RATES AND REGULATORY ACTIONS:

SJG and ETG are subject to the rules and regulations of the BPU. ELK is subject to the rules and regulations of the MPSC.

SJG:

In January 2017, SJG filed a base rate case with the BPU to increase its base rates in order to obtain a return on new capital investments made by SJG since the settlement of its last base rate case in 2014. In October 2017, SJG settled its base rate case, pursuant to which the BPU granted SJG a base rate increase, effective November 1, 2017, of $39.5 million, which was predicated in part upon a 6.80% rate of return on rate base that included a 9.60% return on common equity. The BPU Order allows SJG to recover revenues associated with certain infrastructure and system improvement investments made and the related expenses incurred since the approval of its previous base rate case proceeding in September 2014.

SJG's tariff, a schedule detailing the terms, conditions and rate information applicable to its various types of natural gas service, as approved by the BPU, has several primary rate mechanisms as discussed in detail below:

BGSS Clause - The BGSS price structure allows SJG to recover all prudently incurred gas costs. BGSS charges to customers can be either monthly or periodic (annual). Monthly BGSS charges are applicable to large use customers and are referred to as monthly because the rate changes on a monthly basis pursuant to a BPU-approved formula based on commodity market prices. Periodic BGSS charges are applicable to lower usage customers, which include all of SJG's residential customers, and are evaluated at least annually by the BPU. However, to some extent, more frequent rate changes to the periodic BGSS are allowed. SJG collects gas costs from customers on a forecasted basis and defers periodic over/under recoveries to the following BGSS year, which runs from October 1 through September 30. If SJG is in a net cumulative undercollected position, gas costs deferrals are reflected on the balance sheet as a regulatory asset. If SJG is in a net cumulative overcollected position, amounts due back to customers are reflected on the balance sheet as a regulatory liability. SJG pays interest on net overcollected BGSS balances at the rate of return on rate base utilized by the BPU to set rates in the last base rate proceeding.

For the preceding three years, regulatory actions regarding the BGSS were as follows:


•	January 2016 - SJG provided a BGSS bill credit of approximately $20.0 million to its residential and small commercial customers. This credit was in addition to the overall rate reduction that was approved by the BPU and took effect in 2015.


•	June 2016 - SJG filed its annual BGSS filing with the BPU, requesting a $47.1 million decrease in gas cost recoveries.


•	September 2016 - The BPU issued an Order approving, on a provisional basis, SJG’s request for a $47.1 million decrease in gas cost recoveries, effective October 2016.


•	December 2016 - SJG provided a BGSS bill credit of approximately $10.0 million to its residential and small commercial customers. The credit was in addition to the overall rate reduction that was approved by the BPU and took effect in October 2016.


•	April 2017 - SJG provided a BGSS bill credit of approximately $8.0 million to its residential and small commercial customers. The credit was in addition to the overall rate reduction that was approved by the BPU and took effect in October 2016.


•	June 2017 - SJG filed its annual BGSS filing with the BPU, requesting a $4.7 million decrease in gas cost recoveries.


•	September 2017 - The BPU issued an Order approving, on a provisional basis, SJG’s request for a $4.7 million decrease in gas cost recoveries associated with the 2017-2018 BGSS year, effective October 2017.


•	May 2018 - SJG received BPU final approval of provisional rates that were authorized in a BPU order during September 2017, as they relate to SJG's 2017-2018 BGSS filing, as submitted to the BPU in June 2017. The impact of the final rates was a $4.7 million decrease in revenue.


•	June 2018 - SJG filed its annual BGSS filing with the BPU requesting a $65.5 million increase in gas recoveries, which included a $53.7 million under-recovered deferred balance.

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September 2018 - The BPU issued an Order approving, on a provisional basis, SJG's request for a $65.5 million increase in the gas cost recoveries associated with the 2018-2019 BGSS year, effective October 1, 2018. The matter was thereafter referred to the Office of Administrative Law for further proceedings. Presently, the parties are engaged in settlement negotiations. In the event a settlement is not reached, evidentiary hearings are scheduled for April 2019. A range of potential outcomes include, among other things, provisional rates will be made final, a reduction in rates to minimize negative financial impacts on ratepayers for a set period of time, a disallowance of part or all of the under-recovered deferred balance, modifications to the Company’s existing risk/hedging policies, limitations on affiliate transactions, and/or additional filing requirements associated with future annual BGSS filings.


•	December 2018 - SJG submitted a notice of intent to self-implement a BGSS rate adjustment based on a 5% increase of the monthly bill of a typical residential customer, effective February, 1, 2019.

CIP - The primary purpose of the CIP is to promote conservation efforts, without negatively impacting financial stability, and to base SJG's profit margin on the number of customers rather than the amount of natural gas distributed to customers. Each CIP year begins October 1 and ends September 30 of the subsequent year. On a monthly basis during the CIP year, SJG records adjustments to earnings based on weather and customer usage factors, as incurred. Subsequent to each year, SJG makes filings with the BPU to review and approve amounts recorded under the CIP. BPU-approved cash inflows or outflows generally will not begin until the next CIP year.

For the preceding three years, regulatory actions regarding the CIP were as follows:


•	June 2016 - SJG filed its annual CIP filing with the BPU, requesting a $46.5 million increase in revenues, which includes a $9.9 million increase in non-weather related revenues and a $36.6 million increase in weather related revenues.


•	September 2016 - The BPU issued an Order approving, on a provisional basis, the 2016-2017 CIP rates filed in June 2016, effective October 2016.


•	June 2017 - SJG filed its annual CIP filing with the BPU requesting a $0.2 million increase in revenues, which included a $1.1 million increase in non-weather related revenues and a $0.9 million decrease in weather related revenues.


•	September 2017 - The BPU issued an Order approving the 2017-2018 CIP Year rates filed in June 2017, effective October 2017.


•	May 2018 - SJG received BPU final approval of provisional rates that were authorized in a BPU order during September 2017, as they relate to SJG's 2017-2018 CIP filing, as submitted to the BPU in June 2017. The impact of the final rates was a $0.2 million increase in revenue.


•	September 2018 - SJG received BPU final approval of a $26.4 million decrease in CIP annual revenues, effective October 1, 2018, on a provisional basis, associated with the 2018-2019 CIP year, which runs from October 1, 2018 through September 30, 2019.

AIRP - In February 2013, the BPU issued an Order approving a $141.2 million program to replace cast iron and unprotected bare steel mains and services over a four-year period, with annual investments of approximately $35.3 million. Pursuant to the Order, AIRP investments are to be reviewed and included in rate base in future base rate proceedings.

For the preceding three years, regulatory actions regarding AIRP were as follows:

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February 2016 - SJG filed a petition with the BPU for approval to continue its AIRP, which was set to expire at the end of 2016. In its petition, SJG requested to extend the AIRP for an additional seven years with program investments totaling approximately $500.0 million. In its Petition, SJG also requested to increase revenues by $13.0 million to reflect in base rates all AIRP investments made from the time of SJG’s last base rate case to the end of the initial AIRP.

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October 2016 - The BPU issued an Order approving an extension of the AIRP for a five-year period (“AIRP II”), commencing October 1, 2016, with authorized investments of up to $302.5 million to continue replacing cast iron and unprotected bare steel mains and associated services. The BPU also approved an $11.0 million increase in revenues associated with the roll in of $80.2 million of AIRP investments, inclusive of $5.7 million of AFUDC into base rates, effective December 1, 2016.


•	April 2017 - SJG filed a petition, pursuant to the October 2016 BPU approval of the AIRP II, seeking a base rate adjustment to increase annual revenues by approximately $4.5 million to reflect the roll-in of $42.0 million of AIRP II investments made from October 1, 2016 through June 30, 2017.


•	September 2017 - The BPU issued an Order approving an increase in annual revenues from base rates of $5.0 million to reflect the roll-in of $46.1 million AIRP II investments made from October 2016 through June 2017, effective October 1, 2017.


•	April 2018 - SJG submitted its second annual filing, pursuant to the October 2016 BPU approval of the AIRP II, seeking a base rate adjustment to increase annual revenues by approximately $6.6 million to reflect the roll-in of $60.4 million of AIRP II investments placed in service from July 1, 2017 through June 30, 2018. This was approved in September 2018.

SHARP - In August 2014, the BPU issued an order approving a $103.5 million SHARP to replace low pressure distribution mains and services with high pressure mains and services in coastal areas that are susceptible to flooding during major storm events over a three-year period. Pursuant to the Order, SHARP investments are to be recovered through annual base rate adjustments.

For the preceding three years, regulatory actions regarding SHARP included the following:


•	April 2016 - SJG filed a petition seeking a base rate adjustment to increase annual revenues by approximately $4.3 million to reflect approximately $33.7 million of SHARP investments made from July 2015 through June 2016.


•	September 2016 - The BPU approved an increase in annual revenues from base rates of $3.9 million to reflect the roll-in of $33.7 million of SHARP investments made from July 2015 through June 2016, effective October 1, 2016.


•	April 2017 - SJG filed a petition seeking a base rate adjustment to increase annual revenues by approximately $4.0 million to reflect approximately $35.7 million of SHARP investments made from July 2016 through June 2017.


•	September 2017 - The BPU issued an Order approving an increase in annual revenues from base rates of $3.6 million to reflect the roll-in of $33.3 million SHARP investments made from July 2016 through June 2017, effective October 1, 2017.

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November 2017 - SJG filed a petition with the BPU for approval to continue its storm hardening efforts under a second phase of SHARP (“SHARP II”). Phase one of SJG’s initial SHARP expired in June of 2017. In its petition, SJG proposed a three-year program, with a total investment level of approximately $110.3 million, focused on four system enhancement projects within the coastal regions. SJG also proposed to recover the SHARP II through annual base rate adjustments, with no impact to customer bills until October 2019. This was approved by the BPU in May 2018 with a total of $100.3 million recoverable through SHARP II. Pursuant to the order, SHARP II investments are to be recovered through annual base rate adjustments.

EET - In July 2009, the BPU issued an Order approving a $17.0 million EEP I, under which SJG was permitted to invest in EEPs for residential, commercial and industrial customers over a two-year period. Pursuant to the Order, SJG was also permitted to recover incremental operating and maintenance expenses and earn a return of, and return on, program investments annually through the EET. The BPU has authorized SJG to continue to offer EEPs as discussed further below.

For the preceding three years, regulatory actions regarding the EET/EEP were as follows:


•	February 2016 - The BPU approved a revenue decrease of $7.9 million associated with the two most recent annual EET rate adjustment filings, effective April 1, 2016.


•	June 2016 - SJG filed its annual EET rate adjustment petition, requesting a $0.8 million decrease in revenues to continue recovering the costs of, and the allowed return on, prior investments associated with EEPs.


•	October 2016 - The BPU approved a revenue decrease of $1.6 million associated with SJG's annual EET rate adjustment filing, effective November 10, 2016.


•	November 2016 - SJG filed a letter petition requesting an extension of its current EEP III through December 31, 2018, allowing SJG to spend the remainder of its existing BPU approved budget over the extended term.


•	January 2017 - The BPU issued an Order approving SJG’s request to extend the expiration date of EEP III from August 2017 to December 2018, without any modification to the subprograms or the amount of the previously authorized budget of $36.3 million, inclusive of operation and maintenance expenses.


•	June 2017 - SJG filed its Eighth Annual EET Filing, requesting a $3.0 million increase in revenues to continue recovering the costs of, and the allowed return on, prior investments associated with EEPs.


•	November 2017 - The BPU issued an Order approving a revenue increase of $2.6 million associated with the Eighth Annual EET Filing, effective December 1, 2017.

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March 2018 - SJG filed a petition with the BPU seeking to continue its existing EEP's, with modifications, and to implement new programs (the “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.


•	June 2018 - SJG filed its ninth annual 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.


•	October 2018 - The BPU issued an Order approving SJG's request to continue its existing EEPs with modifications, and to implement several new EEP's for a period of three years (the "EEP IV"), with a total budget of $81.3 million and a revenue increase of $3.5 million, effective November 1, 2018.


•	January 2019 - The BPU issued an Order approving a revenue decrease of $1.6 million associated with SJG's annual EET rate adjustment filing, effective February, 1, 2019.

SBC - The SBC allows SJG to recover costs related to several BPU-mandated programs. Within the SBC are a RAC, the NJCEP) and the USF program. SBC adjustments affect revenue and cash flows but do not directly affect earnings as related costs are deferred and recovered through rates on an on-going basis.

For the preceding three years, regulatory actions regarding the SBC, with the exception of USF, which requires separate regulatory filings, were as follows:


•	July 2016 - SJG made its annual 2016-2017 SBC filing, requesting a $16.0 million increase in SBC revenues. The BPU approved this filing in May 2017.


•	July 2017 - SJG made its annual 2017-2018 SBC filing, requesting an $8.5 million increase in annual revenues. The BPU approved this filing in January 2018.


•	July 2018 - SJG made its annual 2018-2019 SBC filing, requesting $3.4 million decrease in annual revenues.

RAC - The RAC recovers environmental remediation costs of 12 former gas manufacturing plants (see Note 15). The BPU allows SJG to recover such costs over seven-year amortization periods. The net between the amounts actually spent and amounts recovered from customers is recorded as a regulatory asset, "Environmental Remediation Cost Expended - Net." RAC activity affects revenue and cash flows but does not directly affect earnings because of the cost recovery over seven-year amortization periods. As of December 31, 2018 and 2017, SJG reflected the unamortized remediation costs of $136.2 million and $100.3 million, respectively, on the consolidated balance sheets under Regulatory Assets (see Note 11). Since implementing the RAC in 1992, SJG has recovered $137.2 million through rates

CLEP - The CLEP recovers costs associated with State mandated NJCEP related to SJG’s energy efficiency and renewable energy programs. In June of 2016, the BPU approved a NJCEP funding level of $345.0 million through June 2017, of which SJG was responsible for $14.6 million. In June of 2017, the BPU approved a NJCEP funding level of $344.7 million through June 2018, of which SJG was responsible for $12.7 million. In June of 2018, the BPU approved a NJCEP funding level of $344.7 million through June 2019, of which SJG is responsible for 12.7 million

USF - The USF is a statewide program through which funds for the USF and Lifeline Credit and Tenants Assistance Programs are collected from customers of all New Jersey electric and gas utilities. USF adjustments affect cash flows but do not directly affect revenue or earnings as related costs are deferred and recovered through rates on an on-going basis.

Separate regulatory actions regarding the USF were as follows:


•	June 2016 - SJG made its annual USF filing, along with the State’s other electric and gas utilities, proposing to increase the statewide gas revenues by $56.0 million. This proposal was designed to increase SJG’s annual USF revenue by $1.1 million.


•	September 2016 - The BPU approved the statewide budget of $56.0 million for all the State’s gas utilities. SJG's portion of the total is approximately $5.6 million, which increased rates effective October 1, 2016, resulting in a $1.1 million increase to its USF recoveries.


•	June 2017 - SJG made its annual USF filing, along with the State’s other gas utilities, proposing to decrease the statewide gas revenues by $16.3 million. This proposal was designed to decrease SJG’s annual USF revenue by $2.0 million.


•	September 2017 - The BPU approved the statewide budget of $38.3 million for all the State’s gas utilities. SJG's portion of the total was approximately $3.2 million, resulting in a $2.2 million decrease to its USF recoveries effective October 1, 2017.


•	June 2018 - SJG made its annual USF filing, along with the State's other gas utilities, proposing to decrease statewide electric and gas revenues by $10.4 million. This proposal included an increase to SJG's annual USF recoveries of $0.9 million.


•	September 2018 - The BPU approved the Statewide USF annual 2018-2019 budget for all of New Jersey's gas utilities. SJG's portion of the total is approximately $3.7 million, resulting in a $0.9 million increase to its USF recoveries, effective October 1, 2018.

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

Other Regulatory Matters -

Unbundling - This allows all natural gas consumers to select their natural gas commodity supplier. As of December 31, 2018, 29,141 of SJG's customers were purchasing their gas commodity from someone other than SJG. Customers choosing to purchase natural gas from providers other than the utility are charged for the cost of gas by the marketer. The resulting decrease in utility revenues is offset by a corresponding decrease in gas costs. While customer choice can reduce utility revenues, it does not negatively affect SJG's net income or financial condition. The BPU continues to allow for full recovery of prudently incurred natural gas costs through the BGSS. Unbundling did not change the fact that SJG still recovers cost of service, including certain deferred costs, through base rates.

Pipeline Integrity Costs - SJG is permitted to defer and recover incremental costs incurred as a result of Pipeline Integrity Management regulations, which are aimed at enhancing public safety and reliability. The regulations require that utilities use a comprehensive analysis to assess, evaluate, repair and validate the integrity of certain transmission lines in the event of a leak or failure. As part of SJG's 2017 base rate case, it was permitted to recover previously deferred pipeline integrity costs incurred from July 2014 through August 2017, with the costs to be amortized over a three year period. In addition, SJG is authorized to defer future program costs, including related carrying costs, for recovery in the next base rate case proceeding, subject to review by the BPU.

Tax Reform - In March 2018, SJG filed a petition with the BPU for a change in rates, customer refund and rider associated with the implementation of Tax Reform. The BPU subsequently approved an interim rate reduction, effective April 1, 2018, to reflect the change in the corporate tax rate within SJG's base rates. In September 2018, the BPU approved SJG's request to implement changes in the corporate tax rate, from 35% to21%, 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.

Filings and petitions described above are still pending, unless otherwise indicated.

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 customer by September 2018.

ETG's most recent base rate case was resolved by a settlement that was approved by a BPU order issued in June 2017. The settlement, as approved by the BPU, granted ETG an annual base rate increase of $13.3 million and reflected a 9.6% return on equity, a $720.0 million rate base, and a 5.77% overall after-tax rate of return.

Tax Reform - 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 as a result of Tax Reform. The BPU authorized ETG to implement its proposed base rate reduction on April 1, 2018 on an interim basis. In June 2018, the BPU approved a final base rate reduction of $12.1 million which was implemented by ETG on July 1, 2018.

In June 2018, the BPU authorized ETG to issue a one-time customer refund for over-collected tax during the period January 1, 2018 though June 30, 2018. ETG issued a one-time customer refund of $5.2 million, including interest, for the over-collected taxes in July and August 2018 as bill credits.

IIP - Consistent with Acquisition approval, SJI was required to develop a plan, in concert with the BPU and the New Jersey Division of Rate Counsel, to address the replacement of ETG's aging infrastructure. In October 2018, ETG filed an IIP petition with the BPU pursuant to rules adopted by the BPU in December 2017 pertaining to utility infrastructure investments. The IIP petition seeks authority to recover the costs associated with ETG's initial investment of approximately $518.0 million from 2019-2023 to, among other things, replace its cast-iron and low-pressure vintage main and related services. The IIP petition includes a request for timely recovery of ETG's investment on a semi-annual basis through a separate rate mechanism. A resolution of the IIP petition is pending.

The currently effective rate mechanisms reflected in ETG’s tariff are as follows:

BGSS Clause - The BGSS for ETG is similar to that of SJG defined above. For the preceding year, inclusive of the period following the Acquisition of ETG by SJI, regulatory actions regarding the BGSS were as follows:


•	May 2018 - The BPU issued an Order approving, on a final basis, the provisional rates that were authorized by the BPU in its September 2017 Order, effective June 2018.


•	May 2018 - ETG filed its annual BGSS filing with the BPU, requesting a $7.1 million decrease in gas cost recoveries. This was approved in September 2018.


•	December 2018 - ETG submitted a notice of intent to self-implement a BGSS rate adjustment based on a 5% increase of the monthly bill of a typical residential customer, effective February 1, 2019; that adjustment took effect on February 1, 2019.

EEP - The EEP rate enables ETG to recover the costs of its EEP as authorized by the BPU. ETG’s EEP consists of a range of rebates and related offers, including, for example, various customer education and outreach initiatives, as well as an on-line customer dashboard, that are designed to encourage customers to conserve energy and to provide them with information on how to lower their gas bills. ETG has authorization from the BPU to offer its EEP through February 28, 2019 and has entered into a Stipulation that is pending BPU approval to continue the EEP through February 29, 2020 at a total budget of approximately $3.0 million. For the preceding year, inclusive of the period following the Acquisition of ETG by SJI, regulatory actions regarding the EEP were as follows:


•	June 2018 - ETG filed to extend its EEPs through December 2019.


•	August 2018 - The BPU issued an Order on ETG’s November 2017 filing approving a revenue increase of $1.2 million to an annual revenue of $2.2 million effective September 2018 to continue recovering the costs of, and the allowed return on, prior investments associated with its EEPs.


•	August 2018 - ETG filed its annual EEP rate adjustment petition, requesting a revenue increase of $1.3 million to an annual revenue of $2.2 million to continue recovering the costs of, and the allowed return on, prior investments associated with its EEPs.


•	October 2018 - The Board approved EEPs extension through February 2019, consistent in all other respects with the Board's April 2017 Order.


•	January 2019 - ETG entered into a Stipulation with Board Staff and the New Jersey Division of Rate Counsel extending its EEP through February 29, 2020 at a total budget of approximately $3.0 million.

WNC - The WNC rate allows ETG to implement surcharges or credits during the months of October through May to compensate for weather-related changes in customer usage from the previous winter period. For the preceding year, inclusive of the period following the Acquisition of ETG by SJI, regulatory actions regarding the WNC were as follows:


•	August 2018 - ETG filed its annual WNC rate adjustment petition, requesting a revenue decrease of $0.8 million to an annual revenue of $6.3 million to recover a deficiency from warmer than normal weather. This was approved in October 2018.

OSMC - The OSMC rate is designed to flow back to ETG’s firm customers the margins received from on-system sales and transportation services. For the preceding year, inclusive of the period following the Acquisition of ETG by SJI, regulatory actions regarding the OSMC were as follows:


•	August 2018 - ETG filed its annual OSMC rate adjustment petition, requesting a revenue increase of $1.1 million. This was approved in October 2018.

SBC - Similar to SJG, the SBC allows ETG to recover costs related to several BPU-mandated programs, including the RAC, the NJCEP and the USF program. SBC adjustments affect revenue and cash flows but do not directly affect earnings as related costs are deferred and recovered through rates on an on-going basis.

RAC - The RAC is similar to that of SJG defined above. As of December 31, 2018, ETG reflected the unamortized remediation costs of $10.9 million on the consolidated balance sheet as a regulatory asset. For the preceding year, inclusive of the period following the Acquisition of ETG by SJI, regulatory actions regarding the RAC were as follows:


•	August 2018 - ETG filed its annual RAC filing with the BPU, requesting a $6.9 million increase in RAC recoveries.


•	October 2018 - The BPU issued an Order maintain the current rate with no change in RAC recoveries, effective November 2018.

CEP - The CEP recovers costs associated with State mandated NJCEP related to ETG’s energy efficiency and renewable energy programs. In June of 2018, the BPU approved a NJCEP funding level of $344.7 million through June 2019, of which ETG is responsible for $10.6 million. For the preceding year, inclusive of the period following the Acquisition of ETG by SJI, regulatory actions regarding the CEP were as follows:


•	August 2018 - ETG filed its annual CEP rate adjustment petition, requesting a revenue decrease of $1.6 million to an annual revenue of $10.0 million to recovery costs mandated by the Board. This was approved in October 2018.

USF - The USF is similar to that of SJG defined above. For the preceding year, inclusive of the period following the Acquisition of ETG by SJI, regulatory actions regarding the USF were as follows:


•	June 2018 - ETG made its annual USF filing, along with the State’s other gas utilities, proposing to increase statewide electric and gas revenues by $7.2 million. This proposal included an increase to ETG’s annual USF recoveries of $0.8 million.


•	September 2018 - The BPU approved the Statewide budget of $45.5 million for all the State's gas utilities. ETG’s portion of the total is approximately $4.8 million, resulting in a $0.8 million increase to its USF recoveries, effective October 1, 2018.

Aside from EEP and WNC and carrying cost income/expense on the BGSS (expense only), CEP, RAC and USF, the clauses discussed above do not impact ETG’s earnings. They represent changes in the cash requirements of ETG corresponding to cost changes and/or previously over/under recoveries from ratepayers associated with each respective mechanism.

ELK:

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. Consistent with this requirement, ELK issued one-time bill credits to all customers in September 2018.

In June 2018, ELK filed a base rate case application with the MPSC. In January 2019, the PULJ issued a proposed ruling approving a settlement in which the parties agreed to revenue increase of approximately 90,000, with a 9.8% return on equity and a 6.98% overall return. In February 2019, the Commission approved ELK's new rates effective February 20, 2019.

Currently effective rate mechanisms reflected in ELK's tariff include a Purchase Gas Adjustment Clause (PGA) and Revenue Normalization Adjustment Clause (RNA). The PGA is a cost pass through for cost incurred from purchasing gas supplies for customers. Over/under recoveries are reconciled annually. The Company earns no profits on the PGA. The RNA is applicable to residential and commercial heating customers having a stated monthly revenue per customer. The primary variance is due to weather. The RNA amounts are established in a rate case for each customer grouping based on normal weather and the resultant average revenues per customer. The revenue excess or deficiency is calculated monthly and trued-up on a rolling twelve-month basis.