RATES AND REGULATORY ACTIONS

3 Months Ended

Mar. 31, 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 its filing, SJG requested a base rate revenue increase of $75.3 million, reflecting an overall rate of return of 7.34%, with a return on equity of 10.4% and a common equity component of approximately 54.18%. 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. Additionally, SJG will issue a one-time BGSS bill credit of approximately $0.8 million, plus interest, sales tax and public utility assessments, which will be returned to customers in the second quarter of 2020. The BGSS and CIP approvals discussed above do not impact SJG's earnings. They represent changes in the cash requirements of SJG corresponding to cost changes and/or previously over/under recoveries from ratepayers associated with each respective mechanism.

In March 2020, SJG executed a Stipulation of Settlement resolving a 2019 Compliance Filing and 2019 Tax Act Rider petition, anticipated to be approved by the BPU in May 2020. The terms of settlement include the following:

•The “Unprotected” EDIT balance of approximately $44.7 million will be refunded to customers over the remaining 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.

RC Cape May Holdings, LLC has communicated to SJG that it no longer intends to proceed with a project to re-power the former BL England facility with natural gas. As of March 2020, SJG has determined that the project under construction will be abandoned. SJG has requested that the project costs spent to date of $10.1 million be recovered as a regulatory asset within its March 2020 rate case petition filed with the BPU. As such, the amount has been reclassified from Utility Plant and is presented as a Regulatory Asset within the condensed consolidated balance sheets at March 31, 2020. The matter is currently pending with the BPU.

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.

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 for approximately $15.0 million, less any indebtedness at the time of closing, and pending MPSC approval. This transaction is expected to close in the middle of 2020.