Edgar Filing: PUBLIC SERVICE ELECTRIC & GAS CO

PSEG-3/31/2013-Q1

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED March 31, 2013

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM TO



Commission File Number	Registrants, State of Incorporation, Address, and Telephone Number	I.R.S. Employer Identification No.
001-09120	PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED (A New Jersey Corporation) 80 Park Plaza, P.O. Box 1171 Newark, New Jersey 07101-1171 973 430-7000 http://www.pseg.com	22-2625848
001-34232	PSEG POWER LLC (A Delaware Limited Liability Company) 80 Park Plaza—T25 Newark, New Jersey 07102-4194 973 430-7000 http://www.pseg.com	22-3663480
001-00973	PUBLIC SERVICE ELECTRIC AND GAS COMPANY (A New Jersey Corporation) 80 Park Plaza, P.O. Box 570 Newark, New Jersey 07101-0570 973 430-7000 http://www.pseg.com	22-1212800

Indicate by check mark whether the registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days. Yes ý No ¨

Indicate by check mark whether the registrants have submitted electronically and posted on their corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrants were required to submit and post such files). Yes ý No ¨

Indicate by check mark whether each registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.



Public Service Enterprise Group Incorporated	Large accelerated filer x	Accelerated filer o	Non-accelerated filer o	Smaller reporting company o

PSEG Power LLC	Large accelerated filer o	Accelerated filer o	Non-accelerated filer x	Smaller reporting company o

Public Service Electric and Gas Company	Large accelerated filer o	Accelerated filer o	Non-accelerated filer x	Smaller reporting company o

Indicate by check mark whether any of the registrants is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No ý

As of April 16, 2013, Public Service Enterprise Group Incorporated had outstanding 505,968,562 shares of its sole class of Common Stock, without par value.

As of April 16, 2013, Public Service Electric and Gas Company had issued and outstanding 132,450,344 shares of Common Stock, without nominal or par value, all of which were privately held, beneficially and of record by Public Service Enterprise Group Incorporated.

PSEG Power LLC and Public Service Electric and Gas Company are wholly owned subsidiaries of Public Service Enterprise Group Incorporated and meet the conditions set forth in General Instruction H(1) (a) and (b) of Form 10-Q. Each is filing its Quarterly Report on Form 10-Q with the reduced disclosure format authorized by General Instruction H.

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		Page
FORWARD-LOOKING STATEMENTS		ii

PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements
	Public Service Enterprise Group Incorporated	1
	PSEG Power LLC	6
	Public Service Electric and Gas Company	11
	Notes to Condensed Consolidated Financial Statements
	Note 1. Organization and Basis of Presentation	16
	Note 2. Recent Accounting Standards	16
	Note 3. Variable Interest Entities (VIEs)	17
	Note 4. Rate Filings	17
	Note 5. Financing Receivables	18
	Note 6. Available-for-Sale Securities	20
	Note 7. Pension and Other Postretirement Benefits (OPEB)	25
	Note 8. Commitments and Contingent Liabilities	26
	Note 9. Changes in Capitalization	34
	Note 10. Financial Risk Management Activities	34
	Note 11. Fair Value Measurements	41
	Note 12. Other Income and Deductions	49
	Note 13. Income Taxes	49
	Note 14. Accumulated Other Comprehensive Income (Loss), Net of Tax	50
	Note 15. Earnings Per Share (EPS) and Dividends	52
	Note 16. Financial Information by Business Segments	53
	Note 17. Related-Party Transactions	54
	Note 18. Guarantees of Debt	56
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	58
	Overview of 2013 and Future Outlook	58
	Results of Operations	61
	Liquidity and Capital Resources	66
	Capital Requirements	68
	Accounting Matters	68
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	68
Item 4.	Controls and Procedures	69

PART II. OTHER INFORMATION		70
Item 1.	Legal Proceedings	70
Item 1A.	Risk Factors	70
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	70
Item 5.	Other Information	70
Item 6.	Exhibits	74
	Signatures	75

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FORWARD-LOOKING STATEMENTS

Certain of the matters discussed in this report constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ materially from those anticipated. Such statements are based on management’s beliefs as well as assumptions made by and information currently available to management. When used herein, the words “anticipate,” “intend,” “estimate,” “believe,” “expect,” “plan,” “should,” “hypothetical,” “potential,” “forecast,” “project,” variations of such words and similar expressions are intended to identify forward-looking statements. Factors that may cause actual results to differ are often presented with the forward-looking statements themselves. Other factors that could cause actual results to differ materially from those contemplated in any forward-looking statements made by us herein are discussed in Item 1. Financial Statements—Note 8. Commitments and Contingent Liabilities, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations, and other factors discussed in filings we make with the United States Securities and Exchange Commission (SEC). These factors include, but are not limited to:


•	adverse changes in the demand for or the price of the capacity and energy that we sell into wholesale electricity markets,


•	adverse changes in energy industry law, policies and regulation, including market structures and a potential shift away from competitive markets toward subsidized market mechanisms, transmission planning and cost allocation rules, including rules regarding how transmission is planned and who is permitted to build transmission in the future, and reliability standards,


•	any inability of our transmission and distribution businesses to obtain adequate and timely rate relief and regulatory approvals from federal and state regulators,


•	changes in federal and state environmental regulations that could increase our costs or limit our operations,


•	changes in nuclear regulation and/or general developments in the nuclear power industry, including various impacts from any accidents or incidents experienced at our facilities or by others in the industry, that could limit operations of our nuclear generating units,


•	actions or activities at one of our nuclear units located on a multi-unit site that might adversely affect our ability to continue to operate that unit or other units located at the same site,


•	any inability to balance our energy obligations, available supply and risks,


•	any deterioration in our credit quality or the credit quality of our counterparties, including in our leveraged leases,


•	availability of capital and credit at commercially reasonable terms and conditions and our ability to meet cash needs,


•	changes in the cost of, or interruption in the supply of, fuel and other commodities necessary to the operation of our generating units,


•	delays in receipt of necessary permits and approvals for our construction and development activities,


•	delays or unforeseen cost escalations in our construction and development activities,


•	any inability to achieve, or continue to sustain, our expected levels of operating performance,


•	any equipment failures, accidents, severe weather events or other incidents that impact our ability to provide safe and reliable service to our customers, and any inability to sufficiently obtain coverage or recover proceeds of insurance on such matters,


•	increase in competition in energy supply markets as well as competition for certain rate-based transmission projects,


•	any inability to realize anticipated tax benefits or retain tax credits,


•	challenges associated with recruitment and/or retention of a qualified workforce,


•	adverse performance of our decommissioning and defined benefit plan trust fund investments and changes in funding requirements, and


•	changes in technology and customer usage patterns.

All of the forward-looking statements made in this report are qualified by these cautionary statements and we cannot assure you that the results or developments anticipated by management will be realized or even if realized, will have the expected consequences to, or effects on, us or our business prospects, financial condition or results of operations. Readers are cautioned not to place undue reliance on these forward-looking statements in making any investment decision. Forward-looking statements made in this report apply only as of the date of this report. While we may elect to update forward-looking statements from time to time, we specifically disclaim any obligation to do so, even if internal estimates change, unless otherwise required by applicable securities laws.

The forward-looking statements contained in this report are intended to qualify for the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.

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PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Millions

(Unaudited)




	Three Months Ended
	March 31,
	2013			2012
OPERATING REVENUES	$	2,786		$	2,875
OPERATING EXPENSES
Energy Costs	1,155			1,179
Operation and Maintenance	710			628
Depreciation and Amortization	290			256
Taxes Other Than Income Taxes	21			29
Total Operating Expenses	2,176			2,092
OPERATING INCOME	610			783
Income from Equity Method Investments	2			—
Other Income	61			44
Other Deductions	(29		)	(16		)
Other-Than-Temporary Impairments	(2		)	(5		)
Interest Expense	(102		)	(101		)
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES	540			705
Income Tax (Expense) Benefit	(220		)	(212		)
NET INCOME	$	320		$	493
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING (THOUSANDS):
BASIC	505,942			506,010
DILUTED	507,220			507,029
EARNINGS PER SHARE:
BASIC
INCOME FROM CONTINUING OPERATIONS	$	0.63		$	0.97
NET INCOME	$	0.63		$	0.97
DILUTED
INCOME FROM CONTINUING OPERATIONS	$	0.63		$	0.97
NET INCOME	$	0.63		$	0.97
DIVIDENDS PAID PER SHARE OF COMMON STOCK	$	0.3600		$	0.3550

See Notes to Condensed Consolidated Financial Statements.

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PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Millions

(Unaudited)




	Three Months Ended
	March 31,
	2013			2012
NET INCOME	$	320		$	493
Other Comprehensive Income (Loss), net of tax
Unrealized Gains (Losses) on Available-for-Sale Securities, net of tax (expense) benefit of $(27) and $(38) for 2013 and 2012, respectively	27			37
Change in Fair Value of Derivative Instruments, net of tax (expense) benefit of $0 and $(14) for 2013 and 2012, respectively	—			20
Reclassification Adjustments for Net Amounts included in Net Income, net of tax (expense) benefit of $2 and $15 for 2013 and 2012, respectively	(4		)	(20		)
Pension/OPEB adjustment, net of tax (expense) benefit of $(7) and $(5) for 2013 and 2012, respectively	10			7
Other Comprehensive Income (Loss), net of tax	33			44
COMPREHENSIVE INCOME	$	353		$	537

See Notes to Condensed Consolidated Financial Statements.

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PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED

CONDENSED CONSOLIDATED BALANCE SHEETS

Millions

(Unaudited)




	March 31, 2013			December 31, 2012
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents	$	420		$	379
Accounts Receivable, net of allowances of $64 and $56 in 2013 and 2012, respectively	1,457			1,069
Tax Receivable	226			227
Unbilled Revenues	265			314
Fuel	318			583
Materials and Supplies, net	436			422
Prepayments	87			283
Derivative Contracts	77			138
Deferred Income Taxes	38			49
Regulatory Assets	282			349
Other	50			56
Total Current Assets	3,656			3,869
PROPERTY, PLANT AND EQUIPMENT	27,932			27,402
Less: Accumulated Depreciation and Amortization	(7,807		)	(7,666		)
Net Property, Plant and Equipment	20,125			19,736
NONCURRENT ASSETS
Regulatory Assets	3,643			3,830
Regulatory Assets of Variable Interest Entities (VIEs)	658			713
Long-Term Investments	1,320			1,324
Nuclear Decommissioning Trust (NDT) Fund	1,602			1,540
Other Special Funds	202			191
Goodwill	16			16
Other Intangibles	37			34
Derivative Contracts	102			153
Restricted Cash of VIEs	22			23
Other	329			296
Total Noncurrent Assets	7,931			8,120
TOTAL ASSETS	$	31,712		$	31,725

See Notes to Condensed Consolidated Financial Statements.

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PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED

CONDENSED CONSOLIDATED BALANCE SHEETS

Millions

(Unaudited)




	March 31, 2013			December 31, 2012
LIABILITIES AND CAPITALIZATION
CURRENT LIABILITIES
Long-Term Debt Due Within One Year	$	876		$	1,026
Securitization Debt of VIEs Due Within One Year	229			226
Commercial Paper and Loans	165			263
Accounts Payable	1,078			1,304
Derivative Contracts	27			46
Accrued Interest	114			91
Accrued Taxes	92			17
Deferred Income Taxes	10			72
Clean Energy Program	92			153
Obligation to Return Cash Collateral	125			122
Regulatory Liabilities	120			67
Other	478			390
Total Current Liabilities	3,406			3,777
NONCURRENT LIABILITIES
Deferred Income Taxes and Investment Tax Credits (ITC)	6,604			6,542
Regulatory Liabilities	245			209
Regulatory Liabilities of VIEs	10			10
Asset Retirement Obligations	636			627
Other Postretirement Benefit (OPEB) Costs	1,270			1,285
Accrued Pension Costs	724			876
Environmental Costs	464			537
Derivative Contracts	123			122
Long-Term Accrued Taxes	160			164
Other	114			108
Total Noncurrent Liabilities	10,350			10,480
COMMITMENTS AND CONTINGENT LIABILITIES (See Note 8)
CAPITALIZATION
LONG-TERM DEBT
Long-Term Debt	6,542			6,148
Securitization Debt of VIEs	442			496
Project Level, Non-Recourse Debt	25			43
Total Long-Term Debt	7,009			6,687
STOCKHOLDERS’ EQUITY
Common Stock, no par, authorized 1,000,000,000 shares; issued, 2013 and 2012—533,556,660 shares	4,833			4,833
Treasury Stock, at cost, 2013—27,692,398 shares; 2012—27,664,188 shares	(612		)	(607		)
Retained Earnings	7,080			6,942
Accumulated Other Comprehensive Loss	(355		)	(388		)
Total Common Stockholders’ Equity	10,946			10,780
Noncontrolling Interest	1			1
Total Stockholders’ Equity	10,947			10,781
Total Capitalization	17,956			17,468
TOTAL LIABILITIES AND CAPITALIZATION	$	31,712		$	31,725

See Notes to Condensed Consolidated Financial Statements.

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PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Millions

(Unaudited)




	Three Months Ended
	March 31,
	2013			2012
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income	$	320		$	493
Adjustments to Reconcile Net Income to Net Cash Flows from Operating Activities:
Depreciation and Amortization	290			256
Amortization of Nuclear Fuel	50			43
Provision for Deferred Income Taxes (Other than Leases) and ITC	(5		)	12
Non-Cash Employee Benefit Plan Costs	61			68
Leveraged Lease Income, Adjusted for Rents Received and Deferred Taxes	(6		)	140
Net Realized and Unrealized (Gains) Losses on Energy Contracts and Other Derivatives	165			—
Deferred Storm Costs	(46		)	4
Net Change in Regulatory Assets and Liabilities	80			(26		)
Cost of Removal	(24		)	(20		)
Net Realized (Gains) Losses and (Income) Expense from NDT Fund	(24		)	(15		)
Net Change in Certain Current Assets and Liabilities	207			279
Employee Benefit Plan Funding and Related Payments	(192		)	(154		)
Other	1			8
Net Cash Provided By (Used In) Operating Activities	877			1,088
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to Property, Plant and Equipment	(724		)	(687		)
Proceeds from Sales of Available-for-Sale Securities	258			499
Investments in Available-for-Sale Securities	(271		)	(511		)
Other	4			(7		)
Net Cash Provided By (Used In) Investing Activities	(733		)	(706		)
CASH FLOWS FROM FINANCING ACTIVITIES
Net Change in Commercial Paper and Loans	(98		)	29
Issuance of Long-Term Debt	400			—
Redemption of Long-Term Debt, including Securitization Debt	(201		)	(115		)
Cash Dividends Paid on Common Stock	(182		)	(179		)
Other	(22		)	(20		)
Net Cash Provided By (Used In) Financing Activities	(103		)	(285		)
Net Increase (Decrease) in Cash and Cash Equivalents	41			97
Cash and Cash Equivalents at Beginning of Period	379			834
Cash and Cash Equivalents at End of Period	$	420		$	931
Supplemental Disclosure of Cash Flow Information:
Income Taxes Paid (Received)	$	3		$	3
Interest Paid, Net of Amounts Capitalized	$	82		$	84
Accrued Property, Plant and Equipment Expenditures	$	265		$	202

See Notes to Condensed Consolidated Financial Statements.

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PSEG POWER LLC

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Millions

(Unaudited)




	Three Months Ended
	March 31,
	2013			2012
OPERATING REVENUES	$	1,447		$	1,561
OPERATING EXPENSES
Energy Costs	860			822
Operation and Maintenance	282			241
Depreciation and Amortization	64			57
Total Operating Expenses	1,206			1,120
OPERATING INCOME	241			441
Other Income	47			30
Other Deductions	(28		)	(15		)
Other-Than-Temporary Impairments	(2		)	(5		)
Interest Expense	(30		)	(30		)
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES	228			421
Income Tax (Expense) Benefit	(91		)	(168		)
EARNINGS AVAILABLE TO PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED	$	137		$	253

See disclosures regarding PSEG Power LLC included in the Notes to Condensed Consolidated Financial Statements.

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PSEG POWER LLC

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Millions

(Unaudited)




	Three Months Ended
	March 31,
	2013			2012
NET INCOME	$	137		$	253
Other Comprehensive Income (Loss), net of tax
Unrealized Gains (Losses) on Available-for-Sale Securities, net of tax (expense) benefit of $(27) and ($39) for 2013 and 2012, respectively	27			37
Change in Fair Value of Derivative Instruments, net of tax (expense) benefit of $0 and $(14) for 2013 and 2012, respectively	—			20
Reclassification Adjustments for Net Amounts included in Net Income, net of tax (expense) benefit of $2 and $15 for 2013, and 2012, respectively	(4		)	(20		)
Pension/OPEB adjustment, net of tax (expense) benefit of $(5) and $(5) for 2013 and 2012, respectively	9			7
Other Comprehensive Income (Loss), net of tax	32			44
COMPREHENSIVE INCOME	$	169		$	297

See disclosures regarding PSEG Power LLC included in the Notes to Condensed Consolidated Financial Statements.

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PSEG POWER LLC

CONDENSED CONSOLIDATED BALANCE SHEETS

Millions

(Unaudited)




	March 31, 2013			December 31, 2012
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents	$	6		$	7
Accounts Receivable	405			269
Accounts Receivable—Affiliated Companies, net	170			340
Short-Term Loan to Affiliate	748			574
Fuel	318			583
Materials and Supplies, net	313			307
Derivative Contracts	52			118
Prepayments	11			17
Deferred Income Taxes	28			—
Other	1			19
Total Current Assets	2,052			2,234
PROPERTY, PLANT AND EQUIPMENT	9,786			9,697
Less: Accumulated Depreciation and Amortization	(2,793		)	(2,679		)
Net Property, Plant and Equipment	6,993			7,018
NONCURRENT ASSETS
Nuclear Decommissioning Trust (NDT) Fund	1,602			1,540
Goodwill	16			16
Other Intangibles	38			34
Other Special Funds	38			36
Derivative Contracts	6			49
Other	120			105
Total Noncurrent Assets	1,820			1,780
TOTAL ASSETS	$	10,865		$	11,032

See disclosures regarding PSEG Power LLC included in the Notes to Condensed Consolidated Financial Statements.

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PSEG POWER LLC

CONDENSED CONSOLIDATED BALANCE SHEETS

Millions

(Unaudited)




	March 31, 2013			December 31, 2012
LIABILITIES AND MEMBER’S EQUITY
CURRENT LIABILITIES
Long-Term Debt Due Within One Year	$	300		$	300
Accounts Payable	408			498
Derivative Contracts	27			46
Deferred Income Taxes	—			16
Accrued Interest	41			26
Other	96			81
Total Current Liabilities	872			967
NONCURRENT LIABILITIES
Deferred Income Taxes and Investment Tax Credits (ITC)	1,628			1,575
Asset Retirement Obligations	374			369
Other Postretirement Benefit (OPEB) Costs	224			221
Derivative Contracts	14			15
Accrued Pension Costs	230			272
Long-Term Accrued Taxes	38			50
Other	87			84
Total Noncurrent Liabilities	2,595			2,586
COMMITMENTS AND CONTINGENT LIABILITIES (See Note 8)
LONG-TERM DEBT
Total Long-Term Debt	2,040			2,040
MEMBER’S EQUITY
Contributed Capital	2,028			2,028
Basis Adjustment	(986		)	(986		)
Retained Earnings	4,612			4,725
Accumulated Other Comprehensive Loss	(296		)	(328		)
Total Member’s Equity	5,358			5,439
TOTAL LIABILITIES AND MEMBER’S EQUITY	$	10,865		$	11,032

See disclosures regarding PSEG Power LLC included in the Notes to Condensed Consolidated Financial Statements.

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PSEG POWER LLC

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Millions

(Unaudited)




	Three Months Ended
	March 31,
	2013			2012
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income	$	137		$	253
Adjustments to Reconcile Net Income to Net Cash Flows from Operating Activities:
Depreciation and Amortization	64			57
Amortization of Nuclear Fuel	50			43
Provision for Deferred Income Taxes and ITC	(33		)	101
Net Realized and Unrealized (Gains) Losses on Energy Contracts and Other Derivatives	165			—
Non-Cash Employee Benefit Plan Costs	17			18
Net Realized (Gains) Losses and (Income) Expense from NDT Fund	(24		)	(15		)
Net Change in Certain Current Assets and Liabilities:
Fuel, Materials and Supplies	259			188
Margin Deposit	(117		)	(34		)
Accounts Receivable	3			47
Accounts Payable	(67		)	(11		)
Accounts Receivable/Payable-Affiliated Companies, net	121			145
Accrued Interest Payable	15			17
Other Current Assets and Liabilities	22			(39		)
Employee Benefit Plan Funding and Related Payments	(45		)	(38		)
Other	5			(1		)
Net Cash Provided By (Used In) Operating Activities	572			731
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to Property, Plant and Equipment	(143		)	(237		)
Proceeds from Sales of Available-for-Sale Securities	244			375
Investments in Available-for-Sale Securities	(256		)	(385		)
Short-Term Loan—Affiliated Company, net	(174		)	(128		)
Other	8			10
Net Cash Provided By (Used In) Investing Activities	(321		)	(365		)
CASH FLOWS FROM FINANCING ACTIVITIES
Cash Dividend Paid	(250		)	(300		)
Redemption of Long-Term Debt	—			(66		)
Other	(2		)	(7		)
Net Cash Provided By (Used In) Financing Activities	(252		)	(373		)
Net Increase (Decrease) in Cash and Cash Equivalents	(1		)	(7		)
Cash and Cash Equivalents at Beginning of Period	7			12
Cash and Cash Equivalents at End of Period	$	6		$	5
Supplemental Disclosure of Cash Flow Information:
Income Taxes Paid (Received)	$	2		$	(2	)
Interest Paid, Net of Amounts Capitalized	$	18		$	15
Accrued Property, Plant and Equipment Expenditures	$	41		$	59

See disclosures regarding PSEG Power LLC included in the Notes to the Condensed Consolidated Financial Statements.

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PUBLIC SERVICE ELECTRIC AND GAS COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Millions

(Unaudited)




	Three Months Ended
	March 31,
	2013			2012
OPERATING REVENUES	$	1,995		$	1,939
OPERATING EXPENSES
Energy Costs	967			1,002
Operation and Maintenance	427			376
Depreciation and Amortization	215			190
Taxes Other Than Income Taxes	21			29
Total Operating Expenses	1,630			1,597
OPERATING INCOME	365			342
Other Income	13			11
Other Deductions	(1		)	(1		)
Interest Expense	(73		)	(73		)
INCOME BEFORE INCOME TAXES	304			279
Income Tax (Expense) Benefit	(125		)	(82		)
EARNINGS AVAILABLE TO PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED	$	179		$	197

See disclosures regarding Public Service Electric and Gas Company included in the Notes to Condensed Consolidated Financial Statements.

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PUBLIC SERVICE ELECTRIC AND GAS COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Millions

(Unaudited)




	Three Months Ended
	March 31,
	2013		2012
NET INCOME	$	179	$	197
Unrealized Gains (Losses) on Available-for-Sale Securities, net of tax (expense) benefit of $0 and $1 for 2013 and 2012, respectively	—		(1		)
COMPREHENSIVE INCOME	$	179	$	196

See disclosures regarding Public Service Electric and Gas Company included in the Notes to Condensed Consolidated Financial Statements.

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PUBLIC SERVICE ELECTRIC AND GAS COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS

Millions

(Unaudited)




	March 31, 2013			December 31, 2012
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents	$	61		$	116
Accounts Receivable, net of allowances of $64 and $56 in 2013 and 2012, respectively	1,032			783
Unbilled Revenues	265			314
Materials and Supplies	121			114
Prepayments	9			29
Regulatory Assets	282			349
Derivative Contracts	10			5
Deferred Income Taxes	38			49
Other	15			24
Total Current Assets	1,833			1,783
PROPERTY, PLANT AND EQUIPMENT	17,494			17,006
Less: Accumulated Depreciation and Amortization	(4,780		)	(4,726		)
Net Property, Plant and Equipment	12,714			12,280
NONCURRENT ASSETS
Regulatory Assets	3,643			3,830
Regulatory Assets of VIEs	658			713
Long-Term Investments	361			348
Other Special Funds	61			61
Derivative Contracts	59			62
Restricted Cash of VIEs	22			23
Other	137			123
Total Noncurrent Assets	4,941			5,160
TOTAL ASSETS	$	19,488		$	19,223

See disclosures regarding Public Service Electric and Gas Company included in the Notes to Condensed Consolidated Financial Statements.

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PUBLIC SERVICE ELECTRIC AND GAS COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS

Millions

(Unaudited)




	March 31, 2013		December 31, 2012
LIABILITIES AND CAPITALIZATION
CURRENT LIABILITIES
Long-Term Debt Due Within One Year	$	575	$	725
Securitization Debt of VIEs Due Within One Year	229		226
Commercial Paper and Loans	165		263
Accounts Payable	539		630
Accounts Payable—Affiliated Companies, net	89		73
Accrued Interest	73		65
Clean Energy Program	92		153
Deferred Income Taxes	43		60
Obligation to Return Cash Collateral	125		122
Regulatory Liabilities	120		67
Other	351		269
Total Current Liabilities	2,401		2,653
NONCURRENT LIABILITIES
Deferred Income Taxes and ITC	4,249		4,223
Other Postretirement Benefit (OPEB) Costs	992		1,011
Accrued Pension Costs	369		463
Regulatory Liabilities	245		209
Regulatory Liabilities of VIEs	10		10
Environmental Costs	413		486
Asset Retirement Obligations	254		250
Derivative Contracts	109		107
Long-Term Accrued Taxes	39		32
Other	44		38
Total Noncurrent Liabilities	6,724		6,829
COMMITMENTS AND CONTINGENT LIABILITIES (See Note 8)
CAPITALIZATION
LONG-TERM DEBT
Long-Term Debt	4,467		4,070
Securitization Debt of VIEs	442		496
Total Long-Term Debt	4,909		4,566
STOCKHOLDER’S EQUITY
Common Stock; 150,000,000 shares authorized; issued and outstanding, 2013 and 2012—132,450,344 shares	892		892
Contributed Capital	520		420
Basis Adjustment	986		986
Retained Earnings	3,054		2,875
Accumulated Other Comprehensive Income	2		2
Total Stockholder’s Equity	5,454		5,175
Total Capitalization	10,363		9,741
TOTAL LIABILITIES AND CAPITALIZATION	$	19,488	$	19,223

See disclosures regarding Public Service Electric and Gas Company included in the Notes to Condensed Consolidated Financial Statements.

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PUBLIC SERVICE ELECTRIC AND GAS COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Millions

(Unaudited)




	Three Months Ended
	March 31,
	2013			2012
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income	$	179		$	197
Adjustments to Reconcile Net Income to Net Cash Flows from Operating Activities:
Depreciation and Amortization	215			190
Provision for Deferred Income Taxes and ITC	29			8
Non-Cash Employee Benefit Plan Costs	39			44
Cost of Removal	(24		)	(20		)
Deferred Storm Costs	(46		)	4
Net Change in Regulatory Assets and Liabilities	80			(26		)
Net Change in Certain Current Assets and Liabilities:
Accounts Receivable and Unbilled Revenues	(200		)	(14		)
Materials and Supplies	(7		)	(3		)
Prepayments	20			52
Accounts Receivable/Payable-Affiliated Companies, net	64			(8		)
Other Current Assets and Liabilities	112			51
Employee Benefit Plan Funding and Related Payments	(120		)	(103		)
Other	(12		)	(6		)
Net Cash Provided By (Used In) Operating Activities	329			366
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to Property, Plant and Equipment	(572		)	(435		)
Proceeds from Sale of Available-for-Sale Securities	6			51
Investments in Available-for-Sale Securities	(6		)	(51		)
Solar Loan Investments	(7		)	(19		)
Restricted Funds	1			—
Net Cash Provided By (Used In) Investing Activities	(578		)	(454		)
CASH FLOWS FROM FINANCING ACTIVITIES
Net Change in Short-Term Debt	(98		)	29
Issuance of Long-Term Debt	400			—
Redemption of Long-Term Debt	(150		)	—
Redemption of Securitization Debt	(51		)	(49		)
Contributed Capital	100			—
Other	(7		)	—
Net Cash Provided By (Used In) Financing Activities	194			(20		)
Net Increase (Decrease) In Cash and Cash Equivalents	(55		)	(108		)
Cash and Cash Equivalents at Beginning of Period	116			143
Cash and Cash Equivalents at End of Period	$	61		$	35
Supplemental Disclosure of Cash Flow Information:
Income Taxes Paid (Received)	$	—		$	(22	)
Interest Paid, Net of Amounts Capitalized	$	63		$	69
Accrued Property, Plant and Equipment Expenditures	$	224		$	143

See disclosures regarding Public Service Electric and Gas Company included in the Notes to Condensed Consolidated Financial Statements.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

This combined Form 10-Q is separately filed by Public Service Enterprise Group Incorporated (PSEG), PSEG Power LLC (Power) and Public Service Electric and Gas Company (PSE&G). Information relating to any individual company is filed by such company on its own behalf. Power and PSE&G each is only responsible for information about itself and its subsidiaries.

Note 1. Organization and Basis of Presentation

Organization

PSEG is a holding company with a diversified business mix within the energy industry. Its operations are primarily in the Northeastern and Mid-Atlantic United States and in other select markets. PSEG’s four principal direct wholly owned subsidiaries are:

•

Power—which is a multi-regional, wholesale energy supply company that integrates its generating asset operations and gas supply commitments with its wholesale energy, fuel supply and energy trading functions through three principal direct wholly owned subsidiaries. Power’s subsidiaries are subject to regulation by the Federal Energy Regulatory Commission (FERC), the Nuclear Regulatory Commission (NRC) and the states in which they operate.

•

PSE&G—which is an operating public utility engaged principally in the transmission of electricity and distribution of electricity and natural gas in certain areas of New Jersey. PSE&G is subject to regulation by the New Jersey Board of Public Utilities (BPU) and the FERC. PSE&G also invests in solar generation projects and has implemented energy efficiency and demand response programs, which are regulated by the BPU.

•

PSEG Energy Holdings L.L.C. (Energy Holdings)—which primarily has investments in leveraged leases and solar generation projects through its direct wholly owned subsidiaries. Certain Energy Holdings’ subsidiaries are subject to regulation by the FERC and the states in which they operate. Energy Holdings has also been awarded a contract to manage the transmission and distribution assets of the Long Island Power Authority (LIPA) starting in 2014.


•	PSEG Services Corporation (Services)—which provides management, administrative and general services to PSEG and its subsidiaries at cost.

Basis of Presentation

The respective financial statements included herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (SEC) applicable to Quarterly Reports on Form 10-Q. Certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (GAAP) have been condensed or omitted pursuant to such rules and regulations. These Condensed Consolidated Financial Statements and Notes to Condensed Consolidated Financial Statements (Notes) should be read in conjunction with, and update and supplement matters discussed in, the Annual Report on Form 10-K for the year ended December 31, 2012.

The unaudited condensed consolidated financial information furnished herein reflects all adjustments which are, in the opinion of management, necessary to fairly state the results for the interim periods presented. All such adjustments are of a normal recurring nature. All significant intercompany accounts and transactions are eliminated in consolidation, except as discussed in Note 17. Related-Party Transactions. The year-end Condensed Consolidated Balance Sheets were derived from the audited Consolidated Financial Statements included in the Annual Report on Form 10-K for the year ended December 31, 2012.

Note 2. Recent Accounting Standards

New Standards Adopted during 2013

Disclosures about Offsetting Assets and Liabilities

This accounting standard requires enhanced disclosures regarding assets and liabilities that are either offset in the financial statements, or are subject to an enforceable master netting arrangement or similar agreement. The guidance is applicable to certain financial instruments (e.g. derivatives) and securities borrowing and lending transactions. This standard requires entities:


•	to disclose information about offsetting and related arrangements to enable users of financial statements to understand the effect of those arrangements on an entity's financial position, and

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)


•	to present both net (offset amounts) and gross information in the notes to the financial statements for relevant assets and liabilities.

We adopted this standard retrospectively effective January 1, 2013. As this standard requires disclosures only, it did not have any impact on our consolidated financial position, results of operations or cash flows. For additional information, see Note 10. Financial Risk Management Activities.

Reclassification Adjustments out of Accumulated Other Comprehensive Income (AOCI)

This accounting standard requires entities to disclose the following information about reclassification adjustments related to AOCI:


•	changes in AOCI balances by component; and


•	significant amounts reclassified out of AOCI by respective line items of net income (for amounts that are required by GAAP to be reclassified to net income in their entirety in the same reporting period).

We adopted this standard prospectively effective January 1, 2013. As this standard requires disclosures only, it did not have any impact on our consolidated financial position, results of operations or cash flows. For additional information, see Note 14. Accumulated Other Comprehensive Income (Loss), Net of Tax.

Note 3. Variable Interest Entities (VIEs)

Variable Interest Entities for which PSE&G is the Primary Beneficiary

PSE&G is the primary beneficiary and consolidates two marginally capitalized VIEs, PSE&G Transition Funding LLC (Transition Funding) and PSE&G Transition Funding II LLC (Transition Funding II), which were created for the purpose of issuing transition bonds and purchasing bond transitional property of PSE&G, which is pledged as collateral to a trustee. PSE&G acts as the servicer for these entities to collect securitization transition charges authorized by the BPU. These funds are remitted to Transition Funding and Transition Funding II and are used for interest and principal payments on the transition bonds and related costs.

The assets and liabilities of these VIEs are presented separately on the face of the Condensed Consolidated Balance Sheets of PSEG and PSE&G because the Transition Funding and Transition Funding II assets are restricted and can only be used to settle their respective obligations. No Transition Funding or Transition Funding II creditor has any recourse to the general credit of PSE&G in the event the transition charges are not sufficient to cover the bond principal and interest payments of Transition Funding or Transition Funding II, respectively.

PSE&G’s maximum exposure to loss is equal to its equity investment in these VIEs which was $16 million as of March 31, 2013 and December 31, 2012. The risk of actual loss to PSE&G is considered remote. PSE&G did not provide any financial support to Transition Funding or Transition Funding II during the first three months of 2013 or in 2012. Further, PSE&G does not have any contractual commitments or obligations to provide financial support to Transition Funding or Transition Funding II.

Note 4. Rate Filings

The following information discusses significant updates regarding orders and pending rate filings. This Note should be read in conjunction with Note 6. Regulatory Assets and Liabilities to the Consolidated Financial Statements in the Annual Report on Form 10-K for the year ended December 31, 2012.


•	Weather Normalization Clause (WNC)—On April 29, 2013, the BPU approved PSE&G's filing with respect to deficiency revenues from the 2011-2012 Winter Period. As a result, provisional rates were approved which are recovering $41 million from customers during the 2012-2013 Winter Period, with a carryover deficiency of $24 million to the 2013-2014 Winter Period.


•	Remediation Adjustment Charge (RAC)—In April 2013, PSE&G filed a RAC 20 petition with the BPU requesting a decrease in electric and gas RAC revenues on an annual basis of $12 million and $7 million, respectively.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Note 5. Financing Receivables

PSE&G

PSE&G sponsors a solar loan program designed to help finance the installation of solar power systems throughout its electric service area. The loans are generally paid back with Solar Renewable Energy Certificates (SRECs) generated from the installed solar electric system. The following table reflects the outstanding loans by class of customer, none of which are considered “non-performing.”




Credit Risk Profile Based on Payment Activity
	As of		As of
Consumer Loans	March 31, 2013		December 31, 2012
	Millions
Commercial/Industrial	$	185	$	174
Residential	16		15
Total	$	201	$	189

Energy Holdings

Energy Holdings, through various of its indirect subsidiary companies, has investments in domestic energy and real estate assets subject primarily to leveraged lease accounting. A leveraged lease is typically comprised of an investment by an equity investor and debt provided by a third party debt investor. The debt is recourse only to the assets subject to lease and is not included on PSEG’s Condensed Consolidated Balance Sheets. As an equity investor, Energy Holdings’ investments in the leases are comprised of the total expected lease receivables on its investments over the lease terms plus the estimated residual values at the end of the lease terms, reduced for any income not yet earned on the leases. This amount is included in Long-Term Investments on PSEG’s Condensed Consolidated Balance Sheets. The more rapid depreciation of the leased property for tax purposes creates tax cash flow that will be repaid to the taxing authority in later periods. As such, the liability for such taxes due is recorded in Deferred Income Taxes on PSEG’s Condensed Consolidated Balance Sheets.

The table below shows Energy Holdings’ gross and net lease investment as of March 31, 2013 and December 31, 2012, respectively.




	As of			As of
	March 31, 2013			December 31, 2012
	Millions
Lease Receivables (net of Non-Recourse Debt)	$	705		$	721
Estimated Residual Value of Leased Assets	529			535
	1,234			1,256
Unearned and Deferred Income	(412		)	(416		)
Gross Investments in Leases	822			840
Deferred Tax Liabilities	(704		)	(723		)
Net Investments in Leases	$	118		$	117

The corresponding receivables associated with the lease portfolio are reflected below, net of non-recourse debt. The ratings in the table represent the ratings of the entities providing payment assurance to Energy Holdings. "Not Rated" counterparties relate to investments in leases of commercial real estate properties.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)




	Lease Receivables, Net of Non-Recourse Debt
Counterparties’ Credit Rating (Standard & Poor's (S&P))	As of		As of
As of March 31, 2013	March 31, 2013		December 31, 2012
	Millions
AA	$	20	$	21
AA-	58		73
BBB+ - BBB-	316		316
B	166		166
D	134		134
Not Rated	11		11
Total	$	705	$	721

The “B” and "D" ratings above represent lease receivables related to coal-fired assets in Pennsylvania and Illinois, respectively. As of March 31, 2013, the gross investment in the leases of such assets, net of non-recourse debt, was $560 million ($30 million, net of deferred taxes). A more detailed description of such assets under lease is presented in the table below.

Asset

Location

Gross

Investment

Owned

Total

Fuel

Type

Counter-parties’

S&P Credit

Ratings

Counterparty

Millions

Powerton Station Units 5 and 6

134

1,538

Coal

(A)

Edison Mission Energy

Joliet Station Units 7 and 8

1,044

Coal

(A)

Edison Mission Energy

Keystone Station Units 1 and 2

116

1,711

Coal

GenOn REMA, LLC

Conemaugh Station Units 1 and 2

116

1,711

Coal

GenOn REMA, LLC