NEW JERSEY RESOURCES CORP

Natural Gas Distribution

Natural Gas Distribution is comprised of NJNG, a natural gas utility that provides regulated natural gas service to residential and commercial customers throughout Burlington, Middlesex, Monmouth, Morris, Ocean, and Sussex counties in New Jersey and also participates in the off-system sales and capacity release markets. The business is subject to various risks, which may include but are not limited to impacts to customer growth and customer usage, customer collections, the timing and costs of capital expenditures and construction of infrastructure projects, operating and financing costs, fluctuations in commodity prices, customer conservation efforts and changes in how customers consume energy. In addition, NJNG may be subject to adverse economic conditions such as inflation and rising natural gas costs, certain regulatory actions, environmental remediation and severe weather conditions. It is often difficult to predict the impact of events or trends associated with these risks.

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

As a regulated company, NJNG is required to recognize the impact of regulatory decisions on its financial statements. See Note 4. Regulation in the accompanying Unaudited Condensed Consolidated Financial Statements for a more detailed discussion of regulatory actions, including filings related to programs and associated expenditures, as well as rate requests related to recovery of capital investments and operating costs.

NJNG’s operations are managed with the goal of providing safe and reliable service, growing its customer base, diversifying its Utility Gross Margin, promoting clean energy programs and mitigating the risks discussed above.

Part I

Base Rate Case

On November 21, 2024, the BPU issued an order adopting a stipulation of settlement approving a $157.0M increase to base rates, effective as of the date of the order. The increase includes an overall rate of return on rate base of 7.08%, return on common equity of 9.6%, a common equity ratio of 54.0% and a composite depreciation rate of 3.21%.

On June 1, 2026, NJNG filed a base rate case with the BPU requesting a natural gas revenue increase of $157.6M including a recovery of infrastructure investments, a change in the Company's overall rate of return on rate base to 7.60% and a change in the return on common equity to 10.10%.

Infrastructure Projects

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

Below is a summary of NJNG’s capital expenditures, including accruals, for the nine months ended June 30, 2026, and estimates of expected investments for fiscal 2026 and 2027:

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

Infrastructure Investment Program

In October 2020, the BPU approved NJNG’s five-year IIP filing for $150.0M of transmission and distribution investments, effective November 1, 2020, which were recovered through annual filings to adjust base rates.

In July 2025, NJNG submitted a filing with the BPU to extend the IIP through June 30, 2026.

On December 17, 2025, the BPU approved NJNG's final IIP filing, which requested a rate increase for capital expenditures of approximately $33.1M through October 31, 2025, resulting in a revenue increase of approximately $3.3M, effective January 1, 2026. In conjunction with this filing, NJNG notified the BPU that it was withdrawing its July 2025 request to extend the program. Any recovery of future infrastructure investments will be requested through a NJNG base rate case.

Natural Gas Customers

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

Part I

NJNG's total customers include the following:

NJNG expects new customer additions during the nine months ended June 30, 2026, and those customers who added additional natural gas services to their premises, to contribute approximately $5.9M of incremental Utility Gross Margin on an annualized basis.

Energy Efficiency Programs

SAVEGREEN conducts home energy audits and provides various grants, incentives and financing alternatives designed to encourage the installation of high-efficiency heating and cooling equipment and other energy efficiency upgrades. Depending on the specific incentive 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 consisting of approximately $126.1M of direct investment, $109.4M in financing options, and $23.4M in O&M. In April 2024, the BPU approved NJNG’s $76.9M extension to this SAVEGREEN program through December 2024.

In October 2024, the BPU approved a new SAVEGREEN program effective from January 1, 2025 to June 30, 2027, consisting of $205.0M of direct investment, $160.5M in financing options and $20.1M in O&M. Recoveries include a weighted average cost of capital that ranges from 6.9% to 7.08%, with a return on equity of 9.6%.

In December 2024, the BPU approved NJNG's annual SAVEGREEN filing for the recovery of costs, which increased annual recoveries by approximately $3.1M, effective January 1, 2025.

On December 17, 2025, the BPU approved NJNG's annual SAVEGREEN filing for the recovery of costs, which will increase annual recoveries by approximately $13.3M, effective January 1, 2026.

On June 1, 2026, NJNG submitted its annual SAVEGREEN filing to the BPU for the recovery of costs, requesting a decrease in annual recoveries of approximately $18.3M, which would be effective October 1, 2026.

The following table summarizes loans, grants, rebates and related investments through:

(1)Amounts have been updated to correct the prior year presentation.

Conservation Incentive Program/BGSS

The CIP facilitates normalizing NJNG’s Utility Gross Margin for variances due not only to weather but also other factors affecting customer usage, such as conservation and energy efficiency. Recovery of Utility Gross Margin for the non-weather variance through the CIP is limited to the amount of certain natural gas supply cost savings achieved and is subject to a variable margin revenue test. Additionally, recovery of the CIP Utility Gross Margin is subject to an annual earnings test. An annual review of the CIP must be filed by June 1, coincident with NJNG’s annual BGSS filing, during which NJNG can request rate changes to the CIP.

Part I

NJNG's total utility firm gross margin includes the following adjustments related to the CIP mechanism:

(1)Compared with the 20-year average, weather was 3.3% warmer and 5.5% colder-than-normal during the three and nine months ended June 30, 2026, respectively, and 17.8% and 4.9% warmer-than-normal during the three and nine months ended June 30, 2025, respectively.

Recovery of Natural Gas Costs

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

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

On October 31, 2025, NJNG notified the BPU that it intended to self-implement an increase to its BGSS rate, effective December 1, 2025 through September 30, 2026, which will result in an increase of approximately $38.1M in revenues related to BGSS.

On December 17, 2025, the BPU approved, on a provisional basis, NJNG's annual BGSS/CIP filing, which included an increase of approximately $6.1M related to its balancing charge and a decrease of approximately $26.2M to CIP rates, effective January 1, 2026. The balancing charge rate includes the cost of balancing natural gas deliveries with customer usage for sales and transportation customers, and balancing charge revenues are credited to BGSS.

On June 1, 2026, NJNG submitted its annual BGSS/CIP filing to the BPU requesting a decrease of approximately $27.4M to annual revenues related to BGSS, an increase of approximately $1.0M related to its balancing charge and a decrease of approximately $46.8M to CIP rates, effective October 1, 2026.

BGSS Incentive Programs

NJNG is eligible to receive financial incentives for reducing BGSS costs through a series of Utility Gross Margin-sharing programs that include off-system sales, capacity release and storage incentive programs. These programs are designed to encourage better utilization and hedging of NJNG’s natural gas supply and transportation and storage assets. Depending on the program, NJNG shares 80% or 85% of Utility Gross Margin generated by these programs with firm customers. Utility Gross Margin from incentive programs was approximately $3.1M and $3.9M during the three months ended June 30, 2026 and 2025, respectively, and approximately $20.4M and $14.5M during the nine months ended June 30, 2026 and 2025, respectively.

Hedging

In order to provide relative price stability to its natural gas supply portfolio, NJNG employs a hedging strategy with the goal of having at least 75% of the Company's projected winter periodic BGSS natural gas sales volumes hedged by each November 1 and at least 25% of the projected periodic BGSS natural gas sales hedged for the following April through March period. The hedging goal is typically achieved with gas in storage and the use of financial instruments to hedge storage injections. NJNG may also use various financial instruments including futures, swaps, options and weather related products to hedge its future delivery obligations.

Part I

Commodity Prices

NJNG is affected by the price of natural gas, which can have a significant impact on our cash flows and short-term financing costs, the price of natural gas charged to our customers through the BGSS clause, our ability to collect accounts receivable, which impacts our bad debt expense, and our ability to maintain a competitive advantage over other energy sources. Natural gas commodity prices are shown in the graph below, which illustrates the daily natural gas prices per MMBtu(1) in the Northeast market region, also known as TETCO M-3.

(1) Data sourced from Standard & Poor's Financial Services, LLC Global Platts.

The maximum price per MMBtu was $122.84 and $40.02 and the minimum price was $1.42 and $1.05 for the nine months ended June 30, 2026 and 2025, respectively. As a result of NJNG's hedging strategy as previously discussed, customers are protected from much of the short-term price volatility during the winter months. A more detailed discussion of the impacts of the price of natural gas on operating revenues, natural gas purchases and cash flows can be found in the Operating Results and Cash Flow sections of Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

Societal Benefits Charge

The SBC is comprised of three primary riders that allow NJNG to recover costs associated with USF, MGP remediation, and the NJCEP. NJNG’s qualifying customers are eligible for the USF program, which is administered by the New Jersey Department of Community Affairs, to help make energy bills more affordable.

In April 2025, the BPU approved NJNG's annual SBC filing of RAC expenditures through June 30, 2024, which included an increase to the RAC annual recoveries of approximately $2.4M and an increase to the NJCEP annual recoveries of approximately $1.6M, effective May 1, 2025.

In September 2025, the BPU approved NJNG's annual USF filing, which resulted in a decrease to annual recoveries of approximately $1.0M, effective October 1, 2025.

On March 18, 2026, the BPU approved NJNG's annual SBC filing of RAC expenditures through June 30, 2025, which included a decrease to the RAC annual recoveries of approximately $0.8M and a decrease to the NJCEP annual recoveries of approximately $5.2M, effective April 1, 2026.

On June 29, 2026, NJNG submitted its annual USF filing to the BPU requesting a decrease to annual recoveries of approximately $1.8M, effective October 1, 2026.

Part I

Environmental Remediation

NJNG is responsible for the environmental remediation of former MGP sites, which contain contaminated residues from former gas manufacturing operations that ceased operating at these sites by the mid-1950s and, in some cases, had been discontinued many years earlier. Actual MGP remediation costs may vary from management’s estimates due to the developing nature of remediation requirements, regulatory decisions by the NJDEP and related litigation. NJNG reviews these costs periodically, and at least annually, and adjusts its liability and corresponding regulatory asset as necessary to reflect its expected future remediation obligation. Accordingly, NJNG recognized a regulatory asset and an obligation of approximately $165.2M as of June 30, 2026, a decrease of approximately $1.8M compared with September 30, 2025. See Note 13. Commitments and Contingent Liabilities in the accompanying Unaudited Condensed Consolidated Financial Statements for a more detailed description of MGP expenditures.

Other regulatory filings and a more detailed discussion of the filings in this section can be found in Note 4. Regulation in the accompanying Unaudited Condensed Consolidated Financial Statements.