SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13E-4
ISSUER TENDER OFFER STATEMENT
(PURSUANT TO SECTION 13(E)(1) OF THE SECURITIES EXCHANGE ACT OF 1934)
PUBLIC SERVICE ELECTRIC AND GAS COMPANY
(NAME OF THE ISSUER AND PERSON(S) FILING STATEMENT)
4.08% Cumulative Preferred Stock
4.18% Cumulative Preferred Stock
4.30% Cumulative Preferred Stock
5.05% Cumulative Preferred Stock
5.28% Cumulative Preferred Stock
6.80% Cumulative Preferred Stock
6.92% Cumulative Preferred Stock
(TITLE OF CLASS OF SECURITIES)
744567 306 (4.08% Cumulative Preferred Stock)
744567 405 (4.18% Cumulative Preferred Stock)
744567 504 (4.30% Cumulative Preferred Stock)
744567 603 (5.05% Cumulative Preferred Stock)
744567 702 (5.28% Cumulative Preferred Stock)
744567 801 (6.80% Cumulative Preferred Stock)
744567 710 (6.92% Cumulative Preferred Stock)
(CUSIP NUMBER OF CLASS OF SECURITIES)
Robert C. Murray
Senior Vice President and Chief Financial Officer
80 Park Plaza, T4B
P.O. Box 570
Newark, New Jersey 07101
(201) 430-5630
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE NOTICES
AND COMMUNICATIONS ON BEHALF OF THE PERSON(S) FILING STATEMENT)
MAY 16, 1996
(DATE TENDER OFFER FIRST PUBLISHED, SENT OR GIVEN TO SECURITY HOLDERS)
CALCULATION OF FILING FEE
TRANSACTION VALUATION* AMOUNT OF FILING FEE
--------------------- --------------------
$125,260,500 $ 25,052.10
* Pursuant to Section 13(e)(3) of the Securities Exchange Act of 1934, as
amended, and Rule 0-11(b)(1) thereunder, the transaction value was
calculated by multiplying 187,500 shares of 4.08% Preferred Stock, 187,500
shares of 4.18% Preferred Stock, 187,500 shares of 4.30% Preferred Stock,
187,500 shares of 5.05% Preferred Stock, 187,500 shares of 5.28% Preferred
Stock, 187,500 shares of 6.80% Preferred Stock and 450,000 shares of 6.92%
Preferred Stock by $59.30, $60.76, $62.50, $73.40, $76.74, $97.42 and
$99.14, the respective per share purchase prices.
[ ] CHECK BOX IF ANY PART OF THE FEE IS OFFSET AS PROVIDED BY RULE 0-11(A)(2)
AND IDENTIFY THE FILING WITH WHICH THE OFFSETTING FEE WAS PREVIOUSLY PAID.
IDENTIFY THE PREVIOUS FILING BY REGISTRATION STATEMENT NUMBER, OR THE FORM
OR SCHEDULE, AND THE DATE OF ITS FILING.
Amount Previously Paid: N/A Filing Parties: N/A
Form or Registration Nos.: N/A Date Filed N/A
Page 1 of 5 Pages
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EXPLANATORY NOTE
Copies of the Offer to Purchase and each Letter of Transmittal, among other
documents, have been filed by Public Service Electric and Gas Company, a New
Jersey corporation (the "Company") as Exhibits to this Issuer Tender Offer
Statement on Schedule 13E-4 (the "Statement"). Unless otherwise indicated, all
material incorporated by reference in this Statement in response to items or
sub-items of this Statement is incorporated by reference to the corresponding
caption in the Offer to Purchase, including the information stated under such
captions as being incorporated in response thereto.
ITEM 1. Security and Issuer.
(a) The name of the issuer is Public Service Electric and Gas Company, a
New Jersey corporation, which has its principal executive offices at
80 Park Plaza, Newark, New Jersey 07101 (telephone number 201-430-
7000).
(b) The information set forth in the front cover page, "Introduction,"
Section 1-"Purpose of the Offer; Certain Effects of the Offer; Plans
of the Company After the Offer" and Section 12 - "Transactions and
Agreements Concerning the Shares" of the Offer to Purchase is
incorporated herein by reference.
(c) The information set forth in Section 9 - "Price Ranges of Shares;
Dividends" of the Offer to Purchase is incorporated herein by
reference.
(d) Not applicable.
ITEM 2. Source and Amount of Funds.
(a) The information set forth in Section 11 - "Source and Amount of Funds"
in the Offer to Purchase is incorporated herein by reference.
(b) Not applicable.
ITEM 3. Purpose of the Tender Offer and Plans or Proposals of the Issuer or
Affiliate.
The information set forth in Section 1 - "Purpose of the Offer;
Certain Effects of the Offer; Plans of the Company After the Offer" in
the Offer to Purchase is incorporated herein by reference.
ITEM 4. Interest in Securities of the Issuer.
The information set forth in Section 12 - "Transactions and Agreements
Concerning the Shares" in the Offer to Purchase is incorporated herein
by reference.
Page 2 of 5 Pages
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ITEM 5. Contracts, Arrangements, Understandings or Relationships with Respect
to the Issuer's Securities.
Not applicable.
ITEM 6. Persons Retained, Employed or to be Compensated.
The information set forth in Section 14 - "Fees and Expenses" in the
Offer to Purchase is incorporated herein by reference.
ITEM 7. Financial Information.
(a)-(b) The information set forth in Section 10 - "Certain Information
Concerning the Company" in the Offer to Purchase and Exhibit (g)(1)
and (g)(2) hereto is incorporated herein by reference.
ITEM 8. Additional Information.
(a) Not applicable.
(b) There are no applicable regulatory requirements which must be complied
with or approvals which must be obtained in connection with the Offer
other than compliance with the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder
including, without limitation, Rule 13e-3 and Rule 13e-4, the rules
and regulations promulgated by the New Jersey Board of Public
Utilities and the requirements of the state securities or "Blue Sky"
laws.
(c) Not applicable.
(d) Not applicable.
(e) Not applicable.
Item 9. Material to be Filed as Exhibits.
Exhibit No. Description
- ----------- -----------
(a)(1) Offer to Purchase dated May 16, 1996.
(a)(2) Form of Letter of Transmittal.
(a)(3) Form of Notice of Guaranteed Delivery.
(a)(4) Letter to Brokers, Dealers, Commercial Banks, Trust Companies and
Other Nominees dated May 16, 1996.
Page 3 of 5 Pages
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(a)(5) Letter to Clients for use by Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees.
(a)(6) Letter to Holders of Shares dated May 16, 1996.
(a)(7) Press Release dated May 16, 1996.
(a)(8) Summary Advertisement dated May 17, 1996.
(a)(9) Guidelines of the Internal Revenue Service for Certification of
Taxpayer Identification Number on Substitute Form W-9.
(b) Not applicable.
(c) Not applicable.
(d) Not applicable.
(e) Not applicable.
(f) Not applicable.
(g)(1) Annual Report on Form 10-K for the year ended December 31, 1995.
(g)(2) Quarterly Report on Form 10-Q for the quarter ended March 31, 1996.
Page 4 of 5 Pages
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SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
Dated: May 16, 1996 PUBLIC SERVICE ELECTRIC AND GAS COMPANY
By: /s/ Francis J. Riepl
-----------------------------------------
Name: Francis J. Riepl
Title: Vice President and Treasurer
Page 5 of 5 Pages
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EXHIBIT INDEX
--------------
Exhibit No. Description
- ----------- -----------
(a)(1) Offer to Purchase dated May 16, 1996.
(a)(2) Form of Letter of Transmittal.
(a)(3) Form of Notice of Guaranteed Delivery.
(a)(4) Letter to Brokers, Dealers, Commercial Banks, Trust Companies and
Other Nominees dated May 16, 1996.
(a)(5) Letter to Clients for use by Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees.
(a)(6) Letter to Holders of Shares dated May 16, 1996.
(a)(7) Press Release dated May 16, 1996.
(a)(8) Summary Advertisement dated May 17, 1996.
(a)(9) Guidelines of the Internal Revenue Service for Certification of
Taxpayer Identification Number on Substitute Form W-9.
(b) Not applicable.
(c) Not applicable.
(d) Not applicable.
(e) Not applicable.
(f) Not applicable.
(g)(1) Annual Report on Form 10-K for the year ended December 31, 1995.
(g)(2) Quarterly Report on Form 10-Q for the quarter ended March 31, 1996.
EXHIBIT 99.(a)(1)
OFFER TO PURCHASE FOR CASH
BY
PUBLIC SERVICE ELECTRIC AND GAS COMPANY
187,500 SHARES OF ITS 4.08% CUMULATIVE PREFERRED STOCK
($100 PAR VALUE) (CUSIP NO. 744567 306) AT A PURCHASE PRICE OF $59.30
PER SHARE
187,500 SHARES OF ITS 4.18% CUMULATIVE PREFERRED STOCK
($100 PAR VALUE) (CUSIP NO. 744567 405) AT A PURCHASE PRICE OF $60.76
PER SHARE
187,500 SHARES OF ITS 4.30% CUMULATIVE PREFERRED STOCK
($100 PAR VALUE) (CUSIP NO. 744567 504) AT A PURCHASE PRICE OF $62.50
PER SHARE
187,500 SHARES OF ITS 5.05% CUMULATIVE PREFERRED STOCK
($100 PAR VALUE) (CUSIP NO. 744567 603) AT A PURCHASE PRICE OF $73.40
PER SHARE
187,500 SHARES OF ITS 5.28% CUMULATIVE PREFERRED STOCK
($100 PAR VALUE) (CUSIP NO. 744567 702) AT A PURCHASE PRICE OF $76.74
PER SHARE
187,500 SHARES OF ITS 6.80% CUMULATIVE PREFERRED STOCK
($100 PAR VALUE) (CUSIP NO. 744567 801) AT A PURCHASE PRICE OF $97.42
PER SHARE
450,000 SHARES OF ITS 6.92% CUMULATIVE PREFERRED STOCK
($100 PAR VALUE) (CUSIP NO. 744567 710) AT A PURCHASE PRICE OF $99.14
PER SHARE
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON THURSDAY, JUNE 13, 1996 UNLESS THE OFFER IS EXTENDED.
Public Service Electric and Gas Company, a New Jersey corporation (the
"Company"), invites (i) the holders of its 4.08% Cumulative Preferred Stock
($100 par value) (the "4.08% Preferred") to tender their shares of such stock
(the "4.08% Shares") at a price of $59.30 per 4.08% Share, (ii) the holders of
its 4.18% Cumulative Preferred Stock ($100 par value) (the "4.18% Preferred") to
tender their shares of such stock (the "4.18% Shares") at a price of $60.76 per
4.18% Share, (iii) the holders of its 4.30% Cumulative Preferred Stock ($100 par
value) (the "4.30% Preferred") to tender their shares of such stock (the "4.30%
Shares") at a price of $62.50 per 4.30% Share, (iv) the holders of its 5.05%
Cumulative Preferred Stock ($100 par value) (the "5.05% Preferred") to tender
their shares of such stock (the "5.05% Shares") at a price of $73.40 per 5.05%
Share, (v) the holders of its 5.28% Cumulative Preferred Stock ($100 par value)
(the "5.28% Preferred") to tender their shares of such stock (the "5.28%
Shares") at a price of $76.74 per 5.28% Share, (vi) the holders of its 6.80%
Cumulative Preferred Stock ($100 par value) (the "6.80% Preferred") to tender
their shares of such stock (the "6.80% Shares") at a price of $97.42 per 6.80%
Share and (vii) the holders of its 6.92% Cumulative Preferred Stock ($100 par
value) (the "6.92% Preferred") to tender their shares of such stock (the "6.92%
Shares") at a price of $99.14 per 6.92% Share, net to the seller in cash, upon
the terms and subject to the conditions set forth in this Offer to Purchase (the
"Offer to Purchase") and in each applicable Letter of Transmittal (which,
together with the Offer to Purchase, constitutes the "Offer" with respect to the
applicable Series of Preferred Stock). The 4.08% Shares, the 4.18% Shares, the
4.30% Shares, the 5.05% Shares, the 5.28% Shares, the 6.80% Shares and the 6.92%
Shares collectively constitute the "Shares." The Company will purchase all
Shares validly tendered and not withdrawn up to the 187,500 shares sought of the
4.08% Preferred, 187,500 shares sought of the 4.18% Preferred, 187,500 shares
sought of the 4.30% Preferred, 187,500 shares sought of the 5.05% Preferred,
187,500 shares sought of the 5.28% Preferred, 187,500 shares sought of the 6.80%
Preferred and 450,000 shares sought of the 6.92% Preferred (each, the "Amount
Sought"), upon the terms and subject to the conditions of the Offer, including
the provisions relating to proration described herein. Shares not purchased
because of proration will be returned. Each Offer has its own Letter of
Transmittal and Notice of Guaranteed Delivery.
-------------------
THE OFFER FOR ONE SERIES OF PREFERRED STOCK IS INDEPENDENT OF THE OFFER FOR
ANY OTHER SERIES OF PREFERRED STOCK. THE OFFER IS NOT CONDITIONED UPON ANY
MINIMUM NUMBER OF SHARES OF THE APPLICABLE SERIES OF PREFERRED STOCK BEING
TENDERED. THE OFFER IS, HOWEVER, SUBJECT TO CERTAIN OTHER CONDITIONS. SEE
SECTION 8--"CERTAIN CONDITIONS OF THE OFFER."
SUBJECT TO THE RECEIPT OF A PROPERLY COMPLETED AND DULY EXECUTED NOTICE OF
SOLICITED TENDERS AS DESCRIBED HEREIN, THE COMPANY WILL PAY TO A SOLICITING
DEALER (AS DEFINED HEREIN) A SOLICITATION FEE OF $1.25 PER SHARE FOR ANY SHARES
TENDERED, ACCEPTED FOR PAYMENT AND PAID FOR PURSUANT TO THE OFFER.
-------------------
The Shares, except the 6.92% Shares, are listed and traded on the New York
Stock Exchange, Inc. (the "New York Stock Exchange"). The 6.92% Shares are
traded in the over-the-counter market and are not listed on any national
securities exchange or quoted on the automated quotation system of a registered
securities association. For information concerning the Shares, quarterly sales
prices and bids, see Section 9--"Price Ranges of Shares; Dividends."
STOCKHOLDERS ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR THE SHARES.
-------------------
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE FAIRNESS OR MERITS
OF SUCH TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION
CONTAINED IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS
UNLAWFUL.
-------------------
THE COMPANY, ITS BOARD OF DIRECTORS AND ITS EXECUTIVE OFFICERS MAKE NO
RECOMMENDATION TO ANY STOCKHOLDER AS TO WHETHER TO TENDER ANY OR ALL SHARES
OF ANY SERIES OF PREFERRED STOCK PURSUANT TO THE OFFER. STOCKHOLDERS
MUST MAKE THEIR OWN DECISION AS TO WHETHER TO TENDER SHARES OF ANY
SERIES OF PREFERRED STOCK PURSUANT TO THE OFFER AND, IF SO,
HOW MANY SHARES TO TENDER.
-------------------
The Dealer Managers for the Offer are:
GOLDMAN, SACHS & CO. MERRILL LYNCH & CO.
-------------------
The date of this Offer to Purchase is May 16, 1996.
<PAGE>
IMPORTANT
Any stockholder desiring to tender any or all of such stockholder's Shares
should either (1) complete and sign the applicable Letter of Transmittal, in
accordance with the instructions in such Letter of Transmittal, mail it or
deliver it by hand or facsimile transmission, and any other required documents
to First Chicago Trust Company of New York, as Depositary, and either deliver
the certificates for such Shares to the Depositary or deliver such Shares
pursuant to the procedure for book-entry transfer set forth in Section
5-"Procedure for Tendering Shares" or (2) request such stockholder's broker,
dealer, commercial bank, trust company or nominee to effect the transaction for
such stockholder. Stockholders whose Shares are registered in the name of a
broker, dealer, commercial bank, trust company or nominee must contact such
broker, dealer, commercial bank, trust company or nominee if they desire to
tender such Shares. Stockholders who desire to tender Shares and whose
certificates for such Shares are not immediately available, or who cannot comply
in a timely manner with the procedure for book-entry transfer, should tender
such Shares by following the procedures for guaranteed delivery set forth in
Section 5-"Procedure for Tendering Shares."
Questions or requests for assistance or for additional copies of this Offer
to Purchase, the applicable Letter of Transmittal, the applicable Notice of
Guaranteed Delivery or other tender offer materials may be directed to Georgeson
& Company Inc., as Information Agent, or the Dealer Managers at their respective
addresses and telephone numbers set forth on the back cover of this Offer to
Purchase.
NO PERSON HAS BEEN AUTHORIZED TO MAKE ANY RECOMMENDATION ON BEHALF OF THE
COMPANY AS TO WHETHER STOCKHOLDERS SHOULD TENDER OR REFRAIN FROM TENDERING
SHARES OF ANY SERIES OF PREFERRED STOCK PURSUANT TO THE OFFER. NO PERSON HAS
BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN
CONNECTION WITH THE OFFER OTHER THAN THOSE CONTAINED HEREIN OR IN THE APPLICABLE
LETTER OF TRANSMITTAL. IF GIVEN OR MADE, SUCH RECOMMENDATION, INFORMATION AND
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY.
<PAGE>
TABLE OF CONTENTS
<TABLE>
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PAGE
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<S> <C> <C>
SUMMARY................................................................................ iii
INTRODUCTION........................................................................... 1
SPECIAL FACTORS........................................................................ 2
Section 1. Purpose of the Offer; Certain Effects of the Offer; Plans of the Company
After the Offer.......................................................... 2
Section 2. Certain Federal Income Tax Consequences.................................. 5
Section 3. Certain Legal Matters; Regulatory and Foreign Approvals; No Appraisal
Rights................................................................... 8
THE OFFER.............................................................................. 9
Section 4. Number of Shares; Purchase Price; Expiration Date; Receipt of Dividend;
Extension of the Offer; Proration........................................ 9
Section 5. Procedure for Tendering Shares........................................... 10
Section 6. Withdrawal Rights........................................................ 12
Section 7. Acceptance for Payment of Shares and Payment of Purchase Price........... 12
Section 8. Certain Conditions of the Offer.......................................... 14
Section 9. Price Ranges of Shares; Dividends........................................ 16
Section 10. Certain Information Concerning the Company............................... 19
Section 11. Source and Amount of Funds............................................... 21
Section 12. Transactions and Agreements Concerning the Shares........................ 21
Section 13. Extension of Tender Period; Termination; Amendments...................... 21
Section 14. Fees and Expenses........................................................ 22
Section 15. Miscellaneous............................................................ 24
</TABLE>
ii
<PAGE>
SUMMARY
This general summary is provided solely for the convenience of holders of
Shares and is qualified in its entirety by reference to the full text and more
specific details contained in this Offer to Purchase and the applicable Letter
of Transmittal and any amendments hereto and thereto. Each of the capitalized
terms used in this Summary and not defined herein has the meaning set forth
elsewhere in this Offer to Purchase.
<TABLE>
<CAPTION>
<S> <C>
The Company..................... Public Service Electric and Gas Company
The Shares...................... Shares of 4.08% Cumulative Preferred Stock ($100 par
value) Shares of 4.18% Cumulative Preferred Stock ($100
par value) Shares of 4.30% Cumulative Preferred Stock
($100 par value) Shares of 5.05% Cumulative Preferred
Stock ($100 par value) Shares of 5.28% Cumulative
Preferred Stock ($100 par value) Shares of 6.80%
Cumulative Preferred Stock ($100 par value) Shares of
6.92% Cumulative Preferred Stock ($100 par value)
Number of Shares Sought......... 187,500 of the 250,000 4.08% Shares outstanding; 187,500
of the 249,942 4.18% Shares outstanding; 187,500 of the
250,000 4.30% Shares outstanding; 187,500 of the 250,000
5.05% Shares outstanding; 187,500 of the 250,000 5.28%
Shares outstanding; 187,500 of the 250,000 6.80% Shares
outstanding; and 450,000 of the 600,000 6.92% Shares
outstanding.
Purchase Price.................. $59.30 per 4.08% Share, $60.76 per 4.18% Share, $62.50
per 4.30% Share, $73.40 per 5.05% Share, $76.74 per 5.28%
Share, $97.42 per 6.80% Share and $99.14 per 6.92% Share,
in each case net to the seller in cash. See Section
9--"Price Ranges of Shares; Dividends."
Independent Offer............... The Offer for one Series of Preferred is independent of
the Offer for any other Series of Preferred. The Offer is
not conditioned upon any minimum number of Shares of the
applicable Series of Preferred being tendered. The Offer
is, however, subject to certain other conditions.
Expiration Date of the Offer.... The Offer expires on Thursday, June 13, 1996 at 12:00
Midnight, New York City time, unless extended.
How to Tender Shares............ See Section 5--"Procedure for Tendering Shares." For
further information, call the Information Agent or the
Dealer Managers or consult your broker for assistance.
Withdrawal Rights............... Tendered Shares of any Series of Preferred may be
withdrawn at any time until the expiration of the Offer
with respect to such Series of Preferred and, unless
theretofore accepted for payment, may also be withdrawn
after Friday, July 12, 1996. See Section 6--"Withdrawal
Rights."
Purpose of the Offer............ The Company is making the Offer because it believes that
the purchase of Shares is economically attractive to the
Company. In addition, the Offer gives stockholders the
opportunity to sell their Shares at a premium over market
price and without the usual transaction costs associated
with a market sale. See Section 1--"Purpose of the Offer;
Certain Effects of the Offer; Plans of the Company After
the Offer."
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iii
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Dividends....................... The Board of Directors of the Company will consider the
declaration of dividends on the Company's capital stock
at its meeting on May 21, 1996. The Regular Quarterly
Dividend for each Series of Preferred, if, when and as
declared, will be paid on June 28, 1996 to holders of
record as of the close of business on June 7, 1996. A
holder of record of Shares on June 7, 1996 who tenders
Shares will be entitled to the Regular Quarterly
Dividend, regardless of when such tender is made. Holders
of Shares purchased pursuant to the Offer will not be
entitled to any dividends in respect of any later
dividend periods. See Section 9--"Price Ranges of Shares;
Dividends."
Brokerage Commissions........... Not payable by stockholders.
Solicitation Fee................ The Company will pay to a Soliciting Dealer a
solicitation fee of $1.25 per Share for any Shares
tendered, accepted for payment and paid for pursuant to
the Offer.
Stock Transfer Tax.............. None, except as provided in Instruction 6 of the Letters
of Transmittal. See Section 7--"Acceptance for Payment of
Shares and Payment of Purchase Price."
Payment Date.................... Promptly after the applicable Expiration Date of the
Offer.
Further Information............. Additional copies of this Offer to Purchase and the
applicable Letter of Transmittal may be obtained by
contacting Georgeson & Company Inc., Wall Street Plaza,
New York, New York 10005, telephone (800) 223-2064
(toll-free) and (212) 440-9800 (brokers and dealers).
Questions about the Offer should be directed to Goldman,
Sachs & Co. at (800) 828-3182 or Merrill Lynch & Co. at
(212) 449-4914 (call collect).
</TABLE>
iv
<PAGE>
INTRODUCTION
To the Holders of 4.08% Cumulative Preferred Stock,
4.18% Cumulative Preferred Stock,
4.30% Cumulative Preferred Stock,
5.05% Cumulative Preferred Stock,
5.28% Cumulative Preferred Stock,
6.80% Cumulative Preferred Stock, and
6.92% Cumulative Preferred Stock:
Public Service Electric and Gas Company, a New Jersey corporation (the
"Company"), invites (i) the holders of its 4.08% Cumulative Preferred Stock
($100 par value) (the "4.08% Preferred") to tender their shares of such stock
(the "4.08% Shares") at a price of $59.30 per 4.08% Share, (ii) the holders of
its 4.18% Cumulative Preferred Stock ($100 par value) (the "4.18% Preferred") to
tender their shares of such stock (the "4.18% Shares") at a price of $60.76 per
4.18% Share, (iii) the holders of its 4.30% Cumulative Preferred Stock ($100 par
value) (the "4.30% Preferred") to tender their shares of such stock (the "4.30%
Shares") at a price of $62.50 per 4.30% Share, (iv) the holders of its 5.05%
Cumulative Preferred Stock ($100 par value) (the "5.05% Preferred") to tender
their shares of such stock (the "5.05% Shares") at a price of $73.40 per 5.05%
Share, (v) the holders of its 5.28% Cumulative Preferred Stock ($100 par value)
(the "5.28% Preferred") to tender their shares of such stock (the "5.28%
Shares") at a price of $76.74 per 5.28% Share, (vi) the holders of its 6.80%
Cumulative Preferred Stock ($100 par value) (the "6.80% Preferred") to tender
their shares of such stock (the "6.80% Shares") at a price of $97.42 per 6.80%
Share and (vii) the holders of its 6.92% Cumulative Preferred Stock ($100 par
value) (the "6.92% Preferred") to tender their shares of such stock (the "6.92%
Shares") at a price of $99.14 per 6.92% Share, net to the seller in cash, upon
the terms and subject to the conditions set forth in this Offer to Purchase (the
"Offer to Purchase") and in the applicable Letter of Transmittal (which,
together with the Offer to Purchase, constitutes the "Offer" with respect to the
applicable Series of Preferred). Each series of the Company's Cumulative
Preferred Stock which is subject to the Offer is referred to herein as a "Series
of Preferred" and the shares of all Series of Preferred subject to the Offer are
collectively referred to as the "Shares." The Company will purchase all Shares
validly tendered and not withdrawn up to 187,500 shares sought of the 4.08%
Preferred, 187,500 shares sought of the 4.18% Preferred, 187,500 shares sought
of the 4.30% Preferred, 187,500 shares sought of the 5.05% Preferred, 187,500
shares sought of the 5.28% Preferred, 187,500 shares sought of the 6.80%
Preferred and 450,000 shares sought of the 6.92% Preferred (each, the "Amount
Sought"), upon the terms and subject to the conditions of the Offer, including
the provisions relating to proration described herein. Shares not purchased
because of proration will be returned.
THE COMPANY, ITS BOARD OF DIRECTORS AND ITS EXECUTIVE OFFICERS MAKE NO
RECOMMENDATION TO ANY STOCKHOLDER AS TO WHETHER TO TENDER ANY OR ALL SHARES OF
ANY SERIES OF PREFERRED PURSUANT TO THE OFFER. STOCKHOLDERS MUST MAKE THEIR OWN
DECISION AS TO WHETHER TO TENDER SHARES OF ANY SERIES OF PREFERRED PURSUANT TO
THE OFFER AND, IF SO, HOW MANY SHARES TO TENDER.
The Board of Directors of the Company (the "Board") will consider the
declaration of dividends on the Company's capital stock at its May 21, 1996
meeting. The regular quarterly dividend on each Series of Preferred (the
"Regular Quarterly Dividend"), if, when and as declared, will be paid on June
28, 1996 to holders of record as of the close of business on June 7, 1996. A
holder of record of Shares on June 7, 1996 who tenders Shares will be entitled
to the Regular Quarterly Dividend, regardless of when
1
<PAGE>
such tender is made. Holders of Shares purchased pursuant to the Offer will not
be entitled to any dividends in respect of any later dividend periods.
THE OFFER FOR ONE SERIES OF PREFERRED IS INDEPENDENT OF THE OFFER FOR ANY
OTHER SERIES OF PREFERRED. THE OFFER IS NOT CONDITIONED UPON ANY MINIMUM NUMBER
OF SHARES BEING TENDERED. THE OFFER IS, HOWEVER, SUBJECT TO CERTAIN OTHER
CONDITIONS. SEE SECTION 8-"CERTAIN CONDITIONS OF THE OFFER."
Tendering stockholders will not be obligated to pay brokerage commissions,
solicitation fees or, subject to the Instructions to the applicable Letter of
Transmittal, stock transfer taxes on the purchase of Shares by the Company. The
Company will pay all charges and expenses of the Depositary, Information Agent
and the Dealer Managers incurred in connection with the Offer.
As of May 15, 1996, there were issued and outstanding 250,000 Shares of each
of the 4.08% Preferred, the 4.30% Preferred, the 5.05% Preferred, the 5.28%
Preferred and the 6.80% Preferred, 249,942 Shares of the 4.18% Preferred and
600,000 Shares of the 6.92% Preferred. The Company is offering to purchase up to
187,500 Shares of each of the 4.08% Preferred, the 4.18% Preferred, the 4.30%
Preferred, the 5.05% Preferred, the 5.28% Preferred and the 6.80% Preferred and
450,000 Shares of the 6.92% Preferred.
Each Series of Preferred, other than the 6.92% Preferred, is listed and
traded on the New York Stock Exchange, Inc. ("New York Stock Exchange") under
the respective symbol listed below: 4.08% Preferred under "PEG-A"; 4.18%
Preferred under "PEG-B"; 4.30% Preferred under "PEG-C"; 5.05% Preferred under
"PEG-D"; 5.28% Preferred under "PEG-E"; and 6.80% Preferred under "PEG-G". The
6.92% Shares are traded in the over-the-counter market and are not listed on any
national securities exchange or quoted on the automated quotation system of a
registered securities association. Stockholders are urged to obtain current
market quotations for the Shares. The information concerning recent quarterly
trading history of the Shares of each Series of Preferred is set forth in
Section 9-"Price Ranges of Shares; Dividends."
SPECIAL FACTORS
SECTION 1. PURPOSE OF THE OFFER; CERTAIN EFFECTS OF THE OFFER; PLANS OF THE
COMPANY AFTER THE OFFER.
The Company is making the Offer because it believes that, given the current
market prices of the Shares and the opportunity for the Company to replace the
Shares with other securities that in the aggregate have a lower after-tax cost,
the purchase of the Shares pursuant to the Offer is economically attractive to
the Company. See Section 10-"Certain Information Concerning the Company." The
Board, including all non-employee directors of the Company, has authorized the
Offer by a unanimous vote.
The Company believes the Offer is fair to unaffiliated holders of Shares. In
making this determination, the Company considered that (a) the Offer gives
holders of Shares the opportunity to sell their Shares at a premium over market
price and (b) the Offer provides stockholders who are considering a sale of all
or a portion of the Shares the opportunity to sell those Shares for cash without
the usual transaction costs associated with open-market sales. See Section
9-"Price Ranges of Shares; Dividends." The Company did not find it practicable
to, and did not, quantify or otherwise assign relative weights to these factors.
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Neither the Company nor the Board received any report, opinion or appraisal
from an outside party which is materially related to the Offer, including, but
not limited to, any report, opinion or appraisal relating to the consideration
or the fairness of the consideration to be offered to the holders of the Shares
or the fairness of such Offer to the Company or the unaffiliated holders of
Shares. Neither the Board nor any director has retained an unaffiliated
representative to act solely on behalf of unaffiliated holders of Shares for the
purposes of negotiating the terms of the Offer or preparing a report concerning
the fairness of the Offer.
Except as set forth in Section 10-"Certain Information Concerning the
Company," following the consummation of the Offer, the business and operations
of the Company will be continued by the Company substantially as they are
currently being conducted. Neither the Company nor Public Service Enterprise
Group Incorporated, the holder of all issued and outstanding common stock of the
Company ("Parent"), has any plans or proposals which relate to or would result
in: (a) the acquisition by any Person of additional securities of the Company or
Parent or the disposition of securities of the Company or Parent, other than in
the ordinary course of business; (b) an extraordinary corporate transaction,
such as a merger, reorganization or liquidation involving the Company or any of
its material subsidiaries or Parent; (c) a sale or transfer of a material amount
of assets of the Company or any of its material subsidiaries; (d) any change in
the present Board or management of the Company or Parent; (e) any material
change in the present dividend rate or policy or indebtedness or capitalization
of the Company; (f) any other material change in the Company's corporate
structure or business; (g) a change in the Company's Restated Certificate of
Incorporation or Bylaws; (h) except as otherwise described in this Offer to
Purchase, a class of equity securities of the Company becoming eligible for
termination of registration pursuant to Section 12(g)(4) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"); or (i) except as
otherwise described in this Offer to Purchase, the suspension of the Company's
obligation to file reports pursuant to Section 15(d) of the Exchange Act.
Following the expiration of the Offer, the Company may, in its sole
discretion, determine to redeem Shares then subject to redemption at the
applicable redemption prices, or to purchase any outstanding Shares through
privately negotiated transactions, open market purchases, another tender offer
or otherwise, on such terms and at such prices as the Company may determine from
time to time. The terms of subsequent purchases or offers could differ from
those of the Offer, and may be at a higher price than the related price per
Share offered hereby, except that the Company will not make any such purchases
of Shares until the expiration of ten business days after the termination of the
Offer. Any possible future purchases of Shares by the Company will depend on
many factors, including the market prices of the Shares, the Company's business
and financial position, alternative investment opportunities available to the
Company, the results of the Offer and general economic and market conditions.
As of May 15, 1996, the ratings of the Company's preferred stock, including
each Series of Preferred, by Standard & Poor's Ratings Group ("S&P"), Moody's
Investors Service, Inc. ("Moody's") and Duff & Phelps, Inc. ("D&P") were BBB+,
Baa1 and A-, respectively. The Company has been informed by D&P that the rating
for the Company's preferred stock is under review with possible negative
implications.
The purchase of Shares of a Series of Preferred pursuant to the Offer will
reduce the number of holders of Shares of that Series of Preferred and the
number of such Shares that might otherwise trade publicly, and, depending upon
the number of Shares so purchased, such reduction could adversely affect the
liquidity and market value of the remaining Shares of that Series of Preferred
held by the public. In addition, depending upon the number of Shares of a Series
of Preferred, other than the 6.92% Preferred, purchased pursuant to the Offer,
the Shares of that Series of Preferred may no longer meet the requirements of
the New York Stock Exchange for continued listing. As of May 15, 1996, there
were issued and outstanding 250,000 Shares of each of the 4.08% Preferred, 4.30%
Preferred, 5.05% Preferred, 5.28% Preferred and 6.80% Preferred and 249,942
Shares of the 4.18% Preferred. According
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to the New York Stock Exchange's published guidelines, the New York Stock
Exchange would consider delisting a Series of Preferred if, among other things,
the number of publicly held Shares for such Series of Preferred should fall
below 100,000 or the aggregate market value of such Series of Preferred should
fall below $2,000,000. If, as a result of the purchase of Shares pursuant to the
Offer or otherwise, any of the six Series of Preferred currently listed on the
New York Stock Exchange no longer meets the requirements of the New York Stock
Exchange for continued listing and the listing of such Series of Preferred is
discontinued, the market for such Series of Preferred would be adversely
affected.
In the event of the delisting of any of the six Series of Preferred by the
New York Stock Exchange, it is possible that such Series of Preferred would
continue to trade on another securities exchange or in the over-the-counter
market and that price quotations would be reported by such exchange, by the
National Association of Securities Dealers, Inc. ("NASD") through the National
Association of Securities Dealers Automated Quotation System ("NASDAQ") or by
other sources. The extent of the public market for such Series of Preferred and
the availability of such quotations would, however, depend upon such factors as
the number of stockholders remaining at such time, the interest in maintaining a
market in such Series of Preferred on the part of securities firms, the possible
termination of registration under the Exchange Act as described below, and other
factors.
The six Series of Preferred currently listed on the New York Stock Exchange
are presently "margin securities" under the regulations of the Board of
Governors of the Federal Reserve System, which has the effect, among other
things, of allowing brokers to extend credit on the collateral of such
securities. If a Series of Preferred remains listed on the New York Stock
Exchange, the Shares of such Series of Preferred will continue to be "margin
securities." If a Series of Preferred currently listed on the New York Stock
Exchange were delisted, depending upon factors similar to those described above,
such Series of Preferred may no longer constitute "margin securities" for
purposes of the margin regulations of the Board of Governors of the Federal
Reserve System, in which case, Shares of such Series of Preferred could no
longer be used as collateral for loans made by brokers.
There are currently issued and outstanding 600,000 Shares of the 6.92%
Preferred that are traded only in the over-the-counter market.
Each Series of Preferred is currently registered under the Exchange Act.
Registration of any such series under the Exchange Act may be terminated upon
application of the Company to the Securities and Exchange Commission (the
"Commission") pursuant to Section 12(g)(4) of the Exchange Act if such Series of
Preferred is neither held by 300 or more holders of record nor listed on a
national securities exchange. Termination of registration of any Series of
Preferred under the Exchange Act would substantially reduce the information
required to be furnished by the Company to holders of Shares corresponding to
such Series of Preferred (although the Company would, among other things, remain
subject to the reporting obligations under the Exchange Act as a result of other
of its outstanding securities) and would make certain provisions of the Exchange
Act, such as the requirement of Rule 13e-3 thereunder with respect to "going
private" transactions, no longer applicable in respect of such Series of
Preferred. If registration of any Series of Preferred under the Exchange Act
were terminated, Shares of such Series of Preferred would no longer be "margin
securities" or be eligible for NASDAQ reporting. There are currently 364 holders
of record of the 4.08% Preferred, 262 holders of record of the 4.18% Preferred,
316 holders of record of the 4.30% Preferred, 515 holders of record of the 5.05%
Preferred, 427 holders of record of the 5.28% Preferred, 253 holders of record
of the 6.80% Preferred and 3 holders of record of the 6.92% Preferred.
All Shares purchased by the Company pursuant to the Offer will be retired,
cancelled and thereafter returned to the status of authorized but unissued
shares of the Company's preferred stock. All Shares, except the 6.92% Shares,
remaining outstanding after the Offer will continue to be redeemable at the
option of the Company at the redemption price plus accumulated and unpaid
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dividends to the date of redemption which price is greater than the applicable
price per Share offered hereby. The 6.92% Shares will not be redeemable by the
Company until February 1, 2004. Upon liquidation or dissolution of the Company,
holders of each Series of Preferred are entitled to receive a liquidation
preference of $100 per Share, plus all accumulated and unpaid dividends thereon
to the date of payment, prior to the payment of any amounts to holders of the
Company's common stock.
THE COMPANY, ITS BOARD AND ITS EXECUTIVE OFFICERS MAKE NO RECOMMENDATION TO
ANY STOCKHOLDER AS TO WHETHER TO TENDER ANY OR ALL SHARES OF ANY SERIES OF
PREFERRED PURSUANT TO THE OFFER. STOCKHOLDERS MUST MAKE THEIR OWN DECISION AS TO
WHETHER TO TENDER SHARES OF ANY SERIES OF PREFERRED PURSUANT TO THE OFFER AND,
IF SO, HOW MANY SHARES TO TENDER.
SECTION 2. CERTAIN FEDERAL INCOME TAX CONSEQUENCES
EACH HOLDER OF SHARES IS URGED TO CONSULT AND RELY ON SUCH HOLDER'S OWN TAX
ADVISOR WITH RESPECT TO THE TAX CONSEQUENCES TO THE HOLDER OF TENDERING SHARES
PURSUANT TO THE OFFER.
IN GENERAL. The following summary describes certain Federal income tax
consequences relating to the Offer. The summary deals only with Shares held as
capital assets within the meaning of Section 1221 of the Internal Revenue Code
of 1986, as amended (the "Code"), and does not address tax consequences that may
be relevant to investors in special tax situations, such as certain financial
institutions, tax-exempt organizations, life insurance companies, dealers in
securities or currencies, or stockholders holding the Shares as part of a
conversion transaction, as part of a hedge or hedging transaction, or as a
position in a straddle for tax purposes. Each stockholder should consult its own
tax advisor with regard to the Offer and the application of Federal income tax
laws, as well as the laws of any state, local or foreign taxing jurisdiction, to
its particular situation.
CHARACTERIZATION OF THE SALE. A sale of Shares by a stockholder of the
Company pursuant to the Offer will be a taxable transaction for Federal income
tax purposes. Under Section 302 of the Code, a sale of Shares by a stockholder
to the Company pursuant to the Offer will be treated as a "sale or exchange" of
such Shares for Federal income tax purposes (rather than as a distribution by
the Company with respect to the Shares held by the tendering stockholder) if the
receipt of cash upon such sale (a) results in a "complete redemption" (i.e. a
complete termination of the stockholder's interest) of the Shares and any other
stock in the Company owned by the stockholder, or (b) is "not essentially
equivalent to a dividend" with respect to the stockholder (each as described
below).
If either of the above tests is satisfied, and the sale of the Shares is
therefore treated as a "sale or exchange" of such Shares for Federal income tax
purposes, the tendering stockholder will recognize gain or loss equal to the
difference between the amount of cash received by the stockholder pursuant to
the Offer and the stockholder's tax basis in the Shares sold pursuant to the
Offer. Any such gain or loss will be capital gain or loss, and will be long-term
capital gain or loss if the Shares have been held for more than one year. If a
tendering stockholder does not own, either directly or indirectly under the
attribution rules described below, any common stock of Parent, a sale of Shares
by such stockholder to the Company pursuant to the Offer will be treated as a
sale or exchange of such Shares for Federal income tax purposes, provided that
the Shares constitute a capital asset in such stockholder's hands. See "-Section
302 Tests" and "-Constructive Ownership" below.
If neither of the above tests is satisfied, the tendering stockholder would
be treated as having received a dividend to the extent of the stockholder's
allocable portion of the Company's earnings and profits for Federal income tax
purposes. The cash amount of such dividend would be included in gross
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income as an ordinary item in its entirety (without reduction for the tax basis
of the Shares sold pursuant to the Offer), no loss would be recognized, and the
tendering stockholder's basis in the Shares sold pursuant to the Offer would be
added to such stockholder's basis in its remaining Shares or other stock that it
owns in the Company, if any. If neither of the above tests is satisfied, to the
extent the amount of cash received by the stockholder pursuant to the Offer
exceeds such stockholder's allocable portion of the Company's earnings and
profits, such stockholder's basis will be reduced by the amount of such excess.
If the amount of cash received by such stockholder exceeds its basis in the
Shares, the stockholder would be required to treat the excess as gain from the
sale or exchange of property.
SECTION 302 TESTS. The receipt of cash by a stockholder will be a "complete
redemption" of all the Shares owned by the stockholder if either (a) all of the
Shares and any other stock of the Company actually and constructively owned by
the stockholder are sold pursuant to the Offer, or (b) all of the Shares and any
other stock of the Company actually owned by the stockholder are sold pursuant
to the Offer and, with respect to Shares and other stock of the Company
constructively owned by the stockholder which are not sold pursuant to the
Offer, the stockholder waives constructive ownership of all such Shares under
procedures described in Section 302(c) of the Code. However, Section 302(c) only
permits the waiver of the constructive ownership rules in limited circumstances.
Accordingly, stockholders expecting to waive constructive ownership should
consult their own tax advisors regarding eligibility and procedural rules
applicable to their particular situations.
The receipt of cash by a stockholder will be "not essentially equivalent to
a dividend" if the stockholder's sale of Shares pursuant to the Offer results in
a "meaningful reduction" in the stockholder's interest in the Company. The sale
of Shares to the Company by a tendering stockholder that does not own, either
directly or indirectly under the attribution rules, any common stock of Parent
may also qualify as "not essentially equivalent to a dividend" regardless of
proration in the Offer. Also, a stockholder who owns only a small amount of
common stock of Parent should probably satisfy the "not essentially equivalent
to a dividend" test. However, because what constitutes a "meaningful reduction"
depends upon a variety of factors, stockholders expecting to rely upon the "not
essentially equivalent to a dividend" test should consult their own tax advisors
as to its application in their particular situations.
CONSTRUCTIVE OWNERSHIP. In determining whether any of the tests under
Section 302 of the Code are satisfied, stockholders must take into account not
only the Shares which are actually owned by the stockholder, but also Shares
which are constructively owned by the stockholder under Section 318 of the Code.
Under Section 318 of the Code, a stockholder may constructively own Shares
actually owned, and in some cases constructively owned, by certain related
individuals or entities and Shares which the stockholder has the right to
acquire by exercise of an option or by conversion. Contemporaneous dispositions
or acquisitions of Shares by a stockholder or related individuals or entities
may be deemed to be part of a single integrated transaction which will be taken
into account in determining whether any of the tests under Section 302 of the
Code have been satisfied.
EACH STOCKHOLDER SHOULD BE AWARE THAT BECAUSE PRORATION MAY OCCUR IN THE
OFFER, EVEN IF ALL THE SHARES ACTUALLY AND CONSTRUCTIVELY OWNED BY A STOCKHOLDER
ARE TENDERED PURSUANT TO THE OFFER, FEWER THAN ALL OF SUCH SHARES MAY BE
PURCHASED BY THE COMPANY. THUS, PRORATION MAY AFFECT WHETHER A SALE BY A
STOCKHOLDER PURSUANT TO THE OFFER WILL MEET ANY OF THE TESTS UNDER SECTION 302
OF THE CODE.
CORPORATE STOCKHOLDER DIVIDEND TREATMENT. If a sale of Shares by a corporate
stockholder is treated as a dividend, the corporate stockholder may be entitled
to claim a deduction equal to 70% of the dividend under Section 243 of the Code,
subject to applicable limitations. Corporate stockholders should, however,
consider the effect of Section 246(c) of the Code which disallows the 70%
dividends received deduction with respect to stock that is held for 45 days or
less or where the corporate stockholder is under an obligation to make related
payments with respect to substantially similar or related property. For this
purpose, the length of time a taxpayer is deemed to have held stock may be
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reduced by periods during which the taxpayer's risk of loss with respect to the
stock is diminished by reason of the existence of certain options or other
transactions. Moreover, under Section 246A of the Code, if a corporate
stockholder has incurred indebtedness directly attributable to an investment in
Shares, the 70% dividends-received deduction may be reduced by a percentage
generally computed based on the amount of such indebtedness and the total
adjusted tax basis in the Shares.
Any amount received by a corporate stockholder pursuant to the Offer that is
treated as a dividend would likely constitute an "extraordinary dividend" under
Section 1059 of the Code. For this purpose, all dividends received by a
stockholder within, and having their ex-dividend date within, an 85-day period
(expanded to a 365-day period in the case of dividends received in such period
that in the aggregate exceed 20% of the stockholder's adjusted tax basis in the
Shares) are aggregated and also treated as extraordinary dividends. Accordingly,
a corporate stockholder would be required under Section 1059(a) of the Code to
reduce its basis (but not below zero) in its Shares by the non-taxed portion of
the aggregate dividend (i.e., the portion of the dividend for which a deduction
is allowed). If such portion exceeds the stockholder's tax basis for its Shares
(and its tax basis in any other stock of the Company that it owns), the
stockholder would be required to treat the excess as gain from the sale of its
remaining Shares or other stock that it owns in the Company. Corporate
stockholders should consult their own tax advisors as to the application of
Section 1059 of the Code to the Offer.
FOREIGN STOCKHOLDERS. The Company will withhold Federal income tax at a rate
of 30% from gross proceeds paid pursuant to the Offer to a foreign stockholder
or his agent, unless the Company determines that a reduced rate of withholding
is applicable pursuant to a tax treaty or that an exemption from withholding is
applicable because such gross proceeds are effectively connected with the
conduct of a trade or business by the foreign stockholder within the United
States. For this purpose, a foreign stockholder is any stockholder that is not
(a) a citizen or resident of the United States, (b) a corporation, partnership
or other entity created or organized in or under the laws of the United States,
or (c) any estate or trust the income of which is subject to Federal income
taxation regardless of its source. Without definite knowledge to the contrary,
the Company will determine whether a stockholder is a foreign stockholder by
reference to the stockholder's address. A foreign stockholder may be eligible to
file for a refund of such tax or a portion of such tax if such stockholder (a)
meets the "complete redemption," or "not essentially equivalent to a dividend"
tests described above, (b) is entitled to a reduced rate of withholding pursuant
to a treaty and the Company withheld at a higher rate, or (c) is otherwise able
to establish that no tax or a reduced amount of tax was due. In order to claim
an exemption from withholding on the ground that gross proceeds paid pursuant to
the Offer are effectively connected with the conduct of a trade or business by a
foreign stockholder within the United States or that the foreign stockholder is
entitled to the benefits of a tax treaty, the foreign stockholder must deliver
to the Depositary (or other person who is otherwise required to withhold Federal
income tax) a properly executed statement claiming such exemption or benefits on
Treasury Form 4224 (Exemption from Withholding on Tax on Income Effectively
Connected with the conduct of a Trade or Business in the United States) or
Treasury Form 1001 (Ownership, Exemption, or Reduced Rate Certificate),
respectively. Such statements may be obtained from the Depositary. Foreign
stockholders are urged to consult their own tax advisors regarding the
application of Federal income tax withholding, including eligibility for a
withholding tax reduction or exemption and the refund procedures.
BACKUP WITHHOLDING. ANY TENDERING STOCKHOLDER OR OTHER PAYEE WHO FAILS TO
COMPLETE AND SIGN THE SUBSTITUTE FORM W-9 THAT IS INCLUDED IN THE APPLICABLE
LETTER OF TRANSMITTAL (OR, IN THE CASE OF A FOREIGN STOCKHOLDER, FORM W-8
OBTAINABLE FROM THE DEPOSITARY) MAY BE SUBJECT TO A REQUIRED FEDERAL INCOME TAX
BACKUP WITHHOLDING OF 31% OF THE GROSS PROCEEDS PAYABLE TO SUCH STOCKHOLDER OR
OTHER PAYEE PURSUANT TO THE OFFER. See Section 7-"Acceptance for Payment of
Shares and Payment of Purchase Price" with respect to the application of the
Federal income tax backup withholding.
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THE TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL INFORMATION ONLY.
THE TAX CONSEQUENCES OF A SALE PURSUANT TO THE OFFER MAY VARY DEPENDING UPON,
AMONG OTHER THINGS, THE PARTICULAR CIRCUMSTANCES OF THE TENDERING STOCKHOLDER.
NO INFORMATION IS PROVIDED HEREIN AS TO THE STATE, LOCAL OR FOREIGN TAX
CONSEQUENCES OF THE TRANSACTION CONTEMPLATED BY THE OFFER. STOCKHOLDERS ARE
URGED TO CONSULT THEIR OWN TAX ADVISORS TO DETERMINE THE PARTICULAR FEDERAL,
STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF SALES MADE BY THEM PURSUANT TO THE
OFFER AND THE EFFECT OF THE STOCK OWNERSHIP ATTRIBUTION RULES MENTIONED ABOVE.
SECTION 3. CERTAIN LEGAL MATTERS; REGULATORY AND FOREIGN APPROVALS; NO APPRAISAL
RIGHTS.
The Company is not aware of any license or regulatory permit that appears to
be material to its business that might be adversely affected by its acquisition
of Shares as contemplated in the Offer or of any approval or other action by any
government or governmental, administrative or regulatory authority or agency,
domestic or foreign, that would be required for the Company's acquisition or
ownership of Shares pursuant to the Offer, except for approval by the New Jersey
Board of Public Utilities, which has previously been obtained, or as described
under Section 10-"Certain Information Concerning the Company." Should any other
approval or other action be required, the Company currently contemplates that it
will seek such approval or other action. The Company cannot predict whether it
may determine that it is required to delay the acceptance for payment of, or
payment for, Shares tendered pursuant to the Offer pending the outcome of any
such matter. There can be no assurance that any such approval or other action,
if needed, would be obtained or would be obtained without substantial conditions
or that the failure to obtain any such approval or other action might not result
in adverse consequences to the Company's business.
The Company intends to make all required filings under the Exchange Act.
The Company's obligation under the Offer to accept for payment, or make
payment for, Shares is subject to certain conditions. See Section 8-"Certain
Conditions of the Offer."
No approval of the holders of any Shares or the holders of any of the
Company's other securities is required in connection with the Offer.
No appraisal rights are available to holders of Shares in connection with
the Offer.
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THE OFFER
SECTION 4. NUMBER OF SHARES; PURCHASE PRICE; EXPIRATION DATE; RECEIPT OF
DIVIDEND; EXTENSION OF THE OFFER; PRORATION.
NUMBER OF SHARES; PURCHASE PRICE; EXPIRATION DATE. Upon the terms and
subject to the conditions described in this Offer to Purchase and in the
applicable Letter of Transmittal, the Company will purchase up to the Amount
Sought of any Shares of a Series of Preferred validly tendered on or prior to
the Expiration Date with respect to that Series of Preferred (and not withdrawn)
at a price of $59.30 per 4.08% Share, $60.76 per 4.18% Share, $62.50 per 4.30%
Share, $73.40 per 5.05% Share, $76.74 per 5.28% Share, $97.42 per 6.80% Share
and $99.14 per 6.92% Share. The later of 12:00 midnight, New York City time, on
June 13, 1996, or the latest time and date to which the Offer with respect to a
Series of Preferred is extended, is referred to herein as the "Expiration Date"
with respect to that Series of Preferred. If the Offer is oversubscribed with
respect to a Series of Preferred, only Shares tendered on or prior to the
Expiration Date with respect to that Series of Preferred shall be eligible for
proration. The Offer for one Series of Preferred is independent of the Offer for
any other Series of Preferred. The Offer is not conditioned on any minimum
number of Shares of the applicable Series of Preferred being tendered. The Offer
is, however, subject to certain other conditions. Section 8-"Certain Conditions
of the Offer."
RECEIPT OF DIVIDEND. The Board will consider the declaration of dividends on
the Company's capital stock on May 21, 1996. The Regular Quarterly Dividend for
a Series of Preferred, if, as and when declared, will be paid to holders of
record as of the close of business on June 7, 1996. A holder of record of Shares
on June 7, 1996 who tenders Shares will be entitled to such Regular Quarterly
Dividend, regardless of when such tender is made. Holders of Shares purchased
pursuant to the Offer will not be entitled to any dividends in respect of any
later dividend periods.
EXTENSION OF THE OFFER. The Company expressly reserves the right, in its
sole discretion, at any time or from time to time, to extend the period of time
during which the Offer is open with respect to a Series of Preferred by giving
oral or written notice of such extension to the Depositary and making a public
announcement thereof. If the Company extends the Offer with respect to one
Series of Preferred, the Company is under no obligation to extend the Offer with
respect to any other Series of Preferred. See Section 13-"Extension of Tender
Period; Termination; Amendments." There can be no assurance, however, that the
Company will exercise its right to extend any Offer or, if one Offer is
extended, that any other Offer will also be extended.
If (a) the Company (i) increases or decreases the price to be paid for the
Shares of a Series of Preferred hereunder, (ii) increases or decreases the
Amount Sought with respect to a particular Series of Preferred or (iii)
increases or decreases the Soliciting Dealers' fees, and (b) the applicable
Offer is scheduled to expire at any time earlier than the tenth business day
from and including the date that notice of such increase or decrease is first
published, sent or given in the manner specified in Section 13-"Extension of the
Tender Period; Termination; Amendments," the Offer for such Shares of that
Series of Preferred will be extended until the expiration of such ten business
day period. For purposes of the Offer, "business day" means any day other than a
Saturday, Sunday or Federal holiday and consists of the time period from 12:01
a.m. through 12:00 midnight, New York City time.
PRORATION. Upon the terms and subject to the conditions of the Offer, if the
Amount Sought of a Series of Preferred or fewer Shares of that Series of
Preferred have been validly tendered and not withdrawn on or prior to the
Expiration Date with respect to that Series of Preferred, the Company will
purchase all such Shares. Upon the terms and subject to the conditions of the
Offer, if more Shares than the Amount Sought of a Series of Preferred (or, if
decreased as described herein, such lesser number as the Company may elect to
purchase pursuant to the Offer) have been validly tendered and not withdrawn on
or prior to the Expiration Date with respect to that Series of Preferred, the
Company will
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purchase Shares of that Series of Preferred from each tendering holder on a pro
rata basis, subject to adjustment to avoid the purchase of fractional Shares.
If proration of tendered Shares of a Series of Preferred is required,
because of the difficulty in determining the number of Shares of that Series of
Preferred validly tendered (including Shares tendered by the guaranteed delivery
procedure described in Section 5-"Procedure for Tendering Shares"), the Company
does not expect that it would be able to announce the final proration factor or
to commence payment for any Shares of such Series of Preferred purchased
pursuant to the Offer until approximately five business days after the
applicable Expiration Date. Preliminary results of proration will be announced
by press release promptly after such Expiration Date. Holders of Shares may
obtain such preliminary information from the Dealer Managers or the Information
Agent and may also be able to obtain such information from their brokers.
All tendered Shares not purchased pursuant to the Offer, including Shares
not purchased because of proration, will be returned to the tendering
stockholders at the Company's expense promptly following the applicable
Expiration Date.
SECTION 5. PROCEDURE FOR TENDERING SHARES.
TENDER OF SHARES. To tender Shares validly pursuant to the Offer, each
tendering holder of Shares must either:
(a) send to the Depositary (at one of its addresses set forth on the back
cover of this Offer to Purchase) a properly completed and duly executed Letter
of Transmittal for the applicable Shares being tendered, or facsimile thereof,
together with any required signature guarantees and any other documents required
by such Letter of Transmittal, and either (i) cause certificates for the
applicable Shares to be tendered to be received by the Depositary at one of such
addresses or (ii) cause such Shares to be delivered pursuant to the procedures
for book-entry transfer described below (and a confirmation of such delivery
received by the Depositary), in each case on or prior to the applicable
Expiration Date; or
(b) comply with the guaranteed delivery procedure described under
"Guaranteed Delivery Procedure" below.
A tender of Shares made pursuant to any method of delivery set forth herein
or in the applicable Letter of Transmittal will constitute a binding agreement
between the tendering holder and the Company upon the terms and subject to the
conditions of the Offer.
No alternative, conditional or contingent tenders of Shares will be
accepted.
It is a violation of Rule 14e-4 promulgated under the Exchange Act for
persons to tender Shares for their own account unless the persons so tendering
(a) have a net long position equal to or greater than the amount of Shares
tendered or other securities immediately convertible into, or exercisable or
exchangeable for, the amount of Shares tendered, and will acquire such Shares
for tender by conversion, exercise or exchange of such other securities and (b)
will cause such Shares to be delivered in accordance with the terms of the
Offer. Rule 14e-4 provides a similar restriction applicable to the tender or
guarantee of a tender on behalf of another person. The tender of Shares pursuant
to any one of the procedures described herein will constitute the tendering
stockholder's representation and warranty that (a) such stockholder has a net
long position in the Shares being tendered within the meaning of Rule 14e-4, and
(b) the tender of such Shares complies with Rule 14e-4. The Company's acceptance
for payment of Shares tendered pursuant to the Offer will constitute a binding
agreement between the tendering stockholder and the Company upon the terms and
subject to the conditions of the Offer.
10
<PAGE>
BOOK-ENTRY DELIVERY. The Depositary will establish an account with respect
to the Shares at The Depository Trust Company and The Philadelphia Depository
Trust Company (together referred to as the "Book-Entry Transfer Facilities") for
purposes of the Offer within two business days after the date of this Offer to
Purchase. Any financial institution that is a participant in the system of any
Book-Entry Transfer Facility may make delivery of Shares by causing such
Book-Entry Transfer Facility to transfer such Shares into the Depositary's
account in accordance with the procedures of such Book-Entry Transfer Facility.
Although delivery of Shares may be effected through book-entry transfer, a
properly completed and duly executed Letter of Transmittal for the Series of
Preferred being tendered, or facsimile thereof, together with any required
signature guarantees and any other required documents, must be received by the
Depositary at one of its addresses set forth on the back cover of this Offer to
Purchase on or prior to the applicable Expiration Date, or the tendering holder
of Shares must comply with the guaranteed delivery procedure described below.
DELIVERY OF SUCH LETTER OF TRANSMITTAL AND ANY OTHER REQUIRED DOCUMENTS TO A
BOOK-ENTRY TRANSFER FACILITY OR THE COMPANY DOES NOT CONSTITUTE DELIVERY TO THE
DEPOSITARY.
SIGNATURE GUARANTEES AND METHOD OF DELIVERY. Except as otherwise provided
below, all signatures on a Letter of Transmittal must be guaranteed by a
financial institution (including most banks, savings and loan associations and
brokerage houses) that is a participant in the Security Transfer Agents
Medallion Program or the Stock Exchange Medallion Program (each of the foregoing
being referred to as an "Eligible Institution"). Signatures on a Letter of
Transmittal need not be guaranteed if (a) such Letter of Transmittal is signed
by the registered holder of the Shares tendered therewith and such holder has
not completed the box entitled "Special Payment Instructions" or the box
entitled "Special Delivery Instructions" on the applicable Letter of Transmittal
or (b) such Shares are tendered for the account of an Eligible Institution. If
Shares are registered in the name of a person other than the signatory on the
applicable Letter of Transmittal, or if unpurchased Shares (including Shares not
purchased because of proration) are to be issued to a person other than the
registered holder(s), the certificates must be endorsed or accompanied by
appropriate stock powers, in either case signed exactly as the name or names of
the registered holder(s) appear on the Shares with the signature(s) on the
Shares or stock powers guaranteed as aforesaid. See Instructions 4, 6 and 7 to
the applicable Letter of Transmittal.
THE METHOD OF DELIVERY OF SHARES AND ALL OTHER REQUIRED DOCUMENTS IS AT THE
OPTION AND RISK OF THE TENDERING STOCKHOLDER. IF DELIVERY IS BY MAIL, REGISTERED
MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL
CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY.
GUARANTEED DELIVERY PROCEDURE. If a stockholder desires to tender Shares
pursuant to the Offer and cannot deliver certificates for such Shares and all
other required documents to the Depositary on or prior to the applicable
Expiration Date, or the procedure for book-entry transfer cannot be complied
with in a timely manner, such Shares may nevertheless be tendered if all of the
following conditions are met:
(a) such tender is made by or through an Eligible Institution;
(b) a properly completed and duly executed Notice of Guaranteed Delivery
in the form provided by the Company is received by the Depositary as
provided below on or prior to the applicable Expiration Date; and
(c) the certificates for such Shares (or a confirmation of a book-entry
transfer of such Shares into the Depositary's account at one of the
Book-Entry Transfer Facilities), together with a properly completed and duly
executed Letter of Transmittal for the Series of Preferred being tendered,
or facsimile thereof, and any other documents required by such Letter of
Transmittal,
11
<PAGE>
are received by the Depositary no later than 5:00 p.m., New York City time,
on the third New York Stock Exchange trading day after the Expiration Date.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted by
facsimile transmittal or mail to the Depositary and must include a guarantee by
an Eligible Institution in the form set forth in such Notice.
DETERMINATION OF VALIDITY; REJECTION OF SHARES; WAIVER OF DEFECTS; NO
OBLIGATION TO GIVE NOTICE OF DEFECTS. All questions as to the form of documents
and the validity, eligibility (including time of receipt) and acceptance for
payment of any tender of Shares will be determined by the Company, in its sole
discretion, and its determination shall be final and binding. The Company
reserves the absolute right to reject any or all tenders of Shares that it
determines are not in proper form or the acceptance for payment of or payment
for which may, in the opinion of the Company's counsel, be unlawful. The Company
also reserves the absolute right to waive any defect or irregularity in any
tender of Shares. No tender of Shares will be deemed to be properly made until
all defects or irregularities have been cured or waived. None of the Company,
the Dealer Managers, the Depositary, the Information Agent or any other person
will be under any duty to give notice of any defect or irregularity in tenders,
nor shall any of them incur any liability for failure to give any such notice.
SECTION 6. WITHDRAWAL RIGHTS.
Tenders of Shares of a Series of Preferred made pursuant to the Offer may be
withdrawn at any time on or prior to the Expiration Date with respect to such
Series of Preferred. Thereafter, such tenders are irrevocable, except that they
may be withdrawn after 12:00 midnight, Friday, July 12, 1996 unless theretofore
accepted for payment as provided in this Offer to Purchase.
To be effective, a written or facsimile transmission notice of withdrawal
must be timely received by the Depositary at one of its addresses or facsimile
numbers set forth on the back cover of this Offer to Purchase and must specify
the name of the person who tendered the Shares of the applicable Series of
Preferred to be withdrawn and the number of Shares to be withdrawn. If the
Shares of the applicable Series of Preferred to be withdrawn have been delivered
to the Depositary, a signed notice of withdrawal with signatures guaranteed by
an Eligible Institution (except in the case of Shares tendered by an Eligible
Institution) must be submitted prior to the release of such Shares. In addition,
such notice must specify, in the case of Shares tendered by delivery of
certificates, the name of the registered holder (if different from that of the
tendering stockholder) and the serial numbers shown on the particular
certificates evidencing the Shares to be withdrawn or, in the case of Shares
tendered by book-entry transfer, the name and number of the account at one of
the Book-Entry Transfer Facilities to be credited with the withdrawn Shares and
the name of the registered holder (if different from the name on such account).
Withdrawals may not be rescinded, and Shares withdrawn will thereafter be deemed
not validly tendered for purposes of the Offer. However, withdrawn Shares may be
re-tendered by following one of the procedures described in Section 5-"Procedure
for Tendering Shares" at any time on or prior to the applicable Expiration Date.
All questions as to the form and validity (including time of receipt) of any
notice of withdrawal will be determined by the Company in its sole discretion,
and its determination shall be final and binding. None of the Company, the
Dealer Managers, the Depositary, the Information Agent or any other person will
be under any duty to give notification of any defect or irregularity in any
notice of withdrawal or incur any liability for failure to give any such
notification.
SECTION 7. ACCEPTANCE FOR PAYMENT OF SHARES AND PAYMENT OF PURCHASE PRICE.
Upon the terms and subject to the conditions of the Offer (including the
proration provisions) and promptly after the Expiration Date with respect to a
Series of Preferred, the Company will accept for payment and pay for Shares of
that Series of Preferred validly tendered up to the Amount Sought. See Section
4-"Number of Shares; Purchase Price; Expiration Date; Receipt of Dividend;
Extension of the
12
<PAGE>
Offer; Proration" and Section 8-"Certain Conditions of the Offer." Thereafter,
payment for all Shares of that Series of Preferred validly tendered on or prior
to the applicable Expiration Date and accepted for payment pursuant to the Offer
will be made by the Depositary by check promptly after the Expiration Date. In
all cases, payment for Shares accepted for payment pursuant to the Offer will be
made only after timely receipt by the Depositary of certificates for Shares (or
of a confirmation of a book-entry transfer of such Shares into the Depositary's
account at one of the Book-Entry Transfer Facilities), a properly completed and
duly executed Letter of Transmittal for the Series of Preferred so tendered, or
facsimile thereof, and any other required documents.
For purposes of the Offer, the Company will be deemed to have accepted for
payment (and thereby purchased) Shares that are validly tendered and not
withdrawn if and when it gives oral or written notice to the Depositary of its
acceptance for payment of such Shares. The Company will pay for Shares that it
has purchased pursuant to the Offer by depositing the purchase price therefor
with the Depositary. The Depositary will act as agent for tendering stockholders
for the purpose of receiving payment from the Company and transmitting payment
to tendering stockholders. Under no circumstances will interest be paid on
amounts to be paid to tendering stockholders, regardless of any delay in making
such payment.
Certificates for all Shares not purchased will be returned (or, in the case
of Shares tendered by book-entry transfer, such Shares will be credited to an
account maintained with a Book-Entry Transfer Facility) promptly, without
expense to the tendering stockholder.
Payment for Shares may be delayed in the event of difficulty in determining
the number of Shares properly tendered or if proration is required. In addition,
if certain events occur, the Company may not be obligated to purchase Shares
pursuant to the Offer. See Section 8-"Certain Conditions of the Offer."
The Company will pay or cause to be paid any stock transfer taxes with
respect to the sale and transfer of any Shares to the Company or its order
pursuant to the Offer. However, if payment of the purchase price is to be made
to, or Shares not tendered or not purchased are to be registered in the name of,
any person other than the registered holder, or if tendered Shares are
registered in the name of any person other than the person signing the
applicable Letter of Transmittal, the amount of any stock transfer taxes
(whether imposed on the registered holder, such other person or otherwise)
payable on account of the transfer to such person will be deducted from the
purchase price, unless satisfactory evidence of the payment of such taxes, or
exemption therefrom, is submitted. See Instruction 6 to the applicable Letter of
Transmittal.
BACKUP WITHHOLDING. To prevent backup Federal income tax withholding with
respect to the purchase price of Shares purchased pursuant to the Offer, a
holder of Shares (except as set forth herein) must provide the Depositary with
the holder's correct taxpayer identification number and certify whether the
holder is subject to backup withholding of Federal income tax by completing the
Substitute Form W-9 included in the applicable Letter of Transmittal. Certain
holders of Shares (including, among others, all corporations and certain foreign
stockholders) are not subject to these backup withholding and reporting
requirements (although foreign stockholders are subject to other withholding
requirements. See Section 2-"Certain Federal Income Tax Consequences"). In order
for a foreign stockholder to qualify as an exempt recipient, the holder must
submit a Form W-8, Certificate of Foreign Status, signed under penalties of
perjury, attesting to that stockholder's exempt status. Unless an exemption
applies under the applicable law and regulations concerning "backup withholding"
of Federal income tax, the Depositary will be required to withhold, and will
withhold, 31% of the gross proceeds otherwise payable to a holder of Shares or
other payee unless the holder of such Shares or other payee certifies that such
person is not otherwise subject to backup withholding, provides such person's
tax identification number (social security number or employer identification
number) and certifies that such number in correct. Each tendering holder of
Shares should complete and sign the main signature form and, other than foreign
stockholders, the Substitute Form W-9 included as part of the applicable Letter
of Transmittal, so as to provide the information and certification necessary to
13
<PAGE>
avoid backup withholding, unless an applicable exemption exists and is proved in
a manner satisfactory to the Company and the Depositary. Foreign stockholders
should generally complete and sign a Form W-8, a copy of which may be obtained
from the Depositary, in order to avoid backup withholding.
ANY TENDERING STOCKHOLDER OR OTHER PAYEE WHO FAILS TO COMPLETE AND SIGN THE
SUBSTITUTE FORM W-9 INCLUDED IN THE APPLICABLE LETTER OF TRANSMITTAL (OR, IN THE
CASE OF A FOREIGN STOCKHOLDER, FORM W-8 OBTAINABLE FROM THE DEPOSITARY) MAY BE
SUBJECT TO REQUIRED FEDERAL INCOME TAX WITHHOLDING OF 31% OF THE GROSS PROCEEDS
PAYABLE TO SUCH STOCKHOLDER OR OTHER PAYEE PURSUANT TO THE OFFER.
SECTION 8. CERTAIN CONDITIONS OF THE OFFER.
Notwithstanding any other provisions of the Offer, or any extension of the
Offer, the Company will not be required to accept for payment and pay for Shares
of a Series of Preferred in respect of any validly tendered Shares and may
terminate the Offer with respect to such Series of Preferred (by oral or written
notice to the Depositary and timely public announcement) or may modify or
otherwise amend any such Offer with respect to such Shares if any of the
following conditions are not waived or satisfied on or prior to the Expiration
Date:
(a) there shall have been threatened, instituted or pending any action
or proceeding by any government or governmental, regulatory or
administrative agency, authority or tribunal or any other person, domestic
or foreign, or before any court, authority, agency or tribunal that (i)
challenges the acquisition of Shares of that Series of Preferred pursuant to
the Offer or otherwise in any manner, directly or indirectly, relates to or
affects the Offer or (ii) in the reasonable judgment of the Company, would
or might materially and adversely affect the business, condition (financial
or other), income, operations or prospects of the Company and its
subsidiaries taken as a whole, or otherwise materially impair in any way the
contemplated future conduct of the business of the Company or any of its
subsidiaries or materially impair the Offer's contemplated benefits to the
Company;
(b) there shall have been any action threatened, pending or taken, or
approval withheld, or any statute, rule, regulation, judgment, order or
injunction threatened, proposed, sought, promulgated, enacted, entered,
amended, enforced or deemed to be applicable to the Offer or the Company or
any of its subsidiaries, by any legislative body, court, authority, agency
or tribunal which, in the Company's reasonable judgment, would or might
directly or indirectly (i) make the acceptance for payment of, or payment
for, some or all of the Shares of that Series of Preferred illegal or
otherwise restricts or prohibits consummation of the Offer, (ii) delay or
restrict the ability of the Company, or render the Company unable, to accept
for payment or pay for some or all of the Shares of that Series of
Preferred, (iii) materially impair the contemplated benefits of the Offer to
the Company or (iv) materially affect the business, condition (financial or
other), income, operations or prospects of the Company and its subsidiaries
taken as a whole, or otherwise materially impair in any way the contemplated
future conduct of the business of the Company or any of its subsidiaries;
(c) there shall have occurred (i) any general suspension of trading in,
or limitation on prices for, securities on any national securities exchange
or in the over-the-counter market, (ii) any significant decline in the
market price of the Shares of that Series of Preferred, (iii) any change in
the general political, market, economic or financial condition in the United
States or abroad that, in the reasonable judgment of the Company, would or
might have a material adverse effect on the Company's business, operations,
prospects or ability to obtain financing generally or the trading in the
Shares of that Series of Preferred or other equity securities of the
Company, (iv) the declaration of a banking moratorium or any suspension of
payments in respect of banks in the United States or any limitation on, or
any event which, in the Company's reasonable judgment,
14
<PAGE>
might affect the extension of credit by lending institutions in the United
States, (v) the commencement of a war, armed hostilities or other
international or national calamity directly or indirectly involving the
United States; (vi) in the case of any of the foregoing existing at the time
of the commencement of the Offer, in the Company's reasonable judgment, a
material acceleration or worsening thereof; or (vii) there shall have been
any decrease in the ratings accorded any of the Company's securities by S&P
or Moody's or that S&P or Moody's has announced that it has placed any such
rating under surveillance or review with possible negative implications;
(d) a tender or exchange offer with respect to some or all of the Shares
of that Series of Preferred or other equity securities of the Company or
Parent, or a merger, acquisition or other business combination for the
Company or Parent, shall have been proposed, announced or made by another
person;
(e) there shall have occurred any event or events that have resulted, or
may in the reasonable judgment of the Company result, in an actual or
threatened change in the business, condition (financial or other), income,
operations, stock ownership or prospects of the Company and its
subsidiaries;
(f) there shall have occurred any decline in the S&P's Composite 500
Stock Index (665.42 at the close of business on May 15, 1996) by an amount
in excess of 15% measured from the close of business on May 15, 1996; or
(g) the Company elects not to proceed with the offering of the
Cumulative Quarterly Income Preferred Securities ("QUIPS") by PSE&G Capital
Trust I, a special purpose business trust controlled by the Company, or the
offering of the QUIPS, if commenced, is terminated on or prior to the
Expiration Date;
and, in the reasonable judgment of the Company, such event or events make it
undesirable or inadvisable to proceed with the Offer with respect to such Series
of Preferred or with such payment or acceptance for payment. The consummation of
the Offer for any Series of Preferred is not conditioned on the consummation of
the Offer for any other Series of Preferred.
The foregoing conditions are for the sole benefit of the Company and may be
asserted by the Company regardless of the circumstances (including any action or
inaction by the Company) giving rise to any such condition with respect to any
or all Series of Preferred, and any such condition may be waived by the Company
with respect to any or all Series of Preferred at any time and from time to time
in its sole discretion. The Company's decision to terminate or otherwise amend
the Offer, following the occurrence of any of the foregoing, with respect to one
Series of Preferred will not create an obligation on behalf of the Company to
similarly terminate or otherwise amend the Offer with respect to any other
Series of Preferred. The failure by the Company at any time to exercise any of
the foregoing rights shall not be deemed a waiver of any such right and each
such right shall be deemed an ongoing right which may be asserted at any time
and from time to time. Any determination by the Company concerning the events
described above will be final and binding on all parties.
15
<PAGE>
SECTION 9. PRICE RANGES OF SHARES; DIVIDENDS.
Stockholders should be aware that the Shares of each Series of Preferred
only trade sporadically, therefore, the Company believes that the last reported
sale prices may not reflect the market value of the Shares. The high and low
sale prices of the Shares in the following tables are taken from the Bloomberg
Exchange inter-day quotations.
4.08% SHARES
The 4.08% Shares are listed and traded on the New York Stock Exchange. The
following table sets forth the high and low sales prices of the 4.08% Shares on
the New York Stock Exchange and the cash dividends per 4.08% Share for the
fiscal quarters indicated.
<TABLE>
<CAPTION>
CASH
DIVIDENDS
HIGH LOW PER SHARE
------ ------ ---------
<S> <C> <C> <C>
1994: 1st Quarter................................................ $60.00 $56.00 $1.02
2nd Quarter................................................. 54.50 50.50 1.02
3rd Quarter................................................. 51.00 48.00 1.02
4th Quarter................................................. 50.50 46.50 1.02
1995: 1st Quarter................................................ 50.50 46.00 1.02
2nd Quarter................................................. 54.00 49.00 1.02
3rd Quarter................................................. 56.00 52.00 1.02
4th Quarter................................................. 60.00 56.50 1.02
1996: 1st Quarter................................................ 60.00 54.00 1.02
2nd Quarter (through May 15, 1996).......................... 56.00 52.25 --
</TABLE>
The last reported sale of 4.08% Shares on the New York Stock Exchange prior
to the commencement of the Offer occurred on May 8, 1996 at a price of $56.00
per 4.08% Share.
4.18% SHARES
The 4.18% Shares are listed and traded on the New York Stock Exchange. The
following table sets forth the high and low sales prices of the 4.18% Shares on
the New York Stock Exchange and the cash dividends per 4.18% Share for the
fiscal quarters indicated.
<TABLE>
<CAPTION>
CASH
DIVIDENDS
HIGH LOW PER SHARE
------ ------ ---------
<S> <C> <C> <C>
1994: 1st Quarter................................................ $60.88 $22.00 $ 1.045
2nd Quarter................................................. 56.00 52.75 1.045
3rd Quarter................................................. 51.50 49.50 1.045
4th Quarter................................................. 49.00 45.75 1.045
1995: 1st Quarter................................................ 53.00 47.00 1.045
2nd Quarter................................................. 56.00 49.50 1.045
3rd Quarter................................................. 58.69 53.00 1.045
4th Quarter................................................. 60.00 55.50 1.045
1996: 1st Quarter................................................ 61.50 57.00 1.045
2nd Quarter (through May 15, 1996).......................... 59.00 55.00 --
</TABLE>
The last reported sale of 4.18% Shares on the New York Stock Exchange prior
to the commencement of the Offer occurred on May 8, 1996 at a price of $59.00
per 4.18% Share.
16
<PAGE>
4.30% SHARES
The 4.30% Shares are listed and traded on the New York Stock Exchange. The
following table sets forth the high and low sales prices of the 4.30% Shares on
the New York Stock Exchange and the cash dividends per 4.30% Share for the
fiscal quarters indicated.
<TABLE>
<CAPTION>
CASH
DIVIDENDS
HIGH LOW PER SHARE
------ ------ ---------
<S> <C> <C> <C>
1994: 1st Quarter................................................ $63.50 $57.50 $ 1.075
2nd Quarter................................................. 57.00 52.00 1.075
3rd Quarter................................................. 53.75 50.50 1.075
4th Quarter................................................. 52.50 48.00 1.075
1995: 1st Quarter................................................ 52.00 48.63 1.075
2nd Quarter................................................. 58.50 51.00 1.075
3rd Quarter................................................. 58.50 52.50 1.075
4th Quarter................................................. 66.00 55.50 1.075
1996: 1st Quarter................................................ 61.00 57.00 1.075
2nd Quarter (through May 15, 1996).......................... 58.00 57.00 --
</TABLE>
The last reported sale of 4.30% Shares on the New York Stock Exchange prior
to the commencement of the Offer occurred on May 1, 1996 at a price of $57.00
per 4.30% Share.
5.05% SHARES
The 5.05% Shares are listed and traded on the New York Stock Exchange. The
following table sets forth the high and low sales prices of the 5.05% Shares on
the New York Stock Exchange and the cash dividends per 5.05% Share for the
fiscal quarters indicated.
<TABLE>
<CAPTION>
CASH
DIVIDENDS
HIGH LOW PER SHARE
------ ------ ---------
<S> <C> <C> <C>
1994: 1st Quarter................................................ $74.00 $71.63 $1.2625
2nd Quarter................................................. 72.00 61.00 1.2625
3rd Quarter................................................. 63.00 51.00 1.2625
4th Quarter................................................. 61.75 59.00 1.2625
1995: 1st Quarter................................................ 62.50 60.00 1.2625
2nd Quarter................................................. 68.13 61.50 1.2625
3rd Quarter................................................. 67.00 62.25 1.2625
4th Quarter................................................. 73.00 66.00 1.2625
1996: 1st Quarter................................................ 71.00 67.00 1.2625
2nd Quarter (through May 15, 1996).......................... 69.00 69.00 --
</TABLE>
The last reported sale of 5.05% Shares on the New York Stock Exchange prior
to the commencement of the Offer occurred on May 2, 1996 at a price of $69.00
per 5.05% Share.
17
<PAGE>
5.28% SHARES
The 5.28% Shares are listed and traded on the New York Stock Exchange. The
following table sets forth the high and low sales prices of the 5.28% Shares on
the New York Stock Exchange and the cash dividends per 5.28% Share for the
fiscal quarters indicated.
<TABLE>
<CAPTION>
CASH
DIVIDENDS
HIGH LOW PER SHARE
------ ------ ---------
<S> <C> <C> <C>
1994: 1st Quarter................................................ $77.75 $73.00 $1.32
2nd Quarter................................................. 72.50 64.00 1.32
3rd Quarter................................................. 66.00 62.00 1.32
4th Quarter................................................. 63.09 58.50 1.32
1995: 1st Quarter................................................ 64.00 60.75 1.32
2nd Quarter................................................. 70.50 63.00 1.32
3rd Quarter................................................. 74.13 68.50 1.32
4th Quarter................................................. 73.00 70.00 1.32
1996: 1st Quarter................................................ 74.50 67.50 1.32
2nd Quarter (through May 15, 1996).......................... 69.25 67.50 --
</TABLE>
The last reported sale of 5.28% Shares on the New York Stock Exchange prior
to the commencement of the Offer occurred on May 13, 1996 at a price of $69.25
per 5.28% Share.
6.80% SHARES
The 6.80% Shares are listed and traded on the New York Stock Exchange. The
following table sets forth the high and low sales prices of the 6.80% Shares on
the New York Stock Exchange and the cash dividends per 6.80% Share for the
fiscal quarters indicated.
<TABLE>
<CAPTION>
CASH
DIVIDENDS
HIGH LOW PER SHARE
------ ------ ---------
<S> <C> <C> <C>
1994: 1st Quarter................................................ $96.50 $92.50 $1.70
2nd Quarter................................................. 92.50 86.00 1.70
3rd Quarter................................................. 87.00 81.00 1.70
4th Quarter................................................. 81.50 75.50 1.70
1995: 1st Quarter................................................ 83.00 79.50 1.70
2nd Quarter................................................. 92.00 81.00 1.70
3rd Quarter................................................. 94.13 89.58 1.70
4th Quarter................................................. 101.00 91.00 1.70
1996: 1st Quarter................................................ 98.50 96.00 1.70
2nd Quarter (through May 15, 1996).......................... 96.50 93.00 --
</TABLE>
The last reported sale of 6.80% Shares on the New York Stock Exchange prior
to the commencement of the Offer occurred on May 15, 1996 at a price of $95.50
per 6.80% Share.
18
<PAGE>
6.92% SHARES
The 6.92% Preferred trade in the over-the-counter market to the extent
trading occurs. Trading of the 6.92% Preferred has been limited and sporadic,
and information concerning trading prices and volumes is difficult to obtain.
Depending on the amount of 6.92% Preferred outstanding after the Offer, the
liquidity of the 6.92% Preferred may be adversely affected.
STOCKHOLDERS ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR THE SHARES.
DIVIDENDS. The holders of each Series of Preferred are entitled to receive,
when and as declared by the Board, cash dividends at the annual rate specified
for that Series of Preferred, and no more, cumulative and payable quarterly with
respect to each calendar quarterly period, on or before the last day of each
March, June, September and December. No dividends may be paid on the Company's
capital stock except out of its earned surplus. Under an indenture relating to
the loan by the Company of the proceeds of the Cumulative Monthly Income
Preferred Securities of Public Service Electric and Gas Capital, L.P., dividends
may not be paid on the Company's capital stock as long as any payments on the
Company's Deferrable Interest Subordinated Debentures issued under such
indenture have been deferred or the Company is in default under such indenture
or its guarantee relating to the Cumulative Monthly Income Preferred Securities.
To date, the Company has timely made all quarterly dividend payments on each
Series of Preferred.
The record date for the Regular Quarterly Dividend is June 7, 1996. Holders
of record of Shares on June 7, 1996 who tender Shares will be entitled to the
Regular Quarterly Dividend, regardless of when such tender is made. Holders of
Shares purchased pursuant to the Offer will not be entitled to any dividends in
respect of any later periods.
SECTION 10. CERTAIN INFORMATION CONCERNING THE COMPANY.
The Company is an operating public utility company engaged principally in
the generation, transmission, distribution and sale of electric energy service
and in the transmission, distribution and sale of gas service in New Jersey. The
Company supplies electric and gas service in areas of New Jersey in which
approximately 5,500,000 persons, approximately 70% of the State's population,
reside. The Company is the principal subsidiary of Public Service Enterprise
Group Incorporated, which owns all of the Company's common stock.
The Company's service area is a corridor of approximately 2,600 square miles
running diagonally across the State of New Jersey from Bergen County in the
northeast to an area below the City of Camden in the southwest. This heavily
populated, commercialized and industrialized territory encompasses most of New
Jersey's largest municipalities, including its six largest cities, in addition
to approximately 300 suburban and rural communities.
REGISTRATION STATEMENT. The Company and three special purpose business
trusts controlled by the Company have filed a registration statement (the
"Registration Statement") with the Commission with respect to the proposed
offering from time to time of up to $350,000,000 aggregate liquidation amount of
QUIPS, guaranteed by the Company to the extent set forth in the Registration
Statement. Following the commencement of the Offer, and subject to market and
other conditions, the Company intends that PSE&G Capital Trust I will effect a
public offering of QUIPS. As set forth in Section 11-"Source and Amount of
Funds," the Company intends to finance the Offer with the proceeds from the sale
of the QUIPS, which will be loaned by PSE&G Capital Trust I to the Company. If
the sale of QUIPS has not been consummated on or prior to the Expiration Date of
the Offer, the Company intends to issue commercial paper to finance the Offer.
SELECTED FINANCIAL DATA OF THE COMPANY. Set forth below is certain financial
data for the Company. The historical financial information as of and for the
years ended December 31, 1995,
19
<PAGE>
December 31, 1994 and December 31, 1993 has been summarized from the Company's
audited consolidated financial statements contained in the Company's Annual
Report on Form 10-K for the year ended December 31, 1995. The following selected
historical financial data should be read in conjunction with, and is qualified
in its entirety by reference to, such audited consolidated financial statements
and the notes thereto and Management's Discussion and Analysis therein.
SELECTED FINANCIAL DATA
(IN THOUSANDS, EXCEPT RATIOS)
<TABLE>
<CAPTION>
TWELVE MONTHS
ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
-------------------------------------- 1996
1993 1994 1995 (UNAUDITED)
---------- ---------- ---------- -------------
<S> <C> <C> <C> <C>
Operating Revenues.......................... $5,290,455 $5,518,241 $5,707,245 $5,882,978
Net Income.................................. 614,868 659,406 616,964 593,718
Ratios of Earnings to Fixed Charges plus
Preferred Securities Dividend
Requirements................................ 2.89 2.92 2.77 2.70
</TABLE>
<TABLE>
<CAPTION>
PRO-FORMA
AS OF MARCH 31, 1996 AS OF MARCH 31, 1996
(UNAUDITED)(1) (UNAUDITED)
------------------------ -------------------------
AMOUNT PERCENTAGE AMOUNT PERCENTAGE
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Total Common Stock Equity.................. $4,576,051 47% $4,576,051 47%
Preferred Stock without mandatory
redemption................................. 324,994 3% 67,494(1) 1%
Preferred Stock with mandatory
redemption................................. 150,000 2% 150,000 1%
Monthly Income Preferred Securities of
Subsidiary................................. 210,000 2% 210,000 2%
Quarterly Income Preferred Securities of
Subsidiary................................. -- -- 257,500 3%
Long-Term Debt............................. 4,523,614 46% 4,523,614 46%
Total Capitalization....................... 9,784,659 100% 9,784,659 100%
</TABLE>
- ------------
(1) Assumes the purchase by the Company of the Amount Sought for each Series of
Preferred, the redemption of the Company's 7.52% and 7.40% Cumulative
Preferred Stock ($100 par value) and the issuance of $257,500,000 aggregate
liquidation amount of QUIPS.
ADDITIONAL INFORMATION. The Company is subject to the informational
requirements of the Exchange Act, and, in accordance therewith, files reports
and other information with the Commission. The Company has also filed a Rule
13E-3 Transaction Statement on Schedule 13E-3 and an Issuer Tender Offer
Statement on Schedule 13E-4 with the Commission which includes certain
additional information relating to the Offer.
Such reports and other information can be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Washington, D.C. and at its regional offices at 500 West Madison Street,
Chicago, Illinois and 7 World Trade Center, New York, New York. Copies of such
reports and other information may also be obtained from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549-1004
at prescribed rates. Such reports and other information can also be inspected at
the New York Stock Exchange, where certain of the Company's securities are
listed. The Company's Schedules 13E-3 and 13E-4 will not be available at the
Commission's Regional Offices.
The Company undertakes to provide without charge to each person, including
any beneficial owner, to whom this Offer to Purchase is delivered, upon written
or oral request of such person, a copy of the Company's Annual Report on Form
10-K for the year ended December 31, 1995 and Quarterly Report on Form 10-Q for
the quarter ended March 31, 1996, other than exhibits to such documents. Such
requests should be directed to the Director--Investor Relations, Public Service
Electric and Gas Company, 80 Park Plaza, T6B, P.O. Box 570, Newark, New Jersey
07101, telephone (201) 430-6503.
20
<PAGE>
SECTION 11. SOURCE AND AMOUNT OF FUNDS.
Assuming that the Company purchases the Amount Sought of each Series of
Preferred, the total amount required by the Company to purchase all Shares
subject to the Offer will be $125,260,500, exclusive of fees and other expenses.
As described under Section 10-"Certain Information Concerning the Company,"
a Registration Statement has been filed with the Commission with respect to the
offering of QUIPS by PSE&G Capital Trust I, the proceeds of which will be
invested in the Deferrable Interest Subordinated Debentures issued by the
Company. The Company intends to finance the Offer with the proceeds from the
sale of the QUIPS, which will be loaned by PSE&G Capital Trust I to the Company.
If the sale of the QUIPS has not been consummated on or prior to the Expiration
Date of the Offer, the Company intends to issue commercial paper to finance the
Offer.
.
SECTION 12. TRANSACTIONS AND AGREEMENTS CONCERNING THE SHARES.
The 6.92% Shares were issued by the Company in an underwritten public
offering for cash which was registered under the Securities Act of 1933, as
amended. Such offering, which was consummated on February 3, 1994, was for
600,000 Shares of 6.92% Preferred at a price to the public of $100 per 6.92%
Share, and the Company received aggregate proceeds of $60,000,000 before
deducting expenses payable by the Company.
Based upon the Company's records and upon information provided to the
Company by its directors and executive officers and those of Parent, neither the
Company nor, to the Company's knowledge, Parent or any director or executive
officer of the Company or Parent, or associate of the foregoing, or any
subsidiary or affiliate of the Company or Parent has engaged in any transactions
involving Shares during the 60 days preceding the date hereof. Neither the
Company nor, to the best of the Company's knowledge, Parent or any director or
executive officer of Company or Parent, or associate of the foregoing, or, any
subsidiary or affiliate of the Company or Parent is a party to any contract,
arrangement, understanding or relationship relating directly or indirectly to
the Offer with any other person with respect to any securities of the Company.
As of May 15, 1996, none of the Company or, to the best of the Company's
knowledge, Parent or any director or executive officer of Company or Parent, or
associate of the foregoing, or any subsidiary or affiliate of the Company or
Parent, or any pension, profit sharing or similar plan of the Company or its
affiliates, owns any Shares, and therefore such persons do not intend to tender
or sell any Shares pursuant to the Offer.
Except as set forth in this Offer to Purchase, neither the Company nor, to
the best of the Company's knowledge, Parent or any director or executive officer
of the Company or Parent, or any associate of the foregoing, or any subsidiary
or affiliate of the Company or Parent, is a party to any contract, understanding
or relationship with any other person relating, directly or indirectly, to, or
in connection with, the Offer with respect to any securities of the Company
(including, but not limited to, any contract, arrangement, understanding or
relationship concerning the transfer or the voting of any of such securities,
joint ventures, loan or option arrangements, puts or calls, guarantees of loans,
guarantees against loss or the giving or withholding of proxies, consents or
authorizations).
SECTION 13. EXTENSION OF TENDER PERIOD; TERMINATION; AMENDMENTS.
The Company expressly reserves the right, in its sole discretion and at any
time or from time to time, to extend the period of time during which the Offer
is open with respect to any Series of Preferred by giving oral or written notice
of such extension to the Depositary. There can be no assurance, however, that
the Company will exercise such right to extend the Offer. The Company may, in
its sole discretion, at any time or from time to time amend the Offer with
respect to a Series of Preferred in any respect. If the Company makes a material
change in the terms of the Offer with respect to a Series of Preferred
(including an increase or decrease in the consideration offered, change in the
solicitation fee or change
21
<PAGE>
in the Amount Sought in the Offer), the Company will extend the Offer with
respect to such Series of Preferred. The minimum period for which the Offer will
be extended following a material change or waiver, other than an increase or
decrease in the consideration offered, change in the solicitation fee or change
in the Amount Sought, will depend upon the facts and circumstances, including
the relative materiality of the change or waiver. With respect to an increase or
decrease in the consideration offered, change in the solicitation fee or change
in the Amount Sought, the Offer may be extended such that the Offer remains open
for a minimum of ten business days following the public announcement of such
change. During any such extension, all Shares of that Series of Preferred
previously tendered will remain subject to the Offer, except to the extent that
such Shares may be withdrawn as set forth in Section 6-"Withdrawal Rights."
If, with respect to a Series of Preferred, the Company extends the period of
time during which the Offer is open, is delayed in accepting for payment or
paying for Shares of that Series of Preferred or is unable to accept for payment
or pay for Shares pursuant to the Offer for any reason, then, without prejudice
to the Company's rights under the Offer, the Depositary may, on behalf of the
Company, retain all Shares of that Series of Preferred tendered, and such Shares
may not be withdrawn except as otherwise provided in this Section 13, subject to
Rule 13e-4(f)(5) under the Exchange Act, which provides that an issuer making a
tender offer shall either pay the consideration offered or return the tendered
securities promptly after the termination or withdrawal of the tender offer.
THE OFFER FOR ONE SERIES OF PREFERRED IS INDEPENDENT OF THE OFFER FOR ANY
OTHER SERIES OF PREFERRED. IF THE COMPANY EXTENDS OR AMENDS THE OFFER WITH
RESPECT TO ONE SERIES OF PREFERRED FOR ANY REASON, THE COMPANY WILL HAVE NO
OBLIGATION TO EXTEND THE OFFER FOR ANY OTHER SERIES OF PREFERRED.
The Company also expressly reserves the right, with respect to any Series of
Preferred, in its sole discretion, to, among other things, terminate the Offer
and not accept for payment or pay for any Shares tendered or, subject to Rule
13e-4(f)(5) under the Exchange Act, which requires the Company either to pay the
consideration offered or to return the Shares tendered promptly after the
termination or withdrawal of the Offer, to postpone acceptance for payment of or
payment for Shares upon the occurrence of any of the conditions specified in
Section 8-"Certain Conditions of the Offer" by, in the case of any termination,
giving oral or written notice of such termination to the Depositary and making a
public announcement thereof.
Extensions and termination of and amendments to the Offer may be effected by
public announcement. Without limiting the manner in which the Company may choose
to make public announcement of any extension, termination or amendment, the
Company shall have no obligation (except as otherwise required by applicable
law) to publish, advertise or otherwise communicate any such public
announcement, other than by making a release to the Dow Jones News Service,
except in the case of an announcement of an extension of the Offer with respect
to any Series of Preferred, in which case the Company shall have no obligation
to publish, advertise or otherwise communicate such announcement other than by
issuing a notice of such extension by press release or other public
announcement, which notice shall be issued no later than 9:00 a.m., New York
City time, on the next business day after the previously scheduled Expiration
Date with respect to that Series of Preferred. Material changes to information
previously provided to holders of the Shares in this Offer to Purchase or in
documents furnished subsequent thereto will be disseminated to holders of Shares
in compliance with Rule 13e-4(e)(2) promulgated by the Commission under the
Exchange Act.
SECTION 14. FEES AND EXPENSES.
The Company has retained First Chicago Trust Company of New York, as
Depositary, Georgeson & Company Inc., as Information Agent, and Goldman, Sachs &
Co. and Merrill Lynch & Co., as Dealer Managers, in connection with the Offer.
The Information Agent and Dealer Managers will assist
22
<PAGE>
stockholders who request assistance in connection with the Offer and may request
brokers, dealers and other nominee stockholders to forward materials relating to
the Offer to beneficial owners. The Company has agreed to pay the Dealer
Managers, upon acceptance for payment of Shares pursuant to the Offer, a fee of
$0.50 per Share so paid for in the Offer. The Dealer Managers will also be
reimbursed by the Company for their reasonable out-of-pocket expenses, including
attorneys' fees. The Dealer Managers have rendered, are currently rendering and
are expected to continue to render various investment banking and other advisory
services to the Company. They have received, and will continue to receive,
customary compensation from the Company for such services. The Depositary and
the Information Agent will receive reasonable and customary compensation for
their services in connection with the Offer and will also be reimbursed for
reasonable out-of-pocket expenses, including attorneys' fees. The Company has
agreed to indemnify the Depositary, the Information Agent and the Dealer
Managers against certain liabilities in connection with the Offer, including
certain liabilities under the Federal securities laws. Neither the Depositary
nor the Information Agent has been retained to make solicitations, and none of
the Depositary, the Information Agent or the Dealer Managers have been retained
to make recommendations with respect to the Offer, in their respective roles as
Depositary, Information Agent and Dealer Managers.
The Company will pay to a Soliciting Dealer a solicitation fee of $1.25 per
Share for Shares tendered, accepted for payment and paid for pursuant to the
Offer. For purposes of this Section 14, "Soliciting Dealer" includes (a) any
broker or dealer in securities, including the Dealer Managers in their capacity
as a broker or dealer, which is a member of any national securities exchange or
of the NASD, (b) any foreign broker or dealer not eligible for membership in the
NASD which agrees to conform to the NASD's Rules of Fair Practice in soliciting
tenders outside the United States to the same extent as if it were an NASD
member, or (c) any bank or trust company. No such fee shall be payable to a
Soliciting Dealer in respect of Shares registered in the name of such Soliciting
Dealer unless such Shares are held by such Soliciting Dealer as nominee and such
Shares are being tendered for the benefit of one or more beneficial owners
identified in the applicable Letter of Transmittal or in the applicable Notice
of Solicited Tenders (included in the materials provided to brokers and
dealers). No such fee shall be payable to a Soliciting Dealer with respect to
the tender of Shares by a holder unless the applicable Letter of Transmittal
accompanying such tender designates such Soliciting Dealer. No such fee shall be
payable to the Soliciting Dealer unless the Soliciting Dealer returns a Notice
of Solicited Tenders to the Depositary within three business days after the
applicable Expiration Date. No such fee shall be payable to a Soliciting Dealer
to the extent such Soliciting Dealer is required for any reason to transfer the
amount of such fee to any person (other than itself). No broker, dealer, bank,
trust company or fiduciary shall be deemed to be the agent of the Company, the
Depositary, the Information Agent or the Dealer Managers for purposes of the
Offer.
The Company will pay (or cause to be paid) any stock transfer taxes on its
purchase of Shares, except as otherwise provided in Instruction 6 of the
applicable Letter of Transmittal.
Assuming the Amount Sought for each Series of Preferred pursuant to the
Offer is tendered and purchased by the Company, it is estimated that the
expenses incurred by the Company in connection with the Offer will be
approximately as set forth below. The Company will be responsible for paying all
such expenses.
23
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Dealer Managers' fees.......................................... $ 787,500
Solicitation fees.............................................. 1,968,750
Printing and mailing fees...................................... 50,000
Filing fees.................................................... 25,052
Legal, accounting and miscellaneous............................ 68,698
----------
Total.................................................... $2,900,000
</TABLE>
SECTION 15. MISCELLANEOUS.
The Offer is not being made to, nor will the Company accept tenders from,
owners of Shares in any jurisdiction in which the Offer or its acceptance would
not be in compliance with the laws of such jurisdiction. The Company is not
aware of any jurisdiction where the making of the Offer or the tender of Shares
would not be in compliance with applicable law. If the Company becomes aware of
any jurisdiction where the making of the Offer or the tender of Shares is not in
compliance with any applicable law, the Company will make a good faith effort to
comply with such law. If, after such good faith effort, the Company cannot
comply with such law, the Offer will not be made to (nor will tenders be
accepted from or on behalf of) the holders of Shares residing in such
jurisdiction. In any jurisdiction in which the securities, blue sky or other
laws require the Offer to be made by a licensed broker or dealer, the Offer will
be deemed to be made on the Company's behalf by one or more registered brokers
or dealers licensed under the laws of such jurisdiction.
24
<PAGE>
THE DEPOSITARY FOR THE OFFER IS:
FIRST CHICAGO TRUST COMPANY OF NEW YORK
<TABLE>
<CAPTION>
Facsimile
By Mail: Transmission: By Hand or By Overnight Courier:
<S> <C> <C>
Tenders & Exchanges (201) 222-4720 Tenders & Exchange
P.O. Box 2559--Suite 4660--PSE&G or 14 Wall Street
Jersey City, New Jersey (201) 222-4721 Suite 4680--8th Floor--PSE&G
07303-2559 New York, New York 10005
Confirm by
Telephone:
(201) 222-4707
</TABLE>
Any questions or requests for assistance may be directed to the Information
Agent or the Dealer Managers at the respective telephone numbers and addresses
listed below. Requests for additional copies of this Offer to Purchase, any
Letter of Transmittal or other tender offer materials may be directed to the
Information Agent or the Dealer Managers, and such copies will be furnished
promptly at the Company's expense. Stockholders may also contact their local
broker, dealer, commercial bank or trust company for assistance concerning the
Offer.
THE INFORMATION AGENT FOR THE OFFER IS:
GEORGESON & COMPANY INC.
Wall Street Plaza
New York, New York 10005
Banks and Brokers Call Collect: (212) 440-9800
All Others Call Toll-Free: (800)223-2064
THE DEALER MANAGERS FOR THE OFFER ARE:
<TABLE>
<S> <C>
GOLDMAN, SACHS & CO. MERRILL LYNCH & CO.
85 Broad Street World Financial Center
New York, New York 10004 250 Vesey Street
(800) 828-3182 New York, New York 10281
(212) 449-4914 (call collect)
</TABLE>
25
EXHIBIT 99.(a)(2)
LETTER OF TRANSMITTAL
TO ACCOMPANY
SHARES OF 4.08% CUMULATIVE PREFERRED STOCK
($100 PAR VALUE)
CUSIP NO. 744567 306
OF
PUBLIC SERVICE ELECTRIC AND GAS COMPANY
TENDERED PURSUANT TO THE OFFER TO PURCHASE
DATED MAY 16, 1996
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON THURSDAY, JUNE 13, 1996, UNLESS THE OFFER IS EXTENDED.
To: FIRST CHICAGO TRUST COMPANY OF NEW YORK, DEPOSITARY
<TABLE>
<S> <C> <C>
By Mail: Facsimile Transmission: By Hand or By Overnight Courier:
Tenders & Exchanges (201) 222-4720 Tenders & Exchanges
P.O. Box 2559-Suite 4660-PSE&G or 14 Wall Street-Suite 4680
Jersey City, New Jersey 07303-2559 (201) 222-4721 8th Floor-PSE&G
Confirm by Telephone: New York, New York 10005
(201) 222-4707
</TABLE>
<TABLE>
<CAPTION>
DESCRIPTION OF SHARES OF 4.08% CUMULATIVE PREFERRED STOCK TENDERED
NAME(S) AND ADDRESS(ES) OF REGISTERED
HOLDER(S) (IF BLANK, PLEASE FILL IN EXACTLY AS NAME(S) SHARES TENDERED
APPEAR(S) ON CERTIFICATE(S)) (ATTACH ADDITIONAL LIST IF NECESSARY)
<S> <C> <C> <C>
<CAPTION>
TOTAL NUMBER
OF SHARES NUMBER OF
CERTIFICATE REPRESENTED BY SHARES
NUMBER(S)* CERTIFICATE(S)* TENDERED**
<S> <C> <C> <C>
TOTAL
* NEED NOT BE COMPLETED BY STOCKHOLDERS TENDERING BY BOOK-ENTRY TRANSFER.
** UNLESS OTHERWISE INDICATED, THE HOLDER WILL BE DEEMED TO HAVE TENDERED THE FULL NUMBER OF SHARES
REPRESENTED BY THE TENDERED CERTIFICATE(S). SEE INSTRUCTION 4.
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR
TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN ONE LISTED ABOVE
WILL NOT CONSTITUTE A VALID DELIVERY.
DO NOT SEND ANY CERTIFICATES TO THE DEALER MANAGERS, THE INFORMATION AGENT
OR PUBLIC SERVICE ELECTRIC AND GAS COMPANY.
The instructions accompanying this Letter of Transmittal should be read
carefully before the Letter of Transmittal is completed. Questions and requests
for assistance or for additional copies of the Offer to Purchase or this Letter
of Transmittal may be directed to Georgeson & Company Inc., the Information
Agent, at Wall Street Plaza, New York, NY 10005 or telephone (800) 223-2064
(toll free).
This Letter of Transmittal is to be used if certificates are to be forwarded
herewith or if delivery of Shares (as defined below) is to be made by book-entry
transfer to the Depositary's account at The Depository Trust Company ("DTC") or
The Philadelphia Depository Trust Company ("PDTC") (hereinafter together
referred to as the "Book-Entry Transfer Facilities") pursuant to the procedures
set forth under Section 5--"Procedure for Tendering Shares" in the Offer to
Purchase (as defined below).
<PAGE>
Stockholders who cannot deliver their Shares and all other documents
required hereby to the Depositary by the Expiration Date (as defined in the
Offer to Purchase) must tender their Shares pursuant to the guaranteed delivery
procedure set forth under Section 5--"Procedure for Tendering Shares" in the
Offer to Purchase. See Instruction 2. Delivery of documents to the Company or to
a Book-Entry Transfer Facility does not constitute a valid delivery.
/ / CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER TO
THE DEPOSITARY'S ACCOUNT AT ONE OF THE BOOK-ENTRY TRANSFER FACILITIES AND
COMPLETE THE FOLLOWING:
Name of tendering
institution ____________________________________________________________________
Check applicable box:
/ / DTC
/ / PDTC
Account
No. ____________________________________________________________________________
Transaction Code
No. ___________________________________________________________________________
/ / CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE
FOLLOWING:
Name(s) of tendering
stockholder(s) ______________________________________________________________
Date of execution of Notice of Guaranteed
Delivery ________________________________________________
Name of institution that guaranteed
delivery _______________________________________________________
If delivery is by book-entry transfer:
Name of tendering
institution ____________________________________________________________________
Check applicable box:
/ / DTC
/ / PDTC
Account
No. ____________________________________________________________________________
Transaction Code
No. ___________________________________________________________________________
<PAGE>
NOTE: SIGNATURES MUST BE PROVIDED BELOW.
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY.
Ladies and Gentlemen:
The undersigned hereby tenders to Public Service Electric and Gas Company, a
New Jersey corporation (the "Company"), the above-described shares (together,
the "Shares") pursuant to the Company's offer to purchase up to 187,500 shares
(the "Shares") of the 4.08% Cumulative Preferred Stock ($100 par value) (the
"4.08% Preferred") at a price of $59.30 per Share, net to the seller in cash,
upon the terms and subject to the conditions set forth in the Offer to Purchase,
dated May 16, 1996 (the "Offer to Purchase"), receipt of which is hereby
acknowledged, and in this Letter of Transmittal (which together constitute the
"Offer").
Subject to, and effective upon, acceptance for payment of and payment for
the Shares tendered herewith in accordance with the terms and subject to the
conditions of the Offer (including, if the Offer is extended or amended with
respect to the 4.08% Preferred, the terms and conditions of any such extension
or amendment), the undersigned hereby sells, assigns and transfers to, or upon
the order of, the Company all right, title and interest in and to all the Shares
that are being tendered hereby and constitutes and appoints First Chicago Trust
Company of New York, as "Depositary," the true and lawful agent and
attorney-in-fact of the undersigned with respect to such Shares, with full power
of substitution (such power of attorney, being deemed to be an irrevocable power
coupled with an interest), to (a) deliver certificates for such Shares and to
accept such Shares or assign or transfer ownership of such Shares on the account
books maintained by the Book-Entry Transfer Facility that holds such Shares
together, in any such case, with all accompanying evidences of transfer and
authenticity, for deposit with the Depositary, (b) present such Shares for
transfer on the books of the Company, (c) issue payment for such Shares and/or
certificates for unpurchased Shares or deliver unpurchased Shares to the account
of the undersigned, and (d) receive all benefits and otherwise exercise all
rights of beneficial ownership of such Shares, all in accordance with the terms
of the Offer. The Depositary will act as agent for tendering stockholders for
the purpose of receiving payment from the Company and transmitting payment to
tendering stockholders.
The undersigned hereby represents and warrants that the undersigned has full
power and authority to tender, sell, assign and transfer the Shares tendered
hereby and that, when and to the extent the same are accepted for payment by the
Company, the Company will acquire good and unencumbered title thereto, free and
clear of all liens, restrictions, charges and encumbrances and not subject to
any adverse claim. The undersigned will, upon request, execute and deliver any
additional documents deemed by the Depositary or the Company to be necessary or
desirable to complete the sale, assignment and transfer of the Shares tendered
hereby or transfer ownership of such Shares.
All authority herein conferred or agreed to be conferred shall survive the
death, bankruptcy or incapacity of the undersigned, and every obligation of the
undersigned hereunder shall be binding upon the heirs, legal representatives,
successors, assigns, executors and administrators of the undersigned. Except as
stated in the Offer, this tender is irrevocable.
The undersigned understands that tenders of Shares pursuant to any one of
the procedures described under Section 5--"Procedure for Tendering Shares" in
the Offer to Purchase and in the instructions hereto will constitute the
undersigned's acceptance of the terms and conditions of the Offer.
Unless otherwise indicated under "Special Payment Instructions," the check
for the purchase price of any Shares purchased, and/or the return of any Shares
not tendered or not purchased, will be issued in the name(s) of the undersigned
(and, in the case of Shares tendered by book-entry transfer, by credit to the
account at the Book-Entry Transfer Facility designated above). Similarly, unless
otherwise indicated under "Special Delivery Instructions," the check for the
purchase price of any Shares purchased and/or the return of any certificates for
Shares not tendered or not purchased (and accompanying documents, as
appropriate) will be mailed to the undersigned at the address shown below the
undersigned signature(s). In the event that both "Special Payment Instructions"
and "Special Delivery Instructions" are completed, the check for the purchase
price of any Shares purchased and/or the return of any Shares not tendered or
not purchased will be issued in the name(s) of, and such check and/or any
certificates will be mailed to, the person(s) so indicated. The undersigned
recognizes that the Company has no obligation, pursuant to the "Special Payment
Instructions," to transfer any Shares from the name of the registered holder(s)
thereof if the Company does not accept for payment any of the Shares so
tendered.
<PAGE>
SPECIAL PAYMENT INSTRUCTIONS
SPECIAL DELIVERY INSTRUCTIONS
(See Instructions 4, 6 and 7)
(See Instructions 4, 6 and 7)
To be completed ONLY if the
check for the
To be completed ONLY if the check for the
purchase price of Shares
purchased and/or purchase price of Shares purchased and/or
certificates for Shares not
tendered or not purcertificates for Shares not tendered or not
pur chased are to be mailed
to someone other than chased are to be issued in the name of
some the undersigned or to
the undersigned at an one other than the undersigned.
address other than that
shown below the
Issue / / check and/or / / certificate(s) to:
undersigned's signature(s).
Name __________________________________
Mail / / check
and/or / / certificate(s) to:
(Please Print)
Name __________________________________
Address ________________________________
(Please Print)
________________________________________
Address ________________________________
(Include Zip Code)
________________________________________
________________________________________
(include Zip Code)
(Taxpayer Identification or Social Security No.)
<PAGE>
SOLICITED TENDERS
(SEE INSTRUCTION 10)
The Company will pay to any Soliciting Dealer, as defined in Instruction 10,
a solicitation fee of $1.25 per Share for each Share tendered, accepted for
payment and purchased pursuant to the Offer.
The undersigned represents that the Soliciting Dealer which solicited and
obtained this tender is:
Name of
Firm: __________________________________________________________________________
(Please Print)
Name of Individual Broker or Financial
Consultant: ____________________________________________________
Identification Number (if
known): ____________________________________________________________________
Address: ___________________________________________________________________
(Include Zip Code)
The following to be completed ONLY if customer's Shares held in nominee name are
tendered.
<TABLE>
<S> <C>
Name of Beneficial Owner Number of Shares Tendered
(Attach additional list if necessary)
</TABLE>
The acceptance of compensation by such Soliciting Dealer will constitute a
representation by it that: (a) it has complied with the applicable requirements
of the Securities Exchange Act of 1934, as amended, and the applicable rules and
regulations thereunder, in connection with such solicitation; (b) it is entitled
to such compensation for such solicitation under the terms and conditions of the
Offer to Purchase; (c) in soliciting tenders of Shares, it has used no
solicitation materials other than those furnished by the Company; and (d) if it
is a foreign broker or dealer not eligible for membership in the National
Association of Securities Dealers, Inc. (the "NASD"), it has agreed to conform
to the NASD's Rules of Fair Practice in making solicitations.
The payment of compensation to any Soliciting Dealer is dependent on such
Soliciting Dealer returning a Notice of Solicited Tenders to the Depositary.
<PAGE>
SIGN HERE
(Please complete Substitute Form W-9 below)
_______________________________________________________________________________
_____________________________________________________________________________
Signature(s) of Owner(s)
Dated __________________________________________________________________, 1996
Name(s)
______________________________________________________________________________
______________________________________________________________________________
(Please Print)
Capacity (full
title) ______________________________________________________________________
Address ______________________________________________________________________
Area Code and Telephone
No. _______________________________________________________________
(Must be signed by the registered holder(s) exactly as name(s) appear(s)
on the stock certificate(s) or on a security position listing or by
person(s) authorized to become registered holder(s) by certificates and
documents transmitted herewith. If signature is by a trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation or
other person acting in a fiduciary or representative capacity, please
set forth full title and see Instruction 5.)
GUARANTEE OF SIGNATURE(S)
(See Instructions 1 and 5)
Name of
Firm ___________________________________________________________________________
Authorized
Signature ______________________________________________________________________
Name ___________________________________________________________________________
Title __________________________________________________________________________
Address ________________________________________________________________________
________________________________________________________________________________
Area Code and Telephone
No. _______________________________________________________________
Dated __________________________________________________________________________
<PAGE>
THE LETTER OF TRANSMITTAL IS TO BE USED FOR THE TENDER OF SHARES OF 4.08%
PREFERRED ONLY. ANY PERSON DESIRING TO TENDER SHARES OF ANY OTHER SERIES OF
CUMULATIVE PREFERRED STOCK FOR WHICH THE COMPANY IS MAKING A TENDER OFFER MUST
SUBMIT THE LETTER OF TRANSMITTAL RELATING TO THAT SPECIFIC SERIES.
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES. Except as otherwise provided below, all
signatures on this Letter of Transmittal must be guaranteed by a financial
institution (including most banks, savings and loan associations and brokerage
houses) that is a participant in the Security Transfer Agents Medallion Program
or the Stock Exchange Medallion Program (any of the foregoing, an "Eligible
Institution"). Signatures on this Letter of Transmittal need not be guaranteed
(a) if this Letter of Transmittal is signed by the registered holder(s) of the
Shares (which term, for purposes of this document, shall include any participant
in one of the Book-Entry Transfer Facilities whose name appears on a security
position listing as the owner of Shares) tendered herewith and such holder(s)
has not completed the box entitled "Special Payment Instructions" or the box
entitled "Special Delivery Instructions" on this Letter of Transmittal or (b) if
such Shares are tendered for the account of an Eligible Institution. See
Instruction 5.
2. DELIVERY OF LETTER OF TRANSMITTAL AND SHARES. This Letter of Transmittal
is to be used either if certificates are to be forwarded herewith or if delivery
of Shares is to be made by book-entry transfer pursuant to the procedures set
forth under Section 5--"Procedure for Tendering Shares" in the Offer to
Purchase. Certificates for all physically delivered Shares, or a confirmation of
a book-entry transfer into the Depositary's account at one of the Book-Entry
Transfer Facilities of all Shares delivered electronically, as well as a
properly completed and duly executed Letter of Transmittal (or facsimile
thereof) and any other documents required by this Letter of Transmittal, must be
received by the Depositary at one of its addresses set forth on the front page
of this Letter of Transmittal on or prior to the Expiration Date (as defined in
the Offer to Purchase) with respect to the 4.08% Preferred. Stockholders who
cannot deliver their Shares and all other required documents to the Depositary
on or prior to the applicable Expiration Date must tender their Shares pursuant
to the guaranteed delivery procedure set forth under Section 5--"Procedure for
Tendering Shares" in the Offer to Purchase. Pursuant to such procedure: (a) such
tender is made by or through an Eligible Institution, (b) a properly completed
and duly executed Notice of Guaranteed Delivery in the form provided by the
Company is received by the Depositary on or prior to the applicable Expiration
Date and (c) the certificates for such Shares (or a confirmation of a book-entry
transfer of such Shares into the Depositary's account at one of the Book-Entry
Transfer Facilities), together with a properly completed and duly executed
Letter of Transmittal for the 4.08% Preferred, or facsimile thereof, and any
other documents required by such Letter of Transmittal, are received by the
Depositary no later than 5:00 p.m. New York City time on the third New York
Stock Exchange trading day after the Expiration Date, all as provided under
Section 5--"Procedure for Tendering Shares" in the Offer to Purchase.
THE METHOD OF DELIVERY OF SHARES AND ALL OTHER REQUIRED DOCUMENTS IS AT THE
OPTION AND RISK OF THE TENDERING STOCKHOLDER. IF CERTIFICATES FOR SHARES ARE
SENT BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED,
IS RECOMMENDED.
No alternative, conditional or contingent tenders will be accepted. See
Section 4--"Number of Shares; Purchase Price; Expiration Date; Receipt of
Dividend; Extension of the Offer; Proration" in the Offer to Purchase. By
executing this Letter of Transmittal (or facsimile thereof), the tendering
stockholder waives any right to receive any notice of the acceptance for payment
of the Shares.
3. INADEQUATE SPACE. If the space provided herein is inadequate, the
certificate numbers and/or the number of Shares should be listed on a separate
schedule attached hereto.
4. PARTIAL TENDERS (NOT APPLICABLE TO STOCKHOLDERS WHO TENDER BY BOOK-ENTRY
TRANSFER). If fewer than all the Shares represented by any certificate delivered
to the Depositary are to be tendered, fill in the number of Shares that are to
be tendered in the box entitled "Number of Shares Tendered." In such case, a new
certificate for the remainder of the Shares represented by the old certificate
will be sent in the name of and to the person(s) signing this Letter of
Transmittal, unless otherwise provided in the "Special Payment Instructions" or
"Special Delivery Instructions" boxes on this Letter of Transmittal, as promptly
as practicable following the expiration or termination of the Offer. All Shares
represented by certificates delivered to the Depositary will be deemed to have
been tendered unless otherwise indicated.
<PAGE>
5. SIGNATURES ON LETTER OF TRANSMITTAL; STOCK POWERS AND ENDORSEMENTS. If
this Letter of Transmittal is signed by the registered holder(s) of the Shares
tendered hereby, the signature(s) must correspond with the name(s) as written on
the face of the certificates without alteration, enlargement or any change
whatsoever.
If any of the Shares tendered hereby are held of record by two or more
persons, all such persons must sign this Letter of Transmittal.
If any of the Shares tendered hereby are registered in different names on
different certificates, it will be necessary to complete, sign and submit as
many separate Letters of Transmittal as there are different registrations of
certificates.
If this Letter of Transmittal is signed by the registered holder(s) of the
Shares tendered hereby, no endorsements of certificates or separate stock powers
are required unless payment of the purchase price is to be made to, or Shares
not tendered or not purchased are to be registered in the name of, any person
other than the registered holder(s). Signatures on any such certificates or
stock powers must be guaranteed by an Eligible Institution. See Instruction 1.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the Shares tendered hereby, certificates must be
endorsed or accompanied by appropriate stock powers, in either case, signed
exactly as the name(s) of the registered holder(s) appear(s) on the certificates
for such Shares. Signature(s) on any such certificates or stock powers must be
guaranteed by an Eligible Institution. See Instruction 1.
If this Letter of Transmittal or any certificate or stock power is signed by
a trustee, executor, administrator, guardian, attorney-in-fact, officer of a
corporation or other person acting in a fiduciary or representative capacity,
such person should so indicate when signing, and proper evidence satisfactory to
the Company of the authority of such person so to act must be submitted.
6. STOCK TRANSFER TAXES. The Company will pay or cause to be paid any stock
transfer taxes with respect to the sale and transfer of any Shares to it or its
order pursuant to the Offer. If, however, payment of the purchase price is to be
made to, or Shares not tendered or not purchased are to be registered in the
name of, any person other than the registered holder(s), or if tendered Shares
are registered in the name of any person other than the person(s) signing this
Letter of Transmittal, the amount of any stock transfer taxes (whether imposed
on the registered holder(s), such other person or otherwise) payable on account
of the transfer to such person will be deducted from the purchase price unless
satisfactory evidence of the payment of such taxes, or exemption therefrom, is
submitted. See Section 7--"Acceptance for Payment of Shares and Payment of
Purchase Price" in the Offer to Purchase. EXCEPT AS PROVIDED IN THIS INSTRUCTION
6, IT WILL NOT BE NECESSARY TO AFFIX TRANSFER TAX STAMPS TO THE CERTIFICATES
REPRESENTING SHARES TENDERED HEREBY.
7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If the check for the purchase
price of any Shares purchased is to be issued in the name of, and/or any Shares
not tendered or not purchased are to be returned to, a person other than the
person(s) signing this Letter of Transmittal or if the check and/or any
certificate for Shares not tendered or not purchased are to be mailed to someone
other than the person(s) signing this Letter of Transmittal or to an address
other than that shown above in the box captioned "Description of Shares
Tendered," then the boxes captioned "Special Payment Instructions" and/or
"Special Delivery Instructions" on this Letter of Transmittal should be
completed. Stockholders tendering Shares by book-entry transfer will have any
Shares not accepted for payment returned by crediting the account maintained by
such stockholder at the Book-Entry Transfer Facility from which such transfer
was made.
8. SUBSTITUTE FORM W-9 AND FORM W-8. The tendering stockholder is required
to provide the Depositary with either a correct Taxpayer Identification Number
("TIN") on Substitute Form W-9, which is provided under "Important Tax
Information" below, or a properly completed Form W-8. Failure to provide the
information on either Substitute Form W-9 or Form W-8 may subject the tendering
stockholder to 31% Federal income tax backup withholding on the payment of the
purchase price. The box in Part 2 of Substitute Form W-9 may be checked if the
tendering stockholder has not been issued a TIN and has applied for a number or
intends to apply for a number in the near future. If the box in Part 2 is
checked and the Depositary is not provided with a TIN by the time of payment,
the Depositary will withhold 31% on all payments of the purchase price
thereafter until a TIN is provided to the Depositary.
<PAGE>
9. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Any questions or requests
for assistance may be directed to Georgeson & Company Inc., as "Information
Agent," or Goldman, Sachs & Co. and Merrill Lynch & Co., as "Dealer Managers,"
at their respective telephone numbers and addresses listed below. Requests for
additional copies of the Offer to Purchase, this Letter of Transmittal or other
tender offer materials may be directed to the Information Agent or the Dealer
Managers and such copies will be furnished promptly at the Company's expense.
Stockholders may also contact their local broker, dealer, commercial bank or
trust company for assistance concerning the Offer.
10. SOLICITED TENDERS. The Company will pay a solicitation fee of $1.25 per
Share for any Shares tendered, accepted for payment and paid for pursuant to the
Offer, covered by the Letter of Transmittal which designates, in the box
captioned "Solicited Tenders," as having solicited and obtained the tender, the
name of (a) any broker or dealer in securities, including a Dealer Manager in
its capacity as a dealer or broker, which is a member of any national securities
exchange or of the National Association of Securities Dealers, Inc. ("NASD"),
(b) any foreign broker or dealer not eligible for membership in the NASD which
agrees to conform to the NASD's Rules of Fair Practice in soliciting tenders
outside the United States to the same extent as though it were an NASD member,
or (c) any bank or trust company (each of which is referred to herein as a
"Soliciting Dealer"). No such fee shall be payable to a Soliciting Dealer with
respect to the tender of Shares by a holder unless the Letter of Transmittal
accompanying such tender designates such Soliciting Dealer. No such fee shall be
payable to a Soliciting Dealer in respect of Shares registered in the name of
such Soliciting Dealer unless such Shares are held by such Soliciting Dealer as
nominee and such Shares are being tendered for the benefit of one or more
beneficial owners identified on the Letter of Transmittal or on the Notice of
Solicited Tenders (included in the materials provided to brokers and dealers).
No such fee shall be payable to a Soliciting Dealer with respect to the tender
of Shares by the holder of record, for the benefit of the beneficial owner,
unless the beneficial owner has designated such Soliciting Dealer. If tendered
Shares are being delivered by book-entry transfer, the Soliciting Dealer must
return a Notice of Solicited Tenders to the Depositary within three New York
Stock Exchange trading days after expiration of the Offer to receive a
solicitation fee. No such fee shall be payable to a Soliciting Dealer if such
Soliciting Dealer is required for any reason to transfer the amount of such fee
to a depositing holder (other than itself). No broker, dealer, bank, trust
company or fiduciary shall be deemed to be the agent of the Company, the
Depositary, the Information Agent or the Dealer Managers for purposes of the
Offer.
11. IRREGULARITIES. All questions as to the form of documents and the
validity, eligibility (including time of receipt) and acceptance of any tender
of Shares will be determined by the Company, in its sole discretion, and its
determination shall be final and binding. The Company reserves the absolute
right to reject any and all tenders of Shares that it determines are not in
proper form or the acceptance for payment of or payment for Shares that may, in
the opinion of the Company's counsel, be unlawful. The Company also reserves the
absolute right to waive any of the conditions to the Offer or any defect or
irregularity in any tender of Shares and the Company's interpretation of the
terms and conditions of the Offer (including these instructions) shall be final
and binding. Unless waived, any defects or irregularities in connection with
tenders must be cured within such time as the Company shall determine. None of
the Company, the Dealer Managers, the Depositary, the Information Agent or any
other person shall be under any duty to give notice of any defect or
irregularity in tenders, nor shall any of them incur any liability for failure
to give any such notice. Tenders will not be deemed to have been made until all
defects and irregularities have been cured or waived.
<PAGE>
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR A FACSIMILE COPY THEREOF), DULY
EXECUTED, TOGETHER WITH CERTIFICATES OR CONFIRMATION OF BOOK-ENTRY TRANSFER AND
ALL OTHER REQUIRED DOCUMENTS MUST BE RECEIVED BY THE DEPOSITARY, OR THE NOTICE
OF GUARANTEED DELIVERY MUST BE RECEIVED BY THE DEPOSITARY, ON OR PRIOR TO THE
APPLICABLE EXPIRATION DATE (AS DEFINED IN THE OFFER TO PURCHASE).
IMPORTANT TAX INFORMATION
Under Federal income tax law, a stockholder whose tendered Shares are
accepted for payment is required to provide the Depositary (as payer) with
either such stockholder's correct TIN on Substitute Form W-9 below or a properly
completed Form W-8. If such stockholder is an individual, the TIN is his or her
social security number. For businesses and other entities, the TIN is the
employer identification number. If the Depositary is not provided with the
correct TIN or properly completed Form W-8, the stockholder may be subject to a
$50 penalty imposed by the Internal Revenue Service. In addition, payments that
are made to such stockholder with respect to Shares purchased pursuant to the
Offer may be subject to backup withholding. The Form W-8 can be obtained from
the Depositary. See the enclosed Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9 for additional instructions.
If Federal income tax backup withholding applies, the Depositary is required
to withhold 31% of any payments made to the stockholder. Backup withholding is
not an additional tax. Rather, the Federal income tax liability of persons
subject to backup withholding will be reduced by the amount of the tax withheld.
If withholding results in an overpayment of taxes, a refund may be obtained.
PURPOSE OF SUBSTITUTE FORM W-9 AND FORM W-8
To avoid backup withholding on payments that are made to a stockholder with
respect to Shares purchased pursuant to the Offer, the stockholder is required
to notify the Depositary of his or her correct TIN by completing the Substitute
Form W-9 attached hereto certifying that the TIN provided on Substitute Form W-9
is correct and that (a) the stockholder has not been notified by the Internal
Revenue Service that he or she is subject to Federal income tax backup
withholding as a result of failure to report all interest or dividends or (b)
the Internal Revenue Service has notified the stockholder that he or she is no
longer subject to Federal income tax backup withholding. Foreign stockholders
must submit a properly completed Form W-8 in order to avoid the applicable
backup withholding; provided, however, that backup withholding will not apply to
foreign stockholders subject to 30% (or lower treaty rate) withholding on gross
payments received pursuant to the Offer.
WHAT NUMBER TO GIVE THE DEPOSITARY
The stockholder is required to give the Depositary the social security
number or employer identification number of the registered owner of the Shares.
If the Shares are in more than one name or are not in the name of the actual
owner, consult the enclosed Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9 for additional guidance on which
number to report.
<PAGE>
PAYER'S NAME: FIRST CHICAGO TRUST COMPANY OF NEW YORK
PART 1--PLEASE PROVIDE
YOUR TIN IN
SUBSTITUTE
Social security number OR
THE BOX AT RIGHT AND
CERTIFY BY
SIGNING AND DATING
BELOW:
Employee Identification
Number
TIN ________________________
FORM W-9
Name (Please
Print) ________________________________
PART 2
Address ________________________________________________________________________
Awaiting
TIN / / City _________________ State _______ Zip
Code _______
PART 3--CERTIFICATION--UNDER THE PENALTIES OF
PERJURY, I CERTIFY THAT:
Department of the Treasury
(1) The number shown on this form is my correct
taxpayer identification number (or a TIN has
Internal Revenue Service
not been issued to me but I have mailed or
delivered an application to receive a TIN or
intend to do so in the near future).
PAYER'S REQUEST FOR
(2) I am not subject to backup withholding either
because I have not been notified by the Internal
TAXPAYER IDENTIFICATION
Revenue Service (the "IRS") that I am subject to
backup withholding as a result of a failure to
report all interest or dividends or the IRS has
notified me that I am no longer subject to NUMBER
(TIN)
backup withholding.
AND CERTIFICATION
(3) All other information provided on this form is
true, correct and complete.
SIGNATURE: ____________________________________ DATE: ______________
You must cross out item (2) above if you have been
notified by the IRS that you are currently subject to
backup withholding because of underreporting interest
or dividends on your tax return.
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER.
PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN
PART 2 OF THE SUBSTITUTE FORM W-9.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification
number has not been issued to me and either (1) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or
(2) I intend to mail or deliver an application in the near future. I
understand that if I do not provide a taxpayer identification number by the
time of payment, 31% of all payments of the purchase price made to me will be
withheld until I provide a number.
THE INFORMATION AGENT FOR THE OFFER IS:
GEORGESON & COMPANY INC.
Wall Street Plaza
New York, New York 10005
Banks and Brokers Call Collect: (212) 440-9800
All Others Call Toll-Free: (800) 223-2064
THE DEALER MANAGERS FOR THE OFFER ARE:
<TABLE>
<S> <C>
GOLDMAN, SACHS & CO. MERRILL LYNCH & CO.
85 Broad Street World Financial Center
New York, New York 10004 250 Vesey Street
(800) 828-3182 New York, New York 10281
(212) 449-4914 (call collect)
</TABLE>
EXHIBIT 99.(a)(3)
PUBLIC SERVICE ELECTRIC AND GAS COMPANY
Notice of Guaranteed Delivery of
Shares of 4.08% Cumulative Preferred Stock ($100 par value)
This form, or a form substantially equivalent to this form, must be used to
accept the Offer (as defined below) if certificates for the shares of 4.08%
Cumulative Preferred Stock ($100 par value) (the "Shares") are not immediately
available, if the procedure for book-entry transfer cannot be completed on a
timely basis, or if time will not permit all other documents required by the
applicable Letter of Transmittal to be delivered to First Chicago Trust Company
of New York, as Depositary on or prior to the expiration of the Offer. Such form
may be delivered by hand or transmitted by mail, or by facsimile transmission,
to the Depositary. See Section 5--"Procedure for Tendering Shares" in the Offer
to Purchase. THE ELIGIBLE INSTITUTION (AS DEFINED HEREIN) WHICH COMPLETES THIS
FORM MUST COMMUNICATE THE GUARANTEE TO THE DEPOSITARY AND MUST DELIVER THE
APPLICABLE LETTER OF TRANSMITTAL AND CERTIFICATES FOR SHARES TO THE DEPOSITARY
WITHIN THREE NEW YORK STOCK EXCHANGE TRADING DAYS AFTER THE EXPIRATION DATE.
Failure to do so could result in a financial loss to such Eligible Institution.
To: FIRST CHICAGO TRUST COMPANY OF NEW YORK, DEPOSITARY
<TABLE>
<CAPTION>
By Mail: Facsimile Transmission: By Hand or By Overnight Courier:
<S> <C> <C>
Tenders & Exchanges (201) 222-4720 Tenders & Exchange
P.O. Box 2559--Suite 4660--PSE&G or 14 Wall Street
Jersey City, New Jersey (201) 222-4721 Suite 4680--8th Floor--PSE&G
07303-2559 New York, New York 10005
Confirm by
Telephone:
(201) 222-4707
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR
TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN ONE LISTED ABOVE
WILL NOT CONSTITUTE A VALID DELIVERY.
This form is not to be used to guarantee signatures. If a signature on a
Letter of Transmittal is required to be guaranteed by an Eligible Institution
under the instructions thereto, such signature guarantee must appear in the
applicable space provided in the signature box on the Letter of Transmittal.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to Public Service Electric and Gas Company, a
New Jersey corporation (the "Company"), upon the terms and subject to the
conditions set forth in the Offer to Purchase dated May 16, 1996 (the "Offer to
Purchase"), and the applicable Letter of Transmittal (which, together with the
Offer to Purchase, constitutes the "Offer"), receipt of which is hereby
acknowledged, the number of Shares of the 4.08% Cumulative Preferred Stock of
the Company listed below, pursuant to the guaranteed delivery procedure set
forth in Section 5--"Procedure for Tendering Shares" in the Offer to Purchase.
<TABLE>
<S> <C>
Number of 4.08% Shares: Signature
Certificate Nos. (if available): Name(s) of Record Holder(s)
(Please Print)
If 4.08% Shares will be tendered by Address
book-entry
transfer: Name of Tendering Institution:
Account No. at (check one) Area Code and Telephone Number
/ / The Depository Trust Company
/ / The Philadelphia Depository Trust
Company
</TABLE>
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned financial institution (including most banks, savings and
loan associations and brokerage houses) that is a participant in the Security
Transfer Agents Medallion Program or the Stock Exchange Medallion Program (each,
an "Eligible Institution") guarantees (a) that the above-named person(s) has a
net long position in the Shares being tendered within the meaning of Rule 14e-4
promulgated under the Securities Exchange Act of 1934, as amended, (b) that such
tender of Shares complies with Rule 14e-4 and (c) to deliver to the Depositary
at one of its addresses set forth above certificate(s) for the Shares tendered
hereby, in proper form for transfer, or a confirmation of the book-entry
transfer of the Shares tendered hereby into the Depositary's account at The
Depository Trust Company or The Philadelphia Depository Trust Company, in each
case together with a properly completed and duly executed Letter(s) of
Transmittal (or facsimile(s) thereof), with any required signature guarantee(s)
and any other required documents, all within three New York Stock Exchange
trading days after the Expiration Date.
<TABLE>
<S> <C>
NAME OF FIRM AUTHORIZED SIGNATURE
ADDRESS NAME
CITY, STATE, ZIP CODE TITLE
AREA CODE AND TELEPHONE NUMBER
Dated: , 1996
</TABLE>
DO NOT SEND CERTIFICATES WITH THIS FORM. YOUR CERTIFICATES MUST BE SENT WITH THE
APPLICABLE LETTER OF TRANSMITTAL.
2
EXHIBIT 99.(a)(4)
<TABLE>
<S> <C>
GOLDMAN, SACHS & CO. MERRILL LYNCH & CO.
85 Broad Street World Financial Center
New York, New York 10004 250 Vesey Street
New York, New York 10281
</TABLE>
PUBLIC SERVICE ELECTRIC AND GAS COMPANY
OFFER TO PURCHASE FOR CASH
UP TO
187,500 SHARES OF 4.08% CUMULATIVE PREFERRED STOCK
($100 PAR VALUE) CUSIP NO. 744567 306
187,500 SHARES OF 4.18% CUMULATIVE PREFERRED STOCK
($100 PAR VALUE) CUSIP NO. 744567 405
187,500 SHARES OF 4.30% CUMULATIVE PREFERRED STOCK
($100 PAR VALUE) CUSIP NO. 744567 504
187,500 SHARES OF 5.05% CUMULATIVE PREFERRED STOCK
($100 PAR VALUE) CUSIP NO. 744567 603
187,500 SHARES OF 5.28% CUMULATIVE PREFERRED STOCK
($100 PAR VALUE) CUSIP NO. 744567 702
187,500 SHARES OF 6.80% CUMULATIVE PREFERRED STOCK
($100 PAR VALUE) CUSIP NO. 744567 801
450,000 SHARES OF 6.92% CUMULATIVE PREFERRED STOCK
($100 PAR VALUE) CUSIP NO. 744567 710
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON THURSDAY, JUNE 13, 1996 UNLESS THE OFFER IS EXTENDED.
May 16, 1996
To Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
We have been appointed by Public Service Electric and Gas Company, a New
Jersey corporation (the "Company"), to act as Dealer Managers in connection with
the offer to purchase up to 187,500 shares of its 4.08% Cumulative Preferred
Stock ($100 par value) (the "4.08% Shares") at a price of $59.30 per 4.08%
Share, up to 187,500 shares of its 4.18% Cumulative Preferred Stock ($100 par
value) (the "4.18% Shares") at a price of $60.76 per 4.18% Share, up to 187,500
shares of its 4.30% Cumulative Preferred Stock ($100 par value) (the "4.30%
Shares") at a price of $62.50 per 4.30% Share, up to 187,500 shares of its 5.05%
Cumulative Preferred Stock ($100 par value) (the "5.05% Shares") at a price of
$73.40 per 5.05% Share, up to 187,500 shares of its 5.28% Cumulative Preferred
Stock ($100 par value) (the "5.28% Shares") at a price of $76.74 per 5.28%
Share, up to 187,500 shares of its 6.80% Cumulative Preferred Stock ($100 par
value) (the 6.80% Shares") at a price of $97.42 per 6.80% Share and up to
450,000 shares of its 6.92% Cumulative Preferred Stock ($100 par value) (the
"6.92% Shares") at a price of $99.14 per 6.92% Share (together, the "Shares" and
each, a "Series of Preferred"), net to the seller in cash, upon the terms and
subject to the conditions set forth in the Offer to Purchase dated May 16, 1996
(the "Offer to Purchase"), and in the applicable Letter of Transmittal
(which, together with the Offer to Purchase, constitutes the "Offer"). The
Company will purchase all Shares validly tendered and not withdrawn, upon the
terms and subject to the conditions of the Offer, including the provisions
thereof relating to proration (as described in the Offer to Purchase). Shares
not purchased because of proration or otherwise will be returned (or, in the
case of Shares tendered by book-entry transfer, such Shares will be credited to
an account maintained with a Book-Entry Transfer Facility (as defined in the
Offer to Purchase)) promptly without expense to the tendering stockholder.
<PAGE>
THE OFFER FOR ONE SERIES OF PREFERRED IS INDEPENDENT OF THE OFFER FOR THE
OTHER SERIES OF PREFERRED. THE OFFER IS NOT CONDITIONED UPON ANY MINIMUM NUMBER
OF SHARES BEING TENDERED. The Offer is, however, subject to certain other
conditions. See Section 8--"Certain Conditions of the Offer" in the Offer to
Purchase.
We are asking you to contact your clients for whom you hold Shares
registered in your name (or in the name of your nominee) or who hold Shares
registered in their own names. Please bring the Offer to their attention as
promptly as possible.
The Company will pay to a Soliciting Dealer (as defined in the Offer to
Purchase) a solicitation fee of $1.25 per Share for any Shares tendered,
accepted for payment and paid for pursuant to the Offer. For purposes of this
letter, Soliciting Dealer includes (i) any broker or dealer in securities,
including Goldman, Sachs & Co. and Merrill Lynch & Co., as "Dealer Managers," in
their capacity as a broker or dealer, which is a member of any national
securities exchange or of the National Association of Securities Dealers, Inc.
(the "NASD"), (ii) any foreign broker or dealer not eligible for membership in
the NASD which agrees to conform to the NASD's Rules of Fair Practice in
soliciting tenders outside the United States to the same extent as if it were an
NASD member, or (iii) any bank or trust company. No such fee shall be payable to
a Soliciting Dealer in respect of Shares registered in the name of such
Soliciting Dealer unless such Shares are held by such Soliciting Dealer as
nominee and such Shares are being tendered for the benefit of one or more
beneficial owners identified in the applicable Letter of Transmittal or in the
applicable Notice of Solicited Tenders (included in the materials provided to
brokers and dealers). No such fee shall be payable to a Soliciting Dealer with
respect to the tender of Shares by a holder unless the applicable Letter of
Transmittal accompanying such tender designates such Soliciting Dealer. No such
fee shall be payable to the Soliciting Dealer unless the Soliciting Dealer
returns a Notice of Solicited Tenders to the Depositary within three New York
Stock Exchange trading days after the applicable Expiration Date. No such fee
shall be payable to a Soliciting Dealer to the extent such Soliciting Dealer is
required for any reason to transfer the amount of such fee to any person (other
than itself). No broker, dealer, bank, trust company or fiduciary shall be
deemed to be the agent of the Company, First Chicago Trust Company of New York,
as "Depositary," the Dealer Managers or Georgeson & Company Inc., as
"Information Agent," for purposes of the Offer.
The Company will also, upon request, reimburse Soliciting Dealers for
reasonable and customary handling and mailing expenses incurred by them in
forwarding materials relating to the Offer to their customers. The Company will
pay all stock transfer taxes applicable to its purchase of Shares pursuant to
the Offer, subject to Instruction 6 of each Letter of Transmittal.
In order for a Soliciting Dealer to receive a solicitation fee, the
Depositary must receive from such Soliciting Dealer a properly completed and
duly executed Notice of Solicited Tenders in the form attached hereto (or
facsimile thereof) within three New York Stock Exchange trading days after the
expiration of the Offer.
For your information and for forwarding to your clients, we are enclosing
the following documents:
1. The Offer to Purchase;
2. A Letter of Transmittal for each Series of Preferred for your use and
for the information of your clients;
3. A letter to holders of the Shares from the Senior Vice President and
Chief Financial Officer of the Company;
4. A Notice of Guaranteed Delivery for each Series of Preferred to be
used to accept the Offer if the Shares or any other required documents
cannot be delivered to the Depositary by the expiration of the Offer;
2
<PAGE>
5. A letter which may be sent to your clients for whose accounts you
hold Shares registered in your name or in the name of your nominee, with
space for obtaining such clients' instructions with regard to the Offer;
6. Guidelines of the Internal Revenue Service for Certification of
Taxpayer Identification Number on Substitute Form W-9, providing information
relating to backup Federal income tax withholding; and
7. A return envelope addressed to First Chicago Trust Company of New
York, as Depositary.
We urge you to contact your clients as promptly as possible. Please note
that the Offer, proration period and withdrawal rights expire at 12:00 midnight,
New York City time, on Thursday, June 13, 1996, unless the Offer is extended.
As described in the Offer to Purchase, if more than 187,500 4.08% Shares,
187,500 4.18% Shares, 187,500 4.30% Shares, 187,500 5.05% Shares, 187,500 5.28%
Shares, 187,500 6.80% Shares or 450,000 6.92% Shares (or, if such amount for
each Series of Preferred is decreased, such lesser amount) have been validly
tendered and not withdrawn on or prior to the expiration of the Offer, the
Company will purchase Shares of that Series of Preferred from all tendering
holders on a pro rata basis.
THE COMPANY, ITS BOARD OF DIRECTORS AND ITS EXECUTIVE OFFICERS MAKE NO
RECOMMENDATION TO ANY STOCKHOLDER AS TO WHETHER TO TENDER ANY OR ALL SHARES OF
ANY SERIES OF PREFERRED PURSUANT TO THE OFFER. STOCKHOLDERS MUST MAKE THEIR OWN
DECISION AS TO WHETHER TO TENDER SHARES OF ANY SERIES OF PREFERRED PURSUANT TO
ANY OFFER AND, IF SO, HOW MANY SHARES TO TENDER.
Any questions or requests for assistance or additional copies of the
enclosed materials may be directed to the Information Agent, or to us, as Dealer
Managers, at the respective addresses and telephone numbers set forth on the
back cover of the enclosed Offer to Purchase.
Very truly yours,
Goldman, Sachs & Co. Merrill Lynch & Co.
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU
THE AGENT OF THE COMPANY, THE DEALER MANAGERS, THE INFORMATION AGENT OR THE
DEPOSITARY, OR AUTHORIZE YOU OR ANY OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY
STATEMENT ON BEHALF OF ANY OF THEM IN CONNECTION WITH THE OFFER OTHER THAN THE
DOCUMENTS ENCLOSED HEREWITH AND THE STATEMENTS CONTAINED THEREIN.
3
<PAGE>
NOTICE OF SOLICITED TENDERS
List below the number of Shares tendered by each beneficial owner whose
tender you have solicited. All Shares beneficially owned by a beneficial owner,
whether in one account or several, and in however many capacities, must be
aggregated for purposes of completing the table below. Any questions as to what
constitutes beneficial ownership should be directed to the Depositary. If the
space below is inadequate, list the Shares in a separate signed schedule and
affix the list to this Notice of Solicited Tenders. Please do not complete the
sections of the table headed "TO BE COMPLETED ONLY BY DEPOSITARY."
ALL NOTICES OF SOLICITED TENDERS SHOULD BE RETURNED TO, AND ALL QUESTIONS
CONCERNING THE NOTICES OF SOLICITED TENDERS SHOULD BE DIRECTED TO, THE
DEPOSITARY. ALL NOTICES OF SOLICITED TENDERS MUST BE RECEIVED BY THE DEPOSITARY
WITHIN THREE NEW YORK STOCK EXCHANGE TRADING DAYS AFTER THE EXPIRATION OF THE
OFFER.
SOLICITED TENDERS OF 4.08% SHARES NOT BENEFICIALLY OWNED BY SOLICITING DEALER
<TABLE>
<CAPTION>
TO BE COMPLETED
TO BE COMPLETED BY THE ONLY BY TO BE COMPLETED
SOLICITING DEALER DEPOSITARY ONLY BY
------------------------------------ ---------------------- DEPOSITARY
NUMBER OF SERIES OF NUMBER OF SERIES OF -----------------
SHARES PREFERRED VOI TICKET SHARES PREFERRED FEE
BENEFICIAL OWNER TENDERED TENDERED NUMBER* ACCEPTED ACCEPTED ($1.25 PER SHARE)
- ----------------- --------- --------- ---------- --------- --------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Beneficial Owner
No. 1
Beneficial Owner
No. 2
Beneficial Owner
No. 3
Beneficial Owner
No. 4
Beneficial Owner
No. 5
Beneficial Owner
No. 6
Beneficial Owner
No. 7
Beneficial Owner
No. 8
Total
</TABLE>
- ------------
* Complete if Shares delivered by book-entry transfer.
All questions as to the validity, form and eligibility (including time of
receipt) of Notices of Solicited Tenders will be determined by the Company, in
its sole discretion, which determination will be final and binding. Neither the
Company nor any other person will be under any duty to give notification of any
defects or irregularities in any Notice of Solicited Tenders or incur any
liability for failure to give such notification.
4
<PAGE>
NOTICE OF SOLICITED TENDERS
List below the number of Shares tendered by each beneficial owner whose
tender you have solicited. All Shares beneficially owned by a beneficial owner,
whether in one account or several, and in however many capacities, must be
aggregated for purposes of completing the table below. Any questions as to what
constitutes beneficial ownership should be directed to the Depositary. If the
space below is inadequate, list the Shares in a separate signed schedule and
affix the list to this Notice of Solicited Tenders. Please do not complete the
sections of the table headed "TO BE COMPLETED ONLY BY DEPOSITARY."
ALL NOTICES OF SOLICITED TENDERS SHOULD BE RETURNED TO, AND ALL QUESTIONS
CONCERNING THE NOTICES OF SOLICITED TENDERS SHOULD BE DIRECTED TO, THE
DEPOSITARY. ALL NOTICES OF SOLICITED TENDERS MUST BE RECEIVED BY THE DEPOSITARY
WITHIN THREE NEW YORK STOCK EXCHANGE TRADING DAYS AFTER THE EXPIRATION OF THE
OFFER.
SOLICITED TENDERS OF 4.18% SHARES NOT BENEFICIALLY OWNED BY SOLICITING DEALER
<TABLE>
<CAPTION>
TO BE COMPLETED ONLY
TO BE COMPLETED BY THE BY TO BE COMPLETED
SOLICITING DEALER DEPOSITARY ONLY BY
------------------------------------ ---------------------- DEPOSITARY
NUMBER OF SERIES OF NUMBER OF SERIES OF -----------------
SHARES PREFERRED VOI TICKET SHARES PREFERRED FEE
BENEFICIAL OWNER TENDERED TENDERED NUMBER* ACCEPTED ACCEPTED ($1.25 PER SHARE)
- ----------------- --------- --------- ---------- --------- --------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Beneficial Owner
No. 1
Beneficial Owner
No. 2
Beneficial Owner
No. 3
Beneficial Owner
No. 4
Beneficial Owner
No. 5
Beneficial Owner
No. 6
Beneficial Owner
No. 7
Beneficial Owner
No. 8
Total
</TABLE>
- ------------
* Complete if Shares delivered by book-entry transfer.
All questions as to the validity, form and eligibility (including time of
receipt) of Notices of Solicited Tenders will be determined by the Company, in
its sole discretion, which determination will be final and binding. Neither the
Company nor any other person will be under any duty to give notification of any
defects or irregularities in any Notice of Solicited Tenders or incur any
liability for failure to give such notification.
5
<PAGE>
NOTICE OF SOLICITED TENDERS
List below the number of Shares tendered by each beneficial owner whose
tender you have solicited. All Shares beneficially owned by a beneficial owner,
whether in one account or several, and in however many capacities, must be
aggregated for purposes of completing the table below. Any questions as to what
constitutes beneficial ownership should be directed to the Depositary. If the
space below is inadequate, list the Shares in a separate signed schedule and
affix the list to this Notice of Solicited Tenders. Please do not complete the
sections of the table headed "TO BE COMPLETED ONLY BY DEPOSITARY."
ALL NOTICES OF SOLICITED TENDERS SHOULD BE RETURNED TO, AND ALL QUESTIONS
CONCERNING THE NOTICES OF SOLICITED TENDERS SHOULD BE DIRECTED TO, THE
DEPOSITARY. ALL NOTICES OF SOLICITED TENDERS MUST BE RECEIVED BY THE DEPOSITARY
WITHIN THREE NEW YORK STOCK EXCHANGE TRADING DAYS AFTER THE EXPIRATION OF THE
OFFER.
SOLICITED TENDERS OF 4.30% SHARES NOT BENEFICIALLY OWNED BY SOLICITING DEALER
<TABLE>
<CAPTION>
TO BE COMPLETED ONLY
TO BE COMPLETED BY THE BY TO BE COMPLETED
SOLICITING DEALER DEPOSITARY ONLY BY
------------------------------------ ---------------------- DEPOSITARY
NUMBER OF SERIES OF NUMBER OF SERIES OF -----------------
SHARES PREFERRED VOI TICKET SHARES PREFERRED FEE
BENEFICIAL OWNER TENDERED TENDERED NUMBER* ACCEPTED ACCEPTED ($1.25 PER SHARE)
- ----------------- --------- --------- ---------- --------- --------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Beneficial Owner
No. 1
Beneficial Owner
No. 2
Beneficial Owner
No. 3
Beneficial Owner
No. 4
Beneficial Owner
No. 5
Beneficial Owner
No. 6
Beneficial Owner
No. 7
Beneficial Owner
No. 8
Total
</TABLE>
- ------------
* Complete if Shares delivered by book-entry transfer.
All questions as to the validity, form and eligibility (including time of
receipt) of Notices of Solicited Tenders will be determined by the Company, in
its sole discretion, which determination will be final and binding. Neither the
Company nor any other person will be under any duty to give notification of any
defects or irregularities in any Notice of Solicited Tenders or incur any
liability for failure to give such notification.
6
<PAGE>
NOTICE OF SOLICITED TENDERS
List below the number of Shares tendered by each beneficial owner whose
tender you have solicited. All Shares beneficially owned by a beneficial owner,
whether in one account or several, and in however many capacities, must be
aggregated for purposes of completing the table below. Any questions as to what
constitutes beneficial ownership should be directed to the Depositary. If the
space below is inadequate, list the Shares in a separate signed schedule and
affix the list to this Notice of Solicited Tenders. Please do not complete the
sections of the table headed "TO BE COMPLETED ONLY BY DEPOSITARY."
ALL NOTICES OF SOLICITED TENDERS SHOULD BE RETURNED TO, AND ALL QUESTIONS
CONCERNING THE NOTICES OF SOLICITED TENDERS SHOULD BE DIRECTED TO, THE
DEPOSITARY. ALL NOTICES OF SOLICITED TENDERS MUST BE RECEIVED BY THE DEPOSITARY
WITHIN THREE NEW YORK STOCK EXCHANGE TRADING DAYS AFTER THE EXPIRATION OF THE
OFFER.
SOLICITED TENDERS OF 5.05% SHARES NOT BENEFICIALLY OWNED BY SOLICITING DEALER
<TABLE>
<CAPTION>
TO BE COMPLETED ONLY
TO BE COMPLETED BY THE BY TO BE COMPLETED
SOLICITING DEALER DEPOSITARY ONLY BY
------------------------------------ ---------------------- DEPOSITARY
NUMBER OF SERIES OF NUMBER OF SERIES OF -----------------
SHARES PREFERRED VOI TICKET SHARES PREFERRED FEE
BENEFICIAL OWNER TENDERED TENDERED NUMBER* ACCEPTED ACCEPTED ($1.25 PER SHARE)
- ---------------- --------- --------- ---------- --------- --------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Beneficial Owner
No. 1
Beneficial Owner
No. 2
Beneficial Owner
No. 3
Beneficial Owner
No. 4
Beneficial Owner
No. 5
Beneficial Owner
No. 6
Beneficial Owner
No. 7
Beneficial Owner
No. 8
Total
</TABLE>
- ------------
* Complete if Shares delivered by book-entry transfer.
All questions as to the validity, form and eligibility (including time of
receipt) of Notices of Solicited Tenders will be determined by the Company, in
its sole discretion, which determination will be final and binding. Neither the
Company nor any other person will be under any duty to give notification of any
defects or irregularities in any Notice of Solicited Tenders or incur any
liability for failure to give such notification.
7
<PAGE>
NOTICE OF SOLICITED TENDERS
List below the number of Shares tendered by each beneficial owner whose
tender you have solicited. All Shares beneficially owned by a beneficial owner,
whether in one account or several, and in however many capacities, must be
aggregated for purposes of completing the table below. Any questions as to what
constitutes beneficial ownership should be directed to the Depositary. If the
space below is inadequate, list the Shares in a separate signed schedule and
affix the list to this Notice of Solicited Tenders. Please do not complete the
sections of the table headed "TO BE COMPLETED ONLY BY DEPOSITARY."
ALL NOTICES OF SOLICITED TENDERS SHOULD BE RETURNED TO, AND ALL QUESTIONS
CONCERNING THE NOTICES OF SOLICITED TENDERS SHOULD BE DIRECTED TO, THE
DEPOSITARY. ALL NOTICES OF SOLICITED TENDERS MUST BE RECEIVED BY THE DEPOSITARY
WITHIN THREE NEW YORK STOCK EXCHANGE TRADING DAYS AFTER THE EXPIRATION OF THE
OFFER.
SOLICITED TENDERS OF 5.28% SHARES NOT BENEFICIALLY OWNED BY SOLICITING DEALER
<TABLE>
<CAPTION>
TO BE COMPLETED ONLY
TO BE COMPLETED BY THE BY TO BE COMPLETED
SOLICITING DEALER DEPOSITARY ONLY BY
------------------------------------ ---------------------- DEPOSITARY
NUMBER OF SERIES OF NUMBER OF SERIES OF -----------------
SHARES PREFERRED VOI TICKET SHARES PREFERRED FEE
BENEFICIAL OWNER TENDERED TENDERED NUMBER* ACCEPTED ACCEPTED ($1.25 PER SHARE)
- ----------------- --------- --------- ---------- --------- --------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Beneficial Owner
No. 1
Beneficial Owner
No. 2
Beneficial Owner
No. 3
Beneficial Owner
No. 4
Beneficial Owner
No. 5
Beneficial Owner
No. 6
Beneficial Owner
No. 7
Beneficial Owner
No. 8
Total
</TABLE>
- ------------
* Complete if Shares delivered by book-entry transfer.
All questions as to the validity, form and eligibility (including time of
receipt) of Notices of Solicited Tenders will be determined by the Company, in
its sole discretion, which determination will be final and binding. Neither the
Company nor any other person will be under any duty to give notification of any
defects or irregularities in any Notice of Solicited Tenders or incur any
liability for failure to give such notification.
8
<PAGE>
NOTICE OF SOLICITED TENDERS
List below the number of Shares tendered by each beneficial owner whose
tender you have solicited. All Shares beneficially owned by a beneficial owner,
whether in one account or several, and in however many capacities, must be
aggregated for purposes of completing the table below. Any questions as to what
constitutes beneficial ownership should be directed to the Depositary. If the
space below is inadequate, list the Shares in a separate signed schedule and
affix the list to this Notice of Solicited Tenders. Please do not complete the
sections of the table headed "TO BE COMPLETED ONLY BY DEPOSITARY."
ALL NOTICES OF SOLICITED TENDERS SHOULD BE RETURNED TO, AND ALL QUESTIONS
CONCERNING THE NOTICES OF SOLICITED TENDERS SHOULD BE DIRECTED TO, THE
DEPOSITARY. ALL NOTICES OF SOLICITED TENDERS MUST BE RECEIVED BY THE DEPOSITARY
WITHIN THREE NEW YORK STOCK EXCHANGE TRADING DAYS AFTER THE EXPIRATION OF THE
OFFER.
SOLICITED TENDERS OF 6.80% SHARES NOT BENEFICIALLY OWNED BY SOLICITING DEALER
<TABLE>
<CAPTION>
TO BE COMPLETED ONLY
TO BE COMPLETED BY THE BY TO BE COMPLETED
SOLICITING DEALER DEPOSITARY ONLY BY
------------------------------------ ---------------------- DEPOSITARY
NUMBER OF SERIES OF NUMBER OF SERIES OF -----------------
SHARES PREFERRED VOI TICKET SHARES PREFERRED FEE
BENEFICIAL OWNER TENDERED TENDERED NUMBER* ACCEPTED ACCEPTED ($1.25 PER SHARE)
- ----------------- --------- --------- ---------- --------- --------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Beneficial Owner
No. 1
Beneficial Owner
No. 2
Beneficial Owner
No. 3
Beneficial Owner
No. 4
Beneficial Owner
No. 5
Beneficial Owner
No. 6
Beneficial Owner
No. 7
Beneficial Owner
No. 8
Total
</TABLE>
- ------------
* Complete if Shares delivered by book-entry transfer.
All questions as to the validity, form and eligibility (including time of
receipt) of Notices of Solicited Tenders will be determined by the Company, in
its sole discretion, which determination will be final and binding. Neither the
Company nor any other person will be under any duty to give notification of any
defects or irregularities in any Notice of Solicited Tenders or incur any
liability for failure to give such notification.
9
<PAGE>
NOTICE OF SOLICITED TENDERS
List below the number of Shares tendered by each beneficial owner whose
tender you have solicited. All Shares beneficially owned by a beneficial owner,
whether in one account or several, and in however many capacities, must be
aggregated for purposes of completing the table below. Any questions as to what
constitutes beneficial ownership should be directed to the Depositary. If the
space below is inadequate, list the Shares in a separate signed schedule and
affix the list to this Notice of Solicited Tenders. Please do not complete the
sections of the table headed "TO BE COMPLETED ONLY BY DEPOSITARY."
ALL NOTICES OF SOLICITED TENDERS SHOULD BE RETURNED TO, AND ALL QUESTIONS
CONCERNING THE NOTICES OF SOLICITED TENDERS SHOULD BE DIRECTED TO, THE
DEPOSITARY. ALL NOTICES OF SOLICITED TENDERS MUST BE RECEIVED BY THE DEPOSITARY
WITHIN THREE NEW YORK STOCK EXCHANGE TRADING DAYS AFTER THE EXPIRATION OF THE
OFFER.
SOLICITED TENDERS OF 6.92% SHARES NOT BENEFICIALLY OWNED BY SOLICITING DEALER
<TABLE>
<CAPTION>
TO BE COMPLETED ONLY
TO BE COMPLETED BY THE BY TO BE COMPLETED
SOLICITING DEALER DEPOSITARY ONLY BY
------------------------------------ ---------------------- DEPOSITARY
NUMBER OF SERIES OF NUMBER OF SERIES OF -----------------
SHARES PREFERRED VOI TICKET SHARES PREFERRED FEE
BENEFICIAL OWNER TENDERED TENDERED NUMBER* ACCEPTED ACCEPTED ($1.25 PER SHARE)
- ----------------- --------- --------- ---------- --------- --------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Beneficial Owner
No. 1
Beneficial Owner
No. 2
Beneficial Owner
No. 3
Beneficial Owner
No. 4
Beneficial Owner
No. 5
Beneficial Owner
No. 6
Beneficial Owner
No. 7
Beneficial Owner
No. 8
Total
</TABLE>
- ------------
* Complete if Shares delivered by book-entry transfer.
All questions as to the validity, form and eligibility (including time of
receipt) of Notices of Solicited Tenders will be determined by the Company, in
its sole discretion, which determination will be final and binding. Neither the
Company nor any other person will be under any duty to give notification of any
defects or irregularities in any Notice of Solicited Tenders or incur any
liability for failure to give such notification.
10
<PAGE>
The undersigned hereby confirms that: (i) it has complied with the
applicable requirements of the Securities Exchange Act of 1934, as amended, and
the applicable rules and regulations thereunder, in connection with such
solicitation; (ii) it is entitled to such compensation for such solicitation
under the terms and conditions of the Offer to Purchase; (iii) in soliciting
tenders of Shares, it has used no soliciting materials other than those
furnished by the Company; and (iv) if it is a foreign broker or dealer not
eligible for membership in the NASD, it has agreed to conform to the NASD's
Rules of Fair Practice in making solicitations.
<TABLE>
<S> <C>
Printed Firm Name Street
Authorized Signature City, State, Zip Code
Name and Title Area Code and Telephone Number
</TABLE>
11
EXHIBIT 99.(a)(5)
PUBLIC SERVICE ELECTRIC AND GAS COMPANY
OFFER TO PURCHASE FOR CASH
Shares of its 4.08% Cumulative Preferred Stock ($100 par
value),
Shares of its 4.18% Cumulative Preferred Stock ($100 par
value),
Shares of its 4.30% Cumulative Preferred Stock ($100 par
value),
Shares of its 5.05% Cumulative Preferred Stock ($100 par
value),
Shares of its 5.28% Cumulative Preferred Stock ($100 par
value),
Shares of its 6.80% Cumulative Preferred Stock ($100 par
value) and
Shares of its 6.92% Cumulative Preferred Stock ($100 par
value)
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00
MIDNIGHT,
NEW YORK CITY TIME, ON THURSDAY, JUNE 13, 1996 UNLESS THE OFFER IS EXTENDED.
To Our Clients:
Enclosed for your consideration are the Offer to Purchase dated May 16, 1996
(the "Offer to Purchase"), and applicable Letters of Transmittal (which together
constitute the "Offer") setting forth an offer by Public Service Electric and
Gas Company, a New Jersey corporation (the "Company"), to purchase up to 187,500
shares of its 4.08% Cumulative Preferred Stock ($100 par value) (the "4.08%
Shares") at a price of $59.30 per 4.08% Share, 187,500 shares of its 4.18%
Cumulative Preferred Stock ($100 par value) (the "4.18% Shares") at a price of
$60.76 per 4.18% Share, 187,500 shares of its 4.30% Cumulative Preferred Stock
($100 par value) (the "4.30% Shares") at a price of $62.50 per 4.30% Share,
187,500 shares of its 5.05% Cumulative Preferred Stock ($100 par value) (the
"5.05% Shares") at a price of $73.40 per 5.05% Share, 187,500 shares of its
5.28% Cumulative Preferred Stock ($100 par value) (the "5.28% Shares") at a
price of $76.74 per 5.28% Share, 187,500 shares of its 6.80% Cumulative
Preferred Stock ($100 par value) (the "6.80% Shares") at a price of $97.42 per
6.80% Share and 450,000 shares of its 6.92% Cumulative Preferred Stock ($100 par
value) (the "6.92% Shares") at a price of $99.14 per 6.92% Share (collectively,
the "Shares" and, each a "Series of Preferred"), net to the seller in cash, upon
the terms and subject to the conditions of the Offer. The Company will purchase
all Shares of each Series of Preferred validly tendered and not withdrawn, up to
the amount of Shares of such Series of Preferred sought, upon the terms and
subject to the conditions of the Offer, including the provisions thereof
relating to proration (as described in the Offer to Purchase).
We are the holder of record of Shares held for your account. A tender of
such Shares can be made only by us as the holder of record and pursuant to your
instructions. The applicable Letter of Transmittal is furnished to you for your
information only and cannot be used by you to tender Shares held by us for your
account.
We request instructions as to whether you wish us to tender any or all of
the Shares held by us for your account, upon the terms and subject to the
conditions set forth in the Offer to Purchase and applicable Letter of
Transmittal.
Your attention is invited to the following:
(1) The Offer is for up to 187,500 4.08% Shares, 187,500 4.18% Shares,
187,500 4.30% Shares, 187,500 5.05% Shares, 187,500 5.28% Shares, 187,500
6.80% Shares and 450,000 6.92% Shares. The Offer is not conditioned upon any
minimum number of Shares of any Series of Preferred being tendered. The
Offer for Shares of one Series of Preferred is not conditioned on the Offer
for Shares of any other Series of Preferred, but the Offer is subject to
certain other conditions.
(2) The Offer, proration period and withdrawal rights will expire at
12:00 midnight, New York City time, on Thursday, June 13, 1996, unless the
Offer is extended with respect to a Series of Preferred. Your instructions
to us should be forwarded to us in ample time to permit us to submit a
tender on your behalf. If you would like to withdraw your Shares that we
have tendered, you can
<PAGE>
withdraw them so long as the Offer remains open or at any time after the
expiration of 40 business days from the commencement of the Offer if such
Shares have not been accepted for payment.
(3) As described in the Offer to Purchase, if more than 187,500 4.08%
Shares, more than 187,500 4.18% Shares, more than 187,500 4.30% Shares, more
than 187,500 5.05% Shares, more than 187,500 5.28% Shares, more than 187,500
6.80% Shares or more than 450,000 6.92% Shares (or, if decreased as provided
in the Offer, such lesser amount as the Company may elect to purchase) have
been validly tendered and not withdrawn on or prior to the expiration of the
Offer for any Series of Preferred, the Company will purchase 4.08% Shares,
4.18% Shares, 4.30% Shares, 5.05% Shares, 5.28% Shares, 6.80% Shares or
6.92% Shares, as applicable, from all tendering holders on a pro rata basis,
subject to adjustment to avoid the purchase of fractional Shares.
(4) Any stock transfer taxes applicable to the sale of Shares to the
Company pursuant to the Offer will be paid by the Company, except as
otherwise provided in Instruction 6 of each Letter of Transmittal.
THE COMPANY, ITS BOARD OF DIRECTORS AND ITS EXECUTIVE OFFICERS MAKE NO
RECOMMENDATION TO ANY STOCKHOLDER AS TO WHETHER TO TENDER ANY OR ALL SHARES OF
ANY SERIES OF PREFERRED PURSUANT TO THE OFFER. STOCKHOLDERS MUST MAKE THEIR OWN
DECISION AS TO WHETHER TO TENDER SHARES OF ANY SERIES OF PREFERRED PURSUANT TO
THE OFFER AND, IF SO, HOW MANY SHARES TO TENDER.
If you wish to have us tender any or all of your Shares held by us for your
account upon the terms and subject to the conditions set forth in the Offer,
please so instruct us by completing, executing, detaching and returning to us
the instruction form on the detachable part hereof. If you hold Shares of more
than one Series of Preferred, you must specify the number of Shares tendered for
each Series of Preferred. An envelope to return your instructions to us is
enclosed. If you authorize tender of your Shares, all such Shares will be
tendered unless otherwise specified on the detachable part hereof. Your
instructions should be forwarded to us in ample time to permit us to submit a
tender on your behalf by the expiration of the Offer.
The Offer is being made to all holders of Shares.The Company is not aware of
any state where the making of the Offer is prohibited by administrative or
judicial action pursuant to a valid state statute. If the Company becomes aware
of any valid state statute prohibiting the making of the Offer, the Company will
make a good faith effort to comply with such statute. If, after such good faith
effort, the Company cannot comply with such statute, the Offer will not be made
to, nor will tenders be accepted from or on behalf of, holders of Shares in such
state. In those jurisdictions who securities, blue sky or other laws require the
Offer to be made by a licensed broker or dealer, the Offer shall be deemed to be
made on behalf of the Company by Goldman, Sachs & Co. and Merrill Lynch & Co.,
as Dealer Managers, or one or more registered brokers or dealers licensed under
the laws of such jurisdictions.
2
<PAGE>
INSTRUCTIONS
WITH RESPECT TO OFFER TO PURCHASE FOR CASH UP TO
187,500 SHARES OF 4.08% CUMULATIVE PREFERRED STOCK ($100 PAR VALUE)
187,500 SHARES OF 4.18% CUMULATIVE PREFERRED STOCK ($100 PAR VALUE)
187,500 SHARES OF 4.30% CUMULATIVE PREFERRED STOCK ($100 PAR VALUE)
187,500 SHARES OF 5.05% CUMULATIVE PREFERRED STOCK ($100 PAR VALUE)
187,500 SHARES OF 5.28% CUMULATIVE PREFERRED STOCK ($100 PAR VALUE)
187,500 SHARES OF 6.80% CUMULATIVE PREFERRED STOCK ($100 PAR VALUE)
450,000 SHARES OF 6.92% CUMULATIVE PREFERRED STOCK ($100 PER VALUE)
OF
PUBLIC SERVICE ELECTRIC AND GAS COMPANY
The undersigned acknowledge(s) receipt of your letter and the enclosed Offer
to Purchase, dated May 16, 1996, and the applicable Letter of Transmittal (which
together constitute the "Offer") in connection with the Offer by Public Service
Electric and Gas Company (the "Company") to purchase up to 187,500 shares of
4.08% Cumulative Preferred Stock ($100 par value) (the "4.08% Shares") at a
price of $59.30 per 4.08% Share, 187,500 shares of 4.18% Cumulative Preferred
Stock ($100 par value) (the "4.18% Shares") at a price of $60.76 per 4.18%
Share, 187,500 shares of 4.30% Cumulative Preferred Stock ($100 par value) (the
"4.30% Shares") at a price of $62.50 per 4.30% Share, 187,500 shares of 5.05%
Cumulative Preferred Stock ($100 par value) (the "5.05% Shares") at a price of
$73.40 per 5.05% Share, 187,500 shares of 5.28% Cumulative Preferred Stock ($100
par value) (the "5.28% Shares") at a price of $76.74 per 5.28% Share, 187,500
shares of 6.80% Cumulative Preferred Stock ($100 par value) (the "6.80% Shares")
at a price of $97.42 per 6.80% Share and 450,000 shares of 6.92% Cumulative
Preferred Stock ($100 par value) (the "6.92% Shares") at a price of $99.14 per
6.92% Share (together, the "Shares"), net to the undersigned in cash.
This will instruct you to tender to the Company the number of shares of each
Series of Preferred indicated below (or, if no number is indicated below, all
shares of such Series of Preferred) which are held by you for the account of the
undersigned, upon the terms and subject to the conditions of the Offer.
<TABLE>
<S> <C>
(Check only one*)
/ / Number of 4.08% Shares to be Tendered: Shares**
/ / Number of 4.18% Shares to be Tendered: Shares**
/ / Number of 4.30% Shares to be Tendered: Shares**
/ / Number of 5.05% Shares to be Tendered: Shares**
/ / Number of 5.28% Shares to be Tendered: Shares**
/ / Number of 6.80% Shares to be Tendered: Shares**
/ / Number of 6.92% Shares to be Tendered: Shares**
Dated: , 1996
SIGN HERE
Signature(s):
Name(s):
Address:
Social Security or Taxpayer ID No.:
</TABLE>
- ------------
* A separate instruction must be completed for each Series of Preferred
tendered.
** Unless otherwise indicated, it will be assumed that all Shares of such Series
of Preferred held by us for your account are to be tendered.
3
<PAGE>
Please designate in the box below any Soliciting Dealer who solicited your
tender.
SOLICITED TENDERS
The undersigned represents that the Soliciting Dealer who solicited and obtained
this tender is:
Name of
Firm: __________________________________________________________________________
(Please Print)
Name of Individual Broker or Financial
Consultant: __________________________________________
Identification Number (if
known): ___________________________________________________________
Address: __________________________________________________________
___________________________________________________________________
(Include Zip Code)
4
EXHIBIT 99.(a)(6)
May 16, 1996
Dear Stockholder:
Public Service Electric and Gas Company (the "Company") is offering to
purchase (the "Offer") up to 187,500 shares of each of its 4.08% Cumulative
Preferred Stock ($100 par value) (the "4.08% Shares") at a price of $59.30 per
4.08% Share, its 4.18% Cumulative Preferred Stock ($100 par value) (the "4.18%
Shares") at a price of $60.76 per 4.18% Share, its 4.30% Cumulative Preferred
Stock ($100 par value) (the "4.30% Shares") at a price of $62.50 per 4.30%
Share, its 5.05% Cumulative Preferred Stock ($100 par value) (the "5.05%
Shares") at a price of $73.40 per 5.05% Share, its 5.28% Cumulative Preferred
Stock ($100 par value) (the "5.28% Shares") at a price of $76.74 per 5.28%
Share, and its 6.80% Cumulative Preferred Stock ($100 par value) (the "6.80%
Shares") at a price of $97.42 per 6.80% Share and 450,000 shares of its 6.92%
Cumulative Preferred Stock ($100 par value) (the "6.92% Shares") at a price of
$99.14 per 6.92% Share (together, the "Shares" and each, a "Series of
Preferred").
All of the Shares that are properly tendered (and not withdrawn) will,
subject to the terms and conditions set forth in the enclosed Offer to Purchase
and the applicable Letter of Transmittal (including the proration provisions
therein) be purchased at the applicable price therefor, net to the selling
stockholder in cash. All other Shares that have been tendered and not purchased
will be returned to the stockholder.
If you do not wish to participate in the Offer, you do not need to take any
action.
The Offer is explained in detail in the enclosed Offer to Purchase and
applicable Letter of Transmittal. A separate Letter of Transmittal has been
prepared for each Series of Preferred and only the applicable Letter of
Transmittal may be used to tender Shares for that Series of Preferred. If you
want to tender your Shares, the instructions on how to tender Shares are in the
enclosed materials. I encourage you to read carefully these materials before
making any decision with respect to the Offer.
The Offer for one Series of Preferred is independent of the Offer for any
other Series of Preferred.
The Offer gives stockholders the opportunity to sell their Shares at a
premium over the market price and without the usual transaction costs associated
with a market sale.
The Company, its Board of Directors and its executive officers make no
recommendation to any stockholder as to whether to tender any or all Shares of
any Series of Preferred pursuant to the Offer. Stockholders must make their own
decision as to whether to tender Shares of any Series of Preferred pursuant to
the Offer and, if so, how many Shares to tender.
Sincerely,
ROBERT C. MURRAY
Senior Vice President
and Chief Financial Officer
EXHIBIT 99.(a)(7)
May 16, 1996
PUBLIC SERVICE ELECTRIC AND GAS COMPANY
ANNOUNCES THE REDEMPTION OF TWO SERIES AND THE TENDER
FOR SEVEN SERIES OF CUMULATIVE PREFERRED STOCK
Public Service Electric and Gas Company (PSE&G) announced today (May
16, 1996) that its Board of Directors has called for redemption all outstanding
shares of two series of its cumulative preferred stock and authorized cash
tender offers for up to 75% of the outstanding shares of seven series of its
cumulative preferred stock.
The cumulative preferred stock issues called for redemption by PSE&G
are its 7.52% and 7.40% series ($100 par value). Both issues will be redeemed on
June 28, 1996 at a redemption price of $101 per share, plus accrued dividends to
the date of redemption.
PSE&G is also offering to purchase up to 187,500 shares ($100 par
value) of each of the 4.08%, 4.18%, 4.30%, 5.05%, 5.28%, and 6.80% series of its
cumulative preferred stock at the respective per share purchase price of $59.30,
$60.76, $62.50, $73.40, $76.74 and $97.42 and 450,000 shares ($100 par value) of
the 6.92% series of its cumulative preferred stock at a per share purchase price
of $99.14.
Any accrued dividends, if, when and as declared, for the quarter ended
June 30,1996 on each series of preferred stock for which a tender offer is being
made will be paid on June 28, 1996 to holders of record on June 7, 1996. A
holder of record on June 7, 1996 who tenders such preferred stock will be
entitled to any such declared dividends.
Each of the foregoing series of preferred stock is listed and traded on
the New York Stock Exchange, except the 6.92% series, which is traded in the
over- the-counter market and is not listed on any national securities exchange
or quoted on the automated quotation system of a registered securities
association.
The offer, proration period and withdrawal rights will expire at 12:00
midnight, New York City time, on Thursday, June 13, 1996. The tender offer is
not conditioned upon any minimum number of shares being tendered and the offer
with respect to each series of preferred stock is not conditioned on the offer
for any other series of preferred stock, but is subject to certain other
conditions.
(more...)
<PAGE>
The dealer managers for the offer are Goldman, Sachs & Co. and Merrill
Lynch & Co. and the depositary for the tendered shares will be First Chicago
Trust Company of New York. Questions or requests for assistance may be directed
to Georgeson & Company Inc., the information agent, at Wall Street Plaza, New
York, New York 10005 (telephone 1-800-223-2064) or Goldman, Sachs & Co. at
1-800-828-3182 or Merrill Lynch & Co. at 212-449-4914 (call collect).
######
Exhbit 99.(a)(8)
This announcement is neither an offer to purchase nor a solicitation of an offer
to sell Shares. The Offer is made solely by the Offer to Purchase dated May 16,
1996, and the applicable Letter of Transmittal. The Offer is being made to all
holders of Shares; provided, that the Offer is not being made to, nor will
tenders be accepted from or on behalf of, holders of Shares in any jurisdiction
in which making or accepting the Offer would violate that jurisdiction's laws.
In those jurisdictions whose securities, blue sky or other laws require the
Offer to be made by a licensed broker or dealer, the Offer shall be deemed to be
made on behalf of the Company by Goldman, Sachs & Co., Merrill Lynch & Co. or
one or more registered brokers or dealers licensed under the laws of such
jurisdictions.
$157,500,000
Notice of Offer to Purchase for Cash
by
PUBLIC SERVICE ELECTRIC AND GAS COMPANY
187,500 Shares of its 4.08% Cumulative Preferred Stock
($100 Par Value) at a Purchase Price of $59.30 Per Share
CUSIP No. 744567 306
187,500 Shares of its 4.18% Cumulative Preferred Stock
($100 Par Value) at a Purchase Price of $60.76 Per Share
CUSIP No. 744567 405
187,500 Shares of its 4.30% Cumulative Preferred Stock
($100 Par Value) at a Purchase Price of $62.50 Per Share
CUSIP No. 744567 504
187,500 Shares of its 5.05% Cumulative Preferred Stock
($100 Par Value) at a Purchase Price of $73.40 Per Share
CUSIP No. 744567 603
187,500 Shares of its 5.28% Cumulative Preferred Stock
($100 Par Value) at a Purchase Price of $76.74 Per Share
CUSIP No. 744567 702
187,500 Shares of its 6.80% Cumulative Preferred Stock
($100 Par Value) at a Purchase Price of $97.42 Per Share
CUSIP No. 744567 801
450,000 Shares of its 6.92% Cumulative Preferred Stock
($100 Par Value) at a Purchase Price of $99.14 Per Share
CUSIP No. 744567 710
Public Service Electric and Gas Company, a New Jersey corporation (the
"Company"), invites the holders of the above-referenced Cumulative Preferred
Stock (the "4.08% Preferred," the "4.18% Preferred," the "4.30% Preferred," the
"5.05% Preferred," the "5.28% Preferred," the "6.80% Preferred," and the "6.92%
Preferred", each such series a "Series of Preferred") to tender their shares of
such stock (the "4.08% Shares," the "4.18% Shares," the "4.30% Shares," the
"5.05% Shares," the "5.28% Shares," the "6.80% Shares," and the "6.92% Shares,"
and collectively the "Shares") at the respective prices set forth above, net to
the seller in cash and upon the terms and subject to the conditions set forth in
the Offer to Purchase dated May 16, 1996 (the "Offer to Purchase") and in the
applicable Letter of Transmittal (which, together with the Offer to Purchase,
constitutes the "Offer" with respect to the applicable Series of Preferred).
The Company will purchase all Shares validly tendered and not withdrawn up to
the 187,500 Shares sought of the 4.08% Preferred, 187,500 Shares sought of the
4.18% Preferred, 187,500 Shares sought of the 4.30% Preferred, 187,500 Shares
sought of the 5.05% Preferred, 187,500 Shares sought of the 5.28% Preferred,
187,500 shares sought of the 6.80% Preferred and 450,000 Shares sought of the
6.92% Preferred (each, the "Amount Sought"), upon the terms and subject to the
conditions of the Offer, including the provisions relating to proration
described in the Offer to Purchase. Shares not purchased because of proration
will be returned.
On May 21, 1996, the Board of Directors of the Company will consider the
declaration of dividends on the Company's capital stock. The Regular Quarterly
Dividend (as defined in the Offer to Purchase) for each Series of Preferred, if,
when and as declared, will be paid on June 28, 1996 to holders of record as of
the close of business on June 7, 1996. A holder of record of Shares on June 7,
1996 who tenders shares will be entitled to the Regular Quarterly Dividend,
regardless of when such tender is made. Holders of Shares purchased pursuant to
the Offer will not be entitled to any dividends in respect of any later dividend
periods.
The Offer has separate Letters of Transmittal and separate Notices of
Guaranteed Delivery for each Series of Preferred.
THE OFFER FOR ONE SERIES OF PREFERRED IS INDEPENDENT OF THE OFFER FOR ANY
OTHER SERIES OF PREFERRED. THE OFFER IS NOT CONDITIONED UPON ANY MINIMUM NUMBER
OF SHARES OF THE APPLICABLE
<PAGE>
SERIES OF SHARES BEING TENDERED. THE OFFER IS, HOWEVER, SUBJECT TO CERTAIN
OTHER CONDITIONS. SEE SECTION 8 -- "CERTAIN CONDITIONS OF THE OFFER" IN THE
OFFER TO PURCHASE.
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00
MIDNIGHT, NEW YORK CITY TIME, ON THURSDAY, JUNE 13, 1996, UNLESS THE OFFER IS
EXTENDED.
Upon the terms and subject to the conditions described in the Offer to
Purchase and in the applicable Letter of Transmittal, the Company will purchase
up to the Amount Sought of any Shares of a Series of Preferred validly tendered
and not withdrawn on or prior to the Expiration Date (as defined in the Offer to
Purchase) with respect to that Series of Preferred.
Upon the terms and subject to the conditions of the Offer, if more Shares
than the Amount Sought of a Series of Preferred have been validly tendered and
not withdrawn on or prior to the Expiration Date with respect to that Series of
Preferred, the Company will purchase Shares of that Series of Preferred from
each tendering holder on a pro rata basis, subject to adjustment to avoid the
purchase of fractional shares.
The Company is making the Offer because it believes that the purchase of
Shares is economically attractive to the Company. In addition, the Offer gives
stockholders the opportunity to sell their Shares at a premium over market price
and without the usual transaction costs associated with a market sale.
The Company, its Board of Directors and its executive officers make no
recommendation to any stockholder as to whether to tender any or all Shares of
any Series of Preferred pursuant to the Offer. Stockholders must make their own
decision as to whether to tender Shares of any Series of Preferred pursuant to
the Offer and, if so, how many Shares to tender.
The Company reserves the right, at any time or from time to time, to extend
the period of time during which the Offer is open with respect to a Series of
Preferred by giving oral or written notice of such extension to First Chicago
Trust Company of New York, as "Depositary" and making a public announcement
thereof.
The Company will pay to a Soliciting Dealer (as defined in the Offer to
Purchase) a solicitation fee of $1.25 per Share tendered, accepted for payment
and paid for pursuant to the Offer, subject to certain conditions. See Section
14 --"Fees and Expenses" in the Offer to Purchase.
Tenders of Shares of a Series of Preferred made pursuant to the Offer may
be withdrawn at any time on or prior to the Expiration Date with respect to such
Series of Preferred. Thereafter, such tenders are irrevocable, except that they
may be withdrawn after 12:00 midnight, Friday, July 12, 1996 unless theretofore
accepted for payment by the Company as provided in the Offer to Purchase. For a
withdrawal to be effective, a written or facsimile transmission notice of
withdrawal must be timely received by the Depositary at one of the addresses or
facsimile numbers set forth on the back cover of the Offer to Purchase and must
specify the name of the person who tendered the Shares of the applicable Series
of Preferred to be withdrawn and the number of Shares to be withdrawn. If the
Shares of the applicable Series of Preferred to be withdrawn have been delivered
to the Depositary, a signed notice of withdrawal with signatures guaranteed by
an Eligible Institution (as defined in the Offer to Purchase) (except in the
case of Shares tendered by an Eligible Institution) must be submitted prior to
the release of such Shares. In addition, such notice must specify, in the case
of Shares tendered by delivery of certificates, the name of the registered
holder (if different from that of the tendering stockholder) and the serial
numbers shown on the particular certificates evidencing the Shares to be
withdrawn or, in the case of Shares tendered by book-entry transfer, the name
and number of the account at one of the Book-Entry Transfer Facilities (as
defined in the Offer to Purchase) to be credited with the withdrawn Shares and
the name of the registered holder (if different from the name of such account).
Withdrawals may not be rescinded, and Shares withdrawn will thereafter be deemed
not validly tendered for purposes of the Offer. However, withdrawn Shares may
be re-tendered by again following one of the procedures described in Section
5 -- "Procedure for Tendering Shares" in the Offer to Purchase at any time on
or prior to the applicable Expiration Date.
The Company will be deemed to have purchased Shares validly tendered and
not withdrawn if and when it gives oral or written notice to the Depositary of
its acceptance for payment of Shares.
The information required to be disclosed by Rule 13e-3(e)(1) and Rule 13e-
4(d)(1) of the General Rules and Regulations under the Securities Exchange Act
of 1934, as amended, is contained in the Offer to Purchase and is incorporated
herein by reference.
Copies of the Offer to Purchase and the applicable Letter of Transmittal
are being mailed to registered holders of Shares and will be furnished to
brokers, banks and similar persons whose names, or the names of whose nominees,
appear on the Company's stockholder list or, if applicable, who are listed as
participants in a Book-Entry Transfer Facility's security position listing for
subsequent transmittal to beneficial owners of Shares.
The Offer to Purchase and the applicable Letter of Transmittal contain
important information that should be read carefully before any decision is made
with respect to the Offer.
Any questions or requests for assistance may be directed to the
Information Agent or the Dealer Managers at their respective telephone numbers
and addresses listed below. Requests for additional copies of the Offer to
Purchase, the applicable Letter of Transmittal or other tender offer materials
may be directed to the Information Agent or the Dealer Managers, and such copies
will be furnished promptly at the Company's expense. Holders of Shares may also
contact their local broker, dealer, commercial bank or trust company for
assistance concerning the Offer.
Information on the Offer is available from "MCM Corporate Watch Services"
on Telerate page 41.998.
The Information Agent for the Offer is:
Georgeson & Company Inc.
Wall Street Plaza
New York, New York 10005
2
<PAGE>
Banks and Brokers Call Collect:
(212) 440-9800
All Others Call Toll Free:
(800) 223-2064
The Dealer Managers for the Offer are:
Goldman, Sachs & Co. Merrill Lynch & Co.
Liability Management Group World Financial Center
85 Broad Street 250 Vesey Street
New York, New York 10004 New York, New York 10281
(800) 828-3162 (212) 449-4914 (call collect)
May 17, 1996
3
EXHIBIT 99.(a)(9)
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER OF SUBSTITUTE FORM W-9
SECTION REFERENCES ARE TO THE INTERNAL REVENUE CODE.
PURPOSE OF FORM.--A person who is required to file an information return with
the IRS must obtain your correct TIN to report income paid to you, real estate
transactions, mortgage interest you paid, the acquisition or abandonment of
secured property or contributions you made to an IRA. Use Form W-9 to furnish
your correct TIN to the requester (the person asking you to furnish your TIN)
and, when applicable, (1) to certify that the TIN you are furnishing is correct
(or that you are waiting for a number to be issued), (2) to certify that you are
not subject to backup withholding, and (3) to claim exemption from backup
withholding if you are an exempt payee. Furnishing your correct TIN and making
the appropriate certifications will prevent certain payments from being subject
to backup withholding.
Note: If a requester gives you a form other than a W-9 to request your TIN,
you must use the requester's form.
HOW TO OBTAIN A TIN.--If you do not have a TIN, apply for one immediately. To
apply, get Form SS-5, Application for a Social Security Card (for individuals),
from your local office of the Social Security Administration, or Form SS-4,
Application for Employer Identification Number (for businesses and all other
entities), from your local IRS office.
To complete Form W-9 if you do not have a TIN, write "Applied for" in the
space for the TIN in Part I (or check box 2 of Substitute Form W-9), sign and
date the form, and give it to the requester. Generally, you must obtain a TIN
and furnish it to the requester by the time of payment. If the requester does
not receive your TIN by the time of payment, backup withholding, if applicable,
will begin and continue until you furnish your TIN to the requester.
Note: Writing "Applied for" (or checking box 2 of the Substitute Form W-9) on
the form means that you have already applied for a TIN OR that you intend to
apply for one in the near future.
As soon as you receive your TIN, complete another Form W-9, include your TIN,
sign and date the form, and give it to the requester.
WHAT IS BACKUP WITHHOLDING?--Persons making certain payments to you after
1992 are required to withhold and pay to the IRS 31% of such payments under
certain conditions. This is called "backup withholding". Payments that could be
subject to backup withholding include interest, dividends, broker and barter
exchange transactions, rents, royalties, nonemployee compensation and certain
payments from fishing boat operators, but do not include real estate
transactions.
If you give the requester your correct TIN, make the appropriate
certifications, and report all your taxable interest and dividends on your tax
return, your payments will not be subject to backup withholding. Payments you
receive will be subject to backup withholding if:
1. You do not furnish your TIN to the requester, or
2. The IRS notifies the requester that you furnished an incorrect TIN, or
3. You are notified by the IRS that you are subject to backup withholding
because you failed to report all your interest and dividends on your tax
return (for reportable interest and dividends only), or
4. You do not certify to the requester that you are not subject to backup
withholding under 3 above (for reportable interest and dividend accounts
opened after 1983 only), or
5. You do not certify your TIN. This applies only to reportable interest,
dividend, broker or barter exchange accounts opened after 1983, or broker
accounts considered inactive in 1983.
Except as explained in 5 above, other reportable payments are subject to
backup withholding only if 1 or 2 above applies. Certain payees and payments are
exempt from backup withholding and information reporting. See Payees and
Payments Exempt From Backup Withholding, below, and Example Payees and Payments
under Specific Instructions, below, if you are an exempt payee.
PAYEES AND PAYMENTS EXEMPT FROM BACKUP WITHHOLDING.--The following is a list
of payees exempt from backup withholding and for which no information reporting
is required. For interest and dividends, all listed payees are exempt except
item (9). For broker transactions, payees listed in (1) through (13) and a
person registered under the Investment Advisers Act of 1940 who regularly acts
as a broker are exempt. Payments subject to reporting under sections 6041 and
6041A are generally exempt from backup withholding only if made to payees
described in items (1) through (7), except a corporation that provides medical
and health care services or bills and collects payments for such services is not
exempt from backup withholding or information reporting. Only payees described
in items (2) through (6) are exempt from backup withholding for barter exchange
transactions, patronage dividends and payments by certain fishing boat
operations.
(1) A corporation. (2) An organization exempt from tax under section 501(a),
or an IRA, or a custodial account under section 403(b)(7). (3) The United States
or any of its agencies or instrumentalities. (4) A state, the District of
Columbia, a possession of the United States or any of their political
subdivisions or instrumentalities. (5) A foreign government or any of its
political subdivisions, agencies, or instrumentalities. (6) An international
organization or any of its agencies or instrumentalities. (7) A foreign central
bank of issue. (8) A dealer in securities or commodities required to register in
the United States or a possession of the United States. (9) A futures commission
merchant registered with the Commodity Futures Trading Commission. (10) A real
estate investment trust. (11) An entity registered at all times during the tax
year under the Investment Company Act of 1940. (12) A common trust fund operated
by a bank under section 584(a). (13) A financial institution. (14) A middleman
known in the investment community as a nominee or listed in the most recent
publication of the American Society of Corporate Secretaries, Inc., Nominee
List. (15) A trust exempt from tax under section 664 or described in section
4947.
Payments of dividend and patronage dividends generally not subject to backup
withholding include the following:
. Payments to nonresident aliens subject to withholding under section 1441.
. Payments to partnerships not engaged in a trade or business in the United
States and that have at least one nonresident partner.
. Payments of patronage dividends not paid in money.
. Payments made by certain foreign organizations.
Payments of interest generally not subject to backup withholding include the
following:
. Payments of interest on obligations issued by individuals.
Note: You may be subject to backup withholding if this interest is $600 or
more and is paid in the course of the payer's trade or business and you have not
provided your correct TIN to the payer.
. Payments of tax-exempt interest (including exempt-interest dividends under
section 852).
. Payments described in section 6049(b)(5) to nonresident aliens.
. Payment on tax-free covenant bonds under section 1451.
. Payments made by certain foreign organizations.
. Mortgage interest paid by you.
Payments that are not subject to information reporting are also not subject
to backup withholding. For details, see sections 6041, 6041A(a), 6042, 6044,
6045, 6049, 6050A and 6050N, and their regulations.
PENALTIES
FAILURE TO FURNISH TIN.--If you fail to furnish your correct TIN to a
requester, you will be subject to a penalty of $50 for each such failure unless
your failure is due to reasonable cause and not to willful neglect.
<PAGE>
CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If you make
a false statement with no reasonable basis that results in no backup
withholding, you are subject to a $500 penalty.
CRIMINAL PENALTY FOR FALSIFYING INFORMATION.--Willfully falsifying
certifications or affirmations may subject you to criminal penalties including
fines and/or imprisonment.
MISUSE OF TINS.--If the requester discloses or uses TINs in violation of
Federal law, the requester may be subject to civil and criminal penalties.
SPECIAL INSTRUCTIONS
NAME.--If you are an individual, you must generally provide the name shown on
your Social Security card. However, if you have changed your last name, for
instance, due to marriage, without informing the Social Security Administration
of the name change, please enter your first name, the last name shown on your
Social Security card, and your new last name.
If you are a sole proprietor, you must furnish your individual name and
either the SSN or EIN. You may also enter your business name or "doing business
as" name on the business name line. Enter your name(s) as shown on your Social
Security card and/or as it was used to apply for your EIN on Form SS-4.
SIGNING THE CERTIFICATION.
1. INTEREST, DIVIDEND, BROKER AND BARTER EXCHANGE ACCOUNTS OPENED BEFORE 1984
AND BROKER ACCOUNTS CONSIDERED ACTIVE DURING 1983. You are required to furnish
your correct TIN, but you are not required to sign the certification.
2. INTEREST, DIVIDEND, BROKER AND BARTER EXCHANGE ACCOUNTS OPENED AFTER 1983
AND BROKER ACCOUNTS CONSIDERED INACTIVE DURING 1983. You must sign the
certification or backup withholding will apply. If you are subject to backup
withholding and you are merely providing your correct TIN to the requester, you
must cross out item 2 in the certification before signing the form.
3. REAL ESTATE TRANSACTIONS. You must sign the certification. You may cross
out item 2 of the certification.
4. OTHER PAYMENTS. You are required to furnish your correct TIN, but you are
not required to sign the certification unless you have been notified of an
incorrect TIN. Other payments include payments made in the course of the
requester's trade or business for rents, royalties, goods (other than bills for
merchandise), medical and health care services, payments to a nonemployee for
services (including attorney and accounting fees) and payments to certain
fishing boat crew members.
5. MORTGAGE INTEREST PAID BY YOU, ACQUISITION OR ABANDONMENT OF SECURED
PROPERTY OR IRA CONTRIBUTIONS. You are required to furnish your correct TIN, but
you are not required to sign the certification.
6. EXEMPT PAYEES AND PAYMENTS. If you are exempt from backup withholding, you
should complete this form to avoid possible erroneous backup withholding. Enter
your correct TIN in Part 1, write "EXEMPT" in the block in Part II, and sign and
date the form. If you are a nonresident alien or foreign entity not subject to
backup withholding, give the requester a complete Form W-8, Certificate of
Foreign Status.
7. TIN "APPLIED FOR." Follow the instructions under How To Obtain a TIN on
page 1, and sign and date this form.
SIGNATURE.--For a joint account, only the person whose TIN is shown in Part I
should sign.
PRIVACY ACT NOTICE.--Section 6109 requires you to furnish your correct TIN to
persons who must file information returns with the IRS to report interest,
dividends, certain other income paid to you, mortgage interest you paid, the
acquisition or abandonment of secured property or contributions you made to an
IRA. The IRS uses the numbers for identification purposes and to help verify the
accuracy of your tax return. You must provide your TIN whether or not you are
required to file a tax return. Payers must generally withhold 31% of taxable
interest, dividend and certain other payments to a payee who does not furnish a
TIN to a payer. Certain penalties may also apply.
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER OF SUBSTITUTE FORM W-9
WHAT NAME AND NUMBER TO GIVE THE REQUESTER
<TABLE>
<CAPTION>
FOR THIS TYPE OF ACCOUNT: GIVE NAME AND SSN OF: FOR THIS TYPE OF ACCOUNT: GIVE NAME AND EIN OF:
<S> <C> <C> <C> <C> <C>
</TABLE>
<TABLE>
<C> <S> <C>
1. Individual The individual
2. Two or more The actual owner of
individuals (joint the account or, if
account) combined funds, the
first individual on
the account (1)
3. Custodian account of a The minor(2)
minor (Uniform Gift to
Minors Act)
4. a. The usual revocable The grantor-trustee(1)
savings trust
(grantor is also
trustee)
b. So-called trust The actual owner(1)
account that is not
a legal or valid
trust under state
law
5. Sole proprietorship The owner(3)
6. Sole proprietorship The owner(3)
7. A valid trust, estate Legal entity(4)
or pension trust
8. Corporate The corporation
9. Association, club, The organization
religious, charitable,
educational or other
tax-exempt
organization
10. Partnership The partnership
11. A broker or registered The broker or nominee
nominee
12. Account with the The public entity
Department of
Agriculture in the
name of a public
entity (such as a
state or local
government, school
district or prison)
that receives
agriculture program
payments
</TABLE>
- ------------------------------------------------
- ------------------------------------------------
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's SSN.
(3) Show your individual name. You may also enter your business name. You may
use your SSN or EIN.
(4) List first and circle the name of the legal trust, estate or pension trust.
(Do not furnish the TIN of the personal representative or trustee unless the
legal entity itself is not designated in the account title).
NOTE: If no name is circled when there is more than one name, the number will be
considered to be that of the first name listed.
2
EXHIBIT 99.(g)(1)
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-K
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995
COMMISSION FILE NUMBER 1-9120
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
(Exact name of registrant as specified in its charter)
NEW JERSEY 22-2625848
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
80 PARK PLAZA, P.O. BOX 1171 07101-1171
NEWARK, NEW JERSEY (Zip Code)
(Address of principal executive offices)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 201 430-7000
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
- ---------------------------------------------- ----------------------------
Common Stock without par value New York Stock Exchange
Philadelphia Stock Exchange
COMMISSION FILE NUMBER 1-973
PUBLIC SERVICE ELECTRIC AND GAS COMPANY
(Exact name of registrant as specified in its charter)
NEW JERSEY 22-1212800
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
80 PARK PLAZA, P.O. BOX 570 07101-0570
NEWARK, NEW JERSEY (Zip Code)
(Address of principal executive offices)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 201 430-7000
DOCUMENTS INCORPORATED BY REFERENCE
PART OF FORM 10-K DOCUMENTS INCORPORATED BY REFERENCE
- ----------------- -----------------------------------
III Portions of the definitive Proxy Statement for the Annual Meeting
of Stockholders of Public Service Enterprise Group Incorporated
to be held April 16, 1996, which definitive Proxy Statement is
expected to be filed with the Securities and Exchange Commission
on or about March 1, 1996, as specified herein.
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
<PAGE>
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS TITLE OF EACH CLASS WHICH REGISTERED
------------------- -------------------- ------------------------
<S> <C> <C>
Cumulative Preferred Stock First and Refunding
$100 par value Series: Mortgage
Bonds Series Due:
4.08%
4.18% 8 3/4% Z 1999
4.30% 9 1/8% BB 2005
5.05% 9 1/4% CC 2021
5.28% 8 7/8% DD 2003
5.97% 8 3/4% EE 2021
6.80% 7 7/8% FF 2001
7.40% 7 1/8% GG 1997
7.44% 8 3/4% HH 2022
7.52% 7 5/8% II 2000
7.70% 6 7/8% KK 1997 New York Stock Exchange
8 1/2% LL 2022
6 7/8% MM 2003
6 % NN 1998
Cumulative Preferred Stock 7 1/2% OO 2023
$25 par value Series: 6 1/2% PP 2004
6 % QQ 2000
6.75% 6 1/8% RR 2002
7 % SS 2024
7 3/8% TT 2014
6 3/4% UU 2006
6 3/4% VV 2016
6 1/4% WW 2007
8 % 2037
5 % 2037
Monthly Income Preferred
Securities
$25 par Value Series
9.375%
8.00%
</TABLE>
<TABLE>
<CAPTION>
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
REGISTRANT TITLE OF CLASS
------------------------------------- -------------------------------------
<S> <C>
Public Service Enterprise Group None
Incorporated
Public Service Electric and Gas 6.92% Cumulative Preferred Stock $100
Company par value
Medium-Term Notes, Series A
Indicate by check mark whether the registrants (1) have filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrants were required to file such reports), and (2) have been
subject to such filing requirements for the past 90 days. Yes X No .
------ -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation
S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or
any amendment to this Form 10-K. X
-----
The aggregate market value of the Common Stock of Public Service Enterprise Group Incorporated
held by non-affiliates as of January 31, 1996 was $7,642,239,750 based upon the New York Stock
Exchange Composite Transaction closing price.
The number of shares outstanding of Enterprise's sole class of common stock, as of the latest
practicable date, was as follows:
CLASS OUTSTANDING AT JANUARY 31, 1996
------------------------------- -------------------------------
Common Stock, without par value 244,697,930
As of January 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 (Enterprise).
</TABLE>
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Table of Contents........................................... i
Glossary of Terms........................................... v
PART I
Item 1. Business..................................... 1
General...................................... 1
Enterprise................................. 1
PSE&G...................................... 2
Industry Issues.............................. 3
Competition.................................. 3
Overview................................... 3
Electric................................... 5
Gas........................................ 7
Construction and Capital Requirements........ 7
Financing Activities......................... 7
Federal Income Taxes......................... 8
Credit Ratings............................... 8
PSE&G........................................ 9
Rate Matters............................... 9
Nuclear Performance Standard............... 9
Customers.................................. 10
Integrated Resource Plan................... 12
Pennsylvania -- New Jersey -- Maryland
Interconnection........................ 12
Power Purchases.......................... 14
Demand Side Management................... 15
Electric Generating Capacity............... 16
Nuclear Operations....................... 17
Salem.................................... 18
Hope Creek............................... 22
Peach Bottom............................. 24
Other Nuclear Matters.................... 25
Nuclear Decommissioning.................. 26
Electric Fuel Supply and Disposal.......... 27
Nuclear Fuel............................. 28
Coal..................................... 29
Natural Gas.............................. 30
Oil...................................... 30
Nuclear Fuel Disposal.................... 30
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Low Level Radioactive Waste (LLRW)......... 32
Gas Operations and Supply.................. 33
Employee Relations........................... 35
Regulation................................... 35
Environmental Controls....................... 39
Air Pollution Control...................... 41
Water Pollution Control.................... 44
Control of Hazardous Substances............ 46
PSE&G Manufactured Gas Plant Remediation
Program................................. 46
Other Sites................................ 46
Hazardous Substances....................... 47
Other Potential Liability.................. 53
Consolidated Financial Statistics of
Enterprise............................... 54
Operating Statistics of PSE&G................ 55
EDHI......................................... 56
EDC........................................ 56
CEA........................................ 57
PSRC....................................... 57
EGDC....................................... 58
Capital.................................... 58
Funding.................................... 59
Item 2. Properties................................... 60
PSE&G...................................... 60
Electric Properties...................... 61
Gas Properties........................... 62
Office Buildings and Facilities............ 63
Item 3. Legal Proceedings............................ 64
Item 4. Submission of Matters to a Vote of Security
Holders.................................... 66
Item 10. Executive Officers of the Registrants........ 67
PART II
Item 5. Market for Registrant's Common Equity and
Related Stockholder Matters................ 68
Item 6. Selected Financial Data...................... 70
Enterprise................................. 70
PSE&G...................................... 70
Item 7. Management's Discussion and Analysis of
Financial Condition and Results
of Operations............................... 71
Enterprise................................... 71
Overview................................... 71
Competition................................ 72
Accounting for the Effects of Regulation... 76
PSE&G Energy and Fuel Adjustment Clauses... 77
</TABLE> ii
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Accounting for Stock Compensation......... 77
Corporate Policy for the Use of Derivatives 78
Nuclear Operations........................ 78
Results of Operations..................... 79
PSE&G - Earnings Available to Enterprise.. 79
PSE&G - Revenues.......................... 80
Electric................................ 80
Gas..................................... 80
PSE&G - Expenses.......................... 81
Fuel Expenses.......................... 81
Other Operation Expenses............... 81
Maintenance Expenses................... 82
Depreciation and Amortization Expenses. 82
Federal Income Taxes................... 82
Interest Charges....................... 82
Allowance for Funds Used During
Construction........................ 82
Preferred Securities................... 83
EDHI - Net Income...................... 83
Dividends.............................. 84
Liquidity and Capital Resources........... 84
PSE&G.................................. 85
EDHI................................... 85
Long-Term Investments and Real Estate.. 86
Construction, Investments and Other
Capital Requirements Forecast....... 87
Internal Generation of Cash from
Operations........................... 88
External Financings........................ 88
PSE&G................................... 88
EDHI.................................... 89
PSE&G........................................ 90
Item 8. Financial Statements and Supplementary Data.. 91
Financial Statement Responsibility
(Enterprise)............................. 91
Financial Statement Responsibility (PSE&G). 93
Independent Auditors' Report (Enterprise).. 95
Independent Auditors' Report (PSE&G)....... 96
Consolidated Statements of Income
(Enterprise)............................. 97
Consolidated Balance Sheets (Enterprise)... 98
Consolidated Statements of Cash Flows
(Enterprise)............................. 100
Consolidated Statements of Retained Earnings
(Enterprise)............................ 101
Consolidated Statements of Income (PSE&G).. 102
Consolidated Balance Sheets (PSE&G)........ 103
Consolidated Statements of Cash Flows
(PSE&G).................................. 105
Consolidated Statements of Retained Earnings
(PSE&G).................................. 106
Notes to Consolidated Financial Statements
(Enterprise)............................. 107
Notes to Consolidated Financial Statements
(PSE&G).................................. 152
</TABLE>
iii
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART III
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure...... 156
Item 10. Directors and Executive Officers of the
Registrants............................... 156
Directors of the Registrants................ 156
Enterprise................................ 156
PSE&G..................................... 156
Executive Officers of the Registrants......... 157
Item 11. Executive Compensation........................ 159
Enterprise.................................. 159
PSE&G....................................... 159
Summary Compensation Table................ 159
Option Grants in Last Fiscal Year (1995).. 161
Aggregated Option Exercises in Last
Fiscal Year and Fiscal Year-End
Option Values (12/31/95)................ 161
Employment Contracts and Arrangements..... 161
Compensation Committee Interlocks and
Insider Participation................... 162
Compensation of Directors and Certain
Business Relationships.................. 162
Compensation Pursuant to Pension Plans.... 162
Item 12. Security Ownership of Certain Beneficial Owners
and Management........................... 162
Enterprise.................................. 162
PSE&G....................................... 163
Item 13. Certain Relationships and Related Transactions.163
Enterprise.................................. 163
PSE&G....................................... 163
PART IV
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K..................... 164
Schedule II -- Valuation and Qualifying Accounts
(Enterprise)............................. 166
Schedule II -- Valuation and Qualifying Accounts (PSE&G)... 167
Signatures -- Public Service Enterprise Group
Incorporated............................ 168
Signatures -- Public Service Electric and Gas Company... 169
Exhibit Index.............................................. 170
Enterprise................................................. 170
PSE&G...................................................... 177
</TABLE>
iv
<PAGE>
GLOSSARY OF TERMS
The following is a glossary of frequently used abbreviations or
acronyms that are found in this report:
<TABLE>
<CAPTION>
TERM MEANING
----------------------- -----------------------------------------
<S> <C>
ACO.................... Administrative Consent Order
AFDC................... Allowance for Funds used During Construction
Alternative Rate Plan.. New Jersey Partners in Power Plan
AMT.................... Alternative Minimum Tax
BCFE................... Billion Cubic Feet Equivalent
Bonds.................. First and Refunding Mortgage Bonds
BPU.................... New Jersey Board of Public Utilities
BTA.................... Best Technology Available
BWR.................... Boiling Water Reactor
CAA.................... Federal Clean Air Act
Capital................ PSEG Capital Corporation
CEA.................... Community Energy Alternatives Incorporated
CEA USA................ CEA USA, Inc.
CEA New Jersey......... CEA New Jersey, Inc.
CERCLA................. Federal Comprehensive Environmental
Response, Compensation and Liability
Act of 1980
Certificate of Need.... Certificate of Need under the NJNAA
CORP................... New Jersey Commission on Radiation Protection
DGW.................... Discharge to Ground Water
DOE.................... United States Department of Energy
DRBC................... Delaware River Basin Commission
DRIP................... Enterprise's Dividend Reinvestment and Stock
Purchase Plan
DSM.................... Demand Side Management
DSW.................... Discharge to Surface Water
Eagle Point............ CEA Eagle Point, Inc.
EBIT................... Earnings before interest and taxes
ECRA................... New Jersey Environmental Cleanup
Responsibility Act
EDC.................... Energy Development Corporation
EDHI................... Enterprise Diversified Holdings Incorporated
EGDC................... Enterprise Group Development Corporation
EITF................... FASB's Emerging Issues Task Force
EMF.................... Electric and Magnetic Fields
Enterprise............. Public Service Enterprise Group Incorporated
EPA.................... United States Environmental Protection Agency
</TABLE>
v
<PAGE>
<TABLE>
<CAPTION>
TERM MEANING
---------------------- ---------------------------------------------
<S> <C>
EPAct.................. National Energy Policy Act of 1992
EPC.................... Eagle Point Cogeneration Faclility
EWGs................... Exempt Wholesale Generators
FASB................... Financial Accounting Standards Board
Fault Act.............. New Jersey Public Utility Accident Fault
Determination Act
FERC................... Federal Energy Regulatory Commission
Fuelco................. PSE&G Fuel Corporation
Funding................ Enterprise Capital Funding Corporation
FWPCA.................. Federal Water Pollution Control Act
GE..................... General Electric
GEMS................... Gloucester Environmental Management
Services, Inc.
Hope Creek............. Hope Creek Nuclear Generating Station
IPP.................... Independent Power Producers
IRP.................... Integrated Resource Plan
IRS.................... Internal Revenue Service
ISO.................... Independent System Operator
KWH.................... Kilowatthours
LEAC................... Electric Levelized Energy Adjustment Clause
LGAC................... Levelized Gas Adjustment Charge
LLRW................... Low Level Radioactive Waste
LNG.................... Liquefied Natural Gas
LPG.................... Liquid Petroleum Air Gas
LTIP................... Long-Term Incentive Plan
MAAC................... Mid-Atlantic Area Reliability Council
MD&A................... Management's Discussion and Analysis of
Financial Condition and Results of
Operations
MICP................... Management Incentive Compensation Plan
mmbtu.................. Millions of British Thermal Units
MOA.................... Memorandum of Agreement
Mortgage............... First and Refunding Mortgage of PSE&G
MTNs................... Medium-Term Notes
MW..................... Megawatts
MWH.................... Megawatthours
NAAQS.................. National Ambient Air Quality Standards
NEIL................... Nuclear Electric Insurance Limited
NJAPCC................. New Jersey Air Pollution Control Code
NJDEP.................. New Jersey Department of Environmental
Protection
NJGRT.................. New Jersey Gross Receipts and Franchise Tax
NJNAA.................. New Jersey Need Assessment Act
</TABLE> vi
<PAGE>
<TABLE>
<CAPTION>
TERM MEANING
----------------------- ---------------------------------------------
<S> <C>
NJPDES................. New Jersey Pollution Discharge Elimination
System
NJWPCA................. New Jersey Water Pollution Control Act
NML.................... Nuclear Mutual Limited
NOC.................... Nuclear Oversight Committee
NOPR................... Notice of Proposed Rulemaking
NOV.................... Notice of Violation
NOx.................... Nitrogen Oxides
NPDES.................. National Pollutant Discharge Elimination
System
NPS.................... The BPU's nuclear performance standard
established for nuclear generating stations
owned by New Jersey electric utilities
NRC.................... Nuclear Regulatory Commission
NUGs................... Nonutility Generators
NWPA................... Nuclear Waste Policy Act of 1982, as amended
OAL.................... Office of Administrative Law of the State of
New Jersey
OPEB................... Other Postretirement Benefits
OTAG................... Ozone Transport Assessment Group
Partnership............ Public Service Electric and Gas Capital, L.P.
Peach Bottom........... Peach Bottom Atomic Power Station,
Units 2 and 3
PECO................... PECO Energy Inc.
PJM.................... Pennsylvania -- New Jersey -- Maryland
Interconnection
PJP.................... PJP Landfill in Jersey City, New Jersey
POTW................... Publicly Owned Treatment Works
PPUC................... Pennsylvania Public Utility Commission
Price Anderson......... Price-Anderson liability provisions of the
Atomic Energy Act of 1954, as amended
PRAP................... Proposed Remedial Action Plan
PRPs................... Potentially Responsible Parties
PSE&G.................. Public Service Electric and Gas Company
PSCRC.................. Public Service Conservation Resources
Corporation
PSRC................... Public Service Resources Corporation
PUHCA.................. Public Utility Holding Company Act of 1935
PURPA.................. Public Utility Regulatory Policies
Act of 1978
PWR.................... Pressurized Water Reactor
QFs.................... Qualifying Facilities
RAC.................... Remediation Adjustment Charge
RACT................... Reasonable Available Control Technologies
RAR.................... Revenue Agent's Report
RCRA................... Federal Resource Conservation and Recovery
Act of 1976
</TABLE> vii
<PAGE>
<TABLE>
<CAPTION>
TERM MEANING
----------------------- ---------------------------------------------
<S> <C>
Remediation Program.... PSE&G Gas Plant Remediation Program
RI..................... Remedial Investigation
RI/FS.................. Remedial Investigation and Feasibility Study
RIPW................... Remedial Investigation Work Plan
ROD.................... Record of Decision
Salem.................. Salem Nuclear Generating Station,
Units 1 and 2
SALP................... Systematic Assessment of Licensee Performance
SEC.................... Securities and Exchange Commission
SFAS 71................ Statement of Financial Accounting Standards
No. 71, "Accounting for the Effects of
Certain Types of Regulation"
SFAS 106............... Statement of Financial Accounting Standards
No. 106, "Employers' Accounting for
Postretirement Benefits Other than
Pensions"
SFAS 107............... Statement of Financial Accounting Standards
No. 107, "Disclosures About Fair Value of
Financial Instruments"
SFAS 109............... Statement of Financial Accounting Standards
No. 109, "Accounting for Income Taxes"
SFAS 121............... Statement of Financial Accounting Standards
No. 121, "Accounting for the Impairment of
Long-Lived Assets"
SFAS 123............... Statement of Financial Accounting Standards
No. 123, "Accounting for Stock Based
Compensation"
SIU.................... Significant Industrial Users
SNG Plant.............. Synthetic Natural Gas Plant
Spill Act.............. New Jersey Spill Compensation and Control Act
SPPP................... Stormwater Pollution Prevention Plans
USDOT.................. United States Department of Transportation
USEC................... United States Enrichment Corporation
USEP................... U.S. Energy Partners
Ventures............... Enterprise Ventures & Services
VOC.................... Volatile Organic Compound
</TABLE>
viii
<PAGE>
PART I
ITEM 1. BUSINESS
General
Enterprise
Public Service Enterprise Group Incorporated (Enterprise),
incorporated under the laws of the State of New Jersey with its
principal executive offices located at 80 Park Plaza, Newark, New
Jersey 07101, is a public utility holding company that neither owns nor
operates any physical properties. Enterprise has two direct
wholly-owned subsidiaries, Public Service Electric and Gas Company
(PSE&G) and Enterprise Diversified Holdings Incorporated (EDHI).
Enterprise's principal subsidiary, PSE&G, is an operating public
utility providing electric and gas service in certain areas in the
State of New Jersey. Enterprise has claimed an exemption from
regulation by the Securities and Exchange Commission (SEC) as a
registered holding company under the Public Utility Holding Company Act
of 1935 (PUHCA), except for Section 9(a)(2) thereof which relates to
the acquisition of voting securities of an electric or gas utility
company. PSE&G is subject to direct regulation by the New Jersey Board
of Public Utilities (BPU) and the Federal Energy Regulatory Commission
(FERC). EDHI is the parent of Enterprise's nonutility businesses:
Energy Development Corporation (EDC), an oil and gas exploration and
production and marketing company; Community Energy Alternatives
Incorporated (CEA), an investor in and developer and operator of
cogeneration and independent power production facilities; Public
Service Resources Corporation (PSRC), which makes primarily passive
investments; Enterprise Group Development Corporation (EGDC), a
diversified nonresidential real estate development and investment
business; PSEG Capital Corporation (Capital), which provides debt
financing on the basis of a minimum net worth maintenance agreement
from Enterprise; and Enterprise Capital Funding Corporation (Funding),
which provides privately placed debt financing on the basis of the
consolidated financial position of EDHI without direct support from
Enterprise. As of December 31, 1995 and 1994, PSE&G comprised 85% of
Enterprise's assets. PSE&G's 1995, 1994 and 1993 revenues were 93% of
Enterprise's revenues and PSE&G's earnings available to Enterprise for
such years were 88%, 91% and 96%, respectively, of Enterprise's net
income. Production of electricity and electric and gas distribution
will continue as the principal business of Enterprise for the
foreseeable future. Enterprise has announced that it intends to divest
EDC in 1996. See EDHI - EDC and Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations (MD&A).
<PAGE>
Financial information with respect to business segments of PSE&G
and Enterprise is set forth in Note 15 -- Financial Information by
Business Segments of Notes to Consolidated Financial Statements
(Notes).
PSE&G
PSE&G, a New Jersey corporation with its principal executive
offices at 80 Park Plaza, Newark, New Jersey 07101, is an operating
public utility company engaged principally in the generation,
transmission, distribution and sale of electric energy service and in
the transmission, distribution and sale of gas service in New Jersey.
PSE&G supplies electric and gas service in areas of New Jersey in which
approximately 5,500,000 persons, about 70% of the State's population,
reside. (See General -- Enterprise.)
PSE&G's electric and gas service area is a corridor of
approximately 2,600 square miles running diagonally across New Jersey
from Bergen County in the northeast to an area below the City of Camden
in the southwest. The greater portion of this area is served with both
electricity and gas, but some parts are served with electricity only
and other parts with gas only. This heavily populated, commercialized
and industrialized territory encompasses most of New Jersey's largest
municipalities, including its six largest cities -- Newark, Jersey
City, Paterson, Elizabeth, Trenton and Camden -- in addition to
approximately 300 suburban and rural communities. It contains a
diversified mix of commerce and industry, including major facilities
of many corporations of national prominence.
Under the general laws of New Jersey, PSE&G has the right to use
the public highways, streets and alleys in New Jersey for erecting,
laying and maintaining poles, conduits and wires necessary for its
electric operations. PSE&G must, however, first obtain the consent in
writing of the owners of the soil for the purpose of erecting poles.
In incorporated cities and towns, PSE&G must obtain from the
municipality a designation of the streets in which the poles are to be
placed and the manner of placing them. PSE&G's rights are also subject
to regulation by municipal authorities with respect to street openings
and the use of streets for erecting poles in incorporated cities and
towns.
PSE&G, by virtue of a special charter granted by the State of New
Jersey to one of its predecessors, has the right to use the roads,
streets, highways and public grounds in New Jersey for pipes and
conduits for distributing gas.
PSE&G believes that it has all the franchises (including consents)
necessary for its electric and gas operations in the territory it
serves. Such franchises are non-exclusive.
<PAGE>
For discussion of the significant changes which PSE&G's electric
and gas utility businesses have been and are undergoing, see
Competition and Regulation.
Industry Issues
Enterprise and PSE&G are affected by many issues that are common
to the electric and gas industries, such as: deregulation and the
unbundling of energy supplies and services; an increasingly competitive
energy marketplace, sales retention and growth potential in a mature
service territory and a need to contain costs (see Competition,
Regulation and MD&A - Competition); ability to operate nuclear plants
in a cost effective way (see PSE&G - Nuclear Operations); ability to
obtain adequate and timely rate relief, cost recovery, including the
potential impact of stranded assets, and other necessary regulatory
approvals (see PSE&G -- Rate Matters; Regulation and Item 7. MD&A -
Competition); costs of construction (see Construction and Capital
Requirements); operating restrictions, increased costs and construction
delays attributable to environmental regulations (see Environmental
Controls); controversies regarding electric and magnetic fields (EMF)
(see Environmental Controls); nuclear decommissioning and the
availability of reprocessing and storage facilities for spent nuclear
fuel (see Electric Fuel Supply and Disposal); and credit market
concerns with these issues.
Competition
Overview
The energy utility industry is in transition. Changes in Federal
and state law and regulation are encouraging new entrants to the
traditional markets of electric and gas utilities. New technologies are
creating opportunities for new energy services. Customers, more aware
and sophisticated about their choices and dissatisfied with prices and
the often limited range of options available from the local utility,
are increasingly turning elsewhere for energy supplies and services.
As a consequence of competition, the traditional utility structure --
consisting of a vertically integrated system and functioning as a
natural monopoly -- is being dramatically altered. Further, PSE&G's
ability to meet competition and change prices to meet customer's needs
is impacted by state regulation, including the historic utility mandate
to serve all customers. (See MD&A -- Competition.) For a discussion
of PSE&G's alternative plan of rate regulation, "New Jersey Partners
in Power" (Alternative Rate Plan) as a response to these demands, see
MD&A and Note 2 -- Rate Matters of Notes.
Non health and safety related Federal energy laws and regulations
are designed to make more efficient use of all energy, introduce price
competition, encourage the use of nonconventional energy sources and
<PAGE>
limit oil imports by increasing production of domestic energy
resources. Among other things, these actions (1) encourage development
of alternative energy generation, (2) require wheeling of power for
wholesale transactions, (3) require state regulatory authorities to
consider certain standards on rate design and certain other utility
practices, (4) encourage conservation of energy through certain
financial incentives, including incentives by individual utilities to
customers to help them to conserve energy and (5) deregulate prices on
natural gas.
Also, Federal and State laws designed to reduce air and water
pollution and control hazardous substances have had the effect of
increasing the costs of operation and replacement of existing utility
plants and other facilities. (See Environmental Controls.)
Competition from nonutility generators (NUGs), such as
cogenerators, independent power producers (IPP) and exempt wholesale
generators (EWGs), as permitted by the Public Utility Regulatory
Policies Act of 1978 (PURPA) and the National Energy Policy Act of 1992
(EPAct), continues to impact PSE&G. As a result of changes brought
about by EPAct, along with proposals in some states to authorize retail
wheeling, discussed below, electric customers and suppliers, including
PSE&G and its customers, have increased opportunities for purchase and
sale of electricity from and to sellers and buyers outside of
traditional franchised territories. Retention of existing customers
and potential sales growth will depend upon the ability of PSE&G to
contain costs, meet customer expectations and respond to changing
economic conditions and energy regulation. As a result of such
competitive forces, Enterprise Ventures & Services Corporation
(Ventures) has been established as a subsidiary of PSE&G to develop and
market new energy-related products and services beyond traditional
geographic and/or industry boundaries. Competition may also adversely
impact upon the economics of certain regulatory-created incentives,
such as Demand Side Management (DSM) and conservation. For additional
information, including a discussion of the potential effects of
competition upon rates, cost recovery and assets, see MD&A --
Competition. For information relating to the Alternative Rate Plan see
MD&A and Note 1--Organization and Summary of Significant Accounting
Policies, Note 2--Rate Matters and Note 5--Deferred Items of Notes.
<PAGE>
Electric
In the electric utility industry, competitive pressures began with
the enactment of PURPA. This law, together with subsequent changes in
Federal regulation, has increasingly opened the electric utility
industry to competition. PURPA created a class of generating
facilities exempt from Federal and State public utility regulation --
cogeneration and small power producers known as "qualifying facilities"
(QFs) -- and created an instant market for them by requiring regulated
utilities to purchase their excess power production. EPAct, by
facilitating the development of the wholesale power market, has led to
even stronger competition. The increasing competitiveness of the
electric wholesale markets, along with consideration of retail wheeling
or "direct retail access" within utility franchise areas in several
states, has brought to the forefront the issue of potential stranded
costs within the electric utility industry (see MD&A - Competition).
EPAct provides FERC with increased authority to order "wheeling"
of wholesale, but not retail, electric power on the transmission
systems of electric utilities, provided that certain requirements are
met. In order to facilitate the transition to increased competition in
wholesale power markets made possible by EPAct, in March 1995, FERC
issued a Notice of Proposed Rulemaking (NOPR) which, if adopted, would
require electric utilities, including PSE&G, to provide open access to
the interstate transmission network pursuant to non-discriminatory
tariffs available to all wholesale sellers and buyers of electric
energy. Utilities would be required to offer transmission to eligible
customers comparable to the service they provide themselves and to take
service under the tariffs for their own wholesale sales and purchases.
Further, transmission and ancillary service components would be
unbundled and, when buying or selling power, utilities would have to
rely on the same network for transmission system information as their
customers.
The NOPR states FERC's general principle that utilities should be
entitled to full recovery of legitimate and verifiable stranded costs
at the Federal and State levels and reiterates its prior proposal that
such costs be directly assigned to departing customers. The NOPR
further provides that stranded costs due to retail wheeling are a state
matter, while stranded costs due to wholesale wheeling,
municipalization or a change from retail to wholesale customer class
are within FERC's jurisdiction. PSE&G cannot predict the impact of any
regulations that may be adopted. See MD&A -- Competition. For
discussion of the Pennsylvania, New Jersey and Maryland Interconnection
(PJM) proposal in response to the FERC NOPR, see Pennsylvania--New
Jersey--Maryland Interconnection. For a discussion of PSE&G's actions
and comments related to the potential environmental impact of the NOPR,
see Environmental Controls - Air Pollution Control.
<PAGE>
EPAct also amended PUHCA to create a new category of generation
owners known as EWGs, which are not subject to PUHCA regulation. EPAct
permits both independent companies and utility affiliates to
participate in the development of EWG projects regardless of the
location and ownership of other generating resources. The transmission
access provisions apply to wholesale, but not retail, "wheeling" of
power, subject to FERC review. See PSE&G -- Integrated Resource Plan,
Construction and Capital Requirements, Financing Activities and PSE&G
- -- Customers. For information concerning the activities of CEA, which
is an owner-developer of QFs and EWGs, see EDHI -- CEA.
Another key factor in determining how competition will affect
PSE&G's electric business is the extent to which New Jersey public
utility regulation may be modified to be reflective of these new
competitive realities. The BPU presented the first phase of the New
Jersey Energy Master Plan to Governor Whitman on March 8, 1995. This
Phase I Plan acknowledged the need for regulatory flexibility as
competition unfolds and called for legislation that would allow New
Jersey utilities to propose, subject to BPU approval, alternatives to
existing rate base/rate of return pricing, allow for pricing
flexibility under certain standards for customers with competitive
options and equalize the impact of tax policies, such as New Jersey
Gross Receipts and Franchise Tax (NJGRT) which is currently assessed
only on utility retail energy sales. On July 20, 1995, Governor
Whitman signed into law legislation which provides utilities the
flexibility to propose alternative regulatory pricing and to offer
negotiated off-tariff agreements (See PSE&G - Customers). On January
16, 1996, PSE&G filed a petition with the BPU for its Alternative Rate
Plan designed to fulfill the objectives of this new regulatory reform
legislation. This Alternative Rate Plan represents a regulatory
transition designed to provide PSE&G with the mechanisms and incentives
to compete more effectively on several fronts, including the ability
to develop revenue from non-regulated products and services, accelerate
or modify depreciation schedules to help mitigate any potential
stranded asset issue and more aggressively manage costs. For more
information regarding the Alternative Rate Plan see MD&A and Note 1 --
Organization and Summary of Significant Accounting Policies, Note 2 --
Rate Matters and Note 5 -- Deferred Items of Notes.
On June 1, 1995, the BPU issued its Order initiating a formal
Phase II proceeding to the New Jersey Energy Master Plan. This
proceeding is intended to investigate and consider the future long term
structure of the electric power industry in New Jersey. The proceeding
will address wholesale and retail competition, ownership of generation,
transmission and distribution facilities, operation of the transmission
system and stranded investments. A Phase II report proposing policy
restructuring is expected by March 1996. PSE&G cannot predict what
impact, if any, the Phase II report will have.
<PAGE>
Gas
Over the last decade the natural gas industry has experienced a
dramatic transformation as several FERC initiatives have subjected the
industry to competitive market forces. On the interstate level, the
pipeline suppliers that serve PSE&G have unbundled gas supply and
service and now offer transportation services that move gas purchased
from numerous natural gas producers and marketers to PSE&G's service
territory.
This unbundling effort has moved to the local level and, in late
1994, the BPU approved unbundled transport tariffs for PSE&G. These
tariffs allow any non-residential customer, regardless of size, to
purchase its own gas, transport it to PSE&G and require PSE&G to
deliver such gas to the customer's facility. To date, over 5,000
commercial and industrial customers out of a potential of 180,000
customers have decided to utilize this service. It is expected that
this number will continue to grow as marketers become more active in
New Jersey and encourage customers to convert from sales service. The
transportation rate schedules produce the same non-fuel revenue per
therm as existing sales service rate schedules. Thus, PSE&G's earnings
are unaffected whether the customers remain on sales service or convert
to transportation service. See Gas Operations and Supply. In meeting
the challenges and opportunities presented by this unbundling of gas
supply and service, Enterprise initiated a gas marketing company, U.S.
Energy Partners (USEP). For more information see EDHI - PSRC.
Construction and Capital Requirements
For information concerning investments, construction and capital
requirements see MD&A, Note 6 -- Schedule of Consolidated Debt, Note
7 -- Long-Term Investments and Note 12 -- Commitments and Contingent
Liabilities -- Construction and Fuel Supplies of Notes.
Financing Activities
For a discussion of issuance, book value and market value of
Enterprise's Common Stock and external financing activities of
Enterprise, PSE&G and EDHI for the year 1995, see MD&A -- Liquidity and
Capital Resources and Item 5. Market for Registrant's Common Equity and
Related Stockholder Matters.
<PAGE>
For a discussion of Capital and Funding, see EDHI -- Capital and
EDHI - Funding. For further discussion of long-term debt and
short-term debt, see Note 6 -- Schedule of Consolidated Debt of Notes.
Federal Income Taxes
For information regarding Federal income taxes, see Note 1 --
Organization and Summary of Significant Accounting Policies, Note 2 --
Rate Matters and Note 10 -- Federal Income Taxes of Notes.
Credit Ratings
The current ratings of securities of Enterprise's subsidiaries set
forth below reflect the respective views of the rating agency
furnishing the same, from whom an explanation of the significance of
such ratings may be obtained. There is no assurance that such ratings
will continue for any given period of time or that they will not be
revised downward or withdrawn entirely by such rating agencies, if, in
their respective judgments, circumstances so warrant. Any such downward
revision or withdrawal of any of such ratings may have an adverse
effect on the market price of Enterprise's Common Stock and PSE&G's
securities and serve to increase the cost of capital of PSE&G and EDHI.
<TABLE>
<CAPTION>
STANDARD DUFF
PSE&G MOODY'S & POOR'S & PHELPS FITCH
- ----- ------- -------- -------- -----
<S> <C> <C> <C> <C>
Mortgage Bonds............ A3 A- A A-
Debenture Bonds........... Baa1 BBB+ A- BBB+
Preferred Stock........... Baa1 BBB+ A- BBB+
Commercial Paper.......... P2 A2 Duff 1
Fuelco: Commercial Paper.. P2 A2 Duff 1
As a component of the ratings noted above, each rating agency
issues its opinion of the credit trend or outlook for the entity being
rated. For PSE&G, each of the four rating agencies currently evaluate
that outlook as stable.
<PAGE>
EDHI
- ----
Capital: Senior Debt......... Baa2 BBB BBB+
Funding: Commercial Paper(A). P1 A1+ Duff 1+
</TABLE>
(A) Supported by commercial bank letter of credit (see MD&A --
Liquidity and Capital Resources and Note 6-- Schedule of Consolidated
Debt -- Short-Term of Notes.)
PSE&G
Rate Matters
For information concerning PSE&G's Alternative Rate Plan, rate
matters, and environmental remediation and fuel adjustment clauses see
Note 1 -- Organization and Summary of Significant Accounting Policies
and Note 2 -- Rate Matters of Notes. For information concerning
PSE&G's Under (Over) recovered Electric Energy and Gas Fuel Costs, see
Note 5 -- Deferred Items of Notes.
Nuclear Performance Standard
The BPU has established a nuclear performance standard (NPS) for
nuclear generating stations owned by New Jersey electric utilities,
including the five nuclear units in which PSE&G has an ownership
interest: Salem Nuclear Generating Station, Units 1 and 2 (Salem 1 and
2) -- 42.59%; Hope Creek Nuclear Generating Station (Hope Creek) --
95%; and Peach Bottom Atomic Power Station, Units 2 and 3 (Peach Bottom
2 and 3) -- 42.49%. PSE&G operates Salem and Hope Creek, while Peach
Bottom is operated by PECO Energy, Inc. (PECO). The following table
sets forth the capacity factor in accordance with the NPS of each of
PSE&G's nuclear units for the years indicated:
<PAGE>
<TABLE>
<CAPTION>
NUCLEAR UNITS 1995 1994 1993
- -------------- ---- ---- ----
<S> <C> <C> <C>
Capacity Factors:
Salem 1..................................... 26% 59% 60%
Salem 2..................................... 21 58 57
Hope Creek.................................. 76 77 95
Peach Bottom 2.............................. 96 80 84
Peach Bottom 3.............................. 78 98 70
Aggregate capacity factor of nuclear units.. 62 74 77
</TABLE>
For information concerning the NPS, see Nuclear Operations and
Note 12 -- Commitments and Contingent Liabilities of Notes.
Customers
As of December 31, 1995, PSE&G provided service to approximately
1,900,000 electric customers and 1,500,000 gas customers. PSE&G is not
dependent on a single customer or a few customers for its electric or
gas sales. For the year ended December 31, 1995, PSE&G's operating
revenues aggregated $5.7 billion, of which 70% was from its electric
operations and 30% from its gas operations. PSE&G's business is
seasonal in that sales of electricity are higher during the summer
months because of air conditioning requirements and sales of gas are
greater in the winter months due to the use of gas for space-heating
purposes.
<PAGE>
These revenues were derived as follows:
<TABLE>
<CAPTION> Revenues
------------------
Electric Gas
--------- ------
(Millions of Dollars)
<S> <C> <C>
Residential................................ $1,275 $ 823
Commercial................................. 1,854 501
Industrial................................. 705 275
Transportation Service - Gas............... -- 54
Other...................................... 187 33
------ ------
Total................................... $4,021 $1,686
====== ======
</TABLE>
Customers of PSE&G, as well as those of other New Jersey electric
and gas utilities, pay the NJGRT which, in effect, adds approximately
13% to their bills. The NJGRT is a unit tax based on electric
kilowatthour and gas therm sales. This tax differential provides an
incentive to large-volume electric and gas customers to seek to obtain
their energy supplies from nonutility sources not subject to NJGRT.
To the extent PSE&G experiences a loss of customers seeking to avoid
this cost, it could result in a significant decrease in PSE&G's
revenues and earnings.
On November 17, 1995, the BPU issued an order approving a
Stipulation regarding PSE&G's proposed Experimental Hourly Energy
Pricing Tariff and the first service agreement thereunder with its
second largest customer. Under the agreement, the tariff will result
in a bill reduction for the customer of approximately $7 million or
about 27%. This reduction in revenues will be partially offset by a
decrease of $1.25 million in PSE&G's NJGRT liability. Under the
agreement between the customer and PSE&G, the customer will forego an
opportunity to relocate to another state and remain a PSE&G customer
for ten years. On January 2, 1996, an appeal seeking to overturn the
BPU's November 17, 1995 Decision and Order was filed by a third party
in the Appellate Division of the Superior Court of New Jersey. PSE&G
cannot predict the outcome of this matter.
<PAGE>
PSE&G has signed each of its three existing wholesale electric
customers, aggregating 40 mw of load, to 5-year full service agreements
with mid-term extension options. In addition, under the terms of a
previously negotiated 10-year wholesale power transaction, PSE&G
receives $12.5 million in annual revenues from an out of state electric
cooperative. For further information on the impact of competition on
PSE&G's customer and revenue base - See Competition and MD&A -
Competition.
Integrated Resource Plan
PSE&G's construction program focuses on upgrading electric and gas
transmission and distribution systems and constructing new transmission
and distribution facilities to serve new load.
Pursuant to its Integrated Resource Plan (IRP), PSE&G periodically
reevaluates its forecasted customer load and peak growth and the
sources of electric generating capacity and DSM to meet such projected
growth (see Demand Side Management below). The IRP takes into account
assumptions concerning future customer demand, future cost trends,
especially fuel and purchased power expenses, the effectiveness of
conservation and load management activities, the long-term condition
of and projected additions to PSE&G's plants and capacity available
from other electric utilities and nonutility suppliers. PSE&G's IRP
consists principally of plant additions, power purchases through PJM
and from NUGs and DSM.
Pennsylvania -- New Jersey -- Maryland Interconnection
PSE&G is a member of the PJM which integrates the bulk power
generation and transmission supply operations of 11 utilities in
Pennsylvania, New Jersey, Delaware, Maryland, Virginia and the District
of Columbia, and, in turn, is interconnected with other major electric
utility companies in the northeastern part of the United States. The
PJM is operated as one system and provides for the purchase and sale
of power among members on the basis of reliability of service and
operating economy. As a result, the most economical mix of generating
capability available is used to meet PJM daily load requirements.
PSE&G's output, as shown under Electric Fuel Supply and Disposal,
reflects significant amounts of purchased power because at times it is
more economical for PSE&G to purchase power from PJM and others than
to produce it. As of December 31, 1995, the aggregate installed
generating capacity of the PJM companies was 56,098 megawatts (MW).
The all time record peak one-hour demand experienced by the PJM power
pool was 48,524 MW which occurred on August 2, 1995. The 1995 peak was
2,532 MW higher than the record-setting 1994 summer peak of 45,992 MW
which occurred on July 8, 1994. PSE&G's capacity obligations to the
PJM system vary from year to year due to changes in system
characteristics. PSE&G expects to have sufficient installed capacity
to meet its obligations during the 1996-2000 period.
<PAGE>
PJM has developed a comprehensive proposal intended to meet or
exceed the goals expressed by FERC in its open access NOPR, including
a number of innovations that were designed to harmonize the
requirements of the NOPR with the benefits of power pooling. In this
proposal, PJM intends to satisfy the NOPR's goals by building upon the
foundation of PJM's power pooling operations. The member companies of
PJM intend to file this proposal with FERC by May 1996 and implement
a restructured pool by year-end 1996.
Under this proposal, the current members of PJM and other load-
serving entities in the PJM control area will purchase regional
"network" transmission rights that are intended to enable them to
reliably and economically integrate generation and load. For
deliveries to retail customers, this service will remain part of the
bundled rates for retail electric service, subject to state
jurisdiction, but with terms and conditions comparable to the service
provided for wholesale users. Because this service will cover all
deliveries to loads located in the pool, generators selling power to
serve pool load will not have to purchase transmission service
independently. This is intended to create a regional wholesale power
market in which all sellers and buyers operate on a level playing
field.
Under the proposal, transmission service will be provided under
a regional point-to-point transmission service tariff. This tariff
will apply a uniform ratemaking methodology to all wholesale
transactions involving deliveries outside the pool, including off-
system sales by the current members of PJM and other load-serving
entities in the pool. Accordingly, all transmission service associated
with sales outside the pool will be provided on a comparable basis.
In order to meet the requirements to functionally unbundle
transmission, PJM has proposed to reorganize into an independent System
Operator (ISO) with responsibility for operating the bulk power system,
administering the regional transmission service tariffs and managing
<PAGE>
the pool's competitive energy market. The ISO will be governed by a
Board of Directors that is not controlled by the transmission-owning
members of PJM or their affiliates, and its responsibilities will be
set forth in contracts filed with the FERC. The ISO will contract with
the various pool participants to supply control area services,
administer the transmission service tariffs and be responsible for
maintaining the reliable operation of the system throughout each day.
One of the key elements of PJM's restructuring proposal is the
creation of an expanded regional market for energy transactions. PJM
will replace the existing system of cost-based centralized dispatch
with an expanded, hourly bid/price pool in which all sellers will be
able to bid their energy into the pool and all load-serving entities
will be able to buy energy from the pool. The energy market will
"clear" in each hour at the highest bid price for energy that must be
dispatched to serve load.
Further, under the proposal, PJM will retain most of the existing
pool procedures for ensuring reliable electric service, but will create
new contractual mechanisms to ensure participation by all entities
responsible for serving load in decisions affecting reliability. Each
load-serving entity that chooses to operate in the PJM control area
will be required to execute an agreement to maintain adequate
generation reserves and to share those reserves on a reciprocal basis.
PJM will establish an enhanced regional planning process, under the
supervision of the ISO, to meet Mid-Atlantic Area Reliability Council
(MAAC) reliability requirements applicable to both generation and
transmission. In short, all load-serving entities in the pool will be
subject to the same reliability standards and will participate in
decisions relating to the establishment of regional reliability
requirements.
Power Purchases
A component of PSE&G's IRP consists of expected capacity additions
from NUGs. These additions are projected to aggregate 46 MW and are
scheduled for service by 1998. NUG projects are expected to comprise
approximately 6.5% of energy resources by 2004. This availability of
NUG generation will reduce the need for PSE&G to build or acquire
additional generation.
PSE&G is also a party to the MAAC which provides for review and
evaluation of plans for generation and transmission facilities and
other matters relevant to reliability of the bulk electric supply
systems in the Mid-Atlantic area.
<PAGE>
PSE&G expects to be able to continue to meet the demand for
electricity on its system through operation of available equipment and
by power purchases. However, if periods of unusual demand should
coincide with outages of equipment, PSE&G could find it necessary at
times to reduce voltage or curtail load in order to safeguard the
continued operation of its system.
Demand Side Management
Integrated resource planning brings together demand-side and
supply-side strategies. In order to encourage DSM, the BPU adopted
rules in 1991 providing special incentives to encourage utilities to
offer these load management conservation services. The rules are
designed to place DSM on an equal regulatory footing with supply side
or energy production investments. Both EPAct and Phase I of the Energy
Master Plan call for conservation to play a significant role in meeting
New Jersey's energy needs over the coming decade. PSE&G's DSM Plan has
been approved by the BPU. The IRP calls for PSE&G to utilize
conservation and DSM to meet most of the incremental resource needs for
the next decade (see Competition).
PSE&G's DSM Plan is designed to encourage investment in
energy-saving DSM activities in New Jersey. These activities involve
new techniques and technologies, such as high-efficiency lighting and
motors, that help reduce customer demand for energy. The DSM Plan
consists of two major program areas for both electric and gas: (1) a
core program which includes many specialized programs such as energy
audits, seal-ups and rebates for high efficiency heating and cooling
equipment; and (2) a standard offer program which is performance based
and provides payment for measurable energy savings resulting from the
installation of qualified measures that improve the energy efficiency
of end-uses. PSE&G's most recent IRP includes a demand forecast average
compound annual rate of growth through the year 2004 of electric system
peak demand of 1.3%. PSE&G's IRP projects 597 MW of passive DSM and
815 MW of active DSM by the year 2004.
PSE&G has established a wholly owned subsidiary, Public Service
Conservation Resources Corporation (PSCRC), to offer DSM services.
PSCRC has its principal office at 9 Campus Drive, Parsippany, N.J.
07054. PSCRC finances, markets and develops energy conservation
projects, mostly within the PSE&G service territory. At December 31,
1995, its assets totaled $110 million, of which $88.2 million were
project assets and work in progress.
<PAGE>
Electric Generating Capacity
The following table sets forth certain information as to PSE&G's
installed generating capacity as of December 31, 1995:
<TABLE>
<CAPTION>
INSTALLED
SOURCE CAPACITY(MW) PERCENTAGE
- --------------- ------------ ----------
<S> <C> <C>
Conventional Steam Electric
Oil-fired(a)............................. 1,723 17
Coal-fired New Jersey(b)................. 1,242 12
Coal-fired Pennsylvania (mine mouth)(c).. 770 7
Combustion Turbine(d)...................... 2,724 26
Combined Cycle............................. 890 9
Diesel(c).................................. 5 --
Nuclear(c)
New Jersey............................... 1,921 18
Pennsylvania............................. 930 9
Pumped Storage(c)(d)....................... 195 2
------ ----
Total(e)......................... 10,400 100
====== ====
(a) Units with aggregate capacity of 836 MW can also burn gas.
(b) Can also burn gas.
(c) PSE&G share of jointly owned facilities.
(d) Primarily used for peaking purposes.
(e) Excludes 664 MW of nonutility generation and temporary capacity
sales of 200 MW to General Public Utilities Corporation.
</TABLE>
For additional information, see Item 2. Properties -- PSE&G --
Electric Properties.
The capacity available at any time may be less than the installed
capacity because of temporary outages for inspection, maintenance,
repairs, legal and regulatory requirements or unforeseen circumstances.
<PAGE>
The maximum one-hour demand (peak load) which PSE&G experienced
in 1995 was 9,467 MW, an all time record which occurred on August 2,
1995, when the day's output was 182,404 Megawatthours (MWH) of
electricity. (For information concerning sales, output and capacity
factors, see Operating Statistics.) The peak load in 1994 was 9,001 MW
which occurred on June 15, 1994, when the day's output was 172,362 MWH
of electricity.
Nuclear Operations
Operation of nuclear generating units involves continuous close
regulation by the Nuclear Regulatory Commission (NRC). Such regulation
involves testing, evaluation and modification of all aspects of plant
operation in light of NRC safety and environmental requirements and
continuous demonstrations to the NRC that plant operations meet
applicable requirements. The NRC has the ultimate authority to
determine whether any nuclear generating unit may operate. For
information concerning the performance of the nuclear units, see
Nuclear Performance Standard and Note 12 -- Commitments and Contingent
Liabilities of Notes.
The scheduled 1996, 1997, and 1998 refueling outages, each
estimated at eight to ten weeks duration, for PSE&G's five licensed
nuclear units are expected to commence in the following months:
<TABLE>
<CAPTION>
REFUELING OUTAGES
--------------------------------------------
1996 1997 1998
------------- ------------- -------------
<S> <C> <C> <C>
Salem 1.......... -- -- --
Salem 2.......... -- -- February
Hope Creek....... -- April October
Peach Bottom 2... September -- September
Peach Bottom 3... -- September --
</TABLE>
<PAGE>
Salem
Salem Generating Station consists of two 1100 MW pressurized water
nuclear reactors (PWR) located in southern New Jersey on the Delaware
River. PSE&G owns 42.59% of the Salem units and operates them on behalf
of itself and three other owners: PECO - 42.59%: Atlantic Electric
Company - 7.41%; and Delmarva Power and Light Company - 7.41%. As of
January 31, 1996, PSE&G's net book value for Salem nuclear production
units is approximately $285 million for Salem 1, $250 million for Salem
2 and $93 million in common plant between the two units. Each Salem
unit represents approximately 4% of PSE&G's installed electric
generating capacity and approximately 2% of its total assets.
Salem 1 and 2 have been out of service since May 16, 1995 and June
7, 1995, respectively. Since that time, PSE&G has been engaged in a
thorough assessment of each unit to identify and complete the work
necessary to achieve safe, sustained, reliable and economic operation.
PSE&G has stated that it will keep each unit off line until it is
satisfied that the unit is ready to return to service and to operate
reliably over the long term and the NRC has agreed that the unit is
sufficiently prepared to restart. On June 9, 1995, the NRC issued a
Confirmatory Action Letter documenting these commitments of PSE&G.
On December 11, 1995, PSE&G presented its restart plan for both
units to the NRC at a public meeting. On February 13, 1996, the NRC
staff issued a letter to PSE&G indicating that it had concluded that
PSE&G's overall restart plan, if implemented effectively, should
adequately address the numerous Salem issues to support a safe plant
restart, and describing further actions the NRC will undertake to
confirm that PSE&G's actions have resulted in the necessary performance
improvements to support safe plant restart.
As a part of PSE&G's comprehensive review, an extensive
examination is being performed on the steam generators, which are large
heat exchangers used to produce steam to drive the turbines. Within
the industry, certain PWRs other than Salem have experienced cracking
in a sufficient number of the steam generator tubes to require various
modifications to these tubes and replacement of the steam generators
in some cases. Until the current outage, regular periodic inspections
of the steam generators for each Salem unit have resulted in repairs
of a small number of tubes well within NRC limits. As a result of the
experience of other utilities with cracking in steam generator tubes,
in April 1995 the NRC issued a generic letter to all utilities with
pressurized water reactors. This generic letter requested utilities
with pressurized water reactors to conduct steam generator examinations
with more sensitive inspection devices capable of detecting evidence
of degradation. Subsequently, PSE&G conducted steam generator
inspections of the Salem units using the latest technology available,
including a new, more sensitive, eddy current testing device.
<PAGE>
With respect to Salem 1, the most recent inspection of the steam
generators is not complete, but partial results from eddy current
inspections in February 1996 using this new technology show
indications of degradation in a significant number of tubes. The
inspections are continuing and PSE&G has decided to remove several
tubes for laboratory examination to confirm the results of the
inspections. Removal of the tubes should be completed in March and
preliminary results of the state of the Salem 1 tubes from the
subsequent laboratory examinations should be known in April. However,
based on the results of inspections to date, PSE&G has concluded that
the Salem 1 outage, which was expected to be completed in the second
quarter of 1996, will be required to be extended for a substantial
additional period to evaluate the state of the steam generators and to
subsequently determine an appropriate course of action. Degradation
of steam generators in PWRs has become of increasing concern for the
nuclear industry. Nationally and internationally, utilities have
undertaken actions to repair or replace steam generators. In the
extreme, degradation of steam generators has contributed to the
retirement of several American nuclear power reactors. After the Salem
1 tubes are fully examined, PSE&G will be able to evaluate its course
of action in light of NRC and other industry requirements.
The examination of the Salem 2 steam generators was completed in
January 1996 using the same testing device used in Salem 1. The
results of the Salem 2 inspection are being reviewed again to confirm
their results in light of the experience with Salem 1. Although this
review has not yet been completed, results to date appear to confirm
that the condition of the Salem 2 steam generators is well within
current repair limits at the present time. PSE&G will also remove
tubes from the Salem 2 steam generators for laboratory analysis to
further confirm the results of this testing.
PSE&G had planned to return Salem 1 to service in the second
quarter of 1996 and Salem 2 in the third quarter of 1996. As a result
of the extent of the recently discovered degradation in the Salem 1
steam generators, PSE&G is focusing its efforts on the return of Salem
2 to service in the third quarter. The conduct of the additional steam
generator inspections and testing on Salem 2 is not expected to
adversely affect the timing of its restart. However, the timing of the
restart is subject to completion of the requirements of the restart
plan to the satisfaction of PSE&G and the NRC as well as to the normal
uncertainties associated with such a substantial review and improvement
of the systems of a large nuclear unit, so that no assurance can be
given that the projected return date will be met.
<PAGE>
PSE&G's share of additional operating and maintenance expenses
associated with Salem restart activities in 1995 was $16 million, and
capital was $1.9 million. PSE&G's share of total operating and
maintenance expenses for both Salem units for the year was $111 million
and capital costs were $50.8 million. For 1996, PSE&G does not
presently expect its share of operating and maintenance expenses or
capital costs for Salem station to exceed 1995 amounts; however this
could change as a result of the steam generator inspection results
referred to above. The outage of a Salem unit causes PSE&G to incur
replacement power costs of approximately $4 to $6 million per month.
Such amounts vary, however, depending on the availability of other
generation, the cost of purchased energy and other factors, including
modifications to maintenance schedules of other units.
PSE&G's 1995 aggregate capacity factor for its five nuclear units
was 62%, below the 65% minimum annual standard established by the BPU
(see Nuclear Performance Standard), resulting in a penalty of
approximately $3.5 million. Based upon current projections and
assumptions regarding PSE&G's five nuclear units during 1996, including
the return of Hope Creek to service in early March, the return of Salem
2 in the third quarter, and the continued outage of Salem 1 for the
remainder of the year, the 1996 aggregate capacity factor would be
approximately 57%, which would result in a penalty ranging from $11 to
$12 million. For a discussion of the proposed elimination of the NPS
under the proposed Alternate Rate Plan, see Note 2 -- Rate Matters of
Notes.
An NRC enforcement conference was held on July 28, 1995 related
to certain violations of NRC requirements at Salem. The violations
included valves that were incorrectly positioned following a plant
modification in May 1993, non-conservatisms in setpoints for a
pressurizer overpressure protection system and several examples of
inadequate root cause determination of events, leading to insufficient
corrective actions. On October 16, 1995, the NRC imposed cumulative
civil penalties of $600,000 related to these violations. PSE&G did not
contest the penalties.
<PAGE>
On January 3, 1995, the NRC provided PSE&G with its latest
Systematic Assessment of Licensee Performance (SALP) report on Salem
for the period between June 20, 1993 and November 5, 1994. SALP is a
process pursuant to which the NRC periodically reviews the performance
of nuclear power plant operations. SALP reports rate licensee
performance in four assessment areas: Operations, Maintenance,
Engineering and Plant Support (the Plant Support area includes
security, emergency preparedness, radiological controls, fire
protection, chemistry and housekeeping). Ratings range from a high of
"1" to a low of "3" for each assessment area. Salem received a rating
of "3" in the Operations and Maintenance areas, a rating of "2" in
Engineering, and a rating of "1" in the Plant Support area. The NRC
noted an overall decline in performance and evidenced particular
concern with plant and operator challenges caused by repetitive
equipment problems and personnel errors. The NRC also noted that
although PSE&G has initiated several comprehensive actions within the
past year to improve plant performance, and some recent incremental
gains have been made, these efforts have yet to noticeably change
overall performance at Salem.
On March 21, 1995, representatives of the NRC Staff met with the
Boards of Directors of Enterprise and PSE&G to reiterate the previously
expressed concerns with regard to Salem's operations. The NRC staff
acknowledged that PSE&G had made efforts to improve Salem's operations,
including making senior management changes, but indicated that
demonstrated sustained results have not yet been achieved.
PSE&G's own assessments, as well as those by the NRC and the
Institute of Nuclear Power Operations, indicate that additional efforts
are required to further improve operating performance, as reflected in
the restart plans referred to above. PSE&G is committed to taking the
necessary actions to address Salem's performance needs. It is
anticipated that the NRC will continue to maintain a close watch on
Salem's restart activities and subsequent operational performance. No
assurance can be given as to what, if any, further or additional
actions may be taken or required by the NRC to improve Salem's
performance.
For certain litigation and potential claims relating to Salem, see
Item 3. Legal Proceedings and Note 12 -- Commitments and Contingent
Liabilities of Notes.
<PAGE>
Hope Creek
An outage at Hope Creek causes PSE&G to incur replacement energy
costs of approximately $10 to $16 million per month. Such amounts vary,
however, depending upon the availability of other generation, the cost
of purchased energy and other factors including modifications to
maintenance schedules of other units.
Hope Creek is currently undergoing a refueling and maintenance
outage which commenced November 11, 1995. Replacement power costs
incurred during the outage are expected to be approximately $10 million
per month. Hope Creek is presently scheduled to return to service in
early March 1996.
As a result of an internal allegation report, PSE&G submitted a
Licensee Event Report to the NRC on October 14, 1994 which stated that
in 1992, the Hope Creek control room was understaffed for approximately
three minutes and a decision was made by those involved that the
incident did not warrant initiation of NRC reporting documentation.
A meeting with Region I NRC personnel was held on October 18, 1994 in
which the NRC expressed a high degree of concern over the issue. Both
the NRC and PSE&G investigated the validity of the allegation and, on
September 19, 1995, the NRC issued two Level IV violations with no
civil penalty for this incident.
A small amount of low-level radioactive material was released to
the atmosphere at Hope Creek on April 5, 1995. The release did not
exceed federal limits nor pose any danger to the public or plant
employees; however, a trailer driven offsite had exceeded the limit for
releasing materials and was later cleaned. PSE&G and the NRC
<PAGE>
have investigated the event, and on June 16, 1995 an enforcement
conference was held. On July 20, 1995, the NRC issued a Notice Of
Violation for the Hope Creek unplanned release which noted four
violations. No fine was issued, partly because of the comprehensive
corrective actions taken following the event and the plant's history
of limited enforcement action.
On June 29, 1995, the NRC provided PSE&G with the latest periodic
SALP report for Hope Creek for the period between June 20, 1993 and
April 22, 1995. The Operations, Maintenance and Engineering areas each
received a rating of "2", while the Plant Support area received a
rating of "1". However, the NRC noted an overall decline in
performance in the Operations, Maintenance and Engineering areas
compared to the previous SALP period and cited weak root cause analysis
as a dominant factor.
On July 8, 1995, during a manual shutdown of Hope Creek in order
to repair control room ventilation equipment, operators partially
opened a valve for a period of time and inadvertently reduced the
effectiveness of the shutdown cooling system. Although the impact of
the event to plant safety was minimal, the positioning of the valve and
the resulting temperature change violated plant procedures and
technical specifications. On July 31, 1995, NRC staff met with plant
management concerning this issue and subsequently determined to assign
a special inspection team to independently evaluate this event as well
as PSE&G s response to it, including PSE&G s procedures and training
for operator handling of abnormal conditions. An NRC enforcement
conference was held on November 6, 1995. On December 12, 1995, the NRC
issued a Level III violation for this event, with a civil penalty of
$100,000. PSE&G did not challenge the fine.
By letter dated January 29, 1996, the NRC requested a meeting with
PSE&G senior management to discuss its concerns regarding declining
trends in performance at Hope Creek. The meeting has not yet been
scheduled but is expected to occur after the restart of Hope Creek from
its current refueling and maintenance outage.
<PAGE>
Peach Bottom
The outage of a Peach Bottom unit causes PSE&G to incur additional
replacement energy costs of approximately $4 to $6 million per month
per unit. Such amounts vary, however, depending upon the availability
of other generation, the cost of purchased energy and other factors
including modifications to maintenance schedules of other units.
PSE&G has been advised by PECO that on January 19, 1996, the NRC
issued its periodic SALP Report for Peach Bottom for the period May 1,
1994 to October 14, 1995. Peach Bottom received a rating of "1" in the
areas of Plant Operations, Maintenance, and Plant Support. Engineering
received a rating of "2". The NRC found continued improvement in
performance during the period. Operator performance continued to be
a strength as well as operations management oversight. Effective
engineering management actions to improve the overall self assessment
and system performance evaluation programs were noted, as well as good
management oversight activities. Response to emerging issues,
equipment problems and event related issues were noted as particularly
strong. However, lapses in the quality of technical work and in
modification implementation indicated inconsistent performance, and
resulted in a repeat rating of "2" for the Engineering area. PECO has
advised PSE&G that it will be taking actions to address weaknesses
discussed in the SALP Report.
PSE&G has been advised by PECO that, by letter dated October 18,
1994, the NRC has approved PECO's request to re-rate the authorized
maximum reactor core power levels of both Peach Bottom units by 5% to
3,458 MW from the current limits of 3,293 MW. The amendment of the
Peach Bottom 2 facility operating license was effective upon the date
of the NRC approval letter and the hardware changes were completed
during the Fall 1994 refueling outage. The amendment of the Peach
Bottom 3 facility operating license became effective when the hardware
changes for Unit 3 were completed during its Fall 1995 refueling
outage.
PSE&G has been advised by PECO that on August 2, 1995, the NRC
held an enforcement conference regarding three alleged violations
identified by the NRC at Peach Bottom. The NRC s findings included
alleged violations in control and design activities and technical
specification requirements regarding operability of the emergency
diesel generators. As a result, on August 17, 1995, the NRC issued
PECO a Level III violation with no civil penalty.
<PAGE>
Other Nuclear Matters
In 1990, General Electric (GE) reported that crack indications
were discovered near the seam welds of the core shroud assembly in a
GE Boiling Water Reactor (BWR) located outside the United States. As
a result, GE issued a letter requesting that the owners of GE BWR
plants take interim corrective actions, including a review of
fabrication records and visual examinations of accessible areas of the
core shroud seam welds. PSE&G (Hope Creek) and PECO (Peach Bottom)
participated in a GE BWR Owners' Group to evaluate this issue and
develop long-term corrective actions.
During the Spring 1994 refueling outage, PSE&G inspected the
shroud of Hope Creek in accordance with GE's recommendations and found
no cracks. In June 1994, an industry group was formed and subsequently
established generic inspection guidelines which were approved by the
NRC. Due to the age and materials of the Hope Creek shroud and the
historical maintenance of low conductivity water chemistry, Hope Creek
has been placed in the lowest susceptibility category under these
guidelines. Hope Creek must do another shroud inspection during its
next refueling outage in 1997, or install a preemptive repair that
would maintain the structural integrity of the shroud under all normal
and design basis accident conditions for the remaining life of the
plant.
PECO has advised PSE&G that Peach Bottom 3 was last examined
during its Fall 1995 refueling outage and the extent of cracking
identified was determined to be within industry-established guidelines.
In a letter to the NRC dated November 3, 1995, PECO concluded that
there is a substantial margin for each core shroud weld to allow for
continued operation of Unit 3. PECO has also advised that Peach Bottom
2 was examined in October 1994 during its refueling outage. Although
some crack indications were identified, PECO advised that they were
considered to be much less severe than those found on Unit 3, and no
repairs were required to operate Unit 2 for another two-year cycle.
As a separate matter, as a result of several BWR's experiencing
clogging of some emergency core cooling system suction strainers, which
supply water from the suppression pool for emergency cooling of the
core and related structures, the NRC is drafting rules which
tentatively require compliance by December 1997. Alternative
resolution options will be subject to NRC approval. PSE&G cannot
predict what other actions, if any, the NRC may take on this matter.
<PAGE>
Nuclear Decommissioning
In accordance with Nuclear Waste Policy Act of 1992, as amended
(NWPA), utilities owning an interest in nuclear generating facilities
are required to determine the costs and funding methods necessary to
decommission such facilities upon termination of operation. As a
general practice, each nuclear utility places funds in independent
external trust accounts it maintains to provide for decommissioning.
PSE&G currently recovers from its customers the amounts paid into the
trust fund over a period of years and would continue to do so under its
proposed Alternative Rate Plan (see Note 2 -- Rate Matters of Notes).
For information concerning enrichment of nuclear fuel and nuclear
decommissioning costs, see Note 3 -- PSE&G Nuclear Decommissioning and
Amortization of Nuclear Fuel of Notes.
<PAGE>
Electric Fuel Supply and Disposal
The following table indicates PSE&G's KWH output by source of energy:
<TABLE>
<CAPTION>
ACTUAL ESTIMATED
SOURCE 1995 1996
------ ------ ---------
<S> <C> <C>
Nuclear
New Jersey facilities.......................... 21% 23%
Pennsylvania facilities........................ 16 15
Fossil
Coal
New Jersey facilities........................... 7 9
Pennsylvania facilities......................... 12 13
Natural Gas..................................... 8 10
Residual Oil.................................... 1 0
Net PJM Interchange and Utility Purchases
and NUGs........................................ 35 30
---- ----
Total................................................. 100% 100%
==== ====
</TABLE>
<TABLE>
<CAPTION>
PSE&G's cost of fuel used to generate electricity in the periods shown below
was as follows:
NATURAL
NUCLEAR COAL GAS OIL
--------- ------------------------------------- -------- -------
NEW JERSEY PENNSYLVANIA
FACILITIES FACILITIES
--------------- -------------------
CENTS/ CENTS/ CENTS/ CENTS/ CENTS/
MILLION MILLION MILLION MILLION $/ MILLION
YEAR BTU $/TON BTU $/TON BTU BTU BARREL BTU
- ---- ------ ------- ------- ------- ------- ------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1993 59.3 55.45 203.8 33.73 136.6 221.7 23.44 384.5
1994 62.3 56.31 213.8 34.78 140.7 197.8 22.19 361.02
1995 60.8 58.29 214.0 33.30 134.4 176.6 20.17 324.50
Substantially all of PSE&G's electric sales are made under rates which are
currently designed to permit the recovery of increases in energy costs over base
costs on a current annual basis. The Alternative Rate Plan filed by PSE&G proposes
discontinuing the Levelized Energy Adjustment Clause (LEAC) and NPS and would
substantially shift the risks and opportunities involved in managing changes in fuel
and replacement power costs from customers to PSE&G. (see Note 2 -- Rate Matters of
Notes)
</TABLE>
<PAGE>
Nuclear Fuel
The supply of fuel for nuclear generating units involves the
mining and milling of uranium ore to uranium concentrate, conversion
of the uranium concentrate to uranium hexafluoride, enrichment of the
uranium hexafluoride gas, conversion of the enriched gas to fuel
pellets and fabrication of fuel assemblies.
PSE&G has several long-term contracts with ore operators to
process uranium ore to uranium concentrate to meet the currently
projected requirements for the Salem and Hope Creek units fully through
the year 2000 and, thereafter, 60% of their requirements through the
year 2002.
Present contracts for conversion, enrichment and fabrication
services to meet the fuel cycle requirements for Salem and Hope Creek
units through the years shown in the following table:
<TABLE>
<CAPTION>
NUCLEAR UNIT CONVERSION ENRICHMENT FABRICATION
- ------------ ---------- ---------- -----------
<S> <C> <C> <C>
Salem 1..................... 2000 (1) 2004
Salem 2..................... 2000 (1) 2005
Hope Creek.................. 2000 (1) 2000
</TABLE>
(1) 100% coverage through 1998; approximately 50% through 2002; and
approximately 30% through 2004. PSE&G does not anticipate any
difficulties in obtaining necessary enrichment service for its
Salem and Hope Creek units.
PSE&G has been advised by PECO that it has contracts for the
purchase of uranium which will satisfy the fuel requirements of Peach
Bottom 2 and 3 through 2002. PSE&G has also been advised by PECO that
it has contracts for the conversion of uranium concentrates which will
be allocated to Peach Bottom 2 and 3 and two other nuclear generating
units in which PSE&G does not have an interest, on an as-needed basis.
<PAGE>
PECO has also advised PSE&G that it has contracted for the
following segments of the nuclear fuel supply cycle for Peach Bottom
2 and 3 through the following years:
<TABLE>
<CAPTION>
NUCLEAR UNIT CONVERSION ENRICHMENT FABRICATION
- ------------ ---------- ---------- -----------
<S> <C> <C> <C>
Peach Bottom 2.............. 1997 2008 1999
Peach Bottom 3.............. 1997 2008 1998
</TABLE>
For information regarding the decontamination and decommissioning
funds, see Note 3 -- PSE&G Nuclear Decommissioning and Amortization of
Nuclear Fuel of Notes.
Coal
Approximately 40% of PSE&G's coal supply for its New Jersey
facilities is obtained under a contract which expires in 1999. The
balance of the supply is contracted annually from various suppliers,
many of whom PSE&G has dealt with on a continuing basis for a number
of years, and is supplemented by spot market purchases. The New Jersey
Air Pollution Control Code (NJAPCC) permits the burning of coal with
a sulfur content of up to 1% at existing coal-fired generating stations
including PSE&G's three coal-fired New Jersey units, Hudson 2 and
Mercer 1 and 2. The weighted monthly average sulfur content of the
coal received at Hudson Station and at Mercer Station must not exceed
1.0% (dry weight basis). PSE&G has been able to obtain sufficient
quantities of 1% (or less) sulfur coal and does not presently
anticipate any difficulties in obtaining adequate coal supplies to
replace expiring contracts. (See Environmental Controls -- Air
Pollution Control).
PSE&G has approximately a 23% interest in the Keystone and
Conemaugh coal-fired generating stations located in Western
Pennsylvania and operated by Pennsylvania Electric Company. At least
71% of the fuel required by the Keystone station is supplied by one
coal company under a contract which expires December 31, 2004. At least
30% of the fuel required by Conemaugh station is supplied by
<PAGE>
another coal company under a contract which expires on December 31,
1997. In addition, approximately 18% of Conemaugh's coal requirements
is supplied by a short-term contract which expires on November 30,
1996. The balance of the fuel requirements for each station is
supplied through spot purchases obtained from local suppliers. The
Keystone Conemaugh Projects Office, which runs project administration
at these plants on a day to day basis, has advised PSE&G that it does
not expect any difficulties in obtaining adequate coal supplies. (See
Environmental Controls).
Natural Gas
PSE&G utilizes natural gas available from various spot, short-term
and long-term gas contracts, to replace other fuels for electric
generation. Presently, there are no effective legal restrictions on
the use of natural gas for electric generation in existing plants.
However, approval by FERC is required for the interstate transportation
of natural gas, either by virtue of existing blanket authority or
through individual proceedings. PSE&G does not expect any difficulties
in obtaining natural gas supplies.
Oil
PSE&G uses residual oil in its conventional fossil-fired,
steam-electric units. The supply of residual oil is furnished by
contract suppliers, supplemented by occasional spot market purchases.
PSE&G uses distillate fuel in its combustion turbines which is acquired
by spot market purchases. PSE&G does not presently anticipate any
difficulties in obtaining oil supplies.
Nuclear Fuel Disposal
After spent fuel is removed from a nuclear reactor, it is placed
in temporary storage for cooling in a spent fuel pool at the nuclear
station site. Under NWPA, the Federal government has entered into
contracts for transportation and ultimate disposal of the spent fuel.
The Federal government's present policy is that spent nuclear fuel will
be accepted for long-term storage at government-owned and operated
repositories. However, at present, no such repositories are in service
or under construction. In December 1989, the U.S. Department of Energy
(DOE) announced that it would not be able to open a permanent, high-
level nuclear waste storage facility until 2010, at the earliest.
However, the DOE has also indicated that progress on the repository
will be delayed beyond 2010 if sufficient funds are not appropriated
by the Congress for this program.
<PAGE>
In conformity with the NWPA, PSE&G entered into contracts with the
DOE for the disposal of spent nuclear fuel from Salem and Hope Creek.
Similarly, PECO contracted with the DOE in connection with Peach Bottom
2 and 3. Under these contracts, the DOE is required to take title to
the spent fuel at the site, then transport it and provide for its
permanent disposal at a cost of one mil per KWH of nuclear generation,
subject to such escalation as may be required to assure full cost
recovery by the Federal government. In addition, a one-time payment was
made to the DOE for permanently discharged spent fuels irradiated prior
to 1983.
On April 28, 1995, the DOE published its final interpretation on
the nuclear waste acceptance issues in which it stated that it had no
legal obligation to begin waste acceptance in 1998, in the absence of
a repository or other storage facility. PSE&G s contracts with DOE
call for DOE to begin accepting spent fuel from PSE&G in 1998. As a
result, on September 7, 1995, PSE&G, along with 24 other utilities and
a combination of 48 States, state regulatory agencies and municipal
power agencies, filed a lawsuit in the US District Court of Appeals for
the District of Columbia Circuit against the DOE to protect its
contractual rights.
Pursuant to NRC rules, spent nuclear fuel generated in any reactor
can be stored safely and without significant environmental impact in
reactor facility storage pools or in independent spent fuel storage
installations located at reactor or away-from-reactor sites for at
least 30 years beyond the licensed life for reactor operation (which
may include the term of a revised or renewed license).
As a result of reracking the two spent fuel pools at Salem, the
availability of adequate spent fuel storage capacity is conservatively
estimated through 2008 for Salem 1 and 2012 for Salem 2, prior to
losing an operational full core discharge reserve. The Hope Creek pool
is also fully racked and it is conservatively expected to provide
storage capacity until 2006, again prior to losing an operational full
core discharge reserve. The units can be safely operated for many years
beyond these dates, as pool storage capacity will continue to be
available. These dates simply assist in planning the need for
additional storage capacity that may be needed to operate the units
until the expiration of their operating license. In addition, PECO has
advised PSE&G that spent fuel racks at Peach Bottom have storage
capacity until 2000 for Unit 2 and 2001 for Unit 3, prior to losing
full core reserve capability, and that expansion of storage capacity
beyond such dates is being investigated.
<PAGE>
Low Level Radioactive Waste (LLRW)
As a by-product of their operations, nuclear generating units,
including those in which PSE&G owns an interest, produce LLRW. Such
wastes include paper, plastics, protective clothing, water purification
materials and other materials. Such materials are accumulated on site
and disposed of at a federally licensed permanent disposal facility in
Barnwell, South Carolina.
In 1991, New Jersey enacted legislation providing for funding of
the estimated $90 million cost of establishing a LLRW disposal
facility. The State would recover the costs through fees paid by LLRW
generators. PSE&G's overall share is expected to be about 40% of the
total cost and has provided about $4.8 million to date. New Jersey has
introduced a volunteer siting process to establish a LLRW disposal
facility by the year 2000. Public meetings have been held across the
state in an effort to provide information to and obtain feedback from
the public. To date, there have been no volunteers identified.
Because of the uncertainties in disposal, PSE&G built an on-site
facility completed in September 1994. This facility provides five
years storage for LLRW from Hope Creek and Salem. The facility was used
from July 1994 through June 1995, while the Barnwell facility was
temporarily unavailable, and emptied when Barnwell re-opened in 1995.
It will be used for interim storage of radioactive materials and waste,
and if it proves necessary in the future, to temporarily store waste
until New Jersey provides a permanent disposal facility.
PECO has advised PSE&G that it has an on-site LLRW storage
facility for Peach Bottom, which will provide at least 5 years of
temporary storage. PECO has also advised PSE&G that Pennsylvania is
pursuing its own LLRW site development via state-selected candidate
sites, along with a volunteer plan option. PSE&G has paid $2.5 million
as its share of siting costs due to its ownership in the Peach Bottom
units.
<PAGE>
Gas Operations and Supply
PSE&G supplies its gas customers principally with natural gas.
PSE&G supplements natural gas with purchased refinery gas and liquefied
petroleum gas produced from propane. The adequacy of supply of all
types of gas is affected by the nationwide availability of all sources
for energy production.
As of December 31, 1995, the daily gas capacity of PSE&G was as
follows:
<TABLE>
<CAPTION>
Type of Gas Therms Per Day
------------------------------------ --------------
<S> <C>
Natural gas......................... 23,191,270
Liquefied petroleum gas............. 2,200,000
Refinery gas........................ 400,000
-----------
Total........................... 25,791,270
===========
</TABLE>
About 40% of the daily gas capacity is high load factor natural
gas and is available every day of the year. The remainder comes from
field storage, liquefied natural gas, seasonal sales, contract peaking
supply, propane and refinery gas.
PSE&G's total gas sold to and transported for its various customer
classes in 1995 was 3.9 billion therms which consisted of approximately
96% natural gas. Included in this amount is 1.6 billion therms of gas
delivered to customers under PSE&G's transportation tariffs and
individual cogeneration contracts. (See Operating Statistics of PSE&G).
During 1995, PSE&G purchased approximately 3.3 billion therms of gas
for its combined gas and electric operations directly from natural gas
producers and marketers and the balance from interstate pipeline
suppliers. These supplies were transported to New Jersey by PSE&G's
four interstate pipeline suppliers. This diversification of supply
sources provides PSE&G with reliability of supply, purchasing
flexibility and lower overall costs.
PSE&G's gas supply contracts expire at various times over the next
two to ten years. PSE&G does not presently anticipate any difficulty
in negotiating replacement contracts. Since the quantities of gas
available to PSE&G under its supply contracts are more than adequate
<PAGE>
in warm months, PSE&G nominates part of such quantities for storage,
to be withdrawn during the winter season, under storage contracts with
its principal suppliers. Underground storage capacity currently is
approximately 770 million therms. PSE&G does not presently anticipate
any difficulty in obtaining adequate supplies of natural gas.
PSE&G's annual average cost of natural gas sendout is shown below:
<TABLE>
<CAPTION>
Cents Per
Year Million BTU(A)
---------------------------------- --------------
<S> <C>
1995.............................. 308.00
1994.............................. 318.09
1993.............................. 327.00
</TABLE>
(A) Excludes contribution by PSE&G's electric operating units for a
gas reservation charge and natural gas refunds from suppliers.
Substantially all of PSE&G's gas sales are made under rates which
are currently designed to permit the recovery of projected increases
in the cost of natural gas and gas from supplemental sources, when
compared to levels included in base rates, on a current annual basis.
(See Note 2 -- Rate Matters of Notes.)
The demand for gas by PSE&G's customers is affected by customer
conservation, economic conditions, weather, the price relationship
between gas and alternative fuels and other factors not within PSE&G's
control. Presently, the majority of gas sold in interstate commerce has
become deregulated. The ability of gas prices to respond to market
conditions has improved in recent years because of actions taken by the
FERC. Pipeline companies are able to adjust their gas rates up or down
through their purchased gas adjustment mechanism more often than the
semi-annual filings of prior years. As discussed above in Competition,
FERC actions provided pipeline customers, such as PSE&G, with the
opportunity to convert a portion of their pipeline sales contracts to
transportation agreements and purchase natural gas supplies directly
from a producer or other seller of natural gas. This has increased
competition in the gas market by encouraging pipeline companies to act
as non-discriminatory transporters of natural gas. PSE&G has taken
advantage of these actions to lower its overall gas costs through the
displacement of higher cost contract supplies with lower cost spot gas
purchases and long-term producer contract supplies. (See Competition.)
<PAGE>
PSE&G was able to meet all of the demands of its firm customers
during the 1994-95 winter season and expects to continue to meet such
energy-related demands of its firm customers during the 1995-96 winter
season. However, the sufficiency of supply could be affected by several
factors not within PSE&G's control, including curtailments of natural
gas by its suppliers, the severity of the winter, the extent of energy
conservation by its customers and the availability of feedstocks for
the production of supplements to its natural gas supply. During the
1995-96 heating season through February 14, 1996, it was necessary for
PSE&G to interrupt service to 'interruptible' customers for 25 days as
permitted by the applicable tariff. During the 1994-95 heating season,
service to such customers was interrupted for eight days.
Employee Relations
Enterprise has no employees. As of December 31, 1995, PSE&G and
its subsidiaries employed 11,452 persons. Four-year bargaining
agreements between PSE&G and its unions, representing 6,746 employees,
will expire April 30, 1996. Also at December 31, 1995, EDHI and its
subsidiaries employed 523 persons, of which 38 were represented by
unions. PSE&G, EDHI and their subsidiaries believe that they maintain
satisfactory relationships with their employees.
For information concerning the employee pension plan and other
postretirement benefits, see Note 1 -- Organization and Summary of
Significant Accounting Policies, Note 13 -- Postretirement Benefits
Other Than Pensions and Note 14 -- Pension Plan of Notes.
Regulation
Enterprise has claimed an exemption from regulation by the SEC as
a registered holding company under PUHCA, except for Section 9(a)(2)
thereof, which relates to the acquisition of 5% or more of the voting
securities of an electric or gas utility company. Enterprise is not
subject to direct regulation by the BPU, except potentially with
respect to certain transfers of control and reporting requirements, and
is not subject to regulation by the FERC. The BPU may also impose
certain requirements with respect to affiliate transactions between and
among PSE&G, Enterprise and Enterprise's nonutility subsidiaries. (See
EDHI.)
As a New Jersey public utility, PSE&G is subject to comprehensive
regulation by the BPU including, among other matters, regulation of
intrastate rates and service and the issuance and sale of securities.
<PAGE>
As a participant in the ownership and operation of certain generation
and transmission facilities in Pennsylvania, PSE&G is subject to
regulation by the Pennsylvania Public Utility Commission (PPUC) in
limited respects in regard to such facilities.
PSE&G is subject to regulation by FERC and by the Economic
Regulatory Administration, both within DOE, with respect to certain
matters, including regulation by FERC with respect to interstate sales
and exchanges of electric transmission, capacity and energy, including
cogeneration and small power production projects being constructed
pursuant to PURPA, and accounts, records and reports. PSE&G is also
subject to regulation by the United States Department of Transportation
(USDOT) with respect to safety standards for pipeline facilities and
the transportation of gas under the Natural Gas Pipeline Safety Act of
1968.
In addition, the New Jersey Need Assessment Act (NJNAA) provides
that no public utility shall commence construction of any electric
facility (as defined in the NJNAA) without having first obtained a
Certificate of Need (Certificate of Need) from the Division of Energy
Planning and Conservation within the New Jersey Department of
Environmental Protection (NJDEP). A Certificate of Need, if granted,
is valid for three years, renewable subject to review by the
Commissioner of the NJDEP. Under the NJNAA, no state or local agency
may issue any license or permit required for any such construction or
substantial expansion prior to the issuance of the Certificate of Need.
An electric facility is defined under the NJNAA as any electric power
generating unit or combination of units at a single site with a
capacity of 100 MW or more or any such units added to an existing
electric generating facility which will increase its installed capacity
by 25% or by more than 100 MW, whichever is smaller. Under NJNAA, a
Certificate of Need will be issued only if the NJDEP Commissioner
determines that the proposed facility is necessary to meet the
projected need for electricity in the area to be served and that no
more efficient, economical or environmentally sound alternative is
available.
For information concerning nuclear insurance coverages, the BPU's
NPS and assessments and the Price-Anderson Amendments Act of 1988, as
amended, (Price Anderson) see Note 12 -- Commitments and Contingent
Liabilities of Notes.
<PAGE>
The New Jersey Public Utility Accident Fault Determination Act
(Fault Act) requires the BPU to make a determination of fault with
regard to any accident at any electric generating or transmission
facility prior to granting a request by any utility for a rate increase
to cover accident-related costs in excess of $10 million. Fault, as
defined in the Fault Act, means any negligent action or omission of any
party which either contributed substantially to causing the accident
or failed to mitigate its severity.
However, the Fault Act allows the affected utility to file for
non-accident related rate increases during such fault determination
hearings and to recover contributions to federally mandated or
voluntary cost-sharing plans and allows the BPU to authorize the
recovery of certain fault-related repair, clean-up, power replacement
and damage costs if substantiated by the evidence presented and if
authorized in writing by the BPU. The Fault Act could have a material
adverse effect on PSE&G's financial position if such an accident were
to occur at a PSE&G facility, it was ultimately determined that the
accident was due to the fault of PSE&G and the BPU were to deny
recovery of all or a portion of the costs related thereto. The
Alternative Rate Plan filed by PSE&G proposes discontinuing LEAC and
NPS and would substantially shift the risks and opportunities involved
in managing changes in fuel and replacement power costs from customers
to PSE&G. See Note 2 - Rate Matters -- Alternative Rate Plan and LEAC
of Notes.
Under New Jersey law, the BPU is required to audit all or a
portion of the operating procedures and other internal workings of
every gas or electric utility subject to its jurisdiction, including
PSE&G, at least once every six years. Under the law, the audit may be
performed either by the BPU Staff or under the supervision of
designated members of such Staff by an independent management
consulting firm, chosen by the utility from a list provided by the BPU.
The BPU may, upon completion of the audit and after notice and hearing,
order the utility to adopt such new practices and procedures that it
shall find reasonable and necessary to promote efficient and adequate
service to meet public convenience and necessity. The last such
management audit of PSE&G was completed in 1991.
In 1992, as a follow-up to its 1991 management audit, the BPU
conducted a focused audit of Enterprise's nonutility businesses to
ascertain whether nonutility activities had harmed PSE&G. Enterprise
has consistently maintained a clear and distinct separation of its
utility and nonutility operations and believes that its nonutility
activities have not in any way adversely affected the utility. The
results of the focused audit confirmed that there has been no harm to
PSE&G as a result of Enterprise's nonutility activities. However, as
a result of recommendations made by the BPU's auditors regarding
operations and intercompany relationships between PSE&G and EDHI's
<PAGE>
nonutility businesses, the BPU approved a plan which, among other
things, provides: (1) that Enterprise will not permit EDHI's nonutility
investments to exceed 20% of Enterprise's consolidated assets without
prior notice to the BPU (such assets at December 31, 1995 were
approximately 15%); (2) for a restructuring of the PSE&G Board to
include nonemployee Enterprise directors with an annual certification
by such Board that the business and financing plans of EDHI will not
adversely affect PSE&G; (3) for an Enterprise agreement to (a) limit
debt supported by the minimum net worth maintenance agreement between
Enterprise and Capital to $750 million, and (b) make a good-faith
effort to eliminate such support over a six to ten year period from
April 1993; and (4) the payment by EDHI to PSE&G of an affiliation fee
of up to $2 million a year which will be applied by PSE&G through its
LGAC and LEAC to reduce utility rates. Effective January 31, 1995, the
debt supported by the minimum net worth maintenance agreement will be
limited to $650 million and such affiliation fee will be
proportionately reduced as such supported debt is reduced. In
addition, Enterprise and EDHI and its subsidiaries continue to
reimburse PSE&G for all costs of services provided by employees of
PSE&G.
The issue of Enterprise sharing the benefits of consolidated tax
savings with PSE&G or its ratepayers was not resolved by the plan
approved as a result of the focused audit and remains open. Enterprise
believes that PSE&G's taxes should be treated on a stand-alone basis
for rate-making purposes, based on the separate nature of the utility
and nonutility businesses. However, neither Enterprise nor PSE&G is
able to predict what action, if any, the BPU may take concerning
consolidation of tax benefits in future proceedings. On July 28, 1995,
the BPU reported to PSE&G that it had fully evaluated all available
information regarding the 18 recommendations of the Focused Audit
conducted by the BPU's consultant and determined that 17 have been
implemented pursuant to the BPU's Order Approving Audit Implementation
Plans. The remaining issue regarding Enterprise sharing the benefits
of consolidated taxes with PSE&G or its ratepayers may be considered
in the context of a future base rate case, or in a filing that
considers an alternative form of regulation. PSE&G cannot predict what
actions, if any, the BPU may take regarding the consolidated tax issue.
(See Note 2 -- Rate Matters - Consolidated Tax Benefits of Notes.)
Construction and operation of nuclear generating facilities are
regulated by the NRC. For additional information relating to regulation
by the NRC, see Nuclear Operations. In addition, the Federal Emergency
Management Agency is responsible for the review in conjunction with the
NRC of certain aspects of emergency planning relating to the operation
of nuclear plants.
<PAGE>
CEA invests in and participates in the development and operation
of domestic and foreign cogeneration and power production facilities,
which include QFs and EWGs. For additional information, see EDHI --
CEA.
The BPU has authority to regulate power sales agreements within
the BPU's pricing guidelines to utilities in the State of New Jersey
and ascertain that the terms and conditions of agreements with New
Jersey utilities are fair and reasonable. For additional information,
see EDHI.
Environmental Controls
PSE&G, like most industrial enterprises, is subject to regulation
with respect to the environmental impacts of its operations, including
air and water quality control, limitations on land use, disposal of
wastes, aesthetics and other matters, by various federal, regional,
state and local authorities, including the United States Environmental
Protection Agency (EPA), the United States Department of Transportation
(USDOT), NJDEP, the New Jersey Department of Health, the BPU, the
Interstate Sanitation Commission, the Hackensack Meadowlands
Development Commission, the Pinelands Commission, the Delaware River
Basin Commission, the United States Coast Guard and the United States
Army Corps of Engineers. EDC, CEA and EGDC are also subject to similar
regulation with respect to operation of their facilities. (See EDHI)
Environmental laws generally require air emissions and water
discharges to meet specified limits. They also impose potential joint
and several liability, without regard to fault, on the generators of
various hazardous substances to manage these materials properly and to
clean up property affected by the production and discharge of such
substances. Compliance with environmental requirements has caused
PSE&G to modify the day-to-day operation of its facilities, to
participate in the cleanup of various properties that have been
contaminated and to modify, supplement and replace existing equipment
and facilities. During 1995, PSE&G expended approximately $148 million
for capital related expenditures to improve the environment and comply
with changing regulations. It is estimated that PSE&G will expend
approximately $81 million, $43 million, $35 million, $30 million and
$13 million in the years 1996 through 2000, respectively, for such
purposes. Such amounts are included in PSE&G's estimates of
construction expenditures. (See MD&A -- Liquidity and Capital
Resources.)
<PAGE>
Preconstruction analyses and projections of the environmental
impacts of contemplated activities, discharges and emissions are
frequently required by the permitting agency. Before licensing
approvals and permits are granted, the agency usually requests a
modeling analysis of the effects of a specific action, and of its
effect in combination with other existing and permitted activities, and
may request the applicant to address emerging environmental issues.
Such environmental reviews have caused delays in the proceedings for
licensing facilities and similar delays can be expected in the future.
An industry issue with respect to the construction and operation
of electric transmission and distribution lines is the alleged adverse
health effects of EMF exposure. In 1990, the New Jersey Commission on
Radiation Protection (CORP) decided against setting a limit on magnetic
fields produced by high-voltage power lines citing the lack of
convincing evidence required to determine dangerous levels. Proposed
power regulations are currently under study by CORP to cover new power
lines and allow existing power lines to continue to function regardless
of new rule changes. If revised, the rules would authorize the NJDEP
to screen all new power line projects of 100 kilovolts or more using
a principle of "as low as reasonably achievable" to demonstrate that
all steps within reason, including modest cost, were taken to reduce
EMFs. The outcome of EMF study and/or regulations and the public
concerns will affect PSE&G's design and location of future electric
power lines and facilities and the cost thereof. Such amounts as may
be necessary to comply with these new EMF rules and address public
concerns cannot be determined at this time, but such amounts could be
material.
The New Jersey Environmental Rights Act provides that any person
may maintain a court action against any other person to enforce, or to
restrain the violation of any statute, regulation or ordinance which
is designed to prevent or minimize pollution, impairment or destruction
of the environment, or where no such violation exists, to protect the
environment from pollution, impairment or destruction. Certain Federal
legislation confers similar rights on individuals. The principal laws
and regulations relating to the protection of the environment which
affect PSE&G's operations are described below.
<PAGE>
Air Pollution Control
The Federal Clean Air Act ("CAA") imposes emission control
requirements across the United States, including requirements related
to the emissions of sulfur dioxide and Nitrogen Oxides ("NOx") and
requires attainment of National Ambient Air Quality Standards
("NAAQS").
PSE&G's two wholly-owned and operated coal-fired generating
stations in New Jersey are presently expected to be able to meet CAA
sulfur dioxide requirements with only modest expenditures.
PSE&G also has approximately a 23% interest in Conemaugh and
Keystone, coal-fired generating stations located in western
Pennsylvania. With respect to Conemaugh, in order to comply with the
CAA Sulfur Dioxide Requirements, the station's co-owners, including
PSE&G, approved the installation of scrubbers (flue gas desulfurization
systems). PSE&G's share of the remaining Conemaugh scrubber cost is
less than $1.0 million and is included in PSE&G's estimate of
construction expenditures. Scrubber construction at Conemaugh Unit 2
was completed in November 1995. Keystone is presently expected to
comply with the Sulfur Dioxide Requirements by utilizing excess
emission allowances from the over-scrubbing of the Conemaugh units.
The CAA established a national emission trading system for Sulfur
Dioxide allowances. Yearly allowances have been allocated according
to a formula specified by the CAA and applicable to owner/operators of
large boilers and power generating equipment.
New Jersey and other Northeastern states have imposed Reasonably
Available Control Technology ("RACT") requirements on each major source
of NOx. Additionally, these states have committed to additional
overall NOx emission reductions on power plants and large industrial
boilers of .2 pounds per million BTUs by 1999 with potential additional
reductions of .15 pounds per million BTUs by 2003. All of PSE&G's
Fossil Generating units are currently in compliance with RACT
requirements.
The NJDEP, in concert with other states in the Northeast, is
implementing a regional CAA NOx allowance emission trading system for
power plants and large industrial boilers. This includes the
allocation of emission allowances to these sources in 1996. The NOx
allowance trading system is scheduled to be operational by the
beginning of 1999 and could result in additional changes to equipment,
methods of operation or fuel.
EPA has promulgated six NAAQS. PSE&G's Fossil Generating Stations
are all located in areas of non-attainment for ozone. Each state has
the responsibility under the CAA to adopt a plan, and regulations, to
attain and maintain compliance to these standards.
<PAGE>
In New Jersey, NJDEP is using the New Jersey Air Pollution Control
Code ("NJAPCC") to achieve compliance with, and maintenance of, the
NAAQS. The NJAPCC provides stringent requirements restricting the
sulfur content in coal and oil fuels. (See PSE&G -- Electric Fuel
Supply and Disposal -- Coal.) The increased cost of purchasing low-
sulfur fuel is offset by rates which are designed to permit the
recovery of fuel costs on a current annual basis. In accordance with
the proposed Alternative Rate Plan, separate mechanisms would be
established to ensure continued recovery of costs associated with
activities mandated or approved by state or federal agencies or
otherwise out of PSE&G's control. (See PSE&G -- Electric Fuel Supply
and Disposal and Note 2 -- Rate Matters of Notes.)
The CAA also requires that each major facility apply for and
receive a facility-wide operating permit. The facility-wide operating
permit terms and conditions are enforceable by both the EPA and NJDEP.
PSE&G filed permit applications for its major facilities in New Jersey
in 1995. The operating permit program will require some PSE&G
facilities to assess emissions, which could require the installation
of emission monitoring equipment and changes to facility operations or
technology. To the extent estimates of the costs of complying with
these requirements through the year 2000 are quantifiable, they are
included in PSE&G's construction expenditures. In accordance with the
filed Alternative Rate Plan, PSE&G has requested to have separate
mechanisms to ensure continued recovery of costs associated with
activities mandated or approved by State or Federal agencies, although
no assurances can be given as to what action may be taken by the BPU.
In addition, the revised CAA requirements will increase the cost of
producing electricity for the Pennsylvania and Ohio Valley Region
Generating units supplying electricity to the PJM and New Jersey. All
of PSE&G's current purchased power costs are included in PSE&G's LEAC.
(See Note 2 -- Rate Matters of Notes.)
In non-attainment areas, one of the effects of the CAA is to allow
construction or expansion of a facility only upon a showing that any
additional emissions from the source will be more than offset by
reductions in similar emissions from existing sources. In prevention
of significant deterioration areas, construction or expansion of a
facility would be permitted only if emissions from the source, together
with emissions from other expected new sources, would not violate air
quality increments for particulates and sulfur dioxide that are more
stringent than NAAQS. All of these requirements may affect PSE&G's
ability to locate, construct or expand generating facilities in the
future.
<PAGE>
PSE&G has been working collaboratively with environmentalists, a
select number of other electric utilities in the Northeast, NJDEP and
other Northeast environmental regulators, EPA, and a number of large
manufacturing companies to achieve significant emission reductions from
power plants in the Midwest. PSE&G has also been working with these
respective groups to establish a flexible NOx and Volatile Organic
Compound ("VOC") emissions trading system as a compliance alternative
to CAA compliance requirements for industrial facilities, highway and
off-highway emission sources, state transportation CAA conformity and
automobile inspection and maintenance. Significant emission reductions
from Midwest are expected to improve New Jersey's and the Northeast's
air quality thereby lessening the need for additional New Jersey
emission controls over and beyond those already regulatorily adopted.
These collaborative efforts, coupled with growing environmental
regulator and industry concerns for cost-effective compliance with CAA
requirements, have resulted in the creation of a thirty-seven state
environment forum called Ozone Transport Assessment Group ("OTAG").
This includes Midwest, Northeast and Southern states east of the
Mississippi River. OTAG's charter is to produce consensus
recommendations concerning the need for additional emission controls
and to identify the level and sources to which those controls should
be applied. OTAG is expected to conclude its work by the fall of 1996.
If the OTAG process fails to produce consensus that leads to an
agreement by individual states to undertake timely necessary control
actions, affected downwind states such as those in the Northeast are
required as part of their EPA approved 1994 CAA State Implementation
Plans to submit petitions to EPA seeking EPA's imposition of controls
on upwind states. It is difficult to determine at this time the likely
outcome of this process.
Recently, the issue of transported air pollution from the Midwest
power plants and their negative impact on air quality in the Northeast
has become the subject of concern before the FERC. The FERC has
performed a draft environmental impact statement to assess the
environmental impact of developing a generic rule by which electric
utilities will be required to provide full non-discriminatory
transmission access to all wholesale power providers. PSE&G and a
number of other utilities, environmental groups and regulators have
submitted comments seeking FERC's mitigation of expected additional
power plant emissions resulting from the implementation of FERC's open
access policies. It is too soon to determine to what extent FERC will
act on the concerns raised.
<PAGE>
Water Pollution Control
The Federal Water Pollution Control Act (FWPCA) authorizes the
imposition of technology and water-quality based effluent limitations
to regulate the discharge of pollutants into the surface waters of the
United States through the issuance of National Pollutant Discharge
Elimination System (NPDES) permits. The New Jersey Water Pollution
Control Act (NJWPCA) authorizes the NJDEP to regulate discharges to
surface waters and ground waters of the State through the New Jersey
Pollutant Discharge Elimination System (NJPDES) permits. NJDEP also
administers the NPDES/NJPDES permit program. Certain PSE&G facilities
are directly regulated by NJPDES permits issued pursuant to FWPCA and
the NJWPCA.
In addition, the FWPCA also imposes additional requirements with
respect to the control of toxic discharges to degraded waterbodies
under Section 304(1). Although five PSE&G electric generating stations
(Bergen, Hudson, Kearny, Linden and Sewaren) were originally subject
to requirements imposed pursuant to Section 304(l), the NJDEP and EPA
have proposed delisting these stations from the 304(l) program for the
present time.
The FWPCA also authorizes the imposition of less stringent thermal
limits pursuant to a variance procedure set forth in Section 316(a) and
the regulation of cooling water intake structures pursuant to Section
316(b). PSE&G has filed information with the NJDEP in support of
Section 316(a) variance requests and Section 316(b) best technology
available determinations for several of its electric generating
stations which are pending before the NJDEP presently and may be
required to submit information for other stations as a result of the
permit renewal process. With respect to Section 316(b) requirements,
the EPA initiated a rulemaking procedure in 1994 to develop regulations
implementing this provision. Pursuant to a Consent Decree entered by
a Federal District Court resolving an action to compel the rulemaking
brought by a number of environmental groups including certain of those
who opposed the 1994 Salem NJPDES permit, EPA must propose draft
regulations on or before July 2, 1999 and promulgate final regulations
by August 2001. While the content and scope of these regulations can
not be predicted at this time, they may have a considerable effect on
agency review of section 316(b) determinations pending in 1999 or
after. (see discussions on Hudson, Mercer, and Salem NJPDES permits
below.)
The FWPCA and the NJWPCA also authorize the discharge of
stormwater from certain facilities including steam electric generating
stations. In many instances, this is accomplished through the
development of Stormwater Pollution Prevention Plans (SPPP).
Similarly, both laws authorize Publicly Owned Treatment Works (POTW)
to issue permits for significant industrial users (SIU) of the
treatment facility. Certain of PSE&G's facilities have permits under
the SPPP and SIU programs.
<PAGE>
A brief discussion on pending permit proceedings which have the
potential to impose new or more stringent terms or conditions which
could require changes to operations or significant expenditures
follows:
Hudson Station's NJPDES permit is in the process of being renewed
by the NJDEP. As part of that renewal, the NJDEP has requested updated
information in connection with PSE&G's 316(a) and 316(b)
demonstrations, in part, to address issues identified by a consultant
hired by NJDEP. The consultant recommended that Hudson be retrofit to
operate with closed cycle cooling to address alleged adverse impacts
associated with the thermal discharge and intake structure. PSE&G is
in the process of collecting additional data which will be used in the
updated demonstrations. PSE&G anticipates submitting these documents
to NJDEP in the first quarter of 1998. It is impossible to predict the
NJDEP's determinations on these demonstrations; however, PSE&G
presently estimates that the cost of retrofitting Hudson to operate
with closed cycle cooling could be in excess of $59 million in 1998
dollars.
NJDEP has advised PSE&G that it is preparing a renewal permit for
Mercer Station and, in connection with that renewal, will also be
reexamining Mercer's compliance with Section 316(a) & 316(b). This may
result in PSE&G's being required to submit updated 316(a) and 316(b)
demonstrations for NJDEP review. It is impossible to predict at this
time the outcome of such review.
PSE&G is implementing the 1994 NJPDES permit issued for Salem
Station which requires, among other things, water intake screen
modifications and wetlands restoration. In addition, PSE&G is seeking
permits and approvals from various agencies needed to fully implement
the special conditions of the permit. No assurances can be given as
to receipt of any such additional permits or approvals. The estimated
capital cost of compliance with the final permit is approximately $100
million, of which PSE&G's share is 42.59% and is included in PSE&G's
1996-2000 construction program. In accordance with the filed
Alternative Rate Plan PSE&G has requested to have separate mechanisms
to ensure continued recovery of costs associated with activities
mandated or approved by State or Federal agencies, although no
assurances can be given as to what action may be taken by the BPU.
PSE&G must apply to renew the Salem permit in March 1999 which renewal
application must provide updated Section 316(a) and 316(b)
demonstrations for the NJDEP's review. (See the discussion above
regarding EPA's Section 316(b) rulemaking.) (See MD&A -- Liquidity and
Capital Resources -- Construction, Investments and Other Capital
Requirements Forecast.)
<PAGE>
In June, 1995, PSE&G filed an application with the Delaware River
Basin Commission (DRBC) seeking a modification to the heat dissipation
area previously established based upon the NJDEP's grant of a Section
316(a) variance for Salem Station. DRBC issued a modified Docket in
September 1995 granting PSE&G's request. PSE&G must reapply to the DRBC
in 1999 for a continuation of this heat dissipation area.
PSE&G anticipates that NJDEP will issue a draft renewal permit for
Hope Creek Station in 1996 which will not propose effluent limitations
or other requirements significantly more stringent than those in the
existing permit.
CEA Eagle Point, Inc. (Eagle Point), an indirect subsidiary of
CEA, is a partner in a partnership which owns the Eagle Point
Cogeneration Facility (EPC), located in West Deptford, New Jersey. EPC
is operated by an affiliate of Eagle Point's partner and provides
electricity and steam for an adjacent petroleum refinery (owned and
operated by another affiliate of Eagle Point's partner) and sells
excess electricity to PSE&G. On January 15, 1995, Eagle Point received
a Notice of Violation (NOV) from Region II of EPA alleging violations
of certain CAA requirements and limitations related to the air permit
at EPC and the adjacent refinery and demanding that such violations be
corrected. Eagle Point, its partner and the operator of the refinery
are contesting the EPA conclusion that violations have occurred and
have met with staff of EPA and NJDEP to discuss issues related to the
NOV. Eagle Point cannot predict whether EPA will take action with
respect to the NOV and, if so, what action it may take. Applicable
regulations provide EPA with the power to seek to collect criminal and
civil penalties for continued violation of the provisions of air
permits.
Control of Hazardous Substances
PSE&G Manufactured Gas Plant Remediation Program
For information regarding PSE&G's Manufactured Gas Plant
Remediation Program, see Note 12 -- Commitments and Contingent
Liabilities of Notes.
Other Sites
A preliminary review of possible mercury contamination at the
Kearny Station concluded that an additional study and investigations
are required. In 1995, PSE&G entered into a Memorandum of Agreement
(MOA) with NJDEP for the Kearny Generating Station pursuant to which
PSE&G will conduct a Remedial Investigation (RI) of the site. A
Remedial Investigation Work Plan (RIWP) has been filed and is currently
under review by the NJDEP. Field work activities associated with the
RI will begin after NJDEP approval of the RIWP.
<PAGE>
Hazardous Substances
The Federal Comprehensive Environmental Response, Compensation and
Liability Act of 1980 (CERCLA), as amended by the Superfund Amendments
and Reauthorization Act of 1986 and the Federal Resource Conservation
and Recovery Act of 1976 (RCRA), authorize EPA to issue orders and/or
to bring an enforcement action to compel responsible parties to take
investigative and/or cleanup actions at any site that is determined to
present an imminent and substantial danger to the public or to the
environment because of an actual or threatened release of one or more
hazardous substances. The New Jersey Spill Compensation and Control Act
(Spill Act) provides similar authority to NJDEP. Because of the nature
of PSE&G's business, including the production of electricity, the
distribution of gas and, formerly, the manufacture of gas, various
by-products and substances are or were produced or handled which
contain constituents classified as hazardous under one or more of the
above laws.
PSE&G generally provides for the disposal or processing of such
substances through licensed independent contractors. However, these
statutory provisions impose joint and several liability without regard
to fault on all allegedly responsible parties, including the generators
of the hazardous substances for certain investigative and cleanup
costs at sites where these substances were disposed or processed. These
statutes also authorize private rights of action for recovery of these
costs.
PSE&G has been notified with respect to a number of such sites
and the cleanup of these potentially hazardous sites is receiving
greater attention from the government agencies involved.
Generally,actions directed at funding such site investigations and
cleanups include suspected or known allegedly responsible parties.
PSE&G's past operations suggest that some remedial action may be
required. PSE&G does not expect its expenditures for any such site to
have a material effect on its financial position, results of operations
or net cash flows.
EPA has determined that a portion of the Passaic River from a
point at its confluence with Hackensack River to a point six miles up-
river (the Site) is a "facility" within the meaning of that term as
defined under CERCLA. EPA has also determined that five corporations
are persons within the meaning of CERCLA for purposes of liability
under CERCLA with respect to remedial actions at the Site. EPA has
publicly indicated that it is continuing an assessment of available
information with respect to the identification of other responsible
parties. One of these corporations has entered into a consent order
with EPA pursuant to which it is obligated to conduct a remedial
investigation, human and ecological risk assessment and feasibility
<PAGE>
study relating to the Site. Field work activities associated with
these actions were initiated in the spring of 1995. A report
presenting the results of the remedial investigation and risk
assessment is scheduled to be filed in the fall of 1997.
PSE&G and certain of its predecessors conducted operations at
properties along the Passaic River both within and outside the Site.
EPA has not named PSE&G as a responsible party. PSE&G cannot predict
what, if any, action EPA or others may take against PSE&G with respect
to the Site or, in such event, what contributions PSE&G may be required
to make to the costs of these initiatives.
Presently, significant CERCLA/Spill Act actions involving PSE&G
include the following:
(1) Claim made in 1985 by U. S. Department of the Interior under
CERCLA with respect to the Pennsylvania Avenue and Fountain Avenue
municipal landfills in Brooklyn, New York for damages to natural
resources. The U.S. Government alleges damages of approximately $200
million. To PSE&G's knowledge, there has been no action on this matter
since 1988.
(2) Claim by EPA, Region III, under CERCLA with respect to a site
operated by Sealand Ltd. in Mount Pleasant Township, New Castle County,
Delaware. PSE&G and other companies have entered into an Administrative
Consent Order (ACO) obligating the signatories thereto to fund a
Remedial Investigation and Feasibility Study (RI/FS). PSE&G's share
of the costs of actions taken at this site have approximated 25% of
such costs. In 1991, EPA entered a Record of Decision (ROD) which
determined that no further action was required at the site. The State
of Delaware filed comments objecting to this ROD and hired a consultant
which has recommended that additional actions be taken at the site
based on its review of EPA's files. The State of Delaware required the
potentially responsible parties (PRPs) to conduct additional
groundwater analyses during 1994. Based on its review of the
monitoring data, in 1995, the State of Delaware proposed to require the
PRPs to conduct additional groundwater monitoring for a five year
period and to reimburse it for its past and future oversight costs
associated with this site. Delaware has not yet provided an estimate
on its oversight costs.
(3) At the Duane Marine Salvage Corporation Superfund Site in
Perth Amboy, Middlesex County, New Jersey, PRPs including PSE&G, had
completed an EPA-approved surface removal action during 1986 and EPA
<PAGE>
had required no further response actions. However, NJDEP ordered that
an RI/FS be performed to address or disprove an alleged subsurface
contamination and, following negotiations with the PRPs, including
PSE&G, an ACO was executed. The PRPs have submitted an RI/FS and a
second revised Draft Feasibility Study. In 1994, NJDEP selected a
remedy for the site, the total cost of which is estimated to be
$1,500,000. Based upon the claims made and activities taken to date,
PSE&G anticipates that its obligations with respect to this site will
be de minimis.
(4) Spill Act Directive issued by NJDEP in 1987 to PRPs, including
PSE&G, with respect to a site formerly owned and operated by Borne
Chemical Company in Elizabeth, Union County, New Jersey, ordering
certain interim actions directed at both site security and the off-site
removal of certain hazardous substances. Certain PRPs, including PSE&G,
signed an ACO with NJDEP to secure the site, which has been completed.
After further negotiations, certain other PRPs, including PSE&G, signed
a further ACO requiring them to perform a removal action at the site,
which was completed in 1992. In 1994, NJDEP issued a third Directive
requiring the performance of an RI/FS. Following negotiations with
certain PRPs including PSE&G, an MOA regarding the conduct of the RI/FS
was executed in 1995. Based upon the claims made and activities taken
to date, PSE&G anticipates that its obligations with respect to this
site will be de minimis.
(5) A second Directive pursuant to the Spill Act was issued by
NJDEP in 1989 to PRPs, including PSE&G, with respect to the PJP
Landfill in Jersey City, Hudson County, New Jersey (PJP), ordering
payment of operating and maintenance costs of approximately $150,000
and reasserting claims made in an initial Directive for all past and
future costs associated with investigations and remediation of the
alleged contamination. Additionally, in 1990, also pursuant to the
Spill Act, NJDEP issued a Multi-Site Directive concerning four sites,
including PJP. With respect to the PJP site, NJDEP reasserted demands
for payment made in earlier Directives. The NJDEP alleges that it has
spent approximately $23 million in interim remedial measures at the PJP
site. The NJDEP also alleges that it will incur approximately $2
million in costs to complete a remedial investigation of the PJP site.
PSE&G has made a good-faith payment of approximately $21,000 to NJDEP
pursuant to the Multi-Site Directive in accordance with actions taken
by certain other PRPs named in these Directives. The NJDEP has filed
a cost recovery action in Superior Court against certain of the other
PRPs named in the Directives. Based upon the claims made and
activities taken to date, PSE&G anticipates that its obligations with
respect to this site will be de minimis.
<PAGE>
(6) Claim by EPA, Region III, under CERCLA with respect to a
Superfund Site in Philadelphia, Pennsylvania, owned and formerly
operated by Metal Bank, Inc., as a non-ferrous scrap reclamation
facility. PSE&G, together with several other utilities, is alleged to
be liable either to conduct an RI/FS and undertake the necessary
cleanup, if any, or to reimburse EPA for the cost of performing these
functions. In 1991 these utilities, including PSE&G, entered into an
ACO with the EPA to perform an RI/FS, Docket No. III-91-34-DC. The
RI/FS was completed and the RI/FS Report was submitted to EPA in
October 1994. The RI/FS Report proposes various remedial alternatives
for consideration by EPA in its selection of a remedy for the site.
In July 1995, the EPA issued its Proposed Remedial Action Plan (PRAP)
for the site. The PRAP details the EPA's intention to select a remedy
that will cost between $17 and $30 million. It is anticipated that EPA
will assert a claim against PSE&G and the other utility companies, and
perhaps others as well, for the performance or funding of the selected
remedy. PSE&G's share of the costs of the proposed remedy is between
$4 and $8 million or approximately 26% of the total.
(7) The Klockner Road site is located in Hamilton Township,
Mercer County, New Jersey and occupies approximately two acres on the
Trenton Switching Station property. In May 1995, the NJDEP formally
notified PSE&G that the Klockner Road site is an open case and that
absent voluntary action by PSE&G, the NJDEP would prioritize the site
and thereafter take appropriate enforcement action. As a result of
this notice, PSE&G is in the process of filing an application for a
MOA. Preliminary investigations indicate the potential presence of
soil and groundwater contamination at the site. PSE&G's preliminary
estimate is that an environmental characterization of the site will
cost approximately $800,000. The cost of any remediation of potential
site contamination is not presently estimable.
(8) In U.S. v. CDMG Realty Co., et al., Civil Action No. 89-4246
(NHP) (RJH), pending in the United States District Court for the
District of New Jersey, PSE&G and over 60 other entities were joined
in January 1995 as additional third-party defendants. Third-party
plaintiffs, an association of 44 entities, are essentially seeking
contribution and/or indemnification for the expenses they have incurred
and will incur as a result of having settled the direct claims of the
NJDEP and EPA related to the investigation and remediation of Sharkey's
Landfill, located in Parsippany-Troy Hills, Morris County, New Jersey.
The claims are all alleged to be brought pursuant to CERCLA and PSE&G
is alleged to have arranged for the disposal of industrial wastes at
Sharkey's Landfill. The claims with respect to this matter are
presently the subject of an alternative dispute resolution proceeding.
Based upon the claims made and activities to date, PSE&G estimates that
its obligations for this site will be de minimis.
<PAGE>
(9) In 1991, the NJDEP issued Directive and Notice to Insurers
Number Two (Directive Two) to 24 Insurers and 52 Respondents, including
PSE&G in connection with an investigation and remediation of the Global
Landfill Site in Old Bridge Township, Middlesex County New Jersey
(Global Site). Directive Two seeks recovery of past and anticipated
future NJDEP response costs ($37.4 million). PSE&G's alleged liability
is based on assertions that it generated asbestos-containing materials
which were disposed of at the Global Site. In 1991, PSE&G entered into
an agreement with the NJDEP and 29 other Directive Two Respondents
effecting a partial settlement of the foregoing costs subject to a
subsequent reallocation based upon the parties' further development of
information concerning their respective proportionate waste
contributions to the Global Site. Negotiations are ongoing regarding
resolution of the balance of the response costs sought pursuant to
Directive Two. In 1993, the NJDEP and various participating PRPs,
including PSE&G, executed a Consent Decree whereby the participating
PRPs agreed to perform the remedial design and remedial action for the
operable unit one remedy as specified in a 1991 ROD (approximate total
cost $30 million). The Consent Decree was executed and entered by the
United States District Court for the District of New Jersey in 1993.
Subject to a subsequent reallocation, the various parties to the
Consent Decree have agreed that PSE&G's contribution under the Consent
Decree settlement will be $300,000 (approximately 1% of the total
cost).
(10) In 1991, the New Jersey Department of Law and Public Safety,
Division of Law, issued Directive and Notice To Insurers Number One
(Directive One) to 50 Insurers and 20 Respondents, including PSE&G,
seeking from the Respondents payment of $5.5 million of NJDEP's
anticipated costs of remedial action and of administrative oversight
at the Combe Fill South Sanitary Landfill in Washington and Chester
Townships, Morris County, New Jersey (Combe Site). The $5.5 million
represents the NJDEP's 10% share of such anticipated costs pursuant to
a cooperative agreement with the United States regarding the selected
remedial action. Therefore, total site remediation costs approximate
$50 million. Further, the Directive One Respondents are directed to
perform the operation and maintenance of the remedial action including
all remedial facilities on the Combe Site. PSE&G's alleged liability
is based on the assertion that PSE&G-generated waste oil and water,
containing hazardous substances, was transported to the Combe Site and
applied to Combe Site roads for dust control. Based upon the claims
made and PSE&G's investigation and response to same, PSE&G anticipates
that its obligations, if any, with respect to this site will be de
minimis.
<PAGE>
(11) In United States of America v. Superior Tube Company, et al.,
Docket No. 89-7421 in the U.S. District Court for the Eastern District
of Pennsylvania, PSE&G was served in 1990 with a Third-Party Complaint.
Pursuant to CERCLA, the United States filed suit against Superior Tube
Company (Superior) and others seeking recovery of past and future costs
incurred or to be incurred in the cleanup of the Moyer Landfill located
in Collegeville, Pennsylvania. Superior filed a Third-Party Complaint
naming approximately 150 third-party defendants, including PSE&G.
Superior alleges that PSE&G generated, transported, arranged for the
disposal of and/or caused to be deposited certain hazardous substances
at the Moyer Landfill. On the basis of those allegations, Superior
seeks contribution and/or indemnification from the third-party
defendants, including PSE&G, on the United States' action against it.
PSE&G has participated in negotiations concerning resolution of the
United States' and Superior Tube's claims. Pursuant to settlement
negotiations amongst certain direct defendants, certain third party
defendants and the plaintiffs, the defending parties participating in
said negotiations are currently pursuing the possibility of resolving
all potential liability concerning the above referenced matter
(excluding any potential liability associated with a future claim, if
any, for natural resource damages) on behalf of certain de minimis
defending parties, including PSE&G. Based upon the claims made and the
above referenced negotiations, PSE&G anticipates that its obligations
with respect to this site will be de minimis.
(12) Spill Act Multi-Site Directive (Directive) issued by the
NJDEP to PRPs, including PSE&G, listing four separate sites, including
the former bulking and transfer facility called the Marvin Jonas
Transfer Station (Sewell Site) in Deptford Township, Gloucester County,
New Jersey. With regard to the Sewell Site, this Directive ordered
approximately 350 PRPs, including PSE&G, to enter into an ACO with
NJDEP, requiring them to remediate the Sewell Site. Certain PRPs,
including PSE&G, have completed the interim actions directed at both
site security and off-site disposal of containers, trailers and
contaminated surface soils. PRPs, including PSE&G, are currently
fulfilling the terms of a MOA entered into with NJDEP in 1993 to
conduct an RI/FS and, if necessary, take remedial action. Based upon
the claims made and activities taken to date, PSE&G anticipates that
its obligations with respect to this site will be de minimis.
(13) In Transtech Industries, Inc. et al v. A&Z Septic Clean et
al., Docket No. 2-90-2578(HAA), filed on October 5, 1992, in the U.S.
District Court for the District of New Jersey, PSE&G has been named a
defendant in a Complaint which has been filed pursuant to CERCLA,
against several hundred parties seeking recovery of past and future
<PAGE>
response costs incurred or to be incurred in the investigation and/or
remediation of the Kin-Buc Landfill, located in Edison Township,
Middlesex County, New Jersey. Plaintiffs allege that all named
defendants, including PSE&G, are PRPs as generators and/or transporters
of various hazardous substances ultimately deposited at the Kin-Buc
Landfill. Based upon the claims made and activities taken to date,
PSE&G anticipates that its obligations with respect to this site will
be de minimis.
(14) In 1993, PSE&G acknowledged service of Plaintiff's Summons
and Complaint in a matter entitled The Fishbein Family Partnership v.
PPG Industries, Inc. and Public Service Electric and Gas Company.
Pursuant to CERCLA, the Spill Act and various common law theories of
liability, the Plaintiff filed an action seeking declaratory relief
regarding responsibility for and recovery of damages and response costs
incurred and/or to be incurred as a result of the release or threatened
release of hazardous substances at property located in Jersey City,
Hudson County, New Jersey. Plaintiff named PPG Industries, Inc. (PPG)
and PSE&G as defendants in the above-referenced action. The Plaintiff
alleges that defendants are liable for the damages and relief sought
based on their past conduct of industrial operations at the site. The
industrial operations referenced in Plaintiff's Complaint include
chromium ore processing operations (PPG and its predecessors) and coal
gasification operations (PSE&G and its predecessors). PSE&G filed its
response to the Plaintiff's Complaint including cross-claims for
indemnity and contribution against co-defendant PPG. PSE&G also filed
a Third Party Complaint against UGI Utilities, Inc. (UGI) seeking
indemnification and contribution as to any liability imposed upon PSE&G
attributable to UGI's past conduct of industrial operations on a
portion of the site. In March 1995, PSE&G filed an Amended Third Party
Complaint extending the time period of PSE&G's allegations concerning
UGI's past conduct of industrial operations at the site. In May 1995,
an Administrative Stay of this matter was entered pending either an
agreement between the NJDEP and PPG as to a cleanup plan for the site
or a determination of certain cross-motions for summary judgement filed
by Plaintiff and PPG. Based upon the claims made and activities taken
to date, PSE&G's potential liability in this matter, if any, is not
currently estimable.
Other Potential Liability
In addition to the sites individually listed above, PSE&G has
received 14 claims and/or inquiries concerning prospective enforcement
actions by the EPA and/or NJDEP. Such claims/inquiries relate to
alleged properties/sites where it has been alleged that an imminent and
substantial danger to the public or to the environment exists as a
result of an actual or threatened release of one or more hazardous
substances. PSE&G's investigation and initial response concerning each
such claim and/or inquiry suggests that PSE&G's potential liability,
if any, is de minimis.
<PAGE>
Enterprise
----------
Consolidated Financial Statistics (A)
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
---------- ----------- ----------- ---------- ---------
(Thousands of Dollars where applicable)
<S> <C> <C> <C> <C> <C>
Selected Income Information
Operating Revenues
Electric........................... $ 4,020,842 $ 3,739,713 $ 3,696,114 $ 3,407,830 $ 3,519,806
Gas................................ 1,686,403 1,778,528 1,594,341 1,586,181 1,307,849
Nonutility Activities.............. 456,908 404,202 418,135 362,781 283,766
------------ ----------- ----------- ----------- -----------
Total Operating Revenues........... $ 6,164,153 $ 5,922,443 $ 5,708,590 $ 5,356,792 $ 5,111,421
------------ ----------- ----------- ----------- ------------
Net Income......................... $ 662,323 $ 679,033 $ 600,933 $ 504,117 $ 543,035
------------ ----------- ----------- ----------- ------------
Earnings per average share of
Common Stock..................... $ 2.71 $ 2.78 $ 2.50 $ 2.17 $ 2.43
Dividends Paid per Share........... $ 2.16 $ 2.16 $ 2.16 $ 2.16 $ 2.13
Payout Ratio....................... 80% 78% 86% 100% 88%
Rate of Return on Average Common
Equity (B)...................... 12.31% 12.94% 11.91% 10.69% 12.24%
Ratio of Earnings to Fixed Charges. 2.77 2.76 2.59 2.30 2.54
Book Value per Common Share (C).... $ 22.25 $ 21.70 $ 21.07 $ 20.32 $ 20.04
Gross Utility Plant................ $16,925,280 $16,566,058 $15,861,484 $15,081,907 $14,426,560
Accumulated Depreciation and
Amortization of Utility Plant.... $ 5,737,849 $ 5,467,813 $ 5,057,104 $ 4,610,595 $ 4,243,979
Total Assets....................... $17,171,439 $16,717,440 $16,329,656 $14,777,732 $14,804,354
------------- ------------ ----------- ------------ ------------
Consolidated Capitalization
Common Stock....................... $ 3,801,157 $ 3,801,157 $ 3,772,662 $ 3,499,183 $ 3,262,138
Retained Earnings.................. 1,643,785 1,510,010 1,361,018 1,282,931 1,282,029
------------- ------------ ----------- ------------ ------------
Common Equity...................... 5,444,942 5,311,167 5,133,680 4,782,114 4,544,167
Long-Term Debt..................... 5,189,791 5,180,657 5,256,321 4,977,579 5,128,373
Preferred Stock without Mandatory
Redemption....................... 324,994 384,994 429,994 429,994 429,994
Preferred Stock with Mandatory
Redemption....................... 150,000 150,000 150,000 75,000 --
Monthly Income Preferred Securities. 210,000 150,000 -- -- --
------------- ------------ ----------- ------------ ------------
Total Capitalization................$11,319,727 $11,176,818 $10,969,995 $10,264,687 $10,102,534
============= ============ =========== ============ ============
(A) See Management's Discussion and Analysis of Financial Condition and Results of Operations and
Notes to Consolidated Financial Statements.
(B) Net Income for a twelve-month period divided by the thirteen-month average of Common Equity.
(C) Total Common Equity divided by end-of-period Common Shares outstanding.
</TABLE>
<PAGE>
Operating Statistics
PSE&G
- -----
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
---------- ----------- ------------ ----------- ------------
(Thousands of Dollars where applicable)
<S> <C> <C> <C> <C> <C>
Electric
Revenues from Sales of Electricity:
Residential...................... $ 1,274,712 $ 1,187,099 $ 1,175,875 $ 1,037,099 $ 1,116,699
Commercial....................... 1,853,855 1,734,894 1,678,011 1,554,956 1,575,547
Industrial....................... 704,861 686,065 710,206 683,750 728,411
Public Street Lighting........... 54,730 52,353 51,019 47,729 46,400
----------- ----------- ----------- ----------- -----------
Total Revenues from Sales to
Customers........................ 3,888,158 3,660,411 3,615,111 3,323,534 3,467,057
Interdepartmental.................. 1,862 1,710 1,737 1,544 1,599
Non-Required Energy and
Capacity Revenues.(a)............ 37,179 35,223 48,625 51,313 19,763
Wholesale Energy and Capacity
Revenues.(b)..................... 19,446 7,481 -- -- --
----------- ----------- ----------- ----------- -----------
Total Revenues from Sales of
Electricity...................... 3,946,645 3,704,825 3,665,473 3,376,391 3,488,419
Other Electric Revenues............ 74,197 34,888 30,641 31,439 31,387
----------- ----------- ----------- ----------- -----------
Total Operating Revenues...... $ 4,020,842 $ 3,739,713 $ 3,696,114 $ 3,407,830 $ 3,519,806
=========== =========== =========== =========== ===========
Sales of Electricity - megawatthours:
Residential...................... 10,885,479 10,594,134 10,631,402 9,816,046 10,505,547
Commercial....................... 18,761,863 18,466,863 18,096,312 17,454,352 17,596,569
Industrial....................... 9,026,838 9,109,998 9,203,839 9,298,741 9,406,109
Public Street Lighting........... 339,164 334,726 329,828 325,545 320,900
----------- ----------- ----------- ----------- -----------
Total Sales to Customers........... 39,013,344 38,505,721 38,261,381 36,894,684 37,829,125
Interdepartmental.................. 20,095 17,755 18,514 19,012 19,719
Non-Required Energy Sales.(a)...... 1,047,996 1,320,170 2,245,884 2,116,049 1,858,590
Wholesale Energy Sales.(b)......... 201,610 139,235 -- -- --
----------- ----------- ----------- ----------- -----------
Total Sales of Electricity.... 40,283,045 39,982,881 40,525,779 39,029,745 39,707,434
=========== =========== =========== =========== ===========
Gas
Revenues from Sales of Gas:
Residential...................... $ 823,302 $ 889,541 $ 780,195 $ 809,559 $ 699,696
Commercial....................... 501,102 510,829 460,340 481,960 426,110
Industrial....................... 274,937 312,405 299,762 243,527 138,394
Street Lighting.................. 468 491 467 468 468
----------- ----------- ----------- ----------- -----------
Total Revenues from Sales to
Customers........................ 1,599,809 1,713,266 1,540,764 1,535,514 1,264,668
Interdepartmental.................. 2,636 3,976 3,078 2,572 2,689
----------- ----------- ----------- ----------- -----------
Total Revenues from Sales of Gas... 1,602,445 1,717,242 1,543,842 1,538,086 1,267,357
Transportation Service Revenues.... 54,427 35,057 37,081 34,739 27,036
Other Gas Revenues................. 29,531 26,229 13,418 13,356 13,456
----------- ----------- ----------- ----------- -----------
Total Operating Revenues...... $ 1,686,403 $ 1,778,528 $ 1,594,341 $ 1,586,181 $ 1,307,849
=========== =========== =========== =========== ===========
Sales of Gas - kilotherms:
Residential...................... 1,258,181 1,337,267 1,280,128 1,265,270 1,140,887
Commercial....................... 971,243 945,950 943,054 939,021 893,069
Industrial....................... 942,846 912,689 876,421 739,508 399,385
Street Lighting.................. 670 668 666 668 666
----------- ----------- ----------- ----------- -----------
Total Sales to Customers........... 3,172,940 3,196,574 3,100,269 2,944,467 2,434,007
Interdepartmental.................. 6,139 9,316 7,509 5,967 6,174
----------- ----------- ----------- ----------- -----------
Total Sales of Gas................. 3,179,079 3,205,890 3,107,778 2,950,434 2,440,181
Transportation Service............. 682,693 544,539 557,403 543,097 381,497
----------- ----------- ----------- ----------- -----------
Total Gas Sold and Transported.. 3,861,772 3,750,429 3,665,181 3,493,531 2,821,678
=========== =========== =========== =========== ===========
(a) Non-Required - The sale of excess generation both energy and capacity to other power producers.
(b) Wholesale - Consists of sales for resale to municipalities and to an out of state electric
cooperative under negotiated contracts. Prior to 1994, these sales for resale were treated as
industrial sales.
</TABLE>
<PAGE>
EDHI
EDHI, a wholly owned, direct subsidiary of Enterprise, is
incorporated under the laws of New Jersey and is the parent company of
EDC, CEA, PSRC, EGDC, Capital and Funding. EDHI's principal executive
offices are located at One Riverfront Plaza, Newark, New Jersey 07102.
EDHI's focus is on investment in the independent energy market. For a
discussion of the impact on EDHI of Enterprise's agreement with the BPU
regarding utility/nonutility activities, see Regulation.
EDC
On December 6, 1995, Enterprise announced that EDHI is pursuing
the divestiture of EDC. Enterprise anticipates that, subject to
satisfying certain conditions, EDHI will divest EDC during 1996, but
no formal plan of divestiture has been approved. The decision stems
from Enterprise's belief that EDC is not fully recognized in the value
of Enterprise's Common Stock and that, with the advent of the energy
futures market, it is not necessary for Enterprise to own large volumes
of oil and gas.
EDC, a New Jersey corporation, has its principal executive offices
at 1000 Louisiana Street, Suite 2900, Houston, Texas 77002. EDC is an
oil and gas exploration and production and marketing company with
principal operations both onshore and offshore in the southern United
States and a growing international production base. EDC will continue
to pursue a program to grow its reserve base through a combination of
strategic acquisitions, high potential exploration activities and
exploitation of its acquired properties and new discoveries. EDC's
worldwide 1995 production totaled 99 BCFE. Year-end 1995 proved
reserves were 630 billion cubic feet of gas and 48 million barrels of
oil, an increase of 6% and a decrease of 1%, respectively, compared to
1994. As of December 31, 1995 and 1994, EDC's consolidated assets
aggregated $756 million and $729 million, respectively. EDC has
operations encompassing about 5.6 million net acres in 13 states,
offshore in the Gulf of Mexico and both onshore and offshore in the
United Kingdom, Argentina, Senegal, Ireland, Tunisia and China. EDC is
exempt from direct regulation by the BPU and FERC except that certain
FERC approval is required to transport its gas interstate from its
discovery fields. (See Note 1 -- Summary of Significant Accounting
Policies of Notes.)
<PAGE>
CEA
CEA, a New Jersey corporation, has its principal executive offices
at 1200 East Ridgewood Avenue, Ridgewood, New Jersey 07450. CEA invests
and participates in the development and operation of cogeneration,
thermal and power production facilities, which include domestic QFs,
two foreign EWGs and one foreign utility company. CEA is expected to
be the primary vehicle for EDHI's business growth for the foreseeable
future, with emphasis on international projects. CEA's two direct
subsidiaries, CEA New Jersey, Inc. (CEA New Jersey) and CEA USA, Inc.
(CEA USA), hold certain of its investments. CEA New Jersey's
subsidiaries invest in projects in New Jersey selling power to PSE&G.
CEA USA's subsidiaries invest in projects selling power to other
domestic and foreign entities. CEA and/or its subsidiaries and
affiliates have investments in 22 commercially operating cogeneration
or independent power projects, one anthracite coal mine and one project
under construction. CEA continuously evaluates the status of project
development and construction in light of the realities of timely
completion and the costs incurred.
CEA's investments in QF projects have been undertaken with other
participants because CEA, together with any other utility affiliate,
may not own more than 50% of a QF under applicable law subsequent to
the in-service date. Projects involving EWGs are not restricted to a
50% investment limitation. CEA's projects are diversified
internationally and technologically and are generally financed through
non-recourse debt. CEA is an investor in these projects and the
electricity produced by the facilities is not part of PSE&G's installed
capacity. However, some of such power is being purchased by PSE&G
pursuant to long-term contracts with the applicable projects.
As of December 31, 1995 and 1994, CEA's consolidated assets
aggregated $271 million and $232 million, respectively. (See Note 7 --
Long-Term Investments of Notes.)
PSRC
PSRC, a New Jersey corporation, has its principal executive
offices at One Riverfront Plaza, Newark, New Jersey 07102. PSRC makes
primarily passive investments in assets that can provide funds for
future growth as well as provide incremental earnings for Enterprise.
Investments have been made in leveraged and direct financing leases,
project financings, venture capital funds, leveraged buyout funds, real
estate limited partnerships and securities. The maturities of the
portfolio's investments are also fairly diverse, with some having terms
exceeding 30 years. PSRC's leveraged lease investments include a wide
<PAGE>
range of asset sectors. Some of the transactions in which PSRC and its
subsidiaries participate involve other equity investors. PSRC plans to
limit new investments to existing commitments and investments related
to the energy business.
PSRC has a gas marketing subsidiary which markets natural gas and
associated services on an unregulated basis to commercial and
industrial gas consumers nationwide.
PSRC is a limited partner in various partnerships and is committed
to make investments from time to time, upon the request of the
respective general partners. On December 31, 1995, $58 million remained
as PSRC's unfunded commitment subject to call. As of year-end 1995 and
1994, PSRC's long-term investments aggregated $1.4 and $1.3 billion,
respectively.
EGDC
EGDC, a New Jersey corporation having its principal executive
offices at One Riverfront Plaza, Newark, New Jersey 07102, is a
nonresidential real estate development and investment business. EGDC
has investments in ten commercial real estate properties (two of which
are developed) in several states. EGDC's strategy is to preserve and
build the value of its assets to allow for the controlled disposition
of its properties as the real estate market improves. As of December
31, 1995 and 1994, EGDC's consolidated assets aggregated $116 million
and $189 million, respectively.
Capital
Capital, a New Jersey corporation, has its principal executive
offices at 80 Park Plaza, Newark, New Jersey 07101. Capital serves as
a financing vehicle for EDHI's businesses, borrowing on their behalf
on the basis of a minimum net worth maintenance agreement with
Enterprise. That agreement provides, among other things, that
Enterprise (i) maintain its ownership, directly or indirectly, of all
outstanding common stock of Capital, (ii) cause Capital to have at all
times a positive tangible net worth of at least $100,000 and (iii) make
sufficient contributions of liquid assets to Capital in order to permit
it to pay its debt obligations. In 1993, Enterprise agreed with the
BPU to make a good-faith effort to eliminate such Enterprise support
within six to ten years. Intercompany borrowing rates are established
based upon Capital's cost of funds. Effective January 31, 1995, Capital
will not have more than $650 million of debt outstanding at any time.
Capital's assets consist principally of demand notes of EDC, CEA and
<PAGE>
PSRC. As of December 31, 1995 and 1994, Capital had outstanding $477.5
million and $632 million, respectively, of its long-term debt. For
additional information, see Construction and Capital Requirements --
Financing Activities and MD&A -- Liquidity and Capital Resources --
EDHI.
Funding
Funding, a New Jersey corporation, has its principal executive
offices at 80 Park Plaza, Newark, New Jersey 07101. Funding serves as
a financing vehicle for EDHI's businesses (excluding EGDC), borrowing
on their behalf, as well as investing their short-term funds.
Short-term investments are made only if the funds cannot be employed
in intercompany loans. Intercompany borrowing rates are established
based upon Funding's cost of funds. Funding is providing both long and
short-term capital for the nonutility businesses other than EGDC on the
basis of an unconditional guaranty from EDHI, but without direct
support from Enterprise. As of December 31, 1995 and 1994, Funding's
assets consisted principally of demand notes of EDC, CEA and PSRC, all
of which are pledged to Funding's lenders and which aggregated $492
million and $334 million, respectively. For additional information, see
MD&A -- Liquidity and Capital Resources -- EDHI.
<PAGE>
ITEM 2. PROPERTIES
PSE&G
The statements under this Item as to ownership of properties are
made without regard to leases, tax and assessment liens, judgments,
easements, rights of way, contracts, reservations, exceptions,
conditions, immaterial liens and encumbrances and other outstanding
rights affecting such properties, none of which is considered to be
significant in the operations of PSE&G, except that PSE&G's First and
Refunding Mortgage (Mortgage), securing the bonds issued thereunder,
constitutes a direct first mortgage lien on substantially all of such
property.
PSE&G maintains insurance coverage against loss or damage to its
principal plants and properties, subject to certain exceptions, to the
extent such property is usually insured and insurance is available at
a reasonable cost. For a discussion of nuclear insurance, see Note 12
- -- Commitments and Contingent Liabilities of Notes to Consolidated
Financial Statements.
The electric lines and gas mains of PSE&G are located over or
under public highways, streets, alleys or lands, except where they are
located over or under property owned by PSE&G or occupied by it under
easements or other rights. These easements and rights are deemed by
PSE&G to be adequate for the purposes for which they are being used.
Generally, where payments are minor in amount, no examinations of
underlying titles as to the rights of way for transmission or
distribution lines or mains have been made.
<PAGE>
Electric Properties
As of December 31, 1995, PSE&G's share of installed
generating capacity was 10,400 MW, as shown in the following
table:
<TABLE>
<CAPTION>
INSTALLED NET
MEGAWATT PRINCIPAL HEAT GENERATION CAPACITY
NAME AND LOCATION CAPACITY FUEL USED RATE (000 MWH) FACTOR(a)
- -------------------------------------------- --------- --------- ------ --------- ---------
<S> <C> <C> <C> <C> <C>
Fossil
Burlington, Burlington, NJ ................. 180 Oil 17,742 30 1.9
Conemaugh, New Florence, PA - 22.50%(b)(c).. 382 Coal 9,380 2,650 79.2
Hudson, Jersey City, NJ .................... 983 Coal 11,351 1,861 21.6
Kearny, Kearny, NJ ......................... 292 Oil 16,221 46 1.8
Keystone, Shelocta, PA - 22.84%(b)(c)....... 388 Coal 9,635 2,643 77.8
Linden, Linden, NJ ......................... 415 Oil 18,007 117 3.2
Mercer, Hamilton, NJ ....................... 642 Coal 10,279 2,087 37.1
Sewaren, Woodbridge Twp., NJ ............... 453 Gas 13,808 360 9.1
------- ------ --------- ---------
Total Fossil........................... 3,735 10,343 9,794 29.9
------- ------ --------- ---------
Nuclear (Capacity factor calculated in
accordance with industries maximum
dependable capability standards)
Hope Creek, Lower Alloways Creek, NJ
95%(b)(c)................................. 979 Nuclear 10,801 6,694 78.9
Peach Bottom, Peach Bottom, PA - 42.49%(b).. 930 Nuclear 10,809 6,976 93.3
Salem, Lower Alloways Creek, NJ
42.59%(b)................................. 942 Nuclear 11,088 1,923 23.4
------- ------ --------- ---------
Total Nuclear(b)(c).................... 2,851 10,843 15,593 62.9
------- ------ --------- ---------
Combined Cycle
Bergen, Ridgefield, NJ..................... 650 Gas 8,034 1,533 26.9
Burlington, Burlington, NJ................. 240 Gas 9,255 513 23.5
------- ------ --------- ---------
Total Combined Cycle.................. 890 8,340 2,046 26.5
------- ------ --------- ---------
Combustion Turbine
Bayonne, Bayonne, NJ........................ 42 Oil 35,297 0.4 0.1
Bergen, Ridgefield, NJ ..................... 21 Oil 111,665 0.8 0.1
Burlington, Burlington, NJ.................. 389 Gas 18,937 7.1 0.2
Edison, Edison Township, NJ ................ 504 Gas 16,532 8.5 0.2
Essex, Newark, NJ .......................... 617 Gas 13,270 279.1 5.2
Hudson, Jersey City, NJ .................... 129 Oil 68,666 0.6 -
Kearny, Kearny, NJ ......................... 504 Oil 18,352 1.7 0.4
Linden, Linden, NJ ......................... 223 Oil 12,635 135.0 3.7
Mercer, Hamilton, NJ ....................... 129 Oil 72,912 0.4 -
National Park, National Park, NJ ........... 21 Oil 0 0.0 -
Salem, Lower Alloways Creek, NJ
42.59%(b)................................. 16 Oil 25,189 0.3 0.1
Sewaren, Woodbridge Township, NJ ........... 129 Oil 45,613 0.8 -
------- ------ --------- ---------
Total Combustion Turbine............... 2,724 13,761 434.7 10.4
------- ------ --------- ---------
Diesel
Conemaugh, New Florence, PA - 22.50%(b)..... 3 Oil 10,101 2.1 0.1
Keystone, Shelocta, PA - 22.84%(b).......... 2 Oil 10,448 5.5 3.1
------- ------ --------- ---------
Total Diesel........................... 5 10,354 7.6 1.7
------- ------ --------- ---------
Pumped Storage
Yards Creek, Blairstown, NJ - 50%(b)(c)..... 195 - 227 13.3
------- ------ --------- ---------
Total PSE&G............................ 10,400(d) 10,531 28,102(e) 30.8
======= ====== ========= =========
(a) Net generation divided by the product of weighted average generating capacity times
total hours.
(b) PSE&G's share of jointly owned facility.
(c) Excludes energy for pumping and synchronous condensers.
(d) Excludes 664 MW of nonutility generation and 200 MW of capacity sales to General
Public Utilities Corporation.
(e) Excludes 5,136 MW of nonutility generation.
/TABLE
<PAGE>
For information regarding construction see MD&A -- Construction
and Capital Expenditures.
In addition to the generating facilities in New Jersey and
Pennsylvania as indicated in the table above, as of December 31, 1995,
PSE&G owned 41 switching stations with an aggregate installed capacity
of 31,591,000 kilovolt-amperes, and 222 substations with an aggregate
installed capacity of 7,313,000 kilovolt-amperes. In addition, 6
substations having an aggregate installed capacity of 139,250
kilovolt-amperes were operated on leased property. All of these
facilities are located in New Jersey.
As of December 31, 1995, PSE&G's transmission and distribution
system included 151,449 circuit miles, of which 36,007 miles were
underground, and 789,106 poles, of which 534,106 poles were jointly
owned. Approximately 99% of this property is located in New Jersey.
In addition, as of December 31, 1995, PSE&G owned 4 electric
distribution headquarters and five subheadquarters in four operating
divisions all located in New Jersey.
Gas Properties
As of December 31, 1995, the daily gas capacity of PSE&G's
100%-owned peaking facilities (the maximum daily gas delivery available
during the three peak winter months) consisted of liquid petroleum air
gas (LPG) and liquefied natural gas (LNG) and aggregated 2,973,000
therms (approximately 297,300 Mcf. on an equivalent basis of 1,000
Btu/cubic foot) as shown in the following table:
<TABLE>
<CAPTION>
Daily Capacity
Plant Location (Therms)
- -------------------------------- ------------------ --------------
<S> <C> <C>
Burlington LNG.................. Burlington, N.J. 773,000
Camden LPG...................... Camden, N.J. 280,000
Central LPG..................... Edison Twp., N.J. 960,000
Harrison LPG.................... Harrison, N.J. 960,000
---------
Total........................... 2,973,000
=========
</TABLE>
<PAGE>
As of December 31, 1995, PSE&G owned and operated approximately
15,467 miles of gas mains, owned 12 gas distribution headquarters and
one subheadquarters and leased one other subheadquarters all in two
operating regions located in New Jersey and owned one meter shop in New
Jersey serving all such areas. In addition, PSE&G operated 61 natural
gas metering or regulating stations, all located in New Jersey, of
which 28 were located on land owned by customers or natural gas
pipeline companies supplying PSE&G with natural gas and were operated
under lease, easement or other similar arrangement. In some instances,
portions of the metering and regulating facilities were owned by the
pipeline companies.
Office Buildings and Facilities
PSE&G leases substantially all of a 26-story office tower for its
corporate headquarters at 80 Park Plaza, Newark, New Jersey, together
with an adjoining three-story building. PSE&G also leases other office
space at various locations throughout New Jersey for district offices
and offices for various corporate groups and services. PSE&G also owns
various other sites for training, testing, parking, records storage,
research, repair and maintenance, warehouse facilities and for other
purposes related to its business.
EDHI owns no real property. EDHI leases its corporate headquarters
at One Riverfront Plaza, Newark, New Jersey 07102. For a brief general
description of the properties of the subsidiaries of EDHI, see Item 1.
Business -- EDHI.
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
In October 1995, Enterprise received a letter from a
representative of a purported shareholder demanding that it commence
legal action against certain of its officers and directors with regard
to nuclear operations and the current shutdown of the Salem generating
station. In January, 1996, Enterprise and each of its directors except
Forrest J. Remick were served with a civil complaint in a shareholder
derivative action by such purported shareholder on behalf of Enterprise
shareholders (Public Service Enterprise Group Incorporated by G.E.
Stricklin, derivatively vs. E. James Ferland, et al., Docket No.
L1068395, Superior Court of New Jersey, Law Division, Camden County
filed December 27, 1995). The complaint seeks removal of certain
executive officers of PSE&G and Enterprise, certain changes in the
composition of Enterprise's Board of Directors, recovery of damages and
certain other relief for alleged losses purportedly arising out of
PSE&G's operation of the Salem and Hope Creek generating stations. The
Board of Directors has commenced an investigation of the matters raised
in the October demand letter, and that investigation has not yet been
completed. Following conclusion of the investigation, the Board will
meet to determine what action, if any, should be taken with respect to
the complaint filed in the shareholder derivative action.
In addition, see the following, at the pages indicated:
(1) Page 5. Proceedings before FERC relating to competition and
electric wholesale power markets. (Inquiry Concerning the Pricing
Policy for Transmission Services Provided by Utilities Under the
Federal Power Act, Docket No. RM93-19.)
(2) Page 11. Proceedings before the BPU relating to PSE&G's
Second Largest Customer, filed January 6, 1995, in Docket No.
ER95010005.
(3) Page 44. Requests filed in 1974 and later supplemented, to EPA
and NJDEP to establish thermal discharges and intake structures for
PSE&G's electric generating stations (Sewaren Generating Station, NJ
0000680; Hudson Generating Station, NJ 0000647; Kearny Generating
Station, NJ 0000655; Salem Generating Station, NJ 0005622; Linden
Generating Station, NJ 0000663).
(4) Page 46. Notice of Violation issued by EPA against Eagle Point
Cogeneration Partnership regarding alleged violations of air permit.
(5) Pages 48 through 53. Various administrative actions, claims,
litigation and requests for information by federal and/or state
agencies, and/or private parties, under CERCLA, RCRA, and state
environmental laws to compel PRPs, which may include PSE&G, to provide
information with respect to transportation and disposal of hazardous
substances and wastes, and/or to undertake or contribute to the costs
of investigative and/or cleanup actions at various locations because
of actual or threatened releases of one or more potentially hazardous
substances and/or wastes.
<PAGE>
(6) Page 74. Proceedings before The BPU relating to New Jersey
Partners in Power Plan filed January 16, 1996, in Docket No.
E096010028.
(7) Page 115. Proceedings before the BPU relating to PSE&G's LGAC,
filed October 2, 1995, in Docket No. GR9510456.
(8) Page 116. Proceedings before the BPU relating to recovery of
replacement power costs in connection with the Salem 1 shutdown, May
5, 1995, Docket No. ER94070293.
(9) Page 116. Proceedings before the BPU relating to PSE&G's LEAC
Remediation Program Costs (RAC), filed July 21, 1995, in Docket No.
GR95070344.
(10) Page 117. Generic proceeding before the BPU relating to
recovery of capacity costs associated with power purchases from
cogenerators, September 16, 1994, in Docket No. EX93060255.
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Enterprise and PSE&G, inapplicable.
<PAGE>
ITEM 10. EXECUTIVE OFFICERS OF THE REGISTRANTS
Enterprise and PSE&G. Information regarding executive officers
required by this Item is set forth in Part III, Item 10 hereof.
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
Enterprise's Common Stock is listed on the New York Stock
Exchange, Inc. and the Philadelphia Stock Exchange, Inc. All of PSE&G's
common stock is owned by Enterprise, its corporate parent. As of
December 31, 1995, there were 175,831 holders of record of Enterprise
Common Stock.
The following table indicates the high and low sale prices for
Enterprise's Common Stock, as reported in The Wall Street Journal as
Composite Transactions and dividends paid for the periods indicated:
<TABLE>
<CAPTION>
Dividend High Low Per Share
------ ------- ---------
<S> <C> <C> <C>
Common Stock:
1995
First Quarter................ 29 7/8 26 .54
Second Quarter............... 30 1/4 26 3/4 .54
Third Quarter................ 29 3/4 26 3/4 .54
Fourth Quarter............... 30 5/8 28 3/4 .54
1994
First Quarter................ 32 27 1/4 .54
Second Quarter............... 29 1/4 25 .54
Third Quarter................ 28 5/8 23 7/8 .54
Fourth Quarter............... 27 1/8 25 .54
</TABLE>
Since 1986, PSE&G has made regular cash payments to Enterprise in
the form of dividends on outstanding shares of PSE&G's Common Stock.
PSE&G has paid quarterly dividends on its common stock in each year
commencing in 1948, the year of the distribution of PSE&G's common
stock by Public Service Corporation of New Jersey, the former parent
of PSE&G. Since 1992, EDHI has made regular cash payments to
Enterprise in the form of dividends on outstanding shares of EDHI's
common stock. Enterprise has paid quarterly dividends in each year
commencing with the corporate restructuring of PSE&G when Enterprise
became the owner of all the outstanding common stock of PSE&G. While
the Board of Directors of Enterprise intends to continue the practice
of paying dividends quarterly, amounts and dates of such dividends as
may be declared will necessarily be dependent upon Enterprise's future
earnings, financial requirements and other factors. See MD&A --
Dividends.
<PAGE>
The ability of Enterprise to declare and to pay dividends is
contingent upon its receipt of dividend payments from its subsidiaries.
PSE&G has restrictions on the payments of dividends which are contained
in its Restated Certificate of Incorporation, as amended, certain of
the indentures supplemental to its Mortgage and certain debenture bond
indentures. Under these restrictions, dividends on PSE&G's common stock
may be paid only out of PSE&G's earned surplus and may not reduce
PSE&G's earned surplus to less than $10 million. PSE&G dividends on
common stock would be limited to 75% of Earnings Available for Public
Service Enterprise Group Incorporated if payment thereof would reduce
PSE&G's Stock Equity to less than 33 1/3% of PSE&G's Total
Capitalization and would be limited to 50% of Earnings Available for
Public Service Enterprise Group Incorporated if payment thereof would
reduce Stock Equity to less than 25% of PSE&G's Total Capitalization,
as each of said terms is defined in said PSE&G's debenture bond
indentures. Further, under an indenture relating to the loan to PSE&G
of the proceeds of the Monthly Income Preferred Securities of Public
Service Electric and Gas Capital, L.P. (see Note 4. -- Schedule of
Consolidated Capital Stock and Other Securities of Notes), dividends
may not be paid on PSE&G's capital stock as long as any payments on
PSE&G's deferrable interest subordinated debentures issued under said
indenture have been deferred or there is a default under said indenture
or PSE&G's guarantee relating to the Monthly Income Preferred
Securities. None of these restrictions presently limits the payment
of dividends out of current earnings. The amount of Enterprise's and
PSE&G's consolidated retained earnings not subject to these
restrictions at December 31, 1995 was $1.6 billion and $1.4 billion,
respectively.
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
Enterprise
<TABLE>
The information presented below should be read in conjunction with Enterprise Consolidated
Financial
Statements and Notes thereto.
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------------------------------------
1995 1994 1993 1992 1991
----------- ----------- ----------- ----------- -----------
(THOUSANDS OF DOLLARS, WHERE APPLICABLE)
<S> <C> <C> <C> <C> <C>
Total Operating Revenues.... $ 6,164,153 $ 5,922,443 $ 5,708,590 $ 5,356,792 $ 5,111,421
Net Income.................. $ 662,323 $ 679,033 $ 600,933 $ 504,117 $ 543,035
Earnings per average share
of Common Stock........... $ 2.71 $ 2.78 $ 2.50 $ 2.17 $ 2.43
Dividends paid per share of
Common Stock.............. $ 2.16 $ 2.16 $ 2.16 $ 2.16 $ 2.13
As of December 31:
Total Assets.............. $ 17,170,068 $16,717,440 $16,329,656 $14,777,732 $14,804,354
Long-Term Liabilities:
Long-Term Debt....... $ 5,189,791 $ 5,180,657 $ 5,256,321 $ 4,977,579 $ 5,128,373
Other Long-Term
Liabilities........ $ 199,832 $ 215,603 $ 220,159 $ 146,785 $ 162,064
Preferred Stock with
mandatory redemption...... $ 150,000 $ 150,000 $ 150,000 $ 75,000 $ --
Monthly Income Preferred
Securities................ $ 210,000 $ 150,000 $ -- $ -- $ --
Ratio of Earnings to Fixed
Charges plus Preferred
Securities Dividend
Requirements (A).......... 2.77 2.76 2.59 2.30 2.54
(A) Fixed charges include the preferred securities dividend requirements of PSE&G.
</TABLE>
PSE&G
<TABLE>
The information presented below should be read in conjunction with PSE&G Consolidated Financial
Statements and Notes thereto.
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------------------------------------
1995 1994 1993 1992 1991
----------- ----------- ----------- ----------- -----------
(THOUSANDS OF DOLLARS, WHERE APPLICABLE)
<S> <C> <C> <C> <C> <C>
Total Operating Revenues.... $ 5,707,245 $ 5,518,241 $ 5,290,455 $ 4,994,011 $ 4,827,655
Net Income.................. $ 616,964 $ 659,406 $ 614,868 $ 475,936 $ 545,479
As of December 31:
Total Assets.............. $14,555,577 $14,264,398 $13,984,298 $12,273,857 $12,027,970
Long-Term Liabilities:
Long-Term Debt....... $ 4,586,268 $ 4,486,787 $ 4,364,437 $ 3,978,138 $ 3,933,389
Other Long-Term
Liabilities........ $ 199,832 $ 215,603 $ 220,159 $ 146,785 $ 162,064
Preferred Stock with
mandatory redemption...... $ 150,000 $ 150,000 $ 150,000 $ 75,000 $ --
Monthly Income Preferred
Securities................ $ 210,000 $ 150,000 $ -- $ -- $ --
Ratio of Earnings to Fixed
Charges................... 3.25 3.35 3.30 2.70 3.20
Ratio of Earnings to Fixed
Charges plus Preferred
Securities Dividend
Requirements.............. 2.77 2.92 2.89 2.43 2.86
</TABLE>
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
ENTERPRISE
Significant factors affecting the consolidated financial condition
and the results of operations of Public Service Enterprise Group
Incorporated (Enterprise) and its subsidiaries are described below.
This discussion refers to the Consolidated Financial Statements and
related Notes of Enterprise and should be read in conjunction with such
statements and notes.
Overview
Enterprise has two direct wholly owned subsidiaries, Public
Service Electric and Gas Company (PSE&G) and Enterprise Diversified
Holdings Incorporated (EDHI). Enterprise's principal subsidiary, PSE&G,
is an operating public utility providing electric and gas service in
certain areas in the State of New Jersey.
EDHI is the parent of Enterprise's nonutility businesses: Energy
Development Corporation (EDC), an oil and gas exploration and
production and marketing company; Community Energy Alternatives
Incorporated (CEA), an investor in and developer and operator of
cogeneration and independent power production (IPP) facilities and
exempt wholesale generators (EWGs); Public Service Resources
Corporation (PSRC), which has made primarily passive investments; and
Enterprise Group Development Corporation (EGDC), a diversified
nonresidential real estate development and investment business. EDHI
also has two finance subsidiaries: PSEG Capital Corporation (Capital),
which provides privately placed debt financing on the basis of a
minimum net worth maintenance agreement from Enterprise and Enterprise
Capital Funding Corporation (Funding), which provides privately placed
debt financing guaranteed by EDHI but without direct support from
Enterprise. Enterprise has been conducting a controlled exit from the
real estate business since 1993 and, in December 1995, announced that
it intends to divest EDC.
As of December 31, 1995 and December 31, 1994, PSE&G comprised 85%
of Enterprise assets. For each of the years 1995, 1994 and 1993, PSE&G
revenues were 93% of Enterprise's revenues and PSE&G's earnings
available to Enterprise for such years were 88%, 91% and 96%,
respectively, of Enterprise's net income.
The major factors which will affect Enterprise's future results
include general and regional economic conditions, PSE&G's customer
retention and growth, the ability of PSE&G and EDHI to meet competitive
pressures and to contain costs, the ability to respond to and take
advantage of opportunities arising from increasing competition in the
<PAGE>
utility business, the adequacy and timeliness of rate relief, cost
recovery and necessary regulatory approvals, the ability to continue
to operate and maintain nuclear programs in accordance with Nuclear
Regulatory Commission (NRC) and New Jersey Board of Public Utilities
(BPU) requirements, the impact of environmental regulations, continued
access to the capital markets and continued favorable regulatory
treatment of consolidated tax benefits. (See Note 2 -- Rate Matters,
Note 10 -- Federal Income Taxes and Note 12 -- Commitments and
Contingent Liabilities of Notes to Consolidated Financial Statements
("Notes").)
Competition
The regulatory structure which has historically embraced the
electric and gas industry is in the process of transition. Legislative
and regulatory initiatives, at both the federal and state levels, are
designed to promote competition and will continue to impose additional
pressures on PSE&G's ability to retain customers. In addition, new
technology and interest in self generation and cogeneration have
provided customers with alternative sources of energy.
Over the last several years, the gas industry has been
transformed. Today, commercial and industrial customers can negotiate
their own gas purchases directly with producers or brokers, while PSE&G
is required to provide intrastate transportation of such purchased gas
to the customers' facilities. Although PSE&G is not providing gas
sales service to certain commercial and industrial customers, to date
there has been no negative impact on earnings since sales service and
transportation service tariffs result in the same non-fuel revenue per
therm. Additionally, as a result of this restructuring, PSE&G has been
able to negotiate lower cost gas supplies for those customers who
continue to be part of its bundled rate schedules. A potential
significant competitive challenge could emerge if interstate pipeline
companies are permitted to expand their facilities into PSE&G territory
and provide intrastate transportation to customers. However, this type
of expansion would require federal and state regulatory approvals not
currently in existence.
The restructuring of the electric industry is more complex and
evolving at a slower pace than that of the gas industry. Federal
legislation, such as the National Energy Policy Act (EPAct) has eased
restrictions on independent power producers (IPP) in an effort to
increase competition in the wholesale electric generation market. As
the barriers to entry in the power production business have been
lowered, the construction of cogeneration facilities and independent
<PAGE>
power production facilities has been growing, with the result of
creating lower cost alternatives for large commercial and industrial
customers. Presently, PSE&G is in the process of assessing the
potential for individual arrangements with commercial and industrial
customers which have such competitive alternatives, but PSE&G believes
that it does not currently have a material exposure with respect to
such customers.
Further, EPAct authorized the Federal Energy Regulatory Commission
(FERC) to mandate utilities to transport and deliver or "wheel" energy
for the supply of bulk power to wholesale customers. In March 1995,
FERC issued a Notice of Proposed Rulemaking (NOPR) that would require
utilities to (1) establish open access to all wholesale sellers and
buyers, (2) offer transmission service comparable to service they
provide themselves and (3) take transmission service under the same
tariffs offered to other buyers and sellers. FERC's stated position is
that it will ensure that utilities have a fair opportunity to recover
prudently incurred investments that could become stranded costs as a
result of the NOPR.
In the wholesale electric market, other competitive pressures,
such as municipalization, may also have an impact on utilities in the
evolving electric power industry. Municipalization involves the
acquisition and operation of existing investor-owned facilities by a
municipal utility (MUNI) through condemnation, purchase or lease or the
construction and operation of duplicate, parallel facilities within a
municipal boundary. As a result, utilities, such as PSE&G, could lose
customers (residential, commercial and industrial) in the municipality
that is served by the MUNI, as well as lose the municipal entity itself
as a customer.
EPAct granted the states sole authority to mandate retail
wheeling. New Jersey regulators have been reviewing existing
regulations in an effort to develop a revised regulatory structure that
would afford public utilities, such as PSE&G, increased flexibility to
meet the competitive challenges of the future. Phase I of the New
Jersey Energy Master Plan (Phase I), a two-phase plan to better manage
the future energy needs of the State, has been completed. Phase I
called for legislation that would allow New Jersey utilities to
propose, subject to BPU approval, alternatives to rate base/rate of
return pricing, allow for pricing flexibility under certain standards
for customers with competitive options and equalize the impact of tax
policies, such as the New Jersey Gross Receipts and Franchise Tax
(NJGRT) currently assessed on retail energy utility sales, upon all
energy producers. On July 20, 1995, Governor Whitman signed into law
legislation which provides utilities the flexibility
<PAGE>
to propose, subject to BPU approval, alternatives to existing rate
base/rate of return pricing and offer negotiated off-tariff agreements
to customers with competitive options. 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.
Recoverability of stranded costs is largely dependent on the
transition rules established by regulators, including FERC and the BPU.
Stranded costs that could result as the industry moves to a more
competitive environment include investments in generating facilities,
transmission assets, purchase 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 regulators will
allow recovery of such costs.
Increased competition and the shift of risks and opportunities
between rate payers and PSE&G resulting from PSE&G's filing of its
proposed Alternative Rate Plan (discussed below) will increase the
emphasis upon electric operational reliability, efficiency and cost.
While the incremental cost of nuclear production is less expensive than
PSE&G's other sources of generation, comparatively high embedded costs
for nuclear plants increase the need for PSE&G to optimize the
utilization of its nuclear generating capacity in order to make its
actual generation output cost competitive.
In order to succeed in this increasingly competitive environment,
Enterprise and its subsidiaries have taken the following steps designed
to retain customers, reduce costs, improve operations and strategically
position itself for future operation:
1) On January 16, 1996, PSE&G filed its proposed alternative rate plan,
the "New Jersey Partners in Power" Plan (Alternative Rate Plan). This
seven-year proposed Alternative Rate Plan allows for a transition to
a competitive energy marketplace while substantially shifting the
business and financial risks and opportunities involved in such
transition away from customers to PSE&G. Some of the key features of
the proposal are: (a) an indexed or price-capped approach to replace
the rate base/rate of return form of regulation including the
discontinuance of the electric Levelized Energy Adjustment Clause
(LEAC) and the BPU's Nuclear Performance Standard (NPS), (b) a
productivity gains sharing mechanism with electric and gas customers,
(c) continued recovery of costs associated with activities mandated by
state or federal agencies and (d) a program of rewards and penalties
based on the performance of certain key overall service indicators,
such as the
<PAGE>
duration of customer power outages compared to a five year average.
For a full discussion of the Alternative Rate Plan, see Note 2 -- Rate
Matters of Notes.
2) PSE&G reorganized its senior nuclear leadership team to address
operation and performance issues at PSE&G operated nuclear facilities
and completed a thorough work scope assessment of Salem 1 and Salem 2
in order to return these units to safe, reliable operation over the
long-term.
3) PSE&G reorganized to reflect the evolution toward stand-alone energy
and energy services businesses designed to compete successfully in the
future. The reorganization "unbundled" the services previously
provided by the electric and gas businesses. The focus is now on areas
of business: Generation, Transmission and Distribution and Customer
Services.
4) Also as part of the corporate reorganization, a new business was
created, Enterprise Ventures & Services Corporation, to pursue products
and services which can be marketed beyond traditional geographic and
industry boundaries. Among these are: natural gas marketing in the
wake of deregulation of that industry, conservation and energy
management services and a product development venture with AT&T Corp.
to pilot and eventually market two-way customer communications systems
and services.
5) PSE&G developed initiatives, including the announced closure of five
older, less efficient generating units, to reduce annual fossil
generation operating and maintenance expenses, as well as to reduce
annual fossil capital expenditures.
6) PSE&G has established a deleveraging plan to retire more than $1
billion of outstanding debt over the next five years and to fund its
current five-year construction program entirely through internally
generated cash.
7) PSE&G became the first utility in the Northeast to implement a
service guarantee program. It covers nine key service areas and
provides direct bill credits to customers should PSE&G fail to live up
to its promises.
8) The Strategic Account Marketing Organization was created within
PSE&G to provide more individualized service to its 200 largest
customers.
9) PSE&G received BPU approval for its proposed Experimental Hourly
Energy Pricing Tariff and the first service agreement thereunder with
its second largest customer. This type of agreement serves as an
incentive to retain customers with other energy alternatives in PSE&G's
customer base, as well as in New Jersey.
<PAGE>
10) Also in 1995, PSE&G completed the Bergen Repowering Project which
improved the efficiency and environmental effectiveness of the
facility. Fuel costs for the facility will be reduced by approximately
$30 million annually.
11) CEA pursued business opportunities in certain international
markets. During 1995, CEA closed on three projects and a strategic
alliance in China and South America.
12) Enterprise announced that EDHI will pursue the divestiture of EDC.
The decision to divest EDC stems from Enterprise's conclusion that
ownership of large oil and natural gas reserves is no longer necessary
to provide efficient energy solutions to customers and that the true
market value of EDC is not reflected in the price of Enterprise Common
Stock.
Enterprise and its subsidiaries remain committed to the pursuit
of initiatives to contain costs and retain customers.
Accounting for the Effects of Regulation
Currently, PSE&G accounts for the effects of regulation in
accordance with Statement of Financial Accounting Standards No. 71
"Accounting for the Effects of Certain Types of Regulation" (SFAS 71).
In accordance with the provisions of SFAS 71, PSE&G defers certain
expenses (regulatory assets) on the basis that they will be recovered
from customers as part of the ratemaking process. PSE&G believes that
if its proposed Alternative Rate Plan is approved essentially as
proposed, it would continue to meet the criteria to account for certain
utility revenues and expenses in accordance with SFAS 71. However, if
future events or regulatory changes limit PSE&G's ability to establish
prices to recover its costs, PSE&G might conclude that it no longer
meets the application criteria to defer certain expenses in accordance
with SFAS 71. If PSE&G were to discontinue the application of SFAS 71,
the accounting impact would be an extraordinary, non-cash charge to
operations that could be material to the financial position and results
of operations of Enterprise and PSE&G.
PSE&G has certain regulatory assets resulting from the use of a
level of depreciation expense in the rate making process that is less
than the amount that would be recorded under Generally Accepted
Accounting Principles (GAAP) for non-regulated companies. PSE&G cannot
presently quantify what the financial statement impact may be if
depreciation expense were required to be determined absent regulation,
but the impact on the financial position and results of operations of
PSE&G and Enterprise could be material.
<PAGE>
Statement of Financial Accounting Standards No. 121 "Accounting
for the Impairment of Long-Lived Assets" (SFAS 121) effective for 1996,
establishes accounting standards for the impairment of long-lived
assets. SFAS 121 also requires that regulatory assets which are no
longer probable of recovery through future revenues be charged to
earnings. The adoption of SFAS 121 is not expected to have a material
impact on the financial position or results of operations of PSE&G and
Enterprise.
PSE&G Energy and Fuel Adjustment Clauses
Under the existing regulatory framework, PSE&G has fuel and energy
tariff rate adjustment clauses, the Levelized Gas Adjustment Charge
(LGAC) and the LEAC, which are designed to permit adjustments for
changes in electric energy and gas supply costs and certain other costs
as approved by the BPU, when compared to cost recovery included in base
rates. Presently, charges under the clauses are primarily based on
energy and gas supply costs which are normally projected over
twelve-month periods except for large gas commercial and industrial
customers for which commencing January 1, 1996, gas supply costs are
projected monthly. The changes in the clauses do not directly affect
earnings because such costs are adjusted monthly to match amounts
recovered through revenues except for the financing costs of carrying
underrecovered balances and required interest payments on net
overrecovered balances. Under the clauses, if actual costs differ from
the costs recovered, the amount of the underrecovery or overrecovery
is deferred. Actual costs otherwise includable in the LEAC are subject
to adjustment by the BPU in accordance with the NPS. (See Note 2 --
Rate Matters and Note 12 -- Commitments and Contingent Liabilities of
Notes.) The Alternative Rate Plan proposes discontinuing LEAC and NPS
and would substantially shift the risks and opportunities involved in
managing changes in fuel and replacement power costs from customers to
PSE&G.
Accounting for Stock Compensation
Statement of Financial Accounting Standards No. 123 "Accounting
for Stock-Based Compensation" (SFAS 123) is effective for fiscal years
that begin after December 15, 1995. SFAS 123 establishes financial
accounting and reporting standards for stock based compensation plans
and includes all arrangements by which employees receive shares of
stock or other equity instruments of the employer or by which the
employer incurs liabilities to employees in amounts based on the price
of the employer's stock. The adoption of SFAS 123 is not expected to
have a material impact on the financial position or results of
operations of PSE&G and Enterprise.
<PAGE>
Corporate Policy for the Use of Derivatives
Enterprise and its subsidiaries have established a policy to use
derivatives only for the purpose of managing financial risk and not for
speculative purposes. EDHI currently uses derivatives to manage
financial risk for EDC and PSRC, including its subsidiary United States
Energy Partners (USEP). The derivatives are used to mitigate the
impact on earnings of volatile gas prices for EDC and USEP and volatile
security prices for PSRC's investing activities. For details, see Note
8 -- Financial Instruments and Risk Management of Notes. Although
PSE&G does not currently use derivatives, if the Alternative Rate Plan
is approved as proposed, PSE&G could find derivatives to be a useful
and appropriate tool in managing the volatility of fuel prices, among
other things.
Nuclear Operations
Operation of the Salem units has continued to present challenges
to PSE&G. The units have experienced equipment failures which,
combined with personnel errors, have precipitated or contributed to
plant events or trips which have led to a number of outages over the
lifetime of the units.
Both of the Salem units are currently out of service and their
return dates are subject to completion of testing, analysis, repair
activity and NRC concurrence that they are prepared to restart.
Restart of Salem 1, which had originally been scheduled for the second
quarter of 1996, will be delayed for a substantial period as a result
of the ongoing steam generator inspection and analysis. Salem 2, which
is also undergoing steam generator inspection and analysis is still
scheduled to return to service in the third quarter of 1996. The
inability to successfully return these units to continuous, safe
operation could have a material effect on the financial position,
results of operation and net cash flows of Enterprise and PSE&G.
<PAGE>
Results of Operations
Earnings per share of Enterprise Common Stock were $2.71 in 1995,
$2.78 in 1994 and $2.50 in 1993.
In 1995, Enterprise earnings decreased principally due to
increased operating expenses and lower gas sales from PSE&G. These
decreases in earnings were partially offset by improved electric sales,
EDC revenues resulting from the settlement of litigation related to a
take or pay sales contract and from gains realized on sales of
properties by EDC.
In 1994, the increase in Enterprise earnings was driven primarily
by increased weather related electric and gas sales. Enterprise
earnings also benefited from higher investment income from PSRC.
PSE&G - Earnings Available to Enterprise
<TABLE>
<CAPTION>
1995 vs. 1994 1994 vs. 1993
---------------- ---------------
Per Per
Amount Share Amount Share
------ ------ ------ ------
(Millions, except Per Share Data)
<S> <C> <C> <C> <C>
PSE&G
Revenues (net of fuel costs and gross
receipts taxes).............................. $ 38 $ .16 $ 147 $ .60
Other operation expenses....................... 10 .04 (77) (.32)
Maintenance expenses........................... (4) (.02) (4) (.02)
Depreciation and amortization expenses......... (39) (.16) (41) (.17)
Federal income taxes........................... (27) (.11) 14 .06
Interest charges............................... (11) (.05) (6) (.02)
Allowance for Funds used During Construction
(AFDC)......................................... (2) (.01) 11 .05
Preferred Securities Dividend Requirements..... (8) (.03) (4) (.02)
Other income and expenses...................... 7 .03 2 .01
----- ----- ----- ----
Earnings Available to Enterprise............... (36) (.15) 42 .17
<PAGE>
PSE&G - Revenues
Electric
Revenues increased $281 million, or 7.5%, in 1995 from 1994; 1994
revenues increased $44 million, or 1.2%, compared to 1993. The
significant components of these changes follow:
</TABLE>
<TABLE>
<CAPTION>
Increase or (Decrease)
------------------------------
1995 vs. 1994 1994 vs. 1993
------------- -------------
(Millions)
<S> <C> <C>
Kilowatthour sales............................... $ 38 $ 69
Recovery of energy costs......................... 189 (26)
NJGRT............................................ 12 (4)
Other operating revenues......................... 42 5
----- -----
Total Electric Revenues.......................... $ 281 $ 44
===== =====
Gas
During 1995, revenues decreased $92 million, or 5.2%, from 1994;
1994 revenues increased $184 million, or 11.6%, over 1993. The
significant components of these changes follow:
</TABLE>
<TABLE>
<CAPTION>
Increase or (Decrease)
------------------------------
1995 vs. 1994 1994 vs. 1993
------------- -------------
(Millions)
<S> <C> <C>
Therm sales................................... $ (35) $ 61
Recovery of fuel costs........................ (78) 121
NJGRT......................................... 19 (12)
Other operating revenues...................... 2 14
----- -----
Total Gas Revenues................ $ (92) $ 184
===== =====
</TABLE>
During 1995, electric revenues were impacted by higher residential
and commercial sales resulting from a recovering economy, warm summer
weather and a modest increase in customer base. In addition, other
electric revenues increased principally due to higher miscellaneous
revenues from increased capacity sales to unaffiliated utilities and
to wholesale customers, service reconnections, temporary services and
revenues from Public Service Conservation Resources Corporation
(PSCRC), PSE&G's energy services subsidiary. Capacity sales are sales
for the reservation of a specified quantity of PSE&G system generating
capacity and must be paid even when the energy is not taken.
<PAGE>
In 1995, gas revenues decreased due to the mild winter weather,
partially offset by revenues resulting from the rapidly growing off
system sales and higher gas service contract revenues. Off system
sales are sales of excess gas to brokers and other utilities which are
not part of PSE&G's firm customer base. Earnings on these sales are
shared between the firm customer and PSE&G on an 80/20 split,
respectively.
In 1994, electric and gas revenues benefited from weather related
sales which primarily impacted electric commercial sales and all firm
gas rate schedules. Other electric revenues increased principally due
to increased capacity sales to unaffiliated utilities and increased
miscellaneous revenues, partially offset by lower energy sales to the
unaffiliated utilities. Other gas revenues were significantly impacted
by a one time $10 million legal settlement of a gas contract.
PSE&G - Expenses
Fuel Expenses
As discussed in the PSE&G Energy and Fuel Adjustment Clauses
section, variances in fuel expenses do not directly affect earnings
because of the adjustment clause mechanism. However, if the proposed
Alternative Rate Plan is adopted as filed, future changes in electric
fuel and replacement power costs could impact earnings.
Other Operation Expenses
During 1995, other operation expenses decreased $10 million from
1994 levels. PSE&G had lower nuclear and miscellaneous production
expenses. Nuclear production expenses decreased during 1995 due in
part to the extended outage of Salem Units 1 and 2. PSE&G also secured
savings in miscellaneous expenditures, such as clerical and office
supplies in its steam production area. These savings were partially
offset by increased marketing expenditures for customer related
programs initiated in 1995.
During 1994, other operation expenses increased $77 million when
compared to 1993 principally due to increased nuclear production
expenses which were higher than 1993 levels when Salem had a refueling
outage, increased transmission and distribution expenses incurred
during the bitter 1994 winter and increased administrative and general
expenses primarily due to a rise in personal and property damage claim
expenses. The increase in personal and property damage claims was
directly related to storm damage and other weather related occurrences.
<PAGE>
Maintenance Expenses
Maintenance expense increased $4 million in 1995 in comparison to
1994 due to the extended outage at Salem Units 1 and 2, partially
offset by decreased expenses for electric and gas distribution
facilities. Maintenance expense for 1994 was $4 million higher than
in 1993 primarily due to the 1994 Hope Creek refueling outage and
increased expenses for gas distribution facilities which resulted from
the extremely cold weather during January and February 1994.
Depreciation and Amortization Expenses
Depreciation and Amortization expenses increased $39 million in
1995 when compared to 1994 and $41 million in 1994 when compared to
1993. The increases in 1995 and 1994 are attributable to increased
depreciation expenses directly related to increases in plant in
service.
Federal Income Taxes
In 1995, Federal Income Taxes increased $27 million from 1994 and
1994 Federal Income Taxes decreased $14 million from 1993. The 1995
taxes were higher than 1994 principally due to the receipt of a non-
taxable insurance benefit in 1994 and to higher pre-tax operating
income. Federal Income Taxes decreased in 1994 due to the receipt of
a non-taxable insurance benefit, partially offset by higher pre-tax
operating income.
Interest Charges
In 1995, interest charges were $11 million higher than in 1994
and, in 1994, interest charges were $6 million higher than in 1993.
The primary reason for the 1995 increase was higher interest charges
on miscellaneous liabilities, while the driving force behind the 1994
increase was a higher average daily balance of short-term debt
outstanding at higher interest rates.
Allowance for Funds Used During Construction
In 1995, there was a $2 million decrease in AFDC income
principally due to a decrease in construction expenditures. In 1994,
AFDC income was $11 million higher than the 1993 level due to increased
construction resulting from the repowering of the Bergen Generating
Station.
<PAGE>
Preferred Securities
Dividend requirements on preferred securities increased $8 million
in 1995 compared to 1994 and $4 million in 1994 compared to 1993. The
increases are the result of the issuance of higher rate Monthly Income
Preferred Securities used to redeem certain issues of PSE&G Preferred
Stock.
EDHI - Net Income
<TABLE>
<CAPTION>
1995 vs. 1994 1994 vs. 1993
---------------- ----------------
Per Per
Amount Share Amount Share
------ ------ ------ ------
(Millions, except Per Share Data)
<S> <C> <C> <C> <C>
PSRC..................... -- -- 14 .06
CEA...................... (4) (.02) 2 .01
EDC...................... 23 .10 (34) (.14)
EGDC..................... 1 -- 54 .22
----- ----- ----- -----
Total............ 20 .08 36 .15
===== ===== ===== =====
</TABLE>
The net income of EDHI was $80 million in 1995, a $20 million
increase over 1994. EDC's income increased $23 million primarily due
to the realization of a settlement related to a take-or-pay sales
contract. EDC's gains from property sales, higher oil prices and
volumes and reduced depreciation, depletion and amortization (DD&A)
expenses also contributed to higher earnings but were substantially
offset by lower gas prices and volumes. CEA's earnings decreased $4
million compared to 1994 due to higher interest and development
expenses.
The net income of EDHI was $60 million in 1994. Excluding the
impact of an impairment of assets of $51 million, after tax, by EGDC
in 1993, EDHI's earnings in 1994 decreased $15 million in comparison
to 1993. Increased income from PSRC (higher investment income, lower
income taxes compared to 1993 which included the effects of a Federal
income tax increase and lower interest charges) and CEA (higher income
from operating plants) was offset by lower EDC earnings (lower gas
volumes and prices and higher exploration and development expenditures
due to increased drilling activities).
<PAGE>
Dividends
The ability of Enterprise to declare and pay dividends is
contingent upon its receipt of dividend payments from its subsidiaries.
PSE&G has made regular payments to Enterprise in the form of dividends
on outstanding shares of its common stock since Enterprise was formed
in 1986. In addition, commencing in 1992, EDHI has also made payments
to Enterprise in the form of dividends on its outstanding common stock.
Since 1992, Enterprise has maintained a constant rate of common stock
dividends. Management believes that gradually reducing the common
stock dividend payout ratio is a prudent policy.
Dividends paid to holders of Enterprise Common Stock increased $.5
million during 1995 compared to 1994 and increased $6 million during
1994 compared to 1993. Such increases were due to the issuance of
additional shares of Enterprise Common Stock.
Dividends paid to holders of PSE&G's Preferred Stock decreased
$6.7 million during 1995 compared to 1994 and increased $2 million
during 1994 compared to 1993. The 1995 decrease in such dividends was
due to the redemption of certain series of Preferred Stock. The
increase in 1994 was due to the issuance of additional shares of
Preferred Stock. (See Liquidity and Capital Resources.)
Dividends paid to holders of Monthly Income Preferred Securities
of Public Service Electric and Gas Capital, L.P. (Partnership), a
limited partnership of which PSE&G is the general partner, increased
$14 million during 1995 compared to 1994. The Partnership's Monthly
Income Preferred Securities were first issued in 1994 and were not
outstanding for the entire year. The increase in 1995 was due to the
issuance of additional securities coupled with the fact that Monthly
Income Preferred Securities were outstanding for the entire year. (See
Note 4 -- Schedule of Consolidated Capital Stock and Other Securities
of Notes.)
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 programs in accordance with NRC and BPU requirements, the
impact of environmental regulations, continued access to the capital
markets and continued favorable regulatory treatment of consolidated
tax benefits. (For additional information see the discussion of
Competition above and Note 12, Commitments and Contingencies of the
Notes.)
<PAGE>
PSE&G
PSE&G had utility plant additions of $686 million, $887 million
and $890 million, for 1995, 1994 and 1993, respectively, including AFDC
of $36 million, $38 million and $27 million, respectively. Construction
expenditures were related to improvements in PSE&G's existing power
plants, transmission and distribution system, gas system and common
facilities. PSE&G also expended $30 million, $34 million and $48
million for the cost of plant removal (net of salvage) in 1995, 1994
and 1993, respectively. Construction expenditures from 1996 through
2000 are expected to aggregate $2.8 billion, including AFDC.
Forecasted construction expenditures are related to improvements in
PSE&G's existing power plants (including nuclear fuel), transmission
and distribution system, gas system and common facilities. (See
Construction, Investments and Other Capital Requirements Forecast
below.)
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 2 -- Rate Matters and Note 12 --
Commitments and Contingent Liabilities of Notes.)
EDHI
During the next five years, a majority of EDHI's capital
requirements are expected to be provided from operational cash flows.
(See Construction, Investments and Other Capital Requirements Forecast
below.) 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. EDC will
continue to pursue a program to grow its reserve base through a
combination of strategic acquisitions, high potential exploration
activities and exploitation of its acquired properties and new
discoveries. EDC's worldwide 1995 production totaled 99 BCFE and, at
year end, EDC had proved reserves of 920 BCFE. EDC expended
approximately $153 million, $188 million and $109 million in 1995, 1994
and 1993, respectively, to acquire, discover or develop domestic and
international reserves. Of these expenditures, $132 million, $160
million and $92 million in 1995, 1994 and 1993, respectively, were
capitalized. These amounts included capitalized interest of $4
million, $4 million and $3 million, respectively. For discussion
regarding the potential divestiture of EDC, see Competition.
<PAGE>
PSRC will continue to limit new investments to those related to
the energy businesses, while EGDC will exit the real estate business
in a prudent manner. Over the next several years, EDHI and its
subsidiaries will also be required to refinance a portion of their
maturing debt in order to meet their capital requirements. In addition,
any divestiture of EDC will require the renegotiation of existing loan
agreements of Funding. Any inability to extend or replace maturing
debt and or existing agreements at current levels and interest rates
may affect future earnings and result in an increase in EDHI's cost of
capital.
PSRC is a limited partner in various limited partnerships and is
committed to make investments from time to time, upon the request of
the respective general partners. At December 31, 1995, $58 million
remained as PSRC's unfunded commitment subject to call.
EDHI and each of its subsidiaries are subject to restrictive
business and financial covenants contained in existing debt agreements
and are required to not exceed various debt to equity ratios which vary
from 3:1 to 1.75:1. EDHI is also required to maintain a twelve-months
earnings before interest and taxes to interest (EBIT) coverage ratio
of at least 1.35:1. As of December 31, 1995 and 1994, EDHI had a
consolidated debt to equity ratio of 1.15:1 and, for the years ended
December 31, 1995, 1994 and 1993, EBIT coverage ratios, as defined to
exclude the effects of EGDC, of 2.47:1, 1.94:1 and 2.13:1,
respectively. Compliance with applicable financial covenants will
depend upon future financial position and levels of earnings, as to
which no assurance can be given. (See Note 6 -- Schedule of
Consolidated Debt and Note 16 -- Property Impairment of Enterprise
Group Development Corporation of Notes.)
Long-Term Investments and Real Estate
Long-term investments and real estate increased $82 million in
1995 and decreased $58 million and $67 million in 1994 and 1993,
respectively. The increase in 1995 was primarily due to an increase
in PSCRC's long-term investments of $49 million, PSRC's increase in
investments in partnerships and leases of $52 million and CEA's
increase in partnership investments of $27 million, partially offset
by EGDC's property sales of $53 million. The decrease in 1994 was
primarily due to a $73 million net decrease in PSE&G's investment in
an insurance contract, partially offset by an increase in long-term
investments of $23 million. The decrease in 1993 was due primarily to
EDHI's decrease in long-term investments of $63 million. (For more
details, see Note 7 -- long-term investments and Note 11 -- Leasing
Activities - As Lessor of Notes.)
<PAGE>
Construction, Investments and Other Capital Requirements Forecast
<TABLE>
<CAPTION>
1996 1997 1998 1999 2000 TOTAL
------ ------ ------ ------ ----- ------
(MILLIONS OF DOLLARS)
<S> <C> <C> <C> <C> <C>
PSE&G (including AFDC)
Electric (including Nuclear).......... 464 408 383 356 342 1,953
Gas................................... 128 117 110 106 102 563
Miscellaneous Corporate............... 70 56 50 41 35 252
------ ------ ------ ------ ------ -----
Total PSE&G Construction Requirements... 662 581 543 503 479 2,768
------ ------ ------ ------ ------ ------
EDHI.................................... 272 148 229 206 225 1,080
------ ------ ------ ----- ------ ------
Mandatory Retirement of Securities:
PSE&G................................. 345 400 118 100 400 1,363
EDHI.................................. 91 125 195 200 78 689
------- ------ ------ ------ ------ ------
436 525 313 300 478 2,052
------- ------ ------ ------ ------ ------
Working Capital and Other - net........ 16 (26) 70 (21) 59 98
------- ------ ------ ------ ------ ------
Total Capital Requirements... $1,386 $1,228 $1,155 $ 988 $1,241 $5,998
======= ====== ====== ====== ====== ======
</TABLE>
While the above forecast includes capital costs to comply with revised
Federal Clean Air Act (CAA) requirements through 2000, it does not include
additional requirements being developed under the CAA by Federal and State
agencies. Such additional costs cannot be reasonably estimated at this
time. PSE&G believes that such CAA costs would be recoverable from electric
customers. In accordance with the proposed Alternative Rate Plan, separate
mechanisms would be established to ensure continued recovery of costs
associated with activities mandated or approved by state or federal agencies
or otherwise out of PSE&G's control.
<PAGE>
Internal Generation of Cash from Operations
Enterprise's cash from operations is generated primarily from the
operating activities of PSE&G.
Enterprise's cash provided by operations for 1995 increased $261
million to $1.493 billion from 1994. This increase was primarily due
to the increase in PSE&G s revenues (partially offset by an increase
in accounts receivable and unbilled revenues), an increase in the
recovery of electric energy and gas costs through PSE&G's LEAC and LGAC
and a decrease in PSE&G s gross receipts taxes. For additional
information see Results of Operations.
Enterprise's cash provided by operations for 1994 increased $200
million to $1.232 billion from 1993. This increase was primarily due
to the increase in PSE&G's revenues (plus a decrease in accounts
receivable and unbilled revenues) and an increase in the recovery of
electric energy and gas costs through PSE&G's LEAC and LGAC. For
additional information see Results of Operations.
External Financings - PSE&G
In 1995, PSE&G issued $156 million of its First and Refunding
Mortgage Bonds (Bonds)/Medium-Term Notes (MTNs) for the purpose of
redeeming $56 million of its higher cost Bonds and to pay a portion of
its maturing bonds.
In 1995, Partnership issued $60 million of Monthly Income
Preferred Securities, the proceeds of which were used to redeem $60
million of PSE&G's Preferred Stock.
The BPU has authorized PSE&G to issue approximately $4.375 billion
aggregate amount of additional Bonds/MTNs/Preferred Stock/Monthly
Income Preferred Securities through 1997 for refunding purposes. Under
its Mortgage, PSE&G may issue new Bonds against retired Bonds and as
of December 31, 1995, up to $2.840 billion aggregate amount of new
Bonds against previous additions and improvements to utility plant,
provided that the ratio of earnings to fixed charges is at least 2:1.
At December 31, 1995 the ratio was 2.77:1.
In January 1996, PSE&G issued $350 million of Bonds. In February
1996, 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.
The BPU has authorized PSE&G to issue and have outstanding at any
one time not more than $1 billion of its short-term obligations,
consisting of commercial paper and other unsecured borrowings from
banks and other lenders through January 1, 1997. On December 31, 1995,
PSE&G had $449 million of short-term debt outstanding.
<PAGE>
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
borrowing up to one year. On December 31, 1995, there were no
borrowings outstanding under these credit agreements. PSE&G expects
to be able to renew the credit agreement expiring in 1996.
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 7, 1996. PSCRC is presently in the process
of negotiating a one year extension for this facility. As of December
31, 1995, PSCRC had $30 million outstanding under this facility.
PSE&G Fuel Corporation (Fuelco) has a $150 million commercial
paper program to finance a 42.49% share of Peach Bottom nuclear fuel,
supported by a $150 million revolving credit facility with a group of
banks, which expires on June 28, 1996. PSE&G has guaranteed repayment
of Fuelco's respective obligations. As of December 31, 1995, Fuelco
had commercial paper of $88 million outstanding under such program.
External Financings - EDHI
Funding has 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 December 31, 1995, Funding had
$182 million of borrowings outstanding under this commercial paper
program.
Additionally, Funding has a $225 million revolving credit facility
expiring in March 1998. As of December 31, 1995, Funding had $100
million of borrowings outstanding under this facility.
Capital's MTN program has previously provided for an aggregate
principal amount of up to $750 million of MTNs so that its total debt
outstanding at any time, including MTNs, would not exceed such amount.
Effective January 31, 1995, Capital will not have more than $650
million of debt outstanding at any time. In 1995, Capital repaid $112
million of its MTNs. At December 31, 1995, Capital had total debt
outstanding of $478 million, including $355 million of MTNs.
<PAGE>
PSE&G
The information required by this item is incorporated herein by
reference to the following portions of Enterprise's Management's
Discussion and Analysis of Financial Condition and Results of
Operations, insofar as they relate to PSE&G and its subsidiaries:
Overview; Competition; PSE&G Energy and Fuel Adjustment Clauses;
Accounting for Stock Compensation; Corporate Policy for the Use of
Derivatives; Nuclear Operations; Results of Operations; Dividends;
Liquidity and Capital Resources; Long-Term Investments and Real Estate;
Construction; Investments and Other Capital Requirements Forecast; and
External Financings.
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
FINANCIAL STATEMENT RESPONSIBILITY - ENTERPRISE
Management of Enterprise is responsible for the preparation,
integrity and objectivity of the consolidated financial statements and
related notes of Enterprise. The consolidated financial statements and
related notes are prepared in accordance with generally accepted
accounting principles. The financial statements reflect estimates based
upon the judgment of management where appropriate. Management believes
that the consolidated financial statements and related notes present
fairly Enterprise's financial position and results of operations.
Information in other parts of this Annual Report is also the
responsibility of management and is consistent with these consolidated
financial statements and related notes.
The firm of Deloitte & Touche LLP, independent auditors, is
engaged to audit Enterprise's consolidated financial statements and
related notes and issue a report thereon. Deloitte & Touche's audit is
conducted in accordance with generally accepted auditing standards.
Management has made available to Deloitte & Touche, all the
corporation's financial records and related data, as well as the
minutes of directors' meetings. Furthermore, management believes that
all representations made to Deloitte & Touche, during its audit were
valid and appropriate.
Management has established and maintains a system of internal
accounting controls to provide reasonable assurance that assets are
safeguarded, and that transactions are executed in accordance with
management's authorization and recorded properly for the prevention and
detection of fraudulent financial reporting, so as to maintain the
integrity and reliability of the financial statements. The system is
designed to permit preparation of consolidated financial statements and
related notes in accordance with generally accepted accounting
principles. The concept of reasonable assurance recognizes that the
costs of a system of internal accounting controls should not exceed the
related benefits. Management believes the effectiveness of this system
is enhanced by an ongoing program of continuous and selective training
of employees. In addition, management has communicated to all employees
its policies on business conduct, safeguarding assets and internal
controls.
The Internal Auditing Department of PSE&G conducts audits and
appraisals of accounting and other operations of Enterprise and its
subsidiaries and evaluates the effectiveness of cost and other controls
and recommends to management, where appropriate, improvements thereto.
<PAGE>
Management has considered the internal auditors' and Deloitte &
Touche's recommendations concerning the corporation's system of
internal accounting controls and has taken actions that, in its
opinion, are cost-effective in the circumstances to respond
appropriately to these recommendations. Management believes that, as
of December 31, 1995, the corporation's system of internal accounting
controls is adequate to accomplish the objectives discussed herein.
The Board of Directors of Enterprise carries out its
responsibility of financial overview through its Audit Committee, which
presently consists of six directors who are not employees of Enterprise
or any of its affiliates. The Audit Committee meets periodically with
management as well as with representatives of the internal auditors and
Deloitte & Touche. The Audit Committee reviews the work of each to
ensure that its respective responsibilities are being carried out and
discusses related matters. Both the internal auditors and Deloitte &
Touche periodically meet alone with the Audit Committee and have free
access to the Audit Committee, and its individual members, at any time.
<TABLE>
<S> <C>
E. James Ferland Robert C. Murray
Chairman of the Board, Vice President and
President and Chief Chief Financial Officer
Executive Officer
Patricia A. Rado
Vice President and Controller
Principal Accounting Officer
February 14, 1996
</TABLE>
<PAGE>
FINANCIAL STATEMENT RESPONSIBILITY - PSE&G
Management of PSE&G is responsible for the preparation, integrity
and objectivity of the consolidated financial statements and related
notes of PSE&G. The consolidated financial statements and related notes
are prepared in accordance with generally accepted accounting
principles. The financial statements reflect estimates based upon the
judgment of management where appropriate. Management believes that the
consolidated financial statements and related notes present fairly
PSE&G's financial position and results of operations. Information in
other parts of this Annual Report is also the responsibility of
management and is consistent with these consolidated financial
statements and related notes.
The firm of Deloitte & Touche LLP, independent auditors, is
engaged to audit PSE&G's consolidated financial statements and related
notes and issue a report thereon. Deloitte & Touche's audit is
conducted in accordance with generally accepted auditing standards.
Management has made available to Deloitte & Touche, all the
corporation's financial records and related data, as well as the
minutes of directors' meetings. Furthermore, management believes that
all representations made to Deloitte & Touche, during its audit were
valid and appropriate.
Management has established and maintains a system of internal
accounting controls to provide reasonable assurance that assets are
safeguarded, and that transactions are executed in accordance with
management's authorization and recorded properly for the prevention and
detection of fraudulent financial reporting, so as to maintain the
integrity and reliability of the financial statements. The system is
designed to permit preparation of consolidated financial statements and
related notes in accordance with generally accepted accounting
principles. The concept of reasonable assurance recognizes that the
costs of a system of internal accounting controls should not exceed the
related benefits. Management believes the effectiveness of this system
is enhanced by an ongoing program of continuous and selective training
of employees. In addition, management has communicated to all employees
its policies on business conduct, safeguarding assets and internal
controls.
The Internal Auditing Department conducts audits and appraisals
of accounting and other operations and evaluates the effectiveness of
cost and other controls and recommends to management, where
appropriate, improvements thereto. Management has considered the
internal auditors' and Deloitte & Touche's recommendations concerning
the corporation's system of internal accounting controls and has taken
actions that are cost-effective in the circumstances to respond
appropriately to these recommendations. Management believes that, as
of December 31, 1995, the corporation's system of internal accounting
controls is adequate to accomplish the objectives discussed herein.
<PAGE>
The Board of Directors carries out its responsibility of financial
overview through the Audit Committee of Enterprise, which presently
consists of six directors who are not employees of Enterprise or any
of its affiliates. The Enterprise Audit Committee meets periodically
with management as well as with representatives of the internal
auditors and Deloitte & Touche. The Audit Committee reviews the work
of each to ensure that their respective responsibilities are being
carried out and discusses related matters. Both the internal auditors
and Deloitte & Touche, periodically meet alone with the Audit Committee
and have free access to the Audit Committee, and its individual
members, at any time.
<TABLE>
<S> <C>
E. James Ferland Robert C. Murray
Chairman of the Board Senior Vice President and
and Chief Executive Officer Chief Financial Officer
Patricia A. Rado
Vice President and Controller
Principal Accounting Officer
February 14, 1996
</TABLE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Stockholders and Board of Directors of Public Service Enterprise
Group Incorporated:
We have audited the consolidated balance sheets of Public Service
Enterprise Group Incorporated and its subsidiaries (the "Company") as
of December 31, 1995 and 1994, and the related consolidated statements
of income, retained earnings, and cash flows for each of the three
years in the period ended December 31, 1995. Our audits also included
the consolidated financial statement schedules listed in the Index in
Item 14(b)(1). These consolidated financial statements and the
consolidated financial statement schedules are the responsibility of
the Company's management. Our responsibility is to express an opinion
on these consolidated financial statements and consolidated financial
statement schedules based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audits to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, such consolidated financial statements present
fairly, in all material respects, the financial position of Public
Service Enterprise Group Incorporated and its subsidiaries at December
31, 1995 and 1994, and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 1995
in conformity with generally accepted accounting principles. Also, in
our opinion, such consolidated financial statement schedules, when
considered in relation to the basic consolidated financial statements
taken as a whole, present fairly in all material respects the
information set forth therein.
We have also previously audited, in accordance with generally
accepted auditing standards, the consolidated balance sheets as of
December 31, 1993, 1992, and 1991, and the related consolidated
statements of income, retained earnings and cash flows for the years
ended December 31, 1992 and 1991 (none of which are presented herein)
and we expressed unqualified opinions on those consolidated financial
statements. In our opinion, the information set forth in the Selected
Financial Data for each of the five years in the period ended December
31, 1995 for the Company, presented in Item 6, is fairly stated in all
material respects, in relation to the consolidated financial statements
from which it has been derived.
DELOITTE & TOUCHE LLP
February 14, 1996
Parsippany, New Jersey
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of Public Service Electric and Gas Company:
We have audited the consolidated balance sheets of Public Service
Electric & Gas Company and its subsidiaries (the "Company") as of
December 31, 1995 and 1994, and the related consolidated statements of
income, retained earnings, and cash flows for each of the three years
in the period ended December 31, 1995. Our audits also included the
consolidated financial statement schedules listed in the Index in Item
14(b)(2). These consolidated financial statements and the consolidated
financial statement schedules are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
consolidated financial statements and consolidated financial statement
schedules based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audits to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present
fairly, in all material respects, the financial position of Public
Service Electric & Gas Company and its subsidiaries at December 31,
1995 and 1994, and the results of their operations and their cash flows
for each of the three years in the period ended December 31, 1995 in
conformity with generally accepted accounting principles. Also, in our
opinion, such consolidated financial statement schedules, when
considered in relation to the basic consolidated financial statements
taken as a whole, present fairly in all material respects the
information set forth therein.
We have also previously audited, in accordance with generally
accepted auditing standards, the consolidated balance sheets as of
December 31, 1993, 1992, and 1991, and the related consolidated
statements of income, retained earnings and cash flows for the years
ended December 31, 1992 and 1991 (none of which are presented herein)
and we expressed unqualified opinions on those consolidated financial
statements. In our opinion, the information set forth in the Selected
Financial Data for each of the five years in the period ended December
31, 1995 for the Company, presented in Item 6, is fairly stated in all
material respects, in relation to the consolidated financial statements
from which it has been derived.
DELOITTE & TOUCHE LLP
February 14, 1996
Parsippany, New Jersey
<PAGE>
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------------------
1995 1994 1993
------------ ------------ ------------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
OPERATING REVENUES
Electric............................................... $ 4,020,842 $ 3,739,713 $ 3,696,114
Gas.................................................... 1,686,403 1,778,528 1,594,341
Nonutility Activities.................................. 456,908 404,202 418,135
------------ ------------ ------------
Total Operating Revenues........................ 6,164,153 5,922,443 5,708,590
------------ ------------ ------------
OPERATING EXPENSES
Operation
Fuel for Electric Generation and Interchanged
Power............................................. 891,782 695,763 717,136
Gas Purchased and Materials for Gas Produced......... 961,539 1,023,956 897,885
Other................................................ 1,118,758 1,118,523 1,014,455
Maintenance............................................ 312,610 308,080 304,403
Depreciation and Amortization.......................... 674,231 634,028 601,597
Property Impairment (note 16).......................... -- -- 77,637
Taxes
Federal Income Taxes (note 10)....................... 353,997 312,551 313,680
New Jersey Gross Receipts Taxes...................... 612,961 583,167 597,898
Other................................................ 80,565 82,282 77,052
------------ ------------ -----------
Total Operating Expenses........................ 5,006,443 4,758,350 4,601,743
------------ ------------ -----------
OPERATING INCOME......................................... 1,157,710 1,164,093 1,106,847
------------ ------------ -----------
OTHER INCOME
Allowance for Funds Used During
Construction -- Equity............................... 5,324 12,789 12,265
Miscellaneous -- net................................... 8,041 6,430 (3,778)
------------ ------------ -----------
Total Other Income.............................. 13,365 19,219 8,487
------------ ------------ -----------
INCOME BEFORE INTEREST CHARGES AND DIVIDENDS ON
PREFERRED SECURITIES................................... 1,171,075 1,183,312 1,115,334
------------ ------------ -----------
INTEREST CHARGES (note 6)
Long-Term Debt......................................... 434,066 459,158 469,120
Short-Term Debt........................................ 32,822 23,962 13,860
Other.................................................. 29,172 12,805 19,554
------------ ------------ -----------
Total Interest Charges.......................... 496,060 495,925 502,534
Allowance for Funds Used During Construction -- Debt and
Capitalized Interest................................... (37,208) (33,793) (20,833)
------------ ------------ -----------
Net Interest Charges..................................... 458,852 462,132 481,701
------------ ------------ -----------
Preferred Securities Dividend Requirements (note 4)...... 49,426 42,147 38,114
Preferred Stock Redemption Premium....................... 474 -- --
------------ ------------ -----------
Income before cumulative effect of accounting change..... 662,323 679,033 595,519
Cumulative effect of change in accounting for income taxes
(note 10).............................................. -- -- 5,414
------------ ------------ -----------
Net Income............................................... $ 662,323 $ 679,033 $ 600,933
============ ============ ===========
SHARES OF COMMON STOCK OUTSTANDING
End of Year............................................ 244,697,930 244,697,930 243,688,256
Average for Year....................................... 244,697,930 244,470,794 240,663,599
EARNINGS PER AVERAGE SHARE OF COMMON STOCK
Before cumulative effect of accounting change........... $ 2.71 $ 2.78 $ 2.48
Cumulative effect of change in accounting for income
taxes................................................ -- -- .02
------------ ------------ -----------
TOTAL EARNINGS PER AVERAGE SHARE OF COMMON STOCK......... $ 2.71 $ 2.78 $ 2.50
============ ============ ===========
DIVIDENDS PAID PER SHARE OF COMMON STOCK................. $ 2.16 $ 2.16 $ 2.16
============ ============ ===========
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1995 1994
----------- -----------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
UTILITY PLANT-ORIGINAL COST (note 15)
Electric................................................................ $13,095,103 $12,345,919
Gas..................................................................... 2,442,572 2,318,233
Common.................................................................. 517,104 545,131
----------- -----------
Total............................................................ 16,054,779 15,209,283
Less: accumulated depreciation and amortization........................... 5,440,414 5,147,105
----------- -----------
Net....................................................................... 10,614,365 10,062,178
Nuclear Fuel in Service, net of accumulated amortization --
1995, $297,435; 1994, $302,906........................................ 180,018 205,273
----------- -----------
Net Utility Plant in Service..................................... 10,794,383 10,267,451
Construction Work in Progress, including Nuclear Fuel in Process --
1995, $104,743; 1994, $65,429........................................... 369,082 806,934
Plant Held for Future Use................................................. 23,966 23,860
----------- -----------
Net Utility Plant................................................ 11,187,431 11,098,245
----------- -----------
INVESTMENTS AND OTHER NONCURRENT ASSETS (notes 3,7,8,11,12 and 16)
Long-Term Investments, net of amortization --
1995, $7,213; 1994, $2,365, and net of valuation allowances --
1995, $21,302; 1994, $17,104, respectively............................ 1,822,160 1,625,952
Oil and Gas Property, Plant and Equipment, net of accumulated depreciation
and amortization -- 1995, $786,736; 1994, $748,245.................... 608,015 577,913
Real Estate, Property and Equipment, net of accumulated depreciation --
1995, $5,063; 1994, $14,242, and net of valuation allowances --
1995, $8,228; 1994, $23,264, respectively............................. 75,558 115,210
Other Plant, net of accumulated depreciation and amortization --
1995, $6,531; 1994, $4,653............................................ 27,997 36,063
Nuclear Decommissioning and Other Special Funds......................... 276,348 233,022
Other Assets - net...................................................... 55,974 85,478
----------- -----------
Total Investments and Other Noncurrent Assets.................... 2,866,052 2,673,638
----------- -----------
CURRENT ASSETS
Cash and Cash Equivalents (note 9)...................................... 76,233 67,866
Accounts Receivable:
Customer Accounts Receivable.......................................... 525,404 434,207
Other Accounts Receivable............................................. 260,713 211,779
Less: allowance for doubtful accounts................................ 37,641 40,915
Unbilled Revenues....................................................... 246,876 204,056
Fuel, at average cost................................................... 253,360 268,927
Materials and Supplies, net of inventory valuation reserves --
1995, $20,100; 1994, $18,200, respectively............................ 144,970 148,285
Deferred Income Taxes (note 10)......................................... 27,571 25,311
Miscellaneous Current Assets............................................ 62,631 37,356
----------- -----------
Total Current Assets............................................. 1,560,117 1,356,872
----------- -----------
DEFERRED DEBITS (note 5)
Property Abandonments -- net............................................ 70,120 88,269
Oil and Gas Property Write-Down......................................... 36,078 41,232
Unamortized Debt Expense................................................ 123,833 134,599
Deferred OPEB Costs (notes 1 and 13).................................... 167,189 116,476
Underrecovered Electric Energy and Gas Costs -- net..................... 170,565 172,563
Unrecovered Environmental Costs (notes 2 and 12)........................ 130,070 138,435
Unrecovered Plant and Regulatory Study Costs............................ 35,150 37,128
Unrecovered SFAS 109 Deferred Income Taxes (note 10).................... 769,136 791,393
Deferred Decontamination and Decommissioning Costs (note 3)............. 49,872 53,016
Other................................................................... 5,826 15,574
----------- -----------
Total Deferred Debits............................................ 1,557,839 1,588,685
----------- -----------
Total.......................................................... $17,171,439 $16,717,440
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
CONSOLIDATED BALANCE SHEETS
CAPITALIZATION AND LIABILITIES
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1995 1994
----------- -----------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
CAPITALIZATION (notes 4 and 6)
Common Equity
Common Stock.................................. $ 3,801,157 $ 3,801,157
Retained Earnings............................. 1,643,785 1,510,010
----------- -----------
Total Common Equity...................... 5,444,942 5,311,167
Subsidiaries' Securities and Obligations
Preferred Securities
Preferred Stock Without Mandatory Redemption.. 324,994 384,994
Preferred Stock With Mandatory Redemption..... 150,000 150,000
Monthly Income Preferred Securities........... 210,000 150,000
Long-Term Debt................................... 5,189,791 5,180,657
----------- -----------
Total Capitalization..................... 11,319,727 11,176,818
----------- -----------
OTHER LONG-TERM LIABILITIES
Decontamination, Decommissioning and Low Level
Radwaste Costs (note 3)........................ 50,449 56,149
Environmental Costs (notes 2 and 12).............. 96,272 105,684
Capital Lease Obligations......................... 53,111 53,770
----------- -----------
Total Other Long-Term Liabilities......... 199,832 215,603
----------- -----------
CURRENT LIABILITIES
Long-Term Debt due within one year................ 90,630 499,738
Commercial Paper and Loans (note 6)............... 849,567 491,586
Book Overdrafts................................... 70,014 86,576
Accounts Payable.................................. 567,787 433,471
Other Taxes Accrued............................... 34,678 44,149
Interest Accrued.................................. 108,245 107,962
Estimated Liability for Vacation Pay.............. 17,089 27,080
Customer Deposits................................. 32,785 33,698
Liability for Injuries and Damages................ 38,141 29,814
Miscellaneous Environmental Liabilities........... 16,954 15,365
Other............................................. 95,907 87,480
----------- ----------
Total Current Liabilities................. 1,921,797 1,856,919
----------- ----------
DEFERRED CREDITS
Accumulated Deferred Income Taxes (note 10)....... 3,094,620 2,905,390
Accumulated Deferred Investment Tax Credits ...... 392,324 412,466
Deferred OPEB Costs (notes 1 and 13).............. 167,189 116,476
Other............................................. 75,950 33,768
----------- ----------
Total Deferred Credits.................... 3,730,083 3,468,100
----------- ----------
COMMITMENTS AND CONTINGENT LIABILITIES (note 12)
Total..................................... $17,171,439 $16,717,440
=========== ===========
</TABLE>
<PAGE>
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
---------------------------------------
1995 1994 1993
---------- ---------- ---------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income......................................... $ 662,323 $ 679,033 $ 600,933
Adjustments to reconcile net income to net cash
flows from operating activities:
Depreciation and Amortization................... 674,231 634,028 601,597
Amortization of Nuclear Fuel.................... 75,028 95,173 102,718
Recovery (Deferral) of Electric Energy
and Gas Costs -- net.......................... 1,998 (110,529) (184,770)
Loss from Property Impairments.................. -- -- 77,637
Cumulative Effect of Change in Accounting for
Income Taxes.................................. -- -- (5,414)
Unrealized Gains on Investments -- net.......... (46,668) (26,329) (8,694)
Provision for Deferred Income Taxes -- net...... 145,092 138,919 168,406
Investment Tax Credits -- net................... (20,142) (20,247) (11,655)
Allowance for Funds Used During Construction --
Debt and Equity and Capitalized Interest...... (42,532) (46,582) (33,098)
Proceeds from Leasing Activities -- net......... 37,652 27,682 14,780
Changes in certain current assets and liabilities
Net (increase) decrease in Accounts Receivable
and Unbilled Revenues...................... (186,225) 84,440 (68,382)
Net decrease in Inventory -- Fuel and Materials
and Supplies............................... 18,882 41,169 16,438
Net increase (decrease) in Accounts Payable... 134,316 (85,790) 95,331
Net decrease in Accrued Taxes................. (17,279) (258,818) (293,919)
Net change in Other Current Assets and
Liabilities................................ (12,005) 36,748 (19,505)
Other........................................... 68,244 42,893 (20,732)
---------- ---------- ----------
Net cash provided by operating
activities............................... 1,492,915 1,231,790 1,031,671
---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to Utility Plant, excluding AFDC......... (649,883) (849,174) (863,294)
Additions to Oil and Gas Property, Plant and
Equipment, excluding Capitalized Interest....... (127,729) (156,302) (88,864)
Net (increase) decrease in Long-Term Investments
and Real Estate................................. (81,264) 58,416 66,659
Increase in Decommissioning and Other Special
Funds, excluding interest....................... (29,617) (35,394) (45,508)
Cost of Plant Removal -- net....................... (29,674) (33,962) (47,791)
Other.............................................. 29,899 13,933 (14,042)
---------- ---------- ----------
Net cash used in investing activities...... (888,268) (1,002,483) (992,840)
---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in Short-Term Debt......... 357,981 (86,050) 185,654
(Decrease) increase in Book Overdrafts............. (16,562) 23,584 (10,078)
Issuance of Long-Term Debt......................... 156,320 849,800 2,137,700
Redemption of Long-Term Debt....................... (556,294) (593,790) (2,083,453)
Long-Term Debt Issuance and Redemption Costs....... (9,177) (29,811) (72,114)
Issuance of Preferred Stock........................ -- 75,000 75,000
Redemption of Preferred Stock...................... (60,000) (120,000) --
Issuance of Monthly Income Preferred Securities.... 60,000 150,000 --
Issuance of Common Stock........................... -- 28,495 273,479
Cash Dividends Paid on Common Stock................ (528,548) (528,071) (521,572)
Other.............................................. -- (1,970) (6,772)
---------- ---------- ----------
Net cash used in financing activities...... (596,280) (232,813) (22,156)
---------- ---------- ----------
Net increase (decrease) in Cash and Cash
Equivalents........................................ 8,367 (3,506) 16,675
Cash and Cash Equivalents at Beginning of Year....... 67,866 71,372 54,697
---------- ---------- ----------
Cash and Cash Equivalents at End of Year............. $ 76,233 $ 67,866 $ 71,372
========== ========== ==========
Income Taxes Paid.................................... $ 185,376 $ 155,104 $ 140,172
Interest Paid........................................ $ 481,264 $ 432,873 $ 458,956
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
----------------------------------------
1995 1994 1993
---------- ---------- ----------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
BALANCE JANUARY 1...................................... $1,510,010 $1,361,018 $1,282,931
ADD NET INCOME......................................... 662,323 679,033 600,933
---------- ---------- ----------
Total........................................ 2,172,333 2,040,051 1,883,864
---------- ---------- ----------
DEDUCT
Dividends on Common Stock(A)......................... 528,548 528,071 521,572
Capital Stock Expenses............................... -- 1,970 1,274
---------- ---------- ----------
Total Deductions............................. 528,548 530,041 522,846
---------- ---------- ----------
BALANCE DECEMBER 31.................................... $1,643,785 $1,510,010 $1,361,018
========== ========== ==========
(A) The ability of Enterprise to declare and pay dividends is contingent upon its
receipt of dividend payments from its subsidiaries. PSE&G, Enterprise's
principal subsidiary, has restrictions on the payment of dividends which are
contained in its Restated Certificate of Incorporation, as amended, certain
of the indentures supplemental to its Mortgage and certain other indentures.
However, none of these restrictions presently limits the payment of dividends
out of current earnings. The amount of PSE&G's restricted retained earnings
at December 31, 1995, 1994 and 1993 was $10 million.
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
PUBLIC SERVICE ELECTRIC AND GAS COMPANY
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
----------------------------------------
1995 1994 1993
---------- ---------- ----------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
OPERATING REVENUES
Electric............................................. $4,020,842 $3,739,713 $3,696,114
Gas.................................................. 1,686,403 1,778,528 1,594,341
---------- ---------- ----------
Total Operating Revenues..................... 5,707,245 5,518,241 5,290,455
---------- ---------- ----------
OPERATING EXPENSES
Operation
Fuel for Electric Generation and Interchanged
Power........................................... 891,782 695,763 717,136
Gas Purchased and Materials for Gas Produced...... 961,539 1,036,701 919,870
Other............................................. 949,400 959,859 882,641
Maintenance.......................................... 312,610 308,080 304,403
Depreciation and Amortization........................ 591,114 551,372 510,539
Taxes
Federal Income Taxes (note 10).................... 321,433 294,529 308,790
New Jersey Gross Receipts Taxes................... 612,961 583,167 597,898
Other............................................. 70,904 76,100 67,593
---------- ---------- ----------
Total Operating Expenses..................... 4,711,743 4,505,571 4,308,870
---------- ---------- ----------
OPERATING INCOME....................................... 995,502 1,012,670 981,585
---------- ---------- ----------
OTHER INCOME
Allowance for Funds Used During
Construction -- Equity............................ 5,324 12,789 12,265
Miscellaneous -- net................................. 7,728 6,233 (3,841)
---------- ---------- ----------
Total Other Income........................... 13,052 19,022 8,424
---------- ---------- ----------
INCOME BEFORE INTEREST CHARGES AND DIVIDENDS ON
PREFERRED SECURITIES................................. 1,008,554 1,031,692 990,009
---------- ---------- ----------
INTEREST CHARGES (note 6)
Long-Term Debt....................................... 357,584 366,894 364,252
Short-Term Debt...................................... 20,740 18,175 6,414
Other................................................ 28,545 10,856 19,290
---------- ---------- ----------
Total Interest Charges....................... 406,869 395,925 389,956
Allowance for Funds Used During Construction -- Debt... (30,943) (25,319) (14,815)
---------- ---------- ----------
Net Interest Charges................................... 375,926 370,606 375,141
---------- ---------- ----------
Monthly Income Preferred Securities
Dividend Requirements (note 4)....................... 15,664 1,680 --
---------- ---------- ----------
Net Income............................................. 616,964 659,406 614,868
---------- ---------- ----------
Preferred Stock Dividend Requirements (note 4)......... 33,762 40,467 38,114
Preferred Stock Redemption Premium (note 4)............ 474 -- --
---------- ---------- ----------
EARNINGS AVAILABLE TO PUBLIC SERVICE ENTERPRISE GROUP
INCORPORATED......................................... $ 582,728 $ 618,939 $ 576,754
========== ========== ==========
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
PUBLIC SERVICE ELECTRIC AND GAS COMPANY
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1995 1994
----------- -----------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
UTILITY PLANT-ORIGINAL COST (note 15)
Electric........................................................ $13,095,103 $12,345,919
Gas............................................................. 2,442,572 2,318,233
Common.......................................................... 517,104 545,131
----------- -----------
Total................................................... 16,054,779 15,209,283
Less accumulated depreciation and amortization.................... 5,440,414 5,147,105
----------- -----------
Net............................................................... 10,614,365 10,062,178
Nuclear Fuel in Service, net of accumulated amortization --
1995, $297,435; 1994, $302,906............................... 180,018 205,273
----------- -----------
Net Utility Plant in Service............................ 10,794,383 10,267,451
Construction Work in Progress, including Nuclear Fuel in
Process -- 1995, $104,743; 1994, $65,429........................ 369,082 806,934
Plant Held for Future Use......................................... 23,966 23,860
----------- -----------
Net Utility Plant....................................... 11,187,431 11,098,245
----------- -----------
INVESTMENTS AND OTHER NONCURRENT ASSETS
Long-Term Investments, net of amortization --
1995, $6,009; 1994, $2,365, respectively.................... 119,474 65,886
Nuclear Decommissioning and Other Special Funds (note 3)........ 276,348 233,022
Other Plant, net of accumulated depreciation and amortization --
1995, $1,905; 1994, $1,127.................................. 24,976 32,879
----------- -----------
Total Investments and Other Noncurrent Assets........... 420,798 331,787
----------- -----------
CURRENT ASSETS
Cash and Cash Equivalents (note 9).............................. 32,373 27,498
Accounts Receivable:
Customer Accounts Receivable................................. 525,404 434,207
Other Accounts Receivable.................................... 163,976 151,684
Less: allowance for doubtful accounts........................ 37,641 40,915
Unbilled Revenues............................................... 246,876 204,056
Fuel, at average cost........................................... 253,360 268,927
Materials and Supplies, net of inventory valuation reserves --
1995, $20,100; 1994, $18,200, respectively.................... 143,741 146,763
Deferred Income Taxes (note 10)................................. 27,571 25,311
Miscellaneous Current Assets.................................... 37,130 30,407
----------- -----------
Total Current Assets.................................... 1,392,790 1,247,938
----------- -----------
DEFERRED DEBITS (note 5)
Property Abandonments -- net.................................... 70,120 88,269
Oil and Gas Property Write-Down................................. 36,078 41,232
Unamortized Debt Expense........................................ 122,049 132,342
Deferred OPEB Costs (notes 1 and 13)............................ 167,189 116,476
Underrecovered Electric Energy and Gas Costs -- net............. 170,565 172,563
Unrecovered Environmental Costs (notes 2 and 12)................ 130,070 138,435
Unrecovered Plant and Regulatory Study Costs.................... 35,150 37,128
Deferred Decontamination and Decommissioning Costs (note 3)..... 49,872 53,016
Unrecovered SFAS 109 Deferred Income Taxes (note 10)............ 769,136 791,393
Other........................................................... 5,700 15,574
----------- -----------
Total Deferred Debits................................... 1,555,929 1,586,428
----------- -----------
Total................................................. $14,556,948 $14,264,398
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
PUBLIC SERVICE ELECTRIC AND GAS COMPANY
CONSOLIDATED BALANCE SHEETS
CAPITALIZATION AND LIABILITIES
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1995 1994
----------- -----------
<S> <C> <C>
(THOUSANDS OF DOLLARS)
CAPITALIZATION (notes 4 and 6)
Common Equity
Common Stock................................... $ 2,563,003 $ 2,563,003
Contributed Capital from Enterprise........... 594,395 534,395
Retained Earnings............................. 1,372,729 1,292,201
----------- -----------
Total Common Equity...................... 4,530,127 4,389,599
Preferred Stock without mandatory redemption....... 324,994 384,994
Preferred Stock with mandatory redemption.......... 150,000 150,000
Monthly Income Preferred Securities of Subsidiary.. 210,000 150,000
Long-Term Debt..................................... 4,586,268 4,486,787
----------- -----------
Total Capitalization..................... 9,801,389 9,561,380
----------- -----------
OTHER LONG-TERM LIABILITIES
Decontamination, Decommissioning and Low Level
Radwaste Costs (note 3)...................... 50,449 56,149
Environmental Costs (notes 2 and 12)............. 96,272 105,684
Capital Lease Obligations (note 11).............. 53,111 53,770
----------- -----------
Total Other Long-Term Liabilities......... 199,832 215,603
----------- -----------
CURRENT LIABILITIES
Long-Term Debt due within one year................ -- 310,200
Commercial Paper and Loans (note 6)............... 567,316 401,759
Book Overdrafts................................... 70,014 86,576
Accounts Payable.................................. 481,632 370,005
Accounts Payable - Associated Companies (note 19). 8,011 16,677
Other Taxes Accrued............................... 32,767 36,030
Interest Accrued.................................. 95,811 95,721
Estimated Liability for Vacation Pay.............. 17,089 27,080
Customer Deposits................................. 32,785 33,698
Liability for Injuries and Damages................ 38,141 29,814
Miscellaneous Environmental Liabilities........... 16,954 15,365
Other............................................. 50,751 50,778
----------- -----------
Total Current Liabilities................. 1,411,271 1,473,703
----------- -----------
DEFERRED CREDITS
Accumulated Deferred Income Taxes (note 10)....... 2,535,603 2,478,539
Accumulated Deferred Investment Tax Credits ...... 370,610 389,721
Deferred OPEB Costs (notes 1 and 13).............. 167,189 116,476
Other............................................. 71,054 28,976
----------- -----------
Total Deferred Credits.................... 3,144,456 3,013,712
----------- -----------
COMMITMENTS AND CONTINGENT LIABILITIES (note 12)
Total..................................... $14,556,948 $14,264,398
=========== ===========
</TABLE>
<PAGE>
PUBLIC SERVICE ELECTRIC AND GAS COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
---------------------------------------
1995 1994 1993
----------- ----------- -----------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income................................................. $ 616,964 $ 659,406 $ 614,868
Adjustments to reconcile net income to net cash flows from
operating activities:
Depreciation and Amortization........................... 591,114 551,372 510,539
Amortization of Nuclear Fuel............................ 75,028 95,173 102,718
Recovery (Deferral) of Electric Energy and Gas
Costs -- net........................................ 1,998 (110,529) (184,770)
Provision for Deferred Income Taxes -- net.............. 79,321 108,163 175,868
Investment Tax Credits -- net........................... (19,111) (19,208) (18,408)
Allowance for Funds Used During Construction -- Debt and
Equity................................................ (36,267) (38,108) (27,080)
Changes in certain current assets and liabilities
Net (increase) decrease in Accounts Receivable
and Unbilled Revenues.............................. (149,583) 74,891 (78,953)
Net decrease in Inventory -- Fuel and Materials
and Supplies....................................... 18,589 41,163 16,920
Net increase (decrease) in Accounts Payable........... 102,961 (99,788) 83,421
Net decrease in Accrued Taxes......................... (11,071) (261,037) (286,119)
Net change in Other Current Assets and Liabilities.... (2,100) 36,245 (27,790)
Other................................................... 57,158 22,763 (49,006)
----------- ----------- -----------
Net cash provided by operating activities............. 1,325,001 1,060,506 832,208
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to Utility Plant, excluding AFDC................. (649,883) (849,174) (863,294)
Net (increase) decrease in Long-Term Investments........... (65,189) 50,668 (26,980)
Net increase in Decommissioning Funds and Other Special
Funds, excluding interest............................... (29,617) (35,394) (45,508)
Cost of Plant Removal -- net............................... (29,674) (33,962) (47,791)
Other...................................................... 859 1,692 (13,607)
----------- ----------- -----------
Net cash used in investing activities................. (773,504) (866,170) (997,180)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in Short-Term Debt................. 165,557 (130,969) 275,192
(Decrease) increase in Book Overdrafts..................... (16,562) 23,584 (10,078)
Issuance of Long-Term Debt................................. 156,320 849,800 1,972,700
Redemption of Long-Term Debt............................... (367,039) (478,950) (1,716,401)
Long-Term Debt Issuance and Redemption Costs............... (8,462) (29,731) (68,227)
Issuance of Preferred Stock................................ -- 75,000 75,000
Redemption of Preferred Stock.............................. (60,000) (120,000) --
Issuance of Monthly Income Preferred Securities............ 60,000 150,000 --
Contributed Capital by Enterprise.......................... 60,000 -- 174,670
Cash Dividends Paid........................................ (535,962) (545,767) (531,314)
Other...................................................... (474) (1,970) (754)
----------- ----------- -----------
Net cash (used in) provided by financing activities... (546,622) (209,003) 170,788
----------- ----------- -----------
Net increase (decrease) in Cash and Cash Equivalents......... 4,875 (14,667) 5,816
Cash and Cash Equivalents at Beginning of Year............... 27,498 42,165 36,349
----------- ----------- -----------
Cash and Cash Equivalents at End of Year..................... $ 32,373 $ 27,498 $ 42,165
=========== =========== ===========
Income Taxes Paid............................................ $ 279,873 $ 209,196 $ 172,869
Interest Paid................................................ $ 399,509 $ 345,867 $ 356,620
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
PUBLIC SERVICE ELECTRIC AND GAS COMPANY
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
----------------------------------------
1995 1994 1993
---------- ---------- ----------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
BALANCE JANUARY 1...................................... $1,292,201 $1,180,532 $1,097,734
ADD NET INCOME......................................... 616,964 659,406 614,868
---------- ---------- ----------
Total........................................ 1,909,165 1,839,938 1,712,602
---------- ---------- ----------
DEDUCT CASH DIVIDENDS(A)
Preferred Stock, at required rates................... 33,762 40,467 38,114
Common Stock......................................... 502,200 505,300 493,200
ADJUSTMENT TO RETAINED EARNINGS........................ 474 1,970 756
---------- ---------- ----------
Total Deductions............................. 536,436 547,737 532,070
---------- ---------- ----------
BALANCE DECEMBER 31.................................... $1,372,729 $1,292,201 $1,180,532
========== ========== ==========
(A) The Company has restrictions on the payment of dividends which are contained
in its Restated Certificate of Incorporation, as amended, and certain of the
indentures supplemental to its Mortgage and certain other indentures.
However, none of these restrictions presently limits the payment of dividends
out of current earnings. The amount of the Company's restricted retained
earnings at December 31, 1995, 1994 and 1993 was $10 million.
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Public Service Enterprise Group (Enterprise) has two direct wholly
owned subsidiaries, Public Service Electric and Gas Company (PSE&G) and
Enterprise Diversified Holdings Incorporated (EDHI). Enterprise's
principal subsidiary, PSE&G, is an operating public utility providing
electric and gas service to customers in certain areas in the State of
New Jersey. As of December 31, 1995, PSE&G comprised 85% of
Enterprise's assets and for the year ending on that date, 93% of its
revenues. Of the 150,000,000 authorized shares of PSE&G common stock
at December 31, 1995, there were 132,450,344 shares outstanding, with
an aggregate book value of $2.6 billion.
PSE&G has a finance subsidiary, PSE&G Fuel Corporation (Fuelco),
providing financing, unconditionally guaranteed by PSE&G, of up to $150
million aggregate principal amount at any one time of a 42.49% interest
in the nuclear fuel acquired for Peach Bottom Atomic Power Station
Units 2 and 3 (Peach Bottom). PSE&G also has a subsidiary, Public
Service Conservation Resources Corporation (PSCRC) which offers demand
side management (DSM) services to utility customers. In 1994, Public
Service Electric and Gas Capital, L.P. (Partnership), a limited
partnership in which PSE&G is the general partner, was formed for the
purpose of issuing Monthly Income Preferred Securities. (See Note 4 --
Schedule of Consolidated Capital Stock and Other Securities.) In 1995,
PSE&G created a new subsidiary, Enterprise Ventures and Services, to
pursue products and services beyond traditional geographic and industry
boundaries.
EDHI is the parent of Enterprise's nonutility businesses: Energy
Development Corporation (EDC), an oil and gas exploration and
production and marketing company; Community Energy Alternatives
Incorporated (CEA), an investor in and developer and operator of
cogeneration and independent power production facilities; Public
Service Resources Corporation (PSRC), which makes primarily passive
investments; and Enterprise Group Development Corporation (EGDC), a
nonresidential real estate development and investment business. EDHI
also has two finance subsidiaries: PSEG Capital Corporation (Capital)
and Enterprise Capital Funding Corporation (Funding).
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Consolidation Policy
The consolidated financial statements include the accounts of
Enterprise and its subsidiaries. All significant intercompany accounts
and transactions have been eliminated in consolidation. Certain
reclassifications of prior years' data have been made to conform with
the current presentation.
Regulation -- PSE&G
The accounting and rates of PSE&G are subject, in certain respects,
to the requirements of the New Jersey Board of Public Utilities (BPU)
and the Federal Energy Regulatory Commission (FERC). As a result, PSE&G
maintains its accounts in accordance with their prescribed Uniform
Systems of Accounts, which are the same. The applications of Generally
Accepted Accounting Principles (GAAP) by PSE&G differ in certain
respects from applications by non-regulated businesses. PSE&G prepares
its financial statements in accordance with the provisions of Statement
of Financial Accounting Standards No. 71 -- "Accounting for the Effects
of Certain Types of Regulation" (SFAS 71). In general, SFAS 71
recognizes that accounting for rate-regulated enterprises should
reflect the relationship of costs and revenues. As a result, a
regulated utility may defer recognition of cost (a regulatory asset)
or recognize an obligation (a regulatory liability) if it is probable
that, through the rate-making process, there will be a corresponding
increase or decrease in revenues. Accordingly, PSE&G has deferred
certain costs, which will be amortized over various periods. To the
extent that collection of such costs or payment of liabilities is no
longer probable as a result of changes in regulation and/or PSE&G's
competitive position, the associated regulatory asset or liability will
be reversed with a charge or credit to income. (See Note 5 -- Deferred
Items.) If PSE&G were to discontinue the application of SFAS 71, the
accounting impact would be an extraordinary, non-cash charge to
operations that could be material to the financial position and results
of operations of Enterprise and PSE&G.
Amounts charged to operations for depreciation expense reflect
estimated useful lives and methods, which include estimates of cost of
removal and salvage, prescribed and approved by regulators rather than
those that might otherwise apply to non-regulated enterprises. PSE&G
cannot presently quantify what the financial statement impact may be
if depreciation expense were to be determined absent regulation.
Utility Plant and Related Depreciation -- PSE&G
Additions to utility plant and replacements of units of property
are capitalized at original cost. The cost of maintenance, repairs and
replacements of minor items of property is charged to appropriate
expense accounts. At the time units of depreciable property are
retired or otherwise disposed of, the original cost less net salvage
value is charged to accumulated depreciation.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Depreciation is computed under the straight-line method.
Depreciation is based on estimated average remaining lives of the
several classes of depreciable property. These estimates are reviewed
on a periodic basis and necessary adjustments are made as approved by
the BPU. Depreciation provisions stated in percentages of original
cost of depreciable property were 3.52% in 1995, 3.51% in 1994 and
3.46% in 1993.
Use of Estimates
The process of preparing financial statements in conformity with
GAAP requires the use of estimates and assumptions regarding certain
types of assets, liabilities, revenues and expenses. Such estimates
primarily relate to unsettled transactions and events as of the date
of the financial statements. Accordingly, upon settlement, actual
results may differ from estimated amounts.
Decontamination and Decommissioning -- PSE&G
In 1993, FERC issued Order No. 557 on the accounting and rate-
making treatment of special assessments levied under the National
Energy Policy Act of 1992 (EPAct). Order No. 557 provides that special
assessments are a necessary and reasonable current cost of fuel and
shall be fully recoverable in rates in the same manner as other fuel
costs. In accordance with its filed Alternative Rate Plan, PSE&G has
requested to have separate mechanisms to ensure continued recovery of
costs associated with activities mandated or approved by state or
federal agencies, but no assurances can be given that the BPU will
authorize such recovery from customers. (See Note 2 -- Rate Matters
and Note 3 -- PSE&G Nuclear Decommissioning and Amortization of Nuclear
Fuel - Uranium, Decontamination and Decommissioning Fund.)
Amortization of Nuclear Fuel -- PSE&G
Nuclear energy burnup costs are charged to fuel expense on a
units-of-production basis over the estimated life of the fuel. Rates
for the recovery of fuel used at all nuclear units include a provision
of one mill per kilowatthour (KWH) of nuclear generation for spent fuel
disposal costs. (See Note 3 -- PSE&G Nuclear Decommissioning and
Amortization of Nuclear Fuel.)
Revenues and Fuel Costs -- PSE&G
Revenues are recorded based on services rendered to customers
during each accounting period. PSE&G records unbilled revenues
representing the estimated amount customers will be billed for services
<PAGE>
rendered from the time meters were last read to the end of the
respective accounting period. Rates include projected fuel costs for
electric generation, purchased and interchanged power, gas purchased
and materials used for gas production. Any under or overrecoveries,
together with interest (in the case of net overrecoveries), are
deferred and included in operations in the period in which they are
reflected in rates.
Long-Term Investments
PSRC has invested in securities and limited partnerships investing
in securities, which are recorded at fair value, and various leases and
other limited partnerships. EGDC is a participant in the nonresidential
real estate markets. CEA is an investor in and developer and operator
of cogeneration and power production facilities. (See Note 7 --
Long-Term Investments.)
Derivatives
Gains and losses on hedges of existing assets or liabilities are
included in the carrying amounts of those assets and liabilities and
are ultimately recognized in income as part of those carrying amounts.
Gains and losses related to qualifying hedges of firm commitments or
anticipated transactions also are deferred and recognized in income or
as adjustments of carrying amounts when the hedged transaction occurs.
(See Note 8 -- Financial Instruments and Risk Management.)
Oil and Gas Accounting -- EDC
EDC uses the successful efforts method of accounting under which
proved leasehold costs are capitalized and amortized over the proved
developed and undeveloped reserves on a unit-of-production basis.
Drilling and equipping costs, except exploratory dry holes, are
capitalized and depreciated over the proved developed reserves on a
unit-of-production basis. Estimated future abandonment costs of
offshore proved properties are depreciated on a unit-of-production
basis over the proved developed reserves. Estimated future abandonment
costs of onshore properties are estimated to be offset by the salvage
value of the tangible equipment. Unproved leasehold costs are
capitalized and not amortized, pending an evaluation of the exploration
results. Unproved leasehold and producing properties costs are assessed
periodically to determine if an impairment of the cost of significant
individual properties has occurred. The cost of an impairment is
charged to expense. Costs incurred for exploratory dry holes,
exploratory geological and geophysical work and delay rentals are
charged to expense as incurred.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Income Taxes
Enterprise and its subsidiaries file a consolidated Federal income
tax return and income taxes are allocated to Enterprise's subsidiaries
based on taxable income or loss of each. Investment tax credits are
deferred and amortized over the useful lives of the related property,
including nuclear fuel.
Effective January 1, 1993, Enterprise and its subsidiaries adopted
Statement of Financial Accounting Standards No. 109 "Accounting for
Income Taxes" (SFAS 109). Under SFAS 109, deferred income taxes are
provided for all temporary differences between the financial statement
carrying amounts and the tax bases of existing assets and liabilities
irrespective of the treatment for rate-making purposes. For periods
prior to January 1, 1993, PSE&G provided deferred income taxes to the
extent permitted for rate-making purposes. (See Note 10 -- Federal
Income Taxes.)
Allowance for Funds Used During Construction (AFDC) and Capitalized
Interest
PSE&G -- AFDC represents the cost of debt and equity funds used to
finance the construction of new utility facilities. The amount of AFDC
capitalized is reported in the Consolidated Statements of Income as a
reduction of interest charges for the borrowed funds component and as
other income for the equity funds component. The rates used for
calculating AFDC in 1995, 1994 and 1993 were 6.98%, 6.48% and 6.96%,
respectively. These rates were within the limits set by FERC.
EDHI -- The operating subsidiaries of EDHI capitalize interest
costs allocable to construction expenditures at the average cost of
borrowed funds.
Pension Plan and Other Postretirement Benefits
The employees of PSE&G, other than non represented employees
commencing service after January 1, 1996, as well as those of
participating affiliates, are covered by a noncontributory trusteed
pension plan (Pension Plan) from the date of hire. New represented
employees of PSE&G who commence service after January 1, 1996 are
covered by a Cash Balance Pension Plan. The policy is to fund pension
costs accrued. PSE&G also provides certain health care and life
insurance benefits to active and retired employees. The portion of such
costs pertaining to retirees amounted to $33 million, $29 million, and
$28 million in 1995, 1994 and 1993, respectively. The current cost of
these benefits is charged to expense when paid and is currently being
recovered from ratepayers.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
On January 1, 1993, Enterprise and PSE&G adopted Statement of
Financial Accounting Standards No. 106, "Employers Accounting for
Postretirement Benefits Other Than Pensions" (SFAS 106), which requires
that the expected cost of employees' postretirement health care
benefits be charged to expense during the years in which employees
render service. Prior to 1993, Enterprise and PSE&G recognized
postretirement health care costs in the year in which the benefits were
paid. PSE&G elected to amortize over 20 years its unfunded obligation
at January 1, 1993. (See Note 13 -- Postretirement Benefits Other Than
Pensions and Note 14 -- Pension Plan.)
NOTE 2. RATE MATTERS
Alternative Rate Plan
On January 16, 1996, PSE&G proposed to the BPU major changes in
utility regulation that include an immediate $50 million rate reduction
for its electric customers, various types of rate freezes, 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.
The seven-year "New Jersey Partners in Power" Plan (Plan), if
approved, would give PSE&G the mechanisms and incentives to compete
more effectively on several fronts, including the ability to develop
revenue from non-regulated products and services, accelerate or modify
depreciation schedules to help mitigate any potential stranded asset
issue 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.
The Plan begins the process for a transition to a more competitive
energy marketplace while substantially shifting the business and
financial risks and opportunities involved in this transition away from
customers to PSE&G and enhancing PSE&G's ability to make the necessary
human, intellectual and financial investments required to stimulate
innovation and productivity.
Key energy pricing features of the proposed Plan are as follows:
Upon the BPU's approval of the Plan, PSE&G will reduce electric
rates across the board by $50 million annually as an upfront
guaranteed share of the productivity improvements that it expects
to achieve over the life of the Plan.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
New rates for all PSE&G electric customers reflecting the
reduction would be established through a merger of existing base
tariffs and the electric Levelized Energy Adjustment Clause (LEAC)
and would be frozen at these levels through December 31, 1996. In
addition, the Plan proposes the elimination of the BPU's existing
Nuclear Performance Standard (NPS). This discontinuance of the
LEAC and NPS would result in substantially shifting the risks and
opportunities involved in managing changes in fuel and replacement
power costs from customers to PSE&G. Gas fuel costs will continue
to be recovered on a dollar for dollar basis from customers under
the existing Levelized Gas Adjustment Charge (LGAC).
In order to create incentives to lower costs and improve
efficiency and productivity, the Plan would rely on a
comprehensive external price cap index based upon changes in the
Gross Domestic Product Price Index (GDPPI) and a separate fuel
price index mechanism, reduced by a fixed productivity offset of
0.30% to establish optional annual price changes each January 1st
for electricity. In addition, the Plan would rely on an index for
non-fuel gas prices calculated on the basis of changes in the
GDPPI, reduced by a fixed productivity offset of 0.35%, to
establish optional annual price changes each January 1st. The
price cap mechanisms would become effective on January 1, 1997 and
would assure that any rate increase related to controllable costs
would be below the rate of inflation, guaranteeing that these
costs would decline in real terms.
Under the Plan, PSE&G would establish an initial service block
equal to the first 150 kilowatthours (KWH) of usage for
residential electric customers who would be protected from price
cap index increases through December 31, 2002, the proposed
expiration date of the Plan. Similarly, an initial service block
equal to 40 therms would be set for residential gas customers and
protected from index increases over the same period of time. In
addition, public street lighting prices would not be subject to
index increases for the life of the Plan.
The Plan includes a productivity gains sharing mechanism. This
mechanism has been designed to provide incentives to maximize
efficiency and productivity improvements and ensure that electric and
gas customers receive an increasing share of productivity gains using
returns on equity as a proxy for these gains. The gains, which would
be awarded through bill credits, would be based on a threshold earnings
level defined as PSE&G's established return on equity of 12% plus a 100
basis points neutral zone above that level. Customers would receive a
10% share of the gains from the first 50 basis points above the
threshold level. Their share would increase by an additional 10% for
each subsequent increase of 50 basis points up to a maximum of 50%.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Separate mechanisms also would be established to ensure continued
recovery of costs associated with activities mandated or approved
by state or federal agencies or otherwise out of PSE&G's control.
These costs include demand side management programs, environmental
remediation, costs associated with non-utility electric
generators, nuclear decommissioning funding and nuclear fuel
assessment costs. These mechanisms would assure that PSE&G
recovers only actual costs related to these activities.
The Plan would allow for electric and non-fuel gas prices to be
changed to reflect exogenous events beyond the control of PSE&G
and would be subject to modification for industry restructuring.
The Plan calls for an increase of $50 million in annual
depreciation expenses for PSE&G's Hope Creek nuclear generating
station -- $25 million effective January 1, 1997, and an
additional $25 million effective January 1, 1998. In addition,
the Plan proposes a transfer of depreciation reserves totaling
$253 million from transmission and distribution to fossil steam
electric generating accounts. The Plan would permit depreciation
to be changed annually following BPU review and approval.
In addition to the pricing features, the Plan guarantees enhanced
quality of customer services through PSE&G's recently established
service guarantee program for electric and gas customers and specific
incentive and penalty mechanisms based on various service indicators.
The Plan would establish a program of rewards and penalties in key
overall service indicators such as duration of customer power outages
compared to a historic five-year average.
In addition to these service quality incentives, the Plan would
establish rewards and penalties based on the movement of PSE&G's
average electric residential rate measured against the national average
of residential electric rates. Rewards or penalties of up to $5 million
would be implemented if comparisons indicate that PSE&G's residential
rates decreased or increased by more than one-half of one percent
relative to the national average.
A major component of the Plan is a proposed economic and market
development and retention assurance program. This would allow flexible
pricing and promote special economic development activities designed
to enhance the economic vitality of the State of New Jersey. One aspect
of the program would give PSE&G the ability to quickly establish new
optional electric or gas rates or individual customer contracts to
serve new markets and retain or attract individual customers.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Also under the Plan, PSE&G would fund two economic development
initiatives. The first is a private sector leadership investment of $5
million in the New Jersey Fund for Community Economic Development. The
second new initiative is the establishment of the PSE&G Economic
Development Fund in which PSE&G would commit to investing up to $50
million for financing significant economic development projects within
PSE&G's service territory over the seven years of the Plan.
In addition, the Plan calls for establishment of a State Emissions
Trading Bank (Bank) for economic development and environmental
improvement. PSE&G would donate 1,000 tons of nitrogen oxide emissions
credits to the Bank for use in economic development. This is intended
as a key step to linking economic development with sound environmental
policy and building on New Jersey's leadership role in seeking a
regional solution to air pollution problems.
Under the Plan, price levels associated with the recovery of Gross
Receipts and Franchise Tax (GRFT) or successor taxes will be directly
adjusted in such a manner as to insure their full and timely recovery
from ratepayers.
PSE&G cannot predict what action, if any, may be taken by the BPU
with respect to the Plan.
Levelized Gas Adjustment Charge
On October 2, 1995, PSE&G petitioned the BPU for modifications to
its LGAC, requesting that:
(a) The LGAC be renamed to the Levelized Gas Incentive Clause
(LGIC);
(b) A benchmark be established for certain gas delivered from the
Gulf Coast, and any difference between PSE&G's actual gas
purchase costs and the benchmark price, either positive or
negative, be shared 50/50 between customers and PSE&G;
(c) The current annual LGAC rate be converted to a monthly rate
for firm commercial and industrial customers; and
(d) A fixed annual margin would be credited to LGAC for certain
interruptible rate schedules, while actual margins from such
sales will be retained by PSE&G. Any differences, positive
or negative, will be absorbed by PSE&G.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
On December 20, 1995, the BPU approved an interim Stipulation to
include the implementation of monthly pricing on the commodity portion
of the LGAC rate for firm commercial and industrial customers effective
January 1, 1996. The incentive proposal relating to interruptible
sales (request (d)) above was withdrawn. The remaining aspects of
PSE&G's October 2, 1995 petition remain the subject of continued
investigation and litigation.
Electric Levelized Energy Adjustment Clause
By Order dated May 5, 1995, the BPU approved PSE&G's LEAC. Such
Order also required that a hearing be convened regarding the April 1994
Salem 1 shutdown, to determine whether PSE&G should be allowed to
recover replacement power costs of approximately $8 million which have
been deferred. On October 18, 1995, this matter was ordered to be
transmitted to the Office of Administrative Law (OAL) for hearing.
PSE&G cannot predict the outcome of this proceeding.
Remediation Adjustment Charge
On July 21, 1995, PSE&G petitioned the BPU to recover Remediation
Program costs incurred during the period August 1, 1994 through July
31, 1995. In accordance with a BPU Order dated November 4, 1994, the
petition proposes to recover, effective October 1, 1995, $2.5 million
from gas customers and $1.6 million from electric customers.
Consolidated Tax Benefits
In a case affecting another utility in which neither Enterprise nor
PSE&G were parties, the BPU considered the extent to which tax savings
generated by nonutility affiliates included in the consolidated tax
return of that utility's holding company should be considered in
setting that utility's rates. In September, 1992, the BPU approved an
order in such case treating certain consolidated tax savings generated
after June 30, 1990 by that utility's nonutility affiliates as a
reduction of its rate base. In December, 1992, the BPU issued an order
approving a stipulation in PSE&G's 1992 base rate proceeding which
resolved the case without separate quantification of the consolidated
tax issue. The stipulation did not provide final resolution of the
consolidated tax issue for any subsequent base rate filing. While
Enterprise continues to account for its two wholly-owned subsidiaries
on a stand-alone basis, resulting in a realization of the tax benefits
by the entity generating the benefit, an ultimate unfavorable
resolution of the consolidated tax issue could reduce PSE&G's and
Enterprise's future revenue and net income. In addition, an unfavorable
resolution
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
may adversely impact Enterprise's nonutility investment strategy.
Enterprise believes that PSE&G's taxes should be treated on a
stand-alone basis for rate-making purposes, based on the separate
nature of the utility and nonutility businesses. However, neither
Enterprise nor PSE&G is able to predict what action, if any, the BPU
may take concerning consolidation of tax benefits in future rate
proceedings. (See Note 10 -- Federal Income Taxes.)
Other Rate Matters
On July 21, 1995, the BPU initiated a generic proceeding to
expeditiously adopt specific standards to guide utility "off-tariff"
negotiated rate agreement programs, which proceeding would consider
minimum prices, confidentiality, maximum contract duration, filing
requirements and such other standards as necessary for compliance with
the law. A Written Summary Decision and Order was issued on October
27, 1995, which ordered 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. 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
recovery of capacity costs associated with electric utility power
purchases from cogeneration and small power procedures. The initial
phase of the proceeding, which has been transmitted to the Office of
Administrative Law, seeks to determine whether there was any such
overrecovery and, if so, the amount overrecovered.
The New Jersey Division of Ratepayer Advocate has intervened in the
proceeding and alleges, among other things, that PSE&G has
overrecovered such costs ranging from $250 to $300 million during the
period from August 1991 to December 1994. PSE&G denies such
overrecovery because its capacity cost recovery mechanisms were
approved by the BPU as to each of its cogeneration contracts and as to
its base rates. Additionally, PSE&G contends that a review of any
individual cost item is inappropriate and that the BPU has previously
found that, during the period under review, PSE&G did not overearn
compared to its established return. Moreover, PSE&G contends that the
Ratepayer Advocate's assertion 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 from operations or net cash flows of Enterprise and PSE&G on
a prospective basis.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 3. PSE&G NUCLEAR DECOMMISSIONING AND AMORTIZATION OF NUCLEAR FUEL
The BPU decision in PSE&G's 1992 base rate case utilized studies
based on the prompt removal/dismantlement method of decommissioning for
all of PSE&G's nuclear generating stations. This method consists of
removing all fuel, source material and all other radioactive materials
with activity levels above accepted release limits from the nuclear
sites. PSE&G has an ownership interest in five nuclear units: Salem 1
and Salem 2 -- 42.59% each, Hope Creek -- 95% and Peach Bottom 2 and
3 -- 42.49% each. In accordance with rate orders received from the BPU,
PSE&G has established an external master nuclear decommissioning trust
for all of its nuclear units. The Internal Revenue Service (IRS) has
ruled that payments to the trust are tax deductible. PSE&G's total
estimated cost of decommissioning its share of these 5 nuclear units
is estimated at $681 million in year-end 1990 dollars (the year that
the site specific estimate was prepared), excluding contingencies. The
1992 base rate decision provided that $15.6 million of such costs are
to be collected through base rates and an additional annual amount of
$7.0 million in 1993 and $14 million each year thereafter are to be
recovered through PSE&G's LEAC. In accordance with the filed
Alternative Rate Plan, PSE&G has requested to have separate mechanisms
to ensure continued recovery of costs associated with activities
mandated or approved by state or federal agencies, but no assurances
can be given that the BPU will authorize such recovery from customers
(see Note 2 -- Rate Matters). At December 31, 1995 and 1994, the
accumulated provision for depreciation and amortization included
reserves for nuclear decommissioning for PSE&G's units of $292 million
and $249 million, respectively. As of December 31, 1995 and 1994, PSE&G
had contributed $220 million and $190 million, respectively, into
independent external qualified and nonqualified nuclear decommissioning
trust funds.
On January 3, 1996, PSE&G filed with the BPU its 1995 nuclear plant
decommissioning cost update. The filing includes decommissioning cost
updates for PSE&G's respective ownership share of Salem, Hope Creek and
Peach Bottom. PSE&G's filing was based on the existing Nuclear
Regulatory Commission (NRC) generic formula(s). PSE&G does not believe
that the NRC generic estimates provide an accurate estimate of the cost
of decommissioning because the NRC formula does not factor into its
cost estimates the cost of removal of nonradiological structures and
equipment and interim spent fuel storage installations. PSE&G is
currently completing site specific studies in order to update its
filing with the BPU during 1996.
The Staff of the Securities and Exchange Commission (SEC) has
questioned certain of the current accounting practices of the electric
utility industry, including PSE&G, regarding the recognition,
measurement and classification of decommissioning costs for nuclear
generating stations in the financial statements of electric utilities.
In response to these questions, the Financial Accounting Standards
Board (FASB) has agreed to review the accounting for removal costs,
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
including decommissioning. If current electric utility industry
accounting practices for such decommissioning are changed: (1) annual
provisions for decommissioning could increase, (2) the estimated cost
for decommissioning could be recorded as a liability rather than as
accumulated depreciation and (3) trust fund income from the external
decommissioning trusts could be reported as investment income rather
than as a reduction to decommissioning expense.
Uranium Enrichment Decontamination and Decommissioning Fund
In accordance with EPAct, domestic utilities that own nuclear
generating stations are required to pay a cumulative total of $150
million each year (adjusted for inflation) into a decontamination and
decommissioning fund, based on their past purchases of enrichment
services from the United States Department of Energy (DOE) Uranium
Enrichment Enterprise (now a federal government corporation known as
the United States Enrichment Corporation (USEC)). These amounts are
being collected over a period of 15 years or until $2.25 billion
(adjusted for inflation) has been collected. Under this legislation,
PSE&G's obligation for the nuclear generating stations in which it has
an interest is $67 million (adjusted for inflation). Since 1993, PSE&G
has paid $17 million, resulting in a balance due of $50 million. PSE&G
has deferred the expenditures incurred to date as part of deferred
underrecovered electric energy costs and expects to recover its costs
in the next LEAC. In accordance with the filed Alternative Rate Plan,
PSE&G has requested to have separate mechanisms to ensure continued
recovery of costs associated with activities mandated or approved by
state or federal agencies, but no assurances can be given that the BPU
will authorize such recovery from customers (see Note 2 -- Rate
Matters).
Spent Nuclear Fuel Disposal Costs
In accordance with the Nuclear Waste Policy Act (NWPA), PSE&G has
entered into contracts with the DOE for the disposal of spent nuclear
fuel. Payments made to the DOE for disposal costs are based on nuclear
generation and are included in Fuel for Electric Generation and
Interchanged Power in the Statements of Income. These costs are
recovered through the LEAC. In accordance with the filed Alternative
Rate Plan, PSE&G has requested to have separate mechanisms to ensure
continued recovery of costs associated with activities mandated or
approved by state or federal agencies, but no assurances can be given
that the BPU will authorize such recovery from customers (see Note 2 --
Rate Matters).
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 4. SCHEDULE OF CONSOLIDATED CAPITAL STOCK AND OTHER SECURITIES
<TABLE>
<CAPTION>
CURRENT
REDEMPTION
OUTSTANDING PRICE DECEMBER 31, DECEMBER 31,
SHARES PER SHARE 1995 1994
----------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
(THOUSANDS OF DOLLARS)
ENTERPRISE COMMON STOCK (no par) - note (A) --
authorized 500,000,000 shares; issued and
outstanding at December 31, 1995, and
December 31, 1994, 244,697,930 shares,
and at December 31, 1993, 243,688,256 shares. $3,801,157 $3,801,157
ENTERPRISE PREFERRED SECURITIES (note B)
PSE&G CUMULATIVE PREFERRED SECURITIES (note C)
Without Mandatory Redemption (notes D and E)
$100 par value series
4.08%................................ 250,000 103.00 $ 25,000 $ 25,000
4.18%................................ 249,942 103.00 24,994 24,994
4.30%................................ 250,000 102.75 25,000 25,000
5.05%................................ 250,000 103.00 25,000 25,000
5.28%................................ 250,000 103.00 25,000 25,000
6.80%................................ 250,000 102.00 25,000 25,000
6.92%................................ 600,000 -- 60,000 60,000
7.40%................................ 500,000 101.00 50,000 50,000
7.52%................................ 500,000 101.00 50,000 50,000
7.70% (note E)....................... -- -- -- 60,000
$25 par value series
6.75%................................ 600,000 -- $ 15,000 $ 15,000
---------- ----------
Total Preferred Stock without
Mandatory Redemption............... $ 324,994 $ 384,994
========== ==========
With Mandatory Redemption (notes D and F)
$100 par value series
7.44%................................ 750,000 -- $ 75,000 $ 75,000
5.97%................................ 750,000 -- 75,000 75,000
---------- ----------
Total Preferred Stock With
Mandatory Redemption (note G)...... $ 150,000 $ 150,000
========== ==========
Monthly Income Preferred Securities (notes D, F, G and H)
9.375%............................... 6,000,000 -- $ 150,000 $ 150,000
8.00%................................ 2,400,000 -- $ 60,000
---------- ----------
Total Monthly Income Preferred Securities $ 210,000 $ 150,000
========== ==========
(A) Total authorized and unissued shares include 7,302,488 shares of Enterprise Common Stock reserved
for issuance through Enterprise's Dividend Reinvestment and Stock Purchase Plan and various employee
benefit plans. In 1995, no shares of Enterprise Common Stock were issued or sold and in 1994,
1,009,674 shares were issued and sold for $28,495,122.
(B) Enterprise has authorized a class of 50,000,000 shares of Preferred Stock without par value, none
of which is outstanding.
(C) As of December 31, 1995, there were 2,900,058 shares of $100 par value and 9,400,000 shares of $25
par value Cumulative Preferred Stock which were authorized and unissued, and which upon issuance
may or may not provide for mandatory sinking fund redemption. If dividends upon any shares of
Preferred Stock are in arrears in an amount equal to the annual dividend thereon, voting rights for
the election of a majority of PSE&G's Board of Directors become operative and continue until all
accumulated and unpaid dividends thereon have been paid, whereupon all such voting rights cease,
subject to being again revived from time to time.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(D) At December 31, 1995, the annual dividend requirement and embedded dividend for Preferred Stock
without mandatory redemption were $20,046,765 and 6.14%, respectively, and for Preferred Stock with
mandatory redemption were $10,057,500 and 6.75%, respectively.
At December 31, 1994, the annual dividend requirement and embedded dividend for Preferred Stock
without mandatory redemption were $24,666,763 and 6.39%, respectively and for Preferred Stock with
mandatory redemption were $10,057,500 and 6.75%, respectively.
At December 31, 1995, the annualized monthly income requirement of the Monthly Income Preferred
Securities and their embedded cost were $18,862,500 and 6.04%, respectively.
At December 31, 1994, the annualized monthly income requirement of the Monthly Income Preferred
Securities and their embedded cost were $14,062,500 and 6.31%, respectively.
(E) On October 16, 1995, PSE&G redeemed all of the 600,000 shares of its outstanding 7.70% Cumulative
Preferred Stock ($100 par), at a redemption price of $100.79.
(F) For information concerning fair value of financial instruments, see Note 8 -- Financial Instruments
and Risk Management.
(G) On September 12, 1995, Partnership issued 2,400,000 shares of its 8% Monthly Income Preferred
Securities, Series A, with a stated liquidation preference of $25 each.
(H) Public Service Electric and Gas Capital, L.P. (Partnership) was formed for the purpose of issuing
Monthly Income Preferred Securities. The proceeds of Monthly Income Preferred Securities sales are
lent to PSE&G and evidenced by PSE&G's Deferrable Interest Subordinated Debentures. If and for as
long as payments on PSE&G's Deferred Interest Subordinated Debentures have been deferred, or PSE&G
has defaulted on the indenture related thereto or its guarantee thereof, PSE&G may not pay any
dividends on its Capital Stock.
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 5. DEFERRED ITEMS
Property Abandonments
<TABLE>
The BPU has authorized PSE&G to recover after-tax property abandonment costs from its customers. The
following table reflects the application of Statement of Financial Accounting Standards No. 90, "Regulated
Enterprises -- Accounting for Abandonments and Disallowances of Plant Costs," as amended (SFAS 90), on
property abandonments, and related tax effects, for which no return is earned. The net-of-tax discount rate
used was between 4.443% and 7.801%. (See Note 2 -- Rate Matters.) The following table reflects property
abandonments:
<CAPTION>
DECEMBER 31, 1995 DECEMBER 31, 1994
------------------ ------------------
DISCOUNTED DISCOUNTED
PROPERTY ABANDONMENTS COST TAXES COST TAXES
- ------------------------------------------------ ---------- ------- ---------- -------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C>
Atlantic Project................................ $ 58,221 $ 24,440 $ 70,130 $29,453
LNG Project..................................... 2,992 957 7,287 2,635
Uranium Projects................................ 8,907 3,871 10,852 4,677
-------- ------- -------- -------
$ 70,120 $ 29,268 $ 88,269 $36,765
======== ======= ======== =======
</TABLE>
Under (Over) Recovered Electric Energy and Gas Costs -- net
<TABLE>
Recoveries of electric energy and gas costs are determined by the BPU under the LEAC and LGAC.
PSE&G's deferred fuel balances as of December 31, 1995 and December 31, 1994, reflect underrecovered
costs as follows:
<CAPTION>
DECEMBER 31,
-------------------
1995 1994
------ ------
(Millions)
<S> <C> <C>
Underrecovered Electric Energy Costs......... $162.4 $172.0
Underrecovered Gas Fuel Costs................ 8.2 .6
------ ------
Total................................... $170.6 $172.6
====== ======
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Unrecovered Plant and Regulatory Study Costs
Amounts shown in the consolidated balance sheets consist of costs
associated with developing, consolidating and documenting the specific
design basis of PSE&G's jointly owned nuclear generating stations, as
well as PSE&G's share of costs associated with the cancellation of the
Hydrogen Water Chemistry System Project (HWCS Project) at Peach Bottom.
PSE&G has received both BPU and FERC approval to defer and amortize,
over the remaining life of the Salem and Hope Creek nuclear units,
costs associated with configuration baseline documentation and the
canceled HWCS Project. PSE&G has received FERC approval to defer and
amortize over the remaining life of the applicable Peach Bottom units,
costs associated with the configuration baseline documentation and the
canceled HWCS Project. In accordance with the filed Alternative Rate
Plan, PSE&G has requested to have separate mechanisms to ensure
continued recovery of costs associated with activities mandated or
approved by state or federal agencies or otherwise out of PSE&G's
control (see Note 2 -- Rate Matters).
Unamortized Debt Expense
Gains and losses and the costs of issuing and redeeming long-term
debt for PSE&G are deferred and amortized over the life of the
applicable debt.
Oil and Gas Property Write-Down
On December 31, 1992, the BPU approved the recovery of PSE&G's
deferral of an EDC write-down through PSE&G's LGAC over a ten-year
period beginning January 1, 1993. At December 31, 1995 and 1994, the
remaining balance to be amortized was $36.1 million and $41.2,
respectively.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 6. SCHEDULE OF CONSOLIDATED DEBT
LONG-TERM
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
INTEREST RATES DUE 1995 1994
- ----------------- --------- ---------- ----------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
PSE&G
FIRST AND REFUNDING MORTGAGE BONDS (note A)
4 3/4% - 6% 1995........... $ -- $ 310,000
6 7/8% - 7 1/8% 1997........... 300,000 300,000
6% 1998........... 100,000 100,000
8 3/4% 1999........... 100,000 100,000
6% - 7 5/8% 2000........... 400,000 400,000
6 1/8% - 9 1/8% 2001-2005........... 1,125,000 1,125,000
6.30% - 6.90% 2006-2010........... 177,990 234,310
6.80% - 7 3/8% 2011-2015........... 198,500 198,500
Variable 2011-2015........... 42,620 --
6.45% - 8.10% 2016-2020........... 29,600 29,600
Variable 2016-2020........... 13,700 --
5.20% - 9 1/4% 2021-2025........... 1,263,500 1,267,500
5.70% - 6.55% 2026-2030........... 244,835 244,835
5.45% - 6.40% 2031-2035........... 399,565 399,565
5% - 8% 2037................ 15,001 15,001
MEDIUM-TERM NOTES
7.10% - 7.13% 1997................. 100,000 --
7.15% - 7.18% 2023................. 40,500 40,500
8.10% - 8.16% 2009................. 60,000 60,000
---------- ----------
Total First and Refunding Mortgage
Bonds............................... $4,610,811 $4,824,811
========== ==========
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
INTEREST RATES DUE 1995 1994
- ----------------- ---- ---------- ----------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
DEBENTURE BONDS UNSECURED
6% 1998.......................................... $ 18,195 $ 18,195
---------- ----------
Total Debenture Bonds............................................... 18,195 18,195
---------- ----------
Principal Amount Outstanding (note F)............................... 4,629,006 4,843,006
Amounts Due Within One Year (note B)................................ (310,200)
Net Unamortized Discount............................................ (42,738) (46,019)
---------- ----------
Total Long-Term Debt of PSE&G (note G)......................... 4,586,268 4,486,787
---------- ----------
EDHI
CAPITAL (note C)
Senior notes
9.875% - 10.05% 1998.......................................... 122,500 165,000
Medium-Term Notes
5.65% - 9.55% 1995.......................................... 112,000
9.00% 1996.......................................... 20,000 20,000
5.79% - 5.92% 1997.......................................... 27,000 27,000
9.00% 1998.......................................... 75,000 75,000
8.95% - 9.93% 1999.......................................... 155,000 155,000
6.54% 2000.......................................... 78,000 78,000
---------- ----------
Principal Amount Outstanding (note F)............................... 477,500 632,000
Amounts Due Within One Year (note B)................................ (62,482) (154,405)
Net Unamortized Discount............................................ (901) (1,278)
---------- ----------
Total Long-Term Debt of Capital................................ 414,117 476,317
---------- ----------
FUNDING (note D)
9.54% 1995.......................................... 35,000
9.55% 1996.......................................... 28,000 28,000
6.85% - 9.59% 1997.......................................... 55,000 55,000
9.95% 1998.......................................... 83,000 83,000
7.58% 1999.......................................... 45,000 45,000
---------- ----------
Principal Amount Outstanding (note F)............................... 211,000 246,000
Amounts Due Within One Year (note B)................................ (28,000) (35,000)
---------- ----------
Total Long-Term Debt of Funding................................ 183,000 211,000
---------- ----------
EGDC MORTGAGE NOTES
10.625% - 12.75% 2012 (note F)................................. 6,554 6,686
---------- ----------
Amounts Due Within One Year (note B)................................ (148) (133)
---------- ----------
Total Long-Term Debt of EGDC................................... 6,406 6,553
---------- ----------
Total Long-Term Debt of EDHI................................... 603,523 693,870
---------- ----------
Consolidated Long-Term Debt (note E)......................... $5,189,791 $5,180,657
========== ==========
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTES:
(A) PSE&G's Mortgage, securing the Bonds, constitutes a direct first
mortgage lien on substantially all PSE&G'S property and franchises.
(B) The aggregate principal amounts of mandatory requirements for
sinking funds and maturities for each of the five years following
December 31, 1995 are as follows:
<TABLE>
<CAPTION>
SINKING
FUNDS MATURITIES
---------- ----------------------------------------------
YEAR CAPITAL PSE&G CAPITAL EGDC FUNDING TOTAL
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C>
1996.......... $ 42,500 $ -- $ 20,000 $ 148 $ 28,000 $ 90,648
1997........... 42,500 400,000 27,000 166 55,000 524,666
1998........... 37,500 118,195 75,000 184 83,000 313,879
1999........... -- 100,000 155,000 205 45,000 300,205
2000........... -- 400,000 78,000 228 -- 478,228
-------- -------- -------- ----- -------- ---------
$122,500 $1,018,195 $355,000 $ 931 $211,000 $1,707,626
======== ======== ======== ===== ======== ==========
In January 1996 principal amounts of $3.5 million of the above series
and $16.942 million of the 8 3/4% Series HH First and Refunding
Mortgage Bonds were reacquired.
On February 1, 1996 a sinking fund in the principal amount of $1.5
million of the 8 3/4% Series HH First and Refunding Mortgage Bonds
was met. In addition, the remaining principal amounts of $192.5
million of the 8 3/4% Series EE and $130.058 million of the 8 3/4%
Series HH were defeased.
(C) Capital has provided up to $750 million debt financing for EDHI's
businesses on the basis of a net worth maintenance agreement with
Enterprise. Since January 31, 1995, Capital has agreed to limit its
borrowings to no more than $650 million.
(D) Funding provides debt financing for EDHI's businesses other than EGDC
on the basis of unconditional guarantees from EDHI.
(E) At December 31, 1995 and 1994, the annual interest requirement on
long-term debt was $399.8 million and $422.7 million, of which $315.6
million and $335.6 million was the requirement for Bonds. The
embedded interest cost on long-term debt on such date was 7.71% and
7.79%, respectively.
(F) For information concerning fair value of financial instruments, see
Note 8 -- Financial Instruments and Risk Management.
(G) At December 31, 1995 and 1994, PSE&G's annual interest requirement
on long-term debt was $330.5 million and $343.3 million, of which
$315.6 million and $335.6 million, respectively, was the requirement
for Bonds. The embedded interest cost on long-term debt was 7.54%
and 7.59%, respectively.
PSE&G has authorization from the BPU to issue approximately $4.375
billion aggregate amount of additional bonds/MTNs/Preferred
Stock/Monthly Income Preferred Securities through 1997 for refunding
purposes.
</TABLE>
<PAGE>
SHORT-TERM (Commercial Paper and Loans)
Commercial paper represents unsecured bearer promissory notes sold
through dealers at a discount with a term of nine months or less.
Bank loans represent PSE&G's unsecured promissory notes issued under
informal credit arrangements with various banks and have a term of eleven
months or less.
<TABLE>
<CAPTION>
PSE&G
- -----
1995 1994
1993
------ ------
------
(Millions of
Dollars)
<S> <C> <C>
<C>
Principal amount outstanding at end of year,
primarily commercial paper...................... $ 567 $ 402
$ 533
Weighted average interest rate for Short-Term
Debt at year-end................................ 5.93% 6.07%
3.34%
PSE&G has authorization from the BPU to issue and have outstanding
not more than $1 billion of its short-term obligations at any one time,
consisting of commercial paper and other unsecured borrowings from banks
and other lenders. This authorization expires January 1, 1997.
PSE&G has 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 each of which
provides for borrowing up to one year. As of December 31, 1995, there was
no short-term debt outstanding under this agreement.
PSE&G has a $50 million uncommitted Line of Credit facility extended
by a bank to primarily support short-term borrowings all of which was
outstanding under this facility on December 31, 1995 and is included in
the table above.
PSE&G had various Lines of Credit facility extended by a bank to
primarily support the issuance of Letters of Credit. As of December 31,
1995, Letters of Credit were issued in the amount of $20.6 million.
Fuelco has a $150 million commercial paper program to finance a
42.49% share of Peach Bottom nuclear fuel, supported by a $150 million
revolving credit facility with a group of banks, which expires in June
1996. PSE&G has guaranteed repayment of Fuelco's respective obligations.
As of December 31, 1995, 1994 and 1993, Fuelco had commercial paper of
$87.7 million, $93.7 million and $108.7 million, respectively, outstanding
under such program, which amounts are included in the table above.
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 7, 1996. PSCRC is presently in the process of
negotiating a one year extension for this facility. As of December 31,
1995, PSCRC had $30 million outstanding under this facility, which amount
is included in the table above.
PSE&G has entered into standby financing arrangements with a bank
totaling $61 million. These facilities support tax-exempt multi-mode
financings done through the New Jersey Economic Development Authority and
the York County (Pennsylvania) Industrial Development Authority. As of
December 31, 1995, no amounts were outstanding under such arrangements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EDHI
- ----
1995 1994 1993
------ ------ ------
(Millions of Dollars)
<S> <C> <C> <C>
Principal amount outstanding at end of year....... $ 182 $ 90 $ 45
Weighted average interest rate for Short-Term
Debt at year-end................................ 6.26% 5.97%
3.47%
At December 31, 1995, Funding had a $225 million commercial paper program
supported by a direct pay commercial bank letter of credit and revolving credit
facility and a $225 million revolving credit facility, each of which expires in March
1998. At December 31, 1995, there was $100 million outstanding under this agreement.
ENTERPRISE
- ----------
At December 31, 1995, 1994 and 1993, Enterprise had a $25 million line of credit
with a bank. At December 31, 1995, 1994 and 1993, Enterprise had no borrowings under
this line.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 7. LONG-TERM INVESTMENTS
Long-Term Investments are primarily those of EDHI. A summary of
Long-Term Investments is as follows:
1995 1994
------ ------
(MILLIONS OF DOLLARS)
Lease Agreements (see Note 11 -
Leasing Activities):
Leveraged Leases...................... $ 845 $ 789
Direct-Financing Leases............... 35 76
Other Leases.......................... 6 6
------ ------
Total............................ 886 871
------ ------
Partnerships:
General Partnerships.................. 177 168
Limited Partnerships.................. 522 437
------ ------
Total............................ 699 605
------ ------
Corporate Joint Ventures.................. 49 26
Securities................................ 76 75
Valuation Allowances...................... (21) (17)
Other Investments......................... 133 66
------ ------
Total Long-Term Investments...... $1,822 $1,626
====== ======
PSRC's leveraged leases are reported net of principal and interest
on nonrecourse loans, unearned income and deferred tax credits. Income
and deferred tax credits are recognized at a level rate of return from
each lease during the periods in which the net investment is positive.
Partnership investments are those of PSRC, EGDC and CEA and are
undertaken with other investors. PSRC is a limited partner in various
partnerships and is committed to make investments from time to time
upon the request of the respective general partners. As of December 31,
1995, $58 million remained as PSRC's unfunded commitment subject to
call.
PSRC has invested in securities and limited partnerships investing
in securities, which are recorded at fair value. Realized investment
gains and losses on the sale of investment securities are determined
utilizing the specific cost identification method. (See Note 8 --
Financial Instruments and Risk Management.)
As of December 31, 1995 and 1994, EDHI's long-term investments
aggregated $1.7 billion and $1.6 billion, respectively, and its
property, plant and equipment (net of accumulated depreciation and
amortization and valuation allowances) aggregated $.7 billion. As of
December 31, 1995 and December 31, 1994, EDHI comprised 15% of
Enterprise's assets.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 8. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
Enterprise's operations give rise to exposure to market risks from
changes in crude oil and natural gas prices, interest rates, foreign
exchange rates and security prices of investments. Enterprise's policy
is to use derivatives for the purpose of managing market risk
consistent with its business plans and prudent practices. Enterprise
does not hold or issue financial instruments for trading purposes.
The notional amounts of derivatives summarized below do not
represent amounts exchanged by the parties and, thus, are not a measure
of the exposure of Enterprise through its use of derivatives. The
amounts exchanged, under the terms of the derivatives, are calculated
on the basis of the notional amounts. Enterprise limits its exposure
to credit-related losses in the event of nonperformance by
counterparties by limiting its counterparties to those with high credit
ratings.
Natural Gas and Crude Oil Hedging
EDC sold natural gas futures contracts outstanding at December 31,
1995 and 1994 which hedged 21,250,000 mmbtu and 10,650,000 mmbtu,
respectively. Such amounts represented approximately 26% and 13% of
EDC's anticipated domestic natural gas production in 1996 and 1995,
respectively, at average sales prices of $1.93 per mmbtu and $1.95 per
mmbtu, respectively.
At December 31, 1995, EDC sold crude oil futures contracts
outstanding which hedged 1.5 million barrels of oil representing
approximately 38% of EDC's anticipated domestic oil production in 1996
at an average price of $17.74 per barrel.
The deferred unrealized gains (losses) at December 31, 1995 and
1994 related to EDC's futures contracts were ($5.1) million and $2.6
million, respectively.
Through December 31, 1995 and 1994, USEP entered into swaps for
future contracts to buy 4,970,000 mmbtu and 2,850,000 mmbtu of natural
gas related to fixed-price sales commitments. Such swaps hedged
approximately 54% and 73% of sales commitments at December 31, 1995 and
1994 at average prices of $1.78 and $1.94 per mmbtu, respectively.
USEP had deferred unrealized gains of $3.1 million at December 31, 1995
and unrealized losses of $.7 million at December 31, 1994.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Interest Rate Swap
Capital entered into an interest rate swap in December, 1990 to
allow EDHI to borrow at floating rates and effectively swap them into
fixed rates. The interest differential to be received or paid under the
interest rate swap agreement is accrued over the life of the agreement
as an adjustment to the interest expense of the related borrowing. The
swap expired on December 11, 1995.
1995 1994
--------- ---------
(Thousands of Dollars)
Pay-fixed swap
Notional amount.................... $100,000 $100,000
Pay rate........................... 8.0% 8.0%
Average receive rate............... 6.4% 4.1%
Year-end receive rate.............. --% 6.8%
Foreign Exchange
During 1994, PSRC entered into a forward purchase contract for
foreign currency to hedge an EDC firm purchase commitment denominated
in pound sterling. The EDC commitment related to the acquisition of
Industrial Scotland Energy Limited (ISE) for approximately 21 million
pounds. The realized gain of approximately $800 thousand on the
forward purchase contract for foreign currency was used to reduce the
net acquisition cost allocated to ISE's assets upon completion of the
acquisition in June 1994.
Currently, substantially all of Enterprise's foreign revenues and
expenses are denominated in U.S. dollars.
Security Swap
During 1994, PSRC entered into two agreements to swap portions of
its ownership interest in certain equity securities, held in a
partnership, to the S&P 500 return. The purpose of the swaps was to
minimize PSRC's exposure to the potential price volatility of such
equity securities. The agreements had respective notional amounts of
$17.6 million and $12.9 million.
The aggregate notional amounts swapped and the year end unrealized
gain during 1994 for these two agreements were $30.5 million and $3.8
million, respectively.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In March 1995, the equity securities, in which PSRC had an
ownership interest, were exchanged for equity securities of another
entity. Consequently, PSRC terminated the security swap and realized
a pre-tax gain of $3.5 million which was offset by the reversal of the
$3.8 million unrealized gain at year end 1994.
Fair Value of Financial Instruments
The estimated fair value was determined using the market
quotations or values of securities with similar terms, credit ratings,
remaining maturities and redemptions at the end of 1995 and 1994,
respectively.
</TABLE>
<TABLE>
<CAPTION>
1995 1994
------------------------ ------------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
---------- ---------- ---------- ----------
(Thousands of Dollars)
<S> <C> <C> <C> <C>
Long-Term Debt:
EDHI.................................... $ 603,523 730,000 $ 884,686 $ 930,000
PSE&G................................... 4,629,006 4,828,008 4,843,006 4,500,000
Preferred Securities Subject to
Mandatory Redemption:
PSE&G Cumulative Preferred Securities... 150,000 156,000 150,000 145,900
Monthly Income Preferred Securities..... 210,000 225,300 150,000 158,300
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 9. CASH AND CASH EQUIVALENTS
The December 31, 1995 and 1994 balances consist primarily of working funds
and highly liquid marketable securities (commercial paper) with a maturity of
three months or less.
NOTE 10. FEDERAL INCOME TAXES
A reconciliation of reported Net Income with pretax income and of Federal
income tax expense with the amount computed by multiplying pretax income by the
statutory Federal income tax rate of 35% is as follows:
<TABLE>
<CAPTION>
1995 1994 1993
---------- -------- --------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Net Income......................................... $ 662,323 $ 679,033 $600,933
Preferred securities dividend requirements......... 34,236 40,467 38,114
SFAS 109 Cumulative Effect......................... -- -- (5,414)
---------- -------- --------
Subtotal...................................... 696,559 719,500 633,633
---------- -------- --------
Federal income taxes:
Operating income:
Current provision................................ 183,268 162,521 151,208
Provision for deferred income taxes -- net(A).... 192,648 173,327 186,256
Investment tax credits -- net.................... (21,919) (23,297) (23,784)
---------- -------- --------
Total included in operating income................. 353,997 312,551 313,680
Miscellaneous other income:
Current provision................................ (9,897) (8,186) (14,340)
Provision for deferred income taxes(A)........... 9,816 10,422 9,815
SFAS 90 deferred income taxes(A)................... 2,161 2,530 2,948
---------- -------- --------
Total Federal income tax provisions........... 356,077 317,317 312,103
---------- -------- --------
Pretax income...................................... $1,052,636 $1,036,817 $945,736
========== ======== ========
</TABLE>
Reconciliation between total Federal income tax provisions and tax computed
at the statutory tax rate on pretax income:
<TABLE>
1995 1994 1993
-------- -------- --------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Tax computed at the statutory rate................. $ 368,423 $362,887 $331,008
-------- -------- --------
Increase (decrease) attributable to flow through of
certain tax adjustments:
Depreciation.................................. 16,257 (4,597) 3,347
Amortization of investment tax credits........... (21,919) (23,297) (23,784)
Other............................................ (6,684) (17,676) 1,532
-------- -------- --------
Subtotal...................................... (12,346) (45,570) (18,905)
-------- -------- --------
Total Federal income tax provisions........... $(356,077) $317,317 $312,103
======== ======== ========
Effective Federal income tax rate.................. 33.8% 30.6% 33.0%
</TABLE>
(A) The provision for deferred income taxes represents the tax effects of the
following items:
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Deferred Credits:
Additional tax depreciation and amortization..... $174,190 $109,106 $112,814
Leasing Activities............................... 64,567 60,129 34,958
Property Abandonments............................ (7,411) (6,606) (6,632)
Oil and Gas Property Write-Down.................. (2,451) (2,451) (2,451)
Deferred fuel costs -- net....................... (3,601) 39,361 63,330
Other............................................ (20,669) (13,260) (3,000)
-------- -------- --------
Total......................................... $204,625 $186,279 $199,019
======== ======== ========
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Between the years 1987 and 1994, Enterprise's Federal alternative
minimum tax (AMT) liability exceeded its regular Federal income tax
liability. This excess can be carried forward indefinitely to offset
regular income tax liability in future years. Enterprise commenced using
these AMT credits in 1995 and expects to continue using them in future
years as regular tax liability exceeds AMT. As of December 31, 1995, 1994
and 1993, Enterprise had AMT credits of $203 million, $256 million and
$247 million, respectively.
Since 1986, Enterprise has filed a consolidated Federal income tax
return on behalf of itself and its subsidiaries. Prior to 1986, PSE&G
filed consolidated tax returns. In March, 1992, the Internal Revenue
Service (IRS) issued a Revenue Agent's Report (RAR) following completion
of examination of PSE&G's consolidated tax return for 1985 and
Enterprise's consolidated tax returns for 1986 and 1987, proposing various
adjustments for such years which would increase Enterprise's consolidated
Federal income tax liability by approximately $121 million, exclusive of
interest and penalties, of which approximately $118 million is
attributable to PSE&G. Interest after taxes on these proposed adjustments
is currently estimated to be approximately $119 million as of December 31,
1995 and will continue to accrue at the Federal rate for large corporate
underpayments, currently 11% annually.
The most significant of these proposed adjustments relates to the IRS
contention that PSE&G's Hope Creek nuclear unit is a partnership with a
short 1986 taxable year. In addition, the IRS contends that the tax
in-service date of that unit is four months later than the date claimed by
PSE&G. In June 1992, Enterprise and PSE&G filed a protest with the IRS
disagreeing with certain of the proposed adjustments (including those
related to Hope Creek) contained in the RAR for taxable years 1985 through
1987 and continue to contest these issues. Any tax adjustments resulting
from the RAR would reduce Enterprise's and PSE&G's respective deferred
credits for accumulated deferred income taxes. While PSE&G believes that
assessments attributable to it are generally recoverable from its
customers in rates, no assurances can be given as to what regulatory
treatment may be afforded by the BPU.
On January 1, 1993, Enterprise adopted SFAS 109 without restating
prior years' financial statements which resulted in Enterprise recording
a $5.4 million cumulative effect increase in its net income. Under SFAS
109, deferred taxes are provided at the enacted statutory tax rate for all
temporary differences between the financial statement carrying amounts and
the tax bases of existing assets and liabilities irrespective of the
treatment for rate-making purposes. Since management believes that it is
probable that the effects of SFAS 109 on PSE&G, principally the
accumulated tax benefits that previously have been treated as a
flow-through item to customers, will be recovered from utility customers
in the future, an offsetting regulatory asset was established. As of
December 31, 1995, PSE&G had recorded a deferred tax liability and an
offsetting regulatory asset of $769 million representing the future
revenue expected to be recovered through rates based upon established
regulatory practices which permit recovery of current taxes payable. This
amount was determined using the 1995 Federal income tax rate of 35%.
<PAGE>
SFAS 109
The following is an analysis of accumulated deferred income taxes:
<TABLE>
<CAPTION>
ACCUMULATED DEFERRED INCOME TAXES 1995 1994
---------------------------------------- ---------- ----------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Assets:
Current (net)...................................... $ 27,571 $ 25,311
Non-Current:
Unrecovered Investment Tax Credits............ 129,713 136,402
Nuclear Decommissioning....................... 25,241 25,082
Hope Creek Cost Disallowance.................. -- 10,127
Construction Period Interest and Taxes........ 17,199 15,913
Vacation Pay.................................. 6,681 6,822
AMT Credit.................................... 202,655 255,828
Real Estate Impairment........................ 5,213 20,932
Other......................................... 4,107 6,863
---------- ----------
Total Non-Current........................ $ 390,809 $ 477,969
---------- ----------
Total Assets............................. $ 418,380 $ 503,280
========== ==========
Liabilities:
Non-Current:
Plant Related Items........................... $2,370,830 $2,268,688
Leasing Activities............................ 616,914 580,415
Property Abandonments......................... 21,469 26,971
Oil and Gas Property Write-Down............... 13,061 14,925
Deferred Electric Energy & Gas Costs.......... 56,283 59,884
Unamortized Debt Expense...................... 36,945 37,599
Taxes Recoverable Through Future Rates (net).. 262,625 270,684
Other......................................... 107,302 124,193
---------- ----------
Total Non-Current........................ $3,485,429 $3,383,359
---------- ----------
Total Liabilities........................ $3,485,429 $3,383,359
========== ==========
Summary -- Accumulated Deferred Income Taxes
Net Current Assets............................... $ 27,571 $ 25,311
Net Deferred Liability........................... $3,094,620 $2,905,390
---------- ----------
Total.................................... $3,067,049 $2,880,079
========== ==========
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 11. LEASING ACTIVITIES
As Lessee
The Consolidated Balance Sheets include assets and related
obligations applicable to capital leases under which PSE&G is a
lessee. The total amortization of the leased assets and interest on
the lease obligations equals the net minimum lease payments included
in rent expense for capital leases.
Capital leases of PSE&G relate primarily to its corporate
headquarters and other capital equipment. Certain of the leases
contain renewal and purchase options and also contain escalation
clauses.
Enterprise and its other subsidiaries are not lessees in any
capitalized leases.
Utility plant includes the following amounts for capital leases
at December 31:
<TABLE>
<CAPTION>
1995 1994
------- -------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Common Plant............................................. $58,610 $58,610
Less: Accumulated Amortization........................... 5,499 4,840
------- -------
Net Assets under Capital Leases.......................... $53,111 $53,770
======= =======
Future minimum lease payments for noncancelable capital and operating
leases at December 31, 1995 were:
</TABLE>
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
------- ---------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
1996..................................................... 13,174 14,616
1997..................................................... 13,175 12,580
1998..................................................... 13,176 8,638
1999..................................................... 13,177 6,517
2000..................................................... 12,834 4,449
Later Years.............................................. 189,229 12,998
-------- --------
Minimum Lease Payments................................... 254,765 $ 59,798
========
Less: Amount representing estimated executory costs,
together with any profit thereon, included in
minimum lease payments............................. 126,029
--------
Net minimum lease payments............................... 128,736
Less: Amount representing interest....................... 75,625
--------
Present value of net minimum lease payments(A)........... $ 53,111
========
(A) Reflected in the Consolidated Balance Sheets for 1995 and 1994 were
Capital Lease Obligations of $53.111 million and $53.770 million which
includes Capital Lease Obligations due within one year of $739 thousand
and $659 thousand, respectively.
</TABLE>
<TABLE>
The following schedule shows the composition of rent expense included
in Operating Expenses:
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------
1995 1994 1993
------- ------- -------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Interest on Capital Lease Obligations................. $ 6,084 $ 6,156 $ 6,074
Amortization of Utility Plant under Capital Leases.... 659 588 513
------- ------- -------
Net minimum lease payments relating to Capital
Leases.............................................. 6,743 6,744 6,587
Other Lease payments.................................. 27,219 28,447 22,132
------- ------- -------
Total Rent Expense.................................... $33,962 $35,191 $28,719
======= ======= =======
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
As Lessor
<TABLE>
PSRC's net investments in leveraged and direct financing leases are composed of
the following elements:
<CAPTION>
DECEMBER 31, 1995 DECEMBER 31, 1994
---------------------------------- ----------------------------------
(MILLIONS OF DOLLARS)
DIRECT DIRECT
LEVERAGED FINANCING LEVERAGED FINANCING
LEASES LEASES TOTAL LEASES LEASES TOTAL
--------- --------- ------- --------- --------- -------
<S> <C> <C> <C> <C> <C> <C>
Lease rents receivable..... $ 1,031 $ 39 $ 1,070 $ 990 $ 92 $ 1,082
Estimated residual value... 635 8 643 622 13 635
-------- ------- ------- -------- ------- -------
1,666 47 1,713 1,612 105 1,717
Unearned and deferred income (821) (12) (833) (823) (29) (852)
-------- ------- ------- -------- ------- -------
Total investments...... 845 35 880 789 76 865
Deferred taxes.............. (405) (11) (416) (333) (20) (353)
-------- ------- ------- -------- ------- -------
Net investments........ $ 440 $ 24 $ 464 $ 456 $ 56 $ 512
======== ======= ======= ======== ======= =======
PSRC's other capital leases are with various regional, state and city authorities for transportation
equipment and aggregated $6 million as of December 31, 1995 and 1994.
During 1995, PSRC converted two Airbus A-300 aircraft under direct-finance leases to operating
leases. As of December 31, 1995, such aircraft had a net asset value of $11 million. On January 31, 1996,
the aircraft were sold for an amount approximating their net asset value.
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 12. COMMITMENTS AND CONTINGENT LIABILITIES
Nuclear Performance Standard
The BPU has established its NPS for nuclear generating stations
owned by New Jersey electric utilities, including the five nuclear
units in which PSE&G has an ownership interest: Salem 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).
The penalty/reward under the NPS is a percentage of replacement
power costs. (See table below.)
<TABLE>
<CAPTION>
CAPACITY FACTOR RANGE REWARD PENALTY
- -------------------------------------------------- ------ -------
<S> <C> <C>
Equal to or greater than 75%......................... 30% --
Equal to or greater than 65% and less than 75%....... None None
Equal to or greater than 55% and less than 65%....... -- 30%
Equal to or greater than 45% and less than 55%....... -- 40%
Equal to or greater than 40% and less than 45%....... -- 50%
Below 40%............................................ BPU Intervenes
</TABLE>
Under the NPS, the capacity factor is calculated annually using
maximum dependable capability of the five nuclear units in which PSE&G
owns an interest. This method takes into account actual operating
conditions of the units.
While the NPS does not specifically have a gross negligence
provision, the BPU has indicated that it would consider allegations of
gross negligence brought upon a sufficient factual basis. A finding of
gross negligence could result in penalties other than those prescribed
under the NPS. During 1995, the five nuclear units in which PSE&G has
an ownership interest aggregated a 62% combined capacity factor which
resulted in a penalty for 1995 of approximately $3.5 million. On
January 16, 1996, PSE&G filed its Alternative Rate Plan with the BPU
which proposes the elimination of the NPS. See Note 2.
Based upon current projections and assumptions regarding PSE&G's
five nuclear units during 1996, including the return of Hope Creek to
service in early March, the return of Salem 2 in the third quarter and
<PAGE>
the continued outage of Salem 1 for the remainder of the year, the 1996
aggregate capacity factor would be approximately 57%, which would
result in a penalty ranging from $11 to $12 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 NRC concurrence
that they are prepared to restart. Restart of Salem 1, which had
originally been scheduled for the second quarter of 1996, will be
delayed for a substantial period as a result of the ongoing steam
generator inspection and analysis. Salem 2, which is also undergoing
steam generator inspection and analysis is still scheduled to return
to service in the third quarter of 1996. The inability to successfully
return these units to continuous, safe operation could have a material
effect on the financial position, results of operation and net cash
flows of Enterprise and PSE&G.
Certain of the owners of Salem have indicated that they may seek
to hold PSE&G responsible for their share of costs of the current
outage. PSE&G cannot predict what actions, if any, may be taken.
Nuclear Insurance Coverages and Assessments
PSE&G's insurance coverages and maximum retrospective assessments
for its nuclear operations are as follows:
<TABLE>
<CAPTION>
PSE&G MAXIMUM
TOTAL ASSESSMENTS
SITE FOR A SINGLE
TYPE AND SOURCE OF COVERAGES COVERAGES INCIDENT
- ------------------------------------- --------- -------------
(MILLIONS OF DOLLARS)
<S> <C> <C>
Public Liability:
American Nuclear Insurers........... $ 200.0 $ --
Indemnity(A)........................ 8,720.3 210.2
-------- --------
$8,920.3 (B) $ 210.2
-------- --------
Nuclear Worker Liability:
American Nuclear Insurers(C)........ $ 200.0 $ 8.1
-------- --------
Property Damage:
Nuclear Mutual Limited.............. $ 500.0 $ 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.
<PAGE>
(B) Limit of liability for each nuclear incident under Price-
Anderson.
(C) Industry aggregate limit representing the potential liability from
workers claiming exposure to the hazard of nuclear radiation. This
policy includes automatic reinstatements up to an aggregate of
$200 million, thereby providing total coverage of $400 million.
This policy does not increase PSE&G's obligation under Price-
Anderson.
(D) 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 of this limit for each plant.
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. Court of Appeals for the
Third Circuit, not involving PSE&G, held that the Price Anderson Act
did not preclude awards based on state law claims for punitive damage.
PSE&G 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 retrospective premium assessments in
case of adverse loss experience. PSE&G's maximum potential liabilities<PAGE>
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. All coverages at Salem and
Hope Creek remain fully in effect.
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 an 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, which includes
$428 million for nuclear fuel and $84 million of Allowance for Funds
used During Construction (AFDC) during the years 1996 through 2000. The
estimate of construction requirements is based on expected project
completion dates and includes anticipated escalation due to inflation
of approximately 3%, annually. Therefore, construction delays or higher
inflation levels could cause significant increases in these amounts.
PSE&G expects to generate internally the funds necessary to satisfy its
construction expenditures over the next five years, assuming adequate
and timely recovery of costs, as to which no assurances can be given.
In addition, PSE&G does not presently anticipate any difficulties in
obtaining sufficient sources of fuel for electric generation or
adequate gas supplies during the years 1996 through 2000.
<PAGE>
Hazardous Waste
Certain Federal and State laws authorize the United States
Environmental Protection Agency (EPA) and the New Jersey Department of
Environmental Protection (NJDEP), among other agencies, to issue orders
and bring enforcement actions to compel responsible parties to take
investigative and remedial actions at any site that is determined to
present an imminent and substantial danger to the public or the
environment because of an actual or threatened release of one or more
hazardous substances. Because of the nature of PSE&G's business,
including the production of electricity, the distribution of gas and,
formerly, the manufacture of gas, various by-products and substances
are or were produced or handled which contain constituents classified
as hazardous. PSE&G generally provides for the disposal or processing
of such substances through licensed independent contractors. However,
these statutory provisions impose joint and several responsibility
without regard to fault on all responsible parties, including the
generators of the hazardous substances, for certain investigative and
remediation costs at sites where these substances were disposed of or
processed. PSE&G has been notified with respect to a number of such
sites and the remediation of these potentially hazardous sites is
receiving greater attention from the government agencies involved.
Generally, actions directed at funding such site investigations and
remediation include all suspected or known responsible parties. PSE&G
does not expect its expenditures for any such site to have a material
effect on its financial position, results of operations or net cash
flows.
<PAGE>
PSE&G Manufactured Gas Plant Remediation Program
In 1988, NJDEP notified PSE&G that it had identified the need for
PSE&G, pursuant to a formal arrangement, to systematically investigate
and, if necessary, resolve environmental concerns extant at PSE&G's
former manufactured gas plant sites. To date, NJDEP and PSE&G have
identified 38 former gas plant sites. PSE&G is currently working with
NJDEP under a program to assess, investigate and, if necessary,
remediate environmental concerns at these sites (Remediation Program).
The Remediation Program is periodically reviewed and revised by PSE&G
based on regulatory requirements, experience with the Remediation
Program and available technologies. The cost of the Remediation Program
cannot be reasonably estimated, but experience to date indicates that
costs of at least $20 million per year could be incurred over a period
of more than 30 years and that the overall cost could be material to
PSE&G's financial position, results of operations or net cash flows.
Costs incurred through December 31, 1995 for the Remediation
Program amounted to $64.6 million, net of certain insurance proceeds.
In addition, at December 31, 1995, PSE&G's estimated liability for
remediation costs through 1998 aggregated $96.3 million.
In accordance with a Stipulation approved by the BPU in 1992, PSE&G
is recovering through its LEAC over a six-year period $32 million of
its actual remediation costs to reflect costs incurred through
September 30, 1992. As of December 31, 1995, PSE&G has recovered $27.8
million of the $32 million of such costs. PSE&G is expected to recover
the balance of $4.2 million in its currently filed LGAC period ending
in 1996.
<PAGE>
NOTE 13. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
On January 1, 1993, Enterprise and PSE&G adopted SFAS 106 which
requires that the expected cost of employees' postretirement health
care and insurance benefits be charged to expense during the years in
which employees render service. PSE&G elected to amortize, over 20
years, its unfunded obligation of $609.3 million at January 1, 1993.
The following table discloses the significant components of the net
periodic postretirement benefit obligation:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
NET PERIODIC POSTRETIREMENT BENEFIT OBLIGATION 1995 1994 1993
- ---------------------------------------------- ------- ------- -------
(MILLIONS)
<S> <C> <C> <C>
Service cost................................. $ 8.5 $ 11.1 $ 11.7
Interest on accumulated postretirement
obligation................................. 48.2 45.4 44.4
Amortization of transition obligation........ 30.5 30.5 30.5
Amortization of Net (Gain)/Loss (a).......... (3.8) -- --
Deferral of current expense.................. (50.7) (57.8) (58.6)
------ ------ -------
Annual net expense...................... $ 32.7 $ 29.2 $ 28.0
====== ====== =======
</TABLE>
(a) Reflects change in Plan Assumptions.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The discount rate used in determining the PSE&G net periodic
postretirement benefit cost was 8.50% and 7.25% for 1995 and 1994,
respectively.
A one-percentage-point increase in the assumed health care cost
trend rate for each year would increase the aggregate of the service
and interest cost components of net periodic postretirement health care
cost by approximately $2.6 million, or 5.6%, and increase the
accumulated postretirement benefit obligation as of December 31, 1995
by $34.8 million, or 5.9%.
The assumed health care cost trend rates used in measuring the
accumulated postretirement benefit obligation in 1995 were: medical
costs for pre-age sixty-five retirees -- 13.0%, medical costs for
post-age sixty-five retirees -- 9.0% and dental costs -- 7.0%; such
rates are assumed to gradually decline to 5.0%, 5.0% and 5.0%,
respectively, in 2011. The medical costs above include a provision for
prescription drugs.
In its 1992 base rate case, PSE&G requested full recovery of the
costs associated with postretirement benefits other than pensions
(OPEB) on an accrual basis, in accordance with SFAS 106. The BPU's
December 31, 1992 base rate order provided that (1) PSE&G's
pay-as-you-go basis OPEB costs will continue to be included in cost of
service and will be recoverable in base rates on a pay-as-you-go basis;
(2) prudently incurred OPEB costs, that are accounted for on an accrual
basis in accordance with SFAS 106, will be recoverable in future rates;
(3) PSE&G should account for the differences between its OPEB costs on
an accrual basis and the pay-as-you-go basis being recovered in rates
as a regulatory asset; and (4) the issue of cash versus accrual
accounting will be revisited and in the event that FASB or the SEC
requires the use of accrual accounting for OPEB costs for rate-making
purposes, the regulatory asset will be recoverable, through rates, over
an appropriate amortization period.
Accordingly, PSE&G is accounting for the differences between its
SFAS 106 accrual cost and the cash cost currently recovered through
rates as a regulatory asset. OPEB costs charged to expenses during 1995
were $32.6 million and accrued OPEB costs deferred were $50.7 million.
The amount of the unfunded liability, at December 31, 1995, as shown
below, is $717.9 million and funding options are currently being
explored. The primary effect of adopting SFAS 106 on Enterprise's and
PSE&G's financial reporting is on the presentation of their financial
positions with minimal effect on their results of operations.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
During January 1993 and subsequent to the receipt of the Order, the
FASB's Emerging Issues Task Force (EITF) concluded that deferral of
such costs is acceptable, provided regulators allow SFAS 106 costs in
rates within approximately five years of the adoption of SFAS 106 for
financial reporting purposes, with any cost deferrals recovered in
approximately twenty years. In accordance with the Alternative Rate
Plan filed, PSE&G expects full SFAS 106 recovery in accordance with the
EITF's view of such standard and believes that it is probable that any
deferred costs will be recovered from utility customers within such
twenty-year time period. As of December 31, 1995, PSE&G has deferred
$167.2 million of such costs. However, if recovery of SFAS 106 costs
is not approved by the BPU , the impact on the financial position and
results of operations would be material.
In accordance with SFAS 106 disclosure requirements, a
reconciliation of the funded status of the plan is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1995 1994
-------- --------
(MILLIONS)
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees................................. $(444.6) $(379.2)
Fully eligible active plan participants.. (52.9) (45.7)
Other active plan participants........... (220.4) (161.0)
------- -------
Total................................ (717.9) (585.9)
Plan assets at fair value................ -- --
------- -------
Accumulated postretirement benefit
obligation in excess of plan assets..... (717.9) (585.9)
Unrecognized net (gain)/loss from past
experience different from that assumed
And from changes in assumptions......... 32.8 (78.8)
Unrecognized prior service cost.......... -- --
Unrecognized transition obligation....... 517.9 548.3
------- -------
Accrued postretirement obligation........ $(167.2) $(116.4)
======= =======
The discount rate used in determining the accumulated postretirement
benefit obligation as of December 31, 1995 was 7.25% and 8.50% for 1995
and 1994, respectively.
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 14. PENSION PLAN
The discount rates, expected long-term rates of return on assets and
average compensation growth rates used in determining the Pension
Plan's funded status and net pension cost as of December 31, 1995 and
1994 were as follows:
<TABLE>
<CAPTION>
1995 1994
------ ------
<S> <C> <C>
Funded Status:
- -------------
Discount Rate used to Determine Benefit
Obligations................................. 7 1/4% 8-1/2%
Average Compensation Growth to Determine
Benefit Obligations...................... 4.5% 4.5%
Net Pension Cost:
- ----------------
Discount Rate............................... 8.5% 7-1/4%
Expected Long-Term Return on Assets......... 8.5% 8%
Average Compensation Growth................. 4.5% 5.5%
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table shows the Pension Plan's funded status:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1995 1994
----------- -----------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligations, including vested benefits
of $1,403,313 in 1995 and $1,151,677 in 1994........... $(1,509,841) $(1,235,930)
Effect of projected future compensation................... (321,545) (261,846)
----------- -----------
Projected benefit obligations............................... (1,831,386) (1,497,776)
Plan assets at fair value, primarily listed equity and debt
securities................................................ 1,533,446 1,270,116
----------- -----------
Projected benefit obligations in excess of plan assets...... (297,940) (227,660)
Unrecognized net gain (loss) from past experience and
effects of changes in assumptions......................... 120,859 32,815
Prior service cost not yet recognized in net pension cost... 110,213 119,783
Unrecognized net obligations being recognized over
16.7 years................................................ 61,287 69,387
----------- -----------
Accrued pension expense..................................... $ (5,581) $ (5,675)
=========== ===========
</TABLE>
<TABLE>
The net pension cost for the years ending December 31, 1995, 1994 and 1993, include the following
components:
<CAPTION>
1995 1994 1993
-------- -------- --------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Service cost - benefits earned during year......... $ 37,033 $ 42,904 $ 42,948
Interest cost on projected benefit obligations..... 124,147 108,394 103,118
Return on assets................................... (312,190) 5,022 (166,916)
Net amortization and deferral...................... 222,916 (90,752) 90,958
-------- -------- --------
Total......................................... $ 71,906 $ 65,568 $ 70,108
======== ======== ========
See Note 1 -- Organization and Summary of Significant Accounting Policies.
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 15. FINANCIAL INFORMATION BY BUSINESS SEGMENTS
<TABLE>
Information related to the segments of Enterprise's business is detailed below:
<CAPTION>
NONUTILITY
ELECTRIC GAS EDC ACTIVITIES(A) TOTAL
----------- ---------- -------- -------------- --------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C>
FOR THE YEAR ENDED DECEMBER 31, 1995
Operating Revenues...................... $ 4,020,842 $1,686,403 $ 248,002 $ 208,906 $ 6,164,153
Eliminations (Intersegment Revenues).... -- -- -- -- --
----------- ---------- ---------- --------- -----------
Total Operating Revenues................ 4,020,842 1,686,403 248,002 208,906 6,164,153
----------- ---------- ---------- --------- -----------
Depreciation and Amortization........... 503,022 88,092 77,265 5,852 674,231
Operating Income Before Income Taxes.... 1,140,279 178,718 58,654 142,172 1,519,823
Capital Expenditures.................... 545,997 140,153 132,098 8,364 826,612
December 31, 1995
- -----------------
Net Utility Plant....................... 9,651,695 1,535,736 -- -- 11,187,431
Oil and Gas Property, Plant &
Equipment............................. -- -- 608,015 -- 608,015
Other Corporate Assets.................. 2,778,691 589,455 147,822 1,858,654 5,374,622
----------- ---------- ---------- --------- -----------
Total Assets............................ $12,430,386 $2,125,191 $ 755,837 $1,858,654 $17,170,068
=========== ========== ========== ========= ===========
FOR THE YEAR ENDED DECEMBER 31, 1994
Operating Revenues...................... $ 3,739,713 $1,778,528 $ 229,880 $ 187,067 $ 5,935,188
Eliminations (Intersegment Revenues).... -- -- (11,179) (1,566) (12,745)
----------- ---------- ---------- --------- -----------
Total Operating Revenues................ 3,739,713 1,778,528 218,701 185,501 5,922,443
----------- ---------- ---------- --------- -----------
Depreciation and Amortization........... 471,910 79,462 78,567 4,089 634,028
Operating Income Before Income Taxes.... 1,083,155 226,196 39,210 133,590 1,482,151
Capital Expenditures.................... 734,100 153,183 160,296 8,445 1,056,024
December 31, 1994
- -----------------
Net Utility Plant....................... 9,642,177 1,456,068 -- -- 11,098,245
Oil and Gas Property, Plant &
Equipment............................. -- -- 577,913 -- 577,913
Other Corporate Assets.................. 2,589,348 576,806 150,973 1,724,155 5,041,282
----------- ---------- ---------- --------- -----------
Total Assets............................ $12,231,525 $2,032,874 $ 728,886 $1,724,155 $16,717,440
=========== ========== ========== ========= ===========
FOR THE YEAR ENDED DECEMBER 31, 1993
Operating Revenues...................... $ 3,696,114 $1,594,341 $ 278,470 $ 161,650 $ 5,730,575
Eliminations (Intersegment Revenues).... -- -- (20,158) (1,827) (21,985)
----------- ---------- ---------- --------- -----------
Total Operating Revenues................ 3,696,114 1,594,341 258,312 159,823 5,708,590
----------- ---------- ---------- --------- -----------
Depreciation and Amortization........... 441,164 69,375 86,136 4,922 601,597
Operating Income Before Income Taxes.... 1,117,739 173,916 92,162 43,310 1,427,127
Capital Expenditures.................... 738,362 152,012 91,988 2,026 984,388
December 31, 1993
- -----------------
Net Utility Plant....................... 9,451,581 1,352,799 -- -- 10,804,380
Oil and Gas Property, Plant &
Equipment............................. -- -- 506,047 -- 506,047
Other Corporate Assets.................. 2,313,394 866,524 173,390 1,665,921 5,019,229
----------- ---------- ---------- --------- -----------
Total Assets............................ $11,764,975 $2,219,323 $ 679,437 $1,665,921 $16,329,656
=========== ========== ========== ========= ===========
(A) The Nonutility Activities include amounts applicable to Enterprise, the parent corporation.
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
Information related to Property, Plant and Equipment of PSE&G is detailed below:
<CAPTION>
DECEMBER 31,
---------------------------------------
1995 1994 1993
----------- ----------- -----------
(Thousands of Dollars)
<S> <C> <C> <C>
Utility Plant - Original Cost
Electric Plant in Service
Steam Production....................... $ 1,791,010 $ 1,810,674 $ 1,763,253
Nuclear Production..................... 5,992,341 5,931,049 5,873,274
Transmission........................... 1,127,031 1,078,928 1,034,150
Distribution........................... 3,044,830 2,877,862 2,724,202
Other.................................. 1,139,891 647,406 526,015
----------- ----------- ------------
Total Electric Plant in Service.... 13,095,103 12,345,919 11,920,894
----------- ----------- -----------
Gas Plant in Service
Transmission........................... 65,109 62,213 63,395
Distribution........................... 2,250,705 2,131,816 1,993,044
Other.................................. 126,758 124,204 121,402
----------- ----------- -----------
Total Gas Plant in Service......... 2,442,572 2,318,233 2,177,841
----------- ----------- -----------
Common Plant in Service
Capital Leases......................... 58,610 58,610 56,812
General................................ 458,494 486,521 463,473
----------- ----------- -----------
Total Common Plant in Service...... 517,104 545,131 520,285
----------- ----------- -----------
TOTAL......................... $16,054,779 $15,209,283 $14,619,020
=========== =========== ===========
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONCLUDED)
NOTE 16. PROPERTY IMPAIRMENT OF ENTERPRISE GROUP DEVELOPMENT
CORPORATION
As a result of a management review of each property's current value
and the potential for increasing such value through operating and other
improvements, EGDC recorded an impairment in 1993 related to certain of
its properties, including properties upon which EDHI's management
revised its intent from a long-term investment strategy to a hold for
sale status, reflecting such properties on its books at their net
realizable value. This impairment reduced the estimated value of EGDC's
properties by $77.6 million and 1993 net income by $50.5 million, after
tax, or 21 cents per share of Enterprise Common Stock.
NOTE 17. JOINTLY OWNED FACILITIES -- UTILITY PLANT
PSE&G has ownership interests in and is responsible for providing
its share of the necessary financing for the following jointly owned
facilities. All amounts reflect the share of PSE&G's jointly owned
projects and the corresponding direct expenses are included in
Consolidated Statements of Income as operating expenses. (See Note 1 --
Organization and Summary of Significant Accounting Policies.)
<TABLE>
<CAPTION>
OWNERSHIP PLANT IN ACCUMULATED PLANT UNDER
PLANT -- DECEMBER 31, 1995 INTEREST SERVICE DEPRECIATION CONSTRUCTION
- ------------------------------------------------ --------- --------- ------------ ------------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C>
Coal Generating
Conemaugh..................................... 22.50% $ 198,724 $ 38,339 $ 2,401
Keystone...................................... 22.84 119,690 32,800 1,629
Nuclear Generating
Peach Bottom.................................. 42.49 755,504 312,856 21,139
Salem......................................... 42.59 1,055,114 396,795 57,041
Hope Creek.................................... 95.00 4,122,715 1,063,403 13,592
Nuclear Support Facilities.................... Various 179,065 33,754 2,990
Pumped Storage Generating
Yards Creek................................... 50.00 27,246 9,293 2,350
Transmission Facilities......................... Various 121,100 36,266 89
Merrill Creek Reservoir......................... 13.91 37,231 12,111 --
Linden Gas Plant................................ 90.00 15,855 19,388 --
</TABLE>
NOTE 18. SELECTED QUARTERLY DATA (UNAUDITED)
The information shown below, in the opinion of Enterprise, includes all
adjustments, consisting only of normal recurring accruals, necessary to a fair
presentation of such amounts. Due to the seasonal nature of the utility
business, quarterly amounts vary significantly during the year.
<TABLE>
<CAPTION>
CALENDAR MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
QUARTER ---------------------- --------------------- ---------------------- ----------------------
ENDED 1995 1994 1995 1994 1995 1994 1995 1994
- -------------------------- ---------- ---------- ---------- ---------- ---------- ----------- ---------- ----------
(THOUSANDS WHERE APPLICABLE)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Operating Revenues........ $1,676,269 $1,795,457 $1,328,784 $1,279,588 $1,492,130 $1,376,199 $1,666,970 $1,471,199
Operating Income.......... $ 334,336 $ 348,948 $ 233,239 $ 252,725 $ 311,528 $ 311,920 $ 278,607 $ 250,500
Net Income................ $ 212,592 $ 230,127 $ 110,667 $ 129,885 $ 186,782 $ 187,178 $ 152,282 $ 131,843
Earnings Per Share of
Common Stock............ $ 0.87 $ 0.94 $ 0.45 $ 0.53 $ 0.76 $ 0.76 $ .62 $ 0.54
Average Shares of Common
Stock Outstanding....... 244,698 243,777 244,698 244,698 244,698 244,698 244,698 244,698
</TABLE>
<PAGE>
PUBLIC SERVICE ELECTRIC AND GAS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PSE&G
Except as modified below, the Notes to Consolidated Financial
Statements of Enterprise are incorporated herein by reference insofar
as they relate to PSE&G and its subsidiaries:
Note 1. - Organization and Summary of Significant Accounting
Policies
Note 2. - Rate Matters
Note 3. - PSE&G Nuclear Decommissioning and Amortization of
Nuclear Fuel
Note 4.- Schedule of Consolidated Capital Stock and Other
Securities
Note 5. - Deferred Items
Note 6. - Schedule of Consolidated Debt
Note 7. - Long-Term Investments
Note 8. - Financial Instruments and Risk Management
Note 11.- Leasing Activities -- As Lessee
Note 12.- Commitments and Contingent Liabilities
Note 13.- Postretirement Benefits Other Than Pensions
Note 14.- Pension Plan
Note 15.- Financial Information by Business Segments
Note 17.- Jointly Owned Facilities -- Utility Plant
NOTE 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Consolidation Policy
The consolidated financial statements include the accounts of PSE&G
and its subsidiaries. All significant intercompany accounts and
transactions have been eliminated in consolidation. Certain
reclassifications of prior years' data have been made to conform with
the current presentation.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 9. CASH AND CASH EQUIVALENTS
The December 31, 1995 and 1994 balances consist primarily of working funds.
NOTE 10. FEDERAL INCOME TAXES
<TABLE>
A reconciliation of reported Net Income with pretax income and of Federal income tax expense
with the amount computed by multiplying pretax income by the statutory Federal income tax rate of
35% is as follows:
<CAPTION>
1995 1994 1993
-------- -------- --------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Net Income......................................... $616,964 $659,406 $614,868
-------- -------- --------
Federal income taxes:
Operating income:
Current provision............................. 275,460 230,709 177,314
Provision for deferred income taxes-net(A).... 65,084 83,028 149,884
Investment tax credits -- net................. (19,111) (19,208) (18,408)
-------- -------- --------
Total included in operating income................. 321,433 294,529 308,790
Miscellaneous other income:
Current provision................................ (9,897) (8,186) (15,419)
Provision for deferred income taxes(A)........... 9,816 10,422 9,815
SFAS 90 deferred income taxes(A)................... 2,161 2,530 2,948
-------- -------- --------
Total Federal income tax provisions........... 323,513 299,295 306,134
-------- -------- --------
Pretax income...................................... $940,477 $958,701 $921,002
======== ======== ========
</TABLE>
<TABLE>
Reconciliation between total Federal income tax provisions and tax computed at the statutory tax
rate on pretax income:
<CAPTION>
1995 1994 1993
-------- -------- --------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Tax expense at the statutory rate.................. $329,167 $335,546 $322,351
-------- -------- --------
Increase (decrease) attributable to flow-through of
certain tax adjustments:
Depreciation.................................. 16,257 (4,597) 3,347
Amortization of investment tax credits........ (19,111) (19,208) (18,408)
Other......................................... (2,800) (12,446) (1,156)
-------- -------- --------
Subtotal...................................... (5,654) (36,251) (16,217)
-------- -------- --------
Total Federal income tax provisions........... $323,513 $299,295 $306,134
======== ======== ========
Effective Federal income tax rate.................. 34.4% 31.2% 33.2%
(A) The provision for deferred income taxes represents the tax effects of the following items:
</TABLE>
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Deferred Credits:
Additional tax depreciation and amortization......... $111,193 $ 85,335 $ 92,693
Property Abandonments................................ (7,411) (6,606) (6,632)
Oil and Gas Property Write-Down...................... (2,451) (2,451) (2,451)
Deferred fuel costs-net.............................. (3,601) 39,361 63,330
Other................................................ (20,669) (19,659) 15,707
-------- -------- --------
Total........................................ $ 77,061 $ 95,980 $162,647
======== ======== ========
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SFAS 109
The following is an analysis of accumulated deferred income taxes:
<TABLE>
<CAPTION>
ACCUMULATED DEFERRED INCOME TAXES 1995 1994
---------- ----------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Assets:
Current (net)....................................................... $ 27,571 $ 25,311
Non-Current:
Unrecovered Investment Tax Credits............................... 129,713 136,402
Nuclear Decommissioning.......................................... 25,241 25,082
Hope Creek Cost Disallowance..................................... -- 10,127
Construction Period Interest and Taxes........................... 17,199 15,913
Vacation Pay..................................................... 6,681 6,822
Other............................................................ 5,057 6,863
---------- ----------
Total Non-Current........................................... $ 183,891 $ 201,209
---------- ----------
Total Assets................................................ $ 211,462 $ 226,520
========== ==========
Liabilities:
Non-Current:
Plant Related Items.............................................. $2,237,386 $2,157,206
Property Abandonments............................................ 21,469 26,971
Oil and Gas Property Write-Down.................................. 13,061 14,925
Deferred Electric Energy & Gas Costs............................. 56,283 59,884
Unamortized Debt Expense......................................... 36,945 37,599
Taxes Recoverable Through Future Rates (Net)..................... 262,625 270,684
Other............................................................ 91,725 112,479
---------- ----------
Total Non-Current........................................... $2,719,494 $2,679,748
---------- ----------
Total Liabilities........................................... $2,719,494 $2,679,748
========== ==========
Summary -- Accumulated Deferred Income Taxes
Net Current Assets.................................................. $ 27,571 $ 25,311
Net Deferred Liability.............................................. $2,535,603 $2,478,539
---------- ----------
Total....................................................... $2,508,032 $2,453,228
========== ==========
The balance of Federal income tax payable by PSE&G to Enterprise was $5.3 million and $15.6
million, as of December 31, 1995 and December 31, 1994, respectively.
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONCLUDED)
NOTE 18. SELECTED QUARTERLY DATA (UNAUDITED)
The information shown below, in the opinion of PSE&G, includes all
adjustments, consisting only of normal recurring accruals, necessary to a fair
presentation of such amounts. Due to the seasonal nature of the utility
business, quarterly amounts vary significantly during the year.
<TABLE>
<CAPTION>
CALENDAR MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
QUARTER ---------------------- ---------------------- ---------------------- ----------------------
ENDED 1995 1994 1995 1994 1995 1994 1995 1994
- ---------------------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Operating Revenues.... $1,579,516 $1,690,999 $1,235,435 $1,182,880 $1,381,004 $1,284,175 $1,511,290 $1,360,187
Operating Income...... $ 298,432 $ 305,013 $ 204,606 $ 218,225 $ 280,525 $ 282,782 $ 211,939 $ 206,650
Net Income............ $ 206,896 $ 221,439 $ 111,300 $ 128,113 $ 184,878 $ 190,378 $ 113,890 $ 119,476
Earnings Available to
Public Service
Enterprise Group
Incorporated........ $ 198,214 $ 211,159 $ 102,620 $ 117,969 $ 176,196 $ 180,234 $ 105,698 $ 109,577
</TABLE>
NOTE 19. ACCOUNTS PAYABLE TO ASSOCIATED COMPANIES -- NET
The balance at December 31, 1995 and 1994 consisted of the following:
<TABLE>
<CAPTION>
1995 1994
------- -------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Public Service Enterprise Group Incorporated (A).......... $ 9,055 $17,678
Energy Development Corporation............................ (306) (336)
Other..................................................... (738) (665)
------- -------
Total.............................................. $ 8,011 $16,677
======= =======
(A) Principally Federal income taxes related to PSE&G's taxable income.
</TABLE>
<PAGE>
PART III
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
Enterprise and PSE&G, none.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANTS
DIRECTORS OF THE REGISTRANTS
Enterprise
The information required by Item 10 of Form 10-K with respect to
present directors who are nominees for election as directors at
Enterprise's Annual Meeting of Stockholders to be held on April 16,
1996, and directors whose terms will continue beyond the meeting, is
set forth under the heading "Election of Directors" in Enterprise's
definitive Proxy Statement for such Annual Meeting of Stockholders,
which definitive Proxy Statement is expected to be filed with the
Securities and Exchange Commission on or about March 1, 1996 and which
information set forth under said heading is incorporated herein by this
reference thereto.
PSE&G
There is shown as to each present director information as to the
period of service as a director of PSE&G, age as of April 16, 1996,
present committee memberships, business experience during the last five
years and other present directorships. For discussion of certain
litigation involving the directors of PSE&G, except Forrest J. Remick,
see Part I - Business, Item 3 - Legal Proceedings.
LAWRENCE R. CODEY has been a director since 1988. Age 51. Member
of Executive Committee. Has been President and Chief Operating Officer
of PSE&G since September 1991. Was Senior Vice President - Electric of
PSE&G from January 1989 to September 1991. Director of Enterprise.
Director of Sealed Air Corporation, The Trust Company of New Jersey,
United Water Resources Inc. and Blue Cross & Blue Shield of New Jersey.
E. JAMES FERLAND has been a director since 1986. Age 54. Chairman
of Executive Committee. Chairman of the Board, President and Chief
Executive Officer of Enterprise since July 1986, Chairman of the Board
and Chief Executive Officer of PSE&G since September 1991 and Chairman
of the Board and Chief Executive Officer of EDHI since June 1989.
President of PSE&G from July 1986 to September 1991. Director of
Enterprise and of EDHI and its principal subsidiaries. Director of
Foster Wheeler Corporation and The Hartford Steam Boiler Inspection and
Insurance Company.
<PAGE>
RAYMOND V. GILMARTIN has been a director since 1993. Age 55.
Director of Enterprise. Has been Chairman of the Board, President and
Chief Executive Officer of Merck & Co., Inc., Whitehouse Station, New
Jersey (discovers, develops, produces and markets human and animal
health products) since November 1994. Was President and Chief
Executive Officer from June 1994 to November 1994. Was Chairman of the
Board, President and Chief Executive Officer of Becton Dickinson and
Company from November 1992 to June 1994 and President and Chief
Executive Officer from February 1989 to November 1992. Director of
Merck & Co., Inc. and Providian Corporation.
IRWIN LERNER has been a director since 1993. Age 65. Was
previously a director from 1981 to February 1988. Director of
Enterprise. Was Chairman, Board of Directors and Executive Committee
from January 1993 to September 1993 and President and Chief Executive
Officer from 1980 to December 1992 of Hoffmann-La Roche Inc., Nutley,
New Jersey (prescription pharmaceuticals, vitamins and fine chemicals,
and diagnostic products and services). Director of Humana Inc., Sequana
Therapeutics, Inc. and Medarex, Inc.
JAMES C. PITNEY has been a director since 1993. Age 69. Was
previously a director from 1979 to February 1988. Member of Executive
Committee. Director of Enterprise. Has been a partner in the law firm
of Pitney, Hardin, Kipp & Szuch, Morristown, New Jersey, since 1958.
Director of Tri-Continental Corporation, sixteen funds of the Seligman
family of funds and Seligman Quality, Inc.
FORREST J. REMICK has been a director since May 1995. Age 65.
Director of Enterprise. Has been an engineering consultant since July
1994. Was Commissioner, United States Nuclear Regulatory Commission,
from December 1989 to June 1994. Was Associate Vice President -
Research and Professor of Nuclear Engineering at Pennsylvania State
University, from 1985 to 1989.
Executive Officers of the Registrants
The following table sets forth certain information concerning the
executive officers of Enterprise and PSE&G, respectively.
<PAGE>
<TABLE>
<CAPTION>
AGE EFFECTIVE DATE
DECEMBER 31, FIRST ELECTED
NAME 1995 OFFICE TO PRESENT POSITION
- ------------------------------------ ---------------------------------- -------------------------
<S> <C> <C> <C>
E. James Ferland........ 53 Chairman of the Board, President July 1986 to present
and Chief Executive Officer
(Enterprise)
Chairman of the Board and Chief July 1986 to present
Executive Officer (PSE&G)
President (PSE&G) June 1986 to September 1991
Chairman of the Board and Chief June 1989 to present
Executive Officer (EDHI)
Lawrence R. Codey....... 51 President and Chief Operating September 1991 to present
Officer (PSE&G)
Senior Vice President - Electric January 1989 to September 1991
(PSE&G)
Robert C. Murray........ 50 Vice President and Chief Financial January 1992 to present
Officer (Enterprise)
Senior Vice President and January 1992 to present
Chief Financial Officer
(PSE&G)
Managing Director of Morgan January 1987 to July 1991
Stanley & Co. Incorporated
Patricia A. Rado........ 53 Vice President and Controller April 1993 to present
(Enterprise)
Vice President and Controller April 1993 to present
(PSE&G)
Controller of Yankee Energy July 1989 to April 1993
Systems Inc.
Paul H. Way............. 58 President, Chief Operating February 1993 to present
Officer and Director (EDHI)
Senior Vice President (EDHI) June 1992 to February 1993
Senior Vice President - April 1988 to June 1992
Corporate Performance (PSE&G)
R. Edwin Selover........ 50 Vice President and General April 1988 to present
Counsel (Enterprise)
Senior Vice President and General January 1988 to present
Counsel (PSE&G)
Robert J. Dougherty, Jr. 44 President - Enterprise Ventures
and Services Corporation (PSE&G) February 1995 to present
Senior Vice President - Electric September 1991 to February 1995
(PSE&G)
Senior Vice President - Customer September 1989 to
Operations (PSE&G) September 1991
Leon R. Eliason......... 56 Chief Nuclear Officer and October 1994 to present
President - Nuclear Business
Unit (PSE&G)
President, Power Supply Business January 1993 to September 1994
Unit, Northern States Power
Vice President, Nuclear Genera- July 1990 to January 1993
tion, Northern States Power
Alfred C. Koeppe........ 49 Senior Vice President - External
Affairs (PSE&G) October 1995 to present
President and Chief Executive
Officer of Bell Atlantic -
New Jersey February 1993 to October 1995
Vice President - Public Affairs
of Bell Atlantic - New Jersey February 1991 to February 1993
</TABLE>
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
ENTERPRISE
The information required by Item 11 of Form 10-K is set forth under the
heading "Executive Compensation" in Enterprise's definitive Proxy Statement for
the Annual Meeting of Stockholders to be held April 16, 1996, which definitive
Proxy Statement is expected to be filed with the Securities and Exchange
Commission on or about March 1, 1996 and such information set forth under such
heading is incorporated herein by this reference thereto.
PSE&G
Information regarding the compensation of the Chief Executive Officer and
the four most highly compensated executive officers of PSE&G as of December 31,
1995 is set forth below. Amounts shown were paid or awarded for all services
rendered to Enterprise and its subsidiaries and affiliates including PSE&G.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
---------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
----------------------- --------- ---------
BONUS/ANNUAL LTIP ALL OTHER
SALARY INCENTIVE OPTIONS PAYOUTS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR $ AWARD($)(/1/) (#)(/2/) ($)(/3/) ($)(/4/)
- --------------------------- ---- ------- ------------ ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C>
E. James Ferland.......
Chairman of the Board, 1995 682,377 (/5/) 5,800 246,288 8,681
President and CEO of 1994 652,492 251,383 5,400 127,140 5,628
Enterprise 1993 622,606 265,316 5,800 28,072 7,678
Lawrence R. Codey......
President and Chief 1995 418,392 (5) 2,800 118,746 5,756
Operating Officer of 1994 398,468 129,276 2,500 48,900 5,351
PSE&G 1993 378,545 109,585 2,800 9,570 6,981
Leon R. Eliason........
President - Nuclear 1995 323,755 165,000(/5/)(/6/) 5,500 26,388 3,242
Business Unit of 1994 74,713 0 600 0 0
PSE&G and 1993 0 0 0 0 0
Chief Nuclear Officer (/7/)
Robert J. Dougherty, Jr. .. 1995 322,759 (/5/) 2,500 70,368 4,269
Vice President of 1994 273,946 72,027 1,800 26,895 4,227
Enterprise and President of
Enterprise Ventures and
Services Corporation 1993 259,004 65,703 2,000 5,104 6,341
Robert C. Murray.......
Vice President and 1995 318,775 25,000(/5/)(/8/) 2,000 70,368 5,169
Chief Financial 1994 303,832 152,621(/8/) 1,800 26,895 4,944
Officer of Enterprise 1993 288,889 154,032(/8/) 2,000 3,190 7,264
(1) Amount awarded in given year was earned under Management Incentive Compensation Plan
(MICP) and determined in following year with respect to the given year based on
individual performance and financial and operating performance of Enterprise and PSE&G,
including comparison to other companies. Award is accounted for as market-priced phantom
stock with dividend reinvestment at 95% of market price, with payment made over three
years beginning in second year following grant.
(2) Granted under Long-Term Incentive Plan (LTIP) in tandem with equal number of
performance units and dividend equivalents which may provide cash payments, dependent
upon future financial performance of Enterprise in comparison to other companies and
dividend payments by Enterprise, to assist officers in exercising options granted. The
grant is made at the beginning of a three-year performance period and cash payment of the
value of such performance units and dividend equivalents is made following such period
in proportion to the options, if any, exercised at such time.
<PAGE>
(3) Amount paid in proportion to options exercised, if any, based on value of previously
granted performance units and dividend equivalents, each as measured during three-year
period ending the year prior to the year in which payment is made.
(4) Includes employer contribution to Thrift and Tax-Deferred Savings Plan and value of
5% discount on phantom stock dividend reinvestment under MICP:
</TABLE>
<TABLE>
<CAPTION>
FERLAND CODEY ELIASON DOUGHERTY MURRAY
------------- ---------- ----------- --------- -----------
THRIFT MICP THRIFT MICP THRIFT MICP THRIFT MICP THRIFT MICP
------ ----- ------ ------ ------ ------ ------ ----- ------ ------
($) ($) ($) ($) ($) ($) ($) ($) ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1995.......... 3,752 2,383 4,502 1,254 1,795 0 3,754 515 4,502 667
1994.......... 3,751 1,877 4,197 1,154 0 0 3,752 475 4,504 440
1993.......... 5,900 1,778 5,896 1,085 0 0 5,907 434 7,078 186
In addition, for Mr. Ferland and Mr. Eliason, 1995 amounts include $2,546
and $1,447, respectively, representing interest on compensation deferred
under PSE&G's Deferred Compensation Plan in excess of 120% of the
applicable federal long-term rate as prescribed under Section 1274(d) of
the Internal Revenue Code. Under PSE&G's Deferred Compensation Plan,
interest is paid at prime rate plus 1/2%, adjusted quarterly.
(5) The 1995 MICP award amount has not yet been determined. The
target award is 40% of salary for Mr. Ferland, 30% for
Messrs. Codey, Eliason and Dougherty and 25% for Mr. Murray.
The target award is adjusted to reflect Enterprise's return
on capital, PSE&G's comparative electric and gas costs and
individual performance.
(6) Amount paid pursuant to Mr. Eliason's employment agreement.
(7) Mr. Eliason commenced employment September 26, 1994.
(8) 1995 amount paid pursuant to Mr. Murray's employment
agreement. 1994 and 1993 amounts include $50,000 and
$75,000, respectively, paid pursuant to Mr. Murray's
employment agreement.
</TABLE>
<PAGE>
<TABLE>
OPTION GRANTS IN LAST FISCAL YEAR (1995)
<CAPTION>
INDIVIDUAL GRANTS
---------------------------------------------- POTENTIAL REALIZABLE
NUMBER VALUE AT ASSUMED ANNUAL
OF % OF TOTAL RATES OF STOCK PRICE
SECURITIES OPTIONS APPRECIATION FOR OPTION
UNDERLYING GRANTED TO EXERCISE OR TERM(2)
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION
NAME GRANTED(1) FISCAL YEAR ($/SH) DATE 0% ($) 5% ($) 10%($)
- ---------------------- --------------- ------------- -------------- ---------- --------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
E. James Ferland.......... 5,800 16.6 26.625 1/04/05 0 97,117 246,114
Lawrence R. Codey......... 2,800 8.0 26.625 1/04/05 0 46,884 118,874
Leon R. Eliason........... 2,500 26.625 1/04/05 0 41,861 106,083
1,800 { 15.7 } 31.375 1/04/05 0 35,517 90,007
1,200 30.500 1/04/05 0 23,018 58,331
Robert J. Dougherty, Jr... 2,000 { 7.1 } 26.625 1/04/05 0 33,489 84,867
500 28.125 3/02/05 0 8,844 22,412
Robert C. Murray.......... 2,000 5.7 26.625 1/04/05 0 33,489 84,867
(1) Granted under LTIP in tandem with equal number of performance units and dividend equivalents which may provide
cash payments, dependent on future financial performance of Enterprise in comparison to other companies and
dividend payments by Enterprise, to assist individuals in exercising options, with exercisability commencing
January 1, 1998, except with respect to Mr. Eliason, for whom exercisabilty commences January 1, 1996, 1997 and
1998, respectively, for each of his three grants. Cash payment is made, based on the value, if any, of
performance units awarded and dividend equivalents accrued, if any, as measured during the three-year period
ending the year prior to the year in which payment, if any, is made, only if the specified performance level is
achieved, dividend equivalents have accrued and options are exercised.
(2) All options reported have a ten-year term, as noted. Amounts shown represent hypothetical future values at such
term based upon hypothetical price appreciation of Enterprise Common Stock and may not necessarily be realized.
Actual values which may be realized, if any, upon any exercise of such options, will be based on the market price
of Enterprise Common Stock at the time of any such exercise and thus are dependent upon future performance of
Enterprise Common Stock.
</TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR (1995) AND FISCAL YEAR-END
OPTION VALUES (12/31/95)
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT FY-END (#)(1) AT FY-END($)(3)
ACQUIRED VALUE ----------- -------------- ------------ ---------------
ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
NAME (#)(1) ($)(2) (#) (#) ($) ($)
- ------------ ------------- --------- ------------- --------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
E. James
Ferland....... 5,600 0 0 17,000 0 23,925
Lawrence R.
Codey......... 2,700 0 700 8,100 4,463 11,550
Leon R.
Eliason....... 600 72 0 5,500 0 10,150
Robert J
Dougherty..... 1,600 0 0 6,300 0 9,500
Robert C.
Murray........ 1,600 192 0 5,800 0 8,250
(1) Does not reflect any options granted and/or exercised after year-end (12/31/95). The net effect of any such grants and
exercises is reflected in the table appearing under Security Ownership of Directors and Management.
(2) Represents difference between exercise price and market price of Enterprise Common Stock on date of exercise.
(3) Represents difference between market price of Enterprise Common Stock and the respective exercise prices of the options
at fiscal year-end (12/31/95). Such amounts may not necessarily be realized. Actual values which may be realized, if any,
upon any exercise of such options will be based on the market price of Enterprise Common Stock at the time of any such
exercise and thus are dependent upon future performance of Enterprise Common Stock.
EMPLOYMENT CONTRACTS AND ARRANGEMENTS
Employment agreements were entered into with Messrs. Ferland, Eliason and Murray at the time of their employment. For
Mr. Ferland, the remaining applicable provisions of the agreement provide for additional credited service for pension purposes
in the amount of 22 years. . The principal remaining applicable terms of the agreement with Mr. Eliason provide for payment
of severance in the amount of one year's salary, if discharged without cause during his first five years of employment which
begin in September 1994, for lump sum cash payments of $100,000 in 1996, $65,000 in 1997 and $35,000 in 1998 to align Mr.
Eliason with MICP payments for other executive officers, and additional years of credited service for pension purposes for
allied work experience of 19 years after completion of three years of service, and up to 29 years after completion of ten years
of service. The principal remaining applicable terms of the agreement with Mr. Murray provide for payment of severance in the
amount of one year's salary, if discharged without cause during his first five years of employment, which began in January 1992,
and additional years of credited service for pension purposes for allied work experience of five years after completion of five
years of service, and up to fifteen years after completion of ten years of service
<PAGE>
Compensation Committee Interlocks and Insider Participation
PSE&G does not have a compensation committee. Decisions regarding compensation of PSE&G's executive officers
are made by the Organization and Compensation Committee of Enterprise. Hence, during 1995 the PSE&G Board of Directors
did not have, and no officer, employee or former officer of PSE&G participated in any deliberations of such Board,
concerning executive officer compensation.
Compensation of Directors and Certain Business Relationships
A director who is not an officer of Enterprise or its subsidiaries and affiliates, including PSE&G, is paid an
annual retainer of $22,000 and a fee of $1,200 for attendance at any Board or committee meeting, inspection trip,
conference or other similar activity relating to Enterprise, PSE&G or EDHI. Each of the directors of PSE&G is also
a director of Enterprise. No additional retainer is paid for service as a director of PSE&G. Fifty percent of the
annual retainer is paid in Enterprise Common Stock.
Enterprise also maintains a Stock Plan for Outside Directors pursuant to which directors who are not employees
of Enterprise or its subsidIaries receive 300 shares Of restri#ted stock for each material
effect on its financial position, results of operations or net cash
flows.
<PAGE>
PSE&G Manufactured Gas Plant Remediation Program
In 1988, NJDEP notified PSE&G that it had identified the need for
PSE&G, pursuant to a formal arrangement, to systematically investigate
and, if necessary, resolve environmental concerns extant at PSE&G's
former manufactured gas plant sites. To date, NJDEP and PSE&G have
identified 38 former gas plant sites. PSE&G is currently working with
NJDEP under a program to assess, investigate and, if necessary,
remediate environmental concerns at these sites (Remediation Program).
The Remediation Program is periodically reviewed and revised by PSE&G
based on regulatory requirements, experience with the Remediation
Program and available technologies. The cost of the Remediation Program
cannot be reasonably estimated, but experience to date indicates that
costs of at least $20 million per year could be incurred over a period
of more than 30 years and that the overall cost could be material to
PSE&G's financial position, results of operations or net cash flows.
Costs incurred through December 31, 1995 for the Remediation
Program amounted to $64.6 million, net of certain insurance proceeds.
In addition, at December 31, 1995, PSE&G's estimated liability for
remediation costs through 1998 aggregated $96.3 million.
In accordance with a Stipulation approved by the BPU in 1992, PSE&G
is recovering through its LEAC over a six-year period $32 million of
its actual remediation costs to reflect costs incurred through
September 30, 1992. As of December 31, 1995, PSE&G has recovered $27.8
million of the $32 million of such costs. PSE&G is expected to recover
the balance of $4.2 million in its currently filed LGAC period ending
in 1996.
<PAGE>
NOTE 13. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
On January 1, 1993, Enterprise and PSE&G adopted SFAS 106 which
requires that the expected cost of employees' postretirement health
care and insurance benefits be charged to expense during the years in
which employees render service. PSE&G elected to amortize, over 20
years, its unfunded obligation of $609.3 million at January 1, 1993.
The following table discloses the significant components of the net
periodic postretirement benefit obligation:
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
NET PERIODIC POSTRETIREMENT BENEFIT OBLIGATION 1995 1994 1993
- ---------------------------------------------- ------- ------- -------
(MILLIONS)
<S> <C> <C> <C>
Service cost................................. $ 8.5 $ 11.1 $ 11.7
Interest on accumulated postretirement
obligation................................. 48.2 45.4 44.4
Amortization of transition obligation........ 30.5 30.5 30.5
Amortization of Net (Gain)/Loss (a).......... (3.8) -- --
Deferral of current expense.................. (50.7) (57.8) (58.6)
------ ------ -------
Annual net expense...................... $ 32.7 $ 29.2 $ 28.0
====== ====== =======
</TABLE>
(a) Reflects change in Plan Assumptions.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The discount rate used in determining the PSE&G net periodic
postretirement benefit cost was 8.50% and 7.25% for 1995 and 1994,
respectively.
A one-percentage-point increase in the assumed health care cost
trend rate for each year would increase the aggregate of the service
and interest cost components of net periodic postretirement health care
cost by approximately $2.6 million, or 5.6%, and increase the
accumulated postretirement benefit obligation as of December 31, 1995
by $34.8 million, or 5.9%.
The assumed health care cost trend rates used in measuring the
accumulated postretirement benefit obligation in 1995 were: medical
costs for pre-age sixty-five retirees -- 13.0%, medical costs for
post-age sixty-five retirees -- 9.0% and dental costs -- 7.0%; such
rates are assumed to gradually decline to 5.0%, 5.0% and 5.0%,
respectively, in 2011. The medical costs above include a provision for
prescription drugs.
In its 1992 base rate case, PSE&G requested full recovery of the
costs associated with postretirement benefits other than pensions
(OPEB) on an accrual basis, in accordance with SFAS 106. The BPU's
December 31, 1992 base rate order provided that (1) PSE&G's
pay-as-you-go basis OPEB costs will continue to be included in cost of
service and will be recoverable in base rates on a pay-as-you-go basis;
(2) prudently incurred OPEB costs, that are accounted for on an accrual
basis in accordance with SFAS 106, will be recoverable in future rates;
(3) PSE&G should account for the differences between its OPEB costs on
an accrual basis and the pay-as-you-go basis being recovered in rates
as a regulatory asset; and (4) the issue of cash versus accrual
accounting will be revisited and in the event that FASB or the SEC
requires the use of accrual accounting for OPEB costs for rate-making
purposes, the regulatory asset will be recoverable, through rates, over
an appropriate amortization period.
Accordingly, PSE&G is accounting for the differences between its
SFAS 106 accrual cost and the cash cost currently recovered through
rates as a regulatory asset. OPEB costs charged to expenses during 1995
were $32.6 million and accrued OPEB costs deferred were $50.7 million.
The amount of the unfunded liability, at December 31, 1995, as shown
below, is $717.9 million and funding options are currently being
explored. The primary effect of adopting SFAS 106 on Enterprise's and
PSE&G's financial reporting is on the presentation of their financial
positions with minimal effect on their results of operations.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
During January 1993 and subsequent to the receipt of the Order, the
FASB's Emerging Issues Task Force (EITF) concluded that deferral of
such costs is acceptable, provided regulators allow SFAS 106 costs in
rates within approximately five years of the adoption of SFAS 106 for
financial reporting purposes, with any cost deferrals recovered in
approximately twenty years. In accordance with the Alternative Rate
Plan filed, PSE&G expects full SFAS 106 recovery in accordance with the
EITF's view of such standard and believes that it is probable that any
deferred costs will be recovered from utility customers within such
twenty-year time period. As of December 31, 1995, PSE&G has deferred
$167.2 million of such costs. However, if recovery of SFAS 106 costs
is not approved by the BPU , the impact on the financial position and
results of operations would be material.
In accordance with SFAS 106 disclosure requirements, a
reconciliation of the funded status of the plan is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1995 1994
-------- --------
(MILLIONS)
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees................................. $(444.6) $(379.2)
Fully eligible active plan participants.. (52.9) (45.7)
Other active plan participants........... (220.4) (161.0)
------- -------
Total................................ (717.9) (585.9)
Plan assets at fair value................ -- --
------- -------
Accumulated postretirement benefit
obligation in excess of plan assets..... (717.9) (585.9)
Unrecognized net (gain)/loss from past
experience different from that assumed
And from changes in assumptions......... 32.8 (78.8)
Unrecognized prior service cost.......... -- --
Unrecognized transition obligation....... 517.9 548.3
------- -------
Accrued postretirement obligation........ $(167.2) $(116.4)
======= =======
The discount rate used in determining the accumulated postretirement
benefit obligation as of December 31, 1995 was 7.25% and 8.50% for 1995
and 1994, respectively.
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 14. PENSION PLAN
The discount rates, expected long-term rates of return on assets and
average compensation growth rates used in determining the Pension
Plan's funded status and net pension cost as of December 31, 1995 and
1994 were as follows:
<TABLE>
<CAPTION>
1995 1994
------ ------
<S> <C> <C>
Funded Status:
- -------------
Discount Rate used to Determine Benefit
Obligations................................. 7 1/4% 8-1/2%
Average Compensation Growth to Determine
Benefit Obligations...................... 4.5% 4.5%
Net Pension Cost:
- ----------------
Discount Rate............................... 8.5% 7-1/4%
Expected Long-Term Return on Assets......... 8.5% 8%
Average Compensation Growth................. 4.5% 5.5%
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table shows the Pension Plan's funded status:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1995 1994
----------- -----------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligations, including vested benefits
of $1,403,313 in 1995 and $1,151,677 in 1994........... $(1,509,841) $(1,235,930)
Effect of projected future compensation................... (321,545) (261,846)
----------- -----------
Projected benefit obligations............................... (1,831,386) (1,497,776)
Plan assets at fair value, primarily listed equity and debt
securities................................................ 1,533,446 1,270,116
----------- -----------
Projected benefit obligations in excess of plan assets...... (297,940) (227,660)
Unrecognized net gain (loss) from past experience and
effects of changes in assumptions......................... 120,859 32,815
Prior service cost not yet recognized in net pension cost... 110,213 119,783
Unrecognized net obligations being recognized over
16.7 years................................................ 61,287 69,387
----------- -----------
Accrued pension expense..................................... $ (5,581) $ (5,675)
=========== ===========
</TABLE>
<TABLE>
The net pension cost for the years ending December 31, 1995, 1994 and 1993, include the following
components:
<CAPTION>
1995 1994 1993
-------- -------- --------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Service cost - benefits earned during year......... $ 37,033 $ 42,904 $ 42,948
Interest cost on projected benefit obligations..... 124,147 108,394 103,118
Return on assets................................... (312,190) 5,022 (166,916)
Net amortization and deferral...................... 222,916 (90,752) 90,958
-------- -------- --------
Total......................................... $ 71,906 $ 65,568 $ 70,108
======== ======== ========
See Note 1 -- Organization and Summary of Significant Accounting Policies.
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 15. FINANCIAL INFORMATION BY BUSINESS SEGMENTS
<TABLE>
Information related to the segments of Enterprise's business is detailed below:
<CAPTION>
NONUTILITY
ELECTRIC GAS EDC ACTIVITIES(A) TOTAL
----------- ---------- -------- -------------- --------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C>
FOR THE YEAR ENDED DECEMBER 31, 1995
Operating Revenues...................... $ 4,020,842 $1,686,403 $ 248,002 $ 208,906 $ 6,164,153
Eliminations (Intersegment Revenues).... -- -- -- -- --
----------- ---------- ---------- --------- -----------
Total Operating Revenues................ 4,020,842 1,686,403 248,002 208,906 6,164,153
----------- ---------- ---------- --------- -----------
Depreciation and Amortization........... 503,022 88,092 77,265 5,852 674,231
Operating Income Before Income Taxes.... 1,140,279 178,718 58,654 142,172 1,519,823
Capital Expenditures.................... 545,997 140,153 132,098 8,364 826,612
December 31, 1995
- -----------------
Net Utility Plant....................... 9,651,695 1,535,736 -- -- 11,187,431
Oil and Gas Property, Plant &
Equipment............................. -- -- 608,015 -- 608,015
Other Corporate Assets.................. 2,778,691 589,455 147,822 1,858,654 5,374,622
----------- ---------- ---------- --------- -----------
Total Assets............................ $12,430,386 $2,125,191 $ 755,837 $1,858,654 $17,170,068
=========== ========== ========== ========= ===========
FOR THE YEAR ENDED DECEMBER 31, 1994
Operating Revenues...................... $ 3,739,713 $1,778,528 $ 229,880 $ 187,067 $ 5,935,188
Eliminations (Intersegment Revenues).... -- -- (11,179) (1,566) (12,745)
----------- ---------- ---------- --------- -----------
Total Operating Revenues................ 3,739,713 1,778,528 218,701 185,501 5,922,443
----------- ---------- ---------- --------- -----------
Depreciation and Amortization........... 471,910 79,462 78,567 4,089 634,028
Operating Income Before Income Taxes.... 1,083,155 226,196 39,210 133,590 1,482,151
Capital Expenditures.................... 734,100 153,183 160,296 8,445 1,056,024
December 31, 1994
- -----------------
Net Utility Plant....................... 9,642,177 1,456,068 -- -- 11,098,245
Oil and Gas Property, Plant &
Equipment............................. -- -- 577,913 -- 577,913
Other Corporate Assets.................. 2,589,348 576,806 150,973 1,724,155 5,041,282
----------- ---------- ---------- --------- -----------
Total Assets............................ $12,231,525 $2,032,874 $ 728,886 $1,724,155 $16,717,440
=========== ========== ========== ========= ===========
FOR THE YEAR ENDED DECEMBER 31, 1993
Operating Revenues...................... $ 3,696,114 $1,594,341 $ 278,470 $ 161,650 $ 5,730,575
Eliminations (Intersegment Revenues).... -- -- (20,158) (1,827) (21,985)
----------- ---------- ---------- --------- -----------
Total Operating Revenues................ 3,696,114 1,594,341 258,312 159,823 5,708,590
----------- ---------- ---------- --------- -----------
Depreciation and Amortization........... 441,164 69,375 86,136 4,922 601,597
Operating Income Before Income Taxes.... 1,117,739 173,916 92,162 43,310 1,427,127
Capital Expenditures.................... 738,362 152,012 91,988 2,026 984,388
December 31, 1993
- -----------------
Net Utility Plant....................... 9,451,581 1,352,799 -- -- 10,804,380
Oil and Gas Property, Plant &
Equipment............................. -- -- 506,047 -- 506,047
Other Corporate Assets.................. 2,313,394 866,524 173,390 1,665,921 5,019,229
----------- ---------- ---------- --------- -----------
Total Assets............................ $11,764,975 $2,219,323 $ 679,437 $1,665,921 $16,329,656
=========== ========== ========== ========= ===========
(A) The Nonutility Activities include amounts applicable to Enterprise, the parent corporation.
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
Information related to Property, Plant and Equipment of PSE&G is detailed below:
<CAPTION>
DECEMBER 31,
---------------------------------------
1995 1994 1993
----------- ----------- -----------
(Thousands of Dollars)
<S> <C> <C> <C>
Utility Plant - Original Cost
Electric Plant in Service
Steam Production....................... $ 1,791,010 $ 1,810,674 $ 1,763,253
Nuclear Production..................... 5,992,341 5,931,049 5,873,274
Transmission........................... 1,127,031 1,078,928 1,034,150
Distribution........................... 3,044,830 2,877,862 2,724,202
Other.................................. 1,139,891 647,406 526,015
----------- ----------- ------------
Total Electric Plant in Service.... 13,095,103 12,345,919 11,920,894
----------- ----------- -----------
Gas Plant in Service
Transmission........................... 65,109 62,213 63,395
Distribution........................... 2,250,705 2,131,816 1,993,044
Other.................................. 126,758 124,204 121,402
----------- ----------- -----------
Total Gas Plant in Service......... 2,442,572 2,318,233 2,177,841
----------- ----------- -----------
Common Plant in Service
Capital Leases......................... 58,610 58,610 56,812
General................................ 458,494 486,521 463,473
----------- ----------- -----------
Total Common Plant in Service...... 517,104 545,131 520,285
----------- ----------- -----------
TOTAL......................... $16,054,779 $15,209,283 $14,619,020
=========== =========== ===========
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONCLUDED)
NOTE 16. PROPERTY IMPAIRMENT OF ENTERPRISE GROUP DEVELOPMENT
CORPORATION
As a result of a management review of each property's current value
and the potential for increasing such value through operating and other
improvements, EGDC recorded an impairment in 1993 related to certain of
its properties, including properties upon which EDHI's management
revised its intent from a long-term investment strategy to a hold for
sale status, reflecting such properties on its books at their net
realizable value. This impairment reduced the estimated value of EGDC's
properties by $77.6 million and 1993 net income by $50.5 million, after
tax, or 21 cents per share of Enterprise Common Stock.
NOTE 17. JOINTLY OWNED FACILITIES -- UTILITY PLANT
<TABLE>
<S> <C> <C>
PSE&G has
IRWIN LERNER
- -------------------------------- Director February 22, 1996
Irwin Lerner
MARILYN M. PFALTZ
- -------------------------------- Director February 22, 1996
Marilyn M. Pfaltz
JAMES C. PITNEY
- -------------------------------- Director February 22, 1996
James C. Pitney
FORREST J. REMICK
- -------------------------------- Director February 22, 1996
Forrest J. Remick
RICHARD J. SWIFT
- -------------------------------- Director February 22, 1996
Richard J. Swift
JOSH S. WESTON
- -------------------------------- Director February 22, 1996
Josh S. Weston
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
PUBLIC SERVICE ELECTRIC AND GAS
COMPANY
By E. JAMES FERLAND
-------------------------------
E. James Ferland
Chairman of the Board and
Chief Executive Officer
Date: February 22, 1996
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
E. JAMES FERLAND
- -------------------------------- Chairman of the Board and February 22, 1996
E. James Ferland Chief Executive Officer
and Director (Principal
Executive Officer)
ROBERT C. MURRAY
- -------------------------------- Senior Vice President and February 22, 1996
Robert C. Murray Chief Financial Officer
(Principal Financial
Officer)
PATRICIA A. RADO
- -------------------------------- Vice President and February 22, 1996
Patricia A. Rado Controller (Principal
Accounting Officer)
LAWRENCE R. CODEY
- -------------------------------- Director February 22, 1996
Lawrence R. Codey
RAYMOND V. GILMARTIN
- -------------------------------- Director February 22, 1996
Raymond V. Gilmartin
IRWIN LERNER
- -------------------------------- Director February 22, 1996
Irwin Lerner
JAMES C. PITNEY
- -------------------------------- Director February 22, 1996
James C. Pitney
FORREST J. REMICK
- -------------------------------- Director February 22, 1996
Forrest J. Remick
</TABLE>
<PAGE>
EXHIBIT INDEX
Certain Exhibits previously filed with the Commission and the appropriate
securities exchanges are indicated as set forth below. Such Exhibits are not
being refiled, but are included because inclusion is desirable for convenient
reference.
(a) Filed by PSE&G with Form 8-A under the Securities Exchange Act
of 1934, on the respective dates indicated, File No. 1-973.
(b) Filed by PSE&G with Form 8-K under the Securities Exchange Act
of 1934, on the respective dates indicated, File No. 1-973.
(c) Filed by PSE&G with Form 10-K under the Securities Exchange Act
of 1934, on the respective dates indicated, File No. 1-973.
(d) Filed by PSE&G with Form 10-Q under the Securities Exchange Act
of 1934, on the respective dates indicated, File No. 1-973.
(e) Filed by Enterprise with Form 10-K under the Securities Exchange
Act of 1934, on the respective dates indicated, File No. 1-9120.
(f) Filed with registration statement of PSE&G under the Securities
Exchange Act of 1934, File No. 1-973, effective July 1, 1935, relating to
the registration of various issues of securities.
(g) Filed with registration statement of PSE&G under the Securities
Act of 1933, No. 2-4995, effective May 20, 1942, relating to the issuance
of $15,000,000 First and Refunding Mortgage Bonds, 3% Series due 1972.
(h) Filed with registration statement of PSE&G under the Securities
Act of 1933, No. 2-7568, effective July 1, 1948, relating to the proposed
issuance of 200,000 shares of Cumulative Preferred Stock.
(i) Filed with registration statement of PSE&G under the Securities
Act of 1933, No. 2-8381, effective April 18, 1950, relating to the
issuance of $26,000,000 First and Refunding Mortgage Bonds, 2 3/4%
Series due 1980.
(j) Filed with registration statement of PSE&G under the Securities
Act of 1933, No. 2-12906, effective December 4, 1956, relating to the
issuance of 1,000,000 shares of Common Stock.
(k) Filed with registration statement of PSE&G under the Securities
Act of 1933, No. 2-59675, effective September 1, 1977, relating to the
issuance of $60,000,000 First and Refunding Mortgage Bonds, 8 1/8%
Series I due 2007.
(l) Filed with registration statement of PSE&G under the Securities
Act of 1933, No. 2-60925, effective March 30, 1978, relating to the
issuance of 750,000 shares of Common Stock through an Employee Stock
Purchase Plan.
(m) Filed with registration statement of PSE&G under the Securities
Act of 1933, No. 2-65521, effective October 10, 1979, relating to the
issuance of 3,000,000 shares of Common Stock.
(n) Filed with registration statement of PSE&G under the Securities
Act of 1933, No. 2-74018, filed on June 16, 1982, relating to the Thrift
Plan of PSE&G.
(o) Filed with registration statement of Public Service Enterprise
Group Incorporated under the Securities Act of 1933, No. 33-2935 filed
January 28, 1986, relating to PSE&G's plan to form a holding company as
part of a corporate restructuring.
(p) Filed with registration statement of PSE&G under the Securities
Act of 1933, No. 33-13209 filed April 9, 1987, relating to the
registration of $575,000,000 First and Refunding Mortgage Bonds
pursuant to Rule 415.
<PAGE>
ENTERPRISE
<TABLE>
<CAPTION>
EXHIBIT NUMBER
- --------------------------------------------
PREVIOUS FILING
THIS --------------------------------
FILING COMMISSION EXCHANGES
- --------- -------------- --------------
<S> <C> <C> <C> <C> <C>
3a (o) 3a (o) 3a Certificate of Incorporation Public Service
Enterprise Group Incorporated
3b (e) 3b (e) 3b Copy of By-Laws of Public Service Enterprise
4/11/88 Group Incorporated, as in effect May 1, 1987
3c (e) 3c (e) 3c Certificate of Amendment of Certificate of
4/11/88 Incorporation of Public Service Enterprise Group
Incorporated, effective April 23, 1987
4a(1) (f) B-1 (c) 4b(1) Indenture between PSE&G and Fidelity Union Trust
2/18/81 Company, (now First Fidelity Bank, National
Association), as Trustee, dated August 1, 1924,
securing First and Refunding Mortgage Bonds
Indentures between PSE&G and First Fidelity
Bank, National Association, as Trustee,
supplemental to Exhibit 4a(1), dated as follows:
4a(2) (i) 7(1a) (c) 4b(2) April 1, 1927
2/18/81
4a(3) (k) 2b(3) (c) 4b(3) June 1, 1937
2/18/81
4a(4) (k) 2b(4) (c) 4b(4) July 1, 1937
2/18/81
4a(5) (k) 2b(5) (c) 4b(5) December 19, 1939
2/18/81
4a(6) (g) B-10 (c) 4b(6) March 1, 1942
2/18/81
4a(7) (k) 2b(7) (c) 4b(7) June 1, 1949
2/18/81
4a(8) (k) 2b(8) (c) 4b(8) May 1, 1950
2/18/81
4a(9) (k) 2b(9) (c) 4b(9) October 1, 1953
2/18/81
4a(10) (k) 2b(10) (c) 4b(10) May 1, 1954
2/18/81
4a(11) (j) 4b(16) (c) 4b(11) November 1, 1956
2/18/81
4a(12) (k) 2b(12) (c) 4b(12) September 1, 1957
2/18/81
4a(13) (k) 2b(13) (c) 4b(13) August 1, 1958
2/18/81
4a(14) (k) 2b(14) (c) 4b(14) June 1, 1959
2/18/81
4a(15) (k) 2b(15) (c) 4b(15) September 1, 1960
2/18/81
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NUMBER
- --------------------------------------------
PREVIOUS FILING
THIS --------------------------------
FILING COMMISSION EXCHANGES
- --------- -------------- --------------
<S> <C> <C> <C> <C> <C>
4a(16) (k) 2b(16) (c) 4b(16) August 1, 1962
2/18/81
4a(17) (k) 2b(17) (c) 4b(17) June 1, 1963
2/18/81
4a(18) (k) 2b(18) (c) 4b(18) September 1, 1964
2/18/81
4a(19) (k) 2b(19) (c) 4b(19) September 1, 1965
2/18/81
4a(20) (k) 2b(20) (c) 4b(20) June 1, 1967
2/18/81
4a(21) (k) 2b(21) (c) 4b(21) June 1, 1968
2/18/81
4a(22) (k) 2b(22) (c) 4b(22) April 1, 1969
2/18/91
4a(23) (k) 2b(23) (c) 4b(23) March 1, 1970
2/18/81
4a(24) (k) 2b(24) (c) 4b(24) May 15, 1971
2/18/81
4a(25) (k) 2b(25) (c) 4b(25) November 15, 1971
2/18/81
4a(26) (k) 2b(26) (c) 4b(26) April 1, 1972
2/18/81
4a(27) (a) 2 (c) 4b(27) March 1, 1974
3/29/74 2/18/81
4a(28) (a) 2 (c) 4b(28) October 1, 1974
10/11/74 2/18/81
4a(29) (a) 2 (c) 4b(29) April 1, 1976
4/6/76 2/18/81
4a(30) (a) 2 (c) 4b(30) September 1, 1976
9/16/76 2/18/81
4a(31) (k) 2b(31) (c) 4b(31) October 1, 1976
2/18/81
4a(32) (a) 2 (c) 4b(32) June 1, 1977
6/29/77 2/18/81
4a(33) (l) 2b(33) (c) 4b(33) September 1, 1977
2/18/81
4a(34) (a) 2 (c) 4b(34) November 1, 1978
11/21/78 2/18/81
4a(35) (a) 2 (c) 4b(35) July 1, 1979
7/25/79 2/18/81
4a(36) (m) 2d(36) (c) 4b(36) September 1, 1979 (No. 1)
2/18/81
4a(37) (m) 2d(37) (c) 4b(37) September 1, 1979 (No. 2)
2/18/81
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NUMBER
- --------------------------------------------
PREVIOUS FILING
THIS --------------------------------
FILING COMMISSION EXCHANGES
- --------- -------------- --------------
<S> <C> <C> <C> <C> <C>
4a(38) (a) 2 (c) 4b(38) November 1, 1979
12/3/79 2/18/81
4a(39) (a) 2 (c) 4b(39) June 1, 1980
6/10/80 2/18/81
4a(40) (a) 2 (a) 2 August 1, 1981
8/19/81 8/19/81
4a(41) (b) 4e (b) 4e April 1, 1982
4/29/82 5/5/82
4a(42) (a) 2 (a) 2 September 1, 1982
9/17/82 9/20/82
4a(43) (a) 2 (a) 2 December 1, 1982
12/21/82 12/21/82
4a(44) (d) 4(ii) (d) 4(ii) June 1, 1983
7/26/83 7/27/83
4a(45) (a) 4 (a) 4 August 1, 1983
8/19/83 8/19/83
4a(46) (d) 4(ii) (d) 4(ii) July 1, 1984
8/14/84 8/17/84
4a(47) (d) 4(ii) (d) 4(ii) September 1, 1984
11/2/84 11/9/84
4a(48) (b) 4(ii) (b) 4(ii) November 1, 1984 (No. 1)
1/4/85 1/9/85
4a(49) (b) 4(ii) (b) 4(ii) November 1, 1984 (No. 2)
1/4/85 1/9/85
4a(50) (a) 2 (a) 2 July 1, 1985
8/2/85 8/2/85
4a(51) (c) 4a(51) (c) 4a(51) January 1, 1986
2/11/86 2/11/86
4a(52) (a) 2 (a) 2 March 1, 1986
3/28/86 3/28/86
4a(53) (a) 2(a) (a) 2(a) April 1, 1986 (No. 1)
5/1/86 5/1/86
4a(54) (a) 2(b) (a) 2(b) April 1, 1986 (No. 2)
5/1/86 5/1/86
4a(55) (p) 4a(55) (p) 4a(55) March 1, 1987
4/9/87 4/9/87
4a(56) (a) 4 (a) 4 July 1, 1987 (No. 1)
8/17/87 8/17/87
4a(57) (d) 4 (d) 4 July 1, 1987 (No. 2)
11/13/87 11/20/87
4a(58) (a) 4 (a) 4 May 1, 1988
5/17/88 5/18/88
4a(59) (a) 4 (a) 4 September 1, 1988
9/27/88 9/28/88
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NUMBER
- --------------------------------------------
PREVIOUS FILING
THIS --------------------------------
FILING COMMISSION EXCHANGES
- --------- -------------- --------------
<S> <C> <C> <C> <C> <C>
4a(60) (a) 4 (a) 4 July 1, 1989
7/25/89 7/26/89
4a(61) (a) 4 (a) 4 July 1, 1990 (No. 1)
7/25/90 7/26/90
4a(62) (a) 4 (a) 4 July 1, 1990 (No. 2)
7/25/90 7/26/90
4a(63) (a) 4 (a) 4 June 1, 1991 (No. 1)
7/1/91 7/2/91
4a(64) (a) 4 (a) 4 June 1, 1991 (No. 2)
7/1/91 7/2/91
4a(65) (a) 4 (a) 4 November 1, 1991 (No. 1)
12/2/91 12/3/91
4a(66) (a) 4 (a) 4 November 1, 1991 (No. 2)
12/2/91 12/3/91
4a(67) (a) 4 (a) 4 November 1, 1991 (No. 3)
12/2/91 12/3/91
4a(68) (a) 4 (a) 4 February 1, 1992 (No. 1)
2/27/92 2/28/92
4a(69) (a) 4 (a) 4 February 1, 1992 (No. 2)
2/27/92 2/28/92
4a(70) (a) 4 (a) 4 June 1, 1992 (No. 1)
6/17/92 6/11/92
4a(71) (a) 4 (a) 4 June 1, 1992 (No. 2)
6/17/92 6/11/92
4a(72) (a) 4 (a) 4 June 1, 1992 (No. 3)
6/17/92 6/11/92
4a(73) (a) 4 (a) 4 January 1, 1993 (No.1)
2/2/93 2/2/93
4a(74) (a) 4 (a) 4 January 1, 1993 (No. 2)
2/2/93 2/2/93
4a(75) (a) 4 (a) 4 March 1, 1993
3/17/93 3/18/93
4a(76) (b) 4 (a) 4 May 1, 1993
5/27/93 5/28/93
4a(77) (a) 4 (a) 4 May 1, 1993 (No. 2)
5/25/93 5/25/93
4a(78) (a) 4 (a) 4 May 1, 1993 (No. 3)
5/25/93 5/25/93
4a(79) (b) 4 (b) 4 July 1, 1993
12/1/93 12/1/93
4a(80) (a) 4 (a) 4 August 1, 1993
8/3/93 8/3/93
4a(81) (b) 4 (b) 4 September 1, 1993
12/1/93 12/1/93
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NUMBER
- --------------------------------------------
PREVIOUS FILING
THIS --------------------------------
FILING COMMISSION EXCHANGES
- --------- -------------- --------------
<S> <C> <C> <C> <C> <C>
4a(82) (b) 4 (b) 4 September 1, 1993 (No. 2)
12/1/93 12/1/93
4a(83) (b) 4 (b) 4 November 1, 1993
12/1/93 12/1/93
4a(84) (a) 4 (a) 4 February 1, 1994
2/3/94 2/14/94
4a(85) (a) 4 (a) 4 March 1, 1994 (No. 1)
3/15/94 3/16/94
4a(86) (a) 4 (a) 4 March 1, 1994 (No. 2)
3/15/94 3/16/94
4a(87) (d) 4 (d) 4 May 1, 1994
11/8/94 12/2/94
4a(88) (d) 4 (d) 4 June 1, 1994
11/8/94 12/2/94
4a(89) (d) 4 (d) 4 August 1, 1994
11/8/94 12/2/94
4a(90) (d) 4 (d) 4 October 1, 1994 (No. 1)
11/8/94 12/2/94
4a(91) (d) 4 (d) 4 October 1, 1994 (No. 2)
11/8/94 12/2/94
4a(92) (a) 4 (a) 4 January 1, 1996 (No.1)
1/26/96 1/26/96
4a(93) (a) 4 (a) 4 January 1, 1996 (No.2)
1/26/96 1/26/96
4b (h) 7(12) (c) 4c(1) Indenture between PSE&G and Federal Trust
2/18/81 Company, as Trustee (Midlantic National Bank,
Successor Trustee) dated July 1, 1948, providing
for 6% Debenture Bonds due 1998
4c (l) 2c(8) (c) 4c(8) Indenture between PSE&G and The Chase Manhattan
2/18/81 Bank (National Association), as Trustee, dated
August 15, 1971, providing for 7 3/4% Debenture
Bonds due 1996
4d (b) 4 (b) 4 Indenture of Trust between PSE&G and The Chase
12/1/93 12/1/93 Manhattan Bank (National Association), as
Trustee, providing for Secured Medium-Term Notes
dated July 1, 1993
4e(1) (c) (c) Indenture between PSE&G and First Fidelity Bank,
2/23/95 2/23/95 National Association, as Trustee, dated
November 1, 1994, providing for Deferrable
Interest Subordinated Debentures in Series
4e(2) (a) (a) Supplemental Indenture between PSE&G and First
9/11/95 9/11/95 Fidelity Bank, National Association, as Trustee,
dated September 11, 1995 providing for Deferrable
Interest Subordinated Debentures, Series B
9 Inapplicable
10a(1) (c) 10c(1) (c) 10c(1) Directors' Deferred Compensation Plan
3/17/82 3/19/82
10a(2) (c) 10c(2) (c) 10c(2) Officers' Deferred Compensation Plan
3/17/82 3/19/82
10a(3) (c) 10c(3) (c) 10c(3) Supplemental Death Benefits Plan for officers
3/17/82 3/19/82
10a(4) (c) 10c(4) (c) 10c(4) Description of additional retirement benefits
3/17/82 3/19/82 for certain officers
10a(5)(i) (c) 10b(5) (c) 10b(5) Limited Supplemental Death Benefits and
3/31/83 4/8/83 Retirement Plan
10a(5)(ii) (c) 10a(5)(ii) (c) 10a(5)(ii) Limited Supplemental Benefits Plan for Certain
2/25/94 3/1/94 Employees
10a(6)(i) (c) 10a(6) (c) 10a(6) Description of additional retirement benefits
3/10/87 4/16/87 for certain officers
10a(6)(ii) (c) 10a(6)(1) (c) 10a(6)(1) Description of additional retirement benefits
3/30/90 3/30/90 for certain officers.
10a(6)(iii) (c) 10a(6)(2) (c) 10a(6)(2) Description of additional retirement benefits
3/30/92 4/27/92 for a certain officer.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NUMBER
- --------------------------------------------
PREVIOUS FILING
THIS --------------------------------
FILING COMMISSION EXCHANGES
- --------- -------------- --------------
<S> <C> <C> <C> <C> <C>
10a(7) (o) 10g (o) 10g Management Incentive Compensation Plan
10a(8) (c) 10a(8) (c) 10a(8) Long-Term Incentive Plan
3/30/89 4/18/89
10a(9) (c) 10a(9) (c) 10a(9) Public Service Enterprise Group Incorporated
3/30/89 4/18/89 Pension Plan for Outside Directors
10a(10) (c) 10a(11) (c) 10a(11) Letter Agreement with E. James Ferland dated
2/10/93 2/11/93 April 16, 1986
10a(11) (c) 10a(12) (c) 10a(12) Letter Agreement with Paul H. Way dated March
2/10/93 2/11/93 28, 1988
10a(12) (c) 10a(13) (c) 10a(13) Letter Agreement with Thomas M. Crimmins, Jr.
2/10/93 2/11/93 dated April 5, 1989
10a(13) (c) 10a(15) (c) 10a(15) Letter Agreement with Robert C. Murray dated
2/10/93 2/11/93 December 17, 1991
10a(14) (c) 10a(14) (c) 10a(14) Letter agreement with Patricia A. Rado dated
2/26/94 3/9/94 March 24, 1993
10a(15) (c) 10a(15) (c) 10a(15) Letter Agreement, as amended, with Leon R.
2/23/95 2/23/95 Eliason dated September 14, 1994
10a(16) (d) 10a(15) (d) 10a(15) Letter Agreement with Louis F. Storz dated
8/14/95 8/14/95 July 7, 1995
10a(17) (d) 10a(16) (d) 10a(16) Letter Agreement with Elbert C. Simpson dated
8/14/95 8/14/95 May 31, 1995
10a(18) (d) 10a(17) (d) 10a(17) Letter Agreement with Alfred C. Koeppe dated
11/14/95 11/14/95 August 23, 1995
10a(19) Director Stock Plan
10a(20) Mid Career Hire Supplemental Retirement Plan
10a(21) Retirement Income Reinstatement Plan
11 Inapplicable
12 Computation of Ratios of Earnings to Fixed
Charges
13 Inapplicable
16 Inapplicable
18 Inapplicable
21 Subsidiaries of the Registrant
22 Inapplicable
23 Independent Auditors' Consent
24 Inapplicable
27 Financial Data Schedule
28 Inapplicable
99 Inapplicable
</TABLE>
<PAGE>
PSE&G
<TABLE>
<CAPTION>
EXHIBIT NUMBER
- --------------------------------------------
PREVIOUS FILING
THIS --------------------------------
FILING COMMISSION EXCHANGES
- --------- -------------- --------------
<S> <C> <C> <C> <C> <C>
3a(1) (b) 3a (b) 3a Restated Certificate of Incorporation of PSE&G,
8/28/86 8/29/86 effective May 1, 1986
3a(2) (c) 3a(2) (c) 3a(2) Certificate of Amendment of Certificate of
4/10/87 Restated Certificate of Incorporation of PSE&G
filed February 18, 1987 with the State of New
Jersey adopting limitations of liability
provisions in accordance with an amendment to
New Jersey Business Corporation Act
3a(3) (a) 3(a)3 (a) 3(a)3 Certificate of Amendment of Restated Certificate
2/3/94 2/14/94 of Incorporation of PSE&G filed June 17, 1992
with the State of New Jersey, establishing the
7.44% Cumulative Preferred Stock ($100 Par) as a
series of the Preferred Stock
3a(4) (a) 3(a)4 (a) 3(a)4 Certificate of Amendment of Restated Certificate
2/3/94 2/14/94 of Incorporation of PSE&G filed March 11, 1993
with the State of New Jersey, establishing the
5.97% Cumulative Preferred Stock ($100 Par) as a
series of Preferred Stock
3a(5) (a) 3(a)5 (a) 3(a)5 Certificate of Amendment of Restated Certificate
2/3/94 2/14/94 of Incorporation of PSE&G filed January 27, 1994
with the State of New Jersey, establishing the
6.92% Cumulative Preferred Stock ($100 Par) and
the 6.75% Cumulative Preferred Stock -- $25 Par as
series of Preferred Stock
3b Copy of By-Laws of PSE&G, as in effect
September 1, 1994
4a(1) (f) B-1 (c) 4b(1) Indenture between PSE&G and Fidelity Union Trust
2/18/81 Company, (now First Fidelity Bank, National
Association), as Trustee, dated August 1, 1924,
securing First and Refunding Mortgage Bonds
Indentures between PSE&G and First Fidelity
Bank, National Association, as Trustee,
supplemental to Exhibit 4a(1), dated as follows:
4a(2) (i) 7(1a) (c) 4b(2) April 1, 1927
2/18/81
4a(3) (k) 2b(3) (c) 4b(3) June 1, 1937
2/18/81
4a(4) (k) 2b(4) (c) 4b(4) July 1, 1937
2/18/81
4a(5) (k) 2b(5) (c) 4b(5) December 19, 1939
2/18/81
4a(6) (g) B-10 (c) 4b(6) March 1, 1942
2/18/81
4a(7) (k) 2b(7) (c) 4b(7) June 1, 1949
2/18/81
4a(8) (k) 2b(8) (c) 4b(8) May 1, 1950
2/18/81
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NUMBER
- --------------------------------------------
PREVIOUS FILING
THIS --------------------------------
FILING COMMISSION EXCHANGES
- --------- -------------- --------------
<S> <C> <C> <C> <C> <C>
4a(9) (k) 2b(9) (c) 4b(9) October 1, 1953
2/18/81
4a(10) (k) 2b(10) (c) 4b(10) May 1, 1954
2/18/81
4a(11) (j) 4b(16) (c) 4b(11) November 1, 1956
2/18/81
4a(12) (k) 2b(12) (c) 4b(12) September 1, 1957
2/18/81
4a(13) (k) 2b(13) (c) 4b(13) August 1, 1958
2/18/81
4a(14) (k) 2b(14) (c) 4b(14) June 1, 1959
2/18/81
4a(15) (k) 2b(15) (c) 4b(15) September 1, 1960
2/18/81
4a(16) (k) 2b(16) (c) 4b(16) August 1, 1962
2/18/81
4a(17) (k) 2b(17) (c) 4b(17) June 1, 1963
2/18/81
4a(18) (k) 2b(18) (c) 4b(18) September 1, 1964
2/18/81
4a(19) (k) 2b(19) (c) 4b(19) September 1, 1965
2/18/81
4a(20) (k) 2b(20) (c) 4b(20) June 1, 1967
2/18/81
4a(21) (k) 2b(21) (c) 4b(21) June 1, 1968
2/18/81
4a(22) (k) 2b(22) (c) 4b(22) April 1, 1969
2/18/81
4a(23) (k) 2b(23) (c) 4b(23) March 1, 1970
2/18/81
4a(24) (k) 2b(24) (c) 4b(24) May 15, 1971
2/18/81
4a(25) (k) 2b(25) (c) 4b(25) November 15, 1971
2/18/81
4a(26) (k) 2b(26) (c) 4b(26) April 1, 1972
2/18/81
4a(27) (a) 2 (c) 4b(27) March 1, 1974
3/29/74 2/18/81
4a(28) (a) 2 (c) 4b(28) October 1, 1974
10/11/74 2/18/81
4a(29) (a) 2 (c) 4b(29) April 1, 1976
4/6/76 2/18/81
4a(30) (a) 2 (c) 4b(30) September 1, 1976
9/16/76 2/18/81
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NUMBER
- --------------------------------------------
PREVIOUS FILING
THIS --------------------------------
FILING COMMISSION EXCHANGES
- --------- -------------- --------------
<S> <C> <C> <C> <C> <C>
4a(31) (k) 2b(31) (c) 4b(31) October 1, 1976
2/18/81
4a(32) (a) 2 (c) 4b(32) June 1, 1977
6/29/77 2/18/81
4a(33) (l) 2b(33) (c) 4b(33) September 1, 1977
2/18/81
4a(34) (a) 2 (c) 4b(34) November 1, 1978
11/21/78 2/18/81
4a(35) (a) 2 (c) 4b(35) July 1, 1979
7/25/79 2/18/81
4a(36) (m) 2d(36) (c) 4b(36) September 1, 1979 (No. 1)
2/18/81
4a(37) (m) 2d(37) (c) 4b(37) September 1, 1979 (No. 2)
2/18/81
4a(38) (a) 2 (c) 4b(38) November 1, 1979
12/3/79 2/18/81
4a(39) (a) 2 (c) 4b(39) June 1, 1980
6/10/80 2/18/81
4a(40) (a) 2 (a) 2 August 1, 1981
8/19/81 8/19/81
4a(41) (b) 4e (b) 4e April 1, 1982
4/29/82 5/5/82
4a(42) (a) 2 (a) 2 September 1, 1982
9/17/82 9/20/82
4a(43) (a) 2 (a) 2 December 1, 1982
12/21/82 12/21/82
4a(44) (d) 4(ii) (d) 4(ii) June 1, 1983
7/26/83 7/27/83
4a(45) (a) 4 (a) 4 August 1, 1983
8/19/83 8/19/83
4a(46) (d) 4(ii) (d) 4(ii) July 1, 1984
8/14/84 8/17/84
4a(47) (d) 4(ii) (d) 4(ii) September 1, 1984
11/2/84 11/9/84
4a(48) (b) 4(ii) (b) 4(ii) November 1, 1984 (No. 1)
1/4/85 1/9/85
4a(49) (b) 4(ii) (b) 4(ii) November 1, 1984 (No. 2)
1/4/85 1/9/85
4a(50) (a) 2 (a) 2 July 1, 1985
8/2/85 8/2/85
4a(51) (c) 4a(51) (c) 4a(51) January 1, 1986
2/11/86 2/11/86
4a(52) (a) 2 (a) 2 March 1, 1986
3/28/86 3/28/86
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NUMBER
- --------------------------------------------
PREVIOUS FILING
THIS --------------------------------
FILING COMMISSION EXCHANGES
- --------- -------------- --------------
<S> <C> <C> <C> <C> <C>
4a(53) (a) 2(a) (a) 2(a) April 1, 1986 (No. 1)
5/1/86 5/1/86
4a(54) (a) 2(b) (a) 2(b) April 1, 1986 (No. 2)
5/1/86 5/1/86
4a(55) (p) 4a(55) (p) 4a(55) March 1, 1987
4/9/87 4/9/87
4a(56) (a) 4 (a) 4 July 1, 1987 (No. 1)
8/17/87 8/17/87
4a(57) (d) 4 (d) 4 July 1, 1987 (No. 2)
11/13/87 11/20/87
4a(58) (a) 4 (a) 4 May 1, 1988
5/17/88 5/18/88
4a(59) (a) 4 (a) 4 September 1, 1988
9/27/88 9/28/88
4a(60) (a) 4 (a) 4 July 1, 1989
7/25/89 7/26/89
4a(61) (a) 4 (a) 4 July 1, 1990 (No. 1)
7/25/90 7/26/90
4a(62) (a) 4 (a) 4 July 1, 1990 (No. 2)
7/25/90 7/26/90
4a(63) (a) 4 (a) 4 June 1, 1991 (No. 1)
7/1/91 7/2/91
4a(64) (a) 4 (a) 4 June 1, 1991 (No. 2)
7/1/91 7/2/91
4a(65) (a) 4 (a) 4 November 1, 1991 (No. 1)
12/2/91 12/3/91
4a(66) (a) 4 (a) 4 November 1, 1991 (No. 2)
12/2/91 12/3/91
4a(67) (a) 4 (a) 4 November 1, 1991 (No. 3)
12/2/91 12/3/91
4a(68) (a) 4 (a) 4 February 1, 1992 (No. 1)
2/27/92 2/28/92
4a(69) (a) 4 (a) 4 February 1, 1992 (No. 2)
2/27/92 2/28/92
4a(70) (a) 4 (a) 4 June 1, 1992 (No. 1)
6/17/92 6/11/92
4a(71) (a) 4 (a) 4 June 1, 1992 (No. 2)
6/17/92 6/11/92
4a(72) (a) 4 (a) 4 June 1, 1992 (No. 3)
6/17/92 6/11/92
4a(73) (a) 4 (a) 4 January 1, 1993 (No.1)
2/2/93 2/2/93
4a(74) (a) 4 (a) 4 January 1, 1993 (No. 2)
2/2/93 2/2/93
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NUMBER
- --------------------------------------------
PREVIOUS FILING
THIS --------------------------------
FILING COMMISSION EXCHANGES
- --------- -------------- --------------
<S> <C> <C> <C> <C> <C>
4a(75) (a) 4 (a) 4 March 1, 1993
3/17/93 3/18/93
4a(76) (b) 4 (a) 4 May 1, 1993
5/27/93 5/28/93
4a(77) (a) 4 (a) 4 May 1, 1993 (No. 2)
5/25/93 5/25/93
4a(78) (a) 4 (a) 4 May 1, 1993 (No. 3)
5/25/93 5/25/93
4a(79) (b) 4 (b) 4 July 1, 1993
12/1/93 12/1/93
4a(80) (a) 4 (a) 4 August 1, 1993
8/3/93 8/3/93
4a(81) (b) 4 (b) 4 September 1, 1993
12/1/93 12/1/93
4a(82) (a) 4 (a) 4 September 1, 1993 (No. 2)
12/1/93 12/1/93
4a(83) (b) 4 (b) 4 November 1, 1993
12/1/93 12/1/93
4a(84) (a) 4 (a) 4 February 1, 1994
2/3/94 2/14/94
4a(85) (a) 4 (a) 4 March 1, 1994 (No. 1)
3/15/94 3/16/94
4a(86) (a) 4 (a) 4 March 1, 1994 (No. 2)
3/15/94 3/16/94
4a(87) (d) 4 (d) 4 May 1, 1994
11/8/94 12/2/94
4a(88) (d) 4 (d) 4 June 1, 1994
11/8/94 12/2/94
4a(89) (d) 4 (d) 4 August 1, 1994
11/8/94 12/2/94
4a(90) (d) 4 (d) 4 October 1, 1994 (No. 1)
11/8/94 12/2/94
4a(91) (d) 4 (d) 4 October 1, 1994 (No. 2)
11/8/94 12/2/94
4a(92) (a) 4 (a) 4 January 1, 1996 (No.1)
1/26/96 1/26/96
4a(93) (a) 4 (a) 4 January 1, 1996 (No.2)
1/26/96 1/26/96
4b(1) (h) 7(12) (c) 4c(1) Indenture between PSE&G and Federal Trust
2/18/81 Company, as Trustee, (Midlantic National Bank,
Successor Trustee) dated July 1, 1948, providing
for 6% Debenture Bonds due 1998
4b(2) (l) 2c(8) (c) 4c(8) Indenture between PSE&G and the Chase Manhattan
2/18/81 Bank (National Association), as Trustee, dated
August 15, 1971, providing for 7 3/4% Debenture
Bonds due 1996
4b(3) (b) 4 (b) 4 Indenture of Trust between the Company and The
12/1/93 12/1/93 Chase Manhattan Bank (National Association), as
Trustee, providing for Secured Medium-Term Notes
dated July 1, 1993
4b(4) (b) (c) Indenture between PSE&G and First Fidelity Bank,
2/2395 2/23/95 National Association, as Trustee, dated
November 1, 1994, providing for Deferrable
Interest Subordinated Debentures in Series
4b(5) (a) 4b(5) (a) 4b(5) Supplemental Indenture between PSE&G and First
Fidelity Bank, National Association, as Trustee,
dated September 11, 1995 providing for Deferrable
Interest Subordinated Debentures in Series B
9 Inapplicable
10a(1) (c) 10c(1) (c) 10c(1) Directors' Deferred Compensation Plan
3/17/82 3/19/82
10a(2) (c) 10c(2) (c) 10c(2) Officers' Deferred Compensation Plan
3/17/82 3/19/82
Supplemental Benefits Plan for Certain
2/25/94 3/1/94 Employees
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NUMBER
- --------------------------------------------
PREVIOUS FILING
THIS --------------------------------
FILING COMMISSION EXCHANGES
- --------- -------------- --------------
<S> <C> <C> <C> <C> <C>
10a(3) (c) 10c(3) (c) 10c(3) Supplemental Death Benefits Plan for officers
3/17/82 3/19/82
10a(4) (c) 10c(4) (c) 10c(4) Description of additional retirement for certain
3/17/82 3/19/82 officers
10a(5)(i) (c) 10b(5) (c) 10b(5) Limited Supplemental Death Benefits and
3/31/83 4/8/83 Retirement Plan
10a(5)(ii) (c) 10a(5)(ii) (c) 10a(5)(ii) Limited S-----
10a(6)(i) (c) 10a(6) (c) 10a(6) Description of additional retirement benefits
3/10/87 4/16/87 for certain officers
10a(6)(ii) (c) 10a(6)(1) (c) 10a(6)(1) Description of additional retirement benefit for
3/30/90 3/30/90 certain officers.
10a(6)(iii) (c) 10a(6)(2) (c) 10a(6)(2) Description of additional retirement benefit for
3/30/92 4/27/92 a certain officer.
10a(7) (o) 10g (o) 10g Management Incentive Compensation Plan
10a(8) (c) 10a(8) (c) 10a(8) Long-Term Incentive Plan
3/30/89 4/18/89
10a(9) (c) 10a(9) (c) 10a(9) Public Service Enterprise Group Incorporated
3/30/89 4/18/89 Pension Plan for Outside Directors
10a(10) (c) 10a(9) (c) 10a(9) Letter Agreement with E. James Ferland dated
2/10/93 2/11/93 April 16, 1986
10a(11) (c) 10a(10) (c) 10a(10) Letter Agreement with Thomas M. Crimmins, Jr.
2/10/93 2/11/93 dated April 5, 1989
10a(12) (c) 10a(12) (c) 10a(12) Letter Agreement with Robert C. Murray dated
2/10/93 2/11/93 December 17, 1991
10a(13) (c) 10a(13) (c) 10a(13) Letter agreement with Patricia A. Rado dated
2/26/94 3/9/94 March 24, 1993.
10a(14) (c) 10a(14) (c) 10a(14) Letter Agreement, as amended, with Leon R.
2/23/95 2/23/95 Eliason dated September 14, 1994
10a(15) (d) 10a(15) (d) 10a(15) Letter Agreement with Louis F. Storz dated
8/14/95 8/14/95 July 7, 1995
10a(16) (d) 10a(16) (d) 10a(16) Letter Agreement with Elbert C. Simpson dated
8/14/95 8/14/95 May 31, 1995
10a(17) (d) 10a(17) (d) 10a(17) Letter Agreement with Alfred C. Koeppe dated
11/14/95 11/14/95 August 23, 1995
10a(18) Director Stock Plan
10a(19) Mid Career Hire Supplemental Retirement Plan
10a(20) Retirement Income Reinstatement Plan
11 Inapplicable
12(a) Computation of Ratios of Earnings to Fixed
Charges
12(b) Computation of Ratios of Earnings to Fixed
Charges Plus Preferred Stock Dividend
Requirements
13 Inapplicable
16 Inapplicable
19 Inapplicable
21 Inapplicable
22 Inapplicable
23 Independent Auditors' Consent
24 Inapplicable
27 Financial Data Schedule
28 Inapplicable
99 Inapplicable
</TABLE>
================================================================================
EXHIBIT 99.(g)(2)
FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 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 April 30, 1996
----- -----------------------------
Common Stock, without par value 244,697,930
As of April 30, 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.
================================================================================
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Public Service Enterprise Group Incorporated (Enterprise):
Consolidated Statements of Income for the Three and
Twelve Months Ended March 31, 1996 and 1995 ................. 1
Consolidated Balance Sheets as of March 31, 1996, 1995
and December 31, 1995 ....................................... 2
Consolidated Statements of Cash Flows for the Three and
Twelve Months Ended March 31, 1996 and 1995 ................. 4
Consolidated Statements of Retained Earnings for the
Three and Twelve Months Ended March 31, 1996 and 1995 ....... 5
Public Service Electric and Gas Company (PSE&G):
Consolidated Statements of Income for the Three and
Twelve Months Ended March 31, 1996 and 1995 ................. 6
Consolidated Balance Sheets as of March 31, 1996,
1995 and December 31, 1995 .................................. 7
Consolidated Statements of Cash Flows for the Three and
Twelve Months Ended March 31, 1996 and 1995 ................. 9
Consolidated Statements of Retained Earnings for the
Three and Twelve Months Ended March 31, 1996 and 1995 ....... 10
Notes to Consolidated Financial Statements - Enterprise......... 11
Notes to Consolidated Financial Statements - PSE&G.............. 21
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Enterprise ....................................... 22
PSE&G ............................................ 37
i
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
PART II. OTHER INFORMATION
Item 1. Legal Proceedings ................................... 38
Item 4. Submission of Matters to a Vote of
Security Holders .................................... 40
Item 5. Other Information ................................... 41
Item 6. Exhibits and Reports on Form 8-K .................... 48
Signatures - Public Service Enterprise Group Incorporated ..... 50
Signatures - Public Service Electric and Gas Company .......... 50
ii
<PAGE>
GLOSSARY OF TERMS
The following is a glossary of frequently used abbreviations or
acronyms that are found in this report:
<TABLE>
<CAPTION>
TERM MEANING
----------------------- -------------------------------------------
<S> <C>
AFDC................... Allowance for Funds used During
Construction
Alternative Rate Plan.. New Jersey Partners in Power Plan
BPU.................... New Jersey Board of Public Utilities
Capital................ PSEG Capital Corporation
CEA.................... Community Energy Alternatives Incorporated
CERCLA................. Federal Comprehensive Environmental
Response, Compensation and Liability
Act of 1980
DSM.................... Demand Side Management
DSM Plan............... DSM Incentive Resource Plan
EBIT................... Earnings before interest and taxes
EDC.................... Energy Development Corporation
EDHI................... Enterprise Diversified Holdings
<PAGE>
Incorporated
EGDC................... Enterprise Group Development Corporation
Enterprise............. Public Service Enterprise Group
Incorporated
EPA.................... United States Environmental Protection
Agency
EPACT.................. National Energy Policy Act of 1992
Fault Act.............. New Jersey Public Utility Accident
Fault Determination Act
FERC................... Federal Energy Regulatory Commission
Fuelco................. PSE&G Fuel Corporation
Funding................ Enterprise Capital Funding Corporation
IRP.................... Integrated Electric Resource Plan
Hope Creek............. Hope Creek Nuclear Generating Station
KKR.................... Kohlberg, Kravis, Roberts and Co.
KWH.................... Kilowatthours
LEAC................... Electric Levelized Energy Adjustment Clause
LGAC................... Levelized Gas Adjustment Charge
MD&A................... Management's Discussion and Analysis of
Financial Condition and Results of
Operations
MIPS................... Monthly Income Preferred Securities
Mortgage............... First and Refunding Mortgage of PSE&G
MTNs................... Medium-Term Notes
MW..................... Megawatts
MWH.................... Megawatthours
</TABLE>
iii
<PAGE>
<TABLE>
<CAPTION>
TERM MEANING
----------------------- -------------------------------------------
<S> <C>
NBU.................... Nuclear Business Unit
NEIL................... Nuclear Electric Insurance Limited
NJDEP.................. New Jersey Department of Environmental
Protection
NJGRT.................. New Jersey Gross Receipts and Franchise Tax
NJNAA.................. New Jersey Need Assessment Act
NJPDES................. New Jersey Pollution Discharge Elimination
System
NML.................... Nuclear Mutual Limited
NOPR................... Notice of Proposal Rulemaking
NPS.................... The BPU's nuclear performance standard
established for nuclear generating
stations owned by New Jersey electric
utilities
NRC.................... Nuclear Regulatory Commission
OAL.................... Office of Administrative Law
Partnership............ Public Service Electric and Gas Capital,
L.P.
Peach Bottom........... Peach Bottom Atomic Power Station, Units 2
and 3
PECO................... PECO Energy, Inc.
PJM.................... Pennsylvania -- New Jersey -- Maryland
Interconnection
Price Anderson......... Price-Anderson liability provisions of the
Atomic Energy Act of 1954, as amended
PSE&G.................. Public Service Electric and Gas Company
PSCRC.................. Public Service Conservation Resources
Corporation
PSRC................... Public Service Resources Corporation
RAC.................... Remediation Adjustment Charge
Ratepayer Advocate..... New Jersey Division of Ratepayer Advocate
Remediation Program.... PSE&G Gas Plant Remediation Program
Salem.................. Salem Nuclear Generating Station, Units 1
and 2
SEC.................... Securities and Exchange Commission
Ventures............... Enterprise Ventures and Service Corporation
iv
<PAGE>
<PAGE>
</TABLE>
<TABLE><CAPTION>
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
The financial statements included herein as of March 31, 1996 and 1995 and
for the periods then ended are unaudited but, in the opinion of Enterprise's
management, reflect all adjustments, consisting only of normal recurring
accruals, necessary for a fair presentation.
CONSOLIDATED STATEMENTS OF INCOME
(Thousands of Dollars)
Three Months Ended Twelve Months Ended
March 31, March 31,
--------------------------- ---------------------------
1996 1995 1996 1995
------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
OPERATING REVENUES
Electric ................................ $ 958,333 $ 945,038 $ 4,034,137 $ 3,795,409
Gas ..................................... 796,916 634,478 1,848,841 1,611,349
Nonutility Activities ................... 110,533 96,752 470,689 396,496
------------- ------------ ------------ ------------
Total Operating Revenues ........... 1,865,782 1,676,268 6,353,667 5,803,254
------------- ------------ ------------ ------------
OPERATING EXPENSES
Operation
Fuel for Electric Generation and
Interchanged Power .................... 216,075 208,110 899,747 736,672
Gas Purchased and Materials for Gas
Produced............................... 456,732 344,193 1,074,078 907,593
Other ................................... 284,274 253,906 1,149,126 1,122,251
Maintenance................................ 95,416 64,045 343,981 295,650
Depreciation and Amortization.............. 174,468 164,256 684,443 642,045
Taxes
Federal Income Taxes .................... 101,426 106,789 348,729 298,866
New Jersey Gross Receipts Taxes ......... 188,436 176,789 624,608 568,653
Other ................................... 26,132 23,845 82,757 82,044
------------- ------------ ------------ ------------
Total Operating Expenses ........... 1,542,959 1,341,933 5,207,469 4,653,774
------------- ------------ ------------ ------------
OPERATING INCOME .......................... 322,823 334,335 1,146,198 1,149,480
------------- ------------ ------------ ------------
OTHER INCOME
Allowance for Funds Used During
Construction - Equity ................. -- 1,482 3,842 12,483
Miscellaneous - net ..................... 1,278 2,002 7,317 7,277
------------- ------------ ------------ ------------
Total Other Income ................. 1,278 3,484 11,159 19,760
------------- ------------ ------------ ------------
INCOME BEFORE INTEREST CHARGES AND
DIVIDENDS ON PREFERRED SECURITIES ....... 324,101 337,819 1,157,357 1,169,240
------------- ------------ ------------ ------------
INTEREST CHARGES
Long-Term Debt .......................... 109,141 111,604 431,603 458,650
Short-Term Debt ......................... 7,189 4,827 35,184 24,955
Other ................................... 6,883 6,705 29,350 16,659
------------- ------------ ------------ ------------
Total Interest Charges ............. 123,213 123,136 496,137 500,264
Allowance for Funds Used During
Construction - Debt and Capitalized
Interest .............................. (5,457) (10,106) (32,559) (36,586)
------------- ------------ ------------ ------------
Net Interest Charges ............... 117,756 113,030 463,578 463,678
------------- ------------ ------------ ------------
Preferred Securities Dividend
Requirements........................... 12,241 12,197 49,470 44,064
Preferred Stock Redemption Premium....... -- -- 474 --
------------- ------------ ------------ ------------
NET INCOME ......................... $ 194,104 $ 212,592 $ 643,835 $ 661,498
============= ============ ============ ============
SHARES OF COMMON STOCK OUTSTANDING
End of Period ........................... 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
EARNINGS PER AVERAGE SHARE OF COMMON STOCK. $0.79 $0.87 $2.63 $2.70
============= ============ ============ ============
DIVIDENDS PAID PER SHARE OF COMMON STOCK .. $0.54 $0.54 $2.16 $2.16
============= ============ ============ ============
<FN>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>
<PAGE>
<TABLE><CAPTION>
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
CONSOLIDATED BALANCE SHEETS
(Thousands of Dollars)
March 31, March 31, December 31,
ASSETS 1996 1995 1995
- ------ ------------ ------------ ------------
<S> <C> <C> <C>
UTILITY PLANT - Original cost
Electric ............................................. $ 13,189,429 $ 12,470,514 $ 13,095,103
Gas .................................................. 2,458,045 2,344,557 2,442,572
Common ............................................... 511,760 515,113 517,104
------------ ------------ ------------
Total ........................................... 16,159,234 15,330,184 16,054,779
Less: accumulated depreciation and amortization...... 5,559,788 5,229,300 5,440,414
------------ ------------ ------------
Net ............................................. 10,599,446 10,100,884 10,614,365
Nuclear Fuel in Service, net of accumulated
amortization $255,283; $305,655; and
$297,435, respectively ............................. 171,218 201,637 180,018
------------ ------------ ------------
Net Utility Plant in Service .................... 10,770,664 10,302,521 10,794,383
Construction Work in Progress, including Nuclear
Fuel in Process - $108,015; $53,396; and
$104,743, respectively ............................ 352,452 753,774 369,082
Plant Held for Future Use ............................ 23,966 23,861 23,966
------------ ------------ ------------
Net Utility Plant ............................... 11,147,082 11,080,156 11,187,431
------------ ------------ ------------
INVESTMENTS AND OTHER NONCURRENT ASSETS
Long-Term Investments, net of amortization -
$7,320, $3,024, and $7,213, and net of valuation
allowances - $21,392, $17,105 and $21,302 respectively 1,842,395 1,653,183 1,822,160
Oil and Gas Property, Plant and Equipment, net of
accumulated depreciation and amortization - $808,183,
$767,792 and $786,736, respectively ................ 615,654 580,765 608,015
Real Estate Property and Equipment, net of accumulated
depreciation - $5,506; $15,200 and $5,063, and
net of valuation allowance -- $8,227, $23,306 and
$8,228, respectively ............................... 75,188 112,036 75,558
Other Plant, net of accumulated depreciation and
amortization - $6,805; $4,888 and $6,531,
respectively ....................................... 27,975 36,077 27,997
Nuclear Decommissioning and Other Special Funds ...... 286,795 242,330 276,348
Other Assets - net ................................... 53,865 85,502 55,974
------------ ------------ ------------
Total Investments and Other Noncurrent Assets.... 2,901,872 2,709,893 2,866,052
------------ ------------ ------------
CURRENT ASSETS
Cash and Cash Equivalents ............................ 546,532 131,137 76,233
Accounts Receivable:
Customer Accounts Receivable ....................... 623,926 490,106 525,404
Other Accounts Receivable .......................... 304,014 207,168 260,713
Less: allowance for doubtful accounts .............. 38,123 39,734 37,641
Unbilled Revenues .................................... 177,175 152,744 246,876
Fuel, at average cost ................................ 88,022 167,020 253,360
Materials and Supplies, net of inventory valuation
reserves $18,200, $18,200 and $20,100, respectively. 148,033 150,640 144,970
Deferred Income Taxes ................................ 29,734 25,135 27,571
Miscellaneous Current Assets ......................... 51,751 26,891 62,631
------------ ------------ ------------
Total Current Assets ............................ 1,931,064 1,311,107 1,560,117
------------ ------------ ------------
DEFERRED DEBITS
Property Abandonments - net .......................... 65,439 83,817 70,120
Oil and Gas Property Write-Down ...................... 34,790 39,944 36,078
Unamortized Debt Expense ............................. 148,767 131,300 123,833
Deferred OPEB Costs .................................. 250,544 192,727 167,189
Underrecovered Electric Energy and Gas Costs - net.... 207,843 171,238 170,565
Unrecovered Environmental Costs ...................... 127,368 136,151 130,070
Unrecovered Plant and Regulatory Study Costs ......... 34,856 35,661 35,150
Unrecovered SFAS 109 Deferred Income Taxes ........... 766,908 794,665 769,136
Deferred Decontamination and Decommissioning Costs ... 49,872 53,016 49,872
Other ................................................ 28,724 25,570 5,826
------------ ------------ ------------
Total Deferred Debits ........................... 1,715,111 1,664,089 1,557,839
------------ ------------ ------------
Total ........................................... $ 17,695,129 $ 16,765,245 $ 17,171,439
============ ============ ============
<FN>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
CONSOLIDATED BALANCE SHEETS
(Thousands of Dollars)
<CAPTION>
March 31, March 31, 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 ............................... 1,705,753 1,590,464 1,643,785
------------ ------------ ------------
Total Common Equity .......................... 5,506,910 5,391,621 5,444,942
Subsidiaries' Securities and Obligations
Preferred Securities
Preferred Stock Without Mandatory Redemption..... 324,994 384,994 324,994
Preferred Stock With Mandatory Redemption ....... 150,000 150,000 150,000
Monthly Income Preferred Securities ............. 210,000 150,000 210,000
Long-Term Debt .................................... 5,110,163 5,264,646 5,189,791
------------ ------------ ------------
Total Capitalization ......................... 11,302,067 11,341,261 11,319,727
------------ ------------ ------------
OTHER LONG-TERM LIABILITIES
Decontamination, Decommissioning, and Low Level
Radwaste Costs .................................. 49,890 57,664 50,449
Environmental Costs ............................... 96,302 108,576 96,272
Capital Lease Obligations ......................... 52,934 53,612 53,111
------------ ------------ ------------
Total Other Long-Term Liabilities............. 199,126 219,852 199,832
------------ ------------ ------------
CURRENT LIABILITIES
Long-Term Debt due within one year ................ 92,639 364,773 90,630
Commercial Paper and Loans ........................ 1,022,318 238,223 849,567
Book Overdrafts ................................... 63,372 51,913 70,014
Accounts Payable .................................. 526,078 373,159 567,787
New Jersey Gross Receipts Taxes Accrued ........... 188,937 175,261 --
Other Taxes Accrued ............................... 90,189 142,238 34,678
Interest Accrued .................................. 108,556 120,540 108,245
Estimated Liability for Vacation Pay .............. 40,589 40,621 17,089
Customer Deposits ................................. 32,300 32,457 32,785
Liability for Injuries and Damages ................ 44,338 31,784 38,141
Miscellaneous Environmental Liabilities ........... 17,694 15,305 16,954
Other ............................................. 94,825 77,712 95,907
------------ ------------ ------------
Total Current Liabilities .................... 2,321,835 1,663,986 1,921,797
------------ ------------ ------------
DEFERRED CREDITS
Accumulated Deferred Income Taxes ................. 3,144,616 2,912,922 3,094,620
Accumulated Deferred Investment Tax Credits ....... 387,320 407,494 392,324
Deferred OPEB Costs ............................... 250,544 192,727 167,189
Other ............................................. 89,621 27,003 75,950
------------ ------------ ------------
Total Deferred Credits ....................... 3,872,101 3,540,146 3,730,083
------------ ------------ ------------
COMMITMENTS AND CONTINGENCIES (note 2)
Total ........................................ $ 17,695,129 $ 16,765,245 $ 17,171,439
============ ============ ============
</TABLE>
<PAGE>
<TABLE>
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands of Dollars)
<CAPTION>
Three Months Ended Twelve Months Ended
March 31, March 31,
-------------------------- --------------------------
1996 1995 1996 1995
------------ ----------- ----------- -----------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income .............................. $ 194,104 $ 212,592 $ 643,835 $ 661,498
Adjustments to reconcile net income to
net cash flows from operating activities:
Depreciation and Amortization ........... 174,468 164,256 684,443 642,045
Amortization of Nuclear Fuel ............ 8,905 23,120 60,813 94,719
(Deferral) Recovery of Electric Energy
and Gas Costs - net ................... (37,278) 1,325 (36,605) (51,034)
Unrealized Gains on
Investments - net...................... (10,103) (19,421) (37,350) (46,500)
Provision for Deferred Income
Taxes - net............................ 31,482 16,456 160,118 110,129
Investment Tax Credits - net ............ (5,004) (4,972) (20,174) (20,358)
Allowance for Funds Used During
Construction - Debt and Equity and
Capitalized Interest................... (5,457) (11,588) (36,401) (49,069)
Proceeds from Leasing Activities - net... 11,212 (14,487) 63,351 25,893
Changes in certain current assets
and liabilities:
Net (increase) decrease in Accounts
Receivable and Unbilled Revenues..... (71,640) (1,157) (256,708) 83,450
Net decrease (increase) in Inventory -
Fuel and Materials and Supplies...... 162,275 99,552 81,605 (34,999)
Net (decrease) increase in
Accounts Payable..................... (41,709) (60,312) 152,919 (13,289)
Net change in Prepaid/Accrued
Taxes................................ 252,256 273,350 (38,373) (267,678)
Net change in Other Current Assets
and liabilities...................... 30,090 27,661 (9,576) 20,200
Other ................................... 6,797 (7,275) 82,316 30,878
------------ ----------- ----------- ------------
Net cash provided by operating
activities ......................... 700,398 699,100 1,494,213 1,185,885
------------ ----------- ----------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to Utility Plant,
excluding AFDC ........................ (96,349) (128,027) (618,205) (809,519)
Additions to Oil and Gas Property,
Plant and Equipment, excluding
Capitalized Interest .................. (23,346) (21,304) (129,771) (133,763)
Net (increase) decrease in Long-Term
Investments and Real Estate ........... (7,361) (6,113) (82,512) 31,566
Increase in Decommissioning and Other
Special Funds, excluding interest ..... (7,391) (7,390) (29,618) (36,976)
Cost of Plant Removal - net ............. (11,101) (2,103) (38,672) (28,357)
Other ................................... (2,586) 248 27,065 7,950
------------ ----------- ----------- ------------
Net cash used in investing
activities ......................... (148,134) (164,689) (871,713) (969,099)
------------ ----------- ----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in
Short-Term Debt ....................... 172,751 (253,363) 784,095 119,721
(Decrease) increase in Book Overdrafts .. (6,642) (34,663) 11,459 13,286
Issuance of Long-Term Debt .............. 352,451 -- 508,771 449,800
Redemption of Long-Term Debt ............ (430,070) (50,976) (935,388) (547,422)
Long-Term Debt Issuance and
Redemption Costs ...................... (38,319) -- (47,496) (29,811)
Redemption of Preferred Stock ........... -- -- (60,000) (75,000)
Issuance of Monthly Income
Preferred Securities .................. -- -- 60,000 150,000
Cash Dividends Paid on Common Stock ..... (132,138) (132,138) (528,548) (528,548)
Other ................................... 2 -- 2 (843)
------------ ----------- ----------- -----------
Net cash used in financing
activities ...................... (81,965) (471,140) (207,105) (448,817)
------------ ----------- ----------- -----------
Net increase (decrease) in Cash and
Cash Equivalents ........................ 470,299 63,271 415,395 (232,031)
Cash and Cash Equivalents at Beginning
of Period ............................... 76,233 67,866 131,137 363,168
------------ ----------- ----------- -----------
Cash and Cash Equivalents at
End of Period........................... $ 546,532 $ 131,137 $ 546,532 $ 131,137
============ =========== =========== ===========
Income Taxes Paid ......................... $ 7,288 $ 15,136 $ 177,528 $ 166,910
Interest Paid ............................. $ 110,258 $ 94,409 $ 497,113 $ 437,932
<FN>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
(Thousand of Dollars)
<CAPTION>
Three Months Ended Twelve Months Ended
March 31, March 31,
--------------------------- ---------------------------
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Balance at Beginning of Period ............ $ 1,643,785 $ 1,510,010 $ 1,590,464 $ 1,458,357
Add Net Income ............................ 194,104 212,592 643,835 661,498
------------ ------------ ------------ ------------
Total ................................ 1,837,889 1,722,602 2,234,299 2,119,855
------------ ------------ ------------ ------------
Deduct:
Cash Dividends on Common Stock .......... 132,138 132,138 528,548 528,548
Adjustment to Retained Earnings ......... (2) -- (2) 843
------------ ------------ ------------ ------------
Total Deductions ..................... 132,136 132,138 528,546 529,391
------------ ------------ ------------ ------------
Balance at End of Period .................. $ 1,705,753 $ 1,590,464 $ 1,705,753 $ 1,590,464
============ ============ ============ ============
<FN>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
PUBLIC SERVICE ELECTRIC AND GAS COMPANY
The financial statements included herein as of March 31, 1996 and 1995 and for the periods then
ended are unaudited but, in the opinion of PSE&G's management, reflect all adjustments, consisting only
of normal recurring accruals, necessary for a fair presentation.
CONSOLIDATED STATEMENTS OF INCOME
(Thousands of Dollars)
<CAPTION>
Three Months Ended Twelve Months Ended
March 31, March 31,
--------------------------- ---------------------------
1996 1995 1996 1995
------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
OPERATING REVENUES
Electric ................................ $ 958,333 $ 945,038 $ 4,034,137 $ 3,795,409
Gas ..................................... 796,916 634,478 1,848,841 1,611,349
------------- ------------ ------------ ------------
Total Operating Revenues ........... 1,755,249 1,579,516 5,882,978 5,406,758
------------- ------------ ------------ ------------
OPERATING EXPENSES
Operation
Fuel for Electric Generation and
Interchanged Power.................. 216,075 208,110 899,747 736,672
Gas Purchased and Materials for
Gas Produced ........................ 456,732 344,193 1,074,078 915,754
Other ................................. 242,764 220,217 971,947 964,758
Maintenance ............................. 95,416 64,045 343,981 295,650
Depreciation and Amortization ........... 152,508 143,593 600,029 559,960
Taxes
Federal Income Taxes .................. 94,629 102,284 313,873 283,384
New Jersey Gross Receipts Taxes ....... 188,436 176,789 624,608 568,653
Other ................................. 23,587 21,853 72,543 75,838
------------- ------------ ------------ ------------
Total Operating Expenses ........... 1,470,147 1,281,084 4,900,806 4,400,669
------------- ------------ ------------ ------------
OPERATING INCOME .......................... 285,102 298,432 982,172 1,006,089
------------- ------------ ------------ ------------
OTHER INCOME
Allowance for Funds Used During
Construction - Equity ................ -- 1,482 3,842 12,483
Miscellaneous - net ..................... 1,273 1,851 7,150 6,931
------------- ------------ ------------ ------------
Total Other Income ................. 1,273 3,333 10,992 19,414
------------- ------------ ------------ ------------
INCOME BEFORE INTEREST CHARGES AND
DIVIDENDS ON PREFERRED SECURITIES ....... 286,375 301,765 993,164 1,025,503
------------- ------------ ------------ ------------
INTEREST CHARGES
Long-Term Debt .......................... 91,512 91,492 357,604 370,059
Short-Term Debt ......................... 4,034 1,950 22,824 17,866
Other ................................... 6,755 6,531 28,769 16,101
------------- ------------ ------------ ------------
Total Interest Charges ............. 102,301 99,973 409,197 404,026
Allowance for Funds Used During
Construction - Debt ..................... (4,291) (8,619) (26,615) (28,581)
------------- ------------ ------------ ------------
Net Interest Charges ...................... 98,010 91,354 382,582 375,445
Monthly Income Preferred Securities
Dividend Requirements ................... 4,715 3,515 16,864 5,195
------------- ------------ ------------ ------------
NET INCOME ................................ 183,650 206,896 593,718 644,863
------------- ------------ ------------ ------------
Preferred Stock Dividend Requirements ..... 7,526 8,682 32,606 38,869
Preferred Stock Redemption Premium.......... -- -- 474 --
------------- ------------ ------------ ------------
EARNINGS AVAILABLE TO PUBLIC SERVICE
ENTERPRISE GROUP INCORPORATED............ $ 176,124 $ 198,214 $ 560,638 $ 605,994
============= ============ ============ ============
<FN>
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
PUBLIC SERVICE ELECTRIC AND GAS COMPANY
CONSOLIDATED BALANCE SHEETS
(Thousands of Dollars)
<CAPTION>
March 31, March 31, December 31,
ASSETS 1996 1995 1995
- ------ ------------ ------------ -------------
<S> <C> <C> <C>
UTILITY PLANT - Original cost
Electric ........................................... $ 13,189,429 $ 12,470,514 $ 13,095,103
Gas ................................................ 2,458,045 2,344,557 2,442,572
Common ............................................. 511,760 515,113 517,104
------------ ------------ ------------
Total ............................................. 16,159,234 15,330,184 16,054,779
Less: accumulated depreciation and amortization...... 5,559,788 5,229,300 5,440,414
------------ ------------ ------------
Net ............................................... 10,599,446 10,100,884 10,614,365
Nuclear Fuel in Service, net of accumulated
amortization - $255,283; $305,655; and
$297,435, respectively ............................. 171,218 201,637 180,018
------------ ------------ ------------
Net Utility Plant in Service ...................... 10,770,664 10,302,521 10,794,383
Construction Work in Progress, including Nuclear Fuel
in Process - $108,015; $53,396; and $104,743,
respectively ....................................... 352,452 753,774 369,082
Plant Held for Future Use ............................ 23,966 23,861 23,966
------------ ------------ ------------
Net Utility Plant ............................. 11,147,082 11,080,156 11,187,431
------------ ------------ ------------
INVESTMENTS AND OTHER NONCURRENT ASSETS
Long-Term Investments, net of amortization - $7,320;
$3,024; and $6,009, respectively ................... 135,550 76,812 119,474
Nuclear Decommissioning and Other Special Funds ...... 286,795 242,330 276,348
Other Plant, net of accumulated depreciation and
amortization - $1,936; $1,149; and
$1,905, respectively................................ 24,990 32,886 24,976
------------ ------------ ------------
Total Investments and Other Noncurrent Assets......... 447,335 352,028 420,798
------------ ------------ ------------
CURRENT ASSETS
Cash and Cash Equivalents .......................... 508,173 82,990 32,373
Accounts Receivable:
Customer Accounts Receivable ...................... 623,926 490,106 525,404
Other Accounts Receivable ......................... 189,677 112,327 163,976
Less: allowance for doubtful accounts.............. 38,123 39,734 37,641
Unbilled Revenues .................................. 177,175 152,744 246,876
Fuel, at average cost .............................. 88,022 167,020 253,360
Materials and supplies, net of inventory valuation
reserves - $18,200; $18,200; and $20,100,
respectively ...................................... 146,772 149,193 143,741
Deferred Income Taxes .............................. 29,734 25,135 27,571
Miscellaneous Current Assets ....................... 25,124 19,706 37,130
------------ ------------ ------------
Total Current Assets .......................... 1,750,480 1,159,487 1,392,790
------------ ------------ ------------
DEFERRED DEBITS
Property Abandonments - net ........................ 65,439 83,817 70,120
Oil and Gas Property Write-Down .................... 34,790 39,944 36,078
Unamortized Debt Expense ........................... 147,165 128,905 122,049
Deferred OPEB Costs ................................ 250,544 192,727 167,189
Underrecovered Electric Energy and Gas Costs - net.. 207,843 171,238 170,565
Unrecovered Environmental Costs .................... 127,368 136,151 130,070
Unrecovered Plant and Regulatory Study Costs ....... 34,856 35,661 35,150
Deferred Decontamination and Decommissioning Costs.. 49,872 53,016 49,872
Unrecovered SFAS 109 Deferred Income Taxes ......... 766,908 794,665 769,136
Other .............................................. 27,867 25,564 5,700
------------ ------------ ------------
Total Deferred Debits ......................... 1,712,652 1,661,688 1,555,929
------------ ------------ ------------
Total .......................................... $ 15,057,549 $ 14,253,359 $ 14,556,948
============ ============ ============
<FN>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
PUBLIC SERVICE ELECTRIC AND GAS COMPANY
CONSOLIDATED BALANCE SHEETS
(Thousands of Dollars)
<CAPTION>
March 31, March 31, 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 ................................. 1,418,653 1,360,215 1,372,729
------------ ------------ ------------
Total Common Equity ............................ 4,576,051 4,457,613 4,530,127
Preferred Stock without mandatory redemption .......... 324,994 384,994 324,994
Preferred Stock with mandatory redemption ............. 150,000 150,000 150,000
Monthly Income Preferred Securities of Subsidiary ..... 210,000 150,000 210,000
Long-Term Debt ........................................ 4,523,614 4,587,740 4,586,268
------------ ------------ ------------
Total Capitalization ........................... 9,784,659 9,730,347 9,801,389
------------ ------------ ------------
OTHER LONG-TERM LIABILITIES
Decontamination, Decommissioning and Low Level
Radwaste Costs ................................... 49,890 57,664 50,449
Environmental Costs ................................. 96,302 108,576 96,272
Capital Lease Obligations ........................... 52,934 53,612 53,111
------------ ------------ ------------
Total Other Long-Term Liabilities .............. 199,126 219,852 199,832
------------ ------------ ------------
CURRENT LIABILITIES
Long-Term Debt due within one year .................. 2,000 210,200 --
Commercial Paper and Loans .......................... 736,281 94,200 567,316
Book Overdrafts ..................................... 63,372 51,913 70,014
Accounts Payable .................................... 435,457 287,958 481,632
Accounts Payable - Associated Companies ............. 70,613 81,783 8,011
New Jersey Gross Receipts Taxes Accrued ............. 188,937 175,261 --
Other Taxes Accrued ................................. 35,634 39,291 32,767
Interest Accrued .................................... 86,948 96,179 95,811
Estimated Liability for Vacation Pay ................ 40,589 40,621 17,089
Customer Deposits ................................... 32,300 32,457 32,785
Liability for Injuries and Damages .................. 44,338 31,784 38,141
Miscellaneous Environmental Liabilities ............. 17,694 15,305 16,954
Other ............................................... 62,543 48,132 50,751
------------ ------------ ------------
Total Current Liabilities ...................... 1,816,706 1,205,084 1,411,271
------------ ------------ ------------
DEFERRED CREDITS
Accumulated Deferred Income Taxes ................... 2,555,817 2,497,959 2,535,603
Accumulated Deferred Investment Tax Credits ......... 365,867 385,010 370,610
Deferred OPEB Costs ................................. 250,544 192,727 167,189
Other ............................................... 84,830 22,380 71,054
------------ ------------ ------------
Total Deferred Credits ......................... 3,257,058 3,098,076 3,144,456
------------ ------------ ------------
COMMITMENTS AND CONTINGENCIES (note 2)
Total ............................................ $ 15,057,549 $ 14,253,359 $ 14,556,948
============ ============ ============
</TABLE>
<PAGE>
<TABLE>
PUBLIC SERVICE ELECTRIC AND GAS COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands of Dollars)
<CAPTION>
Three Months Ended Twelve Months Ended
March 31, March 31,
--------------------------- ---------------------------
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income ............................. $ 183,650 $ 206,896 $ 593,718 $ 644,863
Adjustments to reconcile net income
to net cash flows from operating
activities:
Depreciation and Amortization ........ 152,508 143,593 600,029 559,960
Amortization of Nuclear Fuel ......... 8,905 23,120 60,813 94,719
(Deferral) Recovery of Electric
Energy and Gas Costs - net ......... (37,278) 1,325 (36,605) (51,034)
Provision for Deferred Income
Taxes - net ........................ 22,442 16,148 85,615 87,838
Investment Tax Credits - net ......... (4,743) (4,711) (19,143) (19,317)
Allowance for Funds Used During
Construction - Debt and Equity ..... (4,291) (10,101) (30,457) (41,064)
Changes in certain current assets
and liabilities:
Net decrease (increase) in Accounts
Receivable and Unbilled Revenues . (54,040) 33,589 (237,212) 114,235
Net decrease (increase) in Inventory -
Fuel and Materials and Supplies... 162,307 99,477 81,419 (34,873)
Net increase (decrease) in
Accounts Payable ................. 16,427 (16,941) 136,329 (73,877)
Net change in Prepaid/Accrued
Taxes ............................ 199,612 178,522 10,019 (276,606)
Net change in Other Current Assets
and Liabilities .................. 34,916 22,899 9,917 27,538
Other ................................ 3,386 (9,720) 70,264 9,762
------------ ----------- ----------- ------------
Net cash provided by operating
activities ....................... 683,801 684,096 1,324,706 1,042,144
------------ ----------- ----------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to Utility Plant,
excluding AFDC ....................... (96,349) (128,027) (618,205) (809,519)
Net (increase) decrease in
Long-Term Investments ................ (18,770) (10,926) (73,033) 50,226
Increase in Decommissioning Funds
and Other Special Funds,
excluding interest ................... (7,391) (7,390) (29,618) (36,976)
Cost of Plant Removal - net ............ (11,101) (2,103) (38,672) (28,357)
Other .................................. (14) (7) 852 2,186
------------ ----------- ----------- ------------
Net cash used in investing
activities ....................... (133,625) (148,453) (758,676) (822,440)
------------ ----------- ----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in
Short-Term Debt ...................... 168,965 (307,559) 642,081 (7,761)
(Decrease) increase in Book
Overdrafts ........................... (6,642) (34,663) 11,459 13,286
Issuance of Long-Term Debt ............. 352,451 -- 508,771 449,800
Redemption of Long-Term Debt............ (413,105) -- (781,097) (411,150)
Long-Term Debt Issuance and
Redemption Costs ..................... (38,319) -- (46,781) (29,731)
<PAGE>
Redemption of Preferred Stock .......... -- -- (60,000) (75,000)
Issuance of Monthly Income
Preferred Securities ................. -- -- 60,000 150,000
Contributed Capital..................... -- -- 60,000 --
Cash Dividends Paid .................... (137,726) (138,882) (534,806) (545,669)
Other .................................. -- 953 (474) (842)
------------ ----------- ----------- ------------
Net cash used in financing
activities ..................... (74,376) (480,151) (140,847) (457,067)
------------ ----------- ----------- ------------
Net increase (decrease) in Cash and
Cash Equivalents ....................... 475,800 55,492 425,183 (237,363)
Cash and Cash Equivalents at Beginning
of Period .............................. 32,373 27,498 82,990 320,353
------------ ----------- ----------- ------------
Cash and Cash Equivalents at End
of Period .............................. $ 508,173 82,990 $ 508,173 $ 82,990
============ =========== =========== ============
Income Taxes Paid ........................ $ 9,049 $ 27,005 $ 261,917 $ 235,615
Interest Paid ............................ $ 101,605 $ 85,972 $ 415,142 $ 350,566
<FN>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
PUBLIC SERVICE ELECTRIC AND GAS COMPANY
CONSOLIDATED STATEMENT OF RETAINED EARNINGS
(Thousands of Dollars)
<CAPTION>
Three Months Ended Twelve Months Ended
March 31, March 31,
--------------------------- ---------------------------
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Balance at Beginning of Period ........... $ 1,372,729 $ 1,292,201 $ 1,360,215 $ 1,261,863
Add: Net Income ......................... 183,650 206,896 593,718 644,863
------------ ------------ ------------ ------------
Total ............................... 1,556,379 1,499,097 1,953,933 1,906,726
------------ ------------ ------------ ------------
Deduct: Cash Dividends
Preferred Stock, at required rates ..... 7,526 8,682 32,606 38,869
Common Stock ........................... 130,200 130,200 502,200 506,800
Adjustment to Retained Earnings......... -- -- 474 842
------------ ------------ ------------ ------------
Total Deductions .................... 137,726 138,882 535,280 546,511
------------ ------------ ------------ ------------
Balance at End of Period ................. $ 1,418,653 $ 1,360,215 $ 1,418,653 $ 1,360,215
============ ============ ============ ============
<FN>
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. 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) for major changes in utility regulation that include an
immediate $50 million rate reduction for PSE&G's electric customers,
various types of rate freezes, elimination of fuel adjustment
mechanisms, 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.
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 develop 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 orally approved intervenor status and
participatory status for twenty-two entities in the proceeding in which
it will consider the proposed Plan. A BPU determination on the process
and procedures to be used to decide the case is being awaited. PSE&G
cannot predict what other actions, if any, may be taken by the BPU with
respect to the Plan or when final action on the proposal 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 BPU's order:
1. declared PSE&G's rates related to Salem Unit 1 interim as of March
14, 1996, and subject to refund, pending further hearings referred
to below;
2. required PSE&G to file briefs with regard to 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 and
supported PSE&G's position that Unit 2's rates should not be
declared interim and subject to refund;
<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,
PSE&G must provide updates of monthly actual replacement power
data for each respective 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 with the BPU the requested
financial information related to actual net plant investment
included in the last base rate case for each Salem unit, operation
and maintenance expenses in current electric base rates for each
Salem unit and replacement power costs associated with the outage
of the Salem units to date. The filing supported a base revenue
requirement of $205 million as well as replacement power costs and
additional on-going costs of $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
costs which would continue 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.
In April and early May, the Board held evidentiary hearings for
purposes of permitting the cross-examination of witnesses pertaining
solely to the issue of whether rates related to Salem Unit 2 should be
interim and subject to refund. During the hearings, PSE&G's witnesses
testified as to the scheduled return date of Salem Unit 2 and stated
that the Nuclear Regulatory Commission (NRC) has concluded that the
overall restart plan, if implemented effectively, should adequately
address the numerous Salem issues to support a safe plant restart.
PSE&G's witnesses also stated that the remaining work activities to
achieve a Salem Unit 2 restart are known and understood by PSE&G
management, do not present any novel engineering issues and that such
restart is achievable using standard outage processes and management
techniques. An expedited briefing schedule, with briefs due in late May
and reply briefs due in early June, has been established. PSE&G cannot
predict the outcome of these hearings.
The issue of whether or not Salem Unit 1, and possibly Salem Unit
2, are no longer used and useful will be addressed in a separate hearing
before the BPU or the Office of Administrative Law (OAL). The date for
such hearing has yet to be determined. Neither Enterprise nor PSE&G
can predict the outcome of this proceeding. 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 will oppose the issuance of any order to remove either Salem unit
from base rates and believes that in the event of a unit's removal from
base rates, all of the replacement power costs attributable to such unit
would be recoverable through its Electric Levelized Energy Adjustment
Clause (LEAC) and that the estimated $12 million Nuclear Performance
Standard (NPS) penalty for 1996 would be substantially reduced. (see
Note 2, Commitments and Contingent Liabilities of Notes).
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Levelized Gas Adjustment Charge
On April 24, 1996, the BPU orally approved PSE&G's 1995/96
Levelized Gas Adjustment Charge (LGAC), which would finalize the interim
rates approved by the BPU on December 20, 1995. The approved LGAC rates
are to remain in effect through December 31, 1996.
Electric Levelized Energy Adjustment Clause
By Order dated May 5, 1995, the BPU approved PSE&G's LEAC. Such
Order also required that a hearing be convened regarding the April 1994
Salem 1 shutdown to determine whether PSE&G should be allowed to recover
replacement power costs of approximately $8 million, which have been
deferred. On October 18, 1995, this matter was ordered to be
transferred to the OAL for a hearing which is scheduled for June 7,
1996. PSE&G cannot predict the outcome of this proceeding.
Other Rate Matters
On July 21, 1995, the BPU initiated a generic proceeding to
expeditiously adopt specific standards to guide utility "off-tariff"
negotiated rate agreement programs. 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. 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 are currently in progress.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 or net cash flows of Enterprise and PSE&G
prospectively.
NOTE 2. COMMITMENTS AND CONTINGENT LIABILITIES
Nuclear Performance Standard
The BPU has established a NPS for nuclear generating stations owned
by New Jersey electric utilities, including the five nuclear units in
which PSE&G has an ownership interest: Salem Units 1 and 2 -- 42.59%;
Hope Creek -- 95%; and Peach Bottom Units 2 and 3 -- 42.49%. PSE&G
operates Salem Units 1 and 2 and Hope Creek, while Peach Bottom is
operated by PECO Energy, Inc. (PECO).
The penalty/reward under the NPS is a percentage of replacement
power costs. (See table below.)
<TABLE>
<CAPTION>
CAPACITY FACTOR RANGE REWARD PENALTY
- -------------------------------------------------- ------ -------
<S> <C> <C>
Equal to or greater than 75%......................... 30% --
Equal to or greater than 65% and less than 75%....... None None
Equal to or greater than 55% and less than 65%....... -- 30%
Equal to or greater than 45% and less than 55%....... -- 40%
Equal to or greater than 40% and less than 45%....... -- 50%
Below 40%............................................ BPU Intervenes
</TABLE>
Under the NPS, the capacity factor is calculated annually using
maximum dependable capability of the five nuclear units in which PSE&G
owns an interest. This method takes into account actual operating
conditions of the units.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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. (See Note 1 - Rate Matters of Notes).
Based upon current projections and assumptions regarding PSE&G's
five nuclear units during 1996, including the return of Salem 2 by the
end of August and the continued outage of Salem 1 for the remainder of
the year, the 1996 aggregate capacity factor would be approximately 57%,
which would result in a penalty of approximately $12 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 NRC
concurrence that they are prepared to restart.
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>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(A) Retrospective premium program under the Price-Anderson liability
provisions of the Atomic Energy Act of 1954, as amended (Price-
Anderson). Subject to retrospective assessment with respect to
loss from an incident at any licensed nuclear reactor in the
United States. Assessment adjusted for inflation effective August
20, 1993.
(B) Limit of liability for each nuclear incident under Price-
Anderson.
(C) Industry aggregate limit representing the potential liability from
workers claiming exposure to the hazard of nuclear radiation. This
policy includes automatic reinstatements up to an aggregate of
$200 million, thereby providing total coverage of $400 million.
This policy does not increase PSE&G's obligation under Price-
Anderson.
(D) 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 of this limit for each plant.
Price-Anderson sets the "limit of liability" for claims that could
arise from an incident involving any licensed nuclear facility in the
nation. The "limit of liability" is based on the number of licensed
nuclear reactors and is adjusted at least every five years based on the
Consumer Price Index. The current "limit of liability" is $8.9 billion.
All utilities owning a nuclear reactor, including PSE&G, have provided
for this exposure through a combination of private insurance and
mandatory participation in a financial protection pool as established
by Price-Anderson. Under Price-Anderson, each party with an ownership
interest in a nuclear reactor can be assessed its share of $79.3 million
per reactor per incident, payable at $10 million per reactor per
incident per year. If the damages exceed the "limit of liability," the
President is to submit to Congress a plan for providing additional
compensation to the injured parties. Congress could impose further
revenue raising measures on the nuclear industry to pay claims. PSE&G's
maximum aggregate assessment per incident is $210.2 million (based on
PSE&G's ownership interests in Hope Creek, Peach Bottom and Salem) and
its maximum aggregate annual assessment per incident is $26.5 million.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 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.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Based on PSE&G's construction program, construction expenditures
are expected to aggregate approximately $2.8 billion, which includes
$428 million for nuclear fuel and $84 million of Allowance for Funds
used During Construction (AFDC) during the years 1996 through 2000. The
estimate of construction requirements is based on expected project
completion dates and includes anticipated escalation due to inflation
of approximately 3%, annually. Therefore, construction delays or higher
inflation levels could cause significant increases in these amounts.
PSE&G expects to generate internally the funds necessary to satisfy its
construction expenditures over the next five years, assuming adequate
and timely recovery of costs, as to which no assurances can be given.
In addition, PSE&G does not presently anticipate any difficulties in
obtaining sufficient sources of fuel for electric generation or adequate
gas supplies during the years 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.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
PSE&G Manufactured Gas Plant Remediation Program
In 1988, NJDEP notified PSE&G that it had identified the need for
PSE&G, pursuant to a formal arrangement, to systematically investigate
and, if necessary, resolve environmental concerns extant at PSE&G's
former manufactured gas plant sites. To date, NJDEP and PSE&G have
identified 38 former gas plant sites. PSE&G is currently working with
NJDEP under a program to assess, investigate and, if necessary,
remediate environmental concerns at these sites (Remediation Program).
The Remediation Program is periodically reviewed and revised by PSE&G
based on regulatory requirements, experience with the Remediation
Program and available technologies. The 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.
NOTE 3. LONG-TERM DEBT
Enterprise's long-term debt aggregated $5.1 billion as of March 31,
1996, of which $4.5 billion was attributable to PSE&G and $600 million
to Enterprise Diversified Holdings Incorporated (EDHI), the parent of
Enterprise's nonutility businesses.
On January 30, 1996, PSE&G issued the following series of its First
and Refunding Mortgage Bonds (Bonds): $200 million principal amount of
its 6-3/4% Series VV due 2016 and $150 million principal amount of its
6-1/4% WW due 2007. PSE&G applied the net proceeds from the sale of new
Bonds, together with other funds, to defease in substance: $196.0
million aggregate principal amount of its 8-3/4% Series EE Bonds due
2021 and $148.5 million aggregate principal amount of its 8-3/4% Series
HH Bonds due 2022. In addition, PSE&G retired $65 million of its 8-1/2%
Series LL Bonds due 2022 and exercised a $2.5 million optional cash
sinking fund.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 4. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
Natural Gas and Crude Oil Hedging
Energy Development Corporation (EDC) sold natural gas futures
contracts outstanding at March 31, 1996 and 1995 which hedged 12,630,000
mmbtu and 9,020,000 mmbtu, respectively. Such amounts represented
approximately 18% of EDC's anticipated domestic natural gas production
for the remainder of 1996 and 17% of EDC's production for 1995,
respectively, at average sales prices of $1.83 per mmbtu and $1.95 per
mmbtu, respectively.
At March 31, 1996, EDC sold crude oil futures contracts outstanding
which hedged 1.1 million barrels of oil representing approximately 39%
of EDC's anticipated domestic oil production in 1996 at an average price
of $17.81 per barrel.
The deferred unrealized (losses) gains at March 31, 1996 and 1995
related to EDC's futures contracts were ($7.0) million and $1.7 million,
respectively.
Through March 31, 1996 and 1995, U.S. Energy Partners (USEP)
entered into futures contracts and swaps to buy 2,440,000 mmbtu and
3,140,000 mmbtu of natural gas at average prices of $1.81 and $1.79 per
mmbtu, respectively, related to fixed-price sales commitments. Such
contracts, together with physical purchase contracts, hedged
approximately 86% and 84% of fixed-price sales commitments at March 31,
1996 and 1995. USEP had deferred unrealized hedge gains of $2.1 million
and $15 thousand at March 31, 1996 and 1995, respectively.
<PAGE>
PUBLIC SERVICE ELECTRIC AND GAS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PSE&G
Except as modified below, the Notes to Consolidated Financial
Statements of Enterprise are incorporated herein by reference insofar
as they relate to PSE&G and its subsidiaries:
Note 1. Rate Matters
Note 2. Commitments and Contingencies
Note 3. Long-Term Debt
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
ENTERPRISE
Following are the significant changes in or additions to
information reported in Enterprise's Annual Report to the Securities
and Exchange Commission (SEC) on Form 10-K for 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.
Overview
As of March 31, 1996, PSE&G comprised 85% of Enterprise's assets.
For the three months and twelve months ended March 31, 1996, PSE&G
revenues were 95% and 92%, respectively, of Enterprise's revenues and
PSE&G's earnings available to Enterprise for such periods were 91% and
87%, respectively, of Enterprise's net income.
On December 6, 1995, Enterprise announced that it will pursue the
divestiture of Energy Development Corporation (EDC) during 1996 through
either a sale or spin-off. On March 13, 1996, Enterprise filed a Form
S-1 Registration Statement with the SEC, which has not yet become
effective, to position Enterprise to undertake an initial public
offering of up to 20 percent of EDC and subsequently spin-off the
remainder of EDC in a tax-free transaction to Enterprise shareholders.
Enterprise continues to solicit offers from the private marketplace with
the intention of further evaluating its alternatives. No determination
has yet been made as to which path will be undertaken and a decision is
anticipated over the next few months.
Competition
The regulatory structure which has historically embraced the
electric and gas industry is in the process of transition. Legislative
and regulatory initiatives, at both the federal and state levels, are
designed to promote competition and will continue to impose additional
pressures on PSE&G's ability to retain customers. In addition, new
technology and interest in self generation and cogeneration have
provided customers with alternative sources of energy.
<PAGE>
Over the last several years, the gas industry has been transformed.
Today, commercial and industrial customers can negotiate their own gas
purchases directly with producers or brokers, while PSE&G is required
to provide intrastate transportation of such purchased gas to the
customers' facilities. Although PSE&G is not providing gas sales
service to certain commercial and industrial customers, to date there
has been no negative impact on earnings since sales service and
transportation service tariffs result in the same non-fuel revenue per
therm. Additionally, as a result of this restructuring, PSE&G has been
able to negotiate lower cost gas supplies for those customers who
continue to be part of its bundled rate schedules. A potential
significant competitive challenge could emerge if interstate pipeline
companies are permitted to expand their facilities into PSE&G territory
and provide intrastate transportation to customers. However, this type
of expansion would require federal and state regulatory approvals not
currently in existence.
The restructuring of the electric industry is more complex and
evolving at a slower pace than that of the gas industry. Federal
legislation, such as the National Energy Policy Act of 1992 (EPAct) has
eased restrictions on independent power producers (IPP) in an effort to
increase competition in the wholesale electric generation market. As the
barriers to entry in the power production business have been lowered,
the construction of cogeneration facilities and independent power
production facilities has been growing, with the result of creating
lower cost alternatives for large commercial and industrial customers.
Presently, PSE&G is in the process of assessing the potential for
individual arrangements with commercial and industrial customers which
have such competitive alternatives, but PSE&G believes that it does not
currently have a material exposure with respect to such customers.
Further, EPAct authorized the Federal Energy Regulatory Commission
(FERC) to mandate utilities to transport and deliver or "wheel" energy
for the supply of bulk power to wholesale customers. On April 24, 1996,
the FERC issued final rules, to become effective on July 9, 1996,
requiring all public utilities owning, controlling or operating
transmission lines to file non-discriminatory open access tariffs that
offer others the same transmission service they provide to themselves.
Transmission services covered by the final rule include network and
point-to-point services, as well as ancillary services. The final rules
include a pro forma tariff setting minimum terms and conditions of
service for non-discriminatory open access transmission service. Public
utilities are required both to offer service to others under the pro
forma tariff and to use the pro forma tariff for their own wholesale
energy sales and purchases. No later than December 31, 1996, intra-pool
transactions for power pools must be under a joint, pool-wide pro forma
tariff. The final rules also provide public utilities with the
opportunity to seek full recovery of prudently incurred, legitimate and
verifiable wholesale stranded costs resulting from customer use of open
access transmission service to move to another supplier. To be eligible
<PAGE>
for recovery, stranded costs must be associated with wholesale
requirement contracts signed before July 11, 1994. After that date,
recovery must be specifically provided for in the contract. The FERC
ruled that stranded costs should be recovered from a utility's departing
customers. The FERC also stated that if costs are stranded by retail
wheeling, utilities should look to the states first to recover those
costs. FERC will become involved only if state regulators lack
authority under state law provide for stranded cost recovery. (See the
discussion of Phase II of the New Jersey Energy Master Plan, below).
There is opposition in Congress and among Northeastern governors
to this FERC ruling due to environmental concerns. The assumption is
that as deregulation occurs there will be a race to purchase the
cheapest power available. That power will likely come from older, coal-
burning generating facilities in the Midwest that are subject to very
few pollution control requirements. To sell more of their cheap
electricity, these facilities will have to increase their power
production which 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 and the jet stream. A New Jersey
Congressman is currently gathering co-sponsors to a resolution to block
the implementation of this rule and send it back to FERC to be rewritten
in a way that will protect air quality in the Northeast.
In the wholesale electric market, other competitive pressures, such
as municipalization, may also have an impact on utilities in the
evolving electric power industry. Municipalization involves the
acquisition and operation of existing investor-owned facilities by a
municipal utility (MUNI) through condemnation, purchase or lease or the
construction and operation of duplicate, parallel facilities within a
municipal boundary. As a result, utilities, such as PSE&G, could lose
customers (residential, commercial and industrial) in the municipality
that is served by the MUNI, as well as lose the municipal entity itself
as a customer.
EPAct granted the states sole authority to mandate retail wheeling.
The BPU has not yet authorized retail wheeling for the State of New
Jersey. New Jersey regulators have been reviewing existing regulations
in an effort to develop a revised regulatory structure that would afford
public utilities, such as PSE&G, increased flexibility to meet the
competitive challenges of the future. Phase I of the New Jersey Energy
Master Plan (Phase I), a two-phase plan to better manage the future
energy needs of the State, has been completed. Phase I called for
legislation that would allow New Jersey utilities to propose, subject
to BPU approval, alternatives to rate base/rate of return pricing, allow
for pricing flexibility under certain standards for customers with
competitive options and equalize the impact of tax policies, such as the
New Jersey Gross Receipts and Franchise Tax (NJGRT) currently assessed
on retail energy utility sales, upon all energy producers.
<PAGE>
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. The Phase II draft report for the
New Jersey Energy Master Plan proposing policy restructuring is expected
by the end of May 1996 with a final report expected to be issued by the
end of 1996. This report is expected to address the recovery of any
stranded costs attributable to power wheeling.
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, purchase 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 gross receipts and
franchise tax on electric and gas utilities with a combination of New
Jersey's existing corporate business tax, New Jersey's existing state
sales and use tax and a transitional tax which will be phased out over
a 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.
Increased competition and the shift of risks and opportunities
between rate payers and PSE&G resulting from PSE&G's filing of its
proposed Alternative Rate Plan (See Note 1, Rate Matters of Notes) will
increase the emphasis upon electric operational reliability, efficiency
and cost. While the incremental cost of nuclear production is less
expensive than PSE&G's other sources of generation, comparatively high
embedded costs for nuclear plants increase the need for PSE&G to
optimize the utilization of its nuclear generating capacity in order to
make its actual generation output cost competitive.
<PAGE>
Nuclear Operations
Both of the Salem units are currently out of service and their
return dates are subject to completion of testing, analysis, repair
activity and NRC concurrence that they are prepared to restart. Restart
of Salem 1 will be delayed as a result of the ongoing steam generator
inspection and analysis. PSE&G is currently considering three repair
and replacement options for the steam generators in Salem 1. The first
option, repairing of degraded tubes by sleeving, has an estimated cost
of $19 to $38 million (PSE&G's share would be $8 to $16 million) and
would permit Salem 1 to operate for up to one cycle. This option would,
however, require further repair expenditures to permit the unit to
continue to operate after this 18 month period. The second option,
replacing the steam generators with unused steam generators from a
utility that had previously canceled a new plant, has an estimated cost
of $150 to $170 million (PSE&G's share would be $64 to $72 million) and
would permit the plant to operate for the remainder of its license term.
The third option would combine the first option's repair with
replacement by a newly constructed steam generator at the end of three
years and would cost of $169 to $208 million (PSE&G's share would be $72
to $88 million). This option could involve additional inspections,
repairs and/or mid-cycle outage costs. Implementation of one or more
of these options may enable Salem 1 to return to service by mid-1997.
Evaluations of the repair/replacement options and decisions by the Salem
co-owners on the preferred course of action are expected to be completed
by the end of the second quarter of 1996. Completion of the
repair/replacement option selected is not expected to materially
increase PSE&G's current construction program (See Construction and Fuel
Supplies). Salem 2, which is also undergoing steam generator inspection
and analysis is scheduled to return to service by the end of August
1996. The inability to successfully return these units to continuous,
safe operation could have a material effect on the financial position,
results of operation and net cash flows of Enterprise and PSE&G.
Results of Operations
Earnings per share of Enterprise Common Stock were $0.79 for the
three months ended March 31, 1996, a decrease of $.08 per share of
Common Stock from the comparable 1995 period.
Earnings per share of Enterprise Common Stock were $2.63 for the
twelve-month period ended March 31, 1996, a decrease of $.07 per share
of Common Stock from the comparable 1995 period.
The decrease in first quarter and twelve-month earnings was
primarily due to higher maintenance expenses associated with the
shutdown of Salem Nuclear Generating Station, the scheduled refueling
outage of the Hope Creek Nuclear Generating Station, increased
depreciation expense due to more plant in service and a decrease in the
Allowance for Funds Used During Construction due to a decrease in
construction work in progress.
<PAGE>
These negative variances were partially offset by increased off-system
gas sales and increased residential sales during this winter season.
PSE&G - Earnings Available to Enterprise
Increase or (Decrease)
----------------------------------
Three Months Twelve Months
Ended March 31, Ended March 31,
1996 vs. 1995 1996 vs. 1995
---------------- ---------------
Per Per
Amount Share Amount Share
------ ------ ------ ------
(Millions, except Per Share Data)
PSE&G
Revenues (net of fuel costs and gross
receipts taxes).............................. $ 43 $ .18 $ 99 $ .40
Other operation expenses....................... (23) (.09) (7) (.03)
Maintenance expenses........................... (31) (.13) (48) (.20)
Depreciation and amortization expenses......... (9) (.04) (40) (.16)
Federal income taxes........................... 8 .03 (30) (.12)
Interest charges............................... (2) (.01) (5) (.02)
Allowance for Funds used During Construction
(AFDC)......................................... (6) (.02) (11) (.04)
Preferred Securities Dividend Requirements..... -- -- (5) (.02)
Other income and expenses...................... (2) (.01) 2 .01
----- ----- ----- -----
Earnings Available to Enterprise............... $ (22) $(.09) $(45) $ (.18)
===== ===== ===== =====
<PAGE>
PSE&G - Revenues
Electric
Revenues increased $13 million, or 1%, and $239 million, or 6% for
the three and twelve-month periods ended March 31, 1996 over the
comparable periods of 1995 primarily due to a higher recovery of energy
costs, increased residential and commercial sales due to colder weather
during the current heating season and the continued moderate growth in
the economy during the last few years. The significant components of
these changes follow:
Increase or (Decrease)
-----------------------------------
Three Months Twelve Months
Ended March 31, Ended March 31,
1996 vs. 1995 1996 vs. 1995
----------------
- ---------------
(Millions)
Kilowatt hour sales............................ $ 4 $ 30
Recovery of energy costs....................... 8 156
NJGRT.......................................... 4 16
Other operating revenues....................... (3) 37
----- -----
Total Electric Revenues........................ $ 13 $ 239
===== =====
Gas
Revenues increased $162 million, or 26%, and $237 million, or 15%
for the three and twelve-month periods ended March 31, 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
current heating season and increased cogeneration sales. Other operating
revenues increased due to an increase in off-system sales. Off-system
sales are sales of excess gas to brokers and other utilities which are
not part of PSE&G's firm customer base. The significant components of
these changes follow:
Increase or (Decrease)
-----------------------------------
Three Months Twelve Months
Ended March 31, Ended March 31,
1996 vs. 1995 1996 vs. 1995
----------------
- ---------------
(Millions)
Therm sales............................... $ 29 $ (9)
Recovery of fuel costs.................... 120 163
NJGRT..................................... 8 42
Other operating revenues.................. 5 41
----- -----
Total Gas Revenues............ $ 162 $ 237
===== =====
<PAGE>
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 (See Note 1 -
Rate Matters of Notes). However, if the proposed Alternative Rate Plan
is adopted as filed, future changes in electric fuel and replacement
power costs could impact earnings.
Other Operation Expenses
During the first quarter of 1996, other operation expenses
increased $23 million or 10% from the comparable 1995 period due to
increased costs associated with the Hope Creek refueling outage,
increased labor costs for electric distribution related to emergency
work, increased labor expenses for the gas business as a result of
colder weather conditions and higher uncollectibles and conservation
costs.
For the twelve months ended March 31, 1996, other operation
expenses increased $7 million or 1% from the comparable 1995 period due
to restart and outage costs at Salem, higher conservation costs for both
the electric and gas business and higher administrative and general
expenses for the Peach Bottom Station.
Maintenance Expenses
Maintenance expenses increased $31 million and $48 million for the
three and twelve-month periods ended March 31, 1996 from the same
periods ended March 31, 1995. The three and twelve-month increases are
due to refueling outage expenses and increased labor expenses associated
with the shutdown of the Salem Nuclear Generating Station and the
refueling and maintenance outage of the Hope Creek Nuclear Generating
Station.
Depreciation and Amortization Expenses
Depreciation and amortization expenses increased $9 million and $40
million for the three and twelve-month periods ended March 31, 1996 from
the same periods ended March 31, 1995. The three and twelve-month
increases are primarily due to the placement in service of the repowered
Bergen Generating Station, completed in September 1995, and additions
to plant in service.
<PAGE>
Federal Income Taxes
Federal income taxes decreased $8 million and increased $31 million
for the three and twelve-month periods ended March 31, 1996 from the
same periods ended March 31, 1995. The three month decrease is
primarily due to the decrease in 1996 pre-tax income and the twelve-
month increase is principally due to the receipt of a non-taxable
insurance benefit in 1994.
Interest Charges
Interest charges for the three and twelve-month period ended March
31, 1996 increased $2 million and $5 million compared to the same period
ended March 31, 1995. The three and twelve-month increases are
primarily due to a higher daily balance of short-term debt outstanding
at higher interest rates.
Allowance for Funds Used During Construction
For the first quarter of 1996, there was a $6 million decrease in
AFDC from the first quarter of 1995. This was principally due to a
lower AFDC rate and a decrease in construction work in progress, due
primarily to the completion of the repowering of Bergen Generating
Station and its placement into service in September 1995.
For the twelve months ended March 31, 1996, there was an $11
million decrease in AFDC from the twelve months ended March 31, 1995.
This was principally due to a decrease in construction work in progress,
due primarily to the completion of the repowering of Bergen Generating
Station and its placement into service in September 1995.
Preferred Securities
Dividend requirements on preferred securities increased $5 million
for the twelve month period ended March 31, 1996 over the comparable
twelve month period of 1995. The increase is due to the issuance of
higher rate Monthly Income Preferred Securities used to redeem certain
issues of PSE&G Preferred Stock.
<PAGE>
EDHI - Earnings Available to Enterprise
Increase or (Decrease)
-----------------------------------
Three Months Twelve Months
Ended March 31, Ended March 31,
1996 vs. 1995 1996 vs. 1995
---------------- ---------------
Per Per
Amount Share Amount Share
------ ------ ------ ------
(Millions, except Per Share Data)
[S] [C] [C] [C] [C]
PSRC..................... (2) (.01) (7) (.03)
CEA...................... (2) (.01) (4) (.02)
EDC...................... 9 .03 40 .16
EGDC..................... (1) -- (1) --
----- ----- ----- -----
Total............ 4 .01 28 .11
===== ===== ===== =====
The net income of EDHI was $18 million for the quarter ended March
31, 1996, a $4 million increase over the comparable 1995 quarter. The
increase is primarily due to Energy Development Corporation (EDC), which
saw its income increase $9 million due to higher oil and gas prices and
volumes. Public Service Resources Corporation 's (PSRC) income
decreased $2 million due to lower income from limited partnerships,
partially offset by an increase in market values of securities.
Community Energy Alternative Incorporated 's (CEA) income decreased $2
million due to higher development expenses.
The net income of EDHI was $83 million for the twelve month period
ended March 31, 1996, an increase of $28 million over the twelve month
period ended March 31, 1995. This is primarily due to EDC, which saw
its income increase $40 million, of which $23 million was due to the
realization of a settlement related to a take-or-pay sales contract.
The remaining increase was due to higher gas prices and higher oil
prices and volumes.
<PAGE>
Dividends
Dividends paid to holders of PSE&G's Preferred Stock during the
three and twelve month periods ended March 31, 1996 decreased $1.2
million and $6.3 million, respectively, over the comparable 1995
periods. The three and twelve-month decreases are due to the redemption
of certain series of preferred stock. (See Liquidity and Capital
Resources.)
Dividends payable to holders of Monthly Income Preferred Securities
of Public Service Electric and Gas Capital, L.P. (Partnership), a
limited partnership of which PSE&G is the general partner, increased
$1.2 million and $11.7 million during the three and twelve month periods
ended March 31, 1996 over the comparable 1995 periods. The three and
twelve-month increases are due to the issuance of additional securities.
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 2, Commitments and Contingent Liabilities of the Notes.)
<PAGE>
PSE&G
For the three-month period ended March 31, 1996, PSE&G had utility
plant additions, including AFDC, of $101 million, a decrease of $37
million from the corresponding period in 1995. For the twelve-month
period ended March 31, 1996, PSE&G had utility plant additions,
including AFDC, of $649 million, a decrease of $202 million from the
corresponding period in 1995. Construction expenditures were related
to improvements in PSE&G's existing power plants, transmission and
distribution system, gas system and common facilities. PSE&G also
expended, for the cost of plant removal (net of salvage), $11 million
and $39 million for the three-month and twelve-month periods ended March
31, 1996, respectively, compared to $2 million and $28 million for the
corresponding periods in 1995.
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 1 -- Rate Matters and Note 2 --
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. EDC will
continue to pursue a program to grow its reserve base through a
combination of strategic acquisitions, high potential exploration
activities and exploitation of its acquired properties and new
discoveries. For discussion regarding the potential divestiture of EDC,
see Overview.
<PAGE>
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. Over
the next several years, EDHI and its subsidiaries will also be required
to refinance a portion of their maturing debt in order to meet their
capital requirements. In addition, any divestiture of EDC will require
the renegotiation of existing loan agreements of Enterprise Capital
Funding Corporation (Funding). Any inability to extend or replace
maturing debt and or existing agreements at current levels and interest
rates may affect future earnings and result in an increase in EDHI's
cost of capital.
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 March 31, 1996, $58 million remained as
PSRC's unfunded commitment subject to call.
EDHI and each of its subsidiaries are subject to restrictive
business and financial covenants contained in existing debt agreements
and are required to not exceed various debt to equity ratios which vary
from 3:1 to 1.75:1. EDHI is also required to maintain a twelve-months
earnings before interest and taxes to interest (EBIT) coverage ratio of
at least 1.35:1. As of March 31, 1996 and 1995, EDHI had a consolidated
debt to equity ratio of 1.11:1 and 1.13:1, respectively, and for the
twelve months ended March 31, 1996 and 1995, EBIT coverage ratios, as
defined to exclude the effects of EGDC, of 2.60:1 and 1.87:1,
respectively. Compliance with applicable financial covenants will depend
upon future financial position and levels of earnings, as to which no
assurance can be given.
Long-Term Investments and Real Estate
Long-Term investments and real estate increased $7 million for the
three-month period ended March 31, 1996 primarily due to an increase
in Public Service Conservation Resources Corporation 's (PSCRC) long-
term investments. Long-Term investments and real estate increased $6
million for the three-month period ended March 31, 1995 due to PSRC and
EGDC partnership investments, partially offset by CEA capital returns
from partnerships.
Long-Term investments and real estate increased $83 million for the
twelve-month period ended March 31, 1996 primarily due to an increase
in PSCRC's long-term investments. Long-Term investments and real estate
decreased $32 million for the twelve-month period ended March 31, 1995
primarily due to a net decrease in PSE&G's investment in an insurance
contract, partially offset by PSRC and CEA investments in partnerships.
<PAGE>
PSRC, through its Kohlberg, Kravis, Roberts and Co. (KKR) Leveraged
Buy-Out Fund, was the beneficial owner of common stock in First
Interstate Bank, which had a book value of $6.2 million. On April 1,
1996, First Interstate Bank was acquired by Wells Fargo Bank and,
subsequent to that merger, the investment was sold by KKR resulting in
a PSRC after-tax gain of approximately $11.8 million.
PSRC, through its KKR Leveraged Buy-Out Fund, was also the
beneficial owner of common stock in a company which has suffered
earnings disappointments. In April 1996, PSRC recorded an after-tax
valuation allowance of approximately $4.6 million against this
investment.
Continuing its program of prudently exiting the real estate
business, EGDC signed an agreement in April 1996 to sell an office
project located in Valley Forge, Pennsylvania for approximately the book
value ($9.5 million) of the project. The sale is expected to close in
July 1996.
Internal Generation of Cash from Operations
Enterprise's cash from operations is generated primarily from the
operating activities of PSE&G.
Enterprise's cash provided by operations for three months ended
March 31, 1996 in the amount of $700 million was substantially the same
as the corresponding period in 1995. The increase in PSE&G's revenues
(partially offset by the increase in accounts receivable and unbilled
revenues), was substantially offset by an increase in PSE&G's operation
and maintenance expense (mainly gas purchased and the Salem outage and
Hope Creek refueling, respectively). For additional information see
Results of Operations.
Enterprise's cash provided by operations for twelve months ended
March 31, 1996 increased $308 million to $1.494 billion from the
corresponding period in 1995. This increase is primarily due to the
increase in PSE&G's revenues partially offset by an increase in accounts
receivable and unbilled revenues and a decrease in PSE&G's gross
receipts taxes. For additional information see Results of Operations.
<PAGE>
External Financings - PSE&G
The BPU has authorized PSE&G to issue approximately $4.375 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 retired Bonds and, as of March 31,
1996, up to $2.840 billion aggregate amount of new Bonds against
previous additions and improvements to utility plant, provided that the
ratio of earnings to fixed charges is at least 2:1. At March 31, 1996
the ratio was 2.70:1.
In January 1996, PSE&G issued $350 million of 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 April 23, 1996, PSE&G filed a registration statement with the
SEC relating to the sale of up to $350 million of Quarterly Income
Preferred Securities. The proceeds from these securities will be used
for general corporate purposes and to redeem outstanding preferred
stock.
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 its short-
term obligations, consisting of commercial paper and other unsecured
borrowings from banks and other lenders. On March 31, 1996, PSE&G had
$632 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
borrowing up to one year. On March 31, 1996, there were no borrowings
outstanding under these credit agreements. PSE&G expects to be able to
renew the credit agreement expiring in 1996.
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 March 31, 1996, PSCRC had $30
million outstanding under this facility.
In March 1996, PSCRC entered into a secured term loan facility for
loans maturing in three to five years up to $40 million. The agreement
terminates in March 1998. As of March 31, 1996, there was $2 million
outstanding under this facility.
PSE&G Fuel Corporation (Fuelco) has a $150 million commercial paper
program to finance a 42.49% share of Peach Bottom nuclear fuel,
supported by a $150 million revolving credit facility with a group of
banks. The credit facility expires on June 28, 1996, however, an
extension is currently being negotiated. PSE&G has guaranteed repayment
of Fuelco's respective obligations. As of March 31, 1996, Fuelco had
commercial paper of $80 million outstanding under such program.
<PAGE>
External Financings - EDHI
Funding has 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 March 31, 1996, Funding had $186 million
of borrowings outstanding under this commercial paper program.
Additionally, Funding has a $225 million revolving credit facility
expiring in March 1998. As of March 31, 1996, Funding had $100 million
of borrowings outstanding under this facility.
PSEG 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 March 31, 1996, Capital had total debt outstanding of
$461 million, including $355 million of MTNs.
PSE&G
The information required by this item is incorporated herein by
reference to the following portions of Enterprise's Management's
Discussion and Analysis of Financial Condition and Results of
Operations, insofar as they relate to PSE&G and its subsidiaries:
Overview; Competition; Nuclear Operations; Results of Operations;
Dividends; Liquidity and Capital Resources; Long-Term Investments and
Real Estate; Internal Generation of Cash from Operations; and External
Financings.
<PAGE>
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
- ------ -----------------
Certain information reported under Item 1 of Part I of Enterprise's
and PSE&G's Annual Reports to the 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 the Form 10-Q.
As previously reported in a current report on Form 8-K filed on
March 14, 1996, 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. Westinghouse filed an answer and $2.5 million counterclaim
for unpaid work related to services at Salem on April 30, 1996.
As also reported in the March 14th Form 8-K, 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 regarding these matters are presently required to be
filed in late May. 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. PSE&G believes
it has substantial and valid defenses and will vigorously oppose both
of these actions.
As reported in the Form 10-K at page 39 and in the March 14th 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. Enterprise's
answers with respect to these actions are expected to be required to be
filed in June 1996.
In addition, see the following at the pages indicated:
(1) Page 11. Proceedings before the BPU relating to PSE&G's
proposed Alternative Rate Plan, Docket No. E096010028. Form 10-K, Page 73.
<PAGE>
PART II. OTHER INFORMATION - (Continued)
Item 1. Legal Proceedings - (Concluded)
- ------ -------------------------------
(2) Page 13. Proceedings before the BPU relating to PSE&G's LGAC
filed October 2, 1995, Docket No. GR9510456. Form 10-K, Page 75.
(3) Page 13. 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 13. 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 13. Generic proceedings before the BPU relating to
standards for "off tariff" negotiated rate agreement programs, Docket
No. EX95070320. Form 10-K, Page 76.
<PAGE>
Item 4. Submission of Matters to a Vote of Security Holders
- ------ ---------------------------------------------------
Enterprise's Annual Meeting of Stockholders was held on April 16,
1996. Proxies for the meeting were solicited pursuant to Regulation 14A
under the Securities Exchange Act of 1934. There was no solicitation
of proxies in opposition to management's nominees as listed in the proxy
statement and all of management's nominees were elected to the board of
directors. Details of the voting are provided below:
Votes
Votes For Withheld
--------- --------
Proposal 1 - Election of Directors
Class I - Term expiring 1997
Forrest J. Remick.............. 197,707,113 4,533,230
Class II- Term expiring 1999
T. J. Dermot Dunphy............ 197,876,136 4,364,207
Raymond V. Gilmartin........... 197,863,646 4,376,697
Josh S. Weston................. 197,806,930 4,433,413
Votes Votes
Votes For Against Abstaining
--------- --------- ----------
Proposal 2 -
Appointment of Deloitte &
Touche LLP as Independent
Auditors for 1996........ 199,726,538 1,070,013 1,443,792
There were no broker non-votes with respect to either item.
<PAGE>
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
PART II. OTHER INFORMATION - (Continued)
Item 5. Other Information
- ------ -----------------
Certain information reported under Item 1 of Part I of Enterprise's
and PSE&G's Annual Reports to the Securities and Exchange Commission on
Form 10-K for 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.
Credit Ratings
Form 10-K, Page 5, Paragraph 6
------------------------------
As a component of issuing ratings, each rating agency issues its
opinion of the credit trend or outlook for the entity being rated. For
PSE&G, each of the four rating agencies currently evaluate that trend
or outlook as negative.
PSE&G - Nuclear Operations
Form 10-K, Page 10, Paragraph 4
-------------------------------
The scheduled 1996, 1997, and 1998 refueling outages, each
estimated at eight to ten weeks duration, for PSE&G's five licensed
nuclear units are expected to commence in the following months:
<TABLE>
<CAPTION>
REFUELING OUTAGES
--------------------------------------------
1996 1997 1998
------------- ------------- -------------
<S> <C> <C> <C>
Salem 1.......... -- -- --
Salem 2.......... -- -- February
Hope Creek....... -- September --
Peach Bottom 2... September -- September
Peach Bottom 3... -- September --
</TABLE>
<PAGE>
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
PART II. OTHER INFORMATION - (Continued)
Item 5. Other Information - (Continued)
- ------ ------------------------------
Form 10-K, Page 10 thru Page 12
-------------------------------
With respect to Salem 1, the most recent inspection of the steam
generators is not complete, but partial results from eddy current
inspections in February 1996 show indications of degradation in a
significant number of tubes. PSE&G has removed several tubes for
laboratory examination to confirm the results of the inspections. PSE&G
has been evaluating several options which include repair of degraded
tubes by sleeving at locations found to contain crack-like indications,
replacement of the steam generators with existing unused steam
generators from a utility that had previously canceled a new plant, or
repair for an interim period and then replacement of the steam
generators with newly constructed steam generators. These evaluations
are expected to be completed in the second quarter of 1996.
Implementation of one or more of these options may enable the return to
service of Salem unit 1 by mid-1997.
The preliminary results of the Salem 2 inspections confirm that
the condition of the Salem 2 steam generators is well within current
repair limits. PSE&G had also removed several tubes from Salem 2 steam
generators for laboratory analysis to confirm the results of testing.
Repairs to Salem 2 steam generators will be completed in the Second
Quarter of 1996 to support the scheduled return to service by the end
of August 1996.
PSE&G had planned to return Salem 1 to service in the second
quarter of 1996 and Salem 2 in the third quarter of 1996. As a result
of the extent of the previously discovered degradation in the Salem 1
steam generators, PSE&G is focusing its efforts on the return of Salem
2 to service by the end of August 1996. The conduct of the additional
steam generator inspections and testing on Salem 2 is not expected to
affect the timing of its restart. The timing of the restart is subject
to completion of the requirements of the restart plan to the
satisfaction of PSE&G and the NRC, which encompasses a review and
improvement of personnel, process and equipment issues.
<PAGE>
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
PART II. OTHER INFORMATION - (Continued)
Item 5. Other Information - (Continued)
- ------ -------------------------------
Form 10-K, Page 10 thru Page 12 - (Continued)
---------------------------------------------
The restart plan status is as follows:
Two of the five NRC Confirmatory Action Letter
requirements were recognized as complete by the NRC on
February 13, 1996. A third item has been addressed by
PSE&G and approval by the NRC is pending;
Comprehensive action plans concerning people and process
issues are approximately 85% task complete;
A detailed Salem 2 schedule integrating equipment
maintenance, upgrades and testing has been developed and
work is on schedule.
Based on the above, PSE&G is not aware of any constraints which
will prevent Salem 2 from returning to service by the end of August
1996.
Based upon current projections and assumptions regarding PSE&G's
five nuclear units during 1996, including the return of Hope Creek on
March 25, 1996, the return of Salem 2 by the end of August 1996, and the
continued outage of Salem 1 for the remainder of the year, the 1996
aggregate capacity factor would be approximately 57%, which would result
in a penalty of approximately $12 million.
<PAGE>
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
PART II. OTHER INFORMATION - (Continued)
Item 5. Other Information - (Continued)
- ------ -------------------------------
PSE&G - Nuclear Operations - Hope Creek
Form 10-K, Page 12, Paragraph 7
-------------------------------
Hope Creek completed its sixth refueling and maintenance outage on
March 25, 1996.
PSE&G - Nuclear Operations - Hope Creek
Form 10-K, Page 13, Paragraph 4
-------------------------------
By letter dated January 29, 1996, the NRC requested a meeting with
PSE&G senior management to discuss its concerns regarding declining
trends in performance at Hope Creek. Meetings were held with senior NRC
officials on May 6th and 7th to discuss performance at both Hope Creek
and Salem. The NRC acknowledged fundamental changes in PSE&G's nuclear
business unit and that those changes provided an overall positive
impression. The NRC said that PSE&G must demonstrate it has adequately
maintained the design and licensing basis of both units, a generic issue
presently being pursued by the NRC. The NRC staff indicated that it
will continue to closely monitor performance at Salem and Hope Creek,
including emergency preparedness performance and the effectiveness of
PSE&G's corrective action program.
PSE&G - Nuclear Operations - Other Nuclear Matters
Form 10-K, Page 14, Paragraph 5
-------------------------------
In a separate matter, as a result of several Boiling Water Reactors
(BWR) experiencing clogging of some emergency core cooling system
suction strainers, which supply water from the suppression pool for
emergency cooling of the core and related structures, the NRC issued a
Bulletin dated May 6, 1996 to operators of BWRs requesting measures be
taken to minimize the potential for clogging. The NRC has proposed
three resolution options, with a request that actions be completed by
the end of the unit's first refueling outage after January 1997.
Alternative resolution options will be subject to NRC approval. PSE&G
expects to submit its planned actions and schedules within 180 days.
PSE&G cannot predict what other actions, if any, the NRC may take on
this matter.
<PAGE>
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
PART II. OTHER INFORMATION - (Continued)
Item 5. Other Information - (Continued)
- ------ -------------------------------
PSE&G - Nuclear Fuel
Form 10-K, Page 16, Paragraph 2
-------------------------------
PECO has also advised PSE&G that it has contracted for the
following segments of the nuclear fuel supply cycle for Peach Bottom 2
and 3 through the following years:
Nuclear Unit Conversion Enrichment Fabrication
Peach Bottom 2 (1) (2) 1999
Peach Bottom 3 (1) (2) 1998
(1) PECO has commitments for 100% of its conversion services for
Peach Bottom through 1997. Approximately 40% of the conversion service
requirements are covered through 2001. PECO does not anticipate any
difficulties in obtaining necessary conversion services for Peach
Bottom.
(2) 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 1998
and 70% through 1999. PECO does not anticipate any difficulties in
obtaining necessary enrichment services for Peach Bottom.
Environmental Controls
Form 10-K, Page 22, Paragraph 1
-------------------------------
During 1995, PSE&G expended approximately $118 million for capital
related expenditures to improve the environment and comply with changing
regulations. It is estimated that PSE&G will expend approximately $50
million, $32 million, $27 million, $27 million and $13 million in the
years 1996 through 2000, respectively, for such purposes.
<PAGE>
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
PART II. OTHER INFORMATION - (Continued)
Item 5. Other Information - (Continued)
- ------ -------------------------------
FORM 10-K, Page, 26, Paragraph 6
--------------------------------
By letter dated April 30, 1996, EPA submitted a letter to PSE&G
directing that PSE&G provide information concerning the nature and
quantity of hazardous substances and/or wastes which may have been
generated, treated, stored or disposed of at two PSE&G facilities
formerly located adjacent to the Passaic River Site. The two facilities
are PSE&G's former Harrison Gas Plant and Essex Generating Station.
Federal Comprehensive Environmental Response, Compensation and Liability
Act of 1980 (CERCLA) provides that EPA is authorized to direct any
person to submit such information if there is a reasonable basis to
believe that a release of a hazardous substance occurred at a subject
facility. PSE&G is currently in the process of preparing to respond to
the EPA's request for these facilities.
NEW MATTERS
-----------
During a recent NRC inspection, Hope Creek received 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 has been scheduled for June 11,
1996. PSE&G cannot predict what actions, if any, the NRC may take on
this matter.
<PAGE>
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
PART II. OTHER INFORMATION - (Continued)
Item 5. Other Information - (Continued)
- ------ -------------------------------
New Information
- ----------------
Employee Relations
Form 10-K, Page 19
------------------
PSE&G reached agreement for new contracts with its two largest
unions, the International Brotherhood of Electrical Workers Local Union
94 (IBEW) and Local 855 of the Public Utility Construction and Gas
Appliance Workers (Local 855). The six year agreements, which were
effective May 1, 1996, provide for both incremental increases in base
wages as well as a series of two percent lump-sum increases over the
next five years. The agreements allow for some crossover work between
the IBEW and Local 855. These crossover areas addressed in the
agreements include meter installation/repair work, joint trenching and
markouts.
PSE&G also reached agreement for new contracts with the Office and
Professional Employees International Union (OPEIU), Local 153 and the
Consolidated Gas Workers Union. These agreements call for increases of
14% over the six years, annual two percent lump-sum payments over the
first five years of the contract, improvements in shift premiums, travel
and meal allowances and adjustments in medical coverages designed to
provide employees with more options while increasing cost-efficiency.
PSE&G has not yet reached an agreement with the Utility Co-workers
Association (representing approximately 1,100 employees). Negotiations
are still in progress.
The negotiated agreements provide for the Pension Plan to be
amended effective May 1, 1996 to allow employees the option to retire
early upon attainment of age 55 and completion of 25 or more years of
service. Also, between May 1, 1996 and April 30, 1997, early retirement
without reduction will be available to employees who have attained age
50 and have completed 30 or more years of service. This change, coupled
with other benefit modifications, will have a direct impact upon PSE&G's
Pension and Postretirement Benefit Plans. Presently, the impact has not
been quantified, however, it may have a material effect on results of
operations for Enterprise and PSE&G.
<PAGE>
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
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
------- ------------------------------------------------------
4(A) Supplemental Indenture dated October 1, 1995
between PSE&G and First Fidelity Bank, National
Association, New Jersey, as Trustee, providing for
the issue of First and Refunding Mortgage Bonds,
Pollution Control Series U.
4(B) Supplemental Indenture dated October 1, 1995
between PSE&G and First Fidelity Bank, National
Association, New Jersey, as Trustee, providing for
the issue of First and Refunding Mortgage Bonds,
Pollution Control Series V.
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>
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
(b) Reports on Form 8-K.
Registrant Date of Report Item Reported
- ---------- -------------- -------------
Enterprise
and PSE&G 1-19-96 Item 5. Other events (Rate
Matters/ Regulation, PSE&G -
Nuclear Operations/Salem and
Hope Creek, Credit Ratings).
Enterprise
and PSE&G 3-14-96 Item 5. Other events (PSE&G -
Nuclear and PSE&G Operations
- Hope Creek/Nuclear
Performance Standard, Rate
Matters/ Regulation, and
Legal Proceedings).
<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: May 15, 1996
