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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 September 30, 1995
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 October 31, 1995
----- -------------------------------
Common Stock, without par value 244,697,930
As of October 31, 1995, 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
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Page
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Public Service Enterprise Group Incorporated (Enterprise):
Consolidated Statements of Income for the Three, Nine and
Twelve Months Ended September 30, 1995 and 1994 ............... 1
Consolidated Balance Sheets as of September 30, 1995, 1994
and December 31, 1994 ......................................... 2
Consolidated Statements of Cash Flows for the Nine and
Twelve Months Ended September 30, 1995 and 1994 ............... 4
Consolidated Statements of Retained Earnings for the Three,
Nine and Twelve Months Ended September 30, 1995 and 1994........ 5
Public Service Electric and Gas Company (PSE&G):
Consolidated Statements of Income for the Three, Nine and
Twelve Months Ended September 30, 1995 and 1994 ............... 6
Consolidated Balance Sheets as of September 30, 1995,
1994 and December 31, 1994 .................................... 7
Consolidated Statements of Cash Flows for the Nine and
Twelve Months Ended September 30, 1995 and 1994 ............... 9
Consolidated Statements of Retained Earnings for the Three,
Nine and Twelve Months Ended September 30, 1995 and 1994 ...... 10
Notes to Consolidated Financial Statements - Enterprise........... 11
Notes to Consolidated Financial Statements - PSE&G................ 19
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Enterprise ......................................... 20
PSE&G .............................................. 30
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TABLE OF CONTENTS
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PART II. OTHER INFORMATION
Item 5. Other Information ........................................ 31
Item 6. Exhibits and Reports on Form 8-K ......................... 37
Signatures - Public Service Enterprise Group Incorporated ......... 38
Signatures - Public Service Electric and Gas Company .............. 38
ii
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GLOSSARY OF TERMS
The following is a glossary of frequently used abbreviations or acronyms
that are found in this report:
<TABLE>
<CAPTION>
TERM MEANING
----------------------- ----------------------------------------------
<S> <C>
AFDC................... Allowance for Funds used During Construction
BPU.................... New Jersey Board of Public Utilities
Capital................ PSEG Capital Corporation
CEA.................... Community Energy Alternatives Incorporated
DSM.................... Demand Side Management
DSM Plan............... DSM Incentive Resource Plan
EBIT................... Earnings before interest and taxes
EDC.................... Energy Development Corporation
EDHI................... Enterprise Diversified Holdings Incorporated
EGDC................... Enterprise Group Development Corporation
Enterprise............. Public Service Enterprise Group Incorporated
EPA.................... United States Environmental Protection Agency
EPACT.................. Energy Policy Act
FERC................... Federal Energy Regulatory Commission
Fuelco................. PSE&G Fuel Corporation
Funding................ Enterprise Capital Funding Corporation
IRP.................... Integrated Electric Resource Plan
Hope Creek............. Hope Creek Nuclear Generating Station
KWH.................... Kilowatthours
LEAC................... Electric Levelized Energy Adjustment Clause
LGAC................... Levelized Gas Adjustment Charge
LGIC................... Levelized Gas Incentive Clause
MD&A................... Management's Discussion and Analysis of
Financial Condition and Results of Operations
MIPS................... Monthly Income Preferred Securities
Mortgage............... First and Refunding Mortgage of PSE&G
MTNs................... Medium-Term Notes
MUNI................... Municipal Utility
MW..................... Megawatts
MWH.................... Megawatthours
</TABLE>
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<TABLE>
<CAPTION>
TERM MEANING
- ----------------------- ----------------------------------------------
<S> <C>
NEIL.................. Nuclear Electric Insurance Limited
NJDEP................. New Jersey Department of Environmental
Protection
NJGRT................. New Jersey Gross Receipts and Franchise Tax
NOPR................... Notice of Proposed Rulemaking
NPS.................... The BPU's nuclear performance standard
established for nuclear generating stations
owned by New Jersey electric utilities
NRC.................... Nuclear Regulatory Commission
Partnership............ Public Service Electric and Gas Capital, L.P.
Peach Bottom........... Peach Bottom Atomic Power Station, Units 2
and 3
PECO................... PECO Energy, Inc.
Price Anderson......... Price-Anderson liability provisions of the
Atomic Energy Act of 1954, as amended
PSE&G.................. Public Service Electric and Gas Company
PSCRC.................. Public Service Conservation Resources
Corporation
PSRC................... Public Service Resources Corporation
RAC.................... Remediation Adjustment Clause
Remediation Program.... PSE&G Manufactured Gas Plant Remediation
Program
Salem.................. Salem Nuclear Generating Station, Units 1 and 2
SEC.................... Securities and Exchange Commission
Ventures............... Enterprise Ventures and Service Corporation
</TABLE>
iv
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<TABLE>
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
The financial statements included herein as of September 30, 1995 and 1994 and for the periods then
ended are unaudited but, in the opinion of Enterprise's management, reflect all adjustments, consisting only
of normal recurring accruals, necessary for a fair presentation.
CONSOLIDATED STATEMENTS OF INCOME
(Thousands of Dollars)
<CAPTION>
Three Months Ended Nine Months Ended Twelve Months Ended
September 30, September 30, September 30,
------------------------ ------------------------ ------------------------
1995 1994 1995 1994 1995 1994
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
OPERATING REVENUES
Electric......................$ 1,179,373 $ 1,075,694 $ 3,090,656 $ 2,868,384 $ 3,961,985 $ 3,701,807
Gas........................... 201,631 208,481 1,105,299 1,289,670 1,594,157 1,803,859
Nonutility Activities......... 111,126 92,024 301,228 293,190 412,240 409,583
----------- ----------- ----------- ----------- ----------- -----------
Total Operating Revenues.. 1,492,130 1,376,199 4,497,183 4,451,244 5,968,382 5,915,249
----------- ----------- ----------- ----------- ----------- -----------
OPERATING EXPENSES
Operation
Fuel for Electric
Generation and
Interchanged Power........ 264,599 189,384 682,923 514,835 863,851 674,594
Gas Purchased and Materials
for Gas Produced......... 115,336 124,723 625,540 749,265 900,231 1,039,706
Other...................... 283,742 264,883 803,313 772,395 1,149,441 1,049,247
Maintenance................... 76,205 70,647 208,288 222,559 293,809 324,810
Depreciation and Amortization 168,360 160,674 501,902 474,845 661,085 627,609
Property Impairments.......... -- -- -- -- -- 77,637
Taxes:
Federal Income Taxes....... 111,075 96,783 273,506 285,081 300,976 316,685
New Jersey Gross Receipts
Taxes.................... 139,363 136,436 455,426 453,139 585,454 605,992
Other...................... 21,922 20,749 67,182 65,532 83,932 82,477
----------- ----------- ----------- ----------- ----------- -----------
Total Operating Expenses.. 1,180,602 1,064,279 3,618,080 3,537,651 4,838,779 4,798,757
----------- ----------- ----------- ----------- ----------- -----------
OPERATING INCOME............... 311,528 311,920 879,103 913,593 1,129,603 1,116,492
----------- ----------- ----------- ----------- ----------- -----------
OTHER INCOME
Allowance for Funds Used
During Construction -
Equity..................... 1,329 1,824 4,598 5,486 11,901 10,256
Miscellaneous - net.......... 3,047 2,174 6,603 4,677 8,356 (1,972)
----------- ----------- ----------- ----------- ----------- -----------
Total Other Income...... 4,376 3,998 11,201 10,163 20,257 8,284
----------- ----------- ----------- ----------- ----------- -----------
INCOME BEFORE INTEREST CHARGES
AND DIVIDENDS ON PREFERRED
SECURITIES................... 315,904 315,918 890,304 923,756 1,149,860 1,124,776
----------- ----------- ----------- ----------- ----------- -----------
INTEREST CHARGES
Long-Term Debt............... 106,196 115,919 328,993 343,978 444,173 458,691
Short-Term Debt.............. 10,814 7,067 23,233 16,987 30,208 20,653
Other........................ 8,825 3,275 22,658 7,750 27,713 13,292
----------- ----------- ----------- ----------- ----------- -----------
Total Interest Charges.. 125,835 126,261 374,884 368,715 502,094 492,636
Allowance for Funds Used During
Construction - Debt and
Capitalized Interest.......... (8,946) (7,665) (31,248) (22,717) (42,324) (28,888)
----------- ----------- ----------- ----------- ----------- -----------
Net Interest Charges........... 116,889 118,596 343,636 345,998 459,770 463,748
----------- ----------- ----------- ----------- ----------- -----------
Preferred Securities Dividend
Requirements................. 12,233 10,144 36,627 30,568 48,206 40,336
----------- ----------- ----------- ----------- ----------- -----------
NET INCOME.....................$ 186,782 $ 187,178 $ 510,041 $ 547,190 $ 641,884 $ 620,692
=========== =========== =========== =========== =========== ===========
SHARES OF COMMON STOCK
OUTSTANDING
End of Period ................244,697,930 244,697,930 244,697,930 244,697,930 244,697,930 244,697,930
Average for Period ...........244,697,930 244,697,930 244,697,930 244,394,250 244,697,930 244,004,619
EARNINGS PER AVERAGE SHARE OF
COMMON STOCK................... $.76 $.76 $2.08 $2.24 $2.62 $2.54
=========== =========== =========== =========== =========== ===========
DIVIDENDS PAID PER SHARE OF
COMMON STOCK ................. $.54 $.54 $1.62 $1.62 $2.16 $2.16
=========== =========== =========== =========== ========== ===========
<FN>
See Notes to Consolidated Financial Statements.
</TABLE>
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<TABLE>
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
CONSOLIDATED BALANCE SHEETS
(Thousands of Dollars)
<CAPTION>
September 30, September 30, December 31,
ASSETS 1995 1994 1994
- ------ ------------ ------------ ------------
<S> <C> <C> <C>
UTILITY PLANT - Original cost
Electric .............................................. $ 12,983,167 $ 12,218,603 $ 12,345,919
Gas ................................................... 2,413,673 2,266,750 2,318,233
Common ................................................ 531,024 530,143 545,131
------------ ------------ ------------
Total ............................................ 15,927,864 15,015,496 15,209,283
Less: accumulated depreciation and amortization........ 5,324,903 5,059,839 5,147,105
------------ ------------ ------------
Net .............................................. 10,602,961 9,955,657 10,062,178
Nuclear Fuel in Service, net of accumulated
amortization - $345,412, $297,426 and
$302,906, respectively ............................... 162,776 199,886 205,273
------------ ------------ ------------
Net Utility Plant in Service ..................... 10,765,737 10,155,543 10,267,451
Construction Work in Progress, including Nuclear
Fuel in Process - $122,368, $56,983 and
$65,429, respectively ................................ 367,567 752,260 806,934
Plant Held for Future Use ............................. 23,965 20,532 23,860
------------ ------------ ------------
Net Utility Plant ................................ 11,157,269 10,928,335 11,098,245
------------ ------------ ------------
INVESTMENTS AND OTHER PROPERTY
Long-Term Investments, net of amortization -$5,187,
$2,068 and $2,365, and net valuation allowances -
$17,105, $15,892 and $17,104 respectively .......... 1,772,205 1,664,193 1,625,952
Oil and Gas Property, Plant and Equipment, net of
accumulated depreciation and amortization -
$780,054, $758,196 and $748,245, respectively ....... 588,237 560,737 577,913
Real Estate Property and Equipment, net of accumulated
depreciation - $4,549, $13,375 and $14,242, and
net of valuation allowance - $8,227, $22,514 and
$23,264, respectively ............................... 75,978 105,468 115,210
Other Property, net of accumulated depreciation
and amortization - $6,128, $4,442
and $4,653, respectively ............................ 28,202 35,859 36,063
Nuclear Decommissioning and Other Special Funds ....... 263,974 223,588 233,022
Other Assets - net .................................... 61,196 79,063 85,478
------------ ------------ ------------
Total Investments and Other Property ............. 2,789,792 2,668,908 2,673,638
------------ ------------ ------------
CURRENT ASSETS
Cash and Cash Equivalents ............................. 66,808 76,304 67,866
Accounts Receivable:
Customer Accounts Receivable ........................ 405,555 380,539 434,207
Other Accounts Receivable ........................... 204,560 172,464 211,779
Less: Allowance for Doubtful Accounts .............. 38,578 27,075 40,915
Unbilled Revenues ..................................... 127,590 104,522 204,056
Fuel, at average cost ................................. 311,776 302,676 268,927
Materials and Supplies, net of inventory valuation
reserves - $18,200,$8,525 and $18,200, respectively.. 144,990 163,824 148,285
Prepaid Gross Receipts Taxes .......................... 165,342 131,985 --
Deferred Income Taxes ................................. 27,489 15,387 25,311
Miscellaneous Current Assets .......................... 49,018 56,502 37,356
------------ ------------ ------------
Total Current Assets ............................. 1,464,550 1,377,128 1,356,872
------------ ------------ ------------
DEFERRED DEBITS
Property Abandonments - net ........................... 74,742 92,667 88,269
Oil and Gas Property Write-Down ....................... 37,367 42,521 41,232
Unamortized Debt Expense .............................. 126,275 129,870 134,599
Deferred OPEB Costs ................................... 174,706 126,658 116,476
Unrecovered Environmental Costs ....................... 132,634 132,169 138,435
Under Recovered Electric Energy and Gas Costs - net ... 173,270 211,783 172,563
Unrecovered Plant and Regulatory Study Costs .......... 35,285 36,986 37,128
Deferred Decontamination and Decommissioning Costs .... 49,742 53,016 53,016
Unrecovered SFAS 109 Deferred Income Taxes ............ 778,642 786,217 791,393
Other ................................................. 9,313 51,974 15,574
------------ ------------ ------------
Total Deferred Debits ............................ 1,591,976 1,663,861 1,588,685
------------ ------------ ------------
Total ............................................ $ 17,003,587 $ 16,638,232 $ 16,717,440
============ ============ ============
<FN>
See Notes to Consolidated Financial Statements.
</TABLE>
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<TABLE>
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
CONSOLIDATED BALANCE SHEETS
(Thousands of Dollars)
<CAPTION>
September 30, September 30, December 31,
CAPITALIZATION AND LIABILITIES 1995 1994 1994
- ------------------------------ ------------ ------------ --------------
<S> <C> <C> <C>
CAPITALIZATION
Common Equity
Common Stock .................................... $ 3,801,157 $ 3,801,157 $ 3,801,157
Retained Earnings ............................... 1,623,640 1,511,054 1,510,010
------------ ------------ ------------
Total Common Equity .......................... 5,424,797 5,312,211 5,311,167
Subsidiaries' Securities and Obligations
Preferred Securities
Preferred Stock Without Mandatory Redemption..... 384,994 459,994 384,994
Preferred Stock With Mandatory Redemption ....... 150,000 150,000 150,000
Monthly Income Preferred Securities ............. 210,000 -- 150,000
Long-Term Debt .................................... 5,234,516 5,277,722 5,180,657
------------ ------------ ------------
Total Capitalization ......................... 11,404,307 11,199,927 11,176,818
------------ ------------ ------------
OTHER LONG-TERM LIABILITIES
Decontamination, Decommissioning, and Low Level
Radwaste Costs .................................. 55,630 54,308 56,149
Environmental Costs (note 2) ...................... 103,412 105,544 105,684
Capital Lease Obligations ......................... 53,283 52,680 53,770
------------ ------------ ------------
Total Other Long-Term Liabilities............. 212,325 212,532 215,603
------------ ------------ ------------
CURRENT LIABILITIES
Long-Term Debt due within one year ................ 144,639 477,773 499,738
Commercial Paper and Loans ........................ 743,702 562,665 491,586
Book Overdrafts ................................... 61,655 62,787 86,576
Accounts Payable .................................. 404,784 332,356 433,471
Other Taxes Accrued ............................... 63,829 49,842 44,149
Interest Accrued .................................. 119,736 126,682 107,962
Estimated Liability for Vacation Pay .............. 32,235 25,062 27,080
Customer Deposits ................................. 32,810 34,682 33,698
Liability for Injuries and Damages ................ 36,090 27,677 29,814
Miscellaneous Environmental Liabilities ........... 16,652 4,715 15,365
Other ............................................. 65,977 52,874 87,480
------------ ------------ ------------
Total Current Liabilities .................... 1,722,109 1,757,115 1,856,919
------------ ------------ ------------
DEFERRED CREDITS
Accumulated Deferred Income Taxes ................. 3,022,548 2,879,733 2,905,390
Accumulated Deferred Investment Tax Credits ....... 397,429 417,627 412,466
Deferred OPEB Costs ............................... 174,706 126,658 116,476
Other ............................................. 70,163 44,640 33,768
------------ ------------ ------------
Total Deferred Credits ....................... 3,664,846 3,468,658 3,468,100
------------ ------------ ------------
COMMITMENTS AND CONTINGENCIES (note 2)
Total ........................................ $ 17,003,587 $ 16,638,232 $ 16,717,440
============ ============ ============
</TABLE>
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<TABLE>
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands of Dollars)
<CAPTION>
Nine Months Ended Twelve Months Ended
September 30, September 30,
-------------------------- --------------------------
1995 1994 1995 1994
------------ ----------- ----------- -----------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income ...............................$ 510,041 $ 547,190 $ 641,884 $ 620,692
Adjustments to reconcile net income to
net cash flows from operating activities:
Depreciation and Amortization ............ 501,902 474,845 661,085 627,609
Amortization of Nuclear Fuel ............. 62,878 71,892 86,159 93,960
(Deferral) Recovery of Electric Energy
and Gas Costs - net .................... (707) (149,749) 38,513 (211,195)
Loss from Property Impairments ........... -- -- -- 77,637
Amortization of Discounts on Property
Abandonments and Disallowance........... (4,470) (5,140) (6,073) (6,962)
Unrealized Gains on Investments - net..... (32,117) (11,488) (46,958) (12,893)
Provision for Deferred Income Taxes - net. 102,281 146,587 94,613 171,382
Investment Tax Credits - net ............. (15,037) (15,086) (20,198) (19,949)
Allowance for Funds Used During
Construction - Debt and Equity and
Capitalized Interest.................... (35,846) (28,203) (54,225) (39,144)
Proceeds from Leasing Activities - net.... 9,859 9,364 28,177 (5,779)
Changes in certain current assets
and liabilities:
Net decrease (increase) in Accounts
Receivable and Unbilled Revenues...... 110,000 263,117 (68,677) 119,778
Net (increase) decrease in Inventory -
Fuel and Materials and Supplies....... (39,554) (8,119) 9,734 27,238
Net (decrease) increase in
Accounts Payable...................... (28,687) (186,905) 72,428 (45,512)
Net change in Prepaid/Accrued Taxes..... (145,662) (385,110) (19,370) (245,763)
Net change in Other Current Assets
and liabilities....................... (11,738) (2,181) 27,191 (16,915)
Other .................................... 64,115 38,485 57,206 21,370
------------ ----------- ----------- ------------
Net cash provided by operating
activities ........................... 1,047,258 759,499 1,501,489 1,155,554
------------ ----------- ----------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to Utility Plant, excluding AFDC. (475,088) (550,717) (773,545) (879,563)
Additions to Oil and Gas Property, Plant
and Equipment, excluding
Capitalized Interest ................... (61,613) (117,632) (93,504) (144,131)
Net (increase) decrease in Long-Term
Investments and Real Estate ............ (49,875) (8,807) 17,348 118,625
Increase in Decommissioning and Other
Special Funds, excluding interest ...... (22,173) (28,006) (29,561) (28,016)
Cost of Plant Removal - net .............. (21,528) (21,866) (33,624) (51,881)
Other .................................... (4,925) 3,778 16,511 (7,422)
------------ ----------- ----------- ------------
Net cash used in investing
activities ........................... (635,202) (723,250) (896,375) (992,388)
------------ ----------- ----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease)in Short-Term Debt. 252,116 (14,971) 181,037 40,338
Decrease in Book Overdrafts .............. (24,921) (205) (1,132) (20,396)
Issuance of Long-Term Debt ............... 100,000 752,245 197,555 1,039,445
Redemption of Long-Term Debt ............. (401,240) (421,135) (573,895) (1,040,000)
Long-Term Debt Issuance and
Redemption Costs ....................... (2,658) (8,592) (23,877) (27,094)
Issuance of Preferred Stock .............. -- 75,000 -- 75,000
Redemption of Preferred Stock ............ -- (45,000) (75,000) (45,000)
Issuance of Monthly Income
Preferred Securities ................... 60,000 -- 210,000 --
Issuance of Common Stock ................. -- 28,495 -- 61,154
Cash Dividends Paid on Common Stock ...... (396,411) (395,934) (528,548) (527,110)
Other .................................... -- (1,220) (750) (6,715)
------------ ----------- ----------- -----------
Net cash used in financing activities. (413,114) (31,317) (614,610) (450,378)
------------ ----------- ----------- -----------
Net (decrease) increase in Cash and
Cash Equivalents ......................... (1,058) 4,932 (9,496) (287,212)
Cash and Cash Equivalents at Beginning
of Period ................................ 67,866 71,372 76,304 363,516
------------ ----------- ----------- -----------
Cash and Cash Equivalents at
End of Period.............................$ 66,808 $ 76,304 $ 66,808 $ 76,304
============ =========== =========== ===========
Income Taxes Paid ..........................$ 154,228 $ 126,369 $ 182,963 $ 156,873
Interest Paid ..............................$ 323,701 $ 306,454 $ 450,120 $ 433,859
<FN>
See Notes to Consolidated Financial Statements.
</TABLE>
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<TABLE>
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
(Thousands of Dollars)
<CAPTION>
Three Months Ended Nine Months Ended Twelve Months Ended
September 30, September 30, September 30,
------------------------ ------------------------ ------------------------
1995 1994 1995 1994 1995 1994
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance at Beginning of
Period......................$ 1,568,995 $ 1,456,025 $ 1,510,010 $ 1,361,018 $ 1,511,054 $ 1,418,805
Add:
Net Income ................. 186,782 187,178 510,041 547,190 641,884 620,692
----------- ----------- ----------- ----------- ----------- -----------
Total ................... 1,755,777 1,643,203 2,020,051 1,908,208 2,152,938 2,039,497
----------- ----------- ----------- ----------- ----------- -----------
Deduct:
Cash Dividends on
Common Stock ............. 132,137 132,137 396,411 395,934 528,548 527,110
Capital Stock Expenses ..... -- 12 -- 1,220 750 1,333
----------- ----------- ----------- ----------- ----------- -----------
Total Deductions ........ 132,137 132,149 396,411 397,154 529,298 528,443
----------- ----------- ----------- ----------- ----------- -----------
Balance at End of Period .....$ 1,623,640 $ 1,511,054 $ 1,623,640 $ 1,511,054 $ 1,623,640 $ 1,511,054
=========== =========== =========== =========== =========== ===========
<FN>
See Notes to Consolidated Financial Statements.
</TABLE>
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<TABLE>
PUBLIC SERVICE ELECTRIC AND GAS COMPANY
The financial statements included herein as of September 30, 1995 and 1994 and for the periods then
ended are unaudited but, in the opinion of PSE&G's management, reflect all adjustments, consisting only of
normal recurring accruals, necessary for a fair representation.
CONSOLIDATED STATEMENTS OF INCOME
(Thousands of Dollars)
<CAPTION>
Three Months Ended Nine Months Ended Twelve Months Ended
September 30, September 30, September 30,
------------------------ ------------------------ ------------------------
1995 1994 1995 1994 1995 1994
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
OPERATING REVENUES
Electric ..................$ 1,179,373 $ 1,075,694 $ 3,090,656 $ 2,868,384 $ 3,961,985 $ 3,701,807
Gas ....................... 201,631 208,481 1,105,299 1,289,670 1,594,157 1,803,859
----------- ----------- ----------- ----------- ----------- -----------
Total Operating
Revenues ........... 1,381,004 1,284,175 4,195,955 4,158,054 5,556,142 5,505,666
----------- ----------- ----------- ----------- ----------- -----------
OPERATING EXPENSES
Operation
Fuel for Electric
Generation and Net
Interchanged Power .... 264,599 189,384 682,923 514,835 863,851 674,594
Gas Purchased and
Materials for Gas
Produced .............. 115,336 128,719 625,540 761,923 900,318 1,057,794
Other ................... 232,051 222,629 678,652 656,164 982,347 896,129
Maintenance ............... 76,205 70,647 208,288 222,559 293,809 324,810
Depreciation and
Amortization ............ 146,019 138,616 437,887 410,666 578,593 543,236
Taxes:
Federal Income Taxes .... 107,677 96,385 263,537 273,693 284,373 323,373
New Jersey Gross Receipts
Taxes ................. 139,363 136,436 455,426 453,139 585,454 605,992
Other ................... 19,229 18,577 60,139 59,055 77,184 72,096
----------- ----------- ----------- ----------- ----------- -----------
Total Operating
Expenses ........... 1,100,479 1,001,393 3,412,392 3,352,034 4,565,929 4,498,024
----------- ----------- ----------- ----------- ----------- -----------
OPERATING INCOME ............ 280,525 282,782 783,563 806,020 990,213 1,007,642
----------- ----------- ----------- ----------- ----------- -----------
OTHER INCOME
Allowance for Funds Used
During Construction -
Equity .................. 1,329 1,824 4,598 5,486 11,901 10,256
Miscellaneous - net ....... 2,946 2,104 6,296 4,600 7,929 (2,117)
----------- ----------- ----------- ----------- ----------- -----------
Total Other Income ... 4,275 3,928 10,894 10,086 19,830 8,139
----------- ----------- ----------- ----------- ----------- -----------
INCOME BEFORE INTEREST
CHARGES AND DIVIDENDS ON
PREFERRED SECURITIES....... 284,800 286,710 794,457 816,106 1,010,043 1,015,781
----------- ----------- ----------- ----------- ----------- -----------
INTEREST CHARGES
Long-Term Debt ............ 87,844 92,997 270,946 273,838 364,002 362,448
Short-Term Debt ........... 7,600 5,629 14,383 12,842 19,716 15,187
Other ..................... 8,652 3,173 22,195 5,938 27,113 11,355
----------- ----------- ----------- ----------- ----------- -----------
Total Interest Charges 104,096 101,799 307,524 292,618 410,831 388,990
Allowance for Funds Used
During Construction - Debt. (7,725) (5,467) (26,724) (16,442) (35,601) (21,179)
----------- ----------- ----------- ----------- ----------- -----------
Net Interest Charges ........ 96,371 96,332 280,800 276,176 375,230 367,811
----------- ----------- ----------- ----------- ----------- -----------
Monthly Income Preferred
Securities Dividend
Requirements .............. 3,551 -- 10,583 -- 12,263 --
----------- ----------- ----------- ----------- ----------- -----------
NET INCOME .................. 184,878 190,378 503,074 539,930 622,550 647,970
----------- ----------- ----------- ----------- ----------- -----------
Preferred Stock Dividend
Requirements .............. 8,682 10,144 26,044 30,568 35,943 40,336
----------- ----------- ----------- ----------- ----------- -----------
EARNINGS AVAILABLE TO PUBLIC
SERVICE ENTERPRISE GROUP
INCORPORATED ..............$ 176,196 $ 180,234 $ 477,030 $ 509,362 $ 586,607 $ 607,634
=========== =========== =========== =========== =========== ===========
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<PAGE>
<TABLE>
PUBLIC SERVICE ELECTRIC AND GAS COMPANY
CONSOLIDATED BALANCE SHEETS
(Thousands of Dollars)
<CAPTION>
September 30, September 30, December 31,
ASSETS 1995 1994 1994
- ------ ------------ ------------ -------------
<S> <C> <C> <C>
UTILITY PLANT - Original cost
Electric ................................................. $ 12,983,167 $ 12,218,603 $ 12,345,919
Gas ...................................................... 2,413,673 2,266,750 2,318,233
Common ................................................... 531,024 530,143 545,131
------------ ------------ ------------
Total ............................................... 15,927,864 15,015,496 15,209,283
Less: accumulated depreciation and amortization........... 5,324,903 5,059,839 5,147,105
------------ ------------ ------------
Net ................................................. 10,602,961 9,955,657 10,062,178
Nuclear Fuel in Service, net of accumulated
amortization - $345,412, $297,426 and
$302,906, respectively .................................. 162,776 199,886 205,273
------------ ------------ ------------
Net Utility Plant in Service ........................ 10,765,737 10,155,543 10,267,451
Construction Work in Progress, including Nuclear
Fuel in Process - $122,368, $56,983 and
$65,429, respectively ................................... 367,567 752,260 806,934
Plant Held for Future Use ................................ 23,965 20,532 23,860
------------ ------------ ------------
Net Utility Plant ................................... 11,157,269 10,928,335 11,098,245
------------ ------------ ------------
INVESTMENTS AND OTHER PROPERTY
Other Property, net of accumulated depreciation and
amortization - $1,882, $1,126 and $1,127, respectively.... 24,970 32,865 32,879
Long-Term Investments, net of amortization - $4,585,
$2,068 and $2,365, respectively .......................... 98,260 150,866 65,886
Nuclear Decommissioning and Other Special Funds ............ 263,974 223,588 233,022
------------ ------------ ------------
Total Investments and Other Property ....................... 387,204 407,319 331,787
------------ ------------ ------------
CURRENT ASSETS
Cash and Cash Equivalents ................................ 30,247 32,139 27,498
Accounts Receivable:
Customer Accounts Receivable ........................... 405,555 380,539 434,207
Other Accounts Receivable .............................. 125,761 92,582 151,684
Less: Allowance for Doubtful Accounts ................. 38,578 27,075 40,915
Accounts Receivable - Associated Companies ............... 151 -- --
Unbilled Revenues ........................................ 127,590 104,522 204,056
Fuel, at average cost .................................... 311,776 302,676 268,927
Materials and supplies, net of inventory valuation
reserves - $18,200, $8,525 and $18,200, respectively ... 143,689 162,252 146,763
Prepaid Gross Receipts Taxes ............................. 165,342 131,985 --
Deferred Income Taxes .................................... 27,489 15,387 25,311
Miscellaneous Current Assets ............................. 45,109 49,459 30,407
------------ ------------ ------------
Total Current Assets ................................ 1,344,131 1,244,466 1,247,938
------------ ------------ ------------
DEFERRED DEBITS
Property Abandonments - net .............................. 74,742 92,667 88,269
Oil and Gas Property Write-Down .......................... 37,367 42,521 41,232
Deferred OPEB Costs ...................................... 174,706 126,658 116,476
Under Recovered Electric Energy and Gas Costs - net ...... 173,270 211,783 172,563
Unamortized Debt Expense ................................. 124,308 127,157 132,342
Unrecovered Environmental Costs (note 2).. ............... 132,634 132,169 138,435
Unrecovered Plant and Regulatory Study Costs ............. 35,285 36,986 37,128
Deferred Decontamination and Decommissioning Costs........ 49,742 53,016 53,016
Unrecovered SFAS 109 Deferred Income Taxes ............... 778,642 786,217 791,393
Other .................................................... 9,313 51,974 15,574
------------ ------------ ------------
Total Deferred Debits ............................... 1,590,009 1,661,148 1,586,428
------------ ------------ ------------
Total ................................................ $ 14,478,613 $ 14,241,268 $ 14,264,398
============ ============ ============
<FN>
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<PAGE>
<TABLE>
PUBLIC SERVICE ELECTRIC AND GAS COMPANY
CONSOLIDATED BALANCE SHEETS
(Thousands of Dollars)
<CAPTION>
September 30, September 30, December 31,
CAPITALIZATION AND LIABILITIES 1995 1994 1994
- ------------------------------ ------------ ------------ ------------
<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 ...................................... 1,387,931 1,310,074 1,292,201
------------ ------------ ------------
Total Common Equity ................................. 4,485,329 4,407,472 4,389,599
Preferred Stock without mandatory redemption ............... 384,994 459,994 384,994
Preferred Stock with mandatory redemption .................. 150,000 150,000 150,000
Monthly Income Preferred Securities of Subsidiary .......... 210,000 -- 150,000
Long-Term Debt ............................................. 4,585,543 4,486,371 4,486,787
------------ ------------ ------------
Total Capitalization ................................ 9,815,866 9,503,837 9,561,380
------------ ------------ ------------
OTHER LONG-TERM LIABILITIES
Decontamination, Decommissioning, and Low Level
Radwaste Costs ........................................ 55,630 54,308 56,149
Environmental Costs (note 2).............................. 103,412 105,544 105,684
Capital Lease Obligations ................................ 53,283 52,680 53,770
------------ ------------ ------------
Total Other Long-Term Liabilities ................... 212,325 212,532 215,603
------------ ------------ ------------
CURRENT LIABILITIES
Long-Term Debt due within one year ....................... 2,000 310,200 310,200
Commercial Paper and Loans ............................... 633,283 562,665 401,759
Book Overdrafts .......................................... 61,655 62,787 86,576
Accounts Payable ......................................... 320,212 300,996 370,005
Accounts Payable - Associated Companies .................. -- 1,324 16,677
Other Taxes Accrued ...................................... 38,235 36,853 36,030
Interest Accrued ......................................... 93,709 98,972 95,721
Estimated Liability for Vacation Pay ..................... 32,235 25,062 27,080
Customer Deposits ........................................ 32,810 34,682 33,698
Liability for Injuries and Damages ....................... 36,090 27,677 29,814
Miscellaneous Environmental Liabilities .................. 16,652 4,715 15,365
Other .................................................... 42,136 13,605 50,778
------------ ------------ ------------
Total Current Liabilities ........................... 1,309,017 1,479,538 1,473,703
------------ ------------ ------------
DEFERRED CREDITS
Accumulated Deferred Income Taxes ........................ 2,526,135 2,484,400 2,478,539
Accumulated Deferred Investment Tax Credits .............. 375,458 394,623 389,721
Deferred OPEB Costs ...................................... 174,706 126,658 116,476
Other .................................................... 65,106 39,680 28,976
------------ ------------ ------------
Total Deferred Credits .............................. 3,141,405 3,045,361 3,013,712
------------ ------------ ------------
COMMITMENTS AND CONTINGENCIES (note 2)
Total ................................................. $ 14,478,613 $ 14,241,268 $ 14,264,398
============ ============ ============
</TABLE>
<PAGE>
<PAGE>
<TABLE>
PUBLIC SERVICE ELECTRIC AND GAS COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands of Dollars)
<CAPTION>
Nine Months Ended Twelve Months Ended
September 30, September 30,
--------------------------- ---------------------------
1995 1994 1995 1994
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income ............................. $ 503,074 $ 539,930 $ 622,550 $ 647,970
Adjustments to reconcile net income
to net cash flows from operating activities:
Depreciation and Amortization ........ 437,887 410,666 578,593 543,236
Amortization of Nuclear Fuel ......... 62,878 71,892 86,159 93,960
(Deferral) Recovery of Electric
Energy and Gas Costs - net ......... (707) (149,749) 38,513 (211,195)
Amortization of Discounts on Property
Abandonments and Disallowance ...... (4,470) (5,140) (6,073) (6,962)
Provision for Deferred Income
Taxes - net ........................ 60,347 119,200 49,310 169,862
Investment Tax Credits - net ......... (14,263) (14,306) (19,165) (18,908)
Allowance for Funds Used During
Construction - Debt and Equity ..... (31,322) (21,928) (47,502) (31,435)
Changes in certain current assets
and liabilities:
Net decrease (increase) in Accounts
Receivable and Unbilled Revenues . 128,553 273,355 (69,911) 130,986
Net increase (decrease) in Inventory -
Fuel and Materials and Supplies... (39,775) (8,075) 9,463 27,167
Net (decrease) increase in
Accounts Payable ................. (66,470) (184,150) 17,892 (68,496)
Net change in Prepaid/Accrued Taxes. (163,137) (392,199) (31,975) (242,112)
Net change in Other Current Assets
and Liabilities .................. (15,704) (20,626) 41,167 (27,616)
Other ................................ 55,546 (3,583) 88,635 (17,457)
------------ ----------- ----------- ------------
Net cash provided by operating
activities ....................... 912,437 615,287 1,357,656 989,000
------------ ----------- ----------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to Utility Plant,
excluding AFDC ....................... (475,088) (550,717) (773,545) (879,563)
Net (increase) decrease in
Long-Term Investments ................ (39,595) (34,312) 45,385 (53,279)
Increase in Decommissioning and
Other Special Funds,
excluding interest ................... (22,173) (28,006) (29,561) (28,016)
Cost of Plant Removal - net ............ (21,528) (21,866) (33,624) (51,881)
Other .................................. 865 (90) 2,647 (4,981)
------------ ----------- ----------- ------------
Net cash used in investing
activities ....................... (557,519) (634,991) (788,698) (1,017,720)
------------ ----------- ----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in Short-Term Debt ........ 231,524 29,937 70,618 89,943
Decrease in Book Overdrafts ............ (24,921) (205) (1,132) (20,396)
Issuance of Long-Term Debt ............. 100,000 752,245 197,555 961,445
Redemption of Long-Term Debt............ (309,444) (381,811) (406,583) (741,513)
Long-Term Debt Issuance and
Redemption Costs ..................... (1,984) (10,100) (21,615) (26,421)
Issuance of Preferred Stock ............ -- 75,000 -- 75,000
Redemption of Preferred Stock .......... -- (45,000) (75,000) (45,000)
Issuance of Monthly Income
Preferred Securities ................. 60,000 -- 210,000 --
Cash Dividends Paid .................... (407,344) (409,168) (543,943) (541,936)
Other .................................. -- (1,220) (750) (1,331)
------------ ----------- ----------- ------------
Net cash (used in) provided by
financing activities ........... (352,169) 9,678 (570,850) (250,209)
------------ ----------- ----------- ------------
Net increase (decrease) in Cash and
Cash Equivalents ....................... 2,749 (10,026) (1,892) (278,929)
Cash and Cash Equivalents at Beginning
of Period .............................. 27,498 42,165 32,139 311,068
------------ ----------- ----------- ------------
Cash and Cash Equivalents at End
of Period .............................. $ 30,247 32,139 $ 30,247 $ 32,139
============ =========== =========== ============
Income Taxes Paid ........................ $ 242,365 $ 178,584 $ 272,977 $ 207,684
Interest Paid ............................ $ 275,210 $ 255,350 $ 365,727 $ 343,660
<FN>
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<PAGE>
<TABLE>
PUBLIC SERVICE ELECTRIC AND GAS COMPANY
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
(Thousands of Dollars)
<CAPTION>
Three Months Ended Nine Months Ended Twelve Months Ended
September 30, September 30, September 30,
------------------------ ------------------------ ------------------------
1995 1994 1995 1994 1995 1994
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance at Beginning of
Period ....................$ 1,337,284 $ 1,254,553 $ 1,292,201 $ 1,180,532 $ 1,310,074 $ 1,205,373
Add:
Net Income ................ 184,878 190,378 503,074 539,930 622,550 647,970
----------- ----------- ----------- ----------- ----------- -----------
Total .................. 1,522,162 1,444,931 1,795,275 1,720,462 1,932,624 1,853,343
----------- ----------- ----------- ----------- ----------- -----------
Deduct Cash Dividends:
Preferred Stock, at
required rates .......... 8,682 10,144 26,044 30,568 35,943 40,336
Common Stock .............. 125,550 124,700 381,300 378,600 508,000 501,600
Capital Stock Expenses ...... (1) 13 -- 1,220 750 1,333
----------- ----------- ----------- ----------- ----------- -----------
Total Deductions ....... 134,231 134,857 407,344 410,388 544,693 543,269
----------- ----------- ----------- ----------- ----------- -----------
Balance at End of Period ....$ 1,387,931 $ 1,310,074 $ 1,387,931 $ 1,310,074 $ 1,387,931 $ 1,310,074
=========== =========== =========== =========== =========== ===========
</TABLE>
<PAGE>
<PAGE>
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. RATE MATTERS
Levelized Gas Adjustment Charge
On October 2, 1995, Public Service Electric and Gas Company
(PSE&G) petitioned the New Jersey Board of Public Utilities (BPU) for
modifications to its Levelized Gas Adjustment Charge (LGAC). PSE&G
is requesting that:
(a) The LGAC be renamed to the Levelized Gas Incentive Clause
(LGIC);
(b) A benchmark be established for certain gas delivered from
the Gulf Coast, and any difference between PSE&G's actual
gas purchase costs and the benchmark price, either positive
or negative, be shared 50/50 between PSE&G's customers and
its sole shareholder;
(c) The current annual LGAC rate be converted to a monthly rate
for firm commercial and industrial customers; and
(d) A fixed annual margin would be credited to LGAC for certain
interruptible rate schedules, while actual margins from
such sales will be retained by PSE&G. Any differences,
positive or negative, will be absorbed by PSE&G.
Levelized Energy Adjustment Clause
On May 5, 1995, the BPU approved PSE&G's Levelized Energy
Adjustment Clause (LEAC). Such Order also required that a hearing be
convened regarding the April 1994 Salem 1 shutdown, to determine
whether PSE&G should be allowed to recover replacement power costs of
approximately $8 million which have been deferred. On October 18,
1995, this matter was ordered to be transmitted to the Office of
Administrative Law (OAL) for hearing. PSE&G cannot predict the
outcome of this proceeding.
Other Rate Matters
On July 21, 1995, the BPU initiated a generic proceeding to
expeditiously adopt specific standards to guide utility "off-tariff"
negotiated rate agreement programs, which proceeding would consider
minimum prices, confidentiality, maximum contract duration, filing
requirements and such other standards as necessary for compliance with
the law. A Written Summary Decision and Order (Order) was issued on
<PAGE>
<PAGE>
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. RATE MATTERS - (CONCLUDED)
October 27, 1995, which ordered each New Jersey electric utility,
including PSE&G, to file initial minimum tariffs, consistent with the
terms of the Order, and further, indicated that the Order will be
supplemented by a Final Decision and Order to fully discuss and
explain the rationale for the BPU's overall decision. PSE&G cannot
predict what impact, if any, the generic tariff may have on its
electric revenues and earnings.
NOTE 2. COMMITMENTS AND CONTINGENCIES
Nuclear Performance Standard
The BPU has established a nuclear performance standard (NPS) 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. (PECO).
The penalty/reward under the NPS is a percentage of replacement
power costs. (See table below.)
<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%............................................ BPU Intervenes
</TABLE>
Under the NPS, 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 NPS does not specifically have a gross negligence
provision, the BPU has indicated that it would consider allegations
<PAGE>
<PAGE>
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 2. COMMITMENTS AND CONTINGENCIES - (CONTINUED)
of gross negligence brought upon a sufficient factual basis. A finding
of gross negligence could result in penalties other than those
prescribed under the NPS. During 1994, the five nuclear units in which
PSE&G has an ownership interest aggregated a 74% combined capacity
factor. PSE&G currently estimates that the aggregate combined
capacity factor for 1995 will range from 62% to 63%, based on the
planned operation for the remainder of the year of the Hope Creek and
Peach Bottom units, which would result in a penalty for 1995 in the
range of $2 to $4 million. Both Salem units are presently out of
service for the remainder of 1995.
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
TOTAL ASSESSMENTS
SITE FOR A SINGLE
TYPE AND SOURCE OF COVERAGES COVERAGES INCIDENT
- ------------------------------------- --------- -------------
(MILLIONS OF DOLLARS)
<S> <C> <C>
Public Liability:
American Nuclear Insurers........... $ 200.0 $ --
Indemnity(A)........................ 8,720.3 210.2
-------- --------
$8,920.3 (B) $ 210.2
-------- --------
Nuclear Worker Liability:
American Nuclear Insurers(C)........ $ 200.0 $ 8.1
-------- --------
Property Damage:
Nuclear Mutual Limited.............. $ 500.0 $ 8.1
Nuclear Electric Insurance
Ltd. (NEIL II)..................... 1,400.0 (D) 8.2(E)
Nuclear Electric Insurance
Ltd. (NEIL III).................... 850.0 6.7
-------- --------
$2,750.0 $ 23.0
-------- --------
Replacement Power:
Nuclear Electric Insurance
Ltd (NEIL I)....................... $ 3.5 (F) $ 11.4
</TABLE>
<PAGE>
<PAGE>
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 2. COMMITMENTS AND CONTINGENCIES - (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) Includes up to $250 million for premature decommissioning costs.
(E) In the event of a second industry loss triggering NEIL II -
coverage, the maximum retrospective premium assessment can
increase to $17.5 million.
(F) Weekly indemnity for 52 weeks which commences after the first 21
weeks of an outage. Beyond the first 52 weeks of coverage,
indemnity of $2.8 million per week for 104 weeks is afforded.
Total coverage amounts to $473.2 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 $8.9 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 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.
<PAGE>
<PAGE>
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 2. COMMITMENTS AND CONTINGENCIES - (CONTINUED)
Further, a recent decision by the U.S. Court of Appeals for the
Third Circuit, not involving PSE&G, held that the Price Anderson Act
did not preclude awards based on state law claims for punitive damage.
PSE&G purchases property insurance, including decontamination
expense coverage and premature decommissioning coverage, with respect
to loss or damage to its nuclear facilities, see Property Damage in
table above. PECO has advised PSE&G that it maintains similar
insurance coverage with respect to Peach Bottom. 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,
Nuclear Electric Insurance Limited (NEIL), which provides replacement
power cost coverage in the event of a major accidental outage at a
nuclear station. The premium for this coverage is subject to
retrospective assessment for adverse loss experience, see table and
associated notes above.
Construction and Fuel Supplies
PSE&G has substantial commitments as part of its ongoing
construction program which include 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 demand side
management (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
<PAGE>
<PAGE>
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 2. COMMITMENTS AND CONTINGENCIES - (CONTINUED)
long-term condition of PSE&G's plants, capacity available from
electric utilities and other suppliers and the amounts of
co-generation and other non-utility capacity projected to be
available.
Based on PSE&G's construction program, construction expenditures
are expected to aggregate approximately $3.2 billion, which includes
$484 million for nuclear fuel and $78 million of Allowance for Funds
used During Construction (AFDC) during the years 1995 through 1999.
The estimate of construction requirements is based on expected project
completion dates and includes anticipated escalation due to inflation
of approximately 3%, annually. Therefore, construction delays or
higher inflation levels could cause significant increases in these
amounts. PSE&G expects to generate internally the funds necessary to
satisfy its construction expenditures over the next five years,
assuming adequate and timely recovery of costs, 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 1995
through 1999.
Bergen Station Repowering
PSE&G has completed the repowering of the Bergen Station
(Station), which was re-synchronized to the electric grid on June 1,
1995 for a period of final testing. The repowering results in a
slight increase in capacity from 629 MW to 669 MW, improves
operational reliability and efficiency and significantly improves the
environmental effects of operating the Station. The Station was
declared to be in commercial operation effective September 1, 1995.
Cost in service for the project was $338 million, excluding AFDC of
$37 million. PSE&G does not currently expect to seek recovery of such
costs through a traditional rate base rate-of-return filing. However,
pursuant to recently adopted legislation (see MD&A-Competition), PSE&G
expects to file an alternative economic regulatory proposal, such as
a rate cap pricing plan, later this year that is intended to provide
it the continuing opportunity to recover all its costs including the
costs of the Bergen repowering project.
Pursuant to an agreement with the BPU, PSE&G will not seek
implementation of any rate treatment plan for the Station for a
minimum of 90 days from the date of filing of such plan.
<PAGE>
<PAGE>
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 2. COMMITMENTS AND CONTINGENCIES - (CONTINUED)
Hazardous Waste
Certain Federal and State laws authorize the United States
Environmental Protection Agency (EPA) and the New Jersey Department
of Environmental Protection (NJDEP), 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 have a material
effect on its financial position, results of operations or net cash
flows.
PSE&G Manufactured Gas Plant Remediation Program
In 1988, NJDEP 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, NJDEP and PSE&G have
identified 38 former gas plant sites. PSE&G is currently working with
NJDEP under a program to assess, investigate and, if necessary,
remediate environmental concerns at these sites (Remediation Program).
The Remediation Program is periodically 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 to PSE&G's financial position, results of operations
or net cash flows.
<PAGE>
<PAGE>
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONCLUDED)
NOTE 2. COMMITMENTS AND CONTINGENCIES - (CONCLUDED)
Costs incurred through September 30, 1995 for the Remediation
Program amounted to $57.4 million, net of certain insurance proceeds.
In addition, at September 30, 1995, PSE&G's estimated liability for
estimated remediation costs aggregated $103.4 million.
In accordance with a Stipulation approved by the BPU in January
1992, PSE&G is recovering over a six-year period $32 million of its
actual remediation costs to reflect costs incurred through September
30, 1992. As of September 30, 1995, PSE&G has recovered $26 million
of the $32 million of actual remediation costs through its LGAC.
PSE&G is expected to recover the balance of $6 million in its
currently filed LGAC period ending in 1996.
PSE&G has reached a final settlement concluding the litigation
against certain of its insurers to recover the costs associated with
addressing and resolving environmental issues of the Remediation
Program. This settlement, which is subject to a confidentiality
agreement, is not expected to have a material effect upon the
financial position, results of operations or net cash flows of PSE&G
or Enterprise.
<PAGE>
<PAGE>
PUBLIC SERVICE ELECTRIC AND GAS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PSE&G
The Notes to Consolidated Financial Statements of Enterprise are
incorporated herein by reference insofar as they relate to PSE&G and
its subsidiaries:
Note 1. Rate Matters
Note 2. Commitments and Contingencies
<PAGE>
<PAGE>
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 Securities
and Exchange Commission (SEC) on Form 10-K for 1994, and Quarterly
Report on Form 10-Q for March 1995 and June 1995, 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 to Consolidated
Financial Statements (Notes) of Enterprise and should be read in
conjunction with such statements and notes.
COMPETITION
Ongoing initiatives affecting PSE&G's electric and gas utility
businesses associated with the continuing transition to a competitive
market environment will continue to have an increasingly significant
impact on Enterprise and PSE&G. Federal legislation, including the
Energy Policy Act (EPACT), 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 industry can be expected
to result in additional pressures on customer retention due to energy
prices, especially with respect to larger industrial and commercial
customers. Growth potential of traditional gas and electric sales is
limited in PSE&G's mature service territory.
The Federal Energy Regulatory Commission's (FERC) recent Notice
of Proposed Rulemaking (NOPR) on open access would fundamentally
change the electric utility industry by providing wholesale customers
with competitive open access to the interstate transmission system.
However, in the NOPR, FERC states its position that utilities should
be entitled to full recovery of legitimate and verifiable stranded
costs at the federal and state levels. Competition is forcing
utilities, including PSE&G, to operate more cost effective and
efficient plants, particularly in light of the technological
advantages available to new entrants. Recovery of related costs by
utilities, including PSE&G, will depend upon the decisions of the
regulators, which cannot be predicted, and the ability to sell the
electricity generated by such plants in the emerging competitive
electric power market. For discussion of PSE&G's project at Bergen,
see Note 2 - Commitments and Contingencies of Notes. Competition may
also have an adverse impact upon the economics of certain regulatory-
created incentives such as demand side management (DSM).
<PAGE>
<PAGE>
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
In the wholesale market, other competitive pressures, such as
municipalization, may also have an impact on utilities in the evolving
electric power industry. Municipalization involves the condemnation
and operation of existing investor-owned facilities or the
construction and operation of duplicate, parallel facilities by a
municipal utility (MUNI) within a municipal boundary. As a result,
utilities, such as PSE&G, could lose revenues from the former
customers (residential, commercial and industrial) in the municipality
that are served by the Muni, as well as the loss of the municipality
itself as a customer.
The BPU presented its final, first phase of the New Jersey Energy
Master Plan to Governor Whitman March 8, 1995, which acknowledged the
need for regulatory flexibility as competition unfolds and called for
legislation that would allow New Jersey utilities to propose, subject
to BPU approval, alternatives to existing rate base/rate of return
pricing, allow for pricing flexibility under certain standards for
customers with competitive options and equalize the impact of tax
policies, such as New Jersey Gross Receipts and Franchise Tax (NJGRT)
currently assessed on retail energy utility sales, upon all energy
producers. On July 20, 1995, Governor Whitman signed into law
legislation which provides utilities the flexibility to propose
alternative regulatory pricing and to offer negotiated off-tariff
agreements. PSE&G is currently evaluating its available options
including the submission of an alternative economic regulatory
proposal, such as a rate cap pricing plan, and presently anticipates
making a submission later this year.
On June 1, 1995, the BPU issued its Order initiating a formal
Phase II Proceeding to the New Jersey Energy Master Plan. This
proceeding is intended to investigate and consider the future long
term structure of the electric power industry in New Jersey. The
proceeding will address wholesale and retail competition. A Phase II
report proposing policy restructuring is expected by March 1996.
<PAGE>
<PAGE>
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (Continued)
<TABLE>
ENTERPRISE EARNINGS
Earnings per share of Enterprise Common Stock were $.76, $2.08, and $2.62 for the three, nine and twelve
months ended September 30, 1995 compared to $.76, $2.24 and $2.54 for the comparable 1994 periods. (See
Liquidity and Capital Resources - External Financing.) The changes are summarized as follows:
<CAPTION>
Increase or (Decrease)
----------------------------------------------------------------
Three Months Ended Nine Months Ended Twelve Months Ended
September 30, September 30, September 30,
1995 vs. 1994 1995 vs. 1994 1995 vs. 1994
-------------------- -------------------- --------------------
Per Per Per
Amount Share Amount Share Amount Share
-------- -------- -------- -------- -------- --------
(Millions, except Per Share Data)
<S> <C> <C> <C> <C> <C> <C>
PSE&G
Revenues (net of fuel costs and
gross receipts taxes) ............ $ 32 $ 0.13 $ 4 $ 0.02 $ 39 $ 0.16
Other operation expenses ........... (10) (0.04) (22) (0.09) (86) (0.35)
Maintenance expenses ............... (6) (0.02) 14 0.05 31 0.12
Depreciation and amortization
expenses ......................... (7) (0.03) (27) (0.11) (35) (0.15)
Federal income taxes ............... (11) (0.04) 10 0.04 39 0.16
Interest charges ................... (2) (0.01) (15) (0.06) (22) (0.09)
Allowance for Funds used During
Construction (AFDC)............... 2 0.01 9 0.03 16 0.07
Preferred Securities Dividend
Requirements ..................... (2) (0.01) (6) (0.02) (8) (0.03)
Other income and expenses........... -- -- 1 -- 5 0.02
-------- -------- -------- -------- -------- --------
Earnings Available to Enterprise ... (4) (0.01) (32) (0.14) (21) (0.09)
-------- -------- -------- -------- -------- --------
EDHI
EDC ................................ -- -- (10) (0.04) (17) (0.07)
CEA................................. 1 -- -- -- 1 --
PSRC ............................... 3 0.01 4 0.02 6 0.02
EGDC................................ -- -- 1 -- 52 0.22(A)
-------- -------- -------- -------- -------- --------
Subtotal ........................... 4 0.01 (5) (0.02) 42 0.17
-------- -------- -------- -------- -------- --------
Net Income ......................... $ -- -- $ (37) (0.16) $ 21 0.08
======== -------- ======== -------- ======== --------
(A) Includes the impact of an impairment of assets of $51 Million, after tax, by EGDC in December 1993.
(See EDHI, below.)
</TABLE>
<PAGE>
<PAGE>
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (Continued)
ENTERPRISE EARNINGS - (Continued)
PSE&G
Earnings available to Enterprise decreased $4 million for the
quarter ended September 30, 1995 from the quarter ended September 30,
1994, notwithstanding that net revenues (revenues, net of fuel costs
and gross receipt taxes) increased $32 million due to higher electric
residential, commercial, industrial and capacity sales. The increase
in firm sales is attributable to a growth in the economy coupled with
high weather related sales for the quarter. Higher Allowance for
Funds Used During Construction (AFDC) also contributed to earnings due
to an increase in the AFDC rate. The increases in revenues were
offset by higher other operation expenses principally due to increased
expenses at Salem due to the current outage. Also negatively
impacting earnings were higher maintenance expenses primarily at Salem
due to the current outage, higher depreciation and amortization
expenses due to more plant in service, higher income taxes due to
higher pre-tax operating income, higher interest charges on
miscellaneous liabilities and higher dividend requirements resulting
from the issuance of Monthly Income Preferred Securities (See External
Financings).
Earnings available to Enterprise decreased by $32 million for the
nine-month period ended September 30, 1995 compared to the same period
ended September 30, 1994, notwithstanding that net revenues increased
$4 million due to improved electric sales resulting from growth in the
economy and an increase in the customer base, partially offset by
lower gas revenue resulting from a decrease in sales due to the mild
winter. Also contributing to earnings were lower maintenance
expenses, higher AFDC income and lower taxes resulting from lower pre-
tax operating income. Maintenance expenses were lower due to reduced
fossil production expenses primarily attributable to the 1994 outage
at Mercer Generating Station (Mercer) and reduced nuclear production
expenses due to the 1994 refueling outage at Hope Creek, partially
offset by higher maintenance expense for Salem resulting from the
current outage. Earnings were offset by higher depreciation and
amortization expenses due to more plant in service, higher interest
expenses due to more short term debt outstanding and higher interest
charges on miscellaneous liabilities, and higher dividend requirements
resulting from the issuance of Monthly Income Preferred Securities.
Earnings were also negatively impacted by increased other operation
expenses principally due to increased expenses at the Salem Plant and
higher administrative and general expenses.
<PAGE>
<PAGE>
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
ENTERPRISE EARNINGS - (Continued)
Earnings available to Enterprise decreased $21 million for the
twelve months ended September 30, 1995 compared to the same period
ended September 30, 1994, notwithstanding that net revenues increased
$39 million, principally due to higher electric residential and
commercial sales due to a growth in the economy and warm summer
weather, as well as higher capacity sales to wholesale customers and
other utilities. The increase in electric revenues was offset by
lower gas revenues due to lower sales as a result of the mild winter
weather, higher other operation expenses resulting from higher
expenses at the Salem plant due to the current outage and higher
administrative and general expenses. Earnings were also negatively
affected by higher depreciation and amortization expense due to more
plant in service, higher interest charges due to more short-term debt
outstanding and higher interest on miscellaneous liabilities, and
higher dividend requirements due to the issuance of Monthly Income
Preferred Securities. The increase in expenses were partially offset
by lower 1995 maintenance expenses resulting from the 1994 refueling
outage at Hope Creek and the 1994 outage at Mercer and decreased labor
and overtime for fossil production, gas and electric distribution,
lower federal income taxes resulting from lower pre-tax operating
income, and increased AFDC income due to an increase in the rate and
a retroactive adjustment.
EDHI
Net income of EDHI was $11 million for the quarter ended
September 30, 1995, an increase of $4 million from the quarter ended
September 30, 1994. EDHI's earnings increased due to higher income
from Public Service Resources Corporation (PSRC) and Community Energy
Alternatives (CEA) partnership investments.
Net income of EDHI was $33 million for the nine-month period
ended September 30, 1995, a decrease of $5 million from the nine-month
period ended September 30, 1994. EDHI's earnings decreased due to
Energy Development Corporation's (EDC) lower gas prices and volumes,
partially offset by higher income from PSRC partnership investments.
Net income of EDHI was $55 million for the twelve-month period
ended September 30, 1995, an increase of $42 million over the twelve-
month period ended September 30, 1994. Excluding the impact of an
impairment of assets of $51 million, after tax, by EGDC in December
1993, EDHI's earnings decreased by $8 million. Lower EDC earnings
resulting from lower gas prices and volumes were partially offset by
higher PSRC earnings due to higher income from partnerships and lower
interest expense.
<PAGE>
<PAGE>
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
ENTERPRISE EARNINGS - (Concluded)
To the extent that the prices at which EDC is able to sell gas
remain low, EDHI's earnings may continue to be negatively impacted.
DIVIDENDS
Since 1992, Enterprise has maintained a constant rate of common
stock dividends which has had the result of reducing its dividend
payout ratio. Management believes that reducing the payout ratio is
a prudent policy which needs to be continued.
LIQUIDITY AND CAPITAL RESOURCES
Enterprise's liquidity is affected by maturing debt, investment
and acquisition activities, the capital requirements of PSE&G's and
EDHI's construction programs, permitted regulatory recovery of
expenses and collection of revenues. Capital resources available to
meet such requirements depend upon general and regional economic
conditions, PSE&G's customer retention and growth, the ability of
PSE&G and EDHI to meet competitive pressures and to contain costs, the
adequacy and timeliness of rate relief, cost recovery and necessary
regulatory approvals, the ability to continue to operate and maintain
nuclear programs in accordance with NRC and BPU requirements, the
impact of environmental regulations, continued access to the capital
markets and continued favorable regulatory treatment of consolidated
tax benefits. (For additional information see the discussion of
Competition above and Note 2, Commitments and Contingencies of the
Notes.)
PSE&G
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 internally
generate all of its capital requirements including construction
expenditures over the next five years and significantly reduce its
debt outstanding, assuming adequate and timely recovery of costs, as
to which no assurances can be given.
<PAGE>
<PAGE>
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
EDHI
For the nine-month period ended September 30, 1995, EDC had
additions to oil and gas property, plant and equipment, excluding
capitalized interest, of $62 million, a decrease of $56 million from
the corresponding period in 1994. For the twelve-month period ended
September 30, 1995, EDC had additions to oil and gas property, plant,
and equipment, excluding capitalized interest, of $94 million, a
decrease of $51 million compared to the corresponding period in 1994.
PSRC is a limited partner in various limited partnerships and is
committed to make investments from time to time, upon the request of
the respective general partners. At September 30, 1995, $68 million
remained as PSRC's aggregate 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
range from 3:1 to 1.75:1. EDHI is also required to maintain a twelve
month earnings before interest and taxes to interest (EBIT) coverage
ratio of at least 1.35:1. As of September 30, 1995 and 1994, EDHI had
consolidated debt to equity ratios, including contingent obligations,
of 1.04:1 and 1.15:1 and, for the twelve months ended September 30,
1995 and 1994, EBIT coverage ratios, as defined to exclude the effects
of EGDC, of 1.93:1 and 2.01:1, respectively. Compliance with
applicable financial covenants will depend upon future levels of
earnings, among other things, as to which no assurance can be given.
LONG TERM INVESTMENTS AND REAL ESTATE
Long-Term Investments and Real Estate increased $50 million for
the nine-month period ended September 30, 1995, primarily due to an
increase in Public Service Conservation Resources Corporation's
(PSCRC) investments in conservation projects of $35 million, in PSRC's
investments of $53 million due to KKR LBO Fund capital calls and in
CEA's $13 million increase in partnership investments, partially
offset by EGDC's reduced investments of $53 million due to property
sales. For the nine-month period ended September 30, 1994, Long-Term
Investments and Real Estate increased $9 million, primarily due to an
increase in PSCRC's investments in conservation projects of $20
million and an increase in PSE&G's investment in an insurance contract
of $15 million, substantially offset by returns of capital from PSRC
and CEA partnership investments of $27 million.
<PAGE>
<PAGE>
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
LONG TERM INVESTMENTS AND REAL ESTATE - (CONCLUDED)
Long-Term Investments and Real Estate decreased $17 million for
the twelve-month period ended September 30, 1995 primarily due to a
net decrease in PSE&G's investment in an insurance contract of $95
million and EGDC's reduced investments of $49 million due to property
sales, partially offset by PSCRC's increase in investments in
conservation projects of $43 million, PSRC's investments which
increased $60 million due to KKR LBO Fund capital calls, and CEA's $22
million increase in partnership investments. For the twelve-month
period ended September 30, 1994, a $119 million decrease was primarily
due to a $153 million decrease in PSRC investments due to security
sales, partially offset by a net increase in PSE&G's investment in an
insurance contract of $26 million and an increase in PSCRC's
investments in conservation projects of $20 million.
INTERNAL GENERATION OF CASH FROM OPERATIONS
Enterprise's cash provided by operating activities for the nine
months ended September 30, 1995 increased $288 million to $1.047
billion when compared to the corresponding period in 1994. This
increase was primarily due to a greater recovery of electric energy
and gas costs through PSE&G's LEAC and LGAC of $149 million, a smaller
decrease in accounts payable of $158 million, and a net decrease in
prepaid/accrued taxes of $239 million (primarily the result of lower
gross receipts taxes). Partially offsetting these cash inflows were
a decrease in net income of $37 million, a smaller increase in
deferred income taxes of $44 million, a smaller decrease in accounts
receivable of $153 million, and an increase in inventory - fuel and
materials and supplies of $31 million. (For additional information see
Enterprise Earnings.)
Enterprise's cash provided by operating activities for the twelve
months ended September 30, 1995 increased $346 million to $1.501
billion when compared to the corresponding period in 1994. This
increase was primarily due to a higher recovery of electric energy and
<PAGE>
<PAGE>
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
INTERNAL GENERATION OF CASH FROM OPERATIONS - (CONCLUDED)
gas costs through PSE&G's LEAC and LGAC of $250 million, a net
decrease in prepaid/accrued taxes of $226 million (primarily the
result of lower gross receipts taxes), an increase in accounts payable
of $118 million, a positive net change in certain other current assets
and liabilities of $44 million, and a positive net change in certain
noncurrent assets and liabilities, primarily deferred amounts, of $36
million. Partially offsetting these cash inflows were a loss from
property impairments of $78 million in 1993, a smaller increase in
deferred income taxes of $77 million and an increase in accounts
receivable of $188 million. (For additional information see
Enterprise Earnings.)
EXTERNAL FINANCING ACTIVITIES
Book value per share was $22.17 at September 30, 1995, compared
to $21.71 at September 30, 1994.
In October 1995, PSE&G issued a total of $56,320,000 of its
mortgage bonds to redeem a like principal amount, including sinking
fund retirements, of its higher cost bonds. The BPU has authorized
PSE&G to issue approximately $215 million of additional First and
Refunding Mortgage Bonds (Bonds)/Medium-Term Notes (MTNs) through 1996
for refunding purposes.
In September, 1995, Public Service Electric and Gas Capital, L.P.
issued $60 million of Monthly Income Preferred Securities, the
proceeds of which were loaned to PSE&G, evidenced by PSE&G's
subordinated debentures, and used to redeem $60 million of PSE&G
Preferred Stock in October 1995. The BPU has authorized PSE&G to
issue an additional $120 million of Preferred Stock through 1995.
The BPU has authorized PSE&G to issue and have outstanding at any
one time not more than $1 billion of its short-term obligations,
consisting of commercial paper and other unsecured borrowings from
banks and other lenders through January 1, 1997. On September 30,
1995, PSE&G had $509 million of short-term debt outstanding.
To provide liquidity for its commercial paper program, PSE&G has
a $500 million one year revolving credit agreement and a $500 million
five year revolving credit agreement with a group of commercial banks,
each of which provides for borrowing up to one year. On September 30,
1995, there were no borrowings outstanding under these credit
agreements.
<PAGE>
<PAGE>
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
EXTERNAL FINANCING ACTIVITIES - (CONCLUDED)
On October 24, 1995, PSE&G petitioned the BPU for authority to
issue (a) up to $4.725 billion aggregate principal amount of long-term
debt to refund up to $4.575 billion aggregate principal amount (plus
premium and expenses) of its outstanding long-term debt and (b) up to
$685 million of preferred stock or tax deferred preferred securities
to refund a like principal amount of its outstanding preferred stock.
PSCRC has a $30 million revolving credit facility supported by
a PSE&G subscription agreement in an aggregate amount of $30 million
which terminates on March 6, 1996. As of September 30, 1995, PSCRC
had $30 million outstanding under this facility.
PSE&G Fuel Corporation (Fuelco) has a $150 million commercial
paper program to finance a 42.49% share of Peach Bottom nuclear fuel,
supported by a $150 million revolving credit facility with a group of
banks, which expires on June 28, 1996. PSE&G has guaranteed repayment
of Fuelco's respective obligations. As of September 30, 1995, Fuelco
had commercial paper of $94 million outstanding under such program.
Enterprise Capital Funding Corporation (Funding) has a commercial
paper program, supported by a commercial bank letter of credit and
credit facility, in the amount of $225 million expiring March 1998.
As of September 30, 1995, Funding had $111 million of borrowings
outstanding under this commercial paper program.
Additionally, Funding has a $225 million revolving credit
facility expiring March 1998. As of September 30, 1995, Funding had
no borrowings outstanding under this facility.
PSEG Capital Corporation's (Capital) MTN program has previously
provided for an aggregate principal amount of up to $750 million of
MTNs so that its total debt outstanding at any time, including MTNs,
would not exceed such amount. Effective January 31, 1995, Capital
will not have more than $650 million of debt outstanding at any time.
At September 30, 1995, Capital had total debt outstanding of $575
million, including $427 million of MTNs.
<PAGE>
<PAGE>
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 1994 and
Quarterly Reports on Form 10-Q for periods ended March 31, 1995 and
June 30, 1995, 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: Competition; Enterprise Earnings - PSE&G; Dividends;
Liquidity and Capital Resources - PSE&G, Long Term Investments and
Real Estate and External Financings Activities.
LIQUIDITY AND CAPITAL RESOURCES
INTERNAL GENERATION OF CASH FROM OPERATIONS
PSE&G's cash provided by operating activities for the nine months
ended September 30, 1995 increased $297 million to $912 million when
compared to the corresponding period in 1994. This increase was
primarily due to a net decrease in prepaid/accrued taxes of $229
million (primarily the result of lower gross receipts taxes), a
greater recovery of electric energy and gas costs through PSE&G's LEAC
and LGAC of $149 million, a smaller decrease in accounts payable of
$118 million, and a positive net change in certain noncurrent assets
and liabilities, primarily deferred amounts, of $59 million. Partially
offsetting these cash inflows were a decrease in net income of $37
million, a smaller increase in deferred income taxes of $59 million,
and a smaller decrease in accounts receivable of $145 million. (For
additional information see Enterprise Earnings.)
PSE&G's cash provided by operating activities for the twelve
months ended September 30, 1995 increased $369 million to $1.358
billion when compared to the corresponding period in 1994. This
increase was primarily due to a higher recovery of electric energy and
gas costs through PSE&G's LEAC and LGAC of $250 million, a net
decrease in prepaid/accrued taxes of $210 million (primarily the
result of lower gross receipts taxes), an increase in accounts payable
of $86 million, a positive net change in certain other current
assets and liabilities of $69 million, and a positive net change in
certain noncurrent assets and liabilities, primarily deferred amounts,
of $106 million. Partially offsetting these cash inflows were a
smaller increase in deferred income taxes of $121 million and an
increase in accounts receivable of $201 million. (For additional
information see Enterprise Earnings.)
<PAGE>
<PAGE>
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
PART II. OTHER INFORMATION
Item 5. Other Information
- ------ -----------------
Certain information reported under Item 1 - Business of Part I
of Enterprise's and PSE&G's Annual Reports to the SEC on Form 10-K
for 1994 (Form 10-K) and Item 5 of Part II of Enterprise's and PSE&G's
Quarterly Reports to the SEC on Form 10-Q for the periods ended March
31, 1995 (March 10-Q) and June 30, 1995 (June 10-Q) is updated herein
at the respective pages indicated. References are to the related
pages and paragraph(s) of the Form 10-K, March 10-Q and June 10-Q.
Form 10-K, Page 7, Paragraph 5, June 10-Q, Page 31, Paragraph 3
- ---------------------------------------------------------------
On September 6, 1995, the BPU verbally approved a Stipulation
regarding the Company's proposed Experimental Hourly Energy Pricing
Tariff and the first service agreement thereunder with its second
largest customer. Under the stipulation, the pricing would result in
a bill reduction for the customer of approximately $7 million or about
27%. This reduction in revenues would be partially offset by a
decrease of $1.25 million in PSE&G's New Jersey state tax liability.
Form 10-K, Page 11, Paragraph 1, March 10-Q, Page 40, Paragraph 4,
June 10-Q, Page 32, Paragraph 1
- -------------------------------------------------------------------
PSE&G - Nuclear Operations - Salem
As previously reported, Salem Unit 1 and Unit 2 were taken out
of service on May 16, 1995 and June 7, 1995, respectively. PSE&G
subsequently informed the Nuclear Regulatory Commission (NRC) of its
determination to keep the Salem Units shut down pending review and
resolution of certain equipment and management issues, and NRC
agreement that each unit is sufficiently prepared to restart. On June
9, 1995, the NRC issued a Confirmatory Action Letter documenting these
commitments by PSE&G.
PSE&G, as previously reported, is engaged in a thorough
assessment of Salem to identify the scope of work necessary to achieve
safe, sustained and reliable operation. PSE&G has stated that it will
keep the units off line until it is satisfied that they are ready to
return to service and operate reliably over the long term.
<PAGE>
<PAGE>
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
PART II. OTHER INFORMATION (Continued)
Item 5. Other Information - Continued
- ------ -----------------------------
PSE&G has completed its rigorous examination of Salem Unit 1 and
its assessment of Unit 2 is continuing. Work on the 46 systems
critical to Salem 1 is continuing, including those common with Unit
2, with more than 25% of necessary work activities completed and many
others initiated. While PSE&G had previously estimated that Salem 1
would return to service in the first quarter 1996, as a result of its
completed assessment, PSE&G now expects Salem 1 to return in the
second quarter of 1996, assuming receipt of required NRC
authorization, as to which no assurance can be given.
The work scope assessment for Salem 2 is currently scheduled for
completion in November 1995. PSE&G expects to present its final work
scope assessment of both Salem units to the NRC in mid-December 1995.
Since, as previously indicated, some of the work being performed
relates to systems serving both Salem units, the additional time
needed for Salem 1 does not necessarily mean that the current second
quarter 1996 return estimate for Salem 2 will be also extended,
although no assurance can be given. As previously disclosed, during
these outages Salem 1 will undergo a previously scheduled refueling
outage and Salem 2 will undergo a partial refueling which will
eliminate a full refueling outage for Salem 2 originally scheduled for
1996.
PSE&G now estimates that its share of additional 1995 operating
and maintenance expenses associated with Salem restart activities will
amount to approximately $22 million, or a total of $111 million of
operating and maintenance expenses for the year. The increase in the
estimate results from additional overtime expenses projected through
year-end. The assessment is still on-going, and the scope of work
that will assure the reliable, long term operation of the Salem units
has not been fully defined. However, PSE&G's share of the 1996 Salem
incremental operating and maintenance costs is expected to materially
exceed its initial estimate of $2 million made at the start of the
work scope assessment. A firmer scope, schedule and cost will not be
known until the assessment of Unit 2 is complete, and the restart
plans are completed. Replacement power costs incurred while the units
are out of service are expected to be approximately $5 million per
month, per unit. In addition, PSE&G currently anticipates that the
1995 aggregate capacity factor of its five nuclear units will range
from 62% to 63%, below the 65% minimum annual standard established by
the BPU, resulting in a penalty ranging from $2 to $4 million.
<PAGE>
<PAGE>
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
PART II. OTHER INFORMATION (Continued)
Item 5. Other Information - Continued
- ------ -----------------------------
PSE&G - Nuclear Operations - Salem - Concluded
As previously reported, PSE&G has recently undertaken a number
of nuclear senior management changes. PSE&G is committed to achieving
high standards of safety and operational performance for its nuclear
program. PSE&G's objective is to restart and run the Salem plants in
accord with these standards so as to assure long-term reliability and
reduce overall production costs in order to provide customers serviced
by Salem with reliable and economic energy.
As previously reported, a Salem NRC enforcement conference was
held on July 28, 1995 related to certain violations of NRC
requirements. The violations included valves that were incorrectly
positioned following a plant modification in May 1993, non-
conservatisms in setpoints for a pressurizer overpressure protection
system and several examples of inadequate root cause determination of
events, leading to insufficient corrective actions at Salem. On
October 16, 1995, the NRC proposed cumulative civil penalties of
$600,000 related to these violations. PSE&G has advised the NRC that
it will not contest the proposed penalties.
On October 10, 1995, Enterprise received a letter from a
representative of a purported shareholder demanding that it commence
legal action against certain of its officers and directors with regard
to the current Salem shutdown. Enterprise is presently considering
the matter.
New Matter
- -----------
On October 5, 1995 plant operators at Salem Unit 1 declared an
alert because the overhead annunciator panels located in the control
room stopped functioning. On-site facilities and the emergency news
center were staffed and activated during the alert. Contractors on
site at the time were asked to leave the site. The panels were
declared fully operable after testing later that day, and the alert
was terminated and access to the site was fully restored. PSE&G and
the NRC are continuing to investigate this event. PSE&G cannot
predict what action, if any, the NRC may take on this matter.
<PAGE>
<PAGE>
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
PART II. OTHER INFORMATION (Continued)
Item 5. Other Information - Continued
- ------ -----------------------------
Form 10-K, Page 12, June 10-Q, Page 35, Paragraph 2
- ----------------------------------------------------
PSE&G - Nuclear Operations - Hope Creek
On July 8, 1995, during a manual shutdown of Hope Creek in order
to repair control room ventilation equipment, operators partially
opened a valve for a period of time and inadvertently reduced the
effectiveness of the shutdown cooling system. Although the impact of
the event to plant safety was minimal, the positioning of the valve
and the resulting temperature change violated plant procedures and
technical specifications. On July 31, 1995, NRC staff met with plant
management concerning this issue and subsequently determined to assign
a special inspection team to independently evaluate this event as well
as PSE&G s response to it, including PSE&G s procedures and training
for operator handling of abnormal conditions. The team indicated a
potential for one violation, which could involve a civil penalty. An
NRC enforcement conference was held on November 6, 1995. PSE&G cannot
predict what other actions, if any, the NRC may take in this matter.
New Matter
- -----------
On September 19, 1995, the NRC issued a Notice of Violation for
insufficient control room manning at Hope Creek during a three minute
period in June, 1992. Two Level IV violations with no civil penalty
were received for this incident; one for the three minute period in
which there was no senior reactor operator present, and the other for
not meeting the reporting requirements for this event.
Form 10-K, Page 12, Paragraph 4
- --------------------------------
PSE&G - Nuclear Operations - Peach Bottom
PSE&G has been advised by PECO that, by letter dated October 18,
1994, the NRC has approved PECO s request to re-rate the authorized
maximum reactor core power levels of both Peach Bottom units by 5% to
3,458 MW from the current limits of 3,293 MW. The amendment of the
Peach Bottom 2 facility operating license was effective upon the date
of the NRC approval letter and the hardware changes were completed
during the fall 1994 refueling outage. The amendment of the Peach
Bottom 3 facility operating license became effective when the hardware
changes for Unit 3 were completed during its fall 1995 refueling
outage.
<PAGE>
<PAGE>
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
PART II. OTHER INFORMATION (Continued)
Item 5. Other Information - Continued
- ------ -----------------------------
Form 10-K, Page 12, June 10-Q, Page 35, Paragraph 3
- ----------------------------------------------------
PSE&G - Nuclear Operations - Peach Bottom
PSE&G has been advised by PECO that on August 2, 1995, the NRC
held an enforcement conference regarding three alleged violations
identified by the NRC at Peach Bottom. The NRC s findings included
alleged violations in control and design activities and technical
specification requirements regarding operability of the emergency
diesel generators. As a result, on August 17, 1995, the NRC issued
PECO a Level III violation with no civil penalty.
Form 10-K, Page 15, Paragraph 5
- --------------------------------
On April 28, 1995, the DOE published its final interpretation on
the nuclear waste acceptance issues which were the subject of its May
1994 Notice of Inquiry. The DOE stated that it had no legal obligation
to begin waste acceptance in 1998, in the absence of a repository or
other storage facility. PSE&G's contracts with DOE call for DOE to
begin accepting spent fuel from PSE&G in 1998. On September 7, 1995,
PSE&G along with 24 other utilities and a combination of 48 States,
State regulatory agencies and municipal power agencies, filed a
lawsuit in the US District Court of Appeals for the District of
Columbia Circuit against the DOE to protect its contractual rights.
Form 10-K, Page 34, Paragraph 2
- -------------------------------
EDC and Columbia Gas Transmission Company (Columbia) were parties
to a long term contract for the sale by EDC of substantial volumes of
natural gas at above 1991 market prices. In July 1991, Columbia filed
for protection from its creditors under Chapter 11 of the bankruptcy
laws. Shortly after that filing, Columbia rejected the contract with
EDC and most of its other gas purchase contracts with producers,
leaving EDC and nearly 2000 other gas producers as unsecured creditors
in the bankruptcy proceeding. In April 1995, after extensive
litigation and proceedings involving the value of Columbia's estate
and the amount of each gas producer's claim, Columbia filed a Plan of
<PAGE>
<PAGE>
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
PART II. OTHER INFORMATION (Continued)
Item 5. Other Information - Concluded
- ------ -----------------------------
Form 10-K, Page 34, Paragraph 2 - Concluded
- --------------------------------------------
Reorganization (Plan), which incudes a claim settlement among
Columbia's largest creditors, including EDC. Under that settlement
and subject to the confirmation of the Plan, EDC estimates it would
receive approximately $35 million, before Federal income taxes. The
Plan has been approved by the creditors and is currently awaiting
confirmation by the Bankruptcy Court. While EDC expects that the Plan
will be confirmed, there is no assurance when or if the funds will be
received by EDC. No income has been recognized from this anticipated
settlement.
<PAGE>
<PAGE>
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
PART II. OTHER INFORMATION (Concluded)
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
------- --------------------------------------------------
10a(17) Letter Agreement with Alfred C. Koeppe signed
August 23, 1995.
12 Computation of Ratios of Earnings to Fixed
Charges plus Preferred Securities 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 Securities Dividend
Requirements (PSE&G).
27 (A) Financial Data Schedule (Enterprise).
27 (B) Financial Data Schedule (PSE&G).
(b) Reports on Form 8-K.
Registrant Date of Report Item Reported
-------------- ------------------- ----------------
Enterprise and PSE&G 10/17/95 Item 5. Other
Events (Nuclear
Operations -
Salem)
Enterprise and PSE&G 10/17/95 Item 5. Other
Events (Nuclear
Operations -
Salem)
<PAGE>
<PAGE>
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: November 14, 1995
<PAGE>
PSE&G's Logo
Public Service Electric and Gas Company
M. Peter Mellett
Vice President - Human Resources
PSE&G's Logo
Public Service Electric and Gas Company
M. Peter Mellett
Vice President - Human Resources
80 Park Plaza
Newark, New Jersey 07107
201-430-7620
Mailing Address:
PO Box 570
Newark, New Jersey, 07101
Fax: 201-642-1689
August 23, 1995
Mr. Alfred C. Koeppe
2 East Acres Drive
Pennington, NJ 08534
Dear Mr. Koeppe:
In Conjunction with your employment as Senior Vice President -
External Affairs of Public Service Electric and Gas Company (PSE&G), the agreed
terms of employment are as follows:
1. The effective date of your employment with PSE&G shall be
October 10, 1995 or such earlier date as may be agreed to in writing (the
Date of Employment (DOE)).
2. You shall be paid a salary at the annual rate of $240,000,
which salary may be increased, but shall not be reduced, thereafter
during the five-year period commencing on the DOE. This initial annual
rate of salary shall remain in effect until December 31, 1996. As a
PSE&G Officer, you will be entitled to participate in PSE&G's Deferred
Compensation Plan, which permits Officers to elect to defer salary.
Salary deferred under the Plan currently earns interest at the prime rate
plus 1/2%.
<PAGE>
<PAGE>
3. PSE&G will make a cash payment to you on the DOE in the
amount of $100,000 as inducement for you to commence employment with
PSE&G and in consideration of the loss of benefits with your current
employer.
4. You shall be entitled to those benefits from time to time
available to officers and employees of PSE&G generally, except as
otherwise provided in this letter. You shall be initially eligible for
a minimum of six weeks vacation per year. In addition, financial
counseling will be available to you on the same terms and conditions that
it is provided to officers of PSE&G.
5. You may be discharged with or without cause at any time. If
you should be discharged without cause during the five-year period
commencing on DOE, PSE&G will pay to you the salary in effect pursuant
to Paragraph 1 above at the time of your discharge for a period of twelve
months following such discharge, or for the remainder of such five-year
period, whichever is less. "Cause" shall mean (I) the willful or
negligent dereliction of, and continued failure by you to perform your
duties with PSE&G (other than any such failure resulting from your
incapacity due to physical or mental illness), after a written demand for
performance is delivered to you be the Chief Executive Officer of PSE&G
which identifies the manner in which the CEO believes that you have not
so performed your duties, or (ii) any conduct constituting a felony or
moral turpitude.
6. Your participation in PSE&G's Management Incentive
Compensation Plan (MICP) for 1995 will reflect a full year's award. Your
target incentive award as Senior Vice President - External Affairs will
initially be 25% of salary. This may be adjusted from time to time in
accordance with established plan procedures. In addition, to provide an
appropriate transition adjustment, because any MICP awards are paid out
one third annually over a three-year period, PSE&G will pay to you the
following lump sum cash payments in January of the following years: 1996-
$60,000; 1997-$40,000; 1998-$20,000; in addition to any payout which may
result from your participation in the MICP itself. Copies of the MICP
and the calculation determining the 1994 corporate factor have previously
been forwarded to you.
7. As Senior Vice President - External Affairs, you will
participate in the Long-Term Incentive Plan (LTIP) of Public Service
Enterprise Group Incorporated (Enterprise), the parent of PSE&G. The
LTIP provides senior officers selected by the Organization and
Compensation Committee with options to purchase shares of Enterprise
Common Stock. The options generally are granted in January and become
exercisable three years after the date of grant, and the LTIP provides
for payments to be made, dependent upon dividends paid by Enterprise and
future financial performance by Enterprise in comparison to other
corporations, to assist the officers in exercising the options granted.
It will be recommended to the Organization and Compensation Committee
that you be granted 1,600 options in January 1996 (which would be
exercisable in 1999). In addition, it will be recommended to the
Organization and Compensation Committee that you also be granted 600
stock options under the LTIP which are exercisable in 1996, 800 stock
options exercisable in 1997, and 1,000 stock options exercisable in 1998.
<PAGE>
<PAGE>
Such options would be subject to all of the provisions of the LTIP and
would permit the purchase by you of numbers of shares granted by the
Organization and Compensation Committee that appropriately reflect your
responsibilities and ability to contribute to the long term success of
Enterprise.
8. In light of your allied work experience, you shall be granted
credited service, in addition to that earned as a result of your
employment by PSE&G, for the purpose of determining any pension benefits
from PSE&g in accordance with the following schedule:
Additional Years
Date of Termination of Employment of Credited Service
On or after DOE plus 5 years and
prior to DOE plus 6 years 10
On or after DOE plus 6 years and
prior to DOE plus 7 years 20
On or after DOE plus 7 years and
prior to DOE plus 8 years 23
On or after DOE plus 8 years 25
The additional credited service shown in the table above is not
cumulative, but is applied from the table depending upon when you retire.
For example, assuming you are currently age 48, the additional credited
service set forth above, together with the Board's current policy of
granting 5 years of additional credited service to officers who retire
between age 60 and age 65-1/2, and your actual credited service, will
afford you a total of 42 years of credited service at age 60, and 45
years of credited service at age 63, dependent upon your actual date of
birth and DOE. You will be a participant in PSE&G's Pension Plan and in
its Limited Supplemental Death Benefits and Retirement Plan. The Limited
Plan provides a retirement benefit of a percentage of final average
compensation as defined in the Plan that is equal to credited service
plus 30 years. This would result in a target retirement benefit of 72%
(42 years plus 30) at age 60 and 75% at age 63 (the maximum replacement
value under the program) times final average compensation, adjusted for
any survivorship benefit you may choose, and reduced by Social Security
benefits and pensions from other employers as provided in the Plan.
Under these pension programs as presently in effect, you would be
eligible to retire at age 55 without an early retirement penalty,
dependent upon your actual date of birth and DOE. The amount of your
pension or survivorship benefits paid by your present employer (or any
other employer) shall be deducted from the pension benefits payable to
you or your beneficiary by PSE&G on account of such service with your
present employer (or other employer). The Limited Plan also provides for
a pre-retirement death benefit paid for by PSE&G in an amount based upon
150% of salary in effect at the time of death.
<PAGE>
<PAGE>
9. In recognition of your need for an automobile for business
purposes, PSE&G will provide you with a full size American made
automobile (Oldsmobile, Buick, Chrysler or other comparable model) and
shall provide the related maintenance, repairs, insurance and costs of
operation thereof. The automobile shall include a mobile telephone paid
for by PSE&G for your use for business purposes.
10. As part of PSE&G's requirement for a work force that is free
from the influence of foreign chemical substances, you will be required
to complete a medical examination which will include definitive analysis
of freshly voided urine specimen for the presence of commonly abused
drugs, including marijuana.
11. Any and all disputes arising out of or relating to this
Agreement or your employment, other than an unemployment or workers'
compensation claim, shall, at the demand of either you or PSE&G, whether
made before or after the institution of any legal proceeding, be resolved
through binding arbitration administered by the American Arbitration
Association (AAA) in accordance with the Employment Dispute Resolution
Rules of the AAA and with the United States Arbitration Act. The
arbitration shall be conducted in New Jersey before one arbitrator. If
the parties cannot agree on the arbitrator within 30 days after the
demand for an arbitration, then either party may request the AAA to
select an arbitrator, which selection shall be deemed acceptable to both
parties. To the maximum extent practicable, the arbitration proceeding
shall be concluded within 180 days of the filing the demand for
arbitration with the AAA. All costs and fees of the arbitration shall
be shared equally by the parties, unless otherwise awarded by the
arbitrator. Each party agrees to keep all such disputes and arbitration
proceedings strictly confidential except for disclosure of information
required by law.
If the foregoing is in accordance with your understanding, please
sign the enclosed copy of this letter and return it to me.
Very truly yours,
By: M. PETER MELLETT
---------------------------
M. Peter Mellett
Vice President - Human Resources
Agreed to this 28 day
of September, 1995
By: ALFRED C. KOEPPE
- -------------------------
Alfred C. Koeppe
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT 12
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
PLUS PREFERRED SECURITIES DIVIDEND REQUIREMENTS
12 Months
YEARS ENDED DECEMBER 31, Ended
---------------------------------------------------------------- September 30,
1990(A) 1991(A) 1992(A) 1993 1994 1995
--------- --------- ---------- ---------- ---------- ---------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C>
Net Income........................ $ 403,663 $ 543,035 $ 504,117 $ 595,519(A) $ 679,033 $ 641,884
Plus Income Taxes (B)............. 144,652 274,146 253,276 316,010 322,824 309,850
--------- --------- ---------- ---------- ---------- ----------
Income Before Income Taxes........ 548,315 817,181 757,393 911,529 1,001,857 951,734
--------- --------- ---------- ---------- ---------- ----------
Fixed Charges and Preferred
Securities Dividend Requirements:
Interest Charges (C)............ 457,017 478,321 524,025 502,534 495,925 502,094
Interest Factor in Rentals...... 9,162 9,311 9,591 11,090 12,120 12,057
Preferred Securities Dividend
Requirements (Pre-tax) (D).... 38,544 42,676 46,748 58,112 60,566 67,741
--------- --------- ---------- ---------- ---------- ----------
Total................... 504,723 530,308 580,364 571,736 568,611 581,892
--------- --------- ---------- ---------- ---------- ----------
Earnings Before Fixed Charges and
Preferred Securities Dividend
Requirements.................. $1,053,038 $1,347,489 $1,337,757 $1,483,265 $1,570,468 $1,533,626
========== ========== ========== ========== ========== ==========
Ratio............................. 2.09 2.54 2.30 2.59 2.76 2.64
==== ==== ==== ==== ==== ====
(A) Excludes cumulative effect of $5.4 million credit to income reflecting a change in income taxes.
(See Note 9 -- Federal Income Taxes of Notes to Consolidated Financial Statements.)
(B) Includes state income taxes and federal income taxes for other incomes.
(C) Excludes 1991 and 1992 interest expense on decommissioning costs of $6,956 and $5,208, respectively.
Effective January 1, 1992, accounting was changed to follow Federal Energy Regulatory Commission
guidelines.
(D) Includes a reduction for tax-deductible preferred dividends in accordance with Sections 244(a) and
11(b) of the Internal Revenue Code of 1986, as amended, before applying accounting Rule S-K of
Regulation 229.503, Item 503 (d)(6).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT 12(A)
PUBLIC SERVICE ELECTRIC AND GAS COMPANY
COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
12 Months
YEARS ENDED DECEMBER 31, Ended
-------------------------------------------------------------- September 30,
1990 1991 1992 1993 1994 1995
---------- ---------- ---------- ---------- ---------- ---------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C>
Net Income....................... $ 537,619 $ 545,479 $ 475,936 $ 614,868 $ 659,406 $ 622,550
Plus Income Taxes (A)............ 209,360 261,912 223,782 307,414 301,447 289,959
---------- ---------- ---------- ---------- ---------- ----------
Income Before Income Taxes....... 746,979 807,391 699,718 922,282 960,853 912,509
---------- ---------- ---------- ---------- ---------- ----------
Fixed Charges
Interest Charges (B)........... 346,020 358,517 401,902 389,956 395,925 410,831
Interest Factor in Rentals..... 9,162 9,311 9,591 11,090 12,120 12,057
---------- ---------- ---------- ---------- ---------- ----------
Total.................. 355,182 367,828 411,493 401,046 408,045 422,888
---------- ---------- ---------- ---------- ---------- ----------
Earnings Before Fixed Charges.... $1,102,161 $1,175,219 $1,111,211 $1,323,328 $1,368,898 $1,335,397
========== ========== ========== ========== ========== ==========
Ratio............................ 3.10 3.20 2.70 3.30 3.35 3.16
==== ==== ==== ==== ==== ====
(A) Includes state income taxes and federal income taxes for other income.
(B) Excludes 1991 and 1992 interest expense on decommissioning costs of $6,956 and $5,208,
respectively. Effective January 1, 1992, accounting was changed to follow Federal Energy
Regulatory Commission guidelines.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT 12(B)
PUBLIC SERVICE ELECTRIC AND GAS COMPANY
COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
PLUS PREFERRED SECURITIES DIVIDEND REQUIREMENTS
12 Months
YEARS ENDED DECEMBER 31, Ended
------------------------------------------------------------- September 30,
1990 1991 1992 1993 1994 1995
---------- ---------- ---------- ---------- ---------- ---------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C>
Net Income............................ $ 537,619 $ 545,479 $ 475,936 $ 614,868 $ 659,406 $ 622,550
Plus Income Taxes (A)................. 209,361 261,912 223,782 307,414 301,447 289,959
---------- ---------- --------- ---------- ---------- ----------
Income Before Income Taxes............ 746,980 807,391 699,718 922,282 960,853 912,509
---------- ---------- --------- ---------- ---------- ----------
Fixed Charges and Preferred Securities
Dividend Requirements:
Interest Charges (B)................ 346,020 358,517 401,902 389,956 395,925 410,831
Interest Factor in Rentals.......... 9,162 9,311 9,591 11,090 12,120 12,057
Preferred Securities Dividend
Requirements (Pre-tax) (C)........ 40,116 42,703 46,675 56,957 60,910 68,226
---------- ---------- --------- ---------- ---------- ----------
Total....................... 395,298 410,531 458,168 458,003 468,955 491,114
---------- ---------- --------- ---------- ---------- ----------
Earnings Before Fixed Charges and
Preferred Securities Dividend
Requirements........................ $1,102,162 $1,175,219 $1,111,211 $1,323,328 $1,368,898 $1,335,397
========== ========== ========== ========== ========== ==========
Ratio................................. 2.79 2.86 2.43 2.89 2.92 2.72
==== ==== ==== ==== ==== ====
(A) Includes state income taxes and federal income taxes for other income.
(B) Excludes 1991 and 1992 interest expense on decommissioning costs of $6,956 and $5,208, respectively.
Effective January 1, 1992, accounting was changed to follow Federal Energy Regulatory Commission
guidelines.
(C) Includes a reduction for tax-deductible preferred dividends in accordance with Sections 244(a) and
11(b) of the Internal Revenue Code of 1986, as amended, before applying accounting Rule S-K of
Regulation 229.503, Item 503 (d)(6).
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> UT
<LEGEND>
This schedule contains summary financial information extracted from SEC Form 10-Q and is
qualified in its entirety by reference to such financial statements. The referenced
financial statements are unaudited but, in the opinion of Enterprise's management, reflect
all adjustments, consisting only of normal recurring accruals, necessary for a fair
presentation.
</LEGEND>
<CIK> 0000788784
<NAME> PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 11,157,269
<OTHER-PROPERTY-AND-INVEST> 2,789,792
<TOTAL-CURRENT-ASSETS> 1,464,550
<TOTAL-DEFERRED-CHARGES> 1,591,976
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 17,003,587
<COMMON> 3,801,157
<CAPITAL-SURPLUS-PAID-IN> 0
<RETAINED-EARNINGS> 1,623,640
<TOTAL-COMMON-STOCKHOLDERS-EQ> 5,424,797
360,000
384,994
<LONG-TERM-DEBT-NET> 5,234,516
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 743,702
<LONG-TERM-DEBT-CURRENT-PORT> 144,639
0
<CAPITAL-LEASE-OBLIGATIONS> 53,283
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 4,657,656
<TOT-CAPITALIZATION-AND-LIAB> 17,003,587
<GROSS-OPERATING-REVENUE> 4,497,183
<INCOME-TAX-EXPENSE> 281,032<F1>
<OTHER-OPERATING-EXPENSES> 3,338,721
<TOTAL-OPERATING-EXPENSES> 3,618,080
<OPERATING-INCOME-LOSS> 879,103
<OTHER-INCOME-NET> 11,201<F1>
<INCOME-BEFORE-INTEREST-EXPEN> 890,304
<TOTAL-INTEREST-EXPENSE> 374,884
<NET-INCOME> 510,041
36,627
<EARNINGS-AVAILABLE-FOR-COMM> 510,041
<COMMON-STOCK-DIVIDENDS> 396,411
<TOTAL-INTEREST-ON-BONDS> 328,993
<CASH-FLOW-OPERATIONS> 1,047,258
<EPS-PRIMARY> 2.08
<EPS-DILUTED> 2.08
<FN>
<CAPTION>
<F1>State Income Taxes of $5,853 and Federal Income Taxes for Other Income of $1,673 were
incorporated into this line item for FDS purposes. In the referenced financial statements,
State Income Taxes are included in Taxes - Other and Federal Income Taxes for Other Income
are included in Other Income - Miscellaneous.
</FN>
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> UT
<LEGEND>
This schedule contains summary financial information extracted from SEC form 10-Q and is
qualified in its entirety by reference to such financial statements. The financial
statements are unaudited but, in the opinion of PSE&G's management, reflect all adjustments,
consisting only of normal recurring accruals, necessary for a fair presentation.
</LEGEND>
<CIK> 0000081033
<NAME> PUBLIC SERVICE ELECTRIC AND GAS COMPANY
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 11,157,269
<OTHER-PROPERTY-AND-INVEST> 387,204
<TOTAL-CURRENT-ASSETS> 1,344,131
<TOTAL-DEFERRED-CHARGES> 1,590,009
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 14,478,613
<COMMON> 2,563,003
<CAPITAL-SURPLUS-PAID-IN> 534,395
<RETAINED-EARNINGS> 1,387,931
<TOTAL-COMMON-STOCKHOLDERS-EQ> 4,485,329
360,000
384,994
<LONG-TERM-DEBT-NET> 4,585,543
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 633,283
<LONG-TERM-DEBT-CURRENT-PORT> 2,000
0
<CAPITAL-LEASE-OBLIGATIONS> 53,283
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 3,974,181
<TOT-CAPITALIZATION-AND-LIAB> 14,478,613
<GROSS-OPERATING-REVENUE> 4,195,955
<INCOME-TAX-EXPENSE> 267,700<F1>
<OTHER-OPERATING-EXPENSES> 3,146,365
<TOTAL-OPERATING-EXPENSES> 3,412,392
<OPERATING-INCOME-LOSS> 783,563
<OTHER-INCOME-NET> 10,894<F1>
<INCOME-BEFORE-INTEREST-EXPEN> 794,457
<TOTAL-INTEREST-EXPENSE> 307,524
<NET-INCOME> 503,074
26,044
<EARNINGS-AVAILABLE-FOR-COMM> 477,030
<COMMON-STOCK-DIVIDENDS> 381,300
<TOTAL-INTEREST-ON-BONDS> 270,946
<CASH-FLOW-OPERATIONS> 912,437
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<CAPTION>
<F1>State Income Taxes of $2,490 and Federal Income Taxes for Other Income of $1,673 were
incorporated into this line item for FDS purposes. In the referenced financial statements,
State Income Taxes are included in Taxes - Other and Federal Income Taxes for Other Income
are included in Other Income - Miscellaneous.
</FN>
</TABLE>
