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. The impact of the ratemaking process and decisions authorized by the BPU allows NJNG to capitalize or defer certain costs that are expected to be recovered from its customers as regulatory assets and to recognize 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)	December 31, 2014		September 30, 2014
Regulatory assets-current
New Jersey Clean Energy Program	$	13,166	$	14,285
Derivatives at fair value, net	18,866		—
Conservation Incentive Program	1,556		—
Underrecovered gas costs	3,254		12,577
Total current regulatory assets	$	36,842	$	26,862
Regulatory assets-noncurrent
Environmental remediation costs
Expended, net of recoveries	$	26,226	$	30,916
Liability for future expenditures	177,000		177,000
Deferred income taxes	9,968		9,968
SAVEGREEN	28,411		29,180
Postemployment and other benefit costs	106,503		108,507
Deferred Superstorm Sandy costs	15,207		15,207
Other noncurrent regulatory assets	5,861		6,797
Total noncurrent regulatory assets	$	369,176	$	377,575
Regulatory liability-current
Conservation Incentive Program	$	—	$	5,752
Derivatives at fair value, net	—		320
Total current regulatory liabilities	$	—	$	6,072
Regulatory liabilities-noncurrent
Cost of removal obligation	$	58,723	$	61,163
Derivatives at fair value, net	—		57
Other noncurrent regulatory liabilities	6,605		106
Total noncurrent regulatory liabilities	$	65,328	$	61,326

NJNG's recovery of costs is facilitated through its base tariff rates, BGSS and other regulatory tariff 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:


•	On October 1, 2014, NJNG implemented a decrease to its BGSS price for residential sales and general service small sales customers resulting in a 5 percent decrease to the average residential heat customer's bill.


•	On October 22, 2014, the BPU approved, as prudent and reasonable, the deferred O&M storm costs associated with Superstorm Sandy to be recovered in NJNG's next base rate case to be filed no later than November 15, 2015.


•	On December 16, 2014, NJNG filed a petition with the BPU to extend SAVEGREEN through June 30, 2018, with minor modifications.