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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 6 Months Ended
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Mar. 31, 2024
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, 2023 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 2023 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, 2024. 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, lease liabilities, 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 periodically as required. 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. 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. CEV 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. In July 2021, the BPU established a new successor solar incentive program. The Administratively Determined Incentive Program provides administratively set incentives for net metered residential projects and net metered non-residential projects of 5 MW or less. RECs generated through the production of electricity under this program are known as SREC IIs. TRECs and SREC IIs generated are required to be purchased monthly by a REC program administrator as appointed by the BPU. Revenue for TRECs and SREC IIs are recognized upon generation and are transferred monthly based upon metered solar electricity activity. Revenues for ES 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. ES also recognizes changes in the fair value of SREC derivative contracts as a component of operating revenues. During December 2020, ES 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 in November 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. ES recognized operating revenue of $9.5M during both the three months ended March 31, 2024 and 2023, and $19.0M and $29.5M during the six months ended March 31, 2024 and 2023, respectively, on the Unaudited Condensed Consolidated Statements of Operations. Amounts received in excess of revenue totaling $107.2M and $58.7M are included in deferred revenue on the Unaudited Condensed Consolidated Balance Sheets as of March 31, 2024 and September 30, 2023, respectively. S&T 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 escrow balances for utility plant projects at NJNG, which are recorded in other noncurrent assets on the Unaudited Condensed Consolidated Balance Sheets. 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) | March 31, 2024 | September 30, 2023 | March 31, 2023 |
Balance Sheet |  |  |  |
Cash and cash equivalents | $ | 5,036 |  | $ | 954 |  | $ | 27,095 |  |
Restricted cash in other noncurrent assets | $ | 710 |  | $ | 563 |  | $ | 461 |  |
Statements of Cash Flow |  |  |  |
Cash, cash equivalents and restricted cash | $ | 5,746 |  | $ | 1,517 |  | $ | 27,556 |  |
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. 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 $15.8M and $15.1M recorded in other current assets and $43.6M and $39.0M in other noncurrent assets as of March 31, 2024 and September 30, 2023, respectively, on the Unaudited Condensed Consolidated Balance Sheets, related to the loans. The Company regularly evaluates the credit quality and collection profile of its customers. If NJNG determines a loan is impaired, the basis of the loan would be subject to regulatory review for recovery. As of March 31, 2024 and September 30, 2023, the Company has not recorded any impairments for SAVEGREEN loans. Natural Gas in Storage The following table summarizes natural gas in storage, at average cost by segment as of:
| March 31, 2024 | September 30, 2023
($ in thousands) | Natural Gas in Storage | Bcf | Natural Gas in Storage | Bcf
NJNG |  | $ | 60,539 |  | 9.2 |  |  | $ | 175,025 |  | 29.1 |
ES |  | 20,457 |  | 11.3 |  |  | 24,476 |  | 14.6 |
Total |  | $ | 80,996 |  | 20.5 |  |  | $ | 199,501 |  | 43.7 |
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) | March 31, 2024 | September 30, 2023
Balance Sheets |  |
Utility plant, at cost | $ | 88,234 |  | $ | 51,282 |
Construction work in progress | $ | 45,573 |  | $ | 55,012 |
Nonutility plant and equipment, at cost | $ | 344 |  | $ | 344 |
Accumulated depreciation and amortization, utility plant | $ | (9,728) |  | $ | (7,480) |
Accumulated depreciation and amortization, nonutility plant and equipment | $ | (42) |  | $ | (36) |
Software costs | $ | 9,734 |  | $ | 8,375 |
| Three Months Ended | Six Months Ended
| March 31, | March 31,
Statements of Operations | 2024 | 2023 | 2024 | 2023
Operation and maintenance | $ | 2,674 |  | $ | 3,886 |  | $ | 5,927 |  | $ | 7,638 |
Depreciation and amortization | $ | 1,265 |  | $ | 957 |  | $ | 2,254 |  | $ | 1,828 |
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. As NJNG retains control of the natural gas meters, these arrangements do not qualify as a sale. NJNG uses the financing method to account for the transactions. 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. 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, 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 SRECs, TRECs, SREC IIs 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 CEV is compensated for the transfer of the related tax attributes. Accordingly, CEV 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. See Note 9. Debt for more details regarding sale leaseback transactions recorded as financing arrangements. Accumulated Other Comprehensive Income (Loss) The following table presents the changes in the components of accumulated other comprehensive income (loss), net of related tax effects during the three months ended March 31, 2024 and 2023:
(Thousands) | Cash Flow Hedges | Postemployment Benefit Obligation | Total
Balance as of December 31, 2023 | $ | (7,005) |  |  | $ | (2,559) |  |  | $ | (9,564) |
Other comprehensive income (loss), net of tax |  |  |  |  |
Other comprehensive income, before reclassifications, net of tax of $0, $(3,020), $(3,020), respectively | — |  |  | 9,992 |  |  | 9,992 |
Amounts reclassified from accumulated other comprehensive income (loss), net of tax of $(80), $112, $32, respectively | 262 |  |  | (368) |  | (1) | (106) |
Net current-period other comprehensive income, net of tax of $(80), $(2,908), $(2,988), respectively | 262 |  |  | 9,624 |  |  | 9,886 |
Balance as of March 31, 2024 | $ | (6,743) |  |  | $ | 7,065 |  |  | $ | 322 |
Balance as of December 31, 2022 | $ | (8,059) |  |  | $ | 3,537 |  |  | $ | (4,522) |
Other comprehensive income, net of tax |  |  |  |  |
Amounts reclassified from accumulated other comprehensive income, net of tax of $(80), $(13), $(93) | 264 |  |  | 41 |  | (1) | 305 |
Balance as of March 31, 2023 | $ | (7,795) |  |  | $ | 3,578 |  |  | $ | (4,217) |
(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 income (loss), net of related tax effects during the six months ended March 31, 2024 and 2023:
(Thousands) | Cash Flow Hedges | Postemployment Benefit Obligation | Total
Balance as of September 30, 2023 | $ | (7,269) |  |  | $ | (2,690) |  |  | $ | (9,959) |
Other comprehensive income (loss), net of tax |  |  |  |  |
Other comprehensive income, before reclassifications, net of tax of $0, $(3,020) and $(3,020), respectively | — |  |  | 9,992 |  |  | 9,992 |
Amounts reclassified from accumulated other comprehensive income (loss), net of tax of $(159), $72 and $(87), respectively | 526 |  |  | (237) |  | (1) | 289 |
Net current-period other comprehensive income, net of tax of $(159), $(2,948), $(3,107), respectively | 526 |  |  | 9,755 |  |  | 10,281 |
Balance as of March 31, 2024 | $ | (6,743) |  |  | $ | 7,065 |  |  | $ | 322 |
Balance as of September 30, 2022 | $ | (8,322) |  |  | $ | 3,496 |  |  | $ | (4,826) |
Other comprehensive income, net of tax |  |  |  |  |
Amounts reclassified from accumulated other comprehensive income, net of tax of $(159), $(25) and $(184), respectively | 527 |  |  | 82 |  | (1) | 609 |
Balance as of March 31, 2023 | $ | (7,795) |  |  | $ | 3,578 |  |  | $ | (4,217) |
(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 have been reclassified to conform to the current period presentation. Deferred income taxes and postemployment employee benefit assets previously classified within other noncurrent assets on the Unaudited Condensed Consolidated Balance Sheets have been reclassified to their own categories. Intangible assets, net previously classified in its own category on the Unaudited Condensed Consolidated Balance Sheets has been reclassified into other noncurrent assets. Other noncurrent assets and other noncurrent liabilities previously classified in their own categories on the Unaudited Condensed Consolidated Statements of Cash Flow have been combined into one category. Recently Adopted Updates to the Accounting Standards Codification 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 was effective for the Company beginning October 1, 2023, and was applied on a prospective basis to new acquisitions following the date of adoption. As the Company has not executed a transaction that would qualify as a business combination, there was no 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 as the “portfolio layer” method. The guidance was effective for the Company beginning October 1, 2023. As the Company does not currently apply hedge accounting to any of its risk management activities, there was no 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 was effective for the Company beginning October 1, 2023. Since the Company has not experienced a troubled debt restructuring, there was no impact on its financial position, results of operations, cash flows and disclosures upon adoption. Other Recent Updates to the Accounting Standards Codification Fair Value Measurement In June 2022, the FASB issued ASU No. 2022-03, an amendment to ASC 820, Fair Value Measurement. The amendment clarifies 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, and will be applied on a prospective basis. At this time, the Company does not have equity securities subject to contractual sale restrictions, and therefore this amendment would only impact the Company upon adoption if, in the future, it entered into such transactions. Leases In March 2023, the FASB issued ASU No. 2023-01, an amendment to ASC 842, Leases, which applies to arrangements between related parties under common control. This update requires that all entities with common control arrangements classify and account for these leases on the same basis as an arrangement with an unrelated party. If the lessee in these types of arrangements continues to control the use of the underlying asset through a lease, the leasehold improvements are to be amortized over the improvements’ useful life to the common control group, regardless of the lease term. The guidance is effective for the Company on October 1, 2024, and the Company will elect to apply it on a prospective basis. At this time, the Company does not have leases that are subject to this amendment, and therefore it would only impact the Company upon adoption if, in the future, it entered into such transactions. Business Combinations In August 2023, the FASB issued ASU No. 2023-05, an amendment to ASC 805, Business Combinations, which addresses how a joint venture should recognize contributions received upon its formation. Joint ventures must account for initial assets and liabilities received at fair value on the date the joint venture is formed. The guidance is effective for the Company for joint ventures formed beginning January 1, 2025, and the Company can elect to apply it either prospectively or retrospectively back to a joint venture’s formation date provided adequate information is available. Early adoption is permitted. This amendment would only impact the Company upon adoption if, in the future, it entered into an applicable transaction. Segment Reporting In November 2023, the FASB issued ASU No. 2023-07, an amendment to ASC 280, Segment Reporting, which improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The update requires entities to disclosure significant segment expenses that are regularly provided to the chief operating decision maker and included within segment profit and loss, and it enhances interim disclosure requirements to conform with annual requirements. This update becomes effective for the Company on October 1, 2024 for the first annual period and on October 1, 2025 for the interim periods. It will be applied retrospectively for the enhanced segment disclosure requirements to all periods presented, with early adoption permitted. The Company is currently evaluating the amendment to understand the impacts on its financial position, results of operations, cash flows and disclosures upon adoption. Income Taxes In December 2023, the FASB issued ASU No. 2023-09, an amendment to ASC 740, Income Taxes, which requires disaggregated information about a reporting entity’s effective tax rate reconciliation and income taxes paid. It will provide investors more detailed income tax disclosures that would be useful in making capital allocation decisions. The guidance is effective for the Company on October 1, 2025, and can be applied either prospectively or retrospectively. Early adoption is permitted. The Company is currently evaluating the amendment to understand the impacts on its financial position, results of operations, cash flows and disclosures upon adoption.

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