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Note 14 - Commitments and Contingencies
 12 Months Ended
Sep. 30, 2024
Notes to Financial Statements  
Commitments and Contingencies Disclosure [Text Block]

14.

COMMITMENTS AND CONTINGENCIES

 

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 through third-party asset management contracts. Roanoke Gas utilizes two 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. Under one 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 2022 for a two-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 a second asset management contract in July 2024, whereby the asset manager acts as agent for the purchase of gas transported by the MVP. This second asset management contract is currently month-to-month with no 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 2024 to 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 may increase 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 years 2024 and 2023, respectively, including approximately $1,048,000 in fiscal year 2024 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. 

 

  

Pipeline and

 

Year

 

Storage Capacity

 

2024 - 2025

 $20,252,594 

2025 - 2026

  20,252,594 

2026 - 2027

  18,783,146 

2027 - 2028

  14,526,463 

2028 - 2029

  12,057,956 

Thereafter

  65,712,396 

Total

 $151,585,149 

 

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 in 2016 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.

 

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 2031 and are not material to the Company.

 

Environmental Matters

 

Roanoke Gas operated an MGP as a source of fuel for lighting and heating until the early 1950’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 does not 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.