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, 2020,
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 that do not directly or
exclusively relate to historical facts. Such statements are "forward-looking
statements" within the meaning of 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, uncertainties and other important factors
that could cause actual future results to differ materially from those expressed
in the forward-looking statements. In addition to the risk factors described
under Item 1A, Risk Factors in our 2020 Annual Report on Form 10-K, such factors
include, but are not limited to:
•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;
•the availability to materials necessary to construct new capital projects;
•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 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;
•the ability to continue to hire, train and retain appropriately qualified
personnel;

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•the effect of accounting pronouncements issued periodically by accounting
standard-setting bodies; and
•risks related to the outbreak of a pandemic, including the duration and scope
of the pandemic and the corresponding impact on our supply chains, our
personnel, our contract counterparties, general economic conditions and growth,
and the financial markets.

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 utility foundation and
investing in related businesses and services that provide opportunities for
returns greater than traditional utility returns. We are focused on identifying
and developing 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.
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, new pipeline expansions, and new products and services as well as
increased opportunities for collaboration and efficiencies across the organization as a
result of our ongoing business transformation.
•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 and complementary business
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 renewable energy opportunities.


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 normally highest due to colder temperatures.
The following discussions and those later in the document on operating income
and segment results include the use of the term "gross margin," which is
determined by deducting the cost of sales from operating revenue. Cost of sales
includes the purchased cost of natural gas, electricity and propane and the cost
of labor spent on direct revenue-producing activities, and excludes
depreciation, amortization and accretion. Gross margin should not be considered
an alternative to operating income or net income, which are determined in
accordance with GAAP. We believe that 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 unregulated energy
operations. Our management uses gross margin in measuring our business units'
performance and has historically analyzed and reported gross margin information
publicly. Other companies may calculate gross margin in a different manner.
Earnings per share information is presented for continuing operations on a
diluted basis, unless otherwise noted.




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Results of Operations for the Three and Nine Months Ended September 30, 2021 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 Delmarva Peninsula and in Florida, Pennsylvania and
Ohio 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.

In March 2020, the U.S. Centers for Disease Control and Prevention ("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 in
2020 and have continued throughout 2021. We are considered an "essential
business," which has allowed us to continue operational activities and
construction projects while adhering to the safety procedures intended to limit
the spread of the virus. At this time, restrictions continue to be lifted as
vaccines have become widely available in the United States. For example, the
state of emergency in Florida was terminated in May 2021 followed by Delaware
and Maryland in July 2021, resulting in reduced restrictions. The expiration of
the states of emergency in our service territories has concluded our ability to
defer incremental pandemic related costs for consideration through the
applicable regulatory process. Despite these positive state orders and in light
of the continued emergence and growing prevalence of new variants of COVID-19,
we continue to operate under our pandemic response plan, monitor developments
affecting employees, customers, suppliers, stockholders and take all precautions
warranted to operate safely and to comply with the CDC, and the Occupational
Safety and Health Administration, in order to protect our employees, customers
and the communities we serve.

Impacts from the restrictions imposed in our service territories and the
implementation of our pandemic response plan, included reduced consumption of
energy largely in the commercial and industrial sectors, higher bad debt
expenses and incremental expenses associated with COVID-19, including personal
protective equipment and premium pay for field personnel. The additional
operating expenses we incurred support the ongoing delivery of our essential
services during these unprecedented times. Refer to Note 5, Rates and Other
Regulatory Activities, for further information on the regulated assets
established as a result of the incremental expenses incurred associated with
COVID-19.

Environmental, Social and Governance Initiatives



ESG initiatives are embedded within Chesapeake Utilities culture and are an
integral part of our strategy. ESG is at the core of our well-established
culture and our informed business decisions. Over the years, we have reduced our
greenhouse gas emissions, while responsibly growing our businesses. We have also
helped to accelerate the reduction of emissions by many of our customers Our
combined efforts have enhanced the sustainability of our local communities. We
look forward to publishing our inaugural Corporate Responsibility and
Sustainability Report which will include, but not be limited to, several of the
areas described below.

Advancing Environmental Initiatives
We are pursuing a three-part action plan that supports decarbonization and a
lower carbon energy future. First, we are taking actions that will continue to
reduce our greenhouse gas emissions. For example, we have largely completed our
Florida GRIP to replace older portions of our natural gas distribution system.
The remaining capital expenditures associated with this program will be invested
through 2022. Our Elkton Gas subsidiary also reached a settlement agreement with
the Maryland PSC to accelerate its Aldyl-A pipeline replacement program and to
recover the costs of the plan in the form of a fixed charge rider through a
5-year surcharge. Throughout our pipeline system, we have also implemented
improved emission detection technology at our pipeline compressor stations.

The second component of our action plan is providing services and support to our
customers who are reducing their greenhouse gas emissions. Our extension from
Eastern Shore's Del-Mar Energy Pathway Project, which was recently completed,
brings natural gas to our distribution system in Somerset County, Maryland for
the first time. As part of this project, our services enable the conversion by
two significant industrial customers in Somerset County from less
environmentally friendly fuel sources, including in one case, wood chips.
Similarly, several of our commercial customers continue to convert their vehicle
fleet to compressed natural gas or propane, further reducing their greenhouse
gas emissions and positively impacting the environment.

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We continue to see significant demand for new natural gas service in both our
Delmarva and Florida territories, with our growth rates more than double the
industry's growth rates. In many of our local markets, natural gas is a cleaner
fuel option than alternative energy sources. Natural gas is an important
component of the country's energy transition and we are committed to responsibly
expanding the infrastructure in our growing service areas.

RNG opportunities with ongoing projects to transform landfill, food, dairy and
poultry waste into usable energy. The development of several RNG projects is the
third component of our action plan. Our participation in these projects extends
from transporting the RNG to market by pipeline or our Marlin Gas Services
compressed natural gas trailers, to potential investments in biogas plants and,
in some cases, the solar energy facilities to provide electricity to the plants
and significantly improve the RNG carbon intensity score. In October 2021, we
completed construction of the Noble Road Landfill Renewable Natural Gas pipeline
project. This is our first RNG transportation project and, when combined with
our previously announced projects, will expand our ability to utilize RNG in our
services territories. We are continuing to actively consider other renewable
projects and the potential of increasing the number of RNG projects in our
diversified energy portfolio. We are committed to remaining disciplined in our
approach by pursuing projects that meet our return thresholds and strategic
goals.

We also have several other initiatives underway, including plans to add
additional small solar facilities along our system, and our participation in a
pilot program to blend hydrogen into the natural gas distribution system that
serves our Eight Flags combined heat and power plant. We are optimistic about
this pilot program and believe that hydrogen will continue to gain in efficiency
and become more price competitive over time.

To finance these projects, we are working with many of our key banking partners
to utilize sustainable financing capacity at attractive pricing. Just recently,
we secured $9.6 million in sustainability linked financing from Bank of America
to fund capital investments in energy delivery solutions provided by our
subsidiary, Marlin Gas Services.

Advancing Social Initiatives
Promoting equity, diversity and inclusion ("EDI"). Our success is the direct
result of our employees and our strong culture that fully engages our team and
promotes equity, diversity, inclusion, integrity, accountability and
reliability. During the third quarter, we were recognized as a Top Workplace in
Delaware for the 10th consecutive year. This follows recognition as a Top
Workplace nationally earlier in the year. These recognitions are a testament to
our employees' commitment to excellence.

We believe that a combination of diverse team members and an inclusive culture
contributes to the success of our Company and to enhanced societal advancement.
During the third quarter, we were very excited to hire William Hughston as Vice
President and Chief Human Resources Officer. Mr. Hughston brings tremendous EDI
experience to the team, including drawing from his vast experience including his
previous role as Chief Diversity Officer. Additionally, in October 2021, we
announced the addition of our third female Director to our Board of Directors,
Lisa Bisaccia. Ms. Bisaccia's addition continues our steady progress of gender
and ethnic diversity that represents the communities we serve. Our Board of
Directors includes, three female directors, an African American director and a
director who is of Middle Eastern descent.

We established an EDI Council in 2020, complementing and broadening the work our
Women in Energy group started years ago. The Council oversees our efforts to
improve diversity in recruitment, employee development and advancement, cultural
awareness and related policies. These efforts are expanded through the broad
reach of our six Employee Resource Groups and other partnerships we have in the
community. Employees have access to communications and on-demand learning
sessions on an array of topics, including equity, diversity and inclusion,
through our "EDI Wise" webinars. We have also expanded our supplier diversity
program to gather information that will enable us to further expand, measure and
report on the diversity of our suppliers and associated spend.

Safety at the center of Chesapeake Utilities culture and the way we do business.
There is nothing more important than the safety of our team, our customers and
our communities. The importance of safety is exhibited throughout our
organization, with the direction and tone set by the Board of Directors and our
President and Chief Executive Officer. Employees are required to attend monthly
safety meetings and incorporate safety moments at operational and other
meetings. Thus far in 2021, four of our business units have been recognized with
awards from the American Gas Association for their commitment to safety.

The achievement of superior safety performance is both an important short and
long-term strategic initiative in managing our operations. Our new
state-of-the-art training center, named 'Safety Town,' provides employees
hands-on training and simulated on-the-job field experiences, further developing
our team and enhancing the reliability and integrity of our systems.

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Safety Town has also expanded our community outreach by offering safety training to many regional first responders. Our second Safety Town facility will be located in Florida and is in the final stages of planning.



Advancing Governance Initiatives
Commitment to sound governance practices. Consistent with our culture of
teamwork, the broad responsibility of ESG stewardship is supported across our
organization by the dedication and efforts of the Board and its Committees, as
well as the entrepreneurship and dedication of our team. As stewards of
long-term enterprise value, the Board is committed to overseeing the
sustainability of the Company. The Board and Corporate Governance Committee
annually review our corporate governance documents and practices to ensure that
they provide the appropriate framework under which we operate. In recent years,
we have received national recognition as the Governance Team of the Year, and
just this year were also recognized as Best for Corporate Governance Among North
American Utilities by Ethical Boardroom magazine. To learn more about our
corporate governance practices and transparency, stakeholder engagement, the
experience and diversity of our Board members, and our Business Code of Ethics
and Conduct, which highlights our commitment to the highest ethical standards
and the importance of engaging in sustainable practices, please view our Proxy
Statement filed with the Securities and Exchange Commission on March 22, 2021.
Additionally, please view Chesapeake Utilities' news releases and historical
quarterly earnings conference calls for additional discussions on ESG and our
sustainability practices.

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Operational Highlights



Our net income for the three months ended September 30, 2021 was $12.5 million,
or $0.71 per share, compared to $9.3 million, or $0.56 per share, for the same
quarter of 2020. Operating income for the three months ended September 30, 2021
increased by $2.7 million, or 15.6 percent, over the same period in 2020. During
the third quarter of 2020, we settled the Hurricane Michael limited proceeding
which resulted in $1.9 million in operating income being recognized that related
to the first and second quarters of 2020. Excluding the absence of this timing
difference, operating income increased $4.6 million compared to the third
quarter of 2020. Higher performance in the third quarter of 2021 was generated
from continued pipeline expansion projects, contributions from the 2020
acquisitions of Elkton Gas and Western Natural Gas, higher margins from
consumption returning toward pre-pandemic levels, natural gas distribution
growth, increased propane margins, and margin growth from increased investment
in the Florida GRIP program. We recorded higher depreciation, amortization and
property taxes related to recent capital investments and operating expenses
associated primarily with growth initiatives, including payroll, benefits and
other employee-related expenses. These expense increases were largely offset by
$3.0 million of lower pandemic related costs and the establishment of regulatory
assets for COVID-19 expenses.

                                                                       Three Months Ended
                                                                          September 30,                   Increase
                                                                     2021               2020             (decrease)
(in thousands except per share)
Gross Margin
 Regulated Energy segment                                        $   65,102          $ 66,491          $    (1,389)
 Unregulated Energy segment                                          14,897            13,068                1,829
Other businesses and eliminations                                       (28)              (51)                  23
Total Gross Margin                                               $   79,971          $ 79,508          $       463

Operating Income
Regulated Energy segment                                         $   23,538          $ 20,482          $     3,056
Unregulated Energy segment                                           (2,883)           (3,092)                 209
Other businesses and eliminations                                      (542)               16                 (558)
Total Operating Income                                               20,113            17,406                2,707
Other income (expense), net                                             339               (40)                 379
Interest charges                                                      4,975             4,584                  391
Income from Continuing Operations Before Income Taxes                15,477            12,782                2,695
Income Taxes on Continuing Operations                                 2,993             3,502                 (509)
Income from Continuing operations                                    12,484             9,280                3,204
Income (Loss) from Discontinued Operations, net of tax                   (9)              (19)                  10
Net Income                                                       $   12,475          $  9,261          $     3,214
Basic Earnings Per Share of Common Stock
Earnings from Continuing Operations                              $     0.71          $   0.56          $      0.15
Earnings from Discontinued Operations                                     -                 -                    -
Basic Earnings Per Share of Common Stock                         $     0.71          $   0.56          $      0.15
Diluted Earnings Per Share of Common Stock
Earnings from Continuing Operations                              $     0.71          $   0.56          $      0.15
Earnings from Discontinued Operations                                     -                 -                    -
Diluted Earnings Per Share of Common Stock                       $     0.71          $   0.56          $      0.15



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Key variances in continuing operations, between the third quarter of 2021 and the third quarter of 2020, included:


                                                                    Pre-tax             Net             Earnings
(in thousands, except per share data)                               Income            Income            Per Share

Third Quarter of 2020 Reported Results from Continuing Operations

$ 12,782

$ 9,280 $ 0.56

Adjusting for Unusual Items: Absence of timing of Hurricane Michael Settlement (first and second quarter 2020 impacts recorded in the third quarter of 2020)

                                                    (1,933)           (1,444)              (0.08)
Regulatory deferral of COVID-19 expenses per PSCs orders             2,437             1,821                0.10

Favorable income tax impact associated the CARES Act recognized during the third quarter of 2021

                              -               922                0.05
                                                                       504             1,299                0.07

Increased (Decreased) Gross Margins:
Increased retail propane margins and fees                              994               743                0.04
Margin contributions from 2020 and 2021 acquisitions*                  855               638                0.04
Eastern Shore and Peninsula Pipeline service expansions*               795               594                0.03
Improved margin from electric operations                               653               488                0.03
Natural gas growth (excluding service expansions)                      620               463                0.03

Increased customer consumption - primarily due to a return toward pre-pandemic conditions

                                         536               400                0.02
Florida GRIP*                                                          475               355                0.02
                                                                     4,928             3,681                0.21

(Increased) Decreased Operating Expenses (Excluding Cost of Sales): Depreciation, amortization and property tax costs due to new capital investments

                                             (1,715)           (1,281)              (0.07)
Payroll, benefits and other employee-related expenses               (1,317)             (984)              (0.06)

Operating expenses for Elkton Gas and Western Natural Gas acquisitions

                                                          (531)             (397)              (0.02)
Net reduction in expenses associated with the COVID-19
pandemic                                                               608               454                0.03
                                                                    (2,955)           (2,208)              (0.12)

Other income tax effects                                                 -               269                0.02
Net other changes                                                      218               163                   -

Change in shares outstanding due to 2020 and 2021 equity offerings

                                                                -                 -               (0.03)
                                                                       218               432               (0.01)

Third Quarter of 2021 Reported Results from Continuing Operations

$ 15,477

$ 12,484 $ 0.71

*See the Major Projects and Initiatives table.





Our net income for the nine months ended September 30, 2021 was $60.8 million,
or $3.45 per share, compared to $49.1 million, or $2.97 per share, for the same
period of 2020. Operating income for the nine months ended September 30, 2021
increased by $16.8 million, or 21.6 percent, over the same period in 2020. The
growth in 2021 reflects increased consumption driven primarily by colder weather
compared to the same period of 2020, expansion projects and acquisitions
completed in 2020. Further contributing to the improved performance in the first
nine months of 2021 was organic growth, consumption returning to pre-pandemic
levels, increased propane margins, increased margins from investment in the
Florida GRIP program, and the impact of the Hurricane Michael regulatory
proceeding settlement. These margin increases were partially offset by higher
depreciation, amortization and property taxes related to recent capital
investments and operating expenses associated primarily with growth initiatives
and a return toward pre-pandemic operating levels, including payroll, benefits
and other employee-related expenses and outside services costs. The operating
expense increases were partially offset by $2.3 million decrease in pandemic
related costs compared to 2020 and the establishment of regulatory assets for
COVID-19 expenses as approved by the PSCs.

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                                                                        Nine Months Ended
                                                                          September 30,                   Increase
                                                                     2021               2020             (decrease)
(in thousands except per share)
Gross Margin
 Regulated Energy segment                                        $ 209,718          $ 191,745          $    17,973
 Unregulated Energy segment                                         71,625             61,883                9,742
Other businesses and eliminations                                     (102)              (210)                 108
Total Gross Margin                                               $ 281,241          $ 253,418          $    27,823

Operating Income
Regulated Energy segment                                         $  79,210          $  66,376          $    12,834
Unregulated Energy segment                                          15,777             11,050                4,727
Other businesses and eliminations                                     (699)                92                 (791)
Total Operating Income                                              94,288             77,518               16,770
Other income, net                                                    2,180              2,997                 (817)
Interest charges                                                    15,134             15,452                 (318)
Income from Continuing Operations Before Income Taxes               81,334             65,063               16,271
Income Taxes on Continuing Operations                               20,563             16,082                4,481
Income from Continuing operations                                   60,771             48,981               11,790
Income (Loss) from Discontinued Operations                             (17)               165                 (182)
Net Income                                                       $  60,754          $  49,146          $    11,608
Basic Earnings Per Share of Common Stock
Earnings from Continuing Operations                              $    3.46          $    2.97          $      0.49
Earnings from Discontinued Operations                                    -               0.01                (0.01)
Basic Earnings Per Share of Common Stock                         $    3.46          $    2.98          $      0.48
Diluted Earnings Per Share of Common Stock
Earnings from Continuing Operations                              $    3.45          $    2.96          $      0.49
Earnings from Discontinued Operations                                    -               0.01                (0.01)
Diluted Earnings Per Share of Common Stock                       $    3.45          $    2.97          $      0.48





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Key variances in continuing operations, between the nine months ended September 30, 2021 and the nine months ended September 30, 2020, included:


                                                                    Pre-tax             Net             Earnings
(in thousands, except per share data)                               Income            Income            Per Share

Nine Months Ended September 30, 2020 Reported Results from Continuing Operations

$ 65,063

$ 48,981 $ 2.96



Adjusting for Unusual Items:
Regulatory deferral of COVID-19 expenses per PSCs orders             3,312             2,437                0.14
Gains from sales of assets                                          (1,563)           (1,150)              (0.07)

Net impact of CARES Act items recognized during the second quarter of 2020 and third quarter of 2021

                                -              (748)              (0.06)
                                                                     1,749               539                0.01
Increased (Decreased) Gross Margins:
Increased customer consumption - primarily weather related           6,485             4,772                0.27
Eastern Shore and Peninsula Pipeline service expansions*             6,037             4,442                0.25
Margin contributions from 2020 and 2021 acquisitions*                3,936             2,896                0.16
Increased propane margins and fees                                   2,712             1,995                0.11

Increased customer consumption - primarily due to a return toward pre-pandemic conditions

                                       2,280             1,677                0.10
Natural gas growth (excluding service expansions)                    2,237             1,646                0.09
Florida GRIP*                                                        1,408             1,036                0.06
Improved margin from electric operations                               931               685                0.04

Aspire Energy improved margin including natural gas liquid processing

                                                             897               660                0.04
Sandpiper infrastructure rider associated with conversions             624               459                0.04
                                                                    27,547            20,268                1.16

(Increased) Decreased Operating Expenses (Excluding Cost of Sales): Depreciation, amortization and property tax costs due to new capital investments

                                             (5,802)           (4,269)              (0.24)

Payroll, benefits and other employee-related expenses due to growth

                                                           (4,679)           (3,443)              (0.20)

Operating expenses for Elkton Gas and Western Natural Gas acquisitions

                                                        (2,499)           (1,839)              (0.10)

Net increase in operating expenses associated with a return toward pre-pandemic conditions

                                        (969)             (713)              (0.04)
Insurance expense (non-health)                                        (420)             (309)              (0.02)
                                                                   (14,369)          (10,573)              (0.60)

Other income tax effects                                                 -               554                0.03
Net other changes                                                    1,344             1,002                0.07

Change in shares outstanding due to 2020 and 2021 equity offerings

                                                                -                 -               (0.18)
                                                                     1,344             1,556               (0.08)

Nine Months Ended September 30, 2021 Reported Results from Continuing Operations

$ 81,334

$ 60,771 $ 3.45

*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 margin
contributions are removed from the table. In the future, we will add new
projects and initiatives to this table once negotiations are substantially
completed and the associated earnings can be estimated.
                                                                            

Gross Margin for the Period


                                       Three Months Ended                    Nine Months Ended                Year Ended                  Estimate for
                                          September 30,                        September 30,                 December 31,                    Fiscal
in thousands                         2021               2020               2021              2020                2020                2021              2022
Pipeline Expansions:
Western Palm Beach County,
Florida Expansion (1)            $    1,175          $  1,020          $  

3,515 $ 2,988 $ 4,167 $ 4,811 $ 5,227 Del-Mar Energy Pathway (1) (2) 1,049

               924              2,854             1,565                 2,462             4,578             

6,708


Callahan Intrastate Pipeline (2)
(3)                                   1,893             1,378              5,673             1,452                 2,926             7,564             7,564
Guernsey Power Station                   47                 -                141                 -                     -               404             1,486
Winter Haven Expansion                    -                 -                  -                 -                     -                 -               658
Beachside Pipeline Expansion              -                 -                  -                 -                     -                 -                 -
Total Pipeline Expansions             4,164             3,322             12,183             6,005                 9,555            17,357            21,643

CNG Transportation                    1,598             1,592              5,383             5,047                 7,231             7,300             8,500

RNG Transportation                        -                 -                  -                 -                     -                86             1,000

Acquisitions:
Elkton Gas                              590               357              2,648               357                 1,344             3,900             4,113
  Western Natural Gas                   372                 -              1,312                 -                   389             2,066             2,251
Escambia Meter Station                  250                 -                333                 -                     -               583             1,000
Total Acquisitions                    1,212               357              4,293               357                 1,733             6,549             7,364

Regulatory Initiatives:
Florida GRIP                          4,306             3,831             12,543            11,135                15,178            16,950            18,797
Hurricane Michael Regulatory
Proceeding                            3,264             8,261              8,984             8,261                10,864            11,014            11,014
Capital Cost Surcharge Programs         433               129                690               389                   523             1,186             1,985
Elkton STRIDE Plan                        -                 -                  -                 -                     -                45               299
Total Regulatory Initiatives          8,003            12,221             22,217            19,785                26,565            29,195            32,095

Total                            $   14,977          $ 17,492          $  44,076          $ 31,194          $     45,084          $ 60,487          $ 70,602

(1) Includes gross margin generated from interim services. (2) Includes gross margin from natural gas distribution services. (3) Prior quarter amounts have been revised to conform to the current period presentation.

Detailed Discussion of Major Projects and Initiatives

Pipeline Expansions



West Palm Beach County, Florida Expansion
Peninsula Pipeline is constructing 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 and generated
incremental gross margin of $0.2 million and $0.5 million for the three and nine
months ended September 30, 2021, respectively, compared to 2020. We expect to
complete the remainder of the project in phases through the fourth quarter of
2021, and estimate that the project will generate annual gross margin of $4.8
million in 2021 and $5.2 million annually thereafter.


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Del-Mar Energy Pathway
In December 2019, the FERC issued an order approving the construction of the
Del-Mar Energy Pathway project. Eastern Shore recently completed this project.
The new facilities: (i) ensure an additional 14,300 Dekatherms per day ("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. Construction of the project began in January 2020.
Including interim services, this project generated additional gross margin of
$0.1 million and $1.3 million for the three and nine months ended September 30,
2021, respectively. The estimated annual gross margin from this project,
including initial natural gas distribution service in Somerset County, Maryland,
is approximately $4.6 million in 2021 and $6.7 million annually thereafter.

Callahan Intrastate Pipeline
Peninsula Pipeline completed the construction of a jointly owned intrastate
transmission pipeline with Seacoast Gas Transmission in Nassau County, Florida
in June 2020. The 26-mile pipeline serves growing demand for energy in both
Nassau and Duval Counties. For the three and nine months ended September 30,
2021, the project generated $0.5 million and $4.2 million, respectively, in
additional gross margin, which includes margin from natural gas distribution
service. The estimated annual gross margin from this project, including natural
gas distribution service, is approximately $7.6 million in 2021 and beyond.

Guernsey Power Station
Guernsey Power Station and our affiliate, Aspire Energy Express, entered into a
precedent firm transportation capacity agreement whereby Guernsey Power Station
will construct a power generation facility and Aspire Energy Express will
provide firm natural gas transportation service to this facility. Guernsey Power
Station commenced construction of the project in October 2019. In the second
quarter of 2021, Aspire Energy Express commenced construction of the gas
transmission facilities to provide the firm transportation service to the power
generation facility. For the nine months ended September 30, 2021, we recognized
approximately $0.1 million, slightly lower than originally estimated as a result
of a construction delay in the project. The project is expected to be in service
in the fourth quarter of 2021, and produce gross margin of approximately $0.4
million in 2021 and $1.5 million in 2022 and beyond.

Winter Haven Expansion
In May 2021, Peninsula Pipeline filed a petition with the Florida PSC for
approval of its Transportation Service Agreement with CFG 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 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 in the area, including providing
service, most immediately, to a new can manufacturing facility, as well as
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. We expect
this expansion to generate additional gross margin of $0.7 million beginning in
2022 and 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 approximately 11.3 miles of pipeline from its existing pipeline
in the Sebastian, Florida, area east under the ICW and southward on the barrier
island. We expect this expansion to generate additional annual gross margin of
$2.5 million in 2023 and beyond.

CNG Transportation



Marlin Gas Services provides CNG temporary hold services, contracted pipeline
integrity services, emergency services for damaged pipelines and specialized gas
services for customers who have unique requirements. Marlin Gas Services
generated additional gross margin of $0.3 million on a year-to-date basis. We
estimate that Marlin Gas Services will generate annual gross margin of
approximately $7.3 million in 2021 and $8.5 million in 2022, with the potential
for additional growth in future years. Marlin Gas Services continues to actively
expand the territories it serves, as well as leverage its patented technology to
serve other markets, including pursuing liquefied natural gas transportation
opportunities and RNG transportation opportunities from diverse supply sources
to various pipeline interconnection points, as further outlined below.

RNG Transportation

Noble Road Landfill RNG Project
In September 2020, Fortistar and Rumpke Waste & Recycling announced commencement
of construction of the Noble Road Landfill RNG Project in Shiloh, Ohio. The
project includes the construction of a new state-of-the-art facility that will
utilize

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advanced, patented technology to treat landfill gas by removing carbon dioxide
and other components to purify the gas and produce pipeline quality RNG. In
October 2021, we announced that Aspire Energy had completed construction of its
Noble Road Landfill RNG pipeline project, a 33.1-mile pipeline, which will
transport RNG generated from the 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. Once flowing, the RNG volume
will 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.

At the present time, we expect to generate $0.1 million in 2021 in incremental
margin from these RNG transportation projects . Timing of incremental margin
from RNG transportation projects is dependent upon the construction schedules of
each project. As we continue to finalize contract terms and complete the
necessary permitting associated with each of these projects, additional
information will be provided regarding incremental margin. In addition to these
projects, the Company is continuing to pursue other RNG projects that provide
opportunities for the Company across the entire value chain.

Acquisitions

Elkton Gas
In July 2020, we closed on the acquisition of Elkton Gas, which provides natural
gas distribution service to approximately 7,000 residential and commercial
customers within a franchised area of Cecil County, Maryland. The purchase price
was approximately $15.6 million, which included $0.6 million of working capital.
Elkton Gas' territory is contiguous to our franchised service territory in Cecil
County, Maryland. For the three and nine months ended September 30, 2021, we
generated $0.2 million and $2.3 million, respectively, in additional gross
margin from Elkton Gas and estimate that this acquisition will generate gross
margin of approximately $3.9 million in 2021 and $4.1 million thereafter.

Western Natural Gas
In October 2020, Sharp acquired certain propane operating assets of Western
Natural Gas, which provides propane distribution service throughout
Jacksonville, Florida and the surrounding communities, for approximately $6.7
million, net of cash acquired. The acquisition was accounted for as a business
combination within our Unregulated Energy Segment in the fourth quarter of 2020.
We generated $0.4 million and $1.3 million in additional gross margin for the
three and nine months ended September 30, 2021, respectively, from Western
Natural Gas and we estimate that this acquisition will generate gross margin of
approximately $2.1 million in 2021 and grow to $2.3 million of gross margin in
2022, with additional opportunities for growth in the future.

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. We
generated $0.3 million in additional gross margin in the third quarter of 2021
and we estimate that this acquisition will generate gross margin of
approximately $0.6 million in 2021 and grow to $1.0 million of gross margin in
2022.




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Regulatory Initiatives

Florida GRIP
Florida GRIP is a natural gas pipe replacement program approved 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,
we have invested $183.6 million of capital expenditures to replace 337 miles of
qualifying distribution mains, including $17.7 million of new pipes during the
first nine months of 2021. We expect to generate annual gross margin of
approximately $17.0 million in 2021, and $18.8 million in 2022.

Hurricane Michael
In August 2019, FPU filed a limited proceeding requesting recovery of
storm-related costs associated with Hurricane Michael (capital and expenses)
through a change in base rates. In March 2020, we filed an update to our
original filing to account for actual charges incurred through December 2019,
revised the amortization period of the storm-related costs, and included costs
related to Hurricane Dorian.

In September 2019, FPU filed a petition with the Florida PSC, for approval of
its consolidated electric depreciation rates. The petition was joined to the
Hurricane Michael docket. The approved rates, which were part of the settlement
agreement in September 2020 that is described below, were retroactively applied
effective January 1, 2020.

In September 2020, the Florida PSC approved a settlement agreement between FPU
and the Office of the Public Counsel regarding final cost recovery and rates
associated with Hurricane Michael. Previously, in late 2019, the Florida PSC
approved an interim rate increase, subject to refund, effective January 1, 2020,
associated with the restoration effort following Hurricane Michael. We fully
reserved these interim rates, pending a final resolution and settlement of the
limited proceeding. The settlement agreement allowed us to: (a) refund the
over-collection of interim rates through the fuel clause; (b) record regulatory
assets for storm costs in the amount of $45.8 million including interest which
will be amortized over six years; (c) recover these storm costs through a
surcharge for a total of $7.7 million annually; and (d) collect an annual
increase in revenue of $3.3 million to recover capital costs associated with new
plant investments and a regulatory asset for the cost of removal and
undepreciated plant. The new base rates and storm surcharge were effective on
November 1, 2020. The following table summarizes the impact of the Hurricane
Michael regulatory proceeding for the three and nine months ended September 30,
2021:

                                                For the Three Months Ended             For the Nine Months Ended
                                                      September 30,                          September 30,

(in thousands)                                   2021              2020 (1)             2021               2020
Gross Margin                                 $    3,264          $   8,261          $    8,984          $  8,261
Depreciation                                       (305)              (883)               (913)             (883)
Amortization of regulatory assets                 2,079              6,238               6,237             6,238
Operating income                                  1,490              2,906               3,660             2,906
Amortization of liability associated with
interest expense                                   (293)            (1,132)               (930)           (1,132)
Pre-tax income                                    1,783              4,038               4,590             4,038
Income tax expense                                  451              1,106               1,213             1,106
Net income                                   $    1,332          $   2,932          $    3,377          $  2,932


(1) Amounts reflected for the quarter ended September 30, 2020 include the
cumulative effect of the Hurricane Michael settlement dating back to January 1,
2020.
Capital Cost Surcharge Programs
In December 2019, the FERC approved Eastern Shore's capital cost surcharge,
which became 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.
Eastern Shore expects to produce gross margin of approximately $1.2 million in
2021 and $2.0 million in 2022 from relocation projects, which is ultimately
dependent upon the timing of filings and the completion of construction.

Elkton Gas STRIDE Plan


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In March 2021, Elkton Gas filed a STRIDE plan with the Maryland PSC. The STRIDE
plan proposes to increase the speed of Elkton Gas' Aldyl-A pipeline replacement
program and to recover the costs of the plan in the form of a fixed charge rider
through a proposed 5-year surcharge. Under Elkton Gas' proposed STRIDE plan, the
Aldyl-A pipelines would be replaced by 2023. In June 2021, we reached a
settlement with the Maryland PSC Staff and the Maryland Office of the Peoples
Counsel. The STRIDE plan is expected to go into service in the fourth quarter of
2021 and is expected to generate $0.3 million of additional 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
will allow 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 Office of Public
Counsel 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 will amortize the amount over two years beginning
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 gross margin of $1.0 million that will be
offset by a corresponding amortization of regulatory asset expense for both 2022
and 2023.

Other major factors influencing gross margin
Weather Impact
Weather was not a significant factor in the third quarter. For the nine-month
period, weather conditions accounted for $6.5 million of increased gross margin
compared to the same period in 2020, primarily due to a 7.2 percent increase in
HDDs and a return to pre-pandemic conditions that resulted in increased customer
consumption. Assuming normal temperatures, as detailed below, gross margin would
have been higher by $1.3 million. The following table summarizes HDD and CDD
variances from the 10-year average HDD/CDD ("Normal") for the three and nine
months ended September 30, 2021 and 2020.
                                       Three Months Ended                                              Nine Months Ended
                                         September 30,                                                   September 30,
                                  2021                   2020               Variance              2021                   2020               Variance
Delmarva Peninsula
Actual HDD                            9                     43                 (34)               2,595                  2,416                 179
10-Year Average HDD
("Normal")                           47                     48                  (1)               2,736                  2,797                 (61)
Variance from Normal                (38)                    (5)                                    (141)                  (381)
Florida
Actual HDD                            1                      2                  (1)                 573                    412                 161
10-Year Average HDD
("Normal")                            1                      -                   1                  550                    613                 (63)
Variance from Normal                  -                      2                                       23                   (201)
Ohio
Actual HDD                           41                     86                 (45)               3,489                  3,383                 106
10-Year Average HDD
("Normal")                           78                     79                  (1)               3,660                  3,691                 (31)
Variance from Normal                (37)                     7                                     (171)                  (308)
Florida
Actual CDD                        1,330                  1,365                 (35)               2,340                  2,637                (297)
10-Year Average CDD
("Normal")                        1,402                  1,416                 (14)               2,563                  2,559                   4
Variance from Normal                (72)                   (51)                                    (223)                    78



Natural Gas Distribution 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 $0.6 million and $2.2 million of
additional margin for the three and nine months ended September 30, 2021,
respectively. The average number of residential customers served on the

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Delmarva Peninsula increased by 4.0 percent and 4.1 percent for the three and
nine months ended September 30, 2021, while Florida customers increased by and
4.7 percent and 5.0 percent, for the three and nine months ended September 30,
2021, respectively. A larger percentage of the 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, as new
communities continue to build out due to population growth, additional
infrastructure is added to support the growth. The details for the three and
nine months ended September 30, 2021 are provided in the following table:

                                      Three Months Ended                    Nine Months Ended
                                      September 30, 2021                    September 30, 2021
 (in thousands)                Delmarva Peninsula      Florida       Delmarva Peninsula       Florida
 Customer Growth:
 Residential                  $      226              $    208      $             1,049      $   788
 Commercial and industrial            84                   102                      183          217
 Total Customer Growth        $      310              $    310      $             1,232      $ 1,005




Regulated Energy Segment

For the quarter ended September 30, 2021, compared to the quarter ended
September 30, 2020:
                                     Three Months Ended
                                       September 30,             Increase
                                     2021           2020        (decrease)
(in thousands)
Revenue                          $   80,396      $ 82,762      $    (2,366)
Cost of sales                        15,294        16,271             (977)
Gross margin                         65,102        66,491           (1,389)
Operations & maintenance             24,477        26,364           (1,887)
Depreciation & amortization          12,296        15,314           (3,018)
Other taxes                           4,791         4,331              460
Total operating expenses             41,564        46,009           (4,445)
Operating income                 $   23,538      $ 20,482      $     3,056



Operating income for the Regulated Energy segment for the third quarter of 2021
was $23.5 million, an increase of $3.1 million, or 14.9 percent, over the same
period in 2020. During the third quarter of 2020, we settled the Hurricane
Michael limited proceeding, which resulted in $1.9 million in operating income
being recognized that related to the first and second quarters of 2020.
Excluding this timing difference, operating income increased $5.0 million
compared to the third quarter of 2020. Higher operating income reflects
continued pipeline expansions by Eastern Shore and Peninsula Pipeline, increased
consumption from a return toward pre-pandemic consumption levels, organic growth
in our natural gas distribution businesses, and operating results from the
Elkton Gas and Escambia Meter Station acquisitions completed in 2020 and 2021,
as well as lower expenses. Operating expenses decreased by $3.0 million compared
to the prior year quarter due to a lower level of overall pandemic related costs
compared to 2020 and the establishment of regulatory assets for COVID-19
expenses as authorized by the PSCs.

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


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(in thousands)
Margin impact from the Hurricane Michael regulatory proceeding settlement
(includes the absence of first and second quarter 2020 impact recorded in the
third quarter of 2020)                                                          $       (5,507)
Eastern Shore and Peninsula Pipeline service expansions                                    795
Improved margin from electric operations                                                   653
Natural gas growth (excluding service expansions)                                          620
Margin contribution from 2020 and 2021 acquisitions                                        483
Florida GRIP                                                                               475

Increased customer consumption - primarily due to a return toward pre-pandemic conditions

                                                                                 314
Eastern Shore capital surcharge                                                            304
Other variances                                                                            474
Quarter-over-quarter decrease in gross margin                               

$ (1,389)

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



Margin Impact from Hurricane Michael Regulatory Proceeding Settlement
We saw a decrease in gross margin of $5.5 million as a result of the settlement
of the Hurricane Michael regulatory proceeding which included the absence of
interim rates from the first and second quarter of 2020 that were first
reflected in the third quarter of 2020. Refer to Note 5, Rates and Other
Regulatory Activities, in the condensed consolidated financial statements for
additional information.

Eastern Shore and Peninsula Pipeline Service Expansions
We generated additional gross margin of $0.7 million from Peninsula Pipeline's
Western Palm Beach County and Callahan projects and $0.1 million from Eastern
Shore's Del-Mar Energy Pathway project.

Improved Margin from Electric Operations
Our electric operations generated additional gross margin of $0.7 million due to
increased consumption and growth.

Natural Gas Distribution Customer Growth
We generated additional gross margin of $0.6 million from natural gas customer
growth. Gross margin increased by $0.3 million in Florida and $0.3 million on
the Delmarva Peninsula for the three months ended September 30, 2021, as
compared to the same period in 2020, due primarily to residential customer
growth of 4.0 percent and 4.7 percent on the Delmarva Peninsula and in Florida,
respectively.

Acquisitions


Gross margin increased by $0.5 million due to margin contributed from Elkton Gas
and the Escambia Meter Station which were completed in July 2020 and June 2021,
respectively.

Florida GRIP
Continued investment in the Florida GRIP generated additional gross margin of
$0.5 million in third quarter of 2021 compared to the same period in 2020.

Increased customer consumption - primarily due to return toward pre-pandemic
consumption
The absence of unfavorable COVID-19 impacts, resulted in a return towards
pre-pandemic consumption, positively impacting gross margin by $0.3 million for
the three months ended September 30, 2021 compared to the same period in 2020.

Eastern Shore Capital Surcharge
Eastern Shore's capital surcharge resulted in $0.3 million of additional margin
for the three months ended September 30, 2021. Refer to Note 5, Rates and Other
Regulatory Activities, in the condensed consolidated financial statements for
additional information.

Operating Expenses
Items contributing to the quarter-over-quarter decrease in operating expenses
are listed in the following table:

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(in thousands) Absence of Hurricane Michael Depreciation and Amortization cumulative adjustment (first and second quarter 2020)

$        (3,574)
Regulatory deferral of COVID-19 expenses per PSCs orders                               (2,437)
Net reduction in expenses associated with the COVID-19 pandemic                          (546)

Depreciation, asset removal and property tax costs due to new capital investments

                                                                             1,181

Payroll, benefits and other employee-related expenses due to growth

               612
Operating expenses from the Elkton Gas acquisition                                        204
Other variances                                                                           115
Quarter-over-quarter decrease in operating expenses                         

$ (4,445)





For the Nine Months Ended September 30, 2021, compared to the nine months ended
September 30, 2020:

                                     Nine Months Ended
                                       September 30,             Increase
                                    2021           2020         (decrease)
(in thousands)
Revenue                          $ 282,503      $ 259,235      $    23,268
Cost of sales                       72,785         67,490            5,295
Gross margin                       209,718        191,745           17,973
Operations & maintenance            79,363         78,062            1,301
Depreciation & amortization         36,156         33,979            2,177
Other taxes                         14,989         13,328            1,661
Total operating expenses           130,508        125,369            5,139
Operating income                 $  79,210      $  66,376      $    12,834



Operating income for the Regulated Energy segment for the first nine months of
2021 was $79.2 million, an increase of $12.8 million, or 19.3 percent, over the
same period in 2020. Higher operating income reflects continued pipeline
expansions by Eastern Shore and Peninsula Pipeline, operating results from the
Elkton Gas and Escambia Meter Station acquisitions completed in 2020 and 2021,
and increased consumption from a return toward pre-pandemic consumption levels.
Further contributing to the operating income growth was margin from organic
growth in our natural gas distribution businesses and increased consumption
driven primarily by colder weather compared to the same period of 2020. These
margin increases were offset by higher depreciation, amortization and property
taxes, including amortization of the regulatory asset associated with the
Hurricane Michael regulatory proceeding settlement, expenses associated with
Elkton Gas, and higher other operating expenses. The operating expense increases
were partially offset by $2.5 million associated with a reduction in pandemic
related costs compared to 2020 and the establishment of regulatory assets for
COVID-19 expenses as approved by the PSCs.

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



(in thousands)
Eastern Shore and Peninsula Pipeline service expansions                      $        6,037
Margin contribution from 2020 and 2021 acquisitions                         

2,624


Natural gas growth (excluding service expansions)                           

2,237

Increased customer consumption - primarily due to a return toward pre-pandemic conditions

2,112


Increased customer consumption - primarily weather related                  

1,510


Florida GRIP                                                                

1,408


Improved margin from electric operations                                                931

Sandpiper Energy infrastructure rider associated with conversions

             624
Other variances                                                                         490
Period-over-period increase in gross margin                                  $       17,973



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

Eastern Shore and Peninsula Pipeline Service Expansions
We generated additional gross margin of $4.7 million from Peninsula Pipeline's
Western Palm Beach County and Callahan projects and $1.3 million from Eastern
Shore's Del-Mar Energy Pathway project.

Acquisitions


Gross margin increased by $2.6 million due to margin contributed from Elkton Gas
and the Escambia Meter Station which were completed in July 2020 and June 2021,
respectively.

Natural Gas Distribution Customer Growth
We generated additional gross margin of $2.2 million from natural gas customer
growth. Gross margin increased by $1.0 million in Florida and $1.2 million on
the Delmarva Peninsula for the nine months ended September 30, 2021, as compared
to the same period in 2020, due primarily to residential customer growth of 4.1
percent and 5.0 percent on the Delmarva Peninsula and in Florida, respectively.

Increased customer consumption - primarily due to return toward pre-pandemic
conditions
The absence of unfavorable COVID-19 impacts during the first nine months of
2021, resulted in a return to pre-pandemic consumption, positively impacting
gross margin by $2.1 million compared to the same period in 2020.

Increased Customer Consumption - primarily weather related
Gross margin increased by $1.5 million for the for the nine months ended
September 30, 2021, compared to the same period in 2020, primarily due to a 7
percent increase in HDDs on the Delmarva Peninsula and a 39 percent increase in
HDDs in Florida that resulted in increased customer consumption of energy.

Florida GRIP
Continued investment in the Florida GRIP generated additional gross margin of
$1.4 million for the nine months ended September 30, 2021 compared to the same
period in 2020.

Improved Margin from Electric Operations
Our electric operations generated additional gross margin of $0.9 million due to
increased consumption and growth.

Sandpiper Energy Infrastructure Rider Associated with Conversions We generated additional margin of $0.6 million associated with the conversion of Sandpiper Energy''s propane customers to natural gas customers for the nine months ended September 30, 2021 compared to the same period in 2020.



Operating Expenses
Items contributing to the period-over-period increase in operating expenses are
listed in the following table:
(in thousands)
Depreciation, asset removal and property tax costs due to new capital
investments                                                                  $         4,563
Payroll, benefits and other employee-related expenses due to growth                    2,601
Operating expenses from the Elkton Gas acquisition                                     1,238

Net increase in operating expenses associated with a return toward pre-pandemic conditions

                                                                  853
Regulatory deferral of COVID-19 expenses per PSCs orders                    

(3,312)


Other variances                                                                         (804)
Period-over-period increase in operating expenses                            $         5,139



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Unregulated Energy Segment



For the quarter ended September 30, 2021, compared to the quarter ended
September 30, 2020:

                                     Three Months Ended
                                       September 30,             Increase
                                     2021           2020        (decrease)
(in thousands)
Revenue                          $   32,110      $ 22,714      $     9,396
Cost of sales                        17,213         9,646            7,567
Gross margin                         14,897        13,068            1,829
Operations & maintenance             13,382        12,412              970
Depreciation & amortization           3,491         2,968              523
Other taxes                             907           780              127
Total operating expenses             17,780        16,160            1,620
Operating loss                   $   (2,883)     $ (3,092)     $       209



Operating results for the Unregulated Energy segment for the third quarter of
2021 increased by $0.2 million compared to the same period in 2020. The
operating results for this segment typically exhibit seasonality with the first
and fourth quarters producing higher results due to colder temperatures. The
results for the third quarter are not indicative of the results for the entire
year.

Higher operating results during the third quarter were driven by increased
propane margins, contributions from the acquisition of Western Natural Gas and
margin improvement from Aspire Energy as well as increased consumption in the
propane businesses as volumes continue returning toward pre-pandemic levels.
Increased operating results were partially offset by higher operating expenses,
depreciation, amortization and property taxes related to recent capital
investments, and expenses associated with Western Natural Gas.
Gross Margin
Items contributing to the quarter-over-quarter increase in gross margin are
listed in the following table:
(in thousands)
Propane Operations
Increased retail propane margins and service fee                                     $        751
Western Natural Gas acquisition (completed in October 2020)                                   372
Increased wholesale propane margins                                                           243

Increased customer consumption - primarily due to a return toward pre-pandemic conditions

                                                                                    222
Increased customer consumption - primarily weather related                                    122
Aspire Energy
Increased margin including improvements from natural gas liquid processing                    320
Other variances                                                                              (201)
Quarter-over-quarter increase in gross margin                               

$ 1,829




The following narrative discussion provides further detail and analysis of the
significant items in the foregoing table.
Propane Operations
•Increased Retail Propane Margins and Service Fee - Gross margin increased by
$0.8 million for the three months ended September 30, 2021, due to lower propane
inventory costs and favorable market conditions as well as resuming assessment
of our customary service fees which had been suspended as a result of the
COVID-19 pandemic during the same period in the prior year. 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.
•Western Natural Gas - Gross margin increased by $0.4 million due to the margin
generated from Western Natural Gas,

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which was acquired by Sharp in October 2020.
•Increased Wholesale Propane Margins - Gross margin increased by $0.2 million
during the third quarter of 2021 over the same period in 2020, due to lower
propane inventory costs and favorable market conditions. These conditions tend
to fluctuate based on changes in demand, supply and other energy commodity
prices.
•Increased Customer Consumption - primarily due to a return toward pre-pandemic
conditions - Gross margin increased due to the absence of unfavorable COVID-19
impacts, resulting in a return toward pre-pandemic consumption, positively
impacting gross margin by $0.2 million for the three months ended September 30,
2021 compared to the same period in 2020.
•Increased Customer Consumption - primarily weather related - Gross margin
increase by $0.1 million due to growth and favorable pricing during the third
quarter of 2021.
Aspire Energy
•Gross margin increased by $0.3 million during the third quarter of 2021 over
the same period in 2020, including improvements from natural gas liquid
processing.

Other 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 tax costs due to new capital
investments                                                                     $         595
Payroll, benefits and other employee-related expenses due to growth                       427
Operating expenses from the Western Natural Gas acquisition                               273
Net increase in operating expenses associated with a return toward pre-pandemic
conditions                                                                                123
Other variances                                                                           202
Quarter-over-quarter increase in operating expenses                         

$ 1,620




For the nine months ended September 30, 2021, compared to the nine months ended
September 30, 2020:

                                     Nine Months Ended
                                       September 30,             Increase
                                    2021           2020         (decrease)
(in thousands)
Revenue                          $ 141,642      $ 104,466      $    37,176
Cost of sales                       70,017         42,583           27,434
Gross margin                        71,625         61,883            9,742
Operations & maintenance            42,560         39,408            3,152
Depreciation & amortization         10,271          8,774            1,497
Other taxes                          3,017          2,651              366
Total operating expenses            55,848         50,833            5,015
Operating income                 $  15,777      $  11,050      $     4,727



Operating income for the Unregulated Energy segment for the nine months ended
September 30, 2021 was $15.8 million, an increase of $4.7 million or 42.8
percent, over the same period in 2020. Higher operating income resulted from
increased consumption driven primarily by colder weather compared to the same
period in 2020, higher retail propane margins per gallon, and contributions from
the acquisition of the Western Natural Gas propane assets. These margin
increases were partially offset by higher depreciation, amortization and
property taxes related to recent capital investments, increased payroll and
benefits costs, new expenses associated with Western Natural Gas and higher
other operating expenses.

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Gross Margin
Items contributing to the period-over-period increase in gross margin are listed
in the following table:
(in thousands)
Propane Operations
Increased customer consumption - primarily weather related        $ 3,823
Increased retail propane margins and service fees                   2,403

Western Natural Gas acquisition (completed in October 2020) 1,312 Increased wholesale propane margins per gallon

                        309
Marlin Gas Services
Increased demand for CNG services                                     337

Aspire Energy Increased customer consumption - primarily weather related 1,152 Improved margin including natural gas liquid processing

               897
Other variances                                                      (491)
Period-over-period increase in gross margin                       $ 9,742


The following narrative discussion provides further detail and analysis of the
significant items in the foregoing table.
Propane Operations
•Increased Customer Consumption Primarily Weather Related - Gross margin
increased by $3.8 million, as weather on the Delmarva Peninsula was 7 percent
colder for the nine months ended September 30, 2021 compared to the same period
in 2020.
•Increased Retail Propane Margins and Service Fees - Gross margin increased by
$2.4 million, due to lower propane inventory costs and favorable market
conditions as well as resuming the assessment of our customary service fees
which had been suspended as a result of the COVID-19 pandemic during the same
period in the prior year. These market conditions, which include 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.
•Western Natural Gas - Gross margin increased by $1.3 million due to the margin
generated from Western Natural Gas, which was acquired by Sharp in October 2020.
•Increased Wholesale Propane Margins - Gross margin increased by $0.3 million
during the third quarter of 2021 over the same period in 2020, due to lower
propane inventory costs and favorable market conditions. These conditions tend
to fluctuate based on changes in demand, supply and other energy commodity
prices.
Marlin Gas Services
•Gross margin increased by $0.3 million for the nine months ended September 30,
2021, as compared to the same period in the prior year due to higher demand for
CNG hold services.
Aspire Energy
•Increased Customer Consumption Primarily Weather Related - Gross margin
increased by $1.2 million due to higher consumption of gas as weather in Ohio
was approximately 3 percent colder for the nine months ended September 30, 2021
over the same period in 2020.
•Improved Margin including natural gas liquid processing - Gross margin
increased by $0.9 million, including improvements from natural gas liquid
processing, for the nine months ended September 30, 2021, as compared to the
same period in 2020.

Other Operating Expenses
Items contributing to the period-over-period increase in operating expenses are
listed in the following table:

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(in thousands) Depreciation, amortization and property tax costs due to new capital investments

$       1,650
Payroll, benefits and other employee-related expenses due to growth                    1,170
Operating expenses from the Western Natural Gas acquisition                              880

Net increase in operating expenses associated with a return toward pre-pandemic conditions

                                                                  406
Insurance expense (non-health)                                                           404
Other variances                                                                          505
Period-over-period increase in operating expenses                              $       5,015



OTHER EXPENSE, NET
For the quarter ended September 30, 2021 compared to the quarter ended
September 30, 2020
Other expense, net, which includes non-operating investment income (expense),
interest income, late fees charged to customers, gains or losses from the sale
of assets and pension and other benefits expense, increased by $0.4 million in
the third quarter of 2021, compared to the same period in 2020.

For the nine months ended September 30, 2021 compared to the nine months ended
September 30, 2020
Other expense, net, which includes non-operating investment income (expense),
interest income, late fees charged to customers, gains or losses from the sale
of assets and pension and other benefits expense, decreased by $0.8 million in
the first nine months of 2021, compared to the same period in 2020. The decrease
was primarily due to gains on two property sales which were completed in the
first quarter of 2020, partially offset by gains from the sales of CGS from
Sharp to our Delaware Division.

INTEREST CHARGES
For the quarter ended September 30, 2021 compared to the quarter ended
September 30, 2020
Interest charges for the three months ended September 30, 2021 increased by $0.4
million, compared to the same period in 2020, attributable primarily to a $0.8
million increase of an amortization credit/reduction in interest expense
associated with a regulatory liability that was established in connection with
the Hurricane Michael regulatory proceeding settlement. Partially offsetting the
increased charges was a decrease of $0.3 million in lower interest expense from
lower levels of outstanding borrowings under our revolving credit facilities and
the restructuring of our revolving credit facilities, and a decrease of $0.2
million in interest expense as a result of several long-term debt placements in
2020.

For the nine months ended September 30, 2021 compared to the nine months ended
September 30, 2020
Interest charges for the nine months ended September 30, 2021 decreased by $0.3
million, compared to the same period in 2020, attributable primarily to a
decrease of $1.5 million in lower interest expense from lower levels of
outstanding borrowings under our revolving credit facilities and the
restructuring of our revolving credit facilities. Partially offsetting the
interest savings was an increase of $0.6 million in interest expense as a result
of several long-term debt placements in 2020, $0.4 million due to lower
capitalized interest associated with growth projects, and $0.2 million of an
amortization credit/reduction in interest expense associated with a regulatory
liability that was established in connection with the Hurricane Michael
regulatory proceeding settlement.

INCOME TAXES
For the quarter ended September 30, 2021 compared to the quarter ended
September 30, 2020
Income tax expense was $3.0 million for the quarter ended September 30, 2021,
compared to $3.5 million for the quarter ended September 30, 2020. Our effective
income tax rate was 19.3 percent and 27.4 percent, for the three months ended
September 30, 2021 and 2020, respectively. During the third quarter 2021, we
recognized a $0.9 million reduction in tax expense associated certain provisions
of the CARES Act which allowed us to carryback net operating losses into prior
year periods where the federal income tax rate was higher.. Excluding this
impact of the CARES Act, our effective tax rate for the three months ended
September 30, 2021 was 25.3 percent.

For the nine months ended September 30, 2021 compared to the nine months ended
September 30, 2020
Income tax expense was $20.6 million for the nine months ended September 30,
2021, compared to $16.1 million for the nine months ended September 30, 2020.
Our effective income tax rate was 25.3 percent and 24.7 percent, for the nine
months ended September 30, 2021 and 2020, respectively.

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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. Beginning in the third quarter of 2020, we issued
shares of common stock under both the DRIP and 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 $151.4 million
for the nine months ended September 30, 2021. In the table below, we have
provided an updated range of our forecasted capital expenditures for 2021:
                                                                  2021
          (dollars in thousands)                           Low           High
          Regulated Energy:
          Natural gas distribution                     $  76,000      $ 

79,000


          Natural gas transmission                        58,000         

63,000


          Electric distribution                            8,000          

8,000


          Total Regulated Energy                         142,000       

150,000

Unregulated Energy:


          Propane distribution                            11,000         

12,000


          Energy transmission                             16,000         

20,000


          Other unregulated energy                        13,000         

15,000


          Total Unregulated Energy                        40,000         

47,000

Other:


          Corporate and other businesses                   3,000          

3,000


          Total Other                                      3,000          

3,000

Total 2021 Forecasted Capital Expenditures $ 185,000 $ 200,000





The 2021 forecast, which excludes any potential acquisitions, includes capital
expenditures associated with the following projects: Delmarva Natural Gas
distribution's Somerset County expansion, Eastern Shore's Del-Mar Energy
Pathway, Florida's Western Palm Beach County expansion and other potential
pipeline projects, continued expenditures under the Florida GRIP, further
expansions of our natural gas distribution and transmission systems, continued
natural gas and electric system infrastructure improvement activities,
facilities to support Marlin Gas Services' CNG transport growth and expansion
into RNG and LNG transport, information technology systems, and other strategic
initiatives and investments, including renewable energy investments.

The capital expenditure projection is subject to continuous review and
modification. Actual capital requirements may vary from the above estimates due
to a number of factors, including changing economic conditions, capital delays
due to COVID-19 that are greater than currently anticipated, customer growth in
existing areas, regulation, new growth or acquisition opportunities and
availability of capital. 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 September 30, 2021 and December 31, 2020:
                                                                     September 30, 2021                         December 31, 2020
(in thousands)
Long-term debt, net of current maturities                    $         505,459             40  %       $         508,499             42  %
Stockholders' equity                                                   750,962             60  %                 697,085             58  %
Total capitalization, excluding short-term debt              $       1,256,421            100  %       $       1,205,584            100  %

                                                                     September 30, 2021                         December 31, 2020
(in thousands)
Short-term debt                                              $         192,026             13  %       $         175,644             13  %
Long-term debt, including current maturities                           521,665             36  %                 522,099             37  %
Stockholders' equity                                                   750,962             51  %                 697,085             50  %
Total capitalization, including short-term debt              $       1,464,653            100  %       $       1,394,828            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 51 percent as of September 30, 2021.
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 third and fourth quarters of 2020, we issued 1.0 million shares of common
stock through our DRIP and the ATM programs and received net proceeds of
approximately $83.0 million, which was added to the general funds and then used
to pay down short-term borrowing. In the first nine months of 2021, we issued
less than 0.1 million shares at an average price per share of $116.63 and
received net proceeds of $6.6 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.
We used the net proceeds from the ATM equity program and the DRIP, after
deducting the commissions or other fees and related offering expenses payable by
us, 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.
Shelf Agreements
We have entered into Shelf Agreements with Prudential, MetLife and NYL, whom are
under no obligation to purchase any unsecured debt. The following table
summarizes our Shelf Agreements at September 30, 2021:
                                                   Total                                                                Remaining
                                                 Borrowing          Less: Amount of          Less: Unfunded             Borrowing
(in thousands)                                    Capacity            Debt Issued             Commitments               Capacity
Shelf Agreement
Prudential Shelf Agreement (1)                 $   370,000          $   (220,000)         $               -          $    150,000
MetLife Shelf Agreement (1)                        150,000                     -                          -               150,000
NYL Shelf Agreement (1)                            150,000              (140,000)                         -                10,000
Total Shelf Agreements as of September
30, 2021                                       $   670,000          $   (360,000)         $               -          $    310,000

(1) The Prudential, MetLife and NYL Shelf Agreements expire in April 2023, May 2023 and November 2021, respectively.



The 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.

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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 September 30, 2021 and December 31, 2020, we
had $192.0 million and $175.6 million, respectively, of short-term borrowings
outstanding at a weighted average interest rate of 0.82 percent and 1.28
percent. Included in the September 30, 2021 balance, is $70.0 million in
short-term debt for which we have entered into interest rate swap agreements.
In August 2021 we amended and restated our Revolver into a multi-tranche
facility totaling $400.0 million with multiple participating lenders. The two
tranches of the facility consist of one $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 the Chief Financial
Officer. We are eligible to establish the repayment term for individual
borrowings under the five year tranche of the facility and to the extent that an
individual loan under the revolver exceeded 12 months, the outstanding balance
would be classified as a component of long-term debt.
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. 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
September 30, 2021, we are in compliance with this covenant.

The 364-day tranche of the Revolver expires in August 2022 and the five-year
tranche expires in August 2026; both tranches are available to provide funds 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 based
upon total indebtedness to total capitalization ratio. As of September 30, 2021,
the pricing under the 364-day tranche of the Revolver does not include an unused
commitment fee and maintains an interest rate of 0.70 percent over LIBOR. As of
September 30, 2021, the pricing under the five-year tranche of the Revolver
included an unused commitment fee of 0.09 percent and an interest rate of 0.95
percent over LIBOR.

Our total available credit under the Revolver at September 30, 2021 was $203.4
million. As of September 30, 2021, we had issued $4.6 million in letters of
credit to various counterparties under the syndicated Revolvers. 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 Revolver.
In the fourth quarter of 2020, the Company 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. 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. Our short-term borrowing is based on the 30-day LIBOR rate. The
interest rate swaps are cash settled monthly as the counter-party pays us the
30-day LIBOR rate less the fixed rate.
Long-Term Debt
On August 25, 2021, we entered into a Note Agreement with multiple lenders to
issue $50.0 million in uncollateralized senior notes. Under the Note Agreement,
we will issue the senior notes on January 25, 2022 at a rate of 2.49 percent for
a 15-year term. These senior notes, when issued, will have similar covenants and
default provisions as the existing senior notes, and will have an annual
principal payment beginning in the sixth year after the issuance. The proceeds
received from the issuances of the senior notes will be used to reduce our
short-term borrowings under our lines of credit and to fund capital
expenditures. In addition, on September 24, 2021, we entered into an Equipment
Financing Agreement with Banc of America Leasing & Capital, LLC to issue $9.6
million in sustainability linked financing for 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 the terms of the
agreement, we granted a security interest in the equipment to the lender, to
serve as collateral.

Cash Flows

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The following table provides a summary of our operating, investing and financing cash flows for the nine months ended September 30, 2021 and 2020:



                                                                Nine Months Ended
                                                                  September 30,
(in thousands)                                                 2021           2020
Net cash provided by (used in):
Operating activities                                        $ 152,784      $ 115,880
Investing activities                                         (148,076)      (136,551)
Financing activities                                           (2,321)        16,742
Net increase (decrease) in cash and cash equivalents            2,387       

(3,929)


Cash and cash equivalents-beginning of period                   3,499       

6,985


Cash and cash equivalents-end of period                     $   5,886

$ 3,056





Cash Flows Provided By 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. Changes in working
capital 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 nine months ended September 30, 2021 and 2020, net cash provided by
operating activities was $152.8 million and $115.9 million, respectively,
resulting in an increase in cash flows of $36.9 million. Significant operating
activities generating the cash flows change were as follows:
•Changes in net accounts receivable and accrued revenue and accounts payable and
accrued liabilities increased cash flows by $31.4 million;
•Net income, adjusted for non-cash adjustments and reconciling activities,
increased cash flows by $10.5 million, due primarily to higher net income, and
higher depreciation and amortization;
•Net cash flows from income taxes receivable increased by $7.0 million;
•Changes in net prepaid expenses and other current assets, customer deposits and
refunds, accrued compensation and other net assets and liabilities, decreased
cash flows by $0.5 million;
•Changes in net regulatory assets and liabilities decreased cash flows by $4.3
million due primarily to the change in fuel costs collected through the various
cost recovery mechanisms; and
•Net cash flows from changes in propane inventory, storage gas and other
inventories decreased by approximately $7.2 million.

Cash Flows Used in Investing Activities



Net cash used in investing activities totaled $148.1 million and $136.6 million
during the nine months ended September 30, 2021 and 2020, respectively,
resulting in a decrease in cash flows of $11.5 million. Cash paid for capital
expenditures was $148.2 million for the first nine months of 2021, compared to
$123.4 million for the same period in 2020, resulting in decreased cash flows of
$24.8 million. The decrease was offset by an increase in cash flows due to the
absence of acquisitions that occurred in the third quarter of 2020.

Cash Flows Used in Financing Activities



Net cash used in financing activities totaled $2.3 million during the nine
months ended September 30, 2021 compared to $16.7 million of net cash provided
by financing activities over the same period in 2020, resulting in a decrease in
cash flows of $19.0 million. The increase in net cash used in financing
activities resulted primarily from the following:

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•Long-term debt repayments of $10.1 million;
•Cash dividends of $23.3 million paid during the nine months ended September 30,
2021, compared to $20.0 million for the nine months ended September 30, 2020;
and
•Cash flows of $7.1 million as a result of issuing shares of our common stock
under the DRIP program.

These increases in cash used were partially offset by increased cash provided by
short-term debt of $16.4 million.
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 September 30, 2021 was $20.0 million. The
aggregate amount guaranteed at September 30, 2021 was $8.0 million, with the
guarantees expiring on various dates through September 24, 2022.
As of September 30, 2021, we have issued letters of credit totaling
approximately $4.6 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 September 30, 2022. We have not drawn upon these letters of credit as of
September 30, 2021 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 2020 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 September 30, 2021:

                                                                            

Payments Due by Period


                                            Less than 1 year           1 - 3 years           3 - 5 years           More than 5 years            Total
(in thousands)
Purchase obligations - Commodity (1)       $         30,597          $     37,437          $          -          $                -          $ 68,034
Total                                      $         30,597          $     37,437          $          -          $                -          $ 68,034



(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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