RATES AND REGULATORY ACTIONS:

SJG and ETG are subject to the rules and regulations of the New Jersey Board of Public Utilities (BPU).

SJG:

In March 2018, SJG filed a petition with the BPU seeking to continue its existing Energy Efficiency Programs (EEP), with modifications, and to implement new programs ( “EEP IV”) for a five-year period with a proposed budget of approximately $195.4 million and with the same rate recovery mechanism that exists for its current EEP's. Under its existing EEP's, SJG is permitted to recover incremental operating and maintenance expenses and earn a return of, and return on, program investments. The BPU approved this matter in October 2018 (see Note 18).

In June 2018, SJG filed its ninth annual Energy Efficiency Tracker (“EET”) rate adjustment petition, requesting a $1.6 million decrease in revenues to continue recovering the costs of, and the allowed return on, prior investments associated with its EEPs. The matter is currently pending BPU approval.

In July 2018, SJG filed its annual Societal Benefits Clause ("SBC") petition, requesting a net $3.4 million decrease, including tax, in SBC- related revenues. The SBC is comprised of three sub-components, including the Remediation Adjustment Clause ("RAC"), the Clean Energy Program ("CLEP") and the Transportation Initiation Clause ("TIC"). The matter is currently pending BPU approval.

In September 2018, the BPU approved the following SJG requests:


•	A $65.5 million increase in the Basic Gas Supply Service ("BGSS") annual revenues and a $26.4 million decrease in Conservation Incentive Program ("CIP") annual revenues, both effective October 1, 2018, on a provisional basis, associated with the 2018-2019 BGSS/CIP year, which runs from October 1, 2018 through September 30, 2019. The matter is currently pending final BPU approval.


•	An increase in annual revenues from base rates of $6.6 million to reflect the roll-in of $60.4 million of Accelerated Infrastructure Replacement Program ("AIRP II") investments made from July 1, 2017 through June 30, 2018, effective October 1, 2018.


•	The Statewide Universal Service Fund ("USF") annual 2018-2019 budget for all of the New Jersey's gas utilities, which included a $0.9 million increase in SJG's USF recoveries, effective October 1, 2018.


•	The authorization to implement changes in the corporate tax rate, from 35% to 21%, within SJG's base rate, in accordance with Tax Reform, including:


◦	A final base rate adjustment to reflect an annual revenue reduction of approximately $25.9 million;


◦	A one-time customer refund of approximately $13.8 million, including interest, for over collected tax during the period January 1, 2018 through September 30, 2018; and


◦	A customer refund of approximately $27.5 million for the "Unprotected" Excess Deferred Income Tax through a separate tariff rider over a five-year period. The refund related to the "Protected" Excess Deferred Tax will be addressed no later than March 31, 2019.

The BGSS, CIP and USF approvals do not impact SJG's earnings. They represent changes in the cash requirement of SJG corresponding to cost changes and/or previous over/under recoveries from ratepayers associated with each respective mechanism.

There have been no other significant regulatory actions or changes to SJG's rate structure since December 31, 2017. See Note 10 to the Consolidated Financial Statements in Item 8 of SJI's and SJG's Annual Report on Form 10-K for the year ended December 31, 2017.

ETG:

As part of the Acquisition approval by the BPU, the Company was required to provide ETG customers with a credit of $15.0 million within ninety days of the Acquisition closing date, which was July 1, 2018. ETG provided a one-time bill credit to all of its customers in the September billing cycle.

In December 2017, the BPU adopted new rules related to utility Infrastructure Investment and Recovery ("IIT") to encourage utilities to implement infrastructure investment programs ("IIP"). ETG filed an IIP request with the BPU in October 2018 (see Note 18).

In June 2017, the BPU approved a base rate settlement, effective July 1, 2017, which granted ETG a base rate increase of $13.3 million based on a 9.6% return on equity.

In March 2018, ETG filed a petition with the BPU requesting an annual reduction of $10.9 million, effective April 1, 2018, which reflected the reduced corporate tax rate. The BPU authorized ETG to implement its proposed base rate reduction on April 1, 2018 on an interim basis and in June 2018, the BPU approved ETG's interim base rate reduction as permanent.

Also in March 2018, ETG requested authorization to issue a one-time customer refund in a billing cycle during or before September 2018 for over-collected tax during the period January 1, 2018 though March 31, 2018. In June 2018, the BPU authorized a one-time customer refund of over-collected tax during the period of January 1, 2018 through June 30, 2018. During the three months ended September 30, 2018, ETG issued a one-time customer refund of $4.8 million, including interest, for over-collected tax during the period January 1, 2018 through June 30, 2018.

ELK:

ELK is subject to the rules and regulations of the Maryland Public Service Commission ("MPSC").

As part of the Acquisition approval by the MPSC, the Company was required to provide ELK customers with a one-time bill credit of $0.3 million. Bill credits were applied in the October billing cycle to ELK customers.

In June 2018, ELK filed a base rate case application with the MPSC. In September 2018, ELK revised the application to request an annual revenue increase of $0.3 million. ELK expects the base rate case to be concluded in 2019.