SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

9 Months Ended

Sep. 30, 2022

Accounting Policies [Abstract]

GENERAL

GENERAL - SJI provides a variety of energy-related products and services primarily through the following wholly-owned subsidiaries:

▪SJIU is a holding company that owns SJG and ETG.

•SJG is a regulated natural gas utility which distributes natural gas in the seven southernmost counties of New Jersey.

•ETG is a regulated natural gas utility which distributes natural gas in seven counties in northern and central New Jersey.

▪SJE has an ownership interest in EnergyMark (see Note 3). Beginning in the second quarter 2022, SJE no longer acquires or markets electricity to retail end users.

▪SJRG markets natural gas storage, commodity and transportation assets along with fuel management services on a wholesale basis in the mid-Atlantic, Appalachian and southern states.

▪SJEX owns oil, gas and mineral rights in the Marcellus Shale region of Pennsylvania.

▪Marina develops and operates on-site energy-related projects. Marina includes the Catamaran joint venture that develops, owns and operates renewable energy projects, and supports SJI's commitment to clean energy initiatives. Catamaran owns Annadale and Bronx Midco, operators of fuel cell projects in New York, in which Marina, through Catamaran, owns 93% and 92%, respectively. Catamaran also owns a solar generation site in Massachusetts, in which Marina, through Catamaran, owns 90%. The remaining ownership percentages are recorded as NCIs in the condensed consolidated financial statements. The principal wholly-owned subsidiaries of Marina are:

•Solar energy projects in New Jersey.

•ACLE, BCLE, SCLE and SXLE own landfill gas-to-energy production facilities in Atlantic, Burlington, Salem and Sussex Counties, respectively, in New Jersey. ACLE ceased operations on September 30, 2021, while BCLE, SCLE and SXLE ceased operations on June 1, 2020.

▪SJESP receives commissions on appliance service contracts from a third party.

▪Midstream invests in infrastructure and other midstream projects, including the PennEast project for which development ceased in September 2021. See Note 3.

▪SJEI provides energy procurement and cost reduction services. The significant wholly-owned subsidiaries of SJEI include:

•AEP, an aggregator, broker and consultant in the retail energy markets that matches end users with suppliers for the procurement of natural gas and electricity.

•EnerConnex, an aggregator, broker and consultant in the retail and wholesale energy markets that matches end users with suppliers for the procurement of natural gas and electricity.

•SJI Renewable Energy Ventures, LLC, which holds our equity interest in REV.

•SJI RNG Devco, LLC, which includes our renewable natural gas development rights and costs incurred in order to develop certain dairy farms, along with the Red River joint venture which was formed on March 22, 2022 (see Note 16).

BASIS OF PRESENTATION

BASIS OF PRESENTATION - SJI's condensed consolidated financial statements include the accounts of SJI, its direct and indirect wholly-owned subsidiaries (including SJG) and subsidiaries in which SJI has a controlling interest. All significant intercompany accounts and transactions have been eliminated in consolidation. In management’s opinion, the condensed consolidated financial statements of SJI and SJG reflect all normal recurring adjustments needed to fairly present their respective financial positions, operating results and cash flows at the dates and for the periods presented. SJI’s and SJG's businesses are subject to seasonal fluctuations and, accordingly, this interim financial information should not be the basis for estimating the full year’s operating results.

As permitted by the rules and regulations of the SEC, the accompanying unaudited condensed consolidated financial statements of SJI and SJG contain certain condensed financial information and exclude certain footnote disclosures normally included in annual audited consolidated financial statements prepared in accordance with GAAP. These financial statements should be read in conjunction with SJI’s and SJG's Annual Reports on Form 10-K for the year ended December 31, 2021. There were no significant changes in or changes in the application of the Company’s significant or critical accounting policies or estimation

procedures for the three and nine months ended September 30, 2022 as compared with the significant accounting policies described in the Company’s audited consolidated financial statements for the year ended December 31, 2021.

ESTIMATES AND ASSUMPTIONS

ESTIMATES AND ASSUMPTIONS - The condensed consolidated financial statements were prepared to conform with GAAP, which requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and related disclosures. Therefore, actual results could differ from those estimates. Significant estimates include amounts related to regulatory accounting, energy derivatives, environmental remediation costs, legal contingencies, pension and other postretirement benefit costs, revenue recognition, goodwill, evaluation of equity method investments for other-than-temporary impairment, income taxes, and allowance for credit losses. Estimates may be subject to future uncertainties, including the continued evolution of the COVID-19 pandemic and its impact on our operations and economic conditions, which could affect the fair value of the ETG reporting unit and its goodwill balance (see Note 17), as well as the allowance for credit losses and the total impact and potential recovery of incremental costs associated with COVID-19 (see Notes 5 and 8, respectively).

IMPAIRMENT OF LONG LIVED ASSETS

IMPAIRMENT OF LONG-LIVED ASSETS - See Note 1 to the Consolidated Financial Statements under "Impairment of Long-Lived Assets" in Item 8 of the Form 10-K for the year ended December 31, 2021 for additional information regarding the Company's policy on impairments of long-lived assets. In the second quarter of 2022, it was determined that SJG had property, plant and equipment that was unusable which resulted in SJI and SJG recording an impairment charge of approximately $1.9 million to Impairment Charges on the condensed consolidated statements of (loss)/income for SJI and SJG during the nine months ended September 30, 2022. These impairment charges were recorded to the SJG Utility Operations segment. No impairments of long-lived assets were identified at SJG for the three months ended September 30, 2022 and three and nine months ended September 30, 2021, respectively.

REGULATION

REGULATION - The Utilities are subject to the rules and regulations of the BPU. See Note 7 for a discussion of the Utilities' rate structure and regulatory actions. The Utilities maintain their accounts according to the BPU's prescribed Uniform System of Accounts. The Utilities follow the accounting for regulated enterprises prescribed by ASC 980, Regulated Operations, which allows for the deferral of certain costs (regulatory assets) and creation of certain obligations (regulatory liabilities) when it is probable that such items will be recovered from or refunded to customers in future periods. In the third quarter of 2022, ETG determined that a regulatory asset which consisted of certain non-functioning property, plant and equipment costs was no longer probable of recovery. This resulted in SJI recording a charge of approximately $7.2 million to Impairment Charges on the condensed consolidated statements of (loss)/income during the three and nine months ended September 30, 2022. This charge was recorded to the ETG Utility Operations segment.

OPERATING REVENUES

OPERATING REVENUES - Gas and electric revenues are recognized in the period the commodity is delivered to customers. For retail customers (including customers of SJG) that are not billed at the end of the month, we record an estimate to recognize unbilled revenues for gas and electricity delivered from the date of the last meter reading to the end of the month. The Utilities also have revenues that arise from alternative revenue programs, which are discussed in Note 15. For ETG and SJG, unrealized gains and losses on energy-related derivative instruments are recorded in Regulatory Assets or Regulatory Liabilities on the condensed consolidated balance sheets of SJI and SJG (see Note 12) until they become realized, in which case they are recognized in operating revenues. SJRG's gas revenues are recognized in the period the commodity is delivered, and operating revenues for SJRG include realized and unrealized gains and losses on energy-related derivative instruments. SJRG presents revenues and expenses related to its energy trading activities on a net basis in operating revenues. This net presentation has no effect on operating income or net income. The Company recognizes revenues on commissions received related to SJESP appliance service contracts, along with commissions received related to AEP and EnerConnex energy procurement service contracts, on a monthly basis as the commissions are earned. Marina recognizes revenue for renewable energy projects when output is generated and delivered to the customer, and when renewable energy credits have been transferred to the third party at an agreed upon price.

We considered the impact the COVID-19 pandemic has had on operating revenues, noting that SJI and SJG have not seen a significant reduction in revenues as a result of the pandemic. This is due to the delivery of gas and electricity being considered an essential service, with delivery to customers continuing in a timely manner with no delays or operational shutdowns taking place to date. To the extent that the pandemic does impact our ability to deliver in the future, operating revenues could be impacted. Currently, the impact of the pandemic on the collectability of our accounts receivable continues to be monitored, but such receivables have traditionally been included in rate recovery (see Note 8).

INCOME TAXES

INCOME TAXES - Deferred income taxes are provided for all significant temporary differences between the book and taxable bases of assets and liabilities in accordance with ASC 740, Income Taxes. Certain deferred income taxes are recorded with offsetting regulatory assets or liabilities by the Company to recognize that income taxes will be recovered or refunded through future rates.

LEASES

LEASES - There have been no significant changes to the nature or balances of the Company's leases since December 31, 2021, which are described in Note 9 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, 2021.

NEW ACCOUNTING PRONOUNCEMENTS

NEW ACCOUNTING PRONOUNCEMENTS - Other than as described below, no new accounting pronouncement had, or is expected to have, a material impact on the condensed consolidated financial statements of SJI, or the condensed financial statements of SJG.

Recently Adopted Standards:

Standard	Description	Date of Adoption	Application	Effect on the Financial Statements of SJI and SJG
ASU 2020-04: Reference Rate Reform (Topic 848) - Facilitation of the Effects of Reference Rate Reform on Financial Reporting ASU 2021-01: Reference Rate Reform (Topic 848)	The amendments in ASU 2020-04 provide various optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The expedients and exceptions provided by the amendments do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, except for hedging relationships existing as of December 31, 2022, that an entity has elected certain optional expedients for and that are retained through the end of the hedging relationship. The amendments in ASU 2021-01 clarify that certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to changes in the interest rates used for margining, discounting, or contract price alignment for derivative instruments that are being implemented as part of the market-wide transition to new reference rates (commonly referred to as the "discounting transition").	January 1, 2022	Prospective for contract modifications and hedging relationships. Once elected for a Topic or an Industry Subtopic, the amendments in this Update must be applied prospectively for all eligible contract modifications for that Topic or Industry Subtopic.	Adoption of this guidance did not have a material impact on the financial statement results of SJI or SJG.
ASU 2020-06: Accounting for Convertible Instruments and Contracts in an Entity's Own Equity	The amendments in this ASU simplify the accounting for convertible instruments by removing certain separation models in Subtopic 470-20. Under the amendments, embedded conversion features are no longer separated from the host contract for convertible instruments with conversion features that are not required to be accounted for as derivatives under Topic 815, or that do not result in substantial premiums accounted for as paid-in capital. Consequently, a convertible debt instrument will be accounted for as a single liability measured at its amortized cost and a convertible preferred stock will be accounted for as a single equity instrument measured at its historical cost, as long as no other features require bifurcation and recognition as derivatives. The amendments also add new convertible instrument disclosure requirements. Additionally, the amendments in this ASU remove certain conditions from the settlement guidance within the derivative scope exception guidance contained in Subtopic 815-40 and further clarify the derivative scope exception guidance. Finally, the amendments in this ASU align the diluted EPS calculation for convertible instruments by requiring that an entity use the if-converted method instead of the treasury stock method when calculated diluted EPS for convertible instruments.	January 1, 2022	Retrospective or Modified Retrospective	Adoption of this guidance did not have a material impact on the financial statement results of SJI or SJG.

Standards Not Yet Effective:

Standard	Description	Date of Adoption	Application	Effect on the Financial Statements of SJI and SJG
ASU 2021-10: Government Assistance (ASC 832): Disclosures by Business Entities about Government Assistance	This ASU requires disclosure in the notes to annual financial statements of government financial assistance from local, (city, town, county, municipal), regional, and federal governments and entities related to those governments. Required disclosure for government assistance transactions includes: 1) information about the nature of transactions and the related accounting policy used to account for the transactions; 2) the line items on the balance sheet and income statement that are affected by the transactions and the amounts applicable to each financial statement line item; and 3) significant terms and conditions of the transactions, including commitments and contingencies.	Annual periods beginning January 1, 2022; early adoption is permitted.	Either (1) prospectively to all transactions that are reflected in financial statements at the date of initial application and to all transactions that are entered into after adoption (2) retrospectively to those transactions	Since this ASU is disclosure only, adoption will not have an impact on the financial statement results of SJI or SJG. Management is currently determining the impact that adoption of this guidance will have on the disclosures of SJI and SJG.
ASU 2021-08: Business Combinations (ASC 805): Accounting for Contract Assets and Contract Liabilities From Contracts With Customers	The amendments to ASC 805 in this ASU require an acquirer to account for revenue contracts acquired in a business combination in accordance with ASC 606 as if it had originated the contracts. The acquirer may assess how the acquiree applied ASC 606 to determine what to record for the acquired contracts. The standard also provides practical expedients for acquirers when recognizing and measuring acquired contract assets and contract liabilities from a business combination.	January 1, 2023; early adoption is permitted, including adoption in an interim period	Prospectively to business combinations occurring on or after the effective date of the amendments	These amendments have not yet been adopted and management is currently evaluating whether to adopt this amendment prior to the effective date.

FAIR VALUE OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES

GAAP establishes a hierarchy that prioritizes fair value measurements based on the types of inputs used for the various valuation techniques. The levels of the hierarchy are described below:

•Level 1:  Observable inputs, such as quoted prices in active markets for identical assets or liabilities.

•Level 2:  Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly; these include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.

•Level 3:  Unobservable inputs that reflect the reporting entity’s own assumptions.

Assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of financial assets and financial liabilities and their placement within the fair value hierarchy.