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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 March 31, 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 April 30, 1997: 231,957,608
As of April 30, 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
Months Ended March 31, 1997 and 1996.............................
Consolidated Balance Sheets as of March 31, 1997
and December 31, 1996............................................
Consolidated Statements of Cash Flows for the Three
Months Ended March 31, 1997 and 1996.............................
Consolidated Statements of Retained Earnings for the Three
Months Ended March 31, 1997 and 1996.............................
Public Service Electric and Gas Company (PSE&G):
Consolidated Statements of Income for the Three
Months Ended March 31, 1997 and 1996.............................
Consolidated Balance Sheets as of March 31, 1997
and December 31, 1996............................................
Consolidated Statements of Cash Flows for the Three
Months Ended March 31, 1997 and 1996.............................
Consolidated Statements of Retained Earnings for the Three
Months Ended March 31, 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 4. Submission of Matters to a Vote of Security Holders.........
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)
Three Months Ended
March 31,
------------------------------
1997 1996
------------- -------------
<S> <C> <C>
OPERATING REVENUES
Electric $ 960,457 $ 959,436
Gas 733,860 796,916
Nonutility Activities 38,235 41,996
------------- -------------
Total Operating Revenues 1,732,552 1,798,348
------------- -------------
OPERATING EXPENSES
Operation
Fuel for Electric Generation and Interchanged Power 248,352 216,075
Gas Purchased 421,833 456,732
Other 249,340 256,861
Maintenance 57,553 95,416
Depreciation and Amortization 150,339 152,346
Taxes
Federal Income Taxes 102,984 98,102
New Jersey Gross Receipts Taxes 172,046 188,436
Other 20,921 24,942
------------- -------------
Total Operating Expenses 1,423,368 1,488,910
------------- -------------
OPERATING INCOME 309,184 309,438
OTHER INCOME AND DEDUCTIONS
Settlement of Salem Litigation - Net of Taxes (Note 3) (53,300) --
Other - net 2,302 (773)
------------- -------------
Total Other Income and Deductions (50,998) (773)
------------- -------------
INCOME BEFORE INTEREST CHARGES AND
DIVIDENDS ON PREFERRED SECURITIES 258,186 308,665
------------- -------------
INTEREST CHARGES
Long-Term Debt 97,009 101,445
Short-Term Debt 5,441 7,189
Other 7,099 6,883
------------- -------------
Total Interest Charges 109,549 115,517
Allowance for Funds Used During Construction -
Debt and Capitalized Interest (5,546) (4,547)
------------- -------------
Net Interest Charges 104,003 110,970
Preferred Securities Dividend Requirements 14,292 12,241
Net Loss on Preferred Stock Redemptions 377 --
------------- -------------
Income From Continuing Operations 139,514 185,454
Discontinued Operations - Net of Taxes (Note 5) -- 8,650
------------- -------------
NET INCOME $ 139,514 $ 194,104
============= =============
SHARES OF COMMON STOCK OUTSTANDING
End of Period 231,957,608 244,697,930
Average for Period 232,071,604 244,697,930
EARNINGS PER AVERAGE SHARE
Income From Continuing Operations $ 0.60 $ 0.75
Income From Discontinued Operations -- 0.04
------------- -------------
TOTAL EARNINGS PER AVERAGE SHARE $ 0.60 $ 0.79
============= =============
DIVIDENDS PAID PER SHARE OF COMMON STOCK $ 0.54 $ 0.54
============= =============
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
CONSOLIDATED BALANCE SHEETS
ASSETS
(Thousands of Dollars)
March 31, December 31,
1997 1996
----------- ------------
<S> <C> <C>
UTILITY PLANT - Original cost
Electric $13,364,416 $13,314,033
Gas 2,577,583 2,555,901
Common 538,993 530,185
----------- ------------
Total 16,480,992 16,400,119
Less: Accumulated depreciation and amortization 6,020,933 5,889,098
----------- ------------
Net 10,460,059 10,511,021
Nuclear Fuel in Service, net of accumulated amortization -
1997, $276,472; 1996, $259,384 182,113 198,845
----------- ------------
Net Utility Plant in Service 10,642,172 10,709,866
Construction Work in Progress, including Nuclear Fuel in
Process - 1997, $78,553; 1996, $70,455 468,513 445,321
Plant Held for Future Use 23,966 23,966
----------- ------------
Net Utility Plant 11,134,651 11,179,153
----------- ------------
INVESTMENTS AND OTHER NONCURRENT ASSETS
Long-Term Investments, net of amortization - 1997, $14,519; 1996, $12,679, and
net of valuation allowances - 1997, $15,969; 1996,
$16,969 1,914,813 1,854,304
Real Estate Property and Equipment, net of accumulated
depreciation - 1997, $6,245; 1996, $5,906 64,462 64,753
Other Plant, net of accumulated depreciation and amortization -
1997, $7,298; 1996, $6,518, and net of valuation allowances -
1997 and 1996, $826 39,742 37,031
Nuclear Decommissioning and Other Special Funds 390,171 382,348
Other Assets 14,114 13,548
----------- ------------
Total Investments and Other Noncurrent Assets 2,423,302 2,351,984
----------- ------------
CURRENT ASSETS
Cash and Cash Equivalents 350,769 278,903
Accounts Receivable:
Customer Accounts Receivable 578,515 499,858
Other Accounts Receivable 213,431 241,483
Less: Allowance for Doubtful Accounts 40,465 42,283
Unbilled Revenues 180,828 248,504
Fuel, at average cost 134,787 313,019
Materials and Supplies, at average cost, net of inventory valuation
reserves - 1997 and 1996, $16,100 148,416 147,757
Deferred Income Taxes 23,210 23,210
Miscellaneous Current Assets 23,985 33,976
----------- ------------
Total Current Assets 1,613,476 1,744,427
----------- ------------
DEFERRED DEBITS
Property Abandonments - net 48,822 52,573
Oil and Gas Property Write-Down 29,636 30,924
Unamortized Debt Expense 135,670 139,067
Deferred OPEB Costs 315,997 226,171
Unrecovered Environmental Costs 127,192 125,900
Unrecovered Plant and Regulatory Study Costs 33,581 33,941
Underrecovered Electric Energy and Gas Costs - net 207,261 176,055
Unrecovered SFAS 109 Deferred Income Taxes 748,589 751,763
Deferred Decontamination and Decommissioning Costs 46,643 46,643
Other 59,278 56,730
----------- ------------
Total Deferred Debits 1,752,669 1,639,767
----------- ------------
Total $16,924,098 $16,915,331
=========== ============
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
CONSOLIDATED BALANCE SHEETS
CAPITALIZATION AND LIABILITIES
(Thousands of Dollars)
March 31, December 31,
1997 1996
----------- ------------
<S> <C> <C>
CAPITALIZATION
Common Equity:
Common Stock $ 3,603,300 $ 3,626,792
Retained Earnings 1,578,256 1,586,256
----------- ------------
Total Common Equity 5,181,556 5,213,048
Subsidiaries' Preferred Securities:
Preferred Stock Without Mandatory Redemption 94,523 113,392
Preferred Stock With Mandatory Redemption 150,000 150,000
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 4,463,916 4,580,231
----------- ------------
Total Capitalization 10,402,995 10,474,671
----------- ------------
OTHER LONG-TERM LIABILITIES
Decontamination and Decommissioning Costs 46,643 46,643
Environmental Costs 84,827 85,755
Capital Lease Obligations 52,173 52,371
----------- ------------
Total Other Long-Term Liabilities 183,643 184,769
----------- ------------
CURRENT LIABILITIES
Long-Term Debt due within one year 607,489 547,981
Commercial Paper and Loans 542,529 638,051
Book Overdrafts 51,547 106,372
Accounts Payable 561,780 590,932
Other Taxes Accrued 263,334 31,577
Interest Accrued 94,799 95,800
Provision for Rate Refund 7,585 89,210
Other 123,594 171,831
----------- ------------
Total Current Liabilities 2,252,657 2,271,754
----------- ------------
DEFERRED CREDITS
Deferred Income Taxes 3,264,915 3,250,343
Deferred Investment Tax Credits 356,968 361,786
Deferred OPEB Costs 315,997 226,171
Other 146,923 145,837
----------- ------------
Total Deferred Credits 4,084,803 3,984,137
----------- ------------
COMMITMENTS AND CONTINGENT LIABILITIES (Note 3) -- --
----------- ------------
Total $16,924,098 $16,915,331
=========== ============
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands of Dollars)
For the Three Months Ended March 31,
------------------------------------
1997 1996
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 139,514 $ 194,104
Adjustments to reconcile net income to net cash flows from
operating activities:
Depreciation and Amortization 150,339 151,957
Amortization of Nuclear Fuel 17,088 8,905
Deferral of Electric Energy and Gas Costs - net (31,206) (37,278)
Unrealized Losses (Gains) on Investments - net 13,675 (10,103)
Provision for Deferred Income Taxes - net 682 24,484
Investment Tax Credits - net (4,600) (5,004)
Allowance for Funds Used During Construction - Debt and
Capitalized Interest (5,546) (4,547)
Proceeds from Leasing Activities 13,871 11,212
Changes in certain current assets and liabilities:
Net decrease (increase) in Accounts Receivable and Unbilled
Revenues 15,253 (54,383)
Net decrease in Inventory - Fuel and Materials and
Supplies 177,573 162,307
Net decrease in Accounts Payable (29,152) (28,448)
Net increase in Other Accrued Taxes 231,757 243,857
Net change in Other Current Assets and Liabilities (120,872) 17,313
Other 5,549 469
Net cash provided by operating activities - Discontinued
Operations -- 10,140
--------- ---------
Net Cash provided by operating activities 573,925 684,985
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to Utility Plant, excluding AFDC (106,408) (96,349)
Net increase in Long-Term Investments and Real Estate (73,818) (21,571)
Contribution to Decommissioning Funds and Other Special Funds (7,371) (7,391)
Cost of Plant Removal - net (9,048) (11,101)
Other (3,385) 14,409
Change in Net Assets - Discontinued Operations -- (9,481)
--------- ---------
Net cash used in investing activities (200,030) (131,484)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Net (decrease) increase in Short-Term Debt (95,522) 184,625
Decrease in Book Overdrafts (54,825) (6,642)
Issuance of Long-Term Debt -- 352,451
Redemption of Long-Term Debt (56,807) (430,070)
Long-Term Debt Issuance and Redemption Costs -- (38,319)
Redemption of Preferred Stock (18,869) --
Issuance of Preferred Securities of Subsidiaries 95,000 --
Retirement of Common Stock (42,588) --
Cash Dividends Paid on Common Stock (125,257) (132,138)
Preferred Securities Issuance Expenses (3,161) 2
--------- ---------
Net cash used in financing activities (302,029) (70,091)
--------- ---------
Net increase in Cash and Cash Equivalents 71,866 483,410
Cash and Cash Equivalents at Beginning of Period 278,903 61,964
--------- ---------
Cash and Cash Equivalents at End of Period $ 350,769 $ 545,374
========= =========
Income Taxes Paid $ 3,078 $ 7,288
Interest Paid $ 74,329 $ 110,258
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
(Thousands of Dollars)
For the Three Months Ended March 31,
------------------------------------
1997 1996
----------- -----------
Balance at Beginning of Period $ 1,586,256 $ 1,636,971
Add:
Net Income 139,514 194,104
----------- -----------
Total 1,725,770 1,831,075
----------- -----------
Deduct:
Cash Dividends on Common Stock 125,257 132,138
Retirement of Common Stock 19,096 --
Preferred Securities Issuance Expenses 3,161 (2)
----------- -----------
Total Deductions 147,514 132,136
----------- -----------
Balance at End of Period $ 1,578,256 $ 1,698,939
=========== ===========
See Notes to Consolidated Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
PUBLIC SERVICE ELECTRIC AND GAS COMPANY
CONSOLIDATED STATEMENTS OF INCOME
(Thousands of Dollars)
Three Months Ended
March 31,
---------------------------------
1997 1996
---------------- --------------
<S> <C> <C>
OPERATING REVENUES
Electric $ 960,457 $ 959,436
Gas 733,860 796,916
-------------- --------------
Total Operating Revenues 1,694,317 1,756,352
-------------- --------------
OPERATING EXPENSES
Operation
Fuel for Electric Generation and Interchanged Power 248,352 216,075
Gas Purchased 421,833 456,732
Other 231,663 242,890
Maintenance 57,553 95,416
Depreciation and Amortization 149,159 151,433
Taxes
Federal Income Taxes 101,907 94,630
New Jersey Gross Receipts Taxes 172,046 188,436
Other 19,685 23,587
-------------- --------------
Total Operating Expenses 1,402,198 1,469,199
-------------- --------------
OPERATING INCOME 292,119 287,153
OTHER INCOME AND DEDUCTIONS
Settlement of Salem Litigation - Net of Taxes (53,300) --
Other - net 2,296 (778)
-------------- --------------
Total Other Income and Deductions (51,004) (778)
-------------- --------------
INCOME BEFORE INTEREST CHARGES AND
DIVIDENDS ON PREFERRED SECURITIES 241,115 286,375
-------------- --------------
INTEREST CHARGES
Long-Term Debt 83,830 91,512
Short-Term Debt 5,095 4,034
Other 6,558 6,755
-------------- --------------
Total Interest Charges 95,483 102,301
Allowance for Funds Used During
Construction - Debt (4,811) (4,291)
-------------- --------------
Net Interest Charges 90,672 98,010
-------------- --------------
Preferred Securities Dividend Requirements of Subsidiaries 10,420 4,715
-------------- --------------
NET INCOME 140,023 183,650
Preferred Stock Dividend Requirements 3,872 7,526
Net Loss on Preferred Stock Redemptions 377 --
-------------- --------------
EARNINGS AVAILABLE TO PUBLIC
SERVICE ENTERPRISE GROUP
INCORPORATED $ 135,774 $ 176,124
============== ==============
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PUBLIC SERVICE ELECTRIC AND GAS COMPANY
CONSOLIDATED BALANCE SHEETS
ASSETS
(Thousands of Dollars)
March 31, December 31,
1997 1996
----------- -----------
<S> <C> <C>
UTILITY PLANT - Original cost
Electric $13,364,416 $13,314,033
Gas 2,577,583 2,555,901
Common 538,993 530,185
----------- -----------
Total 16,480,992 16,400,119
Less: Accumulated depreciation and amortization 6,020,933 5,889,098
----------- -----------
Net 10,460,059 10,511,021
Nuclear Fuel in Service, net of accumulated amortization -
1997, $276,472; 1996, $259,384 182,113 198,845
----------- -----------
Net Utility Plant in Service 10,642,172 10,709,866
Construction Work in Progress, including Nuclear Fuel in
Process - 1997, $78,553; 1996, $70,455 468,513 445,321
Plant Held for Future Use 23,966 23,966
----------- -----------
Net Utility Plant 11,134,651 11,179,153
----------- -----------
INVESTMENTS AND OTHER NONCURRENT ASSETS
Long-Term Investments, net of amortization - 1997, $14,519; 1996, $12,679, and
net of valuation allowances - 1997 and
1996, $13,969 132,892 133,342
Nuclear Decommissioning and Other Special Funds 390,171 382,348
Other Plant, net of accumulated depreciation and
amortization - 1997, $1,174; 1996, $1,171 19,155 19,157
----------- -----------
Total Investments and Other Noncurrent Assets 542,218 534,847
----------- -----------
CURRENT ASSETS
Cash and Cash Equivalents 251,377 47,639
Accounts Receivable:
Customer Accounts Receivable 578,515 499,858
Other Accounts Receivable 152,872 175,009
Less: Allowance for Doubtful Accounts 40,465 42,283
Accounts Receivable - Associated Companies - net -- 4,308
Unbilled Revenues 180,828 248,504
Fuel, at average cost 134,787 313,019
Materials and Supplies, at average cost, net of inventory
valuation reserves - 1997 and 1996, $16,100 148,416 147,757
Deferred Income Taxes 23,210 23,210
Miscellaneous Current Assets 20,617 30,409
----------- -----------
Total Current Assets 1,450,157 1,447,430
----------- -----------
DEFERRED DEBITS
Property Abandonments - net 48,822 52,573
Oil and Gas Property Write-Down 29,636 30,924
Unamortized Debt Expense 134,393 137,606
Deferred OPEB Costs 315,997 226,171
Unrecovered Environmental Costs 127,192 125,900
Unrecovered Plant and Regulatory Study Costs 33,581 33,941
Underrecovered Electric Energy and Gas Costs - net 207,261 176,055
Unrecovered SFAS 109 Deferred Income Taxes 748,589 751,763
Deferred Decontamination and Decommissioning Costs 46,643 46,643
Other 59,278 56,348
----------- -----------
Total Deferred Debits 1,751,392 1,637,924
----------- -----------
Total $14,878,418 $14,799,354
=========== ===========
See Notes to Consolidated Financial Statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PUBLIC SERVICE ELECTRIC AND GAS COMPANY
CONSOLIDATED BALANCE SHEETS
CAPITALIZATION AND LIABILITIES
(Thousands of Dollars)
March 31, 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 1,370,816 1,365,003
----------- -----------
Total Common Equity 4,528,214 4,522,401
Preferred Stock Without Mandatory Redemption 94,523 113,392
Preferred Stock With Mandatory Redemption 150,000 150,000
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 4,005,958 4,107,331
----------- -----------
Total Capitalization 9,291,695 9,311,124
----------- -----------
OTHER LONG-TERM LIABILITIES
Decontamination and Decommissioning Costs 46,643 46,643
Environmental Costs 84,827 85,755
Capital Lease Obligations 52,173 52,371
----------- -----------
Total Other Long-Term Liabilities 183,643 184,769
----------- -----------
CURRENT LIABILITIES
Long-Term Debt due within one year 500,000 423,500
Commercial Paper and Loans 542,529 638,051
Book Overdrafts 51,547 106,372
Accounts Payable 470,793 520,651
Accounts Payable - Associated Companies - net 80,271 --
Other Taxes Accrued 204,469 33,745
Interest Accrued 76,184 86,674
Provision for Rate Refund 7,585 89,210
Other 123,449 132,113
----------- -----------
Total Current Liabilities 2,056,827 2,030,316
----------- -----------
DEFERRED CREDITS
Deferred Income Taxes 2,545,767 2,557,587
Deferred Investment Tax Credits 346,945 351,637
Deferred OPEB Costs 315,997 226,171
Other 137,544 137,750
----------- -----------
Total Deferred Credits 3,346,253 3,273,145
----------- -----------
COMMITMENTS AND CONTINGENT LIABILITIES (Note 3) -- --
----------- -----------
Total $14,878,418 $14,799,354
=========== ===========
See Notes to Consolidated Financial Statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PUBLIC SERVICE ELECTRIC AND GAS COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands of Dollars)
For the Three Months Ended March 31,
------------------------------------
1997 1996
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 140,023 $ 183,650
Adjustments to reconcile net income to net cash flows from
operating activities:
Depreciation and Amortization 149,159 151,044
Amortization of Nuclear Fuel 17,088 8,905
Deferral of Electric Energy and Gas Costs - net (31,206) (37,278)
Provision for Deferred Income Taxes - net (8,646) 22,442
Investment Tax Credits - net (4,692) (4,743)
Allowance for Funds Used During Construction - Debt (4,811) (4,291)
Changes in certain current assets and liabilities:
Net decrease (increase) in Accounts Receivable and Unbilled
Revenues 13,646 (50,783)
Net decrease in Inventory - Fuel and Materials and
Supplies 177,573 162,307
Net increase in Accounts Payable 30,413 18,912
Net increase in Other Accrued Taxes 170,724 191,804
Net change in Other Current Assets and Liabilities (90,987) 27,036
Other 2,981 3,385
--------- ---------
Net cash provided by operating activities 561,265 672,390
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to Utility Plant, excluding AFDC (106,408) (96,349)
Net increase in Long-Term Investments (1,403) (19,188)
Contribution to Decommissioning Funds and Other Special Funds (7,371) (7,391)
Cost of Plant Removal - net (9,048) (11,101)
Other 2 (13)
--------- ---------
Net cash used in investing activities (124,228) (134,042)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Net (decrease) increase in Short-Term Debt (95,522) 180,839
Decrease in Book Overdrafts (54,825) (6,642)
Issuance of Long-Term Debt -- 352,451
Redemption of Long-Term Debt (24,873) (413,105)
Long-Term Debt Issuance and Redemption Costs -- (38,319)
Redemption of Preferred Stock (18,869) --
Issuance of Preferred Securities of Subsidiaries 95,000 --
Cash Dividends Paid (130,672) (137,726)
Other (3,538) --
--------- ---------
Net cash used in financing activities (233,299) (62,502)
--------- ---------
Net increase in Cash and Cash Equivalents 203,738 475,846
Cash and Cash Equivalents at Beginning of Period 47,639 32,373
--------- ---------
Cash and Cash Equivalents at End of Period $ 251,377 $ 508,219
========= =========
Income Taxes Paid $ 4,149 $ 9,049
Interest Paid $ 71,276 $ 101,605
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
PUBLIC SERVICE ELECTRIC AND GAS COMPANY
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
(Thousands of Dollars)
For the Three Months Ended March 31,
------------------------------------
1997 1996
----------- -----------
Balance at Beginning of Period $ 1,365,003 $ 1,365,915
Add:
Net Income 140,023 183,650
----------- -----------
Total 1,505,026 1,549,565
----------- -----------
Deduct Cash Dividends:
Preferred Stock, at required rates 3,872 7,526
Common Stock 126,800 130,200
Preferred Securities Issuance Expenses 3,161 --
----------- -----------
Total Deductions 133,833 137,726
----------- -----------
Net Loss on Preferred Stock Redemptions (377) --
----------- -----------
Balance at End of Period $ 1,370,816 $ 1,411,839
=========== ===========
See Notes to Consolidated Financial Statements.
<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
Competitive Transition Charge (CTC)
On April 24, 1997, the Board of Public Utilities (BPU) issued a generic
order regarding CTC filings by electric utilities in New Jersey. The BPU will
conduct a generic review of CTC issues since these issues are integral to the
restructuring of the electric utility industry. As a result, PSE&G's petition
and the motions concerning PSE&G's CTC filing will be placed in abeyance pending
the conclusion of the generic proceeding. The BPU will hold a public hearing
under the generic proceeding to receive written and oral testimony on June 19,
1997. Written comments regarding the generic proceeding are to be submitted to
the BPU by June 27, 1997 and the BPU expects to resolve CTC issues by the end of
July 1997. PSE&G cannot predict the outcome of this proceeding.
Levelized Gas Adjustment Charge (LGAC)
On April 2, 1997, the BPU approved PSE&G's LGAC stipulation. The interim
residential LGAC charge, approved on November 22, 1996, will continue through
October 31, 1997.
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 for
hearing. PSE&G cannot predict the outcome of this proceeding.
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.
Settlement of Salem Litigation
On May 12, 1997, PSE&G settled the lawsuit brought against it by PECO
Energy Company (PECO) and Delmarva Power & Light Company (DP&L), two co-owners
of the Salem Nuclear Generating Station (Salem), relating to alleged damages
resulting from the current outage of the facility. Under the terms of the
settlement, PSE&G will pay an aggregate of $82.0 million to PECO and DP&L. This
resulted in an after-tax charge to earnings of $53.3 million or $0.23 per share
of Enterprise Common Stock. PSE&G is also obligated to pay $1.4 million for each
reactor month that the outage continues beyond an aggregate outage of 64 reactor
months, up to a maximum payment under this provision of $17 million. Salem has
presently been out of service for approximately 47 reactor months through April
30, 1997, and PSE&G does not expect to be required to make any payments under
this provision.
PECO, DP&L and PSE&G have also agreed to an operating performance standard
through December 31, 2011 for Salem and December 31, 2007 for the Peach Bottom
Atomic Power Station (Peach Bottom) operated by PECO. Under this standard, the
operator would be required to make payments to the non-operating parties if the
three-year capacity factor, determined annually, of either station falls below
40 percent, subject to a maximum of $25 million per year. The initial three-year
period begins for Peach Bottom on January 1, 1998 and for Salem on the date the
later of the two Salem units returns to service. The parties have further agreed
to forego litigation in the future, except for limited cases in which the
operator would be responsible for damages of no more than $5 million per year.
As previously reported, PSE&G and Atlantic City Electric Company (ACE)
entered into an operating agreement which resulted in the dismissal of a similar
lawsuit by ACE. Under the agreement, ACE pays a portion of its 1997 operation
and maintenance (O&M) requirements based on the generation at Salem. Current
expectations of the return to service of the Salem units (see Nuclear Operations
of MD&A), is likely to result in PSE&G absorbing $7 to $10 million of ACE's
share of 1997 O&M. As of April 30, 1997, PSE&G has realized $4.5 million of such
costs.
Note 4. Financial Instruments and Risk Management
Enterprise's operations give rise to exposure to market risks from changes
in fossil fuel 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. Enterprise does not currently hold or issue
financial instruments for trading purposes.
Natural Gas Hedging
Through March 31, 1997, Energis Resources Incorporated (Energis Resources)
entered into futures contracts to buy 7,960,000 mmbtu of natural gas at an
average price of $2.04 per mmbtu related to fixed-price sales commitments. Such
contracts, together with physical purchase contracts, hedged approximately 93%
of its fixed-price sales commitments at March 31, 1997. Energis Resources had a
deferred unrealized hedge loss of $0.3 million at March 31, 1997.
<PAGE>
Note 5. Discontinued Operations
Prior year operating results of Energy Development Corporation (EDC) are
summarized below:
Quarter Ended
March 31, 1996
Revenues $68,537
Operating income 19,486
Earnings before income taxes 12,700
Income taxes 4,050
Net income 8,650
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 were $0.60 for the quarter
ended March 31, 1997, a decrease of $0.19 per share of common stock from the
comparable 1996 period.
The earnings per share decrease was primarily due to the settlement of a
lawsuit filed by two of the co-owners of the Salem Nuclear Generating Station
(Salem) (see Note 3 -- Commitments and Contingent Liabilities). Under this
settlement, PSE&G will pay an aggregate of $82.0 million to PECO Energy Company
(PECO) and Delmarva Power and Light Company (DP&L), resulting in an after tax
charge to earnings of $53.3 million or $0.23 per share. Another factor that
decreased earnings per share was weak electric and gas sales due to mild
weather, partially offset by lower operation and maintenance expenses at Hope
Creek Nuclear Generating Station (Hope Creek) and Salem. In 1996, expenses at
these stations were higher than in 1997 due to the extended 1996 refueling and
maintenance outage at Hope Creek and restart activities at Salem.
Enterprise Diversified Holdings Incorporated's (EDHI) contribution to
earnings decreased. This decrease was primarily due to the contribution of $0.04
per share in the first quarter of 1996 by EDHI's oil and gas subsidiary, Energy
Development Corporation (EDC), which was sold on July 31, 1996. Approximately
$350 million of the proceeds was used to buy back 12.7 million shares of
Enterprise common stock. The resulting lower number of shares outstanding
offset, on an earnings per share basis, the absence of an EDC contribution in
the first quarter of 1997.
PSE&G - Revenues
Electric
Increase or (Decrease)
--------------------------
Quarter Ended
March 31,
1997 vs. 1996
--------------------------
(Millions of Dollars)
Kilowatt-hour sales $ (23)
Recovery of energy costs 30
Non-margin revenues (A) ( 9)
Other operating revenues 3
-----------
Total Electric Revenues $ 1
===========
Revenues increased $1 million or 0.1% for the quarter ended March 31, 1997
from the comparable period of 1996 primarily due to higher recovery of energy
costs. This increase was partially offset by lower kilowatt-hour sales due to
milder weather.
Gas
Increase or (Decrease)
--------------------------
Quarter Ended
March 31,
1997 vs. 1996
--------------------------
(Millions of Dollars)
Therm sales $ (13)
Recovery of fuel costs (31)
Non-margin revenues (A) (17)
Other operating revenues (2)
----------
Total Gas Revenues $ (63)
==========
Revenues decreased $63 million or 7.9% for the quarter ended March 31, 1997
over the comparable period of 1996 primarily due to lower recovery of fuel costs
and decreased therm sales due to milder weather. Lower other operating revenues
due to weak off-system sales also contributed to the overall revenue decrease.
(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
Other Operation and Maintenance Expenses
Other operation and maintenance expenses decreased $49 million or 14.5% for
the quarter ended March 31, 1997 from the comparable 1996 period. The decrease
was primarily due to Hope Creek's extended refueling and maintenance outage
during the first quarter of 1996. Also contributing to the decrease were lower
1997 restart activity expenses at Salem.
Federal Income Taxes
Federal income taxes increased $7 million or 7.7% for the quarter ended
March 31, 1997 from the comparable 1996 period. The increase was primarily due
to the increase in 1997 pre-tax income.
Interest on Long-Term Debt
Interest on long-term debt decreased $8 million or 8.4% for the quarter
ended March 31, 1997 from the comparable 1996 period. In 1996, interest was
higher due to a premium payment in connection with open market purchases of
certain outstanding First and Refunding Mortgage Bonds.
Fuel for Electric Generation and Interchanged Power
Fuel for Electric Generation and Interchanged Power increased $32 million
or 14.9% due to an increase in fuel recovery revenues. 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.
EDHI - Net Income
Increase or (Decrease)
---------------------------------------------
Quarter Ended
March 31,
1997 vs. 1996
---------------------------------------------
Amount Per
(Millions of Dollars) Share
----------------------- ---- ----------------
PSRC $ (6) $ (.02)
CEA 3 .01
Energis Resources (3) (.01)
EGDC 1 --
----- ---------- ----- -----------
Continuing Operations (5) (.02)
Discontinued Operations-EDC (9) (.04)
===== ========== ==== ============
Total $ (14) $ (.06)
===== ========== ==== ============
Continuing Operations
EDHI's income from continuing operations was $4 million for the quarter
ended March 31, 1997, a $5 million decrease from the comparable 1996 period. The
decrease was primarily due to lower gains on Public Service Resources
Corporation's (PSRC) security investments held in limited partnerships. The loss
for Energis Resources increased due to higher administrative and general
expenditures while income for Community Energy Alternatives Inc. (CEA) increased
due to the improved operations of several projects.
<PAGE>
Discontinued Operations
EDC was sold on July 31, 1996.
Liquidity and Capital Resources
Enterprise
Cash generated from operations will provide the major source of funds for
growth of the business. Cash and cash equivalents totaled $351 million at March
31, 1997.
As of March 31, 1997, Enterprise's capital structure consisted of 49.8%
common equity, 42.9% long-term debt and 7.3% preferred stock and other preferred
securities.
Dividend payments on Common Stock were $0.54 per share and totaled $125
million for the quarter ended March 31, 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
For the quarter ended March 31, 1997, PSE&G had utility plant additions,
including AFDC, of $111 million, an $11 million increase from the corresponding
1996 period. The increase was primarily due to the cost of 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 approximately $1 billion, assuming adequate and timely
recovery of costs including any costs stranded as a result of changes in federal
and state regulations, as to which no assurances can be given. (See Competitive
Environment below; Note 2, Rate Matters; Note 3, Commitments and Contingent
Liabilities of Notes and Federal Regulations (Electric) of Item 5.)
EDHI
During the next five years, EDHI's capital requirements are expected to be
provided from additional debt financing, operational cash flows and equity
capital. CEA and Energis Resources are expected to be the primary vehicles 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. Energis Resources is
expected to expand upon the current energy related services being provided to
industrial and commercial customers. 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.
In the first quarter of 1997, PSRC entered into a leveraged lease of a
coal-fired steam generating station located in the Netherlands. In April 1997,
PSRC entered into two additional leveraged leases of power plants: one located
in the United Kingdom; the other in the Netherlands. The aggregate of these
investments amounted to approximately $107 million.
In the first quarter of 1997, CEA acquired a 50% interest in a 200 MW
natural gas-fired plant located in Columbia which is currently under
construction. In April 1997, CEA and a partner won a bid to acquire, for $565
million, 90% of two Argentinean electric distribution companies serving the
Buenos Aires province. CEA's indirect ownership of the two companies is 33%.
Financial closing is expected to occur in June 1997. Each of these investments
is considered an exempt foreign utility company. Also in April 1997, CEA
acquired a 49% interest in an operating 180 MW oil-fired cogeneration plant
located on the island of Oahu in Hawaii. The aggregate equity investment for
these and other projects will amount to approximately $225 million by year end.
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 March 31,
1997, EDHI had a consolidated debt to equity ratio of 1.00:1. For the twelve
months ended March 31, 1997, the EBIT coverage ratio, as defined to exclude the
effects of EGDC and the 1996 gain on the sale of EDC, was 2.25:1. Compliance
with applicable financial covenants will depend upon future financial position
and levels of earnings, as to which no assurance can be given.
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 $4.336 billion aggregate amount of additional Bonds/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 March 31, 1997, this Mortgage
ratio was 3.34:1. As of March 31, 1997, the Mortgage would permit up to $3.047
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 will redeem
all 750,000 shares of its 7.44% Cumulative Preferred Stock $100 par value at
$103.72 per share in June 1997.
The BPU has authorized PSE&G to issue and have outstanding at any one time
not more than $1.3 billion of short-term obligations, consisting of commercial
paper and other unsecured borrowings from banks and other lenders through
January 2, 1999. On March 31, 1997, PSE&G had $467 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 1997 and a $500
million five-year revolving credit agreement expiring in August 2000 with a
group of commercial banks, which provide for borrowings of up to one year. On
March 31, 1997, there were no borrowings outstanding under these credit
agreements. PSE&G expects to be able to renew the credit agreement expiring in
1997.
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 March 31, 1997, Fuelco had
commercial paper of $74 million outstanding under such program.
External Financings - EDHI
PSEG Capital Corporation's (Capital) Medium-Term Note (MTN) program is
expected to provide for an aggregate principal amount of up to $650 million and
its total debt outstanding at any time, including MTNs, is not expected to
exceed such amount. At March 31, 1997, Capital had total debt outstanding of
$398 million, including $335 million of MTN's.
Nuclear Operations
PSE&G's Salem Units 1 and 2 were taken out of service in the second quarter
of 1995. Salem Unit 2 is in the final stage of preparation for restart and is
expected to return to service early in the third quarter of 1997. In a May 5,
1997 letter to the Nuclear Regulatory Commission (NRC), PSE&G requested that the
NRC commence its Readiness Assessment Team Inspection (a requirement for unit
restart) in early June 1997. PSE&G expects that the NRC will complete its
inspection in June. Installation of Salem Unit 1 steam generators is nearing
completion, and the unit is expected to return to service in late 1997. Restart
of each Salem Unit is subject to NRC approval. The cost of the replacement of
Unit 1 steam generators, including installation, and the cost of disposal of the
four old steam generators is estimated at $180 million (PSE&G's share is $77
million), of which approximately $150 million has already been spent. The
inability to successfully return these units to continuous, safe operation could
have a material adverse effect on the financial condition, results of operations
and net cash flows of Enterprise and PSE&G.
<PAGE>
Impact of New Accounting Pronouncement
In March 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 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.
Competitive Environment
Energy Master Plan
On January 16, 1997, the BPU issued its draft report regarding Phase II of
the New Jersey Energy Master Plan (draft Phase II report) addressing wholesale
and retail electric competition in New Jersey. PSE&G assessed the draft Phase II
report's proposed findings and recommendations and, in accordance with the
proceeding requirements, filed formal written comments with the BPU on February
28, 1997.
The comments stated that PSE&G will voluntarily commit to provide access to
its transmission system for retail customers in order to facilitate electric
industry restructuring to open the market to competition. PSE&G further stated
that it is committed to working toward rate reductions in a manner that assures
the reliability of electric service, safeguards the environment, protects the
New Jersey labor force and treats investors fairly. PSE&G urged the BPU not to
allow prudently incurred costs to be stranded in the industry transition to
competition. PSE&G also recommended that, as long as the BPU's policy objectives
are met and the utility meets its burden of proof, there should be flexibility
in the guidelines for the form and content of the various utility filings
required to be made by July 15, 1997. In addition, PSE&G recommended that, at a
minimum, the BPU should require certain environmental protection standards.
On April 30, 1997, the BPU issued its final report regarding Phase II of
the New Jersey Energy Master Plan (final Phase II report). The majority of the
final Phase II report mirrors the draft Phase II report, except that it
accelerates the phase-in period of customer choice of providers for all
customers to include 10% in October 1998, 20% by January 1999, 35% by April
1999, 50% by October 1999, 75% by April 2000 and 100% by July 2000. The final
Phase II report also calls for: (1) near term rate reductions in retail electric
rates of 5-10%; (2) utilities to have the opportunity, but no guarantee, to
recover stranded costs associated with generating capacity investment and
independent power contract costs; (3) a market transition charge to be
established for a limited time of 4-8 years to provide for the recovery of
non-mitigated stranded costs; (4) the issue of securitization of stranded costs
to be explored; (5) functional separation of utility generating assets, subject
to BPU detailed analyses of potential market power issues and (6) the filing of
a rate unbundling plan, stranded cost status report and restructuring plan by
July 15, 1997. The final Phase II report endorses environmental disclosure by
power suppliers to provide consumers with information necessary to choose
cleaner sources of power available in the marketplace. The information will
enable verification of claimed emission rates, which will be explored by a
Consumer Protection Task Force. The final Phase II report is to be submitted to
New Jersey's Governor and Legislature in May 1997, with restructuring
legislation expected to be introduced in the Legislature before year-end 1997.
BPU action on the July 15, 1997 utility filings pursuant to the final Phase II
report is expected to be completed during the fourth quarter of 1998.
Stranded Costs
Recoverability of stranded costs is largely dependent on the transition
rules established by regulators, including the Federal Energy Regulatory
Commission (FERC) and the BPU. The final Phase II report concluded that a
utility's stranded costs should be limited to costs associated with past
financial commitments made for the purpose of procuring a utility's power supply
and that the utility should be given the opportunity but that there should not
be a guarantee provided for 100% recovery of all eligible stranded costs. Due to
uncertainties regarding future market prices of electricity and the duration of
the transition period, PSE&G has not yet determined the level of stranded costs
related to its generating facilities and thus cannot currently predict the
amount of its potential stranded costs. PSE&G plans to file, no later than July
15, 1997, a stranded cost status report with the BPU. The opportunity for full
recovery of such eligible costs would be contingent upon, and may be constrained
by, the utility meeting a number of conditions, including achievement of the
goal of delivering a near term rate reduction to customers of 5 to 10%.
A mechanism that is currently being explored to mitigate stranded costs for
utilities is securitization. With the adoption of appropriate state legislation,
this mechanism offers a means to reduce the cost of stranded asset recovery by
refinancing stranded capital, formerly financed with a combination of debt and
equity, with all debt. The final Phase II report recognizes the potential
benefits of this valuable mechanism. However, the report expresses the BPU's
view that securitization is not the sole solution for solving the stranded cost
problems but must be used with other reasonably available mitigation steps.
Recognizing that stranded costs have not yet been quantified, that the issue of
asset securitization and the extent of its application have not been determined,
as well as the need for enabling legislation, PSE&G cannot predict the extent to
which regulators may allow recovery of its potentially stranded costs. Inability
to adequately recover stranded costs could have a material adverse affect on the
financial condition, results of operations and net cash flows of Enterprise and
PSE&G.
New Jersey Gross Receipts and Franchise Tax (NJGRT)
On March 10, 1997, legislation was introduced in the New Jersey Legislature
to repeal the NJGRT collected by utilities from their customers and replace it
with a combination of corporate business tax, state sales and use tax and a
transitional assessment which would be phased out over five years. The new tax
structure would improve the competitive position of PSE&G vis-a-vis non-utility
energy providers in New Jersey who are currently not subject to NJGRT. If this
legislation is approved, the new tax structure would take effect January 1,
1998. PSE&G cannot predict when or if this legislation will be approved.
PSE&G SelectGas Pilot Program
On March 12, 1997, the BPU approved PSE&G's SelectGas Pilot Program which
gives residential customers in four municipalities the option to purchase gas
from a supplier other than PSE&G beginning May 1, 1997. This residential gas
unbundling pilot program will extend through June 1998, but customers can elect
to return to the PSE&G system during the pilot or stay with their selected
supplier, assuming the customer's supplier also provides for such a change.
Unbundling in the gas industry began in PSE&G's service area in 1994 when PSE&G
opened the gas market to its commercial and industrial customers.
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 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.
Page 24. PSE&G settled the lawsuit brought against it by PECO and DP&L, two
co-owners of Salem, relating to alleged damages resulting from the current
outage of the facility. Under the terms of the settlement, PSE&G will pay an
aggregate of $82.0 million to PECO and DP&L. PSE&G would also be obligated to
pay $1.4 million for each reactor month that the outage continues beyond an
aggregate outage of 64 reactor months, up to a maximum payment under this
provision of $17 million. Salem has presently been out of service for
approximately 47 reactor months and PSE&G does not expect to be required to make
any payments under this provision. The parties have also agreed to an operating
performance standard through December 31, 2007 for Peach Bottom (operated by
PECO) and December 31, 2011 for Salem. Under this standard, the operator would
be required to make payments to the non-operating owners if the three year
capacity factor, determined annually, of either station falls below 40 percent
subject to a maximum of up to $25 million per year. The initial three-year
period begins for Peach Bottom on January 1, 1998 and for Salem on the date the
later of the two Salem units returns to service. The parties have further agreed
to forego litigation in the future, except for limited cases in which the
operator would be responsible for damages of no more than $5 million per year.
(See Results of Operations of MD&A and Note 3 -- Commitments and Contingent
Liabilities for more information.)
Page 24. In the shareholder derivative litigation, the Appellate Division
sustained the trial court's denial of defendants' motions to dismiss the
complaints. Defendants' appeal of this denial was recently dismissed by the
New Jersey Supreme Court. The litigation will now enter the discovery
phase.
In addition, see the following at the pages indicated:
(1) Page 14. Generic proceeding before the BPU relating to Competitive
Transition Charges, Docket No. ET96090669. Form 10-K, Page 55.
(2) Page 14. Proceedings before the BPU relating to PSE&G's Demand Side
Adjustment Factor, Docket No. ER97020101.
New Matter
On March 18, 1997, Public Service Conservation Resources Corporation
(PSCRC), an indirect wholly-owned subsidiary of Enterprise and a direct
wholly-owned subsidiary of PSE&G, filed a collection action against SYCOM
Enterprises Limited Partnership (SYCOM) in connection with PSCRC's DSM business.
PSCRC alleged that SYCOM has breached a number of different loan agreements
under which PSCRC is owed approximately $13.4 million in principal and interest.
On May 7, 1997, SYCOM filed a counterclaim against PSCRC and a third-party
complaint against an officer and certain consultants of PSCRC, alleging damages
of $750 million and asserting claims that pursuant to statute, if successful,
would permit treble damages. PSCRC believes that the counterclaim and
third-party complaint are spurious and without merit and PSCRC will vigorously
contest such claims. At March 31, 1997, Enterprise and PSE&G had aggregate
investments in PSCRC of $54.9 million. Public Service Conservation Resources
Corporation v. Sycom Enterprises Limited Partnership, Docket No. L-2744-97
Superior Court of New Jersey, Law Division, Middlesex County.
Item 4. Submission of Matters to a Vote of Security Holders
Enterprise's Annual Meeting of Stockholders was held on April 15, 1997.
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:
<PAGE>
Votes Votes
For Withheld
----------- ----------
Proposal 1 - Election of Directors
Class I - Term expiring 2000
Lawrence R. Codey 188,131,745 4,415,553
Ernest H. Drew 188,383,436 4,365,974
Forrest J. Remick 188,411,539 4,328,727
Votes Votes Votes
For Against Abstaining
----------- ------------ ----------
Proposal 2 - Appointment of
Deloitte & Touche
LLP as Independent
Auditors for 1997 190,203,448 1,117,328 1,265,980
There were no broker non-votes with respect to either item.
Item 5. Other Information
Certain information reported under Enterprise's and PSE&G's 1996 Annual
Report to the SEC is updated below. References are to the related pages of the
Form 10-K as printed and distributed.
Nuclear Operations
Form 10-K, Page 9
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.
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
its 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. Hope Creek was initially placed in
the lowest susceptibility category under these guidelines. Due to Hope Creek's
operating time, it now falls into the intermediate susceptibility category. Hope
Creek will perform another shroud inspection during its next refueling outage in
September 1997.
Form 10-K, Page 10
In a separate matter, as a result of several BWRs 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 in May 1996 to operators of BWRs requesting that
measures be taken to minimize the potential for clogging. The NRC has proposed
three resolution options and requires that actions be completed by the end of
the unit's first refueling outage after January 1, 1997. Alternative resolution
options will be subject to NRC approval. PSE&G has responded to the NRC,
indicating its intention to comply with the Bulletin. The Bulletin requires all
BWRs to resolve this issue at their first refueling outage after January 1,
1997. Therefore, PSE&G will be installing large capacity passive strainers
during Hope Creek's next refueling in September 1997. PECO has advised PSE&G
that large capacity passive strainers will also be installed at Peach Bottom
Units 2 and 3 during their next refueling outages in September 1997 and
September 1998, respectively. PSE&G cannot predict what other actions, if any,
the NRC may take in this matter.
Form 10-K, Page 12
As a result of reracking the two spent fuel pools at Salem, the
availability of adequate spent fuel storage capacity is estimated through 2012
for Salem 1 and 2016 for Salem 2, prior to losing an operational full core
discharge reserve. The Hope Creek pool is also fully racked and it is expected
to provide storage capacity until 2006, again prior to losing an operational
full core discharge reserve. 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 discharge reserve capability. PECO has also advised
PSE&G that it is exploring the feasibility of constructing an on-site dry
storage facility which would be operational in the year 2000 and designed to
provide adequate storage capacity through 2014.
Form 10-K, Page 16
New Jersey Department of Environmental Protection (NJDEP) issued a final
renewal permit for Hope Creek Station effective April 1, 1997.
Federal Regulation (Electric)
Form 10-K, Page 2
Federal Energy Regulatory Commission (FERC) Order No. 888 requires all
public utilities owning, controlling or operating transmission lines to file
nondiscriminatory open access tariffs that offer others the same wholesale
transmission service utilities provide to themselves. On February 28, 1997, FERC
issued an order accepting for filing nondiscriminatory pool-wide open access
transmission tariffs for existing power pools. Transmission services covered by
Order No. 888 include network and point-to-point services, as well as ancillary
services and a pro forma tariff setting minimum terms and conditions of service
for nondiscriminatory 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. This
Order also provides public utilities with the opportunity to seek full recovery
of prudently incurred, legitimate and verifiable stranded costs resulting from
the transfer of open access wholesale transmission service customers to another
supplier. To be eligible 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. FERC has ruled that
stranded costs should be recovered from a utility's departing wholesale
customers. FERC has also stated that if costs are stranded by retail wheeling,
utilities should first look to the states to recover those costs. FERC will
become involved only if state regulators lack authority under state law to
provide for stranded cost recovery.
Numerous parties, including PSE&G, had filed requests seeking rehearing and
clarification of various aspects of Order No. 888. On February 26, 1997, FERC
responded to rehearing requests by reaffirming its findings in Order No. 888,
making minor adjustments to ease implementation and providing clarifications to
issues raised on rehearing.
Pennsylvania - New Jersey - Maryland Interconnection (PJM)
Form 10-K, Page 6
On April 1, 1997, PJM, as agent for the PJM transmission owners, began
providing transmission service under the PJM Open Access Transmission Tariff.
The PJM Open Access Transmission Tariff superseded all individual transmission
open access tariffs of the PJM transmission owners. In the order, FERC directed
PJM to use the PECO proposal for interim implementation due to unresolved
questions regarding the other PJM companies' proposal on pricing. FERC had a
technical conference on May 9, 1997 to facilitate the resolution of issues not
fully addressed in the other PJM companies' proposal on congestion pricing.
PSE&G cannot predict what actions, if any, FERC may take in this matter. With
respect to the other tariff options contained in PJM's December 31, 1996 filing,
FERC ordered implementation of the other PJM companies proposal. Action on
interventions and requests for relief filed in response to the December 31, 1996
filing were deferred.
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) A listing of exhibits being filed with this document is as follows:
Exhibit Number Document
12 Computation of Ratios of Earnings to Fixed
Charges plus Preferred Securities Dividend
Requirements (Enterprise).
12(A) Computation of Ratios of Earnings to Fixed Charges
(PSE&G).
12(B) Computation of Ratios of Earnings to Fixed Charges
plus Preferred Securities Dividend Requirements
(PSE&G).
27(A) Financial Data Schedule (Enterprise)
27(B) Financial Data Schedule (PSE&G)
(b) Reports on Form 8-K.
Registrant Date of Report Item Reported
Enterprise and PSE&G January 24, 1997 Item 5
Enterprise and PSE&G January 29, 1997 Item 5
Item 5
<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, 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, March 31,
------------ ------------ ------------ ------------- -------------
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) 475,150 549,178 666,521 627,287 587,358 557,005
Federal Income Taxes (B) 238,270 296,223 320,218 348,324 297,277 302,717
Fixed Charges 537,455 538,556 534,859 548,579 527,974 522,054
------------ ------------- ------------- ------------- ------------ ---------------
Earnings 1,250,875 1,383,957 1,521,598 1,524,190 1,412,609 1,381,776
============ ============ ============ ============= ============ ===============
Fixed Charges as Defined in
Regulation S-K (C):
Total Interest Expense (D) 481,116 470,585 462,189 464,207 453,111 447,144
Interest Factor in Rentals 9,591 11,090 12,120 11,956 11,490 11,404
Subsidiaries' Preferred Securities
Dividend Requirements -- -- 1,680 15,664 27,741 33,495
Preferred Stock Dividends 31,907 38,114 40,467 33,762 23,161 19,507
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 10,504
------------ ------------- ------------- ------------- ----------- ----------------
Total Fixed Charges 537,455 538,556 534,859 548,579 527,974 522,054
============ ============ ============ ============= =========== ================
Ratio of Earnings to Fixed Charges 2.33 2.57 2.84 2.78 2.68 2.65
============ ============ ============ ============= ============ ================
</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
YEARS ENDED DECEMBER 31, March 31,
------------ ------------- ------------- ------------- -------------
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 475,936 614,868 659,406 616,964 535,071 491,444
Federal Income Taxes (A) 223,782 307,414 301,447 325,737 267,619 275,412
Fixed Charges 411,493 401,046 408,045 418,825 437,812 436,662
------------ ------------- ------------- ------------- ------------- ----------------
Earnings 1,111,211 1,323,328 1,368,898 1,361,526 1,240,502 1,203,518
============ ============= ============= ============ ============= ================
Fixed Charges as Defined in
Regulation S-K (B)
Total Interest Expense (C) 401,902 389,956 395,925 406,869 398,581 391,763
Interest Factor in Rentals 9,591 11,090 12,120 11,956 11,490 11,404
Subsidiaries' Preferred Securities
Dividend Requirements -- -- -- -- 27,741 33,495
------------ ------------- ------------- ------------- ------------- ----------------
Total Fixed Charges 411,493 401,046 408,045 418,825 437,812 436,662
============ ============= ============= ============ ============= ================
Ratio of Earnings to Fixed Charges 2.70 3.30 3.35 3.25 2.83 2.76
============ ============= ============= ============ ============= ================
</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, March 31,
------------ ------------- ------------- ------------- -------------
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 475,936 614,868 659,406 616,964 535,071 491,444
Federal Income Taxes (A) 223,782 307,414 301,447 325,737 267,619 275,412
Fixed Charges 411,493 401,046 408,045 418,825 437,812 436,662
------------ ------------- ------------- ------------- ------------- ----------------
Earnings 1,111,211 1,323,328 1,368,898 1,361,526 1,240,502 1,203,518
============ ============= ============= ============= ============= =================
Fixed Charges as Defined in
Regulation S-K (B):
Total Interest Expense (C) 401,902 389,956 395,925 406,869 398,581 391,763
Interest Factor in Rentals 9,591 11,090 12,120 11,956 11,490 11,404
Subsidiaries' Preferred Securities
Dividend Requirements -- -- -- -- 27,741 33,495
Preferred Stock Dividends 31,907 38,114 42,147 49,426 23,161 19,507
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 10,504
------------ ------------- ------------- ------------- ------------- ----------------
Total Fixed Charges 458,168 458,003 468,955 491,679 473,016 466,673
============ ============= ============= ============= ============= =================
Ratio of Earnings to Fixed Charges 2.43 2.89 2.92 2.77 2.62 2.58
============ ============= ============= ============= ============= =================
</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. The referenced financial statements are unaudited but, in the
opinion of Enterprise's management, reflect all adjustments, consisting only of
normal recurring accruals, necessary for a fair presentation.
</LEGEND>
<CIK> 0000788784
<NAME> PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 11,134,651
<OTHER-PROPERTY-AND-INVEST> 2,423,302
<TOTAL-CURRENT-ASSETS> 1,613,476
<TOTAL-DEFERRED-CHARGES> 1,752,669
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 16,924,098
<COMMON> 3,603,300
<CAPITAL-SURPLUS-PAID-IN> 0
<RETAINED-EARNINGS> 1,578,256
<TOTAL-COMMON-STOCKHOLDERS-EQ> 5,181,556
663,000
94,523
<LONG-TERM-DEBT-NET> 4,463,916
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 542,529
<LONG-TERM-DEBT-CURRENT-PORT> 607,489
0
<CAPITAL-LEASE-OBLIGATIONS> 52,173
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 5,318,912
<TOT-CAPITALIZATION-AND-LIAB> 16,924,098
<GROSS-OPERATING-REVENUE> 1,732,552
<INCOME-TAX-EXPENSE> 105,690 <F1>
<OTHER-OPERATING-EXPENSES> 1,318,793
<TOTAL-OPERATING-EXPENSES> 1,423,368
<OPERATING-INCOME-LOSS> 309,184
<OTHER-INCOME-NET> (50,998)
<INCOME-BEFORE-INTEREST-EXPEN> 258,186
<TOTAL-INTEREST-EXPENSE> 109,549
<NET-INCOME> 139,514
14,292
<EARNINGS-AVAILABLE-FOR-COMM> 139,514
<COMMON-STOCK-DIVIDENDS> 125,257
<TOTAL-INTEREST-ON-BONDS> 97,009
<CASH-FLOW-OPERATIONS> 573,925
<EPS-PRIMARY> .60
<EPS-DILUTED> .60
<PAGE>
<FN>
<F1>State Income Taxes of $1,591 and Federal Income Taxes for Other Income of
$1,115 were incorporated into this line item for FDS purposes. In the referenced
financial statements, State Income Taxes are included in Taxes - Other and
Federal Income Taxes for Other Income are included in Other Income -
Miscellaneous.
</FN>
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> UT
<LEGEND>
This schedule contains summary financial information extracted from SEC form
10-Q and is qualified in its entirety by reference to such financial statements.
The financial statements are unaudited but, in the opinion of PSE&G's
management, reflect all adjustments, consisting only of normal recurring
accruals, necessary for a fair presentation.
</LEGEND>
<CIK> 0000081033
<NAME> PUBLIC SERVICE ELECTRIC AND GAS COMPANY
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 11,134,651
<OTHER-PROPERTY-AND-INVEST> 542,218
<TOTAL-CURRENT-ASSETS> 1,450,157
<TOTAL-DEFERRED-CHARGES> 1,751,392
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 14,878,418
<COMMON> 2,563,003
<CAPITAL-SURPLUS-PAID-IN> 594,395
<RETAINED-EARNINGS> 1,370,816
<TOTAL-COMMON-STOCKHOLDERS-EQ> 4,528,214
663,000
94,523
<LONG-TERM-DEBT-NET> 4,005,958
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 542,529
<LONG-TERM-DEBT-CURRENT-PORT> 500,000
0
<CAPITAL-LEASE-OBLIGATIONS> 52,173
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 4,492,021
<TOT-CAPITALIZATION-AND-LIAB> 14,878,418
<GROSS-OPERATING-REVENUE> 1,694,317
<INCOME-TAX-EXPENSE> 103,501 <F1>
<OTHER-OPERATING-EXPENSES> 1,299,812
<TOTAL-OPERATING-EXPENSES> 1,402,198
<OPERATING-INCOME-LOSS> 292,119
<OTHER-INCOME-NET> (51,004)
<INCOME-BEFORE-INTEREST-EXPEN> 241,115
<TOTAL-INTEREST-EXPENSE> 105,903 <F2>
<NET-INCOME> 140,023
3,872
<EARNINGS-AVAILABLE-FOR-COMM> 135,774
<COMMON-STOCK-DIVIDENDS> 126,800
<TOTAL-INTEREST-ON-BONDS> 83,830
<CASH-FLOW-OPERATIONS> 561,265
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<PAGE>
<FN>
<F1>State Income Taxes of $479 and Federal Income Taxes for Other Income of
$1,115 were incorporated into this line item for FDS purposes. In the referenced
financial statements, State Income Taxes are included in Taxes - Other and
Federal Income Taxes for Other Income are included in Other Income -
Miscellaneous.
<F2>Total interest expense includes
Preferred Securities Dividend Requirements.
</FN>
</TABLE>
