Christopher T. Forsythe
Senior Vice President and Chief Financial Officer at Atmos Energy
Thank you, Kevin, and good morning, everybody. Our fiscal '21 diluted earnings per share of $5.12, representing 8.5% increase over adjusted diluted earnings per share of $4.72 reported in the prior year. As a reminder, our fiscal 2020 GAAP results included a one-time non-cash income tax benefit of $21 million, or $0.17 per diluted share related to the enactment of new tax legislation in Kansas.
As we entered fiscal '21, we conservatively planned for lower non-residential revenues, while planning to execute our normal O&M program. Our non-residential sales volumes declined 10% period over period during the first quarter. And early into the second quarter, we carefully managed our O&M spending, focusing on compliance-related activities. Non-residential sales volumes rebounded sooner than we anticipated, which created the opportunity to expand our O&M spending in the second half of the fiscal year. Additionally, the timing difference between the impact of refunding excess deferred taxes on our revenues and deferred income tax expense contributed about $0.01 to fiscal '21's results. As a result, actual earnings per share slightly exceeded the higher end of our guidance range.
Taking a closer look, consolidated operating income rose approximately 10% to $905 million. Slides 5 and 6 provide details of the year-over-year changes to operating income for each of our segments. I will touch on a few of the fiscal year highlights. Rate increases in both of our operating segments, driven by increased safety and reliability capital spending, totaled $207 million. We continue to benefit from strong customer growth in most of our jurisdictions, resulting in a $19 million increase in distribution operating income.
During fiscal '21, we added 51,000 new customers, which represents a 1.6% increase over the last 12 months. Sales volumes for our commercial customers recovered in fiscal '21 rising almost 6% over last year. Service order revenue in our distribution segment declined about $8.5 million, primarily due to the waiver of our customer service fees for disconnections and re-connections. Additionally, our bad debt expense increased about $18 million year-over-year. Bill collection activities resume in the third quarter, and we continued to offer flexible payment arrangements, help customers find financial assistance, and remain in close contact with our regulators. We continue to believe this bad debt will be recovered over time.
Consolidated O&M expense, excluding bad debt, increased $31 million, with a focus on system safety, including enhanced leak surveys, pipeline integrity work, and continued records establishment and retention. Additionally, line locate requests increased over 9% as a result of increased economic activity and the effects of our third-party damage awareness efforts. Capital spending increased to $2 billion, with 88% of our spending directed towards investments to modernize the safety, reliability and environmental performance of our system. In fiscal '21, over 90% of our capital spending began to earn a return within six months of the test period end. We accomplished this by implementing $226 million in annualized operating income increases, excluding the amortization of excess deferred tax liabilities.
Since the end of fiscal year, we have reached agreement with the regulators to implement an additional $69 million annualized operating income during our first quarter -- our fiscal '22 -- 2022 first quarter. As of today, we have four filings pending, seeking about $22 million. Slides 27 to 36 summarize our regulatory activities.
During fiscal '21, we completed over $1.2 billion of long-term debt equity financing to support our ongoing operations. We fully satisfied or fiscal '21 equity needs or ATM equity sales program. Under that program, we issued approximately 6 million shares under forward agreements for $578 million. And we settled approximately 6 million shares for net proceeds of $607 million. As of September 30, we had approximately $300 million remaining under existing equity forward arrangements that will satisfy a significant portion of our fiscal '22 equity needs. This equity financing complemented the $600 million of long-term debt financing we issued last fall.
Additionally, we improved our financial flexibility during fiscal '21. During the second quarter, we renewed, extended and increased in on liquidity under our credit facilities. Our primary five-year $1.5 billion facility was extended to March of 2026, and retains a $250 million accordion feature. And we replaced our expiring 364-day $600 million credit facility with a new $900 million three-year credit facility, with a $100 million accordion feature. We now have $2.5 billion available under four credit facilities. The financial flexibility these facilities provide improves our ability to respond to unforeseen events such as Winter Storm, Uri. Additionally, we issued a new $5 billion shelf registration statement, and a new $1 billion ATM program to support our financing plans for fiscal '22 and beyond. Additionally, during the fourth quarter, we mitigated future interest rate risk by executing $875 million of forward starting interest rate swaps. Currently, we have $1.85 billion in swaps to support our future long-term debt financing needs.
Finally, our Treasury team did an outstanding job in outstanding for $2.2 billion in cost effective interim financing to pay for the gas costs incurred during Winter Storm, Uri, all of which preserved our ability to continue supporting our operational needs. As a result of these financing activities, our equity capitalization, excluding the $2.2 billion of Winter Storm financing, was 60.6% as of September 30. Additionally, we finished the fiscal year with approximately $2.9 billion of total liquidity. The strength of our balance sheet and liquidity leaves us well positioned as we move into fiscal '22. Details of our financing activities and financial profile can be found on Slides 9 through 12.
We've also deferred our Winter operations for the next fiscal year. You heard Kevin discuss that our procurement team has mitigated supply chain and inflation risk in our operations. Our gas supply team has also done an excellent job preparing our gas supply strategy for the upcoming winter heating season. Our proprietary and contracted storage is over 95% full, at a weighted average cost of gas of approximately $3. Additionally, we have physically and financially hedged about one-third of our expected purchase requirements in approximately $4. Through the use of storage and hedge purchases, we've stabilized prices for approximately half of our normal winter usage in the mid-$3 range. For remainder of our anticipated gas supply needs, we satisfied through a combination of base load purchases and [Indecipherable] prices, peaking contracts and spot purchases when needed.
Today, we have transportation capacity on 37 pipelines across our eight state footprint. It provides our gas supply team access to a wide variety of producing basins to ensure supply reliability and competitive natural gas prices for our customers. As a reminder, all the gas costs we incur are recovered through purchase gas cost mechanisms generally over 12 months, and the process generally involves weighted average approach, which helps us move the impact on customer bills. Finally, we've been actively communicating with our customers about how they can mitigate the potential impact of higher gas prices through energy conservation, as well as the various ways we can help them with their bills, through instalment plans, budget billing and locating energy assistance agencies.
Looking forward, fiscal '22 will begin the second decade of pursuing our safety-focused organic growth strategy. Yesterday, we initiated our fiscal '22 earnings per share guidance in the range of $5.40 to $5.60. Consistent with prior years, we expect about two-thirds of our earnings will come from our distribution segment. Details surrounding our fiscal '22 guidance can be found on Slides 20 and 21. Also yesterday, Atmos Energy's Board of Directors approved a 152nd second consecutive quarterly cash dividend. The indicated annual dividend for fiscal '22 is $2.72, 8.8% increase over fiscal '21.
Finally, fiscal '22 capital spending is expected to rise about 25%, and is expected to be in the range of $2.4 billion to $2.5 billion. Most of this increase will be incurred at APT, which will represent approximately one-third of our capital spending in fiscal '22, as a result of the project work that Kevin described a few minutes ago. Over 90% of our fiscal '22 capital spending is expected to begin earning return within six months of the test period end.
Slide 19 summarizes the key themes underlying our fiscal '22 five-year plan. Over the next five years, we anticipate earnings per share will grow 6% to 8% per year. By fiscal '26, we anticipate earnings per share to be in the range of $7.00 to $7.40. We also anticipate dividends per share to increase annually in line with earnings per share. Continued spending for system replacement and modernization, environment improvements, and system expansion will be the primary driver for the anticipated increase in capital spending, net income and earnings per share through fiscal '26. Over the next five years, we anticipate total spending of approximately $13 billion to $14 billion. This level of spend is expected to support rate base growth of about 11% to 13% per year. This translates into an estimated rate base of $21 billion to $23 billion in fiscal '26, up from about $12 billion at the end of fiscal '21.
From an O&M perspective, we continue to focus on compliance-based activities that address system safety. For fiscal '22, we anticipate O&M to range from $690 million to $710 million, and we have assumed O&M inflation of 3.0% to 3.5% annually through fiscal '26. In addition to the spending plans I outlined, we have assumed approximately $600 million in excess deferred tax refunds over the next five years will flow back to customers. As a result, we expect our effective tax rate in fiscal '22 to be between 9% and 11%. This rate assumes no tax changes that are currently being considered at federal level.
In the financing perspective, we will continue to follow the financing strategy that we've been executing in the last few years to preserve the strength of our balance sheet. Excluding securitization, we anticipate the need to raise between $7 billion and $8 billion of incremental long-term financing over the next five years. The strength of our balance sheet enables us to use a prudent mix of long-term debt and equity financing to target a 50% to 60% equity capitalization ratio, inclusive of short-term debt. This financing plan has been fully reflected in our earnings per share guidance through fiscal '26.
In October, we completed a $600 million 30-year senior note issuance with a coupon of 2.85%. After factoring in the favorable settlement of forward starting interest rate swaps, the effective rate on this issuance is 2.58%. And our debt profile remains very manageable, with a weighted average maturity of 19 years, excluding the $2.2 billion of incremental Winter Storm financing. Finally, as I previously mentioned, we have hedged a substantial portion of our anticipated long-term debt needs to mitigate interest rate risk.
From an equity perspective, utilizing our ATM program continue to be our -- continues to be our preferred method for raising equity. As I mentioned earlier, the equity forwards we executed during fiscal '21 will satisfy a significant portion of our expected equity needs for fiscal '22. And we expect to raise our remaining fiscal '22 equity needs through our ATM program.
Regarding securitization, we have made substantial progress in the last few months. Yesterday, the Railroad Commission of Texas unanimously issued a final determination to regulatory asset that will be securitized under the statewide program. The final rule stipulated that all of our gas and storage costs are prudently incurred, and are fully recoverable. Next step is for the Railroad Commission to issue a financing order. Following the issuance of the financing order, the Texas Public Financing Authority has up to 180 days to complete the securitization transaction. Upon receipt of the securitization funds, we will repay the $2.2 billion of Winter Storm financing we issued last March. In Kansas, we filed a securitization application in mid-September. We're currently responding to various questions, and the procedural schedule hasn't set with final proceedings expected to begin in January.
Finally, annual filing mechanisms will be the primary means through which we recover capital spending. These mechanisms enable us to more efficiently deploy our capital spend and generate the returns necessary to attract the capital we need to finance our investments. And these mechanisms produce a smaller impact to customer bills, while providing the regular rate adjustments that support our system modernization efforts. We have assumed no material changes to these mechanisms through fiscal '26. In fiscal '22, we anticipate completing filings for $215 million to $225 million in annualized regulatory outcomes that will impact fiscal years '22 and '23. The execution of this plan to modernize assistant through disciplined capital spending, timely recovery of those investments through our various regulatory mechanisms, and balanced long-term financing, all supports our ability to grow earnings per share and dividends in the 6% to 8% range annually through the fiscal 2026. And as you can see on Slide 25, the execution of this plan will also keep customer bills affordable, which should help us sustain this plan for the long term.
Thank you for your time this morning. I will now turn the call back to Kevin for his closing remarks. Kevin?
