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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1994
COMMISSION FILE NUMBER 1-9120
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
(Exact name of registrant as specified in its charter)
NEW JERSEY 22-2625848
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
80 PARK PLAZA, P.O. BOX 1171 07101-1171
NEWARK, NEW JERSEY (Zip Code)
(Address of principal executive offices)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 201 430-7000
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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Common Stock without par value New York Stock Exchange
Philadelphia Stock Exchange
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 Identification No.)
incorporation or organization)
80 PARK PLAZA, P.O. BOX 570 07101-0570
NEWARK, NEW JERSEY (Zip Code)
(Address of principal executive offices)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 201 430-7000
DOCUMENTS INCORPORATED BY REFERENCE
PART OF FORM 10-K DOCUMENTS INCORPORATED BY REFERENCE
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III Portions of the definitive Proxy Statement for the Annual
Meeting of Stockholders of Public Service Enterprise Group
Incorporated to be held April 18, 1995, which definitive
Proxy Statement is expected to be filed with the Securities
and Exchange Commission on or about March 1, 1995, as
specified herein.
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SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
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NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS TITLE OF EACH CLASS WHICH REGISTERED
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Cumulative Preferred Stock First and Refunding
$100 par value Series: Mortgage
Bonds Series Due:
4.08% 8 3/4% Z 1999
4.18% 9 3/4% AA 2020
4.30% 9 1/8% BB 2005
5.05% 9 1/4% CC 2021
5.28% 8 7/8% DD 2003
5.97% 8 3/4% EE 2021
6.80% 7 7/8% FF 2001
7.40% 7 1/8% GG 1997
7.44% 8 3/4% HH 2022
7.52% 7 5/8% II 2000
7.70% 6 % JJ 1995
6 7/8% KK 1997 New York Stock Exchange
8 1/2% LL 2022
6 7/8% MM 2003
6 % NN 1998
Cumulative Preferred Stock 7 1/2% OO 2023
$25 par Series: 6 1/2% PP 2004
6 % QQ 2000
6.75% 6 1/8% RR 2002
7 % SS 2024
7 3/8% TT 2014
6 3/4% UU 2006
8 % 2037
5 % 2037
Monthly Income Preferred
Securities
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SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
REGISTRANT TITLE OF CLASS
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<S> <C>
Public Service Enterprise Group None
Incorporated
Public Service Electric and Gas 6.92% Cumulative Preferred Stock $100
Company par value
Medium-Term Notes, Series A
Indicate by check mark whether the registrants (1) have filed all reports required to be filed by Section 13
or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the
registrants were required to file such reports), and (2) have been subject to such filing requirements for the past
90 days. Yes X No .
----- ----
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not
contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. X
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The aggregate market value of the Common Stock of Public Service Enterprise Group Incorporated held by
non-affiliates as of January 31, 1995 was $7,031,387,787 based upon the New York Stock Exchange Composite Transaction
closing price.
The number of shares outstanding of Enterprise's sole class of common stock, as of the latest practicable date,
was as follows:
CLASS OUTSTANDING AT JANUARY 31, 1995
------------------------------- -------------------------------
Common Stock, without par value 244,697,930
As of January 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 (Enterprise).
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TABLE OF CONTENTS
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Table of Contents................................................... i
Glossary of Terms................................................... v
PART I
Item 1. Business............................................. 1
General.............................................. 1
Enterprise......................................... 1
PSE&G.............................................. 2
Industry Issues...................................... 3
Competition.......................................... 3
Overview........................................... 3
Electric........................................... 4
Gas................................................ 5
Construction and Capital Requirements................ 6
PSE&G.............................................. 6
EDHI............................................... 7
Financing Activities................................. 7
Federal Income Taxes................................. 8
Credit Ratings....................................... 8
PSE&G................................................ 9
Rate Matters....................................... 9
Nuclear Performance Standard....................... 9
Customers.......................................... 10
Integrated Resource Plan........................... 11
Pennsylvania -- New Jersey -- Maryland
Interconnection................................ 11
Power Purchases.................................. 11
Demand Side Management........................... 12
Electric Generating Capacity....................... 13
Nuclear Operations................................. 14
Salem............................................ 14
Hope Creek....................................... 16
Peach Bottom..................................... 16
Other Nuclear Matters............................ 17
Electric Fuel Supply and Disposal.................. 18
Nuclear Fuel..................................... 19
Coal............................................. 20
Natural Gas...................................... 20
Oil.............................................. 20
Nuclear Fuel Disposal............................ 21
Low Level Radioactive Waste (LLRW)............... 22
Gas Operations and Supply.......................... 23
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i
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Employee Relations................................... 25
Regulation........................................... 25
Environmental Controls............................... 28
Air Pollution Control.............................. 29
Water Pollution Control............................ 31
Control of Hazardous Substances.................... 34
Financial Statistics of Enterprise................... 42
Operating Statistics of PSE&G........................ 43
EDHI................................................. 44
EDC................................................ 44
CEA................................................ 44
PSRC............................................... 45
EGDC............................................... 46
Capital............................................ 46
Funding............................................ 46
Item 2. Properties........................................... 47
PSE&G.............................................. 47
Electric Properties.............................. 48
Gas Properties................................... 49
Office Buildings and Facilities.................... 50
Item 3. Legal Proceedings.................................... 51
Item 4. Submission of Matters to a Vote of Security
Holders............................................ 52
Item 10. Executive Officers of the Registrants................ 52
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters................................ 53
Item 6. Selected Financial Data............................. 55
Enterprise........................................ 55
PSE&G............................................. 55
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations............... 56
Enterprise.......................................... 56
Overview.......................................... 56
PSE&G Energy and Fuel Adjustment Clauses.......... 57
Competition....................................... 57
Enterprise Earnings............................... 59
PSE&G........................................... 60
EDHI............................................ 60
Dividends......................................... 61
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ii
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Revenues.......................................... 62
PSE&G Electric................................ 62
PSE&G Gas..................................... 63
EDHI.......................................... 65
Electric Energy Costs............................. 66
Gas Supply Costs.................................. 66
Liquidity and Capital Resources................... 68
PSE&G........................................... 68
EDHI............................................ 68
Long-Term Investments and Real Estate........... 63
Construction, Investments and Other Capital
Requirements Forecast......................... 70
Internal Generation of Cash from Operations..... 71
External Financings............................. 71
PSE&G............................................... 75
Gas Supply Costs.................................. 75
Liquidity and Capital Resources................... 76
Internal Generation of Cash from Operations..... 76
Item 8. Financial Statements and Supplementary Data......... 77
Financial Statement Responsibility (Enterprise)... 77
Financial Statement Responsibility (PSE&G)........ 79
Independent Auditors' Report (Enterprise)......... 81
Independent Auditors' Report (PSE&G).............. 82
Consolidated Statements of Income (Enterprise).... 83
Consolidated Balance Sheets (Enterprise).......... 84
Consolidated Statements of Cash Flows (Enterprise) 86
Consolidated Statements of Retained Earnings
(Enterprise).................................... 87
Consolidated Statements of Income (PSE&G)......... 88
Consolidated Balance Sheets (PSE&G)............... 89
Consolidated Statements of Cash Flows (PSE&G)..... 91
Consolidated Statements of Retained Earnings
(PSE&G).......................................... 92
Notes to Consolidated Financial Statements
(Enterprise)..................................... 93
Notes to Consolidated Financial Statements (PSE&G). 132
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iii
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PART III
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure................ 136
Item 10. Directors and Executive Officers of the Registrants.. 136
Directors of the Registrants....................... 136
Enterprise....................................... 136
PSE&G............................................ 136
Executive Officers of the Registrants................ 137
Item 11. Executive Compensation............................... 139
Enterprise......................................... 139
PSE&G.............................................. 139
Summary Compensation Table....................... 140
Option Grants in Last Fiscal Year (1994)......... 141
Aggregated Option Exercises in Last Fiscal
Year (1994) and Fiscal Year-End Option
Values (12/31/94).............................. 141
Employment Contracts and Arrangements............ 142
Compensation Committee Interlocks and Insider
Participation.................................. 142
Compensation of Directors and Certain Business
Relationships.................................. 142
Compensation Pursuant to Pension Plans........... 143
Item 12. Security Ownership of Certain Beneficial Owners and
Management......................................... 144
Enterprise......................................... 144
PSE&G.............................................. 144
Item 13. Certain Relationships and Related Transactions....... 145
Enterprise......................................... 145
PSE&G.............................................. 145
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K........................................ 146
Schedule VIII -- Valuation and Qualifying Accounts (Enterprise)... 149
Schedule VIII -- Valuation and Qualifying Accounts (PSE&G)........ 150
Signatures -- Public Service Enterprise Group Incorporated..... 151
Signatures -- Public Service Electric and Gas Company.......... 152
Exhibit Index..................................................... 153
Enterprise........................................................ 154
PSE&G............................................................. 160
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iv
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GLOSSARY OF TERMS
The following is a glossary of frequently used abbreviations or acronyms that
are found in this report:
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TERM MEANING
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ACO.................... Administrative Consent Order
AFDC................... Allowance for Funds used During Construction
AMT.................... Alternative Minimum Tax
BCFE................... Billion Cubic Feet Equivalent
Bonds.................. First and Refunding Mortgage Bonds
BPU.................... New Jersey Board of Public Utilities
BTA.................... Best Technology Available
BWA.................... Boiling Water Reactor
CAA.................... Federal Clean Air Act
Capital................ PSEG Capital Corporation
CEA.................... Community Energy Alternatives Incorporated
CEA USA................ CEA USA, Inc.
CEA New Jersey......... CEA New Jersey, Inc.
CERCLA................. Federal Comprehensive Environmental Response,
Compensation and Liability Act of 1980
Certificate............ Certificate of Need under the NJNAA
CORP................... New Jersey Commission on Radiation Protection
DGW.................... Discharge to Ground Water
DOE.................... United States Department of Energy
DRIP................... Enterprise's Dividend Reinvestment and Stock
Purchase Plan
DSM.................... Demand Side Management
DSM Plan............... DSM Incentive Resource Plan
DSW.................... Discharge to Surface Water
EBIT................... Earnings before interest and taxes
ECRA................... New Jersey Environmental Cleanup Responsibility Act
EDC.................... Energy Development Corporation
EDHI................... Enterprise Diversified Holdings Incorporated
EGDC................... Enterprise Group Development Corporation
EITF................... FASB's Emerging Issues Task Force
EMF.................... Electric and Magnetic Fields
Enterprise............. Public Service Enterprise Group Incorporated
EPA.................... United States Environmental Protection Agency
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v
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TERM MEANING
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EWGs................... Exempt Wholesale Generators
FASB................... Financial Accounting Standards Board
Fault Act.............. New Jersey Public Utility Accident
Fault Determination Act
FERC................... Federal Energy Regulatory Commission
Fuelco................. PSE&G Fuel Corporation
Funding................ Enterprise Capital Funding Corporation
FWPCA.................. Federal Water Pollution Control Act
GE..................... General Electric
GEMS................... Gloucester Environmental Management Services, Inc.
Hope Creek............. Hope Creek Nuclear Generating Station
IEPNJ.................. Independent Energy Producers of New Jersey
IPP.................... Independent Power Producers
IRP.................... Integrated Resource Plan
IRS.................... Internal Revenue Service
KWH.................... Kilowatthours
LEAC................... Electric Levelized Energy Adjustment Clause
LGAC................... Levelized Gas Adjustment Charge
LLRW................... Low Level Radioactive Waste
LLRWPA................. Low Level Radioactive Waste Policy Act, as amended
LNG.................... Liquefied Natural Gas
LPG.................... Liquid Petroleum Air Gas
LTIP................... Long-Term Incentive Plan
MD&A................... Management's Discussion and Analysis of Financial
Condition and Results of Operations
MICP................... Management Incentive Compensation Plan
MIPS................... Monthly Income Preferred Securities
Mortgage............... First and Refunding Mortgage of PSE&G
MTNs................... Medium-Term Notes
MW..................... Megawatts
MWH.................... Megawatthours
NAAQS.................. National Ambient Air Quality Standards
NEIL................... Nuclear Electric Insurance Limited
NEPA................... National Energy Policy Act of 1992
NJAPCC................. New Jersey Air Pollution Control Code
NJDEP.................. New Jersey Department of Environmental Protection
NJEDA.................. New Jersey Economic Development Authority
NJGRT.................. New Jersey Gross Receipts and Franchise Tax
NJNAA.................. New Jersey Need Assessment Act
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vi
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TERM MEANING
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NJPDES................. New Jersey Pollution Discharge Elimination System
NJWPCA................. New Jersey Water Pollution Control Act
NOC.................... Nuclear Oversight Committee
NOx.................... Nitrogen Oxides
NPDES.................. National Pollutant Discharge Elimination System
NPS.................... The BPU's nuclear performance standard established
for nuclear generating stations owned by
New Jersey electric utilities
NRC.................... Nuclear Regulatory Commission
NUGs................... Nonutility Generators
NWPA................... Nuclear Waste Policy Act of 1982, as amended
OAL.................... Office of Administrative Law of the State of
New Jersey
OPEB................... Other Postretirement Benefits
Partnership............ Public Service Electric and Gas Capital, L.P.
Peach Bottom........... Peach Bottom Atomic Power Station, Units 2 and 3
PECO................... PECO Energy Inc.
Penelec................ Pennsylvania Electric Company
PJM.................... Pennsylvania -- New Jersey -- Maryland
Interconnection
PJP.................... PJP Landfill in Jersey City, New Jersey
PPUC................... Pennsylvania Public Utility Commission
Price Anderson......... Price-Anderson liability provisions of the Atomic
Energy Act of 1954, as amended
PRPs................... Potentially Responsible Parties
PSE&G.................. Public Service Electric and Gas Company
PSCRC.................. Public Service Conservation Resources Corporation
PSRC................... Public Service Resources Corporation
PUHCA.................. Public Utility Holding Company Act of 1935
PURPA.................. Public Utility Regulatory Policies Act of 1978
QFs.................... Qualifying Facilities
RAC.................... Remediation Adjustment Charge
RACT................... Reasonable Available Control Technologies
RAR.................... Revenue Agent's Report
RCRA................... Federal Resource Conservation and Recovery Act
of 1976
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vii
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TERM MEANING
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Remediation Program.... PSE&G Gas Plant Remediation Program
RI/FS.................. Remedial Investigation and Feasibility Study
ROD.................... Record of Decision
Salem.................. Salem Nuclear Generating Station, Units 1 and 2
SALP................... Systematic Assessment of Licensee Performance
SEC.................... Securities and Exchange Commission
SFAS 71................ Statement of Financial Accounting Standards
No. 71, "Accounting for the Effects of Certain
Types of Regulation"
SFAS 106............... Statement of Financial Accounting Standards
No. 106, "Employers' Accounting for Postretirement
Benefits Other than Pensions"
SFAS 107............... Statement of Financial Accounting Standards
No. 107, "Disclosures About Fair Value of
Financial Instruments"
SFAS 109............... Statement of Financial Accounting Standards
No. 109, "Accounting for Income Taxes"
SNG Plant.............. Synthetic Natural Gas Plant
636 Orders............. Orders No. 636 and No. 636-A of FERC
Spill Act.............. New Jersey Spill Compensation and Control Act
USDOT.................. United States Department of Transportation
USEC................... United States Enrichment Corporation
USEP................... U.S. Energy Partners
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viii
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PART I
ITEM 1. BUSINESS.
General
Enterprise
Public Service Enterprise Group Incorporated (Enterprise), incorporated
under the laws of the State of New Jersey with its principal executive offices
located at 80 Park Plaza, Newark, New Jersey 07101, is a public utility holding
company that neither owns nor operates any physical properties. Enterprise has
two direct wholly-owned subsidiaries, Public Service Electric and Gas Company
(PSE&G) and Enterprise Diversified Holdings Incorporated (EDHI). Enterprise's
principal subsidiary, PSE&G, is an operating public utility providing electric
and gas service in certain areas in the State of New Jersey. Enterprise has
claimed an exemption from regulation by the Securities and Exchange Commission
(SEC) as a registered holding company under the Public Utility Holding Company
Act of 1935 (PUHCA), except for Section 9(a)(2) thereof which relates to the
acquisition of voting securities of an electric or gas utility company. PSE&G
is subject to direct regulation by the New Jersey Board of Public Utilities
(BPU) and the Federal Energy Regulatory Commission (FERC). EDHI is the parent
of Enterprise's nonutility businesses: Energy Development Corporation (EDC),
an oil and gas exploration and production and marketing company; Community
Energy Alternatives Incorporated (CEA), an investor in and developer of
cogeneration and independent power production facilities; Public Service
Resources Corporation (PSRC), which has made primarily passive investments;
Enterprise Group Development Corporation (EGDC), a diversified nonresidential
real estate development and investment business; PSEG Capital Corporation
(Capital), which has provided up to $750 million debt financing on the basis
of a minimum net worth maintenance agreement from Enterprise; and Enterprise
Capital Funding Corporation (Funding), which provides privately placed debt
financing on the basis of the consolidated financial position of EDHI without
direct support from Enterprise. As of December 31, 1994 and December 31, 1993,
respectively, PSE&G comprised 85% and 86% of Enterprise's assets. PSE&G's 1994,
1993 and 1992 revenues were 93% of Enterprise's revenues and PSE&G's earnings
available to Enterprise for such years were 91%, 96% and 88%, respectively, of
Enterprise's net income. Electric and gas production and distribution will
continue as the principal business of Enterprise for the foreseeable future.
Financial information with respect to business segments of PSE&G and
Enterprise is set forth in Note 15 -- Financial Information by Business
Segments of Notes to Consolidated Financial Statements.
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PSE&G
PSE&G, a New Jersey corporation with its principal executive offices at
80 Park Plaza, Newark, New Jersey 07101, is an operating public utility company
engaged principally in the generation, transmission, distribution and sale of
electric energy service and in the production, transmission, distribution and
sale of gas service in New Jersey. PSE&G supplies electric and gas service in
areas of New Jersey in which approximately 5,500,000 persons, about 70% of the
State's population, reside. (See General -- Enterprise.)
PSE&G's electric and gas service area is a corridor of approximately 2,600
square miles running diagonally across New Jersey from Bergen County in the
northeast to an area below the City of Camden in the southwest. The greater
portion of this area is served with both electricity and gas, but some parts
are served with electricity only and other parts with gas only. This heavily
populated, commercialized and industrialized territory encompasses most of New
Jersey's largest municipalities, including its six largest cities -- Newark,
Jersey City, Paterson, Elizabeth, Trenton and Camden -- in addition to
approximately 300 suburban and rural communities. It contains a diversified mix
of commerce and industry, including major facilities of many corporations of
national prominence.
Under the general laws of New Jersey, PSE&G has the right to use the
public highways, streets and alleys in New Jersey for erecting, laying and
maintaining poles, conduits and wires necessary for its electric operations.
PSE&G must, however, first obtain the consent in writing of the owners of the
soil for the purpose of erecting poles. In incorporated cities and towns, PSE&G
must obtain from the municipality a designation of the streets in which the
poles are to be placed and the manner of placing them. PSE&G's rights are also
subject to regulation by municipal authorities with respect to street openings
and the use of streets for erecting poles in incorporated cities and towns.
PSE&G, by virtue of a special charter granted by the State of New Jersey
to one of its predecessors, has the right to use the roads, streets, highways
and public grounds in New Jersey for pipes and conduits for distributing gas.
PSE&G believes that it has all the franchises (including consents)
necessary for its electric and gas operations in the territory it serves. Such
franchises are non-exclusive.
For discussion of the significant changes which PSE&G's electric and gas
utility businesses have been and are undergoing, see Competition and
Regulation.
<PAGE>
Industry Issues
Enterprise and PSE&G are affected by many issues that are common to the
electric and gas industries, such as: an increasingly competitive energy
marketplace, sales retention and growth potential in a mature service territory
and need to contain costs (see Regulation and Competition); deregulation and
the unbundling of energy supplies and services (see Competition); ability to
obtain adequate and timely rate relief, cost recovery, and other necessary
regulatory approvals (see PSE&G -- Rate Matters; Regulation and Item 7,
Management's Discussion and Analysis of Financial Condition and Results of
Operations (MD&A) - Competition); costs of construction (see Construction and
Capital Requirements); operating restrictions, increased costs and construction
delays attributable to environmental regulations (see Environmental Controls);
controversies regarding electric and magnetic fields (EMF) (see Environmental
Controls); nuclear decommissioning and the availability of reprocessing and
storage facilities for spent nuclear fuel (see Electric Fuel Supply and
Disposal); and credit market concerns with these issues.
Competition
Overview
The energy utility industry is in transition. Changes in Federal law and
regulation are encouraging new entrants to the traditional markets of electric
and gas utilities. New technologies are creating opportunities for new energy
services. Customers, more aware and sophisticated about their choices and
dissatisfied with the often limited range of options available from the local
utility, are increasingly turning elsewhere for energy supplies and services.
Competition has arrived and, as a consequence, the traditional utility
structure -- consisting of a vertically integrated system and functioning as
a natural monopoly -- is being dramatically altered. Further, PSE&G's ability
to meet competition and shift costs among customer categories is impacted by
State regulation, including the historic utility mandate to serve all
customers. (See MD&A -- Competition.)
Federal energy laws and regulations are designed to make more efficient
use of all energy, introduce price competition and encourage the use of
nonconventional energy sources and to limit oil imports by increasing
production of domestic energy resources. Among other things, these actions (1)
encourage development of alternative energy generation, (2) require wheeling
of power for wholesale transactions, (3) require state regulatory authorities
to consider certain standards on rate design and certain other utility
practices, (4) encourage conservation of energy through certain financial
incentives, including incentives by individual utilities to customers to help
them to conserve energy and (5) deregulate prices on natural gas.
Also, Federal and State laws designed to reduce air and water pollution
and control hazardous substances have had the effect of increasing the costs
of operation and replacement of existing utility plants. (See Environmental
Controls.)
<PAGE>
Competition from nonutility generators (NUGs), such as
cogenerators,independent power producers (IPP) and exempt wholesale generators
(EWGs), as permitted by the Public Utility Regulatory Policies Act of 1978
(PURPA) and the National Energy Policy Act of 1992 (NEPA), continues to impact
upon PSE&G. As a result of changes brought about by NEPA, along with proposals
in some states to authorize retail wheeling, discussed below, electric
customers and suppliers, including PSE&G and its customers, have increased
opportunities for purchase and sale of electricity from and to sellers and
buyers outside of traditional franchised territories. Retention of existing
customers and potential sales growth will depend upon the ability of PSE&G to
contain costs, meet customer expectations and respond to changing economic
conditions and energy regulation. As a result of such competitive forces,
Enterprise announced a corporate reorganization on February 22, 1995, effective
March 1, 1995, that includes the creation of a new ventures and services
corporation ("Ventures") as a subsidiary of PSE&G to develop and market new
energy-related products and services and the establishment of three new
separate business units: fossil generation; electric and gas transmission and
distribution; and customer services. Previously in the Fall of 1994, PSE&G
reorganized its nuclear operations as a business unit, (see Nuclear
Operations). Ventures is expected to be the foundation for new businesses
through the development of energy-related products and services that may be
marketed beyond traditional boundries. It will include such existing
businesses as Public Service Conservation Resources Corporation (PSCRC)
offering demand side management (DSM) services (see PSE&G Demand Side
Management) and U.S. Energy Partners (USEP) a natural gas marketing company
(see EDHI -- PSRC). (See PSE&G -- Customers and MD&A -- Competition.)
Competition may also adversely impact upon the economics of certain
regulatory-created incentives, such DSM and conservation. For additional
information, including a discussion of the potential effects of competition
upon rates, cost recovery and assets, see MD&A -- Competition.
Electric
In the electric utility industry, competitive pressures began with the
enactment of PURPA. This law, together with subsequent changes in Federal
regulation, has increasingly opened the electric utility industry to
competition. PURPA created a class of generating facilities exempt from
federal and state public utility regulation -- cogeneration and small power
producers known as "qualifying facilities" (QFs) -- and created an instant
market for them by requiring regulated utilities to purchase their excess power
production. NEPA, by facilitating the development of the wholesale power
market, has lead to even stronger competition. The increasing competitiveness
of the electric wholesale markets, along with consideration of retail wheeling
or "direct retail access" within utility franchise areas in several states, but
not New Jersey to date, has brought to the forefront the issue of potential
stranded costs within the electric utility industry (see MD&A - Competition).
NEPA provides FERC with increased authority to order "wheeling" of
wholesale, but not retail, electric power on the transmission systems of
electric utilities, provided that certain requirements are met. In order to
facilitate the transition to increased competition in wholesale power markets
made possible by NEPA, FERC has, in a Notice of Inquiry, requested comments on
a wide array of policy and legal questions related to wholesale transmission
pricing, alternative power pooling institutions and stranded costs. NEPA also
amended PUHCA to permit EWGs, which are not subject to PUHCA regulation. NEPA
permits both independent companies and utility affiliates to participate in the
development of EWGs' projects regardless of the location and ownership of other
generating resources. The transmission access provisions apply to wholesale,
but not retail, "wheeling" of power, subject to FERC review. See PSE&G --
Integrated Resource Plan, Construction and Capital Requirements, Financing
Activities and PSE&G -- Customers. For information concerning the activities
of CEA, which is an owner-developer of QFs and EWGs, see EDHI -- CEA.
<PAGE>
Another key factor in determining how competition will affect PSE&G's
electric business is the extent to which New Jersey public utility regulation
may be modified to be reflective of these new competitive realities. The BPU
in November 1994 issued the first phase of a draft revised Energy Master Plan.
The revised Energy Master Plan acknowledges the need for regulatory flexibility
that is responsive to the competitive realities of today's energy marketplace
and the competitive pressures being experienced by energy customers in New
Jersey. The revised Energy Master Plan calls for legislation that would allow
PSE&G and other New Jersey utilities to propose, subject to BPU approval,
alternatives to existing rate base/rate-of-return pricing and allow for pricing
flexibility under certain standards for customers with competitive options and
for the equalization of the impact of tax policy upon energy producers (see
PSE&G -- Customers). The revised Energy Master Plan also calls for integrated
resource planning and a competitive supply procurement process for electric
utilities as measures that would accommodate competition and support the
State's environmental and energy conservation goals. Repeal of the Certificate
of Need (Certificate) process for new electric capacity also is recommended
(see Regulation).
PSE&G is in agreement with the essential elements of this first phase of
the revised Energy Master Plan and is encouraged that the plan acknowledges the
need for legislation that would provide much needed regulatory flexibility in
meeting the needs of customers and New Jersey's economy. PSE&G has supported
such legislation in the past and will review the precise terms and conditions
of any proposed legislation. The BPU is expected to begin consideration of a
second phase of the revised Energy Master Plan during the second quarter of
1995. This second phase is expected to address the future structure of the
utility industry, including retail wheeling and wholesale competition. PSE&G
intends to actively participate in the public debate concerning the revised
Energy Master Plan. PSE&G cannot predict the impact of any regulatory or
legislative changes which might ultimately be adopted.
Gas
Competition in the natural gas industry was dramatically accelerated with
the issuance by FERC of its Order Nos. 636 and 636-A (636 Orders) which
transformed it from an industry driven by regulation to one driven by
competitive market forces. The principal effect of the 636 Orders has been to
cause interstate natural gas pipelines to reconfigure their services so that
services provided to third-party shippers are now fully comparable to the
services that pipelines had historically provided in their role as gas
merchants. To this end, the 636 Orders required the unbundling of interstate
pipeline services (i.e., transportation service and sales service bundled
together for one price) in order to develop a more competitive interstate
natural gas industry. While unbundling of services provides PSE&G and certain
of its customers with greater access to lower cost gas supplies, it also
results in pipeline transition costs being borne by pipeline ratepayers and
their customers. Although each pipeline has completed the restructuring of its
services in order to comply with the 636 Orders, numerous parties have appealed
the 636 Orders to the U.S. Court of Appeals for the Eleventh Circuit and for
the D.C. Circuit. PSE&G has been granted status as an intervenor in these
appeals, which remain pending. However, the appeals have not had the effect of
staying the 636 Orders.
<PAGE>
In November 1993, the BPU adopted a proposal for the unbundling of
traditional services provided by the local gas distribution companies, such as
PSE&G, within the State of New Jersey in order to promote unrestricted access
to natural gas and related services in New Jersey for all customer classes
except the residential end user.
On November 30, 1994, the BPU approved PSE&G's proposed new rate
schedules, effective December 1, 1994, to implement the BPU guidelines on
unbundled gas services. This will enable PSE&G's industrial and commercial gas
customers, who represent about half of PSE&G's sales volumes, to participate
in the competitive market. The transportation rate schedules produce the same
non-fuel revenue per therm as the customers' existing sales service rate
schedules. Thus, PSE&G's earnings are unaffected whether the customers remain
on sales service or convert to transportation service. PSE&G cannot predict
how its gas business may be affected in the future should additional
modifications to the New Jersey public utility regulations be made. (See Note
2 - Rate Matters of Notes to Consolidated Financial Statements.)
Construction and Capital Requirements
PSE&G
PSE&G has substantial commitments as part of its ongoing construction
program which includes capital requirements for nuclear fuel. PSE&G's
construction program is continuously reviewed and periodically revised as a
result of changes in economic conditions, revised load forecasts, changes in
the scheduled retirement dates of existing facilities, changes in business
plans, site changes, cost escalations under construction contracts,
requirements of regulatory authorities and laws, the timing of and amount of
electric and gas rate changes and the ability of PSE&G to raise necessary
capital.
Based on PSE&G's current IRP and construction program, construction
expenditures are expected to aggregate approximately $3.2 billion during the
years 1995 through 1999, including $484 million for nuclear fuel and
$78 million of allowance for funds used during construction (AFDC). For
additional information, see MD&A -- Liquidity and Capital Resources and Note
12 -- Commitments and Contingent Liabilities -- Construction and Fuel Supplies
of Notes to Consolidated Financial Statements.
PSE&G's estimate of its electric construction expenditures, including
AFDC, for the years 1995 through 1999, described above, recognizes the current
and planned results of PSE&G's Demand Side Management (DSM) Incentive Resource
Plan (DSM Plan) which is designed to reduce the rate of growth in its electric
system peak demand and improve system load factor without restricting the
continued economic development of PSE&G's service area. PSE&G's DSM Plan
includes rebates for high efficiency appliances and heating equipment, audits,
loans, seal-ups and for larger customers, an overall standard offer for
eligible DSM end-users. PSE&G's 1994 IRP includes a demand forecast average
<PAGE>
compound annual rate of growth through the year 2004 of electric system peak
demand of 0.6%. Aggressive conservation and load management efforts are
expected to reduce the system peak by 843 Megawatts (MW) by 1998. By the year
2004, 1,412 MW are expected to be saved through these programs. It is
important to note that, through its "Standard Offer" program, PSE&G only pays
for its verified, audited conservation (see PSE&G -- Integrated Resource Plan).
PSE&G's construction program focuses on upgrading electric and gas
transmission and distribution systems and constructing new transmission and
distribution facilities to serve new load. Gross additions to PSE&G's utility
plant during the three-year period ended December 31, 1994 amounted to
approximately $2.5 billion, including $92 million of AFDC.
EDHI
As of December 31, 1994 and 1993, EDHI's long-term investments aggregated
$1.6 billion and $1.5 billion, respectively. Its property, plant and equipment
(net of accumulated depreciation and amortization and valuation allowances)
aggregated $.7 billion and $.6 billion, respectively. As of December 31, 1994
and December 31, 1993, respectively, EDHI comprised 15% and 14% of Enterprise's
assets.
Enterprise has an agreement in place with the BPU that it will not permit
its investments in EDHI, as defined in the agreement, to exceed 20% of its
consolidated assets without prior notice to the BPU and that debt supported
by a minimum net worth maintenance agreement (see EDHI -- Capital) between
Enterprise and Capital will be limited to $750 million, with a good faith
effort to eliminate such support over a six-to-ten-year period from April 1993.
Effective January 31, 1995, the maximum amount of Capital debt that may be
outstanding was reduced to $650 million. As of December 31, 1994, Capital's
long-term and short-term portion of long-term debt was $478 million and $154
million, respectively. (See Regulation and MD&A -- Liquidity and Capital
Resources.)
For further discussion of capital requirements, investments and internal
generation of cash from operations, see MD&A -- Liquidity and Capital
Resources, and Note 7 -- Long-Term Investments, of Notes to Consolidated
Financial Statements. For a discussion of sinking fund payments and maturities
through 1999, see Note 6 -- Schedule of Consolidated Debt of Notes to
Consolidated Financial Statements.
Financing Activities
For a discussion of issuance, book value and market value of Enterprise's
Common Stock and external financing activities of Enterprise, PSE&G and EDHI
for the year 1994, see MD&A -- Liquidity and Capital Resources and Item 5. -
Market for Registrant's Common Equity and Related Stockholder Matters.
Enterprise's Common Stock is listed on the New York and Philadelphia Stock
Exchanges.
<PAGE>
For a discussion of Capital and Funding, see EDHI -- Capital and EDHI -
Funding. For further discussion of long-term debt and short-term debt, see
Note 6 -- Schedule of Consolidated Debt of Notes to Consolidated Financial
Statements.
Federal Income Taxes
For information regarding Federal income taxes, see Note 1 --
Organization and Summary of Significant Accounting Policies, Note 2 -- Rate
Matters and Note 10 -- Federal Income Taxes of Notes to Consolidated Financial
Statements.
Credit Ratings
The current ratings of securities of Enterprise's subsidiaries set forth
below reflect the respective views of the rating agency furnishing the same,
from whom an explanation of the significance of such ratings may be obtained.
There is no assurance that such ratings will continue for any given period of
time or that they will not be revised downward or withdrawn entirely by such
rating agencies, if, in their respective judgments, circumstances so warrant.
Any such downward revision or withdrawal of such ratings, or any of them, may
have an adverse effect on the market price of Enterprise's Common Stock and
PSE&G's securities and serve to increase the cost of capital of PSE&G and EDHI.
<TABLE>
<CAPTION>
STANDARD DUFF
PSE&G MOODY'S & POOR'S & PHELPS FITCH
- ----- ------- -------- -------- -----
<S> <C> <C> <C> <C>
Mortgage Bonds............... A2 A- A A-
Debenture Bonds.............. A3 BBB+ A- BBB+
Preferred Stock.............. A3 BBB+ A- BBB+
Commercial Paper............. P1 A2 Duff 1
Fuelco: Commercial Paper..... P1 A2 Duff 1
As a component of the ratings noted above, each rating agency issues its
opinion of the credit trend or outlook for the entity being rated. For PSE&G,
these opinions are as follows: Moody's -- negative; Standard & Poor's --
stable; Duff & Phelps -- stable; and Fitch -- stable.
EDHI
- ----
Capital: Senior Debt......... Baa2 BBB BBB+
Funding: Commercial Paper(A). P1 A1+ Duff 1+
</TABLE>
(A) Supported by commercial bank letter of credit (see MD&A -- Liquidity and
Capital Resources and Note 6-- Schedule of Consolidated Debt --
Short-Term of Notes to Consolidated Financial Statements.)
<PAGE>
PSE&G
Rate Matters
For information concerning PSE&G's rate matters, see Note 2 -- Rate
Matters of Notes to Consolidated Financial Statements.
For information concerning PSE&G's Energy Remediation and Fuel Adjustment
Clauses, see MD&A. For information concerning PSE&G's Under (Over) recovered
Electric Energy and Gas Fuel Costs, see Note 5 -- Deferred Items of Notes to
Consolidated Financial Statements.
For a discussion of the repowering of Bergen Generating Station, see Note
12 -- Commitments and Contingent Liabilities of Notes to Consolidated Financial
Statements.
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 Nuclear
Generating Station, Units 1 and 2 (Salem 1 and 2) -- 42.59%; Hope Creek Nuclear
Generating Station (Hope Creek) -- 95%; and Peach Bottom Atomic Power Station,
Units 2 and 3 (Peach Bottom 2 and 3) -- 42.49%. PSE&G operates Salem and Hope
Creek, while Peach Bottom is operated by PECO Energy, Inc. (PECO). The
following table sets forth the capacity factor in accordance with the NPS of
each of PSE&G's nuclear units for the years indicated:
<TABLE>
<CAPTION>
NUCLEAR UNITS 1994 1993 1992
- -------------- ---- ---- ----
<S> <C> <C> <C>
Capacity Factors:
Salem 1...................................... 59% 60% 54%
Salem 2...................................... 58 57 49
Hope Creek................................... 77 95 76
Peach Bottom 2............................... 80 84 61
Peach Bottom 3............................... 98 70 80
Aggregate capacity factor of nuclear units... 74 77 66
</TABLE>
For information concerning such NPS, see Note 12 -- Commitments and
Contingent Liabilities of Notes to Consolidated Financial Statements.
<PAGE>
Customers
As of December 31, 1994, PSE&G provided service to approximately 1,900,000
electric customers and 1,500,000 gas customers. PSE&G is not dependent on a
single customer or a few customers for its electric or gas sales. For the year
ended December 31, 1994, PSE&G's operating revenues aggregated $5.5 billion,
of which 68% was from its electric operations and 32% from its gas operations.
These revenues were derived as follows:
<TABLE>
<CAPTION> Revenues
------------------
Electric Gas
--------- ------
(Millions of Dollars)
<S> <C> <C>
Residential........................................ $1,187 $ 890
Commercial......................................... 1,735 511
Industrial......................................... 693 312
Transportation Service - Gas....................... -- 35
Other.............................................. 118 31
------ ------
Total........................................... $3,733 $1,779
====== ======
</TABLE>
Customers of PSE&G, as well as those of other New Jersey electric and gas
utilities, pay New Jersey Gross Receipts and Franchise Tax (NJGRT) which, in
effect, adds approximately 13% to their bills. The NJGRT is a unit tax based
on electric kilowatthour and gas therm sales. This tax differential provides
an incentive to large-volume electric and gas customers to seek to obtain their
energy supplies from nonutility sources not subject to NJGRT. To the extent
this occurs, it could result in a significant decrease in PSE&G's revenues and
earnings. (See Competition.)
In January 1995, PSE&G and its second-largest industrial customer
submitted a petition to the BPU to approve a tariff modification for this
customer that would vary the electric price hourly to reflect changes in
PSE&G's marginal cost of energy. The proposed pricing would result in a bill
reduction for the customer of approximately $7 million or about 25%. This
reduction in revenues would be partially offset by a proposed decrease of $1.8
million in PSE&G's State tax liability. Under the agreement between the
customer and PSE&G, the customer will forego an opportunity to relocate to
another state and remain a PSE&G customer for ten years. BPU approval is
pending. A tariff modification to reduce electric costs of PSE&G's largest
industrial customer by approximately $9 million, or about 23%, was approved by
the BPU in December 1993.
PSE&G has signed each of its three existing wholesale electric customers,
aggregating 40 mw of load, to new 5-year full service agreements with mid-term
extension options. Two of these agreements are pending approval by FERC.
<PAGE>
Beginning in 1995, under the terms of a previously negotiated 10-year wholesale
power transaction negotiated in 1992, PSE&G will receive $12.5 million in
annual revenues from Old Dominion Electric Cooperative.
PSE&G's business is seasonal in that sales of electricity are higher
during the summer months because of air conditioning requirements and sales of
gas are greater in the winter months due to the use of gas for space-heating
purposes.
Integrated Resource Plan
Pursuant to its IRP, PSE&G periodically reevaluates its forecasted
customer load and peak growth and the sources of electric generating capacity
and DSM to meet such projected growth (see Demand Side Management below). The
IRP takes into account assumptions concerning future customer demand, future
cost trends, especially fuel and purchased power expenses, effectiveness of
conservation and load management activities, the long-term condition of and
projected additions to PSE&G's plants and capacity available from other
electric utilities and nonutility suppliers. PSE&G's IRP consists principally
of plant additions, power purchases through PJM and NUGs and DSM.
Pennsylvania -- New Jersey -- Maryland Interconnection
PSE&G is a member of Pennsylvania -- New Jersey -- Maryland
Interconnection (PJM) which integrates the bulk power generation and
transmission supply operations of 11 utilities in Pennsylvania, New Jersey,
Delaware, Maryland, Virginia and the District of Columbia, and in turn is
interconnected with other major electric utility companies in the northeastern
part of the United States. The PJM is operated as one system and provides for
the purchase and sale of power among members on the basis of reliability of
service and operating economy. As a result, the most economical mix of
generating capability available is used to meet PJM daily load requirements.
PSE&G's output, as shown under Electric Fuel Supply, reflects purchased power
because at times it is more economical for PSE&G to purchase power from PJM and
others than to produce it. As of December 31, 1994, the aggregate installed
generating capacity of the PJM companies was 56,073 MW. The peak one-hour
demand experienced by the PJM power pool was 45,992 MW which occurred on July
8, 1994. The 1994 peak was 437 MW lower than the record-setting 1993 summer
peak of 46,429 MW which occurred on July 8, 1993. PSE&G's capacity obligations
to PJM system vary from year to year due to changes in system characteristics.
PSE&G expects to have sufficient installed capacity to meet its obligations
during the 1995-96 period.
Power Purchases
A component of PSE&G's IRP consists of expected capacity additions from
NUGs. These additions are projected to be 57 MW and are scheduled for service
by 1998. NUG projects are expected to comprise approximately 7% of resources
by 2004. This availability of NUG generation will reduce the need for PSE&G
to build or acquire additional generation.
<PAGE>
PSE&G is also a party to the Mid-Atlantic Area Coordination Agreement
which provides for review and evaluation of plans for generation and
transmission facilities and other matters relevant to reliability of the bulk
electric supply systems in the Mid-Atlantic area.
PSE&G expects to be able to continue to meet the demand for electricity
on its system through operation of available equipment and by power purchases.
However, if periods of unusual demand should coincide with outages of
equipment, PSE&G could find it necessary at times to reduce voltage or curtail
load in order to safeguard the continued operation of its system.
Demand Side Management
Integrated resource planning brings together demand-side and supply-side
strategies. In order to encourage DSM, the BPU adopted rules in late 1991
providing special incentives to encourage utilities to offer these load
management conservation services. The rules are designed to place DSM on an
equal regulatory footing with supply side or energy production investments.
Both NEPA and the revised Energy Master Plan call for conservation to play a
significant role in meeting New Jersey's energy needs over the coming decade.
PSE&G's DSM Plan has been approved by the BPU. The IRP calls for PSE&G to
utilize conservation and DSM to meet most of the incremental resource needs for
the next decade (see Competition).
PSE&G's DSM Plan is designed to encourage investment in energy-saving DSM
activities in New Jersey. These activities involve new techniques and
technologies, such as high-efficiency lighting and motors, that help reduce
customer demand for energy. The DSM Plan presents a two-phase approach -- a
core program that includes many of the conservation programs now available to
customers and a performance-based program that offers payments for introducing
DSM technology and services that result in measurable energy savings. The
performance-based proposal uses a technique that provides direct payments for
kilowatthours of electricity and therms of gas saved through investments in
DSM. PSE&G's IRP projects 597 MW of passive DSM and 815 MW of active DSM by
the year 2004.
PSE&G has established a wholly owned subsidiary, Public Service
Conservation Resources Corporation (PSCRC), to offer DSM services. PSCRC has
its principal office at 9 Campus Drive, Parsippany, N.J. 07054. PSCRC
finances, markets and develops energy conservation projects, mostly within the
PSE&G service territory. At December 31, 1994, assets totaled $49.6 million,
of which $38.1 million were project assets and work in progress. <PAGE>
Electric Generating Capacity
The following table sets forth certain information as to PSE&G's installed
generating capacity as of December 31, 1994:
<TABLE>
<CAPTION>
INSTALLED
SOURCE CAPACITY(MW) PERCENTAGE
- --------------- ------------ ----------
<S> <C> <C>
Conventional Steam Electric
Oil-fired(a)............................. 2,359 23
Coal-fired New Jersey(b)................. 1,242 12
Coal-fired Pennsylvania (mine mouth)(c).. 770 7
Combustion Turbine(d)...................... 2,875 27
Combined Cycle............................. 249 2
Diesel(c).................................. 5
Nuclear(c)
New Jersey............................... 1,921 18
Pennsylvania............................. 886 9
Pumped Storage(c)(d)....................... 190 2
------ ----
Total(e)......................... 10,497 100
====== ====
(a) Units with aggregate capacity of 1,406 MW can also burn gas.
(b) Can also burn gas.
(c) PSE&G share of jointly owned facilities.
(d) Primarily used for peaking purposes.
(e) Excludes 664 MW of nonutility generation and temporary capacity sales
of 173 MW to Baltimore Gas and Electric and 111 MW to General Public
Utilities.
</TABLE>
For additional information, see Item 2. Properties -- PSE&G -- Electric
Properties.
The capacity available at any time may be less than the installed capacity
because of temporary outages for inspection, maintenance, repairs, legal and
regulatory requirements or unforeseen circumstances.
The maximum one-hour demand (peak load) which PSE&G experienced in 1994
was 9,001 MW, which occurred on June 15, 1994 when PSE&G's customers used a
total of 172,362 Megawatthours (MWH) of electricity. (For information
concerning sales, output and capacity factors, see Operating Statistics.) The
peak load in 1993 was 9,147 MW, a record which occurred on July 8, 1993, when
the day's output was 180,643 MWH of electricity. <PAGE>
Nuclear Operations
Operation of nuclear generating units involves continuous close regulation
by the Nuclear Regulatory Commission (NRC). Such regulation involves testing,
evaluation and modification of all aspects of plant operation in light of NRC
safety and environmental requirements and continuous demonstrations to the NRC
that plant operations meet applicable requirements. The NRC has the ultimate
authority to determine whether any nuclear generating unit may operate. For
information concerning the performance of the nuclear units, see Nuclear
Performance Standard and Note 12 -- Commitments and Contingent Liabilities of
Notes to Consolidated Financial Statements.
The scheduled 1995, 1996, and 1997 refueling outages, each estimated at
eight to ten weeks duration, for PSE&G's five licensed nuclear units are
expected to commence in the following months:
<TABLE>
<CAPTION>
REFUELING OUTAGES
-----------------------------------------------
1995 1996 1997
------------- ------------- -------------
<S> <C> <C> <C>
Salem 1................... April September --
Salem 2................... -- March September
Hope Creek................ September -- March
Peach Bottom 2............ -- September --
Peach Bottom 3............ September -- September
</TABLE>
Salem
The outage of a Salem unit causes PSE&G to incur replacement power costs
of approximately $4 million to $6 million per month. Such amounts vary,
however, depending upon the availability of other generation, the cost of
purchased energy and other factors including modifications to maintenance
schedules of other units. Operations at the Salem units continue to present
challenges for PSE&G. These units have experienced equipment failures and
personnel errors that have precipitated or contributed to plant events or trips
which have lead to a number of outages over the units' lifetimes.
As a result of the NRC investigation following the reactor shutdown of
Salem 1 in April 1994, PSE&G was fined $500,000 for violations relating to the
failure to identify and correct significant conditions adverse to quality at
the facility related to spurious steam flow signals and inoperable atmospheric
relief valves, both of which, the NRC concluded, lead to unnecessary safety
injections during the event; the failure to identify and correct significant
conditions adverse to quality at the facility related to providing adequate
training, guidance and procedures for the operators to cope with the event; and
the failure by supervisors to exercise appropriate command and control of the
operations staff and the reactor during the event. On November 1, 1994, PSE&G
responded to the violations and paid the fine. <PAGE>
On January 3, 1995, the NRC provided PSE&G with its latest Systematic
Assessment of Licensee Performance (SALP) report on Salem for the period
between June 20, 1993 and November 5, 1994. SALP is a process pursuant to
which the NRC periodically reviews the performance of nuclear power plant
operations. The Salem SALP report was issued under the revised SALP process
in which the number of assessment areas has been reduced from seven to four:
Operations, Maintenance, Engineering and Plant Support (the Plant Support area
includes security, emergency preparedness, radiological controls, fire
protection, chemistry and housekeeping). Ratings range from a high of "1" to
a low of "3" for each assessment area. Salem received a rating of "3" in the
Operations and Maintenance areas, a rating of "2" in Engineering, and a rating
of "1" in the Plant Support area. The NRC noted an overall decline in
performance, and evidenced particular concern with plant and operator
challenges caused by repetitive equipment problems and personnel errors. The
NRC also noted that although PSE&G has initiated several comprehensive actions
within the past year to improve plant performance, and some recent incremental
gains have been made, these efforts have yet to noticeably change overall
performance at Salem.
PSE&G's own assessments, as well as those by the NRC and the Institute of
Nuclear Power Operations indicate that additional efforts are required to
further improve operating performance, and PSE&G is committed to taking the
necessary actions to address Salem's performance needs. It is anticipated that
the NRC will maintain a close watch on Salem's performance and corrective
actions related to the April reactor shutdown. No assurance can be given as
to what, if any, further or additional actions may be taken or required by the
NRC to improve Salem's performance.
PSE&G is taking significant steps to address performance shortfalls at
Salem. In 1993, a comprehensive performance assessment team identified areas
of weakness through an in-depth investigation of common causes and events.
Corrective action plans and effectiveness measures were then initiated in 1994
and are ongoing, along with additional measures designed to achieve a change
in Salem's performance. Personnel performance is being addressed through
improved supervisory training and increased monitoring of work activities,
improved operational command and control and the reorganization and increased
staffing of Salem Station. PSE&G has established a goal of safe, uneventful
operation to be achieved through enhanced self-assessment and corrective action
processes, resolution of long-standing equipment problems, improved independent
oversight of plant operations and improved root-cause analysis of plant
problems. In furtherance of these goals, PSE&G has reorganized the operational
structure of its Nuclear Department and recruited a new chief nuclear officer.
In addition, Enterprise has strengthened oversight of nuclear plant operations
by establishing a standing Nuclear Committee of its Board of Directors. (see
Item 10. -- Directors and Executive Officers of the Registrants).
On February 6, 1995, Enterprise and PSE&G received a request from the NRC
for a meeting of its representatives with their respective Boards of Directors
to discuss the need for continued improvements in equipment reliability and
staff performance. This meeting is scheduled for mid-March. Enterprise cannot
predict what actions, if any, the NRC may take as a result of this meeting.
<PAGE>
Hope Creek
An outage at Hope Creek causes PSE&G to incur replacement energy costs of
approximately $10 million to $16 million per month. Such amounts vary, however,
depending upon the availability of other generation, the cost of purchased
energy and other factors including modifications to maintenance schedules of
other units.
The NRC's latest periodic SALP report on Hope Creek was received in
September 1993 and covered the period between December 29, 1991 and June 19,
1993. This report was issued under prior SALP procedures. Hope Creek received
a rating of "1" in six functional areas, and received a rating of "2" in the
one remaining area. The NRC noted an improvement over the prior rating period
in the Maintenance/Surveillance and Engineering/Technical Support areas and a
declining trend in the Emergency Preparedness area, with excellent performance
overall.
As a result of an internal allegation report, PSE&G submitted a License
Event Report to the NRC on October 14, 1994 which stated that in 1992, the Hope
Creek control room was understaffed for approximately three minutes and a
decision was made by those involved that the incident did not warrant
initiation of NRC reporting documentation. A meeting with Region I NRC
personnel was held on October 18, 1994 in which the NRC expressed a high degree
of concern over the issue. The NRC's Office of Investigation has since looked
into the event, as well as an internal investigation by PSE&G as to the
validity of the allegation. The NRC's Senior Resident Inspector has indicated
to PSE&G that a Notice of Violation would likely be issued. A second meeting
with the NRC was held on February 3, 1995, with resolution of this issue
pending completion of the NRC's investigation. PSE&G cannot predict what other
action the NRC may take in this matter.
Peach Bottom
The outage of a Peach Bottom unit causes PSE&G to incur additional
replacement energy costs of approximately $4 million to $6 million per month
per unit. Such amounts vary, however, depending upon the availability of other
generation, the cost of purchased energy and other factors including
modifications to maintenance schedules of other units.
PSE&G has been advised by PECO that on June 29, 1994, the NRC issued its
periodic SALP Report for Peach Bottom for the period November 1, 1992 to April
30, 1994. The Report was issued under the revised SALP process described above
for Salem. PECO has advised PSE&G that Peach Bottom received a rating of "1"
in the area of Plant Operations; the areas of Engineering, Maintenance, and
Plant Support received ratings of "2" overall, the NRC found continued
improvement in performance during the period; the NRC stated that enhancement
in problem identification and resolution, good control of refuelings and
outages and excellent oversight by plant management of day-to-day activities
in a manner that ensured safe operation of the units contributed to the
improvement; despite the overall improvement, the NRC noted that some areas
require continued management attention and that management needs to continue
to encourage plant personnel at all levels to identify existing, and sometimes
<PAGE>
longstanding, problems so that priorities can be established, and effective
corrective actions implemented; the NRC also noted instances of personnel
inattention to detail and failure to follow procedures which warranted
additional management attention. PECO has advised PSE&G that it has taken and
is taking actions to address the weaknesses discussed in the SALP Report.
PSE&G has been advised by PECO that on October 18, 1994, the NRC held an
enforcement conference to discuss a violation at Peach Bottom. An emergency
service water valve was left closed and unattended for approximately 45 minutes
during testing, which would have prevented safety-related equipment from
receiving the proper cooling flow in an emergency. On November 21, 1994, PECO
received a Level III violation for this incident, including a civil penalty of
$87,500. PSE&G cannot predict what other actions, if any, the NRC may take in
this matter.
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 will be effective upon the
implementation of associated hardware changes, which are to be completed during
Peach Bottom 3's next refueling outage scheduled for the fall of 1995.
Other Nuclear Matters
In October 1990, General Electric (GE) reported that crack indications
were discovered near the seam welds of the core shroud assembly in a GE Boiling
Water Reactor (BWR) located outside the United States. As a result, GE issued
a letter requesting that the owners of GE BWR plants take interim corrective
actions, including a review of fabrication records and visual examinations of
accessible areas of the core shroud seam welds. PSE&G (Hope Creek) and PECO
(Peach Bottom) are participating in a GE BWR Owners' Group to evaluate this
issue and develop long-term corrective actions. During the spring 1994
refueling outage, PSE&G inspected the shroud of Hope Creek in accordance with
GE's recommendations and found no cracks. PSE&G is working closely with GE and
the BWR Owners' Group on coordination of inspections, evaluations and repair
options, if required. PSE&G expects minimal impact due to the age and
materials of the Hope Creek shroud and the historical maintenance of low
conductivity water chemistry. For these reasons, Hope Creek has been placed
in the lowest susceptibility category by the BWR Owners' Group.
PECO has advised PSE&G that Peach Bottom 3 was examined in October 1993
during the last refueling outage and crack indications were identified at two
locations. On November 3, 1993, PECO presented its findings to the NRC and
provided justification for continued operation of Unit 3 for another two-year
cycle with crack indications. PECO has also advised that Peach Bottom 2 was
examined in October 1994 during its refueling outage. Although some crack
indications were identified, they were considered to be much less severe than
those previously found on Unit 3, and no repairs were required to operate Unit
2 for another two-year cycle.
<PAGE>
Electric Fuel Supply and Disposal
The following table indicates PSE&G's KWH output by source of energy:
<TABLE>
<CAPTION>
ACTUAL ESTIMATED
SOURCE 1994 1995
------ ------ ---------
<S> <C> <C>
Nuclear
New Jersey facilities.......................... 28% 30%
Pennsylvania facilities........................ 17 14
Fossil
Coal
New Jersey facilities........................... 7 11
Pennsylvania facilities......................... 12 12
Natural Gas..................................... 7 6
Residual Oil.................................... 2 1
Net PJM Interchange and Utility Purchases
and NUGs........................................ 27 26
---- ----
Total................................................. 100% 100%
==== ====
</TABLE>
<TABLE>
<CAPTION>
PSE&G's cost of fuel used to generate electricity in the periods shown below was as follows:
NATURAL
COAL GAS
---------------------------------------- --------
NEW JERSEY PENNSYLVANIA
NUCLEAR FACILITIES FACILITIES OIL
------- ------------------- ------------------- -------------------
CENTS/ CENTS/ CENTS/ CENTS/ CENTS/
MILLION MILLION MILLION MILLION $/ MILLION
YEAR BTU $/TON BTU $/TON BTU BTU BARREL BTU
- ---- ------- ------- ------- ------- ------- ------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1992 60.8 58.24 214.0 32.98 133.4 207.4 21.70 351.7
1993 59.3 55.45 203.8 33.73 136.6 221.7 23.44 384.5
1994 62.3 56.31 213.8 34.78 140.7 197.8 22.19 361.02
Substantially all of PSE&G's electric sales are made under rates which are designed to permit the
recovery of increases in energy costs over base costs on a current annual basis. (See PSE&G --
Rate Matters -- Adjustment Clauses.)
</TABLE>
<PAGE>
Nuclear Fuel
The supply of fuel for nuclear generating units involves the mining and
milling of uranium ore to uranium concentrate, conversion of the uranium
concentrate to uranium hexafluoride, enrichment of that gas, conversion of the
enriched gas to fuel pellets and fabrication of fuel assemblies.
PSE&G has several long-term contracts with ore operators to process
uranium ore to uranium concentrate to meet the currently projected requirements
for the Salem and Hope Creek units fully through the year 2000 and, thereafter,
60% of their requirements through the year 2002.
Present contracts for conversion, enrichment and fabrication services
meet the fuel cycle requirements for Salem and Hope Creek units through the
years shown in the following table:
<TABLE>
<CAPTION>
NUCLEAR UNIT CONVERSION ENRICHMENT FABRICATION
- ------------ ---------- ---------- -----------
<S> <C> <C> <C>
Salem 1..................... 2000 (1) 2004
Salem 2..................... 2000 (1) 2005
Hope Creek.................. 2000 (1) 2000
</TABLE>
(1) 100% coverage through 1998; approximately 50% through 2002; and
approximately 30% through 2004. PSE&G does not anticipate
any difficulties in obtaining necessary enrichment service for
its Salem and Hope Creek units.
PSE&G has been advised by PECO that it has contracts for the purchase of
uranium which will satisfy the fuel requirements of Peach Bottom 2 and 3
through 2002. PSE&G has also been advised by PECO that it has contracts for
uranium concentrates which will be allocated to Peach Bottom 2 and 3 and two
other nuclear generating units in which PSE&G does not have an interest, on an
as-needed basis.
PECO has also advised PSE&G that it has contracted for the following
segments of the nuclear fuel supply cycle for Peach Bottom 2 and 3 through the
following years:
<TABLE>
<CAPTION>
NUCLEAR UNIT CONVERSION ENRICHMENT FABRICATION
- ------------ ---------- ---------- -----------
<S> <C> <C> <C>
Peach Bottom 2.............. 1997 2008 1999
Peach Bottom 3.............. 1997 2008 1998
</TABLE>
<PAGE>
Coal
Approximately 40% of PSE&G's coal supply for its New Jersey facilities is
obtained under a contract which expires in 1999. The balance of the supply is
contracted annually from various suppliers, many of whom PSE&G has dealt with
on a continuing basis for a number of years, and is supplemented by spot market
purchases. The New Jersey Air Pollution Control Code (NJAPCC) permits the
burning of coal with a sulfur content of up to 1% at existing coal-fired
generating stations including PSE&G's three coal-fired New Jersey units, Hudson
2 and Mercer 1 and 2. The weighted monthly average sulfur content of the coal
received at Hudson Station and at Mercer Station must not exceed 1.0% (dry
weight basis). PSE&G has been able to obtain sufficient quantities of 1% (or
less) sulfur coal and does not presently anticipate any difficulties in
obtaining adequate coal supplies to replace expiring contracts. (See
Environmental Controls -- Air Pollution Control).
PSE&G has an approximately 23% interest in the Keystone and Conemaugh
coal-fired generating stations located in western Pennsylvania and operated by
Pennsylvania Electric Company (Penelec). At least 67%, optionally up to 100%,
of the fuel required by the Keystone station is supplied by one coal company
under a contract which expires December 31, 2004. At least 18% of the fuel
required by Conemaugh station is supplied by another coal company under a
contract which expires on December 31, 1997. In addition, approximately 51% of
Conemaugh's coal requirements is supplied under a mix of short-term contracts
which expire on March 31, 1995 and September 30, 1995. The balance of the fuel
requirements for each station is supplied through spot purchases obtained from
local suppliers. Penelec has advised PSE&G that it does not expect any
difficulties in obtaining adequate coal supplies. (See Environmental Controls).
Natural Gas
PSE&G utilizes natural gas available from various spot, short-term and
long-term gas contracts, to replace other fuels for electric generation.
Presently, there are no effective legal restrictions on the use of natural gas
for electric generation in existing plants. However, approval by FERC is
required for the interstate transportation of natural gas, either by virtue of
existing blanket authority or through individual proceedings. PSE&G does not
expect any difficulties in obtaining natural gas supplies.
Oil
PSE&G uses residual oil in its conventional fossil-fired, steam-electric
units. The supply of residual oil is furnished by contract suppliers,
supplemented by occasional spot market purchases. PSE&G uses distillate fuel
in its combustion turbines which is acquired by spot market purchases. PSE&G
does not presently anticipate any difficulties in obtaining oil supplies.
<PAGE>
Nuclear Fuel Disposal
As a result of NEPA, all utilities owning nuclear units will be
responsible to co-fund with the Federal government a decontamination and
decommissioning fund for the United States Department of Energy (DOE)
enrichment facilities. Both PSE&G and PECO are responsible for making annual
payments into this fund through 2008, with payments based on enrichment
services purchased from the DOE prior to 1993. (See Note 3 -- PSE&G Nuclear
Decommissioning and Amortization of Nuclear Fuel of Notes to Consolidated
Financial Statements.)
After spent fuel is removed from a nuclear reactor, it is placed in
temporary storage for cooling in a spent fuel pool at the nuclear station site.
Under the Nuclear Waste Policy Act of 1982, as amended, (NWPA), the Federal
government has entered into contracts for transportation and ultimate disposal
of the spent fuel. The Federal government's present policy is that spent
nuclear fuel will be accepted for long-term storage at government-owned and
operated repositories. At present, no such repositories are in service or
under construction.
In conformity with the NWPA, PSE&G entered into contracts with the DOE for
the disposal of spent nuclear fuel from Salem and Hope Creek. Similarly, PECO
contracted with the DOE in connection with Peach Bottom 2 and 3. Under these
contracts, the DOE will take title to the spent fuel at the site, then
transport it and provide for its permanent disposal at a cost of one mil per
KWH of nuclear generation, subject to such escalation as may be required to
assure full cost recovery by the Federal government. In addition, a one-time
payment was made to the DOE for permanently discharged spent fuels irradiated
prior to 1983. In December 1989, the DOE announced that it would not be able
to open a permanent, high-level nuclear waste storage facility until 2010, at
the earliest. The DOE stated it would seek legislation from Congress for the
construction of a temporary storage facility which would accept spent nuclear
fuel from utilities in 1998 or soon thereafter.
On May 25, 1994, the DOE published a Notice of Inquiry indicating its
preliminary view on waste acceptance. The DOE stated that, despite provisions
of NWPA to the contrary, it has no statutory obligation to accept spent nuclear
fuel beginning in 1998 in the absence of an operational repository or other
facility constructed under the NWPA although the DOE may have created an
expectation that it would begin accepting such spent nuclear fuel in 1998. The
Notice of Inquiry is intended to elicit the views of the affected parties on
the DOE's preliminary view on the 1998 obligation issue, the need for an
interim, away-from-reactor storage facility prior to repository operations and
options for offsetting, through the use of a nuclear waste fund, a portion of
the financial burden that may be incurred by utilities to store spent fuel at
reactor sites beyond 1998. Pursuant to NRC rules, spent nuclear fuel generated
in any reactor can be stored safely and without significant environmental
impact in reactor facility storage pools or in independent spent fuel storage
installations located at reactor or away-from-reactor sites for at least 30
years beyond the licensed life for operation (which may include the term of
a revised or renewed license). <PAGE>
In June 1994, two separate lawsuits were filed by a group of states and
a group of utilities, respectively, in the U. S. Court of Appeals for the
District of Columbia Circuit to compel DOE to accept spent fuel by 1998. On
July 19, 1994, the BPU voted to join the lawsuit brought by the group of
states. PSE&G is not a party to the lawsuit brought by the group of utilities.
Salem 1 and 2 have adequate on-site temporary storage capability through
March 1998 and March 2002, respectively, when operational full core discharge
capability requirements are considered. PSE&G has developed an integrated
strategy to meet the longer term Salem and Hope Creek spent fuel storage needs.
In May 1994, PSE&G received a license from the NRC to replace the existing high
density racks in the spent fuel pools of Salem 1 and 2 with maximum density
racks. The Salem re-racking project is ongoing and is expected to extend the
storage capability through March 2008 for Salem 1 and March 2012 for Salem 2,
considering operational full core discharge requirements. The Hope Creek pool
is fully racked and it has capacity to hold spent fuel through September 2007,
considering operational full core discharge requirements. PECO has advised
PSE&G that spent fuel racks at Peach Bottom have storage capacity until 2000
for Unit 2 and 1999 for Unit 3 prior to loss of full core reserve occurring,
and that expansion of storage capacity beyond such dates is being investigated.
In accordance with NWPA, utilities owning an interest in nuclear
generating facilities are required to determine the costs and methods of
funding the costs necessary to decommission such facilities upon termination
of operation. As a general practice, a utility funding such costs places funds
in trust accounts it maintains. The utility recovers from its customers the
amounts paid into the trust fund over a period of years. For information
concerning enrichment of nuclear fuel and nuclear decommissioning costs, see
Note 3 -- PSE&G Nuclear Decommissioning and Amortization of Nuclear Fuel of
Notes to Consolidated Financial Statements.
Low Level Radioactive Waste (LLRW)
As a by-product of their operations, nuclear generating units, including
those in which PSE&G owns an interest, produce LLRW. Such wastes include
paper, plastics, protective clothing, water purification materials and other
materials of which proper disposal must be made. Prior to July 1, 1994, such
materials were accumulated on site and disposed of at a federally licensed
permanent disposal facility. However, in accordance with the Low Level
Radioactive Waste Policy Act, as amended (LLRWPA), operating disposal sites
have exercised their authority to either cease operations or deny access to
LLRW generated in states which are not members of the regional compact in which
they are located. For PSE&G and all other New Jersey LLRW generators, this
means that since July 1, 1994, LLRW must be temporarily stored on site until
New Jersey provides for permanent disposal.
In 1991, New Jersey enacted legislation providing for funding of the
estimated $90 million cost of establishing a disposal facility. The State
would recover the costs through fees paid by LLRW generators. PSE&G's overall
share is expected to be about 40% of the total cost and has provided about $4.8
million to date. New Jersey has introduced a volunteer siting process as its
<PAGE>
plan for establishing a LLRW disposal facility by the year 2000. Public
meetings have been held across the state in an effort to provide information
to and obtain feedback from the public. The plan is expected to be approved
in early 1995 and an official invitation to municipalities to become volunteer
hosts for a disposal facility will be announced sometime in 1995.
Until New Jersey provides for disposal, PSE&G will temporarily store LLRW
in an on-site facility completed in September 1994 at a total cost of $7.1
million. This facility will provide five years' storage for LLRW from Hope
Creek and Salem. PECO has advised PSE&G that as of July 1, 1994, the Peach
Bottom plants are also providing temporary on-site storage with adequate space
for at least five years. PECO has also advised that Pennsylvania is pursuing
its own LLRW site development via state-selected candidate sites, along with
a volunteer plan option. PSE&G will continue to accrue monies for stored LLRW
from Salem, Hope Creek and Peach Bottom to cover expenses with a concurrent
liability for the amount to be paid at the time of ultimate disposal when New
Jersey and Pennsylvania provide disposal facilities.
Gas Operations and Supply
PSE&G supplies its gas customers principally with natural gas. PSE&G
supplements natural gas with purchased refinery gas and liquefied petroleum gas
produced from propane. The adequacy of supply of all types of gas is affected
by the nationwide availability of all sources for energy production.
As of December 31, 1994, the daily gas capacity of PSE&G was as follows:
<TABLE>
<CAPTION>
Type of Gas Therms Per Day
------------------------------------ --------------
<S> <C>
Natural gas......................... 23,191,270
Liquefied petroleum gas............. 2,200,000
Refinery gas........................ 400,000
-----------
Total........................... 25,791,270
===========
</TABLE>
About 40% of the daily gas capacity is high load factor natural gas and
is available every day of the year. The remainder comes from field storage,
liquefied natural gas, seasonal sales, contract peaking supply, propane and
refinery gas.
<PAGE>
PSE&G's total gas sold to and transported for its various customer classes
in 1994 was 3.8 billion therms which consisted of approximately 96% natural
gas. Included in this amount is 1.3 billion therms of gas delivered to
customers under PSE&G's transportation tariffs and individual cogeneration
contracts. (See Operating Statistics of PSE&G). During 1994, PSE&G purchased
approximately 3.5 billion therms of gas for its combined gas and electric
operations directly from natural gas producers and marketers and the balance
from interstate pipeline suppliers. These supplies were transported to New
Jersey by PSE&G's four interstate pipeline suppliers. This diversification of
supply sources provides PSE&G with reliability of supply, purchasing
flexibility and lower overall costs.
PSE&G's gas supply contracts expire at various times over the next two to
ten years. PSE&G does not presently anticipate any difficulty in negotiating
replacement contracts. Since the quantities of gas available to PSE&G under its
supply contracts are more than adequate in warm months, PSE&G nominates part
of such quantities for storage, to be withdrawn during the winter season, under
storage contracts with its principal suppliers. Underground storage capacity
currently is approximately 770 million therms. PSE&G does not presently
anticipate any difficulty in obtaining adequate supplies of natural gas.
PSE&G's annual average cost of natural gas sendout is shown below:
<TABLE>
<CAPTION>
Cents Per
Year Million BTU(A)
---------------------------------- --------------
<S> <C>
1994............................. 338.09
1993.............................. 340.85
1992.............................. 311.16
</TABLE>
(A) Excludes contribution by electric department for gas reservation charge
and natural gas refunds from suppliers.
Substantially all of PSE&G's gas sales are made under rates which are
designed to permit the recovery of projected increases in the cost of natural
gas and gas from supplemental sources, when compared to levels included in base
rates, on a current annual basis. (See Note 2 -- Rate Matters of Notes to
Consolidated Financial Statements.)
The demand for gas by PSE&G's customers is affected by customer
conservation, economic conditions, weather, the price relationship between gas
and alternative fuels and other factors not within PSE&G's control. Presently,
the majority of gas sold in interstate commerce has become deregulated. The
ability of gas prices to respond to market conditions has improved in recent
years because of actions taken by the FERC. Pipeline companies are able to
adjust their gas rates up or down through their purchased gas adjustment
<PAGE>
mechanism more often than the semi-annual filings of prior years. As
previously discussed, FERC's 636 Orders provided pipeline customers, such as
PSE&G, with the opportunity to convert a portion of their pipeline sales
contracts to transportation agreements and purchase natural gas supplies
directly from a producer or other seller of natural gas. This regulatory
framework has increased competition in the gas market by encouraging pipeline
companies to act as non-discriminatory transporters of natural gas. PSE&G has
used these regulations to lower its overall gas costs through the displacement
of higher cost contract supplies with lower cost spot gas purchases and
long-term producer contract supplies. (See Competition.)
PSE&G was able to meet all of the demands of its firm customers during the
1993-94 winter season and expects to continue to meet such energy-related
demands of its firm customers during the 1994-95 winter season. However, the
sufficiency of supply could be affected by several factors not within PSE&G's
control, including curtailments of natural gas by its suppliers, the severity
of the winter, the extent of energy conservation by its customers and the
availability of feedstocks for the production of supplements to its natural gas
supply. During the 1994-95 heating season through February 13, 1995, it was
necessary for PSE&G to interrupt service to 'interruptible' customers for eight
days as permitted by the applicable tariff. During the 1993-94 heating season,
service to such customers was interrupted for 25 days.
Employee Relations
Enterprise has no employees. As of December 31, 1994, PSE&G and its
subsidiaries employed 11,919 persons. Four-year bargaining agreements between
PSE&G and its unions, representing approximately 7,000 employees, will expire
April 30, 1996. EDHI and its subsidiaries employed 471 persons, of which 37
are represented by unions. Enterprise and EDHI and its subsidiaries reimburse
PSE&G for the costs of services provided by employees of PSE&G. PSE&G, EDHI
and their subsidiaries believe that they maintain satisfactory relationships
with their employees.
For information concerning the employee pension plan and other
postretirement benefits, see Note 1 -- Organization and Summary of Significant
Accounting Policies, Note 13 -- Postretirement Benefits Other Than Pensions and
Note 14 -- Pension Plan of Notes to Consolidated Financial Statements.
Regulation
Enterprise has claimed an exemption from regulation by the SEC as a
registered holding company under PUHCA, except for Section 9(a)(2) thereof,
which relates to the acquisition of 5% or more of the voting securities of an
electric or gas utility company. Enterprise is not subject to direct regulation
by the BPU, except potentially with respect to certain transfers of control and
reporting requirements, and is not subject to regulation by the FERC. The BPU
may also impose certain requirements with respect to affiliate transactions
between and among PSE&G, Enterprise and Enterprise's nonutility subsidiaries.
(See EDHI.) <PAGE>
As a New Jersey public utility, PSE&G is subject to comprehensive
regulation by the BPU including, among other matters, regulation of intrastate
rates and service and the issuance and sale of securities. As a participant in
the ownership and operation of certain generation and transmission facilities
in Pennsylvania, PSE&G is subject to regulation by the Pennsylvania Public
Utility Commission (PPUC) in limited respects in regard to such facilities.
PSE&G is subject to regulation by FERC and by the Economic Regulatory
Administration, both within DOE, with respect to certain matters, including
regulation by FERC with respect to interstate sales and exchanges of electric
transmission, capacity and energy, including cogeneration and small power
production projects being constructed pursuant to PURPA, and accounts, records
and reports. PSE&G is also subject to regulation by the United States
Department of Transportation (USDOT) with respect to safety standards for
pipeline facilities and the transportation of gas under the Natural Gas
Pipeline Safety Act of 1968.
In addition, the New Jersey Need Assessment Act (NJNAA) provides that no
public utility shall commence construction of any electric facility (as defined
in the NJNAA) without having first obtained from the Division of Energy
Planning and Conservation within the New Jersey Department of Environmental
Protection (NJDEP) a Certificate. A Certificate, if granted, is valid for three
years, renewable subject to review by the Commissioner of the NJDEP. Under the
NJNAA, no state or local agency may issue any license or permit required for
any such construction or substantial expansion prior to the issuance of the
Certificate. An electric facility is defined under the NJNAA as any electric
power generating unit or combination of units at a single site with a capacity
of 100 MW or more or any such units added to an existing electric generating
facility which will increase its installed capacity by 25% or by more than 100
MW, whichever is smaller. Under NJNAA, a Certificate shall be issued only if
the NJDEP Commissioner determines that the proposed facility is necessary to
meet the projected need for electricity in the area to be served and that no
more efficient, economical or environmentally sound alternative is available.
For a discussion of the repowering of Bergen Generating Station, see Note 12
- -- Commitments and Contingent Liabilities of Notes to Consolidated Financial
Statements.
For information concerning nuclear insurance coverages, the BPU's NPS and
assessments and the Price-Anderson Amendments Act of 1988, as amended, see Note
12 -- Commitments and Contingent Liabilities of Notes to Consolidated Financial
Statements.
The New Jersey Public Utility Accident Fault Determination Act (Fault Act)
requires the BPU to make a determination of fault with regard to any accident
at any electric generating or transmission facility prior to granting a request
by any utility for a rate increase to cover accident-related costs in excess
of $10 million. Fault, as defined in the Fault Act, means any negligent action
or omission of any party which either contributed substantially to causing the
accident or failed to mitigate its severity.
<PAGE>
However, the Fault Act allows the affected utility to file for non-accident
related rate increases during such fault determination hearings and to recover
contributions to federally mandated or voluntary cost-sharing plans and allows
the BPU to authorize the recovery of certain fault-related repair, clean-up,
power replacement and damage costs if substantiated by the evidence presented
and if authorized in writing by the BPU. The Fault Act could have a material
adverse effect on PSE&G's financial position if such an accident were to occur
at a PSE&G facility, it was ultimately determined that the accident was due to
the fault of PSE&G and the BPU were to deny recovery of all or a portion of the
costs related thereto. See Note 2 - Rate Matters -- LEAC of Notes to
Consolidated Financial Statements.
Under New Jersey law, the BPU is required to audit all or a portion of the
operating procedures and other internal workings of every gas or electric
utility subject to its jurisdiction, including PSE&G, at least once every six
years. Under the law, the audit may be performed either by the BPU Staff or
under the supervision of designated members of such Staff by an independent
management consulting firm, chosen by the utility from a list provided by the
BPU. The BPU may, upon completion of the audit and after notice and hearing,
order the utility to adopt such new practices and procedures that it shall find
reasonable and necessary to promote efficient and adequate service to meet
public convenience and necessity. The last such management audit of PSE&G was
completed in 1991.
In 1992, as a follow-up to its 1991 management audit, the BPU conducted
a focused audit of Enterprise's nonutility businesses to ascertain whether
nonutility activities had harmed PSE&G. Enterprise has consistently maintained
a clear and distinct separation of its utility and nonutility operations and
believes that its nonutility activities have not in any way adversely affected
the utility. The results of the focused audit confirmed that there has been
no harm to PSE&G as a result of Enterprise's nonutility activities. However,
as a result of recommendations made by the BPU's auditors regarding operations
and intercompany relationships between PSE&G and EDHI's nonutility businesses,
the BPU approved a plan which, among other things, provides: (1) that
Enterprise will not permit EDHI's nonutility investments to exceed 20% of
Enterprise's consolidated assets without prior notice to the BPU (such assets
presently being approximately 15%); (2) for a restructuring of the PSE&G Board
to include nonemployee Enterprise directors with an annual certification by
such Board that the business and financing plans of EDHI will not adversely
affect PSE&G; (3) for an Enterprise agreement to (a) limit debt supported by
the minimum net worth maintenance agreement between Enterprise and Capital to
$750 million, and (b) make a good- faith effort to eliminate such support over
a six to ten year period from April 1993; and (4) the payment by EDHI to PSE&G
of an affiliation fee of up to $2 million a year which will be applied by PSE&G
through its LGAC and LEAC to reduce utility rates. Effective January 31, 1995,
such fee is predicated on up to $650 million of supported debt outstanding and
will be proportionately reduced as such debt is repaid.
The issue of Enterprise sharing the benefits of consolidated tax savings
with PSE&G or its ratepayers was not resolved by this plan and remains open.
Enterprise believes that PSE&G's taxes should be treated on a stand-alone
<PAGE>
basis for ratemaking purposes, based on the separate nature of the utility and
nonutility businesses. However, neither Enterprise nor PSE&G is able to predict
what action, if any, the BPU may take concerning consolidation of tax benefits
in future proceedings. (See Note 2 -- Rate Matters - Consolidated Tax Benefits
of Notes to Consolidated Financial Statements.)
Construction and operation of nuclear generating facilities are regulated
by the NRC. For additional information relating to regulation by the NRC, see
Construction and Capital Requirements, Rate Matters and Nuclear Operations. In
addition, the Federal Emergency Management Agency is responsible for the review
in conjunction with the NRC of certain aspects of emergency planning relating
to the operation of nuclear plants.
CEA invests in and participates in the development of domestic and foreign
cogeneration and power production facilities, which include QFs and EWGs. For
additional information, see EDHI -- CEA.
The BPU has authority to regulate power sales agreements within the BPU's
pricing guidelines to utilities in the State of New Jersey and ascertain that
the terms and conditions of agreements with New Jersey utilities are fair and
reasonable. For additional information, see EDHI.
Environmental Controls
PSE&G, like most industrial enterprises, is subject to regulation with
respect to the environmental effects of its operations, including air and water
quality control, limitations on land use, disposal of wastes, aesthetics and
other matters, by various federal, regional, state and local authorities,
including the United States Environmental Protection Agency (EPA), the USDOT,
NJDEP, the New Jersey Department of Health, the BPU, the Interstate Sanitation
Commission, the Hackensack Meadowlands Development Commission, the Pinelands
Commission, the Delaware River Basin Commission, the United States Coast Guard,
the United States Army Corps of Engineers, the Delaware Department of Natural
Resources and Environmental Control and, with regard to its ownership interest
in the Keystone, Conemaugh and Peach Bottom generating stations in
Pennsylvania, by the PPUC and the Pennsylvania Department of Environmental
Resources. EDC, CEA and EGDC are also subject to similar regulation.
Environmental laws generally require air emissions and water discharges
to meet specified limits. They also impose potential joint and several
liability, without regard to fault, on the generators of various hazardous
substances to clean up property affected by the production and discharge of
such substances. Environmental controls also require, in many instances,
balancing the need for additional quantities of energy against the need to
protect the environment. The necessity to comply with environmental standards
has caused PSE&G to modify the day-to-day operation of its facilities, to
participate financially in the cleanup of various properties that have been
contaminated and to modify, supplement and replace existing equipment and
facilities. Further, compliance with environmental requirements has resulted
in significant delays with respect to construction of facilities. During 1994,
PSE&G expended approximately $255 million of capital related to improving the
<PAGE>
environment. It is estimated that PSE&G will expend approximately $169
million, $142 million, $54 million, $53 million and $54 million in the years
1995 through 1999, respectively, for such purposes. Such amounts are included
in PSE&G's estimates of construction expenditures. (See MD&A -- Liquidity and
Capital Resources.)
Preconstruction analyses and projections of the environmental effects of
contemplated activities and emissions are frequently required by the permitting
agency. Before licensing approvals and permits are granted, the agency usually
requests a modeling analysis of the effects of a specific action, and of its
effect in combination with other existing and permitted activities and may
request the applicant to address emerging environmental issues. Such
environmental reviews have caused delays in the proceedings for licensing
facilities and more such delays can be expected in the future. An emerging
environmental issue with respect to the construction and operation of electric
transmission and distribution lines is the possible adverse health effects of
EMF exposure. In September 1990, the New Jersey Commission on Radiation
Protection (CORP) decided against setting a limit on magnetic fields produced
by high-voltage power lines citing the lack of convincing evidence required to
determine dangerous levels. Proposed power regulations are currently under
study by CORP to cover new power lines and allow existing power lines to
continue to function regardless of new rule changes. As revised, the rules
would authorize the NJDEP to screen all new power line projects of 100
kilovolts or more using a principle of "as low as reasonably achievable" to
demonstrate that all steps within reason, including modest cost, were taken to
reduce EMFs. The outcome of EMF study and/or regulations and the public
concerns will affect PSE&G's design and location of future electric power lines
and facilities and the cost thereof. Such amounts as may be necessary to comply
with these new EMF rules and address public concerns cannot be determined at
this time, but such amounts could be material.
The New Jersey Environmental Rights Act provides that any person may
maintain a court action against any other person to enforce, or to restrain the
violation of, any statute, regulation or ordinance which is designed to prevent
or minimize pollution, impairment or destruction of the environment, or where
no such requirement exists, to protect the environment from pollution,
impairment or destruction. Certain Federal legislation confers similar rights
on individuals. The principal laws and regulations relating to the protection
of the environment which affect PSE&G's operations are described below.
Air Pollution Control
The Federal Clean Air Act (CAA) imposes stringent emission requirements
across the United States, including requirements related to the emissions of
sulfur dioxide and nitrogen oxides (NOx). Additional requirements are being
developed under the CAA by Federal and State agencies, the costs of which
cannot be quantified, but could be material. PSE&G's two wholly-owned and
operated coal-fired generating stations in New Jersey are presently expected
to be able to meet CAA sulfur dioxide requirements with only modest
<PAGE>
expenditures. PSE&G's New Jersey generating stations are located in a severe
non-attainment area for ozone and the CAA requires that reductions be made in
NOx from major sources in this area. A requirement for these areas is that each
state impose reasonable available control technologies (RACT) on major sources
of NOx effective May 1995.
All of PSE&G's fossil steam and combustion turbine generating units are
subject to RACT requirements. NJDEP RACT Regulations were adopted in November
1993 and will result in capital expenditures of approximately $90 million over
a period of years. Such amount is included in PSE&G's estimate of construction
expenditures. Additional reductions of NOx emissions will likely be needed
continuing through the attainment dates of 2005 and 2007 to bring the area into
attainment with ozone standards. The necessary reductions will be based upon
modeling results and regulatory agency discussions currently underway and could
result in additional changes to equipment, in methods of operation or in fuel.
PSE&G also has an approximately 23% interest in Conemaugh and Keystone,
coal-fired generating stations located in western Pennsylvania. With respect
to Conemaugh, in order to comply with the CAA, the station's co-owners,
including PSE&G, have formally approved the installation of scrubbers (flue gas
desulfurization systems). PSE&G's share of the remaining Conemaugh scrubber
cost is estimated at $78.6 million including cost of removal. Such amount is
included in PSE&G's estimate of construction expenditures. Construction at
Conemaugh Unit 2 is scheduled for completion by January 1, 1996. Conemaugh and
Keystone will also be required to reduce NOx emissions. PSE&G's share of
capital costs for NOx emission controls are included in PSE&G's estimate of
construction expenditures and are estimated at approximately $8.2 million for
Keystone and $9.1 million for Conemaugh.
Permitting of all major stationary sources will also be required under the
CAA. This national air pollution emission source operating permit program will
require some PSE&G facilities to assess emissions, install continuous emission
monitors and/or make changes in facility operations or technology in order to
comply with permit conditions. All such amounts which can be quantified and
which may be necessary to comply with the revised CAA requirements through 1999
are included in PSE&G's estimate of construction expenditures. PSE&G expects
to request the BPU to allow the recovery of all such CAA costs from electric
customers, although no assurances can be given as to what action may be taken
by the BPU. In addition, the revised CAA requirements will increase the cost
of producing electricity for the Pennsylvania and Ohio Valley Region generating
units supplying electricity to the PJM and New Jersey. All of PSE&G's current
purchased power costs are included in PSE&G's LEAC. (See Note 2 -- Rate
Matters of Notes to Consolidated Financial Statements.)
In non-attainment areas, one of the effects of the CAA is to allow
construction or expansion of a facility only upon a showing that any additional
emissions from the source will be more than offset by reductions in similar
emissions from existing sources. In prevention of significant deterioration
areas, construction or expansion of a facility would be permitted only if
emissions from the source, together with emissions from other expected new
sources, would not violate air quality increments for particulates and sulfur
<PAGE>
dioxide that are more stringent than the National Ambient Air Quality Standards
(NAAQS). All of these requirements may affect PSE&G's ability to locate,
construct or expand generating facilities in the future.
NJDEP is using the New Jersey Air Pollution Control Code (NJAPCC) to
achieve compliance with the NAAQS adopted by EPA under the CAA. The NJAPCC
currently establishes ambient air quality standards and emission limitations
for six pollutants, all of which have EPA approval. In addition, the NJAPCC
provides stringent requirements restricting the sulfur content in coal and oil
fuels. (See PSE&G -- Electric Fuel Supply and Disposal -- Coal.) The increased
cost of purchasing low-sulfur fuel is offset by rates which are designed to
permit the recovery of fuel costs on a current annual basis. (See PSE&G --
Electric Fuel Supply and Disposal and Note 2 -- Rate Matters of Notes to
Consolidated Financial Statements.)
Water Pollution Control
The Federal Water Pollution Control Act (FWPCA) provides for the
imposition of technology and water-quality based effluent limitations to
regulate the discharge of pollutants into the waters of the United States.
Certain PSE&G facilities are directly regulated by permits issued pursuant to
FWPCA.
Under the FWPCA, compliance with the above-referenced applicable
limitation is to be achieved under the National Pollutant Discharge Elimination
System (NPDES) permit program, which is administered by NJDEP pursuant to the
New Jersey Water Pollution Control Act (NJWPCA). The NJWPCA authorizes NJDEP
to regulate discharges of pollutants to surface and ground waters of the State.
The NPDES permit program, administered by the NJDEP, is referred to as the New
Jersey Pollutant Discharge Elimination System (NJPDES) program. The NJPDES
program provides for Discharge to Surface Water (DSW) permits and Discharge to
Ground Water (DGW) permits, among others.
Section 304(l) of the FWPCA requires all states to implement more
stringent controls on discharges of toxics to certain water-bodies deemed
contaminated by toxic discharges. Although five PSE&G electric generating
stations (Bergen, Hudson, Kearny, Linden and Sewaren) were originally subject
to requirements imposed pursuant to Section 304(l), the NJDEP and EPA have
proposed delisting these stations from the 304(l) program for the present time.
No final action on this proposal has been taken.
The FWPCA also includes specific provisions relating to discharges of heat
and the design, location, construction and capacity of intake structures for
cooling water. Pursuant to Section 316(a) and (b) of the FWPCA, if the
permittee can demonstrate that the aquatic ecosystem is protected, then
alternate thermal limits may be imposed and/or the intake structure may be
found to be the Best Technology Available (BTA). PSE&G has submitted
applications to EPA and NJDEP seeking variances from thermal limits and BTA
determinations in connection with six of its electric generating stations
<PAGE>
pursuant to Section 316(a) and (b). If PSE&G's applications with respect to
these generating stations do not receive favorable action, NJDEP may impose
requirements for closed-cycle cooling, e.g., cooling towers, or other
structural modifications and/or operational restrictions at these facilities.
The NJDEP regulations relating to DGW require permits for some of PSE&G's
facilities and may require the monitoring of ground water at such locations.
PSE&G has applied for DGW permits at certain facilities as discussed below. The
total cost to comply with all applicable requirements of DGW permits at all
PSE&G facilities covered by NJPDES -- DGW permits cannot be accurately
estimated at this time, but aggregate annual ground water monitoring cost is
not expected to be material.
PSE&G has NJPDES DSW permits for its Bergen, Hudson, Kearny, Essex,
Linden, Sewaren, Edison, Mercer, Burlington, Salem and Hope Creek electric
generating stations and its Harrison gas facilities. Adjudicatory hearing
requests are pending before the NJDEP to resolve one or more contested issues
in the above-referenced permits for Linden and are discussed below.
Discussed below are pending actions or proceedings relating to specific
facilities or sites.
In 1991, the NJDEP issued a draft NJPDES permit for Sewaren Station which
would impose water quality-based effluent limits both on pollutants identified
as a result of a monitoring program instituted pursuant to Section 304(l) in
non-contact cooling water and treatment plant discharges, which could have
significant adverse impact on the operations of this station. PSE&G submitted
comments addressing factual and legal issues raised by the draft permit. The
NJDEP and the EPA have proposed delisting Sewaren and the NJDEP has indicated
its intent to reissue a draft permit which would not impose water-quality-based
effluent limits.
In August 1994, the Bergen County Utilities Authority issued a significant
industrial user permit for the discharge of cooling tower blowdown and other
sources associated with the newly repowered Bergen Unit. This permit will
replace the expired NJPDES DSW permit.
In 1993, the NJDEP issued a final Major Modification to Linden's DSW
permit incorporating conditions consistent with the comments PSE&G previously
filed on the 1992 draft permit. PSE&G is evaluating whether to rescind its
request for an adjudicatory hearing based on these changes.
NJDEP advised PSE&G in 1986 that, with respect to PSE&G's Bergen, Hudson,
Kearny, Sewaren and Linden Stations, the demonstrations and reports previously
submitted to EPA supporting PSE&G's Section 316(a) variance requests and
Section 316(b) determinations no longer provided adequate information upon
which decisions could be made. PSE&G submitted supplemental Section 316(a) and
Section 316(b) demonstrations in 1988 for Bergen, Hudson and Kearny Stations.
In 1989, PSE&G submitted supplemental Section 316(b) demonstrations for both
Linden and Sewaren Stations and a supplemental Section 316(a) demonstration for
Sewaren. The Linden supplemental Section 316(a) demonstration was submitted in
1990. To date, the NJDEP has not responded to these submittals. <PAGE>
PSE&G received a final DGW permit for Bergen in 1987. A hearing request
was filed and all issues but one were resolved amicably thereafter in 1987.
PSE&G may ultimately contest the single unresolved issue contained in the final
Bergen DGW permit.
A draft DGW permit was issued by NJDEP for Mercer Generating Station in
1987. NJDEP has taken no further action.
Salem Station
As required by the FWPCA, over the past 15 years, PSE&G has submitted to
the EPA and NJDEP its demonstrations which concluded that structural
modifications including cooling towers, are not required at Salem to achieve
satisfactory environmental effects. In 1990, the NJDEP issued a draft NJPDES
Permit to the Salem Station which required closed-cycle cooling. In response
to the 1990 Draft Permit, PSE&G submitted extensive written comments to the
NJDEP regarding the ecological effects of station operations demonstrating that
Salem was not having and would not have an adverse environmental impact and
that closed-cycle cooling was an inappropriate solution.
To resolve the NJDEP's concerns, PSE&G also developed and submitted a
supplement to the permit renewal application setting forth an alternative
approach that would protect aquatic life in the Delaware Estuary and provide
other ecological benefits. PSE&G proposed intake screen modifications to
reduce fish losses, a study of sound deterrent systems to divert fish from the
intake and a limit on intake flow. In addition, PSE&G proposed conservation
measures, including the restoration of up to 10,000 acres of degraded wetlands
and the installation of fish ladders to allow fish to reach upstream spawning
areas. Finally, PSE&G proposed a comprehensive biological monitoring program
to expand existing knowledge of the Delaware Estuary and to monitor station
impacts.
In June 1993, the NJDEP issued Salem a revised draft permit which
reconsidered the requirement for closed-cycle cooling and adopted alternative
measures proposed by PSE&G with certain modifications. A final five-year
permit, with essentially the same provisions as the revised draft permit, was
issued on July 20, 1994 with an effective date of September 1, 1994. The EPA,
which has authority to review the final permit issued by the NJDEP, completed
its review and has not raised any objections.
Certain environmental groups and other entities, including the State of
Delaware, have filed requests for hearings with the NJDEP challenging the final
permit. The NJDEP granted the hearing requests on certain of the issues and
PSE&G has been named as a respondent along with the NJDEP in these matters
which are pending in the Office of Administrative Law of the State of New
Jersey (OAL).
PSE&G is implementing the final permit. Additional permits from various
agencies are required to be obtained to implement the permit. No assurances
<PAGE>
can be given as to receipt of any such additional permits. The estimated
capital cost of compliance with the final permit is approximately $100 million,
of which PSE&G's share is 42.59% and is included in PSE&G's 1995-1999
construction program. PSE&G will request the BPU to allow the recovery in
rates from electric customers of all costs associated with the modifications
and conservation measures required by the permit. (See MD&A -- Liquidity and
Capital Resources -- Construction, Investments and Other Capital Requirements
Forecast.)
Hope Creek Station
Hope Creek's existing permit has been in effect since 1985. PSE&G
submitted an application for renewal in 1990. The existing permit remains in
effect pending NJDEP action expected in 1995. PSE&G cannot predict what new
terms and conditions NJDEP may seek to impose in the renewed permit.
Control of Hazardous Substances
PSE&G Manufactured Gas Plant Remediation Program
For information regarding PSE&G's Manufactured Gas Plant Remediation
Program, see Note 12 -- Commitments and Contingent Liabilities of Notes to
Consolidated Financial Statements.
Other Sites
PSE&G's 1989 decision to close the Synthetic Natural Gas Plant (SNG Plant)
in Linden, New Jersey (jointly owned by PSE&G (90%) and the Elizabethtown Gas
Company (10%)) triggered certain environmental compliance activities under the
New Jersey Environmental Cleanup Responsibility Act (ECRA). PSE&G has completed
the first stage of the required site sampling activities at this facility.
During field work activities, certain soil and ground water contamination has
been identified. The costs of any necessary cleanup are not currently
estimable, but such costs are not expected to have a material effect on its
financial position, results of operations or net cash flows.
A preliminary review of possible mercury contamination at the Kearny
Generating Station concluded that additional study and investigations are
required. PSE&G filed an application in January 1995 for a Memorandum of
Agreement with NJDEP for the conduct of the additional study and investigation.
A work plan detailing additional sampling will be developed in early 1995 and
submitted to the NJDEP. Soil sampling and surveys will begin after approval
of the detailed work plan with completion estimated for the end of the third
quarter 1995.
The Federal Comprehensive Environmental Response, Compensation and
Liability Act of 1980 (CERCLA), as amended by the Superfund Amendments and
Reauthorization Act of 1986 and the Federal Resource Conservation and Recovery
Act of 1976 (RCRA), authorize EPA to issue orders and/or to bring an
enforcement action to compel responsible parties to take investigative and/or
<PAGE>
cleanup actions at any site that is determined to present an imminent and
substantial danger to the public or to the environment because of an actual or
threatened release of one or more hazardous substances. The New Jersey Spill
Compensation and Control Act (Spill Act) and the New York Environmental
Conservation Law provide similar authority to NJDEP and the New York Attorney
General, respectively. 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 under one or more
of the above laws. PSE&G generally provides for the disposal or processing of
such substances through licensed independent contractors. However, these
statutory provisions impose joint and several liability without regard to fault
on all allegedly responsible parties, including the generators of the hazardous
substances for certain investigative and cleanup 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 cleanup of these potentially hazardous sites
is receiving greater attention from the government agencies involved.
Generally, actions directed at funding such site investigations and cleanups
include suspected or known allegedly responsible parties. PSE&G's past
operations suggest that some remedial action may be required. 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.
Presently, such actions involving PSE&G include the following:
(1) In United States and New Jersey v. Alcan Aluminum, et al., Civil
Action Nos. 88-4646 (NHP) and 88-4670 (NHP), in the U. S. District Court for
the District of New Jersey, in 1989, a Consent Decree was entered with EPA and
NJDEP, obligating potentially responsible parties (PRPs), including PSE&G, to
implement both a bioremediation treatability study and a two-stage subsurface
remedial action, i.e., excavation and bioremediation, at the Renora Superfund
Site in Edison, Middlesex County, New Jersey. The excavation and off-site
removal of soils contaminated with polychlorinated biphenyls has been
completed. However, because the treatability study showed that bioremediation
would fail at this site, in 1991, the Consent Decree was modified to eliminate
that remedial action. Instead, EPA required new treatability studies on
solidification technologies, and a Phase II Feasibility Study (FS II)
incorporating that new data. These new studies proved that all on-site soil
treatment technologies would fail, and in 1992, the PRPs submitted FS II for
EPA's and NJDEP's comments. An amended Record of Decision (ROD) issued by EPA
in October 1994 requires additional excavation and off-site removal of soil,
the estimated cost of which is approximately $2.8 million. Based upon
discussions held among the parties to date, it appears that PSE&G's
responsibility for clean-up costs at this site will approximate 10% of such
costs.
(2) 1985 claim by U. S. Department of the Interior under CERCLA with
respect to the Pennsylvania Avenue and Fountain Avenue municipal landfills in
Brooklyn, New York for damages to natural resources. The U.S. Government
alleges damages of approximately $200 million. To PSE&G's knowledge, there has
been no action on this matter since 1988.
<PAGE>
(3) Claim by EPA, Region III, under CERCLA with respect to a site operated
by Sealand Ltd. in Mount Pleasant Township, New Castle County, Delaware. PSE&G
and other companies have entered into an Administrative Consent Order (ACO)
obligating the signatories thereto to fund a Remedial Investigation and
Feasibility Study (RI/FS). PSE&G's share of the costs of actions taken at this
site have approximated 25% of such costs. In 1991, EPA entered a ROD which
determined that no further action was required at the site. The State of
Delaware has filed comments objecting to this ROD and has hired a consultant
which has recommended that additional actions be taken at the site based on its
review of EPA's files. The State of Delaware required the PRPs to conduct
additional groundwater analyses during 1994 and is presently reviewing the
results to determine whether any future actions are required at this site.
(4) At the Duane Marine Salvage Corporation Superfund Site in Perth Amboy,
Middlesex County, New Jersey, the PRPs, including PSE&G, had completed an
EPA-approved surface removal action during 1986 and EPA had required no further
response actions. However, NJDEP ordered that an RI/FS be performed to address
or disprove an alleged subsurface contamination and, following negotiations
with the PRPs, including PSE&G, an ACO was executed. The PRPs have submitted
an RI/FS and a second revised Draft Feasibility Study. In 1994, NJDEP selected
a remedy for the site, the total cost of which is estimated to be $1,500,000.
Based upon the claims made and activities taken to date, PSE&G anticipates that
its obligations with respect to this site will be de minimis.
(5) Spill Act Directive issued by NJDEP in 1987 to PRPs, including PSE&G,
with respect to a site formerly owned and operated by Borne Chemical Company
in Elizabeth, Union County, New Jersey, ordering certain interim actions
directed at both site security and the off-site removal of certain hazardous
substances. Certain PRPs, including PSE&G, signed an ACO with NJDEP to secure
the site, which has been completed. After further negotiations, certain other
PRPs, including PSE&G, signed a further ACO requiring them to perform a removal
action at the site, which was completed in 1992. In 1994, NJDEP issued a third
Directive requiring the performance of an RI/FS. The PRPs have entered into
negotiations with NJDEP regarding the terms of the RI/FS oversight document.
Based upon the claims made and activities taken to date, PSE&G anticipates that
its obligations with respect to this site will be de minimis.
(6) A second Directive pursuant to the Spill Act was issued by NJDEP in
1989 to PRPs, including PSE&G, with respect to the PJP Landfill in Jersey City,
Hudson County, New Jersey (PJP), ordering payment of operating and maintenance
costs of approximately $150,000 and reasserting claims made in an initial
Directive for all past and future costs associated with investigations and
remediation of the alleged contamination. Additionally, in 1990, also pursuant
to the Spill Act, NJDEP issued a Multi-Site Directive concerning four sites,
including PJP. With respect to the PJP site, NJDEP reasserted demands for
payment made in the earlier Directives. The NJDEP alleges that it has spent
approximately $23 million in interim remedial measures at the PJP site. The
NJDEP also alleges that it will incur approximately $2 million in costs to
complete a remedial investigation of the PJP site. PSE&G has made a good-faith
<PAGE>
payment of approximately $21,000 to NJDEP pursuant to the Multi-Site Directive
in accordance with actions taken by certain other PRPs named in these
Directives. The NJDEP has filed a cost recovery action in Superior Court
against certain of the other PRPs named in the Directives. Based upon the
claims made and activities taken to date, PSE&G anticipates that its
obligations with respect to this site will be de minimis.
(7) Prospective enforcement action by NJDEP with respect to a site
formerly owned by the Township of Hillsborough, Somerset County, New Jersey and
used for a sanitary landfill and presently owned by PSE&G. NJPDES-DGW permits
were issued by NJDEP to PSE&G and to the adjoining property owner to install
monitoring wells on these premises. As required by the foregoing permits,
groundwater monitoring wells were established and groundwater monitored. In
accordance with a subsequent New Jersey Supreme Court decision in a case to
which PSE&G was not a party, the subject NJPDES -- DGW permit was determined
to be invalid. However, the NJDEP has recommended that any existing ground
water monitoring wells be maintained pending the NJDEP's drafting of
groundwater regulations which may affect the former landfill site.
(8) In State of New Jersey, Department of Environmental Protection v.
Gloucester Environmental Management Services, Inc. (GEMS), et al., Docket No.
84-0152 (SSB), in the U.S. District Court for the District of New Jersey, the
Fourth Amended Complaint was filed, naming PSE&G and approximately forty other
alleged generators of hazardous waste materials as defendants. PSE&G
investigated possible involvement with the GEMS site in Gloucester Township,
Camden County, in response to an earlier inquiry from EPA. That investigation
revealed that certain waste materials originating at a PSE&G facility may have
contained asbestos and may have been taken to the GEMS site by an independent
contractor performing removal work for PSE&G. PSE&G agreed to participate in
the partial settlement of the litigation which includes the Phase I remediation
of the landfill and contributed $150,000 toward the estimated Phase I cost of
approximately $32.5 million.
(9) Claim by EPA, Region III, under CERCLA with respect to a Superfund
Site in Philadelphia, Pennsylvania, owned and formerly operated by Metal Bank,
Inc., as a non-ferrous scrap reclamation facility. PSE&G, together with several
other similarly situated utilities, is alleged to be liable either to conduct
an RI/FS and undertake the necessary cleanup, if any, or to reimburse EPA for
the cost of performing these functions. In 1991 these utilities, including
PSE&G, entered into an ACO with the EPA to perform an RI/FS, Docket No.
III-91-34-DC. The RI/FS was recently completed and the RI/FS Report was
submitted to EPA on October 14, 1994. The RI/FS Report proposes various
remedial alternatives for consideration by EPA in its selection of a remedy for
the site. The alternatives proposed in the RI/FS range in cost from
approximately $2 million to approximately $90 million. However, the RI/FS
proposes a remedy ranging in cost from $15 to $30 million. It is expected that
during 1995 EPA will select a remedy and issue a ROD memorializing this remedy
<PAGE>
selection. At that time it is anticipated that EPA will assess a claim against
PSE&G and the other similarly situated utility companies, and perhaps others
as well, for the performance or funding of the selected remedy. PSE&G's share
of the costs of the proposed remedy is approximately $7 million or
approximately 26% of the total.
(10) Inquiry and prospective enforcement action by EPA, Region II, with
respect to a site known as the Florence Land Recontouring (FLR) Landfill Site
in the Townships of Florence, Mansfield and Springfield, Burlington County, New
Jersey. In 1989 the NJDEP issued Directive and Notice to Insurers (1989
Directive) to PSE&G and twenty-six other respondents. The 1989 Directive
requires the respondents to arrange for certain remedial measures at the FLR
Site and to pay the NJDEP a total of approximately $7.5 million in estimated
remedial construction activities and administration costs regarding future
operations and maintenance. In 1990, pursuant to the Spill Act, the NJDEP
issued Multi-Site Directive and Notice to Insurers Number One (1990 Directive)
in the matter of four sites including the FLR Site. The 1990 Directive, as it
relates to the FLR Site, directs eighteen of the twenty-seven respondents named
in the 1989 Directive to undertake the same remedial measures and pay the same
costs as set forth in the 1989 Directive. PSE&G is currently evaluating the
NJDEP's claim and is working in concert with other PRPs to address the NJDEP
Directives. Based upon the claims made and activities taken to date, PSE&G
anticipates that its obligations with respect to this site will be de minimis.
(11) Claim by EPA, Region II, under CERCLA with respect to a Superfund
Site known as the Lone Pine Landfill in Freehold Township, Monmouth County, New
Jersey. EPA investigation regarding this site disclosed that certain hazardous
waste materials generated by approximately 200 alleged generators and
transported to a site known as the SCP Scientific Chemical Processing Site,
Wilson Avenue, Newark, Essex County, New Jersey (SCP-Newark), were allegedly
subsequently transshipped, taken to and disposed of at the Lone Pine Landfill.
PSE&G's prior investigation in response to an earlier inquiry from EPA
regarding the SCP-Newark Site revealed that certain waste materials originating
at a PSE&G facility were received by Scientific Chemical Processing, Inc. for
processing and disposal. A consent decree was entered in the U.S. District
Court for the District of New Jersey in 1990 approving the terms of a
settlement under which PSE&G agreed to participate as a de minimis settlor.
A second Consent Decree was lodged with the United States District Court for
the District of New Jersey in 1991 seeking approval of the terms of a
settlement under which PSE&G agreed to participate as a de minimis settlor
toward an off-site investigation/remediation cost. PSE&G cannot determine, at
this time, whether the off-site investigation activities will result in the
identification of further off-site remediation costs. Based upon the claims
made and activities taken to date, PSE&G anticipates that its obligations with
respect to this site will be de minimis.
(12) Inquiry and prospective enforcement action by NJDEP against PSE&G
regarding PSE&G's property in Hamilton Township, Mercer County, New Jersey,
adjacent to PSE&G's Trenton Switching Station. PSE&G is implementing a
groundwater monitoring program at the site.
<PAGE>
(13) 1987 inquiry and prospective enforcement action by EPA, Region II,
under CERCLA regarding a site formerly owned and/or operated by Atlantic
Resources Corporation in Sayreville, Middlesex County, New Jersey. To PSE&G's
knowledge, there has been no action taken on this matter since the initial
filing by the EPA.
(14) In U.S. v. CDMG Realty Co., et al., Civil Action No. 89-4246 (NHP)
(RJH), pending in the United States District Court for the District of New
Jersey, PSE&G and over 60 other entities were joined in January 1995 as
additional third-party defendants. Third-party plaintiffs, an association of
44 entities, are essentially seeking contribution and/or indemnification for
the expenses they have incurred and will incur as a result of having settled
the direct claims of the NJDEP and EPA related to the investigation and
remediation of Sharkey's Landfill, located in Parsippany-Troy Hills, Morris
County, New Jersey. The claims are all alleged to be brought pursuant to
CERCLA, and PSE&G is alleged to have arranged for the disposal of industrial
wastes at Sharkey's Landfill.
(15) 1987 Inquiry and prospective enforcement action by EPA, Region II,
under CERCLA regarding PSE&G's possible use of the Curcio Scrap Metal facility
in Saddle Brook Township, Bergen County, New Jersey, for scrap reclamation
since 1981. To PSE&G's knowledge, there has been no action taken on this
matter since the initial filing by the EPA.
(16) 1988 inquiry and prospective enforcement action by EPA, Region II,
under CERCLA regarding PSE&G's possible use of Higgins Disposal Service Site
in Kingston, Franklin Township, Somerset County, New Jersey. To PSE&G's
knowledge, there has been no action taken on this matter since the initial
filing by the EPA.
(17) Inquiry and prospective enforcement actions by EPA, Region II and
NJDEP, under CERCLA and the Spill Act regarding PSE&G's possible use of Global
Landfill Site in Old Bridge Township, Middlesex County, New Jersey (Global
Site). In 1991, the NJDEP issued Directive and Notice to Insurers Number Two
(Directive Two) to 24 Insurers and 52 Respondents, including PSE&G. Directive
Two seeks recovery of past and anticipated future NJDEP response costs ($37.4
million) incurred and to be incurred in connection with an investigation and
remediation of the Global Site. PSE&G's alleged liability is based on
assertions that it generated asbestos-containing materials which were disposed
of at the Global Site. In 1991, PSE&G entered into an agreement with the NJDEP
and 29 other Directive Two Respondents effecting a partial settlement of the
foregoing costs subject to a subsequent reallocation based upon the parties'
further development of information concerning their respective proportionate
waste contributions to the Global Site. The New Jersey Department of Law and
Public Safety and PRPs who participated in the partial settlement set forth
above have concluded negotiations concerning a resolution of the balance of the
response costs sought pursuant to Directive Two. In connection with those
negotiations, the PRPs are currently attempting to secure the information
necessary to determine their respective proportionate waste contributions to
the Global Site for the purpose of further establishing proportionate shares
<PAGE>
of any future settlement. Negotiations are ongoing regarding resolution of the
balance of the response costs sought pursuant to Directive Two. In 1993, the
NJDEP and various participating PRPs, including PSE&G, executed a Consent
Decree whereby the participating PRPs agreed to perform the remedial design and
remedial action for the operable unit one remedy as specified in a 1991 ROD
(approximate total cost $30 million). The Consent Decree was executed and
entered by the United States District Court for the District of New Jersey in
1993. Subject to a subsequent reallocation, the various parties to the Consent
Decree have agreed that PSE&G's contribution under the Consent Decree
settlement will be $300,000 (approximately 1% of the total cost).
(18) 1989 inquiry and prospective enforcement action by EPA, Region II
under CERCLA regarding PSE&G's possible use of the Port Washington Landfill in
North Hempstead, New York. To PSE&G's knowledge, there has been no action
taken on this matter since the initial filing by the EPA (NJDEP).
(19) 1989 Spill Act inquiry and prospective enforcement action issued by
NJDEP to PRPs, including PSE&G, regarding PSE&G's possible use of Combe Fill
North Sanitary Landfill in Mt. Olive Township, Morris County, New Jersey. To
PSE&G's knowledge, there has been no action taken on this matter since the
initial filing by the NJDEP.
(20) Spill Act inquiry and prospective enforcement action issued by NJDEP
to PRPs, including PSE&G, regarding PSE&G's possible use of Combe Fill South
Sanitary Landfill in Washington and Chester Townships, Morris County, New
Jersey (Combe Site). In 1991, the New Jersey Department of Law and Public
Safety, Division of Law, issued Directive and Notice To Insurers Number One
(Directive One) to 50 Insurers and 20 Respondents, including PSE&G, seeking
from the Respondents payment of $5.5 million of NJDEP's anticipated costs of
remedial action and of administrative oversight at the Combe Site. The $5.5
million represents the NJDEP's 10% share of such anticipated costs pursuant to
a cooperative agreement with the United States regarding the selected remedial
action. Therefore, total site remediation costs approximate $50 million.
Further, the Directive One Respondents are directed to perform the operation
and maintenance of the remedial action including all remedial facilities on the
Combe Site. PSE&G's alleged liability is based on the assertion that
PSE&G-generated waste oil and water, containing hazardous substances, was
transported to the Combe Site and applied to Combe Site roads for dust control.
Based upon the claims made and activities taken to date, PSE&G anticipates that
its obligations, if any, with respect to this site will be deminimis.
(21) In United States of America v. Superior Tube Company, et al., Docket
No. 89-7421 in the U.S. District Court for the Eastern District of
Pennsylvania, PSE&G was served in 1990 with a Third-Party Complaint. Pursuant
to CERCLA, the United States filed suit against Superior Tube Company
(Superior) and others seeking recovery of past and future costs incurred or to
be incurred in the cleanup of the Moyer Landfill located in Pennsylvania.
Superior filed a Third-Party Complaint naming approximately 150 third-party
defendants, including PSE&G.
<PAGE>
Superior alleges that PSE&G generated, transported, arranged for the
disposal of and/or caused to be deposited certain hazardous substances at the
Moyer Landfill. On the basis of those allegations, Superior seeks contribution
and/or indemnification from the third-party defendants, including PSE&G, on the
United States' action against it. PSE&G has recently participated in
negotiations concerning resolution of the United States' and Superior Tube's
claims. Based upon the claims made and activities taken to date, PSE&G
anticipates that its obligations with respect to this site will be de minimis.
(22) Spill Act Multi-Site Directive (Directive) issued by the NJDEP to
PRPs, including PSE&G, listing four separate sites, including the former
bulking and transfer facility called the Marvin Jonas Transfer Station (Sewell
Site) in Deptford Township, Gloucester County, New Jersey. With regard to the
Sewell Site, this Directive ordered approximately 350 PRPs, including PSE&G,
to enter into an ACO with NJDEP, requiring them to remediate the Sewell Site.
Certain PRPs, including PSE&G, have completed the interim actions directed at
both site security and off-site disposal of containers, trailers and
contaminated surface soils. PRPs, including PSE&G, are currently fulfilling the
terms of a Memorandum of Agreement (MOA) entered into with NJDEP in July 1993
to conduct an RI/FS and, if necessary, take remedial action. An RI/FS Work
Plan has been approved by the NJDEP and the RI/FS is expected to be conducted
during 1995. Based upon the claims made and activities taken to date, PSE&G
anticipates that its obligations with respect to this site will be de minimis.
(23) In Transtech Industries, Inc. et al v. A&Z Septic Clean et al.,
Docket No. 2-90-2578(HAA), filed on October 5, 1992, in the U.S. District Court
for the District of New Jersey, PSE&G has been named a defendant in a Complaint
which has been filed pursuant to CERCLA, against several hundred parties
seeking recovery of past and future response costs incurred or to be incurred
in the investigation and/or remediation of the Kin-Buc Landfill, located in
Edison Township, Middlesex County, New Jersey. Plaintiffs allege that all named
defendants, including PSE&G, are PRPs as generators and/or transporters of
various hazardous substances ultimately deposited at the Kin-Buc Landfill.
Based upon the claims made and activities taken to date, PSE&G anticipates that
its obligations with respect to this site will be de minimis.
(24) Ongoing and prospective enforcement action by EPA, Region II, under
CERCLA regarding PSE&G's possible use of the Custom Distribution Services Site
in Perth Amboy, Middlesex County, New Jersey.
(25) 1992 inquiry and prospective CERCLA enforcement action by EPA, Region
II, regarding PSE&G's possible use of the Scientific Chemical Processing
Superfund Site, Carlstadt, New Jersey.
(26) 1993 inquiries and prospective enforcement action by EPA, Region II,
regarding PSE&G's possible use of the Bridgeport Rental and Oil Services site
located in Logan Township, Gloucester County, New Jersey.
<PAGE>
Enterprise
- ----------
Consolidated Financial Statistics (A)
<TABLE>
<CAPTION>
(Thousands of Dollars where applicable) 1994 1993 1992 1991 1990
- ---------------------------------------------- ------------ ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Selected Income Information
Operating Revenues
Electric...................................... $ 3,733,113 $ 3,693,083 $ 3,407,819 $ 3,519,806 $ 3,380,742
Gas........................................... 1,778,528 1,594,341 1,586,181 1,307,849 1,236,747
Nonutility Activities......................... 404,202 418,135 362,781 283,766 230,075
- ------------------------------------------------------------------------------------------------------------------
Total Operating Revenues...................... $ 5,915,843 $ 5,705,559 $ 5,356,781 $ 5,111,421 $ 4,847,564
- ------------------------------------------------------------------------------------------------------------------
Net Income.................................... $ 679,033 $ 600,933 $ 504,117 $ 543,035 $ 403,663
- ------------------------------------------------------------------------------------------------------------------
Earnings per average share of Common Stock.... $ 2.78 $ 2.50 $ 2.17 $ 2.43 $ 1.90
Dividends Paid per Share...................... $ 2.16 $ 2.16 $ 2.16 $ 2.13 $ 2.09
Payout Ratio.................................. 78% 86% 100% 88% 110%
Rate of Return on Average Common Equity(B).... 12.94% 11.91% 10.69% 12.24% 9.66%
Ratio of Earnings to Fixed Charges............ 2.76 2.59 2.30 2.54 2.09
Book Value per Common Share(C)................ $ 21.70 $ 21.07 $ 20.32 $ 20.04 $ 19.44
Gross Utility Plant........................... $16,566,058 $15,861,484 $15,081,907 $14,426,560 $12,836,874
Accumulated Depreciation and Amoritzation
of Utility Plant............................ $ 5,467,813 $ 5,057,104 $ 4,610,595 $ 4,243,979 $ 3,963,093
Total Assets.................................. $16,717,440 $16,329,656 $14,777,732 $14,804,354 $13,713,248
- ------------------------------------------------------------------------------------------------------------------
Consolidated Capitalization
Common Stock.................................. $ 3,801,157 $ 3,772,662 $ 3,499,183 $ 3,262,138 $ 3,043,402
Retained Earnings............................. 1,510,010 1,361,018 1,282,931 1,282,029 1,203,772
- ------------------------------------------------------------------------------------------------------------------
Common Equity................................. 5,311,167 5,133,680 4,782,114 4,544,167 4,247,174
Long-Term Debt................................ 5,180,657 5,256,321 4,977,579 5,128,373 4,668,024
Preferred Stock without Mandatory Redemption.. 384,994 429,994 429,994 429,994 429,994
Preferred Stock with Mandatory Redemption..... 150,000 150,000 75,000 -- --
Monthly Income Preferred Securities........... 150,000 -- -- -- --
- ------------------------------------------------------------------------------------------------------------------
Total Capitalization.......................... $11,176,818 $10,969,995 $10,264,687 $10,102,534 $ 9,345,192
==================================================================================================================
(A) See Management's Discussion and Analysis of Financial Condition and Results of Operations and Notes to
Consolidated Financial Statements.
(B) Net Income for a twelve-month period divided by the thirteen-month average of Common Equity.
(C) Total Common Equity divided by end-of-period Common Shares outstanding.
</TABLE>
<PAGE>
Operating Statistics
PSE&G
- -----
<TABLE>
<CAPTION>
(Thousands of Dollars where applicable) 1994 1993 1992 1991 1990
- ---------------------------------------------- ------------ ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Electric
Revenues from Sales of Electricity:
Residential................................. $ 1,187,103 $ 1,175,875 $ 1,037,099 $ 1,116,699 $ 1,038,906
Commercial.................................. 1,734,901 1,678,011 1,554,956 1,575,547 1,516,755
Industrial.................................. 693,535 710,206 683,750 728,411 697,571
Public Street Lighting...................... 52,353 51,019 47,729 46,400 45,418
----------- ----------- ----------- ----------- -----------
Total Revenues from Sales to Customers........ 3,667,892 3,615,111 3,323,534 3,467,057 3,298,650
Interdepartmental........................... 1,710 1,737 1,544 1,599 1,652
Non-Jurisdictional Sales.................... 35,223 48,625 51,313 19,763 48,325
----------- ----------- ----------- ----------- -----------
Total Revenues from Sales of Electricity...... 3,704,825 3,665,473 3,376,391 3,488,419 3,348,627
Other Electric Revenues....................... 28,288 27,610 31,428 31,387 32,115
----------- ----------- ----------- ----------- -----------
Total Operating Revenues................. $ 3,733,113 $ 3,693,083 $ 3,407,819 $ 3,519,806 $ 3,380,742
=========== =========== =========== =========== ===========
Sales of Electricity - megawatthours:
Residential................................. 10,594,134 10,631,402 9,816,046 10,505,547 9,875,569
Commercial.................................. 18,466,863 18,096,312 17,454,352 17,596,569 17,054,495
Industrial.................................. 9,249,233 9,203,839 9,298,741 9,406,109 9,457,985
Public Street Lighting...................... 334,726 329,828 325,545 320,900 314,936
----------- ----------- ----------- ----------- -----------
Total Sales to Customers...................... 38,644,956 38,261,381 36,894,684 37,829,125 36,702,985
Interdepartmental........................... 17,755 18,514 19,012 19,719 19,822
Non-Jurisdictional Sales.................... 1,320,170 2,245,884 2,116,049 1,858,590 1,625,016
----------- ----------- ----------- ----------- -----------
Total Sales of Electricity............... 39,982,881 40,525,779 39,029,745 39,707,434 38,347,823
=========== =========== =========== =========== ===========
Gas
Revenues from Sales of Gas:
Residential................................. $ 889,541 $ 780,195 $ 809,559 $ 699,696 $ 667,077
Commercial.................................. 510,829 460,340 481,960 426,110 406,577
Industrial.................................. 312,405 299,762 243,527 138,394 130,273
Street Lighting............................. 491 467 468 468 385
----------- ----------- ----------- ----------- -----------
Total Revenues from Sales to Customers........ 1,713,266 1,540,764 1,535,514 1,264,668 1,204,312
Interdepartmental............................ 3,976 3,078 2,572 2,689 2,157
----------- ----------- ----------- ----------- -----------
Total Revenues from Sales of Gas.............. 1,717,242 1,543,842 1,538,086 1,267,357 1,206,469
Transportation Service Revenues............... 35,057 37,081 34,739 27,036 15,654
Other Gas Revenues............................ 26,229 13,418 13,356 13,456 14,624
----------- ----------- ----------- ----------- -----------
Total Operating Revenues................. $ 1,778,528 $ 1,594,341 $ 1,586,181 $ 1,307,849 $ 1,236,747
=========== =========== =========== =========== ===========
Sales of Gas - kilotherms:
Residential................................. 1,337,267 1,280,128 1,265,270 1,140,887 1,097,034
Commercial.................................. 945,950 943,054 939,021 893,069 837,650
Industrial.................................. 912,689 876,421 739,508 399,385 341,467
Street Lighting............................. 668 666 668 666 657
----------- ----------- ----------- ----------- -----------
Total Sales to Customers...................... 3,196,574 3,100,269 2,944,467 2,434,007 2,276,808
Interdepartmental............................. 9,316 7,509 5,967 6,174 5,144
----------- ----------- ----------- ----------- -----------
Total Sales of Gas............................ 3,205,890 3,107,778 2,950,434 2,440,181 2,281,952
Transportation Service........................ 544,539 557,403 543,097 381,497 182,056
----------- ----------- ----------- ----------- -----------
Total Gas Sold and Transported........... 3,750,429 3,665,181 3,493,531 2,821,678 2,464,008
=========== =========== =========== =========== ===========
</TABLE>
<PAGE>
EDHI
EDHI, a wholly owned, direct subsidiary of Enterprise, is incorporated
under the laws of New Jersey and is the parent company of EDC, CEA, PSRC, EGDC,
Capital and Funding. EDHI's principal executive offices are located at One
Riverfront Plaza, Newark, New Jersey 07102. EDHI's focus is on its energy-
related core businesses, with emphasis on its investment in the independent
energy market. For a discussion of the impact on EDHI of Enterprise's agreement
with the BPU regarding utility/nonutility activities, see Regulation.
EDC
EDC, a New Jersey corporation, has its principal executive offices at 1000
Louisiana Street, Suite 2900, Houston, Texas 77002. EDC is an oil and gas
exploration and production and marketing company with principal operations both
onshore and offshore in the southern United States and has a growing
international production base. EDC has been pursuing a program to grow its
reserve base in order to maintain an annual production level of 130-140 Billion
Cubic Feet Equivalent (BCFE) through a combination of exploratory and
development activities. EDC's worldwide 1994 production totaled 108 BCFE.
Year-end 1994 proved reserves were 594 billion cubic feet of gas and 49 million
barrels of oil, increases of 10% and 9%, respectively, compared to 1993. As of
December 31, 1994 and 1993, EDC's consolidated assets aggregated $729 million
and $679 million, respectively. EDC is exempt from direct regulation by the
BPU and FERC except that certain FERC approval is required to transport its gas
interstate from its discovery fields. EDC had provided a source of firm gas
supply to PSE&G which in 1994 accounted for approximately 7% of EDC's gas
sales volumes. Sales by EDC to PSE&G were discontinued on September 30, 1994
pursuant to an agreement with the BPU. (See PSE&G -- Gas Operations and Supply,
Regulation and Note 1 -- Summary of Significant Accounting Policies of Notes
to Consolidated Financial Statements.)
CEA
CEA, a New Jersey corporation, has its principal executive offices at 1200
East Ridgewood Avenue, Ridgewood, New Jersey 07450. CEA invests in and
participates in the development of cogeneration and power production
facilities, which include QFs and a foreign EWG. CEA is expected to be the
primary vehicle for EDHI's business growth for the foreseeable future, with
emphasis on international projects. CEA's two direct subsidiaries, CEA New
Jersey, Inc. (CEA New Jersey) and CEA USA, Inc. (CEA USA), hold certain of its
investments. CEA New Jersey's subsidiaries invest in projects in New Jersey
selling power to PSE&G. CEA USA's subsidiaries invest in projects selling
power to other domestic and foreign utilities. CEA and/or its subsidiaries and
affiliates have investments in 17 commercially operating cogeneration or power
projects, one anthracite coal mine and one project scheduled for start-up in
the first quarter of 1995. CEA continuously evaluates the status of project
development and construction in light of the realities of timely completion and
the costs incurred.
<PAGE>
CEA's investments in QF projects have been undertaken with other
participants because CEA, together with any other utility affiliate, may not
own more than 50% of a QF under applicable law subsequent to the in-service
date. Projects involving EWGs are not restricted to a 50% investment
limitation. CEA's projects are diversified internationally and technologically
and are generally financed through non-recourse debt. CEA is an investor in
these projects and the electricity produced by the facilities is not part of
PSE&G's installed capacity. However, some of such power is being purchased by
PSE&G pursuant to long-term contracts with the applicable projects.
As of December 31, 1994 and 1993, CEA's consolidated assets aggregated
$232 million and $211 million, respectively. (See Note 7 -- Long-Term
Investments of Notes to Consolidated Financial Statements.)
PSRC
PSRC, a New Jersey corporation, has its principal executive offices at One
Riverfront Plaza, Newark, New Jersey 07102. PSRC makes primarily passive
investments in assets that can provide funds for future growth as well as
provide incremental earnings for Enterprise. Investments have been made in
leveraged and direct financing leases, project financings, venture capital
funds, leveraged buyout funds, real estate limited partnerships and
securities. The maturities of the portfolio's investments are also fairly
diverse, with some having terms exceeding 30 years. PSRC's leveraged lease
investments include a wide range of asset sectors. Some of the transactions in
which PSRC and its subsidiaries participate involve other equity investors.
PSRC plans to limit new investments to existing commitments and investments
related to EDHI's core business. For information concerning PSRC's three
direct-finance leases with Continental Airlines, see Note 12 -- Commitment and
Contingent Liabilities of Notes to Consolidated Financial Statements.
In January 1994, in response to regulatory changes occurring at both
the national and state levels regarding the sale and distribution of natural
gas (see Competition), PSRC formed a gas marketing subsidiary, Public Service
Gas Marketing Company, which has entered into a partnership with another major
utility to market natural gas and associated services on an unregulated basis
to commercial and industrial gas consumers nationwide. The partnership, USEP,
commenced its marketing activities in May 1994 and had sold approximately 4.9
mmbtu of gas through December 1994.
PSRC is a limited partner in various partnerships and is committed to make
investments from time to time, upon the request of the respective general
partners. On December 31, 1994, $134 million remained as PSRC's unfunded
commitment subject to call. As of year-end 1994 and 1993, PSRC's long-term
investments aggregated $1.3 billion.
<PAGE>
EGDC
EGDC, a New Jersey corporation having its principal executive offices at
One Riverfront Plaza, Newark, New Jersey 07102, is a diversified nonresidential
real estate development and investment business. EGDC has investments in ten
commercial real estate properties (five of which are developed) in several
states. EGDC's strategy is to preserve and build the value of its assets to
allow for the controlled disposition of its properties as the real estate
market improves. As of December 31, 1994 and 1993, EGDC's consolidated assets
aggregated $189 million and $203 million, respectively.
For further discussion of EGDC, see MD&A -- Liquidity and Capital
Resources -- EDHI.
Capital
Capital, a New Jersey corporation, has its principal executive offices at
80 Park Plaza, Newark, New Jersey 07101. Capital serves as a financing vehicle
for EDHI's businesses, borrowing on their behalf on the basis of a minimum net
worth maintenance agreement with Enterprise. That agreement provides, among
other things, that Enterprise (i) maintain its ownership, directly or
indirectly, of all outstanding common stock of Capital, (ii) cause Capital to
have at all times a positive tangible net worth of at least $100,000 and (iii)
make sufficient contributions of liquid assets to Capital in order to permit
it to pay its debt obligations. In 1993, Enterprise agreed with the BPU to
make a good-faith effort to eliminate such Enterprise support within six to ten
years. Intercompany borrowing rates are established with reference to
Capital's cost of funds. Effective January 31, 1995, Capital will not have more
than $650 million of debt outstanding at any time. Capital's assets consist
principally of demand notes of EDC, CEA, PSRC and EGDC. As of December 31, 1994
and 1993, Capital had outstanding $632 million and $724.5 million,
respectively, of its long-term debt. For additional information, see
Construction and Capital Requirements -- Financing Activities and MD&A --
Liquidity and Capital Resources -- EDHI.
Funding
Funding, a New Jersey corporation, has its principal executive offices at
80 Park Plaza, Newark, New Jersey 07101. Funding serves as a financing vehicle
for EDHI's businesses (excluding EGDC), borrowing on their behalf, as well as
investing their short-term funds. Short-term investments are made only if the
funds cannot be employed in intercompany loans. Intercompany borrowing rates
are established with reference to Funding's cost of funds. Funding is providing
both long and short-term capital for the nonutility businesses other than EGDC
on the basis of an unconditional guaranty from EDHI, but without direct support
from Enterprise. As of December 31, 1994 and 1993, Funding's assets consisted
principally of demand notes of EDC, CEA and PSRC and their subsidiaries, all
of which are pledged to Funding's lenders and which aggregated $334 million and
$289 million, respectively. For additional information, see MD&A -- Liquidity
and Capital Resources -- EDHI.
<PAGE>
ITEM 2. PROPERTIES
PSE&G
The statements under this Item as to ownership of properties are made
without regard to leases, tax and assessment liens, judgments, easements,
rights of way, contracts, reservations, exceptions, conditions, immaterial
liens and encumbrances and other outstanding rights affecting such properties,
none of which is considered to be significant in the operations of PSE&G,
except that PSE&G's First and Refunding Mortgage (Mortgage), securing the bonds
issued thereunder, constitutes a direct first mortgage lien on substantially
all of such property.
PSE&G maintains insurance coverage against loss or damage to its principal
plants and properties, subject to certain exceptions, to the extent such
property is usually insured and insurance is available at a reasonable cost.
For a discussion of nuclear insurance, see Note 12 -- Commitments and
Contingent Liabilities of Notes to Consolidated Financial Statements.
<PAGE>
The electric lines and gas mains of PSE&G are located over or under public
highways, streets, alleys or lands, except where they are located over or under
property owned by PSE&G or occupied by it under easements or other rights. These
easements and rights are deemed by PSE&G to be adequate for the purposes for
which they are being used. Generally, where payments are minor in amount, no
examinations of underlying titles as to the rights of way for transmission or
distribution lines or mains have been made.
Electric Properties
As of December 31, 1994, PSE&G's share of installed generating capacity was
10,497 MW, as shown in the following table:
<TABLE>
<CAPTION>
INSTALLED NET
MEGAWATT PRINCIPAL HEAT GENERATION CAPACITY
NAME AND LOCATION CAPACITY FUEL USED RATE (000 MWH) FACTOR(a)
- -------------------------------------------- --------- --------- ------ --------- ---------
<S> <C> <C> <C> <C> <C>
Fossil
Bergen, Ridgefield, NJ ..................... 570 Gas 14,433 305 6.1
Burlington, Burlington, NJ ................. 180 Oil 16,921 57 3.6
Conemaugh, New Florence, PA - 22.50%(b)(c).. 382 Coal 9,488 2,463 73.6
Hudson, Jersey City, NJ .................... 983 Coal 10,975 2,611 30.3
Kearny, Kearny, NJ ......................... 292 Oil 14,349 101 3.9
Keystone, Shelocta, PA - 22.84%(b)(c)....... 388 Coal 9,647 2,381 70.1
Linden, Linden, NJ ......................... 481 Oil 16,540 177 4.2
Mercer, Hamilton, NJ ....................... 642 Coal 10,130 2,297 40.8
Sewaren, Woodbridge Twp., NJ ............... 453 Gas 13,480 441 11.1
------- ------ --------- ---------
Total Fossil........................... 4,371 10,953 10,833 28.5
------- ------ --------- ---------
Nuclear (Capacity factor calculated in
accordance with industries maximum
dependable capability standards)
Hope Creek, Lower Alloways Creek, NJ
95%(b)(c)................................. 979 Nuclear 10,751 6,752 78.9
Peach Bottom, Peach Bottom PA - 42.49%(b)... 886 Nuclear 10,798 6,873 89.3
Salem, Lower Alloways Creek, NJ
42.59%(b)................................. 942 Nuclear 11,032 4,809 58.5
------- ------ --------- ---------
Total Nuclear(b)(c).................... 2,807 10,842 18,434 75.4
------- ------ --------- ---------
Combustion Turbine
Bayonne, NJ ................................ 42 Oil 14,130 0.9
Bergen, Ridgefield, NJ ..................... 61 Oil 14,716 1.0
Burlington, NJ ............................. 629 Gas 9,291 413.7
Edison, Edison Township, NJ ................ 504 Gas 15,299 12.7
Essex, Newark, NJ .......................... 617 Gas 13,855 189.5
Hudson, Jersey City, NJ .................... 134 Oil 26,703 1.7
Kearny, Kearny, NJ ......................... 501 Oil 16,478 40.0
Linden, Linden, NJ ......................... 329 Oil 18,494 10.0
Mercer, Hamilton, NJ ....................... 134 Oil 47,299 1.0
National Park, National Park, NJ ........... 21 Oil 43,551 0.1
Salem, Lower Alloways Creek, NJ
42.59%(b)................................. 18 Oil 23,603 0.2
Sewaren, Woodbridge Township, NJ ........... 134 Oil 35,332 2.0
------- ------ --------- ---------
Total Combustion Turbine............... 3,124 11,432 672.8 0.2
------- ------ --------- ---------
Diesel
Conemaugh, New Florence, PA - 22.50%(b)..... 3 Oil 10,226 0.2 0.7
Keystone, Shelocta, PA - 22.84%(b).......... 2 Oil 10,261 0.7 4.0
------- ------ --------- ---------
Total Diesel........................... 5 10,254 0.9 2.0
------- ------ --------- ---------
Pumped Storage
Yards Creek, Blairstown, NJ - 50%(b)(c)..... 190 367 22.0
------- ------ --------- ---------
Total PSE&G............................ 10,497(d) 10,739 30,308(e) 33.0
======= ====== ========= =========
(a) Net generation divided by the product of weighted average generating capacity times total hours.
(b) PSE&G's share of jointly owned facility.
(c) Excludes energy for pumping and synchronous condensers.
(d) Excludes 664 MW of nonutility generation and temporary capacity sales of 173 MW to Baltimore Gas and
Electric and 111 MW to General Public Utilities.
(e) Excludes 4,876 of NUGs.
</TABLE>
<PAGE>
For information regarding construction see Item 1. Business --
Construction and Capital Expenditures.
As of December 31, 1994, PSE&G owned 40 switching stations with an
aggregate installed capacity of 31,351,000 kilovolt-amperes, and 224
substations with an aggregate installed capacity of 7,277,000 kilovolt-amperes.
In addition, 6 substations having an aggregate installed capacity of 139,250
kilovolt-amperes were operated on leased property. All of these facilities are
located in New Jersey. Also at that date, PSE&G owned undivided interests in
similar jointly owned facilities at jointly owned generating facilities in New
Jersey and Pennsylvania as indicated in the table above.
As of December 31, 1994, PSE&G's transmission and distribution system
included 149,533 circuit miles, of which 34,868 miles were underground, and
782,031 poles, of which 533,017 poles were jointly owned. Approximately 99% of
this property is located in New Jersey.
In addition, as of December 31, 1994, PSE&G owned 4 electric distribution
headquarters and five subheadquarters in four operating divisions all located
in New Jersey.
Gas Properties
As of December 31, 1994, the daily gas capacity of PSE&G's 100%-owned
peaking facilities (the maximum daily gas delivery available during the three
peak winter months) consisted of liquid petroleum air gas (LPG) and liquefied
natural gas (LNG) and aggregated 2,973,000 therms (approximately 297,300 Mcf.
on an equivalent basis of 1,000 Btu/cubic foot) as shown in the following
table:
<TABLE>
<CAPTION>
Daily Capacity
Plant Location (Therms)
- -------------------------------- ------------------ --------------
<S> <C> <C>
Burlington LNG.................. Burlington, N.J. 773,000
Camden LPG...................... Camden, N.J. 280,000
Central LPG..................... Edison Twp., N.J. 960,000
Harrison LPG.................... Harrison, N.J. 960,000
---------
Total........................... 2,973,000
=========
</TABLE>
<PAGE>
As of December 31, 1994, PSE&G owned and operated approximately 15,406
miles of gas mains, owned 12 gas distribution headquarters and one
subheadquarters and leased one other subheadquarters all in two operating
regions located in New Jersey and owned one meter shop in New Jersey serving
all such areas. In addition, PSE&G operated 61 natural gas metering or
regulating stations, all located in New Jersey, of which 28 were located on
land owned by customers or natural gas pipeline companies supplying PSE&G with
natural gas and were operated under lease, easement or other similar
arrangement. In some instances, portions of the metering and regulating
facilities were owned by pipeline companies.
Office Buildings and Facilities
PSE&G leases substantially all of a 26-story office tower for its
corporate headquarters at 80 Park Plaza, Newark, N. J., together with an
adjoining three-story building. PSE&G also leases other office space at various
locations throughout New Jersey for district offices and offices for various
corporate groups and services. PSE&G also owns various other sites for
training, testing, parking, records storage, research, repair and maintenance,
warehouse facilities and for other purposes related to its business.
EDHI owns no real property. EDHI leases its corporate headquarters at One
Riverfront Plaza, Newark, New Jersey 07102. For a brief general description of
the properties of the subsidiaries of EDHI, see Item 1. Business -- EDHI.
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
See the following, at the pages indicated:
(1) Page 4. Proceedings before FERC relating to competition and electric
wholesale power markets. (Inquiry Concerning the Pricing Policy for
Transmission Services Provided by Utilities Under the Federal Power Act, Docket
No. RM93-19.)
(2) Page 5. Proceedings before FERC relating to restructuring of natural
gas industry pursuant to Orders 636. (In Re Pipeline Service Obligations and
Revisions to Regulations Governing Self-Implementing Transportation Under Part
284 of the Commission's Regulations, Docket No. RM91-11-000).
(3) Page 10. Proceedings before the BPU relating to PSE&G's Second
Largest Customer, filed January 6, 1995, in Docket No. ER95010005.
(4) Page 31. Requests filed in 1974 and later supplemented, to EPA and
NJDEP to establish thermal discharges and intake structures for PSE&G's
electric generating stations (Sewaren Generating Station, NJ 0000680; Hudson
Generating Station, NJ 0000647; Kearny Generating Station, NJ 0000655; Salem
Generating Station, NJ 0005622; Linden Generating Station, NJ 0000663).
(5) Pages 35 through 41. Various administrative actions, claims,
litigation and requests for information by federal and/or state agencies,
and/or private parties, under CERCLA, RCRA, and state environmental laws to
compel PRPs, which may include PSE&G, to provide information with respect to
transportation and disposal of hazardous substances and wastes, and/or to
undertake or contribute to the costs of investigative and/or cleanup actions
at various locations because of actual or threatened releases of one or more
potentially hazardous substances and/or wastes.
(6) Page 98. Proceedings before the BPU relating to PSE&G's LGAC, filed
July 1, 1994, in Docket No. GR94070292.
(7) Page 98. Proceedings before the BPU relating to PSE&G's LEAC, filed
July 1, 1994, in Docket No. ER94070293.
(8) Page 123. On November 7, 1988, PSE&G filed a lawsuit in the United
States District Court for the District of New Jersey against Associated
Electric & Gas Insurance Services, Ltd., Certain Underwriters at Lloyd's of
London, and Certain London Market Companies (PSE&G v. AEGIS, et al., Civ.
Action No. 884811.) The suit seeks insurance coverage from these insurers for
claims that have been made against PSE&G by the NJDEP and certain private
parties. The claims concern alleged contamination at former gas manufacturing
plant sites in New Jersey that are either currently owned by PSE&G or that were
previously owned by PSE&G or one of its predecessors.
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Enterprise and PSE&G, inapplicable.
ITEM 10. EXECUTIVE OFFICERS OF THE REGISTRANTS
Enterprise and PSE&G. Information regarding executive officers required
by this Item is set forth in Part III, Item 10 hereof.
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
Enterprise's Common Stock is listed on the New York Stock Exchange, Inc.
and the Philadelphia Stock Exchange, Inc. All of PSE&G's common stock is owned
by Enterprise, its corporate parent. As of December 31, 1994, there were
185,941 holders of record of Enterprise Common Stock.
The following table indicates the high and low sale prices for
Enterprise's Common Stock, as reported in The Wall Street Journal as Composite
Transactions and dividends paid for the periods indicated:
<TABLE>
<CAPTION>
Dividend
High Low Per Share
------ ------- ---------
<S> <C> <C> <C>
Common Stock:
1994
First Quarter........................ 32 27 1/4 .54
Second Quarter....................... 29 1/4 25 .54
Third Quarter........................ 28 5/8 23 7/8 .54
Fourth Quarter....................... 27 1/8 25 .54
1993
First Quarter........................ 34 1/4 30 .54
Second Quarter....................... 35 31 7/8 .54
Third Quarter........................ 36 1/8 34 .54
Fourth Quarter....................... 35 1/4 30 .54
</TABLE>
Since 1986, PSE&G has made regular cash payments to Enterprise in the form
of dividends on outstanding shares of PSE&G's Common Stock. PSE&G has paid
quarterly dividends on its common stock in each year commencing in 1948, the
year of the distribution of PSE&G's common stock by Public Service Corporation
of New Jersey, the former parent of PSE&G. Beginning in 1992, EDHI has made
regular cash payments to Enterprise in the form of dividends on outstanding
shares of EDHI's common stock. Enterprise has paid quarterly dividends in each
year commencing with the corporate restructuring of PSE&G when Enterprise
became the owner of all the outstanding common stock of PSE&G. While the Board
of Directors of Enterprise intends to continue the practice of paying dividends
quarterly, amounts and dates of such dividends as may be declared will
necessarily be dependent upon Enterprise's future earnings, financial
requirements and other factors.
<PAGE>
The ability of Enterprise to declare and to pay dividends is contingent
upon its receipt of dividend payments from its subsidiaries. PSE&G has
restrictions on the payments of dividends which are contained in its Restated
Certificate of Incorporation, as amended, certain of the indentures
supplemental to its Mortgage and certain debenture bond indentures. Under these
restrictions, dividends on PSE&G's common stock may be paid only out of PSE&G's
earned surplus and may not reduce PSE&G's earned surplus to less than $10
million. PSE&G dividends on common stock would be limited to 75% of Earnings
Available for Public Service Enterprise Group Incorporated if payment thereof
would reduce PSE&G's Stock Equity to less than 33 1/3% of PSE&G's Total
Capitalization and would be limited to 50% of Earnings Available for Public
Service Enterprise Group Incorporated if payment thereof would reduce Stock
Equity to less than 25% of PSE&G's Total Capitalization, as each of said terms
is defined in said PSE&G's debenture bond indentures. Further, under an
indenture relating to the loan to PSE&G of the proceeds of the monthly income
preferred securities (MIPS) of Public Service Electric and Gas Capital, L.P.
(see Note 4. -- Schedule of Consolidated Capital Stock and Other Securities of
Notes to Consolidated Financial Statements), dividends may not be paid on
PSE&G's capital stock as long as any payments on PSE&G's deferrable interest
subordinated debentures issued under said indenture have been deferred or there
is a default under said indenture or PSE&G's guarantee relating to the MIPS.
None of these restrictions presently limits the payment of dividends out of
current earnings. The amount of Enterprise's and PSE&G's consolidated retained
earnings free of these restrictions at December 31, 1994 was $1.5 billion and
$1.3 billion, respectively.
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
Enterprise
<TABLE>
The information presented below should be read in conjunction with Enterprise Consolidated Financial
Statements and Notes thereto.
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------------------------------------
1994 1993 1992 1991 1990
----------- ----------- ----------- ----------- -----------
(THOUSANDS OF DOLLARS, WHERE APPLICABLE)
<S> <C> <C> <C> <C> <C>
Total Operating Revenues.... $ 5,915,843 $ 5,705,559 $ 5,356,781 $ 5,111,421 $ 4,847,564
Net Income.................. $ 679,033 $ 600,933 $ 504,117 $ 543,035 $ 403,663
Earnings per average share
of Common Stock........... $ 2.78 $ 2.50 $ 2.17 $ 2.43 $ 1.90
Dividends paid per share of
Common Stock.............. $ 2.16 $ 2.16 $ 2.16 $ 2.13 $ 2.09
As of December 31:
Total Assets.............. $16,717,440 $16,329,656 $14,777,732 $14,804,354 $13,713,248
Long-Term Liabilities:
Long-Term Debt....... $ 5,180,657 $ 5,256,321 $ 4,977,579 $ 5,128,373 $ 4,668,024
Other Long-Term
Liabilities........ $ 215,603 $ 220,159 $ 53,617 $ 54,073 $ 54,512
Preferred Stock with
mandatory redemption...... $ 150,000 $ 150,000 $ 75,000 $ -- $ --
Monthly Income Preferred
Securities................ $ 150,000 $ -- $ -- $ -- $ --
Ratio of Earnings to Fixed
Charges plus Preferred
Securities Dividend
Requirements (A).......... 2.76 2.59 2.30 2.54 2.09
(A) Fixed charges include the preferred securities dividend requirements of PSE&G.
</TABLE>
PSE&G
<TABLE>
The information presented below should be read in conjunction with PSE&G Consolidated Financial
Statements and Notes thereto.
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------------------------------------
1994 1993 1992 1991 1990
----------- ----------- ----------- ----------- -----------
(THOUSANDS OF DOLLARS, WHERE APPLICABLE)
<S> <C> <C> <C> <C> <C>
Total Operating Revenues.... $ 5,511,641 $ 5,287,424 $ 4,994,000 $4,827,655 $ 4,617,489
Net Income.................. $ 659,406 $ 614,868 $ 475,936 $ 545,479 $ 537,619
As of December 31:
Total Assets.............. $14,264,398 $13,984,298 $12,273,857 $12,027,971 $11,652,208
Long-Term Liabilities:
Long-Term Debt....... $ 4,486,787 $ 4,364,437 $ 3,978,138 $ 3,933,389 $ 3,733,444
Other Long-Term
Liabilities........ $ 215,603 $ 220,159 $ 53,617 $ 54,073 $ 54,512
Preferred Stock with
mandatory redemption...... $ 150,000 $ 150,000 $ 75,000 $ -- $ --
Monthly Income Preferred
Securities................ $ 150,000 $ -- $ -- $ -- $ --
Ratio of Earnings to Fixed
Charges................... 3.35 3.30 2.70 3.20 3.10
Ratio of Earnings to Fixed
Charges plus Preferred
Securities Dividend
Requirements.............. 2.92 2.89 2.43 2.86 2.79
</TABLE>
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
ENTERPRISE
Following are the significant factors affecting the consolidated financial
condition and the results of operations of Public Service Enterprise Group
Incorporated (Enterprise) and its subsidiaries. This discussion refers to the
Consolidated Financial Statements and related Notes of Enterprise and should
be read in conjunction with such statements and notes.
Overview
Enterprise has two direct wholly owned subsidiaries, Public Service
Electric and Gas Company (PSE&G) and Enterprise Diversified Holdings
Incorporated (EDHI). Enterprise's principal subsidiary, PSE&G, is an operating
public utility providing electric and gas service in certain areas in the State
of New Jersey.
EDHI is the parent of Enterprise's nonutility businesses: Energy
Development Corporation (EDC), an oil and gas exploration and production and
marketing company; Community Energy Alternatives Incorporated (CEA), an
investor in and developer of cogeneration and independent power production
(IPP) facilities and exempt wholesale generators (EWGs); Public Service
Resources Corporation (PSRC), which has made primarily passive investments; and
Enterprise Group Development Corporation (EGDC), a diversified nonresidential
real estate development and investment business. EDHI also has two finance
subsidiaries: PSEG Capital Corporation (Capital), which provides privately
placed debt financing on the basis of a minimum net worth maintenance agreement
from Enterprise and Enterprise Capital Funding Corporation (Funding), which
provides privately placed debt financing guaranteed by EDHI but without direct
support from Enterprise.
As of December 31, 1994 and December 31, 1993, PSE&G comprised 85% and
86%, respectively, of Enterprise assets. For each of the years 1994, 1993 and
1992, PSE&G revenues were 93% of Enterprise's revenues and PSE&G's earnings
available to Enterprise for such years were 91%, 96% and 88%, respectively, of
Enterprise's net income.
The major factors which will affect Enterprise's future results include
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 Nuclear Regulatory Commission (NRC) and New
Jersey Board of Public Utilities (BPU) requirements, the impact of
environmental regulations, continued access to the capital markets and
continued favorable regulatory treatment of consolidated tax benefits. (See
Note 2 -- Rate Matters, Note 10 -- Federal Income Taxes and Note 12 --
Commitments and Contingent Liabilities of Notes to Consolidated Financial
Statements ("Notes").)
<PAGE>
PSE&G Energy and Fuel Adjustment Clauses
PSE&G has fuel and energy tariff rate adjustment clauses which are
designed to permit adjustments for changes in electric energy and gas supply
costs and certain other costs as approved by the BPU, when compared to cost
recovery included in base rates. Charges under the clauses are primarily based
on energy and gas supply costs which are normally projected over twelve-month
periods. The changes in the Levelized Gas Adjustment Charge (LGAC) and the
electric Levelized Energy Adjustment Clause (LEAC) do not directly affect
earnings because such costs are adjusted monthly to match amounts recovered
through revenues. However, the carrying of underrecovered costs ultimately
increases financing costs. PSE&G is also required to pay interest on net
overrecovered costs. Under the clauses, if actual costs differ from the costs
recovered, the amount of the underrecovery or overrecovery is deferred and is
reflected in the average cost used to determine the fuel and energy tariff rate
adjustment for the period in which it is recovered or repaid. Actual costs
otherwise includable in the LEAC are subject to adjustment by the BPU in
accordance with its nuclear performance standard (NPS). (See Note 2 -- Rate
Matters and Note 12 -- Commitments and Contingent Liabilities of Notes.)
Competition
Ongoing initiatives affecting PSE&G's electric and gas utility businesses
associated with the continuing transition to a competitive market environment
will have an increasingly significant impact on Enterprise and PSE&G. Federal
legislation, including the National Energy Policy Act (NEPA), as well as
regulatory initiatives at both the federal and state levels that are designed
to promote competition and lessen regulation of the energy supply 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 is limited in PSE&G's mature service territory.
The shift of rate regulation from traditional concepts based upon rate
base/rate of return to concepts based upon market competition and service is
accelerating. As a result, added emphasis will be placed upon cost reduction.
Utilities and their regulators will need to develop flexible ratemaking
strategies to minimize adverse impacts which might otherwise occur to revenues
and earnings and to maximize potential opportunities presented by deregulation.
The manner in which regulators address evolving competitive issues will also
affect utility credit quality and the carrying value of assets.
<PAGE>
The transition to a competitive market environment will cause changes
from traditional utility ratemaking and is likely to affect utilities' ability
to recover costs, resulting in these costs being "stranded." Stranded costs
are costs and liabilities that were incurred by regulated utilities as a result
of the regulatory compact among utilities, regulators and customers which are
no longer recoverable from such customers due to changes in the regulatory
framework that allow such customers to change electric suppliers before paying
for the costs the utility has incurred on their behalf. Potential stranded
costs include but are not limited to: generation assets; long-term purchase
power and fuel contracts; "regulatory assets" -- Statement of Financial
Accounting Standards No. 71, "Accounting for the Effects of Certain Types of
Regulation" (SFAS 71), which are expenses that have been deferred pending
recovery from customers; and costs which regulators have ordered utilities to
incur to fulfill a variety of broader social purposes (including such things
as energy conservation costs such as demand-side management (DSM) costs). More
competitive electric wholesale markets, proposals to authorize retail wheeling
or direct retail access within utility franchise areas, but not New Jersey to
date, as well as the recent Federal Energy Regulatory Commission's (FERC)
notice of proposed rulemaking on stranded costs have brought to the forefront
the issue of potential stranded costs. If changes in rate regulation
ultimately require a recognition of any such stranded costs, asset write-downs
for utilities, including PSE&G, may occur. At this time, management cannot
predict the level of transition costs or stranded costs resulting from industry
deregulation, if any, or whether utility regulators will allow recovery of any
such transition costs from customers. In addition, PSE&G cannot presently
quantify what the financial statement impact may be if depreciation expense is
determined absent regulation. However, if any such amounts are not recovered,
the impact on the financial position, results of operations or net cash flows
of PSE&G and Enterprise could be material. (See Note 1 -- Organization and
Summary of Significant Accounting Policies and 2 -- Rate Matters of Notes.)
Further, competition will force utilities, including PSE&G, to operate
more cost effective and efficient plants, particularly in light of the
technological advantages available to new entrants, which unlike utilities, do
not operate older, less efficient units. Recovery of related costs by
utilities, including PSE&G, will depend upon the decisions of the regulators,
which cannot be predicted, or the ability to sell the electricity generated by
such plants in the emerging wholesale power market. For discussion of PSE&G's
renovation project at Bergen, see Note 12 - Commitments and Contingent
Liabilities of Notes.
The BPU has issued the first phase of a draft revised Energy Master Plan
which acknowledges the need for regulatory flexibility as competition unfolds
and calls 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), upon energy producers.
Management cannot predict the ultimate form of any legislative or regulatory
changes which may be adopted as a result of this revised Energy Master Plan.
<PAGE>
Enterprise Earnings
Earnings per share of Enterprise Common Stock were $2.78 in 1994, $2.50
in 1993 and $2.17 in 1992. The changes are summarized as follows:
<TABLE>
<CAPTION>
1994 vs. 1993 1993 vs. 1992
---------------- ---------------
Per Per
Amount Share Amount Share
------ ------ ------ ------
(Millions, except Per Share Data)
<S> <C> <C> <C> <C>
PSE&G
Revenues (net of fuel costs and gross
receipts taxes).......................... $ 144 $ .60 $ 347 $1.49
Peach Bottom Settlement (net of Federal
income taxes)........................... -- -- (33) (.14)
Other operation expenses.................. (77) (.32) (62) (.26)
Maintenance expenses...................... (3) (.02) 3 .01
Depreciation and amortization expenses.... (29) (.12) (15) (.06)
Federal income taxes...................... 14 .06 (113) (.49)
Other taxes............................... (9) (.04) (1) --
Interest charges.......................... (6) (.02) 12 .05
Allowance for Funds used During
Construction (AFDC)...................... 11 .05 -- --
Preferred Securities Dividend
Requirements............................ (4) (.02) (6) (.02)
Other income and expenses................. 1 -- 1 --
------ ----- ----- ----
Earnings Available to Enterprise.......... 42 .17 133 .58
EDHI
PSRC................................. 14 .06 (07) (.04)
CEA.................................. 2 .01 3 .01
EDC.................................. (34) (.14) 17 .07
EGDC................................. 54 .22 (49) (.20)
----- ----- ----- -----
Subtotal.................................. 36 .15 (36) (.16)
----- ----- ----- -----
Net Income................................ $ 78 .32 $ 97 .42
===== =====
Effect of additional shares of
Enterprise Common Stock issued........... (.04) (.09)
----- ----
Total........................... $.28 $.33
===== ====
</TABLE>
The average shares of Enterprise Common Stock outstanding were
244,470,794 for 1994, 240,663,599 for 1993 and 232,306,492 for 1992,
respectively.
<PAGE>
PSE&G
In 1994, PSE&G's earnings available to Enterprise increased by $42
million. The increase was primarily due to higher electric commercial sales
and firm gas residential and commercial sales. Electric kilowatthour (KWH)
commercial sales increased 2% and total gas therms sold and transported
increased 2.3%, respectively, principally due to weather and a modest
improvement in New Jersey's economy. Also benefitting earnings was the
decrease in Federal income tax expense resulting from the receipt of a
nontaxable insurance benefit partially offset by higher pre-tax operating
income. In addition, higher AFDC was a benefit to earnings due to greater
construction, partially offset by a slightly reduced 1994 AFDC rate. The major
factors adversely affecting earnings were higher other operation expenses,
comprised primarily of miscellaneous nuclear production expenses,
employee benefits expenses and increased accruals for uncollectible customer
accounts, increased depreciation and amortization expenses due to more utility
plant in service, higher interest charges due to a higher average daily balance
of short-term debt outstanding at higher interest rates and higher maintenance
expenses, principally at Hope Creek nuclear station due to the spring 1994
refueling outage.
In 1993, excluding the $33 million net effect of the settlement of
litigation against Philadelphia Electric Company, now known as PECO Energy,
Inc. (PECO), in connection with the 1987 shutdown of Peach Bottom Atomic Power
Station, Units 2 and 3 (Peach Bottom) by the NRC, PSE&G's earnings available
to Enterprise increased by $166 million. The principal contributing factors
to the increase in earnings available to Enterprise were PSE&G's higher
electric and gas base rates that became effective January 1, 1993 and a
substantial increase in electric KWH sales. (See Revenues below.) The
increase in electric sales was primarily due to the abnormally warm summer
weather. Partially offsetting the increase in earnings were higher other
operation expenses (comprised primarily of labor and employee benefits costs
and miscellaneous nuclear production costs), higher depreciation and
amortization and higher Federal income taxes resulting from increased pre-tax
operating income and an increase in the Federal corporate income tax rate,
effective January 1993. (See Note 10 -- Federal Income Taxes of Notes.)
EDHI
The net income of EDHI was $60 million in 1994. Excluding the impact of
an impairment of assets of $51 million, after tax, by EGDC in 1993, EDHI's
earnings in 1994 decreased $15 million in comparison to 1993. Increased income
from PSRC (higher investment income, lower income taxes compared to 1993 which
included the effects of a Federal income tax increase and lower interest
charges) and CEA (higher income from operating plants) was offset by lower EDC
earnings (lower gas volumes and prices and higher exploration and development
expenditures due to increased drilling activities).
<PAGE>
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. For information
concerning certain of PSRC's direct-finance aircraft leases, see Note 12 --
Commitments and Contingent Liabilities of Notes.
The net income of EDHI was $24 million in 1993, a decrease of $36 million
from 1992. The decrease in EDHI's net income was due primarily to EGDC's
recording of an impairment related to certain real estate properties, including
properties upon which management revised its intent from a long-term investment
strategy to a short-term hold for sale status, reflecting such properties at
their net realizable value. This impairment reduced EDHI's earnings by $51
million, after tax, or 21 cents per share of Enterprise Common Stock. Partially
offsetting this decrease was an increase in the earnings of EDC due to the
higher price of natural gas. Exclusive of the recorded impairment, EDHI's net
income would have been $75 million for 1993.
Dividends
The ability of Enterprise to declare and pay dividends is contingent upon
its receipt of dividend payments from its subsidiaries. PSE&G has made regular
payments to Enterprise in the form of dividends on outstanding shares of its
common stock since Enterprise was formed in 1986. In addition, commencing in
1992, EDHI has also made payments to Enterprise in the form of dividends on its
outstanding common stock.
Dividends paid to holders of Enterprise Common Stock increased $6 million
during 1994 compared to 1993 and increased $18 million during 1993 compared to
1992. The increase in dividend payments for 1994 over 1993 and for 1993 over
1992, respectively, was due to the issuance of additional shares of Enterprise
Common Stock.
Dividends paid to holders of PSE&G's Preferred Stock increased $2 million
during 1994 compared to 1993 and $6 million during 1993 compared to 1992. The
increase in such dividends was due to the issuance of additional shares of
PSE&G's Preferred Stock, partially offset by reduced dividend requirements
resulting from the redemption of certain higher cost series of Preferred Stock.
(See Liquidity and Capital Resources.)
Dividends payable to holders of Monthly Income Preferred Securities (MIPS)
of Public Service Electric and Gas Capital, L.P. (Partnership), a limited
partnership of which PSE&G is the general partner, aggregated $2 million for
1994. (See Note 4 -- Schedule of Consolidated Capital Stock and Other
Securities of Notes.)
<PAGE>
Revenues
PSE&G Electric
Revenues increased $40 million, or 1.1%, in 1994 from 1993; 1993 revenues
increased $285 million, or 8.4%, compared to 1992. The significant components
of these changes follow:
<TABLE>
<CAPTION>
Increase or (Decrease)
------------------------------
1994 vs. 1993 1993 vs. 1992
------------- -------------
(Millions)
<S> <C> <C>
Kilowatthour sales....................... $ 69 $ 67
Base rate increase effective January 1,
1993................................... - 244
Tax Reform Act of 1986................... - 13
Recovery of energy costs................. (26) (52)
NJGRT.................................... (4) 17
Other operating revenues................. 1 (4)
----- -----
Total Electric Revenues.................. $ 40 $ 285
===== =====
</TABLE>
Changes in kilowatthour sales by customer category are described below:
<TABLE>
<CAPTION>
Increase or (Decrease)
-----------------------------
1994 vs. 1993 1993 vs. 1992
------------- -------------
<S> <C> <C>
Residential.............................. (0.4)% 8.3%
Commercial............................... 2.0 3.7
Industrial............................... 0.5 (1.0)
Total Sales of Electricity
to Customers........................... 1.0 3.7
</TABLE>
<PAGE>
1994 -- The increase in electric revenues was primarily due to higher
kilowatthour sales, partially offset by lower recovery of energy costs. The
increase in kilowatthour sales is due to higher commercial and industrial sales
as a result of an improving economy. Residential sales were below last year's
levels due to the abnormally warm summer weather experienced in 1993.
1993 -- The increase in electric revenues over 1992 was primarily due to
the base rate increase which became effective January 1, 1993, partially offset
by the larger LEAC credit also effective January 1, 1993. Abnormally warm
summer weather resulted in a significant increase in weather sensitive sales
during 1993. Increased competition from nonutility generators (NUGs) and an
unscheduled maintenance shutdown at PSE&G's largest industrial customer
negatively impacted industrial sales.
PSE&G Gas
Revenues increased $184 million, or 11.6%, during 1994 over 1993; 1993
revenues increased $8 million, or 0.5%, over 1992. The significant components
of these changes follow:
<TABLE>
<CAPTION>
Increase or (Decrease)
------------------------------
1994 vs. 1993 1993 vs. 1992
------------- -------------
(Millions)
<S> <C> <C>
Therm sales.............................. $ 61 $ (29)
Base rate increase effective
January 1, 1993........................ - 48
Recovery of fuel costs................... 121 15
NJGRT.................................... (12) (5)
Other operating revenues................. 14 (21)
----- -----
Total Gas Revenues............. $ 184 $ 8
===== =====
</TABLE>
<PAGE>
Changes in gas revenues sold and transported by customer category are
described below:
<TABLE>
<CAPTION>
Increase or (Decrease)
-------------------------------
1994 vs. 1993 1993 vs. 1992
------------- -------------
<S> <C> <C>
Residential.............................. 4.5% 1.2%
Commercial............................... .3 .4
Industrial............................... 4.1 18.5
Transportation Service................... (2.3) 2.6
Total Gas Sold and Transported........... 2.3 4.9
</TABLE>
1994 -- The increase in gas revenues was primarily due to an increase in
the recovery of fuel costs, principally due to higher fuel rates, higher sales
and significantly lower customer refunds. Residential, commercial and
industrial sales increased due to favorable weather conditions and an improving
economy. Sales to cogenerators was the largest contributor to the increase in
industrial sales as cogeneration average customer usage continues to increase.
Transportation sales decreased due to storm-related service interruptions in
January and February.
1993 -- The increase in gas revenues over 1992 was primarily attributable
to the base rate increase which became effective January 1, 1993 and the higher
recovery of fuel-related costs. Sales to cogenerators was the largest
contributor to the increase in industrial sales as cogeneration average
customer usage for electric generation continued to increase. Transportation
service sales reflect the movement of some interruptible customers to
transportation service.
<PAGE>
EDHI
EDHI revenues decreased $23 million, or 5%, during 1994 from 1993; 1993
revenues increased $30 million, or 7%, over 1992. The significant components
contributing to such results were as follows:
<TABLE>
<CAPTION>
Increase or (Decrease)
------------------------------
1994 vs. 1993 1993 vs. 1992
------------- -------------
(Millions)
<S> <C> <C>
EDC...................................... $ (46) $ 30
CEA...................................... 17 10
PSRC..................................... 10 (11)
EGDC..................................... (4) 1
----- ----
Total EDHI Revenues............ $ (23) $ 30
===== ====
</TABLE>
1994 -- EDC's revenues decreased due to lower natural gas volumes ($29
million) and prices ($17 million). CEA's revenues increased as a result of
greater income from operating projects. PSRC's revenues increased due to
higher income from partnerships.
1993 -- EDC was the largest contributor to the EDHI revenue increase due
to the higher price of natural gas. CEA revenues increased as a result of
greater income from operating projects. PSRC revenues decreased due to
unrealized losses on investments and lower income from leases.
<PAGE>
Electric Energy Costs
Electric energy costs decreased $21 million, or 3.0%, in 1994 compared
to 1993 and $59 million, or 7.7%, in 1993 compared to 1992. The significant
components of these changes follow:
<TABLE>
<CAPTION>
Increase or (Decrease)
-------------------------------
1994 vs. 1993 1993 vs. 1992
------------- -------------
(Millions)
<S> <C> <C>
Change in prices paid for fuel
and power purchases................. $ 12 $ 18
Kilowatthour generation............... 9 29
Adjustment of actual costs to match
recoveries through revenues(A)...... (42) (106)
----- ----
Total Electric Energy Costs.... $ (21) $ (59)
===== =====
</TABLE>
(A) Reflects the change in the deferred over(under)recovered energy costs,
which in the years 1994, 1993 and 1992 amounted to $(135) million, $(93)
million and $13 million, respectively. (See PSE&G Energy and Fuel
Adjustment Clauses and Note 2 -- Rate Matters of Notes.)
1994 -- The decrease in total costs was principally due to the
underrecovery of energy costs, partially offset by a 12% increase in purchased
power costs and a 1% increase in kilowatthour generation.
1993 -- The decrease in total costs was the result of an adjustment in the
recovery of energy costs resulting from the base rate case decision effective
January 1, 1993, partially offset by a 17% increase in nuclear kilowatthour
generation and an 11% increase in purchased power costs.
Gas Supply Costs
Gas supply costs increased $126 million, or 14.0%, in 1994 compared to
1993 and $39 million, or 4.6%, in 1993 compared to 1992. The significant
components of these changes follow:
<PAGE>
<TABLE>
<CAPTION>
Increase or (Decrease)
------------------------------
1994 vs. 1993 1993 vs. 1992
------------- -------------
(Millions)
<S> <C> <C>
Change in prices paid for gas supplies... $ (10) $ 117
Therm sendout............................ 31 41
Refunds from pipeline suppliers.......... (21) 33
Adjustment of actual costs to match
recoveries through revenues(A)......... 126 (152)
----- -----
Total Gas Supply Costs......... $ 126 $ 39
===== =====
</TABLE>
(A) Reflects the change in the deferred over(under)recovered gas supply costs,
which in the years 1994, 1993 and 1992 amounted to $26 million, $(100)
million and $52 million, respectively. (See PSE&G Energy and Fuel
Adjustment Clauses and Note 2 -- Rate Matters of Notes.)
1994 -- The increase in total costs was principally due to the
overrecovery of fuel costs and increased sales to nonutility generators (NUGs),
partially offset by lower gas prices.
1993 -- The increase in total costs was principally due to greater sales
to NUGs and other customers, higher gas costs and higher therm sendout
resulting from the colder 1993 winter season compared to the 1992 winter
season. The increase in costs was reduced by deferred underrecovered 1993 gas
costs resulting from the BPU approved adjustment in PSE&G's LGAC, effective
January 1, 1993 of $71 million on an annualized basis through December 31,
1993. The adjustment reflects lower gas costs and the inclusion of $15.1
million of conservation program costs in LGAC. In addition, gas customers
received $45 million of credits during the first quarter of 1993.
<PAGE>
Liquidity and Capital Resources
Enterprise's liquidity is affected by maturing debt (see Note 6 --
Schedule of Consolidated Debt of Notes), investment and acquisition activities,
the capital requirements of PSE&G's construction program, permitted regulatory
recovery of expenses and collection of revenues. Capital resources available to
meet such requirements depend upon the factors noted above under Overview. (See
Construction, Investments and Other Capital Requirements Forecast below.)
PSE&G
For 1994, PSE&G had utility plant additions, including AFDC, of $887
million, a decrease of $3 million versus 1993 additions of $890 million.
Additions in 1993 increased $63 million from 1992 additions of $827 million.
AFDC for 1994, 1993 and 1992 amounted to $38 million, $27 million and $26
million, respectively. Construction expenditures were related to improvements
in PSE&G's existing power plants, transmission and distribution system, gas
system and common facilities. PSE&G also expended $34 million, $48 million and
$40 million for the cost of plant removal (net of salvage) in 1994, 1993 and
1992, respectively. Construction expenditures from 1995 through 1999 are
expected to aggregate $3.2 billion. Forecasted construction expenditures are
related to improvements in PSE&G's existing power plants, transmission and
distribution system, gas system and common facilities. (See Construction,
Investments and Other Capital Requirements Forecast below.)
Decommissioning and other special funds, excluding interest, increased $35
million, $46 million and $9 million in 1994, 1993 and 1992, respectively. (See
Note 3 -- PSE&G Nuclear Decommissioning and Amortization of Nuclear Fuel of
Notes.)
PSE&G expects that it will be able to generate internally a majority of
its capital requirements including construction expenditures over the next five
years, assuming adequate and timely recovery of costs as to which no assurances
can be given. (See Note 2 -- Rate Matters and Note 12 -- Commitments and
Contingent Liabilities of Notes.)
EDHI
During the next five years, a majority of EDHI's capital requirements are
expected to be provided from operational cash flows. (See Construction,
Investments and Other Capital Requirements Forecast below.) EDHI's focus is
on CEA and EDC, its energy-related core businesses. CEA is expected to be the
primary vehicle for EDHI's business growth, both domestically and
internationally. A significant portion of CEA's growth is expected to occur
in the international arena, due to the current and anticipated growth in
electric capacity required in certain regions of the world. EDC is projected
to grow its reserve base, principally through exploration and drilling, in
order to maintain an annual production level of 130-140 billion cubic feet
equivalent (BCFE). EDC's worldwide 1994 production totaled 108 BCFE and at
year end had proved reserves of 888 BCFE. EDC expended approximately $188
million, $109 million and $56 million in 1994, 1993 and 1992, respectively, to
<PAGE>
acquire, discover or develop domestic and international reserves. Of these
expenditures, $154 million, $91 million and $36 million in 1994, 1993 and 1992,
respectively, were capitalized. These amounts included capitalized interest of
$4 million, $3 million and $4 million, respectively.
PSRC will limit new investments to those which support EDHI's core
businesses, while EGDC will exit the real estate business in a prudent manner.
Over the next several years, EDHI and its subsidiaries will also be required to
refinance a portion of their maturing debt in order to meet their capital
requirements. Any inability to extend or replace maturing debt at current
levels and interest rates may affect future earnings and result in an increase
in EDHI's cost of capital.
A partnership, in which EGDC is an 80% partner ($21 million equity
investment), is currently negotiating to extend or replace a mortgage financing
of $40.2 million which is maturing on February 28, 1995. EGDC has guaranteed
$5.3 million of the financing. No assurances can be given that EGDC or the
partnership will be able to extend this loan or obtain a replacement loan in
the amount of the existing loan. Failure to extend or replace the existing loan
at the current outstanding loan balance, or at current interest rates, may
result in an increase in the amount of capital which EGDC will require.
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 December 31, 1994, $134 million remained as PSRC's
unfunded commitment subject to call.
EDHI and each of its subsidiaries are subject to restrictive business and
financial covenants contained in existing debt agreements and are required to
not exceed various debt to equity ratios which vary from 3:1 to 1.75:1. EDHI is
also required to maintain a twelve-months earnings (before interest and taxes)
to interest (EBIT) coverage ratio of at least 1.35:1. As of December 31, 1994
and 1993, EDHI had consolidated debt to equity ratios of 1.15:1 and 1.34:1 and,
for the years ended December 31, 1994, 1993 and 1992, EBIT coverage ratios, as
defined to exclude the effects of EGDC of 1.94:1, 2.13:1 and 1.88:1,
respectively. Compliance with applicable financial covenants will depend upon
future levels of earnings, among other things, as to which no assurance can be
given. (See Note 6 -- Schedule of Consolidated Debt and Note 16 -- Property
Impairment of Enterprise Group Development Corporation of Notes.)
Long-Term Investments and Real Estate
Long-Term Investments and Real Estate, which are primarily those of EDHI,
decreased $58 million and $67 million in 1994 and 1993, respectively, and
increased $61 million in 1992. The decrease in 1994 is primarily due to a $73
million net decrease in PSE&G's investment in an insurance contract, partially
offset by an increase in Public Service Conservation Resources Corporation's (a
PSE&G subsidiary) Long-Term Investments of $23 million. The decrease in 1993
is due primarily to EDHI's decrease in Long-Term Investments of $63 million.
The increase in 1992 is due primarily to EDHI's increase in investments in real
estate of $77 million. (For more details, see Note 7 -- Long-Term Investments
and Note 11 -- Leasing Activities - As Lessor of Notes.)
<PAGE>
Construction, Investments and Other Capital Requirements Forecast
<TABLE>
The estimated construction requirements of PSE&G, including AFDC, investments and other capital requirements
of PSE&G and EDHI for 1995 through 1999 are based on expected project completion dates, included anticipated
escalation due to inflation of approximately 3% for utility projects and are as follows:
<CAPTION>
1995 1996 1997 1998 1999 TOTAL
------ ------ ------ ------ ------ ------
(MILLIONS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C>
PSE&G
ELECTRIC
Nuclear Production Facilities...... $ 89 $ 85 $ 66 $ 65 $ 66 $ 371
Nuclear Fuel....................... 96 90 87 112 99 484
Transmission and Distribution...... 165 185 175 163 175 863
Other Production................... 166 118 42 52 58 436
Conservation and Other............. 45 39 37 33 29 183
------ ------ ------ ------ ------ ------
Total Electric..................... 561 517 407 425 427 2,337
------ ------ ------ ------ ------ ------
GAS
Production Facilities.............. 2 2 - - - 4
Transmission and Distribution...... 136 141 143 143 143 706
------ ------ ------ ------ ------ ------
Total Gas.......................... 138 143 143 143 143 710
------ ------ ------ ------ ------ ------
Miscellaneous Corporate.............. 46 38 35 35 35 189
------ ------ ------ ------ ------ ------
Total Construction
Requirements of PSE&G.... 745 698 585 603 605 3,236
------ ------ ------ ------ ------ ------
EDHI................................. 242 175 125 153 149 844
------ ------ ------ ------ ------ ------
Mandatory Retirement of Securities:
PSE&G.............................. 310 - 300 118 100 828
EDHI............................... 190 91 125 196 200 802
------ ------ ------ ------ ------ ------
500 91 425 314 300 1,630
------ ------ ------ ------ ------ ------
Working Capital and Other-net...... 101 43 41 21 21 227
------ ------ ------ ------ ------ ------
Total Capital Requirements......... $1,588 $1,007 $1,176 $1,091 $1,075 $5,937
====== ====== ====== ====== ====== ======
</TABLE>
While the above forecast includes capital costs to comply with revised
Federal Clean Air Act (CAA) requirements through 1999, it does not include
additional requirements being developed under the CAA by Federal and State
agencies. Such additional costs cannot be reasonably estimated at this time.
PSE&G believes that such CAA costs would be recoverable from electric customers.
<PAGE>
Internal Generation of Cash from Operations
Enterprise's cash provided by operating activities for 1994 increased $200
million to $1.232 billion when compared to 1993. This increase was primarily
due to the increase in net income of $78 million, higher recovery of electric
energy and gas costs through PSE&G's LEAC and LGAC of $74 million, a decrease in
accounts receivable of $152 million, a decrease in accrued taxes of $35 million,
a positive net change in certain other current assets and liabilities of $57
million and a positive net change in certain noncurrent assets and liabilities,
primarily deferred amounts, of $61 million. Partially offsetting these cash
inflows were a decrease in accounts payable of $181 million and the loss from
property impairments in 1993 of $78 million. (For additional information see
Enterprise Earnings and Revenues.)
Although net income increased in 1993 (see Enterprise Earnings and
Revenues), net cash provided by operating activities decreased by $292 million
from 1992 to $1.032 billion. This decrease was primarily due to an
underrecovery of electric energy and gas costs through PSE&G's LEAC and LGAC of
$306 million, a decrease in accrued taxes of $332 million (primarily increased
NJGRT payments), and a decrease in depreciation and amortization of $42 million.
Partially offsetting these cash outflows were the increase in net income of $97
million, increases in deferred income taxes of $112 million, inventory decreases
in fuel and materials and supplies of $54 million, increases in accounts
payable of $57 million and a loss from property impairments of $78 million.
External Financings
ENTERPRISE CONSOLIDATED CASH FLOWS FROM FINANCING ACTIVITIES
<TABLE>
<CAPTION>
1994 1993 1992
------- ------- ------
(MILLIONS OF DOLLARS)
<S> <C> <C> <C>
Enterprise (Parent Company):
Issuance of Common Stock(A)....................... $ 28 $ 273 $ 237
Cash Dividends paid on Common Stock(B)............ (528) (522) (503)
------- ------- -------
Total Enterprise (Parent Company)......... (500) (249) (266)
------- ------- -------
PSE&G:(C)
Net (decrease) increase in Short-Term Debt(D)..... (131) 275 92
Increase (decrease) in Book Overdrafts............ 24 (10) 24
Issuance of Long-Term Debt(E)..................... 850 1,973 850
Redemptions of Long-Term Debt..................... (479) (1,716) (1,032)
Long-Term Debt Issuance and Redemption Costs...... (30) (68) (19)
Issuance of Preferred Stock(F).................... 75 75 75
Redemption of Preferred Stock..................... (120) - -
Issuance of Monthly Income Preferred
Securities (G)................................. 150 - -
Other............................................. (2) (6) (6)
------- ------- -------
Total PSE&G............................... 337 523 (16)
------- ------- -------
EDHI:(H)
Net increase (decrease) in Short-Term Debt........ 45 (90) (89)
Issuance of Long-Term Debt........................ 165 30
Redemptions of Long-Term Debt..................... (115) (367) (27)
Other............................................. - (4) -
------- ------- -------
Total EDHI................................ (70) (296) (86)
------- ------- -------
Net cash used in financing activities............... $ (233) $ (22) $ (368)
======= ======= =======
</TABLE>
<PAGE>
(A) During 1994, Enterprise issued 1,009,674 shares of Common Stock through its
Dividend Reinvestment and Stock Purchase Plan (DRIP) and various employee
benefit plans. The net proceeds from such sales, aggregating approximately
$28 million, were used by Enterprise to make equity investments in its
subsidiaries. Book value per share was $21.70 at December 31, 1994,
compared to $21.07 at December 31, 1993. (See Note 4 -- Schedule of
Consolidated Capital Stock and Other Securities of Notes.)
(B) See Dividends.
(C) Under the terms of PSE&G's Mortgage and Restated Certificate of
Incorporation at December 31, 1994, PSE&G would qualify to issue an
additional $3.511 billion of its First and Refunding Mortgage Bonds
(Bonds) at a rate of 8.875% or $3.017 billion of Preferred Stock at a
rate of 8.750%. PSE&G's Restated Certificate of Incorporation currently
limits the issuance of Preferred Stock to $1.0 billion, of which $535
million is outstanding.
In addition, as a prerequisite to the issuance of additional Bonds,
PSE&G's Mortgage requires a 2:1 ratio of earnings to fixed charges
as computed thereunder. For 1994, such ratio was 3.62:1. The ratio
of earnings to fixed charges as required by the Securities and Exchange
Commission was 3.35:1.
The BPU has authorized PSE&G to issue $370 million of Bonds/Medium-Term
Notes (MTNs) through 1996 for refunding purposes.
The BPU has authorized PSE&G to issue not more than $1 billion of its
short-term obligations at any one time outstanding, consisting of
commercial paper and other unsecured borrowings from banks and other
lenders through January 1, 1997. On December 31, 1994, PSE&G had $308
million of short-term debt outstanding.
PSE&G renewed and increased to $800 million a revolving credit
agreement with a group of commercial banks through September 14, 1995.
On December 31, 1994, there were no short-term borrowings outstanding
under this credit agreement.
For additional detail, see Note 4 -- Schedule of Consolidated Capital
Stock and Other Securities and Note 6 -- Schedule of Consolidated Debt of
Notes.
<PAGE>
(D) 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 December 31,
1994, Fuelco had commercial paper of $93.7 million outstanding under
such program.
(E) Enterprise's long-term debt aggregated $5.181 billion as of December 31,
1994, of which $4.487 billion was attributable to PSE&G and $694 million
to EDHI.
During 1994, PSE&G issued a total of $850 million principal amount of
its Bonds/MTNs. The net proceeds from the sale of the Bonds were used by
PSE&G to redeem or defease $474 million of its higher cost Bonds and to
pay a portion of its current construction program.
For additional detail see Note 6 -- Schedule of Consolidated Debt of
Notes.
(F) In February 1994, PSE&G issued and sold $75 million of its
Cumulative Preferred Stock. In March 1994, PSE&G used the funds
from the above sale to redeem $45 million of its higher priced
Preferred Stock. The remaining funds were added to the general
funds of PSE&G and used to pay a portion of its then outstanding
short-term debt obligations, which were principally incurred to
fund a portion of its construction expenditures. In December 1994,
PSE&G redeemed an additional $75 million of its Preferred Stock.
The BPU has authorized PSE&G to issue not more than $180 million
of Preferred Stock through 1995.
For additional detail see Note 4 -- Schedule of Consolidated Capital Stock
and Other Securities of Notes.
(G) In November 1994, Public Service Electric and Gas Capital, L.P.
(Partnership) issued $150 million of Monthly Income Preferred Securities
(MIPS), the proceeds of which were loaned to PSE&G and used to redeem $75
million of Preferred Stock and the payment of construction expenditures.
For additional detail see Note 4 -- Schedule of Consolidated Capital Stock
and Other Securities of Notes.
<PAGE>
(H) Funding has a commercial paper program, supported by a commercial bank
letter of credit and credit facility, through November 18, 1995 in the
amount of $225 million. As of December 31, 1994, Funding had $90
million of borrowings outstanding under this program.
Funding has a $225 million revolving credit facility which terminates
on November 18, 1995. As of December 31, 1994, Funding had no
borrowings outstanding under this facility.
Funding is in the process of amending its letter of credit and revolving
credit facility in order to adjust pricing and extend the maturity to
early 1998.
Capital's MTN program provides for an aggregate principal amount of up
to $750 million of MTNs provided that its total debt outstanding at any
time, including MTNs, shall not exceed such amount. Effective January
31, 1995, Capital will not have more than $650 million of debt outstanding
at any time. In November 1994, Capital repaid $50 million of its 7.40%
MTNs. At December 31, 1994, Capital had $467 million of MTNs outstanding
and total debt outstanding of $632 million.
For additional detail see Note 6 -- Schedule of Consolidated Debt of
Notes.
<PAGE>
PSE&G
Following are the significant factors affecting the consolidated financial
condition and the results of operations of PSE&G and its subsidiaries. This
discussion refers to the Consolidated Financial Statements and related Notes
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
Management's Discussion and Analysis of Financial Condition and Results of
Operations, insofar as they relate to PSE&G and its subsidiaries: Overview;
PSE&G Energy and Fuel Adjustment Clauses; Enterprise Earnings: Dividends;
Revenues -- PSE&G Electric, PSE&G Gas; PSE&G Electric Energy Costs; Liquidity
and Capital Resources, PSE&G, Long-Term Investments and Real Estate;
Construction, Investments and Other Capital Requirements Forecast; and External
Financings.
Gas Supply Costs
Gas supply costs increased $117 million or 12.7% in 1994 compared to 1993
and $17 million or 1.8% in 1993 compared to 1992. The significant components
of these changes follow:
<TABLE>
<CAPTION>
Increase or (Decrease)
-----------------------------
1994 vs.1993 1993 vs. 1992
------------- -------------
(Millions)
<S> <C> <C>
Change in prices paid for gas supplies... $ (20) $ 93
Therm sendout............................ 32 43
Refunds from pipeline suppliers.......... (21) 33
Adjustment of actual costs to match
recoveries through revenues (A)........ 126 (152)
----- -----
Total Gas Supply Costs......... $ 117 $ 17
===== =====
</TABLE>
(A) Reflects the change in the deferred over(under)recovered gas supply costs,
which in the years 1994, 1993 and 1992 amounted to $26 million, $(100)
million and $52 million, respectively. (See PSE&G Energy and Fuel
Adjustment Clauses and Note 2 -- Rate Matters of Notes.)
<PAGE>
1994 -- The increase in total costs was principally due to the
overrecovery of fuel costs and increased sales to NUGs, partially offset by
lower gas prices.
1993 -- The increase in total costs was principally due to greater sales
to cogenerators and other customers, higher gas costs and higher therm sendout
resulting from the colder 1993 winter season compared to the 1992 winter
season. The increase in costs was reduced by deferred underrecovered 1993 gas
costs resulting from the BPU approved adjustment in PSE&G's LGAC, effective
January 1, 1993, of $71 million on an annualized basis through December 31,
1993. The adjustment reflects lower gas costs and the inclusion of $15.1
million of conservation program costs in LGAC. In addition, gas customers
received $45 million of credits during the first quarter of 1993.
Liquidity and Capital Resources
Internal Generation of Cash from Operations
PSE&G's cash provided by operating activities increased $229 million to
$1,061 million for 1994 compared to the corresponding period in 1993. This
increase was primarily due to an increase in net income of $45 million, a
decrease in accounts receivable of $154 million, a greater recovery of electric
energy and gas costs through PSE&G's LEAC and LGAC of $74 million, an increase
in depreciation and amortization of $38 million, a decrease in accrued taxes
of $25 million, a positive net change in certain other current assets and
liabilities of $64 million and a positive net change in certain noncurrent
assets and liabilities, primarily deferred amounts, of $69 million, partially
offset by a decrease in accounts payable of $183 million and a decrease in
deferred income taxes of $68 million. (For additional information see PSE&G -
Earnings and Revenues.)
Although net income increased for 1993 (See Enterprise Earnings -- PSE&G
and Revenues -- PSE&G Electric and PSE&G Gas), PSE&G's net cash provided by
operating activities decreased by $338 million from 1992 to $832 million. This
decrease was primarily due to an underrecovery of electric energy and gas costs
through PSE&G's LEAC and LGAC of $306 million, a decrease in accrued taxes of
$306 million (primarily increased NJGRT payments), a decrease in depreciation
and amortization of $43 million and a negative net change in certain other
current assets and liabilities of $28 million and a negative net change in
certain noncurrent assets and liabilities, primarily deferred amounts, of $32
million. Partially offsetting these cash outflows were the increase in net
income of $139 million, an increase in deferred income taxes of $154 million,
a decrease in fuel and materials and supplies inventories of $54 million and
an increase in accounts payable of $36 million.
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
FINANCIAL STATEMENT RESPONSIBILITY
Management of Enterprise is responsible for the preparation, integrity and
objectivity of the consolidated financial statements and related notes of
Enterprise. The consolidated financial statements and related notes are
prepared in accordance with generally accepted accounting principles. The
financial statements reflect estimates based upon the judgment of management
where appropriate. Management believes that the consolidated financial
statements and related notes present fairly Enterprise's financial position and
results of operations. Information in other parts of this Annual Report is also
the responsibility of management and is consistent with these consolidated
financial statements and related notes.
The firm of Deloitte & Touche LLP, independent auditors, is engaged to
audit Enterprise's consolidated financial statements and related notes and
issue a report thereon. Deloitte & Touche's audit is conducted in accordance
with generally accepted auditing standards. Management has made available to
Deloitte & Touche LLP, all the corporation's financial records and related
data, as well as the minutes of directors' meetings. Furthermore, management
believes that all representations made to Deloitte & Touche LLP, during its
audit were valid and appropriate.
Management has established and maintains a system of internal accounting
controls to provide reasonable assurance that assets are safeguarded, and that
transactions are executed in accordance with management's authorization and
recorded properly for the prevention and detection of fraudulent financial
reporting, so as to maintain the integrity and reliability of the financial
statements. The system is designed to permit preparation of consolidated
financial statements and related notes in accordance with generally accepted
accounting principles. The concept of reasonable assurance recognizes that the
costs of a system of internal accounting controls should not exceed the related
benefits. Management believes the effectiveness of this system is enhanced by
an ongoing program of continuous and selective training of employees. In
addition, management has communicated to all employees its policies on business
conduct, safeguarding assets and internal controls.
The Internal Auditing Department of PSE&G conducts audits and appraisals
of accounting and other operations of Enterprise and its subsidiaries and
evaluates the effectiveness of cost and other controls and recommends to
management, where appropriate, improvements thereto. Management has considered
the internal auditors' and Deloitte & Touche's recommendations concerning the
corporation's system of internal accounting controls and has taken actions
that, in its opinion, are cost-effective in the circumstances to respond
appropriately to these recommendations. Management believes that, as of
December 31, 1994, the corporation's system of internal accounting controls is
adequate to accomplish the objectives discussed herein.
<PAGE>
The Board of Directors of Enterprise carries out its responsibility of
financial overview through its Audit Committee, which presently consists of
six directors who are not employees of Enterprise or any of its affiliates. The
Audit Committee meets periodically with management as well as with
representatives of the internal auditors and Deloitte & Touche LLP. The Audit
Committee reviews the work of each to ensure that its respective
responsibilities are being carried out and discusses related matters. Both the
internal auditors and Deloitte & Touche LLP periodically meet alone with the
Audit Committee and have free access to the Audit Committee, and its individual
members, at any time.
<TABLE>
<S> <C>
E. JAMES FERLAND ROBERT C. MURRAY
E. James Ferland Robert C. Murray
Chairman of the Board, Vice President and
President and Chief Chief Financial Officer
Executive Officer
PATRICIA A. RADO
Patricia A. Rado
Vice President and Controller
Principal Accounting Officer
February 14, 1995
</TABLE>
<PAGE>
FINANCIAL STATEMENT RESPONSIBILITY
Management of PSE&G is responsible for the preparation, integrity and
objectivity of the consolidated financial statements and related notes of
PSE&G. The consolidated financial statements and related notes are prepared in
accordance with generally accepted accounting principles. The financial
statements reflect estimates based upon the judgment of management where
appropriate. Management believes that the consolidated financial statements
and related notes present fairly PSE&G's financial position and results of
operations. Information in other parts of this Annual Report is also the
responsibility of management and is consistent with these consolidated
financial statements and related notes.
The firm of Deloitte & Touche LLP, independent auditors, is engaged to
audit PSE&G's consolidated financial statements and related notes and issue a
report thereon. Deloitte & Touche's audit is conducted in accordance with
generally accepted auditing standards. Management has made available to
Deloitte & Touche LLP, all the corporation's financial records and related
data, as well as the minutes of directors' meetings. Furthermore, management
believes that all representations made to Deloitte & Touche LLP, during its
audit were valid and appropriate.
Management has established and maintains a system of internal accounting
controls to provide reasonable assurance that assets are safeguarded, and that
transactions are executed in accordance with management's authorization and
recorded properly for the prevention and detection of fraudulent financial
reporting, so as to maintain the integrity and reliability of the financial
statements. The system is designed to permit preparation of consolidated
financial statements and related notes in accordance with generally accepted
accounting principles. The concept of reasonable assurance recognizes that the
costs of a system of internal accounting controls should not exceed the related
benefits. Management believes the effectiveness of this system is enhanced by
an ongoing program of continuous and selective training of employees. In
addition, management has communicated to all employees its policies on business
conduct, safeguarding assets and internal controls.
The Internal Auditing Department conducts audits and appraisals of
accounting and other operations and evaluates the effectiveness of cost and
other controls and recommends to management, where appropriate, improvements
thereto. Management has considered the internal auditors' and Deloitte &
Touche's recommendations concerning the corporation's system of internal
accounting controls and has taken actions that are cost-effective in the
circumstances to respond appropriately to these recommendations. Management
believes that, as of December 31, 1994, the corporation's system of internal
accounting controls is adequate to accomplish the objectives discussed herein.
<PAGE>
The Board of Directors carries out its responsibility of financial
overview through the Audit Committee of Enterprise, which presently consists
of six directors who are not employees of Enterprise or any of its affiliates.
The Enterprise Audit Committee meets periodically with management as well as
with representatives of the internal auditors and Deloitte & Touche LLP. The
Audit Committee reviews the work of each to ensure that their respective
responsibilities are being carried out and discusses related matters. Both the
internal auditors and Deloitte & Touche LLP, periodically meet alone with the
Audit Committee and have free access to the Audit Committee, and its individual
members, at any time.
<TABLE>
<S> <C>
E. JAMES FERLAND ROBERT C. MURRAY
E. James Ferland Robert C. Murray
Chairman of the Board Senior Vice President and
and Chief Executive Officer Chief Financial Officer
PATRICIA A. RADO
Patricia A. Rado
Vice President and Controller
Principal Accounting Officer
February 14, 1995
</TABLE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Stockholders and Board of Directors of
Public Service Enterprise Group Incorporated:
We have audited the accompanying consolidated balance sheets of Public
Service Enterprise Group Incorporated and its subsidiaries as of December 31,
1994 and 1993, and the related consolidated statements of income, retained
earnings, and cash flows for each of the three years in the period ended
December 31, 1994. Our audits also included the consolidated financial
statement schedules listed in the Index in Item 14(b)(1). These consolidated
financial statements and the consolidated financial statement schedules are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements and consolidated
financial statement schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Public Service Enterprise
Group Incorporated and its subsidiaries at December 31, 1994 and 1993, and the
results of their operations and their cash flows for each of the three years
in the period ended December 31, 1994 in conformity with generally accepted
accounting principles. Also, in our opinion, such consolidated financial
statement schedules, when considered in relation to the basic consolidated
financial statements taken as a whole, present fairly in all material respects
the information set forth therein.
We have also previously audited, in accordance with generally accepted
auditing standards, the consolidated balance sheets as of December 31, 1992,
1991, and 1990, and the related consolidated statements of income, retained
earnings, and cash flows for the years ended December 31, 1991 and 1990 (none
of which are presented herein) and we expressed unqualified opinions on those
consolidated financial statements. In our opinion, the information set forth
in the Selected Financial Data for each of the five years in the period ended
December 31, 1994 for the Company, presented in Item 6, is fairly stated in all
material respects, in relation to the consolidated financial statements from
which it has been derived.
DELOITTE & TOUCHE LLP
February 14, 1995
Parsippany, New Jersey <PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
Public Service Electric and Gas Company:
We have audited the accompanying consolidated balance sheets of Public
Service Electric & Gas Company and its subsidiaries as of December 31, 1994 and
1993, and the related consolidated statements of income, retained earnings, and
cash flows for each of the three years in the period ended December 31, 1994.
Our audits also included the consolidated financial statement schedules listed
in the Index in Item 14(b)(2). These consolidated financial statements and the
consolidated financial statement schedules are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements and consolidated financial statement
schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Public Service Electric & Gas
Company and its subsidiaries at December 31, 1994 and 1993, and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1994 in conformity with generally accepted accounting
principles. Also, in our opinion, such consolidated financial statement
schedules, when considered in relation to the basic consolidated financial
statements taken as a whole, present fairly in all material respects the
information set forth therein.
We have also previously audited, in accordance with generally accepted
auditing standards, the consolidated balance sheets as of December 31, 1992,
1991, and 1990, and the related consolidated statements of income, retained
earnings, and cash flows for the years ended December 31, 1991 and 1990 (none
of which are presented herein) and we expressed unqualified opinions on those
consolidated financial statements. In our opinion, the information set forth
in the Selected Financial Data for each of the five years in the period ended
December 31, 1994 for the Company, presented in Item 6, is fairly stated in all
material respects, in relation to the consolidated financial statements from
which it has been derived.
DELOITTE & TOUCHE LLP
February 14, 1995
Parsippany, New Jersey
<PAGE>
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------------------
1994 1993 1992
------------ ------------ ------------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
OPERATING REVENUES
Electric............................................... $ 3,733,113 $ 3,693,083 $ 3,407,819
Gas.................................................... 1,778,528 1,594,341 1,586,181
Nonutility Activities.................................. 404,202 418,135 362,781
------------ ------------ ------------
Total Operating Revenues........................ 5,915,843 5,705,559 5,356,781
------------ ------------ ------------
OPERATING EXPENSES
Operation
Fuel for Electric Generation and Interchanged
Power............................................. 695,763 717,136 776,571
Gas Purchased and Materials for Gas Produced......... 1,023,956 897,885 858,737
Other................................................ 1,116,263 1,012,757 924,942
Maintenance............................................ 308,080 304,403 307,726
Depreciation and Amortization.......................... 629,688 600,264 642,548
Property Impairment (note 16).......................... -- 77,637 --
Taxes
Federal Income Taxes (note 10)....................... 312,551 313,680 221,469
New Jersey Gross Receipts Taxes...................... 583,167 597,898 585,770
Other................................................ 82,282 77,052 72,883
------------ ------------ -----------
Total Operating Expenses........................ 4,751,750 4,598,712 4,390,646
------------ ------------ -----------
OPERATING INCOME......................................... 1,164,093 1,106,847 966,135
------------ ------------ -----------
OTHER INCOME
Allowance for Funds Used During
Construction -- Equity............................... 12,789 12,265 12,828
Peach Bottom Settlement -- net of Federal income taxes
1992, $16,985 (note 2)............................... -- -- 32,970
Miscellaneous -- net................................... 6,430 (3,778) 30,188
------------ ------------ -----------
Total Other Income.............................. 19,219 8,487 75,986
------------ ------------ -----------
INCOME BEFORE INTEREST CHARGES AND DIVIDENDS ON
PREFERRED SECURITIES................................... 1,183,312 1,115,334 1,042,121
------------ ------------ -----------
INTEREST CHARGES (note 6)
Long-Term Debt......................................... 459,158 469,120 479,898
Short-Term Debt........................................ 23,962 13,860 14,858
Other.................................................. 12,805 19,554 29,269
------------ ------------ -----------
Total Interest Charges.......................... 495,925 502,534 524,025
Allowance for Funds Used During Construction -- Debt and
Capitalized Interest................................... (33,793) (20,833) (17,928)
------------ ------------ -----------
Net Interest Charges..................................... 462,132 481,701 506,097
------------ ------------ -----------
Preferred Securities Dividend Requirements (note 4)...... 42,147 38,114 31,907
------------ ------------ -----------
Income before cumulative effect of accounting change..... 679,033 595,519 504,117
Cumulative effect of change in accounting for income taxes
(note 10).............................................. -- 5,414 --
------------ ------------ -----------
Net Income............................................... $ 679,033 $ 600,933 $ 504,117
============ ============ ===========
SHARES OF COMMON STOCK OUTSTANDING
End of Year............................................ 244,697,930 243,688,256 235,395,751
Average for Year....................................... 244,470,794 240,663,599 232,306,492
EARNINGS PER AVERAGE SHARE OF COMMON STOCK
Income before cumulative effect of accounting change... $ 2.78 $ 2.48 $ 2.17
Cumulative effect of change in accounting for income
taxes................................................ -- .02 --
------------ ------------ -----------
TOTAL EARNINGS PER AVERAGE SHARE OF COMMON STOCK......... $ 2.78 $ 2.50 $ 2.17
============ ============ ===========
DIVIDENDS PAID PER SHARE OF COMMON STOCK................. $ 2.16 $ 2.16 $ 2.16
============ ============ ===========
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1994 1993
----------- -----------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
UTILITY PLANT-ORIGINAL COST (note 15)
Electric.................................................................. $12,345,919 $11,920,894
Gas....................................................................... 2,318,233 2,177,841
Common.................................................................... 545,131 520,285
----------- -----------
Total.............................................................. 15,209,283 14,619,020
Less accumulated depreciation and amortization.............................. 5,147,105 4,772,942
----------- -----------
Net......................................................................... 10,062,178 9,846,078
Nuclear Fuel in Service, net of accumulated amortization --
1994, $302,906; 1993, $275,638.......................................... 205,273 205,237
----------- -----------
Net Utility Plant in Service....................................... 10,267,451 10,051,315
Construction Work in Progress, including Nuclear Fuel in Process --
1994, $65,429; 1993, $98,780.............................................. 806,934 735,356
Plant Held for Future Use................................................... 23,860 17,709
----------- -----------
Net Utility Plant.................................................. 11,098,245 10,804,380
----------- -----------
INVESTMENTS AND OTHER NONCURRENT ASSETS (notes 3, 7, 8, 11,12 and 16)
Long-Term Investments, net of amortization --
1994, $2,365; 1993, $572, and net of valuation allowances --
1994, $17,104; 1993, $18,018, respectively.............................. 1,625,952 1,630,996
Oil and Gas Property, Plant and Equipment, net of accumulated depreciation
and amortization -- 1994, $748,245; 1993, $695,791...................... 577,913 506,047
Real Estate, Property and Equipment, net of accumulated depreciation --
1994, $14,242; 1993, $10,840, and net of valuation allowances --
1994, $23,264; 1993, $16,684, respectively.............................. 115,210 110,661
Other Plant, net of accumulated depreciation and amortization --
1994, $4,653; 1993, $3,735.............................................. 36,063 28,327
Nuclear Decommissioning and Other Special Funds........................... 233,022 189,282
Other Assets - net........................................................ 85,478 103,538
----------- -----------
Total Investments and Other Noncurrent Assets...................... 2,673,638 2,568,851
----------- -----------
CURRENT ASSETS
Cash and Cash Equivalents (note 9)........................................ 67,866 71,372
Accounts Receivable:
Customer Accounts Receivable............................................ 434,207 446,629
Other Accounts Receivable............................................... 211,779 230,373
Less: allowance for doubtful accounts.................................. 40,915 27,932
Unbilled Revenues......................................................... 204,056 244,497
Fuel, at average cost..................................................... 268,927 285,943
Materials and Supplies, net of inventory valuation reserves --
1994, $18,200; 1993, $8,525, respectively............................... 148,285 172,438
Deferred Income Taxes (note 10)........................................... 25,311 12,934
Miscellaneous Current Assets.............................................. 37,356 49,860
----------- -----------
Total Current Assets............................................... 1,356,872 1,486,114
----------- -----------
DEFERRED DEBITS (note 5)
Property Abandonments -- net.............................................. 88,269 105,536
Oil and Gas Property Write-Down........................................... 41,232 46,386
Unamortized Debt Expense.................................................. 134,599 121,278
Deferred OPEB Costs (notes 1 and 13)...................................... 116,476 58,593
Underrecovered Electric Energy and Gas Costs -- net....................... 172,563 62,034
Unrecovered Environmental Costs (notes 2 and 12).......................... 135,499 138,531
Unrecovered Plant and Regulatory Study Costs.............................. 37,128 35,196
Unrecovered SFAS 109 Deferred Income Taxes (note 10)...................... 791,393 789,795
Deferred Decontamination and Decommissioning Costs (note 3)............... 53,016 56,055
Other..................................................................... 18,510 56,907
----------- -----------
Total Deferred Debits.............................................. 1,588,685 1,470,311
----------- -----------
Total............................................................ $16,717,440 $16,329,656
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
CONSOLIDATED BALANCE SHEETS
CAPITALIZATION AND LIABILITIES
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1994 1993
----------- -----------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
CAPITALIZATION (notes 4, 5 and 6)
Common Equity
Common Stock.................................. $ 3,801,157 $ 3,772,662
Retained Earnings............................. 1,510,010 1,361,018
----------- -----------
Total Common Equity...................... 5,311,167 5,133,680
Subsidiaries' Securities and Obligations
Preferred Securities
Preferred Stock Without Mandatory Redemption.. 384,994 429,994
Preferred Stock With Mandatory Redemption..... 150,000 150,000
Monthly Income Preferred Securities........... 150,000 --
Long-Term Debt................................... 5,180,657 5,256,321
----------- -----------
Total Capitalization..................... 11,176,818 10,969,995
----------- -----------
OTHER LONG-TERM LIABILITIES
Decontamination and Decommissioning Costs (note 3) 56,149 56,055
Environmental Costs (notes 2 and 12).............. 105,684 111,000
Capital Lease Obligations......................... 53,770 53,104
----------- -----------
Total Other Long-Term Liabilities......... 215,603 220,159
----------- -----------
CURRENT LIABILITIES
Long-Term Debt due within one year................ 499,738 168,064
Commercial Paper and Loans (note 6)............... 491,586 577,636
Book Overdrafts................................... 86,576 62,992
Accounts Payable.................................. 433,471 519,261
New Jersey Gross Receipts Taxes Accrued........... -- 263,357
Other Taxes Accrued............................... 44,149 39,610
Interest Accrued.................................. 107,962 107,027
Estimated Liability for Vacation Pay.............. 27,080 26,993
Customer Deposits................................. 33,698 36,668
Liability for Injuries and Damages................ 29,814 28,338
Miscellaneous Environmental Liabilities........... 15,365 4,475
Other............................................. 87,480 61,277
----------- ----------
Total Current Liabilities................. 1,856,919 1,895,698
----------- ----------
DEFERRED CREDITS
Accumulated Deferred Income Taxes (note 10)....... 2,905,390 2,702,386
Accumulated Deferred Investment Tax Credits ...... 412,466 432,713
Deferred OPEB Costs (notes 1 and 13).............. 116,476 58,593
Other............................................. 33,768 50,112
----------- ----------
Total Deferred Credits.................... 3,468,100 3,243,804
----------- ----------
COMMITMENTS AND CONTINGENT LIABILITIES (note 12)
Total..................................... $16,717,440 $16,329,656
=========== ===========
</TABLE>
<PAGE>
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
---------------------------------------
1994 1993 1992
---------- ---------- ---------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income......................................... $ 679,033 $ 600,933 $ 504,117
Adjustments to reconcile net income to net cash
flows from operating activities:
Depreciation and Amortization................... 629,688 600,264 642,548
Amortization of Nuclear Fuel.................... 95,173 102,718 91,903
(Deferral) Recovery of Electric Energy
and Gas Costs -- net.......................... (110,529) (184,770) 121,371
Loss from Property Impairments.................. -- 77,637 --
Cumulative Effect of Change in Accounting for
Income Taxes.................................. -- (5,414) --
Amortization of Discounts on Property
Abandonments and Disallowance................. (6,743) (7,801) (11,293)
Unrealized Gains on Investments -- net.......... (26,329) (8,694) (24,843)
Provision for Deferred Income Taxes -- net...... 138,919 168,406 56,846
Investment Tax Credits -- net................... (20,247) (11,655) (20,342)
Allowance for Funds Used During Construction --
Debt and Equity and Capitalized Interest...... (46,582) (33,098) (30,756)
Proceeds from Leasing Activities -- net......... 27,682 14,780 30,295
Changes in certain current assets and liabilities
Net decrease (increase) in Accounts Receivable
and Unbilled Revenues...................... 84,440 (68,382) (68,525)
Net decrease (increase) in Inventory -- Fuel
and Materials and Supplies................. 41,169 16,438 (37,083)
Net (decrease) increase in Accounts Payable... (85,790) 95,331 38,589
Net (decrease) increase in Accrued Taxes...... (258,818) (293,919) 37,892
Net change in Other Current Assets and
Liabilities................................ 36,748 (19,505) 8,263
Other........................................... 53,976 (11,598) (14,538)
---------- ---------- ----------
Net cash provided by operating
activities............................... 1,231,790 1,031,671 1,324,444
---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to Utility Plant, excluding AFDC......... (849,174) (863,294) (800,344)
Additions to Oil and Gas Property, Plant and
Equipment, excluding Capitalized Interest....... (149,523) (87,968) (32,337)
Net decrease (increase) in Long-Term Investments
and Real Estate................................. 58,416 66,659 (61,099)
Increase in Decommissioning and Other Special
Funds, excluding interest....................... (35,394) (45,508) (9,262)
Cost of Plant Removal -- net....................... (33,962) (47,791) (40,111)
Other.............................................. 7,154 (14,938) (6,000)
---------- ---------- ----------
Net cash used in investing activities...... (1,002,483) (992,840) (949,153)
---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (decrease) increase in Short-Term Debt......... (86,050) 185,654 2,932
Increase (decrease) in Book Overdrafts............. 23,584 (10,078) 24,009
Issuance of Long-Term Debt......................... 849,800 2,137,700 880,000
Redemption of Long-Term Debt....................... (593,790) (2,083,453) (1,058,179)
Long-Term Debt Issuance and Redemption Costs....... (29,811) (72,114) (19,753)
Issuance of Preferred Stock........................ 75,000 75,000 75,000
Redemption of Preferred Stock...................... (120,000) -- --
Issuance of Monthly Income Preferred Securities.... 150,000 -- --
Issuance of Common Stock........................... 28,495 273,479 237,045
Cash Dividends Paid on Common Stock................ (528,071) (521,572) (503,197)
Other.............................................. (1,970) (6,772) (5,719)
---------- ---------- ----------
Net cash used in financing activities...... (232,813) (22,156) (367,862)
---------- ---------- ----------
Net (decrease) increase in Cash and Cash
Equivalents........................................ (3,506) 16,675 7,429
Cash and Cash Equivalents at Beginning of Year....... 71,372 54,697 47,268
---------- ---------- ----------
Cash and Cash Equivalents at End of Year............. $ 67,866 $ 71,372 $ 54,697
========== ========== ==========
Income Taxes Paid.................................... $ 155,104 $ 140,172 $ 143,211
Interest Paid........................................ $ 432,873 $ 458,956 $ 486,396
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
----------------------------------------
1994 1993 1992
---------- ---------- ----------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
BALANCE JANUARY 1...................................... $1,361,018 $1,282,931 $1,282,029
ADD NET INCOME......................................... 679,033 600,933 504,117
---------- ---------- ----------
Total........................................ 2,040,051 1,883,864 1,786,146
---------- ---------- ----------
DEDUCT
Dividends on Common Stock(A)......................... 528,071 521,572 503,197
Capital Stock Expenses............................... 1,970 1,274 18
---------- ---------- ----------
Total Deductions............................. 530,041 522,846 503,215
---------- ---------- ----------
BALANCE DECEMBER 31.................................... $1,510,010 $1,361,018 $1,282,931
========== ========== ==========
(A) The ability of Enterprise to declare and pay dividends is contingent upon its receipt of dividend
payments from its subsidiaries. PSE&G, Enterprise's principal subsidiary, has restrictions on the
payment of dividends which are contained in its Restated Certificate of Incorporation, as amended,
certain of the indentures supplemental to its Mortgage, and certain debenture bond and other
indentures. However, none of these restrictions presently limits the payment of dividends out of
current earnings. The amount of PSE&G's restricted retained earnings at December 31, 1994, 1993
and 1992 was $10 million.
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
PUBLIC SERVICE ELECTRIC AND GAS COMPANY
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
----------------------------------------
1994 1993 1992
---------- ---------- ----------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
OPERATING REVENUES
Electric............................................. $3,733,113 $3,693,083 $3,407,819
Gas.................................................. 1,778,528 1,594,341 1,586,181
---------- ---------- ----------
Total Operating Revenues..................... 5,511,641 5,287,424 4,994,000
---------- ---------- ----------
OPERATING EXPENSES
Operation
Fuel for Electric Generation and Interchanged
Power........................................... 695,763 717,136 776,571
Gas Purchased and Materials for Gas Produced...... 1,036,701 919,870 903,360
Other............................................. 957,599 880,943 818,606
Maintenance.......................................... 308,080 304,403 307,726
Depreciation and Amortization........................ 547,032 509,206 552,011
Taxes
Federal Income Taxes (note 10).................... 294,529 308,790 195,464
New Jersey Gross Receipts Taxes................... 583,167 597,898 585,770
Other............................................. 76,100 67,593 65,968
---------- ---------- ----------
Total Operating Expenses..................... 4,498,971 4,305,839 4,205,476
---------- ---------- ----------
OPERATING INCOME....................................... 1,012,670 981,585 788,524
---------- ---------- ----------
OTHER INCOME
Allowance for Funds Used During
Construction -- Equity............................ 12,789 12,265 12,828
Peach Bottom Settlement -- net of Federal income
taxes -- 1992, $16,985 (note 2)................... -- -- 32,970
Miscellaneous -- net................................. 6,233 (3,841) 29,927
---------- ---------- ----------
Total Other Income........................... 19,022 8,424 75,725
---------- ---------- ----------
INCOME BEFORE INTEREST CHARGES AND DIVIDENDS ON
PREFERRED SECURITIES................................. 1,031,692 990,009 864,249
---------- ---------- ----------
INTEREST CHARGES (note 6)
Long-Term Debt....................................... 366,894 364,252 368,496
Short-Term Debt...................................... 18,175 6,414 5,920
Other................................................ 10,856 19,290 27,486
---------- ---------- ----------
Total Interest Charges....................... 395,925 389,956 401,902
Allowance for Funds Used During Construction -- Debt... (25,319) (14,815) (13,589)
---------- ---------- ----------
Net Interest Charges................................... 370,606 375,141 388,313
---------- ---------- ----------
Monthly Income Preferred Securities
Dividend Requirements (note 4)....................... 1,680 -- --
---------- ---------- ----------
Net Income............................................. 659,406 614,868 475,936
---------- ---------- ----------
Preferred Stock Dividend Requirements (note 4)......... 40,467 38,114 31,907
---------- ---------- ----------
EARNINGS AVAILABLE TO PUBLIC SERVICE ENTERPRISE GROUP
INCORPORATED......................................... $ 618,939 $ 576,754 $ 444,029
========== ========== ==========
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
PUBLIC SERVICE ELECTRIC AND GAS COMPANY
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1994 1993
----------- -----------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
UTILITY PLANT-ORIGINAL COST (note 15)
Electric........................................................ $12,345,919 $11,920,894
Gas............................................................. 2,318,233 2,177,841
Common.......................................................... 545,131 520,285
----------- -----------
Total................................................... 15,209,283 14,619,020
Less accumulated depreciation and amortization.................... 5,147,105 4,772,942
----------- -----------
Net............................................................... 10,062,178 9,846,078
Nuclear Fuel in Service, net of accumulated amortization --
1994, $302,906; 1993, $275,638............................... 205,273 205,237
----------- -----------
Net Utility Plant in Service............................ 10,267,451 10,051,315
Construction Work in Progress, including Nuclear Fuel in
Process -- 1994, $65,429; 1993, $98,780......................... 806,934 735,356
Plant Held for Future Use......................................... 23,860 17,709
----------- -----------
Net Utility Plant....................................... 11,098,245 10,804,380
----------- -----------
INVESTMENTS AND OTHER NONCURRENT ASSETS
Long-Term Investments, net of amortization --
1994, $2,365; 1993, $572, respectively...................... 65,886 116,554
Nuclear Decommissioning and Other Special Funds (note 3)........ 233,022 189,282
Other Plant, net of accumulated depreciation and amortization --
1994, $1,127; 1993, $872................................... 32,879 26,369
----------- -----------
Total Investments and Other Noncurrent Assets........... 331,787 332,205
----------- -----------
CURRENT ASSETS
Cash and Cash Equivalents (note 9).............................. 27,498 42,165
Accounts Receivable:
Customer Accounts Receivable................................. 434,207 446,629
Other Accounts Receivable.................................... 151,684 160,729
Less: allowance for doubtful accounts........................ 40,915 27,932
Unbilled Revenues............................................... 204,056 244,497
Fuel, at average cost........................................... 268,927 285,943
Materials and Supplies, net of inventory valuation reserves --
1994, $18,200; 1993, $8,525, respectively..................... 146,763 170,910
Deferred Income Taxes (note 10)................................. 25,311 12,934
Miscellaneous Current Assets.................................... 30,407 45,754
----------- -----------
Total Current Assets.................................... 1,247,938 1,381,629
----------- -----------
DEFERRED DEBITS (note 5)
Property Abandonments -- net.................................... 88,269 105,536
Oil and Gas Property Write-Down................................. 41,232 46,386
Unamortized Debt Expense........................................ 132,342 117,057
Deferred OPEB Costs (notes 1 and 13)............................ 116,476 58,593
Underrecovered Electric Energy and Gas Costs -- net............. 172,563 62,034
Unrecovered Environmental Costs (notes 2 and 12)................ 135,499 138,531
Unrecovered Plant and Regulatory Study Costs.................... 37,128 35,196
Deferred Decontamination and Decommissioning Costs (note 3)..... 53,016 56,055
Unrecovered SFAS 109 Deferred Income Taxes (note 10)............ 791,393 789,795
Other........................................................... 18,510 56,901
----------- -----------
Total Deferred Debits................................... 1,586,428 1,466,084
----------- -----------
Total................................................. $14,264,398 $13,984,298
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
PUBLIC SERVICE ELECTRIC AND GAS COMPANY
CONSOLIDATED BALANCE SHEETS
CAPITALIZATION AND LIABILITIES
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1994 1993
----------- -----------
<S> <C> <C>
(THOUSANDS OF DOLLARS)
CAPITALIZATION (notes 4, 5 and 6)
Common Equity
Common Stock................................... $ 2,563,003 $ 2,563,003
Contributed Capital from Enterprise........... 534,395 534,395
Retained Earnings............................. 1,292,201 1,180,532
----------- -----------
Total Common Equity...................... 4,389,599 4,277,930
Preferred Stock without mandatory redemption....... 384,994 429,994
Preferred Stock with mandatory redemption.......... 150,000 150,000
Monthly Income Preferred Securities of
Subsidiary....................................... 150,000 --
Long-Term Debt..................................... 4,486,787 4,364,437
----------- -----------
Total Capitalization..................... 9,561,380 9,222,361
----------- -----------
OTHER LONG-TERM LIABILITIES
Decontamination and Decommissioning Costs (note 3) 56,149 56,055
Environmental Costs (notes 2 and 12)............. 105,684 111,000
Capital Lease Obligations (note 11).............. 53,770 53,104
----------- -----------
Total Other Long-Term Liabilities......... 215,603 220,159
----------- -----------
CURRENT LIABILITIES
Long-Term Debt due within one year................ 310,200 61,700
Commercial Paper and Loans (note 6)............... 401,759 532,728
Book Overdrafts................................... 86,576 62,992
Accounts Payable.................................. 370,005 480,796
Accounts Payable - Associated Companies (note 19). 16,677 5,674
New Jersey Gross Receipts Taxes Accrued........... -- 263,357
Other Taxes Accrued............................... 36,030 33,710
Interest Accrued.................................. 95,721 96,257
Estimated Liability for Vacation Pay.............. 27,080 26,993
Customer Deposits................................. 33,698 36,668
Liability for Injuries and Damages................ 29,814 28,338
Miscellaneous Environmental Liabilities........... 15,365 4,475
Other............................................. 50,778 26,450
----------- -----------
Total Current Liabilities................. 1,473,703 1,660,138
----------- -----------
DEFERRED CREDITS
Accumulated Deferred Income Taxes (note 10)....... 2,478,539 2,368,778
Accumulated Deferred Investment Tax Credits ...... 389,721 408,929
Deferred OPEB Costs (notes 1 and 13).............. 116,476 58,593
Other............................................. 28,976 45,340
----------- -----------
Total Deferred Credits.................... 3,013,712 2,881,640
----------- -----------
COMMITMENTS AND CONTINGENT LIABILITIES (note 12)
Total..................................... $14,264,398 $13,984,298
=========== ===========
</TABLE>
<PAGE>
PUBLIC SERVICE ELECTRIC AND GAS COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
---------------------------------------
1994 1993 1992
----------- ----------- -----------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income................................................. $ 659,406 $ 614,868 $ 475,936
Adjustments to reconcile net income to net cash flows from
operating activities:
Depreciation and Amortization........................... 547,032 509,206 552,011
Amortization of Nuclear Fuel............................ 95,173 102,718 91,903
(Deferral) Recovery of Electric Energy and Gas
Costs -- net.......................................... (110,529) (184,770) 121,371
Amortization of Discounts on Property Abandonments and
Disallowance.......................................... (6,743) (7,801) (11,293)
Provision for Deferred Income Taxes -- net.............. 108,163 175,868 21,839
Investment Tax Credits -- net........................... (19,208) (18,408) (19,089)
Allowance for Funds Used During Construction -- Debt and
Equity................................................ (38,108) (27,080) (26,417)
Changes in certain current assets and liabilities
Net decrease (increase) in Accounts Receivable
and Unbilled Revenues.............................. 74,891 (78,953) (54,792)
Net decrease (increase) in Inventory -- Fuel and
Materials and Supplies............................. 41,163 16,920 (36,775)
Net (decrease) increase in Accounts Payable........... (99,788) 83,421 47,365
Net (decrease) increase in Accrued Taxes.............. (261,037) (286,119) 20,227
Net change in Other Current Assets and Liabilities.... 36,245 (27,790) 492
Other................................................... 33,846 (39,872) (12,115)
----------- ----------- -----------
Net cash provided by operating activities............. 1,060,506 832,208 1,170,663
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to Utility Plant, excluding AFDC................. (849,174) (863,294) (800,344)
Net decrease (increase) in Long-Term Investments........... 50,668 (26,980) (20,438)
Net increase in Decommissioning Funds and Other Special
Funds, excluding interest............................... (35,394) (45,508) (9,262)
Cost of Plant Removal -- net............................... (33,962) (47,791) (40,111)
Other...................................................... 1,692 (13,607) (4,572)
----------- ----------- -----------
Net cash used in investing activities................. (866,170) (997,180) (874,727)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (decrease) increase in Short-Term Debt................. (130,969) 275,192 91,679
Increase (decrease) in Book Overdrafts..................... 23,584 (10,078) 24,009
Issuance of Long-Term Debt................................. 849,800 1,972,700 850,000
Redemption of Long-Term Debt............................... (478,950) (1,716,401) (1,031,660)
Long-Term Debt Issuance and Redemption Costs............... (29,731) (68,227) (19,314)
Issuance of Preferred Stock................................ 75,000 75,000 75,000
Redemption of Preferred Stock.............................. (120,000) - -
Issuance of Monthly Income Preferred Securities............ 150,000 - -
Contributed Capital by Enterprise.......................... 174,670 239,725
Cash Dividends Paid........................................ (545,767) (531,314) (517,907)
Other...................................................... (1,970) (754) (402)
----------- ----------- -----------
Net cash (used in) provided by financing activities... (209,003) 170,788 (288,881)
----------- ----------- -----------
Net (decrease) increase in Cash and Cash Equivalents......... (14,667) 5,816 7,055
Cash and Cash Equivalents at Beginning of Year............... 42,165 36,349 29,294
----------- ----------- -----------
Cash and Cash Equivalents at End of Year..................... $ 27,498 $ 42,165 $ 36,349
=========== =========== ===========
Income Taxes Paid............................................ $ 209,196 $ 172,869 209,258
Interest Paid................................................ $ 345,867 $ 356,620 $ 374,049
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
PUBLIC SERVICE ELECTRIC AND GAS COMPANY
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
----------------------------------------
1994 1993 1992
---------- ---------- ----------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
BALANCE JANUARY 1...................................... $1,180,532 $1,097,734 $1,140,117
ADD NET INCOME......................................... 659,406 614,868 475,936
---------- ---------- ----------
Total........................................ 1,839,938 1,712,602 1,616,053
---------- ---------- ----------
DEDUCT CASH DIVIDENDS(A)
Preferred Stock, at required rates................... 40,467 38,114 31,907
Common Stock......................................... 505,300 493,200 486,000
CAPITAL STOCK EXPENSES................................. 1,970 756 412
---------- ---------- ----------
Total Deductions............................. 547,737 532,070 518,319
---------- ---------- ----------
BALANCE DECEMBER 31.................................... $1,292,201 $1,180,532 $1,097,734
========== ========== ==========
(A) The Company has restrictions on the payment of dividends which are contained in its Restated
Certificate of Incorporation, as amended, certain of the indentures supplemental to its
Mortgage, and certain debenture bond indentures. However, none of these restrictions presently
limits the payment of dividends out of current earnings. The amount of the Company's restricted
retained earnings at December 31, 1994, 1993 and 1992 was $10 million.
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Enterprise has two direct wholly owned subsidiaries, Public Service
Electric and Gas Company (PSE&G) and Enterprise Diversified Holdings
Incorporated (EDHI). Enterprise's principal subsidiary, PSE&G, is an operating
public utility providing electric and gas service in certain areas in the State
of New Jersey. Enterprise owns all of PSE&G's common stock (without nominal
or par value). Of the 150,000,000 authorized shares of such common stock at
December 31, 1994, 1993 and 1992, there were 132,450,344 shares outstanding,
with an aggregate book value of $2.6 billion.
PSE&G has a finance subsidiary, PSE&G Fuel Corporation (Fuelco), providing
financing, unconditionally guaranteed by PSE&G, of up to $150 million aggregate
principal amount at any one time of a 42.49% interest in the nuclear fuel
acquired for Peach Bottom Atomic Power Station Units 2 and 3 (Peach Bottom).
PSE&G also has a nonutility subsidiary, Public Service Conservation Resources
Corporation (PSCRC) which offers demand side management (DSM) services to
utility customers. In 1994, Public Service Electric and Gas Capital, L.P.
(Partnership), a limited partnership in which PSE&G is the general partner, was
formed for the purpose of issuing monthly income preferred securities (MIPS).
(See Note 4 -- Schedule of Consolidated Capital Stock and Other Securities.)
EDHI is the parent of Enterprise's nonutility businesses: Energy
Development Corporation (EDC), an oil and gas exploration and production and
marketing company; Community Energy Alternatives Incorporated (CEA), an
investor in and developer of cogeneration and independent power production
facilities; Public Service Resources Corporation (PSRC), which makes primarily
passive investments; and Enterprise Group Development Corporation (EGDC), a
diversified nonresidential real estate development and investment business.
EDHI also has two finance subsidiaries: PSEG Capital Corporation (Capital), and
Enterprise Capital Funding Corporation (Funding).
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Consolidation Policy
The consolidated financial statements include the accounts of Enterprise
and its subsidiaries. All significant intercompany accounts and transactions
have been eliminated in consolidation. Certain reclassifications of prior
years' data have been made to conform with the current presentation.
Regulation -- PSE&G
The accounting and rates of PSE&G are subject, in certain respects, to
the requirements of the New Jersey Board of Public Utilities (BPU) and the
Federal Energy Regulatory Commission (FERC). As a result, PSE&G maintains its
accounts in accordance with their prescribed Uniform Systems of Accounts, which
are the same. The applications of Generally Accepted Accounting Principles by
PSE&G differ in certain respects from applications by non-regulated businesses.
PSE&G prepares its financial statements in accordance with the provisions of
Statement of Financial Accounting Standards No. 71 -- "Accounting for the
Effects of Certain Types of Regulation" (SFAS 71). In general, SFAS 71
recognizes that accounting for rate-regulated enterprises should reflect the
relationship of costs and revenues. As a result, a regulated utility may defer
recognition of cost (a regulatory asset) or recognize an obligation (a
regulatory liability) if it is probable that, through the rate-making process,
there will be a corresponding increase or decrease in revenues. Accordingly,
PSE&G has deferred certain costs, which will be amortized over various periods.
To the extent that collection of such costs or payment of liabilities is no
longer probable as a result of changes in regulation and/or PSE&G's competitive
position, the associated regulatory asset or liability will be reversed with
a charge or credit to income. (See Note 5 -- Deferred Items.)
Amounts charged to operations for depreciation expense reflect
estimated useful lives and methods, that include estimated cost of removal and
salvage, prescribed and approved by regulators rather than those that might
otherwise apply to unregulated enterprises. PSE&G cannot presently quantify
what the financial statement impact may be if depreciation expense is
determined absent regulation.
Utility Plant and Related Depreciation -- PSE&G
Additions to utility plant and replacements of units of property are
capitalized at original cost. The cost of maintenance, repairs and replacements
of minor items of property is charged to appropriate expense accounts. At the
time units of depreciable properties are retired or otherwise disposed of, the
original cost less net salvage value is charged to accumulated depreciation.
For financial reporting purposes, depreciation is computed under the
straight-line method. Depreciation is based on estimated average remaining
lives of the several classes of depreciable property. These estimates are
reviewed on a periodic basis and necessary adjustments are made as approved by
the BPU. Depreciation provisions stated in percentages of original cost of
depreciable property were 3.51% in 1994, 3.46% in 1993 and 3.48% in 1992.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Decontamination and Decommissioning -- PSE&G
In September 1993, FERC issued Order No. 557 on the accounting and
rate-making treatment of special assessments levied under the National Energy
Policy Act of 1992 (NEPA). Order No. 557 provides that special assessments are
a necessary and reasonable current cost of fuel and shall be fully recoverable
in rates in the same manner as other fuel costs. While PSE&G expects to
recover such special assessments through its electric Levelized Energy
Adjustment Clause (LEAC) no assurances can be given that the BPU will authorize
such recovery from customers. (See Note 3 -- PSE&G Nuclear Decommissioning and
Amortization of Nuclear Fuel - Uranium, Decontamination and Decommissioning
Fund.)
Amortization of Nuclear Fuel -- PSE&G
Nuclear energy burnup costs are charged to fuel expense on a
units-of-production basis over the estimated life of the fuel. Rates for the
recovery of fuel used at all nuclear units include a provision of one mill per
kilowatthour (KWH) of nuclear generation for spent fuel disposal costs. (See
Note 3 -- PSE&G Nuclear Decommissioning and Amortization of Nuclear Fuel.)
Revenues and Fuel Costs -- PSE&G
Revenues are recorded based on services rendered to customers during each
accounting period. PSE&G records unbilled revenues representing the estimated
amount customers will be billed for services rendered from the time meters were
last read to the end of the respective accounting period. Rates include
projected fuel costs for electric generation, purchased and interchanged power,
gas purchased and materials used for gas production. Any under or
overrecoveries, together with interest (in the case of net overrecoveries), are
deferred and included in operations in the period in which they are reflected
in rates.
Long-Term Investments
PSRC has invested in securities and limited partnerships investing in
securities, which are recorded at fair value, and various leases and other
limited partnerships. EGDC is a participant in the nonresidential real estate
markets. CEA is an investor in and developer of cogeneration and power
production facilities. (See Note 7 -- Long-Term Investments.)
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Derivatives
Gains and losses on hedges of existing assets or liabilities are included
in the carrying amounts of those assets and liabilities and are ultimately
recognized in income as part of those carrying amounts. Gains and losses
related to qualifying hedges of firm commitments or anticipated transactions
also are deferred and recognized in income or as adjustments of carrying
amounts when the hedged transaction occurs.
PSRC's security derivatives are recorded at fair value. Realized and
unrealized changes in fair values are recognized in revenues in the period in
which the changes occur. (See Note 8 -- Financial Instruments and Risk
Management.)
Oil and Gas Accounting -- EDC
EDC uses the successful efforts method of accounting under which proved
leasehold costs are capitalized and amortized over the proved developed and
undeveloped reserves on a units-of-production basis. Drilling and equipping
costs, except exploratory dry holes, are capitalized and depreciated over the
proved developed reserves on a units-of-production basis. Estimated future
abandonment costs of offshore proved properties are depreciated on a
units-of-production basis over the proved developed reserves. Unproved
leasehold costs are capitalized and not amortized, pending an evaluation of the
exploration results. Unproved leasehold and producing properties costs are
assessed periodically to determine if an impairment of the cost of significant
individual properties has occurred. The cost of an impairment is charged to
expense. Costs incurred for exploratory dry holes, exploratory geological and
geophysical work and delay rentals are charged to expense as incurred.
Income Taxes
Enterprise and its subsidiaries file a consolidated Federal income tax
return and income taxes are allocated to Enterprise's subsidiaries based on
taxable income or loss of each. Investment tax credits are deferred and
amortized over the useful lives of the related property, including nuclear
fuel.
Effective January 1, 1993, Enterprise and its subsidiaries adopted
Statement of Financial Accounting Standards No. 109 "Accounting for Income
Taxes" (SFAS 109). Under SFAS 109, deferred income taxes are provided for all
temporary differences between the financial statement carrying amounts and the
tax bases of existing assets and liabilities irrespective of the treatment for
rate-making purposes. For periods prior to January 1, 1993, PSE&G provided
deferred income taxes to the extent permitted for rate-making purposes. (See
Note 10 -- Federal Income Taxes.)
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Allowance for Funds Used During Construction and Capitalized Interest
PSE&G -- Allowance for Funds Used During Construction (AFDC) represents
the cost of debt and equity funds used to finance the construction of new
utility facilities. The amount of AFDC capitalized is reported in the
Consolidated Statements of Income as a reduction of interest charges for the
borrowed funds component and as other income for the equity funds component.
The rates used for calculating AFDC in 1994, 1993 and 1992 were 6.48%, 6.96%
and 7.80%, respectively. These rates are within the limits set by FERC.
EDHI -- The operating subsidiaries of EDHI capitalize interest costs
allocable to construction expenditures at the average cost of borrowed funds.
Pension Plan and Other Postretirement Benefits
The employees of PSE&G and participating affiliates, after completing one
year of service, are covered by a noncontributory trusteed pension plan
(Pension Plan). The policy is to fund pension costs accrued. PSE&G also
provides certain health care and life insurance benefits to active and retired
employees. The portion of such costs pertaining to retirees amounted to $29
million, $28 million, and $24 million in 1994, 1993 and 1992, respectively. The
current cost of these benefits is charged to expense when paid and is currently
being recovered from ratepayers.
On January 1, 1993, Enterprise and PSE&G adopted Statement of Financial
Accounting Standards No. 106, "Employers Accounting for Postretirement Benefits
Other Than Pensions" (SFAS 106), which requires that the expected cost of
employees' postretirement health care benefits be charged to expense during the
years in which employees render service. Prior to 1993, Enterprise and PSE&G
recognized postretirement health care costs in the year in which the benefits
were paid. PSE&G elected to amortize over 20 years its unfunded obligation at
January 1, 1993. (See Note 13 -- Postretirement Benefits Other Than Pensions
and Note 14 -- Pension Plan.)
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 2. RATE MATTERS
Levelized Gas Adjustment Charge
On July 1, 1994, PSE&G petitioned the BPU to increase its Levelized Gas
Adjustment Charge (LGAC) rates to recover an additional $23.7 million, to be
effective October 1, 1994. On August 4, 1994, the matter was transmitted to
the Office of Administrative Law of the State of New Jersey (OAL) for
adjudication. Due to recent projections of lower gas prices, the parties
reached a stipulated settlement on October 6, 1994 which provides for the
implementation of the Gas Remediation Adjustment Charge (RAC) with an equal
corresponding offsetting adjustment to the current LGAC rate. These LGAC and
RAC rates, when combined, produce a charge which results in a zero increase to
the firm customers for the LGAC period ending September 30, 1995. The
settlement was approved by the BPU on December 21, 1994.
The BPU, on January 24, 1995, approved PSE&G's proposal to credit a total
of $50 million to its firm gas sales customers during February and March 1995.
Specifically, PSE&G will credit approximately $30 million in February and $20
million in March 1995. The opportunity to provide these credits was due
principally to abnormally warm winter weather, lower gas prices and a lower
current short-term price forecast.
Electric Levelized Energy Adjustment Clause
On July 1, 1994, PSE&G petitioned the BPU to increase its LEAC rates,
effective October 1, 1994, to recover an additional $130 million of energy
costs. A significant part of the need for an increase is the larger percentage
of power that PSE&G is obligated to purchase under prior BPU approved contracts
with non-regulated power producers. On November 1, 1994, the parties reached
a stipulated settlement which provides for the implementation of provisional
LEAC rates, subject to refund, designed to recover an additional $98 million
over the period November 1994 through May 1995. The stipulation provided
sufficient rate relief to recover current fuel costs and to begin to reduce the
accumulated underrecovered balance while affording the parties the opportunity
to continue litigating unresolved issues of: a) rate treatment for the Bergen
repowering project (See Note 12 -- Commitments and Contingent Liabilities -
Bergen Station Repowering); b) an alleged overearnings issue; c) recovery of
the costs related to the April 7, 1994 shutdown at Salem 1 nuclear unit; and
d) the appropriateness of PSE&G's gas to electric transfer and pricing
calculations pertaining to the 1993 agreement with PSE&G's largest industrial
customer (Bayway Decision and Order). This stipulation was approved by the BPU
without modification and became effective on November 4, 1994.
With respect to the litigated issues outlined above, an Administrative Law
Judge (ALJ) decision was filed with the BPU on January 30, 1995 recommending
that (1) the issue of alleged overearnings is not a LEAC issue and PSE&G is not
earning in excess of its rate of return; (2) a hearing convene regarding the
Salem 1 shutdown to determine replacement power costs and whether any
limitations imposed by the New Jersey Public Utility Fault Determination Act
should be triggered; (3) a reduction of the 1993 Nuclear Performance Standard
(NPS) reward to $1.9 million from $3.9 million be made; (4) the joint position
of the parties on gas to electric pricing and the accounting procedures
approved by the BPU in its Bayway Decision and Order should not be revised; (5)
a decrease of $700 thousand in DSM program costs; and (6) the BPU should
address the RAC costs in the LEAC. PSE&G filed exceptions to the ALJ's
decision on February 14, 1995 addressing the 1993 NPS reward; DSM estimates;
replacement power costs for the April 7, 1994 Salem outage and the treatment
of RAC charges. However, neither Enterprise nor PSE&G is able to predict what
action, if any, the BPU may take concerning the ALJ's decision. (See Note 3 --
PSE&G Nuclear Decommissioning and Amortization of Nuclear Fuel.)
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
On July 7, 1994, the BPU approved a stipulation which made permanent the
LEAC rates that went into effect on January 1, 1993 on an interim basis and
closed out the previous LEAC for the period ended December 31, 1992. The
stipulation also provided a credit of $2.5 million to the deferred fuel balance
for LEAC customers in resolution of all outstanding issues related to the
November 9, 1991 Salem 2 turbine generator outage and a credit of $1.3 million
to reflect an adjustment of estimated New Jersey Gross Receipts and Franchise
Tax (NJGRT) unit tax rates to actual unit tax rates.
Remediation Adjustment Charge
In accordance with the BPU Order dated September 15, 1993 and the BPU
approved Technical Conference Decision and Order dated November 4, 1993, PSE&G
proposed to recover, effective October 1, 1994, $3.7 million from its gas
customers and $2.4 million from its electric customers for costs incurred
during the period October 1, 1992 through July 31, 1994 with respect to PSE&G's
Manufactured Gas Plant Remediation Program (Remediation Program). Pursuant to
the above-referenced Board Order and Technical Conference Stipulation, costs
are to be included in a RAC and are amortized over a rolling seven-year period,
60 percent to be recovered through the gas RAC and the remaining 40 percent to
be recovered through the electric RAC. This Remediation Program has been and
continues to be carried out under the direction and supervision of the New
Jersey Department of Environmental Protection (NJDEP). On December 21, 1994,
the BPU approved a LGAC Stipulation allowing PSE&G to recover $3.1 million of
Remediation Program costs from gas customers. (See Note 12 -- Commitments and
Contingent Liabilities of Notes.) All recovery of costs through PSE&G rates are
subject to audit and verification by the BPU.
Consolidated Tax Benefits
In a case affecting another utility in which neither Enterprise nor PSE&G
were parties, the BPU considered the extent to which tax savings generated by
nonutility affiliates included in the consolidated tax return of that utility's
holding company should be considered in setting that utility's rates. On
September 30, 1992, the BPU approved an order in such case treating certain
consolidated tax savings generated after June 30, 1990 by that utility's
nonutility affiliates as a reduction of its rate base. On December 31, 1992 the
BPU issued an order approving a stipulation in PSE&G's 1992 base rate
proceeding which resolved the case without separate quantification of the
consolidated tax issue. The stipulation does not provide final resolution of
the consolidated tax issue for any subsequent base rate filing. While
Enterprise continues to account for these entities on a stand-alone basis,
resulting in a realization of the tax benefits by the entity generating the
benefit, an ultimate unfavorable resolution of the consolidated tax issue could
reduce PSE&G's and Enterprise's future revenue and net income. In addition, an
unfavorable resolution may adversely impact Enterprise's nonutility investment
strategy. Enterprise believes that PSE&G's taxes should be treated on a
stand-alone basis for rate-making purposes, based on the separate nature of the
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
utility and nonutility businesses. However, neither Enterprise nor PSE&G is
able to predict what action, if any, the BPU may take concerning consolidation
of tax benefits in future rate proceedings. (See Note 10 -- Federal Income
Taxes.)
Peach Bottom Settlement
In the first quarter of 1992, Enterprise and PSE&G allocated 75% of the
net proceeds of the Peach Bottom settlement to income attributable to
shareholders and deferred 25% attributable to ratepayers. Pursuant to the base
rate case settlement, such allocations were adjusted in December 1992 to an
equal sharing of the benefits of the Peach Bottom settlement.
NOTE 3. PSE&G NUCLEAR DECOMMISSIONING AND AMORTIZATION OF NUCLEAR FUEL
The BPU decision in PSE&G's 1992 base rate case utilized studies based on
the prompt removal/dismantlement method of decommissioning for all of PSE&G's
nuclear generating stations. This method consists of removing all fuel, source
material and all other radioactive materials with activity levels above
accepted release limits from the nuclear sites. PSE&G has an ownership interest
in five nuclear units: Salem 1 and Salem 2 -- 42.59% each, Hope Creek -- 95%
and Peach Bottom 2 and 3 -- 42.49% each. In accordance with rate orders
received from the BPU, PSE&G has established an external master nuclear
decommissioning trust for all of its nuclear units. The Internal Revenue
Service (IRS) has ruled that payments to the trust are tax deductible. PSE&G's
total estimated cost of decommissioning its share of these 5 nuclear units is
estimated at $681 million in year-end 1990 dollars (the year that the site
specific estimate was prepared), excluding contingencies. The 1992 base rate
decision provided that $15.6 million of such costs are to be collected through
base rates and an additional annual amount of $7.0 million in 1993 and $14
million each year thereafter are to be recovered through PSE&G's LEAC. At
December 31, 1994 and 1993, the accumulated provision for depreciation and
amortization included reserves for nuclear decommissioning for PSE&G's units
of $249 million and $211 million, respectively. As of December 31, 1994 and
1993, PSE&G has contributed $190 million and $155 million, respectively, into
external qualified and nonqualified nuclear decommissioning trust funds.
Based upon current regulatory requirements, PSE&G must file a
decommissioning cost update by January 1, 1996 based on a site-specific study
or upon the generic NRC guidelines.
The staff of the Securities and Exchange Commission (SEC) has questioned
certain of the current accounting practices of the electric utility industry,
including PSE&G, regarding the recognition, measurement and classification of
decommissioning costs for nuclear generating stations in the financial
statements of electric utilities. In response to these questions, the
Financial Accounting Standards Board (FASB) has agreed to review the accounting
for removal costs, including decommissioning. If current electric utility
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
industry accounting practices for such decommissioning are changed: (1) annual
provisions for decommissioning could increase, (2) the estimated cost for
decommissioning could be recorded as a liability rather than as accumulated
depreciation and (3) trust fund income from the external decommissioning trusts
could be reported as investment income rather than as a reduction to
decommissioning expense.
Uranium Enrichment Decontamination and Decommissioning Fund
In accordance with NEPA, domestic utilities that own nuclear generating
stations are required to pay a cumulative total of $150 million each year
(adjusted for inflation) into a decontamination and decommissioning fund, based
on their past purchases of enrichment services from the United States
Department of Energy (DOE) Uranium Enrichment Enterprise (now a federal
government corporation known as the United States Enrichment Corporation
(USEC)). These amounts are being collected over a period of 15 years or until
$2.25 billion (adjusted for inflation) has been collected. Under this
legislation, PSE&G's obligation for the nuclear generating stations in which
it has an interest is $66 million (adjusted for inflation). To date, PSE&G has
paid $13 million, resulting in a balance due of $53 million. PSE&G has
deferred the expenditures incurred to date as part of deferred underrecovered
electric energy costs and expects to recover its costs in the next LEAC. PSE&G
cannot predict the outcome, amount or timing of any recovery associated with
this matter. In addition, as of December 31, 1994, PSE&G has recorded a
liability of $3 million relating to low level radioactive waste costs incurred
at its nuclear generating stations.
Spent Nuclear Fuel Disposal Costs
In accordance with the Nuclear Waste Policy Act (NWPA), PSE&G has entered
into contracts with the DOE for the disposal of spent nuclear fuel. Payments
made to the DOE for disposal costs are based on nuclear generation and are
included in Fuel for Electric Generation and Interchanged Power in the
Statements of Income. These costs are recovered through the LEAC.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 4. SCHEDULE OF CONSOLIDATED CAPITAL STOCK AND OTHER SECURITIES
<TABLE>
<CAPTION>
CURRENT
REDEMPTION
OUTSTANDING PRICE DECEMBER 31, DECEMBER 31,
(THOUSANDS OF DOLLARS) SHARES PER SHARE 1994 1993
- --------------------------------------------------- ----------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
ENTERPRISE COMMON STOCK (no par) - note (A) --
authorized 500,000,000 shares; issued and
outstanding at December 31, 1994, 244,697,930
shares, at December 31, 1993, 243,688,256 shares,
and at December 31, 1992, 235,395,751 shares. 3,801,157 3,772,662
ENTERPRISE PREFERRED SECURITIES (note B)
PSE&G CUMULATIVE PREFERRED SECURITIES (note C)
Without Mandatory Redemption (notes D and E)
$100 par value series
4.08%.................................... 250,000 103.00 25,000 25,000
4.18%.................................... 249,942 103.00 24,994 24,994
4.30%.................................... 250,000 102.75 25,000 25,000
5.05%.................................... 250,000 103.00 25,000 25,000
5.28%.................................... 250,000 103.00 25,000 25,000
6.80%.................................... 250,000 102.00 25,000 25,000
6.92%.................................... 600,000 103.46 60,000 -
7.40%.................................... 500,000 101.00 50,000 50,000
7.52%.................................... 500,000 101.00 50,000 50,000
7.80%.................................... 750,000 - - 75,000
7.70%.................................... 600,000 100.79 60,000 60,000
8.08%.................................... 150,000 - - 15,000
8.16%.................................... 300,000 - - 30,000
--------- ---------
$25 par value series
6.75%.................................... 600,000 - 15,000 -
--------- ---------
Total Preferred Stock without
Mandatory Redemption................... 384,994 429,994
========= =========
With Mandatory Redemption (notes D and F)
$100 par value series
7.44%.................................... 750,000 103.72 75,000 75,000
5.97%.................................... 750,000 102.99 75,000 75,000
--------- ---------
Total Preferred Stock With
Mandatory Redemption (note G).......... 150,000 150,000
========= =========
Monthly Income Preferred Securities (notes F and G)
9.375%................................... 6,000,000 25.00 150,000 -
---------
Total Monthly Income Preferred Securities 150,000 -
=========
(A) Total authorized and unissued shares include 7,302,488 shares of Enterprise Common Stock reserved
for issuance through Enterprise's Dividend Reinvestment and Stock Purchase Plan and various
employee benefit plans. In 1994, 1,009,674 shares of Enterprise Common Stock were issued and
sold for $28,495,122 and in 1993, 8,292,505 shares were issued and sold for $273,479,342, including
a public offering of 4,400,000 shares issued and sold for $142,670,000.
(B) Enterprise has authorized a class of 50,000,000 shares of Preferred Stock without par value, none of
which is outstanding.
(C) As of December 31, 1994, there were 2,300,058 shares of $100 par value and 9,400,000 shares
of $25 par value Cumulative Preferred Stock which were authorized and unissued, and which upon
issuance may or may not provide for mandatory sinking fund redemption. If dividends upon any shares
of Preferred Stock are in arrears in an amount equal to the annual dividend thereon, voting rights
for the election of a majority of PSE&G's Board of Directors become operative and continue until
all accumulated and unpaid dividends thereon have been paid, whereupon all such voting rights
cease, subject to being again revived from time to time.
(D) At December 31, 1994, the annual dividend requirement and embedded dividend for Preferred Stock
without mandatory redemption were $24,666,763 and 6.39%, respectively, and for Preferred Stock
with mandatory redemption were $10,057,500 and 6.75%, respectively.
At December 31, 1993, the annual dividend requirement and embedded dividend for Preferred Stock
without mandatory redemption were $29,012,000 and 6.75%, respectively and for Preferred Stock with
mandatory redemption were $10,057,500 and 6.71%, respectively.
(E) In February 1994, PSE&G sold 600,000 shares of its 6.92% Cumulative Preferred Stock ($100 Par)
and 600,000 shares of its 6.75% Cumulative Preferred Stock ($25 par). PSE&G redeemed the 150,000
shares of its outstanding 8.08% Cumulative Preferred Stock ($100 par) on March 1, 1994 at a
redemption price of $101.00. In addition, PSE&G redeemed on March 1, 1994, all of the 300,000
shares of its outstanding 8.16% Cumulative Preferred Stock ($100 par), at a redemption price
of $100.74. On December 16, 1994, PSE&G redeemed all of the outstanding 750,000 shares of its
7.80% cumulative preferred stock ($100 par), at a redemption price of $101.00.
(F) Public Service Electric and Gas Capital, L.P. (Partnership) was formed for the purpose of issuing
Monthly Income Preferred Securities (MIPS). The proceeds of MIPS sales are lent to PSE&G and evidenced
by PSE&G's Deferrable Interest Subordinated Debentures. If and for as long as payments on PSE&G's
Deferred Interest Subordinated Debentures have been deferred, or PSE&G has defaulted on the indenture
related thereto or its guarantee thereof, PSE&G may not pay any dividends on its Capital Stock. On
November 9, 1994, the Partnership issued 6,000,000 of its 9-3/8% MIPS, Series A, with a stated
liquidation preference of $25 each.
(G) For information concerning fair value of financial instruments, see Note 8 -- Financial Instruments and
Risk Management.
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 5. DEFERRED ITEMS
Property Abandonments
<TABLE>
The BPU has authorized PSE&G to recover after-tax property abandonment costs from its
customers. The following table reflects the application of Statement of Financial Accounting
Standards No. 90, "Regulated Enterprises -- Accounting for Abandonments and Disallowances
of Plant Costs," as amended (SFAS 90), on property abandonments, and related tax effects,
for which no return is earned. The net-of-tax discount rate used was between 4.443% and 7.801%.
(See Note 2 -- Rate Matters.) The following table reflects property abandonments:
<CAPTION>
DECEMBER 31, 1994 DECEMBER 31, 1993
------------------ ------------------
DISCOUNTED DISCOUNTED
PROPERTY ABANDONMENTS COST TAXES COST TAXES
- ------------------------------------------------ ---------- ------- ---------- -------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C>
Atlantic Project................................ $ 70,130 $29,453 $81,475 $34,229
LNG Project..................................... 7,287 2,635 11,362 4,227
Uranium Projects................................ 10,852 4,677 12,699 5,442
-------- ------- -------- -------
$ 88,269 $36,765 $105,536 $43,898
======== ======= ======== =======
</TABLE>
Under (Over) Recovered Electric Energy and Gas Costs -- net
<TABLE>
Recoveries of electric energy and gas costs are determined by the BPU under the LEAC and LGAC.
PSE&G's deferred fuel balances as of December 31, 1994 and December 31, 1993, reflect underrecovered
costs as follows:
<CAPTION>
DECEMBER 31,
-------------------
1994 1993
------ ------
(Thousands of Dollars)
<S> <C> <C>
Underrecovered Electric Energy Costs......... $172.0 $ 35.2
Underrecovered Gas Fuel Costs................ .6 26.8
------ ------
Total................................... $172.6 $ 62.0
====== ======
</TABLE>
Unrecovered Plant and Regulatory Study Costs
Amounts shown in the consolidated balance sheets consist of costs
associated with developing, consolidating and documenting the specific design
basis of PSE&G's jointly owned nuclear generating stations, as well as PSE&G's
share of costs associated with the cancellation of the Hydrogen Water Chemistry
System Project at Peach Bottom. PSE&G has received both BPU and FERC approval
to defer and amortize, over the remaining life of the Salem and Hope Creek
nuclear units, costs associated with configuration baseline documentation
projects. PSE&G has received FERC approval to defer and amortize over the
remaining life of the applicable Peach Bottom units, costs associated with the
configuration baseline documentation and the cancelled Hydrogen Water Chemistry
System Projects. While PSE&G expects the BPU to authorize recovery of such
costs from electric customers, no assurances can be given.
Unamortized Debt Expense
Gains and losses and the costs of issuing and redeeming long-term debt for
PSE&G are deferred and amortized over the life of the applicable debt.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Oil and Gas Property Write-Down
On December 31, 1992, the BPU approved the recovery of the EDC write-down
through PSE&G's LGAC over a ten-year period beginning January 1, 1993. At
December 31, 1994 and 1993, the remaining balance to be amortized was $41.2
million and $46.4, respectively.
NOTE 6. SCHEDULE OF CONSOLIDATED DEBT
LONG-TERM
<TABLE>
<CAPTION>
DECEMBER DECEMBER
INTEREST RATES DUE 1994 1993
- ----------------- ------------------------------------------------- ---------- ----------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
PSE&G
FIRST AND REFUNDING MORTGAGE BONDS (note A)
4 5/8% 1994............................................. $ -- $ 60,000
4 3/4% - 6% 1995............................................. 310,000 310,000
6 7/8% - 7 1/8% 1997............................................. 300,000 300,000
6% 1998............................................. 100,000 100,000
8 3/4% 1999............................................. 100,000 100,000
6% - 8 7/8% 2000-2004........................................ 1,400,000 1,400,000
6.30% - 9 1/8% 2005-2009........................................ 359,310 184,510
6.80% - 10 1/2% 2010-2014........................................ 198,500 313,300
6.45% - 8.10% 2015-2019........................................ 29,600 25,000
7% - 9 3/4% 2020-2024........................................ 1,244,500 1,368,500
5.2% - 6.55% 2025-2029........................................ 179,955 87,000
5.45% - 6.40% 2030-2034........................................ 487,445 145,200
5% - 8% 2037............................................. 15,001 15,001
MEDIUM-TERM NOTES
7.15% - 7.18% 2023............................................. 40,500 40,500
8.10% - 8.16% 2009............................................. 60,000 --
---------- ----------
Total First and Refunding Mortgage Bonds.......................... $4,824,811 $4,449,011
========== ==========
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
DECEMBER DECEMBER
INTEREST RATES DUE 1994 1993
- ----------------- ---- ---------- ----------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
DEBENTURE BONDS UNSECURED
6% 1998............................................. $ 18,195 $ 18,195
---------- ----------
Total Debenture Bonds.................................................. 18,195 18,195
---------- ----------
Principal Amount Outstanding (note F).................................. 4,843,006 4,467,206
Amounts Due Within One Year (note B)................................... (310,200) (61,700)
Net Unamortized Discount............................................... (46,019) (41,069)
---------- ----------
Total Long-Term Debt of PSE&G (note G)............................ 4,486,787 4,364,437
---------- ----------
EDHI
CAPITAL (note C)
Senior Notes
9.875% - 10.05% 1998............................................. 165,000 207,500
Medium-Term Notes
7.40% 1994............................................. -- 50,000
5.65% - 9.55% 1995............................................. 112,000 112,000
9.00% 1996............................................. 20,000 20,000
5.79% - 5.91% 1997............................................. 27,000 27,000
9.00% 1998............................................. 75,000 75,000
8.95% - 9.93% 1999............................................. 155,000 155,000
6.54% 2000............................................. 78,000 78,000
---------- ----------
Principal Amount Outstanding (note F).................................. 632,000 724,500
Amounts Due Within One Year (note B)................................... (154,405) (92,436)
Net Unamortized Discount............................................... (1,278) (1,746)
---------- ----------
Total Long-Term Debt of Capital................................... 476,317 630,318
---------- ----------
FUNDING (note D)
9.54% 1995............................................. 35,000 35,000
9.55% 1996............................................. 28,000 28,000
6.85% - 9.59% 1997............................................. 55,000 55,000
9.95% 1998............................................. 83,000 83,000
7.58% 1999............................................. 45,000 45,000
---------- ----------
Principal Amount Outstanding (note F).................................. 246,000 246,000
Amounts Due Within One Year (note B)................................... (35,000) --
---------- ----------
Total Long-Term Debt of Funding................................... 211,000 246,000
---------- ----------
EGDC MORTGAGE NOTES
5.18% - 7.736% 1994............................................. -- 13,638
5.75% 1998............................................. -- 9,050
10.625% - 12.75% 2012............................................. 6,686 6,806
---------- ----------
Principal Amount Outstanding (note F).................................. 6,686 29,494
Amounts Due Within One Year (note B)................................... (133) (13,928)
---------- ----------
Total Long-Term Debt of EGDC........................................... 6,553 15,566
---------- ----------
Total Long-Term Debt of EDHI........................................... 693,870 891,884
---------- ----------
Consolidated Long-Term Debt (note E).............................. $5,180,657 $5,256,321
========== ==========
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTES:
(A) PSE&G's Mortgage, securing the Bonds, constitutes a direct first mortgage
lien on substantially all PSE&G'S property and franchises.
(B) The aggregate principal amounts of mandatory requirements for sinking funds
and maturities for each of the five years following December 31, 1994 are
as follows:
<TABLE>
<CAPTION>
SINKING FUNDS MATURITIES
----------------- ----------------------------------------------------
YEAR PSE&G CAPITAL PSE&G CAPITAL EGDC FUNDING TOTAL
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C> <C>
1995................ $ 200 $ 42,500 $310,000 $112,000 $ 133 $ 35,000 $ 499,833
1996................ 200 42,500 -- 20,000 149 28,000 90,849
1997................ 300 42,500 300,000 27,000 166 55,000 424,966
1998................ 300 37,500 118,195 75,000 184 83,000 314,179
1999................ 300 -- 100,000 155,000 205 45,000 300,505
------ -------- -------- -------- ------- -------- ---------
$1,300 $165,000 $828,195 $389,000 $ 837 $246,000 $1,630,332
====== ======== ======== ======== ======= ======== ==========
(C) Capital has provided up to $750 million debt financing for EDHI's businesses on the basis of a net
worth maintenance agreement with Enterprise. Effective January 31, 1995, Capital will not have more
than $650 million of debt outstanding at any one time.
(D) Funding provides debt financing for EDHI's businesses other than EGDC on the basis of unconditional
guarantees from EDHI.
(E) At December 31, 1994 and 1993, the annual interest requirement on long-term debt was $422.7 million and
$421.2 million, of which $335.6 million and $327.5 million was the requirement for Bonds. The embedded
interest cost on long-term debt on such date was 7.79% and 8.06%, respectively.
(F) For information concerning fair value of financial instruments, see Note 8 -- Financial Instruments and
Risk Management.
(G) At December 31, 1994 and 1993, PSE&G's annual interest requirement on long-term debt was $343.3 million
and $331.5 million, of which $335.6 million and $327.5 million, respectively, was the requirement for Bonds.
The embedded interest cost on long-term debt was 7.59% and 7.85%, respectively.
</TABLE>
SHORT-TERM (Commercial Paper and Loans)
Commercial paper represents unsecured bearer promissory notes sold through
dealers at a discount with a term of nine months or less.
Bank loans represent PSE&G's unsecured promissory notes issued under
informal credit arrangements with various banks and have a term of eleven
months or less.
<TABLE>
<CAPTION>
PSE&G
- -----
1994 1993 1992
------ ------ ------
(Millions of Dollars)
<S> <C> <C> <C>
Principal amount outstanding at end of year,
primarily commercial paper...................... $ 402 $ 533 $ 258
Weighted average interest rate for Short-Term
Debt at year-end................................ 6.07% 3.34% 3.64%
PSE&G has authorization from the BPU to issue and have outstanding not more than $1 billion of its
short-term obligations at any one time, consisting of commercial paper and other unsecured borrowings
from banks and other lenders. This authorization expires January 1, 1997.
PSE&G has an $800 million revolving credit agreement with a group of banks which expires September
14, 1995. As of December 31, 1994, there was no short-term debt outstanding under this agreement.
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 in
June 1996. PSE&G has guaranteed repayment of Fuelco's respective obligations. As of December 31,
1994, 1993 and 1992, Fuelco had commercial paper of $93.7 million, $108.7 million and $122.5 million,
respectively, outstanding under such program, which amounts are included in the table above.
</TABLE>
<TABLE>
<CAPTION>
EDHI
- ----
1994 1993 1992
------ ------ ------
(Millions of Dollars)
<S> <C> <C> <C>
Principal amount outstanding at end of year....... $ 90 $ 45 $ 134
Weighted average interest rate for Short-Term
Debt at year-end................................ 5.97% 3.47% 3.76%
At December 31, 1994, Funding had a $225 million commercial paper program supported by a direct pay
commercial bank letter of credit and revolving credit facility and a $225 million revolving credit facility,
each of which expires in November 1995.
ENTERPRISE
- ----------
At each of December 31, 1994, 1993 and 1992, Enterprise had a $25 million line of credit supported by
compensating balances under an informal arrangement with a bank. At each of December 31, 1994, 1993 and
1992, Enterprise had no lines of credit compensated for by fees.
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 7. LONG-TERM INVESTMENTS
Long-Term Investments are primarily those of EDHI. A summary of Long-Term
Investments is as follows:
<TABLE>
<CAPTION>
1994 1993
------ ------
(MILLIONS OF DOLLARS)
<S> <C> <C>
Lease Agreements (see Note 11 - Leasing Activities):
Leveraged Leases................................ $ 789 $ 738
Direct-Financing Leases......................... 76 85
Other Leases.................................... 6 8
------ ------
Total...................................... 871 831
------ ------
Partnerships:
General Partnerships............................ 157 152
Limited Partnerships............................ 437 433
------ ------
Total...................................... 594 585
------ ------
Joint Ventures....................................... 37 35
Securities........................................... 75 82
Valuation Allowances................................. (17) (18)
Other Investments.................................... 66 116
------ ------
Total Long-Term Investments................ $1,626 $1,631
====== ======
</TABLE>
PSRC's leveraged leases are reported net of principal and interest on
nonrecourse loans and unearned income, including deferred tax credits. Income
and deferred tax credits are recognized at a level rate of return from each
lease during the periods in which the net investment is positive. For
information concerning PSRC's three direct-finance leases with Continental
Airlines, see Note 12 -- Commitment and Contingent Liabilities of Notes.
Partnership investments are those of PSRC, EGDC and CEA and are undertaken
with other investors. PSRC is a limited partner in various partnerships and is
committed to make investments from time to time, upon the request of the
respective general partners. As of December 31, 1994, $134 million remained as
PSRC's unfunded commitment subject to call.
PSRC has invested in securities and limited partnerships investing in
securities, which are recorded at fair value. Realized investment gains and
losses on the sale of investment securities are determined utilizing the
specific cost identification method. (See Note 8 -- Financial Instruments and
Risk Management.)
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 8. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
Enterprise's operations give rise to exposure to market risks from changes
in crude oil and natural gas prices, interest rates, foreign exchange rates and
security prices of investments recorded at fair value. Enterprise's policy is
to use derivatives for the purpose of managing market risk consistent with its
business plans and prudent practices. Enterprise does not hold or issue
financial instruments for trading purposes.
The notional amounts of derivatives summarized below do not represent
amounts exchanged by the parties and, thus, are not a measure of the exposure
of Enterprise through its use of derivatives. The amounts exchanged, under the
terms of the derivatives, are calculated on the basis of the notional amounts.
Enterprise limits its exposure to credit-related losses in the event of
nonperformance by counterparties by limiting its counterparties to those with
high credit ratings.
Natural Gas Hedging
EDC sold futures contracts outstanding at December 31, 1994 which hedged
10,650,000 mmbtu representing approximately 13% of anticipated domestic natural
gas production in 1995 at an average sales price of $1.95 per mmbtu. The
deferred unrealized gain at December 31, 1994 related to EDC's futures
contracts was $2.6 million. EDC did not have any outstanding futures contracts
at December 31, 1993.
Interest Rate Swap
Capital entered into an interest rate swap on December 7, 1990 to allow
EDHI to borrow at floating rates and effectively swap them into fixed rates.
The interest differential to be received or paid under the interest rate swap
agreement is accrued over the life of the agreement as an adjustment to the
interest expense of the related borrowing. The swap terminates on December 11,
1995.
<TABLE>
<CAPTION>
1994 1993
--------- ---------
(Thousands of Dollars)
<S> <C> <C>
Pay-fixed swap
Notional amount............................... $100,000 $100,000
Pay rate...................................... 8.0% 8.0%
Average receive rate.......................... 4.1% 3.5%
Year-end receive rate......................... 6.8% 3.4%
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Foreign Exchange
During 1994, PSRC entered into a forward purchase contract for foreign
currency to hedge an EDC firm purchase commitment denominated in pound
sterling. The EDC commitment related to the acquisition of Industrial Scotland
Energy Limited (ISE) for approximately 21 million pounds. The realized gain
of approximately $800 thousand on the forward purchase contract for foreign
currency was used to reduce the net acquisition cost allocated to ISE's assets
upon completion of the acquisition in June 1994.
Currently, substantially all of Enterprise's foreign revenues and expenses
are denominated in U.S. dollars.
Security Swap
During 1994, PSRC entered into two agreements to swap portions of its
ownership interest in certain equity securities, held in a partnership, to the
S&P 500 return. The purpose of the swap was to minimize PSRC's exposure to the
potential price volatility of such equity securities. One agreement with a
notional amount of $17.6 million expires in June 1995; the other agreement,
with a notional amount of $12.9 million, expires in September 1995.
The notional amount swapped and the year end gain during 1994 for these
two agreements were as follows:
<TABLE>
<CAPTION>
Notional Year End
Amount Fair Value Gain
-------- ----------------------
(Thousands of Dollars)
<S> <C>
$30,489 $ 3,801
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Fair Value of Financial Instruments
<TABLE>
The estimated fair value was determined using the market quotations or values of securities
with similar terms, credit ratings, remaining maturities and redemptions at the end of 1994 and
1993, respectively.
<CAPTION>
1994 1993
------------------------ ------------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
---------- ---------- ---------- ----------
(Millions of Dollars)
<S> <C> <C> <C> <C>
Long-Term Debt:
EDHI.................................... $ 884,686 $ 900,000 $ 999,994 $1,200,000
PSE&G................................... 4,843,006 4,500,000 4,467,206 4,700,000
Preferred Securities Subject to
Mandatory Redemption:
PSE&G Cumulative Preferred Securities... 150,000 145,900 150,000 158,000
Monthly Income Preferred Securities..... 150,000 158,300 -- --
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 9. CASH AND CASH EQUIVALENTS
The December 31, 1994 and 1993 balances consist primarily of working funds
and highly liquid marketable securities (commercial paper) with a maturity of
three months or less.
NOTE 10. FEDERAL INCOME TAXES
A reconciliation of reported Net Income with pretax income and of Federal
income tax expense with the amount computed by multiplying pretax income by the
statutory Federal income tax rates of 35% in 1994 and 1993 and 34% in 1992 is
as follows:
<TABLE>
<CAPTION>
1994 1993 1992
---------- -------- --------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Net Income......................................... $ 679,033 $600,933 $504,117
Preferred securities dividend requirements......... 40,467 38,114 31,907
SFAS 109 Cumulative Effect......................... -- (5,414) --
---------- -------- --------
Subtotal................................. 719,500 633,633 536,024
---------- -------- --------
Federal income taxes:
Operating income:
Current provision................................ 162,521 151,208 151,509
Provision for deferred income taxes -- net(A).... 173,327 186,256 91,595
Investment tax credits -- net.................... (23,297) (23,784) (21,635)
---------- -------- --------
Total included in operating income................. 312,551 313,680 221,469
Miscellaneous other income:
Current provision................................ (8,186) (14,340) 4,946
Provision for deferred income taxes(A)........... 10,422 9,815 19,261
SFAS 90 deferred income taxes(A)................... 2,530 2,948 2,690
---------- -------- --------
Total Federal income tax provisions................ 317,317 312,103 248,366
---------- -------- --------
Pretax income...................................... $1,036,817 $945,736 $784,390
========== ======== ========
</TABLE>
Reconciliation between total Federal income tax provisions and tax computed
at the statutory tax rate on pretax income:
<TABLE>
1994 1993 1992
-------- -------- --------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Tax computed at the statutory rate................. $362,887 $331,008 $266,693
-------- -------- --------
Increase (decrease) attributable to flow through of
certain tax adjustments:
Depreciation.................................. (4,597) 3,347 19,330
Amortization of plant abandonments and
write-downs................................. (2,046) (2,239) (18,867)
Amortization of investment tax credits........... (23,297) (23,784) (20,681)
Other............................................ (15,630) 3,771 1,891
-------- -------- --------
Subtotal........................................... (45,570) (18,905) (18,327)
-------- -------- --------
Total Federal income tax provisions................ $317,317 $312,103 $248,366
======== ======== ========
Effective Federal income tax rate.................. 30.6% 33.0% 31.7%
</TABLE>
(A) The provision for deferred income taxes represents the tax effects of the
following items:
<TABLE>
<CAPTION>
1994 1993 1992
-------- -------- --------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Deferred Credits:
Additional tax depreciation and amortization..... $109,106 $112,814 $136,073
Leasing Activities............................... 60,129 34,958 56,087
Property Abandonments............................ (6,606) (6,632) (34,739)
Oil and Gas Property Write-Down.................. (2,451) (2,451) (6,393)
Deferred fuel costs -- net....................... 39,361 63,330 (40,148)
Other............................................ (13,260) (3,000) 2,666
-------- -------- --------
Total.............................................. $186,279 $199,019 $113,546
======== ======== ========
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Since 1987, Enterprise's Federal alternative minimum tax (AMT) liability
has exceeded its regular Federal income tax liability. This excess can be
carried forward indefinitely to offset regular income tax liability in future
years. Enterprise expects to utilize these AMT credits in the future as regular
tax liability exceeds AMT. As of December 31, 1994, 1993 and 1992, Enterprise
had AMT credits of $256 million, $247 million and $212 million, respectively.
Since 1986, Enterprise has filed a consolidated Federal income tax return
on behalf of itself and its subsidiaries. Prior to 1986, PSE&G filed
consolidated tax returns. On March 20, 1992, the Internal Revenue Service (IRS)
issued a Revenue Agent's Report (RAR) following completion of examination of
PSE&G's consolidated tax return for 1985 and Enterprise's consolidated tax
returns for 1986 and 1987, proposing various adjustments for such years which
would increase Enterprise's consolidated Federal income tax liability by
approximately $121 million, exclusive of interest and penalties, of which
approximately $118 million is attributable to PSE&G. Interest after taxes on
these proposed adjustments is currently estimated to be approximately $97
million as of December 31, 1994 and will continue to accrue at the Federal rate
for large corporate underpayments, currently 11% annually.
The most significant of these proposed adjustments relates to the IRS
contention that PSE&G's Hope Creek nuclear unit is a partnership with a short
1986 taxable year. In addition, the IRS contends that the tax in-service date
of that unit is four months later than the date claimed by PSE&G. In June
1992, Enterprise and PSE&G filed a protest with the IRS disagreeing with
certain of the proposed adjustments (including those related to Hope Creek)
contained in the RAR for taxable years 1985 through 1987 and continue to
contest these issues. Any tax adjustments resulting from the RAR would reduce
Enterprise's and PSE&G's respective deferred credits for accumulated deferred
income taxes. While PSE&G believes that assessments attributable to it are
generally recoverable from its customers in rates, no assurances can be given
as to what regulatory treatment may be afforded by the BPU.
On January 1, 1993, Enterprise adopted SFAS 109 without restating prior
years' financial statements which resulted in Enterprise recording a $5.4
million cumulative effect increase in its net income. Under SFAS 109, deferred
taxes are provided at the enacted statutory tax rate for all temporary
differences between the financial statement carrying amounts and the tax bases
of existing assets and liabilities irrespective of the treatment for ratemaking
purposes. Since management believes that it is probable that the effects of
SFAS 109 on PSE&G, principally the accumulated tax benefits that previously
have been treated as a flow-through item to customers, will be recovered from
utility customers in the future, an offsetting regulatory asset was
established. As of December 31, 1994, PSE&G had recorded a deferred tax
liability and an offsetting regulatory asset of $791 million representing the
future revenue expected to be recovered through rates based upon established
regulatory practices which permit recovery of current taxes payable. This
amount was determined using the 1994 Federal income tax rate of 35%.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SFAS 109
The following is an analysis of accumulated deferred income taxes:
<TABLE>
<CAPTION>
ACCUMULATED DEFERRED INCOME TAXES 1994 1993
----------------------------------------- ---------- ----------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Assets:
Current (net)................................... $ 25,311 $ 12,934
Non-Current:
Unrecovered Investment Tax Credits......... 136,402 143,125
Nuclear Decommissioning.................... 25,082 25,211
Hope Creek Cost Disallowance............... 10,127 20,231
Construction Period Interest and Taxes..... 15,913 9,811
Vacation Pay............................... 6,822 6,721
AMT Credit................................. 255,828 246,862
Real Estate Impairment..................... 20,932 27,173
Other...................................... 6,863 14,845
---------- ----------
Total Non-Current..................... $ 477,969 $ 493,979
---------- ----------
Total Assets.................................... $ 503,280 $ 506,913
========== ==========
Liabilities:
Non-Current:
Plant Related Items........................ $2,268,688 $2,169,861
Leasing Activities......................... 580,415 520,286
Property Abandonments...................... 26,971 32,206
Oil and Gas Property Write-Down............ 14,925 16,790
Deferred Electric Energy & Gas Costs....... 59,884 20,133
Unamortized Debt Expense................... 37,599 38,768
Taxes Recoverable Through Future
Rates (net).............................. 270,684 270,518
Other...................................... 124,193 127,803
---------- ----------
Total Non-Current..................... $3,383,359 $3,196,365
---------- ----------
Total Liabilities............................... $3,383,359 $3,196,365
========== ==========
Summary -- Accumulated Deferred Income Taxes
Net Current Assets........................... $ 25,311 $ 12,934
Net Deferred Liability....................... $2,905,390 $2,702,386
---------- ----------
Total..................................... $2,880,079 $2,689,452
========== ==========
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 11. LEASING ACTIVITIES
As Lessee
The Consolidated Balance Sheets include assets and related obligations
applicable to capital leases under which PSE&G is a lessee. The total
amortization of the leased assets and interest on the lease obligations equals
the net minimum lease payments included in rent expense for capital leases.
Capital leases of PSE&G relate primarily to its corporate headquarters and
other capital equipment. Certain of the leases contain renewal and purchase
options and also contain escalation clauses.
Enterprise and its other subsidiaries are not lessees in any capitalized
leases.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
Utility plant includes the following amounts for capital leases at
December 31:
1994 1993
------- -------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Common Plant............................................. $58,610 $56,812
Less: Accumulated Amortization........................... 4,840 3,708
------- -------
Net Assets under Capital Leases.......................... $53,770 $53,104
======= =======
Future minimum lease payments for noncancelable capital and operating leases at
December 31, 1994 were:
</TABLE>
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
------- ---------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
1995..................................................... $ 13,174 $ 15,013
1996..................................................... 13,174 13,933
1997..................................................... 13,175 11,945
1998..................................................... 13,176 8,631
1999..................................................... 13,177 6,442
Later Years.............................................. 202,064 18,426
-------- --------
Minimum Lease Payments................................... 267,940 $ 74,390
========
Less: Amount representing estimated executory costs,
together with any profit thereon, included in
minimum lease payments............................. 132,453
--------
Net minimum lease payments............................... 135,487
Less: Amount representing interest....................... 81,717
--------
Present value of net minimum lease payments(A)........... $ 53,770
========
(A) Reflected in the Consolidated Balance Sheets for 1994 and 1993 were Capital Lease Obligations of
$53.770 million and $53.104 million which includes Capital Lease Obligations due within one year of
$659 thousand and $574 thousand, respectively.
</TABLE>
<TABLE>
The following schedule shows the composition of rent expense included in Operating Expenses:
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------
1994 1993 1992
------- ------- -------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Interest on Capital Lease Obligations................. $ 6,156 $ 6,074 $ 6,129
Amortization of Utility Plant under Capital Leases.... 588 513 457
------- ------- -------
Net minimum lease payments relating to Capital
Leases.............................................. 6,744 6,587 6,586
Other Lease payments.................................. 28,447 22,095 21,739
------- ------- -------
Total Rent Expense.................................... $35,191 $28,682 $28,325
======= ======= =======
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
As Lessor
<TABLE>
PSRC's net investments in leveraged and direct financing leases are composed of the following elements:
<CAPTION>
DECEMBER 31, 1994 DECEMBER 31, 1993
---------------------------------- ----------------------------------
(MILLIONS OF DOLLARS)
DIRECT DIRECT
LEVERAGED FINANCING LEVERAGED FINANCING
LEASES LEASES TOTAL LEASES LEASES TOTAL
--------- --------- ------- --------- --------- -------
<S> <C> <C> <C> <C> <C> <C>
Lease rents receivable.......... $ 990 $ 92 $ 1,082 $ 980 $ 114 $ 1,094
Estimated residual value........ 622 13 635 595 12 607
-------- ------- ------- -------- ------- -------
1,612 105 1,717 1,575 126 1,701
Unearned and deferred income.... (823) (29) (852) (837) (41) (878)
-------- ------- ------- -------- ------- -------
Total investments............... 789 76 865 738 85 823
Deferred taxes.................. (333) (20) (353) (267) (20) (287)
-------- ------- ------- -------- ------- -------
Net investments................. $ 456 $ 56 $ 512 $ 471 $ 65 $ 536
======== ======= ======= ======== ======= =======
PSRC's other leases are with various regional, state and city authorities for transportation equipment and
aggregated $6 million and $8 million as of December 31, 1994 and 1993, respectively.
For information concerning PSRC's three direct-finance leases with Continental Airlines, see Note 12 --
Commitments and Contingent Liabilities -- Public Service Resources Corporation.
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 12. COMMITMENTS AND CONTINGENT LIABILITIES
Nuclear Performance Standard
The BPU has established an 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.
The penalty/reward under the NPS is a percentage of replacement power
costs. (See table below.) The NPS provides that the penalties will be
calculated to the edge of each capacity factor range. For example, a 30%
penalty applies to replacement power costs incurred in the 55% to 65% range and
a 40% penalty applies to replacement power costs in the 45% to 55% range.
<TABLE>
<CAPTION>
CAPACITY FACTOR RANGE REWARD PENALTY
- ----------------------------------------------------- ------ -------
<S> <C> <C>
Equal to or greater than 75%......................... 30% --
Equal to or greater than 65% and less than 75%....... None None
Equal to or greater than 55% and less than 65%....... -- 30%
Equal to or greater than 45% and less than 55%....... -- 40%
Equal to or greater than 40% and less than 45%....... -- 50%
Below 40%............................................ 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 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.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 $ 8.2
-------- --------
Property Damage:
Nuclear Mutual Limited..................... $ 500.0 $ 11.6
Nuclear Electric Insurance Ltd. (NEIL II).. 1,400.0 (D) 8.2 (E)
Nuclear Electric Insurers Ltd. (NEIL III).. 850.0 6.7
-------- --------
$2,750.0 $ 26.5
-------- --------
Replacement Power:
Nuclear Electric Insurance Ltd (NEIL I).... $ 3.5 (F) $ 12.4
</TABLE>
(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.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(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.
PSE&G purchases property insurance, including decontamination expense
coverage and premature decommissioning coverage, with respect to loss or damage
to its nuclear facilities. PECO has advised PSE&G that it maintains similar
insurance coverage with respect to Peach Bottom. Under the terms of the various
insurance agreements, PSE&G could be subject to a maximum retrospective
assessment for a single incident of up to $26.5 million. Certain of the
policies also provide that the insurer may suspend coverage with respect to all
nuclear units on a site without notice if the Nuclear Regulatory Commission
(NRC) suspends or revokes the operating license for any unit on a site, issues
a shutdown order with respect to such unit or issues a confirmatory order
keeping such unit shut down.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
PSE&G is a member of an industry mutual insurance company, NEIL, which
provides replacement power cost coverage in the event of a major accidental
outage at a nuclear station. The policies provide for a weekly indemnity
payment of $3.5 million for 52 weeks, subject to a 21-week waiting period. The
policies provide for weekly indemnity payments of $2.8 million for a 104-week
period beyond the first year's indemnity. The premium for this coverage is
subject to retrospective assessment for adverse loss experience. Under the
policies, PSE&G's present maximum share of any retrospective assessment in any
year is $12.4 million.
Construction and Fuel Supplies
PSE&G has substantial commitments as part of its ongoing construction
program which includes capital requirements for nuclear fuel. PSE&G's
construction program is continuously reviewed and periodically revised as a
result of changes in economic conditions, revised load forecasts, changes in
the scheduled retirement dates of existing facilities, changes in business
plans, site changes, cost escalations under construction contracts,
requirements of regulatory authorities and laws, the timing of and amount of
electric and gas rate changes and the ability of PSE&G to raise necessary
capital. Pursuant to an integrated electric resource plan (IRP), PSE&G
periodically reevaluates its forecasts of future customers, load and peak
growth, sources of electric generating capacity and DSM to meet such projected
growth, including the need to construct new electric generating capacity. The
IRP takes into account assumptions concerning future demands of customers,
effectiveness of conservation and load management activities, the long-term
condition of PSE&G's plants, capacity available from electric utilities and
other suppliers and the amounts of cogeneration and other nonutility capacity
projected to be available.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Based on PSE&G's 1995-1999 construction program, construction expenditures
are expected to aggregate approximately $3.2 billion, which includes $484
million for nuclear fuel and $78 million of 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 increase 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 is presently engaged in a construction project to renovate (or
"repower") the Bergen Station pursuant to an air pollution control permit
issued by the NJDEP in May 1993. The current effort would maintain the existing
electric supply of the station (with a small increase from 629 MW to 669 MW),
improve operational reliability and efficiency and significantly improve the
environmental effects of operation of the facility.
In July 1993, an association of competitors of PSE&G appealed the NJDEP's
issuance of the air permit for the project to the Appellate Division of the New
Jersey Superior Court, alleging that PSE&G is first required to obtain a
Certificate of Need (Certificate) under the New Jersey Need Assessment Act
(NJNAA). The NJDEP determined that the NJNAA was inapplicable to this
renovation project. The Appellate Division of New Jersey Superior Court
affirmed this determination. The New Jersey Supreme Court has denied
certification of the petition for review of this decision.
As of December 31, 1994, the repowering project was about 95% complete and
PSE&G had spent approximately $291 million on this effort. The final cost is
estimated to be approximately $400 million. In order for PSE&G to recover its
costs for the project, PSE&G would need either BPU authorization to recover
such costs in its rates or be successful in selling the station's output in the
emerging wholesale market.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Hazardous Waste
Certain Federal and State laws authorize the EPA and the 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.
Costs incurred through December 31, 1994 for the Remediation Program
amounted to $51.4 million. In addition, at December 31, 1994, PSE&G's
estimated liability for estimated remediation costs aggregated $105.7 million
through 1997.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In accordance with a Stipulation approved by the BPU in January 1992,
PSE&G is recovering $32 million of its actual remediation costs to reflect
costs incurred through September 30, 1992 over a six-year period. PSE&G will
recover $5.3 million in each of its next two LGAC periods ending in 1996. The
regulatory treatment of the remediation costs covered by this Stipulation was
not changed in the BPU's September 15, 1993 written order, allowing continued
collection under the terms of the January 1992 Stipulation. As of December 31,
1994, PSE&G has recovered $22.2 million through its LGAC.
The September 1993 decision concluded that PSE&G had met its burden of
proof for establishing the reasonableness and prudence of remediation costs
incurred in operating and decommissioning these facilities in the past. The
remediation costs incurred during the period July 1, 1992 through September 30,
1992 were subject to audit and verification in PSE&G's 1992-93 LGAC. The audit
has been completed and resulted in no disallowance of any costs. (See Note 2
- - Rate Matters - Remediation Adjustment Charge). A final Board Order was
received on November 4, 1994, memorializing the above September 15, 1993
Stipulation.
Also in 1988, PSE&G filed suit against certain of its insurers to recover
the costs associated with addressing and resolving environmental issues of the
Remediation Program. PSE&G has settled its claim with one insurer and there is
a trial scheduled for March 1995 with the remaining insurers. Pending full
recovery of Remediation Program costs through rates or under its insurance
policies, neither of which can be assured, PSE&G will be required to finance
the unreimbursed costs of its Remediation Program.
Public Service Resources Corporation
PSRC has leased three wide-body aircraft to Continental Airlines
(Continental) through direct-finance leases. The leases for two A-300 aircraft
expire December 2000, while the lease for one DC 10-30 aircraft expires June
2002. At December 31, 1994, PSRC had investments in the A-300 leases and the
DC 10-30 lease of $43.0 million and $33.1 million, respectively. Continental
has failed to make full payment of its required lease payments due February 1,
1995 and has advised PSRC of its intent to seek the termination of the A-300
leases and return the A-300 aircraft to PSRC. Continental also advised PSRC
of its intention, effective February 1, 1995, to reduce its rental payments due
under all three leases by approximately 50%. Continental indicated that
payments under these leases could include debt securities convertible into
equity in lieu of full cash payments. Under the leases, PSRC rents receivable
and pre-tax lease income in 1995 would have been $9.4 million and $4.1 million,
respectively for the A-300 aircraft and $5.5 million and $2.7 million,
respectively for the DC 10-30 aircraft. PSRC has informed Continental that it
expects all of Continental's lease obligations to be satisfied in full.
Negotiations are continuing concerning this matter. No assurances can be given
that PSRC will be able to obtain new leases, sell or otherwise dispose of any
such aircraft on satisfactory terms in the event of an unscheduled lease
termination. Enterprise believes the ultimate resolution of this matter will
not have a material effect on its financial position, results of operations or
net cash flows.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 13. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
On January 1, 1993, Enterprise and PSE&G adopted SFAS 106, which requires
that the expected cost of employees' postretirement health care and insurance
benefits be charged to expense during the years in which employees render
service. PSE&G elected to amortize over 20 years of its unfunded obligation of
$609.3 million at January 1, 1993. Prior to 1993, Enterprise and PSE&G
recognized postretirement health care and insurance costs in the year that the
benefits were paid. The following table discloses the significant components
of the net periodic postretirement benefit obligation:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
NET PERIODIC POSTRETIREMENT BENEFIT OBLIGATION 1994 1993
- ---------------------------------------------------- --------- ---------
(MILLIONS)
<S> <C> <C>
Service cost......................................... $ 11.1 $ 11.7
Interest on accumulated postretirement obligation.... 45.4 44.4
Amortization of transition obligations............... 30.5 30.5
Deferral of current expense.......................... (57.8) (58.6)
------ ------
Annual net expense.............................. $ 29.2 $ 28.0
====== ======
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The discount rate used in determining the PSE&G net periodic
postretirement benefit cost was 7.25% and 7.50% for 1994 and 1993,
respectively.
A one-percentage-point increase in the assumed health care cost trend rate
for each year would increase the aggregate of the service and interest cost
components of net periodic postretirement health care cost by approximately
$4.7 million, or 10.5%, and increase the accumulated postretirement benefit
obligation as of December 31, 1994 by $54.4 million, or 11.3%.
The assumed health care cost trend rates used in measuring the accumulated
postretirement benefit obligation in 1994 were: medical costs for pre-age
sixty-five retirees -- 13.5%, medical costs for post-age retirees -- 9.5% and
dental costs -- 7.5%; such rates are assumed to gradually decline to 5.5%, 5.0%
and 5.0%, respectively, in 2010. The medical costs above include a provision
for prescription drugs.
In its 1992 base rate case, PSE&G requested full recovery of the costs
associated with postretirement benefits other than pensions (OPEB) on an
accrual basis, in accordance with SFAS 106. The BPU's December 31, 1992 base
rate order provided that (1) PSE&G's pay-as-you-go basis OPEB costs will
continue to be included in cost of service and will be recoverable in base
rates on a pay-as-you-go basis; (2) prudently incurred OPEB costs, that are
accounted for on an accrual basis in accordance with SFAS 106, will be
recoverable in future rates; (3) PSE&G should account for the differences
between its OPEB costs on an accrual basis and the pay-as-you-go basis being
recovered in rates as a regulatory asset; and (4) the issue of cash versus
accrual accounting will be revisited and in the event that FASB or the SEC
requires the use of accrual accounting for OPEB costs for ratemaking purposes,
the regulatory asset will be recoverable, through rates, over an appropriate
amortization period.
Accordingly, PSE&G is accounting for the differences between its SFAS 106
accrual cost and the cash cost currently recovered through rates as a
regulatory asset. OPEB costs charged to expenses during 1994 were $29.2 million
and accrued OPEB costs deferred were $57.8 million. The amount of the unfunded
liability, at December 31, 1994, as shown below, is $585.9 million and funding
options are currently being explored. The primary effect of adopting SFAS 106
on Enterprise's and PSE&G's financial reporting is on the presentation of their
financial positions with minimal effect on their results of operations.
During January 1993 and subsequent to the receipt of the Order, the FASB's
Emerging Issues Task Force (EITF) concluded that deferral of such costs is
acceptable, provided regulators allow SFAS 106 costs in rates within
approximately five years of the adoption of SFAS 106 for financial reporting
purposes, with any cost deferrals recovered in approximately twenty years.
PSE&G intends to request the BPU for full SFAS 106 recovery in accordance with
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
the EITF's view of such standard and believes that it is probable that any
deferred costs will be recovered from utility customers within such twenty-year
time period. As of December 31, 1994, PSE&G has deferred $116.4 million of
such costs.
In accordance with SFAS 106 disclosure requirements, a reconciliation of
the funded status of the plan is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1994 1993
-------- --------
(MILLIONS)
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees........................................... $(379.2) $(406.4)
Fully eligible active plan participants............ (45.7) (35.0)
Other active plan participants..................... (161.0) (215.6)
------- -------
Total.......................................... (585.9) (657.0)
Plan assets at fair value.......................... -- --
------- -------
Accumulated postretirement benefit obligation
in excess of plan assets......................... (585.9) (657.0)
Unrecognized net (gain)/loss from past experience
different from that assumed and from changes
in assumptions................................... (78.8) 19.6
Unrecognized prior service cost.................... -- --
Unrecognized transition obligation................. 548.3 578.8
------- -------
Accrued postretirement obligation.................. $(116.4) $ (58.6)
======= =======
The discount rate used in determining the accumulated postretirement
benefit obligation as of December 31, 1994 was 8.50% and 7.25% for 1994 and
1993, respectively.
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 14. PENSION PLAN
The discount rates, expected long-term rates of return on assets and
average compensation growth rates used in determining the Pension Plan's funded
status and net pension cost as of December 31, 1994 and 1993 were as follows:
<TABLE>
<CAPTION>
1994 1993
------ ------
<S> <C> <C>
Funded Status:
- -------------
Discount Rate used to Determine Benefit Obligations...... 8-1/2% 7-1/4%
Average Compensation Growth to Determine
Benefit Obligations.................................... 4.5% 5.5%
Net Pension Cost:
- ----------------
Discount Rate............................................ 7-1/4% 7-1/2%
Expected Long-Term Return on Assets...................... 8% 8%
Average Compensation Growth.............................. 5.5% 6%
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table shows the Pension Plan's funded status:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1994 1993
----------- -----------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligations, including vested benefits
of $1,151,677 in 1994 and $1,045,035 in 1993........... $(1,235,930) $(1,144,214)
Effect of projected future compensation................... (261,846) (346,416)
----------- -----------
Projected benefit obligations............................... (1,497,776) (1,490,630)
Plan assets at fair value, primarily listed equity and debt
securities................................................ 1,270,116 1,312,619
----------- -----------
Projected benefit obligations in excess of plan assets...... (227,660) (178,011)
Unrecognized net gain (loss) from past experience and
effects of changes in assumptions......................... 32,815 (20,981)
Prior service cost not yet recognized in net pension cost... 119,783 113,397
Unrecognized net obligations being recognized over
16.7 years................................................ 69,387 77,486
----------- -----------
Accrued pension expense..................................... $ (5,675) $ (8,109)
=========== ===========
</TABLE>
<TABLE>
The net pension cost for the years ending December 31, 1994, 1993 and 1992, include the following
components:
<CAPTION>
1994 1993 1992
-------- -------- --------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Service cost - benefits earned during year......... $ 42,904 $ 42,948 $ 36,125
Interest cost on projected benefit obligations..... 108,394 103,118 94,233
Return on assets................................... 5,022 (166,916) (62,323)
Net amortization and deferral...................... (90,752) 90,958 (14,035)
-------- -------- --------
Total.............................................. $ 65,568 $ 70,108 $ 54,000
======== ======== ========
See Note 1 -- Organization and Summary of Significant Accounting Policies.
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 15. FINANCIAL INFORMATION BY BUSINESS SEGMENTS
<TABLE>
Information related to the segments of Enterprise's business is detailed below:
<CAPTION>
NONUTILITY
ELECTRIC GAS ACTIVITIES(A) TOTAL
----------- ---------- ------------- -----------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C>
FOR THE YEAR ENDED DECEMBER 31, 1994
Operating Revenues...................... $ 3,733,113 $1,778,528 $ 416,947 $ 5,928,588
Eliminations (Intersegment Revenues).... -- -- (12,745) (12,745)
----------- ---------- ---------- -----------
Total Operating Revenues................ 3,733,113 1,778,528 404,202 5,915,843
----------- ---------- ---------- -----------
Depreciation and Amortization........... 467,570 79,462 82,656 629,688
Operating Income Before Income Taxes.... 1,083,155 226,196 172,800 1,482,151
Capital Expenditures.................... 734,100 153,183 168,741 1,056,024
December 31, 1994
Net Utility Plant....................... 9,642,177 1,456,068 -- 11,098,245
Oil and Gas Property, Plant &
Equipment............................. -- -- 577,913 577,913
Other Corporate Assets.................. 2,589,348 576,806 1,875,128 5,041,282
----------- ---------- ---------- -----------
Total Assets............................ $12,231,525 $2,032,874 $2,453,041 $16,717,440
=========== ========== ========== ===========
FOR THE YEAR ENDED DECEMBER 31, 1993
Operating Revenues...................... $ 3,693,083 $1,594,341 $ 440,120 $ 5,727,544
Eliminations (Intersegment Revenues).... -- -- (21,985) (21,985)
----------- ---------- ---------- -----------
Total Operating Revenues................ 3,693,083 1,594,341 418,135 5,705,559
----------- ---------- ---------- -----------
Depreciation and Amortization........... 439,831 69,375 91,058 600,264
Operating Income Before Income Taxes.... 1,117,739 173,916 135,472 1,427,127
Capital Expenditures.................... 738,362 152,012 94,014 984,388
December 31, 1993
Net Utility Plant....................... 9,451,581 1,352,799 -- 10,804,380
Oil and Gas Property, Plant &
Equipment............................. -- -- 506,047 506,047
Other Corporate Assets.................. 2,313,394 866,524 1,839,311 5,019,229
----------- ---------- ---------- -----------
Total Assets............................ $11,764,975 $2,219,323 $2,345,358 $16,329,656
=========== ========== ========== ===========
FOR THE YEAR ENDED DECEMBER 31, 1992
Operating Revenues...................... $ 3,407,819 $1,586,181 $ 407,404 $ 5,401,404
Eliminations (Intersegment Revenues).... -- -- (44,623) (44,623)
----------- ---------- ---------- -----------
Total Operating Revenues................ 3,407,819 1,586,181 362,781 5,356,781
----------- ---------- ---------- -----------
Depreciation and Amortization........... 435,104 116,907 90,537 642,548
Operating Income Before Income Taxes.... 861,066 124,893 206,783 1,192,742
Capital Expenditures.................... 668,537 158,224 61,048 887,809
December 31, 1992
Net Utility Plant....................... 9,224,543 1,246,769 -- 10,471,312
Oil and Gas Property, Plant &
Equipment............................. -- -- 506,814 506,814
Other Corporate Assets.................. 1,315,564 486,981 1,997,061 3,799,606
----------- ---------- ---------- -----------
Total Assets............................ $10,540,107 $1,733,750 $2,503,875 $14,777,732
=========== ========== ========== ===========
(A) The Nonutility Activities include amounts applicable to Enterprise, the parent corporation.
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
Information related to Property, Plant and Equipment of PSE&G is detailed below:
<CAPTION>
DECEMBER DECEMBER DECEMBER
1994 1993 1992
----------- ----------- -----------
(Thousands of Dollars)
<S> <C> <C> <C>
Utility Plant - Original Cost
Electric Plant in Service
Steam Production....................... $ 1,810,674 $ 1,763,253 $ 1,668,198
Nuclear Production..................... 5,931,049 5,873,274 5,819,755
Transmission........................... 1,078,928 1,034,150 1,024,843
Distribution........................... 2,877,862 2,724,202 2,573,226
Other.................................. 647,406 526,015 479,647
----------- ----------- ------------
Total Electric Plant in Service.... 12,345,919 11,920,894 11,565,669
----------- ----------- -----------
Gas Plant in Service
Transmission........................... 62,213 63,395 57,405
Distribution........................... 2,131,816 1,993,044 1,870,462
Other.................................. 124,204 121,402 117,077
----------- ----------- -----------
Total Gas Plant in Service......... 2,318,233 2,177,841 2,044,944
----------- ----------- -----------
Common Plant in Service
Capital Leases......................... 58,610 56,812 56,812
General................................ 486,521 463,473 423,160
----------- ----------- -----------
Total Common Plant in Service...... 545,131 520,285 479,972
----------- ----------- -----------
TOTAL......................... $15,209,283 $14,619,020 $14,090,585
=========== =========== ===========
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONCLUDED)
NOTE 16. PROPERTY IMPAIRMENT OF ENTERPRISE GROUP DEVELOPMENT CORPORATION
As a result of a management review of each property's current value and
the potential for increasing such value through operating and other
improvements, EGDC recorded an impairment in 1993 related to certain of its
properties, including properties upon which EDHI's management revised its
intent from a long-term investment strategy to a hold for sale status,
reflecting such properties on its books at their net realizable value. This
impairment reduced the estimated value of EGDC's properties by $77.6 million
and 1993 net income by $50.5 million, after tax, or 21 cents per share of
Enterprise Common Stock. EGDC's real estate held for sale of $13.5 million and
$33.8 million at December 31, 1994 and 1993 are presented in "Other Assets --
net," respectively, in the accompanying consolidated balance sheets.
NOTE 17. JOINTLY OWNED FACILITIES -- UTILITY PLANT
PSE&G has ownership interests in and is responsible for providing its
share of the necessary financing for the following jointly owned facilities.
All amounts reflect the share of PSE&G's jointly owned projects and the
corresponding direct expenses are included in Consolidated Statements of Income
as operating expenses. (See Note 1 -- Organization and Summary of Significant
Accounting Policies.)
<TABLE>
<CAPTION>
OWNERSHIP PLANT IN ACCUMULATED PLANT UNDER
PLANT -- DECEMBER 31, 1994 INTEREST SERVICE DEPRECIATION CONSTRUCTION
- ------------------------------------------------ --------- --------- ------------ ------------
% (THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C>
Coal Generating
Conemaugh..................................... 22.50 $ 176,463 $ 35,044 $ 16,150
Keystone...................................... 22.84 111,360 30,935 2,615
Nuclear Generating
Peach Bottom.................................. 42.49 729,317 286,565 28,239
Salem......................................... 42.59 1,021,588 358,492 39,550
Hope Creek.................................... 95.00 4,120,538 938,535 5,104
Nuclear Support Facilities.................... Various 158,400 28,211 6,342
Pumped Storage Generating
Yards Creek................................... 50.00 23,645 8,721 2,886
Transmission Facilities......................... Various 120,274 34,720 9
Merrill Creek Reservoir......................... 13.91 37,184 10,492 --
Linden Gas Plant................................ 90.00 15,872 18,532 --
</TABLE>
NOTE 18. SELECTED QUARTERLY DATA (UNAUDITED)
The information shown below, in the opinion of Enterprise, includes all
adjustments, consisting onlyof normal recurring accruals, necessary to a fair
presentation of such amounts. Due to the seasonal nature of the utility
business, quarterly amounts vary significantly during the year.
<TABLE>
<CAPTION>
CALENDAR MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
QUARTER ---------------------- ---------------------- ---------------------- ----------------------
ENDED 1994 1993 1994 1993 1994 1993 1994 1993
- -------------------------- ---------- ---------- ---------- ---------- ---------- ----------- ---------- ----------
(THOUSANDS WHERE APPLICABLE)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Operating Revenues........ $1,794,425 $1,594,708 $1,278,363 $1,246,337 $1,374,976 $1,402,037 $1,468,079 $1,462,477
Operating Income.......... $ 348,948 $ 336,505 $ 252,725 $ 248,658 $ 311,920 $ 318,785 $ 250,500 $ 202,899
Net Income................ $ 230,127 $ 215,418 $ 129,885 $ 119,782 $ 187,178 $ 192,231 $ 131,843 $ 73,502
Earnings Per Share of
Common Stock............ $ 0.94 $ 0.91 $ 0.53 $ 0.49 $ 0.76 $ 0.79 $ 0.54 $ 0.30
Average Shares of Common
Stock Outstanding....... 243,777 236,919 244,698 240,920 244,698 241,889 244,698 242,848
</TABLE>
<PAGE>
PUBLIC SERVICE ELECTRIC AND GAS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PSE&G
Except as modified below, 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. - Organization and Summary of Significant Accounting Policies
Note 2. - Rate Matters
Note 3. - PSE&G Nuclear Decommissioning and Amortization of Nuclear Fuel
Note 4. - Schedule of Consolidated Capital Stock and Other Securities
Note 5. - Deferred Items
Note 6. - Schedule of Consolidated Debt
Note 7. - Long-Term Investments
Note 8. - Financial Instruments and Risk Management
Note 11. - Leasing Activities -- As Lessee
Note 12. - Commitments and Contingent Liabilities
Note 13. - Postretirement Benefits Other Than Pensions
Note 14. - Pension Plan
Note 15. - Financial Information by Business Segments
Note 17. - Jointly Owned Facilities -- Utility Plant
NOTE 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Consolidation Policy
The consolidated financial statements include the accounts of PSE&G and
its subsidiaries. All significant intercompany accounts and transactions have
been eliminated in consolidation. Certain reclassifications of prior years'
data have been made to conform with the current presentation.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 9. CASH AND CASH EQUIVALENTS
The December 31, 1994 and 1993 balances consist primarily of working funds.
NOTE 10. FEDERAL INCOME TAXES
<TABLE>
A reconciliation of reported Net Income with pretax income and of Federal income tax expense
with the amount computed by multiplying pretax income by the statutory Federal income tax rates of
35% in 1994 and 1993 and 34% in 1992 is as follows:
<CAPTION>
1994 1993 1992
-------- -------- --------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Net Income......................................... $659,406 $614,868 $475,936
-------- -------- --------
Federal income taxes:
Operating income:
Current provision............................. 230,709 177,314 214,887
Provision for deferred income taxes-net(A).... 83,028 149,884 (334)
Investment tax credits -- net................. (19,208) (18,408) (19,089)
-------- -------- --------
Total included in operating income................. 294,529 308,790 195,464
Miscellaneous other income:
Current provision................................ (8,186) (15,419) 4,718
Provision for deferred income taxes(A)........... 10,422 9,815 19,261
SFAS 90 deferred income taxes(A)................... 2,530 2,948 2,690
-------- -------- --------
Total Federal income tax provisions................ 299,295 306,134 222,133
-------- -------- --------
Pretax income...................................... $958,701 $921,002 $698,069
======== ======== ========
</TABLE>
<TABLE>
Reconciliation between total Federal income tax provisions and tax computed at the statutory tax
rate on pretax income:
<CAPTION>
1994 1993 1992
-------- -------- --------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Tax expense at the statutory rate.................. $335,546 $322,351 $237,343
-------- -------- --------
Increase (decrease) attributable to flow-through of
certain tax adjustments:
Depreciation.................................. (4,597) 3,347 19,330
Amortization of plant abandonments and
write-downs................................. (2,046) (2,239) (18,867)
Amortization of investment tax credits........ (19,208) (18,408) (18,408)
Other......................................... (10,400) 1,083 2,735
-------- -------- --------
Subtotal........................................... (36,251) (16,217) (15,210)
-------- -------- --------
Total Federal income tax provisions................ $299,295 $306,134 $222,133
======== ======== ========
Effective Federal income tax rate.................. 31.2% 33.2% 31.8%
(A) The provision for deferred income taxes represents the tax effects of the following items:
</TABLE>
<TABLE>
<CAPTION>
1994 1993 1992
-------- -------- --------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Deferred Credits:
Additional tax depreciation and amortization......... $ 85,335 $ 92,693 $ 94,757
Property Abandonments................................ (6,606) (6,632) (34,739)
Oil and Gas Property Write-Down...................... (2,451) (2,451) (6,393)
Deferred fuel costs-net.............................. 39,361 63,330 (40,148)
Other................................................ (19,659) 15,707 8,140
-------- -------- --------
Total........................................ $ 95,980 $162,647 $ 21,617
======== ======== ========
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SFAS 109
The following is an analysis of accumulated deferred income taxes:
<TABLE>
<CAPTION>
ACCUMULATED DEFERRED INCOME TAXES 1994 1993
---------- ----------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Assets:
Current (net)....................................................... $ 25,311 $ 12,934
Non-Current:
Unrecovered Investment Tax Credits............................... 136,402 143,125
Nuclear Decommissioning.......................................... 25,082 25,211
Hope Creek Cost Disallowance..................................... 10,127 20,231
Construction Period Interest and Taxes........................... 15,913 9,811
Vacation Pay..................................................... 6,822 6,721
Other............................................................ 6,863 14,845
---------- ----------
Total Non-Current........................................... $ 201,209 $ 219,944
---------- ----------
Total Assets.......................................................... $ 226,520 $ 232,878
========== ==========
Liabilities:
Non-Current:
Plant Related Items.............................................. $2,157,206 $2,075,359
Property Abandonments............................................ 26,971 32,206
Oil and Gas Property Write-Down.................................. 14,925 16,790
Deferred Electric Energy & Gas Costs............................. 59,884 20,133
Unamortized Debt Expense......................................... 37,599 38,768
Taxes Recoverable Through Future Rates (Net)..................... 270,684 270,518
Other............................................................ 112,479 134,948
---------- ----------
Total Non-Current........................................... $2,679,748 $2,588,722
---------- ----------
Total Liabilities..................................................... $2,679,748 $2,588,722
========== ==========
Summary -- Accumulated Deferred Income Taxes
Net Current Assets.................................................. $ 25,311 $ 12,934
Net Deferred Liability.............................................. $2,478,539 $2,368,778
---------- ----------
Total............................................................ $2,453,228 $2,355,844
========== ==========
The balance of Federal income tax payable by PSE&G to Enterprise was $15.6 million and zero, as of
December 31, 1994 and December 31, 1993, respectively.
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONCLUDED)
NOTE 18. SELECTED QUARTERLY DATA (UNAUDITED)
The information shown below, in the opinion of PSE&G, includes all
adjustments, consisting only of normal recurring accruals, necessary to a fair
presentation of such amounts. Due to the seasonal nature of the utility
business, quarterly amounts vary significantly during the year.
<TABLE>
<CAPTION>
CALENDAR MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
QUARTER ---------------------- ---------------------- ---------------------- ----------------------
ENDED 1994 1993 1994 1993 1994 1993 1994 1993
- ---------------------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Operating Revenues.... $1,689,967 $1,502,247 $1,181,655 $1,147,901 $1,282,952 $1,291,192 $1,357,067 $1,346,084
Operating Income...... $ 305,013 $ 294,734 $ 218,225 $ 206,056 $ 282,782 $ 279,173 $ 206,650 $ 201,622
Net Income............ $ 221,439 $ 204,404 $ 128,113 $ 113,849 $ 190,378 $ 188,575 $ 119,476 $ 108,040
Earnings Available to
Public Service
Enterprise Group
Incorporated........ $ 211,159 $ 195,582 $ 117,969 $ 104,092 $ 180,234 $ 178,808 $ 109,577 $ 98,272
</TABLE>
NOTE 19. ACCOUNTS PAYABLE TO ASSOCIATED COMPANIES -- NET
The balance at December 31, 1994 and 1993 consisted of the following:
<TABLE>
<CAPTION>
1994 1993
------- -------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Public Service Enterprise Group Incorporated (A).......... $17,678 $ 582
Energy Development Corporation............................ (336) 5,698
Other..................................................... (665) (606)
------- -------
Total.............................................. $16,677 $ 5,674
======= =======
(A) Principally Federal income taxes related to PSE&G's taxable income.
</TABLE>
<PAGE>
PART III
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
Enterprise and PSE&G, none.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANTS
DIRECTORS OF THE REGISTRANTS
Enterprise
The information required by Item 10 of Form 10-K with respect to present
directors who are nominees for election as directors at Enterprise's Annual
Meeting of Stockholders to be held on April 18, 1995, and directors whose terms
will continue beyond the meeting, is set forth under the heading "Election of
Directors" in Enterprise's definitive Proxy Statement for such Annual Meeting
of Stockholders, which definitive Proxy Statement is expected to be filed with
the Securities and Exchange Commission on or about March 1, 1995 and which
information set forth under said heading is incorporated herein by this
reference thereto.
PSE&G
There is shown as to each present director information as to the period
of service as a director of PSE&G, age as of April 18, 1995, present committee
memberships, business experience during the last five years and other present
directorships.
LAWRENCE R. CODEY has been a director since 1988. Age 50. Member of
Executive Committee. Has been President and Chief Operating Officer of PSE&G
since September 1991. Was Senior Vice President-Electric of PSE&G from January
1989 to September 1991. Director of Enterprise. Director of Sealed Air
Corporation, The Trust Company of New Jersey, United Water Resources Inc.,
and Blue Cross & Blue Shield of New Jersey.
E. JAMES FERLAND has been a director since 1986, and Chairman of the
Board, President and Chief Executive Officer of Enterprise since July 1986,
Chairman of the Board and Chief Executive Officer of PSE&G since September
1991, and Chairman of the Board and Chief Executive Officer of EDHI since June
1989. Age 53. Chairman of Executive Committee. President of PSE&G from July
1986 to September 1991. Director of Enterprise and of EDHI and its
subsidiaries, CEA, EDC, PSRC, EGDC, Capital and Funding. Director of First
Fidelity Bancorporation, First Fidelity Bank, N.A., Foster Wheeler Corporation
and The Hartford Steam Boiler Inspection and Insurance Company.
<PAGE>
RAYMOND V. GILMARTIN has been a director since July 20, 1993. Age 54.
Director of Enterprise. Has been Chairman of the Board, President and Chief
Executive Officer of Merck & Co., Inc. Whitehouse Station, New Jersey
(discovers, develops, produces and markets human and animal health products)
since November 1994. Was President and Chief Executive Officer of Merck & Co.,
Inc. from June 1994 to November 1994. Was Chairman of the Board, President and
Chief Executive Officer of Becton Dickinson and Company (manufactures medical
devices and diagnostic systems) from November 1992 to June 1994 and President
and Chief Executive Officer of Becton Dickinson and Company from February 1989
to November 1992. Director of Merck & Co., Inc. and Providian Corporation.
SHIRLEY A. JACKSON has been a director since July 20, 1993. Was previously
a director from 1987 to February 1988. Age 48. Director of Enterprise. Has been
Professor of Physics, Rutgers University, since 1991 and has been a theoretical
physics consultant since 1991 and was a theoretical physicist from 1976 to 1991
at AT&T Bell Laboratories (performs research and development in areas related
to telecommunications for AT&T Corp.). Director of Core States Financial
Corporation, Core States/New Jersey National Bank, New Jersey Resources
Corporation and Sealed Air Corporation. Trustee of Massachusetts Institute of
Technology.
IRWIN LERNER has been a director since July 20, 1993. Was previously a
director from 1981 to February 1988. Age 64. Director of Enterprise. Was
Chairman, Board of Directors and Executive Committee from January 1993 to
September 1993 and President and Chief Executive Officer from 1980 to December
1992 of Hoffmann-La Roche Inc., Nutley, New Jersey (manufactures
pharmaceuticals, vitamins, fine chemicals and provides home health care and
diagnostic products and services). Director of Humana Inc. and Affymax, N.V.
JAMES C. PITNEY has been a director since July 20, 1993. Was previously
a director from 1979 to February 1988. Age 68. Member of Executive Committee.
Director of Enterprise. Has been a partner in the law firm of Pitney, Hardin,
Kipp & Szuch, Morristown, New Jersey, since 1958, Director of Tri-Continental
Corporation and sixteen funds of the Seligman family of funds.
Executive Officers of the Registrants
The following table sets forth certain information concerning the
executive officers of Enterprise and PSE&G, respectively.
<PAGE>
<TABLE>
<CAPTION>
AGE EFFECTIVE DATE
DECEMBER 31, FIRST ELECTED
NAME 1994 OFFICE TO PRESENT POSITION
- ------------------------------------ ---------------------------------- -------------------------
<S> <C> <C> <C>
E. James Ferland........ 52 Chairman of the Board, President July 1986 to present
and Chief Executive Officer
(Enterprise)
Chairman of the Board and Chief July 1986 to present
Executive Officer (PSE&G)
President (PSE&G) June 1986 to September 1991
Chairman of the Board and Chief June 1989 to present
Executive Officer (EDHI)
Lawrence R. Codey....... 50 President and Chief Operating September 1991 to present
Officer (PSE&G)
Senior Vice President -- Electric January 1989 to September 1991
(PSE&G)
Robert C. Murray........ 49 Vice President and Chief Financial January 1992 to present
Officer (Enterprise)
Senior Vice President -- Finance January 1992 to present
and Chief Financial Officer
(PSE&G)
Managing Director of Morgan January 1987 to July 1991
Stanley & Co. Incorporated
Patricia A. Rado........ 52 Vice President and Controller April 1993 to present
(Enterprise)
Vice President and Controller April 1993 to present
(PSE&G)
Controller of Yankee Energy July 1989 to April 1993
Systems Inc.
Paul H. Way............. 57 President, Chief Operating February 1993 to present
Officer and Director (EDHI)
Senior Vice President (EDHI) June 1992 to February 1993
Senior Vice President -- April 1988 to
Corporate Performance (PSE&G) June 1992
R. Edwin Selover........ 49 Vice President and General April 1988 to present
Counsel (Enterprise)
Senior Vice President and General January 1988 to present
Counsel (PSE&G)
Francis J. Riepl........ 58 Treasurer (Enterprise) March 1987 to present
Vice President and Treasurer March 1987 to present
(PSE&G)
Harold W. Borden, Jr.... 50 Senior Vice President -- External January 1990 to present
Affairs (PSE&G)
Thomas M. Crimmins, Jr. . 51 Senior Vice President -- September 1991 to present
Customer Operations (PSE&G)
Vice President -- Nuclear May 1989 to
Engineering (PSE&G) September 1991
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AGE EFFECTIVE DATE
DECEMBER 31, FIRST ELECTED
NAME 1994 OFFICE TO PRESENT POSITION
- ------------------------------------ ---------------------------------- -------------------------
<S> <C> <C> <C>
Robert J. Dougherty, Jr. 43 Senior Vice President -- Electric September 1991 to present
(PSE&G)
Senior Vice President -- Customer September 1989 to
Operations (PSE&G) September 1991
Leon R. Eliason 55 Chief Nuclear Officer and October 1994 to
President - Nuclear Business present
Unit (PSE&G)
President, Power Supply Business January 1993 to
Unit, Northern States Power September 1994
Vice President, Nuclear Genera- July 1990 to
tion, Northern States Power January 1993
General Manager, Nuclear Opera- 1980 to June 1990
tions, Prairie Island and Monti-
cello Nuclear Station, Northern
States Power
Rudolph D. Stys......... 59 Senior Vice President -- Gas January 1989 to present
(PSE&G)
</TABLE>
ITEM 11. EXECUTIVE COMPENSATION
ENTERPRISE
The information required by Item 11 of Form 10-K is set forth under the
heading "Executive Compensation" in Enterprise's definitive Proxy Statement for
the Annual Meeting of Stockholders to be held April 18, 1995, which definitive
Proxy Statement is expected to be filed with the Securities and Exchange
Commission on or about March 1, 1995 and such information set forth under such
heading is incorporated herein by this reference thereto.
PSE&G
Information regarding the compensation of the Chief Executive Officer and
the four most highly compensated executive officers of PSE&G as of December 31,
1994 is set forth below. Amounts shown were paid or awarded for all services
rendered to Enterprise and its subsidiaries and affiliates including PSE&G.
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
---------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
----------------------- --------- ---------
SECURITIES
BONUS/ANNUAL UNDERLYING LTIP ALL OTHER
SALARY INCENTIVE OPTIONS PAYOUTS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR $(1) AWARD($)(2) (#)(3) ($)(4) ($)(5)
- --------------------------- ---- ------- ------------ ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C>
E. James Ferland........... 1994 652,492 (6) 5,400 127,140 5,628
Chairman of the Board, 1993 622,606 265,316 5,800 28,072 7,678
President and CEO of 1992 620,691 244,759 5,600 27,588 7,610
Enterprise
Lawrence R. Codey.......... 1994 398,468 (6) 2,500 48,900 5,351
President and Chief 1993 378,545 109,585 2,800 9,570 6,981
Operating Officer of PSE&G 1992 336,208 102,919 2,700 6,270 6,789
Robert C. Murray........... 1994 303,832 50,000(6)(7) 1,800 26,895 4,944
Vice President and Chief 1993 288,889 154,032(6)(8) 2,000 3,190 7,264
Financial Officer of 1992 263,410 70,463 3,200 0 5,064
Enterprise and
Senior Vice President-
Finance and Chief Financial
Officer of PSE&G
Robert J. Dougherty, Jr. .. 1994 273,946 (6) 1,800 26,895 4,227
Senior Vice President- 1993 259,004 65,703 2,000 5,104 6,341
Electric of PSE&G 1992 222,415 59,916 1,600 0 5,995
R. Edwin Selover........... 1994 241,074 (6) 1,300 29,340 5,512
Vice President and General 1993 231,113 51,040 1,400 0 7,594
Counsel of Enterprise and 1992 228,621 44,914 1,300 0 7,576
Senior Vice President and
General Counsel of PSE&G
(1) Due to pay schedules, 1992 amounts reflect one additional pay period per individual compared to 1994
and 1993.
(2) Amount awarded in given year was earned under Management Incentive Compensation Plan (MICP) and
determined in following year with respect to the given year based on individual performance and
financial and operating performance of Enterprise and PSE&G, including comparison to other
companies. Award is accounted for as market-priced phantom stock with dividend reinvestment at
95% of market price, with payment made over three years beginning in second year following grant.
(3) Granted under Long-Term Incentive Plan (LTIP) in tandem with equal number of performance units and
dividend equivalents which may provide cash payments, dependent upon future financial performance of
Enterprise in comparison to other companies and dividend payments by Enterprise, to assist officers in
exercising options granted. The grant is made at the beginning of a three-year performance period and
cash payment of the value of such performance units and dividend equivalents is made following such period
in proportion to the options, if any, exercised at such time.
(4) Amount paid in proportion to options exercised, if any, based on value of previously granted performance
units and dividend equivalents, each as measured during three-year period ending the year prior to the
year in which payment is made.
(5) Includes employer contribution to Thrift and Tax-Deferred Savings Plan and value of 5% discount on phantom stock
dividend reinvestment under MICP:
</TABLE>
<TABLE>
<CAPTION>
FERLAND CODEY MURRAY DOUGHERTY SELOVER
-------------- -------------- ------------- ------------- ---------------
THRIFT MICP THRIFT MICP THRIFT MICP THRIFT MICP THRIFT MICP
$ $ $ $ $ $ $ $ $ $
------ ----- ------ ----- ------ ---- ------ ---- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1994............ 3,751 1,877 4,197 1,154 4,504 440 3,752 475 4,506 1,006
1993............ 5,900 1,778 5,896 1,085 7,078 186 5,907 434 6,630 964
1992............ 5,725 1,885 5,725 1,064 5,064 0 5,562 433 6,588 988
(6) The 1994 MICP award amount has not yet been determined. The target award is 40% of salary for Mr. Ferland,
30% for Mr. Codey, 25% for Messrs. Murray and Dougherty and 20% for Mr. Selover. The target award is
adjusted to reflect Enterprise's comparative return on capital, PSE&G's comparative electric and gas costs
and individual performance.
(7) Amount paid pursuant to Mr. Murray's employment agreement.
</TABLE>
<PAGE>
(8) Includes $75,000 paid pursuant to Mr. Murray's employment agreement.
OPTION GRANTS IN LAST FISCAL YEAR (1994)
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
-------------------------------------------------- VALUE AT ASSUMED ANNUAL
NUMBER OF % OF TOTAL RATES OF STOCK PRICE
SECURITIES OPTIONS APPRECIATION FOR OPTION
UNDERLYING GRANTED TO EXERCISE OR TERM(2)
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION -----------------------
NAME GRANTED(1) FISCAL YEAR ($/SH) DATE 0%($) 5%($) 10%($)
- ------------------------- ----------- ------------ ----------- ---------- ----- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
E. James Ferland......... 5,400 28.1 31.375 1/04/94 0 106,550 270,020
Lawrence R. Codey........ 2,500 13.0 31.375 1/04/94 0 49,329 125,009
Robert C. Murray......... 1,800 9.4 31.375 1/04/94 0 35,517 90,007
Robert J. Dougherty,
Jr..................... 1,800 9.4 31.375 1/04/94 0 35,517 90,007
R. Edwin Selover......... 1,300 6.8 31.375 1/04/94 0 25,651 65,005
(1) Granted under LTIP in tandem with equal number of performance units and dividend equivalents which may
provide cash payments, dependent on future financial performance of Enterprise in comparison to other
companies and dividend payments by Enterprise, to assist individuals in exercising options, with exercisability
commencing January 1, 1997. Cash payment is made, based on the value, if any, of performance units awarded and
dividend equivalents accrued, if any, as measured during the three-year period ending the year prior to the year
in which payment, if any, is made, only if the specified performance level is achieved, dividend equivalents have
accrued and options are exercised.
(2) All options reported have a ten-year term, as noted. Amounts shown represent hypothetical future values
at such term based upon hypothetical price appreciation of Enterprise Common Stock and may not
necessarily be realized. Actual values which may be realized, if any, upon any exercise of such
options, will be based on the market price of Enterprise Common Stock at the time of any such exercise
and thus are dependent upon future performance of Enterprise Common Stock.
</TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR (1994) AND
FISCAL YEAR-END OPTION VALUES (12/31/94)
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT FY-END(#)(1) AT FY-END($)(3)
ACQUIRED VALUE -------------------------- --------------------------
ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
NAME (#)(1) ($)(2) (#) (#) ($) ($)
- ------------------------- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
E. James Ferland......... 5,200 19,874 0 16,800 0 0
Lawrence R. Codey........ 2,000 6,500 700 8,000 1,575 0
Robert C. Murray......... 1,100 2,200 0 5,400 0 0
Robert J. Dougherty, Jr.. 1,100 0 0 5,400 0 0
R. Edwin Selover......... 1,200 3,450 2,200 4,000 2,700 0
(1) Does not reflect any options granted and/or exercised after year-end (12/31/94). The net effect of any
such grants and exercises is reflected in the table appearing under Security Ownership of Directors and
Management.
(2) Represents difference between exercise price and market price of Enterprise Common Stock on date of
exercise.
(3) Represents difference between market price of Enterprise Common Stock and the respective exercise prices
of the options at fiscal year-end (12/31/94). Such amounts may not necessarily be realized. Actual values
which may be realized, if any, upon any exercise of such options will be based on the market price of
Enterprise Common Stock at the time of any such exercise and thus are dependent upon future performance of
Enterprise Common Stock.
</TABLE>
<PAGE>
Employment Contracts and Arrangements
Employment agreements were entered into with Messrs. Ferland and Murray
at the time of their employment. For Mr. Ferland, the remaining applicable
provisions of these agreements provide for additional credited service for
pension purposes in the amount of 22 years. The principal remaining applicable
terms of the agreement with Mr. Murray provide for payment of severance in the
amount of one year's salary, if discharged without cause during his first five
years of employment, for a lump sum cash payment of $25,000 in 1995 to align
Mr. Murray with MICP payments for other executive officers, and additional
years of credited service for pension purposes for allied work experience of
five years after completion of five years of employment, and up to fifteen
years after completion of ten years of service.
Compensation Committee Interlocks and Insider Participation
PSE&G does not have a compensation committee. Decisions regarding
compensation of PSE&G's executive officers are made by the Organization and
Compensation Committee of Enterprise. Hence, during 1994 the PSE&G Board of
Directors did not have, and no officer, employee or former officer of PSE&G
participated in any deliberations of such Board, concerning executive officer
compensation.
Compensation of Directors and Certain Business Relationships
A director who is not an officer of Enterprise or its subsidiaries and
affiliates, including PSE&G, is paid an annual retainer of $22,000 and a fee
of $1,200 for attendance at any Board or committee meeting, inspection trip,
conference or other similar activity relating to Enterprise, PSE&G or EDHI.
Each of the directors of PSE&G is also a director of Enterprise. No additional
retainer is paid for service as a director of PSE&G. Effective July 1, 1994,
50 percent of the annual retainer is payable each January in Enterprise Common
Stock for the twelve-month period beginning the preceding July 1 and ending the
following June 30.
Enterprise has a Retirement Plan for outside directors. Under this Plan,
directors with five years of service who have not been employees of Enterprise
or its subsidiaries, who leave service after age 65, or for disability, receive
an annual retirement benefit payable for life equal to the annual Board
retainer in effect at the time the director's service terminates. The benefit
payment is prorated for directors with less than 10 years of service on the
Board.
<PAGE>
During 1994, Dr. Shirley A. Jackson, a director of Enterprise and PSE&G,
was the liaison member for the Board of Directors on and Chair of PSE&G's
Nuclear Oversight Committee (NOC). The NOC met three times during 1994, with
two meetings lasting two days and one meeting lasting three days. In accordance
with the compensation policy for all NOC members, Dr. Jackson received an
annual retainer of $28,000 and $1,000 per day for each NOC meeting attended.
COMPENSATION PURSUANT TO PENSION PLANS
PENSION PLAN TABLE
<TABLE>
<CAPTION>
AVERAGE LENGTH OF SERVICE
FINAL -----------------------------------------------
COMPENSATION 30 YEARS 35 YEARS 40 YEARS 45 YEARS
- ------------ -------- -------- -------- --------
<S> <C> <C> <C> <C>
$ 300,000 $180,000 $195,000 $210,000 $225,000
400,000 240,000 260,000 280,000 300,000
500,000 300,000 325,000 350,000 375,000
600,000 360,000 390,000 420,000 450,000
700,000 420,000 455,000 490,000 525,000
800,000 480,000 520,000 560,000 600,000
900,000 540,000 585,000 630,000 675,000
1,000,000 600,000 650,000 700,000 750,000
</TABLE>
The above table illustrates annual retirement benefits expressed in terms
of single life annuities based on the average final compensation and service
shown and retirement at age 65. A person's annual retirement benefit is based
upon a percentage that is equal to years of credited service plus 30, but not
more than 75%, times average final compensation at the earlier of retirement,
attainment of age 65 or death. These amounts are reduced by Social Security
benefits and certain retirement benefits from other employers. Pensions in the
form of joint and survivor annuities are also available.
Average final compensation, for purposes of retirement benefits of
executive officers, is generally equivalent to the average of the aggregate of
the salary and bonus amounts reported in the Summary Compensation Table above
under 'Annual Compensation' for the five years preceding retirement, not to
exceed 120% of the average annual salary for such five year period. Messrs.
Ferland, Codey, Murray, Dougherty and Selover will have accrued approximately
48, 41, 39, 48 and 43 years of credited service, respectively, as of age 65.
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Enterprise
The information required by Item 12 of Form 10-K with respect to directors
and executive officers is set forth under the heading 'Security Ownership of
Directors and Management' in Enterprise's definitive Proxy Statement for the
Annual Meeting of Stockholders to be held April 18, 1995 which definitive Proxy
Statement is expected to be filed with the Securities and Exchange Commission
on or about March 1, 1995 and such information set forth under such heading is
incorporated herein by this reference thereto.
PSE&G
All of PSE&G's 132,450,344 outstanding shares of Common Stock are owned
beneficially and of record by PSE&G's parent, Enterprise, 80 Park Plaza, P.O.
Box 1171, Newark, New Jersey.
The following table sets forth beneficial ownership of Enterprise Common
Stock, including options, by the directors and executive officers named below
as of January 31, 1995. None of these amounts exceed 1% of the Enterprise
Common Stock outstanding at such date. No director or executive officer owns
any PSE&G Preferred Stock of any class.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
NAME BENEFICIAL OWNERSHIP
----------------------------------------------- --------------------
<S> <C>
Lawrence R. Codey.............................. 18,611(1)
Robert J. Dougherty, Jr. ...................... 10,147(2)
E. James Ferland............................... 56,335(3)
Raymond V. Gilmartin........................... 1,415
Shirley A. Jackson............................. 1,488
Irwin Lerner................................... 3,996
Robert C. Murray............................... 11,555(4)
James C. Pitney................................ 3,154
R. Edwin Selover............................... 11,191(5)
All directors and executive officers (15)
as a group................................... 148,561(6)
</TABLE>
- ---------------
(1) Includes options to purchase 11,500 additional shares, 3,400 of which are
currently exercisable.
(2) Includes the equivalent of 639 shares held under Thrift and Tax-Deferred
Savings Plan. Include options to purchase 7,400 additional shares, 1,600 of
which are currently exercisable.
<PAGE>
(3) Includes the equivalent of 8,788 shares held under Thrift and Tax-Deferred
Savings Plan. Includes options to purchase 22,600 additional shares, 5,600
of which are currently exercisable.
(4) Includes the equivalent of 555 shares held under Thrift and Tax-Deferred
Savings Plan. Includes options to purchase 7,400 additional shares, 1,600
of which are currently exercisable.
(5) Disclaims beneficial ownership of 273 shares. Includes options to
purchase 7,600 additional shares, 3,500 of which are currently
exercisable.
(6) Includes 275 shares owned by relatives as to which beneficial ownership
is disclaimed. Also includes the equivalent of 10,699 shares held under
Thrift and Tax-Deferred Savings Plan. Includes options to purchase 78,400
additional shares, of which 21,000 are currently exercisable.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Enterprise
The information required by Item 13 of Form 10-K is set forth under the
heading "Executive Compensation" in Enterprise's definitive Proxy Statement for
the Annual Meeting of Stockholders to be held April 18, 1995, which definitive
Proxy Statement is expected to be filed with the Securities and Exchange
Commission on or about March 1, 1995. Such information set forth under such
heading is incorporated herein by this reference thereto.
PSE&G
None.
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Financial Statements:
(1) Enterprise Consolidated Statements of Income for the years ended
December 31, 1994, 1993, and 1992, on page 83.
Enterprise Consolidated Balance Sheets for the years ended
December 31, 1994 and 1993, on pages 84 and 85.
Enterprise Consolidated Statements of Cash Flows for the
years ended December 31, 1994, 1993 and 1992 on page 86.
Enterprise Statements of Retained Earnings for the years
ended December 31, 1994, 1993 and 1992 on page 87.
Enterprise Notes to Consolidated Financial Statements on
pages 93 through 131.
(2) PSE&G Consolidated Statements of Income for the years ended
December 31, 1994, 1993 and 1992, on page 88.
PSE&G Consolidated Balance Sheets for the years ended
December 31, 1994 and 1993, on pages 89 and 90.
PSE&G Consolidated Statements of Cash Flows for the years
ended December 31, 1994, 1993 and 1992 on page 91.
PSE&G Statements of Retained Earnings for the years ended
December 31, 1994, 1993 and 1992 on page 92.
PSE&G Notes to Consolidated Financial Statements on pages
132 through 135.
(b) The following documents are filed as a part of this report:
(1) Enterprise Financial Statement Schedules:
Schedule VIII -- Valuation and Qualifying Accounts for each of
the three years in the period ended
December 31, 1994 (page 149).
<PAGE>
(2) PSE&G Financial Statement Schedules:
Schedule VIII -- Valuation and Qualifying Accounts for each of
the three years in the period ended December 31,
1994 (page 150).
Schedules other than those listed above are omitted for the reason
that they are not required or are not applicable, or the required
information is shown in the consolidated financial statements or notes
thereto.
<PAGE>
(c) The following exhibits are filed herewith:
(1) Enterprise:
[S] [C]
4b(4) -- Indenture dated November 1, 1994
10a(15) -- Letter Agreement, as amended, with
Leon R. Eliason dated September 14, 1994
12 -- Computation of Ratios of Earnings to Fixed Charges.
21 -- Subsidiaries of Registrant.
23 -- Independent Auditors' Consent.
27 -- Financial Data Schedule
(See Exhibit Index on pages 153 through 159).
(2) PSE&G:
[S] [C]
3b -- Copy of By-Laws of PSE&G, as in effect
September 1, 1994
4b(4) -- Indenture dated November 1, 1994
10a(14) -- Letter Agreement, as amended, with
Leon R. Eliason dated September 14, 1994
12(a) -- Computation of Ratios of Earnings to Fixed Charges.
12(b) -- Computation of Ratios of Earnings to Fixed Charges
Plus Preferred Stock Dividend Requirements.
23 -- Independent Auditors' Consent.
27 -- Financial Data Schedule
(See Exhibit Index on page 153 and pages 160 through 165).
(d) The following reports on Form 8-K were filed by the registrant(s)
named below during the last quarter of 1994 and the 1995
period covered by this report under Item 5:
<TABLE>
<CAPTION>
REGISTRANT DATE OF REPORT ITEM REPORTED
- ------------------- ----------------- --------------------------------
<S> <C> <C>
Enterprise and PSE&G October 6, 1994 Item 5. Other Events (NRC fine
for the Salem Unit No. 1 event
and electric Levelized Energy
Adjustment Charge).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE VIII
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
SCHEDULE VIII -- VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 1994 -- DECEMBER 31, 1992
- ----------------------------------------------------------------------------------------------------------------------------
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- ----------------------------------------------------------------------------------------------------------------------------
ADDITIONS
----------------------------------
CHARGED TO
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
BEGINNING OF COST AND OTHER ACCOUNTS- DEDUCTIONS- END OF
DESCRIPTION PERIOD EXPENSES DESCRIBE DESCRIBE PERIOD
- ----------------------------------------------------------------------------------------------------------------------------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C>
1994
Allowance for Doubtful Accounts........... $ 27,932 $ 50,140 $ -- $37,157(A) $ 40,915
============ ========== =============== =========== ==========
Discount on Property Abandonments......... $ 16,263 $ -- $ -- $ 4,840(B) $ 11,423
============ ========== =============== =========== ==========
Valuation Allowances...................... $ 34,703 $ 6,827 $ 4,500 $ 5,662 $ 40,368
============ ========== =============== =========== ==========
Inventory Valuation Reserve............... $ 8,525 $ 9,675 $ -- $ -- $ 18,200
1993
Allowance for Doubtful Accounts........... $ 24,059 $ 31,625 $ -- $27,752(A) $ 27,932
============ ========== =============== =========== ==========
Discount on Property Abandonments......... $ 21,951 $ -- $ -- $ 5,688(B) $ 16,263
============ ========== =============== =========== ==========
Valuation Allowances...................... $ 21,509 $ 17,887 $ -- $ 4,693 $ 34,703
============ ========== =============== =========== ==========
Inventory Valuation Reserve............... $ -- $ 8,525 $ -- $ -- $ 8,525
1992
Allowance for Doubtful Accounts........... $ 21,241 $ 29,488 $ -- $26,670(A) $ 24,059
========== ========= =============== =========== ==========
Discount on Property Abandonments......... $ 31,567 $ -- $ -- $ 9,616(B) $ 21,951
============ ========== =============== =========== ==========
Valuation Allowances...................... $ 16,696 $ 42,859 $ -- $38,046 $ 21,509
============ ========== =============== =========== ==========
Inventory Valuation Reserve............... $ -- $ -- $ -- $ -- $ --
NOTES:
(A) Accounts Receivable/Investments written off.
(B) Amortization of discount to income.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE VIII
PUBLIC SERVICE ELECTRIC AND GAS COMPANY
SCHEDULE VIII -- VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 1994 -- DECEMBER 31, 1992
- ----------------------------------------------------------------------------------------------------------------------------
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- ----------------------------------------------------------------------------------------------------------------------------
ADDITIONS
----------------------------------
CHARGED TO
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
BEGINNING OF COST AND OTHER ACCOUNTS- DEDUCTIONS- END OF
DESCRIPTION PERIOD EXPENSES DESCRIBE DESCRIBE PERIOD
- ----------------------------------------------------------------------------------------------------------------------------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C>
1994
Allowance for Doubtful Accounts........... $ 27,932 $ 50,140 $ -- $37,157(A) $ 40,915
============ ========== =============== =========== ==========
Discount on Property Abandonments......... $ 16,263 $ -- $ -- $ 4,840(B) $ 11,423
============ ========== =============== =========== ==========
Inventory Valuation Reserve............... $ 8,525 $ 9,675 $ -- $ -- $ 18,200
1993
Allowance for Doubtful Accounts........... $ 24,059 $ 31,625 $ -- $27,752(A) $ 27,932
============ ========== =============== =========== ==========
Discount on Property Abandonments......... $ 21,951 $ -- $ -- $ 5,688(B) $ 16,263
============ ========== =============== =========== ==========
Inventory Valuation Reserve............... $ -- $ 8,525 $ -- $ -- $ 8,525
1992
Allowance for Doubtful Accounts........... $ 21,241 $ 29,488 $ -- $26,670(A) $ 24,059
============ ========== =============== =========== ==========
Discount on Property Abandonments......... $ 31,567 $ -- $ -- $ 9,616(B) $ 21,951
============ ========== =============== =========== ==========
Inventory Valuation Reserve............... $ -- $ -- $ -- $ -- $ --
NOTES:
(A) Accounts Receivable/Investments written off.
(B) Amortization of discount to income.
</TABLE>
<PAGE> SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
PUBLIC SERVICE ENTERPRISE GROUP
INCORPORATED
By E. JAMES FERLAND
-------------------------------
E. James Ferland
Chairman of the Board, President
Date: February 23, 1995 and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
E. JAMES FERLAND
- -------------------------------- Chairman of the Board, February 23, 1995
E. James Ferland President and Chief
Executive Officer and
Director (Principal
Executive Officer)
ROBERT C. MURRAY
- -------------------------------- Vice President and Chief February 23, 1995
Robert C. Murray Financial Officer
(Principal Financial
Officer)
PATRICIA A. RADO
- -------------------------------- Vice President and February 23, 1995
Patricia A. Rado Controller (Principal
Accounting Officer)
LAWRENCE R. CODEY
- -------------------------------- Director February 23, 1995
Lawrence R. Codey
ERNEST H. DREW
- -------------------------------- Director February 23, 1995
Ernest H. Drew
T. J. DERMOT DUNPHY
- -------------------------------- Director February 23, 1995
T. J. Dermot Dunphy
RAYMOND V. GILMARTIN
- -------------------------------- Director February 23, 1995
Raymond V. Gilmartin
SHIRLEY A. JACKSON
- -------------------------------- Director February 23, 1995
Shirley A. Jackson
IRWIN LERNER
- -------------------------------- Director February 23, 1995
Irwin Lerner
MARILYN M. PFALTZ
- -------------------------------- Director February 23, 1995
Marilyn M. Pfaltz
JAMES C. PITNEY
- -------------------------------- Director February 23, 1995
James C. Pitney
RICHARD J. SWIFT
- -------------------------------- Director February 23, 1995
Richard J. Swift
JOSH S. WESTON
- -------------------------------- Director February 23, 1995
Josh S. Weston
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
PUBLIC SERVICE ELECTRIC AND GAS
COMPANY
By E. JAMES FERLAND
-------------------------------
E. James Ferland
Chairman of the Board and
Chief Executive Officer
Date: February 23, 1995
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
E. JAMES FERLAND
- -------------------------------- Chairman of the Board and February 23, 1995
E. James Ferland Chief Executive Officer
and Director (Principal
Executive Officer)
LAWRENCE R. CODEY
- -------------------------------- President and Chief February 23, 1995
Lawrence R. Codey Operating Officer and
Director
ROBERT C. MURRAY
- -------------------------------- Senior Vice President - February 23, 1995
Robert C. Murray Finance and Chief
Financial Officer
(Principal Financial
Officer)
PATRICIA A. RADO
- -------------------------------- Vice President and February 23, 1995
Patricia A. Rado Controller (Principal
Accounting Officer)
RAYMOND V. GILMARTIN
- -------------------------------- Director February 23, 1995
Raymond V. Gilmartin
SHIRLEY A. JACKSON
- -------------------------------- Director February 23, 1995
Shirley A. Jackson
IRWIN LERNER
- -------------------------------- Director February 23, 1995
Irwin Lerner
JAMES C. PITNEY
- -------------------------------- Director February 23, 1995
James C. Pitney
</TABLE>
<PAGE>
EXHIBIT INDEX
Certain Exhibits previously filed with the Commission and the appropriate
securities exchanges are indicated as set forth below. Such Exhibits are not
being refiled, but are included because inclusion is desirable for convenient
reference.
(a) Filed by PSE&G with Form 8-A under the Securities Exchange Act
of 1934, on the respective dates indicated, File No. 1-973.
(b) Filed by PSE&G with Form 8-K under the Securities Exchange Act
of 1934, on the respective dates indicated, File No. 1-973.
(c) Filed by PSE&G with Form 10-K under the Securities Exchange Act
of 1934, on the respective dates indicated, File No. 1-973.
(d) Filed by PSE&G with Form 10-Q under the Securities Exchange Act
of 1934, on the respective dates indicated, File No. 1-973.
(e) Filed by Enterprise with Form 10-K under the Securities Exchange
Act of 1934, on the respective dates indicated, File No. 1-9120.
(f) Filed with registration statement of PSE&G under the Securities
Exchange Act of 1934, File No. 1-973, effective July 1, 1935, relating to
the registration of various issues of securities.
(g) Filed with registration statement of PSE&G under the Securities
Act of 1933, No. 2-4995, effective May 20, 1942, relating to the issuance
of $15,000,000 First and Refunding Mortgage Bonds, 3% Series due 1972.
(h) Filed with registration statement of PSE&G under the Securities
Act of 1933, No. 2-7568, effective July 1, 1948, relating to the proposed
issuance of 200,000 shares of Cumulative Preferred Stock.
(i) Filed with registration statement of PSE&G under the Securities
Act of 1933, No. 2-8381, effective April 18, 1950, relating to the
issuance of $26,000,000 First and Refunding Mortgage Bonds, 2 3/4%
Series due 1980.
(j) Filed with registration statement of PSE&G under the Securities
Act of 1933, No. 2-12906, effective December 4, 1956, relating to the
issuance of 1,000,000 shares of Common Stock.
(k) Filed with registration statement of PSE&G under the Securities
Act of 1933, No. 2-59675, effective September 1, 1977, relating to the
issuance of $60,000,000 First and Refunding Mortgage Bonds, 8 1/8%
Series I due 2007.
(l) Filed with registration statement of PSE&G under the Securities
Act of 1933, No. 2-60925, effective March 30, 1978, relating to the
issuance of 750,000 shares of Common Stock through an Employee Stock
Purchase Plan.
(m) Filed with registration statement of PSE&G under the Securities
Act of 1933, No. 2-65521, effective October 10, 1979, relating to the
issuance of 3,000,000 shares of Common Stock.
(n) Filed with registration statement of PSE&G under the Securities
Act of 1933, No. 2-74018, filed on June 16, 1982, relating to the Thrift
Plan of PSE&G.
(o) Filed with registration statement of Public Service Enterprise
Group Incorporated under the Securities Act of 1933, No. 33-2935 filed
January 28, 1986, relating to PSE&G's plan to form a holding company as
part of a corporate restructuring.
(p) Filed with registration statement of PSE&G under the Securities
Act of 1933, No. 33-13209 filed April 9, 1987, relating to the
registration of $575,000,000 First and Refunding Mortgage Bonds
pursuant to Rule 415.
<PAGE>
ENTERPRISE
<TABLE>
<CAPTION>
EXHIBIT NUMBER
- --------------------------------------------
PREVIOUS FILING
THIS --------------------------------
FILING COMMISSION EXCHANGES
- --------- -------------- --------------
<S> <C> <C> <C> <C> <C>
3a (o) 3a (o) 3a Certificate of Incorporation Public Service
Enterprise Group Incorporated
3b (e) 3b (e) 3b Copy of By-Laws of Public Service Enterprise
4/11/88 Group Incorporated, as in effect May 1, 1987
3c (e) 3c (e) 3c Certificate of Amendment of Certificate of
4/11/88 Incorporation of Public Service Enterprise Group
Incorporated, effective April 23, 1987
4a(1) (f) B-1 (c) 4b(1) Indenture between PSE&G and Fidelity Union Trust
2/18/81 Company, (now First Fidelity Bank, National
Association), as Trustee, dated August 1, 1924,
securing First and Refunding Mortgage Bonds
Indentures between PSE&G and First Fidelity
Bank, National Association, as Trustee,
supplemental to Exhibit 4a(1), dated as follows:
4a(2) (i) 7(1a) (c) 4b(2) April 1, 1927
2/18/81
4a(3) (k) 2b(3) (c) 4b(3) June 1, 1937
2/18/81
4a(4) (k) 2b(4) (c) 4b(4) July 1, 1937
2/18/81
4a(5) (k) 2b(5) (c) 4b(5) December 19, 1939
2/18/81
4a(6) (g) B-10 (c) 4b(6) March 1, 1942
2/18/81
4a(7) (k) 2b(7) (c) 4b(7) June 1, 1949
2/18/81
4a(8) (k) 2b(8) (c) 4b(8) May 1, 1950
2/18/81
4a(9) (k) 2b(9) (c) 4b(9) October 1, 1953
2/18/81
4a(10) (k) 2b(10) (c) 4b(10) May 1, 1954
2/18/81
4a(11) (j) 4b(16) (c) 4b(11) November 1, 1956
2/18/81
4a(12) (k) 2b(12) (c) 4b(12) September 1, 1957
2/18/81
4a(13) (k) 2b(13) (c) 4b(13) August 1, 1958
2/18/81
4a(14) (k) 2b(14) (c) 4b(14) June 1, 1959
2/18/81
4a(15) (k) 2b(15) (c) 4b(15) September 1, 1960
2/18/81
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NUMBER
- --------------------------------------------
PREVIOUS FILING
THIS --------------------------------
FILING COMMISSION EXCHANGES
- --------- -------------- --------------
<S> <C> <C> <C> <C> <C>
4a(16) (k) 2b(16) (c) 4b(16) August 1, 1962
2/18/81
4a(17) (k) 2b(17) (c) 4b(17) June 1, 1963
2/18/81
4a(18) (k) 2b(18) (c) 4b(18) September 1, 1964
2/18/81
4a(19) (k) 2b(19) (c) 4b(19) September 1, 1965
2/18/81
4a(20) (k) 2b(20) (c) 4b(20) June 1, 1967
2/18/81
4a(21) (k) 2b(21) (c) 4b(21) June 1, 1968
2/18/81
4a(22) (k) 2b(22) (c) 4b(22) April 1, 1969
2/18/91
4a(23) (k) 2b(23) (c) 4b(23) March 1, 1970
2/18/81
4a(24) (k) 2b(24) (c) 4b(24) May 15, 1971
2/18/81
4a(25) (k) 2b(25) (c) 4b(25) November 15, 1971
2/18/81
4a(26) (k) 2b(26) (c) 4b(26) April 1, 1972
2/18/81
4a(27) (a) 2 (c) 4b(27) March 1, 1974
3/29/74 2/18/81
4a(28) (a) 2 (c) 4b(28) October 1, 1974
10/11/74 2/18/81
4a(29) (a) 2 (c) 4b(29) April 1, 1976
4/6/76 2/18/81
4a(30) (a) 2 (c) 4b(30) September 1, 1976
9/16/76 2/18/81
4a(31) (k) 2b(31) (c) 4b(31) October 1, 1976
2/18/81
4a(32) (a) 2 (c) 4b(32) June 1, 1977
6/29/77 2/18/81
4a(33) (l) 2b(33) (c) 4b(33) September 1, 1977
2/18/81
4a(34) (a) 2 (c) 4b(34) November 1, 1978
11/21/78 2/18/81
4a(35) (a) 2 (c) 4b(35) July 1, 1979
7/25/79 2/18/81
4a(36) (m) 2d(36) (c) 4b(36) September 1, 1979 (No. 1)
2/18/81
4a(37) (m) 2d(37) (c) 4b(37) September 1, 1979 (No. 2)
2/18/81
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NUMBER
- --------------------------------------------
PREVIOUS FILING
THIS --------------------------------
FILING COMMISSION EXCHANGES
- --------- -------------- --------------
<S> <C> <C> <C> <C> <C>
4a(38) (a) 2 (c) 4b(38) November 1, 1979
12/3/79 2/18/81
4a(39) (a) 2 (c) 4b(39) June 1, 1980
6/10/80 2/18/81
4a(40) (a) 2 (a) 2 August 1, 1981
8/19/81 8/19/81
4a(41) (b) 4e (b) 4e April 1, 1982
4/29/82 5/5/82
4a(42) (a) 2 (a) 2 September 1, 1982
9/17/82 9/20/82
4a(43) (a) 2 (a) 2 December 1, 1982
12/21/82 12/21/82
4a(44) (d) 4(ii) (d) 4(ii) June 1, 1983
7/26/83 7/27/83
4a(45) (a) 4 (a) 4 August 1, 1983
8/19/83 8/19/83
4a(46) (d) 4(ii) (d) 4(ii) July 1, 1984
8/14/84 8/17/84
4a(47) (d) 4(ii) (d) 4(ii) September 1, 1984
11/2/84 11/9/84
4a(48) (b) 4(ii) (b) 4(ii) November 1, 1984 (No. 1)
1/4/85 1/9/85
4a(49) (b) 4(ii) (b) 4(ii) November 1, 1984 (No. 2)
1/4/85 1/9/85
4a(50) (a) 2 (a) 2 July 1, 1985
8/2/85 8/2/85
4a(51) (c) 4a(51) (c) 4a(51) January 1, 1986
2/11/86 2/11/86
4a(52) (a) 2 (a) 2 March 1, 1986
3/28/86 3/28/86
4a(53) (a) 2(a) (a) 2(a) April 1, 1986 (No. 1)
5/1/86 5/1/86
4a(54) (a) 2(b) (a) 2(b) April 1, 1986 (No. 2)
5/1/86 5/1/86
4a(55) (p) 4a(55) (p) 4a(55) March 1, 1987
4/9/87 4/9/87
4a(56) (a) 4 (a) 4 July 1, 1987 (No. 1)
8/17/87 8/17/87
4a(57) (d) 4 (d) 4 July 1, 1987 (No. 2)
11/13/87 11/20/87
4a(58) (a) 4 (a) 4 May 1, 1988
5/17/88 5/18/88
4a(59) (a) 4 (a) 4 September 1, 1988
9/27/88 9/28/88
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NUMBER
- --------------------------------------------
PREVIOUS FILING
THIS --------------------------------
FILING COMMISSION EXCHANGES
- --------- -------------- --------------
<S> <C> <C> <C> <C> <C>
4a(60) (a) 4 (a) 4 July 1, 1989
7/25/89 7/26/89
4a(61) (a) 4 (a) 4 July 1, 1990 (No. 1)
7/25/90 7/26/90
4a(62) (a) 4 (a) 4 July 1, 1990 (No. 2)
7/25/90 7/26/90
4a(63) (a) 4 (a) 4 June 1, 1991 (No. 1)
7/1/91 7/2/91
4a(64) (a) 4 (a) 4 June 1, 1991 (No. 2)
7/1/91 7/2/91
4a(65) (a) 4 (a) 4 November 1, 1991 (No. 1)
12/2/91 12/3/91
4a(66) (a) 4 (a) 4 November 1, 1991 (No. 2)
12/2/91 12/3/91
4a(67) (a) 4 (a) 4 November 1, 1991 (No. 3)
12/2/91 12/3/91
4a(68) (a) 4 (a) 4 February 1, 1992 (No. 1)
2/27/92 2/28/92
4a(69) (a) 4 (a) 4 February 1, 1992 (No. 2)
2/27/92 2/28/92
4a(70) (a) 4 (a) 4 June 1, 1992 (No. 1)
6/17/92 6/11/92
4a(71) (a) 4 (a) 4 June 1, 1992 (No. 2)
6/17/92 6/11/92
4a(72) (a) 4 (a) 4 June 1, 1992 (No. 3)
6/17/92 6/11/92
4a(73) (a) 4 (a) 4 January 1, 1993 (No.1)
2/2/93 2/2/93
4a(74) (a) 4 (a) 4 January 1, 1993 (No. 2)
2/2/93 2/2/93
4a(75) (a) 4 (a) 4 March 1, 1993
3/17/93 3/18/93
4a(76) (b) 4 (a) 4 May 1, 1993
5/27/93 5/28/93
4a(77) (a) 4 (a) 4 May 1, 1993 (No. 2)
5/25/93 5/25/93
4a(78) (a) 4 (a) 4 May 1, 1993 (No. 3)
5/25/93 5/25/93
4a(79) (b) 4 (b) 4 July 1, 1993
12/1/93 12/1/93
4a(80) (a) 4 (a) 4 August 1, 1993
8/3/93 8/3/93
4a(81) (b) 4 (b) 4 September 1, 1993
12/1/93 12/1/93
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NUMBER
- --------------------------------------------
PREVIOUS FILING
THIS --------------------------------
FILING COMMISSION EXCHANGES
- --------- -------------- --------------
<S> <C> <C> <C> <C> <C>
4a(82) (b) 4 (b) 4 September 1, 1993 (No. 2)
12/1/93 12/1/93
4a(83) (b) 4 (b) 4 November 1, 1993
12/1/93 12/1/93
4a(84) (a) 4 (a) 4 February 1, 1994
2/3/94 2/14/94
4a(85) (a) 4 (a) 4 March 1, 1994 (No. 1)
3/15/94 3/16/94
4a(86) (a) 4 (a) 4 March 1, 1994 (No. 2)
3/15/94 3/16/94
4a(87) (d) 4 (d) 4 May 1, 1994
11/8/94 12/2/94
4a(88) (d) 4 (d) 4 June 1, 1994
11/8/94 12/2/94
4a(89) (d) 4 (d) 4 August 1, 1994
11/8/94 12/2/94
4a(90) (d) 4 (d) 4 October 1, 1994 (No. 1)
11/8/94 12/2/94
4a(91) (d) 4 (d) 4 October 1, 1994 (No. 2)
11/8/94 12/2/94
4b(1) (h) 7(12) (c) 4c(1) Indenture between PSE&G and Federal Trust
2/18/81 Company, as Trustee (Midlantic National Bank,
Successor Trustee) dated July 1, 1948, providing
for 6% Debenture Bonds due 1998
4b(2) (l) 2c(8) (c) 4c(8) Indenture between PSE&G and The Chase Manhattan
2/18/81 Bank (National Association), as Trustee, dated
August 15, 1971, providing for 7 3/4% Debenture
Bonds due 1996
4b(3) (b) 4 (b) 4 Indenture of Trust between PSE&G and The Chase
12/1/93 12/1/93 Manhattan Bank (National Association), as
Trustee, providing for Secured Medium-Term Notes
dated July 1, 1993
4b(4) Indenture between PSE&G and First Fidelity Bank,
National Association, as Trustee, dated November 1,
1994, providing for Deferrable Interest Subordinated
Debentures in Series
9 Inapplicable
10a(1) (c) 10c(1) (c) 10c(1) Directors' Deferred Compensation Plan
3/17/82 3/19/82
10a(2) (c) 10c(2) (c) 10c(2) Officers' Deferred Compensation Plan
3/17/82 3/19/82
10a(3) (c) 10c(3) (c) 10c(3) Supplemental Death Benefits Plan for officers
3/17/82 3/19/82
10a(4) (c) 10c(4) (c) 10c(4) Description of additional retirement benefits
3/17/82 3/19/82 for certain officers
10a(5)(i) (c) 10b(5) (c) 10b(5) Limited Supplemental Death Benefits and
3/31/83 4/8/83 Retirement Plan
10a(5)(ii) (c) 10a(5)(ii) (c) 10a(5)(ii) Limited Supplemental Benefits Plan for Certain
2/25/94 3/1/94 Employees
10a(6)(i) (c) 10a(6) (c) 10a(6) Description of additional retirement benefits
3/10/87 4/16/87 for certain officers
10a(6)(ii) (c) 10a(6)(1) (c) 10a(6)(1) Description of additional retirement benefits
3/30/90 3/30/90 for certain officers.
10a(6)(iii) (c) 10a(6)(2) (c) 10a(6)(2) Description of additional retirement benefits
3/30/92 4/27/92 for a certain officer.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NUMBER
- --------------------------------------------
PREVIOUS FILING
THIS --------------------------------
FILING COMMISSION EXCHANGES
- --------- -------------- --------------
<S> <C> <C> <C> <C> <C>
10a(7) (o) 10g (o) 10g Management Incentive Compensation Plan
10a(8) (c) 10a(8) (c) 10a(8) Long-Term Incentive Plan
3/30/89 4/18/89
10a(9) (c) 10a(9) (c) 10a(9) Public Service Enterprise Group Incorporated
3/30/89 4/18/89 Pension Plan for Outside Directors
10a(10) (c) 10a(11) (c) 10a(11) Letter Agreement with E. James Ferland dated
2/10/93 2/11/93 April 16, 1986
10a(11) (c) 10a(12) (c) 10a(12) Letter Agreement with Paul H. Way dated March
2/10/93 2/11/93 28, 1988
10a(12) (c) 10a(13) (c) 10a(13) Letter Agreement with Thomas M. Crimmins, Jr.
2/10/93 2/11/93 dated April 5, 1989
10a(13) (c) 10a(15) (c) 10a(15) Letter Agreement with Robert C. Murray dated
2/10/93 2/11/93 December 17, 1991
10a(14) (c) 10a(14) (c) 10a(14) Letter agreement with Patricia A. Rado dated
2/26/94 3/9/94 March 24, 1993
10a(15) Letter Agreement, as amended, with Leon R. Eliason
dated September 14, 1994
11 Inapplicable
12 Computation of Ratios of Earnings to Fixed
Charges
13 Inapplicable
16 Inapplicable
18 Inapplicable
21 Subsidiaries of the Registrant
22 Inapplicable
23 Independent Auditors' Consent
24 Inapplicable
27 Financial Data Schedule
28 Inapplicable
99 Inapplicable
</TABLE>
<PAGE>
PSE&G
<TABLE>
<CAPTION>
EXHIBIT NUMBER
- --------------------------------------------
PREVIOUS FILING
THIS --------------------------------
FILING COMMISSION EXCHANGES
- --------- -------------- --------------
<S> <C> <C> <C> <C> <C>
3a(1) (b) 3a (b) 3a Restated Certificate of Incorporation of PSE&G,
8/28/86 8/29/86 effective May 1, 1986
3a(2) (c) 3a(2) (c) 3a(2) Certificate of Amendment of Certificate of
4/10/87 Restated Certificate of Incorporation of PSE&G
filed February 18, 1987 with the State of New
Jersey adopting limitations of liability
provisions in accordance with an amendment to
New Jersey Business Corporation Act
3a(3) (a) 3(a)3 (a) 3(a)3 Certificate of Amendment of Restated Certificate
2/3/94 2/14/94 of Incorporation of PSE&G filed June 17, 1992
with the State of New Jersey, establishing the
7.44% Cumulative Preferred Stock ($100 Par) as a
series of the Preferred Stock
3a(4) (a) 3(a)4 (a) 3(a)4 Certificate of Amendment of Restated Certificate
2/3/94 2/14/94 of Incorporation of PSE&G filed March 11, 1993
with the State of New Jersey, establishing the
5.97% Cumulative Preferred Stock ($100 Par) as a
series of Preferred Stock
3a(5) (a) 3(a)5 (a) 3(a)5 Certificate of Amendment of Restated Certificate
2/3/94 2/14/94 of Incorporation of PSE&G filed January 27, 1994
with the State of New Jersey, establishing the
6.92% Cumulative Preferred Stock ($100 Par) and
the 6.75% Cumulative Preferred Stock -- $25 Par as
series of Preferred Stock
3b Copy of By-Laws of PSE&G, as in effect September 1,
1994
4a(1) (f) B-1 (c) 4b(1) Indenture between PSE&G and Fidelity Union Trust
2/18/81 Company, (now First Fidelity Bank, National
Association), as Trustee, dated August 1, 1924,
securing First and Refunding Mortgage Bonds
Indentures between PSE&G and First Fidelity
Bank, National Association, as Trustee,
supplemental to Exhibit 4a(1), dated as follows:
4a(2) (i) 7(1a) (c) 4b(2) April 1, 1927
2/18/81
4a(3) (k) 2b(3) (c) 4b(3) June 1, 1937
2/18/81
4a(4) (k) 2b(4) (c) 4b(4) July 1, 1937
2/18/81
4a(5) (k) 2b(5) (c) 4b(5) December 19, 1939
2/18/81
4a(6) (g) B-10 (c) 4b(6) March 1, 1942
2/18/81
4a(7) (k) 2b(7) (c) 4b(7) June 1, 1949
2/18/81
4a(8) (k) 2b(8) (c) 4b(8) May 1, 1950
2/18/81
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NUMBER
- --------------------------------------------
PREVIOUS FILING
THIS --------------------------------
FILING COMMISSION EXCHANGES
- --------- -------------- --------------
<S> <C> <C> <C> <C> <C>
4a(9) (k) 2b(9) (c) 4b(9) October 1, 1953
2/18/81
4a(10) (k) 2b(10) (c) 4b(10) May 1, 1954
2/18/81
4a(11) (j) 4b(16) (c) 4b(11) November 1, 1956
2/18/81
4a(12) (k) 2b(12) (c) 4b(12) September 1, 1957
2/18/81
4a(13) (k) 2b(13) (c) 4b(13) August 1, 1958
2/18/81
4a(14) (k) 2b(14) (c) 4b(14) June 1, 1959
2/18/81
4a(15) (k) 2b(15) (c) 4b(15) September 1, 1960
2/18/81
4a(16) (k) 2b(16) (c) 4b(16) August 1, 1962
2/18/81
4a(17) (k) 2b(17) (c) 4b(17) June 1, 1963
2/18/81
4a(18) (k) 2b(18) (c) 4b(18) September 1, 1964
2/18/81
4a(19) (k) 2b(19) (c) 4b(19) September 1, 1965
2/18/81
4a(20) (k) 2b(20) (c) 4b(20) June 1, 1967
2/18/81
4a(21) (k) 2b(21) (c) 4b(21) June 1, 1968
2/18/81
4a(22) (k) 2b(22) (c) 4b(22) April 1, 1969
2/18/81
4a(23) (k) 2b(23) (c) 4b(23) March 1, 1970
2/18/81
4a(24) (k) 2b(24) (c) 4b(24) May 15, 1971
2/18/81
4a(25) (k) 2b(25) (c) 4b(25) November 15, 1971
2/18/81
4a(26) (k) 2b(26) (c) 4b(26) April 1, 1972
2/18/81
4a(27) (a) 2 (c) 4b(27) March 1, 1974
3/29/74 2/18/81
4a(28) (a) 2 (c) 4b(28) October 1, 1974
10/11/74 2/18/81
4a(29) (a) 2 (c) 4b(29) April 1, 1976
4/6/76 2/18/81
4a(30) (a) 2 (c) 4b(30) September 1, 1976
9/16/76 2/18/81
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NUMBER
- --------------------------------------------
PREVIOUS FILING
THIS --------------------------------
FILING COMMISSION EXCHANGES
- --------- -------------- --------------
<S> <C> <C> <C> <C> <C>
4a(31) (k) 2b(31) (c) 4b(31) October 1, 1976
2/18/81
4a(32) (a) 2 (c) 4b(32) June 1, 1977
6/29/77 2/18/81
4a(33) (l) 2b(33) (c) 4b(33) September 1, 1977
2/18/81
4a(34) (a) 2 (c) 4b(34) November 1, 1978
11/21/78 2/18/81
4a(35) (a) 2 (c) 4b(35) July 1, 1979
7/25/79 2/18/81
4a(36) (m) 2d(36) (c) 4b(36) September 1, 1979 (No. 1)
2/18/81
4a(37) (m) 2d(37) (c) 4b(37) September 1, 1979 (No. 2)
2/18/81
4a(38) (a) 2 (c) 4b(38) November 1, 1979
12/3/79 2/18/81
4a(39) (a) 2 (c) 4b(39) June 1, 1980
6/10/80 2/18/81
4a(40) (a) 2 (a) 2 August 1, 1981
8/19/81 8/19/81
4a(41) (b) 4e (b) 4e April 1, 1982
4/29/82 5/5/82
4a(42) (a) 2 (a) 2 September 1, 1982
9/17/82 9/20/82
4a(43) (a) 2 (a) 2 December 1, 1982
12/21/82 12/21/82
4a(44) (d) 4(ii) (d) 4(ii) June 1, 1983
7/26/83 7/27/83
4a(45) (a) 4 (a) 4 August 1, 1983
8/19/83 8/19/83
4a(46) (d) 4(ii) (d) 4(ii) July 1, 1984
8/14/84 8/17/84
4a(47) (d) 4(ii) (d) 4(ii) September 1, 1984
11/2/84 11/9/84
4a(48) (b) 4(ii) (b) 4(ii) November 1, 1984 (No. 1)
1/4/85 1/9/85
4a(49) (b) 4(ii) (b) 4(ii) November 1, 1984 (No. 2)
1/4/85 1/9/85
4a(50) (a) 2 (a) 2 July 1, 1985
8/2/85 8/2/85
4a(51) (c) 4a(51) (c) 4a(51) January 1, 1986
2/11/86 2/11/86
4a(52) (a) 2 (a) 2 March 1, 1986
3/28/86 3/28/86
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NUMBER
- --------------------------------------------
PREVIOUS FILING
THIS --------------------------------
FILING COMMISSION EXCHANGES
- --------- -------------- --------------
<S> <C> <C> <C> <C> <C>
4a(53) (a) 2(a) (a) 2(a) April 1, 1986 (No. 1)
5/1/86 5/1/86
4a(54) (a) 2(b) (a) 2(b) April 1, 1986 (No. 2)
5/1/86 5/1/86
4a(55) (p) 4a(55) (p) 4a(55) March 1, 1987
4/9/87 4/9/87
4a(56) (a) 4 (a) 4 July 1, 1987 (No. 1)
8/17/87 8/17/87
4a(57) (d) 4 (d) 4 July 1, 1987 (No. 2)
11/13/87 11/20/87
4a(58) (a) 4 (a) 4 May 1, 1988
5/17/88 5/18/88
4a(59) (a) 4 (a) 4 September 1, 1988
9/27/88 9/28/88
4a(60) (a) 4 (a) 4 July 1, 1989
7/25/89 7/26/89
4a(61) (a) 4 (a) 4 July 1, 1990 (No. 1)
7/25/90 7/26/90
4a(62) (a) 4 (a) 4 July 1, 1990 (No. 2)
7/25/90 7/26/90
4a(63) (a) 4 (a) 4 June 1, 1991 (No. 1)
7/1/91 7/2/91
4a(64) (a) 4 (a) 4 June 1, 1991 (No. 2)
7/1/91 7/2/91
4a(65) (a) 4 (a) 4 November 1, 1991 (No. 1)
12/2/91 12/3/91
4a(66) (a) 4 (a) 4 November 1, 1991 (No. 2)
12/2/91 12/3/91
4a(67) (a) 4 (a) 4 November 1, 1991 (No. 3)
12/2/91 12/3/91
4a(68) (a) 4 (a) 4 February 1, 1992 (No. 1)
2/27/92 2/28/92
4a(69) (a) 4 (a) 4 February 1, 1992 (No. 2)
2/27/92 2/28/92
4a(70) (a) 4 (a) 4 June 1, 1992 (No. 1)
6/17/92 6/11/92
4a(71) (a) 4 (a) 4 June 1, 1992 (No. 2)
6/17/92 6/11/92
4a(72) (a) 4 (a) 4 June 1, 1992 (No. 3)
6/17/92 6/11/92
4a(73) (a) 4 (a) 4 January 1, 1993 (No.1)
2/2/93 2/2/93
4a(74) (a) 4 (a) 4 January 1, 1993 (No. 2)
2/2/93 2/2/93
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NUMBER
- --------------------------------------------
PREVIOUS FILING
THIS --------------------------------
FILING COMMISSION EXCHANGES
- --------- -------------- --------------
<S> <C> <C> <C> <C> <C>
4a(75) (a) 4 (a) 4 March 1, 1993
3/17/93 3/18/93
4a(76) (b) 4 (a) 4 May 1, 1993
5/27/93 5/28/93
4a(77) (a) 4 (a) 4 May 1, 1993 (No. 2)
5/25/93 5/25/93
4a(78) (a) 4 (a) 4 May 1, 1993 (No. 3)
5/25/93 5/25/93
4a(79) (b) 4 (b) 4 July 1, 1993
12/1/93 12/1/93
4a(80) (a) 4 (a) 4 August 1, 1993
8/3/93 8/3/93
4a(81) (b) 4 (b) 4 September 1, 1993
12/1/93 12/1/93
4a(82) (a) 4 (a) 4 September 1, 1993 (No. 2)
12/1/93 12/1/93
4a(83) (b) 4 (b) 4 November 1, 1993
12/1/93 12/1/93
4a(84) (a) 4 (a) 4 February 1, 1994
2/3/94 2/14/94
4a(85) (a) 4 (a) 4 March 1, 1994 (No. 1)
3/15/94 3/16/94
4a(86) (a) 4 (a) 4 March 1, 1994 (No. 2)
3/15/94 3/16/94
4a(87) (d) 4 (d) 4 May 1, 1994
11/8/94 12/2/94
4a(88) (d) 4 (d) 4 June 1, 1994
11/8/94 12/2/94
4a(89) (d) 4 (d) 4 August 1, 1994
11/8/94 12/2/94
4a(90) (d) 4 (d) 4 October 1, 1994 (No. 1)
11/8/94 12/2/94
4a(91) (d) 4 (d) 4 October 1, 1994 (No. 2)
11/8/94 12/2/94
4b(1) (h) 7(12) (c) 4c(1) Indenture between PSE&G and Federal Trust
2/18/81 Company, as Trustee, (Midlantic National Bank,
Successor Trustee) dated July 1, 1948, providing
for 6% Debenture Bonds due 1998
4b(2) (l) 2c(8) (c) 4c(8) Indenture between PSE&G and the Chase Manhattan
2/18/81 Bank (National Association), as Trustee, dated
August 15, 1971, providing for 7 3/4% Debenture
Bonds due 1996
4b(3) (b) 4 (b) 4 Indenture of Trust between the Company and The
12/1/93 12/1/93 Chase Manhattan Bank (National Association), as
Trustee, providing for Secured Medium-Term Notes
dated July 1, 1993
4b(4) Indenture between PSE&G and First Fidelity Bank,
National Association, as Trustee, dated November 1,
1994, providing for Deferrable Interest Subordinated
Debentures in Series
9 Inapplicable
10a(1) (c) 10c(1) (c) 10c(1) Directors' Deferred Compensation Plan
3/17/82 3/19/82
10a(2) (c) 10c(2) (c) 10c(2) Officers' Deferred Compensation Plan
3/17/82 3/19/82
Supplemental Benefits Plan for Certain
2/25/94 3/1/94 Employees
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NUMBER
- --------------------------------------------
PREVIOUS FILING
THIS --------------------------------
FILING COMMISSION EXCHANGES
- --------- -------------- --------------
<S> <C> <C> <C> <C> <C>
10a(3) (c) 10c(3) (c) 10c(3) Supplemental Death Benefits Plan for officers
3/17/82 3/19/82
10a(4) (c) 10c(4) (c) 10c(4) Description of additional retirement for certain
3/17/82 3/19/82 officers
10a(5)(i) (c) 10b(5) (c) 10b(5) Limited Supplemental Death Benefits and
3/31/83 4/8/83 Retirement Plan
10a(5)(ii) (c) 10a(5)(ii) (c) 10a(5)(ii) Limited S-----
10a(6)(i) (c) 10a(6) (c) 10a(6) Description of additional retirement benefits
3/10/87 4/16/87 for certain officers
10a(6)(ii) (c) 10a(6)(1) (c) 10a(6)(1) Description of additional retirement benefit for
3/30/90 3/30/90 certain officers.
10a(6)(iii) (c) 10a(6)(2) (c) 10a(6)(2) Description of additional retirement benefit for
3/30/92 4/27/92 a certain officer.
10a(7) (o) 10g (o) 10g Management Incentive Compensation Plan
10a(8) (c) 10a(8) (c) 10a(8) Long-Term Incentive Plan
3/30/89 4/18/89
10a(9) (c) 10a(9) (c) 10a(9) Public Service Enterprise Group Incorporated
3/30/89 4/18/89 Pension Plan for Outside Directors
10a(10) (c) 10a(9) (c) 10a(9) Letter Agreement with E. James Ferland dated
2/10/93 2/11/93 April 16, 1986
10a(11) (c) 10a(10) (c) 10a(10) Letter Agreement with Thomas M. Crimmins, Jr.
2/10/93 2/11/93 dated April 5, 1989
10a(12) (c) 10a(12) (c) 10a(12) Letter Agreement with Robert C. Murray dated
2/10/93 2/11/93 December 17, 1991
10a(13) (c) 10a(13) (c) 10a(13) Letter agreement with Patricia A. Rado dated
2/26/94 3/9/94 March 24, 1993.
10a(14) Letter Agreement, as amended, with Leon R. Eliason
dated September 14, 1994
11 Inapplicable
12(a) Computation of Ratios of Earnings to Fixed
Charges
12(b) Computation of Ratios of Earnings to Fixed
Charges Plus Preferred Stock Dividend
Requirements
13 Inapplicable
16 Inapplicable
19 Inapplicable
21 Inapplicable
22 Inapplicable
23 Independent Auditors' Consent
24 Inapplicable
27 Financial Data Schedule
28 Inapplicable
99 Inapplicable
</TABLE>
<PAGE>
EXHIBIT 3-B
BY-LAWS
OF
PUBLIC SERVICE ELECTRIC
AND GAS COMPANY
-------------------------
As in effect
September 1, 1994
============================================================================
==============================================
<PAGE>
BY-LAWS
OF
PUBLIC SERVICE ELECTRIC AND GAS COMPANY
_________________________
ARTICLE I.
DIRECTORS
SECTION 1. The Board of Directors shall consist of such number of
directors, not less than 3 nor more than 16, as shall be fixed from time to
time by the Board of Directors. The directors shall be elected annually at the
annual meeting of the stockholders by those stockholders entitled to vote at
the election of directors. If the holders of Preferred Stock and the holders
of Preferred Stock-$25 Par are entitled to vote at elections of directors, such
stockholders, voting as a single class separately from the holders of Common
Stock, shall be entitled to elect the smallest number of directors which will
be more than on-half of the total number of directors, and the holders of
Common Stock, voting separately as a single class, shall be entitled to elect
all other directors. As used in these By-Laws, the term "entire Board" means
the total number of directors which the corporation would have if there were
no vacancies.
Directors shall hold office for one year and until their successors are
duly elected and qualified, but if, in accordance with the provisions of the
third paragraph of Section 6 of Article IX of these By-Laws, a special meeting
of stockholders is convened at which a quorum of the holders of Preferred Stock
and the holders of Preferred Stock-$25 Par is present, the terms of office of
all directors shall terminate, and at such meeting, the holders of Preferred
Stock and the holders of Preferred Stock-$25 Par, voting as a single class
separately form the holders of Common Stock, shall be entitled to elect the
smallest number of directors which will be more than one-half the total number
of directors, and the holders of Common Stock, voting separately as a single
class shall be entitled to elect all other directors.
If the office of any director becomes vacant, the remaining directors, by
a majority vote, may elect a successor, who shall hold office for the unexpired
term, and until his successor is duly elected and qualified except that if the
holders of Preferred Stock and the holders of Preferred Stock-$25 Par are
entitled to voting rights to elect directors, any vacancy in the Board of
Directors caused by the death or resignation of any director elected by the
holders of Preferred Stock and the holder of Preferred Stock-$25 Par shall be
entitled to fill upon any increase in the number of directors shall, until the
next meeting of the stockholders for the election directors, in each case be
filled by majority vote of the remaining or other directors elected by the
holders of Preferred Stock and the holders of Preferred Stock-$25 Par.
<PAGE>
Upon the termination of such voting rights of the holders of Preferred
Stock and the holders of Preferred Stock-$25 Par, the terms of office of all
persons who shall have been elected directors by vote of such holders, or by
vote of the directors elected by such holders, shall forthwith terminate, and
the vacancies thereby created may be filled by majority vote of the remaining
directors, though less than a quorum.
SECTION 2. The Board of Directors, by the affirmative vote of a majority
of directors in office and irrespective of any personal interest of any of
them, may establish reasonable compensation of directors for services to the
corporation as directors, officers, or otherwise.
ARTICLE II.
OFFICERS.
SECTION 1. The elective officers of the corporation shall include a
President, one or more Vice Presidents, a Secretary, one or more Assistant
Secretaries, a Treasurer, and one or more Assistant Treasurers, and may also
include a Chairman of the Board, one or more Senior Executive Vice Presidents,
one or more Executive Vice Presidents, one or more Senior Vice Presidents and
a Chief Nuclear Officer. The Chairman of the Board and the President shall be
members of the Board of Directors. All elective officers of the corporation
shall be elected by the Board of Directors at the first meeting thereof after
the annual election of directors. The Board of Directors shall also have
power, at any time, to elect additional Senior Executive Vice Presidents,
Executive Vice Presidents, Senior Vice Presidents, Vice Presidents, Assistant
Secretaries and Assistant Treasurers. The Board of Directors may appoint such
other officers as it shall from time to time deem necessary, who shall have
such powers and perform such duties as may be assigned to them by the Board of
Directors, the Executive Committee, or the person exercising the authority of
chief executive officer of the corporation. Any two or more offices may be
held by the same person.
The Board of Directors shall have power to fill any vacancy in any
existing office or to fill any newly created office, at any time.
The Chairman of the Board, the President, each Senior Executive Vice
President, each Executive Vice President, each Senior Vice President, each Vice
President and the Chief Nuclear Officer, severally, shall have power to sign
deeds, contracts, and other instruments. Each elective officer shall have such
powers and perform such duties as may be assigned to him by the Board of
Directors, the Executive Committee, or the chief executive officer, in addition
to any powers and duties that are assigned to him specifically by these By-
Laws.
The term of office of each officer shall be from the time of his election
or appointment and qualification until the first meeting of the Board of
Directors after the last annual election of Directors, or such other term of
office as shall be provided in the resolution of election or appointment, and
until the election or appointment and qualification of his successor, subject
to earlier termination by removal or resignation.
<PAGE>
ARTICLE III.
CHAIRMAN OF THE BOARD; PRESIDENT;
SENIOR EXECUTIVE VICE PRESIDENTS;
EXECUTIVE VICE PRESIDENTS; SENIOR VICE PRESIDENTS;
CHIEF NUCLEAR OFFICER
SECTION 1. If there be a Chairman of the Board, he shall preside at all
meetings of the stockholders and of the Board of Directors, and shall have such
other powers and perform such other duties as may be assigned to him by the
Board of Directors or the Executive Committee.
SECTION 2. If there be a Chairman of the Board, the Board of Directors
shall designate either the Chairman of the Board or the President as the chief
executive officer of the corporation with plenary powers of supervision and
direction of the business and affairs of the corporation, unless such offices
are occupied by the same person. If there be no Chairman of the Board, the
President shall be the chief executive officer.
SECTION 3. If there be a Chairman of the Board and if he be designated
as the chief executive officer of the corporation, the President shall have
charge of the coordination and supervision of all matters of operation of the
corporation. In the absence of the Chairman of the Board, the President shall
have the powers and perform the duties of the Chairman of the Board.
SECTION 4. The Senior Executive Vice Presidents, severally, in the order
designated by the chief executive officer, shall, in the absence of the
president, have the powers and perform the duties of the President, and if
there be a Chairman of the Board, they shall, in the absence of the Chairman
of the Board and the President, have the powers and perform the duties of the
Chairman of the Board.
SECTION 5. The Executive Vice Presidents, severally, in the order
designated by the chief executive officer, shall, in the absence of the
President and the Senior Executive Vice Presidents, have the powers and perform
the duties of the President, and if there be a Chairman of the Board, they
shall, in the absence of the Chairman of the Board and the President, have the
powers and perform the duties of the Chairman of the Board.
SECTION 6. The Senior Vice Presidents, severally, in the order designated
by the chief executive officer, shall, in the absence of the President, the
Senior Executive Vice Presidents and the Executive Vice Presidents, have the
powers and perform the duties of the President, and if there be a Chairman of
the Board, they shall, in the absence of the Chairman of the Board, the
President, the Senior Executive Vice Presidents and the Executive Vice
Presidents, have the powers and perform the duties of the Chairman of the
Board.
SECTION 7. The Chief Nuclear Officer shall, in the absence of the
President, the Senior Executive Vice Presidents, the Executive Vice Presidents
and the Senior Vice Presidents have the powers and perform the duties of the
President, and if there be a Chairman of the Board, the Chief Nuclear Officer
shall, in the absence of the Chairman of the Board, the President the Senior
Executive Vice Presidents, the Executive Vice Presidents and the Senior Vice
Presidents have the powers and perform the duties of the Chairman of the Board.
<PAGE>
ARTICLE IV.
VICE PRESIDENTS.
SECTION 1. The Vice Presidents, severally, in the order designated by the
chief executive officer, shall, in the absence of the President, the Senior
Executive Vice Presidents, the Executive Vice Presidents, and the Senior Vice
Presidents, have the powers and perform the duties of the President, and if
there be a Chairman of the Board, they shall, in the absence of the Chairman
of the Board, the President, the Senior Executive Vice President, the Executive
Vice Presidents and the Senior Vice presidents, have the powers and perform the
duties of the Chairman of the Board.
ARTICLE V.
SECRETARY.
SECTION 1. The Secretary shall keep minutes of all meetings of the
stockholders of the Board of Directors and of the Executive Committee, and
shall give notices of meetings of the stockholders, of the Board of Directors,
and of the Executive Committee. He shall have custody of all deeds, contracts,
and other instruments, documents and records, except as otherwise provided in
these By-Laws, or by the Board of Directors, and shall attend to such
correspondence of the corporation as the Board of Directors or the chief
executive officer shall direct. He shall be the custodian of the seal of the
corporation and shall affix it to any instrument requiring the same, except as
otherwise provided herein or by the Board of Directors.
ARTICLE VI.
ASSISTANT SECRETARIES.
SECTION 1. Each Assistant Secretary shall have such powers and perform
such duties as may be assigned to him by the Secretary. In the absence of the
Secretary, the Assistant Secretaries, in the order designated by the Secretary,
shall have the powers and perform the duties of the Secretary.
ARTICLE VII.
TREASURER.
SECTION 1. The Treasurer shall have charge of all receipts and
disbursements of the corporation and shall be the custodian of the
corporation's funds. He shall have full authority to receive and give receipts
for all moneys due and payable to the corporation from any source whatever, and
to endorse or cause to be endorsed checks, drafts, warrants, and other
instruments for the payment of money in its name and on its behalf, and full
discharge for the same to give. The funds of the corporation shall be <PAGE>
deposited in its name in such depositories as may be designated from time to
time by the Board of Directors, or by the Treasurer if the Board of Directors
shall authorize him to do so. All checks, drafts and other instruments for the
payment of money, and all notes and other evidences of indebtedness, issued in
the name of the corporation, shall be signed by such officer or officers,
employee or employees, agent or agents, of the corporation, and in such manner,
including the use of facsimile signatures, as shall be determined from time to
time by the Board of Directors, or by the Treasurer if the Board of Directors
shall authorize him to make such determination. A report of the financial
condition of the corporation shall be made by the Treasurer whenever requested
by the chief executive officer. If required by the Board of Directors he shall
give bond for the faithful performance of his duties, in such sum and with such
surety or sureties as the Board of Directors may determine.
ARTICLE VIII.
ASSISTANT TREASURERS.
SECTION 1. Each Assistant Treasurer shall have such powers and perform
such duties as may be assigned to him by the Treasurer. In the absence of the
Treasurer, the Assistant Treasurers, in the order designated by the Treasurer,
shall have the powers and perform the duties of the Treasurer.
ARTICLE IX.
MEETINGS.
SECTION 1. The meetings of the stockholders shall, unless otherwise
provided by law, be held at such place, within or without the State of New
Jersey, as may be fixed by the Board of Directors and stated in the notice of
the meeting.
Each annual meeting of the stockholders for the election of directors for
the ensuing year, and for the transaction of such other business as may be
brought before the meeting, shall be held at such time, not more than 13 months
after the last annual meeting, as may be fixed by the Board of Directors.
SECTION 2. Except as herein or in the Restated Certificate of
Incorporation expressly provided to the contrary or as otherwise required by
law, all voting rights in the corporation shall be vested exclusively in the
holders of Common Stock, and the holders of Preferred Stock and the holders of
Preferred Stock-$25 Par shall have no right to vote or to participate in any
meeting of the stockholders of the corporation or to receive any notice of any
such meeting.
Except as herein or in the Restated Certificate of Incorporation expressly
provided to the contrary or as otherwise required by law, at all meetings of
stockholders the holders of Common Stock shall be entitled to cast one vote for
each share of Common Stock held.
<PAGE>
At any meeting of the stockholders of the corporation at which the holders
of Preferred Stock and the holders of Preferred Stock-$25 Par shall be entitled
to vote as a single class, the holders of Preferred stock shall be entitled to
cast one vote for each share of Preferred Stock held and the holders of
Preferred Stock-$25 Par shall be entitled to cast one-quarter vote for each
Preferred Stock-$25 Par held.
At all elections of directors each holder of Common Stock shall be
entitled to as many votes as shall equal the number of his shares of Common
Stock multiplied by the number of directors to be elected, and, in each case,
the stockholder may cast all such votes for a single director or may distribute
them among the number to be voted for, or any two or more of them as he may see
fit; provided that whenever the holders of Preferred Stock and the holders of
Preferred Stock-$25 Par, voting separately as a single class, are entitled to
elect directors, (i) each holder of Preferred Stock shall be entitled to as
many votes as shall equal the numbers of his shares of stock, and each holder
of Preferred Stock-$25 Par shall be entitled to as many votes as shall equal
one-fourth the number of his shares of stock, in each case multiplied by the
number of directors to be elected by the holders of Preferred Stock and the
holders of Preferred Stock-$25 Par, and (ii) each holder of Common Stock shall
be entitled to as many votes as shall equal the number of his shares of stock,
multiplied by the number of directors to be elected by the holders of Common
Stock.
SECTION 3. So long as any Preferred Stock or Preferred Stock-$25 Par
shall be outstanding, if dividends upon any shares of Preferred Stock-$25 Par
shall be in arrears to an amount equal to the annual dividend thereon, the
holders of Preferred Stock and the holders of Preferred Stock-$25 Par shall
become entitled, to the extent, herein provided, to vote at all elections of
directors for the corporation and to receive notice of stockholders' meetings
to be held for such purpose. Such voting rights of the holders of Preferred
Stock and the holders of Preferred Stock-$25 Par to elect directors shall
continue until all the accumulated and unpaid dividends on Preferred Stock and
Preferred Stock-$25 Par shall have been paid, whereupon all such voting rights
shall cease, subject to being again revived from time to time upon the
recurrence of the conditions described above as giving rise thereto.
SECTION 4. Every stockholder entitled to vote at a meeting of
stockholders or to express consent or dissent without a meeting may authorize
another person or persons to act for him by proxy. No proxy shall be valid
after 11 months from the date of its execution, unless a longer time is
expressly provided therein, but in no event shall a proxy be valid after three
years from the date of execution. A proxy shall not be revoked by the death
or incapacity of a stockholder but shall continue in force until revoked by the
personal representative or guardian of the stockholder. The presence at any
meeting of any stockholder who has given a proxy shall not revoke such proxy
unless the stockholder shall file written notice of such revocation with the
secretary of the meeting prior to the voting of such proxy.
A person named in a proxy as the attorney or agent of a stockholder may,
if the proxy so provides, substitute another person to act in his place,
including any other person named as an attorney or agent in the same proxy.
The substitution shall not be effective until an instrument effecting it is
filed with the Secretary.
<PAGE>
SECTION 5. All elections for directors shall be by ballot, and the polls
at every such election shall remain open so long as may be reasonably necessary
to permit all stockholders entitled to vote at such meeting, present in person
or by proxy, to cast their votes.
SECTION 6. Special meetings of the stockholders may be called at any time
by the Board of Directors or by the chief executive officer or upon the written
request of the holders of the capital stock entitled to cast a majority of
votes thereat.
Except as otherwise provided by law, and unless waived, written notice of
the time, place and purposes of every meeting of stockholders shall be given
not less than 10 nor more than 60 days before the date of the meeting, to each
stockholder of record entitled to vote at the meeting, either personally or by
mailing a notice to him at his last post office address appearing on the books
of the corporation.
At any time after the accrual to the holders of Preferred Stock and the
holders of Preferred Stock-$25 Par of voting rights to elect directors, a
special meeting of the stockholders for the purpose of electing directors shall
be held upon not less than 30 days' notice upon call of the Secretary at the
written request of any holder of shares of Preferred Stock or Preferred Stock-
$25 Par at the time outstanding, or, if the Secretary should fail or neglect
to call such meeting within 30 days after receipt of such request, then upon
call by any such holder.
SECTION 7. At any meeting of the stockholders the holders of stock
entitled to cast a majority of the votes at the meeting, present in person or
by proxy, shall constitute a quorum of the stockholders for all purposes
unless the representation of a larger number shall be required by law, and in
that case the representation of the number so required shall constitute a
quorum.
If the holders of the amount of stock necessary to constitute a quorum
shall fail to attend in person or by proxy at the time and place fixed for any
meeting of the stockholders, the meeting may be adjourned from time to time by
the vote of the majority of the votes cast by the holders of stock present in
person or represented by proxy at such meeting, without notice other than by
announcement at the meeting, and at any such adjourned meeting held more than
one week after such time the holders of stock entitled to cast 40% of the votes
at such meeting, present in person or represented by proxy, shall constitute
a quorum of the stockholders for all purposes unless the representation of a
larger number shall be required by law, and in that case the representation of
the number so required shall constitute a quorum. At any such adjourned
meeting, whenever held, at which a quorum shall be present, any business may
be transacted which might have been transacted at the meeting originally
called.
In any case where the holders of Preferred Stock and the holders of
Preferred Stock-$25 Par are entitled to vote separately as a single class, or
the holders of Common Stock are entitled to vote separately as a single class;
meetings of each such class may be held and adjourned (by the vote of a
majority of the votes cast by the holders of stock of such class present in
<PAGE>
person or represented by proxy at such meeting) without notice other than by
announcement at the meeting, separately or together, and a quorum of each such
class at any meeting or adjourned meeting thereof shall be the same percentage
of the votes entitled to be cast by the stockholders of such class as is
hereinabove required for a quorum of stockholders of the corporation entitled
to vote at a meeting or adjourned meeting as the case may be.
SECTION 8. Regular meetings of the Board of Directors shall be held
monthly unless otherwise determined by resolution of the Board.
Special meetings of the Board of Directors may be called at any time by
the Chairman of the Board, or by the President if he be the chief executive
officer. The Secretary shall also call such meetings on the written request
on a majority of the directors.
No notice shall be required for regular meetings of the Board of
Directors. The meeting for organization may be held on the day and after the
annual meeting of stockholders. At least two days' notice of a special meeting
of the Board of Directors shall be given, but this notice may be waived in
writing or by telegraph, either before or after the meeting. A meeting may be
held without notice at any time when all the directors are present.
At all meetings of the Board of Directors a majority of the directors in
office, or one-third of the entire Board, whichever is greater, shall
constitute a quorum for the transaction of business. A less number than a
quorum, however, may meet and adjourn to any day.
SECTION 9. The Board of Directors may, in advance of any meeting of
stockholders, appoint one or more inspectors to act at the meeting or any
adjournment thereof. If inspectors are not so appointed by the Board of
Directors or shall fail to qualify, the person presiding at a meeting of
stockholders may, and on the request of any stockholder entitled to vote
thereat, shall make such appointment. In case any person appointed as
inspector fails to appear or act, the vacancy may be filled by appointment made
by the Board of Directors in advance of the meeting of stockholders or at the
meeting by the person presiding at the meeting. Each inspector, before
entering upon the discharge of his duties, shall take and sign an oath
faithfully to execute the duties of inspector at such meeting with strict
impartiality and according to the best of his ability. No person shall be
elected a director at a meeting at which he has served as an inspector.
ARTICLE X.
RECORD DATE FOR DETERMINATION OF
RIGHT OF STOCKHOLDERS.
SECTION 1. For the purpose of determining the stockholders entitled to
notice of or to vote at any meeting of stockholders or any adjournment thereof,
or to express consent to or dissent from any proposal without a meeting, or
for the purpose of determining stockholders entitled to receive payment of any
dividend or allotment of any right, or for the purpose of any other action, the
Board of Directors may fix, in advance, a date as the record date for any such
determination of stockholders. Such date shall not be more than 60 nor less
<PAGE>
than 10 days before the date of such meeting, nor more than 60 days prior to
any other action. When a determination of stockholders entitled to notice of
or to vote at any meeting of stockholders has been so made, such determination
shall apply to any adjournment thereof, unless the Board of Directors fixes a
new record date for the adjourned meeting.
ARTICLE XI.
COMMITTEES.
SECTION 1. The Board of Directors, by resolution adopted by a majority
of the entire Board, may appoint from among its members an Executive Committee
and one or more other committees. Except as otherwise provided by law, the
Executive Committee shall have and may exercise all the authority of the Board
of Directors when the Board is not in session, and each such other committee
of the Board shall have and may exercise the authority of the Board to the
extent provided in the resolution of appointment.
The Board of Directors, by resolution adopted by a majority of the entire
Board, may (a) fill any vacancy in any committee of the Board, (b) appoint one
or more directors to serve as alternate members of any such committee, to act
in the absence or disability of members of any such committee with all the
powers of such absent or disabled members, (c) abolish any such committee at
its pleasure, and (d) remove any director from membership on such committee at
any time, with or without cause.
Actions taken at a meeting of any committee of the Board of Directors
shall be reported to the Board at its next meeting following such committee
meeting; except that, when the meeting of the Board is held within two days
after the committee meeting, such report shall, if not made at the first
meeting, be made to the Board at its second meeting following such committee
meeting.
SECTION 2. The Board of Directors may appoint and prescribe the powers
duties of other committees, the members of which may be but need not be
directors and shall serve at the pleasure of the Board.
SECTION 3. One-third of the entire committee, or two members, whichever
is greater, shall constitute a quorum for the transaction of business.
SECTION 4. Each committee shall fix its own rules of procedure, shall
meet where and as provided by such rules of procedure or by resolution of the
Board of Directors, shall keep full records of its proceedings and shall report
from time to time to the Board, as called upon by the Board.
<PAGE>
ARTICLE XII.
VOTING UPON STOCK OWNED BY THE CORPORATION.
SECTION 1. Unless otherwise ordered by the Board of Directors, the
Chairman of the Board, the President, the Senior Executive Vice Presidents, the
Executive Vice Presidents, the Senior Vice Presidents, and the Vice Presidents,
severally, shall each have full power and authority on behalf of the
corporation to attend, act, and vote at any meeting of the stockholders of any
corporation in which this corporation may hold stock, and to appoint one or
more other persons as proxy or proxies to attend, act, and vote at any such
meeting, and such office or such proxy or proxies shall possess and may
exercise on behalf of this corporation any and all rights and powers incident
to its ownership of such stock. The Board of Directors or the Executive
Committee from time to time by resolution may confer like powers upon any other
person or persons.
ARTICLE XIII.
STOCK.
SECTION 1. The certificates which shall be issued for shares of stock in
this corporation shall be signed by the Chairman of the Board, the President,
or a Vice President, and either the Treasurer or an Assistant Treasurer, or the
Secretary or an Assistant Secretary. If the certificate is countersigned by
a transfer agent or registrar, who is not an officer or employee of the
corporation, any and all other signatures may be facsimiles.
SECTION 2. The shares issued by this corporation shall be transferable
only on the books of the corporation by the holder or owner thereof in person
or by power of attorney, on surrender of the certificate therefor.
SECTION 3. The Treasurer shall make and certify a complete list of the
stockholders entitled to vote at a meeting of stockholders or any adjournment
thereof. Such list shall be arranged alphabetically within each class and
series, with the address of, and the number of shares held by, each
stockholder, shall be produced at the time and the place of the meeting, and
shall be subject to the inspection of any stockholder during the whole time of
the meeting.
ARTICLE XIV.
FISCAL YEAR.
SECTION 1. The fiscal year of the corporation shall begin on January 1
of each year.
<PAGE>
ARTICLE XV.
SEAL.
SECTION 1. The seal of the corporation shall be circular in form, and
shall have inscribed thereon the following words and figures: "PUBLIC SERVICE
ELECTRIC AND GAS COMPANY INCORPORATED 1924."
ARTICLE XVI.
AMENDMENTS.
SECTION 1. Except as otherwise provided by law, the Board of Directors
shall have the power to make, alter, or repeal any by-laws. By-Laws made by
the Board may be altered or repealed and new by-laws made, by the stockholders.
<PAGE>
EXHIBIT 4b(4)
PUBLIC SERVICE ELECTRIC AND GAS COMPANY
and
FIRST FIDELITY BANK, NATIONAL ASSOCIATION, as Trustee
INDENTURE
Dated as of November 1, 1994
Providing for the Issuance of
Deferrable Interest Subordinated Debentures in Series
including
9-3/8% Deferrable Interest Subordinated Debentures, Series A
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE 1. DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01 Definitions........................................ 2
SECTION 1.02 Other Definitions.................................. 7
SECTION 1.03 Incorporation by Reference of Trust
Indenture Act.................................... 7
SECTION 1.04 Rules of Construction.............................. 8
SECTION 1.05 Acts of Holders.................................... 8
ARTICLE 2. THE DEBENTURES; THE SERIES A DEBENTURES
SECTION 2.01 Issue of Debentures Generally...................... 9
SECTION 2.02 Terms and Form of the Series A
Debentures....................................... 10
SECTION 2.03 Payment of Principal and Interest.................. 11
SECTION 2.04 Execution, Authentication and Delivery............. 13
SECTION 2.05 Registrar and Paying Agent......................... 15
SECTION 2.06 Paying Agent to Hold Money in Trust................ 16
SECTION 2.07 Debentureholder Lists.............................. 16
SECTION 2.08 Transfer and Exchange.............................. 16
SECTION 2.09 Replacement Debentures............................. 17
SECTION 2.10 Outstanding Debentures; Determinations of
Holders' Action.................................. 18
SECTION 2.11 Temporary Debentures............................... 19
SECTION 2.12 Book Entry System.................................. 19
SECTION 2.13 Cancellation....................................... 21
ARTICLE 3. REDEMPTION
SECTION 3.01 Redemption; Notice to Trustee...................... 21
SECTION 3.02 Selection of Debentures to be Redeemed............. 22
SECTION 3.03 Notice of Redemption............................... 22
SECTION 3.04 Effect of Notice of Redemption..................... 23
SECTION 3.05 Deposit of Redemption Price........................ 23
SECTION 3.06 Debentures Redeemed in Part........................ 23
ARTICLE 4. COVENANTS
SECTION 4.01 Payment of Debentures.............................. 23
SECTION 4.02 Prohibition Against Dividends, etc. ............... 24
SECTION 4.03 SEC Reports........................................ 25
SECTION 4.04 Compliance Certificates............................ 25
SECTION 4.05 Relationship with the Partnership.................. 25
SECTION 4.06 Further Instruments and Acts....................... 26
SECTION 4.07 Payments for Consents.............................. 26
ARTICLE 5. SUCCESSOR CORPORATION
SECTION 5.01 When the Company May Merge, Etc. .................. 26
ARTICLE 6. DEFAULTS AND REMEDIES
SECTION 6.01 Events of Default.................................. 27
SECTION 6.02 Acceleration....................................... 28
i
<PAGE>
Page
----
SECTION 6.03 Other Remedies..................................... 29
SECTION 6.04 Waiver of Past Defaults............................ 29
SECTION 6.05 Control by Majority or the Special
Representative................................... 30
SECTION 6.06 Limitation on Suits................................ 30
SECTION 6.07 Rights of Holders to Receive Payment............... 30
SECTION 6.08 Collection Suit by the Trustee..................... 31
SECTION 6.09 The Trustee May File Proofs of Claim............... 31
SECTION 6.10 Priorities......................................... 31
SECTION 6.11 Undertaking for Costs.............................. 32
SECTION 6.12 Waiver of Stay, Extension or Usury Laws............ 32
ARTICLE 7. THE TRUSTEE
SECTION 7.01 Duties of the Trustee.............................. 32
SECTION 7.02 Rights of the Trustee.............................. 33
SECTION 7.03 Individual Rights of the Trustee................... 34
SECTION 7.04 The Trustee's Disclaimer........................... 34
SECTION 7.05 Notice of Defaults................................. 35
SECTION 7.06 Reports by Trustee to Holders...................... 35
SECTION 7.07 Compensation and Indemnity......................... 35
SECTION 7.08 Replacement of Trustee............................. 36
SECTION 7.09 Successor Trustee by Merger........................ 37
SECTION 7.10 Eligibility; Disqualification...................... 37
SECTION 7.11 Preferential Collection of Claims Against
the Company...................................... 37
ARTICLE 8. SATISFACTION AND DISCHARGE OF INDENTURE;
DEFEASANCE OF CERTAIN OBLIGATIONS; UNCLAIMED MONEYS
SECTION 8.01 Satisfaction and Discharge of Indenture............ 38
SECTION 8.02 Application by Trustee of Funds Deposited
for Payment of Debentures........................ 39
SECTION 8.03 Repayment of Moneys Held by Paying Agent........... 39
SECTION 8.04 Return of Moneys Held by the Trustee and
Paying Agent Unclaimed for Three Years........... 39
ARTICLE 9. AMENDMENTS
SECTION 9.01 Without Consent of Holders......................... 40
SECTION 9.02 With Consent of Holders............................ 40
SECTION 9.03 Compliance with Trust Indenture Act................ 41
SECTION 9.04 Revocation and Effect of Consents,
Waivers and Actions.............................. 41
SECTION 9.05 Notation on or Exchange of Debentures.............. 42
SECTION 9.06 Trustee to Execute Supplemental
Indentures....................................... 42
SECTION 9.07 Effect of Supplemental Indentures.................. 42
ii
<PAGE>
Page
----
ARTICLE 10. SUBORDINATION
SECTION 10.01 Debentures Subordinated to Senior Indebtedness..... 43
SECTION 10.02 Priority and Payment of Proceeds in
Certain Events; Remedies Standstill.............. 43
SECTION 10.03 Payments which May Be Made Prior to Notice......... 44
SECTION 10.04 Rights of Holders of Senior Indebtedness
Not to Be Impaired............................... 44
SECTION 10.05 Trustee May Take Action to Effectuate
Subordination.................................... 45
SECTION 10.06 Subrogation........................................ 45
SECTION 10.07 Obligations of Company Unconditional;
Reinstatement.................................... 46
SECTION 10.08 Trustee Entitled to Assume Payments Not
Prohibited in Absence of Notice.................. 46
SECTION 10.09 Right of Trustee to Hold Senior
Indebtedness..................................... 47
ARTICLE 11. MISCELLANEOUS
SECTION 11.01 Trust Indenture Act Controls....................... 47
SECTION 11.02 Notices............................................ 48
SECTION 11.03 Communication by Holders with Other Holders........ 48
SECTION 11.04 Certificate and Opinion as to Conditions
Precedent........................................ 49
SECTION 11.05 Statements Required in Certificate or Opinion...... 49
SECTION 11.06 Severability Clause................................ 49
SECTION 11.07 Rules by Trustee, Paying Agent and
Registrar........................................ 50
SECTION 11.08 Legal Holidays..................................... 50
SECTION 11.09 Governing Law...................................... 50
SECTION 11.10 No Recourse Against Others......................... 50
SECTION 11.11 Successors......................................... 50
SECTION 11.12 Multiple Original Copies of this Indenture......... 50
SECTION 11.13 No Adverse Interpretation of Other Agreements...... 51
SECTION 11.14 Table of Contents; Headings, Etc. ................. 51
SECTION 11.15 Benefits of the Indenture.......................... 51
SECTION 11.16 Partnership Books and Records...................... 51
iii
<PAGE>
CROSS-REFERENCE TABLE
of Provisions of the Indenture
Required by the Trust Indenture Act of 1939
Trust Indenture Provision of
Act Section Indenture
--------------- -----------------
310(a)(1)........................... 7.10
(a)(2)........................... 7.10
(a)(3)........................... Not Applicable
(a)(4)........................... Not Applicable
(a)(5)........................... Not Applicable
(b).............................. 7.08; 7.10; 11.01
(c).............................. Not Applicable
311(a).............................. 7.11
(b).............................. 7.11
(c).............................. Not Applicable
312(a).............................. 2.07
(b).............................. 11.03
(c).............................. 11.03
313(a).............................. 7.06
(b)(1)........................... Not Applicable
(b)(2)........................... 7.06
(c).............................. 7.06; 11.02
(d).............................. 7.06
314(a).............................. 4.03; 11.02
(b).............................. Not Applicable
(c)(1)........................... 2.02; 11.04; 11.05
(c)(2)........................... 2.02; 11.04; 11.05
(c)(3............................ Not Applicable
(d).............................. Not Applicable
(e).............................. 11.05
(f).............................. Not Applicable
315(a).............................. 7.01(b)
(b).............................. 7.05; 11.02
(c).............................. 7.01(a)
(d).............................. 7.01(c)
(e).............................. 6.11
316(a)(1)(A)........................ 6.05
(a)(1)(B)........................ 6.04
(a)(2)........................... Not Applicable
(a)(last sentence)............... 2.10
(b).............................. 6.07
(c).............................. 2.02
317(a)(1)........................... 6.08
(a)(2)........................... 6.09
(b).............................. 2.06
318(a).............................. 11.01
(b).............................. Not Applicable
(c).............................. 11.01
-------------------
Note: This Cross-Reference Table shall not, for any purpose, be
deemed to be part of the Indenture.
iv
<PAGE>
INDENTURE, dated as of November 1, 1994, by and between Public
Service Electric and Gas Company, a corporation duly organized and existing
under the laws of the State of New Jersey (the "Company"), and First Fidelity
Bank, National Association, a national banking association duly organized and
existing under the laws of the United States of America as trustee (the
"Trustee").
WHEREAS, the Company is the general partner of Public Service
Electric and Gas Capital, L.P., a New Jersey limited partnership (the
"Partnership"), which intends to issue in series from time to time its limited
partner interests and to loan the proceeds thereof, together with the
investment by the Company, as its sole general partner, in the Partnership to
the Company.
WHEREAS, in order to evidence its intention to make such loans and
to accept the Debentures as evidence of such loans, and its approval of the
terms of the Series A Debentures (as hereinafter defined), the Partnership has
joined in this Indenture.
WHEREAS, the Company has authorized the issuance of its 9-3/8%
Deferrable Interest Subordinated Debentures, Series A (the "Series A
Debentures") to evidence its obligations with respect to a loan from the
Partnership of the proceeds of a series of its preferred limited partner
interests designated 9-3/8% Cumulative Monthly Income Preferred Securities,
Series A and the related investment by the Company, as its sole general
partner, in the Partnership, and to provide therefor, the Company has duly
authorized the execution and delivery of this Indenture.
WHEREAS, all things necessary to make the Series A Debentures, when
duly issued and executed by the Company and authenticated and delivered
hereunder, the valid obligations of the Company, and to make this Indenture a
valid and binding agreement of the Company, in accordance with its terms, have
been done.
NOW THEREFORE:
Each of the Company and the Trustee, intending to be legally bound
hereby, agrees as follows for the benefit of the other party and for the equal
and ratable benefit of the Holders (as hereinafter defined) of the securities
issued hereunder, including the Series A Debentures:
<PAGE>
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01 Definitions.
"Additional Interest," with respect to the Series A Debentures, means
an amount equal to and payable at the same time as any Additional Amounts
payable on the Series A Preferred Securities, as defined in the action pursuant
to the Limited Partnership Agreement creating the Series A Preferred
Securities, plus amounts, if any, which the Partnership would be required to
pay as taxes, duties, assessments or governmental charges of whatever nature
(other than withholding taxes) imposed by the United States, or any other
taxing authority, with respect to the Series A Debentures so that the net
amounts received and retained by the Partnership after paying any such taxes,
duties, assessments or governmental charges will be not less than the amounts
the Partnership would have received had no such taxes, duties, assessments or
governmental charges been imposed. With respect to any other series of
Debentures, "Additional Interest" shall have the meaning set forth in the
supplemental indenture creating such series.
"Affiliate" of any specified Person means any other Person, directly
or indirectly, controlling or controlled by or under direct or indirect common
control with such specified Person. When used with respect to any Person,
"control" means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise; and the terms "controlling" and "controlled" have
meanings correlative to the foregoing.
"Board of Directors" means the Board of Directors of the Company or
any committee thereof duly authorized to act on behalf of such Board.
"Board Resolution" means a copy of a resolution certified by the
Secretary or the Assistant Secretary of the Company to have been duly adopted
by the Board of Directors and to be in full force and effect on the date of
such certification and delivered to the Trustee.
"Business Day" means any day that is not a Saturday, a Sunday or a
day on which banking institutions in The City of New York or the State of New
Jersey are authorized or required by law or executive order to close.
"Capital Lease Obligations" of a Person means any obligation which
is required to be classified and accounted for as a capital lease on the face
of a balance sheet of such Person prepared in accordance with GAAP.
"Capital Stock" means any and all shares, interests, rights to
purchase, warrants, options, participations or other equivalents of or
interests in (however designated) corporate stock.
"Company" means Public Service Electric and Gas Company, a New Jersey
corporation, or any successor thereto.
"Company Order" means a written request or order signed in the name
of the Company by an Officer of the Company and delivered to the Trustee.
<PAGE>
"Debentureholder" or "Holder" means a Person in whose name a
Debenture is registered on the Registrar's books.
"Debentures" shall mean any of the securities of any series issued,
authenticated and delivered under this Indenture.
"Default" means any event which is, or after notice or passage of
time, or both, would be, an Event of Default pursuant to Section 6.01 hereof.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Extension Period" means a period, up to 60 consecutive months, in
which the Company elects to extend the interest payment period on the
Debentures pursuant to Section 4.01(b) hereof; provided that no Extension
Period shall extend beyond the Stated Maturity Date or the Redemption Date of
any Debenture.
"GAAP" means generally accepted accounting principles set forth in
the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board.
"General Partner" means the Company, as the general partner of the
Partnership, or any successor thereto or permitted assigns thereof that becomes
a general partner of the Partnership pursuant to the Limited Partnership
Agreement.
"Guarantee Agreement" means that certain payment and guarantee
agreement issued by the Company with respect to a series of Preferred
Securities, in which the Company irrevocably and unconditionally agrees to pay
the Guarantee Payments (as defined in the Guarantee Agreement) to the holders
of the series of Preferred Securities issued concurrently therewith.
"Indebtedness" means without duplication, (i) the principal of and
premium (if any) in respect of (A) indebtedness of the Company for money
borrowed and (B) indebtedness evidenced by securities, debentures, bonds or
other similar instruments issued by the Company; (ii) all Capital Lease
Obligations of the Company; (iii) all obligations of the Company issued or
assumed as the deferred purchase price of property, all conditional sale
obligations of the Company and all obligations of the Company under any title
retention agreement (but excluding trade accounts payable arising in the
ordinary course of business); (iv) all obligations of the Company for the
reimbursement of any obligor on any letter of credit, banker's acceptance,
security purchase facility or similar credit transaction (other than
obligations with respect to letters of credit securing obligations (other than
obligations described in (i) through (iii) above) entered into in the ordinary
course of business of the Company to the extent such letters of credit are not
drawn upon or, if and to the extent drawn upon, such drawing is reimbursed no
later than the third Business Day following receipt by the Company of a demand
for reimbursement following payment on the letter of credit); (v) all
obligations of the type referred to in clauses (i) through (iv) of other
Persons and all dividends of other Persons (other than the Preferred
Securities) for the payment of which, in either case, the Company is
responsible or liable as obligor, guarantor or otherwise (other than the
<PAGE>
Guarantee Agreement); and (vi) all obligations of the type referred to in
clauses (i) through (v) of other Persons secured by any lien on any property
or asset of the Company (whether or not such obligation is assumed by the
Company), the amount of such obligation being deemed to be the lesser of the
value of such property or assets or the amount of the obligation so secured;
provided, however, that Indebtedness will not include endorsements of
negotiable instruments for collection in the ordinary course of business.
"Indenture" means this indenture, as amended or supplemented from
time to time in accordance with the terms hereof, including the provisions of
the TIA that are deemed to be a part hereof.
"Interest Payment Date," when used with respect to the Debentures of
any series, means the stated maturity of any installment of interest on the
Debentures of that series.
"Issue Date," with respect to a series of Debentures, means the date
on which the Debentures of such series are originally issued.
"Limited Partnership Agreement" means the Amended and Restated
Limited Partnership Agreement of the Partnership dated as of November 9, 1994,
as it may be amended from time to time.
"Officer" means, with respect to any corporation, the Chairman of the
Board, the Chief Executive Officer, the President, any Vice President, the
Treasurer, Assistant Treasurer, Secretary or the Assistant Secretary of such
corporation.
"Officer's Certificate" means a written certificate containing the
applicable information specified in Sections 11.04 and 11.05 hereof, signed in
the name of the Company by any one of its Officers, and delivered to the
Trustee.
"Opinion of Counsel" means a written opinion containing the
applicable information specified in Sections 11.04 and 11.05 hereof, by legal
counsel who is reasonably acceptable to the Trustee.
"Partnership" means Public Service Electric and Gas Capital, L.P.,
a New Jersey limited partnership, or any successor thereto.
"Paying Agent" means any Person authorized by the Company to pay the
principal of and premium, if any, and interest on the Debentures on behalf of
the Company.
"Person" means any individual, corporation, partnership, limited
liability company, joint venture, association, joint-stock company, trust,
unincorporated organization, government or any agency or political subdivision
thereof or any other entity.
"Predecessor Debentures" of any particular Debenture means every
previous Debenture evidencing all or a portion of the same debt as that
evidenced by such particular Debenture; and for purposes of this definition,
any Debenture authenticated and delivered under Section 2.09 hereof in exchange
for or in lieu of a mutilated, destroyed, lost or stolen Debenture shall be
deemed to evidence the same debt as the mutilated, destroyed, lost or stolen
Debenture.
<PAGE>
"Preferred Securities" means the limited partner interests issued
from time to time in series by the Partnership.
"Record Date," with respect to any series of the Debentures, means
the Regular Record Date, the Special Record Date or any date set to determine
the Holders of such series entitled to vote, consent, make a request or
exercise any other right associated with such series.
"Redemption Date," with respect to any Debenture to be redeemed,
means the date specified for the redemption of such Debenture in accordance
with the terms thereof and pursuant to Article 3 of this Indenture.
"Redemption Price," with respect to any Debenture to be redeemed,
means the price at which such Debenture is to be redeemed in accordance with
the terms thereof and pursuant to Article 3 of this Indenture.
"Regular Record Date," with respect to an interest payment on the
Debentures of a series, means the date set forth in this Indenture or the
supplemental indenture creating such series for the determination of Holders
entitled to receive payment of interest on the next succeeding Interest Payment
Date.
"SEC" or "Commission" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Indebtedness" means all Indebtedness, except for Indebtedness
that is by its terms subordinated to or pari passu with the Debentures.
Notwithstanding anything to the contrary in the foregoing, Senior Indebtedness
shall not include any Indebtedness between or among the Company and any
Affiliates.
"Series A Debentures" means any of the Company's 9-3/8% Deferrable
Interest Subordinated Debentures, Series A issued under this Indenture.
"Series A Preferred Securities" means the limited partner interests
designated 9-3/8% Cumulative Monthly Income Preferred Securities, Series A
issued by the Partnership.
"Special Record Date" for the payment of any Defaulted Interest on
the Debentures of any series means the date determined pursuant to Section 2.03
hereof.
"Special Representative" means a special representative appointed by
the holders of the Preferred Securities pursuant to Section 13.02(d) of the
Limited Partnership Agreement, provided that any appointment of a Special
Representative shall terminate upon the distribution of the Debentures to the
holders of the Preferred Securities (if not previously terminated).
"Stated Maturity Date," with respect to any Debenture, means the date
specified for the Debentures as the fixed date on which the principal of the
Debentures is due and payable.
<PAGE>
"Subsidiary" means any corporation, association, partnership or other
business entity of which more than 50% of the total voting power of shares of
Capital Stock or other interests (including partnership interests) entitled
(without regard to the occurrence of any contingency) to vote in the election
of directors, managers or trustees thereof is at the time owned or controlled,
directly or indirectly, by (i) the Company, (ii) the Company and one or more
Subsidiaries, or (iii) one or more Subsidiaries.
"TIA" means the Trust Indenture Act of 1939, as amended and as in
effect on the date of this Indenture; provided, however, that if the TIA is
amended after such date, TIA means, to the extent required by any such
amendment, the TIA as so amended.
"Trust Officer," when used with respect to the Trustee, means the
chairman or vice-chairman of the Board of Directors of the Trustee, the
chairman or vice-chairman of the executive committee of the Board of Directors
of the Trustee, the President, any vice president, any assistant vice
president, any trust officer, senior corporate trust officer or any other
officer of the Trustee customarily performing functions similar to those
performed by any of the above designated officers and also means, with respect
to a particular corporate trust matter, any other officer to whom such matter
is referred because of his or her knowledge of and familiarity with the
particular subject.
"Trustee" means First Fidelity Bank, National Association, until a
successor replaces it pursuant to the applicable provisions of this Indenture
and, thereafter, shall mean such successor.
"U.S. Government Obligations" means direct obligations (or
certificates representing an ownership interest in such obligations) of the
United States of America (including any agency or instrumentality thereof) for
the payment of which the full faith and credit of the United States of America
is pledged and which are not callable at the issuer's option.
"Voting Stock" means, with respect to a corporation, all classes of
Capital Stock then outstanding of such corporation normally entitled to vote
in elections of directors.
"Wholly Owned Subsidiary" means a Subsidiary all the Capital Stock
of which (other than directors' qualifying shares) is owned by the Company or
another Wholly Owned Subsidiary.
<PAGE>
SECTION 1.02 Other Definitions.
TERM DEFINED IN SECTION
-------------------- ------------------
"Act"...................................... 1.05
"Bankruptcy Law"........................... 6.01
"Custodian"................................ 6.01
"Defaulted Interest"....................... 2.03
"Depositary"............................... 2.12
"global Debenture"......................... 2.12
"Legal Holiday"............................ 11.08
"Notice of Default"........................ 6.01
"Register"................................. 2.05
"Registrar"................................ 2.05
"Successor"................................ 5.01
SECTION 1.03 Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, such
provision is incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following meanings:
"indenture securities" means the Debentures.
"indenture security holder" means a Debentureholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the indenture securities means the Company and any other
obligor on the Debentures.
All other TIA terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by SEC rule have
the meanings assigned to them by such definitions.
<PAGE>
SECTION 1.04 Rules of Construction.
Unless the context otherwise requires:
(1) A term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) "including" means including, without limitation;
(5) words in the singular include the plural, and words in the
plural include the singular; and
(6) "herein," "hereof" and other words of similar import refer to
this Indenture as a whole and not to any particular Article,
Section or other subdivision.
SECTION 1.05 Acts of Holders.
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Indenture to be given or taken by
Holders, may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or by an agent
duly appointed in writing or by the Special Representative and, except as
herein otherwise expressly provided, such action shall become effective when
such instrument or instruments are delivered to the Trustee and, where it is
hereby expressly required, to the Company. Such instrument or instruments (and
the action embodied therein and evidenced thereby) are herein sometimes
referred to as the "Act" of Holders signing such instrument or instruments.
Proof of execution of any such instrument or of a writing appointing any such
agent shall be sufficient for any purpose of this Indenture and conclusive in
favor of the Trustee and the Company, if made in the manner provided in this
Section.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved in any manner which the Trustee deems
sufficient.
(c) The ownership of Debentures shall be proved by the Register.
(d) Any request, demand, authorization, direction, notice, consent,
waiver or other Act of the Holder of any Debenture shall bind every future
Holder of the same Debenture and the Holder of every Debenture issued upon the
registration of transfer thereof or in exchange therefor or in lieu thereof in
respect of anything done, omitted or suffered to be done by the Trustee or the
Company in reliance thereon, whether or not notation of such action is made
upon such Debenture.
<PAGE>
(e) If the Company solicits from the Holders any request, demand,
authorization, direction, notice, consent, waiver or other Act, the Company
may, at its option, by or pursuant to a resolution of its Board of Directors,
fix in advance a Record Date for the determination of Holders entitled to give
such request, demand, authorization, direction, notice, consent, waiver or
other Act, but the Company shall have no obligation to do so. If such a Record
Date is fixed, such request, demand, authorization, direction, notice, consent,
waiver or other Act may be given before or after such Record Date, but only
Holders of record at the close of business on such Record Date shall be deemed
to be Holders for the purposes of determining whether Holders of the requisite
proportion of outstanding Debentures have authorized or agreed or consented to
such request, demand, authorization, direction, notice, consent, waiver or
other Act, and for that purpose the outstanding Debentures shall be computed
as of such Record Date.
ARTICLE 2
THE DEBENTURES; THE SERIES A DEBENTURES
SECTION 2.01 Issue of Debentures Generally.
The aggregate principal amount of the Debentures which may be
authenticated and delivered under this Indenture is limited to the sum of the
aggregate stated liquidation preference of the Preferred Securities and the
aggregate capital contribution of the General Partner to the Partnership.
The Debentures may be issued in one or more series as from time to
time shall be authorized by the Board of Directors.
The Debentures of each series and the Trustee's Certificate of
Authentication shall be substantially in the forms to be attached as exhibits
to the Indenture or supplemental indenture creating such series, but in the
case of Debentures other than the Series A Debentures, with such inclusions,
omissions and variations as to letters, numbers or other marks of
identification or designation and such legends or endorsements printed,
lithographed or engraved thereon as the Company may deem appropriate and as are
not inconsistent with the provisions of this Indenture, or as may be required
to comply with any law or with any rule or regulation made pursuant thereto or
with any rule or regulation of any securities exchange on which the Debentures
may be listed, or to conform to usage.
The several series of Debentures may differ from the Series A
Debentures, and as and between series, in respect of any or all of the
following matters:
(a) designation;
(b) Stated Maturity Date or Dates, which may be serial;
(c) interest rate or method of determination of the interest rate
and whether Additional Interest will be payable;
(d) the basis upon which interest shall be computed if other than
a 360-day year composed of twelve 30-day months;
<PAGE>
(e) Interest Payment Dates and the Regular Record Dates therefor;
(f) Issue Date or Dates and interest accrual provisions;
(g) authorized denominations;
(h) the place or places for the payment of principal (and premium,
if any) and interest;
(i) the aggregate principal amount of Debentures of such series
which may be issued;
(j) the optional and mandatory redemption provisions, if any;
(k) provisions, if any, for any sinking or analogous fund with
respect to the Debentures of such series; and
(l) any other provisions expressing or referring to the terms and
conditions upon which the Debentures of such series are to be
issued under this Indenture which are not in conflict with the
provisions of this Indenture;
in each case as determined by the Board of Directors and specified in the
supplemental indenture creating such series.
SECTION 2.02 Terms and Form of the Series A Debentures.
The Series A Debentures shall be designated "Public Service Electric
and Gas Company 9-3/8% Deferrable Interest Subordinated Debentures, Series A."
The Series A Debentures and the Trustee's Certificate of Authentication shall
be substantially in the form of Exhibit A attached hereto. The terms and
provisions contained in the Series A Debentures shall constitute, and are
hereby expressly made, a part of this Indenture. The Company and the Trustee,
by their execution and delivery of this Indenture, expressly agree to such
terms and provisions and to be bound thereby.
The aggregate principal amount of Series A Debentures outstanding at
any time may not exceed $154,639,176 except as provided in Section 2.09 hereof
to be initially authenticated and delivered from time to time upon delivery to
the Trustee of the items specified in Section 2.04(d) hereof.
The Stated Maturity Date of the Series A Debentures is November 17,
2043. The interest rate of the Series A Debentures is 9-3/8% per annum plus
Additional Interest, if any.
The Interest Payment Dates for the Series A Debentures are the last
calendar day of each month of each year commencing November 30, 1994. In the
event that any date on which interest is payable on the Series A Debentures is
not a Business Day, then payment of interest payable on such date will be made
on the next day which is a Business Day (and without any interest or other
payment in respect of any such delay), except that, if such Business Day is in
the next succeeding calendar year, such payment shall be made on the
immediately preceding Business Day, in each case with the same force and effect
as if made on such date. The Regular Record Date for each Interest Payment
<PAGE>
Date for the Series A Debentures shall be the 15th day of each month, provided
that if the Partnership is the sole Holder of the Series A Debentures or the
Series A Debentures are issued in book-entry-only form, the Regular Record Date
shall be the close of business on the Business Day next preceding such Interest
Payment Date.
Each Series A Debenture shall bear interest from its Issue Date or
from the most recent Interest Payment Date to which interest has been paid or
duly provided for with respect to such Series A Debenture; except that, so long
as there is no existing Defaulted Interest or Extension Period on the Series
A Debentures, any Series A Debenture authenticated by the Trustee between the
Regular Record Date for any Interest Payment Date and such Interest Payment
Date shall bear interest from such Interest Payment Date.
Overdue principal of and interest on any Series A Debenture and
interest which has been deferred pursuant to Section 4.01(b) hereof shall bear
interest (to the extent that the payment of such interest shall be legally
enforceable) at a rate per annum equal to the interest rate per annum,
including Additional Interest, if any, payable on such Series A Debenture.
The Series A Debentures shall be issuable only in registered form
without coupons and only in denominations of $25 and any integral multiple
thereof.
SECTION 2.03 Payment of Principal and Interest.
Unless otherwise specified pursuant to Section 2.01(d), interest on
the Debentures shall be computed on the basis of a 360-day year composed of
twelve 30-day months, and for any period shorter than thirty days, interest
will be computed on the basis of the actual number of days elapsed in such
period.
Unless otherwise provided with respect to a series of Debentures,
(i) the principal and Redemption Price of and interest on each
Debenture shall be payable in such coin or currency of the
United States of America as at the time of payment is legal
tender for the payment of public and private debts;
(ii) the principal and Redemption Price of any Debenture and interest
payable on the Stated Maturity Date (if other than an Interest
Payment Date) or Redemption Date shall be payable, upon
surrender of such Debenture at the office or agency of any
Paying Agent therefor; and
(iii) interest on any Debenture on each Interest Payment Date therefor
shall be payable by check mailed to the address of the Person
entitled thereto as such address appears on the Register;
provided that, at the written request of the Holder of at least
$10,000,000 aggregate principal amount of Debentures received
by the Registrar not later than the Regular Record Date for such
Interest Payment Date, interest accrued on such Debenture will
be payable by wire transfer within the continental United States
in immediately available funds to the bank account number of
such Holder specified in such request and entered on the
Register by the Registrar.
<PAGE>
Except as specified pursuant to Section 2.01 or Section 4.01(b)
hereof, interest on any Debenture which is payable, and is punctually paid or
duly provided for, on any Interest Payment Date shall be paid to the Person in
whose name that Debenture (or one or more Predecessor Debentures) is registered
at the close of business on the Regular Record Date for such interest. Any
interest on any Debenture which is payable, but is not punctually paid or duly
provided for, on any Interest Payment Date (herein called "Defaulted Interest")
shall forthwith cease to be payable to the Holder on the relevant Regular
Record Date by virtue of having been such Holder, and such Defaulted Interest
may be paid by the Company, at its election in each case, as provided in Clause
(1) and (2) below:
(1) The Company may elect to make payment of any Defaulted Interest
to the Persons in whose names the Debentures (or their respective Predecessor
Debentures) are registered at the close of business on a Special Record Date
for the payment of such Defaulted Interest, which shall be fixed in the
following manner. The Company shall, not less than 15 Business Days prior to
the date of the proposed payment, notify the Trustee and the Paying Agent in
writing of the amount of Defaulted Interest proposed to be paid on each
Debenture and the date of the proposed payment, and at the same time the
Company shall deposit with the Paying Agent an amount of money equal to the
aggregate amount proposed to be paid in respect of such Defaulted Interest or
shall make arrangements satisfactory to the Paying Agent for such deposit prior
to the date of the proposed payment, such money when deposited to be held in
trust for the benefit of the Persons entitled to such Defaulted Interest as in
this Clause provided. The Special Record Date for the payment of such
Defaulted Interest shall be the close of business on the tenth calendar day
prior to the date of the proposed payment. The Trustee shall, in the name and
at the expense of the Company, cause notice of the proposed payment of such
Defaulted Interest and the Special Record Date therefor to be given to the
Holder thereof, not less than 7 calendar days prior to such Special Record
Date. Notice of the proposed payment of such Defaulted Interest and the
Special Record Date therefor having been given, such Defaulted Interest shall
be paid to the Persons in whose names the Debentures (or their respective
Predecessor Debentures) are registered at the close of business on such Special
Record Date and shall no longer be payable pursuant to the following Clause
(2).
(2) The Company may make payment of any Defaulted Interest on the
Debentures in any other lawful manner not inconsistent with the requirements
of any securities exchange on which such Debentures may be listed, and upon
such notice as may be required by such exchange, if, after notice given by the
Company to the Trustee and the Paying Agent of the proposed payment pursuant
to this Clause, such manner of payment shall be deemed practicable by the
Paying Agent.
Subject to the foregoing provisions of this Section, each Debenture
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Debenture shall carry the rights to interest
accrued and unpaid, and to accrue, which were carried by such other Debenture.
<PAGE>
SECTION 2.04 Execution, Authentication and Delivery.
(a) The Debentures shall be executed on behalf of the Company by its
Chief Executive Officer, its President or one of its Vice Presidents, under its
corporate seal imprinted or reproduced thereon and attested by its Secretary
or one of its Assistant Secretaries. The signature of any such Officer on the
Debentures may be manual or facsimile.
(b) Debentures bearing the manual or facsimile signatures of
individuals who were at any time the proper Officers of the Company shall bind
the Company, notwithstanding that such individuals or any of them have ceased
to hold such offices prior to the authentication and delivery of such
Debentures or did not hold such offices at the date of such Debentures.
(c) No Debenture shall be entitled to any benefit under this
Indenture or be valid or obligatory for any purpose unless there appears on
such Debenture a Certificate of Authentication duly executed by the Trustee by
manual signature of a Trust Officer, and such Certificate of Authentication
upon any Debenture shall be conclusive evidence, and the only evidence, that
such Debenture has been duly authenticated and made available for delivery
hereunder.
(d) The Trustee shall authenticate and deliver Debentures of a
series, for original issue, at one time or from time to time in accordance with
the Company Order referred to below, upon receipt by the Trustee of:
(1) a Board Resolution approving the form or forms and terms
of such series;
(2) a Company Order requesting the authentication and delivery
of such Debentures and stating the sum of the aggregate stated
liquidation preference of the Preferred Securities to be issued
concurrently with such Debentures plus the aggregate capital
contribution to be made by the General Partner to the Partnership
concurrently with the issuance of such Debentures;
(3) unless previously delivered, an indenture supplement hereto
setting forth the form of such Debentures and establishing the terms
thereof;
(4) the Debentures of such series, executed on behalf of the
Company in accordance with Section 2.04(a) hereof;
(5) an Opinion of Counsel to the effect that:
(i) the form or forms of such Debentures have been duly
authorized by the Company and have been established in
conformity with the provisions of this Indenture; and
<PAGE>
(ii) such Debentures, when authenticated and delivered by
the Trustee and issued and delivered by the Company in the
manner and subject to any conditions specified in such Opinion
of Counsel, will have been duly issued under this Indenture
and will constitute valid and legally binding obligations of
the Company, entitled to the benefits provided by
this Indenture, and enforceable in accordance with their terms,
subject, as to enforcement to laws relating to or affecting
generally the enforcement of creditors' rights, including,
without limitation, bankruptcy and insolvency laws and to
general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at
law); and
(iii) that any supplemental indenture referred to in clause
(3) above has been duly authorized, executed and delivered by
the Company and is a valid instrument legally binding upon the
Company, enforceable in accordance with its terms, subject as
to enforcement to laws relating to or affecting creditors'
rights, including, without limitation, bankruptcy and insolvency
laws and to general principles of equity (regardless of whether
such enforceability is considered in a proceeding in equity or
at law); and
(iv) that all consents, approvals and orders of any
commission, governmental authority or agency required in
connection with the issuance and sale of the Debentures have
been obtained.
(e) an Officer's Certificate certifying that no Default or Event of
Default has occurred and is continuing.
(f) The Trustee shall act as the initial authenticating agent.
Thereafter, the Trustee may appoint an authenticating agent. An authenticating
agent may authenticate Debentures whenever the Trustee may do so. Each
reference in this Indenture to authentication by the Trustee includes
authentication by such agent. The Trustee shall pay any authenticating agent
appointed by the Trustee reasonable compensation for its services and the
Trustee shall be reimbursed for such payment by the Company pursuant to Section
7.07 hereof. The provisions set forth in Section 7.02, Section 7.03, Section
7.04 and Section 7.07 hereof shall be applicable to any authenticating agent.
<PAGE>
SECTION 2.05 Registrar and Paying Agent.
The Company shall maintain or cause to be maintained, within or
outside the State of New Jersey, an office or agency where the Debentures may
be presented for registration of transfer or for exchange ("Registrar"), an
office or agency where Debentures may be presented or surrendered for payment
("Paying Agent"), and an office or agency where notices and demands to or upon
the Company in respect of the Debentures and this Indenture may be served. The
Registrar shall keep a register (the "Register") of the Debentures and of their
transfer and exchange. The Company may have one or more co-Registrars and one
or more additional Paying Agents. The term Registrar includes any additional
registrar and the term Paying Agent includes any additional paying agent. The
corporate trust office of the Trustee in Newark, New Jersey, shall initially
be the Registrar for the Series A Debentures and agent for service of notice
or demands on the Company, and the Trustee shall initially be the Paying Agent
for the Series A Debentures.
The Company shall enter into an appropriate agency agreement with any
Registrar, Paying Agent or co-Registrar (if not the Company or the Trustee or
an affiliate of the Trustee). The agreement shall implement the provisions of
this Indenture that relate to such agent. The Company shall give prompt
written notice to the Trustee of any change of location of such office or
agency. If at any time the Company shall fail to maintain or cause to be
maintained any such required office or agency or shall fail to furnish the
Trustee with the address thereof, such presentations, surrenders, notices and
demands may be made or served at the address of the Trustee set forth in
Section 11.02 hereof. The Company shall notify the Trustee of the name and
address of any such agent. If the Company fails to maintain a Registrar,
Paying Agent or agent for service of notices or demands, the Trustee shall act
as such and shall be entitled to appropriate compensation therefor pursuant to
Section 7.07 hereof. The Company or any Affiliate of the Company may act as
Paying Agent, Registrar or co-Registrar or agent for service of notices and
demands.
The Company may also from time to time designate one or more other
offices or agencies where the Debentures may be presented or surrendered for
any or all such purposes and may from time to time rescind such designations.
The Company will give prompt written notice to the Trustee of any such
designation or rescission and of any change in location of any such other
office or agency.
SECTION 2.06 Paying Agent to Hold Money in Trust.
Except as otherwise provided herein, prior to or on each due date of
the principal of and premium (if any) and interest on any Debenture, the
Company shall deposit with the Paying Agent a sum of money sufficient to pay
such principal, premium (if any) and interest so becoming due. The Company
shall require each Paying Agent (other than the Trustee or the Company) to
agree in writing that such Paying Agent shall hold in trust for the benefit of
Holders or the Trustee all money held by the Paying Agent for the payment of
principal of and premium (if any) and interest on the Debentures and shall
notify the Trustee of any Default by the Company in making any such payment.
At any time during the continuance of any such Default, the Paying Agent shall,
<PAGE>
upon the request of the Trustee, forthwith pay to the Trustee all money so held
in trust and account for any money disbursed by it. The Company at any time
may require a Paying Agent to pay all money held by it to the Trustee and to
account for any money disbursed by it. Upon doing so, the Paying Agent shall
have no further liability for the money so paid over to the Trustee. If the
Company, a Subsidiary or an Affiliate of either of them acts as Paying Agent,
it shall segregate the money held by it as Paying Agent and hold it as a
separate trust fund.
SECTION 2.07 Debentureholder Lists.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
Debentureholders. If the Trustee is not the Registrar, the Company shall cause
to be furnished to the Trustee on or before the Record Date for each Interest
Payment Date and at such other times as the Trustee may request in writing,
within five Business Days of such request, a list, in such form as the Trustee
may reasonably require of the names and addresses of Debentureholders.
SECTION 2.08 Transfer and Exchange.
When Debentures are presented to the Registrar or a co-Registrar with
a request to register the transfer or to exchange them for an equal principal
amount of Debentures of the same series of other authorized denominations, the
Registrar shall register the transfer or make the exchange as requested if its
reasonable requirements for such transactions are met. To permit registrations
of transfer and exchanges, the Company shall execute and the Trustee shall
authenticate Debentures, all at the Registrar's request.
Every Debenture presented or surrendered for registration of transfer
or for exchange shall (if so required by the Company or the Trustee) be duly
endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Registrar duly executed by the Holder or his attorney duly
authorized in writing.
The Company shall not require payment of a service charge for any
registration of transfer or exchange of Debentures, but the Company may require
payment of a sum sufficient to pay all taxes, assessments or other governmental
charges that may be imposed in connection with the registration of the transfer
or exchange of Debentures from the Debentureholder requesting such transfer or
exchange (other than any exchange of a temporary Debenture for a definitive
Debenture not involving any change in ownership).
The Company shall not be required to make, and the Registrar need not
register, transfers or exchanges of (a) any Debenture for a period beginning
at the opening of business 15 days before the mailing of a notice of redemption
of Debentures and ending at the close of business on the day of such mailing
or (b) any Debenture selected, called or being called for redemption, except,
in the case of any Debenture to be redeemed in part, the portion thereof not
to be redeemed.
<PAGE>
SECTION 2.09 Replacement Debentures.
If (a) any mutilated Debenture is surrendered to the Company or the
Trustee, or (b) the Company and the Trustee receive evidence to their
satisfaction of the destruction, loss or theft of any Debenture, and there is
delivered to the Company and the Trustee such Debenture or indemnity as may be
required by them to save each of them harmless, then, in the absence of notice
to the Company or the Trustee that such Debenture has been acquired by a bona
fide purchaser, the Company shall execute in exchange for any such mutilated
Debenture or in lieu of any such destroyed, lost or stolen Debenture, a new
Debenture of the same series and of like tenor and principal amount, bearing
a number not contemporaneously outstanding, and the Trustee shall authenticate
and make such new Debenture available for delivery.
In case any such mutilated, destroyed, lost or stolen Debenture has
become or is about to become due and payable, or is about to be redeemed by the
Company pursuant to Article 3 hereof, the Company in its discretion may,
instead of issuing a new Debenture, pay or purchase such Debenture, as the case
may be.
Upon the issuance of any new Debentures under this Section 2.09, the
Company may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) in connection
therewith.
Every new Debenture issued pursuant to this Section 2.09 in lieu of
any mutilated, destroyed, lost or stolen Debenture shall constitute an original
additional contractual obligation of the Company (whether or not the mutilated,
destroyed, lost or stolen Debenture shall be at any time enforceable) by
anyone, and shall be entitled to all benefits of this Indenture equally and
ratably with any and all other Debentures duly issued hereunder.
The provisions of this Section 2.09 are exclusive and shall preclude
(to the extent lawful) all other rights and remedies with respect to the
replacement or payment of mutilated, destroyed, lost or stolen Debentures.
SECTION 2.10 Outstanding Debentures; Determinations of Holders' Action.
Debentures outstanding at any time are all the Debentures
authenticated by the Trustee except for those canceled by it, those delivered
to it for cancellation, those mutilated, destroyed, lost or stolen Debentures
referred to in Section 2.09 hereof, those redeemed by the Company pursuant to
Article 3 hereof, and those described in this Section 2.10 as not outstanding.
A Debenture does not cease to be outstanding because the Company or a
Subsidiary or Affiliate thereof holds the Debenture; provided, however, that
in determining whether the Holders of the requisite principal amount of
Debentures have given or concurred in any request, demand, authorization,
direction, notice, consent or waiver hereunder, Debentures owned by the Company
or a Subsidiary or Affiliate (other than the Partnership, so long as any of its
Preferred Securities are outstanding) shall be disregarded and deemed not to
be outstanding.
Subject to the foregoing, only Debentures outstanding at the time of
such determination shall be considered in any such determination (including
determinations pursuant to Articles 3, 6 and 9).
<PAGE>
If a Debenture is replaced pursuant to Section 2.09 hereof, it ceases
to be outstanding unless the Trustee receives proof satisfactory to it that the
replaced Debenture is held by a bona fide purchaser.
If the Paying Agent (other than the Company) holds, in accordance
with this Indenture, at the Stated Maturity Date or on a Redemption Date, money
sufficient to pay the Debentures payable on that date, then immediately on the
Stated Maturity Date or such Redemption Date, as the case may be, such
Debentures shall cease to be outstanding, and interest, if any, on such
Debentures shall cease to accrue.
SECTION 2.11 Temporary Debentures.
So long as the Partnership is the sole Holder of the Debentures, the
Company may execute temporary Debentures, and upon the Company's Order, the
Trustee shall authenticate and make such temporary Debentures available for
delivery. Temporary Debentures shall be printed, lithographed, typewritten,
mimeographed or otherwise produced, in any authorized denomination, in the same
series and principal amount and of like tenor as the definitive Debentures in
lieu of which they are issued and with such appropriate insertions, omissions,
substitutions and other variations as the Officers of the Company executing
such Debentures may determine, as conclusively evidenced by their execution of
such Debentures.
After the preparation of definitive Debentures, the temporary
Debentures shall be exchangeable for definitive Debentures of the same series
upon surrender of the temporary Debentures at the office or agency of the
Company designated for such purpose pursuant to Section 2.05 hereof, without
charge to the Holders thereof. Upon surrender for cancellation of any one or
more temporary Debentures, the Company shall execute a like principal amount
of definitive Debentures of the same series of authorized denominations, and
the Trustee, upon written request of the Company signed by two Officers of the
Company, shall authenticate and make such Debentures available for delivery in
exchange therefor. Until so exchanged, the temporary Debentures shall in all
respects be entitled to the same benefits under this Indenture as definitive
Debentures.
SECTION 2.12 Book Entry System.
If the Partnership is not the sole Holder of the Debentures, in order
to utilize a book-entry-only system for all or any portion of the Debentures
of any series, all or a portion of the Debentures of any series may be issued
in the form of one or more fully registered Debentures of the same series for
the aggregate principal amount of such Debentures of each Issue Date, interest
rate and Stated Maturity Date (a "global Debenture"), which global Debenture
shall be registered in the name of the depositary (the "Depositary") selected
by the Company or in the name of such Depositary's nominee. Each global
Debenture shall be delivered by the Trustee to the Depositary or pursuant to
the Depositary's instruction and shall bear a legend substantially to the
following effect: "Except as otherwise provided in Section 2.12 of the
Indenture, this Debenture may be transferred, in whole but not in part, only
to another nominee of the Depositary or to a successor Depositary or to a
nominee of such successor Depositary."
<PAGE>
Notwithstanding any other provision of this Section 2.12 or of
Section 2.08 hereof, a global Debenture may be transferred in whole but not in
part and in the manner provided in Section 2.08 hereof, only by a nominee of
the Depositary for such series, or by the Depositary or any such nominee of a
successor Depositary for such series selected or approved by the Company or to
a nominee of such successor Depositary.
If at any time the Depositary for global Debentures of any series of
Debentures notifies the Company that it is unwilling or unable to continue as
Depositary for such global Debentures or if at any time the Depositary for such
global Debentures shall no longer be registered or in good standing under the
Exchange Act or other applicable statute or regulation, and a successor
Depository for such global Debentures is not appointed by the Company within
90 days after the Company receives such notice or becomes aware of such
condition, as the case may be, then this Section 2.12 shall no longer be
applicable to the global Debentures of such series and the Company will
execute, and the Trustee will authenticate and deliver, Debentures of such
series in definitive registered form without coupons, in authorized
denominations, and in an aggregate principal amount equal to the principal
amount of the global Debentures of such series in exchange for such global
Debentures. In addition, the Company may at any time determine, in its sole
discretion, that the Debentures of any series shall no longer be represented
by one or more global Debentures and that the provisions of this Section 2.12
shall no longer apply to the Debentures of such series. In such event the
Company will execute and the Trustee, upon receipt of an Officers' Certificate
evidencing such determination by the Company, will authenticate and deliver
Debentures of such series and of like tenor in definitive registered form, in
authorized denominations, and in aggregate principal amount equal to the
principal amount of the global Debentures of such series in exchange for such
global Debentures. Upon the exchange of global Debentures for such Debentures
in definitive registered form without coupons, in authorized denominations, the
global Debentures shall be cancelled by the Trustee. Such Debentures in
definitive registered form issued in exchange for global Debentures pursuant
to this Section 2.12 shall be registered in such names and in such authorized
denominations as the Depositary, pursuant to instructions from its direct or
indirect participants or otherwise, shall instruct the Trustee. The Trustee
shall deliver such Debentures to the Person in whose names such Debentures are
so registered.
Except as provided above, owners solely of beneficial interests in
a global Debenture shall not be entitled to receive physical delivery of
Debentures in definitive form and will not be considered the Holders thereof
for any purpose under this Indenture.
Members of or participants in the Depositary shall have no rights
under this Indenture with respect to any global Debenture held on their behalf
by the Depositary, and such Depositary or its nominee, as the case may be, may
be treated by the Company, the Trustee, and any agent of the Company or the
Trustee as the Holder of such global Debentures for all purposes whatsoever.
Notwithstanding the foregoing, nothing herein shall prevent the Company, the
Trustee, or any agent of the Company or the Trustee, from giving effect to any
written certification, proxy or other authorization furnished by the Depositary
or impair, as between the Depositary and its members or participants, the
<PAGE>
operation of customary practices governing the exercise of the rights of a
Holder of any Debenture, including without limitation the granting of proxies
or other authorization of participants to give or take any request, demand,
authorization, direction, notice, consent, waiver or other action which a
Holder is entitled to give or take under this Indenture.
SECTION 2.13 Cancellation.
All Debentures surrendered for payment, redemption by the Company
pursuant to Article 3 hereof or registration of transfer or exchange shall, if
surrendered to any Person other than the Trustee, be delivered to the Trustee
and shall be promptly canceled by the Trustee. The Company may at any time
deliver to the Trustee for cancellation any Debentures previously authenticated
and made available for delivery hereunder which the Company may have acquired
in any manner whatsoever, and all Debentures so delivered shall be promptly
canceled by the Trustee. The Company may not reissue or issue new Debentures
to replace Debentures it has paid or delivered to the Trustee for cancellation.
No Debentures shall be authenticated in lieu of or in exchange for any
Debentures canceled as provided in this Section 2.13, except as expressly
permitted by this Indenture. All canceled Debentures held by the Trustee shall
be destroyed by the Trustee, and the Trustee shall deliver a certificate of
destruction to the Company.
ARTICLE 3
REDEMPTION
SECTION 3.01 Redemption; Notice to Trustee.
(a) The Series A Debentures are subject to redemption prior to
maturity as provided therein.
(b) The redemption terms for any additional series of Debentures
shall be as specified in the supplemental indenture creating such series of
Debentures; provided that each series of Debentures shall be subject to
mandatory redemption upon the dissolution and winding up of the Partnership,
unless, in connection therewith, the Debentures are distributed to the holders
of the Preferred Securities.
(c) If any or all of the Debentures are to be redeemed pursuant to
Section 3.01 (a) or (b) hereof, the Company shall deliver to the Trustee at
least 45 days prior to the Redemption Date a Company Order specifying the
series and principal amount of Debentures to be redeemed and the Redemption
Date and Redemption Price for such Debentures. Such Company Order shall be
accompanied by a Board Resolution authorizing such redemption.
SECTION 3.02 Selection of Debentures to be Redeemed.
If less than all the outstanding Debentures are to be redeemed at any
time, the Trustee shall select the Debentures to be redeemed by lot or by any
other method the Trustee considers fair and appropriate. The Trustee shall
make the selection at least 30 but not more than 60 days before the Redemption
Date from outstanding Debentures not previously called for redemption.
Provisions of this Indenture that apply to Debentures called for redemption
also apply to portions of Debentures called for redemption. The Trustee shall
notify the Company promptly of the Debentures or portions of Debentures to be
redeemed.
<PAGE>
SECTION 3.03 Notice of Redemption.
At least 30 days but not more than 60 days before the Redemption
Date, the Trustee, in the Company's name and at the Company's expense, shall
mail or cause to be mailed a notice of redemption by first-class mail, postage
prepaid, to each Holder of Debentures to be redeemed at such Holder's last
address as it appears in the Register.
The notice of redemption shall identify the Debentures to be
redeemed, the provision of the Debentures or this Indenture pursuant to which
the Debentures called for redemption are being redeemed and shall state:
(1) the Redemption Date;
(2) the Redemption Price;
(3) the name and address of the Paying Agent;
(4) that payment of the Redemption Price of Debentures called for
redemption will be made only upon surrender of such Debentures to the Paying
Agent;
(5) if fewer than all the outstanding Debentures of any series are
to be redeemed, the identification and principal amounts of the particular
Debentures to be redeemed and that, on and after the Redemption Date, upon
surrender of such Debentures, a new Debenture or Debentures of the same series
and of like tenor and in a principal amount equal to the unredeemed portion
thereof will be issued; and
(6) that, unless the Company defaults in paying the Redemption Price
of the Debentures called for Redemption, plus accrued interest thereon to the
Redemption Date, interest will cease to accrue on such Debentures on and after
the Redemption Date.
Any notice of redemption given in the manner provided herein shall
be conclusively presumed to have been given, whether or not such notice is
actually received. Failure to mail any notice or defect in the mailed notice
or the mailing thereof in respect of any Debenture shall not affect the
validity of the redemption of any other Debenture.
SECTION 3.04 Effect of Notice of Redemption.
If notice of redemption is required as set forth in Section 3.03
hereof, and after notice of redemption has been given, Debentures called for
redemption shall become due and payable on the Redemption Date and at the
Redemption Price and from and after the Redemption Date (unless the Company
shall default in the payment of the Redemption Price and accrued interest),
such Debentures shall cease to bear interest. Upon the later of the Redemption
Date and the date such Debentures are surrendered to the Paying Agent, such
Debentures shall be paid at the Redemption Price, plus accrued interest to the
Redemption Date, provided that installments of interest on Debentures with an
Interest Payment Date which is on or prior to the Redemption Date shall be
payable to the Holders of such Debentures, or one or more Predecessor
Debentures, registered as such at the close of business on the Regular Record
Dates therefor according to their terms and provisions.
<PAGE>
SECTION 3.05 Deposit of Redemption Price.
On or prior to the Redemption Date, the Company shall deposit with
the Paying Agent (or if the Company or an Affiliate is the Paying Agent, shall
segregate and hold in trust or cause such Affiliate to segregate and hold in
trust) money sufficient to pay the Redemption Price of, and accrued interest
on, all Debentures to be redeemed on that date. The Paying Agent shall return
to the Company any money in excess of the amount sufficient to pay the
Redemption Price of, and accrued interest on, all Debentures to be redeemed and
any interest accrued on the amount deposited pursuant to this Section 3.05.
SECTION 3.06 Debentures Redeemed in Part.
Upon surrender of a Debenture that is redeemed in part, the Trustee
shall authenticate for the Holder a new Debenture of the same series and in a
principal amount equal to the unredeemed portion of such Debenture.
ARTICLE 4
COVENANTS
SECTION 4.01 Payment of Debentures.
(a) The Company shall pay the principal of and premium, if any, and
interest (including interest accruing on or after the filing of a petition in
bankruptcy or reorganization relating to the Company, whether or not a claim
for post-filing interest is allowed in such proceeding) on the Debentures on
(or prior to) the dates and in the manner provided in the Debentures or
pursuant to this Indenture. An installment of principal, premium, if any, or
interest shall be considered paid on the applicable due date if on such date
the Trustee or the Paying Agent holds, in accordance with this Indenture, money
sufficient to pay all of such installment then due. The Company shall pay
interest on overdue principal and interest on overdue installments of interest
(including interest accruing during an Extension Period and/or on or after the
filing of a petition in bankruptcy or reorganization relating to the Company,
whether or not a claim for post-filing interest is allowed in such proceeding),
to the extent lawful, at the rate per annum plus Additional Interest, if any,
borne by the Debentures, which interest on overdue interest shall accrue from
the date such amounts became overdue.
(b) Notwithstanding the provisions of Section 4.01(a) hereof or any
other provision herein to the contrary, the Company shall have the right in its
sole and absolute discretion at any time and from time to time while the
Debentures are outstanding, so long as an Event of Default has not occurred and
is continuing, to extend the interest payment period for up to 60 consecutive
months, provided that such extended interest period shall not extend beyond the
Stated Maturity Date or Redemption Date of any Debenture, and provided further
that at the end of each Extension Period the Company shall pay all interest
then accrued and unpaid (together with interest thereon to the extent permitted
by applicable law at the rate per annum borne by the Debentures). Prior to the
termination of an Extension Period, the Company may shorten or may further
extend the interest payment period, provided that such Extension Period
together with all such previous and further extensions may not exceed 60
consecutive months. The Company shall give the Trustee notice of its selection
<PAGE>
of such extended or shortened interest payment period at least one Business Day
prior to the date the Partnership or the Company is required to give notice of
the record or payment date of the related distribution on the Preferred
Securities or payment of interest on the Debentures to any national securities
exchange on which the Preferred Securities or the Debentures are then listed
or other applicable self-regulatory organization, but in any event not less
than two Business Days prior to the Record Date fixed by the Company for the
payment of such interest. If the Partnership is the sole holder of the
Debentures, the Company shall cause the Partnership to give notice of the
Company's selection of such extended interest payment period to the holders of
the Preferred Securities by first class mail, postage prepaid. If the
Partnership is not the sole Holder of the Debentures, the Company shall give
or cause the Trustee to give notice (a form of which shall be provided by the
Company to the Trustee) of the Company's selection of such extended interest
payment period to the Holders by first class mail, postage prepaid.
SECTION 4.02 Prohibition Against Dividends, etc.
The Company shall not declare or pay any dividend on, or redeem,
purchase, acquire or make a liquidation payment with respect to, any of its
Capital Stock (i) during an Extension Period, (ii) if at such time there shall
have occurred any Default or Event of Default, or (iii) if the Company shall
be in default with respect to its payment or other obligations under the
Guarantee Agreement.
SECTION 4.03 SEC Reports.
The Company shall file with the Trustee, within 15 days after it
files them with the SEC, copies of its annual report and of the information,
documents and other reports (or copies of such portions of any of the foregoing
as the SEC may by rules and regulations prescribe) which the Company is
required to file with the SEC pursuant to Section 13 or 15(d) of the Exchange
Act. If the Company is not subject to the reporting requirements of Section
13 or 15(d) of the Exchange Act, the Company shall file with the Trustee such
information, documents and other reports (or copies of such portions of any of
the foregoing as the SEC may by rules and regulations prescribe) which are
specified in Sections 13 or 15(d) of the Exchange Act. The Company shall also
comply with the provisions of Section 314(a) of the TIA.
SECTION 4.04 Compliance Certificates.
(a) The Company shall deliver to the Trustee, within 90 days after
the end of each of the Company's fiscal years, an Officer's Certificate stating
whether or not the signer knows of any Default or Event of Default. Such
certificate shall contain a certification from the principal executive officer,
principal financial officer or principal accounting officer of the Company as
to his or her knowledge of the Company's compliance with all conditions and
covenants under this Indenture. For purposes of this Section 4.04(a), such
compliance shall be determined without regard to any period of grace or
requirement of notice provided under this Indenture. If such Officer does know
of such a Default or Event of Default, the Officer's Certificate shall describe
any such Default or Event of Default, and its status. Such Officer's
Certificate need not comply with Sections 11.04 and 11.05 hereof.
<PAGE>
(b) The Company shall deliver to the Trustee any information
reasonably requested by the Trustee in connection with the compliance by the
Trustee or the Company with the TIA.
SECTION 4.05 Relationship with the Partnership.
In the event that the Company has transferred its general partner
interests in the Partnership to any Wholly Owned Subsidiary, the Company agrees
(i) to maintain direct or indirect (through a Wholly Owned Subsidiary) 100%
ownership of the General Partner and will cause the General Partner to maintain
100% ownership of the general partnership interests in the Partnership; (ii)
to cause the General Partner to maintain a fair market value net worth of at
least 10% of the total capital contributions less redemptions to the
Partnership and to contribute capital to the Partnership in an aggregate amount
equal to 3% of the aggregate capital contributed to the Partnership; (iii) to
cause the General Partner to timely perform all of its duties as General
Partner of the Partnership (including the duty to pay distributions on the
Preferred Securities to the extent the Partnership has funds legally available
therefor); and (iv) to use its reasonable efforts to cause the Partnership to
remain a limited partnership and otherwise continue to be treated as a
partnership for United States federal income tax purposes.
SECTION 4.06 Further Instruments and Acts.
Upon request of the Trustee, the Company shall execute and deliver
such further instruments and do such further acts as may be reasonably
necessary or proper to carry out more effectively the purposes of this
Indenture.
SECTION 4.07 Payments for Consents.
Neither the Company nor any Subsidiary shall, directly or indirectly,
pay or cause to be paid any consideration, whether by way of interest, fee or
otherwise, to any Holder of any Debentures for or as an inducement to any
consent, waiver or amendment of any of the terms or provisions of this
Indenture or the Debentures unless such consideration is offered to be paid or
agreed to be paid to all Holders of the Debentures who so consent, waive or
agree to amend in the time frame set forth in the documents soliciting such
consent, waiver or agreement.
ARTICLE 5
SUCCESSOR CORPORATION
SECTION 5.01 When the Company May Merge, Etc.
The Company may not consolidate with or merge with or into, or sell,
convey, transfer or lease its properties and assets as an entirety or
substantially as an entirety (either in one transaction or a series of
transactions) to, any Person unless:
(1) the Person formed by or surviving such consolidation or merger
or to which such sale, conveyance, transfer or lease shall have been made (the
"Successor") if other than the Company, (a) is organized and existing under the
laws of the United States of America or any State thereof or the District of
<PAGE>
Columbia, and (b) shall expressly assume by a supplemental indenture, executed
and delivered to the Trustee, in form satisfactory to the Trustee, all the
obligations of the Company under the Debentures and the Indenture;
(2) immediately prior to and after giving effect to such transaction
(and treating any Indebtedness which becomes an obligation of the Successor
Person or any Subsidiary as a result of such transaction as having been
incurred by such Person or such Subsidiary at the time of such transaction),
no Default or Event of Default shall have occurred and be continuing; and
(3) the Company delivers to the Trustee an Officer's Certificate and
an Opinion of Counsel, each stating that such consolidation, merger, sale,
conveyance, transfer or lease and such supplemental indenture comply with this
Indenture.
The Successor will be the successor to the Company, and will be
substituted for, and may exercise every right and power and become the obligor
on the Debentures with the same effect as if the Successor had been named as
the Company herein but, in the case of a sale, conveyance, transfer or lease
of all or substantially all of the assets of the Company, the predecessor
Company will not be released from its obligation to pay the principal of and
premium, if any, and interest on the Debentures.
ARTICLE 6
DEFAULTS AND REMEDIES
SECTION 6.01 Events of Default.
An "Event of Default" occurs if one of the following shall have
occurred and be continuing:
(1) The Company defaults in the payment, when due and payable, of
(a) interest, including Additional Interest, on any Debenture and the default
continues for a period of 10 days; provided, that during an Extension Period,
failure to pay interest on the Debentures shall not constitute a Default or
Event of Default hereunder, or (b) the principal of or premium, if any, on any
Debentures when the same becomes due and payable on the Stated Maturity Date
thereof, upon acceleration, on any Redemption Date, or otherwise;
(2) The Company defaults in the performance of or fails to comply
with any of its other covenants or agreements in the Debentures or this
Indenture and such failure continues for 60 days after receipt by the Company
of a "Notice of Default";
(3) The Company, pursuant to or within the meaning of any Bankruptcy
Law:
(a) commences a voluntary case or proceeding;
(b) consents to the entry of an order for relief against it in
an involuntary case or proceeding;
<PAGE>
(c) consents to the appointment of a Custodian of it or for all
or substantially all of its property, and such Custodian
is not discharged within 60 days;
(d) makes a general assignment for the benefit of its
creditors; or
(e) admits in writing its inability to pay its debts generally
as they become due; or
(4) A court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that:
(a) is for relief against the Company in an involuntary case
or proceeding;
(b) appoints a Custodian of the Company for all or
substantially all of its properties;
(c) orders the liquidation of the Company;
(d) and in each case the order or decree remains unstayed and
in effect for 60 days.
The foregoing will constitute Events of Default whatever the reason
for any such Event of Default and whether it is voluntary or involuntary or is
effected by operation of law or pursuant to any judgment, decree or order of
any court or any order, rule or regulation of any administrative or
governmental body.
The term "Bankruptcy Law" means Title 11, United States Code, or any
similar federal or state law for the relief of debtors. "Custodian" means any
receiver, trustee, assignee, liquidator, sequestrator, custodian or similar
official under any Bankruptcy Law.
A Default under clause (2) above is not an Event of Default until (i)
the Trustee provides a "Notice of Default" to the Company or the Holders of at
least a majority in aggregate principal amount of the Debentures at the time
outstanding or the Special Representative provides a "Notice of Default" to the
Company and the Trustee of the Default and (ii) the Company does not cure such
Default within the time specified in clause (2) above after receipt of such
notice. Any such notice must specify the Default, demand that it be remedied
and state that such notice is a "Notice of Default."
SECTION 6.02 Acceleration.
If any Event of Default other than an Event of Default under clause
(3) or (4) of Section 6.01 hereof occurs and is continuing, the Trustee, the
Holders of not less than 25% in principal amount of the Debentures then
outstanding or the Special Representative may declare the principal of all such
Debentures due and payable. Upon such a declaration, such principal and
interest shall be due and payable immediately.
<PAGE>
If an Event of Default specified in clause (3) or (4) of Section 6.01
hereof occurs, the principal of and interest on all the Debentures shall ipso
facto become and be immediately due and payable without any declaration or
other act on the part of the Trustee, any Debentureholders or the Special
Representative.
After such a declaration, (i) if the Partnership is the sole Holder
of the Debentures, the Special Representative, if one has been appointed, or,
if no Special Representative has been appointed, the Partnership, at the
direction of the holders of 66 % of the aggregate stated liquidation preference
of the Preferred Securities, or (ii) if the Partnership is not the sole Holder
of the Debentures, the Holders of at least 66 % in aggregate principal amount
of the Debentures at the time outstanding, in each case, by notice to the
Trustee, may rescind an acceleration and its consequences if the rescission
would not conflict with any judgment or decree and if all existing Events of
Default have been cured or waived except nonpayment of principal or interest
that has become due solely because of acceleration. No such rescission shall
affect any subsequent Default or impair any right consequent thereto.
SECTION 6.03 Other Remedies.
If an Event of Default occurs and is continuing, the Trustee may, in
its own name or as trustee of an express trust, institute, pursue and prosecute
any proceeding, including, without limitation, any action at law or suit in
equity or other judicial or administrative proceeding to collect the payment
of principal of or premium, if any, or interest on the Debentures, to enforce
the performance of any provision of the Debentures or this Indenture or to
obtain any other available remedy.
The Trustee may maintain a proceeding even if it does not possess any
of the Debentures or does not produce any of the Debentures in the proceeding.
A delay or omission by the Trustee, the Special Representative or any
Debentureholder in exercising any right or remedy accruing upon an Event of
Default shall not impair such right or remedy or constitute a waiver of, or
acquiescence in, such Event of Default. No remedy is exclusive of any other
remedy. All available remedies are cumulative.
SECTION 6.04 Waiver of Past Defaults.
If a Default or Event of Default has occurred and is continuing, (i)
if the Partnership is the sole Holder of the Debentures, the Special
Representative or, if no Special Representative has been appointed, the
Partnership, at the direction of the holders of 66 % of the aggregate stated
liquidation preference of the Preferred Securities, or (ii) if the Partnership
is not the sole Holder of the Debentures, the Holders of at least 66 % in
aggregate principal amount of the Debentures at the time outstanding, in each
case by notice to the Trustee, the Company and the Partnership (if the
Partnership, at such time, holds any Debentures), may waive an existing Default
or Event of Default and its consequences except a Default or Event of Default
in the payment of the principal or premium, if any, or interest on any
Debenture. When a Default or Event of Default is waived, it is deemed cured
and shall cease to exist, but no such waiver shall extend to any subsequent or
other Default or Event of Default or impair any consequent right.
<PAGE>
SECTION 6.05 Control by Majority or the Special Representative.
If an Event of Default has occurred and is continuing, (i) if the
Partnership is the sole Holder of the Debentures, the Special Representative
or, if no Special Representative has been appointed, the Partnership, at the
direction of the holders of 66 % of the aggregate stated liquidation preference
of the Preferred Securities, or (ii) if the Partnership is not the sole Holder
of the Debentures, the Holders of at least 66 % in aggregate principal amount
of the Debentures at the time outstanding, in each case may direct the time,
method and place of conducting any proceeding for any remedy available to the
Trustee or of exercising any trust or power conferred on the Trustee. However,
the Trustee may refuse to follow any direction that conflicts with law or this
Indenture or that the Trustee determines in good faith is unduly prejudicial
to the rights of other Debentureholders or may involve the Trustee in personal
liability. The Trustee may take any other action deemed proper by the Trustee
which is not inconsistent with such direction, including withholding notice to
the Holders of the Debentures of continuing default (except in the payment of
the principal (other than any mandatory sinking fund payment) or premium, if
any or interest on any Debentures) if the Trustee considers it in the interest
of the Holders of the Debentures to do so.
SECTION 6.06 Limitation on Suits.
Except as provided in Section 6.07 hereof, neither the Special
Representative nor any Debentureholder may pursue any remedy with respect to
this Indenture or the Debentures unless:
(1) the Holders or the Special Representative gives to the Trustee
written notice stating that an Event of Default is continuing;
(2) the Holders or the Special Representative provides to the
Trustee reasonable security and indemnity against any loss, liability or
expense satisfactory to the Trustee; and
(3) the Trustee does not comply with the request within 60 days
after receipt of the notice, the request and the offer of security and
indemnity.
SECTION 6.07 Rights of Holders to Receive Payment.
Notwithstanding any other provision of this Indenture, the right of
any Holder to receive payment of principal and premium (if any) or interest on
the Debentures held by such Holder, on or after the respective due dates
expressed in the Debentures (in the case of interest, as the same may be
extended pursuant to Section 4.01(b) hereof) or any Redemption Date, or to
bring suit for the enforcement of any such payment on or after such respective
dates shall not be impaired or affected adversely without the consent of each
such Holder.
SECTION 6.08 Collection Suit by the Trustee.
If an Event of Default described in Section 6.01(1) hereof occurs and
is continuing, the Trustee may recover judgment in its own name and as trustee
of an express trust against the Company or any obligor on the Debentures for
the whole amount owing with respect to the Debentures and the amounts provided
for in Section 7.07 hereof.
<PAGE>
SECTION 6.09 The Trustee May File Proofs of Claim.
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
judicial proceeding relative to the Company or its properties or assets, the
Trustee shall be entitled and empowered, by intervention in such proceeding or
otherwise:
(1) to file and prove a claim for the whole amount of the principal
of and premium, if any, and interest on the Debentures and to file such other
papers or documents as may be necessary or advisable in order to have the
claims of the Trustee (including any claim for the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel)
and of the Holders allowed in such judicial proceeding; and
(2) to collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute the same; and any Custodian
in any such judicial proceeding is hereby authorized by each Holder to make
such payments to the Trustee and, in the event that the Trustee shall consent
to the making of such payments directly to the Holders, to pay the Trustee any
amount due it for the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel, and any other amounts due the
Trustee under Section 7.07 hereof.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Debentures
or the rights of any Holder thereof, or to authorize the Trustee to vote in
respect of the claim of any Holder in any such proceeding.
SECTION 6.10 Priorities.
If the Trustee collects any money pursuant to this Article 6, it
shall, subject to Article 10 hereof, pay out the money in the following order:
FIRST: to the Trustee for amounts due under Section 7.07 hereof;
SECOND: to Debentureholders for amounts due and unpaid on the Debentures
for the principal amount, Redemption Price or interest, if any,
as the case may be, ratably, without preference or priority of
any kind, according to such amounts due and payable on the
Debentures; and
THIRD: the balance, if any, to the Company.
The Trustee may fix a Record Date and payment date for any payment
to Debentureholders pursuant to this Section 6.10.
<PAGE>
SECTION 6.11 Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted
by it as Trustee, a court in its discretion may require the filing by any party
litigant (other than the Trustee) in the suit of an undertaking to pay the
costs of the suit, and the court in its discretion may assess reasonable costs,
including reasonable attorneys' fees and expenses, against any party litigant
in the suit, having due regard to the merits and good faith of the claims or
defenses made by the party litigant. This Section 6.11 does not apply to a
suit by the Trustee, a suit by a Holder pursuant to Section 6.07 hereof, a suit
by Holders of more than 10% in aggregate principal amount of the Debentures at
the time outstanding or a suit by the Special Representative.
SECTION 6.12 Waiver of Stay, Extension or Usury Laws.
The Company covenants (to the extent that it may lawfully do so) that
it will not at any time insist upon, or plead or in any manner whatsoever claim
or take the benefit or advantage of, any stay or extension law or any usury or
other law wherever enacted, now or at any time hereafter in force, that would
prohibit or forgive the Company from paying all or any portion of the principal
of or premium, if any, or interest on the Debentures as contemplated herein or
affect the covenants or the performance by the Company of its obligations under
this Indenture; and the Company (to the extent that it may lawfully do so)
hereby expressly waives all benefit or advantage of any such law, and covenants
that it will not hinder, delay or impede the execution of any power herein
granted to the Trustee, but will suffer and permit the execution of every such
power as though no such law had been enacted.
ARTICLE 7
THE TRUSTEE
SECTION 7.01 Duties of the Trustee.
(a) If an Event of Default has occurred and is continuing, the
Trustee shall exercise the rights and powers vested in it by this Indenture and
use the same degree of care and skill in its exercise as a prudent man would
exercise or use under the circumstances in the conduct of his own affairs.
(b) Except during the continuance of an Event of Default, (i) the
Trustee need perform only those duties that are specifically set forth in this
Indenture and no others; and (ii) in the absence of bad faith on its part, the
Trustee may conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or opinions
furnished to the Trustee and conforming to the requirements of this Indenture.
However, in the case of any certificates or opinions which by any provision
hereof are specifically required to be furnished to the Trustee, the Trustee
shall examine the certificates and opinions to determine whether or not they
conform to the requirements of this Indenture.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act or its own willful
misconduct, except that:
<PAGE>
(i) this Section 7.01(c) does not limit the effect of Section
7.01(b) hereof;
(ii) the Trustee shall not be liable for any error of judgment
made in good faith by a Trust Officer unless it is proved
that the Trustee was negligent in ascertaining the
pertinent facts; and
(iii) the Trustee shall not be liable with respect to any action
it takes or omits to take in good faith in accordance with
a direction received by it pursuant to Section 6.05 hereof.
(d) Every provision of this Indenture that in any way relates to the
Trustee is subject to Section 7.01(a), (b), (c) and (e) and Section 7.02
hereof.
(e) The Trustee may refuse to perform any duty or exercise any right
or power or extend or risk its own funds or otherwise incur any financial
liability unless it receives security and indemnity reasonably satisfactory to
it against any loss, liability or expense (including reasonable counsel fees).
(f) Money held by the Trustee in trust hereunder need not be
segregated from other funds except to the extent required by law. Except as
otherwise provided in Section 3.05 and Section 8.01 hereof the Trustee shall
not be liable for interest on any money held by it hereunder.
SECTION 7.02 Rights of the Trustee.
(a) The Trustee may rely on any document believed by it to be
genuine and to have been signed or presented by the proper person. The Trustee
need not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require
an Officer's Certificate and, if appropriate, an Opinion of Counsel. The
Trustee shall not be liable for any action it takes or omits to take in good
faith in reliance on such Officer's Certificate and Opinion of Counsel.
(c) The Trustee may act through agents and shall not be responsible
for the misconduct or negligence of any agent appointed with due care.
(d) The Trustee shall not be liable for any action it takes or omits
to take in good faith which it reasonably believes to be authorized or within
its rights or powers.
(e) The Trustee may consult with counsel of its selection and the
advice of such counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or
omitted by it hereunder in good faith and in reliance thereon.
(f) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction of
any of the Holders or the Special Representative pursuant to this Indenture,
unless such Holders or the Special Representative, as the case may be, shall
have offered to the Trustee reasonable security and indemnity against the
costs, expenses and liabilities (including reasonable counsel fees) which might
be incurred by it in compliance with such request or direction.
<PAGE>
SECTION 7.03 Individual Rights of the Trustee.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Debentures and may otherwise deal with the Company or its
Affiliates with the same rights it would have if it were not Trustee. Any
Paying Agent, Registrar or co-registrar may do the same with like rights.
However, the Trustee must comply with Sections 7.10 and 7.11 hereof.
SECTION 7.04 The Trustee's Disclaimer.
The Trustee makes no representation as to the validity or adequacy
of this Indenture or the Debentures. The Trustee shall not be accountable for
the Company's use of the proceeds from the Debentures, and the Trustee shall
not be responsible for any statement in this Indenture or the Debentures or any
report or certificate issued by the Company hereunder or any registration
statement relating to the Debentures (other than the Trustee's Certificate of
Authentication), or the determination as to which beneficial owners are
entitled to receive any notices hereunder.
SECTION 7.05 Notice of Defaults.
If a Default occurs and is continuing and if it is known to the
Trustee, the Trustee shall mail to each Debentureholder, as their names and
addresses appear in the Register, notice of the Default within 90 days after
it becomes known to the Trustee unless such Default shall have been cured or
waived. Except in the case of a Default described in Section 6.01(1) hereof,
the Trustee may withhold such notice if and so long as a committee of Trust
Officers in good faith determines that the withholding of such notice is in the
interests of the Debentureholders. The Trustee shall not be charged with
knowledge of any Default (except in the case of a Default under Section 6.01(1)
hereof) unless a responsible Trust Officer assigned to the corporate trust
administration department of the Trustee shall have actual knowledge of the
Default. The second sentence of this Section 7.05 shall be in lieu of the
proviso to TIA Section 315(b). Said proviso is hereby expressly excluded from
this Indenture, as permitted by the TIA.
SECTION 7.06 Reports by Trustee to Holders.
Within 60 days after each October 31, beginning with the October 31
next following the date of this Indenture, the Trustee shall mail to each
Debentureholder, and such other holders that have submitted their names to the
Trustee for such purpose, a brief report dated as of such October 31 in
accordance with and to the extent required under TIA Section 313.
A copy of each report at the time of its mailing to Debentureholders
shall be filed with the Company, the SEC and any securities exchange on which
the Debentures are listed. The Company agrees to promptly notify the Trustee
whenever the Debentures become listed on any securities exchange and of any
listing thereof.
<PAGE>
SECTION 7.07 Compensation and Indemnity.
The Company agrees:
(1) to pay to the Trustee from time to time such compensation as
shall be agreed in writing between the Company and the Trustee for all services
rendered by it hereunder (which compensation shall not be limited by any
provision of law in regard to the compensation of a trustee of an express
trust);
(2) to reimburse the Trustee upon its request for all reasonable
expenses, disbursements and advances incurred or made by the Trustee in
accordance with any provision of this Indenture (including the reasonable
compensation and the expenses, and advances of its agents and counsel, provided
that prior to an Event of Default, the Trustee shall only have one counsel),
including all reasonable expenses and advances incurred or made by the Trustee
in connection with any Event of Default or any membership on any creditors'
committee, except any such expense or advance as may be attributable to its
negligence or bad faith; and
(3) to indemnify the Trustee, its officers, directors and
shareholders, for, and to hold it harmless against, any and all loss, liability
or expense, incurred without negligence or bad faith on its part, arising out
of or in connection with the acceptance or administration of this trust,
including the costs and expenses of defending itself against any claim or
liability in connection with the exercise or performance of any of its powers
or duties hereunder.
Before, after or during an Event of Default, the Trustee shall have
a claim and lien prior to the Debentures as to all property and funds held by
it hereunder for any amount owing it for its fees and expenses or any
predecessor Trustee pursuant to this Section 7.07, except with respect to funds
held by the Trustee or any Paying Agent in trust for the payment of principal
of, premium, if any, or interest on particular Debentures pursuant to Section
2.06 or Section 8.01 hereof.
The Company's payment obligations pursuant to this Section 7.07 are
not subject to Article 10 of this Indenture and shall survive the discharge of
this Indenture. When the Trustee renders services or incurs expenses after the
occurrence of a Default specified in Section 6.01 hereof, the compensation for
services and expenses are intended to constitute expenses of administration
under any Bankruptcy Law.
<PAGE>
SECTION 7.08 Replacement of Trustee.
The Trustee may resign at any time, by so notifying the Company in
writing at least 30 days prior to the date of the proposed resignation;
provided, however, no such resignation shall be effective until a successor
Trustee has accepted its appointment pursuant to this Section 7.08. The
Special Representative, if one has been appointed, or, if the Partnership is
not the sole Holder of the Debentures, the Holders of a majority in aggregate
principal amount of the Debentures at the time outstanding or, if the
Partnership is the sole Holder of the Debentures, the Partnership, with the
consent of the holder of 66 % of the aggregate stated liquidation preference
of the Preferred Securities, may remove the Trustee by so notifying the Trustee
in writing and may appoint a successor Trustee, which shall be subject to the
consent of the Company unless an Event of Default has occurred and is
continuing. The Trustee shall resign if:
(1) the Trustee fails to comply with Section 7.10 hereof;
(2) the Trustee is adjudged bankrupt or insolvent;
(3) a receiver or public officer takes charge of the Trustee or its
property; or
(4) the Trustee otherwise becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the office of
Trustee for any reason, the Company shall promptly appoint a successor Trustee.
A successor Trustee shall deliver a written acceptance of its appointment to
the retiring Trustee and to the Company. Thereupon the resignation or removal
of the retiring Trustee shall become effective, and the successor Trustee shall
have all the rights, powers and duties of the Trustee under this Indenture.
The successor Trustee shall mail a notice of its succession to
Debentureholders. Subject to payment of all amounts owing to the Trustee under
Section 7.07 hereof and subject further to its lien under Section 7.07, the
retiring Trustee shall promptly transfer all property held by it as Trustee to
the successor Trustee. If a successor Trustee does not take office within 30
days after the retiring Trustee resigns or is removed, the Company, the Special
Representative or the Holders of a majority in aggregate principal amount of
the Debentures at the time outstanding may petition any court of competent
jurisdiction for the appointment of a successor Trustee.
If the Trustee fails to comply with Section 7.10 hereof, any
Debentureholder may petition any court of competent jurisdiction for its
removal and the appointment of a successor Trustee.
SECTION 7.09 Successor Trustee by Merger.
If the Trustee consolidates with, merges or converts into, or
transfers all or substantially all its corporate trust business or assets to
another corporation, the resulting, surviving or transferee corporation without
any further act shall be the successor Trustee.
<PAGE>
SECTION 7.10 Eligibility; Disqualification.
The Trustee shall at all times satisfy the requirements of TIA
Sections 310(a)(1) and 310(a)(2). The Trustee (or any Affiliate thereof which
has unconditionally guaranteed the obligations of the Trustee hereunder) shall
have a combined capital and surplus of at least $50,000,000 as set forth in its
most recently published annual report of condition. The Trustee shall comply
with TIA Section 310(b). In determining whether the Trustee has conflicting
interests as defined in TIA Section 310(b)(1), the provisions contained in the
proviso to TIA Section 310(b)(1) shall be deemed incorporated herein.
SECTION 7.11 Preferential Collection of Claims Against the Company.
If and when the Trustee shall be or become a creditor of the Company,
the Trustee shall be subject to the provisions of the TIA regarding the
collection of claims against the Company.
ARTICLE 8
SATISFACTION AND DISCHARGE OF INDENTURE;
DEFEASANCE OF CERTAIN OBLIGATIONS; UNCLAIMED MONEYS
SECTION 8.01 Satisfaction and Discharge of Indenture.
The Company shall be deemed to have paid and discharged the entire
indebtedness on any series of the Debentures outstanding on the date the
Company has irrevocably deposited or caused to be irrevocably deposited with
the Trustee or any Paying Agent as trust funds in trust, specifically pledged
as security for, and dedicated solely to, the benefit of the Holders of the
Debentures of such series (1) cash (which may be held in an interest bearing
account insured by the Federal Deposit Insurance Corporation) in an amount, or
(2) U.S. Government Obligations, maturing as to principal and interest at such
times and in such amounts as will ensure the availability of cash, or (3) a
combination thereof, sufficient to pay the principal of and premium, if any,
and interest on all Debentures then outstanding, provided that in the case of
redemption, notice of redemption shall have been given or the Company shall
have irrevocably instructed the Trustee to give such notice; and further
provided that the following conditions shall have been met:
(A) no Default or Event of Default with respect to the Debentures
has occurred and is continuing on the date of such deposit or occurs as
a result of such deposit;
(B) the Company has delivered to the Trustee an Officer's
Certificate certifying that there does not exist (i) a default in the
payment of all or any portion of any Senior Indebtedness or (ii) any other
default affecting Senior Indebtedness permitting its acceleration as the
result of which the maturity of Senior Indebtedness has been accelerated;
<PAGE>
(C) the Company has delivered to the Trustee (i) either a private
Internal Revenue Service ruling or an Opinion of Counsel based on a ruling
of the Internal Revenue Service or other change in Federal income tax law
to the effect that the Holders will not recognize income, gain or loss for
federal income tax purposes as a result of such deposit, defeasance and
discharge and will be subject to federal income tax on the same amount and
in the manner and at the same times as would have been the case if such
deposit, defeasance and discharge had not occurred, and (ii) an Opinion
of Counsel to the effect that (A) the deposit shall not result in the
Company, the Trustee or the trust being deemed to be an "investment
company" under the Investment Company Act of 1940, as amended, and (B)
such deposit creates a valid trust in which such Holders of the Debentures
have the sole beneficial ownership interest or that such Holders of the
Debentures have a nonavoidable first priority security interest in such
trust; and
(D) the Company has delivered to the Trustee an Officer's
Certificate and an Opinion of Counsel, each stating that all conditions
precedent relating to the defeasance contemplated by this provision have
been complied with.
Upon such deposit, provisions of this Indenture with respect to such series of
Debentures shall no longer be in effect (except as to (1) the rights of
registration of transfer and exchange of Debentures, (2) the replacement of
apparently mutilated, defaced, destroyed, lost or stolen Debentures, (3) the
rights of the Holders to receive payments of the principal thereof and premium,
if any, and interest thereon, (4) the rights of the Holders as beneficiaries
hereof with respect to the property so deposited with the Trustee payable to
all or any of them, (5) the obligation of the Company to maintain an office or
agency for payments on and registration of transfer of the Debentures, (6) the
rights, obligations and immunities of the Trustee hereunder, and (7) the
obligations of the Company to the Trustee for compensation and indemnity under
Section 7.07 hereof; and the Trustee shall, at the request and expense of the
Company, execute proper instruments acknowledging the same.
SECTION 8.02 Application by Trustee of Funds Deposited for
Payment of Debentures.
Subject to Section 8.04 hereof, all moneys deposited with the Trustee
pursuant to Section 8.01 hereof shall be held in trust and applied by it to the
payment, either directly or through any Paying Agent (including the Company
acting as its own Paying Agent), to the Holders for the payment or redemption
of which such moneys have been deposited with the Trustee, of all sums due and
to become due thereon for principal and interest; but such money need not be
segregated from other funds except to the extent required by law.
SECTION 8.03 Repayment of Moneys Held by Paying Agent.
In connection with the satisfaction and discharge of this Indenture,
all moneys then held by any Paying Agent under this Indenture shall, upon
demand of the Company, be repaid to it or paid to the Trustee, and thereupon
such Paying Agent shall be released from all further liability with respect to
such moneys.
<PAGE>
SECTION 8.04 Return of Moneys Held by the Trustee and Paying Agent
Unclaimed for Three Years.
Any moneys deposited with or paid to the Trustee or any Paying Agent
for the payment of the principal of and premium, if any, or interest on any
Debenture and not applied but remaining unclaimed for three years after the
date when such principal, premium, if any, or interest shall have become due
and payable shall, unless otherwise required by mandatory provisions of
applicable escheat or abandoned or unclaimed property law, be repaid to the
Company by the Trustee or such Paying Agent, and the Holder of such Debenture
shall, unless otherwise required by mandatory provisions of applicable escheat
or abandoned or unclaimed property laws, thereafter look only to the Company
for any payment which such Holder may be entitled to collect, and all liability
of the Trustee or any Paying Agent with respect to such moneys shall thereupon
cease.
ARTICLE 9
AMENDMENTS
SECTION 9.01 Without Consent of Holders.
From time to time, when authorized by a resolution of the Board of
Directors, the Company and the Trustee, without notice to or the consent of any
Holders of the Debentures or the Special Representative, may amend or
supplement this Indenture or the Debentures:
(1) to cure any ambiguity, defect or inconsistency;
(2) to comply with Article 5 hereof;
(3) to provide for uncertificated Debentures in addition to or in
place of certificated Debentures;
(4) to make any other change that does not in the reasonable
judgment of the Company adversely affect the rights of any Debentureholder;
(5) to comply with any requirement of the SEC in connection with the
qualification of this Indenture under the TIA; or
(6) to set forth the terms and conditions, which shall not be
inconsistent with this Indenture, of the series of Debentures (other than the
Series A Debentures) that are to be issued hereunder and the form of Debentures
of such series.
<PAGE>
SECTION 9.02 With Consent of Holders.
The Company and the Trustee may amend this Indenture or the
Debentures in any manner not permitted by Section 9.01 or may waive future
compliance by the Company with any provisions of this Indenture or the
Debentures (i) if the Partnership is the sole Holder of the Debentures, with
the written consent of the Special Representative or if no Special
Representative has been appointed, the Partnership, at the direction of the
holders of 66 % of the aggregate stated liquidation preference of the Preferred
Securities at the time outstanding, or (ii) if the Partnership is not the sole
Holder of the Debentures, with the consent of the Holders of at least 66 % in
aggregate principal amount of the Debentures at the time outstanding. Such an
amendment or waiver may not, without the consent of (i) each Holder of the
Debentures (if the Partnership is not the sole Holder of the Debentures) or
(ii) each holder of the Preferred Securities (if the Partnership is the sole
Holder of the Debentures):
(1) reduce the principal of the Debentures;
(2) reduce the principal amount of the Debentures the Holders of
which must consent to an amendment of the Indenture or a waiver;
(3) change the stated maturity of the principal of, premium, if any,
or the interest on or rate of interest of, or Additional Interest with respect
to, any Debentures, change adversely to the Holders the redemption provisions
of Article 3 hereof, or impair the right to institute suit for the enforcement
of any such payment or change the currency in respect of which the payments on
any Debentures are to be made;
(4) change the obligation of the Company to pay Additional Interest
on the Debentures;
(5) make any change in Article 10 hereof that adversely affects the
rights of the Holders of the Debentures or any change to any other Section
hereof that adversely affects their rights under Article 10 hereof;
(6) change Section 6.07 hereof.
It shall not be necessary for the consent of the Holders under this
Section 9.02 to approve the particular form of any proposed amendment, but it
shall be sufficient if such consent approves the substance thereof.
If certain Holders agree to defer or waive certain obligations of the
Company hereunder with respect to Debentures held by them, such deferral or
waiver shall not affect the rights of any other Holder to receive the payment
or performance required hereunder in a timely manner.
After an amendment or waiver under this Section 9.02 becomes
effective, the Company shall mail to the Special Representative and to each
Holder a notice briefly describing the amendment or waiver. Any failure of the
Company to mail such notices, or any defect therein, shall not, however, in any
way impair or affect the validity of such amendment or waiver.
<PAGE>
SECTION 9.03 Compliance with Trust Indenture Act.
Every supplemental indenture executed pursuant to this Article 9
shall comply with the TIA.
SECTION 9.04 Revocation and Effect of Consents, Waivers and Actions.
Until an amendment, waiver or other action by Holders becomes
effective, a consent to it or any other action by a Holder of a Debenture
hereunder is a continuing consent by the Holder and every subsequent Holder of
that Debenture or portion of the Debenture that evidences the same obligation
as the consenting Holder's Debenture, even if notation of the consent, waiver
or action is not made on the Debenture. However, any such Holder or subsequent
Holder may revoke the consent, waiver or action as to such Holder's Debenture
or portion of the Debenture if the Trustee receives the notice of revocation
before the consent of the requisite aggregate principal amount of the
Debentures then outstanding has been obtained and not revoked. After an
amendment, waiver or action becomes effective, it shall bind every
Debentureholder, except as provided in Section 9.02 hereof.
The Company may, but shall not be obligated to, fix a Record Date for
the purpose of determining the Holders entitled to consent to any amendment or
waiver. If a Record Date is fixed, then, notwithstanding the first two
sentences of the immediately preceding paragraph, those Persons who were
Holders at such Record Date or their duly designated proxies, and only those
Persons, shall be entitled to consent to such amendment, supplement or waiver
or to revoke any consent previously given, whether or not such Persons continue
to be Holders after such Record Date. No such consent shall be valid or
effective for more than 90 days after such Record Date.
SECTION 9.05 Notation on or Exchange of Debentures.
Debentures authenticated and made available for delivery after the
execution of any supplemental indenture pursuant to this Article 9 may, and
shall, if required by the Trustee, bear a notation in form approved by the
Trustee as to any matter provided for in such supplemental indenture. If the
Company shall so determine, new Debentures so modified as to conform, in the
opinion of the Trustee and the Board of Directors, to any such supplemental
indenture may be prepared and executed by the Company and authenticated and
made available for delivery by the Trustee in exchange for outstanding
Debentures.
SECTION 9.06 Trustee to Execute Supplemental Indentures.
The Trustee shall execute any supplemental indenture authorized
pursuant to this Article 9 if the supplemental indenture does not adversely
affect the rights, duties, liabilities or immunities of the Trustee. If it
does, the Trustee may, but need not, execute it. In executing such
supplemental indenture the Trustee shall be entitled to receive, and shall be
fully protected in relying upon, an Officer's Certificate and Opinion of
Counsel stating that such supplemental indenture is authorized or permitted by
this Indenture.
<PAGE>
SECTION 9.07 Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this Article
9, this Indenture shall be modified in accordance therewith, and such
supplemental indenture shall form a part of this Indenture for all purposes and
every Holder of Debentures theretofore or thereafter authenticated and made
available for delivery hereunder shall be bound thereby.
ARTICLE 10
SUBORDINATION
SECTION 10.01 Debentures Subordinated to Senior Indebtedness.
Notwithstanding the provisions of Section 6.10 hereof or any other
provision herein or in any Debenture, the Company and the Trustee or Holder by
his acceptance thereof (a) covenants and agrees, that all payments by the
Company of the principal of and premium, if any, and interest on the Debentures
(other than Debentures which have been discharged pursuant to Article 8) shall
be subordinated in accordance with the provisions of this Article 10 to the
prior payment in full, in cash or cash equivalents, of all amounts payable on,
under or in connection with Senior Indebtedness, and (b) acknowledges that
holders of Senior Indebtedness are or shall be relying on this Article 10.
SECTION 10.02 Priority and Payment of Proceeds in Certain Events;
Remedies Standstill.
(a) Upon any payment or distribution of assets or securities of the
Company, as the case may be, of any kind or character, whether in cash,
property or securities, upon any dissolution or winding up or total or partial
liquidation or reorganization of the Company, whether voluntary or involuntary,
or in bankruptcy, insolvency, receivership or other proceedings, all amounts
payable on, under or in connection with Senior Indebtedness (including any
interest accruing on such Senior Indebtedness subsequent to the commencement
of a bankruptcy, insolvency or similar proceeding) shall first be paid in full
in cash, or payment provided for in cash or cash equivalents, before the
Holders or the Trustee on behalf of the Holders shall be entitled to receive
from the Company any payment of principal of or premium, if any, or interest
on the Debentures or distribution of any assets or securities.
(b) No direct or indirect payment by or on behalf of the Company of
principal of or premium, if any, or interest on the Debentures (other than
Debentures which have been discharged pursuant to Article 8) whether pursuant
to the terms of the Debentures or upon acceleration or otherwise shall be made
if, at the time of such payment, there exists (i) a default in the payment of
all or any portion of any Senior Indebtedness and the Trustee has received
written notice thereof from the Company, one or more holders of Senior
Indebtedness or from any trustee, representative or agent therefor, or (ii) any
other default affecting Senior Indebtedness permitting its acceleration, as the
result of which the maturity of Senior Indebtedness has been accelerated and
the Trustee has received written notice from any trustee, representative or
agent for the holders of the Senior Indebtedness or the holders of at least a
majority in principal amount of the Senior Indebtedness then outstanding of
such default and acceleration, and such default shall not have been cured or
waived by or on behalf of the holders of such Senior Indebtedness.
<PAGE>
(c) If, notwithstanding the foregoing provisions prohibiting such
payment or distribution, the Trustee or any Holder shall have received any
payment on account of the principal of or premium, if any, or interest on the
Debentures (other than as permitted by subsections (a) and (b) of this Section
10.02) when such payment is prohibited by this Section 10.02 and before all
amounts payable on, under or in connection with Senior Indebtedness are paid
in full in cash or cash equivalents, then and in such event (subject to the
provisions of Section 10.08 hereof) such payment or distribution shall be
received and held in trust for the holders of Senior Indebtedness and, at the
written direction of the trustee, representative or agent for the holders of
the Senior Indebtedness, shall be paid to the holders of the Senior
Indebtedness remaining unpaid to the extent necessary to pay such Senior
Indebtedness in full in cash or cash equivalents.
Upon any payment or distribution of assets or securities referred to
in this Article 10, the Trustee and the Holders shall be entitled to rely upon
any order or decree of a court of competent jurisdiction in which such
dissolution, winding up, liquidation or reorganization proceedings are pending,
and upon a certificate of the receiver, trustee in bankruptcy, liquidating
trustee, agent or other Person making any such payment or distribution,
delivered to the Trustee for the purpose of ascertaining the Persons entitled
to participate in such distribution, the holders of Senior Indebtedness and
other Indebtedness of the Company, the amount thereof or payable thereon, the
amount or amounts paid or distributed thereon and all other facts pertinent
thereto or to this Article 10.
SECTION 10.03 Payments which May Be Made Prior to Notice.
Nothing in this Article 10 or elsewhere in this Indenture shall
prevent (i) the Company, except under the conditions described in Section 10.02
hereof, from making payments of principal of or premium, if any, or interest
on the Debentures or from depositing with the Trustee any monies for such
payments, or (ii) the application by the Trustee of any monies deposited with
it for the purpose of making such payments of principal of or premium, if any,
or interest on the Debentures, to the Holders entitled thereto, unless at least
one Business Day prior to the date when such payment would otherwise (except
for the prohibitions contained in Section 10.02 hereof) become due and payable
the Trustee shall have received the written notice provided for in Section
10.02(b)(i) or (ii) hereof.
SECTION 10.04 Rights of Holders of Senior Indebtedness Not to Be Impaired.
No right of any present or future holder of any Senior Indebtedness
to enforce subordination as herein provided shall at any time or in any way be
prejudiced or impaired by any act or failure to act in good faith by any such
holder, or by any noncompliance by the Company with the terms and provisions
and covenants herein regardless of any knowledge thereof any such holder may
have or otherwise be charged with.
The provisions of this Article 10 are intended to be for the benefit
of, and shall be enforceable directly by, the holders of Senior Indebtedness.
<PAGE>
Notwithstanding anything to the contrary in this Article 10, to the
extent any Holders or the Trustee have paid over or delivered to any holder of
Senior Indebtedness any payment or distribution received on account of the
principal of or premium (if any) or interest on the Debentures to which any
other holder of Senior Indebtedness shall be entitled to share in accordance
with Section 10.02 hereof, no holder of Senior Indebtedness shall have a claim
or right against any Holders or the Trustee with respect to any such payment
or distribution or as a result of the failure to make payments or distributions
to such other holder of Senior Indebtedness.
SECTION 10.05 Trustee May Take Action to Effectuate Subordination.
Each Holder of a Debenture, by his acceptance thereof, authorizes and
directs the Trustee on his behalf to take such action as may be required by the
trustee, representative or agent for holders of Senior Indebtedness or by the
Company to effectuate, as between the holders of Senior Indebtedness and the
Holders, the subordination as provided in this Article 10 and appoints the
Trustee his attorney-in-fact for any and all such purposes.
SECTION 10.06 Subrogation.
Upon the payment in full, in cash or cash equivalents, of all Senior
Indebtedness, any Holder shall be subrogated to the rights of the holders of
such Senior Indebtedness to receive payments or distributions of assets of the
Company made on such Senior Indebtedness until the Debentures shall be paid in
full; and for the purposes of such subrogation, no payments or distributions
to holders of such Senior Indebtedness of any cash, property or securities to
which such Holders of the Debentures would be entitled except for this Article
10, and no payment pursuant to this Article 10 to holders of such Senior
Indebtedness by such Holders of the Debentures, shall, as between the Company,
its creditors other than holders of such Senior Indebtedness and such Holders
of the Debentures, be deemed to be a payment by the Company to or on account
of such Senior Indebtedness, it being understood that the provisions of this
Article 10 are solely for the purpose of defining the relative rights of the
holders of such Senior Indebtedness, on the one hand, and such Holders of the
Debentures, on the other hand.
If any payment or distribution to which Holders of the Debentures
would otherwise have been entitled but for the provisions of this Article 10
shall have been applied, pursuant to this Article 10, to the payment of all
Senior Indebtedness, then and in such case, such Holders of the Debentures
shall be entitled to receive from the holders of such Senior Indebtedness at
the time outstanding any payments or distributions received by such holders of
Senior Indebtedness in excess of the amount sufficient to pay, in cash or cash
equivalents, all such Senior Indebtedness in full.
<PAGE>
SECTION 10.07 Obligations of Company Unconditional; Reinstatement.
Nothing in this Article 10 or elsewhere in this Indenture or in any
Debenture is intended to or shall impair, as between the Company and Holders
of the Debentures, the obligations of the Company, which are absolute and
unconditional, to pay to such Holders the principal of and premium, if any, and
interest on the Debentures as and when the same shall become due and payable
in accordance with their terms, or is intended to or shall affect the relative
rights of such Holders of the Debentures and creditors of the Company other
than the holders of the Senior Indebtedness, nor shall anything herein or
therein prevent the Trustee, the Special Representative or any Holder from
exercising all remedies otherwise permitted by applicable law under this
Indenture, subject to the rights, if any, under this Article 10 of the holders
of such Senior Indebtedness in respect of cash, property or securities of the
Company received upon the exercise of any such remedy.
The failure to make a scheduled payment of principal of or premium,
if any, or interest on the Debentures by reason of Section 10.02 shall not be
construed as preventing the occurrence of an Event of Default under Section
6.01 hereof; provided, however, that if (i) the conditions preventing the
making of such payment no longer exist, and (ii) such Holders of the Debentures
are made whole with respect to such omitted payments, the Event of Default
relating thereto (including any failure to pay any accelerated amounts) shall
be automatically waived, and the provisions of the Indenture shall be
reinstated as if no such Event of Default had occurred.
SECTION 10.08 Trustee Entitled to Assume Payments Not Prohibited
in Absence of Notice.
The Trustee or Paying Agent shall not be charged with the knowledge
of the existence of any default in the payment of all or a portion of any
Senior Indebtedness or any other default affecting Senior Indebtedness
permitting its acceleration, as a result of which the maturity of the Senior
Indebtedness has been accelerated, unless and until the Trustee or Paying Agent
shall have received written notice thereof from the Company or one or more
holders of Senior Indebtedness or from any trustee or agent therefor or unless
the Trustee or Paying Agent otherwise had actual knowledge thereof; and, prior
to the receipt of any such written notice or actual knowledge of a responsible
Trust Officer in the corporate trust administration department of the Trustee
or Paying Agent, the Trustee or Paying Agent may conclusively assume that no
such facts exist.
Unless at least one Business Day prior to the date when by the terms
of this Indenture any monies are to be deposited by the Company with the
Trustee or any Paying Agent for any purpose (including, without limitation, the
payment of the principal of or premium, if any, or interest on any Debenture),
the Trustee or Paying Agent shall have received with respect to such monies the
notice provided for in Section 10.02 or a responsible Trust Officer in the
corporate trust administration department of the Trustee or Paying Agent shall
have actual knowledge of default in the payment of all or a portion of any
Senior Indebtedness or any other default affecting Senior Indebtedness
permitting its acceleration, as the result of which the maturity of the Senior
Indebtedness has been accelerated, the Trustee or Paying Agent shall have full
power and authority to receive and apply such monies to the purpose for which
<PAGE>
they were received. Neither of them shall be affected by any notice to the
contrary, which may be received by either on or after such date. The foregoing
shall not apply to the Paying Agent if the Company is acting as Paying Agent.
Nothing in this Section 10.08 shall limit the right of the holders of Senior
Indebtedness to recover payments as contemplated by Section 10.02 hereof. The
Trustee or Paying Agent shall be entitled to rely on the delivery to it of a
written notice by a Person representing himself or itself to be a holder of
such Senior Indebtedness (or a trustee or agent on behalf of, or other
representative of, such holder) to establish that such notice has been given
by a holder of such Senior Indebtedness or a trustee or representative on
behalf of any such holder. The Trustee shall not be deemed to have any duty
to the holders (and shall be fully protected in relying upon such notice) of
Senior Indebtedness.
SECTION 10.09 Right of Trustee to Hold Senior Indebtedness.
The Trustee and any Paying Agent shall be entitled to all of the
rights set forth in this Article 10 in respect of any Senior Indebtedness at
any time held by them to the same extent as any other holder of such Senior
Indebtedness, and nothing in this Indenture shall be construed to deprive the
Trustee or any Paying Agent of any of its rights as such holder.
ARTICLE 11
MISCELLANEOUS
SECTION 11.01 Trust Indenture Act Controls.
If any provision of this Indenture limits, qualifies or conflicts
with the duties imposed by operation of subsection (c) of Section 318 of the
TIA, the imposed duties shall control. The provisions of Sections 310 to 317,
inclusive, of the TIA that impose duties on any Person (including provisions
automatically deemed included in an indenture unless the indenture provides
that such provisions are excluded) are a part of and govern this Indenture,
except as, and to the extent, they are expressly excluded from this Indenture,
as permitted by the TIA.
SECTION 11.02 Notices.
Any notice or communication shall be in writing and delivered in
person or mailed by first-class mail, postage prepaid, addressed as follows:
if to the Company:
Public Service Electric and Gas Company
80 Park Plaza, T6B
P.O. Box 570
Newark, New Jersey 07101
Attention: Treasurer
if to the Trustee:
First Fidelity Bank, National Association
765 Broad Street
Newark, New Jersey 07101
Attention: Corporate Trust Department
<PAGE>
The Company or the Trustee, by giving notice to the other, may
designate additional or different addresses for subsequent notices of
communications. The Company shall notify the holder, if any, of Senior
Indebtedness of any such additional or different addresses of which the Company
receives notice from the Trustee.
Any notice or communication given to a Debentureholder shall be
mailed or delivered to the Debentureholder at the Debentureholder's address as
it appears on the Register of the Registrar and shall be sufficiently given if
mailed within the time prescribed.
Failure to mail a notice or communication to a Debentureholder or any
defect in it shall not affect its sufficiency with respect to other
Debentureholders. If a notice or communication is mailed in the manner
provided above, it is duly given, whether or not received by the addressee.
If the Company mails a notice or communication to the
Debentureholders, it shall mail a copy to the Trustee and each Registrar,
Paying Agent or co-Registrar.
SECTION 11.03 Communication by Holders with Other Holders.
Debentureholders may communicate, pursuant to TIA Section 312(b),
with other Debentureholders with respect to their rights under this Indenture
or the Debentures. The Company, the Trustee, the Registrar, the Paying Agent
and anyone else shall have the protection of TIA Section 312(c).
SECTION 11.04 Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Company to the Trustee to take
any action under this Indenture, the Company shall furnish to the Trustee:
(1) an Officer's Certificate (complying with Section 11.05 hereof)
stating that, in the opinion of such Officer, all conditions precedent to the
taking of such action have been complied with; and
(2) if appropriate, an Opinion of Counsel (complying with Section
11.05 hereof) stating that, in the opinion of such counsel, all such conditions
precedent to the taking of such action have been complied with.
SECTION 11.05 Statements Required in Certificate or Opinion.
Each Officer's Certificate and Opinion of Counsel with respect to
compliance with a covenant or condition provided for in this Indenture shall
include:
(1) a statement that each Person making such Officer's Certificate
or Opinion of Counsel has read such covenant or condition;
(2) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
Officer's Certificate or Opinion of Counsel are based;
<PAGE>
(3) a statement that, in the opinion of each such Person, he has
made such examination or investigation as is necessary to enable him to express
an informed opinion as to whether or not such covenant or condition has been
complied with; and
(4) a statement that, in the opinion of such Person, such covenant
or condition has been complied with; provided, however, that with respect to
matters of fact not involving any legal conclusion, an Opinion of Counsel may
rely on an Officer's Certificate or certificates of public officials.
SECTION 11.06 Severability Clause.
If any provision in this Indenture or in the Debentures shall be
invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
SECTION 11.07 Rules by Trustee, Paying Agent and Registrar.
The Trustee may make reasonable rules for action by or a meeting of
Debentureholders. The Registrar and Paying Agent may make reasonable rules for
their functions.
SECTION 11.08 Legal Holidays.
A "Legal Holiday" is any day other than a Business Day. If any
specified date (including a date for giving notice) is a Legal Holiday, the
action to be taken on such date shall be taken on the next succeeding day that
is not a Legal Holiday, and if such action is a payment in respect of the
Debentures, unless otherwise specified pursuant to Section 2.01 hereof no
principal, premium (if any) or interest installment shall accrue for the
intervening period; except that if any interest payment is due on a Legal
Holiday and the next succeeding day is in the next succeeding calendar year,
such payment shall be made on the Business Day immediately preceding such Legal
Holiday.
SECTION 11.09 Governing Law.
This Indenture and the Debentures shall be governed by and construed
in accordance with the laws of the State of New Jersey as applied to contracts
made and performed within the State of New Jersey, without regard to its
principles of conflicts of laws.
SECTION 11.10 No Recourse Against Others.
No director, officer, employee or stockholder, as such, of the
Company shall have any liability for any obligations of the Company under the
Debentures or this Indenture or for any claim based on, in respect of or by
reason of such obligations or their creation. By accepting a Debenture, each
Debentureholder shall waive and release all such liability. The waiver and
release shall be part of the consideration for the issue of the Debentures.
<PAGE>
SECTION 11.11 Successors.
All agreements of the Company in this Indenture and the Debentures
shall bind its successors and assigns. All agreements of the Trustee in this
Indenture shall bind its successors and assigns.
SECTION 11.12 Multiple Original Copies of this Indenture.
The parties may sign any number of copies of this Indenture. Each
signed copy shall be an original, but all of them together represent the same
agreement. Any signed copy shall be sufficient proof of this Indenture.
SECTION 11.13 No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret another indenture, loan
or debt agreement of the Company or any Subsidiary. Any such indenture, loan
or debt agreement may not be used to interpret this Indenture.
SECTION 11.14 Table of Contents; Headings, Etc.
The Table of Contents, Cross-Reference Table, and headings of the
Articles and Sections of this Indenture have been inserted for convenience of
reference only, are not to be considered a part hereof, and shall in no way
modify or restrict any of the terms or provisions hereof.
SECTION 11.15 Benefits of the Indenture.
Except as expressly provided in Article 10 hereof, nothing in this
Indenture or in the Debentures, express or implied, shall give to any person,
other than the parties hereto and their successors hereunder, the Holders and
the Special Representative, any benefit or any legal or equitable right, remedy
or claim under this Indenture.
SECTION 11.16 Partnership Books and Records.
If at any time the consent or direction of all or a portion of the
holders of the Preferred Securities is required hereunder, the Company will use
its best efforts to cause the Partnership to provide to the Trustee such books
and records of the Partnership as are necessary to determine if the consent or
direction of the holders of the requisite amount of the Preferred Securities
has been obtained, and the Trustee shall be entitled to rely on such books and
records in making such a determination.
<PAGE>
SIGNATURES
IN WITNESS WHEREOF, the undersigned, being duly authorized, have
executed this Indenture on behalf of the respective parties hereto as of the
date first above written.
PUBLIC SERVICE ELECTRIC AND GAS COMPANY
By: FRANCIS J. RIEPL
Name: Francis J. Riepl
Title: Vice President and Treasurer
FIRST FIDELITY BANK,
NATIONAL ASSOCIATION, as Trustee
By: D. DOWDELL
Name: D. Dowdell
Title: Corporate Trust Officer
Public Service Electric and Gas Capital, L.P.
By: Public Service Electric and Gas Company,
its sole general partner
By: FRANCIS J. RIEPL
Name:Francis J. Riepl
Title:Vice President and Treasurer
Solely for the purposes stated
in the recitals hereto.
<PAGE>
Exhibit A
PUBLIC SERVICE ELECTRIC AND GAS COMPANY
__% Deferrable Interest Subordinated Debenture,
Series A
No. 1
Public Service Electric and Gas Company, a New Jersey corporation
(the "Company," which term includes any successor corporation under the
Indenture hereinafter referred to), for value received, hereby promises to pay
to ______________________________ or registered assigns, the principal sum of
________________________ __________________________________ Dollars on
__________, 2043, and to pay interest on said principal sum from _________,
1994 or from the most recent Interest Payment Date (as defined below) to which
interest has been paid or duly provided for, monthly in arrears on the last day
of each calendar month of each year commencing ________, 1994 (each, an
"Interest Payment Date") at the rate of __% per annum plus Additional Interest,
if any, until the principal hereof shall have become due and payable, and on
any overdue principal and (to the extent that payment of such interest is
enforceable under applicable law) on any overdue installment of interest at the
same rate per annum. The amount of interest payable on any Interest Payment
Date shall be computed on the basis of a 360-day year of twelve 30-day months.
In the event that any Interest Payment Date is not a Business Day, then
interest will be payable on the next succeeding day which is a Business Day
(and without any interest or other payment in respect of any such delay),
except that, if such Business Day is in the next succeeding calendar year, such
payment shall be made on the immediately preceding Business Day, in each case
with the same force and effect as if made on such date. The interest
installment so payable, and punctually paid or duly provided for, on any
Interest Payment Date will, as provided in the Indenture, be paid to the person
in whose name this Debenture is registered at the close of business on the
Regular Record Date for such interest installment, which shall be the 15th day
of each month, provided that if all of the Series A Debentures (as defined
below) are then held by the Partnership or the Series A Debentures are held in
book-entry-only form, the Regular Record Date shall be the close of business
on the Business Day next preceding such Interest Payment Date. Any such
interest installment not punctually paid or duly provided for shall forthwith
cease to be payable to the registered holders on such Regular Record Date, and
may be paid to the person in whose name this Debenture is registered at the
close of business on a Special Record Date to be fixed by the Trustee (as
defined below) for the payment of such defaulted interest, notice whereof shall
be given to the registered holders of the Series A Debentures not less than 7
days prior to such Special Record Date, as more fully provided in the
Indenture.
Payment of the principal of and interest on this Debenture will be
made in such coin or currency of the United States of America as at the time
of payment is legal tender for payment of public and private debts. Payments
of interest on an Interest Payment Date will be made by check mailed to the
registered holder hereof at the address shown in the Register or, at the option
of the registered holder hereof, to such other place in the United States of
A-1
<PAGE>
America as registered holder hereof shall designate to the Trustee in writing.
At the request of a registered holder of at least $10,000,000 aggregate
principal amount of Series A Debentures, interest on such Debentures will be
payable by wire transfer within the continental United States in immediately
available funds to the bank account number specified in writing by such holder
to the Registrar prior to the Regular Record Date.
The principal amount hereof and any interest due on the Stated
Maturity Date or a Redemption Date (other than an Interest Payment Date) will
be paid only upon surrender of this Debenture at the principal corporate trust
office of First Fidelity Bank, National Association, Paying Agent, in Newark,
New Jersey, or at such other office or agency of the Paying Agent as the
Company shall designate by written notice to the registered holder of this
Debenture.
The indebtedness evidenced by this Debenture is, to the extent
provided in the Indenture, subordinate and subject in right of payment to the
prior payment in full of all Senior Indebtedness, and this Debenture is issued
subject to the provisions of the Indenture with respect thereto. The
registered holder of this Debenture, by accepting the same, (a) agrees to and
shall be bound by such provisions, (b) authorizes and directs the Trustee on
his behalf to take such action as may be necessary or appropriate to
acknowledge or effectuate the subordination so provided and (c) appoints the
Trustee his attorney-in-fact for any and all such purposes. The registered
holder hereof, by his acceptance hereof, hereby waives all notice of the
acceptance of the subordination provisions contained herein and in the
Indenture by each holder of Senior Indebtedness, whether now outstanding or
hereafter incurred, and waives reliance by each such Holder upon said
provisions.
This Debenture is one of a duly authorized series of Debentures of
the Company (herein sometimes referred to as the "Series A Debentures"),
specified in the Indenture, limited in aggregate principal amount to
$___________, issued under and pursuant to an Indenture dated as of _________,
1994 (the "Indenture") executed and delivered between the Company and First
Fidelity Bank, National Association, as trustee (the "Trustee"). Reference is
made to the Indenture for a description of the rights, limitations of rights,
obligations, duties and immunities thereunder of the Trustee, the Company and
the registered holders of the Debentures. By the terms of the Indenture,
subordinated debentures (the "Debentures") are issuable in series which may
vary as to amount, date of maturity, rate of interest and in other respects as
in the Indenture provided.
The Series A Debentures are subject to mandatory redemption prior to
maturity at 100% of the principal amount thereof plus accrued interest to the
Redemption Date as follows:
(i) in whole upon the dissolution and winding up of the Partnership,
unless, in connection with such dissolution and winding up, the
Series A Debentures are distributed to the holders of the Series
A Preferred Securities (as defined in the Indenture); and
A-2
<PAGE>
(ii) in whole or in part upon a redemption of the Series A Preferred
Securities, but if in part, in an aggregate principal amount
equal to the aggregate stated liquidation preference of the
Series A Preferred Securities redeemed.
At the option of the Company, the Series A Debentures are redeemable
prior to maturity (i) at any time after the Company is required to pay
Additional Interest on the Series A Debentures, in whole or in part, (ii) at
any time on or after ___________, 1999, in whole or in part, and (iii) if a Tax
Event shall occur and be continuing, in whole (but not in part), in each case
at 100% of the principal amount thereof plus accrued interest to the Redemption
Date. "Tax Event" shall mean that the Partnership shall have received an
opinion of counsel (which may be regular counsel to the Company or an
Affiliate, but not an employee thereof) experienced in such matters to the
effect that, as a result of any amendment to, or change (including any
announced prospective change) in, the laws (or any regulations thereunder) of
the United States or any political subdivision or taxing authority thereof or
therein affecting taxation, or as a result of any official administrative
pronouncement or judicial decision interpreting or applying such laws or
regulations, which amendment or change is effective or such interpretation or
pronouncement is announced on or after the date of original issuance of
Preferred Securities, there is more than an insubstantial risk that (i) the
Partnership is subject to United States Federal income tax with respect to
interest received on the Debentures or the Partnership will otherwise not be
taxed as a Partnership or (ii) interest payable by the Company to the
Partnership on the Debentures will not be deductible for United States Federal
income tax purposes or (iii) the Partnership is subject to more than a de
minimis amount of other taxes, duties, assessments or other governmental
charges.
At least 30 days but not more than 60 days before the Redemption
Date, the Trustee shall mail or caused to be mailed a notice of redemption by
first-class mail, postage prepaid, to each Holder of Debentures to be redeemed.
In the event of redemption of this Debenture in part only, a new
Debenture or Debentures of this series for the unredeemed portion hereof will
be issued in the name of the Holder hereof upon the cancellation hereof.
In case an Event of Default, as defined in the Indenture, shall have
occurred and be continuing, the principal of and premium, if any, and interest
on all of the Debentures may be declared, and upon such declaration shall
become, due and payable, in the manner, with the effect and subject to the
conditions provided in the Indenture.
The Indenture contains provisions for defeasance at any time of the
entire indebtedness of this Debenture upon compliance by the Company with
certain conditions set forth therein.
Subject to certain exceptions in the Indenture which require the
consent of every Holder, the Company and the Trustee may amend the Indenture
or the Debentures issued thereunder or may waive future compliance by the
Company with any provisions of the Indenture or the Debentures issued
thereunder (i) if the Partnership is the sole holder of the Debentures issued
A-3
<PAGE>
thereunder, with the written consent of the Special Representative or, if no
Special Representative has been appointed, the Partnership, at the direction
of the holders of 66 % of the aggregate stated liquidation preference of the
Preferred Securities at the time outstanding, or (ii) if the Partnership is not
the sole Holder of the Debentures, with the consent of the Holders of at least
66 % in aggregate principal amount of the Debentures issued under the Indenture
at the time outstanding. Subject to certain exceptions in the Indenture,
without the consent of any Debentureholder, the Company and the Trustee may
amend the Indenture or the Debentures to cure any ambiguity, defect or
inconsistency, to bind a successor to the obligations of the Indenture, to
provide for uncertificated Debentures in addition to certificated Debentures,
to comply with any requirements of the Debentures and the Securities and
Exchange Commission in connection with the qualification of the Indenture under
the TIA, or to make any change that, in the reasonable judgment of the Company,
does not adversely affect the rights of any Debentureholder. Amendments bind
all Holders and subsequent Holders.
No reference herein to the Indenture and no provision of this
Debenture or the Indenture shall alter or impair the obligation of the Company,
which is absolute and unconditional, to pay the principal of and interest on
this Debenture at the time and place and at the rate and in the money herein
prescribed.
So long as an Event of Default has not occurred and is continuing,
the Company shall have the right at any time and from time to time to extend
the interest payment period of the Debentures issued under the Indenture,
including the Series A Debentures, to up to 60 consecutive months (the
"Extended Interest Payment Period"), provided that no Extended Interest Payment
Period shall extend beyond the Stated Maturity Date or Redemption Date of any
Debenture issued under the Indenture. At the end of the Extended Interest
Payment Period, the Company shall pay all interest then accrued and unpaid
(together with interest thereon at the rate specified for the Debentures,
including the Series A Debentures to the extent that payment of such interest
is enforceable under applicable law). During such Extended Interest Payment
Period, the Company may not declare or pay any dividend on, redeem, purchase,
acquire or make a liquidation payment with respect to, any of its capital
stock. Prior to the termination of any such Extended Interest Payment Period,
the Company may further extend such Extended Interest Payment Period, provided
that such Extended Interest Payment Period together with all such previous and
further extensions thereof shall not exceed 60 consecutive months. At the
termination of any such Extended Interest Payment Period and upon the payment
of all amounts then due, the Company may select a new Extended Interest Payment
Period, subject to the foregoing restrictions.
Series A Debentures are issuable only in registered form without
coupons in denominations of $25 and any integral multiple thereof. As provided
in the Indenture and subject to certain limitations therein set forth, this
Debenture is exchangeable for a like aggregate principal amount of Series A
Debentures of a different authorized denomination, as requested by the
registered holder surrendering the same.
A-4
<PAGE>
As provided in the Indenture and subject to certain limitations
therein set forth, this Debenture is transferable by the registered holder
hereof upon surrender of this Debenture for registration of transfer at the
office or agency of the Registrar accompanied by a written instrument or
instruments of transfer in form satisfactory to the Registrar duly executed by
the registered holder hereof or his attorney duly authorized in writing, and
thereupon one or more new Series A Debentures of authorized denominations and
for the same aggregate principal amount will be issued to the designated
transferee or transferees. No service charge will be made for any such
transfer, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge payable in relation thereto.
Prior to presentment for registration of transfer of this Debenture,
the Company, the Trustee, any Paying Agent and any Registrar may deem and treat
the registered holder hereof as the absolute owner hereof (whether or not this
Debenture shall be overdue and notwithstanding any notice of ownership or
writing hereon made by anyone other than the Registrar) for the purpose of
receiving payment of or on account of the principal hereof and interest due
hereon and for all other purposes, and neither the Company nor the Trustee nor
any Paying Agent nor any Registrar shall be affected by any notice to the
contrary.
No recourse shall be had for the payment of the principal of or the
interest on this Debenture, or for any claim based hereon, or otherwise in
respect hereof, or based on or in respect of the Indenture, against any
incorporator, stockholder, officer or director, past, present or future, as
such, of the Company or of any predecessor or successor corporation, whether
by virtue of any constitution, statute or rule of law, or by the enforcement
of any assessment or penalty or otherwise, all such liability being, by the
acceptance hereof and as part of the consideration for the issuance hereof,
expressly waived and released.
Each term used in this Debenture which is defined in the Indenture
and not defined herein shall have the meaning assigned to it in the Indenture.
This Debenture shall not be valid until an authorized officer of the
Trustee manually signs and dates the Trustee's Certificate of Authentication
below.
IN WITNESS WHEREOF, the Company has caused this Debenture to be
signed manually or by facsimile by its duly authorized officers and a facsimile
of its corporate seal to be affixed hereto or imprinted hereon.
PUBLIC SERVICE ELECTRIC AND GAS COMPANY
By: ___________________________________
[SEAL] Name:
Title:
Attest:
___________________________
Assistant Secretary
Dated: _____________, 1995
A-5
<PAGE>
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Debentures referred
to in the within-mentioned Indenture.
FIRST FIDELITY BANK, NATIONAL ASSOCIATION, as Trustee
By: __________________________
Name
Authorized Signatory
A-6
<PAGE>
ASSIGNMENT FORM
To assign this Debenture, fill in the form below: (I) or (we) assign
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_______________________________________________________________
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________________________________________________________________
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Dated: ________________ Signature: ________________________
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A-7
<PAGE>
EXHIBIT 10a(14)
Public Service
Electric and Gas
Company
80 Park Plaza, Newark, NJ 07101 201-430-5620
Mailing Address: P.O. Box 570, Newark, NJ 07101
E. James Ferland
Chairman of the Board
and Chief Executive Officer
September 14, 1994
Mr. Leon R. Eliason
10435 61st Street, N.W.
Stillwater, MN 55082
Dear Mr. Eliason:
This letter will serve as an amendment and modification of the letter
agreement (Agreement) between you and Public Service Electric and Gas Company
(PSE&G) dated August 24, 1994, regarding your employment as Chief Nuclear
Officer of PSE&G.
A. Paragraph No. 1 of the Agreement is revised so that your effective
Date of Employment (DOE) with PSE&G shall be September 26, 1994.
B. Paragraph Nos. 3 and 4 of the Agreement are revised so that the
payments called for therein, which are contingent upon your
commencing employment with PSE&G, shall (i) be paid on January 2,
1995 and (ii) not be subject to advancement.
If the foregoing is in accordance with your understanding of our
agreement, please sign the enclosed copy of this letter and return it to me at
your earliest convenience.
Sincerely,
Agreed to this 17th day
of September, 1994.
LEON R. ELIASON
- --------------------------------
Leon R. Eliason
<PAGE>
Public Service
Electric and Gas
Company
80 Park Plaza, Newark, NJ 07101 201-430-5620
Mailing Address: P.O. Box 570, Newark, NJ 07101
E. James Ferland
Chairman of the Board
and Chief Executive Officer
August 24, 1994
Mr. Leon R. Eliason
10435 61st Street, N.W.
Stillwater, MN 55082
Dear Mr. Eliason:
In conjunction with your employment as Chief Nuclear Officer of
Public Service Electric and Gas Company (PSE&G) and President of PSE&G's
Nuclear Business Unit, reporting to me as Chief Executive Officer, the agreed
terms of employment are as follows:
1. The effective date of your employment with PSE&G shall be
October 1, 1994 or such earlier date as may be agreed to in writing
between you and I (the Date of Employment (DOE)).
2. You shall be paid a salary at the annual rate of $325,000, 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, 1995.
3. PSE&G will make a cash payment to you on the DOE in the amount
of $40,000 to compensate you for the loss of stock option and restricted
stock benefits under plans of your present employer.
4. PSE&G will pay you $125,000 cash on the first business day of
1995 to compensate you for the loss of your 1994 annual bonus under the
plan of your present employer. You shall have the option, upon five days
written notice, to advance this payment to any date of your choice that
is subsequent to the DOE.
5. 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 eligible for a minimum
of six weeks of vacation per year, except that for calendar year 1994, you
shall be eligible for three weeks of vacation. In addition, financial
counseling will be available to you.
<PAGE>
6. PSE&G will compensate you for reasonably incurred moving and
relocation expenses in accordance with PSE&G's Relocation Program. Such
compensation shall specifically include reimbursement of any sales
commissions on your existing principal residence and on a second
residential property located in Rapid City, South Dakota and will also
include, if you so elect, the purchase of your principal residence and
such second property. In addition, PSE&G will provide you and your spouse
temporary living expenses in New Jersey for a period of up to six months
and will provide for the taxes associated with providing you housing in
New Jersey during such six-month period. PSE&G will pay for the cost of
installation of a security system in your permanent home in New Jersey,
or vicinity, and will maintain such a system in your permanent home as
long as you are Chief Nuclear Officer of PSE&G.
7. 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 by the Board of Directors or the Chief Executive Officer
of PSE&G which identifies the manner in which the Board or CEO believes
that you have not so performed your duties, or (ii) any conduct
constituting a felony or moral turpitude.
8. Your participation in PSE&G's Management Incentive Compensation
Plan (MICP) will begin effective as of January 1, 1995. Your target
incentive award as Chief Nuclear Officer will initially be 30% 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 -- $100,000;
1997 -- $65,000; 1998 -- $35,000, in addition to any payouts which may
result from your participation in the MICP itself. Copies of the MICP
and the calculation determining the 1993 corporate factor have previously
been forwarded to you.
9. As Chief Nuclear Officer, 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. I will recommend to the Organization and
Compensation Committee that you be granted 2,500 options in January 1995
<PAGE>
(which would be exercisable in 1998). In addition, I will recommend to
the Organization and Compensation Committee that you also be granted 600
stock options under the LTIP which are exercisable in 1995, 1,200 stock
options exercisable in 1996, and 1,800 stock options exercisable in 1997.
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.
10. 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 3 years and
prior to DOE plus 4 years 19
On or after DOE plus 4 years and
prior to DOE plus 5 years 20
On or after DOE plus 5 years and
prior to DOE plus 6 years 21
On or after DOE plus 6 years and
prior to DOE plus 7 years 22
On or after DOE plus 7 years and
prior to DOE plus 8 years 23
On or after DOE plus 8 years and
prior to DOE plus 9 years 25
On or after DOE plus 9 years and
prior to DOE plus 10 years 27
On or after DOE plus 10 years 29
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 55, 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 31 years
of credited service at age 60, and 44 years of credited service at age 65,
dependent upon your actual date of birth and DOE. Under PSE&G's pension
programs as presently in effect, you would be eligible to retire at age 58 with
a reduced pension, or at age 60 with an unreduced pension, 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).
<PAGE>
11. 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 or other comparable model) and shall provide the related maintenance,
repairs, insurance and costs of operation thereof.
12. 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 a freshly voided
urine specimen for the presence of commonly abused drugs, including marijuana.
If the foregoing is in accordance with your understanding, please sign the
enclosed copy of this letter and return it to me.
Sincerely,
E. JAMES FERLAND
E. James Ferland
Chairman of the Board and
Chief Executive Officer
Agreed to this 26th day
of August, 1994.
LEON R. ELIASON
- --------------------------------
Leon R. Eliason
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT 12
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
PLUS PREFERRED SECURITIES DIVIDEND REQUIREMENTS
YEARS ENDED DECEMBER 31,
----------------------------------------------------------------
1990(A) 1991(A) 1992(A) 1993 1994
--------- --------- ---------- ---------- ----------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C>
Net Income............................ $ 403,663 $ 543,035 $ 504,117 $ 595,519(A) $ 679,033
Plus Income Taxes (B)................. 144,652 274,146 253,276 316,010 322,824
--------- --------- ---------- ---------- ----------
Income Before Income Taxes............ 548,315 817,181 757,393 911,529 1,001,857
--------- --------- ---------- ---------- ----------
Fixed Charges and Preferred
Securities Dividend Requirements:
Interest Charges (C)................ 457,017 478,321 524,025 502,534 495,925
Interest Factor in Rentals.......... 9,162 9,311 9,591 11,090 12,120
Preferred Securities Dividend
Requirements (Pre-tax) (D)........ 38,544 42,676 46,748 58,112 60,589
--------- --------- ---------- ---------- ----------
Total....................... 504,723 530,308 580,364 571,736 568,634
--------- --------- ---------- ---------- ----------
Earnings Before Fixed Charges and
Preferred Securities Dividend
Requirements...................... $1,053,038 $1,347,489 $1,337,757 $1,483,265 $1,570,491
========== ========== ========== ========== ==========
Ratio................................. 2.09 2.54 2.30 2.59 2.76
(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(6).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT 12(A)
PUBLIC SERVICE ELECTRIC AND GAS COMPANY
COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
YEARS ENDED DECEMBER 31,
--------------------------------------------------------------
1990 1991 1992 1993 1994
---------- ---------- ---------- ---------- ----------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C>
Net Income....................... $ 537,619 $ 545,479 $ 475,936 $ 614,868 $ 659,406
Plus Income Taxes (A)............ 209,360 261,912 223,782 307,414 301,447
---------- ---------- ---------- ---------- ----------
Income Before Income Taxes....... 746,979 807,391 699,718 922,282 960,853
---------- ---------- ---------- ---------- ----------
Fixed Charges
Interest Charges (B)........... 346,020 358,517 401,902 389,956 395,925
Interest Factor in Rentals..... 9,162 9,311 9,591 11,090 12,120
---------- ---------- ---------- ---------- ----------
Total.................. 355,182 367,828 411,493 401,046 408,045
---------- ---------- ---------- ---------- ----------
Earnings Before Fixed Charges.... $1,102,161 $1,175,219 $1,111,211 $1,323,328 $1,368,898
========== ========== ========== ========== ==========
Ratio............................ 3.10 3.20 2.70 3.30 3.35
==== ==== ==== ==== ====
(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
YEARS ENDED DECEMBER 31,
-------------------------------------------------------------
1990 1991 1992 1993 1994
---------- ---------- ---------- ---------- ----------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C>
Net Income................................ $ 537,619 $ 545,479 $ 475,936 $ 614,868 $ 659,406
Plus Income Taxes (A)..................... 209,361 261,912 223,782 307,414 301,447
---------- ---------- --------- ---------- ----------
Income Before Income Taxes................ 746,980 807,391 699,718 922,282 960,853
---------- ---------- --------- ---------- ----------
Fixed Charges and Preferred Securities
Dividend Requirements:
Interest Charges (B).................... 346,020 358,517 401,902 389,956 395,925
Interest Factor in Rentals.............. 9,162 9,311 9,591 11,090 12,120
Preferred Securities Dividend
Requirements (Pre-tax) (C)............ 40,116 42,703 46,675 56,957 60,981
---------- ---------- --------- ---------- ----------
Total........................... 395,298 410,531 458,168 458,003 469,026
---------- ---------- --------- ---------- ----------
Earnings Before Fixed Charges and
Preferred Securities Dividend
Requirements............................ $1,102,162 $1,175,219 $1,111,211 $1,313,328 $1,368,898
========== ========== ========== ========== ==========
Ratio................................ 2.79 2.86 2.43 2.89 2.92
==== ==== ==== ==== ====
(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(6).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT 21
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
SIGNIFICANT SUBSIDIARIES
STATE OF
NAME OWNERSHIP % INCORPORATION
- --------------------------------------------------------------------- ----------- -------------
<S> <C> <C>
Public Service Electric and Gas Company.............................. 100 New Jersey
The remaining subsidiaries of Public Service Enterprise Group Incorporated are not significant
subsidiaries as defined in Regulation S-X.
</TABLE>
<PAGE>
EXHIBIT 23
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statements
Nos. 33-44581, 33-44582, 33-45491 and 33-4781 of Public Service Enterprise
Group Incorporated on Form S-8 and Registration Statement No. 33-49123 of
Public Service Enterprise Group Incorporated on Form S-3 of our report dated
February 14, 1995, appearing in this Annual Report on Form 10-K of Public
Service Enterprise Group Incorporated for the year ended December 31, 1994.
DELOITTE & TOUCHE, LLP
Parsippany, New Jersey
February 23, 1995
<PAGE>
EXHIBIT 23
PUBLIC SERVICE ELECTRIC AND GAS COMPANY
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statements
Nos. 33-49367, 33-50197, 33-50199 and 33-51309 of Public Service Electric and
Gas Company on Forms S-3 of our report dated February 14, 1995 appearing in
this Annual Report on Form 10-K of Public Service Electric and Gas Company for
the year ended December 31, 1994.
DELOITTE & TOUCHE, LLP
Parsippany, New Jersey
February 23, 1995
<TABLE> <S> <C>
<PAGE>
<ARTICLE> UT
<LEGEND>
This schedule contains summary information extracted from SEC Form 10-K
and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<CIK> 0000788784
<NAME> PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 11098245
<OTHER-PROPERTY-AND-INVEST> 2673663
<TOTAL-CURRENT-ASSETS> 1356872
<TOTAL-DEFERRED-CHARGES> 1588685
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 16717440
<COMMON> 3801157
<CAPITAL-SURPLUS-PAID-IN> 0
<RETAINED-EARNINGS> 1510010
<TOTAL-COMMON-STOCKHOLDERS-EQ> 5311167
300000
384994
<LONG-TERM-DEBT-NET> 5180657
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 491586
<LONG-TERM-DEBT-CURRENT-PORT> 499738
0
<CAPITAL-LEASE-OBLIGATIONS> 53770
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 4495528
<TOT-CAPITALIZATION-AND-LIAB> 16717440
<GROSS-OPERATING-REVENUE> 5915843
<INCOME-TAX-EXPENSE> 322824<F1>
<OTHER-OPERATING-EXPENSES> 4433692
<TOTAL-OPERATING-EXPENSES> 4751750
<OPERATING-INCOME-LOSS> 1164093
<OTHER-INCOME-NET> 19219
<INCOME-BEFORE-INTEREST-EXPEN> 1183312
<TOTAL-INTEREST-EXPENSE> 495925
<NET-INCOME> 679033
42147
<EARNINGS-AVAILABLE-FOR-COMM> 679033
<COMMON-STOCK-DIVIDENDS> 528071
<TOTAL-INTEREST-ON-BONDS> 459158
<CASH-FLOW-OPERATIONS> 1231790
<EPS-PRIMARY> $2.78
<EPS-DILUTED> $2.78
<FN>
<CAPTION>
<F1>State Income Taxes of $5,507 and Federal Income Taxes for Other Income of $4,766 were
incorporated into this line 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
Form 10-K and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<CIK> 0000081033
<NAME> PUBLIC SERVICE ELECTRIC AND GAS COMPANY
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 11098245
<OTHER-PROPERTY-AND-INVEST> 331787
<TOTAL-CURRENT-ASSETS> 1247938
<TOTAL-DEFERRED-CHARGES> 1586428
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 14264398
<COMMON> 2563003
<CAPITAL-SURPLUS-PAID-IN> 534395
<RETAINED-EARNINGS> 1292201
<TOTAL-COMMON-STOCKHOLDERS-EQ> 4389599
300000
384994
<LONG-TERM-DEBT-NET> 4486787
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 401759
<LONG-TERM-DEBT-CURRENT-PORT> 310200
0
<CAPITAL-LEASE-OBLIGATIONS> 53770
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 3937829
<TOT-CAPITALIZATION-AND-LIAB> 14264398
<GROSS-OPERATING-REVENUE> 5511641
<INCOME-TAX-EXPENSE> 301447<F1>
<OTHER-OPERATING-EXPENSES> 4202290
<TOTAL-OPERATING-EXPENSES> 4498971
<OPERATING-INCOME-LOSS> 1012670
<OTHER-INCOME-NET> 19022
<INCOME-BEFORE-INTEREST-EXPEN> 1031692
<TOTAL-INTEREST-EXPENSE> 395925
<NET-INCOME> 659406
40467
<EARNINGS-AVAILABLE-FOR-COMM> 618939
<COMMON-STOCK-DIVIDENDS> 505300
<TOTAL-INTEREST-ON-BONDS> 366894
<CASH-FLOW-OPERATIONS> 1060506
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<CAPTION>
<F1>State Income Taxes of $2,152 and Federal Income Taxes for Other Income of
$4,766 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>
