| REVENUE |
REVENUE:
At contract inception, SJI and SJG assess the goods and services promised in all of its contracts with customers, and identifies a performance obligation for each promise to transfer to a customer a distinct good or service.
As applicable for each revenue stream and customer contract type, SJI and SJG follow two approaches:
| | • | SJI and SJG have elected the Practical Expedient in ASC 606 for recognizing revenue on contracts with customers on a portfolio of performance obligations with similar characteristics, as we reasonably expect the effects of applying the guidance to the portfolio would not differ materially from applying it to individual contracts. |
| | • | SJI and SJG apply the accounting guidance for recognizing revenue on contracts with customers on a series of distinct goods and services as one performance obligation, as long as the distinct goods and services are part of a series that are substantially the same and satisfied over time, and the same method would be used to measure progress towards satisfaction of the performance obligation. All performance obligations noted below under "Revenue Recognized Over Time" apply this guidance. |
Below is a listing of all performance obligations that arise from contracts with customers, along with details on the satisfaction of each performance obligation, the significant payment terms, and the nature of the goods and services being transferred: | | | | Revenue Recognized Over Time: | Reportable Segment | Performance Obligation | Description | SJG Utility Operations; ETG Gas Utility Operations; ELK Gas Utility Operations; Wholesale Energy Operations; Retail Gas and Other Operations | Natural Gas | SJG, ETG and ELK sell natural gas to residential, commercial and industrial customers, and price is based on regulated tariff rates which are established by the BPU or the MPSC, as applicable. There is an implied contract with a customer for the purchase, delivery, and sale of gas, and the customer is billed monthly, with payment due within 30 days. SJRG sells natural gas to commercial customers at either a fixed quantity or at variable quantities based on a customer's needs. Payment is due on the 25th of each month for the previous month's deliveries. SJE sells natural gas to commercial, industrial and residential customers at fixed prices throughout the life of the contract, with the customer billed monthly and payment due within 30 days. For all four segments, revenue is currently being recognized over time based upon volumes delivered (i.e., unit of output) or through the passage of time ratably as the customer uses natural gas, which represents satisfaction of the performance obligation. | SJG Utility Operations; ETG Gas Utility Operations; ELK Gas Utility Operations; Wholesale Energy Operations | Pipeline transportation capacity | SJG, ETG and SJRG sell pipeline transportation capacity on a wholesale basis to various customers on the interstate pipeline system and transport natural gas purchased directly from producers or suppliers to their customers. These contracts to sell this capacity are at a price, quantity and time period agreed to by both parties determined on a contract by contract basis. Payment is due on the 25th of each month for the previous month's deliveries. Revenue is currently being recognized over time based upon volumes delivered (i.e., unit of output) or through the passage of time ratably coinciding with the delivery of gas and the customer obtaining control, which represents satisfaction of the performance obligation. | Wholesale Energy Operations | Fuel Management Services | SJRG currently has eleven fuel supply management contracts where SJRG has acquired pipeline transportation capacity that allows SJRG to match end users, many of which are merchant generators, with producers looking to find a long-term solution for their supply. Natural gas is sold to the merchant generator daily based on its needs, with payment made either weekly or biweekly depending on the contract. Revenue is currently being recognized over time based upon volumes delivered (i.e., unit of output) coinciding with the delivery of gas and the customer obtaining control, which represents satisfaction of the performance obligation. | Retail Electric Operations | Electricity | SJE sells electricity to commercial, industrial and residential customers at fixed prices throughout the life of the contract, with the customer billed monthly and payment due within 30 days. Revenue is currently being recognized over time based upon volumes delivered (i.e., unit of output) or through the passage of time ratably coinciding with the delivery of electricity and the customer obtaining control, which represents satisfaction of the performance obligation. | On-Site Energy Production | Solar | Marina has several wholly-owned solar projects that earn revenue based on electricity generated. The customer pays monthly as electricity is being generated, with payment due within 30 days. The performance obligation is satisfied as kwh's of energy are generated (i.e., unit of output), which is when revenue is recognized. As disclosed in Note 1, solar assets are in the process of being sold to a third party; however, as of September 30, 2018, all solar assets were still owned by Marina. | On-Site Energy Production | Marina Thermal Facility | Marina has a contract with a casino and resort in Atlantic City, NJ to provide cooling, heating and emergency power. There are multiple performance obligations with this contract, including electric, chilled water and hot water, and each of these are considered distinct and separately identifiable, and they are all priced separately. These performance obligations are satisfied over time ratably as they are used by the customer, who is billed monthly. Payment is due within 30 days. |
| | | | Revenue Recognized at a Point in Time: | Reportable Segment | Performance Obligation | Description | On-Site Energy Production | SREC's | The customer is billed based on a contracted amount of SREC's to be sold, with the price based on the market price of the SRECs at the time of generation. This does not represent variable consideration as the price is known and established at the time of generation and delivery to the customer. The performance obligation is satisfied at the point in time the SREC is delivered to the customer, which is when revenue is recognized. Payment terms are approximately 10 days subsequent to delivery. As disclosed in Note 1, SJI has entered into an agreement to sell SREC's generated to a third party; as a result, no revenue with customers from SREC agreements was recorded for the three months ended September 30, 2018. |
For all revenue streams listed above, revenue is recognized using the Practical Expedient in ASC 606 which allows an entity to recognize revenue in the amount that is invoiced, as long as that amount corresponds to the value to the customer ("Invoiced Practical Expedient"). SJI's and SJG's contracts with customers discussed above are at prices that are known to the customer at the time of delivery, either through a fixed contractual price or market prices that are established and tied to each delivery. These amounts match the value to the customer as they are purchasing and obtaining the good or service on the same day at the agreed-upon price. This eliminates any variable consideration in transaction price, and as a result revenue is recognized at this price at the time of delivery.
SJI and SJG have determined that the above methods provide a faithful depiction of the transfer of goods or services to the customer. For all above performance obligations, SJI's and SJG's efforts are expended throughout the contract based on seasonality and customer needs. Further, for various contracts among each performance obligation, SJI and SJG may have a stand ready obligation to provide goods or services on an as needed basis to the customer.
Because the Invoiced Practical Expedient is used for recognizing revenue, SJI and SJG further adopted the Practical Expedient in ASC 606 that allows both company's to not disclose additional information regarding remaining performance obligations. SJI revenues from contracts with customers totaled $314.5 million and $960.3 million for the three and nine months ended September 30, 2018, respectively. SJG revenues from contracts with customers totaled $49.5 million and $307.5 million for the three and nine months ended September 30, 2018, respectively. The SJG balance is a part of the SJG utility operating segment, and is before intercompany eliminations with other SJI entities. Revenues on the condensed consolidated statements of income that are not with contracts with customers consist of (a) revenues from alternative revenue programs at the SJG, ETG and ELK gas utility operating segments, and (b) both utility and nonutility revenue from derivative contracts at the SJG and ETG gas utility, wholesale energy, retail gas and retail electric operating segments.
SJI and SJG disaggregate revenue from contracts with customers into customer type and product line. SJI and SJG have determined that disaggregating revenue into these categories achieves the disclosure objective in ASC 606 to depict how the nature, timing and uncertainty of revenue and cash flows are affected by economic factors. Further, disaggregating revenue into these categories is consistent with information regularly reviewed by the CODM in evaluating the financial performance of SJI's operating segments. SJG only operates in the SJG Utility Operations segment. See Note 6 for further information regarding SJI's operating segments.
Disaggregated revenues from contracts with customers, by both customer type and product line, are disclosed below, by operating segment, for the three and nine months ended September 30, 2018 (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Three Months Ended
September 30, 2018 | | SJG Utility Operations | ETG Utility Operations | ELK Utility Operations | Wholesale Energy Operations | Retail Gas and Other Operations | Retail Electric Operations | On-Site Energy Production | Appliance Service Operations | Corporate Services and Intersegment | Total | Customer Type: | | | | | | | | | | | Residential | $ | 26,683 |
| $ | 16,193 |
| $ | 222 |
| $ | — |
| $ | — |
| $ | 9,691 |
| $ | — |
| $ | 509 |
| $ | — |
| $ | 53,298 |
| Commercial & Industrial | 19,109 |
| 11,946 |
| 496 |
| 173,363 |
| 12,487 |
| 27,755 |
| 15,317 |
| — |
| (4,032 | ) | 256,441 |
| OSS & Capacity Release | 3,066 |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| 3,066 |
| Other | 658 |
| 978 |
| 26 |
| — |
| — |
| — |
| — |
| — |
| — |
| 1,662 |
| | $ | 49,516 |
| $ | 29,117 |
| $ | 744 |
| $ | 173,363 |
| $ | 12,487 |
| $ | 37,446 |
| $ | 15,317 |
| $ | 509 |
| $ | (4,032 | ) | $ | 314,467 |
| Product Line: | | | | | | | | | | | Gas | $ | 49,516 |
| $ | 29,117 |
| $ | 718 |
| $ | 173,363 |
| $ | 12,487 |
| $ | — |
| $ | — |
| $ | — |
| $ | (1,579 | ) | $ | 263,622 |
| Electric | — |
| — |
| — |
| — |
| — |
| 37,446 |
| — |
| — |
| (2,453 | ) | 34,993 |
| Solar | — |
| — |
| — |
| — |
| — |
| — |
| 5,392 |
| — |
| — |
| 5,392 |
| CHP | — |
| — |
| — |
| — |
| — |
| — |
| 8,151 |
| — |
| — |
| 8,151 |
| Landfills | — |
| — |
| — |
| — |
| — |
| — |
| 1,774 |
| — |
| — |
| 1,774 |
| Other | — |
| — |
| 26 |
| — |
| — |
| — |
| — |
| 509 |
| — |
| 535 |
| | $ | 49,516 |
| $ | 29,117 |
| $ | 744 |
| $ | 173,363 |
| $ | 12,487 |
| $ | 37,446 |
| $ | 15,317 |
| $ | 509 |
| $ | (4,032 | ) | $ | 314,467 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Nine Months Ended
September 30, 2018 | | SJG Utility Operations | ETG Utility Operations | ELK Utility Operations | Wholesale Energy Operations | Retail Gas and Other Operations | Retail Electric Operations | On-Site Energy Production | Appliance Service Operations | Corporate Services and Intersegment | Total | Customer Type: | | | | | | | | | | | Residential | $ | 217,927 |
| $ | 16,193 |
| $ | 222 |
| $ | — |
| $ | — |
| $ | 24,178 |
| $ | — |
| $ | 1,480 |
| $ | — |
| $ | 260,000 |
| Commercial & Industrial | 78,478 |
| 11,946 |
| 496 |
| 423,585 |
| 60,854 |
| 72,135 |
| 61,208 |
| — |
| (20,508 | ) | 688,194 |
| OSS & Capacity Release | 9,242 |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| 9,242 |
| Other | 1,860 |
| 978 |
| 26 |
| — |
| — |
| — |
| — |
| — |
| — |
| 2,864 |
| | $ | 307,507 |
| $ | 29,117 |
| $ | 744 |
| $ | 423,585 |
| $ | 60,854 |
| $ | 96,313 |
| $ | 61,208 |
| $ | 1,480 |
| $ | (20,508 | ) | $ | 960,300 |
| Product Line: | | | | | | | | | | | Gas | $ | 307,507 |
| $ | 29,117 |
| $ | 718 |
| $ | 423,585 |
| $ | 60,854 |
| $ | — |
| $ | — |
| $ | — |
| $ | (8,067 | ) | $ | 813,714 |
| Electric | — |
| — |
| — |
| — |
| — |
| 96,313 |
| — |
| — |
| (6,134 | ) | 90,179 |
| Solar | — |
| — |
| — |
| — |
| — |
| — |
| 33,133 |
| — |
| (6,307 | ) | 26,826 |
| CHP | — |
| — |
| — |
| — |
| — |
| — |
| 23,165 |
| — |
| — |
| 23,165 |
| Landfills | — |
| — |
| — |
| — |
| — |
| — |
| 4,910 |
| — |
| — |
| 4,910 |
| Other | — |
| — |
| 26 |
| — |
| — |
| — |
| — |
| 1,480 |
| — |
| 1,506 |
| | $ | 307,507 |
| $ | 29,117 |
| $ | 744 |
| $ | 423,585 |
| $ | 60,854 |
| $ | 96,313 |
| $ | 61,208 |
| $ | 1,480 |
| $ | (20,508 | ) | $ | 960,300 |
|
The following table provides information about SJI's and SJG's receivables and unbilled revenue from contracts with customers (in thousands):
| | | | | | | | | Accounts Receivable (1) | Unbilled Revenue (2) | SJI (including SJG and all other consolidated subsidiaries): | Beginning balance as of 1/1/18 | $ | 202,379 |
| $ | 73,377 |
| Ending balance as of 9/30/18 | 220,561 |
| 29,313 |
| Increase (Decrease) | $ | 18,182 |
| $ | (44,064 | ) | SJG: | | | Beginning balance as of 1/1/18 | $ | 78,571 |
| $ | 54,980 |
| Ending balance as of 9/30/18 | 72,010 |
| 7,995 |
| Increase (Decrease) | $ | (6,561 | ) | $ | (46,985 | ) |
(1) Included in Accounts Receivable in the condensed consolidated balance sheets. A receivable is SJI's and SJG's right to consideration that is unconditional, as only the passage of time is required before payment is expected from the customer. All of SJI's and SJG's Accounts Receivable arise from contracts with customers.
(2) Included in Unbilled Revenues in the condensed consolidated balance sheets. All unbilled revenue for SJI and SJG arises from contracts with customers. Unbilled revenue relates to SJI's and SJG's right to receive payment for commodity delivered but not yet billed. This represents contract assets that arise from contracts with customers, which is defined in ASC 606 as the right to payment in exchange for goods already transferred to a customer, excluding any amounts presented as a receivable. The unbilled revenue is transferred to accounts receivable when billing occurs and the rights to collection become unconditional. The change in unbilled revenues for the nine months ended September 30, 2018 is due primarily to the timing difference between SJI and SJG delivering the commodity to the customer and the customer actually receiving the bill for payment. |