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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission Registrant, State of Incorporation, I.R.S. Employer
File Number Address, and Telephone Number Identification No.
- --------------------------------------------------------------------------------
1-9120 PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED 22-2625848
(A New Jersey Corporation)
80 Park Plaza
P.O. Box 1171
Newark, New Jersey 07101-1171
201 430-7000
http://www.pseg.com
1-973 PUBLIC SERVICE ELECTRIC AND GAS COMPANY 22-1212800
(A New Jersey Corporation)
80 Park Plaza
P.O. Box 570
Newark, New Jersey 07101-0570
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: Common Stock, without par value
Outstanding at July 31, 1997: 231,957,608
As of July 31, 1997, Public Service Electric and Gas Company had issued and
outstanding 132,450,344 shares of common stock, without nominal or par value,
all of which were privately held, beneficially and of record by Public Service
Enterprise Group Incorporated.
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<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 Six
Months Ended June 30, 1997 and 1996...................................
Consolidated Balance Sheets as of June 30, 1997
and December 31, 1996.................................................
Consolidated Statements of Cash Flows for the Six
Months Ended June 30, 1997 and 1996...................................
Consolidated Statements of Retained Earnings for the Three and Six
Months Ended June 30, 1997 and 1996...................................
Public Service Electric and Gas Company (PSE&G):
Consolidated Statements of Income for the Three and Six
Months Ended June 30, 1997 and 1996...................................
Consolidated Balance Sheets as of June 30, 1997
and December 31, 1996.................................................
Consolidated Statements of Cash Flows for the Six
Months Ended June 30, 1997 and 1996...................................
Consolidated Statements of Retained Earnings for the Three and Six
Months Ended June 30, 1997 and 1996...................................
Notes to Consolidated Financial Statements - Enterprise.................
Notes to Consolidated Financial Statements - PSE&G......................
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Enterprise..............................................................
PSE&G .................................................................
PART II. OTHER INFORMATION
Item 1. Legal Proceedings................................................
Item 5. Other Information................................................
Item 6. Exhibits and Reports on Form 8-K.................................
Signatures - Public Service Enterprise Group Incorporated.................
Signatures - Public Service Electric and Gas Company......................
<PAGE>
<TABLE>
<CAPTION>
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
CONSOLIDATED STATEMENTS OF INCOME
(Thousands of Dollars, except per share data)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
-------------------------------- -------------------------------
1997 1996 1997 1996
--------------- --------------- -------------- --------------
<S> <C> <C> <C> <C>
OPERATING REVENUES
Electric $ 946,006 $ 989,145 $ 1,906,463 $ 1,948,581
Gas 324,179 297,674 1,058,039 1,094,590
Nonutility Activities 52,719 50,255 90,954 92,251
--------------- --------------- -------------- --------------
Total Operating Revenues 1,322,904 1,337,074 3,055,456 3,135,422
--------------- --------------- -------------- --------------
OPERATING EXPENSES
Operation:
Fuel for Electric Generation and Interchanged Power 242,776 215,972 491,128 432,047
Gas Purchased 179,555 186,504 601,388 643,236
Other 267,792 250,223 517,132 507,084
Maintenance 70,118 87,240 127,671 182,656
Depreciation and Amortization 155,084 151,555 305,423 303,901
Taxes:
Federal Income Taxes 49,595 56,092 152,579 154,194
New Jersey Gross Receipts Taxes 117,077 130,979 289,123 319,415
Other 21,557 20,944 42,478 45,886
--------------- --------------- ------------- --------------
Total Operating Expenses 1,103,554 1,099,509 2,526,922 2,588,419
--------------- --------------- ------------- --------------
OPERATING INCOME 219,350 237,565 528,534 547,003
OTHER INCOME AND DEDUCTIONS
Settlement of Salem Litigation - Net of Applicable
Taxes of $28,700 - - (53,300) -
Other - net 1,902 (1,273) 4,204 (2,046)
--------------- --------------- -------------- --------------
Total Other Income and Deductions 1,902 (1,273) (49,096) (2,046)
--------------- --------------- -------------- --------------
INCOME BEFORE INTEREST CHARGES AND DIVIDENDS
ON PREFERRED SECURITIES 221,252 236,292 479,438 544,957
--------------- --------------- -------------- --------------
INTEREST EXPENSE AND PREFERRED DIVIDENDS
Interest Expense 116,828 111,044 226,377 226,561
Allowance for Funds Used During Construction - Debt and
Capitalized Interest (4,300) (3,921) (9,846) (8,468)
Preferred Securities Dividend Requirements 14,430 12,228 28,722 24,469
Net Loss (Gain) on Preferred Stock Redemptions 2,795 (18,493) 3,172 (18,493)
--------------- --------------- -------------- --------------
Total Interest Expense and Preferred Dividends 129,753 100,858 248,425 224,069
--------------- --------------- -------------- --------------
INCOME FROM CONTINUING OPERATIONS 91,499 135,434 231,013 320,888
Discontinued Operations - Net of Taxes (Note 5) - (896) - 7,754
--------------- --------------- -------------- --------------
NET INCOME $ 91,499 $ 134,538 $ 231,013 $ 328,642
=============== =============== ============== ==============
AVERAGE SHARES OF COMMON STOCK OUTSTANDING 231,957,608 244,697,930 232,014,291 244,697,930
EARNINGS PER AVERAGE SHARE
Income From Continuing Operations $0.39 $0.55 $0.99 $1.31
Income From Discontinued Operations - - - 0.03
--------------- --------------- -------------- --------------
TOTAL EARNINGS PER AVERAGE SHARE $0.39 $0.55 $0.99 $1.34
=============== =============== ============== ==============
DIVIDENDS PAID PER SHARE OF COMMON STOCK $0.54 $0.54 $1.08 $1.08
<FN>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
CONSOLIDATED BALANCE SHEETS
ASSETS
(Thousands of Dollars)
(Unaudited)
June 30, December 31,
1997 1996
----------- ------------
<S> <C> <C>
UTILITY PLANT - Original cost
Electric $13,548,730 $13,314,033
Gas 2,625,772 2,555,901
Common 547,564 530,185
----------- -----------
Total 16,722,066 16,400,119
Less: Accumulated depreciation and amortization 6,158,905 5,889,098
----------- -----------
Net 10,563,161 10,511,021
Nuclear Fuel in Service, net of accumulated amortization -
1997, $293,330; 1996, $259,384 165,327 198,845
----------- -----------
Net Utility Plant in Service 10,728,488 10,709,866
Construction Work in Progress, including Nuclear Fuel in
Process - 1997, $108,008; 1996, $70,455 347,659 445,321
Plant Held for Future Use 23,966 23,966
----------- -----------
Net Utility Plant 11,100,113 11,179,153
----------- -----------
INVESTMENTS AND OTHER NONCURRENT ASSETS
Long-Term Investments, net of amortization - 1997, $16,728; 1996, $12,679, and
net of valuation allowances - 1997, $16,057; 1996,
$16,969 2,257,665 1,854,304
Nuclear Decommissioning and Other Special Funds 432,350 382,348
Other Noncurrent Assets 154,867 115,332
----------- -----------
Total Investments and Other Noncurrent Assets 2,844,882 2,351,984
------------ -----------
CURRENT ASSETS
Cash and Cash Equivalents 53,746 278,903
Accounts Receivable:
Customer Accounts Receivable 456,913 499,858
Other Accounts Receivable 214,270 241,483
Less: Allowance for Doubtful Accounts 37,284 42,283
Unbilled Revenues 172,050 248,504
Fuel, at average cost 224,724 313,019
Materials and Supplies, at average cost, net of inventory valuation
reserves - 1997 and 1996, $16,100 147,407 147,757
Prepaid Gross Receipts Taxes - net 301,481 -
Miscellaneous Current Assets 67,917 57,186
----------- -----------
Total Current Assets 1,601,224 1,744,427
----------- -----------
DEFERRED DEBITS
Property Abandonments - net 45,024 52,573
Oil and Gas Property Write-Down 28,347 30,924
Unamortized Debt Expense 132,601 139,067
Deferred OPEB Costs 306,759 226,171
Unrecovered Environmental Costs 126,184 125,900
Unrecovered Plant and Regulatory Study Costs 33,229 33,941
Underrecovered Electric Energy and Gas Costs - net 160,824 176,055
Unrecovered SFAS 109 Deferred Income Taxes 740,627 751,763
Decontamination and Decommissioning Costs 46,643 46,643
Other 81,023 56,730
----------- -----------
Total Deferred Debits 1,701,261 1,639,767
----------- -----------
Total $17,247,480 $16,915,331
=========== ===========
<FN>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
CONSOLIDATED BALANCE SHEETS
CAPITALIZATION AND LIABILITIES
(Thousands of Dollars)
(Unaudited)
June 30, December 31,
1997 1996
----------- -----------
<S> <C> <C>
CAPITALIZATION
Common Equity:
Common Stock $ 3,603,300 $ 3,626,792
Retained Earnings 1,544,421 1,586,256
----------- -----------
Total Common Equity 5,147,721 5,213,048
Subsidiaries' Preferred Securities:
Preferred Stock Without Mandatory Redemption 94,523 113,392
Preferred Stock With Mandatory Redemption 75,000 150,000
Monthly Guaranteed Preferred Beneficial Interest in PSE&G's
Subordinated Debentures 210,000 210,000
Quarterly Guaranteed Preferred Beneficial Interest in PSE&G's
Subordinated Debentures 303,000 208,000
Long-Term Debt 4,713,494 4,580,231
----------- -----------
Total Capitalization 10,543,738 10,474,671
----------- -----------
OTHER LONG-TERM LIABILITIES
Decontamination and Decommissioning Costs 46,643 46,643
Environmental Costs 82,797 85,755
Capital Lease Obligations 51,969 52,371
----------- -----------
Total Other Long-Term Liabilities 181,409 184,769
----------- -----------
CURRENT LIABILITIES
Long-Term Debt due within one year 532,359 547,981
Commercial Paper and Loans 990,991 638,051
Accounts Payable 593,191 697,304
Other 276,906 388,418
----------- -----------
Total Current Liabilities 2,393,447 2,271,754
----------- -----------
DEFERRED CREDITS
Deferred Income Taxes 3,306,857 3,250,343
Deferred Investment Tax Credits 352,155 361,786
Deferred OPEB Costs 306,759 226,171
Other 163,115 145,837
----------- -----------
Total Deferred Credits 4,128,886 3,984,137
----------- -----------
COMMITMENTS AND CONTINGENT LIABILITIES (Note 3) -- --
----------- -----------
Total $17,247,480 $16,915,331
=========== ===========
<FN>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands of Dollars)
(Unaudited)
Six Months Ended June 30,
-------------------------
1997 1996
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 231,013 $ 328,642
Adjustments to reconcile net income to net cash flows from
operating activities:
Depreciation and Amortization 305,423 303,901
Amortization of Nuclear Fuel 33,947 26,277
Recovery (deferral) of Electric Energy and Gas Costs - net 15,231 (36,344)
Unrealized Gains on Investments - net (6,653) (1,985)
Provision for Deferred Income Taxes - net 4,467 44,430
Investment Tax Credits - net (9,393) (9,021)
Allowance for Funds Used During Construction - Debt and
Capitalized Interest (9,846) (8,468)
Proceeds from Leasing Activities 46,755 35,818
Changes in certain current assets and liabilities:
Net decrease in Accounts Receivable and Unbilled Revenues 141,613 147,076
Net decrease in Inventory - Fuel and Materials and Supplies 88,645 59,731
Net decrease in Accounts Payable (104,113) (49,550)
Net change in Prepaid / Other Accrued Taxes (313,597) (294,823)
Net change in Other Current Assets and Liabilities (110,127) (33,056)
Other (14,366) 4,349
Net cash provided by operating activities - Discontinued
Operations -- 61,377
--------- ---------
Net cash provided by operating activities 298,999 578,354
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to Utility Plant, excluding AFDC (229,327) (218,426)
Net increase in Long-Term Investments and Real Estate (384,847) (8,320)
Contribution to Decommissioning Funds and Other Special Funds (27,655) (13,444)
Cost of Plant Removal - net (16,241) (13,827)
Other (40,119) (2,547)
Change in Net Assets - Discontinued Operations -- (23,947)
--------- ---------
Net cash used in investing activities (698,189) (280,511)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in Short-Term Debt 352,940 169,613
Issuance of Long-Term Debt 475,754 368,324
Redemption of Long-Term Debt (358,113) (529,967)
Long-Term Debt Issuance and Redemption Costs (1,339) (38,618)
Redemption of Preferred Stock (93,869) (211,602)
Issuance of Preferred Securities of Subsidiaries 95,000 208,000
Retirement of Common Stock (42,588) --
Cash Dividends Paid on Common Stock (250,514) (264,274)
Preferred Securities Issuance Expenses (3,238) (6,508)
--------- ---------
Net cash provided by (used in) financing activities 174,033 (305,032)
--------- ---------
Net decrease in Cash and Cash Equivalents (225,157) (7,189)
Cash and Cash Equivalents at Beginning of Period 278,903 61,964
--------- ---------
Cash and Cash Equivalents at End of Period $ 53,746 $ 54,775
========= =========
Income Taxes Paid $ 83,686 $ 83,900
Interest Paid $ 186,571 $ 271,785
<FN>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
(Thousands of Dollars)
(Unaudited)
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- -------------------------
1997 1996 1997 1996
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Balance at Beginning of Period $1,578,256 $1,698,939 $1,586,256 $1,636,971
Add:
Net Income 91,499 134,538 231,013 328,642
---------- ---------- ---------- ----------
Total 1,669,755 1,833,477 1,817,269 1,965,613
---------- ---------- ---------- ----------
Deduct:
Cash Dividends on Common Stock 125,257 132,136 250,514 264,274
Retirement of Common Stock -- -- 19,096 --
Preferred Securities Issuance Expenses 77 6,510 3,238 6,508
---------- ---------- ---------- ----------
Total Deductions 125,334 138,646 272,848 270,782
---------- ---------- ---------- ----------
Balance at End of Period $1,544,421 $1,694,831 $1,544,421 $1,694,831
========== ========== ========== ==========
<FN>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
<TABLE>
<CAPTION>
PUBLIC SERVICE ELECTRIC AND GAS COMPANY
CONSOLIDATED STATEMENTS OF INCOME
(Thousands of Dollars)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
-------------------------- --------------------------
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
OPERATING REVENUES
Electric $ 946,006 $ 989,145 $ 1,906,463 $ 1,948,581
Gas 324,179 297,674 1,058,039 1,094,590
------------ ------------ ----------- -----------
Total Operating Revenues 1,270,185 1,286,819 2,964,502 3,043,171
------------ ------------ ----------- -----------
OPERATING EXPENSES
Operation:
Fuel for Electric Generation and Interchanged Power 242,776 215,972 491,128 432,047
Gas Purchased 179,555 186,504 601,388 643,236
Other 246,175 235,410 477,838 478,300
Maintenance 70,118 87,240 127,671 182,656
Depreciation and Amortization 154,049 150,869 303,208 302,302
Taxes:
Federal Income Taxes 45,568 48,984 147,475 143,614
New Jersey Gross Receipts Taxes 117,077 130,979 289,123 319,415
Other 19,838 19,230 39,523 42,817
------------ ------------ ------------ -----------
Total Operating Expenses 1,075,156 1,075,188 2,477,354 2,544,387
------------ ------------ ------------ -----------
OPERATING INCOME 195,029 211,631 487,148 498,784
OTHER INCOME AND DEDUCTIONS
Settlement of Salem Litigation - Net of Applicable
Taxes of $28,700 - - (53,300) -
Other - net 1,905 (1,279) 4,201 (2,057)
------------ ------------ ------------ ------------
Total Other Income and Deductions 1,905 (1,279) (49,099) (2,057)
------------ ------------ ------------ ------------
INCOME BEFORE INTEREST CHARGES AND
DIVIDENDS ON PREFERRED SECURITIES 196,934 210,352 438,049 496,727
------------ ------------ ------------ -----------
INTEREST EXPENSE AND PREFERRED SECURITIES
DIVIDENDS
Interest Expense 101,328 100,291 196,811 202,592
Allowance for Funds Used During Construction - Debt (2,855) (3,471) (7,666) (7,762)
Preferred Securities Dividend Requirement
of Subsidiaries 11,131 4,765 21,551 9,480
------------ ------------ ------------ -----------
Total Interest Expense and Preferred Securities
Dividends 109,604 101,585 210,696 204,310
------------ ------------ ------------ -----------
NET INCOME 87,330 108,767 227,353 292,417
Preferred Stock Dividend Requirements 3,299 7,463 7,171 14,989
Net Loss (Gain) on Preferred Stock Redemptions 2,795 (18,493) 3,172 (18,493)
------------ ------------ ------------ -----------
EARNINGS AVAILABLE TO PUBLIC SERVICE
ENTERPRISE GROUP INCORPORATED $ 81,236 $ 119,797 $ 217,010 $ 295,921
============ ============ =========== ===========
<FN>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PUBLIC SERVICE ELECTRIC AND GAS COMPANY
CONSOLIDATED BALANCE SHEETS
ASSETS
(Thousands of Dollars)
(Unaudited)
June 30, December 31,
1997 1996
----------- -----------
<S> <C> <C>
UTILITY PLANT - Original cost
Electric $13,548,730 $13,314,033
Gas 2,625,772 2,555,901
Common 547,564 530,185
----------- -----------
Total 16,722,066 16,400,119
Less: Accumulated depreciation and amortization 6,158,905 5,889,098
----------- -----------
Net 10,563,161 10,511,021
Nuclear Fuel in Service, net of accumulated amortization -
1997, $293,330; 1996, $259,384 165,327 198,845
----------- -----------
Net Utility Plant in Service 10,728,488 10,709,866
Construction Work in Progress, including Nuclear Fuel in
Process - 1997, $108,008; 1996, $70,455 347,659 445,321
Plant Held for Future Use 23,966 23,966
----------- -----------
Net Utility Plant 11,100,113 11,179,153
----------- -----------
INVESTMENTS AND OTHER NONCURRENT ASSETS
Long-Term Investments, net of amortization - 1997, $16,728; 1996, $12,679,
and net of valuation allowances - 1997, $14,057; 1996, $13,969 133,699 133,342
Nuclear Decommissioning and Other Special Funds 432,350 382,348
Other Plant, net of accumulated depreciation and
amortization - 1997, $1,176; 1996, $1,171 19,153 19,157
----------- -----------
Total Investments and Other Noncurrent Assets 585,202 534,847
----------- -----------
CURRENT ASSETS
Cash and Cash Equivalents 19,420 47,639
Accounts Receivable:
Customer Accounts Receivable 456,913 499,858
Other Accounts Receivable 132,805 175,009
Less: Allowance for Doubtful Accounts 37,284 42,283
Accounts Receivable - Associated Companies - net -- 4,308
Unbilled Revenues 172,050 248,504
Fuel, at average cost 224,724 313,019
Materials and Supplies, at average cost, net of inventory
valuation reserves - 1997 and 1996, $16,100 147,407 147,757
Prepaid Gross Receipts and Franchise Taxes 301,481 --
Miscellaneous Current Assets 65,421 53,619
----------- -----------
Total Current Assets 1,482,937 1,447,430
----------- -----------
DEFERRED DEBITS
Property Abandonments - net 45,024 52,573
Oil and Gas Property Write-Down 28,347 30,924
Unamortized Debt Expense 131,489 137,606
Deferred OPEB Costs 306,759 226,171
Unrecovered Environmental Costs 126,184 125,900
Unrecovered Plant and Regulatory Study Costs 33,229 33,941
Underrecovered Electric Energy and Gas Costs - net 160,824 176,055
Unrecovered SFAS 109 Deferred Income Taxes 740,627 751,763
Decontamination and Decommissioning Costs 46,643 46,643
Other 79,868 56,348
----------- -----------
Total Deferred Debits 1,698,994 1,637,924
----------- -----------
Total $14,867,246 $14,799,354
=========== ===========
<FN>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PUBLIC SERVICE ELECTRIC AND GAS COMPANY
CONSOLIDATED BALANCE SHEETS
CAPITALIZATION AND LIABILITIES
(Thousands of Dollars)
(Unaudited)
June 30, December 31,
1997 1996
----------- -----------
<S> <C> <C>
CAPITALIZATION
Common Equity:
Common Stock $ 2,563,003 $ 2,563,003
Contributed Capital from Enterprise 594,395 594,395
Retained Earnings 1,326,675 1,365,003
----------- -----------
Total Common Equity 4,484,073 4,522,401
Preferred Stock Without Mandatory Redemption 94,523 113,392
Preferred Stock With Mandatory Redemption 75,000 150,000
Subsidiaries' Preferred Securities:
Monthly Guaranteed Preferred Beneficial Interest in PSE&G's
Subordinated Debentures 210,000 210,000
Quarterly Guaranteed Preferred Beneficial Interest in PSE&G's
Subordinated Debentures 303,000 208,000
Long-Term Debt 4,141,444 4,107,331
----------- -----------
Total Capitalization 9,308,040 9,311,124
----------- -----------
OTHER LONG-TERM LIABILITIES
Decontamination and Decommissioning Costs 46,643 46,643
Environmental Costs 82,797 85,755
Capital Lease Obligations 51,969 52,371
----------- -----------
Total Other Long-Term Liabilities 181,409 184,769
----------- -----------
CURRENT LIABILITIES
Long-Term Debt due within one year 391,862 423,500
Commercial Paper and Loans 861,991 638,051
Accounts Payable 540,523 627,023
Accounts Payable - Associated Companies - net 651 --
Other 250,745 341,742
----------- -----------
Total Current Liabilities 2,045,772 2,030,316
----------- -----------
DEFERRED CREDITS
Deferred Income Taxes 2,532,277 2,557,587
Deferred Investment Tax Credits 342,253 351,637
Deferred OPEB Costs 306,759 226,171
Other 150,736 137,750
----------- -----------
Total Deferred Credits 3,332,025 3,273,145
----------- -----------
COMMITMENTS AND CONTINGENT LIABILITIES (Note 3) -- --
----------- -----------
Total $14,867,246 $14,799,354
=========== ===========
<FN>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PUBLIC SERVICE ELECTRIC AND GAS COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands of Dollars)
(Unaudited)
Six Months Ended June 30,
-----------------------------------
1997 1996
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $227,353 $292,417
Adjustments to reconcile net income to net cash flows from
Operating activities:
Depreciation and Amortization 303,208 302,302
Amortization of Nuclear Fuel 33,947 26,277
Recovery (deferral) of Electric Energy and Gas Costs - net 15,231 (36,344)
Provision for Deferred Income Taxes - net (14,174) 29,609
Investment Tax Credits - net (9,384) (9,486)
Allowance for Funds Used During Construction - Debt (7,666) (7,762)
Changes in certain current assets and liabilities:
Net decrease in Accounts Receivable and Unbilled Revenues 160,912 146,124
Net decrease in Inventory - Fuel and Materials and Supplies 88,645 59,731
Net decrease in Accounts Payable (85,849) (73,157)
Net change in Prepaid / Other Accrued Taxes (301,407) (279,499)
Net change in Other Current Assets and Liabilities (102,873) (12,712)
Other (19,050) 6,606
----------- ----------
Net cash provided by operating activities 288,893 444,106
----------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to Utility Plant, excluding AFDC (229,327) (218,426)
Net increase in Long-Term Investments (4,419) (32,377)
Contribution to Decommissioning Funds and Other Special Funds (27,655) (13,444)
Cost of Plant Removal - net (16,241) (13,827)
Other 4 (92)
----------- ----------
Net cash used in investing activities (277,638) (278,166)
----------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in Short-Term Debt 223,940 169,613
Issuance of Long-Term Debt 278,720 368,324
Redemption of Long-Term Debt (276,245) (414,010)
Long-Term Debt Issuance and Redemption Costs (1,339) (38,573)
Redemption of Preferred Stock (93,869) (211,602)
Net (Loss) Gain on Preferred Stock Redemptions (3,172) 18,493
Issuance of Preferred Securities of Subsidiaries 95,000 208,000
Cash Dividends Paid (259,271) (271,389)
Other (3,238) (6,509)
----------- ----------
Net cash used in financing activities (39,474) (177,653)
----------- ----------
Net decrease in Cash and Cash Equivalents (28,219) (11,713)
Cash and Cash Equivalents at Beginning of Period 47,639 32,373
----------- ----------
Cash and Cash Equivalents at End of Period $19,420 $20,660
=========== ==========
Income Taxes Paid $136,599 $142,751
Interest Paid $160,941 $214,403
<FN>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PUBLIC SERVICE ELECTRIC AND GAS COMPANY
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
(Thousands of Dollars)
(Unaudited)
Three Months Ended June 30, Six Months Ended June 30,
------------------------- -------------------------
1997 1996 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Balance at Beginning of Period $ 1,370,816 $ 1,411,839 $ 1,365,003 $ 1,365,915
Add:
Net Income 87,330 108,767 227,353 292,417
----------- ----------- ----------- -----------
Total 1,458,146 1,520,606 1,592,356 1,658,332
----------- ----------- ----------- -----------
Deduct:
Cash Dividends on Common Stock 125,300 126,200 252,100 256,400
Preferred Stock, at required rates 3,299 7,463 7,171 14,989
Preferred Securities Issuance Expenses 77 6,509 3,238 6,509
----------- ----------- ----------- -----------
Total Deductions 128,676 140,172 262,509 277,898
----------- ----------- ----------- -----------
Net Loss (Gain) on Preferred Stock Redemptions 2,795 (18,493) 3,172 (18,493)
----------- ----------- ----------- -----------
Balance at End of Period $ 1,326,675 $ 1,398,927 $ 1,326,675 $ 1,398,927
=========== =========== =========== ===========
<FN>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>
<PAGE>
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Basis of Presentation
The financial statements included herein have been prepared pursuant to the
rules and regulations of the Securities and Exchange Commission (SEC). Certain
information and note disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations. However, in the
opinion of management, the disclosures are adequate to make the information
presented not misleading. These financial statements and Notes to Consolidated
Financial Statements (Notes) thereto should be read in conjunction with the
respective Registrant's Notes contained in the 1996 Annual Report on Form 10-K.
The Notes contained herein update and supplement matters discussed in the 1996
Annual Report on Form 10-K.
The unaudited financial information furnished herewith reflects all
adjustments which are, in the opinion of management, necessary to a fair
statement of the results for the interim periods presented.
Note 2. Rate Matters
Interim Competition Transition Charge (ICTC)
On April 24, 1997, the New Jersey Board of Public Utilities (BPU) issued a
generic order to investigate the policy issues related to whether customers who
cease to receive electric service from a utility and go to on-site generation
should be charged an exit fee. As a result, PSE&G's petition and the motions
concerning PSE&G's September 1996 ICTC filing to address this situation has been
placed in abeyance pending the conclusion of the generic proceeding. PSE&G and
other interested parties presented testimony at the public hearing held by the
BPU under the generic proceeding on June 19, 1997. The matter continues to be
reviewed by the BPU within the New Jersey Energy Master Plan proceeding. PSE&G
cannot predict the outcome of this proceeding.
Demand Side Adjustment Factor (DSAF)
On February 24, 1997, PSE&G filed a motion with the BPU requesting a $151
million increase for its DSAF to reflect increases in the costs associated with
PSE&G's Demand Side Management (DSM) Programs. The increase was requested to
become effective on May 1, 1997 and continue through December 31, 1998. On March
26, 1997, this matter was transferred to the Office of Administrative Law (OAL)
for hearing. A hearing has been scheduled before the OAL beginning on September
17, 1997. PSE&G cannot predict the outcome of this proceeding.
Remediation Adjustment Charge (RAC)
On July 30, 1997, the BPU approved the recovery of remediation program
costs incurred during the period August 1, 1995 through July 31, 1996 on a final
basis. Also on this date, PSE&G filed a motion with the BPU requesting an
increase of $6.8 million in its RAC in order to recover remediation costs
incurred during the period August 1, 1996 through July 31, 1997. PSE&G cannot
predict the outcome of this proceeding.
Postretirement Benefits Other Than Pensions (OPEB)
On July 8, 1997, PSE&G filed its Phase II Petition with the BPU to resolve
the regulatory and rate issues associated with Statement of Financial Accounting
Standards No. 106 "Employers' Accounting for Postretirement Benefits Other Than
Pensions" (SFAS 106). The petition requests the BPU to recognize that current
base rates are sufficient to recover PSE&G's accrued and deferred OPEB costs.
This petition was in response to a January 8, 1997 BPU Order which adopted a
Stipulation of the parties for determining accrual rate recognition under one of
the rate mechanisms established in the BPU's Generic Proceeding, initiated on
August 1, 1996. PSE&G cannot predict the outcome of this proceeding.
<PAGE>
New Jersey Gross Receipts and Franchise Tax (NJGRT)
Legislation was approved and will become effective on January 1, 1998 which
repeals the NJGRT collected by utilities from their customers and replaces it
with a combination of corporate business tax, state sales and use tax and a
transitional tax assessment which will be phased out over five years. The new
tax structure is expected to improve the competitive position of PSE&G vis-a-vis
non-utility energy providers in New Jersey who are currently not subject to
NJGRT.
Note 3. Commitments and Contingent Liabilities
Hazardous Waste
Certain Federal and State laws authorize the U.S. 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 investigate and take 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 attention from the government agencies
involved. Generally, actions directed at funding such site investigations and
remediation include all suspected or known responsible parties. Except as
discussed below with respect to its Manufactured Gas Plant Remediation Program
(Remediation Program), Enterprise and PSE&G do not expect their expenditures for
any such site to have a material effect on their financial condition, results of
operations and net cash flows.
PSE&G Manufactured Gas Plant Remediation Program
In 1988, NJDEP notified PSE&G that it had identified the need for PSE&G,
pursuant to a formal arrangement, to systematically investigate and, if
necessary, resolve environmental concerns extant at PSE&G's former manufactured
gas plant sites. To date, NJDEP and PSE&G have identified 38 such sites. PSE&G
is currently working with NJDEP under a program to assess, investigate and, if
necessary, remediate environmental concerns at these sites. The Remediation
Program is periodically reviewed and revised by PSE&G based on regulatory
requirements, experience with the Remediation Program and available remediation
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 Enterprise and PSE&G's financial condition,
results of operations and net cash flows (see Rate Matters).
Note 4. Financial Instruments and Risk Management
Enterprise's operations give rise to exposure to market risks from changes
in commodity prices, interest rates, foreign exchange rates and security prices
of investments. Enterprise's policy is to use derivative financial instruments
for the purpose of managing market risk consistent with its business plans and
prudent practices.
Natural Gas Hedging
Through June 30, 1997, Energis Resources Incorporated (Energis Resources)
entered into futures contracts to buy an aggregate of 7,280,000 mmbtu of natural
gas at an average price of $2.13 per mmbtu related to fixed-price sales
commitments. Such contracts, together with physical purchase contracts, hedged
approximately 89% of its fixed-price sales commitments at June 30, 1997. Energis
Resources had a deferred unrealized hedge gain of $0.9 million at June 30, 1997.
<PAGE>
Interest Rate Swap
CEA Americas Operating Company (CEA-AOC), an indirect 90% owned subsidiary
of Community Energy Alternatives Incorporated (CEA), entered into an interest
rate borrowing on June 2, 1997 to swap floating rate borrowings into fixed rate
borrowings. The interest differential to be received or paid under the interest
rate swap agreement is accrued over the life of the agreement as an adjustment
to the interest expense of the related borrowing. The swap terminates on May 28,
1999.
The notional amount and interest rates are as follows:
Pay-fixed swap
Notional amount $43,522,000
Pay rate 6.65%
Average receive rate 5.69%
June 30, 1997 receive rate 5.69%
Receive rate index: Libor
Note 5. Discontinued Operations
Prior year operating results of Energy Development Corporation (EDC) are
summarized below:
Three Months Ended Six Months Ended
June 30, 1996 June 30, 1996
---------------------- ----------------------
(Thousands of Dollars) (Thousands of Dollars)
Revenues $ 58,914 $126,259
Operating income 4,163 22,457
Earnings before income taxes (3,638) 9,062
Income taxes (2,742) 1,308
Net income (896) 7,754
PUBLIC SERVICE ELECTRIC AND GAS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Notes to Consolidated Financial Statements of Enterprise are
incorporated herein by reference insofar as they relate to PSE&G and its
subsidiaries:
Note 1. Basis of Presentation
Note 2. Rate Matters
Note 3. Commitments and Contingent Liabilities
<PAGE>
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Following are the significant changes in or additions to information
reported in the Public Service Enterprise Group Incorporated (Enterprise) 1996
Annual Report on Form 10-K affecting the consolidated financial condition and
the results of operations of Enterprise and its subsidiaries. This discussion
refers to the Consolidated Financial Statements (Statements) and related Notes
of Enterprise and should be read in conjunction with such Statements and Notes.
Results of Operations
Earnings per share of Enterprise common stock for the quarter and six
months ended June 30, 1997 were $0.39 and $0.99, respectively, down 29% and 26%
compared to the same periods in 1996.
Earnings per share for the quarter and six months ended June 30, 1997
decreased primarily due to lower electric and gas sales by Public Service
Electric and Gas Company (PSE&G) resulting from considerably cooler weather in
May and June 1997, as well as milder winter weather during 1997, the settlement
of a lawsuit filed by two of the co-owners of the Salem Nuclear Generating
Station (Salem), higher administrative costs attributable to legal fees
associated with the settlement and a gain in the second quarter of 1996 from the
repurchase of a portion of PSE&G's outstanding cumulative preferred stock at
discounts to par. These decreases were partially offset by lower 1997 operations
and maintenance expenses at Hope Creek Nuclear Generating Station (Hope Creek)
and Salem.
Enterprise Diversified Holdings Incorporated's (EDHI) contribution to
earnings decreased for the quarter and six months ended June 30, 1997 primarily
due to lower Public Service Resources Corporation (PSRC) earnings in 1997 as a
result of leveraged buy-out fund gains realized in 1996 and higher operating
expenses of Energis Resources Incorporated (Energis Resources).
PSE&G - Revenues
Electric
Increase (Decrease) Increase (Decrease)
-------------------- ---------------------
Three Months Ended Six Months Ended
June 30, June 30,
1997 vs. 1996 1997 vs. 1996
-------------------- -----------------------
(Millions of Dollars) (Millions of Dollars)
Kilowatt-hour revenues $ (62) $ (84)
Recovery of energy costs 30 61
Non-margin revenues (A) (8) (17)
Other operating revenues (3) (2)
-------------------- -----------------------
Total Electric Revenues $ (43) $ (42)
===================== ======================
Revenues decreased $43 million or 4.4% and $42 million or 2.2% for the
quarter and six months ended June 30, 1997, respectively, from comparable
periods in 1996. These decreases were primarily due to cooler spring and summer
weather in 1997, and a change in estimates of unbilled revenue as a result of
refinements to PSE&G's methodology, partially offset by increased energy sales
to other utilities and to wholesale customers.
<PAGE>
Gas
Increase (Decrease) Increase (Decrease)
-------------------- ---------------------
Three Months Ended Six Months Ended
June 30, June 30,
1997 vs. 1996 1997 vs. 1996
-------------------- ---------------------
(Millions of Dollars) (Millions of Dollars)
Therm revenues $ 40 $ 27
Recovery of fuel costs (5) (36)
Non-margin revenues (A) (9) (26)
Other operating revenues 1 (2)
--------------------- ---------------------
Total Gas Revenues $ 27 $ (37)
===================== =====================
Revenues increased $27 million or 8.9% for the quarter ended June 30, 1997
over the comparable period of 1996 primarily due to cooler weather in May and
June of 1997 and a change in estimates of unbilled revenue as a result of
refinements to PSE&G's methodology. Revenues decreased $37 million or 3.3% for
the six months ended June 30, 1997 over the comparable period of 1996 primarily
due to a lower recovery of fuel costs and mild winter weather in 1997.
(A) Non-margin revenues primarily reflect recoveries for Demand Side
Management (DSM) Program costs, uncollectibles and NJ Gross Receipts
and Franchise Taxes (NJGRT).
PSE&G - Expenses
Fuel for Electric Generation and Interchanged Power
Fuel for Electric Generation and Interchanged Power increased $27 million
or 12.4% and $59 million or 13.7% for the quarter and six months ended June 30,
1997, respectively, from the comparable 1996 periods. The increases were
primarily due to an increase in energy sales to other utilities and to wholesale
customers. Due to the operation of the Electric Levelized Energy Adjustment
Clause (LEAC) mechanism, variances in fuel revenues and expenses offset, with no
direct effect on earnings. However, under the New Jersey Energy Master Plan,
future changes in electric fuel and replacement power costs could impact
earnings (see Competitive Environment).
Other Operation and Maintenance Expenses
Other operation and maintenance expenses decreased $6 million or 2.0% and
$55 million or 8.4% for the quarter and six months ended June 30, 1997,
respectively, from the comparable 1996 periods. The decreases were primarily due
to Hope Creek's extended refueling outage in 1996 and lower 1997 restart
activity expenses at Salem.
Net (Loss) Gain on Preferred Stock Redemptions
Net (Loss) Gain on Preferred Stock Redemptions decreased $21 million and
$22 million for the quarter and six months ended June 30, 1997, respectively,
from the comparable 1996 periods. The decreases were primarily due to an $18
million net gain on the repurchase of certain of PSE&G's outstanding cumulative
preferred stock at discounts to par in the second quarter of 1996.
<PAGE>
EDHI - Net Income
Increase (Decrease) Increase (Decrease)
-------------------- ---------------------
Three Months Ended Six Months Ended
June 30, June 30,
1997 vs. 1996 1997 vs. 1996
-------------------- ---------------------
(Millions of Dollars) (Millions of Dollars)
PSRC $ (2) $ (8)
CEA - 2
Energis Resources (3) (6)
EGDC - 1
--------------------- ----------------------
Continuing Operations (5) (11)
Discontinued Operations - EDC 1 (8)
-------------------- -----------------------
Total $ (4) $ (19)
===================== ======================
Continuing Operations
EDHI's income from continuing operations was $10 million for the quarter
and $14 million for the six months ended June 30, 1997, respectively, a $5
million and $11 million decrease from the comparable 1996 periods. PSRC's
earnings decreased primarily due to leveraged buy-out fund gains realized in
1996. The loss for Energis Resources increased due to higher administrative and
general expenditures. CEA's income increased due to improved operations of
several projects.
Discontinued Operations
Energy Development Corporation (EDC) was sold on July 31, 1996.
Liquidity and Capital Resources
Enterprise
Cash generated from operations is expected to provide the major source of
funds for growth of the business. Cash and cash equivalents totaled $54 million
at June 30, 1997.
As of June 30, 1997, Enterprise's capital structure consisted of 48.8%
common equity, 44.7% long-term debt and 6.5% preferred stock and other preferred
securities.
Dividend payments on Common Stock were $1.08 per share and totaled $251
million for the six months ended June 30, 1997. The ability of Enterprise to
declare and pay dividends is contingent upon its receipt of dividend payments
from its subsidiaries. Since 1992, Enterprise has maintained a constant rate of
dividend on its common stock. A key Enterprise objective is to keep its common
stock dividend secure.
PSE&G
During the period January 1, 1997 through June 30, 1997, PSE&G had utility
plant additions, including AFDC, of $237 million, primarily due to the
replacement of the Salem Unit 1 steam generators.
PSE&G expects that it will be able to internally generate all of its
construction and capital requirements over the next five years and reduce its
debt outstanding by between $1 and $2 billion, assuming adequate and timely
recovery of costs including any costs potentially stranded as a result of
changes in federal and state regulations, as to which no assurances can be
given. (See Competitive Environment and Forward Looking Statements below; Note
2, Rate Matters; Note 3, Commitments and Contingent Liabilities of Notes to
Consolidated Financial Statements (Notes).)
<PAGE>
EDHI
During the period January 1, 1997 through June 30, 1997, PSRC entered into
leveraged leases of three power plants: one located in the United Kingdom and
two in the Netherlands. In July 1997, PSRC entered into an additional leveraged
lease of a waste-to-energy facility located in the Netherlands. The aggregate of
these investments is approximately $145 million.
During the period January 1, 1997 through June 30, 1997, CEA's investment
activities included:
Acquisition of a 50% interest in a 200 MW natural gas-fired power
plant located in Colombia, South America which is currently under
construction.
Acquisition with a partner of a 90% interest in two Argentinean
electric distribution companies serving the Buenos Aires province.
CEA's indirect ownership of the two companies is 30%. Each of these
investments is considered an exempt foreign utility company.
Acquisition of a 49% interest in an operating 180 MW oil-fired
cogeneration plant located on the island of Oahu in Hawaii.
Acquisition of an 80% interest in a 30 MW coal-fired cogeneration
plant in the Jiangsu Province of China which is currently under
construction.
Acquisition of 27% and 50% ownership interests in energy development
companies located in the Philippines and Thailand, respectively.
The aggregate of these investments is approximately $290 million, of which
$97 million was financed with nonrecourse debt.
Over the next several years, EDHI and its subsidiaries will be required to
refinance a portion of their maturing debt in order to meet their capital
requirements. Any inability to extend or replace maturing debt and/or existing
agreements at current levels and interest rates may affect future earnings and
result in an increase in EDHI's cost of capital.
External Financings - PSE&G
PSE&G has New Jersey Board of Public Utilities (BPU) authority to issue
approximately $4.455 billion aggregate amount of additional Bonds/Medium-Term
Notes (MTNs)/Preferred Stock/Preferred Securities through 1997 for refunding
purposes. Under its Mortgage, PSE&G may issue new First and Refunding Mortgage
Bonds (Bonds) against previous additions and improvements and/or retired Bonds
provided that its ratio of earnings to fixed charges is at least 2:1. At June
30, 1997, this Mortgage ratio was 2.92:1. As of June 30, 1997, the Mortgage
would permit up to $3.200 billion aggregate principal amount of new bonds to be
issued against previous additions and improvements.
In February 1997, PSE&G Capital Trust II, a special purpose statutory
business trust controlled by PSE&G, issued $95 million of 8.125% Quarterly
Income Preferred Securities (Quarterly Guaranteed Preferred Beneficial Interest
in PSE&G's Subordinated Debentures). PSE&G used the proceeds to fund the
redemption of the remaining 188,684 shares outstanding of its 6.80% Cumulative
Preferred Stock $100 par value at $102 per share in January 1997 and all 750,000
shares of its 7.44% Cumulative Preferred Stock $100 par value at $103.72 per
share in June 1997.
In June 1997, PSE&G issued $235 million of 6.50% Series XX Bonds due 2000.
The proceeds were used primarily to refund the 8.50% Series LL Bonds due 2022.
<PAGE>
The BPU has authorized PSE&G to issue and have outstanding at any one time
through January 2, 1999, not more than $1.3 billion of short-term obligations,
consisting of commercial paper and other unsecured borrowings from banks and
other lenders. On June 30, 1997, PSE&G had $792 million of short-term debt
outstanding.
To provide liquidity for its commercial paper program, PSE&G has a $650
million one-year revolving credit agreement expiring in June 1998 and a $650
million five-year revolving credit agreement expiring in June 2002 with a group
of commercial banks, which provide for borrowings of up to one year. On June 30,
1997, there were no borrowings outstanding under these credit agreements.
PSE&G Fuel Corporation (Fuelco) has a $125 million commercial paper program
to finance a 42.49% share of Peach Bottom Atomic Power Station nuclear fuel,
supported by a $125 million revolving credit facility with a group of banks,
which expires on June 28, 2001. PSE&G has guaranteed repayment of Fuelco's
respective obligations under this program. As of June 30, 1997, Fuelco had
commercial paper of $70 million outstanding under such program.
External Financings - EDHI
PSEG Capital Corporation's (Capital) Medium-Term Note (MTN) program
provides for an aggregate principal of up to $650 million. At June 30, 1997,
Capital had total debt outstanding of $388 million, including $325 million of
MTNs. In July 1997, Capital issued an additional $100 million of MTNs with
interest rates of approximately 7%.
As of June 30, 1997, Enterprise Capital Funding Corporation (Funding) had
$128 million of debt outstanding. The MTN and Funding proceeds were used
primarily to fund the investments of PSRC and CEA.
EDHI, PSRC and CEA are subject to restrictive business and financial
covenants contained in existing debt agreements. EDHI is required to maintain a
debt to equity ratio of no more than 2.00:1 and a twelve-months earnings before
interest and taxes (EBIT) coverage ratio of at least 1.50:1. As of June 30,
1997, EDHI had a consolidated debt to equity ratio of 1.45:1. For the twelve
months ended June 30, 1997, the EBIT coverage ratio, as defined to exclude the
effects of EGDC and the 1996 gain on the sale of EDC, was 2.26:1. Compliance
with applicable financial covenants will depend upon future financial position
and levels of earnings, as to which no assurance can be given.
Nuclear Operations
PSE&G's Salem Units 1 and 2 were taken out of service in the second quarter
of 1995. The Salem Restart Plan, which encompassed a comprehensive review and
improvement of personnel, process and equipment issues, has been completed for
Salem Unit 2. On August 6, 1997, the NRC authorized the restart of Salem 2. The
NRC stated that it would continue to closely monitor activities at Salem. Three
planned hold points were established and the NRC plans to perform a final
assessment after approximately two months of full power operations. The NRC's
June 9, 1995 Confirmatory Action letter was amended to include the planned hold
points and the final assessment. The restart process is underway.
Installation of Salem Unit 1 steam generators has been completed and the
unit is expected to return to service around the end of the year. Restart of
Salem Unit 1 is also subject to NRC approval. The inability to successfully
return these units to continuous, safe operation could have a material adverse
impact on the financial condition, results of operations and net cash flows of
Enterprise and PSE&G (see Forward Looking Statements).
<PAGE>
Competitive Environment
New Jersey Energy Master Plan
On July 15, 1997, PSE&G filed a proposal regarding competition and rates
with the BPU in accordance with the April 30, 1997 final report of the BPU on
Phase II of the New Jersey Energy Master Plan (Energy Master Plan). The BPU is
expected to take at least a year to review and hold public hearings on PSE&G's
proposal, rendering a decision by September 1998. Enterprise and PSE&G cannot
predict the outcome of this matter. PSE&G's proposal in response to the Energy
Master Plan includes the following key elements:
A decrease in rates of between 5% and 10%, effective January 1, 1999,
dependent upon BPU approval of the proposal's several key elements.
Allow all customers in all classes to register for their choice of
energy supplier beginning October 1, 1998. Those customers choosing a
supplier other than PSE&G would be permitted to switch to the new
supplier effective January 1, 1999.
A transition period of seven years with basic tariff rates capped
during the period. During this transition period, PSE&G would maintain
responsibility for system reliability of energy and capacity supply.
Recovery of transition costs through securitization, restructuring of
certain non-utility generation contracts and depreciation accounting
changes.
Recovery of societal mandated costs, such as nuclear decommissioning
and demand side management expenses, would be adjusted based on changes
in these costs.
Discontinuation of PSE&G's LEAC effective December 31, 1998. PSE&G
would be responsible for all risks associated with changing fuel
prices, changes in operations and maintenance expenses and mitigation
of the transition costs of non-securitized generation production assets
within the price capped rates.
Transfer of PSE&G's nuclear and fossil generation assets, at net book
value, to a separate entity functionally independent of PSE&G at the
conclusion of the transition period.
PSE&G would file a rate case or a plan for a form of alternative
regulation for its electric distribution delivery service functions one
year prior to the end of the transition period.
At the end of the transition period, responsibility for generation
reliability would shift to the marketplace and PSE&G would retain its
obligation to connect and deliver energy and would offer basic
generation service.
Stranded Costs
PSE&G believes its identifiable potentially stranded costs associated with
fossil and nuclear generation stations is $3.9 billion, based on certain
assumptions, which include market prices of electricity and performance of
generating units. Changes in these and other factors could alter the amount of
such stranded costs. PSE&G is proposing to refinance, through securitization,
$2.5 billion of these costs, with the remainder to be mitigated, in part,
through depreciation changes during the transition period. In addition, PSE&G is
seeking to restructure certain of its Non-utility Generators (NUGs) contracts,
which are estimated as being $1.5 billion above assumed market prices. Under the
Energy Master Plan, the cost of power under these contracts would be recoverable
in rates (see Forward Looking Statements).
Securitization
PSE&G is proposing to securitize $2.5 billion of the potentially stranded
costs through the issuance of transition bonds with an estimated term of 15
years. The use of securitization as a means to reduce rates depends on enabling
legislation, which the New Jersey legislature is not expected to consider prior
to the second quarter of 1998. If legislative approval is not granted, PSE&G
would alter its proposal and projected rate reduction range.
Depreciation
PSE&G is proposing to lengthen the depreciable lives of its distribution
assets, which are expected to remain regulated, from 28 to 45 years, and
amortize the excess of the calculated theoretical depreciation reserves for
distribution assets over the seven year transition period. This adjustment is
expected to result in an annual depreciation expense associated with
distribution assets that would decline by $94 million a year during the
transition period and $32 million a year thereafter.
Accounting for the Effects of Regulation
Currently, PSE&G accounts for the effects of regulation in accordance with
the Statement of Financial Accounting Standards (SFAS) 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 through the ratemaking process.
The regulatory changes proposed in the Energy Master Plan will create a shift
from regulated pricing to competitive market pricing. These proposed regulatory
changes will limit Enterprise's and PSE&G's ability to continue to meet the
applicable criteria of SFAS 71 for the generation portion of PSE&G's business.
In response to the continuing deregulation of the electric utility
industry, the Financial Accounting Standards Board (FASB), through its Emerging
Issues Task Force (EITF), has undertaken an initiative designated as EITF Issue
No. 97-4, "Deregulation of the Pricing of Electricity". The purpose of this
initiative is to develop guidance for the application of SFAS 101, "Regulated
Enterprises-Accounting for the Discontinuation of Application of FASB Statement
No. 71". SFAS 101 addresses how an enterprise that ceases to meet the criteria
for application of SFAS 71 to all or part of its operations should report that
event in its general-purpose financial statements.
In May and July 1997, the EITF met to deliberate EITF Issue No. 97-4. In
its discussions, the EITF reached a consensus. First, the EITF concluded that an
enterprise is required to discontinue the application of SFAS 71 for the
deregulated portion of its business once legislation is passed or a rate order
is issued, which contains a plan to transition from regulated pricing to market
pricing. In addition, the EITF concluded that an enterprise may continue to
carry on its books the regulatory assets and regulatory liabilities of the
portion of the business to which SFAS 101 is being applied, provided the
regulators have approved a regulated cash flow stream. This also applies to
costs or obligations not yet recorded as regulatory assets or liabilities
regardless of when they are incurred. The discontinuance of SFAS 71 also
requires an enterprise to evaluate the impact of SFAS 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of".
SFAS 121 requires that regulatory assets be written off once they are no longer
probable of recovery and that impairment losses be recorded for long lived
assets when related future cash flows are less than the carrying value of the
assets.
The impact to Enterprise and PSE&G will be determined based on the outcome
of PSE&G's proposal filed in response to the Energy Master Plan. Under its
proposal, PSE&G would have the opportunity, through various mechanisms, to
recover its electric generation related potentially stranded costs. Management
cannot predict the impact of EITF Issue No. 97-4 on Enterprise's and PSE&G's
future results of operations and financial condition. However, depending on the
legislative and regulatory actions taken in New Jersey with respect to electric
utility deregulation, the impact could be material.
Impact of New Accounting Pronouncements
In March 1997, FASB issued SFAS 128, "Earnings per Share" (SFAS 128) which
is effective for financial statements issued after December 15, 1997. SFAS 128
supersedes Accounting Principles Board Opinion No. 15 (APB 15) and replaces the
presentation of Primary EPS with a presentation of Basic EPS. It also requires
presentation of Basic and Diluted EPS on the income statement for all entities
with complex capital structures. The adoption of SFAS 128 is not expected to
have a material impact on the financial condition, results of operations and net
cash flows of Enterprise and PSE&G.
In June 1997, the FASB issued SFAS 130, "Reporting Comprehensive Income"
(SFAS 130), which is effective for fiscal years beginning after December 15,
1997. SFAS 130 requires that all items that are required to be recognized under
accounting standards as components of comprehensive income be reported in a
financial statement that is displayed with the same prominence as other
financial statements. It also requires that an enterprise classify items of
other comprehensive income by their nature in a financial statement and display
the accumulated balance of other comprehensive income separately from retained
earnings and additional paid-in capital in the equity section of a statement of
financial position.
Also in June 1997, FASB issued SFAS 131, "Disclosures about Segments of an
Enterprise and Related Information" (SFAS 131), which is effective for financial
statements for periods beginning after December 15, 1997. This Statement need
not be applied to interim financial statements in the initial year of its
application. SFAS 131 supersedes Statement of Financial Accounting Standards No.
14, "Financial Reporting for Segments of a Business Enterprise" (SFAS 14), and
requires that companies disclose segment data based on how management makes
decisions about allocating resources to segments and measuring their
performance.
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: Results of Operations; Liquidity and Capital
Resources; External Financings; Nuclear Operations; Impact of New Accounting
Pronouncements and Competitive Environment.
Forward Looking Statements
The Private Securities Litigation Reform Act of 1995 (the Act) provides a
new "safe harbor" for forward-looking statements to encourage such disclosures
without the threat of litigation providing those statements are identified as
forward-looking and are accompanied by meaningful, cautionary statements
identifying important factors that could cause the actual results to differ
materially from those projected in the statement. Forward-looking statements
have been made in this report. Such statements are based on management's beliefs
as well as assumptions made by and information currently available to
management. When used herein, the words "will", "anticipate", "estimate",
"expect", "objective" and similar expressions are intended to identify
forward-looking statements. In addition to any assumptions and other factors
referred to specifically in connection with such forward-looking statements,
factors that could cause actual results to differ materially from those
contemplated in any forward-looking statements include, among others, the
following: 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; ability to
obtain adequate and timely rate relief, cost recovery, including the potential
impact of stranded costs, and other necessary regulatory approvals; federal and
state regulatory actions; costs of construction; operating restrictions,
increased cost and construction delays attributable to environmental
regulations; nuclear decommissioning and the availability of reprocessing and
storage facilities for spent nuclear fuel; licensing and regulatory approval
necessary for nuclear and other operating stations; and credit market concerns.
Enterprise and PSE&G undertake no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise. The foregoing review of factors pursuant to the Act should
not be construed as exhaustive or as any admission regarding the adequacy of
disclosures made by Enterprise and PSE&G prior to the effective date of the Act.
<PAGE>
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Certain information reported under Item 3 of Part I of Enterprise's and
PSE&G's 1996 Annual Report to the SEC on Form 10-K is updated below. References
are to the related page of the Form 10-K.
(1) Pages 17 and 25. In July 1997 EPA named PSE&G as a Potentially
Responsible Party (PRP) with respect to its Harrison Gas Plant and its
Essex Generating Station under the Federal Comprehensive Environmental
Response, Compensation and Liability Act of 1980 (CERCLA) at the
Passaic River Site. There are currently three PRPs named by EPA at the
site, and EPA has sent data requests to additional corporations. While
certain remedial activities are ongoing, a report presenting the
results thereof is not expected until at least 1999. That report will
assess the requirement for remediation and, if determined to be
required, present an assessment of and recommendation for a
remediation alternative. Total costs associated with the current
assessment and feasibility study at the site that have been incurred
by other parties are expected to approximate $30 million. PSE&G cannot
predict what, if any, action EPA or other PRPs may take with respect
to the site or, in such event, what contributions PSE&G may be
required to make to the costs of these initiatives.
(2) Page 24. PSE&G and the three other co-owners of Salem filed suit in
February 1996 in the U.S. District Court for the District of New Jersey
against Westinghouse Electric Corporation (Westinghouse) seeking
damages to recover the cost of replacing the steam generators at Salem
Units 1 and 2. The suit alleges fraud and breach of contract by
Westinghouse in the sale, installation and maintenance of the
generators. In April 1996, Westinghouse filed an answer and $2.5
million counterclaim for unpaid work related to services at Salem.
PSE&G cannot predict the outcome of these proceedings. Ernest H. Drew,
a Director of Enterprise, but not of PSE&G became Chief Executive
Officer - Industries and Technology Group of Westinghouse on July 1,
1997.
In addition, see the following at the pages indicated:
(1) Page 12. Proceedings before the BPU relating to PSE&G's Remediation
Adjustment Charge (RAC) filed July 30, 1997, Docket No. GR97080573.
(2) Page 12. General proceeding before the BPU relating to Statement of
Financial Accounting Standards No. 106, "Employers' Accounting for
Postretirement Benefits Other than Pensions"(SFAS-106), Docket No.
ER97070470.
Item 5. Other Information
Certain information reported under Enterprise's and PSE&G's 1996 Annual and
1997 Quarterly Reports to the SEC is updated below. References are to the
related pages of the Form 10-K and the first quarter 10-Q as printed and
distributed.
Other State Regulatory Matters
Form 10-K, Page 4
In an Order dated June 25, 1997, the BPU determined to commence management
audits of all New Jersey electric utilities, with the assistance of one or more
consulting firms, under the direction of its own audit staff. The audit process
is to include, but not be limited to, focused reviews of electric utility
filings in response to the Energy Master Plan.
<PAGE>
Pennsylvania - New Jersey - Maryland Interconnection (PJM)
Form 10-K, Page 6, and First Quarter 10-Q, Page 24
On June 2, 1997, the PJM Member Companies, except for PECO Energy Company
(PECO), filed a proposal with the Federal Energy Regulatory Commission (FERC) to
reorganize PJM into an Independent System Operator (ISO). The proposal builds on
PJM's December 31, 1996 filing with regard to energy market operation and design
of transmission tariffs. The filing was made to meet a commitment made to FERC
in the December 31, 1996 filing. On June 9, 1997, PECO filed a competing
proposal that continues to advocate a different design of the energy market and
transmission tariffs consistent with their December 31, 1996 filing. PSE&G
cannot predict what actions, if any, FERC may take on this matter.
Air Pollution Control
Form 10-K, Page 15
In August 1997, the New Jersey Department of Environmental Protection
announced that it would be proposing regulations to reduce Nitrogen Oxide (NOx)
emissions in New Jersey by 90% from the 1990 level by 2003. At this time, PSE&G
cannot predict the impact such proposed regulations may have on its operations
or any cost associated with compliance.
Nuclear
On July 8, 1997, a predecisional enforcement conference was held with the
NRC to discuss apparent violations at Salem. These apparent violations were
identified in May and June, 1997, and concern emergency core cooling system
switchover and related residual heat removal system flow issues, and Appendix R
(fire protection) issues. PSE&G cannot predict what further actions the NRC may
take in this matter.
A predecisional enforcement conference was held with the NRC on August 12,
1997, to discuss apparent violations at Hope Creek relating to the installation
of cross-tie valves in the residual heat removal system at Hope Creek in 1994.
PSE&G cannot predict what further actions the NRC may take in this matter.
PSE&G has been advised by PECO that on July 17, 1997, the NRC issued its
periodic Systematic Assessment of Licensee Performance (SALP) Report for Peach
Bottom Nuclear Generating Station (Peach Bottom) for the period October 15, 1995
to June 7, 1997. Peach Bottom achieved ratings of "1" in the areas of Plant
Operations, Maintenance and Plant Support. The area of Engineering achieved a
rating of "2". Overall, the NRC observed excellent performance at Peach Bottom
during the assessment period. The NRC stated that station management provided
excellent oversight and control of engineering activities throughout the period.
The NRC noted that, while overall engineering performance was good, there were
several instances where operating procedures, surveillances, and tests were not
consistent with the design and licensing bases. PECO has advised PSE&G that it
will continue to take actions to improve performance at Peach Bottom.
Item 6. Exhibits and Reports on Form 8-K
(a) A listing of exhibits being filed with this document is as follows:
<PAGE>
Exhibit Number Document
12 Computation of Ratios of Earnings to Fixed Charges plus
Preferred Securities Dividend Requirements (Enterprise).
12(A) Computation of Ratios of Earnings to Fixed Charges (PSE&G).
12(B) Computation of Ratios of Earnings to Fixed Charges plus
Preferred Securities Dividend Requirements (PSE&G).
27(A) Financial Data Schedule (Enterprise)
27(B) Financial Data Schedule (PSE&G)
(b) Reports on Form 8-K.
None
<PAGE>
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrants have duly caused these reports to be signed on their respective
behalf by the undersigned thereunto duly authorized.
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
PUBLIC SERVICE ELECTRIC AND GAS COMPANY
(Registrants)
By: PATRICIA A. RADO
Patricia A. Rado
Vice President and Controller
(Principal Accounting Officer)
Date: August 14, 1997
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT 12
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
PLUS PREFERRED SECURITIES DIVIDEND REQUIREMENTS
12 Months
Ended
YEARS ENDED DECEMBER 31, June 30,
------------ ------------ ------------ ------------- -------------
1992 1993 1994 1995 1996 1997
------------ ------------ ------------ ------------- ------------- ------------------
(Thousands of Dollars)
<S> <C> <C> <C> <C> <C> <C>
Earnings as Defined in Regulation S-K:
Net Income (A) 475,150 549,178 666,521 627,287 587,358 513,967
Federal Income Taxes (B) 238,270 296,223 320,218 348,324 297,277 268,735
Fixed Charges 537,455 538,556 534,859 548,579 527,974 527,756
------------ ------------ ------------ ------------- ------------ ------------------
Earnings 1,250,875 1,383,957 1,521,598 1,524,190 1,412,609 1,310,458
============ ============ ============ ============= ============ ==================
Fixed Charges as Defined in Regulation S-K (C):
Total Interest Expense (D) 481,116 470,585 462,189 464,207 453,111 452,927
Interest Factor in Rentals 9,591 11,090 12,120 11,956 11,490 11,363
Subsidiaries' Preferred Securities
Dividend Requirements -- -- 1,680 15,664 27,741 39,861
Preferred Stock Dividends 31,907 38,114 40,467 33,762 23,161 15,343
Adjustment to Preferred and
Preference Stock Dividends to
state on a pre-income tax basis 14,841 18,767 18,403 22,990 12,471 8,262
------------ ------------ ------------ ------------ ----------- ------------------
Total Fixed Charges 537,455 538,556 534,859 548,579 527,974 527,756
============ ============ ============ ============= ============ ==================
Ratio of Earnings to Fixed Charges 2.33 2.57 2.84 2.78 2.68 2.48
============ ============ ============ ============= ============ ==================
</TABLE>
(A) Excludes 1993 cumulative effect of $5.4 million credit to income reflecting
a change in income taxes.
(B) Includes state income taxes and federal income taxes for other incomes.
(C) Fixed Charges represent (a) interest, whether expensed or capitalized, (b)
amortization of debt discount, premium and expense, (c) an estimate of
interest implicit in rentals, (d) Preferred Securities Dividend
Requirements of subsidiaries, and (e) Preferred Stock Dividend
Requirements, increased to reflect the pre-tax earnings requirement for
Public Service Enterprise Group Incorporated.
(D) Excludes 1992 interest expense on decommissioning costs of $5,208.
Effective January 1, 1992, accounting was changed to follow Federal Energy
Regulatory Commission guidelines.
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT 12 (A)
PUBLIC SERVICE ELECTRIC AND GAS COMPANY
COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
12 Months
Ended
June 30,
------------ ------------- ------------- ------------- -------------
1992 1993 1994 1995 1996 1997
------------ ------------- ------------- ------------- ------------- ----------------
(Thousands of Dollars)
<S> <C> <C> <C> <C> <C> <C>
Earnings as Defined in
Regulation S-K:
Net Income 475,936 614,868 659,406 616,964 535,071 470,007
Federal Income Taxes (A) 223,782 307,414 301,447 325,737 267,619 244,390
Fixed Charges 411,493 401,046 408,045 418,825 437,812 444,024
------------ ------------- ------------- ------------ ------------ -----------------
Earnings 1,111,211 1,323,328 1,368,898 1,361,526 1,240,502 1,158,421
============ ============= ============= ============ ============= =================
Fixed Charges as Defined in
Regulation S-K (B)
Total Interest Expense (C) 401,902 389,956 395,925 406,869 398,581 392,800
Interest Factor in Rentals 9,591 11,090 12,120 11,956 11,490 11,363
Subsidiaries' Preferred Securities
Dividend Requirements -- -- -- -- 27,741 39,861
------------ ------------- ------------- ------------ ------------- -----------------
Total Fixed Charges 411,493 401,046 408,045 418,825 437,812 444,024
============ ============= ============= ============ ============= =================
Ratio of Earnings to Fixed Charges 2.70 3.30 3.35 3.25 2.83 2.61
============ ============= ============= ============ ============= =================
</TABLE>
(A) Includes state income taxes and federal income taxes for other income.
(B) Fixed Charges represent (a) interest, whether expensed or capitalized, (b)
amortization of debt discount, premium and expense, (c) an estimate of
interest implicit in rentals, and (d) Preferred Securities Dividend
Requirements of subsidiaries.
(C) Excludes 1992 interest expense on decommissioning costs of $5,208.
Effective January 1, 1992, accounting was changed to follow Federal Energy
Regulatory Commission guidelines.
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT 12 (B)
PUBLIC SERVICE ELECTRIC AND GAS COMPANY
COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
PLUS PREFERRED SECURITIES DIVIDEND REQUIREMENTS
12 Months
Ended
YEARS ENDED DECEMBER 31, June 30,
------------ ------------- ------------- ------------- -------------
1992 1993 1994 1995 1996 1997
------------ ------------- ------------- ------------- ------------- -----------------
(Thousands of Dollars)
<S> <C> <C> <C> <C> <C> <C>
Earnings as Defined in Regulation S-K:
Net Income 475,936 614,868 659,406 616,964 535,071 470,007
Federal Income Taxes (A) 223,782 307,414 301,447 325,737 267,619 244,390
Fixed Charges 411,493 401,046 408,045 418,825 437,812 444,024
------------ ------------- ------------- ------------- ------------ ----------------
Earnings 1,111,211 1,323,328 1,368,898 1,361,526 1,240,502 1,158,421
============ ============= ============= ============= ============= ================
Fixed Charges as Defined in Regulation S-K (B):
Total Interest Expense (C) 401,902 389,956 395,925 406,869 398,581 392,800
Interest Factor in Rentals 9,591 11,090 12,120 11,956 11,490 11,363
Subsidiaries' Preferred Securities
Dividend Requirements -- -- -- -- 27,741 39,861
Preferred Stock Dividends 31,907 38,114 42,147 49,426 23,161 15,343
Adjustment to Preferred and
Preference Stock Dividends to
state on a pre-income tax basis 14,768 18,843 18,763 23,428 12,043 8,262
------------ ------------- ------------- ------------- ------------ -----------------
Total Fixed Charges 458,168 458,003 468,955 491,679 473,016 467,629
============ ============= ============= ============= ============= =================
Ratio of Earnings to Fixed Charges 2.43 2.89 2.92 2.77 2.62 2.48
============ ============= ============= ============= ============= =================
</TABLE>
(A) Includes state income taxes and federal income taxes for other income.
(B) Fixed Charges represent (a) interest, whether expensed or capitalized, (b)
amortization of debt discount, premium and expense, (c) an estimate of
interest implicit in rentals, (d) Preferred Securities Dividend
Requirements of subsidiaries, and (e) Preferred Stock Dividend
Requirements, increased to reflect the pre-tax earnings requirement for
Public Service Electric and Gas Company.
(C) Excludes 1992 interest expense on decommissioning costs of $5,208.
Effective January 1, 1992, accounting was changed to follow Federal Energy
Regulatory Commission guidelines.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> UT
<LEGEND>
This schedule contains summary financial information extracted from SEC Form
10-Q and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000788784
<NAME> PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 11,100,113
<OTHER-PROPERTY-AND-INVEST> 2,844,882
<TOTAL-CURRENT-ASSETS> 1,601,224
<TOTAL-DEFERRED-CHARGES> 1,701,261
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 17,247,480
<COMMON> 3,603,300
<CAPITAL-SURPLUS-PAID-IN> 0
<RETAINED-EARNINGS> 1,544,421
<TOTAL-COMMON-STOCKHOLDERS-EQ> 5,147,721
588,000
94,523
<LONG-TERM-DEBT-NET> 4,713,494
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 990,991
<LONG-TERM-DEBT-CURRENT-PORT> 532,359
0
<CAPITAL-LEASE-OBLIGATIONS> 51,969
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 5,128,423
<TOT-CAPITALIZATION-AND-LIAB> 17,247,480
<GROSS-OPERATING-REVENUE> 3,055,456
<INCOME-TAX-EXPENSE> 129,863 <F1>
<OTHER-OPERATING-EXPENSES> 2,370,874
<TOTAL-OPERATING-EXPENSES> 2,526,922
<OPERATING-INCOME-LOSS> 528,534
<OTHER-INCOME-NET> (49,096)
<INCOME-BEFORE-INTEREST-EXPEN> 479,438
<TOTAL-INTEREST-EXPENSE> 226,377
<NET-INCOME> 231,013
28,722
<EARNINGS-AVAILABLE-FOR-COMM> 231,013
<COMMON-STOCK-DIVIDENDS> 250,514
<TOTAL-INTEREST-ON-BONDS> 192,672
<CASH-FLOW-OPERATIONS> 298,999
<EPS-PRIMARY> .99
<EPS-DILUTED> .99
<PAGE>
<FN>
<F1>State Income Taxes of $3,469 and Federal Income Taxes for Other Income of
$(26,185) were incorporated into this line item for FDS purposes. In the
referenced financial statements, State Income Taxes are included in Taxes -
Other and Total Other Income and Deductions are net of the above applicable
federal income taxes.
</FN>
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> UT
<LEGEND>
This schedule contains summary financial information extracted from SEC form
10-Q and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000081033
<NAME> PUBLIC SERVICE ELECTRIC AND GAS COMPANY
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 11,100,113
<OTHER-PROPERTY-AND-INVEST> 585,202
<TOTAL-CURRENT-ASSETS> 1,482,937
<TOTAL-DEFERRED-CHARGES> 1,698,994
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 14,867,246
<COMMON> 2,563,003
<CAPITAL-SURPLUS-PAID-IN> 594,395
<RETAINED-EARNINGS> 1,326,675
<TOTAL-COMMON-STOCKHOLDERS-EQ> 4,484,073
588,000
94,523
<LONG-TERM-DEBT-NET> 4,141,444
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 861,991
<LONG-TERM-DEBT-CURRENT-PORT> 391,862
0
<CAPITAL-LEASE-OBLIGATIONS> 51,969
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 4,253,384
<TOT-CAPITALIZATION-AND-LIAB> 14,867,246
<GROSS-OPERATING-REVENUE> 2,964,502
<INCOME-TAX-EXPENSE> 122,127 <F1>
<OTHER-OPERATING-EXPENSES> 2,329,042
<TOTAL-OPERATING-EXPENSES> 2,477,354
<OPERATING-INCOME-LOSS> 487,148
<OTHER-INCOME-NET> (49,009)
<INCOME-BEFORE-INTEREST-EXPEN> 438,049
<TOTAL-INTEREST-EXPENSE> 218,362 <F2>
<NET-INCOME> 227,353
7,171
<EARNINGS-AVAILABLE-FOR-COMM> 217,010
<COMMON-STOCK-DIVIDENDS> 252,100
<TOTAL-INTEREST-ON-BONDS> 165,471
<CASH-FLOW-OPERATIONS> 288,893
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<PAGE>
<FN>
<F1>State Income Taxes of $837 and Federal Income Taxes for Other Income of
$(26,185) were incorporated into this line item for FDS purposes. In the
referenced financial statements, State Income Taxes are included in Taxes -
Other and Total Other Income and Deductions are net of the above applicable
federal income taxes.
<F2>Total interest expense includes Preferred Securities Dividend Requirements.
</FN>
</TABLE>
