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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) October 23, 1996
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
(Exact name of registrant as specified in its charter)
State of New Jersey 1-9120 22-2625848
(State or other (Commission (I.R.S. Employer
Jurisdiction of File Number) Identification No.)
Incorporation)
80 Park Plaza, P.O. Box 1171
Newark, New Jersey 07101-1171
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 201-430-7000
PUBLIC SERVICE ELECTRIC AND GAS COMPANY
(Exact name of registrant as specified in its charter)
State of New Jersey 1-973 22-1212800
(State or other (Commission (I.R.S. Employer
Jurisdiction of File Number) Identification No.)
Incorporation)
80 Park Plaza, P.O. Box 570
Newark, New Jersey 07101-0570
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 201-430-7000
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Item 5. Other Events
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The following information updates certain matters previously reported to the
Securities and Exchange Commission under Item 1 - Business of Part I and under
Item 7 - Management's Discussion and Analysis of Financial Condition and Results
of Operations ("MD&A") of the Annual Report on Form 10-K for the year ended
December 31, 1995; and under Item 2 - MD&A of Part I and under Item 5 - Other
Information of Part II of the Reports on Form 10-Q for the quarters ended March
31, 1996 and June 30, 1996 of Public Service Enterprise Group Incorporated
("Enterprise") and Public Service Electric and Gas Company ("PSE&G"),
respectively.
PSE&G - Rate Matters - Nuclear Performance Standard - Nuclear Operations (Salem)
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Reference is made to the press release of Enterprise, dated October 23, 1996, a
copy of which is attached hereto as Exhibit 99, announcing the proposed
settlement of three PSE&G regulatory issues pending before the New Jersey Board
of Public Utilities, including the "used and usefulness" of the Salem Nuclear
Generating Station, Units 1 and 2.
Item 7. Financial Statements and Exhibits
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Exhibit
Designation Nature of Exhibit
99 Enterprise press release dated October 23, 1996.
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SIGNATURE
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Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrants have duly caused this report to be signed on their behalf by the
undersigned hereunto duly authorized.
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
(Registrant)
PUBLIC SERVICE ELECTRIC AND GAS COMPANY
(Registrant)
By ROBERT C. MURRAY
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Robert C. Murray
Vice President and Chief Financial Officer
Public Service Enterprise Group Incorporated
Senior Vice President and Chief Financial Officer
Public Service Electric and Gas Company
Date: October 23, 1996
Exhibit 99
October 23, 1996
SETTLEMENT PROPOSED ON "USED AND USEFUL" ISSUE
INVOLVING SALEM NUCLEAR GENERATING STATION
Public Service Electric and Gas Company (PSE&G), the staff of the New
Jersey Board of Public Utilities (BPU), and the state's Division of Ratepayer
Advocate today (October 23) agreed upon the resolution of three regulatory
issues, including the "used and usefulness" of the Salem Nuclear Generating
Station.
Under the settlements, which require approval of the BPU, PSE&G would
provide electric customers with bill credits totaling $83.9 million in January
and February, 1997, and would forego recovery of another $12 million in energy
costs that have been deferred. The total benefit to PSE&G's customers would
amount to $95.9 million.
The settlements would result in an earnings loss of $62.3 million or 26
cents per share of Public Service Enterprise Group (Enterprise) common stock. Of
the total, $3.3 million or 1 cent per share had been previously recorded, and
the remaining $59.0 million or 25 cents per share will be recorded in the third
quarter of 1996.
Accordingly, Enterprise and PSE&G are required to restate third-quarter
earnings announced on October 15. As a result, Enterprise's restated earnings
for the third quarter of 1996 are $156.0 million or 64 cents per share of common
stock based on 243.1 million average shares outstanding, compared to $186.8
million or 76 cents per share, based on 244.7 million average shares
outstanding, for the corresponding period of 1995. PSE&G's restated earnings for
the third quarter are $117.8 million or 48 cents per share, compared to $176.2
million or 72 cents per share for the third quarter of 1995.
In addition to the settlement of the regulatory issues, PSE&G and the
Ratepayer Advocate announced that the utility would create a $30 million
economic development fund and support certain customer assistance programs.
Under the first of the three agreements, Salem 1 and 2 nuclear units would
continue in base rates without being subject to further refund. In addition,
PSE&G would assume all nuclear and fossil generating fuel and performance risks,
including replacement power costs associated with the Salem, Hope Creek and
Peach Bottom nuclear stations from January 1, 1996 through December 31, 1998,
the proposed expiration date of this settlement.
As a result of PSE&G's assumption of these risks, New Jersey's nuclear
performance standard would not apply during the period of January 1, 1996 to
December 31, 1998. In addition, the energy component of PSE&G's levelized energy
adjustment charge (LEAC) would be fixed at its existing level, assuring PSE&G's
customers of no increase in this rate until at least January 1999.
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"The proposed settlement gives PSE&G increased incentives to operate all
its electric generating facilities as efficiently as possible, particularly
since costs associated with substandard nuclear performance will not be
recovered from customers," said Lawrence R. Codey, president and chief operating
officer of PSE&G.
"In particular, with the plan to keep the energy component of the LEAC at
its current level, PSE&G would have an opportunity --through efficient and
effective operations -- to recover deferred energy costs as of December 31,
1996, which are currently estimated to be $163 million."
Codey emphasized that the proposed settlements are a "fair resolution of
difficult regulatory issues." He added: "By settling the Salem proceedings, we
will be able to address more effectively the rapidly developing industry issues
for the benefit of PSE&G, especially those currently being addressed by the BPU
through its review of the Energy Master Plan."
Salem 1 and 2 have been out of service for refurbishment since May and
June of 1995, respectively, and both are targeted for full operation in 1997.
"Activities at Salem 2 are now predominantly test-related," said Leon R.
Eliason, PSE&G's chief nuclear officer. "Our latest schedule calls for fuel
loading in about five weeks, with synchronization of the unit to the grid around
or shortly after the first of the year. Our objective remains unchanged: Neither
Salem unit will be returned to operation until we are convinced that it will
operate on a safe, reliable and sustained basis."
Salem 1 is scheduled to return to service in mid-1997. Currently,
replacement steam generators, purchased from Northeast Utilities, have arrived
on site and are scheduled for installation by year-end 1996. With the
replacement effort underway, overall refurbishment of the unit is set to resume
in November.
The key elements of the stipulation resolving the "used and useful" issue
are as follows:
I. PSE&G would provide bill credits to electric customers of $77.5
million during January and February, 1997.
II. The energy component of PSE&G's LEAC, which recovers all LEAC costs
except gas plant remediation, demand side management and nuclear
decommissioning, would be fixed at its current level. From January 1,
1997 through December 31, 1998, any revenue and costs related to the
energy component of the LEAC would be treated as revenue and expense.
In addition, from January 1, 1997 through December 31, 1998, PSE&G
would have the opportunity to reduce its deferred LEAC energy balance
as of December 31, 1996. Any underrecovered or overrecovered balance
that exists on December 31, 1998 would be to PSE&G's account and would
not be considered in any LEAC review subsequent to that date.
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III. Because the bill credits "fully protect ratepayers from the economic
consequences of the current outages," there would be no further
regulatory action regarding the "used and useful" issue through December
31, 1998.
IV. The BPU's nuclear performance standard would not apply to PSE&G from
January 1, 1996 through December 31, 1998 since the risk of nuclear
operation and performance will reside with the company. The standard had
served as a mechanism to share the risk of performance between the
company and its customers.
V. If PSE&G buys out or buys down any cogeneration contracts during the
stipulation period, it would be permitted to defer associated costs,
which would be reviewed at a future BPU proceeding.
VI. PSE&G, the BPU staff and the Ratepayer Advocate reserve the right to
review, in the next base rate proceeding, Salem-related capitalized
costs incurred since base rates were last reviewed in 1992 as part of a
rate case that was effective January 1, 1993.
VII. A new LEAC rate would be established after the settlement period, with
PSE&G making a filing no later than November 1, 1998.
In addition to the resolution of the Salem "used and useful" issue, two
other agreements would address separate long-standing issues that PSE&G had been
litigating before the BPU:
VIII. The recovery of certain replacement power costs associated with a 58-day
outage at Salem 1 in 1994 after excessive grass from the Delaware River
clogged the unit's intake system. Under the proposed agreement, PSE&G
would reduce its underrecovered LEAC balance by $7 million.
IX. The recovery of capacity costs associated with electric utility power
purchases from cogeneration producers through December 31, 1998. Under
the proposed agreement, PSE&G would provide bill credits to electric
customers of $6.4 million during January and February, 1997. In
addition, it would reduce its underrecovered LEAC balance by $5 million.
X. Besides the agreements, PSE&G and the Ratepayer Advocate agreed on a
commitment by the utility to provide financial assistance toward
economic growth and development in New Jersey. The agreement, which runs
through December 31, 1999, calls for PSE&G to:
XI. Create a $30 million revolving economic development fund with emphasis
on stimulating jobs and developing high technology projects in urban
areas.
XII. Provide incentives to encourage local public housing authorities to
replace up to 4,000 refrigerators a year.
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XIII. Commit $1 million to develop a fund to provide innovative assistance
to low-income residents who are having difficulty paying energy bills.
XIV. Develop a computer system to assist low-income residents in identifying
government and community programs for which they would be eligible to
receive benefits.
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This news release includes forward-looking statements. Although Public
Service Enterprise Group Incorporated and its principal subsidiary, Public
Service Electric and Gas Company, believe that their expectations are based on
reasonable assumptions, they can give no assurance that these expectations will
be achieved. For further information, please refer to their reports filed with
the Securities and Exchange Commission. These documents address company
business, industry issues and other factors that could cause actual results to
differ materially from those indicated in this release.
