EDGAR 10-K Filing

Company CIK: 1582244
Filing Year: 2021
Filename: 1582244_10-K_2021_0001174947-21-001128.json

---

ITEM 1. BUSINESS
ITEM 1 - BUSINESS
General
The Holding Company was incorporated in New York in July 2013 to serve as a holding company for the Gas Company and its dormant subsidiary Corning Natural Gas Appliance Corporation (the “Appliance Company”), Pike, Leatherstocking Gas Company, LLC, and Leatherstocking Pipeline Company, LLC. The Holding Company also owns 50% of Leatherstocking Gas of New York, Inc. (“Leatherstocking NY”). As used in this document, the term “the Company” refers to the consolidated operations of the Holding Company, Gas Company, Pike and (from July 1, 2020) the Leatherstocking Companies.
The Company’s principal executive offices are located at 330 W. William Street, Corning New York, 14830, the telephone number is (607) 936-3755, and our website is www.corninggas.com.
Business
The Company’s primary business, through its subsidiaries Corning Gas, Pike and the Leatherstocking Companies, is natural gas and electric distribution. Corning Gas serves approximately 15,000 residential, commercial, industrial and municipal customers in the Corning, Hammondsport and Virgil, New York, areas and two other gas utilities which serve the Elmira and Bath, New York areas. It is franchised to supply gas service in all the political subdivisions in which it operates. The Gas Company is under the jurisdiction of the New York Public Service Commission (“NYPSC”) which oversees and sets rates for New York gas distribution companies. In addition, the Gas Company has contracts with Corning Incorporated and Woodhull Municipal Gas Company, a small local utility, to provide maintenance service on their gas lines. Pike is an electric and gas utility regulated by the Pennsylvania Public Utility Commission (“PAPUC”). Pike provides electric service to approximately 4,900 customers in the Townships of Westfall, Milford, the northern part of Dingman, and in the Boroughs of Milford and Matamoras. Pike provides natural gas service to 1,300 customers in Westfall Township and the Borough of Matamoras. All these communities are located in Pike County, Pennsylvania. Additionally, Leatherstocking Gas is also regulated by the PAPUC and distributes gas in Susquehanna and Bradford Counties, Pennsylvania. Leatherstocking Pipeline, an unregulated company, has served one customer in Lawton, Pennsylvania and has had no revenues since 2018. Leatherstocking NY has an application pending before the NYPSC for authority to provide gas distribution services in Broome County, New York.
Pending Merger
On January 12, 2021, Holding Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) by and among Holding Company, affiliates of Argo Infrastructure partners, LP named ACP Crotona Corp. (“Parent”), and ACP Crotona Merger Sub Corp. (“Merger Sub”), pursuant to which Merger Sub will merge with and into Holding Company, and Holding Company will continue as the surviving corporation and a wholly owned subsidiary of Parent (the “Merger” or the “Argo Merger”). As a result of the Merger, shareholders of Holding Company will receive consideration for their shares in the following amounts: (i) $24.75 in cash, per share of common stock (the “Merger Consideration”); (ii) $25 per share of Series A preferred stock; (iii) $29.70 per share of Series B preferred stock; and (iv) $25 per share of Series C preferred stock. Amounts payable to all shareholders will include cash for any unpaid dividends.
The Merger is subject to, among other customary closing conditions, the approvals of the NYPSC and the PAPUC. In addition, the Merger requires the approval of the Company’s shareholders and the expiration of any applicable waiting period under the Hart-Scott-Rodino Antitrust Improvement Act. The Merger Agreement also includes certain termination rights for both the Company and Parent and provides that, in connection with the termination of the Merger Agreement under specified circumstances, termination fees may be owed by the Company to Parent, depending on the circumstances surrounding a termination.
The Merger Agreement provided for a 45-day “Go Shop” period which expired on February 26, 2021. During the “Go Shop” period, the Company received no competing offers or alternative acquisition proposals. The Company is now subject to a customary “No Shop” provision that restricts the Company’s ability to solicit acquisition proposals from third parties and to provide non-public information and to negotiate with third parties regarding unsolicited acquisition proposals that is reasonably expected to lead to a superior proposal. On April 30, 2021, the Company and Argo filed with the NYPSC and PAPUC joint petitions requesting approval to conclude the merger. Decisions from the commissions on the merger petitions are not expected until the first half of 2022. The Merger was voted on and approved by the Company’s shareholders at its annual shareholder meeting on May 27, 2021.
In connection with the execution of the Merger Agreement, the Company has suspended its dividend reinvestment plan.
Upon consummation of the Merger, the Company’s common stock will be delisted from the OTCQX and deregistered under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) as soon as practicable.
Gas and Electric Supply
Corning Gas has contracted with various sources to provide natural gas to our distribution system. The Gas Company contracts for pipeline capacity, as well as storage capacity of approximately 736,000 dekatherms (“Dth”). The Company manages its transportation and storage capacity with internal resources. Pike has contracted with Orange and Rockland Utilities, Inc. (“O&R”) to provide electricity and natural gas according to agreements until August 2022, subject to renewal. Leatherstocking Gas has a supply agreement with Cabot Oil and Gas that expires in August of 2026.
Corning Gas secured the NYPSC-required fixed price and storage gas supply for the 2021-2022 winter season and is managing its storage and gas supply contracts following its gas supply and acquisition plan. Assuming no extraordinary conditions for the winter season, gas supply, flowing and storage will be adequate to serve its customers.
Corning Gas does not expect a shortage of natural gas to impact our business over the next five to ten years. Natural gas supply over the last several years has been positive, and domestic reserves and production have increased. This is especially true in proximity to our distribution network. We likewise anticipate no shortages of the necessary pipes and valves for safe distribution of natural gas and continue to receive material inventory from various reliable sources. We also have confidence that our agreement with O&R will enable Pike to meet all our electric and gas needs for Pike’s customers and that Cabot Oil and Gas will be able to continue reliably supplying Leatherstocking Gas.
Seasonality
The Company’s business is seasonal in nature, and sales for each quarter of the year vary and are not comparable. Sales vary depending on seasonal variations in temperature. Gas sales peak in the winter, while Pike’s electric sales peak in the summer.
Significant Customers
The Gas Company has three major customers, Corning Incorporated, New York State Electric & Gas, and Bath Electric, Gas & Water Systems. In total, these customers accounted for approximately 14.98% of the Gas Company’s revenues in the fiscal year ended September 30, 2021 (“FY 2021”) and 14.32% in the fiscal year ended September 30, 2020 (“FY 2020”). The loss of any of these customers would have an adverse impact on our financial results.
Human Capital
The Company had 73 employees as of September 30, 2021, and 72 as of September 30, 2020. Of this total, approximately one third are union labor working under a union contract effective until April 3, 2023. Our people work primarily at three business locations in New York and Pennsylvania. The Company offers its employees competitive salaries and wages, excellent health and welfare benefit plans, including a 401(k) plan with a company match, and at the Gas Company, a qualified defined benefit pension plan. Our employees enjoy eleven paid holidays, paid vacation and personal days, paid sick leave, and Company sponsored group term life insurance benefits.
We offer employee training programs that enable our employees to obtain and maintain industry certifications required to assist customers with gas and electric service issues. We promote safety in the workplace by requiring our people to receive training on sexual
harassment in the workplace, alcohol and substance abuse, and we offer free training on interpersonal skills. We also offer our employees access to professional counseling to help them deal with personal and family issues.
Competition
Historically, the competition in the Gas Company’s residential market and Pike’s and Leatherstocking Gas’s gas franchise territories has been primarily from electricity for water heating and clothes drying, and to a small degree, fuel oil and propane for heating. The price of gas remains low in comparison to that of alternative fuels in our service territories and our competitive position in the residential, commercial and industrial markets continues to be strong. When we expand our distribution system to attract new customers, our principal competition is oil and propane. Natural gas enjoys a price advantage over these fuels today. Pike electric has not faced significant competition to date. Although not material today, we could experience competition from customer owned solar in the future.
Environmental Regulation
We believe we are in compliance with present federal, state and local provisions relating to the protection of the environment. We do not expect that continued compliance with these requirements will have any material adverse effect on our capital expenditures, earnings and financial position. The Company has no former manufactured gas plant sites (MGP) and is not a party to any environmental proceedings, litigation or complaints.
Regulatory Matters
On May 19, 2021, the NYPSC issued a rate order establishing rates and a rate plan for the Gas Company for a one-year period ending January 31, 2022. The rate order reduced customer rates by $766,000, but it eliminated a $1.3 million tax sur-credit related to income tax rate reductions in the 2017 Tax Cuts and Jobs Act. The rate order was retroactive to February 1, 2021.
On July 16, 2021, the Gas Company filed a three-year rate plan with the NYPSC for rate years ending on June 30, 2023, 2024, and 2025. The rate increases requested for the three-year rate plan are $6,555,000, $1,030,000, and $843,000, respectively.
On June 25, 2021, the PAPUC issued a rate order approving Pike’s gas rate increase of $225,000 per year, and on July 15, 2021, the PAPUC issued a rate order approving an electric rate increase in the amount of $1.4 million per year. Both rate increases took effect on July 28, 2021.
For additional information see “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Regulatory Matters”.

---

ITEM 1A. RISK FACTORS
ITEM 1A. RISK FACTORS
Failure to consummate the Argo Merger
The Argo Merger is subject to approval by, among others, both the New York and Pennsylvania public utility commissions, and the United States Justice Department. In the event that regulators fail to approve the Merger, the Company could experience difficulty in obtaining financing for capital projects required by its regulators, and the Company would realize a significant cash loss related to costs incurred in pursuit of the merger transaction.
Our operations could be adversely affected by fluctuations in the price of natural gas and electricity.
Prices for natural gas and electricity are subject to volatile fluctuations in response to changes in supply and other market conditions. While these costs are usually passed on to customers of the Gas Company pursuant to natural gas adjustment clauses, and to customers of Pike and Leatherstocking Gas through the gas rate cost, and therefore do not pose a direct risk to earnings, we are unable to predict what effect a sharp increase in natural gas and electricity prices may have on our customers’ energy consumption or ability to pay. Higher prices to customers can lead to higher bad debt expense and customer conservation. Higher prices may also have an adverse effect on our cash flow as we are typically required to pay for our natural gas and electricity prior to receiving payments for the natural gas or electricity from our customers.
Operational issues beyond our control could have an adverse effect on our business.
Pike, Leatherstocking Gas, and the Gas Company’s ability to provide natural gas and electricity depends both on our own operations and facilities and that of third parties, including local gas producers, natural gas pipeline operators, and our electric supplier from whom we receive our natural gas and electric supplies. The loss of use or destruction of our facilities or the facilities of third parties due to extreme weather conditions, breakdowns, war, acts of terrorism or other occurrences could greatly reduce potential earnings and cash flows and increase our costs of repairs and replacement of assets. Although we carry property insurance to protect our assets, and regulatory policies of the NYPSC and PAPUC provide the opportunity for deferral and recovery of extraordinary incremental costs associated with losses for such incidents, our losses may not be fully recoverable through insurance or customer rates. Additionally, the effect of the coronavirus pandemic could adversely affect our ability to maintain our gas and electric distribution systems and serve our customer base.
Environmental regulations can significantly affect the Company’s business.
The Company’s business operations are subject to federal, state, and local laws and regulations relating to environmental protection. Costs of compliance and liabilities could negatively affect the Company’s results. In addition, compliance with environmental laws, regulations or permit conditions could require unexpected capital expenditures at the Company’s facilities. Because the costs of such compliance could be significant, additional regulation could negatively affect the Company’s business. Climate change, and the regulatory and legislative developments related to climate change, may adversely affect operations and financial results. If there were to be any impacts from climate change to the Company’s operations and financial results, the Company expects that they would likely occur over a long period of time and thus are difficult to quantify with any degree of specificity. Extreme weather events may result in adverse physical effects on portions of the Company’s gas and electric infrastructure, which could disrupt the Company’s supply chain, and ultimately its operations. Disruption of transportation and distribution systems activities could result in reduced operational efficiency, and customer service interruption. Climate change, and the laws, regulations and other initiatives to address climate change, may impact the Company’s financial results. Federal, state and local legislative and regulatory initiatives proposed or adopted in recent years in an attempt to limit the effects of climate change, including greenhouse gas emissions, could have significant impacts on the energy industry including government-imposed limitations, prohibitions or moratoriums on the use of gas. A number of states have adopted energy strategies or plans with goals that include the reduction of greenhouse gas emissions. New York passed the Climate Leadership and Community Protection Act (“CLCPA”), which created emission reduction and electric generation mandates, and could ultimately impact the Company’s customer base. Legislation or regulation that aims to reduce greenhouse gas emissions could also include greenhouse gas emissions limits and reporting requirements, carbon taxes, restrictive permitting, increased efficiency standards, and incentives or mandates to conserve energy, or to use renewable energy sources. Additionally, the trend toward increased conservation, competition from renewable energy sources, and technological advances to address climate change may reduce the demand for natural gas and electricity. For further discussion of the risks associated with environmental regulation to address climate change, refer Management’s Discussion and Analysis under the heading “Environmental Matters”.
Significantly warmer than normal weather conditions may affect the sale of natural gas and significantly cooler than normal weather could affect our electric sales. Either could adversely impact our financial position and the results of our operations.
The demand for natural gas and electricity are directly affected by weather conditions. Significantly warmer than normal weather conditions in the winter in our service areas could reduce our earnings and cash flows as a result of lower gas sales. Cooler summer weather would result in lower electricity sales for air conditioning. Corning Gas mitigates the risk of warmer winter weather through the weather normalization and revenue decoupling clauses in our tariffs. These clauses allow the Gas Company to surcharge customers for under-recovery of revenue. Pike and Leatherstocking Gas do not have weather normalization or revenue decoupling to mitigate the risk of warmer weather in the winter or cooler weather in the summer.
Information Technology
Cyber-attacks or acts of cyber-terrorism could disrupt our business operations and information technology systems or result in the loss or exposure of confidential or sensitive customer, employee or Company information. In FY 2020, the Company experienced cyber-attacks that were intended to extract ransom payments. The attacks were resolved without paying a ransom and did not result in the loss of data or an interruption of customer service. Since the attacks, the Company has taken steps to harden its defenses against future attacks.
There are inherent risks associated with storing and transporting natural gas and distribution of electricity, which could cause us to incur significant financial losses.
There are inherent hazards and operation risks in gas transportation and distribution activities, such as leaks, accidental explosions and mechanical problems that could cause substantial financial losses. There are also risks associated with the distribution of electricity. These risks could, if they occur, result in the loss of human life, significant damage to property, environmental pollution, impairment of operations and substantial losses. The location of pipelines, storage facilities and electric distribution near populated areas, including
residential areas, commercial business centers and industrial sites, could increase the level of damages resulting from these risks. These activities may subject us to litigation and administrative proceedings that could result in substantial monetary judgments, fines or penalties. To the extent that the occurrence of any of these events is not fully covered by insurance, they could adversely affect our financial position and results of operations.
Changes in regional economic conditions could reduce the demand for natural gas and electricity.
The Gas Company’s business follows the economic cycle of the customers in our service regions: Corning, Bath, Virgil, Elmira, and Hammondsport, New York. A falling, slow or sluggish economy that would reduce the demand for natural gas in the areas in which we are doing business by forcing temporary plant shutdowns, closing operations or slow economic growth would reduce our earnings potential. Pike and Leatherstocking Gas are less likely to be affected by a sluggish economy as they presently have no large industrial customers.
Many of our commercial and industrial gas customers use natural gas in the production of their products. During economic downturns, these customers may see a decrease in demand for their products, which in turn may lead to a decrease in the amount of natural gas they require for production. During any economic slowdown, there is typically an increase in individual and corporate customer bankruptcies. Pike and Leatherstocking Gas have limited industrial customers and are therefore less vulnerable to economic conditions in their service territories. An increase in customer bankruptcies would increase our bad debt expenses and reduce our cash flows.
Our earnings may decrease in the event of adverse regulatory actions.
Most of our operations are subject to the jurisdiction of the NYPSC or the PAPUC. The NYPSC and PAPUC approve the rates that we may charge to our customers. If we are required in a rate proceeding to reduce the rates we charge our customers, or if we are unable to obtain approval for rate relief, particularly when necessary to cover increased costs, including costs that may be incurred in connection with mandated infrastructure improvements, our earnings would decrease.
Our success depends in large part upon the continued services of a number of significant employees, the loss of which could adversely affect our business, financial condition, and results of operation.
Our success depends in large part upon the continued services of our senior executives and other key employees. Although we have entered into an employment agreement with Michael I. German, our president and chief executive officer, he can terminate his agreement on ninety days’ notice. Other significant officers may terminate their employment at any time. The loss of the services of any significant employee could have a material adverse effect on our business.
Concentration of share ownership among our largest shareholders may prevent other shareholders from influencing significant corporate decisions.
The four largest holders of our common stock own approximately 52% of the outstanding common stock. As a result, if any chose to act together, they would have the ability to exert substantial influence over all matters requiring approval by our shareholders, including the election and removal of directors, any proposed merger, consolidation or sale of all or substantially all of our assets and other corporate transactions. This concentration of ownership could be disadvantageous to other shareholders with differing interests from these shareholders.
Our cash flows from operations may not be sufficient to fund our capital expenditures.
Our cash flows from operations are largely dependent on allowed revenues subject to the approval of the NYPSC and PAPUC, and may not be sufficient to meet all of our cash needs. The Company has a pending rate case before the NYPSC, the outcomes of which is uncertain. We estimate capital expenditures in fiscal 2022 for the Gas Company, Pike, and Leatherstocking Gas to be $7.0 million, $3.3 million and $0.94 million, respectively. If cash flows from operations are not sufficient to fund these capital expenditures, we will need to rely on new debt or equity financing which may be difficult to obtain.
We will require additional financing which may be difficult or costly to obtain.
In order to fund our capital expenditures, we may need to obtain additional debt and/or equity financing. The incurrence of debt would result in increased debt service obligations and could result in operating and financing covenants that would restrict our operations. Additional financing for the Gas Company requires NYPSC approval, and for Pike and Leatherstocking Gas requires PAPUC approval. Additional financing may have unacceptable terms or may not be available at all for various reasons including:
* Limits placed on us by our current lenders in our loan agreements,
* Our future results of operations, financial condition, and cash flows,
* Our inability to meet our business plan,
* Lenders’ or investors’ perception of, and demand for, securities of natural gas utilities, and
* Conditions of the capital markets in which we may seek to raise funds.
If we cannot raise additional capital on acceptable terms, we may not be able to finance the expansion and mandated upgrading of our distribution system, take advantage of future opportunities or respond to competitive pressures, or respond to unanticipated capital requirements.
The Company’s profitability may be adversely affected by increased competition.
Corning Gas is in a geographical area with a number of interstate pipelines and local production sources. If a major customer decided to connect directly to either an interstate pipeline or a local producer, our earnings and revenues would decrease. At Pike, electric customers could construct solar facilities at their homes or businesses reducing electric demand.
The Companies face risks related to health epidemics and other outbreaks, including the COVID-19 pandemic.
The COVID-19 pandemic has impacted, and continues to impact, countries, communities, supply chains and markets. As a result of the COVID-19 pandemic, we may face an extended economic slowdown in our service territories that could have a material impact on our liquidity, financial condition, and results of operations.
We will continue to monitor developments relating to the COVID-19 pandemic; however, we cannot predict the extent to which COVID-19 may have a material impact on our business operations, liquidity, financial condition, and financial results. The extent to which COVID-19 may impact these matters will depend on future developments that are highly uncertain and cannot be predicted, including new information concerning the severity of COVID-19 and possible variants, actions that federal, state and local governmental or regulatory agencies may take in response to COVID-19, and other actions taken to contain it or treat its impact, among others.

---

ITEM 1B. UNRESOLVED STAFF COMMENTS

---

ITEM 2. PROPERTIES
ITEM 2 - PROPERTIES
Corning Gas and the Holding Company’s headquarters are located at 330 West William Street, Corning, New York. This structure is physically connected to the operations center. Pike’s headquarters and operation center are in Westfall, Pennsylvania. The Leatherstocking Companies’ headquarters and operations center is in Montrose, Pennsylvania.
The Gas Company’s pipeline system is surveyed each year as required for compliance with federal and state regulations. Any deficiencies found are corrected as mandated. Approximately 434 miles of distribution main, 15,000 services, and 86 regulating stations, along with various other properties, are owned by the Gas Company. Pike owns approximately 160 miles of electric distribution wire, poles and services and 20 miles of gas distribution pipeline. The Leatherstocking Companies own four gate stations and approximately 18 miles of pipe in Susquehanna and Bradford Counties, Pennsylvania. All of the property owned by the Company is adequately insured and is subject to various liens typical of corporate debt.

---

ITEM 3. LEGAL PROCEEDINGS
ITEM 3 - LEGAL PROCEEDINGS
The Company has litigation pending of the type incurred in the normal course of business and the Company believes that any potential losses should be covered by insurance and will not have a material impact on the business.

---

ITEM 4. MINE SAFETY DISCLOSURE
ITEM 4 - MINE SAFETY DISCLOSURES
Not applicable.
PART II

---

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
ITEM 5 - MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
The principal market on which the Holding Company’s common stock is traded is the OTCQX Best Marketplace, under the symbol CNIG. Trading in the common stock is limited and sporadic. The following table sets forth the high and low closing sale prices as reported on the OTCQX for the Holding Company’s common stock for each quarter within the Holding Company’s last two fiscal years. Because the Holding Company’s stock is traded on the OTCQX, these quotations reflect inter-dealer prices, without retail markup, markdown or commission and may not represent actual transactions. The number of shareholders of record of the Holding Company’s common stock was 943 at September 30, 2021.
MARKET PRICE - (OTCQX)
Quarter Ended
High
Low
December 31, 2019
22.50
18.05
March 31, 2020
21.50
13.06
June 30, 2020
17.69
14.00
September 30, 2020
17.69
15.25
December 31, 2020
17.00
14.67
March 31, 2021
23.95
15.00
June 30, 2021
23.88
23.08
September 30, 2021
24.65
23.00
COMMON STOCK, PREFERRED STOCK, AND DIVIDENDS
For FY 2021, there were a total of 11,030 shares of common stock issued for $78,711 of services and $51,749 in connection with the DRIP (dividend reinvestment program). There were 3,150 shares issued to directors, 4,500 shares issued to officers, and 3,380 shares issued to various investors under the DRIP.
For FY 2020, there were a total of 25,487 shares of common stock issued for $177,675 of services and $201,940 in connection with the DRIP (dividend reinvestment program). There were 12,600 shares issued to directors, 600 shares sold to Leatherstocking Gas, which used the shares to compensate its independent director, Carl Hayden, and 12,287 shares issued to various investors under the DRIP.
Dividends on shares of common stock are accrued when declared by the board of directors. Dividend on common shares were declared and paid quarterly during the years ended September 30, 2021 and 2020. For FY 2021 dividends declared totaled $0.61 per common share. For the quarter ended September 30, 2021, $469,230 was accrued for dividends paid on October 15, 2021 to stockholders of record on September 30, 2021. For FY 2020 dividends declared totaled $0.603 per common share. For the quarter ended September 30, 2020, $468,235 was accrued for dividends paid on October 15, 2020 to stockholders of record on September 30, 2020.
Series A Cumulative Preferred Stock accrues cumulative dividends at a rate of 6.0% of the liquidation preference per share ($25.00) and are expected to be paid on or about the 14th day of April, July, October and January of each year. For the quarter ended September 30, 2021, $97,725 was accrued for dividends paid on October 15, 2021. Dividends on the Series A Preferred Stock are reported as interest expense.
Series B Convertible Preferred Stock accrues cumulative dividends at a rate of 4.8% of the liquidation preference per share ($20.75) and are expected to be paid on or about the 14th day of April, July, October and January of each year. For the quarter ended September 30, 2021, $61,066 was accrued for dividends paid on October 15, 2021.
Series C Cumulative Preferred Stock accrues cumulative dividends at a rate of 6.0% of the liquidation preference per share ($25.00) and are expected to be paid on or about the 14th day of April, July, October and January of each year and began July 15, 2020. For the quarter ended September 30, 2021, $67,500 was accrued for dividends paid on October 15, 2021. Dividends on the Series C Preferred Stock are reported as interest expense.

---

ITEM 6. SELECTED FINANCIAL DATA

---

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
New York and Pennsylvania government authorities, in response to the COVID-19 pandemic, imposed restrictions on social activities, closed schools and placed operating restrictions on commercial operations in our franchise areas beginning in March of 2020. Many
pandemic related restrictions have been lifted and businesses have re-opened. The Company is now focused on completing work on inspecting and remediating interior property/customer services that were restricted during the pandemic, most of which require work done on customer premises. Our customer service specialists are working with customers to bring them current on their utility bills. We are assisting pandemic affected customers to access government funding designed to help customers pay current and past due utility bills. The Company has limited service termination options in New York and in Pennsylvania. The Company is still recovering from the impact of lost revenues, mostly from commercial customers, due to the pandemic.
On May 19, 2021, the NYPSC issued a rate order (Case 20-G-0101) establishing rates and a rate plan for the Gas Company for a one year period ending January 31, 2022, denying the Gas Company’s request for a rate increase of approximately $6.2 million and instead ordered a base rate decrease of $766,000, offset by the termination of an existing tax sur-credit customer refund of approximately $1.3 million, resulting in an overall rate increase of approximately $500,000. The order was lower than the rate increase recommended by the NYPSC staff. The NYPSC cited pandemic austerity issues in support of its order. The Gas Company is appealing this order under Article 78 of the Civil Practice Law and Rules asking the New York Supreme Court to set aside the order and to remand the case to the NYPSC for further proceedings. In addition, on July 16, 2021, the Gas Company filed a three year rate plan with the NYPSC seeking levelized rate increases of approximately $3,761,000 per year. The results in Case 20-G-0101 adversely impacted the Company’s earnings for fiscal 2021.
In June and July of 2021, the PAPUC issued rate orders approving Pike gas rate increases of $225,000 and electric rate increases of $1.4 million, beginning on July 28, 2021. These rate increases occurred late in the Company’s fiscal year and did not materially impact our financial results for fiscal 2021.
We believe our key performance indicators are net income, stockholders’ equity and the safety and reliability of our systems. Net income decreased by $1,676,455 for FY 2021 compared to FY 2020. Because the Holding Company’s principal operations are conducted through Corning Gas and Pike, both regulated utility companies, stockholders’ equity is an important performance indicator. The NYPSC and PAPUC allow the Company the opportunity to earn a just and reasonable return on stockholders’ equity as determined under applicable regulations. Stockholders’ equity is, therefore, a precursor of future earnings potential. As of September 30, 2021, compared to September 30, 2020, stockholders’ equity decreased slightly from $35,933,515 to $35,472,550. We plan to continue our focus on building stockholders’ equity. Safety and efficiency indicators include leak repair, main and service replacements and customer service metrics.
For FY 2021, our net income decreased due to transaction costs associated with the pending Argo merger, higher depreciation expense, increased interest expense, increased operating costs, and non-recurring income items recognized in FY 2020, partially offset by the forgiveness of our Paycheck Protection Program loans in the third quarter of FY 2021. We continue to focus on improving the efficiency of our operations and making capital investments to improve our infrastructure. Corning Gas’s infrastructure improvement program concentrates on the replacement of older distribution mains and customer service lines. In FY 2021 the Gas Company repaired 110 leaks, replaced 9.0 miles of bare steel main and replaced 176 bare steel services. In FY 2020 the Gas Company repaired 184 leaks, replaced 8.6 miles of bare steel main and replaced 229 bare steel services. Pike replaced approximately 82 utility poles in FY 2021, 150 utility poles in FY 2020, and did extensive tree trimming to maintain our electric infrastructure. On January 18, 2019 Pike filed a Long-Term Infrastructure Improvement Plan (“LTIIP”) to accelerate replacement of cast iron, wrought iron and bare steel pipe over 11 years. The PAPUC approved the LTIIP plan on June 13, 2019.
Key financial performance indicators:
Year Ended September 30,
Net income
$ 1,524,903
$ 3,201,358
Stockholders' equity
$ 35,472,550
$ 35,933,515
Stockholders' equity per outstanding share
$ 11.50
$ 11.70
Gas Revenue and Margin
Gas retail operating revenues increased $1,317,197, during FY 2021 compared to FY 2020. Gas costs increased $0.25 per one thousand cubic feet (Mcf) year over year. The higher gas costs increased revenues by $464,385. Firm sales increased by 299,998.6 Mcf which resulted in higher gas cost revenues of $929,681, However, this increase was offset by a Corning Gas rate decrease net of the pass back to customers for the federal income tax benefit related to the 2017 Tax Act amounting to a net decrease of $76,869. Purchased gas costs are subject to a NYPSC approved reconciliation that permits recovery of all prudently incurred costs. Therefore, the higher gas cost revenues does not impact net income.
Other gas revenues increased $159,009 during FY 2021 compared to FY 2020. The components of this increase are detailed in the tables below:
Retail gas revenue:
September 30, 2021
September 30, 2020
Residential
$ 16,230,268
$ 15,814,929
Commercial
2,832,210
2,420,930
Transportation
4,770,464
4,407,991
Wholesale
1,859,538
1,731,433
Total retail gas revenue
25,692,480
24,375,283
Other gas revenue:
Local production
509,933
694,237
Customer discounts forfeited
40,288
Reconnect fees
1,374
Surcharges
(829 )
3,480
All other
659,291
270,556
Total other gas revenue
1,168,944
1,009,935
Total gas operating revenue
$ 26,861,424
$ 25,385,218
The following tables further summarize all other income in the other gas revenue table above:
September 30, 2021
September 30, 2020
Other gas & electric revenues:
2017 Tax Act FIT reconciliation
$ 868,544
$ 492,641
RDM amortizations net
316,212
(278,600 )
Contract customer reconciliation
(59,532 )
(80,928 )
Regulatory liability reserve
(512,839 )
-
Local production revenues
36,043
61,305
Capacity release revenues
35,246
41,187
Customer performance incentive
-
32,000
Delivery rate adjustment carrying costs
5,367
6,038
All Other
(29,750 )
(3,087 )
$ 659,291
$ 270,556
Gas purchases are our largest expenses. Purchased gas expense increased $1,158,756 for FY 2021 compared to FY 2020. The increase in costs is due primarily to higher gas costs of $338,655 and increased fuel deferral of $792,104, offset by a decrease in prior period customer pass back of $22,003.
We anticipate that the cost of natural gas is likely to increase in the near term due to the post pandemic demand for energy and current economic conditions. Increases in the cost of gas should be tempered by our access to low cost local production gas.
Gas Margin (the excess of utility gas revenues over the cost of natural gas purchased) for FY 2021 was up $317,450 or approximately 1.60%. Gas margin percentage decreased 3.12% for FY 2021 compared to FY 2020. Gas revenues increased 5.82% and purchased gas expense increased 21.06%. The gas margin percentages were negatively impacted by the higher gas costs of $1,158,756.
Gas Margin:
September 30, 2021
September 30, 2020
Utility Gas Revenues
$ 26,861,424
$ 25,385,218
Natural Gas Purchased
6,659,993
5,501,237
Gas Margin
$ 20,201,431
$ 19,883,981
Gas Margin Percentage
75.21 %
78.33 %
Electric Revenue and Margin
Utility electric retail operating revenues increased $1,307,351 during FY 2021 compared to FY 2020. This increase was mainly attributable to increased purchased power costs of $954,392 and increased customer usage of $352,959. The purchased electricity costs increased by $0.015 per Kilowatt hour when compared to FY 2020. Purchased electricity costs are subject to a PAPUC approved reconciliation that permits recovery of all prudently incurred costs. Accordingly, higher purchased electricity costs does not impact net income.
Other electric revenues increased $66,103 during FY 2021 compared to FY 2020. The components of this increase are detailed in the tables below:
Retail electric revenue:
September 30, 2021
September 30, 2020
Residential
4,136,041
3,449,851
Commercial
3,900,393
3,288,582
Street lights
132,405
123,055
Total retail electric revenue
8,168,839
6,861,488
Other electric revenue:
Customer discounts forfeited
35,942
2,658
Third party billings
-
176,645
All other
169,340
(40,124 )
Total other electric revenues
205,282
139,179
Total electric operating revenues
$ 8,374,121
$ 7,000,667
Electricity costs increased by $1,047,718 for FY 2021 compared to FY 2020. The increase in costs for FY 2021 is due primarily to an increase in the price of purchased electricity of $998,256 and increased fuel deferral of $49,493.
The cost of electricity is likely to increase in the near term as electricity prices generally follow the prices of natural gas.
Electric Margin (the excess of electric revenues over the cost) was up $325,736 for FY 2021 compared to FY 2020. Electric margin percentage decreased 8.74% for FY 2021 compared to FY 2020. The electric margin was negatively impacted by the higher purchased power costs of $1,047,718.
September 30, 2021
September 30, 2020
Utility Electric Revenues
$ 8,374,121
$ 7,000,667
Electricity Purchased
2,657,032
1,609,314
Margin
$ 5,717,089
$ 5,391,353
68.27 %
77.01 %
Operating and Interest Expenses
Operating and maintenance expense for FY 2021 increased by $2,861,412 compared to FY 2020. The increase in expenses was due primarily to merger related costs of $667,585 additional expenses associated with 100% ownership of Leatherstocking Gas Company of $420,284, leak repair reserve write down of $174,773, liability reserve of $490,052, insurance costs of $244,663, wages of $200,000, outside services of $370,598 and all other costs, including pandemic related costs, in the amount of $293,457.
Taxes other than income taxes increased $51,698 for FY 2021 compared to FY 2020. The increase results from a property tax increase of $25,222 and gross receipts tax increase of $37,680 net of decrease in payroll taxes of $11,204.
Depreciation expense for FY 2021 compared to FY 2020 increased by $717,384 primarily due to reduced depreciable lives of certain Pike assets from 11 years to 5 years, increased depreciable utility plant placed in service, as well as a full year’s depreciation expense for the Leatherstocking Companies.
Interest expense for FY 2021 compared to FY 2020 increased by $866,315 mainly due to additional interest costs associated with higher levels of outstanding debt attributed to capital expenditures, the Leatherstocking acquisition, write down of fixed interest regulatory asset
in the amount of $231,000 and additional dividends associated with outstanding Preferred Series A and C shares which are recorded as interest expense.
Effective Tax Rate
Our effective income tax rate was 23.3% for FY 2021 and 23.1% for FY 2020. The increase in the effective tax rate was impacted by higher non deductible dividends on preferred stock that are reflected as interest expense on our income statement, offset by the tax free forgiveness of our PPP loans. See Note 11 “Income Taxes” in the notes to the consolidated financial statements.
Paycheck Protection Program Loans
On various dates in the second and third quarters of FY 2021, the Company’s Paycheck Protection Program Loans (“PPP loans”) were forgiven by the United States Small Business Administration in the following amounts:
Gas Company
$ 970,900
Pike
$ 137,200
Leatherstocking Gas
$ 64,691
The Company recorded these debt forgiveness amounts as other income in the quarters in which the loans were forgiven. In response to a NYPSC order to show cause as to why the Gas Company loan forgiveness amount should not be refunded to its customers, in addition to responding to the show cause order, the Gas Company recorded a reserve in the third quarter of FY 2021 for approximately $490,000. While this issue remains unresolved, NYPSC staff in its direct testimony in Case 20-G-0394 recommended that the Company’s reserve be refunded to customers over a five year amortization period beginning in 2022.
Liquidity and Capital Resources
Internally generated cash from operating activities consists of net income, adjusted for non-cash expenses and changes in operating assets and liabilities. Non-cash items include depreciation and amortization, gain or loss on sale of securities and deferred income taxes. Over or under recovered gas costs could significantly impact cash flow. In addition, there are significant year-to-year changes in regulatory assets that impact cash flow. Cash flows used in investing activities typically consist primarily of capital expenditures and investments in our joint ventures. For FY 2020 the acquisition of our partner’s 50% interests in the Leatherstocking Companies added approximately $1.9 million to cash used in investing activities. We estimate capital expenditures to upgrade our distribution system of approximately $11.3 million in fiscal 2022. We expect to finance these planned capital expenditures with a combination of cash provided by operations and issuance of additional long-term debt and equity.
The earnings sharing mechanism approved by the NYPSC in the June 2017 Order provided for sharing between Corning Gas stockholders and customers of the earned return on equity (ROE) above certain levels. Under the earnings sharing mechanism, Corning Gas is allowed to retain all earnings up to and including a 9.5% ROE level, 50% of earnings above 9.5% up to and including 10%, 25% of earnings above 10% up to and including 10.5%, and 10.0% of earnings above 10.5%. We believe that these limits do not have a significant effect on our liquidity because even at those limits we have sufficient cash collected from our earnings to support operations.
Cash flows from financing activities consist of dividends paid, repayment of long-term debt, net proceeds from new debt, net proceeds from sales of preferred shares and changes in the outstanding balances of our lines-of-credit.
On September 30, 2021, we had approximately $52.6 million in long-term debt outstanding. We made principal payments on outstanding debt during FY 2021 consistent with the requirements of our debt instruments and refinancing activities.
On January 15, 2021, Corning Gas obtained a short term loan from M&T Bank in the amount of $850,000 to be used to finance merger transaction costs, and for general operating expenses and working capital. The loan had an interest rate of 2.6% plus the one month LIBOR interest rate, with a combined floor of 3.1%. This loan was repaid in full as part of the Gas Company’s June 25, 2021 multiple disbursement term loan.
On June 25, 2021, Corning Gas secured a $4.665 million multiple disbursement term loan (“Term Loan”) from M&T Bank. Corning Gas used $850,000 of the Term Loan to repay the January 15, 2021 M&T Bank short term loan, and used the remainder of the loan proceeds for capital expenditures and pipeline repairs. The Term Loan allowed for multiple draws until October 31, 2021, at which time the loan converted into a ten-year term loan. The Term loan bore interest at a variable rate equal to 2.9% plus the one-month LIBOR rate, with a floor of 3.4%, converting into a 10 year term loan at a variable interest rate.
On June 25, 2021, Corning Gas obtained a $1.9 million bridge loan (“Bridge loan”) from M&T Bank, the proceeds of which were used for general operating purposes, and to fund merger related costs. The Bridge loan is a demand note that bears interest at a variable rate equal to 3.0% plus the one-month LIBOR rate, with a 3.5% floor.
On September 30, 2021, Corning Gas secured a $3 million demand loan from M&T Bank, the proceeds of which were used for working capital purposes. The demand loan bears interest at a variable rate equal to 2.90% plus the greater of the applicable daily simple Secured Overnight Financing rate (SOFR) or 0.50%.
On October 13, 2020, Pike secured a $1.315 million multiple disbursement loan from M&T Bank, the proceeds of which were used to fund capital construction projects. The loan allowed for multiple draws until it converted into a 10 year long term loan at a fixed interest rate of 3.4%. The Holding Company guarantees the Pike loan.
On August 19, 2021, Pike obtained a $2.21 million multiple disbursement loan (“Pike Loan”) from M&T Bank. The Pike Loan was used for capital expenditures and for pipeline repairs. The Pike Loan allowed for multiple draws until October 31, 2021, at which time the loan converted into a ten year term loan at a variable interest rate. The Pike Loan bore interest at 2.9% plus the one month LIBOR rate with a floor of 3.4%. At October 31, 2021, the Pike note converted into a ten year term loan at a variable interest rate. The Holding Company guarantees the Pike Loan.
On February 12, 2021, Leatherstocking Gas obtained an $800,000 multiple disbursement loan (“Leatherstocking Loan”) from Wayne Bank. The Leatherstocking Loan was used for capital expenditures and for gas pipeline repairs. The Leatherstocking Loan converted into a ten year term loan on October 31, 2021, at a fixed interest rate of 4.75%. The Holding Company guarantees the Leatherstocking Loan.
Corning Gas, Pike and Leatherstocking Gas have revolving lines of credit of $8.5 million, $2.0 million and $1.5 million, respectively. The Company primarily utilizes these lines of credit to purchase gas and electricity. The Company believes these lines of credit are sufficient to fund our short term purchasing needs.
The Gas Company is responsible for managing its gas supply assets. At September 30, 2021, the Gas Company had 586,455 Dth at a cost of $1,366,341 in storage. We anticipate that the Gas Company will have sufficient gas to supply our customers for the 2021-2022 winter heating season. The contract with O&R should provide for sufficient electricity and natural gas to supply Pike for the 2021-2022 winter heating and summer cooling demand. M&T has issued to O&R a letter of credit in the amount of $1 million as security for the obligations of Pike under Pike’s electric and the gas supply and gas transportation agreement. The agreements provide for three years of electric and gas supply for the customers of Pike, with up to three one-year extensions. Leatherstocking Gas purchases its gas from Cabot Oil on an as needed basis and therefore has no gas in storage. We anticipate that Leatherstocking will have sufficient gas to supply its customers for the 2021-2022 winter heating season.
As of September 30, 2021, we believe that cash flow from operating activities and borrowings under our lines of credit will be sufficient to satisfy debt service requirements over the next twelve months. We believe new debt and proceeds from equity will be required to satisfy our capital expenditures to finance our internal growth needs for the next twelve months.
Off Balance Sheet Arrangements
We have no off balance sheet arrangements.
Contractual Obligations
The following tables summarize the Company’s expected future contractual cash obligations as of September 30, 2021, and the twelve-month periods over which they occur.
The aggregate maturities of long-term debt for each of the five years subsequent to September 30, 2021 are as follows:
$ 6,407,545
$ 6,624,807
$ 6,836,192
$ 7,081,604
$ 7,379,639
The estimated interest payments on the above debts are as follows:
$ 1,839,209
$ 1,562,298
$ 1,276,022
$ 979,873
$ 671,760
The estimated pension plan benefit payments are as follows:
$ 1,485,220
$ 1,493,007
$ 1,529,429
$ 1,599,886
$ 1,596,310
The projected benefit obligation of the benefit plan has been calculated based on the census and plan provisions, as well as a number of economic and demographic assumptions. The discount rate for the period ending September 30, 2021 is 3.64% and is assumed to be the rate going forward. A decrease in the discount rate of 1% could increase the projected benefit obligation by $4.3 million and an increase in the discount rate of 1% could decrease the obligation by $3.4 million. Either change would impact the estimated pension plan payment for future periods.
Regulatory Matters
Holding Company
The Holding Company’s primary business, through its subsidiaries Corning Gas, Pike, and Leatherstocking Gas, is regulated by the NYPSC and PAPUC, among other agencies.
On April 30, 2021, the Company and Argo filed with the NYPSC a Verified Joint Petition seeking approval, pursuant to Section 70 of the New York Public Service Law for its merger. This case is pending approval by the Commission and there is no statutory timeline for the NYPSC to decide this matter.
Also on April 30, 2021, the Company and Argo filed with the PAPUC a Joint Application requesting certificates of public convenience from the PAPUC and seeking all other PAPUC approvals necessary for the merger. This case is pending approval by the Commission and there is no statutory deadline for the PAPUC to decide this matter.
Gas Company
On August 9, 2018, The NYSPSC issued an order in Case 17-M-0815 that required Corning Gas to return to customers the difference between the federal income tax allowance in base rates and the new statutory rate of 21% under the Tax Cuts and Jobs Act of 2017 (the “Tax Act”). The refund to customers began on October 1, 2018. The customers experienced a decrease of 3.87% on their overall bill in the year starting October 1, 2018 and experienced a decrease of 3.72% on their overall bill in the year starting October 1, 2019. The amount estimated to be returned to customers was $980,964 during FY 2019 and was $1,004,563 during FY 2020. These refunds will not impact the Gas Company’s allowed earnings. The impact of the change in the Tax Act on deferred regulatory balances was deferred until the Gas Company’s base rate case (Case 20-G-0101). The Gas Company has recorded those amounts as Regulatory Liabilities on the consolidated balance sheets. The lower tax rate of 21% was included in base rates in Case 20-G-0101 therefore the pass back to customers ceased on February 1, 2021. The impact of the change in the Tax Act on deferred regulatory balances was reflected in customer rates in Case 20-G-0101 effective February 1, 2021.
On May 19, 2021, the NYPSC issued a rate order in Case 20-G-0101, establishing rates and a rate plan for the Gas Company for a one-year period ending on January 31,2022 (“Rate Year”). The rate order disallowed the Company’s request for an increase in required revenue of $6,223,603, and instead ordered a reduction of $766,000 from current rates. In the current rate order, the existing $1.3 million tax sur-credit (an adjustment to rates to refund to customers an amount owing them due to income tax rate reductions in the 2017 Tax Cuts and Jobs Act) expired, along with a $30,000 reduction to the annual Delivery Rate Adjustment. In addition, the NYPSC denied recovery of the Gas Company’s approximately $350,000 leak repair and survey cost reserve established in FY 2016. The denial of recovery of this reserve resulted in a FY 2021 charge of approximately $180,000 (pre tax), as the Company had previously established a reserve for this matter in the amount of $170,000 (pre-tax). The net impact on the Gas Company’s customers was an increase of $505,000 for the Rate Year, retroactive to February 1, 2021.
The Gas Company, on July 15, 2021, filed a petition with the State of New York Supreme Court in Albany County pursuant to Article 78 of the Civil Practice Law and Rules to review and set aside the NYPSC May 19, 2021 Order that was issued in PSC cases 20-G-0101 and 16_G-0204 involving the Gas Company’s rates for gas service. The Gas Company’s petition claims that the NYPSC’s decision was arbitrary and capricious and an abuse of discretion, affected by errors of law, and in violation of established regulatory procedure. The Gas Company’s petition requests a judgment: (1) annulling and setting aside the Order as arbitrary and capricious and an abuse of discretion, affected by errors of law, in violation of lawful regulatory procedure, and unsupported by substantial evidence in the record, insofar as the Order implements four areas of “austerity” adjustments and denies recovery of leak survey and repair costs; (2) remanding this matter to the NYPSC for further proceedings consistent with the Court’s judgment; and (3) granting such other and further relief as may be just and proper. The resolution of this matter is pending judicial review.
On July 16, 2021, the Gas Company filed a three-year rate plan (Case 20-G-0394) with the NYPSC for rate years ending on June 30, 2023, 2024, and 2025. The rate increases requested for the three year rate plan (as amended) are $6,555,000, $1,030,000, and $843,000, respectively. In its filing, the gas Company proposes a rate plan with levelized increases over three years in the amount of $3,761,000 per year. These rates, if implemented, would impact customer bills by 11.14% in each year.
In March of 2021, the NYPSC issued a “Show Cause” order instructing Corning Gas to show cause why its PPP loan in the amount of $970,000 should not be refunded to its customers if and when the loan is forgiven. On May 13, 2021, the Gas Company responded to the “Show Cause” order supporting its position that it will use the PPP loan proceeds to fund COVID operating costs, lost commercial revenues, and customer bad debt increases. On May 21, 2021, the Corning Gas PPP loan was forgiven. This matter is pending with the NYPSC. The NYPSC Staff has filed testimony on November 12, 2021 in Case 20-G-0394 on how to resolve the issues raised in the NYPSC “Show Cause” order. The Company expects that the issue will be adjudicated in the pending rate case.
By petition dated September 3, 2020 in Case 20-G-0442, Corning Gas requested authority under Public Service Law Section 69 to issue approximately $29.5 million of long term debt through December 31, 2024. The proceeds are to be used principally to fund NYPSC mandated system safety and reliability measures, including replacement of older pipe and regulator stations; and purchase equipment, computer software and other supplies as necessary to maintain the distribution system. The NYPSC issued a financing order in April of 2021 permitting the Gas Company to issue long term debt in the amount of $19.1 million, along with certain reporting requirements.
Pike
The PAPUC issued an order in Case M-2018-2641242 that requires Pike to return to customers the difference between the federal income tax allowance in base rates and the new statutory rate of 21%. Pike’s electric customers received a refund of $73,923 or decrease of 0.67% on their overall bill effective October 1, 2018. No refunds were ordered for Pike’s gas operation because amounts were not material. The impact of the change in the Tax Act on deferred regulatory balances will be deferred until Pike’s next base rate case. Pike has recorded those amounts as Regulatory Liabilities on the consolidated balance sheets. The lower tax rate of 21%, as well as deferred regulatory balances, was included in customer rates in Case R-2020-302235.
On October 24, 2020, Pike filed separate rate cases with the PAPUC for an increase in revenues for its electric services in the amount of $1,933,600 (Case R-2020-302235) and for an increase in revenues for its gas services in the amount of $262,200 (Case R-2020-3022134). Pike’s current rates have been in effect since 2014. The rate increase would impact residential customer bills by 17.3% for electric customers, and by 19.7% for gas customers. The base period (test year) for this filing is the 12 month period ended June 30, 2020. The filings with the PAPUC reflect returns on equity of 9.75% and pro forma equity ratios of 48.3% for each case. The primary reasons for the requested rate increases are PAPUC mandated initiatives including the replacement of gas distribution equipment, replacement of electric poles and wires, the recovery of deferred storm related costs, new safety, training, and cyber security requirement, and increased employee health and welfare benefits costs.
On June 25, 2021, the PAPUC issued a rate order approving a gas rate increase of $225,000 and on July 15, 2021, the PAPUC issued a rate order approving an electric rate increase in the amount of $1.4 million. Both rate increases took effect on July 28, 2021.
On July 15, 2021, the PAPUC issued a securities certificate authorizing Pike to borrow up to $8,973,695 in long term debt, commencing on the date of issuance of the securities certificate through December 31, 2025. The securities certificate requires Pike to file notice of long term borrowings with the PAPUC within 60 days of borrowings.
Leatherstocking Gas
On September 15, 2021, the PAPUC issued a securities certificate to Leatherstocking Gas permitting Leatherstocking Gas to issue debt securities in an aggregate principal amount not to exceed $5,348,850. The certificate was issued in order to allow Leatherstocking to
restructure two existing long-term loans owed to Wayne Bank. On October 5, 2021, Leatherstocking Gas and Wayne Bank restructured two promissory notes due in March and August of 2029, locking in each loan’s interest rate at its current interest rate of 4.75% for the remaining loan terms, and cancelling provisions calling for a redetermination of the interest rate on the 5th anniversary of the loans. The Holding Company provided a guarantee of both restructured loans. Leatherstocking Gas provided notice of this debt restructuring on October 12, 2021.
Environmental Matters
The Company is subject to various federal, state and local laws and regulations relating to the protection of the environment. The effect (material or not) on the Company of any new legislative or regulatory measures will depend on the particular provisions that are ultimately adopted. Environmental regulation legislative and regulatory measures to address climate change and greenhouse gas emissions are in various phases of discussion or implementation. Legislation or regulation that aims to reduce greenhouse gas emissions could also include greenhouse gas emissions limits and reporting requirements, carbon taxes, restrictive permitting, increased efficiency standards, and incentives or mandates to conserve energy or use renewable energy sources. Federal, state or local governments may provide tax advantages and other subsidies to support alternative energy sources, mandate the use of specific fuels or technologies, or promote research into new technologies to reduce the cost and increase the scalability of alternative energy sources. New York State, for example, passed the CLCPA that mandates reduced greenhouse gas emissions to 60% of 1990 levels by 2030, and 15% of 1990 levels by 2050, with the remaining emission reduction achieved by controlled offsets. The CLCPA also requires electric generators to meet 70% of demand with renewable energy by 2030. These climate change and greenhouse gas initiatives could impact the Company's customer base and assets depending on regulatory treatment afforded in the process. The initiatives could also increase the Company’s cost of environmental compliance by increasing reporting requirements and requiring the Company to replace all leak prone pipe. They could also delay or otherwise negatively affect efforts to obtain permits and other regulatory approvals with regard to existing and new facilities and impose additional monitoring and reporting requirements. Changing market conditions and new regulatory requirements, as well as unanticipated or inconsistent application of existing laws and regulations by administrative agencies, make it difficult to predict a long-term business impact across twenty or more years.
Critical Accounting Policies
Our significant accounting policies are described in the notes to the accompanying Consolidated Financial Statements of this Form 10-K. The application of generally accepted accounting principles involves certain assumptions, judgments and estimates that affect reported amounts of assets, liabilities, revenues and expenses. Thus, the application of these principles can result in varying results from company to company. The principles and policies that most significantly impact us are discussed below.
Accounting for Utility Revenue and Cost of Gas Recognition
Corning Gas records revenues from residential and commercial customers based on meters read on a cycle basis throughout each month, while certain large industrial and utility customers’ meters are read at the end of each month. Corning Gas does not accrue revenue for gas delivered but not yet billed, as the NYPSC requires that such accounting be adopted during a rate proceeding, which we have not done. Currently Corning Gas does not anticipate adopting unbilled revenue recognition nor does it believe it would have a material impact on financial results. Our tariffs contain mechanisms that provide for the recovery of the cost of gas applicable to firm customers, which includes estimates. Under these mechanisms, we periodically adjust rates to reflect increases and decreases in the cost of gas and electricity. Annually, we reconcile the difference between the total gas costs collected from customers and the cost of gas. We defer any excess or deficiency and subsequently either recover it from, or refund it to, customers over the following twelve-month period or possibly longer based on the amounts if the cost for gas significantly exceeds the total gas costs collected from customers. Quarterly, we reconcile the difference between electric costs collected from customers and the cost of electricity. The default service charges for electricity are adjusted every quarter. To the extent estimates are inaccurate, a regulatory asset on the balance sheet is increased or decreased. Pike and Leatherstocking Gas read all meters at the end of the month and therefore have no unbilled revenue. As gas and electricity are immediately available for use upon delivery to the customer, the gas or electricity and its delivery are identifiable as a single performance obligation. The Company recognizes revenues as this performance obligation is satisfied over time as the Company delivers, and its customers simultaneously receive and consume, the gas or electricity.
Accounting for Regulated Operations - Regulatory Assets and Liabilities
Corning Gas is subject to regulation by NYPSC, and Pike and Leatherstocking are subject to regulation by the PAPUC. We record the results of our regulated activities in accordance with Financial Accounting Standards Board (FASB) ASC No. 980, which results in differences in the application of generally accepted accounting principles between regulated and non-regulated businesses. ASC No. 980 requires the recording of regulatory assets and liabilities for certain transactions that would have been treated as revenue and expense in
non-regulated businesses. In certain circumstances, FASB ASC No. 980 allows entities whose rates are determined by third-party regulators to defer costs as regulatory assets in the balance sheet to the extent that the entity expects to recover these costs in future rates. Management believes that currently available facts support the continued application of ASC No. 980 and that all regulatory assets and liabilities are recoverable or refundable through the regulatory environment.
Accounting for Income Taxes
The Holding Company uses the asset and liability method to establish deferred tax assets and liabilities for the temporary differences between the financial reporting basis and the tax basis of the Holding Company’s assets and liabilities at enacted tax rates expected to be in effect when such amounts are realized or settled. Such deferred tax assets and liabilities will be adjusted for the effects of enacted changes in tax laws and rates.
Accounting for Joint Ventures
Investments in joint ventures have been recognized in the consolidated financial statements using the equity method of accounting based on the guidelines established in FASB ASC 323. In applying this guidance, the Holding Company recognizes investments in joint ventures as assets at cost. Investments fluctuate in future periods based on the Holding Company’s allocable share of earnings or losses from the joint ventures which is recognized through earnings.
Pension and Post-Retirement Benefits
The amounts reported in our consolidated financial statements related to pension and other post-retirement benefits are determined on an actuarial basis, which requires the use of many assumptions in the calculation of such amounts. These assumptions include the discount rate, the expected return on plan assets, the rate of compensation increase and, for other post-retirement benefits, the expected annual rate of increase in per capita cost of covered medical and prescription benefits. Changes in actuarial assumptions and actuarial experience could have a material impact on the amount of our pension and post-retirement benefit costs and funding requirements. In FY 2020, the mortality assumption was revised to the sex-distinct Amount-Weighted Pri-2012 Mortality Tables for employees, healthy annuitants, and contingent survivors with mortality improvements projected using Scale MP-2019 on a generational basis. The decrease in discount rate from 3.96% to 3.64% as of September 2020 increased the benefit obligation. The net effect of changes to the assumptions and discount rate is an increase of approximately $1.6 million to the pension benefit obligation. However, we expect to recover substantially all our net periodic pension and other post-retirement benefit costs attributed to employees in accordance with NYPSC authorization. For financial reporting purposes, the difference between the amounts of such costs as determined under applicable accounting principles is recorded as either a regulatory asset or liability.
For FY 2021, the Pension Plan mortality assumption was revised to the sex-distinct Amount-Weighted Pri-2012 Mortality Tables for employees, health annuitants, and contingent survivors with mortality improvements projected using Scale MP-2020 on a generational basis. The discount rate remained at 3.64% as of September 30, 2021. The net effect of changes to the assumptions, demographics and plan experience is an increase of approximately $18,000 to the pension benefit obligation. However, we expect to recover substantially all of our net periodic pension and other post-retirement benefit costs attributed to employees in accordance with NYPSC authorization. For financial reporting purposes, the difference between the amounts of such costs as determined under applicable accounting principles is recorded as a regulatory asset or a regulatory liability.
In FY 2021, the Retiree Group Health Benefits Plan mortality assumption was revised to the sex-distinct Headcount Weighted Pri-2012 Mortality Tables for employees, healthy annuitants, and contingent survivors with mortality improvements projected using Scale MP-2020 on a generational basis. The discount rate increased from 2.21% to 2.53% as of September 2021 which resulted in a decrease in the benefit obligation. The net effect of changes to the assumptions, demographics and plan experience is an increase of approximately $14,000 to the retiree group health benefit obligation.
Preferred Stock and Temporary Equity
The Holding Company classifies conditionally redeemable convertible preferred shares, which includes preferred shares subject to redemption upon the occurrence of uncertain events not solely within control of the Holding Company, as temporary equity in the mezzanine section of the consolidated balance sheets, in accordance with the guidance enumerated in ASC No. 480 "Distinguishing Liabilities from Equity". The Company also analyzes the embedded conversion feature for bifurcation, based on whether the host instrument has more equity-like or debt-like characteristics. Dividends are recorded as a reduction to retained earnings and issuance costs reduce the initial proceeds and are then accreted over the life of the instrument to the redemption amount.
The Holding Company records mandatorily redeemable stock as a liability in accordance with FASB ASC No. 480. Dividends are recorded as interest expense and issuance costs are treated the same way as debt issuance costs.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This report contains statements which, to the extent they are not recitations of historical facts, constitute "forward-looking statements" within the meaning of the Securities Litigation Reform Act of 1995 (“Reform Act”). The words "estimate", "project", "anticipate", "expect", "intend", "believe", "could" and similar expressions are intended to identify forward-looking statements. All such forward-looking statements are intended to be subject to the safe harbor protection provided by the Reform Act. Although we believe that the expectations reflected in these forward-looking statements are based on reasonable assumptions, we can give no assurance that our expectations will be achieved. As forward-looking statements, these statements involve risks, uncertainties and other factors that could cause actual results to differ materially from the expected results. Accordingly, actual results may differ materially from those expressed in any forward-looking statements. Factors that could cause results to differ materially from our management's expectations include, but are not limited to, those listed under Item 1A - "Risk Factors" of this Annual Report on Form 10-K for the fiscal year ended September 30, 2021, in addition to:
* The impact of the COVID-19 pandemic,
* Completion of the pending merger with Argo,
* The effect of an interruption in our supply of natural gas or electricity or a substantial increase in the price of natural gas or electricity,
* Our ability to successfully negotiate new supply agreements for natural gas as they expire, on terms favorable to us, or at all,
* The effect on our operations of any action by the NYPSC or PAPUC,
* The effect of litigation,
* The effect on our operations of unexpected changes in other applicable legal or regulatory requirements,
* The amount of natural gas produced and directed through our pipeline by producers,
* The effect of weather on our utility infrastructure,
* Our ability to obtain additional equity or debt financing to fund our capital expenditure plans and for general corporate purposes,
* The impact of New York State’s Climate Leadership and Community Protection Act legislation on the Company’s ability to recover in cost of service through depreciation expense its investment in utility plant,
*
Our successful completion of various capital projects and the use of pipeline, compressor stations and storage by customers and
counterparties at levels consistent with our expectations,
* Our ability to retain the services of our senior executives and other key employees,
*
Our vulnerability to adverse general economic and industry conditions generally and particularly the effect of those conditions on
our major customers,
* The effect of events in our transportation and delivery facilities,
* Competition to our gas supply and transportation business from other pipelines, and
* The possibility of cyber and malware attacks.
Forward-looking statements speak only as of the date they are made, and we undertake no obligation to update any forward-looking statement in light of new information or future events.

---

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

---

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following financial statements are filed with this Form 10-K:
Report of Freed Maxick CPAs, P.C., Independent Registered Public Accounting Firm
Consolidated Financial Statements:
Consolidated Balance Sheets as of September 30, 2021 and 2020
Consolidated Statements of Income for the years ended September 30, 2021 and 2020
Consolidated Statements of Comprehensive Income for the years ended September 30, 2021 and 2020
Consolidated Statements of Changes in Stockholders’ Equity for the years ended September 30, 2021 and 2020
Consolidated Statements of Cash Flows for the years ended September 30, 2021 and 2020
Notes to Consolidated Financial Statements

---

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None

---

ITEM 9A. CONTROLS AND PROCEDURES
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
As of September 30, 2021, the Company’s management, with the participation of the Company’s chief executive officer and chief financial officer, evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended. Based upon the Company’s evaluation, the Company’s chief executive officer and chief financial officer concluded that the Company’s disclosure controls and procedures are effective as of September 30, 2021.
Management’s Report on Internal Controls over Financial Reporting
The management of the Company is responsible for establishing and maintaining adequate internal controls over financial reporting as such term is defined in Exchange Act Rule 13a-15(f) and 15d-15(f). The Company’s internal controls over financial reporting are designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the consolidated financial statements. Our internal controls over financial reporting is supported by appropriate reviews by management, written policies and guidelines, careful selection and training of qualified personnel, and a written Code of Conduct adopted by our Company’s Board of Directors, applicable to all Company Directors and all officers and employees of our Company.
The Audit Committee of our Company’s Board of Directors meets with the independent public accountants and management periodically to discuss internal controls over financial reporting and auditing and financial reporting matters. The Audit Committee reviews with the independent public accountants the scope and results of the audit effort.
The Company’s management, including the Company’s chief executive officer and chief financial officer, assessed the effectiveness of the Company’s internal controls over financial reporting as of September 30, 2021. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control - Integrated Framework from 2013. Based upon that evaluation, our chief executive officer and chief financial officer concluded that our internal controls over financial reporting was effective as of September 30, 2021.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Exchange Act Rules 13a-15 or 15d-15 that was conducted during the last fiscal quarter for the Company that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

---

ITEM 9B. OTHER INFORMATION
ITEM 9B. OTHER INFORMATION
None
PART III

---

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Item 10. Directors, Executive Officers and Corporate Governance.
Board of Directors
The name, age, position, business experience, and principal occupation and employment of each of our directors is provided below, including service as directors of our wholly owned subsidiary, Corning Gas.
Name
Age
Position
Director of the
Company Since
Director of
Corning Gas Since
Henry B. Cook, Jr.
Chairman of the Board
Michael I. German
Chief Executive Officer, President and Director
Ted W. Gibson
Director
Robert B. Johnston
Director
Joseph P. Mirabito
Director
William Mirabito
Director
George J. Welch
Director
John B. Williamson III
Director
Henry B. Cook, Jr. is our chairman of the board of directors and has served as a director since May 2007. He has served as the president of Triple Cities Acquisition, LLC, a heavy truck parts and vehicle dealer, and Roadwolf Transportation Products, LLC, an importer of heavy-duty truck parts, since 2001. Mr. Cook has exhibited his expertise in the development and management of the business of those two companies. This business experience, together with the expertise about our business and operations derived from his years of service on the board of the Company and leadership as chairman of the board, led the board of directors to conclude that Mr. Cook has the judgment and skills desired for continued service on the board. He is not related to Matthew J. Cook, our chief operations officer.
Michael I. German has served as our chief executive officer, president, and a director since December 2006. Mr. German serves as president of Corning Gas, Corning Appliance, Pike County Light & Power Company, Leatherstocking Gas and Leatherstocking Pipeline. He also serves on the boards of Leatherstocking Gas, Leatherstocking Pipeline, Leatherstocking New York and Pike. Prior to joining the Company, he was senior vice president, utility operations for Southern Union Company where he was responsible for gas utility operations in Missouri, Pennsylvania, Rhode Island, and Massachusetts. From 1994 to 2005, Mr. German held several senior positions at Energy East Corporation, a publicly held energy services and delivery company, including president of several utilities. From 1978 to 1994, Mr. German worked at the American Gas Association, finishing as senior vice president. From 1976 to 1978, Mr. German worked for the US Energy Research and Development Administration. Mr. German is a board member of the Northeast Gas Association, Ampco Pittsburgh Corporation, and several non-profit organizations. Mr. German’s role as president and chief executive officer, responsibility for the day-to-day operations and significant strategic initiatives, as well as his extensive experience in utility and public company operations, led the board to conclude that Mr. German should continue to serve as a director.
Ted W. Gibson has been a director since November 2006. He has served as the chief executive officer of Classic City Mechanical, an underground utility business, since 1979. Mr. Gibson is also a corrosion specialist in the National Association of Corrosion Engineers and a graduate of the Georgia Institute of Technology - Mechanical Engineer. Mr. Gibson previously served as a United States Marine Corps Captain and is a Vietnam veteran. He is also an inspector for the Nevada State Boxing Commission. Mr. Gibson’s professional background and extensive experience with pipelines and other underground utilities, his business and management expertise in his service as chief executive officer of Classic City Mechanical, his knowledge of our business, and contributions during his years of service on the board of directors led the board of the Company to conclude that Mr. Gibson has the skills desired for continued service on the board.
Robert B. Johnston has been a director since July 2014. He has served as the executive vice president and chief strategy officer for The InterTech Group, Inc. since 2008. In this capacity, he is responsible for merger and acquisition activities, investments and communications, as well as oversight of a number of InterTech operating companies. He currently serves as chairman of the board of directors of Colabor Inc. Additionally, he serves on the board of directors of the South Carolina Community Loan Fund, Supremex Inc., FIH Group PLC, Circa Enterprises, and Swiss Water Decaffeinated, Inc. Mr. Johnston previously served as the president, chief executive officer, and deputy governor of the Hudson’s Bay Company, and on the boards of the Hudson’s Bay Company, Gas Natural Inc., Pacific Northern Gas, Central Vermont Public Service Corporation, Produce Investments PLC, Fyffes PLC, Galvanic Applied Sciences, Span America Medical Products, Experiences Canada, Carolina Youth Development Center, and Canada’s National History Society. He was also a member of the advisory board of the McGill University Executive Institute. Mr. Johnston completed the University of Oxford Advanced Management and Leadership Program and received an MBA from the John Molson School of Business, an MA in Public Policy & Public Administration, and a BA in Political Science from Concordia University. Additionally, he holds the ICD.D Designation from the Institute of Corporate Directors (Canada). Mr. Johnston’s extensive financial and operational experience coupled with his corporate governance and regulated utility experience led the board to conclude that he should continue to serve as a director.
Joseph P. Mirabito has been a director since November 2010. He was president of Mirabito Fuel Group from 1986 to 1998. He has also served as president of Granite Capital Holdings, Inc. from 1998 to 2009. He is currently chairman and chief executive officer of Mirabito Holdings, Inc. and Mirabito Regulated Industries, LLC. He serves as a director on several professional and civic boards in the central New York region. He and William Mirabito are cousins. Mr. Mirabito’s business and corporate management experience in the energy delivery businesses where he serves as the president and chief executive officer, his knowledge of the local communities in Central New York served by those businesses, and commitment to the growth of our business as a significant shareholder, as well as his prior experience in advising and serving on the board and
committees of Wilber Bank. led the board of directors to conclude that Mr. Mirabito has the skills, connections, and experience desired for continued service on the board.
William Mirabito has served as a director since November 2010. He was president of Mang Insurance Agency from 2008 to 2015 and has served as vice chairman and treasurer of Mirabito Holdings, Inc. and Mirabito Regulated Industries, LLC since 2014. He is also the chairperson of the audit committee for Mirabito Holdings. He previously served on the board and finance committee of Fox Hospital in Oneonta, New York. He is also a board member of Springbrook, New York, and serves on its executive committee. He and Joseph Mirabito are cousins. Mr. Mirabito’s business and management experience as president of Mang Insurance Agency and vice chairman and treasurer of Mirabito Holdings and Mirabito Regulated Industries, his commitment to the growth of our business as a significant shareholder, as well as his experience in advising and serving on the board and committees of Fox Hospital and Springbrook led the board of directors to conclude that Mr. Mirabito has the skills and experience desired for continued service on the board.
George J. Welch has served as a director since May 2007. He is the senior partner in Welch Law LLP in Corning, New York, concentrating on real estate and business transactions. He has served as a director of many regional organizations, including a regional economic development organization, and PaneLogic, Inc., a provider of control system integration services. Mr. Welch serves on the Alfred State College Council, an advisory group to the president of the college. Mr. Welch’s extensive experience in legal matters and economic development, and as a community leader led the board to conclude that he should continue to serve as a director.
John B. Williamson III has served as a director since November 2010. Since 2004, Mr. Williamson has served as chairman of RGC Resources, Inc., a $230 million energy distribution and services holding company, and as director, president, and chief executive officer from 1999 to 2013. He currently serves as a director of Bank of Botetourt, Optical Cable Corporation, and Lawrence Transportation Company, an ESOP. He previously served as a director on the board of Luna Innovations Corporation. Mr. Williamson received an MBA from the College of William and Mary, and a BS from Virginia Commonwealth University. Mr. Williamson’s experience as the chairman, president, and chief executive officer of an energy distribution and services company, as well as his experience in advising and serving on the board and committees of other corporations has resulted in his broad understanding of the operational, financial, and strategic issues that businesses and utilities face. This led the board to conclude that he should continue to serve as a director.
All of our directors were elected by our shareholders in 2021 to serve for a one-year term and will hold office until the earlier of their removal or resignation or until their successors are chosen and qualified.
Executive Officers
The names, ages, positions, and certain other information concerning our current executive officers and significant employees is provided below. Biographical information for Mr. German can be found under Board of Directors.
Name
Age
Position
Michael I. German
Chief Executive Officer, President and Director
Charles A. Lenns
Senior Vice President, Chief Financial Officer and Treasurer
Matthew J. Cook
Senior Vice President and Chief Operations Officer
Russell S. Miller
Senior Vice President and Chief Information Officer
Charles A. Lenns joined the Company in July 2020 as vice president, chief financial officer and treasurer and was promoted to senior vice president, chief financial officer and treasurer on October 19, 2021. Mr. Lenns began his professional career with Ernst & Young, LLP, and became a partner with the firm in 1989, primarily serving clients in the power and utilities industry group. He later became a transaction advisory services tax partner, advising power and utility industry clients on the tax consequences of business combination transactions. In 2012, Mr. Lenns retired from E&Y and became the vice president - tax at Consolidated Edison Corporation in New York City, where he was responsible for the financial accounting for income taxes, and all other tax affairs of the company. Mr. Lenns retired from Consolidated Edison in 2018 and formed his own business and tax consulting firm. He is an adjunct instructor at the University of Scranton, in Scranton, Pennsylvania, where he also serves on the university’s business advisory council. He serves as a director of Brayman Corporation, a closely held construction company. Mr. Lenns also serves as a director on the boards of Leatherstocking Gas and Pike.
Matthew J. Cook joined Corning Gas in February 2008 as vice president - operations and was promoted to senior vice president and chief operations officer on October 19, 2021. Mr. Cook has more than three decades of natural gas utility experience. In addition to the operations department, Mr. Cook manages the customer service department and our facilities. From 2000 until joining Corning Gas, Mr. Cook was employed by Mulcare Pipeline Solutions, a supplier of products and services to the natural gas industry, in various positions including sales manager and technical specialist. Previously, Mr. Cook served as operations engineer and gas engineer for New York State Electric and Gas. He
holds a B.S. in mechanical engineering from Rochester Institute of Technology. Mr. Cook also serves as a director on the boards of Leatherstocking Gas and Pike. He is not related to our director, Henry B. Cook, Jr.
Russell S. Miller rejoined Corning Gas as director of gas supply and marketing in June 2008, was appointed as vice president - gas supply and marketing, in December 2009, and promoted to senior vice president and chief information officer on October 19, 2021. From 1987 through 2004 he was employed by us in various positions including vice president - operations, gas supply manager and mapping technician. From 2006 until rejoining Corning Gas, he was employed by IBM, as energy distribution manager where he managed a team of energy buyers. From 2004 through 2006, he was employed as an industrial account manager for Sprague Energy Corp. located in Portsmouth, New Hampshire. He has an A.A.S. in computer aided design from Corning Community College and a B.S. in telecommunications technology from Empire State College. Mr. Miller also serves as a director on the boards of Leatherstocking Gas and Pike.
Executive officers are generally chosen or elected to their positions annually and hold office until the earlier of their removal or resignation or until their successors are chosen and qualified.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act requires our directors and executive officers and persons who own more than 10% of our common stock to file with the United States Securities and Exchange Commission (the “SEC”) initial reports of ownership and reports of changes in ownership of our common stock. Our officers, directors, and greater than 10% shareholders are required by the SEC to furnish us with copies of all Section 16(a) forms they file. Based solely on review of copies of reports furnished to us or written representations that no reports were required, we believe that all Section 16(a) filing requirements were met in the last fiscal year.
Code of Business Conduct and Ethics
We have adopted a code of business conduct and ethics that applies to all employees, including our chief executive officer and our chief financial officer, who also serves as our principal accounting officer. This code is available on our website at www.CorningGas.com. Any amendments or waivers to the code that apply to our chief executive officer or chief financial officer will be promptly disclosed to our shareholders by posting that information on our website.
Audit Committee Report
Our board of directors has a separately designated standing audit committee. In accordance with its written charter, which was approved and adopted by our board, our audit committee assists the board in fulfilling its responsibility of overseeing the quality and integrity of our accounting, auditing and financial reporting practices. A copy of the audit committee charter is available on our website at www.CorningGas.com. The audit committee is directly responsible for the appointment of our independent registered public accounting firm, currently Freed Maxick CPA’s, P.C.(“Freed Maxick”), and is charged with reviewing and approving all services performed for us by Freed Maxick and for reviewing the firm’s fees. The audit committee reviews Freed Maxick’s internal quality control procedures, reviews all relationships between Freed Maxick and the Company and its subsidiaries in order to assess the firm’s independence, and monitors compliance with our policy regarding non-audit services, if any, rendered by Freed Maxick. In addition, the audit committee ensures the regular rotation of the lead audit partner and concurring partner. The audit committee reviews management’s programs to monitor compliance with our policies on business ethics and risk management.
The audit committee is currently comprised of Mr. Welch, the committee’s chairman, Mr. Cook, Mr. William Mirabito and Mr. Williamson. Mr. Mirabito is an officer, director, and shareholder of a company that has entered into a joint venture with the Company (Leatherstocking New York). The committee met three times in the last fiscal year. Mr. Welch, Mr. Cook, Mr. Mirabito, and Mr. Williamson are “independent directors” as defined in the New York Stock Exchange listing standards. In addition, each member of the audit committee is able to read and understand financial statements, including balance sheets, income statements, and cash flow statements. Our board has determined that Mr. Williamson meets the qualifications for designation as a financial expert as defined in SEC rules through his experience as the chief executive officer of RGC Resources, Inc., a publicly-held company. The audit committee reviews and reassesses its charter as needed from time to time and will obtain the approval of the board for any proposed changes to its charter.
Our audit committee oversees management’s implementation of internal controls and procedures for financial reporting which are designed to ensure the integrity and accuracy of our financial statements and our ability to timely record, process, and report the information required for public disclosure. In fulfilling its oversight responsibilities, the audit committee reviewed and discussed the financial statements with management and Freed Maxick. The audit committee reviewed and discussed with Freed Maxick the audited financial statements of the Company for the years ended September 30, 2021 and 2020. The audit committee also discussed with Freed Maxick the matters required by AU Section 380, “Communication with Audit Committees” . The audit committee reviewed with Freed Maxick, which is responsible for expressing an opinion on the conformity of our audited financial statements with accounting principles generally accepted in the United States, its judgment
as to the quality, not just the acceptability, of our accounting principles and other matters as are required to be discussed with the audit committee pursuant to generally accepted auditing standards.
In discharging its oversight responsibility as to the audit process, our audit committee obtained from Freed Maxick a formal written statement describing all relationships between Fred Maxick and the Company that might bear on Freed Maxick’s independence consistent with the requirements of the Public Company Accounting Oversight Board, and discussed with Freed Maxick any relationships that may impact its objectivity and independence. In considering Freed Maxick’s independence, the audit committee also considered whether the non-audit services performed by Freed Maxick on our behalf were compatible with maintaining the independence of Freed Maxick.
In reliance upon (1) the audit committee’s reviews and discussions with management and Freed Maxick, (2) management’s assessment of the effectiveness of our internal control over financial reporting, and (3) the receipt of an opinion from Freed Maxick dated December 17, 2021 stating that the Company’s financial statements for the fiscal year ended September 30, 2021 are presented fairly, in all material respects, in conformity with U.S. generally accepted accounting principles, the audit committee recommended to our board that these audited financial statements be included in our Annual Report on Form 10-K for the fiscal year ended September 30, 2021, for filing with the SEC.
Audit Committee
George J. Welch, Chairman
Henry B. Cook, Jr.
William Mirabito
John B. Williamson III

---

ITEM 11. EXECUTIVE COMPENSATION
Item 11. Executive Compensation.
Nominating and Compensation Committee
Our nominating and compensation committee is comprised of Mr. Joseph Mirabito, the committee’s chairman, Mr. Gibson, Mr. Cook, Mr. Johnston and Mr. Williamson. The nominating and compensation committee oversees our executive compensation program. In this role, the committee reviews and approves, or recommends for approval by the full board, the compensation that is paid or awarded to our executive officers. The goal of our nominating and compensation committee is to ensure that the total compensation paid to our executive officers and significant employees is fair, reasonable, and competitive.
No officers or employees of the Company or its subsidiaries served on the nominating and compensation committee. Mr. German meets with the committee at their request and makes recommendations with respect to the compensation of other officers. Mr. Joseph Mirabito is an officer, director, and shareholder of a company that has entered into a joint venture with the Company (Leatherstocking New York). There are no interlocks between our nominating and compensation committee, our officers, and those of any other company.
The nominating and compensation committee also administers our stock compensation plan. On January 12, 2021, we discontinued the issuance of stock compensation for our directors in connection with the proposed merger with companies affiliated with Argo Infrastructure Partners, LP. The nominating and compensation committee met three times in the last fiscal year to recommend salaries and report those recommendations to the full board of directors for approval and to nominate directors. Our board has approved the charter of the nominating and compensation committee, which is available on our website at www.CorningGas.com.
Executive Compensation
Summary Compensation Table
The following table summarizes the compensation paid to our chief executive officer, chief financial officer and our most highly compensated executive officers.
Name and Principal Position
Year
Salary
Bonus
Change in
Pension
Value
Stock
Awards
(1)
Option
Awards
(2)
All Other
(3)
Total
Michael I. German
$ 190,740
-
$ 84,266
-
-
$ 6,930
$ 281,936
President & CEO
186,293
-
45,357
-
-
6,315
237,965
Charles A. Lenns
181,500
$ 35,588
-
-
$ 17,500
13,466
248,054
SVP & CFO (4)
37,019
-
-
$ 74,250
19,505
19,557
150,331
Matthew J. Cook
165,360
19,882
51,091
-
-
5,741
242,074
SVP & COO
158,788
15,900
50,544
-
-
4,763
229,995
Name and Principal Position
Year
Salary
Bonus
Change in
Pension
Value
Stock
Awards
(1)
Option
Awards
(2)
All Other
(3)
Total
Russell S. Miller
156,000
16,076
62,636
-
-
4,837
239,549
SVP & CIO
149,790
10,875
62,350
-
-
4,127
227,142
(1) The amounts reported reflect restricted stock grants to Mr. Lenns of 4,500 shares in fiscal 2020. These shares will vest immediately upon a “change in control” (as defined in our 2018 employee long-term incentive plan) or in accordance with the following schedule: 1,125 shares on each of June 1, 2021, December 1, 2021, June 1, 2022 and December 1, 2022. We value stock awards in accordance with FASB ASC No. 718. For more information about the assumptions underlying our valuation, please see note 9 Stockholders’ Equity and Stock-based Compensation of the notes to our consolidated financial statements for the year ended September 30, 2021.
(2) The amount reported reflects stock options grants to Mr. Lenns to acquire 10,000 common shares in each of fiscal 2021 and 2020. The 2021 options have a purchase price of $23.00 a share and the 2020 options $16.50. Both options are incentive stock options and are exercisable immediately for a period of ten years. We value stock option awards in accordance with FASB ASC No. 718. For more information about the assumptions underlying our valuation, please see note 9 Stockholders’ Equity and Stock-based Compensation of the notes to our consolidated financial statements for the year ended September 30, 2021.
(3) The amounts reported include 401(k) matching contributions by the Company in fiscal 2021 of $994 for Mr. German, $1,466 for Mr. Lenns, $5,741 for Mr. Cook and $4,435 for Mr. Miller, and in fiscal 2020 of $5,607 for Mr. German, $4,763 for Mr. Cook and $4,127 for Mr. Miller. The amount reported for Mr. German includes an automobile benefit of $5,936 in fiscal 2021. The amount reported for Mr. Lenns in fiscal 2021 includes $12,000 for a housing allowance, and in fiscal 2020 $6,000 for a housing allowance provided to Mr. Lenns from July to December 2020 and $13,557 paid to Lenns Consulting Group for June 2020 before he became our chief financial officer.
(4) Mr. Lenns was appointed chief financial officer on July 1, 2020.
Employment Agreements
Pursuant to his employment agreement dated November 30, 2006, as amended effective December 31, 2008, Mr. German continued to serve as president and chief executive officer of Corning Gas for 2021 under the automatic renewal provisions of his contract. The employment agreement provides for termination payments to Mr. German as follows:
· If Mr. German terminates his employment for “good reason” (as defined in the employment agreement - generally a decrease in title, position or responsibilities, a decrease in salary or bonus or a reduction in benefits), then he will receive compensation and benefits until the effective date of his termination, plus a severance package equal to his then current annual salary.
· If Mr. German’s employment is terminated without “cause” (as defined in the employment agreement), then he will receive compensation and benefits until the effective date of his termination, plus a severance package equal to his then current annual salary.
· If Mr. German’s employment is terminated for a “change in control” (as defined in the employment agreement), then he will receive compensation and benefits until the effective date of his termination, plus a severance package equal to three times his then current annual salary.
The employment agreement also contains standard confidentiality, non-competition and non-solicitation provisions for a period including Mr. German’s employment and the twelve months immediately following the date of the termination of his employment.
On April 17, 2012, Corning Gas entered into change of control agreements with all executive officers other than Mr. German. None of our other executive officers have employment agreements.
Change of Control Agreements
On April 27, 2017, we entered into change of control agreements with Mr. Cook and Mr. Miller. On August 31, 2020, we entered into a change of control agreement with Mr. Lenns. The Cook and Miller agreements terminate on the first to occur of: (i) termination of the executive’s employment with the Company prior to a “change of control” (as defined in the agreements); (ii) one year from the date of a change of control; or (iii) May 1, 2022, but only if no change of control has occurred as of that date. The agreement with Mr. Lenns is identical to the agreements with Messrs. Cook and Miller, except its termination date is October 1, 2025.
Under each agreement, upon termination of the executive’s employment with the Company within twelve months following a change of control, unless termination is because of the executive’s death, or by the Company for “cause” or “disability” (each as defined in the agreements) or by the executive other than for “good reason” (as defined in the agreements), we will be required to pay to the executive the following: (i) the executive’s full salary through the date of termination and all other unpaid amounts to which the executive is entitled as of the date of termination
under any plan or other arrangement of the Company, at the time such payments are due (and in any event within 90 days after the executive’s separation of service from the Company); and (ii) an amount equal to the executive’s annualized includable compensation for the base period (within the meaning of Section 280G of the tax code), subject to reduction if the payment is or will be subject to the excise tax imposed by Section 4999 of the tax code, which payment must be made in a lump sum within 90 days after the executive’s separation from service.
The executives are not required to mitigate the amount of any payment under the change of control agreements by seeking employment or otherwise. We also agreed to pay to each of the executives all legal fees and related expenses incurred by the executive in connection with enforcing the agreement, whether or not the executive prevails (subject to certain conditions with respect to Mr. Cook).
Executive Employee Incentive Program
Each year, our board of directors approves the performance goals and terms of an executive employee incentive program. The program is designed to attract and retain high caliber executives who can optimize the Company’s performance and to reward our executive officers for the achievement of annual corporate and operational goals. Performance bonuses, if earned, are paid in cash during the first calendar quarter of the calendar year following the calendar year for which performance was measured and are based upon the board’s determination of the percentage of the goals that were met. Eligible employees include each of our executive officers listed in the summary compensation table who are officers on the date of payment of the awards, other than Mr. German. Awards under the program are at the discretion of our board and may be modified or discontinued at any time.
Benefit Plans
We provide competitive welfare and retirement benefits to our executive officers as an important element of their compensation packages. Our executives receive medical and dental coverage, life insurance, disability coverage and other benefits on the same basis as our other employees. Our executives are also eligible to participate in our employee savings and pension plans.
Corning Natural Gas Corporation Employees Savings Plan. All employees of Corning Gas who work for more than 1,000 hours per year and who have completed one year of service may enroll in the savings plan at the beginning of each calendar quarter. Under the savings plan, participants may contribute up to 50% of their wages. Corning Gas matches one-half of the participant’s contributions up to a total of 3% of the participant’s wages. Matching contributions vest in the participants’ accounts at a rate of 20% per year and become fully vested after five years. All participants may select one or a combination of ten investment plans for their account. Distribution of amounts accumulated under the savings plan occurs upon the termination of employment or death of the participant. The savings plan also contains loan and hardship withdrawal provisions.
Pension Plan. We maintain a defined benefit pension plan, the retirement plan for salaried and non-union employees of Corning Gas that covers substantially all our employees. We make annual contributions to the plan equal to amounts determined in accordance with the funding requirements of the Employee Retirement Security Act of 1974. The benefit payable under the pension plan is calculated based upon the employee’s average salary for the four years immediately preceding his or her retirement. As defined in the plan, the normal retirement age is 62. The compensation covered by the pension plan includes only base salary, identified in the summary compensation table as “salary.”
Outstanding Equity Awards at Fiscal Year End
In fiscal 2021 and 2020, we issued restricted shares and options to our chief financial officer, Charles Lenns. The following table summarizes Mr. Lenns’ grants at September 30, 2021. There were no other outstanding equity grants at year-end.
Option Awards (1)
Stock Awards (2)
Shares Underlying
Unexercised Options
Name
Exercisable
Unexercisable
Option
Exercise
Price
Option
Expiration
Date
Shares of
Unvested
Stock
Market Value
of Unvested
Stock
Charles A. Lenns
10,000
-
$ 23.00
9/22/2031
3,375
$ 81,675
SVP & CFO
10,000
-
16.50
8/31/2030
(1) Mr. Lenns was granted immediately exercisable incentive stock options to acquire 10,000 common shares in each of fiscal 2021 and 2020.
(2) Mr. Lenns was granted 4,500 restricted shares of common stock in fiscal 2020. 1,125 of these shares vested on June 1, 2021. The remaining 3,375 unvested shares will vest immediately upon a “change in control” (as defined in our 2018 employee long-term incentive plan) or in accordance with the following schedule: 1,125 on each of December 1, 2021, June 1, 2022 and December 1, 2022.
Director Compensation
Historically, we have paid our directors, other than our CEO Michael I. German, with restricted stock grants of 450 shares per quarter. The shares awarded will become unrestricted upon a director leaving the board. We issued 450 shares to each of our directors for the first quarter of fiscal 2021. In January 2021, we discontinued the issuance of stock compensation for our directors in connection with our entry into the merger agreement with Argo. For the remainder of fiscal 2021, we compensated our non-employee directors with deferred cash awards equal in value to 450 shares a quarter based on the closing price of our stock on the last day of each quarter. To conserve cash, our board members have elected to defer payment of the cash board fees until the merger with Argo is completed. Information regarding the compensation of directors Henry B. Cook, Jr., Ted W. Gibson, Robert B. Johnston, Joseph P. Mirabito, William Mirabito, George J. Welch and John B. Williamson III for the fiscal year ended September 30, 2021 is summarized below. Mr. German’s compensation is described under Executive Compensation above.
Name
Fees Earned In
Cash
Stock
Awards*
All Other
Compensation
Total
All directors other than
CEO Michael I. German
$32,099
$5,211
-
$37,310
* The value of restricted stock awards is listed at the amount recognized for financial statement reporting purposes in accordance with FASB ASC 718.

---

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Item 12. Security Ownership of Certain Beneﬁcial Owners and Management and Related Stockholder Matters.
Stock Ownership of Management and Other Major Shareholders
The following table summarizes information about ownership of our stock by each of our directors and senior executive officers, all of our directors and executive officers as a group, and each other person we know beneficially owns more than 5% of our stock. We have determined beneficial ownership in accordance with the rules of the SEC. The information is as of December 1, 2021. On December 1, there were 3,083,577 shares of common stock outstanding, 260,600 shares of Series A Preferred Stock, 244,263 shares of Series B Preferred Stock, and 180,000 shares of Series C Preferred Stock. Each share of the Series B Preferred Stock is convertible into 1.2 shares of common stock at the option of the holder. [The table does not include 5,000 shares of 1.5% Series D Cumulative Redeemable Preferred Stock purchased by an Argo affiliate for $5.0 million on December 6, 2021. The Series D Preferred Stock is not convertible into shares of our common stock and is not registered with the SEC. None of our directors or officers own any shares of Series D Preferred Stock. For more information about the Series D Preferred Stock, please turn to “Subsequent Events”, Note 17.
Preferred Stock
Common Stock (2)
Series A
Series B
Series C
Name and Address (1)
Shares
Percent
Shares
Percent
Shares
Percent
Shares
Percent
The Gabelli Group (3)
527,745
17.1%
-
-
73,298
30.0%
16,200
9.0%
The Zucker Marital Trust (4)
347,341
11.3%
26,736
10.6%
-
-
30,000
16.7%
Directors
Henry B. Cook, Jr. (5)
41,595
1.4%
-
-
-
-
-
-
Michael I. German (6)
570,675
18.5%
5,129
2.0%
57,936
23.7%
-
-
Ted W. Gibson (7)
157,489
5.1%
43,047
16.5%
-
-
51,000
28.3%
Robert B. Johnston (8)
18,980
0.6%
15,000
5.8%
-
-
10,000
5.6%
Joseph P. Mirabito (9)
66,528
2.2%
10,900
4.2%
<0.1%
-
-
William Mirabito (10)
75,689
2.5%
17,868
6.9%
1,039
0.4%
4,000
2.2%
George J. Welch (11)
27,708
0.9%
10,600
4.1%
0.4%
-
-
John B. Williamson III (12)
22,464
0.7%
1,052
0.4%
1,416
0.6%
-
-
Officers
Matthew J. Cook (13)
2,169
0.1%
-
-
-
-
-
-
Russell S. Miller (14)
2,016
0.1%
-
-
-
-
-
-
Charles A. Lenns (15)
24,500
0.8%
-
-
-
-
-
-
All directors and officers as a group (eleven individuals)
1,009,813
32.5%
103,596
39.8%
61,405
25.1%
65,000
36.1%
1. Unless otherwise indicated, we believe that each person named in the table has sole investment and voting power over the shares of stock owned. Unless otherwise indicated, the address of each person is c/o Corning Natural Gas Holding Corporation, 330 West William Street, Corning, New York 14830.
2. Does not include shares of our common stock issuable upon conversion of any shares of Series B Preferred Stock held.
3. The address of the Gabelli Group is One Corporate Center, Rye, New York 10580. Includes 513,086 shares of common stock and 73,298 shares of Series B Preferred Stock held by Gabelli Funds, LLC. Includes 105,664 shares of common stock held by Teton Advisors, Inc. The Series C Cumulative Preferred Stock is held by the Gabelli Foundation. Each of Gabelli Funds, Teton Advisors and Gabelli Foundation has sole voting and dispositive power over the shares of stock held by it. Based primarily on information in Amendment No. 17 to Schedule 13D filed with the SEC on June 28, 2016.
4. The address of The Article 6 Marital Trust Under the First Amended and Restated Jerry Zucker Revocable Trust is 4838 Jenkins Avenue, North Charleston, South Carolina 29405. Based primarily on information in Amendment No. 2 to Schedule 13D filed with the SEC on April 23, 2014.
5. Common stock includes 21,450 shares of restricted stock and 2,762 shares of common stock acquired through the Company’s dividend reinvestment program, or DRP.
6. Includes 9,382 shares of common stock owned by Mr. German’s son, of which Mr. German disclaims beneficial ownership, and 50,023 shares of common stock acquired by Mr. German through the DRP.
7. Common stock includes 48,837 shares of restricted stock. The Series C Preferred Stock includes 8,000 shares held by the Gibson Family Trust.
8. Common stock includes 16,650 shares of restricted stock.
9. Common stock includes 21,450 shares of restricted stock. Includes 4,791 common shares 102 shares of Series B Preferred Stock held by Mr. Mirabito’s wife. Mr. Mirabito disclaims beneficial ownership of the shares owned by his wife except to the extent of his pecuniary interest in them.
10. Common stock includes 17,696 shares of restricted stock and 1,775 shares acquired through the DRP.
11. Common stock includes 21,450 shares of restricted stock and 4,791 shares acquired through the DRP.
12. Common stock includes 17,696 shares of restricted stock. Includes 1,687 common shares and 1,416 shares of Series B Preferred Stock and owned jointly with his spouse.
13. Includes 720 shares of common stock acquired through the DRP.
14. Includes 79 shares owned by Mr. Miller’s wife, 142 shares held jointly with his wife and 274 shares acquired through DRP. Mr. Miller disclaims beneficial ownership of the shares owned by his wife except to the extent of his pecuniary interest in them.
15. Include 4,500 shares of restricted stock and options to acquire 20,000 shares that are currently exercisable.
Pending Merger with Argo
On January 12, 2021, we entered into an agreement and plan of merger with companies affiliated with Argo Infrastructure Partners, LP, an independent investment firm registered with the SEC with a focus on utilities and other long duration infrastructure assets. Subject to the terms and conditions of the merger agreement, Argo will acquire the Company and pay our shareholders $24.75 for each share of common stock they own immediately prior to completion of the merger without interest and less any applicable withholding taxes. See Note 1, Summary of Significant Accounting Policies, for the impact of the merger on preferred shares. The merger will result in a change of control of the Company. Our shareholders approved the merger on May 27, 2021. We expect to obtain the necessary regulatory approvals and complete the merger in 2022, but the exact timing of the merger cannot be predicted.
Voting Agreement
On January 12, 2021, we entered a merger agreement with companies affiliated with Argo. In connection with the merger agreement with Argo, our directors entered into a voting agreement pursuant to which each director agreed to vote in favor of the merger and the approval of the merger agreement as a shareholder of the Company, subject to the limitations included in the voting agreement. The obligations under the voting agreement will terminate if, among other reasons, the merger agreement is terminated in accordance with its terms.
Equity Compensation Plan Information
At the annual meeting held on April 24, 2018, our shareholders approved the Company’s 2018 long-term incentive plan. The 2018 incentive plan provides for grants of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock, and dividend equivalent
units to officers, employees, and directors of the Company and its subsidiaries. There are a total of 350,000 shares authorized for grant under the 2018 plan. The following table summarizes information about our equity compensation plans at September 30, 2021.
Plan Category
Shares to Be Issued
Upon Exercise of
Outstanding
Options
Weighted-Average
Exercise Price of
Outstanding
Options
Securities Remaining
Available for Future
Issuance Under Equity
Compensation Plans
Equity compensation plans approved by security holders
20,000
$ 19.75
307,350
Equity compensation plans not approved by security holders
-
-
-
Total
20,000
$ 19.75
307,350

---

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Item 13. Certain Relationships and Related Transactions, and Director Independence.
Certain Relationships and Related Transactions
On July 1, 2020, we completed the acquisition of the 50% interests in Leatherstocking Gas and Leatherstocking Pipeline held by Mirabito Regulated Industries, LLC. Immediately before the acquisition, Leatherstocking Gas distributed to its members franchises, engineering and gas pipeline assets located in New York having a book value of $532,000. These assets were then contributed to the equity of the newly-formed Leatherstocking Gas Company of New York, Inc. The Company and Mirabito Regulated Industries each own 50% of Leatherstocking New York. Joseph Mirabito and William Mirabito are officers, directors and are 20% and 21% shareholders, respectively, of Mirabito Holdings, Incorporated, a sister company of Mirabito Regulated Industries. Together they hold approximately 5% of our outstanding common stock and are also directors of the Company, Corning Gas, Corning Appliance, Leatherstocking Gas and Leatherstocking Pipeline. In fiscal 2021, we paid $120,705 to US Bank Voyager Fleet System for purchase of gas for our service vehicles. Mirabito Holdings dba Mirabito Energy Products is a Voyager Network Partner. For coverage of emergency services in the Town of Virgil in fiscal 2021, we paid Mirabito Holdings dba Mirabito Energy, Vestal, $28,783
We paid a total of $23,572 to the law firm of Welch Law LLP for legal services performed during fiscal 2021. Director George Welch is the managing partner of Welch Law.
We paid $8,478 to Cook Brothers Truck Parts in fiscal 2021. Director Henry Cook is the majority owner of Cook Brothers Truck Parts.
Director Independence
The board of directors has determined and confirmed that each of Mr. Cook, Mr. Gibson, Mr. Johnston, Mr. Joseph Mirabito, Mr. William Mirabito, Mr. Welch, and Mr. Williamson do not have a material relationship with the Company or any of its subsidiaries that would interfere with the exercise of independent judgment and are, therefore, independent as defined by applicable laws and regulations and the listing standards of the New York Stock Exchange. In making the determination that each of the members of our board and our board’s committees is independent, the board considered that Mr. Joseph Mirabito and Mr. William Mirabito are officers of Mirabito Regulated Industries, LLC. The Company and Mirabito Regulated Industries are each 50% owners of Leatherstocking New York.

---

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Item 14. Principal Accountant Fees and Services.
The following is a summary of the aggregate fees for the fiscal years ended September 30, 2021 and 2020, by our independent registered public accounting firm, Freed Maxick CPA’s, P.C.
Audit Fees
$ 171,400
$ 171,000
Audit-Related Fees
10,500
10,000
Tax Fees
35,000
32,400
All Other Fees
21,400
11,400
Total
$ 238,300
$ 224,800
Audit Fees. These are fees for professional services for the audit of our annual consolidated financial statements, the review of financial statements included in our quarterly reports on Form 10-Q, and services that are typically rendered in connection with statutory and regulatory filings or engagements.
Audit-Related Fees. These are fees related to our employee benefit plan audit.
Tax Fees. These are fees for professional services rendered with respect to tax compliance, tax advice and tax planning. These services include the review of tax returns and consulting on tax planning matters.
All Other Fees. These are fees related to the due diligence process in connection with our proposed merger with companies affiliated with Argo.
Our audit committee’s charter requires that all audit and permissible non-audit services provided by Freed Maxick to the Company must be pre-approved by the audit committee. The audit committee pre-approved all of the services provided by Freed Maxick in fiscal 2021 and the payment by us of the fees listed in the table above. The decision to engage Freed Maxick was approved by our audit committee and in making that decisions the audit committee considered whether the provision of non-audit services is compatible with maintaining independence. In fiscal 2021 and 2020, Freed Maxick had no direct or indirect financial interest in the Company in the capacity of promoter, underwriter, voting director, officer or employee.
We used the following defined terms in Part III of the September 30, 2021 Form 10-K:
“Argo” means Argo Infrastructure Partners, LP, an independent investment firm, and its affiliated companies.
“ASC” means a FASB Accounting Standards Codification.
“Company,” “we” or “us” means Corning Natural Gas Holding Corporation, a New York corporation.
“Corning Gas” means Corning Natural Gas Corporation, a New York corporation and our wholly-owned subsidiary that provides natural gas service to customers primarily in Corning, Hammondsport and Virgil, New York.
“Corning Appliance” means Corning Natural Gas Appliance Corporation, a New York corporation and our wholly-owned subsidiary that is inactive.
“DRP” means the Company’s dividend reinvestment program.
The “Exchange Act” means the Securities Exchange Act of 1934, as amended.
“FASB” means the Financial Accounting Standards Board.
“Fiscal 2021” and “fiscal 2020” mean the Company’s fiscal years ended September 30, 2021 and 2020.
“Freed Maxick” means Freed Maxick CPA’s, P.C., our independent registered public accounting firm.
“Leatherstocking Gas” means Leatherstocking Gas Company LLC, a New York limited liability company and our wholly-owned subsidiary that provides natural gas service to customers in Bradford and Susquehanna Counties, Pennsylvania.
“Leatherstocking New York” means Leatherstocking Gas Company of New York, Inc., a New York corporation that we own with Mirabito Regulated Industries, LLC.
“Leatherstocking Pipeline” means Leatherstocking Pipeline Company LLC, a Pennsylvania limited liability company and our wholly-owned subsidiary.
“Pike” means Pike County Light & Power Company, a Pennsylvania corporation and our wholly-owned subsidiary that provides natural gas and electric service to customers in Pike County, Pennsylvania.
The “SEC” means the United States Securities and Exchange Commission.
The “Securities Act” means the Securities Act of 1933, as amended.
“Series A Preferred Stock” means the Company’s 6% Series A Cumulative Preferred Stock.
“Series B Preferred Stock” means the Company’s Series B Convertible Preferred Stock.
“Series C Preferred Stock” means the Company’s 6% Series C Cumulative Preferred Stock.
The “tax code” means the Internal Revenue Code of 1986, as amended.
PART IV

---

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Financial Statement Schedules (see Item 8 Financial Statements and Supplementary Data)
(b) Exhibits
Exhibits incorporated by reference for filings made before January 1, 1995 may be found in the Company's Commission File 0-643
Exhibit No. Description
3.1 The Holding Company’s Certificate of Incorporation, (included as Exhibit B to the Proxy Statement/Prospectus forming portion of the Form S-4)
3.2 Second Amended and Restated By-laws of Corning Natural Gas Holding Corporation, effective February 6, 2018 (incorporated by reference to Exhibit 3.2 of the Company’s Current Report on Form 8-K dated February 6, 2018)
3.7 Certificate of Amendment to the Certificate of Incorporation with respect to the number of shares of common stock and preferred stock filed with the Department of State of the State of New York on May 1, 2018 (incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K dated May 1, 2018)
3.8 Certificate of Amendment of the Certificate of Incorporation of Corning Natural Gas Holding Corporation authorizing 261,500 Shares of 6% Series A Cumulative Preferred Stock Filed with the Department of State of the State of New York on June 29, 2020 (incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K dated June 29, 2020)
3.9 Certificate of Amendment to the Certificate of Incorporation of Corning Natural Gas Holding Corporation authorizing 5,000 Shares of 1.5% Series D Cumulative Redeemable Preferred Stock Filed with the Department of State of the State of New York on December 3, 2021 (incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K dated December 3, 2021)
4.4* Corning Natural Gas Holding Corporation 2018 Employee Long-Term Incentive Plan (incorporated by reference to Appendix 1 of the Company’s definitive Proxy Statement on Schedule 14A filed with the Securities and Exchange Commission on March 22, 2018)
10.1* Employment Agreement dated November 30, 2006 between Michael German and the Company (incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K dated November 30, 2006)
10.3* First Amendment to Employment Agreement between Michael I. German and the Company dated December 31, 2008 (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 10-Q dated August 12, 2009)
10. 4 Amended and Restated 2007 Stock Plan (incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 10-Q dated August 12, 2009)
10.16 Operating Agreement of the Leatherstocking Gas Company, LLC (incorporated by reference to Exhibit 10.32 of the Company’s Registration Statement on Form S-1 (No. 333-182386), originally filed with the Securities and Exchange Commission on June 28, 2012)
10.22* Form of Restricted Stock Agreement - Non-employee Directors under the Corning Natural Gas Corporation’s Amended and Restated 2007 Stock Plan (incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K dated December 11, 2012)
10.35 Stock Purchase Agreement between the Holding Company and Cold Spring Construction Profit Sharing Plan with QCI Asset Management, Inc., as Registered Investment Advisor dated April 14, 2014
10.48 Pledge and Security Agreement between Corning Natural Gas Holding Corporation and Mirabito Regulated Industries, LLC with Wayne Bank dated January 31, 2019 (incorporated by reference to Exhibit 10.6 of the March 2019 8-K)
10.49 Pledge and Security Agreement between Corning Natural Gas Holding Corporation and Mirabito Regulated Industries, LLC with Wayne dated January 31, 2019 (incorporated by reference to Exhibit 10.7 of the March 2019 8-K)
10.72 Loan Agreement between Leatherstocking Gas (Borrower) and Leatherstocking Pipeline (Guarantor) and Five Star Bank, dated July 11, 2016 (incorporated by reference to Exhibit 10.2 of the June 2016 10-Q)
10.73 General Security Agreement between Leatherstocking Gas and Five Star Bank dated July 11, 2016 (incorporated by reference to Exhibit 10.3 of the June 2016 10-Q)
10.74 General Security Agreement between Leatherstocking Pipeline and Five Star Bank dated July 11, 2016 (incorporated by reference to Exhibit 10.4 of the June 2016 10-Q)
10.79 Continuing Guaranty, dated August 31, 2016, from Corning Natural Gas Holding Corporation to M&T Bank with respect to the obligations of Pike County Light & Power Company to M&T Bank (incorporated by reference to Exhibit 10.5 on the September 2016 8-K)
10.87 Credit Agreement, dated August 31, 2020, between Corning Natural Gas Company and M&T Bank (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K dated August 31, 2020)
10.88 Multiple Disbursement Term Note, dated August 15, 2018, from Corning Natural Gas Corporation to M&T Bank in the maximum principal amount of $3,600,000 (incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K dated August 31, 2020)
10.89 General Security Agreement, dated August 31, 2020, from Corning Natural Gas Corporation to M&T Bank (incorporated by reference to Exhibit 10.3 of the Company’s Current Report on Form 8-K dated August 31, 2020)
10.90 Replacement Credit Agreement, dated June 27, 2019, between Pike Light & Power Company and M&T Bank (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K dated May 23, 2019)
10.91 Replacement Term Note, dated May 23, 2018, from Pike Light & Power Company to M&T Bank in the initial principal amount of $11,200,000 (incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K dated May 23, 2018)
10.92 Continuing Guaranty, dated June 27, 2019, between Pike Light & Power Company and M&T Bank (incorporated by reference to Exhibit 10.3 of the Company’s Current Report on Form 8-K dated May 23, 2019)
10.93 General Security Agreement, dated June 27, 2019, between Pike Light & Power Company and M&T Bank (incorporated by reference to Exhibit 10.4 of the Company’s Current Report on Form 8-K dated May 23, 2019)
10.94 Multiple Disbursement Term Note, dated June 27, 2019, from Corning Natural Gas Corporation to M&T Bank in the maximum principal amount of $3,127,000, with Prepayment Premium Rider. (incorporated by reference to Exhibit 10.1 on the December, 31 2019 10-Q)
10.95 Multiple Disbursement Term Note, dated June 27, 2019 from Pike Light & Power Company to M&T Bank in the maximum principal amount of $2,072,000, with Prepayment Premium Rider. (incorporated by reference to Exhibit 10.2 on the December, 31 2019 10-Q)
10.96 Form of Series C Preferred Stock Purchase Agreement dated March 27, 2020 between Corning Natural Gas Holding Corporation and the Series C Preferred Stock Purchasers (incorporated by reference to Exhibit 10.1 on the March, 31 2020 10-Q)
10.97 Term Note under the U.S. Small Business Administration Paycheck Protection Program issued by Corning Natural Gas Holding Corporation on April 17, 2020 to M&T Bank in the principal amount of $970,900 (incorporated by reference to Exhibit 10.2 on the March, 31 2020 10-Q)
10.98 Term Note under the U.S. Small Business Administration Paycheck Protection Program issued by Pike County Light & Power Company on April 22, 2020 to M&T Bank in the principal amount of $137,200 (incorporated by reference to Exhibit 10.3 on the March, 31 2020 10-Q)
10.99 Agreement and Plan of Merger, dated as of January 12, 2021, by and among Corning Natural Gas Holding Corporation, ACP Crotona Corp., and ACP Crotona Merger Sub Corp. (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K dated January 12, 2021)
10.100 Credit Agreement, dated January 15, 2021, between Corning Natural Gas Company and M&T Bank (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K dated January 15, 2021)
10.101 Term Note, dated January 15, 2021, from Corning Natural Gas Corporation to M&T Bank in the principal amount of $850,000 (incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K dated January 15, 2021)
10.102 Replacement Credit Agreement, dated October 13, 2020, between Pike Light & Power Company and M&T Bank (incorporated by reference to Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q for the Quarter ended December 31, 2020)
10.103 Multiple Disbursement Term Note, dated October 13, 2020, from Pike Light & Power Company to M&T Bank in the maximum principal amount of $1,315,000 (incorporated by reference to Exhibit 10.2 of the Company’s Quarterly Report on Form 10-Q for the Quarter ended December 31, 2020)
10.104 Fifth Amended Replacement and Restated Credit Agreement, dated June 25, 2021, between Corning Natural Gas Company and M&T Bank (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K dated June 25, 2021)
10.105 Replacement Daily Adjusting LIBOR Revolving Line Note, dated June 25, 2021, from Corning Natural Gas Corporation to M&T Bank in the principal amount of $8.0 million (incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K dated June 25, 2021)
10.106 Multiple Disbursement Term Note, dated June 25, 2021, from Corning Natural Gas Corporation to M&T Bank in the principal amount of $4.665 million (incorporated by reference to Exhibit 10.3 of the Company’s Current Report on Form 8-K dated June 25, 2021)
10.107 LIBOR Demand Note, dated June 25, 2021, from Corning Natural Gas Corporation to M&T Bank in the principal amount of $1.9 million (incorporated by reference to Exhibit 10.4 of the Company’s Current Report on Form 8-K dated June 25, 2021)
10.108 General Security Agreement, dated June 25, 2021, between Corning Natural Gas Company and M&T Bank (incorporated by reference to Exhibit 10.5 of the Company’s Current Report on Form 8-K dated June 25, 2021)
1.109 Fifth Amended Replacement and Restated Credit Agreement, dated August 19, 2021, between Pike County Light & Power Company and M&T Bank (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K dated August 19, 2021)
1.110 Multiple Disbursement Term Note, dated August 19, 2021, from Pike County Light & Power Company to M&T Bank in the principal amount of $2.21 million (incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K dated August 19, 2021)
1.111 General Security Agreement, dated August 19, 2021, between Pike County Light & Power Company and M&T Bank (incorporated by reference to Exhibit 10.3 of the Company’s Current Report on Form 8-K dated August 19, 2021)
1.112 Continuing Guaranty, dated August 19, 2021, by Corning Natural Gas Holding Corporation to M&T Bank (incorporated by reference to Exhibit 10.4 of the Company’s Current Report on Form 8-K dated August 19, 2021)
1.113 Demand Note, dated September 30, 2021, from Corning Natural Gas Corporation to M&T Bank in the principal amount of $3 million (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K dated September 30, 2021)
1.114 General Security Agreement, dated September 30, 2021, between Corning Natural Gas Company and M&T Bank (incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K dated September 30, 2021)
1.115 Purchase Agreement, dated December 8, 2021, by and between Corning Natural Gas Holding Corporation and ACP Crotona Corp. (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K dated December 3, 2021)
21** Subsidiary of Company
23.1** Consent of Freed Maxick CPA's, P.C.
Power of Attorney
31.1** Certification Pursuant to Section 302 of the Sarbanes-Oxley Act - Michael I. German
31.2** Certification Pursuant to Section 302 of the Sarbanes-Oxley Act - Charles A. Lenns
32.1*** Certification Pursuant to Section 906 of the Sarbanes-Oxley Act
101*** The following materials from the Corning Natural Gas Corporation Annual Report on Form 10-K for the period ended September 30, 2020, formatted in XBRL (eXtensible Business Reporting Language):
(i) the Consolidated Balance Sheets at September 30, 2021 and 2020
(ii) the Consolidated Statements of Income for the years ended September 30, 2021 and 2020
(iii) the Comprehensive Income Statements for the years ended September 30, 2021 and 2020
(iv) the Consolidated Statements of Changes in Stockholders' Equity for the years ended September 30, 2021 and 2020
(v) the Consolidated Statements of Cash Flows for the years ended September 30, 2021 and 2020
(vi) related notes to the Consolidated Financial Statements
* Indicates management contract or compensatory plan or arrangement
** Filed herewith
*** Furnished herewith