<PAGE> 1
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FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1994
Commission file number 1-9120
Public Service Enterprise Group Incorporated
- -----------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
New Jersey 22-2625848
- ----------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
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
------------
Commission file number 1-973
Public Service Electric and Gas Company
- -----------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
New Jersey 22-1212800
- ----------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
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
------------
Indicate by check mark whether the registrant (1) has 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
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes x . No .
---- ----
The number of shares outstanding of Public Service Enterprise Group
Incorporated's sole class of common stock, as of the latest practicable date,
was as follows:
Class Outstanding at April 30, 1994
----- -----------------------------
Common Stock, without par value 244,697,930
As of April 30, 1994 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.
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TABLE OF CONTENTS
-----------------
-Page-
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
Public Service Enterprise Group Incorporated (Enterprise):
Consolidated Statements of Income for the
Three and Twelve Months Ended March 31,
1994 and 1993 .................................... 5
Consolidated Balance Sheets as of
March 31, 1994, 1993 and December 31, 1993 ....... 6
Consolidated Statements of Cash Flows for the
Three and Twelve Months Ended March 31,
1994 and 1993 .................................... 8
Consolidated Statements of Retained Earnings for the
Three and Twelve Months Ended March 31,
1994 and 1993 .................................... 9
Public Service Electric and Gas Company (PSE&G):
Consolidated Statements of Income for the
Three and Twelve Months Ended March 31,
1994 and 1993 .................................... 10
Consolidated Balance Sheets as of
March 31, 1994, 1993 and December 31, 1993 ....... 11
Consolidated Statements of Cash Flows for the
Three and Twelve Months Ended March 31,
1994 and 1993 .................................... 13
Consolidated Statements of Retained Earnings for the
Three and Twelve Months Ended March 31,
1994 and 1993 .................................... 14
Notes to Consolidated Financial Statements
Enterprise ........................................ 15
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations
Enterprise .............................. 26
PSE&G ................................... 41
PART II. OTHER INFORMATION
Item 1. Legal Proceedings ............................ 43
Item 4. Submission of Matters to a Vote of
Security Holders ............................ 44
Item 5. Other Information ............................ 45
Item 6. Exhibits and Reports on Form 8-K ............. 47
Signatures - Public Service Enterprise Group Incorporated .... 48
Signatures - Public Service Electric and Gas Company ......... 48
<PAGE> 3
GLOSSARY OF TERMS
The following is a glossary of frequently used abbreviations or acronyms
that are found through this report:
Abbreviations
or Acronyms Term
- ----------------------- --------------------------------------------------
AE Act................. Atomic Energy Act of 1954, as amended
AFDC................... Allowance for Funds used During Construction
AIT.................... Nuclear Regulatory Commission Augmented
Inspection Team
Bonds.................. First and Refunding Mortgage Bonds
BRC.................... New Jersey Board of Regulatory Commissioners
Capital................ PSEG Capital Corporation
CEA.................... Community Energy Alternatives Incorporated
CERCLA................. Federal Comprehensive Environmental Response,
Compensation and Liability Act of 1980
DOE.................... United States Department of Energy
DRIP................... Enterprise's Dividend Reinvestment and Stock
Purchase Plan
EBIT................... Earnings before interest and taxes to interest
EDC.................... Energy Development Corporation
EDHI................... Enterprise Diversified Holdings Incorporated
EITF................... Financial Accounting Standards Board's
Emerging Issues Task Force
EGDC................... Enterprise Group Development Corporation
EMF.................... Electric and Magnetic Fields
Enterprise............. Public Service Enterprise Group Incorporated
EPA.................... United States Environmental Protection Agency
FASB................... Financial Accounting Standards Board
FERC................... Federal Energy Regulatory Commission
Fuelco................. PSE&G Fuel Corporation
Funding................ Enterprise Capital Funding Corporation
HSCA................... Commonwealth of Pennsylvania's Hazardous Sites
Cleanup Act
Hope Creek............. Hope Creek Nuclear Generating Station
IRP.................... Integrated Electric Resource Plan
LEAC................... Electric Levelized Energy Adjustment Clause
LGAC................... Levelized Gas Adjustment Clause
MW..................... Megawatts
MWH.................... Megawatthours
NEIL................... Nuclear Electric Insurance Limited
NEPA................... National (Federal) Energy Policy Act
NJDEPE................. New Jersey Department of Environmental Protection and
Energy
NJGRT.................. New Jersey Gross Receipts and Franchise Tax
NJPDES................. New Jersey Pollution Discharge Elimination System
NRC.................... Nuclear Regulatory Commission
NUGS................... Nonutility generators
OPEB................... Other Postemployment Benefits
Peach Bottom........... Peach Bottom Atomic Power Station, Units 2 and 3
PECO................... PECO Energy Inc.
<PAGE> 4
GLOSSARY OF TERMS - (Concluded)
Abbreviations
or Acronyms Term
- ----------------------- -----------------------------------------------------
PJM.................... Pennsylvania--New Jersey--Maryland Interconnection
PSE&G.................. Public Service Electric and Gas Company
PSRC................... Public Service Resources Corporation
Salem.................. Salem Nuclear Generating Station, Units 1 and 2
SEC.................... Securities and Exchange Commission
SFAS 106............... Statement of Financial Accounting Standards No. 106,
"Employers' Accounting for Postretirement Benefits
Other Than Pensions"
SFAS 107............... Statement of Financial Accounting Standards No. 107,
"Disclosure about Fair Value of Financial Instru-
ments"
SFAS 115............... Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and
Equity Securities"
Standard............... The BRC's nuclear performance standard established for
nuclear generating stations owned by New Jersey
utilities
THI.................... Temperature Humidity Index Hours
USEC................... United States Enrichment Corporation
<PAGE> 5
<TABLE>
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
The financial statements included herein as of March 31, 1994 and 1993 and for the periods then ended
are unaudited but, in the opinion of Public Service Enterprise Group Incorporated, reflect all adjustments,
consisting only of normal recurring accruals.
CONSOLIDATED STATEMENTS OF INCOME
(Thousands of Dollars)
<CAPTION>
Three Months Ended Twelve Months Ended
March 31, March 31,
----------------------- ------------------------
1994 1993 1994 1993
----------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
OPERATING REVENUES
Electric ................................. $ 888,310 $ 872,168 $3,709,225 $3,459,930
Gas ...................................... 801,657 630,079 1,765,919 1,609,236
Nonutility Activities .................... 104,430 92,461 430,104 369,873
---------- ---------- ---------- -----------
Total Operating Revenues ............ 1,794,397 1,594,708 5,905,248 5,439,039
---------- ---------- ---------- -----------
OPERATING EXPENSES
Operation
Fuel for Electric Generation and
Net Interchanged Power ............... 167,201 186,561 697,776 766,523
Gas Purchased and Materials
for Gas Produced ..................... 460,556 328,972 1,029,469 867,069
Other ................................. 249,812 232,376 1,030,193 931,517
Maintenance .............................. 76,475 57,323 323,555 292,440
Depreciation and Amortization ............ 155,545 147,588 608,221 634,168
Property Impairment ...................... - - 77,637 -
Taxes
Federal Income Taxes ................... 120,489 103,979 331,269 251,643
New Jersey Gross Receipts Taxes ........ 191,303 180,094 609,107 588,476
Other .................................. 24,068 21,310 78,731 73,216
---------- ---------- ---------- -----------
Total Operating Expenses ............ 1,445,449 1,258,203 4,785,958 4,405,052
---------- ---------- ---------- -----------
OPERATING INCOME ........................... 348,948 336,505 1,119,290 1,033,987
---------- ---------- ---------- -----------
OTHER INCOME
Allowance for Funds Used During
Construction - Equity ................... 1,788 2,638 11,415 13,064
Peach Bottom Settlement - net of Federal
Income Taxes, $0, $0, $0 and $(7,023)
respectively ............................ - - - (13,632)
Miscellaneous - net ...................... 1,155 2,175 (4,798) 27,140
---------- ---------- ---------- -----------
Total Other Income .................. 2,943 4,813 6,617 26,572
---------- ---------- ---------- -----------
INCOME BEFORE INTEREST CHARGES AND
DIVIDENDS ON PREFERRED STOCK ............. 351,891 341,318 1,125,907 1,060,559
---------- ---------- ---------- -----------
INTEREST CHARGES
Long-Term Debt ........................... 112,112 118,724 462,508 474,820
Short-Term Debt .......................... 3,834 2,404 15,290 13,523
Other .................................... 2,851 5,723 16,682 28,420
---------- ---------- ---------- -----------
Total Interest Charges .............. 118,797 126,851 494,480 516,763
Allowance for Funds Used During Construction
- Debt and Capitalized Interest .......... (7,313) (4,359) (23,787) (17,468)
---------- ---------- ---------- -----------
Net Interest Charges ....................... 111,484 122,492 470,693 499,295
---------- ---------- ---------- -----------
Preferred Stock Dividend Requirements -PSE&G 10,280 8,822 39,572 33,476
---------- ---------- ---------- -----------
Income before cumulative effect of
accounting change ......................... 230,127 210,004 615,642 527,788
Cumulative effect of change in accounting
for income taxes .......................... - 5,414 - 5,414
---------- ---------- ---------- -----------
NET INCOME ................................. $ 230,127 $ 215,418 $ 615,642 $ 533,202
========== ========== ========== ===========
SHARES OF COMMON STOCK OUTSTANDING
End of Period ............................. 244,697,930 240,771,790 244,697,930 240,771,790
Average for Period ........................ 243,776,766 236,918,796 242,354,605 234,126,820
EARNINGS PER AVERAGE SHARE OF COMMON STOCK
Before cumulative effect of accounting
change .................................... $.94 $.89 $2.54 $2.26
Cumulative effect of change in accounting
for income taxes .......................... - .02 - .02
---------- ---------- ---------- -----------
Total earnings per average share of common
stock ..................................... $.94 $.91 $2.54 $2.28
=========== =========== ========== =========
DIVIDENDS PAID PER SHARE OF COMMON STOCK ... $.54 $.54 $2.16 $2.16
=========== =========== ========== =========
<FN>
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE> 6
<TABLE>
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
CONSOLIDATED BALANCE SHEETS
(Thousands of Dollars)
<CAPTION>
March 31, March 31, December 31,
ASSETS 1994 1993 1993
- ------ --------------- ------------- ----------------
<S> <C> <C> <C>
UTILITY PLANT - Original cost
Electric ............................................................... $ 11,993,662 $ 11,617,697 $ 11,920,894
Gas .................................................................... 2,194,430 2,061,137 2,177,841
Common ................................................................. 519,449 479,099 520,285
-------------- ------------- -------------
Total ............................................................. 14,707,541 14,157,933 14,619,020
Less Accumulated Depreciation and Amortization ........................... 4,874,555 4,489,731 4,772,942
-------------- ------------- -------------
Net ............................................................... 9,832,986 9,668,202 9,846,078
Nuclear Fuel in Service, net of accumulated amortization - $299,212;
$251,094; and $284,162, respectively .................................... 198,130 226,651 205,237
-------------- ------------- -------------
Net Utility Plant in Service ...................................... 10,031,116 9,894,853 10,051,315
Construction Work in Progress, including Nuclear Fuel in Process -
$88,942; $72,933; and $98,780, respectively ............................. 784,411 544,662 735,356
Plant Held for Future Use ................................................ 17,847 22,253 17,709
-------------- ------------- -------------
Net Utility Plant ................................................. 10,833,374 10,461,768 10,804,380
-------------- ------------- -------------
INVESTMENTS AND OTHER PROPERTY
Long-Term Investments, net of valuation allowance - $16,648; $17,548;
and $18,018, respectively ............................................ 1,594,968 1,667,598 1,613,823
Oil and Gas Property, Plant and Equipment, net of accumulated
depreciation and amortization - $716,201, $667,964 and $695,791,
respectively .......................................................... 522,644 497,601 506,047
Real Estate Property and Equipment, net of accumulated depreciation -
$11,684; $12,435 and $10,840, respectively ........................... 110,642 225,015 110,661
Other Plant, net of accumulated depreciation
and amortization - $3,928; $3,188 and $3,735, respectively ............ 28,401 21,938 28,327
Nuclear Decommissioning and Other Special Funds ........................ 198,540 171,178 189,282
Other Investments - net ................................................ 125,244 80,833 120,711
-------------- ------------- -------------
Total Investments and Other Property .............................. 2,580,439 2,664,213 2,568,851
-------------- ------------- -------------
CURRENT ASSETS
Cash and Cash Equivalents .............................................. 324,541 774,557 46,880
Accounts Receivable:
Customer Accounts Receivable .......................................... 614,785 510,620 446,629
Other Accounts Receivable ............................................. 186,494 205,649 233,307
Less: Allowance for Doubtful Accounts ................................. 31,774 27,841 27,932
Unbilled Revenues ...................................................... 124,229 199,437 244,497
Fuel, at average cost .................................................. 113,174 108,518 285,943
Materials and Supplies, at average cost ................................ 169,487 212,326 172,438
Prepayments ............................................................ 78,185 61,399 82,586
Deferred Income Taxes .................................................. 14,834 (3,070) 12,934
-------------- ------------- ------------
Total Current Assets .............................................. 1,593,955 2,047,735 1,497,282
-------------- ------------- ------------
DEFERRED DEBITS
Property Abandonments - net ............................................ 101,300 118,158 105,536
Oil and Gas Property Write-Down ........................................ 45,098 50,252 46,386
Unamortized Debt Expense ............................................... 118,078 62,940 121,278
Deferred OPEB Costs (note 6) ........................................... 140,770 55,435 58,593
Under(Over)Recovered Electric Energy and Gas Costs - net ............... 120,204 (74,891) 62,034
Unrecovered Environmental Costs (note 5) ............................... 135,421 104,662 138,531
Unrecovered Plant and Regulatory Study Costs ........................... 35,182 23,288 35,196
Deferred Decontamination and Decommissioning Costs (note 5) ............ 61,108 - 56,055
Unrecovered SFAS 109 Deferred Income Taxes ............................. 789,881 708,541 789,795
Other .................................................................. 18,908 10,184 21,247
-------------- ------------- ------------
Total Deferred Debits ............................................. 1,565,950 1,058,569 1,434,651
-------------- ------------- ------------
Total ............................................................. $ 16,573,718 $ 16,232,285 $ 16,305,164
============== ============= ============
<FN>
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE> 7
<TABLE>
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
CONSOLIDATED BALANCE SHEETS
(Thousands of Dollars)
<CAPTION>
March 31, March 31, December 31,
CAPITALIZATION AND LIABILITIES 1994 1993 1993
- ------------------------------ -------------- ------------ ----------------
<S> <C> <C> <C>
CAPITALIZATION
Common Equity
Common Stock ........................................................ $ 3,801,157 $ 3,674,211 $ 3,772,662
Retained Earnings ................................................... 1,458,357 1,368,695 1,361,018
-------------- ------------ ------------
Total Common Equity .............................................. 5,259,514 5,042,906 5,133,680
Subsidiaries' Securities and Obligations
Preferred Stock
Without Mandatory Redemption (note 2) ............................... 459,994 429,994 429,994
With Mandatory Redemption ........................................... 150,000 150,000 150,000
Long-Term Debt (note 4) ............................................... 5,599,071 5,043,883 5,256,321
Capital Lease Obligations ............................................. 52,375 52,967 52,530
-------------- ------------ ------------
Total Capitalization ............................................. 11,520,954 10,719,750 11,022,525
-------------- ------------ ------------
OTHER LONG-TERM LIABILITIES
Decontamination and Decommissioning Costs (note 5) .................... 61,108 - 56,055
Unrecovered Environmental Costs (note 5) .............................. 112,851 91,688 111,000
-------------- ------------ ------------
Total Other Long-Term Liabilities 173,959 91,688 167,055
-------------- ------------ ------------
CURRENT LIABILITIES
Long-Term Debt and Capital Lease Obligations due within one year ...... 128,561 675,659 168,638
Commercial Paper and Loans ............................................ 118,502 264,904 577,636
Accounts Payable ...................................................... 385,034 323,179 557,761
New Jersey Gross Receipts Taxes Accrued ............................... 454,482 735,165 263,357
Other Taxes Accrued ................................................... 130,695 112,040 39,610
Interest Accrued ...................................................... 129,176 138,761 107,027
Other ................................................................. 163,373 145,149 157,751
-------------- ------------ ------------
Total Current Liabilities ........................................ 1,509,823 2,394,857 1,871,780
-------------- ------------ ------------
DEFERRED CREDITS
Accumulated Deferred Income Taxes ..................................... 2,742,076 2,445,625 2,702,386
Accumulated Deferred Investment Tax Credits ........................... 427,852 447,299 432,713
Deferred OPEB Costs (note 6) .......................................... 140,770 55,435 58,593
Materials and Supplies ................................................ 9,819 20,975 11,847
Other ................................................................. 48,465 56,656 38,265
-------------- ------------ ------------
Total Deferred Credits ........................................... 3,368,982 3,025,990 3,243,804
-------------- ------------ ------------
COMMITMENTS AND CONTINGENT LIABILITIES (note 5)
Total ............................................................ $ 16,573,718 $ 16,232,285 $ 16,305,164
============== ============ ============
</TABLE>
<PAGE> 8
<TABLE>
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands of Dollars)
<CAPTION>
Three Months Ended Twelve Months Ended
March 31, March 31,
---------------------- -----------------------
1994 1993 1994 1993
---------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income ......................................... $ 230,127 $ 215,418 $ 615,642 $ 533,202
Adjustments to reconcile net income
to net cash flows from operating activities:
Depreciation and Amortization .................... 155,545 147,588 608,221 634,168
Amortization of Nuclear Fuel ..................... 23,574 27,237 99,055 95,952
(Deferral) Recovery of Electric Energy and Gas
Costs - net ..................................... (58,170) (47,845) (195,095) 37,711
Loss from Property Impairments ................... - - 77,637 -
Cumulative Effect of Change in Accounting
for Income Taxes ................................ - (5,414) - (5,414)
Amortization of Discounts on Property
Abandonments and Disallowance ................... (1,767) (2,177) (7,391) (10,805)
Unrealized Losses (Gains) on Investments ......... 750 (1,928) (6,016) (16,719)
Provision for Deferred Income Taxes - net ........ 45,246 35,561 178,091 82,705
Investment Tax Credits - net ..................... (4,861) 2,931 (19,447) (12,625)
Allowance for Funds Used During Construction -
Debt and Equity and Capitalized Interest ........ (9,101) (6,997) (35,202) (30,532)
Proceeds from Leasing Activities ................. (12,698) (5,446) 7,528 24,509
Changes in certain current assets and liabilities:
Net decrease (increase) in Accounts Receivable
and Unbilled Revenues ......................... 2,767 (56,066) (5,869) (17,520)
Net decrease in Inventory - Fuel and
Materials and Supplies ........................ 175,720 153,975 38,183 3,619
Net (decrease) increase in Accounts Payable .... (172,727) (150,798) 61,855 (36,107)
Net increase (decrease) in Accrued Taxes ....... 282,210 250,319 (262,028) 20,895
Net change in Other Current Assets and
Liabilities ................................... 30,272 34,604 (19,911) (23,684)
Other .............................................. 16,556 15,841 (30,947) (5,569)
--------- --------- ---------- ----------
Net cash provided by operating activities .... 703,443 606,803 1,104,306 1,273,786
--------- --------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to Utility Plant, excluding AFDC ......... (167,682) (125,799) (905,177) (764,978)
Additions to Oil and Gas Property, Plant and
Equipment, excluding Capitalized Interest ......... (37,064) (12,564) (112,468) (39,041)
Net decrease (increase) in Long-Term Investments and
Real Estate ........................................ 20,737 (22,883) 97,648 (81,772)
Increase in Decommissioning and Other Special Funds,
excluding interest ................................ (5,808) (34,310) (17,006) (42,664)
Cost of Plant Removal - net ........................ (7,708) (8,768) (46,731) (40,904)
Other .............................................. (548) (842) (2,013) (2,168)
--------- --------- ---------- ----------
Net cash used in investing activities ........ (198,073) (205,166) (985,747) (971,527)
--------- --------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net decrease in Short-Term Debt .................... (459,134) (127,078) (146,402) (43,903)
Issuance of Long-Term Debt ......................... 400,000 560,000 1,977,700 1,190,000
Redemption of Long-Term Debt and Other Obligations . (97,482) (211,245) (1,970,202) (1,092,114)
Amortization (Deferral) of Debt Expense - net ...... 3,200 (806) (55,138) (10,815)
Issuance of Preferred Stock ........................ 75,000 75,000 75,000 150,000
Redemption of Preferred Stock ...................... (45,000) - (45,000) -
Issuance of Common Stock ........................... 28,495 175,028 126,946 274,384
Cash Dividends Paid on Common Stock ............... (131,660) (129,609) (523,622) (507,580)
Other .............................................. (1,128) (44) (7,857) 743
--------- --------- ----------- ----------
Net cash (used in) provided by financing
activities ................................. (227,709) 341,246 (568,575) (39,285)
--------- --------- ---------- ----------
Net increase (decrease) in Cash and Cash Equivalents . 277,661 742,883 (450,016) 262,974
Cash and Cash Equivalents at Beginning of Period ..... 46,880 31,674 774,557 511,583
--------- --------- ---------- ----------
Cash and Cash Equivalents at End of Period ........... $ 324,541 $ 774,557 $ 324,541 $ 774,557
========= ========= ========== ==========
Income Taxes Paid .................................... $ 3,330 $ 7,918 $ 135,584 $ 149,144
Interest Paid ........................................ $ 89,350 $ 90,182 $ 458,124 $ 486,142
<FN>
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE> 9
<TABLE>
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
(Thousands of Dollars)
<CAPTION>
Three Months Ended Twelve Months Ended
March 31, March 31,
----------------------- -------------------------------
1994 1993 1994 1993
---------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Balance at Beginning of Period ........... $1,361,018 $1,282,931 $1,368,695 $1,342,845
Add Net Income ........................... 230,127 215,418 615,642 533,202
---------- ---------- ---------- ----------
Total ............................... 1,591,145 1,498,349 1,984,337 1,876,047
---------- ---------- ---------- ----------
Deduct
Cash Dividends on Common Stock ........... 131,660 129,609 523,622 507,580
Capital Stock Expenses ................... 1,128 45 2,358 (228)
---------- ---------- ---------- ----------
Total Deductions .................... 132,788 129,654 525,980 507,352
---------- ---------- ---------- ----------
Balance at End of Period ................. $1,458,357 $1,368,695 $1,458,357 $1,368,695
========== ========== ========== ==========
<FN>
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE> 10
<TABLE>
PUBLIC SERVICE ELECTRIC AND GAS COMPANY
The financial statements included herein as of March 31, 1994 and 1993 and for the periods then
ended are unaudited but, in the opinion of Public Service Electric and Gas Company, reflect all
adjustments, consisting only of normal recurring accruals.
CONSOLIDATED STATEMENTS OF INCOME
(Thousands of Dollars)
<CAPTION>
Three Months Ended Twelve Months Ended
March 31, March 31,
------------------------ -----------------------
1994 1993 1994 1993
---------- --------- ---------- -----------
<S> <C> <C> <C> <C>
OPERATING REVENUES
Electric .............................. $ 888,310 $ 872,168 $3,709,225 $3,459,930
Gas ................................... 801,657 630,079 1,765,919 1,609,236
---------- ---------- ---------- ----------
Total Operating Revenues ......... 1,689,967 1,502,247 5,475,144 5,069,166
---------- ---------- ---------- ----------
OPERATING EXPENSES
Operation
Fuel for Electric Generation
and Net Interchanged Power ....... 167,201 186,561 697,776 766,523
Gas Purchased and Materials for
Gas Produced ..................... 465,140 336,062 1,048,948 907,873
Other ............................... 214,980 202,488 893,435 818,734
Maintenance ........................... 76,475 57,323 323,555 292,440
Depreciation and Amortization ......... 134,311 124,206 519,311 541,990
Taxes
Federal Income Taxes ................ 113,429 100,654 321,565 228,010
New Jersey Gross Receipts Taxes ..... 191,303 180,094 609,107 588,476
Other ............................... 22,115 20,125 69,583 66,777
---------- ---------- ---------- -----------
Total Operating Expenses ......... 1,384,954 1,207,513 4,483,280 4,210,823
---------- ---------- ---------- ----------
OPERATING INCOME ........................ 305,013 294,734 991,864 858,343
---------- ---------- ---------- ----------
OTHER INCOME
Allowance for Funds Used During
Construction - Equity .............. 1,788 2,638 11,415 13,064
Peach Bottom Settlement - net of Federal
Income Taxes, $0, $0, $0,
and $(7,023), respectively ......... - - - (13,632)
Miscellaneous - net ................... 1,153 2,224 (4,912) 26,894
---------- ---------- ---------- ----------
Total Other Income ............... 2,941 4,862 6,503 26,326
---------- ---------- ---------- ----------
INCOME BEFORE INTEREST CHARGES AND
DIVIDENDS ON PREFERRED STOCK .......... 307,954 299,596 998,367 884,669
---------- ---------- ---------- ----------
INTEREST CHARGES
Long-Term Debt ........................ 88,327 91,991 360,588 364,571
Short-Term Debt ....................... 2,259 528 8,145 5,637
Other ................................. 1,286 5,715 14,861 26,753
---------- ---------- ---------- ----------
Total Interest Charges ........... 91,872 98,234 383,594 396,961
Allowance for Funds Used During
Construction - Debt ................... (5,357) (3,042) (17,130) (12,836)
---------- ---------- ---------- ----------
Net Interest Charges .................... 86,515 95,192 366,464 384,125
---------- ---------- ---------- ----------
NET INCOME .............................. 221,439 204,404 631,903 500,544
---------- ---------- ---------- ----------
Preferred Stock Dividend Requirements ... 10,280 8,822 39,572 33,476
---------- ---------- ---------- -----------
EARNINGS AVAILABLE TO PUBLIC SERVICE
ENTERPRISE GROUP INCORPORATED ......... $ 211,159 $ 195,582 $ 592,331 $ 467,068
========== ========== ========== ===========
<FN>
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE> 11
<TABLE>
PUBLIC SERVICE ELECTRIC AND GAS COMPANY
CONSOLIDATED BALANCE SHEETS
(Thousands of Dollars)
<CAPTION>
March 31, March 31, December 31,
ASSETS 1994 1993 1993
- ------ -------------- -------------- ----------------
<S> <C> <C> <C>
UTILITY PLANT - Original cost
Electric ............................................................. $ 11,993,662 $ 11,617,697 $ 11,920,894
Gas .................................................................. 2,194,430 2,061,137 2,177,841
Common ............................................................... 519,449 479,099 520,285
------------ ------------ ------------
Total ........................................................... 14,707,541 14,157,933 14,619,020
Less Accumulated Depreciation and Amortization ......................... 4,874,555 4,489,731 4,772,942
------------ ------------ ------------
Net ............................................................. 9,832,986 9,668,202 9,846,078
Nuclear Fuel in Service, net of accumulated amortization -
$299,212; $251,094; $284,162, respectively ........................... 198,130 226,651 205,237
------------ ------------ ------------
Net Utility Plant in Service .................................... 10,031,116 9,894,853 10,051,315
Construction Work in Progress, including Nuclear Fuel in Process -
$88,942; $72,933; $98,780, respectively .............................. 784,411 544,662 735,356
Plant Held for Future Use .............................................. 17,847 22,253 17,709
------------ ------------ ------------
Net Utility Plant ............................................... 10,833,374 10,461,768 10,804,380
------------ ------------ ------------
INVESTMENTS AND OTHER PROPERTY
Other Plant, net of accumulated depreciation and amortization -
$1,942; $649; $872, respectively ..................................... 26,344 20,091 26,369
Nuclear Decommissioning and Other Special Funds (note 1) ............. 198,540 171,178 189,282
Other Investments - net .............................................. 127,038 86,593 116,554
------------ ------------ ------------
Total Investments and Other Property ................................. 351,922 277,862 332,205
------------ ------------ ------------
CURRENT ASSETS
Cash and Cash Equivalents ............................................ 281,726 759,904 17,673
Accounts Receivable:
Customer Accounts Receivable ........................................ 614,785 510,620 446,629
Other Accounts Receivable ........................................... 122,438 134,907 163,663
Less: Allowance for Doubtful Accounts ............................... 31,774 27,841 27,932
Unbilled Revenues .................................................... 124,229 199,437 244,497
Fuel, at average cost ................................................ 113,174 108,518 285,943
Materials and Supplies, at average cost .............................. 168,166 210,975 170,910
Prepayments .......................................................... 72,292 57,637 78,480
Deferred Income Taxes ................................................ 14,834 (3,070) 12,934
------------ ------------ ------------
Total Current Assets ............................................ 1,479,870 1,957,227 1,392,797
------------ ------------ ------------
DEFERRED DEBITS
Property Abandonments - net .......................................... 101,300 118,158 105,536
Oil and Gas Property Write-Down ...................................... 45,098 50,252 46,386
Unamortized Debt Expense ............................................. 114,320 60,049 117,057
Deferred OPEB Costs (note 6) ......................................... 140,770 55,435 58,593
Under(Over)Recovered Electric Energy and Gas Costs - net ............. 120,204 (74,891) 62,034
Unrecovered Environmental Costs (note 5) ............................. 135,421 104,662 138,531
Unrecovered Plant and Regulatory Study Costs ......................... 35,182 23,288 35,196
Deferred Decontamination and Decommissioning Costs (note 5) .......... 61,108 - 56,055
Unrecovered SFAS 109 Deferred Income Taxes ........................... 789,881 708,541 789,795
Other ................................................................ 18,908 10,153 21,241
------------ ------------ ------------
Total Deferred Debits ........................................... 1,562,192 1,055,647 1,430,424
------------ ------------ ------------
Total ........................................................... $ 14,227,358 $ 13,752,504 $ 13,959,806
============ ============ ============
<FN>
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE> 12
<TABLE>
PUBLIC SERVICE ELECTRIC AND GAS COMPANY
CONSOLIDATED BALANCE SHEETS
(Thousands of Dollars)
<CAPTION>
March 31, March 31, December 31,
CAPITALIZATION AND LIABILITIES 1994 1993 1993
- ------------------------------ ------------ ------------ ------------
<S> <C> <C> <C>
CAPITALIZATION
Common Equity
Common Stock ........................................................ $ 2,563,003 $ 2,563,003 $ 2,563,003
Contributed Capital by Enterprise ................................... 534,395 534,395 534,395
Retained Earnings ................................................... 1,261,863 1,173,840 1,180,532
------------ ------------ ------------
Total Common Equity .............................................. 4,359 261 4,271,238 4,277,930
Preferred Stock Without Mandatory Redemption (note 2) ................... 459,994 429,994 429,994
Preferred Stock With Mandatory Redemption ............................... 150,000 150,000 150,000
Long-Term Debt (note 4).................................................. 4,759,090 4,041,388 4,364,437
Capital Lease Obligations ............................................... 52,375 52,967 52,530
------------ ------------ ------------
Total Capitalization ............................................. 9,780,720 8,945,587 9,274,891
------------ ------------ ------------
OTHER LONG-TERM LIABILITIES
Decontamination and Decommissioning Costs (note 5) .................... 61,108 - 56,055
Unrecovered Environmental Costs (note 5) .............................. 112,851 91,688 111,000
------------ ----------- ------------
Total Other Long-Term Liabilities 173,959 91,688 167,055
------------ ----------- ------------
CURRENT LIABILITIES
Long-Term Debt and Capital Lease Obligations due within one year ...... 791 534,771 62,274
Commercial Paper and Loans ............................................ 101,961 114,814 532,728
Accounts Payable ...................................................... 351,662 291,278 519,296
Accounts Payable-Associated Companies ................................. 90,542 80,814 5,674
New Jersey Gross Receipts Taxes Accrued ............................... 454,482 735,165 263,357
Other Taxes Accrued ................................................... 36,676 30,812 33,710
Interest Accrued ...................................................... 100,559 112,759 96,257
Other ................................................................. 132,003 120,311 122,924
------------ ------------ ------------
Total Current Liabilities ........................................ 1,268 676 2,020,724 1,636,220
------------ ------------ ------------
DEFERRED CREDITS
Accumulated Deferred Income Taxes ..................................... 2,405,337 2,150,576 2,368,778
Accumulated Deferred Investment Tax Credits ........................... 404,327 422,735 408,929
Deferred OPEB Costs (note 6)......................................... 140,770 55,435 58,593
Materials and Supplies ................................................ 9,819 20,975 11,847
Other ................................................................. 43,750 44,784 33,493
------------ ------------ ------------
Total Deferred Credits ........................................... 3,004,003 2,694,505 2,881,640
------------ ------------ ------------
COMMITMENTS AND CONTINGENT LIABILITIES (note 5)
Total ............................................................ $ 14,227,358 $ 13,752,504 $ 13,959,806
============ ============ ============
</TABLE>
<PAGE> 13
<TABLE>
PUBLIC SERVICE ELECTRIC AND GAS COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands of Dollars)
<CAPTION>
Three Months Ended Twelve Months Ended
March 31, March 31,
------------------------- -----------------------
1994 1993 1994 1993
------------ ----------- ----------- ----------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income ............................................................... $ 221,439 $ 204,404 $ 631,903 $ 500,544
Adjustments to reconcile net income to net cash flows from
operating activities:
Depreciation and Amortization .......................................... 134,311 124,206 519,311 541,990
Amortization of Nuclear Fuel ........................................... 23,574 27,237 99,055 95,952
(Deferral) Recovery of Electric Energy and Gas Costs - net ............. (58,170) (47,845) (195,095) 37,711
Amortization of Discounts on Property Abandonments and Disallowance .... (1,767) (2,177) (7,391) (10,805)
Provision for Deferred Income Taxes - net .............................. 36,473 38,920 173,421 60,507
Investment Tax Credits - net ........................................... (4,602) (4,602) (18,408) (19,089)
Allowance for Funds Used During Construction - Debt and Equity ......... (7,145) (5,680) (28,545) (25,900)
Changes in certain current assets and liabilities:
Net decrease (increase) in Accounts Receivable and Unbilled Revenues . (2,821) (69,219) (12,555) 12,607
Net decrease (increase) in Inventory - Fuel and Materials and
Supplies............................................................. 175,513 154,280 38,153 4,124
Net (decrease) increase in Accounts Payable .......................... (82,766) (81,004) 70,112 (40,518)
Net increase (decrease) in Accrued Taxes ............................. 194,091 182,791 (274,819) 23,733
Net change in Other Current Assets and Liabilities ................... 17,669 17,662 (26,927) (36,109)
Other .................................................................. 15,560 3,205 (37,954) (19,656)
----------- ----------- ----------- ---------
Net cash provided by operating activities .......................... 661,359 542,178 930,261 1,125,091
----------- ----------- ----------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to Utility Plant, excluding AFDC ............................... (167,682) (125,799) (905,177) (764,978)
Net increase in Long-Term Investments .................................... (10,484) (9,650) (40,445) (27,050)
Increase in Decommissioning and Other Special Funds, excluding
interest ................................................................ (5,808) (34,310) (17,006) (42,664)
Cost of Plant Removal - net .............................................. (7,708) (8,768) (46,731) (40,904)
Other .................................................................... (501) (270) (1,207) (299)
----------- ----------- ---------- ---------
Net cash used in investing activities .............................. (192,183) (178,797) (1,010,566) (875,895)
----------- ----------- ----------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net decrease in Short-Term Debt .......................................... (430,767) (142,722) (12,853) (15,365)
Issuance of Long-Term Debt ............................................... 400,000 500,000 1,872,700 1,100,000
Redemption of Long-Term Debt and Other Obligations ....................... (66,985) (94,328) (1,689,570) (949,603)
Amortization (Deferral) of Debt Expense - net ............................ 2,737 (1,125) (54,271) (11,718)
Issuance of Preferred Stock .............................................. 75,000 75,000 75,000 150,000
Redemption of Preferred Stock ............................................ (45,000) - (45,000) -
Contributed Capital by Enterprise ........................................ 174,670 271,570
Cash Dividends Paid ...................................................... (138,980) (127,822) (542,472) (513,476)
Other .................................................................... (1,128) (476) (1,407) (888)
----------- ----------- ----------- ----------
Net cash (used in) provided by financing activities ................ (205,123) 383,197 (397,873) 30,520
----------- ----------- ----------- ----------
Net increase (decrease) in Cash and Cash Equivalents ....................... 264,053 746,578 (478,178) 279,716
Cash and Cash Equivalents at Beginning of Period ........................... 17,673 13,326 759,904 480,188
----------- ----------- ----------- ----------
Cash and Cash Equivalents at End of Period ................................. $ 281,726 $ 759,904 $ 281,726 $ 759,904
=========== =========== =========== ==========
Income Taxes Paid .......................................................... $ 586 $ 9,389 $ 164,066 $ 210,891
Interest Paid .............................................................. $ 81,273 $ 77,563 $ 360,330 $ 368,497
<FN>
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE> 14
<TABLE>
PUBLIC SERVICE ELECTRIC AND GAS COMPANY
CONSOLIDATED STATEMENT OF RETAINED EARNINGS
(Thousands of Dollars)
<CAPTION>
Three Months Ended Twelve Months Ended
March 31, March 31,
----------------------- ------------------------------
1994 1993 1994 1993
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Balance at Beginning of Period ........ $ 1,180,532 $ 1,097,734 $ 1,173,840 $ 1,187,660
Add Net Income ........................ 221,439 204,404 631,903 500,544
----------- ----------- ----------- -----------
Total ............................. 1,401,971 1,302,138 1,805,743 1,688,204
----------- ----------- ----------- -----------
Deduct:
Cash Dividends
Preferred Stock, at required rates .. 10,280 8,822 39,572 33,476
Common Stock ........................ 128,700 119,000 502,900 480,000
Capital Stock Expenses ................ 1,128 476 1,408 888
---------- ---------- ---------- ----------
Total Deductions .................. 140,108 128,298 543,880 514,364
---------- ---------- ---------- ----------
Balance at End of Period .............. $ 1,261,863 $ 1,173,840 $ 1,261,863 $ 1,173,840
=========== =========== =========== ===========
<FN>
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE> 15
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. LEVELIZED GAS ADJUSTMENT CLAUSE
On December 8, 1993, the BRC approved an interim Levelized Gas
Adjustment Clause (LGAC) settlement which provides for an increase of $75.3
million for the approximate ten-month period ending September 30, 1994. The
LGAC increase principally reflects recent increases in the cost of natural
gas. On April 8, 1994, PSE&G, the BRC Staff and Public Advocate of New
Jersey entered into a Stipulation which made the interim LGAC final. This
Stipulation was approved by the BRC on April 25, 1994.
NOTE 2. PREFERRED STOCK
In February 1994, PSE&G issued and sold 600,000 shares of its 6.92%
Cumulative Preferred Stock ($100 Par) which may not be redeemed before
February 1, 2004 and 600,000 shares of its 6.75% Cumulative Preferred Stock -
$25 Par which may not be redeemed before February 1, 1999. The net proceeds
from the sale of the 6.92% Cumulative Preferred Stock ($100 Par) were added
to the general funds of PSE&G and used to pay a portion of its then
outstanding short-term debt obligations, which were primarily used to fund a
portion of its construction expenditures. The net proceeds from the sale of
the 6.75% Cumulative Preferred Stock - $25 Par were used by PSE&G to redeem
the 150,000 shares outstanding of its 8.08% Cumulative Preferred Stock ($100
Par) on March 1, 1994. In addition, PSE&G redeemed on March 1, 1994 all of
the 300,000 shares of its 8.16% Cumulative Preferred Stock ($100 Par).
<PAGE> 16
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
NOTE 3. COMMON STOCK
As of March 31, 1994 and December 31, 1993, 244,697,930 shares and
243,688,256 shares, respectively, of Enterprise Common Stock (Common Stock)
were outstanding. This increase was due to the issuance of an aggregate
1,009,674 shares for $28 million through Enterprise's Dividend Reinvestment
and Stock Purchase Plan (DRIP) and Employee Stock Purchase Plan.
NOTE 4. LONG-TERM DEBT
Enterprise's long-term debt aggregated $5.6 billion as of March 31,
1994, of which $4.8 billion was attributable to PSE&G and $800 million to
EDHI, the parent of Enterprise's nonutility businesses.
On February 10, 1994, the Pollution Control Financing Authority of Salem
County New Jersey issued and sold on behalf of PSE&G $50 million principal
amount of its 5.45% Pollution Control Revenue Bonds, 1994 Series A (Public
Service Electric and Gas Company Project) (New Authority Bonds). The New
Authority Bonds are serviced and secured by an equal principal amount of
PSE&G's Pollution Control Series O Bonds.
On March 1, 1994, PSE&G redeemed all of its First and Refunding Mortgage
Bonds (Bonds) $60 million principal amount 4-5/8% Series due 1994. On March
15, 1994, PSE&G issued the following series of its Bonds: $175 million
principal amount 7-3/8% Series TT due 2014 and $175 million principal amount
6-3/4% Series UU due 2006.
<PAGE> 17
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
NOTE 5. COMMITMENTS AND CONTINGENT LIABILITIES
NUCLEAR PERFORMANCE STANDARD
The BRC has established a nuclear performance standard (Standard) for
nuclear generating stations owned by New Jersey electric utilities, including
the five nuclear units in which PSE&G has an ownership interest: Salem --
42.59%; Hope Creek -- 95%; and Peach Bottom -- 42.49%. PSE&G operates
Salem and Hope Creek, while Peach Bottom is operated by PECO Energy Inc.,
formerly Philadelphia Electric Company, (PECO).
The penalty/reward under the Standard is a percentage of replacement
power costs. (See table below.) The Standard provides that the penalties will
be calculated to the edge of each capacity factor range. For example, a 30%
penalty applies to replacement power costs incurred in the 55% to 65% range
and a 40% penalty applies to replacement power costs in the 45% to 55% range.
<TABLE>
<CAPTION>
CAPACITY FACTOR RANGE REWARD PENALTY
------------------------------------------------------ ------ -------
<S> <C> <C>
Equal to or greater than 75%........................... 30% --
Equal to or greater than 65% and less than 75%......... None None
Equal to or greater than 55% and less than 65%......... -- 30%
Equal to or greater than 45% and less than 55%......... -- 40%
Equal to or greater than 40% and less than 45%......... -- 50%
Below 40%.............................................. BRC Intervenes
</TABLE>
Under the Standard, the capacity factor is calculated annually using
maximum dependable capability of the five nuclear units in which PSE&G owns an
interest. This method takes into account actual operating conditions of the
units.
While the Standard does not specifically have a gross negligence
provision, the BRC has indicated that it would consider allegations of gross
negligence brought upon a sufficient factual basis. A finding of gross
negligence could result in penalties other than those prescribed under the
Standard. During 1993, the five nuclear units in which PSE&G has an ownership
<PAGE> 18
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
NOTE 5. COMMITMENTS AND CONTINGENT LIABILITIES (Continued)
NUCLEAR PERFORMANCE STANDARD (Concluded)
interest aggregated a 77% combined capacity factor. In accordance with the
Standard, PSE&G's combined capacity factor exceeded the 75% reward threshold,
entitling PSE&G to a reward of approximately $3.9 million. PSE&G is expected
to petition the BRC to recover this reward through the Electric Levelized
Energy Adjustment Clause (LEAC) commencing October 1, 1994. PSE&G expects that
the 1994 capacity factor under the Standard will exceed 65%, although no
assurances can be given.
NUCLEAR INSURANCE COVERAGES AND ASSESSMENTS
PSE&G's insurance coverages and maximum retrospective assessments for its
nuclear operations are as follows:
<TABLE>
<CAPTION>
PSE&G
MAXIMUM
ASSESSMENTS
TOTAL FOR A
SITE SINGLE
TYPE AND SOURCE OF COVERAGES COVERAGES INCIDENT
- ------------------------------------------------------------------- --------- ----------
(MILLIONS OF DOLLARS)
<S> <C> <C>
Public Liability:
American Nuclear Insurers........................ $ 200.0 $ --
Indemnity(A)..................................... 9,116.6 210.2
--------- ----------
$9,316.6 (B) $210.2
--------- ----------
Nuclear Worker Liability:
American Nuclear Insurers(C)..................... $ 200.0 $ 8.2
--------- ----------
Property Damage:
Nuclear Mutual Limited(D)........................ $ 500.0 $ 17.6
American Nuclear Insurers........................ 765.0 (E) --
Nuclear Electric Insurance Ltd. (NEIL I)......... 85.0 (F) --
Nuclear Electric Insurance Ltd. (NEIL II)........ 1,400.0 (G) 10.9(H)
--------- ----------
$2,750.0 $ 28.5
--------- ----------
Replacement Power:
Nuclear Electric Insurance Ltd................... $ 3.5 (I) $ 11.3
</TABLE>
<PAGE> 19
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
NOTE 5. COMMITMENTS AND CONTINGENT LIABILITIES (Continued)
NUCLEAR INSURANCE COVERAGES AND ASSESSMENTS (Continued)
(A) Retrospective premium program under the Price-Anderson liability provisions
of the Atomic Energy Act of 1954, as amended, (Price-Anderson). Subject to
retrospective assessment with respect to loss from an incident at any
licensed nuclear reactor in the United States. Assessment adjusted for
inflation effective August 20, 1993.
(B) Limit of liability for each nuclear incident under Price-Anderson.
(C) Industry aggregate limit representing the potential liability from workers
claiming exposure to the hazard of nuclear radiation. This policy includes
automatic reinstatements up to an aggregate of $200 million, thereby
providing total coverage of $400 million. This policy does not increase
PSE&G's obligation under Price-Anderson.
(D) PSE&G has examined the Financial Accounting Standards Board's (FASB)
Emerging Issues Task Force's (EITF) Issue 93-14, "Accounting for
Multiple-Year Retrospectively Rated Insurance Contracts by Insurance
Enterprises and Other Enterprises", and has determined that the potential
insurance premium recovery is not material.
(E) Includes $100 million sublimit for premature decommissioning costs.
(F) New policy effective January 1, 1994.
(G) Includes up to $250 million for premature decommissioning costs.
(H) In the event of a second industry loss triggering NEIL coverage, the
maximum retrospective premium assessment can increase to $23.4 million.
(I) Weekly indemnity for 52 weeks which commences after the first 21 weeks of
an outage. Beyond the first 52 weeks of coverage indemnity of $2.3 million
per week for 104 weeks is afforded. Total coverage amounts to $425.9
million over three years.
Price-Anderson sets the "limit of liability" for claims that could arise
from an incident involving any licensed nuclear facility in the nation. The
"limit of liability" is based on the number of licensed nuclear reactors and is
adjusted at least every five years based on the Consumer Price Index. The
current "limit of liability" is $9.3 billion. All utilities owning a nuclear
reactor, including PSE&G, have provided for this exposure through a combination
of private insurance and mandatory participation in a financial protection pool
as established by Price-Anderson. Under Price-Anderson, each party with an
ownership interest in a nuclear reactor can be assessed its share of $79.3
million per reactor per incident, payable at $10 million per reactor
<PAGE> 20
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
NOTE 5. COMMITMENTS AND CONTINGENT LIABILITIES (Continued)
NUCLEAR INSURANCE COVERAGES AND ASSESSMENTS (Concluded)
per incident per year. If the damages exceed the "limit of liability", the
President is to submit to Congress a plan for providing additional compensation
to the injured parties. Congress could impose further revenue raising measures
on the nuclear industry to pay claims. PSE&G's maximum aggregate assessment per
incident is $210.2 million (based on PSE&G's ownership interests in Hope Creek,
Peach Bottom and Salem) and its maximum aggregate annual assessment per
incident is $26.5 million.
PSE&G purchases all property insurance available, including
decontamination expense coverage and premature decommissioning coverage, with
respect to loss or damage to its nuclear facilities. PECO has advised PSE&G
that it maintains similar insurance coverage with respect to Peach Bottom.
Under the terms of the various insurance agreements, PSE&G could be subject to
a maximum retrospective assessment for a single incident of up to $28.5
million. Certain of the policies also provide that the insurer may suspend
coverage with respect to all nuclear units on a site without notice if the
Nuclear Regulatory Commission (NRC) suspends or revokes the operating license
for any unit on a site, issues a shutdown order with respect to such unit or
issues a confirmatory order keeping such unit shut down.
PSE&G is a member of an industry mutual insurance company, NEIL, which
provides replacement power cost coverage in the event of a major accidental
outage at a nuclear station. The policies provide for a weekly indemnity
payment of $3.5 million for 52 weeks, subject to a 21-week waiting period. The
policies provide for weekly indemnity payments of $2.3 million for a 104 week
period beyond the first year's indemnity. The premium for this coverage is
subject to retrospective assessment for adverse loss experience. Under the
policies, PSE&G's present maximum share of any retrospective assessment in any
year is $11.3 million.
PSE&G URANIUM ENRICHMENT DECONTAMINATION AND DECOMMISSIONING FUND
In accordance with the National Energy Policy Act (NEPA), domestic
utilities that own nuclear generating stations are required to pay a cumulative
total of $150 million each year (adjusted for inflation) into a decontamination
and decommissioning fund, based on their past purchases of enrichment services
from the United States Department of Energy (DOE) Uranium Enrichment Enterprise
(now a federal government corporation known as the United States Enrichment
Corporation (USEC)). These amounts are being collected over a period of 15
years or until $2.25 billion (adjusted for inflation) has been collected.
Under this legislation, the nuclear facilities operated by PSE&G, Salem and
Hope Creek, aggregate 3.09% of the total amount of enrichment services sold to
the domestic commercial nuclear industry and the nuclear facilities operated by
PECO, Peach Bottom and other nuclear facilities not co-owned by PSE&G,
<PAGE> 21
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
NOTE 5. COMMITMENTS AND CONTINGENT LIABILITIES (Continued)
PSE&G URANIUM ENRICHMENT DECONTAMINATION AND DECOMMISSIONING FUND (Concluded)
aggregate 3.95%. In 1993, PSE&G paid approximately $4 million and deferred the
balance of $56 million. Due to subsequent adjustments to the 1993 fiscal year
amount and adjustment for inflation, PSE&G has deferred, at April 30, 1994, a
balance of $61 million. While PSE&G expects to recover such deferred amounts
in its LEAC commencing October 1, 1994, it cannot predict the outcome, amount
or timing of any recovery associated with this matter.
CONSTRUCTION AND FUEL SUPPLIES
PSE&G has substantial commitments as part of its ongoing construction
program which includes capital requirements for nuclear fuel. PSE&G's
construction program is continuously reviewed and periodically revised as a
result of changes in economic conditions, revised load forecasts, changes in
the scheduled retirement dates of existing facilities, changes in business
plans, site changes, cost escalations under construction contracts,
requirements of regulatory authorities and laws, the timing of and amount of
electric and gas rate changes and the ability of PSE&G to raise necessary
capital. Pursuant to an integrated electric resource plan (IRP), PSE&G
periodically reevaluates its forecasts of future customers, load and peak
growth, sources of electric generating capacity and DSM to meet such projected
growth, including the need to construct new electric generating capacity. The
IRP takes into account assumptions concerning future demands of customers,
effectiveness of conservation and load management activities, the long-term
condition of PSE&G's plants, capacity available from electric utilities and
other suppliers and the amounts of cogeneration and other nonutility capacity
projected to be available.
Based on PSE&G's 1994-1998 construction program, construction expenditures
are expected to aggregate approximately $4.2 billion, which includes $483
million for nuclear fuel and $133 million of AFDC and capitalized interest
during the years 1994 through 1998. The estimate of construction requirements
is based on expected project completion dates and includes anticipated
escalation due to inflation of approximately 4%, annually. Therefore,
construction delays or higher inflation levels could cause significant
increases in these amounts. PSE&G expects to generate internally a majority of
the funds necessary to satisfy its construction expenditures over the next five
years, assuming adequate and timely rate relief, as to which no assurances can
be given. In addition, PSE&G does not presently anticipate any difficulties in
obtaining sufficient sources of fuel for electric generation or adequate gas
supplies during the years 1994 through 1998.
<PAGE> 22
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
NOTE 5. COMMITMENTS AND CONTINGENT LIABILITIES (Continued)
SALEM STATION
Not included in PSE&G's estimated construction expenses is the capital
cost of compliance with the New Jersey Department of Environmental Protection
and Energy (NJDEPE) draft permit issued October 3, 1990 pursuant to the Federal
Water Pollution Control Act with respect to Salem 1 and 2 which, if adopted as
proposed, would require the immediate shutdown of both units pending retrofit
with cooling towers. On June 24, 1993, NJDEPE issued a revised draft permit
that would permit Salem to continue to operate with once-through cooling and
would require PSE&G to make certain plant modifications and to take certain
other actions to enhance the ecology of the affected water body. The public
comment period with respect to the revised draft permit expired on January 15,
1994. While a final permit is expected to be issued sometime in the second
quarter of 1994, no assurances can be given as to the timing of any final
agency determination. The capital cost of complying with the revised permit is
estimated at approximately $75 million, PSE&G's share of which is included in
its estimate of construction expenses. Nevertheless, if cooling towers are
ultimately required, PSE&G estimates that it would take at least four years,
and between $720 million and $2.0 billion in capital, operation and maintenance
costs and replacement power costs to retrofit Salem with cooling towers.
PSE&G's share of any such costs would be 42.59%.
BERGEN STATION REPOWERING
PSE&G is presently engaged in Phase I of a construction project to
renovate (or "repower") the Bergen Station pursuant to an air pollution control
permit issued by the NJDEPE on May 27, 1993. The current effort would maintain
the existing electric supply of the station (with a small increase from 629 MW
to 669 MW), improve operational reliability and efficiency and significantly
improve the environmental effects of operation of the facility. Phase II of the
project, if
it is undertaken by PSE&G, would increase the capacity of Bergen by an
additional 650 MW.
On July 12, 1993, an association of competitors of PSE&G appealed the
NJDEPE's issuance of the air permit for Phase I of the project to the Appellate
Division of the New Jersey Superior Court, alleging that PSE&G is first
required to obtain a Certificate of Need under the New Jersey Need Assessment
Act (Need Assessment Act). The NJDEPE determined that the Need Assessment Act
was inapplicable to this renovation project. Obtaining a Certificate of Need
would be a complex procedure entailing proceedings of at least a two year
duration before the NJDEPE, the outcome of which could not be assured. As of
March 31, 1994, Phase I of the renovation project was about 67% complete and
PSE&G had spent approximately $191 million on this effort. The final cost is
estimated to be approximately $400 million.
<PAGE> 23
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
NOTE 5. COMMITMENTS AND CONTINGENT LIABILITIES (Continued)
BERGEN STATION REPOWERING (Concluded)
Briefs have been filed in the appeal and an oral argument before the
appellate division is scheduled for June 13, 1994. PSE&G continue to believe
that a Certificate of Need is not required for Phase I of the project. However,
if a Certificate of Need were ultimately required by the courts after
exhaustion of all appeals, the permits needed to operate the plant could not be
issued until after a Certificate of Need was obtained. PSE&G intends to
continue this renovation project and to vigorously defend its position through
all available means.
ENVIRONMENT
GENERAL
Certain Federal and State laws authorize the United States Environmental
Protection Agency (EPA) and NJDEPE, among other agencies, to issue orders and
bring enforcement actions to compel responsible parties to take investigative
and remedial actions at any site that is determined to present an imminent and
substantial danger to the public or the environment because of an actual or
threatened release of one or more hazardous substances. Because of the nature
of PSE&G's business, including the production of electricity, the distribution
of gas and, formerly, the manufacture of gas, various by-products and
substances are or were produced or handled which contain constituents
classified as hazardous. PSE&G generally provides for the disposal or
processing of such substances through licensed independent contractors.
However, these statutory provisions impose joint and several responsibility
without regard to fault on all responsible parties, including the generators of
the hazardous substances, for certain investigative and remediation costs at
sites where these substances were disposed of or processed. PSE&G has been
notified with respect to a number of such sites and the remediation of these
potentially hazardous sites is receiving greater attention from the government
agencies involved. Generally, actions directed at funding such site
investigations and remediation include all suspected or known responsible
parties. PSE&G does not expect its expenditures for any such site to be
material.
PSE&G MANUFACTURED GAS PLANT REMEDIATION PROGRAM
In March 1988, NJDEPE notified PSE&G that it had identified the need for
PSE&G, pursuant to a formal arrangement, to systematically investigate and, if
necessary, resolve environmental concerns extant at PSE&G's former manufactured
gas plant sites. To date, NJDEPE and PSE&G have identified 38 former gas plant
sites. PSE&G is currently working with NJDEPE under a program to assess,
investigate and, if necessary, remediate environmental concerns at its former
gas plant sites (Remediation Program). The Remediation Program is periodically
<PAGE> 24
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
NOTE 5. COMMITMENTS AND CONTINGENT LIABILITIES (Concluded)
ENVIRONMENT (Concluded)
PSE&G MANUFACTURED GAS PLANT REMEDIATION PROGRAM (Concluded)
reviewed and revised by PSE&G based on regulatory requirements, experience with
the Remediation Program and available technologies. The cost of the Remediation
Program cannot be reasonably estimated, but experience to date indicates that
costs of at least $20 million per year could be incurred over a period of more
than 30 years and that the overall cost could be material.
Costs incurred through March 31, 1994 for the Remediation Program amounted
to $42.8 million, net of insurance recoveries. In addition, at December 31,
1993, PSE&G's liability for estimated remediation costs, net of insurance
recoveries, through March 31, 1996 aggregated $113 million. In accordance with
a Stipulation approved by the BRC on January 21, 1992, PSE&G is recovering $32
million of its actual remediation costs to reflect costs incurred through
September 30, 1992, net of insurance recoveries, over a six-year period. PSE&G
will recover $5.3 million in each of its next three LGAC periods ending in
1996, net of insurance recoveries. The regulatory treatment of the remediation
costs covered by this Stipulation was not changed in the BRC's September 15,
1993 written order, allowing continued collection under the terms of the
January 21, 1992 Stipulation. The decision of September 15, 1993 concluded that
PSE&G had met its burden of proof for establishing the reasonableness and
prudence of remediation costs incurred in operating and decommissioning these
facilities in the past. The remediation costs incurred during the period July
1, 1992 through September 30, 1992 were subject to audit and verification in
PSE&G's 1992-93 LGAC. The audit has been completed and resulted in no
disallowance of any cost. The order also approved a mechanism for costs
incurred since October 1, 1992, allowing the recovery of actual costs plus
carrying charges, net of insurance recoveries, over a seven-year period through
PSE&G's LEAC and LGAC, with 60% charged to gas customers and 40% charged to
electric customers.
In November 1988, PSE&G filed suit against certain of its insurers to
recover the costs associated with addressing and resolving environmental issues
of the Remediation Program. PSE&G has settled its claim with one insurer and
there is a trial scheduled for October 1994 with the remaining insurers.
Pending full recovery of Remediation Program costs through rates or under its
insurance policies, neither of which can be assured, PSE&G will be required to
finance the unreimbursed costs of its Remediation Program.
<PAGE> 25
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Concluded)
NOTE 6. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
In accordance with SFAS 106, the BRC's December 31, 1992 base rate order,
provided that (1) PSE&G's pay-as-you-go basis Other Postemployment Benefits
(OPEB) costs will continue to be included in cost of service and will be
recoverable in base rates on a pay-as-you-go basis; (2) prudently incurred OPEB
costs, that are accounted for on an accrual basis in accordance with SFAS 106,
will be recoverable in future rates; (3) PSE&G should account for the
differences between its OPEB costs on an accrual basis and the pay-as-you-go
basis being recovered in rates as a regulatory asset. During January 1993 and
subsequent to the receipt of the Order, the FASB's EITF concluded that deferral
of such costs is acceptable provided regulators allow SFAS 106 costs in rates
within approximately five years of the adoption of SFAS 106 for financial
reporting purposes, with any cost deferrals recovered in approximately twenty
years. PSE&G intends to request the BRC for full SFAS 106 recovery in
accordance with the EITF's view of such standard and believes that it is
probable that any deferred costs will be recovered from utility customers
within such twenty year time period. Accordingly, PSE&G is accounting for the
differences between its SFAS 106 accruals cost and the cash cost currently
recovered through rates as a regulatory asset. PSE&G's accrued OPEB costs
deferred were $140.8 million on March 31, 1994.
<PAGE> 26
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Following are the significant changes in or additions to information
reported in Enterprise's Annual Report to the SEC on Form 10-K for 1993,
affecting the consolidated financial condition and the results of operations of
Enterprise and its subsidiaries. This discussion refers to the Consolidated
Financial Statements and related Notes of Enterprise and should be read in
conjunction with such statements and notes.
As of March 31, 1994, PSE&G comprised 86% of Enterprise assets. For the
first quarter and twelve months ended March 31, 1994, PSE&G's revenues were 94%
and 93%, respectively, of Enterprise's revenues and PSE&G's earnings available
to Enterprise for such periods were 92% and 96%, respectively, of Enterprise's
net income.
COMPETITION
Ongoing initiatives affecting PSE&G's electric and gas utility businesses
associated with the transition to a competitive market environment can be
expected to have an increasingly significant impact on Enterprise and PSE&G.
Federal legislation, including the National Energy Policy Act (NEPA), as well
as regulatory initiatives at both the Federal and state levels that are
designed to promote competition and lessen regulation of the energy supply
relationships can be expected to result in additional pressures on sales
retention due to energy prices, especially with respect to larger industrial
and commercial customers. Growth potential is limited in PSE&G's mature
service territory.
The shifting of rate regulation from traditional concepts based upon cost
recovery to concepts based upon market competition and service appears to be
accelerating. As a result, added emphasis will be placed upon cost
containment, and utilities and their regulators will need to develop flexible
ratemaking strategies to minimize adverse impacts which might otherwise occur
to revenues and earnings. The manner in which regulators address evolving
competitive issues will also affect utility credit quality.
This transition to a competitive market environment may also affect
utilities' asset values as a result of changes from traditional utility
cost-recovery ratemaking. A shift from such regulatory method to a
market-price determination of asset values could result in unrecoverable costs
and create "stranded assets". Such assets could include electric generating
units constituting excess capacity, inefficient units whose cost may be too
high to be fully supported by competitively set rates, and certain regulatory
assets whose costs may not be fully recoverable in a deregulated environment.
If changes in rate regulation ultimately require a recognition of any such
stranded assets, write-downs for utilities, including PSE&G, could occur. At
this time management cannot predict the level of stranded assets or other
unrecoverable costs resulting from industry deregulation, if any, or whether
utility regulators will allow recovery of any such industry transition costs
from customers. However, such amounts could be material.
<PAGE> 27
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
ENTERPRISE EARNINGS
Earnings per share of Enterprise Common Stock were 94 cents for the
quarter ended March 31, 1994, an increase of 3 cents per share of Common
Stock from the comparable 1993 quarter, after giving effect to the issuance
of additional shares of Common Stock. Earnings per share of Enterprise
Common Stock were $2.54 for the twelve month period ended March 31, 1994, an
increase of 26 cents per share of Common Stock from the comparable 1993
period, after giving effect to the issuance of additional shares of Common
Stock. (See Liquidity and Capital Resources - External Financing.) The
changes are summarized as follows:
Increase or (Decrease)
-----------------------------------------
Three Months Ended Twelve Months Ended
March 31, March 31,
1994 vs. 1993 1994 vs. 1993
------------------- -------------------
Per Per
Millions Share Millions Share
-------- --------- -------- ---------
PSE&G
Revenues (net of fuel costs
and gross receipts taxes) ...... $ 63 $ 0.26 $ 312 $ 1.33
Peach Bottom Settlement - net
of Federal income taxes of
$7 million ..................... - - 14 0.06
Other operation expenses ........ (13) (0.06) (75) (0.32)
Maintenance expenses ............ (19) (0.08) (31) (0.13)
Depreciation and
amortization expenses .......... (6) (0.03) (17) (0.07)
Federal income taxes ............ (9) (0.04) (90) (0.38)
Interest charges ................ 9 0.04 18 0.07
Other income .................... (3) (0.01) (3) (0.01)
Other ........................... (5) (0.02) 3 0.01
Preferred stock dividend require-
ments .......................... (1) - (6) (0.03)
----- ----- ------ -----
Earnings Available to Enterprise 16 0.06 125 0.53
----- ----- ------ -----
EDHI .............................. (1) - (43) (0.18)
----- ----- ------ -----
Net Income ...................... $ 15 0.06 $ 82 0.35
===== ----- ====== -----
Effect of additional shares of
Enterprise Common Stock issues .. (0.03) (0.09)
----- ------
Total ........................... $ 0.03 $ 0.26
====== ======
Average Shares of Common Stock
Outstanding 1993 ................ 236,918,796 234,126,820
Average Shares of Common Stock
Outstanding 1994 ................ 243,776,766 242,354,605
<PAGE> 28
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (Continued)
ENTERPRISE EARNINGS - (Continued)
PSE&G
PSE&G's earnings available to Enterprise increased by $16 million, or
8%, for the quarter ended March 31, 1994 from the quarter ended March 31,
1993. The increase was principally due to PSE&G's higher electric and gas
sales resulting from the colder weather during the first quarter of 1994.
Also contributing to the increase in earnings were lower interest charges
resulting from refinancing of debt at lower interest rates. Adversely
affecting net income were higher operation expenses (comprised primarily of
labor, employee benefits costs and miscellaneous nuclear production costs),
higher maintenance expenses at Hope Creek nuclear station and Mercer
generating station and increased federal income taxes resulting from higher
pre-tax income.
Excluding the $14 million net effect of the 1992 settlement of
litigation against PECO in connection with the 1987 shutdown of Peach Bottom
by the NRC, PSE&G's earnings available to Enterprise increased $111 million,
or 23%, for the twelve month period ended March 31, 1994 from the comparable
twelve month period of 1993. The principal factors contributing to the
increase were PSE&G's higher electric and gas base rates that became
effective January 1, 1993 and increased weather-related utility sales. In
addition, lower interest charges resulting from refinancing of debt at lower
interest rates contributed to the increase in earnings. Partially offsetting
the increase in earnings were higher other operation expenses (comprised
primarily of labor, employee benefits costs and miscellaneous nuclear
production costs), higher federal income taxes resulting from increased
pre-tax operating income and an increase in the Federal corporate income tax
rate, effective January 1993, higher maintenance expenses at various nuclear
and fossil generating stations and higher depreciation and amortization.
EDHI
EDHI's decrease in net income of $1 million, or 4%, for the quarter
ended March 31, 1994 compared to the quarter ended March 31, 1993 was
primarily due to lower gas volumes for EDC, higher administrative and general
expenses of CEA and the effect of EDHI's change in accounting for income
taxes, adopted January 1, 1993. Partially offsetting the decrease were
higher income from CEA's power projects and PSRC's investments.
Excluding the 1993 property impairment to certain of EGDC's properties,
which reduced net income by $51 million, after tax, EDHI's net income for the
twelve month period ended March 31, 1994 increased by $8 million, or 12%,
compared to the twelve month period ended March 31, 1993. The increase was
due principally to higher gas prices of EDC and improved performance on
certain projects of CEA.
<PAGE> 29
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (Continued)
ENTERPRISE EARNINGS - (Concluded)
DIVIDENDS
Dividends paid to holders of Enterprise Common Stock during the three
and twelve month periods ended March 31, 1994 increased $2 million and $16
million, respectively, over the comparable 1993 periods. The increase in
such dividend payments was due to the issuance of additional shares of
Enterprise Common Stock. (See Liquidity and Capital Resources.)
Dividends paid to holders of PSE&G's Preferred Stock during the three
and twelve month periods ended March 31, 1994 increased $1 million and $6
million, respectively, over the comparable 1993 periods. The increase in
such dividend payments was due to the issuance of additional shares of
PSE&G's Preferred Stock, partially offset by lower dividend payment rates on
certain preferred stock issues resulting from redemptions. (See Liquidity
and Capital Resources.)
REVENUES
PSE&G ELECTRIC
Revenues increased $16 million, or 2%, during the first quarter of 1994
and $249 million, or 7%, during the twelve months ended March 31, 1994. The
significant components of these changes follow:
Increase or (Decrease)
--------------------------------------
Three Months Ended Twelve Months Ended
March 31, March 31,
1994 vs. 1993 1994 vs. 1993
------------------ ------------------
(Millions)
Kilowatthour sales ............. $ 32 $111
Base rate increase effective
January 1, 1993 ............... - 183
Recovery of energy costs ....... (19) (61)
NJGRT .......................... 2 18
Other operating revenues ....... 1 (2)
---- -----
Total Electric Revenues ...... $ 16 $249
==== =====
<PAGE> 30
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (Continued)
REVENUES - (Continued)
PSE&G ELECTRIC - (Concluded)
Changes in kilowatthour sales by customer category are described below:
Increase or (Decrease)
--------------------------------------
Three Months Ended Twelve Months Ended
March 31, March 31,
1994 vs. 1993 1994 vs. 1993
------------------ -------------------
Residential ................... 2.3% 8.2%
Commercial .................... 4.4 4.3
Industrial .................... 0.1 (0.4)
Non-Jurisdictional ............ (47.3) (22.3)
The 2% increase and 7% increase, respectively, in revenues during the
quarter and twelve month period ended March 31, 1994 over the comparable 1993
quarter and period was due to greater sales to residential and commercial
customers resulting from the colder 1994 winter season and improvement in New
Jersey's economy.
PSE&G GAS
Revenues increased $172 million, or 27%, and $157 million, or 10%, for
the three and twelve month periods ended March 31, 1994 over the similar
periods ended March 31, 1993. The significant components of these changes
follow:
Increase or (Decrease)
---------------------------------------
Three Months Ended Twelve Months Ended
March 31, March 31,
1994 vs. 1993 1994 vs. 1993
------------------ -------------------
(Millions)
Therm sales ................... $ 31 $ (1)
Base rate increase effective
January 1, 1993 .............. - 26
Recovery of fuel costs ........ 129 139
NJGRT ......................... 9 3
Other operating revenues ...... 3 (10)
---- ----
Total Gas Revenues ......... $172 $157
==== ====
<PAGE> 31
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (Continued)
REVENUES - (Concluded)
PSE&G GAS - (Concluded)
Changes in gas sold or transported by customer category are described
below:
Increase or (Decrease)
--------------------------------------
Three Months Ended Twelve Months Ended
March 31, March 31,
1994 vs. 1993 1994 vs. 1993
------------------ ------------------
Residential ................. 12.3% 3.8%
Commercial .................. 8.2 1.9
Industrial .................. 12.8 11.6
Transportation Service ...... (17.6) (5.4)
The gas revenue increase of 27% and 10%, respectively, for the quarter
and twelve month period ended March 31, 1994 over the comparable quarter and
twelve month period of 1993 was primarily attributable to the colder 1994
winter season and improvement in New Jersey's economy. Sales to cogenerators
was the largest contributor to the increase in industrial sales as
cogeneration average customer usage for electric generation continued to
increase. Transportation service sales reflect significantly more
interruptions due to the colder 1994 winter season when compared to 1993.
EDHI
EDHI's revenues increased $9 million, or 10%, during the first quarter
of 1994 over the first quarter of 1993, and $36 million, or 9%, during the
twelve month period ended March 31, 1994 over the twelve month period ended
March 31, 1993. The significant factors contributing to such results are as
follows:
<PAGE> 32
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (Continued)
REVENUES - (Concluded)
EDHI - (Concluded)
Increase or (Decrease)
---------------------------------------
Three Months Ended Twelve Months Ended
March 31, March 31,
1994 vs. 1993 1994 vs. 1993
------------------ -------------------
(Million)
CEA ........................ $ 4 $ 18
EDC ........................ (1) 15
PSRC ....................... 7 3
EGDC ....................... (1) -
----- -----
$ 9 $ 36
===== =====
The 10% increase in revenues for the quarter ended March 31, 1994 over
the comparable 1993 quarter was due to PSRC's income from investments and
greater income from CEA's power projects.
The 9% increase in revenues for the twelve months ended March 31, 1994
over the comparable 1993 period was primarily due to an increase in gas
prices at EDC and greater income from CEA's power projects.
<PAGE> 33
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (Continued)
PSE&G - ELECTRIC ENERGY COSTS
Electric energy costs decreased $19 million, or 10%, and $69 million, or
9%, in the first quarter and twelve months ended March 31, 1994,
respectively, from the comparable 1993 periods. The significant components
of these changes follow:
Increase or (Decrease)
--------------------------------------
Three Months Ended Twelve Months Ended
March 31, March 31,
1994 vs. 1993 1994 vs. 1993
------------------ -----------------
(Millions)
Change in prices paid for
fuel and power purchases .......... $ 32 $ 43
Kilowatthour generation ............ 5 33
Adjustment of actual costs to match
recoveries through revenues (A) ... (56) (145)
----- ----
Total Electric Energy Costs.... $(19) $(69)
===== =====
(A) Reflects the change in deferred over(under) recovered energy costs.
The decrease in total costs during the first quarter of 1994 from the
comparable 1993 quarter was principally due to the underrecovery of energy
costs, partially offset by a 37% increase in purchased power costs,
principally from nonutility generators (NUGs).
The decrease in total costs for the twelve month period ended March 31,
1994 from the comparable 1993 period was principally the result of an
adjustment in the recovery of energy costs resulting from the base rate case
decision effective January 1, 1993, partially offset by an 8% increase in
nuclear generation and a 20% increase in purchased power costs, principally
from NUGs.
<PAGE> 34
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (Continued)
GAS SUPPLY COSTS
Gas supply costs increased $132 million, or 40%, and $162 million, or
19% in the first quarter and twelve months ended March 31, 1994,
respectively, from the comparable 1993 periods. The significant components
of these changes follow:
Increase or (Decrease)
-------------------------------------
Three Months Ended Twelve Months Ended
March 31, March 31,
1994 vs. 1993 1994 vs. 1993
------------------ ----------------
(Millions)
Change in prices paid for
gas supplies ...................... $ 41 $122
Therm sendout ...................... 45 47
Refunds from pipeline suppliers .... (8) 16
Adjustment of actual costs to match
recoveries through revenues (A) ... 54 (23)
---- ----
Total Gas Supply Costs ........ $132 $162
==== ====
(A) Reflects the change in deferred over(under) recovered gas costs.
The increase in total costs was principally due to greater sales to NUGs
and other customers, higher gas costs and higher therm sendout resulting from
the colder 1994 winter season compared to the 1993 winter season.
<PAGE> 35
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (Continued)
LIQUIDITY AND CAPITAL RESOURCES
Enterprise's liquidity is affected by maturing debt (see Note 4 -
Long-Term Debt of Notes to Consolidated Financial Statements) investment and
acquisition activities and the capital requirements of PSE&G's construction
program. (For additional information see Note 5 - Commitments and Contingent
Liabilities of Notes to Consolidated Financial Statements.)
PSE&G
For the three month period ended March 31, 1994, PSE&G had utility plant
additions, excluding AFDC, of $168 million, an increase of $42 million from
the corresponding period in 1993. For the twelve month period ended March
31, 1994, PSE&G had utility plant additions, excluding AFDC, of $905 million,
an increase of $140 million from the corresponding period ended in 1993.
Construction expenditures were related to improvements in PSE&G's existing
power plants, transmission and distribution system, gas system and common
facilities.
PSE&G expects that it will be able to generate internally a majority of
its capital requirements including construction expenditures over the next
five years, assuming adequate and timely rate relief as to which no
assurances can be given. (See Note 5 - Commitments and Contingent Liabilities
of Notes to Consolidated Financial Statements.)
Legislation effective January 1, 1992 phases in an acceleration of
payment of the New Jersey Gross Receipts and Franchise Tax (NJGRT) during
1992-94, so that for 1994 and for each year thereafter PSE&G will be paying
its estimated current year's NJGRT liability in April of each such year. In
April 1993, PSE&G paid $899 million (its 1992 NJGRT plus 50% of its estimated
1993 NJGRT). In April 1994, PSE&G paid $847 million (the remainder of its
1993 NJGRT plus its 1994 estimated NJGRT). Pending collection from customers,
PSE&G is required to finance such NJGRT payments.
EDHI
During the next five years, a majority of EDHI's capital requirements
are expected to be provided from operational cash flows. EDHI intends to
focus its efforts on CEA and EDC, its energy-related core businesses. CEA is
expected to be the primary vehicle for its business growth and EDC is
projected to attain and maintain a reserve base at approximately 900 billion
cubic feet equivalent, approximately 11% above the year-end 1993 level. PSRC
will limit new investments, while EGDC will exit the real estate business in
a prudent manner. Over the next several years, EDHI and its subsidiaries will
also be required to refinance a portion of their maturing debt in order to
meet their capital requirements. Any inability to extend or replace maturing
debt at current levels and interest rates may affect future earnings and
result in an increase in EDHI's cost of capital.
<PAGE> 36
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (Continued)
LIQUIDITY AND CAPITAL RESOURCES (Continued)
PSRC is a limited partner in various partnerships and is committed to
make investments from time to time, upon the request of the respective
general partners. On March 31, 1994, $139 million remained as PSRC's unfunded
commitment subject to call.
EDHI and each of its subsidiaries are subject to restrictive business
and financial covenants contained in existing debt agreements and are
required to not exceed various debt to equity ratios which vary from 3:1 to
1.75:1. EDHI is also required to maintain a twelve months earnings before
interest and taxes to interest (EBIT) coverage ratio of at least 1.35:1. As
of March 31, 1994 and 1993, EDHI had consolidated debt to equity ratios of
1.24:1 and 1.76:1 and, for the twelve months ended March 31, 1994 and 1993,
EBIT coverage ratios, which exclude the effects of EGDC, of 2.23:1 and
1.90:1, respectively. Compliance with applicable financial covenants will
depend upon future levels of earnings, among other things, as to which no
assurance can be given. (See Note 4 - Long-Term Debt of Notes to
Consolidated Financial Statements.)
INTERNAL GENERATION OF CASH FROM OPERATIONS
Enterprise's cash provided by operating activities increased by $96
million to $703 million for the three months ended March 31, 1994 compared to
the corresponding period in 1993. This increase was primarily due to a
decrease in accounts receivable and an increase in accrued taxes. (For more
information see Net Income and Revenues.)
Although net income increased by $82 million, Enterprise's net cash
provided by operating activities for the twelve months ended March 31, 1994
decreased by $170 million to $1.104 billion when compared to the
corresponding period in 1993. This decrease was primarily due to a smaller
recovery of electric energy and gas costs through PSE&G's LEAC and LGAC and
increased NJGRT payments. Partially offsetting these cash outflows was the
increase in net income, the loss from property impairment, increased deferred
income taxes and an increase in accounts payable. (For additional
information see Net Income and Revenues.)
<PAGE> 37
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (Continued)
LIQUIDITY AND CAPITAL RESOURCES (Continued)
EXTERNAL FINANCINGS
Cash Flows from Financing Activities:
Three Months Ended Twelve Months Ended
March 31, March 31,
------------------ -------------------
1994 1993 1994 1993
------- -------- ------- ---------
(Millions)
Enterprise:
Issuance of Common Stock (A) $ 28 $ 175 $ 127 $ 274
------- -------- ------- -------
Cash Dividends Paid on
Common Stock (B) (132) (130) (524) (508)
-------- -------- ------- -------
PSE&G: (C)
Net decrease in Short-Term
Debt (D) (431) (143) (13) (15)
Issuance of Long-Term Debt (E) 400 500 1,873 1,100
Redemption of Long-Term Debt and
Other Obligations (67)(E) (94) (1,690) (950)
Amortization (Deferral) of
Debt Expense - net 3 (1) (54) (12)
Issuance of Preferred Stock 75 (F) 75 75 150
Redemption of Preferred Stock (45)(F) - (45) -
Other (1) (1) (1) (1)
-------- -------- ------- -------
Total PSE&G (66) 336 145 272
-------- -------- ------- -------
EDHI:
Net decrease (increase) in
Short-Term Debt (G) (28) 16 (134) (29)
Issuance of Long-Term Debt - 60 105 90
Redemption of Long-Term Debt and
Other Obligations (30) (117) (281) (142)
Other - 1 (7) 4
-------- -------- ------- -------
Total EDHI (58) (40) (317) (77)
-------- ------- ------- -------
Net cash (used in) provided by
financing activities $ (228) $ 341 $ (569) $ (39)
======== ======= ======= =======
(A) During the first three months of 1994, Enterprise issued and sold
1,009,674 shares of Common Stock through its DRIP and employee stock purchase
plan. The net proceeds from such sales, aggregating approximately $28
<PAGE> 38
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (Continued)
LIQUIDITY AND CAPITAL RESOURCES - (Continued)
million, were used by Enterprise to make equity investments in EDHI. EDHI
utilized such funds to repay outstanding debt at maturity. Book value per
share was $21.49 at March 31, 1994, compared to $20.94 at March 31, 1993 and
$21.07 at December 31, 1993. (See Note 3 - Common Stock of Notes to
Consolidated Financial Statements.)
(B) See DIVIDENDS.
(C) Under the terms of PSE&G's Mortgage and Restated Certificate of
Incorporation at March 31, 1994, PSE&G would qualify to issue an additional
$3.952 billion of Bonds at a rate of 8.125% or $3.330 billion of Preferred
Stock at a rate of 7.875%.
In addition, as a prerequisite to the issuance of additional Bonds, PSE&G's
mortgage requires a 2:1 ratio of earnings to fixed charges as computed
thereunder. For the twelve months ended March 31,1994 such ratio was 3.41:1.
The BRC has authorized PSE&G to issue not more than $800 million of its
short-term obligations at any one time outstanding, consisting of commercial
paper and other unsecured borrowings from banks and other lenders through
December 31, 1994. On March 31, 1994, PSE&G had no short-term debt
outstanding.
PSE&G has a $600 million revolving credit agreement with a group of
commercial banks which expires on September 17, 1994. On March 31, 1994,
there was no short-term debt outstanding under this credit agreement.
(D) Includes commercial paper issued and/or redeemed by PSE&G Fuel
Corporation (Fuelco) and guaranteed by PSE&G pursuant to a commercial paper
program supported by a bank revolving credit facility to finance the
acquisition of a 42.49% undivided interest in the nuclear fuel for Peach
Bottom. Fuelco has a $150 million commercial paper program through June
1996. On March 31, 1994, Fuelco had $102 million of its commercial paper
outstanding.
(E) Enterprise's long-term debt aggregated $5.6 billion as of March 31,
1994, of which $4.8 billion was attributable to PSE&G and $800 million to
EDHI.
On February 10, 1994, the Pollution Control Financing Authority of Salem
County New Jersey issued and sold on behalf of PSE&G $50 million principal
amount of its 5.45% Pollution Control Revenue Bonds, 1994 Series A (Public
Service Electric and Gas Company Project) (New Authority Bonds). The New
Authority Bonds will be serviced and secured by an equal principal amount of
PSE&G's Pollution Control Series O Bonds. The net proceeds of the New
Authority Bonds were loaned to PSE&G to finance a portion of certain
pollution control facilities. PSE&G applied the net proceeds of the
Authority's loan to refund and redeem higher cost long-term debt obligations.
<PAGE> 39
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (Continued)
LIQUIDITY AND CAPITAL RESOURCES - (Continued)
On March 1, 1994, PSE&G redeemed all of its First and Refunding Mortgage
Bonds (Bonds) $60 million principal amount 4-5/8% Series due 1994. On March
15, 1994 PSE&G issued $175 million principal amount 7-3/8% Series TT Bonds
due 2014 and $175 million principal amount of its 6-3/4% Series UU Bonds due
2006. The net proceeds of such Bonds were used by PSE&G to finance a portion
of its construction program and to reimburse its treasury for funds expended
to refund and redeem certain of its debt obligations, including the payment
of short-term obligations incurred for such purposes.
(F) In February 1994, PSE&G sold 600,000 shares of its 6.75% Cumulative
Preferred Stock -- $25 Par and 600,000 shares of its 6.92% Cumulative
Preferred Stock ($100 Par). The net proceeds of $15 million from the sale of
the Preferred Stock -- $25 Par were used by PSE&G to redeem all of the
150,000 outstanding shares of PSE&G's 8.08% Cumulative Preferred Stock ($100
Par). The net proceeds of $60 million from the sale of the Cumulative
Preferred Stock ($100 Par) were added to the general funds of PSE&G and used
to pay a portion of its then outstanding short-term debt obligations, which
were principally incurred to fund a portion of its construction expenditures.
On March 1, 1994, PSE&G redeemed all of the 300,000 shares of its 8.16%
Cumulative Preferred Stock ($100 Par).
Under authority granted by the BRC, expiring December 31, 1995, PSE&G is
authorized to issue an additional $330 million of Preferred Stock after
giving effect to the 1994 issuances of Preferred Stock.
(G) Funding has a commercial paper program, supported by a commercial bank
letter of credit and credit facility, through November 18, 1995 in the amount
of $225 million. As of March 31, 1994, Funding had $16.6 million outstanding
under this program.
Funding has a $225 million revolving credit facility which terminates
on November 18, 1995. As of March 31, 1994, Funding had no borrowings on this
facility.
NUCLEAR OPERATIONS
Salem Nuclear Generating Station, Unit 1 (Salem 1) experienced a
automatic reactor shutdown which occurred on April 7, 1994 due to excessive
grass from the Delaware River clogging the station's water intake structure.
Subsequent to the shutdown a precautionary Alert was declared at 1:16 p.m.
and this emergency classification was terminated at 8:20 p.m. No abnormal
releases of radiation to the environment occurred during the event and there
was no threat to the public health and safety. Salem 1 has remained out of
service while PSE&G and the NRC have investigated the event and PSE&G has
implemented remedial actions that must be completed prior to returning the
unit to service. PSE&G agreed not to restart the unit until approval is
obtained from the NRC.
<PAGE> 40
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (Continued)
LIQUIDITY AND CAPITAL RESOURCES - (Concluded)
On April 7, 1994 the NRC sent an augmented inspection team (AIT) to
Salem to investigate the event. The AIT completed its on-site investigation
on April 15, 1994 and presented its preliminary findings at a public meeting
held at the station site on April 26, 1994. The AIT concluded that the event
had challenged the reactor coolant system pressure boundary, that operator
error had occurred which complicated the event, that management had allowed
equipment problems to exist which made operations difficult for plant
operators, and that some equipment was degraded by the event, but overall the
plant performed as designed. The AIT further concluded that operator use of
emergency operating procedures was good and that investigation and
trouble-shooting efforts were good. PSE&G's investigation of the event has
resulted in conclusions similar to those of the AIT.
On May 9, 1994, PSE&G and the NRC staff presented their findings to the
NRC Commissioners, and PSE&G described the actions it has taken to prepare
Salem 1 for restart. On May 11, 1994, Senator Joseph Biden, representing
Delaware, wrote to the NRC expressing his concerns regarding early restart of
the unit and requested assurances "that all outstanding mechanical and
management problems have been resolved and that a fine in the maximum amount
will be levied upon the licensee." Nevertheless, PSE&G believes that the
event has been thoroughly analyzed and that all necessary corrective actions
have been identified so as to permit the unit to return to service. PSE&G
expects to request authorization to restart the unit shortly. PSE&G cannot
determine what action, if any, the NRC may take in this matter or when PSE&G
will be permitted to restart the unit.
Salem Unit 2 and Hope Creek Generating Station, both located adjacent to
Salem 1 and operated by PSE&G, are presently in operation.
<PAGE> 41
PUBLIC SERVICE ELECTRIC AND GAS COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (Continued)
Following are changes in or additions to the significant factors
reported in PSE&G's Annual Report to the SEC on Form 10-K for 1993, affecting
the consolidated financial condition of PSE&G and its subsidiaries as
reflected in their consolidated results of operations. This discussion
refers to the consolidated financial statements and related notes herein of
PSE&G and should be read in conjunction with such statements and notes.
Except as modified below, the information required by this item is
incorporated herein by reference to the following portions of Enterprise's
MD&A, insofar as they relate to PSE&G and its subsidiaries: Net Income;
Dividends; Revenues -- PSE&G Electric; PSE&G Gas; PSE&G Electric Energy
Costs; Liquidity and Capital Resources - PSE&G and External Financings.
GAS SUPPLY COSTS
Gas supply costs increased $129 million, or 38%, and $141 million, or
16%, in the first quarter and twelve months ended March 31, 1994,
respectively, from the comparable 1993 periods. The significant components
of these changes follow:
Increase or (Decrease)
-------------------------------------
Three Months Ended Twelve Months Ended
March 31, March 31,
1994 vs. 1993 1994 vs. 1993
------------------ ----------------
(Millions)
Change in prices paid for
gas supplies ...................... $ 38 $ 99
Therm sendout ...................... 45 49
Refunds from pipeline suppliers .... (8) 16
Adjustment of actual costs to match
recoveries through revenues (A) .. 54 (23)
---- ----
Total Gas Supply Costs ........ $129 $141
==== ====
(A) Reflects the change in deferred over(under) recovered gas costs.
The increase in total costs was principally due to greater sales to NUGs
and other customers, higher gas costs and higher therm sendout resulting from
the colder 1994 winter season compared to the 1993 winter season.
<PAGE> 42
PUBLIC SERVICE ELECTRIC AND GAS COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (Concluded)
INTERNAL GENERATION OF CASH FROM OPERATIONS
PSE&G's cash provided by operating activities increased by $119 million
to $661 million for the three months ended March 31, 1994 compared to the
corresponding period in 1993. This increase was primarily due to an increase
in net income, a smaller increase in accounts receivable and a decrease in
fuel and materials and supplies inventories. (For additional information see
PSE&G - Net Income and Revenues.)
PSE&G's net cash provided by operating activities for the twelve months
ended March 31, 1994 decreased by $195 million to $930 million when compared
to the corresponding period in 1993. This decrease was primarily due to a
smaller recovery of electric energy and gas costs through PSE&G's LEAC and
LGAC and increased NJGRT payments. Partially offsetting these cash outflows
was the increase in net income, an increase in deferred income taxes and an
increase in accounts payable. (For additional information see PSE&G - Net
Income and Revenues.)
<PAGE> 43
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
- ------ ------------------
Certain information reported under Item 1 of Part I of Enterprise's and
PSE&G's Annual Reports to the Securities and Exchange Commission on Form 10-K
for 1993 (the "Form 10-K") is updated below. References are to the related
pages and paragraph(s) of the Form 10-K.
Form 10-K, Page 28, Paragraphs 4 and 5
--------------------------------------
(21) In United States of America v. Superior Tube Company, et al.,
Docket No. 89-7421 in the U.S. District Court for the Eastern District of
Pennsylvania, the Commonwealth of Pennsylvania filed a Complaint In
Intervention aligning itself as a plaintiff.
PSE&G has recently participated with twenty-one (21) other defending
parties in negotiations concerning a de minimis settlement of the claims of
the United States and the Commonwealth of Pennsylvania.
<PAGE> 44
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
PART II. OTHER INFORMATION - (Continued)
Item 4. Submission of Matters to a Vote of Security Holders
- ------ ---------------------------------------------------
Enterprise's Annual Meeting of Stockholders was held on April 19, 1994.
Proxies for the meeting were solicited pursuant to Regulation 14A under the
Securities Exchange Act of 1934, there was no solicitation of proxies in
opposition to management's nominees as listed in the proxy statement and all
of management's nominees were elected to the board of directors. Details of
the voting are provided below:
Item 1 - Election of Directors
Votes For Votes Withheld
--------- --------------
Class I - Term Expiring 1997
Ernest H. Drew 198,549,375 2,267,472
James C. Pitney 198,428,791 2,388,056
Item 2 - Appointment of Deloitte & Touche as Independent
Auditors for 1994
Votes For 197,910,551
Votes Against 1,275,624
Votes Abstaining 1,748,046
There were no broker non votes with respect to either item.
<PAGE> 45
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
PART II. OTHER INFORMATION - (Continued)
Item 5. Other Information.
- ------ ------------------
Certain information reported under Item 1 of Part I of Enterprise's and
PSE&G's Annual Reports to the Securities and Exchange Commission on Form 10-K
for 1993 (the "Form 10-K") is updated below. References are to the related
pages and paragraph(s) of the Form 10-K.
Form 10-K, page 3, paragraph 2
------------------------------
NEPA, however, does not pre-empt state regulation of retail "wheeling",
i.e., the transportation of electricity by a transmission owner from a third
party generator to a retail customer. In April 1994, several states, but not
New Jersey, issued proposed regulations to either mandate phased-in
intra-state retail wheeling by utilities or authorize limited retail wheeling
by utilities on an experimental basis. The BRC is presently conducting
hearings concerning the desirability of amending New Jersey law to provide
the BRC with greater flexibility in tariff design. While neither Enterprise
nor PSE&G is able to predict the ultimate outcome or effect of such
initiatives, in the aggregate such initiatives indicate an acceleration of
the trend to deregulate the electric power industry. (See Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Competition.)
Form 10-K, page 5, paragraph 7
------------------------------
The second component of PSE&G's IRP consists of expected additions to
nonutility generation (NUG) from cogenerators, independent power producers
and refuse burning generators. These additions are projected to be 139 MW
and are scheduled for service by 1998. NUG projects are expected to grow
from approximately 4% of resources to 7% by 2004. This growth, if
accomplished, is expected to reduce the need for PSE&G to build or acquire
additional generating facilities or capacity, other than what is described
below.
The third and final component of PSE&G's IRP consists of utility
projects. These projects include programs to revitalize and modernize
PSE&G's existing power production system , making the system environmentally
cleaner and more economically efficient to operate. As part of the
continuing program, PSE&G will convert its existing Bergen Generating Station
to combined cycle operation in 1995, which will reduce emissions, increase
efficiency and provide 40 MW of increased capacity. A second phase at Bergen
is being considered which could add 650 MW in the 1998 to 2000 time frame.
These environmentally clean and efficient additions at Bergen Generating
Station would allow PSE&G to retire approximately 750 MW of older, less
efficient generating units by 2000, if economically and environmentally
desirable.
<PAGE> 46
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
PART II. OTHER INFORMATION - (Continued)
Item 5. Other Information.
- ------ ------------------
Form 10-K, page 9, paragraph 5
------------------------------
For a discussion of the recent outage at the Salem Nuclear Generating
Station, Unit I see Management's Discussion and Analysis of Financial
Condition and Results of Operations - Nuclear Operations.
Form 10-K, page 10, paragraph 6
-------------------------------
In February 1989, PECO, on behalf of the co-owners of Peach Bottom,
filed a proof of loss with Nuclear Electric Insurance Limited (NEIL) for
replacement power costs associated with the 1983 outages of Peach Bottom Unit
No. 3. On January 19, 1993, the arbitrators issued a decision in favor of
NEIL and denied PECO's claim. On April 19, 1993, PECO filed a motion in the
United States District Court for the Southern District of New York to vacate
the arbitration decision, which was denied on March 4, 1994.
PECO filed a request with the NRC to amend its Facility Operating
Licenses for Peach Bottom Units 2 and 3 to extend the expiration dates to
August 2013 and July 2014, respectively, 40 years from the dates of issuance.
By letter dated March 28, 1994, the NRC approved PECO's request to extend the
license expiration dates.
<PAGE> 47
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
PART II. OTHER INFORMATION - (Concluded)
Form 10-K, page 20, first paragraph
-----------------------------------
In response to a BRC directive, PSE&G surveyed EMF levels at 19 schools
located within 100 feet of its electric transmission lines. In April 1994,
the survey results were provided to the BRC and officials of such schools.
The survey has generated requests by five schools for additional information
and has resulted in a heightened concern about the emerging EMF issue in one
school district. PSE&G cannot predict what actions, if any, it may hereafter
be required to take to address such concerns, the costs of which could be
material.
Item 6. Exhibits and Reports on Form 8-K.
- ------ --------------------------------
(a) A listing of exhibits being filed with this document is as follows:
Exhibit
Number Document
------- ----------------------------------------------------------
12 Computation of Ratios of Earnings to Fixed Charges plus
Preferred Stock Dividend Requirements (Enterprise)
12(a) Computation of Ratios of Earnings to Fixed Charges (PSE&G)
12(b) Computation of Ratios of Earnings to Fixed Charges plus
Preferred Stock Dividend Requirements (PSE&G)
(b) The following report on Form 8-K was filed by Enterprise and PSE&G
during the first quarter of 1994 and the period covered by this
report under Item 5:
Date of Report Item Reported
-------------- -------------
January 21, 1994 Item 5. Other Events (Credit Ratings and
Unaudited Operating Results)
<PAGE> 48
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrants have duly caused these reports to be signed on their respective
behalf by the undersigned thereunto duly authorized.
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
PUBLIC SERVICE ELECTRIC AND GAS COMPANY
--------------------------------------------
(Registrants)
By PATRICIA A. RADO
--------------------------------------
Patricia A. Rado
Vice President and Controller
(Principal Accounting Officer)
Date: May 13, 1994
<PAGE> 1
EXHIBIT 12
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
PLUS PREFERRED STOCK DIVIDEND REQUIREMENTS
<TABLE>
<CAPTION>
12 MONTHS
YEAR ENDED DECEMBER 31, ENDED
------------------------------------------------------------- MARCH 31,
1989 1990 1991 1992 1993 1994
--------- --------- --------- --------- --------- ---------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C>
Net Income....................... $ 523,435 $ 403,662 $ 543,035 $ 504,117 $ 595,519(A) $ 615,642
Plus Income Taxes................ 207,644 144,652 274,146 253,276 316,010 335,713
--------- --------- --------- --------- --------- ---------
Net Income Before Income Taxes... 731,079 548,314 817,181 757,393 911,529 951,355
--------- --------- --------- --------- --------- ---------
Fixed Charges and Preferred Stock
Dividend Requirements:
Interest Charges............... 408,661 457,017 478,321 524,025 502,534 494,480
Interest Factor in Rentals..... 8,908 9,162 9,311 9,591 11,090 11,393
Preferred Stock Dividend
Requirements (Pre-tax)...... 39,729 38,544 42,676 46,748 58,112 60,917
--------- --------- --------- --------- --------- ---------
Total.................. 457,298 504,723 530,308 580,364 571,736 566,790
--------- --------- --------- --------- --------- ---------
Earnings Before Fixed Charges and
Preferred Stock Dividend
Requirements................... $1,188,377 $1,053,037 $1,347,489 $1,337,757 $1,483,265 $1,518,145
========== ========== ========== ========== ========== ==========
Ratio............................ 2.60 2.09 2.54 2.30 2.59 2.68
==== ==== ==== ==== ==== ====
</TABLE>
(A) Excludes cumulative effect of $5.4 million change in accounting for EDHI's
income taxes.
1
<PAGE> 1
EXHIBIT 12(A)
PUBLIC SERVICE ELECTRIC AND GAS COMPANY
COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
12 MONTHS
YEAR ENDED DECEMBER 31, ENDED
------------------------------------------------------------- MARCH 31,
1989 1990 1991 1992 1993 1994
--------- --------- --------- --------- --------- ---------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C>
Net Income....................... $ 544,374 $ 537,619 $ 545,479 $ 475,936 $ 614,868 $ 631,903
Plus Income Taxes................ 214,299 209,360 261,912 223,782 307,414 321,016
--------- --------- --------- --------- --------- ---------
Net Income Before Income Taxes... 758,673 746,979 807,391 699,718 922,282 952,919
--------- --------- --------- --------- --------- ---------
Fixed Charges
Interest Charges............... 333,717 346,020 358,517 401,902 389,956 383,594
Interest Factor in Rentals..... 8,908 9,162 9,311 9,591 11,090 11,393
--------- --------- --------- --------- --------- --------
Total.................. 342,625 355,182 367,828 411,493 401,046 394,987
--------- --------- --------- --------- --------- --------
Earnings Before Fixed Charges.... $1,101,298 $1,102,161 $1,175,219 $1,111,211 $1,323,328 $1,347,906
========== ========== ========== ========== ========== ==========
Ratio............................ 3.21 3.10 3.20 2.70 3.30 3.41
==== ==== ==== ==== ==== ====
</TABLE>
2
<PAGE> 1
EXHIBIT 12(B)
PUBLIC SERVICE ELECTRIC AND GAS COMPANY
COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
PLUS PREFERRED STOCK DIVIDEND REQUIREMENTS
<TABLE>
<CAPTION>
12 MONTHS
YEAR ENDED DECEMBER 31, ENDED
-------------------------------------------------------------- MARCH 31,
1989 1990 1991 1992 1993 1994
---------- ---------- ---------- ---------- ---------- ---------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C>
Net Income........................... $ 544,374 $ 537,619 $ 545,479 $ 475,936 $ 614,868 $ 631,903
Plus Income Taxes.................... 214,299 209,361 261,912 223,782 307,414 321,016
---------- ---------- ---------- ---------- ---------- ---------
Net Income Before Income Taxes....... 758,673 746,980 807,391 699,718 922,282 952,919
---------- ---------- ---------- ---------- ---------- ---------
Fixed Charges and Preferred Stock
Dividend Requirements:
Interest Charges................... 333,717 346,020 358,517 401,902 389,956 383,594
Interest Factor in Rentals......... 8,908 9,162 9,311 9,591 11,090 11,393
Preferred Stock Dividend
Requirements (Pre-tax).......... 40,236 40,116 42,703 46,675 56,957 59,459
---------- ---------- ---------- ---------- ---------- ---------
Total...................... 382,861 395,298 410,531 458,168 458,003 454,446
---------- ---------- ---------- ---------- ---------- ---------
Earnings Before Fixed Charges and
Preferred Stock Dividend........... $1,101,298 $1,102,162 $1,175,219 $1,111,211 $1,323,328 $1,347,906
========== ========== ========== ========== ========== ==========
Ratio................................ 2.88 2.79 2.86 2.43 2.89 2.97
==== ==== ==== ==== ==== ====
</TABLE>
3
