INCOME TAXES (Tables)

12 Months Ended

Sep. 30, 2013

Schedule of Effective Income Tax Rate Reconciliation

A reconciliation of the U.S. federal statutory rate of 35 percent to the effective rate from operations for the fiscal years ended September 30, 2013, 2012 and 2011 is as follows:



(Thousands)	2013			2012			2011
Statutory income tax expense	$	52,661		$	35,213		$	48,638
Change resulting from
State income taxes	5,168			5,434			3,435
Depreciation and cost of removal	(5,769		)	(3,999		)	(2,558		)
Investment tax credits	(18,749		)	(34,397		)	(13,150		)
Basis adjustment of solar assets due to ITC	3,225			5,974			2,266
Other	(961		)	(496		)	(966		)
Income tax provision	$	35,575		$	7,729		$	37,665
Effective income tax rate	23.6		%	7.7		%	27.1		%

Schedule of Components of Income Tax Expense (Benefit)

The income tax provision (benefit) from operations consists of the following:



(Thousands)	2013			2012			2011
Current
Federal	$	12,248		$	14,983		$	14,566
State	1,763			4,025			6,618
Deferred
Federal	34,127			18,757			30,932
State	6,186			4,361			(1,301		)
Investment tax credits	(18,749		)	(34,397		)	(13,150		)
Income tax provision	$	35,575		$	7,729		$	37,665

Schedule of Deferred Tax Assets and Liabilities

The temporary differences, which give rise to deferred tax assets and (liabilities), consist of the following:



(Thousands)	2013				2012
Deferred tax assets
Investment tax credits	$	43,033		⁽¹⁾	$	32,002
Deferred service contract revenue	3,231				3,185
Incentive compensation	6,798				7,666
State net operating losses	6,118				3,012
Other	5,718				5,881
Total deferred tax assets	$	64,898			$	51,746
Deferred tax liabilities
Property related items	$	(329,921	)		$	(284,871	)
Remediation costs	(18,881		)		(24,018		)
Equity investments	(33,368		)		(31,610		)
Post employment benefits	(17,455		)		(8,520		)
Fair value of derivatives	(6,258		)		(5,461		)
Conservation incentive plan	(7,611		)		(11,200		)
Under-recovered gas costs	(383		)		(2,835		)
Other	(13,699		)		(4,514		)
Total deferred tax liabilities	$	(427,576	)		$	(373,029	)

Total net deferred tax liabilities	$	(362,678	)		$	(321,283	)

(1) Includes $3 million for NJNG, which is being amortized over the life of the related assets and $40 million for NJRCEV, which is the ITC carryforward.

Summary of Operating Loss Carryforwards

The deferred tax assets will expire as follows:



(Thousands)
Fiscal years 2014 - 2017	$	62
Fiscal years 2018 - 2022	—
Fiscal Years 2023 - 2027	—
Fiscal Years 2028 - 2033	6,056
Total	$	6,118