Greetings, and welcome to the Chesapeake Utilities Corporation Results for First Quarter 2022 Earnings Call. As a reminder, this call is being recorded today, Wednesday, May 4, 2022. And I'd now like to turn the conference over to Alex Whitelam, Head of Investor Relations. Please go ahead, sir.

Thank you, Dave, and good afternoon, everyone. We know it's late today, and appreciate everyone joining us. We're excited to present Chesapeake's Utilities results for the first quarter of 2022. As you saw in our press release issued yesterday, the company reported solid financial performance at the beginning of the year, demonstrating our continued ability to deliver long-term sustainable growth for our stakeholders. As shown on slide two, participating with me on the call today are Jeff Householder, President and Chief Executive Officer; Beth Cooper, Executive Vice President, Chief Financial Officer, Treasurer and Assistant Corporate Secretary; and Jim Moriarty, Executive Vice President, General Counsel, Corporate Secretary and Chief Policy and Risk Officer. We also have other members of our management team joining us virtually. Today's presentation can be accessed on our website under the Investor page and Events and Presentation subsection. After our prepared remarks, we'll open the call up for questions. Moving to slide three. I'd like to remind you that matters discussed in this conference call may include forward-looking statements that involve risks and uncertainties. Forward-looking statements and projections could differ materially from our actual results. The safe harbor for forward-looking statements section of the company's 2021 Form 10-K provides further information on the factors that could cause such statements to differ from our actual results. Additionally, the company evaluates its performance based on the metric-adjusted gross margin and has provided the appropriate disclosures in accordance with the SEC Regulation G. A reconciliation of GAAP gross margin to non-GAAP adjusted gross margin is provided in the appendix of this presentation and in our earnings release. Now I'll turn the call over to Jeff to provide some opening remarks from the company's first quarter results and the key drivers of our performance. Jeff?

Thank you, Alex. Good afternoon, and thank you for joining our call today. I'd like to start by thanking all of my colleagues across the company for their continued hard work and dedication to our energy-delivered mission. For the second consecutive year, we were recognized as a Top Workplace USA for Midsized Companies. I think that recognition speaks to the effort by our entire team to sustain a work environment that reflects our core values of care, integrity, and excellence. It's been an interesting quarter. Despite inflationary pressures, variable weather conditions across our footprint, and ongoing supply chain and market challenges, our team produced another great quarter. Chesapeake Utilities delivered solid financial results with both adjusted gross margin and earnings growth in the quarter; took significant steps to address important ESP considerations; and remained focused on our business transformation and continuous improvement objectives. As usual, Beth will provide a more detailed overview of our financial results in just a moment, but on slide four, I wanted to highlight a couple of more recent key accomplishments. First, earnings were $2.08 per share for the first quarter, up 6.1% over the same period in 2021. This resulted from an incremental $8.8 million in adjusted gross margin for the quarter, which reflects solid top line and bottom line growth. We remain on track to deploy $175 million to $200 million in new capital investment this year. It's been somewhat of a challenge to keep individual projects on schedule, given the supply issues, contractor manpower difficulties, and protracted regulatory processes. Although we saw a reduction in our month-by-month capital deployment forecast in Q1, the effective projects are viable and remain in our investment queue. Our ongoing robust business development process continues to present opportunities for future investment, and we're confident in our long-term capital guidance. Supporting the investments we have already made, we issued $50 million of senior notes in March at an attractive rate of 2.95%. We also completed a number of sustainable energy delivery projects during the quarter. We opened our CNG fueling station near the Port of Savannah to supply the trucking and vehicle markets that serve the port. We designed the station to receive and distribute renewable natural gas to help our customers achieve their emission-reduction sustainability goals. The station will also serve as a logistics center for our Marlin Gas Services business, providing a refueling site for our expanding Southeastern market. We hosted a groundbreaking ceremony, where many local, political, corporate, and utility officials came to see the capabilities of the new station firsthand. We’re excited about the future expected free float of this facility. This week, we also announced the North Ocean City Connector Pipeline project. We'll dive into greater details on this in just a moment. As we briefly introduced in our year-end call, we also completed our first test of the hydrogen and natural gas blend in our Eight Flags combined heat and power plant in January. In late February, we received positive results from this testing. This was an important first step in introducing hydrogen blends into our power generation system and provides a hands-on hydrogen demonstration for other industrial gas users. We'll continue doing further testing later this year, building off our pilot tests and results when Eight Flags completes its previously scheduled turbine replacement. Finally, today, the Board announced an 11.5% increase to our annualized dividend per share. This level of dividend growth aligns with our recent earnings growth and speaks to the long-term growth pathway we continue to see for the company. With all that said, it was another great quarter with solid financial results and a number of exciting announcements that will positively impact the future. I can also say that we have several projects that we are finalizing and look forward to announcing those in the near term as the details are finalized. As we have in the past, I wanted to briefly touch on our five growth platforms on slide five. Our natural gas distribution businesses continued to grow organically at a level significantly above the national average. In the first quarter, our Delmarva and Florida service territories generated 5.3% and 4.0% residential customer growth, respectively. This growth presents investment opportunities, and we are partnering with developers to attract new customers, either from new developments or build-outs of existing projects. Given the inflationary environment and rising interest rates, we also continue to closely monitor market factors impacting new home builds. But at this time, we're not seeing a slowdown in Delmarva or in Florida. We continue to invest in our pipeline systems, primarily to support the growth I just spoke of in our distribution system. Earlier this week, we announced the North Ocean City Connector project, reaching new customers along the Delaware-Maryland coastal border and adding capacity to support the customer growth we're seeing in Ocean City and the surrounding areas. We continue to find attractive propane expansion opportunities in the Mid-Atlantic and Southeast. Propane is an important non-regulated contributor to our earnings and the long-term ability to achieve an overall Chesapeake return on equity above 11%. The diversified energy acquisition in North Carolina and Pennsylvania made a significant contribution in its first full quarter as part of the Chesapeake Utilities family, adding approximately $4 million of incremental adjusted gross margin. The integration of this business into our company has gone well, and we are excited about the opportunities that this platform provides concerning expanding our services and programs like AutoGas, ProCap, Smart Club, and many others in the Carolinas. Marlin Gas Services and their virtual pipeline system continued to provide growth opportunities, and we're seeing solid margin growth as a result. Marlin began providing temporary renewable natural gas transport services this quarter to a customer in Florida. Finally, I'd like to remind our stakeholders of the sustainability report we published in late February. In light of the national discussion over the past few weeks on furthering ESG disclosures, we believe the efforts we've taken thus far are great first steps, but we have much more to do. We will continue to take additional steps that will help reduce our emissions even further, and we'll continue to enhance our disclosures around important ESG initiatives. Slide six reaffirms our efforts to expand our service territory with sustainable energy delivery solutions. And with that, I'll turn it over to Beth to discuss our results in more depth. Beth?

Thank you, Jeff, and good afternoon, everyone. I'd like to echo Jeff's comments on the work and dedication of our team. They continue to step up and deliver increased performance and find ways to continually better our great company. With that said, let me dive into the details of the quarter. As you'll see on slide seven, diluted earnings per share grew to $2.08, an increase of 6.1% over the first quarter 2021 EPS of $1.96. Some of the key gross margin drivers for the quarter included the contribution from Diversified Energy, which we acquired in December of 2021, that was really near the midpoint of December, continued pipeline expansions, as Jeff mentioned, strong customer growth in our natural gas distribution businesses as well. Also, there was additional growth from various regulated infrastructure programs established in our service territories, increased margins at our Aspire Energy business in Ohio, higher performance through higher retail margins per gallon achieved, and our legacy propane businesses. Finally, weather contributed a slight headwind to our consolidated results; we saw variable weather conditions in our different service territories across the different months in the quarter. For instance, we experienced a colder January in each of our northern territories but warmer temperatures in February and much of March in the regions where our propane business is served. On slide eight, our financial summary shows that adjusted gross margin increased by $8.8 million or 7.5% during the quarter, driven by the initiatives I just mentioned. Net income for the quarter was $36.9 million, and earnings per share were $2.08, increases of 7.2% and 6.1%, respectively. We remind everyone that earnings per share growth rate compared to the net income growth rate for the quarter reflects the issuance of stock to continue to achieve our target capitalization range through the issuance of equity. In summary, despite weather volatility, Chesapeake Utilities executed well during the quarter and delivered solid adjusted gross margins and earnings growth. On slide nine, we highlight the key contributors to earnings growth for the first quarter as measured on a per share basis. Let me provide some additional detail for just a minute. First, the contributions from the acquisitions of the Escambia Meter Station and Diversified Energy generated an incremental $0.17 in earnings for the quarter. Our core businesses delivered additional margin contributions that increased earnings by $0.19 per share. This includes higher operating income from organic growth projects, higher performance in our Aspire Energy and propane operations, along with additional income from our regulated infrastructure programs. Operating expenses tied to the acquisitions, largely with diversified energy, were $0.10 per share. Higher depreciation, amortization, and property tax costs associated with new capital investments were a $0.07 headwind. Operating expenses tied to growth in our core business were a net $0.05 increase higher. Changes in shares outstanding last due to equity offerings that helped us align our target capital structure were a $0.02 headwind. Let me touch a minute on Chesapeake Utilities' operating segments on the next two slides. On slide 10, you'll see adjusted gross margin was up 5.5% year-over-year for our Regulated Energy segment. Operating income was slightly higher, up 6.3%, primarily driven by pipeline expansions with Eastern Shore Natural Gas, Peninsular Pipeline, and also Aspire Energy Express in Ohio, our incremental contributions from various infrastructure programs, organic growth in our natural gas distribution operations, and contributions from the Escambia Meter Station acquisition. Additionally, our business transformation efforts continued to drive operational improvements to allow or to enable our businesses to scale and capture efficiencies within our regulated operations. Next on slide 11, our Unregulated Energy segment also achieved solid performance in the quarter. Adjusted gross margin increased an impressive 11.6% compared to last year's first quarter. This margin growth was driven primarily by contributions from diversified energy and increased margins for our propane distribution businesses and Aspire Energy. Offsetting that growth, however, were increased operating expenses specifically tied to the inflationary environment we're all seeing with transportation, fuel, labor costs, supply chain impacts, and other rising costs. Despite these challenges, our Unregulated Energy segment delivered operating income growth of 5.6%. On slide 12, I'll mention a few updates on the balance sheet. In March, we issued $50 million in senior notes at 2.95% with a 15-year average life. Something to note is that while we were pleased to secure capital at this attractive rate, our new long-term debt facility will increase Chesapeake Utilities' interest expense by approximately $1 million annually. At the quarter end, total capitalization totaled approximately $1.6 billion. This included 51.5% of stockholders' equity, which is now $806 million, and within our target capital range; 38.2% long-term debt at an average fixed rate of 3.41%; and short-term debt, which decreased from $222 million at year-end to $141 million at March 31, with $50 million tied to that long-term debt financing I just mentioned. During the quarter, we continued to utilize our traditional equity plan to issue new equity totaling approximately $2.6 million. We retained capacity under these plans as well as our ATM program to provide additional equity as needed for permanent financing. Our balance sheet remains strong and well-positioned to support our capital investments, which will drive our earnings growth and enhance shareholder value. Moving to slide 13, we highlight the pipeline expansion, CNG, LNG, and RNG transportation projects, the acquisitions, and the strategic regulatory initiatives that will drive our growth through 2023. As always, we remind you that this table does not include organic growth and is not indicative of all the projects, as Jeff referenced, that we are evaluating and pursuing. We are continually encouraged by the opportunities introduced and evaluated by our business development team. As you know, in addition to looking at value-enhancing utility deals, we have widened our appetite for renewable energy projects, and we're excited about the level of activity we're seeing. That said, as we have mentioned in the past, these types of projects take longer to come to fruition. We'll continue to provide updates on the projects underway as they become available. For the year, we expect the projects that are already underway will add more than $20 million in 2022 and another $7 million in 2023. Cumulatively, the major projects included in this table are expected to add more than $43.5 million of adjusted gross margin over our 2020 levels. Moving to slide 14, we highlight our key expansion projects. With an investment of $136 million, these projects are expected to contribute more than $19 million in adjusted gross margin. Let me touch on our newest project, the North Ocean City Connector, on the next slide. On slide 15, you'll see that we are planning to construct an approximate 6-mile pipeline along the coastal Delaware-Maryland State Line to connect our Sandpiper Energy system in Ocean City, Maryland, to our Sussex County, Delaware system. The expansion will support growth in the Fenwick Island, Delaware area and provide Ocean City with a second connection to support its growth. Pending applicable approvals, we expect to invest $6.3 million in the construction of the infrastructure, which is projected to generate $400,000 in adjusted gross margin for 2023, with an opportunity for additional margin growth in 2024 and beyond. With that, I'll pass the call off to Jim to discuss our regulatory and ESG update. Jim?

Well, thank you, Beth, and good afternoon to you all. Slide 16 lists certain of our ongoing regulatory initiatives, including the announcement of our intention to file a joint base rate proceeding in Florida for our various natural gas distribution businesses. We submitted this notification on March 24. We intend to file the proceeding as soon as practicable, following the notification period expiring on May 24. The filing will include an estimated $18 million to $20 million increase in the revenue requirement. We look forward to working with all the stakeholders throughout Florida on this important proceeding. Additionally, Florida Public Utilities continues to make significant progress with the gas reliability infrastructure program that began in 2012. Through the end of the first quarter, we have invested nearly $190 million to upgrade approximately 348 miles of distribution mains, increasing the safety and reliability of our systems for many Floridians. We expect to complete this program by the end of 2023, at the latest. At Elkton Maryland, we continue to invest in the integrity of this system by upgrading Aldyl-A pipeline. The program went into service towards the end of 2021. Going forward, we expect the project will generate $200,000 and $400,000 in adjusted gross margin in 2022 and 2023, respectively. Finally, our Eastern Shore natural gas interstate unit has the authority to recover capital costs associated with mandated highway or railroad relocation projects. We expect that this program will generate $2 million in additional adjusted gross margin in 2022 and 2023. Moving to slide 17. We are proud of our inaugural sustainability report, which we published in February and appreciate the positive feedback we have received. Our newly created Environmental Sustainability Office and our internal ESG Committee are well underway with our emission-reduction initiatives and efforts to build upon the success of our inaugural report. In the report, we outlined our ESG commitments. Chesapeake Utilities will be a leader in the transition to a lower carbon future. The company will continue to promote a diverse and inclusive workplace and further the sustainability of the communities we serve. The company's businesses will operate with integrity and the highest ethical standards. These clear commitments guide our mission to deliver energy that makes life better for the people and the communities we serve. Within that context, I'd like to highlight some of our recent ESG accomplishments. From an environmental perspective, as Jeff mentioned earlier, we successfully completed the first test of hydrogen and the natural gas blend to fuel the company's Eight Flags CHP facility. We also opened the company's first CNG fueling station near the Port of Savannah, capable of distributing RNG for fleet vehicles. On the social side, we were excited to have been named a 2022 Top Workplace USA Award Recipient for Midsized Companies for the second consecutive year. We also initiated two new employee resource groups within the company, which I'll cover in more detail on the next slide. From a governance perspective, we enhanced our transparency with our director skills matrix and our latest proxy statement distributed to shareholders in March. In April, we joined Governance Leaders as a member of the Advisory Board for the John L. Weinberg Center for Corporate Governance. All great efforts on the ESG front. Additionally, we are evaluating the SEC's recent proposal on climate-related disclosures. While the proposal is quite broad in scope and timing, we are working to enhance our ESG and climate-related disclosures. We are proud of our ESG initiatives and look forward to discussing them in greater detail in our next sustainability report. Turning to slide 18, highlighted in our sustainability report is our strong company culture and the recognition that we have recently received. As discussed, we started two new employee resource groups in the quarter, Diverse Abilities and EPIC. Our Diverse Abilities ERG aims to increase awareness, empathy, inclusion, and advocacy of those with different abilities within our work family and in the communities we serve. Our EPIC ERG aims to create an inclusive environment among members where all can broaden the understanding of, forge a community network around, and celebrate the diverse cultural groups within the company. These ERGs and other initiatives focused on employee engagement, equity, diversity, and inclusion have led to awards recognized in our positive and unique culture. As we touched on previously, Chesapeake was named a Top Workplace in the United States for the second year in a row. The award is based solely on employee feedback, which speaks to our people-focused culture, the foundation of our success. It's great to be with you all, and I will now turn the call back to Jeff for some closing comments.

Thanks, Jim. On slide 19, I want to spotlight again the Board's decision today to increase the company's quarterly dividend by 11.5% with an annualized rate of $2.14 per share. This level of dividend growth is supported by our strong double-digit earnings growth in 2021 and our positive outlook for the future. We are proud to have consistently paid dividends over the last 61 years and increased our annual dividend each of the last 19 years. Moving to slide 20. We continue to reaffirm our long-term earnings and capital expenditure guidance. In 2025, we expect to deliver diluted earnings per share in the range of $6.05 to $6.25. This represents a compounded annual growth rate of 9.1% to 9.5% over the five-year period. We also continue to expect to deploy $750 million to $1 billion in capital expenditures during the same period. 2021 provided a strong start to achieving that goal, with $228 million deployed during the year. Despite a few timing delays on a select number of projects in the first quarter, we continue to expect another $175 million to $200 million deployed in 2022. To finish on slide 21, we remain bullish on the future that natural gas has in driving our country's long-term energy strategy. We're also excited about the opportunities we see to help drive the transition to a future of cleaner, more sustainable energy. Our senior management team and the Board are committed to executing upon each of our five growth platforms and delivering top quartile financial performance over the long term. While there are certainly challenges on the horizon with continued inflation, rising rates, and the ever-changing market environment, we see a bright future for Chesapeake Utilities, and we appreciate your continued support. And with that, Alex, we'll open it up for questions.

Thanks, Jeff. Dave, please open the line for the Q&A session.

And our first question comes from the line of Tate Sullivan with Maxim Group.

You gave a lot of good detail on your North Ocean City Connector project. Is it right now and in the first year for capacity expansion to serve existing customers? Is that the reason for the level of incremental gross margin from that project of about $400,000 in year 1? And how can that increase? Those are my questions as well, too, please.

Yes, it's actually, Tate, both. It's supporting growth. It's also increasing the reliability of the system that we have in place, given a lot of the growth that we've already experienced.

It provides a second feed into Ocean City, so there's a significant amount of reliability increase that we anticipate once we get this feed in place.

And are there still many unconverted homes from propane to natural gas? Or is this left in Ocean City in terms of future customer growth in that area?

Well, you have several things that are happening within Ocean City's surrounding area. So, within Ocean City, our Sandpiper conversion captured a lot of the customers at that time that could be converted. But what’s happening is you're seeing a lot of older buildings, older homes actually being demolished and larger condominiums, apartments, larger homes, etc. So while there may have been gas, you could actually see in certain locations multifamily buildings being constructed that would actually increase the capacity within Ocean City. Outside of Ocean City, both in Southern Delaware and also, I would say, on the outskirts in Western Ocean City, you're continuing to see new developments build out and be constructed. So it's a combination of both that we're seeing. And so growth is happening and it’s continuing to happen, not only along those kind of beach areas but even as you move a little bit inland. This actual expansion of construction projects will really hit a great part of that, where it connects.

No, I think that's right, Beth. I mean we're running this pipeline past a number of emerging developments, especially in Southern Delaware. And then also, as Beth indicated, interconnecting it into the system that ultimately serves Ocean City, where there's a significant amount of redevelopment going on.

Great. I have some context for my next question regarding the organic customer growth rates. Delmarva natural gas distribution experienced about 4.9% growth in the first quarter. Jeff, can you discuss the natural gas distribution customer growth rates in Florida? I'd like to understand that the Florida NG division had low growth this quarter, at 1.2%. Am I interpreting that correctly? Could you explain why some areas in Florida have a lower natural gas customer growth than others?

I'd say that really is more just a matter of customers coming on. What I can tell you is in Florida, equally on Delmarva, if not even more, we have a lot of opportunities for continued expansion. We're actually in the development where our Florida corporate headquarters is. There's planned development within where our corporate facility is for ultimately there to be like 20,000 homes, residences, and businesses over time. So some of what you're seeing, it's really less about the quarter; it's more about the long-term. You may see one quarter go up or down a little bit, but I'd really look at the longer term and not so much just a particular quarter because, again, we see a lot of opportunity, and there's still a lot of developments that are underway.

Okay. Great. Thank you, Beth. Thank you, Jeff.

Thank you.

Sure.

And our next question comes from the line of Shar Pourreza with Guggenheim Partners.

It's actually Constantine here for Shar. Can you talk about what moves you beyond your range of CapEx investment across the regulated and unregulated businesses? Is there kind of more leverage to customer growth expectations or traction in RNG, hydrogen, new technologies? And maybe as pivoting as we think about potential opportunistic bolt-ons or acquisitions, what parameters would you focus on, geography, IRR, etc.?

Okay. So, Constantine, if you look at the capital guidance that we have out currently, you'll see the biggest proportion of capital investments is centered around our natural gas distribution business. So an example is just the Ocean City Connector project that we talked about. There are lots of other expansions that are underway or that are coming to our internal capital committee for review. There's also developments where we're already in, where there's additional build-out. There's also some project capital dollars that are in there for some of the pipeline projects that we are in midstream that are included in our major projects table, some of which will come to fruition this year; a couple will come to full completion next year; and we even have one that hits more in 2024. So you've got capital dollars associated with those. In some cases, we may have projects that we are evaluating that haven't been fully announced in both of those buckets. Additionally, we have ongoing infrastructure programs that are underway. The GRIP in Florida has continued to be a lot of capital investment for us; an Aldyl-A pipeline program that you heard Jim talk about in Elkton; and the Eastern Shore capital surcharge program, where we're making required replacements because of the government relocating some of our facilities. All of those are impacting our capital. And we have the normal growth CapEx that may be occurring with our Aspire Energy system as well as our propane systems. Because of what we’ve done in Diversified, we're looking to stand up some increased programs in North Carolina that will require some incremental capital down there for AutoGas and for some other things that we're looking to do. And I would also say from the Marlin side, Marlin has had some investments to ready itself for, first, the CNG fueling station was something that we completed. We believe that will be very instrumental to a lot of growth that we expect to see on the CNG side, particularly over the next couple of years. But Marlin did something in that to help foster that particular project to get to completion. They’ve also readied some of their capabilities internally to handle R&D. They also did some things to ready their tanks for carrying hydrogen, which occurred with our Eight Flags facility. Again, a lot of projects across our portfolio are underway. You won't see a lot of dollars that are factored in for acquisitions. There may be some small dollar if we think there's an acquisition or two out there that we're looking at that align with what we have currently. So that’s generally what's in that bucket of $175 million to $200 million.

I think incrementally beyond that, we are doing what many companies are doing and looking, as Beth indicated, at renewable energy opportunities that exist. We’re finding many, many things to consider. Of course, the issue is what parts of those projects we are actually going to build. How are we going to build them in partnership with others? And what’s the timing of all of that? We're finding, as we indicated in the presentation, that the study is that the timing of those development and financing of those projects, especially the larger-scale projects, where we might actually take a minority interest in a service area where we have other synergies surrounding those plants, takes quite a bit of time. Whether we're building solar energy facilities to serve electric needs of the plant, transporting LNG with Marlin, or providing thermal gas to drive fertilizer, those are the things we typically look for to enhance our financial prospects. We're seeing fairly lengthy development and financing time on many of these larger projects. This is not a one dairy farm and going to put in the anaerobic digester, but it's looking at consolidating, aggregating waste across a large regional area and bringing it to a centralized processing plant, producing RNG and then producing the soil remnants or fertilizer at the other side of the plant. So those are of interest to us, not just because they drive RNG production, but because they help address a fundamental environmental requirement or need in an important industry to us, like the poultry industry in Delmarva, and the poultry industry in Georgia and Florida. We believe there’s a business opportunity for us assisting these other industries in meeting their ESG and sustainability needs, generating renewable natural gas and producing economic returns for our shareholders. Those are the projects that I think are significantly incremental due to the several hundred million working through traditional projects that Beth has been describing over the last several months.

Thanks. I think that's a very comprehensive answer to a multi-pronged question, so definitely appreciate that. Maybe can you touch on the inflationary environment and commodities? What impacts do you anticipate on the unregulated businesses in the near term? Are there some opportunities to increase market share potentially, just given the fragmented nature of the businesses, organic and inorganic?

Well, so on the propane side, I mean that, from a pricing standpoint, we evaluate our pricing all the time relative to the markets in which we operate. In a period, Constantine, where you see higher commodity prices, generally, you’re going to look at what the market is doing. Sometimes the market will respond immediately, and sometimes it may be delayed. But certainly, we will try to maximize the margin opportunities we have. We want to ensure we're providing the needed service. Secondarily, we want to remain competitive in this market. On the Aspire side, you're absolutely right. In times like this from a commodity standpoint, there can be opportunities on the Aspire side, particularly in the small component of their business that's associated with NGLs. We saw that come through in our first quarter when looking at what they were able to do from a higher margin perspective.

Constantine, if your question suggests that the inflationary environment and commodity price volatility might pressure some companies to consider exiting the market, giving us acquisition opportunities, that’s an interesting question. We've seen that happen before, whether it will happen again, we’ll see. I mean we’re always pretty opportunistic in those market opportunities. We’ve done enough lately, especially over the last 4 or 5 years that we typically get a look at most anything that does come on the market. We think there are opportunities there, and we'll continue to opportunistically look throughout the Mid-Atlantic and the Southeast. I doubt you'll see us looking elsewhere, though.

I think that was a little bit embedded in there. So definitely appreciate it. Thank you guys for your time and congrats on your quarter.

Thank you.

Thank you.

Our next question comes from the line of Brian Russo with Sidoti.

Hello. I'm just curious, what are the primary drivers of the Florida base rate filing that you notified the condition about this?

Well, probably the primary driver is we haven't been in to the Commission since, I believe, it was 2009 and 2010 where the Florida Public Utilities filed one year, and our existing Tampa Florida Gas filed the next year, and then we executed a merger between those two companies. It’s been a long time since we've done any work before the Commission. We've been working for the last several years to consolidate the tariffs as much as possible in the existing four utilities that we operate in Florida. We're taking additional steps to consolidate much of the remaining pieces of those tariffs. We'll see where the rates ultimately end up. We may end up with some phase-ins on rates between those four units before we get to consolidated rates. The other thing I would tell you is that we need to go in and move the GRIP investments into the rate base. It's the way the accounting kind of works for those investments. Other utilities have been doing that, and we'll do the same thing. So it's a series of those issues. And obviously, we've seen significant investment in those systems in Florida over the last decade. We need to make sure that we're getting solid recovery on the investments we've made and the forecast investments in the projected test year. When you look out in Florida a year through 2023, we'll be recovering costs for some of the investments that we see in the near-term future.

I see. So, the $18 million to $21 million is a forward test year calculation.

It is. It is. I'm sorry.

Yes. I'm just wondering are you under earning? Is part of the $18 million to $20 million close to an ROE gap incremental margin going forward?

Yes. It is projected under earnings that reflect the return on some of the expenses that we've been able to avoid during this COVID period for many days. Travel, for example, those sorts of things reflect continued increases in expenses related to compensation for employees. We're looking at that all the time. As you all know, this is an interesting employment market these days. It reflects those kinds of cost increases and the additional capital that we invest over the next year or so.

Right. And also the accumulation of the GRIP investments, while it's added to the base rate, it's not necessarily an incremental rate increase for the customer?

That's correct. The mechanism we have for recovering those pipeline replacement investments is virtually immediate. We have adjusted rates many times over the years to recover those GRIP investments, but this brings everything into the rate base and move those recovery mechanism kind of adjustments, if you will, into the base rates. No impact on customers.

I understand. Once the Elkton Gas acquisition is approved, the settlement includes an agreed stay out. Is there any expectation for a rate case soon, or can you extend the stay out beyond the agreed settlement date?

We have been looking into various opportunities, including a mechanism for Sandpiper Energy and something related to Elkton Gas. We are considering all these options together. Similar to our approach in Florida, we are also looking at a consolidated opportunity in Maryland. While this won't happen this year, we plan to bring those three businesses together in the future, similar to what Jeff mentioned regarding Florida.

Okay. And then is it fair to say that your organic customer growth is accelerating in Delmarva? If that's the case, do you see kind of an acceleration of your CapEx for infrastructure in that region?

I think this ties back to the earlier question about Florida. We are seeing strong growth, ranging from 3.9% to above 5% in recent years, including in Delaware and Delmarva, where it has also reached over 5%. Florida has similarly experienced high growth in the upper 4%. It's important to note that as we expand our system, the development of those areas is crucial. Additionally, we are converting some of our CGS systems on Delmarva, which may result in an increase on the distribution side. However, this shifts some resources from the propane segment to the natural gas segment, potentially enhancing the growth rate. We highlighted this in our recent earnings release, and you will see continued expansion of our natural gas distribution system along the beach. Florida presents significant commercial and industrial growth, although this is not reflected in the growth percentage. Overall, growth remains robust, with quarterly fluctuations depending on customer acquisition rates. There are no signs of decline in either territory, but spikes may occur due to factors like CGS conversions.

Okay. Great. Thank you very much.

And Mr. Householder, there are no further questions. I'll turn the call back to yourself. Thank you very much.

All right. Well, thank you very much for joining us today. We appreciate your time and look forward to catching up with many of you in person at the upcoming AGA Conference in Miami. Goodbye.

And on that, we'll conclude the conference call for today. We thank you very much for your participation, and you may now disconnect.