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SEC Filings

10-Q
SOUTHERN CO GAS filed this Form 10-Q on 11/04/2016
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Segment Information
Operating margin, operating expenses, and EBIT information for each of Southern Company Gas' segments is contained in the tables below. A reconciliation of operating revenue and operating margin to operating income and EBIT to income before income taxes and net income is contained in "Combined Operating Results" herein. See Note (J) to the Condensed Consolidated Financial Statements herein for additional segment information.
 
 
Successor
 
 
Predecessor
 
 
Third Quarter 2016
 
 
Third Quarter 2015
 
 
Operating margin (*)
 
Operating expenses (*)
 
EBIT
 
 
Operating margin (*)
 
Operating expenses (*)
 
EBIT
 
 
(in millions)
 
 
(in millions)
Gas distribution operations
 
$
353

 
$
284

 
$
75

 
 
$
341

 
$
256

 
$
86

Gas marketing services
 
45

 
51

 
(6
)
 
 
48

 
37

 
11

Wholesale gas services
 
(8
)
 
10

 
(17
)
 
 
33

 
15

 
18

Gas midstream operations
 
9

 
13

 
25

 
 
9

 
25

 
(16
)
All other
 
2

 
31

 
(27
)
 
 

 
39

 
(37
)
Intercompany eliminations
 
(1
)
 
(1
)
 

 
 
(1
)
 
(1
)
 

Consolidated
 
$
400

 
$
388

 
$
50

 
 
$
430

 
$
371

 
$
62

(*)
Operating margin and operating expenses are adjusted for revenue tax expenses, which are passed through directly to customers.
 
 
Combined
 
 
Predecessor
 
 
Year-to-Date 2016
 
 
Year-to-Date 2015
 
 
Operating margin (*)
 
Operating expenses (*)
 
EBIT
 
 
Operating margin (*)
 
Operating expenses (*)
 
EBIT
 
 
(in millions)
 
 
(in millions)
Gas distribution operations
 
$
1,264

 
$
844

 
$
428

 
 
$
1,213

 
$
798

 
$
420

Gas marketing services
 
235

 
132

 
103

 
 
237

 
122

 
115

Wholesale gas services
 
(44
)
 
43

 
(85
)
 
 
118

 
52

 
66

Gas midstream operations
 
24

 
37

 
19

 
 
27

 
48

 
(20
)
All other
 
6

 
96

 
(87
)
 
 
4

 
49

 
(41
)
Intercompany eliminations
 
(5
)
 
(5
)
 

 
 
(4
)
 
(4
)
 

Consolidated
 
$
1,480

 
$
1,147

 
$
378

 
 
$
1,595

 
$
1,065

 
$
540

(*)
Operating margin and operating expenses are adjusted for revenue tax expenses, which are passed through directly to customers.
Gas Distribution Operations
The gas distribution operations segment is the largest component of Southern Company Gas' business and is subject to regulation and oversight by agencies in each of the states it serves. These agencies approve natural gas rates designed to provide Southern Company Gas the opportunity to generate revenues to recover the cost of natural gas delivered to its customers and its fixed and variable costs, such as depreciation, interest, maintenance and overhead costs, and to earn a reasonable return on its investments.
With the exception of Atlanta Gas Light, Southern Company Gas' second largest utility that operates in a deregulated natural gas market and has a straight-fixed-variable rate design that minimizes the variability of its revenues based on consumption, the earnings of Southern Company Gas' regulated utilities can be affected by customer consumption patterns that are a function of weather conditions, price levels for natural gas, and general economic conditions that may impact customers’ ability to pay for natural gas consumed. Southern Company Gas has various weather mechanisms, such as weather normalization mechanisms and weather derivative instruments, that limit its exposure to weather changes within typical ranges in its respective service areas. Gas distribution operations' EBIT decreased by $11 million for the third quarter 2016 and increased by $8 million for combined year-to-date 2016 compared to the corresponding periods in 2015, as shown in the following table.


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