UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C.

FORM 10-K

ANNUAL REPORT

For the Fiscal Year Ended September 30, ~~2013~~2015

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-K

[UNITED ~~X ] ANNUAL REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934For the Fiscal Year Ended September 30, 2013~~STATES

ORSECURITIES AND EXCHANGE COMMISSION

[WASHINGTON, ]D.C. ~~TRANSITION REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934For the Transition Period from __________ to __________~~20549

~~Commission~~FORM ~~File Number 1~~10-~~1822~~K

~~LACLEDE~~(Mark ~~GAS COMPANY~~One)

(Exact name of registrant as specified in its charter)



[ X ]	ANNUAL REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended September 30, 2015
	OR
[ ]	TRANSITION REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period from to

Missouri(State of Incorporation) 43-0368139(I.R.S. Employer Identification number) 720 Olive StreetSt. Louis, MO 63101(Address and zip code of principal executive offices) 314-342-0500(Registrant’s telephone number, including area code)



Commission File Number	Registrant, Address and Telephone Number	State of Incorporation	I.R.S. Employer Identification Number
1-16681	The Laclede Group, Inc. 700 Market Street St. Louis, MO 63101 Telephone Number 314-342-0878	Missouri	74-2976504
1-1822	Laclede Gas Company 700 Market Street St. Louis, MO 63101 Telephone Number 314-342-0878	Missouri	43-0368139
2-38960	Alabama Gas Corporation 2101 6th Avenue North Birmingham, Alabama 35203 Telephone Number 205-326-8100	Alabama	63-0022000

Securities registered pursuant to Section 12(b) ~~or 12(g)~~ of the Act~~: None.~~

Indicate by check mark if the registrant:



	Title of Each Class	Name of Each Exchange On Which Registered
The Laclede Group, Inc.	Common Stock $1.00 par value	New York Stock Exchange
Laclede Gas Company	None	Not applicable
Alabama Gas Corporation	None	Not Applicable

isSecurities aregistered ~~well-known~~pursuant ~~seasoned~~to ~~issuer,~~Section as12(g) ~~defined in Rule 405~~ of the ~~Securities~~ Act.: ~~Yes [ ] No [ X ]~~

isThe ~~not~~Laclede ~~required~~Group, ~~to file reports pursuant to Section 13 or Section 15(d) of the Act~~Inc. Yes [ ] No [ X ]

~~(1)~~Laclede ~~has~~Gas 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 (or for such shorter period that the registrant was required to file such report) and (2) has been subject to such filing requirements for the past 90 days. Company Yes [ ] No [ X ] ~~No [ ]~~

~~has~~Alabama ~~submitted~~Gas electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Corporation Yes [ ] No [ X ] ~~No [ ]~~

Indicate by check mark ifwhether ~~disclosure~~each ofregistrant ~~delinquent~~is ~~filers~~a ~~pursuant to Item 405 of Regulation S~~well-Kknown isseasoned ~~not contained herein~~issuer, ~~and~~as ~~will~~defined ~~not be contained, to the best of registrant’s knowledge,~~ in ~~definitive~~Rule ~~proxy~~405 ~~or information statements incorporated by reference in Part III~~ of ~~this~~the ~~Form~~Securities ~~10-K or any amendment to this Form 10-K~~Act. ~~( X )~~

~~Indicate~~The byLaclede ~~check~~Group, ~~mark~~Inc. Yes [ ~~whether~~X ~~the registrant:~~] No [ ]

isLaclede aGas ~~large~~Company Yes [ ] No [ ~~accelerated~~X filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.]

~~Large~~Alabama ~~accelerated~~Gas ~~filer~~ Corporation Yes [ ] ~~Accelerated filer~~ No [ ~~] Non-accelerated filer [~~ X ] ~~Smaller reporting company [ ]~~

isIndicate aby ~~shell~~check ~~company~~mark ~~(as~~if ~~defined~~the inregistrant ~~Rule~~is ~~12b-2~~not ofrequired ~~the~~to ~~Exchange~~file ~~Act).~~reports ~~Yes~~pursuant ~~[ ]~~to NoSection [13 Xor ]Section 15(d) of the act.

AsThe ofLaclede ~~November 21~~Group, ~~2013,~~ ~~there~~Inc. Yes [ ] No [ ~~were~~X ~~24,549 shares of the registrant’s common stock outstanding.~~]

~~All of the registrant’s equity securities are owned by The~~ Laclede ~~Group,~~Gas ~~Inc.,~~Company Yes [ ] No [ ~~its~~X parent company and a 1934 Act reporting company. The registrant meets all of the conditions set forth in General Instruction (I)(1)(a) and (b) of Form 10-K and is filing this Form with reduced disclosure format.]

~~Document~~Alabama ~~Incorporated~~Gas byCorporation Yes [ ] No [ ~~Reference:~~X ~~None~~]

TABLE OF CONTENTS		Page No.
PART I
Forward-Looking Statements		4
Item 1	Business	5
Item 1A	Risk Factors	8
Item 1B	Unresolved Staff Comments	15
Item 2	Properties	15
Item 3	Legal Proceedings	15
Executive Officers of the Registrant (Item 401(b) of Regulation S-K)		16
PART II
Item 5	Market for Registrant’s Common Equity, Related Stockholder Matters	17
Item 6	Selected Financial Data	18
Item 7	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 7A	Quantitative and Qualitative Disclosures About Market Risk	33
Item 8	Financial Statements and Supplementary Data	34
Item 9	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	74
Item 9A	Controls and Procedures	74
Item 9B	Other Information	74
PART III
Item 10	Directors, Executive Officers and Corporate Governance	*
Item 11	Executive Compensation	*
Item 12	Security Ownership of Certain Beneficial Owners and Management
	and Related Stockholder Matters	*
Item 13	Certain Relationships and Related Transactions, and Director Independence	*
Item 14	Principal Accounting Fees and Services	75
PART IV
Item 15	Exhibits, Financial Statement Schedule	76
SIGNATURES		77
FINANCIAL STATEMENT SCHEDULE		78
INDEX TO EXHIBITS		79

Indicate by check mark whether each 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 (or for such shorter period that the registrant was required to file such report), and (2) has been subject to such filing requirements for the past 90 days.

* The Laclede ~~Gas~~Group, ~~Company~~Inc. Yes [ ~~meets~~X ~~all of the conditions set forth in General Instruction (I)(1)(a) and (b) of Form 10-K and is filing this Form with reduced disclosure format.~~] No [ ]

3Laclede Gas Company Yes [ X ] No [ ]

Alabama Gas Corporation Yes [ X ] No [ ]

Indicate by check mark whether each registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

The Laclede Group, Inc. Yes [ X ] No [ ]

Laclede Gas Company Yes [ X ] No [ ]

Alabama Gas Corporation Yes [ X ] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.

The Laclede Group, Inc. [ X ]

Laclede Gas Company [ X ]

Alabama Gas Corporation [ X ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.



	Large accelerated filer	Accelerated filer	Non- accelerated filer	Smaller reporting company
The Laclede Group, Inc.	X
Laclede Gas Company			X
Alabama Gas Corporation			X

Indicate by check mark whether each registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

The Laclede Group, Inc. Yes [ ] No [ X ]

Laclede Gas Company Yes [ ] No [ X ]

Alabama Gas Corporation Yes [ ] No [ X ]

The aggregate market value of the voting stock held by non-affiliates of The Laclede Group, Inc. amounted to $2,145,801,563 as of March 31, 2015. All of Laclede Gas Company's and Alabama Gas Corporation's equity securities are owned by The Laclede Group, Inc., their parent company and a 1934 Act Reporting Company. Laclede Gas Company and Alabama Gas Corporation meet the conditions set forth in General Instructions I(1)(a) and (b) of Form 10-K and are therefore filing this Form 10-K with the reduced disclosure format specified in General Instructions I(2) to Form 10-K.

The number of shares outstanding of each registrant’s common stock as of November 20, 2015 was as follows:



The Laclede Group, Inc.	Common Stock, par value $1.00 per share	43,350,411
Laclede Gas Company	Common Stock, par value $1.00 per share (all owned by The Laclede Group, Inc.)	24,577
Alabama Gas Corporation	Common Stock, par value $0.01 per share (all owned by The Laclede Group, Inc.)	1,972,052

Document Incorporated by Reference:

Portions of Proxy Statement for Laclede Group, Inc. to be filed on or about December 18, 2015 — Part III. Exhibit Index is found on page 145.

This combined Form 10-K represents separate filings by The Laclede Group, Inc. Laclede Gas Company, and Alabama Gas Corporation. Information contained herein relating to an individual registrant is filed by that registrant on its own behalf. Each registrant makes no representation as to information relating to the other registrant, except that information relating to Laclede Gas Company and Alabama Gas Corporation is also attributed to The Laclede Group, Inc.



TABLE OF CONTENTS		Page No.

Glossary of Key Terms		2

PART I

Forward-Looking Statements		3

Item 1	Business	4
Item 1A	Risk Factors	10
Item 1B	Unresolved Staff Comments	18
Item 2	Properties	18
Item 3	Legal Proceedings	18

Executive Officers of the Registrant (Item 401(b) of Regulation S-K)		19

PART II

Item 5	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	21
Item 6	Selected Financial Data	23
Item 7	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 7A	Quantitative and Qualitative Disclosures About Market Risk	47
Item 8	Financial Statements and Supplementary Data	48
Item 9	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	137
Item 9A	Controls and Procedures	137
Item 9B	Other Information	138

PART III

Item 10	Directors, Executive Officers and Corporate Governance	139
Item 11	Executive Compensation	139
Item 12	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	139
Item 13	Certain Relationships and Related Transactions, and Director Independence	140
Item 14	Principal Accounting Fees and Services	140

PART IV

Item 15	Exhibits, Financial Statement Schedules	141

SIGNATURES		142

EXHIBIT INDEX		145

GLOSSARY OF KEY TERMS AND ABBREVIATIONS



Alagasco	Alabama Gas Corporation or Alabama Utility	LNG	Liquefied natural gas
Alabama Utility	Alabama Gas Corporation or Alagasco; the utility serving the Alabama region	MGE	Missouri Gas Energy
AOCI	Accumulated other comprehensive income	Missouri Utilities	Laclede Gas Company (including MGE), the utilities serving the Missouri region
APSC	Alabama Public Service Commission	MMBtu	Million British thermal units
ASC	Accounting Standards Codification	MoPSC	Missouri Public Service Commission
APUC	Algonquin Power and Utilities Corp.	MRT	Enable Mississippi River Transmission LLC
Bcf	Billion cubic feet	NEG	New England Gas Company
CAM	Cost Allocation Manual	NYSE	New York Stock Exchange
CCM	Cost Control Mechanism	NYMEX	New York Mercantile Exchange, Inc.
CNG	Compressed Natural Gas	OCI	Other comprehensive income
DOE	Department of Energy	OTCBB	Over-the-counter bulletin board
EPA	US Environmental Protection Agency	PEPL	Panhandle Eastern Pipe Line Company, LP
ESR	Enhanced Stability Reserve	PGA	Purchased Gas Adjustment
ETE	Energy Transfers Equity, LP	PP&E	Property, plant, and equipment
FASB	Financial Accounting Standards Board	REX	Rockies Express Pipeline, LLC
FERC	Federal Energy Regulatory Commission	RSE	Rate Stabilization and Equalization
FIFO	First-in, first-out	SEC	US Securities and Exchange Commission
GAAP	Accounting principles generally accepted in the United States of America	SPA	Stock Purchase Agreement with Energen to purchase 100% of the common shares of Alabama Gas Corporation (Alagasco)
Gas Utility	Operating segment including the regulated operations of Laclede Gas Company and Alabama Gas Corporation	Spire	Laclede Group's compressed natural gas fueling solutions business
Gas Marketing	Operating segment including LER, a subsidiary engaged in the non-regulated marketing of natural gas and related activities	Southern Natural Gas	Southern Natural Gas Company, LLC
GSA	Gas supply adjustment	Southern Star	Southern Star Central Gas Pipeline, Inc.
ICE	Intercontinental Exchange	SUG	Southern Union Company
ISRS	Infrastructure System Replacement Surcharge	TGIT	Tallgrass Interstate Gas Transmission, LLC
LER	Laclede Energy Resources, Inc.	TSR	Total shareholder return
LG	The Laclede Group, Inc.	Transco	Transcontinental Gas Pipe Line Company, LLC
LGC	Laclede Gas Company	US	United States
LIBOR	London Inter-Bank Offered Rate
LIFO	Last-in, first-out

Table of Contents

~~Part~~PART I

FORWARD-LOOKING STATEMENTS

Certain matters discussed in this report, excluding historical information, include forward-looking statements. Certain words, such as “may,” “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan,” “seek,” and similar words and expressions identify forward-looking statements that involve uncertainties and risks. Future developments may not be in accordance with our current expectations or beliefs and the effect of future developments may not be those anticipated. Among the factors that may cause results to differ materially from those contemplated in any forward-looking statement are:

• ~~weather~~Weather conditions and catastrophic events, particularly severe weather in the natural gas producing areas of the country; • volatility in gas prices, particularly sudden and sustained changes in natural gas prices, including the related impact on margin deposits associated with the use of natural gas derivative instruments; • the impact of changes and volatility in natural gas prices on our competitive position in relation to suppliers of alternative heating sources, such as electricity; • changes in gas supply and pipeline availability, including decisions by natural gas producers to reduce production or shut in producing natural gas wells as well as other changes that impact supply for and access to our service area; • legislative, regulatory and judicial mandates and decisions, some of which may be retroactive, including those affecting • allowed rates of return • incentive regulation • industry structure • purchased gas adjustment provisions • rate design structure and implementation • regulatory assets • non-regulated and affiliate transactions • franchise renewals • environmental or safety matters, including the potential impact of legislative and regulatory actions related to climate change and pipeline safety • taxes • pension and other postretirement benefit liabilities and funding obligations • accounting standards; • the results of litigation; • retention of, ability to attract, ability to collect from, and conservation efforts of, customers; • capital and energy commodity market conditions, including the ability to obtain funds with reasonable terms for necessary capital expenditures and general operations and the terms and conditions imposed for obtaining sufficient gas supply; • discovery of material weakness in internal controls; and • employee workforce issues.


•	Volatility in gas prices, particularly sudden and sustained changes in natural gas prices, including the related impact on margin deposits associated with the use of natural gas derivative instruments;


•	The impact of changes and volatility in natural gas prices on our competitive position in relation to suppliers of alternative heating sources, such as electricity;

•

Changes in gas supply and pipeline availability, including decisions by natural gas producers to reduce production or shut producing natural gas wells, expiration of existing supply and transportation arrangements that are not replaced with contracts with similar terms and pricing, as well as other changes that impact supply for and access to the markets in which our subsidiaries transact business;


•	The recent acquisitions may not achieve their intended results, including anticipated cost savings;


•	Legislative, regulatory and judicial mandates and decisions, some of which may be retroactive, including those affecting


•	allowed rates of return


•	incentive regulation


•	industry structure


•	purchased gas adjustment provisions


•	rate design structure and implementation


•	regulatory assets


•	non-regulated and affiliate transactions


•	franchise renewals


•	environmental or safety matters, including the potential impact of legislative and regulatory actions related to climate change and pipeline safety


•	taxes


•	pension and other postretirement benefit liabilities and funding obligations


•	accounting standards;


•	The results of litigation;


•	The availability and access, in general, of funds to meet our debt obligations prior to or when they become due and to fund our operations and necessary capital expenditures, either through (i) cash on hand, (ii) operating cash flow, or (iii) access to the capital or credit markets;


•	Retention of, ability to attract, ability to collect from, and conservation efforts of, customers;


•	Our ability to comply with all covenants in our indentures and credit facilities any violations of which, if not cured in a timely manner, could trigger a default of our obligations under cross-default;


•	Capital and energy commodity market conditions, including the ability to obtain funds with reasonable terms for necessary capital expenditures and general operations and the terms and conditions imposed for obtaining sufficient gas supply;


•	Discovery of material weakness in internal controls; and


•	Employee workforce issues, including but not limited to labor disputes and future wage and employee benefit costs, including changes in discount rates and returns on benefit plan assets.

Readers are urged to consider the risks, uncertainties, and other factors that could affect our business as described in this report. All forward-looking statements made in this report rely upon the safe harbor protections provided under the Private Securities Litigation Reform Act of 1995. We do not, by including this statement, assume any obligation to review or revise any particular forward-looking statement in light of future events.

Table of Contents

ITEM 1. BUSINESS

OVERVIEW

The Laclede Group, Inc. (Laclede Group or the Company) formed in 2000 and, effective October 1, 2001, became the public utility holding company for Laclede Gas Company (Laclede Gas or the Missouri Utilities). Laclede Gas was founded in 1857 as The Laclede Gas Light Company and it was listed on the New York Stock Exchange (NYSE) in 1889, making the Company successor to the eighth longest listed stock on the NYSE. The Laclede Gas Light Company was renamed Laclede Gas Company in 1950.

Laclede Group is committed to transforming its business and pursuing growth by: 1) growing its Gas Utility business through prudent investment in infrastructure upgrades and organic growth initiatives; 2) acquiring and integrating gas utilities; 3) modernizing its gas assets; and 4) investing in innovation and emerging markets.

The Company has two key business segments: Gas Utility and Gas Marketing. The Gas Utility segment includes the regulated operations of Laclede Gas and Alabama Gas Corporation (Alagasco or the Alabama Utility) (collectively, the Utilities). Laclede Gas, a public utility engaged in the purchase, retail distribution and sale of natural gas, is the largest natural gas distribution utility system in Missouri, serving more than 1.1 million residential, commercial and industrial customers, and is headquartered in St. Louis, Missouri. Laclede Gas serves St. Louis and eastern Missouri and, through Missouri Gas Energy (MGE), Kansas City and western Missouri. MGE was acquired by Laclede Gas on September 1, 2013. Alagasco is a public utility engaged in the purchase, retail distribution and sale of natural gas principally in central and northern Alabama, serving more than 0.4 million residential, commercial and industrial customers with primary offices located in Birmingham, Alabama. The Company purchased 100% of the common shares of Alagasco from Energen Corporation (Energen) effective on August 31, 2014.

The Gas Marketing segment includes Laclede Energy Resources, Inc. (LER), a wholly owned subsidiary engaged in the marketing of natural gas and related activities on a non-regulated basis.

As of September 30, 2015, Laclede Group had 3,078 employees, Laclede Gas had 2,169 employees (including 22 employees dedicated to LER and other subsidiaries of the Company), and Alagasco had 909 employees.

The business of the Utilities is subject to seasonal fluctuations with the peak period occurring in the winter heating season, typically November through April of each fiscal year. Consolidated operating revenues contributed by each segment for the last three fiscal years are presented below. For more detailed financial information regarding the segments, see Note 14, Information by Operating Segment, of the Notes to Financial Statements in Item 8.



(Dollars in millions)	2015		2014		2013
Gas Utility	$	1,891.8	$	1,462.6	$	847.2
Gas Marketing	84.6		164.6		169.8
Total Operating Revenues	$	1,976.4	$	1,627.2	$	1,017.0

2015 Gas Utility operating results include twelve months each of MGE and Alagasco revenues. 2014 Gas Utility operating results include twelve months of MGE revenues and one month of Alagasco revenues. 2013 Gas Utility operating results include one month of MGE revenues.

Laclede Group’s common stock is listed on the New York Stock Exchange (NYSE) and trades under the ticker symbol “LG.” The following table reflects Laclede Group shares issued during the two most recent fiscal years:



	2015	2014
Common Stock Issuance	—	10,350,000
Dividend Reinvestment and Stock Purchase Plan (DRIP)	31,166	33,667
Equity Incentive Plan	125,441	97,902
Total Shares Issued	156,607	10,481,569

During fiscal 2015 and 2014, shares were issued at historically consistent levels for Laclede Group's DRIP and Equity Incentive Plan. Shares were issued during 2014 to effect the Alagasco acquisition.

During fiscal 2015, neither Laclede Gas nor Alagasco issued shares to Laclede Group, but during fiscal 2014 Laclede Gas issued 28 shares. For more detailed common stock information of Laclede Group, Laclede Gas and Alagasco, see Item 5. Market for Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities.

The information Laclede Group, Laclede Gas and Alagasco file or furnish to the Securities and Exchange Commission (SEC), including annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and their amendments, and proxy statements are available free of charge under "SEC Filings and Annual Reports" in the Investor Relations section of

Table of Contents

~~Item~~Laclede 1Group's website, www.TheLacledeGroup.com, ~~Business~~as soon as reasonably practical after the information is filed with or furnished to the SEC. Information contained on Laclede Group's website is not incorporated by reference in this report.

Overview

Laclede Gas Company (the Utility) is a wholly owned subsidiary of The Laclede Group, Inc. (Laclede Group). The Utility is a public utility engaged in the retail distribution and sale of natural gas, and is the largest natural gas distribution utility in Missouri, serving more than 1.13 million residential, commercial, and industrial customers. The Gas Utility segment serves St. Louis and eastern Missouri through Laclede Gas and serves Kansas City and western Missouri through Missouri Gas Energy (MGE), whose assets were acquired by the Utility on September 1, 2013. As of September 30, 2013 , the Utility had 2,311 employees, including 15 part-time employees. The Utility has no subsidiaries, but does have certain non-regulated activities, which are presented separately from its regulated utility operations.

Operating Revenues for the last three fiscal years are presented below. For more detailed financial information regarding the Utility’s segments, see Note 12 of the Notes to Financial Statements.

(Thousands)	2013		2012		2011
Utility	$	857,762	$	764,651	$	913,190
Other	1,603		2,976		19,138
Total Operating Revenues	$	859,365	$	767,627	$	932,328

The information we file or furnish to the Securities and Exchange Commission (SEC), including annual reports on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K and their amendments, are available on our website, www.LacledeGas.com, in the SEC Filings section under About Laclede Gas as soon as reasonably practical after the information is filed or furnished to the SEC.

GAS UTILITY

~~NATURAL~~Natural ~~GAS~~Gas ~~SUPPLY~~Supply

The ~~Utility~~Utilities' ~~focuses~~fundamental ~~its~~ gas supply ~~portfolio~~strategy ~~around~~is ato ~~number~~meet the two-fold objective of ~~large~~1) ~~natural~~ensuring a dependable gas ~~suppliers~~supply is available for delivery when needed and 2) insofar as is compatible with ~~equity~~that ~~ownership~~dependability, orpurchasing ~~control~~gas ofthat is economically priced. In structuring their natural gas supply portfolio, the Utilities focus on natural gas assets that are strategically ~~situated~~positioned to ~~complement~~meet ~~Laclede’s~~the ~~regionally~~Utilities' ~~diverse~~primary ~~firm transportation arrangements~~objectives.

The Utility's fundamental gas supply strategy is to meet the two-fold objective of 1) ensuring that the gas supplies it acquires are dependable and will be delivered when needed and 2) insofar as is compatible with that dependability, purchasing gas that is economically priced. In structuring its natural gas supply portfolio, Laclede Gas continues to focus on natural gas assets that are strategically positioned to meet the Utility’s primary objectives. Laclede Gas utilizes both Mid-Continent and Gulf Coast gas sources to provide a level of supply diversity that facilitates the optimization of pricing differentials as well as protecting against the potential of regional supply disruptions. MGE utilizes both Mid-Continent and Rocky Mountain gas sources to provide a level of supply diversity that accesses low cost supplies while providing a natural gas price arbitrage.

InLaclede ~~fiscal~~Gas ~~year~~focuses ~~2013,~~its ~~the Utility purchased natural~~ gas ~~from~~supply 35portfolio ~~different~~around ~~suppliers~~a tonumber ~~meet~~of ~~current~~large natural gas ~~sales~~suppliers ~~and storage injection requirements. The Utility entered into firm agreements~~ with ~~suppliers~~equity ~~including~~ownership ~~major~~or ~~producers~~control ~~and~~of ~~marketers~~assets ~~providing~~strategically ~~flexibility~~situated to ~~meet~~complement ~~the temperature sensitive needs of~~ its ~~customers.~~regionally ~~Natural~~diverse ~~gas~~firm ~~purchased~~transportation ~~by the Utility for delivery to its service area through the Enable Mississippi River Transmission LLC (MRT) system totaled 55~~arrangements.0 ~~billion~~In ~~cubic~~eastern ~~feet~~Missouri, ~~(Bcf).~~ Laclede Gas ~~also~~utilizes ~~holds~~both ~~firm~~Mid-Continent ~~transportation~~and onGulf ~~several~~Coast ~~other~~gas ~~interstate~~sources ~~pipeline~~to ~~systems that~~ provide ~~access~~a tolevel ~~gas supplies upstream~~ of ~~MRT.~~supply Indiversity ~~addition~~that tofacilitates ~~deliveries~~the ~~from~~optimization ~~Enable MRT, 8.6 Bcf~~ of ~~gas~~pricing ~~was~~differentials ~~purchased~~as onwell MOas ~~Gas,~~protecting ~~13.4~~against ~~Bcf on~~ the ~~Southern~~potential ~~Star~~of ~~Central~~regional ~~Gas~~supply ~~Pipeline, Inc~~disruptions. ~~(Southern~~In ~~Star~~western ~~Central)~~Missouri, ~~0.03~~both ~~Bcf~~Mid-Continent onand ~~the~~Rocky ~~Panhandle~~Mountain ~~Eastern~~gas ~~Pipe~~sources ~~Line~~are ~~Company~~utilized ~~system,~~by ~~and~~MGE ~~0.1~~to ~~BCF~~provide ona ~~the~~level ~~Postrock~~of ~~system.~~supply ~~Some~~diversity ofthat ~~the~~accesses ~~Utility’s~~low ~~commercial~~cost ~~and~~supplies ~~industrial~~while ~~customers~~providing ~~purchased~~a ~~their~~natural ~~own~~ gas ~~with~~price ~~the Utility transporting 17~~arbitrage.~~0 Bcf to them through the Utility’s distribution system.~~

~~The~~In fiscal year ~~2013~~2015, ~~peak~~Laclede ~~day~~Gas ~~sendout~~purchased of natural gas from 41 different suppliers to meet its total service area current gas sales and storage injection requirements. Laclede Gas ~~customers,~~entered into firm agreements with suppliers including ~~transportation~~major ~~customers,~~producers ~~occurred~~and onmarketers ~~January~~providing ~~22,~~flexibility ~~2013,~~to ~~when~~meet the ~~average~~ temperature ~~was~~sensitive 16needs ~~degrees~~of ~~Fahrenheit~~its ~~in St~~customers. ~~Louis.~~Natural Ongas ~~that~~purchased ~~day,~~by Laclede Gas ~~customers~~for ~~consumed~~delivery 0to its service area through the Enable Mississippi River Transmission LLC (MRT) system totaled 60.~~766~~5 ~~Bcf~~billion ofcubic ~~natural~~feet ~~gas~~(Bcf). ~~About~~Laclede ~~91%~~Gas ofalso ~~this~~holds ~~peak~~firm ~~day~~transportation ~~demand~~on ~~was~~several ~~met~~other ~~with~~interstate ~~natural~~pipeline ~~gas~~systems ~~transported~~that provide access to Stgas supplies upstream of MRT. ~~Louis~~In ~~through~~addition ~~the~~to natural gas deliveries from MRT, MO57.2 Bcf was purchased on the Southern Star Central Gas Pipeline, ~~and~~Inc. (Southern Star), ~~transportation~~10.0 ~~systems,~~Bcf ~~and~~was purchased on the ~~other~~MoGas Pipeline LLC (MoGas), 2.9% Bcf was ~~met~~purchased ~~from~~on ~~Laclede~~the Tallgrass Interstate Gas' Transmission, LLC (TGIT) system, 1.1 Bcf was purchased on- the Panhandle Eastern Pipe Line Company, LP (PEPL) system, ~~storage~~and 0.6 Bcf was purchased on the Rockies Express Pipeline, LLC (REX) system. Some of Laclede Gas’ commercial and ~~peak~~industrial ~~shaving~~customers ~~resources~~purchased their own gas with Laclede Gas transporting 42.9 Bcf to them through its distribution system.

The fiscal year 2015 peak day send out of natural gas to Laclede Gas customers in both eastern and western Missouri, including transportation customers, occurred on January 7, 2015. The average temperature was 7.0 degrees Fahrenheit in St. Louis and 8.0 degrees Fahrenheit in Kansas City. On that day, the Missouri Utilities' customers consumed 1.67 Bcf of natural gas. For eastern Missouri, about 76% of this peak day demand was met with natural gas transported to St. Louis through the MRT, MoGas, and Southern Star transportation systems, and the other 24% was met from Laclede Gas' on-system storage and peak shaving resources. For western Missouri, this peak day demand was met with natural gas transported to Kansas City through the Southern Star, PEPL, TGIT, and REX transportation systems.

Alagasco

Alagasco’s distribution system is connected to two major interstate natural gas pipeline systems, Southern Natural Gas Company, L.L.C. (Southern Natural Gas) and Transcontinental Gas Pipe Line Company, LLC (Transco). It is also connected to two intrastate natural gas pipeline systems.

Alagasco purchases natural gas from various natural gas producers and marketers. Certain volumes are purchased under firm contractual commitments with other volumes purchased on a spot market basis. The purchased volumes are delivered to Alagasco’s system using a variety of firm transportation, interruptible transportation and storage capacity arrangements designed to meet the system’s varying levels of demand.

In fiscal year 2015, Alagasco purchased natural gas from 15 different suppliers to meet current gas sales, storage injection, and LNG liquefaction requirements, of which six are under long-term supply agreements. Approximately 62.7 Bcf was transported by Southern Natural Gas, 7.1 Bcf by Transco, and 5.3 Bcf through intrastate pipelines to the Alagasco delivery points for its residential, commercial, and industrial customers.

The fiscal year 2015 peak day send out for Alagasco was 0.6 Bcf on January 7, 2015, when the average temperature was 22.0 degrees Fahrenheit in Birmingham, of which 84% was met with supplies transported through Southern Natural Gas, Transco and intrastate facilities and 16% was met with supplies from Alagasco's four liquefied natural gas (LNG) peak shaving facilities.

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~~UNDERGROUND~~Natural ~~NATURAL~~Gas ~~GAS STORAGE~~Storage

~~The~~Laclede Utility has a contractual right to store 23.1 Bcf of gas in MRT’s storage facility located in Unionville, Louisiana, 16.3 Bcf of gas storage in Southern Star Central system storage facilities located in Kansas and Oklahoma, and 1.4 Bcf of firm storage on Panhandle Eastern Pipe Line Company’s system storage. MRT’s tariffs allow injections into storage from May 16 through November 15 and require the withdrawal from storage of all but 2.2 Bcf from November 16 through May 15. Southern Star Central tariffs allow both injections and withdrawals into storage year round with ratchets that restrict the associated flows dependent upon the underlying inventory level per the contracts.Gas

InFor ~~addition~~its eastern service area, ~~the~~Laclede ~~Utility~~Gas ~~supplements~~has ~~flowing~~a ~~pipeline~~contractual ~~gas~~right ~~with~~to ~~natural~~store ~~gas~~21.6 ~~withdrawn~~Bcf ~~from~~of ~~its~~gas ~~own~~in ~~underground~~MRT’s storage ~~field~~facility located in ~~St.~~Unionville, ~~Louis~~Louisiana, and Stfor its western service area 16.3 ~~Charles~~Bcf ~~Counties~~of gas storage in ~~Missouri.~~Southern ~~The~~Star ~~field~~system isstorage ~~designed~~facilities tolocated ~~provide~~in 0Kansas and Oklahoma, as well as 1.34 Bcf of ~~natural~~firm ~~gas~~storage ~~withdrawals~~ on aPEPL’s ~~peak~~system ~~day~~storage. MRT’s tariffs allow injections into storage from May 16 through November 15 and ~~annual~~require ~~withdrawals~~the withdrawal from storage of ~~approximately~~all 4but 2.01 Bcf offrom ~~gas~~November ~~based~~16 onthrough ~~the~~May 15. ~~inventory~~Southern ~~level~~Star tariffs allow both injections and withdrawals into storage year round with ratchets that ~~Laclede~~restrict ~~plans~~the toassociated ~~maintain~~flows dependent upon the underlying inventory level per the contracts.

~~REGULATORY~~In ~~MATTERS~~addition, in eastern Missouri, Laclede Gas supplements pipeline gas with natural gas withdrawn from its own underground storage field located in St. Louis and St. Charles Counties in Missouri. The field is designed to provide approximately 0.3 Bcf of natural gas withdrawals on a peak day and maximum annual net withdrawals of approximately 4.0 Bcf of natural gas based on the inventory level that Laclede Gas plans to maintain.

For details on regulatory matters, see the Regulatory and Other Matters discussion in the Management’s Discussion and Analysis of Financial Condition and Results of Operations, on page 26 of this Form 10-K.Alagasco

~~OTHER~~Alagasco ~~PERTINENT~~has ~~MATTERS~~a contractual right to store 12.5 Bcf of gas with Southern Natural Gas, 0.2 Bcf of gas with Transco and 0.2 Bcf of gas with Tennessee Gas Pipeline. In addition, the Alagasco has 1.8 Bcf of LNG storage that can provide the system with up to an additional 0.2 Bcf of natural gas daily to meet peak day demand.

~~The~~Regulatory Utility's business has monopoly characteristics in that it is the only distributor of natural gas within its franchised service areas. The principal competition are the local electric companies. Other competitors in the Utility's service areas include suppliers of fuel oil, coal, propane, natural gas pipelines which can directly connect to large volume customers, and district steam systems in the downtown areas of both St. Louis and Kansas City.Matters

~~The~~For ~~Utility’s~~details ~~residential,~~on ~~commercial~~regulatory matters, ~~and~~see ~~small~~Note ~~industrial~~15, ~~markets~~Regulatory ~~represent approximately 85% of the Utility's operating revenue. Given the current level of natural gas supply and market conditions~~Matters, ~~the Utility believes that the relative comparison~~ of ~~natural gas equipment and operating costs with those of competitive fuels will not change significantly in~~ the ~~foreseeable~~Notes ~~future, and that these markets will continue~~ to beFinancial ~~supplied~~Statements by natural gas. In new multi-family and commercial rental markets, the Utility's competitive exposure is presently limited to space and water heating applications. Certain alternative heating systems can be cost competitive in ~~traditional~~Item ~~markets~~8.

~~Coal~~Other isPertinent price competitive as a fuel source for very large boiler plant loads, but environmental requirements for coal have shifted the economic advantage to natural gas. Oil and propane can be used to fuel boiler loads and certain direct-fired process applications, but these fuels require on-site storage, thus limiting their competitiveness. In certain cases, district steam has been competitive with gas for downtown St. Louis and Kansas City area heating users. The Utility offers gas transportation service to its large user industrial and commercial customers. The tariff approved for that type of service produces a margin similar to that which the Utility would have received under its regular sales rates.Matters

~~*****~~Laclede Gas is the only distributor of natural gas within its franchised service areas, while Alagasco is the main distributor of natural gas in its service areas. The principal competition for the Utilities comes from the local electric companies. Other competitors in the service areas include suppliers of fuel oil, coal, propane, natural gas pipelines that can directly connect to large volume customers, for the Missouri Utilities, district steam systems in the downtown areas of both St. Louis and Kansas City, and for Alagasco, from municipally or publicly owned gas distributors located adjacent to its service territory. Coal is price competitive as a fuel source for very large boiler plant loads, but environmental requirements for coal have shifted the economic advantage to natural gas. Oil and propane can be used to fuel boiler loads and certain direct-fired process applications, but these fuels require on-site storage, thus limiting their competitiveness. In certain cases, district steam has been competitive with gas for downtown St. Louis and Kansas City area heating users.

~~The~~Laclede ~~Utility~~Gas' isresidential, ~~subject~~commercial, toand ~~various~~small ~~environmental~~industrial ~~laws~~markets ~~and~~represented ~~regulations~~approximately ~~that,~~91% toof ~~date,~~its ~~have~~operating ~~not~~revenue ~~materially~~for ~~affected~~fiscal ~~the~~2015. ~~Utility’~~Alagasco's ~~financial~~residential, ~~position~~commercial, and ~~results~~small industrial markets represented approximately 79% of ~~operations~~its operating revenue for the twelve months ended September 30, 2015. ~~For~~Given athe ~~detailed~~current ~~discussion~~level of ~~environmental~~natural ~~matters~~gas supply and market conditions, ~~see~~the ~~Note~~Utilities 13believe that the relative comparison of natural gas equipment and operating costs with those of competitive fuels will not change significantly in the ~~Notes~~foreseeable future, and that these markets will continue to ~~Financial~~be ~~Statements~~supplied by natural gas. In new multi-family and commercial rental markets, the Utilities' competitive exposures are presently limited to space and water heating applications. Certain alternative heating systems can be cost competitive in traditional markets.

~~*****~~Laclede Gas offers gas transportation service to its large-user industrial and commercial customers. The tariff approved for that type of service produces a margin similar to that which the Missouri Utilities would have received under their regular sales rates. Alagasco’s transportation tariff allows the Alabama Utility to transport gas for large commercial and industrial customers rather than buying and reselling it to them and is based on the Alabama Utility’s sales profit margin so that operating margins are unaffected. During 2015, substantially all of Alagasco’s large commercial and industrial customer deliveries involved the transportation of customer-owned gas.

~~Laclede~~The ~~Gas'~~Utilities ~~labor~~are ~~agreements~~subject ~~with~~to ~~Locals~~various ~~884,~~environmental ~~11-6~~laws and ~~11-194~~regulations ~~of the United Steel~~that, ~~Paper~~to ~~and Forestry~~date, ~~Rubber,~~have ~~Manufacturing,~~not ~~Energy,~~materially ~~Allied-Industrial~~affected ~~and~~the ~~Service~~Utilities' ~~Workers~~or ~~International~~the ~~Union~~Company’s ~~(Union),~~financial ~~which~~position ~~represent~~and ~~approximately~~results ~~67%~~ of ~~Laclede Gas’ employees~~operations. ~~The~~For ~~agreements~~a ~~with Locals~~detailed ~~11-6~~discussion ~~and~~of ~~11-194~~environmental ~~will~~matters, ~~expire~~see atNote ~~midnight on July 31~~16, ~~2014.~~Commitment ~~Laclede Gas~~ and ~~Local~~Contingencies, ~~884~~of ~~have~~the aNotes ~~labor~~to ~~agreement~~Financial ~~that~~Statements ~~expires~~in onItem ~~midnight on July 31, 2015~~8.

MGE have labor agreements with Locals 12561, 14228 and 11-267 of the United Steelworkers (Union) which represents 26% of Missouri Gas Energy employees; Gasworkers Metal Trades Local 781 of the United Association of Journeymen and Apprentices of the Plumbing and Pipefitting Industry of the United States and Canada, A.F. of L. - C.I.O. (Union) which represents approximately 34% of Missouri Gas Energy employees; and Local 53 of the International Brotherhood of Electrical Workers (Union) which represents approximately 13% of Missouri Gas Energy employees.

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~~Missouri~~Union ~~Gas Energy and Locals 12561, 14228, and 11-267, 781, and 53 have labor agreements that will expire at 11:59 p.m. on April 30, 2014.~~Agreements

~~*****~~As of September 30, 2015, the Company had approximately 1,897 employees represented by organized labor unions. The Company believes labor relations with its employees are good. Should that condition change, the Company could experience labor disputes, work stoppages or other disruptions in production that could negatively impact the Company’s results of operations and cash flows.

The ~~business~~following oftable presents the ~~Utility~~Company's isvarious ~~subject~~labor toagreements ~~seasonal~~as ~~fluctuations~~of ~~with~~September ~~the~~30, ~~peak period occurring in the winter season.~~2015:

*****



Union	Local	Employees Covered	Contract Start Date	Contract End Date
Laclede Gas Company (eastern Missouri)
United Steel, Paper and Forestry, Rubber Manufacturing, Allied-Industrial and Service Workers International Union (USW)	884	60	August 1, 2015	July 31, 2018
USW	11-6	858	August 1, 2015	July 31, 2018
USW	11-194	142	August 1, 2015	July 31, 2018

Missouri Gas Energy (western Missouri)
USW	12561	126	June 1, 2014	July 31, 2016
USW	14228	38	June 1, 2014	July 31, 2016
USW	11-267	32	June 1, 2014	July 31, 2016
Gas Workers Metal Trades locals of the United Association of Journeyman and Apprentices of the Plumbing and Pipefitting Industry of the United States and Canada	781-Kansas City	193	June 1, 2014	July 31, 2016
Gas Workers Metal Trades locals of the United Association of Journeyman and Apprentices of the Plumbing and Pipefitting Industry of the United States and Canada	781-Monett	49	June 1, 2014	July 31, 2016
International Brotherhood of Electrical Workers (IBEW)	53	4	April 30, 2014	July 31, 2016

Total Laclede Gas Company		1,502

Alabama Gas Corporation
USW	12030	212	December 19, 2014	April 30, 2017
USW	12030-A	67	May 1, 2014	April 30, 2017
United Association of Gas Fitters	548	116	July 1, 2013	June 30, 2016

Total Alabama Gas Corporation		395

Revenues, therms sold and transported, and customers of the Utility for the last three fiscal years are as follows:

Utility Operating Revenues
(Thousands)	2013*		2012		2011
Residential	$	556,818	$	487,529	$	584,788
Commercial & Industrial	184,101		161,866		202,017
Interruptible	3,524		2,105		3,659
Transportation	15,293		14,094		14,426
Off-System and Capacity Release	90,188		92,477		100,225
Other	7,838		6,580		8,075
Total	$	857,762	$	764,651	$	913,190
Utility Therms Sold and Transported
(Thousands)	2013*		2012		2011
Residential	496,623		385,317		497,171
Commercial & Industrial	229,562		183,536		228,080
Interruptible	3,149		3,013		5,098
Transportation	160,411		146,117		155,067
System Therms Sold and Transported	889,745		717,983		885,416
Off-System	229,358		314,473		223,000
Total Therms Sold and Transported	1,119,103		1,032,456		1,108,416
Utility Customers (End of Period)
(Thousands)	2013*		2012		2011
Residential	1,027,556		588,061		584,926
Commercial & Industrial	99,960		39,741		39,995
Interruptible	17		15		15
Transportation	1,003		140		141
Total Customers	1,128,536		627,957		625,077

*Includes MGE for the month of September 2013, and for the end of the period.

*****

The Utility has franchises in nearly all of the 236 Missouri communities where it provides service with terms varying from five years to an indefinite duration. Generally, a franchise allows the Utility, among other things, to install pipes and construct other facilities in the community. Certain franchise agreements have expired, including Clayton (in 2008), St. Charles County (in 2013), North Kansas City (in 2013), Cameron (in 2013), and Riverside (in 2013) and since that time the Utility has continued to provide service in those communities without formal franchises. All of the franchises are free from unduly burdensome restrictions and are adequate for the conduct of the Utility's current public utility business in the State of Missouri.

OTHER

The Other category includes the Utility's non-regulated propane services business which involves providing propane-related services and storage to third parties and its affiliate, Laclede Pipeline Company. Beginning July 1, 2013, propane-related services are included within Gas Utility operations pursuant to the Utility's new rate case.

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~~Item~~Operating ~~1A.~~Revenues ~~Risk~~and ~~Factors~~Customer Information

~~The~~Revenues ~~Utility's business~~ and ~~financial~~therms ~~results~~sold ~~are~~and ~~subject~~transported tofor athe ~~number~~Gas ofUtility ~~risks~~segment ~~and~~for ~~uncertainties,~~the ~~including~~last ~~those~~three ~~set~~fiscal ~~forth~~years ~~below. The risks described below~~ are ~~those~~as ~~the~~follows ~~Utility~~(before ~~considers~~intersegment ~~to be material.~~eliminations):

Regulation of the Utility business may impact rates it is able to charge, costs, and profitability.



Gas Utility Operating Revenues
(Dollars in millions)		2015			2014*		2013**
Residential		$	1,263.1		$	974.3	$	556.8
Commercial & Industrial		462.3			357.1		184.1
Interruptible		2.3			2.1		3.5
Transportation		92.2			32.4		15.3
Off-System and Other Incentive		76.2			79.5		90.2
Provisions for Refunds and Other		(0.3		)	22.4		7.9
Total Utility Operating Revenues		$	1,895.8		$	1,467.8	$	857.8

Gas Utility Therms Sold and Transported
(In millions)		2015			2014*		2013**
Residential		1,065.1			952.9		496.6
Commercial & Industrial		491.6			435.6		229.6
Interruptible		3.6			3.5		3.1
Transportation		989.0			484.6		160.4
System Therms Sold and Transported		2,549.3			1,876.6		889.7
Off-System		193.5			125.8		229.4
Total Utility Therms Sold and Transported		2,742.8			2,002.4		1,119.1

*	Includes Alagasco for the one month ended September 30, 2014.
**	Includes MGE for the one month ended September 30, 2013.

The ~~Missouri~~following ~~Public~~table ~~Service~~presents ~~Commission~~our ~~(MoPSC~~Gas ~~or Commission) regulates many aspects of the~~ Utility’s ~~distribution operations, including construction and maintenance of facilities, operations, safety, the rates that the Utility may charge~~ customers, ~~the~~for ~~terms of service to its customers, transactions with its affiliates, and~~ the ~~rate~~last ofthree ~~return~~fiscal ~~that it is allowed to realize; as well as the accounting treatment for certain aspects of its operations. For further discussion of these accounting matters~~years, ~~see~~based ~~Critical Accounting Policies pertaining to the Utility, beginning~~ on ~~page~~an ~~26.~~annual ~~The~~average ~~Utility's~~number ~~ability to obtain and timely implement rate increases and rate supplements to maintain the current rate~~ of return depends upon regulatory discretion. There can be no assurance that it will be able to obtain rate increases or rate supplements or continue earning the current authorized rates of return. Furthermore, in accordance with the Unanimous Stipulation and Agreement, the Utility will not file a general rate case, other than the currently pending MGE rate case, for non-gas costs prior to October 1, 2015 unless a significant, unusual event impacts any of its operations. The first general rate case filed after October 1, 2015, requires that it be for both the Utility and MGE.customers:

The Utility could incur additional costs if required to adjust to new laws or regulations, revisions to existing laws or regulations or changes in interpretations of existing laws or regulations such as the Dodd-Frank Act. In addition, as the regulatory environment for the natural gas industry increases in complexity, the risk of inadvertent noncompliance could also increase. If the Utility fails to comply with applicable laws and regulations, whether existing or new, it could be subject to fines, penalties or other enforcement action by the authorities that regulate its operations.



Gas Utility Customers		2015*	2014**	2013***
Residential		1,434,584	1,418,422	1,022,026
Commercial & Industrial		132,388	133,799	99,671
Interruptible		18	18	17
Transportation		796	795	513
Total Utility Customers		1,567,786	1,553,034	1,122,227

*	Includes MGE and Alagasco for the twelve months ended September 30, 2015.
**	Includes Alagasco for the month of September 2014. The number of customers for 2014 is based on average customers over the twelve months ended September 30, 2014, while only including Alagasco customers for the month of ownership. Restated to align methodology.
***	Includes MGE for the one month ended September 30, 2013. Restated to align methodology.

~~The~~Total ~~Utility~~annual isaverage ~~involved~~number inof ~~legal~~customer orfor ~~administrative~~Laclede ~~proceedings~~Gas ~~before various courts~~ and ~~governmental~~Alagasco ~~bodies~~for ~~that~~fiscal ~~could~~2015 ~~adversely~~was ~~affect our results of operations~~1,148,339 ~~cash flows~~ and ~~financial~~419,447, ~~condition~~respectively.

~~The~~Laclede ~~Utility~~Gas ishas ~~involved~~franchises in ~~legal~~nearly orall ~~administrative~~the ~~proceedings~~communities ~~before~~where ~~various~~it ~~courts~~provides ~~and~~service ~~governmental~~with ~~bodies~~terms ~~with~~varying ~~respect~~from five years to ~~general~~an ~~claims,~~indefinite ~~rates~~duration. Generally, ~~environmental~~a ~~issues~~franchise allows Laclede Gas, ~~gas~~among ~~cost~~other ~~prudence~~things, ~~reviews~~to install pipes and construct other ~~matters~~facilities in the community. ~~Adverse~~All ~~decisions~~of ~~regarding~~the ~~these~~franchises ~~matters,~~are tofree ~~the~~from ~~extent~~unduly ~~they~~burdensome ~~require~~restrictions usand toare ~~make~~adequate ~~payments~~for inthe ~~excess~~conduct of ~~amounts~~Laclede ~~provided~~Gas' ~~for~~current public utility businesses in ~~our~~the ~~financial~~state ~~statements,~~of orMissouri. toIn ~~the~~recent ~~extent~~years, ~~they~~although ~~are~~certain ~~not~~franchise ~~covered~~agreements byhave ~~insurance~~expired, ~~could~~including ~~adversely~~Clayton, ~~affect~~North ~~our~~Kansas ~~results~~City, ofCameron, ~~operations~~and Riverside, ~~cash~~Laclede ~~flows~~Gas ~~and~~has ~~financial~~continued ~~condition~~to provide service in those communities without formal franchises.

~~The~~Alagasco ~~Utility's~~has ~~liquidity~~franchises ~~may~~in benearly ~~adversely~~all ~~affected~~the bycommunities ~~delays~~where init ~~recovery~~provides ofservice ~~its~~with ~~costs~~terms varying from five years to an indefinite duration. Generally, ~~due~~a franchise allows Alagasco, among other things, to ~~regulation~~install pipes and construct other facilities in the community. All of the franchises are free from unduly burdensome restrictions and are adequate for the conduct of Alagasco's current public utility business in the state of Alabama.

In the normal course of business, there may be a lag between when the Utility incurs increases in certain of its costs and the time in which those costs are considered for recovery in the ratemaking process. Cash requirements for increased operating costs, increased funding levels of defined benefit pension and postretirement costs, capital expenditures, and other increases in the costs of doing business may require outlays of cash prior to the authorization of increases in rates charged to customers, as approved by the MoPSC. Accordingly, the Utility’s liquidity may be adversely impacted to the extent higher costs are not timely recovered from its customers. In accordance with the Unanimous Stipulation and Agreement, the Utility will not file a general rate case for non-gas costs prior to October 1, 2015 unless a significant, unusual event impacts any of its operations. The first general rate case filed after October 1, 2015, is required to be for both the the Utility and MGE.

The Utility's ability to meet its customers’ natural gas requirements may be impaired if contracted gas supplies, interstate pipeline and/or storage services are not available or delivered in a timely manner.

In order to meet its customers’ annual and seasonal natural gas demands, the Utility must obtain sufficient supplies, interstate pipeline capacity, and storage capacity. If it is unable to obtain these, either from its suppliers’ inability to deliver the contracted commodity or the inability to secure replacement quantities, the Utility's financial condition and results of operations may be adversely impacted. If a substantial disruption in interstate natural gas pipelines’ transmission and storage capacity were to occur during periods of heavy demand, the Utility’s financial results could be adversely impacted.

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~~The~~GAS Utility's liquidity and, in certain circumstances, its results of operations may be adversely affected by the cost of purchasing natural gas during periods in which natural gas prices are rising significantly.MARKETING

~~The~~LER ~~Utility's~~is ~~tariff~~engaged ~~rate~~in ~~schedules~~the ~~contain~~marketing ~~Purchased~~of ~~Gas~~natural ~~Adjustment~~gas ~~(PGA)~~and ~~Clauses~~providing ~~that~~energy ~~permit~~services ~~the Utility~~ to ~~file~~both ~~for~~on-system ~~rate~~utility ~~adjustments~~transportation tocustomers ~~recover~~and ~~the~~customers ~~cost~~outside of ~~purchased gas. Changes in~~ the ~~cost~~Utilities' oftraditional ~~purchased~~service ~~gas~~areas. ~~are~~During ~~flowed~~fiscal ~~through~~year to2015, ~~customers~~LER ~~and~~utilized ~~may~~17 ~~affect~~interstate ~~uncollectible amounts~~ and ~~cash~~intrastate ~~flows~~pipelines and ~~can~~107 ~~therefore~~suppliers ~~impact~~to ~~the~~market ~~amount~~natural ofgas ~~capital~~to ~~resources.~~its ~~Currently,~~customers ~~the~~primarily ~~Utility~~in ~~is allowed to adjust~~ the ~~gas~~Midwest. ~~cost~~LER ~~component~~served ofmore ~~its~~than ~~rates~~225 upretail tocustomers ~~four~~and ~~times~~120 ~~each~~wholesale ~~year~~customers. ~~The~~Through ~~Utility~~its ~~must~~retail ~~make~~operations, aLER ~~mandatory~~offers natural gas ~~cost~~marketing ~~adjustment~~services atto ~~the~~large ~~beginning~~commercial ofand ~~the~~industrial ~~winter~~customers, inwhile ~~November,~~its ~~and~~wholesale ~~during~~business ~~the~~consists ~~next~~of ~~twelve~~buying ~~months~~and itselling ~~may~~natural ~~make~~gas up to ~~three~~other ~~additional~~marketers, ~~discretionary~~producers, ~~gas~~utilities, ~~cost~~power ~~adjustments~~generators, sopipelines, ~~long~~and asmunicipalities. ~~each~~Wholesale ofactivities ~~these~~currently ~~adjustments~~represent isa ~~separated~~majority byof atLER’s ~~least~~total ~~two months~~business.

~~The~~In ~~MoPSC typically approves~~ the ~~Utility’s~~course ~~PGA~~of ~~changes~~its onbusiness, anLER ~~interim~~enters ~~basis,~~into ~~subject~~agreements to ~~refund~~purchase ~~and~~natural ~~the~~gas ~~outcome~~at of a ~~subsequent~~future ~~audit~~date ~~and~~in ~~prudence~~order ~~review.~~to ~~Due~~lock up supply to ~~such~~cover ~~review~~future ~~process,~~sales ~~there~~commitments isto aits ~~risk~~customers. ofTo asecure ~~disallowance~~access ofto ~~full~~the ~~recovery~~markets ofit ~~these~~serves, ~~costs.~~LER ~~Any~~contracts ~~material~~for ~~disallowance~~transportation ofcapacity ~~purchased~~on ~~gas~~various ~~costs~~pipelines ~~would~~from ~~adversely~~both ~~affect~~pipeline ~~revenues.~~companies ~~Increases~~and inthrough the ~~prices~~secondary ~~the~~capacity ~~Utility~~market ~~charges~~from ~~for~~third ~~gas~~parties. ~~may~~Throughout ~~also~~fiscal ~~adversely~~year ~~affect~~2015, ~~revenues~~LER ~~because~~held ~~they~~approximately ~~could~~0.4 ~~lead~~Bcf ~~customers~~per today ~~reduce~~of ~~usage~~firm ~~and~~transportation ~~cause~~capacity. ~~some~~In ~~customers~~addition, to ~~have~~ensure ~~trouble~~reliability ~~paying~~of ~~the~~service ~~resulting~~and ~~higher~~to ~~bills.~~provide ~~These~~operational ~~higher~~flexibility, ~~prices~~LER ~~may~~enters ~~increase~~into ~~bad~~firm ~~debt~~storage ~~expenses~~contracts and ~~ultimately~~interruptible ~~reduce~~park ~~earnings.~~and ~~The~~loan ~~Utility~~transactions ~~has~~with ~~used~~various ~~short-term~~companies, ~~borrowings~~where init ~~the~~is ~~past~~able to ~~finance~~buy ~~storage inventories~~ and ~~purchased~~retain gas ~~costs,~~to ~~and~~be ~~expects~~delivered toat doa sofuture indate, at which time LER sells the ~~future~~natural gas to third parties. ~~Rapid~~As ~~increases~~of inSeptember ~~the~~30, ~~price~~2015, LER has contracted for approximately 4.5 Bcf of ~~purchased~~such ~~gas~~storage ~~may~~and ~~result~~park inand anloan ~~increase~~capacity infor ~~short~~the 2015-~~term~~2016 ~~debt~~winter period.

ToLER’s ~~lower~~strategy ~~financial~~is ~~exposure~~ to ~~commodity~~leverage ~~price~~its ~~fluctuations,~~market ~~the~~expertise ~~Utility~~and ~~enters~~risk ~~into~~management ~~contracts~~skills to ~~hedge~~manage ~~the~~and ~~forward~~optimize ~~commodity~~the ~~price~~value of its ~~natural~~portfolio ~~gas supplies. As part~~ of ~~this strategy~~commodity, ~~the Utility may use fixed-price~~transportation, ~~forward,~~park ~~physical~~and ~~purchase contracts~~loan, ~~swaps, futures,~~ and ~~option~~storage contracts. ~~However,~~while ~~the~~controlling ~~Utility~~costs ~~does not hedge the entire exposure of energy assets or positions to market price volatility,~~ and ~~the~~acting ~~coverage~~on ~~will~~new ~~vary~~marketplace ~~over time~~opportunities. ~~Any costs~~Overall, ~~gains,~~fiscal or2015 ~~losses~~had ~~experienced~~significantly ~~through~~fewer ~~hedging~~opportunities ~~procedures,~~for ~~including~~LER ~~carrying~~due ~~costs,~~primarily ~~generally~~to ~~flow~~volatility ~~through~~and ~~the~~extreme ~~PGA~~price ~~Clause,~~spikes ~~thereby~~as ~~limiting~~compared ~~the Utility’s exposure~~ to ~~earnings~~fiscal ~~volatility~~2014. However, ~~variations~~LER inwas ~~the~~able ~~timing~~to ofexpand ~~collections~~its ofproducer ~~such~~services ~~gas~~business ~~costs under the PGA Clause~~ and ~~the~~sales ~~effect of cash payments for margin deposits associated with the Utility’s use of natural gas derivative instruments may cause short-term cash requirements~~ to ~~vary.~~power ~~These~~generation ~~procedures remain subject to prudence review by the MoPSC~~markets.

~~The Utility may be adversely affected by economic conditions.~~OTHER

~~Periods~~The ofprincipal ~~slowed~~drivers ~~economic~~of ~~activity~~the ~~generally~~Other ~~result~~results infor ~~decreased~~fiscal ~~energy~~2015 ~~consumption, particularly by industrial~~ and ~~large~~fiscal ~~commercial~~2014 ~~companies.~~has Asbeen ainterest ~~consequence,~~expense ~~national~~related orto ~~regional~~the ~~recessions~~2014 ordebt ~~other~~issue ~~downturns~~to infinance ~~economic activity could adversely affect~~ the ~~Utility's~~Alagasco ~~revenues~~acquisition and ~~cash~~expenses ~~flows~~attributable orto ~~restrict its future growth. Economic conditions in its service territory may also adversely impact~~ the ~~Utility’s~~Alagasco ~~ability~~transaction toand ~~collect~~MGE ~~its accounts receivable resulting in an increase to bad debt expenses~~integration.

~~The~~This ~~Utility~~category isalso ~~dependent~~includes onLaclede ~~bank~~Pipeline ~~lines~~Company, a 100% owned subsidiary of ~~credit~~Laclede ~~and~~Group, ~~continued~~which ~~access~~operates a propane pipeline under Federal Energy Regulatory Commission (FERC) jurisdiction. This pipeline allows Laclede Gas to ~~capital~~receive ~~markets~~propane that may be used to ~~successfully~~supplement ~~execute~~its natural gas supply and meet peak demands on its ~~operating~~distribution ~~strategies~~system. Laclede Pipeline Company also provides transportation services to third parties.

~~In addition to longer-term debt that is issued by the Utility under its mortgage and deed of trust dated February 1~~Additionally, ~~1945,~~ ~~the~~this ~~Utility~~category ~~has~~includes ~~relied,~~Laclede ~~and~~Group’s ~~continues~~subsidiaries tothat ~~rely,~~are ~~upon~~engaged ~~shorter~~in ~~term~~compression ~~borrowings or commercial paper supported by bank lines~~ of ~~credit to finance the execution of a portion of its operating strategies. The Utility is dependent on these capital sources to purchase its~~ natural gas ~~supply and maintain its properties. The availability and cost of these credit sources is cyclical and these capital sources may not remain available to the Utility~~, oroil it may not be able to obtain funds at a reasonable cost in the future. The Utility's ability to borrow under its existing lines of credit depends on its compliance with the Utility’s obligations under the lines of credit. If the Utility were to breach any of the financial or other covenants under these agreementsproduction, ~~its~~real ~~debt~~estate ~~repayment obligations under them could be accelerated. The Utility's ability to issue commercial paper supported by its lines of credit~~development, torisk ~~issue long-term bonds~~management, orand tofinancial ~~obtain~~investments ~~new lines of credit also depends on current conditions~~ in ~~the~~other ~~credit markets. The Utility’s access to funds under committed short-term credit facilities~~enterprises, ~~which~~among ~~are~~other ~~currently provided by a number of banks, is dependent on the ability of the participating banks to meet their funding commitments~~activities. ~~Those~~These ~~banks~~operations ~~may~~are ~~not~~conducted bethrough ~~able~~seven ~~to meet their funding commitments if they experience shortages of capital and liquidity~~subsidiaries. Disruptions in the bank or capital financing markets as a result of economic uncertainty, changing or increased regulation of the financial sector, or failure of major financial institutions could adversely affect the Utility’s access to capital and negatively impact its ability to run its business and make strategic investments.

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AITEM ~~downgrade~~1A. inRISK ~~the Utility’s credit rating may negatively affect its ability to access capital.~~FACTORS

~~Standard~~Laclede ~~& Poor~~Group’s ~~rating~~and ~~group,~~the ~~Moody’s~~Utilities' ~~Investors~~business ~~Service,~~ and ~~Fitch~~financial ~~Ratings~~results ~~from~~are ~~time~~subject to ~~time~~a ~~implement~~number ~~new~~of ~~requirements~~risks ~~for~~and ~~various~~uncertainties, ~~ratings~~including ~~levels~~those set forth below. ToThe ~~maintain~~risks ~~its~~described ~~current~~below ~~credit~~are ~~ratings~~those inthe ~~light~~Company ofand the Utilities consider to be material. When considering any ~~new~~investment ~~requirements,~~in ~~The~~Laclede ~~Utility~~Group ~~may~~or ~~find~~the itUtilities' ~~necessary~~securities, toinvestors ~~take~~should ~~steps~~carefully toconsider ~~change~~the ~~its~~following ~~business~~information, ~~plans~~as well as information contained in ~~ways~~the ~~that~~caption ~~may~~"Forward-Looking ~~affect~~Statements," ~~its~~Item ~~results~~7A, ofand ~~operations.~~other ~~The~~documents ~~Utility’s~~Laclede ~~credit~~Group ~~ratings~~and ~~remain~~Laclede atGas ~~investment~~file ~~grade,~~with ~~but~~the ~~are~~SEC. ~~subject~~This tolist ~~review~~is not exhaustive, and ~~change~~Laclede byGroup's and the ~~rating~~Utilities' ~~agencies~~respective management places no priority or likelihood based on the risk descriptions, order of presentation or grouping by subsidiary. All references to dollar amounts are in millions.

IfRISKS ~~the~~AND ~~rating~~UNCERTAINTIES ~~agencies~~THAT ~~lowered~~RELATE ~~the~~TO ~~Utility’s~~THE ~~ratings,~~BUSINESS ~~particularly~~AND ~~below~~FINANCIAL ~~investment~~RESULTS ~~grade,~~OF itLACLEDE ~~could~~GROUP ~~significantly~~AND ~~limit~~ITS its ability to secure new or additional credit facilities and would increase its costs of borrowing. In addition, the Utility would likely be required to pay a higher interest rate in future long-term financings and the Utility’s potential pool of investors and funding sources would likely decrease. The Utility's ability to borrow under current or new credit facilities and costs of that borrowing have a direct impact on its ability to execute operating strategies. Credit ratings are an independent assessment of the Utility’s ability to pay its obligations. Consequently, real or anticipated changes in credit ratings will generally affect the market value of the specific debt instruments that are rated.SUBSIDIARIES

~~Unexpected~~As ~~losses~~a ~~may~~holding ~~adversely~~company, ~~affect~~Laclede ~~the~~Group ~~Utility’s~~depends ~~financial~~on ~~condition~~its ~~and~~operating ~~results~~subsidiaries ofto ~~operations~~meet its financial obligations.

AsLaclede ~~with~~Group ~~most~~is ~~businesses,~~a ~~there~~holding ~~are~~company ~~operations~~with ~~and~~no ~~business~~significant ~~risks~~assets ~~inherent~~other inthan the ~~activities~~stock of ~~the~~its ~~Utility.~~operating ~~If,~~subsidiaries inand ~~the~~cash ~~normal~~investments. ~~course~~Laclede ~~of business~~Group, ~~the~~and ~~Utility~~Laclede ~~becomes~~Gas aprior ~~party~~ to ~~litigation,~~Laclede ~~such~~Group’s ~~litigation could result in substantial monetary judgments~~formation, ~~fines,~~have orpaid ~~penalties~~dividends orcontinuously besince ~~resolved on unfavorable terms~~1946. InLaclede ~~accordance~~Group’s ~~with~~ability ~~customary~~to ~~practice,~~pay ~~the~~dividends ~~Utility~~to ~~maintains~~its ~~insurance~~shareholders ~~against~~is adependent ~~significant~~on ~~portion of, but not all, risks and losses. In addition, in~~ the ~~normal~~ability ~~course~~ of its ~~operations,~~subsidiaries ~~the~~to ~~Utility~~generate ~~may~~sufficient benet ~~exposed~~income toand ~~loss~~cash ~~from~~flows ~~other~~to ~~sources,~~pay ~~such~~upstream asdividends ~~bad~~and ~~debt~~make ~~expense~~loans or ~~the~~loan ~~failure~~repayments. ofIn aaddition, ~~counterparty~~because toit ~~meet~~is ~~its~~a ~~financial~~holding ~~obligations.~~company ~~The~~and ~~Utility~~the ~~employs~~substantial ~~many~~portion ~~strategies~~of toits ~~gain~~assets ~~assurance~~are ~~that~~represented ~~such~~by ~~risks~~its ~~are~~holdings ~~appropriately~~in ~~managed,~~the ~~mitigated~~Utilities, orthe ~~insured,~~risks asfaced ~~appropriate.~~by To the ~~extent~~Utilities aas ~~loss~~described isunder ~~not~~RISKS ~~fully~~THAT ~~covered~~RELATE byTO ~~insurance~~THE orGAS ~~other~~UTILITY ~~risk~~SEGMENT ~~mitigation~~below ~~strategies,~~may ~~that~~also ~~loss could~~ adversely affect ~~the~~Laclede ~~Utility~~Group’s cash flows, liquidity, financial condition and results of operations.

~~Numerous~~A ~~environmental~~downgrade ~~laws~~in Laclede Group’s and/or ~~regulations~~its subsidiaries' credit ratings may ~~require~~negatively ~~significant~~affect ~~expenditures~~its orability ~~increase~~to ~~operating~~access ~~costs~~capital.

~~The~~Currently, ~~Utility~~Laclede isGroup ~~subject~~and toits ~~federal~~utility subsidiaries have investment grade credit ratings, ~~state~~which are subject to review and ~~local~~change ~~environmental~~by ~~laws~~the rating agencies. Laclede Group, Laclede Gas and ~~regulations~~Alagasco ~~affecting~~each ~~many~~have ~~aspects~~a working capital line of ~~its~~credit ~~present~~to ~~and~~meet ~~future~~its ~~operations~~short-term liquidity needs. Laclede ~~These~~Group’s ~~laws~~line ~~and~~of ~~regulations~~credit ~~require~~may ~~the~~also ~~Utility~~be used to ~~obtain~~meet ~~and~~the ~~comply~~liquidity ~~with~~needs aof ~~wide~~any ~~variety~~of its subsidiaries. If the rating agencies lowered the credit rating at any of ~~environmental~~these ~~licenses~~entities, ~~permits,~~particularly ~~inspections~~below investment grade, ~~and~~it ~~approvals.~~might ~~Failure~~significantly limit such entity’s ability to ~~comply~~secure ~~with~~new ~~these~~or ~~laws~~additional ~~and~~credit ~~regulations~~facilities and ~~failure~~would toincrease ~~obtain~~its ~~any~~costs ~~required~~of ~~permits~~borrowing. ~~and~~Laclede ~~licenses~~Group’s ~~may~~or ~~result~~the inUtilities’ ~~costs~~ability to ~~the~~borrow ~~Utility~~under incurrent ~~the~~or ~~form~~new credit facilities and costs of ~~fines,~~that ~~penalties~~borrowing orhave ~~business~~a ~~interruptions,~~direct ~~which~~impact ~~may~~on betheir ~~material~~ability to execute their operating strategies. In ~~addition,~~the ~~existing~~fourth ~~environmental~~quarter ~~laws~~of ~~and~~2014, ~~regulations~~Laclede ~~could~~Group beissued ~~revised~~its orfirst ~~reinterpreted~~public debt and~~/or~~ ~~new~~received ~~laws~~its ~~and~~first ~~regulations~~senior ~~could~~unsecured bedebt ~~adopted~~ratings. orStandard ~~become~~& ~~applicable~~Poor’s torated ~~the~~Laclede ~~Utility~~Group ordebt BBB+, one notch lower than its ~~facilities~~issuer rating of A-, while ~~thereby~~Fitch ~~impacting~~also rated the ~~Utility~~Laclede Group debt at BBB+, equal to its issuer rating, and Moody’s ~~cost~~(which ofdoes ~~compliance~~not use issuer ratings) rated the Laclede Group debt at Baa2. These ~~The~~rating ~~discovery~~levels ofhave ~~presently~~no ~~unknown~~specific ~~environmental~~implications ~~conditions,~~for ~~including~~Laclede ~~former~~Group's ~~manufactured~~corporate ~~gas~~funding ~~plant~~ability ~~sites,~~or ~~and~~our ~~claims~~ability ~~against~~to access the ~~Utility~~capital markets, nor do they trigger any collateralization requirements under ~~environmental~~Laclede ~~laws~~Group's ~~and~~corporate ~~regulations~~guarantees. ~~may~~There ~~result~~is inno ~~expenditures~~assurance ~~and~~that ~~liabilities,~~such ~~which~~credit ~~could~~ratings befor ~~material.~~any Toof the ~~extent~~Laclede ~~environmental~~Group ~~compliance~~companies ~~costs~~will ~~are~~remain ~~not~~in ~~fully~~effect ~~covered~~for byany ~~insurance~~given period of time or ~~recovered~~that insuch ~~rates~~ratings ~~from~~will ~~the~~not ~~Utility’s~~be ~~customers~~lowered, ~~those~~suspended ~~costs~~or ~~may~~withdrawn ~~have~~entirely anby ~~adverse~~the ~~effect~~rating onagencies, ~~the~~if, ~~Utility's~~in ~~financial~~each ~~condition~~rating ~~and~~agency’s ~~results~~judgment, ofcircumstances ~~operations~~so warrant.

~~The~~Unexpected ~~Utility~~losses ismay ~~subject~~adversely toaffect ~~pipeline~~Laclede ~~safety~~Group’s ~~and~~or ~~system~~its ~~integrity~~subsidiaries ~~laws~~financial condition and ~~regulations~~results ~~that~~of ~~may require significant expenditures or significant increases in operating costs~~operations.

~~Such~~As ~~laws~~with most businesses, there are operations and ~~regulations~~business ~~affect~~risks ~~various~~inherent ~~aspects~~in the activities of ~~the~~Laclede ~~Utility'~~Group’s ~~present~~subsidiaries. ~~and~~If, ~~future~~in ~~operations.~~the ~~These~~normal ~~laws~~course ~~and~~of ~~regulations~~business, ~~require~~Laclede ~~the~~Group ~~Utility~~or any of its subsidiaries becomes a party to ~~maintain~~litigation, ~~pipeline~~such ~~safety~~litigation ~~and~~could ~~system~~result ~~integrity~~in bysubstantial ~~identifying~~monetary ~~and~~judgments, ~~reducing~~fines, ~~pipeline~~or ~~risks~~penalties or be resolved on unfavorable terms. ~~Compliance~~In accordance with ~~these~~customary ~~laws~~practice, Laclede Group and ~~regulations,~~its orsubsidiaries ~~future~~maintain ~~changes~~insurance inagainst ~~these~~a ~~laws~~significant ~~and~~portion ~~regulations~~of, ~~may~~but ~~result~~not all, risks and losses. In addition, in ~~increased~~the ~~capital~~normal course of its operations, ~~operating~~Laclede Group and its subsidiaries may be exposed to loss from other ~~costs~~sources, ~~which~~such ~~may~~as ~~not~~bad bedebt ~~recoverable~~expense inor the failure of a ~~timely~~counterparty ~~manner~~to ~~from~~meet ~~customers~~its infinancial ~~rates~~obligations. ~~Failure~~Laclede Group and its operating companies employ many strategies to ~~comply~~gain ~~may~~assurance ~~result~~that insuch ~~fines~~risks are appropriately managed, ~~penalties~~mitigated, or ~~injunctive~~insured, ~~measures~~as ~~that~~appropriate. ~~would~~To the extent a loss is not befully ~~recoverable~~covered ~~from~~by ~~customers~~insurance inor ~~rates~~other ~~and~~risk ~~could~~mitigation ~~result~~strategies, inthat aloss ~~material~~could ~~effect~~adversely onaffect the ~~Utility'~~Company’s and/or its subsidiaries' financial condition and results of operations.

~~Transporting,~~Increased ~~distributing,~~inter-dependence ~~and~~on ~~storing~~technology ~~natural~~may ~~gas~~hinder ~~and~~Laclede ~~transporting~~Group’s and ~~storing~~its ~~propane~~subsidiaries' ~~involves~~business ~~numerous~~operations ~~risks~~and ~~that~~adversely ~~may~~affect ~~result~~their infinancial ~~accidents~~condition and ~~other~~results ~~operating~~of ~~risks~~operations ~~and~~if ~~costs~~such technologies fail or are compromised.

~~There~~Over ~~are~~the ~~inherent~~last inseveral ~~gas~~years, ~~distribution~~Laclede ~~activities~~Group aand ~~variety~~its ofsubsidiaries ~~hazards~~have ~~and~~implemented ~~operations~~a ~~risks,~~variety ~~such~~of astechnological ~~leaks,~~tools ~~accidental explosions,~~ including ~~third~~both ~~party~~Company-owned ~~damages,~~information technology and ~~mechanical~~technological ~~problems,~~services ~~which~~provided ~~could~~by ~~cause~~outside ~~substantial financial losses~~parties. In ~~addition,~~fiscal ~~these~~year ~~risks could result in serious injury to employees and non-employees~~2013, ~~loss~~the ofCompany ~~human~~completed ~~life,~~its ~~significant~~implementation ~~damage to property, environmental pollution, impairment~~ of ~~operations,~~a ~~and~~Company-wide ~~substantial~~enterprise ~~losses~~resource toplanning ~~the~~(ERP) ~~Utility~~system. ~~The~~These ~~location~~tools ~~of pipelines~~ and ~~storage~~systems ~~facilities~~support ~~near~~critical ~~populated~~functions ~~areas,~~ including ~~residential~~Laclede ~~areas,~~Group ~~commercial~~and ~~business~~its ~~centers,~~subsidiaries' ~~and~~integrated ~~industrial sites~~planning, ~~could~~scheduling ~~increase~~and ~~the~~dispatching ~~level~~ of ~~damages~~field ~~resulting~~resources, ~~from~~its ~~these~~automated ~~risks. Similar~~meter ~~risks~~reading ~~also~~system, ~~exist~~customer ~~for~~care ~~the~~and ~~Utility's~~billing, ~~propane~~procurement ~~storage~~ and ~~transmission~~accounts ~~operations. These activities may subject the Utility to litigation or administrative proceedings from time to time.~~

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~~Such~~payable, ~~litigation~~operational orplant ~~proceedings~~logistics, ~~could~~management ~~result~~reporting, inand ~~substantial~~external ~~monetary~~financial ~~judgments,~~reporting. ~~fines,~~The orfailure ~~penalties~~of ~~against~~these ~~the Utility~~ or beother ~~resolved~~similarly onimportant ~~unfavorable~~technologies, ~~terms.~~or Inthe ~~accordance~~Company’s ~~with~~or ~~customary~~its ~~industry~~subsidiaries' ~~practices,~~inability ~~the~~to ~~Utility~~have ~~maintains~~these ~~insurance~~technologies ~~against~~supported, ~~a significant portion~~updated, ~~but not all~~expanded, ofor ~~these~~integrated ~~risks~~into ~~and~~other ~~losses.~~technologies, Tocould ~~the~~hinder ~~extent~~their ~~that~~business ~~the~~operations ~~occurrence~~and ~~of any of these events is not fully covered by insurance, it could~~ adversely ~~affect~~impact ~~the~~their ~~Utility’s~~ financial condition and results of operations.

~~Changes~~Although in the ~~wholesale~~Company ~~costs~~and its subsidiaries have, when possible, developed alternative sources of ~~purchased~~technology ~~natural~~and ~~gas~~built ~~supplies~~redundancy ~~may~~into ~~adversely~~their ~~impact~~computer networks and tools, there can be no assurance that these efforts to date would protect against all potential issues related to the ~~Utility’s~~loss ~~competitive~~of ~~position~~any ~~compared~~such ~~with~~technologies ~~alternative~~or ~~energy~~the ~~sources~~Utilities’ use of such technologies.

~~The~~Laclede ~~Utility~~Gas iscompleted the ~~only~~acquisition ~~distributor~~ of ~~natural~~the ~~gas~~assets ~~within~~and ~~its~~liabilities ~~franchised~~of ~~service~~MGE ~~area.~~near ~~Nevertheless,~~the ~~rising~~end ~~wholesale~~of ~~natural~~fiscal ~~gas~~2013. ~~prices~~Through ~~compared~~fiscal ~~with prices for electricity~~2015, ~~fuel~~Laclede ~~oil,~~Gas ~~coal,~~integrated ~~propane,~~MGE’s ordata ~~other~~into ~~energy~~its ~~sources~~systems, ~~may~~with ~~affect~~ the ~~Utility’s~~final ~~retention~~migration ofto ~~natural~~Laclede ~~gas~~Gas' ~~customers~~technology ~~and~~platforms ~~adversely~~occurring ~~impact~~in ~~its~~September ~~financial condition and results of operations~~2015.

~~Significantly~~The ~~warmer-than-normal~~Company ~~weather~~completed ~~conditions,~~the acquisition of the ~~effects~~common stock of ~~global~~Alagasco ~~warming~~near ~~and~~the ~~climate~~end ~~change,~~of ~~and~~fiscal ~~other~~2014. ~~factors~~Alagasco ~~that~~utilizes ~~influence~~a ~~customer~~different ~~usage~~ERP ~~may~~system ~~affect~~which ~~the~~will ~~Utility’s~~remain ~~sale~~in ofplace ~~heating~~pending ~~energy~~review ~~and~~of ~~adversely~~the ~~impact~~Company's ~~its~~long-term ~~financial~~ERP ~~position~~needs ~~and~~during ~~results~~the ofintegration ~~operations~~process.

~~The~~Furthermore, ~~Utility's~~the ~~earnings~~Company and its subsidiaries are subject to cyber-security risks primarily ~~generated~~related to breaches of security pertaining to sensitive customer, employee, and vendor information maintained by the ~~sale~~Company and its subsidiaries in the normal course of ~~heating~~business, ~~energy~~as well as breaches in the technology that manages natural gas distribution operations and other business processes. ~~The~~A ~~Utility~~loss ~~has~~of ~~weather~~confidential ~~mitigation~~or ~~rate~~proprietary ~~designs,~~data ~~approved~~or bysecurity breaches of other technology business tools could adversely affect the ~~MoPSC~~Company’s and its subsidiaries' reputation, ~~which~~diminish ~~provide~~customer ~~better~~confidence, ~~assurance~~disrupt ofoperations, and subject the ~~recovery~~Company and its subsidiaries to possible financial liability, any of which could have a material effect on the ~~Utility~~Company’s ~~fixed~~and ~~costs~~its subsidiaries' financial condition and ~~margins~~results ~~during~~of ~~winter~~operations. ~~months~~The ~~despite~~Company ~~variations~~and inits ~~sales~~subsidiaries ~~volumes~~closely ~~due~~monitor both preventive and detective measures to ~~the~~manage ~~impacts~~these risks and maintain cyber risk insurance to mitigate a significant portion, but not all, of ~~weather~~these risks and ~~other~~losses. ~~factors~~To the extent that the occurrence of any of these cyber events is not fully covered by insurance, it could adversely affect ~~customer~~the ~~usage~~Company’s and its subsidiaries' financial condition and results of operations.

~~However,~~Resources ~~significantly~~expended ~~warmer-than-normal~~to ~~weather~~pursue ~~conditions~~business inacquisitions, ~~the~~investments ~~Utility’s~~or ~~service area and~~ other ~~factors,~~business ~~such~~arrangements ~~as global warming, climate change and alternative energy sources,~~ may ~~result~~adversely inaffect ~~reduced profitability and decreased cash flows attributable to lower gas sales. Furthermore, continuation of the weather mitigation rate design at~~ Laclede ~~Gas~~Group’s orfinancial ~~the~~position ~~straight~~and ~~fixed~~results ~~variable rate design at MGE are subject to regulatory discretion. In addition, the promulgation~~ of ~~regulations~~operations byand ~~the~~return ~~U.S.~~on ~~Environmental~~investments ~~Protection~~made ~~Agency or the potential enactment of Congressional legislation addressing global warming and climate change~~ may ~~result~~not inmeet ~~future additional compliance costs that could impact the Utility’s financial condition and results of operations~~expectations.

~~Regional~~From ~~supply/demand~~time ~~fluctuations~~to time, Laclede Group may seek to grow through strategic acquisitions, investments or other business arrangements, including the recent MGE and Alagasco acquisitions, the opening of public compressed natural gas (CNG) stations or other future opportunities. Attractive acquisition candidates may be difficult to acquire on economically acceptable terms. It is possible for Laclede Group to expend considerable resources pursuing an acquisition candidate, but for a variety of reasons such as changes in ~~national~~economic ~~pipeline~~conditions, ~~infrastructure~~changes in the acquisition candidate’s business or concerns arising out of due diligence review, asdecide ~~well~~not asto consummate a definitive transaction. To the extent that acquisitions are made, such acquisitions involve a number of risks, including but not limited to, the assumption of material liabilities, the diversion of management’s attention from daily operations to the integration of the acquisition, difficulties in assimilation and retention of employees, securing adequate capital to support the transaction, and regulatory ~~discretion~~approval. Uncertainties exist in assessing the value, risks, profitability, and liabilities associated with certain businesses or assets and there is a possibility that anticipated operating and financial efficiencies expected to result from an acquisition do not develop. The failure to complete an acquisition successfully, or to integrate future acquisitions that it may ~~adversely~~choose ~~affect~~to undertake could have an adverse effect on the ~~Utility~~Company's ~~ability~~financial tocondition ~~profit~~and ~~from~~results ~~off-system~~of ~~sales~~operations and ~~capacity~~the ~~release~~market’s perception of the Company’s execution of its strategy.

~~The~~In ~~Utility's~~order ~~income from off-system sales and capacity release is subject~~ to ~~fluctuations~~manage ~~in market conditions~~ and ~~changing~~diversify ~~supply and demand conditions in areas~~ the ~~Utility~~risks ~~holds pipeline capacity rights. Specific factors impacting the Utility’s income from off-system sales and capacity release include the availability~~ of ~~attractively-priced~~certain ~~natural~~development ~~gas supply~~projects, ~~availability~~Laclede ofGroup ~~pipeline~~may ~~capacity,~~use ~~and~~partnerships ~~market~~or ~~demand~~other investments. ~~Income~~Such ~~from~~business ~~off-system~~arrangements ~~sales~~may ~~and~~limit ~~capacity~~Laclede ~~release~~Group’s isability ~~shared with customers. The Utility is allowed~~ to ~~retain~~fully ~~15%~~direct ~~to 25% of~~ the ~~first~~management ~~$6 million in annual income earned (depending on the level of income earned)~~ and ~~30%~~policies of ~~income~~the ~~exceeding~~business ~~$6 million annually~~relationship. InThese ~~accordance~~arrangements ~~with~~may ~~the~~cause ~~MoPSC~~additional ~~agreement~~risks tosuch ~~suspend~~as ~~the~~operating ~~procedural~~agreements ~~schedule~~limiting in Laclede ~~Gas~~Group's ~~base~~control ~~rate~~or ~~proceeding,~~Laclede ~~the~~Group's ~~Utility~~ability ~~deferred,~~to ~~until~~appropriately ~~fiscal~~value ~~year~~the ~~2017,~~business ~~its~~drivers ~~ability~~or toassets ~~retain 15%~~ of the ~~first~~business ~~$2 million~~arrangement. ~~MGE~~While isLaclede ~~allowed~~Group towould ~~retain~~pursue ~~15%~~strategies to ~~25%~~mitigate ofthese ~~the~~risks ~~first~~and ~~$3.6~~enforce ~~million~~its ininterests, ~~annual~~these ~~income~~risks ~~earned~~may ~~(depending~~adversely onimpact the ~~level~~projects ~~of income earned)~~ and ~~30%~~Laclede ~~of income exceeding $3.6 million annually. The Utility~~Group’s ~~ability~~financial tocondition, ~~retain~~results ~~such~~of ~~income~~operations inand ~~the~~cash ~~future is subject to regulatory discretion in a base rate proceeding~~flows.

~~Workforce~~In ~~risks~~addition, ~~may~~to ~~affect~~the extent Laclede Group engages in any of the ~~Utility's~~above ~~financial~~activities ~~results~~together with or through one or more of its subsidiaries, including the Utilities, such subsidiaries may face the same risks.

~~The~~Workforce ~~Utility is subject to various workforce~~ risks, ~~including,~~may ~~but~~affect ~~not limited to,~~ the ~~risk~~Company's ~~that~~financial it will be unable to attract and retain qualified personnel; that it will be unable to effectively transfer the knowledge and expertise of an aging workforce to new personnel as those workers retire; and that it will be unable to reach collective bargaining arrangements with the unions that represent certain of its workers, which could result in work stoppagesresults.

~~Increased~~The ~~inter-dependence~~Company onand ~~technology~~its ~~may~~subsidiaries ~~adversely~~are ~~hinder~~subject to various workforce risks, including, but not limited to, the ~~Utility's~~risk ~~business~~that ~~operations~~it will be unable to attract and ~~affect~~retain ~~its~~qualified ~~financial~~personnel; ~~condition~~that it will be unable to effectively transfer the knowledge and ~~results~~expertise of ~~operations~~an ifaging ~~such~~workforce ~~technologies~~to ~~fail~~new orpersonnel ~~are~~as ~~compromised~~those workers retire; and that it will be unable to reach collective bargaining arrangements with the unions that represent certain of its workers, which could result in work stoppages.

Over the last several years, the Utility has implemented a variety of technological tools including both company-owned information technology and technological services provided by outside parties. In fiscal year 2013, the Company completed its implementation of a Company-wide enterprise resource planning (ERP) system. These tools and systems support critical functions including the Utility’s integrated planning, scheduling and dispatching of field resources, and its automated meter reading system, customer care and billing, procurement and accounts payable, operational plant logistics, management reporting, and external financial reporting. The failure of these or other similarly important technologies, or the Utility’s inability to have these technologies supported, updated, expanded, or integrated into other technologies, could hinder its business operations and adversely impact its financial condition and results of operations.

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~~Although~~Changes ~~the~~in ~~Utility~~accounting ~~has,~~standards ~~when~~may ~~possible,~~adversely ~~developed~~impact ~~alternative~~the ~~sources~~Utilities’ offinancial ~~technology~~condition and ~~built~~results ~~redundancy into its computer networks and tools, there can be no assurance that these efforts to date would protect against all potential issues related to the loss~~ of ~~any such technologies or their use~~operations.

~~Furthermore,~~Laclede ~~the~~Group ~~Utility~~and isits ~~subject~~subsidiaries toare ~~cyber-security~~subject ~~risks primarily related~~ to ~~breaches~~changes ofin ~~security~~US ~~pertaining~~Generally toAccepted ~~sensitive~~Accounting ~~customer,~~Principles ~~employee~~(GAAP), ~~and~~SEC ~~vendor~~regulations ~~information~~and ~~maintained~~other byinterpretations ~~the Utility in the normal course~~ of ~~business,~~financial asreporting ~~well~~requirements asfor ~~breaches~~public inutilities. Neither the ~~technology~~Company ~~that~~nor ~~manages~~any ~~natural gas distribution operations and other business processes. A loss~~ of ~~confidential~~its orsubsidiaries ~~proprietary~~have ~~data~~any orcontrol ~~security~~over ~~breaches of other technology business tools could adversely affect~~ the ~~Utility’s~~impact ~~reputation,~~these ~~diminish~~changes ~~customer~~may ~~confidence, disrupt operations, and subject the Utility to possible financial liability, any of which could~~ have ~~a material affect~~ on ~~the~~their ~~Utility’s~~ financial condition ~~and~~or results of operations. ~~The~~nor ~~Utility~~the ~~closely~~timing ~~monitors~~of ~~both~~such ~~preventive~~changes. ~~and~~The ~~detective~~potential ~~measures~~issues toassociated ~~manage~~with ~~these~~rate-regulated ~~risks~~accounting, ~~and~~along ~~maintains~~with ~~cyber~~other ~~risk~~potential ~~insurance~~changes to ~~mitigate~~GAAP ~~a significant portion, but not all, of these risks and losses. To the extent~~ that the ~~occurrence~~US ofFinancial ~~any~~Accounting ofStandards ~~these~~Board ~~cyber~~(FASB) ~~events~~continues isto ~~not~~consider ~~fully~~may ~~covered~~be ~~by insurance, it could adversely affect the Utility’s financial condition and results of operations~~significant.

~~Laclede~~RISKS ~~Gas~~RELATED ~~has~~TO ~~also~~THE ~~completed~~COMPANY'S ~~the~~AND ~~acquisition~~ITS ofSUBSIDIARIES' ~~the~~ACQUISITION ~~assets~~AND ~~and~~INTEGRATION liabilities of MGE in Kansas City. Through fiscal 2015, the Utility will be integrating MGE’s data into Laclede’s systems. During this time the Utility will also be evaluating the security controls both process and tool based in place at MGE. ACTIVITIES

~~Catastrophic~~As ~~events~~a ~~may~~result ~~adversely~~of ~~affect~~recent acquisitions, the ~~Utility's~~Company ~~facilities~~ and ~~operations~~its subsidiaries are subject to risks related to its level of indebtedness.

~~Catastrophic~~In ~~events~~connection ~~such~~with asthe ~~fires,~~Alagasco ~~earthquakes,~~and ~~explosions,~~MGE ~~floods~~acquisitions, ~~tornados,~~Laclede ~~terrorist~~Group ~~acts,~~and orLaclede ~~other~~Gas ~~similar~~incurred ~~occurrences~~additional ~~could~~debt ~~adversely~~to ~~affect~~pay a portion of the ~~Utility's~~acquisition ~~facilities~~cost and ~~operations~~transaction expenses. ~~The~~On ~~Utility~~August ~~has~~19, ~~emergency~~2014 ~~planning~~Laclede ~~and~~Group ~~training~~issued ~~programs~~unsecured debt in ~~place~~the toaggregate ~~respond~~principal toamount ~~events~~of ~~that~~$625.0 ~~could~~to ~~cause~~finance ~~business~~the ~~interruptions~~acquisition of Alagasco. ~~However,~~On ~~unanticipated~~August ~~events~~13, or2013, ~~combination~~Laclede ofGas ~~events,~~issued ~~failure~~debt in ~~resources~~the ~~needed~~aggregate toprincipal ~~respond~~amount toof ~~events,~~$450.0 orto ~~slow~~finance orthe ~~inadequate~~acquisition ~~response~~of toMGE. ~~events~~Laclede ~~may~~Group's ~~have~~total anconsolidated ~~adverse~~indebtedness ~~impact~~as onof ~~the~~September 30, ~~Utility’s~~2015 ~~operations~~was $2,189.5 ~~financial~~($338.0 ~~condition,~~of short-term borrowings and ~~results~~$1,851.5 of ~~operations.~~long-term ~~The~~debt, ~~availability~~including ofcurrent ~~insurance~~portion) ~~covering~~and ~~catastrophic~~Laclede ~~events~~Gas' ~~may~~total beindebtedness ~~limited~~as orof ~~may~~September 30, ~~result~~2015 inwas ~~higher~~$1,041.1 ~~deductibles~~($233.0 of short-term borrowings, ~~higher~~including ~~premiums~~borrowings from affiliates, and ~~more~~$808.1 ~~restrictive~~of ~~policy~~long-term ~~terms~~debt).

~~Changes~~Laclede inGroup’s ~~accounting~~and ~~standards~~Laclede ~~may~~Gas' ~~adversely~~debt service obligations with respect to this increased indebtedness could have an adverse impact on their earnings and cash flows (which after the ~~Utility's~~acquisitions ~~financial~~include ~~condition~~the earnings and ~~results~~cash flows of ~~operations~~MGE and, in the case of Laclede Group, Alagasco) for as long as the indebtedness is outstanding. Among other risks, the increase in indebtedness may:

~~The~~• ~~Utility~~make isit ~~subject~~more ~~changes~~difficult ~~in U.S. Generally Accepted Accounting Principles (GAAP), SEC regulations and other interpretations of financial reporting requirements~~ for ~~public~~Laclede ~~utilities. The~~Group ~~company~~or ~~has~~Laclede noGas ~~control~~to ~~over~~pay ~~the impact these changes may have on our financial condition~~ or ~~results~~refinance oftheir ~~operations~~debts ~~nor~~as ~~the~~they ~~timing~~become ofdue ~~such~~during ~~changes.~~adverse ~~The~~economic ~~potential~~and ~~issues~~industry associated with rate-regulated accounting, along with other potential changes considered by U.S. Financial Accounting Standards Board continues to consider various changes to U.S. GAAP may be significant.conditions;

~~RISKS~~• ~~RELATED~~limit TOthe ~~THE~~Company’s ~~COMPANY~~or Laclede Gas'S ~~ACQUISITION~~flexibility OFto ~~MISSOURI~~pursue ~~GAS~~other ~~ENERGY~~strategic ~~(MGE)~~opportunities ~~ASSETS~~or ~~AND~~react ~~LIABILITIES~~to ASchanges ~~WELL~~in ASits ~~THE~~business ~~ACQUISITION~~and ~~AGREEMENTS~~the ~~WITH~~industry ~~SOUTHERN~~in ~~UNION~~which ~~COMPANY~~they ~~AND~~operate ~~ALGONQUIN~~and, ~~POWER~~consequently, &place ~~UTILITIES~~them ~~CORP~~at ~~REGARDING~~a ~~NEW~~competitive ~~ENGLAND~~disadvantage ~~GAS~~to ~~ASSETS~~competitors ~~AND~~with ~~LIABILITIES.~~less debt;

~~The~~• ~~New~~require ~~England~~an ~~Gas~~increased ~~(NEG)~~portion ~~transaction~~of ~~may~~the ~~not~~Company’s beor ~~completed~~Laclede orGas' ~~may~~cash beflows ~~approved~~from ~~subject~~operations of their respective subsidiaries to ~~unfavorable~~be ~~regulatory~~used ~~conditions~~for debt service payments, ~~which~~thereby ~~could~~reducing ~~adversely~~the ~~affect~~availability ~~anticipated~~of ~~benefits~~their ~~and/or~~cash ~~Laclede~~flows ~~Group's~~to ~~business,~~fund ~~financial~~working ~~condition~~capital, ~~results~~capital ofexpenditures, ~~operations~~dividend payments and~~/or~~ ~~stock~~other ~~price.~~general corporate activities;

On• ~~December~~result ~~14,~~in ~~2012, Laclede Group, through~~ a ~~wholly~~downgrade ~~owned~~in ~~subsidiary, Plaza Massachusetts Acquisition, Inc. (Plaza Massachusetts), entered into an acquisition agreement to acquire from Southern Union Company (SUG) substantially all of~~ the ~~assets~~credit ~~and~~rating ~~liabilities~~ of ~~New~~Laclede ~~England~~Group’s ~~Gas~~or ~~Company (NEG). On February 11, 2013,~~ the ~~Company entered into an agreement with Algonquin Power &~~ Utilities’ ~~Corp. (APUC) that will allow an APUC subsidiary~~indebtedness, ~~through~~which ~~its~~could ~~acquisition~~limit of the ~~stock~~Utilities’ ofability ~~Plaza Massachusetts,~~ to ~~acquire~~borrow ~~the~~additional ~~Company's~~funds ~~rights~~or toincrease ~~purchase~~ the ~~assets~~interest ofrates ~~NEG,~~applicable ~~subject~~ to ~~certain approvals and conditions. In order to close the NEG transaction, approval by the Massachusetts Department of Public~~ Utilities’ ~~(MDPU) of the acquisition of the assets of NEG by the APUC subsidiary must be received.~~ indebtedness;

The sale of NEG to APUC is still pending before the MDPU. The acquisition agreement contains certain termination rights for both the Company and SUG, including, among others, the right to terminate if the transaction is not completed by October 14, 2013 (subject to up to four 30-day extensions under certain circumstances related to obtaining required regulatory approvals). The Company and SUG agreed to extend the NEG purchase agreement until December 14, 2013 to enable the MDPU to complete its review process. Nonetheless, there can be no assurance that APUC will be able to satisfy all of the required conditions on or before the end of the extension periods. The Company's agreement to acquire NEG remains in effect if APUC cannot satisfy the conditions for closing before the expiration of the extension periods.

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The pending transaction with APUC and SUG for the NEG assets subjects Laclede Group to a number of additional risks, including the following:

• the Company’s estimate of the costs to complete the sale of NEG may vary significantly from actual results;

• both before and after the sale of NEG to APUC, the attention of management may be diverted to the closing of the sale of NEG rather than to current operations, the integration of MGE or the pursuit of other opportunities that could be beneficial to the Company;

• the potential loss of key employees of the Company or of NEG who may be uncertain about their future roles if and when the NEG sale is completed; and

• the trading price of Laclede Group’s common stock may decline to the extent that the current market price reflects a market assumption that the transaction will be completed.

The occurrence of any of these events individually or in combination could have a material adverse effect on the Company's business, financial condition or results of operations or the trading price of its common stock.

On August 13, 2013, the Utility issued debt in the aggregate principal amount of $450 million to provide permanent financing for the acquisition of MGE and, as a result, the Company is subject to risks related to a higher level of indebtedness.

In connection with the MGE acquisition, the Utility incurred additional debt to pay a portion of the acquisition cost and transaction expenses. The Utility's total indebtedness as of September 30, 2013 was $1,011 million (including $121 million of short-term borrowings and $890 million of long-term debt).

The Utility’s debt service obligations with respect to this increased indebtedness could have an adverse impact on its earnings and cash flows (which after the acquisition include the earnings and cash flows of MGE) for as long as the indebtedness is outstanding.

Among other risks, the increase in indebtedness may:

• make it more difficult for Laclede Gas to pay or refinance its debts as they become due during adverse economic and industry conditions;

• limit the Utility’s flexibility to pursue other strategic opportunities or react to changes in its business and the industry in which it operates and, consequently, place it at a competitive disadvantage to competitors with less debt;

• require an increased portion of the cash flows from operations of the Utility to be used for debt service payments, thereby reducing the availability of its cash flow to fund working capital, capital expenditures, dividend payments and other general corporate purposes;

• result in a downgrade in the credit rating of Laclede Group’s or the Utility's indebtedness, which could limit its ability to borrow additional funds or increase the interest rates applicable to its indebtedness;


•	result in higher interest expense in the event of an increase in market interest rates for both long-term debt and short-term commercial paper or bank loans at variable rates;


•	reduce the amount of credit available to support hedging activities; and

• require that additional terms, conditions or covenants be placed on the ~~Utility~~Company or Laclede Gas.

Based upon current levels of operations, ~~the~~Laclede ~~Utility~~Group ~~expects~~or Laclede Gas expect to be able to generate sufficient cash through earnings on a consolidated basis or through refinancing to make all of the principal and interest payments when such payments are due under ~~its~~their existing credit agreements, indentures and other instruments governing ~~its~~ outstanding indebtedness; but there can be no assurance that ~~the~~Laclede ~~Utility~~Group or Laclede Gas will be able to repay or refinance such borrowings and obligations in future periods.

In addition, in order to maintain investment-grade credit ratings, ~~the~~Laclede ~~Utility~~Group and Laclede Gas may consider it appropriate to reduce the amount of indebtedness outstanding following the acquisitions. This may be accomplished in several ways, including, in the case of Laclede Group, issuing additional shares of common stock or securities convertible into shares of common stock, or in the case of Laclede Group or Laclede Gas, reducing discretionary uses of cash or a combination of these and other measures. Issuances of additional shares of common stock or securities convertible into shares of common stock would have the effect of diluting the ownership percentage that shareholders hold in the Company, increasing the Company’s dividend payment obligations and perhaps reducing the reported earnings per share.

~~This~~Recent acquisitions may benot ~~accomplished~~achieve intheir ~~several~~intended ~~ways~~results, including ~~issuing~~anticipated ~~additional~~efficiencies ~~shares of common stock or securities convertible into shares of common stock, reducing discretionary uses of cash or a combination of these~~ and ~~other~~cost ~~measures~~savings. Issuances of additional shares of common stock or securities convertible into shares of common stock would have the effect of increasing the Utility’s dividend payment obligations and might reduce the reported earnings per share.

Although the Company and its subsidiaries expect that the recent acquisitions will result in various benefits, including a significant cost savings and other financial and operational benefits, there can be no assurance regarding when or the extent to which the Company and its subsidiaries will be able to realize or retain these benefits. Achieving and retaining the anticipated benefits, including cost savings, is subject to a number of uncertainties, including whether the assets acquired can be operated in the manner the Company and its subsidiaries intended. Events outside of the control of the Company and its

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subsidiaries, including but not limited to regulatory changes or developments, could also adversely affect their ability to realize the anticipated benefits from the acquisitions.

Thus, the integration of Alagasco may be unpredictable, subject to delays or changed circumstances, and the Company and its subsidiaries can give no assurance that the acquisitions will perform in accordance with their expectations or that their expectations with respect to integration or cost savings as a result of the Alagasco acquisition will materialize. In addition, the anticipated costs to the Company and its subsidiaries to achieve the integration of Alagasco may differ significantly from their current estimates. The integration may place an additional burden on management and internal resources, and the diversion of management’s attention during the integration process could have an adverse effect on the Company's and its subsidiaries' business, financial condition and expected operating results.

In connection with the MGE and the Alagasco acquisitions, Laclede Gas and Laclede Group, respectively, recorded goodwill and long-lived assets that could become impaired and adversely affect its financial condition and results of operations.

Laclede Group and Laclede Gas will assess goodwill for impairment annually or more frequently if events or circumstances occur that would more likely than not reduce the fair value of a reporting unit below its carrying value. The Company and Laclede Gas will assess their long-lived assets for impairment whenever events or circumstances indicate that an asset’s carrying amount may not be recoverable. To the extent the value of goodwill or long-lived assets becomes impaired, the Company and Laclede Gas may be required to incur impairment charges that could have a material impact on their results of operations. No impairment of long-lived assets was recorded during 2015 or 2014.

Since interest rates are a key component, among other assumptions, in the models used to estimate the fair values of the Company's reporting units, as interest rates rise, the calculated fair values decrease and future impairments may occur. Due to the subjectivity of the assumptions and estimates underlying the impairment analysis, Laclede Group and Laclede Gas cannot provide assurance that future analyses will not result in impairment. These assumptions and estimates include projected cash flows, current and future rates for contracted capacity, growth rates, weighted average cost of capital and market multiples. For additional information, see Item 7, Critical Accounting Policies.

RISKS THAT RELATE TO THE GAS UTILITY SEGMENT

Regulation of the Utilities’ businesses may impact rates they are able to charge, costs, and profitability.

The Utilities are subject to regulation by federal, state and local regulatory authorities. At the state level, the Utilities are regulated by regulatory authorities in Missouri by the Missouri Public Service Commission (MoPSC) and in Alabama by the Alabama Public Service Commission (APSC). The state regulatory authorities regulate many aspects of the Utilities’ distribution operations, including construction and maintenance of facilities, operations, safety, the rates that the Utilities may charge customers, the terms of service to their customers, transactions with their affiliates, and the rate of return that they are allowed to realize; as well as the accounting treatment for certain aspects of their operations. For further discussion of these accounting matters, see Item 7, Critical Accounting Policies pertaining to the Utilities’ operations.

The Utilities’ ability to obtain and timely implement rate increases and rate supplements to maintain the current rate of return is subject to regulatory review and approval. There can be no assurance that they will be able to obtain rate increases or rate supplements or continue earning the current authorized rates of return. The first Missouri Utilities general rate case filed after October 1, 2015 must be for both the legacy Laclede Gas and the MGE operations. Alagasco’s rate setting process, Rate Stabilization and Equalization (RSE), is subject to regulation by the APSC and is implemented pursuant to an APSC order that will continue beyond September 30, 2018, unless the APSC enters an order to the contrary in a manner consistent with the law. Under the current RSE order, Alagasco is allowed to earn a return on average common equity between 10.5% and 10.95%. Quarterly reviews are conducted by the APSC and if it is determined that Alagasco will exceed the allowed range of return, rates are reduced to bring the projected return within the allowed range. Rates can only be increased once a year effective December 1. Alagasco’s year-end equity under RSE is limited to 56.5% of total capitalization, subject to certain adjustments. The RSE order includes a Cost Control Mechanism (CCM) which requires Alagasco’s operation and maintenance expenses to be within an allowed index range based on inflation-adjusted from 2007 actual operation and maintenance (O&M) expenses. If O&M expenses exceed the index range, 75% of the amount over the range is returned to customers through future rate adjustments.

The Utilities could incur additional costs if required to adjust to new laws or regulations, revisions to existing laws or regulations or changes in interpretations of existing laws or regulations such as the Dodd-Frank Act. In addition, as the regulatory environment for the natural gas industry increases in complexity, the risk of inadvertent noncompliance could also increase. If the Utilities fail to comply with applicable laws and regulations, whether existing or new, they could be subject to fines, penalties or other enforcement action by the authorities that regulate the Utilities’ operations.

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The ~~acquisition~~Utilities ofare ~~MGE~~involved ~~and~~in ~~associated~~legal ~~costs~~or ~~and~~administrative ~~integration~~proceedings ~~efforts~~before ~~may~~various ~~adversely~~courts ~~affect~~and ~~the~~governmental ~~Company's~~bodies ~~business,~~that ~~financial~~could ~~condition~~adversely oraffect their results of operations, ~~which~~cash ~~may~~flows ~~negatively~~and ~~affect~~financial ~~the market price of Laclede Group's common shares~~condition.

~~While~~The ~~management~~Utilities ~~currently~~are ~~anticipates~~involved ~~that~~in ~~the~~legal ~~acquisition~~or ofadministrative ~~MGE~~proceedings ~~will~~before bevarious ~~accretive~~courts toand ~~the~~governmental ~~Utility's~~bodies ~~net~~with ~~economic~~respect ~~earnings~~to ingeneral ~~fiscal~~claims, ~~year 2014~~rates, ~~and~~environmental ~~thereafter~~issues, ~~this~~gas ~~expectation~~cost isprudence ~~based~~reviews onand ~~preliminary~~other ~~estimates~~matters. ~~which~~Adverse ~~may~~decisions ~~materially~~regarding ~~change.~~these ~~Laclede~~matters, ~~Group~~to ~~may~~the ~~encounter~~extent ~~additional~~they ~~transaction~~require ~~and~~the ~~integration-related~~Utilities ~~costs,~~to ~~may~~make ~~fail~~payments toin ~~realize~~excess ~~all~~ of ~~the~~amounts ~~anticipated~~provided ~~synergies~~for ~~and~~in ~~benefits~~their offinancial statements, or to the ~~acquisitions~~extent orthey beare ~~subject~~not tocovered ~~other~~by ~~factors~~insurance, ~~that~~could adversely affect ~~those~~the ~~preliminary~~Utilities’ ~~estimates.~~results of operations, cash flows and financial condition.

The ~~process~~Utilities’ ofliquidity ~~integrating~~may ~~the~~be ~~operations~~adversely ofaffected ~~MGE~~by could cause an interruption of, or loss of momentum in, the activities of one or more of those businesses and the possible loss of key personnel. Integration could take longer than anticipated and could result in inconsistencies in standards, controls, procedures, practices, policies and compensation arrangements. The diversion of management's attention and any delays ~~or difficulties encountered~~ in ~~connection~~recovery ~~with the transaction and the integration~~ of ~~the~~their ~~companies' operations could have an adverse effect on the business~~costs, ~~results~~due ofto ~~operations, financial condition or prospects of the Utility after the acquisitions are ultimately consummated~~regulation.

~~The~~In ~~Utility~~the ~~expects~~normal tocourse ~~incur~~of ~~costs~~business, ~~associated~~there ~~with~~may ~~integrating~~be ~~the~~a ~~operations~~lag ofbetween when the ~~utilities,~~Utilities ~~and~~incur ~~management’s~~increases ~~estimate~~in certain of ~~the~~their costs and the ~~operating~~time ~~performance~~in ~~after~~which ~~the~~those ~~transaction~~costs ~~closes~~are ~~may~~considered ~~vary~~for ~~significantly~~recovery ~~from~~in ~~actual~~the ~~results~~ratemaking process. InCash ~~accordance~~requirements ~~with~~for ~~the~~increased ~~Unanimous~~operating ~~Stipulation~~costs, ~~and~~increased ~~Agreement,~~funding ~~the~~levels ~~Utility~~of ~~may~~defined ~~amortize~~benefit pension and ~~recover~~postretirement ~~certain~~costs, ~~transition~~capital ~~costs~~expenditures, and other increases in ~~future~~the ~~rate~~costs ~~case~~of ~~proceedings~~doing ~~subject~~business tomay ~~review~~require outlays of ~~other~~cash ~~parties’~~prior ~~and~~to the ~~Missouri~~authorization ~~Public~~of ~~Service~~increases ~~Commission’s~~in ~~(MoPSC~~rates orcharged ~~Commission)~~to ~~approval~~customers, ofas ~~the~~approved ~~Company’s~~by ~~quantification~~the ofMoPSC ~~such~~and ~~cost~~APSC. ~~Potential~~ ~~differences~~Accordingly, ~~regarding~~the ~~these~~Utilities’ ~~quantifications~~liquidity may ~~impact~~be adversely impacted to the ~~Company’s~~extent ~~financial~~higher ~~results~~costs are not timely recovered from their customers. ~~Additional~~ ~~unanticipated~~The ~~costs~~first ~~may~~Missouri Utilities general rate case filed after October 1, 2015 is required to be ~~incurred~~for inboth the ~~integration~~legacy ofLaclede Gas and the ~~businesses~~MGE operations.

The ~~acquisition~~Utilities’ ofability ~~MGE~~to meet their customers’ natural gas requirements may ~~not~~be ~~achieve~~impaired ~~its~~if ~~intended~~contracted ~~results~~gas supplies, ~~including~~interstate ~~anticipated~~pipeline ~~synergies~~ and/or ~~cost~~storage ~~savings~~services are not available or delivered in a timely manner.

~~Although~~In weorder ~~expect~~to ~~that~~meet ~~the~~their ~~acquisition~~customers’ ofannual ~~MGE~~and ~~will~~seasonal ~~result~~natural ingas ~~various benefits~~demands, ~~including~~the aUtilities ~~significant~~must ~~amount~~obtain ofsufficient ~~synergies~~supplies, ~~cost~~interstate ~~savings~~pipeline ~~and~~capacity, ~~other financial~~ and ~~operational~~storage ~~benefits,~~capacity. ~~there~~If ~~can~~they beare nounable ~~assurance regarding when or the extent~~ to ~~which~~obtain ~~we will be able to realize~~ these ~~synergies~~, ~~cost~~either ~~savings~~from ortheir ~~other~~suppliers’ ~~benefits.~~inability ~~Achieving the anticipated benefits, including synergies and cost savings, is subject~~ to adeliver ~~number of uncertainties, including whether~~ the ~~assets~~contracted ~~acquired~~commodity ~~can~~or ~~be operated in~~ the ~~manner~~inability ~~we intend. Events outside of our control, including but not limited~~ to ~~regulatory~~secure ~~changes~~replacement ~~or developments~~quantities, ~~could also adversely affect our ability to realize~~ the ~~anticipated~~Utilities’ ~~benefits~~financial ~~from~~condition ~~the~~and ~~MGE~~results ~~acquisition. Thus the integration~~ of ~~MGE~~operations may be ~~unpredictable,~~adversely ~~subject~~impacted. toIf ~~delays~~a orsubstantial ~~changed~~disruption ~~circumstances, and we can give no assurance that the acquired assets will perform~~ in ~~accordance~~interstate ~~with~~natural ~~our~~gas ~~expectations~~pipelines’ ortransmission ~~that~~and ~~our~~storage ~~expectations~~capacity ~~with~~were ~~respect~~ to ~~integration,~~occur ~~synergies~~during orperiods ~~cost savings as a result~~ of ~~the~~heavy ~~MGE acquisition will materialize. In addition~~demand, ~~our anticipated costs to achieve~~ the ~~integration of MGE may differ significantly from our current estimates. The integration may place an additional burden on our management and internal resources, and the diversion of management~~Utilities’s ~~attention~~financial ~~during~~results ~~the integration process~~ could ~~have~~be anadversely ~~adverse effect on our business, financial condition and expected operating results~~impacted.

WeThe ~~are~~Utilities’ ~~dependent~~liquidity ~~on ETE~~ and, ~~SUG~~in ~~for~~ certain ~~transitional~~circumstances, ~~services~~the ~~for~~Utilities’ ~~MGE~~results toof beoperations ~~provided~~may ~~pursuant~~be toadversely aaffected ~~continuing~~by ~~services~~the ~~agreement.~~cost ~~The failure~~ of ~~ETE~~purchasing ornatural ~~SUG~~gas toduring ~~perform~~periods ~~its~~in ~~obligations~~which ~~under~~natural ~~this~~gas ~~agreement~~prices ~~could~~are ~~adversely~~rising ~~affect our business, financial results and financial condition~~significantly.

WeThe ~~are~~Missouri ~~initially~~Utilities' ~~dependent~~tariff ~~upon~~rate ~~ETE~~schedules ~~and~~contain ~~SUG~~Purchased toGas ~~continue~~Adjustment to(PGA) ~~provide~~clauses ~~certain shared services~~ and ~~business~~the ~~support~~Alabama ~~functions~~Utility’s intariff ~~areas~~rate ~~such~~schedule ascontains ~~technology and human resources for~~ a ~~period~~Gas ofSupply ~~time~~Adjustment ~~after~~(GSA) ~~the~~rider ~~close~~that ofpermit the ~~acquisition~~Utilities to ~~facilitate~~file ~~the~~for ~~integration~~rate ofadjustments ~~MGE. The terms of these arrangements are governed by a continuing services agreement. If ETE or SUG fails~~ to ~~perform~~recover ~~its obligations under~~ the ~~continuing~~cost ~~services~~of ~~agreement,~~purchased ~~we may not be able to perform such services or obtain such services from third parties on favorable terms or at all~~gas. InChanges ~~addition,~~in ~~upon~~the ~~termination~~cost of ~~the~~purchased ~~continuing~~gas ~~services agreement, if we~~ are ~~unable~~flowed through to ~~perform~~customers ~~such~~and ~~services~~may oraffect ~~obtain~~uncollectible ~~such~~amounts ~~services~~and ~~from~~cash ~~third~~flows ~~parties,~~and itcan ~~could~~therefore ~~adversely~~impact ~~affect~~the ~~our~~amount ~~business,~~of ~~financial~~capital ~~results and financial condition~~resources.

InCurrently, ~~connection~~the ~~with~~Missouri Utilities are allowed to adjust the ~~MGE~~gas ~~acquisition,~~cost component of rates up to four times each year while the Alabama Utility ~~recorded~~may ~~goodwill~~adjust ~~and~~its ~~long-lived~~gas ~~assets~~cost ~~that~~component ~~could~~of ~~become~~its ~~impaired~~rates ~~and~~on ~~adversely~~a ~~affect~~monthly ~~its~~basis. ~~financial~~The ~~condition~~Missouri Utilities must make a mandatory gas cost adjustment at the beginning of the winter, in November, and ~~results~~during the next twelve months may make up to three additional discretionary gas cost adjustments, so long as each of ~~operations~~these adjustments is separated by at least two months.

The ~~Utility~~MoPSC ~~will~~typically ~~assess~~approves ~~goodwill~~the ~~for~~Missouri ~~impairment~~Utilities' ~~annually~~PGA orchanges ~~more~~on ~~frequently~~an ifinterim ~~events~~basis, orsubject ~~circumstances~~to ~~occur~~refund ~~that~~and ~~would more likely than not reduce~~ the ~~fair~~outcome ~~value~~ of a ~~reporting~~subsequent ~~unit~~audit ~~below~~and ~~its~~prudence ~~carrying value~~review. ~~The~~Due ~~Company~~to ~~assesses~~such ~~its~~review ~~long-lived~~process, ~~assets~~there ~~for~~is ~~impairment~~a ~~whenever~~risk ~~events~~of ora ~~circumstances~~disallowance ~~indicate~~of ~~that~~full anrecovery ~~asset’s~~of ~~carrying~~these ~~amount may not be recoverable~~costs. To ~~the~~Any ~~extent~~material ~~the~~disallowance ~~value~~ of ~~goodwill~~purchased orgas ~~long-lived~~costs ~~assets~~would ~~becomes~~adversely ~~impaired,~~affect ~~the~~revenues. ~~Company~~Alagasco's ~~may~~GSA bechanges ~~required~~are tosubmitted ~~incur~~for ~~impairment~~APSC ~~charges~~review ~~that~~on ~~could~~a ~~have~~monthly abasis, ~~material~~regardless ~~impact~~of onwhether ~~its~~there ~~results~~is ofa ~~operations.~~request Nofor ~~impairment~~a ofchange, ~~long-lived~~so ~~assets~~prudence ~~was~~review ~~recorded~~occurs ~~during~~on ~~2013~~an ongoing basis.

Increases in the prices the Utilities charge for gas may also adversely affect revenues because they could lead customers to reduce usage and cause some customers to have trouble paying the resulting higher bills. These higher prices may increase bad debt expenses and ultimately reduce earnings. Rapid increases in the price of purchased gas may result in an increase in short-term debt.

To lower financial exposure to commodity price fluctuations, Laclede Gas enters into contracts to hedge the forward commodity price of its natural gas supplies. As part of this strategy, Laclede Gas may use fixed-price, forward, physical purchase contracts, swaps, futures, and option contracts. However, Laclede Gas does not hedge the entire exposure of energy assets or positions to market price volatility, and the coverage will vary over time. Any costs, gains, or losses experienced through hedging procedures, including carrying costs, generally flow through the PGA clause, thereby limiting the Missouri Utilities' exposure to earnings volatility. However, variations in the timing of collections of such gas costs under the PGA clause and the effect of cash payments for margin deposits associated with the Missouri Utilities' use of natural gas derivative instruments may cause short-term cash requirements to vary. These procedures remain subject to prudence review by the MoPSC.

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~~Since~~The ~~interest~~Alabama ~~rates~~Utility ~~are~~currently adoes ~~key~~not ~~component,~~utilize ~~among~~risk ~~other~~mitigation ~~assumptions,~~strategies inthat ~~the~~incorporate ~~models~~commodity ~~used~~hedge ~~to estimate the fair values of our reporting units~~instruments, asbut ~~interest~~has ~~rates rise,~~ the ~~calculated~~ability ~~fair values decrease and future impairments may occur. Due~~ to ~~the~~do ~~subjectivity~~so ofthrough ~~the~~its ~~assumptions and estimates underlying the impairment analysis, the Utility cannot provide assurance that future analyses will not result in impairment~~GSA. These assumptions and estimates include projected cash flows, current and future rates for contracted capacity, growth rates, weighted average cost of capital and market multiples. For additional information, see Item 7, “Critical Accounting Policies.”

~~Item~~The ~~1B.~~Utilities' ~~Unresolved~~business ~~Staff~~activities ~~Comments~~are concentrated in two states.

~~None~~The Utilities provide natural gas distribution services to customers in Missouri and Alabama. Changes in the regional economies, politics, regulations and weather patterns of these states could negatively impact the Utilities' growth opportunities and the usage patterns and financial condition of customers and could adversely affect the Utilities' earnings, cash flow, and financial position.

~~Item~~The 2.Utilities ~~Properties~~may be adversely affected by economic conditions.

~~The~~Periods ~~principal~~of ~~properties~~slowed ofeconomic ~~the~~activity ~~Utility~~generally ~~consist~~result ofin ~~more~~decreased ~~than~~energy 30consumption,~~000~~ ~~miles~~particularly ofby ~~gas~~industrial ~~main~~ and ~~related~~large ~~service~~commercial ~~pipes~~companies, ~~meters,~~a ~~and~~loss ~~regulators.~~of ~~Other~~existing ~~physical~~customers, ~~properties~~fewer ~~include~~new ~~regional~~customers ~~service~~especially ~~centers~~in ~~and~~newly ~~related~~constructed buildings. ~~Extensive~~As ~~underground~~a ~~natural~~consequence, ~~gas~~national ~~and~~or ~~propane~~regional ~~storage~~recessions ~~facilities~~or ~~and~~other ~~equipment~~downturns ~~are located~~ in aneconomic ~~area~~activity incould ~~North~~adversely ~~St.~~affect ~~Louis~~the ~~County~~Utilities’ ~~extending~~revenues ~~under~~and ~~the~~cash ~~Missouri~~flows ~~River~~or ~~into~~restrict ~~St.~~their ~~Charles~~future ~~County~~growth. ~~Substantially~~Economic ~~all~~conditions ofin the ~~Utility's~~Utilities’ ~~utility~~service ~~plant~~territories ismay ~~subject~~also toadversely impact the ~~liens~~Utilities’ ofability ~~its~~to ~~mortgage.~~collect accounts receivable, resulting in an increase in bad debt expenses.

~~All~~Environmental oflaws ~~the~~and ~~properties~~regulations ofmay ~~the~~require ~~Utility~~significant ~~are~~expenditures ~~held in fee,~~ or byincrease ~~easement,~~operating ~~or under lease agreements~~costs. The principal lease agreements include underground storage rights that are of indefinite duration, the downtown St. Louis office building and MGE's Kansas City, Missouri office building. The current lease on the downtown St. Louis office building extends through February 2015 with the option to renew for a term of five additional years. The current lease on MGE's Kansas City office lease extends through November 30, 2015 with the option to renew for four additional terms of five years each.

~~For~~The ~~further~~Utilities ~~information~~are onsubject to federal, state and local environmental laws and regulations affecting many aspects of their present and future operations. These laws and regulations require the ~~Utility's~~Utilities ~~leases~~to ~~see~~obtain ~~Note~~and 13comply with a wide variety of environmental licenses, permits, inspections, and approvals. Failure to comply with these laws and regulations and failure to obtain any required permits and licenses may result in costs to the ~~Notes~~Utilities in the form of fines, penalties or business interruptions, which may be material. In addition, existing environmental laws and regulations could be revised or reinterpreted and/or new laws and regulations could be adopted or become applicable to ~~Financial~~the ~~Statements~~Utilities or their facilities, thereby impacting the Utilities’ cost of compliance. The discovery of presently unknown environmental conditions, including former manufactured gas plant sites, and claims against the Utilities under environmental laws and regulations may result in expenditures and liabilities, which could be material. To the extent environmental compliance costs are not fully covered by insurance or recovered in rates from customers, those costs may have an adverse effect on the Utilities’ financial condition and results of operations.

~~Item~~The 3.Utilities ~~Legal~~are ~~Proceedings~~subject to pipeline safety and system integrity laws and regulations that may require significant expenditures or significant increases in operating costs.

~~For~~Such alaws ~~description~~and regulations affect various aspects of ~~environmental~~the ~~matters,~~Utilities’ ~~see~~present ~~Note~~and ~~13,~~future ~~Commitments~~operations. These laws and ~~Contingencies,~~regulations ofrequire the ~~Notes~~Utilities to ~~Financial~~maintain ~~Statements.~~pipeline ~~For~~safety aand ~~description~~system ofintegrity ~~pending~~by ~~regulatory~~identifying ~~matters~~and ofreducing ~~the~~pipeline ~~Utility~~risks. Compliance with these laws and regulations, ~~see~~or ~~the~~future ~~Regulatory~~changes in these laws and ~~Other~~regulations, ~~Matters~~may ~~discussion~~result in ~~the~~increased ~~Management’s~~capital, ~~Discussion~~operating and ~~Analysis~~other ofcosts ~~Financial~~which ~~Condition~~may ~~and~~not ~~Results~~be ofrecoverable ~~Operations,~~in ona ~~page~~timely 28manner from customers in rates.

~~The~~Failure ~~Utility~~to iscomply ~~involved~~may result in ~~litigation~~fines, ~~claims~~penalties, ~~and~~or ~~investigations~~injunctive ~~arising~~measures inthat ~~the~~would ~~normal~~not ~~course~~be ofrecoverable ~~business.~~from ~~Management,~~customers ~~after~~in ~~discussion~~rates ~~with~~and ~~counsel,~~could ~~believes~~result ~~the~~in ~~final outcome will not have~~ a material effect on the Utilities’ financial ~~position~~condition orand results of operations ~~reflected in the financial statements presented herein~~.

Transporting, distributing, and storing natural gas and transporting and storing propane involves numerous risks that may result in accidents and other operating risks and costs.

There are inherent in gas distribution activities a variety of hazards and operations risks, such as leaks, accidental explosions, including third party damages, and mechanical problems, which could cause substantial financial losses. In addition, these risks could result in serious injury to employees and non-employees, loss of human life, significant damage to property, environmental pollution, impairment of operations, and substantial losses to the Utilities. The location of pipelines and storage facilities near populated areas, including residential areas, commercial business centers, and industrial sites, could increase the level of damages resulting from these risks. Similar risks also exist for Laclede Gas' propane storage and transmission operations. These activities may subject the Utilities to litigation or administrative proceedings from time to time. Such litigation or proceedings could result in substantial monetary judgments, fines, or penalties against the Utilities or be resolved on unfavorable terms. The Utilities are subject to federal and state laws and regulations requiring the Utilities to maintain certain safety and system integrity measures by identifying and managing storage and pipeline risks. Compliance with these laws and regulations, or future changes in these laws and regulations, may result in increased capital, operating and other costs which may not be recoverable in a timely manner from customers in rates. In accordance with customary industry practices, the Utilities maintain insurance against a significant portion, but not all, of these risks and losses. To the extent that the occurrence of any of these events is not fully covered by insurance, it could adversely affect the Utilities’ financial condition and results of operations.

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~~EXECUTIVE~~Because ~~OFFICERS~~of OFthe ~~THE~~highly ~~REGISTRANT~~competitive –nature ~~Listed below are executive officers~~ of ~~the~~its ~~Utility. Their ages~~business, ~~at September 30, 2013, and positions held at~~ the ~~Utility~~Utilities ~~are~~may ~~listed~~not ~~below~~be ~~along~~able ~~with~~to ~~their~~retain ~~business~~existing ~~experience~~customers ~~during~~or ~~the~~acquire ~~past~~new ~~five~~customers, ~~years.~~which ~~Many~~would ofhave ~~the~~an ~~executives~~adverse ~~currently~~impact ~~serve~~on asits ~~directors~~businesses, oroperating ~~officers~~results ofand ~~The~~financial ~~Laclede Group or its affiliates~~conditions.

Name, Age, and Position with the Utility		Appointed (1)
S. Sitherwood, Age 53
	Chairman of the Board and Chief Executive Officer	October 2012
	Chairman of the Board, President and Chief Executive Officer (2)	February 2012
S. L. Lindsey, Age 47
	President (3)	October 2012
S. P. Rasche, Age 53
	Chief Financial Officer	May 2012
	Vice President, Finance (4)	November 2009
M. C. Kullman, Age 53
	Senior Vice President, Assistant Corporate Secretary	October 2013
	Corporate Secretary	May 2012
	Chief Governance Officer and Corporate Secretary	February 2004

The Utilities face the risk that customers may bypass gas distribution services by gaining distribution directly from interstate pipelines or, in the case of Alagasco, also from municipally or publicly owned gas distributors located adjacent to its service territory. The Utilities cannot provide any assurance that increased competition or other changes in legislation, regulation or policies will not have a material adverse effect on their business, financial condition or results of operation.

~~(1)~~The ~~Officers~~Utilities compete with distributors offering a broad range of ~~Laclede~~services ~~are~~and ~~normally~~prices, ~~reappointed~~from atfull-service ~~the~~distributors ~~Annual~~to ~~Meeting~~those offering delivery only. The Utilities also compete for retail customers with suppliers of alternative energy products, principally propane and electricity. If they are unable to compete effectively, the ~~Board~~Utilities ofmay ~~Directors~~lose inexisting ~~January~~customers ofand/or ~~each~~fail ~~year~~to acquire new customers, which could have a material adverse effect on their business, operating results and financial condition.

~~(2)~~Changes ~~Ms.~~in ~~Sitherwood~~the ~~served~~wholesale ascosts ~~President~~ of ~~Atlanta~~purchased ~~Gas~~natural ~~Light~~gas ~~Company,~~supplies ~~Chattanooga~~may ~~Gas~~adversely ~~Company,~~impact ~~and~~the ~~Florida~~Utilities’ ~~City~~competitive ~~Gas,~~position ~~all~~compared ofwith ~~which~~alternative ~~are~~energy ~~subsidiaries of AGL Resources, Inc~~sources., from November 2004 to September 2011. During that time, she also served as Senior Vice President of Southern Operations for AGL Resources, Inc. From September 2011 to February 2012, Ms. Sitherwood served as President of The Laclede Group, Inc. and became its President and Chief Executive Officer effective February 1, 2012.

~~(3)~~Changes ~~Mr.~~in ~~Lindsey~~wholesale ~~served~~natural asgas ~~Senior~~prices ~~Vice~~compared ~~President,~~with ~~Southern~~prices ~~Operations~~for ofelectricity, ~~AGL~~fuel ~~Resources~~oil, ~~Inc.~~coal, ~~and President of its Atlanta Gas Light~~propane, ~~Chattanooga~~or ~~Gas~~other ~~and~~energy ~~Florida~~sources ~~City~~may ~~Gas~~affect ~~subsidiaries~~the ~~since~~Utilities’ ~~December~~retention ~~2011.~~of Henatural ~~also~~gas ~~served~~customers ~~as Vice President~~ and ~~General~~may ~~Manager~~adversely ofimpact ~~Atlanta~~their ~~Gas~~financial ~~Light~~condition and ~~Chattanooga~~results ~~Gas~~of ~~from 2005 to 2011~~operations.

~~(4)~~Significantly ~~Mr.~~warmer-than-normal ~~Rasche~~weather ~~served~~conditions, asthe effects of climate change, and other factors that influence customer usage may affect the ~~Chief~~Utilities’ ~~Financial~~sale ~~Officer~~of ~~for~~heating ~~TLCVision~~energy ~~Corporation~~and ~~from~~adversely ~~2004~~impact totheir ~~May~~financial ~~2009~~position and results of operations.

MrThe Utilities’ earnings are primarily generated by the sale of heating energy. MThe Missouri Utilities have weather mitigation rate designs and the Alabama Utility has a Temperature Adjustment Rider (TAR), each of which is approved by the respective state regulatory body, which provide better assurance of the recovery of fixed costs and margins during winter months despite variations in sales volumes due to the impacts of weather and other factors that affect customer usage. DHowever, significantly warmer-than-normal weather conditions in the Utilities’ service areas and other factors, such as climate change and alternative energy sources, may result in reduced profitability and decreased cash flows attributable to lower gas sales. ~~Waltermire~~Furthermore, continuation of the ~~Utility's~~weather ~~previous~~mitigation ~~Executive~~rate ~~Vice~~design ~~President~~at Laclede Gas, ~~retired~~the ~~October~~rate 1design where distribution costs are recovered predominantly through fixed monthly charges at MGE, ~~2013~~or the Rate Stabilization and Equalization (RSE) at Alagasco are subject to regulatory discretion. In addition, the promulgation of regulations by the Environmental Protection Agency (EPA), Department of Energy (DOE) or the potential enactment of congressional legislation addressing global warming and climate change may result in future additional compliance costs that could impact the Utilities’ financial conditions and results of operations.

Regional supply/demand fluctuations and changes in national infrastructure, as well as regulatory discretion, may adversely affect the Missouri Utilities' ability to profit from off-system sales and capacity release.

The Missouri Utilities' income from off-system sales and capacity release is subject to fluctuations in market conditions and changing supply and demand conditions in areas the Missouri Utilities hold pipeline capacity rights. Specific factors impacting the Missouri Utilities' income from off-system sales and capacity release include the availability of attractively-priced natural gas supply, availability of pipeline capacity, and market demand. Income from off-system sales and capacity release is shared with customers. The Missouri Utilities are allowed to retain 15% to 25% of the first $6.0 in annual income earned (depending on the level of income earned) and 30% of income exceeding $6.0 annually. In accordance with an agreement approved by the MoPSC, Laclede Gas deferred, until fiscal year 2017, its ability to retain 15% of the first $2.0. MGE is allowed to retain 15% to 25% of the first $3.6 in annual income earned (depending on the level of income earned) and 30% of income exceeding $3.6 annually. The Missouri Utilities' ability to retain such income in the future is subject to regulatory discretion in a base rate proceeding.

Catastrophic events may adversely affect the Utilities’ facilities and operations.

Catastrophic events such as fires, earthquakes, explosions, floods, tornadoes, hurricanes, tropical storms, terrorist acts, pandemic illnesses or other similar occurrences could adversely affect the Utilities’ facilities and operations. The Utilities have emergency planning and training programs in place to respond to events that could cause business interruptions. However, unanticipated events or a combination of events, failure in resources needed to respond to events, or slow or inadequate response to events may have an adverse impact on the Utilities’ operations, financial condition, and results of operations. The availability of insurance covering catastrophic events may be limited or may result in higher deductibles, higher premiums, and more restrictive policy terms.

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~~Part~~RISKS IITHAT RELATE TO THE GAS MARKETING SEGMENT

~~Item~~Increased 5.competition, ~~Market~~fluctuations ~~for~~in ~~Registrant’s~~natural ~~Common~~gas ~~Equity~~commodity prices, ~~Related~~expiration ~~Stockholder~~of ~~Matters~~supply and transportation arrangements, and ~~Issuer~~infrastructure ~~Purchases~~projects ofmay ~~Equity~~adversely ~~Securities~~impact LER’s future profitability.

~~The~~Competition ~~Utility~~in ~~common~~the ~~stock~~marketplace isand ~~owned~~fluctuations byin ~~its~~natural ~~parent~~gas commodity prices have a direct impact on LER’s business. Changing market conditions and prices, ~~The~~the ~~Laclede~~narrowing ~~Group~~of regional and seasonal price differentials and limited future price volatility may adversely impact LER’s sales margins or affect LER’s ability to procure gas supplies and/or to serve certain customers, ~~Inc~~which may reduce sales profitability and/or increase certain credit requirements caused by reductions in netting capability. Also, LER’s profitability may be impacted by the effects of the expiration, in the normal course of business, of certain of its natural gas supply contracts if those contracts cannot be replaced and/or renewed with arrangements with similar terms and pricing. Although the Federal Energy Regulatory Commission (FERC) regulates the interstate transportation of natural gas and establishes the general terms and conditions under which LER may use interstate gas pipeline capacity to purchase and transport natural gas, LER must occasionally renegotiate its transportation agreements with a concentrated group of pipeline companies. Renegotiated terms of new agreements, or increases in FERC-authorized rates of existing agreements, may impact LER’s future profitability. Profitability may also be adversely impacted if pipeline capacity or future storage capacity secured by LER is not ~~traded~~fully onutilized ~~any~~and/or ~~stock~~its ~~exchange~~costs are not fully recovered.

~~Dividends~~Reduced ~~declared~~access onto ~~the~~credit ~~common~~and/or ~~stock~~capital ~~for~~markets ~~the~~may ~~two~~prevent ~~most~~LER ~~recent~~from ~~fiscal~~executing ~~years~~operating ~~were:~~strategies.

	Fiscal 2013		Fiscal 2012
1st Quarter	$	747.77	$	795.11
2nd Quarter	748.56		794.13
3rd Quarter	1,080.54		793.56
4th Quarter	592.87		793.62

LER relies on its cash flows, netting capability, parental guarantees, and access to Laclede Group’s liquidity resources to satisfy its credit and working capital requirements. LER’s ability to rely on parental guarantees is dependent upon Laclede Group’s financial condition and credit ratings. If the rating agencies lowered Laclede Group’s credit ratings, particularly below investment grade, counterparty acceptance of parental guarantees may diminish, resulting in decreased availability of credit. Additionally, under such circumstances, certain counterparties may require LER to provide prepayments or cash deposits, amounts of which would be dependent upon natural gas market conditions. Reduced access to credit or increased credit requirements, which may also be caused by factors such as higher overall natural gas prices, may limit LER’s ability to enter into certain transactions. In addition, LER has concentrations of counterparty credit risk in that a significant portion of its transactions are with (or are associated with) energy producers, utility companies, and pipelines. These concentrations of counterparties have the potential to affect the Company’s overall exposure to credit risk, either positively or negatively, in that each of these three groups may be affected similarly by changes in economic, industry, or other conditions. LER also has concentrations of credit risk in certain individually significant counterparties. LER closely monitors its credit exposure and, although uncollectible amounts have not been significant, increased counterparty defaults are possible and may result in financial losses and/or capital limitations.

~~The~~Risk ~~Utility~~management ~~mortgage~~policies, ~~contains~~including ~~several~~the ~~restrictions~~use onof ~~its~~derivative ~~ability~~instruments, tomay ~~pay~~not ~~cash~~fully ~~dividends~~protect onLER’s ~~its~~sales ~~common~~and ~~stock,~~results asof ~~described~~operations infrom ~~further~~volatility ~~detail~~and inmay ~~Note~~result 4,in ~~Stockholder’s~~financial ~~Equity, of the Notes to Financial Statements~~losses.

~~Laclede~~In ~~Group~~the ~~periodically~~course ~~purchases~~of ~~common~~its ~~stock~~business, ofLER ~~the~~enters ~~Utility~~into ~~with~~contracts ~~the~~to ~~price~~purchase ~~set~~and sell natural gas at ~~the~~fixed ~~book~~prices ~~value~~and ofindex-based ~~the~~prices. ~~Utility~~Commodity ~~common~~price ~~stock~~risk asassociated ofwith these contracts has the ~~most~~potential ~~recently~~to ~~completed~~impact ~~fiscal~~earnings ~~quarter~~and cash flows. ~~The~~To ~~details~~minimize onthis ~~sales~~risk, ofLER ~~common~~has ~~stock~~a ofrisk ~~the~~management ~~Utility~~policy tothat ~~Laclede~~provides ~~Group~~for ~~during~~daily ~~the~~monitoring ~~past~~of ~~three~~a ~~fiscal~~number ~~years~~of ~~are~~business ~~set~~measures, ~~forth~~including ~~below:~~fixed price commitments.

Date of Sale	AggregatePurchase Price (millions)		Number of Shares
FY 2011
December 13, 2010	$	0.4	10
February 8, 2011	0.4		10
May 12, 2011	0.3		9
August 9, 2011	0.5		14
FY 2012
December 13, 2011	$	0.4	11
February 8, 2012	0.7		18
May 14, 2012	0.9		22
August 14, 2012	0.7		18
September 12, 2012	40.0		1,018
FY 2013
December 13, 2012	$	0.8	21
March 13, 2013	0.9		22
May 10, 2013	0.2		5
August 8, 2013	0.4		9
August 30, 2013	430.0		10,581
September 30, 2013	45.0		1,107

LER currently manages the commodity price risk associated with fixed-price commitments for the purchase or sale of natural gas by either closely matching the offsetting physical purchase or sale of natural gas at fixed prices or through the use of natural gas futures, options, and swap contracts traded on or cleared through the NYMEX and ICE to lock in margins. These exchange-traded/cleared contracts may be designated as cash flow hedges of forecasted transactions. However, market conditions and regional price changes may cause ineffective portions of matched positions to result in financial losses. Additionally, to the extent that LER’s natural gas contracts are classified as trading activities or do not otherwise qualify for the normal purchases or normal sales designation (or the designation is not elected), the contracts are recorded as derivatives at fair value each period. Accordingly, the associated gains and losses are reported directly in earnings and may cause volatility in results of operations. Gains or losses (realized and unrealized) on certain wholesale purchase and sale contracts, consisting of those classified as trading activities, are required to be presented on a net basis (instead of a gross basis) in the statements of consolidated income. Such presentation could result in volatility in the Company’s operating revenues.

~~The proceeds from the Utility'~~LER’s ~~sales~~ability ~~of stock were used~~ to ~~reduce~~meet its ~~short-term~~customers’ ~~borrowings~~natural ~~and,~~gas inrequirements ~~the~~may ~~case~~be ofimpaired ~~the~~if ~~sale~~contracted ofgas ~~August~~supplies ~~30,~~and ~~2013,~~interstate topipeline ~~provide~~services ~~funds~~are ~~for~~not ~~payment~~available ofor adelivered ~~portion~~in ofa ~~the~~timely ~~purchase price for MGE~~manner. ~~Exemption from registration was claimed under Section 4(2) of the Securities Act of 1933.~~

LER’s ability to deliver natural gas to its customers is contingent upon the ability of natural gas producers, other gas marketers, and interstate pipelines to fulfill delivery obligations to LER under firm contracts. If these counterparties fail to perform, they have a contractual obligation to reimburse LER for adverse consequences. LER will attempt to use such reimbursements to

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~~Item~~obtain 6the necessary supplies so that LER may fulfill its customer obligations. ~~Selected~~To ~~Financial~~the ~~Data~~extent that it is unable to obtain the necessary supplies, LER’s financial position and results of operations may be adversely impacted.

~~The~~Regulatory ~~Utility~~and legislative developments pertaining to the energy industry may adversely impact LER’s results of operations, financial condition and cash flows.

	Fiscal Years Ended September 30
(Thousands)	2013			2012			2011			2010			2009
Income statement data
Operating Revenues:
Utility	$	857,762		$	764,651		$	913,190		$	864,297		$	1,053,993
Other	1,603			2,976			19,138			10,327			2,246
Total Operating Revenues	859,365			767,627			932,328			874,624			1,056,239
Operating Expenses:
Utility
Natural and propane gas	469,098			414,846			549,947			519,905			699,984
Other operation and maintenance expenses	180,703			167,351			172,938			169,239			174,360
Depreciation and amortization	48,283			40,739			39,214			37,572			36,751
Taxes, other than income taxes	60,079			53,672			60,752			61,407			68,639
Total Utility Operating Expenses	758,163			676,608			822,851			788,123			979,734
Other	13,658			209			7,985			4,343			2,238
Total Operating Expenses	771,821			676,817			830,836			792,466			981,972
Operating Income	87,544			90,810			101,492			82,158			74,267
Other Income and (Income Deductions) – Net	2,009			2,705			825			2,569			3,128
Interest Charges	26,137			25,156			25,544			26,852			30,353
Income Before Income Taxes	63,416			68,359			76,773			57,875			47,042
Income Tax Expense	14,651			18,460			22,996			18,150			13,859
Income Before Income Taxes and Dividends on Redeemable Preferred Stock	48,765			49,899			53,777			39,725			33,183
Dividends on Redeemable Preferred Stock	—			—			—			—			15
Net Income	$	48,765		$	49,899		$	53,777		$	39,725		$	33,168
Common stock data
Dividends Declared – Common Stock	$	46,976		$	37,345		$	36,297		$	35,195		$	34,108
Statements of financial position data
Net Utility Plant	1,776,630			1,019,299			928,683			884,084			855,929
Other Property and Investments	54,016			46,358			46,950			45,864			40,549
Total Assets	2,981,016			1,760,152			1,643,046			1,658,452			1,600,287
Current Liabilities	326,900			242,791			231,462			276,226			251,913
Deferred Credits and Other Liabilities	792,474			686,617			613,270			606,669			556,549
Long-Term Debt (less current portion)	887,712			339,416			364,357			364,298			389,240
Cash flow data
Net cash provided by operating activities	125,486			118,967			156,975			92,580			216,442
Net cash used in investing activities	(1,104,824		)	(103,127		)	(66,562		)	(59,769		)	(51,645		)
Net cash provided by (used in) financing activities	1,000,852			(14,361		)	(90,499		)	(33,204		)	(166,558		)
Consolidated Net Economic Earnings Data (a)
Net Income (GAAP)	$	48,765		$	49,899		$	53,777		$	39,725		$	33,183
Unrealized loss (gain) on energy-relatedderivative contracts, net of tax	100			(110		)	26			91			(105		)
Acquisition, divestiture and restructuring activities	8,344			—			—			—			—
Net Economic Earnings (Non-GAAP)	$	57,209		$	49,789		$	53,803		$	39,816		$	33,078

LER’s business is non-regulated in that the rates it charges its customers are not established by or subject to approval by any regulatory body. However, LER is subject to various laws and regulations affecting the energy industry. New regulatory and legislative actions may adversely impact LER’s results of operations, financial condition, and cash flows by potentially reducing customer growth opportunities and/or increasing the costs of doing business.

~~(a)~~LER ~~This~~could ~~section~~incur ~~contains~~additional costs to comply with new laws and regulations, such as the ~~non~~Dodd-~~GAAP~~Frank ~~financial~~Act. ~~measures~~In ofaddition, ~~net~~as ~~economic~~the ~~earnings~~regulatory ~~and~~environment ~~net~~for ~~economic~~the ~~earnings~~natural ~~per~~gas ~~share.~~industry ~~Refer~~increases toin complexity, the ~~Earnings~~risk ~~section~~ of ~~Management’s~~inadvertent ~~Discussion~~noncompliance ~~and~~could ~~Analysis~~also ofincrease. ~~Financial~~If ~~Condition~~LER fails to comply with applicable laws and ~~Results~~regulations, ofwhether ~~Operations~~existing onor ~~page~~new 22ones, ~~for~~it acould ~~discussion~~be ~~regarding~~subject to fines, penalties or other enforcement action by the ~~use~~authorities ofthat ~~non-GAAP~~regulate ~~measures~~its operations.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

Laclede Gas

The principal properties of Laclede Gas consist of more than 30,000 miles of gas main and related service pipes, meters, and regulators. In eastern Missouri, Laclede Gas has an underground storage facility, several operating centers, and other related properties, some of which are leased. Laclede Gas' western Missouri region, served by MGE, also has several operating centers and other related properties, some of which are leased. Substantially all of Laclede Gas' utility plant is subject to the liens of its mortgage.

All of the properties of Laclede Gas are held in fee, or by easement, or under lease agreements. The principal lease agreements include underground storage rights that are of indefinite duration and the downtown St. Louis office buildings. The current leases for office space in downtown St. Louis commenced in early 2015, with terms ranging from 10 to 20 years, with multiple renewal options. Laclede Gas entered into an agreement to sell the Forest Park property, which closed on May 14, 2014. As part of the agreement Laclede Gas leased back the property for a term that expired April 1, 2015.

Alagasco

The properties of Alagasco consist primarily of its gas distribution system, which includes approximately 23,000 miles of main and service lines, odorization and regulation facilities, and customer meters. Alagasco also has four LNG facilities, several operation centers, and other related property and equipment, some of which are leased by Alagasco.

For both Laclede Gas and Alagasco, the transmission pipelines and distribution mains are located in municipal streets or alleys, public streets or highways, or on lands of others for which we have obtained the necessary legal rights to place and operate our facilities on such property.

For further information on the Utilities' leases see Note 16, Commitments and Contingencies, of the Notes to Financial Statements in Item 8.

Other properties of Laclede Group, including LER, do not constitute a significant portion of its properties.

ITEM 3. LEGAL PROCEEDINGS

For a description of pending regulatory matters of Laclede Group, see Note 15, Regulatory Matters, of the Notes to Financial Statements in Item 8. For a description of environmental matters, see Note 16, Commitments and Contingencies, of the Notes to Financial Statements in Item 8.

Laclede Group and its subsidiaries are involved in litigation, claims, and investigations arising in the normal course of business. Management, after discussion with counsel, believes the final outcome will not have a material effect on the consolidated financial position or results of operations reflected in the consolidated financial statements presented herein.

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EXECUTIVE OFFICERS OF THE REGISTRANT – Listed below are executive officers as defined by the SEC for Laclede Group, Laclede Gas and Alagasco. Their ages, at September 30, 2015, and positions are listed below along with their business experience during the past five years.



Name, Age, and Position with Company *		Appointed (1)

S. Sitherwood, Age 55 (2)

	Laclede Group
	President and Chief Executive Officer	February 2012
	President	September 2011

	Laclede Gas
	Chairman of the Board	January 2015
	Chairman of the Board and Chief Executive Officer	October 2012
	Chairman of the Board, Chief Executive Officer and President	February 2012

	Alagasco
	Chairman of the Board	September 2014

S. L. Lindsey, Age 49 (3)

	Laclede Group
	Executive Vice President, Chief Operating Officer, Distribution Operations	October 2012

	Laclede Gas
	Chief Executive Officer and President	January 2015
	President	October 2012

	Alagasco
	Chief Executive Officer	September 2014

S. P. Rasche, Age 55

	Laclede Group
	Executive Vice President, Chief Financial Officer	November 2013
	Senior Vice President, Chief Financial Officer	October 2013
	Senior Vice President, Finance and Accounting	May 2012

	Laclede Gas
	Chief Financial Officer	May 2012
	Vice President, Finance	November 2009

	Alagasco
	Chief Financial Officer	September 2014

M. C. Darrell, Age 57 (4)

	Laclede Group
	Senior Vice President, General Counsel and Chief Compliance Officer	May 2012
	General Counsel	May 2004

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L. C. Dowdy, Age 59 (5)

	Laclede Group
	Senior Vice President, External Affairs, Corporate Communications and Marketing	January 2014

M. C. Geiselhart, Age 56

	Laclede Group
	Senior Vice President, Strategic Planning and Corporate Development	January 2015
	Vice President, Strategic Planning and Corporate Development	February 2014
	Vice President, Strategic Development and Planning	August 2006

K. A. Smith, Age 57

	Alagasco
	President	April 2015
	Vice President, System Integrity	August 2011
	Vice President, Operations	January 2008



*	The information provided relates to the Company and its principal subsidiaries. Many of the executive officers have served or currently serve as officers or directors for other subsidiaries of the Company.


(1)	Officers of Laclede Group are normally reappointed by the Board of Directors in November of each year. Officers of Laclede Gas and Alagasco are normally reappointed by the Board of Directors in January of each year.


(2)	Ms. Sitherwood served as President of Atlanta Gas Light Company, Chattanooga Gas Company, and Florida City Gas, all of which are subsidiaries of AGL Resources, Inc., from November 2004 to September 2011. During that time, she also served as Senior Vice President of Southern Operations for AGL Resources, Inc.


(3)	Mr. Lindsey served as Senior Vice President, Southern Operations of AGL Resources, Inc. and President of its Atlanta Gas Light, Chattanooga Gas and Florida City Gas subsidiaries from December 2011 to October 2012. He also served as Vice President and General Manager of Atlanta Gas Light and Chattanooga Gas from 2005 to 2011.


(4)	Mr. Darrell served as Senior Vice President and General Counsel of Laclede Gas from October 2007 to July 2012.


(5)	Mr. Dowdy served as Partner at the law firm McKenna Long & Aldridge LLP until December 2013. He also served as Senior Vice President of Laclede Gas from January 2014 to January 2015.

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PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES

Laclede Group

Laclede Group’s common stock trades on The New York Stock Exchange (NYSE) under the symbol “LG.” The high and the low sales price for the common stock for each quarter in the two most recent fiscal years are:



	2015				2014
	High		Low		High		Low
1st Quarter	$	55.22	$	46.00	$	47.82	$	43.96
2nd Quarter	55.75		49.07		47.48		43.95
3rd Quarter	54.32		50.04		48.75		44.75
4th Quarter	56.31		49.66		49.95		45.36

The number of holders of record as of September 30, 2015 was 3,611.

Dividends declared on common stock for the two most recent fiscal years were:



	2015		2014
1st Quarter	$	0.46	$	0.44
2nd Quarter	0.46		0.44
3rd Quarter	0.46		0.44
4th Quarter	0.46		0.44

For disclosures related to securities authorized for issuance under equity compensation plans, see Item 12, page 139.

The only repurchases of Laclede Group's common stock during the three months ended September 30, 2015 would be pursuant to elections by employees to have shares of stock withheld to cover employee tax withholding obligations upon the vesting of performance-based and time-vested restricted stock and stock units. During the three months ended September 30, 2015, there were no such repurchases of Laclede Group's common stock.

Laclede Gas

Laclede Gas common stock is owned by its parent, The Laclede Group, Inc., and is not traded on any stock exchange.

Dividends declared on common stock for the two most recent fiscal years were:



	2015		2014
1st Quarter	$	808.84	$	586.08
2nd Quarter	810.93		587.16
3rd Quarter	810.71		587.14
4th Quarter	811.21		773.05

Laclede Gas' mortgage contains restrictions on its ability to pay cash dividends on its common stock, as described in further detail in Note 5, Stockholder’s Equity, of the Notes to Financial Statements in Item 8.

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Laclede Group periodically purchases common stock of Laclede Gas with the price set at the book value of Laclede Gas common stock as of the most recently completed fiscal quarter. The details on sales of common stock of Laclede Gas to Laclede Group during the past three fiscal years are set forth below:



Date of Sale	Aggregate Purchase Price (In millions)		Number of Shares

2013
December 13, 2012	$	0.8	21
March 13, 2013	0.9		22
May 10, 2013	0.2		5
August 8, 2013	0.4		9
August 30, 2013	430.0		10,581
September 30, 2013	45.0		1,107

2014
December 10, 2013	$	0.3	9
February 6, 2014	0.4		9
May 12, 2014	0.4		10

2015 (1)
	$	—	—

(1) There were no purchases of Laclede Gas common stock during fiscal 2015.

Exemption from registration for the sale of stock was claimed under section 4(a)(2) of the Securities Act of 1933.

Alagasco

Alagasco common stock is owned by its parent, The Laclede Group, Inc., and is not traded on any stock exchange.

Dividends declared on common stock for the two most recent fiscal years were:



	2015		2014
1st Quarter	$	—	$	—
2nd Quarter	—		10.8
3rd Quarter	—		10.8
4th Quarter	—		15.8

In the fourth quarter of fiscal 2014, dividends declared after the August 31, 2014 effective date of Alagasco's acquisition by Laclede Group totaled $5.0.

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ITEM 6. SELECTED FINANCIAL DATA

Laclede Group



	Fiscal Years Ended September 30
(Dollars in Millions, Except Per Share Amounts)	2015			2014 ⁽¹⁾			2013 ⁽²⁾		2012			2011
Statements of Income data
Total Operating Revenues	$	1,976.4		$	1,627.2		$	1,017.0	$	1,125.5		$	1,603.3
Net Income	136.9			84.6			52.8		62.6			63.8
Common Stock data
Diluted Earnings Per Share of Common Stock	$	3.16		$	2.35		$	2.02	$	2.79		$	2.86
Dividends Declared Per Share of Common Stock	1.84			1.76			1.70		1.66			1.62
Statements of Financial Position data
Total Assets	$	5,290.2		$	5,074.0		$	3,125.4	$	1,880.3		$	1,783.1
Long-Term Debt (less current portion)	1,771.5			1,851.0			912.7		339.4			364.4
Consolidated Net Economic Earnings data ⁽³⁾
Net Income (GAAP)	$	136.9		$	84.6		$	52.8	$	62.6		$	63.8
Unrealized (gain) loss on energy-related derivatives	(1.8		)	(0.9		)	0.5		(0.3		)	(1.4		)
Lower of cost or market inventory adjustments	0.3			(0.7		)	0.9		—			—
Realized loss (gain) on economic hedges prior to the sale of the physical commodity	1.5			(0.2		)	—		0.2			—
Acquisition, divestiture and restructuring activities	6.1			17.3			10.8		0.1			—
Gain on sale of property	(4.7		)	—			—		—			—
Net Economic Earnings (Non-GAAP)	$	138.3		$	100.1		$	65.0	$	62.6		$	62.4
Diluted Earnings per Share of Common Stock:
Net Income (GAAP)	$	3.16		$	2.35		$	2.02	$	2.79		$	2.86
Unrealized (gain) loss on energy-related derivatives	(0.04		)	(0.02		)	0.02		(0.02		)	(0.07		)
Lower of cost or market inventory adjustments	0.01			(0.02		)	0.03		—			—
Realized loss (gain) on economic hedges prior to the sale of the physical commodity	0.03			(0.01		)	—		0.01			—
Acquisition, divestiture and restructuring activities	0.14			0.48			0.42		0.01			—
Gain on sale of property	(0.11		)	—			—		—			—
Weighted average shares adjustment	—			0.27			0.38		—			—
Net Economic Earnings (Non-GAAP)	$	3.19		$	3.05		$	2.87	$	2.79		$	2.79

(1) Effective August 31, 2014, the Company completed the purchase from Energen of 100% of the outstanding common stock of Alagasco for $1,590.3 (including assumed debt of $264.8). Laclede Group funded the purchase price with a combination of the issuance of approximately 10.4 million shares of common stock and approximately 2.8 million equity units completed on June 11, 2014, the issuance by Laclede Group of $625.0 aggregate principal amount of senior notes on August 19, 2014, and cash from operations.

(2) Effective September 1, 2013, Laclede Gas completed the purchase from Southern Union Company, an affiliate of Energy Transfer Equity, L.P. and Energy Transfer Partners, L.P., of substantially all of the assets and liabilities of MGE, a utility engaged in the distribution of natural gas on a regulated basis in western Missouri for $940.2. The acquisition was supported by a combination of the issuance of approximately 10 million shares of common stock completed on May 29, 2013 and the issuance by Laclede Gas of $450.0 of first mortgage bonds on August 13, 2013.

(3) This section contains the non-GAAP financial measures of net economic earnings and net economic earnings per share. Net economic earnings per share are calculated by replacing consolidated net income with consolidated net economic earnings in the GAAP diluted earnings per share calculation. Each item is shown net of tax.


	2014 net economic earnings per share excludes the impact of the June 2014 equity offerings to fund the acquisition of Alagasco, but includes the May 2013 equity offering to fund the MGE acquisition. The weighted-average diluted shares used in the net economic earnings per share calculation for the fiscal year ended September 30, 2014 was 32.7 compared to 35.9 in the GAAP EPS calculation.

2013 net economic earnings per share excludes the impact of the May 2013 equity offering to fund the acquisition of MGE. The weighted-average diluted shares used in the net economic earnings per share calculation for the fiscal year ended September 30, 2013 was 22.5 compared to 26.0 in the GAAP EPS calculation.

For more information on economics earnings data, refer to the Earnings section of Management's Discussion and Analysis of Financial Condition and Results of Operations on page 24.

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

~~The~~(Dollars ~~Utility~~in millions, except per share amounts)

INTRODUCTION

This section analyzes the financial condition and results of operations of The Laclede Group, Inc. (Laclede Group or the Company), Laclede Gas Company (Laclede Gas or the Missouri Utilities), and Alabama Gas Corporation (Alagasco or the Alabama Utility). ItLaclede Gas and Alagasco are wholly owned subsidiaries of the Company. Collectively, Laclede Gas and Alagasco are referred to as the Utilities. This section includes management’s view of factors that affect ~~its~~the ~~business~~respective businesses of the Company, Laclede Gas, and Alagasco, explanations of ~~past~~ financial results including changes in earnings and costs from the prior ~~year~~ periods, and ~~their~~the effects of such factors on the ~~Utility’~~Company's, Laclede Gas' and Alagasco's overall financial condition and liquidity.

~~The~~Reference ~~Management’s~~is ~~Discussion~~made to “Part I. Item 1A. Risk Factors” and ~~Analysis~~“Forward-Looking ofStatements,” ~~Financial~~which ~~Condition~~describe important factors that could cause actual results to differ from expectations and ~~Results~~non-historical ofinformation ~~Operations~~contained herein. In addition, the following discussion should be read in conjunction with the ~~Utility’s~~audited financial statements and ~~the~~accompanying notes thereto of Laclede Group, Laclede Gas, and Alagasco included in “Item 8. Financial Statements and Supplementary Data.”

RESULTS OF OPERATIONS

Overview

The ~~Utility~~Company ishas atwo ~~wholly~~key ~~owned~~business ~~subsidiary~~segments: ofGas ~~The Laclede Group, Inc. (Laclede Group). The~~ Utility ~~is regulated by the Missouri Public Service Commission (MoPSC or Commission)~~ and ~~serves~~Gas ~~the City of St~~Marketing. ~~Louis and eastern Missouri through~~ Laclede ~~Gas~~Group’s ~~and~~earnings ~~Kansas~~are ~~City~~primarily ~~and~~derived ~~western~~from ~~Missouri~~its ~~through Missouri~~ Gas ~~Energy (MGE). The~~ Utility ~~delivers~~segment, ~~natural~~which ~~gas~~reflects tothe ~~retail~~regulated ~~customers~~activities atof ~~rates and in accordance with tariffs authorized by~~ the ~~MoPSC~~Utilities. The Gas Utility’s ~~earnings~~segment ~~are~~consists ~~primarily generated by the sale~~ of ~~heating energy. The Utility’s weather mitigation rate design and MGE's straight fixed variable rate design lessen~~ the ~~impact~~regulated businesses of ~~weather~~Laclede ~~volatility~~Gas ~~on its customers during cold winters~~ and ~~stabilizes the Utility’s earnings by recovering fixed costs more evenly during the heating season~~Alagasco. Due to the seasonal nature of the Utilities' business, earnings of ~~the~~Laclede ~~Utility~~Group, Laclede ~~Group’s~~Gas ~~earnings~~and Alagasco are typically concentrated induring the heating season of November through April ~~period,~~each ~~which~~fiscal ~~generally corresponds with the heating season~~year.

~~Based~~Gas ~~on the nature of the business of the~~ Utility, as- ~~well~~Laclede ~~as current economic conditions, management focuses on the following key variables in evaluating the financial condition and results of operations and managing the business:~~Gas

•Laclede ~~the~~Gas ~~Utility~~is Missouri’s ~~ability~~largest tonatural ~~recover~~gas distribution company and is regulated by the ~~costs~~Missouri ofPublic ~~purchasing~~Service Commission (MoPSC). Laclede Gas serves St. Louis and ~~distributing~~eastern Missouri through Laclede Gas and serves Kansas City and western Missouri through MGE, which was acquired on September 1, 2013. Laclede Gas delivers natural gas ~~from~~to retail customers at rates and in accordance with tariffs authorized by the MoPSC. The earnings of Laclede Gas are primarily generated by the sale of heating energy. The rate design for both service territories serve to lessen the impact of weather volatility on its customers; during cold winters and stabilize Laclede Gas' earnings.

Gas Utility - Alagasco

On August 31, 2014, the Company purchased from Energen 100% of the outstanding common stock of Alagasco. Alagasco is the largest natural gas distribution utility in the state of Alabama. Alagasco’s service territory is located in central and northern Alabama. Among the cities served by Alagasco are Birmingham, the center of the largest metropolitan area in Alabama, and Montgomery, the state capital. Alagasco is regulated by the Alabama Public Service Commission (APSC). Alagasco purchases natural gas through interstate and intrastate suppliers and distributes the purchased gas through its distribution facilities for sale to residential, commercial, and industrial customers and other end-users of natural gas. Alagasco also provides transportation services to large industrial and commercial customers located on its distribution system. These transportation customers, using Alagasco as their agent or acting on their own, purchase gas directly from marketers or suppliers and arrange for delivery of the gas into the Alagasco distribution system. Alagasco charges a fee to transport such customer-owned gas through its distribution system to the customers’ facilities.

Gas Marketing

Laclede Energy Resources, Inc. is engaged in the marketing of natural gas and related activities on a non-regulated basis and is reported in the Gas Marketing segment. LER markets natural gas to both on-system utility transportation customers and customers outside of Laclede Gas’ traditional service territory, including large retail and wholesale customers. LER’s operations and customer base are more subject to fluctuations in market conditions than the Utilities. LER entered into a 10-year contract for 1 Bcf of natural gas storage effective August 1, 2013 and has contracts for an additional 3.5 Bcf of storage that expire at various times through April 30, 2016.

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Business Evaluation Factors

Based on the nature of the business of the Company and its subsidiaries, as well as current economic conditions, management focuses on the following key variables in evaluating the financial condition and results of operations and managing the business.

Gas Utility Segment:


•	the Utilities' ability to recover the costs of purchasing and distributing natural gas from their customers;


•	the impact of weather and other factors, such as customer conservation, on revenues and expenses;

• changes in the regulatory environment at the federal, state, and local levels, as well as decisions by regulators, that impact the ~~Utility’s~~Utilities' ability to earn its authorized rate of return in all service territories itthey ~~serves~~serve;

• the ~~Utility’s~~Utilities' ability to access credit markets and maintain working capital sufficient to meet operating requirements; ~~and,~~

• the effect of natural gas price volatility on the business; and,


•	the ability to integrate the operations of all acquisitions.

Gas Marketing Segment:


•	the risks of competition;


•	fluctuations in natural gas prices;


•	new national infrastructure projects;


•	the ability to procure firm transportation and storage services at reasonable rates;


•	credit and/or capital market access;


•	counterparty risks; and


•	the effect of natural gas price volatility on the business.

Further information regarding how management seeks to manage these key variables is discussed below.

~~The~~Gas Utility provides reliable natural gas service at a reasonable cost, while maintaining and building a secure and dependable infrastructure. The Utility’s strategy focuses on improving both performance and the ability to recover its authorized distribution costs and rate of return. The Utility’s distribution costs are the essential, primarily fixed, expenditures it must incur to operate and maintain more than 30,000 miles of mains and services comprising its natural gas distribution system and related storage facilities. The Utility’s distribution costs include wages and employee benefit costs, depreciation and maintenance expenses, and other utility operating expenses, excluding natural and propane gas expense. Distribution costs are considered in the ratemaking process, and recovery of these types of costs is included in revenues generated through the Utility’s tariff rates, as approved by the MoPSC. The settlement of the Utility’s rate case in July 2013 retained the Utility’s weather mitigation rate design that better ensures the recovery of its fixed costs and margins despite variations in sales volumes due to the impacts of weather and other factors that affect customer usage.

19The Utilities seek to provide reliable natural gas services at a reasonable cost, while maintaining and building secure and dependable infrastructures. The Utilities’ strategies focus on improving both performance and the ability to recover their authorized distribution costs and rates of return. The Utilities' distribution costs are the essential, primarily fixed, expenditures it must incur to operate and maintain more than 53,000 miles of mains and services comprising the natural gas distribution systems and related storage facilities for Laclede Gas and Alagasco.

The Utilities' distribution costs include wages and employee benefit costs, depreciation and maintenance expenses, and other regulated utility operating expenses, excluding natural and propane gas expense. Distribution costs are considered in the rate-making process, and recovery of these types of costs is included in revenues generated through the Utilities' tariff rates. Laclede Gas' tariff rates are approved by the MoPSC, whereas Alagasco's tariff rates are approved by the APSC. Laclede Gas also has an off-system sales and capacity release income stream that is regulated by tariff.

Laclede Gas’ income from off-system sales and capacity release remains subject to fluctuations in market conditions. Laclede Gas is allowed to retain the following portions annual income (shown by service territory):



Laclede Gas Company (eastern Missouri)
Pre-tax Income	Customer Share	Company Share
First $2.0*	100%	—%
Next $2.0	80%	20%
Next $2.0	75%	25%
Amounts exceeding $6.0	70%	30%
* Customer share reverts to 85% and company share reverts to 15% in 2017.

MGE (western Missouri)
Pre-tax Income	Customer Share	Company Share
First $1.2	85%	15%
Next $1.2	80%	20%
Next $1.2	75%	25%
Amounts exceeding $3.6	70%	30%

Some of the factors impacting the level of off-system sales include the availability and cost of Laclede Gas’ natural gas supply, the weather in its service area, and the weather in other markets. When Laclede Gas’ service area experiences warmer-than-

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~~The~~normal ~~Utility’s~~weather ~~income~~while ~~from~~other ~~off-system~~markets ~~sales~~experience ~~and~~colder ~~capacity~~weather ~~release~~or ~~remains~~supply ~~subject~~constraints, tosome ~~fluctuations~~of inLaclede ~~market~~Gas' ~~conditions.~~natural ~~The~~gas ~~Utility~~supply is ~~allowed~~available tofor ~~retain~~off-system ~~the~~sales. ~~following annual income (shown by legacy company):~~

Laclede Gas
Pre-tax Income	Customer Share	Company Share
First $2 million	100%	—%
Next $2 million	80%	20%
Next $2 million	75%	25%
Amounts exceeding $6 million	70%	30%
MGE
Pre-tax Income	Customer Share	Company Share
First $1.2 million	85%	15%
Next $1.2 million	80%	20%
Next $1.2 million	75%	25%
Amounts exceeding $3.6 million	70%	30%

Laclede Gas and Alagasco work actively to reduce the impact of wholesale natural gas price volatility on their costs by strategically structuring their natural gas supply portfolios to increase their gas supply availability and pricing alternatives. The Utilities may also use derivative instruments to hedge against significant changes in the commodity price of natural gas. Nevertheless, the overall cost of purchased gas remains subject to fluctuations in market conditions. Laclede Gas’ Purchased Gas Adjustment (PGA) clause and Alagasco's Gas Supply Adjustment (GSA) rider allows the Utilities to flow through to customers, subject to prudence review by, as applicable, the MoPSC or APSC, the cost of purchased gas supplies, including costs, cost reductions, and related carrying costs associated with the use of derivative instruments to mitigate volatility in the cost of natural gas, as well as gas inventory carrying costs. As of September 30, 2015, Laclede Gas had active derivative positions, but Alagasco has had no derivative instrument activity since 2010. The Utilities believe they will continue to be able to obtain sufficient gas supply. The price of natural gas supplies and other economic conditions may affect sales volumes, due to the conservation efforts of customers, and cash flows associated with the timing of collection of gas costs and related accounts receivable from customers.

~~Some~~Both ofLaclede ~~the~~Gas ~~factors~~and ~~impacting~~Alagasco ~~the~~rely ~~level~~on ofshort-term ~~off~~credit and long-~~system~~term ~~sales~~capital ~~include~~markets, ~~the~~as ~~availability~~well as cash flows from operations, to satisfy their seasonal cash requirements and ~~cost~~fund oftheir ~~the~~capital ~~Utility’s~~expenditures. ~~natural~~The ~~gas~~Utilities' ~~supply~~ability to issue commercial paper, ~~the~~access ~~weather~~their inlines ~~its~~of ~~service~~credit, ~~area~~issue long-term bonds, ~~and~~or ~~the~~obtain ~~weather~~new lines of credit is dependent on current conditions in ~~other~~the credit and capital markets. ~~When~~Management ~~the~~focuses ~~Utility’s~~on ~~service~~maintaining ~~area~~a ~~experiences~~strong ~~warmer-than-normal~~balance ~~weather~~sheet ~~while~~and ~~other~~believes ~~markets~~it ~~experience~~currently ~~colder~~has ~~weather~~adequate oraccess ~~supply~~to ~~constraints,~~credit ~~some~~and ofcapital ~~the~~markets ~~Utility’s~~and ~~natural~~will ~~gas~~have ~~supply~~sufficient iscapital ~~available~~resources ~~for~~to ~~off-system~~meet ~~sales~~their foreseeable obligations. See the ~~Regulatory~~Liquidity and ~~Other~~Capital ~~Matters~~Resources section on page 2841 ~~of this report~~ for additional information ~~on Laclede Gas' off-system sales~~.

The Utility works actively to reduce the impact of wholesale natural gas price volatility on its costs by strategically structuring its natural gas supply portfolio to increase its gas supply availability and pricing alternatives and through the use of derivative instruments to protect its customers from significant changes in the commodity price of natural gas. Nevertheless, the overall cost of purchased gas remains subject to fluctuations in market conditions. The Utility’s Purchased Gas Adjustment (PGA) Clause allows the Utility to flow through to customers, subject to prudence review by the MoPSC, the cost of purchased gas supplies, including costs, cost reductions, and related carrying costs associated with the use of derivative instruments to hedge the purchase price of natural gas, as well as gas inventory carrying costs. The Utility believes it will continue to be able to obtain sufficient gas supply. The price of natural gas supplies and other economic conditions may affect sales volumes, due to the conservation efforts of customers, and cash flows associated with the timing of collection of gas costs and related accounts receivable from customers.Marketing

~~The~~LER ~~Utility~~provides ~~relies~~both on-system ~~both~~Laclede ~~short-term~~Gas ~~credit~~transportation customers and ~~long-term~~customers ~~capital~~outside ~~markets,~~of asLaclede ~~well~~Gas' astraditional ~~cash~~service ~~flows~~area ~~from~~with ~~operations,~~another tochoice ~~satisfy~~in ~~its~~non-regulated ~~seasonal~~natural ~~cash~~gas ~~requirements~~suppliers. ~~and~~LER ~~fund~~utilizes its ~~cost~~natural ofgas ~~capital~~supply ~~expenditures.~~agreements, ~~The~~transportation ~~Utility's~~agreements, ~~ability~~park toand ~~issue~~loan ~~commercial~~agreements, ~~paper~~storage ~~supported~~agreements, byand ~~lines~~other ofexecutory ~~credit,~~contracts to ~~issue~~support ~~long-term~~a ~~bonds,~~variety orof services to ~~obtain~~its ~~new~~customers ~~lines~~at ofcompetitive ~~credit~~prices. isIt ~~dependent~~closely onmonitors ~~current~~and ~~conditions~~manages in the ~~credit~~natural gas commodity price and ~~capital~~volatility ~~markets.~~risks ~~Management~~associated ~~focuses~~with onproviding ~~maintaining~~such services to its customers through the use of a ~~strong~~variety ~~balance~~of ~~sheet~~risk ~~and~~management ~~believes~~activities, itincluding ~~currently~~the ~~has~~use ~~adequate~~of ~~access~~exchange-traded/cleared toderivative ~~credit~~instruments and ~~capital~~other ~~markets~~contractual ~~and~~arrangements. ~~will~~LER ~~have~~is ~~sufficient~~committed ~~capital~~to ~~resources~~managing commodity price risk while it seeks to ~~meet~~expand ~~its~~the ~~foreseeable~~services ~~obligations~~that it now provides. ~~See~~Nevertheless, ~~the~~income ~~Liquidity~~from ~~and~~LER’s ~~Capital~~operations ~~Resources~~is ~~section~~subject onto ~~page~~more 30fluctuations ~~for~~in ~~additional~~market ~~information~~conditions than Laclede Gas’ operations.

20LER’s business is directly impacted by the effects of competition in the marketplace, the impacts of new infrastructure and surplus natural gas supplies on natural gas commodity prices. Management expects that LER's net economic earnings (a non-GAAP measure, as discussed below) will be challenged by significant commodity pricing declines that occurred through fiscal 2015 and that are expected to remain constrained for the foreseeable future.

In addition to its operating cash flows, LER relies on Laclede Group’s parental guarantees to secure its purchase and sales obligations of natural gas. LER also has access to Laclede Group’s liquidity resources. A large portion of LER’s receivables are from customers in the energy industry. LER also enters into netting arrangements with many of its energy counterparties to reduce overall credit and collateral exposure. Although LER’s uncollectible amounts are closely monitored and have not been significant, increases in uncollectible amounts from customers are possible and could adversely affect LER’s liquidity and results of operations.

LER carefully monitors the creditworthiness of counterparties to its transactions. LER performs in-house credit reviews of potential customers and may require credit assurances such as prepayments, letters of credit, or parental guarantees when appropriate. Credit limits for customers are established and monitored.

As a result of infrastructure optimization activities and an abundance of natural gas supply, LER cannot be certain that all of its wholesale purchase and sale transactions will settle physically. As such, certain transactions entered into in fiscal years 2015, 2014, and 2013 are designated as trading activities for financial reporting purposes, due to their settlement characteristics, rather than elected for normal purchases or normal sales designations under generally accepted accounting principles (GAAP). Results of operations from trading activities are reported on a net basis in Gas Marketing Operating Revenues, which may cause volatility in the Company’s operating revenues, but has no effect on operating income or net income.

In the course of its business, LER enters into commitments associated with the purchase or sale of natural gas. In accordance with GAAP, some of LER’s purchase and sale transactions are not recognized in earnings until the natural gas is physically delivered, while other energy-related transactions, including those designated as trading activities, are required to be accounted for as derivatives, with the changes in their fair value (representing unrealized gains or losses) recorded in earnings in periods prior to settlement. Because related transactions of a purchase and sale strategy may be accounted for differently,

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there may be timing differences in the recognition of earnings under GAAP and economic earnings realized upon settlement. The Company reports both GAAP and net economic earnings (non-GAAP), as discussed below.

Other

In addition to the Gas Utility and Gas Marketing segments, the Company's business includes certain other non-utility activities reported as Other. Other includes:


•	unallocated corporate costs, including certain debt and associated interest costs,


•	Laclede Pipeline Company, a subsidiary of Laclede Group which operates a propane pipeline under Federal Energy Regulatory Commission (FERC) jurisdiction, and


•	Laclede Group's subsidiaries that are engaged in compression of natural gas, oil production, real estate development, risk management, and financial investments in other enterprises, among other activities. All subsidiaries are wholly owned.

EARNINGS

~~2013~~Net vsincome reported by the Laclede Group, Laclede Gas and Alagasco are determined in accordance with accounting principles generally accepted in the United States of America (GAAP). ~~2012~~Management also uses the non-GAAP measures of net economic earnings, net economic earnings per share and operating margin when internally evaluating and reporting results of operations. These non-GAAP operating metrics should not be considered as an alternative to, or more meaningful than, GAAP measures such as net income.

~~The Utility's net income decreased by $1.1 million for the fiscal year ended September 30, 2013, compared with 2012. The decrease in net income was primarily due to (on a pre~~Non-~~tax~~GAAP ~~basis)~~Measures higher depreciation and amortization costs totaling $7.5 million and higher other operation and maintenance expenses totaling $13.4 million. These factors were partially offset by higher Gas Utility operating margin (a non-~~GAAP~~ ~~measure,~~Net asEconomic ~~discussed~~Earnings ~~below) of $34.1 million~~ and aNet ~~reduction~~Economic inEarnings ~~other~~Per ~~interest charges totaling $0.9 million.~~Share

Net economic earnings and net economic earnings per share are non-GAAP measures that exclude from net income the after-tax impacts of fair value accounting and timing adjustments associated with energy-related transactions as well as acquisition, divestiture, and restructuring activities. These fair value and timing adjustments are made in instances where the accounting treatment differs from the economic substance of the underlying transaction, including the following:


•	Net unrealized gains and losses on energy-related derivatives that are required by GAAP fair value accounting associated with current changes in the fair value of financial and physical transactions prior to their completion and settlement. These unrealized gains and losses result primarily from two sources:


1)	changes in the fair values of physical and/or financial derivatives prior to the period of settlement; and,


2)	ineffective portions of accounting hedges, required to be recorded in earnings prior to settlement, due to differences in commodity price changes between the locations of the forecasted physical purchase or sale transactions and the locations of the underlying hedge instruments;


•	Lower of cost or market adjustments to the carrying value of commodity inventories resulting when the market price of the commodity falls below its original cost, to the extent that those commodities are economically hedged; and


•	Realized gains and losses resulting from the settlement of economic hedges prior to the sale of the physical commodity.

These adjustments eliminate the impact of timing differences and the impact of current changes in the fair value of financial and physical transactions prior to their completion and settlement. Unrealized gains or losses are recorded in each period until being replaced with the actual gains or losses realized when the associated physical transaction(s) occur. While management uses these non-GAAP measures to evaluate both the Utilities and LER, the net effect of adjustments on the Utilities' earnings are minimal. This is due to gains or losses on Laclede Gas' natural gas derivative instruments being deferred pursuant to its PGA clause, as authorized by the MoPSC.

Management believes that excluding the earnings volatility caused by recognizing changes in fair value prior to settlement and other timing differences associated with related purchase and sale transactions provides a useful representation of the economic effects of only the actual settled transactions and their effects on results of operations. In addition, management excludes the impact related to unique acquisition, divestiture, and restructuring activities when evaluating on-going performance, and therefore excludes these impacts from net economic earnings. Net economic earnings per share also exclude the impacts of the May 2013 and June 2014 equity offerings to fund the acquisitions of MGE and Alagasco, respectively. Management believes that this presentation provides a useful representation of operating performance by facilitating comparisons of year-over-year results. The definition and measurement of net economic earnings provided above is consistent with that used by management and the Board of Directors in assessing the Company's, Laclede Gas' and Alagasco's performance as well as determining performance under the Company's, Laclede Gas' and Alagasco's incentive compensation plans. Further, the Company believes this better enables an investor to view the Company's, Laclede Gas' and Alagasco's performance in that period on a basis that would be comparable to prior periods.

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Reconciliations of net economic earnings and net economic earnings per share to the Company's most directly comparable GAAP measures are provided on the following pages.

Non-GAAP Measure - Operating Margin

In addition to operating revenues and operating expenses, management also uses the non-GAAP measure of operating margin when evaluating result of operations, as shown in the table below. The Utilities pass to their customers (subject to prudence review by, as applicable, the MoPSC or APSC) increases and decreases in the wholesale cost of natural gas in accordance with their PGA clauses (Missouri Utilities) and GSA rider (Alabama Utility). The volatility of the wholesale natural gas market results in fluctuations from period to period in the recorded levels of, among other items, revenues and natural gas cost expense. Nevertheless, increases and decreases in the cost of gas associated with system gas sales volumes and gross receipts tax expense, which are calculated as a percentage of revenues, with the same amount, excluding immaterial timing differences, included in revenues, has no direct effect on operating income. As these costs are included in revenue and operating expenses and management does not have any control over these amounts for the Utilities, management believes that beginning with operating margins is a more useful measure. In addition, it is management's belief that operating margins and the remaining operating expenses that calculate operating income is a more useful measure in assessing the Company's and the Utilities' performance as management has more ability to influence control over these revenues and expenses.

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LACLEDE GROUP

Overview – Net Income (Loss)



		Gas Utility			Gas Marketing			Other			Consolidated			Per Diluted Share
Year Ended September 30, 2015
	Net Income (Loss) (GAAP)	$	153.3		$	4.1		$	(20.5	)	$	136.9		$	3.16
	Unrealized (gain) on energy-related derivatives*	(0.1		)	(1.7		)	—			(1.8		)	(0.04		)
	Lower of cost or market inventory adjustments*	—			0.3			—			0.3			0.01
	Realized loss on economic hedges prior to the sale of the physical commodity*	—			1.5			—			1.5			0.03
	Acquisition, divestiture and restructuring activities*	1.9			—			4.2			6.1			0.14
	Gain on sale of property*	(4.7		)	—			—			(4.7		)	(0.11		)
	Net Economic Earnings (Loss) (Non-GAAP)	$	150.4		$	4.2		$	(16.3	)	$	138.3		$	3.19

Year Ended September 30, 2014
	Net Income (Loss) (GAAP)	$	87.1		$	12.2		$	(14.7	)	$	84.6		$	2.35
	Unrealized loss (gain) on energy-related derivatives*	0.2			(1.1		)	—			(0.9		)	(0.02		)
	Lower of cost or market inventory adjustments*	—			(0.7		)	—			(0.7		)	(0.02		)
	Realized (gain) on economic hedges prior to the sale of the physical commodity*	—			(0.2		)	—			(0.2		)	(0.01		)
	Acquisition, divestiture and restructuring activities*	5.5			—			11.8			17.3			0.48
	Weighted average shares adjustment **													0.27
	Net Economic Earnings (Loss) (Non-GAAP)	$	92.8		$	10.2		$	(2.9	)	$	100.1		$	3.05

Year Ended September 30, 2013
	Net Income (Loss) (GAAP)	$	56.3		$	7.6		$	(11.1	)	$	52.8		$	2.02
	Unrealized loss on energy-related derivatives*	0.1			0.4			—			0.5			0.02
	Lower of cost or market inventory adjustments*	—			0.9			—			0.9			0.03
	Less: Acquisition, divestiture and restructuring activities*	0.3			—			10.5			10.8			0.42
	Weighted average shares adjustment ***													$	0.38
	Net Economic Earnings (Loss) (Non-GAAP)	$	56.7		$	8.9		$	(0.6	)	$	65.0		$	2.87


*	Amounts presented net of income taxes. Income taxes are calculated by applying federal, state, and local income tax rates applicable to ordinary income to the amounts of the pre-tax reconciling items.


**	2014 net economic earnings per share excludes the impact of the June 2014 equity offerings to fund the acquisition of Alagasco, but includes the May 2013 equity offering to fund the MGE acquisition. The weighted-average diluted shares used in the net economic earnings per share calculation for the fiscal year ended September 30, 2014 was 32.7 compared to 35.9 in the GAAP EPS calculation.


***	2013 net economic earnings per share excludes the impact of the May 2013 equity offering to fund the acquisition of MGE. The weighted-average diluted shares used in the net economic earnings per share calculation for the fiscal year ended September 30, 2014 was 22.5 compared to 26.0 in the GAAP EPS calculation.

2015 vs. 2014

Consolidated

Laclede Group’s net income was $136.9 in fiscal year 2015, compared with $84.6 in fiscal year 2014. Basic and diluted earnings per share were $3.16 for fiscal year 2015 compared with basic and diluted earnings per share of $2.36 and $2.35, respectively, for fiscal year 2014. Net economic earnings were $138.3 (or $3.19 per share) in fiscal year 2015, compared with $100.1 (or $3.05 per share) in fiscal year 2014. Net income increased in fiscal year 2015 compared to fiscal year 2014 primarily due to $66.2 income growth in the Gas Utility segment, which reflects $50.9 improvement relating to the inclusion of a full year of Alagasco earnings versus the $2.9 Alagasco loss included in 2014 for the month of September. Gas Utility also

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benefited from $15.3 income growth from the Missouri Utilities. The increased net income from Gas Utility was partially offset by an $8.1 decrease in Gas Marketing net income and a $5.8 higher loss from other non-utility activities, principally due to interest expense relating to the 2014 financing of the Alagasco acquisition.

Gas Utility

Gas Utility net income and net economic earnings increased by $66.2 and $57.6, respectively, in 2015, compared to 2014. The increases to net income and net economic earnings were primarily due to higher operating margin (a non-GAAP measure, as discussed below) of $271.3, which reflects the inclusion of Alagasco operating margin of $285.1 for twelve months in 2015 versus $14.8 for one month in 2014, and a $1.0 increase in Laclede Gas operating margin. The increase in operating margin was partially offset by an increase in other operating expenses of $112.1 and an increase in depreciation and amortization expenses totaling $47.5, as discussed in the Gas Utility section below. Additionally, interest expense for 2015 was $11.6 higher than 2014 due to the inclusion of full year Alagasco results offsetting the $1.0 decline experienced by Laclede Gas. Income taxes were also higher by $38.8, due to higher Missouri Utilities operating results and from the inclusion of twelve months of Alagasco operating results in 2015 versus only the month of September in 2014.

Gas Marketing

Gas Marketing reported GAAP earnings totaling $4.1, a decrease of $8.1 compared with the same period last year. Net economic earnings for fiscal year 2015 decreased $6.0 from fiscal year 2014. The decreases in net income and net economic earnings were primarily attributable to decreases in operating margin, with the impact to net economic earnings being partly mitigated by mark-to-market activity as discussed in the Gas Marketing section below.

Other

The combined net loss and net economic loss for the Company's other non-utility activities were $5.8 and $13.4 larger, respectively, for the 2015 fiscal year compared to the same period last year. The increase in net loss was primarily the result of $16.6 increased interest expense related to the 2014 debt issued to finance the Alagasco acquisition, partially offset by lower transaction and integration expenses in fiscal year 2015 as compared to 2014.

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Operating Revenues and Operating Expenses

Reconciliations of operating margin to the most directly comparable GAAP measure are shown below.



		Gas Utility		Gas Marketing		Other			Eliminations			Consolidated
Year Ended September 30, 2015
	Operating Revenues	$	1,895.8	$	153.4	$	3.7		$	(76.5	)	$	1,976.4
	Natural and propane gas expense	957.6		140.5		0.3			(75.5		)	1,022.9
	Gross receipts tax expense	96.1		0.2		—			—			96.3
	Operating margin (non-GAAP)	842.1		12.7		3.4			(1.0		)	857.2
	Depreciation and amortization	129.9		0.3		0.6			—			130.8
	Other operating expenses	437.6		5.6		11.7			(1.0		)	453.9
	Operating income (Loss) (GAAP)	$	274.6	$	6.8	$	(8.9	)	$	—		$	272.5

Year Ended September 30, 2014
	Operating revenues	$	1,467.8	$	246.6	$	3.8		$	(91.0	)	$	1,627.2
	Natural and propane gas expense	821.8		220.4		—			(90.2		)	952.0
	Gross receipts tax expense	75.2		0.2		—			—			75.4
	Operating margin (non-GAAP)	570.8		26.0		3.8			(0.8		)	599.8
	Depreciation and amortization	82.4		0.4		0.5			—			83.3
	Other operating expenses	325.5		5.4		20.0			(0.8		)	350.1
	Operating income (Loss) (GAAP)	$	162.9	$	20.2	$	(16.7	)	$	—		$	166.4

Year Ended September 30, 2013
	Operating revenues	$	857.8	$	189.4	$	6.2		$	(36.4	)	$	1,017.0
	Natural and propane gas expense	469.1		171.6		1.3			(35.7		)	606.3
	Gross receipts tax expense	40.2		0.1		—			—			40.3
	Operating margin (non-GAAP)	348.5		17.7		4.9			(0.7		)	370.4
	Depreciation and amortization	48.3		0.3		0.7			—			49.3
	Other operating expenses	200.6		4.6		20.1			(0.7		)	224.6
	Operating income (Loss) (GAAP)	$	99.6	$	12.8	$	(15.9	)	$	—		$	96.5

(Millions)		Gas Utility		Other			Total
Year Ended September 30, 2013
	Operating Revenues	$	857.8	$	1.6		$	859.4
	Natural and propane gas expense	469.1		—			469.1
	Gross receipts tax expense	40.2		—			40.2
	Operating margin (non-GAAP)	348.5		1.6			350.1
	Remaining operating expenses	248.9		13.7			262.6
	Operating income (GAAP)	$	99.6	$	(12.1	)	$	87.5
Year Ended September 30, 2012
	Operating revenues	$	764.7	$	2.9		$	767.6
	Natural and propane gas expense	414.8		—			414.8
	Gross receipts tax expense	35.5		—			35.5
	Operating margin (non-GAAP)	314.4		2.9			317.3
	Remaining operating expenses	226.3		0.2			226.5
	Operating income (GAAP)	$	88.1	$	2.7		$	90.8
Year Ended September 30, 2011
	Operating revenues	$	913.2	$	19.1		$	932.3
	Natural and propane gas expense	549.9		—			549.9
	Gross receipts tax expense	42.9		—			42.9
	Operating margin (non-GAAP)	320.4		19.1			339.5
	Remaining operating expenses	230.1		8.0			238.1
	Operating income (GAAP)	$	90.3	$	11.1		$	101.4

Consolidated

21Laclede Group reported operating revenues of $1,976.4 for the fiscal year ended September 30, 2015 compared with $1,627.2 for the same period last year. Laclede Group's operating margin increased $257.4 for the twelve months ended September 30, 2015, compared to the same period last year primarily due to higher Gas Utility operating margin, slightly offset by the lower operating margin reported by Gas Marketing as discussed below. Other operating expenses and depreciation and amortization increased $103.8 and $47.5, respectively, for the twelve months ended September 30, 2015 as compared to the same period last year. These increases were primarily due to the impact of eleven additional months of Alagasco other operating expenses and depreciation and amortization expenses in fiscal 2015 totaling $134.4 and $43.4, respectively. The increase in other operating expenses was partially offset by $22.3 lower expenses in the Missouri Utilities and a $8.3 decrease in expenses in Other, as discussed below. The remaining increase in depreciation and amortization was related to higher capital spending within the Missouri Utilities in 2015.

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Gas Utility

Operating Revenues -– Gas Utility Operating Revenues for fiscal year ~~2013~~2015 increased $93428.~~1 million~~0, compared to fiscal year ~~2012~~2014, was primarily attributable to the following factors:

(Millions)
New customer revenue from Alagasco acquisition	$	459.5
Higher system sales volumes and other variations	$	101.3
Variance due to Missouri Utilities:
Lower wholesale gas costs passed on to Utility customers	(30.6		)
Lower system volumes and off-system pricing	(42.2		)
Lower off-system sales volumes	(24.0		)
Base rate increases and Infrastructure System Replacement Surcharge (ISRS) charges	10.9
Higher prices charged for off-system sales	19.9
Higher wholesale gas prices passed to customers	7.1
New customer revenue from MGE acquisition	22.0
Higher optimization of assets in the prior year	(6.2		)
Higher ISRS revenues	4.5
Lower gross receipts tax	(1.8		)
Total Variation	$	93.1
All other variance	0.7
Total Variation	$	428.0

~~Temperatures~~Operating ~~experienced~~Margin in– ~~the~~Gas Utility’s ~~service~~operating ~~area~~margin ~~during~~was ~~2013 were 35~~$842.8%1 ~~colder~~for ~~than~~fiscal ~~the same period last~~ year 2015, ~~which~~a ~~were the warmest on record~~$271.3 ~~Total~~increase ~~system~~over ~~therms sold and transported to~~ the ~~Utility’s~~same ~~customers~~period ~~within~~last ~~its service territory were 884.7 million for fiscal~~ year ~~2013 compared with 718~~.0 ~~million~~The ~~for~~increase ~~fiscal~~was ~~year~~attributable ~~2012.~~to ~~Total off-system therms sold and transported outside of~~ the ~~Utility’s~~following ~~service area were 229.4 million for fiscal year 2013 compared with 314.5 million for fiscal year 2012.~~ factors:

Operating Margin - Gas Utility operating margin was $348.5 million for fiscal year 2013, a $34.1 million increase over the same period last year. Of the $34.1 million increase, $15.2 million is attributed to the acquisition of MGE. The remaining increase is primarily due to increased sales margins reflecting colder weather this year totaling $13.3 million, higher Infrastructure System Replacement Surcharge (ISRS) revenues totaling $4.5 million, and other minor variations of $1.1 million.



Operating margin from Alagasco	$	270.3
Variance due to Missouri Utilities:
Base rate increases and ISRS charges	10.9
Lower system volumes and off-system pricing	(8.3		)
Higher optimization of assets in the prior year	(3.1		)
All other variance	1.5
Total Variation	$	271.3

~~Operating~~The ~~Expenses~~increase -was ~~Remaining~~primarily ~~operating~~attributable ~~expenses~~to inthe ~~fiscal~~acquisition ~~year~~of ~~2013~~Alagasco ~~increased~~totaling $22270.63. ~~million~~Temperatures ~~from~~in ~~fiscal~~the ~~year~~Laclede ~~2012.~~Gas ~~Other~~service ~~operation~~area ~~and~~in ~~maintenance~~2015 ~~expenses~~were ~~increased $4~~11.02% ~~million~~warmer ~~primarily~~than ~~due~~in tothe ~~increased~~same ~~compensation~~period ~~and~~in ~~benefits,~~the ~~maintenance~~prior year, ITnegatively ~~and~~impacting ~~professional~~current ~~fees,~~year ~~partially~~revenues ~~offset~~ by ~~a lower provision for uncollectible accounts and a decrease in customer accounts expenses~~$8.3. ~~Depreciation~~The ~~and~~prior ~~amortization~~year ~~expense~~also ~~increased~~benefited $53.01 ~~million primarily~~ due to ~~additional~~a ~~depreciable~~higher ~~property.~~level ~~Taxes,~~of ~~other~~asset ~~than income and gross receipts tax, increased $1~~optimization.0 ~~million~~These ~~primarily~~negative ~~due~~impacts to ~~higher~~revenue ~~payroll~~were ~~taxes~~mostly ~~related~~offset toby ~~aforementioned~~base ~~employee~~rate ~~expenses. The~~increases ~~remaining~~and ~~increase~~ISRS ischarges ~~attributed to the acquisition~~ of ~~MGE~~$10.9.

Operating Expenses – Gas Utility other operating expenses in fiscal year 2015 increased $112.1 from fiscal year 2014, with $134.4 attributable to the Alagasco acquisition offset by a decrease in other operating expenses within the Missouri Utilities. Of the $22.3 decrease in Missouri, $7.6 was due to a gain on the sale of property, $7.5 was the result of lower payroll and benefits expenses, and $9.8 resulted from cost efficiencies. Depreciation and amortization expense increased $4.1 at the Missouri Utilities primarily due to higher levels of capital expenditures, with the remaining $43.4 increase reflecting the inclusion of Alagasco for the full fiscal year.

Gas Marketing

Operating Revenues – Gas Marketing operating revenue for the twelve months ended September 30, 2015 decreased $93.2 from the same period last year due to higher per unit gas sales prices in the prior year as the colder weather in the Midwest created higher market volatility and basis differentials (pricing differences between supply regions). Gas commodity pricing has also declined $1.35/MMBtu versus the prior year. Overall gas commodity pricing in the current year is below the prior year, negatively impacting revenues in the current year. The prior year also included a $3.3 higher benefit from mark-to-market impact on derivatives and inventory.

Operating Margin – Gas Marketing operating margin was $12.7 for fiscal year 2015, a $13.3 decrease compared to the same period last year. Of this decrease, $10.0 was primarily attributable to higher sales margins (operating margin less fair value adjustments) last year reflecting higher market volatility and basis differentials of natural gas prices and the expiration of a favorable gas supply contract in the first quarter of fiscal 2014. The remaining variance was due to $3.3 higher pre-tax income in the prior year associated with unrealized gains on derivatives and lower-of-cost-or-market adjustments to inventory.

Other

~~Other~~Operating ~~operating~~Revenue ~~revenues~~ and ~~operating~~Operating ~~margin~~Expenses in- ~~fiscal~~Other ~~year~~operating ~~2013~~revenue ~~decreased~~was ~~$1.3~~essentially ~~million~~flat ~~from~~with ~~fiscal~~the ~~year~~prior ~~2012. Beginning July 2013~~year, ~~propane~~as ~~activities~~volume ~~are~~increases ~~now~~at ~~recorded within~~ the ~~regulated~~Company's ~~Gas~~Spire ~~Utility~~LNG ~~pursuant~~fueling tooperations ~~the~~were ~~recent~~offset ~~rate~~by ~~case~~lower ~~filing~~prices. Other operating expenses ~~increased~~decreased $138.53 ~~million~~ primarily due to the Alagasco acquisition-related transaction expenses ~~for~~in the prior year being higher than the MGE and Alagasco integration related expenses incurred in fiscal 2015.

~~Other Income and (Income Deductions) - Net~~32

~~Other~~Table ~~Income~~of ~~and (Income Deductions) - Net decreased by $0.7 million primarily due to lower net investment gains, increased charitable donations, and other minor variations.~~ Contents

Interest Charges

Interest charges during ~~fiscal~~the ~~year~~twelve ~~2013~~months ended September 30, 2015 increased $128.04 ~~million~~ from the same period last year. The increase was primarily due to the ~~issuance~~Company's ~~of long-term~~August ~~debt,~~2014 ~~partially~~issuance ~~offset~~of ~~by lower interest rates on~~ long-term debt ~~outstanding~~totaling $625.0, ~~The~~and ~~higher~~the ~~interest~~June on2014 ~~long-term~~issuance ~~debt~~of ~~reflects~~equity ~~the~~units ~~net~~totaling ~~effect~~$143.8. ofThese ~~the~~increases ~~March~~were ~~2013,~~partially ~~and~~offset ~~August~~by ~~2013~~Laclede ~~issuances~~Gas' ofearly ~~additional~~redemption ~~long-term debt~~ of $~~100~~80.0 ~~million~~of ~~and~~6.35% ~~$450~~first ~~million,~~mortgage ~~respectively,~~bonds ~~and~~on ~~the~~January ~~October~~6, ~~2012~~2014. ~~maturity~~The assumption of ~~$25~~Alagasco ~~million~~debt ofcontributed $12.6 ~~1/2%~~to ~~first~~the ~~mortgage~~increase ~~bonds.~~in ~~Average short-term~~ interest ~~rates~~expense. ~~were~~For ~~0.3%~~the ~~for~~twelve ~~both~~months ~~fiscal~~ended ~~years~~September ~~2013~~30, 2015 and ~~2012.~~2014, ~~Average~~average short-term borrowings were $63300.46 ~~million~~ and $~~122~~82.03, ~~million~~respectively, ~~for~~and ~~fiscal~~the ~~years~~average ~~2013~~interest rates on those borrowings were 0.7% and ~~2012~~0.5%, respectively.

Income Taxes

Consolidated Income tax ~~expenses~~expense ~~decreased~~increased $329.89 ~~million~~ in fiscal year ~~2013~~2015 from fiscal year ~~2012~~2014 primarily due to ~~lower~~higher pre-tax income and ~~various~~a ~~property~~higher effective tax rate. The current year effective tax rate of 31.2% is approximately 3.6 percentage points higher than the prior year primarily due to the full-~~related~~year ~~deductions~~inclusion of Alagasco, which has a higher effective tax rate than Laclede Gas.

22In connection with the acquisition of 100% of the common stock of Alagasco (Alagasco Transaction), the Company and Energen made an election under Section 338(h)(10) of the Internal Revenue Code of 1986, as amended, to treat the Alagasco Transaction as a deemed purchase and sale of assets for tax purposes. As a result of the election, goodwill was generated for tax purposes at Alagasco. For book purposes, goodwill was recorded on the Laclede Group parent entity balance sheet and not pushed down to Alagasco. Consequently, a deferred tax asset (DTA) was recorded at Alagasco related to the excess of tax deductible goodwill over book goodwill for the stand-alone entity. That initial goodwill DTA is eliminated (along with the investment in subsidiary and Alagasco’s equity) in the Laclede Group consolidated balance sheet because, at that consolidated level, there is no excess of tax deductible goodwill over book goodwill. As the tax goodwill is amortized and deducted for tax purposes, the DTA at Alagasco is reduced, and for Laclede Group, a deferred tax liability (DTL) is created. For both Alagasco and consolidated Laclede Group, the change to the goodwill DTA/DTL is reported as a component of deferred tax expense in the statements of income. Because the deferred tax expense impact is offset by an opposite current tax expense impact, there is no significant impact on the effective tax rate of the Company.

LACLEDE GAS

Summary Operating Results



Year ended September 30,	2015		2014
Operating revenues	$	1,416.6	$	1,448.2
Natural and propane gas expense	786.1		816.9
Gross receipts tax expense	73.5		75.2
Operating margin (non-GAAP)	557.0		556.1
Depreciation and amortization	82.6		78.5
Other operating expenses	289.0		311.2
Operating income (GAAP)	$	185.4	$	166.4
Net Income	$	105.3	$	90.1

Operating revenues during the twelve months ended September 30, 2015 decreased $31.6 from the same period last year. Base rate increases and ISRS charges of $10.9 and $7.1 in higher wholesale gas costs passed onto customers were more than offset by $42.2 in lower system volumes and off-system pricing and $6.2 higher optimization of assets in the prior year.

Operating margin for the twelve months ended September 30, 2015 increased $0.9 from the same period last year. Higher base rates and ISRS charges of $10.9 and other positive variations of $1.5 were mostly offset by lower system volumes and off-system pricing of $8.3 in the current year and $3.1 in higher optimization of assets in the prior year.

Other operating expenses for the twelve months ended September 30, 2015 decreased $22.2 versus the same period last year. Primary drivers of the expense decrease were a $7.6 gain on the sale of property, $9.8 of cost efficiencies and a $7.5 decrease in payroll and benefits expenses. Resulting net income for the twelve months ended September 30, 2015 increased $15.2 from the same period last year.

Temperatures experienced in the Missouri Utilities' service area during 2015 were 11.2% warmer than the same period last year and 1.5% warmer than normal. Total system therms sold and transported were 1,684.3 million for fiscal year 2015 compared with 1,828.1 million for fiscal year 2014. Total off-system therms sold and transported outside of Laclede Gas' service area were 193.5 million for fiscal year 2015 compared with 125.8 million for fiscal year 2014. This increase was due to warmer temperatures and decreased heating demand in Laclede Gas' services areas, increasing the gas supply resources

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~~2012~~available vsfor off-system sales or capacity release. ~~2011~~However, the increase in off-system volume revenue was more than offset by lower gas commodity pricing realized during 2015.

~~Utility~~ ALAGASCO

~~The~~Change ~~Utility's net income decreased by $3.9 million~~ in ~~fiscal~~Fiscal ~~year~~Year 2012 compared with fiscal year 2011. The decrease in net income was primarily due to (on a pre-tax basis) the effect of income from an April 2011 non-regulated sale of propane inventory totaling $10.0 million, lower system gas sales margins and other variations totaling $7.8 million, increases in pension and group insurance expenses totaling $5.5 million, and increases in charitable contributions totaling $1.9 million. These factors were partially offset by decreases in operation and maintenance expenses, excluding pension and group insurance expenses, totaling $11.1 million, higher Infrastructure System Replacement Surcharge (ISRS) revenues totaling $4.6 million, and higher net investment gains and other variations totaling $3.3 million.

~~Operating~~Effective ~~Revenues~~September ~~and~~2, ~~Operating~~2014, ~~Expenses~~Alagasco changed its fiscal year end from December 31 to September 30. The various periods that are covered in the discussion below are defined as follows:

~~Utility~~• "current year" means October 1, 2014 through September 30, 2015; and

~~Operating~~• ~~Revenues~~"transition -period" ~~Utility~~means ~~Operating~~January ~~Revenues for fiscal year 2012 decreased $148.5 million~~1, ~~compared~~2014 tothrough ~~fiscal~~September ~~year 2011~~30, ~~primarily attributable to the following factors:~~2014.

(Millions)
Lower system sales volumes and other variations	$	(114.5	)
Lower prices charged for off-system sales	(44.6		)
Higher off-system sales volumes	38.8
Lower wholesale gas costs passed on to Utility customers	(32.8		)
Higher ISRS revenues	4.6
Total Variation	$	(148.5	)

Summary Operating Results

Temperatures experienced in the Utility’s service area during 2012, which were the warmest on record, were 27.9% warmer than in 2011. Total system therms sold and transported to the Utility’s customers within its service territory were 718.0 million for fiscal year 2012 compared with 885.4 million for fiscal year 2011. Total off-system therms sold and transported outside of the Utility’s service area were 314.5 million for fiscal year 2012 compared with 223.0 million for fiscal year 2011.



	Year Ended September 30,		Nine Months Ended September 30,
	2015		2014
Operating revenues	$	479.2	$	417.2
Natural gas expense	171.5		184.5
Gross receipts tax expense	22.6		20.6
Operating margin (non-GAAP)	285.1		212.1
Depreciation and amortization	47.3		34.4
Other operating expenses	148.6		115.5
Operating income (GAAP)	$	89.2	$	62.2
Net Income	$	48.0	$	33.0

Operating ~~Margin~~revenues -for ~~Gas~~the ~~Utility~~twelve ~~operating~~months ~~margin~~ended ~~was~~September ~~$314.4 million for fiscal year 2012~~30, a2015 increased $662.0 ~~million~~versus ~~decrease over~~ the ~~same~~transition period ~~last~~ended ~~year~~September 30, 2014. ~~The~~Of ~~decrease~~the isincrease, ~~primarily~~$142.7 ~~due~~was attributable to ~~decreased~~the ~~sales~~current ~~margins~~year ~~reflecting~~including ~~warmer~~one ~~weather~~more ~~totaling~~quarter ~~$7.8~~of ~~million~~operating inactivity, ~~2012~~offset ~~compared~~by tolower ~~fiscal~~system ~~year~~volumes ~~2011~~and aslower ~~2012~~pricing ~~was~~in the ~~warmest~~current onyear ~~record,~~totaling ~~partially offset by increased ISRS revenues of~~ $480.~~6 million~~7.

Operating ~~Expenses~~margin -increased ~~Remaining operating expenses in fiscal year 2012 decreased~~ $373.~~8 million~~0, ~~from~~due ~~fiscal~~primarily ~~year~~to ~~2011.~~the ~~Other~~inclusion ~~operation~~of ~~and maintenance expenses decreased~~ $584.63 ~~million,~~relating ~~primarily due~~ to athe ~~higher~~extra ~~rate~~quarter of ~~overheads~~activity ~~capitalized,~~included ~~decreased~~in ~~maintenance~~the ~~charges,~~current ayear ~~lower provision for uncollectible accounts~~results, ~~and a decrease in customer accounts expenses. These factors were partially~~ offset slightly by ~~higher~~the ~~pension~~previously ~~and~~mentioned ~~group~~lower ~~insurance~~system ~~expenses.~~volumes ~~Depreciation~~ and ~~amortization expense increased $1~~pricing.5 ~~million, primarily due to additional depreciable property. Taxes, other than income taxes and gross receipts tax, increased $0.3 million, primarily due to higher payroll taxes.~~

Other operating expenses for the twelve months ended September 30, 2015 increased $33.1 versus the transition period ended September 30, 2014. $38.4 of the increase was due to the current year including one more quarter of activity than the prior year. This increase was offset slightly by $2.6 lower labor-related costs and $2.7 in net other cost reductions during the current year. Net income increased $15.0 in the current year, $19.8 due to the inclusion of an extra quarter of activity in 2015 partly offset due to the factors described above.

Temperatures in Alagasco's service area during the twelve months ended September 30, 2015 were 9.7% colder than normal. However, temperatures were 7.8% warmer than the same period a year earlier. The colder than normal temperatures still resulted in comparatively higher gas usage for cycle customers versus the prior year. Alagasco's total therms sold and transported were 865.0 million for the twelve months ended September 30, 2015, compared with 840.1 million for the same period last year.

For further information on the GSA and Rate Stabilization and Equalization (RSE) mechanisms, please see Note 1, Summary of Significant Accounting Policies, and Note 15, Regulatory Matters, in the Notes to Financial Statements.

2014 vs. 2013

LACLEDE GROUP

Consolidated

Laclede Group’s net income was $84.6 in fiscal year 2014, including net loss of $2.9 relating to Alagasco's operations for the month ended September 30, 2014, compared with $52.8 in fiscal year 2013. Basic and diluted earnings per share were $2.36 and $2.35 respectively for fiscal year 2014 compared with basic and diluted earnings per share of $2.03 and $2.02 respectively for fiscal year 2013. Net economic earnings were $100.1 (or $3.05 per share) in fiscal year 2014, compared with $65.0 (or $2.87 per share) in fiscal year 2013. GAAP earnings increased in fiscal year 2014 compared to fiscal year 2013 primarily due to improved results in Laclede Group's Gas Utility segment, which reflects the inclusion of a full year of MGE operations,

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improved earnings from Gas Marketing and the impact of colder weather in fiscal 2014, partially offset by Alagasco acquisition costs and MGE integration costs incurred during the year.

Gas Utility

Gas Utility net income and net economic earnings increased by $30.8 and $36.1, respectively, in 2014, compared with 2013. The increase to net income and net economic earnings were primarily due to higher operating margin (a non-GAAP measure discussed below) of $222.3, which reflects the inclusion of MGE operating margin of $186.5 and Alagasco operating margin of $14.8. These increases were partially offset by an increase in other operating expenses of $124.9, including MGE other operating expenses of $103.5; Alagasco other operating expenses of $14.2; an increase in depreciation and amortization expenses totaling $34.1, including MGE depreciation and amortization expenses totaling $26.0 and Alagasco depreciation and amortization of $3.9; higher interest expense totaling $12.6; and increased income tax expenses of $14.5.

Gas Marketing

Gas Marketing reported GAAP earnings totaling $12.2, an increase of $4.6 compared with the same period in 2013. Net economic earnings for fiscal year 2014 increased $1.3 from fiscal year 2013. The increases in net income and net economic earnings were primarily attributable to increases in operating margin, as discussed in the Gas Marketing section below.

Other

Other ~~Operating~~net ~~Revenues~~income and ~~Operating~~other ~~Expenses~~net economic earnings for fiscal 2014 decreased $3.6 and $2.3, respectively, compared with the fiscal 2013. The decrease in net income is primarily due to expenses attributable to the Alagasco acquisition in fiscal 2014 being higher than the expenses attributable to the MGE and NEG transaction in 2013.

~~Other~~ Operating Revenues ~~decreased~~and ~~$16.2 million in fiscal year 2012 (compared to fiscal year 2011). Other~~ Operating Expenses decreased $7.8 million in fiscal year 2012 (compared to fiscal year 2011). These year-to-year variations were primarily attributable to non-regulated sales of propane inventory in fiscal year 2011. These transactions resulted in pre-tax income of $10.0 million in fiscal year 2011. This type of transaction did not recur in fiscal year 2012.

23Reconciliations of the Company's operating margin to the most directly comparable GAAP measure are shown below.

Consolidated

Laclede Group reported operating revenues of $1,627.2 for the fiscal year ended September 30, 2014 compared with $1,017.0 for the 2013 fiscal year. Laclede Group's operating margin increased $229.4 for the twelve months ended September 30, 2014, compared to the same period in 2013 primarily due to higher Gas Utility operating margin, and growth in the operating margin reported by Gas Marketing as discussed below. Other operating expenses and depreciation and amortization increased $125.5 and $34.0, respectively, for the twelve months ended September 30, 2014 as compared to the twelve months ended September 30, 2013. The increases were primarily due to the incremental impact of eleven additional months of MGE other operating expenses and depreciation and amortization expenses in fiscal 2014 totaling $103.5 and $26.0, respectively, as well as the inclusion of one month of Alagasco operating expenses and depreciation and amortization of $14.2 and $3.9, respectively. The remaining increase in other operating expenses was due to the impact of colder weather reflected in the higher provision for uncollectible accounts, and higher maintenance and employee-related expenses. The remaining increase in depreciation and amortization was associated with capital spending in fiscal 2014.

Gas Utility

Operating Revenues – Gas Utility Operating Revenues for fiscal year 2014 increased $610.0, compared to fiscal year 2013, which was primarily attributable to the following factors:



Higher system sales volumes and other variations	$	66.3
Lower wholesale gas costs passed on to Utility customers	(9.4		)
Lower off-system sales volumes	(11.7		)
Propane utility sales	9.2
Higher gross receipts tax	3.7
New customer revenue from MGE acquisition	532.2
New customer revenue from Alagasco acquisition	19.7
Total Variation	$	610.0

Temperatures experienced in Laclede Gas' service area during 2014 were 13.3% colder than 2013 and 11.4% colder than normal. Total system therms sold and transported were 1,876.6 million for fiscal year 2014 compared with 889.7 million for fiscal year 2013. Total off-system therms sold and transported outside of Laclede Gas' service area were 125.8 million for fiscal

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~~Other~~year ~~Income~~2014 compared with 229.4 million for fiscal year 2013. This decrease was due to colder temperatures and ~~(Income~~increased ~~Deductions)~~heating demand in our services areas, reducing the gas supply resources available for off-system ~~Net~~sales or capacity release.

~~Other~~Operating ~~Income~~Margin ~~and~~– ~~(Income~~Gas ~~Deductions)~~Utility -operating ~~Net~~margin ~~increased~~was $1570.98 ~~million~~for in fiscal year ~~2012~~2014, ~~(compared~~a to$222.3 ~~fiscal~~increase ~~year~~over ~~2011)~~the ~~primarily~~same ~~due~~period tofor ~~higher~~2013. ~~net~~The ~~investment~~increase ~~gains,~~was ~~partially~~attributable ~~offset~~to bythe ~~increased~~following ~~charitable contributions.~~factors:



Operating margin from MGE	$	186.5
Operating margin from Alagasco	14.8
Cold weather impact - higher therms sold and transported	11.9
Propane utility sales	6.1
Other	3.0
Total Variation	$	222.3

The increase is primarily attributable to the acquisitions of MGE and Alagasco totaling $186.5 and $14.8, respectively. The higher system sales volume driven by the 13.3% colder weather in the Laclede Gas service area contributed to $11.9 of the increase. $6.1 of the increase was the result of propane utility sales, with the remaining $3.0 the result of all other minor variations.

Operating Expenses – Gas Utility other operating expenses in fiscal year 2014 increased $124.9 from fiscal year 2013. Of the $124.9 increase, $103.5 is attributable to the MGE acquisition and $14.2 is the result of the Alagasco acquisition. The remaining increase in other expenses was due to the impact of colder weather reflected in the higher provision for uncollectible accounts, higher maintenance costs and employee-related expenses. Excluding the acquisition impact of $29.9, depreciation and amortization expense increased $4.2 primarily due to additional depreciable property.

Gas Marketing

Operating Revenues – Gas Marketing operating revenues for the twelve months ended September 30, 2014 increased $57.2 from the twelve months ended September 30, 2013 due to higher volumes sold and higher per unit gas sales prices. Higher gas sales prices were driven by the colder weather that resulted in a constrained infrastructure creating higher volatility between differing regions.

Operating Margin – Gas Marketing operating margin was $26.0 for fiscal year 2014, an $8.3 increase compared to fiscal 2013. The increase in operating margin was primarily attributable to higher price volatility and basis differentials that stemmed from unusually cold winter. The higher weather-related margins offset lower run-rate margins versus the prior year, reflecting the expiration of two favorable gas supply contracts during 2013 and early 2014.

Other

Operating Revenue and Operating Expenses – Other operating revenue decreased $2.4 primarily due to fiscal 2013 having a one-time sale of propane inventory by Laclede Pipeline totaling $1.7. Other operating expenses decreased $0.1 primarily due to the 2014 Alagasco acquisition-related expenses discussed above being lower than the MGE acquisition expenses incurred in 2013.

Interest Charges

Interest charges ~~decreased~~during ~~$0.4 million in~~ fiscal year ~~2012~~2014 (increased $17.6 from fiscal year ~~2011)~~2013. The ~~decrease~~increase was primarily due to ~~lower~~the ~~interest~~December on2012, March 2013, August 2013 and August 2014 issuance of additional long-term debt of $25.0, ~~attributable~~$100.0, to$450.0 and $625.0, respectively, the ~~November 2010~~June ~~maturity~~2014 issuance of equity units totaling $25143.8, ~~million~~offset ~~principal~~by ~~amount~~the early bond redemption of 6$80.0, ~~1/2~~6.35% first mortgage bonds. ~~Average~~on ~~short-term~~January ~~interest~~6, ~~rates~~2014 ~~were~~and ~~0.3%~~the ~~for~~October ~~fiscal~~2012 ~~years~~maturity ~~2012~~of ~~and~~$25.0, ~~2011~~6.5% ~~Average~~first ~~short-term~~mortgage ~~borrowings~~bonds. ~~were~~The ~~$122.0~~assumption ~~million~~of ~~and~~Alagasco debt contributed $991.23 ~~million~~to ~~for~~the ~~fiscal~~increase ~~years~~in ~~2012~~interest ~~and 2011, respectively~~expense.

Average short-term interest rates were 0.5% and 0.3% for fiscal years 2014 and 2013. Average short-term borrowings were $82.3 and $34.2 for fiscal years 2014 and 2013, respectively.

Income Taxes

Income tax expense ~~decreased~~increased $414.57 ~~million~~ in fiscal year ~~2012~~2014 (from fiscal year ~~2011).~~2013 ~~This variation was~~ primarily due to ~~changes~~higher in pre-tax income, slightly higher effective tax rates, and other minor variations.

24As explained for Laclede Group above, changes to the goodwill DTA are not expected to have a significant impact on Alagasco's effective tax rate.

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CRITICAL ACCOUNTING POLICIES

Our discussion and analysis of our financial condition, results of operations, liquidity, and capital resources isare based upon our financial statements, which have been prepared in accordance with ~~accounting principles generally accepted in the United States of America (~~GAAP), which ~~require~~requires that we make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We evaluate our estimates on an ongoing basis. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. We believe the following represent the more significant items requiring the use of judgment and estimates in preparing our financial statements:

~~Accounts~~Regulatory ~~Receivable~~Accounting ~~and~~– ~~Allowance~~The Utilities account for ~~Doubtful~~their ~~Accounts~~regulated –operations ~~Trade~~in ~~accounts~~accordance ~~receivable~~with ~~are~~FASB ~~recorded~~ASC atTopic ~~the~~980, ~~amounts~~“Regulated ~~due~~Operations.” ~~from~~The ~~customers~~provisions of this accounting guidance require, ~~including~~among ~~unbilled~~other ~~amounts.~~things, ~~Estimates~~that financial statements of a rate-regulated enterprise reflect the ~~collectibility~~actions of ~~trade~~regulators, ~~accounts~~where ~~receivable~~appropriate. ~~are~~These ~~based~~actions onmay ~~historical~~result ~~trends,~~in ~~age~~the recognition of ~~receivables,~~revenues ~~economic~~and ~~conditions,~~expenses ~~credit~~in ~~risk~~time ofperiods ~~specific~~that ~~customers,~~are ~~and~~different ~~other~~than ~~factors~~non-rate-regulated enterprises. ~~Accounts~~When ~~receivable~~this occurs, costs are ~~written~~deferred ~~off~~as ~~against~~assets in the ~~allowance~~balance ~~for~~sheet ~~doubtful~~(regulatory ~~accounts~~assets) and recorded as expenses when ~~they~~those amounts are ~~deemed~~reflected in rates. Also, regulators can impose liabilities upon a regulated company for amounts previously collected from customers and for recovery of costs that are expected to be ~~uncollectible~~incurred in the future (regulatory liabilities). ~~The~~Management ~~Utility’s~~believes ~~provision~~that ~~for~~the ~~uncollectible~~current ~~accounts~~regulatory ~~includes~~environment supports the ~~amortization~~continued use of ~~previously~~these ~~deferred~~regulatory ~~uncollectible~~accounting ~~expenses,~~principles asand ~~approved~~that byall regulatory assets and regulatory liabilities are recoverable or refundable through the ~~MoPSC~~regulatory process. Management believes the following represent the more significant items recorded through the application of this accounting guidance:

~~Goodwill~~PGA -Clause ~~For~~– ~~the~~Laclede Gas' PGA clauses allows Laclede Gas and MGE ~~acquisition~~to flow through to customers, ~~goodwill~~subject ~~was~~to ~~calculated~~a asprudence ofreview by the ~~date~~MoPSC, the cost of ~~the~~purchased ~~acquisition~~gas supplies, ~~September~~including 1the costs, ~~2013~~cost reductions, ~~measured~~and asrelated carrying costs associated with the ~~excess~~Missouri Utilities' use of ~~the~~natural ~~consideration~~gas ~~transferred~~derivative ~~over~~instruments to hedge the ~~net~~purchase ~~amount~~price of ~~assets~~natural ~~acquired~~gas. ~~less~~The ~~liabilities~~difference ~~assumed.~~between ~~Goodwill~~actual ~~will~~costs beincurred ~~tested~~and ~~for~~costs ~~impairment~~recovered ~~beginning~~through inthe ~~fiscal~~application ~~year~~of ~~2014~~the onPGA anclauses ~~annual~~are ~~basis,~~recorded oras ~~more~~regulatory ~~frequently~~assets ifand ~~circumstances~~regulatory ~~surrounding~~liabilities ~~the~~that ~~goodwill~~are ~~valuation~~recovered ~~change~~or refunded in a subsequent period. The ~~goodwill~~PGA ~~impairment~~clauses ~~test~~also ~~compares~~permit the ~~fair~~application ~~value~~ of acarrying ~~reporting~~costs ~~unit,~~to all over- or ~~operating~~under-recoveries ~~segment~~of gas costs, including costs and cost reductions associated with the use of derivative instruments, and also provide for a portion of income from off-system sales and capacity release revenues to be flowed through to customers. Laclede Gas' PGA clause also authorizes it to recover costs it incurs to finance its ~~carrying~~investment ~~amount,~~in ~~including~~gas ~~goodwill~~supplies that are purchased during the storage injection season for sale during the heating season.

~~Employee~~GSA ~~Benefits~~Rider ~~and~~– ~~Postretirement~~Alagasco’s ~~Obligations~~rate –schedules ~~Pension~~for ~~and~~natural ~~postretirement~~gas ~~obligations~~distribution ~~are~~charges ~~calculated~~contain bya ~~actuarial~~GSA ~~consultants~~rider, ~~that~~established ~~utilize~~in ~~several~~1993, ~~statistical~~which ~~factors~~permits ~~and~~the ~~other~~pass-through ~~assumptions~~to ~~provided~~customers byof ~~management~~changes ~~related~~in tothe ~~future~~cost ~~events~~of gas supply. Alagasco’s tariff provides a temperature adjustment mechanism, ~~such~~also asincluded ~~discount~~in ~~rates~~the GSA, ~~returns~~that is designed to moderate the impact of departures from normal temperatures on ~~plan~~Alagasco’s ~~assets,~~earnings. ~~compensation~~The ~~increases~~temperature adjustment applies primarily to residential, small commercial and ~~mortality~~small ~~rates~~industrial customers. ~~For~~Other non-temperature weather related conditions that may affect customer usage are not included in the ~~Utility~~temperature adjustment. In prior years, ~~the~~Alagasco ~~amount~~entered ofinto ~~expense~~cash ~~recognized~~flow ~~and~~derivative commodity instruments to hedge its exposure to price fluctuations on its gas supply. Alagasco recognizes all derivatives at fair value as either assets or liabilities on the ~~amounts~~balance ~~reflected~~sheet. inAny ~~other~~realized ~~comprehensive~~gains ~~income~~or losses are ~~dependent~~passed ~~upon~~through to customers using the ~~regulatory~~mechanisms ~~treatment~~of ~~provided~~the ~~for~~GSA ~~such~~rider ~~costs,~~in accordance with Alagasco’s APSC approved tariff and are recognized as ~~discussed~~a ~~further~~regulatory ~~below~~asset or regulatory liability. ~~Certain~~All ~~liabilities~~derivative ~~related~~commodity toinstruments ~~group~~in ~~medical~~a ~~benefits~~gain ~~and~~position ~~workers’~~are ~~compensation~~valued ~~claims,~~on ~~portions~~a discounted basis incorporating an estimate of ~~which~~performance ~~are~~risk ~~self-insured~~specific ~~and/or~~to ~~contain~~each ~~“stop-~~related counterparty. Derivative commodity instruments in a loss” ~~coverage~~position ~~with~~are ~~third-party~~valued ~~insurers~~on a discounted basis incorporating an estimate of performance risk specific to ~~limit~~Alagasco. ~~exposure,~~Alagasco ~~are~~currently ~~established~~has ~~based~~no onactive ~~historical~~derivative ~~trends~~positions.

Revenue Recognition – The ~~table~~Utilities ~~below~~read ~~reflects~~meters ~~the~~and ~~sensitivity~~bill ofcustomers ~~Laclede’s~~on ~~plans~~monthly tocycles. ~~potential~~The ~~changes~~Utilities record their gas utility revenues from gas sales and transportation services on an accrual basis that includes estimated amounts for gas delivered, but not yet billed. The accruals for unbilled revenues are reversed in ~~key~~the ~~assumptions:~~subsequent accounting period when meters are actually read and customers are billed.

Pension Plan Benefits:
Actuarial Assumptions	Increase/(Decrease)		Estimated Increase/(Decrease) to Projected Benefit Obligation (Thousands)			Estimated Increase/ (Decrease) to Annual Net Pension Cost* (Thousands)
Discount Rate	0.25	%	$	(13,210	)	$	400
	(0.25	)	13,510			(440		)
Rate of Future Compensation Increase	0.25	%	5,840			350
	(0.25	)	(5,720		)	(350		)
Expected Return on Plan Assets	0.25	%	—			(930		)
	(0.25	)	—			930

Goodwill – Goodwill is measured as the excess of the acquisition-date fair value of the consideration transferred over the amount of acquisition-date identifiable assets acquired net of assumed liabilities, and adjustments are recorded during the measurement period to finalize the allocation of purchase price. Laclede Gas has recorded goodwill related to the 2013 acquisition of MGE and Laclede Group also has recorded goodwill related to the 2014 acquisition of Alagasco. Alagasco has no goodwill on its balance sheet as push down accounting was not applied. Laclede Group and Laclede Gas evaluate goodwill for impairment as of July 1st of each year, or more frequently if events and circumstances indicate that goodwill might be impaired. The goodwill impairment test compares the fair value of the determined reporting unit to its carrying amount, including goodwill. Laclede Group has one reporting unit, which is the Gas Utility segment, and Laclede Gas has one reporting

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Postretirement Benefits:
Actuarial Assumptions	Increase/(Decrease)		Estimated Increase/(Decrease) to Projected Postretirement Benefit Obligation (Thousands)			Estimated Increase/(Decrease) to Annual Net Postretirement Benefit Cost* (Thousands)
Discount Rate	0.25	%	$	(4,000	)	$	(181	)
	(0.25	)	4,080			180
Expected Return on Plan Assets	0.25	%	—			(240		)
	(0.25	)	—			240
Annual Medical Cost Trend	1.00	%	7,060			1,520
	(1.00	)	(6,580		)	(1,390		)

unit, which is the entire Laclede Gas Company. At July 1, 2015 and 2014, Laclede Group and Laclede Gas each applied a quantitative goodwill evaluation model to its reporting unit and concluded goodwill was not impaired because the fair value exceeded the carrying amount.

*Employee ~~Excludes~~Benefits ~~the~~and ~~impact~~Postretirement ofObligations ~~regulatory~~– ~~deferral~~Pension ~~mechanism.~~and ~~See~~postretirement ~~Note~~obligations 3are calculated by actuarial consultants that utilize several statistical factors and other assumptions provided by management related to future events, ~~Pension~~such ~~Plans~~as discount rates, returns on plan assets, compensation increases, and ~~Other~~mortality ~~Postretirement~~rates. ~~Benefits~~For the Utilities, the amount of expense recognized and the ~~Notes~~amounts toreflected ~~Financial~~in ~~Statements~~other ~~for~~comprehensive ~~information~~income ~~regarding~~are dependent upon the regulatory treatment ofprovided ~~these~~for such costs, as discussed further below. Certain liabilities related to group medical benefits and workers’ compensation claims, portions of which are self-insured and/or contain “stop-loss” coverage with third-party insurers to limit exposure, are established based on historical trends.

~~Regulated Operations –~~ The ~~Utility~~amount ~~accounts~~of ~~for~~net ~~its~~periodic ~~regulated~~pension ~~operations~~and inother ~~accordance~~postretirement ~~with~~benefit ~~Financial~~cost ~~Accounting~~recognized ~~Standards~~in ~~Board~~the ~~(FASB)~~financial ~~Accounting~~statements ~~Standards~~related ~~Codification~~to ~~(ASC)~~the ~~Topic~~Utilities' ~~980,~~qualified ~~“Regulated~~pension ~~Operations.”~~plans ~~This~~and ~~Topic~~other ~~sets~~postretirement ~~forth~~benefit ~~the~~plans ~~application~~is ofbased ~~GAAP~~upon ~~for~~allowances, ~~those~~as ~~companies~~approved ~~whose~~by ~~rates~~the ~~are~~MoPSC ~~established~~(for byLaclede orGas) ~~are~~and ~~subject~~as toapproved ~~approval~~ by anthe ~~independent~~APSC ~~third-party~~(for ~~regulator~~Alagasco). The ~~provisions~~allowances ofhave ~~this~~been ~~accounting~~established ~~guidance~~in ~~require,~~the ~~among~~rate-making ~~other~~process ~~things,~~for ~~that financial statements of a regulated enterprise reflect~~ the ~~actions~~recovery of ~~regulators,~~these ~~where~~costs ~~appropriate~~from customers. ~~These~~The ~~actions~~differences ~~may~~between ~~result~~these inamounts ~~the~~and ~~recognition~~actual ofpension ~~revenues~~ and ~~expenses~~other inpostretirement ~~time~~benefit ~~periods~~costs ~~that~~incurred ~~are~~for ~~different~~financial ~~than~~reporting ~~non-regulated~~purposes ~~enterprises. When this occurs, costs~~ are deferred as regulatory assets inor ~~the balance sheet (~~regulatory ~~assets)~~liabilities. ~~and~~GAAP ~~recorded~~also asrequires ~~expenses~~that ~~when~~changes ~~those~~that ~~amounts~~affect ~~are~~the ~~reflected~~funded instatus ~~rates.~~of ~~Also,~~pension ~~regulators~~and ~~can~~other ~~impose~~postretirement ~~liabilities~~benefit ~~upon~~plans, abut ~~regulated~~that ~~company~~are ~~for~~not ~~amounts~~yet ~~previously~~required ~~collected~~to ~~from~~be ~~customers~~recognized ~~and~~as ~~for~~components ~~recovery~~ of ~~costs~~pension ~~that~~and ~~are~~other ~~expected~~postretirement tobenefit cost, be ~~incurred~~reflected in ~~the~~other ~~future~~comprehensive ~~(regulatory liabilities)~~income. ~~Management~~For ~~believes that~~ the ~~current~~Utilities' ~~regulatory~~qualified ~~environment~~pension ~~supports~~plans ~~the~~and ~~continued~~other ~~use~~postretirement ofbenefit ~~these~~plans, ~~regulatory~~amounts ~~accounting~~that ~~principles~~would ~~and~~otherwise ~~that~~be ~~all~~reflected ~~regulatory~~in ~~assets~~other ~~and~~comprehensive ~~regulatory~~income ~~liabilities~~ are ~~recoverable~~deferred orwith ~~refundable~~entries ~~through~~to ~~the~~ regulatory ~~process.~~assets ~~Management~~or ~~believes~~regulatory ~~the~~liabilities. ~~following represent the more significant items recorded through the application of this accounting guidance:~~

~~PGA~~The ~~Clause~~tables below reflect the sensitivity of Laclede Group's plans to potential changes in key assumptions:

The Utility’s PGA Clause allows the Utility and MGE to flow through to customers, subject to prudence review by the MoPSC, the cost of purchased gas supplies, including the costs, cost reductions, and related carrying costs associated with the Utility’s use of natural gas derivative instruments to hedge the purchase price of natural gas. The difference between actual costs incurred and costs recovered through the application of the PGA Clauses are recorded as regulatory assets and regulatory liabilities that are recovered or refunded in a subsequent period. The PGA Clauses also permit the application of carrying costs to all over- or under-recoveries of gas costs, including costs and cost reductions associated with the use of derivative instruments, and also provides for a portion of income from off-system sales and capacity release revenues to be flowed through to customers. Laclede Gas' PGA Clause also authorizes the Utility to recover costs it incurs to finance its investment in gas supplies that are purchased during the storage injection season for sale during the heating season.



Pension Plan Benefits:
Actuarial Assumptions	Increase/ (Decrease)		Estimated Increase/(Decrease) to Projected Benefit Obligation			Estimated Increase/ (Decrease) to Annual Net Pension Cost*
Discount Rate	0.25	%	$	(15.9	)	$	0.3
	(0.25	)%	16.5			(0.4		)
Rate of Future Compensation Increase	0.25	%	6.3			0.7
	(0.25	)%	(6.3		)	(0.8		)
Expected Return on Plan Assets	0.25	%	—			(1.2		)
	(0.25	)%	—			1.2

Taxes



Postretirement Benefits:
Actuarial Assumptions	Increase/ (Decrease)		Estimated Increase/(Decrease) to Projected Postretirement Benefit Obligation			Estimated Increase/(Decrease) to Annual Net Postretirement Benefit Cost*
Discount Rate	0.25	%	$	(5.1	)	$	—
	(0.25	)%	5.3			—
Expected Return on Plan Assets	0.25	%	—			(0.5		)
	(0.25	)%	—			0.5
Annual Medical Cost Trend	1.00	%	9.2			1.6
	(1.00	)%	(8.5		)	(1.5		)

~~The~~* ~~Utility~~Excludes ~~records deferred tax liabilities and assets measured by enacted tax rates for~~ the ~~net~~impact ~~tax effect~~ of ~~all~~regulatory ~~temporary~~deferral ~~differences between the carrying amounts of assets and liabilities for financial reporting purposes, and the amounts used for income tax purposes~~mechanism. ~~Changes~~See inNote ~~enacted tax rates~~13, ifPension ~~any,~~Plans and ~~certain~~Other ~~property~~Postretirement ~~basis differences will be reflected by entries to regulatory asset or regulatory liability accounts for regulated activities. Pursuant to the direction of the MoPSC~~Benefits, ~~the Utility's provision for income tax expense reflects the regulatory method~~ of ~~excess asset depreciation followed for financial reporting purposes. The Utility's provision for income tax expense also records~~ the ~~income~~Notes ~~tax effect associated with the difference between overheads capitalized~~ to ~~construction~~Financial ~~for~~Statements ~~financial reporting purposes and those recognized~~ for ~~tax~~information ~~purposes~~regarding ~~without recording an offsetting deferred income tax expense. These two methods are consistent with~~ the regulatory treatment ~~prescribed~~of bythese ~~the MoPSC~~costs.

26Asset Retirement Obligations – Asset retirement obligations are recorded in accordance with GAAP using various assumptions related to the timing, method of settlement, inflation, and profit margins that third parties would demand to settle the future obligations. These assumptions require the use of judgment and estimates and may change in future periods as circumstances dictate. As authorized by the MoPSC, Laclede Gas accrues future removal costs associated with its property, plant and equipment through its depreciation rates, even if a legal obligation does not exist as defined by GAAP. Similarly, Alagasco accrues removal costs on certain gas distribution assets over the useful lives of its property, plant and equipment through depreciation expense in accordance with rates approved by the APSC.

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~~Asset~~As ~~Retirement~~part ~~Obligations~~of the MGE and Alagasco acquisitions, Laclede Gas and Laclede Group had estimated the asset retirement obligation of their long-lived assets as of their respective acquisition dates. Subsequent valuations were finalized for the MGE acquisition as of September 30, 2014 and for the Alagasco acquisition as of September 30, 2015.

Asset retirement obligations are recorded in accordance with GAAP using various assumptions related to the timing, method of settlement, inflation, and profit margins that third parties would demand to settle the future obligations. These assumptions require the use of judgment and estimates and may change in future periods as circumstances dictate. As authorized by the MoPSC, the Utility accrues future removal costs associated with its property, plant and equipment through its depreciation rates, even if a legal obligation does not exist as defined by GAAP. The difference between removal costs recognized in depreciation rates and the accretion expense and depreciation expense recognizable pursuant to GAAP is a timing difference between the recovery of these costs in rates and their recognition for financial reporting purposes. Accordingly, these differences are deferred as regulatory liabilities.

Defined Pension Benefit and Other Postretirement Benefits

The amount of net periodic pension and other postretirement benefit cost recognized in the financial statements related to the Utility’s qualified pension plans and other postretirement benefit plans is based upon allowances, as approved by the MoPSC, which have been established in the rate-making process for the recovery of these costs from customers. The differences between these amounts and actual pension and other postretirement benefit costs incurred for financial reporting purposes are deferred as regulatory assets or regulatory liabilities. GAAP also requires that changes that affect the funded status of pension and other postretirement benefit plans, but that are not yet required to be recognized as components of pension and other postretirement benefit cost, be reflected in other comprehensive income. For the Utility’s qualified pension plans and other postretirement benefit plans, amounts that would otherwise be reflected in other comprehensive income are deferred with entries to regulatory assets or regulatory liabilities.

For further discussion of significant accounting policies, see Note 1, Summary of Significant Accounting Policies, of the Notes to Financial Statements.

REGULATORY AND OTHER MATTERS

The MoPSC Staff previously proposed disallowances related to the Utility's recovery of its purchased gas costs totaling $6.0 million pertaining to the Utility's purchase of gas from a marketing affiliate, LER, applicable to fiscal years 2005 through 2007. The MoPSC Staff also proposed a number of non-monetary recommendations, based on its review of gas costs for fiscal years 2008 through 2011. In a related matter, on October 6, 2010, the MoPSC Staff filed a complaint against the Utility alleging that the Utility's affiliate transactions and its Cost Allocation Manual (CAM) violated the MoPSC's affiliate transaction rules. The Utility responded with a counterclaim that the MoPSC Staff had failed to adhere to the affiliate transaction rules and the Utility's CAM. On July 16, 2013, the Utility, the MoPSC Staff and the Office of the Public Counsel requested MoPSC approval of a unanimous stipulation and agreement resolving the affiliate transaction matters for fiscal years 2005 through 2011, resolving the October 6, 2010 complaint, resolving the Utility's counterclaim, presenting a revised CAM for MoPSC approval, and establishing standards of conduct for gas purchases and sales. While the PSC Staff's disallowances were withdrawn as part of the stipulation, Laclede Gas agreed to a minor adjustment to the off-system sales and capacity release sharing mechanism. For a three-year period ending September 3, 2016, Laclede Gas' share of the first $2 million in net margin is reduced from 15% to 0%. None of the other sharing percentages are affected, and beginning October 1, 2016, Laclede's sharing percentage of the first $2 million in net margins returns to 15%. The stipulation and agreement was approved by the MoPSC in an order issued on August 14, 2013.

On ~~July~~December 719, ~~2010~~2014, the MoPSC Staff ~~filed~~proposed a ~~complaint~~contingent ~~against~~disallowance ~~the Utility alleging that, by stating that it was not in possession~~ of ~~proprietary~~approximately ~~LER documents, the Utility violated the MoPSC Order authorizing the holding company structure (2001 Order)~~$1.0 ~~The~~related ~~Utility counterclaimed stating the Staff failed~~ to ~~adhere~~Laclede ~~to pricing provisions of the MoPSC~~Gas's ~~affiliate~~recovery transaction rules and The Utility's Cost Allocation Manual. By orders dated November 3, 2010 and February 4, 2011, respectively, the MoPSC dismissed Laclede's counterclaim and granted summary judgment to Staff, finding that the Utility violated the terms of ~~the 2001 Order and authorizing~~ its ~~General~~purchased ~~Counsel~~gas tocosts ~~seek penalties~~ in ~~court~~fiscal ~~against the Utility~~2013. On May 19, 2011, the MoPSC's General Counsel filed a petition seeking penalties against the Utility for violation of the 2001 Order. The MoPSC and the Utility agreed to hold the penalty case in abeyance pending the outcome of Laclede's ~~appeal~~Gas ofopposed the ~~November~~disallowance ~~3, 2010~~ and ~~February~~reached 4,an ~~2011~~agreement ~~orders.~~with ~~These Orders were reversed by~~ the ~~Cole~~MoPSC ~~County~~Staff ~~Circuit~~under ~~Court,~~which ~~but later upheld by~~ the ~~Western~~proposed ~~District~~disallowance ~~Court~~was ~~of Appeals~~withdrawn. OnThe March 19, 2013, the Missouri Supreme Court declined the Utility's request to review the opinion of the Western District Court of Appeals. As a result, the Utility produced certain LER documentation that had been requested by the MoPSC ~~Staff~~approved ~~and,~~this ~~pursuant to~~ agreement ~~between~~effective ~~the MoPSC and Laclede Gas~~August 29, ~~the MoPSC's May 2011 penalty case was dismissed~~2015.

27On April 17, 2015, Laclede Gas filed to increase its Infrastructure System Replacement Surcharge (ISRS) revenues by $5.5 in its Laclede Gas' eastern Missouri service territory and by $2.9 in its MGE service territory, to recover the cost of gas safety replacement investments and public improvement projects over six months from September 2014 through February 2015. Effective May 22, 2015, the MoPSC approved an increase to the ISRS tariffs in the amounts of $5.4 for Laclede Gas' eastern Missouri service territory and $2.8 for MGE's service territory.

On August 3, 2015, Laclede Gas filed applications to increase its ISRS revenues by $4.3 in its Laclede Gas eastern Missouri service territory and by $1.8 in its MGE service territory, to recover the cost of replacement investments related to gas safety and public improvement projects over six months from March through August 2015. On November 12, 2015, the MoPSC approved an incremental ISRS amount of $4.4 for Laclede Gas' eastern Missouri service territory and $1.9 for MGE, effective December 1, 2015, bringing total annualized ISRS revenue to $19.6 for Laclede Gas' eastern Missouri service territory and $6.7 for MGE's service territory.

Alagasco

On April 14, 2014, Laclede Group, along with Energen and Alagasco, filed a joint application with the APSC for approval to acquire from Energen 100% of the common stock of Alagasco. On July 22, 2014 the APSC unanimously voted to approve the Alagasco Transaction and subsequently issued a written order reflecting their decision effective July 24, 2014. This sale closed August 31, 2014.

Alagasco is subject to regulation by the APSC which established the Rate Stabilization and Equalization (RSE) rate-setting process in 1983. Alagasco’s current RSE order has a term extending beyond September 30, 2018, unless the APSC enters an order to the contrary in a manner consistent with law. In the event of unforeseen circumstances, whether physical or economic, of the nature of force majeure and including a change in control, the APSC and Alagasco will consult in good faith with respect to modifications, if any. Effective January 1, 2014, Alagasco’s allowed range of return on average common equity is 10.5% to 10.95% with an adjusting point of 10.8%. The previous allowed range of return on average common equity was 13.15% to 13.65% through December 31, 2013. Alagasco is eligible to receive a performance-based adjustment of 5 basis points to the return on equity adjusting point, based on meeting certain customer satisfaction criteria. Under RSE, the APSC conducts quarterly reviews to determine whether Alagasco’s return on average common equity at the end of the rate year will be within the allowed range of return. Reductions in rates can be made quarterly to bring the projected return within the allowed range; increases, however, are allowed only once each rate year, effective December 1, and cannot exceed 4% of prior-year revenues.

The inflation-based Cost Control Mechanism (CCM), established by the APSC, allows for annual increases to operations and maintenance (O&M) expense. The CCM range is Alagasco’s 2007 actual rate year O&M expense (Base Year) inflation-adjusted using the June Consumer Price Index For All Urban Consumers each rate year plus or minus 1.75% (Index Range). If rate year O&M expense falls within the Index Range, no adjustment is required. If rate year O&M expense exceeds the Index Range, three-quarters of the difference is returned to customers through future rate adjustments. To the extent that rate year O&M is less than the Index Range, Alagasco benefits by one-half of the difference through future rate adjustments. Certain items that fluctuate based on situations demonstrated to be beyond Alagasco’s control may be excluded from the CCM calculation. The benefit for fiscal 2015 was $4.9, and $2.4 for 2014.

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On ~~December~~June 2128, ~~2012~~2010, the ~~Utility~~APSC ~~filed~~approved ~~tariff~~a ~~sheets~~reduction in depreciation rates, effective June 1, 2010, and a ~~new~~regulatory ~~general~~liability set up for Alagasco, with the revised prospective composite depreciation rate ~~case~~approximating ~~proceeding~~3.1%. ~~that~~Refunds ~~were~~from ~~designed~~such negative salvage liability will be passed back to ~~increase~~eligible ~~total~~customers ~~revenues~~on bya ~~$58.4~~declining ~~million,~~basis ~~less~~through lower tariff rates through rate year 2019 pursuant to the ~~current~~terms ~~annualized~~of ~~ISRS~~this ~~revenues~~Negative ~~that~~Salvage ~~were~~Rebalancing ~~already~~(NSR) ~~being~~rider. ~~recovered~~The ~~from~~total amount refundable to customers. Onis ~~June~~subject ~~26,~~to ~~2013,~~adjustments over the ~~MoPSC~~remaining period for charges made to the Enhanced Stability Reserve (ESR) and other APSC-approved charges. The refunds are due to a ~~Unanimous~~re-estimation ~~Stipulation~~of ~~and~~future ~~Agreement~~removal incosts ~~which~~provided for through the ~~Utility~~prior ~~will~~depreciation ~~incorporate~~rates. ~~its~~The ~~then~~re-estimation ~~current~~was ~~annualized~~primarily ~~ISRS~~the ~~revenues~~result of ~~$14.8~~Alagasco’s ~~million~~actual ~~into~~removal ~~its~~cost ~~base rates~~experience, ~~effective~~combined ~~September~~with 1,technology ~~2013~~improvements and Alagasco’s system efficiency improvements. AtFor ~~that~~fiscal ~~time~~2015, ~~the~~Alagasco ~~ISRS~~refunded ~~charge~~$13.1 ~~was~~to ~~reset~~customers. toFor ~~zero~~fiscal 2016, ~~and~~$10.8 of the ~~Utility~~remaining customer refund of $27.0 will be ~~permitted~~returned to ~~make~~customers. ~~future~~This ~~ISRS~~order ~~filings~~also ~~for~~required ~~any~~a ~~qualifying~~comprehensive ~~expenditures~~depreciation ~~incurred~~study ~~after~~to ~~January~~occur ~~31,~~every ~~2013~~5 years. This was completed and provided to the APSC in a timely manner in fiscal 2015.

OnThe ~~January~~APSC ~~14,~~approved ~~2013,~~an ~~the~~Enhanced ~~Utility~~Stability ~~filed~~Reserve an(ESR) ~~application~~in ~~with~~1998, ~~the~~which ~~MoPSC~~was ~~for~~subsequently ~~approval~~modified toand ~~acquire~~expanded in 2010. As currently approved, the ~~assets~~ESR ofprovides ~~MGE~~deferred ~~from~~treatment ~~Southern~~and ~~Union~~recovery ~~Company~~for the following: (~~SUG~~1). Onextraordinary ~~July~~O&M 2,expenses ~~2013,~~related ~~the~~to ~~Utility~~environmental ~~and~~response ~~other~~costs; ~~parties~~(2) extraordinary O&M expenses related to ~~the~~self-insurance ~~proceeding~~costs ~~filed~~that aexceed ~~Unanimous~~$1 ~~Stipulation~~million ~~and~~per ~~Agreement~~occurrence; (~~Agreement~~3) ~~with~~extraordinary ~~the~~O&M ~~MoPSC~~expenses, ~~resolving~~other ~~all~~than ~~matters~~environmental inresponse ~~the~~costs ~~case,~~and ~~which~~self-insurance ~~was~~costs, ~~approved~~resulting byfrom ~~the~~a ~~Commission~~single onforce ~~July~~majeure ~~17,~~event ~~2013.~~or ~~The~~multiple ~~Agreement~~force ~~authorizes~~majeure ~~the~~events ~~Utility~~greater tothan ~~acquire~~$0.3 ~~MGE~~ and ~~obtain~~$0.4, ~~the necessary financing~~respectively, ~~subject~~during toa ~~various~~rate ~~conditions~~year; ~~set~~and ~~forth~~(4) innegative ~~the~~individual ~~Agreement.~~large ~~Under~~commercial ~~the~~and ~~Agreement,~~industrial ~~the~~customer ~~Utility~~budget ~~would~~revenue ~~generally~~variances bethat ~~precluded~~exceed ~~from~~$0.4 ~~filing~~during a ~~general~~ rate ~~case~~year. ~~for~~Charges ~~either~~to ~~Laclede~~the ~~Gas~~ESR orare ~~MGE~~subject ~~prior~~ to ~~October~~certain 1,limitations ~~2015,~~which ~~except~~may ~~that~~disallow adeferred ~~general~~treatment ~~rate~~and ~~case~~which ~~for~~prescribe the ~~MGE~~timing ~~service~~of ~~territory~~recovery. ~~could~~Funding beto ~~filed~~the noESR ~~later~~is ~~than~~provided ~~September~~as ~~18,~~a ~~2013.~~reduction ~~ISRS~~to ~~filings and~~ the ~~collection~~refundable ofnegative ~~gas~~salvage ~~costs~~balance ~~under~~over ~~Laclede~~its ~~Gas'~~nine ~~PGA~~year ~~Clause~~term ~~would~~beginning ~~not~~December be1, ~~impacted~~2010. ~~The~~Subsequent ~~Agreement~~to ~~also~~the ~~allows~~nine-year ~~for~~period ~~the~~and ~~deferral~~subject ~~for~~to ~~future~~APSC ~~recovery~~authorization, ofAlagasco aexpects ~~portion~~to ofbe ~~one-time~~able ~~costs~~to ~~incurred~~recover ~~associated~~underfunded ~~with~~ESR ~~the~~balances ~~integration~~over ofa ~~MGE.~~five-year ~~The~~amortization ~~Agreement~~period ~~sets~~with ~~forth~~an aannual ~~number~~limitation of ~~other~~$0.7. ~~conditions~~Amounts ~~including~~in ~~those~~excess ~~related~~of tothis ~~credit~~limitation ~~ratings,~~are ~~gas~~deferred ~~supply,~~for ~~service~~recovery ~~quality,~~in ~~gas~~future ~~safety, and reporting requirements~~years.

On June 29, 2010, the Office of Federal Contract Compliance Programs (OFCCP) issued a Notice of Violations to the Utility alleging lapses in certain employment selection procedures during a two-year period ending in February 2006. On July 2, 2013, the Utility executed a Conciliation Agreement with the OFCCP in which the Utility did not admit to liability, but agreed to provide make whole relief of back pay and interest to the impacted individuals from 2004-2006. The Utility's agreement to provide make whole relief will not have a material effect on the financial position and results of operations, or cash flows of the Utility.

On September 16, 2013, MGE filed tariff sheets in a new general rate case proceeding that were designed to increase the Utility's total revenues by $23.4 million, less the current annualized ISRS revenues of $6.3 million that were already being recovered from customers. Consistent with its normal practice, the MoPSC suspended implementation of the MGE proposed rates on September 17, 2013 and set the case for hearing in April 2014.

ACCOUNTING PRONOUNCEMENTS

The ~~Utility~~Company, ~~has~~Laclede Gas and Alagasco have evaluated or isare in the process of evaluating the impact that recently issued accounting standards will have on ~~the~~their ~~Utility’s~~ financial position or results of operations upon adoption. For disclosures related to the adoption of new accounting standards, see the New Accounting Standards section of Note 1 of the Notes to Financial Statements.

The Utility continues to monitor the developments of the Financial Accounting Standards Board (FASB) relative to possible changes in accounting standards. Currently, the FASB is considering various changes to U. S. GAAP, some of which may be significant, as part of a joint effort with the International Accounting Standards Board to converge accounting standards. Future developments, depending on the outcome, have the potential to impact the Utility’s financial condition and results of operations.

INFLATION

The accompanying financial statements reflect the historical costs of events and transactions, regardless of the purchasing power of the dollar at the time. Due to the capital-intensive nature of the ~~business~~businesses of the Company, Laclede Gas and Alagasco, the most significant impact of inflation is on the depreciation of utility plant. Rate regulation, to which the ~~Utility~~Utilities isare subject, allows recovery through its rates of only the historical cost of utility plant as depreciation. The ~~Utility~~Utilities ~~expects~~expect to incur significant capital expenditures ~~during~~in ~~the~~future ~~next few~~ years, primarily related to ~~a significant software replacement project to enhance technology, customer service, and business processes and~~ the planned increased replacements of distribution plant. The Company, ~~believes~~Laclede Gas and Alagasco believe that any higher costs experienced upon replacement of existing facilities will be recovered through the normal regulatory process.

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FINANCIAL CONDITION

CASH FLOWS

~~The~~Laclede Utility's short-term borrowing requirements typically peak during colder months when the Utility borrows money to cover the lag between when it purchases its natural gas and when its customers pay for that gas. Changes in the wholesale cost of natural gas, including cash payments for margin deposits associated with the Utility’s use of natural gas derivative instruments, variations in the timing of collections of gas cost under the Utility’s PGA Clause, the seasonality of accounts receivable balances, and the utilization of storage gas inventories cause short-term cash requirements to vary during the year and from year to year, and may cause significant variations in the Utility’s cash provided by or used in operating activities.Group

~~Net~~The ~~cash~~Company’s ~~provided~~short-term byborrowing ~~operating~~requirements ~~activities~~typically ~~for~~peak ~~fiscal~~during ~~years~~colder ~~2013,~~months ~~2012~~when ~~and~~the ~~2011~~Utilities ~~was~~borrow ~~$125.5~~money ~~million,~~to ~~$119.0~~cover ~~million~~the ~~and~~lag ~~$157.0~~between ~~million,~~when ~~respectively.~~it ~~The~~purchases ~~increase~~its innatural ~~net~~gas ~~cash~~and ~~provided~~when byits ~~operating~~customers ~~activities~~pay infor ~~fiscal~~that ~~year~~gas. ~~2013~~Changes asin ~~compared to fiscal year 2012 is primarily attributable to variations associated with~~ the ~~timing~~wholesale ofcost ~~collections~~ of natural gas ~~cost under the Utility's PGA Clause,~~ (including ~~the net effect of increased~~ cash payments for margin deposits associated with ~~the~~Laclede ~~Utility’s~~Gas' use of natural gas derivative instruments.), ~~The~~variations ~~variation also reflects decreased cash payments for the funding of pension plans and for the payment of income taxes. These benefits were partially offset by changes~~ in delayed and advanced customer billings. The decrease in net cash provided by operating activities in fiscal year 2012 as compared to fiscal year 2011 is primarily attributable to variations associated with the timing of collections of gas cost under ~~the~~Laclede ~~Utility’s~~Gas' PGA ~~Clause,~~clause ~~including~~and ~~the~~Alagasco's ~~net~~GSA ~~effect~~rider, ~~of increased cash payments for margin deposits associated with~~ the ~~Utility’s~~seasonality ~~use~~ of ~~natural~~accounts ~~gas~~receivable ~~derivative~~balances, ~~instruments~~ and ~~changes in~~ the ~~cost~~utilization of ~~natural~~storage gas ~~storage~~ inventories. ~~The~~cause ~~decrease~~short-term iscash ~~also~~requirements ~~attributable~~ to vary during the ~~effect~~year ofand afrom ~~non-regulated~~year ~~sale~~to ofyear, ~~propane~~and ~~inventory~~may incause ~~fiscal~~significant ~~year~~variations ~~2011~~in ~~and~~the ~~increased~~Company’s cash ~~payments~~provided ~~for~~by ~~the~~or ~~funding~~used ofin ~~pension~~operating ~~plans this year~~activities.

Net cash used in investing activities for fiscal years 2013, 2012, and 2011 was $1,104.8 million, $103.1 million, and $66.6 million, respectively. The variations primarily reflect additional capital expenditures for distribution plant and information technology investments and the acquisition of MGE in 2013.



Cash Flow Summary	2015		2014		2013
Net cash provided by operating activities	322.4		122.6		163.9
Net cash used in investing activities	(298.7	)	(1,437.6	)	(1,108.3	)
Net cash (used in) provided by financing activities	(26.0	)	1,278.1		969.9

Net cash provided by (used in) financing activities for fiscal years 2013, 2012 and 2011 was $1,000.9 million, $(14.4) million, and $(90.5) million, respectively. The increase in net cash provided by financing activities in fiscal year 2013 from fiscal year 2012 primarily reflects the issuance of first mortgage bonds and the issuance of common stock to Laclede Group. The decrease in net cash used in financing activities in fiscal year 2012 from fiscal year 2011 primarily reflects a net decrease in the repayment of short-term borrowings in 2012 and the effect of the maturity of long-term debt in 2011. 40

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Net cash provided by operating activities for fiscal years 2015, 2014 and 2013 was $322.4, $122.6 and $163.9, respectively. The increase from 2014 to 2015 was primarily due to the incremental change for Alagasco reflecting the inclusion of a full year in 2015, which provided $96.3 of cash from operating activities. The remaining increase was driven by the timing of collections of gas costs under the PGA and changes in natural gas inventory values. The decrease in net cash provided by operating activities in 2014 as compared to 2013 is primarily attributable to delayed customer billings increases reflecting the inclusion of MGE's operations and the timing of collections of gas cost under Laclede Gas' PGA clauses, accelerated build of natural gas stored underground, the cash paid on interest rate swaps and other working capital changes. These uses of cash were only partly offset by higher net income and higher depreciation, amortization and accretion reflecting the inclusion of MGE and colder weather.

Net cash used in investing activities for fiscal years 2015, 2014 and 2013 was $298.7, $1,437.6 and $1,108.3, respectively. The increased use of cash, excluding $1,305.2 for the 2014 acquisition of Alagasco, was driven by higher capital expenditures of approximately $118.8, which includes the incremental increase of $80.2 for Alagasco and an increase of $35.6 at Laclede Gas. Additionally, the current year included a payment for the final reconciliation associated with the Alagasco acquisition, whereas the prior year included the cash receipts associated with the MGE acquisition and the sale of New England Gas Company (NEG) to Algonquin Power & Utility Corp. (APUC). The increase in net cash used in 2014 as compared to 2013 is attributable to $1,305.2 for the acquisition of Alagasco, offset partially by cash receipts for the final reconciliation amount for the MGE acquisition and for the sale of NEG to APUC. Net cash used in 2013 includes $975.0 for the acquisition of MGE. The remaining net cash used in investing activities in 2014 primarily reflected the increase in capital expenditures related to distribution plant and information technology investments. Laclede Group estimates its capital expenditures for fiscal 2016 will be approximately $315, comprised of $220 for Laclede Gas, $90 for Alagasco, and $5 for non-regulated businesses.

Net cash used in financing activities for fiscal year 2015 was $26.0, while the net cash provided by financing activities for 2014 and 2013 was $1,278.1 and $969.9, respectively. Excluding the proceeds from the prior year common stock issuance of 10.350 million shares of $457.1 and the prior year issuance of long-term debt of $768.8 for the acquisition of Alagasco, the difference between net cash used in 2015 and net cash provided in 2014 was $78.2. This change primarily reflects the decrease in short-term borrowing and the increase in dividends paid, partially offset by the lower repayment of long term-debt. The increase in net cash provided by financing activities in fiscal year 2014 from fiscal year 2013 primarily reflects the issuance of common stock, equity units, and long-term debt related to the Alagasco acquisition in 2014, exceeding the common stock and long-term debt issuance associated with the MGE acquisition in 2013.

LIQUIDITY AND CAPITAL RESOURCES

Cash and Cash Equivalents

Laclede Group had no temporary cash investments as of September 30, 2015.

Laclede Gas had no temporary cash investments as of September 30, 2015, but the balance of its short-term investments ranged between $0 and $10.0 during fiscal 2015 and ranged between $0.0 and $983.5 during fiscal year 2014.

Alagasco had no short-term investments as of September 30, 2015. Its bank deposits were used to support working capital needs of the business.

Short-term Debt

The ~~Utility’s~~Utilities' short-term ~~borrowing~~borrowings requirements typically peak during the colder months, while the Company's needs are less seasonal. These short-term cash requirements can be met through the sale of commercial paper supported by lines of credit with banks or through direct use of the lines of credit. OnAt September 3 30, ~~2013~~2015, ~~the~~Laclede ~~Utility~~Gas ~~entered~~had ~~into~~ a ~~new~~ syndicated line of credit ~~for~~in place of $450.0 ~~million~~from ~~with~~ nine banks~~, which will expire in September 2018~~. ~~The~~ ~~previous syndicated line of credit was terminated at that time.~~ The largest portion provided by a single bank under the ~~current~~ line is 15.6%. The ~~Utility's~~Laclede Gas line of credit includes a covenant limiting total debt, including short-term debt, to no more than 70% of total capitalization. As defined in the line of credit, total debt was 5150% of total capitalization on September 30, ~~2013~~2015.

29At September 30, 2015, Alagasco had a $150.0 syndicated line of credit with twelve banks. The largest portion provided by a single bank is 10%. The line of credit, which matures on September 2, 2019, has a covenant limiting total debt to 70% of Alagasco’s total capitalization. As defined in the line of credit, this ratio stood at 24% on September 30, 2015. Borrowing under Alagasco's line during fiscal year 2015 ranged from $0.0 to $69.5, with a balance at September 30, 2015 of $31.0. Borrowings under Alagasco's line for the month of September of fiscal 2014 ranged from $9.0 to $16.0, with a balance at September 30, 2014 of $16.0.

At September 30, 2015, the Laclede Group parent company had a $150.0 syndicated line of credit from nine banks, with the largest portion provided by a single bank being 15.6%. The line of credit has a covenant limiting the total debt of the consolidated Laclede Group to no more than 70% of the Company’s total capitalization. As defined in the line of credit, this ratio stood at 58% on September 30, 2015. Laclede Group’s line may be used to provide for the funding needs of various

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~~Due~~subsidiaries. toBorrowings ~~lower~~under ~~yields available to~~ Laclede Group’s online ~~its~~during ~~short-term~~fiscal ~~investments,~~year ~~Laclede~~2015 ~~Group~~ranged ~~elected~~from $32.5 to ~~provide~~$80.0, awith ~~portion of~~ the ~~Utility's~~balance ~~short-term~~at ~~funding~~September 30, ~~through~~2015 ~~intercompany~~at ~~lending~~$74.0. ~~during~~Borrowings ~~fiscal~~under ~~years~~this ~~2013~~line ~~and~~of ~~2012.~~credit ~~Information~~during ~~about~~fiscal ~~the~~year ~~Utility’s~~2014 ~~short-term~~ranged ~~borrowings~~from ~~during~~$0.0 ~~the~~to ~~12 months ended September 30~~$40.0, ~~2013~~ ~~and~~with ~~2012~~the ~~and~~balance asat of September 30, ~~2013~~ ~~and~~2014 ~~2012,~~of ~~is presented below:~~$32.5.

	Commercial PaperBorrowings	Borrowings fromLaclede Group	TotalShort-TermBorrowings
Twelve Months Ended September 30, 2013
Weighted average borrowings outstanding	$34.2 million	$29.2 million	$63.4 million
Weighted average interest rate	0.3%	0.3%	0.3%
Range of borrowings outstanding	$0 – $99.4 million	$0 – $91.7 million	$0 – $160.5 million
As of September 30, 2013
Borrowings outstanding at end of period	$74.0 million	$46.7 million	$120.7 million
Weighted average interest rate	0.3%	0.3%	0.3%
Twelve Months Ended September 30, 2012
Weighted average borrowings outstanding	$43.8 million	$78.2 million	$122.0 million
Weighted average interest rate	0.3%	0.3%	0.3%
Range of borrowings outstanding	$0 – $133.5 million	$13.0 - $107.5 million	$59.6 - $200.1 million
As of September 30, 2012
Borrowings outstanding at end of period	$40.1 million	$37.1 million	$77.2 million
Weighted average interest rate	0.2%	0.2%	0.2%

On September 3, 2014, Laclede Group and Laclede Gas entered into extension agreements to extend the maturity dates on their loan agreements for a period of one year from September 3, 2018 to September 3, 2019.

~~Based~~Information onabout ~~average~~Laclede Group’s consolidated short-term borrowings ~~for~~during the 12 twelve months ended September 30, ~~2013,~~ an2015 ~~increase~~and in2014 ~~the~~and ~~average~~as ~~interest rate~~ of ~~100~~September 30, ~~basis~~2015 ~~points would decrease the Utility’s pre-tax earnings~~ and ~~cash~~2014 ~~flows~~is bypresented ~~approximately $0.6 million on an annual basis, portions of which may be offset through the application of PGA carrying costs.~~below:



	Laclede Gas Commercial Paper Borrowings	Laclede Group*** Bank Line Borrowings	Alagasco Bank Line Borrowings *	Total Short-Term Borrowings **
Year Ended September 30, 2015
Weighted average borrowings outstanding	$212.7	$65.6	$22.3	$300.6
Weighted average interest rate	0.4%	1.4%	1.1%

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