UGI Stock

UGI Corporation, through its subsidiaries and affiliates (UGI), distributes, stores, transports, and markets energy products and related services.

In the United States (U.S.), the company owns and operates a retail propane marketing and distribution business; natural gas and electric distribution utilities; and energy marketing (including RNG), midstream infrastructure, storage, natural gas gathering and processing, natural gas production, electricity generation and energy services businesses. In Europe, the company markets and distributes propane and other liquefied petroleum gas (LPG), and markets other energy products and services.

Segments

The company operates through four segments: AmeriGas Propane, UGI International, Midstream & Marketing, and UGI Utilities.

The AmeriGas Propane segment consists of the propane distribution business of AmeriGas Partners, an indirect wholly owned subsidiary of UGI (Partnership). The Partnership conducts its domestic propane distribution business through its principal operating subsidiary, AmeriGas OLP, and is the nation's largest retail propane distributor based on the volume of propane gallons distributed annually. The general partner of AmeriGas Partners (AmeriGas Partners and its consolidated subsidiaries, including AmeriGas OLP) is the company's wholly owned subsidiary, AmeriGas Propane, Inc.

The UGI International segment consists of LPG distribution businesses conducted by the company's subsidiaries and affiliates in Austria, Belgium, the Czech Republic, Denmark, Finland, France, Hungary, Italy, Luxembourg, the Netherlands, Norway, Poland, Romania, Slovakia, Sweden, Switzerland, and the United Kingdom. Based on reported market volumes for 2022, which is the most recent information available, UGI International is the largest distributor of LPG in France, Austria, Belgium, Denmark, and Luxembourg; and one of the largest distributors of LPG in Norway, Poland, the Czech Republic, Slovakia, the Netherlands, Sweden, and Switzerland. In Fiscal 2023, the company divested of its energy marketing business in the United Kingdom and Belgium. On October 1, 2023, the company divested substantially all of its energy marketing business in France.

The Midstream & Marketing segment consists of energy-related businesses conducted by the company's indirect, wholly owned subsidiary, Energy Services. These businesses conduct energy marketing, including renewable natural gas (RNG), in the Mid-Atlantic region of the United States and California; own and operate natural gas liquefaction, storage and vaporization facilities and propane-air mixing assets; manage natural gas pipeline and storage contracts; develop, own and operate pipelines, gathering infrastructure and gas storage facilities in the Marcellus and Utica Shale regions of Pennsylvania, eastern Ohio, and the panhandle of West Virginia; own electricity generation facilities; and develop, own and operate RNG production facilities. Energy Services and its subsidiaries' storage, LNG and portions of its midstream transmission operations are subject to regulation by the Federal Energy Regulatory Commission (FERC).

The Utilities segment consists of the regulated natural gas (PA Gas Utility) and electric (Electric Utility) distribution businesses of the company's wholly owned subsidiary, UGI Utilities, and the regulated natural gas distribution business of its indirect, wholly owned subsidiary, Mountaineer. PA Gas Utility serves customers in eastern and central Pennsylvania and in portions of one Maryland county, and Mountaineer serves customers in West Virginia. Electric Utility serves customers in portions of Luzerne and Wyoming counties in northeastern Pennsylvania. PA Gas Utility is subject to regulation by the Pennsylvania Public Utility Commission (PAPUC) and FERC and, with respect to its customers in Maryland, the Maryland Public Service Commission (MDPSC). Mountaineer is subject to regulation by the Public Service Commission of West Virginia (WVPSC) and FERC. Electric Utility is subject to regulation by the PAPUC and FERC.

Business Strategy

The company's business strategy is to grow it by focusing on its core competencies of distributing, storing, transporting, and marketing energy products and services. The company utilizes its core competencies from its existing diversified businesses and its international experience, extensive asset base and access to customers to accelerate both organic growth, and growth through acquisitions in its existing businesses, as well as in related and complementary businesses.

The key elements of the company's strategy include providing reliable earnings growth; rebalancing its portfolio, with an emphasis on natural gas and renewable energy solutions; and investing in renewable energy solutions.

AmeriGas Propane segment

Products, Services, and Marketing

The company's domestic propane distribution business is conducted through AmeriGas Propane. AmeriGas Propane serves nearly 1.2 million customers in all 50 states from approximately 1,380 propane distribution locations. Typically, propane distribution locations are in suburban and rural areas where natural gas is not readily available. As part of its overall transportation and distribution infrastructure, AmeriGas Propane operates as an interstate carrier in all states throughout the continental U.S.

AmeriGas Propane sells propane primarily to residential, commercial/industrial, motor fuel, agricultural, and wholesale customers. AmeriGas Propane distributed approximately 940 million gallons of propane in Fiscal 2023. Approximately 88% of AmeriGas Propane's Fiscal 2023 sales (based on gallons sold) was to retail accounts and approximately 12% was to wholesale accounts. Sales to residential customers in Fiscal 2023 represented approximately 30% of retail gallons sold; commercial/industrial customers 41%; motor fuel customers 21%; and agricultural customers 3%. Transport gallons, which are large-scale deliveries to retail customers other than residential, accounted for approximately 5% of Fiscal 2023 (the fiscal year ended September 30, 2023) retail gallons.

The ACE program continued to be an important element of AmeriGas Propane's business in Fiscal 2023. As of September 30, 2023, ACE cylinders were available at over 48,000 retail locations throughout the U.S. Sales of the company's ACE cylinders to retailers are included in commercial/industrial sales. The ACE program enables consumers to purchase or exchange propane cylinders at various retail locations, such as home centers, gas stations, mass merchandisers and grocery, and convenience stores. In addition, the company's Cynch propane home delivery service was available in 24 cities as of September 30, 2023. It also supplies retailers with large propane tanks to enable them to replenish customers' propane cylinders directly at the retailers' locations.

Residential and commercial customers use propane primarily for home heating, water heating, and cooking purposes. Commercial users include hotels, restaurants, churches, warehouses, and retail stores. Industrial customers use propane to fire furnaces, as a cutting gas and in other process applications. Other industrial customers are large-scale heating accounts and local gas utility customers that use propane as a supplemental fuel to meet peak load deliverability requirements. As a motor fuel, propane is burned in internal combustion engines that power school buses and other over-the-road vehicles, forklifts, and stationary engines. Agricultural uses include tobacco curing, chicken brooding, crop drying, and orchard heating. In its wholesale operations, AmeriGas Propane principally sells propane to large industrial end-users and other propane distributors.

Retail deliveries of propane are usually made to customers by means of bobtail and rack trucks. Propane is pumped from the bobtail truck, which generally holds 2,400 to 3,000 gallons of propane, into a stationary storage tank on the customer's premises. AmeriGas Propane owns most of these storage tanks and leases them to its customers. The capacity of these tanks ranges from approximately 120 gallons to approximately 1,200 gallons. AmeriGas Propane also delivers propane in portable cylinders, including ACE and motor fuel cylinders. Some of these deliveries are made to the customer's location where cylinders are either picked up or replenished in place.

Properties

As of September 30, 2023, AmeriGas Propane owned approximately 87% of its nearly 525 local offices throughout the country. Other assets owned on September 30, 2023 included approximately 909,000 stationary storage tanks with typical capacities of more than 120 gallons, approximately 4.7 million portable propane cylinders with typical capacities of 1 to 120 gallons, 21 terminals, and 11 transflow units.

Trade Names, Trade and Service Marks

AmeriGas Propane markets propane and other services principally under the 'AmeriGas,' 'America's Propane Company,' and 'Cynch' trade names, and related service marks. AmeriGas Propane owns, directly or indirectly, all the right, title and interest in the 'AmeriGas' name and related trade and service marks. AmeriGas Polska Sp. z.o.o. has an exclusive, royalty-free license from AmeriGas Propane to use the 'AmeriGas' name and related service marks in Poland and Germany and with respect thereto on the Internet. The term of the license is in perpetuity.

Seasonality

Because many customers use propane for heating purposes, AmeriGas Propane's retail sales volume is seasonal. During Fiscal 2023, approximately 63% of the Partnership's retail sales volume occurred, and substantially all of AmeriGas Propane's operating income was earned, during the peak heating season from October through March. As a result of this seasonality, revenues are typically higher in AmeriGas Propane's first and second fiscal quarters (October 1 through March 31). Cash receipts are generally greatest during the second and third fiscal quarters when customers pay for propane purchased during the winter heating season.

Sales volume for AmeriGas Propane traditionally fluctuates from year-to-year in response to variations in weather, prices, competition, customer mix, and other factors, such as conservation efforts and general economic conditions.

Government Regulations

AmeriGas Propane is subject to the requirements of Occupational Safety and Health Act (OSHA) and comparable state laws that regulate the protection of the health and safety of the company's workers. With respect to general operations, AmeriGas Propane is subject in all jurisdictions in which it operates to rules and procedures governing the safe handling of propane, including those established by National Fire Protection Association (NFPA) in the Liquefied Petroleum Gas Code (NFPA 58) and National Fuel Gas Code (NFPA 54), the International Code Council's International Fuel Gas Code, and International Fire Code, as well as various state and local codes.

With respect to the transportation of propane, AmeriGas Propane is subject to regulations promulgated under federal legislation, including the Federal Motor Carrier Safety Regulations and Pipeline Hazardous Materials Regulations which fall under the enforcement and supervision of the U.S. Department of Transportation (DOT), Pipeline Hazardous Materials Safety Administration, Federal Railroad Administration, Federal Motor Carrier Safety Administration, and the Federal Aviation Administration.

AmeriGas Propane maintains jurisdictional pipeline systems as defined by the Transportation of Natural and Other Gas by Pipeline: Minimum Federal Safety Standards as regulated by the Pipeline Hazardous Materials Safety Administration and multiple State Public Utility Commissions under the authority and authorization of the Pipeline Hazardous Materials Safety Administration.

UGI International segment

UGI International, through its subsidiaries and affiliates, conducts an LPG distribution business in 17 countries throughout Europe (Austria, Belgium, the Czech Republic, Denmark, Finland, France, Hungary, Italy, Luxembourg, the Netherlands, Norway, Poland, Romania, Slovakia, Sweden, Switzerland, and the United Kingdom). Based on reported market volumes for 2022, which is the most recent information available, UGI International is the largest distributor of LPG in France, Austria, Belgium, Denmark, and Luxembourg; and one of the largest distributors of LPG in Norway, Poland, the Czech Republic, Slovakia, the Netherlands, Sweden, and Switzerland.

During Fiscal 2023, the company made significant progress on its strategic decision to exit the energy marketing business at UGI International. In Fiscal 2023, it divested of its energy marketing business in the United Kingdom and Belgium. On October 1, 2023, the company divested substantially all of its energy marketing business in France. The company also continues to make significant progress on the wind-down of its energy marketing business in the Netherlands.

Products, Services, and Marketing

LPG Distribution Business

During Fiscal 2023, UGI International sold approximately 900 million gallons of LPG throughout Europe. UGI International operates under six distinct LPG brands, and its customer base primarily consists of residential, commercial, industrial, agricultural, wholesale and automobile fuel (autogas) customers that use LPG for space heating, cooking, water heating, motor fuel, leisure activities, crop drying, irrigation, construction, power generation, manufacturing, and as an aerosol propellant. For Fiscal 2023, approximately 50% of UGI International's LPG volume was sold to commercial and industrial customers, 15% was sold to residential, 9% was sold to agricultural, and 26% was sold to wholesale and other customers (including autogas). UGI International supplies LPG to its customers in small, medium, and large bulk tanks at their locations. In addition to bulk sales, UGI International sells LPG in cylinders through retail outlets, such as supermarkets, individually owned stores, and gas stations and directly to businesses that operate LPG-powered forklifts. Sales of LPG are also made to service stations to fuel vehicles that run on LPG. UGI International's Fiscal 2023 LPG sales were attributed to bulk, cylinder, wholesale, and autogas.

Bulk

Approximately 62% of UGI International's Fiscal 2023 LPG sales (based on volumes) were attributed to bulk customers. UGI International classifies its bulk customers as small, medium, or large bulk, depending upon volume consumed annually at the customer locations. Based on volumes consumed, small bulk customers are primarily residential and small business users, such as restaurants, that use LPG mainly for heating and cooking. Medium bulk customers consist mainly of large residential housing developments, hospitals, hotels, municipalities, medium-sized industrial enterprises, and poultry brooders. Large bulk customers include agricultural customers (including crop drying) and companies that use LPG in their industrial processes. UGI International had approximately 492,000 bulk LPG customers and sold 557 million gallons of bulk LPG during Fiscal 2023.

Cylinder

Approximately 15% of UGI International's Fiscal 2023 LPG sales (based on volumes) were attributed to cylinder customers. UGI International sells LPG in both steel and composite cylinders and typically owns the cylinders in which the LPG is sold. The principal end-users of cylinders are residential customers who use LPG for domestic applications, such as cooking and heating. Non-residential uses include fuel for forklift trucks, road construction, and welding. As of September 30, 2023, UGI International had more than 20 million cylinders in circulation and sold approximately 137 million gallons of LPG in cylinders during Fiscal 2023. UGI International also delivers LPG to wholesale and retail customers in cylinders, including through the use of vending machines.

Wholesale, Autogas and Other Services

Approximately 19% of UGI International's Fiscal 2023 LPG sales (based on volumes) were to wholesale customers (including small competitors and large industrial customers), and approximately 4% of Fiscal 2023 LPG sales (based on volumes) were to autogas customers. UGI International also provides logistics, storage, and other services to third-party LPG distributors.

Energy Marketing Business

UGI sold its energy marketing business in the United Kingdom, France, and Belgium; and continues to make progress on the wind-down of its energy marketing business in the Netherlands.

LPG Supply, Storage, and Transportation

UGI International is typically party to term contracts, with approximately 45 different suppliers, including producers, and international oil and gas trading companies, to meet LPG supply requirements throughout Europe. LPG supply is transported via rail and sea, and by road for shorter distances. Agreements are generally one-year terms with pricing based on internationally quoted market prices. In certain geographic areas, such as the United Kingdom (U.K.) and Italy, a single supplier may provide nearly 50% or more of UGI International's requirements.

UGI International stores LPG at various storage facilities and terminals located across Europe and has interests in both primary storage facilities and secondary storage facilities. LPG stored in primary storage facilities is transported by rail and road to secondary storage facilities where LPG is loaded into cylinders or trucks equipped with tanks and then is delivered to customers. UGI International also manages an extensive logistics and transportation network and has access to seaborne import facilities.

UGI International transports LPG to customers primarily through outsourced transportation providers to serve both bulk and cylinder markets. UGI International has long-term relationships with many providers of logistics and transportation services in most of its markets, and is not dependent on the services of any single transportation provider.

Trade Names, Trade, and Service Marks

UGI International and its subsidiaries utilize a variety of tradenames, including but not limited to, AmeriGas (Poland), Antargaz, AvantiGas, FLAGA, Kosan Gas, and UniverGas; and related service marks to market its LPG products and services and energy marketing services. UGI International and its subsidiaries have tradenames, trade, and service marks registered in various countries.

Seasonality

Because many of UGI International's customers use LPG for heating, sales volumes are affected principally by the severity of the temperatures during the heating season months and traditionally fluctuates from year-to-year in response to variations in weather, prices, and other factors, such as conservation efforts and the economic environment. During Fiscal 2023, approximately 60% of UGI International's retail sales volumes occurred during the peak heating season from October through March. As a result of this seasonality, revenues are typically higher in UGI International's first and second fiscal quarters (October 1 through March 31).

Government Regulations

UGI International's business is subject to various laws and regulations at the country and local levels, as well as at the European Union (EU) level, with respect to matters, such as protection of the environment, the storage, transportation, and handling of hazardous materials and flammable substances (including the Seveso II Directive), regulations specific to bulk tanks, cylinders and piped networks, competition, pricing, regulation of contract terms, anti-corruption (including the U.S. Foreign Corrupt Practices Act, Sapin II, and the U.K. Bribery Act), data privacy and protection, and the safety of persons and property.

Properties

In addition to regional headquarter locations and sales offices throughout its service territory, UGI International has interests in ten primary storage facilities and more than 80 secondary storage facilities.

Midstream & Marketing segment

Retail Energy Marketing

The company's retail energy marketing business is conducted through Energy Services and its subsidiaries, and sells natural gas, RNG, liquid fuels and electricity to nearly 11,500 residential, commercial, and industrial customers at approximately 41,000 locations. In Fiscal 2023, the company served customers in all or portions of Pennsylvania, New Jersey, Delaware, New York, Ohio, Maryland, Virginia, North Carolina, South Carolina, Massachusetts, New Hampshire, Rhode Island, California, and the District of Columbia; distributed natural gas through the use of the distribution systems of 47 local gas utilities; and supplied power to customers through the use of the transmission and distribution lines of 20 utility systems.

Midstream Assets

LNG

The company's midstream assets, which are owned by Energy Services and its subsidiaries, comprise a natural gas liquefaction, storage and vaporization facility in Temple, Pennsylvania, a natural gas liquefaction and storage facility in Mehoopany, Pennsylvania, liquefied natural gas vaporization and storage facilities in Steelton and Bethlehem, Pennsylvania, and three small mobile facilities located in Reading, Mount Carmel, and Stroudsburg, Pennsylvania.

In addition, Energy Services sells LNG to customers for use by trucks, drilling rigs, other motor vehicles and facilities located off the natural gas grid. In Fiscal 2023, Energy Services sold LNG to Mountaineer under a Public Service Commission of West Virginia (WVPSC) approved contract. Further, in Fiscal 2023, the company's Midstream & Marketing segment also managed natural gas pipeline and storage contracts for utility company customers, including UGI Utilities.

Natural Gas and Propane Storage

Energy Services and its subsidiaries own propane storage and propane-air mixing stations in Bethlehem, Reading, Hunlock Creek and White Deer, Pennsylvania. Energy Services and its subsidiaries also operate propane storage, rail transshipment terminals, and propane-air mixing stations in Steelton and Williamsport, Pennsylvania. These assets are used in Midstream & Marketing's energy peaking business that provides supplemental energy, primarily LNG and propane-air mixtures, to gas utilities at times of high demand (generally during periods of coldest winter weather).

A wholly owned subsidiary of Energy Services owns and operates underground natural gas storage and related high pressure pipeline facilities, which have FERC approval to sell storage services at market-based rates. The storage facilities are located in the Marcellus Shale region of north-central Pennsylvania and have a total storage capacity of 15 million dekatherms and a maximum daily withdrawal quantity of 224,000 dekatherms. In Fiscal 2023, Energy Services leased approximately 82% of the firm capacity at its underground natural gas facilities to third parties.

Gathering Systems and Pipelines

Energy Services operates the Auburn gathering system in the Marcellus Shale region of northeastern Pennsylvania with a total pipeline system capacity of 635,000 dekatherms per day. The gathering system delivers into both the Tennessee Gas and Transcontinental Gas pipelines and receives gas from Tennessee Gas Pipeline as part of a capacity lease with UGI Utilities. Energy Services also operates a 6.5-mile pipeline, known as the Union Dale pipeline, that gathers gas in Susquehanna County and has a capacity of 100,000 dekatherms per day. In addition, Energy Services owns and operates approximately 90 miles of natural gas gathering lines, dehydration, and compression facilities, known as Texas Creek, Marshlands, and Ponderosa, located in Bradford, Tioga, Lycoming, Potter and Clinton Counties, Pennsylvania. The combined capacity of these three systems is more than 250,000 dekatherms per day.

Energy Services and its subsidiaries also own and operate a 35-mile, 20-inch pipeline, known as the Sunbury pipeline, with related facilities located in Snyder, Union, Northumberland, Montour, and Lycoming Counties, Pennsylvania, which has a design capacity of 200,000 dekatherms per day. In addition, Energy Services owns and operates the Mt. Bethel pipeline, which runs 12.5 miles in Northampton County, Pennsylvania and is designed to provide 72,000 dekatherms per day.

Energy Services' subsidiary, UGI Appalachia, consists of six natural gas gathering systems with approximately 305 miles of natural gas gathering pipelines and gas compressors and one processing plant in southwestern Pennsylvania, eastern Ohio, and the panhandle of West Virginia. In 2022, Energy Services also acquired the remaining ownership interest in Pennant, a natural gas gathering system located in northeast Ohio and western Pennsylvania, and has 100% ownership interest in Pennant. The UGI Appalachia assets provide natural gas gathering and processing services in the Appalachian Basin with gathering capacity of approximately 2,808,000 dekatherms per day and processing capacity of approximately 240,000 dekatherms per day.

In Fiscal 2021, a subsidiary of Energy Services entered into a joint venture with Stonehenge to acquire Pine Run Midstream, LLC. Energy Services owns approximately 49% of the Pine Run Midstream joint venture with Stonehenge, and Stonehenge operates the system. The system includes approximately 46 miles of pipeline, 40,830 HP of installed compression and dedicated production of 54,000 gross acres. The system is attached to another gathering system owned by Energy Services.

In January 2022, Energy Services acquired Stonehenge Appalachia, LLC from Stonehenge Energy Holdings, LLC and subsequently renamed the system UGI Moraine East. The system consists of approximately 48 miles of pipeline and associated compression assets.

Electric Generation Assets

Midstream & Marketing holds electric generation facilities conducted by Energy Services' wholly owned subsidiary, UGID (UGI Development Company, a wholly owned subsidiary of Energy Services). UGID owns and operates the Hunlock Creek Energy Center located near Wilkes-Barre, Pennsylvania, a 174-megawatt natural gas-fueled electricity generating station. Additionally, UGID owns and operates 13.5 megawatts of solar-powered generation capacity in Pennsylvania, Maryland, and New Jersey.

Renewable Natural Gas

GHI (GHI Energy, LLC, a Houston-based renewable natural gas company and indirect wholly owned subsidiary of Energy Services), purchases gas produced from landfills and biodigesters and resells the gas to fleet operators in California. Environmental credits are generated through this process, which are then sold to various third parties for an additional revenue stream.

Through the company's wholly owned subsidiary, GHI, Energy Services has the capability to source and deliver RNG to customers throughout the U.S. GHI delivers RNG to transportation fleets for utilization in their compressed natural gas and LNG fueled vehicles, resulting in the creation and monetization of California Low Carbon Fuel Standard credits and Renewable Fuel Standard Renewable Identification Number credits.

Government Regulations

Energy Services has a tariff on file with FERC, pursuant to which it may make power sales to wholesale customers at market-based rates, to the extent that Energy Services purchases power in excess of its retail customer needs. Two subsidiaries of Energy Services, UGI LNG, Inc. and UGI Storage Company, operate natural gas storage facilities under FERC certificate approvals and offer services to wholesale customers at FERC-approved market-based rates. Two other Energy Services subsidiaries operate natural gas pipelines that are subject to FERC regulation. UGI Mt. Bethel Pipeline Company, LLC operates a 12.5-mile, 12-inch pipeline located in Northampton County, Pennsylvania, and UGI Sunbury, LLC operates the Sunbury Pipeline, a 35-mile, 20-inch diameter pipeline located in central Pennsylvania. Both pipelines offer open-access transportation services at cost-based rates approved by FERC. Energy Services and its subsidiaries undertake various activities to maintain compliance with the FERC Standards of Conduct with respect to pipeline operations. Energy Services is also subject to FERC reporting requirements, market manipulation rules and other FERC enforcement and regulatory powers with respect to its wholesale commodity business.

Midstream & Marketing's midstream assets include natural gas gathering pipelines and compression and processing in northeastern Pennsylvania, southwestern Pennsylvania, eastern Ohio and the panhandle of West Virginia that are regulated under federal pipeline safety laws and subject to operational oversight by both the Pipeline and Hazardous Materials Safety Administration and the state public utility commissions for the states in which the specific pipelines are located.

Certain of the company's Midstream & Marketing and RNG businesses are subject to various federal, state, and local environmental, safety and transportation laws and regulations governing the storage, distribution and transportation of propane and the operation of bulk storage LPG terminals. These laws include, among others, the Resource Conservation and Recovery Act, CERCLA, the Clean Air Act, OSHA, the Homeland Security Act of 2002, the Emergency Planning and Community Right-to-Know Act, the Clean Water Act and comparable state statutes. Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) imposes joint and several liability on certain classes of persons considered to have contributed to the release or threatened release of a 'hazardous substance' into the environment without regard to fault or the legality of the original conduct. With respect to the operation of natural gas gathering and transportation pipelines, Energy Services also is required to comply with the provisions of the Pipeline Safety Improvement Act of 2002 and the regulations of the DOT.

The company's Midstream & Marketing's electricity generation assets own electric generation facilities that are within the control area of PJM and are dispatched in accordance with a FERC-approved open access tariff and associated agreements administered by PJM. UGID is the entity designated for dispatching and financially settling all company owned generation and receives certain revenues collected by PJM, determined under an approved rate schedule. Like Energy Services, UGID has a tariff on file with FERC pursuant to which it may make power sales to wholesale customers at market-based rates, and FERC has approved UGID's market-based rate authority through 2023, with approval pending through 2026. UGID is also subject to FERC reporting requirements, market manipulation rules and other FERC enforcement and regulatory powers.

Utilities (UGI Utilities and Mountaintop Energy Holdings, LLC) segment

PA Gas Utility

PA Gas Utility consists of the regulated natural gas distribution business of the company's subsidiary, UGI Utilities. PA Gas Utility serves customers in eastern and central Pennsylvania and in portions of one Maryland county, and therefore is regulated by the PAPUC and, with respect to its customers in Maryland, the MDPSC.

Approximately 74% of PA Gas Utility's annual throughput volume for commercial and industrial customers include customers at locations that afford them the opportunity of seeking transportation service directly from interstate pipelines, thereby bypassing PA Gas Utility. During Fiscal 2023, PA Gas Utility had 17 such customers, 15 of which have transportation contracts extending beyond Fiscal 2024. The majority of these customers are served under transportation contracts having three to 20-year terms and all are among the largest customers for PA Gas Utility in terms of annual volumes.

Service Area; Revenue Analysis

PA Gas Utility provides natural gas distribution services to approximately 684,000 customers in certificated portions of 46 eastern and central Pennsylvania counties through its distribution system. Contemporary materials, such as plastic or coated steel, comprise approximately 93% of PA Gas Utility's more than 12,600 miles of gas mains, with bare steel pipe comprising approximately 6%, and cast iron pipe comprising approximately 1% of PA Gas Utility's gas mains. In accordance with PA Gas Utility's agreement with the PAPUC, PA Gas Utility will replace the cast iron portion of its gas mains by March 2027 and the bare steel portion of its gas mains by September 2041. Located in PA Gas Utility's service area are major production centers for basic industries, such as specialty metals, aluminum, glass, paper product manufacturing, and several power generation facilities. PA Gas Utility also distributes natural gas to more than 550 customers in portions of one Maryland county.

System throughput (the total volume of gas sold to or transported for customers within PA Gas Utility's distribution system) for Fiscal 2023 was approximately 324 billions of cubic feet (Bcf). System sales of gas accounted for approximately 18% of system throughput, while gas transported for residential, commercial, and industrial customers who bought their gas from others accounted for approximately 82% of system throughput.

Sources of Supply and Pipeline Capacity

PA Gas Utility is permitted to recover all prudently incurred costs of natural gas it sells to its customers. PA Gas Utility meets its service requirements by utilizing a diverse mix of natural gas purchase contracts with marketers and producers, along with storage and transportation service contracts. These arrangements enable PA Gas Utility to purchase gas from Marcellus, Gulf Coast, Mid-Continent, and Appalachian sources. For its transportation and storage functions, PA Gas Utility has long-term agreements with a number of pipeline companies, including Texas Eastern Transmission, LP, Columbia Gas Transmission, LLC, Transcontinental Gas Pipeline Company, LLC, Eastern Gas Transmission and Storage, Inc., Tennessee Gas Pipeline Company, L.L.C., and Energy Services and its subsidiaries (including UGI Storage Company and UGI Sunbury, LLC).

Gas Supply Contracts

During Fiscal 2023, PA Gas Utility purchased approximately 78 Bcf of natural gas for sale to retail core-market customers (principally comprised firm residential, commercial, and industrial customers that purchase their gas from PA Gas Utility) and off-system sales customers. Approximately 96% of the volumes purchased were supplied under agreements with ten suppliers, with the remaining volumes supplied primarily by 30 producers and marketers. Gas supply contracts for PA Gas Utility vary in length by counterparty and type of supply. Typically, pipeline and storage contracts range from one to five years in length. PA Gas Utility also has long-term contracts with suppliers for natural gas peaking supply during the months of November through March.

Seasonality

Because many of its customers use natural gas for heating purposes, PA Gas Utility's sales are seasonal. For Fiscal 2023, approximately 59% of PA Gas Utility's sales volume was supplied, and approximately 90% of PA Gas Utility's operating income was earned, during the peak heating season from October through March.

Outlook for Gas Service and Supply

During Fiscal 2023, PA Gas Utility supplied transportation service to 11 electric generation facilities and 29 major co-generation facilities. PA Gas Utility continues to seek new residential, commercial, and industrial customers for both firm and interruptible service. In Fiscal 2023, PA Gas Utility connected more than 1,460 new commercial and industrial customers. In the residential market sector, PA Gas Utility added more than 11,100 residential heating customers during Fiscal 2023. Approximately 56% of these customers converted to natural gas heating from other energy sources, mainly oil and electricity. New home construction and existing non-heating gas customers who added gas heating systems to replace other energy sources primarily accounted for the other residential heating connections in Fiscal 2023.

Mountaineer

In September 2021, the company completed the Mountaineer Acquisition, whereby Mountaineer Gas Company (Mountaineer) became an indirect, wholly owned subsidiary of UGI. Mountaineer provides a regulated natural gas distribution business to over 211,000 customers in 50 of West Virginia's 55 counties. Mountaineer's system includes approximately 6,200 miles of distribution, transmission, and gathering pipelines. Contemporary materials, such as plastic or coated steel, comprise approximately 76% of Mountaineer's gas mains, with bare steel pipe comprising the remaining 24%.

As of September 30, 2023, Mountaineer's customer base was approximately 90% residential, and 10% commercial and industrial customers, with throughput volumes consisting of approximately 25% residential, 33% commercial and 42% industrial and other. Because many of its customers use gas for heating purposes, Mountaineer's sales are seasonal. For Fiscal 2023, approximately 60% of Mountaineer's sales volume (including transport volumes) was supplied, and 142% of Mountaineer's operating income was earned, during the peak heating season from October through March.

System throughput (the total volume of gas sold to or transported for customers within Mountaineer's distribution system) for Fiscal 2023 was approximately 51 Bcf. Retail core-market sales of gas accounted for approximately 39% of system throughput, while gas transported for commercial and industrial customers who bought their gas from others accounted for approximately 61% of system throughput. Mountaineer anticipates having adequate pipeline capacity, peaking services, and other sources of supply available to it to meet the full requirements of all firm customers on its system through Fiscal 2024.

Approximately 53% of Mountaineer's annual throughput volume for commercial and industrial customers represents customers who are served under interruptible rates and are also in a location near an interstate pipeline. As of September 30, 2023, Mountaineer had 19 such customers, one of which has a transportation contract extending beyond September 30, 2024. The majority of these customers, including 10 of Mountaineer's largest customers in terms of annual volumes, are served under evergreen transportation contracts having a 30- to 180-day termination notice.

Mountaineer meets its service requirements by utilizing a diverse mix of natural gas purchase contracts with marketers and producers, along with storage, and transportation service contracts. During Fiscal 2023, Mountaineer purchased approximately 20 Bcf of natural gas for sale to retail core-market customers (principally includes firm- residential, commercial, and industrial customers that purchase their gas from Mountaineer). Approximately 81% of the volume purchased was supplied under agreements with 10 suppliers, with the remaining volumes supplied by various producers and marketers. Gas supply contracts for Mountaineer are generally evergreen agreements with a 30-day termination notice.

Electric Utility

Electric Utility supplies electric service to approximately 62,700 customers in portions of Luzerne and Wyoming counties in northeastern Pennsylvania through a system consisting of over 2,600 miles of transmission and distribution lines and 14 substations. For Fiscal 2023, approximately 57% of sales volume came from residential customers, 32% from commercial customers, and 11% from industrial and other customers. During Fiscal 2023, 12 retail electric generation suppliers provided energy for customers representing approximately 23% of Electric Utility's sales volume.

Utilities Regulation

State Utility Regulation

PA Gas Utility is subject to regulation by the PAPUC as to rates, terms and conditions of service, accounting matters, issuance of securities, contracts and other arrangements with affiliated entities, gas safety, and various other matters.

In addition, Act 11 requires affected utilities to obtain approval of long-term infrastructure improvement plans (LTIIPs) from the PAPUC. Act 11 also authorized electric and gas distribution companies to utilize a fully projected future test year when establishing rates in base rate cases before the PAPUC.

Mountaineer

Mountaineer is subject to regulation of rates and other aspects of its business by the WVPSC. Mountaineer makes routine filings with the WVPSC to reflect changes in the costs of purchased gas.

Electric Utility

On January 27, 2023, Electric Utility filed for a base rate increase with the PAPUC. On July 14, 2023, Electric Utility filed a joint petition for settlement of the rate case. In an order dated September 21, 2023, the PAPUC approved the settlement and authorized the increased rate to become effective October 1, 2023.

Electric Utility's default service rates include recovery of costs associated with compliance with the AEPS Act, which requires Electric Utility to directly or indirectly acquire certain percentages of its supplies from designated alternative energy sources. In an order dated January 14, 2021, the PAPUC authorized Electric Utility to implement its Default Service plan for the period June 1, 2021 through May 31, 2025, subject to possible, prospectively applied interim modifications that parties to that proceeding may propose in accordance with a settlement filed in that proceeding on October 23, 2020.

Utility Franchises

PA Gas Utility and Electric Utility hold certificates of public convenience issued by the PAPUC and certain 'grandfather rights' predating the adoption of the Pennsylvania Public Utility Code and its predecessor statutes, which authorize it to carry on its business in the territories in which it renders gas service. Under applicable Pennsylvania law, PA Gas Utility and Electric Utility also have certain rights of eminent domain, as well as the right to maintain their facilities in public streets and highways in their respective territories.

Similarly, Mountaineer holds certificates of public convenience issued by the WVPSC, which authorize it to carry on its business in substantially all of the territories in which it now renders gas service. Under applicable West Virginia law, Mountaineer also has certain rights of eminent domain, as well as the right to maintain its facilities in public streets and highways in its territories.

Federal Energy Regulation

With the acquisition of Mountaineer on September 1, 2021, UGI and its subsidiaries became subject to FERC regulation under PUHCA 2005 pertaining to record-keeping and affiliate service pricing requirements. UGI provided notice of its non-exempt status on September 17, 2021.

Utilities is subject to Section 4A of the Natural Gas Act, which prohibits the use or employment of any manipulative or deceptive devices or contrivances in connection with the purchase or sale of natural gas or natural gas transportation subject to the jurisdiction of FERC, and FERC regulations that are designed to promote the transparency, efficiency, and integrity of gas markets.

Similarly, UGI Utilities is also subject to Section 222 of the Federal Power Act, which prohibits the use or employment of any manipulative or deceptive devices or contrivances in connection with the purchase or sale of electric energy or transmission service subject to the jurisdiction of FERC, and FERC regulations that are designed to promote the transparency, efficiency, and integrity of electric markets.

Electric Utility owns electric transmission facilities that are within the control area of PJM and are dispatched in accordance with a FERC-approved open access tariff and associated agreements administered by PJM. PJM is a regional transmission organization that regulates and coordinates generation, supply, and the wholesale delivery of electricity. Electric Utility receives certain revenues collected by PJM, determined under a formulary rate schedule that is adjusted in June of each year to reflect annual changes in Electric Utility's electric transmission revenue requirements, when its transmission facilities are used by third parties. FERC has jurisdiction over the rates and terms and conditions of service of wholesale sales of electric capacity and energy. Electric Utility has a tariff on file with FERC pursuant to which it may make power sales to wholesale customers at market-based rates.

Under provisions of EPACT 2005, Electric Utility is subject to certain electric reliability standards established by FERC and administered by an ERO. Electric Utility anticipates that substantially all the costs of complying with the ERO standards will be recoverable through its PJM formulary electric transmission rate schedule.

Other Government Regulation

In addition to state and federal regulation, Utilities is subject to various federal, state, and local laws governing environmental matters, occupational health and safety, pipeline safety and other matters. Each is subject to the requirements of the Resource Conservation and Recovery Act, CERCLA and comparable state statutes with respect to the release of hazardous substances.

Acquisitions

In February 2023, Energy Services entered into a joint venture to develop an RNG project at the Commonwealth Environmental Systems landfill in Pennsylvania. Once complete, the project is expected to have the capacity to produce approximately 5,000 MMBtu per day of pipeline-quality RNG.

History

UGI Corporation was founded in 1882. The company was incorporated in Pennsylvania in 1882.