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. 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 in accordance with accounting guidance applicable to regulated operations.

Regulatory assets and liabilities included on the Unaudited Condensed Consolidated Balance Sheets are comprised of the following:



(Thousands)	June 30, 2015		September 30, 2014
Regulatory assets-current
New Jersey Clean Energy Program	$	15,685	$	14,285
Derivatives at fair value, net	13,938		—
Underrecovered gas costs	—		12,577
Total current regulatory assets	$	29,623	$	26,862
Regulatory assets-noncurrent
Environmental remediation costs
Expended, net of recoveries	$	18,095	$	30,916
Liability for future expenditures	177,000		177,000
Deferred income taxes	9,968		9,968
SAVEGREEN	23,738		29,180
Postemployment and other benefit costs	102,497		108,507
Deferred Superstorm Sandy costs	15,207		15,207
Other noncurrent regulatory assets	5,258		6,797
Total noncurrent regulatory assets	$	351,763	$	377,575
Overrecovered gas costs	$	3,820	$	—
Conservation Incentive Program	7,464		5,752
Derivatives at fair value, net	—		320
Total current regulatory liabilities	$	11,284	$	6,072
Regulatory liabilities-noncurrent
Cost of removal obligation	$	49,904	$	61,163
Derivatives at fair value, net	3,450		57
Conservation programs	11,911		—
Other noncurrent regulatory liabilities	968		106
Total noncurrent regulatory liabilities	$	66,233	$	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.

Regulatory filings and/or actions that occurred during the current fiscal year include the following:

•

On October 1, 2014, NJNG implemented a decrease to its BGSS rate for residential sales and general service small sales customers resulting in a 5 percent decrease to the average residential heat customer's bill. In addition, NJNG reduced its CIP rates resulting in a 4.3 percent decrease to the average residential heat customer's bill. On April 15, 2015, the BPU approved the BGSS and CIP rates on a final basis.


•	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 17, 2014, NJNG filed a petition with the BPU to extend SAVEGREEN through June 30, 2018, with minor modifications. On July 22, 2015, the BPU approved the petition allowing the extension of SAVEGREEN through July 31, 2017, with an additional $75.2 million in investments and a weighted average cost of capital of 6.69 percent.


•	On March 18, 2015, the BPU approved the June 2014 compliance filing associated with SAVEGREEN to maintain the existing rate. On July 31, 2015, NJNG submitted its 2015 SAVEGREEN rate recovery filing to maintain its existing SAVEGREEN recovery rate.


•	On March 27, 2015, NJNG filed a letter petition with the BPU to continue its existing BGSS Incentive Programs, which currently expire October 31, 2015.


•	On April 2, 2015, NJNG filed two petitions with the BPU to construct, operate and finalize the route for its SRL project. On June 5, 2015, NJNG filed two petitions with the BPU to amend the previously proposed route.

•

On May 19, 2015, the BPU approved a decrease to NJNG's SBC rate, resulting in a 3.3 percent decrease to the average residential heat customer's bill, effective June 1, 2015, and approved the recovery of NJNG's MGP expenditures incurred through June 2014. The rate includes a reduction in the RA factor from $18.7 million to $8.5 million annually and in the NJCEP factor from $26.8 million to $16.3 million annually.


•	On May 29, 2015, NJNG filed a petition with the BPU for NJ RISE to recover costs through July 31, 2015, resulting in a .03 percent increase to the average residential heat customer's bill, effective November 1, 2015.

•

On June 1, 2015, NJNG filed a petition with the BPU to continue its existing BGSS rate for residential and small commercial customers and to increase its CIP rates resulting in a .08 percent increase to the average residential heat customer's bill effective October 1, 2015. This petition included notification that NJNG will provide bill credits to residential and small commercial customers during the months of November 2015 through February 2016, as a result of a decline in the wholesale price of natural gas. The amount of the bill credits will be determined during Fiscal 2016, but estimates a reduction of approximately $63.7 million, or an approximate 14.3 percent decrease to the average residential heat customer's bill.


•	On June 19, 2015, NJNG submitted its annual USF compliance filing proposing to decrease the statewide USF rate, resulting in a .6 percent decrease to the average residential heat customer’s total bill effective October 1, 2015.