REGULATORY ASSETS & REGULATORY LIABILITIES

12 Months Ended

Dec. 31, 2020

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, 2020
	SJG		ETG		Total SJI
Environmental Remediation Costs:
Expended - Net	$	157,340	$	5,196	$	162,536
Liability for Future Expenditures	101,243		91,837		193,080
Insurance Recovery Receivables	—		(6,807)		(6,807)
Deferred ARO Costs	42,365		25,453		67,818
Deferred Pension Costs - Unrecognized Prior Service Cost	—		33,898		33,898
Deferred Pension and Other Postretirement Benefit Costs	77,426		8,466		85,892
Deferred Gas Costs - Net	19,178		—		19,178
CIP Receivable	21,013		—		21,013
SBC Receivable (excluding RAC)	3,453		—		3,453
Deferred Interest Rate Contracts	9,938		—		9,938
EET/EEP	18,725		3,062		21,787
Pipeline Supplier Service Charges	434		—		434
Pipeline Integrity Cost	6,091		—		6,091
AFUDC - Equity Related Deferrals	11,822		—		11,822
WNC	—		7,444		7,444
Other Regulatory Assets	26,056		10,359		36,415
Total Regulatory Assets	$	495,084	$	178,908	$	673,992

	December 31, 2019
	SJG		ETG		ELK		Total SJI
Environmental Remediation Costs:
Expended - Net	$	156,279	$	16,955	$	—	$	173,234
Liability for Future Expenditures	131,262		101,083		—		232,345
Insurance Recovery Receivables	—		(20,423)		—		(20,423)
Deferred ARO Costs	36,515		18,108		—		54,623
Deferred Pension Costs - Unrecognized Prior Service Cost	—		37,378		—		37,378
Deferred Pension and Other Postretirement Benefit Costs	72,010		1,825		—		73,835
Deferred Gas Costs - Net	49,469		5,301		293		55,063
SBC Receivable (excluding RAC)	1,478		—		—		1,478
Deferred Interest Rate Contracts	7,856		—		—		7,856
EET/EEP	12,877		4,468		—		17,345
Pipeline Supplier Service Charges	525		—		—		525
Pipeline Integrity Cost	6,516		—		—		6,516
AFUDC - Equity Related Deferrals	10,712		—		—		10,712
WNC	—		—		231		231
Other Regulatory Assets	10,678		4,536		—		15,214
Total Regulatory Assets	$	496,177	$	169,231	$	524	$	665,932

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 as discussed in Note 15. "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). These costs meet the deferral requirements of ASC 980, as the BPU allows SJG and ETG to recover such expenditures through the RAC mechanism. "Environmental Remediation Cost: Expended - Net," represents what has been spent to clean up the sites, less recoveries through the RAC and insurance carriers. The BPU allows SJG and ETG to recover the deferred costs not recovered from insurance carriers through their RAC mechanisms over seven-year periods after the costs are incurred. "Insurance Recovery Receivables" represents the balance of 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 the original total of $20.4 million, $13.6 million was received by ETG in 2020.

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. The Deferred ARO Costs regulatory asset increased year over year due to the revisions to the ARO liabilities (see Note 1) resulting from revisions to the estimates in settlement timing, retirement costs, and inflation and discount rates used to measure the expected retirement costs. There is no impact on earnings as a results of these changes.

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 15.0 years for pension and over 9.2 years for postretirement benefits.

DEFERRED PENSION AND OTHER POSTRETIREMENT BENEFIT COSTS - The BPU authorized SJG and ETG 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 SJI's and ETG'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). Realized and unrealized gains and losses on derivative contracts used to hedge natural gas purchases are also included in the BGSS, subject to BPU approval (see Note 16). SJG's balance as of both December 31, 2020 and 2019 also includes $22.9 million of costs related to a previous pricing dispute on a long-term gas supply contract. We believe that the amount paid by SJG to the third party supplier to settle the pricing dispute reflects a gas cost that ultimately will be recovered from SJG's customers through adjusted rates through the BGSS clause, and the matter is currently pending review by the BPU as part of SJG's 2020-2021 BGSS annual filing (see Note 10). The BGSS regulatory assets of SJI and SJG decreased from year over year primarily due to recoveries from customers exceeding the actual gas commodity costs, changes in valuations of hedged natural gas positions from prior periods and refunds from a third party gas supplier (see Note 1). For ETG, the BGSS clause changed from a regulatory asset position as of December 31, 2019 to a regulatory liability position as of December 31, 2020, primarily as a result of refunds received from a third party gas supplier (see Note 1). The regulatory liability position is included in Other Regulatory Liabilities within the table below.

CIP RECEIVABLE - 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 less than the established baseline during 2020, resulting in a regulatory asset at December 31, 2020 as compared to a regulatory liability at December 31, 2019. This is primarily the result of warmer than normal weather experienced in the region during the winter months.

SBC RECEIVABLE - This regulatory asset primarily represents the deferred expenses incurred under SBC programs, which include the CEP, CLEP and USF mechanisms (see Note 10).

DEFERRED INTEREST RATE CONTRACTS - These amounts represent the market value of interest rate derivatives as discussed further in Note 16.

EET/EEP - The SJG EET Regulatory Asset increased year over year due to expenditures in excess of recoveries. The change in the ETG EEP Regulatory Asset was not significant.

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.

PIPELINE INTEGRITY COST - 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 weather is colder than normal and increases customer bills when weather is warmer than normal. The overall change in ETG's weather normalization from a regulatory liability at December 31, 2019 to a regulatory asset at December 31, 2020 was due to timing of collections from customers and warmer than normal weather during the winter months.

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 12). The increase in Other Regulatory Assets for SJG is primarily due to a $10.1 million reclassification of costs from Utility Plant to Regulatory Assets on the consolidated balance sheet related to an abandoned project to re-power the former BL England facility with natural gas. The regulatory asset related to this project, along with the impact of the ERIP, were approved for recovery by the BPU during the third quarter of 2020. Amortization of these assets began in the fourth quarter of 2020 and will be amortized over a 5 year period (see Note 10).

On July 2, 2020, the BPU issued an Order authorizing New Jersey's regulated utilities to create a COVID-19-related regulatory asset by deferring on their books and records the prudently incurred incremental costs related to COVID-19 beginning on March 9, 2020 and continuing through September 30, 2021, or 60 days after the termination of the public health emergency, whichever is later. The Company is required to file quarterly reports with the BPU, along with a petition of recovery of such incremental costs with the BPU by December 31, 2021 or within 60 days of the close of the tracking period, whichever is later. As of December 31, 2020, ETG and SJG deferred $5.8 million and $4.7 million, respectively, of incremental costs principally related to expected credit losses from uncollectibles as a result of the COVID-19 pandemic, specifically related to changes in payment patterns observed to date and consideration of macroeconomic factors. We have deemed these costs to be probable of recovery.

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

	December 31, 2020
	SJG		ETG		Total SJI
Excess Plant Removal Costs	$	12,666	$	37,953	$	50,619
Excess Deferred Taxes	232,694		113,888		346,582
Deferred Gas Costs - Net	—		15,322		15,322
Amounts to be Refunded to Customers	—		6,969		6,969
Other Regulatory Liabilities	—		1,085		1,085
Total Regulatory Liabilities	$	245,360	$	175,217	$	420,577

	December 31, 2019
	SJG		ETG		ELK		Total SJI
Excess Plant Removal Costs	$	16,333	$	36,343	$	—	$	52,676
Excess Deferred Taxes	251,355		117,695		—		369,050
Deferred Gas Costs - Net	—		52		—		52
CIP Payable	6,794		—		—		6,794
WNC	—		2,684		—		2,684
Amounts to be Refunded to Customers	—		10,625		—		10,625
Other Regulatory Liabilities	—		1,037		—		1,037
Total Regulatory Liabilities	$	274,482	$	168,436	$	—	$	442,918

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 2020.

EXCESS DEFERRED TAXES - This liability is recognized as a result of Tax Reform enacted into law on December 22, 2017. The decrease in this regulatory liability year over year is related to excess tax amounts returned to customers through customer billings. See Note 10.

DEFERRED GAS COSTS - NET - Over/under collections of gas costs are monitored through SJG's and ETG's bill credit. 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. The regulatory liability as of December 31, 2020 is a result of over-collection and refunds from a third party gas supplier (see Note 1).

AMOUNTS TO BE REFUNDED TO CUSTOMERS - See "AMA" section in Note 1.