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FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
Commission file number 1-9120
Public Service Enterprise Group Incorporated
-------------------------------------------------
(Exact name of registrant as specified in its charter)
New Jersey 22-2625848
------------------------------ -----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
80 Park Plaza, P.O. Box 1171, Newark, New Jersey 07101-1171
-------------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 201 430-7000
------------
Commission file number 1-973
Public Service Electric and Gas Company
------------------------------------------------------
(Exact name of registrant as specified in its charter)
New Jersey 22-1212800
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
80 Park Plaza, P.O. Box 570, Newark, New Jersey 07101-0570
------------------------------------------------ ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 201 430-7000
------------
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes x No
---- ----
The number of shares outstanding of Public Service Enterprise
Group Incorporated's sole class of common stock, as of the latest
practicable date, was as follows:
Class Outstanding at July 31, 1996
----- ----------------------------
Common Stock, without par value 244,500,130
As of July 31, 1996, Public Service Electric and Gas Company had
issued and outstanding 132,450,344 shares of Common Stock, without
nominal or par value, all of which were privately held, beneficially
and of record by Public Service Enterprise Group Incorporated.
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TABLE OF CONTENTS
-----------------
Page
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Public Service Enterprise Group Incorporated (Enterprise):
Consolidated Statements of Income for the Three, Six
and Twelve Months Ended June 30, 1996 and 1995 ........... 1
Consolidated Balance Sheets as of June 30, 1996 and
1995, and December 31, 1995 .............................. 2
Consolidated Statements of Cash Flows for the Six and
Twelve Months Ended June 30, 1996 and 1995 ............... 4
Consolidated Statements of Retained Earnings for the Three,
Six, and Twelve Months Ended June 30, 1996 and 1995 ...... 5
Public Service Electric and Gas Company (PSE&G):
Consolidated Statements of Income for the Three, Six and
Twelve Months Ended June 30, 1996 and 1995 ............... 6
Consolidated Balance Sheets as of June 30, 1996 and 1995,
and December 31, 1995 .................................... 7
Consolidated Statements of Cash Flows for the Six and
Twelve Months Ended June 30, 1996 and 1995 ............... 9
Consolidated Statements of Retained Earnings for the Three,
Six, and Twelve Months Ended June 30, 1996 and 1995 ...... 10
Notes to Consolidated Financial Statements - Enterprise ..... 11
Notes to Consolidated Financial Statements - PSE&G .......... 25
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Enterprise .................................... 26
PSE&G ......................................... 40
PART II. OTHER INFORMATION
Item 1. Legal Proceedings .................................. 41
Item 5. Other Information .................................. 43
Item 6. Exhibits and Reports on Form 8-K ................... 46
Signatures - Public Service Enterprise Group Incorporated ... 48
Signatures - Public Service Electric and Gas Company ........ 48
i<PAGE>
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<TABLE>
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
PART I. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF INCOME
(Thousands of Dollars)
<CAPTION>
Three Months Ended Six Months Ended Twelve Months Ended
June 30, June 30, June 30,
-------------------------- -------------------------- --------------------------
1996 1995 1996 1995 1996 1995
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
OPERATING REVENUES:
Electric .......................... $ 987,963 $ 966,245 $ 1,946,296 $ 1,911,283 $ 4,055,855 $ 3,858,306
Gas ............................... 297,674 269,190 1,094,590 903,668 1,877,325 1,601,007
Nonutility Activities ............. 50,255 38,975 92,251 89,251 189,417 190,109
------------ ------------ ------------ ------------ ------------ ------------
Total Operating Revenues ..... 1,335,892 1,274,410 3,133,137 2,904,202 6,122,597 5,649,422
------------ ------------ ------------ ------------ ------------ ------------
OPERATING EXPENSES:
Operation:
Fuel for Electric Generation and
Interchanged Power .............. 215,972 210,214 432,047 418,324 905,505 788,636
Gas Purchased and Materials for
Gas Produced .................... 186,504 166,011 643,236 510,204 1,094,571 909,618
Other ............................. 253,035 239,075 509,772 473,238 1,044,269 1,034,428
Maintenance ......................... 87,240 68,038 182,656 132,083 363,183 288,252
Depreciation and Amortization ....... 150,093 149,497 303,513 294,289 606,190 575,715
Taxes:
Federal Income Taxes .............. 56,095 56,344 154,195 164,635 327,526 291,126
New Jersey Gross Receipts Taxes ... 130,979 139,274 319,415 316,063 616,313 582,527
Other ............................. 20,945 20,312 45,887 43,222 79,578 81,630
------------ ------------ ------------ ------------ ------------ ------------
Total Operating Expenses ..... 1,100,863 1,048,765 2,590,721 2,352,058 5,037,135 4,551,932
------------ ------------ ------------ ------------ ------------ ------------
OPERATING INCOME .................... 235,029 225,645 542,416 552,144 1,085,462 1,097,490
------------ ------------ ------------ ------------ ------------ ------------
OTHER INCOME:
Allowance for Funds Used During
Construction - Equity ........... -- 1,787 -- 3,269 2,055 12,396
Miscellaneous - net ............... 1,214 1,555 2,492 3,557 6,976 7,484
------------ ------------ ------------ ------------ ------------ ------------
Total Other Income ........... 1,214 3,342 2,492 6,826 9,031 19,880
------------ ------------ ------------ ------------ ------------ ------------
INCOME BEFORE INTEREST CHARGES AND
DIVIDENDS ON PREFERRED SECURITIES ... 236,243 228,987 544,908 558,970 1,094,493 1,117,370
------------ ------------ ------------- ------------ ------------ ------------
INTEREST CHARGES:
Long-Term Debt .................... 91,082 102,665 192,527 205,620 389,120 419,139
Short-Term Debt ................... 11,331 7,592 18,520 12,419 38,923 26,461
Other ............................. 8,631 7,128 15,514 13,833 30,853 22,163
------------ ------------ ------------- ------------ ------------ ------------
Total Interest Charges ....... 111,044 117,385 226,561 231,872 458,896 467,763
Allowance for Funds Used During
Construction - Debt and
Capitalized Interest ............ (3,921) (11,082) (8,468) (20,198) (21,109) (36,863)
------------ ------------ ------------- ------------ ------------ ------------
Net Interest Charges ......... 107,123 106,303 218,093 211,674 437,787 430,900
------------ ------------ ------------- ------------ ------------ ------------
Preferred Securities Dividend
Requirements .................... 12,179 12,197 24,420 24,394 49,452 46,117
Net Gain on Preferred Stock
Redemptions ..................... 18,493 -- 18,493 -- 18,019 --
------------ ------------ ------------- ------------ ------------ ------------
Income From Continuing Operations . 135,434 110,487 320,888 322,902 625,273 640,353
Discontinued Operations - Net of
Income Taxes (Note 2) ........... (896) 180 7,754 357 42,433 1,927
------------ ------------ ------------- ------------ ------------ ------------
NET INCOME ................... $ 134,538 $ 110,667 $ 328,642 $ 323,259 $ 667,706 $ 642,280
============ ============ ============= ============ ============ ============
SHARES OF COMMON STOCK OUTSTANDING:
End of Period ..................... 244,697,930 244,697,930 244,697,930 244,697,930 244,697,930 244,697,930
Average for Period ................ 244,697,930 244,697,930 244,697,930 244,697,930 244,697,930 244,697,930
EARNINGS PER AVERAGE SHARE:
Income From Continuing Operations . $ 0.55 $ 0.45 $ 1.31 $ 1.32 $ 2.56 $ 2.61
Income From Discontinued Operations -- -- 0.03 -- 0.17 0.01
------------ ------------ ------------- ------------ ------------ ------------
NET INCOME ................... $ 0.55 $ 0.45 $ 1.34 $ 1.32 $ 2.73 $ 2.62
============ ============ ============= ============ ============ ============
DIVIDENDS PAID PER SHARE OF COMMON
STOCK ............................... $ 0.54 $ 0.54 $ 1.08 $ 1.08 $ 2.16 $ 2.16
============ ============ ============= ============ ============ ============
<FN>
See Notes to Consolidated Financial Statements.
/TABLE
<PAGE>
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<TABLE>
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
CONSOLIDATED BALANCE SHEETS
(Thousands of Dollars)
<CAPTION>
June 30, June 30, December 31,
ASSETS 1996 1995 1995
- ------ ------------ ------------ ------------
<S> <C> <C> <C>
UTILITY PLANT - Original cost:
Electric ..................................................... $ 13,247,874 $ 12,598,360 $ 13,095,103
Gas .......................................................... 2,488,255 2,381,112 2,442,572
Common ....................................................... 518,251 522,689 517,104
------------ ------------ ------------
Total ................................................... 16,254,380 15,502,161 16,054,779
Less: accumulated depreciation and amortization .............. 5,694,639 5,328,551 5,440,414
------------ ------------ ------------
Net ..................................................... 10,559,741 10,173,610 10,614,365
Nuclear Fuel in Service, net of accumulated amortization -
$272,654, $330,025, and $297,435, respectively .............. 206,195 178,454 180,018
------------ ------------ ------------
Net Utility Plant in Service ............................ 10,765,936 10,352,064 10,794,383
Construction Work in Progress, including Nuclear Fuel in
Process - $61,364, $92,846, and $104,743, respectively ..... 320,619 756,753 369,082
Plant Held for Future Use .................................... 23,966 23,966 23,966
------------ ------------ ------------
Net Utility Plant ....................................... 11,110,521 11,132,783 11,187,431
------------ ------------ ------------
INVESTMENTS AND OTHER NONCURRENT ASSETS:
Long-Term Investments, net of amortization -$8,907, $3,489 and
$6,009 and net valuation allowances - $21,415, $17,105 and
$21,302, respectively ..................................... 1,866,390 1,668,331 1,808,368
Real Estate Property and Equipment, net of accumulated
depreciation - $5,497, $16,141, and $6,267, and net of
valuation allowance - $8,457, $23,306, and $8,228,
respectively ............................................... 66,521 136,581 89,350
Other Plant, net of accumulated depreciation and amortization
- $7,061, $5,825, and $6,531, respectively ................. 27,968 28,298 27,997
Nuclear Decommissioning and Other Special Funds .............. 335,355 272,895 313,178
Other Assets - Net ........................................... 6,948 21,093 3,241
------------ ------------ ------------
Total Investments and Other Noncurrent Assets ........... 2,303,182 2,127,198 2,242,134
------------ ------------ ------------
CURRENT ASSETS:
Cash and Cash Equivalents .................................... 54,729 74,887 61,964
Accounts Receivable:
Customer Accounts Receivable ............................... 484,508 387,664 525,404
Other Accounts Receivable .................................. 189,680 140,538 208,256
Less: Allowance for Doubtful Accounts ..................... 37,337 40,031 37,641
Unbilled Revenues ............................................ 153,634 128,309 246,876
Fuel, at average cost ........................................ 191,915 257,488 253,360
Materials and Supplies, net of inventory valuation reserves -
$18,200, $18,200, and $20,100, respectively ................ 145,455 147,846 143,741
Prepaid Gross Receipts Taxes ................................. 279,328 304,705 --
Deferred Income Taxes ........................................ 29,568 23,967 27,571
Miscellaneous Current Assets ................................. 23,057 31,660 40,464
Net Assets of Discontinued Operations ........................ 328,475 342,459 365,905
----------- ------------ ------------
Total Current Assets .................................... 1,843,012 1,799,492 1,835,900
----------- ------------ ------------
DEFERRED DEBITS:
Property Abandonments - net .................................. 60,700 79,308 70,120
Oil and Gas Property Write-Down .............................. 33,501 38,655 36,078
Unamortized Debt Expense ..................................... 145,011 127,747 123,833
Deferred OPEB Costs .......................................... 241,614 182,736 167,189
Underrecovered Electric Energy and Gas Costs - net ........... 206,909 138,394 170,565
Unrecovered Environmental Costs (Note 4) ..................... 124,235 134,436 130,070
Unrecovered Plant and Regulatory Study Costs ................. 34,495 35,475 35,150
Unrecovered SFAS 109 Deferred Income Taxes ................... 761,944 790,561 769,136
Deferred Decontamination and Decommissioning Costs ........... 49,872 53,016 49,872
Other ........................................................ 28,427 10,100 5,826
------------ ------------ ------------
Total Deferred Debits ................................... 1,686,708 1,590,428 1,557,839
------------ ------------ ------------
Total ................................................... $ 16,943,423 $ 16,649,901 $ 16,823,304
============ ============ ============
<FN>
See Notes to Consolidated Financial Statements.
/TABLE
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<TABLE>
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
CONSOLIDATED BALANCE SHEETS
(Thousands of Dollars)
<CAPTION>
June 30, June 30, December 31,
CAPITALIZATION AND LIABILITIES 1996 1995 1995
- ------------------------------ ------------ ------------ ------------
<S> <C> <C> <C>
CAPITALIZATION:
Common Equity:
Common Stock ..................................................... $ 3,801,157 $ 3,801,157 $ 3,801,157
Retained Earnings ................................................ 1,708,153 1,568,995 1,643,785
------------ ------------ -------------
Total Common Equity ........................................... 5,509,310 5,370,152 5,444,942
Subsidiaries' Preferred Securities:
Preferred Stock Without Mandatory Redemption ..................... 113,392 384,994 324,994
Preferred Stock With Mandatory Redemption ........................ 150,000 150,000 150,000
Company-Obligated Mandatorily Redeemable Preferred Securities of
a Partnership holding solely PSE&G Debentures ................. 210,000 150,000 210,000
Company-Obligated Mandatorily Redeemable Preferred Securities
of a Subsidiary Trust holding solely PSE&G Debentures
(QUIPS) (Note 5) ............................................... 208,000 -- --
Long-Term Debt ...................................................... 4,805,844 5,235,367 5,189,791
------------ ------------ -------------
Total Capitalization ........................................... 10,996,546 11,290,513 11,319,727
------------ ------------ -------------
OTHER LONG-TERM LIABILITIES:
Decontamination, Decommissioning, and Low Level Radwaste
Costs ............................................................. 49,718 59,180 50,449
Environmental Costs (Note 4)......................................... 90,765 105,600 96,272
Capital Lease Obligations ........................................... 52,752 53,450 53,111
------------ ------------- -------------
Total Other Long-Term Liabilities .............................. 193,235 218,230 199,832
------------ ------------ -------------
CURRENT LIABILITIES:
Long-Term Debt due within one year .................................. 283,364 64,159 61,060
Commercial Paper and Loans .......................................... 736,929 725,881 567,316
Book Overdrafts ..................................................... 63,108 58,833 70,014
Accounts Payable .................................................... 490,049 394,737 549,593
Other Taxes Accrued ................................................. 15,725 48,902 30,816
Interest Accrued .................................................... 76,282 80,504 108,245
Estimated Liability for Vacation Pay ................................ 31,603 30,334 17,089
Customer Deposits ................................................... 32,312 32,942 32,785
Liability for Injuries and Damages .................................. 32,399 30,568 38,141
Miscellaneous Environmental Liabilities ............................. 17,453 14,255 16,954
Other ............................................................... 48,186 26,492 56,013
------------ ------------ -------------
Total Current Liabilities ...................................... 1,827,410 1,507,607 1,548,026
------------ ------------ -------------
DEFERRED CREDITS:
Accumulated Deferred Income Taxes ................................... 3,174,345 2,972,094 3,083,433
Accumulated Deferred Investment Tax Credits ......................... 382,317 402,459 392,317
Deferred OPEB Costs ................................................. 241,614 182,736 167,189
Other ............................................................... 127,956 76,262 112,780
------------ ------------ -------------
Total Deferred Credits ......................................... 3,926,232 3,633,551 3,755,719
------------ ------------ -------------
COMMITMENTS AND CONTINGENT LIABILITIES (Note 4)
Total .......................................................... $ 16,943,423 $ 16,649,901 $ 16,823,304
============ ============ =============
</TABLE>
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<TABLE>
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands of Dollars)
<CAPTION>
Six Months Ended Twelve Months Ended
June 30, June 30,
-------------------------- --------------------------
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income .................................................... $ 328,642 $ 323,259 $ 667,706 $ 642,280
Adjustments to reconcile net income to net cash flows from
operating activities:
Depreciation and Amortization ............................... 303,513 294,289 606,190 575,715
Amortization of Nuclear Fuel ................................ 26,277 47,490 53,815 97,836
(Deferral) Recovery of Electric Energy and Gas Costs - net .. (36,344) 34,169 (68,515) 22,974
Unrealized Gains on Investments - net ....................... (1,985) (9,311) (39,342) (26,734)
Provision for Deferred Income Taxes - net ................... 44,422 60,719 117,608 52,407
Investment Tax Credits - net ................................ (9,014) (10,007) (19,156) (20,331)
Allowance for Funds Used During Construction - Debt and
Equity and Capitalized Interest ........................... (8,468) (23,467) (23,164) (49,259)
Proceeds from Leasing Activities ............................ 35,818 3,783 69,687 27,989
Changes in certain current assets and liabilities:
Net decrease (increase) in Accounts Receivable and Unbilled
Revenues .................................................. 152,410 150,424 (174,005) 46,576
Net decrease (increase) in Inventory - Fuel and Materials and
Supplies .................................................. 59,731 10,356 67,964 (16,070)
Net (decrease) increase in Accounts Payable ................. (59,544) (27,818) 95,311 32,238
Net change in Prepaid/Accrued Taxes ......................... (294,419) (296,303) (15,608) (18,680)
Net change in Other Current Assets and Liabilities .......... (15,582) (49,042) 33,951 (31,875)
Other ....................................................... 4,820 25,990 83,977 97,676
------------ ------------ ------------ ------------
Net cash provided by operating activities - Continuing
Operations................................................ 530,277 534,531 1,456,419 1,432,742
Net cash provided by operating activities - Discontinued
Operations ................................................ 61,377 47,387 152,632 83,954
------------- ------------ ------------ ------------
Net Cash provided by operating activities ................ 591,654 581,918 1,609,051 1,516,696
------------- ------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to Utility Plant, excluding AFDC .................... (218,426) (312,685) (555,624) (801,445)
Net (increase) decrease in Long-Term Investments and Real
Estate ...................................................... (20,341) (63,981) (22,734) 12,629
Increase in Nuclear Decommissioning Funds and Other Special
Funds, excluding interest .................................. (13,444) (34,903) (44,988) (49,730)
Cost of Plant Removal - net ................................... (13,827) (13,677) (29,824) (28,951)
Other ......................................................... (3,474) 8,523 (55,599) 9,367
------------- ----------- ----------- ------------
Net Cash used in investing activities - Continuing
Operations ............................................... (269,512) (416,723) (708,769) (858,130)
Increase in Oil and Gas Net Assets - Discontinued Operations .. (23,947) (74,059) (138,648) (122,350)
------------- ----------- ----------- ------------
Net cash used in investing activities .................... (293,459) (490,782) (847,417) (980,480)
------------ ------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in Short-Term Debt ............................... 169,613 324,122 11,048 53,886
(Decrease) increase in Book Overdrafts ........................ (6,906) (27,743) 4,275 23,372
Issuance of Long-Term Debt .................................... 368,324 100,000 424,644 285,435
Redemption of Long-Term Debt .................................. (529,967) (220,696) (634,962) (526,001)
Long-Term Debt Issuance and Redemption Costs .................. (38,618) -- (47,794) (29,731)
Redemption of Preferred Stock ................................. (211,602) -- (271,602) (75,000)
Issuance of Monthly Income Preferred Securities ............... -- -- 60,000 150,000
Issuance of Quarterly Income Preferred Securities (QUIPS) ..... 208,000 -- 208,000 --
Cash Dividends Paid on Common Stock ........................... (264,274) (264,274) (528,548) (528,548)
Other ......................................................... -- 6,853 (6,853) 6,624
------------ ------------ ------------ ------------
Net cash used in financing activities .................... (305,430) (81,738) (781,792) (639,963)
------------ ------------ ------------ ------------
Net (decrease) increase in Cash and Cash Equivalents ............ (7,235) 9,398 (20,158) (103,747)
Cash and Cash Equivalents at Beginning of Period ................ 61,964 65,489 74,887 178,634
------------ ------------ ------------ ------------
Cash and Cash Equivalents at End of Period ...................... $ 54,729 $ 74,887 $ 54,729 $ 74,887
============ ============ ============ ============
Income Taxes Paid ............................................... $ 83,900 $ 125,104 $ 144,172 $ 185,579
Interest Paid ................................................... $ 271,785 $ 230,210 $ 522,839 $ 451,058
<FN>
See Notes to Consolidated Financial Statements.
/TABLE
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<TABLE>
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
(Thousands of Dollars)
<CAPTION>
Three Months Ended Six Months Ended Twelve Months Ended
June 30, June 30, June 30,
-------------------------- -------------------------- --------------------------
1996 1995 1996 1995 1996 1995
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Balance at Beginning of Period ...... $ 1,705,753 $ 1,590,464 $ 1,643,785 $ 1,510,010 $ 1,568,995 $ 1,456,025
Add:
Net Income ........................ 134,538 110,667 328,642 323,259 667,706 642,280
------------ ------------ ------------ ------------ ------------ ------------
Total ........................ 1,840,291 1,701,131 1,972,427 1,833,269 2,236,701 2,098,305
------------ ------------ ------------ ------------ ------------ ------------
Deduct:
Cash Dividends on Common Stock .... 132,138 132,136 264,274 264,274 528,548 528,548
Capital Stock Expenses ............ -- -- -- -- -- 762
------------ ------------ ------------ ------------ ------------ ------------
Total Deductions ............. 132,138 132,136 264,274 264,274 528,548 529,310
------------ ------------ ------------ ------------ ------------ ------------
Balance at End of Period ............ $ 1,708,153 $ 1,568,995 $ 1,708,153 $ 1,568,995 $ 1,708,153 $ 1,568,995
============ ============ ============ ============ ============ ============
<FN>
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<PAGE>
<TABLE>
PUBLIC SERVICE ELECTRIC AND GAS COMPANY
CONSOLIDATED STATEMENTS OF INCOME
(Thousands of Dollars)
<CAPTION>
Three Months Ended Six Months Ended Twelve Months Ended
June 30, June 30, June 30,
-------------------------- -------------------------- --------------------------
1996 1995 1996 1995 1996 1995
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
OPERATING REVENUES:
Electric .......................... $ 987,963 $ 966,245 $ 1,946,296 $ 1,911,283 $ 4,055,855 $ 3,858,306
Gas ............................... 297,674 269,190 1,094,590 903,668 1,877,325 1,601,007
------------ ------------ ------------ ------------ ------------ ------------
Total Operating Revenues ..... 1,285,637 1,235,435 3,040,886 2,814,951 5,933,180 5,459,313
------------ ------------ ------------ ------------ ------------ ------------
OPERATING EXPENSES:
Operation:
Fuel for Electric Generation and
Net Interchanged Power .......... 215,972 210,214 432,047 418,324 905,505 788,636
Gas Purchased and Materials for
Gas Produced .................... 186,504 166,011 643,236 510,204 1,094,571 913,701
Other ............................. 238,225 226,384 480,989 446,601 983,788 972,925
Maintenance ......................... 87,240 68,038 182,656 132,083 363,183 288,251
Depreciation and Amortization ....... 149,406 148,275 301,914 291,868 601,160 571,190
Taxes:
Federal Income Taxes .............. 48,985 53,576 143,614 155,860 309,282 273,081
New Jersey Gross Receipts Taxes ... 130,979 139,274 319,415 316,063 616,313 582,527
Other ............................. 19,231 19,057 42,818 40,910 72,717 76,532
------------ ------------ ------------ ------------ ------------ ------------
Total Operating Expenses ..... 1,076,542 1,030,829 2,546,689 2,311,913 4,946,519 4,466,843
------------ ------------ ------------ ------------ ------------ ------------
OPERATING INCOME .................... 209,095 204,606 494,197 503,038 986,661 992,470
------------ ------------ ------------ ------------ ------------ ------------
OTHER INCOME:
Allowance for Funds Used During
Construction - Equity ........... -- 1,787 -- 3,269 2,055 12,396
Miscellaneous - net ............... 1,208 1,499 2,481 3,350 6,859 7,087
------------ ------------ ------------ ------------ ------------ ------------
Total Other Income ........... 1,208 3,286 2,481 6,619 8,914 19,483
------------ ------------ ------------ ------------ ------------ ------------
INCOME BEFORE INTEREST CHARGES AND
DIVIDENDS ON PREFERRED SECURITIES ... 210,303 207,892 496,678 509,657 995,575 1,011,953
------------ ------------ ------------ ------------ ------------ ------------
INTEREST CHARGES:
Long-Term Debt .................... 84,109 91,610 175,621 183,102 350,103 369,155
Short-Term Debt ................... 8,332 4,833 12,366 6,783 26,323 17,745
Other ............................. 7,850 7,012 14,605 13,543 29,607 21,634
------------ ------------ ------------ ------------ ------------ ------------
Total Interest Charges ....... 100,291 103,455 202,592 203,428 406,033 408,534
Allowance for Funds Used During
Construction - Debt ............. (3,471) (10,380) (7,762) (18,999) (19,706) (33,343)
------------ ------------ ------------ ------------ ------------ ------------
Net Interest Charges ......... 96,820 93,075 194,830 184,429 386,327 375,191
------------ ------------ ------------ ------------ ------------ ------------
Monthly Income Preferred Securities
Dividend Requirements ........... 4,716 3,517 9,431 7,032 18,063 8,712
------------ ------------ ------------ ------------ ------------ ------------
NET INCOME ................... 108,767 111,300 292,417 318,196 591,185 628,050
Preferred Stock Dividend
Requirements .................... 7,463 8,680 14,989 17,362 31,389 37,405
NET GAIN ON PREFERRED STOCK
REDEMPTION .......................... 18,493 -- 18,493 -- 18,019 --
------------ ------------ ------------ ------------ ------------ ------------
EARNINGS AVAILABLE TO PUBLIC SERVICE
ENTERPRISE GROUP INCORPORATED ....... $ 119,797 $ 102,620 $ 295,921 $ 300,834 $ 577,815 $ 590,645
============ ============ ============ ============ ============ ============
<FN>
See Notes to Consolidated Financial Statements.
/TABLE
<PAGE>
<PAGE>
<TABLE>
PUBLIC SERVICE ELECTRIC AND GAS COMPANY
CONSOLIDATED BALANCE SHEETS
(Thousands of Dollars)
<CAPTION>
June 30, June 30, December 31,
ASSETS 1996 1995 1995
- ------ ------------ ------------ ------------
<S> <C> <C> <C>
UTILITY PLANT - Original cost:
Electric ...................................................... $ 13,247,874 $ 12,598,360 $ 13,095,103
Gas ........................................................... 2,488,255 2,381,112 2,442,572
Common ........................................................ 518,251 522,689 517,104
------------ ------------ ------------
Total .................................................... 16,254,380 15,502,161 16,054,779
Less: accumulated depreciation and amortization ............... 5,694,639 5,328,551 5,440,414
------------ ------------ ------------
Net ...................................................... 10,559,741 10,173,610 10,614,365
Nuclear Fuel in Service, net of accumulated amortization -
$272,654, $330,025, and $297,435, respectively .............. 206,195 178,454 180,018
------------ ------------ ------------
Net Utility Plant in Service ............................. 10,765,936 10,352,064 10,794,383
Construction Work in Progress, including Nuclear Fuel in
Process - $61,364, $92,846, and $104,743, respectively ...... 320,619 756,753 369,082
Plant Held for Future Use ..................................... 23,966 23,966 23,966
------------ ------------ ------------
Net Utility Plant ........................................ 11,110,521 11,132,783 11,187,431
------------ ------------ ------------
INVESTMENTS AND OTHER NONCURRENT ASSETS:
Long-Term Investments, net of amortization - $8,907, $3,489 and
$6,009, respectively ........................................ 161,141 85,204 119,474
Nuclear Decommissioning and Other Special Funds ............... 335,355 272,895 313,178
Other Plant, net of accumulated depreciation and
amortization - $1,962, $1,857 and $1,905, respectively ...... 25,068 24,966 24,976
------------ ------------ ------------
Total Investments and Other Noncurrent Assets ............ 521,564 383,065 457,628
------------ ------------ ------------
CURRENT ASSETS:
Cash and Cash Equivalents ..................................... 20,614 38,146 32,373
Accounts Receivable:
Customer Accounts Receivable ................................ 484,508 387,664 525,404
Other Accounts Receivable ................................... 140,249 99,829 163,976
Less: Allowance for Doubtful Accounts ...................... 37,337 40,031 37,641
Accounts Receivable - Associated Companies .................... 8,082 -- --
Unbilled Revenues ............................................. 153,634 128,309 246,876
Fuel, at average cost ......................................... 191,915 257,488 253,360
Materials and supplies, net of inventory valuation
reserves - $18,200, $18,200 and $20,100, respectively ....... 145,455 147,846 143,741
Prepaid Gross Receipts Taxes - net ............................ 279,328 304,705 --
Deferred Income Taxes ......................................... 29,568 23,967 27,571
Miscellaneous Current Assets .................................. 18,464 17,971 37,130
------------ ------------ ------------
Total Current Assets ..................................... 1,434,480 1,365,894 1,392,790
------------ ------------ ------------
DEFERRED DEBITS:
Property Abandonments - net ................................... 60,700 79,308 70,120
Oil and Gas Property Write-Down ............................... 33,501 38,655 36,078
Unamortized Debt Expense ...................................... 143,727 125,560 122,049
Deferred OPEB Costs ........................................... 241,614 182,736 167,189
Underrecovered Electric Energy and Gas Costs - net ............ 206,909 138,394 170,565
Unrecovered Environmental Costs (Note 4)....................... 124,235 134,436 130,070
Unrecovered Plant and Regulatory Study Costs .................. 34,495 35,475 35,150
Deferred Decontamination and Decommissioning Costs............. 49,872 53,016 49,872
Unrecovered SFAS 109 Deferred Income Taxes .................... 761,944 790,561 769,136
Other ......................................................... 25,754 10,100 5,700
------------ ------------ ------------
Total Deferred Debits .................................... 1,682,751 1,588,241 1,555,929
------------ ------------ ------------
Total .................................................... $ 14,749,316 $ 14,469,983 $ 14,593,778
============ ============ ============
<FN>
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<PAGE>
<TABLE>
PUBLIC SERVICE ELECTRIC AND GAS COMPANY
CONSOLIDATED BALANCE SHEETS
(Thousands of Dollars)
<CAPTION>
June 30, June 30, December 31,
CAPITALIZATION AND LIABILITIES 1996 1995 1995
- ------------------------------ ------------ ------------ ------------
<S> <C> <C> <C>
CAPITALIZATION
Common Equity
Common Stock ...................................................... $ 2,563,003 $ 2,563,003 $ 2,563,003
Contributed Capital from Enterprise ............................... 594,395 534,395 594,395
Retained Earnings ................................................. 1,412,249 1,337,284 1,372,729
------------ ------------ ------------
Total Common Equity ............................................ 4,569,647 4,434,682 4,530,127
Subsidiaries' Preferred Securities:
Preferred Stock without mandatory redemption ...................... 113,392 384,994 324,994
Preferred Stock with mandatory redemption ......................... 150,000 150,000 150,000
Company-Obligated Mandatorily Redeemable Preferred Securities of
a Partnership holding solely PSE&G Debentures .................. 210,000 150,000 210,000
Company-Obligated Mandatorily Redeemable Preferred Securities
of a Subsidiary Trust holding solely PSE&G Debentures
(QUIPS) (Note 5) ................................................ 208,000 -- --
Long-Term Debt ...................................................... 4,290,582 4,586,428 4,586,268
------------ ------------ ------------
Total Capitalization ........................................... 9,541,621 9,706,104 9,801,389
------------ ------------ ------------
OTHER LONG-TERM LIABILITIES:
Decontamination, Decommissioning, and Low Level Radwaste
Costs ............................................................. 49,718 59,180 50,449
Environmental Costs (Note 4)......................................... 90,765 105,600 96,272
Capital Lease Obligations ........................................... 52,752 53,450 53,111
------------ ------------ ------------
Total Other Long-Term Liabilities .............................. 193,235 218,230 199,832
------------ ------------ ------------
CURRENT LIABILITIES:
Long-Term Debt due within one year .................................. 250,000 60,200 --
Commercial Paper and Loans .......................................... 736,929 725,881 567,316
Book Overdrafts ..................................................... 63,108 58,833 70,014
Accounts Payable .................................................... 423,391 324,536 481,632
Accounts Payable - Associated Companies ............................. -- 488 8,011
Other Taxes Accrued ................................................. 32,595 37,104 32,767
Interest Accrued .................................................... 66,185 69,560 95,811
Estimated Liability for Vacation Pay ................................ 31,603 30,334 17,089
Customer Deposits ................................................... 32,312 32,942 32,785
Liability for Injuries and Damages .................................. 32,399 30,568 38,141
Miscellaneous Environmental Liabilities ............................. 17,453 14,255 16,954
Other ............................................................... 44,546 23,947 50,751
------------ ------------ ------------
Total Current Liabilities ...................................... 1,730,521 1,408,648 1,411,271
------------ ------------ ------------
DEFERRED CREDITS:
Accumulated Deferred Income Taxes ................................... 2,558,020 2,502,304 2,535,603
Accumulated Deferred Investment Tax Credits ......................... 361,124 380,234 370,610
Deferred OPEB Costs ................................................. 241,614 182,736 167,189
Other ............................................................... 123,181 71,727 107,884
------------ ------------ ------------
Total Deferred Credits ......................................... 3,283,939 3,137,001 3,181,286
------------ ------------ ------------
COMMITMENTS AND CONTINGENT LIABILITIES (Note 4)
Total .......................................................... $ 14,749,316 $ 14,469,983 $ 14,593,778
============ ============ ============
</TABLE>
<PAGE>
<PAGE>
<TABLE>
PUBLIC SERVICE ELECTRIC AND GAS COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands of Dollars)
<CAPTION>
Six Months Ended Twelve Months Ended
June 30, June 30,
------------------------- -------------------------
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income .................................................... $ 292,417 $ 318,196 $ 591,185 $ 628,050
Adjustments to reconcile net income to net cash flows from
operating activities:
Depreciation and Amortization ............................... 301,914 291,868 601,160 571,190
Amortization of Nuclear Fuel ................................ 26,277 47,490 53,815 97,836
(Deferral) Recovery of Electric Energy and Gas Costs - net .. (36,344) 34,169 (68,515) 22,974
Provision for Deferred Income Taxes - net ................... 29,609 24,597 84,333 58,194
Investment Tax Credits - net ................................ (9,486) (9,487) (19,110) (19,291)
Allowance for Funds Used During Construction - Debt and
Equity .................................................... (7,762) (22,268) (21,761) (45,739)
Changes in certain current assets and liabilities:
Net decrease (increase) in Accounts Receivable and Unbilled
Revenues .................................................. 149,479 173,261 (173,365) 77,086
Net decrease (increase) in Inventory - Fuel and Materials
and Supplies .............................................. 59,731 10,356 67,964 (16,070)
Net (decrease) increase in Accounts Payable ................. (66,252) (61,658) 98,367 (12,873)
Net change in Prepaid/Accrued Taxes ......................... (279,500) (303,631) 13,060 (34,311)
Net change in Other Current Assets and Liabilities .......... (10,364) (37,070) 24,606 (20,193)
Other ......................................................... 6,994 46,752 54,230 74,222
----------- ------------ ------------ ------------
Net cash provided by operating activities ................ 456,713 512,575 1,305,969 1,381,075
----------- ------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to Utility Plant, excluding AFDC .................... (218,426) (312,685) (555,624) (801,444)
Net (increase) decrease in Long-Term Investments .............. (44,632) (24,827) (84,994) 48,387
Increase in Nuclear Decommissioning and Other Special Funds,
excluding interest .......................................... (13,444) (34,903) (44,988) (49,730)
Cost of Plant Removal - net ................................... (13,827) (13,677) (29,824) (28,951)
Other ......................................................... (92) 7,913 (7,146) 9,675
----------- ------------ ------------ ------------
Net cash used in investing activities .................... (290,421) (378,179) (722,576) (822,063)
----------- ------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in Short-Term Debt ............................... 169,613 324,122 11,048 53,886
(Decrease) Increase in Book Overdrafts ........................ (6,906) (27,743) 4,275 23,372
Issuance of Long-Term Debt .................................... 368,324 100,000 424,644 285,435
Redemption of Long-Term Debt .................................. (414,010) (250,359) (530,690) (537,881)
Long-Term Debt Issuance and Redemption Costs .................. (38,573) -- (47,035) (29,731)
Redemption of Preferred Stock ................................. (211,602) -- (271,602) (75,000)
Net Gain on Preferred Stock Redemptions ....................... 18,493 -- 18,019 --
Issuance of Monthly Income Preferred Securities ............... -- -- 60,000 150,000
Issuance of Quarterly Income Preferred Securities .(QUIPS) .... 208,000 -- 208,000 --
Contributed Capital ........................................... -- -- 60,000 --
Cash Dividends Paid ........................................... (271,390) (273,112) (534,239) (544,555)
Other ......................................................... -- 3,344 (3,345) 8,874
----------- ------------ ------------ ------------
Net cash used in financing activities .................... (178,051) (123,748) (600,925) (665,600)
----------- ------------ ------------ ------------
Net increase (decrease) in Cash and Cash Equivalents .......... (11,759) 10,648 (17,532) (106,588)
Cash and Cash Equivalents at Beginning of Period .............. 32,373 27,498 38,146 144,734
----------- ------------ ------------ ------------
Cash and Cash Equivalents at End of Period .................... $ 20,614 $ 38,146 $ 20,614 $ 38,146
=========== ============ ============ ============
Income Taxes Paid ............................................. $ 142,751 $ 158,502 $ 264,122 $ 261,248
Interest Paid ................................................. $ 214,403 $ 188,795 $ 425,117 $ 367,312
<FN>
See Notes to Consolidated Financial Statements.
/TABLE
<PAGE>
<PAGE>
<TABLE>
PUBLIC SERVICE ELECTRIC AND GAS COMPANY
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
(Thousands of Dollars)
<CAPTION>
Three Months Ended Six Months Ended Twelve Months Ended
June 30, June 30, June 30,
-------------------------- -------------------------- --------------------------
1996 1995 1996 1995 1996 1995
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Balance at Beginning of
Period ........................... $ 1,418,653 $ 1,360,215 $ 1,372,729 $ 1,292,201 $ 1,337,284 $ 1,254,553
Add:
Net Income ....................... 108,767 111,300 292,417 318,196 591,185 628,050
------------ ------------ ------------ ------------ ------------ ------------
Total ......................... 1,527,420 1,471,515 1,665,146 1,610,397 1,928,469 1,882,603
------------ ------------ ------------ ------------ ------------ ------------
Deduct Cash Dividends:
Preferred Stock, at
required rates ................... 7,463 8,680 14,989 17,362 31,389 37,405
Common Stock ..................... 126,201 125,550 256,401 255,750 502,850 507,150
Capital Stock Expenses ........... -- 1 -- 1 -- 764
------------ ------------ ------------ ------------ ------------ ------------
Total Deductions ....... 133,664 134,231 271,390 273,113 534,239 545,319
------------ ------------ ------------ ------------ ------------ ------------
Net Gain on Preferred Stock
Redemptions ....................... 18,493 -- 18,493 -- 18,019 --
------------ ------------ ------------ ------------ ------------ ------------
Balance at End of Period ........... $ 1,412,249 $ 1,337,284 $ 1,412,249 $ 1,337,284 $ 1,412,249 $ 1,337,284
============ ============ ============ ============ ============ ============
<FN>
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<PAGE>
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. BASIS OF PRESENTATION
The financial statements included herein have been prepared
pursuant to the rules and regulations of the Securities and
Exchange Commission (SEC). Certain information and note
disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations.
However, in the opinion of management, the disclosures are adequate
to make the information presented not misleading. It is recommended
that these financial statements and notes thereto be read in
conjunction with the financial statements and the notes thereto
included in the Annual Report on Form 10-K for the year ended
December 31, 1995.
The unaudited financial information furnished herewith
reflects all adjustments which are, in the opinion of management,
necessary to a fair statement of the results for the interim
periods presented.
NOTE 2. DISCONTINUED OPERATIONS
On July 1, 1996, Enterprise Diversified Holdings Incorporated
(EDHI), a subsidiary of Public Service Enterprise Group
Incorporated (Enterprise), entered into a contract for the sale of
Energy Development Corporation (EDC) to Samedan Oil Corporation
(Samedan), a subsidiary of Noble Affiliates, Inc., for an aggregate
purchase price of $779 million subject to various purchase price
adjustments. As a result, certain financial information previously
issued has been restated herein to give effect to the
classification of EDC as discontinued operations. The sale, which
was completed on July 31, 1996, resulted in an after-tax gain of
approximately $13.5 million.
<PAGE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Operating results of EDC for the three, six, and twelve months
ended June 30, 1996 and 1995 are summarized in the following table.
<TABLE>
<CAPTION>
-----------------------------------------------------------------
Three Months Ended Six Months Ended Twelve Months Ended
June 30, June 30, June 30,
1996 1995 1996 1995 1996 1995
-------- -------- -------- -------- -------- --------
(Thousands)
<S> <C> <C> <C> <C> <C> <C>
Revenues ......................... $ 58,914 $ 54,766 126,259 $102,894 $271,367 $208,990
Operating income.................. 4,163 5,506 22,457 11,322 69,790 21,330
Earnings (losses) before income
taxes .......................... (3,638) 13 9,062 (963) 63,324 (2,889)
Income taxes ..................... (2,742) (167) 1,308 (1,320) 20,891 (4,816)
Net income (loss) ................ (896) 180 7,754 357 42,433 1,927
</TABLE>
The net assets of EDC included in Enterprise's Consolidated
Balance Sheets at June 30, 1996 and 1995, and December 31, 1995
are summarized in the following table.
<TABLE>
<CAPTION>
June 30, June 30, December 31,
1996 1995 1995
--------- --------- -----------
(Thousands)
<S> <C> <C> <C>
Property ............................. $ 632,042 $ 589,088 $ 608,015
Current assets, primarily receivables 73,563 58,444 90,986
Other assets .......................... 56,309 82,318 56,836
Current liabilities .................. 60,791 46,808 62,204
Debt ................................. 350,000 335,821 311,821
Deferred credits and other liabilities 22,648 4,762 15,907
Net assets ........................... $328,475 $342,459 $365,905
</TABLE>
The amount of debt included in determining the net assets of
EDC is the actual EDC debt balance up to $350 million, which is the
amount of external debt to be repaid from the proceeds of the sale
of EDC.
NOTE 3. RATE MATTERS
Alternative Rate Plan
On January 16, 1996, PSE&G filed a proposal, the "New Jersey
Partners in Power" Plan (Plan) with the New Jersey Board of Public
Utilities (BPU) that includes a $50 million rate reduction for
PSE&G's electric customers, various types of rate freezes,
elimination of the electric fuel adjustment mechanism, assurances
that future price increases related to controllable costs will be
lower than the rate of inflation and funding of up to an aggregate
of $55 million in two economic development initiatives.<PAGE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The seven-year Plan, if approved, would give PSE&G the
mechanisms and incentives to compete more effectively on several
fronts, including the ability to earn revenue from non-regulated
products and services, accelerate or modify depreciation schedules
to help mitigate any potential stranded asset issues and more
aggressively manage the control of costs. In addition, the Plan
would provide the foundation for ongoing price flexibility without
the need for prolonged, adversarial regulatory proceedings.
On April 24, 1996, the BPU approved intervenor status and
participatory status for twenty-two entities in the proceeding in
which it will consider the proposed Plan. On June 21, 1996, after
extensive briefing during the first and second quarter, the BPU
issued its written Order defining the process and procedures which
the parties will follow and on which the BPU will rely when
deciding this case. The Order declared 1) that PSE&G has the
burden of proving that the Plan comports with the established
legislative standards and 2) that it will not be necessary to
conduct a full traditional rate base/rate of return review to
evaluate the reasonableness of PSE&G's current rates. As a result
of the BPU's Order, the regulatory review process pertaining to
the Plan has now commenced. PSE&G cannot predict what further
actions, if any, may be taken by the BPU with respect to the Plan
or when final action may be completed.
Salem Investigation
On March 14, 1996, the BPU issued an Order regarding its
investigation into the continuing outage of the Salem Nuclear
Generating Station. The Order:
1. declared PSE&G's rates related to Salem Unit 1 interim and
subject to refund as of March 14, 1996, pending hearings
referred to below;
2. required PSE&G to file briefs explaining why the BPU should
not declare rates related to Salem Unit 2 interim and subject
to refund. Such briefs were filed by PSE&G on April 14,
1996.
<PAGE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. required PSE&G to furnish certain other financial information
related to the rate treatment of each Salem unit as well as
replacement power costs associated with the outage. In
addition, the Order requires PSE&G to provide updates of
monthly actual replacement power data for each unit and
updates on the status of the outage, including the
anticipated return to service date for each unit. On April
4, 1996, PSE&G filed the requested financial information
related to net plant investment included in the last base
rate case for each unit, operation and maintenance expenses
in current electric base rates for each unit and replacement
power costs associated with the outage of the units to date.
The data provided by PSE&G indicates that the portion of its
annual base rates attributable to the Salem units is $192
million. However, PSE&G has also submitted data which
indicates that removal of the units from base rates would
justify an offsetting increase in revenue requirements
totaling $214 million. This information was based upon facts
and circumstances which existed at the date of filing and did
not contain any adjustments necessary to reflect continuing
costs to safely maintain either or both units in a shutdown
mode; and
4. required further proceedings to determine if each Salem unit
remains "used and useful" for rate making purposes. PSE&G
cannot predict the outcome of these hearings.
On June 26, 1996, the BPU issued its Decision and Order
declaring Salem Unit 2 base rates interim and subject to refund,
effective as of that date.
The issue of whether or not Salem Unit 1 and Salem Unit 2 are
no longer used and useful will be addressed in a separate joint
investigatory hearing before the BPU. The hearings are scheduled
to be held in October 1996. Removal of Salem Unit 1 and/or Salem
Unit 2 from base rates could have a material adverse effect on
PSE&G's financial position, results of operations and net cash
flows. PSE&G believes the units should not be removed from base
rates and believes that, in the event of a unit's removal from
base rates, the replacement power costs attributable to such unit,
approximately $4 to $6 million per month, would be recoverable
through its current Electric Levelized Energy Adjustment Clause
(LEAC), and that the estimated $18 million Nuclear Performance
Standard (NPS) penalty for 1996 would be substantially reduced.
PSE&G cannot predict the outcome of this proceeding.
(See Note 4, Commitments and Contingent Liabilities).<PAGE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Levelized Gas Adjustment Charge (LGAC)
On April 24, 1996, the BPU approved PSE&G's 1995/96 LGAC,
which finalizes the interim rates approved by the BPU on December
20, 1995. On July 30, 1996, PSE&G filed its 1996/97 LGAC petition
with the BPU requesting that it be effective October 1, 1996
through December 31, 1997. PSE&G has requested the LGAC be
modified so as to more closely track the market price of gas and
avoid the distorted price signals and dislocations resulting from
the reflection of over and under recoveries. The 1996/97 LGAC
requests that residential and certain other customer billings be
converted from a levelized charge to one derived on a monthly
basis. The requested change in the LGAC pricing is the same as
the change in pricing for Large Volume Gas (LVG) and General
Service Gas (GSG) customers which was approved by the BPU in
PSE&G's 1995/96 LGAC filing. In addition, there would be a cap of
five cents per therm in the month to month change in the 1996/97
LGAC rate for all customer classes. PSE&G has also requested that
the 1996/97 LGAC reflect a refund of approximately $14 million to
LVG and GSG customers in the form of bill credits, stemming from
over collections which occurred during the 1995/96 LGAC.
Electric Levelized Energy Adjustment Clause
By Order dated May 5, 1995, the BPU approved PSE&G's LEAC.
Such Order also required that hearings be convened regarding the
April 1994 Salem 1 shutdown to determine whether PSE&G should be
allowed to recover replacement power costs of approximately $8
million, which have been deferred. On October 18, 1995, this
matter was ordered to be transferred to the OAL for hearing.
Hearings have been held and a briefing schedule established.
PSE&G cannot predict the outcome of this proceeding.
Remediation Adjustment Clause (RAC)
On July 30, 1996, PSE&G petitioned the BPU for recovery of
its Remediation Program Costs incurred during the period August
1995 through July 1996. In accordance with the BPU'S Order dated
November 4, 1994, the petition proposes to recover, effective
October 1, 1996, $4.3 million from gas customers and $2.9 million
from electric customers from October 1, 1996 through September 30,
1997.
<PAGE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Other Rate Matters
On July 21, 1995, the BPU initiated a generic proceeding to
expeditiously adopt specific standards to guide utility "off-
tariff" negotiated rate agreement programs. Such proceeding would
consider minimum prices, confidentiality, maximum contract
duration, filing requirements and such other standards as may be
necessary for compliance with the law. A written Summary Decision
and Order was issued on October 27, 1995, which required each New
Jersey electric utility, including PSE&G, to file initial minimum
tariffs, consistent with the terms of such Order, and further,
indicated that such Order will be supplemented by a Final Decision
and Order to fully discuss and explain the rationale for the BPU's
overall decision. On November 13, 1995, PSE&G filed its
compliance filing with respect to floor prices. These were
eventually modified and approved by the BPU in April 1996. PSE&G
cannot predict what impact, if any, the generic tariff may have on
its electric revenues and earnings.
In September 1994, the BPU initiated a generic proceeding
regarding overrecovery of capacity costs associated with electric
utility power purchases from cogenerators and small power
producers. The initial phase of the proceeding, which has been
transferred to the OAL, seeks to determine whether there was any
such overrecovery and, if so, the amount overrecovered. Hearings
were initiated during the first quarter of 1996 and completed on
July 25, 1996. Briefs are expected to be filed during the third
quarter of 1996.
The New Jersey Division of Ratepayer Advocate has intervened
in the proceeding and alleges, among other things, that PSE&G has
overrecovered such costs in an amount ranging from $250 to $300
million during the period from August 1991 to December 1994.
PSE&G denies such overrecovery because all relevant capacity cost
recovery mechanisms have been previously reviewed and approved by
the BPU. Additionally, PSE&G contends that a review of any
individual cost item is inappropriate and is proscribed as
retroactive ratemaking.
While PSE&G cannot predict the outcome of this proceeding,
the final resolution of this issue may impact the financial
position, results of operations and net cash flows of Enterprise
and PSE&G prospectively.
<PAGE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
On August 1, 1996, the BPU issued an Order of Inquiry which
essentially initiated a generic proceeding to resolve the
regulatory and rate issues associated with Statement of Financial
Accounting Standards (SFAS) 106, "Employers Accounting for
Postretirement Benefits Other Than Pensions" (OPEB).
In this proceeding, the BPU will determine the appropriate
level of recovery, necessary rate changes and the proper funding
mechanism for these costs. PSE&G cannot predict what action, if
any, may be taken by the BPU on this matter or when final action
may be completed.
On July 31, 1996, PSE&G filed a motion for reconsideration of
a declaratory ruling by the BPU that a proposed on-site
cogeneration project to supply the total energy needs of a large
PSE&G industrial customer did not constitute a public utility for
the purposes of regulation by the BPU. In that motion, PSE&G has
requested the BPU to impose on that customer an interim
competition transition charge. Such a charge would be imposed to
permit PSE&G the ability to recover its stranded costs which may
result from the customer's leaving the PSE&G system as a full
requirements customer. The filing is intended to ensure that
departing customers bear their fair share of any stranded costs.
PSE&G cannot predict what action the BPU may take in this matter.
NOTE 4. COMMITMENTS AND CONTINGENT LIABILITIES
Nuclear Performance Standard (NPS)
The BPU has established a NPS for nuclear generating units
owned by New Jersey electric utilities, including the five nuclear
units in which PSE&G has an ownership interest: Salem Units 1 and
2 -- 42.59%; Hope Creek -- 95%; and Peach Bottom Units 2 and 3 --
42.49%. PSE&G operates Salem and Hope Creek, while Peach Bottom is
operated by PECO Energy, Inc. (PECO).
<PAGE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The penalty/reward under the NPS is a percentage of
replacement power costs. (See table below.)
<TABLE>
<CAPTION>
CAPACITY FACTOR RANGE REWARD PENALTY
- -------------------------------------------------- ------ -------
<S> <C> <C>
Equal to or greater than 75% ........................ 30% --
Equal to or greater than 65% and less than 75% ...... None None
Equal to or greater than 55% and less than 65% ...... -- 30%
Equal to or greater than 45% and less than 55% ...... -- 40%
Equal to or greater than 40% and less than 45% ...... -- 50%
Below 40% ........................................... BPU Intervenes
</TABLE>
Under the NPS, the composite 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. PSE&G's Alternative
Rate Plan proposes the elimination of the NPS.
Based upon current projections and assumptions regarding
PSE&G's five nuclear units during 1996, including the return of
Salem 2 late in the fourth quarter and the continued outage of
Salem 1 for the remainder of the year, the 1996 aggregate capacity
factor would be approximately 53%, which would result in a penalty
of approximately $18 million. Both of the Salem units are
currently out of service and their return dates are subject to
completion of testing, analysis, repair activity and Nuclear
Regulatory Commission (NRC) concurrence that they are prepared to
restart. In the event the Salem Units are removed from base
rates, PSE&G believes the projected $18 million NPS penalty would
be substantially reduced. (See Note 3, Rate Matters).
<PAGE>
<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 $ 8.0
-------- --------
Property Damage:
Nuclear Mutual Limited.............. $ 500.0 $ 9.2
Nuclear Electric Insurance
Ltd. (NEIL II)..................... 1,400.0 8.3(D)
Nuclear Electric Insurance
Ltd. (NEIL III).................... 850.0 9.2
-------- --------
$2,750.0 $ 26.7
-------- --------
Replacement Power:
Nuclear Electric Insurance
Ltd (NEIL I)....................... $ 3.5 (E) $ 11.4
</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.
(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.
<PAGE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(D) In the event of a second industry loss triggering NEIL
II - coverage, the maximum retrospective premium
assessment can increase to $18.5 million.
(E) Represents limit of coverage available to co-owners of
Salem and Hope Creek, for each plant. Each co-owner
purchases its own policy. PSE&G is currently covered
for its percent ownership interest in each plant for
this limit.
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.
Further, a recent decision by the U.S. Supreme Court, not
involving PSE&G, held that the Price Anderson Act did not preclude
awards based on state law claims for punitive damages.
PSE&G is a member of two industry mutual insurance companies:
Nuclear Mutual Limited (NML) and Nuclear Electric Insurance
Limited (NEIL). NML provides the primary property insurance at
Salem and Hope Creek. NEIL provides excess property insurance
through its NEIL II and NEIL III policies and replacement power
coverage through its NEIL I policy. Both companies may make<PAGE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
retrospective premium assessments in case of adverse loss
experience. PSE&G's maximum potential liabilities under these
assessments are included in the table and notes above. 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
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 down.
Construction and Fuel Supplies
PSE&G has substantial commitments as part of its ongoing
construction program which include capital requirements for
nuclear fuel. PSE&G's construction program is continuously
reviewed and periodically revised as a result of changes in
economic conditions, revised load forecasts, changes in the
scheduled retirement dates of existing facilities, changes in
business strategies, 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
its electric Integrated Resource Plan (IRP), PSE&G periodically
reevaluates its forecasts of future customers, load and peak
growth, sources of electric generating capacity and demand side
management (DSM) to meet such projected growth, including the need
to construct new electric generating capacity. The IRP takes into
account assumptions concerning future demands of customers,
effectiveness of conservation and load management activities, the
long-term condition of PSE&G's plants, capacity available from
electric utilities and other suppliers and the amounts of
co-generation and other non-utility capacity projected to be
available.
Based on PSE&G's construction program, construction
expenditures are expected to aggregate approximately $2.8 billion
during the years 1996 through 2000, which includes $428 million
for nuclear fuel and $84 million of Allowance for Funds used
During Construction (AFDC). The estimate of construction
requirements is based on expected project completion dates and
includes anticipated escalation due to inflation of approximately
3% annually. Therefore, construction delays or higher inflation
levels could cause significant increases in these amounts. PSE&G<PAGE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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 1996
through 2000.
Hazardous Waste
Certain Federal and State laws authorize the United States
Environmental Protection Agency (EPA) and the New Jersey
Department of Environmental Protection (NJDEP), among other
agencies, to issue orders and bring enforcement actions to compel
responsible parties to take investigative and remedial actions at
any site that is determined to present an imminent and substantial
danger to the public or the environment because of an actual or
threatened release of one or more hazardous substances. Because of
the nature of PSE&G's business, including the production of
electricity, the distribution of gas and, formerly, the
manufacture of gas, various by-products and substances are or were
produced or handled which contain constituents classified as
hazardous. PSE&G generally provides for the disposal or processing
of such substances through licensed independent contractors.
However, these statutory provisions impose joint and several
responsibility without regard to fault on all responsible parties,
including the generators of the hazardous substances, for certain
investigative and remediation costs at sites where these
substances were disposed of or processed. PSE&G has been notified
with respect to a number of such sites and the remediation of
these potentially hazardous sites is receiving greater attention
from the government agencies involved. Generally, actions
directed at funding such site investigations and remediation
include all suspected or known responsible parties. PSE&G does not
expect its expenditures for any such site to have a material
adverse 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<PAGE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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 overall 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. (See Note 3, Rate Matters.)
NOTE 5. PREFERRED STOCK
On June 26, 1996, PSE&G Capital Trust I (Trust), a special
purpose statutory business trust controlled by PSE&G, issued $208
million of 8.625% Company-Obligated Mandatorily Redeemable
Preferred Securities of a Subsidiary Trust holding solely
Subordinated Debentures of PSE&G (QUIPS). The QUIPS pay a
quarterly dividend and have a liquidation amount of $25. The
proceeds were loaned to PSE&G.
The sole asset of the Trust is PSE&G's 8.625% Series A
Deferrable Interest Subordinated Debenture, evidenced by such
loan, in an aggregate principal amount of $214,433,000 with a
stated maturity date of June 26, 2045. PSE&G's service payments
on the loan will be used by the Trust to pay dividends on the
QUIPS. 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.
PSE&G used the proceeds to redeem all 500,000 shares of each
of its 7.52% and 7.40% Cumulative Preferred Stock at $101 per
share on June 28, 1996. In addition, PSE&G purchased, pursuant to
a tender offer, an aggregate $111.6 million of its 4.08%, 4.18%,
4.30%, 5.05%, 5.28%, 6.80% and 6.92% Cumulative Preferred Stock.
<PAGE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 6. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
Natural Gas and Crude Oil Hedging
Continuing Operations
Through June 30, 1996 and 1995, U.S. Energy Partners (USEP),
a subsidiary of Public Service Resources Corporation (PSRC),
entered into futures contracts and swaps to buy 2,530,000 mmbtu
and 3,190,000 mmbtu of natural gas at average prices of $2.05 per
mmbtu and $1.83 per mmbtu, respectively, related to fixed-price
sales commitments. Such contracts, together with physical
purchase contracts, hedged approximately 90% and 77% of its fixed-
price sales commitments at June 30, 1996 and 1995, respectively.
USEP had deferred unrealized hedge gains (losses) of $1.5 million
and($445) thousand at those respective dates.
Discontinued Operations
EDC sold natural gas futures contracts outstanding at June
30, 1996 and 1995, which hedged 5,130,000 mmbtu and 3,670,000
mmbtu, respectively. Such amounts represented approximately 11.9%
of EDC's anticipated domestic natural gas production for the
remainder of 1996 and 10.5% of EDC's production for the remainder
of 1995, at average sales prices of $1.89 per mmbtu and $1.96 per
mmbtu, respectively.
At June 30, 1996 and 1995, EDC sold crude oil futures
contracts outstanding which hedged 420,000 barrels and 250,000
barrels of oil, respectively, at an average price of $17.65 per
barrel and $19.83 per barrel, respectively. EDC has also entered
into collar agreements which have the effect of establishing a
floor and ceiling price for 1,355,000 barrels of oil. The floor
price is $18.00 per barrel and the ceiling price is $20.015 per
barrel. There was no cost to EDC to enter into these agreements.
Based upon EDC's outstanding crude oil futures and the collar
agreements at June 30, 1996 and 1995, EDC had hedged approximately
78% and 12%, respectively, of its anticipated oil production for
the remainder of the respective periods.
The deferred unrealized gains (losses) at June 30, 1996 and
1995 related to EDC's futures contracts was ($5.8) million and
$2.1 million, respectively.
<PAGE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Public Service Electric and Gas Company
Notes To Consolidated Financial Statements
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. Basis of Presentation
Note 3. Rate Matters
Note 4. Commitments and Contingent Liabilities
Note 5. Preferred Stock<PAGE>
<PAGE>
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Following are the significant changes in or additions to
information reported in the Public Service Enterprise Group
Incorporated (Enterprise) Annual Report to the Securities and
Exchange Commission (SEC) on Form 10-K for 1995, affecting
the consolidated financial condition and the results of
operations of Enterprise and its subsidiaries. This
discussion refers to the Consolidated Financial Statements
and related Notes to Consolidated Financial Statements
(Notes) of Enterprise and should be read in conjunction with
such statements and Notes.
Recent Developments
On July 1, 1996, Enterprise Diversified Holdings
Incorporated (EDHI) entered into a contract with Samedan Oil
Corporation (Samedan), a subsidiary of Noble Affiliates,
Inc., pursuant to which EDHI sold Energy Development
Corporation (EDC) to Samedan for an aggregate purchase price
of $779 million subject to various purchase price
adjustments. The sale was completed on July 31, 1996.
Enterprise expects to record an after-tax gain of
approximately $ 13.5 million, or 6 cents per share, in the
third quarter. The proceeds from the sale will be used to
repay approximately $350 million of EDHI debt related to EDC
and initiate a repurchase program of up to $350 million of
Enterprise Common Stock. As of July 31, 1996, approximately
$260 million of the EDHI debt related to EDC had been repaid.
On July 16, 1996, Enterprise announced that its Board of
Directors had authorized the repurchase of up to $350 million
of its Common Stock. Under the authorization, repurchases
will be made in the open market at the discretion of
Enterprise management. If the entire authorized amount were
to be repurchased, it would represent about 5% of
Enterprise's outstanding 244.7 million shares of Common Stock
based on current market prices.
<PAGE>
<PAGE>
Competition
There continues to be opposition in Congress and among
Northeastern governors to FERC's recent open access ruling,
Order No. 888, due to environmental concerns. The concern is
that, as a result of open access on high voltage interstate
electric transmission facilities, there will be an increase
in nitrogen oxide (nox) emissions due to increased outputs
from older, dirtier coal-fired plants in the Midwest that are
subject to less restrictive pollution control requirements.
These facilities, by increasing their power production in
order to sell into the higher priced markets including the
East, will, in turn, increase the release of pollutants that
eventually make their way to New Jersey and other
northeastern states due to the prevailing westerly winds. On
May 13, 1996, the EPA referred FERC's ruling to the Council
for Environmental Quality (CEQ). CEQ responded to the EPA's
referral on June 14, 1996. The potential for significant air
quality impacts from the FERC's ruling was affirmed by the
CEQ's response. The CEQ's response, which follows a
year-long environmental review during which the EPA,
environmental organizations, industry groups, and other
stakeholders raised serious concerns over increased pollution
from FERC's open access and electricity restructuring
policies, provides support for addressing clean air issues
and pursuing mitigation options to safeguard against
emissions increases from open access.
On June 1, 1995, the BPU issued its Order initiating a
formal Phase II proceeding of the Master Plan. The proceeding
will address wholesale and retail competition in New Jersey.
On May 23, 1996 the BPU voted to release the Phase II
Proceeding Staff Status Report: Restructuring the Electric
Power Industry in New Jersey (Status Report). The BPU also
voted to adopt the recommended procedures cited in the Status
Report to reach a resolution and render its final decisions
concerning electric power industry restructuring by
approximately year-end 1996. The BPU also agreed to follow a
concurrent, two pronged process to address the outstanding
issues and render final decisions. Therefore, the BPU will
1) conduct formal public and legislative-type hearings to
take testimony on the outstanding issues as well as accept
advance written comments to develop a formal record in this
matter and 2) establish a negotiating group comprised of
representatives of the various interest groups in this
proceeding.<PAGE>
<PAGE>
The BPU indicated its intention to release its
recommended findings by approximately October 1996, either
via a unilateral decision based upon the record before it, or
via a consensus in the event that one can be reached. Final
comments will then be taken and a final decision is expected
to be announced by year end.
Recoverability of stranded costs for PSE&G will be
largely dependent on the final Phase II report and on the
rules to be established by the BPU. Stranded costs that
could result as the industry moves to a more competitive
environment include investments in generating facilities,
transmission assets, purchased power agreements where the
price being paid under such an agreement exceeds the market
price for electricity, and regulatory assets for which
recovery is based solely on continued cost based regulation.
At this time, management cannot predict the level of stranded
costs, if any, or the extent to which the BPU will allow
recovery of such costs.
A joint task force of the BPU and the New Jersey
Treasury Department has proposed replacing the current NJGRT
with a combination of existing corporate business tax,
existing state sales and use tax and a transitional tax which
will be phased out over an expected five or six year time
frame. After the phase-out is completed, the proposal is
expected to significantly reduce the tax burden on electric
and gas utilities and improve their competitive position
vis-a-vis non-utility energy providers and energy providers
in other states. PSE&G cannot predict when or if this
proposal will be adopted.
Nuclear Operations
Both of PSE&G's Salem Nuclear Generating Units are
currently out of service and their return dates are subject
to completion of the requirements of their respective restart
plans to the satisfaction of PSE&G and the NRC, which
encompasses a substantial review and improvement of
personnel, process and equipment issues.
On May 23, 1996, PSE&G and the co-owners of Salem signed
an agreement to purchase the steam generators from the owner
of the unfinished Seabrook Nuclear Unit 2 for installation in
Salem Unit 1. Removal of the steam generators from the
Seabrook site has begun. They will be shipped to the Salem<PAGE>
<PAGE>
site and are expected to arrive at Salem before the end of
the year. By using these replacement steam generators, PSE&G
expects to return Salem 1 to service in mid-1997. The cost
of replacement, including installation, will be approximately
$150 to $170 million (PSE&G's share would be $64 to $72
million). In addition, the cost of disposal of the four old
steam generators could be as much as $20 million (PSE&G's
share would be $9 million). The disposal options include
storing them at the Salem site or shipping them to another
location. (For discussion of replacement power costs, see
Note 3, Rate Matters, of Notes.)
On July 22, 1996, PSE&G announced that although
substantial progress has been made in upgrading Salem Unit
2's major systems, some of the originally scheduled work,
along with additional work that had since been identified,
remained to be completed and that the outage at this unit
would continue well into the fourth quarter of 1996. This
change to the Unit 2 schedule is not presently expected to
impact the restart of Salem Unit 1. The inability to
successfully return these units to continuous, safe operation
could have a material adverse effect on the financial
position, results of operations and net cash flows of
Enterprise and PSE&G. (See Note 3, Rate Matters, of Notes.)
Given the additional scope of work associated with the
Salem Unit 2 delay, Unit 1 restart activities (excluding the
steam generator replacement) and various cost saving
initiatives in progress, it is expected that PSE&G's share of
Salem operation and maintenance expenditures will increase
approximately $12 million from original plans developed in
late 1995, to a total of $130 million for 1996.
Results of Operations
Earnings per share of Enterprise Common Stock was $0.55
for the three-month period ended June 30, 1996, an increase
of $0.10 per share of Common Stock over the comparable 1995
period. Earnings per share of Enterprise Common Stock was
$1.34 for the six-month period ended June 30, 1996, an
increase of $0.02 per share of Common Stock over the
comparable 1995 period. Earnings per share of Enterprise
Common Stock was $2.73 for the twelve-month period ended
June 30, 1996, an increase of $0.11 per share of Common Stock
over the comparable 1995 period.
<PAGE>
<PAGE>
Earnings per share for the three, six and twelve-month
periods ended June 30, 1996 increased primarily due to higher
electric and gas sales by PSE&G resulting from favorable
weather conditions in 1996, the purchase of certain of
PSE&G's outstanding cumulative preferred stock at discounts
to par, increased income from discontinued operations - EDC
and increased investment income from Public Service Resources
Corporation (PSRC). These increases were partially offset by
increased maintenance and operation expenses related to the
outage at Salem and Hope Creek, a decrease in the Allowance
for Funds Used During Construction (AFDC) that resulted from
a decrease in construction work in progress and increased
depreciation expenses due to more plant in service.
PSE&G - Earnings Available to Enterprise
<TABLE>
<CAPTION>
Increase or (Decrease)
-----------------------------------------------
Three Months Six Months Twelve Months
Ended June 30, Ended June 30, Ended June 30,
1996 vs. 1995 1996 vs. 1995 1996 vs. 1995
------------- -------------- --------------
Per Per Per
Amount Share Amount Share Amount Share
------ ----- ------ ----- ------ -----
(Millions, except Per Share Data)
<S> <C> <C> <C>
PSE&G
Revenues (net of fuel costs and gross.....
receipts taxes)......................... $ 33 $ .14 $ 76 $ .31 $ 142 $ .58
Other operation expenses.................. (12) (.05) (34) (.14) (11) (.04)
Maintenance expenses...................... (19) (.08) (51) (.21) (75) (.31)
Depreciation and amortization expenses.... (1) -- (10) (.04) (30) (.12)
Federal income taxes...................... 5 .02 12 .05 (36) (.15)
Interest charges.......................... 3 .01 1 -- 3 .01
Allowance for Funds used During
Construction(AFDC)..................... (9) (.04) (14) (.06) (24) (.10)
Preferred securities dividend requirements -- -- -- -- (4) (.01)
Other income ............................. 17 .07 16 .07 22 .09
------ ----- ------ ------ ------ -----
Earnings Available to Enterprise.......... $ 17 $ .07 $ (4) $ (.02) $ (13) $(.05)
====== ====== ====== ====== ====== =====
</TABLE>
<PAGE>
<PAGE>
PSE&G - Revenues
Electric
Revenues increased $22 million or 2%, $35 million or 2%,
and $198 million or 5% for the three, six and twelve-month
periods ended June 30, 1996 over the comparable periods of
1995 primarily due to higher recovery of energy costs,
increased residential and commercial sales attributable to
warmer than normal weather in the second quarter of 1996 and
the continued moderate growth in the economy. Increased
residential and commercial sales were slightly offset by
lower industrial sales. The significant components of these
changes follow:
<TABLE>
<CAPTION>
Increase or (Decrease)
-----------------------------------------------
Three Months Six Months Twelve Months
Ended June 30, Ended June 30, Ended June 30,
1996 vs. 1995 1996 vs. 1995 1996 vs. 1995
------------- -------------- --------------
Amount Amount Amount
-------------- -------------- --------------
(Millions)
<S> <C> <C> <C>
Kilowatt-hour sales....................... $ 11 $15 $ 45
Recovery of energy costs................. 8 16 113
NJGRT.................................... -- 4 14
Other operating revenues................. 1 (4) 18
PSCRC ................................... 2 4 8
-------------- -------------- --------------
Total Electric Revenues.................. $ 22 $ 35 $ 198
============== ============== ==============
</TABLE>
<PAGE>
<PAGE>
Gas
Revenues increased $28 million or 11%, $191 million or
21%, and $276 million or 17% for the three, six and twelve-
month periods ended June 30, 1996 over the comparable periods
of 1995 primarily due to a higher recovery of fuel costs,
increased residential sales due to colder weather during the
most recent heating season and increased cogeneration sales.
Other operating revenues reflect increases in offsystem sales
which are sales of excess gas to brokers and other utilities
which are not part of PSE&G's firm customer base. The
effects of those gains on total revenues for the three-month
and six-month periods were depressed by approximately $13
million due to a special rate adjustment in 1995. The
significant components of these changes follow:
<TABLE>
<CAPTION> Increase or (Decrease)
----------------------------------------------
Three Months Six Months Twelve Months
Ended June 30, Ended June 30, Ended June 30,
1996 vs. 1995 1996 vs. 1995 1996 vs. 1995
------------- -------------- --------------
Amount Amount Amount
-------------- -------------- --------------
(Millions)
<S> <C> <C> <C>
Therm sales............................ $ 24 $ 40 $ 53
Recovery of fuel costs................. 20 141 187
NJGRT.................................. (8) -- 21
Other operating revenues............... (8) 10 15
------------ ------------- --------------
Total Gas Revenues..................... $ 28 $ 191 $ 276
============= ============= ===============
</TABLE>
PSE&G - Expense
Fuel Expenses
Variances in fuel expenses do not directly affect
earnings because of fuel adjustment clauses which are part of
PSE&G's rates. However, if the proposed Alternative Rate
Plan is adopted as filed, future changes in electric fuel and
replacement power costs could impact earnings. (See Note 3,
Rate Matters, of Notes)
<PAGE>
<PAGE>
Other Operation Expenses
Other operation expenses increased $12 million or 5%,
$34 million or 8% and $11 million or 1% for the three, six
and twelve-month periods ended June 30, 1996 from the
comparable 1995 periods. The increases during the three, six
and twelve-month periods were due to higher refueling outage
expenses and restart activities at Salem and Hope Creek,
increased labor and material expenses in the gas business as
a result of greater than anticipated repair work and
increased conservation costs which were offset by higher
Demand Side Management (DSM) revenue recovered through rates.
Maintenance Expenses
Maintenance expenses increased $19 million or 28%, $51
million or 38% and $75 million or 26% for the three, six and
twelve-month periods ended June 30, 1996 from the comparable
1995 periods. The three, six and twelve-month increases were
due to refueling outage expenses associated with the ongoing
shutdown of Salem and the 1995 refueling and maintenance
outage of Hope Creek.
Depreciation and Amortization Expenses
Depreciation and amortization expenses increased $1
million or 1%, $10 million or 3% and $30 million or 5% for
the three, six and twelve-month periods ended June 30, 1996
over the comparable 1995 periods. The increases were due to
the completion of the repowering of Bergen Generating Station
in September 1995.
Federal Income Taxes
Federal income taxes decreased $5 million or 9% and $12
million or 8% for the three and six-month periods ended June
30, 1996 from the comparable 1995 periods. There was an
increase of $36 million or 13% for the twelve-month period
ended June 30, 1996 when compared to the same 1995 period.
The three and six-month decreases were primarily due to the
decrease in 1996 pre-tax income. The twelve-month increase
was principally due to the receipt of a non-taxable insurance
benefit in 1994.
<PAGE>
<PAGE>
Allowance for Funds Used During Construction
AFDC used during construction decreased $9 million or
71%, $14 million or 65% and $24 million or 52% during the
three, six and twelve-month periods ended June 30, 1996 from
the comparable 1995 periods. The three, six and twelve-month
decreases were primarily the result of a decrease in
construction work in progress resulting from the completion
of the repowering of Bergen Generating Station in September
1995. In addition, a lower AFDC rate contributed to the
decrease.
Other Income
Other income increased $17 million or 98%, $16 million
or 43% and $22 million or 31% for the three, six and twelve-
month periods over the comparable 1995 periods primarily due
to an $18 million net gain on the repurchase of certain of
PSE&G's outstanding cumulative preferred stock at discounts
to par.
EDHI - Net Income
<TABLE>
<CAPTION>
Increase or <Decrease>
-----------------------------------------------
Three Months Six Months Twelve Months
Ended June 30, Ended June 30, Ended June 30,
1996 vs. 1995 1996 vs. 1995 1996 vs. 1995
------------- -------------- --------------
Per Per Per
Amount Share Amount Share Amount Share
------ ------ ------ ------ ------ -----
(Millions, except Per Share Data)
<S> <C> <C> <C> <C> <C> <C>
PSRC ................................... 10 .04 8 .03 7 .03
CEA.................................... (1) (.01) (4) (.02) (7) (.03)
EGDC................................... (1) -- (1) -- (2) (.01)
Discontinued Operations - EDC ......... (1) -- 7 .03 40 .17
------ ------ ------ ------ ------ -----
Total............................. $ 7 $ .03 $ 10 $ .04 $ 38 $ .16
====== ====== ====== ====== ====== =====
</TABLE>
EDHI
The net income of EDHI was $15 million for the quarter
ended June 30, 1996, a $7 million increase over the period
ended June 30, 1995. The increase was primarily due to
PSRC's increased income from its Kohlberg, Kravis, Roberts
and Co. (KKR) Leveraged Buy-Out Fund investment due to a gain
related to the sale of certain assets.
<PAGE>
<PAGE
The net income of EDHI was $33 million for the six
months ended June 30, 1996, a $10 million increase over the
same period ended June 30, 1995. The increase was primarily
due to EDC's increased income of $7 million as a result of
higher gas prices and greater volumes of oil and gas sales,
and PSRC's higher income from limited partnerships resulting
in an increase in net income of $8 million. Community Energy
Alternative Incorporated's (CEA) income decreased $4 million
because of higher administrative and general expenses as well
as start-up losses related to the commencement of two
projects in April 1995.
The net income of EDHI was $90 million for the 12 month
period ended June 30, 1996, an increase of $38 million over
the 12 month period ended June 30, 1995. This was
principally because EDC's income increased by $40 million,
due in part to the realization of a settlement related to a
take or pay sales contract in November 1995. The remaining
increase was due to higher gas prices and higher oil prices
and volumes.
Liquidity and Capital Resources
Enterprise's liquidity is affected by maturing debt,
investment and acquisition activities, the capital
requirements of PSE&G's and EDHI's construction and
investment programs, permitted regulatory recovery of
expenses and collection of revenues. Capital resources
available to meet such requirements depend upon general and
regional economic conditions, PSE&G's customer retention and
growth, the ability of PSE&G and EDHI to meet competitive
pressures and to contain costs, the adequacy and timeliness
of rate relief, cost recovery and necessary regulatory
approvals, the ability to continue to operate and maintain
nuclear plants in accordance with NRC and BPU requirements,
the impact of environmental regulations, continued access to
the capital markets and continued favorable regulatory
treatment of consolidated tax benefits. For additional
information, see the discussion of Competition above and Note
4, Commitments and Contingent Liabilities, of Notes.
<PAGE>
<PAGE>
PSE&G
For the six-month period ended June 30, 1996, PSE&G had
utility plant additions, including AFDC, of $226 million, a
decrease of $109 million from the corresponding 1995 period.
For the twelve-month period ended June 30, 1996, PSE&G had
utility plant additions, including AFDC, of $577 million, a
decrease of $270 million from the corresponding 1995 period.
The six and twelve-month decreases were primarily due to the
completion of the Bergen Generating Station repowering
project.
PSE&G expects that it will be able to internally
generate all of its capital requirements, including
construction expenditures, over the next five years and
reduce its debt outstanding by approximately $1 billion,
assuming adequate and timely recovery of costs, as to which
no assurances can be given. (See Note 3, Rate Matters, and
Note 4, 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. CEA is expected to be the primary vehicle for
EDHI's business growth. 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.
On July 1, 1996, EDHI entered into a contract with
Samedan for the sale of EDC to Samedan for $779 million. For
additional discussion regarding the sale of EDC, see Recent
Developments.
PSRC will continue to limit new investments to those
related to energy businesses, while Enterprise Group
Development Corporation (EGDC) will continue to exit the real
estate business in a prudent manner. On June 20, 1996, EGDC
sold an office project located in Valley Forge, Pennsylvania.
Over the next several years, EDHI and its subsidiaries will
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 and or existing agreements at
current levels and interest rates may affect future earnings
and EDHI's cost of capital.<PAGE>
<PAGE>
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 June 30, 1996, $86 million remained as PSRC's unfunded
commitment related to these investments subject to call.
EDHI and each of its subsidiaries are subject to
restrictive business and financial covenants contained in
existing debt agreements. Prior to the sale of EDC, EDHI was
required to maintain debt to equity ratios which varied from
3:1 to 1.75:1 and twelve-month earnings before interest and
taxes (EBIT) coverage ratio of at least 1.35:1. As of June
30, 1996 and 1995, EDHI had a consolidated debt to equity
ratio of 1.06:1 and 1.15:1, respectively, and for the twelve
months ended June 30, 1996 and 1995, EBIT coverage ratios, as
defined to exclude the effects of EGDC, of 2.75:1 and 1.81:1,
respectively.
Beginning July 31, 1996, EDHI is required to maintain a
debt to equity ratio of no more than 2.00:1 and a twelve-
month EBIT coverage ratio of at least 1.50:1. As of June 30,
1996 and 1995, excluding the discontinued operations of EDC
and $350 million of dividends by EDHI to Enterprise, EDHI had
consolidated debt to equity ratios of 1.21 and 1.25,
respectively. For the twelve months ended June 30, 1996 and
1995, excluding the discontinued operations of EDC, the EBIT
coverage ratios, as defined to exclude the effects of EGDC,
were 2.45:1 and 2.32:1, respectively. Compliance with
applicable financial covenants will depend upon future
financial position and levels of earnings, as to which no
assurance can be given.
Internal Generation of Cash From Continuing Operations
Enterprise's cash provided by operations for the six
months ended June 30, 1996 decreased $4 million to $530
million from the corresponding 1995 period.
Enterprise's cash provided by operations for the twelve
months ended June 30, 1996 increased $24 million to $1.456
billion from the corresponding 1995 period. <PAGE>
<PAGE>
External Financings - Enterprise
Enterprise has a $25 million line of credit with a bank.
At June 30, 1996, Enterprise had no borrowings under this
line.
External Financings - PSE&G
The BPU has authorized PSE&G to issue approximately
$4.852 billion aggregate amount of additional
Bonds/MTNs/Preferred Stock/Preferred Securities through 1997
for refunding purposes. Under its Mortgage, PSE&G may issue
new Bonds against previous additions and improvements and/or
retired Bonds provided that the ratio of earnings to fixed
charges is at least 2:1. As of June 30, 1996, up to $2.92
billion aggregate principal amount of new bonds could be
issued against previous additions and improvements. At June
30, 1996, the ratio of earnings to fixed charges was 2.77:1.
In January 1996, PSE&G issued $350 million of its First
and Refunding Mortgage Bonds (Bonds). The net proceeds from
the sale were deposited in an escrow account for the purpose
of refunding certain higher cost Bonds at their respective
first optional redemption dates in November 1996 and February
1997.
On June 26, 1996, PSE&G Capital Trust I issued $208
million of 8.625% Quarterly Income Preferred Securities
(QUIPS). For additional information, see Note 5, Preferred
Stock, of Notes.
The BPU has authorized PSE&G to issue and have
outstanding at any one time through January 1, 1997 not more
than $1 billion of short-term obligations, consisting of
commercial paper and other unsecured borrowings from banks
and other lenders. On June 30, 1996, PSE&G had $631 million
of short-term debt outstanding.
To provide liquidity for its commercial paper program,
PSE&G has a $500 million one-year revolving credit agreement
expiring in August 1996 and a $500 million five-year
revolving credit agreement expiring in August 2000 with a
group of commercial banks, which provides for borrowings of
up to one year. On June 30, 1996, there were no borrowings
outstanding under either of these credit agreements. PSE&G
expects to be able to renew the credit agreement expiring in
1996.<PAGE>
<PAGE>
Public Service Conservation Resources Corporation
(PSCRC) has a $30 million revolving credit facility supported
by a PSE&G subscription agreement in an aggregate amount of
$30 million which terminates on March 6, 1997. As of June
30, 1996, PSCRC had $30 million outstanding under this
facility.
In March 1996, PSCRC entered into a $40 million secured
term loan facility for loans maturing in three to five years.
The agreement terminates in March 1998. As of June 30, 1996,
there was $18 million outstanding under this facility.
PSE&G Fuel Corporation (Fuelco) has a $125 million
commercial paper program to finance PSE&G's 42.49% share of
Peach Bottom nuclear fuel, supported by a $125 million
revolving credit facility with a group of banks. The credit
facility expires in 2001. PSE&G has guaranteed repayment of
Fuelco's respective obligations. As of June 30, 1996, Fuelco
had commercial paper of $76 million outstanding under the
program and the facility.
External Financings - EDHI
Through July 31, 1996, Enterprise Capital Funding
Corporation (Funding) had a commercial paper program,
supported by a commercial bank letter of credit and credit
facility, in the amount of $225 million expiring in March
1998. As of June 30, 1996, Funding had $186 million of
borrowings outstanding under this commercial paper program.
Additionally, Funding had a $225 million revolving
credit facility expiring in March 1998. As of June 30, 1996,
Funding had $70 million of borrowings outstanding under this
facility.
On July 31, 1996, Funding amended and restated its
commercial paper program and revolving credit facility in
conjunction with the sale of EDC, reducing the total amount
from $450 to $300 million and extending the maturity from
March 1998 to July 1999. The $225 million commercial paper
program was eliminated and the $225 million revolving credit
facility was increased to $300 million. As of July 31, 1996,
Funding had no borrowings outstanding under the amended and
restated facility.
<PAGE>
<PAGE>
PSE&G Capital Corporation's (Capital) MTN program
provides for an aggregate principal amount of up to $650
million of MTNs so that its total debt outstanding at any
time, including MTNs, would not exceed such amount. At June
30, 1996, Capital had total debt outstanding of $461 million,
including $355 million of MTNs.
Public Service Electric and Gas Company
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: Recent Developments; Competition;
Nuclear Operations; Results of Operations; Liquidity and
Capital Resources; Internal Generation of Cash from
Operations; and External Financings.
INFORMATION REGARDING FORWARD LOOKING STATEMENTS
This Quarterly Report on Form 10-Q includes forward
looking statements within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Although Enterprise and PSE&G believe
that their expectations are based on reasonable assumptions,
they can give no assurance that their expectations will be
achieved.
<PAGE>
<PAGE>
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
- ------ -----------------
As previously reported, PSE&G and the three other
co-owners of Salem filed suit in February 1996 in the United
States District Court for the District of New Jersey against
Westinghouse Electric Corporation (Westinghouse) seeking
damages to recover the cost of replacing the steam generators
at Salem Units 1 and 2. The suit alleges fraud and breach of
contract by Westinghouse in the sale, installation and
maintenance of the generators. In April 1996, Westinghouse
filed an answer and $2.5 million counterclaim for unpaid work
related to services at Salem. The parties to this litigation
have been ordered by the Court to participate in mediation on
the matter and the discovery process has been stayed. PSE&G
cannot predict the outcome of these proceedings.
Also previously reported, the co-owners of Salem have
filed lawsuits against Enterprise and PSE&G in the United
States District Court for the Eastern District of
Pennsylvania and in the New Jersey Superior Court alleging
mismanagement by PSE&G in its operation of Salem and are
seeking unspecified compensatory and punitive damages.
PSE&G's answers in these matters have been filed and
discovery is proceeding. While PSE&G cannot predict the
outcome of these proceedings, PSE&G believes it has operated
Salem in accordance with the requirements of the owners'
agreement and applicable law and that it has substantial and
valid defenses to these claims. On July 30, 1996, the Judge
in the Eastern District of Pennsylvania matter issued an
Order scheduling discovery and setting a trial for May 1997.
Certain information reported under Item 3 of Part I of
Enterprise's and PSE&G's Annual Report to the SEC on Form
10-K for 1995 (the "Form 10-K") is updated herein at the
respective pages indicated. References are to the related
pages and paragraph(s) of this report.
<PAGE>
<PAGE>
As previously reported in the Form 10-K at page 39 and
in a prior Form 8-K, three shareholder derivative action
civil complaints have been filed against Enterprise and
certain of its directors and officers seeking to recover
unspecified damages for alleged losses purportedly arising
out of PSE&G's operations of Salem and Hope Creek. These
three actions have been consolidated and a case management
order to deal with discovery and motions has been issued. A
fourth shareholder derivative action, alleging substantially
similar claims, was filed on July 3, 1996.
In addition, see the following at the pages indicated:
(1) Page 12. Proceedings before the BPU relating to
PSE&G's proposed Alternative Rate Plan, Docket No.
E096010028. Form 10-K, Page 73.
(2) Page 15. Proceedings before the BPU relating to
PSE&G's LGAC filed October 2, 1995, Docket No.
GR9510456. Form 10-K, Page 75.
(3) Page 15. Proceedings before the BPU relating to
recovery of replacement power costs in connection
with the April 1994 Salem 1 shutdown, Docket No.
ER94070293. Form 10-K, Page 75.
(4) Page 16. Generic proceeding before the BPU relating
to recovery of capacity costs associated with power
purchases from cogenerators, Docket No.
EX93060255. Form 10-K, Page 76.
(5) Page 16. Generic proceedings before the BPU
relating to standards for "off tariff" negotiated
rate agreement programs, Docket No. EX95070320.
Form 10-K, Page 76.
(6) Page 15. Proceedings before the BPU relating to
PSE&G's LGAC filed July 30, 1996, Docket No.
GR96070554.
(7) Page 15. Proceedings before the BPU relating to
PSE&G's RAC filed July 30, 1996, Docket No.
GR96070555.
<PAGE>
<PAGE>
(8) Page 17. Generic proceeding before the BPU relating
to the matter of an inquiry into methods of
implementation of FAS-106, Docket No. AX96070530.
(9) Page 16. Proceedings before the BPU for
reconsideration of a declaratory ruling related to
a cogeneration project at the site of a large
industrial customer and for imposition of an
interim competition transition charge. Docket No.
EE95100486.
Item 5. Other Information
- ------ -----------------
Certain information reported under Item 1 of Part I of
Enterprise's and PSE&G's Annual Reports to the Securities and
Exchange Commission on Form 10-K for 1995 (the "Form 10-K")
is updated below. References are to the related pages and
paragraph(s) of the Form 10-K as printed and distributed.
Pennsylvania - New Jersey - Maryland Interconnection
Form 10-K, Page 7, Paragraph 6
------------------------------
On July 24, 1996, the member companies of Pennsylvania-
New Jersey-Maryland Interconnection (PJM), except PECO, filed
their proposal to reorganize into an independent system
operator in response to FERC's open access proposed
rulemaking and plan to implement a restructured pool by year-
end 1996 if approved by FERC. PECO has filed a separate
proposal with FERC. PSE&G cannot predict what action FERC
will take regarding this matter.
PSE&G - Nuclear Fuel
Form 10-K, Page 7, Paragraph 2 and 1st Quarter 10-Q,
Page 45
--------------------------------------------------------
PECO has commitments for enrichment services for Peach
Bottom under contract with the United States Enrichment
Corporation. The commitments represent 100% of the
enrichment requirements through 2004. PECO does not
anticipate any difficulties in obtaining necessary enrichment
services for Peach Bottom.<PAGE>
<PAGE>
PSE&G - Nuclear Operations
Form 10-K, Page 10 and 1st Quarter 10-Q, Page 42
------------------------------------------------
Both of PSE&G's Salem Nuclear Generating Units are
currently out of service. PSE&G expects to return Salem 1 to
service in mid-1997 while Salem 2 is expected to return to
service late in the fourth quarter of 1996. Their return
dates are subject to completion of the requirements of the
restart plan to the satisfaction of PSE&G and the NRC, which
encompasses a substantial review and improvement of
personnel, process, and equipment issues. For further
discussion of the Salem Units, see Nuclear Operations in
MD&A.
Nuclear Fuel Disposal
Form 10-K, Page 17, Paragraph 3
-------------------------------
In a decision issued July 23, 1996, the Court of Appeals
found that the DOE is obligated to begin accepting spent
nuclear fuel for disposal no later than January 31, 1998.
PSE&G cannot predict when or if the DOE will accept nuclear
fuel as no repository or other storage facility currently
exists or is under construction.
Form 10-K, Page 17, Paragraph 5
-------------------------------
As a result of reracking the two spent fuel pools at
Salem, the availability of adequate spent fuel storage
capacity is estimated through 2008 for Salem 1 and 2012 for
Salem 2, prior to losing an operational full core discharge
reserve. The current shutdown of the Salem Units is expected
to extend these dates further by a few years.
<PAGE>
<PAGE>
Employee Relations
------------------
Form 10-K, Page 19, and 1st Quarter 10-Q, Page 47
-------------------------------------------------
PSE&G and the unions representing all of its represented
employees have entered into new six year contracts which will
expire April 30, 2002.
The recent amendments to PSE&G's pension plan, coupled
with other benefit modifications, had a direct impact upon
PSE&G's Pension and Postretirement Benefit Plans which
required that actuarial assumptions be modified and assets
and liabilities be remeasured. This resulted in an
immaterial increase to the annual expense.
New Matters
-----------
Following an NRC inspection in early 1996, Hope Creek
received notice of four potential violations. Two of the
potential violations concerned failure to properly implement
corrective actions, another concerned a safety evaluation for
a service water system design change and the last concerned a
violation of Technical Specifications for control rod
testing. An NRC enforcement conference was held on June 11,
1996 to discuss these potential violations, one of which
PSE&G contested. PSE&G cannot predict what actions the NRC
will take on these matters.
New Matters
-----------
On June 24, 1996, PSE&G and PECO announced the
commissioning of a study to investigate competitive
alternatives to the current independent nuclear power plant
operations of the two companies. The goal of this effort is
to determine if feasible alternatives exist to permit
diversification of financial risks and reduction of costs for
both companies in order to increase competitiveness.
<PAGE>
<PAGE>
New Matters
-----------
On July 5, 1996, the NRC notified PSE&G of the need for
a predecisional enforcement conference for apparent
violations involving alleged discrimination against two
employees for their engagement in protected activities in
accordance with federal regulations. The enforcement
conference has been scheduled for September 11, 1996. PSE&G
cannot predict what actions the NRC may take in this matter.
PART II.
Item 6. Exhibits and Reports on Form 8-K
- ------ --------------------------------
(a) A listing of exhibits being filed with this document is
as follows:
Exhibit
Number Document
------- -------------------------------------------
12 Computation of Ratios of Earnings to
Fixed Charges plus Preferred Securities
Dividend Requirements (Enterprise).
12(A) Computation of Ratios of Earnings to
Fixed Charges (PSE&G).
12(B) Computation of Ratios of Earnings to
Fixed Charges plus Preferred Securities
Dividend Requirements (PSE&G).
27(A) Financial Data Schedule (Enterprise)
27(B) Financial Data Schedule (PSE&G)
<PAGE>
<PAGE>
(b) Reports on Form 8-K.
Registrant Date of Report Item Reported
- ---------- -------------- -------------
Enterprise
and PSE&G 5-24-96 Item 5. Other events
(PSE&G Nuclear
Operations - Salem)
Enterprise
and PSE&G 6-10-96 Item 5. Other events
(PSE&G Rate Matters -
Salem Investigation
and Nuclear
Operations- Salem)
Enterprise 7-2-96 Item 5. Other events
(Enterprise) Item 7.
Financial Statements
and Exhibits
Enterprise
and PSE&G 7-22-96 Item 5. Other events
(PSE&G Nuclear
Operations - Salem)
Item 7. Financial
Statements and
Exhibits
<PAGE>
<PAGE>
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrants have duly caused these reports
to be signed on their respective behalf by the undersigned
thereunto duly authorized.
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
PUBLIC SERVICE ELECTRIC AND GAS COMPANY
--------------------------------------------
(Registrants)
By: PATRICIA A. RADO
--------------------------------------
Patricia A. Rado
Vice President and Controller
(Principal Accounting Officer)
Date: August 14, 1996
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT 12
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
PLUS PREFERRED SECURITIES DIVIDEND REQUIREMENTS
12 Months
YEARS ENDED DECEMBER 31, Ended
---------------------------------------------------------------- June 30,
1991(A) 1992(A) 1993(A) 1994 1995 1996
--------- --------- ---------- ---------- ---------- ---------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C>
Earnings as Defined in Regulation
S-K:
Net Income ...................... 543,035 504,117 595,519 679,033 662,323 667,706
Federal Income Taxes (B) ........ 274,146 253,276 316,010 322,824 364,355 337,111
Fixed Charges ................... 530,308 580,364 570,505 568,611 580,432 516,289
Earnings ........................ 1,347,489 1,337,757 1,482,034 1,570,468 1,607,110 1,521,106
--------- --------- ---------- ---------- ---------- ---------
Fixed Charges as Defined in
Regulation S-K (C):
Total Interest Expense (D) ...... 478,321 524,025 502,534 495,925 496,060 437,787
Interest Factor in Rentals ...... 9,311 9,591 11,090 12,120 11,956 11,790
Subsidiaries' Preferred Stock
Dividend Requirements ......... 29,012 31,907 38,114 42,163 49,426 49,452
Adjustment to preferred and
preference stock dividends to
state on a pre-income tax basis 13,664 14,841 18,767 18,403 22,990 17,260
--------- --------- ---------- ---------- ---------- ---------
Total Fixed Charges ...... 530,308 580,364 570,505 568,611 580,432 516,289
========= ========= ========== ========== ========== =========
Ratio of Earnings to Fixed
Charges ...................... 2.54 2.30 2.59 2.76 2.77 2.94
==== ==== ==== ==== ==== ====
(A) Excludes cumulative effect of $5.4 million credit to income reflecting a change in income taxes.
(B) Includes state income taxes and federal income taxes for other incomes.
(C) Fixed Charges represent (a) interest, whether expensed or capitalized, (b) amortization of debt discount,
premium and expense, (c) an estimate of interest implicit in rentals, and (d) preferred securities dividend
requirements of subsidiaries, increased to reflect the pre-tax earnings requirement for
Public Service Enterprise Group Incorporated.
(D) 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(A)
PUBLIC SERVICE ELECTRIC AND GAS COMPANY
COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
12 Months
YEARS ENDED DECEMBER 31, Ended
-------------------------------------------------------------- June 30,
1991 1992 1993 1994 1995 1996
---------- ---------- ---------- ---------- ---------- ---------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C>
Earnings as Defined in
Regulation S-K:
Net Income .................... 545,479 475,936 614,868 659,406 616,964 591,185
Federal Income Taxes (A) ...... 261,912 223,782 307,414 301,447 325,737 312,888
Fixed Charges ................. 367,828 411,493 401,046 408,045 418,825 435,886
Earnings ...................... 1,175,219 1,111,211 1,323,328 1,368,898 1,361,526 1,339,959
---------- ---------- ---------- ---------- ---------- ----------
Fixed Charges as Defined in
Regulation S-K (B)
Total Interest Expense (C) .... 358,517 401,902 389,956 395,925 406,869 406,033
Interest Factor in Rentals .... 9,311 9,591 11,090 12,120 11,956 11,790
Subsidiaries' Preferred Stock
Dividend Requirements ....... -- -- -- -- -- 18,063
Total Fixed Charges .... 367,828 411,493 401,046 408,045 418,825 435,886
========= ========= ========== ========== ========== ==========
Ratio of Earnings to Fixed
Charges ..................... 3.20 2.70 3.30 3.35 3.25 3.07
==== ==== ==== ==== ==== ====
(A) Includes state income taxes and federal income taxes for other income.
(B) Fixed Charges represent (a) interest, whether expensed or capitalized, (b) amortization of debt discount,
premium and expense, (c) an estimate of interest implicit in rentals, and (d) preferred securities dividend
requirements of subsidiaries, increased to reflect the pre-tax earnings requirement for Public Service Electric
and Gas Company.
(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.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT 12(B)
PUBLIC SERVICE ELECTRIC AND GAS COMPANY
COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
PLUS PREFERRED SECURITIES DIVIDEND REQUIREMENTS
12 Months
YEARS ENDED DECEMBER 31, Ended
-------------------------------------------------------------- June 30,
1991 1992 1993 1994 1995 1996
---------- ---------- ---------- ---------- ---------- ----------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C>
Earnings as Defined in Regulation
S-K:
Net Income ......................... 545,479 475,936 614,868 659,406 616,964 591,185
Federal Income Taxes (A) ........... 261,912 223,782 307,414 301,447 325,737 312,888
Fixed Charges ...................... 367,828 411,493 401,046 408,045 418,825 435,886
Earnings ........................... 1,175,219 1,111,211 1,323,328 1,368,898 1,361,526 1,339,959
---------- ---------- ---------- ---------- ---------- ----------
Fixed Charges as Defined in
Regulation S-K (B):
Total Interest Expense (C) ......... 358,517 401,902 389,956 395,925 406,869 406,033
Interest Factor in Rentals ......... 9,311 9,591 11,090 12,120 11,956 11,790
Subsidiaries' Preferred Stock
Dividend Requirements ............ -- -- -- -- -- 18,063
Preferred Stock Dividends .......... 29,012 31,907 38,114 42,147 49,426 31,389
Adjustment to preferred and preference
stock dividends tp state on a
pre-income tax basis ............. 13,691 14,768 18,843 18,763 23,428 16,564
---------- ---------- ---------- ---------- ---------- ----------
Total Fixed Charges ...... 410,531 458,168 458,003 468,955 491,679 483,839
========== ========== ========== ========== ========== ==========
Ratio of Earnings to Fixed
Charges .......................... 2.86 2.43 2.89 2.92 2.77 2.77
==== ==== ==== ==== ==== ====
(A) Includes state income taxes and federal income taxes for other income.
(B) Fixed Charges represent (a) interest, whether expensed or capitalized, (b) amortization of debt discount,
premium and expense, (c) an estimate of interest implicit in rentals, and (d) preferred securities dividend
requirements of Subsidiaries, increased to reflect the pre-tax earnings requirement for Public Service
Electric and Gas Company.
(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.
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> UT
<LEGEND>
This schedule contains summary financial information extracted from SEC Form 10-Q and is qualified in its
entirety by reference to such financial statements. The referenced financial statements are unaudited but, in
the opinion of Enterprise's management, reflect all adjustments, consisting only of normal recurring accruals,
necessary for a fair presentation.
</LEGEND>
<CIK> 0000788784
<NAME> PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 11,110,521
<OTHER-PROPERTY-AND-INVEST> 2,303,182
<TOTAL-CURRENT-ASSETS> 1,843,012
<TOTAL-DEFERRED-CHARGES> 1,686,708
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 16,943,423
<COMMON> 3,801,157
<CAPITAL-SURPLUS-PAID-IN> 0
<RETAINED-EARNINGS> 1,708,153
<TOTAL-COMMON-STOCKHOLDERS-EQ> 5,509,310
568,000
113,392
<LONG-TERM-DEBT-NET> 4,805,844
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 736,929
<LONG-TERM-DEBT-CURRENT-PORT> 283,364
0
<CAPITAL-LEASE-OBLIGATIONS> 52,752
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 4,873,832
<TOT-CAPITALIZATION-AND-LIAB> 16,943,423
<GROSS-OPERATING-REVENUE> 3,133,137
<INCOME-TAX-EXPENSE> 158,408<F1>
<OTHER-OPERATING-EXPENSES> 2,433,398
<TOTAL-OPERATING-EXPENSES> 2,590,721
<OPERATING-INCOME-LOSS> 542,416
<OTHER-INCOME-NET> 2,492
<INCOME-BEFORE-INTEREST-EXPEN> 544,908
<TOTAL-INTEREST-EXPENSE> 235,992<F2>
<NET-INCOME> 328,642
14,989<F3>
<EARNINGS-AVAILABLE-FOR-COMM> 328,642
<COMMON-STOCK-DIVIDENDS> 264,274
<TOTAL-INTEREST-ON-BONDS> 192,527
<CASH-FLOW-OPERATIONS> 591,654
<EPS-PRIMARY> 1.34
<EPS-DILUTED> 1.34
<FN>
<CAPTION>
<F1>State Income Taxes of $3,128 and Federal Income Taxes for Other Income of $1,085 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>
<FN>
<CAPTION>
<F2>Total interest expense includes tax deductible Subsidiary Preferred Dividend Requirements.
</FN>
<FN>
<CAPTION>
<F3>Preferred Stock Dividends include non-tax deductible Subsidiary Preferred Dividend Requirements.
</FN>
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> UT
<LEGEND>
This schedule contains summary financial information extracted from SEC form 10-Q and is qualified in its
entirety by reference to such financial statements. The financial statements are unaudited but, in the opinion
of PSE&G's management, reflect all adjustments, consisting only of normal recurring accruals, necessary for a
fair presentation.
</LEGEND>
<CIK> 0000081033
<NAME> PUBLIC SERVICE ELECTRIC AND GAS COMPANY
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 11,110,521
<OTHER-PROPERTY-AND-INVEST> 521,564
<TOTAL-CURRENT-ASSETS> 1,434,480
<TOTAL-DEFERRED-CHARGES> 1,682,751
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 14,749,316
<COMMON> 2,563,003
<CAPITAL-SURPLUS-PAID-IN> 594,395
<RETAINED-EARNINGS> 1,412,249
<TOTAL-COMMON-STOCKHOLDERS-EQ> 4,569,647
568,000
113,392
<LONG-TERM-DEBT-NET> 4,290,582
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 736,929
<LONG-TERM-DEBT-CURRENT-PORT> 250,000
0
<CAPITAL-LEASE-OBLIGATIONS> 52,752
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 4,168,014
<TOT-CAPITALIZATION-AND-LIAB> 14,749,316
<GROSS-OPERATING-REVENUE> 3,040,886
<INCOME-TAX-EXPENSE> 145,358<F1>
<OTHER-OPERATING-EXPENSES> 2,402,416
<TOTAL-OPERATING-EXPENSES> 2,546,689
<OPERATING-INCOME-LOSS> 494,197
<OTHER-INCOME-NET> 2,481
<INCOME-BEFORE-INTEREST-EXPEN> 496,678
<TOTAL-INTEREST-EXPENSE> 212,023<F2>
<NET-INCOME> 292,417
14,989<F3>
<EARNINGS-AVAILABLE-FOR-COMM> 295,921
<COMMON-STOCK-DIVIDENDS> 256,401
<TOTAL-INTEREST-ON-BONDS> 175,621
<CASH-FLOW-OPERATIONS> 456,713
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<CAPTION>
<F1>State Income Taxes of $659 and Federal Income Taxes for Other Income of $1,085 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>
<FN>
<CAPTION>
<F2>Total interest expense includes tax deductible Subsidiary Preferred Dividend Requirements.
</FN>
<FN>
<CAPTION>
<F3>Preferred Stock Dividends include non-tax deductible Subsidiary Preferred Dividend Requirements.
</FN>
</TABLE>
