UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549



FORM			10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: ~~June 30, 2022~~March 31, 2023


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-11590



CHESAPEAKE UTILITIES CORPORATION (Exact name of registrant as specified in its charter)


Delaware						51-0064146
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

500 Energy Lane, Dover, Delaware 19901

(Address of principal executive offices, including Zip Code)

(302) 734-6799

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock - par value per share $0.4867	CPK	New York Stock Exchange, Inc.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Common Stock, par value $0.4867 — ~~17,737,871~~17,789,856 shares outstanding as of ~~July 29, 2022.~~April 28, 2023.

Table of Contents



PART I—FINANCIAL INFORMATION		1

ITEM 1.	FINANCIAL STATEMENTS	1

ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	3229

ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	6049

ITEM 4.	CONTROLS AND PROCEDURES	6150

PART II—OTHER INFORMATION		6251

ITEM 1.	LEGAL PROCEEDINGS	6251

ITEM 1A.	RISK FACTORS	6251

ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	6251

ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	6251

ITEM 5.	OTHER INFORMATION	6251

ITEM 6.	EXHIBITS	6352

SIGNATURES		6453

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GLOSSARY OF DEFINITIONS

Adjusted Gross Margin: aA non-GAAP measure calculated by deducting the purchased cost of natural gas, propane and electricity and the cost of labor spent on direct revenue-producing activities from operating revenues. The costs included in Adjusted Gross Margin exclude depreciation and amortization and certain costs presented in operations and maintenance expenses in accordance with regulatory requirements

Aspire Energy: Aspire Energy of Ohio, LLC, a wholly-owned subsidiary of Chesapeake Utilities

Aspire Energy ~~Express~~Express:: Aspire Energy Express, LLC, a wholly-owned subsidiary of Chesapeake Utilities

ASU: Accounting Standards Update issued by the FASB

~~ATM~~ATM:: At-the-market

CARES Act: Coronavirus Aid, Relief, and Economic Security Act

CDC: U.S. Centers for Disease Control and Prevention

CDD: Cooling Degree-Day

CFG: Central Florida Gas Company, a division of Chesapeake Utilities

Chesapeake or Chesapeake Utilities: Chesapeake Utilities Corporation, its divisions and subsidiaries, as appropriate in the context of the disclosure

CHP: Combined Heat and Power Plant

Company: Chesapeake Utilities Corporation, its divisions and subsidiaries, as appropriate in the context of the disclosure

COVID-19: An infectious disease caused by a coronavirus

CNG: Compressed natural gas

Davenport Energy: An entity from whom we acquired certain propane operating assets in North Carolina.

Degree-day: ~~A degree-day is the measure~~Measure of the variation in the weather based on the extent to which the average daily temperature (from 10:00 am to 10:00 am) falls above (CDD) or below (HDD) 65 degrees Fahrenheit

Delmarva Peninsula: A peninsula on the east coast of the U.S. occupied by Delaware and portions of Maryland and Virginia

~~Diversified Energy:~~ ~~Diversified Energy Company an entity from whom we acquired certain propane operating assets in North Carolina, South Carolina, Virginia, and Pennsylvania~~

DRIP: Dividend Reinvestment and Direct Stock Purchase Plan

Dt(s): Dekatherm(s), which is a natural gas unit of measurement that includes a standard measure for heating value

Dts/d: Dekatherms per day

Eastern Shore: Eastern Shore Natural Gas Company, a wholly-owned subsidiary of Chesapeake Utilities

Eight Flags: Eight Flags Energy, LLC, a wholly-owned subsidiary of Chesapeake Utilities

Elkton Gas: Elkton Gas Company, a wholly-owned subsidiary of Chesapeake Utilities

~~Escambia Meter Station:~~ ~~A natural gas metering station owned by Peninsula Pipeline Company located in Escambia County,~~

~~Florida~~

ESG: Environmental, Social and Governance

FASB: Financial Accounting Standards Board

FERC: Federal Energy Regulatory Commission

~~Table of Contents~~

FGT: Florida Gas Transmission Company

Florida ~~OPC~~OPC:: The Office of Public Counsel, an agency established by the Florida legislature who advocates on behalf of Florida's utility consumers prior to actions or rule changes

FPU: Florida Public Utilities Company, a wholly-owned subsidiary of Chesapeake Utilities

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GAAP: Generally Accepted Accounting Principles

~~Guernsey Power Station:~~ ~~Guernsey Power Station, LLC, a partner with Aspire Energy Express in the construction of a power generation facility in Ohio~~

~~GRIP:~~ ~~Gas Reliability Infrastructure Program~~

Gross Margin: a term under U.S. GAAP which is the excess of sales over costs of goods sold

GUARD: Gas Utility Access and Replacement Directive a program to enhance the safety, reliability and accessibility of portions of the Company’s natural gas distribution system in Florida

Guernsey Power Station: Guernsey Power Station, LLC, a power generation facility in Guernsey County Ohio

Gulfstream: Gulfstream Natural Gas System, LLC, an unaffiliated pipeline network that supplies natural gas to FPU

HDD: Heating Degree-Day

LNG: Liquefied Natural Gas

Marlin Gas Services: Marlin Gas Services, LLC, a wholly-owned subsidiary of Chesapeake Utilities

MetLife: MetLife Investment Advisors, an institutional debt investment management firm, with which we have previously issued Senior Notes and which is a party to the current MetLife Shelf Agreement, as amended

MGP: Manufactured gas plant, which is a site where coal was previously used to manufacture gaseous fuel for industrial, commercial and residential use

Peninsula Pipeline: Peninsula Pipeline Company, Inc., a wholly-owned subsidiary of Chesapeake Utilities

Peoples Gas: Peoples Gas System, an Emera Incorporated subsidiary

Prudential: Prudential Investment Management Inc., an institutional investment management firm, with which Chesapeake Utilities entered into a previous Shelf Agreement and issued Shelf Notes

PSC: Public Service Commission, which is the state agency that regulates utility rates and/or services in certain of our jurisdictions

Revolver: Our $400.0 million unsecured revolving credit facility with certain lenders

RNG: Renewable natural gas

Sandpiper Energy: Sandpiper Energy, Inc., a wholly-owned subsidiary of Chesapeake Utilities

SEC: Securities and Exchange Commission

Senior ~~Notes~~Notes:: Our unsecured long-term debt issued primarily to insurance companies on various dates

Sharp: Sharp Energy, Inc., a wholly-owned subsidiary of Chesapeake Utilities

Shelf Agreement: An agreement entered into by Chesapeake Utilities and a counterparty pursuant to which Chesapeake Utilities may request that the counterparty purchase our unsecured senior debt with a fixed interest rate and a maturity date not to exceed 20 years from the date of issuance

Shelf Notes: Unsecured senior promissory notes issuable under the Shelf Agreement executed with various counterparties

SICP: 2013 Stock and Incentive Compensation Plan

SOFR: Secured Overnight Financing Rate, a secured interbank overnight interest rate established as an alternative to LIBOR

TCJA: Tax Cuts and Jobs Act enacted on December 22, 2017

TETLP: Texas Eastern Transmission, LP, an interstate pipeline interconnected with Eastern Shore's pipeline

Uncollateralized Senior Notes: Our unsecured long-term debt issued primarily to insurance companies on various dates

~~Table of Contents~~

U.S.: The United States of America

Table of Contents

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

Chesapeake Utilities Corporation and Subsidiaries

Condensed Consolidated Statements of Income (Unaudited)


		Three Months Ended				Six Months Ended					Three Months Ended
		June 30,				June 30,					March 31,
		2022		2021		2022		2021			2023		2022
(in thousands, except shares and per share data)	(in thousands, except shares and per share data)									(in thousands, except shares and per share data)
Operating Revenues	Operating Revenues									Operating Revenues
Regulated Energy	Regulated Energy	$	92,193	$	80,910	$	220,084	$	202,107	Regulated Energy	$	142,270	$	127,891
Unregulated Energy and other	Unregulated Energy and other	47,277		30,172		142,266		100,161		Unregulated Energy and other	75,859		94,989
Total Operating Revenues	Total Operating Revenues	139,470		111,082		362,350		302,268		Total Operating Revenues	218,129		222,880
Operating Expenses	Operating Expenses									Operating Expenses
Regulated natural gas and electric costs		21,573		14,447		67,016		57,491
Unregulated propane and natural gas costs		25,543		12,254		77,279		43,506
Natural gas and electric costs										Natural gas and electric costs	55,288		45,442
Propane and natural gas costs										Propane and natural gas costs	33,301		51,739
Operations	Operations	38,002		36,371		80,796		75,810		Operations	44,767		42,793
Maintenance	Maintenance	4,507		4,259		8,772		8,300		Maintenance	5,104		4,264
Depreciation and amortization	Depreciation and amortization	17,216		15,298		34,193		30,662		Depreciation and amortization	17,183		16,977
Other taxes	Other taxes	6,160		5,875		12,960		12,324		Other taxes	7,571		6,800
Total Operating Expenses	Total Operating Expenses	113,001		88,504		281,016		228,093		Total Operating Expenses	163,214		168,015
Operating Income	Operating Income	26,469		22,578		81,334		74,175		Operating Income	54,915		54,865
Other income, net	Other income, net	2,584		1,453		3,498		1,828		Other income, net	276		913
Interest charges	Interest charges	5,825		5,054		11,164		10,159		Interest charges	7,232		5,339
Income Before Income Taxes	Income Before Income Taxes	23,228		18,977		73,668		65,844		Income Before Income Taxes	47,959		50,439
Income Taxes	Income Taxes	6,177		5,164		19,683		17,565		Income Taxes	11,615		13,506
Net Income	Net Income	$	17,051	$	13,813	$	53,985	$	48,279	Net Income	$	36,344	$	36,933

Weighted Average Common Shares Outstanding:	Weighted Average Common Shares Outstanding:									Weighted Average Common Shares Outstanding:
Basic	Basic	17,730,833		17,546,346		17,704,592		17,516,273		Basic	17,759,896		17,678,060
Diluted	Diluted	17,809,871		17,616,496		17,785,629		17,585,006		Diluted	17,831,772		17,761,119
Earnings Per Share of Common Stock:	Earnings Per Share of Common Stock:									Earnings Per Share of Common Stock:
Basic	Basic	$	0.96	$	0.79	$	3.05	$	2.76	Basic	$	2.05	$	2.09

Diluted	Diluted	$	0.96	$	0.78	$	3.04	$	2.75	Diluted	$	2.04	$	2.08

The accompanying notes are an integral part of these condensed consolidated financial statements.

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Chesapeake Utilities Corporation and Subsidiaries

Condensed Consolidated Statements of Comprehensive Income (Unaudited)


		Three Months Ended				Six Months Ended					Three Months Ended
		June 30,				June 30,					March 31,
		2022		2021		2022		2021			2023		2022
(in thousands)	(in thousands)									(in thousands)
Net Income	Net Income	$	17,051	$	13,813	$	53,985	$	48,279	Net Income	$	36,344	$	36,933
Other Comprehensive Income (Loss), net of tax:	Other Comprehensive Income (Loss), net of tax:									Other Comprehensive Income (Loss), net of tax:
Employee Benefits, net of tax:	Employee Benefits, net of tax:									Employee Benefits, net of tax:
Amortization of prior service cost, net of tax of $(5), $(5), $(10) and $(10), respectively		(14)		(14)		(28)		(28)
Net gain, net of tax of $11, $28, $23 and $53, respectively		32		78		63		156
Reclassifications of amortization of prior service credit and actuarial loss, net of tax of $3 and $6, respectively										Reclassifications of amortization of prior service credit and actuarial loss, net of tax of $3 and $6, respectively	10		18

Cash Flow Hedges, net of tax:	Cash Flow Hedges, net of tax:									Cash Flow Hedges, net of tax:
Unrealized gain (loss) on commodity contract cash flow hedges, net of tax of $(188), $1,193, $(4) and $1,257, respectively		(498)		3,126		32		3,291
Unrealized gain on interest rate swap cash flow hedges, net of tax of $0, $2, $0 and $1, respectively		—		6		—		4
Net gain on commodity contract cash flow hedges, net of tax of $7 and $937, respectively										Net gain on commodity contract cash flow hedges, net of tax of $7 and $937, respectively	22		2,498
Reclassifications of net (gain) on commodity contract cash flow hedges, net of tax $(166) and $(752), respectively										Reclassifications of net (gain) on commodity contract cash flow hedges, net of tax $(166) and $(752), respectively	(440)		(1,969)
Net (loss) on interest rate swap cash flow hedges, net of tax of $(52) and $0, respectively										Net (loss) on interest rate swap cash flow hedges, net of tax of $(52) and $0, respectively	(148)		—
Reclassifications of net (gain) on interest rate swap cash flow hedges, net of tax of $(17) and $0, respectively										Reclassifications of net (gain) on interest rate swap cash flow hedges, net of tax of $(17) and $0, respectively	(48)		—
Total Other Comprehensive Income (Loss), net of tax	Total Other Comprehensive Income (Loss), net of tax	(480)		3,196		67		3,423		Total Other Comprehensive Income (Loss), net of tax	(604)		547
Comprehensive Income	Comprehensive Income	$	16,571	$	17,009	$	54,052	$	51,702	Comprehensive Income	$	35,740	$	37,480

The accompanying notes are an integral part of these condensed consolidated financial statements.

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Chesapeake Utilities Corporation and Subsidiaries

Condensed Consolidated Balance Sheets (Unaudited)


Assets	Assets	June 30, 2022		December 31, 2021		Assets	March 31, 2023		December 31, 2022
(in thousands, except shares and per share data)	(in thousands, except shares and per share data)					(in thousands, except shares and per share data)
Property, Plant and Equipment	Property, Plant and Equipment					Property, Plant and Equipment
Regulated Energy	Regulated Energy	$	1,765,915	$	1,720,287	Regulated Energy	$	1,835,261	$	1,802,999
Unregulated Energy	Unregulated Energy	381,718		357,259		Unregulated Energy	395,052		393,215
Other businesses and eliminations	Other businesses and eliminations	30,713		35,418		Other businesses and eliminations	29,695		29,890
Total property, plant and equipment	Total property, plant and equipment	2,178,346		2,112,964		Total property, plant and equipment	2,260,008		2,226,104
Less: Accumulated depreciation and amortization	Less: Accumulated depreciation and amortization	(438,573)		(417,479)		Less: Accumulated depreciation and amortization	(476,407)		(462,926)
Plus: Construction work in progress	Plus: Construction work in progress	34,027		49,393		Plus: Construction work in progress	53,094		47,295
Net property, plant and equipment	Net property, plant and equipment	1,773,800		1,744,878		Net property, plant and equipment	1,836,695		1,810,473
Current Assets	Current Assets					Current Assets
Cash and cash equivalents	Cash and cash equivalents	4,186		4,976		Cash and cash equivalents	3,065		6,204
Trade and other receivables	Trade and other receivables	42,892		61,623		Trade and other receivables	65,130		65,758
Less: Allowance for credit losses	Less: Allowance for credit losses	(2,758)		(3,141)		Less: Allowance for credit losses	(2,820)		(2,877)
Trade and other receivables, net	Trade and other receivables, net	40,134		58,482		Trade and other receivables, net	62,310		62,881
Accrued revenue	Accrued revenue	15,999		22,513		Accrued revenue	24,135		29,206
Propane inventory, at average cost	Propane inventory, at average cost	9,317		11,644		Propane inventory, at average cost	8,505		9,365
Other inventory, at average cost	Other inventory, at average cost	11,449		9,345		Other inventory, at average cost	17,520		16,896
Regulatory assets	Regulatory assets	28,729		19,794		Regulatory assets	27,874		41,439
Storage gas prepayments	Storage gas prepayments	3,695		3,691		Storage gas prepayments	1,228		6,364
Income taxes receivable	Income taxes receivable	12,353		17,460		Income taxes receivable	—		2,541
Prepaid expenses	Prepaid expenses	11,398		17,121		Prepaid expenses	12,990		15,865
Derivative assets, at fair value	Derivative assets, at fair value	6,772		7,076		Derivative assets, at fair value	1,248		2,787
Other current assets	Other current assets	1,014		1,033		Other current assets	629		428
Total current assets	Total current assets	145,046		173,135		Total current assets	159,504		193,976
Deferred Charges and Other Assets	Deferred Charges and Other Assets					Deferred Charges and Other Assets
Goodwill	Goodwill	45,158		44,708		Goodwill	46,213		46,213
Other intangible assets, net	Other intangible assets, net	14,088		13,192		Other intangible assets, net	17,412		17,859
Investments, at fair value	Investments, at fair value	10,523		12,095		Investments, at fair value	10,866		10,576
Derivative assets, at fair value						Derivative assets, at fair value	898		982
Operating lease right-of-use assets	Operating lease right-of-use assets	15,767		10,139		Operating lease right-of-use assets	14,272		14,421
Regulatory assets	Regulatory assets	99,497		104,173		Regulatory assets	99,379		108,214
Receivables and other deferred charges	Receivables and other deferred charges	13,463		12,549		Receivables and other deferred charges	12,312		12,323
Total deferred charges and other assets	Total deferred charges and other assets	198,496		196,856		Total deferred charges and other assets	201,352		210,588
Total Assets	Total Assets	$	2,117,342	$	2,114,869	Total Assets	$	2,197,551	$	2,215,037

The accompanying notes are an integral part of these condensed consolidated financial statements.

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Chesapeake Utilities Corporation and Subsidiaries

Condensed Consolidated Balance Sheets (Unaudited)


Capitalization and Liabilities	Capitalization and Liabilities	June 30, 2022		December 31, 2021		Capitalization and Liabilities	March 31, 2023		December 31, 2022
(in thousands, except shares and per share data)	(in thousands, except shares and per share data)					(in thousands, except shares and per share data)
Capitalization	Capitalization					Capitalization
Stockholders’ equity	Stockholders’ equity					Stockholders’ equity
Preferred stock, par value $0.01 per share (authorized 2,000,000 shares), no shares issued and outstanding	Preferred stock, par value $0.01 per share (authorized 2,000,000 shares), no shares issued and outstanding	$	—	$	—	Preferred stock, par value $0.01 per share (authorized 2,000,000 shares), no shares issued and outstanding	$	—	$	—
Common stock, par value $0.4867 per share (authorized 50,000,000 shares)	Common stock, par value $0.4867 per share (authorized 50,000,000 shares)	8,632		8,593		Common stock, par value $0.4867 per share (authorized 50,000,000 shares)	8,659		8,635
Additional paid-in capital	Additional paid-in capital	376,866		371,162		Additional paid-in capital	379,703		380,036
Retained earnings	Retained earnings	428,833		393,072		Retained earnings	472,209		445,509
Accumulated other comprehensive income		1,370		1,303
Accumulated other comprehensive income (loss)						Accumulated other comprehensive income (loss)	(1,983)		(1,379)
Deferred compensation obligation	Deferred compensation obligation	7,018		7,240		Deferred compensation obligation	8,816		7,060
Treasury stock	Treasury stock	(7,018)		(7,240)		Treasury stock	(8,816)		(7,060)
Total stockholders’ equity	Total stockholders’ equity	815,701		774,130		Total stockholders’ equity	858,588		832,801
Long-term debt, net of current maturities	Long-term debt, net of current maturities	585,805		549,903		Long-term debt, net of current maturities	656,284		578,388
Total capitalization	Total capitalization	1,401,506		1,324,033		Total capitalization	1,514,872		1,411,189
Current Liabilities	Current Liabilities					Current Liabilities
Current portion of long-term debt	Current portion of long-term debt	21,472		17,962		Current portion of long-term debt	21,489		21,483
Short-term borrowing	Short-term borrowing	137,024		221,634		Short-term borrowing	94,079		202,157
Accounts payable	Accounts payable	38,110		52,628		Accounts payable	38,193		61,496
Customer deposits and refunds	Customer deposits and refunds	34,489		36,488		Customer deposits and refunds	36,676		37,152
Accrued interest	Accrued interest	3,320		2,775		Accrued interest	4,849		3,349
Dividends payable	Dividends payable	9,488		8,466		Dividends payable	9,518		9,492
Accrued compensation	Accrued compensation	9,471		15,505		Accrued compensation	6,350		14,660
Regulatory liabilities	Regulatory liabilities	6,663		2,312		Regulatory liabilities	10,556		5,031
Income taxes payable						Income taxes payable	7,554		—
Derivative liabilities, at fair value	Derivative liabilities, at fair value	427		743		Derivative liabilities, at fair value	798		585
Other accrued liabilities	Other accrued liabilities	26,827		17,920		Other accrued liabilities	16,717		13,618
Total current liabilities	Total current liabilities	287,291		376,433		Total current liabilities	246,779		369,023
Deferred Credits and Other Liabilities	Deferred Credits and Other Liabilities					Deferred Credits and Other Liabilities
Deferred income taxes	Deferred income taxes	244,978		233,550		Deferred income taxes	258,399		256,167
Regulatory liabilities	Regulatory liabilities	143,188		142,488		Regulatory liabilities	143,642		142,989
Environmental liabilities	Environmental liabilities	3,097		3,538		Environmental liabilities	2,530		3,272
Other pension and benefit costs	Other pension and benefit costs	21,458		24,120		Other pension and benefit costs	17,190		16,965
Derivative liabilities, at fair value						Derivative liabilities, at fair value	636		1,630
Operating lease - liabilities	Operating lease - liabilities	13,807		8,571		Operating lease - liabilities	12,110		12,392
Deferred investment tax credits and other liabilities	Deferred investment tax credits and other liabilities	2,017		2,136		Deferred investment tax credits and other liabilities	1,393		1,410
Total deferred credits and other liabilities	Total deferred credits and other liabilities	428,545		414,403		Total deferred credits and other liabilities	435,900		434,825
Environmental and other commitments and contingencies (Notes 6 and 7)	Environmental and other commitments and contingencies (Notes 6 and 7)	0		0		Environmental and other commitments and contingencies (Notes 6 and 7)
Total Capitalization and Liabilities	Total Capitalization and Liabilities	$	2,117,342	$	2,114,869	Total Capitalization and Liabilities	$	2,197,551	$	2,215,037

The accompanying notes are an integral part of these condensed consolidated financial statements.

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Chesapeake Utilities Corporation and Subsidiaries

Condensed Consolidated Statements of Cash Flows (Unaudited)


		Six Months Ended					Three Months Ended
		June 30,					March 31,
		2022		2021			2023		2022
(in thousands)	(in thousands)					(in thousands)
Operating Activities	Operating Activities					Operating Activities
Net income	Net income	$	53,985	$	48,279	Net income	$	36,344	$	36,933
Adjustments to reconcile net income to net cash provided by operating activities:	Adjustments to reconcile net income to net cash provided by operating activities:					Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	Depreciation and amortization	34,193		30,662		Depreciation and amortization	17,183		16,977
Depreciation and accretion included in other costs	Depreciation and accretion included in other costs	5,781		5,061		Depreciation and accretion included in other costs	2,834		2,744
Deferred income taxes	Deferred income taxes	11,434		12,810		Deferred income taxes	2,453		7,398

Realized gain on commodity contracts and sale of assets	Realized gain on commodity contracts and sale of assets	(6,980)		(5,342)		Realized gain on commodity contracts and sale of assets	(284)		(4,274)
Unrealized loss (gain) on investments/commodity contracts	Unrealized loss (gain) on investments/commodity contracts	1,956		(988)		Unrealized loss (gain) on investments/commodity contracts	(551)		541
Employee benefits and compensation	Employee benefits and compensation	(520)		(346)		Employee benefits and compensation	119		(260)
Share-based compensation	Share-based compensation	3,555		3,315		Share-based compensation	2,408		2,213

Changes in assets and liabilities:	Changes in assets and liabilities:					Changes in assets and liabilities:
Accounts receivable and accrued revenue	Accounts receivable and accrued revenue	24,766		23,664		Accounts receivable and accrued revenue	5,641		7,532
Propane inventory, storage gas and other inventory	Propane inventory, storage gas and other inventory	270		(1,085)		Propane inventory, storage gas and other inventory	5,373		4,031
Regulatory assets/liabilities, net	Regulatory assets/liabilities, net	(6,405)		7,711		Regulatory assets/liabilities, net	24,607		5,774
Prepaid expenses and other current assets	Prepaid expenses and other current assets	10,326		2,789		Prepaid expenses and other current assets	3,985		6,626
Accounts payable and other accrued liabilities	Accounts payable and other accrued liabilities	(2,274)		6,563		Accounts payable and other accrued liabilities	(21,166)		(12,918)
Income taxes receivable		5,107		4,514
Income taxes receivable/payable						Income taxes receivable/payable	10,095		6,134
Customer deposits and refunds	Customer deposits and refunds	(1,999)		681		Customer deposits and refunds	(476)		(3,114)
Accrued compensation	Accrued compensation	(6,266)		(3,397)		Accrued compensation	(8,436)		(6,392)
Other assets and liabilities, net	Other assets and liabilities, net	(3,134)		(675)		Other assets and liabilities, net	1,538		(825)
Net cash provided by operating activities	Net cash provided by operating activities	123,795		134,216		Net cash provided by operating activities	81,667		69,120
Investing Activities	Investing Activities					Investing Activities
Property, plant and equipment expenditures	Property, plant and equipment expenditures	(65,087)		(104,631)		Property, plant and equipment expenditures	(42,418)		(29,887)
Proceeds from sale of assets	Proceeds from sale of assets	3,367		497		Proceeds from sale of assets	506		219
Acquisitions, net of cash acquired		(2,006)		—

Environmental expenditures	Environmental expenditures	(441)		(395)		Environmental expenditures	(742)		(267)
Net cash used in investing activities	Net cash used in investing activities	(64,167)		(104,529)		Net cash used in investing activities	(42,654)		(29,935)
Financing Activities	Financing Activities					Financing Activities
Common stock dividends	Common stock dividends	(16,575)		(15,047)		Common stock dividends	(9,492)		(8,274)
Issuance of stock under the Dividend Reinvestment Plan, net of offering fees	Issuance of stock under the Dividend Reinvestment Plan, net of offering fees	4,259		4,799		Issuance of stock under the Dividend Reinvestment Plan, net of offering fees	—		3,242
Tax withholding payments related to net settled stock compensation	Tax withholding payments related to net settled stock compensation	(2,838)		(1,478)		Tax withholding payments related to net settled stock compensation	(2,455)		(2,838)
Change in cash overdrafts due to outstanding checks	Change in cash overdrafts due to outstanding checks	(1,202)		(1,101)		Change in cash overdrafts due to outstanding checks	(323)		1,223
Net advances (repayments) under line of credit agreements		(83,424)		(5,249)
Net repayments under line of credit agreements						Net repayments under line of credit agreements	(107,755)		(82,008)
Proceeds from long-term debt, net of offering fees	Proceeds from long-term debt, net of offering fees	49,890		—		Proceeds from long-term debt, net of offering fees	79,840		49,915
Repayment of long-term debt	Repayment of long-term debt	(10,528)		(10,099)		Repayment of long-term debt	(1,967)		(213)
Net cash used in financing activities	Net cash used in financing activities	(60,418)		(28,175)		Net cash used in financing activities	(42,152)		(38,953)
Net Increase (Decrease) in Cash and Cash Equivalents	Net Increase (Decrease) in Cash and Cash Equivalents	(790)		1,512		Net Increase (Decrease) in Cash and Cash Equivalents	(3,139)		232
Cash and Cash Equivalents—Beginning of Period	Cash and Cash Equivalents—Beginning of Period	4,976		3,499		Cash and Cash Equivalents—Beginning of Period	6,204		4,976
Cash and Cash Equivalents—End of Period	Cash and Cash Equivalents—End of Period	$	4,186	$	5,011	Cash and Cash Equivalents—End of Period	$	3,065	$	5,208

The accompanying notes are an integral part of these condensed consolidated financial statements.

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Chesapeake Utilities Corporation and Subsidiaries

Condensed Consolidated Statements of Stockholders’ Equity (Unaudited)


		Common Stock (1)																Common Stock (1)
(in thousands, except shares and per share data)	(in thousands, except shares and per share data)	Number of Shares(2)	Par Value		Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Income/(Loss)		Deferred Compensation		Treasury Stock		Total		(in thousands, except shares and per share data)	Number of Shares(2)	Par Value		Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Deferred Compensation		Treasury Stock		Total
Balance at March 31, 2021		17,521,493	$	8,528	$	350,875	$	369,623	$	(2,638)	$	6,992	$	(6,992)	$	726,388
Net income		—	—		—		13,813		—		—		—		13,813
Other comprehensive income		—	—		—		—		3,196		—		—		3,196
Dividend declared ($0.480 per share)		—	—		—		(8,500)		—		—		—		(8,500)
Dividend reinvestment plan		39,605	19		4,602		—		—		—		—		4,621
Share-based compensation and tax benefit (3)(4)		6,830	3		2,043		—		—		—		—		2,046
Treasury stock activities		—	—		—		—		—		211		(211)		—
Balance at June 30, 2021		17,567,928	$	8,550	$	357,520	$	374,936	$	558	$	7,203	$	(7,203)	$	741,564

Balance at December 31, 2020		17,461,841	$	8,499	$	348,482	$	342,969	$	(2,865)	$	5,679	$	(5,679)	$	697,085
Net income		—	—		—		48,279		—		—		—		48,279
Other comprehensive income		—	—		—		—		3,423		—		—		3,423
Dividends declared ($0.920 per share)		—	—		—		(16,312)		—		—		—		(16,312)
Dividend reinvestment plan		60,116	29		6,806		—		—		—		—		6,835
Share-based compensation and tax benefit (3) (4)		45,971	22		2,232		—		—		—		—		2,254
Treasury stock activities		—	—		—		—		—		1,524		(1,524)		—

Balance at June 30, 2021		17,567,928	$	8,550	$	357,520	$	374,936	$	558	$	7,203	$	(7,203)	$	741,564

Balance at March 31, 2022		17,719,388	$	8,624	$	373,694	$	421,344	$	1,850	$	6,477	$	(6,477)	$	805,512
Net income		—	—		—		17,051		—		—		—		17,051
Other comprehensive loss		—	—		—		—		(480)		—		—		(480)
Dividend declared ($0.535 per share)		—	—		—		(9,562)		—		—		—		(9,562)
Issuance under various plans (5)		8,886	5		1,203		—		—		—		—		1,208
Share-based compensation and tax benefit (3) (4)		6,520	3		1,969		—		—		—		—		1,972
Treasury stock activities		—	—		—		—		—		541		(541)		—
Balance at June 30, 2022		17,734,794	$	8,632	$	376,866	$	428,833	$	1,370	$	7,018	$	(7,018)	$	815,701

Balance at December 31, 2021	Balance at December 31, 2021	17,655,410	$	8,593	$	371,162	$	393,072	$	1,303	$	7,240	$	(7,240)	$	774,130	Balance at December 31, 2021	17,655,410	$	8,593	$	371,162	$	393,072	$	1,303	$	7,240	$	(7,240)	$	774,130
Net income	Net income	—	—		—		53,985		—		—		—		53,985		Net income	—	—		—		36,933		—		—		—		36,933
Other comprehensive income	Other comprehensive income	—	—		—		—		67		—		—		67		Other comprehensive income	—	—		—		—		547		—		—		547
Dividends declared ($1.015 per share)		—	—		—		(18,224)		—		—		—		(18,224)
Dividends declared ($0.480 per share)																	Dividends declared ($0.480 per share)	—	—		—		(8,661)		—		—		—		(8,661)
Issuance under various plans (5)																	Issuance under various plans (5)	24,960	12		3,410		—		—		—		—		3,422
Share-based compensation and tax benefit (3) (4)																	Share-based compensation and tax benefit (3) (4)	39,018	19		(878)		—		—		—		—		(859)
Treasury stock activities																	Treasury stock activities	—	—		—		—		—		(763)		763		—

Balance at March 31, 2022																	Balance at March 31, 2022	17,719,388	$	8,624	$	373,694	$	421,344	$	1,850	$	6,477	$	(6,477)	$	805,512

Balance at December 31, 2022																	Balance at December 31, 2022	17,741,418	$	8,635	$	380,036	$	445,509	$	(1,379)	$	7,060	$	(7,060)	$	832,801
Net income																	Net income	—	—		—		36,344		—		—		—		36,344
Other comprehensive loss																	Other comprehensive loss	—	—		—		—		(604)		—		—		(604)
Dividends declared ($0.535 per share)																	Dividends declared ($0.535 per share)	—	—		—		(9,644)		—		—		—		(9,644)

Issuance under various plans (5)	Issuance under various plans (5)	33,846	17		4,613		—		—		—		—		4,630		Issuance under various plans (5)	—	—		(11)		—		—		—		—		(11)
Share-based compensation and tax benefit (3) (4)	Share-based compensation and tax benefit (3) (4)	45,538	22		1,091		—		—		—		—		1,113		Share-based compensation and tax benefit (3) (4)	48,438	24		(322)		—		—		—		—		(298)
Treasury stock activities	Treasury stock activities	—	—		—		—		—		(222)		222		—		Treasury stock activities	—	—		—		—		—		1,756		(1,756)		—
Balance at June 30, 2022		17,734,794	$	8,632	$	376,866	$	428,833	$	1,370	$	7,018	$	(7,018)	$	815,701
Balance at March 31, 2023																	Balance at March 31, 2023	17,789,856	$	8,659	$	379,703	$	472,209	$	(1,983)	$	8,816	$	(8,816)	$	858,588

(1)2,000,000 shares of preferred stock at $0.01 par value have been authorized. No shares have been issued or are outstanding; accordingly, no information has been included in the statements of stockholders’ equity.

(2)Includes ~~110,835,~~109,687, 108,143, 107,518, and 116,238 ~~117,193, and 105,087~~ shares at ~~June 30, 2022,~~March 31, 2023, December 31, ~~2021, June 30, 2021~~2022, March 31, 2022 and December 31, ~~2020,~~2021, respectively, held in a Rabbi Trust related to our Non-Qualified Deferred Compensation Plan.

(3)Includes amounts for shares issued for directors’ compensation.

(4)The shares issued under the SICP are net of shares withheld for employee taxes. For the ~~six~~three months ended ~~June 30,~~March 31, 2023 and 2022, ~~and 2021,~~ we withheld ~~21,832~~19,859 and ~~14,020~~21,832 shares, respectively, for employee taxes.

(5)~~Includes~~Can include shares issued under the Retirement Savings Plan, DRIP and ATM equity issuances.

The accompanying notes are an integral part of these condensed consolidated financial statements.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1. Summary of Accounting Policies

Basis of Presentation

References in this document to the “Company,” “Chesapeake Utilities,” “we,” “us” and “our” are intended to mean Chesapeake Utilities Corporation, its divisions and/or its subsidiaries, as appropriate in the context of the disclosure.

The accompanying unaudited condensed consolidated financial statements have been prepared in compliance with the rules and regulations of the SEC and GAAP. In accordance with these rules and regulations, certain information and disclosures normally required for audited financial statements have been condensed or omitted. These financial statements should be read in conjunction with the consolidated financial statements and notes thereto, included in our latest Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022. In the opinion of management, these financial statements reflect all adjustments that are necessary for a fair presentation of our results of operations, financial position and cash flows for the interim periods presented.

Where necessary to improve comparability, prior period amounts have been changed to conform to current period presentation.

Due to the seasonality of our business, results for interim periods are not necessarily indicative of results for the entire fiscal year. Revenue and earnings are typically greater during the first and fourth quarters, when consumption of energy is highest due to colder temperatures.

~~Effects of COVID-19~~

In March 2020, the CDC declared a national emergency due to the rapidly growing outbreak of COVID-19. In response to this declaration and the rapid spread of COVID-19 within the United States, federal, state and local governments throughout the country imposed varying degrees of restrictions on social and commercial activity to promote social distancing in an effort to slow the spread of the illness. These restrictions significantly impacted economic conditions in the United States beginning in 2020 and to a lesser extent have continued into 2022. Chesapeake Utilities is considered an “essential business,” which allowed us to continue operational activities and construction projects while social distancing restrictions were in place. At this time, restrictions have predominantly been lifted as vaccines have become widely available in the United States. Previously existing states of emergency in all of our service territories expired during the second and third quarters of 2021 eliminating a majority of restrictions initially implemented to slow the spread of the virus. The expiration of the states of emergency along with the settlement of our limited proceeding in Florida concluded our ability to defer incremental pandemic related costs for consideration through the applicable regulatory process. We adjusted our operating practices accordingly to ensure the safety of our operations and will take the necessary actions to comply with the CDC, and the Occupational and Safety and Health Administration, as new developments occur.

~~Refer to Note 5,~~ ~~Rates~~FASB Statements and Other ~~Regulatory Activities, for further information on the regulated assets established as a result of the incremental expenses associated with COVID-19.~~Authoritative Pronouncements

Recent Accounting Standards ~~Yet to be Adopted~~

~~Reference Rate Reform - (ASC 848)~~ ~~- In March 2020, the FASB issued ASU 2020-04,~~ ~~Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting~~,There are no pending or recently effective accounting standards which was subsequently amended by ASU 2021-01. The standard provides relief for companies preparing for the discontinuation of interest rates, such as LIBOR, and allows optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions affected by reference rate reform. The amendments included in this ASUhave had, or are ~~to be applied prospectively, and are not~~ expected to have, a material impact onto our consolidated financial ~~position~~statements or ~~results of operations. Refer to Note 16,~~ ~~Short-Term Borrowings, for further information regarding the expected timing of implementing this update.~~disclosures.

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2. Calculation of Earnings Per Share


		Three Months Ended				Six Months Ended					Three Months Ended
		June 30,				June 30,					March 31,
		2022		2021		2022		2021			2023		2022
(in thousands, except shares and per share data)	(in thousands, except shares and per share data)									(in thousands, except shares and per share data)
Calculation of Basic Earnings Per Share:	Calculation of Basic Earnings Per Share:									Calculation of Basic Earnings Per Share:

Net Income	Net Income	$	17,051	$	13,813	$	53,985	$	48,279	Net Income	$	36,344	$	36,933
Weighted average shares outstanding	Weighted average shares outstanding	17,730,833		17,546,346		17,704,592		17,516,273		Weighted average shares outstanding	17,759,896		17,678,060

Basic Earnings Per Share	Basic Earnings Per Share	$	0.96	$	0.79	$	3.05	$	2.76	Basic Earnings Per Share	$	2.05	$	2.09

Calculation of Diluted Earnings Per Share:	Calculation of Diluted Earnings Per Share:									Calculation of Diluted Earnings Per Share:
Net Income	Net Income	$	17,051	$	13,813	$	53,985	$	48,279	Net Income	$	36,344	$	36,933
Reconciliation of Denominator:	Reconciliation of Denominator:									Reconciliation of Denominator:
Weighted shares outstanding—Basic	Weighted shares outstanding—Basic	17,730,833		17,546,346		17,704,592		17,516,273		Weighted shares outstanding—Basic	17,759,896		17,678,060
Effect of dilutive securities—Share-based compensation	Effect of dilutive securities—Share-based compensation	79,038		70,150		81,037		68,733		Effect of dilutive securities—Share-based compensation	71,876		83,059
Adjusted denominator—Diluted	Adjusted denominator—Diluted	17,809,871		17,616,496		17,785,629		17,585,006		Adjusted denominator—Diluted	17,831,772		17,761,119

Diluted Earnings Per Share	Diluted Earnings Per Share	$	0.96	$	0.78	$	3.04	$	2.75	Diluted Earnings Per Share	$	2.04	$	2.08

3. Acquisitions

Acquisition of Davenport Energy

OnIn June ~~13,~~ 2022, Sharp acquired the propane operating assets of Davenport Energy's Siler City, North Carolina propane division for approximately $2.0 million. ~~In connection with~~Through this acquisition, we recorded a $0.1 million liability which is subject to the seller's adherence to various provisions contained in the purchase agreement through the first anniversary of the transaction closing. Included with the acquisition was less than $0.1 million of working capital from the Seller consisting predominantly of accounts receivable and propane inventory. Through this acquisition, the Company expands itsexpanded our operating footprint further into North Carolina, where customers ~~will be~~are served by Sharp Energy’s Diversified Energy division. Sharp added

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approximately 850 customers, along with ~~expected~~ distribution of approximately 0.4 million gallons of propane annually. We recorded $1.5 million in property plant and equipment, $0.5 million in goodwill, and immaterial amounts associated with customer relationships and non-compete agreements, all of which are deductible for income tax purposes. The amounts recorded in conjunction with the acquisition are preliminary, and subject to adjustment based on contractual provisions and finalization prior to the first anniversary of the transaction closing. The financial results associated with this acquisition ~~will be~~are included within ~~Sharp's Diversified~~our propane distribution operations within our Unregulated Energy ~~division, primarily as a result of their geographic proximity, as well as other synergies they generate due to their service territory.~~segment.

Acquisition of ~~Diversified~~Planet Found Energy Development

~~On December 15, 2021, Sharp~~In October 2022, we acquired ~~the propane operating assets of Diversified~~Planet Found Energy Development, LLC ("Planet Found") for ~~approximately $37.5 million, net of cash acquired.~~$9.5 million. In connection with this acquisition, we recorded a ~~$2.1~~$0.9 million liability which is subject to the seller's adherence to various provisions contained in the purchase agreement through the first anniversary of the transaction closing. ~~Included with the acquisition, was approximately $1.7 million of working capital from the Seller consisting predominantly of accounts receivable and propane inventory.~~ We accounted for this acquisition as a business combination within our Unregulated Energy ~~Segment~~segment beginning in the fourth quarter of ~~2021. In January 2022, we recorded a post-closing true-up~~2022. Planet Found's farm scale anaerobic digestion pilot system and technology produces biogas from 1,200 tons of ~~$0.8 million related~~poultry litter annually, which can be used to create renewable energy in the ~~provision~~form of electricity or upgraded to renewable natural gas. The transaction will accelerate our efforts in converting poultry waste to renewable, sustainable energy while simultaneously improving the local environments in our service territories. The operating revenues and operating income of Planet Found were not material to our consolidated results for ~~working capital valuation at~~ the time of closing. There were multiple strategic benefits to this acquisition including it: (i) expands our propane service territory into North Carolina and South Carolina (ii) builds upon our existing propane presence in Virginia and Pennsylvania, and (iii) includes an established customer base with opportunities for future growth. Through this acquisition, the Company added approximately 19,000 residential, commercial and agricultural customers, along with expected distribution of approximately 10.0 million gallons of propane annually. three months ended March 31, 2023.

In connection with this acquisition, we recorded ~~$23.1~~$4.4 million in intangible assets associated primarily with intellectual property and non-compete agreements, $4.0 million in property plant and equipment, ~~$6.2 million in intangible assets associated with customer relationships and non-compete agreements and $5.9~~$1.1 million in goodwill, and less than $0.1 million in working capital, all of which isare deductible for income tax purposes. The amounts recorded in conjunction with the acquisition are preliminary, and subject to adjustment based on contractual provisions and finalization prior to the first anniversary of the transaction closing.

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These acquisitions generated operating revenue and operating loss of $4.0 million and $0.8 million, respectively, for the three months ended June 30, 2022 . For the six months ended June 30, 2022, the acquisitions generated operating revenue and operating income of $14.3 million and $0.7 million, respectively.

4. Revenue Recognition

We recognize revenue when our performance obligations under contracts with customers have been satisfied, which generally occurs when our businesses have delivered or transported natural gas, electricity or propane to customers. We exclude sales taxes and other similar taxes from the transaction price. Typically, our customers pay for the goods and/or services we provide in the month following the satisfaction of our performance obligation. The following table displays our revenue by major source based on product and service type for the three months ended ~~June 30, 2022~~March 31, 2023 and ~~2021:~~2022:

Three months ended June 30, 2022 Three months ended June 30, 2021
(in thousands) Regulated Energy Unregulated Energy Other and Eliminations Total Regulated Energy Unregulated Energy Other and Eliminations Total
Energy distribution
Delaware natural gas division $ 13,086 $ — $ — $ 13,086 $ 10,068 $ — $ — $ 10,068
Florida natural gas division 9,619 — — 9,619 8,446 — — 8,446
FPU electric distribution 20,305 — — 20,305 18,898 — — 18,898
FPU natural gas distribution 25,817 — — 25,817 23,159 — — 23,159
Maryland natural gas division 4,372 — — 4,372 3,224 — — 3,224
Sandpiper natural gas/propane operations 4,248 — — 4,248 3,814 — — 3,814
Elkton Gas 1,705 — — 1,705 1,195 — — 1,195
Total energy distribution 79,152 — — 79,152 68,804 — — 68,804
Energy transmission
Aspire Energy — 10,808 — 10,808 — 5,578 — 5,578
Aspire Energy Express 369 — — 369 47 — — 47
Eastern Shore 18,875 — — 18,875 18,617 — — 18,617
Peninsula Pipeline 6,777 — — 6,777 6,610 — — 6,610
Total energy transmission 26,021 10,808 — 36,829 25,274 5,578 — 30,852
Energy generation
Eight Flags — 5,916 — 5,916 — 4,173 — 4,173
Propane operations
Propane delivery operations — 34,469 — 34,469 — 23,098 — 23,098
Compressed Natural Gas Services
Marlin Gas Services — 2,380 — 2,380 — 1,989 — 1,989
Other and eliminations
Eliminations (12,980) (110) (6,271) (19,361) (13,168) (65) (4,734) (17,967)
Other — — 85 85 — — 133 133
Total other and eliminations (12,980) (110) (6,186) (19,276) (13,168) (65) (4,601) (17,834)
Total operating revenues (1)
$ 92,193 $ 53,463 $ (6,186) $ 139,470 $ 80,910 $ 34,773 $ (4,601) $ 111,082

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	Three Months Ended March 31, 2023								Three Months Ended March 31, 2022
(in thousands)	Regulated Energy		Unregulated Energy		Other and Eliminations		Total		Regulated Energy		Unregulated Energy		Other and Eliminations		Total
Energy distribution
Delaware natural gas division	$	36,907	$	—	$	—	$	36,907	$	34,481	$	—	$	—	$	34,481
Florida natural gas distribution (1)	46,358		—		—		46,358		40,286		—		—		40,286
FPU electric distribution	22,737		—		—		22,737		19,089		—		—		19,089
Maryland natural gas division	12,263		—		—		12,263		10,464		—		—		10,464
Sandpiper natural gas/propane operations	7,082		—		—		7,082		7,636		—		—		7,636
Elkton Gas	4,141		—		—		4,141		3,366		—		—		3,366
Total energy distribution	129,488		—		—		129,488		115,322		—		—		115,322
Energy transmission
Aspire Energy	—		13,954		—		13,954		—		18,036		—		18,036
Aspire Energy Express	364		—		—		364		263		—		—		263
Eastern Shore	20,670		—		—		20,670		20,321		—		—		20,321
Peninsula Pipeline	6,911		—		—		6,911		6,772		—		—		6,772
Total energy transmission	27,945		13,954		—		41,899		27,356		18,036		—		45,392
Energy generation
Eight Flags	—		5,300		—		5,300		—		5,539		—		5,539
Propane operations
Propane delivery operations	—		59,980		—		59,980		—		75,606		—		75,606
Compressed Natural Gas Services
Marlin Gas Services	—		4,001		—		4,001		—		2,209		—		2,209
Other and eliminations
Eliminations	(15,163)		(69)		(7,352)		(22,584)		(14,787)		(98)		(6,435)		(21,320)
Other	—		—		45		45		—		—		132		132
Total other and eliminations	(15,163)		(69)		(7,307)		(22,539)		(14,787)		(98)		(6,303)		(21,188)

Total operating revenues (2)	$	142,270	$	83,166	$	(7,307)	$	218,129	$	127,891	$	101,292	$	(6,303)	$	222,880

(1) In accordance with the Florida PSC approval of our natural gas base rate proceeding, effective March 1, 2023, our natural gas distribution businesses in Florida (FPU, FPU-Indiantown division, FPU-Fort Meade division and Chesapeake Utilities' CFG division, collectively, “Florida natural gas distribution businesses”) have been consolidated for rate-making purposes and amounts above are now being presented on a consolidated basis consistent with the final rate order.

(2) Total operating revenues for the three months ended ~~June 30, 2022,~~March 31, 2023 include other revenue (revenues from sources other than contracts with customers) of ~~$(0.1)~~$0.6 million and $0.1 million for our Regulated and ~~$0.1 million~~ Unregulated Energy segments, respectively and $0.1 million for both our Regulated and Unregulated Energy segments, respectively, for the three months ended ~~June 30, 2021.~~March 31, 2022. The sources of other revenues include revenue from alternative revenue programs related to revenue normalization for the Maryland division and Sandpiper Energy and late fees.

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~~The following table displays our revenue by major source based on product and service type for the six months ended June 30, 2022 and 2021:~~

Six Months Ended June 30, 2022 Six Months Ended June 30, 2021
(in thousands) Regulated Energy Unregulated Energy Other and Eliminations Total Regulated Energy Unregulated Energy Other and Eliminations Total
Energy distribution
Delaware natural gas division $ 47,568 $ — $ — $ 47,568 $ 43,340 $ — $ — $ 43,340
Florida natural gas division 19,885 — — 19,885 17,402 — — 17,402
FPU electric distribution 39,394 — — 39,394 37,449 — — 37,449
FPU natural gas distribution 55,837 — — 55,837 50,020 — — 50,020
Maryland natural gas division 14,836 — — 14,836 13,690 — — 13,690
Sandpiper natural gas/propane operations 11,885 — — 11,885 11,885 — — 11,885
Elkton Gas 5,071 — — 5,071 3,830 — — 3,830
Total energy distribution 194,476 — — 194,476 177,616 — — 177,616
Energy transmission
Aspire Energy — 28,844 — 28,844 — 18,484 — 18,484
Aspire Energy Express 632 — — 632 93 — — 93
Eastern Shore 39,196 — — 39,196 38,589 — — 38,589
Peninsula Pipeline 13,549 — — 13,549 13,077 — — 13,077
Total energy transmission 53,377 28,844 — 82,221 51,759 18,484 — 70,243
Energy generation
Eight Flags — 11,455 — 11,455 — 8,502 — 8,502
Propane operations
Propane delivery operations — 110,075 — 110,075 — 78,361 — 78,361
Compressed Natural Gas Services
Marlin Gas Services — 4,589 — 4,589 — 4,340 — 4,340
Other and eliminations
Eliminations (27,769) (207) (12,706) (40,682) (27,268) (156) (9,635) (37,059)
Other — — 216 216 — — 265 265
Total other and eliminations (27,769) (207) (12,490) (40,466) (27,268) (156) (9,370) (36,794)
Total operating revenues (1)
$ 220,084 $ 154,756 $ (12,490) $ 362,350 $ 202,107 $ 109,531 $ (9,370) $ 302,268

~~(1)~~Total operating revenues for the six months ended June 30, 2022, include other revenue (revenues from sources other than contracts with customers) of $0.1 million for Regulated and $0.2 million Unregulated Energy segments, respectively, and $(0.2) million and $0.2 million for our Regulated and Unregulated Energy segments, respectively, for the six months ended June 30, 2021. The sources of other revenues include revenue from alternative revenue programs related to revenue normalization for the Maryland division and Sandpiper Energy and late fees.

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Contract ~~balances~~Balances

The timing of revenue recognition, customer billings and cash collections results in trade receivables, unbilled receivables (contract assets), and customer advances (contract liabilities) in our condensed consolidated balance sheets. The balances of our trade receivables, contract assets, and contract liabilities as of ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 were as follows:


		Trade Receivables		Contract Assets (Current)		Contract Assets (Non-current)		Contract Liabilities (Current)			Trade Receivables		Contract Assets (Current)		Contract Assets (Non-current)		Contract Liabilities (Current)
(in thousands)	(in thousands)									(in thousands)
Balance at 12/31/2021		$	56,277	$	18	$	4,806	$	747
Balance at 6/30/2022		38,778		18		4,607		724
Balance at 12/31/2022										Balance at 12/31/2022	$	61,687	$	18	$	4,321	$	983
Balance at 3/31/2023										Balance at 3/31/2023	58,514		18		4,174		682
Decrease	Decrease	$	(17,499)	$	—	$	(199)	$	(23)	Decrease	$	(3,173)	$	—	$	(147)	$	(301)

Our trade receivables are included in trade and other receivables in the condensed consolidated balance sheets. Our current contract assets are included in other current assets in the condensed consolidated balance sheet. Our non-current contract assets are included in other assets in the condensed consolidated balance sheet and primarily relate to operations and maintenance costs incurred by Eight Flags that have not yet been recovered through rates for the sale of electricity to our electric distribution operation pursuant to a long-term service agreement.

At times, we receive advances or deposits from our customers before we satisfy our performance obligation, resulting in contract liabilities. Contract liabilities are included in other accrued liabilities in the condensed consolidated balance sheets and relate to non-refundable prepaid fixed fees for our Mid-Atlantic and North Carolina propane delivery operation's retail offerings. Our performance obligation is satisfied over the term of the respective customer retail program on a ratable basis. For the three months ended ~~June 30,~~March 31, 2023 and 2022, ~~and 2021,~~ we recognized revenue of ~~$0.3~~$0.2 million and ~~$0.2 million. For the six months ended June 30, 2022 and 2021, we recognized revenue of $0.7~~$0.4 million, ~~and $0.6 million.~~respectively.

Remaining ~~performance obligations~~Performance Obligations

Our businesses have long-term fixed fee contracts with customers in which revenues are recognized when performance obligations are satisfied over the contract term. Revenue for these businesses for the remaining performance obligations, at ~~June 30, 2022,~~March 31, 2023, are expected to be recognized as follows:


(in thousands)	(in thousands)	2022		2023		2024		2025		2026		2027		2028 and thereafter		(in thousands)	2023		2024		2025		2026		2027		2028		2029 and thereafter
Eastern Shore and Peninsula Pipeline	Eastern Shore and Peninsula Pipeline	$	24,379	$	45,426	$	40,431	$	33,804	$	29,294	$	25,096	$	179,259	Eastern Shore and Peninsula Pipeline	$	29,497	$	37,006	$	30,613	$	27,138	$	24,163	$	23,398	$	188,498
Natural gas distribution operations	Natural gas distribution operations	3,433		6,238		6,050		5,698		5,515		5,100		33,113		Natural gas distribution operations	5,474		7,115		6,757		6,527		5,942		4,742		28,371
FPU electric distribution	FPU electric distribution	326		652		652		275		275		275		275		FPU electric distribution	489		652		275		275		275		275		—
Total revenue contracts with remaining performance obligations	Total revenue contracts with remaining performance obligations	$	28,138	$	52,316	$	47,133	$	39,777	$	35,084	$	30,471	$	212,647	Total revenue contracts with remaining performance obligations	$	35,460	$	44,773	$	37,645	$	33,940	$	30,380	$	28,415	$	216,869

5. Rates and Other Regulatory Activities

Our natural gas and electric distribution operations in Delaware, Maryland and Florida are subject to regulation by their respective PSC; Eastern Shore, our natural gas transmission subsidiary, is subject to regulation by the FERC; and Peninsula Pipeline and Aspire Energy Express, our intrastate pipeline subsidiaries, are subject to regulation (excluding cost of service) by the Florida PSC and Public Utilities Commission of Ohio, respectively.

Delaware

~~See~~Refer to the below discussion ~~below under~~ pertaining to the COVID-19 impact.

~~Maryland~~ and Customer Information System Regulatory Asset Petition.

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Maryland

Customer Information System Regulatory Asset Petition:In July 2022, we filed a joint petition for our natural gas divisions in Maryland (Maryland Division, Sandpiper, and Elkton Gas) for the approval to establish a regulatory asset for non-capitalizable expenses related to the initial development and implementation of our new Customer Information System ("CIS") system. The petition was approved by the Maryland PSC in August 2022.A similar petition for our Florida Regulated Energy businesses was filed during the same time frame and was initially denied. The Florida PSC subsequently approved capitalization of these expenses. Additionally, our Delaware Division has the ability to defer these costs as a regulatory asset. We have completed the system selection process and the CIS implementation began during the first quarter of 2023.

Ocean City Maryland Reinforcement: In March 2022, we filed a Section 7(f) - Request for Service Area Determination with the FERC regarding plans to extend our natural gas facilities across the Delaware/Maryland state line from Sussex County, Delaware, to Worcester County, Maryland, to provide a secondary feed to Sandpiper Energy. The FERC approved the Section 7(f) request on August 29, 2022. The project will increase the reliability of the existing distribution system in those areas while also expanding infrastructure to serve new customers. Construction ~~began in the second quarter of 2022,~~has been initiated with estimated completion in the ~~fourth quarter~~first half of ~~2022.~~

~~Strategic Infrastructure Development and Enhancement (“STRIDE”) Plan:~~ In March 2021, Elkton Gas filed a STRIDE plan with the Maryland PSC. The STRIDE plan accelerates Elkton Gas' Aldyl-A pipeline replacement program as costs of the plan are recovered through a fixed charge rider which is effective for five years. Under Elkton Gas’ STRIDE plan, the Aldyl-A pipelines will be fully replaced by the end of 2023. In July 2021, Elkton Gas reached a settlement with the Maryland PSC Staff and the Maryland Office of Public Counsel that approved Elkton Gas’ STRIDE plan. The STRIDE plan allows for recovery of the associated revenue requirement through a monthly surcharge, which was implemented effective September 2021. We filed the annual STRIDE plan update with the Maryland PSC on November 1, 2021, which was approved for new rates effective January 1, 2022.

Florida

Wildlight Expansion: 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 construct the project during the 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. The various phases of the project commenced in the first quarter of 2023, with construction on the overall project continuing through 2025. The petition was approved by the Florida PSC in November 2022.

Natural Gas Rate Case: In May 2022, our natural gas distribution businesses in Florida ~~FPU, FPU-Indiantown division, FPU-Fort Meade division and Chesapeake Utilities CFG division (collectively, “Florida natural gas distribution businesses”)~~ filed a consolidated natural gas rate case with the Florida PSC. ~~In connection with the~~The application ~~we are seeking approval of~~included a request for the following: (i) ~~interim rate relief of approximately $7.2 million, subject to refund, pending the outcome of the rate case proceeding; (ii)~~ permanent rate relief of approximately $24.1 million, effective January 1, 2023, ~~(iii)~~(ii) a depreciation study also submitted with filing; ~~(iv)~~(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 businesses under FPU; ~~(v)~~(iv) authorization to retain the acquisition adjustment recorded at the time of the FPU merger in our revenue requirement; and ~~(vi)~~(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 ~~reading~~readings in September 2022. The ~~interim rates are subject to refund pending the final outcome of the rate case proceeding. The~~ discovery process ~~has commenced~~ and ~~hearing for~~subsequent hearings were concluded during the ~~proceeding has been scheduled for October~~fourth quarter of 2022 and briefs were submitted during the same quarter of 2022. ~~The outcome of the application is subject to review and approval by the Florida PSC.~~

~~Winter Haven Expansion Project:~~In ~~May 2021, Peninsula Pipeline filed a petition with~~January 2023, the Florida PSC approved the application for ~~approval~~consolidation and permanent rate relief of ~~its Transportation Service Agreement with CFG for~~approximately $17.2 million on an ~~incremental 6,800 Dts/d of firm service~~annual basis. Actual rates in the Winter Haven, Florida area. As part of this agreement, Peninsula Pipeline will construct a new interconnect with FGT and a new regulator station for CFG. CFG will use the additional firm service to support new incremental load due to growth, including providing service to a new can manufacturing facility, as well as provide reliability and operational benefits to CFG’s existing distribution system in the area. In connection with ~~Peninsula Pipeline’s new regulator station, CFG is also extending its distribution system to connect to~~ the ~~new station. The Transportation Service Agreement was~~rate relief were approved by the Florida PSC in ~~September 2021. Construction commenced in~~ February ~~2021 and the expected in-service~~2023 with an effective date ~~is the third quarter~~ of ~~2022.~~March 1, 2023.

Beachside Pipeline Extension: In June 2021, Peninsula Pipeline and Florida City Gas 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 ~~will construct~~constructed 11.3 miles of pipeline from its existing pipeline in the Sebastian, Florida area, ~~which will travel~~traveling east under the Intercoastal Waterway ~~("ICW")~~ and southward on the barrier island. As required by Peninsula Pipeline’s tariff and Florida Statutes, Peninsula Pipeline filed the required company and customer affidavits with the Florida PSC in June 2021. Construction commenced in June 2021 and the expectedThe project was placed in-service ~~date is first quarter of~~during April 2023.

St.Cloud / Twin Lakes Expansion: In July 2022, Peninsula Pipeline filed a petition with the Florida PSC for approval of its Transportation Service Agreement with ~~our Florida natural gas division,~~ FPU, for an additional 2,400 Dt/d of firm service in the St. Cloud, Florida area. As part of this agreement, Peninsula Pipeline will construct a pipeline extension and regulator station for FPU. The extension will be used to support new incremental load due to growth in the area, including providing service, most immediately, to the residential development, Twin Lakes. The expansion will also improve reliability and ~~operation~~provide operational benefits to FPU's existing distribution system in the area, supporting future ~~growth in~~growth. The petition was approved by the ~~area.~~ Florida PSC on October 4, 2022.We expect this expansion to be in service by the ~~first~~second quarter of 2023.

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Storm Protection Plan:In 2020, the Florida PSC implemented the Storm Protection Plan ("SPP") and Storm Protection Plan Cost Recovery Clause ("SPPCRC") rules, 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 for the SPP. Our Florida electric distribution operation’s SPP plan was filed during the first quarter of 2022 and approved in the fourth quarter of 2022 with modifications, by the Florida PSC. Rates associated with this initiative were effective in January 2023.

Lake Wales Pipeline Acquisition: In February 2022, Peninsula Pipeline filed a petition with the Florida PSC for approval of its Transportation Service Agreement with FPU for an additional 9,000 Dt/d of firm service in the Lake Wales, Florida area. Approval of the agreement by the Florida PSC will enable Peninsula Pipeline to begin executing on the acquisition of an existing pipeline in the area that will be utilized to serve our current natural gas customers as well as new customers. The Commission approved the petition in April 2023.

GUARD: In February 2023, FPU filed a petition with the Florida PSC for approval of the GUARD program. GUARD is a proposed ten-year program to enhance the safety, reliability and accessibility of portions of our natural gas distribution system. FPU has identified various categories of eligible projects to be included in GUARD, which includes 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 M&R equipment; and system reliability projects. The petition is currently under review by the Florida PSC.

Eastern Shore

Southern Expansion Project: In January 2022, Eastern Shore submitted a prior notice filing with the FERC pursuant to blanket certificate procedures, regarding its proposal to install an additional compressor unit and related facilities at Eastern Shore's ~~existing~~ compressor station in Bridgeville, Sussex County, Delaware. The project will enable Eastern Shore to provide additional firm natural gas transportation service to an existing shipper on ~~Eastern Shore's~~its pipeline ~~system, with a projected in-service date~~system. The project obtained FERC approval in December 2022, and is under construction, estimated to go into service in the fourth quarter of 2023. ~~We are currently awaiting an order from the FERC on the Company's filing.~~

Capital Cost Surcharge: In ~~June 2021,~~December 2022, Eastern Shore submitted a filing with the FERC regarding a capital cost surcharge to recover capital costs associated with ~~two mandated highway relocate projects that required~~ the replacement of existing Eastern Shore ~~facilities.~~facilities as a result of mandated highway relocation projects as well as compliance with a Pipeline and Hazardous Materials Safety Administration ("PHMSA") regulation. The capital cost surcharge mechanism was an approved ~~item~~ in Eastern Shore’s last rate case. In conjunction with the filing of this surcharge, ~~pursuant to the settlement agreement,~~ a cumulative adjustment to the existing surcharge to reflect additional depreciation was ~~included in this filing.~~included. The FERC issued an order approving the surcharge as filed on ~~July 7, 2021.~~December 19, 2022. The combined revised surcharge became effective ~~July 15, 2021.~~January 1, 2023.

COVID-19 Impact

In response to the COVID-19 pandemic and related restrictions, we experienced reduced consumption of energy largely in the commercial and industrial sectors, higher bad debt expenses and incremental expenses associated with COVID-19, including expenditures associated with personal protective equipment and premium pay for field personnel. The additional operating expenses we incurred supported the ongoing delivery of our essential services during ~~these unprecedented times.~~the height of the pandemic. In April and May 2020, we were authorized by the Maryland and Delaware PSCs, respectively, to record regulatory assets for COVID-19 related costs which ~~offers~~offered us the ability to seek recovery of those costs. In July 2021, the Florida PSC issued an order that approved incremental expenses we incurred due to COVID-19. The order allowed us to establish a regulatory asset in a total amount of $2.1 million as of June 30, 2021 for natural gas and electric distribution operations. The regulatory asset is being amortized over two years and is

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recovered through the Purchased Gas Adjustment and Swing Service mechanisms for our natural gas distribution businesses and through the Fuel Purchased Power Cost Recovery clause for our electric division. As of ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, our total COVID-19 regulatory asset balance was ~~$1.8~~$1.0 million and ~~$2.3~~$1.2 million, respectively.

In 2021 and 2022, restrictions were gradually lifted as vaccines became widely available in the United States. The various state of emergencies associated with the COVID-19 pandemic that were previously declared in our service territories have been terminated and we have adjusted our operating practices accordingly to ensure the safety of our operations and will take the necessary actions to comply with the CDC, and the Occupational Safety and Health Administration, as new developments may occur.

~~Storm Protection Plan~~

In 2020, the Florida PSC implemented the Storm Protection Plan ("SPP") and Storm Protection Plan Cost Recovery ("SPPCR") rules, 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 SPPCR rules allow the utility to file for recovery of associated costs related to its SPP. The Company’s SPP plan was filed in April 2022, with hearings scheduled for early August 2022. The SPP cost recovery clause ("SPPCRC") was filed in May 2022 with requested rates effective January 1, 2023. The SPPCRC hearing is scheduled for November 2022.

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Summary TCJA Table

Customer rates for our regulated businesses were adjusted, as approved by the regulators, prior to 2020 with the exception of Elkton Gas, which implemented a one-time bill credit in May 2020. The following table summarizes the regulatory liabilities related to accumulated deferred taxes ("ADIT") associated with TCJA for our regulated businesses as of ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021:~~2022:

Amount (in thousands)

Operation and Regulatory Jurisdiction

June 30, 2022

December 31, 2021

Status

Operation and Regulatory Jurisdiction

March 31, 2023

December 31, 2022

Status

Eastern Shore (FERC)

$34,190

Will be addressed in Eastern Shore's next rate case filing.

Eastern Shore (FERC)

$34,190

Will be addressed in Eastern Shore's next rate case filing.

Delaware natural gas division (Delaware PSC)

$12,510

$12,591

PSC approved amortization of ADIT in January 2019.

Maryland natural gas division (Maryland PSC)

$3,772

$3,840

PSC approved amortization of ADIT in May 2018.

Chesapeake Delaware natural gas division (Delaware PSC)

$12,182

$12,230

PSC approved amortization of ADIT in January 2019.

Chesapeake Maryland natural gas division (Maryland PSC)

$3,674

$3,703

PSC approved amortization of ADIT in May 2018.

Sandpiper Energy (Maryland PSC)

$3,626

$3,656

PSC approved amortization of ADIT in May 2018.

Sandpiper Energy (Maryland PSC)

$3,570

$3,597

PSC approved amortization of ADIT in May 2018.

Chesapeake Florida natural gas division/CFG (Florida PSC)

$7,939

$8,032

PSC issued order authorizing amortization and retention of net ADIT liability by the Company in February 2019.

FPU natural gas (excludes Fort Meade and Indiantown) (Florida PSC)

$19,058

$19,189

Same treatment on a net basis as Chesapeake Florida Gas Division (above).

FPU Fort Meade and Indiantown natural gas divisions (Florida PSC)

$265

$271

Same treatment on a net basis as Chesapeake Florida Gas Division (above).

Florida natural gas distribution (Florida PSC) (1)

$26,999

$27,179

PSC issued order authorizing amortization and retention of net ADIT liability by the Company in February 2019.

FPU electric division (Florida PSC)

$5,115

$5,237

In January 2019, PSC issued order approving amortization of ADIT through purchased power cost recovery, storm reserve and rates.

FPU electric division (Florida PSC)

$4,934

$4,993

In January 2019, PSC issued order approving amortization of ADIT through purchased power cost recovery, storm reserve and rates.

Elkton Gas (Maryland PSC)

$1,074

$1,091

PSC approved amortization of ADIT in March 2018.

Elkton Gas (Maryland PSC)

$1,051

$1,059

PSC approved amortization of ADIT in March 2018.

(1) In accordance with the Florida PSC approval of our natural gas base rate proceeding, effective March 1, 2023, our natural gas distribution businesses in Florida have been consolidated for rate-making purposes and amounts above are now being presented on a consolidated basis consistent with the final rate order.

6. Environmental Commitments and Contingencies

We are subject to federal, state and local laws and regulations governing environmental quality and pollution control. These laws and regulations require us to remove or remediate, at current and former operating sites, the effect on the environment of the disposal or release of specified substances.

MGP Sites

We have participated in the investigation, assessment or remediation of, and have exposures at, 7seven former MGP sites. We have received approval for recovery of clean-up costs in rates for sites located in Salisbury, Maryland; Seaford, Delaware; and Winter Haven, Key West, Pensacola, Sanford and West Palm Beach, Florida.

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As of ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, we had approximately ~~$4.8~~$3.5 million and ~~$5.2~~$4.3 million, respectively, in environmental liabilities related to the former MGP sites. As of ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, we have cumulative regulatory assets of ~~$1.0~~$0.5 million and ~~$1.3~~$0.8 million, respectively, for future recovery of environmental costs for customers. Specific to FPU’s four MGP sites in Key West, Pensacola, Sanford and West Palm Beach, FPU has approval to recover, from insurance and through customer rates, up to $14.0 million of its environmental costs related to its MGP sites. AsThe total $14.0 million was fully recovered as of ~~June 30, 2022 and December~~March 31, 2021, we had recovered approximately $13.1 million and $12.9 million, respectively, leaving approximately $0.9 million and $1.1 million, respectively, in regulatory assets for future recovery of environmental costs from FPU’s customers.2023.

Environmental liabilities for our MGP sites are recorded on an undiscounted basis based on the estimate of future costs provided by independent consultants. We continue to expect that all costs related to environmental remediation and related activities, including any potential future remediation costs for which we do not currently have approval for regulatory recovery, will be recoverable from customers through rates.

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Remediation is ongoing for the MGPs in Winter Haven and Key West in Florida and in Seaford, Delaware and the remaining clean-up costs are estimated to be between $0.3 million to $0.9 million for these three sites. The Environmental Protection Agency has approved a "site-wide ready for anticipated use" status for the Sanford, Florida MGP site, which is the final step before delisting a site. The remaining remediation expenses for the Sanford MGP site are immaterial.

The remedial actions approved by the Florida Department of Environmental Protection have been implemented on the east parcel of our West Palm Beach Florida site. Similar remedial actions have been initiated on the site's west parcel, and construction of active remedial systems are expected to be completed later in 2022. We expect the costs to clean-up the site to be between $3.3 million to $14.2 million, including costs associated with relocation of FPU's operations at this site, and any potential costs associated with future redevelopment of the properties.

2023.

7. Other Commitments and Contingencies

Natural Gas, Electric and Propane Supply

In March ~~2020,~~2023, our Delmarva Peninsula natural gas distribution operations entered into asset management agreements with a third party to manage their natural gas transportation and storage capacity. The agreements were effective as of April 1, ~~2020~~2023 and expire in March ~~2023.~~2026.

~~FPU~~Our Florida natural gas distribution operations and Eight Flags have separate asset management agreements with Emera Energy Services, Inc. to manage their natural gas transportation capacity. These agreements are for a 10-year term that commenced in November 2020 and expire in October 2030.

~~Chesapeake Utilities'~~Additionally, our Florida natural gas ~~division, CFG has~~distribution operations have firm transportation service contracts with FGT and Gulfstream. Pursuant to a capacity release program approved by the Florida PSC, all of the capacity under these agreements has been released to various third parties. Under the terms of these capacity release agreements, Chesapeake Utilities is contingently liable to FGT and Gulfstream should any party, that acquired the capacity through release, fail to pay the capacity charge. To date, Chesapeake Utilities has not been required to make a payment resulting from this contingency.

FPU’s electric supply contracts require FPU to maintain an acceptable standard of creditworthiness based on specific financial ratios. FPU’s agreement with Florida Power & Light Company requires FPU to meet or exceed a debt service coverage ratio of 1.25 times based on the results of the prior 12 months. If FPU fails to meet this ratio, it must provide an irrevocable letter of credit or pay all amounts outstanding under the agreement within five business days. FPU’s electric supply agreement with Gulf Power requires FPU to meet the following ratios based on the average of the prior 6six quarters: (a) funds from operations interest coverage ratio (minimum of 2two times), and (b) total debt to total capital (maximum of 65 percent). If FPU fails to meet the requirements, it has to provide the supplier a written explanation of actions taken, or proposed to be taken, to become compliant. Failure to comply with the ratios specified in the Gulf Power agreement could also result in FPU having to provide an irrevocable letter of credit. As of ~~June 30, 2022,~~March 31, 2023, FPU was in compliance with all of the requirements of its fuel supply contracts.

Eight Flags provides electricity and steam generation services through its CHP plant located on Amelia Island, Florida. In June 2016, Eight Flags began selling power generated from the CHP plant to FPU pursuant to a 20-year power purchase agreement for distribution to our electric customers. In July 2016, Eight Flags also started selling steam, pursuant to a separate 20-year contract, to the landowner on which the CHP plant is located. The CHP plant is powered by natural gas transported by FPU through its distribution system and Peninsula Pipeline through its intrastate pipeline.

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Corporate Guarantees

The Board of Directors has authorized us to issue corporate guarantees securing obligations of our subsidiaries and to obtain letters of credit securing our subsidiaries' obligations. The maximum authorized liability under such guarantees and letters of credit as of ~~June 30, 2022~~March 31, 2023 was $20.0 million. The aggregate amount guaranteed related to our subsidiaries at ~~June 30, 2022~~March 31, 2023 was approximately ~~$11.4~~$14.2 million with the guarantees expiring on various dates through ~~May 22, 2023.~~March 30, 2024. In addition, the Board has authorized us to issue specific purpose corporate guarantees. The amount of specific purpose guarantees outstanding at ~~June 30, 2022~~March 31, 2023 was ~~$2.0~~$4.0 million. ~~In July 2022, in connection with the Florida rate case, we entered into a guarantee in the amount of $7.1 million with the Florida PSC.~~

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As of ~~June 30, 2022,~~March 31, 2023, we have issued letters of credit totaling approximately ~~$5.3~~$5.8 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, and our current and previous primary insurance carriers. These letters of credit have various expiration dates through October 25, ~~2022. There~~2023 and to date, none have been ~~no draws on these letters of credit as of June 30, 2022.~~used. We do not anticipate that the counterparties will draw upon these letters of credit, and we expect that they will be renewed to the extent necessary in the future.

8. Segment Information

We use the management approach to identify operating segments. We organize our business around differences in regulatory environment and the operating results of each segment are regularly reviewed by the chief operating decision maker, our Chief Executive Officer, in order to make decisions about resources and to assess performance.

Our operations are entirely domestic and are comprised of 2two reportable segments:

•Regulated Energy. Includes energy distribution and transmission services (natural gas distribution, natural gas transmission and electric distribution operations). All operations in this segment are regulated, as to their rates and services, by the PSC having jurisdiction in each operating territory or by the FERC in the case of Eastern Shore.

•Unregulated Energy. Includes energy transmission, energy generation (the operations of our Eight Flags' CHP plant), propane distribution operations, ~~and~~ mobile compressed natural gas distribution and pipeline solutions ~~subsidiary.~~operations, and project development activities related to our sustainable energy initiatives. Also included in this segment are other unregulated energy services, such as energy-related merchandise sales and heating, ventilation and air conditioning, plumbing and electrical services. These operations are unregulated as to their rates and services.

The remainder of our operations is presented as “Other businesses and eliminations,” which consists of unregulated subsidiaries that own real estate leased to Chesapeake Utilities, as well as certain corporate costs not allocated to other operations. The following table presents financial information about our reportable segments:

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		Three Months Ended				Six Months Ended					Three Months Ended
		June 30,				June 30,					March 31,
		2022		2021		2022		2021			2023		2022
(in thousands)	(in thousands)									(in thousands)
Operating Revenues, Unaffiliated Customers	Operating Revenues, Unaffiliated Customers									Operating Revenues, Unaffiliated Customers
Regulated Energy	Regulated Energy	$	91,830	$	80,374	$	215,888	$	201,095	Regulated Energy	$	141,621	$	124,058
Unregulated Energy	Unregulated Energy	47,640		30,708		146,462		101,173		Unregulated Energy	76,508		98,822
Total operating revenues, unaffiliated customers	Total operating revenues, unaffiliated customers	$	139,470	$	111,082	$	362,350	$	302,268	Total operating revenues, unaffiliated customers	$	218,129	$	222,880
Intersegment Revenues (1)	Intersegment Revenues (1)									Intersegment Revenues (1)
Regulated Energy	Regulated Energy	$	363	$	536	$	4,196	$	1,012	Regulated Energy	$	649	$	3,833
Unregulated Energy	Unregulated Energy	5,823		4,065		7,819		8,358		Unregulated Energy	6,657		1,996
Other businesses	Other businesses	85		133		691		265		Other businesses	45		606
Total intersegment revenues	Total intersegment revenues	$	6,271	$	4,734	$	12,706	$	9,635	Total intersegment revenues	$	7,351	$	6,435
Operating Income	Operating Income									Operating Income
Regulated Energy	Regulated Energy	$	25,841	$	22,760	$	60,539	$	55,466	Regulated Energy	$	37,625	$	34,681
Unregulated Energy	Unregulated Energy	560		(465)		20,613		18,575		Unregulated Energy	17,245		20,046
Other businesses and eliminations	Other businesses and eliminations	68		283		182		134		Other businesses and eliminations	45		138
Operating income	Operating income	26,469		22,578		81,334		74,175		Operating income	54,915		54,865
Other income, net	Other income, net	2,584		1,453		3,498		1,828		Other income, net	276		913
Interest charges	Interest charges	5,825		5,054		11,164		10,159		Interest charges	7,232		5,339
Income before Income Taxes		23,228		18,977		73,668		65,844
Income Before Income Taxes										Income Before Income Taxes	47,959		50,439
Income Taxes	Income Taxes	6,177		5,164		19,683		17,565		Income Taxes	11,615		13,506
Net Income	Net Income	$	17,051	$	13,813	$	53,985	$	48,279	Net Income	$	36,344	$	36,933

(1) All significant intersegment revenues are billed at market rates and have been eliminated from consolidated operating revenues.


(in thousands)	(in thousands)	June 30, 2022		December 31, 2021		(in thousands)	March 31, 2023		December 31, 2022
Identifiable Assets	Identifiable Assets					Identifiable Assets
Regulated Energy segment	Regulated Energy segment	$	1,637,003	$	1,629,191	Regulated Energy segment	$	1,713,149	$	1,716,255
Unregulated Energy segment	Unregulated Energy segment	447,209		439,114		Unregulated Energy segment	441,261		463,239
Other businesses and eliminations	Other businesses and eliminations	33,130		46,564		Other businesses and eliminations	43,141		35,543
Total identifiable assets		$	2,117,342	$	2,114,869
Total Identifiable Assets						Total Identifiable Assets	$	2,197,551	$	2,215,037

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9. Stockholders' Equity

Common Stock Issuances

In June 2020, we filed a shelf registration statement with the SEC to facilitate the issuance of our common stock from time to time. In August 2020, we filed a prospectus supplement under the shelf registration statement for an ATM equity program under which we may issue and sell shares of our common stock up to an aggregate offering price of $75.0 million.

We maintain an effective shelf registration statement with the SEC for the issuance of shares under our ~~DRIP.~~DRIP and ATM programs. Depending on our capital needs and subject to market conditions, in addition to other possible debt and equity offerings, we may issue additional shares under the direct stock purchase component of the DRIP. ~~In 2021,~~Under our current ATM equity program we ~~issued just over 0.1~~may issue and sell shares of our common stock up to an aggregate offering price of $75.0 million ~~shares at an average price per share of $125.71 and received net proceeds of $15.2 million under the DRIP.~~through June 2023. In ~~the first six months of~~ 2022, we issued less than 0.1 million shares at an average price per share of ~~$137.24~~$136.26 and received net proceeds of ~~$4.3~~$4.5 million under the DRIP. In the first three months of 2023, there were no issuances under the DRIP.

We ~~used~~use the net proceeds from our share issuances, after fees, for general corporate purposes, including, but not limited to, financing of capital expenditures, repayment of short-term debt, financing acquisitions, investing in subsidiaries, and general working capital purposes.

Accumulated Other Comprehensive ~~Gain~~Income (Loss)

Defined benefit pension and postretirement plan items, unrealized gains (losses) of our propane swap agreements designated as commodity contracts cash flow hedges, and the unrealized gains (losses) of our interest rate swap agreements designated as cash flow hedges are the components of our accumulated other comprehensive income (loss). The following tables present the changes in the balance of accumulated other comprehensive gain (loss) as of ~~June 30, 2022~~March 31, 2023 and ~~2021.~~2022. All amounts in the following tables are presented net of tax.

Defined Benefit Commodity Interest Rate
Pension and Contracts Swap
Postretirement Cash Flow Cash Flow
Plan Items Hedges
Hedges (1)
Total
(in thousands)
As of December 31, 2021 $ (3,268) $ 4,571 $ — $ 1,303
Other comprehensive income before reclassifications — 2,206 — 2,206
Amounts reclassified from accumulated other comprehensive income/(loss) 35 (2,174) — (2,139)
Net current-period other comprehensive income 35 32 — 67
As of June 30, 2022 $ (3,233) $ 4,603 $ — $ 1,370
(in thousands)
As of December 31, 2020 $ (5,146) $ 2,309 $ (28) $ (2,865)
Other comprehensive income before reclassifications — 5,825 23 5,848
Amounts reclassified from accumulated other comprehensive income/(loss) 128 (2,534) (19) (2,425)
Net prior-period other comprehensive income 128 3,291 4 3,423
As of June 30, 2021 $ (5,018) $ 5,600 $ (24) $ 558


	Defined Benefit		Commodity		Interest Rate
	Pension and		Contracts		Swap
	Postretirement		Cash Flow		Cash Flow
	Plan Items		Hedges		Hedges		Total
(in thousands)
As of December 31, 2022	$	(2,506)	$	1,092	$	35	$	(1,379)
Other comprehensive income (loss) before reclassifications	—		22		(148)		(126)
Amounts reclassified from accumulated other comprehensive income (loss)	10		(440)		(48)		(478)
Net current-period other comprehensive income (loss)	10		(418)		(196)		(604)

As of March 31, 2023	$	(2,496)	$	674	$	(161)	$	(1,983)



As of December 31, 2021	$	(3,268)	$	4,571	$	—	$	1,303
Other comprehensive income before reclassifications	—		2,498		—		2,498
Amounts reclassified from accumulated other comprehensive income (loss)	18		(1,969)		—		(1,951)
Net prior-period other comprehensive income	18		529		—		547
As of March 31, 2022	$	(3,250)	$	5,100	$	—	$	1,850

~~(1)~~ ~~All of our interest rate swaps expired at December 31, 2021~~

~~The following table presents amounts reclassified out of accumulated other comprehensive income (loss) for the three and six months ended June 30, 2022 and 2021.~~ Deferred gains or losses for our commodity contracts and interest rate swap cash flow hedges are recognized in earnings upon settlement.

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Three Months Ended Six Months Ended
June 30, June 30,
2022 2021 2022 2021
(in thousands)
Amortization of defined benefit pension and postretirement plan items:
Prior service credit (1)
$ 19 $ 19 $ 38 $ 38
Net loss(1)
(43) (106) (86) (209)
Total before income taxes (24) (87) (48) (171)
Income tax benefit 6 23 13 43
Net of tax $ (18) $ (64) $ (35) $ (128)
Gains on commodity contracts cash flow hedges:
Propane swap agreements (2)
$ 283 $ 455 $ 3,004 $ 3,502
Income tax expense (78) (126) (830) (968)
Net of tax $ 205 $ 329 $ 2,174 $ 2,534
Gains on interest rate swap cash flow hedges:
Interest rate swap agreements $ — $ 22 $ — $ 26
Income tax expense — (6) — (7)
Net of tax $ — $ 16 $ — $ 19
Total reclassifications for the period $ 187 $ 281 $ 2,139 $ 2,425

~~(1)These amounts~~ Prior service credit and net loss related to the defined benefit pension plan and postretirement plans are included in the computation of net periodic costs (benefits). See Note 10,, Employee Benefit Plans, for additional details.

~~(2)These amounts~~ Gains on commodity contracts classified as cash flow hedges related to our propane swaps are included in the effects of gains and losses from derivative instruments. See Note ~~13,~~12, Derivative Instruments, for additional details.

Amortization of defined benefit pension and postretirement plan items are included in other expense, net gains and losses on propane swap agreements contracts are included in revenue and unregulated propane and natural gas, the

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realized gain or loss on interest rate swap agreements is recognized as a component of interest charges in the accompanying condensed consolidated statements of income. The income tax benefit is included in income tax expense in the accompanying condensed consolidated statements of income.

10. Employee Benefit Plans

Net periodic benefit costs for ~~our pension and post-retirement benefits plans~~the FPU Pension Plan for the three ~~and six~~ months ended ~~June 30,~~March 31, 2023 and 2022 ~~and 2021 are~~is set forth in the following ~~tables:~~table:


		Chesapeake Pension Plan				FPU Pension Plan				Chesapeake SERP				Chesapeake Postretirement Plan				FPU Medical Plan					FPU Pension Plan
For the Three Months Ended June 30,		2022		2021		2022		2021		2022		2021		2022		2021		2022		2021
For the Three Months Ended March 31,																						For the Three Months Ended March 31,	2023		2022
(in thousands)	(in thousands)																					(in thousands)
Interest cost	Interest cost	$	—	$	34	$	449	$	429	$	13	$	12	$	6	$	6	$	6	$	6	Interest cost	$	633	$	449
Expected return on plan assets	Expected return on plan assets	—		(40)		(857)		(830)		—		—		—		—		—		—		Expected return on plan assets	(668)		(857)
Amortization of prior service credit		—		—		—		—		—		—		(19)		(19)		—		—

Amortization of net (gain) loss	Amortization of net (gain) loss	—		60		124		155		7		7		12		10		—		(2)		Amortization of net (gain) loss	110		124

Total periodic cost (benefit)	Total periodic cost (benefit)	$	—	$	54	$	(284)	$	(246)	$	20	$	19	$	(1)	$	(3)	$	6	$	4	Total periodic cost (benefit)	$	75	$	(284)

~~Table~~The following table presents the amounts included in the regulatory asset and accumulated other comprehensive income that were recognized as components of ~~Contents~~the FPU Pension Plan's net periodic benefit cost during the three months ended March 31, 2023 and 2022:

Chesapeake
Pension Plan FPU
Pension Plan Chesapeake SERP Chesapeake
Postretirement
Plan FPU
Medical
Plan
For the Six Months Ended June 30, 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021
(in thousands)
Interest cost $ — $ 68 $ 898 $ 858 $ 26 $ 24 $ 12 $ 12 $ 12 $ 12
Expected return on plan assets — (80) (1,714) (1,660) — — — — — —
Amortization of prior service credit — — — — — — (38) (38) — —
Amortization of net (gain) loss — 120 248 310 14 14 24 18 — (4)
Total periodic cost (benefit) $ — $ 108 $ (568) $ (492) $ 40 $ 38 $ (2) $ (8) $ 12 $ 8


	FPU Pension Plan
For the Three Months Ended March 31,	2023		2022
(in thousands)

Net loss	$	110	$	124
Total recognized in net periodic benefit cost	110		124
Recognized from accumulated other comprehensive (income) loss (1)	21		24
Recognized from regulatory asset	89		100
Total	$	110	$	124

(1)See Note 9, Stockholders' Equity.

~~In 2019, we began executing a de-risking strategy~~Net periodic benefit cost for our other pension and post-retirement benefit plans were not material for the ~~Chesapeake Pension Plan. In line with this strategy, we fully terminated the Chesapeake Pension Plan during the fourth quarter of 2021,~~three months ended March 31, 2023 and as of December 31, 2021, there were no remaining assets in the Chesapeake Pension Plan. Accordingly, a portion of the pension settlement expense associated with the termination was allocated to our Regulated Energy operations and was recorded as regulatory assets, previously approved in all of the impacted jurisdictions. The remaining portion of the pension settlement expense totaling $0.6 million was recorded in other expense in our consolidated statement of income in the fourth quarter 2021 which reflected the amount allocated to our Unregulated Energy operations or was deemed not recoverable through the regulatory process.2022.

The components of our net periodic costs have been recorded or reclassified to other expense, net in the condensed consolidated statements of income. Pursuant to their respective regulatory orders, FPU and Chesapeake Utilities continue to record, as a regulatory asset, a portion of their unrecognized postretirement benefit costs related to their regulated operations. The portion of the unrecognized pension and postretirement benefit costs related to FPU’s unregulated operations and Chesapeake Utilities' operations is recorded to accumulated other comprehensive income.

The following tables present the amounts included in the regulatory asset and accumulated other comprehensive income that were recognized as components of net periodic benefit cost during the three and six months ended June 30, 2022 and 2021:

For the Three Months Ended June 30, 2022 Chesapeake
Pension
Plan FPU
Pension
Plan Chesapeake SERP Chesapeake
Postretirement
Plan FPU
Medical
Plan Total
(in thousands)
Prior service credit $ — $ — $ — $ (19) $ — $ (19)
Net loss — 124 7 12 — 143
Total recognized in net periodic benefit cost — 124 7 (7) — 124
Recognized from accumulated other comprehensive (income)/loss (1)
— 24 7 (7) — 24
Recognized from regulatory asset — 100 — — — 100
Total $ — $ 124 $ 7 $ (7) $ — $ 124

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For the Three Months Ended June 30, 2021 Chesapeake
Pension
Plan FPU
Pension
Plan Chesapeake SERP Chesapeake
Postretirement
Plan FPU
Medical
Plan Total
(in thousands)
Prior service credit $ — $ — $ — $ (19) $ — $ (19)
Net loss 60 155 7 10 (2) 230
Total recognized in net periodic benefit cost 60 155 7 (9) (2) 211
Recognized from accumulated other comprehensive (income)/loss (1)
60 29 7 (9) — 87
Recognized from regulatory asset — 126 — — (2) 124
Total $ 60 $ 155 $ 7 $ (9) $ (2) $ 211

For the Six months ended June 30, 2022 Chesapeake
Pension
Plan FPU
Pension
Plan Chesapeake SERP Chesapeake
Postretirement
Plan FPU
Medical
Plan Total
(in thousands)
Prior service credit $ — $ — $ — $ (38) $ — $ (38)
Net loss — 248 14 24 — 286
Total recognized in net periodic benefit cost — 248 14 (14) — 248
Recognized from accumulated other comprehensive (income)/loss (1)
— 48 14 (14) — 48
Recognized from regulatory asset — 200 — — — 200
Total $ — $ 248 $ 14 $ (14) $ — $ 248

For the Six months ended June 30, 2021 Chesapeake
Pension
Plan FPU
Pension
Plan Chesapeake SERP Chesapeake
Postretirement
Plan FPU
Medical
Plan Total
(in thousands)
Prior service credit $ — $ — $ — $ (38) $ — $ (38)
Net loss 120 310 14 18 (4) 458
Total recognized in net periodic benefit cost 120 310 14 (20) (4) 420
Recognized from accumulated other comprehensive (income)/loss (1)
120 58 14 (20) (1) 171
Recognized from regulatory asset — 252 — — (3) 249
Total $ 120 $ 310 $ 14 $ (20) $ (4) $ 420
~~(1)See Note 9, Stockholders' Equity~~.

During the three ~~and six~~ months ended ~~June 30, 2022, we contributed $0.1 million~~March 31, 2023, there were no contributions to the FPU Pension ~~Plan. We~~Plan and we do not expect to contribute ~~approximately$0.3 million~~ to the FPU Pension Plan during ~~2022, which represents the minimum annual contribution payments required.~~

2023. The Chesapeake SERP, the Chesapeake Postretirement Plan and the FPU Medical Plan are unfunded and are expected to be paid out of our general funds. Cash benefits paid under ~~the Chesapeake SERP~~these other post retirement benefit plans for the three ~~and six~~ months ended ~~June 30, 2022~~March 31, 2023 were ~~less than $0.1 million in both periods.~~immaterial. We expect to pay total cash benefits of approximately $0.2 million ~~under~~for the Chesapeake SERP, ~~in 2022. Cash benefits paid under~~approximately $0.1 million for the Chesapeake Postretirement Plan, ~~primarily for medical claims for both the three~~ and ~~six months ended June 30, 2022 were $0.1 million. We estimate that~~ approximately $0.1 million will be paid for such benefits under the Chesapeake Postretirement Plan in 2022. Cash benefits paid under the FPU Medical Plan, primarily for medical claims for the three and six months ended June 30, 2022, were immaterial. We estimate that approximately $0.1 million will be paid for such benefits under the FPU Medical Plan in ~~2022.~~2023.

Non-Qualified Deferred Compensation Plan

Members of our Board of Directors and officers of the Company are eligible to participate in the Non-Qualified Deferred Compensation Plan. Directors can elect to defer any portion of their cash or stock compensation and officers

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~~11. Investments~~

~~The investment balances at June 30, 2022 and December 31, 2021, consisted~~can defer up to 80 percent of ~~the following:~~

(in thousands) June 30,
2022 December 31,
2021
Rabbi trust (associated with the Non-Qualified Deferred Compensation Plan) $ 10,499 $ 12,069
Investments in equity securities 24 26
Total $ 10,523 $ 12,095

~~We classify these investments as trading securities and report them at~~ their ~~fair value. For the three months ended June 30, 2022 and 2021, we recorded~~base compensation, cash bonuses or any amount of their stock bonuses (net of required withholdings). Officers may receive a ~~net unrealized loss~~matching contribution on their cash compensation deferrals up to 6 percent of ~~$1.4 million and~~their compensation, provided it does not duplicate a ~~net unrealized gain of $0.6 million, respectively, in other income, net~~match they receive in the ~~condensed consolidated statements~~Retirement Savings Plan.

All obligations arising under the Non-Qualified Deferred Compensation Plan are payable from our general assets, although we have established a Rabbi Trust to informally fund the plan. Deferrals of ~~income related to these investments. For~~cash compensation may be invested by the ~~six months ended June 30, 2022 and 2021, we recorded a net unrealized loss of approximately $2.0 million and a net unrealized gain of approximately $1.0 million, respectively,~~participants in ~~other expense, net~~various mutual funds (the same options that are available in the ~~condensed consolidated statements of income related to these~~Retirement Savings Plan). The participants are credited with gains or losses on those investments. ~~For the investment~~Assets held in the Rabbi Trust, ~~we also have~~ recorded ~~an associated liability, which is included in other pension and benefit costs in~~as Investments on the consolidated balance ~~sheets~~sheet, had a fair value of $10.8 million at March 31, 2023 and ~~is adjusted each period for the gains and losses incurred by the investments in~~$10.6 million at December 31, 2022. The assets of the Rabbi ~~Trust.~~

Trust are at all times subject to the claims of our general creditors.

~~12.~~11. Share-Based Compensation

Our non-employee directors and key employees ~~are~~have been granted share-based awards through our SICP. We record these share-based awards as compensation costs over the respective service period for which services are received in exchange for an award of equity or equity-based compensation. The compensation cost is based primarily on the fair value of the shares awarded, using the estimated fair value of each share on the date it was granted, and the number of shares to be issued at the end of the service period.

The table below presents the amounts included in net income related to share-based compensation expense for the three ~~and six~~ months ended ~~June 30, 2022~~March 31, 2023 and ~~2021:~~2022:


		Three Months Ended				Six Months Ended					Three Months Ended
		June 30,				June 30,					March 31,
		2022		2021		2022		2021			2023		2022
(in thousands)	(in thousands)									(in thousands)
Awards to key employees										Awards to key employees	$	2,156	$	1,979
Awards to non-employee directors	Awards to non-employee directors	$	220	$	192	$	454	$	380	Awards to non-employee directors	252		234
Awards to key employees		1,122		1,247		3,101		2,935
Total compensation expense	Total compensation expense	1,342		1,439		3,555		3,315		Total compensation expense	2,408		2,213
Less: tax benefit	Less: tax benefit	(346)		(384)		(917)		(885)		Less: tax benefit	(622)		(571)
Share-based compensation amounts included in net income	Share-based compensation amounts included in net income	$	996	$	1,055	$	2,638	$	2,430	Share-based compensation amounts included in net income	$	1,786	$	1,642

Officers and Key Employees

~~Non-employee Directors~~

~~Shares granted~~Our Compensation Committee is authorized to ~~non-employee directors are issued in advance~~grant our key employees the right to receive awards of shares of our common stock, contingent upon the achievement of established performance goals and subject to SEC transfer restrictions once awarded. Our President and CEO has the right to issue awards of shares of our common stock, to other officers of the ~~directors’ service periods~~Company, contingent upon various performance goals and subject to SEC transfer restrictions.

We currently have several outstanding multi-year performance plans, which are ~~fully vested as~~based upon the successful achievement of long-term goals, growth and financial results and comprise both market-based and performance-based conditions and targets. The fair value per share, tied to a performance-based condition or target, is equal to the market price per share on the grant date. ~~We record a deferred expense equal~~For the market-based conditions, we used the Monte Carlo valuation to estimate the fair value of ~~the shares issued and amortize the expense equally over a service period of one year. In May 2022, after the most recent election of directors,~~ each of our non-employee directors received an annual retainer of 652 shares of common stock under the SICP for service as a director through the 2023 Annual Meeting of Stockholders; accordingly, 6,520 shares, with a weighted average fair value of $130.36 per share ~~were issued and vested in 2022.~~

~~At June 30, 2022, there was approximately$0.7 million of unrecognized compensation expense related to shares granted to non-employee directors. This expense will be recognized over the remaining service period ending in May of 2023.~~

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In July, 2022, we announced the appointment of two new non-employee directors to our current Board. These newly appointed directors will be granted share-based awards through the SICP that will be pro-rated in accordance with the beginning of their service period. The associated expense will be recognized in the same manner utilized for our current non-employee directors.

~~Key Employees~~granted.

The table below presents the summary of the stock activity for awards to key employees for the ~~six~~three months ended ~~June 30, 2022:~~March 31, 2023:


		Number of Shares	Weighted Average Fair Value			Number of Shares	Weighted Average Fair Value
Outstanding—December 31, 2021		197,398	$	94.15
Outstanding—December 31, 2022					Outstanding—December 31, 2022	204,149	$	103.17
Granted	Granted	66,942	$	119.77	Granted	80,551	$	128.01
Vested	Vested	(60,850)	$	90.60	Vested	(68,302)	$	91.59
Expired	Expired	557	$	91.42	Expired	(2,053)	$	94.64

Outstanding—June 30, 2022		204,047	$	102.91
Outstanding—March 31, 2023					Outstanding—March 31, 2023	214,345	$	117.23

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During the ~~six~~three months ended ~~June 30, 2022,~~March 31, 2023, we granted awards of ~~66,942~~80,551 shares of common stock to key employees under the SICP, including awards granted in February ~~2022 and~~2023 to key employees appointed in officer positions. The shares granted are multi-year awards that will vest no later than the three-year service period ending December 31, ~~2024.~~2025. All of these stock awards are earned based upon the successful achievement of long-term financial results, which are comprised of market-based and performance-based conditions or targets. The fair value of each performance-based condition or target is equal to the market price of our common stock on the grant date of each award. For the market-based conditions, we used the Monte Carlo valuation to estimate the fair value of each market-based award granted.

In March ~~2022,~~2023, upon the election by certain of our executive officers, we withheld shares with a value at least equivalent to each such executive officer’s minimum statutory obligation for applicable income and other employment taxes related to shares that vested and were paid in ~~February 2022~~March 2023 for the performance period ended December 31, ~~2021,~~2022. We paid the balance of such awarded shares to each such executive officer ~~net~~and remitted cash ~~remitted~~equivalent to the withheld shares to the appropriate taxing authorities. We withheld ~~21,832~~19,859 shares, based on the value of the shares on their award date. Total combined payments for the employees’ tax obligations to the taxing authorities were approximately ~~$2.8~~$2.5 million.

At ~~June 30, 2022,~~March 31, 2023, the aggregate intrinsic value of the SICP awards granted to key employees was approximately ~~$26.4~~$27.4 million. At ~~June 30, 2022,~~March 31, 2023, there was approximately ~~$8.8~~$11.1 million of unrecognized compensation cost related to these awards, which will be recognized through ~~2024.~~

~~Stock Options~~2025.

~~There~~

Non-employee Directors

Shares granted to non-employee directors are issued in advance of the directors’ service periods and are fully vested as of the grant date. We record a deferred expense equal to the fair value of the shares issued and amortize the expense equally over a service period of one year or less.

Our directors receive an annual retainer of shares of common stock under the SICP for services rendered through the subsequent Annual Meeting of Shareholders.Accordingly, our directors that served on the Board as of May 2022 each received 652 shares of common stock, respectively, with a weighted average fair value of $130.36 per share.

In July 2022, we announced the appointment of two new non-employee directors to our Board. These newly appointed directors were ~~no stock options outstanding or issued during~~each granted a prorated share-based award of 526 shares through the ~~six months ended June 30, 2022~~SICP in accordance with the beginning of their service period. The associated expense is being recognized consistent with the methodology described above.

At March 31, 2023, there was approximately ~~and 2021.~~$0.1 million of unrecognized compensation expense related to shares granted to non-employee directors. This expense will be recognized over the remaining service period ending in May 2023.

~~13.~~12. Derivative Instruments

We use derivative and non-derivative contracts to manage risks related to obtaining adequate supplies and the price fluctuations of natural gas, electricity and propane and to mitigate interest rate risk. Our natural gas, electric and propane distribution operations have entered into agreements with suppliers to purchase natural gas, electricity and propane for resale to our customers. Our natural gas gathering and transmission company has entered into contracts with producers to secure natural gas to meet its obligations. Purchases under these contracts typically either do not meet the definition of derivatives or are considered “normal purchases and normal sales” and are accounted for on an accrual basis. Our propane distribution operations may also enter into fair value hedges of their inventory or cash flow hedges of their future purchase commitments in order to mitigate the impact of wholesale price fluctuations. Occasionally, we may enter into interest rate swap agreements to mitigate risk associated with changes in short-term borrowing rates. As of ~~June 30, 2022,~~March 31, 2023, our natural gas and electric distribution operations did not have any outstanding derivative contracts.

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Volume of Derivative Activity

As of ~~June 30, 2022,~~March 31, 2023, the volume of our commodity derivative contracts were as follows:

Business unit

Commodity

Contract Type

Quantity hedged (in millions)

Designation

Longest Expiration date of hedge

Sharp

Propane (gallons)

Purchases

~~16.0~~13.5

Cash ~~flows~~flow hedges

~~June 2024~~August 2025

Sharp

Propane (gallons)

Sales

~~3.8~~3.2

Cash ~~flows~~flow hedges

~~March~~December 2023

Sharp entered into futures and swap agreements to mitigate the risk of fluctuations in wholesale propane index prices associated with the propane volumes that are expected to be purchased and/or sold during the heating season. Under the futures and swap agreements, Sharp will receive the difference between (i) the index prices (Mont Belvieu prices in ~~June 2022~~March 2023 through ~~June 2024)~~August 2025) and (ii) the per gallon propane swap prices, to the extent the index prices exceed the contracted prices. If the index prices are lower than the contract prices, Sharp will pay the difference. We designated and accounted for the propane swaps as cash ~~flows~~flow hedges. The change in the fair value of the swap agreements is recorded as unrealized gain (loss) in other comprehensive income (loss) and later recognized in the statement of income in the same period and in the same line item as the hedged transaction. We expect to reclassify approximately ~~$3.8~~$1.0 million from accumulated other comprehensive income (loss) related to our commodity cash flow hedges to earnings during the next 12-month period ended ~~June 30, 2023.~~March 31, 2024.

Interest Rate Swap Activities

We manage interest rate risk by entering into derivative contracts to hedge the variability in cash flows attributable to changes in the short-term borrowing rates. In ~~the fourth quarter of 2020,~~September 2022, we entered into two $30.0 million interest rate swaps with a total notional amount of $60.0 million through September and December 2021 with pricing of 0.205 and 0.20 percent, respectively, for the period associated with our outstanding borrowing under the Revolver. In February 2021, we entered into an ~~additional~~ interest rate swap with a notional amount of ~~$40.0~~$50.0 million through ~~December 2021~~September 2025, with pricing of ~~0.17~~3.98 percent. ~~Our~~

Prior to August 2022, our short-term borrowing iswas based on the 30-day LIBOR rate. ~~The~~In August 2022, we amended and restated our revolver and transitioned the benchmark interest rate to the 30-day SOFR as a result of the impending expiration of LIBOR. Our prior interest rate swaps were cash settled monthly as the counter-party paid us the 30-day LIBOR rate less the fixed rate. Our interest rate swap is cash settled monthly as the counter-party pays us the 30-day ~~LIBOR~~SOFR rate less the fixed rate. ~~At December 31, 2021 all of our interest rate swaps had expired and we have not entered into any new derivative contracts associated with our outstanding short-term borrowings in 2022.~~

We ~~designated~~designate and ~~accounted~~account for interest rate swaps as cash ~~flows~~flow hedges. Accordingly, unrealized gains and losses associated with the interest rate ~~swaps were~~swap are recorded as a component of accumulated other comprehensive income (loss). When the interest rate ~~swaps settled,~~swap settles, the realized gain or loss ~~was~~is recorded in the income statement and is recognized as a component of interest charges.

Broker Margin

Futures exchanges have contract specific margin requirements that require the posting of cash or cash equivalents relating to traded contracts. Margin requirements consist of initial margin that is posted upon the initiation of a position, maintenance margin that is usually expressed as a percent of initial margin, and variation margin that fluctuates based on the daily mark-to-market relative to maintenance margin requirements. We currently maintain a broker margin account for Sharp which was classified within our Other Current Assets on the consolidated balance sheet with a balance of $0.1 million as ~~follows:~~of March 31, 2023. At December 31, 2022, $0.1 million was classified in Other Current Liabilities on the consolidated balance sheet.

(in thousands) Balance Sheet Location June 30, 2022 December 31, 2021
Sharp Other Accrued Liabilities $ 4,418 $ 4,081

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Financial Statements Presentation

The following tables present information about the fair value and related gains and losses of our derivative contracts. We did not have any derivative contracts with a credit-risk-related contingency. Fair values of the derivative contracts recorded in the consolidated balance sheets as of ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, are as follows:


		Derivative Assets						Derivative Assets
			Fair Value As Of						Fair Value As Of
(in thousands)	(in thousands)	Balance Sheet Location	June 30, 2022		December 31, 2021		(in thousands)	Balance Sheet Location	March 31, 2023		December 31, 2022
Derivatives not designated as hedging instruments
Propane swap agreements		Derivative assets, at fair value	$	—	$	16

Derivatives designated as cash flow hedges	Derivatives designated as cash flow hedges						Derivatives designated as cash flow hedges
Propane swap agreements	Propane swap agreements	Derivative assets, at fair value	6,772		7,060		Propane swap agreements	Derivative assets, at fair value	$	1,801	$	3,317
Total Derivative Assets			$	6,772	$	7,076
Interest rate swap agreements							Interest rate swap agreements	Derivative assets, at fair value	345		452
Total Derivative Assets (1)							Total Derivative Assets (1)		$	2,146	$	3,769

(1) Derivative assets, at fair value include $1.2 million and $2.8 million in current assets in the condensed consolidated balance sheet at March 31, 2023 and December 31, 2022, respectively, with the remainder of the balance classified as long-term.

Derivative Liabilities

Fair Value As Of

(in thousands)

Balance Sheet Location

June 30, 2022

December 31, 2021

(in thousands)

Balance Sheet Location

March 31, 2023

December 31, 2022

Derivatives designated as cash flow hedges

Propane swap agreements

Derivative liabilities, at fair value

427

743

Propane swap agreements

Derivative liabilities, at fair value

871

1,810

Interest rate swap agreements

Derivative liabilities, at fair value

563

405

Total Derivative Liabilities (1)

1,434

2,215

(1) Derivative liabilities, at fair value include $0.8 million and $0.6 million in current liabilities in the condensed consolidated balance sheet at March 31, 2023 and December 31, 2022, respectively, with the remainder of the balance classified as long-term.

The effects of gains and losses from derivative instruments on the condensed consolidated financial statements are as follows:

Amount of Gain (Loss) on Derivatives:
Location of Gain For the Three Months Ended June 30, For the Six Months Ended June 30,
(in thousands) (Loss) on Derivatives 2022 2021 2022 2021
Derivatives not designated as hedging instruments
Propane swap agreements Unregulated propane and natural gas costs $ — $ — $ 56 $ —
Derivatives designated as fair value hedges
Propane put options Unregulated propane and natural gas costs — — — (24)
Derivatives designated as cash flow hedges
Propane swap agreements Revenues — — (826) —
Propane swap agreements Unregulated propane and natural gas costs 283 455 3,830 3,502
Propane swap agreements Other comprehensive income (loss) (686) 4,319 28 4,548
Interest rate swap agreements Interest expense — 22 — 26
Interest rate swap agreements Other comprehensive income — 8 — 5
Total $ (403) $ 4,804 $ 3,088 $ 8,057


		Amount of Gain (Loss) on Derivatives
	Location of Gain	For the Three Months Ended March 31,
(in thousands)	(Loss) on Derivatives	2023		2022
Derivatives not designated as hedging instruments
Propane swap agreements	Unregulated propane and natural gas costs	$	—	$	56


Derivatives designated as cash flow hedges
Propane swap agreements	Revenues	733		(826)
Propane swap agreements	Unregulated propane and natural gas costs	(127)		3,547
Propane swap agreements	Other comprehensive income (loss)	(577)		714
Interest rate swap agreements	Interest expense	65		—
Interest rate swap agreements	Other comprehensive income (loss)	(265)		—


Total		$	(171)	$	3,491

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~~14.~~13. Fair Value of Financial Instruments

GAAP establishes a fair value hierarchy that prioritizes the inputs to valuation methods used to measure fair value. The three levels of the fair value hierarchy are the following:


Fair Value Hierarchy	Description of Fair Value Level	Fair Value Technique Utilized
Level 1	Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities	Investments - equity securities - The fair values of these trading securities are recorded at fair value based on unadjusted quoted prices in active markets for identical securities. Investments - mutual funds and other - The fair values of these investments, comprised of money market and mutual funds, are recorded at fair value based on quoted net asset values of the shares.
Level 2	Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability	Derivative assets and liabilities - The fair value of the propane put/call options, propane and interest rate swap agreements are measured using market transactions for similar assets and liabilities in either the listed or over-the-counter markets.
Level 3	Prices or valuation techniques requiring inputs that are both significant to the fair value measurement and unobservable (i.e. supported by little or no market activity)	Investments - guaranteed income fund - The fair values of these investments are recorded at the contract value, which approximates their fair value.

Financial Assets and Liabilities Measured at Fair Value

The following tables summarize our financial assets and liabilities that are measured at fair value on a recurring basis and the fair value measurements, by level, within the fair value hierarchy as of ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021:~~2022:


				Fair Value Measurements Using:									Fair Value Measurements Using:
As of June 30, 2022		Fair Value		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
As of March 31, 2023										As of March 31, 2023	Fair Value		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
(in thousands)	(in thousands)									(in thousands)
Assets:	Assets:									Assets:
Investments—equity securities	Investments—equity securities	$	24	$	24	$	—	$	—	Investments—equity securities	$	24	$	24	$	—	$	—
Investments—guaranteed income fund	Investments—guaranteed income fund	2,102		—		—		2,102		Investments—guaranteed income fund	1,781		—		—		1,781
Investments—mutual funds and other	Investments—mutual funds and other	8,397		8,397		—		—		Investments—mutual funds and other	9,061		9,061		—		—
Total investments	Total investments	10,523		8,421		—		2,102		Total investments	10,866		9,085		—		1,781
Derivative assets	Derivative assets	6,772		—		6,772		—		Derivative assets	2,146		—		2,146		—
Total assets	Total assets	$	17,295	$	8,421	$	6,772	$	2,102	Total assets	$	13,012	$	9,085	$	2,146	$	1,781
Liabilities:	Liabilities:									Liabilities:
Derivative liabilities	Derivative liabilities	$	427	$	—	$	427	$	—	Derivative liabilities	$	1,434	$	—	$	1,434	$	—

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				Fair Value Measurements Using:									Fair Value Measurements Using:
As of December 31, 2021		Fair Value		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
As of December 31, 2022										As of December 31, 2022	Fair Value		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
(in thousands)	(in thousands)									(in thousands)
Assets:	Assets:									Assets:
Investments—equity securities	Investments—equity securities	$	26	$	26	$	—	$	—	Investments—equity securities	$	24	$	24	$	—	$	—
Investments—guaranteed income fund	Investments—guaranteed income fund	2,036		—		—		2,036		Investments—guaranteed income fund	1,853		—		—		1,853
Investments—mutual funds and other	Investments—mutual funds and other	10,033		10,033		—		—		Investments—mutual funds and other	8,699		8,699		—		—
Total investments	Total investments	12,095		10,059		—		2,036		Total investments	10,576		8,723		—		1,853
Derivative assets	Derivative assets	7,076		—		7,076		—		Derivative assets	3,769		—		3,769		—
Total assets	Total assets	$	19,171	$	10,059	$	7,076	$	2,036	Total assets	$	14,345	$	8,723	$	3,769	$	1,853
Liabilities:	Liabilities:									Liabilities:
Derivative liabilities	Derivative liabilities	$	743	$	—	$	743	$	—	Derivative liabilities	$	2,215	$	—	$	2,215	$	—

The following table sets forth the summary of the changes in the fair value of Level 3 investments for the ~~six~~three months ended ~~June 30, 2022~~March 31, 2023 and ~~2021:~~

2022:


		Six months ended June 30,					Three Months Ended March 31,
		2022		2021			2023		2022
(in thousands)	(in thousands)					(in thousands)
Beginning Balance	Beginning Balance	$	2,036	$	2,156	Beginning Balance	$	1,853	$	2,036
Purchases and adjustments	Purchases and adjustments	132		70		Purchases and adjustments	—		131
Transfers	Transfers	—		—		Transfers	—		—
Distribution	Distribution	(83)		(51)		Distribution	(81)		(71)
Investment income	Investment income	17		16		Investment income	9		8
Ending Balance	Ending Balance	$	2,102	$	2,191	Ending Balance	$	1,781	$	2,104

Investment income from the Level 3 investments is reflected in other ~~expense,~~income, (net) in the condensed consolidated statements of income.

At ~~June 30, 2022,~~March 31, 2023, there were no non-financial assets or liabilities required to be reported at fair value. We review our non-financial assets for impairment at least on an annual basis, as required.

Other Financial Assets and Liabilities

Financial assets with carrying values approximating fair value include cash and cash equivalents and accounts receivable. Financial liabilities with carrying values approximating fair value include accounts payable and other accrued liabilities and short-term debt. The fair value of cash and cash equivalents is measured using the comparable value in the active market and approximates its carrying value (Level 1 measurement). The fair value of short-term debt approximates the carrying value due to its near-term maturities and because interest rates approximate current market rates (Level 32 measurement).

At ~~June 30, 2022,~~March 31, 2023, long-term debt, which includes current maturities but excludes debt issuance costs, had a carrying value of approximately ~~$608.3~~$678.8 million, compared to the estimated fair value of ~~$540.6~~$597.5 million. At December 31, ~~2021,~~2022, long-term debt, which includes the current maturities but excludes debt issuance costs, had a carrying value of approximately ~~$568.8~~$600.8 million, compared to a fair value of approximately ~~$597.2~~$505.0 million. The fair value was calculated using a discounted cash flow methodology that incorporates a market interest rate based on published corporate borrowing rates for debt instruments with similar terms and average maturities, and with adjustments for duration, optionality, and risk profile. The valuation technique used to estimate the fair value of long-term debt would be considered a Level 32 measurement.

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~~15.~~14. Long-Term Debt

Our outstanding long-term debt is shown below:


		June 30,		December 31,			March 31,		December 31,
(in thousands)	(in thousands)	2022		2021		(in thousands)	2023		2022
Uncollateralized senior notes:	Uncollateralized senior notes:					Uncollateralized senior notes:
5.93% note, due October 31, 2023	5.93% note, due October 31, 2023	$	4,500	$	6,000	5.93% note, due October 31, 2023	$	3,000	$	3,000
5.68% note, due June 30, 2026	5.68% note, due June 30, 2026	11,600		14,500		5.68% note, due June 30, 2026	11,600		11,600
6.43% note, due May 2, 2028	6.43% note, due May 2, 2028	4,200		4,900		6.43% note, due May 2, 2028	4,200		4,200
3.73% note, due December 16, 2028	3.73% note, due December 16, 2028	14,000		14,000		3.73% note, due December 16, 2028	12,000		12,000
3.88% note, due May 15, 2029	3.88% note, due May 15, 2029	35,000		40,000		3.88% note, due May 15, 2029	35,000		35,000
3.25% note, due April 30, 2032	3.25% note, due April 30, 2032	70,000		70,000		3.25% note, due April 30, 2032	64,750		66,500
3.48% note, due May 31, 2038	3.48% note, due May 31, 2038	50,000		50,000		3.48% note, due May 31, 2038	50,000		50,000
3.58% note, due November 30, 2038	3.58% note, due November 30, 2038	50,000		50,000		3.58% note, due November 30, 2038	50,000		50,000
3.98% note, due August 20, 2039	3.98% note, due August 20, 2039	100,000		100,000		3.98% note, due August 20, 2039	100,000		100,000
2.98% note, due December 20, 2034	2.98% note, due December 20, 2034	70,000		70,000		2.98% note, due December 20, 2034	70,000		70,000
3.00% note, due July 15, 2035	3.00% note, due July 15, 2035	50,000		50,000		3.00% note, due July 15, 2035	50,000		50,000
2.96% note, due August 15, 2035	2.96% note, due August 15, 2035	40,000		40,000		2.96% note, due August 15, 2035	40,000		40,000
2.49% notes Due January 25, 2037	2.49% notes Due January 25, 2037	50,000		50,000		2.49% notes Due January 25, 2037	50,000		50,000
2.95% notes Due March 15, 2042	2.95% notes Due March 15, 2042	50,000		—		2.95% notes Due March 15, 2042	50,000		50,000
5.43% notes Due March 14, 2038						5.43% notes Due March 14, 2038	80,000		—
Equipment security note	Equipment security note					Equipment security note
2.46% note, due September 24, 2031	2.46% note, due September 24, 2031	8,950		9,378		2.46% note, due September 24, 2031	8,298		8,517
Less: debt issuance costs	Less: debt issuance costs	(973)		(913)		Less: debt issuance costs	(1,075)		(946)
Total long-term debt	Total long-term debt	607,277		567,865		Total long-term debt	677,773		599,871
Less: current maturities	Less: current maturities	(21,472)		(17,962)		Less: current maturities	(21,489)		(21,483)
Total long-term debt, net of current maturities	Total long-term debt, net of current maturities	$	585,805	$	549,903	Total long-term debt, net of current maturities	$	656,284	$	578,388

Note Purchase ~~Agreement~~Agreements

On March 15, 2022 we issued 2.95 percent Senior Notes due March 15, 2042 to MetLife in the aggregate principal amount of ~~$50~~$50.0 million. We used the proceeds received from the issuances of the Senior Notes to reduce short-term borrowings under the Revolver and to fund capital expenditures. These Senior Notes have similar covenants and default provisions as our other Senior Notes, and have an annual principal payment beginning in the eleventh year after the issuance.

~~Equipment Security Note~~

On ~~September 24, 2021,~~March 14, 2023 we ~~entered into an Equipment Financing Agreement with Banc~~issued 5.43 percent Senior Notes due March 14, 2038 in the aggregate principal amount of ~~America Leasing & Capital, LLC to issue $9.6~~$80.0 million ~~in sustainable financing to finance~~and used the ~~purchase of equipment by our subsidiary, Marlin Gas Services. The equipment security note bears a 2.46 percent interest rate and has a term of ten years. Under~~proceeds received from the ~~terms~~issuances of the ~~agreement, we granted a security interest~~Senior Notes to reduce short-term borrowings under our Revolver credit facility and to fund capital expenditures. These Senior Notes have similar covenants and default provisions as our other Senior Notes, and have an annual principal payment beginning in the ~~equipment to~~sixth year after the ~~lender, to serve as collateral.~~issuance.

Shelf Agreements

We have entered into Shelf Agreements with Prudential and MetLife, whom are under no obligation to purchase any unsecured debt. In February 2023, we amended our Shelf Agreements with Prudential and MetLife. The amended agreements expand the total borrowing capacity and extend the term of the agreements for an additional three years from the effective dates. The following table summarizes the current available capacity under our Shelf Agreements at ~~June 30, 2022:~~March 31, 2023:

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(in thousands)	(in thousands)	Total Borrowing Capacity		Less: Amount of Debt Issued		Less: Unfunded Commitments		Remaining Borrowing Capacity		(in thousands)	Total Borrowing Capacity		Less: Amount of Debt Issued		Less: Unfunded Commitments		Remaining Borrowing Capacity
Shelf Agreement
Shelf Agreements (1)										Shelf Agreements (1)
Prudential Shelf Agreement ~~(1)~~	Prudential Shelf Agreement ~~(1)~~	$	370,000	$	(220,000)	$	—	$	150,000	Prudential Shelf Agreement ~~(1)~~	$	405,000	$	(300,000)	$	—	$	105,000
MetLife Shelf Agreement ~~(1)~~	MetLife Shelf Agreement ~~(1)~~	150,000		(50,000)		—		100,000		MetLife Shelf Agreement ~~(1)~~	200,000		(50,000)		—		150,000

Total Shelf Agreements as of June 30, 2022		$	520,000	$	(270,000)	$	—	$	250,000
Total Shelf Agreements as of March 31, 2023										Total Shelf Agreements as of March 31, 2023	$	605,000	$	(350,000)	$	—	$	255,000

(1) The Prudential and MetLife Shelf Agreements both expire in ~~April 2023 and May 2023, respectively.~~February 2026.

The Uncollateralized Senior ~~Notes, Shelf Agreements or Shelf~~ Notes set forth certain business covenants to which we are subject when any note is outstanding, including covenants that limit or restrict our ability, and the ability of our subsidiaries, to incur indebtedness, or place or permit liens and encumbrances on any of our property or the property of our subsidiaries.

~~16.~~15. Short-Term Borrowings

We are authorized by our Board of Directors to borrow up to $400.0 million of short-term debt, as required. At ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, we had ~~$137.0~~$94.1 million and ~~$221.6~~$202.2 million, respectively, of short-term borrowings outstanding at a weighted average interest rate of ~~2.38~~5.17 percent and ~~0.83~~5.04 percent, respectively.

In August ~~2021,~~2022, we amended ~~and restated~~both tranches of our Revolver, ~~into~~which now bear interest using SOFR as the benchmark interest rate, plus a ~~multi-tranche facility totaling $400.0~~10-basis point SOFR adjustment, in lieu of LIBOR which is being retired by financial institutions. In addition, the 364-day tranche was extended for the current year, expiring in August 2023. As part of these amendments, the parties agreed to eliminate the previous covenant capping the aggregate investments limit at $150.0 million ~~with multiple participating lenders. The two tranches of~~where we maintain an ownership interest less than 50 percent. Additionally the ~~Revolver consist of a $200.0 million~~ 364-day short-term debt tranche and a $200.0 million five-year tranche, both of which have three (3) one-year extension options, which can be authorized by our Chief Financial Officer. We are eligible to establish the repayment term for individual borrowings under the five year tranche of the ~~Revolver and~~facility now offers a reduced interest margin similar to the ~~extent that an individual loan~~five-year tranche for amounts borrowed in connection with new sustainable investments. All other terms and conditions remain unchanged. Borrowings outstanding under the ~~Revolver exceeded 12 months,~~sustainable investment sublimit of the ~~outstanding balance would be classified as a component of long-term debt.~~364-day tranche amounted to $9.4 million at March 31, 2023.

The availability of funds under the Revolver is subject to conditions specified in the credit agreement, all of which we currently satisfy. These conditions include our compliance with financial covenants and the continued accuracy of representations and warranties contained in the Revolver's loan documents. We are required by the financial covenants in the Revolver to maintain, at the end of each fiscal year, a funded indebtedness ratio of no greater than 65 percent. As of ~~June 30, 2022,~~March 31, 2023, we are in compliance with this covenant.

The 364-day tranche of the Revolver expires in August ~~2022~~2023 and the five-year tranche expires in August 2026, both of which are available to fund ~~for~~ our short-term cash needs to meet seasonal working capital requirements and to temporarily fund portions of our capital expenditures. Borrowings under both tranches of the Revolver are subject to a pricing grid, including the commitment fee and the interest rate ~~charged. Our pricing is adjusted each quarter~~charged based upon aour total indebtedness to total capitalization ~~ratio.~~ratio for the prior quarter. As of ~~June 30, 2022,~~March 31, 2023, the pricing under the 364-day tranche of the Revolver ~~does not include~~included an unused commitment fee of 9 basis points and maintains an interest rate of ~~0.70 percent~~70 basis points over ~~LIBOR.~~SOFR plus a 10 basis point SOFR adjustment. As of ~~June 30, 2022,~~March 31, 2023, the pricing under the five-year tranche of the Revolver included an unused commitment fee of ~~0.09 percent~~9 basis points and an interest rate of ~~0.95 percent~~95 basis points over ~~LIBOR.~~

We are currently in discussions with the various lending institutions regarding the renewal of the 364-day tranche. At that time, the reference interest rate for the 364-day and five-year tranche will transition from LIBOR which is being retired by financial institutions to the Standard Overnight Financing Rate ("SOFR"). We do not expect this transition to haveSOFR plus a ~~material impact on our financial condition.~~10 basis point SOFR adjustment.

Our total available credit under the Revolver at ~~June 30, 2022~~March 31, 2023 was ~~$257.7~~$300.1 million. As of ~~June 30, 2022,~~March 31, 2023, we had issued ~~$5.3~~$5.8 million in letters of credit to various counterparties under the ~~syndicated Revolvers.~~Revolver. These letters of credit are not included in the outstanding short-term borrowings and we do not anticipate that they will be drawn upon by the counterparties. The letters of credit reduce the available borrowings under ~~our syndicated~~the Revolver.

~~In the fourth quarter of 2020, we entered into two $30.0 million~~For additional information on interest rate swaps with a notional amount of $60.0 million through September and December 2021 at a pricing of 0.205 and 0.20 percent, respectively. In February 2021, we entered into an additional interest rate swap with a notional amount of $40.0 million through December 2021 with pricing of 0.17 percent. Ourrelated to our short-term borrowing is based on the 30-day LIBOR rate. At December 31, 2021, all of our interest rate swaps had expired and we have not entered into any new derivative contracts associated with our outstanding short-term borrowings.borrowings, see Note 12, Derivative Instruments.

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~~17.~~16. Leases

We have entered into lease arrangements for office space, land, equipment, pipeline facilities and warehouses. These lease arrangements enable us to better conduct business operations in the regions in which we operate. Office space is leased to provide adequate workspace for our employees in several locations throughout our service territories. We lease land at various locations throughout our service territories to enable us to inject natural gas into underground storage and distribution systems, for bulk storage capacity, for our propane operations and for storage of equipment used in repairs and maintenance of our infrastructure. We lease natural gas compressors to ensure timely and reliable transportation of natural gas to our customers. Additionally, we lease a pipeline to deliver natural gas to an industrial customer in Polk County, Florida. We also lease warehouses to store equipment and materials used in repairs and maintenance for our businesses.

Some of our leases are subject to annual changes in the Consumer Price Index (“CPI”). While lease liabilities are not re-measured as a result of changes to the CPI, changes to the CPI are treated as variable lease payments and recognized in the period in which the obligation for those payments was incurred. A 100-basis-point increase in CPI would not have resulted in material additional annual lease costs. Most of our leases include options to renew, with renewal terms that can extend the lease term from one to 25 years or more. The exercise of lease renewal options is at our sole discretion. The amounts disclosed in our consolidated balance sheet at ~~June 30, 2022,~~March 31, 2023, pertaining to the right-of-use assets and lease liabilities, are measured based on our current expectations of exercising our available renewal options. Our existing leases are not subject to any restrictions or covenants that would preclude our ability to pay dividends, obtain financing or enter into additional leases. As of ~~June 30, 2022,~~March 31, 2023, we have not entered into any leases, which have not yet commenced, that would entitle us to significant rights or create additional obligations. The following table presents information related to our total lease cost included in our consolidated statements of income:


			Three Months Ended		Six Months Ended				Three Months Ended
			June 30,		June 30,				March 31,
( in thousands)	( in thousands)	Classification	2022	2021	2022	2021	( in thousands)	Classification	2023	2022
Operating lease cost (1)	Operating lease cost (1)	Operations expense	$726	$515	$1,377	$1,038	Operating lease cost (1)	Operations expense	$788	$651

(1) Includes short-term leases and variable lease costs, which are immaterial.

The following table presents the balance and classifications of our right of use assets and lease liabilities included in our condensed consolidated balance sheet at ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021:~~2022:


(in thousands)	(in thousands)	Balance sheet classification	June 30, 2022		December 31, 2021		(in thousands)	Balance sheet classification	March 31, 2023		December 31, 2022
Assets	Assets						Assets
Operating lease assets	Operating lease assets	Operating lease right-of-use assets	$	15,767	$	10,139	Operating lease assets	Operating lease right-of-use assets	$	14,272	$	14,421
Liabilities	Liabilities						Liabilities
Current	Current						Current
Operating lease liabilities	Operating lease liabilities	Other accrued liabilities	$	2,501	$	1,996	Operating lease liabilities	Other accrued liabilities	$	2,562	$	2,552
Noncurrent	Noncurrent						Noncurrent
Operating lease liabilities	Operating lease liabilities	Operating lease - liabilities	13,807		8,571		Operating lease liabilities	Operating lease - liabilities	12,110		12,392
Total lease liabilities	Total lease liabilities		$	16,308	$	10,567	Total lease liabilities		$	14,672	$	14,944

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The following table presents our weighted-average remaining lease terms and weighted-average discount rates for our operating ~~and financing~~ leases at ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021:~~2022:


		June 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022
Weighted-average remaining lease term (in years)	Weighted-average remaining lease term (in years)					Weighted-average remaining lease term (in years)
Operating leases	Operating leases	8.32		8.10		Operating leases	8.40		8.54

Weighted-average discount rate	Weighted-average discount rate					Weighted-average discount rate
Operating leases	Operating leases	3.3	%	3.6	%	Operating leases	3.5	%	3.4	%

The following table presents additional information related to cash paid for amounts included in the measurement of lease liabilities included in our condensed consolidated statements of cash flows as of ~~June 30, 2022~~March 31, 2023 and ~~2021:~~2022:


		Six Months Ended					Three Months Ended
		June 30,					March 31,
(in thousands)	(in thousands)	2022		2021		(in thousands)	2023		2022
Operating cash flows from operating leases	Operating cash flows from operating leases	$	1,428	$	936	Operating cash flows from operating leases	$	722	$	609

The following table presents the future undiscounted maturities of our operating and financing leases at ~~June 30, 2022~~March 31, 2023 and for each of the next five years and thereafter:


(in thousands)	(in thousands)	Operating Leases (1)		(in thousands)	Operating Leases (1)
Remainder of 2022		$	1,392
2023		2,844
Remainder of 2023				Remainder of 2023	$	2,296
2024	2024	2,629		2024	2,623
2025	2025	2,260		2025	2,236
2026	2026	1,746		2026	1,725
2027	2027	1,501		2027	1,571
2028				2028	1,192
Thereafter	Thereafter	5,994		Thereafter	5,243
Total lease payments	Total lease payments	18,366		Total lease payments	16,886
Less: Interest	Less: Interest	(2,058)		Less: Interest	(2,214)
Present value of lease liabilities	Present value of lease liabilities	$	16,308	Present value of lease liabilities	$	14,672

(1) Operating lease payments include $2.1 million related to options to extend lease terms that are reasonably certain of being exercised.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Management’s Discussion and Analysis of Financial Condition and Results of Operations is designed to provide a reader of the financial statements with a narrative report on our financial condition, results of operations and liquidity. This discussion and analysis should be read in conjunction with the attached unaudited condensed consolidated financial statements and notes thereto and our Annual Report on Form 10-K for the year ended December 31, ~~2021,~~2022, including the audited consolidated financial statements and notes thereto.

Safe Harbor for Forward-Looking Statements

We make statements in this Quarterly Report on Form 10-Q (this ~~" Quarterly~~"Quarterly Report") that do not directly or exclusively relate to historical facts. Such statements are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. One can typically identify forward-looking statements by the use of forward-looking words, such as “project,” “believe,” “expect,” “anticipate,” “intend,” “plan,” “estimate,” “continue,” “potential,” “forecast” or other similar words, or future or conditional verbs such as “may,” “will,” “should,” “would” or “could.” These statements represent our intentions, plans, expectations, assumptions and beliefs about future financial performance, business strategy, projected plans and objectives of the Company. Forward-looking statements speak only as of the date they are made or as of the date indicated and we do not undertake any obligation to update forward-looking statements as a result of new information, future events or otherwise. These statements are subject to many risks and uncertainties. In addition to the risk factors described under Item 1A, Risk Factors in our ~~2021~~2022 Annual Report on Form 10-K, the following important factors, among others, could cause actual future results to differ materially from those expressed in the forward-looking statements:

•state and federal legislative and regulatory initiatives that affect cost and investment recovery, have an impact on rate structures, and affect the speed and the degree to which competition enters the electric and natural gas industries;

•the outcomes of regulatory, environmental and legal matters, including whether pending matters are resolved within current estimates and whether the related costs are adequately covered by insurance or recoverable in rates;

•the impact of climate change, including the impact of greenhouse gas emissions or other legislation or regulations intended to address climate change;

•the impact of significant changes to current tax regulations and rates;

•the timing of certification authorizations associated with new capital projects and the ability to construct facilities at or below estimated costs;

•changes in environmental and other laws and regulations to which we are subject and environmental conditions of property that we now, or may in the future, own or operate;

•possible increased federal, state and local regulation of the safety of our operations;

•the availability and reliability of adequate technology, including our ability to adapt to technological advances, effectively implement new technologies and manage the related costs;

•the inherent hazards and risks involved in transporting and distributing natural gas, electricity and propane;

•the economy in our service territories or markets, the nation, and worldwide, including the impact of economic conditions (which we do not control) on demand for natural gas, electricity, propane or other fuels;

•risks related to cyber-attacks or cyber-terrorism that could disrupt our business operations or result in failure of information technology systems or result in the loss or exposure of confidential or sensitive customer, employee or Company information;

•adverse weather conditions, including the effects of hurricanes, ice storms and other damaging weather events;

•customers' preferred energy sources;

•industrial, commercial and residential growth or contraction in our markets or service territories;

•the effect of competition on our businesses from other energy suppliers and alternative forms of energy;

•the timing and extent of changes in commodity prices and interest rates;

•the effect of spot, forward and future market prices on our various energy businesses;

•the extent of our success in connecting natural gas and electric supplies to our transmission systems, establishing and maintaining key supply sources, and expanding natural gas and electric markets;

•the creditworthiness of counterparties with which we are engaged in transactions;

•the capital-intensive nature of our regulated energy businesses;

•our ability to access the credit and capital markets to execute our business strategy, including our ability to obtain financing on favorable terms, which can be affected by various factors, including credit ratings and general economic conditions;

•the ability to successfully execute, manage and integrate a merger, acquisition or divestiture of assets or businesses and the related regulatory or other conditions associated with the merger, acquisition or divestiture;

•the impact on our costs and funding obligations, under our pension and other post-retirement benefit plans, of potential downturns in the financial markets, lower discount rates, and costs associated with health care legislation and regulation;

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•the ability to continue to hire, train and retain appropriately qualified personnel;

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•the availability of, and competition for, qualified personnel supporting our natural gas, electricity and propane businesses;

•the effect of accounting pronouncements issued periodically by accounting standard-setting bodies; and

•the impacts associated with ~~the outbreak of~~ a pandemic, including the duration and scope of the pandemic the corresponding impact on our supply chains, our personnel, our contract counterparties, general economic conditions and growth, the financial markets and any costs to comply with governmental mandates.

Introduction

We are an energy delivery company engaged in the distribution of natural gas, electricity and propane; the transmission of natural gas; the generation of electricity and steam, and in providing related services to our customers.

Our strategy is focused on growing earnings from a stable regulated energy delivery foundation and investing in related businesses and services that provide opportunities for returns greater than traditional utility returns. We seek to identify and develop opportunities across the energy value chain, with emphasis on midstream and downstream investments that are accretive to earnings per share, consistent with our long-term growth strategy and create opportunities to continue our record of top tier returns on equity relative to our peer group.Our growth strategy includes the continued investment and expansion of our regulated operations that provide a stable base of earnings, as well as investments in other related non-regulated businesses and services including sustainable energy initiatives. By investing in these related business and services, we create opportunities to sustain our track record of higher returns, as compared to a traditional utility.


Currently, our growth strategy is focused on the following platforms, including: •Optimizing the earnings growth in our existing businesses, which includes organic growth, territory expansions, and new products and services as well as increased opportunities to transform the Company with a focus on people, process, technology and organizational structure. •Identification and pursuit of additional pipeline expansions, including new interstate and intrastate transmission projects. •Growth of Marlin Gas Services’ CNG transport business and expansion into LNG and RNG transport services as well as methane capture. •Identifying and undertaking additional strategic propane acquisitions that provide a larger foundation in current markets and expand our brand and presence into new strategic growth markets. •Pursuit of growth opportunities that enable us to utilize our integrated set of energy delivery businesses to participate in sustainable energy opportunities.

Earnings per share information is presented on a diluted basis, unless otherwise noted.

The following discussions and those later in the document on operating income and segment results include the use of the term Adjusted Gross Margin which is a non-GAAP measure throughout our discussion on operating results. Adjusted Gross Margin is calculated by deducting the purchased cost of natural gas, propane and electricity and the cost of labor spent on direct revenue-producing activities from operating revenues. The costs included in Adjusted Gross Margin exclude depreciation and amortization and certain costs presented in operations and maintenance expenses in accordance with regulatory requirements. Adjusted Gross Margin should not be considered an alternative to Gross Margin under U.S. GAAP which is defined as the excess of sales over cost of goods sold. We believe that Adjusted Gross Margin, although a non-GAAP measure, is useful and meaningful to investors as a basis for making investment decisions. It provides investors with information that demonstrates the profitability achieved by us under our allowed rates for regulated energy operations and under our competitive pricing structures for our unregulated energy operations. Our management uses Adjusted Gross Margin as one of the financial measures in assessing our business units’ performance. Other companies may calculate Adjusted Gross Margin in a different manner.

The below tables reconcile Gross Margin as defined under GAAP to our non-GAAP measure of Adjusted Gross Margin for the three ~~and six~~ months ended ~~June 30, 2022~~March 31, 2023 and ~~2021:~~2022:

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		For the Three Months Ended June 30, 2022									For the Three Months Ended March 31, 2023
(in thousands)	(in thousands)	Regulated Energy		Unregulated Energy		Other and Eliminations		Total		(in thousands)	Regulated Energy		Unregulated Energy		Other and Eliminations		Total
Operating Revenues	Operating Revenues	$	92,193	$	53,463	$	(6,186)	$	139,470	Operating Revenues	$	142,270	$	83,165	$	(7,306)	$	218,129
Cost of Sales:	Cost of Sales:									Cost of Sales:
Natural gas, propane and electric costs	Natural gas, propane and electric costs	(21,573)		(31,701)		6,158		(47,116)		Natural gas, propane and electric costs	(55,288)		(40,571)		7,270		(88,589)
Depreciation & amortization	Depreciation & amortization	(13,140)		(4,074)		(2)		(17,216)		Depreciation & amortization	(12,952)		(4,234)		3		(17,183)
Operations & maintenance expense (1)	Operations & maintenance expense (1)	(8,324)		(6,699)		(521)		(15,544)		Operations & maintenance expense (1)	(9,287)		(8,476)		5		(17,758)
Gross Margin (GAAP)	Gross Margin (GAAP)	49,156		10,989		(551)		59,594		Gross Margin (GAAP)	64,743		29,884		(28)		94,599
Operations & maintenance expense (1)	Operations & maintenance expense (1)	8,324		6,699		521		15,544		Operations & maintenance expense (1)	9,287		8,476		(5)		17,758
Depreciation & amortization	Depreciation & amortization	13,140		4,074		2		17,216		Depreciation & amortization	12,952		4,234		(3)		17,183
Adjusted Gross Margin (Non-GAAP)	Adjusted Gross Margin (Non-GAAP)	$	70,620	$	21,762	$	(28)	$	92,354	Adjusted Gross Margin (Non-GAAP)	$	86,982	$	42,594	$	(36)	$	129,540

For the Three Months Ended June 30, 2021
(in thousands) Regulated Energy Unregulated Energy Other and Eliminations Total
Operating Revenues $ 80,910 $ 34,773 $ (4,601) $ 111,082
Cost of Sales:
Natural gas, propane and electric costs (14,447) (16,821) 4,567 (26,701)
Depreciation & amortization (11,830) (3,456) (12) (15,298)
Operations & maintenance expense (1)
(8,320) (5,807) 67 (14,060)
Gross Margin (GAAP) 46,313 8,689 21 55,023
Operations & maintenance expense (1)
8,320 5,807 (67) 14,060
Depreciation & amortization 11,830 3,456 12 15,298
Adjusted Gross Margin (Non-GAAP) $ 66,463 $ 17,952 $ (34) $ 84,381

For the Six Months Ended June 30, 2022
(in thousands) Regulated Energy Unregulated Energy Other and Eliminations Total
Operating Revenues $ 220,084 $ 154,754 $ (12,488) $ 362,350
Cost of Sales:
Natural gas, propane and electric costs (67,016) (89,708) 12,427 (144,297)
Depreciation & amortization (26,225) (7,954) (14) (34,193)
Operations & maintenance expense (1)
(16,485) (13,756) (944) (31,185)
Gross Margin (GAAP) 110,358 43,336 (1,019) 152,675
Operations & maintenance expense (1)
16,485 13,756 944 31,185
Depreciation & amortization 26,225 7,954 14 34,193
Adjusted Gross Margin (Non-GAAP) $ 153,068 $ 65,046 $ (61) $ 218,053

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		For the Six Months Ended June 30, 2021									For the Three Months Ended March 31, 2022
(in thousands)	(in thousands)	Regulated Energy		Unregulated Energy		Other and Eliminations		Total		(in thousands)	Regulated Energy		Unregulated Energy		Other and Eliminations		Total
Operating Revenues	Operating Revenues	$	202,107	$	109,532	$	(9,371)	$	302,268	Operating Revenues	$	127,891	$	101,292	$	(6,303)	$	222,880
Cost of Sales:	Cost of Sales:									Cost of Sales:
Natural gas, propane and electric costs	Natural gas, propane and electric costs	(57,491)		(52,804)		9,298		(100,997)		Natural gas, propane and electric costs	(45,442)		(58,008)		6,270		(97,180)
Depreciation & amortization	Depreciation & amortization	(23,860)		(6,780)		(22)		(30,662)		Depreciation & amortization	(13,086)		(3,881)		(10)		(16,977)
Operations & maintenance expense (1)	Operations & maintenance expense (1)	(16,585)		(12,120)		292		(28,413)		Operations & maintenance expense (1)	(8,176)		(7,063)		(401)		(15,640)
Gross Margin (GAAP)	Gross Margin (GAAP)	104,171		37,828		197		142,196		Gross Margin (GAAP)	61,187		32,340		(444)		93,083
Operations & maintenance expense (1)	Operations & maintenance expense (1)	16,585		12,120		(292)		28,413		Operations & maintenance expense (1)	8,176		7,063		401		15,640
Depreciation & amortization	Depreciation & amortization	23,860		6,780		22		30,662		Depreciation & amortization	13,086		3,881		10		16,977
Adjusted Gross Margin (Non-GAAP)	Adjusted Gross Margin (Non-GAAP)	$	144,616	$	56,728	$	(73)	$	201,271	Adjusted Gross Margin (Non-GAAP)	$	82,449	$	43,284	$	(33)	$	125,700

(1)Operations & maintenance expenses within the Consolidated Statements of Income are presented in accordance with regulatory requirements and to provide comparability within the industry. Operations & maintenance expenses which are deemed to be directly attributable to revenue producing activities have been separately presented above in order to calculate Gross Margin as defined under U.S. GAAP.

~~2022~~2023 to ~~2021~~2022 Gross Margin (GAAP) Variance – Regulated Energy

Gross Margin (GAAP) for the Regulated Energy segment for the quarter ended ~~June 30, 2022~~March 31, 2023 was ~~$49.2~~$64.7 million, an increase of ~~$2.8~~$3.6 million, or ~~6.1~~5.8 percent, compared to the same period in ~~2021.~~2022. Higher gross margin ~~reflects continued pipeline expansions~~was driven by ~~Eastern Shore, Peninsula Pipeline, and Aspire Energy Express through~~ contributions from ~~the new Guernsey pipeline,~~our Florida natural gas base rate proceeding, organic growth in the natural gas distribution businesses, incremental contributions associated with regulated infrastructure programs, and ~~operating results from the 2021 Escambia Meter acquisition.~~continued pipeline expansion projects. These increases were partially offset by changes in customer consumption due to significantly warmer weather during the first quarter of 2023, higher depreciation and amortization related to recent capital ~~investments.~~

Gross Margin (GAAP) for the Regulated Energy segment for the six months ended June 30, 2022 was $110.4 million, an increase of $6.2 million, or 5.9 percent, compared to the same period in 2021. Higher gross margin reflects continued pipeline expansions by Eastern Shore, Peninsula Pipeline,investments and ~~Aspire Energy Express through contributions from the new Guernsey pipeline, organic growth in the natural gas distribution businesses~~higher facilities, maintenance and ~~operating results from the 2021 Escambia Meter acquisition. These increases were partially offset by higher depreciation and amortization related to recent capital investments~~

~~as well as, increased payroll, benefits and other employee related~~outside services costs.

~~2022~~2023 to ~~2021~~2022 Gross Margin (GAAP) Variance – Unregulated Energy

Gross Margin (GAAP) for the Unregulated Energy segment for the quarter ended ~~June 30, 2022~~March 31, 2023 was ~~$11.0~~$29.9 million, ~~an increase of $2.3~~compared to $32.3 million ~~or 26.5 percent, compared to~~for the same period in ~~2021. Higher~~2022. Primary drivers of the change in gross margin ~~is a result~~included changes in customer consumption due to significantly warmer weather during the first quarter of ~~increased propane margins per gallon and service fees, along with improved performance in our other unregulated businesses. These increases were partially offset by~~2023, higher depreciation, amortization and property taxes related to recent capital investments and ~~acquisitions and higher vehicle expenses primarily driven by increased fuel costs.~~

Gross Margin (GAAP) for the Unregulated Energy segment for the six months ended June 30, 2022 was $43.3 million, an increase of $5.5 million, or 14.6 percent, compared to the same period in 2021. Higher gross margin is a result of contributions from the propane acquisition of Diversified Energy completed in 2021, increased propane margins per gallon and service fees, along with increased demand for CNG services and higher rates for Aspire Energy. These increases were partially offset by higher depreciation, amortization and property taxes related to recent capital investments and acquisitions, increased payroll, benefits and employee related ~~costs and higher vehicle expenses primarily driven~~expenses. These factors were partially offset by increased ~~fuel costs.~~propane margins and fees and increased demand for our CNG, RNG and LNG services.

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Results of Operations for the Three ~~and Six~~ Months Ended ~~June 30, 2022~~March 31, 2023

Overview

Chesapeake Utilities is a Delaware corporation formed in 1947. We are a diversified energy company engaged, through our operating divisions and subsidiaries, in regulated energy, unregulated energy and other businesses. We operate primarily on the east coast of the United States and provide natural gas distribution and transmission; electric distribution and generation; propane gas distribution; mobile compressed natural gas services; steam generation; and other energy-related services.

As of June 30, 2022, these restrictions have predominantly been lifted as vaccines have become widely available in the United States. Previously existing states of emergency in all of our service territories expired during the second and third quarters of 2021, eliminating a majority of restrictions initially implemented to slow the spread of the virus.The expiration of the states of emergency along with the settlement of our limited proceeding in Florida, has concluded our ability to defer incremental pandemic related costs for consideration through the applicable regulatory process. We have adjusted our operating practices accordingly to ensure the safety of our operations and will take the necessary actions to comply with the CDC, and the Occupational Safety and Health Administration, as new developments occur.

~~Environmental, Social and Governance~~Sustainability Initiatives

~~ESG initiatives are at the core of our well-established culture, guiding our strategy and informing our ongoing business decisions.~~ In February 2022, ~~Chesapeake Utilities~~we published ~~its~~our inaugural sustainability ~~report. In~~report, and are actively working on an updated report to be published in 2023. We continue to remain steadfast in regard to our commitments, including the ~~report, we outline our ESG commitments:~~following:

•~~Chesapeake Utilities will be~~Maintaining a ~~leader~~leading role in the ~~transition~~journey to a lower carbon ~~future.~~future in our service areas.

•~~We will continue~~Continuing to promote a diverse and inclusive workplace and further the sustainability of the communities we serve.

•~~Our~~Operating our businesses ~~will be operated~~ with integrity and the highest ethical standards.

These commitments guide our mission to deliver energy that makes life better for the people and communities we serve. They impact every aspect of ~~our company and~~ the relationships we have with our stakeholders. We encourage our investors to review the report, which can be accessed on our website, and welcome feedback as we continue to enhance our ~~ESG~~sustainability disclosures.

~~Some of our most recent ESG advancements include the following:~~

~~Environmental:~~

•We were joined by the Governor of the state of Maryland to celebrate the public-private partnership resulting from the extension of natural gas transmission and distribution pipeline into Somerset County, MD, enabling conversion for two state-funded entities to natural gas, improving their facilities’ environmental profile.

•~~In our Florida operating area, we participated in an event that showcases model homes filled with the latest designs and technologies for energy conservation.~~

~~Social:~~

•We announced Sharon Grant's appointment as our new assistant vice president and diversity officer; Ms. Grant will have direct oversight responsibilities for our equity, diversity, and inclusion (EDI) strategy and will collaborate across the organization with the teams responsible for the enterprise-wide environmental, social, and governance plan.

•~~We participated in events and made donations to organizations and fundraising initiatives within our local communities through our Employee Resource Groups and company community giving programs.~~

~~Governance:~~

~~Table of Contents~~

•In July 2022, we announced the appointment of Stephanie N. Gary and Sheree M. Petrone to serve as members of our Board of Directors as part of an ongoing succession planning strategy. that is aligned with our EDI commitments.

•~~We recently joined governance leaders as a member of the Advisory Board for the John L. Weinberg Center for Corporate Governance.~~

•~~We were recognized for the Best Corporate Governance in the U.S. for 2022 by~~ ~~World Finance~~ ~~magazine.~~

Earlier this year, we established our Environmental Sustainability Office ("ESO") and ESG Committee ("ESGC"). The ESO was established to identify and manage emission-reducing projects both internally, as well as those that support our customers’ sustainability goals. The ESGC was established to bring together a cross-functional team of leaders across the organization to identify, assess, execute and advance the Company’s strategic ESG initiatives.

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Operational Highlights

Our net income for the three months ended ~~June 30, 2022~~March 31, 2023 was ~~$17.1~~$36.3 million, or ~~$0.96~~$2.04 per share, compared to ~~$13.8~~$36.9 million, or ~~$0.78~~$2.08 per share, for the same quarter of ~~2021.~~2022. Operating income for the ~~three months ended June 30, 2022 increased by $3.9~~first quarter of 2023 was $54.9 million, ~~or 17.2 percent, over~~which was relatively consistent with the same period in ~~2021. Higher performance~~2022, despite significantly warmer temperatures in our northern service territories in 2023. Adjusted gross margin in the ~~second~~first quarter of ~~2022~~2023 was ~~generated primarily~~positively impacted by contributions from ~~continued pipeline expansion projects,~~our Florida natural gas base rate proceeding, increased propane margins ~~per gallon~~ and fees, organic growth in the our natural gas distribution businesses, increased demand for CNG, RNG and LNG services, incremental contributions associated with regulated infrastructure programs, ~~organic growth~~and continued pipeline expansion projects. These increases in adjusted gross margin were partially offset by reduced consumption experienced during the first quarter of 2023 as a result of unprecedented temperatures in our ~~natural gas distribution businesses, increased customer consumption, and improved performance in our other unregulated businesses.~~northern service territories. We recorded higher depreciation, amortization and property taxes related to ~~recent~~continued capital investments, ~~and~~ higher operating expenses associated primarily with growth ~~initiatives.~~initiatives, and increased payroll, benefits and employee expenses driven by the ongoing competitive labor market. We ~~closely managed~~continued to actively manage our operating ~~expense increases, given anticipated future~~expenses to mitigate ongoing interest and other inflationary expense increases.

Three Months Ended
June 30, Increase
2022 2021 (decrease)
(in thousands except per share)
Adjusted Gross Margin
  Regulated Energy segment $ 70,620 $ 66,463 $ 4,157
  Unregulated Energy segment 21,762 17,952 3,810
Other businesses and eliminations (28) (34) 6
Total Adjusted Gross Margin $ 92,354 $ 84,381 $ 7,973
Operating Income
  Regulated Energy segment $ 25,841 $ 22,760 $ 3,081
  Unregulated Energy segment 560 (465) 1,025
Other businesses and eliminations 68 283 (215)
Total Operating Income 26,469 22,578 3,891
Other income, net 2,584 1,453 1,131
Interest charges 5,825 5,054 771
Income from Before Income Taxes 23,228 18,977 4,251
Income Taxes 6,177 5,164 1,013
Net Income $ 17,051 $ 13,813 $ 3,238
Basic Earnings Per Share of Common Stock $ 0.96 $ 0.79 $ 0.17
Diluted Earnings Per Share of Common Stock $ 0.96 $ 0.78 $ 0.18


	Three Months Ended
	March 31,				Increase
	2023		2022		(Decrease)
(in thousands, except per share data)
Adjusted Gross Margin
Regulated Energy segment	$	86,982	$	82,449	$	4,533
Unregulated Energy segment	42,594		43,284		(690)
Other businesses and eliminations	(36)		(33)		(3)
Total Adjusted Gross Margin	$	129,540	$	125,700	$	3,840

Operating Income
Regulated Energy segment	$	37,625	$	34,681	$	2,944
Unregulated Energy segment	17,245		20,046		(2,801)
Other businesses and eliminations	45		138		(93)
Total Operating Income	54,915		54,865		50
Other income, net	276		913		(637)
Interest charges	7,232		5,339		1,893
Income from Before Income Taxes	47,959		50,439		(2,480)
Income Taxes	11,615		13,506		(1,891)
Net Income	$	36,344	$	36,933	$	(589)






Basic Earnings Per Share of Common Stock	$	2.05	$	2.09	$	(0.04)



Diluted Earnings Per Share of Common Stock	$	2.04	$	2.08	$	(0.04)

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Key variances between the ~~second~~first quarter of ~~2022~~2023 and ~~the second quarter of 2021,~~2022, included:

(in thousands, except per share data) Pre-tax
Income Net
Income Earnings
Per Share
Second Quarter of 2021 Reported Results $ 18,977 $ 13,813 $ 0.78
Adjusting for Unusual Items:
Gain from sales of assets 1,902 1,396 0.08
1,902 1,396 0.08
Increased (Decreased) Adjusted Gross Margins:
Contributions from acquisitions* 1,657 1,216 0.07
Natural gas transmission service expansions* 1,291 948 0.05
Increased propane margins and fees 1,104 810 0.05
Contributions from regulated infrastructure programs * 1,080 793 0.04
Natural gas growth (excluding service expansions) 938 689 0.04
Increased customer consumption - Inclusive of weather 773 567 0.03
Increased margins related to demand for Marlin Gas Services* 547 402 0.02
Higher operating results from Aspire Energy 203 149 0.01
7,593 5,574 0.31
(Increased) Decreased Operating Expenses (Excluding Natural Gas, Propane, and Electric Costs):
Operating expenses from recent acquisitions (2,258) (1,657) (0.09)
Depreciation, amortization and property taxes (1,899) (1,394) (0.08)
Vehicle expenses (407) (299) (0.02)
Customer service related costs (200) (147) (0.01)
Facilities expenses, maintenance costs and outside services 559 410 0.02
Payroll, benefits and other employee-related expenses 343 252 0.01
(3,862) (2,835) (0.17)
Interest charges (771) (566) (0.03)
Net other changes (611) (331) (0.01)
(1,382) (897) (0.04)
Second Quarter of 2022 Reported Results $ 23,228 $ 17,051 $ 0.96


(in thousands, except per share data)	Pre-tax Income		Net Income		Earnings Per Share
First Quarter of 2022 Reported Results	$	50,439	$	36,933	$	2.08

Adjusting for Unusual Items:
One-time benefit associated with reduction in state tax rate	—		1,284		0.07
	—		1,284		0.07

Increased (Decreased) Adjusted Gross Margins:
Customer consumption - primarily resulting from weather	(6,916)		(5,241)		(0.29)
Contribution from rates associated with Florida natural gas base rate proceeding*	4,097		3,104		0.17
Increased propane margins and service fees	3,064		2,322		0.13
Natural gas growth including conversions (excluding service expansions)	1,522		1,153		0.06
Increased margins related to demand for CNG/RNG/LNG services*	1,288		976		0.05
Contributions from regulated infrastructure programs*	798		605		0.03
Natural gas transmission service expansions*	481		365		0.02
Eastern Shore contracted rate adjustments	(320)		(242)		(0.01)
	4,014		3,042		0.16

(Increased) Operating Expenses (Excluding Natural Gas, Propane, and Electric Costs):
Increased payroll, benefits and other employee-related expenses	(1,142)		(866)		(0.05)
Depreciation, amortization and property taxes	(1,125)		(852)		(0.05)
Increased facilities expenses, maintenance costs and outside services	(1,061)		(804)		(0.05)
	(3,328)		(2,522)		(0.15)

Interest charges	(1,893)		(1,435)		(0.08)
Changes in Other income, net	(706)		(535)		(0.03)
Net other changes	(567)		(423)		(0.01)
	(3,166)		(2,393)		(0.12)
First Quarter of 2023 Reported Results	$	47,959	$	36,344	$	2.04

*See the Major Projects and Initiatives ~~tabl~~e.

table.

~~Table of Contents~~

Our net income for the six months ended June 30, 2022 was $54.0 million, or $3.04 per share, compared to $48.3 million, or $2.75 per share, for the same period of 2021. Operating income for the six months ended June 30, 2022 increased by $7.2 million, or 9.7 percent, over the same period in 2021. Higher performance in the first six months of 2022 was generated from propane and natural gas acquisitions completed in 2021, continued pipeline expansion projects, organic growth in our natural gas distribution businesses, incremental contributions associated with regulated infrastructure programs, increased propane margins per gallon and fees and improved performance in our other unregulated businesses. We recorded higher depreciation, amortization and property taxes related to recent capital investments and operating expenses associated primarily with growth initiatives, as well as increased vehicle expenses due to higher fuel costs.

Six Months Ended
June 30, Increase
2022 2021 (decrease)
(in thousands except per share)
Adjusted Gross Margin
  Regulated Energy segment $ 153,068 $ 144,616 $ 8,452
  Unregulated Energy segment 65,046 56,728 8,318
Other businesses and eliminations (61) (73) 12
Total Adjusted Gross Margin $ 218,053 $ 201,271 $ 16,782
Operating Income
  Regulated Energy segment $ 60,539 $ 55,466 $ 5,073
  Unregulated Energy segment 20,613 18,575 2,038
Other businesses and eliminations 182 134 48
Total Operating Income 81,334 74,175 7,159
Other income, net 3,498 1,828 1,670
Interest charges 11,164 10,159 1,005
Income from Before Income Taxes 73,668 65,844 7,824
Income Taxes 19,683 17,565 2,118
Net Income $ 53,985 $ 48,279 $ 5,706
Basic Earnings Per Share of Common Stock $ 3.05 $ 2.76 $ 0.29
Diluted Earnings Per Share of Common Stock $ 3.04 $ 2.75 $ 0.29

~~Table of Contents~~

~~Key variances between the six months ended June 30, 2022 and the six months ended June 30, 2021, included:~~

(in thousands, except per share data) Pre-tax
Income Net
Income Earnings
Per Share
Six Months Ended June 30, 2021 Reported Results $ 65,844 $ 48,279 $ 2.75
Adjusting for Unusual Items:
Gain from sales of assets 1,902 1,394 0.08
1,902 1,394 0.08
Increased (Decreased) Adjusted Gross Margins:
Contributions from acquisitions* 5,882 4,312 0.24
Natural gas transmission service expansions* 2,518 1,846 0.10
Natural gas growth (excluding service expansions) 2,132 1,563 0.09
Contributions from regulated infrastructure programs * 2,004 1,469 0.08
Increased propane margins and fees 1,823 1,336 0.08
Higher operating results from Aspire Energy 1,131 829 0.05
Increased margins related to demand for Marlin Gas Services* 612 448 0.03
Increased customer consumption - Inclusive of weather 337 247 0.01
16,439 12,050 0.68
(Increased) Decreased Operating Expenses (Excluding Natural Gas, Propane, and Electric Costs):
Operating expenses from recent acquisitions (4,708) (3,451) (0.19)
Depreciation, amortization and property tax costs (3,436) (2,519) (0.14)
Vehicle expenses (662) (485) (0.03)
Payroll, benefits and other employee-related expenses (503) (369) (0.02)
Facilities expenses, maintenance costs and outside services 615 451 0.03
(8,694) (6,373) (0.35)
Interest charges (1,004) (736) (0.04)
Net other changes (819) (629) (0.05)
Change in shares outstanding due to 2021 and 2022 equity offerings — — (0.03)
(1,823) (1,365) (0.12)
Six Months Ended June 30, 2022 Reported Results $ 73,668 $ 53,985 $ 3.04

*See the Major Projects and Initiatives table.

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Summary of Key Factors

Recently Completed and Ongoing Major Projects and Initiatives

We constantly pursue and develop additional projects and initiatives to serve existing and new customers, and to further grow our businesses and earnings, with the intention to increase shareholder value. The following table includes the major projects/initiatives recently completed and currently underway. Major projects and initiatives that have generated consistent year-over-year adjusted gross margin contributions are removed from the ~~table. In~~table at the ~~future, we will~~beginning of the next calendar year. Our practice is to add new projects and initiatives to this table once negotiations or details are substantially ~~completed and~~final and/or the associated earnings can be estimated.


		Adjusted Gross Margin															Adjusted Gross Margin
		Three Months Ended				Six Months Ended				Year Ended		Estimate for					Three Months Ended				Year Ended	Estimate for
		June 30,				June 30,				December 31,		Fiscal					March 31,				December 31,	Fiscal
in thousands		2022		2021		2022		2021		2021		2022		2023
(in thousands)																(in thousands)	2023		2022			2022		2023		2024
Pipeline Expansions:	Pipeline Expansions:															Pipeline Expansions:
Western Palm Beach County, Florida Expansion (1)		$	1,307	$	1,172	$	2,615	$	2,340	$	4,729	$	5,227	$	5,227
Del-Mar Energy Pathway (1) (2)		1,728		921		3,450		1,805		4,584		6,980		6,980
Guernsey Power Station	Guernsey Power Station	368		47		631		94		187		1,380		1,486		Guernsey Power Station	$	365	$	263		$	1,377	$	1,486	$	1,482
Southern Expansion	Southern Expansion	—		—		—		—		—		—		586		Southern Expansion	—		—			—		586		2,344
Winter Haven Expansion	Winter Haven Expansion	28		—		61		—		—		401		976		Winter Haven Expansion	139		33			260		576		626
Beachside Pipeline Expansion	Beachside Pipeline Expansion	—		—		—		—		—		—		1,825		Beachside Pipeline Expansion	—		—			—		1,825		2,451
North Ocean City Connector	North Ocean City Connector	—		—		—		—		—		—		400		North Ocean City Connector	—		—			—		—		200
St. Cloud / Twin Lakes Expansion	St. Cloud / Twin Lakes Expansion	—		—		—		—		—		—		584		St. Cloud / Twin Lakes Expansion	—		—			—		268		584
Clean Energy (1)																Clean Energy (1)	247		—			126		1,009		1,009
Wildlight																Wildlight	26		—			—		528		2,000
Lake Wales																Lake Wales	—		—			—		TBD		TBD
Total Pipeline Expansions	Total Pipeline Expansions	3,431		2,140		6,757		4,239		9,500		13,988		18,064		Total Pipeline Expansions	777		296			1,763		6,278		10,696

CNG/RNG/LNG Transportation and Infrastructure	CNG/RNG/LNG Transportation and Infrastructure	2,427		1,708		4,660		3,785		7,566		9,500		10,500		CNG/RNG/LNG Transportation and Infrastructure	3,521		2,233			11,100		12,521		12,348

Acquisitions:
Propane Acquisitions		1,491		—		5,466		—		603		11,300		12,000
Escambia Meter Station		249		83		499		83		583		1,000		1,000
Total Acquisitions		1,740		83		5,965		83		1,186		12,300		13,000

Regulatory Initiatives:	Regulatory Initiatives:															Regulatory Initiatives:
Florida GRIP		4,950		4,181		9,802		8,236		16,995		18,797		19,475
Florida GUARD program																Florida GUARD program	—		—			—		TBD		TBD
Capital Cost Surcharge Programs	Capital Cost Surcharge Programs	497		120		1,014		257		1,199		2,018		1,936		Capital Cost Surcharge Programs	720		517			2,001		2,811		3,558
Elkton Gas STRIDE Plan		66		—		140		—		26		241		354
Florida Rate Case Proceeding(3)		—		—		—		—		—		TBD		TBD
Florida Rate Case Proceeding (2)																Florida Rate Case Proceeding (2)	4,097		—			2,474		16,289		17,153
Electric Storm Protection Plan																Electric Storm Protection Plan	206		—			486		1,663		3,032
Total Regulatory Initiatives	Total Regulatory Initiatives	5,513		4,301		10,956		8,493		18,220		21,056		21,765		Total Regulatory Initiatives	5,023		517			4,961		20,763		23,743

Total	Total	$	13,111	$	8,232	$	28,338	$	16,600	$	36,472	$	56,844	$	63,329	Total	$	9,321	$	3,046		$	17,824	$	39,562	$	46,787

(1) Includes adjusted gross margin generated from interim services.

(2) Includes adjusted gross margin ~~from natural gas distribution services.~~

~~(3)~~ ~~Subject to approval from~~during the ~~Florida PSC.~~first quarter of 2023 comprised of both interim rates and permanent base rates.

Detailed Discussion of Major Projects and Initiatives

Pipeline Expansions

~~West Palm Beach County, Florida Expansion~~

Peninsula Pipeline has constructed four transmission lines to bring additional natural gas to our distribution system in West Palm Beach, Florida. The first phase of this project was placed into service in December 2018 with multiple phases placed into service leading up to the project's final completion in the fourth quarter of 2021. The project generated incremental adjusted gross margin for the three and six months ended June 30, 2022 of $0.1 million and $0.3 million, respectively, compared to 2021. We estimate that the project will generate annual adjusted gross margin of $5.2 million in 2022 and beyond.

~~Table of Contents~~

~~Del-Mar Energy Pathway~~

In December 2019, the FERC issued an order approving the construction of the Del-Mar Energy Pathway project. The project was placed into service in the fourth quarter of 2021. The new facilities: (i) include an additional 14,300 Dts/d of firm service to four customers, (ii) provide additional natural gas transmission pipeline infrastructure in eastern Sussex County, Delaware, and (iii) represent the first extension of Eastern Shore’s pipeline system into Somerset County, Maryland. Including interim services in advance of completion, the project generated additional adjusted gross margin for the three and six months ended June 30, 2022 of $0.8 million and $1.6 million, respectively. The estimated annual adjusted gross margin from this project, including natural gas distribution service in Somerset County, Maryland, is approximately $7.0 million in 2022 and beyond.

Guernsey Power Station

Guernsey Power Station and ~~the Company's~~our affiliate, Aspire Energy Express, ~~entered into~~are engaged in a ~~precedent agreement for~~ firm transportation capacity agreement whereby Guernsey Power Station ~~will construct~~has constructed a power generation facility and Aspire Energy Express ~~will provide~~provides firm natural gas transportation service to this facility. Guernsey Power Station commenced construction of the project in October ~~2019.~~2019, Aspire Energy Express completed construction of the gas transmission facilities in the fourth quarter of ~~2021. This~~2021, and the facility went into service during the first quarter of 2023. The project ~~added $0.3 million and $0.5 million of~~generated additional adjusted gross margin of $0.1 million for the three ~~and six~~ months ended ~~June 30, 2022, respectively,~~March 31, 2023, and is expected to produce adjusted gross margin of approximately ~~$1.4 million in 2022 and~~ $1.5 million in 2023 and beyond.

Table of Contents

Southern Expansion

~~Pending FERC authorization,~~ Eastern Shore plans to install a new natural gas driven compressor skid unit at its existing Bridgeville, Delaware compressor station that will provide 7,300 Dts of incremental firm transportation pipeline capacity. The project obtained FERC approval in December 2022 and is currently estimated to go into service in the fourth quarter of 2023. Eastern Shore expects the Southern Expansion project to generate annual adjusted gross margin of $0.6 million in 2023 and ~~annual adjusted gross margin of~~ $2.3 million in 2024 and thereafter.

Winter Haven Expansion

In May 2021, Peninsula Pipeline filed a petition with the Florida PSC for approval of its Transportation Service Agreement with ~~CFG~~Florida Natural Gas Distribution for an incremental 6,800 Dts/d of firm service in the Winter Haven, Florida area. As part of this agreement, Peninsula Pipeline ~~will construct~~constructed a new interconnect with FGT and a new regulator station for ~~CFG. The~~Florida Natural Gas Distribution. Florida Natural Gas Distribution is using the additional firm service ~~will be used~~ to support new incremental load due to growth in the area, including providing service, most immediately, to a new can manufacturing facility, as well as reliability and operational benefits to ~~CFG’s~~Florida Natural Gas Distribution’s existing distribution system in the area. In connection with Peninsula Pipeline’s new regulator station, ~~CFG is~~Florida Natural Gas Distribution also ~~extending~~extended its distribution system to connect to the new station. ~~We expect this~~This expansion ~~to be~~was placed in service in the third quarter of ~~2022 and expect to generate~~2022. The project generated additional adjusted gross margin of ~~$0.4~~approximately $0.1 million in ~~2022 once complete~~the first quarter and ~~$1.0~~is expected to produce adjusted gross margin of approximately $0.6 million in 2023 and ~~thereafter.~~beyond.

Beachside Pipeline Expansion

In June 2021, Peninsula Pipeline and Florida City Gas 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 ~~will construct~~has constructed approximately 11.3 miles of pipeline from its existing pipeline in the Sebastian, Florida, area east under the Intercoastal Waterway and southward on the barrier island. Construction ~~is underway~~was completed and ~~is expected to be complete~~the project went into service in ~~the second quarter of~~April 2023. We expect this extension to generate additional annual adjusted gross margin of $1.8 million in 2023 and $2.5 million thereafter.

North Ocean City Connector

During the second quarter of 2022, we began construction of an extension of service into North Ocean City, Maryland. Our Delaware natural gas division and Sandpiper ~~plan to install~~are installing approximately 5.7 miles of pipeline across southern Sussex County, Delaware to Fenwick Island, Delaware and Worcester County, Maryland. The project will ~~produce additional capacity to serve new customers and~~ reinforce our existing system in Ocean City, Maryland and allow for incremental growth along the pipeline. Adjusted gross margin in connection with this project is expected to be recognized contingent upon the completion and approval of our next rate case in Maryland. We expect this expansion to generate ~~additional~~ annual adjusted gross margin of ~~$0.4~~$0.2 million beginning in ~~2023 and beyond,~~2024, with additional margin opportunities from incremental growth.

St.Cloud / Twin Lakes Expansion

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 Dt/day of firm service in the St. Cloud, Florida area. As part of this agreement, Peninsula Pipeline will construct a pipeline extension and regulator station for FPU. The extension will be used to support new incremental load due to growth in the area, including providing service, most immediately, to the residential development, Twin Lakes. The expansion will also improve reliability and provide operational benefits to FPU’s existing distribution system in the area, supporting future ~~growth in the area.~~growth. We expect this expansion to be in service in the ~~first~~second quarter of 2023 and generate adjusted gross margin of ~~$0.6~~$0.3 million in 2023 and $0.6 million thereafter.

Clean Energy Expansion

During the fourth quarter of 2022, Clean Energy Fuels ("Clean Energy") and Florida Natural Gas Distribution entered into a precedent agreement for firm transportation services associated with a CNG fueling station Clean Energy is constructing. We plan to install approximately 2.2 miles of main extension in Davenport, Florida to support the filling station. Construction is underway and is expected to be complete in the third quarter of 2023. Our subsidiary, Marlin Gas Services, is providing interim services to Clean Energy during the construction phase of the project. The project generated adjusted gross margin of approximately $0.2 million in the first quarter and is expected to produce adjusted gross margin of approximately $1.0 million in 2023 and beyond.

Wildlight Expansion

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

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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. This project is expected to contribute adjusted gross margin of approximately $0.5 million in 2023 and $2.0 million in 2024 and beyond.

Lake Wales Expansion

In February 2022, Peninsula Pipeline filed a petition with the Florida PSC for approval of its Transportation Service Agreement with our Florida natural gas division, FPU for an additional 9,000 Dt/d of firm service in the Lake Wales, Florida area. Approval of the agreement by the Florida PSC will enable Peninsula Pipeline to begin executing on the acquisition of an existing pipeline in the area that will be utilized to serve our current natural gas customers as well as new customers. The Florida PSC approved the petition in April 2023.

CNG/RNG/LNG Transportation and Infrastructure

We have made a commitment to meet customer demand for CNG, RNG and LNG in the markets we serve. This has included making investments within Marlin Gas Services to be able to transport these products through its virtual pipeline fleet to ~~customers.To~~customers. To date, we have also made an infrastructure investment in Ohio, enabling RNG to fuel a third party landfill fleet and to transport RNG to end use customers off our pipeline system. Similarly, we announced in March 2022, the opening of a high-capacity CNG truck and tube trailer fueling station in Port Wentworth, Georgia. As one of the largest public access CNG stations on the East Coast, it will offer a RNG option to customers in the near future. We constructed the station in partnership with Atlanta Gas Light, a subsidiary of Southern Company Gas. ~~In 2020, Atlanta Gas Light announced that Chesapeake Utilities would be constructing, maintaining the station and ensuring access to CNG and RNG for the many customers expected to fuel at the station.~~

We are also involved in various other projects, all at various stages and all with different opportunities to participate across the energy value chain. In many of these projects, Marlin will play a key role in ensuring the RNG is transported to one of our many pipeline systems where it will be injected. ~~Accordingly, given the overlapping role of Marlin in many of these projects, we have combined~~We include our RNG transportation services and infrastructure related adjusted gross margin ~~discussion into one section.~~from across the organization in combination with our CNG and LNG projects.

For the three ~~and six~~ months ended ~~June 30, 2022, the Company~~March 31, 2023, we generated ~~$0.7 million and $0.9~~$1.3 million in additional adjusted gross margin associated with the transportation of CNG and RNG by Marlin’s virtual pipeline and Aspire Energy’s Noble Road RNG pipeline. ~~The Company estimates~~We estimate annual adjusted gross margin of approximately ~~$9.5~~$12.5 million in ~~2022,~~2023, and ~~$10.5~~$12.3 million in ~~2023~~2024 for these transportation related services, with potential for additional growth in future years.

~~Discussed below are some~~Full Circle Dairy

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 ~~recently completed~~gas to market. The first injection of RNG is projected to occur in the first half of 2024.

Planet Found Development

In late October 2022, we consummated the acquisition of Planet Found. Planet Found's farm scale anaerobic digestion pilot system and technology produces biogas from 1,200 tons of poultry litter annually, which can be used to create renewable energy in the form of electricity or upgraded to renewable natural gas. In addition to generating biogas, Planet Found’s nutrient capture system plays a major role in converting digestate into a nutrient-rich soil conditioner, which is distributed to bulk and retail markets under the brand Element Soil. The transaction will accelerate our efforts in converting poultry waste to renewable, sustainable energy while simultaneously improving the local environments in our service territories. The expertise, technologies and know-how can be leveraged for various scale projects ~~as well as a sample of the growth projects in which we are currently involved. As new projects are solidified, we will provide additional detail on those projects at that time.~~across our geographic footprint.

Noble Road Landfill RNG Project

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.

~~Bioenergy DevCo~~

In June 2020, our Delmarva natural gas operations and Bioenergy DevCo (“BDC”), a developer of anaerobic digestion facilities that create renewable energy and healthy soil products from organic material, entered into an agreement related to a project to extract RNG from poultry production waste. BDC and our affiliates are collaborating on this project in addition to several other project sites where organic waste can be converted into a carbon-negative energy source.

Marlin Gas Services will transport the RNG created from the organic waste from the BDC facility to an Eastern Shore interconnection, where the sustainable fuel will be introduced into our transmission system and ultimately distributed to our natural gas customers.

~~CleanBay Project~~

In July 2020, our Delmarva natural gas operations and CleanBay Renewables Inc. ("CleanBay") announced a new partnership to bring RNG to our operations. As part of this partnership, we will transport the RNG produced at CleanBay's planned Westover, Maryland bio-refinery, to our natural gas infrastructure in the Delmarva Peninsula region. Eastern Shore and Marlin Gas Services, will transport the RNG from CleanBay to our Delmarva natural gas distribution system where it is ultimately delivered to the Delmarva natural gas distribution end use customers.

~~Acquisitions~~

~~Propane Acquisitions~~

On December 15, 2021, Sharp Energy acquired the propane operating assets of Diversified Energy for approximately $37.5 million net of cash acquired. There are multiple strategic benefits to this acquisition including it: (i) expanded the Company's propane territory into North Carolina and South Carolina while also expanding our existing footprint in Pennsylvania and Virginia, and (ii) included an established customer base with opportunities for future growth. Through this acquisition, the Company added approximately 19,000 residential, commercial and agricultural customers, along with distribution of approximately 10.0 million gallons of propane annually.

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On June 13, 2022, Sharp acquired the propane operating assets of Davenport Energy's Siler City propane division for approximately $2.0 million. Through this acquisition, the Company expands its operating footprint further into North Carolina, where customers will be served by Sharp Energy’s Diversified Energy division. The acquisition adds approximately 850 customers and distribution of approximately 406,000 gallons of propane annually to Sharp Energy’s territory.

~~For the three and six months ended June 30, 2022, these acquisitions contributed~~ ~~$1.5 million~~ ~~and~~ ~~$5.5 million, respectively, in adjusted gross margin and are~~ ~~expected to generate $11.3 million of additional adjusted gross margin in 2022 and $12.0 million in 2023.~~

~~Escambia Meter Station~~

In June 2021, Peninsula Pipeline purchased the Escambia Meter Station from Florida Power and Light and entered into a Transportation Service Agreement with Gulf Power Company to provide up to 530,000 Dts/d of firm service from an interconnect with FGT to Florida Power & Light’s Crist Lateral pipeline. The Florida Power & Light Crist Lateral provides gas supply to their natural gas fired power plant owned by Florida Power & Light in Pensacola, Florida. The Company generated ~~$0.2 million~~ ~~and~~ ~~$0.4 million, respectively,~~ in additional adjusted gross margin for the three and six months ended June 30, 2022 and estimates that this acquisition will generate adjusted gross margin of approximately $1.0 million in 2022 and beyond.

Regulatory Initiatives

Florida ~~GRIP~~GUARD Program

In February 2023, FPU filed a petition with the Florida ~~GRIP~~PSC for approval of the GUARD program. GUARD is a proposed ten-year program to enhance the safety, reliability and accessibility of portions of our natural gas ~~pipe~~distribution system. We have identified various categories of eligible projects to be included in GUARD, which includes 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 ~~program approved~~of problematic distribution mains, service lines and M&R equipment, and system reliability projects. The petition is currently under review by the Florida PSC that allows automatic recovery, through rates, of costs associated with the replacement of mains and services. Since the program's inception in August 2012, the Company has invested $198.7 million of capital expenditures to replace 351 miles of qualifying distribution mains, including $9.2 million of new pipes during the first six month of 2022. GRIP generated additional gross margin of $0.8 million and $1.6 million, respectively, for the three and six months ended June 30, 2022 compared to 2021. We are currently projecting to complete this program in 2022 and expect to generate adjusted gross margin of $18.8 million and $19.5 million in 2022 and 2023, respectively. The adjusted gross margin on GRIP investments will continue to be generated as we have included the investments, and the associated expenses, in the base rate proceeding that was filed in May 2022.PSC.

Capital Cost Surcharge Programs

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, 2022~~March 31, 2023, there was ~~$0.4~~$0.2 million ~~and $0.8 million, respectively,~~ of incremental adjusted gross margin generated pursuant to the program. Eastern Shore expects to produce adjusted gross margin of approximately ~~$2.0~~$2.8 million in ~~2022~~2023 and ~~$1.9~~$3.6 million in ~~2023~~2024 from relocation projects, which is ultimately dependent upon the timing of filings and the completion of construction.

~~Elkton Gas STRIDE Plan~~

In June 2021, we reached a settlement with the Maryland PSC Staff and the Maryland Office of the Peoples Counsel regarding a five-year plan to replace Aldyl-A pipelines and recover the associated costs of those replacements through a fixed charge rider.The STRIDE plan went into service in September 2021 and is expected to generate $0.2 million of adjusted gross margin in 2022 and $0.4 million annually thereafter.

~~COVID-19 Regulatory Proceeding~~

In October 2020, the Florida PSC approved a joint petition of our natural gas and electric distribution utilities in Florida to establish a regulatory asset to record incremental expenses incurred due to COVID-19. The regulatory asset allows us to seek recovery of these costs in the next base rate proceedings. In November 2020, the Office of Public Counsel filed a protest to the order approving the establishment of this regulatory asset treatment. The Company’s Florida regulated business units reached a settlement with the Florida OPC in June 2021. The settlement allowed the business units to establish a regulatory asset of $2.1 million. This amount includes COVID-19 related incremental expenses for bad debt write-offs, personnel protective equipment, cleaning and business information services for remote work. Our Florida regulated business units are amortizing the amount over two years effective January 1, 2022 and recover the regulatory asset through the Purchased Gas Adjustment and Swing Service mechanisms for the natural gas business units and through the Fuel Purchased Power Cost Recovery clause for the electric division. This results in annual additional adjusted gross margin of $1.0 million that will be offset by a corresponding amortization of regulatory asset expense for both 2022 and 2023.

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Florida Natural Gas Base Rate Proceeding

In May 2022, our natural gas distribution businesses in Florida ~~FPU, FPU-Indiantown division, FPU-Fort Meade division and Chesapeake Utilities CFG division (collectively, “Florida natural gas distribution businesses”)~~ filed a consolidated natural gas rate case with the Florida PSC. ~~In connection with the~~The application ~~the Company is seeking approval of~~included a request for the following: (i) ~~interim rate relief of approximately $7.2 million on an annualized basis, subject to refund, pending the outcome of the rate case proceeding; (ii) a~~ permanent rate relief of approximately $24.1 million, effective January 1, 2023, ~~(iii)~~(ii) a depreciation study also submitted with the filing; ~~(iv)~~(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 businesses under FPU; ~~(v)~~(iv) authorization to retain the acquisition adjustment recorded at the time of the FPU merger in ~~the~~our revenue requirement; and ~~(vi)~~(v) authorization to establish an environmental remediation surcharge for the purposes of addressing future expected remediation costs for ~~manufactured gas plant~~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 ~~interim~~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 ~~are subject to refund pending the final outcome of~~in connection with the rate ~~case proceeding. The discovery process has commenced and hearing for the proceeding has been scheduled for October 2022. The outcome of the application is subject to review and approval~~relief were approved by the Florida ~~PSC.~~PSC in February 2023 with an effective date of March 1, 2023. For the three months ended March 31, 2023, this proceeding generated adjusted gross margin of approximately $4.1 million and is expected to generate $16.3 million of additional adjusted gross margin in 2023 and $17.2 million in 2024.

Storm Protection Plan

In 2020, the Florida PSC implemented the SPP and SPPCR rules, 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 SPPCR rules allow the utility to file for recovery of associated costs related to its SPP. ~~The Company’s~~Our Florida electric distribution operation's SPP ~~plan was~~and SPPCRC were filed during the first quarter of 2022 and approved in ~~April~~the fourth quarter of 2022 with ~~hearings scheduled~~modifications, by the Florida PSC. For the three months ended March 31, 2023, this initiative generated adjusted gross margin of approximately $0.2 million and is expected to generate $1.7 million of additional adjusted gross margin in 2023 and $3.0 million in 2024. We expect continued investment under the SPP going forward.

COVID-19 Regulatory Proceeding

In October 2020, the Florida PSC approved a joint petition of our natural gas and electric distribution utilities in Florida to establish a regulatory asset to record incremental expenses incurred due to COVID-19. The regulatory asset allows us to obtain recovery of these costs in the next base rate proceedings. Our Florida regulated business units reached a settlement with the Florida OPC in June 2021, enabling the business units to establish a regulatory asset of $2.1 million. This amount includes COVID-19 related incremental expenses for ~~early August 2022. The SPPCRC was filed in May 2022 with requested rates~~bad debt write-offs, personnel protective equipment, cleaning and business information services for remote work. Our Florida regulated business units are currently amortizing the amount over two years effective January 1, ~~2023. The SPPCRC hearing~~2022 and recovering the regulatory asset through the Purchased Gas Adjustment and Swing Service mechanisms for the natural gas business units and through the Fuel Purchased Power Cost Recovery clause for the electric division. This results in additional adjusted gross margin of $1.0 million annually that is ~~scheduled~~being offset by a corresponding amortization of regulatory asset expense, for ~~November 2022.~~both 2022 and 2023.

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Other ~~major factors influencing adjusted gross margin~~Major Factors Influencing Adjusted Gross Margin

Weather Impact

~~Weather was not a significant factor during the second quarter and~~For the first ~~half~~quarter of 2023, lower consumption driven primarily by weather resulted in a $6.9 million decrease in adjusted gross margin compared to the same period in 2022. The impact to adjusted gross margin was largely the result of unprecedented temperatures in our northern service territories that were more than 20 percent higher than historical averages. Assuming normal temperatures, as detailed below, gross margin would have been higher by $5.4 million. 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, 2022~~March 31, 2023 and ~~2021.~~2022.


		Three Months Ended			Six Months Ended				Three Months Ended
		June 30,			June 30,				March 31,
		2022	2021	Variance	2022	2021	Variance		2023	2022	Variance
Delmarva Peninsula	Delmarva Peninsula							Delmarva Peninsula
Actual HDD	Actual HDD	394	400	(6)	2,575	2,586	(11)	Actual HDD	1,774	2,181	(407)
10-Year Average HDD ("Normal")	10-Year Average HDD ("Normal")	412	396	16	2,667	2,676	(9)	10-Year Average HDD ("Normal")	2,285	2,255	30
Variance from Normal	Variance from Normal	(18)	4		(92)	(90)		Variance from Normal	(511)	(74)
Florida	Florida							Florida
Actual HDD	Actual HDD	37	69	(32)	534	572	(38)	Actual HDD	344	497	(153)
10-Year Average HDD ("Normal")	10-Year Average HDD ("Normal")	45	43	2	542	549	(7)	10-Year Average HDD ("Normal")	505	497	8
Variance from Normal	Variance from Normal	(8)	26		(8)	23		Variance from Normal	(161)	—
Ohio	Ohio							Ohio
Actual HDD	Actual HDD	604	676	(72)	3,530	3,448	82	Actual HDD	2,384	2,926	(542)
10-Year Average HDD ("Normal")	10-Year Average HDD ("Normal")	630	623	7	3,542	3,582	(40)	10-Year Average HDD ("Normal")	2,965	2,912	53
Variance from Normal	Variance from Normal	(26)	53		(12)	(134)		Variance from Normal	(581)	14
Florida	Florida							Florida
Actual CDD	Actual CDD	988	826	162	1,183	1,010	173	Actual CDD	323	195	128
10-Year Average CDD ("Normal")	10-Year Average CDD ("Normal")	945	966	(21)	1,142	1,161	(19)	10-Year Average CDD ("Normal")	192	197	(5)
Variance from Normal	Variance from Normal	43	(140)		41	(151)		Variance from Normal	131	(2)

Natural Gas Distribution Adjusted Gross Margin Growth

Customer growth for our natural gas distribution operations, as a result of the addition of new customers and the conversion of customers from alternative fuel sources to natural gas service, generated $0.9 million and $2.1 million of additional adjusted gross margin for the three and six months ended June 30, 2022. The average number of residential customers served on the

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Delmarva Peninsula and in Florida increased by ~~5.7~~approximately 5.8 percent and ~~5.5~~4.4 percent, ~~for~~respectively, during 2023. On the ~~three and six months ended June 30, 2022, while Florida customers increased by 4.1 percent for both the three and six month periods. A~~Delmarva Peninsula, a larger percentage of the adjusted gross margin growth was generated from residential growth given the expansion of ~~natural~~ gas into new housing communities and conversions to natural gas as our distribution infrastructure continues to build out. ~~We anticipate continued customer growth,~~In Florida, as new communities continue to build out due to population growth and ~~additional~~ infrastructure is added to support the ~~growth.~~growth, there is increased load from both residential customers as well as new commercial and industrial customers. The details ~~for the three and six months ended June 30, 2022~~ are provided in the following table:


		Three Months Ended				Six Months Ended					Three Months Ended
		June 30, 2022				June 30, 2022					March 31, 2023
(in thousands)	(in thousands)	Delmarva Peninsula		Florida		Delmarva Peninsula		Florida		(in thousands)	Delmarva Peninsula		Florida
Customer Growth:	Customer Growth:									Customer Growth:
Residential	Residential	$	552	$	223	$	1,256	$	494	Residential	$	610	$	316
Commercial and industrial	Commercial and industrial	68		95		159		223		Commercial and industrial	212		384
Total Customer Growth(1)	Total Customer Growth(1)	$	620	$	318	$	1,415	$	717	Total Customer Growth(1)	$	822	$	700

(1) Customer growth amounts for Florida include the effects of revised rates associated with our natural gas base rate proceeding.

~~Regulated Energy Segment~~

~~For the quarter ended June 30, 2022, compared to the quarter ended June 30, 2021:~~

Three Months Ended
June 30, Increase
2022 2021 (decrease)
(in thousands)
Revenue $ 92,193 $ 80,910 $ 11,283
Regulated natural gas and electric costs 21,573 14,447 7,126
Adjusted gross margin (1)
70,620 66,463 4,157
Operations & maintenance 26,489 26,930 (441)
Depreciation & amortization 13,140 11,830 1,310
Other taxes 5,150 4,943 207
Total operating expenses 44,779 43,703 1,076
Operating income $ 25,841 $ 22,760 $ 3,081

~~(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.

Operating income for the Regulated Energy segment for the second quarter of 2022 was $25.8 million, an increase of $3.1 million, or 13.5 percent, over the same period in 2021. Higher operating income reflects continued pipeline expansions by Eastern Shore, Peninsula Pipeline and Aspire Energy Express, incremental contributions from regulated infrastructure programs, organic growth in our natural gas distribution businesses, increased customer consumption, and operating results from the Escambia Meter Station acquisition completed in 2021. Operating expenses increased by $1.1 million compared to the prior year quarter due to higher depreciation, amortization and property taxes and increased vehicle expense resulting from higher fuel costs. The increase was partially offset by reductions in various areas including facilities, maintenance and outside services costs, as well as a lower level of payroll and benefits expenses.

~~Items contributing to the quarter-over-quarter increase in adjusted gross margin are listed in the following table:~~

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~~(in thousands)~~
~~Natural gas transmission service expansions~~	$	~~1,291~~
~~Contributions from regulated infrastructure programs~~	~~1,080~~
~~Natural gas growth (excluding service expansions)~~	~~938~~
~~Changes in customer consumption~~	~~636~~
~~Escambia Meter Station acquisition~~	~~166~~
~~Other variances~~	46
~~Quarter-over-quarter increase in adjusted gross margin~~	$	~~4,157~~

~~The following narrative discussion provides further detail and analysis of the significant items in the foregoing table.~~

~~Natural Gas Transmission Service Expansions~~

We generated increased adjusted gross margin of $1.3 million for the three months ended June 30, 2022 from natural gas transmission service expansions including, Peninsula Pipeline's Western Palm Beach County project, Eastern Shore's Del-MarRegulated Energy ~~Pathway project and the Guernsey pipeline expansion.~~

~~Contributions from Regulated Infrastructure Programs~~

Contributions from regulated infrastructure programs generated incremental adjusted gross margin of $1.1 million in the second quarter of 2022. The increase in adjusted gross margin was primarily related to continued investment in the Florida GRIP, Eastern Shore's capital surcharge program and the Elkton Gas STRIDE Plan. Refer to Note 5, ~~Rates and Other Regulatory Activities~~,~~in the condensed consolidated financial statements for additional information.~~

~~Natural Gas Distribution Customer Growth~~

We generated additional adjusted gross margin of $0.9 million from natural gas customer growth. Adjusted gross margin increased by $0.3 million in Florida and $0.6 million on the Delmarva Peninsula for the three months ended June 30, 2022, as compared to the same period in 2021, due primarily to residential customer growth of 4.1 percent and 5.7 percent in Florida and on the Delmarva Peninsula, respectively.

~~Changes in Customer Consumption~~

~~Increased customer consumption contributed additional adjusted gross margin of $0.6 million in the second quarter of 2022.~~

~~Acquisitions~~

~~Adjusted gross margin increased by $0.2 million due to the acquisition of the Escambia Meter Station which was consummated in June 2021.~~

~~Operating Expenses~~

~~Items contributing to the quarter-over-quarter increase in operating expenses are listed in the following table:~~


~~(in thousands)~~
~~Depreciation, amortization and property taxes~~	$	~~1,643~~
~~Vehicle expenses~~	~~207~~
~~Facilities maintenance costs and outside services~~	~~(635)~~
~~Payroll, benefits and other employee related costs~~	~~(506)~~
~~Other variances~~	~~367~~
~~Quarter-over-quarter increase in operating expenses~~	$	~~1,076~~

Segment

For the ~~six months~~quarter ended ~~June 30, 2022,~~March 31, 2023, compared to the ~~six months~~quarter ended ~~June 30, 2021:~~March 31, 2022:

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		Six Months Ended							Three Months Ended
		June 30,				Increase			March 31,				Increase
		2022		2021		(decrease)			2023		2022		(Decrease)
(in thousands)	(in thousands)							(in thousands)
Revenue	Revenue	$	220,084	$	202,107	$	17,977	Revenue	$	142,270	$	127,891	$	14,379
Regulated natural gas and electric costs	Regulated natural gas and electric costs	67,016		57,491		9,525		Regulated natural gas and electric costs	55,288		45,442		9,846
Adjusted gross margin (1)	Adjusted gross margin (1)	153,068		144,616		8,452		Adjusted gross margin (1)	86,982		82,449		4,533
Operations & maintenance	Operations & maintenance	55,621		55,093		528		Operations & maintenance	30,336		29,149		1,187
Depreciation & amortization	Depreciation & amortization	26,225		23,860		2,365		Depreciation & amortization	12,952		13,086		(134)
Other taxes	Other taxes	10,683		10,197		486		Other taxes	6,069		5,533		536
Total operating expenses	Total operating expenses	92,529		89,150		3,379		Total operating expenses	49,357		47,768		1,589
Operating income	Operating income	$	60,539	$	55,466	$	5,073	Operating income	$	37,625	$	34,681	$	2,944

(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.

Operating income for the Regulated Energy segment for the ~~six months ended June 30, 2022~~first quarter of 2023 was ~~$60.5~~$37.6 million, an increase of ~~$5.1~~$2.9 million, or ~~9.1~~8.5 percent, over the same period in ~~2021.~~2022. Higher operating income reflects ~~continued pipeline expansions by Eastern Shore, Peninsula Pipeline and Aspire Energy Express,~~contributions from our Florida natural gas base rate proceeding, organic growth in our natural gas distribution businesses, incremental contributions ~~from~~associated with regulated infrastructure programs, ~~increased~~and continued pipeline expansion projects. These increases were partially offset by changes in customer consumption ~~and operating results from~~due to significantly warmer weather during the ~~Escambia Meter Station acquisition completed in 2021.~~first quarter of 2023. Operating expenses increased by ~~$3.4~~$1.6 million compared to the prior year quarter primarily due to higher depreciation and amortization related to recent capital investments and ~~property taxes, payroll, benefits~~higher facilities, maintenance and ~~other employee related expenses.~~outside services costs.

Items contributing to the ~~period-over-period~~quarter-over-quarter increase in adjusted gross margin are listed in the following table:


(in thousands)
~~Natural~~Rate changes associated with the Florida natural gas ~~transmission service expansions~~base rate proceeding (1)	$	~~2,518~~4,097
Natural gas growth including conversions (excluding service expansions)	~~2,132~~1,522
Contributions from regulated infrastructure programs	~~2,004~~798
Natural gas transmission service expansions	481
Changes in customer consumption - primarily related to weather	~~449~~ (1,865)
~~Escambia Meter Station acquisition~~Eastern Shore contracted rate adjustments	~~416~~ (320)
Other variances	~~933~~ (180)
~~Period-over-period~~Quarter-over-quarter increase in adjusted gross ~~margin~~margin**	$	~~8,452~~4,533

(1) Includes adjusted gross margin comprised of both interim rates and permanent base rates that became effective in March 2023.

The following narrative discussion provides further detail and analysis of the significant items in the foregoing table.

Rate Changes Associated with the Florida Natural Gas ~~Transmission Service Expansions~~Base Rate Proceeding

~~We generated increased~~In August 2022, the Florida PSC approved interim rates starting in September 2022. In March 2023, we obtained a final rate order in connection with the Florida natural gas base rate proceeding with permanent rates effective on March 1, 2023. These interim and permanent rates contributed additional adjusted gross margin of ~~$2.5 million~~$4.1 million. Please refer to Note 5, Rates and Other Regulatory Activities,in the condensed consolidated financial statements for the six months ended June 30, 2022 from natural gas transmission service expansions including, Peninsula Pipeline's Western Palm Beach County project, Eastern Shore's Del-Mar Energy Pathway project and the Guernsey pipeline expansion.additional information.

Natural Gas Distribution Customer Growth

We generated additional adjusted gross margin of ~~$2.1~~$1.5 million from natural gas customer growth. Adjusted gross margin increased by $0.7 million in Florida and ~~$1.4~~$0.8 million on the Delmarva Peninsula for the ~~six~~three months ended ~~June 30, 2022,~~March 31, 2023, as compared to the same period in ~~2021,~~2022, due primarily to residential customer growth of ~~4.1~~4.4 percent and ~~5.5~~5.8 percent in Florida and on the Delmarva Peninsula, respectively.

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Contributions from Regulated Infrastructure Programs

Contributions from regulated infrastructure programs generated incremental adjusted gross margin of ~~$2.0~~$0.8 million ~~for~~in the ~~six months ended June 30, 2022.~~first quarter of 2023. The increase in adjusted gross margin was primarily related to continued investment in the Florida ~~GRIP,~~Gas Reliability Infrastructure Program, Eastern Shore's capital surcharge program, FPU Electric's storm protection plan, and the Elkton Gas STRIDE Plan. Refer to Note 5, Rates and Other Regulatory Activities, in the condensed consolidated financial statements for additional information.

Natural Gas Transmission Service Expansions

We generated increased adjusted gross margin of $0.5 million for the three months ended March 31, 2023 from natural gas transmission service expansions including, Peninsula Pipeline's Twin Lakes and Winter Haven projects, FPU natural gas' Clean Energy project and Aspire Energy Express' Guernsey pipeline expansion.

Changes in Customer Consumption

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~~Increased customer~~Significantly warmer weather contributed to changes in weather-related consumption ~~contributed additional~~resulting in reduced adjusted gross margin of ~~$0.4~~$1.9 million in the first quarter of 2023. The Delmarva Peninsula and Florida were warmer by approximately 19 percent and 31 percent, respectively, for the ~~six~~three months ended ~~June 30,~~March 31, 2023 compared to the same period in 2022.

~~Acquisitions~~Eastern Shore Contracted Rate Adjustments

~~Adjusted~~Adjustments to contracted rates charged to various Eastern Shore customers resulted in reduced adjusted gross margin ~~increased by $0.4~~of $0.3 million ~~due to~~during the ~~acquisition~~first quarter of ~~the Escambia Meter Station which was consummated in June 2021.~~2023.

Operating Expenses

Items contributing to the ~~period-over-period~~quarter-over-quarter increase in operating expenses are listed in the following table:


(in thousands)
Depreciation, amortization and property taxes	$	~~2,977~~550
~~Customer service related~~Increased facilities expenses, maintenance costs and outside services	~~414~~382
~~Payroll,~~Increased payroll, benefits and other employee-related expenses	~~188~~293
Other variances	~~(200)~~364
~~Period-over-period~~Quarter-over-quarter increase in operating expenses	$	~~3,379~~1,589

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Unregulated Energy Segment

For the quarter ended ~~June 30, 2022,~~March 31, 2023, compared to the quarter ended ~~June 30, 2021:~~March 31, 2022:


		Three Months Ended							Three Months Ended
		June 30,				Increase			March 31,				Increase
		2022		2021		(decrease)			2023		2022		(Decrease)
(in thousands)	(in thousands)							(in thousands)
Revenue	Revenue	$	53,463	$	34,773	$	18,690	Revenue	$	83,165	$	101,292	$	(18,127)
Unregulated propane and natural gas costs	Unregulated propane and natural gas costs	31,701		16,821		14,880		Unregulated propane and natural gas costs	40,571		58,008		(17,437)
Adjusted gross margin (1)	Adjusted gross margin (1)	21,762		17,952		3,810		Adjusted gross margin (1)	42,594		43,284		(690)
Operations & maintenance	Operations & maintenance	16,127		14,037		2,090		Operations & maintenance	19,614		18,090		1,524
Depreciation & amortization	Depreciation & amortization	4,074		3,456		618		Depreciation & amortization	4,234		3,881		353
Other taxes	Other taxes	1,001		924		77		Other taxes	1,501		1,267		234
Total operating expenses	Total operating expenses	21,202		18,417		2,785		Total operating expenses	25,349		23,238		2,111
Operating Income (loss)		$	560	$	(465)	$	1,025
Operating Income								Operating Income	$	17,245	$	20,046	$	(2,801)

Operating results for the Unregulated Energy segment for the ~~second~~first quarter of ~~2022 increased by $1.0~~2023 experienced a reduction of $2.8 million compared to the same period in ~~2021. The operating results for this~~2022. Adjusted gross margin in the Unregulated Energy segment ~~typically are~~during the first quarter was impacted by ~~seasonal variances, with the first and fourth quarters generating a significantly larger portion of adjusted gross margin as a result of colder temperatures generally contributing to higher~~changes in customer ~~demand. Operating results for the second and third quarters historically have been lower~~consumption due to ~~reduced customer demand during the~~significantly warmer ~~periods of the year. The impact to operating income may not align with the seasonal variations as many of the operating expenses are recognized ratably over the course of the year.~~

~~Higher operating results during the second quarter were driven by contributions from the acquisition of Diversified Energy, increased propane margins including higher~~weather in our Mid-Atlantic service ~~fees, increased demand for CNG from Marlin Gas Services and margin improvement from Aspire Energy.~~territories. Additionally, we experienced increased operating expenses associated with higher payroll, benefits and employee related expenses driven by the ~~acquisition of Diversified Energy as well as~~continued competition in the current labor market, depreciation, amortization and property taxes and increased ~~vehicle expenses due to rising fuel costs.~~costs for facilities, maintenance, and outside services. These factors were partially offset by expanded propane margins and fees and increased demand for CNG, RNG and LNG services.

Items contributing to the quarter-over-quarter increase in adjusted gross margin are listed in the following table:


(in thousands)
Propane Operations
~~Diversified Energy acquisition (completed in December 2021)~~Propane customer consumption - primarily weather related	$	~~1,491~~ (4,543)
Increased propane margins and service fees	~~1,104~~3,064
~~Marlin Gas Services~~CNG/RNG/LNG Transportation and Infrastructure
Increased demand for ~~CNG services~~CNG/RNG/LNG Services	~~547~~1,288
Aspire Energy
~~Increased margins~~Reduced customer consumption - ~~rate changes and natural gas liquid processing~~primarily weather related	~~203~~ (508)
Other variances	~~465~~9
Quarter-over-quarter ~~increase~~decrease in adjusted gross margin	$	~~3,810~~(690)

The following narrative discussion provides further detail and analysis of the significant items in the foregoing table.

Propane Operations

•~~Acquisition of Diversified~~Propane customer consumption - ~~Energy~~ - Adjusted gross margin ~~increased~~fell by ~~$1.5~~$4.5 million due to reduced customer consumption as weather on the ~~acquisition of Diversified Energy, which~~Delmarva Peninsula and in Florida was ~~acquired by Sharp in December 2021.~~approximately 19 and 31 percent, warmer relative to the prior year.

•Increased ~~Retail~~ Propane Margins and Service Fees - Adjusted gross margin increased by ~~$1.1~~$3.1 million for the three months ended ~~June 30, 2022,~~March 31, 2023, mainly due to increased ~~customer service fees. Propane margins also increased due to gains with our SWAP agreements. These market conditions, which include market pricing and competition with other~~

~~Table of Contents~~

~~propane suppliers, as well as the availability and price of alternative energy sources, may fluctuate based on changes in demand, supply and other energy commodity prices.~~

~~Marlin Gas Services~~

•~~Increased demand for CNG services~~ ~~- Adjusted gross margin increased by $0.5 million during the second quarter as compared to the same period in the prior year due to higher demand for CNG hold services.~~

~~Aspire Energy~~

•~~Increased Margins -~~ ~~Adjusted~~ g~~ross margin increased by $0.2 million during the second quarter of 2022 over the same period in 2021, including rate changes and improvements from natural gas liquid processing.~~

~~Operating Expenses~~

~~Items contributing to the quarter-over-quarter increase in operating expenses are listed in the following table:~~


~~(in thousands)~~
~~Operating expenses from the Diversified Energy acquisition~~	$	~~2,258~~
~~Increased depreciation, amortization and property tax costs~~	~~264~~
~~Increased vehicle expenses due to higher fuel costs~~	~~199~~
~~Other variances~~	64
~~Quarter-over-quarter increase in operating expenses~~	$	~~2,785~~

Diversified Energy's operating results reflected lower adjusted gross margins during the second quarter of 2022 which is in line with the seasonality typically experienced during the second and third quarters by our legacy propane distribution businesses.

~~For the six months ended June 30, 2022, compared to the six months ended June 30, 2021:~~

Six Months Ended
June 30, Increase
2022 2021 (decrease)
(in thousands)
Revenue $ 154,754 $ 109,532 $ 45,222
Unregulated propane and natural gas costs 89,708 52,804 36,904
Adjusted gross margin (1)
65,046 56,728 8,318
Operations & maintenance 34,211 29,263 4,948
Depreciation & amortization 7,954 6,780 1,174
Other taxes 2,268 2,110 158
Total operating expenses 44,433 38,153 6,280
Operating Income $ 20,613 $ 18,575 $ 2,038

~~Operating results for the Unregulated Energy segment for the for the six months ended June 30, 2022 increased by $2.0 million or, 11.0 percent compared to the same period in 2021.~~

Higher operating results during the first half of 2022 were driven by contributions from the acquisition of Diversified Energy, increased propane margins including higher service fees margin, increased demand for CNG from Marlin Gas Services and margin improvement from Aspire Energy. These increases were partially offset by reduced consumption in our propane operations. Additionally, we experienced increased operating expenses associated with the acquisition of Diversified Energy as well as increased payroll, benefits and employee related expenses, depreciation, amortization and property taxes, and increased vehicle expenses due to rising fuel costs.

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~~Items contributing to the period-over-period increase in adjusted gross margin are listed in the following table:~~


~~(in thousands)~~
~~Propane Operations~~
~~Diversified Energy acquisition (completed in December 2021)~~	$	~~5,466~~
~~Increased propane~~ margins and ~~service fees~~	~~1,823~~
~~Decreased customer consumption - intra-quarter weather volatility~~	~~(577)~~
~~Decreased customer consumption due to conversion of customers to our natural gas system~~	~~(478)~~
~~Marlin Gas Services~~
~~Increased demand for CNG services~~	~~612~~
~~Aspire Energy~~
~~Increased margins - rate changes and natural gas liquid processing~~	~~1,131~~
~~Increased customer consumption - primarily weather related~~	~~465~~
~~Other variances~~	~~(124)~~
~~Period-over-period increase in adjusted gross margin~~	$	~~8,318~~

~~The following narrative discussion provides further detail and analysis of the significant items in the foregoing table.~~

~~Propane Operations~~

•~~Acquisition of DiversifiedEnergy~~ ~~- Adjusted gross margin increased by $5.5 million due to the acquisition of Diversified Energy, which was acquired by Sharp in December 2021.~~

•~~Increased Retail Propane Margins and Service Fees -~~ ~~Adjusted~~ g~~ross margin increased by $1.8 million for the six months ended June 30, 2022, mainly due to increased~~ customer service fees. Propane margins also increased due to gains with our SWAP agreements. These market conditions, which include market pricing and competition with other propane suppliers, as well as the availability and price of alternative energy sources, may fluctuate based on changes in demand, supply and other energy commodity prices.

•

~~Decreased Customer Consumption due to weather -~~ ~~Adjusted~~ g~~ross margin decreased by $0.6 million due to reduced customer consumption during the first quarter~~Table of ~~2022 compared to the same period in 2021 due to intra-quarter weather volatility.~~Contents

•~~Decreased customer consumption due to conversion of customers to natural gas~~ ~~- Adjusted gross margin decreased by $0.5 million as more customers converted from propane to natural gas.~~

~~Marlin Gas Services~~CNG/RNG/LNG Transportation and Infrastructure

•Increased demand for ~~CNG~~CNG/RNG/LNG services - Adjusted gross margin increased by ~~$0.6~~$1.3 million during the ~~second~~first quarter as compared to the same period in the prior year due to higher demand for CNG hold ~~services.~~services and contributions from an Aspire RNG project .

Aspire Energy

•~~Increased Margins -~~ ~~Adjusted~~ g~~ross margin increased by $1.1 million during the second quarter of 2022 over the same period in 2021, including rate changes and improvements from natural gas liquid processing.~~

•~~Increased~~Reduced Customer Consumption ~~Primarily Weather Related~~ - Adjusted gross margin ~~increased~~was reduced by $0.5 million due to ~~higher consumption of gas~~reduced demand as weather in Ohio was approximately 219 percent ~~colder for the six months ended June 30, 2022~~warmer over the same period in ~~2021.~~the prior year.

Operating Expenses

Items contributing to the ~~period-over-period~~quarter-over-quarter increase in operating expenses are listed in the following table:

~~Table of Contents~~


(in thousands)
~~Operating expenses from the Diversified Energy acquisition~~	$	~~4,708~~
Increased payroll, benefits and other employee-related expenses	~~607~~$	825
Increased facilities expenses, maintenance costs and outside services	597
Increased depreciation, amortization and property tax costs	~~476~~
~~Increased vehicle expenses due to higher fuel costs~~	~~385~~587
Other variances	~~104~~102
~~Period-over-period~~Quarter-over-quarter increase in operating expenses	$	~~6,280~~2,111

~~OTHER INCOME, NET~~

OTHER INCOME, NET

For the quarter ended ~~June 30, 2022~~March 31, 2023 compared to the quarter ended ~~June 30, 2021~~March 31, 2022

Other income, net, which includes non-operating investment income, interest income, late fees charged to customers, gains or losses from the sale of assets and pension and other benefits expense, ~~increased~~decreased by ~~$1.1~~$0.6 million in the ~~second~~first quarter of ~~2022,~~2023. This was primarily driven by increased pension related expenses and a reduced volume of asset sales, compared to the same period in ~~2021. The increase was primarily due to gains recognized on the sale of assets.~~

~~For the six months ended June 30, 2022 compared to the six months ended June 30, 2021~~

Other income, net, which includes non-operating investment income, interest income, late fees charged to customers, gains or losses from the sale of assets and pension and other benefits expense, increased by $1.7 million in the six months of 2022, compared to the same period in 2021. The increase was primarily due to gains recognized on the sale of assets.

2022.

INTEREST ~~CHARGES~~ CHARGES

For the quarter ended ~~June 30, 2022~~March 31, 2023 compared to the quarter ended ~~June 30, 2021~~March 31, 2022

Interest charges for the three months ended ~~June 30, 2022~~March 31, 2023 increased by ~~$0.8~~$1.9 million, compared to the same period in ~~2021,~~2022, attributable primarily to ~~an increase of $0.6~~higher interest rates on outstanding borrowings under our Revolver and $0.3 million in interest expense as a result of a long-term debt placement in ~~2022, $0.1~~2022. These factors were partially offset by $0.4 million ~~due~~related to ~~lower~~higher capitalized interest associated with growth ~~projects, $0.1 million related~~projects. The weighted-average interest rate on our Revolver borrowings was 5.17 percent during the first quarter of 2023 compared to ~~amounts assessed by state~~1.17 percent during the prior-year period as a result of the Federal Reserve raising interest rates throughout 2022 and ~~local taxing authorities, and $0.1 million~~during the first quarter of ~~an amortization credit/increase in interest expense associated with~~2023. As a ~~regulatory liability that was established in connection with the Hurricane Michael regulatory proceeding settlement in 2020. Partially offsetting~~result, the interest ~~charges was a $0.1 million decrease in lower interest expense from lower levels of outstanding borrowings under our Revolver. During the second quarter of 2022, the interest rate~~rates associated with our Revolver have increased ~~by 1.22 percent as a result of Federal Reserve raising interest rates.~~446 basis points since March 31, 2022. Any additional increases in interest rates by the Federal Reserve would have a corresponding increase in the interest rates charged under our Revolver.

~~For the six months ended June 30, 2022 compared to the six months ended June 30, 2021~~

Interest charges for the six months ended June 30, 2022 increased by $1.0 million, compared to the same period in 2021, attributable primarily to an increase of $0.9 million in interest expense as a result of a long-term debt placement in 2022, $0.2 million due to lower capitalized interest associated with growth projects, $0.1 million related to amounts assessed by state and local taxing authorities, and $0.1 million of an amortization credit/increase in interest expense associated with a regulatory liability that was established in connection with the Hurricane Michael regulatory proceeding settlement in 2020. Partially offsetting the interest charges was a $0.3 million decrease in lower interest expense from lower levels of outstanding borrowings under our Revolver. During the first six months of 2022, the interest rate associated with our Revolver increased by 1.56 percent as a result of Federal Reserve raising interest rates. Any additional increases in interest rates by the Federal Reserve would have a corresponding increase in the interest rates charged under our Revolver.

~~INCOME TAXES~~NCOME TAXES

For the quarter ended ~~June 30, 2022~~March 31, 2023 compared to the quarter ended ~~June 30, 2021~~March 31, 2022

Income tax expense was ~~$6.2~~$11.6 million for the quarter ended ~~June 30, 2022,~~March 31, 2023, compared to ~~$5.2~~$13.5 million for the quarter ended ~~June 30, 2021.~~March 31, 2022. Our effective income tax rate was ~~26.6~~24.2 percent and ~~27.2~~26.8 percent, for the three months ended ~~June 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively.

~~For the six months ended June 30, 2022 compared to the six months ended June 30, 2021~~

Income tax expense ~~was $19.7 million~~ for the ~~six months~~quarter ended ~~June 30, 2022, compared to $17.6~~March 31, 2023 includes a $1.3 million ~~for~~benefit in deferred tax expense resulting from a reduction in the ~~six months ended June 30, 2021. Our~~Pennsylvania state income tax rate. Excluding this change, our effective income tax rate was ~~26.7~~26.9 percent for ~~both~~ the ~~six months~~quarter ended ~~June 30, 2022 and 2021, respectively.~~March 31, 2023.

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FINANCIAL POSITION, LIQUIDITY AND CAPITAL RESOURCES

Our capital requirements reflect the capital-intensive and seasonal nature of our business and are principally attributable to investment in new plant and equipment, retirement of outstanding debt and seasonal variability in working capital. We rely on cash generated from operations, short-term borrowings, and other sources to meet normal working capital requirements and to temporarily finance capital expenditures. We may also issue long-term debt and equity to fund capital expenditures and to maintain our capital structure within our target capital structure range. We maintain an effective shelf registration statement with the SEC for the issuance of shares of common stock in various types of equity offerings, including shares of common stock under our ATM equity program, as well as an effective registration statement with respect to the DRIP. Depending on our capital needs and subject to market conditions, in addition to other possible debt and equity offerings, we may consider issuing additional shares under the direct share purchase component of the DRIP and/or under the ATM equity program.

Our energy businesses are weather-sensitive and seasonal. We normally generate a large portion of our annual net income and subsequent increases in our accounts receivable in the first and fourth quarters of each year due to significant volumes of natural gas, electricity, and propane delivered by our distribution operations, and our natural gas transmission operations to customers during the peak-heating season. In addition, our natural gas and propane inventories, which usually peak in the fall months, are largely drawn down in the heating season and provide a source of cash as the inventory is used to satisfy winter sales demand.

Capital expenditures for investments in new or acquired plant and equipment are our largest capital requirements. Our capital expenditures were ~~$61.0~~$41.8 million for the ~~six~~three months ended ~~June 30, 2022.~~March 31, 2023. In the table below, we have provided ~~an updated~~the range of our forecasted capital expenditures for ~~2022:~~2023:


		2022					2023
(dollars in thousands)		Low		High
(in thousands)						(in thousands)	Low		High
Regulated Energy:	Regulated Energy:					Regulated Energy:
Natural gas distribution	Natural gas distribution	$	72,000	$	81,000	Natural gas distribution	$	89,000	$	100,000
Natural gas transmission	Natural gas transmission	32,000		36,000		Natural gas transmission	50,000		60,000
Electric distribution	Electric distribution	7,000		12,000		Electric distribution	13,000		15,000
Total Regulated Energy	Total Regulated Energy	111,000		129,000		Total Regulated Energy	152,000		175,000
Unregulated Energy:	Unregulated Energy:					Unregulated Energy:
Propane distribution	Propane distribution	10,000		14,000		Propane distribution	15,000		16,000
Energy transmission	Energy transmission	7,000		10,000		Energy transmission	8,000		9,000
Other unregulated energy	Other unregulated energy	10,000		18,000		Other unregulated energy	23,000		27,000
Total Unregulated Energy	Total Unregulated Energy	27,000		42,000		Total Unregulated Energy	46,000		52,000
Other:	Other:					Other:
Corporate and other businesses	Corporate and other businesses	2,000		4,000		Corporate and other businesses	2,000		3,000
Total Other	Total Other	2,000		4,000		Total Other	2,000		3,000
Total 2022 Forecasted Capital Expenditures		$	140,000	$	175,000
Total 2023 Forecasted Capital Expenditures						Total 2023 Forecasted Capital Expenditures	$	200,000	$	230,000

The ~~2022~~2023 forecast, excluding acquisitions, includes capital expenditures associated with the following: Pipeline expansions related to the Eastern Shore Southern Expansion project and the Florida Beachside Pipeline, ~~as well as amounts for~~ the Wildlight pipeline expansion, ~~into Somerset County, Maryland.~~other small pipeline expansion opportunities, continued distribution system expansions including the Wildlight development in Florida. Furthermore, the ~~2022~~2023 forecast includes continued expenditures under, the ~~Florida GRIP, the~~ capital cost surcharge program ~~and the Elkton Gas STRIDE program~~ as well as ~~further expansion of our natural gas distribution and transmission systems,~~ information technology ~~systems,~~system enhancements, and other strategic initiatives and investments.

The capital expenditure projection is subject to continuous review and modification. During the first half of 2022, the Company experienced a reduced level of new capital investments due to regulatory delays and supply chain disruptions. As a result, the Company is decreasing its capital expenditure guidance range to $140 million to $175 million for 2022. The Company expects these delays in timing to be temporary.ActualActual capital requirements may vary from the above estimates due to a number of factors, including changing economic conditions, supply chain disruptions, capital delays that are greater than currently anticipated, customer growth in existing areas, regulation, new growth or acquisition opportunities and availability of ~~capital.~~capital and other factors discussed in Item 1A. Risk Factors in our 2022 Annual Report on Form 10-K. Historically, actual capital expenditures have typically lagged behind the budgeted amounts.

The timing of capital expenditures can vary based on delays in regulatory approvals, securing environmental approvals and other permits. The regulatory application and approval process has lengthened in the past few years, and we expect this trend to continue.

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Capital Structure

We are committed to maintaining a sound capital structure and strong credit ratings. This commitment, along with adequate and timely rate relief for our regulated energy operations, is intended to ensure our ability to attract capital from outside sources at a reasonable cost, which will benefit our customers, creditors, employees and stockholders.

The following table presents our capitalization, excluding and including short-term borrowings, as of ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021:~~2022:


		June 30, 2022				December 31, 2021					March 31, 2023				December 31, 2022
(in thousands)	(in thousands)									(in thousands)
Long-term debt, net of current maturities	Long-term debt, net of current maturities	$	585,805	42	%	$	549,903	42	%	Long-term debt, net of current maturities	$	656,284	43	%	$	578,388	41	%
Stockholders’ equity	Stockholders’ equity	815,701		58	%	774,130		58	%	Stockholders’ equity	858,588		57	%	832,801		59	%
Total capitalization, excluding short-term debt	Total capitalization, excluding short-term debt	$	1,401,506	100	%	$	1,324,033	100	%	Total capitalization, excluding short-term debt	$	1,514,872	100	%	$	1,411,189	100	%

		June 30, 2022				December 31, 2021					March 31, 2023				December 31, 2022
(in thousands)	(in thousands)									(in thousands)
Short-term debt	Short-term debt	$	137,024	9	%	$	221,634	14	%	Short-term debt	$	94,079	6	%	$	202,157	12	%
Long-term debt, including current maturities	Long-term debt, including current maturities	607,277		39	%	567,865		36	%	Long-term debt, including current maturities	677,773		41	%	599,871		37	%
Stockholders’ equity	Stockholders’ equity	815,701		52	%	774,130		50	%	Stockholders’ equity	858,588		53	%	832,801		51	%
Total capitalization, including short-term debt	Total capitalization, including short-term debt	$	1,560,002	100	%	$	1,563,629	100	%	Total capitalization, including short-term debt	$	1,630,440	100	%	$	1,634,829	100	%

Our target ratio of equity to total capitalization, including short-term borrowings, is between 50 and 60 percent. Our equity to total capitalization ratio, including short-term borrowings, was 5253 percent as of ~~June 30, 2022.~~March 31, 2023. We seek to align permanent financing with the in-service dates of our capital projects. We may utilize more temporary short-term debt when the financing cost is attractive as a bridge to the permanent long-term financing or if the equity markets are volatile.

In the first three months of 2023, there were no issuances under the DRIP. In 2022, we issued less than 0.1 million shares at an average price per share of ~~$137.24~~$136.26 and received net proceeds of ~~$4.3~~$4.5 million under the DRIP. See Note 9, Stockholders’ Equity, in the condensed consolidated financial statements for additional information on commissions and fees paid in connection with these issuances.

Shelf Agreements

We have entered into Shelf Agreements with Prudential and MetLife, whom are under no obligation to purchase any unsecured debt. In February 2023, we amended our Shelf Agreements with Prudential and MetLife. The amended agreements now provide for total borrowing capacity of up to $405.0 million under the Prudential Shelf Agreement and $200.0 million under the MetLife Shelf Agreement. Additionally, the amendments extend the term of the agreements for an additional three years from the effective dates. The following table summarizes our Shelf Agreements at ~~June 30, 2022:~~March 31, 2023:


(in thousands)	(in thousands)	Total Borrowing Capacity		Less: Amount of Debt Issued		Less: Unfunded Commitments		Remaining Borrowing Capacity		(in thousands)	Total Borrowing Capacity		Less: Amount of Debt Issued		Less: Unfunded Commitments		Remaining Borrowing Capacity
Shelf Agreement(1)	Shelf Agreement(1)									Shelf Agreement(1)
Prudential Shelf Agreement ~~(1)~~	Prudential Shelf Agreement ~~(1)~~	$	370,000	$	(220,000)	$	—	$	150,000	Prudential Shelf Agreement ~~(1)~~	$	405,000	$	(300,000)	$	—	$	105,000
MetLife Shelf Agreement ~~(1)~~	MetLife Shelf Agreement ~~(1)~~	150,000		(50,000)		—		100,000		MetLife Shelf Agreement ~~(1)~~	200,000		(50,000)		—		150,000

Total Shelf Agreements as of March 31, 2022		$	520,000	$	(270,000)	$	—	$	250,000
Total Shelf Agreements as of March 31, 2023										Total Shelf Agreements as of March 31, 2023	$	605,000	$	(350,000)	$	—	$	255,000

(1) The Prudential and MetLife Shelf Agreements both expire in ~~April 2023 and May 2023.~~February 2026.

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Short-term Borrowings

In August ~~2021~~2022, we amended ~~and restated our Revolver into a multi-tranche facility totaling $400.0 million with multiple participating lenders. The two~~both tranches of the ~~facility consist~~Revolver, which now bear interest using SOFR as the benchmark interest rate, plus a 10-basis point SOFR adjustment, in lieu of ~~one $200.0~~LIBOR which is being retired by financial institutions. In addition, the 364-day tranche was extended for the upcoming year, expiring in August 2023. As part of these amendments, the parties agreed to eliminate the previous covenant capping the aggregate investments at $150.0 million ~~364-day short-term debt tranche and a $200.0 million five-year tranche, both of which have three one-year extension options, which can be authorized by~~where we maintain an ownership interest less than 50 percent. Additionally, the ~~Chief Financial Officer. We are eligible to establish the repayment term for individual borrowings under the five year~~364 day tranche of the facility ~~and~~now offers a reduced interest margin similar to the ~~extent that an individual loan~~five-year tranche for amounts borrowed in connection with new sustainable investments. All other terms and conditions remained unchanged. Borrowings outstanding under the ~~revolver exceeded 12 months,~~sustainable investment sublimit of the ~~outstanding balance would be classified as a component of long-term debt.~~364-day tranche amounted to $9.4 million at March 31, 2023.

The availability of funds under the Revolver is subject to conditions specified in the credit agreement, all of which we currently satisfy. These conditions include our compliance with financial covenants and the continued accuracy of representations and warranties contained in ~~these agreements.~~the Revolver's loan documents. We are required by the financial covenants in the Revolver to maintain, at the end of each fiscal year, a funded indebtedness ratio of no greater than 65 percent. As of ~~June 30, 2022,~~March 31, 2023, we are in compliance with this covenant.

The 364-day tranche of the Revolver expires in August ~~2022~~2023 and the five-year tranche expires in August ~~2026. Both tranches~~2026, both of which are available to fund our short-term cash needs to meet seasonal working capital requirements and to temporarily fund portions of our capital expenditures. Borrowings under both tranches of the Revolver are subject to a pricing grid, including the commitment fee and the interest rate ~~charged. Our pricing is adjusted each quarter~~charged based upon our total indebtedness to total capitalization ~~ratio.~~ratio for the prior quarter. As of ~~June 30, 2022,~~March 31, 2023, the pricing under the 364-day tranche of the Revolver ~~does not include~~included an unused commitment fee of 9 basis points and maintains an interest rate of ~~0.70 percent~~70 basis points over ~~LIBOR.~~SOFR plus a 10 basis point SOFR adjustment. As of ~~June 30, 2022,~~March 31, 2023, the pricing under the five-year tranche of the Revolver included an unused commitment fee of ~~0.09 percent~~9 basis points and an interest rate of ~~0.95 percent~~95 basis points over ~~LIBOR.~~

~~In the fourth quarter of 2020, we entered into two $30.0 million~~For additional information on interest rate swaps with a total notional amount of $60.0 million through December 2021 with pricing of 0.205 and 0.20 percent, respectively. In February 2021, we entered into an additional interest rate swap with a notional amount of $40.0 million through December 2021 with pricing of 0.17 percent. Ourrelated to our short-term borrowing is based on the 30-day LIBOR rate. At December 31, 2021, all of our interest rate swaps had expired and we have not entered into any new derivative contracts associated with our outstanding short-term borrowings.borrowings, see Note 12, Derivative Instruments.

Long-Term Debt

On March 15, 2022, we issued 2.95 percent Senior Notes due March 15, 2042 to MetLife in the aggregate principal amount of $50 million. We used the proceeds received from the issuances of the Senior Notes to reduce short-term borrowings under ~~our~~the Revolver and to fund capital expenditures. These Senior Notes have similar covenants and default provisions as ~~the existing senior notes,~~our other Senior Notes, and have an annual principal payment beginning in the eleventh year after the issuance.

On March 14, 2023 we issued 5.43 percent Senior Notes due March 14, 2038 in the aggregate principal amount of $80.0 million. We used the proceeds received from the issuances of the Senior Notes to reduce short-term borrowings under our Revolver credit facility and to fund capital expenditures. These Senior Notes have similar covenants and default provisions as our other Senior Notes, and have an annual principal payment beginning in the sixth year after the issuance.

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Cash Flows

The following table provides a summary of our operating, investing and financing cash flows for the ~~six~~three months ended ~~June 30, 2022~~March 31, 2023 and ~~2021:~~2022:


		Six Months Ended					Three Months Ended
		June 30,					March 31,
(in thousands)	(in thousands)	2022		2021		(in thousands)	2023		2022
Net cash provided by (used in):	Net cash provided by (used in):					Net cash provided by (used in):
Operating activities	Operating activities	$	123,795	$	134,216	Operating activities	$	81,667	$	69,120
Investing activities	Investing activities	(64,167)		(104,529)		Investing activities	(42,654)		(29,935)
Financing activities	Financing activities	(60,418)		(28,175)		Financing activities	(42,152)		(38,953)
Net increase in cash and cash equivalents		(790)		1,512
Net (decrease) increase in cash and cash equivalents						Net (decrease) increase in cash and cash equivalents	(3,139)		232
Cash and cash equivalents—beginning of period	Cash and cash equivalents—beginning of period	4,976		3,499		Cash and cash equivalents—beginning of period	6,204		4,976
Cash and cash equivalents—end of period	Cash and cash equivalents—end of period	$	4,186	$	5,011	Cash and cash equivalents—end of period	$	3,065	$	5,208

Cash Flows Provided Byby Operating Activities

Changes in our cash flows from operating activities are attributable primarily to changes in net income, adjusted for non-cash items such as depreciation and changes in deferred income taxes, and working capital. Working capital requirements are determined by a variety of factors, including weather, the prices of natural gas, electricity and propane, the timing of customer collections, payments for purchases of natural gas, electricity and propane, and deferred fuel cost recoveries.

During the ~~six~~three months ended ~~June 30, 2022,~~March 31, 2023, net cash provided by operating activities was ~~$123.8~~$81.7 million. Operating cash flows were primarily impacted by the following:

•Net income, adjusted for non-cash adjustments, provided a ~~$92.0~~$58.1 million source of cash;

•~~An increased level of deferred taxes associated with incremental tax depreciation from growth investments resulted in a source of cash of $11.4 million;~~

•Changes in net regulatory assets and liabilities due primarily to the change in fuel costs collected through the various cost recovery mechanisms resulted in a ~~$6.4~~$24.6 million ~~outflow~~inflow of cash;

•A net increase in income tax payable increased cash inflows by $10.1 million;

•An increased level of deferred taxes associated with incremental tax depreciation from growth investments resulted in a source of cash of $2.5 million; and

•Other working capital changes, impacted primarily by propane inventory purchases and hedging activities, resulted in a ~~$21.7~~$13.5 million use of ~~cash; and~~

•~~A decrease in income tax receivables increased cash inflows by $5.1 million.~~cash.

Cash Flows Used in Investing Activities

Net cash used in investing activities totaled ~~$64.2~~$42.7 million during the ~~six~~three months ended ~~June 30, 2022,~~March 31, 2023, largely driven by ~~$65.1~~$42.4 million for new capital expenditures.

Cash Flows Used in Financing Activities

Net cash used in financing activities totaled ~~$60.4~~$42.2 million during the ~~six~~three months ended ~~June 30, 2022. Net cash used in financing activities:~~March 31, 2023 and included the following:

•~~Repayments~~Net repayments under ~~lines~~the Revolver of ~~credit resulted in a use of cash of $83.4~~$107.8 million;

•Net increase in long-term debt borrowings resulted in a source of cash of ~~$39.4~~$77.9 million to permanently finance investment in growth ~~initiatives, $49.9 million, offset by long-term repayments of $10.5 million;~~

•~~Source of cash of $4.3 million from issuance of stock under the DRIP;~~initiatives; and

•A use of cash of ~~$16.6~~$9.5 million for dividend payments in ~~2022.~~2023.

Off-Balance Sheet Arrangements

The Board of Directors has authorized us to issue corporate guarantees securing obligations of our subsidiaries and to obtain letters of credit securing our subsidiaries' obligations. The maximum authorized liability under such guarantees and letters of credit as of ~~June 30, 2022~~March 31, 2023 was $20.0 million. The aggregate amount guaranteed related to our subsidiaries at ~~June 30, 2022~~March 31, 2023 was ~~$11.4~~$14.2 million, with the guarantees expiring on various dates through ~~May 22, 2023.~~March 30, 2024. In addition, the Board has authorized us to issue specific purpose corporate guarantees. The amount of specific purpose guarantees outstanding at March 31, 2023 was $4.0 million.

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purpose corporate guarantees. The amount of specific purpose guarantees outstanding at June 30, 2022 was $2.0 million. In July 2022, in connection with the Florida rate case, we entered into a guarantee in the amount of $7.1 million with the Florida PSC.

As of ~~June 30, 2022,~~March 31, 2023, we have issued letters of credit totaling approximately ~~$5.3~~$5.8 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, to our current and previous primary insurance carriers. These letters of credit have various expiration dates through October 25, ~~2022.~~2023. We have not drawn upon these letters of credit as of ~~June 30, 2022~~March 31, 2023 and do not anticipate that the counterparties will draw upon these letters of credit. We expect that they will be renewed to the extent necessary in the future. Additional information is presented in Note 7, Other Commitments and Contingencies, in the condensed consolidated financial statements.

Contractual Obligations

There has been no material change in the contractual obligations presented in our ~~2021~~2022 Annual Report on Form 10-K, except for commodity purchase obligations entered into in the ordinary course of our business. The following table summarizes commodity purchase contract obligations at ~~June 30, 2022:~~March 31, 2023:


		Payments Due by Period											Payments Due by Period
		Less than 1 year		1 - 3 years		3 - 5 years		More than 5 years		Total			Less than 1 year		1 - 3 years		3 - 5 years		More than 5 years		Total
(in thousands)	(in thousands)											(in thousands)
Purchase obligations - Commodity (1)	Purchase obligations - Commodity (1)	$	45,935	$	40,058	$	—	$	—	$	85,993	Purchase obligations - Commodity (1)	$	15,493	$	854	$	—	$	—	$	16,347
Total	Total	$	45,935	$	40,058	$	—	$	—	$	85,993	Total	$	15,493	$	854	$	—	$	—	$	16,347

(1) In addition to the obligations noted above, we have agreements with commodity suppliers that have provisions with no minimum purchase requirements. There are no monetary penalties for reducing the amounts purchased; however, the propane contracts allow the suppliers to reduce the amounts available in the winter season if we do not purchase specified amounts during the summer season. Under these contracts, the commodity prices will fluctuate as market prices fluctuate.

Rates and Regulatory Matters

Our natural gas distribution operations in Delaware, Maryland and Florida and electric distribution operation in Florida are subject to regulation by the respective state PSC; Eastern Shore is subject to regulation by the FERC; and Peninsula Pipeline and Aspire Energy Express, our intrastate pipeline subsidiaries, are subject to regulation (excluding cost of service) by the Florida PSC and Public Utilities Commission of Ohio, respectively. We regularly are involved in regulatory matters in each of the jurisdictions in which we operate. Our significant regulatory matters are fully described in Note 5, Rates and Other Regulatory Activities, to the condensed consolidated financial statements in this Quarterly Report on Form 10-Q.

Recent Authoritative Pronouncements on Financial Reporting and Accounting

Recent accounting developments, applicable to us, and their impact on our financial position, results of operations and cash flows are described in Note 1, Summary of Accounting Policies, to the condensed consolidated financial statements in this Quarterly Report on Form 10-Q.

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Item 3. Quantitative and Qualitative Disclosures about Market Risk

INTEREST RATE RISK

Long-term debt is subject to potential losses based on changes in interest rates. We evaluate whether to refinance existing debt or permanently refinance existing short-term borrowings based in part on the fluctuation in interest rates. Increases in interest rates expose us to potential increased costs we could incur when we (i) issue new debt instruments or (ii) provide financing and liquidity for our business activities. We utilize interest rate swap agreements to mitigate short-term borrowing rate risk. Additional information about our long-term debt and short-term borrowing is disclosed in Note ~~15,~~14, Long-Term Debt, and Note ~~16,~~15, Short-Term Borrowings, respectively, in the condensed consolidated financial statements.

COMMODITY PRICE RISK

Regulated Energy Segment

We have entered into agreements with various wholesale suppliers to purchase natural gas and electricity for resale to our customers. Our regulated energy distribution businesses that sell natural gas or electricity to end-use customers have fuel cost recovery mechanisms authorized by the respective PSCs that allow us to recover all of the costs prudently incurred in purchasing natural gas and electricity for our customers. Therefore, our regulated energy distribution operations have limited commodity price risk exposure.

Unregulated Energy Segment

Our propane operations are exposed to commodity price risk as a result of the competitive nature of retail pricing offered to our customers. In order to mitigate this risk, we utilize propane storage activities and forward contracts for supply.

We can store up to approximately ~~8.9~~8.8 million gallons of propane (including leased storage and rail cars) during the winter season to meet our customers’ peak requirements and to serve metered customers. Decreases in the wholesale price of propane may cause the value of stored propane to decline, particularly if we utilize fixed price forward contracts for supply. To mitigate the risk of propane commodity price fluctuations on the inventory valuation, we have adopted a Risk Management Policy that allows our propane distribution operation to enter into fair value hedges, cash flow hedges or other economic hedges of our inventory.

Aspire Energy is exposed to commodity price risk, primarily during the winter season, to the extent we are not successful in balancing our natural gas purchases and sales and have to secure natural gas from alternative sources at higher spot prices. In order to mitigate this risk, we procure firm capacity that meets our estimated volume requirements and we continue to seek out new producers in order to fulfill our natural gas purchase requirements.

The following table reflects the changes in the fair market value of financial derivatives contracts related to propane purchases and sales from December 31, ~~2021~~2022 to ~~June 30, 2022:~~March 31, 2023:


(in thousands)	(in thousands)	Balance at December 31, 2021		Increase (Decrease) in Fair Market Value		Less Amounts Settled		Balance at June 30, 2022		(in thousands)	Balance at December 31, 2022		(Decrease) in Fair Market Value		Less Amounts Settled		Balance at March 31, 2023
Sharp	Sharp	$	6,334	$	(3,050)	$	3,061	$	6,345	Sharp	$	1,507	$	(1,183)	$	606	$	930

There were no changes in methods of valuations during the ~~six~~three months ended ~~June 30, 2022.~~March 31, 2023.

The following is a summary of fair market value of financial derivatives as of ~~June 30, 2022,~~March 31, 2023, by method of valuation and by maturity for each fiscal year period.


(in thousands)	(in thousands)	2022		2023		2024		Total Fair Value		(in thousands)	2023		2024		2025		Total Fair Value
Price based on Mont Belvieu - Sharp	Price based on Mont Belvieu - Sharp	$	1,723	$	3,446	$	1,176	$	6,345	Price based on Mont Belvieu - Sharp	$	305	$	658	$	(33)	$	930

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WHOLESALE CREDIT RISK

The Risk Management Committee reviews credit risks associated with counterparties to commodity derivative contracts prior to such contracts being approved.

Additional information about our derivative instruments is disclosed in Note ~~13,~~12, Derivative Instruments, in the condensed consolidated financial statements.

INFLATION

Inflation affects the cost of supply, labor, products and services required for operations, maintenance and capital improvements. To help cope with the effects of inflation on our capital investments and returns, we periodically seek rate increases from regulatory commissions for our regulated operations and closely monitor the returns of our unregulated energy business operations. To compensate for fluctuations in propane gas prices, we adjust propane sales prices to the extent allowed by the market.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The Chief Executive Officer and Chief Financial Officer of Chesapeake Utilities, with the participation of other Company officials, have evaluated our “disclosure controls and procedures” (as such term is defined under Rules 13a-15(e) and 15d-15(e), promulgated under the Securities Exchange Act of 1934, as amended) as of ~~June 30, 2022.~~March 31, 2023. Based upon their evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of ~~June 30, 2022.~~March 31, 2023.

Changes in Internal Control over Financial Reporting

During the quarter ended ~~June 30, 2022,~~March 31, 2023, there was no change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II—OTHER INFORMATION

Item 1. Legal Proceedings

As disclosed in Note 7, Other Commitments and Contingencies, of the condensed consolidated financial statements in this Quarterly Report on Form 10-Q, we are involved in certain legal actions and claims arising in the normal course of business. We are also involved in certain legal and administrative proceedings before various governmental or regulatory agencies concerning rates and other regulatory actions. In the opinion of management, the ultimate disposition of these proceedings and claims will not have a material effect on our condensed consolidated financial position, results of operations or cash flows.

Item 1A. Risk Factors

Our business, operations, and financial condition are subject to various risks and uncertainties. The risk factors described in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K, for the year ended December 31, ~~2021,~~2022, should be carefully considered, together with the other information contained or incorporated by reference in this Quarterly Report on Form 10-Q and in our other filings with the SEC in connection with evaluating Chesapeake Utilities, our business and the forward-looking statements contained in this Quarterly Report on Form 10-Q.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Total
Number of
Shares Average
Price Paid Total Number of Shares
Purchased as Part of
Publicly Announced Plans Maximum Number of
Shares That May Yet Be
Purchased Under the Plans
Period Purchased per Share
or Programs (2)
or Programs (2)
April 1, 2022
through April 30, 2022(1)
368 $ 142.10 — —
May 1, 2022
through May 31, 2022 — — — —
June 1, 2022
through June 30, 2022 — — — —
Total 368 $ 142.10 — —

Company Purchases of Equity Securities

Share repurchases during the three months ended March 31, 2023 were as follows:


	Total Number of Shares	Average Price Paid		Total Number of Shares Purchased as Part of Publicly Announced Plans	Maximum Number of Shares That May Yet Be Purchased Under the Plans
Period	Purchased	per Share		or Programs (2)	or Programs (2)
January 1, 2023 through January 31, 2023 (1)	503	$	114.94	—	—
February 1, 2023 through February 28, 2023	—	—		—	—
March 1, 2023 through March 31, 2023	—	—		—	—
Total	503	$	114.94	—	—

(1) Chesapeake Utilities purchased shares of common stock on the open market for the purpose of reinvesting the dividend on shares held in the Rabbi Trust accounts for certain directors and senior executives under the Non-Qualified Deferred Compensation Plan. The Non-Qualified Deferred Compensation Plan is discussed in detail in Item 8 under the heading “Notes to the Consolidated Financial Statements—Note 916, Employee Benefit Plans,” in our latest Annual Report on Form 10-K for the year ended December 31, ~~2021. During the quarter ended June 30, 2022, 368 shares were purchased through the reinvestment of dividends on deferred stock units.~~2022.

(2) Except for the purposes described in Footnote (1), Chesapeake Utilities has no publicly announced plans or programs to repurchase its shares.

Item 3. Defaults upon Senior Securities

None.

Item 5. Other Information

None.

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Item 6. Exhibits



3.1						Amended and Restated Bylaws of Chesapeake Utilities Corporation, effective May 3, 2023, are incorporated herein by reference to Exhibit 3.1 of our Current Report on Form 8-K, filed May 3, 2023, File No. 001-11590.

10.1						Chesapeake Utilities Corporation 2023 Stock and Incentive Compensation Plan, effective May 3, 2023 is incorporated herein by reference to our Proxy Statement filed March 21, 2023 in connection with our Annual Meeting held on May 3, 2023, File No. 001-11590.

31.1*						Certificate of Chief Executive Officer of Chesapeake Utilities Corporation pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.

31.2*						Certificate of Chief Financial Officer of Chesapeake Utilities Corporation pursuant to Rule 13a-14(a) under the Securities Exchange Act of ~~1934~~1934..

32.1*						Certificate of Chief Executive Officer of Chesapeake Utilities Corporation pursuant to 18 U.S.C. Section 1350.

32.2*						Certificate of Chief Financial Officer of Chesapeake Utilities Corporation pursuant to 18 U.S.C. Section 1350.

101.INS*						XBRL Instance Document.

101.SCH*						XBRL Taxonomy Extension Schema Document.

101.CAL*						XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF*						XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB*						XBRL Taxonomy Extension Label Linkbase Document.

101.PRE*						XBRL Taxonomy Extension Presentation Linkbase Document.

104						Cover Page Interactive Data File - formatted in Inline XBRL and contained in Exhibit 101

*Filed herewith

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


CHESAPEAKE UTILITIES CORPORATION

/S/ BETH W. COOPER
Beth W. Cooper Executive Vice President, Chief Financial Officer, Treasurer and Assistant Corporate Secretary

Date: ~~August~~May 3, ~~2022~~2023

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	Three months ended June 30, 2022								Three months ended June 30, 2021
(in thousands)	Regulated Energy		Unregulated Energy		Other and Eliminations		Total		Regulated Energy		Unregulated Energy		Other and Eliminations		Total
Energy distribution
Delaware natural gas division	$	13,086	$	—	$	—	$	13,086	$	10,068	$	—	$	—	$	10,068
Florida natural gas division	9,619		—		—		9,619		8,446		—		—		8,446
FPU electric distribution	20,305		—		—		20,305		18,898		—		—		18,898
FPU natural gas distribution	25,817		—		—		25,817		23,159		—		—		23,159
Maryland natural gas division	4,372		—		—		4,372		3,224		—		—		3,224
Sandpiper natural gas/propane operations	4,248		—		—		4,248		3,814		—		—		3,814
Elkton Gas	1,705		—		—		1,705		1,195		—		—		1,195
Total energy distribution	79,152		—		—		79,152		68,804		—		—		68,804
Energy transmission
Aspire Energy	—		10,808		—		10,808		—		5,578		—		5,578
Aspire Energy Express	369		—		—		369		47		—		—		47
Eastern Shore	18,875		—		—		18,875		18,617		—		—		18,617
Peninsula Pipeline	6,777		—		—		6,777		6,610		—		—		6,610
Total energy transmission	26,021		10,808		—		36,829		25,274		5,578		—		30,852
Energy generation
Eight Flags	—		5,916		—		5,916		—		4,173		—		4,173
Propane operations
Propane delivery operations	—		34,469		—		34,469		—		23,098		—		23,098
Compressed Natural Gas Services
Marlin Gas Services	—		2,380		—		2,380		—		1,989		—		1,989
Other and eliminations
Eliminations	(12,980)		(110)		(6,271)		(19,361)		(13,168)		(65)		(4,734)		(17,967)
Other	—		—		85		85		—		—		133		133
Total other and eliminations	(12,980)		(110)		(6,186)		(19,276)		(13,168)		(65)		(4,601)		(17,834)

Total operating revenues (1)	$	92,193	$	53,463	$	(6,186)	$	139,470	$	80,910	$	34,773	$	(4,601)	$	111,082


	Six Months Ended June 30, 2022								Six Months Ended June 30, 2021
(in thousands)	Regulated Energy		Unregulated Energy		Other and Eliminations		Total		Regulated Energy		Unregulated Energy		Other and Eliminations		Total
Energy distribution
Delaware natural gas division	$	47,568	$	—	$	—	$	47,568	$	43,340	$	—	$	—	$	43,340
Florida natural gas division	19,885		—		—		19,885		17,402		—		—		17,402
FPU electric distribution	39,394		—		—		39,394		37,449		—		—		37,449
FPU natural gas distribution	55,837		—		—		55,837		50,020		—		—		50,020
Maryland natural gas division	14,836		—		—		14,836		13,690		—		—		13,690
Sandpiper natural gas/propane operations	11,885		—		—		11,885		11,885		—		—		11,885
Elkton Gas	5,071		—		—		5,071		3,830		—		—		3,830
Total energy distribution	194,476		—		—		194,476		177,616		—		—		177,616
Energy transmission
Aspire Energy	—		28,844		—		28,844		—		18,484		—		18,484
Aspire Energy Express	632		—		—		632		93		—		—		93
Eastern Shore	39,196		—		—		39,196		38,589		—		—		38,589
Peninsula Pipeline	13,549		—		—		13,549		13,077		—		—		13,077
Total energy transmission	53,377		28,844		—		82,221		51,759		18,484		—		70,243
Energy generation
Eight Flags	—		11,455		—		11,455		—		8,502		—		8,502
Propane operations
Propane delivery operations	—		110,075		—		110,075		—		78,361		—		78,361
Compressed Natural Gas Services
Marlin Gas Services	—		4,589		—		4,589		—		4,340		—		4,340
Other and eliminations
Eliminations	(27,769)		(207)		(12,706)		(40,682)		(27,268)		(156)		(9,635)		(37,059)
Other	—		—		216		216		—		—		265		265
Total other and eliminations	(27,769)		(207)		(12,490)		(40,466)		(27,268)		(156)		(9,370)		(36,794)

Total operating revenues (1)	$	220,084	$	154,756	$	(12,490)	$	362,350	$	202,107	$	109,531	$	(9,370)	$	302,268


(in thousands)
As of December 31, 2020	$	(5,146)	$	2,309	$	(28)	$	(2,865)
Other comprehensive income before reclassifications	—		5,825		23		5,848
Amounts reclassified from accumulated other comprehensive income/(loss)	128		(2,534)		(19)		(2,425)
Net prior-period other comprehensive income	128		3,291		4		3,423
As of June 30, 2021	$	(5,018)	$	5,600	$	(24)	$	558


For the Three Months Ended June 30, 2022	Chesapeake Pension Plan		FPU Pension Plan		Chesapeake SERP		Chesapeake Postretirement Plan		FPU Medical Plan		Total
(in thousands)
Prior service credit	$	—	$	—	$	—	$	(19)	$	—	$	(19)
Net loss	—		124		7		12		—		143
Total recognized in net periodic benefit cost	—		124		7		(7)		—		124
Recognized from accumulated other comprehensive (income)/loss (1)	—		24		7		(7)		—		24
Recognized from regulatory asset	—		100		—		—		—		100
Total	$	—	$	124	$	7	$	(7)	$	—	$	124


For the Six months ended June 30, 2022	Chesapeake Pension Plan		FPU Pension Plan		Chesapeake SERP		Chesapeake Postretirement Plan		FPU Medical Plan		Total
(in thousands)
Prior service credit	$	—	$	—	$	—	$	(38)	$	—	$	(38)
Net loss	—		248		14		24		—		286
Total recognized in net periodic benefit cost	—		248		14		(14)		—		248
Recognized from accumulated other comprehensive (income)/loss (1)	—		48		14		(14)		—		48
Recognized from regulatory asset	—		200		—		—		—		200
Total	$	—	$	248	$	14	$	(14)	$	—	$	248


		Amount of Gain (Loss) on Derivatives:
	Location of Gain	For the Three Months Ended June 30,				For the Six Months Ended June 30,
(in thousands)	(Loss) on Derivatives	2022		2021		2022		2021
Derivatives not designated as hedging instruments
Propane swap agreements	Unregulated propane and natural gas costs	$	—	$	—	$	56	$	—
Derivatives designated as fair value hedges
Propane put options	Unregulated propane and natural gas costs	—		—		—		(24)
Derivatives designated as cash flow hedges
Propane swap agreements	Revenues	—		—		(826)		—
Propane swap agreements	Unregulated propane and natural gas costs	283		455		3,830		3,502
Propane swap agreements	Other comprehensive income (loss)	(686)		4,319		28		4,548
Interest rate swap agreements	Interest expense	—		22		—		26
Interest rate swap agreements	Other comprehensive income	—		8		—		5


Total		$	(403)	$	4,804	$	3,088	$	8,057