Document



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, 2018
OR
¨ 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
Newark, New Jersey 07102
973 430-7000

  
22-2625848
001-00973
  
PUBLIC SERVICE ELECTRIC AND GAS COMPANY
(A New Jersey Corporation)
80 Park Plaza
Newark, New Jersey 07102
973 430-7000

  
22-1212800
001-34232
  
PSEG POWER LLC
(A Delaware Limited Liability Company)
80 Park Plaza
Newark, New Jersey 07102
973 430-7000

  
22-3663480
 
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, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth 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
Emerging growth company  o
 
 
 
 
 
 
Public Service Electric and Gas Company
Large accelerated filer o
Accelerated filer o
Non-accelerated filer x
Smaller reporting company o
Emerging growth company  o
 
 
 
 
 
 
PSEG Power LLC
Large accelerated filer o
Accelerated filer o
Non-accelerated filer x
Smaller reporting company o
Emerging growth company  o
If any of the registrants is an emerging growth company, indicate by check mark if such registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨ 
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 17, 2018, Public Service Enterprise Group Incorporated had outstanding 505,323,326 shares of its sole class of Common Stock, without par value.
As of July 17, 2018, 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.
Public Service Electric and Gas Company and PSEG Power LLC are wholly owned subsidiaries of Public Service Enterprise Group Incorporated and meet the conditions set forth in General Instruction H(1) 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
FILING FORMAT
PART I. FINANCIAL INFORMATION
 
Item 1.
Financial Statements
 
 
 
 
 
Notes to Condensed Consolidated Financial Statements
 
 
Note 1. Organization, Basis of Presentation and Significant Accounting Policies
 
Note 2. Recent Accounting Standards
 
Note 3. Revenues
 
Note 4. Early Plant Retirements
 
Note 5. Variable Interest Entity (VIE)
 
Note 6. Rate Filings
 
Note 7. Financing Receivables
 
Note 8. Trust Investments
 
Note 9. Pension and Other Postretirement Benefits (OPEB)
 
Note 10. Commitments and Contingent Liabilities
 
Note 11. Debt and Credit Facilities
 
Note 12. Financial Risk Management Activities
 
Note 13. Fair Value Measurements
 
Note 14. Other Income (Deductions)
 
Note 15. Income Taxes
 
Note 16. Accumulated Other Comprehensive Income (Loss), Net of Tax
 
Note 17. Earnings Per Share (EPS) and Dividends
 
Note 18. Financial Information by Business Segment
 
Note 19. Related-Party Transactions
 
Note 20. Guarantees of Debt
Item 2.
 
Executive Overview of 2018 and Future Outlook
 
 
 
 
Item 3.
Item 4.
 
 
PART II. OTHER INFORMATION
 
Item 1.
Item 1A.
Item 2.
Item 5.
Item 6.
 


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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. These factors include, but are not limited to:
•
fluctuations in wholesale power and natural gas markets, including the potential impacts on the economic viability of our generation units;
•
our ability to obtain adequate fuel supply;
•
any inability to manage our energy obligations with available supply;
•
increases in competition in wholesale energy and capacity markets;
•
changes in technology related to energy generation, distribution and consumption and customer usage patterns;
•
economic downturns;
•
third-party credit risk relating to our sale of generation output and purchase of fuel;
•
adverse performance of our decommissioning and defined benefit plan trust fund investments and changes in funding requirements;
•
changes in state and federal legislation and regulations, and PSE&G’s ability to recover costs and earn returns on authorized investments;
•
the impact of pending and any future rate case proceedings;
•
regulatory, financial, environmental, health and safety risks associated with our ownership and operation of nuclear facilities;
•
adverse changes in energy industry laws, policies and regulations, including market structures and transmission planning;
•
changes in federal and state environmental regulations and enforcement;
•
delays in receipt of, or an inability to receive, necessary licenses and permits;
•
adverse outcomes of any legal, regulatory or other proceeding, settlement, investigation or claim applicable to us and/or the energy industry;
•
changes in tax laws and regulations;
•
the impact of our holding company structure on our ability to meet our corporate funding needs, service debt and pay dividends;
•
lack of growth or slower growth in the number of customers or changes in customer demand;
•
any inability of Power to meet its commitments under forward sale obligations;
•
reliance on transmission facilities that we do not own or control and the impact on our ability to maintain adequate transmission capacity;
•
any inability to successfully develop or construct generation, transmission and distribution projects;
•
any equipment failures, accidents, severe weather events or other incidents that impact our ability to provide safe and reliable service to our customers;

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Table of Contents

•
our inability to exercise control over the operations of generation facilities in which we do not maintain a controlling interest;
•
any inability to recover the carrying amount of our long-lived assets and leveraged leases;
•
any inability to maintain sufficient liquidity;
•
any inability to realize anticipated tax benefits or retain tax credits;
•
challenges associated with recruitment and/or retention of key executives and a qualified workforce;
•
the impact of our covenants in our debt instruments on our operations; and
•
the impact of acts of terrorism, cybersecurity attacks or intrusions.
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, results of operations or cash flows. 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 in light of new information or future events, 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.

FILING FORMAT
This combined Quarterly Report on Form 10-Q is separately filed by Public Service Enterprise Group Incorporated (PSEG), Public Service Electric and Gas Company (PSE&G) and PSEG Power LLC (Power). Information relating to any individual company is filed by such company on its own behalf. PSE&G and Power are each only responsible for information about itself and its subsidiaries.
Discussions throughout the document refer to PSEG and its direct operating subsidiaries, PSE&G and Power. Depending on the context of each section, references to “we,” “us,” and “our” relate to PSEG or to the specific company or companies being discussed.


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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,
 
 
 
2018
 
2017
 
2018
 
2017
 
 
OPERATING REVENUES
$
2,016

 
$
2,142

 
$
4,834

 
$
4,733

 
 
OPERATING EXPENSES
 
 
 
 
 
 
 
 
 
Energy Costs
600

 
588

 
1,552

 
1,456

 
 
Operation and Maintenance
725

 
718

 
1,479

 
1,435

 
 
Depreciation and Amortization
280

 
641

 
560

 
1,469

 
 
Total Operating Expenses
1,605

 
1,947

 
3,591

 
4,360

 
 
OPERATING INCOME
411

 
195

 
1,243

 
373

 
 
Income from Equity Method Investments
5

 
5

 
7

 
8

 
 
Net Gains (Losses) on Trust Investments
8

 
25

 
(14
)
 
53

 
 
Other Income (Deductions)
34

 
33

 
66

 
65

 
 
Non-Operating Pension and OPEB Credits (Costs)
19

 
1

 
38

 
1

 
 
Interest Expense
(111
)
 
(91
)
 
(214
)
 
(189
)
 
 
INCOME BEFORE INCOME TAXES
366

 
168

 
1,126

 
311

 
 
Income Tax Expense
(97
)
 
(59
)
 
(299
)
 
(88
)
 
 
NET INCOME
$
269

 
$
109

 
$
827

 
$
223

 
 
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
 
 
 
 
 
 
 
 
 
BASIC
504

 
505

 
504

 
505

 
 
DILUTED
507

 
507

 
507

 
507

 
 
NET INCOME PER SHARE:
 
 
 
 
 
 
 
 
 
BASIC
$
0.53

 
$
0.22

 
$
1.64

 
$
0.44

 
 
DILUTED
$
0.53

 
$
0.22

 
$
1.63

 
$
0.44

 
 
DIVIDENDS PAID PER SHARE OF COMMON STOCK
$
0.45

 
$
0.43

 
$
0.90

 
$
0.86

 
 
 
 
 
 
 
 
 
 
 
See Notes to Condensed Consolidated Financial Statements.

1

PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Millions
(Unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Six Months Ended
 
 
 
June 30,
 
June 30,
 
 
 
2018
 
2017
 
2018
 
2017
 
 
NET INCOME
$
269

 
$
109

 
$
827

 
$
223

 
 
Other Comprehensive Income (Loss), net of tax
 
 
 
 
 
 
 
 
 
Unrealized Gains (Losses) on Available-for-Sale Securities, net of tax (expense) benefit of $4, $(9), $13 and $(25) for the three and six months ended 2018 and 2017, respectively
(5
)
 
10

 
(19
)
 
25

 
 
Unrealized Gains (Losses) on Cash Flow Hedges, net of tax (expense) benefit of $1, $0, $1 and $0 for the three and six months ended 2018 and 2017, respectively
(1
)
 
—

 
(1
)
 
—

 
 
Pension/Other Postretirement Benefit Costs (OPEB) adjustment, net of tax (expense) benefit of $(3), $(4), $(6) and $(8) for the three and six months ended 2018 and 2017, respectively
7

 
6

 
15

 
12

 
 
Other Comprehensive Income (Loss), net of tax
1

 
16

 
(5
)
 
37

 
 
COMPREHENSIVE INCOME
$
270

 
$
125

 
$
822

 
$
260

 
 
 
 
 
 
 
 
 
 
 
See Notes to Condensed Consolidated Financial Statements.


2

PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
Millions
(Unaudited)
 
 
 
 
 
 
 
 
 
June 30,
2018
 
December 31,
2017
 
 
ASSETS
 
 
CURRENT ASSETS
 
 
 
 
 
Cash and Cash Equivalents
$
95

 
$
313

 
 
Accounts Receivable, net of allowances of $59 in 2018 and 2017
1,163

 
1,348

 
 
Tax Receivable
111

 
127

 
 
Unbilled Revenues
189

 
296

 
 
Fuel
218

 
289

 
 
Materials and Supplies, net
574

 
577

 
 
Prepayments
324

 
118

 
 
Derivative Contracts
24

 
29

 
 
Regulatory Assets
296

 
211

 
 
Other
11

 
4

 
 
Total Current Assets
3,005

 
3,312

 
 
PROPERTY, PLANT AND EQUIPMENT
42,809

 
41,231

 
 
     Less: Accumulated Depreciation and Amortization
(9,658
)
 
(9,434
)
 
 
Net Property, Plant and Equipment
33,151

 
31,797

 
 
NONCURRENT ASSETS
 
 
 
 
 
Regulatory Assets
3,225

 
3,222

 
 
Long-Term Investments
924

 
932

 
 
Nuclear Decommissioning Trust (NDT) Fund
2,049

 
2,133

 
 
Long-Term Receivable of Variable Interest Entity (VIE)
688

 
686

 
 
Rabbi Trust Fund
224

 
231

 
 
Goodwill
16

 
16

 
 
Other Intangibles
127

 
114

 
 
Derivative Contracts
21

 
7

 
 
Other
277

 
266

 
 
Total Noncurrent Assets
7,551

 
7,607

 
 
TOTAL ASSETS
$
43,707

 
$
42,716

 
 
 
 
 
 
 
See Notes to Condensed Consolidated Financial Statements.


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PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
Millions
(Unaudited)

 
 
 
 
 
 
 
 
 
June 30,
2018
 
December 31,
2017
 
 
LIABILITIES AND CAPITALIZATION
 
 
CURRENT LIABILITIES
 
 
 
 
 
Long-Term Debt Due Within One Year
$
1,550

 
$
1,000

 
 
Commercial Paper and Loans
270

 
542

 
 
Accounts Payable
1,348

 
1,694

 
 
Derivative Contracts
23

 
16

 
 
Accrued Interest
105

 
103

 
 
Accrued Taxes
104

 
48

 
 
Clean Energy Program
203

 
128

 
 
Obligation to Return Cash Collateral
131

 
129

 
 
Regulatory Liabilities
32

 
47

 
 
Other
478

 
461

 
 
Total Current Liabilities
4,244

 
4,168

 
 
NONCURRENT LIABILITIES
 
 
 
 
 
Deferred Income Taxes and Investment Tax Credits (ITC)
5,475

 
5,240

 
 
Regulatory Liabilities
2,937

 
2,948

 
 
Clean Energy Program
27

 
—

 
 
Asset Retirement Obligations
1,047

 
1,024

 
 
OPEB Costs
1,423

 
1,455

 
 
OPEB Costs of Servco
551

 
542

 
 
Accrued Pension Costs
480

 
537

 
 
Accrued Pension Costs of Servco
122

 
129

 
 
Environmental Costs
332

 
357

 
 
Derivative Contracts
1

 
5

 
 
Long-Term Accrued Taxes
177

 
175

 
 
Other
223

 
221

 
 
Total Noncurrent Liabilities
12,795

 
12,633

 
 
COMMITMENTS AND CONTINGENT LIABILITIES (See Note 10)


 


 
 
CAPITALIZATION

 
 
 
 
LONG-TERM DEBT
12,510

 
12,068

 
 
STOCKHOLDERS’ EQUITY

 
 
 
 
Common Stock, no par, authorized 1,000 shares; issued, 2018 and 2017—534 shares
4,955

 
4,961

 
 
Treasury Stock, at cost, 2018—30 shares; 2017—29 shares
(813
)
 
(763
)
 
 
Retained Earnings
10,426

 
9,878

 
 
Accumulated Other Comprehensive Loss
(410
)
 
(229
)
 
 
Total Stockholders’ Equity
14,158

 
13,847

 
 
Total Capitalization
26,668

 
25,915

 
 
TOTAL LIABILITIES AND CAPITALIZATION
$
43,707

 
$
42,716

 
 
 


 
 
 
See Notes to Condensed Consolidated Financial Statements.

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PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Millions
(Unaudited)
 
 
 
 
 
 
 
 
Six Months Ended
 
 
 
June 30,
 
 
 
2018
 
2017
 
 
CASH FLOWS FROM OPERATING ACTIVITIES
 
 
 
 
 
Net Income
$
827

 
$
223

 
 
Adjustments to Reconcile Net Income to Net Cash Flows from Operating Activities:
 
 
 
 
 
Depreciation and Amortization
560

 
1,469

 
 
Amortization of Nuclear Fuel
95

 
101

 
 
Emission Allowances and Renewable Energy Credit (REC) Compliance Accrual

46

 
51

 
 
Provision for Deferred Income Taxes (Other than Leases) and ITC
213

 
91

 
 
Non-Cash Employee Benefit Plan Costs
35

 
45

 
 
Leveraged Lease (Income) Loss, Adjusted for Rents Received and Deferred Taxes
8

 
(30
)
 
 
Net (Gain) Loss on Lease Investments
14

 
45

 
 
Net Realized and Unrealized (Gains) Losses on Energy Contracts and Other Derivatives
(54
)
 
(42
)
 
 
Net Change in Regulatory Assets and Liabilities
(58
)
 
(124
)
 
 
Cost of Removal
(84
)
 
(47
)
 
 
Net (Gains) Losses and (Income) Expense from NDT Fund
(8
)
 
(58
)
 
 
Net Change in Certain Current Assets and Liabilities:
 
 
 
 
 
          Tax Receivable
16

 
69

 
 
          Accrued Taxes
57

 
15

 
 
          Margin Deposit
24

 
59

 
 
          Other Current Assets and Liabilities
2

 
(58
)
 
 
Employee Benefit Plan Funding and Related Payments
(58
)
 
(49
)
 
 
Other
(2
)
 
(5
)
 
 
Net Cash Provided By (Used In) Operating Activities
1,633

 
1,755

 
 
CASH FLOWS FROM INVESTING ACTIVITIES


 
 
 
 
Additions to Property, Plant and Equipment
(2,005
)
 
(1,981
)
 
 
Purchase of Emissions Allowances and RECs
(44
)
 
(29
)
 
 
Proceeds from Sales of Trust Investments
821

 
711

 
 
Purchases of Trust Investments
(829
)
 
(726
)
 
 
Other
30

 
36

 
 
Net Cash Provided By (Used In) Investing Activities
(2,027
)
 
(1,989
)
 
 
CASH FLOWS FROM FINANCING ACTIVITIES
 
 
 
 
 
Net Change in Commercial Paper and Loans
(272
)
 
(388
)
 
 
Issuance of Long-Term Debt
1,400

 
1,125

 
 
Redemption of Long-Term Debt
(400
)
 
—

 
 
Cash Dividends Paid on Common Stock
(455
)
 
(435
)
 
 
Other
(83
)
 
(62
)
 
 
Net Cash Provided By (Used In) Financing Activities
190

 
240

 
 
Net Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash
(204
)
 
6

 
 
Cash, Cash Equivalents and Restricted Cash at Beginning of Period
315

 
426

 
 
Cash, Cash Equivalents and Restricted Cash at End of Period
$
111

 
$
432

 
 
Supplemental Disclosure of Cash Flow Information:
 
 
 
 
 
Income Taxes Paid (Received)
$
52

 
$
(30
)
 
 
Interest Paid, Net of Amounts Capitalized
$
205

 
$
189

 
 
Accrued Property, Plant and Equipment Expenditures
$
625

 
$
513

 
 
 
 
 
 
 

See Notes to Condensed Consolidated Financial Statements.

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PUBLIC SERVICE ELECTRIC AND GAS COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Millions
(Unaudited)

 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Six Months Ended
 
 
 
June 30,
 
June 30,
 
 
 
2018
 
2017
 
2018
 
2017
 
 
OPERATING REVENUES
$
1,386

 
$
1,393

 
$
3,231

 
$
3,219

 
 
OPERATING EXPENSES
 
 
 
 
 
 
 
 
 
Energy Costs
488

 
488

 
1,270

 
1,250

 
 
Operation and Maintenance
353

 
359

 
744

 
729

 
 
Depreciation and Amortization
187

 
166

 
377

 
337

 
 
Total Operating Expenses
1,028

 
1,013

 
2,391

 
2,316

 
 
OPERATING INCOME
358

 
380

 
840

 
903

 
 
Net Gains (Losses) on Trust Investments
—

 
—

 
—

 
2

 
 
Other Income (Deductions)
20

 
21

 
40

 
43

 
 
Non-Operating Pension and OPEB Credits (Costs)
15

 
(1
)
 
30

 
(3
)
 
 
Interest Expense
(82
)
 
(69
)
 
(163
)
 
(144
)
 
 
INCOME BEFORE INCOME TAXES
311

 
331

 
747

 
801

 
 
Income Tax Expense
(80
)
 
(123
)
 
(197
)
 
(294
)
 
 
NET INCOME
$
231

 
$
208

 
$
550

 
$
507

 
 
 
 
 
 
 
 
 
 
 
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
 
Six Months Ended
 
 
 
June 30,
 
June 30,
 
 
 
2018
 
2017
 
2018
 
2017
 
 
NET INCOME
$
231

 
$
208

 
$
550

 
$
507

 
 
Unrealized Gains (Losses) on Available-for-Sale Securities, net of tax (expense) benefit of $0, $0, $0 and $1 for the three and six months ended 2018 and 2017, respectively
1

 
—

 
—

 
(1
)
 
 
COMPREHENSIVE INCOME
$
232

 
$
208

 
$
550

 
$
506

 
 
 
 
 
 
 
 
 
 
 
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)

 
 
 
 
 
 
 
 
June 30,
2018
 
December 31,
2017
 
 
ASSETS
 
 
CURRENT ASSETS

 
 
 
 
Cash and Cash Equivalents
$
20

 
$
242

 
 
Accounts Receivable, net of allowances of $59 in 2018 and 2017
796

 
882

 
 
Accounts Receivable—Affiliated Companies
18

 
—

 
 
Unbilled Revenues
189

 
296

 
 
Materials and Supplies
195

 
197

 
 
Prepayments
205

 
44

 
 
Regulatory Assets
296

 
211

 
 
Other
10

 
4

 
 
Total Current Assets
1,729

 
1,876

 
 
PROPERTY, PLANT AND EQUIPMENT
30,396

 
29,117

 
 
Less: Accumulated Depreciation and Amortization
(6,200
)
 
(6,101
)
 
 
Net Property, Plant and Equipment
24,196

 
23,016

 
 
NONCURRENT ASSETS
 
 
 
 
 
Regulatory Assets
3,225

 
3,222

 
 
Long-Term Investments
285

 
280

 
 
Rabbi Trust Fund
45

 
46

 
 
Other
123

 
114

 
 
Total Noncurrent Assets
3,678

 
3,662

 
 
TOTAL ASSETS
$
29,603

 
$
28,554

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


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Table of Contents

PUBLIC SERVICE ELECTRIC AND GAS COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
Millions
(Unaudited)

 
 
 
 
 
 
 
 
June 30,
2018
 
December 31,
2017
 
 
LIABILITIES AND CAPITALIZATION
 
 
CURRENT LIABILITIES
 
 
 
 
 
Long-Term Debt Due Within One Year
$
600

 
$
750

 
 
Commercial Paper and Loans
195

 
—

 
 
Accounts Payable
704

 
728

 
 
Accounts Payable—Affiliated Companies
150

 
340

 
 
Accrued Interest
79

 
78

 
 
Clean Energy Program
203

 
128

 
 
Obligation to Return Cash Collateral
131

 
129

 
 
Regulatory Liabilities
32

 
47

 
 
Other
376

 
311

 
 
Total Current Liabilities
2,470

 
2,511

 
 
NONCURRENT LIABILITIES
 
 
 
 
 
Deferred Income Taxes and ITC
3,570

 
3,391

 
 
OPEB Costs
1,066

 
1,103

 
 
Accrued Pension Costs
189

 
226

 
 
Regulatory Liabilities
2,937

 
2,948

 
 
Clean Energy Program
27

 
—

 
 
Environmental Costs
255

 
283

 
 
Asset Retirement Obligations
214

 
212

 
 
Long-Term Accrued Taxes
94

 
91

 
 
Other
111

 
114

 
 
Total Noncurrent Liabilities
8,463

 
8,368

 
 
COMMITMENTS AND CONTINGENT LIABILITIES (See Note 10)


 


 
 
CAPITALIZATION
 
 
 
 
 
LONG-TERM DEBT
8,286

 
7,841

 
 
STOCKHOLDER’S EQUITY
 
 
 
 
 
Common Stock; 150 shares authorized; issued and outstanding, 2018 and 2017—132 shares
892

 
892

 
 
Contributed Capital
1,095

 
1,095

 
 
Basis Adjustment
986

 
986

 
 
Retained Earnings
7,411

 
6,861

 
 
Total Stockholder’s Equity
10,384

 
9,834

 
 
Total Capitalization
18,670

 
17,675

 
 
TOTAL LIABILITIES AND CAPITALIZATION
$
29,603

 
$
28,554

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


9

Table of Contents

PUBLIC SERVICE ELECTRIC AND GAS COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Millions
(Unaudited)
 
 
 
 
 
 
 
 
Six Months Ended
 
 
 
June 30,
 
 
 
2018
 
2017
 
 
CASH FLOWS FROM OPERATING ACTIVITIES
 
 
 
 
 
  Net Income
$
550

 
$
507

 
 
Adjustments to Reconcile Net Income to Net Cash Flows from Operating Activities:
 
 
 
 
 
Depreciation and Amortization
377

 
337

 
 
Provision for Deferred Income Taxes and ITC
160

 
330

 
 
Non-Cash Employee Benefit Plan Costs
19

 
25

 
 
Cost of Removal
(84
)
 
(47
)
 
 
Net Change in Regulatory Assets and Liabilities
(58
)
 
(124
)
 
 
Net Change in Certain Current Assets and Liabilities:

 
 
 
 
Accounts Receivable and Unbilled Revenues
195

 
108

 
 
Materials and Supplies
2

 
(15
)
 
 
Prepayments
(161
)
 
(184
)
 
 
Accounts Payable
(30
)
 
(30
)
 
 
Accounts Receivable/Payable—Affiliated Companies, net
(204
)
 
(72
)
 
 
Other Current Assets and Liabilities
66

 
14

 
 
Employee Benefit Plan Funding and Related Payments
(50
)
 
(42
)
 
 
Other
(20
)
 
(38
)
 
 
Net Cash Provided By (Used In) Operating Activities
762

 
769

 
 
CASH FLOWS FROM INVESTING ACTIVITIES
 
 
 
 
 
Additions to Property, Plant and Equipment
(1,447
)
 
(1,389
)
 
 
Proceeds from Sales of Trust Investments
9

 
28

 
 
Purchases of Trust Investments
(10
)
 
(29
)
 
 
Solar Loan Investments
(11
)
 
(3
)
 
 
Other
3

 
5

 
 
Net Cash Provided By (Used In) Investing Activities
(1,456
)
 
(1,388
)
 
 
CASH FLOWS FROM FINANCING ACTIVITIES
 
 
 
 
 
Net Change in Short-Term Debt
195

 
—

 
 
Issuance of Long-Term Debt
700

 
425

 
 
Redemption of Long-Term Debt
(400
)
 
—

 
 
Other
(9
)
 
(5
)
 
 
Net Cash Provided By (Used In) Financing Activities
486

 
420

 
 
Net Increase (Decrease) In Cash, Cash Equivalents and Restricted Cash
(208
)
 
(199
)
 
 
Cash, Cash Equivalents and Restricted Cash at Beginning of Period
244

 
393

 
 
Cash, Cash Equivalents and Restricted Cash at End of Period
$
36

 
$
194

 
 
Supplemental Disclosure of Cash Flow Information:
 
 
 
 
 
Income Taxes Paid (Received)
$
97

 
$
(75
)
 
 
Interest Paid, Net of Amounts Capitalized
$
157

 
$
144

 
 
Accrued Property, Plant and Equipment Expenditures
$
436

 
$
319

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

10

Table of Contents


PSEG POWER LLC
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Millions
(Unaudited)

 
 
 
 
 
 
 
 
 
 
 

Three Months Ended
 
Six Months Ended
 
 
 
June 30,
 
June 30,
 
 
 
2018
 
2017
 
2018
 
2017
 
 
OPERATING REVENUES
$
767

 
$
918

 
$
2,170

 
$
2,187

 
 
OPERATING EXPENSES
 
 
 
 
 
 
 
 
 
Energy Costs
373

 
386

 
1,119

 
1,078

 
 
Operation and Maintenance
268

 
256

 
514

 
488

 
 
Depreciation and Amortization
84

 
465

 
166

 
1,115

 
 
Total Operating Expenses
725

 
1,107

 
1,799

 
2,681

 
 
OPERATING INCOME (LOSS)
42

 
(189
)
 
371

 
(494
)
 
 
Income from Equity Method Investments
5

 
5

 
7

 
8

 
 
Net Gains (Losses) on Trust Investments
8

 
24

 
(14
)
 
43

 
 
Other Income (Deductions)
13

 
12

 
24

 
23

 
 
Non-Operating Pension and OPEB Credits (Costs)
3

 
2

 
7

 
4

 
 
Interest Expense
(11
)
 
(13
)
 
(18
)
 
(29
)
 
 
INCOME (LOSS) BEFORE INCOME TAXES
60

 
(159
)
 
377

 
(445
)
 
 
Income Tax Benefit (Expense)
(19
)
 
62

 
(102
)
 
178

 
 
NET INCOME (LOSS)
$
41

 
$
(97
)
 
$
275

 
$
(267
)
 
 
 
 
 
 
 


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


11

Table of Contents

PSEG POWER LLC
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
Millions
(Unaudited)

 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Six Months Ended
 
 
 
June 30,
 
June 30,
 
 
 
2018
 
2017
 
2018
 
2017
 
 
NET INCOME (LOSS)
$
41

 
$
(97
)
 
$
275

 
$
(267
)
 
 
Other Comprehensive Income (Loss), net of tax
 
 
 
 
 
 
 
 
 
Unrealized Gains (Losses) on Available-for-Sale Securities, net of tax (expense) benefit of $3, $(9), $11 and $(27) for the three and six months ended 2018 and 2017, respectively
(4
)
 
10

 
(15
)
 
29

 
 
Pension/OPEB adjustment, net of tax (expense) benefit of $(2), $(3), $(5) and $(7) for the three and six months ended 2018 and 2017, respectively
6

 
5

 
12

 
10

 
 
Other Comprehensive Income (Loss), net of tax
2

 
15

 
(3
)
 
39

 
 
COMPREHENSIVE INCOME (LOSS)
$
43

 
$
(82
)
 
$
272

 
$
(228
)
 
 
 
 
 
 
 
 
 
 
 
See disclosures regarding PSEG Power LLC included in the Notes to Condensed Consolidated Financial Statements.


12

Table of Contents

PSEG POWER LLC
CONDENSED CONSOLIDATED BALANCE SHEETS
Millions
(Unaudited)
 
 
 
 
 
 
 
 
 
June 30,
2018
 
December 31,
2017
 
 
ASSETS
 
 
CURRENT ASSETS
 
 
 
 
 
Cash and Cash Equivalents
$
20

 
$
32

 
 
Accounts Receivable
313

 
380

 
 
Accounts Receivable—Affiliated Companies
81

 
221

 
 
Short-Term Loan to Affiliate
519

 
—

 
 
Fuel
218

 
289

 
 
Materials and Supplies, net
376

 
376

 
 
Derivative Contracts
24

 
29

 
 
Prepayments
10

 
11

 
 
Other
4

 
3

 
 
Total Current Assets
1,565

 
1,341

 
 
PROPERTY, PLANT AND EQUIPMENT
12,046

 
11,755

 
 
Less: Accumulated Depreciation and Amortization
(3,267
)
 
(3,159
)
 
 
Net Property, Plant and Equipment
8,779

 
8,596

 
 
NONCURRENT ASSETS
 
 
 
 
 
NDT Fund
2,049

 
2,133

 
 
Long-Term Investments
87

 
87

 
 
Goodwill
16

 
16

 
 
Other Intangibles
127

 
114

 
 
Rabbi Trust Fund
56

 
57

 
 
Derivative Contracts
21

 
7

 
 
Other
72

 
67

 
 
Total Noncurrent Assets
2,428

 
2,481

 
 
TOTAL ASSETS
$
12,772

 
$
12,418

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


13

Table of Contents

PSEG POWER LLC
CONDENSED CONSOLIDATED BALANCE SHEETS
Millions
(Unaudited)

 
 
 
 
 
 
 
 
June 30,
2018
 
December 31,
2017
 
 
LIABILITIES AND MEMBER’S EQUITY
 
 
CURRENT LIABILITIES
 
 
 
 
 
Long-Term Debt Due Within One Year
$
250

 
$
250

 
 
Accounts Payable
468

 
712

 
 
Accounts Payable—Affiliated Companies
148

 
57

 
 
Short-Term Loan from Affiliate
—

 
281

 
 
Derivative Contracts
23

 
16

 
 
Accrued Interest
22

 
20

 
 
Other
62

 
99

 
 
Total Current Liabilities
973

 
1,435

 
 
NONCURRENT LIABILITIES
 
 
 
 
 
Deferred Income Taxes and ITC
1,451

 
1,406

 
 
Asset Retirement Obligations
831

 
810

 
 
OPEB Costs
287

 
283

 
 
Derivative Contracts
1

 
5

 
 
Accrued Pension Costs
169

 
184

 
 
Long-Term Accrued Taxes
45

 
52

 
 
Other
143

 
140

 
 
Total Noncurrent Liabilities
2,927

 
2,880

 
 
COMMITMENTS AND CONTINGENT LIABILITIES (See Note 10)


 


 
 
LONG-TERM DEBT
2,833

 
2,136

 
 
MEMBER’S EQUITY

 
 
 
 
Contributed Capital
2,214

 
2,214

 
 
Basis Adjustment
(986
)
 
(986
)
 
 
Retained Earnings
5,161

 
4,911

 
 
Accumulated Other Comprehensive Loss
(350
)
 
(172
)
 
 
Total Member’s Equity
6,039

 
5,967

 
 
TOTAL LIABILITIES AND MEMBER’S EQUITY
$
12,772

 
$
12,418

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


14

Table of Contents

PSEG POWER LLC
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Millions
(Unaudited)

 
 
 
 
 
 
 
 
Six Months Ended
 
 
 
June 30,
 
 
 
2018
 
2017
 
 
CASH FLOWS FROM OPERATING ACTIVITIES
 
 
 
 
 
Net Income (Loss)
$
275

 
$
(267
)
 
 
Adjustments to Reconcile Net Income (Loss) to Net Cash Flows from Operating Activities:
 
 
 
 
 
Depreciation and Amortization
166

 
1,115

 
 
Amortization of Nuclear Fuel
95

 
101

 
 
Provision for Deferred Income Taxes and ITC
51

 
(226
)
 
 
Interest Accretion on Asset Retirement Obligation
20

 
15

 
 
Net Realized and Unrealized (Gains) Losses on Energy Contracts and Other Derivatives
(54
)
 
(42
)
 
 
Emission Allowances and Renewable Energy Credit (REC) Compliance Accrual

46

 
51

 
 
Non-Cash Employee Benefit Plan Costs
11

 
14

 
 
Net (Gains) Losses and (Income) Expense from NDT Fund
(8
)
 
(58
)
 
 
Net Change in Certain Current Assets and Liabilities:
 
 
 
 
 
Fuel, Materials and Supplies
71

 
58

 
 
Margin Deposit
24

 
59


 
Accounts Receivable
84

 
36

 
 
Accounts Payable
(90
)
 
(14
)
 
 
Accounts Receivable/Payable—Affiliated Companies, net
227

 
75

 
 
Other Current Assets and Liabilities
(35
)
 
7

 
 
Employee Benefit Plan Funding and Related Payments
(5
)
 
(4
)
 
 
Other
(9
)
 
12

 
 
Net Cash Provided By (Used In) Operating Activities
869

 
932

 
 
CASH FLOWS FROM INVESTING ACTIVITIES
 
 
 
 
 
Additions to Property, Plant and Equipment
(547
)
 
(576
)
 
 
Purchase of Emissions Allowances and RECs
(44
)
 
(29
)
 
 
Proceeds from Sales of Trust Investments
785

 
602

 
 
Purchases of Trust Investments
(793
)
 
(616
)
 
 
Short-Term Loan—Affiliated Company
(519
)
 
(146
)
 
 
Other
23

 
30

 
 
Net Cash Provided By (Used In) Investing Activities
(1,095
)
 
(735
)
 
 
CASH FLOWS FROM FINANCING ACTIVITIES
 
 
 
 
 
Issuance of Long-Term Debt
700

 
—

 
 
Cash Dividend Paid
(200
)
 
(175
)
 
 
Short-Term Loan—Affiliated Company
(281
)
 
—

 
 
Other
(5
)
 
(4
)
 
 
Net Cash Provided By (Used In) Financing Activities
214

 
(179
)
 
 
Net Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash
(12
)
 
18

 
 
Cash, Cash Equivalents and Restricted Cash at Beginning of Period
32

 
11

 
 
Cash, Cash Equivalents and Restricted Cash at End of Period
$
20

 
$
29

 
 
Supplemental Disclosure of Cash Flow Information:
 
 
 
 
 
Income Taxes Paid (Received)
$
(72
)
 
$
66

 
 
Interest Paid, Net of Amounts Capitalized
$
18

 
$
29

 
 
Accrued Property, Plant and Equipment Expenditures
$
189

 
$
194

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


15
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Table of Contents







Note 1. Organization, Basis of Presentation and Significant Accounting Policies
Organization
Public Service Enterprise Group Incorporated (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 principal direct wholly owned subsidiaries are:
•
Public Service Electric and Gas Company (PSE&G)—which is a 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 Federal Energy Regulatory Commission (FERC). PSE&G also invests in solar generation projects and energy efficiency and related programs in New Jersey, which are regulated by the BPU.
•
PSEG Power LLC (Power)—which is a multi-regional energy supply company that integrates the operations of its merchant nuclear and fossil generating assets with its power marketing businesses and fuel supply functions through competitive energy sales in well-developed energy markets primarily in the Northeast and Mid-Atlantic United States through its principal direct wholly owned subsidiaries. In addition, Power owns and operates solar generation in various states. Power’s subsidiaries are subject to regulation by FERC, the Nuclear Regulatory Commission (NRC), the Environmental Protection Agency (EPA) and the states in which they operate.
PSEG’s other direct wholly owned subsidiaries are: PSEG Long Island LLC (PSEG LI), which operates the Long Island Power Authority’s (LIPA) electric transmission and distribution (T&D) system under an Operations Services Agreement (OSA); PSEG Energy Holdings L.L.C. (Energy Holdings), which primarily has investments in leveraged leases; and PSEG Services Corporation (Services), which provides certain management, administrative and general services to PSEG and its subsidiaries at cost.
Basis of Presentation
The 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, 2017.
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. 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, 2017.
Significant Accounting Policies
Cash, Cash Equivalents and Restricted Cash
Cash equivalents consist of short-term, highly liquid investments with original maturities of three months or less. Restricted cash consists primarily of deposits received related to various construction projects at PSE&G.
The following provides a reconciliation of cash, cash equivalents and restricted cash reported within the Condensed Consolidated Balance Sheets that sum to the total of the same such amounts for the beginning (December 31, 2017) and ending periods shown in the Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2018.

16
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Table of Contents






 
 
 
 
 
 
 
 
 
 
 
 
PSE&G
 
Power
 
Other (A)
 
Consolidated
 
 
 
Millions
 
 
As of December 31, 2017
 
 
 
 
 
 
 
 
 
Cash and Cash Equivalents
$
242

 
$
32

 
$
39

 
$
313

 
 
Restricted Cash in Other Current Assets
—

 
—

 
—

 
—

 
 
Restricted Cash in Other Noncurrent Assets
2