Detailed narrative
Operational Performance and Volume Trends
RGC Resources continued its main extension and renewal activities, installing 3.5 miles of new main and connecting 464 new services in the first nine months of fiscal 2026. Service renewals increased 40% year-over-year. While residential and commercial gas usage was flat for the quarter and down year-to-date despite a 3% increase in heating degree days, industrial usage saw a significant increase of over 25% in Q3, primarily driven by one large customer, albeit at lower margins. The company noted the absence of a long-time top 10 customer who ceased operations in March.
Financial Results and Expense Drivers
For Q3 FY26, net income was approximately $0.55 million, or $0.05 per diluted share, primarily due to higher margins from interim rates. Year-to-date, net income reached $14.2 million, or $1.37 per diluted share, representing a 4.6% increase over the prior year. This growth was largely driven by non-gas base rate increases recognized during the winter heating season. However, non-gas operating and maintenance expenses increased due to inflationary pressures on personnel costs, professional services, and IT support.
Regulatory Outcomes and Rate Case Settlement
The company successfully settled its expedited rate case with the SEC staff on July 1st, 2026, securing $3.85 million in incremental annual revenues based on an authorized return on equity of 9.9% and a 59% equity ratio. The new rates became effective August 1st, following interim rates from January 1st. RGC accrued $275,000 for customer refunds related to the period between January 1st and August 1st. Costs associated with the LNG facility event were not part of this settlement but are established as a regulatory asset for future recovery.
LNG Facility Damage and Mitigation Efforts
The LNG facility sustained structural damage in Q2 FY26 due to icing around the tank during the Winter Storm Fern event. The 54-year-old tank experienced metal fatigue, though no leaks or unsafe conditions were reported. The company is evaluating options for repair or replacement, including procuring trucked LNG and utilizing additional capacity from the Columbia Pipeline. The goal is to restore on-system peak shaving storage capability for the 2027-2028 winter season.
Capital Investments and Mountain Valley Pipeline Projects
Capital investment for the first nine months of fiscal 2026 totaled $16.1 million, a 2% increase year-over-year. The full-year 2026 capital forecast remains at $22 million, with the Mountain Valley-Lafayette-Maine extension project pulled forward📎 into this year from the five-year capital forecast. The Mountain Valley Pipeline (MVP) mainline continues to operate safely and reliably. RGC has invested over $1 million in the Southgate and Boost projects, which are underway to enhance future cash flow from MVP.
Roanoke Valley Economic Development
The Roanoke Valley economy is characterized as net positive, with ongoing developments such as the Google data center, continued investment in the medical complex (including the Taubman Cancer Center), and a recently announced foreign direct investment of $85 million expected to create 500 jobs. These economic drivers contribute to continued residential development in the region, supporting the company's healthy backlog of main extensions.