Credit: (South Jersey Industries, Inc.)

New Jersey regulators approved the acquisition of two of the state’s gas utilities by a private-equity investment fund, the first time a utility here has been taken private.

The state Board of Public Utilities voted unanimously Wednesday to allow IIF US Holdings 2, a group managed by J.P. Morgan Chase Co., to purchase South Jersey Gas and Elizabethtown Gas in an all-cash deal valued at $8.1 billion at the time the acquisition was announced last March.

The 700,000 customers of the two utilities will see their rates frozen for two years as well as receiving two credits on their bills totaling $70 million, or $80 for a typical customer, under a stipulation agreed among IIF, the BPU, the New Jersey Division of Rate Counsel and other intervenors in the case.

The stipulation also will write off $14 million in arrearages customers owe the utilities as a result of the COVID-19 pandemic. It also maintains the existing management structure and prevents layoffs of employees for a five-year period.

Is the timing right?

The deal occurs at a time when clean-energy advocates have pressed the Murphy administration to end any new fossil fuel projects and states, including New Jersey, have pushed the eventual electrification of buildings. In New Jersey, more than three-quarters of homes and buildings are heated by natural gas.

Nevertheless, some private investors are drawn to buying utilities, analysts said.

“It’s not a new event,’’ said Paul Patterson, an energy analyst at Glenrock Associates. “The cost of financing is attractive compared to the rate of return the utility will provide.’’

BPU Commissioner Mary-Anna Holden, who presided over the administrative hearing on the proposed acquisition, called the deal part of a national trend. “I see others coming down the road,’’ she said.

In taking the two smallest gas utilities private, other commissioners said the stipulation offers numerous protections for ratepayers and also retains the reliability of their gas distribution systems. “We will keep a close eye on these operations to ensure they work,’’ said BPU President Joseph Fiordaliso.

South Jersey Gas and Elizabethtown Gas are owned by South Jersey Industries. IIF is a $20 billion private-investment vehicle focused on investing in critical infrastructure, such as renewable energy, water, natural gas and electric utilities. Both utilities will maintain headquarters in New Jersey, according to the stipulation.

Cutting greenhouse gases

As part of the settlement, the gas utilities have committed to undertake programs that will reduce greenhouse gas emissions and limit unnecessary investments in natural gas infrastructure, according to the Environmental Defense Fund, one of the parties to the stipulation.

But more progress is needed, said Erin Murphy, a senior attorney at the EDF. “The New Jersey Board of Public Utilities must institute a transparent, long-term gas-system planning process to reduce reliance on natural gas and ensure that utilities are operating in a way that is consistent with New Jersey’s environment and climate goals,’’ Murphy said.

South Jersey Gas has invested in renewable natural gas as an alternative to using conventional natural gas, but the settlement says the company needs to assess other alternatives, such as building electrification and energy efficiency, according to Murphy.

In a statement, SJI said it was pleased with the BPU approval, which marks the final regulatory step to complete the transaction, expected on Feb. 1.