REGULATORY ASSETS AND LIABILITIES:

The discussion under Note 3, Rates and Regulatory Actions, is integral to the following explanations of specific regulatory assets and liabilities.

Regulatory Assets consisted of the following items (in thousands):



	2013		2012
Environmental Remediation Costs:
Expended - Net	$	29,945	$	37,892
Liability for Future Expenditures	119,492		107,410
Deferred Asset Retirement Obligation Costs	31,142		30,199
Deferred Pension and Other Postretirement Benefit Costs	59,284		95,897
Conservation Incentive Program Receivable	10,526		31,686
Societal Benefit Costs Receivable	10,408		12,801
Premium for Early Retirement of Debt	955		1,075
Deferred Interest Rate Contracts	3,735		7,761
Energy Efficiency Tracker	10,420		12,306
Pipeline Supplier Service Charges	7,106		8,771
Pipeline Integrity Cost	2,902		1,584
Other Regulatory Assets	10,166		5,274

Total Regulatory Assets	$	296,081	$	352,656

Except where noted below, all regulatory assets are or will be recovered through utility rate charges, as detailed in the following discussion. We are currently permitted to recover interest on our Environmental Remediation Costs, Societal Benefit Costs Receivable, Energy Efficiency Tracker and Pipeline Integrity Costs, while the other assets are being recovered without a return on investment.

Environmental Remediation Costs - We have two regulatory assets associated with environmental costs related to the cleanup of 12 sites where we or our predecessors previously operated gas manufacturing plants. The first asset, 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 GAAP, as the BPU allows us to recover such expenditures through the RAC. The other asset, Environmental Remediation Cost: Liability for Future Expenditures, relates to estimated future expenditures required to complete the remediation of these sites. We recorded this estimated amount as a regulatory asset with the corresponding current and noncurrent liabilities on the balance sheets under the captions Current Liabilities and Regulatory and Other Noncurrent Liabilities. The BPU allows us to recover the deferred costs over seven-year periods after they are spent (See Notes 3 and 12).

Deferred Asset Retirement Obligation Costs - This regulatory asset resulted from the recording of asset retirement obligations (ARO) and additional utility plant, primarily related to a legal obligation we have for certain safety requirements upon the retirement of our gas distribution and transmission system. We recover asset retirement costs through rates charged to customers. All related accumulated accretion and depreciation amounts for these ARO represent timing differences in the recognition of retirement costs that we are currently recovering in rates and, as such, we are deferring such differences as regulatory assets.

Deferred Pension and Other Postretirement Benefit Costs - The BPU authorized us to recover costs related to postretirement benefits under the accrual method of accounting consistent with GAAP. We deferred amounts accrued prior to that authorization and amortized them as allowed by the BPU over 15 years through 2012. In 2006, our regulatory asset was increased by $37.1 million representing the recognition of the underfunded positions of our 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 11).

Conservation Incentive Program Receivable - The impact of the CIP is recorded as an adjustment to earnings as incurred, while cash recovery under the CIP generally occurs during the subsequent CIP year (see Note 3).

Societal Benefit Costs Receivable - This regulatory asset primarily represents cumulative costs less recoveries under the USF program (See Note 3).

Premium for Early Retirement of Debt - At December 31, 2013, this regulatory asset represents unamortized debt issuance costs related to long-term debt refinancings. Unamortized debt issuance costs are being amortized over the term of the new debt issue pursuant to regulatory approval by the BPU.

Energy Efficiency Tracker - This regulatory asset represents cumulative investments less recoveries under the Energy Efficiency Program (See Note 3).

Deferred Interest Rate Contracts - These amounts represent the market value of interest rate derivatives as discussed further in Note 13.

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 3).

Pipeline Integrity Cost - As part of our September 2010 base rate increase, we were permitted to recover previously deferred pipeline integrity costs incurred through September 2010. In addition, we are authorized to defer future program costs, including related carrying costs, for recovery in our next base rate proceeding, subject to review by the BPU (see Note 3).

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.

Regulatory Liabilities at December 31 consisted of the following items (in thousands):



	2013		2012
Excess Plant Removal Costs	$	40,029	$	45,593
Deferred Revenue - Net	19,067		10,924
Other Regulatory Liabilities	1,853		—

Total Regulatory Liabilities	$	60,949	$	56,517

Excess Plant Removal Costs – Represents amounts accrued in excess of actual utility plant removal costs incurred to date. As part of our September 2010 base rate increase, we are required to amortize approximately $1.2 million of this balance to depreciation expense each year.

Deferred Revenues – Net - Over/under collections of gas costs are monitored through our BGSS mechanism. Net undercollected gas costs are classified as a regulatory asset and net overcollected gas costs are classified as a regulatory liability (See Note 3). Derivative contracts used to hedge our natural gas purchases are also included in the BGSS, subject to BPU approval (See Note 14). The increase from a $10.9 million regulatory liability at December 31, 2012 to a $19.1 million regulatory liability at December 31, 2013 was due to gas costs recovered from customers exceeding the actual cost of the commodity incurred during 2013.

Other Regulatory Liabilities – All other regulatory liabilities are subject to being returned to ratepayers in future rate proceedings.