CHESAPEAKE UTILITIES CORP
For the period ended Jun 30, 2024. Filed Aug 8, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Aug 8, 2024
CPK$140.28-1.0%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-05-08.
0001628280-24-021732
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-08-08.
0001628280-24-036214
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 227 previous paragraphs and 273 current paragraphs.
141 unchanged; 72 reworded; 44 added; 14 removed; 0 previous and 16 current paragraphs rearranged.
Tables are not compared: 17 previous and 27 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (44)
Current report
•changes in the current political environment;
Current report
Gross Margin (GAAP) for the Regulated Energy segment for the six months ended June 30, 2024 was $169.6 million, an increase of $49.8 million, or 41.6 percent, compared to the same period in 2023. The increase in gross margin reflects incremental margin attributable to FCG, organic growth in our natural gas distribution businesses and continued pipeline expansion projects, and incremental margin from regulatory initiatives.
Current report
Gross Margin (GAAP) for the Unregulated Energy segment for the quarter ended June 30, 2024 was $12.3 million, an increase of $1.5 million, or 13.4 percent, compared to the same period in 2023. The increase in gross margin was primarily attributable to contributions from an increased level of virtual pipeline services and improved performance at Aspire.
Current report
Gross Margin (GAAP) for the Unregulated Energy segment for the six months ended June 30, 2024 was $45.4 million, an increase of $4.7 million, or 11.6 percent, compared to the same period in 2023. Higher gross margin reflects higher contributions from propane including increased customer consumption, incremental margin from the JT Lee and Son's acquisition in late 2023, and higher margins and service fees; improved performance at Aspire; and an increased level of virtual pipeline services.
Current report
Net income (GAAP) for the six months ended June 30, 2024 was $64.4 million, or $2.89 per share, compared to $52.5 million, or $2.94 per share, for the same period in 2023. Net income for the six months ended June 30, 2024 included $1.7 million of transaction and transition-related expenses in connection with the acquisition and integration of FCG. Excluding these costs, net income increased by $13.6 million or 26.0 percent compared to the same period in the prior year.
Current report
Our adjusted net income for the three months ended June 30, 2024 was $19.3 million, or $0.86 per share, compared to $16.1 million, or $0.90 per share, for the same quarter of 2023. The improvements in business unit operating results discussed below were offset by the effects of increased interest expense and common shares issued in connection with the acquisition of FCG. Operating income for the second quarter of 2024 was $40.8 million, an increase of $12.4 million or 43.9 percent compared to the same period in 2023. Excluding transaction and transition-related expenses associated with the acquisition and integration of FCG, operating income increased $13.8 million or 48.7 percent compared to the prior-year period. An increase in adjusted gross margin in the second quarter of 2024 was driven by contributions from the acquisition of FCG, natural gas organic growth and continued pipeline expansion projects, incremental margin from regulatory initiatives, and improvements from our unregulated businesses. Higher operating expenses in the second quarter of 2024 were largely associated with FCG, increased payroll, benefits and other employee-related expenses, and higher insurance and vehicle expenses compared to the prior-year period. Increases in depreciation, amortization and property taxes attributable to growth projects and FCG were partially offset by a $2.3 million RSAM adjustment from FCG and lower depreciation from our electric operations due to revised rates from an approved electric depreciation study.
Current report
(2)Transaction and transition-related expenses represent costs incurred attributable to the acquisition and integration of FCG including, but not limited to, transaction costs, transition services, consulting, system integration, rebranding and legal fees.
Current report
*** Reflects the impact of 4.4 million common shares issued in November 2023 in connection with the acquisition of FCG.
Current report
(1) Weighted average shares for the six months ended June 30, 2024 reflect the impact of 4.4 million common shares issued in November 2023 in connection with the acquisition of FCG.
Current report
(2)Transaction and transition-related expenses represent costs incurred attributable to the acquisition and integration of FCG including, but not limited to, transaction costs, transition services, consulting, system integration, rebranding and legal fees.
Current report
Key variances between the six months ended June 30, 2023 and June 30, 2024 included:
Current report
*** Reflects the impact of 4.4 million common shares issued in November 2023 in connection with the acquisition of FCG.
Current report
Warwick Pipeline Project
Current report
In July 2024, we announced plans to extend Eastern Shore's transmission deliverability by constructing an additional 4.4 miles of six inch steel pipeline. The project will reinforce the supply and growth for our Delaware division distribution system and expand further into Maryland for anticipated future growth. The project is estimated to be in service during the fourth quarter of 2024. The project is expected to contribute adjusted gross margin of approximately $0.3 million in 2024 and $1.9 million in 2025 and beyond.
Current report
Renewable Natural Gas Supply Projects
Current report
Delaware Natural Gas Rate Case
Current report
In May 2024, our Delaware natural gas division provided notice to the Delaware PSC of its intent to file a petition seeking a general rate base increase based on a test period ending in December 2024. The filing is expected to be submitted to the Delaware PSC in August 2024 and the outcome of the application will be subject to review and approval by the Delaware PSC.
Current report
FPU Electric Rate Case
Current report
In June 2024, our Florida Electric division provided notice to the Florida PSC of its intent to file a petition seeking a general rate base increase based on a 2025 projected test year. The filing is expected to be submitted to the Florida PSC in August 2024 and the outcome of the application will be subject to review and approval by the Florida PSC.
Current report
Weather was not a significant factor to adjusted gross margin in the second quarter of 2024 compared to the same period in 2023.
Current report
(2)Transaction and transition-related expenses represent costs incurred attributable to the acquisition and integration of FCG including, but not limited to, transaction costs, transition services, consulting, system integration, rebranding and legal fees.
Current report
Margin from Regulated Infrastructure Programs
Current report
Natural Gas Transmission Service Expansions, including interim services
Current report
(1)Transaction and transition-related expenses represent costs incurred attributable to the acquisition and integration of FCG including, but not limited to, transaction costs, transition services, consulting, system integration, rebranding and legal fees.
Current report
For the six months ended June 30, 2024 compared to the six months ended June 30, 2023:
Current report
(2)Transaction and transition-related expenses represent costs incurred attributable to the acquisition and integration of FCG including, but not limited to, transaction costs, transition services, consulting, system integration, rebranding and legal fees.
Current report
Operating income for the Regulated Energy segment for the six months ended June 30, 2024 was $98.6 million, an increase of $31.7 million, or 47.4 percent, over the same period in 2023. Excluding transaction and transition-related expenses associated with the acquisition and integration of FCG, operating income increased $34.0 million or 50.8 percent compared to the same period in 2023. Higher operating income reflects incremental contributions from the acquisition of FCG, organic growth in our natural gas distribution businesses and continued pipeline expansion projects, and incremental margin from regulatory initiatives. Excluding the transaction and transition-related expenses described above, the increase in total operating expenses of $23.5 million was largely attributable to FCG's operating expenses, higher depreciation and amortization expense, and higher property taxes, partially offset by lower payroll, benefits and other employee-related expenses compared to the prior-year period. Increases in depreciation and amortization expense attributable to growth projects and FCG were partially offset by reductions related to revised rates from an approved electric depreciation study and a $5.7 million RSAM adjustment from FCG.
Current report
Items contributing to the period-over-period increase in adjusted gross margin are listed in the following table:
Current report
Contribution from Acquisition of FCG
Current report
FCG contributed adjusted gross margin of $48.3 million for the six months ended June 30, 2024.
Current report
Natural Gas Distribution Customer Growth
Current report
Margin from Regulated Infrastructure Programs
Current report
Natural Gas Transmission Service Expansions, including interim services
Current report
Items contributing to the period-over-period increase in operating expenses are listed in the following table:
Current report
(1)Transaction and transition-related expenses represent costs incurred attributable to the acquisition and integration of FCG including, but not limited to, transaction costs, transition services, consulting, system integration, rebranding and legal fees.
Current report
Operating income for the Unregulated Energy segment for the second quarter of 2024 reflects a $1.2 million improvement compared to the same period in 2023. Adjusted gross margin in the Unregulated Energy segment increased during the second quarter of 2024 primarily due to increased levels of virtual pipeline services, as well as increased rates and gathering fees at Aspire.
Current report
•Increased level of virtual pipeline services - Adjusted gross margin increased by $0.6 million during the second quarter of 2024 as compared to the same period in the prior year due to higher levels of CNG hold services.
Current report
For the six months ended June 30, 2024 compared to the six months ended June 30, 2023:
Current report
Items contributing to the period-over-period increase in adjusted gross margin are listed in the following table:
Current report
Propane Operations
Showing the first 40 of 44 passages. Open the source sections for the rest.
Removed paragraphs (14)
Previous report
Gross Margin (GAAP) for the Unregulated Energy segment for the quarter ended March 31, 2024 was $33.1 million, an increase of $3.3 million, or 10.9 percent, compared to the same period in 2023. Higher gross margin related primarily to contributions from increased propane margins and fees as well as increased customer margins and improved customer consumption at Aspire.
Previous report
(2)Transaction and transition-related expenses represent costs incurred attributable to the acquisition and integration of FCG including, but not limited to, transition services, consulting, system integration, rebranding and legal fees.
Previous report
Alternative Natural Gas Projects
Previous report
CNG/RNG/LNG Transportation and Infrastructure
Previous report
(2)Transaction and transition-related expenses represent costs incurred attributable to the acquisition and integration of FCG including, but not limited to, transition services, consulting, system integration, rebranding and legal fees.
Previous report
The following narrative discussion provides further detail and analysis of the significant items in the foregoing table.
Previous report
Natural Gas Transmission Service Expansions
Previous report
Contributions from Regulated Infrastructure Programs
Previous report
Operating Expenses
Previous report
(1)Transaction and transition-related expenses represent costs incurred attributable to the acquisition and integration of FCG including, but not limited to, transition services, consulting, system integration, rebranding and legal fees.
Previous report
The following narrative discussion provides further detail and analysis of the significant items in the foregoing table.
Previous report
•Increased Customer Consumption - Adjusted gross margin increased by $0.3 million due to increased customer consumption compared to the same period in the prior year primarily related to colder weather in the Ohio region during the first quarter of 2024.
Previous report
Operating Expenses
Previous report
As of March 31, 2024, we have issued letters of credit totaling approximately $7.0 million related to the electric transmission services for FPU's electric division, the firm transportation service agreement between TETLP and our Delaware and Maryland divisions, the capacity agreement between NEXUS and Aspire, the storage agreement between Bay Gas Storage Company and
Reworded paragraphs (72)
Previous wording
The following tables reconcile Gross Margin, Net Income, and EPS, all as defined under GAAP, to our non-GAAP financial measures of Adjusted Gross Margin, Adjusted Net Income and Adjusted EPS for the three months ended March 31, 2024 and 2023:
Current wording
The following tables reconcile Gross Margin, Net Income, and EPS, all as defined under GAAP, to our non-GAAP financial measures of Adjusted Gross Margin, Adjusted Net Income and Adjusted EPS for the three and six months ended June 30, 2024 and 2023:
Previous wording
Gross Margin (GAAP) for the Regulated Energy segment for the quarter ended March 31, 2024 was $93.2 million, an increase of $28.5 million, or 44.0 percent, compared to the same period in 2023. Higher gross margin reflects incremental margin attributable to FCG, organic growth in our natural gas distribution businesses and continued pipeline expansion projects, and incremental contributions associated with regulated infrastructure programs. These contributors were partially offset by non-recurring FCG transaction and transition-related expenses.
Current wording
Gross Margin (GAAP) for the Regulated Energy segment for the quarter ended June 30, 2024 was $76.4 million, an increase of $21.4 million, or 38.8 percent, compared to the same period in 2023. The increase in gross margin reflects incremental margin attributable to FCG, organic growth in our natural gas distribution businesses and continued pipeline expansion projects, and incremental margin from regulatory initiatives.
Previous wording
(1)Transition-related expenses represent non-recurring costs incurred attributable to the acquisition and integration of FCG including, but not limited to, transition services, consulting, system integration, rebranding, and legal fees.
Current wording
(1)Transaction and transition-related expenses represent non-recurring costs incurred attributable to the acquisition and integration of FCG including, but not limited to, transaction costs, transition services, consulting, system integration, rebranding, and legal fees.
Previous wording
(2) Weighted average shares for the quarter ended March 31, 2024 reflect the impact of 4.4 million common shares issued in November 2023 in connection with the acquisition of FCG. See Notes 3 and 9 for additional details on the acquisition and related equity offering.
Current wording
(2) Weighted average shares for the three and six months ended June 30, 2024 reflect the impact of 4.4 million common shares issued in November 2023 in connection with the acquisition of FCG. See Notes 3 and 9 for additional details on the acquisition and related equity offering.
Previous wording
Net income (GAAP) for the quarter ended March 31, 2024 was $46.2 million, or $2.07 per share, compared to $36.3 million, or $2.04 per share, for the same quarter of 2023. Net income for the three months ended March 31, 2024 included $0.7 million of transaction and transition-related expenses in connection with the acquisition and integration of FCG. Excluding these costs, net income increased by $10.5 million or 28.9 percent compared to the same period in the prior year.
Current wording
Net income (GAAP) for the quarter ended June 30, 2024 was $18.3 million, or $0.82 per share, compared to $16.1 million, or $0.90 per share, for the same quarter of 2023. Net income for the three months ended June 30, 2024 included $1.0 million of transaction and transition-related expenses in connection with the acquisition and integration of FCG. Excluding these costs, net income increased by $3.1 million or 19.5 percent compared to the same period in the prior year.
Previous wording
Results of Operations for the Three Months Ended March 31, 2024
Current wording
Results of Operations for the Three and Six Months Ended June 30, 2024
Previous wording
Key variances between the first quarter of 2023 and the first quarter of 2024 included:
Current wording
Key variances between the second quarter of 2023 and 2024 included:
Previous wording
** Transaction and transition-related expenses attributable to the acquisition and integration of FCG have been excluded from the Company’s non-GAAP measures of adjusted net income and adjusted EPS. See reconciliations above for a detailed comparison to the related GAAP measures.
Current wording
** Transaction and transition-related expenses attributable to the acquisition and integration of FCG have been excluded from the Company’s non-GAAP
Previous wording
Our adjusted net income for the three months ended March 31, 2024 was $46.8 million, or $2.10 per share, compared to $36.3 million, or $2.04 per share, for the same quarter of 2023. Adjusted net income for the first quarter of 2023 included a non-recurring gain of $1.3 million related to a reduction in the Pennsylvania state tax rate. Operating income for the first quarter of 2024 was $79.6 million, an increase of $24.7 million or 44.9 percent compared to the same period in 2023. Excluding transaction and transition-related expenses associated with the acquisition and integration of FCG, operating income increased $25.6 million or 46.6 percent compared to the prior-year period. Adjusted gross margin in the first quarter of 2024 was positively impacted by incremental margin from FCG, natural gas organic growth and continued pipeline expansion projects, higher customer consumption, incremental contributions associated with regulatory initiatives, and increased propane margins and fees compared to the prior-year period. Higher operating expenses in the first quarter of 2024 largely associated with FCG were partially offset by lower employee benefits and incentive compensation costs compared to the same quarter of 2023. Increases in depreciation and amortization expense attributable to growth projects and FCG were partially offset by lower depreciation in our electric operations due to revised rates in the electric depreciation study filing approved in December 2023 and a $3.4 million RSAM adjustment from FCG.
Current wording
Our adjusted net income for the six months ended June 30, 2024 was $66.1 million, or $2.96 per share, compared to $52.5 million, or $2.94 per share, for the same period of 2023. Adjusted net income for the first half of 2023 included a non-recurring gain of $1.3 million related to a reduction in the Pennsylvania state tax rate. The improvements in business unit operating results discussed below were largely offset by increased interest expense and common shares issued in connection with the acquisition of FCG. Operating income for the first half of 2024 was $120.4 million, an increase of $37.1 million or 44.6 percent compared to the same period in 2023. Excluding transaction and transition-related expenses associated with the acquisition and integration of FCG, operating income increased $39.4 million or 47.3 percent compared to the prior-year period. An increase in adjusted gross margin in the first half of 2024 was driven by contributions from the acquisition of FCG, natural gas organic growth and continued pipeline expansion projects, incremental margin from regulatory initiatives, higher customer consumption, and improvements from our unregulated businesses. Higher operating expenses in the first half of 2024 were largely associated with FCG, as well as higher insurance and vehicle expenses compared to the prior-year period. These increases were partially offset by lower payroll, benefits and other employee-related expenses. Increases in depreciation and amortization expense attributable to growth projects and FCG were partially offset by a $5.7 million RSAM adjustment from FCG and lower depreciation from our electric operations due to revised rates from an approved electric depreciation study.
Previous wording
Eastern Shore installed a new natural gas driven compressor skid unit at its existing Bridgeville, Delaware compressor station that provides 7,300 Dts of incremental firm transportation pipeline capacity. The project was placed in service in the fourth quarter of 2023. The project generated additional adjusted gross margin of $0.6 million for the three months ended March 31, 2024, and is expected to produce adjusted gross margin of $2.3 million in 2024 and thereafter.
Current wording
Eastern Shore installed a new natural gas driven compressor skid unit at its existing Bridgeville, Delaware compressor station that provides 7,300 Dts of incremental firm transportation pipeline capacity. The project was placed in service in the fourth quarter of 2023. The project generated additional adjusted gross margin of $0.1 million and $0.7 million, for the three and six months ended June 30, 2024, respectively, and is expected to produce adjusted gross margin of $2.3 million in 2024 and thereafter.
Previous wording
In June 2021, Peninsula Pipeline and FCG entered into a Transportation Service Agreement for an incremental 10,176 Dts/d of firm service in Indian River County, Florida, to support Florida City Gas’ growth along the Indian River's barrier island. As part of this agreement, Peninsula Pipeline constructed approximately 11.3 miles of pipeline from its existing pipeline in Sebastian, Florida. The project went into service in April 2023. Subsequent to the acquisition of FCG, the agreement is now an affiliate agreement. The project generated additional adjusted gross margin of $0.6 million for the three months ended March 31, 2024, and is expected to produce adjusted gross margin of approximately $2.5 million in 2024 and $2.4 million in 2025 and thereafter.
Current wording
In June 2021, Peninsula Pipeline and FCG entered into a Transportation Service Agreement for an incremental 10,176 Dts/d of firm service in Indian River County, Florida, to support FCG's growth along the Indian River's barrier island. As part of this agreement, Peninsula Pipeline constructed approximately 11.3 miles of pipeline from its existing pipeline in Sebastian, Florida. The project went into service in April 2023. Subsequent to the acquisition of FCG, the agreement is now an affiliate agreement. The project generated additional adjusted gross margin of $0.6 million for the six months ended June 30, 2024, and is expected to produce adjusted gross margin of approximately $2.4 million in 2024 and thereafter.
Previous wording
In July 2022, Peninsula Pipeline filed a petition with the Florida PSC for approval of its Transportation Service Agreement with FPU for an additional 2,400 Dts/d of firm service in the St. Cloud, Florida area. As part of this agreement, Peninsula Pipeline constructed a pipeline extension and regulator station for FPU. The extension supports new incremental load due to growth in the area, including providing service, most immediately, to the residential development, Twin Lakes. The expansion also improves reliability and provides operational benefits to FPU’s existing distribution system in the area, supporting future growth. This project was placed into service during July 2023 and generated additional adjusted gross margin of $0.1 million for the three months ended March 31, 2024. We expect this extension to generate additional annual adjusted gross margin of $0.6 million in 2024 and thereafter.
Current wording
In July 2022, Peninsula Pipeline filed a petition with the Florida PSC for approval of its Transportation Service Agreement with FPU for an additional 2,400 Dts/d of firm service in the St. Cloud, Florida area. As part of this agreement, Peninsula Pipeline constructed a pipeline extension and regulator station for FPU. The extension supports new incremental load due to growth in the area, including providing service, most immediately, to the residential development, Twin Lakes. The expansion also improves reliability and provides operational benefits to FPU’s existing distribution system in the area, supporting future growth. This project was placed into service during July 2023 and generated additional adjusted gross margin of $0.2 million and $0.3 million for the three and six months ended June 30, 2024, respectively. We expect this extension to generate annual adjusted gross margin of $0.6 million in 2024 and thereafter.
Previous wording
In February 2024, Peninsula Pipeline filed a petition with the Florida PSC for approval of an amendment to its Transportation Service Agreement with FPU for an additional 10,000 Dts/d of firm service in the St. Cloud, Florida area. Peninsula Pipeline will construct pipeline expansions that will allow FPU to serve the future communities that are expected in that area. The Florida PSC approved the projects in May 2024.
Current wording
In February 2024, Peninsula Pipeline filed a petition with the Florida PSC for approval of an amendment to its Transportation Service Agreement with FPU for an additional 10,000 Dts/d of firm service in the St. Cloud, Florida area. Peninsula Pipeline will construct pipeline expansions that will allow FPU to serve the future communities that are expected in that area. The Florida PSC approved the project in May 2024, and it is expected to be complete in the fourth quarter of 2025. We expect this expansion to generate approximately $2.2 million of adjusted gross margin in 2025.
Previous wording
In August 2022, Peninsula Pipeline and FPU filed a joint petition with the Florida PSC for approval of its Transportation Service Agreement associated with the Wildlight planned community located in Nassau County, Florida. The project enables us to meet the significant growing demand for service in Yulee, Florida. The agreement will enable us to build the project during the construction and build-out of the community, and charge the reservation rate as each phase of the project goes into service. Construction of the pipeline facilities will occur in two separate phases. Phase one consists of three extensions with associated facilities, and a gas injection interconnect with associated facilities. Phase two will consist of two additional pipeline extensions. Various phases of the project commenced in the first quarter of 2023, with construction on the overall project continuing through 2025. The project generated additional adjusted gross margin of $0.2 million for the three months ended March 31, 2024, and is expected to contribute adjusted gross margin of approximately $2.0 million in 2024 and beyond.
Current wording
In August 2022, Peninsula Pipeline and FPU filed a joint petition with the Florida PSC for approval of its Transportation Service Agreement associated with the Wildlight planned community located in Nassau County, Florida. The project enables us to meet the significant growing demand for service in Yulee, Florida. The agreement enables us to build the project during the construction and build-out of the community, and charge the reservation rate as each phase of the project goes into service. Construction of the pipeline facilities will occur in two separate phases. Phase one consists of three extensions with associated facilities, and a gas injection interconnect with associated facilities. Phase two will consist of two additional pipeline extensions. Various phases of the project commenced in the first quarter of 2023, with construction on the overall project continuing through 2025. The project generated additional adjusted gross margin of $0.1 million and $0.3 million for the three and six months ended June 30, 2024, respectively, and is expected to contribute adjusted gross margin of approximately $1.4 million in 2024 and $2.0 million thereafter.
Previous wording
In February 2023, Peninsula Pipeline filed a petition with the Florida PSC for approval of its Transportation Service Agreement with our Florida Natural Gas distribution business, FPU, for an additional 9,000 Dts/d of firm service in the Lake Wales, Florida area. The PSC approved the petition in April 2023 and Peninsula Pipeline completed the acquisition of an existing pipeline in May 2023 that is being utilized to serve both current and new natural gas customers. The project generated additional adjusted gross margin of $0.1 million for the three months ended March 31, 2024, and is expected to contribute adjusted gross margin of approximately $0.5 million in 2024 and beyond.
Current wording
In February 2023, Peninsula Pipeline filed a petition with the Florida PSC for approval of its Transportation Service Agreement with FPU for an additional 9,000 Dts/d of firm service in the Lake Wales, Florida area. The PSC approved the petition in April 2023 and Peninsula Pipeline completed the acquisition of an existing pipeline in May 2023 that is being utilized to serve both current and new natural gas customers. The project generated additional adjusted gross margin of $0.1 million and $0.2 million for the three and six months ended June 30, 2024, respectively, and is expected to contribute adjusted gross margin of approximately $0.5 million in 2024 and beyond.
Previous wording
In April 2023, Peninsula Pipeline filed a petition with the Florida PSC for approval of its Transportation Service Agreement with FPU for an additional 8,000 Dts/d of firm service in the Newberry, Florida area. The petition was approved by the Florida PSC in the third quarter of 2023. Peninsula Pipeline will construct a pipeline extension, which will be used by FPU to support the development of a natural gas distribution system to provide gas service to the City of Newberry. A filing to address the acquisition and conversion of existing Company owned propane community gas systems in Newberry was made in November 2023. The Florida PSC approved it in April 2024. Conversions are anticipated to begin during the second quarter of 2024. The project is expected to contribute adjusted gross margin of approximately $0.9 million in 2024 and $2.6 million in 2025 and beyond.
Current wording
In April 2023, Peninsula Pipeline filed a petition with the Florida PSC for approval of its Transportation Service Agreement with FPU for an additional 8,000 Dts/d of firm service in the Newberry, Florida area. The petition was approved by the Florida PSC in the third quarter of 2023. Peninsula Pipeline will construct a pipeline extension, which will be used by FPU to support the development of a natural gas distribution system to provide gas service to the City of Newberry. A filing to address the acquisition and conversion of existing Company owned propane community gas systems in Newberry was made in November 2023. The Florida PSC approved it in April 2024. The Company began the conversions of the community gas systems in the second quarter of 2024. The project generated additional adjusted gross margin of $0.1 million for the three and six months ended June 30, 2024, and is expected to contribute adjusted gross margin of approximately $1.4 million in 2024 and $2.6 million thereafter.
Previous wording
In August 2023, Eastern Shore filed an application with the FERC requesting authorization to construct the Worcester Resiliency Upgrade, which consists of a mixture of storage and transmission facilities in Sussex County, DE and Wicomico, Worcester, and Somerset Counties in Maryland. The project will provide long-term incremental supply necessary to support the growing demand of the participating shippers. Eastern Shore has requested certificate authorization by December 2024, with a target in-service date by the third quarter of 2025. In December 2023, FERC issued its schedule for preparation of the Environmental Assessment. In April 2024, the FERC issued their environmental assessment with no significant impacts noted.
Current wording
In August 2023, Eastern Shore filed an application with the FERC requesting authorization to construct the Worcester Resiliency Upgrade, which consists of a mixture of storage and transmission facilities in Sussex County, DE and Wicomico, Worcester, and Somerset Counties in Maryland. The project will provide long-term incremental supply necessary to support the growing demand of the participating shippers. Eastern Shore has requested certificate authorization by December 2024, with a target in-service date by the third quarter of 2025. In December 2023, the FERC issued its schedule for preparation of the Environmental Assessment. In April 2024, the FERC issued their environmental assessment with no significant impacts noted.
Previous wording
In December 2023, Peninsula Pipeline filed a petition with the Florida PSC for approval of its Transportation Service Agreements with FPU for projects that will support additional supply to communities on the East Coast of Florida. The projects are driven by the need for increased supply to coastal portions of the state that are experiencing significant population growth. Peninsula Pipeline will construct several pipeline extensions which will support FPU’s distribution system in the areas of Boynton Beach and New Smyrna Beach with an additional 15,000 Dts/d and 3,400 Dts/d, respectively. The Florida PSC approved the projects in March 2024. The projects are expected to contribute adjusted gross margin of approximately $5.1 million in 2025 and $6.3 million in 2026 and beyond.
Current wording
In December 2023, Peninsula Pipeline filed a petition with the Florida PSC for approval of its Transportation Service Agreements with FPU for projects that will support additional supply to communities on the East Coast of Florida. The projects are driven by the need for increased supply to coastal portions of the state that are experiencing significant population growth. Peninsula Pipeline will construct several pipeline extensions which will support FPU’s distribution system in the areas of Boynton Beach and New Smyrna Beach with an additional 15,000 Dts/d and 3,400 Dts/d, respectively. The Florida PSC approved the projects in March 2024. Construction is projected to be complete in the first and second quarters of 2025 for Boynton Beach and New Smyrna Beach, respectively. The projects are expected to contribute adjusted gross margin of approximately $5.1 million in 2025 and $6.3 million in 2026 and beyond.
Previous wording
In February 2024, Peninsula Pipeline filed a petition with the Florida PSC for approval of its Transportation Service Agreements with FPU for projects that will support additional supply to communities located in Central Florida. The projects are driven by the need for increased supply to communities in central Florida that are experiencing significant population growth. Peninsula Pipeline will construct several pipeline extensions which will support FPU’s distribution system in the areas of Plant City and Lake Mattie with an additional 5,000 Dts/d and 8,700 Dts/d, respectively. The Florida PSC approved the projects in May 2024.
Current wording
In February 2024, Peninsula Pipeline filed a petition with the Florida PSC for approval of its Transportation Service Agreements with FPU for projects that will support additional supply to communities located in Central Florida. The projects are driven by the need for increased supply to communities in central Florida that are experiencing significant population growth. Peninsula Pipeline will construct several pipeline extensions which will support FPU’s distribution system around the Plant City and Lake Mattie areas of Florida with an additional 5,000 Dts/d and 8,700 Dts/d, respectively. The Florida PSC approved the projects in May 2024. Completion of the projects is projected for the fourth quarter of 2024 for Plant City and the fourth quarter of 2025 for Lake Mattie. The projects are expected to contribute adjusted gross margin of approximately $0.5 million in 2024 and $1.2 million in 2025 and beyond.
Previous wording
In March 2024, Peninsula Pipeline filed a petition with the Florida PSC for its approval of Firm Transportation Service Agreements with both FCG and FPU for a project that will support greater supply growth of natural gas service in southeast Florida. The project consists of the transfer of a pipeline asset from FCG to Peninsula Pipeline. Peninsula Pipeline will proceed to provide transportation service to both FCG and FPU using the pipeline asset, which provides opportunities for additional project development.
Current wording
In March 2024, Peninsula Pipeline filed a petition with the Florida PSC for its approval of Firm Transportation Service Agreements with both FCG and FPU for a project that will support greater supply growth of natural gas service in southeast Florida. The project consists of the transfer of a pipeline asset from FCG to Peninsula Pipeline. Peninsula Pipeline will proceed to provide transportation service to both FCG and FPU using the pipeline asset, which supports continued customer growth and system reinforcement of these distribution systems. The Florida PSC approved the petition in July 2024.
Previous wording
In February 2024, Peninsula Pipeline filed a petition with the Florida PSC for its approval of its Transportation Service Agreements with FCG for projects that will support the transportation of additional supply into FCG’s distribution system. The projects are driven by continued growth in the regions and will facilitate additional transportation capacity, including the transportation of pipeline quality gas produced from landfills through FCG's system. Peninsula Pipeline will construct several pipeline extensions which will support FCG's distribution system in Brevard County, Indian-River County, and Miami-Dade County.
Current wording
In February 2024, Peninsula Pipeline filed a petition with the Florida PSC for its approval of its Transportation Service Agreements with FCG for projects that will support the transportation of additional renewable energy supply to FCG. The projects, located in Florida’s Brevard, Indian River and Miami-Dade counties, will bring renewable natural gas produced from local landfills into FCG’s natural gas distribution system. Peninsula Pipeline will construct several pipeline extensions which will support FCG's distribution system in Brevard County, Indian-River County, and Miami-Dade County. Benefits of these projects include increased gas supply to serve expected FCG growth, strengthened system reliability and additional system flexibility. The Florida PSC approved the petition at it's July 2024 meeting with the projects estimated to be completed in the first half of 2025. These three renewable projects cumulatively are projected to generate adjusted gross margin of approximately $5.5 million in 2025.
Previous wording
We estimate annual adjusted gross margin of approximately $12.5 million in 2024 and $14.0 million in 2025 for these transportation related services, with potential for additional growth in future years.
Current wording
We estimate annual adjusted gross margin, including amounts attributable to the Full Circle Dairy and Noble Road projects described below, of approximately $13.5 million in 2024 and $14.5 million in 2025 for these transportation related services, with potential for additional growth in future years.
Previous wording
In February 2023, we announced plans to construct, own and operate a dairy manure RNG facility at Full Circle Dairy in Madison County, Florida. The project consists of a facility converting dairy manure to RNG and transportation assets to bring the gas to market. The first injection of RNG is projected to occur in the first half of 2024.
Current wording
In February 2023, we announced plans to construct, own and operate a dairy manure RNG facility at Full Circle Dairy in Madison County, Florida. The project consists of a facility converting dairy manure to RNG and transportation assets to bring the gas to market. The first injection of RNG is projected to occur in the second half of 2024.
Previous wording
In October 2021, Aspire Energy completed construction of its Noble Road Landfill RNG pipeline project, a 33.1-mile pipeline, which transports RNG generated from the Noble Road landfill to Aspire Energy’s pipeline system, displacing conventionally produced natural gas. In conjunction with this expansion, Aspire Energy also upgraded an existing compressor station and installed two new metering and regulation sites. The RNG volume is expected to represent nearly 10 percent of Aspire Energy’s gas gathering volumes.
Current wording
In October 2021, Aspire Energy completed construction of its Noble Road Landfill RNG pipeline project, a 33.1-mile pipeline, which transports RNG generated from the Noble Road landfill to Aspire Energy’s pipeline system, displacing conventionally produced natural gas. In conjunction with this expansion, Aspire Energy also upgraded an existing compressor station and installed two new metering and regulation sites. The RNG volume represents more than 10 percent of Aspire Energy’s gas gathering volumes.
Previous wording
In February 2023, FPU filed a petition with the Florida PSC for approval of the GUARD program. GUARD is a ten-year program to enhance the safety, reliability, and accessibility of portions of our natural gas distribution system. We identified various categories of projects to be included in GUARD, which include the relocation of mains and service lines located in rear easements and other difficult to access areas to the front of the street, the replacement of problematic distribution mains, service lines, and maintenance and repair equipment and system reliability projects. In August 2023, the Florida PSC approved the GUARD program, which included $205.0 million of capital expenditures projected to be spent over a 10-year period. For the three months ended March 31, 2024, there was$0.6 million of incremental adjusted gross margin generated pursuant to the program. The program is expected to generate $3.2 million of adjusted gross margin in 2024 and $5.6 million in 2025.
Current wording
In February 2023, FPU filed a petition with the Florida PSC for approval of the GUARD program. GUARD is a ten-year program to enhance the safety, reliability, and accessibility of portions of our natural gas distribution system. We identified various categories of projects to be included in GUARD, which include the relocation of mains and service lines located in rear easements and other difficult to access areas to the front of the street, the replacement of problematic distribution mains, service lines, and maintenance and repair equipment and system reliability projects. In August 2023, the Florida PSC approved the GUARD program, which included $205.0 million of capital expenditures projected to be spent over a 10-year period. For the three and six months ended June 30, 2024, there was$0.9 million and$1.5 million, respectively, of incremental adjusted gross margin generated pursuant to the program. The program is expected to generate $3.2 million of adjusted gross margin in 2024 and $5.6 million in 2025.
Previous wording
In June 2023, the Florida PSC issued the approval order for the continuation of the SAFE program beyond its 2025 expiration date and inclusion of 150 miles of additional mains and services located in rear property easements. The SAFE program is designed to relocate certain mains and facilities associated with rear lot easements to street front locations to improve FCG's ability to inspect and maintain the facilities and reduce opportunities for damage and theft. In the same order, the Commission approved a replacement of 160 miles of pipe that was used in the 1970s and 1980s and shown through industry research to exhibit premature failure in the form of cracking. The program includes projected capital expenditures of $205 million over a 10-year period. For the three months ended March 31, 2024, there was$0.4 million of incremental adjusted gross margin generated pursuant to the program. The program is expected to generate $2.7 million of adjusted gross margin in 2024 and $5.3 million in 2025.
Current wording
In June 2023, the Florida PSC issued the approval order for the continuation of the SAFE program beyond its 2025 expiration date and inclusion of 150 miles of additional mains and services located in rear property easements. The SAFE program is designed to relocate certain mains and facilities associated with rear lot easements to street front locations to improve FCG's ability to inspect and maintain the facilities and reduce opportunities for damage and theft. In the same order, the Commission approved a replacement of 160 miles of pipe that was used in the 1970s and 1980s and shown through industry research to exhibit premature failure in the form of cracking. The program includes projected capital expenditures of $205.0 million over a 10-year period. For the three and six months ended June 30, 2024, there was$0.7 million and$1.1 million, respectively, of incremental adjusted gross margin generated pursuant to the program. The program is expected to generate $2.7 million of adjusted gross margin in 2024 and $5.3 million in 2025.
Previous wording
In April 2024, FCG filed a petition with the Florida PSC to more closely align the SAFE Program with FPU's GUARD program. Specifically, the requested modifications will enable FCG to accelerate remediation related to problematic pipe and facilities consisting of obsolete and exposed pipe. If approved, these efforts will serve to improve the safety and reliability of service to FCG's customers. These modifications, if approved, result in an estimated additional $50.0 million in capital expenditures associated with the SAFE Program which would increase the total projected capital expenditures to $255.0 million over a 10-year period.
Current wording
In April 2024, FCG filed a petition with the Florida PSC to more closely align the SAFE Program with FPU's GUARD program. Specifically, the requested modifications will enable FCG to accelerate remediation related to problematic pipe and facilities consisting of obsolete and exposed pipe. If approved, these efforts will serve to improve the safety and reliability of service to FCG's customers. These modifications, if approved, will result in an estimated additional $50.0 million in capital expenditures associated with the SAFE Program which would increase the total projected capital expenditures to $255.0 million over a 10-year period. The Commission decision is expected in September 2024.
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In December 2019, the FERC approved Eastern Shore’s capital cost surcharge to become effective January 1, 2020. The surcharge, an approved item in the settlement of Eastern Shore’s last general rate case, allows Eastern Shore to recover capital costs associated with mandated highway or railroad relocation projects that required the replacement of existing Eastern Shore facilities. For the three months ended March 31, 2024, there was $0.1 million of incremental adjusted gross margin generated pursuant to the program. Eastern Shore expects to produce adjusted gross margin of approximately $4.0 million in 2024 and $4.4 million in 2025 from relocation projects, which is ultimately dependent upon the timing of filings and the completion of construction.
Current wording
In December 2019, the FERC approved Eastern Shore’s capital cost surcharge to become effective January 1, 2020. The surcharge, an approved item in the settlement of Eastern Shore’s last general rate case, allows Eastern Shore to recover capital costs associated with mandated highway or railroad relocation projects that required the replacement of existing Eastern Shore facilities. For the three and six months ended June 30, 2024, there was $0.1 million and $0.2 million, respectively, of incremental adjusted gross margin generated pursuant to the program. Eastern Shore expects to produce adjusted gross margin of approximately $4.0 million in 2024 and $4.4 million in 2025 from relocation projects, which is ultimately dependent upon the timing of filings and the completion of construction.
Previous wording
In May 2022, our legacy natural gas distribution businesses in Florida filed a consolidated natural gas rate case with the Florida PSC. The application included a request for the following: (i) permanent rate relief of approximately $24.1 million, effective January 1, 2023, (ii) a depreciation study also submitted with the filing; (iii) authorization to make certain changes to tariffs to include the consolidation of rates and rate structure across the businesses and to unify the Florida Natural Gas distribution business under FPU; (iv) authorization to retain the acquisition adjustment recorded at the time of the FPU merger in our revenue requirement; and (v) authorization to establish an environmental remediation surcharge for the purposes of addressing future expected remediation costs for FPU MGP sites. In August 2022, interim rates were approved by the Florida PSC in the amount of approximately $7.7 million on an annualized basis, effective for all meter readings in September 2022. The discovery process and related hearings were concluded during the fourth quarter of 2022 and briefs were submitted in the same quarter of 2022. In January 2023, the Florida PSC approved the application for consolidation and permanent rate relief of approximately $17.2 million on an annual basis. Actual rates in connection with the rate relief were approved by the Florida PSC in February 2023 with an effective date of March 1, 2023. For the three months ended March 31, 2024, there was$1.5 million of incremental adjusted gross margin generated pursuant to this proceeding, and itis expected to generate$17.2 million of total adjusted gross margin in 2024 and 2025.
Current wording
In May 2022, our legacy natural gas distribution businesses in Florida filed a consolidated natural gas rate case with the Florida PSC. The application included a request for the following: (i) permanent rate relief of approximately $24.1 million, effective January 1, 2023, (ii) a depreciation study also submitted with the filing; (iii) authorization to make certain changes to tariffs to include the consolidation of rates and rate structure across the businesses and to unify the Florida Natural Gas distribution business under FPU; (iv) authorization to retain the acquisition adjustment recorded at the time of the FPU merger in our revenue requirement; and (v) authorization to establish an environmental remediation surcharge for the purposes of addressing future expected remediation costs for FPU MGP sites. In August 2022, interim rates were approved by the Florida PSC in the amount of approximately $7.7 million on an annualized basis, effective for all meter readings in September 2022. The discovery process and related hearings were concluded during the fourth quarter of 2022 and briefs were submitted in the same quarter of 2022. In January 2023, the Florida PSC approved the application for consolidation and permanent rate relief of approximately $17.2 million on an annual basis. Actual rates in connection with the rate relief were approved by the Florida PSC in February 2023 with an effective date of March 1, 2023. The proceeding is expected to generate$17.2 million of total adjusted gross margin in 2024 and thereafter.
Previous wording
In January 2024, our Maryland natural gas distribution businesses filed a joint petition for approval of their proposed unified depreciation rates with the Maryland PSC. The outcome of the filing is subject to review by the Maryland PSC which is expected to be completed in the third quarter of 2024.
Current wording
In January 2024, our Maryland natural gas distribution businesses filed a joint petition for approval of their proposed unified depreciation rates with the Maryland PSC. A settlement agreement between the Company, PSC staff and the OPC was reached and the final order approving the settlement agreement went into effect in July 2024 which will include an annual benefit of $1.2 million.
Previous wording
In 2020, the Florida PSC implemented the Storm Protection Plan ("SPP") and Storm Protection Plan Cost Recovery Clause ("SPPCRC"), which require electric utilities to petition the Florida PSC for approval of a Transmission and Distribution Storm Protection Plan that covers the utility’s immediate 10-year planning period with updates to the plan at least every 3 years. The SPPCRC rules allow the utility to file for recovery of associated costs related to its SPP. Our Florida electric distribution operation's SPP and SPPCRC were filed during the first quarter of 2022 and approved in the fourth quarter of 2022, with modifications, by the Florida PSC. For the three months ended March 31, 2024, this initiative generated additional adjusted gross margin of$0.4 million, and is expected to generate$2.4 million of adjusted gross margin in 2024 and$4.0 million in 2025. We expect continued investment under the SPP going forward.
Current wording
In 2020, the Florida PSC implemented the Storm Protection Plan ("SPP") and Storm Protection Plan Cost Recovery Clause ("SPPCRC"), which require electric utilities to petition the Florida PSC for approval of a Transmission and Distribution Storm Protection Plan that covers the utility’s immediate 10-year planning period with updates to the plan at least every 3 years. The SPPCRC rules allow the utility to file for recovery of associated costs related to its SPP. Our Florida electric distribution operation's SPP and SPPCRC were filed during the first quarter of 2022 and approved in the fourth quarter of 2022, with modifications, by the Florida PSC. For the three and six months ended June 30, 2024, this initiative generated additional adjusted gross margin of$0.3 million and $0.7 million, respectively, and is expected to generate$2.4 million of adjusted gross margin in 2024 and$4.0 million in 2025. We expect continued investment under the SPP going forward.
Previous wording
For the first quarter of 2024, higher consumption driven primarily by weather resulted in a $1.9 million increase in adjusted gross margin compared to the same period in 2023. While temperatures were colder than the prior-year period, they were approximately 11.7 percent and 10.3 percent warmer, respectively, compared to normal temperatures in our Delmarva and Ohio service territories. Assuming normal temperatures, as detailed below, we estimate that operating income would have been higher by approximately $1.5 million, or $0.05 per share. The following table summarizes HDD and CDD variances from the 10-year average HDD/CDD ("Normal") for the three months ended March 31, 2024 and 2023.
Current wording
For the six months ended June 30, 2024, higher consumption which includes the effects of colder weather conditions compared to the prior-year period resulted in a $1.8 million increase in adjusted gross margin. While temperatures through June 30, 2024 were colder than the prior-year period, they were approximately 12.5 percent and 12.8 percent warmer, respectively, compared to normal temperatures in our Delmarva and Ohio service territories.
Previous wording
The average number of residential customers served on the Delmarva Peninsula and our legacy Florida Natural Gas distribution business increased by approximately 4.2 percent and 3.6 percent, respectively, for the three months ended March 31, 2024.
Current wording
The average number of residential customers served on the Delmarva Peninsula increased by approximately 3.7 percent and 3.9 percent, respectively, for the three and six months ended June 30, 2024 while our legacy Florida Natural Gas distribution business increased by approximately 3.7 percent and 3.6 percent, respectively, for the three and six month periods.
Previous wording
Operating income for the Regulated Energy segment for the first quarter of 2024 was $58.1 million, an increase of $20.5 million, or 54.4 percent, over the same period in 2023. Excluding transaction and transition-related expenses associated with the acquisition and integration of FCG, operating income increased $21.4 million or 56.9 percent compared to the same period in 2023. Higher operating income reflects incremental contributions from FCG, organic growth in our natural gas distribution businesses and continued pipeline expansion projects, and incremental contributions associated with regulatory initiatives. Excluding the transaction and transition-related expenses described above, operating expenses increased by $10.1 million. Increases in depreciation and amortization expense attributable to growth projects and FCG were partially offset by reductions related to revised depreciation rates in the Company's electric depreciation study filing and a $3.4 million RSAM adjustment from FCG.
Current wording
Operating income for the Regulated Energy segment for the second quarter of 2024 was $40.5 million, an increase of $11.2 million, or 38.3 percent, over the same period in 2023. Excluding transaction and transition-related expenses associated with the acquisition and integration of FCG, operating income increased $12.6 million or 43.0 percent compared to the same period in 2023. Higher operating income reflects incremental contributions from the acquisition of FCG, organic growth in our natural gas distribution businesses and continued pipeline expansion projects, and incremental margin from regulatory initiatives. Excluding the transaction and transition-related expenses described above, the increase in total operating expenses of $13.4 million was largely attributable to FCG's operating expenses, higher depreciation and amortization expense, and increased payroll, benefits and other employee-related expenses. Increases in depreciation and amortization expense attributable to growth projects and FCG were partially offset by reductions related to revised rates from an approved electric depreciation study and a $2.3 million RSAM adjustment from FCG.
Previous wording
FCG contributed adjusted gross margin of $25.0 million for the three months ended March 31, 2024.
Current wording
FCG contributed adjusted gross margin of $23.4 million for the three months ended June 30, 2024.
Previous wording
Contributions from regulated infrastructure programs generated incremental adjusted gross margin of $1.3 million in the first quarter of 2024. The increase in adjusted gross margin was primarily related to FPU Electric's storm protection plan, Florida's GUARD program and Eastern Shore's capital surcharge program. Refer to Note 5, Rates and Other Regulatory Activities, in the condensed consolidated financial statements for additional information.
Current wording
Regulated infrastructure programs generated incremental adjusted gross margin of $1.3 million in the second quarter of 2024. The increase in adjusted gross margin was primarily related to Florida's GUARD program and FPU Electric's storm protection plan. Refer to Note 5, Rates and Other Regulatory Activities, in the condensed consolidated financial statements for additional information.
Previous wording
We generated increased adjusted gross margin of $1.6 million for the three months ended March 31, 2024 from natural gas transmission service expansions of Peninsula Pipeline and Eastern Shore.
Current wording
We generated increased adjusted gross margin of $0.6 million for the three months ended June 30, 2024 from natural gas transmission service expansions of Peninsula Pipeline and Eastern Shore.
Previous wording
We generated additional adjusted gross margin of $1.9 million from natural gas customer growth. Adjusted gross margin increased by $1.3 million for our Florida Natural Gas distribution business and $0.6 million on the Delmarva Peninsula for the three months ended March 31, 2024, as compared to the same period in 2023, due primarily to residential customer growth of 3.6 percent and 4.2 percent in Florida and on the Delmarva Peninsula, respectively, as well as commercial and industrial growth in Florida.
Current wording
We generated additional adjusted gross margin of $3.2 million from natural gas customer growth. Adjusted gross margin increased by $2.1 million for our Florida Natural Gas distribution business and $1.1 million on the Delmarva Peninsula for the six months ended June 30, 2024, as compared to the same period in 2023, due primarily to residential customer growth of 3.6 percent and 3.9 percent in Florida and on the Delmarva Peninsula, respectively.
Previous wording
Permanent rates associated with the Florida Natural Gas base rate proceeding, effective on March 1, 2023, contributed additional adjusted gross margin of $1.5 million for the three months ended March 31, 2024. Refer to Note 5, Rates and Other Regulatory Activities, in the condensed consolidated financial statements for additional information.
Current wording
Permanent rates associated with the Florida Natural Gas base rate proceeding, effective on March 1, 2023, contributed additional adjusted gross margin of $1.6 million for the six months ended June 30, 2024. Refer to Note 5, Rates and Other Regulatory Activities, in the condensed consolidated financial statements for additional information.
Previous wording
•Contributions from acquisition- Adjusted gross margin increased by $0.4 million from the acquisition of J.T. Lee and Son's that was completed in December 2023.
Current wording
•Contributions from acquisition- Adjusted gross margin increased by $0.2 million from the acquisition of J.T. Lee and Son's that was completed in December 2023.
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measures of adjusted net income and adjusted EPS. See reconciliations above for a detailed comparison to the related GAAP measures.
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*See the Major Projects and Initiatives table.
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** Transaction and transition-related expenses attributable to the acquisition and integration of FCG have been excluded from the Company’s non-GAAP
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measures of adjusted net income and adjusted EPS. See reconciliations above for a detailed comparison to the related GAAP measures.
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The following table summarizes HDD and CDD variances from the 10-year average HDD/CDD ("Normal") for the three and six months ended June 30, 2024 and 2023.
Current report — wording carried from elsewhere
We generated additional adjusted gross margin of $1.3 million from natural gas customer growth. Adjusted gross margin increased by $0.8 million for our Florida Natural Gas distribution business and $0.5 million on the Delmarva Peninsula for the three months ended June 30, 2024, as compared to the same period in 2023, due primarily to residential customer growth of 3.7 percent both in Florida and on the Delmarva Peninsula.
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(1) Adjusted Gross Margin is a non-GAAP measure utilized by Management to review business unit performance. For a more detailed discussion on the differences between Gross Margin (GAAP) and Adjusted Gross Margin, see the Reconciliation of GAAP to Non-GAAP Measures presented above.
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(1) Includes adjusted gross margin contributions from permanent base rates that became effective in March 2023.
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Regulated infrastructure programs generated incremental adjusted gross margin of $2.6 million for the six months ended June 30, 2024. The increase in adjusted gross margin was primarily related to Florida's GUARD program and FPU Electric's storm protection plan. Refer to Note 5, Rates and Other Regulatory Activities, in the condensed consolidated financial statements for additional information.
Current report — wording carried from elsewhere
We generated increased adjusted gross margin of $2.2 million for the six months ended June 30, 2024 from natural gas transmission service expansions of Peninsula Pipeline and Eastern Shore.
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•Propane customer consumption -Adjusted gross margin increased by $0.1 million due to increased customer consumption.
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(1)Adjusted Gross Margin is a non-GAAP measure utilized by Management to review business unit performance. For a more detailed discussion on the differences between Gross Margin (GAAP) and Adjusted Gross Margin, see the Reconciliation of GAAP to Non-GAAP Measures presented above.
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•Contributions from acquisition- Adjusted gross margin increased by $0.6 million from the acquisition of J.T. Lee and Son's that was completed in December 2023.
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•Increased margins -Adjusted gross margin increased by $1.2 million primarily due to favorable rate changes and increased gathering charges associated with a large commercial customer.
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Interest charges for the six months ended June 30, 2024 increased by $19.6 million compared to the same period in 2023, attributable primarily to the Senior Notes issued in November 2023 in connection with the FCG acquisition. Higher interest expense on Revolver borrowings of driven by higher average outstanding borrowings and interest rates compared to the prior year also contributed to the increase. The weighted-average interest rate on our Revolver borrowings was 5.9 percent for the six months ended June 30, 2024 compared to 5.2 percent during the prior-year period as a result of the Federal Reserve raising interest rates throughout 2023. These factors were partially offset by higher capitalized interest during the current period of $1.2 million associated with capital projects.
Current report — wording carried from elsewhere
Income tax expense was $6.8 million and $6.1 million for the quarters ended June 30, 2024 and June 30, 2023, respectively, resulting in an effective income tax rate of 27.2 percent and 27.4 percent, respectively, during the periods then ended.