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REGULATORY ASSETS & REGULATORY LIABILITIES
12 Months Ended
Dec. 31, 2011
Regulatory Assets and Liabilities Disclosure [Abstract]  
REGULATORY ASSETS & REGULATORY LIABILITIES
REGULATORY ASSETS & REGULATORY LIABILITIES:

The discussion under Note 10, Rates and Regulatory Actions, is integral to the following explanations of specific regulatory assets and liabilities.

Regulatory Assets consisted of the following items (in thousands):

 
December 31, 2011
 
December 31, 2010
Environmental Remediation Costs:
 
 
 
Expended - Net
$
45,815

 
$
39,056

Liability for Future Expenditures
89,984

 
87,393

Income Taxes - Flowthrough Depreciation

 
774

Deferred Asset Retirement Obligation Costs
25,162

 
24,247

Deferred Pension and Other Postretirement Benefit Costs
88,624

 
69,017

Deferred Gas Costs - Net
22,441

 

Conservation Incentive Program Receivable
13,580

 
12,291

Societal Benefit Costs Receivable
8,618

 
4,216

Premium for Early Retirement of Debt
537

 
699

Deferred Interest Rate Contracts
8,146

 
3,150

Other Regulatory Assets
12,314

 
7,570

 
 
 
 
Total Regulatory Assets
$
315,221

 
$
248,413



Except where noted below, all regulatory assets are or will be recovered through utility rate charges as detailed in the following discussion. SJG is currently permitted to recover interest on Environmental Remediation Costs and Societal Benefit Costs Receivable while the other assets are being recovered without a return on investment.
 
Environmental Remediation Costs - SJG has two regulatory assets associated with environmental costs related to the cleanup of 12 sites where SJG or their predecessors previously operated gas manufacturing plants. The first asset, Environmental Remediation Cost: Expended - Net, represents what was actually spent to clean up the sites, less recoveries through the RAC and insurance carriers. These costs meet the deferral requirements of GAAP as the BPU allows SJG to recover such expenditures through the RAC. The other asset, Environmental Remediation Cost: Liability for Future Expenditures, relates to estimated future expenditures required to complete the remediation of these sites.  SJG recorded this estimated amount as a regulatory asset with the corresponding current and noncurrent liabilities reflected on the consolidated balance sheets under the captions Current Liabilities and Deferred Credits and Other Noncurrent Liabilities. The BPU allows SJG to recover the deferred costs over seven-year periods after they are spent.
 
Income Taxes - Flowthrough Depreciation - This regulatory asset was created upon the adoption of FASB ASC Topic 740 “Income Taxes” in 1993. The amount represents unamortized excess tax depreciation over book depreciation on utility plant because of temporary differences for which, prior to adoption, deferred taxes previously were not provided. SJG previously passed these tax benefits through to ratepayers and recovered the amortization of the regulatory asset through rates until 2011.
 
Deferred Asset Retirement Obligation Costs - This regulatory asset was created with the adoption of FASB ASC Topic 440 “Commitments” in 2005. This resulted in the recording of ARO and additional utility plant, primarily related to a legal obligation SJG has for certain safety requirements upon the retirement of its gas distribution and transmission system. SJG recovers asset retirement costs through rates charged to customers. All related accumulated accretion and depreciation amounts for these ARO represent timing differences in the recognition of retirement costs that SJG is currently recovering in rates and, as such, SJG is deferring such differences as regulatory assets.
 
Deferred Gas Costs and Deferred Revenues - Net - Over/under collections of gas costs are monitored through SJG’s BGSS clause.  Net undercollected gas costs are classified as a regulatory asset and net overcollected gas costs are classified as a regulatory liability.  Derivative contracts used to hedge SJG's natural gas purchases are also included in the BGSS, subject to BPU approval.  The change in the BGSS from a $20.2 million regulatory liability at December 31, 2010 to a $22.4 million regulatory asset at December 31, 2011 was primarily due to the BGSS refund to customers discussed above in Note 10.

Deferred Pension and Other Postretirement Benefit Costs - The BPU authorized SJG to recover costs related to postretirement benefits under the accrual method of accounting consistent with GAAP.  SJG deferred amounts accrued prior to that authorization and are amortizing them as allowed by the BPU over 15 years through 2012. The unamortized balance was $0.4 million at December 31, 2011. Upon the adoption of FASB ASC Topic 715 “Compensation - Retirement Benefits” in 2006, SJG's regulatory asset was increased by $37.1 million representing the recognition of underfunded positions of SJG's pension and other postretirement benefit plans.  Subsequent adjustments to this balance occur annually to reflect changes in the funded positions of these benefit plans caused by changes in actual plan experience as well as assumptions of future experience (See Note 12).
 
Conservation Incentive Program Receivable - The impact of the CIP is recorded as an adjustment to earnings as incurred. The first year of cash recovery under the CIP began October 2007.
 
Societal Benefit Costs Receivable - At both December 31, 2011 and 2010, this regulatory asset primarily represents cumulative costs less recoveries under the USF program.
 
Premium for Early Retirement of Debt - At December 31, 2011, this regulatory asset represents unamortized debt issuance costs related to long-term debt refinancings and a call premium of $0.2 million associated with the retirement of debt, all occurring in 2005 and 2004. Unamortized debt issuance costs are being amortized over the term of the new debt issue pursuant to regulatory approval by the BPU. As part of our September 2010 base rate increase, the call premium was transferred to unamortized debt issuance costs and is being amortized over the term of the new debt issue.

Deferred Interest Rate Contracts - These amounts represent the market value of interest rate derivatives as discussed further in Note 16.
 
Other Regulatory Assets - Some of the assets included in Other Regulatory Assets are currently being recovered from ratepayers as approved by the BPU. Management believes the remaining deferred costs are probable of recovery from ratepayers through future utility rates.

Regulatory Liabilities consisted of the following items (in thousands):

 
December 31, 2011
 
December 31, 2010
Excess Plant Removal Costs
$
47,230

 
$
48,409

Deferred Revenues - Net

 
20,179

Other Regulatory Liabilities
1,081

 
660

 
 
 
 
Total Regulatory Liabilities
$
48,311

 
$
69,248



Excess Plant Removal Costs - Represents amounts accrued in excess of actual utility plant removal costs incurred to date.  As part of our September 2010 base rate increase, we are required to start amortizing approximately $1.2 million of this balance to depreciation expense each year.
 
Deferred Revenues - Net - See previous discussion under “Deferred Gas Costs - Net.”
 
Other Regulatory Liabilities - All other regulatory liabilities are subject to being returned to ratepayers in future rate proceedings.