UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549


FORM 10‑Q10-Q


x☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2022
FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 2017
OR
o
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to  

Commission File Number: 001-08359

NEW JERSEY RESOURCES CORPORATION
FOR THE TRANSITION PERIOD FROM             TO             
Commission file number 001‑08359
NEW JERSEY RESOURCES CORPORATION
(Exact name of registrant as specified in its charter)
New Jersey22‑237646522-2376465
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification Number)
1415 Wyckoff Road Wall, New Jersey 07719732‑(732)938‑1480
(Address of principal
executive offices)
Wall		New Jersey
07719
(Registrant's telephone number,

including area code)
      (Address of principal executive offices)
Securities registered pursuant to Section 12 (b) of the Act:
Common Stock ‑ $2.50 Par ValueNew York Stock Exchange
(Title of each class)classTrading symbol(s)(Name of each exchange on which registered)registered
Common Stock - $2.50 Par ValueNJRNew York Stock Exchange


Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes: x☒            No: o☐


Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes: x☒            No: o☐


Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b‑2 of the Exchange Act.
Large accelerated filer☒Accelerated filer☐
Non-accelerated filer☐Smaller reporting company☐
Large accelerated filer: x
Accelerated filer: o
Non-accelerated filer: o
(Do not check if a smaller reporting company)
Smaller reporting company: o
Emerging growth company: o
☐


If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o


Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes: o☐            No: x☒


The number of shares outstanding of $2.50 par value Common Stock as of February 6, 2018May 2, 2022 was 87,594,863.

96,152,712.



New Jersey Resources Corporation

TABLE OF CONTENTS
Page
1
3
PART I. FINANCIAL INFORMATION
ITEM 1.
4
Notes to Unaudited Condensed Consolidated Financial Statements
89
Note 1. Nature of the Business
89
Note 2. Summary of Significant Accounting Policies
89
Note 3. RegulationRevenue
1211
Note 4. Derivative InstrumentsRegulation
1316
Note 5. Fair ValueDerivative Instruments
18
Note 6. Fair Value
23
Note 7. Investments in Equity Investees
1924
Note 7.8. Earnings Per Share
2025
Note 8. Common Stock Equity
20
Note 9. Debt
2125
Note 10. Employee Benefit Plans
2227
Note 11. Income Taxes
2227
Note 12. Leases
28
Note 13. Commitments and Contingent Liabilities
2430
Note 13. Business14. Reporting Segment and Other Operations Data
2632
Note 14.15. Related Party Transactions
2836
Note 15. Acquisition
29
ITEM 2.
2936
ITEM 3.
5564
ITEM 4.
5867
PART II. OTHER INFORMATION
ITEM 1.
5868
ITEM 1A.
5868
ITEM 2.
5868
ITEM 6.
5969
6070




New Jersey Resources Corporation

GLOSSARY OF KEY TERMS                                                                                                                                                       
Adelphia GatewayAdelphia Gateway, LLC
AFUDCAllowance for Funds Used During Construction
AOCIAMAAccumulated Other Comprehensive IncomeAsset Management Agreement
ASCAccounting Standards Codification
ASUAccounting Standards Update
BcfBillion Cubic Feet
BGSSBasic Gas Supply Service
BPUNew Jersey Board of Public Utilities
CIPConservation Incentive Program
CMEClean Energy VenturesClean Energy Ventures segment
CMEChicago Mercantile Exchange
COVID-19Novel coronavirus disease
CR&RCommercial Realty & Resources Corp.
DMDRPDominion Midstream Partners, L.P., a master limited partnership
DM Common UnitsCommon units representing limited partnership interests in DM
DRPNJR Direct Stock Purchase and Dividend Reinvestment Plan
DthsEEDekathermsEnergy Efficiency
EEEnergy ServicesEnergy EfficiencyServices segment
FASBExchange ActSecurities Exchange Act of 1934, as amended
FASBFinancial Accounting Standards Board
FCMFutures Commission Merchant
FERCFederal Energy Regulatory Commission
Financial marginA non-GAAP financial measure, which represents revenues earned from the sale of natural gas less costs of natural gas sold including any transportation and storage costs, and excludes certain operations and maintenance expense and depreciation and amortization, as well as any accounting impact from the change in the fair value of certain derivative instruments
FMBFitchFitch Ratings Company
FMBFirst Mortgage Bond
GAAPGenerally Accepted Accounting Principles of the United States
Home Services and OtherHome Services and Other Operations
ICEIntercontinental Exchange
IECIIPInterstate Energy Company, LLCInfrastructure Investment Program
ISDAIRSInternal Revenue Service
ISDAThe International Swaps and Derivatives Association
ITCFederal Investment Tax Credit
MGPLeaf RiverLeaf River Energy Center LLC
MGPManufactured Gas Plant
Moody'sMMBtuMillion British Thermal Units
Moody'sMoody's Investors Service, Inc.
Mortgage IndentureThe Amended and Restated Indenture of Mortgage, Deed of Trust and Security Agreement between NJNG and U.S. Bank National Association dated as of September 1, 2014
MWMegawatts
MWhMegawatt Hour
NAESBThe North American Energy Standards Board
NFENatural Gas DistributionNatural Gas Distribution segment
NFENet Financial Earnings
NJ RISENew Jersey Reinvestment in System Enhancement
NJCEPNew Jersey's Clean Energy Program
NJDEPNew Jersey Department of Environmental Protection
NJNG
1
New Jersey Resources Corporation
GLOSSARY OF KEY TERMS (cont.)                                                                                                                                         
NJNGNew Jersey Natural Gas Company
NJNG Credit FacilityNJNG'sThe $250 million unsecured committed credit facility expiring in May 2019September 2026
NJR Credit FacilityNJR's $425The $500 million unsecured committed credit facility expiring in September 20202026
NJR or The CompanyNew Jersey Resources Corporation
NJRHSNJR Home Services Company
Non-GAAPNot in accordance with Generally Accepted Accounting Principles of the United States
New Jersey Resources Corporation

NPNS
GLOSSARY OF KEY TERMS (cont.)                                                                                                                                           
NPNSNormal Purchase/Normal Sale
NYMEXNew York Mercantile Exchange
OCIOther Comprehensive Income
O&MOperation and Maintenance
OCIOPEBOther Comprehensive Income
OPEBOther Postemployment Benefit Plans
PennEastPennEast Pipeline Company, LLC
PPAPower Purchase Agreement
PTCRACFederal Production Tax Credit
RACRemediation Adjustment Clause
RECRenewable Energy Certificate
S&PSAFE IIStandard & Poor's Financial Services, LLC
SAFESafety Acceleration and Facility Enhancement Program, Phase II
SAVEGREENThe SAVEGREEN Project®
SBCSocietal Benefits Charge
SECSOFRU.S. Securities and Exchange CommissionA rate equal to the secured overnight financing rate as administered by the Federal Reserve Bank of New York (or a successor administrator of the secured overnight financing rate)
SRECSolar Renewable Energy Certificate
SRLSouthern Reliability Link
Steckman RidgeCollectively, Steckman Ridge GP, LLC and Steckman Ridge, LP
TalenStorage and TransportationTalen Energy Marketing, LLCStorage and Transportation segment
TetcoTETCOTexas Eastern Transmission
The Exchange ActTRECThe Securities Exchange Act of 1934, as amendedTransition Renewable Energy Certificate
The Tax ActTrusteeAn Act to Provide for Reconciliation Pursuant to Titles II and V of the Concurrent Resolution on the Budget for Fiscal Year 2018, previously known as The Tax Cuts and Jobs Act of 2017
TrusteeU.S. Bank National Association
U.S.The United States of America
USFUniversal Service Fund
Utility Gross MarginA non-GAAP financial measure, which represents operating revenues less natural gas purchases, sales tax, and regulatory rider expense, and excludes certain operations and maintenance expense and depreciation and amortization

2
New Jersey Resources Corporation

INFORMATION CONCERNING FORWARD-LOOKING STATEMENTS                                                                           


Certain statements contained in this report, including, without limitation, statements as to management expectations, assumptions and beliefs presented in Part I, Item 2. “Management's Discussion and Analysis of Financial Condition and Results of Operations,” Part I, Item 3. “Quantitative and Qualitative Disclosures About Market Risk,” Part II, Item I.1. “Legal Proceedings” and in the notes to the financial statements are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. Forward-looking statements can also be identified by the use of forward-looking terminology such as “anticipate,” “estimate,” “may,” “could,” “might,” “intend,” “expect,” “believe,” “will” “plan,” or “should,” or comparable terminology and are made based upon management's current expectations, assumptions and beliefs as of this date concerning future developments and their potential effect on us. There can be no assurance that future developments will be in accordance with management's expectations, assumptions or beliefs, or that the effect of future developments on us will be those anticipated by management.


We caution readers that the expectations, assumptions and beliefs that form the basis for forward-looking statements regarding customer growth, customer usage, qualifications for ITCs, PTCs and SRECs,RECs, future rate case proceedings, financial condition, results of operations, cash flows, capital requirements, future capital expenditures, market risk, effective tax rate and other matters for fiscal 20182022 and thereafter include many factors that are beyond our ability to control or estimate precisely, such as estimates of future market conditions, the behavior of other market participants and changes in the debt and equity capital markets. The factors that could cause actual results to differ materially from our expectations, assumptions and beliefs include, but are not limited to, those discussed in Item 1A. Risk Factors of our Annual Report on Form 10-K for the fiscal year ended September 30, 2017,2021, as well as the following:


risks associated with our investments in clean energy projects, including the availability of regulatory and tax incentives, the availability of viable projects, our eligibility for ITCs and PTCs, the future market for SRECs and electricity prices and operational •risks related to projectsthe impact of COVID-19, including the rise of COVID-19 mutations that have resulted in service;
increased rates of reported cases, as well as impacts on business operations, supply chain, financial performance and condition and cash flows;
•our ability to obtain governmental and regulatory approvals, land-use rights, electric grid connection (in the case of clean energy projects) and/or financing for the construction, development and operation of our unregulated energy investments, pipeline transportation systems and NJNG’s and Storage and Transportation infrastructure projects, including Adelphia Gateway, in a timely manner;
•risks associated with our investments in clean energy projects, including the availability of regulatory incentives and federal tax credits, the availability of viable projects, our eligibility for ITCs, the future market for RECs and electricity prices, our ability to complete construction of the projects and operational risks related to projects in service;
•risks associated with acquisitions and the related integration of acquired assets with our current operations;operations, including the acquisition of Adelphia Gateway;
•our ability to comply with current and future regulatory requirements;
•volatility of natural gas and other commodity prices and their impact on NJNG customer usage, NJNG’s NJNG’s BGSS incentive programs, our Energy Services segment operations and on our risk management efforts;
•the performance of our subsidiaries;
•access to adequate supplies of natural gas and dependence on third-party storage and transportation facilities for natural gas supply;
•the level and rate at which NJNG’sNJNG’s costs and expenses are incurred and the extent to which they are approved for recovery from customers through the regulatory process, including through future base rate case filings;
•the impact of a disallowance of recovery of environmental-related expenditures and other regulatory changes;
•the performanceregulatory and pricing policies of our subsidiaries;federal and state regulatory agencies;
•operating risks incidental to handling, storing, transporting and providing customers with natural gas;
access to adequate supplies of natural gas•demographic changes in our service territory and dependence on third-party storage and transportation facilities for natural gas supply;
the regulatory and pricing policies of federal and state regulatory agencies;
timing of qualifying for ITCs and PTCs due to delays or failures to complete planned solar and wind energy projects and the resultingtheir effect on our effective tax rate and earnings;customer growth;
the results of legal or administrative proceedings with respect to claims, rates, environmental issues, gas cost prudence reviews and other matters;
risks related to cyberattacks or failure of information technology systems;
•changes in rating agency requirements and/or credit ratings and their effect on availability and cost of capital to ourthe Company;
our ability to comply with current and future regulatory requirements;
•the impact of volatility in the equity and credit markets on our access to capital;capital, including the risks, political and economic disruption and uncertainty related to Russia's recent military invasion of Ukraine, and the international community’s responses;
•our ability to comply with debt covenants;
•the results of legal or administrative proceedings with respect to claims, rates, environmental issues, natural gas cost prudence reviews and other matters;
•risks related to cyberattacks or failure of information technology systems;
•the impact to the asset values and resulting higher costs and funding obligations of our pension and postemployment benefit plans as a result of potential downturns in the financial markets, lower discount rates, revised actuarial assumptions or impacts associated with the Patient Protection and Affordable Care Act;
•commercial and wholesale credit risks, including the availability of creditworthy customers and counterparties, and liquidity in the wholesale energy trading market;
•accounting effects and other risks associated with hedging activities and use of derivatives contracts;
•our ability to optimize our physical assets;
•weather and economic conditions, including those changes in weather and weather patterns that could be attributable to climate change;
•the costs of compliance with present and future environmental laws, potential climate change-related legislation or any legislation resulting from the 2019 New Jersey Energy Master Plan;
•uncertainties related to litigation, regulatory, administrative or environmental proceedings;
•changes to tax laws and regulations;
•impacts of inflation and increased natural gas costs;
•any potential need to record a valuation allowance for our deferred tax assets;
changes to tax laws and regulations;
weather and economic conditions;
our ability to comply with debt covenants;
demographic changes in ourservice territory and their effect on our customer growth;
•the impact of natural disasters, terrorist activities and other extreme events on our operations and customers;
the costs of compliance with present and future environmental laws, including potential climate change-related legislation;
environmental-related and other uncertainties related to litigation or administrative proceedings;
•risks related to our employee workforce;workforce and succession planning;
•risks associated with the management of our joint ventures and partnerships,partnerships; and investment in a master limited partnership.

•risks associated with keeping pace with technological change.

While we periodically reassess material trends and uncertainties affecting our results of operations and financial condition in connection with the preparation of management's discussion and analysis of results of operations and financial condition contained in our Quarterly and Annual Reports on Form 10-Q and Form 10-K, respectively, we do not, by including this statement, assume any obligation to review or revise any particular forward-looking statement referenced herein in light of future events.
3
New Jersey Resources Corporation
Part I



ITEM 1. FINANCIAL STATEMENTS                                                                                                                                          


CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Three Months EndedSix Months Ended
March 31,March 31,
(Thousands, except per share data)2022202120222021
OPERATING REVENUES
Utility$463,474 $310,167 $737,909 $505,896 
Nonutility448,842 492,020 850,249 750,596 
Total operating revenues912,316 802,187 1,588,158 1,256,492 
OPERATING EXPENSES
Natural gas purchases:
Utility212,892 113,235 335,161 169,380 
Nonutility410,535 330,488 689,329 503,735 
Related parties1,883 1,730 3,729 3,464 
Operation and maintenance85,786 110,265 154,770 183,901 
Regulatory rider expenses30,910 18,413 47,581 29,114 
Depreciation and amortization31,435 26,848 61,828 54,210 
Total operating expenses773,441 600,979 1,292,398 943,804 
OPERATING INCOME138,875 201,208 295,760 312,688 
Other income, net4,127 5,007 8,263 9,124 
Interest expense, net of capitalized interest18,926 20,153 38,403 39,939 
INCOME BEFORE INCOME TAXES AND EQUITY IN EARNINGS OF AFFILIATES124,076 186,062 265,620 281,873 
Income tax provision28,810 39,057 59,617 56,498 
Equity in earnings of affiliates769 2,804 1,344 5,479 
NET INCOME$96,035 $149,809 $207,347 $230,854 
EARNINGS PER COMMON SHARE
Basic$1.00$1.56$2.16$2.40
Diluted$1.00$1.55$2.15$2.39
WEIGHTED AVERAGE SHARES OUTSTANDING
Basic96,068 96,248 96,006 96,181 
Diluted96,516 96,618 96,480 96,598 
 Three Months Ended
 December 31,
(Thousands, except per share data)2017
2016
OPERATING REVENUES   
Utility$209,787
 $185,556
Nonutility495,518
 355,472
Total operating revenues705,305
 541,028
OPERATING EXPENSES   
Gas purchases:   
Utility77,602
 61,320
Nonutility445,084
 337,932
Related parties2,149
 2,111
Operation and maintenance55,111
 52,228
Regulatory rider expenses11,769
 12,601
Depreciation and amortization21,854
 19,260
Energy and other taxes16,491
 14,101
Total operating expenses630,060
 499,553
OPERATING INCOME75,245
 41,475
Other income, net6,927
 3,776
Interest expense, net of capitalized interest11,905
 10,615
INCOME BEFORE INCOME TAXES AND EQUITY IN EARNINGS OF AFFILIATES70,267
 34,636
Income tax (benefit) provision(50,168) 2,018
Equity in earnings of affiliates3,264
 2,311
NET INCOME$123,699
 $34,929
    
EARNINGS PER COMMON SHARE   
Basic$1.42 $0.41
Diluted$1.42 $0.40
DIVIDENDS DECLARED PER COMMON SHARE$0.2725 $0.255
WEIGHTED AVERAGE SHARES OUTSTANDING   
Basic86,996
 86,084
Diluted87,347
 86,855



CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)
Three Months EndedSix Months Ended
March 31,March 31,
(Thousands)2022202120222021
Net income$96,035 $149,809 $207,347 $230,854 
Other comprehensive income, net of tax
Reclassifications of losses to net income on derivatives designated as hedging instruments, net of tax of $(80), $(79), $(159) and $(191), respectively263 263 527 494 
Adjustment to postemployment benefit obligation, net of tax of $(232), $(244), $(465) and $(489), respectively768 813 1,534 1,625 
Other comprehensive income$1,031 $1,076 $2,061 $2,119 
Comprehensive income$97,066 $150,885 $209,408 $232,973 
  Three Months Ended
  December 31,
(Thousands) 20172016
Net income $123,699
$34,929
Other comprehensive (loss) income, net of tax   
Unrealized (loss) gain on available for sale securities, net of tax of $851 and $(3,786), respectively (2,290)5,515
Reclassifications of (gains) to net income on available for sale securities, net of tax of $2,178 and $0, respectively (3,154)—
Adjustment to postemployment benefit obligation, net of tax of $(136) and $(217), respectively 240
317
Other comprehensive (loss) income (5,204)5,832
Comprehensive income $118,495
$40,761


See Notes to Unaudited Condensed Consolidated Financial Statements

4
New Jersey Resources Corporation
Part I
ITEM 1. FINANCIAL STATEMENTS (Continued)                                                                                                                    

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Six Months Ended
March 31,
(Thousands)20222021
CASH FLOWS FROM OPERATING ACTIVITIES
Net income$207,347 $230,854 
Adjustments to reconcile net income to cash flows from operating activities
Unrealized (gain) on derivative instruments(40,169)(8,235)
Depreciation and amortization61,828 54,210 
Amortization of acquired wholesale energy contracts1,464 3,401 
Allowance for equity used during construction(6,133)(10,603)
Allowance for doubtful accounts1,139 10,607 
Non cash lease expense2,559 1,957 
Deferred income taxes16,912 20,909 
Equivalent value of ITCs recognized on equipment financing(727)— 
Manufactured gas plant remediation costs(14,677)(6,284)
Equity in earnings, net of distributions received from equity investees968 (3,543)
Cost of removal - asset retirement obligations(565)(512)
Contributions to postemployment benefit plans(2,324)(2,018)
Taxes related to stock-based compensation(166)(145)
Changes in:
Components of working capital74,290 6,846 
Other noncurrent assets4,870 18,854 
Other noncurrent liabilities23,836 39,993 
Cash flows from operating activities330,452 356,291 
CASH FLOWS USED IN INVESTING ACTIVITIES
Expenditures for:
Utility plant(108,434)(152,496)
Solar equipment(66,556)(40,884)
Storage and Transportation and other(109,290)(28,518)
Cost of removal(17,030)(23,989)
Distribution from equity investees in excess of equity in earnings478 871 
Investments in equity investees, net of return of capital4,000 (482)
Cash flows used in investing activities(296,832)(245,498)
CASH FLOWS USED IN FINANCING ACTIVITIES
Proceeds from long-term debt100,000 — 
Payments of long-term debt(10,032)(11,001)
Proceeds from term loan150,000 — 
Payments of short-term debt, net(225,090)(116,850)
Proceeds from sale leaseback transactions - solar3,300 12,124 
Proceeds from sale leaseback transactions17,300 — 
Payments of common stock dividends(63,725)(60,894)
Cash settlement of equity forward agreement— (388)
Proceeds from issuance of common stock - DRP7,521 7,540 
Tax withholding payments related to net settled stock compensation(3,737)(1,772)
Cash flows used in financing activities(24,463)(171,241)
Change in cash, cash equivalents and restricted cash9,157 (60,448)
Cash, cash equivalents and restricted cash at beginning of period6,043 119,423 
Cash, cash equivalents and restricted cash at end of period$15,200 $58,975 
CHANGES IN COMPONENTS OF WORKING CAPITAL
Receivables$(107,479)$(136,295)
Inventories125,012 94,233 
Recovery of natural gas costs8,465 (20,279)
Natural gas purchases payable(25,964)33,191 
Natural gas purchases payable - related parties(6)62 
Deferred revenue52,368 (970)
Accounts payable and other(88,866)(18,651)
Prepaid expenses(5,548)(8,170)
Prepaid and accrued taxes75,921 59,614 
Restricted broker margin accounts53,708 7,644 
Customers' credit balances and deposits(12,302)(5,171)
Other current assets(1,019)1,638 
Total$74,290 $6,846 
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION
Cash paid for:
Interest (net of amounts capitalized)$42,754 $40,465 
Income taxes$1,263 $3,733 
Accrued capital expenditures$53,245 $22,840 
See Notes to Unaudited Condensed Consolidated Financial Statements
5
 Three Months Ended
 December 31,
(Thousands)2017 2016
CASH FLOWS USED IN OPERATING ACTIVITIES   
Net income$123,699
 $34,929
Adjustments to reconcile net income to cash flows from operating activities   
Unrealized loss on derivative instruments34,855
 28,302
Gain on sale of available for sale securities, net(5,332) (2,581)
Depreciation and amortization21,854
 19,260
Amortization of acquired wholesale energy contracts3,391
 —
Allowance for equity used during construction(852) (584)
Allowance for bad debt expense471
 230
Deferred income taxes(44,114) 16,262
Manufactured gas plant remediation costs(5,147) (1,619)
Distributions received from equity investees, net of equity in earnings(257) 1,101
Cost of removal - asset retirement obligations(332) (198)
Contributions to postemployment benefit plans(1,467) (1,712)
Tax benefit from stock-based compensation2,831
 1,188
Changes in:   
Components of working capital(189,528) (150,480)
Other noncurrent assets31,038
 9,823
Other noncurrent liabilities5,388
 15
Cash flows used in operating activities(23,502) (46,064)
CASH FLOWS USED IN INVESTING ACTIVITIES   
Expenditures for:   
Utility plant(34,638) (31,396)
Solar and wind equipment(18,387) (46,785)
Real estate properties and other(1,313) (171)
Cost of removal(12,752) (7,459)
Investments in equity investees(7,202) (4,636)
Distribution from equity investees in excess of equity in earnings793
 688
Cash paid related to acquisition(10,000) —
Withdrawal from restricted cash construction fund(43) —
Proceeds from sale of available for sale securities6,616
 3,218
Cash flows used in investing activities(76,926) (86,541)
CASH FLOWS FROM FINANCING ACTIVITIES   
Payments of long-term debt(1,690) (2,716)
Net proceeds from short-term debt107,200
 162,900
Proceeds from sale-leaseback transaction7,820
 9,587
Payments of common stock dividends(23,607) (21,931)
Proceeds from waiver discount issuance of common stock22,690
 —
Proceeds from issuance of common stock3,846
 4,616
Purchases of treasury stock—
 (6,355)
Tax withholding payments related to net settled stock compensation(13,319) (4,167)
Cash flows from financing activities102,940
 141,934
Change in cash and cash equivalents2,512
 9,329
Cash and cash equivalents at beginning of period2,226
 37,546
Cash and cash equivalents at end of period$4,738
 $46,875
CHANGES IN COMPONENTS OF WORKING CAPITAL   
Receivables$(192,253) $(152,180)
Inventories(2,561) (13,954)
Recovery of gas costs17,102
 (2,472)
Gas purchases payable43,284
 47,772
Prepaid and accrued taxes(12,418) 7,954
Accounts payable and other(25,527) (12,405)
Restricted broker margin accounts(21,694) (26,173)
Customers' credit balances and deposits6,093
 616
Other current assets(1,554) 362
Total$(189,528) $(150,480)
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION   
Cash paid (received) for:   
Interest (net of amounts capitalized)$9,758
 $8,153
Income taxes$(191) $(7,020)
Accrued capital expenditures$26,034
 $28,442
See Notes to Unaudited Condensed Consolidated Financial Statements
New Jersey Resources Corporation
Part I
ITEM 1. FINANCIAL STATEMENTS (Continued)                                                                                                                    

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)


ASSETS
(Unaudited)
(Thousands)March 31, 2022September 30,
2021
PROPERTY, PLANT AND EQUIPMENT
Utility plant, at cost$3,451,038 $3,324,611 
Construction work in progress154,978 182,196 
Nonutility plant and equipment, at cost1,154,104 1,124,896 
Construction work in progress511,351 365,346 
Total property, plant and equipment5,271,471 4,997,049 
Accumulated depreciation and amortization, utility plant(637,491)(611,827)
Accumulated depreciation and amortization, nonutility plant and equipment(187,141)(171,709)
Property, plant and equipment, net4,446,839 4,213,513 
CURRENT ASSETS
Cash and cash equivalents13,906 4,749 
Customer accounts receivable
Billed273,313 212,838 
Unbilled revenues56,270 10,351 
Allowance for doubtful accounts(21,470)(24,652)
Regulatory assets33,717 30,118 
Natural gas in storage, at average cost66,300 193,606 
Materials and supplies, at average cost21,855 19,561 
Prepaid expenses13,714 8,166 
Prepaid and accrued taxes4,087 51,211 
Derivatives, at fair value21,586 35,251 
Restricted broker margin accounts49,901 72,840 
Other current assets22,857 20,235 
Total current assets556,036 634,274 
NONCURRENT ASSETS
Investments in equity method investees109,980 114,529 
Regulatory assets513,006 522,099 
Operating lease assets171,207 173,928 
Derivatives, at fair value4,140 3,403 
Intangible assets, net3,445 5,029 
Software costs5,714 5,582 
Other noncurrent assets59,637 49,921 
Total noncurrent assets867,129 874,491 
Total assets$5,870,004 $5,722,278 
(Thousands)December 31,
2017		September 30,
2017
PROPERTY, PLANT AND EQUIPMENT  
Utility plant, at cost$2,273,071
$2,241,324
Construction work in progress121,679
119,318
Solar and wind equipment, real estate properties and other, at cost848,900
843,142
Construction work in progress28,566
7,286
Total property, plant and equipment3,272,216
3,211,070
Accumulated depreciation and amortization, utility plant(501,663)(489,122)
Accumulated depreciation and amortization, solar and wind equipment, real estate properties and other(121,260)(112,207)
Property, plant and equipment, net2,649,293
2,609,741
CURRENT ASSETS  
Cash and cash equivalents4,738
2,226
Customer accounts receivable  
Billed325,406
196,467
Unbilled revenues70,138
7,202
Allowance for doubtful accounts(5,274)(5,181)
Regulatory assets41,574
50,791
Gas in storage, at average cost203,447
202,063
Materials and supplies, at average cost13,121
11,944
Prepaid and accrued taxes39,581
24,764
Derivatives, at fair value46,299
30,081
Restricted broker margin accounts52,850
25,827
Other34,199
33,260
Total current assets826,079
579,444
NONCURRENT ASSETS  
Investments in equity method investees179,429
172,585
Regulatory assets362,150
375,919
Derivatives, at fair value5,537
9,164
Available for sale securities55,995
65,752
Intangible assets37,693
41,084
Other noncurrent assets70,752
74,818
Total noncurrent assets711,556
739,322
Total assets$4,186,928
$3,928,507


See Notes to Unaudited Condensed Consolidated Financial Statements
6
New Jersey Resources Corporation
Part I
ITEM 1. FINANCIAL STATEMENTS (Continued)                                                                                                                    

CAPITALIZATION AND LIABILITIES
(Unaudited)
(Thousands, except share data)March 31, 2022September 30,
2021
CAPITALIZATION
Common stock, $2.50 par value; authorized 150,000,000 shares; outstanding March 31, 2022 — 96,081,796; September 30, 2021 — 95,709,662$241,593 $240,644 
Premium on common stock517,843 502,584 
Accumulated other comprehensive loss, net of tax(32,467)(34,528)
Treasury stock at cost and other; shares March 31, 2022 — 769,835;
September 30, 2021 — 762,313
(15,025)(12,448)
Retained earnings1,072,343 934,610 
Common stock equity1,784,287 1,630,862 
Long-term debt2,319,434 2,162,164 
Total capitalization4,103,721 3,793,026 
CURRENT LIABILITIES
Current maturities of long-term debt24,539 72,840 
Short-term debt302,210 377,300 
Natural gas purchases payable142,733 168,697 
Natural gas purchases payable to related parties855 861 
Deferred revenue54,113 1,745 
Accounts payable and other123,190 223,497 
Dividends payable34,830 34,768 
Accrued taxes32,153 3,356 
Regulatory liabilities88,064 28,007 
New Jersey Clean Energy Program6,608 16,308 
Derivatives, at fair value45,216 87,145 
Operating lease liabilities4,878 4,300 
Restricted broker margin accounts2,464 — 
Customers' credit balances and deposits20,284 32,586 
Total current liabilities882,137 1,051,410 
NONCURRENT LIABILITIES
Deferred income taxes181,875 163,530 
Deferred investment tax credits2,849 3,010 
Deferred revenue5,088 847 
Derivatives, at fair value19,632 13,497 
Manufactured gas plant remediation121,605 135,012 
Postemployment employee benefit liability166,887 169,267 
Regulatory liabilities191,450 193,051 
Operating lease liabilities140,036 141,363 
Asset retirement obligation46,753 46,306 
Other noncurrent liabilities7,971 11,959 
Total noncurrent liabilities884,146 877,842 
Commitments and contingent liabilities (Note 13)00
Total capitalization and liabilities$5,870,004 $5,722,278 
(Thousands, except share data)December 31,
2017		September 30,
2017
CAPITALIZATION  
Common stock, $2.50 par value; authorized 150,000,000 shares;
outstanding December 31, 2017 — 87,475,456; September 30, 2017 — 86,555,507		$225,095
$222,258
Premium on common stock255,142
219,696
Accumulated other comprehensive loss, net of tax(8,460)(3,256)
Treasury stock at cost and other;
shares December 31, 2017 — 2,507,313; September 30, 2017 — 2,347,380
(91,859)(70,039)
Retained earnings967,852
867,984
Common stock equity1,347,770
1,236,643
Long-term debt1,001,183
997,080
Total capitalization2,348,953
2,233,723
CURRENT LIABILITIES  
Current maturities of long-term debt166,167
165,375
Short-term debt373,200
266,000
Gas purchases payable203,401
160,115
Gas purchases payable to related parties1,150
1,152
Accounts payable and other75,924
96,878
Dividends payable23,831
23,586
Accrued taxes4,430
2,031
Regulatory liabilities434
78
New Jersey clean energy program12,626
14,202
Derivatives, at fair value96,788
46,544
Customers' credit balances and deposits33,050
26,957
Total current liabilities991,001
802,918
NONCURRENT LIABILITIES  
Deferred income taxes238,367
514,708
Deferred investment tax credits4,216
4,297
Deferred gain27,531
27,728
Derivatives, at fair value25,759
11,330
Manufactured gas plant remediation144,046
149,000
Postemployment employee benefit liability128,574
128,888
Regulatory liabilities237,838
14,507
Asset retirement obligation31,792
31,420
Other8,851
9,988
Total noncurrent liabilities846,974
891,866
Commitments and contingent liabilities (Note 12)


Total capitalization and liabilities$4,186,928
$3,928,507


See Notes to Unaudited Condensed Consolidated Financial Statements


7
New Jersey Resources Corporation
Part I

ITEM 1. FINANCIAL STATEMENTS (Continued)                                                                                                                    
CONDENSED CONSOLIDATED STATEMENTS OF COMMON STOCK EQUITY (Unaudited)
(Thousands)Number of SharesCommon StockPremium on Common StockAccumulated Other Comprehensive (Loss) IncomeTreasury Stock and OtherRetained EarningsTotal
Balance at September 30, 202195,710 $240,644 $502,584 $(34,528)$(12,448)$934,610 $1,630,862 
Net income— — — — — 111,312 111,312 
Other comprehensive income— — — 1,030 — — 1,030 
Common stock issued:
Incentive compensation plan147 367 7,135 — — — 7,502 
Dividend reinvestment plan105 263 3,415 — — — 3,678 
Cash dividend declared ($.3625 per share)— — — — — (34,787)(34,787)
Treasury stock and other— — — — (2,619)— (2,619)
Balance at December 31, 202195,962 $241,274 $513,134 $(33,498)$(15,067)$1,011,135 $1,716,978 
Net income— — — — — 96,035 96,035 
Other comprehensive income— — — 1,031 — — 1,031 
Common stock issued:
Incentive compensation plan36 91 1,216 — — — 1,307 
Dividend reinvestment plan91 228 3,493 — — — 3,721 
Cash dividend declared ($.3625 per share)— — — — — (34,827)(34,827)
Treasury stock and other(7)— — — 42 — 42 
Balance at March 31, 202296,082 $241,593 $517,843 $(32,467)$(15,025)$1,072,343 $1,784,287 

(Thousands)Number of SharesCommon StockPremium on Common StockAccumulated Other Comprehensive (Loss) IncomeTreasury Stock and OtherRetained EarningsTotal
Balance at September 30, 202095,949 $240,243 $491,982 $(44,315)$8,485 $947,501 $1,643,896 
Net income— — — — — 81,045 81,045 
Other comprehensive income— — — 1,043 — — 1,043 
Common stock issued:
Incentive compensation plan50 124 5,410 — — — 5,534 
Dividend reinvestment plan (1)
140 — (4,502)— 5,593 — 1,091 
Cash dividend declared ($.3325 per share)— — — — — (31,966)(31,966)
Treasury stock and other— — — — (2,429)— (2,429)
Balance at December 31, 202096,139 $240,367 $492,890 $(43,272)$11,649 $996,580 $1,698,214 
Net income— — — — — 149,809 149,809 
Other comprehensive loss— — — 1,076 — — 1,076 
Common stock issued:
Incentive plan28 72 1,144 — — — 1,216 
Dividend reinvestment plan103 58 3,521 — — — 3,579 
Common stock offering— — (388)— — — (388)
Cash dividend declared ($.3325 per share)— — — — — (32,007)(32,007)
Treasury stock and other(8)— — — 334 — 334 
Balance at March 31, 202196,262 $240,497 $497,167 $(42,196)$11,983 $1,114,382 $1,821,833 
(1)Shares sold through the DRP issued from treasury stock at average cost, which may differ from the actual market price paid.

8
New Jersey Resources Corporation
Part I

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS                                               


1. NATURE OF THE BUSINESS


New Jersey Resources CorporationThe Company provides regulated natural gas distribution services, transmission and storage services and operates certain unregulated businesses primarily through the following subsidiaries:following:


New Jersey Natural Gas CompanyNJNG provides natural gas utility service to approximately 534,400 retail568,100 customers in centralthroughout Burlington, Middlesex, Monmouth, Morris, Ocean and northernSussex counties in New Jersey and is subject to rate regulation by the BPU. NJNG comprises the Natural Gas Distribution segment;segment.


NJR Clean Energy Ventures Corporation,NJRCEV, the Company's clean energy subsidiary, comprises the Clean Energy Ventures segment and consists of the Company's capital investmentsinvests in, owns and operates clean energy projects, including commercial and residential solar projectsinstallations located throughoutin New Jersey, Connecticut, Rhode Island and onshore wind investments in Montana, Iowa, Kansas, Wyoming and Pennsylvania;New York.


NJR Energy Services Company and NJR Retail Services Company compriseNJRES comprises the Energy Services segment. Energy Services maintains and transacts around a portfolio of natural gas storagetransportation and transportationstorage capacity contracts and provides physical wholesale energy, retail energy and energy management services in the U.S. and Canada andprovides retail natural gas supply and transportation services to commercial and industrial customers in Delaware, Maryland, Pennsylvania and New Jersey;Canada.


NJR Midstream Holdings Corporation, which comprises the MidstreamStorage and Transportation segment, invests in energy-related ventures through its subsidiaries. The Company operates natural gas storage and transmission assets through the wholly-owned subsidiaries NJR Steckman Ridge Storageof Leaf River and Adelphia Gateway, and is subject to rate regulation by FERC. The Company which holds the Company'sa 50 percent combined ownership interest in Steckman Ridge, located in Pennsylvania NJR Pipeline Company, which holds the Company'sand 20 percent ownership interest in PennEast, and NJNR Pipeline Company, which holdsare accounted for under the Company's 1.84 million Common Unitsequity method of Dominion Midstream Partners, L.P. See Note 6. Investments in Equity Investees for more information; andaccounting.


NJR Retail Holdings Corporation has two2 principal subsidiaries, NJR Home Services Company,NJRHS, which provides heating, central air conditioning, standby generators, solar and other indoor and outdoor comfort products to residential homes throughout New Jersey, and Commercial Realty & Resources Corporation,CR&R, which owns commercial real estate. NJR Home Services CompanyNJRHS and Commercial Realty & Resources CorporationCR&R are included in Home Services and Other operations.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES


The accompanying Unaudited Condensed Consolidated Financial Statements have been prepared by NJRthe Company in accordance with the rules and regulations of the SECU.S. Securities and Exchange Commission and GAAP. The September 30, 20172021 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 NJR's 2017the 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 NJR'sthe 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, 2018.2022. Intercompany transactions and accounts have been eliminated.


Gas in StorageUse of Estimates


The following table summarizespreparation 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 newly implemented hybrid schedule, limiting direct contact with customers and suspending late payment fees for utility customers. While the Company and many businesses are beginning to return 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 March 31, 2022.

Revenues

Revenues from the sale of natural gas to NJNG customers are recognized in storage, at average costthe period that natural gas is delivered and consumed by companycustomers, 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 of: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.

 December 31,
2017		September 30,
2017
($ in thousands)Gas in Storage BcfGas in Storage Bcf
Energy Services $144,456
51.9
 $122,884
53.9
Natural Gas Distribution 58,991
16.5
 79,179
21.8
Total $203,447
68.4
 $202,063
75.7
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.


Sales Tax Accounting

Sales taxRevenues 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 is collected from customers is presentedeconomically hedge the forecasted sales of the natural gas are recognized in both 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 $32.4 million of operating expensesrevenue on the Unaudited Condensed Consolidated Statements of Operations totaled $13.3 million during the three and six months ended DecemberMarch 31, 2017, and $11.22022, respectively. Amounts received in excess of revenue totaling $54.4 million during the three months ended December 31, 2016. Effective January 1, 2017, the New Jersey sales tax rate decreased from 7 percent to 6.875 percent. Effective January 1, 2018, the New Jersey sales tax rate decreased again to 6.625 percent.
New Jersey Resources Corporation
Part I

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)


Available for Sale Securities

As of December 31, 2017,are included in available for sale securitiesdeferred revenue on the Unaudited Condensed Consolidated Balance Sheets is an investment in a publicly traded energy company. The Company's available for sale securities had a fair value of $56 million and $65.8 million as of DecemberMarch 31, 20172022.

The Storage and September 30, 2017, respectively. Total unrealized gains associatedTransportation 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 this investment is included as a partmaturities of accumulated other comprehensive income, a component of common stock equity and was $9.9 million, $5.6 million after tax, and $12.8 million, $7.7 million after tax, as of December 31, 2017 and September 30, 2017, respectively.

During the three months ended December 31, 2017or less, and 2016, NJR received proceedsexcludes restricted cash related to irrevocable letters of approximately $6.6 millioncredit at Leaf River and $3.2 million, respectively, from the sale of availableescrow balances for sale securities and realized a pre-tax gain of $5.3 million and $2.6 million, respectively,utility plant projects at NJNG, which is includedare recorded in other income, netnoncurrent 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 Operations. Reclassifications of realized gains out of other comprehensive incomeCash Flows as follows:
(Thousands)March 31, 2022September 30,
2021		March 31,
2021
Balance Sheet
Cash and cash equivalents$13,906 $4,749 $57,654 
Restricted cash in other noncurrent assets$1,294 $1,294 $1,321 
Statements of Cash Flow
Cash, cash equivalents and restricted cash$15,200 $6,043 $58,975 

Allowance for Doubtful Accounts

The Company segregates financial assets, primarily trade receivables and unbilled revenues due in one year or less, into income are determinedportfolio 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 cost.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.


Customer Accounts Receivable

CustomerIn December 2021, the Company deferred a portion of costs incurred related to bad debt for NJNG associated with customer accounts receivable include outstanding billingsas a regulatory asset resulting from the following subsidiaries as of:impacts of the ongoing COVID-19 pandemic. See Note 4. Regulation for additional information.
(Thousands)December 31,
2017		 September 30,
2017
Energy Services$246,203
76% $150,322
77%
Natural Gas Distribution (1)
72,067
22
 37,432
19
Clean Energy Ventures3,072
1
 2,655
1
NJRHS and other4,064
1
 6,058
3
Total$325,406
100% $196,467
100%
(1)Does not include unbilled revenues of $70.1 million and $7.2 million as of December 31, 2017 and September 30, 2017, respectively.


Loans Receivable


NJNG currently provides loans, with terms ranging from threetwo to 10 years, to customers that elect to purchase and install certain energy efficientenergy-efficient equipment in accordance with its BPU-approved SAVEGREEN program. The loans are recognized at net presentfair value on the Unaudited Condensed Consolidated Balance Sheets. The Company recorded $9.4has $14.5 million and $8.9$14.2 million recorded in other current assets and $40.7$33.7 million and $40.4$32.3 million in other noncurrent assets as of DecemberMarch 31, 20172022 and September 30, 2017,2021, respectively, on the Unaudited Condensed Consolidated Balance Sheets, related to the loans.

NJNG's policy 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 establish an allowanceregulatory review for doubtful accounts when loan balances are in arrears for more than 60 days.recovery. As of DecemberMarch 31, 20172022 and September 30, 2017, there2021, 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, 2022September 30, 2021
($ in thousands)Natural Gas in StorageBcfNatural Gas in StorageBcf
Natural Gas Distribution$31,066 4.9 $115,824 27.6 
Energy Services35,234 7.4 77,782 18.8 
Total$66,300 12.3 $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)March 31, 2022September 30,
2021
Balance Sheets
Utility plant, at cost$16,959 $16,543 
Construction work in progress$20,752 $7,801 
Nonutility plant and equipment, at cost$344 $338 
Construction work in progress$— $8 
Accumulated depreciation and amortization, utility plant$(1,944)$(1,333)
Accumulated depreciation and amortization, nonutility plant and equipment$(19)$(29)
Software costs$5,714 $5,582 

Three Months EndedSix Months Ended
March 31,March 31,
Statements of Operations2022202120222021
Operation and maintenance (1)
$2,828 $2,847 $5,351 $4,770 
Depreciation and amortization$303 $270 $602 $523 
(1)During the three and six months ended March 31, 2022, approximately $113,000 and $225,000, respectively, was amortized from software costs into O&M. During the three and six months ended March 31, 2021, approximately $111,000 and $188,000, 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 six months ended March 31, 2022, in connection with the sale leaseback of its natural gas meters. There were no allowancenatural gas meter sale leasebacks recorded during the six months ended March 31, 2021.

In addition, for doubtful accounts establishedcertain of its commercial solar energy projects, the Company enters into lease agreements that provide for the SAVEGREEN loans.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 $12.1 million during the six months ended March 31, 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) 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 March 31, 2022 and 2021:
(Thousands)Cash Flow HedgesPostemployment Benefit ObligationTotal
Balance at December 31, 2021$(9,112)$(24,386)$(33,498)
Other comprehensive income, net of tax
Amounts reclassified from accumulated other comprehensive loss, net of tax of $(80), $(232), $(312), respectively263 768 (1)1,031 
Balance at March 31, 2022$(8,849)$(23,618)$(32,467)
Balance at December 31, 2020$(10,166)$(33,106)$(43,272)
Other comprehensive income, net of tax
Amounts reclassified from accumulated other comprehensive loss, net of tax of $(79), $(244), $(323)263 813 (1)1,076 
Balance at March 31, 2021$(9,903)$(32,293)$(42,196)

The following table presents the changes in the components of accumulated other comprehensive (loss) income, net of related tax effects during the six months ended March 31, 2022 and 2021:
(Thousands)Cash Flow HedgesPostemployment Benefit ObligationTotal
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 $(159), $(465), $(624), respectively527 1,534 (1)2,061 
Balance at March 31, 2022$(8,849)$(23,618)$(32,467)
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 $(191), $(489) and $(680)494 1,625 (1)2,119 
Balance at March 31, 2021$(9,903)$(32,293)$(42,196)
(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 activities foramounts related to deferred revenue within current liabilities on the three months ended December 31, 2016, wereUnaudited Condensed Consolidated Balance Sheets and Unaudited Consolidated Condensed Statements of Cash Flows have been reclassified to conform to the current period presentation.


9
New Jersey Resources Corporation
Part I

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)                     
Recently Adopted Updates to the Accounting Standards Codification


InventoryIncome Taxes


In July 2015,December 2019, the FASB issued ASU No. 2015-11,2019-12, an amendment to ASC 330, Inventory740, Income Taxes, which requires entities to measure most inventory “atsimplifies the lower of cost or net realizable value,” thereby simplifyingaccounting for income taxes and changes the current guidance under which an entity must measure inventory at the lower of cost or market.accounting for certain income tax transactions, among other minor improvements. The Company adopted the newthis guidance in the first quarter of fiscal 2018on October 1, 2021, and applied the new provisionsit on a prospective basis, whichbasis. The amendments in this update were either not applicable, currently applied, or did not have a material impact itson the Company's financial position, results of operations, or 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 adoption.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


RevenueDebt and Other


In May 2014,August 2020, the FASB issued ASU No. 2014-09, and added Topic 606, Revenue from Contracts with Customers, to the ASC. ASC 606 supersedes ASC 605, Revenue Recognition, as well as most industry-specific guidance, and prescribes a single, comprehensive revenue recognition model designed to improve financial reporting comparability across entities, industries, jurisdictions and capital markets. In August 2015, the FASB issued ASU No. 2015-14, which defers the implementation of the
New Jersey Resources Corporation
Part I

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)


new guidance for one year. The new guidance will not be early adopted and will be effective for the Company’s fiscal year ending September 30, 2019, and interim periods within that year.

The Company has concluded that its tariff based sales of natural gas will be within the scope of the new guidance. However, it does not anticipate any modification to the pattern of revenue recognition from such sales. The Company has also evaluated its renewable asset PPA arrangements and does not anticipate any modification to the pattern of revenue recognition of the related electricity, capacity and REC sales. Revenues from RECs sold as part of a bundled arrangement will be recognized in the same period as the related generation, consistent with current practice.

Based on the review of customer contracts to date, the Company is not anticipating a material impact to its financial position, results of operations or cash flows upon adoption. The Company anticipates significant new disclosures as a result of the implementation of ASC 606 and currently expects to transition to the new guidance using the modified retrospective approach. The Company is also monitoring industry specific developments that may have an impact.

Financial Instruments

In January 2016, the FASB issued ASU No. 2016-01,2020-06, an amendment to ASC 825, Financial Instruments,470, Debt, and ASC 815, Derivatives and Hedging, which changes the accounting for convertible instruments by reducing the number of acceptable accounting models to address certain aspects ofthree models including, the recognition, measurement, presentationembedded derivative, substantial premium, and disclosure of financial instruments. The standard affects investments in equity securities that do not result in consolidation and are not accounted for under the equity method and the presentation of certain fair value changes for financial liabilities measured at fair value. It also simplifies the impairment assessment of equity investments without a readily determinable fair value by requiring a qualitative assessment.traditional no proceeds allocated models. The guidance is effective for the Company’s fiscal year ending September 30, 2019,Company beginning October 1, 2022, and interim periods within that year. Upon adoption, the amendment will be appliedCompany can elect to apply it on either a modified or a full retrospective basis. The Company evaluated the amendmentdoes not currently have convertible debt instruments and noted that, upon adoption, subsequent changes to the fair value of the Company’s available for sale securities will be recorded in the Consolidated Statement of Operations as opposed to other comprehensive income. The Companythus does not expect any other material impactsthe amendments to its financial position, results of operations or cash flows upon adoption.

In June 2016, the FASB issued ASU No. 2016-13,have 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 guidance is effective for the Company’s fiscal year ending September 30, 2021, and interim periods within that year, with early adoption permitted. The Company is currently evaluating the amendment to understand the impact on its financial position, results of operations, and cash flows and disclosures upon adoption and will apply the new guidance to its trade and loan receivables on a modified retrospective basis.adoption.


Leases

In February 2016,May 2021, the FASB issued ASU No. 2016-02,2021-04, an amendment to ASC 842, Leases470, Debt, which provides forASC 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 comprehensive overhaul of the lease accounting model and changes the definition of a lease within the accounting literature. Under the new standard, all leases with a term greater than one year will be recorded on the balance sheet. Amortization of the related asset will be accounted for using one of two approaches prescribed by the guidance. Additional disclosures will be required to allow the user to assess the amount, timing and uncertainty of cash flows arising from leasing activities. A modified retrospective transition approach is required for leases existing at the time of adoption.modification or exchange. The guidance is effective for the Company’s fiscal year ending September 30, 2020,Company beginning October 1, 2022, and interim periods within that year, with early adoption permitted. The Company continues to evaluate the provisions of ASC 842 and is actively monitoring industry specific developments including the exposure draft issued by the FASB that would introduce a land easement practical expedient to ASC 842. At this time, the Company does not plan to early adopt the new guidance and expects to elect the practical expedient package in the new guidance during transition.

Statement of Cash Flows

In August 2016, the FASB issued ASU No. 2016-15, an amendment to ASC 230, Statement of Cash Flows, which addresses eight specific cash flow issues for which there has been diversity in practice. The guidance is effective for the Company’s fiscal year ending September 30, 2019, and interim periods within that year with early adoption permitted. Upon adoption, the amendment will be applied on a retrospective basis. The Company does not expect any material impacts to its cash flows upon adoption.

In November 2016, the FASB issued ASU No. 2016-18, an amendment to ASC 230, Statement of Cash Flows, which requires that any amounts that are deemed to be restricted cash or restricted cash-equivalents be included in cash and cash-equivalent
New Jersey Resources Corporation
Part I

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)


balances on the cash flow statement and, therefore, transfers between cash and restricted cash accounts will no longer be recognized within the statement of cash flows. The guidance is effective for the Company’s fiscal year ending September 30, 2019, with early adoption permitted. Upon adoption, the amendment will be applied on a retrospective basis. Based on the Company's historical restricted cash balances, it does not expect any material impacts to its financial position, results of operations or cash flows upon adoption.

Business Combinations

In January 2017, the FASB issued ASU No. 2017-01, an amendment to ASC 805, Business Combinations, clarifying the definition of a business in the ASC, which is intended to reduce the complexity surrounding the assessment of a transaction as an asset acquisition or business combination. The amendment provides an initial fair value screen to reduce the number of transactions that would fit the definition of a business, and when the screen threshold is not met, provides an updated model that further clarifies the characteristics of a business. The guidance is effective for the Company’s fiscal year ending September 30, 2019, and interim periods within that year, with early adoption permitted. Upon adoption, the amendment will be applied on a prospective basis. The amendment could potentially have material impacts on future transactions that the Company may enter into by altering the Company’s conclusion on the accounting applied to acquisitions.

Gains and Losses from the Derecognition of Nonfinancial Assets

In February 2017, the FASB issued ASU No. 2017-05, an amendment to ASC 610-20, Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets, which clarifies the scope and accounting related to the derecognition of nonfinancial assets, including partial sales and contributions of nonfinancial assets to a joint venture or other non-controlled investee. The guidance is effective concurrently with ASC 606, which is effective for the Company’s fiscal year ending September 30, 2019, and interim periods within that year with early adoption permitted. ASU No. 2017-05 may be applied retrospectively for all periods presented or retrospectively with a cumulative-effect adjustment at the date of adoption. The Company has determined that to the extent a deferred gain exists related to nonfinancial assets on the balance sheet upon adoption, it would be recognized under the new accounting guidance as a cumulative effect adjustment to the opening balance of retained earnings for the first quarter of fiscal 2019.

Compensation - Retirement Benefits

In March 2017, the FASB issued ASU No. 2017-07, an amendment to ASC 715, Compensation - Retirement Benefits, which changes the presentation of net periodic benefit cost on the income statement by requiring companies to present all components of net periodic benefit cost, other than service cost, outside a subtotal of income from operations. The amendment also states that only the service cost component of net periodic benefits costs is eligible for capitalization, when applicable. The guidance is effective for the Company’s fiscal year ending September 30, 2019, and interim periods within that year, with early adoption permitted. Upon adoption, the amendment will be applied on a retrospective basis for presentation and changes to capitalization of costs will be applied on a prospective basis. The Company is continuingdoes not currently have equity-classified written call options and thus does not expect the amendments to evaluate the amendment to fully understand thehave an impact on its financial position, results of operations, and cash flows and disclosures upon adoption. The Company is also monitoring industry specific developments on the new guidance to determine the appropriate treatment of these changes in a rate regulated environment.


Stock CompensationLeases


In May 2017,July 2021, the FASB issued ASU No. 2017-09,2021-05, an amendment to ASC 718, Compensation - Stock Compensation842, Leases, which clarifiesrequires 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 accounting for changes to the terms or conditions of share-based payments.lease commencement date. The guidance is effective for the Company’s fiscal year ending September 30, 2019,Company beginning October 1, 2022, and interim periods withinthe Company can elect to apply it either on a retrospective basis to leases that year, with early adoption permitted. Upon adoption, the amendments will be applied prospectively to awardshave commenced or have been modified under ASC 842 or on or after the adoption date.a prospective basis. The Company is currently evaluating the amendments to understand the impact on its financial position, results of operations, and cash flows and disclosures upon adoption.

10
New Jersey Resources Corporation
Part I

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)                     
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 August 2017,March 2022, the FASB issued ASU No. 2017-12,2022-01, an amendment to ASC 815, Derivatives and Hedging, which is intended to make targeted improvementsaddresses 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 accounting for hedging activities by better aligning an entity’s risk management activities and financial reporting for hedging relationships. These amendments modify the accounting for both nonfinancial and financial risk components and align the recognition and presentation of the effects of the hedging instrument and the hedged item in the financial statements. Additionally, the amendments are intended to simplify the application of the hedge accounting guidance and provide relief to companies by easing certain hedge documentation requirements.“portfolio layer” method. The guidance is effective for the Company’s fiscal year ending September 30, 2020,Company beginning October 1, 2023, and interim periods within that year, with early adoption permitted. Upon adoption, the
New Jersey Resources Corporation
Part I

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)


transition requirements and elections willmethod can be applied toon a prospective basis for a multiple-layer hedging relationships existing on the date of adoption.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 anyan 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.

3. REGULATIONREVENUE


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.

11
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 salesNJNG'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 natural 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 in line with the terms of the contract and based on the services provided. Payment is due upon receipt of the invoice. For temporary releases of pipeline capacity, revenue is recognized on a straight-line basis over the agreed upon term.
Storage and TransportationNatural 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, 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 its 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 contractsHome 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.
12
New Jersey Resources Corporation
Part I

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)                     
Revenue Recognized at a Point in Time:
Energy ServicesNatural gas services
For a permanent release of pipeline capacity, the performance obligation of NJRES is the release of the pipeline capacity associated with certain natural gas transportation contracts and the transfer of the underlying contractual rights to the counterparty.

Revenue is recognized upon the transfer of the underlying contractual rights.
Storage and TransportationNatural 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 usage fees and hub services for the use of storage space, injection and withdrawal from the storage facility. Hub services include park and loan transactions and wheeling.

Usage fees and 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 March 31, 2022 and 2021, are as follows:
(Thousands)Natural Gas DistributionClean Energy VenturesEnergy ServicesStorage and TransportationHome Services
and Other		Total
2022
Natural gas utility sales$381,861 — — — — $381,861 
Natural gas services— — 17,309 13,342 — 30,651 
Service contracts— — — — 8,492 8,492 
Installations and maintenance— — — — 4,730 4,730 
Renewable energy certificates— 1,019 — — — 1,019 
Electricity sales— 6,846 — — — 6,846 
Eliminations (1)
(338)— — (537)(81)(956)
Revenues from contracts with customers381,523 7,865 17,309 12,805 13,141 432,643 
Alternative revenue programs (2)
2,504 — — — — 2,504 
Derivative instruments79,447 3,962 (3)395,336 — — 478,745 
Eliminations (1)
— — (1,576)— — (1,576)
Revenues out of scope81,951 3,962 393,760 — — 479,673 
Total operating revenues$463,474 11,827 411,069 12,805 13,141 $912,316 
2021
Natural gas utility sales$296,888 — — — — $296,888 
Natural gas services— — 11,011 13,926 — 24,937 
Service contracts— — — — 8,314 8,314 
Installations and maintenance— — — — 4,459 4,459 
Renewable energy certificates— 817 — — — 817 
Electricity sales— 4,882 — — — 4,882 
Eliminations (1)
— — — (669)(252)(921)
Revenues from contracts with customers296,888 5,699 11,011 13,257 12,521 339,376 
Alternative revenue programs (2)
(6,664)— — — — (6,664)
Derivative instruments19,943 777 (3)451,558 — — 472,278 
Eliminations (1)
— — (2,803)— — (2,803)
Revenues out of scope13,279 777 448,755 — — 462,811 
Total operating revenues$310,167 6,476 459,766 13,257 12,521 $802,187 
(1)Includes building rent related to the Wall headquarters, which is eliminated in consolidation.
(2)Consists of transactions between subsidiaries that are eliminated in consolidation.
(3)Includes CIP revenue.
(4)Includes SREC revenue.

13
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 six months ended March 31, 2022 and 2021, are as follows:
(Thousands)Natural Gas DistributionClean Energy VenturesEnergy ServicesStorage and TransportationHome Services
and Other		Total
2022
Natural gas utility sales (1)
$605,657 — — — — $605,657 
Natural gas services— — 45,188 25,485 — 70,673 
Service contracts— — — — 16,959 16,959 
Installations and maintenance— — — — 10,214 10,214 
Renewable energy certificates— 1,865 — — — 1,865 
Electricity sales— 13,316 — — — 13,316 
Eliminations (2)
(675)— — (1,096)(180)(1,951)
Revenues from contracts with customers604,982 15,181 45,188 24,389 26,993 716,733 
Alternative revenue programs (3)
13,158 — — — — 13,158 
Derivative instruments119,769 6,829 (4)736,701 — — 863,299 
Eliminations (2)
— — (5,032)— — (5,032)
Revenues out of scope132,927 6,829 731,669 — — 871,425 
Total operating revenues$737,909 22,010 776,857 24,389 26,993 $1,588,158 
2021
Natural gas utility sales$486,252 — — — — $486,252 
Natural gas services— — 17,439 27,030 — 44,469 
Service contracts— — — — 16,573 16,573 
Installations and maintenance— — — — 8,777 8,777 
Renewable energy certificates— 1,507 — — — 1,507 
Electricity sales— 9,270 — — — 9,270 
Eliminations (1)
— — — (1,326)(419)(1,745)
Revenues from contracts with customers486,252 10,777 17,439 25,704 24,931 565,103 
Alternative revenue programs (3)
(5,096)— — — — (5,096)
Derivative instruments24,740 2,069 (4)674,607 — — 24,740 
Eliminations (2)
— — (4,931)— — (4,931)
Revenues out of scope19,644 2,069 669,676 — — 691,389 
Total operating revenues$505,896 12,846 687,115 25,704 24,931 $1,256,492 
(1)Includes building rent related to the Wall headquarters, which is eliminated in consolidation.
(2)Consists of transactions between subsidiaries that are eliminated in consolidation.
(3)Includes CIP revenue.
(4)Includes SREC revenue.

14
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 three months ended March 31, 2022 and 2021, are as follows:
(Thousands)Natural Gas DistributionClean Energy VenturesEnergy ServicesStorage and TransportationHome Services
and Other		Total
2022
Residential$286,205 2,991 — — 13,105 $302,301 
Commercial and industrial60,106 4,874 17,309 12,805 36 95,130 
Firm transportation34,636 — — — — 34,636 
Interruptible and off-tariff576 — — — — 576 
Revenues out of scope81,951 3,962 393,760 — — 479,673 
Total operating revenues$463,474 11,827 411,069 12,805 13,141 $912,316 
2021
Residential$225,174 2,692 — — 12,234 $240,100 
Commercial and industrial42,824 3,007 11,011 13,257 287 70,386 
Firm transportation28,190 — — — — 28,190 
Interruptible and off-tariff700 — — — — 700 
Revenues out of scope13,279 777 448,755 — — 462,811 
Total operating revenues$310,167 6,476 459,766 13,257 12,521 $802,187 

Disaggregated revenues from contracts with customers by customer type and by reporting segment and other business operations during the six months ended March 31, 2022 and 2021, are as follows:
(Thousands)Natural Gas DistributionClean Energy VenturesEnergy ServicesStorage and TransportationHome Services
and Other		Total
2022
Residential$437,513 5,963 — — 26,880 $470,356 
Commercial and industrial107,290 9,218 45,188 24,389 113 186,198 
Firm transportation57,311 — — — — 57,311 
Interruptible and off-tariff2,868 — — — — 2,868 
Revenues out of scope132,927 6,829 731,669 — — 871,425 
Total operating revenues$737,909 22,010 776,857 24,389 26,993 $1,588,158 
2021
Residential$362,398 5,414 — — 24,438 $392,250 
Commercial and industrial72,053 5,363 17,439 25,704 493 121,052 
Firm transportation49,294 — — — — 49,294 
Interruptible and off-tariff2,507 — — — — 2,507 
Revenues out of scope19,644 2,069 669,676 — — 691,389 
Total operating revenues$505,896 12,846 687,115 25,704 24,931 $1,256,492 

15
New Jersey Resources Corporation
Part I

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)                     
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 six months ended March 31, 2022 and 2021, are as follows:
Customer Accounts ReceivableCustomers' Credit
(Thousands)BilledUnbilledBalances and Deposits
Balance as of September 30, 2021$212,838 $10,351 $32,586 
Increase (Decrease)60,475 45,919 (12,302)
Balance as of March 31, 2022$273,313 $56,270 $20,284 
Balance as of September 30, 2020$134,173 $9,226 $25,934 
Increase (Decrease)103,056 32,715 (5,171)
Balance as of March 31, 2021$237,229 $41,941 $20,763 

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 March 31, 2022 and September 30, 2021:
(Thousands)Natural Gas DistributionClean Energy VenturesEnergy ServicesStorage and TransportationHome Services
and Other		Total
March 31, 2022
Customer accounts receivable
Billed$154,380 5,239 107,262 4,385 2,047 $273,313 
Unbilled54,675 1,595 — — — 56,270 
Customers' credit balances and deposits(20,284)— — — — (20,284)
Total$188,771 6,834 107,262 4,385 2,047 $309,299 
September 30, 2021
Customer accounts receivable
Billed$54,514 5,534 147,087 3,956 1,747 $212,838 
Unbilled8,427 1,924 — — — 10,351 
Customers' credit balances and deposits(32,586)— — — — (32,586)
Total$30,355 7,458 147,087 3,956 1,747 $190,603 

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. The current base rates include a weighted average cost of capital of 6.84 percent and a return on common equity of 9.6 percent. All rate and program changes are subject to proper notification and BPU review and approval. In addition, NJNG is also permitted to implement certain BGSS rate changes on an interima provisional basis with proper notification to the BPU.


16
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)March 31, 2022September 30,
2021
Regulatory assets-current
New Jersey Clean Energy Program$6,608 $16,308 
Conservation Incentive Program24,997 11,839 
Other current regulatory assets1,241 1,554 
Total current regulatory assets$32,846 $29,701 
Regulatory assets-noncurrent
Environmental remediation costs:
Expended, net of recoveries$65,523 $58,483 
Liability for future expenditures121,615 135,012 
Deferred income taxes39,857 39,694 
SAVEGREEN33,917 32,941 
Postemployment and other benefit costs111,918 117,194 
Deferred storm damage costs3,257 4,343 
Cost of removal100,423 99,238 
Other noncurrent regulatory assets32,040 32,695 
Total noncurrent regulatory assets$508,550 $519,600 
Regulatory liability-current
Overrecovered natural gas costs$27,133 $5,510 
Derivatives at fair value, net60,931 22,497 
Total current regulatory liabilities$88,064 $28,007 
Regulatory liabilities-noncurrent
Tax Act impact (1)
$187,876 $190,386 
Derivatives at fair value, net— 1,166 
Other noncurrent regulatory liabilities590 336 
Total noncurrent regulatory liabilities$188,466 $191,888 
(Thousands)December 31,
2017		September 30,
2017
Regulatory assets-current  
New Jersey Clean Energy Program$12,626
$14,202
Underrecovered gas costs490
9,910
Derivatives at fair value, net18,471
9,010
Conservation Incentive Program9,987
17,669
Total current regulatory assets$41,574
$50,791
Regulatory assets-noncurrent  
Environmental remediation costs  
Expended, net of recoveries$31,236
$28,547
Liability for future expenditures144,046
149,000
Deferred income taxes16,356
21,795
SAVEGREEN13,419
16,302
Postemployment and other benefit costs138,681
141,433
Deferred Post-Tropical Cyclone Sandy costs12,487
13,030
Other noncurrent regulatory assets5,925
5,812
Total noncurrent regulatory assets$362,150
$375,919
Regulatory liability-current  
Derivatives at fair value, net$434
$78
Total current regulatory liabilities$434
$78
Regulatory liabilities-noncurrent  
Deferred income taxes (1)
$229,315
$—
Cost of removal obligation—
7,902
Derivatives at fair value, net—
146
New Jersey Clean Energy Program7,527
5,795
Other noncurrent regulatory liabilities996
664
Total noncurrent regulatory liabilities$237,838
$14,507
(1)
Includes an adjustment related to the re-measurement of NJNG's net deferred tax liabilities to reflect the change in federal tax rates enacted in the Tax Act. For a more detailed discussion of the Tax Act, see Note 11. Income Taxes.

New Jersey Resources Corporation(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, an Act to Provide for Reconciliation Pursuant to Titles II and V of the Concurrent Resolution on the Budget for Fiscal Year 2018, previously known as The Tax Cuts and Jobs Act of 2017.
Part I

As of March 31, 2022, other noncurrent regulatory assets include deferred pandemic costs of $7.5 million primarily related to a portion of bad debt associated with customer accounts receivable resulting from the impacts of the ongoing COVID-19 pandemic. These costs are eligible for future regulatory recovery. There were no deferred pandemic costs as of September 30, 2021.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

(Thousands)March 31,
2022		September 30,
2021
Total current regulatory assets$871 $417 
Total noncurrent regulatory assets$4,456 $2,499 
Total noncurrent regulatory liabilities$2,984 $1,163 

The assets are comprised primarily of the tax benefit associated with the equity component of AFUDC and the liability consists primarily of scheduling penalties. Recovery of regulatory assets is subject to FERC approval.

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


•On October 20, 2017,November 17, 2021, the BPU issued an order adopting a stipulation of settlement approving a $79.0 million increase to base rates, effective December 1, 2021. In addition, the order also included approval for the final increase for the NJ RISE/SAFE II programs, which totaled $269,000. The increase includes an overall rate of return on rate base of 6.84 percent, return on common equity of 9.6 percent, a common equity ratio of 54.0 percent and a depreciation rate of 2.78 percent.
17
New Jersey Resources Corporation
Part I

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)                     
•On November 17, 2021, the BPU approved NJNG's filinga $2.9 million increase to the annual revenues credited to BGSS, a $13.0 million annual increase related to its balancing charge, as well as changes to CIP rates, which will result in a $6.3 million decrease to the annual recovery, effective December 1, 2021. On April 6, 2022, the BPU and Rate Counsel executed a Stipulation for final BGSS/CIP rates. The BGSS, CIP, and balancing charge rates are currently in effect, on an interim basis, so there is no further rate impact to customers with this filing.

•On November 19, 2021, NJNG submitted notification of its EE recoveryintent to self-implement an increase to its BGSS rate which will result in an approximately $24.2 million increase to annual decrease of $3.9revenues credited to BGSS, effective December 1, 2021.

•On January 26, 2022, the BPU approved a stipulation to resolve the current EE annual cost recovery filing, which will increase annual recoveries by $2.2 million, effective NovemberFebruary 1, 2017.2022.


•On November 17, 2017, NJNG filed itsMarch 23, 2022, the BPU approved NJNG's annual SBC application requesting to recover remediation expenses incurred through June 30, 2017, a reduction in the RAC, which will result in an annual decrease of $2.4 million andfiling to increase the RAC by $600,000 and decrease the NJCEP factor, which will result in an annual increase of $1.8by $2.9 million, effective April 1, 2018.2022.


•On DecemberMarch 31, 2022, NJNG filed its first rate recovery request for its BPU approved IIP with capital expenditures estimated at $25.6 million, including AFUDC through June 30, 2022.

•On April 22, 2017, the Tax Act was signed into law, which resulted in2022, NJNG filed a reduction in the federal corporate tax rate. As a result, NJNG recorded a regulatory liability of $228 million, which includes $164.3 million for the revaluation of its deferred income taxes and $63.7 million for the accounting of the income tax effects on the revaluation. The revaluation is based on certain assumptions and estimations NJNG madepetition with respect to its deferred taxes, as well as the effects from the Tax Act, and as such are subject to change if and when assumptions are updated. See Note 11. Income Taxes for a more detailed discussion on the Tax Act. On January 31, 2018, the BPU issued an Order directing the New Jersey utilitiesseeking authority to submit filings by March 2, 2018, proposing the prospective changeissue up to $500 million in rates asMedium Term Notes over a result of the Tax Act to be effective April 1, 2018, the method to return to customers the rate difference from January 1, 2018, through March 31, 2018, and an outline of the method by which the excess deferred taxes would be returned to customers. The excess deferred taxes are primarily related to timing differences associated with utility plant depreciation and are subject to IRS normalization rules, which require amortization over the remaining life of the utility plant. The return to customers of the plant-related excess deferred taxes, as well as any non-plant related excess deferred taxes will be addressed in NJNG’s filing to the BPU.
3-year period.

4.5. DERIVATIVE INSTRUMENTS


The Company is subject primarily to commodity price risk due to fluctuations in the market price of natural gas, SRECs and electricity. To manage this risk, the Company enters into a variety of derivative instruments including, but not limited to, futures contracts, physical forward contracts, financial options and swaps to economically hedge the commodity price risk associated with its existing and anticipated commitments to purchase and sell natural gas, SRECs and electricity. In addition, the Company is exposed to foreign currency and interest rate risk and may utilize foreign currency derivatives to hedge Canadian dollar denominated natural gas purchases and/or sales. Therefore, the Company's primary underlying risks include commodity prices,sales and interest rates and foreign currency. Theserate derivatives to reduce exposure to fluctuations in interest rates. All of these types of contracts are accounted for as derivatives.derivatives, unless the Company elects NPNS, which is done on a contract-by-contract election. Accordingly, all of the financial and certain of the Company's physical derivative instruments are recorded at fair value on the Unaudited Condensed Consolidated Balance Sheets. For a more detailed discussion of the Company'sCompany’s fair value measurement policies and level disclosures associated with NJR'sthe Company’s derivative instruments, see Note 5.6. Fair Value.


Energy Services


Energy Services chooses not to designate its financial commodity and physical forward commodity derivatives as accounting hedges or to elect NPNS. The changes in the fair value of these derivatives are recorded as a component of natural gas purchases or operating revenues, as appropriate for Energy Services, on the Unaudited Condensed Consolidated Statements of Operations as unrealized gains or losses. For Energy Services at settlement, realized gains and losses on all financial derivative instruments are recognized as a component of natural gas purchases and realized gains and losses on all physical derivatives follow the presentation of the related unrealized gains and losses as a component of either natural gas purchases or operating revenues.


Energy Services also enters into natural gas transactions in Canada and, consequently, is exposed to fluctuations in the value of Canadian currency relative to the U.S. dollar. Energy Services may utilize foreign currency derivatives to lock in the exchange raterates associated with natural gas transactions denominated in Canadian currency. The derivatives may include currency forwards, futures, or swaps and are accounted for as derivatives. These derivatives are typically used to hedge demand fee payments on pipeline capacity, storage and natural gas purchase agreements.


As a result of Energy Services entering into transactions to borrow natural gas, commonly referred to as “park and loans,” an embedded derivative is recognized relating to differences between the fair value of the amount borrowed and the fair value of the amount that will ultimately be repaid, based on changes in the forward price for natural gas prices at the borrowed location over the contract term. This embedded derivative is accounted for as a forward sale in the month in which the repayment of the borrowed natural gas is expected to occur, and is considered a derivative transaction that is recorded at fair value on the Unaudited Condensed Consolidated Balance Sheets, with changes in value recognized in current period earnings.

18
New Jersey Resources Corporation
Part I


NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)                     


Expected production of SRECs is hedged through the use of forward and futures contracts. All contracts require the Company to physically deliver SRECs through the transfer of certificates as per contractual settlement schedules. The Company applies NPNS accounting to SREC forward and futures contracts entered into on or before December 31, 2015. Effective for contracts executed on or after January 1, 2016, Energy Services no longer elects NPNS accounting treatment on all SREC forward sales contracts and recognizes changes in the fair value of these derivatives as a component of operating revenues. Upon settlement of the contract, the related revenue is recognized when the SREC is transferred to the counterparty.

NPNS is a contract-by-contract election and, where it makes sense to do so, we can and may elect normal accounting for certain contracts.


Natural Gas Distribution


Changes in fair value of NJNG's financial commodity derivatives are recorded as a component of regulatory assets or liabilities on the Unaudited Condensed Consolidated Balance Sheets. The Company elects NPNS accounting treatment on all physical commodity contracts that NJNG entered into on or before December 31, 2015, and accounts for these contracts on an accrual basis. Accordingly, physical natural gas purchases are recognized in regulatory assets or liabilities on the Unaudited Condensed Consolidated Balance Sheets when the contract settles and the natural gas is delivered. The average cost of natural gas is charged to expense in the current period earnings based on the BGSS factor times the therm sales. Effective for contracts executed on or after January 1, 2016, NJNG no longer elects NPNS accounting treatment on all physical forward commodity contracts.a portfolio basis. However, since NPNS is a contract-by-contract election, where it makes sense to do so, weNJNG can and may elect to treat certain contracts to beas normal. Because NJNG recovers these amounts through future BGSS rates as increases or decreases to the cost of natural gas in NJNG’s tariff for natural gas service, the changes in fair value of these contracts are deferred as a component of regulatory assets or liabilities on the Unaudited Condensed Consolidated Balance Sheets.


In June 2015, NJNG entered intoClean Energy Ventures

The Company elects NPNS accounting treatment on PPA contracts executed by Clean Energy Ventures that meet the definition of a BPU-approved treasury lock transaction to fix a benchmark treasury rate of 3.26 percent associated with a forecasted $125 million debt issuance expectedderivative and accounts for the contract on an accrual basis. Accordingly, electricity sales are recognized in May 2018. This forecasted debt issuance coincides withrevenues throughout the maturity of NJNG's existing $125 million, 5.6 percent notes due May 15, 2018. The change in fair value of NJNG's treasury lock agreement is recorded as a component of regulatory assets or liabilities on the Unaudited Condensed Consolidated Balance Sheets since NJNG believes that the market value upon settlement will be recovered in future rates. Upon settlement, any gain or loss will be amortized into earnings over the lifeterm of the future underlying debt issuance.PPA as electricity is delivered. NPNS is a contract-by-contract election and where it makes sense to do so, the Company can and may elect to treat certain contracts as normal.


Fair Value of Derivatives


The following table reflectspresents the fair value of NJR'sthe Company's derivative assets and liabilities recognized on the Unaudited Condensed Consolidated Balance Sheets as of:
Derivatives at Fair Value
March 31, 2022September 30, 2021
(Thousands)Balance Sheet LocationAssetsLiabilitiesAssetsLiabilities
Derivatives not designated as hedging instruments:
Natural Gas Distribution:
Physical commodity contractsDerivatives - current$101 $16 $36 $16 
Financial commodity contractsDerivatives - current111 1,887 2,046 13 
Energy Services:
Physical commodity contractsDerivatives - current1,853 21,594 2,818 24,592 
Derivatives - noncurrent131 19,632 333 13,237 
Financial commodity contractsDerivatives - current19,483 21,701 30,226 62,521 
Derivatives - noncurrent4,009 — 3,068 260 
Foreign currency contractsDerivatives - current38 18 125 3 
Derivatives - noncurrent— — 2 — 
Total fair value of derivatives$25,726 $64,848 $38,654 $100,642 

19
   Fair Value
  December 31, 2017 September 30, 2017
(Thousands)Balance Sheet Location
Asset
Derivatives
Liability
Derivatives
Asset
Derivatives
Liability
Derivatives
Derivatives not designated as hedging instruments:        
Natural Gas Distribution:         
Physical commodity contractsDerivatives - current $487
 $53
 $151
 $72
Financial commodity contractsDerivatives - current —
 3,478
 —
 1,149
Interest rate contractsDerivatives - current —
 12,534
 —
 8,467
Energy Services:         
Physical commodity contractsDerivatives - current 13,247
 24,531
 14,588
 16,589
 Derivatives - noncurrent 2,801
 14,256
 7,127
 8,710
Financial commodity contractsDerivatives - current 32,559
 56,188
 15,302
 20,267
 Derivatives - noncurrent 2,706
 11,477
 2,033
 2,620
Foreign currency contractsDerivatives - current 6
 4
 40
 —
 Derivatives - noncurrent 30
 26
 4
 —
Total fair value of derivatives  $51,836
 $122,547
 $39,245
 $57,874

New Jersey Resources Corporation
Part I


NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)                     


Offsetting of Derivatives


The Company transacts under master netting arrangements or equivalent agreements that allow it to offset derivative assets and liabilities with the same counterparty. However, the Company’s policy is to present its derivative assets and liabilities on a gross basis at the contract level unit of account on the Unaudited Condensed Consolidated Balance Sheets.

The following table summarizes the reported gross amounts, the amounts that the Company has the right to offset but elects not to, financial collateral, as well as the net amounts the Company could present on the Unaudited Condensed Consolidated Balance Sheets but elects not to.
(Thousands)
Amounts Presented on Balance Sheets (1)
Offsetting Derivative Instruments (2)
Financial Collateral Received/Pledged (3)
Net Amounts (4)
As of March 31, 2022:
Derivative assets:
Energy Services
Physical commodity contracts$1,984 $(480)$(200)$1,304 
Financial commodity contracts23,492 (18,300)— 5,192 
Foreign currency contracts38 (18)— 20 
Total Energy Services$25,514 $(18,798)$(200)$6,516 
Natural Gas Distribution
Physical commodity contracts$101 $(8)$— $93 
Financial commodity contracts111 (111)— — 
Total Natural Gas Distribution$212 $(119)$— $93 
Derivative liabilities:
Energy Services
Physical commodity contracts$41,226 $(480)$— $40,746 
Financial commodity contracts21,701 (18,300)— 3,401 
Foreign currency contracts18 (18)— — 
Total Energy Services$62,945 $(18,798)$— $44,147 
Natural Gas Distribution
Physical commodity contracts$16 $(8)$— $8 
Financial commodity contracts1,887 (111)— 1,776 
Total Natural Gas Distribution$1,903 $(119)$— $1,784 
As of September 30, 2021:
Derivative assets:
Energy Services
Physical commodity contracts$3,151 $(894)$(700)$1,557 
Financial commodity contracts33,294 (33,294)20,532 20,532 
Foreign currency contracts127 (3)— 124 
Total Energy Services$36,572 $(34,191)$19,832 $22,213 
Natural Gas Distribution
Physical commodity contracts$36 $(8)$— $28 
Financial commodity contracts2,046 (13)— 2,033 
Total Natural Gas Distribution$2,082 $(21)$— $2,061 
Derivative liabilities:
Energy Services
Physical commodity contracts$37,829 $(894)$— $36,935 
Financial commodity contracts62,781 (33,294)— 29,487 
Foreign currency contracts3 (3)— — 
Total Energy Services$100,613 $(34,191)$— $66,422 
Natural Gas Distribution
Physical commodity contracts$16 $(8)$— $8 
Financial commodity contracts13 (13)— — 
Total Natural Gas Distribution$29 $(21)$— $8 
(1)Derivative assets and liabilities are presented on a gross basis on the balance sheet as the Company does not elect balance sheet offsetting under ASC 210-20.
(2)Includes transactions with NAESB netting election, transactions held by FCMs with net margining and transactions with ISDA netting.
(3)Financial collateral includes cash balances at FCMs as well as cash received from or pledged to other counterparties.
(4)Net amounts represent presentation of derivative assets and liabilities if the Company were to elect balance sheet offsetting under ASC 210-20.
20
(Thousands)
Amounts Presented on Balance Sheets (1)
Offsetting Derivative Instruments (2)
Financial Collateral Received/Pledged (3)
Net Amounts (4)
As of December 31, 2017:        
Derivative assets:        
Energy Services        
Physical commodity contracts $16,048
 $(3,137) $(200) $12,711
Financial commodity contracts 35,265
 (29,434) (5,327) 504
Foreign currency contracts 36
 (30) —
 6
Total Energy Services $51,349
 $(32,601) $(5,527) $13,221
Natural Gas Distribution        
Physical commodity contracts $487
 $(25) $—
 $462
Total Natural Gas Distribution $487
 $(25) $—
 $462
Derivative liabilities:        
Energy Services        
Physical commodity contracts $38,787
 $(3,137) $—
 $35,650
Financial commodity contracts 67,665
 (29,434) (38,231) —
Foreign currency contracts 30
 (30) —
 —
Total Energy Services $106,482
 $(32,601) $(38,231) $35,650
Natural Gas Distribution        
Physical commodity contracts $53
 $(25) $—
 $28
Financial commodity contracts 3,478
 —
 (3,478) —
Interest rate contracts 12,534
 —
 —
 12,534
Total Natural Gas Distribution $16,065
 $(25) $(3,478) $12,562
As of September 30, 2017:        
Derivative assets:        
Energy Services        
Physical commodity contracts $21,715
 $(2,173) $(200) $19,342
Financial commodity contracts 17,335
 (14,121) —
 3,214
Foreign currency contracts 44
 —
 —
 44
Total Energy Services $39,094
 $(16,294) $(200) $22,600
Natural Gas Distribution        
Physical commodity contracts $151
 $(20) $—
 $131
Total Natural Gas Distribution $151
 $(20) $—
 $131
Derivative liabilities:        
Energy Services        
Physical commodity contracts $25,299
 $(2,173) $—
 $23,126
Financial commodity contracts 22,887
 (14,121) (8,766) —
Total Energy Services $48,186
 $(16,294) $(8,766) $23,126
Natural Gas Distribution        
Physical commodity contracts $72
 $(20) $—
 $52
Financial commodity contracts 1,149
 —
 (1,149) —
Interest rate contracts 8,467
 —
 —
 8,467
Total Natural Gas Distribution $9,688
 $(20) $(1,149) $8,519
(1)
Derivative assets and liabilities are presented on a gross basis on the balance sheet as the Company does not elect balance sheet offsetting under ASC 210-20.
(2)
Includes transactions with NAESB netting election, transactions held by FCMs with net margining and transactions with ISDA netting.
(3)
Financial collateral includes cash balances at FCMs as well as cash received from or pledged to other counterparties.
(4)
Net amounts represent presentation of derivative assets and liabilities if the Company were to elect balance sheet offsetting under ASC 210-20.

New Jersey Resources Corporation
Part I


NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)                     


Energy Services utilizes financial derivatives to economically hedge the gross margin associated with the purchase of physical natural gas to be used for storage injection and its subsequent sale at a later date. The gains or (losses) on the financial transactions that are economic hedges of the cost of the purchased natural gas are recognized prior to the gains or (losses) on the physical transaction, which are recognized in earnings when the natural gas is delivered. Therefore, mismatches between the timing of the recognition of realized gains or (losses) on the financial derivative instruments and gains or (losses) associated with the actual sale of the natural gas that is being economically hedged along with fair value changes in derivative instruments, creates volatility in the results of Energy Services, although the Company's intended economic results relating to the entire transaction are unaffected.


The following table reflectspresents the effect of derivative instruments recognized on the Unaudited Condensed Consolidated Statements of Operations as of:for the periods set forth below:
(Thousands)Location of gain (loss) recognized in income on derivativesAmount of gain (loss) recognized
in income on derivatives
Three Months EndedSix Months Ended
March 31,March 31,
Derivatives not designated as hedging instruments:2022202120222021
Energy Services:
Physical commodity contractsOperating revenues$(11,582)$36,419 $(11,432)$41,671 
Physical commodity contractsNatural gas purchases(875)2,650 630 (2,404)
Financial commodity contractsNatural gas purchases(31,223)(27,315)29,966 20,440 
Foreign currency contractsNatural gas purchases(14)27 (14)227 
Total unrealized and realized (gain) loss$(43,694)$11,781 $19,150 $59,934 
(Thousands)Location of gain (loss) recognized in income on derivatives
Amount of gain (loss) recognized
in income on derivatives
  Three Months Ended
  December 31,
Derivatives not designated as hedging instruments:2017 2016
Energy Services:    
Physical commodity contractsOperating revenues$1,210
 $1,743
Physical commodity contractsGas purchases(22,697) (8,799)
Financial commodity contractsGas purchases(25,997) (30,611)
Foreign currency contractsGas purchases(48) (86)
Total unrealized and realized gains (losses)$(47,532) $(37,753)


NJNG’s derivative contracts are part of the Company's risk management activities that relate to its natural gas purchases and BGSS incentive programs and debt financing. These transactions are entered into pursuant to regulatory approval.programs. At settlement, the resulting gains and/or losses are payable to or recoverable from utility customers and are deferred in regulatory assets or liabilities resulting in no impact to earnings. The following table reflects the gains (losses) gains associated with NJNG's derivative instruments for the periods set forth below:
Three Months EndedSix Months Ended
March 31,March 31,
(Thousands)2022202120222021
Natural Gas Distribution:
Physical commodity contracts$4,538 $1,091 $6,234 $1,433 
Financial commodity contracts61,485 645 46,838 (3,627)
Total unrealized and realized gain (loss)$66,023 $1,736 $53,072 $(2,194)

During fiscal 2020, NJR entered into treasury lock transactions to fix the benchmark treasury rate associated with debt issuances that were finalized in 2020. NJR designates its treasury lock contracts as of:cash flow hedges, therefore, changes in fair value of the effective portion of the hedges are recorded in OCI and upon settlement of the contracts, realized gains and (losses) are reclassified from OCI to interest expense on the Consolidated Statements of Operations. Pre-tax losses of $343,000 and $342,000 were reclassified from OCI into income during the three months ended March 31, 2022 and 2021, respectively, and pre-tax losses of $686,000 and $685,000 were reclassified during the six months ended March 31, 2022 and 2021, respectively.
 Three Months Ended
 December 31,
(Thousands)2017 2016
Natural Gas Distribution:   
Physical commodity contracts$(2,976) $1,050
Financial commodity contracts(8,808) 11,178
Interest rate contracts(4,067) 20,371
Total unrealized and realized (losses) gains$(15,851) $32,599


NJNG and Energy Services had the following outstanding long (short) derivatives as of:
Volume (Bcf)
Transaction TypeMarch 31, 2022September 30,
2021
Natural Gas DistributionFutures29.6 22.2 
Physical Commodity12.8 7.6 
Energy ServicesFutures(0.7)(13.4)
Swaps(0.2)(0.3)
Physical Commodity7.5 0.6 
   Volume (Bcf)
   December 31,
2017		 September 30,
2017
Natural Gas DistributionFutures 20.4
 18.2
 Physical 26.8
 32.1
Energy ServicesFutures (33.4) (16.4)
 Physical (4.6) (13.1)


Not included in the previousabove table are Energy Services' grossnet notional amount of foreign currency transactions of approximately $9.7$(20,000) as of March 31, 2022 and $(123,000) as of September 30, 2021, and 1.5 million NJNG’s treasury lock agreement as previously discussed and 403,0001.4 million SRECs at Energy Services that arewere open as of DecemberMarch 31, 2017.2022 and September 30, 2021, respectively.

21
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Broker Margin


Futures exchanges have contract specific margin requirements that require the posting of cash or cash equivalents relating to traded contracts. Margin requirements consist of initial margin that is posted upon the initiation of a position, maintenance margin that is usually expressed as a percent of initial margin, and variation margin that fluctuates based on the daily marked-to-market relative to maintenance margin requirements. The Company maintains separate broker margin accounts for the Natural Gas Distribution and Energy Services segments. The balances are as follows:
(Thousands)Balance Sheet LocationMarch 31, 2022September 30,
2021
Natural Gas DistributionRestricted broker margin accounts-current assets$11,617 $2,790 
Energy ServicesRestricted broker margin accounts-current assets$38,284 $70,050 
Restricted broker margin accounts-current liabilities$(2,464)$— 
(Thousands)Balance Sheet LocationDecember 31,
2017		September 30,
2017
Natural Gas DistributionBroker margin - Current assets$4,632
$2,661
Energy ServicesBroker margin - Current assets$48,218
$23,166


Wholesale Credit Risk


NJNG, Energy Services, and Clean Energy Ventures and the Storage and Transportation segment are exposed to credit risk as a result of their sales/wholesale marketing activities. As a result of the inherent volatility in the prices of natural gas commodities, derivatives, SRECs, electricity and RECs, the market value of contractual positions with individual counterparties could exceed established credit limits or collateral provided by those counterparties. If a counterparty fails to perform the obligations under its contract (e.g., failed to deliver or pay for natural gas, SRECs, electricity or RECs), then the Company could sustain a loss.


NJRThe Company monitors and manages the credit risk of its wholesale operations through credit policies and procedures that management believes reduce overall credit risk. These policies include a review and evaluation of current and prospective counterparties' financial statements and/or credit ratings, daily monitoring of counterparties' credit limits and exposure, daily communication with traders regarding credit status and the use of credit mitigation measures, such as collateral requirements and netting agreements. Examples of collateral include letters of credit and cash received for either prepayment or margin deposit. Collateral may be requested due to NJR'sthe Company's election not to extend credit or because exposure exceeds defined thresholds. Most of NJR'sthe Company's wholesale marketing contracts contain standard netting provisions. These contracts include those governed by ISDA and the NAESB. The netting provisions refer to payment netting, whereby receivables and payables with the same counterparty are offset and the resulting net amount is paid to the party to which it is due.


Internally-rated exposure applies to counterparties that are not rated by S&PFitch or Moody's. In these cases, the counterparty's or guarantor's financial statements are reviewed, and similar methodologies and ratios used by S&PFitch and/or Moody's are applied to arrive at a substitute rating. Gross credit exposure is defined as the unrealized fair value of physical and financial derivative commodity contracts, plus any outstanding wholesale receivable for the value of natural gas delivered and/or financial derivative commodity contract that has settled for which payment has not yet been received.


The following is a summary of gross credit exposures grouped by investment and noninvestment grade counterparties, as of DecemberMarch 31, 2017.2022. The amounts presented below have not been reduced by any collateral received or netting and exclude accounts receivable for NJNG retail natural gas sales and services and Clean Energy Ventures residential solar installations.
(Thousands)Gross Credit Exposure
Investment grade$128,926
Noninvestment grade9,601
Internally rated investment grade20,566
Internally rated noninvestment grade22,225
Total$181,318
(Thousands)Gross Credit Exposure
Investment grade $182,514
 
Noninvestment grade 25,079
 
Internally rated investment grade 25,435
 
Internally rated noninvestment grade 61,714
 
Total $294,742
 


Conversely, certain of NJNG's and Energy Services' derivative instruments are linked to agreements containing provisions that would require cash collateral payments from the Company if certain events occur. These provisions vary based upon the terms in individual counterparty agreements and can result in cash payments if NJNG's credit rating were to fall below its current level. NJNG's credit rating, with respect to S&P, reflects the overall corporate credit profile of NJR. Specifically, most, but not all, of these additional payments will be triggered if NJNG's debt is downgraded by the major credit agencies, regardless of investment grade status. In addition, some of these agreements include threshold amounts that would result in additional collateral payments if the values of derivative liabilities were to exceed the maximum values provided for in relevant counterparty agreements. Other provisions include payment features that are not specifically linked to ratings but are based on certain financial metrics.

22
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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)                     
Collateral amounts associated with any of these conditions are determined based on a sliding scale and are contingent upon the degree to which the Company's credit rating and/or financial metrics deteriorate, and the extent to which liability amounts exceed
New Jersey Resources Corporation
Part I

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)


applicable threshold limits. The aggregate fair value of allThere were no derivative instruments with credit-risk-related contingent features that were in a liability position on December 31, 2017 and September 30, 2017, was $14 million and $8.7 million, respectively, for which the Company had not posted collateral. If all thresholds related to the credit-risk-related contingent features underlying these agreements had been invoked on Decembercollateral is required as of March 31, 2017 and September 30, 2017, the Company would have been required to post an additional $13.1 million and $8.6 million, respectively, to its counterparties.2022. These amounts differ from the respective net derivative liabilities reflected on the Unaudited Condensed Consolidated Balance Sheets because the agreements also include clauses, commonly known as “Rights of Offset,” that would permit the Company to offset its derivative assets against its derivative liabilities for determining additional collateral to be posted, as previously discussed.


5.6. FAIR VALUE


Fair Value of Assets and Liabilities


The fair value of cash and cash equivalents, accounts receivable, current loan receivables, accounts payable, commercial paper and borrowings under revolving credit facilities are estimated to equal their carrying amounts due to the short maturity of those instruments. Non-current loan receivables are recorded based on what the Company expects to receive, which approximates fair value.value, in other noncurrent assets on the Unaudited Condensed Consolidated Balance Sheets. The Company regularly evaluates the credit quality and collection profile of its customers to approximate fair value.


The estimated fair value of long-term debt, at NJNG and NJR, including current maturities, excluding capitalfinance leases, debt issuance costs and solar asset financing obligations, is as follows:
(Thousands)March 31, 2022September 30,
2021
Carrying value (1) (2) (3)
$2,202,845 $2,102,845 
Fair market value$2,137,966 $2,288,544 
(Thousands)December 31,
2017		September 30,
2017
Carrying value (1) (2) (3)
$1,097,045
$1,097,045
Fair market value$1,111,265
$1,107,676
(1)
Excludes capital leases of $45 million and $39.7 million as of December 31, 2017 and September 30, 2017, respectively.
(2)
Excludes NJNG's debt issuance costs of $6.2 million and $6.3 million as of December 31, 2017 and September 30, 2017, respectively.
(3)
Excludes NJR's debt issuance costs of $804,000 and $770,000 as of December 31, 2017 and September 30, 2017, respectively.

(1)Excludes finance leases of $33.5 million and $20.1 million as of March 31, 2022 and September 30, 2021, respectively.
NJR(2)Excludes NJNG's debt issuance costs of $10.1 million and $9.1 million as of March 31, 2022 and September 30, 2021, respectively.
(3)Excludes NJR's debt issuance costs of $3.6 million and $3.3 million as of March 31, 2022 and September 30, 2021, respectively.

Clean Energy Ventures enters into transactions to sell certain commercial solar assets and lease the assets back for a term specified in the lease. These transactions are considered financing obligations for accounting purposes and are recorded within long-term debt on the Unaudited Condensed Consolidated Balance Sheets. The estimated fair value of solar asset financing obligations as of March 31, 2022 and September 30, 2021 was $121.8 million and $132.5 million, respectively.

The Company utilizes a discounted cash flow method to determine the fair value of its debt. Inputs include observable municipal and corporate yields, as appropriate for the maturity of the specific issue and the Company's credit rating. As of DecemberMarch 31, 2017, NJR2022, the Company discloses its debt within Level 2 of the fair value hierarchy.


Fair Value Hierarchy


NJRThe Company applies fair value measurement guidance to its financial assets and liabilities, as appropriate, which include financial derivatives and physical commodity contracts qualifying as derivatives, available for saleinvestments in equity securities and other financial assets and liabilities. In addition, authoritative accounting literature prescribes the use of a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value based on the source of the data used to develop the price inputs. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities and the lowest priority to inputs that are based on unobservable market data and include the following:

Level 1
Unadjusted quoted prices for identical assets or liabilities in active markets. NJR's Level 1 assets and liabilities include exchange traded natural gas futures and options contracts, listed equities and money market funds. Exchange traded futures and options contracts include all energy contracts traded on the NYMEX, CME and ICE that NJR refers internally to as basis swaps, fixed swaps, futures and financial options that are cleared through a FCM.

Level 2
Other significant observable inputs such as interest rates or price data, including both commodity and basis pricing that is observed either directly or indirectly from publications or pricing services. NJR's Level 2 assets and liabilities include over-the-counter physical forward commodity contracts and swap contracts, SREC forward sales or derivatives that are initially valued using observable quotes and are subsequently adjusted to include time value, credit risk or estimated transport pricing components for which no basis price is available. Level 2 financial derivatives consist of transactions with non-FCM counterparties (basis swaps, fixed swaps and/or options). NJNG's treasury lock is also considered Level 2 as valuation is based on quoted market interest and swap rates as inputs to the valuation model. Inputs are verifiable and do not require significant management judgment. For some physical commodity contracts the Company utilizes transportation tariff rates that are publicly available and that it considers to be observable inputs that are equivalent to market data received from an independent source. There are no significant judgments or adjustments applied to the transportation tariff inputs and no market perspective is required. Even if the transportation tariff input were considered to be a “model,” it would still be considered to be a Level 2 input as the data is:


widely acceptedLevel 1Unadjusted quoted prices for identical assets or liabilities in active markets. The Company's Level 1 assets and public;liabilities include exchange traded natural gas futures and options contracts, listed equities and money market funds. Exchange traded futures and options contracts include all energy contracts traded on the NYMEX, CME and ICE that the Company refers to internally as basis swaps, fixed swaps, futures and financial options that are cleared through a FCM.

Level 2Other significant observable inputs such as interest rates or price data, including both commodity and basis pricing that is observed either directly or indirectly from publications or pricing services. The Company's Level 2 assets and liabilities include over-the-counter physical forward commodity contracts and swap contracts, SREC forward sales or derivatives that are initially valued using observable quotes and are subsequently adjusted to include time value, credit risk or estimated transport pricing components for which no basis price is available. Level 2 financial
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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)


derivatives consist of transactions with non-FCM counterparties (basis swaps, fixed swaps and/or options). Inputs are verifiable and do not require significant management judgment. For some physical commodity contracts the Company utilizes transportation tariff rates that are publicly available and that it considers to be observable inputs that are equivalent to market data received from an independent source. There are no significant judgments or adjustments applied to the transportation tariff inputs and no market perspective is required. Even if the transportation tariff input were considered to be a “model,” it would still be considered to be a Level 2 input as the data is:

•widely accepted and public;
•non-proprietary and sourced from an independent third party; and

•observable and published.


These additional adjustments are generally not considered to be significant to the ultimate recognized values.


Level 3Inputs derived from a significant amount of unobservable market data. These include NJR's best estimate of fair value and are derived primarily through the use of internal valuation methodologies.

Level 3Inputs derived from a significant amount of unobservable market data. These include the Company's best estimate of fair value and are derived primarily through the use of internal valuation methodologies.

Assets and liabilities measured at fair value on a recurring basis are summarized as follows:

Quoted Prices in Active Markets for Identical AssetsSignificant Other Observable InputsSignificant Unobservable Inputs
(Thousands)(Level 1)(Level 2)(Level 3)Total
As of March 31, 2022:
Assets:
Physical commodity contracts$— $2,085 $— $2,085 
Financial commodity contracts23,603 — — 23,603 
Financial commodity contracts - foreign exchange— 38 — 38 
Money market funds39 — — 39 
Other1,998 — — 1,998 
Total assets at fair value$25,640 $2,123 $— $27,763 
Liabilities:
Physical commodity contracts$— $41,242 $— $41,242 
Financial commodity contracts23,050 538 — 23,588 
Financial commodity contracts - foreign exchange— 18 — 18 
Total liabilities at fair value$23,050 $41,798 $— $64,848 

Quoted Prices in Active Markets for Identical AssetsSignificant Other Observable InputsSignificant Unobservable Inputs
(Thousands)(Level 1)(Level 2)(Level 3)Total
As of September 30, 2021:
Assets:
Physical commodity contracts$— $3,187 $— $3,187 
Financial commodity contracts35,340 — — 35,340 
Financial commodity contracts - foreign exchange— 127 — 127 
Money market funds41 — — 41 
Other1,815 — — 1,815 
Total assets at fair value$37,196 $3,314 $— $40,510 
Liabilities:
Physical commodity contracts$— $37,845 $— $37,845 
Financial commodity contracts62,188 606 — 62,794 
Financial commodity contracts - foreign exchange— 3 — 3 
Total liabilities at fair value$62,188 $38,454 $— $100,642 


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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)                     
 Quoted Prices in Active Markets for Identical AssetsSignificant Other Observable InputsSignificant Unobservable Inputs 
(Thousands)(Level 1)(Level 2)(Level 3)Total
As of December 31, 2017:          
Assets:          
Physical commodity contracts $—
  $16,535
  $—
 $16,535
Financial commodity contracts 35,265
  —
  —
 35,265
Financial commodity contracts - foreign exchange —
  36
  —
 36
Available for sale equity securities - energy industry 55,995
  —
  —
 55,995
Other (1)
 1,106
  —
  —
 1,106
Total assets at fair value $92,366
  $16,571
  $—
 $108,937
Liabilities:          
Physical commodity contracts $—
  $38,840
  $—
 $38,840
Financial commodity contracts 71,143
  —
  —
 71,143
Financial commodity contracts - foreign exchange —
  30
  —
 30
Interest rate contracts —
  12,534
  —
 12,534
Total liabilities at fair value $71,143
  $51,404
  $—
 $122,547
As of September 30, 2017:          
Assets:          
Physical commodity contracts $—
  $21,866
  $—
 $21,866
Financial commodity contracts 17,335
  
  

 17,335
Financial commodity contracts - foreign exchange —
  44
  —
 44
Available for sale equity securities - energy industry 65,752
  —
  —
 65,752
Other (1)
 1,202
  —
  —
 1,202
Total assets at fair value $84,289
  $21,910
  $—
 $106,199
Liabilities:          
Physical commodity contracts $—
  $25,371
  $—
 $25,371
Financial commodity contracts 24,036
  —
  —
 24,036
Interest rate contracts —
  8,467
  —
 8,467
Total liabilities at fair value $24,036
  $33,838
  $—
 $57,874
(1)
Includes money market funds of $4,000 and $112,000 as of December 31, 2017 and September 30, 2017, respectively.

6.7. INVESTMENTS IN EQUITY INVESTEES


NJR'sThe Company's investments in equity method investees include the following as of:
(Thousands)March 31, 2022September 30,
2021
Steckman Ridge (1)
$108,501 $109,050 
PennEast1,479 5,479 
Total$109,980 $114,529 
(Thousands)December 31,
2017		September 30,
2017
Steckman Ridge (1)
$119,433
$120,262
PennEast59,996
52,323
Total$179,429
$172,585
(1)
Includes loans with a total outstanding principal balance of $70.4 million for both December 31, 2017 and September 30, 2017. The loans accrue interest at a variable rate that resets quarterly and are due October 1, 2023.

(1)Includes loans with a total outstanding principal balance of $70.4 million for both March 31, 2022 and September 30, 2021, which accrue interest at a variable rate that resets quarterly and are due October 1, 2023.

Steckman Ridge

The Company through its subsidiary NJR Pipeline Company, is an investorholds a 50 percent equity method investment in PennEast, which is expected to constructSteckman Ridge, a jointly owned and operate a 120-mile pipeline that will extend from northeast Pennsylvania to western New Jersey and is estimated to be completed and operationalcontrolled natural gas storage facility located in 2019.
New Jersey Resources Corporation
Part I

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)


Bedford County, Pennsylvania. NJNG and Energy Services have entered into storage and park and loan agreements with Steckman Ridge. In addition, NJNG has entered into a precedent capacity agreement with PennEast. See Note 14.15. Related Party Transactions for more information on these intercompany transactions.


PennEast
7.
The Company, through its subsidiary NJR Midstream Company, is a 20 percent investor in PennEast, a partnership whose purpose was to construct and operate a 120-mile natural gas pipeline that would have extended from northeast Pennsylvania to western New Jersey.

During the third quarter of fiscal 2021, the PennEast partnership determined that this project was no longer supported, and all further development ceased. The Company recognized an other-than-temporary impairment charge of $92.0 million, or approximately $74.5 million, net of income taxes, which represents the best estimate of the salvage value of the remaining assets of the project. Other-than-temporary impairments are recorded in equity in earnings (losses) of affiliates in the Unaudited Condensed Consolidated Statements of Operations.

On December 16, 2021, the FERC dismissed PennEast’s pending applications. The order vacates the certificate authorization for the PennEast pipeline project in light of PennEast’s response to FERC staff’s November 23, 2021 request for a status update, in which PennEast informed the Commission it is no longer developing the project.

On March 10, 2022, following the sale of certain project related assets and refunds of interconnection fees received from interstate pipelines, the PennEast board of managers approved a cash distribution to members of the partnership totaling $4.0 million per partner. The return of capital was received by the Company on March 31, 2022, and reduced the remaining carrying value of its equity method investment in PennEast to $1.5 million in the Unaudited Condensed Consolidated Balance Sheet.
8. EARNINGS PER SHARE


The following table presents the calculation of the Company's basic and diluted earnings per share for:
Three Months EndedSix Months Ended
March 31,March 31,
(Thousands, except per share amounts)2022202120222021
Net income, as reported$96,035 $149,809 $207,347 $230,854 
Basic earnings per share
Weighted average shares of common stock outstanding-basic96,068 96,248 96,006 96,181 
Basic earnings per common share$1.00$1.56$2.16$2.40
Diluted earnings per share
Weighted average shares of common stock outstanding-basic96,068 96,248 96,006 96,181 
Incremental shares (1)
448 370 474 417 
Weighted average shares of common stock outstanding-diluted96,516 96,618 96,480 96,598 
Diluted earnings per common share (2)
$1.00$1.55$2.15$2.39
 Three Months Ended
 December 31,
(Thousands, except per share amounts)20172016
Net income, as reported$123,699
$34,929
Basic earnings per share  
Weighted average shares of common stock outstanding-basic86,996
86,084
Basic earnings per common share$1.42$0.41
Diluted earnings per share  
Weighted average shares of common stock outstanding-basic86,996
86,084
Incremental shares (1)
351
771
Weighted average shares of common stock outstanding-diluted87,347
86,855
Diluted earnings per common share (2)
$1.42$0.40
(1)Incremental shares consist primarily of unvested stock awards and performance shares.
(2)
There were no anti-dilutive shares excluded from the calculation of diluted earnings per share for the three months endedDecember 31, 2017 and 2016.

(1)Incremental shares consist primarily of unvested stock awards and performance shares.
8. COMMON STOCK EQUITY

Changes in common stock(2)There were anti-dilutive shares of 24,101 and 65,334 excluded from the calculation of diluted earnings per share related to an equity forward sale agreement during the three and six months ended DecemberMarch 31, 2017, were as follows:2021, respectively.


25
(Thousands)Number of SharesCommon StockPremium on Common StockAccumulated Other Comprehensive (Loss) IncomeTreasury Stock And OtherRetained EarningsTotal
Balance at September 30, 201786,556
$222,258
$219,696
 $(3,256) $(70,039)$867,984
$1,236,643
Net income


 
 
123,699
123,699
Other comprehensive income


 (5,204) 

(5,204)
Common stock issued:         
Incentive plan525
1,453
13,951
 
 


15,404
Dividend reinvestment plan (1)
90

245
 
 3,554

3,799
Waiver discount554
1,384
21,306
 
 

22,690
Cash dividend declared ($.2725 per share)


 
 
(23,831)(23,831)
Treasury stock and other(250)
(56) 
 (25,374)
(25,430)
Balance at December 31, 201787,475
$225,095
$255,142
 $(8,460) $(91,859)$967,852
$1,347,770
(1)Shares sold through the DRP are issued from treasury stock at average cost, which may differ from the actual market price paid.

NJR satisfies its external common equity requirements, if any, through issuances of its common stock, including the proceeds from stock issuances under its DRP. The DRP allows NJR, at its option, to use treasury shares or newly issued shares to raise capital. NJR raised $3.8 million and $4.6 million of equity through the DRP, by issuing approximately 90,000 and 139,000 shares of treasury stock, during the three months ended December 31, 2017 and 2016, respectively. During the three months ended December 31, 2017, NJR raised approximately $22.7 million of equity by issuing approximately 554,000 new shares through the waiver discount feature of the DRP. NJR issued no new shares during the three months ended December 31, 2016.

New Jersey Resources Corporation
Part I


NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)                     


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 December 31, 2017 and 2016:
(Thousands)Available for Sale SecuritiesPostemployment Benefit ObligationTotal
Balance at September 30, 2017$11,044
 $(14,300) $(3,256)
Other comprehensive (loss) income, net of tax     
Other comprehensive (loss), before reclassifications, net of tax of $851, $0, $851(2,290) —
 (2,290)
Amounts reclassified from accumulated other comprehensive (loss) income, net of tax of $2,178, $(136), $2,042(3,154) 240
(1) 
(2,914)
Net current-period other comprehensive (loss) income, net of tax of $3,029, $(136), $2,893(5,444) 240
 (5,204)
Balance at December 31, 2017$5,600
 $(14,060) $(8,460)
      
Balance as of September 30, 2016$4,198
 $(19,353) $(15,155)
Other comprehensive income (loss), net of tax     
Other comprehensive income, before reclassifications, net of tax of $(4,840), $0, $(4,840)7,042
 —
 7,042
Amounts reclassified from accumulated other comprehensive (loss) income, net of tax of $1,054, $(217), $837(1,527) 317
(1) 
(1,210)
Net current-period other comprehensive income, net of tax of $(3,786), $(217), $(4,003)5,515
 317
 5,832
Balance as of December 31, 2016$9,713
 $(19,036) $(9,323)
(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.

9. DEBT


NJR and NJNG finance working capital requirements and capital expenditures through various short-term debt and long-term financing arrangements, including a commercial paper program and committed unsecured credit facilities and private placement debt shelf facilities.


Credit Facilities and Short-term Debt


On February 8, 2022, NJR entered into a 364-day $150 million term loan credit agreement with an interest rate based on SOFR plus 0.85 percent and expires on February 7, 2023. The Company borrowed $50 million on February 9, 2022 and $100 million on February 14, 2022.

A summary of NJR's credit facility and term loan credit agreement and NJNG's commercial paper program and credit facility are as follows:
(Thousands)March 31, 2022September 30,
2021		Expiration Dates
NJR
Bank revolving credit facility (1)
$500,000 $500,000 September 2026
Notes outstanding at end of period$152,210 $219,100 
Weighted average interest rate at end of period2.02 %1.05 %
Amount available at end of period (2)
$334,325 $270,312 
Bank term loan credit agreement$150,000 $— February 2023
Loans outstanding at end of period$150,000 $— 
Weighted average interest rate at end of period1.04 %— %
Amount available at end of period$— $— 
NJNG
Bank revolving credit facility (3)
$250,000 $250,000 September 2026
Commercial paper and notes outstanding at end of period$— $158,200 
Weighted average interest rate at end of period— %0.17 %
Amount available at end of period (4)
$249,269 $91,069 
(Thousands)December 31,
2017		 September 30,
2017		 Expiration Dates
NJR     
Bank revolving credit facilities (1)
$425,000
 $425,000
 September 2020
Notes outstanding at end of period$327,200
 $255,000
  
Weighted average interest rate at end of period2.26% 2.14%  
Amount available at end of period (2)
$86,834
 $156,601
  
Bank revolving credit facilities (1)
$75,000
 $—
 April 2018
Amount available at end of period$75,000
 $—
  
NJNG     
Bank revolving credit facilities (1)
$250,000
 $250,000
 May 2019
Commercial paper outstanding at end of period$46,000
 $11,000
  
Weighted average interest rate at end of period1.33% 1.13%  
Amount available at end of period (3)
$203,269
 $238,269
  
(1)Committed credit facilities, which require commitment fees on the unused amounts.
(2)
Letters of credit outstanding total $11 million and $13.4 million for December 31, 2017 and September 30, 2017, respectively, which reduces amount available by the same amount.
(3)
Letters of credit outstanding total $731,000 for both December 31, 2017 and September 30, 2017, which reduces the amount available by the same amount.
New Jersey Resources Corporation(1)Committed credit facilities, which require commitment fees of 0.10 percent on the unused amounts.
Part I

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)


On December 14, 2017, NJR entered into a four-month, $75 million revolving line(2)Letters of credit facility,outstanding total $13.5 million at March 31, 2022 and $10.6 million at September 30, 2021, which will expirereduces the amount available by the same amount.
(3)Committed credit facilities, which require commitment fees of 0.075 percent on April 14, 2018. Asthe unused amounts.
(4)Letters of Decembercredit outstanding total $731,000 at both March 31, 2017, there were no borrowings against2022 and September 30, 2021, which reduces the facility. On January 19, 2018, NJR amendedamount available by the agreement to increase the available amount to $100 million.same amount.


Amounts available under credit facilities are reduced by bank or commercial paper borrowings, as applicable, and any outstanding letters of credit. Neither NJNG nor the results of its operations are obligated or pledged to support the NJR credit facility or debt shelf facilities.term loan.


Long-term Debt


NJR

On February 16, 2022, NJR signed a commitment letter with a financial institution to refinance $50 million of its Senior Unsecured Notes that are currently scheduled to mature in September 2022. The new Senior Unsecured Note will be financed over a 12-year term with an interest rate of 3.64 percent maturing in September 2034.

NJNG


On October 28, 2021, NJNG entered into a Note Purchase Agreement for $100 million of its senior notes, of which $50 million were issued at an interest rate of 2.97 percent, maturing in 2051, and $50 million were issued at an interest rate of 3.07 percent, maturing in 2061. The senior notes are secured by an equal principal amount of NJNG’s FMBs issued under NJNG’s Mortgage Indenture.

26
New Jersey Resources Corporation
Part I

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)                     
NJNG received $7.8$17.3 million and $9.6 million in December 2017 and 2016, respectively,during the six months ended March 31, 2022, in connection with the sale-leasebacksale leaseback of its natural gas meters. NJNG records a capitalfinancing lease obligation that is paid over the term of the lease and has the option to purchase the meters back at fair value upon expiration of the lease. There were no natural gas meter sale leasebacks recorded during the six months ended March 31, 2021. NJNG exercised early purchase options with respect to meter leases by making final principal payments of $1.1 million and $1$1.2 million during the threesix months ended December March 31, 20172022 and 2016,2021, respectively.


NJRClean Energy Ventures


On January 26, 2018, NJR enteredClean Energy Ventures enters into transactions to sell the commercial solar assets concurrent with agreements to lease the assets back over a variable-for-fixed interest rate swapperiod of five to 15 years. These transactions are treated as financing obligations for accounting purposes and are typically secured by the renewable energy facility asset and its future cash flows from RECs and energy sales. ITCs and other tax benefits associated with these solar projects are transferred to the buyer, if applicable; however, the lease payments are structured so that Clean Energy Ventures is compensated for the transfer of the related tax incentives. Clean Energy Ventures continues to operate the solar assets, including related expenses, and retain the revenue generated from RECs and energy sales, and has the option to renew the lease or repurchase the assets sold at the end of the lease term. During the six months ended March 31, 2022 and 2021, Clean Energy Ventures received proceeds of $3.3 million and $12.1 million, respectively, in connection with the sale leaseback of commercial solar projects. The proceeds received were recognized as a financing obligation on NJR's existing $100 million variable rate term loan due August 16, 2019, which fixed the variable rate at 2.84 percent.Unaudited Condensed Consolidated Balance Sheets.


10. EMPLOYEE BENEFIT PLANS


Pension and Other Postemployment Benefit Plans


The components of the net periodic cost for pension benefits, including the Company's Pension Equalization Plan, and OPEB costs (principally health care and life insurance) for employees and covered dependents were as follows:
PensionOPEB
Three Months EndedSix Months EndedThree Months EndedSix Months Ended
March 31,March 31,March 31,March 31,
(Thousands)20222021202220212022202120222021
Service cost$2,073 $2,183 $4,146 $4,365 $1,076 $1,211 $2,152 $2,422 
Interest cost2,408 2,278 4,816 4,556 1,589 1,517 3,178 3,035 
Expected return on plan assets(5,318)(4,851)(10,637)(10,075)(1,894)(1,565)(3,788)(3,248)
Recognized actuarial loss2,186 2,861 4,372 5,723 1,421 1,978 2,842 3,955 
Prior service cost (credit) amortization26 26 51 51 (36)(45)(72)(90)
Net periodic benefit cost$1,375 $2,497 $2,748 $4,620 $2,156 $3,096 $4,312 $6,074 
 PensionOPEB
 Three Months EndedThree Months Ended
 December 31,December 31,
(Thousands)2017201620172016
Service cost$2,035
$2,087
$1,152
$1,095
Interest cost2,623
2,443
1,591
1,386
Expected return on plan assets(4,910)(4,828)(1,338)(1,192)
Recognized actuarial loss1,884
2,207
1,165
1,093
Prior service cost amortization27
27
(91)(91)
Net periodic benefit cost$1,659
$1,936
$2,479
$2,291


The Company does not expect to be required to make additional contributions to fund the pension plans during fiscal 2018 or 20192022 based on current actuarial assumptions; however, funding requirements are uncertain and can depend significantly on changes in actuarial assumptions, returns on plan assets and changes in the demographics of eligible employees and covered dependents. In addition, as in the past, the Company may elect to make contributions in excess of the minimum required amount to the plans. There were no discretionary contributions made during the threesix months ended DecemberMarch 31, 2017.2022 and 2021.

There are no federal requirements to pre-fund OPEB benefits. However, the Company is required to fund certain amounts due to regulatory agreements with the BPU and estimates that it will contribute between $5 million and $10 million over each of the next five years. Additional contributions may be required based on market conditions and changes to assumptions.

11. INCOME TAXES


ASC Topic 740, Income Taxes requires the use of an estimated annual effective tax rate for purposes of determining the income tax provision during interim reporting periods. In calculating its estimated annual effective tax rate, NJRthe Company considers forecasted annual pre-tax income and estimated permanent book versus tax differences, as well as tax credits associated with solar and wind projects. For investment tax credits, the estimate is based on solar projects that are probable of being completed and placed in service during the current fiscal year based on the best information available at each reporting period. For production tax credits, the estimate is based on the forecast of electricity produced during the current fiscal year based on the best information available at each reporting period.differences. Adjustments to the effective tax rate and management's estimates will occur as information and assumptions change.
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New Jersey Resources Corporation
Part I


NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)                     


Changes in tax laws or tax rates are recognized in the financial reporting period that includes the enactment date, the date in which the act is signed into law.


NJRThe Company evaluates its tax positions to determine the appropriate accounting and recognition of potential future obligations associated with unrecognized tax benefits. During the three months ended December 31, 2017 and 2016, the Company determined there was no need to recognize any liabilities associated with uncertainA tax positions.

The Tax Act

On December 22, 2017, the President signed into law the Tax Act. The law made several changes to the Internal Revenue Code of 1986, as amended, the most impactful to the Company of which was a reduction in the federal corporate income tax rate from 35 percent to 21 percent that became effective January 1, 2018. Since the Company's fiscal year end is September 30, it is required by the Internal Revenue Code to calculate a statutory rate based upon the federal tax rates in effect before and after the effective date of the change in the taxable year that includes the effective date. Accordingly, the Company will use a federal statutory tax rate of 24.5 percent during fiscal 2018 and will use the enacted rate of 21 percent beginning in fiscal 2019.

As a result of the changes associated with the Tax Act, the Company revalued its deferred tax assets and liabilities at the enactment date to reflect the rates that will be in effect when the deferred tax assets and liabilities arebenefit claimed, or expected to be realized or settled. The decrease ofclaimed, on a tax return may be recognized if it is more likely than not that the net deferredposition will be upheld upon examination by the applicable taxing authority. Interest and penalties related to unrecognized tax liability at NJNG of $228 million, which includes $164.3 million for the revaluation of its deferred income taxes and $63.7 million for the accounting of thebenefits, if any, are recognized within income tax effects on the revaluation, was recorded as aexpense and accrued interest, and penalties are recognized within other noncurrent regulatory liabilityliabilities on the Unaudited Condensed Consolidated Balance Sheets since it will be refunded to NJNG's ratepayers. The decrease of the net deferred tax liability for the remaining entities resulted in an income tax benefit of $57.6 million that was recognized on the Unaudited Condensed Consolidated Statements of Operations for the three months ended December 31, 2017.Sheets.

The adjustments to deferred income taxes are based on assumptions the Company made with respect to its book versus tax differences and the timing of when those differences will reverse, including estimations associated with depreciation and the settlement of derivative unrealized amounts, therefore the revaluation of net deferred tax liabilities is subject to change as information and assumptions are updated.


Effective Tax Rate


The forecasted effective tax rates were 13.922.3 percent and 8.719.9 percent, for the threesix months ended DecemberMarch 31, 20172022 and 2016,2021, respectively. The increased effective tax rate is due primarily to an increase in forecasted pre-tax income combined with a decrease in forecasted tax credits for the fiscal year ending September 30, 2018, compared with the prior fiscal year, which more than offset the lower statutory rate. Forecasted tax credits, net of deferred income taxes, were $21.9 million and $36.4 million for fiscal 2018 and 2017, respectively.


To the extent there are discrete tax items that are not included in the forecasted effective tax rate, the actual effective tax rate willmay differ from the estimated annual effective tax rate. The Company recognized $2.8 million and $1.2 million duringDuring the threesix months ended DecemberMarch 31, 20172022 and 2016,2021, discrete items totaled approximately $(166,000) and $(145,000), respectively, inrelated to excess tax benefitsexpense (benefits) associated with the vesting of share-based awards, as a component of income tax (benefit) provision in its Unaudited Condensed Consolidated Statements of Operations. In addition, as discussed further above, the Company recognized a tax benefit of $57.6 million during the three months ended December 31, 2017. As a result of these discrete items,awards. NJR’s actual effective tax rate was (68.2)22.3 percent and 5.519.7 percent as of Decemberduring the six months ended March 31, 20172022 and 2016,2021, respectively.


Other Tax Items


As of DecemberMarch 31, 2017,2022 and September 30, 2021, the Company has federal and state income tax net operating lossescredit carryforwards of approximately $125.3$227.1 million and $526.4 million, respectively, which generally have a life of 20 years. The Company has recorded deferred federal and state tax assets of approximately $28.5 million and $27.7 million, respectively, on the Unaudited Condensed Consolidated Balance Sheets, reflecting the tax benefits associated with these net operating losses. As of September 30, 2017, the Company had federal and state income tax net operating losses of approximately $125.3 million and $471.7 million, respectively, and deferred federal and state tax assets of approximately $28.5 million and $23.6 million, respectively.

As of December 31, 2017 and September 30, 2017, the Company recorded a valuation allowance associated with state net operating loss carryforwards of $1.3 million and $1 million, respectively, related to Clean Energy Ventures in the state of Montana. There were no other valuation allowances needed for the Company as of December 31, 2017. In addition, as of December 31,
New Jersey Resources Corporation
Part I

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)


2017 and September 30, 2017, the Company had an ITC/PTC carryforward of approximately $122.9 million and $109.3$224.2 million, respectively, which each have a life of 20 years. The Company expects to utilize this entire carryforward prior to expiration, which would begin in fiscal 2035.

As of March 31, 2022 and September 30, 2021, the Company has state income tax net operating losses of approximately $404.8 million and $554.6 million, respectively. These state net operating losses have varying carry-forward periods dictated by the state in which they were incurred; these state carry-forward periods range from seven to 20 years and began to expire in fiscal 2021, with the majority expiring after 2035. The Company expects to utilize this entire carryforward, other than as described below.


In December 2015,The impairment of the equity method investment in PennEast created potential net capital loss attributes totaling approximately $61.8 million, which can only be utilized to offset capital gains income, and can be carried back three years and forward five years prior to expiration.

As of March 31, 2022, the Company has a valuation allowance totaling $23.7 million comprised of approximately $17.3 million related to the recognition of state net operating loss carryforwards, which primarily relate to New Jersey and approximately $6.4 million related to potential capital loss carryforwards resulting from the impairment of the equity method investment in PennEast, which the Company believes may not be fully utilized prior to expiration. As of September 30, 2021, the Company had a valuation allowance totaling $23.6 million related to the state net operating loss carryforwards and the potential capital loss carryforwards resulting from the impairment of the equity method investment, as previously discussed.

The Consolidated Appropriations Act extended the 30 percent ITC for solar property that is under construction on or before December 31, 2019. Projects placed in service after December 31, 2019, may also qualify for a 30 percent federal ITC if five percent or more of the total costs of a solar property are incurred before the end of the applicable year and there are continuous efforts to advance towards completion of the project, based on the IRS guidance around ITC safe harbor determination. The credit will declinedeclined to 26 percent for property under construction before the end of 2020. The Consolidated Appropriations Act, 2021 extended the 26 percent tax credit for property under construction during 20202021 and 2022. The credit will drop to 22 percent for property under construction during 2021. For any property that is under construction before 2022, but not placed in service before 2024,the end of 2023. After 2023 the ITC will be reduced to 10 percent. In addition,
12. LEASES

Lessee Accounting

The Company determines if an arrangement is a lease at inception based on whether the PTC was extended for five years through December 31, 2019, with a gradual three year phase out for any project for which constructionCompany has the right to control the use of an identified asset, the right to obtain substantially all of the facility begins after Decembereconomic benefits from the use of the asset and the right to direct the use of the asset. After the criteria is satisfied, the Company accounts for these arrangements as leases in accordance
28
New Jersey Resources Corporation
Part I

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)                     
with ASC 842, Leases. Right-of-use assets represent the Company’s right to use the underlying asset for the lease term and lease liabilities represent the Company's obligation to make lease payments arising from the lease. Right-of-use assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term, including payments at commencement that depend on an index or rate. Most leases in which the Company is the lessee do not have a readily determinable implicit rate, so an incremental borrowing rate, based on the information available at the lease commencement date, is utilized to determine the present value of lease payments. When a secured borrowing rate is not readily available, unsecured borrowing rates are adjusted for the effects of collateral to determine the incremental borrowing rate. The Company uses the implicit rate for agreements in which it is a lessor. The Company has not entered into any material agreements in which it is a lessor. Lease expense and lease income are recognized on a straight-line basis over the lease term for operating leases.

The Company’s lease agreements primarily consist of commercial solar land leases, storage and capacity leases, equipment and real property, including land and office facilities, office equipment and the sale leaseback of its natural gas meters.

Certain leases contain escalation provisions for inflation metrics. The storage leases contain a variable payment component that relates to the change in the inflation metrics that are not known past the current payment period. The variable components of these lease payments are excluded from the lease payments that are used to determine the related right-of-use lease asset and liability. The variable portion of these leases are recognized as leasing expenses when they are incurred. The capacity lease payments are fully variable and based on the amount of natural gas stored in the storage caverns.

Generally, the Company’s solar land lease terms are between 20 and 50 years and may include multiple options to extend the terms for an additional five to 20 years. The Company’s office leases vary in duration, ranging from two to 17 years and may or may not include extension or early purchase options. The Company’s meter lease terms are between seven and ten years with purchase options available prior to the end of the term. Equipment leases include general office equipment that also vary in duration, with an average term of six years. The Company's storage and capacity leases have assumed terms of 50 years to coincide with the expected useful lives of the cavern assets with which the leases are associated. The Company's lease terms may include options to extend, purchase the leased asset or terminate a lease and they are included in the lease liability calculation when it is reasonably certain that those options will be exercised. The Company has elected an accounting policy that exempts leases with an original term of one year or less from the recognition requirements of ASC 842, Leases.

The Company has lease agreements with lease and non-lease components and has elected the practical expedient to combine lease and non-lease components for certain classes of leases, such as office buildings, solar land leases and office equipment. Variable payments are not considered material to the Company. The Company’s lease agreements do not contain any material residual value guarantees, material restrictions or material covenants. In July 2021, NJNG entered into 16-year lease agreements, as Lessor, with various NJR subsidiaries, as Lessees, for office space at the Company’s headquarters in Wall, New Jersey, the effects of which are eliminated in consolidation.

The following table presents the Company's lease costs included in the Unaudited Condensed Consolidated Statements of Operations:
Three Months EndedSix Months Ended
March 31,March 31,
(Thousands)Income Statement Location2022202120222021
Operating lease cost (1)
Operation and maintenance$2,915 1,356 $5,034 $3,445 
Finance lease cost
Amortization of right-of-use assetsDepreciation and amortization$457 $1,191 853 2,437 
Interest on lease liabilitiesInterest expense, net of capitalized interest104 113 184 334 
Total finance lease cost561 1,304 1,037 2,771 
Short-term lease costOperation and maintenance12 127 23 254 
Variable lease costOperation and maintenance172 549 363 702 
Total lease cost$3,660 $3,336 $6,457 $7,172 
(1)Net of capitalized costs.

29
New Jersey Resources Corporation
Part I

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)                     
The following table presents supplemental cash flow information related to leases:
Six Months Ended
March 31,
(Thousands)20222021
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows for operating leases$3,557 $2,932 
Operating cash flows for finance leases$404 $791 
Financing cash flows for finance leases$3,947 $5,690 

Assets obtained or modified for operating lease liabilities totaled approximately $17,000 and $5.7 million during the three months ended March 31, 2016.2022 and 2021, respectively, and totaled $825,000 and $13.3 million during the six months ended March 31, 2022 and 2021, respectively. Assets obtained or modified through finance lease liabilities totaled $17.3 million during the six months ended March 31, 2022. There were no assets obtained or modified through finance lease liabilities during the three months ended March 31, 2022 and the three and six months ended March 31, 2021.

The following table presents the balance and classifications of the Company's right of use assets and lease liabilities included in the Unaudited Condensed Consolidated Balance Sheets:
12.
(Thousands)Balance Sheet LocationMarch 31, 2022September 30,
2021
Assets
Noncurrent
Operating lease assetsOperating lease assets$171,207 $173,928 
Finance lease assetsUtility plant22,828 13,489 
Total lease assets$194,035 $187,417 
Liabilities
Current
Operating lease liabilitiesOperating lease liabilities$4,878 $4,300 
Finance lease liabilitiesCurrent maturities of long-term debt6,443 5,393 
Noncurrent
Operating lease liabilitiesOperating lease liabilities140,036 141,363 
Finance lease liabilitiesLong-term debt27,045 14,742 
Total lease liabilities$178,402 $165,798 

For operating lease assets and liabilities, the weighted average remaining lease term was 29.6 years and the weighted average discount rate used in the valuation over the remaining lease term was 3.2 percent for both March 31, 2022 and September 30, 2021.

For finance lease assets and liabilities as of March 31, 2022 and September 30, 2021, the weighted average remaining lease term was 4.5 years and 3.4 years, respectively, and the weighted average discount rate used in the valuation over the remaining lease term is 2.7 percent and 3.5 percent as of March 31, 2022 and September 30, 2021, respectively.

13. COMMITMENTS AND CONTINGENT LIABILITIES


Cash Commitments


NJNG has entered into long-term contracts, expiring at various dates through September 2024,2039, for the supply, storagetransportation and transportationstorage of natural gas. These contracts include annual fixed charges of approximately $75.9$199.5 million at current contract rates and volumes for the remainder of the fiscal year, which are recoverable through BGSS.



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New Jersey Resources Corporation
Part I

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)                     
For the purpose of securing storage and pipeline capacity, the Energy Services segment enters into storage and pipeline capacity contracts, which require the payment of certain demand charges by Energy Services to maintain the ability to access such natural gas storage or pipeline capacity, during a fixed time period, which generally ranges from one to 10 years. Demand charges are established by interstate storage and pipeline operators and are regulated by FERC. These demand charges represent commitments to pay storage providers or pipeline companies for the right to store and/or transport natural gas utilizing their respective assets.


Commitments as of DecemberMarch 31, 2017,2022, for natural gas purchases and future demand fees for the next five fiscal year periods are as follows:
(Thousands)20222023202420252026Thereafter
Energy Services:
Natural gas purchases$110,029 $17,096 $— $— $— $— 
Storage demand fees11,881 20,416 12,256 6,434 3,789 3,027 
Pipeline demand fees36,564 59,876 41,802 27,037 26,359 32,082 
Sub-total Energy Services$158,474 $97,388 $54,058 $33,471 $30,148 $35,109 
NJNG:
Natural gas purchases$55,151 $5,361 $— $— $— $— 
Storage demand fees25,167 41,758 27,318 17,362 10,266 14,320 
Pipeline demand fees72,067 147,689 91,216 136,515 127,692 1,179,683 
Sub-total NJNG$152,385 $194,808 $118,534 $153,877 $137,958 $1,194,003 
Total$310,859 $292,196 $172,592 $187,348 $168,106 $1,229,112 
(Thousands)20182019202020212022Thereafter
Energy Services:      
Natural gas purchases$287,394
$117,129
$21,504
$11,443
$—
$—
Storage demand fees24,479
22,933
13,573
9,263
6,055
3,523
Pipeline demand fees59,067
50,562
39,292
23,348
19,087
18,977
Sub-total Energy Services$370,940
$190,624
$74,369
$44,054
$25,142
$22,500
NJNG:      
Natural gas purchases$39,542
$41,287
$40,046
$38,234
$38,794
$79,894
Storage demand fees22,531
27,193
16,482
9,380
8,952
11,373
Pipeline demand fees53,406
75,718
101,087
91,202
89,828
669,099
Sub-total NJNG$115,479
$144,198
$157,615
$138,816
$137,574
$760,366
Total$486,419
$334,822
$231,984
$182,870
$162,716
$782,866


Certain pipeline demand fees totaling approximately $4.0 million per year, for which Energy Services is the responsible party, are being paid for by the counterparty to a capacity release transaction beginning November 1, 2021 for a period of 10 years.

Legal Proceedings


Manufactured Gas Plant Remediation


NJNG is responsible for the remedial cleanup of fivecertain former MGP sites, dating back to gas operations in the late 1800s and early 1900s, which contain contaminated residues from former gas manufacturing operations. NJNG is currently involved in administrative proceedings with the NJDEP and participating in various studies and investigations by outside consultants, to determine the nature and extent of any such contaminated residues and to develop appropriate programs of remedial action, where warranted, under Administrative Consent Orders or Memoranda of Agreement with the NJDEP.NJDEP regulations.


NJNG recovers its remediation expenditures, including carrying costs, over rolling seven-year periods pursuant to a RAC approved by the BPU. NJNG currently recovers approximately $9.4 million annually through its SBC RAC. On November 17, 2017, NJNG filed its annual SBC application requesting a reduction in the RAC, which will decrease the annual recovery to $7 million, effective April 1, 2018. As of December 31, 2017, $31.2 million of previously incurred remediation costs, net of recoveries from customers and insurance proceeds, are included in regulatory assets on the Unaudited Condensed Consolidated Balance Sheets.

New Jersey Resources Corporation
Part I

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)


In December 2017, the NJDEP contacted NJNG regarding its association with a parcel of land, located within NJNG's territory, which may have been a MGP site for a period of time. NJNG is investigating to determine the nature and extent of its relationship to the parcel, its previous owner and the operations conducted on the site. NJNG will continue to gather information relevant to the site in question, to determine if additional inquiry and inspection is warranted and whether a potential obligation, if any, exists to undertake remedial action.

NJNG periodically, and at least annually, performs an environmental review of theformer MGP sites located in Atlantic Highlands, Berkeley, Long Branch, Manchester, Toms River, Freehold and Aberdeen, New Jersey, including a review of potential liability for investigation and remedial action. NJNG estimated at the time of the most recent review that total future expenditures to remediate and monitorat the fiveformer MGP sites for which it is responsible, including potential liabilities for Natural Resource Damagesnatural resource damages that might be brought by the NJDEP for alleged injury to groundwater or other natural resources concerning these sites will range from approximately $117.6$115.7 million to $205.2$178.7 million. NJNG'sNJNG’s estimate of these liabilities is based upon known facts, existing technology and enacted laws and regulations in place when the review was completed. Where it is probable that costs will be incurred, and the information is sufficient to establish a range of possible liability, NJNG accrues the most likely amount in the range. If no point within the range is more likely than the other, it is NJNG'sNJNG’s policy to accrue the lower end of the range. Accordingly, as of March 31, 2022, NJNG recorded ana MGP remediation liability and a corresponding regulatory asset of approximately $121.6 million on the Unaudited Condensed Consolidated Balance Sheets of $149 million as of September 30, 2017, based on the most likely amount at year end and $144 million as of December 31, 2017, which includes adjustments for actual expenditures during fiscal 2018.amount. The actual costs to be incurred by NJNG are dependent upon several factors, including final determination of remedial action, changing technologies and governmental regulations, the ultimate ability of other responsible parties to pay and insurance recoveries, if any.


31
New Jersey Resources Corporation
Part I

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)                     
In June 2019, NJNG initiated a preliminary assessment of a site in Aberdeen, New Jersey to determine prior ownership and if former MGP operations were active at the location. The preliminary assessment and site investigation activities are ongoing at the Aberdeen, NJ site location. The estimated costs to complete the preliminary assessment and site investigation phase are included in the MGP remediation liability and corresponding regulatory asset on the Unaudited Condensed Consolidated Balance Sheets at March 31, 2022 and September 30, 2021. NJNG will continue to gather information to determine whether the obligation exists to undertake remedial action, if any, and refine its estimate of potential costs for this site as more information becomes available.

NJNG recovers its remediation expenditures, including carrying costs, over rolling seven-year periods pursuant to a RAC approved by the BPU. On March 23, 2022, the BPU approved an increase in the RAC, which increased the pre-tax annual recovery from $11.1 million to $11.7 million, effective April 1, 2022. As of March 31, 2022, $65.5 million of previously incurred remediation costs, net of recoveries from customers and insurance recoveries.

proceeds, are included in regulatory assets on the Unaudited Condensed Consolidated Balance Sheets. NJNG will continue to seek recovery of MGP-related costs through the RAC. If any future regulatory position indicates that the recovery of such costs is not probable, the related non-recoverable costs would be charged to earningsincome in the period of such determination.


General


The Company is involved, and from time to time in the future may be involved, in a number of pending and threatened judicial, regulatory and arbitration proceedings relating to matters that arise in the ordinary course of business. In view of the inherent difficulty of predicting the outcome of litigation matters, particularly when such matters are in their early stages or where the claimants seek indeterminate damages, the Company cannot state with confidence what the eventual outcome of the pending litigation will be, what the timing of the ultimate resolution of these matters will be, or what the eventual loss, fines or penalties related to each pending matter will be, if any. In accordance with applicable accounting guidance, NJRthe Company establishes reservesaccruals for litigation for those matters that present loss contingencies as to which it is both probable that a loss will be incurred and the amount of such loss can be reasonably estimated. The Company also discloses contingent matters for which there is a reasonable possibility of a loss. Based upon currently available information, NJRthe Company believes that the results of litigation that isare currently pending, taken together, will not have a materially adverse effect on the Company’s financial condition, results of operations or cash flows. The actual results of resolving the pending litigation matters may be substantially higher than the amounts reserved.accrued.


The foregoing statements about NJR’sthe Company’s litigation are based upon the Company’s judgments, assumptions and estimates and are necessarily subjective and uncertain. The Company has a number of threatened and pending litigation matters at various stages. Certain of the Company’s significant litigation is described below.


In February 2015, a natural gas fire and explosion occurred in Stafford Township, New Jersey as a result of a natural gas leak emanating from an underground pipe. There were no fatalities, although several employees of NJNG were injured and several homes were damaged. NJNG notified its insurance carrier and believes that any costs associated with the incident, including attorneys’ fees, property damage and other losses, will be substantially covered by insurance. The Company believes the resolution of any potential claims associated with the incident will not have a material effect on its financial condition, results of operations or cash flows. As of December 31, 2017, NJNG estimates that liabilities associated with claims will range between $600,000 and $3.2 million and has accrued the lower end of the range, as we do not believe there is an amount within the range that is more probable than any other.


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New Jersey Resources Corporation
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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)


13.14. REPORTING SEGMENT AND OTHER OPERATIONS DATA


The Company organizes its businesses based on a combination of factors, including its products and its regulatory environment. As a result, the Company manages its businesses through the following reporting segments and other operations: the Natural Gas Distribution segment consists of regulated energy and off-system, capacity and storage management operations; the Clean Energy Ventures segment consists of capital investments in clean energy projects; the Energy Services segment consists of unregulated wholesale and retail energy operations; the MidstreamStorage and Transportation segment consists of the Company'sCompany’s investments in natural gas transportation and storage facilities; the Home Services and Other operations consist of heating, cooling and water appliance sales, installations and services, other investments and general corporate activities.


Information related to the Company's various reporting segments and other operations is detailed below:
Three Months EndedSix Months Ended
March 31,March 31,
(Thousands)2022202120222021
Operating revenues
Natural Gas Distribution
External customers$463,474 $310,167 $737,909 $505,896 
Intercompany338 — 675 — 
Clean Energy Ventures
External customers11,827 6,476 22,010 12,846 
Energy Services
External customers (1)
411,069 459,766 776,857 687,115 
Intercompany1,576 2,803 5,032 4,931 
Storage and Transportation
External customers12,805 13,257 24,389 25,704 
Intercompany537 669 1,096 1,326 
Subtotal901,626 793,138 1,567,968 1,237,818 
Home Services and Other
External customers13,141 12,521 26,993 24,931 
Intercompany81 252 180 419 
Eliminations(2,532)(3,724)(6,983)(6,676)
Total$912,316 $802,187 $1,588,158 $1,256,492 
Depreciation and amortization
Natural Gas Distribution$23,344 $19,475 $46,237 $38,644 
Clean Energy Ventures5,311 4,685 10,544 10,118 
Energy Services (2)
32 13 60 55 
Storage and Transportation2,571 2,364 4,704 5,004 
Subtotal31,258 26,537 61,545 53,821 
Home Services and Other203 227 407 487 
Eliminations(26)84 (124)(98)
Total$31,435 $26,848 $61,828 $54,210 
Interest income (3)
Natural Gas Distribution$191 $76 $384 $158 
Clean Energy Ventures— 240 — 240 
Storage and Transportation381 851 758 1,545 
Subtotal572 1,167 1,142 1,943 
Home Services and Other147 127 302 259 
Eliminations(231)(237)(455)(476)
Total$488 $1,057 $989 $1,726 
(1)Includes sales to Canada for the Energy Services segment, which are immaterial.
(2)The amortization of acquired wholesale energy contracts is excluded above and is included in natural gas purchases - nonutility on the Unaudited Condensed Consolidated Statements of Operations.
(3)Included in other income, net on the Unaudited Condensed Consolidated Statements of Operations.

33
 Three Months Ended
 December 31,
(Thousands)20172016
Operating revenues  
Natural Gas Distribution  
External customers$209,787
$185,556
Clean Energy Ventures  
External customers13,996
7,567
Energy Services  
External customers (1)
472,171
338,930
Intercompany5,810
(1,749)
Subtotal701,764
530,304
Home Services and Other  
External customers9,351
8,975
Intercompany606
1,031
Eliminations(6,416)718
Total$705,305
$541,028
Depreciation and amortization  
Natural Gas Distribution$12,783
$12,030
Clean Energy Ventures8,935
7,041
Energy Services14
16
Midstream1
1
Subtotal21,733
19,088
Home Services and Other188
221
Eliminations(67)(49)
Total$21,854
$19,260
Interest income (2)
  
Natural Gas Distribution$119
$75
Midstream664
462
Subtotal783
537
Home Services and Other204
121
Eliminations(931)(583)
Total$56
$75
(1)
Includes sales to Canada, which accounted for .02 and 1.9 percent of total operating revenues during the three months ended December 31, 2017 and 2016, respectively.
(2)Included in other income, net on the Unaudited Condensed Consolidated Statements of Operations.
New Jersey Resources Corporation
Part I


NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)


Three Months EndedSix Months Ended
March 31,March 31,
(Thousands)2022202120222021
Interest expense, net of capitalized interest
Natural Gas Distribution$10,764 $9,006 $21,759 $17,980 
Clean Energy Ventures5,395 5,266 10,822 10,300 
Energy Services795 575 1,470 1,255 
Storage and Transportation1,847 3,578 3,983 7,560 
Subtotal18,801 18,425 38,034 37,095 
Home Services and Other125 1,728 369 2,844 
Total$18,926 $20,153 $38,403 $39,939 
Income tax provision (benefit)
Natural Gas Distribution$29,689 $15,622 $42,893 $23,989 
Clean Energy Ventures(1,952)(2,714)(3,998)(5,800)
Energy Services(790)23,128 19,715 35,250 
Storage and Transportation714 873 1,057 1,519 
Subtotal27,661 36,909 59,667 54,958 
Home Services and Other256 (59)502 59 
Eliminations893 2,207 (552)1,481 
Total$28,810 $39,057 $59,617 $56,498 
Equity in earnings of affiliates
Storage and Transportation$1,256 $3,386 $2,312 $6,579 
Eliminations(487)(582)(968)(1,100)
Total$769 $2,804 $1,344 $5,479 
Net financial earnings (loss)
Natural Gas Distribution$102,783 $80,541 $153,863 $130,008 
Clean Energy Ventures(6,491)(8,872)(13,312)(19,146)
Energy Services29,940 96,528 47,507 98,028 
Storage and Transportation4,625 4,711 7,587 8,219 
Subtotal130,857 172,908 195,645 217,109 
Home Services and Other451 747 898 685 
Eliminations(1,102)(3,051)(567)(2,533)
Total$130,206 $170,604 $195,976 $215,261 
Capital expenditures
Natural Gas Distribution$52,000 $97,239 $125,464 $176,485 
Clean Energy Ventures41,176 18,549 66,556 40,884 
Storage and Transportation43,673 20,094 109,048 27,707 
Subtotal136,849 135,882 301,068 245,076 
Home Services and Other163 125 242 811 
Total$137,012 $136,007 $301,310 $245,887 
Investments in (return of capital from) equity investees
Storage and Transportation$(4,000)$196 $(4,000)$482 
Total$(4,000)$196 $(4,000)$482 


34
 Three Months Ended
 December 31,
(Thousands)20172016
Interest expense, net of capitalized interest  
Natural Gas Distribution$6,536
$6,824
Clean Energy Ventures4,208
3,324
Energy Services1,257
571
Midstream309
56
Subtotal12,310
10,775
Home Services and Other90
74
Eliminations(495)(234)
Total$11,905
$10,615
Income tax provision (benefit)  
Natural Gas Distribution$11,704
$14,887
Clean Energy Ventures(73,988)(11,887)
Energy Services13,743
(3,176)
Midstream(12,843)1,649
Subtotal(61,384)1,473
Home Services and Other11,698
(245)
Eliminations(482)790
Total$(50,168)$2,018
Equity in earnings of affiliates  
Midstream$4,129
$3,331
Eliminations(865)(1,020)
Total$3,264
$2,311
Net financial earnings  
Natural Gas Distribution$34,109
$30,348
Clean Energy Ventures71,250
2,842
Energy Services20,274
3,487
Midstream17,511
2,387
Subtotal143,144
39,064
Home Services and Other(7,716)1,542
Eliminations(95)(223)
Total$135,333
$40,383
Capital expenditures  
Natural Gas Distribution$47,390
$38,855
Clean Energy Ventures18,387
46,785
Subtotal65,777
85,640
Home Services and Other1,313
171
Total$67,090
$85,811
Investments in equity investees  
Midstream$7,202
$4,636
Total$7,202
$4,636
New Jersey Resources Corporation
Part I


NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)


The Company's assets for the various reporting segments and business operations are detailed below:
(Thousands)March 31,
2022		September 30,
2021
Assets at end of period:
Natural Gas Distribution$3,844,036 $3,707,461 
Clean Energy Ventures970,599 914,788 
Energy Services248,112 365,423 
Storage and Transportation965,615 862,407 
Subtotal6,028,362 5,850,079 
Home Services and Other136,300 162,134 
Intercompany assets (1)
(294,658)(289,935)
Total$5,870,004 $5,722,278 
(1)Consists of transactions between subsidiaries that are eliminated and reclassified in consolidation.

The Chief Executive Officer, who uses NFE as a measure of profit or loss in measuring the results of the Company's reporting segments and operations, is the chief operating decision maker of the Company. A reconciliation of consolidated NFE to consolidated net income is as follows:
Three Months EndedSix Months Ended
March 31,March 31,
(Thousands)2022202120222021
Net financial earnings$130,206 $170,604 $195,976 $215,261 
Less:
Unrealized loss (gain) on derivative instruments and related transactions42,022 29,255 (40,169)(8,235)
Tax effect(9,980)(6,954)9,556 1,958 
Effects of economic hedging related to natural gas inventory1,155 (7,209)24,732 (14,741)
Tax effect(274)1,713 (5,877)3,503 
NFE tax adjustment1,248 3,990 387 1,922 
Net income$96,035 $149,809 $207,347 $230,854 
 Three Months Ended
 December 31,
(Thousands)20172016
Net financial earnings$135,333
$40,383
Less:  
Unrealized loss on derivative instruments and related transactions34,855
28,302
Tax effect(8,059)(9,757)
Effects of economic hedging related to natural gas inventory(25,387)(17,939)
Tax effect8,244
6,204
Net income to NFE tax adjustment1,981
(1,356)
Net income$123,699
$34,929


The Company uses derivative instruments as economic hedges of purchases and sales of physical natural gas inventory. For GAAP purposes, these derivatives are recorded at fair value and related changes in fair value are included in reported earnings. Revenues and cost of natural gas related to physical natural gas flow isare recognized when the natural gas is delivered to customers. Consequently, there is a mismatch in the timing of earnings recognition between the economic hedges and physical natural gas flows. Timing differences occur in two ways:


•unrealized gains and losses on derivatives are recognized in reported earnings in periods prior to physical natural gas inventory flows; and


•unrealized gains and losses of prior periods are reclassified as realized gains and losses when derivatives are settled in the same period as physical natural gas inventory movements occur.


NFE is a measure of the earnings based on eliminating these timing differences, to effectively match the earnings effects of the economic hedges with the physical sale of natural gas, SRECs and foreign currency contracts. Consequently, to reconcile between net income and NFE, current period unrealized gains and losses on the derivatives are excluded from NFE as a reconciling item. Additionally, realizedRealized derivative gains and losses are also included in current period net income. However, NFE includes only realized gains and losses related to natural gas sold out of inventory, effectively matching the full earnings effects of the derivatives with realized margins on physical natural gas flows. NFE also excludes impairment charges associated with equity method investments, which are non-cash charges considered unusual in nature that occur infrequently and are not indicative of the Company's performance for its ongoing operations. Included in the tax effects are current and deferred income tax expense corresponding with the non-GAAP measure. Also included in the tax effects during the three month ended December 31, 2017, are the impactscomponents of the Tax Act and resulting revaluation of the deferred income taxes that arose from derivative and hedging activity as measured under NFE. The revaluation caused the effective tax rate on reconciling items to differ from the statutory rate in effect for the quarter. NJRCompany also calculates a quarterly tax adjustment based on an estimated annual effective tax rate for NFE purposes.

The Company's assets for the various business segments and business operations are detailed below:
35
(Thousands)December 31,
2017		September 30,
2017
Assets at end of period:  
Natural Gas Distribution$2,590,623
$2,519,578
Clean Energy Ventures797,951
771,340
Energy Services547,388
398,277
Midstream248,498
232,806
Subtotal4,184,460
3,922,001
Home Services and Other125,149
114,801
Intercompany assets (1)
(122,681)(108,295)
Total$4,186,928
$3,928,507
(1)Consists of transactions between subsidiaries that are eliminated and reclassified in consolidation.

New Jersey Resources Corporation
Part I
14.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)                     
15. RELATED PARTY TRANSACTIONS


Effective April 1, 2010,2020, NJNG entered into a 10-year5-year agreement for 3 Bcf of firm storage capacity with Steckman Ridge.Ridge, which expires on March 31, 2025. Under the terms of the agreement, NJNG incurs demand fees, at market rates, of approximately $9.3 million annually, a portion of which is eliminated in consolidation. These fees are recoverable through NJNG'sNJNG’s BGSS mechanism and are included as a component of regulatory assets.


New Jersey Resources Corporation
Part I

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)


Energy Services may periodically enter into storage or park and loan agreements with its affiliated FERC-jurisdictional natural gas storage facility, Steckman Ridge. As of DecemberMarch 31, 2017,2022, Energy Services has entered into transactions with Steckman Ridge for varying terms, all of which expire by OctoberMarch 31, 2020.2024.


Demand fees, net of eliminations, associated with Steckman Ridge were as follows:
Three Months EndedSix Months Ended
March 31,March 31,
(Thousands)2022202120222021
Natural Gas Distribution$1,546 $1,505 $3,104 $3,073 
Energy Services337 226 625 391 
Total$1,883 $1,731 $3,729 $3,464 
 Three Months Ended
 December 31,
(Thousands)20172016
Natural Gas Distribution$1,448
$1,410
Energy Services701
701
Total$2,149
$2,111


The following table summarizes demand fees payable to Steckman Ridge as of:
(Thousands)March 31, 2022September 30,
2021
Natural Gas Distribution$779 $778 
Energy Services76 83 
Total$855 $861 
(Thousands)December 31,
2017		September 30,
2017
Natural Gas Distribution$775
$775
Energy Services375
377
Total$1,150
$1,152


NJNG and Energy Services have entered into various asset management agreements,AMAs, the effects of which are eliminated in consolidation. Under the terms of these agreements, NJNG releases certain transportation and storage contracts to Energy Services. As of DecemberMarch 31, 2017,2022, NJNG and Energy Services had four asset management agreements1 AMA with an expiration dates ranging from February 28, 2018 through Octoberdate of March 31, 2020.2023.


NJNG has entered into a 15-year5-year transportation precedent agreement with Adelphia Gateway for committed capacity of 180,000 Dths130,000 Dekatherms per day, which is expected to begin during the 2nd half of fiscal 2022.

Energy Services has a 5-year agreement for 3 Bcf of firm storage capacity with PennEast, to commence when PennEastLeaf River, which is eliminated in service.consolidation and expires in March 2024.


15. ACQUISITION

On October 27, 2017, Adelphia, an indirect wholly owned subsidiary of NJR,In March 2021, NJNG and Clean Energy Ventures entered into a Purchase15-year sublease and Sale Agreement with Talen pursuantPPA agreement related to which Adelphia will acquire all of Talen’s membership interests in IEC for a base purchase price of $166 million. As additional consideration, Adelphia will pay Talen specified amounts of up to $23 million contingent upon the achievement of certain regulatory approvals and binding natural gas capacity commitments. On November 7, 2017, the Company made an initial payment of $10 million towards the base purchase price, which is included in other noncurrent assets on the Unaudited Condensed Consolidated Balance Sheets.

IEC owns an existing 84-mile pipeline in southeastern Pennsylvania. The transaction is expected to close following receipt of necessary permits and regulatory actions including those from the FERConsite solar array and the Pennsylvania Public Utility Commission. Uponrelated energy output at the closing, Adelphia will acquire IEC and,Company’s headquarters in Wall, New Jersey, the effects of which are immaterial to the consolidated financial statements.

In July 2021, NJNG entered into 16-year lease agreements, as Lessor, with it, IEC’s existing pipeline, related assets and rightsvarious NJR subsidiaries, as Lessees, for office space at the Company’s headquarters in Wall, New Jersey, the effects of way. Adelphia has also agreed to provide firm natural gas transportation service for ten years following the closing to two power generators owned by affiliates of Talen thatwhich are currently served by IEC.eliminated in consolidation.
1
ITEM 2. MANAGEMENT'SMANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS                                                                                                                                                                                  


Critical Accounting PoliciesEstimates


A summary of our critical accounting policies is included in Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations of our Annual Report on Form 10-K for the period ended September 30, 2017.2021. Our critical accounting policies have not changed from those reported in the 20172021 Annual Report on Form 10-K.

36
New Jersey Resources Corporation
Part I

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (Continued)                                                                                                                                                             

Recently Issued Accounting Standards


Refer to Note 2. Summary of Significant Accounting Policies for discussion of recently issued accounting standards.

New Jersey Resources Corporation
Part I

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (Continued)

Management's Overview


Consolidated


NJR is ana diversified energy services holding company providing retail natural gas service in New Jersey and wholesale and retail natural gas and related energy services to customers in the United StatesU.S. and Canada. In addition, we invest in clean energy projects, midstreamstorage and transportation assets and provide various repair, sales and installationsinstallation services. A more detailed description of our organizational structure can be found in Item 1. Business of our 20172021 Annual Report on Form 10-K.


Reporting Segments


We have four primary reporting segments as presented in the chart below:


segmentorgchart1a08.jpgnjr-20220331_g1.jpg


In addition to our four reporting segments above, we have non-utility operations that either provide corporate support services or do not meet the criteria to be treated as a separate reporting segment. These operations, which comprise Home Services and Other, include: appliance repair services, sales and installations at NJRHS; andNJRHS, commercial real estate holdings at CR&R.&R and home warranty contracts at NJR Retail.


The Tax ActImpacts of the COVID-19 Pandemic


On December 22, 2017, the President signed into law the Tax Act. The newly enacted legislation became effective January 1, 2018, and includes a broad range of tax reform initiatives, including a reductionWe continue to closely monitor developments related to the federal statutory corporate tax rate from 35 percentCOVID-19 pandemic and have, when appropriate, taken steps intended to 21 percent, modification of bonus depreciationlimit potential exposure for our employees and changes to the deductibility of certain business related expenses. ASC Topic 740, Income Taxes, requires the impact of changes in tax laws or tax rates to be recognizedthose we serve, including continuity in the financial reporting period that includes that enactment date, which issafe operation of our business. These steps include working from home for our office-based employees utilizing a newly implemented hybrid schedule, limiting direct contact with our customers and suspending late payment fees for our utility customers. And while we, along with other businesses, are continuing to return to normal operating practices, this remains an evolving situation. The timing for recovery of businesses and local economies, resurgences or mutations of the datevirus, and any potential future shutdowns remains unknown. Throughout the act is signed into law.COVID-19 pandemic, we have continued to provide essential services to our

37
New Jersey Resources Corporation
Part I


ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (Continued)                                                                                                                                                             

As a resultcustomers. Both NJR and NJNG continue to have sufficient liquidity to meet their current obligations and business operations remain fundamentally unchanged at this time. We cannot predict the nature and extent of the changeimpacts to the federal statutory corporate tax rate, we revalued our deferred tax assets and liabilities at the enactment date to reflect the rates expected to be in effect when the deferred tax assets and liabilities are realizedfuture operations, or settled. The decrease of the net deferred tax liability at NJNG of $228 million, which includes $164.3 million for the revaluation of its deferred income taxes and $63.7 million for the accounting of the income tax effects on our financial condition, results of operations and cash flows. We will continue to monitor developments affecting our employees, customers, and operations and take additional steps to address the revaluation, was recordedCOVID-19 pandemic and its impacts, as a noncurrent regulatory liability on the Unaudited Condensed Consolidated Balance Sheets and will be refunded to ratepayers. The decrease of our net deferred tax liability, that was recognized on the Unaudited Condensed Consolidated Statements of Operations, for the remaining entities was as follows:necessary.
 Three Months Ended
 December 31,
(Thousands)2017
Income tax (benefit) provision 
Clean Energy Ventures$(62,657)
Energy Services9,107
Midstream(13,989)
Home Services and Other9,974
Total$(57,565)

Since these adjustments are based on assumptions the Company made with respect to its book versus tax differences and the timing of when those differences will reverse, including estimations associated with depreciation and the settlement of derivative unrealized amounts, therefore the revaluation of our net deferred tax liabilities is subject to change as information and assumptions are updated.

On January 31, 2018, the BPU issued an Order directing the New Jersey utilities to submit filings by March 2, 2018, proposing the prospective change in rates as a result of the Tax Act, the method to return to customers the rate difference from January 1, 2018 through the effective date of the rate change, and the method by which the excess deferred taxes will be returned to customers. The excess deferred taxes are primarily related to timing differences associated with utility plant depreciation and are subject to IRS normalization rules, which require amortization over the remaining life of the utility plant. The return to customers of the plant-related excess deferred taxes, as well as any non-plant related excess deferred taxes will be addressed in NJNG’s filing to the BPU. See Note 3. Regulation for a more detailed discussion on the BPU order.

Since the Company's fiscal year end is September 30, it is required by the Internal Revenue Code to calculate a statutory rate based upon the federal tax rates in effect before and after the effective date of the change in the taxable year that includes the effective date. Accordingly, the Company will use a federal statutory tax rate of 24.5 percent during fiscal 2018 and will use the enacted rate of 21 percent beginning in fiscal 2019. See Note 11. Income Taxes for a more detailed discussion on the Tax Act.


Operating Results


Net income (loss) by reporting segment and operations are as follows:
Three Months EndedSix Months Ended
March 31,March 31,
(Thousands)2022202120222021
Net income (loss)
Natural Gas Distribution$102,783 107 %$80,541 54 %$153,863 74 %$130,008 56 %
Clean Energy Ventures(6,491)(7)(8,872)(6)(13,312)(6)(19,146)(8)
Energy Services(3,031)(3)75,662 51 62,713 30 114,534 49 
Storage and Transportation4,625 5 4,711 3 7,587 4 8,219 4 
Home Services and Other451 — 747 — 898 — 685 — 
Eliminations (1)
(2,302)(2)(2,980)(2)(4,402)(2)(3,446)(1)
Total$96,035 100 %$149,809 100 %$207,347 100 %$230,854 100 %
 Three Months Ended
 December 31,
(Thousands)2017 2016
Net income (loss)     
Natural Gas Distribution$34,109
28 % $30,348
87 %
Clean Energy Ventures69,269
56
 4,198
12
Energy Services11,120
9
 (4,790)(14)
Midstream17,511
13
 2,387
7
Home Services and Other(7,716)(6) 1,542
4
Eliminations (1)
(594)—
 1,244
4
Total$123,699
100 % $34,929
100 %
(1)
Consists of transactions between subsidiaries that are eliminated in consolidation.

(1)    Consists of transactions between subsidiaries that are eliminated in consolidation.

The increase of $88.8 milliondecrease in net income during the three and six months ended March 31, 2022, compared with the three and six months ended March 31, 2021, was driven primarily by an income tax benefit of $57.6 million associated with the Tax Act and increased operating incomedecreased earnings at Energy Services due primarily to increases in the average price of natural gasresulting from extreme cold weather and volumes relatedstrong market demand during February 2021, which did not reoccur to the weathersame extent during 2022, partially offset by the commencement of AMAs at Energy Services with an investment grade public utility, which began in December 2017 being 14.4 percent colder than normal. The primary drivers of the changes noted above are described in more detail in the individual segment discussions.November 2021 and increased earnings at NJNG due to higher base rates.
New Jersey Resources Corporation
Part I

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (Continued)


Assets by reporting segment and operations are as follows:
(Thousands)March 31,
2022		September 30,
2021
Assets
Natural Gas Distribution$3,844,036 66 %$3,707,461 65 %
Clean Energy Ventures
970,599 17 914,788 16 
Energy Services248,112 4 365,423 6 
Storage and Transportation965,615 16 862,407 15 
Home Services and Other136,300 2 162,134 3 
Intercompany assets (1)
(294,658)(5)(289,935)(5)
Total$5,870,004 100 %$5,722,278 100 %
(Thousands)December 31,
2017		 September 30,
2017
Assets     
Natural Gas Distribution$2,590,623
62 % $2,519,578
64 %
Clean Energy Ventures797,951
19
 771,340
20
Energy Services547,388
13
 398,277
10
Midstream248,498
6
 232,806
6
Home Services and Other125,149
3
 114,801
3
Intercompany assets (1)
(122,681)(3) (108,295)(3)
Total$4,186,928
100 % $3,928,507
100 %
(1)Consists of transactions between subsidiaries that are eliminated in consolidation.
(1)
Consists of transactions between subsidiaries that are eliminated in consolidation.


The increase in assets was due primarily to additional investment in utility plant in our Natural Gas Distribution segment, solar asset investments at Clean Energy Ventures, increased infrastructure spend in Storage and Transportation primarily related to the on-going conversion and construction of the southern end of Adelphia Gateway and an increase in accounts receivable at our Natural Gas Distribution segment, partially offset by lower gas in storage at Energy Services and our Natural Gas Distribution segment, as well as additional utility plant.segment.


Non-GAAP Financial Measures


Our management uses NFE, a non-GAAP financial measure, when evaluating our operating results. Energy Services economically hedges its natural gas inventory with financial derivative instruments. NFE is a measure of the earnings based on eliminating timing differences surrounding the recognition of certain gains or losses, to effectively match the earnings effects of the economic hedges with the physical sale of natural gas and, therefore, eliminates the impact of volatility to GAAP earnings associated with the derivative instruments. There is a related tax effect on current and deferred income tax expense corresponding with this non-GAAP measure. Also included in the tax effect during the three month ended December 31, 2017, are the impacts of the Tax Act and resulting revaluation of the deferred income taxes that arose from derivative and hedging activity as measured under NFE. The revaluation caused the effective tax rate on reconciling items to differ from the statutory rate in effect for the quarter. To the extent we utilize forwards, futures, or other derivatives to hedge forecasted SREC production, unrealized gains and losses are also eliminated from NFE. NFE also excludes impairment charges associated with equity method investments, which are a non-cash charge considered unusual in nature that occur infrequently and are not
38
New Jersey Resources Corporation
Part I

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (Continued)                                                                                                                                                             
indicative of the Company's performance for NFE purposes.our ongoing operations. Included in the tax effects are current and deferred income tax expense corresponding with the components of NFE.


GAAP requires us, during the interim periods, to estimate our annual effective tax rate and use this rate to calculate the year-to-date tax provision. We also determine an annual estimated effective tax rate for NFE purposes and calculate a quarterly tax adjustment based on the differences between our forecasted net income and our forecasted NFE for the fiscal year. Since the annual estimated effective tax rate is based on certain forecasted assumptions, including estimates surrounding completion of Clean Energy Ventures projects, the rate and resulting NFE are subject to change. Since this adjustment is made to reflect the forecasted tax rate, noNo adjustment is needed during the fourth quarter, since the actual effective tax rate is calculated at year end.


Non-GAAP financial measures are not in accordance with, or an alternative to, GAAP and should be considered in addition to, and not as a substitute for or a replacement of, the comparable GAAP measure and should be read in conjunction with those GAAP results. Below is a reconciliation of consolidated net income, the most directly comparable GAAP measure, to NFE:
Three Months EndedSix Months Ended
March 31,March 31,
(Thousands, except per share data)2022202120222021
Net income$96,035 $149,809 $207,347 $230,854 
Add:
Unrealized loss (gain) on derivative instruments and related transactions42,022 29,255 (40,169)(8,235)
Tax effect(9,980)(6,954)9,556 1,958 
Effects of economic hedging related to natural gas inventory (1)
1,155 (7,209)24,732 (14,741)
Tax effect(274)1,713 (5,877)3,503 
NFE tax adjustment1,248 3,990 387 1,922 
Net financial earnings$130,206 $170,604 $195,976 $215,261 
Basic earnings per share$1.00 $1.56 $2.16 $2.40 
Add:
Unrealized loss (gain) on derivative instruments and related transactions0.44 0.30 (0.42)(0.09)
Tax effect(0.10)(0.08)0.10 0.02 
Effects of economic hedging related to natural gas inventory (1)
0.01 (0.07)0.26 (0.15)
Tax effect— 0.02 (0.06)0.04 
NFE tax adjustment0.01 0.04 — 0.02 
Basic NFE per share$1.36 $1.77 $2.04 $2.24 
 Three Months Ended
 December 31,
(Thousands, except per share data)20172016
Net income$123,699
$34,929
Add:  
Unrealized loss on derivative instruments and related transactions34,855
28,302
Tax effect(8,059)(9,757)
Effects of economic hedging related to natural gas inventory (1)
(25,387)(17,939)
Tax effect8,244
6,204
NFE tax adjustment1,981
(1,356)
Net financial earnings$135,333
$40,383
Basic earnings per share$1.42
$0.41
Add:  
Unrealized loss on derivative instruments and related transactions0.40
0.33
Tax effect(0.09)(0.11)
Effects of economic hedging related to natural gas inventory (1)
(0.29)(0.21)
Tax effect0.10
0.07
NFE tax adjustment0.02
(0.02)
Basic NFE per share$1.56
$0.47
(1)Effects of hedging natural gas inventory transactions where the economic impact is realized in a future period.
New Jersey Resources Corporation(1)Effects of hedging natural gas inventory transactions where the economic impact is realized in a future period.
Part I

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (Continued)


NFE by reporting segment and other operations, discussed in more detail within the operating results sections of each segment, is summarized as follows:
Three Months EndedSix Months Ended
March 31,March 31,
(Thousands)2022202120222021
Net financial earnings (loss)
Natural Gas Distribution$102,783 79 %$80,541 47 %$153,863 79 %$130,008 60 %
Clean Energy Ventures(6,491)(5)(8,872)(5)(13,312)(7)(19,146)(9)
Energy Services29,940 23 96,528 57 47,507 24 98,028 46 
Storage and Transportation4,625 4 4,711 3 7,587 4 8,219 4 
Home Services and Other451 — 747 — 898 — 685 — 
Eliminations (1)
(1,102)(1)(3,051)(2)(567)— (2,533)(1)
Total$130,206 100 %$170,604 100 %$195,976 100 %$215,261 100 %
 Three Months Ended
 December 31,
($ in Thousands)2017 2016
Net financial earnings (loss)     
Natural Gas Distribution$34,109
25 % $30,348
75 %
Clean Energy Ventures71,250
53
 2,842
7
Energy Services20,274
15
 3,487
9
Midstream17,511
13
 2,387
6
Home Services and Other(7,716)(6) 1,542
4
Eliminations (1)
(95)—
 (223)(1)
Total$135,333
100 % $40,383
100 %
(1)
Consists of transactions between subsidiaries that are eliminated in consolidation.

(1)     Consists of transactions between subsidiaries that are eliminated in consolidation.

The increase of $95 milliondecrease in NFE during the three and six months ended DecemberMarch 31, 2017,2022, compared with the three and six months ended DecemberMarch 31, 2016,2021, was due primarily to the income tax benefit of $57.6 million associated with the Tax Act, as previously discussed, and higher financial margin generateddecreased earnings at Energy Services due primarilyrelated to colderthe extreme cold weather in December 2017, resulting in increased storage withdrawals dueduring February 2021, which did not reoccur to higher demand coupled with higher volatility allowingthe same extent during 2022, partially offset by the commencement of AMAs at Energy Services to capture additional margin from natural gas price spreads.and higher base rates at NJNG as previously discussed.


39
New Jersey Resources Corporation
Part I

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (Continued)                                                                                                                                                             
Natural Gas Distribution Segment


Overview


Our Natural Gas Distribution segment is comprised of NJNG, a natural gas utility that provides regulated retail natural gas service in centralthroughout Burlington, Middlesex, Monmouth, Morris, Ocean, and northernSussex counties in New Jersey to approximately 534,400568,100 residential and commercial customers in its service territory and also participates in the off-system sales and capacity release markets. The business is subject to various risks, including those risks associated with COVID-19, which can negatively impactmay include but are not limited to impacts to customer growth and customer usage, customer collections, the timing and costs of capital expenditures and construction of infrastructure projects, operating and financing costs, fluctuations in commodity prices and customer conservation efforts. These risks include, but are not limitedIn addition, NJNG may be subject to adverse economic conditions, customer usage, certain regulatory actions, environmental remediation and severe weather conditions. It is often difficult to predict the impact of events or trends associated with these risks.


In addition, NJNG'sNJNG’s business is seasonal by nature, as weather conditions directly influence the volume of natural gas delivered to customers on an annual basis. Specifically, customer demand substantially increases during the winter months when natural gas is used for heating purposes. As a result, NJNG receivesgenerates most of its natural gas distribution revenues during the first and second fiscal quarters and is subject to variations in earnings and working capital during the fiscal year.


As a regulated company, NJNG is required to recognize the impact of regulatory decisions on its financial statements. See Note 3.4. Regulation in the accompanying Unaudited Condensed Consolidated Financial Statements for a more detailed discussion on regulatory actions, including filings related to programs and associated expenditures, as well as rate requests related to recovery of capital investments and operating costs.


NJNG'sNJNG’s operations are managed with the goal of providing safe and reliable service, growing its customer base, diversifying its utility gross margin, promoting clean energy programs and mitigating the risks discussed above through several key initiatives, including:above.


Base Rate Case
earning
On November 17, 2021, the BPU issued an order adopting a reasonablestipulation of settlement approving a $79.0 million increase to base rates, effective December 1, 2021. In addition, the order also included approval for the final increase for the NJ RISE/SAFE II programs, which totaled $269,000. These increases include an overall rate of return on the investments in its natural gas distribution rate base of 6.84 percent, return on common equity of 9.6 percent, a common equity ratio of 54.0 percent and transmission businesses, as well as timely recoverya composite depreciation rate of all prudently incurred costs to provide safe and reliable service throughout NJNG's territory;
2.78 percent.

continuing to invest in the safety and integrity of its infrastructure;

managing its customer growth rate, which NJNG expects will be approximately 1.7 percent annually through fiscal 2020;

maintaining a collaborative relationship with the BPU on regulatory initiatives, including:

-    planning and authorization of infrastructure investments;
-    utilizing BGSS incentive programs through BPU-approved mechanisms to reduce gas costs and generate margin; -    pursuing rate and regulatory strategies to stabilize and decouple margin, including CIP; and
-    administering and promoting NJNG's BPU-approved SAVEGREEN Project;
New Jersey Resources Corporation
Part I

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (Continued)

managing the volatility of wholesale natural gas prices through a hedging program designed to keep customers' BGSS rates as stable as possible; and

working with the NJDEP and BPU to manage its financial obligations related to remediation activities associated with its former MGP sites.

Infrastructure projectsProjects


NJNG has significant annual capital expenditures associated with the management of its natural gas distribution and transmission system, including new utility plant associated with customer growth and its associated pipeline integrity management and infrastructure programs. Below is a summary of NJNG'sNJNG’s capital expenditures, including accruals, for the threesix months ended DecemberMarch 31, 2017,2022, and estimates of expected investments for fiscal 20182022 and 2019:2023:

njr-20220331_g2.jpg
legenda01.jpg
40
New Jersey Resources Corporation
chart-b2cf1f299861b8342eaa01.jpgPart I

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (Continued)                                                                                                                                                             
Estimated capital expenditures are reviewed on a regular basis and may vary based on the ongoing effects of regulatory oversight, environmental regulations, unforeseen events and the ability to access capital.


Infrastructure Investment Program

In February 2019, NJNG filed a petition with the BPU seeking authority to implement a five-year IIP. The IIP consisted of two components: transmission and distribution investments and information technology replacement and enhancements. The total investment for the IIP was approximately $507.0 million. All approved investments will be recovered through annual filings to adjust base rates. In October 2020, the BPU approved the Company’s transmission and distribution component of the IIP for $150.0 million over five years, effective November 1, 2020. NJNG voluntarily withdrew the information technology upgrade component and will seek to recover associated costs in future rate case proceedings. On March 31, 2022, the Company filed its first rate recovery request for its BPU approved IIP with capital expenditures estimated at $25.6 million, including AFUDC through June 30, 2022.

SAFE II and NJ RISE


NJNG continues to implement BPU-approved infrastructure projects that are designed to enhance the reliability and integrity of NJNG'sNJNG’s natural gas distribution system.


The BPU approved recovery of SAFE I capital investments through September 30, 2016, and approved the rate mechanism and extension of5-year SAFE II for an additional five yearsprogram and the associated rate mechanism to replace the remaining unprotected steel mains and services from itsNJNG’s natural gas distribution system at an estimated cost of approximately $200 million, excluding AFUDC. TheWith the approval of SAFE II, $157.5 million was approved for accelerated cost recovery methodology for the $157.5 million associated with the extension of SAFE II was approved in NJNG’s new base rates.methodology. The remaining $42.5 million in capital expenditures will bewas requested for recovery in a futurebase rate cases, of which $23.4 million was approved in NJNG’s 2019 base rate case and $19.1 million was approved in the 2021 base rate case.


The BPU approved the recovery of NJNG'sNJNG’s NJ RISE capital infrastructure program, which consists of six capital investment projects estimated to cost $102.5 million, excluding AFUDC, for natural gas distribution storm hardening and mitigation projects, along with associated depreciation expense. These system enhancements are intended to minimize service impacts during extreme weather events to customers that live in the most storm pronestorm-prone areas of NJNG'sNJNG’s service territory. Recovery of NJ RISE investments is included in NJNG’s base rates.


In March 2017,2021, NJNG filed its annuala petition with the BPU requesting athe final base rate increase for the recovery ofassociated with NJ RISE and SAFE II capital investment costs, with a weightedinvestments cost of capital of 6.9 percent including a return on equity of 9.75 percent, related to the period endingapproximately $3.4 million made through June 30, 2017, based on estimates, pursuant to2021. In June 2021, this filing was consolidated with the September 20162021 base rate case. In July 2017, NJNG filed an update to this petition with actual costs, requesting a $4.1 million annual increase in recoveries, which was approved by the BPU, effective October 1, 2017.

New Jersey Resources Corporation
Part I

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (Continued)

Southern Reliability Link

The SRL is an approximate 30-mile, 30-inch transmission main designed to support improved system reliability and integrity in the southern portion of NJNG's service territory, estimated to cost between $180 million and $200 million. In January 2016,On November 17, 2021, the BPU issued an order approving NJNG's modified, proposed SRL pipeline installation, operation and route selection. In March 2016,for the BPU issued an order designatingconsolidated matter which included approval for the SRL route and exempting the SRL from municipal land use ordinances, regulations, permits and license requirements. In February 2017, the NJDEP issued a permit authorizing construction of the SRL within the jurisdiction of the Coastal Area Facility Review Act, as well as a Freshwater Wetlands permit.

In September 2017,final increase for the NJ Pinelands Commission approved constructionRISE and SAFE II programs of $269,000. With this approval, the SRL as being compliantfilings with the Commission's Comprehensive Management Plan. All approvalsrespect to NJ RISE and permits have been appealed by third parties. Once the final road opening permits and easementsSAFE II are secured, construction is expected to begin, with an estimated in-service date during the first quarter of fiscal 2019.complete.

Customer growthGrowth


In conducting NJNG's business, management focuses on factors it believes may have significant influence on its future financial results. NJNG's policy is to work with all stakeholders, including customers, regulators and policymakers, to achieve favorable results. These factors include the rate of NJNG's customer growth in its service territory, which can be influenced by political and regulatory policies, the delivered cost of natural gas compared with competing fuels, interest rates and general economic and business conditions.

NJNG's total customers include the following:
March 31, 2022March 31,
2021
Firm customers
Residential508,729 498,583 
Commercial, industrial & other32,116 31,313 
Residential transport18,675 22,574 
Commercial transport8,551 8,971 
Total firm customers568,071 561,441 
Other53 45 
Total customers568,124 561,486 
41
 December 31,
2017		December 31,
2016
Firm customers  
Residential463,679
451,587
Commercial, industrial & other28,656
27,995
Residential transport31,969
35,698
Commercial transport10,089
10,149
Total firm customers534,393
525,429
Other49
64
Total customers534,442
525,493
New Jersey Resources Corporation

Part I

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (Continued)                                                                                                                                                             
During the threesix months ended DecemberMarch 31, 20172022 and 2016,2021, respectively, NJNG added 2,6373,579 and 1,8663,694 new customers. NJNG expects new customer additions, and those customers and converted 113 and 196 existing customers towho added additional natural gas heat and other services. This customer growth, as well as commercial customers who switched from interruptibleservices to firm natural gas service, willtheir premises to contribute approximately $1.5$2.9 million of incremental utility gross margin on an annualized basis,basis.

NJNG continues to utility gross margin.

In addition, NJNG currently expectsexpect to add approximately 26,00028,000 to 28,00030,000 new customers during the three-year period of fiscal 20182022 to 2020.2024. Based on information from municipalities and developers, as well as external industry analysts and management's experience, NJNG estimates that approximately 6065 percent of the growth will come from new construction markets and 4035 percent from customer conversions to natural gas from other fuel sources. This new customer and conversion growth would increase utility gross margin under NJNG's base rates by approximately $5.3$19.1 million annually, as calculated under NJNG's CIP tariff. See the Natural Gas Distribution Segment Operating Results section of Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations that follows for a definition and further discussion of utility gross margin.


SAVEGREENEnergy Efficiency Programs


SAVEGREEN conducts home energy audits and provides various grants, incentives and financing alternatives which are designed to encourage the installation of high-efficiency heating and cooling equipment and other energy-efficiencyenergy efficiency upgrades. Depending on the specific incentive or approval, NJNG recovers costs associated with the programs over a twotwo- to 10-year period through a tariff rider mechanism.

Since inception, $153.1 million in grants, rebates and loans has been provided to customers, with a total annual recovery of approximately $20 million. In June 2016,March 2021, the BPU approved NJNG's extensiona three-year SAVEGREEN program consisting of SAVEGREEN through December 31, 2018. approximately $126.1 million of direct investment, $109.4 million in financing options, and approximately $23.4 million in operation and maintenance expenses, which resulted in a $15.6 million annual recovery increase, effective July 1, 2021.

In October 2016,May 2020, NJNG filed a petition with the BPU approved NJNG’s filing to maintain the existing SAVEGREEN recovery rate. On October 20, 2017, the BPU approved NJNG's filing to decrease its EE recovery rate. In October 2020, the BPU approved NJNG to maintain its existing rate, which wouldwill result in an annual decreaserecovery of $3.9approximately $11.4 million, effective November 1, 2017.2020.

In June 2021, NJNG submitted its annual cost recovery filing for the SAVEGREEN programs established from 2010 through 2018. On January 26, 2022, the BPU approved the stipulation, which increases annual recoveries by $2.2 million, effective February 1, 2022.

The following table summarizes, loans, grants, rebates and related investments as of:
(Thousands)March 31, 2022September 30,
2021
Loans$142,400 $132,800 
Grants, rebates and related investments112,700 98,100 
Total$255,100 $230,900 

Program recoveries from customers during the six months ended March 31, 2022 and 2021, were $12.5 million and $5.3 million, respectively. The recovery includes a weighted average cost of capital that ranges from 6.69 percent to 7.76 percent, with a return on equity of 9.759.6 percent to 10.3 percent.
New Jersey Resources Corporation
Part I

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (Continued)


Conservation Incentive ProgramProgram/BGSS


The CIP facilitates normalizing NJNG'sNJNG’s utility gross margin for variances not only due to weather but also for other factors affecting customer usage, such as conservation and energy efficiency. Recovery of utility gross margin for the non-weather variance through the CIP is limited to the amount of certain natural gas supply cost savings achieved and is subject to a variable margin revenue test. Additionally, recovery of the CIP utility gross margin is subject to an annual earnings test. An annual review of the CIP must be filed by June 1, coincident with NJNG'sNJNG’s annual BGSS filing, during which NJNG can request rate changes to the CIP. In May 2014, the BPU approved the continuation of the CIP program with no expiration date. In September 2016, the BPU approved NJNG's filing to increase its CIP rates resulting in a $43.9 million annual recovery increase, effective October 2016. In September 2017, the BPU provisionally approved NJNG's petition to decrease its CIP rates, which will result in a $16.2 million annual recovery decrease, effective October 1, 2017.


42
New Jersey Resources Corporation
Part I

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (Continued)                                                                                                                                                             
NJNG's total utility firm gross margin includes the following adjustments related to the CIP mechanism:
Three Months EndedSix Months Ended
March 31,March 31,
(Thousands)2022202120222021
Weather (1)
$5,523 $6,335 $21,457 $12,790 
Usage3,057 (3,839)1,984 (3,245)
Total$8,580 $2,496 $23,441 $9,545 
 Three Months Ended
 December 31,
(Thousands)20172016
Weather (1)
$(1,368)$2,985
Usage642
(125)
Total$(726)$2,860
(1)
Compared with the CIP 20-year average, weather was 0.1 percent colder-than-normal and 6(1)Compared with the 20-year average, weather was 3.0 percent warmer-than-normal and 4.1 percent warmer-than-normal during the three months ended December 31, 2017 and 2016, respectively.

As of December 31, 2017 and September 30, 2017, NJNG had $10 million and $17.7 million, respectively, in regulatory assets related to CIP to be collected from customers in future periods on the Unaudited Condensed Consolidated Balance Sheets.

Commodity prices

Our Natural Gas Distribution segment is affected by the price of natural gas, which can have a significant impact on our cash flows, short-term financing costs, the price of natural gas charged to our customers through the BGSS clause, our ability to collect accounts receivable, which impacts our bad debt expense, and our ability to maintain a competitive advantage over other fuel sources. Natural gas commodity prices may experience high volatility as shown in the graph below, which illustrates the daily natural gas prices(1) in the Northeast market region, also known as Tetco M-3.
chart-f6a3d91b178e183e693.jpg
(1) Data source from Platts, a division of McGraw Hill Financial.

The maximum daily price was $17.26 and $8.71 and the minimum daily price was $0.53 and $0.36 for the three months ended DecemberMarch 31, 20172022 and 2016,2021, respectively, and 8.7 percent warmer-than-normal and 6.4 percent warmer-than-normal during the six months ended March 31, 2022 and 2021, respectively. A more detailed discussion of the impacts of the price of natural gas on operating revenues, gas purchases and cash flows can be found in the Results of Operations and Cash Flow sections of Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
New Jersey Resources Corporation
Part I

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (Continued)

BGSS


Recovery of natural gas costsNatural Gas Costs


NJNG'sNJNG’s cost of natural gas is passed through to our customers, without markup, by applying NJNG'sNJNG’s authorized BGSS rate to actual therms delivered. There is no utility gross margin associated with BGSS costs; therefore, changes in such costs do not impact NJNG'sNJNG’s earnings. NJNG monitors its actual natural gas costs in comparison to its BGSS rates to manage its cash flows associated with its allowed recovery of natural gas costs, which is facilitated through BPU-approved deferred accounting and the BGSS pricing mechanism. Accordingly, NJNG occasionally adjusts its periodic BGSS rates or can issue credits or refunds, as appropriate, for its residential and small commercial customers when the commodity cost varies from the existing BGSS rate. BGSS rates for its large commercial customers are adjusted monthly based on NYMEX prices.


In September 2017,NJNG’s residential and commercial markets are currently open to competition, and its rates are segregated between BGSS (i.e., natural gas commodity) and delivery (i.e., transportation) components. NJNG earns utility gross margin through the delivery of natural gas to its customers and, therefore, is not negatively affected by customers who use its transportation service and purchase natural gas from another supplier. Under an existing order from the BPU, provisionally approved maintaining NJNG's BGSS ratecan be provided by suppliers other than the state’s natural gas utilities; however, customers who purchase natural gas from another supplier continue to use NJNG for transportation service.

During fiscal 2021, NJNG notified the BPU of its intent to provide BGSS bill credits to residential and small commercial sales customers. The actual bill credits given to customers and an increase to its balancing charge rate, which will result intotaled $20.6 million, $19.3 million net of tax.

On November 17, 2021, the BPU approved a $3.7$2.9 million increase to the annual revenues credited to BGSS, a $13.0 million annual increase related to its balancing charge, as well as changes to CIP rates, which result in a $6.3 million annual recovery decrease, effective OctoberDecember 1, 2017.2021. On November 19, 2021, NJNG submitted notification of its intent to self-implement an increase to its BGSS rate, which result in an approximately $24.2 million increase to annual revenues credited to BGSS, effective December 1, 2021. On April 6, 2022, the Company, BPU, and Rate Counsel executed a Stipulation for final rates. The current BGSS, CIP, and balancing charge rates remain in effect and there is no further rate impact from this filing. The balancing charge rate includes the cost of balancing natural gas deliveries with customer usage for sales and transportation customers and balancing charge revenues are credited to BGSS. During the three months ended December 31, 2016, NJNG issued bill credits of $19.3 million as a result of a decline in the wholesale price of natural gas. There were no bill credits issued during the three months endedDecember 31, 2017.


BGSS Incentive Programs


NJNG is eligible to receive financial incentives for reducing BGSS costs through a series of utility gross margin-sharing programs that include off-system sales, capacity release and storage incentive programs. These programs are designed to encourage better utilization and hedging of itsNJNG’s natural gas supply, transportation and storage assets. Depending on the program, NJNG shares 80 or 85 percent of utility gross margin generated by these programs with firm customers. Should performance of the existing incentives or market conditions warrant, NJNG is permitted to propose a process to re-evaluate and discuss alternative incentive programs annually. Utility gross margin from incentive programs was $4.4$6.3 million and $3.8$2.1 million during the three months ended DecemberMarch 31, 20172022 and 2016,2021, respectively, and $10.1 million and $6.7 million during the six months ended March 31, 2022 and 2021, respectively. A more detailed discussion of the impacts to utility gross margin can be found in the Natural Gas Distribution Operating Results sectionof Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.


Hedging


In order to provide relative price stability to its natural gas supply portfolio, NJNG employs a hedging strategy with the goal of having at least 75 percent of the Company's projected winter periodic BGSS natural gas sales volumes hedged by each November 1 and at least 25 percent of the projected periodic BGSS natural gas sales hedged for the following April through March period. This is accomplished with the use of various financial instruments including futures, swaps and options used in conjunction with commodity and/or weather-related hedging activity.

43
New Jersey Resources Corporation
DuePart I

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (Continued)                                                                                                                                                             
Commodity Prices

Our Natural Gas Distribution segment is affected by the price of natural gas, which can have a significant impact on our cash flows, short-term financing costs, the price of natural gas charged to our customers through the capital-intensive nature of NJNG's operations, significant changesBGSS clause, our ability to collect accounts receivable, which impacts our bad debt expense, and our ability to maintain a competitive advantage over other energy sources.

Natural gas commodity prices are shown in interest rates can impact NJNG's results. NJNG entered into a treasury lock transaction to fix a benchmark treasury rate associated with debt issuance expectedthe graph below, which illustrates the daily natural gas prices(1) in May 2018. the Northeast market region, also known as TETCO M-3.
njr-20220331_g3.jpg
(1) Data sourced from Standard & Poor's Financial Services, LLC Global Platts.

The fair value of NJNG's treasury lock agreement is recorded as a component of regulatory assets or liabilities onmaximum price per MMBtu was $17.69 and $14.57 and the Unaudited Condensed Consolidated Balance Sheets sinceminimum price was $2.42 and $0.28 for the Company believes that the market value upon settlement will be reflected in future rates. Upon settlement, any gain or loss will be amortized in earnings over the life of the future debt issuance.

six months ended March 31, 2022 and 2021, respectively. A more detailed discussion of NJNG's debtthe impacts of the price of natural gas on operating revenues, natural gas purchases and cash flows can be found in the Liquidity Operating Results and Capital Resources and Cash Flowsections ofItem 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.Operations.


Societal Benefits Charge


USF

NJNG'sNJNG’s qualifying customers are eligible for the USF program, which is administered by the New Jersey Department of Community Affairs, to help make energy bills more affordable.

In September 2017,April 2021, the BPU approved on a final basis NJNG's annual SBC application to recover remediation expenses, including an increase in the RAC, of approximately $1.3 million annually and an increase to the NJCEP factor, of approximately $6.0 million, which was effective May 1, 2021.

In September 2021, the BPU approved on a final basis NJNG's annual USF compliance filing, to decrease the statewide USF rate, which will resultresulted in a $2.6an annual increase of approximately $4.9 million, annual decrease, effective October 1, 2017.2021.

On March 23, 2022, the BPU approved on a final basis NJNG's annual SBC application to recover remediation expenses, including an increase in the RAC, of approximately $600,000 annually and a decrease to the NJCEP factor of approximately $2.9 million, effective April 1, 2022.


44
New Jersey Resources Corporation
Part I


ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (Continued)                                                                                                                                                             

Environmental Remediation


NJNG is responsible for the environmental remediation of fiveformer MGP sites, which contain contaminated residues from former gas manufacturing operations that ceased operating at these sites by the mid-1950s and, in some cases, had been discontinued many years earlier. Actual MGP remediation costs may vary from management'smanagement’s estimates due to the developing nature of remediation requirements, regulatory decisions by the NJDEP and related litigation. NJNG reviews these costs at the end of each fiscal year and adjusts its liability and corresponding regulatory asset as necessary to reflect its expected future remediation obligation. Accordingly, NJNG recognized a regulatory asset and an obligation of $144$121.6 million as of DecemberMarch 31, 2017,2022, a decrease of $5$13.4 million compared with September 30, 2017.the prior fiscal period.


In June 2019, NJNG initiated a preliminary assessment of a site in Aberdeen, New Jersey to determine prior ownership and if former MGP operations were active at the location. The preliminary assessment and site investigation activities are ongoing at the Aberdeen, NJ site location and based on initial findings will be moving to remedial investigation phase. The costs associated with preliminary assessment, site investigation and remedial investigation activities are considered immaterial and are included as a component of NJNG’s annual SBC application to recover remediation expenses. We will continue to gather information to further refine and enhance its estimate of potential costs for this site as it becomes available. See Note 13. Commitments and Contingent Liabilities for a more detailed description.

Other regulatory filings and a more detailed discussion of the filings in this section can be found in Note 3.4. Regulation in the accompanying Unaudited Condensed Consolidated Financial Statements.

Operating Results


NJNG's operating results are as follows:
Three Months EndedSix Months Ended
March 31,March 31,
(Thousands)2022202120222021
Operating revenues (1)
$463,812 $310,167 $738,584 $505,896 
Operating expenses
Natural gas purchases (2)(3)
215,223 118,452 339,817 177,761 
Operation and maintenance53,024 52,951 89,455 96,589 
Regulatory rider expense (4)
30,910 18,413 47,581 29,114 
Depreciation and amortization23,344 19,475 46,237 38,644 
Total operating expenses322,501 209,291 523,090 342,108 
Operating income141,311 100,876 215,494 163,788 
Other income, net1,925 4,293 3,021 8,189 
Interest expense, net of capitalized interest10,764 9,006 21,759 17,980 
Income tax provision29,689 15,622 42,893 23,989 
Net income$102,783 $80,541 $153,863 $130,008 
 Three Months Ended
 December 31,
(Thousands)20172016
Operating revenues$209,787
$185,556
Operating expenses  
Gas purchases (1)
84,755
64,186
Operation and maintenance35,391
33,218
Regulatory rider expense11,769
12,601
Depreciation and amortization12,783
12,030
Energy and other taxes13,750
12,149
Total operating expenses158,448
134,184
Operating income51,339
51,372
Other income, net1,010
687
Interest expense, net of capitalized interest6,536
6,824
Income tax provision11,704
14,887
Net income$34,109
$30,348
(1)Includes nonutility revenue of approximately $338,000 and $675,000 for the three and six months ended March 31, 2022, respectively, for lease agreements with various NJR subsidiaries leasing office space from NJNG at the Company’s headquarters that commenced in July 2021, which are eliminated in consolidation. There was no nonutility revenue for the three and six months ended March 31, 2021.
(1)Includes related party transactions of approximately $7.2 million and $2.9 million for the three months ended December 31, 2017 and 2016, respectively, a portion of which is eliminated in consolidation.

(2)Includes the purchased cost of the natural gas, fees paid to pipelines and storage facilities, adjustments as a result of BGSS incentive programs and hedging transactions. These expenses are passed through to customers and are offset by corresponding revenues.
(3)Includes related party transactions of approximately $2.3 million and $5.2 million for the three months ended March 31, 2022 and 2021, respectively, and approximately $4.7 million and $8.4 million for the six months ended March 31, 2022 and 2021, respectively, the majority of which is eliminated in consolidation.
(4)Consists of expenses associated with state-mandated programs, the RAC and energy efficiency programs, and are calculated on a per-therm basis. These expenses are passed through to customers and are offset by corresponding revenues.

Operating Revenues and Natural Gas Purchases


DuringOperating revenues increased by 49.5 percent and 46.0 percent and natural gas purchases increased 81.7 percent and 91.2 percent during the three and six months ended DecemberMarch 31, 2017,2022, respectively, compared with the three and six months ended DecemberMarch 31, 2016, operating revenues and gas purchases increased by 13.1 percent and 32 percent,2021, respectively. The factors contributing to the increases (decreases) in operating revenues and gas purchases are as follows:

45
 Three Months Ended
 December 31,
 2017 v. 2016
(Thousands)
Operating
revenues
Gas
purchases
Bill credits (1)
$19,260
$18,000
Firm sales11,093
4,806
NJ RISE/SAFE II1,448
—
Average BGSS rates (2)
1,156
1,070
CIP adjustments(3,586)—
Off-system sales(2,700)(3,054)
Other (3)
(2,440)(253)
Total increase$24,231
$20,569
(1)
Operating revenues includes changes in sales tax of $1.3 million.
(2)Operating revenues includes changes in sales tax of $86,000.
(3)Other includes changes in rider rates, including those related to NJCEP and other programs.

New Jersey Resources Corporation
Part I


ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (Continued)                                                                                                                                                             

The factors contributing to the increases and decreases in operating revenues and natural gas purchases during the three months ended December 31, 2017, compared with the three months ended December 31, 2016 were due primarily to:are as follows:

Three Months EndedSix Months Ended
March 31,March 31,
2022 v. 20212022 v. 2021
(Thousands)Operating
revenues		Natural gas
purchases		Operating
revenues		Natural gas
purchases
BGSS incentives$63,074 $58,840 $109,427 $106,006 
Average BGSS rates25,309 25,309 39,451 39,451 
Base rate impact32,757 — 41,067 — 
Bill credits11,071 11,071 20,590 20,590 
Firm sales2,356 1,097 (10,788)(4,675)
CIP adjustments6,084 — 13,896 — 
Riders and other (1)
12,994 454 19,045 684 
Total increase$153,645 $96,771 $232,688 $162,056 
bill credits issued to residential and small commercial customers during fiscal 2017 that did not occur(1)Other includes changes in fiscal 2018;

increased firm sales due primarily to customer growth and higher usagerider rates, including those related to weather being 5.6 percent colder; partially offset by
EE, NJCEP and other programs.

a decrease in CIP due primarily to weather being colder during December 2017; and

lower off-system sales due primarily to reduction in volumes of 24.9 percent, partially offset by an increase of 18.5 percent in the average price of gas sold.


Non-GAAP Financial Measures


Management uses utility gross margin, a non-GAAP financial measure, when evaluating the operating results of NJNG. NJNG's utility gross margin is defined as natural gasoperating revenues less natural gas purchases, sales tax, and regulatory rider expenses,expenses. This measure differs from gross margin as presented on a GAAP basis as it excludes certain operations and maintenance expense and depreciation and amortization. Utility gross margin may also not be comparable to the definition of gross margin used by others in the natural gas distribution business and other industries. Management believes that utility gross margin provides a meaningful basis for evaluating utility operations since natural gas costs, sales tax and regulatory rider expenses are included in operating revenuerevenues and passed through to customers and, therefore, have no effect on utility gross margin. Non-GAAP financial measures are not in accordance with, or an alternative to, GAAP and should be considered in addition to, and not as a substitute for, the comparable GAAP measure.


Utility Gross Margin


A reconciliation of operating revenues,gross margin, the closest GAAP financial measure to NJNG's utility gross margin, is as follows:
Three Months EndedSix Months Ended
March 31,March 31,
(Thousands)2022202120222021
Operating revenues$463,812 $310,167 $738,584 $505,896 
Less:
Natural gas purchases215,223 118,452 339,817 177,761 
Operation and maintenance (1)
26,748 26,281 39,889 51,106 
Regulatory rider expense30,910 18,413 47,581 29,114 
Depreciation and amortization23,344 19,475 46,237 38,644 
Gross margin167,587 127,546 265,060 209,271 
Add:
Operation and maintenance (1)
26,748 26,281 39,889 51,106 
Depreciation and amortization23,344 19,475 46,237 38,644 
Utility gross margin$217,679 $173,302 $351,186 $299,021 
 Three Months Ended
 December 31,
(Thousands)20172016
Operating revenues$209,787
$185,556
Less:  
Gas purchases84,755
64,186
Energy taxes (1)
12,404
10,882
Regulatory rider expense11,769
12,601
Utility gross margin$100,859
$97,887
(1)Excludes selling, general and administrative expenses of $26.3 million and $26.7 million for the three months ended March 31, 2022 and 2021, respectively, and approximately $49.6 million and $45.5 million for the six months ended March 31, 2022 and 2021, respectively
(1)Energy taxes includes only sales tax on operating revenues, excluding tax-exempt sales.


Utility gross margin consists of three components:


•utility firm gross margin generated from only the delivery component of either a sales tariff or a transportation tariff from residential and commercial customers who receive natural gas service from NJNG;


•BGSS incentive programs, where revenues generated or savings achieved from BPU-approved off-system sales, capacity release or storage incentive programs are shared between customers and NJNG; and


•utility gross margin generated from off-tariff customers, as well as interruptible customers.

46
New Jersey Resources Corporation
Part I


ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (Continued)                                                                                                                                                             

The following provides more information on the components of utility gross margin and associated throughput (Bcf) of natural gas delivered to customers:
Three Months EndedSix Months Ended
March 31,March 31,
2022202120222021
($ in thousands)MarginBcfMarginBcfMarginBcfMarginBcf
Utility gross margin/throughput
Residential$155,514 23.0 $124,468 22.7 $248,119 35.6 $210,443 36.3 
Commercial, industrial and other30,120 4.3 23,050 4.3 49,222 6.6 40,090 6.7 
Firm transportation25,090 5.6 22,878 5.7 42,372 9.2 40,166 9.6 
Total utility firm gross margin/throughput210,724 32.9 170,396 32.7 339,713 51.4 290,699 52.6 
BGSS incentive programs6,349 24.0 2,114 23.6 10,113 49.1 6,692 49.5 
Interruptible/off-tariff agreements606 1.1 792 0.8 1,360 7.2 1,630 5.3 
Total utility gross margin/throughput$217,679 58.0 $173,302 57.1 $351,186 107.7 $299,021 107.4 
 Three Months Ended
 December 31,
 2017 2016
($ in thousands)MarginBcf MarginBcf
Utility gross margin/throughput     
Residential$64,735
13.6
 $62,498
12.6
Commercial, industrial and other13,918
2.6
 13,696
2.4
Firm transportation16,260
4.6
 16,285
4.5
Total utility firm gross margin/throughput94,913
20.8
 92,479
19.5
BGSS incentive programs4,435
38.7
 3,784
43.6
Interruptible/off-tariff agreements1,511
9.9
 1,624
13.3
Total utility gross margin/throughput$100,859
69.4
 $97,887
76.4


Utility Firm Gross Margin


Utility firm gross margin increased $2.4$40.3 million and $49.0 million during the three and six months ended DecemberMarch 31, 2017,2022, compared with the three and six months ended DecemberMarch 31, 2016,2021, respectively, due primarily to customer growth of $1.2 million and NJ RISE/SAFE II rate impact of $1.4 million.the increase in base rates as previously discussed.


BGSS Incentive Programs


The factors contributing to the increases (decreases)change in utility gross margin generated by BGSS incentive programs are as follows:
Three Months EndedSix Months Ended
March 31,March 31,
(Thousands)2022 v. 20212022 v. 2021
Off-system sales$4,969 $6,149 
Storage(165)(1,669)
Capacity release(569)(1,059)
Total increase$4,235 $3,421 
 Three Months Ended
 December 31,
(Thousands)2017 v. 2016
Off-system sales $354
 
Storage 301
 
Capacity release (3) 
Total increase $652
 


The increase in BGSS incentive programs during the three and six months ended March 31, 2022, compared with the three and six months ended March 31, 2021, was due primarily to increased margins from off-system sales, partially offset by the timing differences for storage incentive and lower capacity release volumes.

Operation and Maintenance Expense

O&M during the three months ended DecemberMarch 31, 2017, compared2022, remained consistent with the three months ended DecemberMarch 31, 2016, was2021. O&M expense decreased $7.1 million during the six months ended March 31, 2022, compared with the six months ended March 31, 2021, due primarily to the deferral of bad debt costs in accordance with the July 2, 2020 BPU deferral order, partially offset by an increase in capacity values contributing tocompensation, information technology expenditures and consulting fees.

Depreciation Expense

Depreciation expense increased margins in off-system sales$3.9 million and timing differences on injection activity in the storage incentive program.

Operation and Maintenance Expense

The factors contributing to the increases (decreases) in O&M expense is as follows:
 Three Months Ended
 December 31,
(Thousands)2017 v. 2016
Compensation and benefits $622
 
Donations 725
 
Consulting 532
 
Other 294
 
Total increase $2,173
 

The increase in O&M expense$7.6 million during the three and six months ended DecemberMarch 31, 2017,2022, compared with the three and six months ended DecemberMarch 31, 2016, was due primarily to higher compensation costs due primarily to increases in headcount and healthcare premiums, charitable contributions and consulting costs due primarily to an increase in software consulting costs and audit expenses.

Depreciation Expense

Depreciation expense increased $753,000 during the three months ended December 31, 2017, compared with the three months ended December 31, 2016,2021, as a result of additional utility plant being placed into service.

Interest Expense

Interest expense increased $1.8 million and $3.8 million during the three and six months ended March 31, 2022, compared with the three and six months ended March 31, 2021, due primarily to increased outstanding long-term debt and lower AFUDC debt related to infrastructure projects completed and placed in service at the end of fiscal 2021.

Other Income

Other income decreased $2.4 million and $5.2 million during the three and six months ended March 31, 2022, compared with the three and six months ended March 31, 2021, due primarily to decreased AFUDC equity as previously discussed.

47
New Jersey Resources Corporation
Part I


ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (Continued)                                                                                                                                                             

Income Tax Provision


Income tax provision decreased $3.2increased $14.1 million and $18.9 million during the three and six months ended DecemberMarch 31, 2017,2022, compared with the three and six months ended DecemberMarch 31, 2016,2021, due primarily to the decreasehigher operating income and an increase in the annualized effective tax rate as a result of the new tax legislation.applied.


Net Income


Net income increased $3.8$22.2 million and $23.9 million during the three and six months ended DecemberMarch 31, 2017,2022, compared with the three and six months ended DecemberMarch 31, 2016,2021, due primarily to the decrease in the income tax provision, as discussed above, increased higher revenue along with decreased O&M, partially offset by higher depreciation and interest expenses and decreased other income, related to AFUDC interest earned on infrastructure projects and lower interest expense due to the purchase in lieu of redemption of the three FMBs that occurred during the second quarter of fiscal 2017.as previously discussed.

Clean Energy Ventures Segment


Overview


Our Clean Energy Ventures segment actively pursues opportunities in the cleanrenewable energy markets. Clean Energy Ventures has enteredenters into various agreements to install solar net-metered systems for residential and commercial customers, as well as large commercial grid-connected projects. In addition, Clean Energy Ventures has enteredenters into various long-term agreements, including PPAs, to supply energy from wind andcommercial solar projects.


Capital expenditures related to clean energy projects are subject to change due to a variety of factors that may affect our ability to commence operations at these projects on a timely basis or at all, including logistics associated with the start-up of residential and commercial solar projects, such as timing of construction schedules, the permitting and regulatory process, any delays related to electric grid interconnection, economic trends, unforeseen events and the ability to access capital or allocation of capital to other investments or business opportunities. Clean Energy Ventures is also subject to risks associated with COVID-19, which may include impacts to residential solar customer growth and customer collections, our ability to identify and develop commercial solar asset investments, impacts to our supply chain and our ability to source materials for construction.

The primary contributors toward the value of qualifying clean energy projects are tax incentives and SRECs.RECs. Changes in the federal statutes related to the ITC or PTC or in the marketplace and/or relevant state legislation surroundingand regulatory policies affecting the market for solar renewable clean energy credits, could significantly affect future results.

Solar


Since inception, Solar projects placed in service and related expenditures are as follows:
Three Months Ended
March 31,
($ in Thousands)20222021
Placed in serviceProjectsMWCostsProjectsMWCosts
Grid-connected (1)
— — $10 1 2.7 $5,492 
Net-metered:
Residential114 1.3 4,144 80 0.8 2,230 
Total placed in service114 1.3 $4,154 81 3.5 $7,722 
Six Months Ended
March 31,
($ in Thousands)20222021
Placed in serviceProjectsMWCostsProjectsMWCosts
Grid-connected (1)
1 1.0 $3,130 2 5.6 $9,175 (2)
Net-metered:
Residential167 1.9 5,697 126 1.3 3,829 
Total placed in service168 2.9 $8,827 128 6.9 $13,004 
(1)Includes projects subject to sale leaseback arrangements.
(2)Includes an operational 2.9 MW commercial solar project acquired in December 2020.

48
New Jersey Resources Corporation
Part I

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (Continued)                                                                                                                                                             
Clean Energy Ventures has constructed a total of 190.9approximately 370.6 MW of solar capacity and has an additional 21.4 MW under construction.in service. Projects that arewere placed in service through December 31, 2019, qualifyqualified for a 30-percent federal ITC. The credit will declinedeclined to 26 percent for property under construction during 2020 and was originally scheduled to decline to 22 percent for property under construction during 2021. The ITC will be reduced to2021 and 10 percent for any property that is under construction beforeafter 2021. On December 27, 2020, the 26 percent federal ITC was extended through the end of 2022. The credit declines to 22 percent after 2022 but notand to 10 percent after 2023.

Projects placed in service before 2024.

We estimate total solar-related capital expenditures for projects during fiscal 2018 to be between $132 million and $140 million. There were no commercial projects placed into service during the three months endedafter December 31, 20172019, also qualified for a 30 percent federal ITC if five percent or 2016.more of the total costs of a solar property are incurred before the end of the applicable year and there are continuous efforts to advance towards completion of the project, based on the IRS guidance around the ITC safe harbor determination. We have taken steps to preserve the ITC at higher rates for certain solar projects that are completed after the scheduled reduction in rates, in accordance with IRS guidance.


During fiscal 2017, Clean Energy Ventures enteredmay enter into sale-leaseback arrangements for twotransactions to sell certain of its commercial solar projects,assets concurrent with agreements to lease the assets back over a period of five to 15 years. The Company will continue to operate the solar assets and are responsible for whichrelated expenses and entitled to retain the revenue generated from RECs and energy sales. The ITCs and other tax benefits associated with these solar projects were transferredtransfer to the buyer.buyer if applicable; however, the lease payments are structured so that Clean Energy Ventures expects to utilize sale-leaseback arrangements, basedis compensated for the transfer of the related tax incentives. Accordingly, for solar projects financed under sale leasebacks for which the assets were sold during the first 5 years of in-service life, Clean Energy Ventures recognizes the equivalent value of the ITC in other income on market conditions, as an option to finance itsthe Unaudited Condensed Consolidated Statements of Operations over the respective five-year ITC recapture periods, starting with the second year of the lease. During the six months ended March 31, 2022 and 2021, Clean Energy Ventures received proceeds of $3.3 million and $12.1 million, respectively, in connection with the sale leaseback of commercial solar projectsassets. There were no proceeds from sale leasebacks during fiscal 2018.the three months ended March 31, 2022 and 2021.


As part of its solar investment portfolio, Clean Energy Ventures operates a residential and small commercial solar program, The Sunlight Advantage®, that provides qualifying homeowners and small business owners the opportunity to have a solar system installed at their home or place of business with no installation or maintenance expenses. Clean Energy Ventures owns, operates and maintains the system over the life of the contract in exchange for monthly lease payments. Clean Energy Ventures' residential

For solar leasing program installed approximately 1.8 MW of capacity on 191 homes, and 2.8 MW of capacity on 314 homes during the three months ended December 31, 2017 and 2016, respectively.

Once a solar installation has received the proper certifications and commences operations,installations placed in-service in New Jersey prior to April 30, 2020, each MWh of electricity produced creates an SREC that represents the renewable energy attribute of the solar-electricity generated that can be sold to third parties, predominantly load-serving entities that are required to comply with the solar requirements under New Jersey's renewable portfolio standard.

In December 2019, the BPU established the TREC as pursuant to the successor program to the SREC activity consistedprogram. 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 following:project, as defined. All TRECs generated are required to be purchased monthly by a TREC program administrator as appointed by the BPU.

REC activity consisted of the following:Six Months Ended
March 31,
20222021
SRECsTRECsSRECsTRECs
Inventory balance as of October 1,108,104 6,944 35,011 9,270 
RECs generated157,902 13,261 141,071 10,310 
RECs delivered(32,200)(12,353)(9,495)(5,294)
Inventory balance as of March 31,233,806 7,852 166,587 14,286 

The average SREC sales price was $212 and $218 during the six months ended March 31, 2022 and 2021, respectively, and the average TREC price was $138 and $147 during the six months ended March 31, 2022 and 2021, respectively.

49
 Three Months Ended
 December 31,
 20172016
Inventory balance as of October 1,48,357
24,135
SRECs generated53,568
41,443
SRECs delivered(29,680)(10,319)
Inventory balance as of December 31,72,245
55,259
New Jersey Resources Corporation
Part I


ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (Continued)                                                                                                                                                             


Clean Energy Ventures hedges a portion of its expected SREC production through the use of forward sales contracts. The following table reflects the hedged percentage of SRECour projected inventory and projected SREC productionof SRECs related to its in-service commercial and residential assets:
Energy Year (1)
Percent of SRECs Hedged
202298%
202399%
202495%
202581%
202629%
Energy Year (1)
Percent of SRECs Hedged
201894%
201986%
202032%
(1)Energy years are compliance periods for New Jersey's renewable portfolio standard that run from June 1 to May 31.
(1)Energy years are compliance periods for New Jersey's renewable portfolio standard that run from June 1 to May 31.


There are no direct costs associated with the production of SRECs/RECsSRECs or TRECs by our solar and wind assets. All related costs are included as a component of O&M expenses on the Unaudited Condensed Consolidated Statements of Operations, including such expenses as facility maintenance and variousbroker fees.


Onshore Wind

Clean Energy Ventures has invested in small to mid-size onshore wind projects that fit its investment profile and had a total of 126.6 MW of wind capacity as of December 31, 2017. The wind projects are eligible for PTCs for a 10-year period following commencement of operations and have PPAs of various terms in place, which typically govern the sale of energy, capacity and/or renewable energy credits.

Clean Energy Ventures' investments are subject to a variety of factors, such as timing of construction schedules, permitting and regulatory processes, volatility of energy prices, the ability to secure PPAs, delays related to electric grid interconnection, which can affect our ability to commence operations on a timely basis or, at all, economic trends, the ability to access capital or allocation of capital to other investments or business opportunities and other unforeseen events. Solar projects not placed in service, as originally planned prior to the end of a reporting period, may result in a failure to qualify for ITCs. Further, changes in prices on the unhedged portion of SREC production could have a significant adverse impact on earnings with some offset expected from higher wind energy market prices due to the PTC phase out and/or improved efficiencies from lower costs for related turbine technology.

Wind projects for which construction of a facility begins after December 31, 2016 through December 31, 2019, will be subject to reduced PTCs, and could have a significant adverse impact on 10 years of forward earnings. PTCs are being be phased out from 100 percent in 2016 to 80 percent in 2017, 60 percent in 2018, 40 percent in 2019 and zero thereafter.

Operating Results


Clean Energy Ventures’ financial results are summarized as follows:
Three Months EndedSix Months Ended
March 31,March 31,
(Thousands)2022202120222021
Operating revenues$11,827 $6,476 $22,010 $12,846 
Operating expenses
Operation and maintenance9,212 8,260 18,134 17,461 
Depreciation and amortization5,311 4,685 10,544 10,118 
Total operating expenses14,523 12,945 28,678 27,579 
Operating loss(2,696)(6,469)(6,668)(14,733)
Other (expense) income, net(352)149 180 87 
Interest expense, net5,395 5,266 10,822 10,300 
Income tax benefit(1,952)(2,714)(3,998)(5,800)
Net loss$(6,491)$(8,872)$(13,312)$(19,146)

Operating Revenues

Operating revenues increased $5.4 million and $9.2 million during the three and six months ended March 31, 2022, compared with the three and six months ended March 31, 2021, respectively, due primarily to increased SREC and electricity sales.

Net Loss

Net loss decreased $2.4 million and $5.8 million during the three and six months ended March 31, 2022, compared with the three and six months ended March 31, 2021, respectively, due primarily to the increased operating revenues, as previously discussed.


 Three Months Ended
 December 31,
(Thousands)20172016
Operating revenues$13,996
$7,567
Operating expenses  
Operation and maintenance5,192
4,404
Depreciation and amortization8,935
7,041
Other taxes404
415
Total operating expenses14,531
11,860
Operating loss(535)(4,293)
Other income, net24
(72)
Interest expense, net4,208
3,324
Income tax benefit(73,988)(11,887)
Net income$69,269
$4,198
50

New Jersey Resources Corporation
Part I


ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (Continued)                                                                                                                                                             

Operating Revenues

Operating revenues increased $6.4 million during the three months ended December 31, 2017, compared with the three months ended December 31, 2016, due primarily to higher SREC sales. SRECs generated increased 29.3 percent and the average SREC sales price was $231 and $241 during the three months ended December 31, 2017, and 2016, respectively.

Operation and Maintenance Expense

O&M expense increased $788,000 during the three months ended December 31, 2017, compared with the three months ended December 31, 2016, due primarily to additional maintenance costs associated with wind and solar projects placed in service.

Depreciation Expense

Depreciation expense increased $1.9 million during the three months ended December 31, 2017, compared with the three months ended December 31, 2016, as a result of increases in solar capital additions.

Income Tax (Benefit)

Income tax benefit increased $62.1 million during the three months ended December 31, 2017, compared with the three months ended December 31, 2016, due primarily to an income tax benefit of $62.7 million associated with the Tax Act, which caused a revaluation of the deferred tax liability related to the book versus tax differences in depreciation calculated on property related items.

Net Income

Net income increased $65.1 million during the three months ended December 31, 2017, compared with the three months ended December 31, 2016, due primarily to the increased income tax benefit, as previously discussed.

Non-GAAP Financial Measures

Management of the Company uses NFE, a non-GAAP financial measure, when evaluating the operating results of Clean Energy Ventures. GAAP requires us, during the interim periods, to estimate our annual effective tax rate and use this rate to calculate the year-to-date tax provision. We also determine an annual estimated effective tax rate for NFE purposes and calculate a quarterly tax adjustment based on the differences between our forecasted net income and our forecasted NFE for the fiscal year. This adjustment is applied to Clean Energy Ventures, as such adjustment is primarily related to tax credits generated by Clean Energy Ventures. Since this adjustment is made to reflect the forecasted tax rate, no adjustment is needed at year end. Accordingly, for NFE purposes, the annual estimated effective tax rate for fiscal 2018 is 16.3 percent and 14.7 percent for fiscal 2017.

Since the annual estimated effective tax rate is based on certain forecasted assumptions, including estimates surrounding completion of projects, the rate and resulting NFE are subject to change. The details of such tax adjustments can be found in the table below. Non-GAAP financial measures are not in accordance with, or an alternative to GAAP, and should be considered in addition to, and not as a substitute for the comparable GAAP measure. A reconciliation of Clean Energy Ventures' net income, the most directly comparable GAAP financial measure to NFE is as follows:
 Three Months Ended
 December 31,
(Thousands)20172016
Net income$69,269
$4,198
Add:  
Net income to NFE tax adjustment1,981
(1,356)
Net financial earnings$71,250
$2,842
New Jersey Resources Corporation
Part I

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (Continued)

Energy Services Segment


Overview


Energy Services markets and sells natural gas to wholesale and retail customers and manages natural gas storagetransportation and transportationstorage assets throughout major market areas across North America. Energy Services maintains a strategic portfolio of natural gas storagetransportation and transportationstorage contracts that it utilizes in conjunction with its market expertise to provide service and value to its customers. Availability of these storagetransportation and transportationstorage contracts allows Energy Services to generate market opportunities by capturing price differentials over specific time horizons and between geographic market locations.


Energy Services also provides management of storagetransportation and transportationstorage assets for natural gas producers and regulated utilities. These management transactions typically involve the release of producer/utility ownedutility-owned storage and/or transportation capacity in combination with either an obligation to purchase and/or deliver physical natural gas. In addition to the contractual purchase and/or sale of physical natural gas, Energy Services generates or pays fee-based margin in exchange for its active management and may provide the producer and/or utility with additional margin based on actual results.


In conjunction with the active management of these contracts, Energy Services generates financial margin by identifying market opportunities and simultaneously entering into natural gas purchase/sale, storage or transportation contracts and financial derivative contracts. In cases where storage is utilized to fulfill these contracts, these forecast sales and/or purchases are economically hedged through the use of financial derivative contracts. The financial derivative contracts consist primarily of exchange-traded futures, options and swap contracts, and are frequently used to lock in anticipated transactional cash flows and to help manage volatility in natural gas market prices. Generally, when its storagetransportation and transportationstorage contracts are exposed to periods of increased market volatility, Energy Services is able to implement strategies that allow themit to capture margin by improving the respective time or geographic spreads on a forward basis.

On July 27, 2017, Energy Services acquired certain retail and wholesale natural gas energy contract assets from Talen. The acquisition included sales agreements with large commercial and industrial retail customers in Delaware, Maryland, New Jersey and Pennsylvania, pipeline and storage capacity agreements on various pipelines and various wholesale transportation contracts.


Energy Services accounts for its physical commodity contracts and its financial derivative instruments at fair value on the Unaudited Condensed Consolidated Balance Sheets. Changes in the fair value of physical commodity contracts and financial derivative instruments are included in earnings as a component of operating revenuerevenues or natural gas purchases on the Unaudited Condensed Consolidated Statements of Operations. Volatility in reported net income at Energy Services can occur over periods of time due to changes in the fair value of derivatives, as well as timing differences related to certain transactions. Unrealized gains and losses can fluctuate as a result of changes in the price of natural gas, SRECs and foreign currency from the original transaction price. Volatility in earnings can also occur as a result of timing differences between the settlement of financial derivatives and the sale of the underlying physical commodity. For example, when a financial instrument settles and the physical natural gas is injected into inventory, the realized gains and losses associated with the financial instrument are recognized in earnings. However, the gains and losses associated with the physical natural gas are not recognized in earnings until the natural gas inventory is withdrawn from storage and sold, at which time Energy Services realizes the entire margin on the transaction.


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. The utility provides certain asset management services and Energy Services may deliver natural gas to the utility in exchange for aggregate net proceeds of approximately $500 million, payable through November 1, 2030. The AMAs include a series of initial and permanent releases, which commenced on November 1, 2021. NJR will receive approximately $260 million in cash from fiscal 2022 through fiscal 2024 and $34 million per year from fiscal 2025 through fiscal 2031 under the agreements. Energy Services recognized $10.3 million and $32.4 million of operating revenue during the three and six months ended March 31, 2022, respectively, on the Unaudited Condensed Consolidated Statements of Operations. Amounts received in excess of revenue totaling $54.4 million as of March 31, 2022, are included in deferred revenue on the Unaudited Condensed Consolidated Balance Sheets.

51
New Jersey Resources Corporation
Part I


ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (Continued)                                                                                                                                                             

Operating Results


Energy Services’ financial results are summarized as follows:
Three Months EndedSix Months Ended
March 31,March 31,
(Thousands)2022202120222021
Operating revenues (1)
$412,645 $462,569 $781,889 $692,046 
Operating expenses
Natural gas purchases (including demand charges (2)(3))
411,146 330,280 689,833 504,117 
Operation and maintenance4,599 32,998 8,350 37,014 
Depreciation and amortization32 13 60 55 
Total operating expenses415,777 363,291 698,243 541,186 
Operating (loss) income(3,132)99,278 83,646 150,860 
Other income, net106 87 252 179 
Interest expense, net795 575 1,470 1,255 
Income tax (benefit) provision(790)23,128 19,715 35,250 
Net (loss) income$(3,031)$75,662 $62,713 $114,534 
 Three Months Ended
 December 31,
(Thousands)20172016
Operating revenues (1)
$477,981
$337,181
Operating expenses  
Gas purchases (including demand charges (2)(3))
446,210
339,087
Operation and maintenance4,420
5,018
Depreciation and amortization14
16
Other taxes1,217
455
Total operating expenses451,861
344,576
Operating income (loss)26,120
(7,395)
Interest expense, net1,257
571
Income tax provision (benefit)13,743
(3,176)
Net income (loss)$11,120
$(4,790)
(1)Includes related party transactions of approximately $1.6 million and $2.8 million for the three months ended March 31, 2022 and 2021, respectively, and approximately $5.0 million and $4.9 million for the six months ended March 31, 2022 and 2021, respectively, which are eliminated in consolidation.
(1)Includes related party transactions of approximately $5.8 million and $1.7 million for the three months ended December 31, 2017 and 2016, respectively, which is eliminated in consolidation.
(2)Costs associated with pipeline and storage capacity that are expensed over the term of the related contracts, which generally varies from less than one year to ten years.
(3)Includes related party transactions of approximately $1.1 million and $1.2 million for the three months ended December 31, 2017 and 2016, respectively, a portion of which is eliminated in consolidation.

(2)Costs associated with pipeline and storage capacity are expensed over the term of the related contracts, which generally varies from less than one year to ten years.
(3)Includes related party transactions of approximately $270,000 and $226,000 for the three months ended March 31, 2022 and 2021, respectively, and approximately $495,000 and $391,000 for the six months ended March 31, 2022 and 2021, respectively, a portion of which is eliminated in consolidation.

Energy Services' portfolio of financial derivative instruments are composed of:
Six Months Ended
March 31,
(in Bcf)20222021
Net short futures contracts0.9 12.4 
 Three Months Ended
 December 31,
(in Bcf)20172016
Net short futures contracts33.4
76.4
Net long options—
0.5


During the six months ended March 31, 2022 and 2021, the net short position resulted in an unrealized gain of $1.8 million and $5.8 million, respectively.

Operating Revenues and Natural Gas Purchases


Operating revenues increased $140.8decreased $49.9 million and natural gas purchases increased $107.1$80.9 million during the three months ended DecemberMarch 31, 2017,2022, compared with the three months endedDecember March 31, 2016,2021. The decrease in operating revenues during the three months was due primarily to an approximate 29.2increased natural gas price volatility related to the extreme weather in the mid-continent and southern regions of the U.S. during February 2021, which did not reoccur to the same extent during 2022. The increase in gas purchases is due primarily to a 83.9 percent increase in the average price of natural gas prices.

Operating revenues and natural gas purchases increased $89.8 million and $185.7 million, respectively, during the six months ended March 31, 2022, compared with the six months ended March 31, 2021, due primarily to a 29.2101.2 percent increase in sales volumesnatural gas prices. To a lesser extent, operating revenues also increased $32.4 million due to AMAs with an investment grade public utility that commenced in November 2021, partially offset by the colderextreme weather in December 2017.during February 2021, as previously discussed.


Future results at Energy Services are contingent upon natural gas market price volatility driven by variations in both the supply and demand balances caused by weather and other factors. As a result, variations in weather patterns in the key market areas served may affect earnings during the fiscal year. Changes in market fundamentals, such as an increase in supply and decrease in demand due to milderwarmer temperatures, and reduced volatility can negatively impact Energy Services' earnings. See Item 2. Management's Discussion and Analysisof Financial Condition and Results of Operations - Natural Gas Distribution Segment forTetcoTETCO M-3 Daily Prices, which illustrates the daily natural gas prices in the Northeast market region.

52
Income Tax Provision

Income tax provision increased $16.9 million during the three months ended December 31, 2017, compared with the three months ended December 31, 2016, due primarily to higher income tax expense associated with the Tax Act in the amount of $9.1 million and an increase in income tax expense related to the increased operating income, partially offset by the lower effective tax rate as a result of the new tax legislation.

Net Income

Net income increased $15.9 million during the three months ended December 31, 2017, compared with the three months ended December 31, 2016, due primarily to the increase in operating income, partially offset by an increase in income tax expense, as previously discussed.
New Jersey Resources Corporation
Part I


ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (Continued)                                                                                                                                                             

Operation and Maintenance Expense

O&M expense decreased $28.4 million and $28.7 million during the three and six months ended March 31, 2022, compared with the three and six months ended March 31, 2021, due primarily to decreased compensation costs, charitable contributions and bad debt expense.

Income Tax Provision

Income tax provision decreased $23.9 million and $15.5 million during the three and six months ended March 31, 2022, compared with the three and six months ended March 31, 2021, respectively, due primarily to decreased operating income related to the increased natural gas prices, partially offset by decreased O&M.

Net (Loss) Income

Net income decreased $78.7 million and $51.8 million during the three and six months ended March 31, 2022, compared with the three and six months ended March 31, 2021, respectively, due primarily to decreased operating income, partially offset by lower income taxes, as previously discussed.

Non-GAAP Financial Measures


Management uses financial margin and NFE, non-GAAP financial measures, when evaluating the operating results of Energy Services. Financial margin and NFE are based on removing timing differences associated with certain derivative instruments, as discussed above. There is a related tax effect on current and deferred income tax expense corresponding with NFE. Also included in the tax effectinstruments. GAAP also requires us, during the three month ended December 31, 2017, are the impacts of the Tax Act and resulting revaluation of the deferred income taxes that arose from derivative and hedging activity as measured under NFE. The revaluation caused theinterim periods, to estimate our annual effective tax rate and use this rate to calculate the year-to-date tax provision. We also determine an annual estimated effective tax rate for NFE purposes and calculate a quarterly tax adjustment based on reconciling items to differ from the statutory rate in effectdifferences between our forecasted net income and our forecasted NFE for the quarter.fiscal year. This adjustment is applied to Energy Services, as the adjustment primarily relates to timing differences associated with certain derivative instruments which impacts the estimate of the annual effective tax rate for NFE. No adjustment is needed during the fourth quarter, since the actual effective tax rate is calculated at year end.


Management views these measures as representative of the overall expected economic result and uses these measures to compare Energy Services' results against established benchmarks and earnings targets as these measures eliminate the impact of volatility on GAAP earnings as a result of timing differences associated with the settlement of derivative instruments. To the extent that there are unanticipated impacts from changes in the market value related to the effectiveness of economic hedges, Energy Services' actual non-GAAP results can differ from the results anticipated at the outset of the transaction. Non-GAAP financial measures are not in accordance with, or an alternative to, GAAP and should be considered in addition to, and not as a substitute for, the comparable GAAP measure.


When Energy Services reconciles the most directly comparable GAAP measure to both financial margin and NFE, the current period unrealized gains and losses on derivatives are excluded as a reconciling item. Financial margin and NFE also exclude the effects of economic hedging of the value of our natural gas in storage and, therefore, only include realized gains and losses related to natural gas withdrawn from storage, effectively matching the full earnings effects of the derivatives with realized margins on the related physical natural gas flows. Financial margin differs from gross margin as defined on a GAAP basis as it excludes certain operations and maintenance expense and depreciation and amortization as well as the effects of derivatives as discussed above.


53
New Jersey Resources Corporation
Part I

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (Continued)                                                                                                                                                             
Financial Margin

The following table is a computation of Energy Services' financial margin:
 Three Months Ended
 December 31,
(Thousands)20172016
Operating revenues (1)
$477,981
$337,181
Less: Gas purchases446,210
339,087
Add:  
Unrealized loss on derivative instruments and related transactions33,873
30,592
Effects of economic hedging related to natural gas inventory (2)
(25,387)(17,939)
Financial margin$40,257
$10,747
(1)
Includes unrealized (gains) related to an intercompany transaction between NJNG and Energy Services that have been eliminated in consolidation of approximately $982,000 and $(2.3) million for the three months ended December 31, 2017 and 2016, respectively.
(2)Effects of hedging natural gas inventory transactions where the economic impact is realized in a future period.


A reconciliation of operating income,gross margin, the closest GAAP financial measure, to Energy Services' financial margin is as follows:
Three Months EndedSix Months Ended
March 31,March 31,
(Thousands)2022202120222021
Operating revenues (1)
$412,645 $462,569 $781,889 $692,046 
Less:
Natural gas purchases411,146 330,280 689,833 504,117 
Operation and maintenance (2)
3,978 20,924 7,247 24,608 
Depreciation and amortization32 13 60 55 
Gross margin(2,511)111,352 84,749 163,266 
Add:
Operation and maintenance (2)
3,978 20,924 7,247 24,608 
Depreciation and amortization32 13 60 55 
Unrealized loss (gain) on derivative instruments and related transactions40,446 29,348 (45,201)(9,433)
Effects of economic hedging related to natural gas inventory (3)
1,155 (7,209)24,732 (14,741)
Financial margin$43,100 $154,428 $71,587 $163,755 
 Three Months Ended
 December 31,
(Thousands)20172016
Operating income (loss)$26,120
$(7,395)
Add:  
Operation and maintenance4,420
5,018
Depreciation and amortization14
16
Other taxes1,217
455
Subtotal31,771
(1,906)
Add:  
Unrealized loss on derivative instruments and related transactions33,873
30,592
Effects of economic hedging related to natural gas inventory(25,387)(17,939)
Financial margin$40,257
$10,747
(1)Includes unrealized losses related to an intercompany transaction between NJNG and Energy Services that have been eliminated in consolidation of approximately $1.6 million and $(91,000) for the three months ended March 31, 2022 and 2021, respectively, and approximately $5.0 million and $1.2 million for the six months ended March 31, 2022 and 2021, respectively.

(2)Excludes selling, general and administrative expenses of approximately $621,000 and $12.1 million for the three months ended March 31, 2022 and 2021, respectively, and approximately $1.1 million and $12.4 million for the six months ended March 31, 2022 and 2021, respectively.
(3)Effects of hedging natural gas inventory transactions where the economic impact is realized in a future period.

Financial margin increased $29.5decreased $111.3 million and $92.2 million during the three and six months ended DecemberMarch 31, 2017,2022, compared with the three and six months ended DecemberMarch 31, 2016, due2021, respectively, resulting primarily from the price volatility related to colderthe extreme weather in December 2017, resulting inthe mid-continent and southern regions of the U.S. during February 2021, which did not reoccur to the same extent during 2022 and increased storage withdrawals due to higher demand coupled with higher volatility allowing Energy Services to capture additional margin from natural gas price spreads.prices, partially offset by the AMAs, which commenced November 2021, as previously discussed.
New Jersey Resources Corporation
Part I

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (Continued)


Net Financial Earnings


A reconciliation of Energy Services' net income, the most directly comparable GAAP financial measure, to NFE is as follows:
Three Months EndedSix Months Ended
March 31,March 31,
(Thousands)2022202120222021
Net (loss) income$(3,031)$75,662 $62,713 $114,534 
Add:
Unrealized loss (gain) on derivative instruments and related transactions40,446 29,348 (45,201)(9,433)
Tax effect (1)
(9,604)(6,976)10,753 2,243 
Effects of economic hedging related to natural gas inventory1,155 (7,209)24,732 (14,741)
Tax effect(274)1,713 (5,877)3,503 
Net income to NFE tax adjustment1,248 3,990 387 1,922 
Net financial earnings$29,940 $96,528 $47,507 $98,028 
(1)Includes taxes related to an intercompany transaction between NJNG and Energy Services that have been eliminated in consolidation of approximately $(375,000) and $23,000 for the three months ended March 31, 2022 and 2021, respectively, and $(1.2) million and $(284,000) for the six months ended March 31, 2022 and 2021, respectively.

54
New Jersey Resources Corporation
Part I

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (Continued)                                                                                                                                                             
 Three Months Ended
 December 31,
(Thousands)20172016
Net income (loss)$11,120
$(4,790)
Add:  
Unrealized loss on derivative instruments and related transactions33,873
30,592
Tax effect (1)
(7,576)(10,580)
Effects of economic hedging related to natural gas inventory(25,387)(17,939)
Tax effect8,244
6,204
Net financial earnings$20,274
$3,487
(1)
Includes taxes related to an intercompany transaction between NJNG and Energy Services that have been eliminated in consolidation of approximately $(483,000) and $823,000 for the three months ended December 31, 2017 and 2016, respectively.

NFE increased $16.8decreased $66.6 million and $50.5 million during the three and six months ended DecemberMarch 31, 2017,2022, compared with the three and six months ended DecemberMarch 31, 2016,2021, respectively, due primarily to higherlower financial margin, partially offset by an an income tax expense of $9.1 million associated with the Tax Act, as previously discussed.


Future results are subject to Energy Services' ability to expand its wholesale sales and service activities and are contingent upon many other factors, including an adequate number of appropriate and credit qualified counterparties in an active and liquid natural marketplace, volatility in the natural gas market due to weather or other fundamental market factors impacting supply and/or demand, transportation, storage and/or other market arbitrage opportunities, sufficient liquidity in the overall energy trading market, and continued access to liquidity in the capital markets.


MidstreamStorage and Transportation Segment


Overview


Our MidstreamStorage and Transportation segment invests in natural gas assets, such as natural gas transportation and storage facilities. We believe that acquiring, owning and developing these midstreamstorage and transportation assets, which operate under a tariff structure that has either regulatedcost- or market-based rates, can provide us a growth opportunity. ToOur Storage and Transportation segment is subject to various risks, including the construction, development and operation of our transportation and storage assets, obtaining necessary governmental, environmental and regulatory approvals, our ability to obtain necessary property rights and our ability to obtain financing at reasonable costs for the construction, operation and maintenance of our assets. In addition, our storage and transportation assets may be subject to risk associated with the COVID-19 pandemic, such as disruption to the supply chain and availability of critical equipment and supplies, disruptions to the availability of our specialized workforce and contractors and changes to demand for natural gas, transportation and other downstream activities.

Our Storage and Transportation segment is comprised of Leaf River, a 32.2 million Dth salt dome natural gas storage facility that end,operates under market-based rates and Adelphia Gateway, an existing 84-mile pipeline in southeastern Pennsylvania. Adelphia Gateway operates under cost of service rates but can enter into negotiated rates with counterparties. The northern portion of the pipeline was operational upon acquisition and it currently serves two natural gas generation facilities. On October 5, 2020, we havebegan the conversion of the southern zone of the pipeline to natural gas.

Our Storage and Transportation segment also has a 50 percent ownership interest in Steckman Ridge, a storage facility that operates under market-based rates and a 20 percent ownership interest in PennEast, a partnership whose purpose was to construct and operate a 120-mile natural gas pipeline which is estimatedthat would have extended from northeast Pennsylvania to be completed and operational in 2019. western New Jersey.

PennEast may revise the project timeline further since thereceived a Certificate of Public Convenience and Necessity for the project from FERC in January 2018. However, because of numerous regulatory and legal challenges, we evaluated our equity investment in PennEast for impairment during fiscal 2021, and determined that it was received on January 19, 2018. As of December 31, 2017, our net investments in Steckman Ridge and PennEast were $119.4 million and $60 million, respectively.

Operating Results

The financial resultsother-than-temporarily impaired. We estimated the fair value of our Midstream segmentinvestment in PennEast using probability weighted scenarios assigned to discounted future cash flows. The impairment was the result of management's estimates and assumptions regarding the likelihood of certain outcomes related to required regulatory approvals and pending legal matters, the timing and magnitude of construction costs and in-service dates, the evaluation of the current environmental and political climate as it relates to interstate pipeline development, and transportation capacity revenues and discount rates.

During the third quarter of fiscal 2021, the PennEast partnership determined that this project is no longer supported, and all further development ceased. The Company recognized an other-than-temporary impairment charge of $92.0 million, or approximately $74.5 million, net of income taxes, which represents the best estimate of the salvage value of the remaining assets of the project. Other-than-temporary impairments are summarized as follows:recorded in equity in (losses) earnings from affiliates in the Unaudited Condensed Consolidated Statements of Operations.

On December 16, 2021, the FERC dismissed PennEast’s pending applications. The order vacates the certificate authorization for the PennEast pipeline project in light of PennEast’s response to FERC staff’s November 23, 2021 request for a status update, in which PennEast informed the Commission it is no longer developing the project. The order vacates the certificate authorization, subject to leave of the U.S. Court of Appeals for the D.C. Circuit where the Commission’s certificate and rehearing orders are under review.

55
 Three Months Ended
 December 31,
(Thousands)20172016
Equity in earnings of affiliates$4,129
$3,331
Operation and maintenance$372
$149
Other income, net$1,221
$917
Interest expense, net$309
$56
Income tax provision$(12,843)$1,649
Net income$17,511
$2,387
New Jersey Resources Corporation
Part I


ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (Continued)                                                                                                                                                             

On March 10, 2022, following the sale of certain project related assets and refunds of interconnection fees received from interstate pipelines, the PennEast board of managers approved a cash distribution to members of the partnership totaling $4.0 million per partner. The distribution was received by the Company on March 31, 2022.

As of March 31, 2022, our investments in Steckman Ridge and PennEast were $108.5 million and $1.5 million, respectively.

Operating Results

The financial results of our Storage and Transportation segment are summarized as follows:
Three Months EndedSix Months Ended
March 31,March 31,
(Thousands)2022202120222021
Operating revenues (1)
$13,342 $13,926 $25,485 $27,030 
Operating expenses
Natural gas purchases337 238 1,041 471 
Operation and maintenance7,254 7,139 14,684 13,681 
Depreciation and amortization2,571 2,364 4,704 5,004 
Total operating expenses10,162 9,741 20,429 19,156 
Operating income3,180 4,185 5,056 7,874 
Other income, net2,750 1,591 5,259 2,845 
Interest expense, net1,847 3,578 3,983 7,560 
Income tax provision714 873 1,057 1,519 
Equity in earnings of affiliates1,256 3,386 2,312 6,579 
Net income$4,625 $4,711 $7,587 $8,219 
(1)Includes related party transactions of approximately $536,000 and $669,000 for the three months ended March 31, 2022 and 2021, respectively, and $1.1 million and $1.3 million for the six months ended March 31, 2022 and 2021, respectively, which are eliminated in consolidation.

Operating Revenues

Operating revenues decreased $584,000 and $1.5 million during the three and six months ended March 31, 2022, compared with the three and six months ended March 31, 2021, respectively, due primarily to a decrease in hub services revenue at Leaf River.

Equity in earnings of affiliates decreased $2.1 million and $4.3 million during the three and six months ended March 31, 2022, compared with the three and six months ended March 31, 2021, respectively, due primarily to decreased AFUDC equity related to our investment in PennEast, which ceased all further development.

Other Income, Net

Other income increased $798,000$1.2 million and $2.4 million during the three and six months ended March 31, 2022, compared with the three and six months ended March 31, 2021, respectively, due primarily to increased AFUDC equity related to the Adelphia Gateway project.

Interest Expense

Interest expense decreased $1.7 million and $3.6 million during the three and six months ended March 31, 2022, compared with the three and six months ended March 31, 2021, respectively, due primarily to reduced debt related to the PennEast project.

Net Income

Net income remained relatively flat during the three months ended DecemberMarch 31, 2017,2022, compared with the three months ended DecemberMarch 31, 2016,2021. Net income decreased $632,000 during the six months ended March 31, 2022, compared with the six months ended March 31, 2021, due primarily to the AFUDC earned at PennEast.

Income tax benefit increased $14.5 million during the three months ended December 31, 2017, compared with the three months ended December 31, 2016, due primarily to an adjustment of $14 million associated with the Tax Act.

Net income increased $15.1 million during the three months ended December 31, 2017, compared with the three months ended December 31, 2016, due primarily to increased income tax benefit, as well as the increasedlower equity in earnings of affiliates, partially offset by higher AFUDC equity at Adelphia Gateway along with decreased interest expense, as previously discussed.


Home Services and Other Operations

56
New Jersey Resources Corporation
Part I

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (Continued)                                                                                                                                                             

Overview


The financial results of Home Services and Other consist primarily of the operating results of NJRHS and CR&R.NJRHS. NJRHS provides service, sales and installation of appliances to approximately 112,000 service contract customers and has been focused on growing its installation business and expanding its service contract customer base. Home Services and Other also includes organizational expenses incurred at NJR. NJR Energy Corporation, a subsidiary of CR&R, which invested in other energy-related ventures, was dissolved on November 28, 2016, and all assets were moved to CR&R during the first quarter of fiscal 2017.home warranty contract income at NJR Retail.


Operating Results


The consolidatedcondensed financial results of Home Services and Other are summarized as follows:
Three Months EndedSix Months Ended
March 31,March 31,
(Thousands)2022202120222021
Operating revenues$13,222 $12,773 $27,173 $25,350 
Income before income taxes$707 $688 $1,400 $744 
Income tax provision (benefit)256 (59)502 59 
Net income$451 $747 $898 $685 
 Three Months Ended
 December 31,
(Thousands)20172016
Operating revenues$9,957
$10,006
Operation and maintenance$10,179
$10,164
Energy and other taxes$1,120
$1,076
Other income, net$5,603
$2,827
Income tax provision (benefit)$11,698
$(245)
Net (loss) income$(7,716)$1,542


Operating Revenues
Other income, net
Operating revenues increased $2.8$449,000 and $1.8 million during the three and six months ended March 31, 2022, compared with the three and six months ended March 31, 2021, respectively, due primarily to the sale of available for sale securities, which resulted in a pre-tax gain of $5.3 millionincreased installation revenue at NJRHS.

Net Income

Net income decreased $296,000 during the three months ended DecemberMarch 31, 2017, compared with $2.6 million during the three months ended December 31, 2016.

Income tax provision increased $11.9 million during the three months ended December 31, 2017,2022, compared with the three months ended DecemberMarch 31, 2016, due primarily to an adjustment of $10 millionassociated with the Tax Act, as well as taxes related to the increased other income, as previously discussed.

Net income decreased $9.3 million during the three months ended December 31, 2017, compared with the three months ended December 31, 2016,2021, due primarily to increased income tax provision,O&M, partially offset by the increase inincreased revenue and other income as previously discussed.along with decreased interest expense. Net income increased $213,000 during the six months ended March 31, 2022, compared with the six months ended March 31, 2021, respectively, due primarily to increased revenue and other income along with decreased interest expense, partially offset by increased O&M.


Liquidity and Capital Resources


Our objective is to maintain an efficient consolidated capital structure that reflects the different characteristics of each businessreporting segment and business operations and provides adequate financial flexibility for accessing capital markets as required.


Our consolidated capital structure was as follows:
March 31, 2022September 30,
2021
Common stock equity40 %38 %
Long-term debt52 51 
Short-term debt8 11 
Total100 %100 %


57
 December 31,
2017		September 30,
2017
Common stock equity47%46%
Long-term debt35
38
Short-term debt18
16
Total100%100%
New Jersey Resources Corporation
Part I


ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (Continued)                                                                                                                                                             

Common Stock Equity


We satisfy our external common equity requirements, if any, through issuances of our common stock, including the proceeds from stock issuances under our DRP. The DRP allows us, at our option, to use treasury shares or newly issued shares to raise capital. WeNJR raised $3.8approximately $3.7 million and $4.6$3.6 million of equity through the DRP by issuing approximately 90,000 and 139,000 shares of treasury stock, during the three months ended DecemberMarch 31, 20172022 and 2016,2021, respectively. During the three months ended December 31, 2017, NJR also raised approximately $22.7$7.5 million of equity by issuing approximately 554,000 new shares through the waiver discount featureDRP during both of the DRP. No new shares were issued during the threesix months ended DecemberMarch 31, 2016.2022 and 2021.


In March 2021, we cash settled a portion of a forward sale agreement for a payout of approximately $388,000 for 727,272 common shares.

In 1996, the Board of Directors authorized us to implement a share repurchase program, which was expanded seven times since the inception of the program, authorizing a total of 19.5 million shares of common stock for repurchase. As of DecemberMarch 31, 2017,2022, we had repurchased a total of approximately 17.117.8 million of those shares and may repurchase an additional 2.41.7 million shares under the approved program. There were no shares repurchased during the threesix months ended DecemberMarch 31, 20172022 and 105,000 shares repurchased during the three months ended December 31, 2016.2021.


Debt


NJR and its unregulated subsidiaries generally rely on cash flows generated from operating activities and the utilization of committed credit facilities to provide liquidity to meet working capital and short-term debt financing requirements. NJNG also relies on the issuance of commercial paper for short-term funding. NJR and NJNG, as borrowers, respectively, periodically access the capital markets to fund long-life assets through the issuance of long-term debt securities.


We believe that our existing borrowing availability, equity proceeds and cash flowflows from operations will be sufficient to satisfy our and our subsidiaries' working capital, capital expenditures and dividend requirements for at least the next 12 months. NJR, NJNG, Clean Energy Ventures, Storage and Transportation and Energy Services currently anticipate that each of their financing requirements for the next 12 months will be met primarily through the issuance of short and long-term debt sale-leasebacks and proceeds from our DRP, including utilizing the waiver discount feature.meter or solar asset sale leasebacks.


We believe that as of DecemberMarch 31, 2017,2022, NJR and NJNG were, and currently are, in compliance with all existing debt covenants, both financial and non-financial.


As a result of the COVID-19 pandemic there have been disruptions, uncertainty and volatility in the credit and capital markets. We have been able to obtain sufficient financing to meet its funding requirements for operations and capital expenditures, however, our ability to access funds from financial institutions at a reasonable cost may impact the nature and timing of future capital market transactions.

Short-Term Debt


We use our short-term borrowings primarily to finance Energy Services' short-term liquidity needs, Midstream segment's PennEast contributions,Storage and Transportation investments, share repurchases and, on an initial basis, Clean Energy Ventures' investments. Energy Services' use of high volumehigh-volume storage facilities and anticipated pipeline park-and-loan arrangements, combined with related economic hedging activities in the volatile wholesale natural gas market, create significant short-term cash requirements.


As of DecemberMarch 31, 2017,2022, NJR had a revolving credit facilitiesfacility and a term loan totaling $500$650 million, with $161.8$334.3 million available under the facilities.facility.


NJNG satisfies its debt needs by issuing short-short-term and long-term debt based on its financial profile. The seasonal nature of NJNG's operations creates large short-term cash requirements, primarily to finance natural gas purchases and customer accounts receivable. NJNG obtains working capital for these requirements, and for the temporary financing of construction and MGP remediation expenditures and energy tax payments, based on its financial profile, through the issuance of commercial paper supported by the NJNG Credit Facility or through short-term bank loans under the NJNG Credit Facility.

58
New Jersey Resources Corporation
Part I

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (Continued)                                                                                                                                                             
NJNG’s commercial paper is sold through several commercial banks under an issuing and paying agency agreement and is supported by the $250 million NJNG Credit Facility. As of DecemberMarch 31, 2017,2022, the unused amount available under the NJNG Credit Facility, including amounts allocated to the backstop under the commercial paper program and the issuance of letters of credit, was $203.3$249.3 million.

New Jersey Resources Corporation
Part I

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (Continued)


Short-term borrowings were as follows:
Three Months EndedSix Months Ended
(Thousands)March 31, 2022
NJR
Notes Payable to banks:
Balance at end of period$302,210 $302,210 
Weighted average interest rate at end of period1.05 %1.05 %
Average balance for the period$385,205 $320,130 
Weighted average interest rate for average balance1.23 %1.01 %
Month end maximum for the period$401,750 $401,750 
NJNG
Commercial Paper and Notes Payable to banks:
Balance at end of period$— $— 
Weighted average interest rate at end of period— %— %
Average balance for the period$3,309 $5,842 
Weighted average interest rate for average balance0.58 %0.43 %
Month end maximum for the period$138,025 $177,700 
 Three Months Ended
(Thousands)December 31, 2017
NJR 
Notes Payable to banks: 
Balance at end of period$327,200
Weighted average interest rate at end of period2.26%
Average balance for the period$299,868
Weighted average interest rate for average balance2.19%
Month end maximum for the period$330,900
NJNG 
Commercial Paper and Notes Payable to banks: 
Balance at end of period$46,000
Weighted average interest rate at end of period1.33%
Average balance for the period$40,114
Weighted average interest rate for average balance1.21%
Month end maximum for the period$51,000


Due to the seasonal nature of natural gas prices and demand, and because inventory levels are built up during its natural gas injection season (April through October), NJR and NJNG's short-term borrowings tend to peak in the November and December.through January time frame.


NJR


As noted above, basedBased on its average borrowings during the three and six months ended DecemberMarch 31, 2017,2022, NJR's average interest rate was 2.191.23 percent and 1.01 percent, resulting in interest expense of $1.7approximately $794,000 and $1.6 million, respectively.

During fiscal 2021, NJR entered into a Second Amended and Restated Credit Agreement governing a $500 million NJR Credit Facility. The NJR Credit Facility expires on September 2, 2026, subject to two mutual options for a one-year extension beyond that date. The NJR Credit Facility permits the borrowing of revolving loans and swingline loans, as well as a $75 million sublimit for the issuance of letters of credit. The NJR Credit Facility also includes an accordion feature, which would allow NJR, in the absence of a default or event of default, to increase from time to time, with the existing or new lenders, the revolving credit commitments under the NJR Credit Facility in increments of $50 million up to a maximum of $250 million.

Certain of NJR’s unregulated subsidiaries have guaranteed all of NJR’s obligations under the NJR Credit Facility. The credit facility is used primarily to finance its share repurchases, to satisfy Energy Services’ short-term liquidity needs and to finance, on an initial basis, unregulated investments. As of DecemberMarch 31, 2017,2022, NJR had sevennine letters of credit outstanding totaling $11$13.5 million, which reduced the amount available under the NJR Credit Facility by the same amount. NJR does not anticipate that these letters of credit will be drawn upon by the counterparties.


On December 14, 2017,February 8, 2022, NJR entered into a four-month $75364-day $150 million revolving line ofterm loan credit facility,agreement with an interest rate based on SOFR plus 0.85 percent, which will expireexpires on AprilFebruary 7, 2023. The Company borrowed $50 million on February 9, 2022 and $100 million on February 14, 2018. Borrowings may be requested in amounts of at least $1 million and in $500,000 increments above such minimum and may be prepaid at any time without premium or penalty other than normal LIBOR break funding costs. The commitment fees rate for the unused portion may range from 0.075 percent to 0.2 percent, depending on NJR’s credit rating. Proceeds will be used for working capital or other general business purposes of NJR. As of December 31, 2017, there were no borrowings against the facility. On January 19, 2018, NJR amended the agreement to increase the available amount to $100 million. All of the other terms and conditions remain unchanged.2022.


Neither NJNG nor its assets are obligated or pledged to support the NJR Credit Facility.Facility or term loan credit agreement.



59
New Jersey Resources Corporation
Part I

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (Continued)                                                                                                                                                             
NJNG


NJNG had no outstanding short-termAs noted above, based on its average borrowings during the three and six months ended DecemberMarch 31, 2017.2022, NJNG's average interest rate was 0.58 percent and 0.43 percent, resulting in interest expense of approximately $27,000 and $159,000, respectively.


During fiscal 2021, NJNG entered into a Second Amended and Restated Credit Agreement governing a $250 million, NJNG Credit Facility. The NJNG Credit Facility expires on September 2, 2026, subject to two mutual options for a one-year extension beyond that date. The NJNG Credit Facility permits the borrowing of revolving loans and swingline loans, as well as a $30 million sublimit for the issuance of letters of credit. The NJNG Credit Facility also includes an accordion feature, which would allow NJNG, in the absence of a default or event of default, to increase from time to time, with the existing or new lenders, the revolving credit commitments under the NJNG Credit Facility in minimum increments of $50 million up to a maximum of $100 million.

As of DecemberMarch 31, 2017,2022, NJNG had two letters of credit outstanding for $731,000, which reduced the amount available under NJNG's committed credit facility by the same amount. NJNG does not anticipate that these letters of credit will be drawn upon by the counterparties.


New Jersey Resources Corporation
Part I

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (Continued)

Short-Term Debt Covenants


Borrowings under the NJR Credit Facility, term loan credit agreement and the NJNG Credit Facility are conditioned upon compliance with a maximum leverage ratio (consolidated total indebtedness to consolidated total capitalization as defined in the applicable agreements), of not more than .70 to 1.00 for NJR and .65 to 1.00 at any time.for NJNG. These revolving credit facilities and term loan credit agreement contain customary representations and warranties for transactions of this type. They also contain customary events of default and certain covenants that will limit NJR's or NJNG's ability, beyond agreed upon thresholds, to, among other things:


•incur additional debt;

•incur liens and encumbrances;

•make dispositions of assets;

•enter into transactions with affiliates; and

•merge, consolidate, transfer, sell or lease all or substantially all of the borrower's or guarantors' assets.


These covenants are subject to a number of exceptions and qualifications set forth in the applicable agreements.


Default Provisions


The agreements governing our long-term and short-term debt obligations include provisions that, if not complied with, could require early payment or similar actions. Default events include, but are not limited to, the following:


•defaults for non-payment;

•defaults for breach of representations and warranties;

•defaults for insolvency;

•defaults for non-performance of covenants;

•cross-defaults to other debt obligations of the borrower; and

•guarantor defaults.


The occurrence of an event of default under these agreements could result in all loans and other obligations of the borrower becoming immediately due and payable and the termination of the credit facilities or term loan.



60
New Jersey Resources Corporation
Part I

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (Continued)                                                                                                                                                             
Long-Term Debt


NJR


As of DecemberMarch 31, 2017,2022, NJR hashad the following outstanding:


•$25 million of 2.51 percent senior notes due September 15, 2018;

•$100 million variable rate term loan due August 16, 2019;

•$50 million of 3.25 percent senior notes due September 17, 2022;

•$50 million of 3.23.20 percent senior notes due August 18, 2023;

•$100 million of 3.48 percent senior notes due November 7, 2024; and

•$100 million of 3.54 percent senior notes due August 18, 2026.2026;

•$100 million of 3.96 percent senior notes due June 8, 2028;
•$150 million of 3.29 percent senior notes due July 17, 2029;
•$130 million of 3.50 percent senior notes due July 23, 2030;
•$120 million of 3.13 percent senior notes due September 1, 2031;
•$130 million of 3.60 percent senior notes due July 23, 2032; and
•$80 million of 3.25 percent senior notes due September 1, 2033.

On February 16, 2022, NJR signed a commitment letter with a financial institution to refinance $50 million of its Senior Unsecured Notes that are currently scheduled to mature in September 2022, over a 12-year term with an interest rate of 3.64 percent maturing in September 2034.

Neither NJNG nor its assets are obligated or pledged to support NJR's long-term debt.

On January 26, 2018, NJR entered into a variable-for-fixed interest rate swap on NJR's existing $100 million variable rate term loan due August 16, 2019, which fixed the variable rate at 2.84 percent.
New Jersey Resources Corporation
Part I

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (Continued)


NJNG


As of DecemberMarch 31, 2017,2022, NJNG's long-term debt consisted of $575 million$1.2 billion in fixed-rate debt issuances secured by the Mortgage Indenture, with maturities ranging from 20182024 to 2046, $972061, and $27.0 million in secured variable rate debt with maturities ranging from 2027 to 2041 and $33.5 million in capitalfinance leases with various maturities ranging from 20182024 to 2025.2028.


On October 28, 2021, NJNG entered into a Note Purchase Agreement for $100 million of its senior notes, of which $50 million were issued at an interest rate of 2.97 percent, maturing in 2051, and $50 million were issued at an interest rate of 3.07 percent, maturing in 2061. The senior notes are secured by an equal principal amount of NJNG’s FMBs issued under NJNG’s Mortgage Indenture.

NJR is not obligated directly or contingently with respect to the NJNG notes or the FMBs.NJNG’s fixed-rate debt issuances.


Long-Term Debt Covenants and Default Provisions


The NJR and NJNG long-term debt instruments contain customary representations and warranties for transactions of their type. They also contain customary events of default and certain covenants that will limit NJR or NJNG's ability beyond agreed upon thresholds to, among other things:


•incur additional debt (including a covenant that limits the amount of consolidated total debt of the borrower at the end of a fiscal quarter to 70 percent for NJR and 65 percent for NJNG of the consolidated total capitalization of the borrower, as those terms are defined in the applicable agreements, and a covenant limiting priority debt to 20 percent of the borrower's consolidated total capitalization, as those terms are defined in the applicable agreements);

•incur liens and encumbrances;

•make loans and investments;

•make dispositions of assets;

•make dividends or restricted payments;

•enter into transactions with affiliates; and

•merge, consolidate, transfer, sell or lease substantially all of the borrower's assets.


The aforementioned covenants are subject to a number of exceptions and qualifications set forth in the applicable note purchase agreements.



61
New Jersey Resources Corporation
Part I

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (Continued)                                                                                                                                                             
In addition, the FMBs issued by NJNG under the Mortgage Indenture are subject to certain default provisions. Events of Default, as defined in the Mortgage Indenture, consist mainly of:


•failure for 30 days to pay interest when due;

•failure to pay principal or premium when due and payable;

•failure to make sinking fund payments when due;

•failure to comply with any other covenants of the Mortgage Indenture after 30 days' written notice from the Trustee;

•failure to pay or provide for judgments in excess of $30 million in aggregate amount within 60 days of the entry thereof; or

•certain events that are or could be the basis of a bankruptcy, reorganization, insolvency or receivership proceeding.


Upon the occurrence and continuance of such an Event of Default, the Mortgage Indenture, subject to any provisions of law applicable thereto, provides that the Trustee may take possession and conduct the business of NJNG, may sell the trust estate, or proceed to foreclose the lien pursuant toof the Mortgage Indenture. The interest rate on defaulted principal and interest, to the extent permitted by law, on the FMBs issued under the Mortgage Indenture is the rate stated in the applicable supplement or, if no such rate is stated, six percent per annum.


New Jersey Resources CorporationSale Leaseback
Part I

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (Continued)

Sale-Leaseback


NJNG


NJNG received $7.8$17.3 million and $9.6 million in December 2017 and 2016, respectively,during the six months ended March 31, 2022, in connection with the sale-leasebacksale leaseback of its natural gas meters. NJNG exercised earlyrecords a financing lease obligation that is paid over the term of the lease and has the option to purchase options with respect to meter leases by making final principal paymentsthe meters back at fair value upon expiration of $1.1 million and $1 million during the three months ended December 31, 2017 and 2016, respectively.lease. NJNG continues to evaluate this sale-leasebacksale leaseback program based on current market conditions. Natural gas meters are excepted from the lien on NJNG property under the Mortgage Indenture. There were no natural gas meter sale leasebacks recorded during the six months ended March 31, 2021.


Clean Energy Ventures


During September 2017, Clean Energy Ventures enteredenters into transactions to sell two of itsthe commercial solar assets concurrent with agreements to lease the assets back over seven year periods.a period of five to 15 years. These sale-leasebackstransactions are considered failed sale leasebacks for accounting purposes and are therefore treated as financing obligations, which are typically secured by the solar assetsrenewable energy facility asset and relatedits future cash flows from SRECRECs and energy sales. ITCs and other tax benefits associated with these solar projects wereare transferred to the buyer.buyer, if applicable; however, the lease payments are structured so that Clean Energy Ventures will continueis compensated for the transfer of the related tax incentives. Clean Energy Ventures continues to operate the solar projectsassets, including related expenses, and retain ownership of SRECsthe revenue generated from RECs and energy sales, and has the option to renew the lease or repurchase the assets sold at the end of the lease term. There were no solar sale-leasebacks duringDuring the threesix months ended December March 31, 20172022 and 2016.2021, Clean Energy Ventures expects to utilize sale-leaseback arrangements, based on market conditions, as an option to finance itsreceived proceeds of $3.3 million and $12.1 million, respectively, in connection with the sale leaseback of commercial solar projects in fiscal 2018.projects. The proceeds received were recognized as a financing obligation on the Unaudited Condensed Consolidated Balance Sheets.


Contractual Obligations


NJNG's total capital expenditures are projected to be $421.4 million and $235.2 million, in fiscal 2018 and 2019, respectively. Total capital expenditures spent or accrued during the three months ended December 31, 2017 were $39.9 million. NJNG expects to fund its obligations with a combination of cash flow from operations, cash on hand, issuance of commercial paper, available capacity under its revolving credit facility and the issuance of long-term debt. As of DecemberMarch 31, 2017, NJNG's future MGP expenditures are estimated to be $144 million. For a more detailed description2022, there were NJR guarantees covering approximately $215.4 million of MGP expenditures see Note 12. Commitmentsnatural gas purchases and Contingent LiabilitiesEnergy Services demand fee commitments and eleven outstanding letters of credit totaling $14.2 million, as previously mentioned, not yet reflected in accounts payable on the accompanying Unaudited Condensed Consolidated Financial Statements.Balance Sheets.


Estimated capital expenditures are reviewed on a regular basis and may vary based on the ongoing effects of regulatory constraints, environmental regulations, unforeseen events, and the ability to access capital.


NJNG's total capital expenditures are projected to be between $285 million and $335 million during fiscal 2022. Total capital expenditures spent or accrued during the six months ended March 31, 2022, were $119.3 million. NJNG expects to fund its obligations with a combination of cash flows from operations, cash on hand, issuance of commercial paper, available capacity under its revolving credit facility and the issuance of long-term debt. As of March 31, 2022, NJNG's future MGP expenditures are estimated to be $121.6 million. For a more detailed description of MGP expenditures see Note 13. Commitments and Contingent Liabilities in the accompanying Unaudited Condensed Consolidated Financial Statements.

62
New Jersey Resources Corporation
Part I

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (Continued)                                                                                                                                                             
During the six months ended March 31, 2022, our Storage and Transportation segment had capital expenditures spent or accrued for the Adelphia Gateway project totaling $88.5 million and capital expenditures spent or accrued for Leaf River totaling $10.2 million. During fiscal 2022, we expect expenditures related to the Adelphia Gateway project to be between $115 million and $130 million and expenditures related to Leaf River to be between $7 million and $11 million.

During the six months ended March 31, 2022, total capital expenditures spent or accrued related to the purchase and installation of solar equipment were $67.7 million. Clean Energy Ventures' expenditures include clean energy projects that support our goal to promote renewable energy. Accordingly, Clean Energy Ventures enters into agreements to install solar equipment involving both residential and commercial projects. During the three months ended December 31, 2017, capital expenditures related to the purchase and installation of solar equipment were $18.3 million. An additional $65.9 million has been committed for solar projects to be placed into service during fiscal 2018 and beyond. We estimate solar-related capital expenditures for projects during fiscal 20182022 to be between $132$139 million and $140$157 million.

During the first quarter of fiscal 2017, Clean Energy Ventures completed construction of a $89 million, 39.9 MW onshore wind project in Somerset County, Pennsylvania.


Capital expenditures related to clean energy projects are subject to change due to a variety of factors that may affect our ability to commence operations at these projects on a timely basis or at all, including sourcing projects that meet our investment criteria, logistics associated with the start-up of residential and commercial solar projects, such as timing of construction schedules, the permitting and regulatory process, any delays related to electric grid interconnection, economic trends or unforeseen events and the ability to access capital or allocation of capital to other investments or business opportunities.

During the three months ended December 31, 2017, capital expenditures related to our investment in the PennEast pipeline project were $7.2 million. We estimate expenditures to be between $240 million and $280 million in fiscal 2018.


Energy Services does not currently anticipate any significant capital expenditures during fiscal 2022 and 2023.

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. The utility provides certain asset management services and Energy Services may deliver natural gas to the utility in exchange for aggregate net proceeds of approximately $500 million, payable through November 1, 2030. The AMAs include a series of initial and permanent releases, which commenced on November 1, 2021. NJR will receive approximately $260 million in cash from fiscal 20182022 through fiscal 2024 and 2019.$34 million per year from fiscal 2025 through fiscal 2031 under the agreements. During the six months ended March 31, 2022, Energy Services recognized $32.4 million of operating revenue on the Unaudited Condensed Consolidated Statements of Operations. Amounts received in excess of revenue totaling $54.4 million as of March 31, 2022, are included in deferred revenue on the Unaudited Condensed Consolidated Balance Sheets.


More detailed information regarding contractual obligations is contained in Liquidity and Capital Resources - Contractual Obligations section of Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations of our Annual Report on Form 10-K for the period ended September 30, 2017.2021.

Off-Balance-Sheet Arrangements

Our off-balance-sheet arrangements consist of guarantees covering approximately $335.6 million of natural gas purchases, SREC sales and demand fee commitments and outstanding letters of credit totaling $11.7 million.
New Jersey Resources Corporation
Part I

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (Continued)

Cash Flows


Operating Activities


Cash flows used infrom operating activities during the threesix months ended DecemberMarch 31, 2017,2022, totaled $23.5$330.5 million, compared with $46.1$356.3 million during the threesix months ended DecemberMarch 31, 2016.2021. Operating cash flows are primarily affected by variations in working capital, which can be impacted by several factors, including:


•seasonality of our business;


•fluctuations in wholesale natural gas prices and other energy prices, including changes in derivative asset and liability values;


•timing of storage injections and withdrawals;


•the deferral and recovery of natural gas costs;


•changes in contractual assets utilized to optimize margins related to natural gas transactions;


•broker margin requirements;


•impact of unusual weather patterns on our wholesale business;


•timing of the collections of receivables and payments of current liabilities;


•volumes of natural gas purchased and sold; and


•timing of SREC deliveries.


63
New Jersey Resources Corporation
Part I

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (Continued)                                                                                                                                                             
The increasedecrease of $22.6$25.8 million in operating cash flows during the threesix months ended DecemberMarch 31, 2017,2022, compared with the threesix months ended DecemberMarch 31, 2016,2021, was due primarily to increased earningsoutsized performance at Energy Services resulting from the volatility in December 2017 due to the colder weather,during February 2021 that did not reoccur during fiscal 2022, partially offset by an increase in working capital requirements.the AMAs, which commenced November 2021, as previously discussed.


Investing Activities


Cash flows used in investing activities totaled $76.9$296.8 million during the threesix months ended DecemberMarch 31, 2017,2022, compared with $86.5$245.5 million during the threesix months ended DecemberMarch 31, 2016.2021. The decreaseincrease of $9.6$51.3 million was due primarily to a decreasean increase in solarcapital expenditures for Storage and Transportation related to the conversion of $28.4 million,the southern portion of Adelphia Gateway's pipeline to natural gas along with an increase of $3.4 million in proceeds from the sale of available for sale securities,increased solar expenditures, partially offset by an increase in expenditures of $8.5 million and $2.6 million for itsdecreased utility plant and investment in PennEast, respectively.expenditures.


Financing Activities


Financing cash flows generally are seasonal in nature and are impacted by the volatility in pricing in the natural gas and other energy markets. NJNG's inventory levels are built up during its natural gas injection season (April through October) and reduced during withdrawal season (November through March) in response to the supply requirements of its customers. Changes in financing cash flows can also be impacted by natural gas management and marketing activities at Energy Services and clean energy investments at Clean Energy Ventures.


Cash flows fromused in financing activities totaled $102.9$24.5 million during the threesix months ended DecemberMarch 31, 2017,2022, compared with $141.9$171.2 million during the threesix months ended DecemberMarch 31, 2016.2021. The decrease of $39$146.8 million is due primarily to decreased short-term borrowings,the new $150 million term loans at NJR, the $100 million issuance of long-term debt at NJNG, along with proceeds of $17.3 million for meter sale leasebacks at NJNG, partially offset by the issuanceincreased payments of common stock through the waiver discount feature of the DRP.short-term debt at NJNG and lower proceeds from solar sale leasebacks at Clean Energy Ventures.

New Jersey Resources Corporation
Part I

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (Continued)


Credit Ratings


The table below summarizes NJNG's credit ratings as of DecemberMarch 31, 2017,2022, issued by two rating entities, S&PMoody's and Moody's:
Fitch:
Standard and Poor'sMoody'sMoody'sFitch
Corporate RatingN/AN/AA-
Commercial PaperA-1P-2P-1F-2
Senior SecuredA+A1Aa2A+
Ratings OutlookStableStable


TheseFitch ratings and outlook were reaffirmed by S&P on October 26, 2017and by Moody’sApril 14, 2022. The Moody's ratings and outlook were reaffirmed on October 4, 2017.May 11, 2021. NJNG's S&PMoody's and Moody'sFitch ratings are investment-grade ratings. NJR is not a rated entity.

On January 19, 2018, Moody’s notified NJNG that it was among 24 companies whose ratings outlook was being lowered to negative from stable. This change reflects Moody’s view that tax reform is credit negative for regulated utilities due to reduced cash collected from customers, while the loss of bonus deprecation reduces tax deferrals. The negative outlook also considers the uncertainty over timing of any regulatory actions or changes to corporate finance polices made to offset the financial impact. This action does not currently affect any of NJNG’s short or long term borrowing rates.


Although NJNG is not party to any lending agreements that would accelerate the maturity date of any obligation caused by a failure to maintain any specific credit rating, if such ratings are downgraded below investment grade, borrowing costs could increase, as would the costs of maintaining certain contractual relationships and future financing and our access to capital markets would be reduced. Even if ratings are downgraded without falling below investment grade, NJR and NJNG could face increased borrowing costs under their credit facilities. A rating set forth above is not a recommendation to buy, sell or hold NJR's or NJNG's securities and may be subject to revision or withdrawal at any time. Each rating set forth above should be evaluated independently of any other rating.


The timing and mix of any external financings will target a common equity ratio that is consistent with maintaining NJNG's current short-term and long-term credit ratings.



64
New Jersey Resources Corporation
Part I

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                                            


Financial Risk Management

Commodity Market Risks


Natural gas is a nationally traded commodity. Its prices are determined effectively by the NYMEX, ICE and over-the-counter markets. The prices on the NYMEX, CME, ICE and over-the-counter markets generally reflect the national balance of natural gas supply and demand, but are also significantly influenced from time to time by other events.


Our regulated and deregulatedunregulated businesses are subject to market risk due to fluctuations in the price of natural gas. To economically hedge against such fluctuations, we have entered into forwards, futures, options and swap agreements. To manage these derivative instruments, we have well-defined risk management policies and procedures that include daily monitoring of volumetric limits and monetary guidelines. Our natural gas businesses are conducted through two of our operating subsidiaries. NJNG is a regulated utility that uses futures, options and swaps to provide relative price stability, and its recovery of natural gas costs is governed by the BPU. Energy Services uses futures, options, swaps and physical contracts to economically hedge purchases and sales of natural gas.


The following table reflects the changes in the fair market value of financial derivatives related to natural gas purchases and sales:
BalanceIncreaseLessBalance
(Thousands)September 30, 2021(Decrease) in Fair
Market Value		Amounts
Settled		March 31, 2022
Natural Gas Distribution$2,033 (3,421)388 $(1,776)
Energy Services(29,487)(18,490)(49,768)1,791 
Total$(27,454)(21,911)(49,380)$15 
 BalanceIncreaseLessBalance
(Thousands)September 30, 2017
(Decrease) in Fair
Market Value
Amounts
Settled
December 31,
2017
Natural Gas Distribution $(1,149) (3,774) (1,445) $(3,478)
Energy Services (5,552) (23,727) 3,121
 (32,400)
Total $(6,701) (27,501) 1,676
 $(35,878)

There were no changes in methods of valuations during the threesix months ended DecemberMarch 31, 2017.2022.
New Jersey Resources Corporation
Part I

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK (Continued)                         


The following is a summary of fair market value of financial derivatives at Decemberas of March 31, 2017,2022, excluding foreign exchange contracts discussed below, by method of valuation and by maturity for each fiscal year period:
(Thousands)202220232024 - 2026After 2026Total
Fair Value
Price based on NYMEX/CME$(416)(122)— — $(538)
Price based on ICE(1,224)(719)2,496 — 553 
Total$(1,640)(841)2,496 — $15 
(Thousands)201820192020 - 2022After 2022
Total
Fair Value
Price based on ICE$(27,037)(6,145) (2,700) 4
 $(35,878)
Total$(27,037)(6,145) (2,700) 4
 $(35,878)


The following is a summary of financial derivatives by type as of DecemberMarch 31, 2017:2022:
Volume Bcf
Price per MMBtu(1)
Amounts included in Derivatives (Thousands)
Natural Gas DistributionFutures29.6 $2.55-$11.54$(1,776)
Energy ServicesFutures(0.7)$2.41-$8.142,329 
Swaps(0.2)$2.72-$3.03(538)
Total$15 
  Volume Bcf
Price per MMBtu(1)
Amounts included in Derivatives (Thousands)
Natural Gas DistributionFutures20.4
$2.73 - $5.21 $(3,478)
Energy ServicesFutures(33.4)$1.53 - $6.04 (32,400)
Total    $(35,878)
(1)    Million British thermal unit
(1)Million British thermal unit


The following table reflects the changes in the fair market value of physical commodity contracts:
BalanceIncreaseLessBalance
(Thousands)September 30, 2021(Decrease) in Fair
Market Value		Amounts
Settled		March 31, 2022
Natural Gas Distribution - Prices based on other external data$20 4,381 4,316 $85 
Energy Services - Prices based on other external data(34,678)(12,085)(7,521)(39,242)
Total$(34,658)(7,704)(3,205)$(39,157)
 BalanceIncreaseLessBalance
(Thousands)September 30, 2017(Decrease) in Fair
Market Value		Amounts
Settled		December 31,
2017
Natural Gas Distribution - Prices based on other external data $79
 (404) (759) $434
Energy Services - Prices based on other external data (3,584) (26,285) (7,130) (22,739)
Total $(3,505) (26,689) (7,889) $(22,305)

The following table reflects the changes in the fair market value of interest rate contracts:
65
 BalanceIncreaseLessBalance
(Thousands)September 30, 2017(Decrease) in Fair
Market Value		Amounts
Settled		December 31,
2017
Natural Gas Distribution - Prices based on other external data $(8,467) (4,067) —
 $(12,534)
New Jersey Resources Corporation

Part I

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK (Continued)                       
Our market price risk is predominately linked with changes in the price of natural gas at the Henry Hub, the delivery point for the NYMEX natural gas futures contracts. Based on price sensitivity analysis, an illustrative 10 percent movement in the natural gas futures contract price, for example, increases (decreases) the reported derivative fair value of all open, unadjusted Henry Hub natural gas futures and fixed price swap positions by approximately $11.6$2.5 million. This analysis does not include potential changes to reported credit adjustments embedded in the $16.3$(6.8) million reported fair value.


Derivative Fair Value Sensitivity Analysis
(Thousands)Henry Hub Futures and Fixed Price Swaps
Percent increase in NYMEX natural gas futures prices0%5%10%15%20%
Estimated change in derivative fair value$— $(1,231)$(2,463)$(3,694)$(4,926)
Ending derivative fair value$(6,805)$(8,036)$(9,268)$(10,499)$(11,731)
Percent decrease in NYMEX natural gas futures prices0%(5)%(10)%(15)%(20)%
Estimated change in derivative fair value$— $1,231 $2,463 $3,694 $4,926 
Ending derivative fair value$(6,805)$(5,574)$(4,342)$(3,111)$(1,879)
Derivative Fair Value Sensitivity Analysis 
(Thousands)Henry Hub Futures and Fixed Price Swaps
Percent increase in NYMEX natural gas futures prices0%5%10%15%20%
Estimated change in derivative fair value$—
$(5,799)$(11,598)$(17,397)$(23,196)
Ending derivative fair value$16,270
$10,471
$4,672
$(1,127)$(6,926)
      
Percent decrease in NYMEX natural gas futures prices0%(5)%(10)%(15)%(20)%
Estimated change in derivative fair value$—
$5,799
$11,598
$17,397
$23,196
Ending derivative fair value$16,270
$22,069
$27,868
$33,667
$39,466

New Jersey Resources Corporation
Part I

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK (Continued)                         

Wholesale Credit Risk


The following is a summary of gross and net credit exposures, grouped by investment and non-investment grade counterparties, as of DecemberMarch 31, 2017.2022. Gross credit exposure for Energy Services is defined as the unrealized fair value of derivative and energy trading contracts plus any outstanding wholesale receivable for the value of natural gas or power delivered and/or financial derivative commodity contract that has settled for which payment has not yet been received. Gross credit exposure for Storage and Transportation is defined as demand and estimated usage fees for contracted services and/or market value of loan balances for which payment has not yet been received. Net credit exposure is defined as gross credit exposure reduced by collateral received from counterparties and/or payables, where netting agreements exist. The amounts presented below exclude accounts receivable for NJNG retail natural gas sales and services.


Energy Services' &, Clean Energy Ventures' and Storage and Transportation's counterparty credit exposure as of DecemberMarch 31, 2017,2022, is as follows:
(Thousands)Gross Credit ExposureNet Credit Exposure
Investment grade$111,418 $88,099 
Noninvestment grade9,568 492 
Internally rated investment grade19,625 14,072 
Internally rated noninvestment grade21,250 9,980 
Total$161,861 $112,643 
(Thousands)Gross Credit ExposureNet Credit Exposure
Investment grade $179,097
 $145,295
Noninvestment grade 24,933
 9,333
Internally rated investment grade 25,235
 17,813
Internally rated noninvestment grade 48,222
 14,517
Total $277,487
 $186,958


NJNG's counterparty credit exposure as of DecemberMarch 31, 2017,2022, is as follows:
(Thousands)Gross Credit ExposureNet Credit Exposure
Investment grade$17,508 $15,343 
Noninvestment grade33 — 
Internally rated investment grade941 209 
Internally rated noninvestment grade975 66 
Total$19,457 $15,618 
(Thousands)Gross Credit ExposureNet Credit Exposure
Investment grade $3,417
 $2,268
Noninvestment grade 146
 —
Internally rated investment grade 200
 138
Internally rated noninvestment grade 13,492
 3,321
Total $17,255
 $5,727


Due to the inherent volatility in the market price for natural gas, electricity and SRECs, the market value of contractual positions with individual counterparties could exceed established credit limits or collateral provided by those counterparties. If a counterparty failed to perform the obligations under its contract (for example, failed to make payment for natural gas received), we could sustain a loss. This loss would comprise the loss on natural gas delivered but not paid for and/or the cost of replacing natural gas not delivered or received at a price that exceeds the original contract price. Any such loss could have a material impact on our financial condition, results of operations or cash flows.

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New Jersey Resources Corporation
Information regarding NJR's interest rate risk can be found in Item 7A. Quantitative and Qualitative Disclosures About Market Risks and the Liquidity and Capital Resources - Debt section of Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operationsof our Annual Report on Form 10-K for the period ended September 30, 2017.Part I


ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK (Continued)     ��                 
Effects of Interest Rate and Foreign Currency Rate Fluctuations


We are also exposed to changes in interest rates on our debt hedges, variable rate debt and changes in foreign currency rates for our business conducted in Canada using Canadian dollars. We do not believe an immediate 10 percent increase or decrease in interest rates or foreign currency rates would have a material effect on our operating results or cash flows.


Information regarding NJR's interest rate risk can be found in Item 7A. Quantitative and Qualitative Disclosures About Market Risks and the Liquidity and Capital Resources - Debt section of Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operationsof our Annual Report on Form 10-K for the period ended September 30, 2021.

Effects of Inflation


Although inflation rates have been relatively low to moderate in recent years, including the three most recent fiscal years, any change in price levels has an effect on operating results due to the capital-intensive and regulated nature of our utility subsidiary. We attempt to minimize the effects of inflation through cost control, productivity improvements and regulatory actions, when appropriate.
New Jersey Resources Corporation
Part I

ITEM 4. CONTROLS AND PROCEDURES                                                                                                                             


Disclosure Controls and Procedures


Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), as of the end of the period covered by this report. Based on this evaluation, our principal executive officer and principal financial officer concluded that, as of end of the period covered by this report, our disclosure controls and procedures are effective, to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act, is recorded, processed, summarized and reported, within the time periods specified in the U.S. Securities and Exchange Commission'sSEC's rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.


Changes in Internal Control over Financial Reporting


There has been no change in internal control over financial reporting (as such term is defined in Exchange Act Rule 13a-15(f)) that occurred during the quarter ended DecemberMarch 31, 2017,2022, that has materially affected, or is reasonably likely to materially affect, internal control over financial reporting.
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New Jersey Resources Corporation
Part II

ITEM 1. LEGAL PROCEEDINGS                                                                                                                                                


Information regarding reportable legal proceedings is contained in Part I, Item 3. Legal Proceedings in our Annual Report on Form 10-K for the year ended September 30, 2017,2021, and is set forth in Part I, Item 1, Note 12.13. Commitments and Contingent Liabilities-Legal Proceedings on the Unaudited Condensed Consolidated Financial Statements, which is incorporated by reference. No legal proceedings became reportable during the quarter ended DecemberMarch 31, 2017,2022, and there have been no material developments during such quarter regarding any previously reported legal proceedings, which have not been previously disclosed.




ITEM 1A. RISK FACTORS                                                                                                                                                            


While we attempt to identify, manage and mitigate risks and uncertainties associated with our business to the extent practical, under the circumstances, some level of risk and uncertainty will always be present. Part I, Item 1A. Risk Factors of our 20172021 Annual Report on Form 10-K includes a detailed discussion of our risk factors. Those risks and uncertainties have the potential to materially affect our financial condition and results of operations. There have been no material changes in our risk factors from those previously disclosed in Part I, Item 1A, of our 20172021 Annual Report on Form 10-K.10-K, except the following, which is an additional risk factor that should be read to supplement the previously disclosed risk factors:



Inflation and increased natural gas costs could adversely impact NJNG’s customer base and customer collections and increase its level of indebtedness.

Inflation has caused increases in certain operating and capital costs. NJR has a process in place to continually review the adequacy of NJNG’s rates in relation to the increasing cost of providing service and the inherent regulatory lag in adjusting those rates. The ability to control expenses is an important factor that will influence future results.

Rapid increases in the price of purchased gas may cause NJNG to experience a significant increase in short-term debt because it must pay suppliers for gas when it is purchased, which can be significantly in advance of when these costs may be recovered through the collection of monthly customer bills for gas delivered. Increases in purchased gas costs could also slow collection efforts as customers are more likely to delay the payment of their gas bills, leading to higher-than-normal accounts receivable. This situation could also result in higher short-term debt levels and increased bad debt expense.

ITEM 2. UNREGISTERED SALE OF EQUITY SECURITIES AND USE OF PROCEEDS                                                 


The following table sets forth our repurchase activity for the quarter ended DecemberMarch 31, 2017:2022:

Period
Total Number of Shares
(or (or Units) Purchased
Average Price Paid per Share (or Unit)Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or ProgramsMaximum Number (or Approximate Dollar Value) of Shares (or Units) That May Yet Be Purchased Under the Plans or Programs
10/01/1701/22 - 10/01/31/1722—$— —
— 		—
2,431,0531,685,053
11/02/01/1722 - 11/30/1702/28/22——
—
2,431,0531,685,053
12/03/01/1722 - 12/03/31/1722——
—
2,431,0531,685,053
Total—$—
—
2,431,0531,685,053


The stock repurchase plan, which was authorized by our Board of Directors, became effective in September 1996 and as of DecemberMarch 31, 2017,2022, included 19.5 million shares of common stock for repurchase, of which, approximately 2.41.7 million shares remained available for repurchase. The stock repurchase plan will expire when we have repurchased all shares authorized for repurchase thereunder, unless the repurchase plan is earlier terminated by action of our Board of Directors or further shares are authorized for repurchase.


68
New Jersey Resources Corporation
Part II

ITEM 6. EXHIBITS                                                                                                                                                                         


Exhibit
Number		Exhibit Description
Exhibit
Number
Exhibit Description
2.1
10.1+
PurchaseIncentive Award Agreement, by and Salebetween New Jersey Resources Corporation and Timothy F. Shea, dated as of January 26, 2022
10.2
$150,000,000 Term Loan Credit Agreement, dated as of October 27, 2017,February 8, 2022, by and between Talen Generation, LLC,among NJR, the guarantors thereto and Adelphia Gateway, LLCPNC Bank, National Association, as Lender (incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K, as filed on November 2, 2017)
10.1
Summary of Company’s Non-Employee Director Compensation (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K, as filed on November 17, 2017February 11, 2021)
10.231.1+
$75,000,000 4 Month Revolver Agreement, dated as of December 14, 2017, between New Jersey Resources Corporation and PNC Bank, National Association (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K as filed on December 19, 2017)
10.3
$75,000,000 Committed Line of Credit Note, dated as of December 14, 2017, between New Jersey Resources Corporation and PNC Bank, National Association (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K as filed on December 19, 2017)
10.4
Amendment to the Committed Line of Credit Note, dated as of January 19, 2018, between New Jersey Resources Corporation and PNC Bank, National Association (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K as filed on January 22, 2018)
10.5
Amended and Restated Committed Line of Credit Note, dated as of January 19, 2018, between New Jersey Resources Corporation and PNC Bank, National Association (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K as filed on January 22, 2018)
10.6+
New Jersey Resources Corporation 2017 Stock Award and Incentive Plan Performance Share Units Agreement - NFE
10.7+
New Jersey Resources Corporation Deferred Stock Retention Award Agreement
10.8+
New Jersey Resources Corporation 2017 Stock Award and Incentive Plan Performance Share Units Agreement - Total Shareholder Return
10.9+
New Jersey Resources Corporation 2017 Stock Award and Incentive Plan Restricted Stock Units Agreement
10.10+
New Jersey Resources Corporation 2017 Stock Award and Incentive Plan Performance Based Restricted Stock Units Agreement
31.1+
Certification of the Chief Executive Officer pursuant to section 302 of the Sarbanes-Oxley Act of 2002
31.2+
Certification of the Chief Financial Officer pursuant to section 302 of the Sarbanes-Oxley Act of 2002
32.1+ †
Certification of the Chief Executive Officer pursuant to section 906 of the Sarbanes-Oxley Act of 2002
32.2+ †
Certification of the Chief Financial Officer pursuant to section 906 of the Sarbanes-Oxley Act of 2002
101+Interactive Data File (Form 10-Q, for the fiscal period ended June 30, 2017,March 31, 2022, furnished in XBRL (eXtensibleiXBRL (Inline eXtensible Business Reporting Language)).


+104+Filed herewith.Cover Page Interactive Data File included in Exhibit 101


+    Filed herewith.
†    This certificate accompanies this report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed filed by NJR for purposes of Section 18 or any other provision of the Securities Exchange Act of 1934, as amended.Act.

69
New Jersey Resources Corporation
Part II

SIGNATURES


Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


NEW JERSEY RESOURCES CORPORATION
(Registrant)
Date:February 8, 2018May 5, 2022
By:/s/ Patrick MigliaccioRoberto F. Bel
Patrick MigliaccioRoberto F. Bel
Senior Vice President and
Chief Financial Officer



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