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Regulatory Assets And Liabilities

12 Months Ended

Dec. 31, 2019

Regulatory Assets And Liabilities [Line Items]

PSE&G prepares its financial statements in accordance with GAAP for regulated utilities as described in Note 1. Organization, Basis of Presentation and Significant Accounting Policies. PSE&G has deferred certain costs based on rate orders issued by the BPU or FERC or based on PSE&G’s experience with prior rate proceedings. Most of PSE&G’s Regulatory Assets and Liabilities as of December 31, 2019 are supported by written orders, either explicitly or implicitly through the BPU’s treatment of various cost items. These costs will be recovered and amortized over various future periods.

Regulatory Assets and other investments and costs incurred under our various infrastructure filings and clause mechanisms are subject to prudence reviews and can be disallowed in the future by regulatory authorities. To the extent that collection of any infrastructure or clause mechanism revenue, Regulatory Assets or payments of Regulatory Liabilities is no longer probable, the amounts would be charged or credited to income.

PSE&G had the following Regulatory Assets and Liabilities:




	As of December 31,
	2019		2018
	Millions
Regulatory Assets
Current
New Jersey Clean Energy Program	$	143	$	143
Electric Energy Costs—Basic Generation Service (BGS)	57		115
2018 Distribution Base Rate Case Regulatory Assets (BRC)	56		56
Societal Benefits Charge (SBC)	30		9
Green Program Recovery Charges (GPRC)	10		34
Other	55		32
Total Current Regulatory Assets	$	351	$	389
Noncurrent
Pension and OPEB Costs	$	1,284	$	1,090
Deferred Income Tax Regulatory Assets	966		896
Manufactured Gas Plant (MGP) Remediation Costs	357		321
Electric Transmission and Gas Cost of Removal	216		223
Asset Retirement Obligation	172		166
BRC	159		214
Remediation Adjustment Charge (RAC) (Other SBC)	158		175
GPRC	118		95
Unamortized Loss on Reacquired Debt and Debt Expense	42		49
Gas Costs—BGSS	27		31
Other	178		139
Total Noncurrent Regulatory Assets	$	3,677	$	3,399
Total Regulatory Assets	$	4,028	$	3,788




	As of December 31,
	2019		2018
	Millions
Regulatory Liabilities
Current
Deferred Income Tax Regulatory Liabilities	$	193	$	299
Weather Normalization Charge (WNC)	15		—
Tax Adjustment Credit (TAC)	12		4
Gas Margin Adjustment Clause	5		8
Other	9		—
Total Current Regulatory Liabilities	$	234	$	311
Noncurrent
Deferred Income Tax Regulatory Liabilities	$	2,955	$	3,170
Electric Distribution Cost of Removal	47		51
Total Noncurrent Regulatory Liabilities	$	3,002	$	3,221
Total Regulatory Liabilities	$	3,236	$	3,532

All Regulatory Assets and Liabilities are excluded from PSE&G’s rate base unless otherwise noted. The Regulatory Assets and Liabilities in the table above are defined as follows:


•	Asset Retirement Obligation: These costs represent the differences between rate-regulated cost of removal accounting and asset retirement accounting under GAAP. These costs will be recovered in future rates as assets are retired.


•	BRC: Represents deferred costs, primarily comprised of storm costs incurred in the cleanup of major storms from 2010 through 2018, which are being amortized over five years pursuant to the 2018 Distribution Base Rate Case Settlement.

•

Deferred Income Tax Regulatory Assets: These amounts relate to deferred income taxes arising from utility operations that have not been included in customer rates relating to depreciation, investment tax credits and other flow-through items, including the flowback to customers of accumulated deferred income taxes related to tax repair deductions. As part of its base rate case settlement with the BPU and the establishment of the TAC mechanism in 2018, PSE&G agreed to a ten-year flowback to customers of its accumulated deferred income taxes from previously realized tax repair deductions which resulted in the recognition of a $581 million Regulatory Asset and Regulatory Liability as of September 30, 2018. In addition, PSE&G agreed to the current flowback of tax benefits from ongoing tax repair deductions as realized which results in the recording of a Regulatory Asset upon flowback. For the years ended December 31, 2019 and 2018, PSE&G had provided $58 million and $15 million, respectively, in current tax repair flowbacks to customers. The recovery and amortization of the tax repair-related Deferred Income Tax Regulatory Assets will be determined in PSE&G’s subsequent base rate cases.

•

Deferred Income Tax Regulatory Liabilities: These liabilities relate to amounts due to customers for excess deferred income taxes as a result of the reduction in the federal income tax provided in the Tax Cuts and Jobs Act of 2017 (the Tax Act), and accumulated deferred income taxes from previously realized tax repair deductions as described above. As part of its settlement with its regulators, PSE&G agreed to refund the excess deferred income taxes as follows:

•

$705 million of distribution-related excess deferred income taxes refunded to customers over five years through PSE&G’s TAC mechanism with the remaining $1.1 billion of distribution-related excess deferred income taxes refunded to customers over the remaining useful life of distribution property, plant and equipment. As of December 31, 2019 and 2018, the balance remaining to be flowed back to customers was $1.6 billion and $1.8 billion, respectively.


•	$150 million of transmission-related excess deferred income taxes refunded to customers during the year ended December 31, 2019 with the remaining $977 million of transmission-related excess deferred income taxes returned over the remaining useful life of the property, plant and equipment.

In addition, PSE&G agreed to flow back to customers $581 million of previously realized tax repair deductions over a ten-year period through the TAC mechanism. As of December 31, 2019 and 2018, the balance remaining to be flowed back to customers was $537 million and $575 million, respectively.


•	Electric and Gas Cost of Removal: PSE&G accrues and collects in rates for the cost of removing, dismantling and disposing of its T&D assets upon retirement. The Regulatory Asset or Liability for non-legally required cost of removal represents the difference between amounts collected in rates and costs actually incurred.

•

Electric Energy Costs—BGS: These costs represent the over or under recovered amounts associated with BGS, as approved by the BPU. Pursuant to BPU requirements, PSE&G serves as the supplier of last resort for electric customers within its service territory that are not served by another supplier. Pricing for those services are set by the BPU as a pass-through, resulting in no margin for PSE&G’s operations. Over or under recovered balances with interest are returned or recovered through monthly filings.

•

Gas Costs—BGSS: These costs represent the over or under recovered amounts associated with BGSS, as approved by the BPU. Pursuant to BPU requirements, PSE&G serves as the supplier of last resort for gas customers within its service territory that are not served by another supplier. Pricing for those services are set by the BPU as a pass-through, resulting in no margin for PSE&G’s operations. Over or under collected balances are returned or recovered through an annual filing. Interest is accrued only on over recovered balances.

•

Gas Margin Adjustment Clause: This mechanism credits Firm delivery customers for net distribution margin revenue collected from Transportation Gas Service Non-Firm (TSG-NF) delivery customers. The balance represents the difference between the net margin collected from the TSG-NF customers versus bill credits provided to Firm delivery customers. Over or under recovered balances with interest are returned or recovered through the subsequent annual filing.

•

GPRC: This amount represents costs of the over or under collected balances associated with various renewable energy and energy efficiency programs. PSE&G files annually with the BPU for recovery of amounts that include a return on and of its investment over the lives of the underlying investments and capital assets which range from five to ten years. Interest is accrued monthly on any over or under recovered balances. Components of the GPRC include: Carbon Abatement, Energy Efficiency Economic Stimulus Program (EEE), EEE Extension Program, EEE Extension II Program, the Demand Response Program, Solar Generation Investment Program (Solar 4 All^®), Solar 4 All^® Extension, Solar 4 All^® Extension II, Solar Loan II Program, Solar Loan III Program and the Energy Efficiency (EE) 2017 Program.


•	MGP Remediation Costs: Represents the low end of the range for the remaining environmental investigation and remediation program cleanup costs for MGPs that are probable of recovery in future rates. Once these costs are incurred, they are recovered through the RAC in the SBC over a seven year period with interest.


•	New Jersey Clean Energy Program: The BPU approved future funding requirements for Energy Efficiency and Renewable Energy Programs through the first half of 2020. The BPU funding requirements are recovered through the SBC.

•

Pension and OPEB Costs: Pursuant to the adoption of accounting guidance for employers’ defined benefit pension and OPEB plans, PSE&G recorded the unrecognized costs for defined benefit pension and other OPEB plans on the balance sheet as a Regulatory Asset. These costs represent actuarial gains or losses and prior service costs which have not been expensed. These costs are amortized and recovered in future rates.


•	RAC (Other SBC): Costs incurred to clean up MGPs which are recovered over seven years with interest through an annual filing.

•

SBC: The SBC, as authorized by the BPU and the New Jersey Electric Discount and Energy Competition Act, includes costs related to PSE&G’s electric and gas business as follows: (1) the Universal Service Fund; (2) Energy Efficiency and Renewable Energy Programs; (3) Electric bad debt expense; and (4) the RAC for incurred MGP remediation expenditures. Over or under recovered balances with interest are to be returned or recovered through an annual filing.

•

TAC: This represents the over or under collected balances associated with the return of excess accumulated deferred income taxes and the flowback of previously realized and current tax repair deductions under a mechanism approved by the BPU in PSE&G’s 2018 Base Rate Case Settlement. Over or under collected balances are returned or recovered through an annual filing. PSE&G includes a return component on the flowback of the excess accumulated deferred income taxes and the previously realized tax repairs. Interest is accrued monthly on any over or under recovered balances.


•	Unamortized Loss on Reacquired Debt and Debt Expense: Represents losses on reacquired long-term debt and expenses associated with issuances of new debt, which are recovered through rates over the remaining life of the debt.

•

WNC: This represents the over or under recovery of gas margin which is filed annually with the BPU. The WNC requires PSE&G to calculate, at the end of each October-to-May period, the level by which margin revenues differed from what would have resulted if normal weather had occurred. Over recoveries are returned to customers in the next winter season while under recoveries (subject to an earnings cap) are recovered from customers in the next winter season.

Significant 2018 and 2019 regulatory orders received and currently pending rate filings with FERC and the BPU by PSE&G are as follows:

•

Electric and Gas Distribution Base Rate Filings—In October 2018, the BPU issued an Order approving the settlement of PSE&G’s distribution base rate proceeding with new rates effective November 1, 2018. The settlement resulted in a net reduction in overall annual revenues of approximately $13 million, comprised of a $212 million increase in base revenues, including recovery of deferred storm costs, offset by the return of tax benefits of approximately $225 million. The tax benefits include the flowback to customers of excess accumulated deferred income taxes resulting from the reduction of the federal income tax rates provided in the Tax Act as well as the accumulated deferred income taxes from previously realized tax repair deductions and tax benefits from future tax repair deductions as realized. The Order provided for a $9.5 billion rate base, a 9.6% return on equity for PSE&G’s distribution business and a 54% equity component of its capitalization structure. In addition to the $13 million annual revenue reduction, the Order provided for a $28 million one-time refund to customers in November and December 2018 for taxes collected at the higher federal income tax rate for the January 1 to March 31, 2018 period. Previously,

the BPU had approved a rate reduction effective April 1, 2018, to PSE&G’s then-current electric and gas base rates of approximately $71 million and $43 million, respectively, on an annual basis, to reflect the lower federal income tax rate for the period April 1 and forward. As a result of the agreement to flow back tax repair-related accumulated deferred income taxes in the settlement, PSE&G recognized a Regulatory Liability and a corresponding Regulatory Asset.


•	Transmission Formula Rate Filings—In October 2019, PSE&G filed its 2020 Transmission Formula Rate Annual Update with FERC requesting approximately $332 million in increased annual transmission revenue effective January 1, 2020, subject to true-up.

In June 2019, PSE&G filed its 2018 true-up adjustment pertaining to its transmission formula rates in effect for 2018. This filing resulted in an additional revenue requirement adjustment of $52 million more than the 2018 originally filed revenue requirement. PSE&G had previously recognized the majority of the additional revenue requirement in its 2018 Consolidated Statement of Operations.

•

BGSS—In September 2019, the BPU provisionally approved PSE&G’s request to decrease its BGSS rates from approximately 35 cents to 34 cents per therm for residential gas customers effective October 1, 2019. In December 2019, a self-implementing reduction of 2 cents per therm was filed with the BPU to further reduce the BGSS rate to approximately 32 cents per therm effective January 1, 2020, which was given final approval by the BPU in February 2020. The final reduction in the BGSS rate to 32 cents per therm will decrease annual BGSS revenues by approximately $34 million. In addition, PSE&G issued a self-implementing one-time bill credit of 7.5 cents per therm to be returned during the months of February and March 2020.


•	Gas System Modernization Program II (GSMP II)—In November 2019, the BPU approved PSE&G’s first GSMP II cost recovery petition requesting approximately $17 million in gas revenues on an annual basis, which included GSMP II investments in service as of August 31, 2019. The increase was effective December 1, 2019.

In December 2019, PSE&G filed its second GSMP II cost recovery petition seeking BPU approval to recover in gas base rates an estimated annual revenue increase of $18 million effective June 1, 2020. This increase represents the return of and on investment for GSMP II investments expected to be in service through February 29, 2020. The request will be updated in March 2020 for actual costs.


•	Gas System Modernization Program I (GSMP I)—In September 2019, the BPU approved PSE&G’s final GSMP I cost recovery petition requesting approximately $11 million in gas revenues, on an annual basis, which included GSMP I investments in service as of June 30, 2019. The increase was effective October 1, 2019.

•

GPRC—In February 2020, the BPU approved a six-month extension of PSE&G’s Energy Efficiency (EE) 2017 component of its GPRC programs, authorizing $111 million of EE investments and $19 million of administrative costs for recovery over the course of the programs though its existing filing mechanism. In September 2019, the BPU approved a one year extension of PSE&G’s EE 2017 component of its GPRC programs, authorizing an additional $27 million of EE investments and $6 million of additional administrative costs for recovery though its existing filing mechanism.

In January 2020, the BPU approved PSE&G’s 2019 GPRC cost recovery petition requesting recovery of approximately $52 million and $11 million in electric and gas revenues, respectively, on an annual basis. This increase was effective February 1, 2020.

In May 2019, the BPU approved PSE&G’s 2018 GPRC cost recovery petition requesting recovery of approximately $65 million and $6 million in electric and gas revenues, respectively, on an annual basis.


•	RAC—In January 2020, PSE&G filed its RAC 27 petition with the BPU seeking recovery of $53 million of net MGP remediation expenditures from August 1, 2018 through July 31, 2019. This matter is pending.

In August 2019, the BPU approved PSE&G’s RAC 26 filing requesting recovery of approximately $73 million in net MGP remediation expenditures from August 1, 2017 through July 31, 2018.


•	SBC—In January 2020, the BPU approved PSE&G’s petition to increase electric and gas rates by approximately $27 million and $7 million, respectively, on an annual basis, in order to recover electric and gas costs incurred through October 31, 2019 under its EE and Renewable Energy and Social Programs. The new rates were effective February 1, 2020.

•

TAC—In January 2020, the BPU approved PSE&G’s initial TAC filing on a provisional basis allowing a reduction to electric and gas revenues by $15 million and $10 million, respectively, on an annual basis effective February 1, 2020. The TAC was a result of the settlement of PSE&G’s distribution base rate case in 2018. The TAC allows for the flowback to customers of excess accumulated deferred income taxes resulting from the reduction of the federal income

tax rates provided in the Tax Act as well as the accumulated deferred income taxes from previously realized tax repair deductions and tax benefits from future tax repair deductions as realized.


•	WNC—In February 2020, the BPU gave final approval to PSE&G’s 2019-2020 WNC rates allowing an approximate $8 million of overcollections from the colder-than-normal 2018-2019 Winter Period, to be refunded to customers over the 2019-2020 Winter Period, with rates effective October 1, 2019.

In March 2019, the BPU approved the final 2018-2019 WNC rates which allowed a net recovery of $14 million to be collected over the 2018-2019 Winter Period. The $14 million net recovery was the result of $9 million of excess revenues from the colder-than-normal 2017-2018 Winter Period offset by $23 million of remaining prior Winter Period undercollection.

•

ZEC Program—In April 2019, the BPU authorized the New Jersey EDCs, including PSE&G, to purchase ZECs from eligible nuclear plants selected by the BPU. In conjunction with this Order, the BPU authorized tariffs to collect a non-bypassable distribution charge in the amount of $0.004 per KWh from each EDC’s retail distribution customers to be used to purchase ZECs from the selected plants. Each EDC purchases ZECs on a monthly basis with payment to be made annually following completion of each energy year. Under the program, any revenue collected in excess of the purchase price will be refunded to customers in the following year.

For the energy year ended May 31, 2019, PSE&G purchased approximately $17 million in ZECs, including interest, from the eligible nuclear plants selected by the BPU. The payment for $17 million was made in August 2019. In addition, there was approximately $0.2 million, including interest, in overcollected revenues which will be refunded to customers pending BPU approval of the refunding mechanism.

Public Service Electric and Gas Company