REGULATION

3 Months Ended

Dec. 31, 2024

4. REGULATION

NJNG is subject to cost-based regulation, therefore, it is permitted to recover authorized operating expenses and earn a reasonable return on its utility capital investments based on the BPU's approval. The impact of the ratemaking process and decisions authorized by the BPU allows NJNG to capitalize or defer certain costs that are expected to be recovered from its customers as regulatory assets and to recognize certain obligations representing amounts that are probable future expenditures as regulatory liabilities in accordance with accounting guidance applicable to regulated operations.

NJNG's recovery of costs is facilitated through its base rates, BGSS and other regulatory tariff riders. NJNG is required to make filings to the BPU for review of its BGSS, CIP and other programs and related rates. Annual rate changes are typically requested to be effective at the beginning of the following fiscal year. The current base rates include a weighted average cost of capital of 7.08% and a return on common equity of 9.6%. All rate and program changes are subject to proper notification and BPU review and approval. In addition, NJNG is permitted to implement certain BGSS rate changes on a provisional basis with proper notification to the BPU.

Regulatory assets and liabilities included on the Unaudited Condensed Consolidated Balance Sheets for NJNG are comprised of the following:


(Thousands)	December 31, 2024		September 30, 2024
Regulatory assets-current
New Jersey Clean Energy Program	$	16,523	$	18,491
Conservation Incentive Program	46,052		51,442

Derivatives at fair value, net	570		1,363
Other current regulatory assets	1,544		1,774
Total current regulatory assets	$	64,689	$	73,070
Regulatory assets-noncurrent
Environmental remediation costs:
Expended, net of recoveries	$	74,146	$	77,475
Liability for future expenditures	161,024		161,650
Deferred income taxes	42,776		42,595

SAVEGREEN	114,391		107,796
Postemployment and other benefit costs	24,695		23,772

Cost of removal	135,006		130,885

Other noncurrent regulatory assets	55,488		59,924
Total noncurrent regulatory assets	$	607,526	$	604,097
Regulatory liability-current
Overrecovered natural gas costs	$	26,692	$	32,457


Derivatives at fair value, net	5,337		—
Total current regulatory liabilities	$	32,029	$	32,457
Regulatory liabilities-noncurrent
Tax Act impact	$	174,074	$	175,328

Derivatives at fair value, net	—		404

Other noncurrent regulatory liabilities	652		115
Total noncurrent regulatory liabilities	$	174,726	$	175,847

Regulatory assets and liabilities included on the Unaudited Condensed Consolidated Balance Sheets for Adelphia are comprised of the following:


(Thousands)	December 31, 2024		September 30, 2024

Total noncurrent regulatory assets	$	5,069	$	5,095
Total current regulatory liabilities	$	581	$	524

The assets are comprised primarily of the tax benefit associated with the equity component of Allowance for Funds Used During Construction and the liability consists primarily of scheduling penalties. Recovery of regulatory assets is subject to FERC approval.

Regulatory filings and/or actions that occurred during the current fiscal year include the following:

•On October 30, 2024, the BPU approved a settlement of the new SAVEGREEN program running from January 1, 2025 to June 30, 2027, and consisting of $205.0M of direct investment, $160.5M in financing options and $20.1M in O&M, which totals $385.6M. Annual recoveries are expected to increase by approximately $12.3M, effective January 1, 2025.

•On November 21, 2024, the BPU issued an order adopting a stipulation of settlement approving a $157.0M increase to base rates, effective November 21, 2024. The increase includes an overall rate of return on rate base of 7.08%, return on common equity of 9.60%, a common equity ratio of 54.0% and a depreciation rate of 3.21%.

•On December 17, 2024, NJNG filed a petition with the BPU seeking authority to issue up to $700M in Medium Term Notes over a three-year period.

•On December 18, 2024, the BPU approved NJNG's annual EE filing for the recovery of SAVEGREEN costs, which will increase annual recoveries by approximately $3.1M, effective January 1, 2025.