XML 24 R11.htm IDEA: XBRL DOCUMENT
v3.22.2

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 9 Months Ended
--- | ---
Jun. 30, 2022
Accounting Policies [Abstract] |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accompanying Unaudited Condensed Consolidated Financial Statements have been prepared by the Company in accordance with the rules and regulations of the U.S. Securities and Exchange Commission and GAAP. The September 30, 2021 Balance Sheet data is derived from the audited financial statements of the Company. These Unaudited Condensed Consolidated Financial Statements should be read in conjunction with the consolidated financial statements and the notes thereto included in the Company's 2021 Annual Report on Form 10-K. The Unaudited Condensed Consolidated Financial Statements include the accounts of NJR and its subsidiaries. In the opinion of management, the accompanying Unaudited Condensed Consolidated Financial Statements reflect all adjustments necessary for a fair presentation of the results of the interim periods presented. These adjustments are of a normal and recurring nature. Because of the seasonal nature of the Company's utility and wholesale energy services operations, in addition to other factors, the financial results for the interim periods presented are not indicative of the results that are to be expected for the fiscal year ending September 30, 2022. Intercompany transactions and accounts have been eliminated. Use of Estimates The preparation of financial statements in conformity with GAAP requires the Company to make estimates that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosure of contingencies during the reporting period. On a quarterly basis or more frequently whenever events or changes in circumstances indicate a need, the Company evaluates its estimates, including those related to the calculation of the fair value of derivative instruments, debt, equity method investments, unbilled revenues, allowance for doubtful accounts, provisions for depreciation and amortization, long-lived assets, regulatory assets and liabilities, income taxes, pensions and other postemployment benefits, contingencies related to environmental matters and litigation. Asset retirement obligations are evaluated as often as needed. The Company’s estimates are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. The Company has legal, regulatory and environmental proceedings during the normal course of business that can result in loss contingencies. When evaluating the potential for a loss, the Company will establish a reserve if a loss is probable and can be reasonably estimated, in which case it is the Company’s policy to accrue the full amount of such estimates. Where the information is sufficient only to establish a range of probable liability, and no point within the range is more likely than any other, it is the Company’s policy to accrue the lower end of the range. In the normal course of business, estimated amounts are subsequently adjusted to actual results that may differ from estimates. In March 2020, COVID-19 was declared a pandemic by the World Health Organization and the Centers for Disease Control and Prevention and has spread globally, including throughout the U.S. The Company’s Unaudited Condensed Consolidated Financial Statements reflect estimates and assumptions made by management that affect the reported amounts of assets and liabilities at the balance sheet date and reported amounts of revenue and expenses during the reporting periods presented. The Company continues to closely monitor developments related to the COVID-19 pandemic and has, when appropriate, taken steps to ensure business continuity in the safe operation of its business. These steps include working from home for office-based employees utilizing a hybrid schedule, limiting direct contact with customers and suspending late payment fees for utility customers. While the Company and many businesses generally have returned to normal operating practices, this remains an evolving situation. The timing for recovery of businesses and local economies, resurgences or mutations of the virus, and any potential future shutdowns remains unknown. Throughout the COVID-19 pandemic, the Company has continued to provide essential services to our customers. Both the Company and NJNG continue to have sufficient liquidity to meet their current obligations and business operations remain fundamentally unchanged at this time. The Company will continue to monitor developments affecting its employees, customers, and operations and take additional steps to address the COVID-19 pandemic and its impacts, as necessary. The Company considered the impacts of COVID-19 on the assumptions and estimates used and determined that there have been no material adverse impacts on the Company’s results of operations as of June 30, 2022. Revenues Revenues from the sale of natural gas to NJNG customers are recognized in the period that natural gas is delivered and consumed by customers, including an estimate for unbilled revenue. NJNG records unbilled revenue for natural gas services. Natural gas sales to individual customers are based on meter readings, which are performed on a systematic basis throughout the month. At the end of each month, the amount of natural gas delivered to each customer after the last meter reading through the end of the respective accounting period is estimated, and recognizes unbilled revenues related to these amounts. The unbilled revenue estimates are based on estimated customer usage by customer type, weather effects, unaccounted-for natural gas and the most current tariff rates. Clean Energy Ventures recognizes revenue when SRECs are transferred to counterparties. SRECs are physically delivered through the transfer of certificates as per contractual settlement schedules. The Clean Energy Act of 2018 established guidelines for the closure of the SREC registration program to new applicants in New Jersey. The SREC program officially closed to new qualified solar projects on April 30, 2020. In December 2019, the BPU established the TREC as the successor to the SREC program. TRECs provide a fixed compensation base multiplied by an assigned project factor in order to determine their value. The project factor is determined by the type and location of the project, as defined. All TRECs generated are required to be purchased monthly by a TREC program administrator as appointed by the BPU. TREC revenue is recognized when TRECs are generated and are transferred monthly based upon metered solar electricity activity. Revenues for Energy Services are recognized when the natural gas is physically delivered to the customer. In addition, changes in the fair value of derivatives that economically hedge the forecasted sales of the natural gas are recognized in operating revenues as they occur, as noted above. Energy Services also recognizes changes in the fair value of SREC derivative contracts as a component of operating revenues. During December 2020, Energy Services entered into a series of AMAs with an investment grade public utility to release pipeline capacity associated with certain natural gas transportation contracts, which commenced on November 1, 2021. The AMAs include a series of temporary and permanent releases and revenue under these agreements is recognized as the performance obligations are satisfied. For temporary releases of pipeline capacity, revenue is recognized on a straight-line basis over the agreed upon term. For permanent releases of pipeline capacity, which represent a transfer of contractual rights for such capacity, revenue is recognized upon the transfer of the underlying contractual rights. Energy Services recognized $10.3 million and $42.7 million of operating revenue on the Unaudited Condensed Consolidated Statements of Operations during the three and nine months ended June 30, 2022, respectively. Amounts received in excess of revenue totaling $44.1 million are included in deferred revenue on the Unaudited Condensed Consolidated Balance Sheets as of June 30, 2022. The Storage and Transportation segment generates revenues from firm storage contracts and transportation contracts, related usage fees and hub services for the use of storage space, injections and withdrawals from their natural gas storage facility and the delivery of natural gas to customers. Demand fees are recognized as revenue over the term of the related agreement while usage fees and hub services revenues are recognized as services are performed. Revenues from all other activities are recorded in the period during which products or services are delivered and accepted by customers, or over the related contractual term. See Note 3. Revenue for further information. Cash and Cash Equivalents Cash and cash equivalents consist of cash on deposit and temporary investments with maturities of three months or less, and excludes restricted cash related to irrevocable letters of credit at Leaf River and escrow balances for utility plant projects at NJNG, which are recorded in other noncurrent assets on the Unaudited Condensed Consolidated Balance Sheets, respectively. The following table provides a reconciliation of cash and cash equivalents and restricted cash reported in the Unaudited Condensed Consolidated Balance Sheets to the total amounts in the Unaudited Condensed Consolidated Statements of Cash Flows as follows:
(Thousands) | June 30, 2022 | September 30, 2021 | June 30, 2021 |
Balance Sheet |  |  |  |
Cash and cash equivalents | $ | 27,693 |  | $ | 4,749 |  | $ | 4,719 |  |
Restricted cash in other noncurrent assets | $ | 300 |  | $ | 1,294 |  | $ | 1,291 |  |
Statements of Cash Flow |  |  |  |
Cash, cash equivalents and restricted cash | $ | 27,993 |  | $ | 6,043 |  | $ | 6,010 |  |
Allowance for Doubtful Accounts The Company segregates financial assets, primarily trade receivables and unbilled revenues due in one year or less, into portfolio segments based on shared risk characteristics, such as geographical location and regulatory environment, for evaluation of expected credit losses. Historical and current information, such as average write-offs, are applied to each portfolio segment to estimate the allowance for losses on uncollectible receivables. Additionally, the allowance for losses on uncollectible receivables is adjusted for reasonable and supportable forecasts of future economic conditions, which can include changing weather, commodity prices, regulations, and macroeconomic factors, such as unemployment rates among others, including the estimated impact of the ongoing pandemic on the outstanding balances. During fiscal 2022, the Company deferred a portion of costs incurred related to bad debt for NJNG associated with customer accounts receivable as a regulatory asset resulting from the impacts of the ongoing COVID-19 pandemic. See Note 4. Regulation for additional information. Loans Receivable NJNG currently provides loans, with terms ranging from two to 10 years, to customers that elect to purchase and install certain energy-efficient equipment in accordance with its BPU-approved SAVEGREEN program. The loans are recognized at fair value on the Unaudited Condensed Consolidated Balance Sheets. The Company has $14.4 million and $14.2 million recorded in other current assets and $33.8 million and $32.3 million in other noncurrent assets as of June 30, 2022 and September 30, 2021, respectively, on the Unaudited Condensed Consolidated Balance Sheets, related to the loans. The Company regularly evaluates the credit quality and collection profile of its customers. If NJNG determines a loan is impaired, the basis of the loan would be subject to regulatory review for recovery. As of June 30, 2022 and September 30, 2021, the Company has not recorded any impairments for SAVEGREEN loans. Natural Gas in Storage The following table summarizes natural gas in storage, at average cost by segment as of:
| June 30, 2022 | September 30, 2021
($ in thousands) | Natural Gas in Storage | Bcf | Natural Gas in Storage | Bcf
Natural Gas Distribution |  | $ | 119,961 |  | 18.6 |  |  | $ | 115,824 |  | 27.6 |
Energy Services |  | 83,477 |  | 11.6 |  |  | 77,782 |  | 18.8 |
Total |  | $ | 203,438 |  | 30.2 |  |  | $ | 193,606 |  | 46.4 |
Software Costs The Company capitalizes certain costs, such as software design and configuration, coding, testing and installation, that are incurred to purchase or create and implement computer software for internal use. Capitalized costs include external costs of materials and services utilized in developing or obtaining internal-use software and payroll and payroll-related costs for employees who are directly associated with and devote time to the internal-use software project. Maintenance costs are expensed as incurred. Upgrades and enhancements are capitalized if it is probable that such expenditures will result in additional functionality. Amortization is recorded on the straight-line basis over the estimated useful lives. The following tables present the software costs included in the Unaudited Condensed Consolidated Financial Statements:
(Thousands) | June 30, 2022 | September 30, 2021
Balance Sheets |  |
Utility plant, at cost | $ | 36,974 |  | $ | 16,543 |
Construction work in progress | $ | 10,828 |  | $ | 7,801 |
Nonutility plant and equipment, at cost | $ | 344 |  | $ | 338 |
Construction work in progress | $ | 1 |  | $ | 8 |
Accumulated depreciation and amortization, utility plant | $ | (2,578) |  | $ | (1,333) |
Accumulated depreciation and amortization, nonutility plant and equipment | $ | (23) |  | $ | (29) |
Software costs | $ | 5,909 |  | $ | 5,582 |
| Three Months Ended | Nine Months Ended
| June 30, | June 30,
Statements of Operations | 2022 | 2021 | 2022 | 2021
Operation and maintenance (1) | $ | 2,835 |  | $ | 2,039 |  | $ | 8,186 |  | $ | 6,810 |
Depreciation and amortization | $ | 637 |  | $ | 273 |  | $ | 1,239 |  | $ | 796 |
(1)During the three and nine months ended June 30, 2022, approximately $113,000 and $339,000, respectively, was amortized from software costs into O&M. During the three and nine months ended June 30, 2021, approximately $147,000 and $335,000, respectively, was amortized from software costs into O&M. Sale Leasebacks NJNG utilizes sale leaseback arrangements as a financing mechanism to fund certain of its capital expenditures related to natural gas meters, whereby the physical asset is sold concurrent with an agreement to lease the asset back. These agreements include options to renew the lease or repurchase the asset at the end of the term. Proceeds from sale leaseback transactions are accounted for as financing arrangements and are included in long-term debt on the Unaudited Condensed Consolidated Balance Sheets. NJNG received $17.3 million during the nine months ended June 30, 2022, in connection with the sale leaseback of its natural gas meters. There were no natural gas meter sale leasebacks recorded during the nine months ended June 30, 2021. In addition, for certain of its commercial solar energy projects, the Company enters into lease agreements that provide for the sale of commercial solar energy assets to third parties and the concurrent leaseback of the assets. For sale leaseback transactions where the Company has concluded that the arrangement does not qualify as a sale as the Company retains control of the underlying assets and, as such, the Company uses the financing method to account for the transaction. Under the financing method, the Company recognizes the proceeds received from the buyer-lessor that constitute a payment to acquire the solar energy asset as a financing arrangement, which is recorded as a component of debt on the Unaudited Condensed Consolidated Balance Sheets. The Company continues to operate the solar assets and is responsible for related expenses and entitled to retain the revenue generated from RECs and energy sales. The ITCs and other tax benefits associated with these solar projects transfer to the buyer; however, the payments are structured so that Clean Energy Ventures is compensated for the transfer of the related tax attributes. Accordingly, Clean Energy Ventures recognizes the equivalent value of the tax attributes in other income on the Unaudited Condensed Consolidated Statements of Operations over the respective five-year ITC recapture periods, starting with the second year of the lease. Clean Energy Ventures received proceeds of $3.3 million and $17.7 million during the nine months ended June 30, 2022 and 2021, respectively, in connection with the sale leaseback of commercial solar projects. The proceeds received were recognized as a financing obligation on the Unaudited Condensed Consolidated Balance Sheets. Accumulated Other Comprehensive Loss The following table presents the changes in the components of accumulated other comprehensive loss, net of related tax effects during the three months ended June 30, 2022 and 2021:
(Thousands) | Cash Flow Hedges | Postemployment Benefit Obligation | Total
Balance at March 31, 2022 | $ | (8,849) |  |  | $ | (23,618) |  |  | $ | (32,467) |
Other comprehensive income, net of tax |  |  |  |  |
Amounts reclassified from accumulated other comprehensive loss, net of tax of $(79), $(232), $(311), respectively | 262 |  |  | 768 |  | (1) | 1,030 |
Balance at June 30, 2022 | $ | (8,587) |  |  | $ | (22,850) |  |  | $ | (31,437) |
Balance at March 31, 2021 | $ | (9,903) |  |  | $ | (32,293) |  |  | $ | (42,196) |
Other comprehensive income, net of tax |  |  |  |  |
Amounts reclassified from accumulated other comprehensive loss, net of tax of $(79), $(245), $(324) | 264 |  |  | 812 |  | (1) | 1,076 |
Balance at June 30, 2021 | $ | (9,639) |  |  | $ | (31,481) |  |  | $ | (41,120) |
(1)Included in the computation of net periodic pension cost, a component of operations and maintenance expense on the Unaudited Condensed Consolidated Statements of Operations. The following table presents the changes in the components of accumulated other comprehensive loss, net of related tax effects during the nine months ended June 30, 2022 and 2021:
(Thousands) | Cash Flow Hedges | Postemployment Benefit Obligation | Total
Balance at September 30, 2021 | $ | (9,376) |  |  | $ | (25,152) |  |  | $ | (34,528) |
Other comprehensive income, net of tax |  |  |  |  |
Amounts reclassified from accumulated other comprehensive loss, net of tax of $(238), $(697), $(935), respectively | 789 |  |  | 2,302 |  | (1) | 3,091 |
Balance at June 30, 2022 | $ | (8,587) |  |  | $ | (22,850) |  |  | $ | (31,437) |
Balance at September 30, 2020 | $ | (10,397) |  |  | $ | (33,918) |  |  | $ | (44,315) |
Other comprehensive income, net of tax |  |  |  |  |
Amounts reclassified from accumulated other comprehensive loss, net of tax of $(270), $(734) and $(1,004) | 758 |  |  | 2,437 |  | (1) | 3,195 |
Balance at June 30, 2021 | $ | (9,639) |  |  | $ | (31,481) |  |  | $ | (41,120) |
(1)Included in the computation of net periodic pension cost, a component of operations and maintenance expense on the Unaudited Condensed Consolidated Statements of Operations. Reclassification Certain prior period amounts related to deferred revenue within current liabilities on the Unaudited Condensed Consolidated Balance Sheets and Unaudited Consolidated Condensed Statements of Cash Flows have been reclassified to conform to the current period presentation. Recently Adopted Updates to the Accounting Standards Codification Income Taxes In December 2019, the FASB issued ASU No. 2019-12, an amendment to ASC 740, Income Taxes, which simplifies the accounting for income taxes and changes the accounting for certain income tax transactions, among other minor improvements. The Company adopted this guidance on October 1, 2021, and applied it on a prospective basis. The amendments in this update were either not applicable, currently applied, or did not have a material impact on the Company's financial position, results of operations, cash flows or disclosures. Investments - Equity Securities, Investments - Equity Method and Joint Ventures and Derivatives and Hedging In January 2020, the FASB issued ASU No. 2020-01, an amendment to ASC 321, Investments - Equity Securities, ASC 323, Investments - Equity Method and Joint Ventures, and ASC 815, Derivatives and Hedging, which clarifies the interactions between the three ASU topics. The update requires an entity to evaluate observable transactions that necessitate applying or discontinuing the equity method of accounting when applying the measurement alternative in Topic 321. This evaluation occurs prior to applying or upon ceasing the equity method. The update also states that when applying paragraph 815-10-15-141(a) for forward contracts and purchased options, an entity is not required to assess whether the underlying securities will be accounted for under the equity method in accordance with Topic 323 or fair value method under Topic 825 upon settlement or exercise. The Company adopted this guidance on October 1, 2021, and applied it on a prospective basis. There was no material impact on the Company's financial position, results of operations, cash flows or disclosures. Other In October 2020, the FASB issued ASU No. 2020-10, Codification Improvements, which clarifies application of various provisions in the ASC by amending and adding new headings, cross referencing to other guidance, and refining or correcting terminology. It also improves the consistency by amending the ASC to include all disclosure guidance in the appropriate section. The Company adopted this guidance on October 1, 2021, and applied it on a prospective basis. There was no material impact on the Company's financial position, results of operations, cash flows or disclosures. Other Recent Updates to the Accounting Standards Codification Debt and Other In August 2020, the FASB issued ASU No. 2020-06, an amendment to ASC 470, Debt, and ASC 815, Derivatives and Hedging, which changes the accounting for convertible instruments by reducing the number of acceptable accounting models to three models including, the embedded derivative, substantial premium, and traditional no proceeds allocated models. The guidance is effective for the Company beginning October 1, 2022, and the Company can elect to apply it on either a modified or a full retrospective basis. The Company does not currently have convertible debt instruments and thus does not expect the amendments to have an impact on its financial position, results of operations, cash flows and disclosures upon adoption. In May 2021, the FASB issued ASU No. 2021-04, an amendment to ASC 470, Debt, ASC 260, Earnings per Share, ASC 718, Stock Compensation, and ASC 815, Derivatives and Hedging. The update impacts equity-classified written call options that remain equity-classified after a modification or exchange. The guidance is effective for the Company beginning October 1, 2022, and will be applied on a prospective basis. The Company does not currently have equity-classified written call options and thus does not expect the amendments to have an impact on its financial position, results of operations, cash flows and disclosures upon adoption. Leases In July 2021, the FASB issued ASU No. 2021-05, an amendment to ASC 842, Leases, which requires a lessor to classify a lease with entirely or partially variable payments that do not depend on an index or rate as an operating lease if another classification, including sales-type or direct financing would trigger a loss at the lease commencement date. The guidance is effective for the Company beginning October 1, 2022, and the Company can elect to apply it either on a retrospective basis to leases that have commenced or have been modified under ASC 842 or on a prospective basis. The Company does not expect the amendments to have an impact on its financial position, results of operations, cash flows and disclosures upon adoption. Business Combinations In October 2021, the FASB issued ASU No. 2021-08, an amendment to ASC 805, Business Combinations, which requires that an acquirer recognize, and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606, Revenue from Contracts with Customers. The guidance is effective for the Company beginning October 1, 2023, and will be applied on a prospective basis to new acquisitions following the date of adoption. The Company is currently evaluating the amendments to understand the impact on its financial position, results of operations, cash flows and disclosures upon adoption. Derivatives and Hedging In March 2022, the FASB issued ASU No. 2022-01, an amendment to ASC 815, Derivatives and Hedging, which addresses fair value hedge accounting of interest rate risk for portfolios of financial assets. This update further clarifies guidance previously released in ASU 2017-12 which established the "last-of-layer" method and this update renames that method to the “portfolio layer” method. The guidance is effective for the Company beginning October 1, 2023, and the transition method can be on a prospective basis for a multiple-layer hedging strategy or a modified retrospective basis for a portfolio layer method. The Company does not currently apply hedge accounting to any of its risk management activities and thus does not expect the amendments to have an impact on its financial position, results of operations, cash flows and disclosures upon adoption. Financial Instruments In March 2022, the FASB issued ASU No. 2022-02, an amendment to ASC 326, Financial Instruments-Credit Losses, which eliminates the accounting guidance for creditors in troubled debt restructuring. It also aligns conflicting disclosure requirement guidance in ASC 326 by requiring disclosure of current-period gross write-offs by year of origination. The amendment also adds new disclosures for creditors with loan refinancing and restructuring for borrowers experiencing financial difficulty. The guidance is effective for the Company beginning October 1, 2023, and the Company can elect to apply it either on a modified retrospective or prospective basis. At this time, the Company has not experienced a troubled debt restructuring and thus does not expect the amendments to have an impact on its financial position, results of operations and cash flows upon adoption. The Company is currently evaluating the amendments to understand the impact on its disclosures upon adoption. Fair Value Measurement In June 2022, the FASB issued ASU No. 2022-03, an amendment to ASC 820, Fair Value Measurement, The amendments clarify the fair value principles when measuring the fair value of an equity security subject to a contractual sale restriction. The guidance is effective for the Company on October 1, 2024, its first fiscal year beginning after December 15, 2023, and will be applied on a prospective basis, if applicable. At this time, the Company does not have equity securities subject to contractual sale restrictions, and therefore these amendments would only impact the Company if, in the future, it entered into such transactions.

X
- References No definition available. + Details
Name: | us-gaap_AccountingPoliciesAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for all significant accounting policies of the reporting entity. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=123372394&loc=d3e18726-107790 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -URI http://asc.fasb.org/topic&trid=2122369 + Details
Name: | us-gaap_SignificantAccountingPoliciesTextBlock
Namespace Prefix: | us-gaap_
Data Type: | dtr-types:textBlockItemType
Balance Type: | na
Period Type: | duration