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As STL pipeline costs balloon after Midwest flooding, Spire asks to raise rates

St. Louis-based gas utility Spire Inc. asked for federal approval to hike rates on its Spire STL Pipeline LLC system, saying that permitting delays pushed project construction directly into the path of historic rain and flooding.

Spire now expects the project to cost $286.9 million, more than 30% above the company's estimate from its January 2017 application to the Federal Energy Regulatory Commission. The revised total is nearly $47 million above the high end of Spire's latest guidance to investors.

The company asked FERC in an Aug. 21 filing to approve a roughly 30% increase in recourse rates charged to some customers that would use the pipeline.

Spire executives warned investors during a July 30 conference call that the cost for the STL pipeline would balloon above its estimated range, but declined to give new guidance until it could further assess the project site. Management said flooding near the confluence of the Missouri and Mississippi rivers was preventing Spire completing the project, which is 97% complete and will link the Rockies Express Pipeline LLC in Scott County, Ill., to eastern Missouri and St. Louis through 65 miles of new pipeline.

The company has pushed $25 million in capital spending linked to the project into 2020, and now expects STL to enter service in the fourth quarter of 2019. Startup could occur as soon as Nov. 1, Spire said in a separate Aug. 21 filing with the Securities and Exchange Commission.

A cascading series of events conspired to delay startup and raise costs on the project, Spire said in the FERC filing.

The company initially asked for approval to begin construction by December 2017 but did not get authorization until nearly a year later. That pushed its project start date into the winter and spring, which Spire called "the two most unfavorable times of the year" to carry out pipeline construction in the region due to unfavorable weather conditions.

The project then became bogged down in historic rain events and flooding that devastated several states in the region. The delays forced Spire to spend more to retain project partners who specialize in engineering, inspection and regulatory matters. Costs also rose as Spire stood down and reactivated construction crews and did repair work linked to flooding.

Spire also incurred higher-than-expected costs to maintain and repair roads around the project and to remove and replace agricultural drain tiles.