RATES AND REGULATORY ACTIONS

6 Months Ended

Jun. 30, 2020

Public Utilities, General Disclosures [Abstract]

RATES AND REGULATORY ACTIONS

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.

Except as described below, there have been no other significant regulatory actions or changes to the Utilities' rate structure since December 31, 2019. 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, 2019.

SJG:

Rate Case - In March 2020, SJG filed a petition with the BPU requesting a base rate revenue increase to recognize the infrastructure investments made to maintain the safety and reliability of its natural gas system since the approval of its previous base rate case proceeding in October 2017. In May 2020, SJG filed to request a base revenue increase of $75.7 million, reflecting an overall rate of return of 7.4%, based on an update to long-term debt costs, a return on equity of 10.4% and common equity component of 54.2%. This matter is currently pending with the BPU.

In the first quarter of 2020, the final rates were approved by the BPU on SJG's 2019-2020 annual BGSS, CIP and SBC/TIC filings. All were approved as requested. The BGSS and CIP approvals do not impact SJG's earnings. They represent changes in the cash requirements of SJG corresponding to cost changes and/or previous over/under recoveries from ratepayers associated with each respective mechanism.

In April 2020, SJG submitted its annual filing, pursuant to the October 2016 BPU approval of the AIRP II, seeking a base rate adjustment to increase annual revenues by approximately $6.5 million to reflect the roll-in of approximately $59.5 million of AIRP II investments placed in service during July 1, 2019 through June 30, 2020. The matter is currently pending BPU approval.

In April 2020, SJG submitted its annual filing, pursuant to the May 2018 BPU approval of the SHARP II, seeking a base rate adjustment to increase annual revenues by approximately $3.8 million to reflect the roll-in of approximately $34.2 million of SHARP II investments placed in service during July 1, 2019 through June 30, 2020. The matter is currently pending BPU approval.

In May 2020, the BPU issued an Order resolving SJG’s 2019 Compliance Filing and 2019 Tax Act Rider petition, with a revised Rider H credit rate effective June 1, 2020. The terms of settlement include the following:

•The “Unprotected” EDIT balance of approximately $44.7 million will be refunded to customers over a 5 year period through the approved rider;

•The net “Protected” EDIT regulatory liability of $149.4 million (regulatory liability of $181.0 million partially offset by a regulatory asset of $31.6 million) will be refunded to customers through a proposed base rate adjustment in SJG’s next base rate case.

In June 2020, SJG submitted its annual Tax Act Rider filing, requesting a rate adjustment to refund approximately $14.9 million related to SJG’s excess deferred income taxes, resulting from the change in the Federal corporate tax rate from 35% to 21% associated with Tax Reform. The matter is currently pending BPU approval.

In June 2020, SJG submitted its annual 2020-2021 BGSS and CIP filings, requesting a $39.2 million decrease in gas costs recoveries related to its BGSS and a $27.4 million increase in revenue related to its CIP, resulting in a net revenue decrease of $11.8 million. In its annual BGSS filing, SJG is seeking recovery of gas costs related to a previous pricing dispute with a third party supplier on two long-term gas supply contracts, with recovery occurring over a two-year period (see Note 8). In addition, the requested decrease in gas costs recoveries includes the return of the refund received from a third party gas supplier (see Note 1). These matters are currently pending BPU approval. Additionally, SJG issued a one-time BGSS bill credit in May 2020 of approximately $0.8 million, plus interest, sales tax and public utility assessments.

In June 2020, SJG filed its annual EET rate adjustment petition, requesting a $5.9 million increase in revenues to continue recovering the costs of, and the allowed return on, investments associated with its EEPs. The matter is currently pending BPU approval.

In June 2020, SJG filed its annual USF petition, along with the State’s other electric and gas utilities. The proposed revenue decrease for SJG is approximately $0.3 million. The matter is currently pending BPU approval.

ETG:

In the first quarter of 2020, the final rates were approved by the BPU on ETG's 2019-2020 annual BGSS, RAC, EEP, WNC, CEP and OSMC filings, effective April 1, 2020. All were approved as requested with the exception of RAC (a final rate reflecting a $6.0 million increase in revenues compared to a request of $6.1 million) and EEP (a final rate reflecting a $0.9 million increase in revenues compared to a request of $1.0 million).

In February 2020, ETG entered into a Stipulation with the BPU and the New Jersey Division of Rate Counsel extending its EEP through June 2020 under the previously approved budget and from July 2020 through December 2021 at a total budget of approximately $4.2 million. The BPU issued an Order in February 2020 approving the Stipulation.

In April 2020, ETG submitted its annual filing, pursuant to the June 2019 BPU approval of the IIP, seeking a rider rate to increase annual revenues by approximately $6.5 million to reflect the roll-in of approximately $60.0 million of IIP investments placed in service during July 1, 2019 through June 30, 2020. The matter is currently pending BPU approval.

In June 2020, ETG submitted its annual BGSS filing, requesting a $15.5 million decrease in gas cost recoveries. with an effective date of October 1, 2020. The matter is currently pending BPU approval.

In June 2020, ETG along with the other New Jersey gas utilities filed jointly for a statewide USF rate decrease and a statewide Lifeline rate increase with effective dates of October 1, 2020 resulting in a reduction in the combined rates. The proposed revenue decrease for ETG is approximately $0.3 million. The matter is currently pending BPU approval.

ELK:

As discussed in Note 1, in December 2019, the Company announced it had entered into an agreement to sell ELK to a third-party buyer. This transaction was approved by the MPSC on June 29, 2020. This transaction closed on July 31, 2020 (see Note 20).