4. 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 capital investments 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.

NJNG's recovery of costs is facilitated through its base rates, BGSS and other regulatory tariff riders. NJNG is required to make annual filings to the BPU for review of its BGSS, CIP and various other programs and related rates. Annual rate changes are typically requested to be effective at the beginning of the following fiscal year. All rate and program changes are subject to proper notification and BPU review and approval. In addition, NJNG is also permitted to implement certain BGSS rate changes on an interim basis with proper notification to the BPU.

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



(Thousands)	December 31, 2018		September 30, 2018
Regulatory assets-current
New Jersey Clean Energy Program	$	12,359	$	14,052
Underrecovered gas costs	6,149		4,137
Derivatives at fair value, net	1		108
Total current regulatory assets	$	18,509	$	18,297
Regulatory assets-noncurrent
Environmental remediation costs
Expended, net of recoveries	$	32,764	$	33,017
Liability for future expenditures	129,556		130,800
Deferred income taxes	17,842		17,225
SAVEGREEN	5,888		8,636
Postemployment and other benefit costs	138,027		136,716
Deferred storm damage costs	10,315		10,858
Cost of removal	26,587		22,339
Other noncurrent regulatory assets	9,045		9,001
Total noncurrent regulatory assets	$	370,024	$	368,592
Regulatory liabilities-current
Conservation Incentive Program	$	7,861	$	6,994
Derivatives at fair value, net	4,961		1,191
Total current regulatory liabilities	$	12,822	$	8,185
Regulatory liabilities-noncurrent
Tax Act impact ⁽¹⁾	$	204,161	$	205,410
New Jersey Clean Energy Program	4,722		1,902
Other noncurrent regulatory liabilities	1,697		1,827
Total noncurrent regulatory liabilities	$	210,580	$	209,139


(1)	Reflects the re-measurement and subsequent amortization of NJNG's net deferred tax liabilities as a result of the change in federal tax rates enacted in the Tax Act.