Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2012

PSEG's, Power's And PSE&G's Respective Assets And (Liabilities) Measured At Fair Value On A Recurring Basis

	Recurring Fair Value Measurements as of September 30, 2012
Description	Total			Cash Collateral Netting (E)			Quoted Market Prices for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
	Millions
PSEG
Assets:
Derivative Contracts:
Energy-Related Contracts (A)	$	197		$	(6	)	$	—	$	116		$	87
Interest Rate Swaps (B)	$	70		$	—		$	—	$	70		$	—
NDT Fund (C)
Equity Securities	$	749		$	—		$	749	$	—		$	—
Debt Securities—Govt Obligations	$	288		$	—		$	—	$	288		$	—
Debt Securities—Other	$	333		$	—		$	—	$	333		$	—
Other Securities	$	123		$	—		$	—	$	123		$	—
Rabbi Trust (C)
Equity Securities—Mutual Funds	$	17		$	—		$	17	$	—		$	—
Debt Securities—Govt Obligations	$	116		$	—		$	—	$	116		$	—
Debt Securities—Other	$	47		$	—		$	—	$	47		$	—
Other Securities	$	3		$	—		$	—	$	3		$	—
Liabilities:
Derivative Contracts:
Energy-Related Contracts (A)	$	(163	)	$	4		$	—	$	(59	)	$	(108	)
Power
Assets:
Derivative Contracts:
Energy-Related Contracts (A)	$	124		$	(6	)	$	—	$	116		$	14
NDT Fund (C)
Equity Securities	$	749		$	—		$	749	$	—		$	—
Debt Securities—Govt Obligations	$	288		$	—		$	—	$	288		$	—
Debt Securities—Other	$	333		$	—		$	—	$	333		$	—
Other Securities	$	123		$	—		$	—	$	123		$	—
Rabbi Trust (C)
Equity Securities—Mutual Funds	$	3		$	—		$	3	$	—		$	—
Debt Securities—Govt Obligations	$	23		$	—		$	—	$	23		$	—
Debt Securities—Other	$	9		$	—		$	—	$	9		$	—
Other Securities	$	1		$	—		$	—	$	1		$	—
Liabilities:
Derivative Contracts:
Energy-Related Contracts (A)	$	(57	)	$	4		$	—	$	(59	)	$	(2	)
PSE&G
Assets:
Derivative Contracts:
Energy Related Contracts (A)	$	73		$	—		$	—	$	—		$	73
Rabbi Trust (C)
Equity Securities—Mutual Funds	$	6		$	—		$	6	$	—		$	—
Debt Securities—Govt Obligations	$	38		$	—		$	—	$	38		$	—
Debt Securities—Other	$	16		$	—		$	—	$	16		$	—
Other Securities	$	1		$	—		$	—	$	1		$	—
Liabilities:
Derivative Contracts:
Energy Related Contracts (A)	$	(106	)	$	—		$	—	$	—		$	(106	)

	Recurring Fair Value Measurements as of December 31, 2011
Description	Total			Cash Collateral Netting (E)			Quoted Market Prices of Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
	Millions
PSEG
Assets:
Derivative Contracts:
Energy-Related Contracts (A)	$	198		$	(100	)	$	—	$	257		$	41
Interest Rate Swaps (B)	$	64		$	—		$	—	$	64		$	—
NDT Fund: (C)
Equity Securities	$	685		$	—		$	685	$	—		$	—
Debt Securities-Govt Obligations	$	359		$	—		$	—	$	359		$	—
Debt Securities-Other	$	281		$	—		$	—	$	281		$	—
Other Securities	$	24		$	—		$	—	$	24		$	—
Rabbi Trust—Mutual Funds (C)	$	172		$	—		$	19	$	153		$	—
Liabilities:
Derivative Contracts:
Energy-Related Contracts (A)	$	(155	)	$	18		$	—	$	(153	)	$	(20	)
Interest Rate Swaps (B)	$	(2	)	$	—		$	—	$	(2	)	$	—
Non-Recourse Debt (D)	$	(50	)	$	—		$	—	$	—		$	(50	)
Power
Assets:
Derivative Contracts:
Energy-Related Contracts (A)	$	194		$	(100	)	$	—	$	257		$	37
NDT Fund: (C)
Equity Securities	$	685		$	—		$	685	$	—		$	—
Debt Securities-Govt Obligations	$	359		$	—		$	—	$	359		$	—
Debt Securities-Other	$	281		$	—		$	—	$	281		$	—
Other Securities	$	24		$	—		$	—	$	24		$	—
Rabbi Trust—Mutual Funds (C)	$	33		$	—		$	4	$	29		$	—
Liabilities:
Derivative Contracts:
Energy-Related Contracts (A)	$	(148	)	$	18		$	—	$	(153	)	$	(13	)
PSE&G
Assets:
Derivative Contracts:
Energy-Related Contracts (A)	$	4		$	—		$	—	$	—		$	4
Rabbi Trust—Mutual Funds (C)	$	57		$	—		$	6	$	51		$	—
Liabilities:
Derivative Contracts:
Energy-Related Contracts (A)	$	(7	)	$	—		$	—	$	—		$	(7	)

(A) Level 2—Fair values for energy-related contracts are obtained primarily using a market-based approach. Most derivative contracts (forward purchase or sale contracts and swaps) are valued using the average of the bid/ask midpoints from multiple broker or dealer quotes or auction prices. Prices used in the valuation process are also corroborated independently by management to determine that values are based on actual transaction data or, in the absence of transactions, bid and offers for the day. Examples may include certain exchange and non-exchange traded capacity and electricity contracts and natural gas physical or swap contracts based on market prices, basis adjustments and other premiums where adjustments and premiums are not considered significant to the overall inputs.

Level 3—For energy-related contracts, which include more complex agreements where limited observable inputs or pricing information are available, modeling techniques are employed using assumptions reflective of contractual terms, current market rates, forward price curves, discount rates and risk factors, as applicable. Fair values of other energy contracts may be based on broker quotes that we cannot corroborate with actual market transaction data.

(B) Interest rate swaps are valued using quoted prices on commonly quoted intervals, which are interpolated for periods different than the quoted intervals, as inputs to a market valuation model. Market inputs can generally be verified and model selection does not involve significant management judgment.

(C) The fair value measurements table excludes cash of $8 million which is part of the NDT Fund as of September 30, 2012. The NDT Fund maintains investments in various equity and fixed income securities classified as “available for sale.” The Rabbi Trust maintains investments in an S&P 500 index fund and various fixed income securities classified as “available for sale.” These securities are generally valued with prices that are either exchange provided (equity securities) or market transactions for comparable securities and/or broker quotes (fixed income securities).

Level 1—Investments in marketable equity securities within the NDT Fund are primarily investments in common stocks across a broad range of industries and sectors. Most equity securities are priced utilizing the principal market close price or, in some cases, midpoint, bid or ask price (primarily Level 1). The Rabbi Trust equity index fund is valued based on quoted prices in an active market (Level 1).

Level 2—NDT and Rabbi Trust fixed income securities are limited to investment grade corporate bonds and United States Treasury obligations or Federal Agency mortgage-backed securities with a wide range of maturities. Since many fixed income securities do not trade on a daily basis, they are priced using an evaluated pricing methodology that varies by asset class and reflects observable market information such as the most recent exchange price or quoted bid for similar securities. Market-based standard inputs typically include benchmark yields, reported trades, broker/dealer quotes, and issuer spreads (primarily Level 2). Short-term investments and certain commingled temporary investments are valued using observable market prices or market parameters such as time-to-maturity, coupon rate, quality rating and current yield (primarily Level 2).

(D) For Non-Recourse Debt, see Fair Value Option below.

(E) Cash collateral netting represents collateral amounts netted against derivative assets and liabilities as permitted under the accounting guidance for Offsetting of Amounts Related to Certain Contracts

Schedule Of Quantitative Information About Level 3 Fair Value Measurements

	Quantitative Information About Level 3 Fair Value Measurements
Commodity	Level 3 Position	Fair Value at September 30, 2012					Valuation Technique(s)	Significant Unobservable Input	Range
		Assets		(Liabilities)
		Millions
Power
Electricity	Electric Swaps	$	10	$	(1	)	Discounted cash flow	Power Basis	$0 -$10/MWh
Other	Various (A)	4		(1		)
Total Power		$	14	$	(2	)
PSE&G
Gas and Capacity	Forward Contracts (B)	$	73	$	(106	)	Discounted cash flow	Long-Term Gas Basis and Capacity Prices	(B)
Total PSE&G		$	73	$	(106	)
TOTAL PSEG		$	87	$	(108	)

(A) Includes long-term electric capacity and long-term gas supply positions which are immaterial.

(B) Includes long-term gas supply and long-term electric capacity positions with various unobservable inputs. Significant unobservable inputs for the gas supply contracts include long-term basis prices in the range of $0 to $2/MMBTU of natural gas. Unobservable inputs for the long-term electric capacity contracts include forecasted capacity prices in the range of $100 to $400/MW day.

Changes In Level 3 Assets And (Liabilities) Measured At Fair Value On A Recurring Basis

Changes in Level 3 Assets and (Liabilities) Measured at Fair Value on a Recurring Basis

for the Three Months EndedSeptember 30, 2012

				Total Gains or (Losses) Realized/Unrealized
Description	Balance as of July 1, 2012			Included in Income (A)			Included in Regulatory Assets/ Liabilities (B)		Purchases, (Sales) (C)		Issuances (Settlements) (D)			Transfers In (Out) (E)		Balance as of September 30, 2012
	Millions
PSEG
Net Derivative Assets (Liabilities)	$	(36	)	$	(1	)	$	25	$	—	$	(9	)	$	—	$	(21	)
Power
Net Derivative Assets (Liabilities)	$	22		$	(1	)	$	—	$	—	$	(9	)	$	—	$	12
PSE&G
Net Derivative Assets (Liabilities)	$	(58	)	$	—		$	25	$	—	$	—		$	—	$	(33	)

Changes in Level 3 Assets and (Liabilities) Measured at Fair Value on a Recurring Basis

for the Nine Months EndedSeptember 30, 2012

				Total Gains or (Losses) Realized/Unrealized
Description	Balance as of January 1, 2012			Included in Income (F)		Included in Regulatory Assets/ Liabilities (B)			Purchases, (Sales) (C)		Issuances (Settlements) (D)			Transfers In (Out) (E)		Balance as of September 30, 2012
	Millions
PSEG
Net Derivative Assets (Liabilities)	$	21		$	40	$	(30	)	$	—	$	(52	)	$	—	$	(21	)
Non-Recourse Debt	$	(50	)	$	50	$	—		$	—	$	—		$	—	$	—
Power
Net Derivative Assets (Liabilities)	$	24		$	40	$	—		$	—	$	(52	)	$	—	$	12
PSE&G
Net Derivative Assets (Liabilities)	$	(3	)	$	—	$	(30	)	$	—	$	—		$	—	$	(33	)

A reconciliation of the beginning and ending balances of Level 3 derivative contracts and securities for the three months and nine months ended September 30, 2011 follows:

Changes in Level 3 Assets and (Liabilities) Measured at Fair Value on a Recurring Basis

for the Three Months EndedSeptember 30, 2011

				Total Gains or (Losses) Realized/Unrealized
Description	Balance as of July 1, 2011			Included in   Income (A)		Included in Regulatory Assets/ Liabilities (B)			Purchases, (Sales) (C)		Issuances (Settlements) (D)		Transfers In (Out) (E)		Balance as of September 30, 2011
	Millions
PSEG
Net Derivative Assets (Liabilities)	$	(3	)	$	13	$	(27	)	$	10	$	3	$	—	$	(4	)
Power
Net Derivative Assets (Liabilities)	$	(4	)	$	13	$	—		$	10	$	3	$	—	$	22
PSE&G
Net Derivative Assets (Liabilities)	$	1		$	—	$	(27	)	$	—	$	—	$	—	$	(26	)

Changes in Level 3 Assets and (Liabilities) Measured at Fair Value on a Recurring Basis

for the Nine Months EndedSeptember 30, 2011

			Total Gains or (Losses) Realized/Unrealized
Description	Balance as of January 1, 2011		Included in   Income (F)			Included in Regulatory Assets/ Liabilities (B)			Purchases, (Sales) (C)		Issuances (Settlements) (D)			Transfers In (Out) (E)			Balance as of September 30, 2011
	Millions
PSEG
Net Derivative Assets (Liabilities)	$	47	$	(27	)	$	(31	)	$	29	$	(22	)	$	—		$	(4	)
NDT Funds	$	8	$	—		$	—		$	—	$	—		$	(8	)	$	—
Power
Net Derivative Assets (Liabilities)	$	42	$	(27	)	$	—		$	29	$	(22	)	$	—		$	22
NDT Funds	$	8	$	—		$	—		$	—	$	—		$	(8	)	$	—
PSE&G
Net Derivative Assets (Liabilities)	$	5	$	—		$	(31	)	$	—	$	—		$	—		$	(26	)

(A) PSEG’s and Power’s gains and losses attributable to changes in net derivative assets and liabilities include $(1) million and $12 million in Operating Income in 2012 and 2011, respectively, $1 million in OCI and less than $1 million in Income from Discontinued Operations in 2011. Of the $(1) million in Operating Income in 2012, $(10) million is unrealized. Of the $12 million in Operating Income in 2011, $31 million is unrealized. Energy Holdings’ release from its obligations under the non-recourse debt is included in PSEG’s Operating Income and is offset by the write-off of the related assets.

(B) Mainly includes gains/losses on PSE&G’s derivative contracts that are not included in either earnings or OCI, as they are deferred as a Regulatory Asset/Liability and are expected to be recovered from/returned to PSE&G’s customers.

(C) Includes $10 million in purchases and $0 million in sales for the three months ended September 30, 2011. Includes $65 million in purchases and $(36) million in sales for the nine months months ended September 30, 2011.

(D) Includes $0 million and $(5) million in issuances and $(9) million and $8 million in settlements for the three months ended September 30, 2012 and 2011, respectively. Includes $0 million and $(25) million in issuances and $(52) million and $3 million in settlements for the nine months ended September 30, 2012 and 2011, respectively.

(E) There were no transfers among levels during the three months ended September 30, 2012 and 2011 and the nine months ended September 30, 2012. During the nine months ended September 30, 2011, $8 million of assets in the NDT fund were transferred from Level 3 to Level 2, due to more observable pricing for the underlying securities. The transfer was recognized as of the beginning of the first quarter (i.e. the quarter in which the transfer occurred), as per PSEG’s policy.

(F) PSEG’s and Power’s gains and losses attributable to changes in net derivative assets and liabilities include $40 million and $(28) million in Operating Income in 2012 and 2011, respectively, $(2) million in OCI and $3 million in Income from Discontinued Operations in 2011. Of the $40 million in Operating Income in 2012, $(12) million is unrealized. Of the $(28) million in Operating Income in 2011, $(25) million is unrealized. Energy Holdings’ release from its obligations under the non-recourse debt is included in PSEG’s Operating Income and is offset by the write-off of the related assets.

Fair Value Of Debt

	September 30, 2012				December 31, 2011
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
	Millions
Long-Term Debt:
PSEG (Parent) (A)	$	49	$	70	$	39	$	62
Power -Recourse Debt (B)	2,686		3,205		2,751		3,158
PSE&G (B)	4,744		5,631		4,270		4,905
Transition Funding (PSE&G) (B)	746		832		895		1,016
Transition Funding II (PSE&G) (B)	39		41		44		47
Energy Holdings:
Project Level, Non-Recourse Debt (C)	45		45		95		95
Total Long-Term Debt	$	8,309	$	9,824	$	8,094	$	9,283

(A) Fair value represents net offsets to debt resulting from adjustments from interest rate swaps entered into to hedge certain debt at Power and the unamortized premium resulting from a debt exchange entered into between Power and Energy Holdings.

(B) The debt fair valuation is based on the present value of each bond’s future cash flows. The discount rates used in the present value analysis are based on an estimate of new issue bond yields across the treasury curve. When a bond has embedded options, an interest rate model is used to reflect the impact of interest rate volatility into the analysis (primarily Level 2 measurements).

(C) Fair value amounts as of December 31, 2011 include $50 million of non-recourse project debt related to Dynegy which is classified as a Level 3 measurement. See “Fair Value Option” above for more details on Dynegy debt. Non-recourse project debt of $45 million is valued as equivalent to the amortized cost and is classified as a Level 3 measurement.