COMMITMENTS AND CONTINGENCIES

12 Months Ended

Dec. 31, 2020

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS AND CONTINGENCIES

COMMITMENTS AND CONTINGENCIES:GAS SUPPLY CONTRACTS - In the normal course of business, SJG, SJRG and ETG have entered into long-term contracts for natural gas supplies, firm transportation and gas storage service. The transportation and storage service agreements with interstate pipeline suppliers were made under FERC-approved tariffs. SJG's and ETG's cumulative obligation for gas supply-

related demand charges and reservation fees paid to suppliers for these services averages approximately $6.7 million and $5.1 million per month, respectively, and is recovered on a current basis through the BGSS. SJRG's cumulative obligation for demand charges and reservation fees paid to suppliers for these services averages approximately $1.4 million per month.  SJRG has also committed to purchase 721,900 dts/d of natural gas, from various suppliers, for terms ranging from five to eleven years at index based prices.

ETG has an AMA with SJRG for transportation and storage capacity to meet natural gas demands. The AMA is in effect through March 31, 2022. It also requires SJRG to pay minimum annual fees of $4.25 million to ETG and includes tiered margin sharing levels between ETG and SJRG (see Note 1).

TSA - SJI had entered into a TSA with Southern Company Gas whereby the latter provided certain administrative and operational services. On March 16, 2020, the TSA between SJI and Southern Company Gas terminated. As of that date, Southern Company Gas no longer provides any administrative or operational services to ETG.

LITIGATION - SJI and SJG are subject to claims, actions and other legal proceedings arising in the ordinary course of business. Neither SJI nor SJG can make any assurance as to the outcome of any of these actions but, based on an analysis of these claims and consultation with outside counsel, we do not believe that any of these claims, other than described below, would be reasonably likely to have a material impact on the business or financial statements of SJI or SJG.

SJI was involved in a pricing dispute related to two long-term gas supply contracts involving SJG and SJRG. As a result of unfavorable court rulings during 2017, SJG and SJRG had accrued, including interest, $22.9 million and $59.3 million, respectively, from the first quarter of 2017 through September 30, 2019. During 2019, the Tenth Circuit issued its decision in SJI’s appeal affirming the lower court’s decision and finding that SJG and SJRG breached the contracts and the plaintiff was entitled to damages. The decision in this lawsuit was prejudicial to a second lawsuit where the plaintiff supplier claimed continued breaches after the filing of the initial lawsuit and, as a result of the ruling in the first lawsuit, SJI was similarly obligated to pay damages related to this breach of contract claim. All reserves related to this second lawsuit were recorded as part of the accrued amounts disclosed above. As a result of these judgments, SJRG paid $59.3 million in September 2019 and SJG paid $22.9 million in October 2019 to the plaintiff supplier. These cases are now concluded. We believe that the amount paid by SJG reflects a gas cost that ultimately will be recovered from SJG’s customers through adjusted rates through the BGSS clause. As such, the $22.9 million associated with SJG is recorded in Regulatory Assets on the consolidated balance sheets of both SJI and SJG as of December 31, 2020 and 2019. See Note 10 under “BGSS Clause” for discussion of current BPU proceedings related to this regulatory asset.

In August 2018, the State of New Jersey filed a civil enforcement action against SJG and several other current and former owners of certain property in Atlantic City, NJ alleging damage to the State's natural resources and seeking payment for damages to those natural resources, where SJG and its predecessors previously operated a manufactured gas plant. Assessment of the nature and extent of the alleged damages requires substantial analysis from multiple experts. To date, discovery has not yet taken place and there is limited precedent on a number of the legal matters involved. As a result, SJG is currently evaluating the merits of the State of New Jersey’s allegations. Consequently, SJG cannot reasonably estimate or provide an assessment of the claim or any assurances regarding its outcome; however, an adverse outcome in the litigation could have a material impact on SJG’s results of operations, financial condition, and liquidity. All parties have agreed to engage in mediation. SJG intends to vigorously defend itself in this matter. This manufactured gas plant site is currently being remediated as discussed under "Environmental Remediation Costs" below.

Liabilities related to claims are accrued when the amount or range of amounts of probable settlement costs or other charges for these claims can be reasonably estimated. For matters other than the disputes noted above, SJI has accrued approximately $4.1 million and $3.1 million related to all claims in the aggregate as of December 31, 2020 and 2019, respectively, of which SJG has accrued approximately $1.2 million and $0.9 million as of both December 31, 2020 and 2019, respectively.

COLLECTIVE BARGAINING AGREEMENTS — As of December 31, 2020, SJI and its subsidiaries employed 1,130 employees compared with 1,111 employees as of December 31, 2019. As of December 31, 2020, 303 of the total number of employees were represented by labor unions at SJG, and 167 were represented by a labor union at ETG. As of December 31, 2019, 319 of the total number of employees were represented by labor unions at SJG, and 176 were represented by a labor union at ETG. SJI has collective bargaining agreements with unions that represent these employees: IBEW Local 1293; IAM Local 76; and UWUA Local 424.  SJG employees represented by the IBEW operate under a collective bargaining agreement that runs through February 2022. SJG's remaining unionized employees are represented by the IAM and operate under a collective bargaining agreement that runs through August 2021. ETG employees represented by the UWUA operate under a collective bargaining agreement that runs through November 2022.

GUARANTEES - As of December 31, 2020, SJI, the parent company, has issued guarantees to third parties on behalf of its consolidated subsidiaries. These guarantees were issued to guarantee payment to third parties with whom SJI's consolidated subsidiaries have commodity supply contracts. As of December 31, 2020, these guarantees support future firm commitments of SJI's consolidated subsidiaries and $99.6 million of the Accounts Payable already recorded on SJI's consolidated balance sheet.

As of December 31, 2020, SJI had issued $11.6 million of parental guarantees on behalf of EnergyMark, an unconsolidated subsidiary. These guarantees generally expire within one year and were issued to enable the subsidiary to market retail natural gas.

AFFILIATE LOANS - As part of the REV LNG transaction (see Note 1), SJI has committed to provide up to $25.0 million in capital contribution loans to REV LNG, $19.3 million of which have been issued and recorded in Notes Receivable - Affiliates on the consolidated balance sheets as of December 31, 2020 (see Note 3). SJI anticipates issuing the remaining $5.7 million of these loans during 2021. Additionally, the amount of capital contribution loans may be amended upward from time to time at the sole discretion of SJI per the terms of the transaction.

STANDBY LETTERS OF CREDIT — See Note 13. In addition, as of December 31, 2020, SJG has provided $25.1 million of letters of credit under a separate facility outside of the revolving credit facility to support variable-rate demand bonds issued through the NJEDA to finance the expansion of SJG’s natural gas distribution system.

CONVERTIBLE UNITS - The Company has a contract obligating the holder of the units to purchase from the Company, and for the Company to sell to the holder for a price in cash of $50, a certain number of shares of common stock. See Note 6.

ENVIRONMENTAL REMEDIATION COSTS — SJG incurred and recorded costs for environmental cleanup of 12 sites where SJG or its predecessors operated gas manufacturing plants. SJG stopped manufacturing gas in the 1950s. ETG is subject to environmental remediation liabilities associated with 5 former manufactured gas plant sites in New Jersey. These environmental remediation expenditures are recoverable from customers through the RAC mechanism approved by the BPU (see Note 10). SJI and some of its nonutility subsidiaries also recorded costs for environmental cleanup of sites where SJF previously operated a fuel oil business and Morie maintained equipment, fueling stations and storage (see Note 3). Remaining ranges of potential exposure for future remediation related to SJI's nonutility subsidiaries' sites are not material.

SJI successfully entered into settlements with all of its historic comprehensive general liability carriers regarding the environmental remediation expenditures at the SJG sites.

Since the early 1980s, SJI accrued environmental remediation costs of $620.5 million, of which $426.9 million was spent as of December 31, 2020. The accrued amount includes the addition of costs related to five ETG sites requiring environmental remediation beginning with the date of the ETG/ELK Acquisition (see ETG discussion below). SJG accrued environmental remediation costs of $501.1 million, of which $399.8 million was spent as of December 31, 2020.

The following table details the amounts expended and accrued for SJI's and SJG's environmental remediation during the last two years (in thousands):

SJI (includes SJG and all other consolidated subsidiaries):	2020		2019
Beginning of Year	$	232,885	$	253,650
Change in Accruals	(22,198)		15,126
Expenditures	(17,112)		(35,891)
End of Year	$	193,575	$	232,885

SJG:	2020		2019
Beginning of Year	$	131,262	$	148,071
Change in Accruals	(15,273)		17,502
Expenditures	(14,746)		(34,311)
End of Year	$	101,243	$	131,262

The balances are segregated between current and noncurrent on the consolidated balance sheets under the captions Current Liabilities (SJI & SJG), Deferred Credits and Other Noncurrent Liabilities (SJI) and Regulatory and Other Noncurrent Liabilities (SJG).

Management estimates that undiscounted future costs to clean up SJG's sites will range from $101.2 million to $173.8 million. Six of SJG's sites comprise the majority of these estimates, with future costs ranging from $95.2 million to $165.7 million. The remediation efforts at SJG's six most significant sites include the following:

Site 1 - A combination of excavation and on site containment of impacted media has been approved by the regulatory authority for this site and work is underway. Steps remaining to remediate the site include completion of the remedial action, issuance of a Response Action Outcome, and long-term groundwater monitoring.

Site 2 - Remediation of the soil contamination at this site has been completed. Steps remaining to remediate the site include completion of sediment remediation, completion of post-remediation groundwater monitoring, issuance of a Response Action Outcome, and long-term groundwater monitoring.

Site 3 - A significant portion of the remedial action at this site has been completed. Steps remaining to remediate the site include completion of the approved remedy, issuance of a Response Action Outcome, and long term groundwater monitoring.

Site 4 - The remedial action approved by the regulatory authority is currently being implemented. Remaining steps to remediate the site include post-remediation groundwater monitoring, ongoing operation of the product recovery system, and issuance of a Response Action Outcome.

Site 5 - The remedial action to address impacted soil and groundwater has been completed. Steps remaining to remediate the site include completion of post-remediation groundwater monitoring, issuance of a Response Action Outcome, and long-term groundwater monitoring.

Site 6 - The remedial action to address impacted soil has been completed. Steps remaining include long-term groundwater monitoring and issuance of a Response Action Outcome.

Management estimates that undiscounted future costs to clean up ETG's sites will range from $91.8 million to $162.2 million.

The remediation efforts at ETG's five sites include the following:

Site 1 - The regulatory authority for this site has approved the remedial action and work is underway. Steps remaining to remediate the site include completion of the remedial action, issuance of a Response Action Outcome, and long-term groundwater monitoring.

Site 2 - Interim remedial actions have been completed at the site. Steps to remediate the balance of the site include selection of the remedial action for the remaining areas, confirmation of regulatory compliance of the selected remedy, implementation of the approved remedy, long-term groundwater monitoring, and issuance of a Response Action Outcome.

Site 3 - Permitting is underway for a soil and sediment remedial action at the site that has recently been approved by the regulatory authority. Steps remaining to fully remediate the site include implementation of the approved remedy, long-term groundwater monitoring, and issuance of a Response Action Outcome.

Site 4 - Soil remediation for the on-site portion of the work has been completed and an unrestricted use Response Action Outcome-A has been issued. Steps remaining to fully remediate the site include implementation of the remedial action proposed for the remaining areas, long-term groundwater monitoring, and issuance of a Response Action Outcome.

Site 5 - Soil remediation for a portion of the site has been completed; investigations to characterize the remaining impacts are underway. Steps remaining to fully remediate the site include implementation of a remedial action for the remaining areas, long-term groundwater monitoring, and issuance of a Response Action Outcome.

SJI and SJG recorded the lower end of the above-mentioned ranges as a liability because a single reliable estimation point is not feasible due to the amount of uncertainty involved in the nature of projected remediation efforts and the long period over which remediation efforts will continue. Recorded amounts include estimated costs based on projected investigation and remediation work plans using existing technologies. Actual costs could differ from the estimates due to the long-term nature of the projects, changing technology, government regulations and site-specific requirements. Significant risks surrounding these estimates include unforeseen market price increases for remedial services, property owner acceptance of the selected remedy, regulatory approval of the selected remedy and remedial investigative findings.