-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, H+qEfnXUPbrKUPKeYMBKyFUL0yZcL4g5yGu8FjH+Xt2QTmXjvK00cCds5zPWVFYi eBGXsKEc1msEL2Gp0eg9Bg== 0000081033-95-000018.txt : 19951119 0000081033-95-000018.hdr.sgml : 19951119 ACCESSION NUMBER: 0000081033-95-000018 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951114 SROS: NYSE SROS: PHLX FILER: COMPANY DATA: COMPANY CONFORMED NAME: PUBLIC SERVICE ENTERPRISE GROUP INC CENTRAL INDEX KEY: 0000788784 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC & OTHER SERVICES COMBINED [4931] IRS NUMBER: 222625848 STATE OF INCORPORATION: NJ FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-09120 FILM NUMBER: 95592115 BUSINESS ADDRESS: STREET 1: 80 PARK PLZ STREET 2: P O BOX 1171 CITY: NEWARK STATE: NJ ZIP: 07101 BUSINESS PHONE: 2014307000 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PUBLIC SERVICE ELECTRIC & GAS CO CENTRAL INDEX KEY: 0000081033 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC & OTHER SERVICES COMBINED [4931] IRS NUMBER: 221212800 STATE OF INCORPORATION: NJ FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-00973 FILM NUMBER: 95592116 BUSINESS ADDRESS: STREET 1: 80 PARK PLZ STREET 2: PO BOX 570 CITY: NEWARK STATE: NJ ZIP: 07101 BUSINESS PHONE: 2014307000 10-Q 1 FORM 10-Q PSE&G, PS ENTERPRISE =========================================================================== FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 /X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1995 Commission file number 1-9120 Public Service Enterprise Group Incorporated ------------------------------------------------------ (Exact name of registrant as specified in its charter) New Jersey 22-2625848 - ------------------------------- ------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 80 Park Plaza, P. O. Box 1171, Newark, New Jersey 07101-1171 - ------------------------------------------------- ------------ (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: 201 430-7000 ------------ Commission file number 1-973 Public Service Electric and Gas Company ------------------------------------------------------ (Exact name of registrant as specified in its charter) New Jersey 22-1212800 - ------------------------------- ------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 80 Park Plaza, P. O. Box 570, Newark, New Jersey 07101-0570 - ------------------------------------------------ ------------ (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: 201 430-7000 ------------ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ---- ---- The number of shares outstanding of Public Service Enterprise Group Incorporated's sole class of common stock, as of the latest practicable date, was as follows: Class Outstanding at October 31, 1995 ----- ------------------------------- Common Stock, without par value 244,697,930 As of October 31, 1995, Public Service Electric and Gas Company had issued and outstanding 132,450,344 shares of Common Stock, without nominal or par value, all of which were privately held, beneficially and of record by Public Service Enterprise Group Incorporated. =========================================================================== 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, Nine and Twelve Months Ended September 30, 1995 and 1994 ............... 1 Consolidated Balance Sheets as of September 30, 1995, 1994 and December 31, 1994 ......................................... 2 Consolidated Statements of Cash Flows for the Nine and Twelve Months Ended September 30, 1995 and 1994 ............... 4 Consolidated Statements of Retained Earnings for the Three, Nine and Twelve Months Ended September 30, 1995 and 1994........ 5 Public Service Electric and Gas Company (PSE&G): Consolidated Statements of Income for the Three, Nine and Twelve Months Ended September 30, 1995 and 1994 ............... 6 Consolidated Balance Sheets as of September 30, 1995, 1994 and December 31, 1994 .................................... 7 Consolidated Statements of Cash Flows for the Nine and Twelve Months Ended September 30, 1995 and 1994 ............... 9 Consolidated Statements of Retained Earnings for the Three, Nine and Twelve Months Ended September 30, 1995 and 1994 ...... 10 Notes to Consolidated Financial Statements - Enterprise........... 11 Notes to Consolidated Financial Statements - PSE&G................ 19 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Enterprise ......................................... 20 PSE&G .............................................. 30 i TABLE OF CONTENTS ----------------- Page ---- PART II. OTHER INFORMATION Item 5. Other Information ........................................ 31 Item 6. Exhibits and Reports on Form 8-K ......................... 37 Signatures - Public Service Enterprise Group Incorporated ......... 38 Signatures - Public Service Electric and Gas Company .............. 38 ii GLOSSARY OF TERMS The following is a glossary of frequently used abbreviations or acronyms that are found in this report:
TERM MEANING ----------------------- ---------------------------------------------- AFDC................... Allowance for Funds used During Construction BPU.................... New Jersey Board of Public Utilities Capital................ PSEG Capital Corporation CEA.................... Community Energy Alternatives Incorporated DSM.................... Demand Side Management DSM Plan............... DSM Incentive Resource Plan EBIT................... Earnings before interest and taxes EDC.................... Energy Development Corporation EDHI................... Enterprise Diversified Holdings Incorporated EGDC................... Enterprise Group Development Corporation Enterprise............. Public Service Enterprise Group Incorporated EPA.................... United States Environmental Protection Agency EPACT.................. Energy Policy Act FERC................... Federal Energy Regulatory Commission Fuelco................. PSE&G Fuel Corporation Funding................ Enterprise Capital Funding Corporation IRP.................... Integrated Electric Resource Plan Hope Creek............. Hope Creek Nuclear Generating Station KWH.................... Kilowatthours LEAC................... Electric Levelized Energy Adjustment Clause LGAC................... Levelized Gas Adjustment Charge LGIC................... Levelized Gas Incentive Clause MD&A................... Management's Discussion and Analysis of Financial Condition and Results of Operations MIPS................... Monthly Income Preferred Securities Mortgage............... First and Refunding Mortgage of PSE&G MTNs................... Medium-Term Notes MUNI................... Municipal Utility MW..................... Megawatts MWH.................... Megawatthours
iii
TERM MEANING - ----------------------- ---------------------------------------------- NEIL.................. Nuclear Electric Insurance Limited NJDEP................. New Jersey Department of Environmental Protection NJGRT................. New Jersey Gross Receipts and Franchise Tax NOPR................... Notice of Proposed Rulemaking NPS.................... The BPU's nuclear performance standard established for nuclear generating stations owned by New Jersey electric utilities NRC.................... Nuclear Regulatory Commission Partnership............ Public Service Electric and Gas Capital, L.P. Peach Bottom........... Peach Bottom Atomic Power Station, Units 2 and 3 PECO................... PECO Energy, Inc. Price Anderson......... Price-Anderson liability provisions of the Atomic Energy Act of 1954, as amended PSE&G.................. Public Service Electric and Gas Company PSCRC.................. Public Service Conservation Resources Corporation PSRC................... Public Service Resources Corporation RAC.................... Remediation Adjustment Clause Remediation Program.... PSE&G Manufactured Gas Plant Remediation Program Salem.................. Salem Nuclear Generating Station, Units 1 and 2 SEC.................... Securities and Exchange Commission Ventures............... Enterprise Ventures and Service Corporation
iv PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED The financial statements included herein as of September 30, 1995 and 1994 and for the periods then ended are unaudited but, in the opinion of Enterprise's management, reflect all adjustments, consisting only of normal recurring accruals, necessary for a fair presentation. CONSOLIDATED STATEMENTS OF INCOME (Thousands of Dollars)
Three Months Ended Nine Months Ended Twelve Months Ended September 30, September 30, September 30, ------------------------ ------------------------ ------------------------ 1995 1994 1995 1994 1995 1994 ----------- ----------- ----------- ----------- ----------- ----------- OPERATING REVENUES Electric......................$ 1,179,373 $ 1,075,694 $ 3,090,656 $ 2,868,384 $ 3,961,985 $ 3,701,807 Gas........................... 201,631 208,481 1,105,299 1,289,670 1,594,157 1,803,859 Nonutility Activities......... 111,126 92,024 301,228 293,190 412,240 409,583 ----------- ----------- ----------- ----------- ----------- ----------- Total Operating Revenues.. 1,492,130 1,376,199 4,497,183 4,451,244 5,968,382 5,915,249 ----------- ----------- ----------- ----------- ----------- ----------- OPERATING EXPENSES Operation Fuel for Electric Generation and Interchanged Power........ 264,599 189,384 682,923 514,835 863,851 674,594 Gas Purchased and Materials for Gas Produced......... 115,336 124,723 625,540 749,265 900,231 1,039,706 Other...................... 283,742 264,883 803,313 772,395 1,149,441 1,049,247 Maintenance................... 76,205 70,647 208,288 222,559 293,809 324,810 Depreciation and Amortization 168,360 160,674 501,902 474,845 661,085 627,609 Property Impairments.......... -- -- -- -- -- 77,637 Taxes: Federal Income Taxes....... 111,075 96,783 273,506 285,081 300,976 316,685 New Jersey Gross Receipts Taxes.................... 139,363 136,436 455,426 453,139 585,454 605,992 Other...................... 21,922 20,749 67,182 65,532 83,932 82,477 ----------- ----------- ----------- ----------- ----------- ----------- Total Operating Expenses.. 1,180,602 1,064,279 3,618,080 3,537,651 4,838,779 4,798,757 ----------- ----------- ----------- ----------- ----------- ----------- OPERATING INCOME............... 311,528 311,920 879,103 913,593 1,129,603 1,116,492 ----------- ----------- ----------- ----------- ----------- ----------- OTHER INCOME Allowance for Funds Used During Construction - Equity..................... 1,329 1,824 4,598 5,486 11,901 10,256 Miscellaneous - net.......... 3,047 2,174 6,603 4,677 8,356 (1,972) ----------- ----------- ----------- ----------- ----------- ----------- Total Other Income...... 4,376 3,998 11,201 10,163 20,257 8,284 ----------- ----------- ----------- ----------- ----------- ----------- INCOME BEFORE INTEREST CHARGES AND DIVIDENDS ON PREFERRED SECURITIES................... 315,904 315,918 890,304 923,756 1,149,860 1,124,776 ----------- ----------- ----------- ----------- ----------- ----------- INTEREST CHARGES Long-Term Debt............... 106,196 115,919 328,993 343,978 444,173 458,691 Short-Term Debt.............. 10,814 7,067 23,233 16,987 30,208 20,653 Other........................ 8,825 3,275 22,658 7,750 27,713 13,292 ----------- ----------- ----------- ----------- ----------- ----------- Total Interest Charges.. 125,835 126,261 374,884 368,715 502,094 492,636 Allowance for Funds Used During Construction - Debt and Capitalized Interest.......... (8,946) (7,665) (31,248) (22,717) (42,324) (28,888) ----------- ----------- ----------- ----------- ----------- ----------- Net Interest Charges........... 116,889 118,596 343,636 345,998 459,770 463,748 ----------- ----------- ----------- ----------- ----------- ----------- Preferred Securities Dividend Requirements................. 12,233 10,144 36,627 30,568 48,206 40,336 ----------- ----------- ----------- ----------- ----------- ----------- NET INCOME.....................$ 186,782 $ 187,178 $ 510,041 $ 547,190 $ 641,884 $ 620,692 =========== =========== =========== =========== =========== =========== SHARES OF COMMON STOCK OUTSTANDING End of Period ................244,697,930 244,697,930 244,697,930 244,697,930 244,697,930 244,697,930 Average for Period ...........244,697,930 244,697,930 244,697,930 244,394,250 244,697,930 244,004,619 EARNINGS PER AVERAGE SHARE OF COMMON STOCK................... $.76 $.76 $2.08 $2.24 $2.62 $2.54 =========== =========== =========== =========== =========== =========== DIVIDENDS PAID PER SHARE OF COMMON STOCK ................. $.54 $.54 $1.62 $1.62 $2.16 $2.16 =========== =========== =========== =========== ========== =========== See Notes to Consolidated Financial Statements.
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED CONSOLIDATED BALANCE SHEETS (Thousands of Dollars)
September 30, September 30, December 31, ASSETS 1995 1994 1994 - ------ ------------ ------------ ------------ UTILITY PLANT - Original cost Electric .............................................. $ 12,983,167 $ 12,218,603 $ 12,345,919 Gas ................................................... 2,413,673 2,266,750 2,318,233 Common ................................................ 531,024 530,143 545,131 ------------ ------------ ------------ Total ............................................ 15,927,864 15,015,496 15,209,283 Less: accumulated depreciation and amortization........ 5,324,903 5,059,839 5,147,105 ------------ ------------ ------------ Net .............................................. 10,602,961 9,955,657 10,062,178 Nuclear Fuel in Service, net of accumulated amortization - $345,412, $297,426 and $302,906, respectively ............................... 162,776 199,886 205,273 ------------ ------------ ------------ Net Utility Plant in Service ..................... 10,765,737 10,155,543 10,267,451 Construction Work in Progress, including Nuclear Fuel in Process - $122,368, $56,983 and $65,429, respectively ................................ 367,567 752,260 806,934 Plant Held for Future Use ............................. 23,965 20,532 23,860 ------------ ------------ ------------ Net Utility Plant ................................ 11,157,269 10,928,335 11,098,245 ------------ ------------ ------------ INVESTMENTS AND OTHER PROPERTY Long-Term Investments, net of amortization -$5,187, $2,068 and $2,365, and net valuation allowances - $17,105, $15,892 and $17,104 respectively .......... 1,772,205 1,664,193 1,625,952 Oil and Gas Property, Plant and Equipment, net of accumulated depreciation and amortization - $780,054, $758,196 and $748,245, respectively ....... 588,237 560,737 577,913 Real Estate Property and Equipment, net of accumulated depreciation - $4,549, $13,375 and $14,242, and net of valuation allowance - $8,227, $22,514 and $23,264, respectively ............................... 75,978 105,468 115,210 Other Property, net of accumulated depreciation and amortization - $6,128, $4,442 and $4,653, respectively ............................ 28,202 35,859 36,063 Nuclear Decommissioning and Other Special Funds ....... 263,974 223,588 233,022 Other Assets - net .................................... 61,196 79,063 85,478 ------------ ------------ ------------ Total Investments and Other Property ............. 2,789,792 2,668,908 2,673,638 ------------ ------------ ------------ CURRENT ASSETS Cash and Cash Equivalents ............................. 66,808 76,304 67,866 Accounts Receivable: Customer Accounts Receivable ........................ 405,555 380,539 434,207 Other Accounts Receivable ........................... 204,560 172,464 211,779 Less: Allowance for Doubtful Accounts .............. 38,578 27,075 40,915 Unbilled Revenues ..................................... 127,590 104,522 204,056 Fuel, at average cost ................................. 311,776 302,676 268,927 Materials and Supplies, net of inventory valuation reserves - $18,200,$8,525 and $18,200, respectively.. 144,990 163,824 148,285 Prepaid Gross Receipts Taxes .......................... 165,342 131,985 -- Deferred Income Taxes ................................. 27,489 15,387 25,311 Miscellaneous Current Assets .......................... 49,018 56,502 37,356 ------------ ------------ ------------ Total Current Assets ............................. 1,464,550 1,377,128 1,356,872 ------------ ------------ ------------ DEFERRED DEBITS Property Abandonments - net ........................... 74,742 92,667 88,269 Oil and Gas Property Write-Down ....................... 37,367 42,521 41,232 Unamortized Debt Expense .............................. 126,275 129,870 134,599 Deferred OPEB Costs ................................... 174,706 126,658 116,476 Unrecovered Environmental Costs ....................... 132,634 132,169 138,435 Under Recovered Electric Energy and Gas Costs - net ... 173,270 211,783 172,563 Unrecovered Plant and Regulatory Study Costs .......... 35,285 36,986 37,128 Deferred Decontamination and Decommissioning Costs .... 49,742 53,016 53,016 Unrecovered SFAS 109 Deferred Income Taxes ............ 778,642 786,217 791,393 Other ................................................. 9,313 51,974 15,574 ------------ ------------ ------------ Total Deferred Debits ............................ 1,591,976 1,663,861 1,588,685 ------------ ------------ ------------ Total ............................................ $ 17,003,587 $ 16,638,232 $ 16,717,440 ============ ============ ============ See Notes to Consolidated Financial Statements.
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED CONSOLIDATED BALANCE SHEETS (Thousands of Dollars)
September 30, September 30, December 31, CAPITALIZATION AND LIABILITIES 1995 1994 1994 - ------------------------------ ------------ ------------ -------------- CAPITALIZATION Common Equity Common Stock .................................... $ 3,801,157 $ 3,801,157 $ 3,801,157 Retained Earnings ............................... 1,623,640 1,511,054 1,510,010 ------------ ------------ ------------ Total Common Equity .......................... 5,424,797 5,312,211 5,311,167 Subsidiaries' Securities and Obligations Preferred Securities Preferred Stock Without Mandatory Redemption..... 384,994 459,994 384,994 Preferred Stock With Mandatory Redemption ....... 150,000 150,000 150,000 Monthly Income Preferred Securities ............. 210,000 -- 150,000 Long-Term Debt .................................... 5,234,516 5,277,722 5,180,657 ------------ ------------ ------------ Total Capitalization ......................... 11,404,307 11,199,927 11,176,818 ------------ ------------ ------------ OTHER LONG-TERM LIABILITIES Decontamination, Decommissioning, and Low Level Radwaste Costs .................................. 55,630 54,308 56,149 Environmental Costs (note 2) ...................... 103,412 105,544 105,684 Capital Lease Obligations ......................... 53,283 52,680 53,770 ------------ ------------ ------------ Total Other Long-Term Liabilities............. 212,325 212,532 215,603 ------------ ------------ ------------ CURRENT LIABILITIES Long-Term Debt due within one year ................ 144,639 477,773 499,738 Commercial Paper and Loans ........................ 743,702 562,665 491,586 Book Overdrafts ................................... 61,655 62,787 86,576 Accounts Payable .................................. 404,784 332,356 433,471 Other Taxes Accrued ............................... 63,829 49,842 44,149 Interest Accrued .................................. 119,736 126,682 107,962 Estimated Liability for Vacation Pay .............. 32,235 25,062 27,080 Customer Deposits ................................. 32,810 34,682 33,698 Liability for Injuries and Damages ................ 36,090 27,677 29,814 Miscellaneous Environmental Liabilities ........... 16,652 4,715 15,365 Other ............................................. 65,977 52,874 87,480 ------------ ------------ ------------ Total Current Liabilities .................... 1,722,109 1,757,115 1,856,919 ------------ ------------ ------------ DEFERRED CREDITS Accumulated Deferred Income Taxes ................. 3,022,548 2,879,733 2,905,390 Accumulated Deferred Investment Tax Credits ....... 397,429 417,627 412,466 Deferred OPEB Costs ............................... 174,706 126,658 116,476 Other ............................................. 70,163 44,640 33,768 ------------ ------------ ------------ Total Deferred Credits ....................... 3,664,846 3,468,658 3,468,100 ------------ ------------ ------------ COMMITMENTS AND CONTINGENCIES (note 2) Total ........................................ $ 17,003,587 $ 16,638,232 $ 16,717,440 ============ ============ ============
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED CONSOLIDATED STATEMENTS OF CASH FLOWS (Thousands of Dollars)
Nine Months Ended Twelve Months Ended September 30, September 30, -------------------------- -------------------------- 1995 1994 1995 1994 ------------ ----------- ----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES: Net Income ...............................$ 510,041 $ 547,190 $ 641,884 $ 620,692 Adjustments to reconcile net income to net cash flows from operating activities: Depreciation and Amortization ............ 501,902 474,845 661,085 627,609 Amortization of Nuclear Fuel ............. 62,878 71,892 86,159 93,960 (Deferral) Recovery of Electric Energy and Gas Costs - net .................... (707) (149,749) 38,513 (211,195) Loss from Property Impairments ........... -- -- -- 77,637 Amortization of Discounts on Property Abandonments and Disallowance........... (4,470) (5,140) (6,073) (6,962) Unrealized Gains on Investments - net..... (32,117) (11,488) (46,958) (12,893) Provision for Deferred Income Taxes - net. 102,281 146,587 94,613 171,382 Investment Tax Credits - net ............. (15,037) (15,086) (20,198) (19,949) Allowance for Funds Used During Construction - Debt and Equity and Capitalized Interest.................... (35,846) (28,203) (54,225) (39,144) Proceeds from Leasing Activities - net.... 9,859 9,364 28,177 (5,779) Changes in certain current assets and liabilities: Net decrease (increase) in Accounts Receivable and Unbilled Revenues...... 110,000 263,117 (68,677) 119,778 Net (increase) decrease in Inventory - Fuel and Materials and Supplies....... (39,554) (8,119) 9,734 27,238 Net (decrease) increase in Accounts Payable...................... (28,687) (186,905) 72,428 (45,512) Net change in Prepaid/Accrued Taxes..... (145,662) (385,110) (19,370) (245,763) Net change in Other Current Assets and liabilities....................... (11,738) (2,181) 27,191 (16,915) Other .................................... 64,115 38,485 57,206 21,370 ------------ ----------- ----------- ------------ Net cash provided by operating activities ........................... 1,047,258 759,499 1,501,489 1,155,554 ------------ ----------- ----------- ------------ CASH FLOWS FROM INVESTING ACTIVITIES: Additions to Utility Plant, excluding AFDC. (475,088) (550,717) (773,545) (879,563) Additions to Oil and Gas Property, Plant and Equipment, excluding Capitalized Interest ................... (61,613) (117,632) (93,504) (144,131) Net (increase) decrease in Long-Term Investments and Real Estate ............ (49,875) (8,807) 17,348 118,625 Increase in Decommissioning and Other Special Funds, excluding interest ...... (22,173) (28,006) (29,561) (28,016) Cost of Plant Removal - net .............. (21,528) (21,866) (33,624) (51,881) Other .................................... (4,925) 3,778 16,511 (7,422) ------------ ----------- ----------- ------------ Net cash used in investing activities ........................... (635,202) (723,250) (896,375) (992,388) ------------ ----------- ----------- ------------ CASH FLOWS FROM FINANCING ACTIVITIES: Net increase (decrease)in Short-Term Debt. 252,116 (14,971) 181,037 40,338 Decrease in Book Overdrafts .............. (24,921) (205) (1,132) (20,396) Issuance of Long-Term Debt ............... 100,000 752,245 197,555 1,039,445 Redemption of Long-Term Debt ............. (401,240) (421,135) (573,895) (1,040,000) Long-Term Debt Issuance and Redemption Costs ....................... (2,658) (8,592) (23,877) (27,094) Issuance of Preferred Stock .............. -- 75,000 -- 75,000 Redemption of Preferred Stock ............ -- (45,000) (75,000) (45,000) Issuance of Monthly Income Preferred Securities ................... 60,000 -- 210,000 -- Issuance of Common Stock ................. -- 28,495 -- 61,154 Cash Dividends Paid on Common Stock ...... (396,411) (395,934) (528,548) (527,110) Other .................................... -- (1,220) (750) (6,715) ------------ ----------- ----------- ----------- Net cash used in financing activities. (413,114) (31,317) (614,610) (450,378) ------------ ----------- ----------- ----------- Net (decrease) increase in Cash and Cash Equivalents ......................... (1,058) 4,932 (9,496) (287,212) Cash and Cash Equivalents at Beginning of Period ................................ 67,866 71,372 76,304 363,516 ------------ ----------- ----------- ----------- Cash and Cash Equivalents at End of Period.............................$ 66,808 $ 76,304 $ 66,808 $ 76,304 ============ =========== =========== =========== Income Taxes Paid ..........................$ 154,228 $ 126,369 $ 182,963 $ 156,873 Interest Paid ..............................$ 323,701 $ 306,454 $ 450,120 $ 433,859 See Notes to Consolidated Financial Statements.
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED CONSOLIDATED STATEMENTS OF RETAINED EARNINGS (Thousands of Dollars)
Three Months Ended Nine Months Ended Twelve Months Ended September 30, September 30, September 30, ------------------------ ------------------------ ------------------------ 1995 1994 1995 1994 1995 1994 ----------- ----------- ----------- ----------- ----------- ----------- Balance at Beginning of Period......................$ 1,568,995 $ 1,456,025 $ 1,510,010 $ 1,361,018 $ 1,511,054 $ 1,418,805 Add: Net Income ................. 186,782 187,178 510,041 547,190 641,884 620,692 ----------- ----------- ----------- ----------- ----------- ----------- Total ................... 1,755,777 1,643,203 2,020,051 1,908,208 2,152,938 2,039,497 ----------- ----------- ----------- ----------- ----------- ----------- Deduct: Cash Dividends on Common Stock ............. 132,137 132,137 396,411 395,934 528,548 527,110 Capital Stock Expenses ..... -- 12 -- 1,220 750 1,333 ----------- ----------- ----------- ----------- ----------- ----------- Total Deductions ........ 132,137 132,149 396,411 397,154 529,298 528,443 ----------- ----------- ----------- ----------- ----------- ----------- Balance at End of Period .....$ 1,623,640 $ 1,511,054 $ 1,623,640 $ 1,511,054 $ 1,623,640 $ 1,511,054 =========== =========== =========== =========== =========== =========== See Notes to Consolidated Financial Statements.
PUBLIC SERVICE ELECTRIC AND GAS COMPANY The financial statements included herein as of September 30, 1995 and 1994 and for the periods then ended are unaudited but, in the opinion of PSE&G's management, reflect all adjustments, consisting only of normal recurring accruals, necessary for a fair representation. CONSOLIDATED STATEMENTS OF INCOME (Thousands of Dollars)
Three Months Ended Nine Months Ended Twelve Months Ended September 30, September 30, September 30, ------------------------ ------------------------ ------------------------ 1995 1994 1995 1994 1995 1994 ----------- ----------- ----------- ----------- ----------- ----------- OPERATING REVENUES Electric ..................$ 1,179,373 $ 1,075,694 $ 3,090,656 $ 2,868,384 $ 3,961,985 $ 3,701,807 Gas ....................... 201,631 208,481 1,105,299 1,289,670 1,594,157 1,803,859 ----------- ----------- ----------- ----------- ----------- ----------- Total Operating Revenues ........... 1,381,004 1,284,175 4,195,955 4,158,054 5,556,142 5,505,666 ----------- ----------- ----------- ----------- ----------- ----------- OPERATING EXPENSES Operation Fuel for Electric Generation and Net Interchanged Power .... 264,599 189,384 682,923 514,835 863,851 674,594 Gas Purchased and Materials for Gas Produced .............. 115,336 128,719 625,540 761,923 900,318 1,057,794 Other ................... 232,051 222,629 678,652 656,164 982,347 896,129 Maintenance ............... 76,205 70,647 208,288 222,559 293,809 324,810 Depreciation and Amortization ............ 146,019 138,616 437,887 410,666 578,593 543,236 Taxes: Federal Income Taxes .... 107,677 96,385 263,537 273,693 284,373 323,373 New Jersey Gross Receipts Taxes ................. 139,363 136,436 455,426 453,139 585,454 605,992 Other ................... 19,229 18,577 60,139 59,055 77,184 72,096 ----------- ----------- ----------- ----------- ----------- ----------- Total Operating Expenses ........... 1,100,479 1,001,393 3,412,392 3,352,034 4,565,929 4,498,024 ----------- ----------- ----------- ----------- ----------- ----------- OPERATING INCOME ............ 280,525 282,782 783,563 806,020 990,213 1,007,642 ----------- ----------- ----------- ----------- ----------- ----------- OTHER INCOME Allowance for Funds Used During Construction - Equity .................. 1,329 1,824 4,598 5,486 11,901 10,256 Miscellaneous - net ....... 2,946 2,104 6,296 4,600 7,929 (2,117) ----------- ----------- ----------- ----------- ----------- ----------- Total Other Income ... 4,275 3,928 10,894 10,086 19,830 8,139 ----------- ----------- ----------- ----------- ----------- ----------- INCOME BEFORE INTEREST CHARGES AND DIVIDENDS ON PREFERRED SECURITIES....... 284,800 286,710 794,457 816,106 1,010,043 1,015,781 ----------- ----------- ----------- ----------- ----------- ----------- INTEREST CHARGES Long-Term Debt ............ 87,844 92,997 270,946 273,838 364,002 362,448 Short-Term Debt ........... 7,600 5,629 14,383 12,842 19,716 15,187 Other ..................... 8,652 3,173 22,195 5,938 27,113 11,355 ----------- ----------- ----------- ----------- ----------- ----------- Total Interest Charges 104,096 101,799 307,524 292,618 410,831 388,990 Allowance for Funds Used During Construction - Debt. (7,725) (5,467) (26,724) (16,442) (35,601) (21,179) ----------- ----------- ----------- ----------- ----------- ----------- Net Interest Charges ........ 96,371 96,332 280,800 276,176 375,230 367,811 ----------- ----------- ----------- ----------- ----------- ----------- Monthly Income Preferred Securities Dividend Requirements .............. 3,551 -- 10,583 -- 12,263 -- ----------- ----------- ----------- ----------- ----------- ----------- NET INCOME .................. 184,878 190,378 503,074 539,930 622,550 647,970 ----------- ----------- ----------- ----------- ----------- ----------- Preferred Stock Dividend Requirements .............. 8,682 10,144 26,044 30,568 35,943 40,336 ----------- ----------- ----------- ----------- ----------- ----------- EARNINGS AVAILABLE TO PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED ..............$ 176,196 $ 180,234 $ 477,030 $ 509,362 $ 586,607 $ 607,634 =========== =========== =========== =========== =========== =========== See Notes to Consolidated Financial Statements.
PUBLIC SERVICE ELECTRIC AND GAS COMPANY CONSOLIDATED BALANCE SHEETS (Thousands of Dollars)
September 30, September 30, December 31, ASSETS 1995 1994 1994 - ------ ------------ ------------ ------------- UTILITY PLANT - Original cost Electric ................................................. $ 12,983,167 $ 12,218,603 $ 12,345,919 Gas ...................................................... 2,413,673 2,266,750 2,318,233 Common ................................................... 531,024 530,143 545,131 ------------ ------------ ------------ Total ............................................... 15,927,864 15,015,496 15,209,283 Less: accumulated depreciation and amortization........... 5,324,903 5,059,839 5,147,105 ------------ ------------ ------------ Net ................................................. 10,602,961 9,955,657 10,062,178 Nuclear Fuel in Service, net of accumulated amortization - $345,412, $297,426 and $302,906, respectively .................................. 162,776 199,886 205,273 ------------ ------------ ------------ Net Utility Plant in Service ........................ 10,765,737 10,155,543 10,267,451 Construction Work in Progress, including Nuclear Fuel in Process - $122,368, $56,983 and $65,429, respectively ................................... 367,567 752,260 806,934 Plant Held for Future Use ................................ 23,965 20,532 23,860 ------------ ------------ ------------ Net Utility Plant ................................... 11,157,269 10,928,335 11,098,245 ------------ ------------ ------------ INVESTMENTS AND OTHER PROPERTY Other Property, net of accumulated depreciation and amortization - $1,882, $1,126 and $1,127, respectively.... 24,970 32,865 32,879 Long-Term Investments, net of amortization - $4,585, $2,068 and $2,365, respectively .......................... 98,260 150,866 65,886 Nuclear Decommissioning and Other Special Funds ............ 263,974 223,588 233,022 ------------ ------------ ------------ Total Investments and Other Property ....................... 387,204 407,319 331,787 ------------ ------------ ------------ CURRENT ASSETS Cash and Cash Equivalents ................................ 30,247 32,139 27,498 Accounts Receivable: Customer Accounts Receivable ........................... 405,555 380,539 434,207 Other Accounts Receivable .............................. 125,761 92,582 151,684 Less: Allowance for Doubtful Accounts ................. 38,578 27,075 40,915 Accounts Receivable - Associated Companies ............... 151 -- -- Unbilled Revenues ........................................ 127,590 104,522 204,056 Fuel, at average cost .................................... 311,776 302,676 268,927 Materials and supplies, net of inventory valuation reserves - $18,200, $8,525 and $18,200, respectively ... 143,689 162,252 146,763 Prepaid Gross Receipts Taxes ............................. 165,342 131,985 -- Deferred Income Taxes .................................... 27,489 15,387 25,311 Miscellaneous Current Assets ............................. 45,109 49,459 30,407 ------------ ------------ ------------ Total Current Assets ................................ 1,344,131 1,244,466 1,247,938 ------------ ------------ ------------ DEFERRED DEBITS Property Abandonments - net .............................. 74,742 92,667 88,269 Oil and Gas Property Write-Down .......................... 37,367 42,521 41,232 Deferred OPEB Costs ...................................... 174,706 126,658 116,476 Under Recovered Electric Energy and Gas Costs - net ...... 173,270 211,783 172,563 Unamortized Debt Expense ................................. 124,308 127,157 132,342 Unrecovered Environmental Costs (note 2).. ............... 132,634 132,169 138,435 Unrecovered Plant and Regulatory Study Costs ............. 35,285 36,986 37,128 Deferred Decontamination and Decommissioning Costs........ 49,742 53,016 53,016 Unrecovered SFAS 109 Deferred Income Taxes ............... 778,642 786,217 791,393 Other .................................................... 9,313 51,974 15,574 ------------ ------------ ------------ Total Deferred Debits ............................... 1,590,009 1,661,148 1,586,428 ------------ ------------ ------------ Total ................................................ $ 14,478,613 $ 14,241,268 $ 14,264,398 ============ ============ ============ See Notes to Consolidated Financial Statements.
PUBLIC SERVICE ELECTRIC AND GAS COMPANY CONSOLIDATED BALANCE SHEETS (Thousands of Dollars)
September 30, September 30, December 31, CAPITALIZATION AND LIABILITIES 1995 1994 1994 - ------------------------------ ------------ ------------ ------------ CAPITALIZATION Common Equity Common Stock ........................................... $ 2,563,003 $ 2,563,003 $ 2,563,003 Contributed Capital by Enterprise ...................... 534,395 534,395 534,395 Retained Earnings ...................................... 1,387,931 1,310,074 1,292,201 ------------ ------------ ------------ Total Common Equity ................................. 4,485,329 4,407,472 4,389,599 Preferred Stock without mandatory redemption ............... 384,994 459,994 384,994 Preferred Stock with mandatory redemption .................. 150,000 150,000 150,000 Monthly Income Preferred Securities of Subsidiary .......... 210,000 -- 150,000 Long-Term Debt ............................................. 4,585,543 4,486,371 4,486,787 ------------ ------------ ------------ Total Capitalization ................................ 9,815,866 9,503,837 9,561,380 ------------ ------------ ------------ OTHER LONG-TERM LIABILITIES Decontamination, Decommissioning, and Low Level Radwaste Costs ........................................ 55,630 54,308 56,149 Environmental Costs (note 2).............................. 103,412 105,544 105,684 Capital Lease Obligations ................................ 53,283 52,680 53,770 ------------ ------------ ------------ Total Other Long-Term Liabilities ................... 212,325 212,532 215,603 ------------ ------------ ------------ CURRENT LIABILITIES Long-Term Debt due within one year ....................... 2,000 310,200 310,200 Commercial Paper and Loans ............................... 633,283 562,665 401,759 Book Overdrafts .......................................... 61,655 62,787 86,576 Accounts Payable ......................................... 320,212 300,996 370,005 Accounts Payable - Associated Companies .................. -- 1,324 16,677 Other Taxes Accrued ...................................... 38,235 36,853 36,030 Interest Accrued ......................................... 93,709 98,972 95,721 Estimated Liability for Vacation Pay ..................... 32,235 25,062 27,080 Customer Deposits ........................................ 32,810 34,682 33,698 Liability for Injuries and Damages ....................... 36,090 27,677 29,814 Miscellaneous Environmental Liabilities .................. 16,652 4,715 15,365 Other .................................................... 42,136 13,605 50,778 ------------ ------------ ------------ Total Current Liabilities ........................... 1,309,017 1,479,538 1,473,703 ------------ ------------ ------------ DEFERRED CREDITS Accumulated Deferred Income Taxes ........................ 2,526,135 2,484,400 2,478,539 Accumulated Deferred Investment Tax Credits .............. 375,458 394,623 389,721 Deferred OPEB Costs ...................................... 174,706 126,658 116,476 Other .................................................... 65,106 39,680 28,976 ------------ ------------ ------------ Total Deferred Credits .............................. 3,141,405 3,045,361 3,013,712 ------------ ------------ ------------ COMMITMENTS AND CONTINGENCIES (note 2) Total ................................................. $ 14,478,613 $ 14,241,268 $ 14,264,398 ============ ============ ============
PUBLIC SERVICE ELECTRIC AND GAS COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS (Thousands of Dollars)
Nine Months Ended Twelve Months Ended September 30, September 30, --------------------------- --------------------------- 1995 1994 1995 1994 ------------ ------------ ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net Income ............................. $ 503,074 $ 539,930 $ 622,550 $ 647,970 Adjustments to reconcile net income to net cash flows from operating activities: Depreciation and Amortization ........ 437,887 410,666 578,593 543,236 Amortization of Nuclear Fuel ......... 62,878 71,892 86,159 93,960 (Deferral) Recovery of Electric Energy and Gas Costs - net ......... (707) (149,749) 38,513 (211,195) Amortization of Discounts on Property Abandonments and Disallowance ...... (4,470) (5,140) (6,073) (6,962) Provision for Deferred Income Taxes - net ........................ 60,347 119,200 49,310 169,862 Investment Tax Credits - net ......... (14,263) (14,306) (19,165) (18,908) Allowance for Funds Used During Construction - Debt and Equity ..... (31,322) (21,928) (47,502) (31,435) Changes in certain current assets and liabilities: Net decrease (increase) in Accounts Receivable and Unbilled Revenues . 128,553 273,355 (69,911) 130,986 Net increase (decrease) in Inventory - Fuel and Materials and Supplies... (39,775) (8,075) 9,463 27,167 Net (decrease) increase in Accounts Payable ................. (66,470) (184,150) 17,892 (68,496) Net change in Prepaid/Accrued Taxes. (163,137) (392,199) (31,975) (242,112) Net change in Other Current Assets and Liabilities .................. (15,704) (20,626) 41,167 (27,616) Other ................................ 55,546 (3,583) 88,635 (17,457) ------------ ----------- ----------- ------------ Net cash provided by operating activities ....................... 912,437 615,287 1,357,656 989,000 ------------ ----------- ----------- ------------ CASH FLOWS FROM INVESTING ACTIVITIES: Additions to Utility Plant, excluding AFDC ....................... (475,088) (550,717) (773,545) (879,563) Net (increase) decrease in Long-Term Investments ................ (39,595) (34,312) 45,385 (53,279) Increase in Decommissioning and Other Special Funds, excluding interest ................... (22,173) (28,006) (29,561) (28,016) Cost of Plant Removal - net ............ (21,528) (21,866) (33,624) (51,881) Other .................................. 865 (90) 2,647 (4,981) ------------ ----------- ----------- ------------ Net cash used in investing activities ....................... (557,519) (634,991) (788,698) (1,017,720) ------------ ----------- ----------- ------------ CASH FLOWS FROM FINANCING ACTIVITIES: Net increase in Short-Term Debt ........ 231,524 29,937 70,618 89,943 Decrease in Book Overdrafts ............ (24,921) (205) (1,132) (20,396) Issuance of Long-Term Debt ............. 100,000 752,245 197,555 961,445 Redemption of Long-Term Debt............ (309,444) (381,811) (406,583) (741,513) Long-Term Debt Issuance and Redemption Costs ..................... (1,984) (10,100) (21,615) (26,421) Issuance of Preferred Stock ............ -- 75,000 -- 75,000 Redemption of Preferred Stock .......... -- (45,000) (75,000) (45,000) Issuance of Monthly Income Preferred Securities ................. 60,000 -- 210,000 -- Cash Dividends Paid .................... (407,344) (409,168) (543,943) (541,936) Other .................................. -- (1,220) (750) (1,331) ------------ ----------- ----------- ------------ Net cash (used in) provided by financing activities ........... (352,169) 9,678 (570,850) (250,209) ------------ ----------- ----------- ------------ Net increase (decrease) in Cash and Cash Equivalents ....................... 2,749 (10,026) (1,892) (278,929) Cash and Cash Equivalents at Beginning of Period .............................. 27,498 42,165 32,139 311,068 ------------ ----------- ----------- ------------ Cash and Cash Equivalents at End of Period .............................. $ 30,247 32,139 $ 30,247 $ 32,139 ============ =========== =========== ============ Income Taxes Paid ........................ $ 242,365 $ 178,584 $ 272,977 $ 207,684 Interest Paid ............................ $ 275,210 $ 255,350 $ 365,727 $ 343,660 See Notes to Consolidated Financial Statements.
PUBLIC SERVICE ELECTRIC AND GAS COMPANY CONSOLIDATED STATEMENTS OF RETAINED EARNINGS (Thousands of Dollars)
Three Months Ended Nine Months Ended Twelve Months Ended September 30, September 30, September 30, ------------------------ ------------------------ ------------------------ 1995 1994 1995 1994 1995 1994 ----------- ----------- ----------- ----------- ----------- ----------- Balance at Beginning of Period ....................$ 1,337,284 $ 1,254,553 $ 1,292,201 $ 1,180,532 $ 1,310,074 $ 1,205,373 Add: Net Income ................ 184,878 190,378 503,074 539,930 622,550 647,970 ----------- ----------- ----------- ----------- ----------- ----------- Total .................. 1,522,162 1,444,931 1,795,275 1,720,462 1,932,624 1,853,343 ----------- ----------- ----------- ----------- ----------- ----------- Deduct Cash Dividends: Preferred Stock, at required rates .......... 8,682 10,144 26,044 30,568 35,943 40,336 Common Stock .............. 125,550 124,700 381,300 378,600 508,000 501,600 Capital Stock Expenses ...... (1) 13 -- 1,220 750 1,333 ----------- ----------- ----------- ----------- ----------- ----------- Total Deductions ....... 134,231 134,857 407,344 410,388 544,693 543,269 ----------- ----------- ----------- ----------- ----------- ----------- Balance at End of Period ....$ 1,387,931 $ 1,310,074 $ 1,387,931 $ 1,310,074 $ 1,387,931 $ 1,310,074 =========== =========== =========== =========== =========== ===========
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1. RATE MATTERS Levelized Gas Adjustment Charge On October 2, 1995, Public Service Electric and Gas Company (PSE&G) petitioned the New Jersey Board of Public Utilities (BPU) for modifications to its Levelized Gas Adjustment Charge (LGAC). PSE&G is requesting that: (a) The LGAC be renamed to the Levelized Gas Incentive Clause (LGIC); (b) A benchmark be established for certain gas delivered from the Gulf Coast, and any difference between PSE&G's actual gas purchase costs and the benchmark price, either positive or negative, be shared 50/50 between PSE&G's customers and its sole shareholder; (c) The current annual LGAC rate be converted to a monthly rate for firm commercial and industrial customers; and (d) A fixed annual margin would be credited to LGAC for certain interruptible rate schedules, while actual margins from such sales will be retained by PSE&G. Any differences, positive or negative, will be absorbed by PSE&G. Levelized Energy Adjustment Clause On May 5, 1995, the BPU approved PSE&G's Levelized Energy Adjustment Clause (LEAC). Such Order also required that a hearing be convened regarding the April 1994 Salem 1 shutdown, to determine whether PSE&G should be allowed to recover replacement power costs of approximately $8 million which have been deferred. On October 18, 1995, this matter was ordered to be transmitted to the Office of Administrative Law (OAL) for hearing. PSE&G cannot predict the outcome of this proceeding. Other Rate Matters On July 21, 1995, the BPU initiated a generic proceeding to expeditiously adopt specific standards to guide utility "off-tariff" negotiated rate agreement programs, which proceeding would consider minimum prices, confidentiality, maximum contract duration, filing requirements and such other standards as necessary for compliance with the law. A Written Summary Decision and Order (Order) was issued on PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1. RATE MATTERS - (CONCLUDED) October 27, 1995, which ordered each New Jersey electric utility, including PSE&G, to file initial minimum tariffs, consistent with the terms of the Order, and further, indicated that the Order will be supplemented by a Final Decision and Order to fully discuss and explain the rationale for the BPU's overall decision. PSE&G cannot predict what impact, if any, the generic tariff may have on its electric revenues and earnings. NOTE 2. COMMITMENTS AND CONTINGENCIES Nuclear Performance Standard The BPU has established a nuclear performance standard (NPS) for nuclear generating stations owned by New Jersey electric utilities, including the five nuclear units in which PSE&G has an ownership interest: Salem -- 42.59%; Hope Creek -- 95%; and Peach Bottom -- 42.49%. PSE&G operates Salem and Hope Creek, while Peach Bottom is operated by PECO Energy, Inc. (PECO). The penalty/reward under the NPS is a percentage of replacement power costs. (See table below.)
CAPACITY FACTOR RANGE REWARD PENALTY - -------------------------------------------------- ------ ------- Equal to or greater than 75%......................... 30% -- Equal to or greater than 65% and less than 75%....... None None Equal to or greater than 55% and less than 65%....... -- 30% Equal to or greater than 45% and less than 55%....... -- 40% Equal to or greater than 40% and less than 45%....... -- 50% Below 40%............................................ BPU Intervenes
Under the NPS, the capacity factor is calculated annually using maximum dependable capability of the five nuclear units in which PSE&G owns an interest. This method takes into account actual operating conditions of the units. While the NPS does not specifically have a gross negligence provision, the BPU has indicated that it would consider allegations PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) NOTE 2. COMMITMENTS AND CONTINGENCIES - (CONTINUED) of gross negligence brought upon a sufficient factual basis. A finding of gross negligence could result in penalties other than those prescribed under the NPS. During 1994, the five nuclear units in which PSE&G has an ownership interest aggregated a 74% combined capacity factor. PSE&G currently estimates that the aggregate combined capacity factor for 1995 will range from 62% to 63%, based on the planned operation for the remainder of the year of the Hope Creek and Peach Bottom units, which would result in a penalty for 1995 in the range of $2 to $4 million. Both Salem units are presently out of service for the remainder of 1995. Nuclear Insurance Coverages and Assessments PSE&G's insurance coverages and maximum retrospective assessments for its nuclear operations are as follows:
PSE&G MAXIMUM TOTAL ASSESSMENTS SITE FOR A SINGLE TYPE AND SOURCE OF COVERAGES COVERAGES INCIDENT - ------------------------------------- --------- ------------- (MILLIONS OF DOLLARS) Public Liability: American Nuclear Insurers........... $ 200.0 $ -- Indemnity(A)........................ 8,720.3 210.2 -------- -------- $8,920.3 (B) $ 210.2 -------- -------- Nuclear Worker Liability: American Nuclear Insurers(C)........ $ 200.0 $ 8.1 -------- -------- Property Damage: Nuclear Mutual Limited.............. $ 500.0 $ 8.1 Nuclear Electric Insurance Ltd. (NEIL II)..................... 1,400.0 (D) 8.2(E) Nuclear Electric Insurance Ltd. (NEIL III).................... 850.0 6.7 -------- -------- $2,750.0 $ 23.0 -------- -------- Replacement Power: Nuclear Electric Insurance Ltd (NEIL I)....................... $ 3.5 (F) $ 11.4
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) NOTE 2. COMMITMENTS AND CONTINGENCIES - (CONTINUED) (A) Retrospective premium program under the Price-Anderson liability provisions of the Atomic Energy Act of 1954, as amended (Price- Anderson). Subject to retrospective assessment with respect to loss from an incident at any licensed nuclear reactor in the United States. Assessment adjusted for inflation effective August 20, 1993. (B) Limit of liability for each nuclear incident under Price- Anderson. (C) Industry aggregate limit representing the potential liability from workers claiming exposure to the hazard of nuclear radiation. This policy includes automatic reinstatements up to an aggregate of $200 million, thereby providing total coverage of $400 million. This policy does not increase PSE&G's obligation under Price-Anderson. (D) Includes up to $250 million for premature decommissioning costs. (E) In the event of a second industry loss triggering NEIL II - coverage, the maximum retrospective premium assessment can increase to $17.5 million. (F) Weekly indemnity for 52 weeks which commences after the first 21 weeks of an outage. Beyond the first 52 weeks of coverage, indemnity of $2.8 million per week for 104 weeks is afforded. Total coverage amounts to $473.2 million over three years. Price-Anderson sets the "limit of liability" for claims that could arise from an incident involving any licensed nuclear facility in the nation. The "limit of liability" is based on the number of licensed nuclear reactors and is adjusted at least every five years based on the Consumer Price Index. The current "limit of liability" is $8.9 billion. All utilities owning a nuclear reactor, including PSE&G, have provided for this exposure through a combination of private insurance and mandatory participation in a financial protection pool as established by Price-Anderson. Under Price- Anderson, each party with an ownership interest in a nuclear reactor can be assessed its share of $79.3 million per reactor per incident, payable at $10 million per reactor per incident per year. If the damages exceed the "limit of liability," the President is to submit to Congress a plan for providing additional compensation to the injured parties. Congress could impose further revenue raising measures on the nuclear industry to pay claims. PSE&G's maximum aggregate assessment per incident is $210.2 million (based on PSE&G's ownership interests in Hope Creek, Peach Bottom and Salem) and its maximum aggregate annual assessment per incident is $26.5 million. PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) NOTE 2. COMMITMENTS AND CONTINGENCIES - (CONTINUED) Further, a recent decision by the U.S. Court of Appeals for the Third Circuit, not involving PSE&G, held that the Price Anderson Act did not preclude awards based on state law claims for punitive damage. PSE&G purchases property insurance, including decontamination expense coverage and premature decommissioning coverage, with respect to loss or damage to its nuclear facilities, see Property Damage in table above. PECO has advised PSE&G that it maintains similar insurance coverage with respect to Peach Bottom. Certain of the policies also provide that the insurer may suspend coverage with respect to all nuclear units on a site without notice if the Nuclear Regulatory Commission (NRC) suspends or revokes the operating license for any unit on a site, issues a shutdown order with respect to such unit or issues a confirmatory order keeping such unit shut down. PSE&G is a member of an industry mutual insurance company, Nuclear Electric Insurance Limited (NEIL), which provides replacement power cost coverage in the event of a major accidental outage at a nuclear station. The premium for this coverage is subject to retrospective assessment for adverse loss experience, see table and associated notes above. Construction and Fuel Supplies PSE&G has substantial commitments as part of its ongoing construction program which include capital requirements for nuclear fuel. PSE&G's construction program is continuously reviewed and periodically revised as a result of changes in economic conditions, revised load forecasts, changes in the scheduled retirement dates of existing facilities, changes in business plans, site changes, cost escalations under construction contracts, requirements of regulatory authorities and laws, the timing of and amount of electric and gas rate changes and the ability of PSE&G to raise necessary capital. Pursuant to an integrated electric resource plan (IRP), PSE&G periodically reevaluates its forecasts of future customers, load and peak growth, sources of electric generating capacity and demand side management (DSM) to meet such projected growth, including the need to construct new electric generating capacity. The IRP takes into account assumptions concerning future demands of customers, effectiveness of conservation and load management activities, the PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) NOTE 2. COMMITMENTS AND CONTINGENCIES - (CONTINUED) long-term condition of PSE&G's plants, capacity available from electric utilities and other suppliers and the amounts of co-generation and other non-utility capacity projected to be available. Based on PSE&G's construction program, construction expenditures are expected to aggregate approximately $3.2 billion, which includes $484 million for nuclear fuel and $78 million of Allowance for Funds used During Construction (AFDC) during the years 1995 through 1999. The estimate of construction requirements is based on expected project completion dates and includes anticipated escalation due to inflation of approximately 3%, annually. Therefore, construction delays or higher inflation levels could cause significant increases in these amounts. PSE&G expects to generate internally the funds necessary to satisfy its construction expenditures over the next five years, assuming adequate and timely recovery of costs, as to which no assurances can be given. In addition, PSE&G does not presently anticipate any difficulties in obtaining sufficient sources of fuel for electric generation or adequate gas supplies during the years 1995 through 1999. Bergen Station Repowering PSE&G has completed the repowering of the Bergen Station (Station), which was re-synchronized to the electric grid on June 1, 1995 for a period of final testing. The repowering results in a slight increase in capacity from 629 MW to 669 MW, improves operational reliability and efficiency and significantly improves the environmental effects of operating the Station. The Station was declared to be in commercial operation effective September 1, 1995. Cost in service for the project was $338 million, excluding AFDC of $37 million. PSE&G does not currently expect to seek recovery of such costs through a traditional rate base rate-of-return filing. However, pursuant to recently adopted legislation (see MD&A-Competition), PSE&G expects to file an alternative economic regulatory proposal, such as a rate cap pricing plan, later this year that is intended to provide it the continuing opportunity to recover all its costs including the costs of the Bergen repowering project. Pursuant to an agreement with the BPU, PSE&G will not seek implementation of any rate treatment plan for the Station for a minimum of 90 days from the date of filing of such plan. PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) NOTE 2. COMMITMENTS AND CONTINGENCIES - (CONTINUED) Hazardous Waste Certain Federal and State laws authorize the United States Environmental Protection Agency (EPA) and the New Jersey Department of Environmental Protection (NJDEP), among other agencies, to issue orders and bring enforcement actions to compel responsible parties to take investigative and remedial actions at any site that is determined to present an imminent and substantial danger to the public or the environment because of an actual or threatened release of one or more hazardous substances. Because of the nature of PSE&G's business, including the production of electricity, the distribution of gas and, formerly, the manufacture of gas, various by-products and substances are or were produced or handled which contain constituents classified as hazardous. PSE&G generally provides for the disposal or processing of such substances through licensed independent contractors. However, these statutory provisions impose joint and several responsibility without regard to fault on all responsible parties, including the generators of the hazardous substances, for certain investigative and remediation costs at sites where these substances were disposed of or processed. PSE&G has been notified with respect to a number of such sites and the remediation of these potentially hazardous sites is receiving greater attention from the government agencies involved. Generally, actions directed at funding such site investigations and remediation include all suspected or known responsible parties. PSE&G does not expect its expenditures for any such site to have a material effect on its financial position, results of operations or net cash flows. PSE&G Manufactured Gas Plant Remediation Program In 1988, NJDEP notified PSE&G that it had identified the need for PSE&G, pursuant to a formal arrangement, to systematically investigate and, if necessary, resolve environmental concerns extant at PSE&G's former manufactured gas plant sites. To date, NJDEP and PSE&G have identified 38 former gas plant sites. PSE&G is currently working with NJDEP under a program to assess, investigate and, if necessary, remediate environmental concerns at these sites (Remediation Program). The Remediation Program is periodically reviewed and revised by PSE&G based on regulatory requirements, experience with the Remediation Program and available technologies. The cost of the Remediation Program cannot be reasonably estimated, but experience to date indicates that costs of at least $20 million per year could be incurred over a period of more than 30 years and that the overall cost could be material to PSE&G's financial position, results of operations or net cash flows. PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONCLUDED) NOTE 2. COMMITMENTS AND CONTINGENCIES - (CONCLUDED) Costs incurred through September 30, 1995 for the Remediation Program amounted to $57.4 million, net of certain insurance proceeds. In addition, at September 30, 1995, PSE&G's estimated liability for estimated remediation costs aggregated $103.4 million. In accordance with a Stipulation approved by the BPU in January 1992, PSE&G is recovering over a six-year period $32 million of its actual remediation costs to reflect costs incurred through September 30, 1992. As of September 30, 1995, PSE&G has recovered $26 million of the $32 million of actual remediation costs through its LGAC. PSE&G is expected to recover the balance of $6 million in its currently filed LGAC period ending in 1996. PSE&G has reached a final settlement concluding the litigation against certain of its insurers to recover the costs associated with addressing and resolving environmental issues of the Remediation Program. This settlement, which is subject to a confidentiality agreement, is not expected to have a material effect upon the financial position, results of operations or net cash flows of PSE&G or Enterprise. PUBLIC SERVICE ELECTRIC AND GAS COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS PSE&G The Notes to Consolidated Financial Statements of Enterprise are incorporated herein by reference insofar as they relate to PSE&G and its subsidiaries: Note 1. Rate Matters Note 2. Commitments and Contingencies PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Following are the significant changes in or additions to information reported in Enterprise's Annual Report to the Securities and Exchange Commission (SEC) on Form 10-K for 1994, and Quarterly Report on Form 10-Q for March 1995 and June 1995, affecting the consolidated financial condition and the results of operations of Enterprise and its subsidiaries. This discussion refers to the Consolidated Financial Statements and related Notes to Consolidated Financial Statements (Notes) of Enterprise and should be read in conjunction with such statements and notes. COMPETITION Ongoing initiatives affecting PSE&G's electric and gas utility businesses associated with the continuing transition to a competitive market environment will continue to have an increasingly significant impact on Enterprise and PSE&G. Federal legislation, including the Energy Policy Act (EPACT), as well as regulatory initiatives at both the federal and state levels that are designed to promote competition and lessen regulation of the energy supply industry can be expected to result in additional pressures on customer retention due to energy prices, especially with respect to larger industrial and commercial customers. Growth potential of traditional gas and electric sales is limited in PSE&G's mature service territory. The Federal Energy Regulatory Commission's (FERC) recent Notice of Proposed Rulemaking (NOPR) on open access would fundamentally change the electric utility industry by providing wholesale customers with competitive open access to the interstate transmission system. However, in the NOPR, FERC states its position that utilities should be entitled to full recovery of legitimate and verifiable stranded costs at the federal and state levels. Competition is forcing utilities, including PSE&G, to operate more cost effective and efficient plants, particularly in light of the technological advantages available to new entrants. Recovery of related costs by utilities, including PSE&G, will depend upon the decisions of the regulators, which cannot be predicted, and the ability to sell the electricity generated by such plants in the emerging competitive electric power market. For discussion of PSE&G's project at Bergen, see Note 2 - Commitments and Contingencies of Notes. Competition may also have an adverse impact upon the economics of certain regulatory- created incentives such as demand side management (DSM). PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) In the wholesale market, other competitive pressures, such as municipalization, may also have an impact on utilities in the evolving electric power industry. Municipalization involves the condemnation and operation of existing investor-owned facilities or the construction and operation of duplicate, parallel facilities by a municipal utility (MUNI) within a municipal boundary. As a result, utilities, such as PSE&G, could lose revenues from the former customers (residential, commercial and industrial) in the municipality that are served by the Muni, as well as the loss of the municipality itself as a customer. The BPU presented its final, first phase of the New Jersey Energy Master Plan to Governor Whitman March 8, 1995, which acknowledged the need for regulatory flexibility as competition unfolds and called for legislation that would allow New Jersey utilities to propose, subject to BPU approval, alternatives to existing rate base/rate of return pricing, allow for pricing flexibility under certain standards for customers with competitive options and equalize the impact of tax policies, such as New Jersey Gross Receipts and Franchise Tax (NJGRT) currently assessed on retail energy utility sales, upon all energy producers. On July 20, 1995, Governor Whitman signed into law legislation which provides utilities the flexibility to propose alternative regulatory pricing and to offer negotiated off-tariff agreements. PSE&G is currently evaluating its available options including the submission of an alternative economic regulatory proposal, such as a rate cap pricing plan, and presently anticipates making a submission later this year. On June 1, 1995, the BPU issued its Order initiating a formal Phase II Proceeding to the New Jersey Energy Master Plan. This proceeding is intended to investigate and consider the future long term structure of the electric power industry in New Jersey. The proceeding will address wholesale and retail competition. A Phase II report proposing policy restructuring is expected by March 1996. PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (Continued) ENTERPRISE EARNINGS Earnings per share of Enterprise Common Stock were $.76, $2.08, and $2.62 for the three, nine and twelve months ended September 30, 1995 compared to $.76, $2.24 and $2.54 for the comparable 1994 periods. (See Liquidity and Capital Resources - External Financing.) The changes are summarized as follows:
Increase or (Decrease) ---------------------------------------------------------------- Three Months Ended Nine Months Ended Twelve Months Ended September 30, September 30, September 30, 1995 vs. 1994 1995 vs. 1994 1995 vs. 1994 -------------------- -------------------- -------------------- Per Per Per Amount Share Amount Share Amount Share -------- -------- -------- -------- -------- -------- (Millions, except Per Share Data) PSE&G Revenues (net of fuel costs and gross receipts taxes) ............ $ 32 $ 0.13 $ 4 $ 0.02 $ 39 $ 0.16 Other operation expenses ........... (10) (0.04) (22) (0.09) (86) (0.35) Maintenance expenses ............... (6) (0.02) 14 0.05 31 0.12 Depreciation and amortization expenses ......................... (7) (0.03) (27) (0.11) (35) (0.15) Federal income taxes ............... (11) (0.04) 10 0.04 39 0.16 Interest charges ................... (2) (0.01) (15) (0.06) (22) (0.09) Allowance for Funds used During Construction (AFDC)............... 2 0.01 9 0.03 16 0.07 Preferred Securities Dividend Requirements ..................... (2) (0.01) (6) (0.02) (8) (0.03) Other income and expenses........... -- -- 1 -- 5 0.02 -------- -------- -------- -------- -------- -------- Earnings Available to Enterprise ... (4) (0.01) (32) (0.14) (21) (0.09) -------- -------- -------- -------- -------- -------- EDHI EDC ................................ -- -- (10) (0.04) (17) (0.07) CEA................................. 1 -- -- -- 1 -- PSRC ............................... 3 0.01 4 0.02 6 0.02 EGDC................................ -- -- 1 -- 52 0.22(A) -------- -------- -------- -------- -------- -------- Subtotal ........................... 4 0.01 (5) (0.02) 42 0.17 -------- -------- -------- -------- -------- -------- Net Income ......................... $ -- -- $ (37) (0.16) $ 21 0.08 ======== -------- ======== -------- ======== -------- (A) Includes the impact of an impairment of assets of $51 Million, after tax, by EGDC in December 1993. (See EDHI, below.)
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (Continued) ENTERPRISE EARNINGS - (Continued) PSE&G Earnings available to Enterprise decreased $4 million for the quarter ended September 30, 1995 from the quarter ended September 30, 1994, notwithstanding that net revenues (revenues, net of fuel costs and gross receipt taxes) increased $32 million due to higher electric residential, commercial, industrial and capacity sales. The increase in firm sales is attributable to a growth in the economy coupled with high weather related sales for the quarter. Higher Allowance for Funds Used During Construction (AFDC) also contributed to earnings due to an increase in the AFDC rate. The increases in revenues were offset by higher other operation expenses principally due to increased expenses at Salem due to the current outage. Also negatively impacting earnings were higher maintenance expenses primarily at Salem due to the current outage, higher depreciation and amortization expenses due to more plant in service, higher income taxes due to higher pre-tax operating income, higher interest charges on miscellaneous liabilities and higher dividend requirements resulting from the issuance of Monthly Income Preferred Securities (See External Financings). Earnings available to Enterprise decreased by $32 million for the nine-month period ended September 30, 1995 compared to the same period ended September 30, 1994, notwithstanding that net revenues increased $4 million due to improved electric sales resulting from growth in the economy and an increase in the customer base, partially offset by lower gas revenue resulting from a decrease in sales due to the mild winter. Also contributing to earnings were lower maintenance expenses, higher AFDC income and lower taxes resulting from lower pre- tax operating income. Maintenance expenses were lower due to reduced fossil production expenses primarily attributable to the 1994 outage at Mercer Generating Station (Mercer) and reduced nuclear production expenses due to the 1994 refueling outage at Hope Creek, partially offset by higher maintenance expense for Salem resulting from the current outage. Earnings were offset by higher depreciation and amortization expenses due to more plant in service, higher interest expenses due to more short term debt outstanding and higher interest charges on miscellaneous liabilities, and higher dividend requirements resulting from the issuance of Monthly Income Preferred Securities. Earnings were also negatively impacted by increased other operation expenses principally due to increased expenses at the Salem Plant and higher administrative and general expenses. PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) ENTERPRISE EARNINGS - (Continued) Earnings available to Enterprise decreased $21 million for the twelve months ended September 30, 1995 compared to the same period ended September 30, 1994, notwithstanding that net revenues increased $39 million, principally due to higher electric residential and commercial sales due to a growth in the economy and warm summer weather, as well as higher capacity sales to wholesale customers and other utilities. The increase in electric revenues was offset by lower gas revenues due to lower sales as a result of the mild winter weather, higher other operation expenses resulting from higher expenses at the Salem plant due to the current outage and higher administrative and general expenses. Earnings were also negatively affected by higher depreciation and amortization expense due to more plant in service, higher interest charges due to more short-term debt outstanding and higher interest on miscellaneous liabilities, and higher dividend requirements due to the issuance of Monthly Income Preferred Securities. The increase in expenses were partially offset by lower 1995 maintenance expenses resulting from the 1994 refueling outage at Hope Creek and the 1994 outage at Mercer and decreased labor and overtime for fossil production, gas and electric distribution, lower federal income taxes resulting from lower pre-tax operating income, and increased AFDC income due to an increase in the rate and a retroactive adjustment. EDHI Net income of EDHI was $11 million for the quarter ended September 30, 1995, an increase of $4 million from the quarter ended September 30, 1994. EDHI's earnings increased due to higher income from Public Service Resources Corporation (PSRC) and Community Energy Alternatives (CEA) partnership investments. Net income of EDHI was $33 million for the nine-month period ended September 30, 1995, a decrease of $5 million from the nine-month period ended September 30, 1994. EDHI's earnings decreased due to Energy Development Corporation's (EDC) lower gas prices and volumes, partially offset by higher income from PSRC partnership investments. Net income of EDHI was $55 million for the twelve-month period ended September 30, 1995, an increase of $42 million over the twelve- month period ended September 30, 1994. Excluding the impact of an impairment of assets of $51 million, after tax, by EGDC in December 1993, EDHI's earnings decreased by $8 million. Lower EDC earnings resulting from lower gas prices and volumes were partially offset by higher PSRC earnings due to higher income from partnerships and lower interest expense. PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) ENTERPRISE EARNINGS - (Concluded) To the extent that the prices at which EDC is able to sell gas remain low, EDHI's earnings may continue to be negatively impacted. DIVIDENDS Since 1992, Enterprise has maintained a constant rate of common stock dividends which has had the result of reducing its dividend payout ratio. Management believes that reducing the payout ratio is a prudent policy which needs to be continued. LIQUIDITY AND CAPITAL RESOURCES Enterprise's liquidity is affected by maturing debt, investment and acquisition activities, the capital requirements of PSE&G's and EDHI's construction programs, permitted regulatory recovery of expenses and collection of revenues. Capital resources available to meet such requirements depend upon general and regional economic conditions, PSE&G's customer retention and growth, the ability of PSE&G and EDHI to meet competitive pressures and to contain costs, the adequacy and timeliness of rate relief, cost recovery and necessary regulatory approvals, the ability to continue to operate and maintain nuclear programs in accordance with NRC and BPU requirements, the impact of environmental regulations, continued access to the capital markets and continued favorable regulatory treatment of consolidated tax benefits. (For additional information see the discussion of Competition above and Note 2, Commitments and Contingencies of the Notes.) PSE&G Construction expenditures were related to improvements in PSE&G's existing power plants, transmission and distribution system, gas system and common facilities. PSE&G expects that it will internally generate all of its capital requirements including construction expenditures over the next five years and significantly reduce its debt outstanding, assuming adequate and timely recovery of costs, as to which no assurances can be given. PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) EDHI For the nine-month period ended September 30, 1995, EDC had additions to oil and gas property, plant and equipment, excluding capitalized interest, of $62 million, a decrease of $56 million from the corresponding period in 1994. For the twelve-month period ended September 30, 1995, EDC had additions to oil and gas property, plant, and equipment, excluding capitalized interest, of $94 million, a decrease of $51 million compared to the corresponding period in 1994. PSRC is a limited partner in various limited partnerships and is committed to make investments from time to time, upon the request of the respective general partners. At September 30, 1995, $68 million remained as PSRC's aggregate unfunded commitment subject to call. EDHI and each of its subsidiaries are subject to restrictive business and financial covenants contained in existing debt agreements and are required to not exceed various debt to equity ratios which range from 3:1 to 1.75:1. EDHI is also required to maintain a twelve month earnings before interest and taxes to interest (EBIT) coverage ratio of at least 1.35:1. As of September 30, 1995 and 1994, EDHI had consolidated debt to equity ratios, including contingent obligations, of 1.04:1 and 1.15:1 and, for the twelve months ended September 30, 1995 and 1994, EBIT coverage ratios, as defined to exclude the effects of EGDC, of 1.93:1 and 2.01:1, respectively. Compliance with applicable financial covenants will depend upon future levels of earnings, among other things, as to which no assurance can be given. LONG TERM INVESTMENTS AND REAL ESTATE Long-Term Investments and Real Estate increased $50 million for the nine-month period ended September 30, 1995, primarily due to an increase in Public Service Conservation Resources Corporation's (PSCRC) investments in conservation projects of $35 million, in PSRC's investments of $53 million due to KKR LBO Fund capital calls and in CEA's $13 million increase in partnership investments, partially offset by EGDC's reduced investments of $53 million due to property sales. For the nine-month period ended September 30, 1994, Long-Term Investments and Real Estate increased $9 million, primarily due to an increase in PSCRC's investments in conservation projects of $20 million and an increase in PSE&G's investment in an insurance contract of $15 million, substantially offset by returns of capital from PSRC and CEA partnership investments of $27 million. PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) LONG TERM INVESTMENTS AND REAL ESTATE - (CONCLUDED) Long-Term Investments and Real Estate decreased $17 million for the twelve-month period ended September 30, 1995 primarily due to a net decrease in PSE&G's investment in an insurance contract of $95 million and EGDC's reduced investments of $49 million due to property sales, partially offset by PSCRC's increase in investments in conservation projects of $43 million, PSRC's investments which increased $60 million due to KKR LBO Fund capital calls, and CEA's $22 million increase in partnership investments. For the twelve-month period ended September 30, 1994, a $119 million decrease was primarily due to a $153 million decrease in PSRC investments due to security sales, partially offset by a net increase in PSE&G's investment in an insurance contract of $26 million and an increase in PSCRC's investments in conservation projects of $20 million. INTERNAL GENERATION OF CASH FROM OPERATIONS Enterprise's cash provided by operating activities for the nine months ended September 30, 1995 increased $288 million to $1.047 billion when compared to the corresponding period in 1994. This increase was primarily due to a greater recovery of electric energy and gas costs through PSE&G's LEAC and LGAC of $149 million, a smaller decrease in accounts payable of $158 million, and a net decrease in prepaid/accrued taxes of $239 million (primarily the result of lower gross receipts taxes). Partially offsetting these cash inflows were a decrease in net income of $37 million, a smaller increase in deferred income taxes of $44 million, a smaller decrease in accounts receivable of $153 million, and an increase in inventory - fuel and materials and supplies of $31 million. (For additional information see Enterprise Earnings.) Enterprise's cash provided by operating activities for the twelve months ended September 30, 1995 increased $346 million to $1.501 billion when compared to the corresponding period in 1994. This increase was primarily due to a higher recovery of electric energy and PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) INTERNAL GENERATION OF CASH FROM OPERATIONS - (CONCLUDED) gas costs through PSE&G's LEAC and LGAC of $250 million, a net decrease in prepaid/accrued taxes of $226 million (primarily the result of lower gross receipts taxes), an increase in accounts payable of $118 million, a positive net change in certain other current assets and liabilities of $44 million, and a positive net change in certain noncurrent assets and liabilities, primarily deferred amounts, of $36 million. Partially offsetting these cash inflows were a loss from property impairments of $78 million in 1993, a smaller increase in deferred income taxes of $77 million and an increase in accounts receivable of $188 million. (For additional information see Enterprise Earnings.) EXTERNAL FINANCING ACTIVITIES Book value per share was $22.17 at September 30, 1995, compared to $21.71 at September 30, 1994. In October 1995, PSE&G issued a total of $56,320,000 of its mortgage bonds to redeem a like principal amount, including sinking fund retirements, of its higher cost bonds. The BPU has authorized PSE&G to issue approximately $215 million of additional First and Refunding Mortgage Bonds (Bonds)/Medium-Term Notes (MTNs) through 1996 for refunding purposes. In September, 1995, Public Service Electric and Gas Capital, L.P. issued $60 million of Monthly Income Preferred Securities, the proceeds of which were loaned to PSE&G, evidenced by PSE&G's subordinated debentures, and used to redeem $60 million of PSE&G Preferred Stock in October 1995. The BPU has authorized PSE&G to issue an additional $120 million of Preferred Stock through 1995. The BPU has authorized PSE&G to issue and have outstanding at any one time not more than $1 billion of its short-term obligations, consisting of commercial paper and other unsecured borrowings from banks and other lenders through January 1, 1997. On September 30, 1995, PSE&G had $509 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 and a $500 million five year revolving credit agreement with a group of commercial banks, each of which provides for borrowing up to one year. On September 30, 1995, there were no borrowings outstanding under these credit agreements. PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) EXTERNAL FINANCING ACTIVITIES - (CONCLUDED) On October 24, 1995, PSE&G petitioned the BPU for authority to issue (a) up to $4.725 billion aggregate principal amount of long-term debt to refund up to $4.575 billion aggregate principal amount (plus premium and expenses) of its outstanding long-term debt and (b) up to $685 million of preferred stock or tax deferred preferred securities to refund a like principal amount of its outstanding preferred stock. PSCRC has a $30 million revolving credit facility supported by a PSE&G subscription agreement in an aggregate amount of $30 million which terminates on March 6, 1996. As of September 30, 1995, PSCRC had $30 million outstanding under this facility. PSE&G Fuel Corporation (Fuelco) has a $150 million commercial paper program to finance a 42.49% share of Peach Bottom nuclear fuel, supported by a $150 million revolving credit facility with a group of banks, which expires on June 28, 1996. PSE&G has guaranteed repayment of Fuelco's respective obligations. As of September 30, 1995, Fuelco had commercial paper of $94 million outstanding under such program. Enterprise Capital Funding Corporation (Funding) has a commercial paper program, supported by a commercial bank letter of credit and credit facility, in the amount of $225 million expiring March 1998. As of September 30, 1995, Funding had $111 million of borrowings outstanding under this commercial paper program. Additionally, Funding has a $225 million revolving credit facility expiring March 1998. As of September 30, 1995, Funding had no borrowings outstanding under this facility. PSEG Capital Corporation's (Capital) MTN program has previously provided for an aggregate principal amount of up to $750 million of MTNs so that its total debt outstanding at any time, including MTNs, would not exceed such amount. Effective January 31, 1995, Capital will not have more than $650 million of debt outstanding at any time. At September 30, 1995, Capital had total debt outstanding of $575 million, including $427 million of MTNs. PUBLIC SERVICE ELECTRIC AND GAS COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Following are changes in or additions to the significant factors reported in PSE&G's Annual Report to the SEC on Form 10-K for 1994 and Quarterly Reports on Form 10-Q for periods ended March 31, 1995 and June 30, 1995, affecting the consolidated financial condition of PSE&G and its subsidiaries as reflected in their consolidated results of operations. This discussion refers to the consolidated financial statements and related notes herein of PSE&G and should be read in conjunction with such statements and notes. Except as modified below, the information required by this item is incorporated herein by reference to the following portions of Enterprise's MD&A, insofar as they relate to PSE&G and its subsidiaries: Competition; Enterprise Earnings - PSE&G; Dividends; Liquidity and Capital Resources - PSE&G, Long Term Investments and Real Estate and External Financings Activities. LIQUIDITY AND CAPITAL RESOURCES INTERNAL GENERATION OF CASH FROM OPERATIONS PSE&G's cash provided by operating activities for the nine months ended September 30, 1995 increased $297 million to $912 million when compared to the corresponding period in 1994. This increase was primarily due to a net decrease in prepaid/accrued taxes of $229 million (primarily the result of lower gross receipts taxes), a greater recovery of electric energy and gas costs through PSE&G's LEAC and LGAC of $149 million, a smaller decrease in accounts payable of $118 million, and a positive net change in certain noncurrent assets and liabilities, primarily deferred amounts, of $59 million. Partially offsetting these cash inflows were a decrease in net income of $37 million, a smaller increase in deferred income taxes of $59 million, and a smaller decrease in accounts receivable of $145 million. (For additional information see Enterprise Earnings.) PSE&G's cash provided by operating activities for the twelve months ended September 30, 1995 increased $369 million to $1.358 billion when compared to the corresponding period in 1994. This increase was primarily due to a higher recovery of electric energy and gas costs through PSE&G's LEAC and LGAC of $250 million, a net decrease in prepaid/accrued taxes of $210 million (primarily the result of lower gross receipts taxes), an increase in accounts payable of $86 million, a positive net change in certain other current assets and liabilities of $69 million, and a positive net change in certain noncurrent assets and liabilities, primarily deferred amounts, of $106 million. Partially offsetting these cash inflows were a smaller increase in deferred income taxes of $121 million and an increase in accounts receivable of $201 million. (For additional information see Enterprise Earnings.) PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED PART II. OTHER INFORMATION Item 5. Other Information - ------ ----------------- Certain information reported under Item 1 - Business of Part I of Enterprise's and PSE&G's Annual Reports to the SEC on Form 10-K for 1994 (Form 10-K) and Item 5 of Part II of Enterprise's and PSE&G's Quarterly Reports to the SEC on Form 10-Q for the periods ended March 31, 1995 (March 10-Q) and June 30, 1995 (June 10-Q) is updated herein at the respective pages indicated. References are to the related pages and paragraph(s) of the Form 10-K, March 10-Q and June 10-Q. Form 10-K, Page 7, Paragraph 5, June 10-Q, Page 31, Paragraph 3 - --------------------------------------------------------------- On September 6, 1995, the BPU verbally approved a Stipulation regarding the Company's proposed Experimental Hourly Energy Pricing Tariff and the first service agreement thereunder with its second largest customer. Under the stipulation, the pricing would result in a bill reduction for the customer of approximately $7 million or about 27%. This reduction in revenues would be partially offset by a decrease of $1.25 million in PSE&G's New Jersey state tax liability. Form 10-K, Page 11, Paragraph 1, March 10-Q, Page 40, Paragraph 4, June 10-Q, Page 32, Paragraph 1 - ------------------------------------------------------------------- PSE&G - Nuclear Operations - Salem As previously reported, Salem Unit 1 and Unit 2 were taken out of service on May 16, 1995 and June 7, 1995, respectively. PSE&G subsequently informed the Nuclear Regulatory Commission (NRC) of its determination to keep the Salem Units shut down pending review and resolution of certain equipment and management issues, and NRC agreement that each unit is sufficiently prepared to restart. On June 9, 1995, the NRC issued a Confirmatory Action Letter documenting these commitments by PSE&G. PSE&G, as previously reported, is engaged in a thorough assessment of Salem to identify the scope of work necessary to achieve safe, sustained and reliable operation. PSE&G has stated that it will keep the units off line until it is satisfied that they are ready to return to service and operate reliably over the long term. PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED PART II. OTHER INFORMATION (Continued) Item 5. Other Information - Continued - ------ ----------------------------- PSE&G has completed its rigorous examination of Salem Unit 1 and its assessment of Unit 2 is continuing. Work on the 46 systems critical to Salem 1 is continuing, including those common with Unit 2, with more than 25% of necessary work activities completed and many others initiated. While PSE&G had previously estimated that Salem 1 would return to service in the first quarter 1996, as a result of its completed assessment, PSE&G now expects Salem 1 to return in the second quarter of 1996, assuming receipt of required NRC authorization, as to which no assurance can be given. The work scope assessment for Salem 2 is currently scheduled for completion in November 1995. PSE&G expects to present its final work scope assessment of both Salem units to the NRC in mid-December 1995. Since, as previously indicated, some of the work being performed relates to systems serving both Salem units, the additional time needed for Salem 1 does not necessarily mean that the current second quarter 1996 return estimate for Salem 2 will be also extended, although no assurance can be given. As previously disclosed, during these outages Salem 1 will undergo a previously scheduled refueling outage and Salem 2 will undergo a partial refueling which will eliminate a full refueling outage for Salem 2 originally scheduled for 1996. PSE&G now estimates that its share of additional 1995 operating and maintenance expenses associated with Salem restart activities will amount to approximately $22 million, or a total of $111 million of operating and maintenance expenses for the year. The increase in the estimate results from additional overtime expenses projected through year-end. The assessment is still on-going, and the scope of work that will assure the reliable, long term operation of the Salem units has not been fully defined. However, PSE&G's share of the 1996 Salem incremental operating and maintenance costs is expected to materially exceed its initial estimate of $2 million made at the start of the work scope assessment. A firmer scope, schedule and cost will not be known until the assessment of Unit 2 is complete, and the restart plans are completed. Replacement power costs incurred while the units are out of service are expected to be approximately $5 million per month, per unit. In addition, PSE&G currently anticipates that the 1995 aggregate capacity factor of its five nuclear units will range from 62% to 63%, below the 65% minimum annual standard established by the BPU, resulting in a penalty ranging from $2 to $4 million. PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED PART II. OTHER INFORMATION (Continued) Item 5. Other Information - Continued - ------ ----------------------------- PSE&G - Nuclear Operations - Salem - Concluded As previously reported, PSE&G has recently undertaken a number of nuclear senior management changes. PSE&G is committed to achieving high standards of safety and operational performance for its nuclear program. PSE&G's objective is to restart and run the Salem plants in accord with these standards so as to assure long-term reliability and reduce overall production costs in order to provide customers serviced by Salem with reliable and economic energy. As previously reported, a Salem NRC enforcement conference was held on July 28, 1995 related to certain violations of NRC requirements. The violations included valves that were incorrectly positioned following a plant modification in May 1993, non- conservatisms in setpoints for a pressurizer overpressure protection system and several examples of inadequate root cause determination of events, leading to insufficient corrective actions at Salem. On October 16, 1995, the NRC proposed cumulative civil penalties of $600,000 related to these violations. PSE&G has advised the NRC that it will not contest the proposed penalties. On October 10, 1995, Enterprise received a letter from a representative of a purported shareholder demanding that it commence legal action against certain of its officers and directors with regard to the current Salem shutdown. Enterprise is presently considering the matter. New Matter - ----------- On October 5, 1995 plant operators at Salem Unit 1 declared an alert because the overhead annunciator panels located in the control room stopped functioning. On-site facilities and the emergency news center were staffed and activated during the alert. Contractors on site at the time were asked to leave the site. The panels were declared fully operable after testing later that day, and the alert was terminated and access to the site was fully restored. PSE&G and the NRC are continuing to investigate this event. PSE&G cannot predict what action, if any, the NRC may take on this matter. PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED PART II. OTHER INFORMATION (Continued) Item 5. Other Information - Continued - ------ ----------------------------- Form 10-K, Page 12, June 10-Q, Page 35, Paragraph 2 - ---------------------------------------------------- PSE&G - Nuclear Operations - Hope Creek On July 8, 1995, during a manual shutdown of Hope Creek in order to repair control room ventilation equipment, operators partially opened a valve for a period of time and inadvertently reduced the effectiveness of the shutdown cooling system. Although the impact of the event to plant safety was minimal, the positioning of the valve and the resulting temperature change violated plant procedures and technical specifications. On July 31, 1995, NRC staff met with plant management concerning this issue and subsequently determined to assign a special inspection team to independently evaluate this event as well as PSE&G s response to it, including PSE&G s procedures and training for operator handling of abnormal conditions. The team indicated a potential for one violation, which could involve a civil penalty. An NRC enforcement conference was held on November 6, 1995. PSE&G cannot predict what other actions, if any, the NRC may take in this matter. New Matter - ----------- On September 19, 1995, the NRC issued a Notice of Violation for insufficient control room manning at Hope Creek during a three minute period in June, 1992. Two Level IV violations with no civil penalty were received for this incident; one for the three minute period in which there was no senior reactor operator present, and the other for not meeting the reporting requirements for this event. Form 10-K, Page 12, Paragraph 4 - -------------------------------- PSE&G - Nuclear Operations - Peach Bottom PSE&G has been advised by PECO that, by letter dated October 18, 1994, the NRC has approved PECO s request to re-rate the authorized maximum reactor core power levels of both Peach Bottom units by 5% to 3,458 MW from the current limits of 3,293 MW. The amendment of the Peach Bottom 2 facility operating license was effective upon the date of the NRC approval letter and the hardware changes were completed during the fall 1994 refueling outage. The amendment of the Peach Bottom 3 facility operating license became effective when the hardware changes for Unit 3 were completed during its fall 1995 refueling outage. PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED PART II. OTHER INFORMATION (Continued) Item 5. Other Information - Continued - ------ ----------------------------- Form 10-K, Page 12, June 10-Q, Page 35, Paragraph 3 - ---------------------------------------------------- PSE&G - Nuclear Operations - Peach Bottom PSE&G has been advised by PECO that on August 2, 1995, the NRC held an enforcement conference regarding three alleged violations identified by the NRC at Peach Bottom. The NRC s findings included alleged violations in control and design activities and technical specification requirements regarding operability of the emergency diesel generators. As a result, on August 17, 1995, the NRC issued PECO a Level III violation with no civil penalty. Form 10-K, Page 15, Paragraph 5 - -------------------------------- On April 28, 1995, the DOE published its final interpretation on the nuclear waste acceptance issues which were the subject of its May 1994 Notice of Inquiry. The DOE stated that it had no legal obligation to begin waste acceptance in 1998, in the absence of a repository or other storage facility. PSE&G's contracts with DOE call for DOE to begin accepting spent fuel from PSE&G in 1998. On September 7, 1995, PSE&G along with 24 other utilities and a combination of 48 States, State regulatory agencies and municipal power agencies, filed a lawsuit in the US District Court of Appeals for the District of Columbia Circuit against the DOE to protect its contractual rights. Form 10-K, Page 34, Paragraph 2 - ------------------------------- EDC and Columbia Gas Transmission Company (Columbia) were parties to a long term contract for the sale by EDC of substantial volumes of natural gas at above 1991 market prices. In July 1991, Columbia filed for protection from its creditors under Chapter 11 of the bankruptcy laws. Shortly after that filing, Columbia rejected the contract with EDC and most of its other gas purchase contracts with producers, leaving EDC and nearly 2000 other gas producers as unsecured creditors in the bankruptcy proceeding. In April 1995, after extensive litigation and proceedings involving the value of Columbia's estate and the amount of each gas producer's claim, Columbia filed a Plan of PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED PART II. OTHER INFORMATION (Continued) Item 5. Other Information - Concluded - ------ ----------------------------- Form 10-K, Page 34, Paragraph 2 - Concluded - -------------------------------------------- Reorganization (Plan), which incudes a claim settlement among Columbia's largest creditors, including EDC. Under that settlement and subject to the confirmation of the Plan, EDC estimates it would receive approximately $35 million, before Federal income taxes. The Plan has been approved by the creditors and is currently awaiting confirmation by the Bankruptcy Court. While EDC expects that the Plan will be confirmed, there is no assurance when or if the funds will be received by EDC. No income has been recognized from this anticipated settlement. PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED PART II. OTHER INFORMATION (Concluded) 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 ------- -------------------------------------------------- 10a(17) Letter Agreement with Alfred C. Koeppe signed August 23, 1995. 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 10/17/95 Item 5. Other Events (Nuclear Operations - Salem) Enterprise and PSE&G 10/17/95 Item 5. Other Events (Nuclear Operations - Salem) 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: November 14, 1995 EX-10.A15 2 EX-10.A15 PSE&G's Logo Public Service Electric and Gas Company M. Peter Mellett Vice President - Human Resources PSE&G's Logo Public Service Electric and Gas Company M. Peter Mellett Vice President - Human Resources 80 Park Plaza Newark, New Jersey 07107 201-430-7620 Mailing Address: PO Box 570 Newark, New Jersey, 07101 Fax: 201-642-1689 August 23, 1995 Mr. Alfred C. Koeppe 2 East Acres Drive Pennington, NJ 08534 Dear Mr. Koeppe: In Conjunction with your employment as Senior Vice President - External Affairs of Public Service Electric and Gas Company (PSE&G), the agreed terms of employment are as follows: 1. The effective date of your employment with PSE&G shall be October 10, 1995 or such earlier date as may be agreed to in writing (the Date of Employment (DOE)). 2. You shall be paid a salary at the annual rate of $240,000, which salary may be increased, but shall not be reduced, thereafter during the five-year period commencing on the DOE. This initial annual rate of salary shall remain in effect until December 31, 1996. As a PSE&G Officer, you will be entitled to participate in PSE&G's Deferred Compensation Plan, which permits Officers to elect to defer salary. Salary deferred under the Plan currently earns interest at the prime rate plus 1/2%. 3. PSE&G will make a cash payment to you on the DOE in the amount of $100,000 as inducement for you to commence employment with PSE&G and in consideration of the loss of benefits with your current employer. 4. You shall be entitled to those benefits from time to time available to officers and employees of PSE&G generally, except as otherwise provided in this letter. You shall be initially eligible for a minimum of six weeks vacation per year. In addition, financial counseling will be available to you on the same terms and conditions that it is provided to officers of PSE&G. 5. You may be discharged with or without cause at any time. If you should be discharged without cause during the five-year period commencing on DOE, PSE&G will pay to you the salary in effect pursuant to Paragraph 1 above at the time of your discharge for a period of twelve months following such discharge, or for the remainder of such five-year period, whichever is less. "Cause" shall mean (I) the willful or negligent dereliction of, and continued failure by you to perform your duties with PSE&G (other than any such failure resulting from your incapacity due to physical or mental illness), after a written demand for performance is delivered to you be the Chief Executive Officer of PSE&G which identifies the manner in which the CEO believes that you have not so performed your duties, or (ii) any conduct constituting a felony or moral turpitude. 6. Your participation in PSE&G's Management Incentive Compensation Plan (MICP) for 1995 will reflect a full year's award. Your target incentive award as Senior Vice President - External Affairs will initially be 25% of salary. This may be adjusted from time to time in accordance with established plan procedures. In addition, to provide an appropriate transition adjustment, because any MICP awards are paid out one third annually over a three-year period, PSE&G will pay to you the following lump sum cash payments in January of the following years: 1996- $60,000; 1997-$40,000; 1998-$20,000; in addition to any payout which may result from your participation in the MICP itself. Copies of the MICP and the calculation determining the 1994 corporate factor have previously been forwarded to you. 7. As Senior Vice President - External Affairs, you will participate in the Long-Term Incentive Plan (LTIP) of Public Service Enterprise Group Incorporated (Enterprise), the parent of PSE&G. The LTIP provides senior officers selected by the Organization and Compensation Committee with options to purchase shares of Enterprise Common Stock. The options generally are granted in January and become exercisable three years after the date of grant, and the LTIP provides for payments to be made, dependent upon dividends paid by Enterprise and future financial performance by Enterprise in comparison to other corporations, to assist the officers in exercising the options granted. It will be recommended to the Organization and Compensation Committee that you be granted 1,600 options in January 1996 (which would be exercisable in 1999). In addition, it will be recommended to the Organization and Compensation Committee that you also be granted 600 stock options under the LTIP which are exercisable in 1996, 800 stock options exercisable in 1997, and 1,000 stock options exercisable in 1998. Such options would be subject to all of the provisions of the LTIP and would permit the purchase by you of numbers of shares granted by the Organization and Compensation Committee that appropriately reflect your responsibilities and ability to contribute to the long term success of Enterprise. 8. In light of your allied work experience, you shall be granted credited service, in addition to that earned as a result of your employment by PSE&G, for the purpose of determining any pension benefits from PSE&g in accordance with the following schedule: Additional Years Date of Termination of Employment of Credited Service On or after DOE plus 5 years and prior to DOE plus 6 years 10 On or after DOE plus 6 years and prior to DOE plus 7 years 20 On or after DOE plus 7 years and prior to DOE plus 8 years 23 On or after DOE plus 8 years 25 The additional credited service shown in the table above is not cumulative, but is applied from the table depending upon when you retire. For example, assuming you are currently age 48, the additional credited service set forth above, together with the Board's current policy of granting 5 years of additional credited service to officers who retire between age 60 and age 65-1/2, and your actual credited service, will afford you a total of 42 years of credited service at age 60, and 45 years of credited service at age 63, dependent upon your actual date of birth and DOE. You will be a participant in PSE&G's Pension Plan and in its Limited Supplemental Death Benefits and Retirement Plan. The Limited Plan provides a retirement benefit of a percentage of final average compensation as defined in the Plan that is equal to credited service plus 30 years. This would result in a target retirement benefit of 72% (42 years plus 30) at age 60 and 75% at age 63 (the maximum replacement value under the program) times final average compensation, adjusted for any survivorship benefit you may choose, and reduced by Social Security benefits and pensions from other employers as provided in the Plan. Under these pension programs as presently in effect, you would be eligible to retire at age 55 without an early retirement penalty, dependent upon your actual date of birth and DOE. The amount of your pension or survivorship benefits paid by your present employer (or any other employer) shall be deducted from the pension benefits payable to you or your beneficiary by PSE&G on account of such service with your present employer (or other employer). The Limited Plan also provides for a pre-retirement death benefit paid for by PSE&G in an amount based upon 150% of salary in effect at the time of death. 9. In recognition of your need for an automobile for business purposes, PSE&G will provide you with a full size American made automobile (Oldsmobile, Buick, Chrysler or other comparable model) and shall provide the related maintenance, repairs, insurance and costs of operation thereof. The automobile shall include a mobile telephone paid for by PSE&G for your use for business purposes. 10. As part of PSE&G's requirement for a work force that is free from the influence of foreign chemical substances, you will be required to complete a medical examination which will include definitive analysis of freshly voided urine specimen for the presence of commonly abused drugs, including marijuana. 11. Any and all disputes arising out of or relating to this Agreement or your employment, other than an unemployment or workers' compensation claim, shall, at the demand of either you or PSE&G, whether made before or after the institution of any legal proceeding, be resolved through binding arbitration administered by the American Arbitration Association (AAA) in accordance with the Employment Dispute Resolution Rules of the AAA and with the United States Arbitration Act. The arbitration shall be conducted in New Jersey before one arbitrator. If the parties cannot agree on the arbitrator within 30 days after the demand for an arbitration, then either party may request the AAA to select an arbitrator, which selection shall be deemed acceptable to both parties. To the maximum extent practicable, the arbitration proceeding shall be concluded within 180 days of the filing the demand for arbitration with the AAA. All costs and fees of the arbitration shall be shared equally by the parties, unless otherwise awarded by the arbitrator. Each party agrees to keep all such disputes and arbitration proceedings strictly confidential except for disclosure of information required by law. If the foregoing is in accordance with your understanding, please sign the enclosed copy of this letter and return it to me. Very truly yours, By: M. PETER MELLETT --------------------------- M. Peter Mellett Vice President - Human Resources Agreed to this 28 day of September, 1995 By: ALFRED C. KOEPPE - ------------------------- Alfred C. Koeppe EX-12 3 EX-12
EXHIBIT 12 PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES PLUS PREFERRED SECURITIES DIVIDEND REQUIREMENTS 12 Months YEARS ENDED DECEMBER 31, Ended ---------------------------------------------------------------- September 30, 1990(A) 1991(A) 1992(A) 1993 1994 1995 --------- --------- ---------- ---------- ---------- --------- (THOUSANDS OF DOLLARS) Net Income........................ $ 403,663 $ 543,035 $ 504,117 $ 595,519(A) $ 679,033 $ 641,884 Plus Income Taxes (B)............. 144,652 274,146 253,276 316,010 322,824 309,850 --------- --------- ---------- ---------- ---------- ---------- Income Before Income Taxes........ 548,315 817,181 757,393 911,529 1,001,857 951,734 --------- --------- ---------- ---------- ---------- ---------- Fixed Charges and Preferred Securities Dividend Requirements: Interest Charges (C)............ 457,017 478,321 524,025 502,534 495,925 502,094 Interest Factor in Rentals...... 9,162 9,311 9,591 11,090 12,120 12,057 Preferred Securities Dividend Requirements (Pre-tax) (D).... 38,544 42,676 46,748 58,112 60,566 67,741 --------- --------- ---------- ---------- ---------- ---------- Total................... 504,723 530,308 580,364 571,736 568,611 581,892 --------- --------- ---------- ---------- ---------- ---------- Earnings Before Fixed Charges and Preferred Securities Dividend Requirements.................. $1,053,038 $1,347,489 $1,337,757 $1,483,265 $1,570,468 $1,533,626 ========== ========== ========== ========== ========== ========== Ratio............................. 2.09 2.54 2.30 2.59 2.76 2.64 ==== ==== ==== ==== ==== ==== (A) Excludes cumulative effect of $5.4 million credit to income reflecting a change in income taxes. (See Note 9 -- Federal Income Taxes of Notes to Consolidated Financial Statements.) (B) Includes state income taxes and federal income taxes for other incomes. (C) Excludes 1991 and 1992 interest expense on decommissioning costs of $6,956 and $5,208, respectively. Effective January 1, 1992, accounting was changed to follow Federal Energy Regulatory Commission guidelines. (D) Includes a reduction for tax-deductible preferred dividends in accordance with Sections 244(a) and 11(b) of the Internal Revenue Code of 1986, as amended, before applying accounting Rule S-K of Regulation 229.503, Item 503 (d)(6).
EX-12.A 4 EX-12.A
EXHIBIT 12(A) PUBLIC SERVICE ELECTRIC AND GAS COMPANY COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES 12 Months YEARS ENDED DECEMBER 31, Ended -------------------------------------------------------------- September 30, 1990 1991 1992 1993 1994 1995 ---------- ---------- ---------- ---------- ---------- --------- (THOUSANDS OF DOLLARS) Net Income....................... $ 537,619 $ 545,479 $ 475,936 $ 614,868 $ 659,406 $ 622,550 Plus Income Taxes (A)............ 209,360 261,912 223,782 307,414 301,447 289,959 ---------- ---------- ---------- ---------- ---------- ---------- Income Before Income Taxes....... 746,979 807,391 699,718 922,282 960,853 912,509 ---------- ---------- ---------- ---------- ---------- ---------- Fixed Charges Interest Charges (B)........... 346,020 358,517 401,902 389,956 395,925 410,831 Interest Factor in Rentals..... 9,162 9,311 9,591 11,090 12,120 12,057 ---------- ---------- ---------- ---------- ---------- ---------- Total.................. 355,182 367,828 411,493 401,046 408,045 422,888 ---------- ---------- ---------- ---------- ---------- ---------- Earnings Before Fixed Charges.... $1,102,161 $1,175,219 $1,111,211 $1,323,328 $1,368,898 $1,335,397 ========== ========== ========== ========== ========== ========== Ratio............................ 3.10 3.20 2.70 3.30 3.35 3.16 ==== ==== ==== ==== ==== ==== (A) Includes state income taxes and federal income taxes for other income. (B) Excludes 1991 and 1992 interest expense on decommissioning costs of $6,956 and $5,208, respectively. Effective January 1, 1992, accounting was changed to follow Federal Energy Regulatory Commission guidelines.
EX-12.B 5 EX-12.B
EXHIBIT 12(B) PUBLIC SERVICE ELECTRIC AND GAS COMPANY COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES PLUS PREFERRED SECURITIES DIVIDEND REQUIREMENTS 12 Months YEARS ENDED DECEMBER 31, Ended ------------------------------------------------------------- September 30, 1990 1991 1992 1993 1994 1995 ---------- ---------- ---------- ---------- ---------- --------- (THOUSANDS OF DOLLARS) Net Income............................ $ 537,619 $ 545,479 $ 475,936 $ 614,868 $ 659,406 $ 622,550 Plus Income Taxes (A)................. 209,361 261,912 223,782 307,414 301,447 289,959 ---------- ---------- --------- ---------- ---------- ---------- Income Before Income Taxes............ 746,980 807,391 699,718 922,282 960,853 912,509 ---------- ---------- --------- ---------- ---------- ---------- Fixed Charges and Preferred Securities Dividend Requirements: Interest Charges (B)................ 346,020 358,517 401,902 389,956 395,925 410,831 Interest Factor in Rentals.......... 9,162 9,311 9,591 11,090 12,120 12,057 Preferred Securities Dividend Requirements (Pre-tax) (C)........ 40,116 42,703 46,675 56,957 60,910 68,226 ---------- ---------- --------- ---------- ---------- ---------- Total....................... 395,298 410,531 458,168 458,003 468,955 491,114 ---------- ---------- --------- ---------- ---------- ---------- Earnings Before Fixed Charges and Preferred Securities Dividend Requirements........................ $1,102,162 $1,175,219 $1,111,211 $1,323,328 $1,368,898 $1,335,397 ========== ========== ========== ========== ========== ========== Ratio................................. 2.79 2.86 2.43 2.89 2.92 2.72 ==== ==== ==== ==== ==== ==== (A) Includes state income taxes and federal income taxes for other income. (B) Excludes 1991 and 1992 interest expense on decommissioning costs of $6,956 and $5,208, respectively. Effective January 1, 1992, accounting was changed to follow Federal Energy Regulatory Commission guidelines. (C) Includes a reduction for tax-deductible preferred dividends in accordance with Sections 244(a) and 11(b) of the Internal Revenue Code of 1986, as amended, before applying accounting Rule S-K of Regulation 229.503, Item 503 (d)(6).
EX-27.A 6 FDS ENTERPRISE
UT 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. 0000788784 PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED 1000 9-MOS DEC-31-1994 JAN-01-1995 SEP-30-1995 PER-BOOK 11,157,269 2,789,792 1,464,550 1,591,976 0 17,003,587 3,801,157 0 1,623,640 5,424,797 360,000 384,994 5,234,516 0 0 743,702 144,639 0 53,283 0 4,657,656 17,003,587 4,497,183 281,032 3,338,721 3,618,080 879,103 11,201 890,304 374,884 510,041 36,627 510,041 396,411 328,993 1,047,258 2.08 2.08
State Income Taxes of $5,853 and Federal Income Taxes for Other Income of $1,673 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.
EX-27.B 7 FDS PSE&G
UT 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. 0000081033 PUBLIC SERVICE ELECTRIC AND GAS COMPANY 1000 9-MOS DEC-31-1994 JAN-01-1995 SEP-30-1995 PER-BOOK 11,157,269 387,204 1,344,131 1,590,009 0 14,478,613 2,563,003 534,395 1,387,931 4,485,329 360,000 384,994 4,585,543 0 0 633,283 2,000 0 53,283 0 3,974,181 14,478,613 4,195,955 267,700 3,146,365 3,412,392 783,563 10,894 794,457 307,524 503,074 26,044 477,030 381,300 270,946 912,437 0 0
State Income Taxes of $2,490 and Federal Income Taxes for Other Income of $1,673 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.
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