REGULATION |
REGULATION
NJNG is subject to cost-based regulation, therefore, it is permitted to recover authorized operating expenses and earn a reasonable return on its utility investment based on the BPU's approval, in accordance with accounting guidance applicable to regulated operations. Accordingly, NJNG capitalizes or defers certain costs that are expected to be recovered from its customers as regulatory assets and recognizes certain obligations representing amounts that are probable future expenditures as regulatory liabilities.
Regulatory assets and liabilities included on the Unaudited Condensed Consolidated Balance Sheets are comprised of the following: | | | | | | | | (Thousands) | March 31, 2013 | September 30, 2012 | Regulatory assets-current | | | Conservation Incentive Program | $ | 18,383 |
| $ | 25,681 |
| Underrecovered gas costs | 7,595 |
| 7,053 |
| Total current | $ | 25,978 |
| $ | 32,734 |
| Regulatory assets-noncurrent | | | Environmental remediation costs | | | Expended, net of recoveries | $ | 48,830 |
| $ | 59,745 |
| Liability for future expenditures | 182,000 |
| 182,000 |
| Deferred income taxes | 11,405 |
| 11,405 |
| Energy Efficiency Program | 31,712 |
| 26,025 |
| New Jersey Clean Energy Program (NJCEP) | 7,464 |
| 5,619 |
| Postemployment and other benefit costs | 137,700 |
| 142,495 |
| Deferred Superstorm Sandy costs | 14,666 |
| — |
| Other | 8,431 |
| 13,974 |
| Total noncurrent | $ | 442,208 |
| $ | 441,263 |
| Regulatory liability-current | | | Derivatives, net | $ | — |
| $ | 1,169 |
| Total current | $ | — |
| $ | 1,169 |
| Regulatory liabilities-noncurrent | | | Cost of removal obligation | $ | 64,346 |
| $ | 65,994 |
| Derivatives, net | 13,189 |
| 1,000 |
| Other | 1,490 |
| 83 |
| Total noncurrent | $ | 79,025 |
| $ | 67,077 |
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NJNG's recovery of costs is facilitated through its base tariff rates, Basic Gas Supply Service (BGSS) and other regulatory riders. As recovery of regulatory assets is subject to BPU approval, if there are any changes in regulatory positions that indicate recovery is not probable, the related cost would be charged to income in the period of such determination.
Recent regulatory filings and/or actions include the following:
| | • | In November 2012, the BPU approved the utilities' funding obligations for NJCEP for the period from January 1, 2013 to June 30, 2013. Those programs will now be on a July 1 through June 30 fiscal year basis. NJNG's share of the total funding requirement will be approximately $9.8 million. Accordingly, NJNG recorded the obligation and a corresponding regulatory asset on the Unaudited Condensed Consolidated Balance Sheets. |
| | • | On October 23, 2012, the BPU approved the Safety Acceleration and Facility Enhancement (SAFE) program, allowing a four-year incremental capital investment program of $130 million, exclusive of allowance for funds used during construction (AFUDC) accruals. The approval includes an agreement that these infrastructure costs will be subject to review in NJNG's next base rate case to be filed no later than November 2015, the deferral of depreciation expense on SAFE investments and an overall rate of return on infrastructure investments of 6.9 percent. The deferred cost recovery will include accruals for both debt and equity components of AFUDC while construction is in progress. When construction is completed and plant is placed in service, NJNG will accrue an AFUDC rate at 6.9 percent per year until such time that NJNG receives approval for recovery of all costs through base rates. |
| | • | On November 19, 2012, NJNG filed a petition with the BPU requesting deferral accounting for uninsured incremental operating and maintenance costs associated with Superstorm Sandy. In addition, NJNG requested the review of and the appropriate recovery period for such deferred expenses be addressed in the Company's next base rate case. As of March 31, 2013, NJNG has recorded a regulatory asset in the amount of $14.7 million related to these costs. |
In addition, on March 20, 2013, the BPU issued an order establishing a generic proceeding to review the prudency of costs incurred by New Jersey utility companies in response to major storm events in 2011 and 2012. The BPU order requires NJNG to file a detailed report by July 1, 2013, including unreimbursed, uninsured incremental storm restoration costs.
| | • | On November 20, 2012, NJNG submitted a filing requesting a base rate increase of $6.9 million for Accelerated Infrastructure Programs (AIP), related to the initial phase of AIP projects (AIP I) and the second phase of AIP projects (AIP II) infrastructure investments installed in NJNG's distribution and transmission systems through October 31, 2012. The existing weighted average cost of capital remained the same for both AIP I and AIP II investments. |
| | • | On January 23, 2013, the BPU approved a stipulation to extend NJNG's current SAVEGREEN Project® (SAVEGREEN) through June 30, 2013. NJNG's July 9, 2012 petition, for an extension and expansion of the SAVEGREEN programs over a four-year period, remains open. |
| | • | On March 1, 2013, NJNG and South Jersey Gas Company (SJG) filed a joint petition with the BPU requesting the continuation of the Conservation Incentive Program (CIP) with certain modifications. |
| | • | On March 20, 2013, the BPU approved a February 2012 filing that requested approval of NJNG's manufactured gas plant (MGP) expenditures incurred through June 30, 2011, maintaining the existing overall social benefit clause (SBC) rate and recovery. |
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