RGC Resources Annual Report 2021

Plain-text annual report

Annual Report 2021 PRESIDENT’S LETTER TO SHAREHOLDERS It is my pleasure to report our 2021 results. The challenge to our employees in 2021 was to prioritize safety, work efficiently and focus on customer needs. Our employees exceeded our expectations in meeting this challenge despite unique and unprecedented circumstances. These efforts resulted in the strong $1.22 earnings per share and enabled our seventy-seventh consecutive year of shareholder dividend payments. Roanoke Gas Company’s net income increased by $1.8 million or 22%. We installed over 7 miles of new natural gas main and added almost 600 new customers, increases of 71% and 8%, respectively, over last year. Our damage rates and crew response times also improved. ESG remains an area of focus. In addition to our improved safety metrics, our corporate office solar project became operational in November 2020, lowering our overall energy usage and reducing our carbon footprint. We continued our methane reduction efforts through the SAVE renewals by replacing nearly 8 miles of main, over 600 services and another city gate transfer station. Construction activities on the Mountain Valley Pipeline (MVP) continued in 2021 but were not completed, as reflected in the reduced Midstream earnings. Total project work is more than 90% complete. We continued to advocate vigorously in 2021 for the MVP’s completion and the final restoration of the project right-of-way, both of which are in the public interest. The MVP, and the clean and affordable natural gas that it will deliver to Roanoke Gas Company’s service territory and our growing customer base, is needed more than ever. The momentum from our 2021 successes has carried over into 2022. Demand for natural gas remains strong and we are pleased to continue to meet the energy needs of our community. Thank you for your continued investment in our Company. Sincerely, Paul W. Nester President and CEO UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549 Form 10-K (Mark One) ☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended September 30, 2021 OR ☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number 000-26591 RGC Resources, Inc.(Exact name of Registrant as Specified in its Charter) Virginia54-1909697(State or Other Jurisdiction of Incorporation or Organization)(I.R.S. Employer Identification No.) 519 Kimball Ave., N.E., Roanoke, VA24016(Address of Principal Executive Offices)(Zip Code)(540) 777-4427(Registrant’s Telephone Number, Including Area Code) Securities registered pursuant to Section 12(b) of the Act: Title of Each ClassTrading SymbolName of Each Exchange on Which RegisteredCommon Stock, $5 Par ValueRGCONASDAQ Global MarketSecurities registered pursuant to Section 12(g) of the Act:None Indicate by check mark if the registrant is a well-known seasoned issuer as defined in Rule 405 of the Securities Act. Yes ☐ No ☒ Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (orfor such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐ Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of thischapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. Seedefinition of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act. Large accelerated filer☐Accelerated filer☐Non-accelerated filer☒Smaller reporting company☒ Emerging growth company☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accountingstandards provided pursuant to Section 13(a) of the Exchange Act. ☐ Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting underSection 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒ The aggregate market value of the common equity held by non-affiliates of RGC Resources, Inc. as of March 31, 2021, the last business day of the its most recently completed secondfiscal quarter, based on the last sale price on that date, as reported by NASDAQ, was approximately $171,488,915. Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the last practicable date. ClassOutstanding at November 30, 2021Common Stock, $5 Par Value8,386,188 DOCUMENTS INCORPORATED BY REFERENCE: Portions of the RGC Resources, Inc. Proxy Statement for the 2022 Annual Meeting of Shareholders are incorporated by reference into Part III hereof. [ THIS PAGE INTENTIONALLY LEFT BLANK ] TABLE OF CONTENTS Page Number Glossary2 Cautionary Note Regarding Forward Looking Statements5 PART I Item 1.Business6 Item 1A.Risk Factors9 Item 1B.Unresolved Staff Comments15 Item 2.Properties15 Item 3.Legal Proceedings15 Item 4.Mine Safety Disclosures15 PART II Item 5.Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities16 Item 6.Selected Financial Data16 Item 7.Management's Discussion and Analysis of Financial Condition and Results of Operations17 Item 7A.Quantitative and Qualitative Disclosures About Market Risk32 Item 8.Financial Statements and Supplementary Data32 Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosures75 Item 9A.Controls and Procedures75 Item 9B.Other Information76 PART III Item 10.Directors, Executive Officers and Corporate Governance77 Item 11.Executive Compensation77 Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters77 Item 13.Certain Relationships and Related Transactions, and Director Independence77 Item 14.Principal Accounting Fees and Services77 PART IV Item 15.Exhibits and Financial Statement Schedules78 Item 16.Form 10-K Summary84 Signatures85 GLOSSARY OF TERMS AFUDCAllowance for Funds Used During Construction AOCI/AOCLAccumulated Other Comprehensive Income (Loss) AROAsset Retirement Obligation ARPAlternative Revenue Program, regulatory or rate recovery mechanisms approved by the SCC that allow for theadjustment of revenues for certain broad, external factors, or for additional billings if the entity achieves certainperformance targets ARPAAmerican Rescue Plan Act of 2021 ASCAccounting Standards Codification ASUAccounting Standards Update as issued by the FASB ATMAt-the-market program whereby a Company can incrementally offer common stock through a broker atprevailing market prices and on an as-needed basis CARES ActCoronavirus Aid, Relief, and Economic Security Act CompanyRGC Resources, Inc. or Roanoke Gas Company COVID-19 or CoronavirusA pandemic disease that causes respiratory illness similar to the flu with symptoms such as coughing, fever, andin more severe cases, difficulty in breathing CPCNCertificate of Public Convenience and Necessity Diversified EnergyDiversified Energy Company, a wholly-owned subsidiary of Resources DRIPDividend Reinvestment and Stock Purchase Plan of RGC Resources, Inc. DTHDecatherm (a measure of energy used primarily to measure natural gas) EPSEarnings Per Share ERISAEmployee Retirement Income Security Act of 1974 ESACEligible Safety Activity Costs, a Virginia natural gas utility’s operation and maintenance expenditures that arerelated to the development, implementation, or execution of the utility’s integrity management plan or programsand measures implemented to comply with regulations issued by the SCC or a federal regulatory body withjurisdiction over pipeline safety FASBFinancial Accounting Standards Board FDICFederal Deposit Insurance Corporation FERCFederal Energy Regulatory Commission Fourth CircuitU.S. Fourth Circuit Court of Appeals GAAPAccounting Principles Generally Accepted in the United States HDDHeating degree day, a measurement designed to quantify the demand for energy. It is the number of degrees thata day’s average temperature falls below 65 degrees Fahrenheit 2 ICCInventory carrying cost revenue, an SCC approved rate structure that mitigates the impact of financing costs onnatural gas inventory IRSInternal Revenue Service KEYSOPRGC Resources, Inc. Key Employee Stock Option Plan LDILiability Driven Investment approach, a strategy which reduces the volatility in the pension plan's funded statusand expense by matching the duration of the fixed income investments with the duration of the correspondingpension liabilities LIBORLondon Inter-Bank Offered Rate LLCMountain Valley Pipeline, L.L.C., a joint venture established to design, construct and operate the MountainValley Pipeline and MVP Southgate LNGLiquefied natural gas, the cryogenic liquid form of natural gas. Roanoke Gas operates and maintains a plantcapable of producing and storing up to 200,000 dth of liquefied natural gas MGPManufactured gas plant MidstreamRGC Midstream, L.L.C., a wholly-owned subsidiary of Resources created to invest in pipeline projectsincluding MVP and Southgate MVPMountain Valley Pipeline, a FERC-regulated natural gas pipeline project intended to connect the Equitran'sgathering and transmission system in northern West Virginia to the Transco interstate pipeline in south centralVirginia with a planned interconnect to Roanoke Gas’ natural gas distribution system NQDC PlanRGC Resources, Inc. Non-qualified Deferred Compensation Plan Normal WeatherThe average number of heating degree days based on the most recent 30-year period PBGCPension Benefit Guaranty Corporation Pension PlanDefined benefit plan that provides pension benefits to employees hired prior to January 1, 2017 who meetcertain years of service criteria PGAPurchased Gas Adjustment, a regulatory mechanism, which adjusts natural gas customer rates to reflect changesin the forecasted cost of gas and actual gas costs Postretirement PlanDefined benefit plan that provides postretirement medical and life insurance benefits to eligible employees hiredprior to January 1, 2000 who meet years of service and other criteria ResourcesRGC Resources, Inc., parent company of Roanoke Gas, Midstream and Diversified Energy RGCOTrading symbol for RGC Resources, Inc. on the NASDAQ Global Stock Market Roanoke GasRoanoke Gas Company, a wholly-owned subsidiary of Resources RSPDRGC Resources, Inc. Restricted Stock Plan for Outside Directors RSPORGC Resources, Inc. Restricted Stock Plan for Officers SAVESteps to Advance Virginia's Energy, a regulatory mechanism per Chapter 26 of Title 56 of the Code of Virginiathat allows natural gas utilities to recover the investment, including related depreciation and expenses andprovide return on rate base, in eligible infrastructure replacement projects on a prospective basis without thefiling of a formal base rate application 3 SAVE PlanSteps to Advance Virginia's Energy Plan, the Company's proposed and approved operational replacement planand related spending under the SAVE regulatory mechanism SAVE RiderSteps to Advance Virginia's Energy Plan Rider, the rate component of the SAVE Plan as approved by the SCCthat is billed monthly to the Company’s customers to recover the costs associated with eligible infrastructureprojects including the related depreciation and expenses and return on rate base of the investment SCCVirginia State Corporation Commission, the regulatory body with oversight responsibilities of the utilityoperations of Roanoke Gas SECU.S. Securities and Exchange Commission SOFRSecured Overnight Financing Rate SouthgateMountain Valley Pipeline, LLC’s Southgate project, which extends from the MVP in south central Virginia tocentral North Carolina, of which Midstream holds less than a 1% investment S&P 500 IndexStandard & Poor’s 500 Stock Index TCJATax Cuts and Jobs Act of 2017 WNAWeather Normalization Adjustment, an ARP mechanism which adjusts revenues for the effects of weathertemperature variations as compared to the 30-year average Some of the terms above may not be included in this filing 4 Cautionary Note Regarding Forward Looking Statements This report contains forward-looking statements that relate to future transactions, events or expectations. In addition, Resources may announce orpublish forward-looking statements relating to such matters as anticipated financial performance, business prospects, technological developments,new products, research and development activities and similar matters. These statements are based on management’s current expectations andinformation available at the time of such statements and are believed to be reasonable and are made in good faith. The Private Securities LitigationReform Act of 1995 provides a safe harbor for forward-looking statements. In order to comply with the terms of the safe harbor, the Company notesthat a variety of factors could cause the Company’s actual results and experience to differ materially from the anticipated results or expectationsexpressed in the Company’s forward-looking statements. The risks and uncertainties that may affect the operations, performance, development andresults of the Company’s business include, but are not limited to those set forth in the following discussion and within Item 1A “Risk Factors” of thisAnnual Report on Form 10-K. All of these factors are difficult to predict and many are beyond the Company’s control. Accordingly, while theCompany believes its forward-looking statements to be reasonable, there can be no assurance that they will approximate actual experience or thatthe expectations derived from them will be realized. When used in the Company’s documents or news releases, the words “anticipate,” “believe,”“intend,” “plan,” “estimate,” “expect,” “objective,” “projection,” “forecast,” “budget,” “assume,” “indicate” or similar words or future or conditionalverbs such as “will,” “would,” “should,” “can,” “could” or “may” are intended to identify forward-looking statements. Forward-looking statements reflect the Company’s current expectations only as of the date they are made. The Company assumes no duty to updatethese statements should expectations change or actual results differ from current expectations except as required by applicable laws and regulations. 5 PART I Item 1. Business. General and Historical Development Resources was incorporated in the Commonwealth of Virginia on July 31, 1998 and, effective July 1, 1999, its subsidiaries were reorganizedinto the Resources holding company structure. Resources is currently composed of the following subsidiaries: Roanoke Gas, Midstream andDiversified Energy. Roanoke Gas, originally established in 1883, was organized as a public service corporation under the laws of the Commonwealth of Virginiain 1912. The principal service of Roanoke Gas is the distribution and sale of natural gas to residential, commercial and industrial customerswithin its service territory in Roanoke, Virginia and the surrounding localities. Roanoke Gas also provides certain non-regulated serviceswhich account for less than 2% of consolidated revenues. In July 2015, the Company formed Midstream for the purpose of becoming a 1% investor in Mountain Valley Pipeline, LLC. The LLC wascreated to construct and operate interstate natural gas pipelines. Additional information regarding this investment is provided under Note 5 ofthe Company's annual consolidated financial statements and under the Equity Investment in Mountain Valley Pipeline section of Item 7. Diversified Energy is currently inactive. Services Roanoke Gas maintains an integrated natural gas distribution system to deliver natural gas purchased from suppliers to residential, commercialand industrial users in its service territory. The schedule below is a summary of customers, delivered volumes (expressed in DTHs), revenuesand margin as a percentage of the total for each category. For the purposes of this schedule, margin for the utility operations is defined asrevenues less cost of gas. 2021 Customers Volume Revenue Margin Residential 91.3% 37% 58% 63%Commercial 8.6% 31% 34% 25%Industrial 0.1% 32% 7% 11%Other Utility 0.0% 0% 1% 1%Other Non-Utility 0.0% 0% 0% 0%Total Percent 100.0% 100.0% 100.0% 100.0%Total Value 62,623 9,909,529 $75,174,779 $39,969,380 2020 Customers Volume Revenue Margin Residential 91.3% 35% 60% 63%Commercial 8.6% 27% 30% 23%Industrial 0.1% 38% 8% 12%Other Utility 0.0% 0% 1% 1%Other Non-Utility 0.0% 0% 1% 1%Total Percent 100.0% 100.0% 100.0% 100.0%Total Value 61,964 10,357,174 $63,075,391 $38,783,925 Roanoke Gas’ regulated natural gas distribution business accounted for more than 98% of Resources total revenues for fiscal years endingSeptember 30, 2021 and 2020. The tables above indicate that residential customers represent over 91% of the Company’s customer total;however, they represent less than 40% of the total gas volumes delivered and more than half of the Company’s consolidated revenues andmargin. Industrial customers include primarily transportation customers that purchase their natural gas requirements directly from a supplierother than the Company and utilize Roanoke Gas’ natural gas distribution system for delivery to their operations. Most of the revenue billedfor these customers relates only to transportation service, and not to the purchase of natural gas, causing total revenues generated by thesedeliveries to be less than 10%, although they represent more than 30% of total natural gas volumes and between 11% and 12% of margin forthe years presented. 6 The Company’s revenues are affected by changes in gas costs, changes in consumption volume due to weather and economic conditions andchanges in the non-gas portion of customer billing rates. Increases or decreases in the cost of natural gas are passed on to customers throughthe PGA mechanism as explained in Note 1 of the Company’s annual consolidated financial statements. The Company’s residential and commercial sales are seasonal and temperature-sensitive as the majority of the gas sold by Roanoke Gas tothese customers is used for heating. For the fiscal year ended September 30, 2021, approximately 63% of the Company’s total DTH ofnatural gas deliveries and 73% of the residential and commercial deliveries were made in the five-month period of November through March. Roanoke Gas relies on multiple interstate pipelines including those operated by Columbia Gas Transmission Corporation, LLC and ColumbiaGulf Transmission Corporation, LLC (together “Columbia”), and East Tennessee Natural Gas, LLC (“East Tennessee”), Tennessee GasPipeline, Midwestern Gas Transmission Company and Saltville Gas Storage Company, LLC ("Saltville"), to transport natural gas from theproduction and storage fields to Roanoke Gas’ distribution system. Roanoke Gas is directly served by two pipelines, Columbia and EastTennessee. Columbia historically has delivered more than 65% of the Company’s required gas supply, with East Tennessee delivering thebalance. The rates paid for interstate natural gas transportation and storage services are established by tariffs approved by FERC. Thecurrent pipeline contracts expire at various times from 2022 to 2027. The Company anticipates being able to renew these contracts or enterinto other contracts to meet customers’ existing demand for natural gas. The Company manages its pipeline contracts and LNG facility in order to provide for sufficient capacity to meet the current natural gasdemands of its customers. The maximum daily winter capacity available for delivery into Roanoke Gas’ distribution system from the currentinterstate pipelines is 78,606 DTH per day. The LNG facility is capable of storing up to 200,000 DTH of natural gas in a liquid state for useduring peak demand. Combined, the pipelines and LNG facility may provide up to 103,606 DTH on a single winter day. The Company currently contracts with Sequent Energy Management, L.P. to manage its pipeline transportation, storage rights, gas supplyinventories and deliveries and serve as the primary supplier of natural gas for Roanoke Gas. Natural gas purchased under the assetmanagement agreement is priced at indexed-based market prices as reported in major industry pricing publications. The current Sequentcontract was extended to March 31, 2023. The Company uses summer storage programs to supplement heating season gas supply requirements. The Company has contracted for 2.4million DTH of storage capacity from Columbia, Tennessee Gas Pipeline and Saltville in addition to the capacity available at the Company'sLNG facility. The balance of the Company’s annual natural gas requirements are met primarily through market purchases made by its assetmanager. Competition The Company’s natural gas utility operates in a regulated, monopolistic environment. Roanoke Gas currently holds the only franchises and/orCPCNs to distribute natural gas in its Virginia service areas. These franchises generally extend for multi-year periods and are renewable bythe municipalities, including exclusive franchises in the cities of Roanoke and Salem and the Town of Vinton, Virginia. All three franchiseagreements were renewed for a 20-year term, set to expire December 31, 2035. In 2019, the SCC issued a final order granting a CPCN tofurnish gas to all of Franklin County. Unlike the CPCNs for the other counties served by Roanoke Gas, the Franklin County CPCN willterminate within five years of the date of the order if Roanoke Gas does not furnish gas service to the designated service area. Roanoke Gasplans to serve the Franklin County area with natural gas delivered through the MVP, once MVP is placed into service. 7 Management anticipates that the Company will be able to renew all of its franchises prior to their current expiration date; however, there canbe no assurance that a given jurisdiction will not refuse to renew a franchise or will not, in connection with the renewal of a franchise, attemptto impose restrictions or conditions that could adversely affect the Company’s business operations or financial condition. CPCNs, issued bythe SCC, are generally of perpetual duration and subject to compliance with regulatory standards. Although Roanoke Gas has exclusive rights for the distribution of natural gas in its service area, the Company competes with suppliers ofother forms of energy such as fuel oil, electricity, propane, coal, wind and solar. Competition can be intense among the other energy sourceswith price being the primary consideration. This is particularly true for those industrial applications that have the ability to switch to alternativefuels. The relationship between supply and demand has the greatest impact on the price of natural gas. Greater demand for natural gas forelectric generation and other uses can provide upward pressure on the price of natural gas. Currently, increased demand and lower storagelevels are placing upward pressure on the price of natural gas. Competition from renewable energy sources such as solar and wind is likely to increase as the political environment currently favors theseenergy sources through incentives or by placing restrictions on emissions from the burning of fossil fuels. Nevertheless, the Companycontinues to see a demand for natural gas. Growth in residential and commercial service has been strong as the Company continues to growits customer base through a combination of extending distribution service and converting other energy users to natural gas. Regulation In addition to the regulatory requirements generally applicable to all companies, Roanoke Gas is also subject to additional regulation at thefederal, state and local levels. At the federal level, the Company is subject to pipeline safety regulations issued by the Department ofTransportation's Pipeline and Hazardous Materials Safety Administration. At the state level, the SCC performs regulatory oversight including the approval of rates and other charges for natural gas sold to customers,the approval of agreements between or among affiliated companies involving the provision of goods and services, pipeline safety and certainother corporate activities of the Company, including mergers and acquisitions related to utility operations. At the local level, Roanoke Gas is further regulated by the municipalities and localities that grant franchises for the placement of gasdistribution pipelines and the operation of gas distribution networks within their jurisdictions. Human Capital Resources At September 30, 2021, Resources had 99 full-time employees, of which 17 employees, or 17%, belonged to the United Steel, Paper andForestry, Rubber, Manufacturing, Energy, Allied-Industrial International Union, Local No. 515 and were represented under a collectivebargaining agreement. The union has been in place at the Company since 1952. The current collective bargaining agreement became effectiveAugust 1, 2020 and expires July 31, 2022. Management maintains an amicable relationship with the union. The Company’s business strategy and ability to serve customers relies on employing talented professionals and attracting, training, developingand retaining a skilled workforce. This is particularly relevant as the Company is facing retirements of key personnel over the next severalyears. With respect to the COVID-19 pandemic, the Company continues to evaluate and implement its pandemic plan to ensure the continuation ofsafe and reliable service to customers and to maintain the safety of the Company's employees. 8 Website Access to Reports The Company’s website address is www.rgcresources.com. Information appearing on this website is not incorporated by reference in and isnot a part of this annual report. The Company files reports with the SEC. A copy of this annual report, as well as other recent annual andquarterly reports are available on the Company's website. You may read and copy these filings with the SEC at the SEC public referenceroom at 100 F Street, NE, Washington, D.C. 20549. Due to COVID-19, the SEC public reference room is closed until further notice.Questions about information available from the public reference room should be directed to SEC staff at library@sec.gov or by calling 1-202-551-5450. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regardingthe Company’s filings at www.sec.gov. Item 1A. Risk Factors Please carefully consider the risks described below regarding the Company. These risks are not the only ones faced by the Company.Additional risks not presently known to the Company or that the Company currently believes are immaterial may also impair businessoperations and financial results. If any of the following risks actually occur, the Company’s business, financial condition or results ofoperations could be adversely affected. In such case, the trading price of the Company’s common stock could decline and investors couldlose all or part of their investment. The risk factors below are categorized by operational, regulatory, financial and general: OPERATIONAL RISKS Availability of sufficient and reliable pipeline capacity. The Company is currently served directly by two interstate pipelines. These two pipelines carry 100% of the natural gas transported to theCompany’s distribution system. Depending on weather conditions and the level of customer demand, failure of one or both of these interstatetransmission pipelines could have a major impact on the Company’s ability to meet customer demand for natural gas and adversely affect theCompany’s earnings as a result of lost revenue and the cost of service restoration. Frequent or prolonged failure could lead customers toswitch to alternative energy sources. Capacity limitations on existing pipeline and storage infrastructure could impact the Company’s ability toobtain additional natural gas supplies, thereby limiting its ability to add new customers or meet increased customer demand and therebylimiting future earnings potential. Risks associated with the operation of a natural gas distribution pipeline and LNG storage facility. Numerous potential risks are inherent in the operation of a natural gas distribution system and LNG storage facility, including unanticipated orunforeseen events that are beyond the control of the Company. Examples of such events include adverse weather conditions, acts ofterrorism or sabotage, accidents and damage caused by third parties, equipment failure, failure of upstream pipelines and storage facilities, aswell as catastrophic events such as explosions, fires, earthquakes, floods, or other similar events. These risks could result in injury or loss oflife, property damage, pollution and customer service disruption resulting in potentially significant financial losses. The Company maintainsinsurance coverage to protect against many of these risks. However, if losses result from an event that is not fully covered by insurance, theCompany’s financial condition could be significantly impacted if it were unable to recover such losses from customers through the regulatoryrate making process. Even if the Company did not incur a direct financial loss as a result of any of the events noted above, it could encountersignificant reputational damage from a reliability, safety, integrity or similar viewpoint, potentially resulting in a longer-term negative earningsimpact or decline in share price. Security incident or cyber-attacks on the Company’s computer or information technology systems. The Company’s business operations and information technology systems may be vulnerable to an attack by individuals or organizationsintending to disrupt the operations of the Company. Such an attack or cyber-security incident on the Company’s information technologysystems could result in corruption of the Company’s financial information; disruption of services to our customers; the unauthorized release ofconfidential customer, employee or vendor information; the interruption of natural gas deliveries to our customers; or compromise the safetyof our distribution, transmission and storage systems. The Company has implemented policies, procedures and controls to prevent and detectthese activities; however, there are no guarantees that Company processes will adequately protect against unauthorized access. In the eventof a successful attack, the Company could be exposed to material financial and reputational risks, possible disruptions in natural gas deliveriesor a compromise of the safety of the natural gas distribution system, as well as be exposed to claims by persons harmed by such an attack, allof which could materially increase the Company's costs to protect against such risks. Resources maintains cyber-insurance coverage, whichdoes not protect the Company from cyber incidents but does provide some level of protection to mitigate the financial impacts resulting fromsuch attacks. 9 Supply disruptions due to weather or other forces. Hurricanes, floods, fires and other natural or man-made disasters could damage or inhibit production and/or pipeline transportation facilities,which could result in decreased natural gas supplies. Decreased supplies could result in an inability to meet customer demand, service newfranchise areas or lead to higher prices and/or service disruptions. Disasters could increase costs to repair damaged facilities and result indelays to restore service to interrupted customers as well as lead to additional governmental regulations that may limit production activityand/or increase production and transportation costs. Volatility in the price and availability of natural gas. Natural gas purchases represent the single largest expense of the Company. Increasing demand from other areas, including electricitygeneration, combined with lower storage balances and production levels, are placing upward pressure on natural gas commodity prices. Ifthese factors continue for an extended period of time, higher natural gas prices could result in declining sales as well as increases in bad debtexpense and increased competition from other energy providers. Inability to attract and retain professional and technical employees. The ability to implement the Company’s business strategy and serve customers is dependent upon employing talented professionals andattracting, training, developing and retaining a skilled workforce. As the Company may have key personnel retire over the next several years,the failure to transition the skills and knowledge of the departing employees to qualified existing or new employees could increase operatingcosts and expose the Company to other operational, reputational and financial risks. Geographic concentration of business activities. The Company's business activities are concentrated in the Roanoke Valley and surrounding areas. Changes in the local economy, politics,regulations and weather patterns or other factors limiting demand for natural gas could negatively impact the Company's existing customerbase, leading to declining usage patterns and financial condition of customers. Furthermore, these changes could also limit the Company'sability to serve its customers or add new customers within its service territory. Any of these factors could adversely affect earnings. Inability to complete necessary or desirable pipeline expansion or infrastructure improvement projects. In order to serve new customers or expand service to existing customers, the Company needs to install new pipeline facilities and maintain,expand or upgrade its existing distribution, transmission and/or storage infrastructure. Various factors may prevent or delay the completion ofsuch projects or make them more costly, such as the inability to obtain required approval from local, state and/or federal regulatory andgovernmental bodies, public opposition to the projects, inability to obtain adequate financing, competition for labor and materials,construction delays, cost overruns, and an inability to negotiate acceptable agreements relating to rights-of-way, construction or other materialdevelopment components. As a result, the Company may not be able to adequately serve existing customers or expand its distribution systemto support customer growth. This could include any potential customer growth or system reliability enhancement resulting from connection tothe MVP. Any of these factors could negatively impact earnings. Impact of weather conditions and related regulatory mechanisms. The Company’s revenues and earnings are dependent upon weather conditions. The Company’s rate structure currently has a WNA factorthat results in either a recovery or refund of revenues due to variation from the 30-year average for heating degree-days. If the WNAmechanism were removed from its rate structure, the Company would be exposed to a much greater risk related to weather variabilityresulting in earnings volatility. 10 Competition from other energy providers. The Company competes with other energy providers in its service territory, including those that provide electricity, propane, coal, fuel oil,wind and solar. Price is a significant competitive factor. Higher natural gas costs or decreases in the price of other energy sources mayenhance competition and encourage customers to switch to alternative energy sources, thus lowering natural gas deliveries and earnings. Priceconsiderations could also inhibit customer and revenue growth if builders and developers do not perceive natural gas to be a better value thanother energy options and elect to install heating systems that use an energy source other than natural gas. Inability to renew or obtain new franchise agreements or certificates of public convenience. Roanoke Gas Company holds either franchises or CPCNs to provide natural gas to customers in its service territory. The franchises aregranted by the local municipalities and the CPCNs are granted by the SCC. The ability to renew such agreements is important to the long-term operations of the Company and the ability to obtain new franchises or CPCNs is fundamental to expanding the Company’s serviceterritory. Failure to renew these agreements could result in significant impact to future earnings and the inability to obtain new franchises orCPCNs for new service areas could negatively impact future earnings growth. REGULATORY RISKS Environmental laws or regulations associated with climate change. Several federal and state legislative and regulatory initiatives have been proposed and passed in recent years in an attempt to limit the effectsof climate change, including greenhouse gas emissions such as those created by the combustion of fossil fuels, including natural gas. Passageof new environmental legislation or implementation of regulations that mandate reductions in greenhouse gas emissions or other similarrestrictions could have a negative effect on the Company’s core operations and its investment in the LLC. Such legislation could imposelimitations on greenhouse gas emissions, require funding of new energy efficiency objectives, impose new operational requirements or lead toother additional costs to the Company. Regulations restricting or prohibiting the use of coal as a fuel for electric power generation hasincreased the demand for natural gas, and could at some point potentially result in natural gas supply concerns and higher costs for naturalgas. Legislation or regulations could limit the exploration and development of natural gas reserves, making the price of natural gas lesscompetitive and less attractive as a fuel source for consumers. Future legislation could also place limitations on the amount of natural gas usedby businesses and homeowners to reduce the level of emissions, resulting in reduced deliveries and earnings. Increased compliance and pipeline safety requirements and fines. The Company is committed to the safe and reliable delivery of natural gas to its customers. Working in concert with this commitment arenumerous federal and state laws and regulations. Failure to comply with these laws and regulations could result in the levy of significant fines.There are inherent risks that may be beyond the Company’s control, including third party actions, which could result in damage to pipelinefacilities, injury and even death. Such incidents could subject the Company to lawsuits, large fines, increased scrutiny and loss of customers,all of which could have a significant effect on the Company’s financial position and results of operations. Regulatory actions or failure to obtain timely rate relief. The Company’s natural gas distribution operations are regulated by the SCC. The SCC approves the rates that the Company charges itscustomers. If the SCC did not authorize rates that provided for the timely recovery of costs or a reasonable rate of return on investment innatural gas distribution facilities, earnings could be negatively impacted. Issuance of debt and equity by Roanoke Gas is also subject to SCCregulation and approval. Delays or lack of approvals could inhibit the ability to access capital markets and negatively impact liquidity orearnings. Compliance with and changes in tax laws. The Company is subject to extensive tax laws and regulations. New tax laws and regulations and changes in existing tax laws and regulationsare continuously being enacted that could result in increased tax expenditures in the future. 11 Many of these tax liabilities are subject to audits by the respective taxing authority. These audits may result in additional taxes as well asinterest and penalties. FINANCIAL RISKS Investment in Mountain Valley Pipeline, LLC. The success of the Company's investment in the LLC is predicated on several key factors including but not limited to the ability of allinvestors to meet their capital calls when due, timely state and federal approvals and completing the construction of the pipeline. Anysignificant delay, cost over-run or the failure to receive the requisite approvals on a timely basis, or at all, could have a significant effect on theCompany's earnings and financial position. Although the LLC initially received the necessary federal and state permits to construct the pipeline, progress on the MVP has been hinderedby several legal and regulatory obstacles as the Fourth Circuit, FERC and other governmental agencies have issued stays, stop orders ordelayed authorizations affecting portions or all of the project pending resolution of issues or concerns raised as the project has progressed.The LLC is currently waiting on resolution of the remaining permits needed for the streams and wetlands crossings. FERC has not yet granteda revised authorization to complete construction work in a 8 mile section of the pipeline route. The LLC also needs authorizations from theBureau of Land Management and the United States Forest Service and resolution of challenges to the Biological Opinion and Incidental TakeStatement issued by the U.S. Fish and Wildlife Service. Several of the prior issues have been resolved; however, the ongoing obstacles as discussed above continue to cause delays in constructionand have resulted in significantly higher projected costs and an extended targeted in-service date for the pipeline. These cost overruns maynot be approved for recovery or be recovered through other regulatory mechanisms, and the LLC could be obligated to make delay ortermination payments or be responsible for other contractual damages. The LLC could also experience the loss of tax incentives, or delayedor diminished returns, and could be required to write-off all or a portion of its investment in the project. New or extended regulatory,legislative or judicial actions or challenges could lead to additional delays and even higher costs, which could affect future returns for the LLCand materially impact Resources consolidated financial position and results of operations, including Resources ability to pay shareholderdividends at the current level or remain in compliance with credit agreement covenants. In addition, there are numerous risks facing the LLC, which can adversely affect the Company's earnings and financial performance throughits investment. The LLC's ability to retain contract crews to complete construction of the pipeline, the inability to obtain or renew ancillarylicenses, rights-of-way, permits or other approvals and opposition from pipeline opponents and environmental groups could all influence thesuccessful completion of the pipeline. Should the LLC be unable to adequately address these issues, the LLC’s business, financial condition,results of operations and prospects could be adversely affected, which could materially impact the financial condition and results ofoperations of the Company. Any failure to negotiate successful project development agreements for new facilities with third parties couldhave similar results. Once in operation, the LLC’s gas infrastructure facilities are subject to many operational risks. Operational risks could result in, among otherthings, lost revenues due to prolonged outages, increased expenses due to monetary penalties or fines for compliance failures, liability to thirdparties for property and personal injury damage, a failure to perform under applicable sales agreements and associated loss of revenues fromterminated agreements or liability for liquidated damages under continuing agreements. The consequences of these risks could have a materialadverse effect on the LLC’s business, financial condition, results of operations and prospects. Uncertainties and risks inherent in operatingand maintaining the LLC's facilities include, but are not limited to, risks associated with facility start-up operations, such as whether the facilitywill achieve projected operating performance on schedule and otherwise as planned. The LLC’s business, financial condition, results ofoperations and prospects can be materially adversely affected by weather conditions, including, but not limited to, the impact of severeweather. Threats of terrorism and catastrophic events resulting from terrorism, cyber-attacks, or individuals and/or groups attempting todisrupt the LLC’s business, or the businesses of third parties, may materially adversely affect the LLC’s business, financial condition, resultsof operations and prospects. 12 Access to capital to maintain liquidity. The Company relies on a variety of capital sources to operate its business and fund capital expenditures, including internally generated cashfrom operations, short-term borrowings under its line-of-credit, proceeds from the issuance of additional shares of its common stock andother sources. Access to a line-of-credit is essential to provide seasonal funding of natural gas operations and provide capital budget bridgefinancing. Access to capital markets and other long-term funding sources is important for capital outlays and funding of the LLC investment.The ability of the Company to maintain and renew its line-of-credit and to secure longer-term financing is critical to operations. Adversemarket trends, market disruptions or deterioration in the financial condition of the Company could increase the cost of borrowing, restrict theCompany's ability to issue additional shares of its common stock or otherwise limit the Company’s ability to secure adequate funding. Failure to comply with debt covenant requirements. The Company's long-term debt obligations and bank line-of-credit contain financial covenants. Noncompliance with any of these covenantscould result in an event of default which, if not cured or waived, could accelerate payment on outstanding debt obligations or causeprepayment penalties. In such an event, the Company may not be able to refinance or repay all of its indebtedness, pay dividends or havesufficient liquidity to meet operating and capital expenditure requirements. Any such acceleration would cause a material adverse change inthe Company's financial condition. Pandemic Outbreak. A pandemic event such as COVID-19 or other similar diseases could cause a significant economic restriction or recession negativelyimpacting the Company’s financial position, results of operations and cash flows. Depending on the duration of these impacts, the liquidity ofthe Company could be strained, reducing the Company’s ability to complete infrastructure investments and its ability to safely and reliablyserve its customers. Impact from commercial customers: In an effort to reduce the spread of disease, businesses, either on their own or by government mandates,may close or reduce operations to limit contact with the contagion. A reduction in business activity could result in lower natural gasconsumption for both production activities as well as space heating, thereby reducing revenues and gross profit. The closing or reduction inoperations by businesses, whether temporary or prolonged, could result in a permanent loss of some commercial customers. Impact from residential customers: The closing of businesses may result in job layoffs or other reductions in employee numbers and/orworking hours, thus reducing or eliminating customers’ ability to pay their utility bills and resulting in increased bad debt expense. Impact on suppliers: A pandemic event could reduce the ability of the Company’s suppliers to supply a sufficient level of natural gas limitingour ability to meet customer demands. Impact to the Company's employees: Orders by government bodies could result in employees of the Company being required to limit contactwith customers or work remotely, thus not allowing them to complete tasks normally requiring a physical presence. Also, if a significantnumber of employees were to contract the virus or be quarantined, the Company may not be able to complete key or critical tasks, notlimited to, but including key financial, reporting, and operational controls. Impact from SCC actions: The SCC could issue orders in response to a pandemic event that result in increased regulatory oversight,operational mandates or restrictions on normal business activities. Any such action could result in increased operating costs or other financialor operational burdens that may negatively impact the Company's results of operations or financial position. Impact on financing capabilities: A prolonged economic shutdown due to a pandemic could stress the banking system, thereby limiting theCompany’s ability to obtain financing on commercially reasonable terms, which could lead to higher interest costs. Furthermore, a distressedequity market could limit the ability to raise capital through the issuance of Resources’ equity instruments due to depressed prices and lowtrading volumes. 13 Post-retirement benefits and related funding of obligations. The costs of providing defined benefit pension and retiree medical plans are dependent on a number of factors such as the rates of return onplan assets, discount rates used in determining plan liabilities, the level of interest rates used to measure the required minimum funding levels ofthe plan, future government regulation, changes in life expectancy and required or voluntary contributions made to the plan. Changes inactuarial assumptions and differences between the assumptions and actual results, as well as a significant decline in the value of investmentsthat fund these plans, if not offset or mitigated by a decline in plan liabilities, could increase the expense of these plans and require significantadditional funding. Although the Company has soft-frozen both plans to limit future growth in each plan's liabilities, ongoing funding obligationsand expenses could have a material impact on the Company's financial position, results of operation and cash flows. Exposure to market risks. The Company is subject to market risks that are beyond the Company’s control, such as commodity price volatility and interest rate risk. TheCompany is generally isolated from commodity price risk through the PGA mechanism the Company has in place. With respect to interestrate risk, the Company has been operating in a relatively low interest rate environment for both short and long-term interest rates. However,increasing interest rates could adversely affect the Company’s future financial results. GENERAL RISKS General downturn in the economy or prolonged period of slow economic recovery. A weak or poorly performing economy can negatively affect the Company’s profitability. An economic downturn can result in loss ofcommercial and industrial customers due to plant closings, a loss of residential customers as well as slow or declining growth in new customeradditions, all of which would result in reduced sales volumes and lower revenues. An economic downturn could also result in risingunemployment and other factors that could lead to a loss of customers and an increase in customer delinquencies and bad debt expense. Insurance coverage may not be sufficient. The Company currently has liability and property insurance to cover a variety of exposures and risks. The insurance policies supporting saidcoverages are subject to certain limits and deductibles. Insurance coverage for risks against which the Company and its industry peerstypically insure may not be offered in the future or such policies may expand exclusions that limit the amount of coverage or remove certainrisks completely as insured events. Furthermore, litigation awards continue to increase and the limits of insurance may not keep paceaccordingly. The proceeds received from any such insurance may not be paid in a timely manner. The occurrence of any of the foregoingcould have a material adverse effect on the Company’s financial position, results of operations and cash flows. 14 Item 1B. Unresolved Staff Comments. None. Item 2. Properties. Included in “Utility Property” on the Company’s consolidated balance sheet are storage plant, transmission plant, distribution plant andgeneral plant of Roanoke Gas as categorized by natural gas utilities. The Company has approximately 1,157 miles of transmission anddistribution pipeline with transmission and distribution plant representing 89% of the total utility plant investment. The transmission anddistribution pipelines are located on or under public roads and highways or private property for which the Company has obtained the legalauthorization and rights to operate. Roanoke Gas currently owns and operates six metering stations through which it measures and regulates the gas being delivered by itssuppliers. These stations are located at various points throughout the Company’s distribution system. Roanoke Gas also owns a liquefied natural gas storage facility located in its service territory that has the capacity to store up to 200,000DTH of natural gas. The Company’s executive, accounting and business offices, along with its maintenance and service departments, are located on KimballAvenue in Roanoke, Virginia. Although the Company considers its present properties to be adequate, management continues to evaluate the adequacy of its currentfacilities as additional needs arise. Item 3. Legal Proceedings. The Company is not known to be a party to any pending legal proceedings. Item 4. Mine Safety Disclosures. Not applicable. 15 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Market Information Resources' common stock is listed on the NASDAQ Global Market under the trading symbol RGCO. Payment of dividends is within thediscretion of the Board of Directors and depends on, among other factors, earnings, capital requirements, and the operating and financialcondition of the Company. Range of Bid Prices CashDividends Year Ending September 30, 2021 High Low Declared First Quarter $27.40 $22.82 $0.185 Second Quarter 25.60 22.08 0.185 Third Quarter 25.60 21.32 0.185 Fourth Quarter 26.02 22.33 0.185 Year Ending September 30, 2020 First Quarter $30.00 $27.53 $0.175 Second Quarter 31.98 24.55 0.175 Third Quarter 28.85 23.15 0.175 Fourth Quarter 24.86 22.58 0.175 As of November 19, 2021, there were 1,030 holders of record of the Company’s common stock. This number does not include all beneficialowners of common stock who hold their shares in “street name." A summary of the Company’s equity compensation plans follows as of September 30, 2021: (a) (b) (c) Plan category Number ofsecurities to beissued uponexercise ofoutstandingoptions, warrantsand rights Weighted-average exerciseprice ofoutstandingoptions, warrantsand rights Number ofsecuritiesremainingavailable forfuture issuanceunder equitycompensationplans (excludingsecuritiesreflected incolumn (a)) Equity compensation plans approved by security holders 45,250 $19.34 457,079 Equity compensation plans not approved by security holders — — — Total 45,250 $19.34 457,079 Item 6. Selected Financial Data. Not applicable.16 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. COVID-19 As was discussed under Item 1A "Risk Factors" above, COVID-19 and the resulting pandemic continues to impact the local, state, nationaland global economies. Supply chain disruptions, labor shortages and inflation have supplanted quarantines and government restrictions as theprimary examples of matters impacting economic conditions. Significant progress was made in distributing and administering vaccines to thepublic through September 30, 2021, which has allowed a return to mostly normal operating conditions. Most restrictions implemented as aresult of the pandemic have been eased, including Virginia’s state of emergency, allowing for increased business, recreational and travelactivities. Natural gas consumption by the Company’s commercial customers has largely returned to pre-pandemic levels. However, theeasing of restrictions and the existence of variant strains of COVID-19 may lead to a rise in infections, which could result in the reinstatementof some or all of the restrictions previously in place. Management continues to monitor current conditions to ensure the continuation of safeand reliable service to customers and to maintain the safety of the Company's employees. See the Regulatory section below for information regarding the service disconnection moratorium, CARES Act and ARPA funds. The full extent to which the COVID-19 pandemic will impact the Company depends on future developments, which are highly uncertain andcannot be reasonably predicted, including the increase or reduction in governmental restrictions to businesses and individuals, the potentialresurgence of the virus, including variants, as well as efficacy of the vaccines. Cyber Risk Cyber attacks are a constant threat to businesses and individuals. The Company remains focused on these threats and is committed tosafeguarding its information technology systems. These systems contain confidential customer, vendor and employee information as well asimportant operational financial data. There is risk associated with unauthorized access of this information with a malicious intent to corruptdata, cause operational disruptions or compromise information. Management continuously monitors access to these systems and believes ithas security measures in place to protect these systems from cyber attacks and similar incidents; however, there can be no guarantee that anincident will not occur. In the event of a cyber incident, the Company will execute its Security Incident Response Plan. The Companymaintains cyber insurance to mitigate financial costs that may result from a cyber incident. Overview Resources is an energy services company primarily engaged in the regulated sale and distribution of natural gas to approximately 62,600residential, commercial and industrial customers in Roanoke, Virginia, and the surrounding localities, through its Roanoke Gas subsidiary.Roanoke Gas also provides certain unregulated services. As a wholly-owned subsidiary of Resources, Midstream is a more than 1%investor in the MVP and a less than 1% investor in Southgate. More information regarding the investment in MVP is provided under theEquity Investment in Mountain Valley Pipeline section below. 17 The utility operations of Roanoke Gas are regulated by the SCC, which oversees the terms, conditions and rates charged to customers fornatural gas service, safety standards, extension of service and depreciation. Nearly all of the Company’s revenues, excluding equity inearnings of MVP, are derived from the sale and delivery of natural gas to Roanoke Gas customers based on rates authorized by theSCC. These rates are designed to provide the Company with the opportunity to recover its gas and non-gas expenses and to earn areasonable rate of return for shareholders based on normal weather. The Company is also subject to federal regulation from the Department of Transportation in regard to the construction, operation,maintenance, safety and integrity of its transmission and distribution pipelines. FERC regulates the prices for the transportation and delivery ofnatural gas to the Company's distribution system and underground storage services. In addition, Roanoke Gas is subject to other regulationswhich are not necessarily industry specific. On October 10, 2018, Roanoke Gas filed a general rate application requesting an annual increase in customer non-gas base rates. RoanokeGas implemented the interim non-gas rates contained in its rate application for natural gas service rendered to customers on or after January1, 2019. On January 24, 2020, the SCC issued its final order on the general rate application, granting Roanoke Gas an annualized increase innon-gas base rates of $7.25 million and an authorized rate of return on equity of 9.44%. As a result, the Company refunded $3.8 million toits customers in March 2020, representing the excess revenues collected plus interest for the difference between the final approved rates andthe interim rates billed since January 1, 2019. The order also directed the Company to write-off $317,000 of ESAC assets that were notsubject to recovery under the final order. As the Company’s business is seasonal in nature, volatility in winter weather and the commodity price of natural gas, can impact theeffectiveness of the Company’s rates in recovering its costs and providing a reasonable return for its shareholders. In order to mitigate theeffect of weather variations and other factors not provided for in the Company's base rates, Roanoke Gas has certain approved ratemechanisms in place that help provide stability in earnings, adjust for volatility in the price of natural gas and provide a return on qualifiedinfrastructure investment. These mechanisms include the SAVE Rider, WNA, ICC and PGA. The Company’s non-gas base rates provide for the recovery of non-gas related expenses and a reasonable return to shareholders. Theserates are determined based on the filing of a formal non-gas rate application with the SCC. Generally, investments related to extending serviceto new customers are recovered through the additional revenues generated by the non-gas base rates currently in place. The investment inreplacing and upgrading existing infrastructure is generally not recoverable until a formal rate application is filed to include the additionalinvestment, and new non-gas base rates are approved. The SAVE Rider provides the Company with a mechanism through which it recoversthe cost related to SAVE qualified infrastructure investments on a prospective basis, until a formal rate application is filed to incorporate therecovery of these costs in non-gas rates. The SAVE Plan and Rider were reset effective January 1, 2019, when the recovery of all priorSAVE Plan investment was incorporated into the current non-gas rates. Accordingly, SAVE Plan revenues increased to $2,487,000 in fiscal2021 from $1,272,000 in fiscal 2020. The current SAVE Plan is focused on replacing first generation, pre-1973 plastic pipe and otherqualifying infrastructures projects. Additional information regarding the SAVE Plan and Rider is provided under the Regulatory section. The WNA model reduces the volatility in earnings due to the variability in temperatures during the heating season. The WNA is based on themost recent 30-year temperature average and provides the Company with a level of earnings protection when weather is warmer than normaland provides its customers with price protection when the weather is colder than normal. The WNA allows the Company to recover from itscustomers the lost margin (excluding gas costs) from the impact of weather that is warmer than normal and correspondingly requires theCompany to refund the excess margin earned for weather that is colder than normal. Any billings or refunds related to the WNA arecompleted following each WNA year, which runs from April to March. The Company recorded approximately $1,196,000 and$1,193,000 in additional revenue from the WNA for weather that was approximately 8% warmer than normal for the fiscal years endedSeptember 30, 2021 and 2020. The number of heating degree days used to determine normal will change annually as a new year is added tothe 30-year period and the oldest year is removed. As a result of adding recent warmer than normal years to replace historical colder years,the number of heating degree days that defines normal has declined over the last several years. 18 The Company also has an approved rate structure in place that mitigates the impact of financing costs of its natural gas inventory. Under thisrate structure, Roanoke Gas recognizes revenue by applying the ICC factor, based on the Company’s weighted-average cost of capital,including interest rates on short-term and long-term debt, and the Company’s authorized return on equity, to the average cost of natural gasinventory. Total ICC revenues were $396,000 and $389,000 for the fiscal years ended September 30, 2021 and 2020, respectively. Average inventory balances varied modestly between periods; however, rising natural gas commodity prices near the end of the current fiscalyear may lead to higher ICC revenues in fiscal 2022. The cost of natural gas is a pass-through cost and is independent of the non-gas rates of the Company. Accordingly, the Company'sapproved billing rates include a component designed to allow for the recovery of the cost of natural gas used by its customers. This ratecomponent, referred to as the PGA, allows the Company to pass along to its customers increases and decreases in natural gas costs basedon a quarterly filing, or more frequent if necessary, with the SCC. Once administrative approval is received, the Company adjusts the gascost component of its rates to reflect the approved amount. As actual costs will differ from the projections used in establishing the PGA rate,the Company will either over-recover or under-recover its actual gas costs during the period. The difference between actual costs incurredand costs recovered through the application of the PGA is recorded as a regulatory asset or liability. At the end of the annual deferral period,the balance is amortized over an ensuing 12-month period as amounts are reflected in customer billings. Roanoke Gas is required to submit an Annual Information Filing ("AIF") each year to the SCC. Included as part of this filing is an earningstest, which is required when the Company has certain regulatory assets. If the results of the earnings test indicate that the Company'sregulatory earnings exceed the mid-point of its authorized return on equity range, then certain regulatory assets are written-down andrecovery accelerated to the point where the actual return for the period adjusts to the mid-point of the range. The Company conductedpreliminary earnings tests for fiscal 2021 and 2020 in preparation for the AIF filings in January of the subsequent years. As a result of thepreliminary earnings tests, Roanoke Gas expensed $217,000 in deferred COVID costs incurred during fiscal 2021, and fully amortized theremaining $525,000 balance of ESAC assets in fiscal 2020. Inflation and Rising Prices Natural gas commodity, delivery and storage capacity costs comprise the single largest expense of the Company representing nearly 58% offiscal 2021 total operating expenses. Natural gas commodity prices have steadily increased through fiscal 2021 and natural gas futures forthe upcoming winter heating season are double September prices. Several factors have contributed to rising natural gas prices including lackof interstate pipeline development, demand rebounding as activity returns to pre-pandemic levels, lower inventory storage levels, increaseddemand for cleaner energy and lagging production from suppliers. Roanoke Gas can recover rising natural gas costs through the PGAmechanism as noted above; however, in times of rapidly increasing costs, the timing of recovery may lag. Increasing natural gas prices,especially in relation to other energy options, may lead to reductions in energy consumption through customer conservation or fuel switchingin addition to the potential for rising bad debts related to customers inability to pay higher natural gas bills. Inflation affects the Company through increases in non-gas expenses such as labor costs, employee benefits, materials and supplies,contracted services and corporate insurance, among other areas. As the country emerges from the pandemic, issues such as supply chaindelays, labor shortages and limited availability of key or critical supplies have put upward pressure on several categories of the Company'snon-gas expenses. The Company recovers non-gas related costs through the non-gas portion of its tariff rates, which are adjusted througha non-gas rate application. Unlike the rate adjustments for the gas portion of rates which are done administratively, the non-gas rateapplication results in an inherent lag in non-gas expense recovery. Therefore, authorized non-gas rates may not keep pace with the risingcosts during inflationary periods. Management must regularly evaluate the Company's operations, economic conditions and other factors toassess the need to apply for a non-gas rate adjustment. 19 Results of Operations The analysis on the results of operations is based on the consolidated operations of the Company, which is primarily associated with the utilitysegment. Additional segment analysis is provided in areas where Midstream's investment in affiliates represents a significant component of thecomparison. The Company's operating revenues are affected by the cost of natural gas, as reflected in the consolidated income statement under the lineitem cost of gas - utility. The cost of natural gas is passed through to customers at cost, which includes commodity price, transportation,storage, injection and withdrawal fees with any increase or decrease offset by a correlating change in revenue through the PGA. Accordingly,management believes that gross utility margin, a non-GAAP financial measure defined as utility revenues less cost of gas, is a more useful andrelevant measure to analyze financial performance. The term gross utility margin is not intended to represent or replace operating income, themost comparable GAAP financial measure, as an indicator of operating performance and is not necessarily comparable to similarly titledmeasures reported by other companies. The following results of operations analyses will reference gross utility margin. Fiscal Year 2021 Compared with Fiscal Year 2020 The table below reflects operating revenues, volume activity and heating degree days. Operating Revenues Year Ended September 30, 2021 2020 Increase /(Decrease) Percentage Gas Utility $75,045,103 $62,408,925 $12,636,178 20%Non Utility 129,676 666,466 (536,790) (81)%Total Operating Revenues $75,174,779 $63,075,391 $12,099,388 19% Delivered Volumes Year Ended September 30, 2021 2020 Increase /(Decrease) Percentage Regulated Natural Gas (DTH) Residential and Commercial 6,773,819 6,419,031 354,788 6%Transportation and Interruptible 3,135,710 3,938,143 (802,433) (20)%Total Delivered Volumes 9,909,529 10,357,174 (447,645) (4)%HDD 3,610 3,623 (13) (0)% Total gas utility operating revenues for the year ended September 30, 2021 increased by 20% from the year ended September 30, 2020primarily due to higher natural gas commodity prices and pipeline storage fees, higher residential and commercial volumes and an increase inSAVE revenues, partially offset by lower transportation and interruptible volumes. Rising natural gas commodity prices combined with highertransportation fees implemented by the Company's pipeline suppliers have resulted in a 41% per dth increase in the commodity component ofrevenue and a 38% per dth increase in the demand (pipeline and storage fees) component of revenue. These higher gas costs are passed onto customers through the PGA mechanism. The mostly weather sensitive residential and commercial natural gas deliveries increased by 6%on nearly the same number of heating degree days. The higher deliveries reflect the increased demand for natural gas as economic conditionscontinue to improve and the economy emerges from last year's pandemic. SAVE Plan revenues increased by $1,215,000 due to theongoing investment in qualified SAVE infrastructure projects. Transportation and interruptible volumes, primarily driven by business activityrather than weather, declined by 20% due to a single multi-fuel customer that switched its primary fuel from natural gas to an alternate energysource in response to rising natural gas prices. In early fiscal 2020, this same customer switched from another energy source to natural gas asits primary fuel due to the favorable pricing of natural gas. Excluding the multi-fuel customer's usage from both periods, total transportationand interruptible volumes would have increased by 3% on a comparative basis. Non-utility revenues decreased due to the completion of asignificant long-term contract in fiscal 2020.20 Gross Utility Margin Year Ended September 30, 2021 2020 Increase Percentage Gas Utility Revenues $75,045,103 $62,408,925 $12,636,178 20%Cost of Gas - Utility 35,179,842 23,949,481 11,230,361 47%Gross Utility Margin $39,865,261 $38,459,444 $1,405,817 4% Gross utility margin increased over the prior fiscal year primarily as a result of the aforementioned higher SAVE revenues and increasein residential and commercial volumes and customer base charges more than offsetting the reduction in transportation and interruptibledeliveries. Total volumetric margin increased for the reasons mentioned above as the increase in residential and commercial DTH sales morethan offset the decline in lower-margin interruptible and transportation volumes. The growth in customer base charge revenues reflect acombination of customer additions and the continuation of service to delinquent customers as a result of the disconnection moratorium, whichended August 30, 2021. The changes in the components of the gross utility margin are summarized below: Years Ended September 30, 2021 2020 Increase /(Decrease) Customer Base Charge $14,563,274 $14,413,709 $149,565 SAVE Plan 2,487,299 1,272,070 1,215,229 Volumetric 21,188,794 21,091,007 97,787 WNA 1,196,499 1,192,715 3,784 Carrying Cost 395,626 388,607 7,019 Other Revenues 33,769 101,336 (67,567)Total $39,865,261 $38,459,444 $1,405,817 Operations and Maintenance Expense - Operations and maintenance expense decreased by $1,703,874 or 11%, from the prior yearprimarily due to the accelerated recovery of ESAC regulatory assets in fiscal 2020 and lower bad debt expense, partially offset by lowercapitalized overheads. In accordance with the SCC's final order on the non-gas base rate application, the Company wrote-down $317,000in ESAC assets last year that were not subject to recovery through the new rates. In addition to the write-down of a portion of the ESACassets in December 2019, Roanoke Gas accelerated the recovery of the remaining $525,000 balance of ESAC assets in September 2020 asa result of the earnings test performed by the Company. Bad debt expense declined by $964,000 due to the application of more than$400,000 in CARES Act funds to eligible COVID-19 impacted customers with past due balances and the pending receipt of $859,000 inARPA funds to provide similar relief. If not for the CARES Act and ARPA funds, bad debt expense would have increased significantly overlast year's higher than normal levels. Total capitalized overheads declined by $258,000 on a nearly $3 million reduction in capitalexpenditures related to project timing.21 General Taxes - General taxes increased by $95,307, or 4%, primarily due to higher property taxes associated with a 5% increase in utilityproperty. Depreciation - Depreciation expense increased by $533,895, or 7%, corresponding to a similar increase in depreciable utility plant. Equity in Earnings of Unconsolidated Affiliate - The equity in earnings of the MVP investment decreased by $3,147,320 as AFUDCactivity ceased during the second fiscal quarter due to the cessation of growth construction activities by the LLC with limitedconstruction resuming in April 2021 resulting in a much lower level of AFUDC recognized for the remainder of the year. See the EquityInvestment in Mountain Valley Pipeline section for additional information. Other Income, net - Other income increased by $275,850 primarily due to a $449,000 decrease in the non-service cost components of netperiodic benefit costs partially offset by $207,000 reduction in the equity portion of AFUDC on Roanoke Gas' two gate stations that willinterconnect with the MVP. Roanoke Gas temporarily stopped recognizing AFUDC effective January 2021 until such time constructionactivities resume on these stations. Interest Expense - Total interest expense decreased by $47,273, or 1%, as a decline in the interest rate on the Company's variable ratedebt offset higher total debt levels. Total average debt outstanding increased by 14% to meet the funding needs of Roanoke Gas' capitalprojects and Midstream's continuing investment in MVP. As a result of the declining interest rates on the Company's variable rate debt, theweighted-average interest rate fell by 12%. Declines in other interest contributed to the lower expense levels including lower customerdeposit interest. Roanoke Gas' interest expense increased by $81,285 as total average debt outstanding increased by $8,500,000 associated with an increasein the borrowings under the line-of-credit. The average interest rate decreased slightly from 3.76% in fiscal 2020 to 3.48% in fiscal 2021.Roanoke gas capitalized $68,000 less in AFUDC during the current year due to the absence of construction activities on the two gatestations, which offset a $67,000 reduction in interest expense attributable to fiscal 2020's rate refund. Midstream's interest expense decreased by $128,558 as the average interest rate on Midstream's total debt declined from 2.76% to 2.23%related to the variable interest rate credit facility more than offsetting a $6,900,000 increase in total average debt outstanding during theperiod. Income Taxes - Income tax expense decreased by $101,598, or 3%, on a 4% decrease in pre-tax earnings. The effective tax rate was24.1% for fiscal 2021 compared to 23.8% for fiscal 2020. The effective tax rate for both years is below the combined state and federalstatutory rate of 25.74% due to the amortization of the excess deferred income taxes, the excess deductions related to restricted stockvesting, stock option exercises and the realization of certain tax credits. Income tax expense related to Midstream decreased by $780,000due to the significant reduction in pre-tax earnings related to AFUDC from the MVP investment. The majority of the remaining $680,000difference in income tax expense is related to the increase in pre-tax earnings of Roanoke Gas. Net Income and Dividends - Net income for fiscal 2021 was $10,102,062 compared to $10,564,534 for fiscal 2020. Basic and dilutedearnings per share were $1.22 in fiscal 2021 compared to $1.30 in fiscal 2020. Dividends declared per share of common stock were$0.74 in fiscal 2021 compared to $0.70 in fiscal 2020. Capital Resources and Liquidity Due to the capital intensive nature of the utility business, as well as the related weather sensitivity, the Company’s primary capital needs arethe funding of its capital projects, investment in MVP, the seasonal funding of its natural gas inventories and accounts receivables and paymentof dividends. To meet these needs, the Company relies on its operating cash flows, credit availability under short-term and long-termdebt agreements and proceeds from the sale of its common stock. 22 Cash and cash equivalents increased by approximately $1.2 million in fiscal 2021 compared to a decrease of $1.3 million in fiscal 2020. Thefollowing table summarizes the categories of sources and uses of cash: Cash Flow Summary Years Ended September 30, 2021 2020 Net cash provided by operating activities $11,568,108 $12,823,903 Net cash used in investing activities (25,849,237) (30,721,011)Net cash provided by financing activities 15,508,380 16,556,826 Net increase (decrease) in cash and cash equivalents $1,227,251 $(1,340,282) Cash Flows Provided by Operating Activities: The seasonal nature of the natural gas business causes operating cash flows to fluctuate significantly during the year, as well as from year toyear. Factors, including weather, energy prices, natural gas storage levels and customer collections, all contribute to working capital levels andrelated cash flows. Generally, operating cash flows are positive during the second and third fiscal quarters as a combination of earnings,declining storage gas levels and collections on customer accounts all contribute to higher cash levels. During the first and fourth fiscal quarters,operating cash flows generally decrease due to the combination of increasing natural gas storage levels and rising customer receivablebalances. Cash flow from operating activities decreased by nearly $1.3 million from the prior year. The decrease in cash flow provided by operationswas primarily driven by the affects of increasing gas commodity prices and changes in certain regulatory assets and liabilities, partially offsetby net income exclusive of noncash equity in earnings. The table below summarizes the significant operating cash flow components: Years Ended September 30, Cash Flows From Operating Activities: 2021 2020 Increase(Decrease) Net Income $10,102,062 $10,564,534 $(462,472)Non-cash adjustments: Depreciation 8,669,977 8,126,427 543,550 Equity in earnings (1,667,554) (4,814,874) 3,147,320 AFUDC (55,981) (330,208) 274,227 Allowance for doubtful accounts (461,130) 592,398 (1,053,528)ESAC assets — 1,022,195 (1,022,195)Changes in working capital and regulatory assets and liabilities: Accounts receivable (1,084,726) (141,482) (943,244)Gas in Storage (2,158,709) 739,546 (2,898,255)Prepaid income taxes (2,457,327) 510,357 (2,967,684)Accounts payable and accrued expenses 2,862,861 659,276 2,203,585 Deferred Taxes 106,188 1,327,655 (1,221,467)Change in over (under) collection of gas costs (3,314,446) (1,895,555) (1,418,891)Rate refund — (3,827,589) 3,827,589 WNA (609,888) 1,171,342 (1,781,230)Non-current regulatory liabilities 2,367,512 — 2,367,512 Other (730,731) (880,119) 149,388 Net cash provided by operating activities $11,568,108 $12,823,903 $(1,255,795) Increasing natural gas commodity prices during 2021, resulted in reductions in operating cash in several areas. Higher accounts receivablebalances, and increases in the under collection of gas costs, and rising gas in storage balances resulted in lower operating cash of$0.9, $1.4 and $2.9 million year over year, respectively. Income tax refunds not yet received, associated with the R&D credit studyconducted by a third party consultant, caused prepaid income taxes to increase significantly year over year, resulting in a decrease inoperating cash of $3 million. See Note 8 for more information regarding the R&D tax credit. 23 Operating cash decreases were partially offset by accounts payable and changes in certain regulatory assets and liabilities. Significantlyhigher accounts payable balances related to increasing natural gas commodity prices provided an additional $2.2 million in operating cashyear over year. As there was no rate refund in fiscal 2021, operating cash improved $3.8 million. Other significant non-cash changes include $1.1 million for allowance for doubtful accounts due to changes in bad debt reserves attributableto the pandemic and funding relief and $2.4 million related to the establishment of a regulatory liability for the R&D tax credit. Cash Flows Used in Investing Activities: Investing activities primarily consist of expenditures related to investment in Roanoke Gas' utility plant, which includes replacing aging naturalgas pipe with new plastic or coated steel pipe, improvements to the LNG plant and gas distribution system facilities and expansion of itsnatural gas system to meet the demands of customer growth, as well as the continued investment in the MVP. Roanoke Gas' expenditureswere approximately $20 million and $22.9 million in fiscal 2021 and 2020, respectively. Roanoke Gas renewed 7.8 miles of main and 620service lines and 9.6 miles of main and 592 service lines in fiscal years 2021 and 2020, respectively. The current SAVE Plan is focused onthe replacement of pre-1973 first generation plastic pipe in addition to other SAVE related infrastructure. Furthermore, Roanoke Gas’ capitalexpenditures included costs to extend natural gas distribution mains and services to 480 customers in fiscal 2021, compared to 448customers in fiscal 2020. Depreciation covered approximately 43% and 35% of the current and prior year's capital expenditures,respectively, with the balance provided from other operating cash flows and financing activities. Capital expenditures are expected to remain at or near current levels over the next three to five years as Roanoke Gas continues to focuson its SAVE Plan, which is expected to be completed by 2024, as well as customer growth and system expansion. The Company expects toutilize its credit facilities, as well as consider additional equity capital, to meet the funding requirements of these planned expenditures. Investing cash flows also reflect the 2021 funding of $6 million for Midstream's participation in the LLC. Midstream's total expected fundingrequirement increased to between $60 and $62 million as discussed below, with anticipated cash investment for fiscal 2022 to beapproximately $10.7 million. Funding for the investment in the LLC is provided through Midstream's credit facility and two unsecured notesin the combined amount of $24 million. More information regarding the credit facility is provided in Note 7 and under the Equity Investment inMountain Valley Pipeline section below. Cash Flows Provided by Financing Activities: Financing activities generally consist of borrowings and repayments under credit agreements, issuance of stock and the payment of dividends.Net cash flows provided by financing activities were $15.5 million and $16.6 million in fiscal 2021 and 2020, respectively. The Companyuses its line-of-credit to fund seasonal working capital needs and provide temporary financing for capital projects. The increase in financingcash flows was derived from Midstream's net borrowings of more than $8 million to finance its investment in MVP. The Company alsorealized $3.3 million from the issuance of common stock through its ATM program and $1.6 million from the issuance of stock through DRIPactivity and the exercise of options. Cash out-flows for dividend payments exceeded $6.0 million as the annualized dividend rate increasedfrom $0.70 to $0.74 per share. The Company’s consolidated capitalization was 41.5% equity and 58.5% long-term debt at September 30,2021, exclusive of unamortized debt expense. This compares to 41.7% equity and 58.3% long-term debt at September 30, 2020. 24 On October 29, 2021 Midstream entered into an unsecured promissory note in the principal amount of $8 million with an interest rate basedon 30-day LIBOR plus 115 basis points maturing December 1, 2027. Related to this note, Midstream also entered into an interest rate swapagreement that effectively converts the variable rate note into a fixed rate instrument with an effective annual interest rate of 2.443%. The loanwill convert into an installment loan with principal pay-down beginning in fiscal 2023. In addition, this note reduces the borrowing capacitydefined by the Third Amendment to Credit Agreement and related Promissory Notes. The total borrowing capacity declined from $41 millionto $33 million effective with the new promissory note. All other terms of the Third Amendment to Credit Agreement remain unchanged. On September 24, 2021, Roanoke Gas entered into an unsecured Delayed Draw Term Note in the principal amount of $10 million with aninterest rate based on 30-day LIBOR plus 100 basis points maturing on October 1, 2028. Related to this note, the Company also enteredinto an interest rate swap agreement that effectively converts the variable rate note into a fixed rate instrument with an effective annual interestrate of 2.49%. The term note will fund in two installments of $5 million each on April 1, 2022 and October 1, 2022, respectively. On August 20, 2021, Roanoke Gas entered into an unsecured Delayed Draw Term Note in the principal amount of $15 million with aninterest rate of 1.20% above the 30-day SOFR Average per annum maturing on August 20, 2026. Related to this note, the Company alsoentered into an interest rate swap agreement that effectively converts the variable rate note into a fixed rate instrument with an effective annualinterest rate of 2.00% The term note funded on October 1, 2021. On March 25, 2021, Roanoke Gas renewed its unsecured line-of-credit agreement for a two-year term expiring March 31, 2023 with amaximum borrowing limit of $40 million. Amounts drawn against the agreement are considered to be non-current as the balance under theline-of-credit is not subject to repayment within the next 12-month period. The agreement has a variable-interest rate based on 30-dayLIBOR plus 100 basis points and an availability fee of 15 basis points and provides multi-tiered borrowing limits aligned with the Company'sseasonal borrowing demand. The Company's total available borrowing limits range from $14 million to $40 million. On December 6, 2019, Roanoke Gas entered into unsecured notes in the aggregate principal amount of $10 million. These notes have a 10-year term from the date of issue at a fixed interest rate of 3.60%. The proceeds from these notes provided financing for Roanoke Gas' capitalbudget. Roanoke Gas has private shelf agreements with two different financial institutions. The first agreement, as amended, provides for the issuanceof up to $40 million in unsecured notes in addition to the $28 million previously issued. This shelf agreement will expire on December 6,2022 unless extended. The second agreement, effective September 30, 2020, provides for the issuance of up to $70 million in unsecurednotes during its 5-year term expiring on September 30, 2025. No funds were drawn on either of these agreements during fiscal 2021. On February 14, 2020, Resources filed a prospectus with the SEC utilizing a shelf registration process where the Company may sell sharesof common stock, in one or more offerings, of an aggregate amount up to $40 million. The prospectus was filed including a supplementallowing the Company to offer a portion of these shares, up to an aggregate of $15 million, utilizing the ATM approach as defined in Rule 415under the Securities Act. The ATM Plan allows Resources flexibility in the frequency, timing and amount of share offerings in supplementingits capital funding needs. There were 142,726 shares issued through the ATM program during fiscal 2021. Off-Balance Sheet Arrangements The Company has no off-balance sheet arrangements as defined in Regulation S-K, Item 303(a)(4)(ii). Equity Investment in Mountain Valley Pipeline Recent construction activity has been limited based on legal and regulatory challenges. Although certain permits and authorizations werereceived in the fourth quarter of fiscal 2020 and the first quarter of fiscal 2021, there remain pending challenges and authorization requestsimpacting current progress. 25 Following a comprehensive review of all outstanding stream and wetland crossings across the approximately 300-mile MVP project route, onFebruary 19, 2021, the LLC submitted (i) a joint application package to each of the Huntington, Pittsburgh and Norfolk Districts of the U.S.Army Corps of Engineers (Army Corps) that requests an individual permit from the Army Corps to cross certain streams and wetlandsutilizing open cut techniques (the Army Corps Individual Permit) and (ii) an application to amend the MVP project’s CPCN that seeks FERCauthority to cross certain streams and wetlands utilizing alternative trenchless construction methods. Related to seeking the Army Corps Individual Permit, on March 4, 2021, the LLC submitted applications to each of the West VirginiaDepartment of Environmental Protection (WVDEP) and the Virginia Department of Environmental Quality (VADEQ) seeking Section 401water quality certification approvals or waivers (such approvals or waivers, the State 401 Approvals). Both the WVDEP and VADEQsubmitted requests to the Army Corps for additional time to address the applications, and in late June 2021, the Army Corps granted theWVDEP and the VADEQ additional review time through November 29, 2021 and December 31, 2021, respectively. In early June 2021,the FERC issued a notice of schedule for the LLC's CPCN amendment application. FERC issued its environmental assessment August 13,2021. Given that the expected permitting timelines for both the FERC and the Army Corps remain in-line with the LLC's expectations, theLLC continues to target a full in-service date for the MVP project in summer 2022 at a total project cost of approximately $6.2 billion(excluding AFUDC). In order to complete the MVP project in accordance with the targeted full in-service date and cost, the LLC must, among other things, timelyreceive the Army Corps Individual Permit (as well as timely receive the State 401 Approvals and, as necessary, certain other state-levelapprovals) and timely receive authorization from the FERC to amend the CPCN to utilize alternative trenchless construction methods forcertain stream and wetland crossings. The LLC also must (i) maintain and, as applicable, timely receive required authorizations, includingauthorization to proceed with construction, related to the Jefferson National Forest from the Bureau of Land Management, the U.S. ForestService and the FERC; (ii) continue to have available the orders previously issued by the FERC modifying its prior stop work orders andextending the LLC’s prescribed time to complete the MVP project; (iii) timely receive authorization from the FERC to complete constructionwork in the portion of the project route currently remaining subject to the FERC's previous stop work order; and (iv) continue to beauthorized to work under the Biological Opinion and Incidental Take Statement issued by the United States Department of the Interior’s Fishand Wildlife Service for the MVP project. In each case, any such foregoing or other authorizations must remain in effect notwithstanding anypending or future challenge thereto. Failure to achieve any one of the above items could lead to additional delays and higher project costs. Resources' current earnings from the MVP investment are attributable to AFUDC income generated by the LLC. The LLC temporarilysuspended the accrual of AFUDC on the project from January 1, 2021 (due to a temporary reduction in growth construction activities)through March 31, 2021. Limited growth construction activities resumed in April 2021, and the LLC began accruing AFUDC associatedwith those activities. It is expected that the accrual of AFUDC will be temporarily suspended again for the winter curtailment period, which isexpected to begin around November 2021. Additionally, Roanoke Gas continues the suspension of AFUDC accruals on its two gate stationsthat will interconnect with the MVP until such time as construction activities resume on the respective gate stations. Management conducted an assessment of its MVP investment in accordance with the provisions of ASC 323, Investments - EquityMethod and Joint Ventures. This assessment included a third-party valuation. As a result of its evaluation, management has concluded thatthe investment is not currently impaired as of September 30, 2021. Furthermore, the LLC has conducted its own evaluation of the projectand also concluded that no impairment exists as of September 30, 2021. Management will continue monitoring the status of the project forcircumstances that may lead to future impairment, including any significant delays or denials of necessary permits and approvals. If necessary,the amount and timing of any future impairment would be dependent on the specific circumstances at the time of evaluation. 26 In April 2018, the LLC announced the MVP Southgate project and submitted Southgate's certificate application to the FERC in November2018. The Final Environmental Impact Statement for the project was issued on February 14, 2020. In June 2020, the FERC issued theCPCN for the MVP Southgate; however, the FERC, while authorizing the project, directed the Office of Energy Projects not to issue anotice to proceed with construction until necessary federal permits are received for the MVP project and the Director of the Office of EnergyProjects lifts the stop work order and authorizes the LLC to continue constructing the MVP. On August 11, 2020, the North CarolinaDepartment of Environmental Quality (NCDEQ) denied Southgate's application for a Clean Water Act Section 401 Individual Water QualityCertification and Jordan Lake Riparian Buffer Authorization due to timing of the MVP project's completion. On March 11, 2021, the FourthCircuit Court of Appeals, pursuant to an appeal filed by the LLC, vacated the NCDEQ's denial and remanded the matter to the NCDEQ foradditional review. On April 29, 2021, the NCDEQ reissued its denial of Southgate's application. Based on the targeted full in-service datefor the MVP and expectations regarding Southgate permit approval timing, the LLC is targeting the commencement of the MVP Southgateconstruction in 2022 and placing the MVP Southgate in-service during the spring of 2023. Midstream has borrowing capacity of $41 million under its current credit facility, which matures in December 2022. As of September 30,2021, $33.6 million had been utilized. Effective November 1, 2021, the borrowing capacity under this credit facility was reduced to $33million as $8 million of the outstanding balance was termed out in a separate unsecured promissory note. See the Capital Resources andLiquidity section for more information. This credit facility will provide additional financing capacity for MVP funding; however, due to ongoingdelays, additional financing will be required. Management is working with the Company's lending institutions to secure the necessaryfunding. If the legal and regulatory challenges, including any future challenges, are not resolved in a timely manner and/or restrictions areimposed that impact future construction, the cost of the MVP and Midstream's capital contributions may increase above current projections. Regulatory On January 24, 2020, the SCC issued its final general rate case order awarding Roanoke Gas an annualized non-gas rate increase of $7.25million and providing for a 9.44% return on equity and directing the write-off of $317,000 of ESAC assets not subject to recovery under theapproved rates. Rates authorized by the SCC's final order required the Company to issue customers $3.8 million in rate refunds, which wascompleted in March 2020. The final order also excluded from current rates a return on the investment of two interconnect stations with the MVP, but provided RoanokeGas with the ability to defer the related financing costs of those investments for possible future recovery. As a result, the Company beganrecognizing AFUDC during the second quarter of fiscal 2020 to capitalize both the equity and debt financing costs incurred during theconstruction phases. During the first quarter of 2021, Roanoke Gas recognized a total of $55,981 in AFUDC, $41,978 and $14,003 ofequity and debt carrying costs, respectively. Beginning January 2021, Roanoke Gas temporarily ceased recording AFUDC on its relatedMVP interconnect construction projects until such time as construction activities resume. The service disconnection moratorium under which the Company has been operating since March 16, 2020, expired August 30, 2021.During the moratorium, utilities were prohibited from disconnecting residential customers for non-payment of their natural gas service andfrom assessing late payment fees; therefore, residential customers that ordinarily would have been disconnected for non-payment continuedincurring charges for gas service. As a result, the Company’s arrearage balances are at historically high levels, which has resulted in a higherpotential for bad debt write-offs. In December 2020, Roanoke Gas received $403,000 in CARES Act funds to assist customers with growing past due balances. Based onguidance provided by the SCC, the Company was able to apply the full amount to eligible customer accounts during the second and thirdfiscal quarters. On October 28, 2021, Roanoke Gas received notification from the SCC that its application for ARPA funds has beenapproved. According to the communication, the Company will receive $858,556 based on arrearage balances as of August 31, 2021. Thepending receipt of these funds were considered in the valuation of the estimated allowance for uncollectibles as of September 30, 2021. 27 In April 2020, the SCC issued an order allowing regulated utilities in Virginia to defer certain incremental, prudently incurred costs associatedwith the COVID-19 pandemic and to apply for recovery at a future date. Roanoke Gas deferred certain COVID-19 related coststhroughout fiscal 2021. Based on Roanoke Gas's preliminary earnings test for the period ended September 30, 2021, fiscal 2021 earningsexceeded the mid-point of the authorized return resulting in the COVID-19 related costs being expensed during the fourth quarter. Roanoke Gas continues to recover the costs of its infrastructure replacement program through its SAVE Rider. In May 2021, the Companyfiled its most recent SAVE application with the SCC to update the SAVE Plan and Rider for the period October 2021 through September2022. In its application, Roanoke Gas requested to continue to recover the costs of the replacement of pre-1973 plastic pipe. In addition,the Company requested to include the replacement of certain regulator stations and pre-1971 coated steel pipe as qualifying SAVE projects.The updated SAVE Rider is designed to collect approximately $3.45 million in annual revenues, an increase of approximately $1.1 millionfrom the existing SAVE Rider rates. The Company received a final order on August 25, 2021 in which the SCC approved the Company’srequested revenue requirement. Critical Accounting Policies and Estimates The consolidated financial statements of Resources are prepared in accordance with accounting principles generally accepted in the UnitedStates of America. The amounts of assets, liabilities, revenues and expenses reported in the Company’s financial statements are affected byaccounting policies, estimates and assumptions that are necessary to comply with generally accepted accounting principles. Estimates used inthe financial statements are derived from prior experience, statistical analysis and professional judgments. Actual results may differ significantlyfrom these estimates and assumptions. The Company considers an estimate to be critical if it is material to the financial statements and requires assumptions to be made that wereuncertain at the time the estimate was made and changes in the estimate are reasonably likely to occur from period to period. The Companyconsiders the following accounting policies and estimates to be critical. Regulatory accounting - The Company’s regulated operations follow the accounting and reporting requirements of FASB ASC No. 980,Regulated Operations. The economic effects of regulation can result in a regulated company deferring costs that have been or are expectedto be recovered from customers in a period different from the period in which the costs would be charged to expense by an unregulatedenterprise. When this occurs, costs are deferred as regulatory assets on the consolidated balance sheet and recorded as expenses in theconsolidated statements of income and comprehensive income when such amounts are reflected in rates. Additionally, regulators can imposeregulatory liabilities upon a regulated company for amounts previously collected from customers and for current collection in rates of coststhat are expected to be incurred in the future. If, for any reason, the Company ceases to meet the criteria for application of regulatory accounting treatment for all or part of its operations,the Company would remove the applicable regulatory assets or liabilities from the consolidated balance sheet and include them in theconsolidated statements of income and comprehensive income for the period in which the discontinuance occurred. The write-downs of theCOVID asset and ESAC assets are consistent with the provisions of ASC No 980. Revenue recognition - Regulated utility sales and transportation revenues are based upon rates approved by the SCC. The non-gas costcomponent of rates may not be changed without a formal rate application and corresponding authorization by the SCC in the form of aCommission order; however, the gas cost component of rates is adjusted quarterly, or more frequently if necessary, through the PGAmechanism. When the Company files a request for a non-gas rate increase, the SCC may allow the Company to place such rates into effectsubject to refund pending a final order. Under these circumstances, the Company estimates the amount of increase it anticipates will beapproved based on the best available information. 28 The Company also bills customers through a SAVE Rider that provides a mechanism to recover on a prospective basis the costs associatedwith the Company’s expected investment related to the replacement of natural gas distribution pipe and other qualifying projects. Asauthorized by the SCC, the Company adjusts billed revenues monthly through the application of the WNA model. As the Company's non-gas rates are established based on the 30-year temperature average, monthly fluctuations in temperature from the 30-year average couldresult in the recognition of more or less revenue than for what the non-gas rates were designed. The WNA authorizes the Company to adjustmonthly revenues for the effects of variation in weather from the 30-year average with a corresponding entry to a WNA receivable orpayable. At the end of each WNA year, the Company refunds excess revenue collected for weather that was colder than the 30-yearaverage or bills customers for revenue short-fall resulting from weather that was warmer than normal. As required under the provisions ofASC No. 980, the Company recognizes billed revenue related to SAVE projects and from the WNA to the extent such revenues have beenearned under the provisions approved by the SCC. The Company bills its regulated natural gas customers on a monthly cycle. The billing cycle for most customers does not coincide with theaccounting periods used for financial reporting. The Company accrues revenue for estimated natural gas delivered to customers but not yetbilled during the accounting period. The following month, the unbilled estimate is reversed, the actual usage is billed and a new unbilledestimate is calculated. The consolidated financial statements include unbilled revenue of $1,191,227 and $1,041,518 as of September 30,2021 and 2020, respectively. The Company adopted ASU 2014-09, Revenue from Contracts with Customers, and subsequent guidance and amendments effectiveOctober 1, 2018. The adoption of the ASU did not have a significant effect on the Company's results of operations, financial position or cashflows as the new guidance resulted in essentially no change in the manner and timing in which the Company recognizes revenues. The primaryoperation of the Company is the sale and/or delivery of natural gas to customers (the performance obligation) based on SCC approved tariffrates (the transaction price). The Company recognizes revenue through billed and unbilled customer usage as natural gas is delivered. TheCompany also recognizes revenue through ARPs, including the WNA. Allowance for Doubtful Accounts - The Company evaluates the collectability of its accounts receivable balances based upon a variety offactors including loss history, level of delinquent account balances, collections on previously written off accounts and general economicconditions. The historical model used in valuing reserve for bad debts has been consistently applied over recent years and has producedreasonable estimates for valuing the potential loss on customer accounts receivable. With the arrival of COVID-19 and the unprecedentedwidespread impact deriving from the pandemic, including the 17 month disconnection moratorium, the estimation of the Company's bad debtreserves has become more subjective with greater reliance on qualitative assessments and judgment rather than historical patterns andtendencies. Furthermore, the federal government has made funds available through the CARES Act and ARPA, which have materiallyreduced the expected uncollectable balances as of September 30, 2021. Accordingly, based on management's evaluation, the total bad debtreserves were estimated at $242,010 as of September 30, 2021. The Company is committed to working with its customers during these difficult times by providing extended payment terms and assistingcustomers in finding other sources of financial aid. With rising natural gas prices and lingering economic effects from the moratorium andCOVID, bad debt concerns will continue into fiscal 2022. Pension and Postretirement Benefits - The Company offers a pension plan and a postretirement plan to eligible employees. The expensesand liabilities associated with these plans, as disclosed in Note 9 to the consolidated financial statements, are based on numerous assumptionsand factors, including provisions of the plans, employee demographics, contributions made to the plan, return on plan assets and variousactuarial calculations, assumptions and accounting requirements. In regard to the pension plan, specific factors include assumptions regardingthe discount rate used in determining future benefit obligations, expected long-term rate of return on plan assets, compensation increases andlife expectancies. Similarly, the postretirement medical plan also requires the estimation of many of the same factors as the pension plan inaddition to assumptions regarding the rate of medical inflation and Medicare availability. Actual results may differ materially from the resultsexpected from the actuarial assumptions due to changing economic conditions, differences in actual returns on plan assets, different rates ofmedical inflation, volatility in interest rates and changes in life expectancy. Such differences may result in a material impact on the amount ofexpense recorded in future periods or the value of the obligations on the consolidated balance sheet. 29 In selecting the discount rate to be used in determining the benefit liability, the Company utilized the FTSE Pension Discount Curve, whichincorporates the rates of return on high-quality, fixed-income investments that corresponded to the length and timing of benefit streamsexpected under both the pension plan and postretirement plan. The Company used a discount rate of 2.73% and 2.70%, respectively, forvaluing its pension plan liability and postretirement plan liability at September 30, 2021. These discount rates represent an increase from the2.47% and 2.44% rates used for valuing the corresponding liabilities at September 30, 2020. The increase in discount rates corresponds tothe inflationary pressures and current market conditions as the economy emerges from the impact of COVID. The yield on the 30-yearTreasury increased from 1.46% last year to 2.08% at September 30, 2021. Corporate bond rates experienced a smaller increase as creditspreads appear to have narrowed. The rise in the discount rates was the primary factor in the reduction of the benefit obligations for both thepension and the postretirement plan. Mortality assumptions were based on the PRI-2012 Mortality Table with generational mortalityimprovements using Projection Scale MP-2020 for the current year valuation. Management has continued to focus on reducing risk in the Company's defined benefit plans with a greater emphasis on pension plan risk. In2016, the Company offered a one-time, lump-sum payout of the pension benefit to vested former employees who were not receivingpayments under the plan. In 2017, the Company implemented a "soft freeze" to the pension plan whereby employees hired on or afterJanuary 1, 2017 would not be eligible to participate. Employees hired prior to that date continue to accrue benefits based on compensationand years of service. This "soft freeze" mirrored the strategy in 2000 when the Company implemented a similar freeze in its postretirementplan. In October 2020, the Company again offered a one-time lump-sum payout option of deferred pension benefits to those vestedterminated employees not currently receiving pension benefits. Lump sum payments of $717,197 were made to those participants thatelected this option and reduced corresponding pension liabilities by approximately $965,000. Each of these strategies have served to limitliability growth and reduce volatility. The Company also has focused on its asset investment strategy. A combination of funding strategy and solid investment returns have allowedpension plan assets to increase by $10.7 million over the last three years, while liabilities increased by $8.8 million during the same periodprimarily due to a decline in the discount rate for determining the liability from 4.11% at September 30, 2018 to 2.73% at September 30,2021. As of September 30, 2021, the pension plan is 103% funded compared to 94% funded in the prior year. Future pension liabilitygrowth associated with participant service and compensation is limited to employees hired prior to the freeze. With the soft freeze of thepension plan, the portion of the liability attributable to active eligible employees continuing to accrue benefits has declined from 56% of theliability as of the date of the soft freeze to 39% in fiscal 2021. The remaining 61% of the 2021 liability is set subject to variability due tochanges in the discount rate and mortality adjustments. Since January 2017 when the pension plan froze access to new employees, the assetallocation has transitioned from a 60% equity and 40% fixed income allocation to a 30% equity and 70% fixed income allocation. Duringthe same period, the fixed income portion of the plan was transitioned to an LDI approach with the fixed income assets invested in securitieswith a duration that corresponds to the duration of the corresponding liability for benefits to be paid. This synchronization of 70% of thepension assets with the pension liabilities will reduce volatility in the funded status of the plan as well as the corresponding expense. The 30%allocation to equity investments provides asset growth potential to offset increases in the pension liability related to those employeescontinuing to accrue benefits. Management will continue to evaluate the investment allocation as the liabilities mature and make adjustments asnecessary. The Company has not made a change in investment allocation for the postretirement plan assets as increasing medical and insurance costswarrant the need for a continued higher allocation to equities for future plan asset growth potential. The postretirement plan assets increasedby $2.9 million and liabilities increased by $0.6 million over the last three-year period. As the number of participants in the postretirementplan continue to decline through attrition, management will continue to monitor and evaluate the asset allocation and adjust as warranted. 30 A summary of the funded status of both the pension and postretirement plans is provided below: Funded status - September 30, 2021 Pension Postretirement Total Benefit Obligation $37,654,468 $16,796,849 $54,451,317 Fair value of assets 38,914,107 15,882,342 54,796,449 Funded status $1,259,639 $(914,507) $345,132 Funded status - September 30, 2020 Pension Postretirement Total Benefit Obligation $39,998,002 $17,925,409 $57,923,411 Fair value of assets 37,657,631 14,116,253 51,773,884 Funded status $(2,340,371) $(3,809,156) $(6,149,527) The Company annually evaluates the returns on its targeted investment allocation model as well as the overall asset allocation of its benefitplans. Understanding the volatility in the markets, the Company reviews both plans' potential long-term rate of return with its investmentadvisors to determine the rates used in each plan's actuarial assumptions. Under the current allocation model for the pension plan,management lowered the long-term rate of return assumption from 5.40% in fiscal 2021 to 4.75% in fiscal 2022 based on the change in thecurrent equity allocation of the pension plan assets and the lower rate of return expected on the fixed income investments. The long-term rateof return was virtually unchanged for the postretirement plan at 4.25% as the asset allocation remains at 50% equity and 50% fixed income.Management will continue to re-evaluate the return assumptions and asset allocation and adjust both as market conditions warrant. Management estimates that, under the current provisions regarding defined benefit pension plans, the Company will have no minimum fundingrequirements next year. However, the Company currently expects to contribute approximately $500,000 to its pension plan and $400,000 toits postretirement plan in fiscal 2022. The Company will continue to evaluate its benefit plan funding levels in light of funding requirements andongoing investment returns and make adjustments, as necessary, to avoid benefit restrictions and minimize PBGC premiums. The following schedule reflects the sensitivity of pension costs to changes in certain actuarial assumptions, assuming that the other componentsof the calculation remain constant. Actuarial Assumptions - Pension Plan Change inAssumption Increase inPension Cost Increase inProjected BenefitObligation Discount rate -0.25% $143,000 $1,547,000 Rate of return on plan assets -0.25% 96,000 N/A Rate of increase in compensation 0.25% 57,000 285,000 The following schedule reflects the sensitivity of postretirement benefit costs from changes in certain actuarial assumptions, while the othercomponents of the calculation remain constant. Actuarial Assumptions - Postretirement Plan Change inAssumption Increase inPostretirementBenefit Cost Increase inAccumulatedPostretirementBenefitObligation Discount rate -0.25% $41,000 $652,000 Rate of return on plan assets -0.25% 35,000 N/A Medical claim cost increase 0.25% 83,000 620,000 Derivatives - The Company may hedge certain risks incurred in its operation through the use of derivative instruments. The Companyapplies the requirements of FASB ASC No. 815, Derivatives and Hedging, which requires the recognition of derivative instruments asassets or liabilities in the Company’s consolidated balance sheet at fair value. In most instances, fair value is based upon quoted futures pricesfor natural gas commodities and interest rate futures for interest rate swaps. Changes in the commodity and futures markets will impact theestimates of fair value in the future. Furthermore, the actual market value at the point of realization of the derivative may be significantlydifferent from the values used in determining fair value in prior financial statements. The Company had three interest-rate swaps outstanding atSeptember 30, 2021 related to its three variable rate notes and two interest-rate swaps associated with delayed draw notes to be fundedsubsequent to fiscal 2021. See Note 7 to the consolidated financial statements for additional information regarding the swaps. 31 Item 7A. Quantitative and Qualitative Disclosures About Market Risk. Not applicable. Item 8. Financial Statements and Supplementary Data. 32 RGC Resources, Inc. and Subsidiaries Consolidated Financial Statementsfor the Years Ended September 30, 2021 and 2020and Report of IndependentRegistered Public Accounting Firm 33 RGC RESOURCES, INC. AND SUBSIDIARIESTABLE OF CONTENTS Page Report of Independent Registered Public Accounting Firm35 Consolidated Financial Statements for the Years Ended September 30, 2021 and 2020: Consolidated Balance Sheets37 Consolidated Statements of Income39 Consolidated Statements of Comprehensive Income40 Consolidated Statements of Stockholders’ Equity41 Consolidated Statements of Cash Flows42 Notes to Consolidated Financial Statements43 34 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Board of Directors and StockholdersRGC Resources, Inc.Roanoke, Virginia Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of RGC Resources, Inc. and Subsidiaries (“the Company”) as of September 30,2021 and 2020, and the related consolidated statements of income, comprehensive income, stockholders' equity, and cash flows for each of theyears in the two-year period ended September 30, 2021, and the related notes (collectively referred to as the financial statements). In our opinion,the financial statements present fairly, in all material respects, the financial position of the Company as of September 30, 2021 and 2020, and theresults of its operations and its cash flows for each of the years in the two-year period ended September 30, 2021, in conformity with accountingprinciples generally accepted in the United States of America. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on theCompany’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Accounting OversightBoard (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securitieslaws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtainreasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is notrequired to have, nor were we engaged to perform an audit of its internal control over financial reporting. As part of our audits, we are required toobtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of theCompany’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, andperforming procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts anddisclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made bymanagement, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for ouropinion. Critical Audit Matters The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that wascommunicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financialstatements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter inany way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below,providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. 35 Valuation of Equity Method Investment in Mountain Valley Pipeline, LLC (“MVP”) Description of the matter As of September 30, 2021, the Company has investments in unconsolidated affiliates of $64.9 million. The majority of this amount, $64.5 millionconsists of an equity method investment in the Mountain Valley Pipeline, LLC. As discussed in Note 5 to the consolidated financial statements, theCompany accounts for its investment in MVP under the equity method because it has the ability to exercise significant influence, but not control, overMVP’s operating and financial policies. The Company reviews the carrying value of its investments in unconsolidated entities for impairmentwhenever events or changes in circumstances indicate a decline in value. When there is evidence of loss in value that is other than temporary, theCompany compares the investment's carrying value to its estimated fair value to determine whether impairment has occurred. The Companyevaluated its investment in MVP for impairment and determined the fair value exceeded the carrying value at September 30, 2021. Accordingly, noimpairment losses were recorded. The Company contracted a third party valuation specialist to perform a valuation of this investment as ofSeptember 30, 2021. Auditing management’s evaluation of impairment of the equity investment in MVP was complex due to significant judgment required to determine fairvalue of the investment. In particular, fair value estimates of the investment in MVP were sensitive to significant assumptions, including discounted cashflows. These assumptions could be affected by factors such as adverse macroeconomic conditions or permit and litigation matters impacting MVP.Audit procedures performed to evaluate the reasonableness of management’s estimates required a high degree of auditor judgement and increasedeffort. How We Addressed the Matter in our Audit We obtained an understanding of the Company’s equity method investment impairment evaluation process and significant assumptions describedabove. In order to test this process, we performed audit procedures regarding methodologies utilized, significant assumptions, and underlying data inthe analyses for completeness and accuracy. We involved valuation specialists from our firm to assist in reviewing valuation methodology and testingthe discount rate assumption. Audit procedures related to discounted future cash flows included, among others, procedures to evaluate cash flows considered in the valuation. Weperformed procedures to assess management’s consideration of potential changes in legal or regulatory trends and how such developments couldimpact significant assumptions that influence the in-service dates or viability of the project, and evaluated the sufficiency of the Company’s financialstatement disclosures. CERTIFIED PUBLIC ACCOUNTANTSWe have served as the Company's auditor since 2006. Blacksburg, VirginiaDecember 2, 2021 36 RGC RESOURCES, INC. AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETSAS OF SEPTEMBER 30, 2021 AND 2020 2021 2020 ASSETS CURRENT ASSETS: Cash and cash equivalents $1,518,317 $291,066 Accounts receivable, net 4,949,900 3,404,044 Materials and supplies 1,031,666 1,027,191 Gas in storage 7,867,470 5,708,761 Prepaid income taxes 3,104,950 647,623 Regulatory assets 5,656,453 2,503,314 Other 1,015,099 854,562 Total current assets 25,143,855 14,436,561 UTILITY PROPERTY: In service 272,382,539 258,342,372 Accumulated depreciation and amortization (76,038,433) (71,386,537)In service, net 196,344,106 186,955,835 Construction work in progress 15,305,578 11,489,258 Utility plant, net 211,649,684 198,445,093 OTHER ASSETS: Regulatory assets 6,769,759 10,970,094 Investment in unconsolidated affiliates 64,867,319 57,542,805 Benefit plan assets 1,259,639 — Other 418,937 284,954 Total other assets 73,315,654 68,797,853 TOTAL ASSETS $310,109,193 $281,679,507 (Continued) 37 RGC RESOURCES, INC. AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETSAS OF SEPTEMBER 30, 2021 AND 2020 2021 2020 LIABILITIES AND STOCKHOLDERS’ EQUITY CURRENT LIABILITIES: Current maturities of long-term debt $7,000,000 $— Dividends payable 1,549,841 1,428,268 Accounts payable 7,729,707 4,442,182 Capital contributions payable 2,140,637 2,512,437 Customer credit balances 1,539,680 1,587,061 Customer deposits 1,571,342 1,611,476 Accrued expenses 3,819,977 3,565,210 Interest rate swaps 332,389 533,795 Regulatory liabilities 329,959 890,313 Total current liabilities 26,013,532 16,570,742 LONG-TERM DEBT: Notes payable 116,110,200 114,975,200 Line-of-credit 17,628,897 9,143,606 Less unamortized debt issuance costs (267,670) (299,175)Long-term debt, net 133,471,427 123,819,631 DEFERRED CREDITS AND OTHER LIABILITIES: Interest rate swaps 863,694 1,689,761 Asset retirement obligations 7,628,958 7,180,982 Regulatory cost of retirement obligations 13,640,567 12,678,043 Benefit plan liabilities 949,851 6,149,527 Deferred income taxes 14,948,213 13,973,762 Regulatory liabilities 12,891,242 10,729,082 Total deferred credits and other liabilities 50,922,525 52,401,157 COMMITMENTS AND CONTINGENCIES (Note 12) CAPITALIZATION: Stockholders’ Equity: Common Stock, $5 par value; authorized 20,000,000 shares; issued and outstanding 8,375,092and 8,160,058 shares in 2021 and 2020, respectively 41,875,460 40,800,290 Preferred stock, no par; authorized 5,000,000 shares; no shares issued and outstanding in 2021 and2020 — — Capital in excess of par value 19,705,387 15,847,121 Retained earnings 39,656,296 35,688,510 Accumulated other comprehensive loss (1,535,434) (3,447,944)Total stockholders’ equity 99,701,709 88,887,977 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $310,109,193 $281,679,507 See notes to consolidated financial statements. 38 RGC RESOURCES, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF INCOMEYEARS ENDED SEPTEMBER 30, 2021 AND 2020 2021 2020 OPERATING REVENUES: Gas utility $75,045,103 $62,408,925 Non utility 129,676 666,466 Total operating revenues 75,174,779 63,075,391 OPERATING EXPENSES: Cost of gas - utility 35,179,842 23,949,481 Cost of sales - non utility 25,557 341,985 Operations and maintenance 14,476,355 16,180,229 General taxes 2,290,096 2,194,789 Depreciation and amortization 8,424,620 7,890,725 Total operating expenses 60,396,470 50,557,209 OPERATING INCOME 14,778,309 12,518,182 Equity in earnings of unconsolidated affiliate 1,667,554 4,814,874 Other income, net 912,146 636,296 Interest expense 4,051,885 4,099,158 INCOME BEFORE INCOME TAXES 13,306,124 13,870,194 INCOME TAX EXPENSE 3,204,062 3,305,660 NET INCOME $10,102,062 $10,564,534 EARNINGS PER COMMON SHARE: Basic $1.22 $1.30 Diluted $1.22 $1.30 WEIGHTED AVERAGE SHARES OUTSTANDING: Basic 8,251,802 8,125,938 Diluted 8,264,904 8,146,666 See notes to consolidated financial statements.39 RGC RESOURCES, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOMEYEARS ENDED SEPTEMBER 30, 2021 AND 2020 2021 2020 NET INCOME $10,102,062 $10,564,534 Other comprehensive income (loss), net of tax: Interest rate swaps 763,003 (987,076)Defined benefit plans 1,149,507 28,049 OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX 1,912,510 (959,027)COMPREHENSIVE INCOME $12,014,572 $9,605,507 See notes to consolidated financial statements. 40RGC RESOURCES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY YEARS ENDED SEPTEMBER 30, 2021 AND 2020 Balance - September 30, 2019 Net income Other comprehensive loss Exercise of stock options (22,992 shares) Stock option grants Cash dividends declared ($0.70 per share) Issuance costs Issuance of common stock (56,802 shares) Balance - September 30, 2020 Net income Other comprehensive income Exercise of stock options (9,250 shares) Stock option grants Cash dividends declared ($0.74 per share) Issuance costs Issuance of common stock (205,784 shares) Balance - September 30, 2021 Total Stock Equity Capital in Common Excess of Par Value Earnings — — 149,960 — — — 284,010 Accumulated Other Retained Comprehensive Stockholders’ Loss (2,488,917) $ 83,096,392 — 10,564,534 (959,027) 439,508 81,380 (5,697,941) (147,517) 1,510,648 (3,447,944) $ 88,887,977 — 10,102,062 1,912,510 137,801 11,100 (6,134,276) (116,926) 4,901,461 (1,535,434) $ 99,701,709 $ 40,366,320 $ 14,397,072 $ 30,821,917 $ — 10,564,534 — — — 289,548 81,380 — (5,697,941) — — (147,517) — 1,226,638 $ 40,800,290 $ 15,847,121 $ 35,688,510 $ — 10,102,062 — — — 91,551 11,100 — (6,134,276) — — (116,926) — 3,872,541 $ 41,875,460 $ 19,705,387 $ 39,656,296 $ — — 46,250 — — — 1,028,920 1,912,510 — — — — — (959,027) — — — — — See notes to consolidated financial statements. 41 RGC RESOURCES, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWSYEARS ENDED SEPTEMBER 30, 2021 AND 2020 2021 2020 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $10,102,062 $10,564,534 Adjustments to reconcile net income to net cash provided by operations: Depreciation and amortization 8,669,977 8,126,427 Cost of retirement of utility plant, net (545,443) (544,696)Stock option grants 11,100 81,380 Equity in earnings of unconsolidated affiliate (1,667,554) (4,814,874)Allowance for funds used during construction (55,981) (330,208)Deferred income taxes 106,188 1,122,303 Other noncash items, net (243,496) 1,837,089 Changes in assets and liabilities which provided (used) cash: Accounts receivable and customer deposits, net (1,124,860) 53,213 Inventories and gas in storage (2,163,184) 734,237 Regulatory and other assets (6,190,720) (677,488)Accounts payable, customer credit balances and accrued expenses, net 2,862,861 659,276 Regulatory liabilities 1,807,158 (3,987,290)Total adjustments 1,466,046 2,259,369 Net cash provided by operating activities 11,568,108 12,823,903 CASH FLOWS FROM INVESTING ACTIVITIES: Expenditures for utility property (19,967,567) (22,916,339)Investment in unconsolidated affiliate (6,028,760) (7,864,859)Proceeds from disposal of utility property 147,090 60,187 Net cash used in investing activities (25,849,237) (30,721,011)CASH FLOWS FROM FINANCING ACTIVITIES: Borrowings under line-of-credit 47,043,566 24,341,134 Repayments under line-of-credit (38,558,275) (23,370,002)Proceeds from issuance of unsecured notes 8,135,000 19,463,000 Debt issuance expenses (21,545) (70,750)Proceeds from issuance of stock 4,922,337 1,802,639 Cash dividends paid (6,012,703) (5,609,195)Net cash provided by financing activities 15,508,380 16,556,826 NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1,227,251 (1,340,282)BEGINNING CASH AND CASH EQUIVALENTS 291,066 1,631,348 ENDING CASH AND CASH EQUIVALENTS $1,518,317 $291,066 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the year for: Interest $3,886,747 $3,845,382 Income taxes 3,063,083 1,673,000 See notes to consolidated financial statements. 42 RGC RESOURCES, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSYEARS ENDED SEPTEMBER 30, 2021 AND 2020 1.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation—RGC Resources, Inc. is an energy services company primarily engaged in the sale and distribution of naturalgas. The consolidated financial statements include the accounts of Resources and its wholly owned subsidiaries: Roanoke Gas, Midstreamand Diversified Energy. Roanoke Gas is a natural gas utility, which distributes and sells natural gas to approximately 62,600 residential,commercial and industrial customers within its service areas in Roanoke, Virginia and the surrounding localities. The Company’s business isseasonal in nature as a majority of natural gas sales are for space heating during the winter season. Roanoke Gas is regulated by the SCC.Midstream is a wholly-owned subsidiary created primarily to invest in the Mountain Valley Pipeline project. Diversified Energy is inactive. The Company follows accounting and reporting standards established by the FASB and the SEC, including certain provisions allowed underthe smaller reporting company exceptions. Rate Regulated Basis of Accounting—The Company’s regulated operations follow the accounting and reporting requirements of FASBASC No. 980, Regulated Operations. The economic effects of regulation can result in a regulated company deferring costs that have beenor are expected to be recovered from customers in a period different from the period in which the costs would be charged to expense by anunregulated enterprise. When this situation occurs, costs are deferred as assets in the consolidated balance sheet (regulatory assets) andrecorded as expenses when such amounts are reflected in rates. Additionally, regulators can impose liabilities upon a regulated company foramounts previously collected from customers and for current collection in rates of costs that are expected to be incurred in the future(regulatory liabilities). In the event the provisions of FASB ASC No. 980 no longer apply to any or all regulatory assets or liabilities, theCompany would write off such amounts and include them in the consolidated statements of income and comprehensive income in the periodwhich FASB ASC No. 980 no longer applied. 43 Regulatory assets and liabilities included in the Company’s consolidated balance sheets as of September 30, 2021 and 2020 are as follows: September 30 2021 2020 Assets: Current Assets: Regulatory assets: Accrued WNA revenues $8,104 $— Under-recovery of gas costs 5,048,164 1,733,718 Under-recovery of SAVE Plan revenues 305,502 108,550 Accrued pension and postretirement medical 206,679 576,731 Other deferred expenses 88,004 84,315 Total current 5,656,453 2,503,314 Utility Property: In service: Other 11,945 11,945 Construction work in progress: AFUDC 386,189 330,208 Other Assets: Regulatory assets: Premium on early retirement of debt 1,484,433 1,598,620 Accrued pension and postretirement medical 5,154,713 9,156,546 Other deferred expenses 130,613 214,928 Total non-current 6,769,759 10,970,094 Total regulatory assets $12,824,346 $13,815,561 Liabilities and Stockholders' Equity: Current Liabilities: Regulatory liabilities: WNA $— $601,784 Deferred income taxes 329,959 205,353 Other deferred liabilities — 83,176 Total current 329,959 890,313 Deferred Credits and Other Liabilities: Asset retirement obligations 7,628,958 7,180,982 Regulatory cost of retirement obligations 13,640,567 12,678,043 Regulatory liabilities: Deferred income taxes 12,891,242 10,729,082 Total non-current $34,160,767 $30,588,107 Total regulatory liabilities $34,490,726 $31,478,420 Amortization of $84,315 and $1,106,511 of regulatory assets for the years ended September 30, 2021 and 2020, respectively, is includedin operations and maintenance expense on the consolidated statements of income. See Note 3 for more information. As of September 30, 2021, the Company had regulatory assets in the amount of $12,812,401 on which the Company did not earn a returnduring the recovery period.44 Utility Plant and Depreciation—Utility plant is stated at original cost and includes direct labor and materials, contractor costs, and allallocable overhead charges. The Company applies the group method of accounting, where the costs of like assets are aggregated anddepreciated by applying a rate based on the average expected useful life of the assets. In accordance with Company policy, expenditures fordepreciable assets with a life greater than one year are capitalized, along with any upgrades or improvements to existing assets, when theysignificantly improve or extend the original expected useful life of an asset. Expenditures for maintenance, repairs, and minor renewals andbetterments are expensed as incurred. The original cost of depreciable property retired is removed from utility plant and charged toaccumulated depreciation. The cost of asset removals, less salvage, is charged to “regulatory cost of retirement obligations” or “assetretirement obligations” as explained under Asset Retirement Obligations below. Utility plant is composed of the following major classes of assets: September 30 2021 2020 Distribution and transmission $241,493,911 $227,753,620 LNG storage 14,966,584 14,798,453 General and miscellaneous 15,922,044 15,790,299 Total utility plant in service $272,382,539 $258,342,372 Provisions for depreciation are computed principally at composite straight-line rates over a range of periods. Rates are determined bydepreciation studies which are required to be performed at least every 5 years on the regulated utility assets of Roanoke Gas. The lastdepreciation study was completed and approved by the SCC staff in fiscal 2019. The Company will be required to complete a newdepreciation study no later than fiscal 2024. The composite weighted-average depreciation rate was 3.28% and 3.30% for the years endedSeptember 30, 2021 and 2020, respectively. The composite rates are composed of two components, one based on average service life and one based on cost of retirement. As a result,the Company accrues the estimated cost of retirement of long-lived assets through depreciation expense. These retirement costs are not alegal obligation but rather the result of cost-based regulation and are accounted for under the provisions of FASB ASC No. 980. Suchamounts are classified as a regulatory liability. The Company reviews long-lived assets and certain identifiable intangibles for impairment whenever events or changes in circumstancesindicate that the carrying amount of an asset may not be recoverable. These reviews have not identified any impairments which would have amaterial effect on the results of operations or financial condition. In fiscal 2020, Roanoke Gas implemented the application of AFUDC related to infrastructure investments associated with two gate stationsthat will interconnect with the MVP. This treatment allows capitalizing both the equity and debt financing costs during the construction phases.For the years ended September 30, 2021, and 2020, the Company capitalized $14,003 and $81,629 of debt financing costs and$41,978 and $248,579 of equity financing costs, respectively, thereby affecting the interest expense and other income, net lines of the relatedconsolidated statements of income. See Note 3 for further information. Asset Retirement Obligations—FASB ASC No. 410, Asset Retirement and Environmental Obligations, requires entities to record thefair value of a liability for an ARO when there exists a legal obligation for the retirement of the asset. When the liability is initially recorded, theentity capitalizes the cost, thereby increasing the carrying amount of the underlying asset. In subsequent periods, the liability is accreted, andthe capitalized cost is depreciated over the useful life of the underlying asset. The Company has recorded AROs for its future legal obligationsrelated to purging and capping its distribution mains and services upon retirement, although the timing of such retirements is uncertain. The Company’s composite depreciation rates include a component to provide for the cost of retirement of assets. As a result, the Companyaccrues the estimated cost of retirement of its utility plant through depreciation expense and creates a corresponding regulatory liability. Thecosts of retirement considered in the development of the depreciation component include those costs associated with the legal liability.Therefore, the ARO is reclassified from the regulatory cost of retirement obligation. If the legal obligations were to exceed the regulatoryliability provided for in the depreciation rates, the Company would establish a regulatory asset for such difference with the anticipation offuture recovery through rates charged to customers.45 The following is a summary of the AROs: Years Ended September 30 2021 2020 Beginning balance $7,180,982 $6,788,683 Liabilities incurred 214,533 165,524 Liabilities settled (160,064) (150,345)Accretion 393,507 377,120 Ending balance $7,628,958 $7,180,982 Cash, Cash Equivalents and Short-Term Investments—From time to time, the Company will have balances on deposit at banks inexcess of the amount insured by the FDIC. The Company has not experienced any losses on these accounts and does not consider theseamounts to be at risk. As of September 30, 2021, the Company did not have any bank deposits in excess of the FDIC insurance limits. Forpurposes of the consolidated statements of cash flows, the Company considers all highly liquid debt instruments purchased with an originalmaturity of three months or less to be cash equivalents. Customer Receivables and Allowance for Doubtful Accounts—Accounts receivable include amounts billed to customers for naturalgas sales and related services and gas sales occurring subsequent to normal billing cycles but before the end of the period. The Companyprovides an estimate for losses on these receivables by utilizing historical information, current account balances, account aging and currenteconomic conditions. Customer accounts are charged off annually when deemed uncollectible or when turned over to a collection agency foraction. Due to the impact of COVID-19 on businesses and individuals, customer delinquent and past due balances increased significantly over thelast two years. The allowance for doubtful accounts disclosed below has been adjusted to reflect the impact of $859,000 in pending ARPAfunds. Without the ARPA and CARES Act funds, the allowance for doubtful accounts would have been more than $1 million as ofSeptember 30, 2021. See Notes 3 and 15 for additional information. A reconciliation of changes in the allowance for doubtful accounts is as follows: Years Ended September 30 2021 2020 Beginning balance $703,140 $110,743 Provision for doubtful accounts (400,614) 556,112 Recoveries of accounts written off 88,893 139,113 Accounts written off (149,409) (102,828)Ending balance $242,010 $703,140 Financing Receivables—Financing receivables represent a contractual right to receive money either on demand, or on fixed ordeterminable dates, and are recognized as assets on the entity’s balance sheet. Trade receivables, resulting from the sale of natural gas andother services to customers, are the Company's primary type of financing receivables. These receivables are short-term in nature with aprovision for uncollectible balances included in the consolidated financial statements. Inventories—Natural gas in storage and materials and supplies inventories are recorded at average cost. Natural gas storage injections arepriced at the purchase cost at the time of injection and storage withdrawals are priced at the weighted average cost of gas in storage.Materials and supplies are removed from inventory at average cost. Unbilled Revenues—The Company bills its natural gas customers on a monthly cycle; however, the billing cycle for most customers doesnot coincide with the accounting periods used for financial reporting. As the Company recognizes revenue when gas is delivered, an accrual ismade to estimate revenues for natural gas delivered to customers but not billed during the accounting period. The amounts of unbilled revenuereceivable included in accounts receivable on the consolidated balance sheets at September 30, 2021 and 2020 were $1,191,227 and$1,041,518, respectively. 46 Income Taxes—Income taxes are accounted for using the asset and liability method. Under the asset and liability method, deferred taxassets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statementcarrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enactedtax rates in effect for the years in which those temporary differences are expected to be recovered or settled. A valuation allowance againstdeferred tax assets is provided if it is more likely than not the deferred tax asset will not be realized. The Company and its subsidiaries fileconsolidated state and federal income tax returns. Debt Expenses—Debt issuance expenses are deferred and amortized over the lives of the debt instruments. The unamortized balances areoffset against the carrying value of long-term debt. Over/Under-Recovery of Natural Gas Costs—Pursuant to the provisions of the Company’s PGA clause, the SCC provides the Companywith a method of passing along to its customers increases or decreases in natural gas costs incurred by its regulated operations, includinggains and losses on natural gas derivative hedging instruments. On at least a quarterly basis, the Company files a PGA rate adjustment requestwith the SCC to increase or decrease the gas cost component of its rates, based on projected price and activity. Once administrativeapproval is received, the Company adjusts the gas cost component of its rates to reflect the approved amount. As actual costs will differ fromthe projections used in establishing the PGA rate, the Company may either over-recover or under-recover its actual gas costs during theperiod. Any difference between actual costs incurred and costs recovered through the application of the PGA is recorded as a regulatoryasset or liability. At the end of the deferral period, the balance of the net deferred charge or credit is amortized over an ensuing 12-monthperiod as amounts are reflected in customer bills. Fair Value—Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transactionbetween willing market participants at the measurement date. The Company determines fair value based on the following fair value hierarchywhich prioritizes each input to the valuation methods into one of the following three broad levels: •Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability toaccess at the measurement date. •Level 2 – Inputs other than quoted prices in Level 1 that are either for similar assets or liabilities in active markets, quotedprices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that areobservable for the asset or liability, or inputs that are derived principally from or corroborated by observable market data bycorrelation or other means. •Level 3 – Unobservable inputs for the asset or liability where there is little, if any, market activity which require the Companyto develop its own assumptions. The fair value hierarchy gives the highest priority to unadjusted quoted prices in active markets (Level 1) and the lowest priority tounobservable inputs (Level 3). All fair value disclosures are categorized within one of the three categories in the hierarchy. See fair valuedisclosures below and in Notes 9 and 13. Use of Estimates—The preparation of consolidated financial statements in conformity with GAAP requires management to make estimatesand assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent liabilities at the date of the financialstatements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Excise and Sales Taxes—Certain excise and sales taxes imposed by the state and local governments in the Company’s service territory arecollected by the Company from its customers. These taxes are accounted for on a net basis and therefore are not included as revenues in theCompany’s consolidated income statements. 47 Earnings Per Share—Basic EPS and diluted EPS are calculated by dividing net income by the weighted-average common sharesoutstanding during the period and the weighted-average common shares outstanding during the period plus dilutive potential common shares,respectively. Dilutive potential common shares are calculated in accordance with the treasury stock method, which assumes that proceedsfrom the exercise of all options are used to repurchase common stock at market value. The amount of shares remaining after the proceedsare exhausted represents the potentially dilutive effect of the securities. A reconciliation of basic and diluted EPS is presented below: Years Ended September 30 2021 2020 Net Income $10,102,062 $10,564,534 Weighted-average common shares 8,251,802 8,125,938 Effect of dilutive securities: Options to purchase common stock 13,102 20,728 Diluted average common shares 8,264,904 8,146,666 Earnings Per Share of Common Stock: Basic $1.22 $1.30 Diluted $1.22 $1.30 Business and Credit Concentrations—The primary business of the Company is the distribution of natural gas to residential, commercialand industrial customers in its service territories. No sales to individual customers accounted for more than 5% of total revenue in any period or amounted to more than 5% of total accountsreceivable. Roanoke Gas currently holds the only franchises and CPCNs to distribute natural gas in its service area. These franchises are effectivethrough January 1, 2036. The Company's current CPCNs in Virginia are exclusive and are intended for perpetual duration. Roanoke Gas is served directly by two primary pipelines that provide all of the natural gas supplied to the Company’s customers. Dependingupon weather conditions and the level of customer demand, failure of one or both of these transmission pipelines could have a major adverseimpact on the Company. Derivative and Hedging Activities—FASB ASC No. 815, Derivatives and Hedging, requires the recognition of all derivativeinstruments as assets or liabilities in the Company’s consolidated balance sheet and measurement of those instruments at fair value. The Company’s hedging and derivatives policy allows management to enter into derivatives for the purpose of managing the commodity andfinancial market risks of its business operations. The Company’s hedging and derivatives policy specifically prohibits the use of derivatives forspeculative purposes. The key market risks that the Company may hedge against include the price of natural gas and the cost of borrowedfunds. The Company historically has entered into collars, swaps and caps for the purpose of hedging the price of natural gas in order to provideprice stability during the winter months. The fair value of these instruments is recorded in the consolidated balance sheets with the offsettingentry to either under- or over-recovery of gas costs. Net income and other comprehensive income are not affected by the change in marketvalue as any cost incurred or benefit received from these instruments is recoverable or refunded through the PGA as the SCC allows for fullrecovery of prudent costs associated with natural gas purchases. At September 30, 2021 and 2020, the Company had no outstandingderivative instruments for the purchase of natural gas. The Company has five interest rate swaps associated with its variable rate debt. Roanoke Gas has a swap on its $7 million term note thateffectively converts the variable interest rate into a 2.30% fixed interest rate. During fiscal 2021, Roanoke Gas entered into two delayeddraw variable-rate term notes in the amounts of $15 million and $10 million, with corresponding swap agreements to convert the variableinterest rates into fixed rates of 2.00% and 2.49%, respectively. Proceeds associated with the delayed draw notes were not received duringthe current fiscal year; therefore, the swaps associated with those notes were not effective during fiscal 2021. Midstream has two variable-rate term notes in the amount of $14 million and $10 million with corresponding swap agreements to convert the variable interest rates intofixed rates of 3.24% and 3.14%, respectively. All swaps qualify as a cash flow hedge with changes in fair value reported in othercomprehensive income. Any cash flows from interest rate swaps are classified as interest expense. No portion of the swaps were deemedineffective during the period. See Notes 7 and 13 for additional information on the swaps and fair value. 48 Non-Cash Activity — A non-cash decrease in unconsolidated affiliate and corresponding decrease in capital contributions payable of$371,800 and $2,512,387 occurred for the fiscal years ended September 30, 2021 and 2020, respectively. Other Comprehensive Income (Loss)—A summary of other comprehensive income is provided below: Tax Before Tax (Expense) Net of Tax Amount or Benefit Amount Year Ended September 30, 2021: Interest rate swaps: Unrealized gains $473,880 $(121,978) $351,902 Transfer of realized losses to interest expense 553,593 (142,492) 411,101 Net interest rate swaps 1,027,473 (264,470) 763,003 Defined benefit plans: Net gains arising during period $1,467,879 $(377,832) $1,090,047 Amortization of actuarial losses 80,069 (20,609) 59,460 Net defined benefit plans 1,547,948 (398,441) 1,149,507 Other comprehensive income $2,575,421 $(662,911) $1,912,510 Year Ended September 30, 2020: Interest rate swaps: Unrealized losses $(1,594,126) $410,328 $(1,183,798)Transfer of realized losses to interest expense 264,911 (68,189) 196,722 Net interest rate swaps (1,329,215) 342,139 (987,076)Defined benefit plans: Net loss arising during period $(52,669) $13,557 $(39,112)Amortization of actuarial losses 90,441 (23,280) 67,161 Net defined benefit plans 37,772 (9,723) 28,049 Other comprehensive loss $(1,291,443) $332,416 $(959,027) The amortization of actuarial gains or losses are included as a component of net periodic pension and postretirement benefit costs under otherincome, net. Composition of AOCI: InterestRate Swaps DefinedBenefitPlans AccumulatedOtherComprehensiveIncome (Loss) Balance September 30, 2019 $(664,137) $(1,824,780) $(2,488,917)Other comprehensive income (loss) (987,076) 28,049 (959,027)Balance September 30, 2020 (1,651,213) (1,796,731) (3,447,944)Other comprehensive income 763,003 1,149,507 1,912,510 Balance September 30, 2021 $(888,210) $(647,224) $(1,535,434) 49 Recently Adopted Accounting Standards In February 2016, the FASB issued ASU 2016-02, Leases. This ASU leaves the accounting for leases mostly unchanged for lessors, withthe exception of targeted improvements for consistency; however, the new guidance requires lessees to recognize assets and liabilities forleases with terms of more than 12 months. The ASU also revises the definition of a lease as a contract, or part of a contract, that conveys theright to control the use of identified property, plant or equipment for a period of time in exchange for consideration. Under prior GAAP, thepresentation and cash flows arising from a lease by a lessee primarily depended on its classification as a finance or operating lease. The newASU requires both types of leases to be recognized on the balance sheet. In addition, the new guidance includes quantitative and qualitativedisclosure requirements to aid financial statement users in better understanding the amount, timing and uncertainty of cash flows arising fromleases. In January 2018, the FASB issued ASU 2018-01, which provides a practical expedient that allows entities the option of notevaluating existing land easements under the new lease standard for those easements that were entered into prior to adoption. New ormodified land easements will require evaluation on a prospective basis. The new guidance is effective for the Company for the annualreporting period ending September 30, 2021 and interim periods within that annual period. The Company adopted ASU 2016-02 and related guidance effective October 1, 2019. At the time of adoption, the Company had oneoperating lease. This lease, which was renewed in fiscal 2021, calls for monthly payments in the amount of $1,100 and is set to expire inSeptember 2025. As the value of this lease obligation was determined to be de minimis and the Company has not entered into any additionallease obligations, this new guidance does not have a material effect on the Company's financial position, results of operations or cash flows. In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging: Targeted Improvements to Accounting For HedgingActivities. The ASU is meant to simplify recognition and presentation guidance in an effort to improve financial reporting of cash flow and fairvalue hedging relationships to better portray the economic results of an entity's risk management activities. This is achieved through changes toboth the designation and measurement guidance for qualifying hedging relationships, as well as changes to the presentation of hedge results.The Company adopted the new guidance effective October 1, 2019. As the Company currently has only cash flow hedges and no portion ofthese hedges were deemed ineffective during the periods presented, this new guidance does not have a material effect on the Company'sfinancial position, results of operations or cash flows. In August 2018, the FASB issued ASU 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40):Customer's Accounting for Implementation Costs incurred in a Cloud Computing Arrangement that is a Service Contract. This ASUreduces the complexity of accounting for costs of implementing a cloud computing service arrangement and aligns the following requirementsto capitalize implementation costs: 1) those incurred in a hosting arrangement that is a service contract, and 2) those incurred to develop orobtain internal-use software, including hosting arrangements that include an internal software license. The Company adopted the newguidance effective October 1, 2019. The new guidance did not have a material effect on the Company's consolidated financial statements. In August 2018, the FASB issued ASU 2018-14, Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic715-20) - Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans. This ASU modifies disclosurerequirements for employers that sponsor defined benefit pension or other postretirement plans. The Company adopted the new guidanceeffective October 1, 2020. The new guidance did not have a material effect on the Company's consolidated financial statements. Recently Issued Accounting Standards In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848) - Facilitation of the Effects of Reference RateReform on Financial Reporting. In combination with 2021-01, the ASU provides temporary optional guidance to ease the potential burdenin accounting for and recognizing the effects of reference rate change on financial reporting. The new guidance applies specifically to contractsand hedging relationships that reference LIBOR, or any other referenced rate that is expected to be discontinued due to reference ratereform. The new guidance is effective for the Company through December 31, 2022. The Intercontinental Exchange (ICE) BenchmarkAdministration, the administrator for LIBOR and other inter-bank offered rates, announced that the LIBOR rates for one-day, one-month, six-month and one-year will cease publication in June 2023 and that no new financial contracts may use LIBOR after December 31,2021. Currently, all of the Company's LIBOR based financial contracts are based on the one-month LIBOR rate. None of the holders ofthese financial contracts have indicated when a transition from LIBOR will occur. Accordingly, the Company does not anticipate adopting thisguidance until fiscal 2022. The new guidance could result in a significant impact on the Company's financial position, results of operations, andcash flows when the reference rate is changed for related contracts. 50 Other accounting standards that have been issued or proposed by the FASB or other standard–setting bodies are not currently applicable tothe Company or are not expected to have a significant impact on the Company’s financial position, results of operations and cash flows. 2.REVENUE The Company assesses new contracts and identifies related performance obligations for promises to transfer distinct goods or services to thecustomer. Revenue is recognized when performance obligations have been satisfied. In the case of Roanoke Gas, the Company contractswith its customers for the sale and/or delivery of natural gas. The following tables summarize revenue by customer, product and income statement classification for the years ended September 30: 2021 Gas utility Non-utility Total operatingrevenues Natural Gas (Billed and Unbilled): Residential $43,108,790 $— $43,108,790 Commercial 25,217,030 — 25,217,030 Industrial and Transportation 4,973,885 — 4,973,885 Other 429,397 129,676 559,073 Total contracts with customers 73,729,102 129,676 73,858,778 Alternative Revenue Programs 1,316,001 — 1,316,001 Total operating revenues $75,045,103 $129,676 $75,174,779 2020 Gas utility Non-utility Total operatingrevenues Natural Gas (Billed and Unbilled): Residential $37,022,219 $— $37,022,219 Commercial 18,387,674 — 18,387,674 Industrial and Transportation 5,188,069 — 5,188,069 Other 489,943 666,466 1,156,409 Total contracts with customers 61,087,905 666,466 61,754,371 Alternative Revenue Programs 1,321,020 — 1,321,020 Total operating revenues $62,408,925 $666,466 $63,075,391 Gas utility revenues Substantially all of Roanoke Gas’ revenues are derived from rates authorized by the SCC through its tariffs. Based on its evaluation, theCompany has concluded that these tariff-based revenues fall within the scope of ASC 606. Tariff rates represent the transaction price.Performance obligations created under these tariff-based sales include commodity (the cost of natural gas sold to customers) and delivery(transporting natural gas through the Company’s distribution system to customers). The delivery of natural gas to customers results in thesatisfaction of the Company’s respective performance obligations over time. All customers are billed monthly based on consumption as measured by metered usage. Revenue is recognized as bills are issued for naturalgas that has been delivered or transported. In addition, the Company utilizes the practical expedient that allows an entity to recognize theinvoiced amount as revenue, if that amount corresponds to the value received by the customer. Since customers are billed tariff rates, there isno variable consideration in the transaction price. 51 Unbilled revenue is included in residential and commercial revenues in the preceding table. Natural gas consumption is estimated for theperiod subsequent to the last billed date and up through the last day of the month. Estimated volumes and approved tariff rates are utilized tocalculate unbilled revenue. The following month, the unbilled estimate is reversed, the actual usage is billed and a new unbilled estimate iscalculated. The Company obtains metered usage for industrial customers at the end of each month, thereby eliminating any unbilledconsideration for these rate classes. Other revenues Other revenues primarily consist of miscellaneous fees and charges, utility-related revenues not directly billed to utility customers and billingsfor non-utility activities. Regarding these activities, the customer is invoiced monthly based on services provided. The Company utilizes thepractical expedient allowing revenue to be recognized based on invoiced amounts. The transaction price is based on a contractuallypredetermined rate schedule; therefore, the transaction price represents total value to the customer and no variable price consideration exists. Alternative Revenue Program revenues ARPs, which fall outside the scope of ASC 606, are SCC approved mechanisms that allow for the adjustment of revenues for certain broad,external factors, or for additional billings if the entity achieves certain performance targets. The Company's ARPs include its WNA, whichadjusts revenues for the effects of weather temperature variations as compared to the 30-year average, and the SAVE Plan over/undercollection mechanism, which adjusts revenues for the differences between SAVE Plan revenues billed to customers and the revenues earned,as calculated based on the timing and extent of infrastructure replacement completed during the period. These amounts are ultimatelycollected from, or returned to, customers through future rate changes approved by the SCC. Customer Accounts Receivable Accounts receivable, as reflected in the condensed consolidated balance sheets, includes both billed and unbilled customer revenues, as wellas amounts that are not related to customers. The balances of customer receivables are provided below: Current Assets Current Liabilities Tradeaccountsreceivable (1) Unbilledrevenue (1) Customercreditbalances Customerdeposits September 30, 2020 $2,343,492 $1,041,518 $1,587,061 $1,611,476 September 30, 2021 3,722,916 1,191,227 1,539,680 1,571,342 Increase (decrease) $1,379,424 $149,709 $(47,381) $(40,134) (1) Included in "Accounts receivable, net" in the consolidated balance sheet. Amounts shown net of reserve for bad debts. The Company had no significant contract assets or liabilities during the period. Furthermore, the Company did not incur any significant coststo obtain contracts. 3.REGULATORY MATTERS The SCC exercises regulatory authority over the natural gas operations of Roanoke Gas. Such regulation encompasses terms, conditions andrates to be charged to customers for natural gas service, safety standards, service extension and depreciation. 52 In May 2021, Roanoke Gas filed its most recent SAVE application with the SCC to update the SAVE Rider for the period October2021 through September 2022. The application requested the continued recovery of pre-1973 plastic pipe replacement costs, as well asinclusion of the replacement of several regulator stations and pre-1971 coated steel pipe as qualifying projects. On August 25, 2021, theSCC issued its final order that approved the Company's requested $3.25 million in annual revenue, which is a $1.1 million increase over theexisting SAVE Rider rates. On January 24, 2020, the SCC issued its final order on the general rate application. Under the provisions of this order, Roanoke Gas wasgranted an annualized non-gas rate increase of $7.25 million and provided for a 9.44% return on equity. In March 2020, the Companycompleted the refund of $3.8 million for revenues collected from the interim rates in excess of the final approved rates, including interest. The final order did not provide for a return on Roanoke Gas infrastructure investments associated with two gate stations that will interconnectwith the MVP; however, the order did provide for the ability to defer financing costs related to these investments for consideration of futurerecovery. The Company is deferring these costs through the application of AFUDC, which capitalizes both the equity and debt financingcosts during the construction phases. Roanoke Gas applied AFUDC treatment retroactively to January 1, 2019, the date new non-gas ratesbecame effective. The January 1, 2019 date was affirmed by the SCC in its October 1, 2020 order in the Company’s 2019 annualinformational filing docket. Amounts capitalized are disclosed in the Utility Plant and Depreciation section of Note 1. In 2020, Roanoke Gas accelerated amortization of the remaining balance of its ESAC assets. This acceleration was the result of theCompany's preliminary earnings test for fiscal 2020. The SCC requires regulated utilities with certain regulatory assets to perform and submitan annual earnings test. Specific to ESAC assets, if the results indicate that earnings exceed the mid-point of its authorized return on equityrange, the Company must write-down certain regulatory assets to the point where the actual return for the period falls to the mid-point. AsRoanoke Gas' fiscal 2020 unadjusted earnings exceeded the mid-point, the Company accelerated amortization of the related ESAC assets. The service disconnection moratorium, under which the Company has been operating since March 16, 2020 in response to COVID-19,expired August 30, 2021. During the moratorium utilities were prohibited from disconnecting customers for non-payment and from assessinglate payment fees; therefore, residential customers that ordinarily would have been disconnected for non-payment continued incurring chargesfor gas service. As a result, the Company's arrearage balances were at historic levels prior to the application of the CARES Act funds andpending application of the ARPA funds. In December 2020, Roanoke Gas received $403,000 in CARES Act funds and was able to apply the funds to eligible customer accounts. The Company applied for ARPA funds to assist its customers with their arrearages. On October 28, 2021, Roanoke Gas received SCCcommunication that it had qualified for and will receive ARPA funds in the amount of $858,556 pursuant to Chapter 1 of the 2021 VirginiaActs of Assembly, Special Session II. The Company's arrearage balances will be favorably impacted when these funds are received andapplied to customer accounts in early fiscal 2022. See Note 15 for additional information. In April 2020, the SCC issued an order allowing regulated utilities in Virginia to defer certain incremental, prudently incurred costs associatedwith the COVID-19 pandemic and to apply for recovery at a future date. Roanoke Gas deferred $217,000 in COVID-19 related costsduring fiscal 2021; however, due to preliminary earnings results that were outside of the authorized range, the Company reversed theregulatory asset and recognized the COVID-19 related costs as expense in the fourth quarter of fiscal 2021. 53 4.SEGMENT INFORMATION Operating segments are defined as components of an enterprise for which separate financial information is available and is evaluated regularlyby the Company's chief operating decision maker in deciding how to allocate resources and assess performance. The Company usesoperating income and equity in earnings to assess segment performance. Intersegment transactions are recorded at cost. The reportable segments disclosed herein are defined as follows: Gas Utility - The natural gas distribution segment of the Company generates revenue from its tariff rates and other regulatory mechanismsthrough which it provides for the sale and distribution of natural gas to its residential, commercial and industrial customers. Investment in Affiliates - The investment in affiliates segment reflects the income generated through the activities of the Company'sinvestment in MVP and Southgate projects. Parent and Other - Parent and other include the unregulated activities of the Company as well as certain corporate eliminations. Information related to the segments of the Company are provided below: Gas Utility Investment inAffiliates Parent andOther ConsolidatedTotal For the Year Ended September 30, 2021: Operating revenues $75,045,103 $— $129,676 $75,174,779 Depreciation 8,424,620 — — 8,424,620 Operating income (loss) 14,955,375 (267,391) 90,325 14,778,309 Equity in earnings — 1,667,554 — 1,667,554 Interest expense 2,812,107 1,239,778 — 4,051,885 Income before income taxes 13,043,470 171,861 90,793 13,306,124 As of September 30, 2021: Total assets $231,737,427 $65,686,376 $12,685,390 $310,109,193 Gross additions to utility property 19,967,567 — — 19,967,567 Gross investment in MVP and Southgate — 6,028,760 — 6,028,760 Gas Utility Investment inAffiliates Parent andOther ConsolidatedTotal For the Year Ended September 30, 2020: Operating revenues $62,408,925 $— $666,466 $63,075,391 Depreciation 7,890,725 — — 7,890,725 Operating income (loss) 12,429,613 (220,194) 308,763 12,518,182 Equity in earnings — 4,814,874 — 4,814,874 Interest expense 2,730,822 1,368,336 — 4,099,158 Income before income taxes 10,350,946 3,233,233 286,015 13,870,194 As of September 30, 2020: Total assets $211,994,364 $57,660,105 $12,025,038 $281,679,507 Gross additions to utility property 22,916,339 — — 22,916,339 Gross investment in MVP and Southgate — 7,864,859 — 7,864,859 54 5.OTHER INVESTMENTS Midstream is an approximately 1% equity investment owner of the LLC constructing the MVP. Due to various legal and regulatory delays,the LLC changed its approach in seeking authorization to cross all remaining streams and wetlands on the project route. It requestedindividual permits from the U.S. Army Corps of Engineers to cross certain streams and wetlands utilizing open cut techniques and has appliedto amend the MVP project's CPCN to seek FERC authority to cross certain streams and wetlands utilizing alternative trenchless constructionmethods. The LLC is targeting a full in-service date for the MVP project in summer 2022 at a total project cost of approximately $6.2 billion,with Midstream's total cash contribution expected to approach $65 million. The LLC temporarily suspended accruing AFUDC on the project beginning January 1, 2021 and through March 31, 2021 due to atemporary reduction in growth construction activities. The LLC resumed accruing AFUDC beginning April 1, 2021 associated with certaingrowth construction activities resuming. The amount of AFUDC recognized during the current and prior years is included in the tables below. Roanoke Gas will continue to suspend accruing AFUDC on its two gate stations that will interconnect with the MVP until such time asconstruction activities resume on the respective gate stations. Roanoke Gas recognized $55,981 of AFUDC associated with these gatestations during the first fiscal quarter ended December 31, 2020. In April 2018, the LLC announced the MVP Southgate project. Midstream is a less than 1% investor in the project, which is beingaccounted for under the cost method. Total project cost is estimated to be nearly $500 million, of which Midstream's portion is estimated tobe approximately $2.1 million. The LLC is targeting the commencement of the MVP Southgate construction in 2022 and placing the MVPSouthgate in-service during the spring of 2023. Funding for Midstream's investments in the LLC for both the MVP and Southgate projects is being provided through two variable rateunsecured promissory notes, under a non-revolving credit agreement maturing in December 2022, and two additional notes issued in June2019. See Note 7 for a schedule of debt instruments. The Company will participate in the earnings generated from the transportation of natural gas through both pipelines proportionate to its levelof investment once the pipelines are placed in service. Midstream utilized a third-party business valuation specialist to assist in Management's assessment of the MVP investment in accordance withASC 323, Investments - Equity Method and Joint Ventures. As a result of its evaluation, including consideration of the valuationspecialist's report, management has concluded that the investment is not currently impaired as of September 30, 2021. Furthermore, theLLC has conducted its own evaluation of the project and has also concluded that no impairment exists as of September 30, 2021.Management will continue monitoring the status of the project for circumstances that may lead to future impairment, including any significantdelays or denials of necessary permits and approvals. If necessary, the amount and timing of any future impairment would be dependent onthe specific circumstances at the time of evaluation. The investments in the LLC are included in the consolidated financial statements as follows: September 30 Balance Sheet location: 2021 2020 Other Assets: MVP $64,462,194 $57,183,063 Southgate 405,125 359,742 Investment in unconsolidated affiliates $64,867,319 $57,542,805 Current Liabilities: MVP $2,139,696 $2,501,883 Southgate 941 10,554 Capital contributions payable $2,140,637 $2,512,437 55 Years Ended September 30 Income Statement location: 2021 2020 Equity in earnings of unconsolidated affiliate $1,667,554 $4,814,874 September 30 2021 2020 Undistributed earnings, net of income taxes, of MVP in retained earnings $8,081,027 $6,842,702 The change in the investment in unconsolidated affiliates is provided below: September 30 2021 2020 Cash investment $6,028,760 $7,864,859 Change in accrued capital calls (371,800) (2,512,387)Equity in earnings of unconsolidated affiliate 1,667,554 4,814,874 Change in investment in unconsolidated affiliates $7,324,514 $10,167,346 Summary unaudited financial statements of MVP are presented below. Southgate financial statements, which are accounted for under the costmethod, are not included: Income Statements Years Ended September 30 2021 2020 AFUDC $165,048,237 $479,586,911 Net other income (expense) (388,436) 714,128 Net income $164,659,801 $480,301,039 Balance Sheets September 30 2021 2020 Assets: Current assets $208,961,113 $513,713,429 Construction work in progress 6,281,991,035 5,536,248,668 Other assets 980,410 4,597,441 Total assets $6,491,932,558 $6,054,559,538 Liabilities and Equity: Current liabilities $200,441,027 $187,581,804 Noncurrent liabilities 13,000 245,000 Capital 6,291,478,531 5,866,732,734 Total liabilities and equity $6,491,932,558 $6,054,559,538 56 6.LINE-OF-CREDIT On March 25, 2021, Roanoke Gas renewed its unsecured line-of-credit agreement for a two-year term expiring March 31, 2023 with amaximum borrowing limit of $40 million. Amounts drawn against the agreement are considered to be non-current as the balance under theline-of-credit is not subject to repayment within the next 12-month period. The agreement has a variable-interest rate based on 30-dayLIBOR plus 100 basis points and an availability fee of 15 basis points and provides multi-tiered borrowing limits associated with the seasonalborrowing demands of the Company. The Company's total available borrowing limits during the term of the agreement range from $14million to $40 million. The Company's total available borrowing limits for the remaining term are as follows: Available As of Line-of-Credit September 30, 2021 $32,000,000 March 1, 2022 25,000,000 July 20, 2022 32,000,000 October 19, 2022 40,000,000 March 1, 2023 34,000,000 A summary of the line-of-credit follows: September 30 2021 2020 Available line-of-credit at year-end $32,000,000 $19,000,000 Outstanding balance at year-end 17,628,897 9,143,606 Highest month-end balance outstanding 17,628,897 12,983,210 Average daily balance 10,042,073 3,286,033 Average rate of interest during year on outstanding balances 1.12% 2.16%Interest rate at year-end 1.08% 1.15%Interest rate on unused line-of-credit 0.15% 0.15% Associated with the line-of-credit is a credit agreement that contains various representations, warranties and covenants including arequirement that the Company maintain an interest coverage ratio of not less than 1.5 to 1 and a long-term debt to long-term capitalizationratio of less than 65%. 57 7.LONG-TERM DEBT On October 29, 2021 Midstream entered into an unsecured promissory note in the principal amount of $8 million with an interest rate basedon 30-day LIBOR plus 115 basis points maturing December 1, 2027. Related to this note, Midstream also entered into an interest rate swapagreement that effectively converts the variable rate note into a fixed rate instrument with an effective annual interest rate of 2.443%. The loanwill convert into an installment loan with principal pay-down beginning in fiscal 2023. In addition, this note reduces the borrowing capacitydefined by the Third Amendment to Credit Agreement and related Promissory Notes. The total borrowing capacity declined from $41 millionto $33 million effective with the new promissory note. All other terms of the Third Amendment to Credit Agreement remain unchanged. On September 24, 2021, Roanoke Gas entered into a Loan Agreement ("Agreement") and an unsecured Delayed Draw Promissory Note inthe principal amount of $10 million ("Promissory Note"). Under the provisions of the Agreement, Roanoke Gas will receive a first advance of$5 million on or about April 1, 2022 with the remaining $5 million received on or about October 1, 2022. The Promissory Note has aninterest rate of 30-day LIBOR plus 100 basis points and a maturity date of October 1, 2028. The proceeds from this Promissory Note willbe used to finance Roanoke Gas' infrastructure enhancement and replacement projects. Also, on September 24, 2021, Roanoke Gasentered into an interest rate swap agreement for $10 million corresponding to the term and draw provisions of the Agreement, whicheffectively converts the variable rate Promissory Note to a fixed instrument with an effective annual interest rate of 2.49%. On August 20, 2021, Roanoke Gas entered into an unsecured Delayed Draw Term Note in the principal amount of $15 million ("TermNote") with an interest rate of 1.20% above 30-day SOFR Average per annum maturing on August 20, 2026. In connection with the TermNote, Roanoke Gas also entered into the Sixth Amendment to its Credit Agreement ("Amendment"), which amends the original CreditAgreement with the corresponding bank dated March 31, 2016 and all subsequent amendments. The Amendment aligns the termination dateand the maximum principal amount available under the Term Note and retains all other terms and requirements of prior creditagreements. The proceeds from this Term Note will be used to finance Roanoke Gas' infrastructure enhancement and replacement projects,as well as to refinance a portion of its existing debt. Also, on August 20, 2021, Roanoke Gas entered into an interest rate swap agreementfor $15 million corresponding to the duration of the Term Note, which effectively converts the variable rate note to a fixed rate instrumentwith an effective annual interest rate of 2.00%. The Term Note funded in full on October 1, 2021. Roanoke Gas also has other unsecured notes at varying fixed interest rates as well as a variable-rate note with interest based on 30-dayLIBOR plus 90 basis points. The variable rate note is hedged by a swap agreement, which converts the debt into a fixed-rate instrument withan annual interest rate of 2.30%. Midstream has two variable rate notes in the amounts of $14 million and $10 million that are hedged by swap agreements, which effectivelyconvert the interest rates to 3.24% and 3.14%, respectively. 58 Long-term debt consists of the following: September 30 2021 2020 Principal UnamortizedDebt IssuanceCosts Principal UnamortizedDebt IssuanceCosts Roanoke Gas: Unsecured senior notes payable, at 4.26%, dueSeptember 18, 2034 $30,500,000 $125,502 $30,500,000 $135,157 Unsecured term note payable, at 30-day LIBOR plus0.90%, due November 1, 2021 7,000,000 278 7,000,000 3,613 Unsecured term notes payable, at 3.58% due October2, 2027 8,000,000 28,896 8,000,000 33,712 Unsecured term notes payable at 4.41%, due March 28,2031 10,000,000 29,760 10,000,000 32,892 Unsecured term notes payable at 3.60%, due December6, 2029 10,000,000 29,062 10,000,000 32,585 Unsecured delayed draw notes payable — 21,545 — — Midstream: Unsecured term notes payable, at 30-day LIBOR plus1.35% due December 29, 2022 33,610,200 14,904 25,475,200 38,728 Unsecured term note payable, at 30-day LIBOR plus1.15%, due June 12, 2026 14,000,000 11,437 14,000,000 13,844 Unsecured term note payable, at 30-day LIBOR plus1.20%, due June 1, 2024 10,000,000 6,286 10,000,000 8,644 Total notes payable, current and noncurrent $123,110,200 $267,670 $114,975,200 $299,175 Line-of-credit, at 30-day LIBOR plus 1.00%, dueMarch 31, 2023 17,628,897 — 9,143,606 — Total long-term debt $140,739,097 $267,670 $124,118,806 $299,175 Less: current maturities of long-term debt (7,000,000) — — — Total long-term debt, net current maturities $133,739,097 $267,670 $124,118,806 $299,175 59 Debt issuance costs are amortized over the life of the related debt. As of September 30, 2021 and 2020, the Company also had anunamortized loss on the early retirement of debt of $1,484,433 and $1,598,620, respectively, which has been deferred as a regulatory assetand is being amortized over a 20 year period. All of the debt agreements set forth certain representations, warranties and covenants to which the Company is subject, including financialcovenants that require the ratio of long-term debt to long-term capitalization to not exceed 65%. All of the debt agreements except for theline-of-credit provide for priority indebtedness to not exceed 15% of consolidated total assets. The Company was in compliance with alldebt covenants as of September 30, 2021 and 2020. The aggregate annual maturities of long-term debt for the next five years ending after September 30, 2021 are as follows: Year Ending September 30 Maturities 2022 $7,000,000 2023 51,239,097 2024 10,000,000 2025 — 2026 14,000,000 Thereafter 58,500,000 Total $140,739,097 8.INCOME TAXES Under the provisions of ASC 740 - Income Taxes, the deferred tax assets and liabilities of the Company were revalued in fiscal 2018 toreflect the reduction in the corporate federal income tax rate. As a result of the revaluation, the excess deferred income taxes of the regulatedoperations of Roanoke Gas were reclassified to a regulatory liability. The excess deferred taxes related to the depreciable property are beingreturned to customers through reduced billings over the remaining weighted average useful life of the property with a corresponding reductionin income tax expense. The excess deferred taxes related to the other regulatory basis differences are being collected from customers over afive year period. 60 During fiscal 2021, the Company engaged an outside firm to conduct a study of its activities that would qualify for the Research andDevelopment ("R&D") credit under 26 U.S. Code § 41 - Credit for increasing research activities. Upon completion of this study, theCompany filed amended federal income tax returns for the 2017, 2018 and 2019 fiscal years to claim the R&D tax credit. The Companyalso filed for the R&D tax credit on its fiscal 2020 federal income tax return. The total credits claimed on the income tax returns amounted to$3,169,656, which was offset by an increase of $636,694 in income tax resulting from the add back to taxable income of an amount equal tothe total tax credits claimed for the 2017, 2018 and 2019 fiscal years. The Company deferred the remaining tax credits as a regulatoryliability because they related to utility plant. These credits will be amortized over the 20 year tax-life of the related utility plant. A portion ofthese tax credits were generated as a result of expenditures that qualify under the SAVE Plan and are subject to return to customers through areduction in the corresponding SAVE rates in future periods. Annual amortization of the tax credits is expected to be approximately$124,000 with a reduction in annual SAVE revenues of approximately $40,000. The Company also applied for a Virginia State tax credit related to the R&D study. The amount to be awarded has not yet been determinedand therefore is not included in the consolidated financial statements at this time. The current year tax expense includes the recognition of a federal solar tax credit and Virginia Neighborhood Assistance Tax Credits. The details of income tax expense are as follows: Years Ended September 30 2021 2020 Current income taxes: Federal $2,527,997 $1,841,124 State 569,877 342,233 Total current income taxes 3,097,874 2,183,357 Deferred income taxes: Federal (137,159) 644,682 State 243,347 477,621 Total deferred income taxes 106,188 1,122,303 Total income tax expense $3,204,062 $3,305,660 Income tax expense for the years ended September 30, 2021 and 2020 differed from amounts computed by applying the U.S. federalincome tax rate to earnings before income taxes due to the following: Years Ended September 30 2021 2020 Income before income taxes $13,306,124 $13,870,194 Corporate federal income tax rate 21% 21%Income tax expense computed at the federal statutory rate $2,794,286 $2,912,741 State income taxes, net of federal income tax benefit 642,447 647,685 Net amortization of excess deferred taxes on regulated operations (162,228) (162,228)Tax benefit recognized on stock compensation (4,099) (114,984)Tax credits (86,839) — Other, net 20,495 22,446 Total income tax expense $3,204,062 $3,305,660 61 The tax effects of temporary differences that give rise to the deferred tax assets and deferred tax liabilities are as follows: September 30 2021 2020 Deferred tax assets: Allowance for uncollectibles $62,292 $180,986 Accrued pension and postretirement medical benefits 195,044 651,356 Regulatory effect of change in federal income tax rate 2,761,667 2,814,525 Accrued paid time off 137,175 140,635 Cost of gas held in storage 753,344 604,962 Deferred compensation 915,749 992,605 Interest rate swaps 307,873 572,343 Accrued gas cost 289,801 — Other 98,642 97,564 Total gross deferred tax assets $5,521,587 $6,054,976 Deferred tax liabilities: Utility plant $18,643,863 $18,310,474 MVP investment 1,825,937 1,693,075 Other — 25,189 Total gross deferred tax liabilities $20,469,800 $20,028,738 Net deferred tax liability $14,948,213 $13,973,762 FASB ASC No. 740 - Income Taxes provides for the determination of whether tax benefits claimed or expected to be claimed on a taxreturn should be recognized in the financial statements. The Company has evaluated its tax positions and accordingly has not identified anysignificant uncertain tax positions. In regard to the R&D tax credit, the firm engaged to conduct the study has done numerous such projectswith successful outcomes with the IRS. The Company’s policy is to classify interest associated with uncertain tax positions as interestexpense in the financial statements. Penalties are netted against other income. The Company files a consolidated federal income tax return and state income tax returns in Virginia and West Virginia. With the amendmentof the federal returns for fiscal 2017, 2018 and 2019, these years will remain open for three more years. The federal returns and the statereturns for Virginia for the tax years ended prior to September 30, 2017 are no longer subject to examination. The state returns for WestVirginia prior to September 30, 2018 are no longer subject to examination. 9.EMPLOYEE BENEFIT PLANS The Company sponsors both a noncontributory pension plan and a postretirement plan. The pension plan covers all employees hired prior toJanuary 2017 and benefits fully vest after 5 years of credited service. Benefits paid to retirees are based on age at retirement, years of serviceand average compensation. Effective January 1, 2017, a "soft freeze" to the pension plan was implemented, and employees hired on or afterthat date are no longer eligible to participate. Commensurate with the "soft freeze" in the pension plan, the Company amended its 401(k)Plan, allowing management to authorize a discretionary contribution to the 401(k) account for those employees hired on or after January 1,2017. The amount, if any, of this discretionary contribution would be determined each year and would be applied to the eligible employees atthe end of the calendar year. This Company contribution would be in addition to any employee elected deferrals and employer match asprovided for under the 401(k) Plan. The postretirement plan provides certain health care, supplemental retirement and life insurance benefits to retired employees who meetspecific age and service requirements. Employees hired prior to January 1, 2000 are eligible to participate in the postretirement plan.Employees must have a minimum of 10 years of service and retire after attaining the age of 55 in order to vest in the postretirement plan.Retiree contributions to the plan are based on the number of years of service to the Company as determined under the pension plan. 62 Employers who sponsor defined benefit plans must recognize the funded status of defined benefit pension and other postretirement plans asan asset or liability in their statements of financial position and recognize changes in that funded status in the year in which the changes occurthrough comprehensive income. For pension plans, the benefit obligation is the projected benefit obligation, and for other postretirementplans, the benefit obligation is the accumulated benefit obligation. The Company established a regulatory asset for the portion of the obligationexpected to be recovered through rates in future periods. The regulatory asset is adjusted for the recognition of actuarial gains and losses.The portion of the obligation attributable to the unregulated operations of the holding company is recognized in other comprehensive income,with actuarial gains and losses recognized using the corridor method. The following tables set forth the benefit obligation, fair value of plan assets, the funded status of the plans, amounts recognized in theCompany’s consolidated financial statements and the assumptions used: Pension Plan Postretirement Plan 2021 2020 2021 2020 Accumulated benefit obligation $33,341,841 $34,821,069 $16,796,849 $17,925,409 Change in benefit obligation: Benefit obligation at beginning of year $39,998,002 $35,550,987 $17,925,409 $18,030,399 Service cost 734,282 691,602 140,691 167,879 Interest cost 975,139 1,062,227 430,490 531,480 Actuarial loss (gain) (2,237,486) 3,620,400 (1,109,181) (325,269)Benefit payments, net of retiree contributions (1,815,469) (927,214) (590,560) (479,080)Benefit obligation at end of year $37,654,468 $39,998,002 $16,796,849 $17,925,409 Change in fair value of plan assets: Fair value of plan assets at beginning of year $37,657,631 $33,586,671 $14,116,253 $13,082,610 Actual return on plan assets, net of taxes 2,571,945 4,198,174 1,956,649 1,112,723 Employer contributions 500,000 800,000 400,000 400,000 Benefit payments, net of retiree contributions (1,815,469) (927,214) (590,560) (479,080)Fair value of plan assets at end of year $38,914,107 $37,657,631 $15,882,342 $14,116,253 Funded status $1,259,639 $(2,340,371) $(914,507) $(3,809,156)Amounts recognized in the consolidated balance sheetconsist of: Noncurrent assets $1,259,639 $— $— $— Noncurrent liabilities — (2,340,371) (914,507) (3,809,156) Amounts recognized in accumulated other comprehensiveloss: Net actuarial loss, net of tax $527,720 $1,181,744 $119,504 $614,987 Total amounts included in accumulated other comprehensiveloss, net of tax $527,720 $1,181,744 $119,504 $614,987 Amounts deferred to a regulatory asset: Net actuarial loss $4,562,834 $6,977,944 $798,558 $2,755,333 Amounts recognized as regulatory assets $4,562,834 $6,977,944 $798,558 $2,755,333 During fiscal 2021, the Company offered a one-time, lump sum pay out option for vested, terminated employees not currently receivingpayments under the pension plan. The lump sum offer was accepted by 17 eligible participants resulting in a distribution of $717,197 in planassets with a corresponding reduction in the benefit plan obligation. The Company expects that an approximately $60,000 credit, before tax, of AOCI will be recognized in net periodic benefit costs in fiscal2022 and approximately $207,000 of amounts deferred as regulatory assets will be amortized and recognized in net periodic benefit costs infiscal 2022. The reduction in the benefit obligations for both the pension plan and postretirement plan was primarily attributed to actuarial gains resultingfrom the increase in the discount rate used to calculate the benefit obligations and improvement in the mortality scale. 63 The following table details the actuarial assumptions used in determining the projected benefit obligations and net benefit cost of the pensionand the accumulated benefit obligations and net benefit cost of the postretirement plan: Pension Plan Postretirement Plan 2021 2020 2021 2020 Assumptions used to determine benefit obligations: Discount rate 2.73% 2.47% 2.70% 2.44%Expected rate of compensation increase 4.00% 4.00% N/A N/A Assumptions used to determine benefit costs: Discount rate 2.47% 3.03% 2.44% 3.00%Expected long-term rate of return on plan assets 5.40% 5.50% 4.25% 4.26%Expected rate of compensation increase 4.00% 4.00% N/A N/A To develop the expected long-term rate of return on assets assumption, the Company, with input from the Plans' actuaries and investmentadvisors, considered the historical returns and the future expectations for returns for each asset class, as well as the target asset allocation ofeach plan’s portfolio. Components of net periodic benefit cost are as follows: Pension Plan Postretirement Plan 2021 2020 2021 2020 Service cost $734,282 $691,602 $140,691 $167,879 Interest cost 975,139 1,062,227 430,490 531,480 Expected return on plan assets (2,015,743) (1,836,623) (596,488) (550,394)Recognized loss 502,141 455,744 154,659 237,371 Net periodic benefit cost $195,819 $372,950 $129,352 $386,336 Service cost is included in operation and maintenance expense of the consolidated income statement. All other components of net periodicbenefit costs are included in the other income, net line. The assumed health care cost trend rates used in measuring the accumulated benefit obligation for the postretirement plan are presentedbelow: Pre 65 Post 65 2021 2020 2021 2020 Health care cost trend rate assumed for next year 6.50% 7.00% 5.20% 5.20%Rate to which the cost trend is assumed to decline (theultimate trend rate) 5.50% 5.50% 5.20% 5.20%Year that the rate reaches the ultimate trend rate 2023 2023 2021 2020 64 The health care cost trend rate assumptions could have a significant effect on the amounts reported. A change of 1% would have thefollowing effects: 1% Increase 1%Decrease Effect on total service and interest cost components $111,000 $(88,000)Effect on accumulated postretirement benefit obligation 2,575,000 (2,106,000) The primary objectives of both plans' investment policies are to maintain investment portfolios that diversify risk through prudent assetallocation parameters, achieve asset returns that meet or exceed the corresponding actuarial assumptions and meet expected future benefits inboth the short-term and long-term. The Company's pension plan allocation approach seeks to match the duration of the fixed income portionof the portfolio with the duration of the plan's liabilities. Such a match is designed to reduce the overall volatility in the pension plan relative tothe funded status. The 30% equity allocation in the pension plan provides for potential returns to offset growth in the liabilities as eligibleparticipants continue to accrue benefits. Based on its most recent evaluation of returns for the asset classes within each plan's investment portfolio, the Company set the expectedlong-term rate of return for the pension plan and the postretirement plan for fiscal 2022 at 4.75% and 4.24% respectively. The Company’s target and actual asset allocation in the pension and postretirement plans as of September 30, 2021 and 2020 were: Pension Plan Postretirement Plan Target 2021 2020 Target 2021 2020 Asset category: Equity securities 30% 30% 30% 50% 49% 51%Debt securities 70% 69% 69% 50% 50% 48%Cash —% 1% 1% —% 1% 1%Other —% —% —% —% —% —% The plans assets are invested in mutual funds. The Company uses the fair value hierarchy described in Note 1 to classify these assets. Themutual funds are included under Level 1 in the fair value hierarchy as their fair values are determined based on individual prices for eachsecurity that comprises the mutual funds. The common and collective trust funds are included under Level 2. The following tables contains thefair value classifications of the plans' assets: Pension Plan Fair Value Measurements - September 30, 2021 Fair Value Level 1 Level 2 Level 3 Asset Class: Cash $429,764 $429,764 $— $— Common and Collective Trust and Pooled Funds: Bonds Liability Driven Investment 26,898,651 — 26,898,651 — Equities Domestic Large Cap Growth 3,430,962 — 3,430,962 — Domestic Large Cap Value 3,480,915 — 3,480,915 — Domestic Small/Mid Cap Core 1,752,186 — 1,752,186 — Foreign Large Cap Value 1,561,512 — 1,561,512 — Mutual Funds: Equities Foreign Large Cap Growth 1,071,719 1,071,719 — — Foreign Large Cap Value 288,398 288,398 — — Total $38,914,107 $1,789,881 $37,124,226 $— 65 Pension Plan Fair Value Measurements - September 30, 2020 Fair Value Level 1 Level 2 Level 3 Asset Class: Cash $339,287 $339,287 $— $— Common and Collective Trust and Pooled Funds: Bonds Liability Driven Investment 26,038,966 — 26,038,966 — Equities Domestic Large Cap Growth 3,462,841 — 3,462,841 — Domestic Large Cap Value 3,351,694 — 3,351,694 — Domestic Small/Mid Cap Core 1,665,005 — 1,665,005 — Foreign Large Cap Value 1,473,427 — 1,473,427 — Mutual Funds: Equities Foreign Large Cap Growth 1,047,274 1,047,274 — — Foreign Large Cap Value 279,137 279,137 — — Total $37,657,631 $1,665,698 $35,991,933 $— Postretirement Plan Fair Value Measurements - September 30, 2021 Fair Value Level 1 Level 2 Level 3 Asset Class: Cash $157,957 $157,957 $— $— Mutual Funds: Bonds Domestic Fixed Income 7,109,967 7,109,967 — — Foreign Fixed Income 757,422 757,422 — — Equities Domestic Large Cap Growth 2,346,401 2,346,401 — — Domestic Large Cap Value 2,361,583 2,361,583 — — Domestic Small/Mid Cap Growth 295,628 295,628 — — Domestic Small/Mid Cap Value 248,317 248,317 — — Domestic Small/Mid Cap Core 557,739 557,739 — — Foreign Large Cap Growth 594,573 594,573 — — Foreign Large Cap Value 1,352,329 1,352,329 — — Foreign Large Cap Core 85,871 85,871 — — Other 14,555 — 14,555 — Total $15,882,342 $15,867,787 $14,555 $— 66 Postretirement Plan Fair Value Measurements - September 30, 2020 Fair Value Level 1 Level 2 Level 3 Asset Class: Cash $73,908 $73,908 $— $— Mutual Funds: Bonds Domestic Fixed Income 6,163,808 6,163,808 — — Foreign Fixed Income 638,709 638,709 — — Equities Domestic Large Cap Growth 2,197,839 2,197,839 — — Domestic Large Cap Value 2,119,433 2,119,433 — — Domestic Small/Mid Cap Growth 262,726 262,726 — — Domestic Small/Mid Cap Value 235,216 235,216 — — Domestic Small/Mid Cap Core 552,607 552,607 — — Foreign Large Cap Growth 548,967 548,967 — — Foreign Large Cap Value 1,224,420 1,224,420 — — Foreign Large Cap Core 77,471 77,471 — — Other 21,149 — 21,149 — Total $14,116,253 $14,095,104 $21,149 $— Each mutual fund or common collective trust fund has been categorized based on its primary investment strategy. The Company expects to contribute $500,000 to its pension plan and $400,000 to its postretirement plan in fiscal 2022. The following table reflects expected future benefit payments: Pension Postretirement Fiscal year ending September 30 Plan Plan 2022 $1,095,464 $730,324 2023 1,154,843 740,565 2024 1,221,199 717,641 2025 1,371,276 721,176 2026 1,487,113 717,684 2027 - 2031 8,715,094 3,697,782 The Company established an NQDC Plan in fiscal 2021. The NQDC Plan is an unfunded, nonqualified benefit plan offered to selectmembers of senior management not eligible to participate in the pension plan. Under the NQDC Plan, participants have the right to defer apercentage of base salary as well as receive discretionary credits from the Company. The Company's discretionary credits vest over time. Any benefits distributed from the NQDC Plan plan are paid from the general assets of the Company. As the plan is unfunded, the balancereflected in the table below is a noncurrent liability included in the benefit plan liabilities line on the consolidated balance sheet. 2021 2020 Beginning deferred compensation balance $— $— Employer contributions 48,100 — Participant contributions — — Earnings 2,297 — Distributions (15,053) — Ending deferred compensation balance $35,344 $— 67 The Company sponsors a 401k Plan covering all employees who elect to participate. Employees may contribute from 1% to 50% of theirannual compensation to the 401k Plan, limited to a maximum annual amount as set periodically by the IRS. The Company matches 100% ofthe participant’s first 4% of contributions and 50% on the next 2% of contributions. The Company also provided discretionary contributionsfor employees hired on or after January 1, 2017. The following table reflects the Company's contributions: Years Ended September 30 2021 2020 Matching contribution $383,340 $364,773 Discretionary contribution 43,093 18,313 10.COMMON STOCK OPTIONS The KESOP provides for the issuance of common stock options to officers and certain other full-time salaried employees to acquire sharesof the Company’s common stock. As of September 30, 2021, the number of shares available for future grants was 20,000. FASB ASC No. 718 - Compensation-Stock Compensation requires that compensation expense be recognized for the issuance of equityinstruments to employees. During the fiscal year ended 2021, the Board approved stock option grants to certain officers. As required by theKESOP, each option's exercise price per share equaled the fair value of the Company's common stock on the grant date. Pursuant to theplan, the options vest over a six-month period and are exercisable over a ten-year period from the date of issuance. As the Company's stock options are not traded on the open market, the fair value of each grant is estimated on the date of grant using theBlack-Scholes option pricing model including the following assumptions: Years Ended September 30 2021 2020 Expected volatility 32.05% 31.53%Expected dividends 2.75% 2.74%Expected exercise term (years) 7 7 Risk-free interest rate 1.24% 0.51% The underlying methods regarding each assumption are as follows: Expected volatility is based on the historical volatility of the daily closing price of the Company's common stock. Expected dividend rate is based on historical dividend payout trends. Expected exercise term is based on the average time historical option grants were outstanding before being exercised. Risk-free interest rate is based on the 7-year Treasury rate on the date of option grant. Forfeitures are recognized when they occur. 68 Stock option transactions under the Company's plans are summarized below. Number ofShares Weighted-AverageExercise Price Weighted-AverageRemainingContractualTerms (years) AggregateIntrinsicValue1 Options outstanding, September 30, 2019 68,492 $14.91 6.2 $981,170 Options granted 13,000 27.87 Options exercised (29,992) 14.65 Options expired — — Options forfeited — — Options outstanding, September 30, 2020 51,500 $18.34 6.4 $320,797 Options granted 3,000 22.93 Options exercised (9,250) 14.90 Options expired — — Options forfeited — — Options outstanding, September 30, 2021 45,250 $19.34 6.0 $213,898 Vested and exercisable at September 30, 2021 45,250 $19.34 6.0 $213,898 1 Aggregate intrinsic value includes only those options where the exercise price is below the market price. Years Ended September 30 2021 2020 Weighted-average grant date option fair value $5.55 $6.26 Stock option expense 11,100 81,380 Intrinsic value of options exercised 70,297 411,638 Proceeds from exercise of stock options 137,802 439,509 11.OTHER STOCK PLANS Dividend Reinvestment and Stock Purchase Plan The Company offers a DRIP Plan to shareholders of record for the reinvestment of dividends and the purchase of up to $100,000 per year inadditional shares of common stock of the Company. Under the DRIP, the Company issued 29,604 and 28,191 shares in 2021 and 2020,respectively. As of September 30, 2021, the Company had 332,719 shares of stock available for issuance under the DRIP. Restricted Stock Plan for Outside Directors The Board of Directors of the Company implemented the RSPD in 1997. Under the RSPD, each director may elect annually to have up to100% of his or her fees paid in shares of common stock ("Director Restricted Stock"); however, a minimum of 40% of the monthly retainerfee must be paid to each non-employee director of Resources in shares of Director Restricted Stock until such time as the director hasaccumulated at least 10,000 shares. The number of shares of Director Restricted Stock awarded each month is determined based on theclosing sales price of Resources' common stock on the NASDAQ Global Market on the first business day of the month. The DirectorRestricted Stock issued under the Plan vests only in the case of a participant's death, disability, retirement, or in the event of a change incontrol of Resources. The Director Restricted Stock may not be sold, transferred, assigned or pledged by the participant until the shareshave vested under the terms of the Plan. The shares of Director Restricted Stock will be forfeited to Resources by a participant's voluntaryresignation during his or her term on the Board or removal for cause as a director. The Company assumes all directors will complete their term and there will be no forfeiture of the Director Restricted Stock. Since theinception of the RSPD, no director has forfeited any shares of Director Restricted Stock. The Company recognizes as compensation themarket value of the Director Restricted Stock in the period it is issued. 69 The following table reflects the director compensation activity pursuant to the Plan: 2021 2020 Shares Weighted-Average FairValue on Dateof Grant Shares Weighted-Average FairValue on Dateof Grant Beginning of year balance 99,070 $14.06 104,680 $12.51 Granted 11,374 23.67 9,193 26.28 Vested — — (14,803) 10.68 Forfeited — — — — End of year balance 110,444 $15.05 99,070 $14.06 The fair market value of the Director Restricted Stock included in compensation during fiscal 2021 and 2020 was $269,200 and $241,617,respectively. No Director Restricted Stock was forfeited during fiscal 2021 or 2020. As of September 30, 2021, the Company had 35,937 shares available for issuance under the RSPD. RGC Resources, Inc. Restricted Stock Plan The Board of Directors of the Company implemented the RSPO in 2017 as approved by shareholders. Under the RSPO, the CompensationCommittee of the Board of Directors may grant shares of common stock ("Officer Restricted Stock") that vest over time to key employeesand officers for the purpose of attracting and retaining those individuals essential to the operation and growth of the Company. The RSPOprovides for certain restrictions and non-transferability requirements until minimum levels of ownership are obtained. Such restrictions maycontinue beyond the vesting period. The Company assumes all officers will complete their requirements and there will be no forfeiture of the Officer Restricted Stock. The following table reflects the officer compensation activity pursuant to the RSPO: 2021 2020 Shares Weighted-Average FairValue on Dateof Grant Shares Weighted-Average FairValue on Dateof Grant Beginning of year balance 6,815 $28.55 10,185 $28.65 Granted 16,656 24.21 14,951 28.17 Vested (11,635) 25.77 (18,321) 28.30 Forfeited — — — — End of year balance 11,836 $25.17 6,815 $28.55 The fair market value of the Officer Restricted Stock included as compensation during fiscal 2021 and 2020 was $366,869 and $450,677,respectively. As of September 30, 2021, the Company had 396,357 shares available for issuance under the RSPO. Stock Bonus Plan Shares from the Stock Bonus Plan may be issued to certain employees and management personnel in recognition of their performance andservice. Under the Stock Bonus Plan, the Company issued no shares in 2021 and 2020. As of September 30, 2021 the Company had 4,785shares of stock available for issuance under the Stock Bonus Plan. The Stock Bonus Plan is currently inactive. 70 12.COMMITMENTS AND CONTINGENCIES Long-Term Contracts Due to the nature of the natural gas distribution business, Roanoke Gas enters into agreements with suppliers and pipelines to contract fornatural gas commodity purchases, storage capacity and pipeline delivery capacity. Roanoke Gas obtains most of its natural gas supplythrough a third party asset management contract. Roanoke Gas utilizes an asset manager to optimize the use of its transportation, storagerights and gas supply inventories, which helps to ensure a secure and reliable source of natural gas. Under the current asset managementcontract, Roanoke Gas has designated the asset manager to act as agent for its storage capacity and all gas balances in storage. RoanokeGas retains ownership of gas in storage. Under provisions of this contract, Roanoke Gas is obligated to purchase its winter storagerequirements from the asset manager during the spring and summer injection periods at market price. The table below details the volumetricobligations as of September 30, 2021 for the remainder of the contract period. The current asset management contract was renewed inAugust 2021 for a one year period which will expire in March 2023. The contract was renewed at essentially the same terms and conditionsas the prior agreement, except the utilization fee retained by Roanoke Gas increased. Natural GasContracts Year (In DTHs) 2021-2022 2,320,859 2022-2023 295,866 Total 2,616,725 In addition to the volumetric commitment above, the Company also has a fixed price agreement to purchase approximately 2.1 million dth,from October 2021 to March 2022, at prices ranging from $2.82 to $3.34 per DTH. Roanoke Gas also has contracts for pipeline and storage capacity which extend for various periods. These capacity costs and related feesare valued at tariff rates in place as of September 30, 2021. These rates may increase or decrease in the future based upon rate filings andrate orders granting a rate change to the pipeline or storage operator. Roanoke Gas expended approximately $33,894,000 and $21,881,000under the asset management, pipeline and storage contracts in fiscal years 2021 and 2020, respectively. The table below details the pipelineand storage capacity commitments as of September 30, 2021 for the remainder of the contract period. Pipeline and Year Storage Capacity 2021 - 2022 $15,432,720 2022 - 2023 13,671,397 2023 - 2024 11,789,154 2024 - 2025 7,206,347 2025 - 2026 2,249,852 Thereafter 1,813,618 Total $52,163,088 Roanoke Gas maintains franchise agreements granted by the local cities and towns served by the Company. Roanoke Gas renewed itsfranchise agreements with the City of Roanoke, the City of Salem and the Town of Vinton in 2016 for 20-year terms to expire in December2035. Per these agreements, franchise fees increase at a rate of 3% annually. As of September 30, 2021, $2,180,752 in future obligationsremain under the franchise agreements. Other Contracts The Company maintains other agreements in the ordinary course of business covering various lease, maintenance, equipment and servicecontracts. These agreements currently extend through December 2031 and are not material to the Company. Legal From time to time, the Company may become involved in litigation or claims arising out of its operations in the normal course of business. Atthe current time, the Company is not known to be a party to any legal proceedings that would be expected to have a materially adverseimpact on its financial position, results of operations or cash flows. 71 Environmental Matters Roanoke Gas operated an MGP as a source of fuel for lighting and heating until the early 1950’s. A by-product of operating the MGP wascoal tar, and the potential exists for tar waste contaminants at the former plant site. While the Company does not currently recognize anycommitments or contingencies related to environmental costs, should the Company ever be required to remediate the site, it will pursue allprudent and reasonable means to recover any related costs, including the use of insurance claims and regulatory approval for rate caserecognition of expenses associated with any work required. 13.FAIR VALUE MEASUREMENTS The following table summarizes the Company’s financial assets and liabilities that are measured at fair value on a recurring basis and the fairvalue measurements by level within the fair value hierarchy as defined in Note 1 as of September 30, 2021 and 2020, respectively: Fair Value Measurements - September 30, 2021 Quoted Pricesin ActiveMarkets SignificantOtherObservableInputs SignificantUnobservableInputs Fair Value Level 1 Level 2 Level 3 Liabilities: Natural gas purchases $2,728,935 $— $2,728,935 $— Interest rate swaps 1,196,083 — 1,196,083 — Total $3,925,018 $— $3,925,018 $— Fair Value Measurements - September 30, 2020 Quoted Pricesin ActiveMarkets SignificantOtherObservableInputs SignificantUnobservableInputs Fair Value Level 1 Level 2 Level 3 Liabilities: Natural gas purchases $470,755 $— $470,755 $— Interest rate swaps 2,223,556 — 2,223,556 — Total $2,694,311 $— $2,694,311 $— Under the asset management contract, a timing difference can exist between the payment for natural gas purchases and the actual receipt ofsuch purchases. Payments are made based on a predetermined monthly volume with the price based on the weighted average first of themonth index prices corresponding to the month of the scheduled payment. At September 30, 2021 and 2020, the Company had recorded inaccounts payable the estimated fair value of the liability determined on the corresponding first of month index prices for which the liability wasexpected to be settled. 72 The Company’s non-financial assets and liabilities that are measured at fair value on a nonrecurring basis consist of its asset retirementobligations. The asset retirement obligations are measured at fair value at initial recognition based on expected future cash flows to settle theobligation. The carrying value of cash and cash equivalents, accounts receivable, borrowings under line-of-credit, accounts payable (with the exceptionof the timing difference under the asset management contract), customer credit balances and customer deposits is a reasonable estimate offair value due to the shorter-term nature of these financial instruments. The following table summarizes the fair value of the Company’sfinancial assets and liabilities that are not adjusted to fair value in the consolidated financial statements as of September 30, 2021 and 2020. Fair Value Measurements - September 30, 2021 Carrying Quoted Pricesin ActiveMarkets SignificantOtherObservableInputs SignificantUnobservableInputs Amount Level 1 Level 2 Level 3 Liabilities: Current maturities of long-term debt $7,000,000 $— $— $7,000,000 Notes payable 116,110,200 — — 124,691,896 Total $123,110,200 $— $— $131,691,896 Fair Value Measurements - September 30, 2020 Carrying Quoted Pricesin ActiveMarkets SignificantOtherObservableInputs SignificantUnobservableInputs Amount Level 1 Level 2 Level 3 Liabilities: Notes payable $114,975,200 $— $— $124,740,970 Total $114,975,200 $— $— $124,740,970 The fair value of long-term debt is estimated by discounting the future cash flows of the fixed rate debt based on the underlying 20-yearTreasury rate or other Treasury instrument with a corresponding maturity period and estimated credit spread extrapolated based on marketconditions since the issuance of the debt. FASB ASC 825 – Financial Instruments requires disclosures regarding concentrations of credit risk from financial instruments. Cashequivalents are investments in high-grade, short-term securities (original maturity less than three months), placed with financially soundinstitutions. Accounts receivable are from a diverse group of customers including individuals and small and large companies in variousindustries. The Company maintains certain credit standards with its customers and requires a customer deposit if such evaluation warrants. 73 14.QUARTERLY FINANCIAL INFORMATION (UNAUDITED) Quarterly financial data for the years ended September 30, 2021 and 2020 is summarized as follows: First Second Third Fourth 2021 Quarter Quarter Quarter Quarter Operating revenues $19,517,017 $28,253,662 $14,048,846 $13,355,254 Operating income $5,581,387 $7,099,426 $1,542,333 $555,163 Net income $4,723,263 $4,767,478 $610,840 $481 Earnings (loss) per share of common stock: Basic $0.58 $0.58 $0.07 $— Diluted $0.58 $0.58 $0.07 $— First Second Third Fourth 2020 Quarter Quarter Quarter Quarter Operating revenues $19,785,453 $22,437,731 $11,071,918 $9,780,289 Operating income (loss) $5,081,979 $6,999,616 $1,335,663 $(899,076)Net income (loss) $4,006,936 $5,680,316 $1,206,578 $(329,296)Earnings (loss) per share of common stock: Basic $0.50 $0.70 $0.15 $(0.04)Diluted $0.49 $0.70 $0.15 $(0.04) 15.SUBSEQUENT EVENTS On October 28, 2021, Roanoke Gas received SCC communication that it had qualified for and will receive ARPA funds in the amount of$858,556 pursuant to Chapter 1 of the 2021 Virginia Acts of Assembly, Special Session II. The ARPA funds are to be applied to residentialcustomer accounts with arrearages greater than 60 days as of August 31, 2021. When received, Roanoke Gas plans to apply the funds toeligible customer accounts. The receipt of the funds was not recorded or applied to accounts receivable balances as of September 30, 2021;however, the Company included the pending receipt of these funds in its estimation of the allowance for uncollectible accounts. As a result,the allowance for uncollectible accounts declined to approximately $242,000 as recorded within the accompanying financial statements anddisclosed in Note 1 above. On October 29, 2021 Midstream entered into an unsecured promissory note in the principal amount of $8.0 million with an interest ratebased on 30-day LIBOR plus 115 basis points maturing December 1, 2027. Related to this note, Midstream also entered into an interestrate swap agreement that effectively converts the variable rate note into a fixed rate instrument with an effective annual interest rate of2.443%. The loan will convert into an installment loan with principal pay-down beginning in fiscal 2023. In addition, this note reduces theborrowing capacity defined by the Third Amendment to Credit Agreement and amendments to the related Promissory Notes. The totalborrowing capacity declined from $41 million to $33 million effective with the new promissory note. All other terms of the Third Amendmentto Credit Agreement remain unchanged. The Company has evaluated subsequent events through the date the financial statements were issued. There were no other items nototherwise disclosed which would have materially impacted the Company’s consolidated financial statements. 74 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. None. Item 9A. Controls and Procedures. The Company maintains disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities ExchangeAct of 1934, as amended (the “Exchange Act”)) that are designed to be effective in providing reasonable assurance that information requiredto be disclosed in reports under the Exchange Act are recorded, processed, summarized and reported within the time periods specified in therules and forms of the SEC, and that such information is accumulated and communicated to management to allow for timely decisionsregarding required disclosure. As of September 30, 2021, the Company completed an evaluation, under the supervision and with the participation of management, includingthe chief executive officer and the chief financial officer, of the effectiveness of the design and operation of the Company’s disclosure controlsand procedures. Based upon that evaluation, the chief executive officer and chief financial officer concluded that the Company’s disclosurecontrols and procedures were effective at the reasonable assurance level as of September 30, 2021. Management routinely reviews the Company’s internal control over financial reporting and makes changes, as necessary, to enhance theeffectiveness of the internal controls over financial reporting. There were no changes in the internal controls over financial reporting during thefourth quarter of the fiscal year covered by this report that have materially affected, or are reasonably likely to materially affect, theCompany’s internal control over financial reporting. MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined inRules 13a-15(f) under the Securities and Exchange Act of 1934). Internal control over financial reporting is a process designed to providereasonable assurance regarding the reliability of financial reporting and the preparation and fair presentation of financial statements for externalpurposes in accordance with GAAP and include those policies and procedures that: (i) pertain to the maintenance of records that, inreasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonableassurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and thatreceipts and expenditures are being made only in accordance with authorizations of the management and directors of the Company; and (iii)provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’sassets that could have a material effect on the financial statements. Because of the inherent limitations, any system of internal control over financial reporting, no matter how well designed, may not prevent ordetect misstatements due to the possibility that a control can be circumvented or overridden or that misstatements due to error or fraud mayoccur that are not detected. Projections of the effectiveness to future periods are subject to the risk that the internal controls may becomeinadequate because of changes in conditions, or that the degree of compliance with the policies and procedures included in such controls maydeteriorate. The Company’s internal control system was designed to provide reasonable assurance regarding the reliability of financialreporting and the preparation of financial statements for external purposes in accordance with GAAP. The Company has conducted an evaluation of the design and effectiveness of the Company’s system of internal control over financialreporting as of September 30, 2021, based on the framework set forth in ”Internal Control - Integrated Framework (2013)” issued by theCommittee of Sponsoring Organizations of the Treadway Commission. Based upon such evaluation, the Company concluded that, as ofSeptember 30, 2021, the Company’s internal control over financial reporting was effective. 75 Item 9B. Other Information. None 76 PART III Item 10. Directors, Executive Officers and Corporate Governance. For information with respect to the executive officers of the registrant, see “Executive Officers" section in the Proxy Statement for the2022 Annual Meeting of Shareholders of Resources incorporated herein by reference. For information with respect to the Company’sdirectors and nominees and the Company’s Audit Committee, see Proposal 1 “Election of Directors of Resources” and “Report of the AuditCommittee”, respectively, in the Proxy Statement for the 2022 Annual Meeting of Shareholders of Resources, which information isincorporated herein by reference. In addition, the Board of Directors has determined that Abney S. Boxley, III and Jacqueline L. Archer areaudit committee financial experts under applicable SEC rules. For information regarding the process for identifying and evaluating candidates to be nominated as directors, see "Director Nominations" inthe Proxy Statement for the 2022 Annual Meeting of Shareholders of Resources, which is incorporated herein by reference. Information with respect to compliance with Section 16(a) of the Exchange Act, which is set forth under the caption "Delinquent Section16(a) Reports" in the Proxy Statement for the 2022 Annual Meeting of Shareholders of Resources, is incorporated herein by reference. The Company has adopted a Code of Ethics applicable to all of its officers, directors and employees. The Company has posted the text of itsCode of Ethics on its website at www.rgcresources.com. The Board of Directors has adopted charters for the Audit, Compensation, andCorporate Governance and Nominating Committees of the Board of Directors. These documents may also be found on the Company’swebsite at www.rgcresources.com. Item 11. Executive Compensation. The information set forth under "Compensation of Directors", "Compensation Discussion and Analysis" and "Report of the CompensationCommittee" in the Proxy Statement for the 2022 Annual Meeting of Shareholders of Resources is incorporated herein by reference. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. For information pertaining to securities authorized for issuance under equity compensation plans, see Part II, Item 5 above. The information pertaining to shareholders beneficially owning more than five percent of the registrant’s common stock and the securityownership of management, which is set forth under the caption “Security Ownership of Certain Beneficial Owners and Management" in theProxy Statement for the 2022 Annual Meeting of Shareholders of Resources, is incorporated herein by reference. Item 13. Certain Relationships and Related Transactions, and Director Independence. The information pertaining to director independence is set forth under the caption “Board of Directors and Committees of the Board ofDirectors” and pertaining to transactions with related persons is set forth under the caption "Transactions with Related Persons" in the ProxyStatement for the 2022 Annual Meeting of Shareholders of Resources, which information is incorporated herein by reference. Item 14. Principal Accounting Fees and Services. The information set forth under the caption "Report of the Audit Committee" in the Proxy Statement for the 2022 Annual Meeting ofShareholders of Resources is incorporated herein by reference. 77 PART IV Item 15. Exhibits and Financial Statement Schedules. (a) List of documents filed as part of this report: 1. Financial statements filed as part of this report: All financial statements of the registrant as set forth under Item 8 of this Report on Form 10-K. 2. Financial statement schedules filed as part of this report: All information is inapplicable or presented in the consolidated financial statements or related notes thereto. 3. Exhibits. 1 (a) At Market Issuance Sales Agreement, dated March 5, 2020, between RGC Resources, Inc. and Janney Montgomery ScottLLC, as agent (incorporated herein by reference to Exhibit 1.1 on Form 8-K as filed March 5, 2020) 3 (a) Articles of Incorporation as amended (incorporated herein by reference to Exhibit 3.1 on Form 8-K as filed February 5, 2020) 3 (b) Amended and Restated Bylaws of RGC Resources, Inc. (incorporated herein by reference to Exhibit 3(b) on the Form 8-Kfiled on February 7, 2014) 4 (a) Specimen copy of certificate for RGC Resources, Inc. common stock, $5.00 par value (incorporated herein by reference toExhibit 4(a) of Registration Statement No. 33-67311, on Form S-4, filed with the Commission on November 13, 1998, andamended by Amendment No. 5, filed with the Commission on January 28, 1999) 4 (b) RGC Resources, Inc., Amended and Restated Dividend Reinvestment and Stock Purchase Plan (incorporated by reference toExhibit 4(b) of the Form 10-K for the year ended September 30, 2014) 4 (c) Description of RGC Resources, Inc. Common Stock 10 (a)PFirm Transportation Agreement between East Tennessee Natural Gas Company and Roanoke Gas Company dated November1, 1993 (incorporated herein by reference to Exhibit 10(a) of the Annual Report on Form 10-K for the fiscal year endedSeptember 30, 1994 (SEC file number reference 0-367)) 10 (b) FSS Service Agreement by and between Columbia Gas Transmission LLC and Roanoke Gas Company dated July 23, 2019(incorporated herein by reference to Exhibit 10.1 on Form 8-K as filed July 26, 2019) 10 (c) FTS Service Agreement by and between Columbia Gas Transmission LLC and Roanoke Gas Company dated July 23, 2019(incorporated herein by reference to Exhibit 10.2 on Form 8-K as filed July 26, 2019) 10 (d) SST Service Agreement by and between Columbia Gas Transmission LLC and Roanoke Gas Company dated July 23, 2019(incorporated herein by reference to Exhibit 10.3 on Form 8-K as filed July 26, 2019) 10 (e) FTS Service Agreement effective April 1, 2017 between Columbia Gas Transmission LLC and Roanoke Gas Company(incorporated herein by reference to Exhibit 10(f) of the Annual Report on Form 10-K as filed December 8, 2017) 10 (f) FTS-1 Service Agreement between Columbia Gulf Transmission Corporation and Roanoke Gas Company dated September 3,2004 (incorporated herein by reference to Exhibit 10(k)(k)(k) of the Quarterly Report on Form 10-Q for period endedDecember 31, 2004) 10 (g) Gas Transportation Agreement, for use under FT-A rate schedule, between Tennessee Gas Pipeline Company and RoanokeGas Company originally dated November 1, 1993 as amended. 78 10 (h)PGas Transportation Agreement, for use under IT rate schedule, between Tennessee Gas Pipeline Company and Roanoke GasCompany dated September 1, 1993 (incorporated herein by reference to Exhibit 10(l) of the Annual Report on Form 10-K forthe fiscal year ended September 30, 1994 (SEC file number reference 0-367)) 10 (i) Gas Storage Contract under rate schedule FS between Tennessee Gas Pipeline Company and Roanoke Gas Companyoriginally dated November 1, 1993 as amended. 10 (j) Gas Transportation Agreement, for use under FT-A rate schedule, between Tennessee Gas Pipeline Company and RoanokeGas Company originally dated November 1, 1993 as amended. 10 (k) FTA Gas Transportation Agreement effective November 1, 1998, between East Tennessee Natural Gas Company andRoanoke Gas Company (incorporated herein by reference to Exhibit 10(s)(s) of Annual Report on Form 10-K for the fiscalyear ended September 30, 1998 (SEC file reference number 0-367)) 10 (l) Firm Storage Service Agreement effective March 19, 1997, between Virginia Gas Storage Company and Roanoke GasCompany (incorporated herein by reference to Exhibit 10(w)(w) of Annual Report on Form 10-K for the fiscal year endedSeptember 30, 1998 (SEC file reference number 0-367)) 10 (m) Firm Storage Service Agreement by and between Roanoke Gas Company and Virginia Gas Pipeline Company, dated June 1,2001 (incorporated herein by reference to Exhibit 10(b)(b)(b) of Annual Report on Form 10-K for the fiscal year endedSeptember 30, 2001 (SEC file number reference 0-367)) 10 (n) FSS Service Agreement between Saltville Gas Storage Company L.L.C. and Roanoke Gas Company dated November 21,2012 (incorporated herein by reference to Exhibit 10(o) of the Annual Report on Form 10-K as filed December 8, 2017) 10 (o) Firm Pipeline Service Agreement by and between Roanoke Gas Company and Virginia Gas Pipeline Company, dated June 1,2001 (incorporated herein by reference to Exhibit 10(c)(c)(c) of Annual Report on Form 10-K for the fiscal year endedSeptember 30, 2001 (SEC file number reference 0-367)) 10 (p) Natural Gas Asset Management Agreement by and between Roanoke Gas Company and Sequent Energy Management LPeffective April 1, 2018 (incorporated herein by reference to Exhibit 10.1 on Form 8-K as filed on March 27, 2018) 10 (q) Amendment No. 1 to Natural Gas Asset Management Agreement dated July 31, 2020 by and between Roanoke GasCompany and Sequent Energy Management LP (incorporated herein by reference to Exhibit 10.6 on From 10Q as filed August5, 2020) 10 (r) Amendment No. 2 to Natural Gas Asset Management Agreement dated August 5, 2021 by and between Roanoke GasCompany and Sequent Energy Management LP (incorporated herein by reference to Exhibit 10.1 on Form 10Q as filed August6, 2021 10 (s) Parental Guaranty by RGC Resources, Inc. in favor of Sequent Energy Management LP effective April 1, 2018 (incorporatedherein by reference to Exhibit 10.2 on Form 8-K as filed on March 27, 2018) 10 (t) Gas Transportation Agreement between Tennessee Gas Pipeline Company and Roanoke Gas Company originally datedNovember 1, 1999 as amended May 17, 2016 (incorporated herein by reference to Exhibit 10.3 of Form 10-Q as filed August4, 2016) 10 (u) Amendment dated May 17, 2016 to Gas Transportation Agreement originally dated December 1, 1993 between TennesseeGas Pipeline Company and Roanoke Gas Company (incorporated herein by reference to Exhibit 10.1 of Form 10-Q as filedAugust 4, 2016) 10 (v) Amendment dated May 17, 2016 to Gas Transportation Agreement originally dated November 1, 1993 between TennesseeGas Pipeline Company and Roanoke Gas Company (incorporated herein by reference to Exhibit 10.2 of Form 10-Q as filedAugust 4, 2016) 10 (w) Gas Transportation Agreement, for use under FT-A rate schedule between Midwestern Gas Transmission Company andRoanoke Gas Company dated March 11, 2019 (incorporated herein by reference to Exhibit 10.1 on Form 10-Q as filed May6, 2019) 79 10 (x)PCertificate of Public Convenience and Necessity for Bedford County dated February 21, 1966 (incorporated herein byreference to Exhibit 10(o) of Registration Statement No. 33-36605, on Form S-2, filed with the Commission on August 29,1990, and amended by Amendment No. 1, filed with the Commission on September 19, 1990) 10 (y)PCertificate of Public Convenience and Necessity for Roanoke County dated October 19, 1965 (incorporated herein byreference to Exhibit 10(p) of Registration Statement No. 33-36605, on Form S-2, filed with the Commission on August 29,1990, and amended by Amendment No. 1, filed with the Commission on September 19, 1990 (SEC file number reference 0-367)) 10 (z)PCertificate of Public Convenience and Necessity for Botetourt County dated August 30, 1966 (incorporated herein by referenceto Exhibit 10(q) of Registration Statement No. 33-36605, on Form S-2, filed with the Commission on August 29, 1990, andamended by Amendment No. 1, filed with the Commission on September 19, 1990 (SEC file number reference 0-367)) 10 (a)(a)PCertificate of Public Convenience and Necessity for Montgomery County dated July 8, 1985 (incorporated herein by referenceto Exhibit 10(r) of Registration Statement No. 33-36605, on Form S-2, filed with the Commission on August 29, 1990, andamended by Amendment No. 1, filed with the Commission on September 19, 1990 (SEC file number reference 0-367)) 10 (b)(b)PResolution of the Council for the Town of Fincastle, Virginia dated June 8, 1970 (incorporated herein by reference to Exhibit10(f) of Registration Statement No. 33-11383, on Form S-4, filed with the Commission on January 16, 1987 (SEC file numberreference 0-367)) 10 (c)(c)PResolution of the Council for the Town of Troutville, Virginia dated November 4, 1968 (incorporated herein by reference toExhibit 10(g) of Registration Statement No. 33-11383, on Form S-4, filed with the Commission on January 16, 1987 (SEC filenumber reference 0-367)) 10 (d)(d) Certificate of Public Convenience and Necessity for Franklin County dated March 5, 2019 (incorporated herein by reference toExhibit 10.2 on Form 10-Q as filed May 6, 2019) 10 (e)(e) Gas Franchise Agreement between the City of Roanoke, Virginia, and Roanoke Gas Company dated December 14, 2015(incorporated herein by reference to Exhibit 10.1 on Form 8-K as filed December 16, 2015) 10 (f)(f) Gas Franchise Agreement between the City of Salem, Virginia, and Roanoke Gas Company dated December 14, 2015(incorporated herein by reference to Exhibit 10.2 on Form 8-K as filed December 16, 2015) 10 (g)(g) Gas Franchise Agreement between the Town of Vinton, Virginia, and Roanoke Gas Company dated November 17, 2015(incorporated herein by reference to Exhibit 10.3 on Form 8-K as filed December 16, 2015) 10 (h)(h) RGC Resources Amended and Restated Key Employee Stock Option Plan (incorporated herein by reference to Exhibit 4(c) ofRegistration Statement No. 333-02455, Post Effective Amendment on Form S-8, filed with the Commission on July 2, 1999) 10 (i)(i) RGC Resources, Inc. Amended and Restated Stock Bonus Plan (incorporated herein by reference to Exhibit 10 on Form 8-Kfiled on January 27, 2005 (SEC file reference number 0-367)) 10 (j)(j) RGC Resources, Inc. Amended And Restated Restricted Stock Plan for Outside Directors (incorporated herein by reference toExhibit 10(i)(i) to the Annual Report on Form 10-K as filed December 8, 2017) 10 (k)(k) RGC Resources, Inc. Restricted Stock Plan (incorporated herein by reference to Exhibit 10.1 of Form 8-K as filed February 9,2017) 10 (l)(l) Change in Control Agreement between RGC Resources, Inc. and Mr. Paul W. Nester effective May 1, 2020 (incorporatedherein by reference to Exhibit 10.1 on Form 8-K as filed April 29, 2020) 10 (m)(m) Change in Control Agreement between RGC Resources, Inc. and Mr. Robert L. Wells, II effective May 1, 2020 (incorporatedherein by reference to Exhibit 10.3 on Form 8-K as filed April 29, 2020) 10 (n)(n) Change in Control Agreement between RGC Resources, Inc. and Mr. Carl J. Shockley, Jr. effective May 1, 2020(incorporated herein by reference to Exhibit 10.4 on Form 8-K as filed April 29, 2020) 80 10 (o)(o) Change in Control Agreement between RGC Resources, Inc. and Mr. Lawrence T. Oliver effective May 1, 2020 (incorporatedherein by reference to Exhibit 10.5 on Form 8-K as filed April 29, 2020) 10 (p)(p) Revolving Line of Credit Note in the original principal amount of $40,000,000 by Roanoke Gas Company with Wells FargoBank, N.A. dated as of March 25, 2021 (incorporated herein by reference to Exhibit 10.1 on Form 8-K as filed March 31,2021) 10 (q)(q) Credit Agreement by and between Roanoke Gas Company and Wells Fargo Bank, N.A. dated March 31, 2016 (incorporatedherein by reference to Exhibit 10.2 on Form 8-K as filed April 4, 2016) 10 (r)(r) First Amendment to Credit Agreement by and between Roanoke Gas Company and Wells Fargo Bank, N.A. dated March 27,2017 (incorporated herein by reference to Exhibit 10.2 on Form 8-K as filed March 29, 2017) 10 (s)(s) Second Amendment to Credit Agreement by and between Roanoke Gas Company and Wells Fargo Bank, N.A. dated as ofMarch 26, 2018 (incorporated herein by reference to Exhibit 10.2 on Form 8-K as filed March 27, 2018) 10 (t)(t) Third Amendment to Credit Agreement by and between Roanoke Gas Company and Wells Fargo Bank, N.A. dated as ofMarch 26, 2019 (incorporated herein by reference to Exhibit 10.2 on Form 8-K as filed March 28, 2019) 10 (u)(u) Fourth Amendment to Credit Agreement by and between Roanoke Gas Company and Wells Fargo Bank, N.A. dated as ofMarch 26, 2020 (incorporated herein by reference to Exhibit 10.2 on Form 8-K as filed March 30, 2020) 10 (v)(v) Fifth Amendment to Credit Agreement by and between Roanoke Gas Company and Wells Fargo Bank, N.A., includingGuarantor's Consent and Reaffirmation, dated as of March 25, 2021 (incorporated herein by reference to Exhibit 10.2 on Form8-K as filed March 31, 2021). 10 (w)(w) Sixth Amendment to Credit Agreement by and between Roanoke Gas Company and Wells Fargo Bank, N.A., includingGuarantor's Consent and Reaffirmation, dated as of August 20, 2021 (incorporated herein by reference to Exhibit 10.2 on Form8-K as filed August 26, 2021). 10 (x)(x) Continuing Guaranty by RGC Resources, Inc. in favor of Wells Fargo Bank, N.A. dated March 31, 2016 (incorporated byreference to Exhibit 10.3 on Form 8-K as filed April 4, 2016) 10 (y)(y) Note Purchase Agreement for 4.26% Senior Guaranteed Notes due September 18, 2034 in the original principal amount of$30,500,000 in favor of The Prudential Insurance Company of America, PAR U Hartford Life & Annuity Comfort Trust andPRUCO Life Insurance Company of New Jersey (incorporated herein by reference to Exhibit 10.1 on Form 8-K as filedAugust 4, 2014) 10 (z)(z) Unconditional Parent Guaranty by RGC Resources, Inc. in favor of each of the holders of the notes: The Prudential LifeInsurance Company of America, PAR U Hartford Life & Annuity Comfort Trust and PRUCO Life Insurance Company of NewJersey (incorporated herein by reference to Exhibit 10.2 on Form 8-K as filed August 4, 2014) 10 (a)(a)(a) 4.26% Senior Guaranteed Notes due September 18, 2034 in the original principal amount of $15,250,000 in favor of ThePrudential Insurance Company of America (incorporated herein by reference to Exhibit 10.1 on Form 8-K as filed September23, 2014) 10 (b)(b)(b) 4.26% Senior Guaranteed Notes due September 18, 2034 in the original principal amount of $9,700,000 in favor of PAR UHartford Life & Annuity Comfort Trust (incorporated herein by reference to Exhibit 10.2 on Form 8-K as filed September 23,2014) 10 (c)(c)(c) 4.26% Senior Guaranteed Notes due September 18, 2034 in the original principal amount of $5,550,000 in favor of PRUCOLife Insurance Company of New Jersey (incorporated herein by reference to Exhibit 10.3 on Form 8-K as filed September 23,2014) 10 (d)(d)(d) Credit Agreement between RGC Midstream, LLC, Union Bank & Trust and Branch Banking and Trust Company datedDecember 29, 2015 (incorporated by reference to Exhibit 10.1 on Form 8-K as filed December 31, 2015) 81 10 (e)(e)(e) First Amendment to Credit Agreement between RGC Midstream, LLC and the lenders Union Bank & Trust and BranchBanking and Trust dated April 11, 2018 (incorporated herein by reference to Exhibit 10.1 on Form 8-K as filed April 12, 2018) 10 (f)(f)(f) Second Amendment to Credit Agreement between RGC Midstream, LLC and the lenders Union Bank & Trust and BranchBanking and Trust dated February 19, 2019 (incorporated herein by reference to Exhibit 10.1 on Form 8-K as filed February19, 2019) 10 (g)(g)(g) Third Amendment to Credit Agreement between RGC Midstream, LLC and the lenders Atlantic Union Bank and Truist Bankdated December 23, 2019 (incorporated herein by reference to Exhibit 10.1 on Form 8-K as filed December 23, 2019) 10 (h)(h)(h) Amended and Restated Note in the principal amount of $24,600,000 in favor of Atlantic Union Bank due December 29, 2022(incorporated herein by reference to Exhibit 10.2 on Form 8-K as filed December 23, 2019) 10 (i)(i)(i) Amended and Restated Note in the principal amount of $16,400,000 in favor of Truist Bank due December 29, 2022(incorporated herein by reference to Exhibit 10.3 on Form 8-K as filed December 23, 2019) 10 (j)(j)(j) Guaranty by RGC Resources, Inc. in favor of Union Bank & Trust and Branch Banking and Trust Company dated December29, 2015 (incorporated herein by reference to Exhibit 10.4 on Form 8-K as filed December 31, 2015) 10 (k)(k)(k) Private Shelf Agreement by and between Roanoke Gas Company and Prudential Investment Management, Inc. for the pre-authorization to issue notes up to $29,500,000 in total during the term of the agreement (incorporated herein by reference toExhibit 10.4 on Form 8-K as filed October 4, 2017) 10 (l)(l)(l) Second Amendment to Private Shelf Agreement dated as of December 6, 2019 (incorporated herein by reference to Exhibit10.4 on Form 8-K as filed December 9, 2019) 10 (m)(m)(m) Unsecured Note in the original principal amount of $4,000,000 by and between Roanoke Gas Company and PRUCO LifeInsurance Company of New Jersey, dated October 2, 2017 (incorporated herein by reference to Exhibit 10.1 on Form 8-K asfiled October 4, 2017) 10 (n)(n)(n) Unsecured Note in the original principal amount of $4,000,000 by and between Roanoke Gas Company and Prudential ArizonaReinsurance Captive Company, dated October 2, 2017 (incorporated herein by reference to Exhibit 10.2 on Form 8-K as filedOctober 4, 2017) 10 (o)(o)(o) Unconditional Parent Guaranty by RGC Resources, Inc. in favor of each of the holders of the notes: The PRUCO LifeInsurance Company of New Jersey and the Prudential Arizona Reinsurance Captive Company (incorporated herein byreference to Exhibit 10.3 on Form 8-K as filed October 4, 2017) 10 (p)(p)(p) Unsecured Note in the original principal amount of $5,000,000 by and between Roanoke Gas Company and Highmark, Inc.dated March 28, 2019 (incorporated herein by reference to Exhibit 10.1 on Form 8-K as filed March 29, 2019) 10 (q)(q)(q) Unsecured Note in the original principal amount of $3,000,000 by and between Roanoke Gas Company and Prudential ArizonaReinsurance Term Company dated March 28, 2019 (incorporated herein by reference to Exhibit 10.2 on Form 8-K as filedMarch 29, 2019) 10 (r)(r)(r) Unsecured Note in the original principal amount of $2,000,000 by and between Roanoke Gas Company and The PrudentialInsurance Company of America dated March 28, 2019 (incorporated herein by reference to Exhibit 10.3 on Form 8-K as filedMarch 29, 2019) 10 (s)(s)(s) Unconditional Guaranty Agreement by and between RGC Resources, Inc. and Prudential Investment Management and eachPrudential Affiliate which is a party to the borrowing (incorporated herein by reference to Exhibit 10.4 on Form 8-K as filedMarch 29, 2019) 10 (t)(t)(t) Promissory Note in the original principal amount of $14,000,000 by and between RGC Midstream, LLC and Atlantic UnionBank, dated June 12, 2019 (incorporated herein by reference to Exhibit 10.1 on Form 8-K as filed June 17, 2019) 10 (u)(u)(u) Loan Agreement between RGC Midstream, LLC and Atlantic Union Bank, dated June 12, 2019 (incorporated herein byreference to Exhibit 10.2 on Form 8-K as filed June 17, 2019) 82 10 (v)(v)(v) Unconditional Guaranty by and between RGC Resources, Inc. and Atlantic Union Bank (incorporated herein by reference toExhibit 10.3 on Form 8-K as filed June 17, 2019) 10 (w)(w)(w) Swap Agreement by and between RGC Midstream, LLC and Atlantic Union Bank, dated June 12, 2019 (incorporated hereinby reference to Exhibit 10.4 on Form 8-K as filed June 17, 2019) 10 (x)(x)(x) Promissory Note in the original principal amount of $10,000,000 by and between RGC Midstream, LLC and Branch Bankingand Trust, dated June 13, 2019 (incorporated herein by reference to Exhibit 10.5 on Form 8-K as filed June 17, 2019) 10 (y)(y)(y) Loan Agreement between RGC Midstream, LLC and Branch Banking and Trust Company, dated June 13, 2019 (incorporatedherein by reference to Exhibit 10.6 on Form 8-K as filed June 17, 2019) 10 (z)(z)(z) Unconditional Guaranty by and between RGC Resources, Inc. and Branch Banking and Trust Company (incorporated hereinby reference to Exhibit 10.7 on Form 8-K as filed June 17, 2019) 10 (a)(a)(a)(a) Swap Agreement by and between RGC Midstream, LLC and Branch Banking and Trust Company, dated June 13, 2019(incorporated herein by reference to Exhibit 10.8 on Form 8-K as filed June 17, 2019) 10 (b)(b)(b)(b)**Third Amended and Restated Limited Liability Company Agreement of Mountain Valley Pipeline, LLC dated April 6, 2018(incorporated by reference to Exhibit 10.1 on the Quarterly Report on Form 10-Q as filed May 7, 2018) 10 (c)(c)(c)(c) Guaranty Agreement by RGC Resources, Inc. in favor of Mountain Valley Pipeline, LLC (incorporated herein by reference toExhibit 10.2 on Form 10-Q as filed May 7, 2018) 10 (d)(d)(d)(d) Unsecured Note in the original principal amount of $5,000,000 by and between Roanoke Gas and Prudential ArizonaReinsurance Universal Company, dated December 6, 2019 (incorporated herein by reference to Exhibit 10.1 on Form 8-K asfiled December 9, 2019) 10 (e)(e)(e)(e) Unsecured Note in the original principal amount of $5,000,000 by and between Roanoke Gas and Prudential ArizonaReinsurance Universal Company, dated December 6, 2019 (incorporated herein by reference to Exhibit 10.2 on Form 8-K asfiled December 9, 2019) 10 (f)(f)(f)(f) Unconditional Guaranty Agreement by and between RGC Resources, Inc. and Prudential Investment Management and eachPrudential Affiliate which is a party to the borrowings dated December 6, 2019 (incorporated herein by reference to Exhibit10.3 on Form 8-K as filed December 9, 2019) 10 (g)(g)(g)(g) Private Shelf Agreement by and between Roanoke Gas Company and MetLife Investment Management Limited datedSeptember 30, 2020, for the pre-authorization to issue notes up to the aggregate amount of $70,000,000 in total during the termof the agreement (incorporated herein by reference to Exhibit (l)(l)(l)(l) on Form 10-K for the year ended September 30, 2020). 10 (h)(h)(h)(h) Delayed Draw Term Note in the principal amount of $15,000,000 by Roanoke Gas Company with Wells Fargo Bank, N.A.dated as of August 20, 2021 (incorporated by reference to Exhibit 10.1 on Form 8-K as filed August 26, 2021). 10 (i)(i)(i)(i) Swap Agreement by and between Roanoke Gas Company and Wells Fargo Bank, N.A., executed on August 20, 2021(incorporated by reference to Exhibit 10.3 on Form 8-K as filed August 26, 2021). 10 (j)(j)(j)(j) Promissory Note in the principal amount of $10,000,000 by Roanoke Gas Company with Pinnacle Bank, dated as ofSeptember 24, 2021 (incorporated herein by reference to Exhibit 10.1 on Form 8-K as filed September 30, 2021). 10 (k)(k)(k)(k) Loan Agreement by and between Roanoke Gas Company and Pinnacle Bank, dated as of September 24, 2021 (incorporatedherein by reference to Exhibit 10.2 on Form 8-K as filed September 30, 2021). 10 (l)(l)(l)(l) Swap Agreement by and between Roanoke Gas Company and Pinnacle Bank, executed on September 24, 2021 (incorporatedherein by reference to Exhibit 10.3 on Form 8-K as filed September 30, 2021). 10 (m)(m)(m)(m) Promissory Note in the principal amount of $8,000,000 by RGC Midstream, LLC with Atlantic Union Bank, dated as ofNovember 1, 2021 (incorporated herein by reference to Exhibit 10.1 on Form 8-K as filed November 4, 2021). 83 10 (n)(n)(n)(n) Loan Agreement by and between RGC Midstream, LLC and Atlantic Union Bank, dated as of November 1, 2021(incorporated herein by reference to Exhibit 10.2 on Form 8-K as filed November 4, 2021). 10 (o)(o)(o)(o) Swap Agreement by and between RGC Midstream, LLC and Atlantic Union Bank, executed on November 1, 2021(incorporated herein by reference to Exhibit 10.3 on Form 8-K as filed November 4, 2021). 10 (p)(p)(p)(p) Guaranty by RGC Resources, Inc. with Atlantic Union Bank, dated as of November 1, 2021 (incorporated herein by referenceto Exhibit 10.4 on Form 8-K as filed November 4, 2021)10 (q)(q)(q)(q) Nonqualified Deferred Compensation Plan Document (incorporated herein by reference to Exhibit 10.1 on Form 10-Q as filedFebruary 11, 2021) 10 (r)(r)(r)(r) Guaranty by RGC Resources, Inc. with Pinnacle Bank, dated as of September 24, 2021. 10 (s)(s)(s)(s) Amendment dated November 29, 2021 to Gas Transportation Agreement originally dated December 1, 1993 betweenTennessee Gas Pipeline and Roanoke Gas Company. 13 Annual Report 14 Code of Ethics (incorporated herein by reference to Exhibit 14 on Form 8-K as filed April 29, 2020) 21 Subsidiaries of the Company 23 Consent of Brown, Edwards & Company, LLP 31.1 Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer 31.2 Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer 32.1*Section 1350 Certification of Principal Executive Officer 32.2*Section 1350 Certification of Principal Financial Officer 101.INS Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags areembedded within the Inline XBRL document)101.SCH Inline XBRL Taxonomy Extension Schema Document101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document104 Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) * These certifications are being furnished solely to accompany this annual report pursuant to 18 U.S.C. Section 1350, and are not being filed forpurposes of Section 18 of the Securities Exchange Act of 1934 and are not to be incorporated by reference into any filing of the registrant, whethermade before or after the date hereof, regardless of any general incorporation language in such filing. ** Confidential treatment has been granted with respect to portions of this exhibit, indicated by asterisks, which has been filed separately with theSecurities and Exchange Commission. P These original exhibits were filed with the SEC in paper form and therefore are not hyper-linked to the original filing. Item 16. Form 10-K Summary. Not applicable. 84 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Annual Report onForm 10-K to be signed on its behalf by the undersigned, thereunto duly authorized. RGC RESOURCES, INC. By:/S/ LAWRENCE T. OLIVERDecember 2, 2021 Lawrence T. OliverDate Vice President, Interim CFO, Corporate Secretary and Treasurer (Principal Financial Officer) 85 Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report on Form 10-K has been signed below by the followingpersons on behalf of the Registrant and in the capacities and on the dates indicated. /S/ PAUL W. NESTER December 2, 2021 President and Chief Executive Officer, DirectorPaul W. Nester Date (Principal Executive Officer) /S/ LAWRENCE T. OLIVER December 2, 2021 Vice President, Interim CFO, Corporate Secretary andTreasurerLawrence T. Oliver Date (Principal Financial Officer) /S/ JOHN B. WILLIAMSON, III December 2, 2021 Chairman of the Board and DirectorJohn B. Williamson, III Date /S/ NANCY H. AGEE December 2, 2021 DirectorNancy H. Agee Date /S/ JACQUELINE L. ARCHER December 2, 2021 DirectorJacqueline L. Archer Date /S/ ABNEY S. BOXLEY, III December 2, 2021 DirectorAbney S. Boxley, III Date /S/ T. JOE CRAWFORD December 2, 2021 DirectorT. Joe Crawford Date /S/ MARYELLEN F. GOODLATTE December 2, 2021 DirectorMaryellen F. Goodlatte Date /S/ J. ALLEN LAYMAN December 2, 2021 DirectorJ. Allen Layman Date /S/ S. FRANK SMITH December 2, 2021 DirectorS. Frank Smith Date 86CORPORATE INFORMATION BOARD OF DIRECTORS Nancy Howell Agee President and CEO - Carilion Clinic Jacqueline L. Archer President and COO - Blue Ridge Beverage Company, Inc. Abney S. Boxley, III President – Boxley Family, LLC T. Joe Crawford Retired Vice President and General Manager - Steel Dynamics Roanoke Bar Division Maryellen F. Goodlatte Attorney - Glenn, Feldmann, Darby & Goodlatte J. Allen Layman Private Investor and Retired President and CEO - Ntelos, Inc. Paul W. Nester President and CEO - RGC Resources, Inc. S. Frank Smith Retired Vice President, Industrial Sales - Alpha Coal Sales Company, LLC John B. Williamson, III Chairman - RGC Resources, Inc. ANNUAL REPORT AND 10-K This annual report, 10-K and the financial statements contained herein are submitted to the shareholders of the Company for their general information and not in connection with any sale or offer to sell, or solicitation of any offer to buy, any securities. PUBLIC INFORMATION AND SEC FILINGS Our latest news and Securities and Exchange Commission (SEC) filings are available to view and print on our website, www.rgcresources.com. Send written notice to Investor Relations to request a printed copy of any Company publication. ANNUAL MEETING Our annual meeting of shareholders will be held virtually at the following URL www.virtual shareholdermeeting.com/RGCO2022 on Monday, January 24, 2022, at 11:30 a.m. Proxies will be requested from shareholders when the notice of meeting, proxy statement and form of proxy are mailed on or about December 8, 2021. Transfer Agent and Registrar: Broadridge Financial Solutions Inc. c/o RGC Resources, Inc. P.O. Box 1342, Brentwood, NY 11717 Phone: (844) 388-9273 Email: shareholder@broadridge.com Web: shareholder.broadridge.com/rgco/ Analyst and Media Inquiries: RGC Resources, Inc. c/o Analyst/Media Inquiries, P.O. Box 13007, Roanoke, VA 24030 Email: Investor_Relations@RGCResources.com Web: www.rgcresources.com/investor-financial-information/ 519 Kimball Avenue, NE P.O. Box 13007 Roanoke, Virginia 24030-3007 www.rgcresources.com Facebook.com/RoanokeGas Twitter.com/RoanokeGas Trading on NASDAQ as RGCO BR74955L-1221-10K

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