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Item 8. Financial Statements and Supplementary Data

2022-11-17 compared with 2021-11-18 · 981 added, 232 removed, 1072 unchanged (53% of the section changed)

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (Continued)

The Company has legal, regulatory and environmental proceedings during the normal course of business that can result in loss contingencies.

When evaluating the potential for a loss, the Company will establish a reserve if a loss is probable and can be reasonably estimated, in which case it is the Company’s policy to accrue the full amount of such estimates.

Where the information is sufficient only to establish a range of probable liability, and no point within the range is more likely than any other, it is the Company’s policy to accrue the lower end of the range.

In the normal course of business, estimated amounts are subsequently adjusted to actual results that may differ from estimates.

In March 2020, COVID-19 was declared a pandemic by the World Health Organization and the Centers for Disease Control and Prevention and has spread globally, including throughout the U.S.

The Company’s Consolidated Financial Statements reflect estimates and assumptions made by management that affect the reported amounts of assets and liabilities at the balance sheet date and reported amounts of revenue and expenses during the reporting periods presented.

The Company considered the impacts 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 September 30, 2022.

The Company continues to closely monitor developments related to the COVID-19 pandemic and has, when appropriate, taken steps to ensure business continuity in the safe operation of its business.

These steps include working from home for office-based employees utilizing a hybrid schedule, limiting direct contact with customers and suspending late payment fees for utility customers.

While the Company and many businesses generally have returned to normal operating practices, this remains an evolving situation.

The timing for recovery of businesses and local economies, resurgences or mutations of the virus, and any potential future shutdowns remains unknown.

Throughout the COVID-19 pandemic, the Company has continued to provide essential services to our customers.

Both the Company and NJNG continue to have sufficient liquidity to meet their current obligations and business operations remain fundamentally unchanged at this time.

The Company will continue to monitor developments affecting its employees, customers, and operations and take additional steps to address the COVID-19 pandemic and its impacts, as necessary.

The Company follows the guidance in ASC 805, Business Combinations, for determining the appropriate accounting treatment for acquisitions.

2017-01, Clarifying the Definition of a Business , provides an initial fair value screen to determine if substantially all of the fair value of the assets acquired is concentrated in a single asset or group of similar assets.

If the initial screening test is not met, the set is considered a business based on whether there are inputs and substantive processes in place.

Based on the results of this analysis and conclusion on an acquisition’s classification of a business combination or an asset acquisition, the accounting treatment is derived.

If the acquisition is deemed to be a business, the acquisition method of accounting is applied.

Identifiable assets acquired and liabilities assumed at the acquisition date are recorded at fair value.

If the transaction is deemed to be an asset purchase, the cost accumulation and allocation model is used, whereby the assets and liabilities are recorded based on the purchase price and allocated to the individual assets and liabilities based on relative fair values.

The determination and allocation of fair values to the identifiable assets acquired and liabilities assumed are based on various assumptions and valuation methodologies requiring considerable management judgment.

The most significant variables in these valuations are discount rates and the number of years on which to base the cash flow projections, as well as other assumptions and estimates used to determine the cash inflows and outflows.

Management determines discount rates based on the risk inherent in the acquired assets, specific risks, industry data and capital structure of guideline companies.

The valuation of an acquired business is based on available information at the acquisition date and assumptions that are believed to be reasonable.

However, a change in facts and circumstances as of the acquisition date can result in subsequent adjustments during the measurement period, but no later than one year from the acquisition date.

Revenues from the sale of natural gas to NJNG customers are recognized in the period that natural gas is delivered and consumed by customers, including an estimate for unbilled revenue.

NJNG records unbilled revenue for natural gas services.

Natural gas sales to individual customers are based on meter readings, which are performed on a systematic basis throughout the month.

At the end of each month, the amount of natural gas delivered to each customer after the last meter reading through the end of the respective accounting period is estimated, and recognizes unbilled revenues related to these amounts.

The unbilled revenue estimates are based on estimated customer usage by customer type, weather effects, unaccounted-for natural gas and the most current tariff rates.

New Jersey Resources Corporation

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (Continued)

Clean Energy Ventures recognizes revenue when SRECs are transferred to counterparties.

SRECs are physically delivered through the transfer of certificates as per contractual settlement schedules.

The Clean Energy Act of 2018 established guidelines for the closure of the SREC registration program to new applicants in New Jersey.

The SREC program officially closed to new qualified solar projects on April 30, 2020.

In December 2019, the BPU established the TREC as the successor to the SREC program.

TRECs provide a fixed compensation base multiplied by an assigned project factor in order to determine their value.

The project factor is determined by the type and location of the project, as defined.

All TRECs generated are required to be purchased monthly by a TREC program administrator as appointed by the BPU.

TREC revenue is recognized when TRECs are generated and are transferred monthly based upon metered solar electricity activity.

Revenues for Energy Services are recognized when the natural gas is physically delivered to the customer.

In addition, changes in the fair value of derivatives that economically hedge the forecasted sales of the natural gas are recognized in operating revenues as they occur.

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 $ 53.0 million of operating revenue on the Consolidated Statements of Operations during fiscal 2022.

Amounts received in excess of revenue recognized totaling $ 33.8 million are included in deferred revenue on the Consolidated Balance Sheets as of September 30, 2022.

Storage and Transportation 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.

Revenue for further information.

Natural Gas Purchases

NJNG’s tariff includes a component for BGSS, which is designed to allow it to recover the cost of natural gas through rates charged to its customers and is typically revised on an annual basis.

As part of computing its BGSS rate, NJNG projects its cost of natural gas, net of supplier refunds, the impact of hedging activities and cost savings created by BGSS incentive programs.

NJNG subsequently recovers or credits the difference, if any, of actual costs compared with those included in current rates.

Any underrecoveries or overrecoveries are either credited to customers or deferred and, subject to BPU approval, reflected in the BGSS rates in subsequent years.

Natural gas purchases at Energy Services are composed of natural gas costs to be paid upon completion of a variety of transactions, as well as realized gains and losses from settled derivative instruments and unrealized gains and losses on the change in fair value of derivative instruments that have not yet settled.

Changes in the fair value of derivatives that economically hedge the forecasted purchases of natural gas are recognized in natural gas purchases as they occur.

For the purpose of securing storage and pipeline capacity in support of their respective businesses, Energy Services and Natural Gas Distribution enter into storage and pipeline capacity contracts, which require the payment of associated demand fees and charges that allow them access to a high priority of service in order to maintain the ability to access storage or pipeline capacity during a fixed time period, which generally ranges from one to 10 years.

Many of these demand fees and charges are based on established tariff rates as established and regulated by FERC.

These charges represent commitments to pay storage providers and pipeline companies for the priority right to transport and/or store natural gas utilizing their respective assets.

New Jersey Resources Corporation

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (Continued)

The following table summarizes the demand charges, which are net of capacity releases, and are included as a component of natural gas purchases on the Consolidated Statements of Operations for the fiscal years ended September 30:

(Millions) 2022 2021 2020

Energy Services $ 95.4 $ 120.5 $ 121.8

Natural Gas Distribution 170.3 123.2 131.9

Total $ 265.7 $ 243.7 $ 253.7

Energy Services expenses demand charges over the term of the service being provided.

Natural Gas Distribution’s costs associated with demand charges are included in its weighted average cost of natural gas.

The demand charges are expensed based on NJNG’s BGSS sales and recovered as part of the natural gas commodity component of its BGSS tariff.

Operations and Maintenance Expenses

Operations and maintenance expenses include operations and maintenance salaries and benefits, materials and supplies, usage of vehicles, tools and equipment, payments to contractors, utility plant maintenance, amortization of software costs for unregulated entities, customer service, professional fees and other outside services, insurance expense, accretion of cost of removal for future retirements of utility assets and other administrative expenses and are expensed as incurred.

Stock-Based Compensation

Stock-based compensation represents costs related to stock-based awards granted to employees and members of NJR’s Board of Directors.

NJR recognizes stock-based compensation based upon the estimated fair value of awards.

The recognition period for these costs begins at either the applicable service inception date or grant date and continues throughout the requisite service period.

The related compensation cost is recognized as O&M expense on the Consolidated Statements of Operations.

Stock-Based Compensation for further information.

The Company computes income taxes using the asset and liability method, whereby deferred income taxes are generally determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse.

Income Taxes.

In addition, the Company evaluates its tax positions to determine the appropriate accounting and recognition of future obligations associated with unrecognized tax benefits.

To the extent that NJNG invests in property that qualifies for ITCs, the ITC is deferred and amortized to income over the life of the equipment in accordance with regulatory treatment.

ITCs at the unregulated subsidiaries of NJR are recorded on the balance sheet as a reduction to property, plant and equipment when the property is placed in service, and recognized in earnings as a reduction of depreciation expense over the useful lives of the related assets.

Projects placed in service through December 31, 2019, qualified for a 30 percent federal ITC.

The ITC declined to 26 percent for property under construction before December 31, 2020.

The Consolidated Appropriations Act of 2021 extended the 26 percent ITC for property under construction during 2021 and 2022.

On August 16, 2022, the President of the U.S.

signed the Inflation Reduction Act, which raised the ITC from 26 percent to 30 percent for property under construction through the end of 2032, dropping to 26 percent for property under construction before the end of 2033 and to 22 percent for property under construction before the end of 2034.

The ITC expires starting in 2035 unless it is renewed.

Investments in Equity Investees

The Company accounts for its investments in Steckman Ridge and PennEast using the equity method of accounting where it is not the primary beneficiary, as defined under ASC 810, Consolidation ;

its respective ownership interests are 50 percent or less and/or it has significant influence over operating and management decisions.

The Company’s share of earnings is recognized as equity in earnings of affiliates on the Consolidated Statements of Operations.

New Jersey Resources Corporation

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (Continued)

Equity method investments are reviewed for impairment when changes in facts and circumstances indicate that the current fair value may be less than the asset’s carrying amount.

If the Company determines the decline in the value of its equity method investment is other than temporary, an impairment charge is recorded in an amount equal to the excess of the carrying value of the asset over its fair value.

Investments in Equity Investees for more information regarding impairments.

Property Plant and Equipment

Property, plant and equipment is stated at original cost.

Costs include direct labor, materials and third-party construction contractor costs, capitalized interest and certain indirect costs related to equipment and employees engaged in construction.

Utility plant and nonutility plant for Adelphia Gateway also includes AFUDC.

Upon retirement, the cost of depreciable property, plus removal costs less salvage, is charged to accumulated depreciation with no gain or loss recorded.

Depreciation is computed on a straight-line basis over the useful life of the assets for the Company’s nonutility entities, and using rates based on the estimated average lives of the various classes of depreciable property for NJNG.

The composite rate of depreciation used for NJNG was 2.66 percent of average depreciable property in fiscal 2022, 2.42 percent in fiscal 2021 and 2.65 percent in fiscal 2020.

The Company recorded $ 129.2 million, $ 111.4 million and $ 107.4 million in depreciation expense during fiscal 2022, 2021 and 2020, respectively.

Property, plant and equipment was comprised of the following as of September 30:

(Thousands) Estimated

Property Classifications Useful Lives 2022 2021

Distribution facilities 10 to 54 years

$ 2,797,936 $ 2,558,651

Transmission facilities 28 to 42 years

649,241 643,942

Storage facilities 35 to 86 years

85,449 79,892

Solar property 20 to 35 years

710,224 675,376

Storage and transportation property 5 to 50 years

850,186 433,678

All other property 5 to 40 years

60,914 57,968

Construction work in progress 361,766 547,542

Total property, plant and equipment 5,515,716 4,997,049

Accumulated depreciation and amortization ( 865,790 ) ( 783,536 )

Property, plant and equipment, net $ 4,649,926 $ 4,213,513

Within storage and transportation property, base gas is required to maintain the necessary pressure and to allow for efficient operation of the Leaf River storage facility.

The base gas is determined to be recoverable and is considered part of the facility and thus presented as a component in property, plant and equipment.

This natural gas is not depreciated, as it is expected to be recovered and sold.

As of September 30, 2022 and 2021, the base gas had a cost basis of $ 15.1 million and $ 7.9 million, respectively.

Capitalized and Deferred Interest

NJNG’s base rates include the ability to recover AFUDC on its construction work in progress.

For all NJNG construction projects, an incremental cost of equity is recoverable during periods when NJNG’s short-term debt balances are lower than its construction work in progress.

For more information on AFUDC treatment with respect to certain accelerated infrastructure projects, see Note 4.

Regulation - Infrastructure Programs.

Capitalized amounts associated with the debt and equity components of NJNG’s AFUDC are recorded in utility plant on the Consolidated Balance Sheets.

Corresponding amounts for the debt component are recognized in interest expense and in other income for the equity component on the Consolidated Statements of Operations.

Adelphia Gateway’s base rates include the ability to recover AFUDC on its construction work in progress.

Beginning in the fourth quarter of fiscal 2020, capitalized amounts associated with Adelphia Gateway’s AFUDC are recorded in nonutility plant on the Consolidated Balance Sheets.

Corresponding amounts for the debt component are recognized in interest expense and in other income for the equity component on the Consolidated Statements of Operations.

New Jersey Resources Corporation

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (Continued)

Capitalized and deferred interest include the following for the fiscal years ended September 30:

($ in thousands) 2022 2021 2020

NJNG Adelphia Gateway NJNG Adelphia Gateway NJNG Adelphia Gateway

Debt $ 1,648 $ 4,019 $ 5,648 $ 2,101 $ 5,134 $ 1,394

Equity 4,169 7,074 16,605 3,698 14,599 2,454

Total $ 5,817 $ 11,093 $ 22,253 $ 5,799 $ 19,733 $ 3,848

Weighted average interest rate 4.91 % 8.28 % 5.97 % 8.28 % 6.79 % 8.28 %

Pursuant to a BPU order, NJNG is permitted to recover carrying costs on uncollected balances related to SBC program costs, which include NJCEP, RAC and USF expenditures.

The SBC interest rate changes each September based on the August 31 seven-year constant maturity treasury rate plus 60 basis points.

The rate was 3.85 percent, 1.68 percent and 1.97 percent for the fiscal years ended September 30, 2022, 2021 and 2020, respectively.

Accordingly, other income included $ 857,000 , $ 346,000 and $ 511,000 in the fiscal years ended September 30, 2022, 2021 and 2020, respectively.

Clean Energy Ventures capitalizes interest on the allocation of the costs of debt borrowed for the financing of solar investments.

Capitalized amounts are included in nonutility plant and equipment on the Consolidated Balance Sheets.

Corresponding amounts are recognized in interest expense on the Consolidated Statements of Operations.

Cash and Cash Equivalents

Cash and cash equivalents consist of cash on deposit and temporary investments with maturities of three months or less, and excludes restricted cash related to escrow balances for utility plant projects at NJNG, which are recorded in other noncurrent assets on the Consolidated Balance Sheets.

The following table provides a reconciliation of cash and cash equivalents and restricted cash reported in the Consolidated Balance Sheets to the total amounts in the Consolidated Statements of Cash Flows, as of September 30:

(Thousands) 2022 2021 2020

Balance Sheet

Cash and cash equivalents $ 1,107 $ 4,749 $ 117,012

Restricted cash in other noncurrent assets $ 345 $ 1,294 $ 2,411

Statements of Cash Flow

Cash, cash equivalents and restricted cash $ 1,452 $ 6,043 $ 119,423

Allowance for Doubtful Accounts

The Company segregates financial assets, primarily trade receivables and unbilled revenues due in one year or less, into portfolio segments based on shared risk characteristics, such as geographical location and regulatory environment, for evaluation of expected credit losses.

Historical and current information, such as average write-offs, are applied to each portfolio segment to estimate the allowance for losses on uncollectible receivables.

Additionally, the allowance for losses on uncollectible receivables is adjusted for reasonable and supportable forecasts of future economic conditions, which can include changing weather, commodity prices, regulations and macroeconomic factors, such as unemployment rates among others, including the estimated impact of the ongoing pandemic on the outstanding balances.

During fiscal 2022, the Company deferred a portion of costs incurred related to bad debt for NJNG associated with customer accounts receivable as a regulatory asset resulting from the impacts of the ongoing COVID-19 pandemic.

Regulation for additional information.

Loans Receivable

NJNG currently provides loans, with terms ranging from 2 to 10 years, to customers that elect to purchase and install certain energy-efficient equipment in accordance with its BPU-approved SAVEGREEN program.

The loans are recognized at fair value on the Consolidated Balance Sheets.

The Company has $ 14.5 million and $ 14.2 million recorded in other current assets and $ 34.7 million and $ 32.3 million in other noncurrent assets as of September 30, 2022 and 2021, respectively, on the Consolidated Balance Sheets, related to the loans.

The Company regularly evaluates the credit quality and collection profile of its customers.

If NJNG determines a loan is impaired, the basis of the loan would be subject to regulatory review for recovery.

As of September 30, 2022 and 2021, the Company has not recorded any impairments for SAVEGREEN loans.

New Jersey Resources Corporation

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (Continued)

Regulatory Assets & Liabilities

Under cost-based regulation, regulated utility enterprises generally are permitted to recover their operating expenses and earn a reasonable rate of return on their utility investment.

Natural Gas Distribution maintains its accounts in accordance with the FERC Uniform System of Accounts as prescribed by the BPU and in accordance with ASC 980, Regulated Operations .

As a result of the impact of the ratemaking process and regulatory actions of the BPU, NJNG is required to recognize the economic effects of rate regulation.

Accordingly, NJNG capitalizes or defers certain costs that are expected to be recovered from its customers as regulatory assets and recognizes certain obligations representing probable future expenditures as regulatory liabilities on the Consolidated Balance Sheets.

Regulation for a more detailed description of NJNG’s regulatory assets and liabilities.

Adelphia Gateway capitalizes or defers certain costs that are expected to be recovered from its customers as regulatory assets and recognizes certain obligations representing probable future expenditures as regulatory liabilities on the Consolidated Balance Sheets.

Regulation for a more detailed description of Adelphia Gateway’s regulatory assets and liabilities.

Natural Gas in Storage

Natural gas in storage is reflected at average cost on the Consolidated Balance Sheets and represents natural gas and LNG that will be utilized in the ordinary course of business.

The following table summarizes natural gas in storage, at average cost by company, as of September 30:

($ in thousands) Natural Gas in Storage Bcf Natural Gas in Storage Bcf

Natural Gas Distribution $ 191,175 29.0 $ 115,824 27.6

Energy Services 82,469 10.8 77,782 18.8

Total $ 273,644 39.8 $ 193,606 46.4

Derivative Instruments

The Company accounts for its financial instruments, such as futures, options, foreign exchange contracts and interest rate contracts, as well as its physical commodity contracts related to the purchase and sale of natural gas at Energy Services, as derivatives, and therefore recognizes them at fair value on the Consolidated Balance Sheets.

The Company’s unregulated subsidiaries record changes in the fair value of their financial commodity derivatives in natural gas purchases and changes in the fair value of their physical forward contracts in natural gas purchases or operating revenues, as appropriate, on the Consolidated Statements of Operations.

Ineffective portions of the cash flow hedges are recognized immediately in earnings.

ASC 815, Derivatives and Hedging also provides for a NPNS scope exception for qualifying physical commodity contracts for which physical delivery is probable and the quantities delivered are expected to be used or sold over a reasonable period of time in the normal course of business.

Effective January 1, 2016, the Company prospectively applies this normal scope exception on a case-by-case basis to physical commodity contracts at NJNG and PPAs at Clean Energy Ventures.

When applied, it does not account for these contracts until the contract settles and the related underlying natural gas or power is delivered.

Gains and/or losses on NJNG’s derivatives used to economically hedge its regulated natural gas supply obligations, as well as its exposure to interest rate variability, are recoverable through its BGSS, a component of its tariff.

Accordingly, the offset to the change in fair value of these derivatives is recorded as a regulatory asset or liability on the Consolidated Balance Sheets.

Derivative Instruments for additional details regarding natural gas trading and hedging activities.

Fair values of exchange-traded instruments, including futures and swaps, are based on unadjusted, quoted prices in active markets.

The Company’s non-exchange-traded financial instruments, foreign currency derivatives, over-the-counter physical commodity contracts at Energy Services and interest rate contracts are valued using observable, quoted prices for similar or identical assets when available.

In establishing the fair value of contracts for which a quoted basis price is not available at the measurement date, management utilizes available market data and pricing models to estimate fair values.

Fair values are subject to change in the near term and reflect management’s best estimate based on a variety of factors.

Estimating fair values of instruments that do not have quoted market prices requires management’s judgment in determining amounts that could reasonably be expected to be received from, or paid to, a third party in settlement of the instruments.

These amounts could be materially different from amounts that might be realized in an actual sale transaction.

New Jersey Resources Corporation

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (Continued)

During fiscal 2020, the Company entered into treasury lock transactions to fix the benchmark treasury rate associated with debt issuances for NJNG and NJR that occurred during the fiscal year.

Settlement of the NJNG treasury locks resulted in a loss, which was recorded as a component of regulatory assets on the Consolidated Balance Sheets and will be amortized in earnings over the term of the debt as a component of interest expense on the Consolidated Statements of Operations.

NJR designated its treasury lock contracts as cash flow hedges;

therefore, changes in fair value of the effective portion of the hedges were recorded in OCI.

Settlement of the treasury locks resulted in a loss, which was recorded within OCI and is amortized into earnings over the term of the associated debt as a component of interest expense on the Consolidated Statements of Operations.

As of September 30, 2022 and 2021, amounts recognized in interest expense related to the amortization of the loss on treasury lock transactions totaled $ 219,000 and $ 223,000 , respectively, for NJNG, and $ 1.1 million and $ 1.0 million, respectively, for NJR.

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 table presents the software costs included in the Consolidated Financial Statements, as of September 30:

(Thousands) 2022 2021

Balance Sheets

Utility plant, at cost $ 40,437 $ 16,543

Construction work in progress $ 14,381 $ 7,801

Nonutility plant and equipment, at cost $ 344 $ 338

Construction work in progress $ — $ 8

Accumulated depreciation and amortization, utility plant $ ( 3,361 ) $ ( 1,333 )

Accumulated depreciation and amortization, nonutility plant and equipment $ ( 25 ) $ ( 29 )

Software costs $ 6,120 $ 5,582

Statements of Operations

Operation and maintenance (1)

$ 11,141 $ 9,141

Depreciation and amortization $ 2,024 $ 1,078

(1) During fiscal 2022 and 2021, $ 452,000 and 447,000 , respectively, was amortized from software costs into O&M.

Intangible Assets

Finite-lived intangible assets are stated at cost less accumulated amortization.

The Company amortizes intangible assets based upon the pattern in which the economic benefits are consumed over the life of the asset unless a pattern cannot be reliably determined, in which case the Company uses a straight-line amortization method.

As of September 30, 2022, intangible assets consist primarily of acquired wholesale natural gas energy contracts totaling $ 2.3 million.

The wholesale natural gas contracts are being amortized based upon expected cash flows over the respective terms of the agreements.

The estimated future amortization expense as of September 30, is as follows:

New Jersey Resources Corporation

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (Continued)

Long-lived Assets

The Company reviews the recoverability of long-lived assets and finite-lived intangible assets whenever events or changes in circumstances indicate that the carrying value may not be recoverable, such as significant adverse changes in regulation, business climate or market conditions, including prolonged periods of adverse commodity and capacity prices.

If there are changes indicating that the carrying value of such assets may not be recoverable, an undiscounted cash flows test is performed.

If the sum of the expected future undiscounted cash flows is less than the carrying amount of the asset, an impairment loss is recognized by reducing the recorded value of the asset to its fair value.

Factors that the Company analyzes in determining whether an impairment in its long-lived assets exists include:

a significant decrease in the market price of a long-lived asset;

a significant adverse change in the extent in which a long-lived asset is being used in its physical condition;

legal proceedings or other contributing factors;

significant business climate changes;

accumulations of costs in significant excess of the amounts expected;

a current-period operating or cash flow loss combined with a history of such events;

and current expectations that more likely than not, a long-lived asset will be sold or otherwise disposed of significantly before the end of its estimated useful life.

During fiscal 2022 and 2021, there were no events or circumstances that indicated that the carrying value of long-lived assets or finite-lived intangibles was not recoverable.

Debt Issuance Costs

Debt issuance costs are capitalized and amortized as interest expense on a basis which approximates the effective interest method over the term of the related debt.

Debt issuance costs are presented as a direct deduction from the carrying amount of the related debt.

Debt for the total unamortized debt issuance costs that are recorded as a reduction to long-term debt on the Consolidated Balance Sheets.

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 Consolidated Balance Sheets.

During fiscal 2022 and 2020, NJNG received $ 17.3 million and $ 4.0 million, respectively, in connection with the sale leaseback of its natural gas meters with terms ranging from seven to 11 years.

There were no natural gas meter sale leasebacks recorded during fiscal 2021.

In addition, for certain of its commercial solar energy projects, the Company enters into lease agreements that provide for the sale of commercial solar energy assets to third parties and the concurrent leaseback of the assets.

For sale leaseback transactions where the Company has concluded that the arrangement does not qualify as a sale as the Company retains control of the underlying assets, 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 Consolidated Balance Sheets.

During fiscal 2022, 2021, and 2020, Clean Energy Ventures received proceeds of $ 24.1 million, $ 17.7 million and $ 42.9 million, respectively, in connection with sale leasebacks of commercial solar assets.

The proceeds received were recognized as a financing obligation on the Consolidated Balance Sheets.

Clean Energy Ventures simultaneously entered into agreements to lease the assets back over a term of five to 15 years.

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 Consolidated Statements of Operations over the respective five-year ITC recapture periods, starting with the second year of the lease.

Environmental Contingencies

Loss contingencies are recorded as liabilities when it is probable a liability has been incurred and the amount of the loss is reasonably estimable in accordance with accounting standards for contingencies.

Estimating probable losses requires an analysis of uncertainties that often depend upon judgments about potential actions by third parties.

Accruals for loss contingencies are recorded based on an analysis of potential results.

New Jersey Resources Corporation

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (Continued)

With respect to environmental liabilities and related costs, NJNG periodically, and at least annually, performs an environmental review of MGP sites, including a review of potential liability for investigation and remedial action.

NJNG’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’s policy to accrue the lower end of the range.

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 any insurance recoveries.

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 income in the period of such determination.

Commitments and Contingent Liabilities for more details.

Pension and Postemployment Plans

The Company has two noncontributory defined pension plans covering eligible employees, including officers.

Benefits are based on each employee’s years of service and compensation.

The Company’s funding policy is to contribute annually to these plans at least the minimum amount required under the Employee Retirement Income Security Act, as amended, and not more than can be deducted for federal income tax purposes.

Plan assets consist of equity securities, fixed-income securities and short-term investments.

The Company did no t make any discretionary contributions to the pension plans during fiscal 2022 and 2021.

The Company also provides two primarily noncontributory medical and life insurance plans for eligible retirees and dependents.

Medical benefits, which make up the largest component of the plans, are based upon an age and years-of-service vesting schedule and other plan provisions.

Funding of these benefits is made primarily into Voluntary Employee Beneficiary Association trust funds.

The Company contributed $ 6.1 million and $ 7.2 million in aggregate to these plans during fiscal 2022 and 2021, respectively, which is recorded in postemployment employee benefit liability on the Consolidated Balance Sheets.

Employee Benefit Plans for a more detailed description of the Company’s pension and postemployment plans.

Asset Retirement Obligations

The Company recognizes ARO related to the costs associated with cutting and capping NJNG’s main and service natural gas distribution mains, which is required by New Jersey law when taking such natural gas distribution mains out of service.

The Company also recognizes ARO associated with Clean Energy Ventures’ solar assets when there are decommissioning provisions in lease agreements that require removal of the asset at the end of the lease term.

ARO are initially recognized when the legal obligation to retire an asset has been incurred and a reasonable estimate of fair value can be made.

The discounted fair value is recognized as an ARO liability with a corresponding amount capitalized as part of the carrying cost of the underlying asset.

The obligation is subsequently accreted to the future value of the expected retirement cost, and the corresponding asset retirement cost is depreciated over the life of the related asset.

Accretion expense associated with Clean Energy Ventures’ ARO is recognized as a component of operations and maintenance expense on the Consolidated Statements of Operations.

Accretion amounts associated with NJNG’s ARO are recognized as part of its depreciation expense, and the corresponding regulatory asset and liability will be shown gross on the Consolidated Balance Sheets.

Estimating future removal costs requires management to make significant judgments because most of the removal obligations span long time frames and removal may be conditioned upon future events.

Asset removal technologies are also constantly changing, which makes it difficult to estimate removal costs.

Accordingly, inherent in the estimate of ARO are various assumptions including the ultimate settlement date, expected cash outflows, inflation rates, credit-adjusted risk-free rates and consideration of potential outcomes where settlement of the ARO can be conditioned upon events.

In the latter case, the Company develops possible retirement scenarios and assigns probabilities based on management’s reasonable judgment and knowledge of industry practice.

Accordingly, ARO are subject to change.

New Jersey Resources Corporation

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (Continued)

Accumulated Other Comprehensive Income

The following table presents the changes in the components of accumulated other comprehensive income, net of related tax effects, as of September 30:

(Thousands) Cash Flow Hedges Postemployment Benefit Obligation Total

Balance at September 30, 2020 $ ( 10,397 ) $ ( 33,918 ) $ ( 44,315 )

Other comprehensive income, net of tax

Other comprehensive income, before reclassifications, net of tax of $ 0 , $( 1,618 ) and $( 1,618 ), respectively

— 5,494 5,494

Amounts reclassified from accumulated other comprehensive income, net of tax of $( 350 ), $( 957 ) and $( 1,307 ), respectively

1,021 3,272 (1) 4,293

Net current-period other comprehensive income, net of tax of $( 350 ), $( 2,575 ) and $( 2,925 ), respectively

1,021 8,766 9,787

Balance at September 30, 2021 $ ( 9,376 ) $ ( 25,152 ) $ ( 34,528 )

Other comprehensive income, net of tax

Other comprehensive income, before reclassifications, net of tax of $ 0 , $( 7,727 ) and $( 7,727 ), respectively

— 25,580 25,580

Amounts reclassified from accumulated other comprehensive income, net of tax of $( 317 ), $( 930 ) and $( 1,247 ), respectively

1,054 3,068 (1) 4,122

Net current-period other comprehensive income, net of tax of $( 317 ), $( 8,657 ) and $( 8,974 ), respectively

1,054 28,648 29,702

Balance at September 30, 2022 $ ( 8,322 ) $ 3,496 $ ( 4,826 )

(1) Included in the computation of net periodic pension cost, a component of operations and maintenance expense on the Consolidated Statements of Operations.

For more details, see Note 11.

Employee Benefit Plans.

Foreign Currency Transactions

The market area of Energy Services includes Canadian delivery points and, as a result, Energy Services incurs certain natural gas commodity costs and demand fees denominated in Canadian dollars.

Gains or losses that occur as a result of these foreign currency transactions are reported as a component of natural gas purchases on the Consolidated Statements of Operations.

Gains and losses recognized for the fiscal years ended September 30, 2022, 2021 and 2020, are considered immaterial.

Recently Adopted Updates to the Accounting Standards Codification

In December 2019, the FASB issued ASU No.

2019-12, an amendment to ASC 740, Income Taxes , which simplifies the accounting for income taxes and changes the accounting for certain income tax transactions, among other minor improvements.

The Company adopted this guidance on October 1, 2021, and applied it on a prospective basis.

The amendments in this update were either not applicable, currently applied, or did not have a material impact on the Company’s financial position, results of operations, cash flows or disclosures upon adoption.

Investments - Equity Securities, Investments - Equity Method and Joint Ventures and Derivatives and Hedging

In January 2020, the FASB issued ASU No.

2020-01, an amendment to ASC 321, Investments - Equity Securities, ASC 323 , Investments - Equity Method and Joint Ventures, and ASC 815 , Derivatives and Hedging, which clarifies the interactions between the three ASU topics.

The update requires an entity to evaluate observable transactions that necessitate applying or discontinuing the equity method of accounting when applying the measurement alternative in Topic 321.

This evaluation occurs prior to applying or upon ceasing the equity method.

The update also states that when applying paragraph 815-10-15-141(a) for forward contracts and purchased options, an entity is not required to assess whether the underlying securities will be accounted for under the equity method in accordance with Topic 323 or fair value method under Topic 825 upon settlement or exercise.

The Company adopted this guidance on October 1, 2021, and applied it on a prospective basis.

There was no material impact on the Company’s financial position, results of operations, cash flows or disclosures upon adoption.

New Jersey Resources Corporation

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (Continued)

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 upon adoption.

Other Recent Updates to the Accounting Standards Codification

Debt and Other

In August 2020, the FASB issued ASU No.

2020-06, an amendment to ASC 470, Debt , and ASC 815, Derivatives and Hedging , which changes the accounting for convertible instruments by reducing the number of acceptable accounting models to three models including, the embedded derivative, substantial premium, and traditional no-proceeds-allocated models.

The guidance is effective for the Company beginning October 1, 2022, and the Company can elect to apply it on either a modified or a full retrospective basis.

The Company does not currently have convertible debt instruments and thus does not expect the amendments to have an impact on its financial position, results of operations, cash flows and disclosures upon adoption.

In May 2021, the FASB issued ASU No.

2021-04, an amendment to ASC 470, Debt , ASC 260, Earnings per Share , ASC 718, Stock Compensation , and ASC 815, Derivatives and Hedging.

The update impacts equity-classified written call options that remain equity-classified after a modification or exchange.

The guidance is effective for the Company beginning October 1, 2022, and will be applied on a prospective basis.

The Company does not currently have equity-classified written call options and thus does not expect the amendments to have an impact on its financial position, results of operations, cash flows and disclosures upon adoption.

In July 2021, the FASB issued ASU No.

2021-05, an amendment to ASC 842, Leases , which requires a lessor to classify a lease with entirely or partially variable payments that do not depend on an index or rate as an operating lease if another classification, including sales-type or direct financing, would trigger a loss at the lease commencement date.

The guidance is effective for the Company beginning October 1, 2022, and the Company has elected to apply it on a prospective basis.

The Company expects the amendments to have an immaterial impact on its financial position, results of operations, cash flows and disclosures upon adoption.

Business Combinations

In October 2021, the FASB issued ASU No.

2021-08, an amendment to ASC 805, Business Combinations , which requires that an acquirer recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606, Revenue from Contracts with Customers .

The guidance is effective for the Company beginning October 1, 2023, and will be applied on a prospective basis to new acquisitions following the date of adoption.

The Company is currently evaluating the amendments to understand the impact on its financial position, results of operations, cash flows and disclosures upon adoption.

Derivatives and Hedging

In March 2022, the FASB issued ASU No.

2022-01, an amendment to ASC 815, Derivatives and Hedging , which addresses fair value hedge accounting of interest rate risk for portfolios of financial assets.

This update further clarifies guidance previously released in ASU 2017-12 which established the “last-of-layer” method and this update renames that method as the “portfolio layer” method.

The guidance is effective for the Company beginning October 1, 2023, and the transition method can be on a prospective basis for a multiple-layer hedging strategy or a modified retrospective basis for a portfolio layer method.

The Company does not currently apply hedge accounting to any of its risk management activities and thus does not expect the amendment to have an impact on its financial position, results of operations, cash flows and disclosures upon adoption.

New Jersey Resources Corporation

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (Continued)

Financial Instruments

In March 2022, the FASB issued ASU No.

2022-02, an amendment to ASC 326, Financial Instruments - Credit Losses , which eliminates the accounting guidance for creditors in troubled debt restructuring.

It also aligns conflicting disclosure requirement guidance in ASC 326 by requiring disclosure of current-period gross write-offs by year of origination.

The amendment also adds new disclosures for creditors with loan refinancing and restructuring for borrowers experiencing financial difficulty.

The guidance is effective for the Company beginning October 1, 2023, and the Company can elect to apply it either on a modified retrospective or prospective basis.

At this time, the Company has not experienced a troubled debt restructuring and thus does not expect the amendments to have an impact on its financial position, results of operations and cash flows upon adoption.

The Company is currently evaluating the amendments to understand the impact on its disclosures upon adoption.

Fair Value Measurement

In June 2022, the FASB issued ASU No.

2022-03, an amendment to ASC 820, Fair Value Measurement.

The amendment clarifies the fair value principles when measuring the fair value of an equity security subject to a contractual sale restriction.

The guidance is effective for the Company on October 1, 2024, its first fiscal year beginning after December 15, 2023, and will be applied on a prospective basis, if applicable.

At this time, the Company does not have equity securities subject to contractual sale restrictions, and therefore these amendments would only impact the Company if, in the future, it entered into such transactions.

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 Consolidated Statements of Operations.

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:

Segment/ Operations Performance Obligation Description

Natural Gas Distribution Natural gas utility sales NJNG’s performance obligation is to provide natural gas to residential, commercial and industrial customers as demanded, based on regulated tariff rates, which are established by the BPU.

Revenues from the sale of natural gas are recognized in the period that 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 Ventures Commercial 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.

New Jersey Resources Corporation

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (Continued)

Revenue Recognized Over Time (continued):

Segment/ Operations Performance Obligation Description

Clean Energy Ventures Residential 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 Ventures Transition 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 Services Natural 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 Transportation Natural gas services The performance obligation of Storage and Transportation is to provide the customer with storage and transportation services.

Storage and Transportation 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 Other Service contracts Home Services enters into service contracts with homeowners to provide maintenance and replacement services of applicable heating, cooling or ventilation equipment.

NJR Retail enters into warranty contracts with homeowners for various appliances.

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.

Revenue Recognized at a Point in Time:

Energy Services Natural gas services For a permanent release of pipeline capacity, the performance obligation of Energy Services 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 Transportation Natural gas services The performance obligation of Storage and Transportation is to provide the customer with storage and transportation services.

Storage and Transportation 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 Other Installations Home Services installs appliances, including but not limited to furnaces, air conditioning units, boilers and generators, for 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.

New Jersey Resources Corporation

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (Continued)

Disaggregated revenues from contracts with customers by product line and by reporting segment and other business operations during fiscal 2022, 2021 and 2020 are as follows:

(Thousands) Natural Gas Distribution Clean Energy Ventures Energy Services Storage and Transportation Home Services

and Other Total

Natural gas utility sales (1)

$ 951,626 — — — — $ 951,626

Natural gas services — — 83,801 67,735 — 151,536

Service contracts — — — — 33,932 33,932

Installations and maintenance — — — — 22,250 22,250

Renewable energy certificates — 5,487 — — — 5,487

Electricity sales — 38,317 — — — 38,317

Eliminations (1)

( 1,350 ) — — ( 2,449 ) ( 364 ) ( 4,163 )

Revenues from contracts with customers 950,276 43,804 83,801 65,286 55,818 1,198,985

Alternative revenue programs (3)

11,259 — — — — 11,259

Derivative instruments 165,882 84,476 (4) 1,445,471 — — 1,695,829

Eliminations (2)

— — ( 94 ) — — ( 94 )

Revenues out of scope 177,141 84,476 1,445,377 — — 1,706,994

Total operating revenues $ 1,127,417 128,280 1,529,178 65,286 55,818 $ 2,905,979

Natural gas utility sales (1)

$ 694,635 — — — — $ 694,635

Natural gas services — — 26,933 51,020 — 77,953

Service contracts — — — — 33,250 33,250

Installations and maintenance — — — — 18,979 18,979

Renewable energy certificates — 4,571 — — — 4,571

Electricity sales — 25,270 — — — 25,270

Eliminations (2)

— — — ( 1,768 ) ( 785 ) ( 2,553 )

Revenues from contracts with customers 694,635 29,841 26,933 49,252 51,444 852,105

Alternative revenue programs (3)

( 7,282 ) — — — — ( 7,282 )

Derivative instruments 44,443 65,434 (4) 1,201,487 — — 1,311,364

Eliminations (2)

— — 426 — — 426

Revenues out of scope 37,161 65,434 1,201,913 — — 1,304,508

Total operating revenues $ 731,796 95,275 1,228,846 49,252 51,444 $ 2,156,613

Natural gas utility sales $ 695,858 — — — — 695,858

Natural gas services — — 24,511 44,728 — 69,239

Service contracts — — — — 32,455 32,455

Installations and maintenance — — — — 18,562 18,562

Renewable energy certificates — 1,384 — — — 1,384

Electricity sales — 20,099 — — — 20,099

Eliminations (2)

— — — ( 2,713 ) ( 1,207 ) ( 3,920 )

Revenues from contracts with customers 695,858 21,483 24,511 42,015 49,810 833,677

Alternative revenue programs (3)

15,750 — — — — 15,750

Derivative instruments 18,315 81,134 (4) 1,005,908 — — 1,105,357

Eliminations (2)

— — ( 1,116 ) — — ( 1,116 )

Revenues out of scope 34,065 81,134 1,004,792 — — 1,119,991

Total operating revenues $ 729,923 102,617 1,029,303 42,015 49,810 1,953,668

(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.

New Jersey Resources Corporation

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (Continued)

Disaggregated revenues from contracts with customers by customer type and by reporting segment and other business operations during the fiscal years ended September 30, are as follows:

(Thousands) Natural Gas Distribution Clean Energy Ventures Energy Services Storage and Transportation Home Services

and Other Total

Residential $ 586,678 12,579 — — 55,629 $ 654,886

Commercial and industrial 265,970 31,225 83,801 65,286 189 446,471

Firm transportation 92,531 — — — — 92,531

Interruptible and off-tariff 5,097 — — — — 5,097

Revenues out of scope 177,141 84,476 1,445,377 — — 1,706,994

Total operating revenues $ 1,127,417 128,280 1,529,178 65,286 55,818 $ 2,905,979

Residential $ 487,018 11,319 — — 50,689 $ 549,026

Commercial and industrial 124,519 18,522 26,933 49,252 755 219,981

Firm transportation 79,256 — — — — 79,256

Interruptible and off-tariff 3,842 — — — — 3,842

Revenues out of scope 37,161 65,434 1,201,913 — — 1,304,508

Total operating revenues $ 731,796 95,275 1,228,846 49,252 51,444 $ 2,156,613

Residential $ 490,233 10,233 — — 48,867 $ 549,333

Commercial and industrial 129,946 11,250 24,511 42,015 943 208,665

Firm transportation 69,357 — — — — 69,357

Interruptible and off-tariff 6,322 — — — — 6,322

Revenues out of scope 34,065 81,134 1,004,792 — — 1,119,991

Total operating revenues $ 729,923 102,617 1,029,303 42,015 49,810 $ 1,953,668

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 Consolidated Balance Sheets are as follows:

Customer Accounts Receivable Customers' Credit

(Thousands) Billed Unbilled Balances and Deposits

Balance as of September 30, 2020 $ 134,173 $ 9,226 $ 25,934

Increase 78,665 1,125 6,652

Balance as of September 30, 2021 212,838 10,351 32,586

Increase 9,459 3,418 660

Balance as of September 30, 2022 $ 222,297 $ 13,769 $ 33,246

New Jersey Resources Corporation

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (Continued)

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 Consolidated Balance Sheets as of September 30:

(Thousands) Natural Gas Distribution Clean Energy Ventures Energy Services Storage and Transportation Home Services

and Other Total

Customer accounts receivable

Billed $ 78,508 5,566 129,199 7,012 2,012 $ 222,297

Unbilled 10,814 2,955 — — — 13,769

Customers’ credit balances and deposits ( 33,246 ) — — — — ( 33,246 )

Total $ 56,076 8,521 129,199 7,012 2,012 $ 202,820

Customer accounts receivable

Billed $ 54,514 5,534 147,087 3,956 1,747 $ 212,838

Unbilled 8,427 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

The EDECA is the legal framework for New Jersey’s public utility and wholesale energy landscape.

NJNG is required, pursuant to a written order by the BPU under EDECA, to open its residential markets to competition from third-party natural gas suppliers.

Customers can choose the supplier of their natural gas commodity in NJNG’s service territory.

As required by EDECA, NJNG’s rates are segregated into two primary components:

the commodity portion, which represents the wholesale cost of natural gas, including the cost for interstate pipeline capacity to transport the natural gas to NJNG’s service territory;

and the delivery portion, which represents the transportation of the commodity portion through NJNG’s natural gas distribution system to the end-use customer.

NJNG does not earn Utility Gross Margin on the commodity portion of its natural gas sales.

NJNG earns Utility Gross Margin through the delivery of natural gas to its customers, regardless of whether it or a third-party supplier provides the wholesale natural gas commodity.

Under EDECA, the BPU is required to audit the state’s energy utilities every two years.

The primary purpose of the audit is to ensure that utilities and their affiliates offering unregulated retail services do not have an unfair competitive advantage over nonaffiliated providers of similar retail services.

A combined competitive services and management audit of NJNG commenced in August 1, 2013.

A draft management audit report was accepted by the BPU on July 23, 2014, for public comment.

To date, NJNG has implemented all audit recommendations with the approval of BPU staff and is waiting for final BPU approval.

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 filings to the BPU for review of its BGSS, CIP and 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 permitted to implement certain BGSS rate changes on a provisional basis with proper notification to the BPU.

New Jersey Resources Corporation

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (Continued)

Regulatory assets and liabilities included on the Consolidated Balance Sheets for NJNG are comprised of the following, as of September 30:

(Thousands) 2022 2021

Regulatory assets-current

New Jersey Clean Energy Program $ 15,697 $ 16,308

Conservation Incentive Program 23,099 11,839

Other current regulatory assets 1,290 1,554

Total current regulatory assets $ 40,086 $ 29,701

Regulatory assets-noncurrent

Environmental remediation costs:

Expended, net of recoveries $ 66,149 $ 58,483

Liability for future expenditures 127,070 135,012

Deferred income taxes 40,520 39,694

SAVEGREEN 52,690 32,941

Postemployment and other benefit costs 56,021 117,194

Deferred storm damage costs 2,172 4,343

Cost of removal 104,850 99,238

Other noncurrent regulatory assets 45,828 32,695

Total noncurrent regulatory assets $ 495,300 $ 519,600

Regulatory liability-current

Overrecovered natural gas costs $ 17,807 $ 5,510

Derivatives at fair value, net 7,972 22,497

Total current regulatory liabilities $ 25,779 $ 28,007

Regulatory liabilities-noncurrent

Tax Act impact (1)

$ 185,367 $ 190,386

Derivatives at fair value, net 116 1,166

Other noncurrent regulatory liabilities 151 336

Total noncurrent regulatory liabilities $ 185,634 $ 191,888

(1) Reflects the re-measurement and subsequent amortization of NJNG’s net deferred tax liabilities as a result of the change in federal tax rates enacted in the Tax Act.

Regulatory assets and liabilities included on the Consolidated Balance Sheets for Adelphia Gateway are comprised of the following, as of September 30:

(Thousands) 2022 2021

Total current regulatory assets $ — $ 417

Total noncurrent regulatory assets $ 5,366 $ 2,499

Total current regulatory liabilities 5,311 —

Total noncurrent regulatory liabilities $ — $ 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.

New Jersey Clean Energy Program

The NJCEP is a statewide program that encourages energy efficiency and renewable energy.

Funding amounts are determined by the BPU’s Office of Clean Energy and all New Jersey utilities are required to share in the annual funding obligation.

The current NJCEP program is for the State of New Jersey’s fiscal year ending June 2023.

NJNG recovers the costs associated with its portion of the NJCEP obligation through its NJCEP rider, with interest.

Conservation Incentive Program

The CIP permits NJNG to recover Utility Gross Margin variations related to customer usage resulting from customer conservation efforts and mitigates the impact of weather on its margin.

Such Utility Gross Margin variations are recovered in the year following the end of the CIP usage year, without interest, and are subject to additional conditions, including an earnings test, a revenue test and an evaluation of BGSS-related savings.

This program has no expiration date.

New Jersey Resources Corporation

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (Continued)

Environmental Remediation Costs

NJNG is responsible for the cleanup of certain former gas manufacturing facilities.

Actual expenditures are recovered from customers, with interest, over seven-year rolling periods, through a RAC rate rider.

Recovery for NJNG’s estimated future liability will be requested and/or recovered when actual expenditures are incurred.

Commitments and Contingent Liabilities .

Derivatives are utilized by NJNG to manage the price risk associated with its natural gas purchasing activities and to participate in certain BGSS incentive programs.

The gains and losses associated with NJNG’s derivatives are recoverable through its BGSS, as noted above, without interest.

Derivative Instruments .

Deferred Income Taxes

Upon adoption of a 1993 provision of ASC 740, Income Taxes , NJNG recognized a transition adjustment and corresponding regulatory asset representing the difference between NJNG’s existing deferred tax amounts compared with the deferred tax amounts calculated in accordance with the change in method prescribed by ASC 740.

NJNG recovers the regulatory asset associated with these tax impacts through future base rates, without interest.

NJNG administers certain programs that supplement the state’s NJCEP and that allow NJNG to promote clean energy to its residential and commercial customers, as described further below.

NJNG will recover related expenditures and a weighted average cost of capital on the unamortized balance through a tariff rider, with interest, as approved by the BPU, over a two - to 10-year period depending upon the specific program incentive.

Postemployment and Other Benefit Costs

Postemployment and Other Benefit Costs represents NJNG’s underfunded postemployment benefit obligations, as well as a fiscal 2010 tax charge resulting from a change in the deductibility of federal subsidies associated with Medicare Part D, both of which are deferred as regulatory assets and are recoverable, without interest, in base rates.

The BPU approved the recovery of the tax charge through NJNG’s base rates effective October 2016 over a seven-year amortization period.

Employee Benefit Plans .

Deferred Storm Damage Costs

Portions of NJNG’s distribution system incurred significant damage as a result of Post-Tropical Cyclone Sandy in October 2012.

NJNG deferred the uninsured incremental O&M costs associated with its restoration efforts, which were approved for recovery by the BPU through NJNG’s base rates, without interest, effective October 2016 over a seven-year amortization period.

Cost of Removal

NJNG accrues and collects for cost of removal in base rates on its utility property, without interest.

These costs are recorded in accumulated depreciation for regulatory reporting purposes, and actual costs of removal, without interest, will be recovered in subsequent rates, pursuant to the BPU order.

Consistent with GAAP, amounts recorded within accumulated depreciation for regulatory accounting purposes are reclassified out of accumulated depreciation to either a regulatory asset or a regulatory liability depending on whether actual cost of removal is still subject to collection or amounts overcollected will be refunded back to customers.

New Jersey Resources Corporation

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (Continued)

Other Regulatory Assets

Other regulatory assets consist primarily of deferred costs associated with certain components of NJNG’s SBC, as discussed further in the regulatory proceedings section, and NJNG’s compliance with federal and state-mandated PIM provisions.

NJNG’s related costs to maintain the operational integrity of its distribution and transmission main are recoverable, without interest, subject to BPU review and approval.

As of September 30, 2022, NJNG recorded $ 635,000 of PIM in other regulatory assets, which is being recovered through base rates over a seven-year amortization period effective October 2016.

Overrecovered Natural Gas Costs

NJNG recovers its cost of natural gas through the BGSS rate component of its customers’ bills.

NJNG’s cost of natural gas includes the purchased cost of the natural gas commodity, fees paid to pipelines and storage facilities, adjustments as a result of BGSS incentive programs and hedging transactions.

Overrecovered natural gas costs represent a regulatory liability that generally occurs when NJNG’s BGSS rates are higher than actual costs and requests approval to be returned to customers including interest, when applicable, in accordance with NJNG’s approved BGSS tariff.

Conversely, underrecovered natural gas costs generally occur during periods when NJNG’s BGSS rates are lower than actual costs, in which case NJNG records a regulatory asset and requests amounts to be recovered from customers in the future.

The following is a description of certain regulatory proceedings during fiscal 2021 and 2022:

On 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.

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.

BGSS rates are normally revised on an annual basis.

In addition, to manage the fluctuations in wholesale natural gas costs, NJNG has the ability to make two interim filings during each fiscal year to increase residential and small commercial customer BGSS rates on a self-implementing and provisional basis.

NJNG is also permitted to refund or credit back a portion of the commodity costs to customers at any time given five days ’ notice when the natural gas commodity costs decrease in comparison to amounts projected or to amounts previously collected from customers.

Concurrent with the annual BGSS filing, NJNG files for an annual review of its CIP.

NJNG’s annual BGSS and CIP filings are summarized as follows:

• In November 2020, NJNG notified the BPU of its intent to provide BGSS bill credits to residential and small commercial sales customers effective December 1, 2020 to December 31, 2020.

In December 2020, NJNG notified the BPU of the extension of the BGSS bill credits through January 2021.

The actual bill credits given to customers totaled $ 20.6 million, $ 19.3 million net of tax.

• 2021 BGSS/CIP filing — In May 2021, NJNG submitted to the BPU the annual petition to modify its BGSS, balancing charge and CIP rates.

On November 17, 2021, the BPU approved a $ 2.9 million increase to the annual revenues credited to BGSS and 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 November 17, 2021, the BPU approved, on a preliminary basis, NJNG’s annual petition to modify its BGSS, balancing charge and CIP rates for residential and small commercial customers.

The rate changes resulted in a $ 2.9 million increase to the annual revenues credited to BGSS and a $ 13.0 million annual increase related to its balancing charge, as well as changes to CIP rates, which resulted in a $ 6.3 million annual recovery decrease, effective December 1, 2021, and was approved on a final basis on May 4, 2022.

• On November 19, 2021, NJNG submitted notification of its intent to self-implement an increase to its BGSS rate which results in an approximate $ 24.2 million increase to annual revenues credited to BGSS, effective December 1, 2021.

• 2022 BGSS/CIP filing — On June 1, 2022, NJNG submitted its annual petition to modify its BGSS, balancing charge and CIP rates for residential and small commercial customers.

On September 7, 2022, the BPU approved, on a preliminary basis, an $ 81.9 million increase to the annual revenues credited to BGSS and a $ 9.0 million annual increase related to its balancing charge, as well as a $ 10.2 million increase to CIP rates, effective October 1, 2022.

New Jersey Resources Corporation

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (Continued)

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.

The Company is permitted to annually propose a process to evaluate and discuss alternative incentive programs, should performance of the existing incentives or market conditions warrant re-evaluation.

Energy 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 upgrades to promote energy efficiency to its residential and commercial customers while stimulating state and local economies through the creation of jobs.

Depending on the specific initiative or approval, NJNG recovers costs associated with the programs over a three - to 10-year period through a tariff rider mechanism.

In March 2021, the BPU approved a three-year SAVEGREEN program that included $ 126.1 million of direct investment, $ 109.4 million in financing options and $ 23.4 million in operation and maintenance expenses, which resulted in a $ 15.6 million annual recovery increase, effective July 1, 2021.

SAVEGREEN investments and costs are filed with the BPU on an annual basis.

NJNG’s annual EE filings are summarized as follows:

• 2020 EE filing — In May 2020, NJNG filed a petition with the BPU to minimally decrease its EE recovery rate.

Throughout the course of the proceeding, the Company updated the filing for additional actual information.

Based on the updated information, the BPU approved the request to maintain its existing rate, which results in an annual recovery of approximately $ 11.4 million, effective November 1, 2020.

• 2021 EE filing — 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 to resolve the current EE annual cost recovery filing, which increases annual recoveries by $ 2.2 million, effective February 1, 2022.

• 2022 EE filing — On June 1, 2022, NJNG submitted its annual cost recovery filing for the SAVEGREEN programs established from 2010 through the present.

On September 28, 2022, the BPU approved the filing, which decreases annual recoveries by $ 3.5 million, effective October 1, 2022.

Societal Benefits Charge

The SBC is comprised of three primary riders that allow NJNG to recover costs associated with USF, which is a permanent statewide program for all natural gas and electric utilities for the benefit of income-eligible customers, MGP remediation and the NJCEP.

NJNG has submitted the following filings to the BPU, which include a report of program expenditures incurred each program year:

• 2020 SBC filing — In April 2021, the BPU approved a stipulation resolving NJNG’s annual SBC application requesting to recover remediation expenses, including an increase in the RAC of approximately $ 1.3 million annually and an increase to the NJCEP factor, which resulted in an annual increase of approximately $ 6.0 million, effective May 1, 2021.

• 2021 USF filing — In June 2021, NJNG filed its annual USF compliance filing proposing an annual increase to the statewide USF rate of approximately $ 4.9 million.

In September 2021, the BPU approved the increase, effective October 1, 2021.

• 2021 SBC filing — On March 23, 2022, the BPU approved NJNG's annual filing to increase the RAC by $ 600,000 and decrease the NJCEP by $ 2.9 million, effective April 1, 2022.

• 2022 USF filing — On June 27, 2022, NJNG filed its annual USF compliance filing proposing a decrease to the statewide USF rate.

On August 25, 2022, an additional update was submitted on behalf of all NJ utilities with actual information through July 31, 2022.

On September 28, 2022, the BPU approved a decrease based on the August update, which resulted in an annual decrease of approximately $ 1.6 million, effective October 1, 2022.

New Jersey Resources Corporation

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (Continued)

• 2022 SBC filing — On September 13, 2022, NJNG submitted its annual SBC filing to the BPU requesting approval of RAC expenditures through June 30, 2022, as well as an increase to the RAC annual recoveries of $ 3.8 million and an increase to the NJCEP annual recoveries of $ 2.2 million, with a proposed effective date of April 1, 2023.

Infrastructure Programs

NJNG has significant annual capital expenditures associated with the management of its natural gas distribution and transmission system, including new utility plant for customer growth and its associated PIM and infrastructure programs.

NJNG continues to implement BPU-approved infrastructure projects that are designed to enhance the reliability of NJNG’s natural gas distribution system, including SAFE and NJ RISE.

The SAFE program replaced portions of NJNG’s natural gas distribution unprotected steel, cast iron infrastructure and associated services to improve the safety and reliability of the natural gas distribution system.

SAFE I was approved to invest up to $ 130.0 million, exclusive of AFUDC, over a four-year period.

SAFE II was approved to invest up to $ 200.0 million, excluding AFUDC, over a five-year period.

NJNG recovered approximately $ 157.5 million through annual rate filings, with the remainder recovered through subsequent rate cases.

As a condition of approval of the program, NJNG was required to file a base rate case no later than November 2019 and satisfied this requirement with its March 29, 2019 base rate case filing.

NJ RISE consisted of six capital investment projects estimated to cost $ 102.5 million over a five-year period, excluding AFUDC, for natural gas distribution storm-hardening and mitigation projects, along with incremental depreciation expense.

NJ RISE includes a weighted average cost of capital that ranges from 6.74 percent to 6.9 percent and a return on equity of 9.75 percent.

Requests for recovery of future NJ RISE capital costs occurred in conjunction with SAFE II.

In March 2021, NJNG filed a petition with the BPU requesting the final base rate increase for the recovery associated with NJ RISE and SAFE II capital investments cost of approximately $ 3.4 million made through June 30, 2021.

In June 2021, this filing was consolidated with the 2021 base rate case.

In November 2021, the BPU issued an order for the consolidated matter which included approval for the final increase for the NJ RISE and SAFE II programs of $ 269,000 .

With this approval, the BPU filings with respect to NJ RISE and SAFE II are complete.

Infrastructure Investment Program

In February 2019, NJNG filed a petition with the BPU seeking authority to implement a five-year IIP.

The IIP consists of two components, transmission and distribution investments and information technology replacement and enhancements.

The total investment for the IIP is approximately $ 507.0 million.

Upon approval from the BPU, 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.

The recovery of information technology replacement and enhancements that was included in the original IIP filing will be included as part of base rate filings as projects are placed in service.

On March 31, 2022, NJNG filed its first rate recovery request for its BPU-approved IIP with capital expenditures estimated through June 30, 2022, including AFUDC.

On July 13, 2022, NJNG filed its update with actual capital expenditures of $ 28.9 million through June 30, 2022.

On September 7, 2022, the BPU approved the rate increase resulting in a $ 3.2 million revenue increase, effective October 1, 2022.

Other Filings

In July 2020, the BPU issued an order which authorized New Jersey utilities to create a regulatory asset by deferring incremental COVID-19 related costs and required a related quarterly report be filed for the COVID-19-related costs and savings incurred.

Utilities were to file a petition by the later of December 31, 2021, or within 60 days of the close of the regulatory asset period, and rate recovery can be addressed in the filing or the utility may request consideration be deferred to a future rate case.

Any potential rate recovery, and the appropriate period of recovery, would be addressed through that filing, or may have requested a deferral of rate recovery for a future base rate case.

In September 2021, the BPU extended the filing date to December 31, 2022, or within 60 days of the close of the regulatory asset period.

On August 17, 2022, the BPU approved NJNG’s petition seeking authority to issue up to $ 500 million in Medium Term Notes over a 3-year period.

New Jersey Resources Corporation

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (Continued)

DERIVATIVE INSTRUMENTS

The Company is subject primarily to commodity price risk due to fluctuations in the market price of natural gas, SRECs and electricity.

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Upon settlement of the contract, the related revenue is recognized when the SREC is transferred to the counterparty.

New Jersey Resources Corporation

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (Continued)

Natural Gas Distribution

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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 Consolidated Balance Sheets.

In February 2020 and March 2020, NJNG entered into treasury lock transactions to fix the benchmark treasury rate associated with a $ 75 million debt tranche that was issued in September 2020.

Settlement of the treasury locks resulted in a $ 6.6 million loss, which was recorded as a component of regulatory assets on the Consolidated Balance Sheets.

The loss is being amortized into earnings over the term of the debt as a component of interest expense on the Consolidated Statements of Operations, which totaled $ 223,000 and $ 50,000 , as of September 30, 2021 and 2020, respectively.

New Jersey Resources Corporation

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (Continued)

Clean Energy Ventures

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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.

Home Services and Other

On January 26, 2018, NJR entered into a variable-for-fixed interest rate swap on its $ 100 million variable rate term loan, which fixed the variable rate at 2.84 percent.

The swap terminated on August 16, 2019, which coincided with the maturity of the debt.

The change in the fair value and the settlement of the interest rate swap was recorded as a component of interest expense on the Consolidated Statements of Operations.

During fiscal 2020, NJR entered into treasury lock transactions to fix the benchmark treasury rate associated with a $ 260 million debt issuance that was finalized in July 2020 and a $ 200 million debt issuance that was finalized in September 2020.

NJR designated its treasury lock contracts as cash flow hedges, therefore, changes in fair value of the effective portion of the hedges were recorded in OCI.

Settlement of the treasury locks in fiscal 2020 resulted in a loss of $ 13.7 million, which was recorded within OCI.

The loss is being amortized into earnings over the term of the debt as a component of interest expense on the Consolidated Statements of Operations, which totaled $ 1.0 million and $ 108,000 , net of tax, as of September 30, 2021 and 2020, respectively.

Fair Value of Derivatives

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Total fair value of derivatives $ 31,020 $ 64,039 $ 38,654 $ 100,642

New Jersey Resources Corporation

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (Continued)

Offsetting of Derivatives

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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 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 Consolidated Balance Sheets but elects not to.

New Jersey Resources Corporation

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (Continued)

The following table summarizes the reported gross amounts, the amounts that the Company has the right to offset but elects not to, financial collateral and the net amounts the Company could present on the Consolidated Balance Sheets but elects not to.

(Thousands) Amounts Presented on Balance Sheets (1)

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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.

(1) Derivative assets and liabilities are presented on a gross basis on the balance sheets 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.

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Foreign currency contracts Natural gas purchases ( 14 ) 238 ( 41 )

Home Services and Other:

Interest rate contracts Interest expense — — ( 233 )

Total unrealized and realized (losses) gains $ ( 12,696 ) $ 56,705 $ ( 7,412 )

Total unrealized and realized gains (losses) $ 9,400 $ ( 12,696 ) $ 56,705

NJNG’s derivative contracts are part of the Company’s risk management activities that relate to its natural gas purchases and BGSS incentive programs.

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Financial commodity contracts 32,868 32,725 ( 3,903 )

Total unrealized and realized (losses) gains $ 34,899 $ ( 1,826 ) $ ( 1,774 )

NJR designates its treasury lock contracts as 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.

Total unrealized and realized gains (losses) $ 39,984 $ 34,899 $ ( 1,826 )

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 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 ratable over the term of the associated debt.

Pre-tax losses of $ 1.4 million were reclassified during both fiscal 2022 and 2021.

The following table reflects the effect of derivative instruments designated as cash flow hedges in OCI as of September 30:

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Physical Commodity 2.7 0.6

Not included in the above table are Energy Services' net notional amount of foreign currency transactions of approximately $( 123,000 ) and $ 5.1 million and 1,358,000 and 960,000 SRECs that were open, as of September 30, 2021 and 2020, respectively.

Not included in the above table are Energy Services’ net notional amount of foreign currency transactions of approximately $( 1,000 ) and $( 123,000 ) and 1.2 million and 1.4 million SRECs that were open as of September 30, 2022 and 2021, respectively.

Broker Margin

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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 as of September 30, by segment, are as follows:

The Company maintains separate broker margin accounts for Natural Gas Distribution and Energy Services.

The balances as of September 30, by reporting segment, are as follows:

(Thousands) Balance Sheet Location 2022 2021

Natural Gas Distribution Restricted broker margin accounts $ 2,790 $ 13,525

Energy Services Restricted broker margin accounts $ 70,050 $ 55,919

Natural Gas Distribution Restricted broker margin accounts - current assets $ 26,138 $ 2,790

Energy Services Restricted broker margin accounts - current assets $ 68,123 $ 70,050

Wholesale Credit Risk

NJNG, Energy Services, 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, the market value of contractual positions with individual counterparties could exceed established credit limits or collateral provided by those counterparties.

NJNG, Energy Services, Clean Energy Ventures and Storage and Transportation 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 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 fails to perform the obligations under its contract, then the Company could sustain a loss.

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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 applicable threshold limits.

There were no derivative instruments with credit-risk-related contingent features that were in a liability position for which collateral is required as of September 30, 2021 and 2020.

There was approximately $ 161,000 of derivative instruments with credit-risk-related contingent features that were in a liability position for which collateral is required as of September 30, 2022.

These amounts differ from the respective net derivative liabilities reflected on the 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.

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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, in other noncurrent assets on the Consolidated Balance Sheets.

Non-current loans receivable are recorded based on what the Company expects to receive, which approximates fair value, in other noncurrent assets on the Consolidated Balance Sheets.

The Company regularly evaluates the credit quality and collection profile of its customers to approximate fair value.

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Inputs include observable municipal and corporate yields, as appropriate for the maturity of the specific issue and the Company’s credit rating.

As of September 30, 2021, NJR discloses its debt within Level 2 of the fair value hierarchy.

As of September 30, 2022, the Company discloses its debt within Level 2 of the fair value hierarchy.

Fair Value Hierarchy

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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.

The Company’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 the Company refers to internally as basis swaps, fixed swaps, futures and financial options that are cleared through a FCM.

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 an 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.

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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.

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Total liabilities at fair value $ 62,188 $ 38,454 $ — $ 100,642

During the third quarter of fiscal 2021, the Company evaluated its equity method investment in PennEast and determined that it was other-than-temporarily impaired.

As of September 30, 2021, the Company recognized an impairment charge of $ 92.0 million, which was determined primarily using significant unobservable inputs (Level 3) in the estimation of fair value, including the probabilities assigned to development options and potential outcomes, forecasts for construction costs and operating revenues, and timing of capital expenditures and in service dates.

See the Company’s discussion of investments in equity method investees in Note 7.

Investments in Equity Investees below for more information regarding the impairment.

New Jersey Resources Corporation

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (Continued)

INVESTMENTS IN EQUITY INVESTEES

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$ 106,571 $ 109,050

PennEast — 5,479

Total $ 106,571 $ 114,529

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

(2) Includes a deferred tax component related to AFUDC equity of $ 4.6 million for September 30, 2020.

As a result of the impairment of the equity method investment in PennEast, the deferred tax component was reversed and charged to earnings as of September 30, 2021.

New Jersey Resources Corporation

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (Continued)

Steckman Ridge

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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.

PennEast received a Certificate of Public Convenience and Necessity for the project from FERC on January 19, 2018.

On June 29, 2021, the Supreme Court ruled in favor of PennEast reversing the earlier decision by the Third Circuit on the use of eminent domain to acquire state owned lands for pipeline construction and remanding the case back to the Third Circuit for further proceedings.

Despite the favorable outcome from the Supreme Court, PennEast continues to experience regulatory and legal challenges.

As a result, the Company evaluated its equity investment in PennEast for impairment as of June 30, 2021, and determined that it was other-than-temporarily impaired.

The Company estimated the fair value of its investment in PennEast using probability weighted scenarios assigned to discounted future cash flows.

The impairment is 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 of which remains uncertain, 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.

As of September 30, 2021, the Company recognized an other-than-temporary impairment charge of $ 92.0 million, or approximately $ 74.5 million, net of income taxes.

The other-than-temporary impairment is recorded in equity in (losses) earnings from affiliates in the Consolidated Statements of Operations.

On September 27, 2021, the PennEast partnership determined that this project is no longer supported, and all further development has ceased.

Given that construction of the pipeline will not continue, the Company re-evaluated its investment for an additional other-than temporary impairment as of September 30, 2021.

It was determined that no additional impairment was needed as the current value of the investment noted above represents the best estimate of the salvage value of the remaining assets of the project.

It is possible that future developments could impact the fair value and could result in the recognition of additional impairment charges.

New Jersey Resources Corporation

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (Continued)

During the third quarter of fiscal 2021, 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 Consolidated Statements of Operations.

In September 2021, the PennEast partnership determined that this project is no longer supported, and all further development has ceased.

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 FERC it is no longer developing the project.

During fiscal 2022, the PennEast board of managers approved cash distributions to members of the partnership following the sale of certain project-related assets and refunds of interconnection fees received from interstate pipelines.

The return of capital received by the Company, which totaled $ 11.0 million, reduced the remaining carrying value of its equity method investment in PennEast to zero in the Consolidated Balance Sheet, with the excess recorded in equity in earnings (loss) of affiliates in the Consolidated Statements of Operations.

The following is the summarized financial information for Steckman Ridge and PennEast for fiscal years ended September 30:

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Noncurrent liabilities $ 500 $ 500

New Jersey Resources Corporation

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (Continued)

EARNINGS PER SHARE

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2.97 % Series HHH September 1, 2060 50,000 50,000

Finance lease obligation-buildings June 30, 2037 — 47,597

2.97 % Series III October 28, 2051 50,000 —

3.07 % Series JJJ October 28, 2061 50,000 —

4.37 % Series LLL May 27, 2037 50,000 —

4.71 % Series MMM May 27, 2052 50,000 —

Finance lease obligation-meters Various dates 30,290 20,135

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3.13 % Unsecured senior notes September 1, 2031 120,000 120,000

4.38 % Unsecured senior notes June 23, 2027 110,000 —

3.64 % Unsecured senior notes September 19, 2034 50,000 —

Debt issuance costs ( 3,753 ) ( 3,269 )

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Thereafter $ 760,000 $ 1,172,845

On June 23, 2022, NJR entered into a Note Purchase Agreement under which NJR issued $ 110 million, Series 2022A senior notes at a fixed rate of 4.38 percent, maturing in 2027.

On September 16, 2022, NJR entered into another Note Purchase Agreement under which NJR issued $ 50 million, Series C senior notes at a fixed rate of 3.64 percent, maturing in 2034.

The senior notes are unsecured and guaranteed by certain unregulated subsidiaries of NJR.

First Mortgage Bonds

NJNG and Trustee entered into the Mortgage Indenture, dated September 1, 2014, which secures all of the outstanding First Mortgage Bonds issued by NJNG.

NJNG and Trustee entered into the Mortgage Indenture, dated September 1, 2014, which secures all of the outstanding FMBs issued by NJNG.

The Mortgage Indenture provides a direct first mortgage lien upon substantially all of the operating properties and franchises of NJNG (other than excepted property, such as cash on hand, choses-in-action, securities, rent, natural gas meters and certain materials, supplies, appliances and vehicles), subject only to certain permitted encumbrances.

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New Jersey Administrative Code 14:4-4.7 states that a public utility cannot issue dividends, without regulatory approval, if its equity-to-total-capitalization ratio falls below 30 percent.

As of September 30, 2021, NJNG’s equity to total capitalization ratio is 52.9 percent and has the ability to issue up to $ 1.2 billion of FMB under the terms of the Mortgage Indenture.

As of September 30, 2022, NJNG’s equity-to-total-capitalization ratio is 53.7 percent and NJNG has the capacity to issue up to $ 1.3 billion of FMB under the terms of the Mortgage Indenture.

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.

On May 27, 2022, 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 4.37 percent, maturing in 2037, and $ 50 million were issued at an interest rate of 4.71 percent, maturing in 2052.

On October 24, 2022, NJNG entered into a Note Purchase Agreement for $ 125 million of its senior notes at an interest rate of 5.47 percent, maturing in 2052.

The senior notes are secured by an equal principal amount of NJNG’s FMBs issued under NJNG’s Mortgage Indenture.

2 unchanged sentences

NJNG records a finance lease liability 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.

NJNG exercised early purchase options with respect to certain outstanding meter leases by making final principal payments of $ 1.2 million for both fiscal 2021 and 2020.

NJNG exercised early purchase options with respect to certain outstanding meter leases by making final principal payments of $ 1.1 million and $ 1.2 million for fiscal 2022 and 2021, respectively.

There were no natural gas meter sale leasebacks recorded during fiscal 2021.

New Jersey Resources Corporation

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (Continued)

Contractual commitments for finance lease payments, as of the fiscal years ended September 30, are as follows:

(Thousands) Lease Payments

Thereafter 3,262

Subtotal 32,034

4 unchanged sentences

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 SREC, TRECs and energy sales.

New Jersey Resources Corporation

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (Continued)

ITCs and other tax benefits associated with these solar projects are transferred to the buyer, if applicable;

10 unchanged sentences

Total $ 111,576

Short-term Debt

New Jersey Resources Corporation

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (Continued)

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, which 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 NJNG’s commercial paper program and credit facility as of September 30, are as follows:

6 unchanged sentences

$ 440,177 $ 270,312

Bank revolving credit facilities (3)

$ — $ 425,000 December 2023

Notes outstanding at end of period $ — $ 125,350

Weighted average interest rate at end of period — % 1.49 %

Amount available at end of period (4)

$ — $ 289,356

Bank revolving credit facilities (3)

$ — $ 250,000 April 2021

Notes outstanding at end of period $ — $ —

Bank term loan credit agreement $ 150,000 $ — February 2023

Loans outstanding at end of period $ 150,000 $ —

Weighted average interest rate at end of period 3.81 % — %

5 unchanged sentences

Amount available at end of period (4)

Bank revolving credit facilities (3)

$ — $ 250,000 December 2023

Commercial paper outstanding at end of period $ — $ —

Weighted average interest rate at end of period — % — %

Amount available at end of period (5)

$ 175,469 $ 91,069

(1) Committed credit facilities, which require commitment fees ranging from 0.10 percent on the unused amounts.

(2) Letters of credit outstanding total $ 10.6 million as of September 30, 2021, which reduces amount available by the same amount.

(3) Committed credit facilities, which require commitment fees ranging from 0.075 percent on the unused amounts

(4) Letters of credit outstanding total $ 10.3 million as of September 30, 2020, which reduces amount available by the same amount.

(1) Committed credit facilities, which require commitment fees of 0.10 percent on the unused amounts.

(2) Letters of credit outstanding total $ 9.7 million and $ 10.6 million as of September 30, 2022 and September 30, 2021, respectively, which reduces amount available by the same amount.

(3) Committed credit facilities, which require commitment fees of 0.075 percent on the unused amounts.

(4) Letters of credit outstanding total $ 731,000 as of both September 30, 2022 and 2021, which reduces amount available by the same amount.

1 unchanged sentence

Neither NJNG nor the results of its operations are obligated or pledged to support the NJR credit or debt shelf facilities.

New Jersey Resources Corporation

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (Continued)

On September 2, 2021, NJR entered into a Second Amended and Restated Credit Agreement governing a $ 500 million NJR Credit Facility.

The agreement replaces a $ 425 million revolving credit facility that was scheduled to expire on December 5, 2023, and the new 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 minimum increments of $ 50 million increments up to a maximum of $ 250 million.

During fiscal 2021, NJR entered into a Second Amended and Restated Credit Agreement governing a $ 500 million NJR Credit Facility, which was to expire on September 2, 2026.

The NJR Credit Facility is subject to two mutual options for a one-year extension beyond that date and includes an accordion feature, which allows 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.

The NJR Credit Facility also permits the borrowing of revolving loans and swingline loans, as well as a $ 75 million sublimit for the issuance of letters of credit.

On August 30, 2022, NJR amended the Second Amended and Restated Credit Agreement to $ 650 million and extended the maturity date of the facility to September 2, 2027.

The amendment also increased the swingline to $ 70 million from $ 60 million and moved to SOFR as the benchmark rate, replacing the existing LIBOR.

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 September 30, 2021, NJR had eight letters of credit outstanding totaling $ 10.6 million on behalf of Energy Services and Clean Energy Ventures.

As of September 30, 2022, NJR had seven letters of credit outstanding totaling $ 9.7 million on behalf of Energy Services and Clean Energy Ventures.

These letters of credit reduce the amount available under NJR’s committed credit facility by the same amount.

NJR does not anticipate that these letters of credit will be drawn upon by the counterparties, and they will be renewed as necessary.

Energy Services’ letters of credit are used for margin requirements for natural gas transactions, collateral and security deposit for retail natural gas sales and expire on dates ranging from December 2021 to September 2022.

Energy Services’ letters of credit are used for margin requirements for natural gas transactions, collateral and security deposit for retail natural gas sales, and they expire on dates ranging from September 2023 to December 2023.

Neither NJNG nor the results of its operations are obligated or pledged to support the NJR credit or debt shelf facilities.

On September 2, 2021, NJNG entered into a Second Amended and Restated Credit Agreement governing a $ 250 million, NJNG Credit Facility.

The agreement refinances a $ 250 million revolving credit facility that was scheduled to expire on December 5, 2023, but has now been terminated.

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.

New Jersey Resources Corporation

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (Continued)

During fiscal 2021, NJNG entered into a Second Amended and Restated Credit Agreement governing a $ 250 million, NJNG Credit Facility, which was to expire on September 2, 2026.

The NJNG Credit Facility is subject to two mutual options for a one-year extension beyond that date and 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 September 30, 2021, NJNG has two letters of credit outstanding for $ 731,000 .

NJNG’s letters of credit are used as collateral for remediation projects and expire in August 11, 2022.

These letters of credit reduce 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 counterparty and they will be renewed as necessary.

On August 30, 2022, NJNG amended the Second Amended and Restated Credit Agreement to extend the maturity date of the facility to September 2, 2027, and moved to SOFR as the benchmark rate, replacing the existing LIBOR.

As of September 30, 2022, NJNG has two letters of credit outstanding for 731,000 , which reduced the amount available under the NJNG Credit Facility by the same amount.

NJNG does not anticipate that these letters of credit will be drawn upon by the counterparties.

STOCK-BASED COMPENSATION

12 unchanged sentences

Total, net of tax $ 11,203 $ 5,536 $ 4,636

(1) Excludes additional tax (expense) benefit related to delivered shares of $( 159,000 ), $ 647,000 and $ 1.3 million as of September 30, 2021, 2020 and 2019, respectively.

New Jersey Resources Corporation

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (Continued)

(1) Excludes additional tax (expense) benefit related to delivered shares of $( 144,000 ), $( 159,000 ) and $ 647,000 as of September 30, 2022, 2021 and 2020, respectively.

Performance Share Units

7 unchanged sentences

There is approximately $ 4.4 million of deferred compensation related to unvested performance shares that is expected to be recognized over the weighted average period of 1.7 years.

New Jersey Resources Corporation

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (Continued)

The following table summarizes the performance share activity under the stock award and incentive plans for the past three fiscal years:

15 unchanged sentences

(1) The number of common shares issued related to certain performance shares may range from zero to 150 percent of the number of shares shown in the table above based on the Company’s achievement of performance goals.

(2) As certified by the Company’s Leadership and Compensation Committee on November 12, 2019, the number of common shares related to performance shares earned was 119 percent, or 43,641 shares, the number of common shares earned related to NFE performance was 117 percent or 26,413 shares, and the number of common shares earned related to Performance Based Restricted Stock was 100 percent or 24,468 shares.

(2) As certified by the Company’s Leadership and Compensation Committee on November 9, 2020, there were no common shares earned related to TSR performance, the number of common shares earned related to NFE performance was 114 percent or 28,513 shares, and the number of common shares earned related to Performance Based Restricted Stock was 100 percent or 11,139 shares.

Each award earned excludes accumulated dividends.

3 unchanged sentences

The number represented on this line is the target number of 100 percent.

(4) As certified by the Company’s Leadership and Compensation Committee on November 10, 2021, there were no common shares earned related to TSR performance, the number of common shares earned related to NFE performance was 93 percent or 31,116 shares and the number of common shares earned related to Performance Based Restricted Stock was 100 percent or 25,982 shares.

(4) As certified by the Company’s Leadership and Compensation Committee on November 9, 2022, the number of common shares earned related to TSR performance was 112 percent or 30,472 shares, the number of common shares earned related to NFE performance was 105 percent or 26,282 shares and the number of common shares earned related to Performance Based Restricted Stock was 100 percent or 28,965 shares.

Each award earned excludes accumulated dividends.

3 unchanged sentences

The Company estimated the fair value of these grants on the date of grant using a lattice model.

Performance condition grants

New Jersey Resources Corporation

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (Continued)

are initially fair valued at the Company’s stock price on grant date, and are subsequently adjusted for actual achievement of the performance goals.

Performance condition grants are initially fair valued at the Company’s stock price on grant date, and are subsequently adjusted for actual achievement of the performance goals.

Restricted Stock Units

In fiscal 2021, the Company granted 67,726 shares of restricted stock that vest annually over a three-year period beginning in October 2021.

In fiscal 2020, the Company granted 42,478 shares of restricted stock that vest annually over a three-year period beginning in October 2020.

In fiscal 2019, the Company granted 29,222 shares of restricted stock that vest annually over a three-year period beginning in October 2019.

In fiscal 2019, the Company also granted 6,062 shares of restricted stock that vest annually over a three-year period beginning in April 2020.

The Company granted 54,826 , 67,726 and 42,478 shares of restricted stock during fiscal 2022, 2021 and 2020, respectively.

The shares vest annually over a three-year period beginning in October of the fiscal year in which they were granted.

There is approximately $ 1.0 million of deferred compensation related to unvested restricted stock shares that is expected to be recognized over the weighted average period of 1.8 years.

New Jersey Resources Corporation

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (Continued)

The following table summarizes the restricted stock activity under the stock award and incentive plans for the past three fiscal years:

24 unchanged sentences

Delivered ( 57,673 ) $ 35.25 $ 2,423

Forfeited ( 7,195 ) $ 44.41 —

Outstanding at September 30, 2020 228,246 $ 46.32 —

4 unchanged sentences

Delivered ( 163,499 ) $ 47.95 $ 6,167

Forfeited ( 6,818 ) 40.33 —

Outstanding at September 30, 2022 231,267 $ 39.16 —

New Jersey Resources Corporation

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (Continued)

Non-Employee Director Stock

Effective January 2020, non-employee director compensation includes an annual equity retainer that is awarded at the time of the Company’s annual meeting of shareowners.

Non-employee director compensation includes an annual equity retainer that is awarded at the time of the Company’s annual meeting of shareowners.

The shares vest upon the earlier of the first anniversary of the grant date or the date of the Company’s next annual meeting of shareowners following the grant date and are subsequently amortized to expense over a 12-month period.

During fiscal years 2019 and 2018, the equity portion of non-employee director compensation was awarded in shares of NJR common stock.

The shares vested immediately and were subsequently amortized to expense over a 12-month period.

The following summarizes non-employee director share awards for the past three fiscal years:

3 unchanged sentences

(1) Approximately $ 300,000 of expense remains as of September 30, 2022, to be recognized through December 31, 2022.

New Jersey Resources Corporation

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (Continued)

EMPLOYEE BENEFIT PLANS

6 unchanged sentences

The Company maintains an unfunded nonqualified PEP that was established to provide employees with the full level of benefits as stated in the qualified plan without reductions due to various limitations imposed by the provisions of federal income tax laws and regulations.

There were no plan assets in the nonqualified plan due to the nature of the plan.

There are no plan assets in the nonqualified plan due to the nature of the plan.

The Company’s funding policy for its pension plans is to contribute at least the minimum amount required by the Employee Retirement Income Security Act of 1974, as amended.

In fiscal 2021 and 2020, the Company had no minimum funding requirements.

The Company made no discretionary contributions to the pension plans in fiscal 2021 or 2020.

The Company does not expect to be required to make additional contributions to fund the pension plans over the following two fiscal years based on current actuarial assumptions;

In fiscal 2022 and 2021, the Company had no minimum funding requirements and did not make any discretionary contributions to the pension plans.

The Company does not expect to be required to make additional contributions to fund the pension plans during the next fiscal year 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.

4 unchanged sentences

The Affordable Care Act was enacted in March 2010 and created an excise tax applicable to high-cost health plans, commonly known as the Cadillac Tax.

Employers who sponsor health plans that have an annual cost that exceeded an amount defined by the law would pay a 40 percent tax on the excess plan costs beginning in 2022.

Beginning in 2022, employers who sponsor health plans that have an annual cost that exceeded an amount defined by the law pay a 40 percent tax on the excess plan costs.

The 2020 federal spending package permanently eliminated the Affordable Care Act-mandated Cadillac tax on high-cost employer-sponsored health coverage.

12 unchanged sentences

59 27 423 451

Actuarial (gain) loss ( 7,319 ) 29,738 ( 4,715 ) ( 23,226 )

Actuarial (gain) ( 109,320 ) ( 7,319 ) ( 77,775 ) ( 4,715 )

Benefits paid, net of retiree subsidies received ( 13,386 ) ( 12,167 ) ( 4,765 ) ( 7,839 )

2 unchanged sentences

Fair value of plan assets at beginning of year $ 355,284 $ 307,968 $ 114,183 $ 96,406

Actual return on plan assets 58,874 30,632 18,144 6,872

Actual (loss) return on plan assets ( 58,239 ) 58,874 ( 15,996 ) 18,144

Employer contributions 628 548 6,082 7,198

4 unchanged sentences

Amounts recognized on Consolidated Balance Sheets

Postemployment employee (liability)

Postemployment employee benefit asset

Noncurrent $ 4,388 $ — $ — $ —

Postemployment employee benefit liability

Current $ ( 578 ) $ ( 587 ) $ ( 900 ) $ ( 900 )

2 unchanged sentences

(1) Includes the Company’s PEP.

(2) Prior to July 1, 1998, employees were eligible to elect an additional participant contribution to enhance their benefits and contributions made during the periods were insignificant.

(2) Employees hired prior to July 1, 1998, that were eligible to elect an additional participant contribution to enhance their benefits, and contributions made during the periods were immaterial.

The actuarial gains on the Company’s pension and OPEB are due primarily to an increase in the discount rate used to measure the benefit obligation.

The Company recognizes a liability for its underfunded benefit plans as required by ASC 715, Compensation - Retirement Benefits .

The Company records the offset to regulatory assets for the portion of liability relating to NJNG and to accumulated other comprehensive income for the portion of the liability related to its unregulated operations.

The following table summarizes the amounts recognized in regulatory assets and accumulated other comprehensive income as of September 30:

The Company records the offset to regulatory assets for the portion of liability relating to NJNG and to accumulated OCI for the portion of the liability related to its unregulated operations.

The following table summarizes the amounts recognized in regulatory assets and accumulated OCI as of September 30:

Regulatory Assets Accumulated Other Comprehensive Income (Loss)

2 unchanged sentences

Amounts arising during the period:

Net actuarial loss (gain) 11,953 ( 21,974 ) 7,731 ( 1,614 )

Net actuarial (gain) ( 39,006 ) ( 16,286 ) ( 7,036 ) ( 76 )

Amounts amortized to net periodic costs:

10 unchanged sentences

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (Continued)

The amounts in regulatory assets and accumulated other comprehensive income not yet recognized as components of net periodic benefit cost as of September 30 are:

The amounts in regulatory assets and accumulated OCI not yet recognized as components of net periodic benefit cost as of September 30 are:

Regulatory Assets Accumulated Other Comprehensive

2 unchanged sentences

(Thousands) 2022 2021 2022 2021 2022 2021 2022 2021

Net actuarial loss $ 55,922 $ 103,197 $ 60,468 $ 83,600 $ 22,790 $ 33,004 $ 12,707 $ 13,847

Net actuarial loss (gain) $ 35,157 $ 55,922 $ 20,110 $ 60,468 $ 5,003 $ 22,790 $ ( 6,822 ) $ 12,707

Prior service cost (credit) 164 265 — ( 133 ) — — — ( 11 )

Total $ 35,321 $ 56,187 $ 20,110 $ 60,335 $ 5,003 $ 22,790 $ ( 6,822 ) $ 12,696

To the extent the unrecognized amounts in accumulated other comprehensive income or regulatory assets exceed 10 percent of the greater of the benefit obligation or the fair value of plan assets, an amortized amount over the average expected future working lifetime of the active plan participants is recognized.

Amounts included in regulatory assets and accumulated other comprehensive income expected to be recognized as components of net periodic benefit cost in fiscal 2022 are as follows:

To the extent the unrecognized amounts in accumulated OCI or regulatory assets exceed 10 percent of the greater of the benefit obligation or the fair value of plan assets, an amortized amount over the average expected future working lifetime of the active plan participants is recognized.

Amounts included in regulatory assets and accumulated OCI expected to be recognized as components of net periodic benefit cost in fiscal 2023 are as follows:

Regulatory Assets Accumulated Other Comprehensive Income (Loss)

(Thousands) Pension OPEB Pension OPEB

Net actuarial loss $ 5,843 $ 4,577 $ 2,902 $ 1,107

Prior service cost (credit) 102 ( 133 ) — ( 11 )

Net actuarial (gain) loss $ ( 36 ) $ — $ 217 $ —

Total $ ( 36 ) $ — $ 217 $ —

The accumulated benefit obligation for the pension plans, including the PEP, exceeded the fair value of plan assets during fiscal 2020.

The projected benefit and accumulated benefit obligations and the fair value of plan assets as of September 30, are as follows:

41 unchanged sentences

(1) 3.00 / 3.50 %

(1) Percentages for represented and nonrepresented plans, respectively.

When measuring its projected benefit obligations, the Company uses an aggregate discount rate at which its obligation could be effectively settled.

(1) Percentages for represented and non-represented plans, respectively.

When measuring its PBO, the Company uses an aggregate discount rate at which its obligation could be effectively settled.

The Company determines a single weighted average discount rate based on a yield curve comprised of rates of return on a population of high quality debt issuances (AA- or better) whose cash flows (via coupons or maturities) match the timing and amount of its expected future benefit payments.

21 unchanged sentences

Fixed income 33 32 40

Other assets 11 7 5

Collective investment trusts at NAV 16 20 7

Total 100 % 100 % 100 %

35 unchanged sentences

Long Duration Fund 59,084 59,084 — —

Total assets at in the fair value hierarchy $ 329,635 329,635 $ 107,197 107,197

Total assets in the fair value hierarchy $ 225,997 225,997 $ 83,170 83,170

Investments measured at net asset value

Common collective trusts 25,649 6,986

Collective investment trusts 58,350 16,566

Total assets at fair value $ 284,347 $ 99,736

18 unchanged sentences

Long Duration Fund 93,849 93,849 — —

Total assets at in the fair value hierarchy $ 292,886 292,886 $ 92,295 92,295

Total assets in the fair value hierarchy $ 329,635 329,635 $ 107,197 107,197

Investments measured at net asset value

Common collective trusts 15,082 4,111

Collective investment trusts 25,649 6,986

Total assets at fair value $ 355,284 $ 114,183

4 unchanged sentences

Registered Investment Companies — Equity and fixed income funds valued at the NAV of shares held by the plan at year end as reported on the active market on which the individual securities are traded.

Common collective trusts — The NAV for common collective trusts is provided by the Trustee and is used as a practical expedient to estimate fair value.

Collective investment trusts — The NAV for collective investment trusts is provided by the Trustee and is used as a practical expedient to estimate fair value.

The NAV is based on the value of the underlying assets owned by the fund less liabilities.

20 unchanged sentences

Additions 161 281 5,697 68

Change in estimated useful life — — — ( 1,160 )

Change in assumptions 7,339 — 6,151 —

4 unchanged sentences

Total $ 15,213

The income tax provision (benefit) from operations for the fiscal years ended September 30, consists of the following:

The income tax provision from operations for the fiscal years ended September 30, consists of the following:

(Thousands) 2022 2021 2020

12 unchanged sentences

$ 212,506 $ 225,036

Federal net operating losses (2)

State net operating losses 36,950 38,108

36 unchanged sentences

The Company and one or more of its subsidiaries files or expects to file income and/or franchise tax returns in the U.S.

Federal jurisdiction and in the states of Colorado, Connecticut, Delaware, Louisiana, Maryland, New Jersey, New York, North Carolina, Pennsylvania, Rhode Island, Texas, Mississippi and Virginia.

federal jurisdiction and in the states of Colorado, Connecticut, Delaware, Louisiana, Maryland, Mississippi, New Jersey, New York, North Carolina, Pennsylvania, Rhode Island, Texas and Virginia.

The Company neither files in, nor believes it has a filing requirement in, any foreign jurisdictions other than Canada.

Due to certain available tax treaty benefits, the Company incurs no tax liability in Canada.

The Company’s federal income tax returns through fiscal 2017 have either been reviewed by the IRS, or the related statute of limitations has expired and all matters have been settled.

Federal income tax returns for periods subsequent to fiscal 2017 are open to examination by the IRS.

For all periods subsequent to those ended September 30, 2017, the Company’s state income

New Jersey Resources Corporation

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (Continued)

tax returns are statutorily open to examination in all applicable states with the exception of Colorado, New Jersey and Texas.

The Company’s U.S.

federal income tax returns through fiscal 2018 have either been reviewed by the IRS, or the related statute of limitations has expired and all matters have been settled.

federal income tax returns for periods subsequent to fiscal 2018 are open to examination by the IRS.

For all periods subsequent to those ended September 30, 2018, the Company’s state income tax returns are statutorily open to examination in all applicable states with the exception of Colorado, New Jersey and Texas.

In Colorado, New Jersey and Texas, all periods subsequent to September 30, 2017, are statutorily open to examination.

NJR evaluates its tax positions to determine the appropriate accounting and recognition of potential future obligations associated with unrecognized tax benefits.

A tax benefit claimed, or expected to be claimed, on a tax return may be recognized if it is more likely than not that the position will be upheld upon examination by the applicable taxing authority.

NJR evaluates its tax positions to determine the appropriate accounting and recognition of potential future obligations associated with uncertain tax positions.

A tax benefit claimed, or expected to be claimed, on a tax return may be recognized only if it is more likely than not that the position will be upheld upon examination by the applicable taxing authority.

Interest and penalties related to unrecognized tax benefits, if any, are recognized within income tax expense, and accrued interest and penalties are recognized within other noncurrent liabilities on the Consolidated Balance Sheets.

11 unchanged sentences

signed the CARES Act, which is aimed at providing emergency assistance and health care for individuals, families, and businesses affected by the COVID-19 pandemic and generally supporting the U.S.

The CARES Act, among other things, includes several business tax provisions which include, but are not limited to modifications of federal net operating loss carrybacks and deductibility, changes to prior year refundable alternative minimum tax liabilities, increase of limitations on business interest deductions from 30 percent to 50 percent of earnings before interest, taxes, depreciation, and amortization, technical corrections of the classification of qualified improvement property making them eligible for bonus depreciation, increase of the limits on charitable contribution deductions from 10 percent to 25 percent of adjusted taxable income, modifications of the treatment of federal loans, loan guarantees, and other investments, suspension of industry specific excise taxes, deferral of the company portion of OASDI, and implementation of a refundable employee retention tax credit.

The CARES Act, among other things, includes several business tax provisions which include, but are not limited to modifications of federal net operating loss carrybacks and deductibility;

changes to prior year refundable alternative minimum tax liabilities;

increase of limitations on business interest deductions from 30 percent to 50 percent of earnings before interest, taxes, depreciation and amortization;

technical corrections of the classification of qualified improvement property making them eligible for bonus depreciation;

increase of the limits on charitable contribution deductions from 10 percent to 25 percent of adjusted taxable income;

modifications of the treatment of federal loans, loan guarantees and other investments;

suspension of industry specific excise taxes;

deferral of the company portion of OASDI;

and implementation of a refundable employee retention tax credit.

The CARES Act provides for the delay in the required deposit of the employer portion of the OASDI payroll tax from the date of enactment through the end of 2020.

Of the taxes that the Company can defer, 50 percent of the deferred taxes are required to be deposited by the end of 2021 and the remaining 50 percent are required to be deposited by the end of 2022.

Of the taxes that the Company can defer, 50 percent of the deferred taxes were required to be deposited by the end of 2021 and the remaining 50 percent were required to be deposited by the end of 2022.

Additionally, the CARES Act provides a refundable tax credit, the employee retention tax credit, to certain employers who are ordered by a competent governmental authority to suspend or reduce business operations due to concern about the spread of COVID-19 or suffered a significant decline in the business during a calendar quarter during 2020 compared to the same calendar quarter during the previous year.

As of September 30, 2021 and 2020, the Company deferred approximately $ 5.1 million and $ 3.1 million, respectively, related to the employer portion of the OASDI tax.

As of September 30, 2021, the Company deferred approximately $ 5.1 million related to the employer portion of the OASDI tax.

During fiscal 2022, the Company made the first of two installment payments, which reduced the balance to $ 2.7 million as of September 30, 2022.

The second installment payment will be made during the first quarter of fiscal 2023.

New Jersey Resources Corporation

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (Continued)

American Rescue Plan Act

On March 11, 2021, the President of the U.S.

1 unchanged sentence

It also expanded the scope of Section 162(m) of the Internal Revenue Code, which imposes a $1.0 million deduction limit on compensation paid to covered employees from the top five officers, to also include the next five highest paid employees for tax years beginning after December 31, 2026.

New Jersey Resources Corporation

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (Continued)

Inflation Reduction Act

On August 16, 2022, the President of the U.S.

signed the Inflation Reduction Act, which contains provisions addressing inflation, clean energy, healthcare and taxes beginning in 2023.

The Inflation Reduction Act imposes a 15 percent minimum tax rate on corporations with higher than $1 billion of annual income, along with a 1 percent excise tax on corporate stock repurchases.

The Inflation Reduction Act raised the ITC from 26 percent to 30 percent through the end of 2032, dropping to 26 percent for property under construction before the end of 2033 and to 22 percent for property under construction before the end of 2034.

The ITC expires starting in 2035 unless it is renewed.

There are additional opportunities to increase the credit amount for certain facilities that are placed in service after December 31, 2022.

The credit amount can be increased by 10 percent if certain domestic content requirements are satisfied or if the facility is located in an energy community, such as a brownfield site.

ITCs are also expanded to include stand-alone energy storage projects without being integrated into a solar facility, allowing solar to claim PTCs that are a production-based credit extending for 10 years following the placed-in-service date of the facility and introduced the concept of transferability of tax credits, providing an additional option to monetize such credits.

The Company is currently evaluating the impacts of the Inflation Reduction Act on its financial position, results of operations and cash flows.

Other Tax Items

As of September 30, 2020, the Company had federal income tax net operating losses of approximately $ 134.0 million.

Federal net operating losses can generally be carried back two years and forward 20 years and will begin to expire in fiscal 2036, with the remainder expiring by 2038.

During fiscal 2021, the Company exercised its ability to carryback these federal net operating losses to offset taxable income in prior periods.

For the net operating losses carried back, the Company estimated the portion of taxes considered refundable totaling approximately $ 22.8 million as of September 30, 2020, which was recorded as a component of prepaid and accrued taxes on the Consolidated Balance Sheets.

The remaining $ 24.1 million that the Company has determined not to be refundable in cash, was recaptured as ITCs that were previously utilized to offset expense.

As of September 30, 2022 and 2021, the Company has tax credit carryforwards of approximately $ 211.8 million and $ 224.2 million, respectively, which each have a life of 20 years.

2 unchanged sentences

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.

these state carry-forward periods range from seven to 20 years, with the majority expiring after 2035.

The Company expects to utilize this entire carryforward, other than as described below.

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.

The impairment of the equity method investment in PennEast created potential net capital loss attributes totaling approximately $ 56.6 million and $ 61.8 million as of September 30, 2022 and 2021, respectively, 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 September 30, 2022, the Company has a valuation allowance totaling $ 22.2 million comprised of approximately $ 17.2 million, related to the recognition of state net operating loss carryforwards, which primarily relate to New Jersey and approximately $ 5.1 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, 2020, the Company had a valuation allowance totaling $ 17.6 million related to the state net operating loss carryforwards, as previously discussed.

As of September 30, 2021, the Company had a valuation allowance totaling $ 23.6 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.

The Consolidated Appropriations Act extended the 30 percent ITC for solar property that is under construction on or before December 31, 2019.

1 unchanged sentence

The credit declined 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 2021 and 2022.

The credit will drop to 22 percent for property under construction before the end of 2023.

After 2023 the ITC will be reduced to 10 percent.

The Consolidated Appropriations Act of 2021 extended the 26 percent tax credit for property under construction during 2021 and 2022.

The Inflation Reduction Act raised the ITC from 26 percent to 30 percent through the end of 2032, as previously stated.

New Jersey Resources Corporation

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (Continued)

Lessee Accounting

The Company determines if an arrangement is a lease at inception based on whether the Company has the right to control the use of an identified asset, the right to obtain substantially all of the economic benefits from the use of the asset and the right to direct the use of the asset and accounts for leases in accordance with ASC 842, Leases .

After the criteria is satisfied, the Company accounts for these arrangements as leases in accordance 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.

5 unchanged sentences

Lease expense and lease income are recognized on a straight-line basis over the lease term for operating leases.

New Jersey Resources Corporation

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (Continued)

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.

4 unchanged sentences

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 15 and 35 years and may include multiple options to extend the terms for an additional five to ten years .

The Company’s office leases vary in duration, ranging from one to 17 years and may or may not include extension or early purchase options.

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, most of which are for a term of five years .

Equipment leases include general office equipment that also vary in duration, with an average term of seven 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.

4 unchanged sentences

The Company’s lease agreements do not contain any material residual value guarantees, material restrictions or material covenants.

There are no material lease transactions with related parties.

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 Consolidated Statements of Operations for the fiscal year ended September 30:

10 unchanged sentences

(1) Net of capitalized costs.

New Jersey Resources Corporation

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (Continued)

The following table presents supplemental cash flow information related to leases for the fiscal year ended September 30:

4 unchanged sentences

Financing cash flows for finance leases $ 7,145 $ 8,180

Assets obtained or modified for operating lease liabilities totaled approximately $ 46.1 million and $ 76.6 million during fiscal 2021 and 2020, respectively.

Assets obtained or modified for operating lease liabilities totaled approximately $ 911,000 and $ 46.1 million during fiscal 2022 and 2021, respectively.

Assets obtained or modified through finance lease liabilities totaled $ 17.3 million during fiscal 2022.

There were no assets obtained or modified through finance lease liabilities during fiscal 2021.

Assets obtained or modified through finance lease liabilities totaled approximately $ 49.7 million during fiscal 2020.

New Jersey Resources Corporation

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (Continued)

The following table presents the balance and classifications of the Company’s right of use assets and lease liabilities included in the Consolidated Balance Sheets for the fiscal year ended September 30:

8 unchanged sentences

Total lease liabilities $ 173,234 $ 165,798

NJNG was a lessee as part of a lease agreement for its headquarters building with a 16-year term that would have expired in June 2037.

On May 26, 2021, NJNG exercised a purchase option of the lease to acquire the building for $ 41.1 million, which is included in utility plant on the Consolidated Balance Sheets.

Following the purchase of the building, NJNG removed the present value of the future lease payments of $ 46.9 million, which was reflected within utility plant and $ 45.6 million as presented within finance lease liabilities on the Consolidated Balance Sheets.

For operating lease assets and liabilities, the weighted average remaining lease term was 29.2 years and 29.6 years and the weighted average discount rate used in the valuation over the remaining lease term was 3.2 percent for both September 30, 2022 and 2021.

9 unchanged sentences

Total future lease payments 227,705 32,034

Liability accretion

( 84,761 ) ( 1,744 )

Total lease liability $ 142,944 $ 30,290

On August 14, 2020, the Company entered into a partial termination agreement of its lease contracts associated with its natural gas cavern storage.

As a result of the partial termination, the Company paid $ 28.5 million to the lease owners receiving in return a 50 year non-compete agreement.

The Company treated these Leaf River lease arrangements as one combined contract and its termination was recognized as remeasurement of the remaining lease assets that will be amortized over the remaining part of the lease lives.

New Jersey Resources Corporation

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (Continued)

COMMITMENTS AND CONTINGENT LIABILITIES

Cash Commitments

NJNG has entered into long-term contracts, expiring at various dates through November 2038, for the supply, transportation and storage of natural gas.

NJNG has entered into long-term contracts, expiring at various dates through September 2039, for the supply, transportation and storage of natural gas.

These contracts include annual fixed charges of approximately $ 196.6 million at current contract rates and volumes, which are recoverable through BGSS.

New Jersey Resources Corporation

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (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.

For the purpose of securing storage and pipeline capacity, Energy Services 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.

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Total $ 504,860 $ 215,578 $ 195,054 $ 173,663 $ 158,978 $ 1,084,260

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

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.

As of September 30, 2022, the Company’s future minimum lease payments under various operating leases will not be more than $ 8.0 million annually for the next five years and $ 191.0 million in the aggregate for all years thereafter.

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NJNG is responsible for the remedial cleanup of certain 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 NJDEP regulations.

NJNG is currently involved in administrative proceedings with the NJDEP, and is 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 NJDEP regulations.

New Jersey Resources Corporation

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (Continued)

NJNG periodically, and at least annually, performs an environmental review of former 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.

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Accordingly, as of September 30, 2022, NJNG recorded a MGP remediation liability and a corresponding regulatory asset of approximately $ 127.1 million on the Consolidated Balance Sheets based on the most likely amount.

New Jersey Resources Corporation

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (Continued)

On September 30, 2021, NJNG filed its annual SBC application requesting to recover remediation expenses including an increase in the RAC, of approximately $ 2.0 million annually, effective April 1, 2022.

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 Consolidated Balance Sheet at September 30, 2021.

The preliminary assessment and site investigation activities are ongoing at the Aberdeen site.

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 September 9, 2020, the BPU approved NJNG's increase in the RAC, which increased the annual recovery from $ 8.5 million to $ 9.7 million, effective October 1, 2020.

On April 7, 2021, the BPU approved an increase in the RAC, which increased the annual recovery from $ 9.7 million to $ 11.1 million and was effective May 1, 2021.

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.

On September 13, 2022, NJNG submitted its annual filing to the BPU requesting approval of RAC expenditures through June 30, 2022, as well as an increase to the RAC annual recoveries of $ 3.8 million, which will increase the pre-tax annual recovery to $ 15.5 million, effective April 1, 2023.

As of September 30, 2022, $ 66.1 million of previously incurred remediation costs, net of recoveries from customers and insurance proceeds, are included in regulatory assets on the Consolidated Balance Sheets.

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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, NJR establishes accruals 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.

NJR also discloses contingent matters for which there is a reasonable possibility of a loss.

Based upon currently available information, NJR believes that the results of litigation that are currently pending, taken together, will not have a materially adverse effect on the Company’s financial condition, results of operations or cash flows.

In accordance with applicable accounting guidance, the Company establishes accruals 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, the Company believes that the results of litigation that are 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 accrued.

The foregoing statements about NJR’s litigation are based upon the Company’s judgments, assumptions and estimates and are necessarily subjective and uncertain.

The foregoing statements about the 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.

New Jersey Resources Corporation

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (Continued)

COMMON STOCK EQUITY

In December 2019, the Company completed an equity offering of 6,545,454 common shares, consisting of 5,333,334 common shares issued directly by the Company and 1,212,120 common shares issuable pursuant to forward sales agreements with investment banks.

The issuance of 5,333,334 resulted in proceeds of approximately $ 212.9 million, net of issuance costs, and was reflected in shareholders' equity and as a financing activity on the statement of cash flows.

The issuance of 5,333,334 common shares resulted in proceeds of approximately $ 212.9 million, net of issuance costs, and was reflected in shareholders' equity and as a financing activity on the statement of cash flows.

Under the forward sale agreements, a total of 1,212,120 common shares were borrowed from third parties and sold to the underwriters.

1 unchanged sentence

The forward sale price was subjected to adjustment daily based on a floating interest rate factor and would decrease in respect of certain fixed amounts specified in the agreement, such as anticipated dividends.

New Jersey Resources Corporation

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (Continued)

Issuances of shares under the forward sale agreements are classified as equity transactions.

Accordingly, no amounts relating to the forward sale agreements have or will be recorded in the financial statements until settlements take place.

Prior to any settlements, the only impact to the financial statements is the inclusion of incremental shares within the calculation of diluted EPS using the treasury stock method until settlement of the forward sale agreements.

Under this method, the number of the Company common shares used in calculating diluted EPS is deemed to be increased by the excess, if any, of the number of shares that would be issued upon physical settlement of the forward sale agreements less the number of shares that would be purchased by the Company in the market (based on the average market price during the same reporting period) using the proceeds receivable upon settlement (based on the adjusted forward sale price at the end of that reporting period).

Prior to any settlements, the only impact to the financial statements is the inclusion of incremental shares within the calculation of diluted Earnings Per Share using the treasury stock method until settlement of the forward sale agreements.

Under this method, the number of the Company common shares used in calculating diluted Earnings Per Share is deemed to be increased by the excess, if any, of the number of shares that would be issued upon physical settlement of the forward sale agreements less the number of shares that would be purchased by the Company in the market (based on the average market price during the same reporting period) using the proceeds receivable upon settlement (based on the adjusted forward sale price at the end of that reporting period).

Share dilution occurs when the average market price of the Company’s common shares is higher than the adjusted forward sale price.

4 unchanged sentences

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 Storage and Transportation segment consists of the Company’s investments in natural gas storage and transportation facilities;

As a result, the Company manages its businesses through the following reporting segments and other business operations:

Natural Gas Distribution consists of regulated energy and off-system, capacity and storage management operations;

Clean Energy Ventures consists of capital investments in clean energy projects;

Energy Services consists of unregulated wholesale and retail energy operations;

Storage and Transportation consists of the Company’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.

1 unchanged sentence

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (Continued)

Information related to the Company’s various reporting segments and other operations is detailed below:

Information related to the Company’s various reporting segments and other business operations is detailed below:

Fiscal Years Ended September 30, 2022 2021 2020

2 unchanged sentences

External customers $ 1,127,417 $ 731,796 $ 729,923

Intercompany 1,350 — —

Clean Energy Ventures

31 unchanged sentences

Total $ 2,716 $ 2,167 $ 2,959

(1) Includes sales to Canada for the Energy Services segment, which are immaterial.

(1) Includes sales to Canada for Energy Services, which are $ 2.4 million, $ 75,000 and $ 584,000 in the fiscal years ended September 30, 2022, 2021 and 2020, respectively.

(2) The amortization of acquired wholesale energy contracts is excluded above and is included in natural gas purchases - nonutility on the Consolidated Statements of Operations.

21 unchanged sentences

Total $ 76,195 $ 33,286 $ 36,494

Equity in earnings of affiliates

Equity in earnings (loss) of affiliates

Storage and Transportation $ 9,865 $ ( 81,072 ) $ 15,903

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Total $ 598,428 $ 624,610 $ 448,109

Investments in equity investees

(Return of capital from) investments in equity investees

Storage and Transportation $ ( 5,479 ) $ 690 $ 2,117

2 unchanged sentences

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (Continued)

The Company’s assets for the various reporting segments and business operations are detailed below:

The Company’s assets for the various reporting segments and other business operations are detailed below:

(Thousands) 2022 2021 2020

10 unchanged sentences

(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.

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 other business operations, is the chief operating decision maker of the Company.

A reconciliation of consolidated NFE to consolidated net income is as follows:

1 unchanged sentence

Net financial earnings $ 240,321 $ 207,712 $ 165,333

Unrealized loss (gain) on derivative instruments and related transactions 54,203 ( 9,644 ) 2,881

Unrealized (gain) loss on derivative instruments and related transactions ( 59,906 ) 54,203 ( 9,644 )

Tax effect 14,248 ( 12,887 ) 2,296

1 unchanged sentence

Tax effect ( 4,738 ) 10,078 ( 3,016 )

Impairment of equity method investment 92,000 — —

(Gain on) impairment of equity method investment ( 5,521 ) 92,000 —

Tax effect 1,377 ( 11,167 ) —

11 unchanged sentences

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.

NFE also excludes certain transactions associated with equity method investments, including impairment charges, which are non-cash charges, and return of capital in excess of the carrying value of our investment.

These are considered unusual in nature and occur infrequently such that they are not indicative of the Company’s performance for our ongoing operations.

Included in the tax effects are current and deferred income tax expense corresponding with the components of NFE.

5 unchanged sentences

These fees are recoverable through NJNG’s BGSS mechanism and are included as a component of regulatory assets.

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 September 30, 2021, Energy Services has entered into transactions with Steckman Ridge for varying terms, all of which expire by October 31, 2022.

Demand fees, net of eliminations, associated with Steckman Ridge during the fiscal years ended September 30, are as follows:

Energy Services may periodically enter into storage or park and loan agreements with an affiliated FERC-jurisdictional natural gas storage facility, Steckman Ridge.

As of September 30, 2022, Energy Services has entered into transactions with Steckman Ridge for varying terms, all of which expire by March 31, 2024.

Demand fees, net of eliminations, associated with Steckman Ridge during the fiscal years ended September 30, were as follows:

(Thousands) 2022 2021 2020

7 unchanged sentences

Total $ 851 $ 861

NJNG and Energy Services have entered into various asset management agreements, the effects of which are eliminated in consolidation.

NJNG and Energy Services have entered into various 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 September 30, 2021, NJNG and Energy Services had two asset management agreements with expiration dates of October 31, 2021 through March 31, 2022.

NJNG has entered into a 5-year transportation precedent agreement with Adelphia Gateway for committed capacity of 130,000 Dths per day, which is expected to begin during the 2nd quarter of fiscal 2022, dependent upon the completion of a compressor.

As of September 30, 2022, NJNG and Energy Services had one AMA with an expiration date of March 31, 2023.

NJNG has entered into a 5-year transportation precedent agreement with Adelphia Gateway for committed capacity of 130,000 Dths per day, which began on August 9, 2022.

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

On February 19, 2021, Energy Services entered into a park and loan agreement with Leaf River for 330,000 Dths, which expired on April 30, 2021, the activity of which is eliminated in consolidation.

In March 2021, NJNG and Clean Energy Ventures entered into a 15-year sublease and PPA agreement related to an onsite solar array and the related energy output at the 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 with various NJR subsidiaries for office space at the Company’s headquarters in Wall, New Jersey, the effects of which are eliminated in consolidation.

In June 2022, NJNG and Clean Energy Ventures entered into a 20-year sublease and PPA agreement related to an onsite solar array and the related energy output at the Company’s LNG plant in Howell, New Jersey, the effects of which are immaterial to the consolidated financial statements.

NJNG entered into a 15-year transportation precedent agreement with Adelphia Gateway for committed capacity of 130,000 Dth per day, beginning November 1, 2023;

however, the agreement term will automatically be reduced to 7 years if Transco has not placed its Regional Energy Access Expansion project into service by October 31, 2030.

The intercompany profit for certain transactions between NJNG and Energy Services and NJNG and Adelphia Gateway is not eliminated in accordance with ASC 980, Regulated Operations.

New Jersey Resources Corporation

1 unchanged sentence

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data