Quarterly report pursuant to Section 13 or 15(d)

Transportation and Distribution Revenue

v3.20.2
Transportation and Distribution Revenue
 6 Months Ended
Jun. 30, 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. Based on the nature of the agreements, revenue for all but one of the Company's natural gas supply, transportation and distribution performance obligations is recognized on a right to invoice basis as the performance obligations are met, which represents what the Company expects to receive in consideration and is representative of value delivered to the customer. System maintenance and improvement contracts are specific and tailored to the customer's needs, have no alternative use and have an enforceable right to payment as the services are provided. Revenue is recognized on an input method, based on the actual cost of service as a measure of the performance obligation satisfaction. Differences between amounts invoiced and revenue recognized under the input method are reflected as an asset or liability on the Consolidated Balance Sheets. The costs of system improvement projects are recognized as a financing arrangement in accordance with guidance in the lease standard while the margin is recognized in accordance with the revenue standard as discussed above.
The Company has a contract with Spire that has fixed pricing which varies over the contract term. For this specific contract, the transaction price has been allocated ratably over the contractual performance obligation. Based on a downward revision of the rate during the Company's long-term natural gas transportation 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. Following the November 2018 rate decline, recognized performance obligations exceeded amounts invoiced and the contract liability began to decline at a rate of approximately $138 thousand per quarter and will continue to decline at the same rate through the end of the contract in October 2030. As of June 30, 2020, the revenue allocated to the remaining performance obligation under this contract is approximately $55.4 million.
The table below summarizes the Company's contract liability balance related to its transportation and distribution revenue contracts as of June 30, 2020:
 
Contract Liability(1)
 
June 30, 2020
 
December 31, 2019
Beginning Balance January 1
$
6,850,790

 
$
6,522,354

Unrecognized Performance Obligations
(10,222
)
 
887,916

Recognized Performance Obligations
(577,470
)
 
(559,480
)
Ending Balance
$
6,263,098

 
$
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 $33 thousand and $206 thousand as of June 30, 2020 and December 31, 2019, respectively. The contract asset balance is 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 three and six months ended June 30, 2020 and 2019:
 
For the Three Months Ended
 
For the Six Months Ended
 
June 30, 2020
 
June 30, 2019
 
June 30, 2020
 
June 30, 2019
Natural gas transportation contracts
68.0
%
 
57.6
%
 
68.4
%
 
59.5
%
Natural gas distribution contracts
27.2
%
 
35.0
%
 
25.0
%
 
34.9
%