XML 52 R19.htm IDEA: XBRL DOCUMENT v3.19.3.a.u2
REGULATORY ASSETS & REGULATORY LIABILITIES
 12 Months Ended
Dec. 31, 2019
Regulatory Assets and Liabilities Disclosure [Abstract]  
REGULATORY ASSETS & REGULATORY LIABILITIES REGULATORY ASSETS & REGULATORY LIABILITIES:The discussion under Note 10 is integral to the following explanations of specific regulatory assets and liabilities.
The Utilities' Regulatory Assets consisted of the following items (in thousands):


December 31, 2019
SJGETGELKTotal SJI
Environmental Remediation Costs:
   Expended - Net$156,279  $16,955  $—  $173,234  
   Liability for Future Expenditures131,262  101,083  —  232,345  
   Insurance Recovery Receivables—  (20,423) —  (20,423) 
Deferred Asset Retirement Obligation Costs36,515  18,108  —  54,623  
Deferred Pension Costs - Unrecognized Prior Service Cost—  37,378  —  37,378  
Deferred Pension and Other Postretirement Benefit Costs72,010  1,825  —  73,835  
Deferred Gas Costs - Net49,469  5,301  293  55,063  
SBC Receivable1,478  —  —  1,478  
Deferred Interest Rate Contracts7,856  —  —  7,856  
EET12,877  —  —  12,877  
Pipeline Supplier Service Charges525  —  —  525  
Pipeline Integrity Cost6,516  —  —  6,516  
AFUDC - Equity Related Deferrals10,712  —  —  10,712  
WNC—  —  231  231  
Other Regulatory Assets10,678  9,004  —  19,682  
Total Regulatory Assets$496,177  $169,231  $524  $665,932  
December 31, 2018
SJGETGELKTotal SJI
Environmental Remediation Costs: 
Expended - Net$136,227  $10,875  $—  $147,102  
Liability for Future Expenditures148,071  104,594  —  252,665  
Deferred Asset Retirement Obligation Costs31,096  —  —  31,096  
Deferred Pension Costs - Unrecognized Prior Service Cost—  40,612  14  40,626  
Deferred Pension and Other Postretirement Benefit Costs80,121  2,607  30  82,758  
Deferred Gas Costs - Net57,889  —  289  58,178  
SBC Receivable2,173  —  —  2,173  
Deferred Interest Rate Contracts5,867  —  —  5,867  
EET2,319  —  —  2,319  
Pipeline Supplier Service Charges617  —  —  617  
Pipeline Integrity Cost5,140  —  —  5,140  
AFUDC - Equity Related Deferrals13,914  —  —  13,914  
WNC—  3,210  139  3,349  
Other Regulatory Assets8,931  8,023  211  17,165  
Total Regulatory Assets$492,365  $169,921  $683  $662,969  

Except where noted below, all regulatory assets are or are expected to be recovered through utility rate charges, as detailed in the following discussion. The Utilities are currently permitted to recover interest on Environmental Remediation Costs, SBC Receivable, EET and Pipeline Integrity Costs, while the other assets are being recovered without a return on investment.
 
Environmental Remediation Costs - SJG and ETG have regulatory assets associated with environmental costs related to the cleanup of environmental sites. SJG has 12 sites where SJG or its predecessors previously operated gas manufacturing plants, while ETG is subject to environmental remediation liabilities associated with five former manufactured gas plant sites in New Jersey. "Environmental Remediation Cost: Expended - Net," represents what was actually spent to clean up the sites, less recoveries through the RAC and insurance carriers. These costs meet the deferral requirements of ASC 980, as the BPU allows SJG and ETG to recover such expenditures through the RAC. "Environmental Remediation Cost: Liability for Future Expenditures," relates to estimated future expenditures required to complete the remediation of these sites.  SJG and ETG recorded this estimated amount as a regulatory asset with the corresponding current and noncurrent liabilities on the consolidated balance sheets under the captions "Current Liabilities" (SJI and SJG) and "Deferred Credits and Other Noncurrent Liabilities" (SJI) and "Regulatory and Other Noncurrent Liabilities" (SJG). The BPU allows SJG to recover the deferred costs through the RAC over seven-year periods after they are incurred. Environmental remediation costs at ETG are recoverable from customers through the RAC approved by the BPU. "Insurance Recovery Receivables" represents an insurance settlement executed in the fourth quarter of 2019 with a third party. This settlement, which is expected to be received in installments through the end of 2021, will be returned to ETG's customers through the RAC. Of this total, $6.8 million was received by ETG in January 2020 (see Note 22).
 
Deferred ARO Costs - The Utilities record AROs primarily related to the legal obligation to cut and cap gas distribution pipelines when taking those pipelines out of service. Deferred ARO costs represent the period to period passage of time (accretion) and the revision to cash flows originally estimated to settle the retirement obligation (see Note 1). The Deferred ARO Costs regulatory asset increased year over year due to revisions to the settlement timing, retirement costs, and changes to inflation and discount rates used to measure the expected retirement costs combined with the addition of ETG's ARO recorded through purchase accounting. Corresponding increases are made to the ARO liability (see Note 1), thus having no impact on earnings.

Deferred Pension Costs - Unrecognized Prior Service Cost - The BPU approved ETG to recover costs related to ETG's unrecognized prior service cost and actuarial gains/losses for pension and postretirement benefits. This ETG deferred asset is being amortized over 13.5 years for pension and over 7.7 years for postretirement benefits.

Deferred Pension and Other Postretirement Benefit Costs - The BPU authorized SJG and ETG and the MPSC authorized ELK to recover costs related to postretirement benefits under the accrual method of accounting consistent with GAAP. SJI's regulatory asset represents the recognition of the underfunded positions of SJIU's pension and other postretirement benefit plans.  Subsequent adjustments to this balance occur annually to reflect changes in the funded positions of these benefit plans caused by changes in actual plan experience as well as assumptions of future experience (see Note 12).

Deferred Gas Costs - Net - Over/under collections of gas costs are monitored through SJG's and ETG's BGSS clause. Net undercollected gas costs are classified as a regulatory asset and net overcollected gas costs are classified as a regulatory liability (see Note 10). Derivative contracts used to hedge natural gas purchases are also included in the BGSS, subject to BPU approval (see Note 16).

SBC Receivable - This regulatory asset primarily represents the deferred expenses incurred under the NJCEP, which is a mechanism designed to recover costs associated with energy efficiency and renewable energy programs(see Note 10).

Deferred Interest Rate Contracts - These amounts represent the market value of interest rate derivatives as discussed further in Note 16.

EET - The EET Regulatory Asset increased year over year due to expenditures in excess of recoveries.

Pipeline Supplier Service Charges - This regulatory asset represents costs necessary to maintain adequate supply and system pressures, which are being recovered on a monthly basis through the BGSS over the term of the underlying supplier contracts (see Note 10).

Pipeline Integrity Cost - As part of SJG's October 2017 base rate increase, SJG was permitted to recover previously deferred pipeline integrity costs incurred through October 2017. In addition, SJG is authorized to defer future program costs, including related carrying costs, for recovery in SJG's next base rate proceeding, subject to review by the BPU (see Note 10).

AFUDC Equity Related Deferrals - This regulatory asset represents the future revenue to recover the future income taxes related to the deferred tax liability for the equity component of AFUDC.  The deferred amount is being amortized over the life of the associated utility plant.
WNC - The tariffs for ETG include a weather normalization clause that reduces customer bills when winter weather is colder than normal and increases customer bills when winter weather is warmer than normal.

Other Regulatory Assets - Some of the assets included in Other Regulatory Assets are currently being recovered from ratepayers as approved by the BPU. Management believes the remaining deferred costs are probable of recovery from ratepayers through future utility rates. Included in Other Regulatory Assets for SJG is the impact of the ERIP on SJG employees, see Note 1.

The Utilities' Regulatory Liabilities consisted of the following items (in thousands):


December 31, 2019
SJGETGELKTotal SJI
Excess Plant Removal Costs$16,333  $36,343  $—  $52,676  
Excess Deferred Taxes251,355  117,695  —  369,050  
Deferred Revenues - Net—  52  —  52  
CIP Payable6,794  —  —  6,794  
Amounts to be Refunded to Customers—  10,625  —  10,625  
WNC—  2,684  —  2,684  
Other Regulatory Liabilities—  1,037  —  1,037  
Total Regulatory Liabilities$274,482  $168,436  $0  $442,918  

December 31, 2018
SJGETGELKTotal SJI
Excess Plant Removal Costs$20,805  $47,909  $1,393  $70,107  
Excess Deferred Taxes259,863  118,757  1,231  379,851  
Deferred Revenues - Net—  3,188  —  3,188  
CIP Payable5,871  —  —  5,871  
Amounts to be Refunded to Customers—  17,039  —  17,039  
Other Regulatory Liabilities—  2,443  —  2,443  
Total Regulatory Liabilities$286,539  $189,336  $2,624  $478,499  

Excess Plant Removal Costs - The Utilities accrue and collect for cost of removal of utility property. This regulatory liability represents customer collections in excess of actual expenditures, which will be returned to customers as a reduction to depreciation expense. The Excess Plant Removal Costs Liability decreased year over year primarily due to the actual removal costs exceeding the collections in 2019.

Excess Deferred Taxes - This liability is recognized as a result of Tax Reform enacted into law on December 22, 2017 (See Notes 1 and 4). The decrease in this regulatory liability year over year is related to excess tax amounts returned to customers through customer billings. The Unprotected amount of excess deferred taxes of $26.1 million will be returned to customers over a five year period. The determination of the treatment for the remaining amount of excess deferred taxes will be deferred until SJG's next base rate case as approved by the BPU. (See Note 10).

Deferred Revenues - Net - Over/under collections of gas costs are monitored through the ETG's BGSS mechanism. Net under collected gas costs are classified as a regulatory asset and net over collected gas costs are classified as a regulatory liability. Derivative contracts used to hedge natural gas purchases are also included in the BGSS, subject to BPU approval.
CIP Payable - The CIP tracking mechanism at SJG adjusts earnings when actual usage per customer experienced during the period varies from an established baseline usage per customer. Actual usage per customer was more than the established baseline during 2019, resulting in a regulatory liability. This is primarily the result of cold weather experienced in the region.

WNC - The tariffs for ETG include a WNC that reduces customer bills when winter weather is colder than normal and increases customer bills when winter weather is warmer than normal. The overall reduction of ETG's weather normalization from a $3.2 million regulatory asset at December 31, 2018 to a $2.7 million regulatory liability at December 31, 2019, was due to warmer weather.

Amounts to be Refunded to Customers - See "AMA" section in Note 1.