,six-month, andone-year LIBOR settings will continue to be published under an unrepresentative synthetic methodology until the end of* September 2024in order to bridge the transition to other reference rates. The Company has transitioned all LIBOR-based variable rate note to a new reference rate as of September**30,* 2024. Each of the revised notes has a corresponding swap that was also transitioned to align with the related notes. See Note7 and8 for more information.

In* November 2023,the FASB issued ASU2023*-07, Segment Reporting (Topic280*) - Improvements to Reportable Segment Disclosures*. The new guidance is designed to provide users of financial statements with enhanced disclosures regarding the information provided to the chief operating decision maker (CODM) and how the CODM uses the information in assessing the performance of each segment. The new guidance is effective for the Company for fiscal year beginning* October 1, 2024and interim periods within fiscal year beginning October 1, 2025.*The Company is currently evaluating the new standard and determining the additional disclosure requirements.

In* December 2023,the FASB issued ASU2023*-09, Income Taxes (Topic740*): Improvements to Income Tax Disclosures*. The new guidance requires that on an annual basis public business entities disclose specific categories in the rate reconciliation table and provide additional information for reconciling items that meet a quantitative threshold (items equal to or greater than5 percent of the amount computed by multiplying pretax income or loss by the applicable statutory rate). The required disclosures will provide more granularity regarding the payment of income taxes to federal, state and foreign entities. The Company doesnot expect certain requirements of this ASU to have a significant impact to its current disclosures as all of its operations are domestic and reside intwo states. Changes to the rate reconciliation table will result in additional disclosure. The new guidance is effective for the Company for annual periods beginning* October 1, 2025.*

In* March 2024,the SEC issued its final rule that requires registrants to provide climate disclosures in their annual reports and registration statements. The new guidance requires that registrants provide information about specified financial statement effects of severe weather events and other natural conditions, certain carbon offsets and renewable energy certificates, and material impacts on financial estimates and assumptions in the footnotes to financial statements. The rule also requires additional disclosures outside of the financial statements including governance and oversight of material climate-related risks, the material impact of climate risks on the company's strategy, business model and outlook, risk management processes for material climate-related risks and material climate targets and goals. The Company is currently evaluating the new rule and determining the impact of the additional disclosure requirements, as well as the data needed and the source of that data to comply with required disclosures. The new rule is currently effective for fiscal years beginning in2027* for smaller reporting companies. The final rule was scheduled to become effective* May 28, 2024;however, the SEC has voluntarily stayed the rule's effective date pending judicial review. Depending on when the legal challenges are resolved, the mandatory compliance date may*be retained or delayed.

In* November 2024,the SEC issued ASU2024*-03, Income Statement - Reporting Comprehensive Income (Topic220*): Expense Disaggregation Disclosures. The new guidance requires public business entities to disclose certain additional detail about expenses including, among other items, purchases of inventory, employee compensation, depreciation and intangible asset amortization included within each income statement expense line items within continuing operations. The guidance also requires disclosure of the total amount of selling expenses and the Company’s definition of selling expenses. Such disclosures must be made on an annual and interim basis and integrated with existing disclosure requirements in a tabular format in the footnotes to the financial statements. The new guidance is effective for the Company for fiscal year beginning October 1, 2027and interim periods within fiscal year beginning October 1, 2028.*The Company is currently assessing the impacts of the new guidance on its financial statement disclosures.

Other accounting standards that have been issued or proposed by the FASB or other standard–setting bodies arenot currently applicable to the Company or arenot expected to have a significant impact on the Company’s financial position, results of operations and cash flows.

Reclassification

Certain prior year amounts have been reclassified to conform to current year presentations.

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The Company assesses new contracts and identifies related performance obligations for promises to transfer distinct goods or services to the customer. Revenue is recognized when performance obligations have been satisfied. In the case of Roanoke Gas, the Company contracts with its customers for the sale and/or delivery of natural gas.

The following tables summarize revenue by customer, product and income statement classification for the years ended* September 30:*

Gas utility revenues

Substantially all of Roanoke Gas’ revenues are derived from rates authorized by the SCC through its tariffs. Based on its evaluation, the Company has concluded that these tariff-based revenues fall within the scope of ASC606. Tariff rates represent the transaction price. Performance obligations include the procurement and transport of natural gas through the Company's distribution system to customers. The delivery of natural gas to customers results in the satisfaction of the Company’s respective performance obligations over time.

All customers are billed monthly based on consumption as measured by metered usage with payments due20 days from the rendering of the bill. Revenue is recognized as bills are issued for natural gas that has been delivered or transported. In addition, the Company utilizes the practical expedient that allows an entity to recognize the invoiced amount as revenue, if that amount corresponds to the value received by the customer. Since customers are billed tariff rates, there isno variable consideration in the transaction price.

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Unbilled revenue is included in residential and commercial revenues in the preceding table. Natural gas consumption is estimated for the period subsequent to the last billed date and up through the last day of the month. Estimated volumes and approved tariff rates are utilized to calculate unbilled revenue. The following month, the unbilled estimate is reversed, the actual usage is billed and a new unbilled estimate is calculated. The Company obtains metered usage for transportation and interruptible customers at the end of each month, thereby eliminating any unbilled consideration for these rate classes.

Other revenues

Other revenues primarily consist of miscellaneous fees and charges, utility-related revenuesnot directly billed to utility customers and billings for non-utility activities. Customers are invoiced monthly based on services provided for these activities. The Company utilizes the practical expedient allowing revenue to be recognized based on invoiced amounts. The transaction price is based on a contractually predetermined rate schedule; therefore, the transaction price represents total value to the customer andno variable price consideration exists.

Alternative revenue program revenues

ARPs, which fall outside the scope of ASC606, are SCC approved mechanisms that allow for the adjustment of revenues for certain broad, external factors, or for additional billings if the entity achieves certain performance targets. The Company's ARPs include its WNA, which adjusts revenues for the effects of weather temperature variations as compared to the30-year average; the SAVE Plan over/under collection mechanism, which adjusts revenues for the differences between SAVE Plan revenues billed to customers and the revenues earned, as calculated based on the timing and extent of infrastructure replacement completed during the period; and the RNG over/under collection mechanism, which adjusts revenues similar to the SAVE Plan, but is calculated based on the timing and costs associated with owning, operating and maintaining the RNG facility. These amounts are ultimately collected from, or returned to, customers through future rate changes approved by the SCC.

Customer accounts receivable and liabilities

Accounts receivable, as reflected in the condensed consolidated balance sheets, includes both billed and unbilled customer revenues, as well as amounts that arenot related to customers. The balances of customer receivables are provided below:

(1) Included in "Accounts receivable, net" in the consolidated balance sheet. Amounts shown net of reserve for bad debts.

The Company didnot incur any significant costs to obtain contracts during the period. Certain customers elect to pay even amounts monthly, giving rise to assets and liabilities that are in the table above. All amounts clear annually.

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Operating segments are defined as components of an enterprise for which separate financial information is available and is evaluated regularly by the Company's executive management in deciding how to allocate resources and assess performance. The Company uses operating income and equity in earnings to assess segment performance.

Intersegment transactions are recorded at cost.

The reportable segments disclosed herein are defined as follows:

Gas Utility - The natural gas distribution segment of the Company generates revenue from its tariff rates and other regulatory mechanisms through which it provides for the sale and distribution of natural gas to its residential, commercial and industrial customers.

Investment in Affiliates - The investment in affiliates segment reflects the income generated through the activities of the Company's investment in the LLC.

Information related to the segments of the Company are provided below:

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The SCC exercises regulatory authority over the natural gas operations of Roanoke Gas. Such regulation encompasses terms, conditions and rates to be charged to customers for natural gas service, safety standards, service extension and depreciation.

In response to continued inflationary pressures, Roanoke Gas filed a general rate application on* February 2, 2024with the SCC seeking to increase its non-gas base rates by $4.33 million and its permitted return on equity from 9.44% to 10.35% reflecting its higher cost of capital, including higher interest expense. The SCC permitted the Company to implement its new rates on an interim basis for customer billings on or after July 1, 2024,subject to refund. On October 16, 2024,the Company reached a settlement with the SCC staff on all outstanding issues in the case. Under the terms of the settlement, the Company agreed to an annual incremental revenue requirement increase of $4.08 million based on a return on equity of 9.90%. The Company expects a final decision from the Commission by thesecond* quarter of fiscal2025.

The SCC requires regulated utilities within the state to perform a depreciation study everyfive years and to submit the study for SCC approval. The Company's prior depreciation rates were based on the last depreciation study approved by the SCC in2019. As part of the general rate application filed in* February 2024,the Company submitted its requisite depreciation study and proposed new depreciation rates. In July 2024,the Company received administrative approval from the SCC staff that authorized the new depreciation rates and instructed the Company to implement the new rates retroactive to October 1, 2023.As a result, in thefourth* quarter the Company recorded an approximate $226,000 reduction in annual depreciation expense for the fiscal year ended* September 30, 2024.*

On* December 2, 2022,Roanoke Gas filed an expedited rate application with the SCC seeking an $8.55 million annual increase in its non-gas base rates, of which $4.05 million was being recovered through the SAVE Rider. The proposed interim rates went into effect January 1, 2023,subject to refund. In thefourth* quarter of fiscal2023, the Company reached a settlement with the SCC staff on all outstanding issues in the case. Under the terms of the settlement, the Company agreed to an annual incremental revenue requirement of $7.45 million. The Company began billing the approved rates effective* October 1, 2023.The SCC issued its Final Order in the matter on December 19, 2023in which it approved the settlement agreement in its entirety. Refunds, which had previously been accrued, were made to customers in February 2024.*

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On* August 31, 2023,the SCC approved the Company's new SAVE Plan and Rider with rates effective October 1, 2023.Under this plan, Roanoke Gas recovers costs associated with an estimated $8.5 million in SAVE eligible investment in fiscal2024* and an estimated cumulative investment of $49.5 million over the proposedfive-year plan period ending* September 30, 2028.The plan was approved with a revenue requirement of approximately $366,000 for fiscal2024.* On* June 28, 2024,Roanoke Gas filed for approval of an updated annual SAVE Rider rate to become effective October 1, 2024.The proposed SAVE rate is based on an estimated $9.13 million of SAVE eligible investment during fiscal2025* and a revenue requirement of $1.53 million that reflects the cost of capital settled in the2024 rate case. The Commission approved the Company’s updated SAVE Rider on* September 24, 2024,which contained a lower revenue requirement of $1.39 million, largely attributable to SCC Staff’s reliance on the overall cost of capital approved in the2022* rate case. The difference in the revenue requirements will be trued-up in subsequent SAVE Rider updates to the overall cost of capital settled in the2024 rate case.

By Order dated* September 1, 2023,the SCC approved the Company’s RNG Rider effective for the period October 1, 2023through September 30, 2024.In its Order, the SCC directed the Company to file an application to update the RNG Rider by May 30, 2024.In compliance with the SCC’s directive, on May 30, 2024,Roanoke Gas filed for an update to become effective October 1, 2024.The revenue requirement associated with the proposed RNG Rider is $1.56 million, offset by the sale of environmental credits in the amount of $1.11 million, as well as credits for the over-recovery of costs during the prior year of approximately $35,000, resulting in a net revenue requirement of approximately $415,000 reflecting the overall cost of capital proposed in the2024* rate case. The Commission approved the Company’s updated RNG Rider on* September 4, 2024,which contained a lower net revenue requirement of approximately $356,000, largely attributable to SCC Staff’s reliance on the overall cost of capital approved in the2022* rate case. The difference in the revenue requirements will be trued-up in subsequent RNG Rider updates at the overall cost of capital approved in the2024 rate case.

On* June 2, 2022,Roanoke Gas filed an application with the SCC to acquire certain natural gas distribution assets from a local housing authority. Under this application, the Company requested the approval to acquire such facilities atfive separate apartment complexes, located in the Company’s service territory, that were under housing authority management. Under the proposed plan, the housing authority would renew existing natural gas distribution facilities to include mains, services, and meter installations and then transfer ownership of these facilities to Roanoke Gas. In turn, Roanoke Gas would assume responsibility for the operation and maintenance of these assets and recognize a gain related to the asset acquisition equal to the cost associated with the renewal. The SCC approved the application in July 2022.*

The housing authority completed the transfer oftwo apartment complexes to Roanoke Gas in fiscal2022, one complex in fiscal2023 andone complex in fiscal2024. The housing authority has notified Roanoke Gas that it intends to complete the remaining complex in fiscal2025. Roanoke Gas recorded these assets and recognized pre-tax income of approximately $219,000, $311,000 and $782,000 in fiscal2022, 2023 and2024, respectively, by analogy to ASC958. The assets are included under utility property, in service on the consolidated balance sheets and the income is recorded in other income, net on the consolidated statements of income. There areno ongoing obligations between the parties for the properties already transferred.

Midstream owns a less than 1% equity investment in the LLC that owns and operates the MVP. The Company accounts for its interest in the LLC under the equity method of accounting given the LLC maintains specific ownership accounts for each investor, and also considering the Company's rights under the LLC management agreement and the Company's involvement as a customer of the MVP. The Company has been using the equity method since the inception of its investment in fiscal2016. Following receipt of authorization from the FERC, the MVP entered commercial operation on* June 14, 2024and became available for interruptible or short-term firm transportation service. On July 1, 2024,the MVP commenced long-term firm capacity obligations. Midstream is also a less than 1% investor, accounted for under the cost method, in Southgate, which is in the design and permitting phase. Completion of the Southgate pipeline is targeted for June 2028.*

While under construction, AFUDC provided the majority of the income recognized by Midstream. The amount of AFUDC recognized during the current and prior year is included in the equity in earnings of unconsolidated affiliate in the tables below. AFUDC ceased in* June 2024*when the pipeline went into commercial operation.

The Company participates in the earnings of the LLC proportionate to its level of investment. With the MVP now in operation, the Company recognizes its share of earnings from the LLC, favorably adjusted for a basis difference between the Company's proportional share of assets and its carrying value that arose when the Company recorded an other-than-temporary impairment of its investment in2022. This basis difference amortization is a favorable non-cash adjustment to income over the operational life of the MVP, which is40 years. The Company's share of earnings from the LLC and the basis difference amortization are presented under equity in earnings of unconsolidated affiliate on the consolidated statements of income. The Company participates in quarterly cash distributions by the LLC, thefirst of which was in* October 2024.*The Company's share was approximately $800,000.

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Midstream assesses the value of its investment in the LLC on at least a quarterly basis, andno impairment indicators were identified in fiscal2024 or2023.

Funding for Midstream's investments has been provided through equity contributions from Resources and unsecured promissory notes as detailed in Note7.

The investments in the LLC are included in the consolidated balance sheets as follows:

The change in the investment in unconsolidated affiliates is provided below:

Summary unaudited financial statements of MVP are presented below. Southgate financial statements, which are accounted for under the cost method, arenot included:

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On* March 24, 2023,Roanoke Gas entered into an unsecured Revolving Note in the principal amount of $25 million. On March 31, 2024,the Revolving Note was amended to extend the maturity date to March 31, 2025.Other key terms and requirements of the Revolving Note were retained. The Revolving Note's variable interest rate is based upon Term SOFR plus 110 basis points and provides multiple tier borrowing limits to accommodate seasonal borrowing demands. The Company's total borrowing limits during the term of the Revolving Note range from $15 million to $25 million. As of September 30, 2024,*the Company had an outstanding balance of $11,166,181 under the Revolving Note.

The Company's total available borrowing limits for the remaining term are as follows:

A summary of the line-of-credit follows:

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Long-term debt consisted of the following:

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On* March 6, 2024,Midstream entered into the Sixth Amendment to Credit Agreement and related Promissory Notes on the non-revolving credit facility. The Sixth Amendment revised the interest rate from Term SOFR plus 2.00% to Term SOFR plus 2.00% subject to adjustment to Term SOFR plus 1.75% and Term SOFR plus 1.55% upon meeting certain milestones. The Sixth Amendment also consolidated the Promissory Notes toone* Promissory Note withone lender, increased the available non-revolving credit facility to $25 million, and extended the maturity date to* December 31, 2025.*All other terms and requirements remain unchanged.

On* May 2, 2024,Midstream established a new $9 million line of credit facility. The interest rate on the borrowings under the facility is SOFR plus 2.215%; the arrangement included a 0.40% upfront fee and 0.125% unused line fee. The facility matures on May 2, 2026.*

On* May 29, 2024,Midstream paid in full the remaining $9 million term note payable that was set to mature June 1, 2024*with proceeds from the new line of credit.

On* June 28, 2023,Midstream amended and restated its $14 million and $8 million Term Notes initially entered into on June 12, 2019and November 1, 2021,respectively. The amendments revised each of the original Term Note's interest rate from LIBOR plus 115 basis points to Daily Simple SOFR plus 126.448 basis points, effective July 1, 2023.On March 6, 2024,Midstream further amended and restated its $8 million Term Note. The amendment suspended quarterly principal payments beginning April 1, 2024through January 1, 2025.Principal payments will commence again on April 1, 2025.All other terms and requirements of the Term Notes were retained. In conjunction with the original amendment of the Term Notes in June 2023,Midstream also amended the corresponding interest rate swaps associated with the Term Notes. The amendments provided for the floating rates on the interest rate swaps to continue to match the rate of the associated notes as well as retain the overall fixed interest rates of 3.24% and 2.443%, respectively. The interest rate swap related to the $8 million Term Note wasnot* amended on* March 6, 2024.*

On* March 24, 2023,Roanoke Gas amended and restated the $10 million Term Note originally entered into on September 24, 2021.The amendment revised the original Term Note's interest rate from LIBOR plus 100 basis points to Term SOFR plus 100 basis points. All other terms and requirements of the original Term Note were retained. The effective date of the Amended Term Note was April 1, 2023.In addition, on April 3, 2023,the interest rate swap was amended to align with the Amended Term Note and retained the fixed interest rate of 2.49%. In connection with the Revolving Note and Amended Term Note, Roanoke Gas also amended and restated the Loan Agreement dated September 24, 2021.The amendment provides for borrowing limits on the Revolving Note and amends certain financial conditions required of Roanoke Gas and Resources. All other terms and requirements of the original Loan Agreement were retained. See Note1* for additional information regarding the interest rate swap.

Debt issuance costs are amortized over the life of the related debt. As of* September 30, 2024* and2023, the Company also had an unamortized loss on the early retirement of debt of $1,141,872 and $1,256,059, respectively, which has been deferred as a regulatory asset and is being amortized over a 20-year period.

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All of the debt agreements set forth certain representations, warranties and covenants to which the Company is subject, including financial covenants that limit consolidated long-term indebtedness tonot more than 65% of total capitalization. All of the debt agreements provide for Priority Indebtedness (defined in the debt agreements) tonot exceed 15% of consolidated total assets. The $15 million and $10 million notes, as well as the line-of-credit, have an interest coverage ratio requirement ofnot less than 1.5 to1, which excludes the effect of a non-cash impairment on the LLC investments up to the total investment as of* December 31, 2021,as revised by the Seventh Amendment to the Credit Agreement. The $9 million revolving line of credit facility also has an interest coverage ratio ofnot* less than 1.5 to1. The Company was in compliance with all debt covenants as of* September 30, 2024* and2023.

The aggregate annual maturities of long-term debt for the nextfive years ending after* September 30, 2024* are as follows:

The following table summarizes the Company’s financial assets and liabilities that are measured at fair value on a recurring basis and the fair value measurements by level within the fair value hierarchy as defined in Note1 as of* September 30, 2024and2023*, respectively. There have beenno changes to the Company's valuation techniques during fiscal years ended* September 30, 2024and2023.*

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The fair value of the interest rate swaps are determined by using the counterparty's proprietary models that include observable quoted market interest rates and interest rate futures as well as certain assumptions regarding past, present and future market conditions.

See Note5 for discussion on the fair value assumptions of the Company's investment in the LLC.

Under the asset management contract, a timing difference can exist between the payment for natural gas purchases and the actual receipt of such purchases. Payments are made based on a predetermined monthly volume with the price based on the weighted averagefirst of the month index prices corresponding to the month of the scheduled payment. At* September 30, 2024and2023*, the Company had recorded in accounts payable the estimated fair value of the liability based on the correspondingfirst of month quoted index prices for which the liability was expected to be settled.

The Company’s non-financial assets and liabilities that are measured at fair value on a nonrecurring basis consist of its AROs. The AROs are measured at fair value at initial recognition based on expected future cash flows to settle the obligation.

The carrying value of cash and cash equivalents, accounts receivable, borrowings under line-of-credit, accounts payable, customer credit balances and customer deposits is a reasonable estimate of fair value due to the short-term nature of these financial instruments. In addition, the carrying amount of the variable rate line-of-credit is a reasonable approximation of its fair value. The following table summarizes the fair value of the Company’s financial assets and liabilities that arenot adjusted to fair value in the consolidated financial statements as of* September 30, 2024and2023*.

The fair value of long-term debt is estimated by discounting the future cash flows of the fixed rate debt based on the underlying Treasury rate or other Treasury instrument with a corresponding maturity period and estimated credit spread extrapolated based on market conditions since the issuance of the debt.

ASC825, Financial Instruments, requires disclosures regarding concentrations of credit risk from financial instruments. Cash equivalents are investments in high-grade, short-term securities (original maturity less thanthree months), placed with financially sound institutions. Accounts receivable are from a diverse group of customers including individuals and small and large companies in various industries. The Company maintains certain credit standards with its customers and requires a customer deposit if such evaluation warrants.

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Under the provisions of ASC740, the deferred tax assets and liabilities of the Company were revalued in fiscal2018 to reflect the reduction in the corporate federal income tax rate. As a result of the revaluation, the excess deferred income taxes of the regulated operations of Roanoke Gas were reclassified to a regulatory liability. The excess deferred taxes related to the depreciable property are being returned to customers over the remaining weighted average useful life of the property with a corresponding reduction in income tax expense. The excess deferred taxes related to the other regulatory basis differences were being collected from customers over afive-year period, which concluded in* December**2023.*

The details of income tax expense (benefit) are as follows:

Income tax expense for the years ended* September 30, 2024* and2023 differed from amounts computed by applying the U.S. federal income tax rate to earnings before income taxes due to the following:

During fiscal2022, the Company engaged an outside firm to conduct a study of its activities that would qualify for the Research and Development ("R&D") credit under26 U.S. Code §41 - Credit for increasing research activities. Upon completion of the2022 study, the Company filed for the R&D tax credit on its fiscal2021 federal income tax return. The total credits claimed on the fiscal2021 income tax return amounted to $659,920. The Company deferred the tax credits as a regulatory liability because they related to utility plant. These credits are being amortized over the 20-year tax-life of the related utility plant. The Company recognized $129,600 of amortization as reduction of income tax expense on the consolidated statement of income in fiscal2023 related to the federal R&D tax credits. No amortization was recognized in fiscal2024 as discussed below. The Company hasnot yet completed a study of R&D activities for fiscal2023 or2024 given the IRS audits in process, as discussed further below. Additionally, during fiscal2023, the Company received refunds for the2020 and2021 tax years, neither of which are subject to the IRS audits.

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During fiscal2022, the Company also applied for a Virginia State tax credit related to the R&D study for its fiscal2021 tax year. The total credits claimed on the fiscal2022 tax return were $58,065. Consistent with the treatment of the federal tax credits, the Company deferred the tax credits as a regulatory liability, which are being amortized over the 20-year tax-life of the related utility plant. The Company recognized $2,020 of amortization as a reduction of income tax expense on the consolidated statement of income in fiscal2023 related to the state R&D tax credits. No amortization was recognized in fiscal2024 as discussed below. The Company didnot apply for a Virginia State tax credit related to R&D for fiscal2023 or2024 given the IRS audits in process, as discussed further below.

In accordance with the SCC settlement agreement in relation to the Company’s non-gas rate application, the amortization of the R&D tax credit was halted effective* August 1, 2023.As such, no amortization was recognized associated with the R&D tax credits in fiscal2024.* After resolution of the IRS audits, the Company will proceed with refunding the R&D tax credits, net of related fees, to customers through a mechanism to be approved by the SCC. As part of the settlement, the Company grossed up the tax credit consistent with treatment of the excess deferred taxes, thereby creating a deferred tax asset of $990,219 as of* September 30, 2023.*

During fiscal2023, the Company engaged an outside firm to conduct a study of its RNG facility to determine eligibility for the Federal Energy Investment Tax Credit under26 U.S. Code §48** – Energy credit(“RNG tax credit”). Upon completion of the study, the Company determined a credit in the amount of $1,892,164 to be claimed on the fiscal2023 tax return. Similar to the treatment of the R&D tax credits, the Company deferred the RNG tax credit as a regulatory liability, which is being amortized over the 20-year tax-life of the related asset. Further, as part of the SCC order approving the RNG project and corresponding rates charged to customers, any tax credits attributable to the RNG project are to be used to reduce the cost to customers through the RNG Rider. Accordingly, the Company grossed up the RNG tax credit consistent with treatment of the excess deferred taxes, thereby creating a deferred tax asset of $655,862, which is also being amortized over the 20-year tax-life of the related asset. The Company recognized $127,404 and $74,265 of amortization as part of income tax expense on the consolidated statements of income in fiscal2024 and2023, respectively, related to the federal RNG tax credit.

The tax effects of temporary differences that give rise to the deferred tax assets and deferred tax liabilities are as follows:

Deferred tax assets and liabilities are recorded on the consolidated balance sheets on a net basis by taxing jurisdictions. As of* September 30, 2024and2023,* the Company's consolidated balance sheets included net deferred tax liabilities of $1,890,562 and $2,008,458, respectively, in deferred credits and other non-current liabilities and net deferred tax assets of $771,746 and $1,163,594, respectively, in other non-current assets.

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ASC740 provides for the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recognized in the financial statements. The Company has evaluated its tax positions and recorded a reserve for unrecognized tax benefits of $273,936 as of* September 30, 2024.*These unrecognized tax benefits relate to tax positions taken in the Company's prior tax returns. A reconciliation of the Company's unrecognized tax benefits is as follows:

The Company’s policy is to classify interest associated with uncertain tax positions as interest expense in the financial statements. Tax penalties, if any, are netted against other income.

The Company files a consolidated federal income tax return and state income tax returns in Virginia and West Virginia, and thus subject to examinations by federal and state tax authorities. The IRS is currently examining the Company's 2018 and2019 federal tax returns. The focus of the exam relates to research and development credits, and the results of its exam havenot been presented to the Company. The Company believes its income tax assets and liabilities are fairly stated as of* September 30, 2024and2023;* however, these assets and liabilities could be adjusted as a result of this examination. The Company's federal returns for fiscal 2018 and 2019 remain open related to the exam. Aside from these exceptions, the federal returns and the state returns for Virginia and West Virginia for the tax years ended prior to* September**30,* 2021 areno longer subject to examination.

The KEYSOP provides for the issuance of common stock options to officers and certain other full-time salaried employees to acquire shares of the Company’s common stock. As of* September 30, 2024*, the number of shares available for future grants was 16,000.

ASC718, Compensation-Stock Compensation,requires that compensation expense be recognized for the issuance of equity instruments to employees. During the fiscal year ended September 30, 2024,the Board approved stock option grants to certain officers. As required by the KEYSOP, each option's exercise price per share equaled the fair value of the Company's common stock on the grant date. Pursuant to the plan, the options vest over asix-month period and are exercisable over aten-year period from the date of issuance. No options were granted during the fiscal year ended September 30, 2023.

As the Company's stock options arenot traded on the open market, the fair value of each grant is estimated on the date of grant using the Black-Scholes option pricing model including the following assumptions:

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The underlying methods regarding each assumption are as follows:

Expected volatility is based on the historical volatility of the daily closing price of the Company's common stock.

Expected dividend rate is based on historical dividend payout trends.

Expected exercise term is based on the average time historical option grants were outstanding before being exercised.

Risk-free interest rate is based on the7-year Treasury rate on the date of option grant.

Forfeitures are recognized when they occur.

Stock option transactions under the Company's plans are summarized below.

(1) Aggregate intrinsic value includes only those options where the exercise price is below the market price.

Stock-based compensation related to stock options disclosed in the table above is included within operations and maintenance expense on the consolidated statements of income.

Dividend Reinvestment and Stock Purchase Plan

The Company offers a DRIP plan to shareholders of record for the reinvestment of dividends and the opportunity to purchase of up to $100,000 per year in additional shares of common stock of the Company. Under the DRIP, the Company issued 33,226 and 32,805 shares in2024 and2023, respectively.

After taking into account the activity discussed above and dividends reinvested, as of* September 30, 2024*, the Company had 232,398 shares of stock available for issuance under the DRIP.

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Restricted Stock Plan for Outside Directors

The Board of Directors of the Company implemented the RSPD in1997. Under the RSPD, each director* mayelect annually to have up to 100% of his or her fees paid in shares of common stock ("Director Restricted Stock"); however, a minimum of 40% of the monthly retainer fee must be paid to each non-employee director of Resources in shares of Director Restricted Stock until such time as the director has accumulated at least 10,000 shares. The number of shares of Director Restricted Stock awarded each month is determined based on the closing sales price of Resources' common stock on the NASDAQ Global Market on thefirst* business day of the month. The Director Restricted Stock issued under the Plan vests only in the case of a participant's death, disability, retirement, or in the event of a change in control of Resources. The Director Restricted Stock* may**not* be sold, transferred, assigned or pledged by the participant until the shares have vested under the terms of the Plan. The shares of Director Restricted Stock will be forfeited to Resources by a participant's voluntary resignation during his or her term on the Board or removal for cause as a director.

The Company assumes all directors will complete their term and there will beno forfeiture of the Director Restricted Stock. Since the inception of the RSPD,no director has forfeited any shares of Director Restricted Stock. The Company recognizes as compensation the market value of the Director Restricted Stock in the period it is issued.

The following table reflects the director compensation activity pursuant to the Plan:

The fair market value of the Director Restricted Stock included as compensation was $299,200 during fiscal years ended* September 30,2024 and2023, and included within operations and maintenance expense on the consolidated statements of income. No Director Restricted Stock was forfeited during fiscal years ended September 30,2024 or2023. During fiscal year ended September 30,2023, an additional 200,000 shares were registered and added to the RSPD, as authorized and approved by shareholders at the Annual Shareholder meeting on January 23, 2023.*

After taking into account the activity discussed above and dividends reinvested, as of* September 30, 2024*, the Company had 173,298 shares available for issuance under the RSPD.

RGC Resources, Inc. Restricted Stock Plan

The Board of Directors of the Company implemented the RSPO in2017 as approved by shareholders. Under the RSPO, the Compensation Committee of the Board of Directors* maygrant shares of common stock ("Officer Restricted Stock") that vest over time to key employees and officers for the purpose of attracting and retaining those individuals essential to the operation and growth of the Company. The RSPO provides for certain restrictions and non-transferability requirements until minimum levels of ownership are obtained. Such restrictions may*continue beyond the vesting period.

The Company assumes all officers will complete their requirements and there will beno forfeiture of the Officer Restricted Stock.

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The following table reflects the officer compensation activity pursuant to the RSPO:

The fair market value of the Officer Restricted Stock included as compensation during fiscal years ended* September 30,2024 and2023 was $660,424 and $169,879, respectively, and included within operations and maintenance expense on the consolidated statements of income. As of September 30, 2024and2023,* there was $285,683 and $25,989, respectively, of unamortized compensation expense related to unvested Officer Restricted Stock. No Officer Restricted Stock was forfeited during fiscal years ended* September 30,*2024 or2023.

After taking into account the activity discussed above and dividends reinvested, as of* September 30, 2024*, the Company had 319,313 shares available for issuance under the RSPO.

Stock Bonus Plan

Shares from the Stock Bonus Plan* maybe issued to certain employees and management personnel in recognition of their performance and service. Under the Stock Bonus Plan, the Company issued 1,562 and 105 shares valued at $24,841 and $2,500, respectively, during the fiscal years ended September 30,*2024 and2023.

As of* September 30, 2024*, the Company had 3,118 shares of stock available for issuance under the Stock Bonus Plan.

The Company sponsors both a noncontributory pension plan and a postretirement plan. The pension plan covers all employees hired prior to* January 2017and benefits fully vest after 5 years of credited service. Benefits paid to retirees are based on age at retirement, years of service and average compensation. Effective January 1, 2017,a "soft freeze" to the pension plan was implemented, and employees hired on or after that date areno* longer eligible to participate. Commensurate with the "soft freeze" in the pension plan, the Company amended its401(k) Plan, allowing management to authorize a discretionary contribution to the401(k) account for those employees hired on or after* January 1, 2017.The amount, if any, of this discretionary contribution would be determined each year and would be applied to the eligible employees in the following calendar year. This Company contribution would be in addition to any employee elected deferrals and employer match as provided for under the401*(k) Plan.

The postretirement plan provides certain health care, supplemental retirement and life insurance benefits to retired employees who meet specific age and service requirements. Employees hired prior to* January**1,* 2000 are eligible to participate in the postretirement plan. Employees must have a minimum of 10 years of service and retire after attaining the age of 55 in order to vest in the postretirement plan. Retiree contributions to the plan are based on the number of years of service to the Company as determined under the pension plan.

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Employers who sponsor defined benefit plans must recognize the funded status of defined benefit pension and other postretirement plans as an asset or liability in their statements of financial position and recognize changes in that funded status in the year in which the changes occur through comprehensive income. For pension plans, the benefit obligation is the projected benefit obligation, and for other postretirement plans, the benefit obligation is the accumulated benefit obligation. The Company established a regulatory asset for the portion of the obligation expected to be recovered through rates in future periods. The regulatory asset is adjusted for the recognition of actuarial gains and losses. The portion of the obligation attributable to the unregulated operations of the holding company is recognized in other comprehensive income, with actuarial gains and losses recognized using the corridor method.

The following table sets forth the benefit obligation, fair value of plan assets, the funded status of the plans, and amounts recognized in the Company’s consolidated financial statements:

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The Company expects that approximately $41,000, before tax, of AOCI will be recognized in net periodic benefit costs in fiscal2025 and approximately $43,000 of amounts deferred as regulatory assets and approximately $174,000 of amounts deferred as regulatory liabilities will be amortized and recognized in net periodic benefit costs in fiscal2025.

The changes in the benefit obligations for both the pension plan and postretirement plan was primarily attributed to actuarial gains and losses associated with the discount rate used to calculate the benefit obligations.

The following table details the actuarial assumptions used in determining the projected benefit obligations and net benefit cost of the pension plan and the accumulated benefit obligations and net benefit cost of the postretirement plan:

To develop the expected long-term rate of return on plan assets assumption, the Company, with input from the Plans' actuaries and investment advisors, considered the historical returns and the future expectations for returns for each asset class, as well as the target asset allocation of each plan’s portfolio.

Components of net periodic benefit cost are as follows:

Service cost is included in operations and maintenance expense in the consolidated statements of income. All other components of net periodic benefit costs are included in other income, net in the consolidated statements of income.

The assumed health care cost trend rates used in measuring the accumulated benefit obligation for the postretirement plan are presented below:

The health care cost trend rate assumptions could have a significant effect on the amounts reported. A change of1% would have the following effects:

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The primary objectives of both plans' investment policies are to maintain investment portfolios that diversify risk through prudent asset allocation parameters, achieve asset returns that meet or exceed the corresponding actuarial assumptions and will provide for future benefits. The Company's pension plan allocation approach seeks to match the duration of the fixed income portion of the portfolio with the duration of the plan's liabilities. Such allocation is designed to reduce the overall volatility in the pension plan relative to the funded status. The equity allocations in both plans provide for potential returns to offset growth in the corresponding liabilities.

Based on its most recent evaluation of returns for the asset classes within each plan's investment portfolio, the Company set the expected long-term rate of return for both the pension plan and the postretirement plan for fiscal2025 at 4.95%.

The Company’s ultimate target and actual asset allocation in the pension and postretirement plans as of* September 30, 2024* and2023 were:

The Company uses the fair value hierarchy described in Note1 to classify these assets. The mutual funds are included under Level1 in the fair value hierarchy as their fair values are based on quoted net asset values of the shares held in the investments in the plans. The bond funds are included under Level2 as these investments have observable Level2 pricing inputs, including quoted prices for similar assets in active or non-active markets. While the underlying asset values are quoted prices, the net asset value of a unit in these funds isnot publicly quoted. The following tables contain the fair value classifications of the plans' assets:

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Each mutual fund or common collective trust fund has been categorized based on its primary investment strategy.

Annual funding contributions to the pension plan and postretirement plan are made under advisement from the Company's actuaries and investment advisor based upon ERISA funding requirements. For the years ended* September 30, 2024and2023,* no contributions were made to the pension plan or postretirement plan. At this time, the Company isnot currently anticipating making any funding contributions to the pension plan or postretirement plan in fiscal2025.

The following table reflects expected future benefit payments:

The Company established an NQDC Plan in fiscal2021. The NQDC Plan is an unfunded, nonqualified benefit plan offered to select members of senior managementnot eligible to participate in the pension plan. Under the NQDC Plan, participants have the right to defer a percentage of base salary as well as receive discretionary credits from the Company. The Company's discretionary credits vest over time. Any benefits distributed from the NQDC Plan are paid from the general assets of the Company. As the plan is unfunded, the balance reflected in the table below is a noncurrent liability included in benefit plan liabilities on the consolidated balance sheet.

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The Company sponsors a401(k) Plan covering all eligible employees who elect to participate. Employees* maycontribute from 1% to 50% of their annual compensation to the401*(k) Plan, either on a pre-tax or post-tax basis, limited to a maximum annual amount as set periodically by the IRS. The Company matches 100% of the participant’sfirst 4% of contributions and 50% of the next 2% of contributions. The401(k) Plan also provides for discretionary contributions for employees hired on or after* January 1, 2017.*The following table reflects the Company's contributions:

During2023, the Company entered into a land lease in conjunction with its RNG facility that has a 20-year term withtwo five-year Company renewal options that arenot considered part of the ROU asset and liability as it wasnot reasonably certain that the Company would exercise these options. The Company also hasthree other operating leases with original terms ranging from 3 to 6 years. The operating lease ROU assets of $331,275 are reflected inother non-current assets in the consolidated balance sheets. The current operating lease liabilities of $25,729 and non-current lease liabilities of $308,439 are included inother current liabilities and deferred credits andother non-current liabilities, respectively, in the consolidated balance sheets. The cost components of the Company’s operating leases are included under operations and maintenance expense in the consolidated statements of income and were less than $50,000 for each period presented.

Other information related to leases were as follows:

On* September 30, 2024,*the future minimum rental payments under non-cancelable operating leases were as follows:

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Long-Term Contracts

Due to the nature of the natural gas distribution business, Roanoke Gas enters into agreements with suppliers and pipelines to contract for natural gas commodity purchases, storage capacity and pipeline delivery capacity. Roanoke Gas obtains most of its natural gas supply throughthird-party asset management contracts. Roanoke Gas utilizestwo asset managers to optimize the use of its transportation, storage rights and gas supply inventories, which helps to ensure a secure and reliable source of natural gas. Underone of the current asset management contracts, Roanoke Gas has designated the asset manager to act as agent for its storage capacity and all gas balances in storage. Roanoke Gas retains ownership of gas in storage. Under provisions of this contract, Roanoke Gas is obligated to purchase its winter storage requirements from the asset manager during the spring and summer injection periods at market price. The volumetric obligation as of* September 30, 2024* for the remainder of the contract period is 295,000 DTHs. This asset management contract was renewed in* September 2022for atwo-year period which will expire in March 2025.The contract was renewed at essentially the same terms and conditions as the prior agreement, except the utilization fee retained by Roanoke Gas increased. Roanoke Gas entered into asecond* asset management contract in* July 2024,whereby the asset manager acts as agent for the purchase of gas transported by the MVP. Thissecond* asset management contract is currently month-to-month withno gas purchase or storage obligations and will expire in* March 2025.*

In addition to the volumetric commitment, the Company also has fixed price agreements to purchase approximately 1.82 million DTH, from* October 2024to March 2025,*at prices ranging from $2.36 to $3.50 per DTH.

Roanoke Gas also has contracts for pipeline and storage capacity which extend for various periods. These capacity costs and related fees are valued at tariff rates in place as of* September 30, 2024*. These rates* mayincrease in the future based upon rate filings and rate orders granting a rate change to the pipeline or storage operator. Roanoke Gas expended approximately $30,880,000 and $44,253,000 under the asset management, pipeline and storage contracts in fiscal years2024* and2023, respectively, including approximately $1,048,000 in fiscal year2024 related to the MVP in which the Company has an investment. The table below details the pipeline and storage capacity commitments as of* September 30, 2024*for the remainder of the contract period.

Roanoke Gas maintains franchise agreements granted by the local cities and towns served by the Company. Roanoke Gas renewed its franchise agreements with the City of Roanoke, the City of Salem and the Town of Vinton in2016 for 20-year terms to expire in* December 2035.Per these agreements, franchise fees increase at a rate of 3% annually. As of September 30, 2024*, $1,818,339 in future obligations remain under the franchise agreements.

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Other Contracts

The Company maintains other agreements in the ordinary course of business covering various maintenance, equipment, user fees and service contracts. These agreements currently extend through* December 2031and arenot* material to the Company.

Environmental Matters

Roanoke Gas operated an MGP as a source of fuel for lighting and heating until the early1950’s. A by-product of operating the MGP was coal tar, and the potential exists for tar waste contaminants at the former plant site. While the Company doesnot currently recognize any commitments or contingencies related to environmental costs, should the Company ever be required to remediate the site, it will pursue all prudent and reasonable means to recover any related costs, including the use of insurance claims and regulatory approval for rate case recognition of expenses associated with any work required.

The Company has evaluated subsequent events through the date the financial statements were issued. There wereno other itemsnot otherwise disclosed which would have materially impacted the Company’s consolidated financial statements.