Roanoke Gas currently holds the only franchises and/or CPCNs to distribute natural gas in its service area.  These franchises generally extend for multi-year periods and are renewable by the municipalities, including exclusive franchises in the cities of Roanoke and Salem and the Town of Vinton, Virginia.  All three franchises are set to expire December 31, 2035.

Due to the nature of the natural gas distribution business, the Company has entered into agreements with both suppliers and pipelines for natural gas commodity purchases, storage capacity and pipeline delivery capacity.  The Company utilizes an asset manager to assist in optimizing the use of its transportation, storage rights and gas supply in order to provide a secure and reliable source of natural gas to its customers.  The Company also has storage and pipeline capacity contracts to store and deliver natural gas to the Company’s distribution system.  Roanoke Gas is currently served directly by three primary pipelines that deliver the natural gas supplied to the Company’s distribution system.  Depending on weather conditions and the level of customer demand, failure of one of these transmission pipelines could have a major adverse impact on the Company's ability to deliver natural gas to its customers and its results of operations.

During a routine inspection in the second quarter of fiscal 2026, the Company noted damage to its LNG facility and more specifically to the LNG tank.  The LNG facility, which has been in operation since 1972, is used for peak shaving during the winter heating season.  The Company has hired subject-matter experts to help assess the cause(s), the scope of the damage and to assist with developing possible workarounds or remediation.  The Company has confirmed that the LNG facility will not be available in the 2026-2027 winter heating season.  The Company has engaged with both the SCC Staff and its insurance carrier on these matters. 

Although no natural or liquified natural gas was discovered outside of the LNG tank, upon the recommendation of experts and to ensure safety, during the third quarter of fiscal 2026, the Company substantially emptied the LNG tank, safely removing approximately $450,000 of liquified natural gas inventory.  This was necessary to ascertain a root cause of the damage and facilitate any repair.  Additional analysis shows the LNG tank underwent significant stress.  Further damage investigation costs could exceed $1 million, could be partially destructive in nature, and may or may not be determinative.  Accordingly, the Company is considering alternatives and has not finalized its long-term plans for the LNG tank or the LNG facility. 

With the LNG facility supply unavailable for the 2026-2027 winter heating season, the Company has taken several actions to add natural gas supply to its distribution system, including:

As of June 30, 2026, the Company had established a $2.1 million regulatory asset for costs to safely empty the LNG tank and evaluate future options.  The Company is currently unable to estimate the total costs associated with this event.  The Company has fully engaged with its insurer but does not yet know what portion, if any, of its spending will be covered by insurance.  The Company has held numerous discussions with the SCC Staff, and continues to keep them apprised of significant developments.  The Company must exercise judgment to conclude that costs deferred as regulatory assets are probable of future recovery.  Conclusions are based on factors, including but not limited to, orders issued by the SCC, historical precedents, discussions with legal counsel, as well as the particular facts and circumstances of the case.  The Company will seek recovery of the regulatory asset in a future regulatory proceeding.