Item 8.01 Other Events.
On March 14, 2022, Corning Natural Gas Holding Corporation (the "Company") and
its subsidiary Corning Natural Gas Corporation ("Corning Gas"), ACP Crotona
Corp. and its subsidiary ACP Crotona Merger Sub Corp., companies affiliated with
Argo Infrastructure Partners, LP (collectively, "Argo"), and the staff of the
New York State Public Service Commission (the "NYPSC") filed a joint proposal
with the NYPSC (the "joint proposal"). The joint proposal relates to:
(1) Corning Gas' July 16, 2021 rate case (Case 21-G-0394) (the "rate case")
seeking a three-year rate plan; and (2) the Company's April 30, 2021 verified
joint petition (Case 21-G-0260) (the "merger petition") seeking approval,
pursuant to Section 70 of the New York Public Service Law, for the prosed merger
of ACP Crotona Merger Sub Corp. into the Company with Company as the surviving
corporation and wholly-owned subsidiary of ACP Crotona Corp. (the "merger").
Four other parties, the Utility Intervention Unit, Division of Consumer
Protection, of the Department of State ("UIU"), the Public Utility Law Project
("PULP"), Multiple Intervenors ("MI"), and the Village of Bath Electric, Gas and
Water Systems ("BEGWS"), have participated in the negotiation of the rate case
and merger petition. MI supports a portion of the joint proposal relating to the
merger petition, and neither supports nor opposes the other provisions of the
joint proposal relating to the rate case. UIU and BEGWS neither subscribe to nor
oppose the joint proposal. PULP supports the merger petition and opposes the
rate case.
In connection with the rate case, Corning Gas and the staff of the NYPSC
submitted a joint proposal for a three-year rate plan. The proposed increases
are for levelized amounts of: (1) $1.7 million for the year ending June 30,
2023; (2) $1.8 million for the year ending June 30, 2024; and (3) $1.7 million
for the year ending June 30, 2025. To the extent the NYPSC approval of the rates
for the first year occurs after a date that would allow the rates to go into
effect by June 12, 2022, the joint proposal includes a make-whole provision
allowing Corning Gas to recover shortfalls and refund over-collections so that
Corning Gas and its customers would be in the same position had rates gone into
effect on June 12, 2022. The cumulative impact of the rate increases is
approximately $5.2 million compared to the rates that are in effect today. Under
the joint proposal, Corning Gas' earned return on equity ("ROE") would be 9.25%.
A proposed earnings sharing mechanism provides for sharing between Corning Gas
shareholders and customers of the ROE above certain levels. Under the earnings
sharing mechanism, Corning Gas would be permitted to retain all earnings up to
and including a 9.75% ROE level, 50% of earnings above 9.75% up to and including
10.25%, 25% of earnings above 10.25% up to and including 10.75%, and 10.0% of
earnings above 10.75%. The joint proposal also includes customary operating,
customer service, safety, and other metrics that Corning Gas must meet.
In connection with the merger petition, the Company, Corning Gas, Argo and the
staff of the NYPSC submitted a joint proposal approving the merger. Under the
joint proposal, among other matters Argo agreed to: (1) maintain the board
governance structure of the Company and Corning Gas, with at least one local
independent board member; (2) keep Corning Gas' headquarters in the company's
service area for at least five years; (3) not pass any costs of the merger
through to the customers of Corning Gas; and (4) maintain a minimum common
equity ratio (measured using a trailing thirteen-month average) of no less than
300 basis points below Corning Gas' current common equity ratio used to set
rates.
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This Current Report on Form 8-K provides a summary only of the rate case, merger
petition and the joint proposal. The Company encourages interested parties to
read the full text of the joint proposal and other filings, which are available
on the NYPSC's website at www.DPS.NY.gov.
The joint proposal has been submitted to the administrative law judge (the
"ALJ") responsible for reviewing the rate case and merger petition. If approved
by the ALJ, the joint proposal will be submitted to the NYPSC for consideration.
The Company expects that the joint proposal will be considered by the NYPSC in
June 2022, but cannot guaranty when or if the joint proposal will be approved.
Safe Harbor Regarding Forward-Looking Statements
The Company is including the following cautionary statement in this release to
make applicable, and to take advantage of, the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995 for any forward-looking
statements made by, or on behalf of, Corning Natural Gas Holding Corporation.
Forward-looking statements are all statements other than statements of
historical fact, including, without limitation, those that are identified by the
use of the words "anticipates," "estimates," "expects" "intends," "plans,"
"predicts," "believes," "may," "will" and similar expressions. Such statements
are inherently subject to a variety of risks and uncertainties that could cause
actual results to differ materially from those expressed. Factors that may
affect forward-looking statements and the Company's business generally include,
but are not limited to the Company's ability to complete the proposed merger;
any event, change or circumstance that might give rise to the termination of the
merger agreement; the effect of the announcement of the proposed transaction on
the Company's relationships with its customers, operating results and business
generally; the risk that the proposed transaction will not be consummated in a
timely manner; the ability of the Company to obtain regulatory approval of the
proposed transaction; the Company's continued ability to make dividend payments;
the Company's ability to implement its business plan, grow earnings and improve
returns on investment; fluctuating energy commodity prices; the possibility that
regulators may not permit the Company to pass through all of its increased costs
to its customers; changes in the utility regulatory environment; wholesale and
retail competition; the Company's ability to satisfy its debt obligations,
including compliance with financial covenants; weather conditions; litigation
risks; and various other matters, many of which are beyond the Company's
control; the risk factors and cautionary statements made in the Company's public
filings with the Securities and Exchange Commission (the "SEC"); and other
factors that the Company is currently unable to identify or quantify, but may
exist in the future. The Company expressly undertakes no obligation to update or
revise any forward-looking statement contained herein to reflect any change in
the Company's expectations with regard thereto or any change in events,
conditions or circumstances on which any such statement is based. Additional
factors that may affect the future results of the Company are set forth in its
filings with the SEC, including its Annual Report on Form 10-K for the fiscal
year ended September 30, 2021 and recent Quarterly Reports on Form 10-Q and
Current Reports on Form 8-K filed with the SEC, which are available on the SEC's
website at www.SEC.gov. Readers are cautioned not to place undue reliance on
these forward-looking statements, which speak only as of the date thereof.
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