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New Jersey Resources Corporation reported for 2021 q2

Published: 2021-08-05 16:46:22 ET (After Market Close)
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New Jersey Resources Corporation
Part I

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
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 United States. 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 considered the impacts ofCOVID-19on 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, 2021.

Acquisitions

The Company follows the guidance in ASC 805, Business Combinations, for determining the appropriate accounting treatment for acquisitions. ASU No. 2017-01, Clarifying the Definition of a Business, provides an initial fair value screen to determine if substantially all of the fair value of the assets acquired is concentrated in a single asset or group of similar assets. If the initial screening test is not met, the set is considered a business based on whether there are inputs and substantive processes in place. Based on the results of this analysis and conclusion on an acquisition’s classification of a business combination or an asset acquisition, the accounting treatment is derived.

If the acquisition is deemed to be a business, the acquisition method of accounting is applied. Identifiable assets acquired and liabilities assumed at the acquisition date are recorded at fair value. If the transaction is deemed to be an asset purchase, the cost accumulation and allocation model is used whereby the assets and liabilities are recorded based on the purchase price and allocated to the individual assets and liabilities based on relative fair values.

The determination and allocation of fair values to the identifiable assets acquired and liabilities assumed are based on various assumptions and valuation methodologies requiring considerable management judgment. The most significant variables in these valuations are discount rates and the number of years on which to base the cash flow projections, as well as other assumptions and estimates used to determine the cash inflows and outflows. Management determines discount rates based on the risk inherent in the acquired assets, specific risks, industry beta and capital structure of guideline companies. The valuation of an acquired business is based on available information at the acquisition date and assumptions that are believed to be reasonable. However, a change in facts and circumstances as of the acquisition date can result in subsequent adjustments during the measurement period, but no later than one year from the acquisition date.

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.

11

New Jersey Resources Corporation
Part I

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In June 2020, Clean Energy Ventures began generating TRECs for qualified new residential and commercial solar projects placed into service following the close of the SREC program. 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.

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 escrow balances for utility plant projects at NJNG and irrevocable letters of credit at Leaf River, which is recorded in other current and 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,
2021
September 30,
2020
June 30,
2020
September 30,
2019
Balance Sheet
Cash and cash equivalents$4,719$117,012$42,821$2,676
Restricted cash in other noncurrent assets$1,291$2,411$2,424$1,387
Statements of Cash Flow
Cash, cash equivalents and restricted cash$6,010$119,423$45,245$4,063

Allowance for Doubtful Accounts

As of October 1, 2021, the Company adopted ASU No. 2016-13, an amendment to ASC 326, Financial Instruments - Credit Losses, which changes the impairment model for certain financial assets that have a contractual right to receive cash, including trade and loan receivables. The Company segregates financial assets that fall within the scope of ASC 326, 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.

In February 2021, severe winter weather affected the U.S. mid-continent and southern regions that resulted in increased demand for natural gas supply and increases in wholesale energy prices. As a result, Energy Services evaluated its counterparties for credit deterioration, as well as the related receivables for the purchase and receipt of natural gas for amounts past due.

The Company examined the credit characteristics of its counterparties, including the history of past due amounts for contractual settlements, counterparty credit ratings, and the likelihood of recovering amounts owed. At March 31, 2021, the Company recorded a reserve for expected credit losses for Energy Services totaling $5.2million within operations and maintenance expense on the Unaudited Condensed Consolidated Statement of Operations, representing management’s best estimate of expected credit losses at this time.

12

New Jersey Resources Corporation
Part I

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
It is possible that future developments could occur that could result in impairment of a portion or all of the remaining amounts owed to Energy Services, which would result in an additional charge to earnings.

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 $14.3 million and $13.7 million recorded in other current assets and $33.2 million and $35.3 million in other noncurrent assets as of June 30, 2021 and September 30, 2020, 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, 2021 and September 30, 2020, 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, 2021September 30, 2020
($ in thousands)Natural Gas in StorageBcfNatural Gas in StorageBcf
Natural Gas Distribution$68,65717.4$110,03727.2
Energy Services57,16722.257,35234.3
Storage and Transportation1150.02
Total$125,82439.6$167,50461.52

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 computersoftware for internal use. Capitalized costs include external costs of materials and services utilized in developing or obtaininginternal-use software and payroll and payroll-related costs for employees who are directly associated with and devote time to theinternal-use softwareproject. 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,
2021
September 30,
2020
Balance Sheets
Utility plant, at cost$14,127$13,452
Construction work in progress$2,496$
Nonutility plant and equipment, at cost$334$316
Accumulated depreciation and amortization, utility plant$(1,057)$(279)
Accumulated depreciation and amortization, nonutility plant and equipment$(23)$(5)
Software costs$5,560$4,707

Three Months EndedNine Months Ended
June 30,June 30,
Statements of Operations2021202020212020
Operation and maintenance (1)
$2,039$1,928$6,810$4,524
Depreciation and amortization$273$$796$
(1)During the three and nine months ended June30, 2021, approximately $147,000 and $335,000, respectively, was amortized from software costs into O&M. There were no amounts amortized for the three and nine months ended June30, 2020.
13

New Jersey Resources Corporation
Part I

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
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 $4.0 million in December 2019, 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 June30, 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.

During the three and nine months ended June30, 2021, Clean Energy Ventures received proceeds of $5.5 million and $17.7 million, respectively, and $42.9 million for both the three and nine months ended June30, 2020, 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) Income

The following table presents the changes in the components of accumulated other comprehensive (loss) income, net of related tax effects during the three months ended June30, 2021 and 2020:
(Thousands)Cash Flow HedgesPostemployment Benefit ObligationTotal
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), $(324), respectively
264812(1)1,076
Balance at June 30, 2021$(9,639)$(31,481)$(41,120)
Balance at March 31, 2020$(9,711)$(24,928)$(34,639)
Other comprehensive (loss) income, net of tax
Other comprehensive loss, before reclassifications, net of tax of $180, $0, $180
(626)(626)
Amounts reclassified from accumulated other comprehensive loss, net of tax of $0, $(191), $(191)
663(1)663
Net current-period other comprehensive (loss) income, net of tax of $180, $(191), $(11)
(626)66337
Balance at June 30, 2020$(10,337)$(24,265)$(34,602)
(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.

14

New Jersey Resources Corporation
Part I

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following table presents the changes in the components of accumulated other comprehensive (loss) income, net of related tax effects during the nine months ended June30, 2021 and 2020:
(Thousands)Cash Flow HedgesPostemployment Benefit ObligationTotal
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), $(1,004), respectively
7582,437(1)3,195
Balance at June 30, 2021$(9,639)$(31,481)$(41,120)
Balance at September 30, 2019$$(31,787)$(31,787)
Other comprehensive income, net of tax
Other comprehensive (loss) income, before reclassifications, net of tax of $2,961, $(1,681), $1,280
(10,337)5,378(4,959)
Amounts reclassified from accumulated other comprehensive loss, net of tax of $0, $(480) and $(480)
2,144(1)2,144
Net current-period other comprehensive (loss) income, net of tax of $2,961, $(2,161), $800
(10,337)7,522(2,815)
Balance at June 30, 2020$(10,337)$(24,265)$(34,602)
(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.

Change in Accounting Policy

Effective October 1, 2020, the Company changed its method of accounting for ITCs at Clean Energy Ventures from the flow through method to the deferral method. Prior to the change, the Company recognized ITCs as a reduction of income tax expense in the period that the qualified solar energy property, to which it relates, was placed in service. Effective with the accounting change, the Company records ITCs as a reduction to the carrying value of the related asset when placed in service and recognizes ITCs in earnings as a reduction to depreciation expense over the productive life of the related property. The deferral method is considered the preferred method per the authoritative guidance as described in ASC 740 - Income Taxes. The change to the deferral method is also consistent with the application of authoritative accounting guidance throughout other reporting segments and promotes proper matching of the benefits of the recognition of the ITC with the expected use of the asset.

The Company applied the change in accounting method retrospectively to all prior periods presented.

The impact of the change in accounting policy on the Unaudited Condensed Consolidated Statements of Operationsduring the three months ended June30, 2020 is as follows:
As PreviouslyEffect ofAs
(Thousands)ReportedChangeAdjusted
Depreciation and amortization$31,216(3,344)$27,872
Total operating expenses$319,165(3,344)$315,821
Operating loss$(20,191)3,344$(16,847)
Loss before income taxes and equity in earnings of affiliates$(32,622)3,344$(29,278)
Income tax benefit$(2,190)(4,577)$(6,767)
Net loss$(27,219)7,921$(19,298)
(Loss) Earnings per common share
Basic$(0.28)0.08$(0.20)
Diluted$(0.28)0.08$(0.20)

15

New Jersey Resources Corporation
Part I

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The impact of the change in accounting policy on the Unaudited Condensed Consolidated Statements of Operationsduring the nine months ended June30, 2020 is as follows:
As PreviouslyEffect ofAs
(Thousands)ReportedChangeAdjusted
Depreciation and amortization$89,758(9,733)$80,025
Total operating expenses$1,377,103(9,733)$1,367,370
Operating income$176,5219,733$186,254
Income before income taxes and equity in earnings of affiliates$136,3649,733$146,097
Income tax (benefit) expense$(4,092)30,080$25,988
Net income$150,647(20,347)$130,300
Earnings per common share
Basic$1.60(0.22)$1.38
Diluted$1.59(0.21)$1.38

The cumulative effect of the change in accounting policy on the Unaudited Condensed Consolidated Balance Sheets as of September 30, 2020 is as follows:
As PreviouslyEffect ofAs
(Thousands)ReportedChangeAdjusted
Assets
Nonutility plant and equipment, at cost$1,430,723(322,211)$1,108,512
Accumulated depreciation and amortization, nonutility plant and equipment$(202,507)61,945$(140,562)
Property, plant and equipment, net$3,983,035(260,266)$3,722,769
Other noncurrent assets$78,7166,941$85,657
Total noncurrent assets$964,4356,941$971,376
Total assets$5,569,802(253,325)$5,316,477
Capitalization
Retained earnings$1,148,297(200,796)$947,501
Common stock equity$1,844,692(200,796)$1,643,896
Total capitalization$4,104,158(200,796)$3,903,362
Liabilities
Deferred income taxes$190,610(52,529)$138,081
Total noncurrent liabilities$931,922(52,529)$879,393
Total capitalization and liabilities$5,569,802(253,325)$5,316,477

The impact of the change in accounting policy on the Unaudited Condensed Consolidated Statements of Cash Flows as of June30, 2020 is as follows:
As PreviouslyEffect ofAs
(Thousands)ReportedChangeAdjusted
Depreciation and amortization$89,758(9,733)$80,025
Deferred income taxes$(3,066)30,080$27,014

16

New Jersey Resources Corporation
Part I

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The impact of the change in accounting policy on the Unaudited Condensed Consolidated Statements of Common Stock Equity as of June30, 2020 is as follows:
As PreviouslyEffect ofAs
(Thousands)ReportedChangeAdjusted
Retained Earnings
Balance at September 30, 2019$1,075,960(206,102)$869,858
Net Income$89,361(13,609)$75,752
Balance at December 31, 2019$1,135,475(219,711)$915,764
Net Income$88,505(14,659)$73,846
Balance at March 31, 2020$1,194,092(234,370)$959,722
Net Loss$(27,219)7,921$(19,298)
Balance at June 30, 2020$1,136,925(226,449)$910,476
Total
Balance at September 30, 2019$1,551,717(206,102)$1,345,615
Net Income$89,361(13,609)$75,752
Balance at December 31, 2019$1,827,803(219,711)$1,608,092
Net Income$88,505(14,659)$73,846
Balance at March 31, 2020$1,889,107(234,370)$1,654,737
Net Loss$(27,219)7,921$(19,298)
Balance at June 30, 2020$1,838,927(226,449)$1,612,478
Recently Adopted Updates to the Accounting Standards Codification

Financial Instruments

In June 2016, the FASB issued ASU No. 2016-13, an amendment to ASC 326, Financial Instruments - Credit Losses, which changes the impairment model for certain financial assets that have a contractual right to receive cash, including trade and loan receivables. The new model requires recognition based upon an estimation of expected credit losses rather than recognition of losses when it is probable that they have been incurred. An entity will apply the amendment through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. The Company assessed the impact of the guidance on NJR's reserve methodologies and credit policies and procedures for any assets that could be impacted, noting the majority of NJR's financial assets are short-term in nature, such as trade receivables and unbilled revenues.

The Company completed its evaluation of this amendment and all subsequent amendments related to this topic and adopted this guidance on October 1, 2020 using the modified retrospective method. The adoption did not result in a cumulative effect adjustment to retained earnings as the current expected lifetime loss estimates were not materially different from the reserves already in place.

The Company segregates financial assets that fall within the scope of ASC 326, 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.

Fair Value

In August 2018, the FASB issued ASU No. 2018-13, an amendment to ASC 820, Fair Value Measurement, which removes, modifies and adds to certain disclosure requirements of fair value measurements. Disclosure requirements removed include the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, the policy for timing of transfers between levels and the valuation processes for Level 3 fair value measurements. Modifications include considerations around the requirement to disclose the timing of liquidation of an investee’s assets and the date when restrictions from redemption might lapse. The additions include the requirement to disclose changes in unrealized gains and losses for the period in other comprehensive income for recurring Level 3 fair value measurements held and the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. The Company adopted this guidance on October 1, 2020 on a prospective basis. The Company does not have either Level 3 fair value measurements or transfers
17

New Jersey Resources Corporation
Part I

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
between Level 1 or Level 2 in its current portfolios, and therefore, this ASU did not have an impact to the Company's financial position, results of operations or cash flows.

Compensation - Retirement Benefits

In August 2018, the FASB issued ASU No. 2018-14, an amendment to ASC 715, Compensation - Retirement Benefits, which removes disclosures that no longer are considered cost-beneficial, clarifies the specific requirements of certain disclosures and adds new disclosure requirements identified as relevant. The Company adopted this guidance on October 1, 2020. There was no impact to the Company's financial position, results of operations or cash flows.

Reference Rate Reform

In January 2021, the FASB issued ASU 2021-01, which refines the scope of ASC 848, Reference Rate Reform, and clarifies some of its guidance of global reference rate reform activities. The amendments in this update permits entities to elect certain optional expedients and exceptions when accounting for derivative contracts and certain hedging relationships affected by changes in the interest rates used for discounting cash flows, for computing variation margin settlements, and for calculating price alignment interest in connection with reference rate reform activities under way in global financial markets (the “discounting transition”). The amendments in this update are effective upon the ASU issuance through December 31, 2022. There was no impact to the Company's financial position, results of operations or cash flows as a result of its adoption.

Other Recent 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 guidance is effective for the Company beginning October 1, 2021, with early adoption permitted. Upon adoption, the amendments will be applied on a prospective basis. The Company is currently evaluating the amendments to understand the impact on its financial position, results of operations, cash flows and disclosures upon adoption.

Investments - Equity Method and Derivatives and Hedging

In January 2020, the FASB issued ASU No. 2020-01, Investments - Equity Securities (Topic 321), Investments - Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815): Clarifying the Interactions between Topic 321, Topic 323, and Topic 815. 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 guidance is effective for the Company beginning October 1, 2021, with early adoption permitted. The Company is currently evaluating the impact of the adoption of these amendments but does not expect that it will have a material effect on its consolidated financial statements.

Other

In October 2020, the FASB issued ASU 2020-10, 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 guidance is effective for the Company on October 1, 2021, with early adoption permitted. The Company is currently evaluating the impact of the adoption of these amendments but does not expect that it will have a material effect on its consolidated financial statements.
3. REVENUE

Revenue is recognized when a performance obligation is satisfied by transferring control of a product or service to a customer. Revenue is measured based on consideration specified in a contract with a customer using the output method of progress. The Company elected to apply the invoice practical expedient for recognizing revenue, whereby the amounts invoiced to customers represent the value to the customer and the Company’s performance completion as of the invoice date. Therefore, the Company does not disclose related unsatisfied performance obligations. The Company also elected the practical expedient to exclude from the transaction price all sales taxes that are assessed by a governmental authority and therefore presents sales tax net in operating revenues on the Unaudited Condensed Consolidated Statements of Operations.
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New Jersey Resources Corporation
Part I

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Below is a listing of performance obligations that arise from contracts with customers, along with details on the satisfaction of each performance obligation, the significant payment terms and the nature of the goods and services being transferred, by reporting segment and other business operations:
Revenue Recognized Over Time:
SegmentPerformance ObligationDescription
Natural Gas DistributionNatural gas utility sales
NJNG's performance obligation is to provide natural gas to residential, commercial and industrial customers as demanded, based on regulated tariff rates, which are established by the BPU. Revenues from the sale of natural gas are recognized in the period that gas is delivered and consumed by customers, including an estimate for quantities consumed but not billed during the period. Payment is due each month for the previous month's deliveries. Natural gas sales to individual customers are based on meter readings, which are performed on a systematic basis throughout the billing period. The unbilled revenue estimates are based on estimated customer usage by customer type, weather effects and the most current tariff rates. NJNG is entitled to be compensated for performance completed until service is terminated.

Customers may elect to purchase the natural gas commodity from NJNG or may contract separately to purchase natural gas directly from third-party suppliers. As NJNG is acting as an agent on behalf of the third-party supplier, revenue is recorded for the delivery of natural gas to the customer.
Clean Energy VenturesCommercial solar electricity
Clean Energy Ventures operates wholly-owned solar projects that recognize revenue as electricity is generated and transferred to the customer. The performance obligation is to provide electricity to the customer in accordance with contract terms or the interconnection agreement and is satisfied upon transfer of electricity generated.

Revenue is recognized as invoiced and the payment is due each month for the previous month's services.
Clean Energy VenturesResidential solar electricity
Clean Energy Ventures provides access to residential rooftop and ground-mount solar equipment to customers who then pay the Company a monthly fee. The performance obligation is to provide electricity to the customer based on generation from the underlying residential solar asset and is satisfied upon transfer of electricity generated.

Revenue is derived from the contract terms and is recognized as invoiced, with the payment due each month for the previous month's services.
Clean Energy VenturesTransition renewable energy certificates
Clean Energy Ventures generates TRECs, which are created for every MWh of electricity produced by a solar generator. The performance obligation of Clean Energy Ventures is to generate electricity and TRECs, which are purchased monthly by a REC Administrator.

Revenue is recognized upon generation.
Energy ServicesNatural gas services
The performance obligation of Energy Services is to provide the customer transportation, storage and asset management services on an as-needed basis. Energy Services generates revenue through management fees, demand charges, reservation fees and transportation charges centered around the buying and selling of the natural gas commodity, representing one series of distinct performance obligations.

Revenue is recognized based upon the underlying natural gas quantities physically delivered and the customer obtaining control. Energy Services invoices customers on a monthly basis in line with the terms of the contract and based on the services provided. Payment is due each month for the previous month's invoiced services.
Storage and Transportation
Natural gas services
The performance obligation of the Storage and Transportation segment is to provide the customer with storage and transportation services. The Storage and Transportation segment generates revenues from firm storage contracts and transportation contracts, related usage fees for the use of storage space, injection and withdrawal at the storage facility and the delivery of natural gas to customers. Revenue is recognized over time as customers receive the benefits of service as it is performed on their behalf using an output method based on actual deliveries.

Demand fees are recognized as revenue over the term of the related agreement.
Home Services and OtherService contracts
Home Services enters into service contracts with homeowners to provide maintenance and replacement services of applicable heating, cooling or ventilation equipment. All services provided relate to a distinct performance obligation which is to provide services for the specific equipment over the term of the contract.

Revenue is recognized on a straight-line basis over the term of the contract and payment is due upon receipt of the invoice.
19

New Jersey Resources Corporation
Part I

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Revenue Recognized at a Point in Time:
Storage and Transportation
Natural gas services
The performance obligation of the Storage and Transportation segment is to provide the customer with storage and transportation services. The Storage and Transportation segment generates revenues from hub services for the use of storage space, injection and withdrawal from the storage facility. Hub services include park and loan transactions and wheeling.

Hub services revenues are recognized as services are performed.
Home Services and OtherInstallationsHome Services installs appliances, including but not limited to, furnaces, air conditioning units, boilers and generators to customers. The distinct performance obligation is the installation of the contracted appliance, which is satisfied at the point in time the item is installed.

The transaction price for each installation differs accordingly. Revenue is recognized at a point in time upon completion of the installation, which is when the customer is billed.

Disaggregated revenues from contracts with customers by product line and by reporting segment and other business operations during the three months ended June30, 2021 and 2020, is as follows:
(Thousands)Natural Gas DistributionClean Energy Ventures Energy ServicesStorage and TransportationHome Services
and Other
Total
2021
Natural gas utility sales$118,367$118,367
Natural gas services4,04111,64915,690
Service contracts8,3338,333
Installations and maintenance4,9794,979
Renewable energy certificates1,5681,568
Electricity sales7,3467,346
Eliminations (1)
(650)(241)(891)
Revenues from contracts with customers118,3678,9144,04110,99913,071155,392
Alternative revenue programs (2)
577577
Derivative instruments8,6824,467(3)197,553210,702
Eliminations (1)
922922
Revenues out of scope9,2594,467198,475212,201
Total operating revenues$127,62613,381202,51610,99913,071$367,593
2020
Natural gas utility sales$124,888$124,888
Natural gas services3,53611,86315,399
Service contracts8,1268,126
Installations and maintenance4,2434,243
Electricity sales5,2945,294
Eliminations (1)
(720)(206)(926)
Revenues from contracts with customers124,8885,2943,53611,14312,163157,024
Alternative revenue programs (2)
(2,665)(2,665)
Derivative instruments6,3098,102(3)130,007144,418
Eliminations (1)
197197
Revenues out of scope3,6448,102130,204141,950
Total operating revenues$128,53213,396133,74011,14312,163$298,974
(1)Consists of transactions between subsidiaries that are eliminated in consolidation.
(2)Includes CIP revenue.
(3)Includes SREC revenue.


20

New Jersey Resources Corporation
Part I

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Disaggregated revenues from contracts with customers by product line and by reporting segment and other business operations during the nine months ended June30, 2021 and 2020, is as follows:
(Thousands)Natural Gas DistributionClean Energy Ventures Energy ServicesStorage and TransportationHome Services
and Other
Total
2021
Natural gas utility sales$604,619$604,619
Natural gas services21,48038,67960,159
Service contracts24,90624,906
Installations and maintenance13,75613,756
Renewable energy certificates3,0753,075
Electricity sales16,61616,616
Eliminations (1)
(1,976)(660)(2,636)
Revenues from contracts with customers604,61919,69121,48036,70338,002720,495
Alternative revenue programs (2)
(4,519)(4,519)
Derivative instruments33,4226,536(3)872,160912,118
Eliminations (1)
(4,009)(4,009)
Revenues out of scope28,9036,536868,151903,590
Total operating revenues$633,52226,227889,63136,70338,002$1,624,085
2020
Natural gas utility sales$611,650$611,650
Natural gas services20,49132,01152,502
Service contracts24,23724,237
Installations and maintenance13,40413,404
Electricity sales13,77013,770
Eliminations (1)
(2,062)(947)(3,009)
Revenues from contracts with customers611,65013,77020,49129,94936,694712,554
Alternative revenue programs (2)
17,46517,465
Derivative instruments16,26011,833(3)797,168825,261
Eliminations (1)
(1,656)(1,656)
Revenues out of scope33,72511,833795,512841,070
Total operating revenues$645,37525,603816,00329,94936,694$1,553,624
(1)Consists of transactions between subsidiaries that are eliminated in consolidation.
(2)Includes CIP revenue.
(3)Includes SREC revenue.

Disaggregated revenues from contracts with customers by customer type and by reporting segment and other business operations during the three months ended June30, 2021 and 2020, is as follows:
(Thousands)Natural Gas DistributionClean Energy VenturesEnergy ServicesStorage and TransportationHome Services
and Other
Total
2021
Residential$79,0542,90412,877$94,835
Commercial and industrial23,3716,0104,04110,99919444,615
Firm transportation15,05215,052
Interruptible and off-tariff890890
Revenues out of scope9,2594,467198,475212,201
Total operating revenues$127,62613,381202,51610,99913,071$367,593
2020
Residential$89,0952,58711,845$103,527
Commercial and industrial20,0502,7073,53611,14331837,754
Firm transportation14,33114,331
Interruptible and off-tariff1,4121,412
Revenues out of scope3,6448,102130,204141,950
Total operating revenues$128,53213,396133,74011,14312,163$298,974
21

New Jersey Resources Corporation
Part I

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Disaggregated revenues from contracts with customers by customer type and by reporting segment and other business operations during the nine months ended June30, 2021 and 2020, is as follows:
(Thousands)Natural Gas DistributionClean Energy VenturesEnergy ServicesStorage and TransportationHome Services
and Other
Total
2021
Residential$441,4528,31837,315$487,085
Commercial and industrial95,42411,37321,48036,703687165,667
Firm transportation64,34664,346
Interruptible and off-tariff3,3973,397
Revenues out of scope28,9036,536868,151903,590
Total operating revenues$633,52226,227889,63136,70338,002$1,624,085
2020
Residential$442,0937,51635,955$485,564
Commercial and industrial107,1076,25420,49129,949739164,540
Firm transportation58,04358,043
Interruptible and off-tariff4,4074,407
Revenues out of scope33,72511,833795,512841,070
Total operating revenues$645,37525,603816,00329,94936,694$1,553,624

Customer Accounts Receivable/Credit Balances and Deposits

The timing of revenue recognition, customer billings and cash collections resulting in accounts receivables, billed and unbilled, and customers’ credit balances and deposits on the Unaudited Condensed Consolidated Balance Sheets during the nine months ended June30, 2021 are as follows:
Customer Accounts ReceivableCustomers' Credit
(Thousands)BilledUnbilledBalances and Deposits
Balance as of October 1, 2020$134,173$9,226$25,934
Increase (Decrease)71,3093,437(3,235)
Balance as of June 30, 2021$205,482$12,663$22,699

The following table provides information about receivables, which are included within accounts receivable, billed and unbilled, and customers’ credit balances and deposits, respectively, on the Unaudited Condensed Consolidated Balance Sheets as of June30, 2021:
(Thousands)Natural Gas DistributionClean Energy Ventures Energy ServicesStorage and TransportationHome Services
and Other
Total
Customer accounts receivable
Billed$76,2545,524118,2343,6621,808$205,482
Unbilled9,0723,59112,663
Customers' credit balances and deposits(22,699)(22,699)
Total$62,6279,115118,2343,6621,808$195,446

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 annual filings to the BPU for review of its BGSS, CIP and various other programs and related rates. Annual rate changes are typically requested to be effective at the beginning of the following fiscal year. 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.
22

New Jersey Resources Corporation
Part I

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Regulatory assets and liabilities included on the Unaudited Condensed Consolidated Balance Sheets for NJNG are comprised of the following:
(Thousands)June 30,
2021
September 30, 2020
Regulatory assets-current
New Jersey Clean Energy Program$18,329$15,570
Conservation Incentive Program14,60219,120
Other current regulatory assets1,8301,682
Total current regulatory assets$34,761$36,372
Regulatory assets-noncurrent
Environmental remediation costs:
Expended, net of recoveries$44,333$36,516
Liability for future expenditures136,882150,590
Deferred income taxes33,50628,241
Derivatives at fair value, net1
SAVEGREEN24,92921,281
Postemployment and other benefit costs176,454188,170
Deferred storm damage costs4,8866,515
Cost of removal94,12475,080
Other noncurrent regulatory assets20,16020,068
Total noncurrent regulatory assets$535,274$526,462
Regulatory liability-current
Overrecovered natural gas costs$2,189$25,914
Derivatives at fair value, net11,848274
Total current regulatory liabilities$14,037$26,188
Regulatory liabilities-noncurrent
Tax Act impact (1)
$191,641$195,425
Derivatives at fair value, net959352
Other noncurrent regulatory liabilities399509
Total noncurrent regulatory liabilities$192,999$196,286
(1)Reflects the re-measurement and subsequent amortization of NJNG's net deferred tax liabilities as a result of the change in federal tax rates enacted in the Tax Act.

Regulatory assets and liabilities included on the Unaudited Condensed Consolidated Balance Sheets for Adelphia Gateway are comprised of the following:
(Thousands)June 30,
2021
September 30, 2020
Total current regulatory assets$269$158
Total noncurrent regulatory assets$1,911$