Note 3 - Regulated Operations

6 Months Ended

Jun. 30, 2015

Regulatory Assets and Liabilities Disclosure [Abstract]

Schedule of Regulatory Assets and Liabilities [Text Block]

Note 3 - Regulated Operations

Our regulatory assets and liabilities reflected within our unaudited Condensed Consolidated Statements of Financial Position as of the dates presented are summarized in the following table.

In millions	June 30, 2015		December 31, 2014		June 30, 2014
Regulatory assets
Recoverable ERC	$	27	$	49	$	33
Recoverable pension and retiree welfare benefit costs		11		12		9
Deferred natural gas costs		-		3		79
Other		10		19		44
Regulatory assets – current		48		83		165
Recoverable ERC		350		329		458
Recoverable pension and retiree welfare benefit costs		105		110		94
Recoverable regulatory infrastructure program costs		77		69		65
Long-term debt fair value adjustment		70		74		78
Other		40		49		31
Regulatory assets – long-term		642		631		726
Total regulatory assets	$	690	$	714	$	891
Regulatory liabilities
Accrued natural gas costs	$	67	$	27	$	41
Bad debt over collection		27		33		39
Accumulated removal costs		25		25		27
Deferred seasonal rates		8		-		8
Other		27		27		34
Regulatory liabilities – current		154		112		149
Accumulated removal costs		1,544		1,520		1,478
Regulatory income tax liability		27		34		27
Unamortized investment tax credit		21		22		24
Bad debt over collection		18		12		9
Other		12		13		27
Regulatory liabilities – long-term		1,622		1,601		1,565
Total regulatory liabilities	$	1,776	$	1,713	$	1,714

Base rates are designed to provide the opportunity to recover cost and earn a return on investment during the period rates are in effect. As such, all of our regulatory assets recoverable through base rates are subject to review by the respective state regulatory commission during future rate proceedings. We are not aware of evidence that these costs will not be recoverable through either rate riders or base rates, and we believe that we will be able to recover such costs consistent with our historical recoveries.

Unrecognized Ratemaking Amounts The following table illustrates our authorized ratemaking amounts that are not recognized in our unaudited Condensed Consolidated Statements of Financial Position. These amounts are primarily composed of an allowed equity rate of return on assets associated with certain of our regulatory infrastructure programs. These amounts will be recognized as revenues in our financial statements in the periods they are billable to our customers.

In millions	Atlanta Gas Light		Virginia Natural Gas		Elizabethtown Gas		Nicor Gas		Total
June 30, 2015	$	126	$	11	$	3	$	1	$	141
December 31, 2014		113		12		2		-		127
June 30, 2014		96		12		1		-		109

Natural Gas Costs We charge our utility customers for natural gas consumed using natural gas cost recovery mechanisms established by the state regulatory agencies. Under these mechanisms, all prudently incurred natural gas costs are passed through to customers without markup, subject to regulatory review. We defer or accrue the difference between the actual cost of natural gas and the amount of commodity revenue earned in a given period, such that no operating margin is recognized related to these costs. The deferred or accrued amount is either billed or refunded to our customers prospectively through adjustments to the commodity rate. Deferred natural gas costs are reflected as regulatory assets and accrued natural gas costs are reflected as regulatory liabilities.

Environmental Remediation Costs We are subject to federal, state and local laws and regulations governing environmental quality and pollution control that require us to remove or remedy the effect on the environment of the disposal or release of specified substances at our current and former operating sites, substantially all of which is related to our former MGP sites. The ERC assets and liabilities are associated with our distribution operations segment and remediation costs are generally recoverable from customers through rate mechanisms approved by regulators. Accordingly, both costs incurred to remediate the former MGP sites, plus the future estimated cost recorded as liabilities, net of amounts previously collected, are recognized as a regulatory asset until recovered from customers. 

Our accrued environmental remediation liabilities are estimates of future remediation costs for investigation and cleanup of our current and former operating sites that are contaminated. These estimates are determined using engineering-based estimates and probabilistic models of potential costs when such estimates cannot be made, on an undiscounted basis. These estimates contain various assumptions, which we refine and update on an ongoing basis. These liabilities do not include other potential expenses, such as unasserted property damage claims, personal injury or natural resource damage claims, legal expenses or other costs for which we may be held liable but for which we cannot reasonably estimate an amount.

Our accrued environmental remediation liabilities are not regulatory liabilities; however, the associated expenses are deferred as a corresponding regulatory asset until the costs are recovered from customers. We primarily recover these deferred costs through three rate riders that authorize dollar-for-dollar recovery. We expect to collect $27 million in revenues over the next 12 months, which is reflected as a current regulatory asset. The following table provides additional information on the estimated costs to remediate our current and former operating sites as of June 30, 2015.

In millions	# of sites		Probabilistic model cost estimates			Engineering-based estimates		Amount recorded		Expected costs over next 12 months		Cost recovery period
Illinois (1)		26	$205	-	$463	$	37	$	242	$	37	As incurred
New Jersey		6	105	-	177		13		118		9	7
Georgia and Florida		13	34	-	58		25		59		29	5
North Carolina (2)		1		n/a			10		10		8	No recovery
Total		46	$344	-	$698	$	85	$	429	$	83

(1) Nicor Gas is responsible in whole or in part for 26 MGP sites, two of which have been remediated and their use is no longer restricted by the environmental condition of the property. Nicor Gas and Commonwealth Edison Company are parties to an agreement to cooperate in cleaning up residue at 23 of the sites. Nicor Gas’ allocated share of cleanup costs for these sites is 52%.

(2) We have no regulatory recovery mechanism for the site in North Carolina and there is no amount included within our regulatory assets. Changes in estimated costs are recognized in income during the period of change.

In July 2014, we reached a settlement with an insurance company for environmental claims relating to potential contamination at several of our MGP sites in New Jersey and North Carolina. The terms of the settlement required the insurance company to pay us a total of $77 million in two installments. We received the $45 million installment in the third quarter of 2014 and this payment was primarily recorded as a reduction to our recoverable ERC regulatory asset. The remaining $32 million was paid to us in July 2015, and as of June 30, 2015, this amount was recorded as a receivable in our unaudited Condensed Consolidated Statements of Financial Position. We will file for approval with the New Jersey BPU to utilize the insurance proceeds related to the New Jersey sites to reduce the ERC expenditures that otherwise would have been recovered from our customers in future periods. If approved, the settlement is expected to reduce our recoverable ERC regulatory asset and have a favorable impact on the rates for our Elizabethtown Gas customers.