Annual report pursuant to Section 13 and 15(d)

Transportation and Distribution Revenue

v3.20.4
Transportation and Distribution Revenue
 12 Months Ended
Dec. 31, 2020
Revenue from Contract with Customer [Abstract]  
Transportation and Distribution Revenue TRANSPORTATION AND DISTRIBUTION REVENUE
The Company's contracts related to transportation and distribution revenue are primarily comprised of a mix of natural gas supply, transportation and distribution performance obligations, as well as limited performance obligations related to system maintenance and improvement. Refer to Note 2 ("Significant Accounting Policies") for additional details on the Company's revenue recognition policies under ASC 606.
Based on a downward revision of the rate during the Company's contract with Spire, ASC 606 requires the Company to record the contractual transaction price, and therefore aggregate revenue, from the contract ratably over the term of the contract. Accordingly, on January 1, 2018, the Company recorded a cumulative adjustment to recognize a contract liability of approximately $3.3 million, and a corresponding reduction to beginning equity (net of deferred tax impact). The adjustment reflects the difference in amounts previously recognized as invoiced, versus cumulative revenues earned under the contract on a straight-line basis in accordance with ASC 606, as of the date of adoption. The contract liability continued to accumulate additional unrecognized performance obligations at a rate of approximately $992 thousand per quarter until the contractual rate decrease took effect in November 2018. Following the rate decline, recognized performance obligations exceeded amounts invoiced and the contract liability began to decline at a rate of approximately $138 thousand per quarter through mid-December 2020.
During the fourth quarter of 2020, MoGas entered into a new long-term firm transportation services agreement with Spire, its largest customer. Upon completion of the STL interconnect project in mid-December 2020, as described in Note 7 ("Property And Equipment"), the agreement increased Spire’s firm capacity from 62,800 dekatherms per day to 145,600 dekatherms per day through October 2030 and replaced the previous firm transportation agreement. In accordance with ASC 606, the Company accounted for the contract modification in the fourth quarter of 2020 as a termination of the existing transportation contract and a creation of a new transportation contract with Spire, which is accounted for prospectively. Following the contract modification,
the recognized performance obligation will continue to exceed amounts invoiced, and the contract liability will decline at a rate of $146 thousand per quarter through the end of the contract in October 2030. As of December 31, 2020, the revenue allocated to the remaining performance obligation under this contract is approximately $68.7 million.
The table below summarizes the Company's contract liability balance related to its transportation and distribution revenue contracts as of December 31, 2020 and 2019:
Contract Liability(1)
December 31, 2020 December 31, 2019
Beginning Balance January 1 $ 6,850,790  $ 6,522,354 
Unrecognized Performance Obligations 347,811  887,916 
Recognized Performance Obligations (1,093,622) (559,480)
Ending Balance December 31 $ 6,104,979  $ 6,850,790 
(1) The contract liability balance is included in unearned revenue in the Consolidated Balance Sheets.
The Company's contract asset balance was $363 thousand and $206 thousand as of December 31, 2020 and 2019, respectively. The Company also recognized deferred contract costs related to incremental costs to obtain a transportation performance obligation contract, which are amortized on a straight-line basis over the remaining term of the contract. As of December 31, 2020, the remaining unamortized deferred contract costs balance was $950 thousand. The contract asset and deferred contract costs balances are included in prepaid expenses and other assets in the Consolidated Balance Sheets.
The following is a breakout of the Company's transportation and distribution revenue for the years ended December 31, 2020, 2019 and 2018:
For the Years Ended December 31,
2020 2019 2018
Natural gas transportation contracts 64.3  % 67.8  % 64.3  %
Natural gas distribution contracts 23.9  % 25.5  % 26.8  %