REGULATION

3 Months Ended

Dec. 31, 2020

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 permitted to implement certain BGSS rate changes on a provisional basis with proper notification to the BPU.

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


(Thousands)	December 31, 2020		September 30, 2020
Regulatory assets-current
New Jersey Clean Energy Program	$	13,508	$	15,570
Conservation Incentive Program	20,689		19,120

Derivatives at fair value, net	3,194		—
Other current regulatory assets	1,622		1,682
Total current regulatory assets	$	39,013	$	36,372
Regulatory assets-noncurrent
Environmental remediation costs:
Expended, net of recoveries	$	36,892	$	36,516
Liability for future expenditures	148,002		150,590
Deferred income taxes	32,406		28,241
Derivatives at fair value, net	8		1
SAVEGREEN	21,825		21,281
Postemployment and other benefit costs	184,265		188,170
Deferred storm damage costs	5,972		6,515
Cost of removal	73,237		75,080

Other noncurrent regulatory assets	17,517		20,068
Total noncurrent regulatory assets	$	520,124	$	526,462
Regulatory liability-current
Overrecovered natural gas costs	$	16,941	$	25,914


Derivatives at fair value, net	—		274
Total current regulatory liabilities	$	16,941	$	26,188
Regulatory liabilities-noncurrent
Tax Act impact (1)	$	194,155	$	195,425
Derivatives at fair value, net	—		352

Other noncurrent regulatory liabilities	961		509
Total noncurrent regulatory liabilities	$	195,116	$	196,286

(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.

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


(Thousands)	December 31, 2020		September 30, 2020
Total current regulatory assets	$	329	$	158
Total noncurrent regulatory assets	$	1,213	$	997

Total-noncurrent regulatory liabilities	$	166	$	—

The assets are comprised primarily of the tax benefit associated with the equity component of AFUDC and the liability consists primarily of scheduling penalties. Recovery of regulatory assets is subject to FERC approval.

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

•On October 28, 2020, the BPU approved the Company’s transmission and distribution component of the IIP for $150 million over five years, effective November 1, 2020. The recovery of information technology replacement and enhancements, that was included in the original IIP filing, will be included as part of base rate filings as projects are placed in service.

•On November 20, 2020, NJNG notified the BPU of its intent to provide BGSS bill credits to residential and small commercial sales customers effective December 1, 2020 to December 31, 2020. The December bill credits were estimated to be $10.0 million, $9.4 million net of tax. On December 22, 2020, NJNG notified the BPU of the extension of the BGSS bill credits through January 31, 2021. The January 2021 bill credits are estimated to be $12.5 million, $11.7 million net of tax.