Edgar Filing: PUBLIC SERVICE ENTERPRISE GROUP INC

PSEG-6/30/2014-Q2

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 June 30, 2014

¨ 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 July 15, 2014, Public Service Enterprise Group Incorporated had outstanding 505,886,756 shares of its sole class of Common Stock, without par value.

As of July 15, 2014, 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.

Table of Contents



		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	17
	Note 3. Variable Interest Entities (VIEs)	17
	Note 4. Rate Filings	18
	Note 5. Financing Receivables	19
	Note 6. Available-for-Sale Securities	21
	Note 7. Pension and Other Postretirement Benefits (OPEB)	27
	Note 8. Commitments and Contingent Liabilities	28
	Note 9. Changes in Capitalization	35
	Note 10. Financial Risk Management Activities	35
	Note 11. Fair Value Measurements	42
	Note 12. Other Income and Deductions	50
	Note 13. Income Taxes	51
	Note 14. Accumulated Other Comprehensive Income (Loss), Net of Tax	52
	Note 15. Earnings Per Share (EPS) and Dividends	56
	Note 16. Financial Information by Business Segments	57
	Note 17. Related-Party Transactions	58
	Note 18. Guarantees of Debt	60
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	64
	Overview of 2014 and Future Outlook	64
	Results of Operations	70
	Liquidity and Capital Resources	75
	Capital Requirements	77
	Accounting Matters	78
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	78
Item 4.	Controls and Procedures	79

PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	80
Item 1A.	Risk Factors	80
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	80
Item 5.	Other Information	80
Item 6.	Exhibits	86
	Signatures	87

Table of Contents

FORWARD-LOOKING STATEMENTS

Certain of the matters discussed in this report about our and our subsidiaries' future performance, including, without limitation, future revenues, earnings, strategies, prospects, consequences and all other statements that are not purely historical 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 filings we make with the United States Securities and Exchange Commission (SEC), including our Annual Report on Form 10-K and subsequent reports on Form 10-Q and Form 8-K and available on our website: http://www.pseg.com. 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 and enforcement 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 manage our energy obligations, available supply and risks,


•	adverse outcomes of any legal, regulatory or other proceeding, settlement, investigation or claim applicable to us and/or the energy industry,


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


•	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 obtain sufficient insurance coverage or recover proceeds of insurance with respect to such events,


•	acts of terrorism, cybersecurity attacks or intrusions that could adversely impact our businesses,


•	increases in competition in energy supply markets as well as competition for certain 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,


•	changes in technology, such as distributed generation and micro grids, and greater reliance on these technologies, and


•	changes in customer behaviors, including increases in energy efficiency, net-metering and demand response.

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.

Table of Contents

PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Millions, except per share data

(Unaudited)




		Three Months Ended						Six Months Ended
		June 30,						June 30,
		2014			2013			2014			2013
	OPERATING REVENUES	$	2,249		$	2,310		$	5,472		$	5,096
	OPERATING EXPENSES
	Energy Costs	789			755			2,145			1,910
	Operation and Maintenance	800			646			1,656			1,356
	Depreciation and Amortization	295			283			601			573
	Taxes Other Than Income Taxes	—			14			—			35
	Total Operating Expenses	1,884			1,698			4,402			3,874
	OPERATING INCOME	365			612			1,070			1,222
	Income from Equity Method Investments	3			3			7			5
	Other Income	62			52			110			113
	Other Deductions	(10		)	(13		)	(22		)	(42		)
	Other-Than-Temporary Impairments	(2		)	(2		)	(4		)	(4		)
	Interest Expense	(94		)	(101		)	(191		)	(203		)
	INCOME BEFORE INCOME TAXES	324			551			970			1,091
	Income Tax Expense	(112		)	(218		)	(372		)	(438		)
	NET INCOME	$	212		$	333		$	598		$	653
	WEIGHTED AVERAGE COMMON SHARES OUTSTANDING (THOUSANDS):
	BASIC	505,875			505,900			505,976			505,921
	DILUTED	508,056			507,381			507,949			507,301
	NET INCOME PER SHARE:
	BASIC	$	0.42		$	0.66		$	1.18		$	1.29
`	DILUTED	$	0.42		$	0.66		$	1.18		$	1.29
	DIVIDENDS PAID PER SHARE OF COMMON STOCK	$	0.37		$	0.36		$	0.74		$	0.72

See Notes to Condensed Consolidated Financial Statements.

Table of Contents

PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Millions

(Unaudited)




	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2014		2013			2014		2013
NET INCOME	$	212	$	333		$	598	$	653
Other Comprehensive Income (Loss), net of tax
Unrealized Gains (Losses) on Available-for-Sale Securities, net of tax (expense) benefit of $(9), $16, $(12) and $(11) for the three and six months ended 2014 and 2013, respectively	11		(16		)	13		11
Unrealized Gains (Losses) on Cash Flow Hedges, net of tax (expense) benefit of $0, $1, $(2) and $3 for the three and six months ended 2014 and 2013, respectively	1		—			3		(4		)
Pension/Other Postretirement Benefit Costs (OPEB) adjustment, net of tax (expense) benefit of $(1), $(7), $(3) and $(14) for the three and six months ended 2014 and 2013, respectively	2		9			6		19
Other Comprehensive Income (Loss), net of tax	14		(7		)	22		26
COMPREHENSIVE INCOME	$	226	$	326		$	620	$	679

See Notes to Condensed Consolidated Financial Statements.

Table of Contents

PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED

CONDENSED CONSOLIDATED BALANCE SHEETS

Millions

(Unaudited)




	June 30, 2014			December 31, 2013
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents	$	570		$	493
Accounts Receivable, net of allowances of $58 and $56 in 2014 and 2013, respectively	1,294			1,203
Tax Receivable	101			109
Unbilled Revenues	238			300
Fuel	426			545
Materials and Supplies, net	476			479
Prepayments	249			89
Derivative Contracts	73			98
Deferred Income Taxes	104			24
Regulatory Assets	229			243
Other	34			31
Total Current Assets	3,794			3,614
PROPERTY, PLANT AND EQUIPMENT	30,709			29,713
Less: Accumulated Depreciation and Amortization	(8,399		)	(8,068		)
Net Property, Plant and Equipment	22,310			21,645
NONCURRENT ASSETS
Regulatory Assets	2,584			2,612
Regulatory Assets of Variable Interest Entities (VIEs)	355			476
Long-Term Investments	1,315			1,313
Nuclear Decommissioning Trust (NDT) Fund	1,777			1,701
Long-Term Receivable of VIE	409			—
Other Special Funds	657			613
Goodwill	16			16
Other Intangibles	90			33
Derivative Contracts	45			163
Restricted Cash of VIEs	24			24
Other	324			312
Total Noncurrent Assets	7,596			7,263
TOTAL ASSETS	$	33,700		$	32,522

See Notes to Condensed Consolidated Financial Statements.

Table of Contents

PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED

CONDENSED CONSOLIDATED BALANCE SHEETS

Millions

(Unaudited)




	June 30, 2014			December 31, 2013
LIABILITIES AND CAPITALIZATION
CURRENT LIABILITIES
Long-Term Debt Due Within One Year	$	844		$	544
Securitization Debt of VIEs Due Within One Year	251			237
Commercial Paper and Loans	—			60
Accounts Payable	1,104			1,222
Derivative Contracts	88			76
Accrued Interest	95			95
Accrued Taxes	93			37
Clean Energy Program	200			142
Obligation to Return Cash Collateral	122			119
Regulatory Liabilities	176			43
Other	490			488
Total Current Liabilities	3,463			3,063
NONCURRENT LIABILITIES
Deferred Income Taxes and Investment Tax Credits (ITC)	7,197			7,107
Regulatory Liabilities	169			233
Regulatory Liabilities of VIEs	11			11
Asset Retirement Obligations	697			677
Other Postretirement Benefit (OPEB) Costs	1,077			1,095
OPEB Costs of Servco	314			—
Accrued Pension Costs	122			121
Accrued Pension Costs of Servco	93			—
Clean Energy Program	27			—
Environmental Costs	381			414
Derivative Contracts	36			31
Long-Term Accrued Taxes	230			180
Other	107			119
Total Noncurrent Liabilities	10,461			9,988
COMMITMENTS AND CONTINGENT LIABILITIES (See Note 8)
CAPITALIZATION
LONG-TERM DEBT
Long-Term Debt	7,782			7,587
Securitization Debt of VIEs	134			259
Project Level, Non-Recourse Debt	16			16
Total Long-Term Debt	7,932			7,862
STOCKHOLDERS’ EQUITY
Common Stock, no par, authorized 1,000,000,000 shares; issued, 2014 and 2013—533,556,660 shares	4,865			4,861
Treasury Stock, at cost, 2014— 27,716,798 shares; 2013— 27,699,398 shares	(630		)	(615		)
Retained Earnings	7,681			7,457
Accumulated Other Comprehensive Loss	(73		)	(95		)
Total Common Stockholders’ Equity	11,843			11,608
Noncontrolling Interest	1			1
Total Stockholders’ Equity	11,844			11,609
Total Capitalization	19,776			19,471
TOTAL LIABILITIES AND CAPITALIZATION	$	33,700		$	32,522

See Notes to Condensed Consolidated Financial Statements.

Table of Contents

PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Millions

(Unaudited)




	Six Months Ended
	June 30,
	2014			2013
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income	$	598		$	653
Adjustments to Reconcile Net Income to Net Cash Flows from Operating Activities:
Depreciation and Amortization	601			573
Amortization of Nuclear Fuel	98			95
Provision for Deferred Income Taxes (Other than Leases) and ITC	70			146
Non-Cash Employee Benefit Plan Costs	24			122
Leveraged Lease Income, Adjusted for Rents Received and Deferred Taxes	(44		)	(26		)
Net Realized and Unrealized (Gains) Losses on Energy Contracts and Other Derivatives	297			20
Change in Accrued Storm Costs	(3		)	(81		)
Net Change in Other Regulatory Assets and Liabilities	192			62
Cost of Removal	(50		)	(46		)
Net Realized (Gains) Losses and (Income) Expense from NDT Fund	(59		)	(47		)
Net Change in Margin Deposit	(234		)	(8		)
Net Change in Certain Current Assets and Liabilities	(53		)	32
Employee Benefit Plan Funding and Related Payments	(50		)	(194		)
Other	61			42
Net Cash Provided By (Used In) Operating Activities	1,448			1,343
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to Property, Plant and Equipment	(1,229		)	(1,406		)
Proceeds from Sales of Capital Leases and Investments	11			42
Proceeds from Sales of Available-for-Sale Securities	584			681
Investments in Available-for-Sale Securities	(599		)	(684		)
Other	(49		)	(12		)
Net Cash Provided By (Used In) Investing Activities	(1,282		)	(1,379		)
CASH FLOWS FROM FINANCING ACTIVITIES
Net Change in Commercial Paper and Loans	(60		)	(106		)
Issuance of Long-Term Debt	500			900
Redemption of Long-Term Debt	—			(450		)
Redemption of Securitization Debt	(111		)	(106		)
Cash Dividends Paid on Common Stock	(374		)	(364		)
Other	(44		)	(53		)
Net Cash Provided By (Used In) Financing Activities	(89		)	(179		)
Net Increase (Decrease) in Cash and Cash Equivalents	77			(215		)
Cash and Cash Equivalents at Beginning of Period	493			379
Cash and Cash Equivalents at End of Period	$	570		$	164
Supplemental Disclosure of Cash Flow Information:
Income Taxes Paid (Received)	$	296		$	138
Interest Paid, Net of Amounts Capitalized	$	192		$	194
Accrued Property, Plant and Equipment Expenditures	$	240		$	222

See Notes to Condensed Consolidated Financial Statements.

Table of Contents

PSEG POWER LLC

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Millions

(Unaudited)




	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2014			2013			2014			2013
OPERATING REVENUES	$	986		$	1,193		$	2,686		$	2,644
OPERATING EXPENSES
Energy Costs	520			495			1,564			1,355
Operation and Maintenance	327			280			629			563
Depreciation and Amortization	72			67			144			133
Total Operating Expenses	919			842			2,337			2,051
OPERATING INCOME	67			351			349			593
Income from Equity Method Investments	3			5			7			8
Other Income	46			35			79			82
Other Deductions	(9		)	(10		)	(19		)	(38		)
Other-Than-Temporary Impairments	(2		)	(2		)	(4		)	(4		)
Interest Expense	(29		)	(29		)	(61		)	(59		)
INCOME BEFORE INCOME TAXES	76			350			351			582
Income Tax Expense	(22		)	(140		)	(133		)	(231		)
EARNINGS AVAILABLE TO PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED	$	54		$	210		$	218		$	351

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

Table of Contents

PSEG POWER LLC

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Millions

(Unaudited)




	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2014		2013			2014		2013
NET INCOME	$	54	$	210		$	218	$	351
Other Comprehensive Income (Loss), net of tax
Unrealized Gains (Losses) on Available-for-Sale Securities, net of tax (expense) benefit of $(9), $16, $(11) and $(11) for the three and six months ended 2014 and 2013, respectively	9		(14		)	11		13
Unrealized Gains (Losses) on Cash Flow Hedges, net of tax (expense) benefit of $(1), $1, $(2) and $3 for the three and six months ended 2014 and 2013, respectively	2		(1		)	3		(5		)
Pension/OPEB adjustment, net of tax (expense) benefit of $(1), $(6), $(3) and $(11) for the three and six months ended 2014 and 2013, respectively	2		8			5		17
Other Comprehensive Income (Loss), net of tax	13		(7		)	19		25
COMPREHENSIVE INCOME	$	67	$	203		$	237	$	376

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

Table of Contents

PSEG POWER LLC

CONDENSED CONSOLIDATED BALANCE SHEETS

Millions

(Unaudited)




	June 30, 2014			December 31, 2013
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents	$	6		$	6
Accounts Receivable	408			338
Accounts Receivable—Affiliated Companies, net	102			333
Short-Term Loan to Affiliate	740			790
Fuel	426			545
Materials and Supplies, net	349			362
Derivative Contracts	55			57
Prepayments	13			13
Deferred Income Taxes	78			30
Other	2			2
Total Current Assets	2,179			2,476
PROPERTY, PLANT AND EQUIPMENT	10,458			10,278
Less: Accumulated Depreciation and Amortization	(3,153		)	(2,911		)
Net Property, Plant and Equipment	7,305			7,367
NONCURRENT ASSETS
Nuclear Decommissioning Trust (NDT) Fund	1,777			1,701
Long-Term Investments	121			123
Goodwill	16			16
Other Intangibles	90			33
Other Special Funds	154			139
Derivative Contracts	9			72
Other	80			75
Total Noncurrent Assets	2,247			2,159
TOTAL ASSETS	$	11,731		$	12,002

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

Table of Contents

PSEG POWER LLC

CONDENSED CONSOLIDATED BALANCE SHEETS

Millions

(Unaudited)




	June 30, 2014			December 31, 2013
LIABILITIES AND MEMBER’S EQUITY
CURRENT LIABILITIES
Long-Term Debt Due Within One Year	$	44		$	44
Accounts Payable	461			516
Derivative Contracts	88			76
Accrued Interest	27			28
Other	193			136
Total Current Liabilities	813			800
NONCURRENT LIABILITIES
Deferred Income Taxes and Investment Tax Credits (ITC)	2,046			2,031
Asset Retirement Obligations	411			400
Other Postretirement Benefit (OPEB) Costs	212			206
Derivative Contracts	36			31
Accrued Pension Costs	35			35
Long-Term Accrued Taxes	88			53
Other	72			91
Total Noncurrent Liabilities	2,900			2,847
COMMITMENTS AND CONTINGENT LIABILITIES (See Note 8)
LONG-TERM DEBT
Total Long-Term Debt	2,498			2,497
MEMBER’S EQUITY
Contributed Capital	2,214			2,214
Basis Adjustment	(986		)	(986		)
Retained Earnings	4,336			4,693
Accumulated Other Comprehensive Loss	(44		)	(63		)
Total Member’s Equity	5,520			5,858
TOTAL LIABILITIES AND MEMBER’S EQUITY	$	11,731		$	12,002

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

Table of Contents

PSEG POWER LLC

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Millions

(Unaudited)




	Six Months Ended
	June 30,
	2014			2013
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income	$	218		$	351
Adjustments to Reconcile Net Income to Net Cash Flows from Operating Activities:
Depreciation and Amortization	144			133
Amortization of Nuclear Fuel	98			95
Provision for Deferred Income Taxes and ITC	(22		)	74
Net Realized and Unrealized (Gains) Losses on Energy Contracts and Other Derivatives	297			20
Non-Cash Employee Benefit Plan Costs	7			33
Net Realized (Gains) Losses and (Income) Expense from NDT Fund	(59		)	(47		)
Net Change in Certain Current Assets and Liabilities:
Fuel, Materials and Supplies	132			97
Margin Deposit	(234		)	(8		)
Accounts Receivable	16			24
Accounts Payable	(72		)	(91		)
Accounts Receivable/Payable—Affiliated Companies, net	229			213
Other Current Assets and Liabilities	13			(8		)
Employee Benefit Plan Funding and Related Payments	(3		)	(44		)
Other	50			24
Net Cash Provided By (Used In) Operating Activities	814			866
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to Property, Plant and Equipment	(226		)	(248		)
Proceeds from Sales of Available-for-Sale Securities	563			625
Investments in Available-for-Sale Securities	(577		)	(637		)
Short-Term Loan—Affiliated Company, net	50			179
Other	(46		)	—
Net Cash Provided By (Used In) Investing Activities	(236		)	(81		)
CASH FLOWS FROM FINANCING ACTIVITIES
Redemption of Long-Term Debt	—			(300		)
Cash Dividend Paid	(575		)	(510		)
Contributed Capital	—			24
Other	(3		)	(2		)
Net Cash Provided By (Used In) Financing Activities	(578		)	(788		)
Net Increase (Decrease) in Cash and Cash Equivalents	—			(3		)
Cash and Cash Equivalents at Beginning of Period	6			7
Cash and Cash Equivalents at End of Period	$	6		$	4
Supplemental Disclosure of Cash Flow Information:
Income Taxes Paid (Received)	$	47		$	60
Interest Paid, Net of Amounts Capitalized	$	62		$	55
Accrued Property, Plant and Equipment Expenditures	$	48		$	46

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

Table of Contents

PUBLIC SERVICE ELECTRIC AND GAS COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Millions

(Unaudited)




	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2014			2013			2014			2013
OPERATING REVENUES	$	1,435		$	1,423		$	3,580		$	3,418
OPERATING EXPENSES
Energy Costs	565			580			1,610			1,547
Operation and Maintenance	362			369			824			796
Depreciation and Amortization	217			207			444			422
Taxes Other Than Income Taxes	—			14			—			35
Total Operating Expenses	1,144			1,170			2,878			2,800
OPERATING INCOME	291			253			702			618
Other Income	14			15			28			28
Other Deductions	(1		)	(1		)	(1		)	(2		)
Interest Expense	(67		)	(75		)	(135		)	(148		)
INCOME BEFORE INCOME TAXES	237			192			594			496
Income Tax Expense	(86		)	(71		)	(229		)	(196		)
EARNINGS AVAILABLE TO PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED	$	151		$	121		$	365		$	300

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

Table of Contents

PUBLIC SERVICE ELECTRIC AND GAS COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Millions

(Unaudited)




	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2014		2013			2014		2013
NET INCOME	$	151	$	121		$	365	$	300
Unrealized Gains (Losses) on Available-for-Sale Securities, net of tax (expense) benefit of $0 for the three and six months ended 2014 and 2013	—		(1		)	—		(1		)
COMPREHENSIVE INCOME	$	151	$	120		$	365	$	299

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

Table of Contents

PUBLIC SERVICE ELECTRIC AND GAS COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS

Millions

(Unaudited)




	June 30, 2014			December 31, 2013
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents	$	257		$	18
Accounts Receivable, net of allowances of $58 and $56 in 2014 and 2013, respectively	846			832
Unbilled Revenues	238			300
Materials and Supplies	126			115
Prepayments	186			24
Regulatory Assets	229			243
Derivative Contracts	2			25
Deferred Income Taxes	18			16
Other	7			12
Total Current Assets	1,909			1,585
PROPERTY, PLANT AND EQUIPMENT	19,889			19,071
Less: Accumulated Depreciation and Amortization	(5,048		)	(4,964		)
Net Property, Plant and Equipment	14,841			14,107
NONCURRENT ASSETS
Regulatory Assets	2,584			2,612
Regulatory Assets of VIEs	355			476
Long-Term Investments	360			361
Other Special Funds	374			354
Derivative Contracts	20			69
Restricted Cash of VIEs	24			24
Other	146			132
Total Noncurrent Assets	3,863			4,028
TOTAL ASSETS	$	20,613		$	19,720

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

Table of Contents

PUBLIC SERVICE ELECTRIC AND GAS COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS

Millions

(Unaudited)




	June 30, 2014		December 31, 2013
LIABILITIES AND CAPITALIZATION
CURRENT LIABILITIES
Long-Term Debt Due Within One Year	$	800	$	500
Securitization Debt of VIEs Due Within One Year	251		237
Commercial Paper and Loans	—		60
Accounts Payable	491		535
Accounts Payable—Affiliated Companies, net	93		190
Accrued Interest	67		67
Clean Energy Program	200		142
Deferred Income Taxes	—		30
Obligation to Return Cash Collateral	122		119
Regulatory Liabilities	176		43
Other	287		314
Total Current Liabilities	2,487		2,237
NONCURRENT LIABILITIES
Deferred Income Taxes and ITC	4,522		4,406
Other Postretirement Benefit (OPEB) Costs	814		839
Accrued Pension Costs	26		27
Regulatory Liabilities	169		233
Regulatory Liabilities of VIEs	11		11
Clean Energy Program	27		—
Environmental Costs	330		363
Asset Retirement Obligations	282		274
Long-Term Accrued Taxes	63		72
Other	58		47
Total Noncurrent Liabilities	6,302		6,272
COMMITMENTS AND CONTINGENT LIABILITIES (See Note 8)
CAPITALIZATION
LONG-TERM DEBT
Long-Term Debt	5,264		5,066
Securitization Debt of VIEs	134		259
Total Long-Term Debt	5,398		5,325
STOCKHOLDER’S EQUITY
Common Stock; 150,000,000 shares authorized; issued and outstanding, 2014 and 2013—132,450,344 shares	892		892
Contributed Capital	695		520
Basis Adjustment	986		986
Retained Earnings	3,852		3,487
Accumulated Other Comprehensive Income	1		1
Total Stockholder’s Equity	6,426		5,886
Total Capitalization	11,824		11,211
TOTAL LIABILITIES AND CAPITALIZATION	$	20,613	$	19,720

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

Table of Contents

PUBLIC SERVICE ELECTRIC AND GAS COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Millions

(Unaudited)




	Six Months Ended
	June 30,
	2014			2013
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income	$	365		$	300
Adjustments to Reconcile Net Income to Net Cash Flows from Operating Activities:
Depreciation and Amortization	444			422
Provision for Deferred Income Taxes and ITC	73			75
Non-Cash Employee Benefit Plan Costs	13			78
Cost of Removal	(50		)	(46		)
Change in Accrued Storm Costs	(3		)	(81		)
Net Change in Other Regulatory Assets and Liabilities	192			62
Net Change in Certain Current Assets and Liabilities:
Accounts Receivable and Unbilled Revenues	44			6
Materials and Supplies	(11		)	(6		)
Prepayments	(162		)	(192		)
Accounts Payable	16			47
Accounts Receivable/Payable—Affiliated Companies, net	(98		)	(137		)
Other Current Assets and Liabilities	(31		)	8
Employee Benefit Plan Funding and Related Payments	(44		)	(134		)
Other	(11		)	19
Net Cash Provided By (Used In) Operating Activities	737			421
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to Property, Plant and Equipment	(996		)	(1,148		)
Proceeds from Sales of Available-for-Sale Securities	8			32
Investments in Available-for-Sale Securities	(6		)	(13		)
Solar Loan Investments	(1		)	(15		)
Net Cash Provided By (Used In) Investing Activities	(995		)	(1,144		)
CASH FLOWS FROM FINANCING ACTIVITIES
Net Change in Short-Term Debt	(60		)	(106		)
Issuance of Long-Term Debt	500			900
Redemption of Long-Term Debt	—			(150		)
Redemption of Securitization Debt	(111		)	(106		)
Contributed Capital	175			100
Other	(7		)	(12		)
Net Cash Provided By (Used In) Financing Activities	497			626
Net Increase (Decrease) In Cash and Cash Equivalents	239			(97		)
Cash and Cash Equivalents at Beginning of Period	18			116
Cash and Cash Equivalents at End of Period	$	257		$	19
Supplemental Disclosure of Cash Flow Information:
Income Taxes Paid (Received)	$	102		$	110
Interest Paid, Net of Amounts Capitalized	$	127		$	135
Accrued Property, Plant and Equipment Expenditures	$	192		$	189

See disclosures regarding Pub