Spire Inc.

Good morning and welcome to the SPIRE year-end earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touchtone phone. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Scott Dudley. Please go ahead.

Thank you. Good morning, and welcome to our fiscal 2021 year-end earnings call. We issued an earnings news release this morning, and you may find that on our website at spireenergy.com under the newsroom. There's also a slide presentation that accompanies our webcast today, and you may download that either from the webcast site or from our website. under investors and then events and presentations. Before we begin, let me cover our safe harbor statement and use of non-GAAP earnings measures. Today's call, including responses to questions, may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Although our forward-looking statements are based on reasonable assumptions, there are various uncertainties and risk factors that may cause future performance or results to be different than those anticipated. These risks and uncertainties are outlined in our quarterly and annual filings with the SEC. In our comments, we will be discussing net economic earnings and contribution margin, which are both non-GAAP measures used by management when evaluating our performance and results of operations. Explanations and reconciliations of these measures to their GAAP counterparts are contained in both our news release and slide presentation. On the call today is Suzanne Sutherwood, SPIRE's President and CEO, Steve Lindsey, Executive Vice President and Chief Operating Officer, Steve Rasche, Executive Vice President and CFO, and Scott Carter, President of SPIRE Missouri. Also in the room is Mark Darrell, our Chief Legal and Compliance Officer, who brings over 30 years of experience in legal matters involving FERC and utilities, and also Adam Woodard, Vice President and Treasurer and CFO of our gas utilities. With that, I will turn the call over to Suzanne.

Thank you, Scott, and good morning, everyone. Thank you for joining us. As we begin today's earnings call, I'd like to remind our investors and analysts why our talented employees and leaders work for SPIRE. At FIRE, everything begins and ends with our mission. Answer every challenge, advance every community, and enrich every life through the strength of our energy. This mission is rooted in the belief that the greatest energy in the world comes from one source, people. So we, the people of FIRE, go to work every day with the intention of using our energy for good and having a positive, measurable impact on the world around us. We do this day in and day out, boldly answering the challenges before us and holding firm to our promise of keeping safe and warm and knowing that the strength of our energy keeps us stepping forward, advancing, and innovating for a better tomorrow. Grounded in who we are and our commitment to answer challenges, this past year offers several, including the severe weather of winter storm Uri, modified operations due to the coronavirus pandemic, challenges to the continued operation of the SPIRE SEL pipeline, and most recently, an unprecedented rate order in our Missouri rate review. Through it all, SPIRE employees rise to the challenge and again achieve solid year-end results, operationally and financially. For this and the collective energy that makes us strong, I extend my gratitude and admiration for our employees, the people who deliver great service to our customers, significant contributions to our communities, and consistent growth for our shareholders. That includes posting strong financial and operational performance by our utilities, further strengthening the safety, integrity, and service level of our natural gas distribution system and enhancing our sustainability. Steve Lindsey and Scott Carter will cover these topics in more detail, but I'd like to share my thoughts on the SPIRE STL pipeline situation and the order we've received for our Missouri rate review. Regarding our pipeline, we continue doing everything possible to ensure that this critical infrastructure remains in service through this winter and permanently. As a utility operator for more than 40 years, I understand the physical criticality of the Spire SEL pipeline to the St. Louis region, a pipeline serving hundreds of thousands of homes and several million people in eastern Missouri, people of every socioeconomic level. It's a pipeline that serves hundreds of thousands of businesses, businesses that provide millions of jobs, from startups to large industrials. For every person, every home, and every business, it is our responsibility to make sure this region has safe, reliable natural gas service. This honor is bestowed upon us by the state of Missouri, and we take this responsibility very seriously, as evidenced by our operating results. Last Thursday, the Federal Energy Regulatory Commission, RFERC, held its monthly public hearing, and Fire STL Pipeline was on the agenda. While the continued operation of the pipeline has not yet to be approved, we are encouraged by the Commissioner's statement, committing to act before the temporary approval expires on December 13th. Until we have certainty regarding continued operations, we'll keep being honest and open with our customers and communities of hope that everyone is prepared for winter. Now, turning to our Missouri rate review, the Missouri Public Service Commission orders issued in this case have been highly inconsistent with precedents set in prior rate cases and with how we operated based on those precedents. Considerable concerns still exist, even as the Missouri Public Service Commission issued an amended order on November 12th, providing some clarification on two important issues, capital structure and the treatment of overhead costs. Both the initial and amended orders lack clarity as to exactly what the commission had ordered and what their intentions were. In response, last Friday we filed for reconsideration. Our objective in making this filing is to achieve a fair and reasonable outcome for our customers, communities, and shareholders. As we answer these challenges, we are poised to step forward in fiscal 2022, remaining focused on our mission, our strategy, and in meeting our commitments to our stakeholders. With that, I'll turn the call over to Steve Lindsey for additional comments on SPIRE STL Pipeline, our capital investment program, and SPIRE's operational performance. Steve?

Thank you, Suzanne. I want to echo your acknowledgement of the efforts of our employees who continue their focus on maintaining safe and reliable gas delivery operations and outstanding service to our customers despite challenges, including the current challenge we're facing to ensure the SPIRE STL Pipeline is available this winter and beyond. As we've consistently stated, The Aspire STL pipeline is critical energy infrastructure. It is absolutely essential to our ability to fully serve more than 650,000 homes and businesses in the St. Louis region that count on this reliable and affordable source of natural gas, especially during cold winter periods. The need for this important energy resource was clearly demonstrated during Winter Storm Yuri last February. We were able to fully serve our customers while avoiding the service disruptions and skyrocketing gas prices experienced in Texas and other parts of the Southwest. As you know, the pipeline has a temporary certificate from FERC to operate through December 13th, and the Commission is considering our application to extend that while they address the issue on remand in the DC Circuit Court. At FERC's open meeting on Thursday, the Commission issued an order clarifying Spire STL Pipeline's ability to add new shippers consistent with other open access pipelines. And as Suzanne noted earlier, while the Commission did not issue an order extending Spire STL Pipeline's authority to operate they did state their commitment to act before December 13th when the temporary approval expires. Aspire Missouri is doing everything possible to ensure our customers have access to safe, reliable natural gas this winter when they need it most and beyond. We've been assessing the near-term risk created by the pipeline not being available throughout the entire winter and have filed operational contingency plans that we hope will not have to be implemented. At the same time, we've been communicating with our customers and communities to make them aware of possible disruptions in gas service. We have strong, broad support for keeping our pipeline in operation, including from government and elected officials, community leaders, customers, and the Missouri Public Service Commission. Even EDF, the party that sued over FERC's approval for the pipeline, is in support of the pipeline's operation during the winter. Finally, Aspire STL Pipeline has asked FERC for resolution of this matter in 2022 earlier this month requested expedited reissuance of the certificate based on additional information pointing to the need for the pipeline. While we are working to preserve critical energy infrastructure, we continue to increase our investment in our utility infrastructure, new business, technology, and innovation. These investments drive growth, enhanced operating performance, and service to customers. Last year, our CapEx totaled $625 million, including increased spend for our gas utilities of $591 million, with over half of our utility investment for infrastructure upgrades. We also spent nearly $140 million on new business, about a 30% increase over last year, and had record number of new premise activations. As we look out over the next five years through fiscal 2026, we're expecting our CapEx to total $3.1 billion, up about $100 million from our previous five-year forecast through fiscal 2025. I would note that more than 95% of our capital spend supports our gas utilities, focused on our long-term pipeline replacement programs and new business, plus innovation and technology, including ultrasonic meters. As you know, a majority of our utility spend is recovered with minimal regulatory lag or reflected in earnings, as in the case of new business. Our investments continue to drive further advancements in operating performance and sustainability. As you can see, our key metrics for resilience, safety, and system integrity continue to show an improving trend over the last five years. Employee injury rates, damage rates, and leaks on our system all hit record lows. At the same time, we are tracking toward our methane emission reduction goals. We expect to hit our target for fiscal 2021 to reduce emissions by 46% from 2005 levels in support of our commitment to being a carbon neutral company by mid-century. With that, let me turn the call over to Scott Carter for review of our Missouri rate review order. Scott?

Thanks, Steve, and good morning. As Suzanne mentioned, and we previously discussed in past calls, we filed a general rate case for a Missouri utility last year. Recently, the Missouri Commission issued an order in this case, which it later amended. The final amended order grants us rate relief of approximately $72 million. This includes roll-in of $47 million already being collected through ISRIS, and the recovery of approximately $20 million in increased depreciation and amortization expense through higher rates. It also includes expansion of energy assistance programs for the customers in need. The order also came with challenges. The Commission issued several concerning decisions in this order. To begin, it included short-term debt in our permanent financing structure, the first time for any Missouri utility in recent history, if ever, This one decision reduced our revenue requirement by approximately $19 million. Up to this point, and as confirmed in our last fully litigated case just three years ago, the Commission had previously decided it was not appropriate to include short-term debt and adopted the actual capital structure at the end of our test period. Both the company and the Commission staff recommendations in this case were consistent with that precedent. The Commission elected to include short-term debt and calculated it in a way that penalizes us for the cost incurred last winter. The order also adopts staff recommendation ROE of 9.37%. Comparing that to the current national average ROE for gas companies of 9.62%, which was the approach the Commission used in our last rate case, this lowered our revenue requirement by approximately $3 million annually. The total impact of short-term debt decision in the below average ROE results in the lowest rate of return for regulator utility in Missouri. Finally, is the suspension of capitalization of overheads pending a staff audit. Despite our consistent methodology for capitalizing overhead for many years, a method consistent with all authoritative guidance, the Commission set aside these prudently incurred costs going forward, pending the completion of an audit by the Commission staff. While the revised order attempts to clarify the treatment of those costs, which total between $20 and $30 million annually, Our best estimates are that it leaves in question how roughly $14 to $22 million for fiscal year 22 will be recovered. We have already begun the process for expedited review of the capitalization methodology and look to have the resolution in the first quarter of calendar 22. On Friday, November 19th, we asked the Commission to reconsider its amended order. We hope they will consider the overall implications of these shifts from longstanding Commission practice and the impacts on our customers as well as the regulatory certainty that SPIRE and other utilities in the state need to continue to invest and provide excellent service. So clearly, we have work to do on the regulatory front. We are committed to working through these issues and continuing to deliver for our customers and all stakeholders. I'll now turn this over to Steve Rasche for financial update.

Thanks, Scott. Good morning, everyone, and thank you for joining us today. Let's start with a brief review of our fourth quarter and financial position. And then let me try to bring together all the moving parts we covered on the call as we look at our outlook for 2022 and beyond. For our fiscal fourth quarter, we narrowed our economic loss to $13 million, better than last year by more than $2 million or five cents a share. Looking at the businesses, our gas utilities typically have a seasonal loss this quarter due to the reduced heating load in the warmest days of summer. For the quarter, the segment lost $17.8 million, just over $9 million more than last year, as slightly higher margins were more than offset by higher depreciation and interest expenses. More on expense trends in a second. Gas marketing posted earnings of just over $9 million. Recall that our prior year results included the cost of storage positions we established going into last winter that ultimately created a lot of value. Looking at this quarter, we were able to resolve a number of outstanding commercial disputes arising from Winter Storm URI. The net impact of those settlements increased quarterly earnings by $13.5 million, as noted here on slide 12. While unexpected, this benefit was the primary driver and results exceeding our expectations. I would also point out several items that moved individual expense and income categories at our gas utility, but did not really impact the bottom line. First, true-ups from the Missouri rate order, including regulatory deferrals, depreciation, and taxes. Secondly, the benefit of an off-system sale from this winter, and the funding of customer programs and initiatives. Drilling down a bit on operations and maintenance expenses, the net variance of $4.4 million is largely due to a $3.8 million expense reduction last year related to a COVID deferral. Excluding that, run rate O&M expenses increased by less than 1%. We have a strong financial position with growing cash flow. Our adjusted EBITDA was up roughly 18% over last year. Our long-term capitalization is balanced, and we have ample liquidity heading into this winter. And as a result, we have seen significant strengthening of our credit metrics. With our FFO to debt metric in the middle of its target range, and holding company debt trending close to our 20 percent target. Finally, let's turn to our outlook. We remain confident in our long-term per share growth target range, which, as always, is predicated on strong rate-based growth paired with fair and reasonable regulatory treatment. Steve has already outlined our robust five-year capital plan, which moved up to $3.1 billion. And as Scott Carter mentioned, we are seeking fair and reasonable regulatory treatment in near-term clarity in Missouri. Given what we know today based on the radar, it appears that 2022 will be a reset year, and we fully expect to regain momentum in 2023 and beyond. Now, looking specifically at fiscal 22, let me walk you through how we arrived at our expected earnings range of $3.70 to $4 per share, starting with our results from 2021. Looking at the year just ended, we estimate non-recurring benefits, largely at our marketing business due to Winter Star-Murray, to be between $0.65 and $0.70 per share. Using the middle of that range, we arrive at a 2021 net economics earnings run rate of approximately $4.18 per share. From that starting point, we apply the net difference between our and market expectations of using the APCO long-term cap structure and an average market order in Missouri. That delta, as Scott discussed, is a reduction in earnings for fiscal 22 of roughly 30 cents per share. And while we are working toward a fair and expedited resolution with staff and the Missouri Public Service Commission on what overheads can be capitalized or deferred, based on a plain reading of the order itself, we have to assume that we will only receive limited deferral of otherwise prudent non-operational overhead costs. The impact in fiscal 22 is significant. a further discount ranging from 20 cents to 35 cents per share. After adding in the benefits of our organic and rate-based growth initiatives, we arrive at a range of $3.70 to $4 per share. Again, based on what we know today, and admittedly a wide range, given the uncertainty specifically on the overhead issue, and we do believe that there is upside to this range with the favorable clarification from the Missouri Public Service Commission. Turning briefly to our financing guidance, our long-term financing plan over the next three years includes a steady but low level of equity paired with Missouri bonds this year to finance our yearly excess gas costs, as well as operating company debt, including some refinancing through the forecast period. And recognizing our strong position and results for 21, as well as the confidence we have in our long-term growth prospects, our board of directors recently increased our common dividend by 5.4%, to an annualized rate of $2.74 per share. This is the 19th consecutive year of dividend increases. In summary, we finished our fiscal year in solid shape. We will continue to remain laser focused on ensuring the availability of the Aspire SDL pipeline for this winter and many winters to come, as well as addressing the change in regulatory approach in Missouri. Our goal is clear, delivering safe and reliable service to our customers and communities and investing for the future for the benefit of all stakeholders. With that, let me turn it back over to you, Suzanne.

Thank you, Steve. In summary, SPIRE continues to execute and deliver solid operating and financial results. We're able to do this regardless of challenges because the people of SPIRE are strong, resilient, and focused on delivering natural gas service to the 1.7 million homes and businesses that rely on us for safe, reliable energy. And the strength of our energy keeps us stepping forward, advancing, and innovating for a better tomorrow. We look forward to updating you on our progress as the year unfolds, and we wish you and your family a nice Thanksgiving holiday. Thank you for your continued interest and investment in FIRE. We are now ready to take your questions.

We will now begin the question and answer session. To ask a question, you may press star, then 1 on your touchtone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star, then two. At this time, we will pause momentarily to assemble our roster. Our first question today comes from Julian Dumoulin-Smith with Bank of America. Please go ahead.

Hey, it's actually Cody Clark on for Julian. Good morning.

Good morning. Hey, Cody. Hey, Cody.

First, can you give some color on the $0.20 to $0.35 impact of the capitalized overhead? Is the range just really timing-related, or are there other mitigating factors, i.e., regulatory assets that we should be thinking about? And also, I know you mentioned it in your prepared remarks, but wondering what the breakdown of gas utility earnings versus other is in the new 22 guidance.

Yeah, let me give it a shot. This is Steve, and Adam's here, so if I miss something, I'm sure that he will help me out. You were right that the range is extremely wide on the overhead issue because there's still a lack of clarity on exactly what the bucket of overheads are that is subject to capitalization or lack of capitalization or deferral. And that is that there's quite a bit of discourse in the amended order and even in our filing for reconsideration, trying to identify exactly what the bucket is. And that is why, unfortunately, we have such a wide range. And we're hopeful, working with the staff, that we'll be able in the near term to clarify what that bucket is as opposed to a range that ultimately is, I think, $25 million from the low end to the high end. But given what we know today, That's where it is. And just as an example, some of the things that would be included on the low end or the worst end and not the best end are things like supervision of field staff and things of that nature, which we believe have a pretty clear line of sight to capitalization since that's what most of our team does. But we have to work through that with the staff and then ultimately with the commission. And that's why that range is so wide. And hopefully we'll get clarity in the near term. On your second question, we're still looking at a business that's going to be 90 plus percent gas utility. And all of these impacts that we're talking about are really in Missouri as opposed to anywhere else. We still expect for Spire Marketing to grow, obviously at a run rate basis from where they ended up, 21. And we continue to like the results and progress we're making. on the pipeline and also in the storage business.

Okay, that's helpful. Thank you. And then how should we be thinking about capitalized overhead going forward if the commission is directing you to file for recovery in subsequent rate cases? Is it incremental lag each year, or do you see it as really just isolated to 22? And more just a clarification, are you rebasing the 5% to 7% growth off of the new 22 range?

Yeah, Cody, why don't I take your first question, and I'll turn it back over to Steve. This is Scott Carter again. You know, again, none of the costs incurred were questioned from a prudency standpoint. So those we consider costs that should be recovered, either capitalizable or recoverable through rates. And so our anticipation is to the extent the Commission finds that some of those costs should not be capitalized going forward, that we'll be able to recover those in future rates through an O&M cost item, just like the other O&M elements. working through the transition and then the time period of getting that back into rates is something we're still working through. But ultimately, our expectation is all those costs are recoverable because all those are prudently incurred.

Yeah, and on your second question about the long-term growth, it's a great question. And, you know, there is so much noise and uncertainty on 22, and we have the unusual benefit in 21, and then we have COVID in 20. So it's been an unusual three-year period. So we kind of looked at it two ways. One, we went back again to 19, and you know us, we don't like to go that far back, but we had to go back to kind of a steady year and then looked out forward over the next three to five years. As you know, we're always kind of looking into the mirror that far out. And based on that, we're confident on the growth rate of 5% to 7%. But I take on your comment, and as we get more clarity in what 22 is going to look like, we will clearly bring that base year forward. And the only thing I can say is I believe that that growth is going to accelerate dramatically, especially as we get some certainty on the overhead issue, and then ultimately we'll figure out on the cap structure and ROE what our next step will be. But it's kind of an uncertain place to be right now. I think you can rest assured that based upon what we're doing organically and a rate-based growth of 7% to 8%, that we've got the engines to continue to grow the business for the long term.

Good. Thanks so much for the time. I'll jump back in the queue.

Our next question comes from Gabe Marine with Mizuho. Please go ahead.

Hey, good morning, everyone. I just wanted to ask maybe a little bit more clarifying sort of on the cap structure outcome here, basically. Just wondering kind of in your future financing plan, let's say that the short-term debt kind of is a thing that's here to stay. Are you looking to purposely push the equity cap structure back higher to where it was prior to that? So I'm just curious how the long-term financing plans fit into sort of your targeted cap structure at this stage? And I recognize there's a lot of uncertainty out there at the moment.

Yeah, Dave, it's a great question. Let me take a shot at that because you had several questions buried in there. We are clearly reevaluating what our capital structure strategy is going to be going forward. We operated against the rules of the road based upon the last rate case. And unfortunately, We did have more short-term debt, a lot of that tied to Winter Storm URI, that we then financed with long-term debt near the end of the update period, which would be exactly what you would do under a point-of-time test for the cap structure, but now the game's changed. We are clearly looking at how, going forward, we manage the short-term debt and really our entire cap structure on 13-month rolling average, if that's going to be the new game. And frankly, we're able to do that. As a reminder, in Alabama... It's real-time rate making, and we have to manage the cap structure every month, and we can do that. So in terms of the equity content in the utility, yes, absolutely. We will rebuild that to the level that makes sense based upon both the risk and returns that we would expect to get in the business. And clearly that risk has increased from where we were before the rate order, and that's been echoed by Moody's and a few other folks who have started to take a look at this. But go with us along for the ride. I did mention on the call that we will be going into the long-term market in order to finance, think of it as securitization, but we're not really securitizing it in the purest sense of the word, for the excess gas cost in Missouri as we look to recover that through customer rates over the next several years and or a pending decision from the Missouri Public Service Commission on a few disputes we have with some marketers who didn't perform.

Thanks, Steve. And then maybe I can ask as a follow-up, sort of as a larger conceptual sort of question, you know, does this rate case outcome change, you know, your CapEx ambitions in Missouri, how you want to do business in the state? I noticed your CapEx didn't really change. And also, sort of as a corollary, how does this rate case at all change, you know, efforts around R&G, new business pursuit, things that you, I think, have been putting at the forefront kind of in the state?

Hey, it's Steve Lindsey. I'll take the first part of the question relative to the capital plan. And as you see, we have reaffirmed or actually added to our five-year plan, if you think about it, up at $3.1 billion now. And that includes some increases in Missouri. So if you want to think about our strategy, I don't think this has changed anything relative to that. I think we have a lot of long-line opportunities in both sides of the state. We're going to unify this and have a cap really for ISRAS across the state, which I think will be beneficial to help us make some good decisions on that. And really, across all of our footprint, we're very evenly spread almost, if you think about the capital that we deploy in each side of the state here, as well as Alabama, whether it's on infrastructure upgrades, new business technology. So I think nothing's really changed on that strategy going forward.

And Gabe, Scott, on your second question, you know, our intention was solid, stable rate case outcome in this case. then turning attention to things like renewable natural gas. We had a proposal in our rate case that kind of got hunted, and we said we would revere it back separately. You know, in the regulatory process, banks consume oxygen, so to the extent that fixing this has a longer lead time to it is obviously going to affect our ability to make progress on things that our customers want, which is renewable natural gas and other customer benefit programs as we try to move towards a system of rate making that better suits their needs. So hopefully we can get this solved in the short run, get our attention back on those things of delivering customers what they want. But obviously this has got to be fixed before we can make real good progress on any of those fronts.

Dave, I'll just add one further comment to tie the capital deployment plan that we've discussed to an environmental impact and our carbon neutrality goals. is modernizing our system is one of the best things we can do, both the pipe and the meters, in terms of our carbon neutrality goals. And it does then tie back into renewable natural gas, as Scott Carter described. So it all actually hangs together, so I appreciated that you asked the two questions together almost as one. So thank you for that.

Of course. Thanks, everyone.

Our next question will come from Char Perez with Guggenheim. Please go ahead.

Hey, guys. Good morning. Good morning. Sorry to kind of ask this question again, but it's still a little bit complex, and I'm not sure if you addressed it directly. Just given the pointed commentary in the commission's order, I guess, how do you anticipate changing the ruling on cap structure on reconsideration? And I'm still trying to get a sense, do you see changes in equity needs to align with the cap structure ruling or not?

Well, Char, let me take a shot. You know, we've asked for reconsideration and asked the Commission to essentially step back and look at the order in its totality because you can, this is human nature, you make decisions based on individual things that are in front of you, but it's also the Commission's duty to step back and look at the fairness overall. I won't handicap whether or not that will actually engender any change, but we felt it was important to point it out as you step back and look at the totality of the order and what is essentially the lowest ROE in Missouri for a utility that is otherwise operating in phenomenal fashion, as Steve Lindsey and Scott Carter talked about. So that is... That's the reason why we've decided to pursue it going forward. It is clear that there's a lot more uncertainty on the overhead issue, and we would hope to get clarification on that, absolutely.

Okay, got it. Again, still just on equity.

Oh, you know, at this point, we're sitting in pretty good shape. You look at our forward financing, and it's a very low level in order to tweak the overall cap structure, which at the consolidated group level is fine. Now, we will, as we think about our overall capital structure strategy in Missouri, we will look at those equity raises and may more closely tie them to actually bolstering the capital structure down in Missouri. But we still have yet to wait for the commission and staff to weigh in so that we know what the new rules of the road are. But I think we're in good shape. And we tested that with ourselves, and that was part of our discussion when we looked at our capital plan for the forward five years. And I think we're in great shape. And remember, we're coming off a year with extremely strong earnings, which really helped us move forward in a big way in our credit metrics, which we referenced on the call, and also building the equity layer the old-fashioned way, which is earning it.

Got it. Yep.

One more thing to add to that, just a way to think about it. Some of the capital structure issue is self-correcting. It was largely driven by some of the short-term debt buildup. And so what they did when they put the short-term structure in, they pulled it out of debt and equity by the inclusion of that. So as we refinance that short-term and that level works off over time, our next case will inherently have less short-term debt in it. And therefore, it would push it back to both the long-term debt and the equity component. So I think our overall capital structure works in the regulatory context. It's just some of the issues we dealt with with changing the rules about the 13-month look at that short-term balance.

Okay, so just to summarize, no new equity as a result of the order, correct?

No, sir.

Okay, thank you. And then just on STL, when do you expect the FERC to issue you a certificate to operate? I guess over the winter months, just given your current temporary certificate that does expire in a couple weeks. Do you expect another temporary certificate or is something more permanent? And if you don't expect a permanent solution in the near term, when do you expect to have that clarity?

Thanks. I asked Mark Darrell to join us today just because he's got extensive experience with FERC, and I thought there might be a general question around this topic. So, Mark, if you don't mind, would you?

Sure. Happy to respond to that. you know, it's hard to predict exactly what the FERPA will do, whether it's on a temporary basis or on a permanent basis. And, you know, they did indicate at the meeting last Thursday that they expect to have a decision before December 13. So I think a number of the commissioners indicated that they were supportive of making a decision before December 13th. So that's pretty much all we know and exactly what the form or scope of that decision will be. Right now, I can't really predict.

That's all I have.

Thanks, guys.

Again, if you'd like to ask a question today, it is star then one, star then one to ask a question. Our next question comes from Vitula Murti with Hudson Bay Capital. Please go ahead.

Good morning. Good morning. Good morning. Can you help me in terms of, like, with the asking for reconsideration here, given that we're nearing the holiday season? When do you expect the Commission to respond to that request?

Yeah. The commission has previously looked at some of the reconsideration requests in this case and acted fairly quickly. So we're hopeful that with what's pending and the scope of the issues out there, they'll do the same in this case. So they have the information they need to act on our request for rehearing. So we'll look for that as soon as they can take it up.

And I'm wondering in terms of the changes, you know, it's one thing to kind of do an audit and that kind of thing. Can you explain to me the rationale for requiring the change of treatment during the audit period as opposed to subsequent to the audit?

Yeah, that was one of the points we made in our request for reconsideration was the fairly unprecedented nature of that change and the transition. Normally, whenever you have a fairly substantial change in the regulatory construct, recoverability of cost, you know, there are studies that are required and there's a process put in place. Think about, you know, changing depreciation rates and other things in the regulatory context. So we felt like it was certainly unprecedented to be that radical of a shift without some ability to work through it. Keep in mind that we had an 11-month process and parties didn't come up with a number. The number's not zero on capitalization of overheads, but that's effectively where we are working through this process. But no party put out what an alternative appropriate number is, so just a question opened up this issue where, again, we would be seen as more consistent with regulatory construct to say that would, if you don't have an answer, that should trigger a study and a process, not an immediate change in the rate making associated with that issue.

And it certainly sounds like it's almost inevitable that you're going to be filing as soon as it's practical. So what should we be expecting there? And can you remind me in terms of what type of a test year and how much pro formas and other types of adjustments you'll be allowed to make over the process once you start this again?

Yeah, so again, we've asked for reconsideration on these issues so the Commission can still address these issues and get the order where it needs to be. So again, it gets us back on the path of delivering the other customer benefits we're looking to try to roll out and get in front of the Commission. Should they not work through this process and come to that place, we would have to file a 60-day notice and then file a rate case after that point in time. Rate cases are historic in Missouri. but then they're trued up through. So we would look at truing that up through a later date as we were updating that test year in a case. So to the extent we can get relief in this, in the current case, all this issue goes away. To the extent we can't get to a place that builds us a construct that is sustainable, then yeah, we'll be looking to do something fairly quickly on a new case and new consideration.

So based on your answer, it sounds like if the On reconsideration, it was an unsatisfactory outcome. With a 60-day notice given that we're in the holiday season, it sounds like that we'd get a filing come March, April of this year, and that would then be adjudicated over the course of the year with a decision around year-end, or would it then slip into next year if it were to run the full term?

Yeah, again, we're hopeful that the commission will take up this issue and can solve it in the current instance. To the extent they don't, just think about it in this terms, and we haven't decided on the exact date, but we would file a 60-day notice sometime after the commission's final determination in this case, file the case roughly 60 days thereafter or maybe a little bit more, and it takes up to 11 months to prosecute. The commission can do it quicker than that. They usually just suspend it for 11 months. There's a lot of variables in there that we haven't fully worked through, but our focus right now is getting the commission to come to a resolution in this case that's more consistent with the previous fragrance.

Okay, so I'm clear. If, you know, in the longest duration viewpoint here, we'd have 60 days notice and then 60 days prior, then period for filing, so it's So it's basically effectively four months. So we call that, you know, around April, give or take, if we start at the beginning of the year, and then 11 months. So then it would run its course if it were to be fully adjudicated into early 2022.

Yeah, I would put it this way. With a 60-day notice and an 11-month case, you're looking at 13 to 14 months from whatever date we file that case at the outsides. Again, given the fact that we just had a case and if these are the only issues out there, we would certainly look for expedited treatment on that. So it's hard to give you an exact date because, again, we haven't set the starting date and we haven't discussed a process. But, again, all that can be avoided with the commission determination consistent with its prior practices.

Okay, thank you very much.

There being no further questions, this will conclude our question and answer session. I would like to turn the conference back over to Scott Dudley for any closing remarks.

Well, thank you all for joining us on this Thanksgiving week. We will be around the rest of the day for any follow-ups. We look forward to that. And have a safe and healthy Thanksgiving. Talk to you soon.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.