Regulatory Assets And Liabilities

12 Months Ended

Dec. 31, 2011

Note 6. Regulatory Assets and Liabilities

As discussed in Note 1. Organization, Basis of Presentation and Summary of Significant Accounting Policies, PSE&G prepares its financial statements in accordance with GAAP accounting for regulated utilities. A regulated utility is required to defer the recognition of costs (a Regulatory Asset) or the recognition of obligations (a Regulatory Liability) if it is probable that, through the rate-making process, there will be a corresponding increase or decrease in future rates. Accordingly, PSE&G has deferred certain costs, which will be amortized over various future periods. These costs are deferred based on rate orders issued by the BPU or FERC or PSE&G's experience with prior rate cases. With the exception of the Storm Damage and Cape May Street Regulatory Assets, all of PSE&G's Regulatory Assets and Liabilities at December 31, 2011 and 2010 are supported by written rate orders, either explicitly or implicitly through the BPU's treatment of various cost items.

Regulatory Assets are subject to prudence reviews and can be disallowed in the future by regulatory authorities. PSE&G believes that all of its Regulatory Assets are probable of recovery. To the extent that collection of any 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,
	2011		2010		Recovery/Refund Period
	Millions
Regulatory Assets
Current:
Non-Utility Generation Charge (NGC)	$	0	$	66	Annual filing for recovery(1)(2)
Underrecovered Electric Costs—BGS		28		12	Various(1)(2)
Societal Benefits Charges (SBC)		87		74	Annual filing for recovery(1)(2)
Renewables & Energy Efficiency		10		0	Annual filing for recovery(1)(2)
Capital Stimulus Undercollection		21		0	Annual filing for recovery(1)(2)
Gas Weather Normalization Deferral		2		0	Annual filing for recovery(2)
OPEB Costs		19		0	Through December 2012(2)
FERC Formula Rate True-up		0		3	Annual filing for recovery(1)(2)

Total Current Regulatory Assets	$	167	$	155

Noncurrent
Stranded Costs To Be Recovered	$	1,460	$	1,776	Through December 2016(1)(2)
Manufactured Gas Plant (MGP) Remediation Costs		635		661	Various(2)
Pension and Other Postretirement		1,280		953	Various
Deferred Income Taxes		393		402	Various
Remediation Adjustment Clause (Other SBC)		92		119	Through 2019(1)(2)
New Jersey Clean Energy Program		253		430	Through February 2013(1)(2)
Gas Contract Mark-to-Market		110		50	Various(1)
OPEB Costs		0		39	Through December 2012(2)
Unamortized Loss on Reacquired Debt and Debt Expense		96		102	Over remaining debt life(1)
Conditional Asset Retirement Obligation		84		72	Various
Repair Allowance Taxes		17		27	Through August 2013(1)(2)
Regulatory Restructuring Costs		8		13	Through August 2013(1)(2)
Gas Margin Adjustment Clause		29		44	Through July 2015(2)
Customer Care System		15		20	Through July 2014
Plant and Regulatory Study Costs		7		9	Through December 2021(2)
Incurred But Not Reported Claim Reserve		15		14	Various
Asbestos Abatement		6		7	Through 2020(2)
Cape May Street Cleanup		9		8	To be determined
Renewables & Energy Efficiency		140		96	Various(2)
Storm Damage		68		8	To be determined
Other		13		14	Various

Total Noncurrent Regulatory Assets	$	4,730	$	4,864

Total Regulatory Assets	$	4,897	$	5,019


	As of December 31,
	2011		2010		Recovery/Refund Period
	Millions
Regulatory Liabilities
Current:
Market Transition Charge Refund, net	$	23	$	58	Through June 2012(2)
Deferred Income Taxes		39		46	Various
Overrecovered Gas Costs—BGSS		30		40	Annual filing for recovery(1)(2)
Renewables & Energy Efficiency		2		7	Annual filing for recovery(1)(2)
Excess Cost of Removal		0		11	Recovery ends November 2011
Capital Stimulus Overcollection		0		5	Annual filing for recovery(1)(2)
FERC Formula Rate True-up		1		5	Annual filing for recovery(1)(2)
NGC		5		0	Annual filing for recovery(1)(2)
BGS Retail Adder		0		2	Charge ends June 2011

Current Regulatory Liabilities	$	100	$	174

Noncurrent:
Electric Cost of Removal	$	222	$	244	Reduced as cost is incurred
Market Transition Charge Refund, net		0		26	January - June 2012
Gas Weather Normalization Deferral		0		9	Annual filing for recovery(1)(2)
Other		15		14	Various(1)

Total Noncurrent Regulatory Liabilities	$	237	$	293

Total Regulatory Liabilities	$	337	$	467

(1)	Recovered/Refunded with interest

(2)	Recoverable/Refundable per specific rate order

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:

•

NGC: Represents the difference between the cost of non-utility generation and the amounts realized from selling that energy at market rates through PJM and ratepayer collections. The BPU instructed PSE&G to transfer the remaining $150 million debit balance for the Market Transition Charge (MTC) from the SBC to the NGC in March 2007.

•

Underrecovered Electric Energy Costs: These costs represent the underrecovered amounts associated with Basic Generation Service (BGS), as approved by the BPU.

•

SBC: The SBC, as authorized by the BPU and the New Jersey Electric Discount and Energy Competition Act (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) Social Programs (electric only) which include electric bad debt expense; and 4) the Remediation Adjustment Clause (RAC) for incurred MGP remediation expenditures. All components accrue interest on both over and underrecoveries.

•

Renewables & Energy Efficiency: These costs are the overrecovered or underrecovered amounts associated with various renewable energy and energy efficiency programs.

•

Capital Stimulus Undercollection/Overcollection: BPU approved collection of costs related to distribution projects.

•

Gas Weather Normalization Deferral: This represents the over or under collection of gas margin refundable or recoverable under the BPU's weather normalization clause.

•

FERC Formula Rate True-up: Over or under collection of transmission earnings calculated using a FERC approved formula.

•

Stranded Costs To Be Recovered: This reflects deferred costs, which are being recovered through the securitization transition charges authorized by the BPU in irrevocable financing orders and being collected by PSE&G, as servicer on behalf of Transition Funding and Transition Funding II, respectively. Funds collected are remitted to Transition Funding and Transition Funding II and are used for interest and principal payments on the transition bonds and related costs and taxes.

Transition Funding and Transition Funding II are wholly owned, bankruptcy-remote subsidiaries of PSE&G that purchased certain transition property from PSE&G and issued transition bonds secured by such property. The transition property consists principally of the rights to receive electricity consumption-based per kilowatt-hour (kWh) charges from PSE&G electric distribution customers, which represent irrevocable rights to receive amounts sufficient to recover certain of PSE&G's transition costs related to deregulation, as approved by the BPU.

•

MGP Remediation Costs: Represents the low end of the range for the remaining environmental investigation and remediation program costs that are probable of recovery in future rates. Once these costs are incurred, they are recovered through the RAC clause in the SBC.

•

Pension and Other Postretirement: 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, prior service costs and transition obligations as a result of adoption, which have not been expensed. These costs will be amortized and recovered in future rates.

•

Deferred Income Taxes: These amounts represent the portion of deferred income taxes that will be recovered or refunded through future rates, based upon established regulatory practices. The Regulatory Asset is expected to be recovered, without interest, over the period the underlying book-tax timing differences reverse and become current taxes. The Regulatory Liability is expected to be refunded, without interest, within the next twelve months.

•

Remediation Adjustment Clause (Other SBC): Costs incurred to clean up manufactured gas plants which are recovered over seven years.

•

New Jersey Clean Energy Program: The BPU approved future funding requirements for Energy Efficiency and Renewable Energy Programs through 2012. Once the rates are measured, they are recovered through the SBC.

•

Gas Contract Mark-to-Market (MTM): The fair value of gas hedge contracts and gas cogeneration supply contracts. This asset is offset by a derivative liability and an intercompany payable on the Consolidated Balance Sheets.

•

OPEB Costs: Include costs associated with the adoption of accounting guidance for employers' benefits other than pensions, which were deferred and amortized over fifteen years.

•

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

•

Conditional 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.

•

Repair Allowance Taxes: This represents tax, interest and carrying charges relating to disallowed tax deductions for repair allowance as authorized by the BPU with recovery over 10 years effective August 1, 2003.

•

Regulatory Restructuring Costs: These are costs related to the restructuring of the energy industry in New Jersey through the Competition Act and include such items as the system design work necessary to transition PSE&G to a transmission and distribution only company, as well as costs incurred to transfer and establish the generation function as a separate corporate entity with recovery over 10 years beginning August 1, 2003.

•

Gas Margin Adjustment Clause: PSE&G defers the margin differential received from Transportation Gas Service Non-Firm Customers versus bill credits provided to Basic Gas Supply Service (BGSS)-Firm customers.

•

Customer Care System: These are deferred costs associated with the replacement of PSE&G's legacy customer accounting system in March 2009.

•

Plant and Regulatory Study Costs: These are costs incurred by PSE&G and required by the BPU which are related to current and future operations, including safety, planning, management and construction.

•

Incurred But Not Reported Claim Reserve: Represents reserves for worker's compensation and injuries and damages that exceed the amounts recognized in rates on a settlement accounting basis.

•

Asbestos Abatement: Represents costs incurred to remove and dispose of asbestos insulation at PSE&G's then-owned fossil generating stations. Per a December 1992 BPU order, these costs are treated as Cost of Removal for ratemaking purposes.

•

Cape May Street Cleanup: Estimated cost for environmental remediation of a company owned site. Recovery will be sought from the BPU.

•

Storm Damage: Costs incurred in the cleanup of 2010 and 2011 storms for which recovery will be sought from the BPU.

•

Other Regulatory Assets: This includes: 1) Undercollected gas cost of removal; 2) an offset to a liability for future demand side management standard offer spending; and 3) costs related to LCAPP.

•

Market Transition Charge Refund (MTC), net: These costs represent the overrecovered amounts associated with MTC.

•

Overrecovered Gas Costs: These costs represent the overrecovered amounts associated with BGSS, as approved by the BPU. Interest is accrued on overrecovered balances.

•

Excess Cost of Removal: The BPU directed PSE&G to refund $66 million of excess gas cost of removal accruals over a five-year period ending November 2011.

•

BGS Retail Adder: Charge included in the BGS tariff rate to induce customer shopping.

•

Electric Cost of Removal: PSE&G accrues and collects for cost of removal in rates. The liability for non-legally required cost of removal is classified as a Regulatory Liability. This liability is reduced as removal costs are incurred. Accumulated cost of removal is a reduction to the rate base.

•

Other Regulatory Liabilities: This includes: 1) amounts collected from customers in order for Transition Funding to obtain a AAA rating on its transition bonds; 2) third party billing discounts related to the Competition Act; and 3) uncertain tax positions.

PSE&G [Member]

Regulatory Assets And Liabilities