Forward-Looking Statements This report contains forward-looking statements that relate to future transactions, events or expectations. In addition, Resources may publish forward-looking statements relating to such matters as anticipated financial performance, business prospects, technological developments, new products, research and development activities, operational impacts and similar matters. These statements are based on management's current expectations and information available at the time of such statements and are believed to be reasonable and are made in good faith. The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements. In order to comply with the terms of the safe harbor, the Company notes that a variety of factors could cause the Company's actual results and experience to differ materially from the anticipated results or other expectations expressed in the Company's forward-looking statements. The risks and uncertainties that may affect the operations, performance, development and results of the Company's business include, but are not limited to those set forth in the following discussion and within Item 1A "Risk Factors" in the Company's 2020 Annual Report on Form 10-K and Item 1A of this report. All of these factors are difficult to predict and many are beyond the Company's control. Accordingly, while the Company believes its forward-looking statements to be reasonable, there can be no assurance that they will approximate actual experience or that the expectations derived from them will be realized. When used in the Company's documents or news releases, the words, "anticipate," "believe," "intend," "plan," "estimate," "expect," "objective," "projection," "forecast," "budget," "assume," "indicate" or similar words or future or conditional verbs such as "will," "would," "should," "can," "could" or "may" are intended to identify forward-looking statements. Forward-looking statements reflect the Company's current expectations only as of the date they are made. The Company assumes no duty to update these statements should expectations change or actual results differ from current expectations except as required by applicable laws and regulations. The three-month earnings presented herein should not be considered as reflective of the Company's consolidated financial results for the fiscal year endingSeptember 30, 2021 . The total revenues and margins realized during the first three months reflect higher billings due to the weather sensitive nature of the natural gas business. COVID-19 As was discussed under Item 1A "Risk Factors" in the Company's 2020 Annual Report on Form 10-K, while vaccines are becoming available, COVID-19 and the resulting pandemic continue to have a significant impact on our local, state, national and global economies. The actions taken to limit the spread and overcome the virus have significantly disrupted normal activities throughout the Company's service territory. Management continues to monitor current conditions to ensure the continuation of safe and reliable service to customers and to maintain the safety of the Company's employees. Since the beginning of the pandemic, Resources has been deemed an essential entity by virtue of the utility services provided throughRoanoke Gas . The Company continues to experience a decline in natural gas consumption by commercial customers, excluding certain industrial customers that have increased gas consumption for use in their business processes. The Company's volume of gas delivered to residential customers, however, has remained relatively consistent year over year, excluding seasonal changes. We expect the service moratorium, as discussed below under "Regulatory and Tax Reform," will continue at least into the summer of 2021. Among other things, management has updated its provision for bad debts, is working with customers and the SCC to maximize use of CARES Act assistance, and is deferring incremental pandemic costs to file for relief with the SCC, as appropriate. The full extent of these costs and the impact to the Company's results of operations and financial position remain unpredictable. As was discussed under Item 1A "Risk Factors" in the Company's 2020 Annual Report on form 10-K, the ultimate impact to the Company will depend on future developments, including the duration, scope and severity of the pandemic, the increase or reduction in governmental restrictions to businesses and individuals, the continued resurgence of the virus or any variants thereof, as well as the timing, availability and efficacy of a vaccine. The longer the pandemic continues, the greater the potential negative financial effect on the Company and its customers. Management believes the economic impact of the pandemic will continue well into calendar year 2021. 20
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Overview
Resources is an energy services company primarily engaged in the regulated sale and distribution of natural gas to approximately 62,600 residential, commercial and industrial customers inRoanoke, Virginia and surrounding localities through itsRoanoke Gas subsidiary. In addition, Resources is a more than 1% investor in the MVP through its Midstream subsidiary and provides certain unregulated services through itsRoanoke Gas subsidiary. Currently, the unregulated operations ofRoanoke Gas represent less than 1% of total revenues of Resources on an annual basis. The Company's utility operations are regulated by the SCC, which oversees the terms, conditions, and rates to be charged to customers for natural gas service, safety standards, extension of service and depreciation. The Company is also subject to federal regulation from theDepartment of Transportation in regard to the construction, operation, maintenance, safety and integrity of its transmission and distribution pipelines.FERC regulates the prices for the transportation and delivery of natural gas to the Company's distribution system and underground storage. The Company is also subject to other regulations which are not necessarily industry specific. Nearly all of the Company's annual revenues, excluding equity in earnings of MVP, are derived from the sale and delivery of natural gas toRoanoke Gas customers. The SCC authorizes the rates and fees the Company charges its customers for these services. These rates are designed to provide the Company with the opportunity to recover its gas and non-gas expenses and to earn a reasonable rate of return for shareholders based on normal weather. OnOctober 10, 2018 ,Roanoke Gas filed a general rate application requesting an annual increase in customer non-gas base rates.Roanoke Gas implemented the non-gas rates contained in its rate application (or the "interim rates") for natural gas service rendered to customers on or afterJanuary 1, 2019 . OnJanuary 24, 2020 , the SCC issued its final order on the general rate application, grantingRoanoke Gas an annualized increase in non-gas base rates of$7.25 million . InMarch 2020 , the Company refunded$3.8 million to its customers, representing the excess revenues collected plus interest for the difference between the final approved rates and the interim rates billed sinceJanuary 1, 2019 . As the Company's business is seasonal in nature, volatility in winter weather and the commodity price of natural gas can impact the effectiveness of the Company's rates in recovering its costs and providing a reasonable return for its shareholders. In order to mitigate the effect of variations in weather and the cost of natural gas, the Company has certain approved rate mechanisms in place that help provide stability in earnings, adjust for volatility in the price of natural gas and provide a return on increased infrastructure investment. These mechanisms include SAVE, WNA, ICC and PGA.The Company's non-gas base rates provide for the recovery of non-gas related expenses and a reasonable return to shareholders. These rates are determined based on the filing of a formal non-gas rate application with the SCC utilizing historical and proforma information, including investment in natural gas facilities. Generally, investments related to extending service to new customers are recovered through the non-gas base rates currently in place. The investment in replacing and upgrading existing infrastructure is generally not recoverable until a formal rate application is filed to include the additional investment, and new non-gas base rates are approved. The SAVE Plan and Rider provides the Company with the ability to recover costs related to these SAVE qualified infrastructure investments on a prospective basis. The SAVE Plan provides a mechanism through which the Company may recover the related depreciation and expenses and provides a return on rate base of the additional capital investments related to improving the Company's infrastructure until such time a formal rate application is filed to incorporate these investments in the Company's non-gas base rates. With the filing of the 2018 non-gas rate application, the SAVE Rider reset effectiveJanuary 2019 , as the prior revenues associated with the qualified SAVE Plan infrastructure investments were incorporated into the new non-gas rates. Accordingly, SAVE Plan revenues increased by$324,000 for the three month period endedDecember 31, 2020 compared to the same period last year, reflecting the reset of the SAVE Plan and the subsequent SAVE Plan investment. The WNA model reduces earnings volatility related to weather variability in the heating season. The WNA is based on the most recent 30-year temperature average and provides the Company with a level of earnings protection when weather is warmer than normal and provides its customers with price protection when the weather is colder than normal. The WNA allows the Company to recover from its customers the lost margin (excluding gas costs) from the impact of weather that is warmer than normal and correspondingly requires the Company to refund the excess margin earned for weather that is colder than normal. The WNA mechanism used by the Company is based on a linear regression model that determines the value of a single heating degree day. For the three-months endedDecember 31, 2020 , the Company accrued approximately$947,000 in additional revenues under the WNA model for weather that was nearly 16% warmer than normal, compared to approximately$167,000 in additional revenue for weather that was 4% warmer than normal during the same period last year. 21
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The Company also has an approved rate structure in place that mitigates the impact of financing costs associated with its natural gas inventory. Under this rate structure,Roanoke Gas recognizes revenue for the financing costs, or "carrying costs," of its inventory. This ICC factor applied to the cost of inventory is based on the Company's weighted-average cost of capital, including interest rates on short-term and long-term debt, and the Company's authorized return on equity. During times of rising gas costs and rising inventory levels,Roanoke Gas recognizes ICC revenues to offset higher financing costs associated with higher inventory balances. Conversely, during times of decreasing gas costs and lower inventory balances, the Company recognizes less ICC revenue as financing costs are lower. In addition, ICC revenues are impacted by the changes in the weighted-average cost of capital. Total ICC revenues for the three month period endedDecember 31, 2020 declined by approximately 19% from the same period last year primarily due to lower average price of gas in storage balances and a reduction in the ICC factor used in calculating these revenues. The Company's approved billing rates include a component designed to allow for the recovery of the cost of natural gas used by its customers. The cost of natural gas is a pass-through cost and is independent of the non-gas base rates of the Company. This rate component, referred to as the PGA, allows the Company to pass along to its customers increases and decreases in natural gas costs incurred by its regulated operations. On a quarterly basis, or more frequently if necessary, the Company files a PGA rate adjustment request with the SCC to adjust the gas cost component of its rates up or down depending on projected price and activity. Once administrative approval is received, the Company adjusts the gas cost component of its rates to reflect the approved amount. As actual costs will differ from projections used in establishing the PGA rate, the Company will either over-recover or under-recover its actual gas costs during the period. The difference between actual costs incurred and costs recovered through the application of the PGA is recorded as a regulatory asset or liability. At the end of the annual deferral period, the balance is amortized over an ensuing 12-month period as those amounts are reflected in customer billings. The Company has recognized significant income from equity in earnings of MVP in the past, as AFDUC has been added to income. EffectiveJanuary 1, 2021 , the LLC determined to cease further recognition of AFUDC on the MVP. The decision to temporarily suspend the accrual of AFUDC relates to the LLC's change in its approach to seeking authorization to cross all remaining streams and wetlands on the project route. The LLC will seek an individual permit for certain stream and wetland crossings and will apply to amend the MVP project's CPCN to seekFERC authority to cross certain streams and wetlands utilizing alternative trenchless construction methods, resulting in limited growth construction activities during the process to obtain the requisite approvals. Assuming the necessary approvals are received for the crossings and construction resumes, AFUDC would again be recognized until such time as the project is ready to be placed into service. During the first quarter of fiscal 2021, the Company recognized$1,356,000 in AFUDC income from its investment in the LLC. Therefore, effectiveJanuary 1, 2021 , the Company will no longer recognize AFUDC income from its investment in the LLC until the LLC resumes such construction activities. As a result of the above, effectiveJanuary 1, 2021 ,Roanoke Gas will suspend AFUDC on its two gate stations that will connect to MVP until such time as construction activities resume on MVP. For the first quarter of fiscal 2021,Roanoke Gas recognized$55,981 of AFUDC income associated with these gate stations.
Results of Operations
The analysis on the results of operations is based on the consolidated operations of the Company, which is primarily associated with the utility segment. Additional segment analysis is provided in areas where the investment in affiliates segment (investment in MVP and Southgate) represent a significant component of the comparison. Management believes that gross utility margin, a non-GAAP financial measure defined as the difference between condensed consolidated income statement line items gas utility revenues and cost of gas - utility, is a more useful and relevant measure to analyze financial performance. The term gross utility margin is not intended to represent or replace operating income, the most comparable GAAP financial measure, as an indicator of operating performance and is not necessarily comparable to similarly titled measures reported by other companies. The following results of operations analyses will reference gross utility margin. Three Months EndedDecember 31, 2020 : Net income increased by$716,327 , or 18%, for the three months endedDecember 31, 2020 , compared to the same period last year. Quarterly performance improved due to a combination of SAVE Plan revenues, earnings on the MVP investment and reduction in operating and maintenance expenses. 22
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The tables below reflect operating revenues, volume activity and heating degree-days. Three Months Ended December 31, 2020 2019 Decrease Percentage Operating Revenues Gas utility$ 19,483,500 $ 19,625,606 $ (142,106) (1) % Non utility 33,517 159,847 (126,330) (79) % Total Operating Revenues$ 19,517,017 $ 19,785,453 $ (268,436) (1) % Delivered VolumesRegulated Natural Gas (DTH) Residential and Commercial 2,050,223 2,249,256 (199,033) (9) % Transportation and Interruptible 816,656 869,582 (52,926) (6) % Total Delivered Volumes 2,866,879 3,118,838 (251,959) (8) % HDD (Unofficial) 1,248 1,440 (192) (13) % Total operating revenues for the three months endedDecember 31, 2020 , compared to the same period last year, declined by 1% as reduced revenues from lower natural gas deliveries were mostly offset by higher WNA and SAVE revenues. Total residential and commercial volumes declined by 9% due to a 13% decrease in heating degree days from the same period last year. Transportation and interruptible volumes, which are excluded from the WNA calculations, decreased by 6%, in part as a result of the economic impact of COVID-19 on natural gas sales. SAVE Plan revenues increased by$324,085 due to the ongoing investment in qualified SAVE infrastructure projects. Non-utility revenues decreased due to the completion of a significant long-term contract in fiscal 2020, which accounted for more than 75% of total non-utility revenues. Three Months Ended December 31, Increase / 2020 2019 (Decrease) Percentage
Gross Utility Margin
Gas Utility Revenue$ 19,483,500 $ 19,625,606 $ (142,106) (1) % Cost of Gas - Utility 7,700,699 8,177,806 (477,107) (6) % Gross Utility Margin$ 11,782,801 $ 11,447,800 $ 335,001 3 % Gross utility margins increased from the same period last year primarily as a result of the aforementioned higher SAVE revenues. WNA-adjusted volumes remained relatively flat year-over-year. The higher customer base charge revenues, associated with customer growth, nearly offset reductions in ICC and other revenues. The components of and the change in gas utility margin are summarized below: Three Months Ended December 31, 2020 2019 Increase / (Decrease) Customer Base Charge$ 3,622,465 $ 3,580,749 $ 41,716 Carrying Cost 126,756 155,907 (29,151) SAVE Plan 504,698 180,613 324,085 Volumetric 6,547,592 7,303,843 (756,251) WNA 946,971 166,597 780,374 Other Gas Revenues 34,319 60,091 (25,772) Total$ 11,782,801 $ 11,447,800 $ 335,001 23
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Operations and maintenance expenses decreased by$415,348 from the same period last year primarily due to the write-down and amortization of ESAC regulatory assets during the prior year. InJanuary 2020 , the SCC issued their final order onRoanoke Gas' non-gas base rate application. Included in the order approving the rate award on the non-gas base rate application was a requirement to write-down$317,000 in ESAC assets that were not subject to recovery. In addition, the first quarter of fiscal 2020 also included$107,000 of ESAC asset amortization. InSeptember 2020 , the Company wrote-off the remaining ESAC balance of$525,000 as a result of an earnings test required as part of the annual AIF filing with the SCC. Accordingly, the Company did not reflect any ESAC asset amortization during the quarter endedDecember 31, 2020 . General taxes increased by$30,787 , or 6%, due to higher property taxes related to ongoing investments in infrastructure replacement, system reinforcements and customer growth.
Depreciation expense increased by
Equity in earnings of unconsolidated affiliate increased by
Other income, net increased by$172,383 primarily due to a$112,000 decrease in the non-service cost components of net periodic benefit costs and$42,000 from the equity portion of AFUDC. Under the requirements of ASC 715, the components of net periodic benefit costs other than service cost are to be classified outside of income from operations. The reduction in these costs is attributable to reduced interest cost due to a lower discount rate applied to the benefit plans' liabilities and higher projected earnings on plan assets attributable to asset growth. In the final order on the Company's non-gas rate application, the SCC allowedRoanoke Gas to defer financing costs related to the two natural gas transfer stations that will interconnectRoanoke Gas' distribution system with the MVP. Beginning in the second quarter of fiscal 2020, the Company used the industry standard practice of AFUDC to defer these costs for potential recovery in future rate proceedings. Interest expense decreased by$65,356 , or 6%, as total average debt outstanding increased 18% between quarters. The higher borrowing levels, derived from the ongoing investment in MVP and financing expenditures in support ofRoanoke Gas' capital budget, were offset by a 16% reduction in the weighted average interest rate on the Company's variable rate debt. Interest expense was also reduced by$14,000 for the capitalization of the interest component of AFUDC related to the two interconnect gate stations with the MVP and accrued interest in the prior year related to the rate refund.
Midstream's interest expense decreased by$50,833 . The decline in the average variable interest rate of Midstream's credit facility from 3.17% to 2.28% more than offset the effect of the$7,768,000 increase in total average debt outstanding associated with cash investments in the MVP. Income tax expense increased by$283,417 corresponding to an increase in taxable income. The effective tax rate was 24.4% and 23.7% for the three month periods endedDecember 31, 2020 and 2019, respectively. The effective tax rate for the prior year was low due to excess deductions related to the vesting of restricted stock and the exercise of stock options.
Critical Accounting Policies and Estimates
The consolidated financial statements of Resources are prepared in accordance with GAAP. The amounts of assets, liabilities, revenues and expenses reported in the Company's consolidated financial statements are affected by accounting policies, estimates and assumptions that are necessary to comply with generally accepted accounting principles. Estimates used in the financial statements are derived from prior experience, statistical analysis and management judgments. Actual results may differ significantly from these estimates and assumptions.
There have been no changes to the critical accounting policies as reflected in
the Company's Annual Report on Form 10-K for the year ended
Asset Management
Roanoke Gas uses a third-party asset manager to oversee its pipeline transportation, storage rights and gas supply inventories and deliveries. In return for being able to utilize the excess capacities of the transportation and storage rights, the asset manager paysRoanoke Gas a monthly utilization fee. In accordance with an SCC order issued in 2018, a portion of the utilization fee is retained by the Company with the balance passed through to customers through reduced gas costs. The current asset manager contract has been renewed throughMarch 31, 2022 . 24
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While the total MVP project work is approximately 92% complete, recent construction activity has been limited based on legal and regulatory challenges. Although certain permits and authorizations were received in the fourth quarter of fiscal 2020 and the first quarter of fiscal 2021, there remain pending challenges and authorization requests impacting current progress. Following a comprehensive review of all outstanding stream and wetland crossings across the approximately 300-mile MVP project route, onJanuary 26, 2021 , the LLC announced its intention to submit (i) a joint application package to each of the Huntington,Pittsburgh and Norfolk Districts of theU.S. Army Corps of Engineers (Army Corps ) that will request an individual permit from theArmy Corps to cross certain streams and wetlands utilizing open cut techniques (the Army Corps Individual Permit) and (ii) an application to amend the MVP project's CPCN that will seekFERC authority to cross certain streams and wetlands utilizing alternative trenchless construction methods. The LLC believes that this modified approach to seeking authorization to cross all remaining streams and wetlands on the project route, in lieu of continuing to pursue authority under Nationwide Permit 12 and the formerly pendingFERC request to amend the CPCN to utilize trenchless construction methods to cross all streams and wetlands for the first 77 miles of the project route, presents the most efficient and effective path to project completion. The LLC continues to target a full in-service date for the MVP project in late 2021 at a total project cost of$5.8 billion to$6.0 billion (excluding AFUDC). In order to complete the MVP project in accordance with the targeted full in-service date and cost, the LLC must, among other things: (i) timely receive the Army Corps Individual Permit, which will require Section 401 water quality certification approvals or waivers from each of theWest Virginia Department of Environmental Protection and theVirginia Department of Environmental Quality and certain other state-level approvals; (ii) maintain and, as applicable, timely receive required authorizations, including authorization to proceed with construction, related to theJefferson National Forest from theBureau of Land Management , theU.S. Forest Service and theFERC ; (iii) timely receive authorization from theFERC to utilize alternative trenchless construction methods for certain stream and wetland crossings; (iv) continue to have available the orders previously issued by theFERC modifying its prior stop work orders and extending the LLC's prescribed time to complete the MVP project; (v) timely receive authorization from theFERC to complete construction work in the portion of the project route currently remaining subject to theFERC's previous stop work order; and (vi) continue to be authorized to work under the Biological Opinion and Incidental Take Statement issued by theUnited States Department of the Interior's Fish and Wildlife Service for the MVP project, in each case including the continued effectiveness of any such foregoing or other authorizations notwithstanding any pending or future challenge thereto. Failure to achieve any one of the above items could lead to additional delays and higher project costs. Resources' current earnings from the MVP investment are attributable to AFUDC income generated by the LLC. As a result of the above-described change in approach to seeking authorization to cross all remaining streams and wetlands on the project route, limited construction activities on the project are expected during the process to obtain the requisite approvals. Accordingly, the LLC will suspend the accruing of AFUDC on the project subsequent toDecember 31, 2020 and until construction activities resume and, as a result, Resources will not recognize AFUDC income from MVP during this suspension. Additionally,Roanoke Gas will also suspend accruing AFUDC for a similar period of time on its two gate stations that will interconnect with the MVP. Midstream has borrowing capacity of$41 million under its current credit facility, which matures inDecember 2022 . As ofDecember 31, 2020 ,$28.4 million had been utilized. This credit facility will provide additional financing capacity for MVP funding; however, due to ongoing delays, additional financing may be required. If the legal and regulatory challenges, including any future challenges, are not resolved in a timely manner and/or restrictions are imposed by the government related to COVID-19 that impact future construction, the cost of the MVP and Midstream's capital contributions may increase above current projections, resulting in additional financing requirements.
Regulatory and Tax Reform
OnJanuary 24, 2020 , the SCC issued its final general rate case order awardingRoanoke Gas an annualized non-gas rate increase of$7.25 million and providing for a 9.44% return on equity. The final order directed the Company to write-off a portion of ESAC assets that were excluded from recovery under the rate award. As a result, in the first quarter of fiscal 2020Roanoke Gas expensed an additional$317,000 of ESAC assets above the normal amortization amount. Rates authorized by the SCC's final order required the Company to issue customers$3.8 million in rate refunds, which was completed inMarch 2020 . The final order also excluded from current rates a return on the investment of two interconnect stations with the MVP, but notedRoanoke Gas could defer the related financing costs of those investments for possible future recovery. As a result, the Company 25
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began recognizing AFUDC during the second quarter of fiscal 2020 to capitalize both the equity and debt financing costs incurred during the construction phases. For the quarter endedDecember 31, 2020 ,Roanoke Gas recognized a total of$55,980 in AFUDC,$41,977 and$14,003 of equity and debt carrying costs, respectively. As ofJanuary 1, 2021 , the LLC will temporarily cease recording AFUDC while the MVP is temporarily inactive and awaiting the resolution of regulatory and permitting issues; therefore,Roanoke Gas will temporarily cease recording AFUDC on its related MVP interconnect construction projects. OnMarch 16, 2020 , in response to COVID-19, the SCC issued an order applicable to all utilities operating inVirginia to suspend disconnection of service to all customers untilMay 15, 2020 . The Commission extended the moratorium on disconnections throughOctober 5, 2020 . Subsequently, theVirginia General Assembly extended the moratorium for residential customers until the Governor determines that the economic and public health conditions have improved such that the prohibition does not need to remain in place, or until at least 60 days after such declared state of emergency ends, whichever is sooner. Under the moratorium, utilities are prohibited from disconnecting residential customers for non-payment of their natural gas service and from assessing late payment fees; therefore, residential customers that would normally be disconnected for non-payment will continue incurring costs for gas service until the moratorium is removed, resulting in higher potential bad debt write-offs.Roanoke Gas continues to evaluate and adjust its provision for bad debts; however, the potential magnitude of the combined impact from the economy and the moratorium on bad debts continues to be uncertain. The Company supports the decision to suspend service disconnections in light of the current economic situation and continues to work with its customers in making arrangements to keep or bring their accounts current. InApril 2020 , the SCC issued an order allowing regulated utilities inVirginia to defer certain incremental, prudently incurred costs associated with the COVID-19 pandemic and to apply for recovery at a future date. Formal guidance has not been provided by the SCC at this time.Roanoke Gas expects to defer certain COVID related costs during fiscal 2021 and plans to seek recovery of these deferrals at the appropriate time. CARES Act funds have been provided to assist customers with past due balances. InDecember 2020 ,Roanoke Gas received$403,000 in CARES Act funds and is currently working with the SCC to determine the amount of funding for each eligible customer.Roanoke Gas continues to recover the costs of its infrastructure replacement program through its SAVE Plan. InMay 2020 , the Company filed its most recent SAVE application with the SCC to further amend its SAVE Plan and for approval of a SAVE Rider for the periodOctober 2020 throughSeptember 2021 . In its application,Roanoke Gas requested to continue to recover the costs of the replacement of pre-1973 plastic pipe. In addition, the Company requested to include the replacement of certain regulator stations and pre-1971 coated steel pipe as qualifying SAVE projects. InSeptember 2020 , the SCC issued its order approving the updated SAVE Plan and Rider effective with theOctober 2020 billing cycle. The new SAVE Rider is designed to collect approximately$2.3 million in annual revenues, an increase from the approximate$1.2 million in annual revenues from the prior SAVE Rider rates.
Capital Resources and Liquidity
Due to the capital intensive nature of the utility business, as well as the related weather sensitivity, the Company's primary capital needs are the funding of its utility plant capital projects, investment in the MVP, the seasonal funding of its natural gas inventories and accounts receivable and the payment of dividends. To meet these needs, the Company relies on its operating cash flows and available financing under short-term and long-term credit agreements.
Cash and cash equivalents increased by
Three Months Ended December 31, Cash Flow Summary 2020 2019 Net cash provided by operating activities$ 152,910 $ 817,963 Net cash used in investing activities (7,853,311) (10,875,736) Net cash provided by financing activities 8,146,000 9,438,772 Increase (decrease) in cash and cash equivalents$ 445,599 $ (619,001) 26
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Cash Flows Provided by Operating Activities:
The seasonal nature of the natural gas business causes operating cash flows to fluctuate significantly during the year as well as from year to year. Factors, including weather, energy prices, natural gas storage levels and customer collections, contribute to working capital levels and related cash flows. Generally, operating cash flows are positive during the second and third fiscal quarters as a combination of earnings, declining storage gas levels and collections on customer accounts all contribute to higher cash levels. During the first and fourth fiscal quarters, operating cash flows generally decrease due to increases in natural gas storage levels and rising customer receivable balances. Cash flows from operating activities for the three-months endedDecember 31, 2020 decreased by$665,053 from the same period last year. The decrease in cash flow provided by operations was primarily driven by changes in regulatory assets and liabilities, partially offset by net income.
The table below summarizes the significant operating cash flow components:
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