FAIR VALUE

6 Months Ended

Mar. 31, 2013

Fair Value Disclosures [Abstract]

FAIR VALUE

FAIR VALUE

Fair Value of Assets and Liabilities

The fair value of cash and temporary investments, commercial paper and borrowings under revolving credit facilities are estimated to equal their carrying amounts due to the short maturity of those instruments. The estimated fair value of long-term debt, including current maturities and excluding capital leases, is as follows:

(Thousands)	March 31, 2013		September 30, 2012
Carrying value	$	479,845	$	479,845
Fair market value	$	527,809	$	530,056

NJR utilizes a discounted cash flow method to determine the fair value of its debt. Inputs include observable municipal and corporate yields, as appropriate for the specific issue and for NJR's credit rating. As of March 31, 2013, NJR discloses its debt within Level 2 of the fair value hierarchy.

Fair Value Hierarchy

NJR applies fair value measurement guidance to its financial assets and liabilities, as appropriate, which include financial derivatives and physical commodity contracts qualifying as derivatives, available for sale securities and other financial assets and liabilities. In addition, authoritative accounting literature prescribes the use of a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value based on the source of the data used to develop the price inputs. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities and the lowest priority to inputs that are based on unobservable market data and include the following:

Level 1 Unadjusted quoted prices for identical assets or liabilities in active markets; NJR's Level 1 assets and liabilities include exchange traded futures and options contracts, listed equities, and money market funds. Exchange traded futures and options contracts include all energy contracts traded on the New York Mercantile Exchange (NYMEX)/Chicago Mercantile Exchange (CME) and the Intercontinental Exchange (ICE) that NJR refers internally to as basis swaps, fixed swaps, futures and options that are cleared through a Futures Commission Merchant (FCM).

Level 2 Price data, which includes both commodity and basis price data other than Level 1 quotes, that is observed either directly or indirectly from publications or pricing services; NJR's Level 2 assets and liabilities include over-the-counter physical forward commodity contracts and swap contracts or derivatives that are initially valued using observable quotes and are subsequently adjusted to include time value, credit risk or estimated transport pricing components for which no basis price is available. Level 2 financial derivatives consist of transactions with non-FCM counterparties (basis swaps, fixed swaps and/or options). For some physical commodity contracts the Company utilizes transportation tariff rates that are publicly available and that it considers to be observable inputs that are equivalent to market data received from an independent source. There are no significant judgments or adjustments applied to the transportation tariff inputs and no market perspective is required. Even if the transportation tariff input was considered to be a “model”, it would still be considered to be a Level 2 input as:

1)     The data is widely accepted and public

2)    The data is non-proprietary and sourced from an independent third party

3)    The data is observable and published

These additional adjustments are generally not considered to be significant to the ultimate recognized values.

Level 3 Inputs derived from a significant amount of unobservable market data; these include NJR's best estimate of fair value and are derived primarily through the use of internal valuation methodologies.

Assets and liabilities measured at fair value on a recurring basis are summarized as follows:

	Quoted Prices in Active Markets for Identical Assets			Significant Other Observable Inputs			Significant Unobservable Inputs
(Thousands)	(Level 1)			(Level 2)			(Level 3)			Total
As of March 31, 2013:
Assets:
Physical forward commodity contracts		$	—		$	10,730		$	—	$	10,730
Financial derivative contracts - natural gas		31,998			134			—		32,132
Financial derivative contracts - foreign exchange		—			71			—		71
Available for sale equity securities - energy industry (1)		11,563			—			—		11,563
Other (2)		36			—			—		36
Total assets at fair value		$	43,597		$	10,935		$	—	$	54,532
Liabilities:
Physical forward commodity contracts		$	—		$	4,722		$	—	$	4,722
Financial derivative contracts - natural gas		43,087			—			—		43,087
Financial derivative contracts - foreign exchange		—			26			—		26
Other		—			—			—		—
Total liabilities at fair value		$	43,087		$	4,748		$	—	$	47,835
As of September 30, 2012:
Assets:
Physical forward commodity contracts		$	—		$	20,248		$	—	$	20,248
Financial derivative contracts - natural gas		14,270			15,645			—		29,915
Financial derivative contracts - foreign exchange		—			186			—		186
Available for sale equity securities - energy industry(1)		11,009			—			—		11,009
Other (2)		30			—			—		30
Total assets at fair value		$	25,309		$	36,079		$	—	$	61,388
Liabilities:
Physical forward commodity contracts		$	—		$	9,746		$	—	$	9,746
Financial derivative contracts - natural gas		16,922			18,793			—		35,715
Financial derivative contracts - foreign exchange		—			112			—		112
Other		—			—			—		—
Total liabilities at fair value		$	16,922		$	28,651		$	—	$	45,573

(1) Included in Other noncurrent assets on the Unaudited Condensed Consolidated Balance Sheets.

(2) Includes various money market funds.