Pension, OPEB and Savings Plans

12 Months Ended

Dec. 31, 2012

Pension, OPEB and Savings Plans

Pension, OPEB and Savings Plans

PSEG sponsors several qualified and nonqualified pension plans and OPEB plans covering PSEG’s and its participating affiliates’ current and former employees who meet certain eligibility criteria. Eligible employees of Power, PSE&G, Energy Holdings and Services participate in non-contributory pension and OPEB plans sponsored by PSEG and administered by Services. In addition, represented and nonrepresented employees are eligible for participation in PSEG’s two defined contribution plans described below.

PSEG, Power and PSE&G are required to record the under or over funded positions of their defined benefit pension and OPEB plans on their respective balance sheets. Such funding positions of each PSEG company are required to be measured as of the date of its respective year-end Consolidated Balance Sheets. For under funded plans, the liability is equal to the difference between the plan’s benefit obligation and the fair value of plan assets. For defined benefit pension plans, the benefit obligation is the projected benefit obligation. For OPEB plans, the benefit obligation is the accumulated postretirement benefit obligation. In addition, accounting guidance requires that the total unrecognized costs for defined benefit pension and OPEB plans be recorded as an after-tax charge to Accumulated Other Comprehensive Income (Loss), a separate component of Stockholders’ Equity. However, for PSE&G, because the amortization of the unrecognized costs is being collected from customers, the accumulated unrecognized costs are recorded as a Regulatory Asset. The unrecognized costs represent actuarial gains or losses, prior service costs and transition obligations arising from the adoption of the revised accounting guidance for pensions and OPEB, which had not been expensed.

For Power, the charge to Accumulated Other Comprehensive Income (Loss) is amortized and recorded as net periodic pension cost in the Consolidated Statements of Operations. For PSE&G, the Regulatory Asset is amortized and recorded as net periodic pension cost in the Consolidated Statements of Operations.

The following table provides a roll-forward of the changes in the benefit obligation and the fair value of plan assets during each of the two years in the periods ended December 31, 2012 and 2011. It also provides the funded status of the plans and the amounts recognized and amounts not recognized on the Consolidated Balance Sheets at the end of both years.

	Pension Benefits						Other Benefits
	2012			2011			2012				2011
	Millions
Change in Benefit Obligation:
Benefit Obligation at Beginning of Year	$	4,572		$	4,353		$	1,338			$	1,162
Service Cost	101			92			17				14
Interest Cost	223			228			65				61
Actuarial (Gain) Loss	586			300			182				179
Gross Benefits Paid	(248		)	(236		)	(69		)		(67		)
Medicare Subsidy Receipts	—			—			5				6
Plan Amendments	—			(165		)	—				(17		)
Special Termination Benefits	1			—			—				—
Benefit Obligation at End of Year	$	5,235		$	4,572		$	1,538			$	1,338
Change in Plan Assets:
Fair Value of Assets at Beginning of Year	$	3,831		$	3,555		$	211			$	195
Actual Return on Plan Assets	541			87			31				5
Employer Contributions	233			425			75				72
Gross Benefits Paid	(248		)	(236		)	(69		)		(67		)
Medicare Subsidy Receipts	—			—			5				6
Fair Value of Assets at End of Year	$	4,357		$	3,831		$	253			$	211
Funded Status:
Funded Status (Plan Assets less Benefit Obligation)	$	(878	)	$	(741	)	$	(1,285	)		$	(1,127	)
Additional Amounts Recognized in the Consolidated Balance Sheets:
Noncurrent Assets	$	6		$	—		$	—		—	$	—
Current Accrued Benefit Cost	(8		)	(7		)	—				—
Noncurrent Accrued Benefit Cost	(876		)	(734		)	(1,285		)		(1,127		)
Amounts Recognized	$	(878	)	$	(741	)	$	(1,285	)		$	(1,127	)
Additional Amounts Recognized in Accumulated Other Comprehensive Income (Loss), Regulated Assets and Deferred Assets (A):
Net Transition Obligation	$	—		$	—		$	—			$	2
Prior Service Cost	(139		)	(158		)	(67		)		(81		)
Net Actuarial Loss	2,174			1,991			527				390
Total	$	2,035		$	1,833		$	460			$	311

(A) Includes $827 million ($485 million, after-tax) and $745 million ($438 million, after-tax) in Accumulated Other Comprehensive Loss related to Pension and OPEB as of December 31, 2012 and 2011, respectively.

The pension benefits table above provides information relating to the funded status of all qualified and nonqualified pension plans and OPEB plans on an aggregate basis. As of December 31, 2012, PSEG had funded approximately 83% of its projected benefit obligation. This percentage does not include $185 million of assets in the Rabbi Trust as of December 31, 2012, which are used to partially fund the nonqualified pension plans. The fair values of the Rabbi Trust assets are included in the Consolidated Balance Sheets.

Accumulated Benefit Obligation

The accumulated benefit obligation for all PSEG’s defined benefit pension plans was $4.9 billion as of December 31, 2012 and $4.3 billion as of December 31, 2011.

The following table provides the components of net periodic benefit cost for the years ended December 31, 2012, 2011 and 2010.

	Pension Benefits Years Ended December 31,									Other Benefits Years Ended December 31,
	2012			2011			2010			2012			2011			2010
	Millions
Components of Net Periodic Benefit Cost:
Service Cost	$	101		$	92		$	87		$	17		$	14		$	16
Interest Cost	223			228			231			65			61			72
Expected Return on Plan Assets	(306		)	(334		)	(266		)	(17		)	(18		)	(14		)
Amortization of Net
Transition Obligation	—			—			—			2			4			27
Prior Service Cost	(18		)	(11		)	—			(14		)	(13		)	13
Actuarial Loss	167			119			122			31			14			8
Net Periodic Benefit Cost	$	167		$	94		$	174		$	84		$	62		$	122
Special Termination Benefits	1			—			—			—			—			—
Effect of Regulatory Asset	—			—			—			19			19			19
Total Benefit Costs, Including Effect of Regulatory Asset	$	168		$	94		$	174		$	103		$	81		$	141

Pension costs and OPEB costs for PSEG, Power and PSE&G are detailed as follows:

	Pension Benefits Years Ended December 31,						Other Benefits Years Ended December 31,
	2012		2011		2010		2012		2011		2010
	Millions
Power	$	52	$	29	$	54	$	18	$	12	$	17
PSE&G	97		51		97		82		67		120
Other	19		14		23		3		2		4
Total Benefit Costs	$	168	$	94	$	174	$	103	$	81	$	141

The following table provides the pre-tax changes recognized in Accumulated Other Comprehensive Income (Loss), Regulatory Assets and Deferred Assets:

	Pension						OPEB
	2012			2011			2012			2011
	Millions
Net Actuarial (Gain) Loss in Current Period	$	350		$	547		$	169		$	192
Amortization of Net Actuarial Gain (Loss)	(167		)	(119		)	(32		)	(14		)
Prior Service Credit in Current Period	—			(165		)	—			(17		)
Amortization of Prior Service Credit	19			11			14			13
Amortization of Transition Asset	—			—			(2		)	(4		)
Total	$	202		$	274		$	149		$	170

Amounts that are expected to be amortized from Accumulated Other Comprehensive Loss, Regulatory Assets and Deferred Assets into Net Periodic Benefit Cost in 2013 are as follows:

	Pension Benefits			Other Benefits
	2013			2013
	Millions
Actuarial (Gain) Loss	$	188		$	43
Prior Service Cost	$	(19	)	$	(14	)

The following assumptions were used to determine the benefit obligations and net periodic benefit costs:

	Pension Benefits						Other Benefits
	2012		2011		2010		2012			2011			2010
Weighted-Average Assumptions Used to Determine Benefit Obligations as of December 31:
Discount Rate	4.20	%	5.00	%	5.51	%	4.20		%	5.00		%	5.50		%
Rate of Compensation Increase	4.61	%	4.61	%	4.61	%	4.61		%	4.61		%	4.61		%
Weighted-Average Assumptions Used to Determine Net Periodic Benefit Cost for Years Ended December 31:
Discount Rate	5.00	%	5.40	%	5.91	%	5.00		%	5.38		%	5.90		%
Expected Return on Plan Assets	8.00	%	8.50	%	8.50	%	8.00		%	8.50		%	8.50		%
Rate of Compensation Increase	4.61	%	4.61	%	4.61	%	4.61		%	4.61		%	4.61		%
Assumed Health Care Cost Trend Rates as of December 31:
Administrative Expense							3.00		%	5.00		%	5.00		%
Dental Costs							6.00		%	6.00		%	6.00		%
Pre-65 Medical Costs
Immediate Rate							8.88		%	8.00		%	7.75		%
Ultimate Rate							5.00		%	5.00		%	5.00		%
Year Ultimate Rate Reached							2023			2016			2015
Post-65 Medical Costs
Immediate Rate							7.98		%	8.25		%	8.75		%
Ultimate Rate							5.00		%	5.00		%	5.00		%
Year Ultimate Rate Reached							2019			2017			2016
Effect of a 1% Increase in the Assumed Rate of Increase in Health Care Benefit Costs:
							Millions
Total of Service Cost and Interest Cost							$	12		$	11		$	10
Postretirement Benefit Obligation							$	180		$	155		$	122
Effect of a 1% Decrease in the Assumed Rate of Increase in Health Care Benefit Costs:
Total of Service Cost and Interest Cost							$	(9	)	$	(9	)	$	(8	)
Postretirement Benefit Obligation							$	(149	)	$	(128	)	$	(102	)

Plan Assets

All the investments of pension plans and OPEB plans are held in a trust account by the trustee and consist of an undivided interest in an investment account of the Master Trust. The investments in the pension and OPEB plans are measured at fair value within a hierarchy that prioritizes the inputs to fair value measurements into three levels. See Note 17. Fair Value Measurements for more information on fair value guidance. Use of the Master Trust permits the commingling of pension plan assets and OPEB plan assets for investment and administrative purposes. Although assets of both plans are commingled in the Master Trust, the Trustee maintains supporting records for the purpose of allocating the net gain or loss of the investment account to the respective participating plans. The net investment income of the investment assets is allocated by the Trustee to each participating plan based on the relationship of the interest of each plan to the total of the interests of the participating plans. As of December 31, 2012, the pension plan interest and OPEB plan interest in such assets of the Master Trust were approximately 94% and 6%, respectively.

The following tables present information about the investments measured at fair value on a recurring basis as of December 31, 2012 and 2011, including the fair value measurements and the levels of inputs used in determining those fair values.

	Recurring Fair Value Measurements as of December 31, 2012
			Quoted Market Prices for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
Description	Total		(Level 1)		(Level 2)		(Level 3)
	Millions
Temporary Investment Funds (A)	$	67	$	—	$	67	$	—
Common Stocks (B)
Commingled—United States	1,928		1,928		—		—
Commingled—International	839		839		—		—
Other	431		431		—		—
Bonds (C)
Government (United States & Foreign)	623		—		623		—
Other	691		—		691		—
Private Equity (E)	31		—		—		31
Total	$	4,610	$	3,198	$	1,381	$	31

	Recurring Fair Value Measurements as of December 31, 2011
			Quoted Market Prices for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
Description	Total		(Level 1)		(Level 2)		(Level 3)
	Millions
Temporary Investment Funds (A)	$	32	$	—	$	32	$	—
Common Stocks (B)
Commingled—United States	1,653		1,653		—		—
Commingled—International	603		603		—		—
Other	356		356		—		—
Bonds (C)
Government (United States & Foreign)	662		—		662		—
Other	663		—		663		—
Pooled Real Estate (D)	36		—		—		36
Private Equity (E)	37		—		—		37
Total	$	4,042	$	2,612	$	1,357	$	73

(A) Certain temporary investment funds are valued using inputs such as time-to-maturity, coupon rate, quality rating and current yield (primarily Level 2).

(B) Wherever possible, fair values of equity investments in stocks and in commingled funds are derived from quoted market prices as substantially all of these instruments have active markets (primarily Level 1). Most investments in stocks are priced utilizing the principal market close price or in some cases midpoint, bid or ask price.

(C) Investments in fixed income securities including bond funds are priced using an evaluated pricing approach or the most recent exchange or quoted bid (primarily Level 2).

(D) The fair value of real estate investments is based on annual independent appraisals. The investments are also valued internally every quarter by the investment managers based on significant changes in property operations and market conditions (primarily Level 3).

(E) Limited partnership interests in private equity funds are valued using significant unobservable inputs as there is little, if any, market activity. In addition, there may be transfer restrictions on private equity securities. The process for determining the fair value of such securities relied on commonly accepted valuation techniques, including the use of earnings multiples based on comparable public securities, industry-specific non-earnings-based multiples and discounted cash flow models. These inputs require significant management judgment or estimation (primarily Level 3).

Reconciliations of the beginning and ending balances of the Pension and OPEB Plans’ Level 3 assets for the years ended December 31, 2012 and 2011 follow:

	Balance as of January 1, 2012		Purchases/ (Sales)			Transfer In/ (Out)		Actual Return on Asset Sales		Actual Return on Assets Still Held			Balance as of December 31, 2012
	Millions
Pooled Real Estate	$	36	$	(38	)	$	—	$	2	$	—		$	—
Private Equity	$	37	$	(6	)	$	—	$	5	$	(5	)	$	31

	Balance as of January 1, 2011		Purchases/ (Sales)			Transfer In/ (Out) (A)			Actual Return on Asset Sales		Actual Return on Assets Still Held			Balance as of December 31, 2011
	Millions
Temporary Investment Funds	$	23	$	—		$	(23	)	$	—	$	—		$	—
Commingled Bonds—United States	$	8	$	(8	)	$	—		$	—	$	—		$	—
Pooled Real Estate	$	48	$	(18	)	$	—		$	1	$	5		$	36
Private Equity	$	38	$	(5	)	$	—		$	7	$	(3	)	$	37

(A) During the year ended December 31, 2011, $23 million of the temporary investment funds in the Pension and OPEB Fund were transferred from Level 3 to Level 2, due to more observable pricing for the underlying securities. As per PSEG’s policy, this transfer was recognized as of the beginning of the first quarter (i.e. the quarter in which the transfer occurred).

The following table provides the percentage of fair value of total plan assets for each major category of plan assets held for the qualified pension and OPEB plans as of the measurement date, December 31:

	As of December 31,
Investments	2012		2011
Equity Securities	69	%	64	%
Fixed Income Securities	29		33
Real Estate Assets	—		1
Other Investments	2		2
Total Percentage	100	%	100	%

PSEG utilizes forecasted returns, risk, and correlation of all asset classes in order to develop a portfolio designed to produce the maximum return opportunity per unit of risk. In 2011, PSEG completed its latest asset/liability study. The results from the study indicated that a long-term target asset allocation of 70% equities and 30% fixed income is consistent with the funds’ financial objectives. Derivative financial instruments are used by the plans’ investment managers primarily to rebalance the fixed income/equity allocation of the portfolio and hedge the currency risk component of foreign investments. The expected long-term rate of return on plan assets was 8.00% as of December 31, 2012 and will remain unchanged for 2013. This expected return was determined based on the study discussed above and considered the plans’ historical annualized rate of return since inception, which was an annualized return of 9.3%.

Plan Contributions

PSEG may contribute up to $145 million into its pension plans and $14 million into its OPEB plan for calendar year 2013.

Estimated Future Benefit Payments

The following pension benefit and postretirement benefit payments are expected to be paid to plan participants.

Year	Pension Benefits		Other Benefits
	Millions
2013	$	254	$	79
2014	260		80
2015	267		82
2016	274		84
2017	284		85
2018-2022	1,592		459
Total	$	2,931	$	869

401(k) Plans

PSEG sponsors two 401(k) plans, which are Employee Retirement Income Security Act defined contribution retirement plans. Eligible represented employees of PSEG's subsidiaries participate in the PSEG Employee Savings Plan (Savings Plan), while eligible non-represented employees of PSEG's subsidiaries participate in the PSEG Thrift and Tax-Deferred Savings Plan (Thrift Plan). Eligible employees may contribute up to 50% of their compensation to these plans. PSEG matches 50% of such employee contributions up to 7% of pay for Savings Plan participants and up to 8% of pay for Thrift Plan participants.

The amount paid for employer matching contributions to the plans for PSEG, Power and PSE&G are detailed as follows:

	Thrift Plan and Savings Plan
	Years Ended December 31,
	2012		2011		2010
	Millions
Power	$	10	$	8	$	5
PSE&G	18		14		9
Other	4		2		3
Total Employer Matching Contributions	$	32	$	24	$	17

Power [Member]

Pension, OPEB and Savings Plans

Pension, OPEB and Savings Plans

PSEG sponsors several qualified and nonqualified pension plans and OPEB plans covering PSEG’s and its participating affiliates’ current and former employees who meet certain eligibility criteria. Eligible employees of Power, PSE&G, Energy Holdings and Services participate in non-contributory pension and OPEB plans sponsored by PSEG and administered by Services. In addition, represented and nonrepresented employees are eligible for participation in PSEG’s two defined contribution plans described below.

PSEG, Power and PSE&G are required to record the under or over funded positions of their defined benefit pension and OPEB plans on their respective balance sheets. Such funding positions of each PSEG company are required to be measured as of the date of its respective year-end Consolidated Balance Sheets. For under funded plans, the liability is equal to the difference between the plan’s benefit obligation and the fair value of plan assets. For defined benefit pension plans, the benefit obligation is the projected benefit obligation. For OPEB plans, the benefit obligation is the accumulated postretirement benefit obligation. In addition, accounting guidance requires that the total unrecognized costs for defined benefit pension and OPEB plans be recorded as an after-tax charge to Accumulated Other Comprehensive Income (Loss), a separate component of Stockholders’ Equity. However, for PSE&G, because the amortization of the unrecognized costs is being collected from customers, the accumulated unrecognized costs are recorded as a Regulatory Asset. The unrecognized costs represent actuarial gains or losses, prior service costs and transition obligations arising from the adoption of the revised accounting guidance for pensions and OPEB, which had not been expensed.

For Power, the charge to Accumulated Other Comprehensive Income (Loss) is amortized and recorded as net periodic pension cost in the Consolidated Statements of Operations. For PSE&G, the Regulatory Asset is amortized and recorded as net periodic pension cost in the Consolidated Statements of Operations.

The following table provides a roll-forward of the changes in the benefit obligation and the fair value of plan assets during each of the two years in the periods ended December 31, 2012 and 2011. It also provides the funded status of the plans and the amounts recognized and amounts not recognized on the Consolidated Balance Sheets at the end of both years.

	Pension Benefits						Other Benefits
	2012			2011			2012				2011
	Millions
Change in Benefit Obligation:
Benefit Obligation at Beginning of Year	$	4,572		$	4,353		$	1,338			$	1,162
Service Cost	101			92			17				14
Interest Cost	223			228			65				61
Actuarial (Gain) Loss	586			300			182				179
Gross Benefits Paid	(248		)	(236		)	(69		)		(67		)
Medicare Subsidy Receipts	—			—			5				6
Plan Amendments	—			(165		)	—				(17		)
Special Termination Benefits	1			—			—				—
Benefit Obligation at End of Year	$	5,235		$	4,572		$	1,538			$	1,338
Change in Plan Assets:
Fair Value of Assets at Beginning of Year	$	3,831		$	3,555		$	211			$	195
Actual Return on Plan Assets	541			87			31				5
Employer Contributions	233			425			75				72
Gross Benefits Paid	(248		)	(236		)	(69		)		(67		)
Medicare Subsidy Receipts	—			—			5				6
Fair Value of Assets at End of Year	$	4,357		$	3,831		$	253			$	211
Funded Status:
Funded Status (Plan Assets less Benefit Obligation)	$	(878	)	$	(741	)	$	(1,285	)		$	(1,127	)
Additional Amounts Recognized in the Consolidated Balance Sheets:
Noncurrent Assets	$	6		$	—		$	—		—	$	—
Current Accrued Benefit Cost	(8		)	(7		)	—				—
Noncurrent Accrued Benefit Cost	(876		)	(734		)	(1,285		)		(1,127		)
Amounts Recognized	$	(878	)	$	(741	)	$	(1,285	)		$	(1,127	)
Additional Amounts Recognized in Accumulated Other Comprehensive Income (Loss), Regulated Assets and Deferred Assets (A):
Net Transition Obligation	$	—		$	—		$	—			$	2
Prior Service Cost	(139		)	(158		)	(67		)		(81		)
Net Actuarial Loss	2,174			1,991			527				390
Total	$	2,035		$	1,833		$	460			$	311

(A) Includes $827 million ($485 million, after-tax) and $745 million ($438 million, after-tax) in Accumulated Other Comprehensive Loss related to Pension and OPEB as of December 31, 2012 and 2011, respectively.

The pension benefits table above provides information relating to the funded status of all qualified and nonqualified pension plans and OPEB plans on an aggregate basis. As of December 31, 2012, PSEG had funded approximately 83% of its projected benefit obligation. This percentage does not include $185 million of assets in the Rabbi Trust as of December 31, 2012, which are used to partially fund the nonqualified pension plans. The fair values of the Rabbi Trust assets are included in the Consolidated Balance Sheets.

Accumulated Benefit Obligation

The accumulated benefit obligation for all PSEG’s defined benefit pension plans was $4.9 billion as of December 31, 2012 and $4.3 billion as of December 31, 2011.

The following table provides the components of net periodic benefit cost for the years ended December 31, 2012, 2011 and 2010.

	Pension Benefits Years Ended December 31,									Other Benefits Years Ended December 31,
	2012			2011			2010			2012			2011			2010
	Millions
Components of Net Periodic Benefit Cost:
Service Cost	$	101		$	92		$	87		$	17		$	14		$	16
Interest Cost	223			228			231			65			61			72
Expected Return on Plan Assets	(306		)	(334		)	(266		)	(17		)	(18		)	(14		)
Amortization of Net
Transition Obligation	—			—			—			2			4			27
Prior Service Cost	(18		)	(11		)	—			(14		)	(13		)	13
Actuarial Loss	167			119			122			31			14			8
Net Periodic Benefit Cost	$	167		$	94		$	174		$	84		$	62		$	122
Special Termination Benefits	1			—			—			—			—			—
Effect of Regulatory Asset	—			—			—			19			19			19
Total Benefit Costs, Including Effect of Regulatory Asset	$	168		$	94		$	174		$	103		$	81		$	141

Pension costs and OPEB costs for PSEG, Power and PSE&G are detailed as follows:

	Pension Benefits Years Ended December 31,						Other Benefits Years Ended December 31,
	2012		2011		2010		2012		2011		2010
	Millions
Power	$	52	$	29	$	54	$	18	$	12	$	17
PSE&G	97		51		97		82		67		120
Other	19		14		23		3		2		4
Total Benefit Costs	$	168	$	94	$	174	$	103	$	81	$	141

The following table provides the pre-tax changes recognized in Accumulated Other Comprehensive Income (Loss), Regulatory Assets and Deferred Assets:

	Pension						OPEB
	2012			2011			2012			2011
	Millions
Net Actuarial (Gain) Loss in Current Period	$	350		$	547		$	169		$	192
Amortization of Net Actuarial Gain (Loss)	(167		)	(119		)	(32		)	(14		)
Prior Service Credit in Current Period	—			(165		)	—			(17		)
Amortization of Prior Service Credit	19			11			14			13
Amortization of Transition Asset	—			—			(2		)	(4		)
Total	$	202		$	274		$	149		$	170

Amounts that are expected to be amortized from Accumulated Other Comprehensive Loss, Regulatory Assets and Deferred Assets into Net Periodic Benefit Cost in 2013 are as follows:

	Pension Benefits			Other Benefits
	2013			2013
	Millions
Actuarial (Gain) Loss	$	188		$	43
Prior Service Cost	$	(19	)	$	(14	)

The following assumptions were used to determine the benefit obligations and net periodic benefit costs:

	Pension Benefits						Other Benefits
	2012		2011		2010		2012			2011			2010
Weighted-Average Assumptions Used to Determine Benefit Obligations as of December 31:
Discount Rate	4.20	%	5.00	%	5.51	%	4.20		%	5.00		%	5.50		%
Rate of Compensation Increase	4.61	%	4.61	%	4.61	%	4.61		%	4.61		%	4.61		%
Weighted-Average Assumptions Used to Determine Net Periodic Benefit Cost for Years Ended December 31:
Discount Rate	5.00	%	5.40	%	5.91	%	5.00		%	5.38		%	5.90		%
Expected Return on Plan Assets	8.00	%	8.50	%	8.50	%	8.00		%	8.50		%	8.50		%
Rate of Compensation Increase	4.61	%	4.61	%	4.61	%	4.61		%	4.61		%	4.61		%
Assumed Health Care Cost Trend Rates as of December 31:
Administrative Expense							3.00		%	5.00		%	5.00		%
Dental Costs							6.00		%	6.00		%	6.00		%
Pre-65 Medical Costs
Immediate Rate							8.88		%	8.00		%	7.75		%
Ultimate Rate							5.00		%	5.00		%	5.00		%
Year Ultimate Rate Reached							2023			2016			2015
Post-65 Medical Costs
Immediate Rate							7.98		%	8.25		%	8.75		%
Ultimate Rate							5.00		%	5.00		%	5.00		%
Year Ultimate Rate Reached							2019			2017			2016
Effect of a 1% Increase in the Assumed Rate of Increase in Health Care Benefit Costs:
							Millions
Total of Service Cost and Interest Cost							$	12		$	11		$	10
Postretirement Benefit Obligation							$	180		$	155		$	122
Effect of a 1% Decrease in the Assumed Rate of Increase in Health Care Benefit Costs:
Total of Service Cost and Interest Cost							$	(9	)	$	(9	)	$	(8	)
Postretirement Benefit Obligation							$	(149	)	$	(128	)	$	(102	)

Plan Assets

All the investments of pension plans and OPEB plans are held in a trust account by the trustee and consist of an undivided interest in an investment account of the Master Trust. The investments in the pension and OPEB plans are measured at fair value within a hierarchy that prioritizes the inputs to fair value measurements into three levels. See Note 17. Fair Value Measurements for more information on fair value guidance. Use of the Master Trust permits the commingling of pension plan assets and OPEB plan assets for investment and administrative purposes. Although assets of both plans are commingled in the Master Trust, the Trustee maintains supporting records for the purpose of allocating the net gain or loss of the investment account to the respective participating plans. The net investment income of the investment assets is allocated by the Trustee to each participating plan based on the relationship of the interest of each plan to the total of the interests of the participating plans. As of December 31, 2012, the pension plan interest and OPEB plan interest in such assets of the Master Trust were approximately 94% and 6%, respectively.

The following tables present information about the investments measured at fair value on a recurring basis as of December 31, 2012 and 2011, including the fair value measurements and the levels of inputs used in determining those fair values.

	Recurring Fair Value Measurements as of December 31, 2012
			Quoted Market Prices for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
Description	Total		(Level 1)		(Level 2)		(Level 3)
	Millions
Temporary Investment Funds (A)	$	67	$	—	$	67	$	—
Common Stocks (B)
Commingled—United States	1,928		1,928		—		—
Commingled—International	839		839		—		—
Other	431		431		—		—
Bonds (C)
Government (United States & Foreign)	623		—		623		—
Other	691		—		691		—
Private Equity (E)	31		—		—		31
Total	$	4,610	$	3,198	$	1,381	$	31

	Recurring Fair Value Measurements as of December 31, 2011
			Quoted Market Prices for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
Description	Total		(Level 1)		(Level 2)		(Level 3)
	Millions
Temporary Investment Funds (A)	$	32	$	—	$	32	$	—
Common Stocks (B)
Commingled—United States	1,653		1,653		—		—
Commingled—International	603		603		—		—
Other	356		356		—		—
Bonds (C)
Government (United States & Foreign)	662		—		662		—
Other	663		—		663		—
Pooled Real Estate (D)	36		—		—		36
Private Equity (E)	37		—		—		37
Total	$	4,042	$	2,612	$	1,357	$	73

(A) Certain temporary investment funds are valued using inputs such as time-to-maturity, coupon rate, quality rating and current yield (primarily Level 2).

(B) Wherever possible, fair values of equity investments in stocks and in commingled funds are derived from quoted market prices as substantially all of these instruments have active markets (primarily Level 1). Most investments in stocks are priced utilizing the principal market close price or in some cases midpoint, bid or ask price.

(C) Investments in fixed income securities including bond funds are priced using an evaluated pricing approach or the most recent exchange or quoted bid (primarily Level 2).

(D) The fair value of real estate investments is based on annual independent appraisals. The investments are also valued internally every quarter by the investment managers based on significant changes in property operations and market conditions (primarily Level 3).

(E) Limited partnership interests in private equity funds are valued using significant unobservable inputs as there is little, if any, market activity. In addition, there may be transfer restrictions on private equity securities. The process for determining the fair value of such securities relied on commonly accepted valuation techniques, including the use of earnings multiples based on comparable public securities, industry-specific non-earnings-based multiples and discounted cash flow models. These inputs require significant management judgment or estimation (primarily Level 3).

Reconciliations of the beginning and ending balances of the Pension and OPEB Plans’ Level 3 assets for the years ended December 31, 2012 and 2011 follow:

	Balance as of January 1, 2012		Purchases/ (Sales)			Transfer In/ (Out)		Actual Return on Asset Sales		Actual Return on Assets Still Held			Balance as of December 31, 2012
	Millions
Pooled Real Estate	$	36	$	(38	)	$	—	$	2	$	—		$	—
Private Equity	$	37	$	(6	)	$	—	$	5	$	(5	)	$	31

	Balance as of January 1, 2011		Purchases/ (Sales)			Transfer In/ (Out) (A)			Actual Return on Asset Sales		Actual Return on Assets Still Held			Balance as of December 31, 2011
	Millions
Temporary Investment Funds	$	23	$	—		$	(23	)	$	—	$	—		$	—
Commingled Bonds—United States	$	8	$	(8	)	$	—		$	—	$	—		$	—
Pooled Real Estate	$	48	$	(18	)	$	—		$	1	$	5		$	36
Private Equity	$	38	$	(5	)	$	—		$	7	$	(3	)	$	37

(A) During the year ended December 31, 2011, $23 million of the temporary investment funds in the Pension and OPEB Fund were transferred from Level 3 to Level 2, due to more observable pricing for the underlying securities. As per PSEG’s policy, this transfer was recognized as of the beginning of the first quarter (i.e. the quarter in which the transfer occurred).

The following table provides the percentage of fair value of total plan assets for each major category of plan assets held for the qualified pension and OPEB plans as of the measurement date, December 31:

	As of December 31,
Investments	2012		2011
Equity Securities	69	%	64	%
Fixed Income Securities	29		33
Real Estate Assets	—		1
Other Investments	2		2
Total Percentage	100	%	100	%

PSEG utilizes forecasted returns, risk, and correlation of all asset classes in order to develop a portfolio designed to produce the maximum return opportunity per unit of risk. In 2011, PSEG completed its latest asset/liability study. The results from the study indicated that a long-term target asset allocation of 70% equities and 30% fixed income is consistent with the funds’ financial objectives. Derivative financial instruments are used by the plans’ investment managers primarily to rebalance the fixed income/equity allocation of the portfolio and hedge the currency risk component of foreign investments. The expected long-term rate of return on plan assets was 8.00% as of December 31, 2012 and will remain unchanged for 2013. This expected return was determined based on the study discussed above and considered the plans’ historical annualized rate of return since inception, which was an annualized return of 9.3%.

Plan Contributions

PSEG may contribute up to $145 million into its pension plans and $14 million into its OPEB plan for calendar year 2013.

Estimated Future Benefit Payments

The following pension benefit and postretirement benefit payments are expected to be paid to plan participants.

Year	Pension Benefits		Other Benefits
	Millions
2013	$	254	$	79
2014	260		80
2015	267		82
2016	274		84
2017	284		85
2018-2022	1,592		459
Total	$	2,931	$	869

401(k) Plans

PSEG sponsors two 401(k) plans, which are Employee Retirement Income Security Act defined contribution retirement plans. Eligible represented employees of PSEG's subsidiaries participate in the PSEG Employee Savings Plan (Savings Plan), while eligible non-represented employees of PSEG's subsidiaries participate in the PSEG Thrift and Tax-Deferred Savings Plan (Thrift Plan). Eligible employees may contribute up to 50% of their compensation to these plans. PSEG matches 50% of such employee contributions up to 7% of pay for Savings Plan participants and up to 8% of pay for Thrift Plan participants.

The amount paid for employer matching contributions to the plans for PSEG, Power and PSE&G are detailed as follows:

	Thrift Plan and Savings Plan
	Years Ended December 31,
	2012		2011		2010
	Millions
Power	$	10	$	8	$	5
PSE&G	18		14		9
Other	4		2		3
Total Employer Matching Contributions	$	32	$	24	$	17

PSE&G [Member]

Pension, OPEB and Savings Plans

Pension, OPEB and Savings Plans

PSEG sponsors several qualified and nonqualified pension plans and OPEB plans covering PSEG’s and its participating affiliates’ current and former employees who meet certain eligibility criteria. Eligible employees of Power, PSE&G, Energy Holdings and Services participate in non-contributory pension and OPEB plans sponsored by PSEG and administered by Services. In addition, represented and nonrepresented employees are eligible for participation in PSEG’s two defined contribution plans described below.

PSEG, Power and PSE&G are required to record the under or over funded positions of their defined benefit pension and OPEB plans on their respective balance sheets. Such funding positions of each PSEG company are required to be measured as of the date of its respective year-end Consolidated Balance Sheets. For under funded plans, the liability is equal to the difference between the plan’s benefit obligation and the fair value of plan assets. For defined benefit pension plans, the benefit obligation is the projected benefit obligation. For OPEB plans, the benefit obligation is the accumulated postretirement benefit obligation. In addition, accounting guidance requires that the total unrecognized costs for defined benefit pension and OPEB plans be recorded as an after-tax charge to Accumulated Other Comprehensive Income (Loss), a separate component of Stockholders’ Equity. However, for PSE&G, because the amortization of the unrecognized costs is being collected from customers, the accumulated unrecognized costs are recorded as a Regulatory Asset. The unrecognized costs represent actuarial gains or losses, prior service costs and transition obligations arising from the adoption of the revised accounting guidance for pensions and OPEB, which had not been expensed.

For Power, the charge to Accumulated Other Comprehensive Income (Loss) is amortized and recorded as net periodic pension cost in the Consolidated Statements of Operations. For PSE&G, the Regulatory Asset is amortized and recorded as net periodic pension cost in the Consolidated Statements of Operations.

The following table provides a roll-forward of the changes in the benefit obligation and the fair value of plan assets during each of the two years in the periods ended December 31, 2012 and 2011. It also provides the funded status of the plans and the amounts recognized and amounts not recognized on the Consolidated Balance Sheets at the end of both years.

	Pension Benefits						Other Benefits
	2012			2011			2012				2011
	Millions
Change in Benefit Obligation:
Benefit Obligation at Beginning of Year	$	4,572		$	4,353		$	1,338			$	1,162
Service Cost	101			92			17				14
Interest Cost	223			228			65				61
Actuarial (Gain) Loss	586			300			182				179
Gross Benefits Paid	(248		)	(236		)	(69		)		(67		)
Medicare Subsidy Receipts	—			—			5				6
Plan Amendments	—			(165		)	—				(17		)
Special Termination Benefits	1			—			—				—
Benefit Obligation at End of Year	$	5,235		$	4,572		$	1,538			$	1,338
Change in Plan Assets:
Fair Value of Assets at Beginning of Year	$	3,831		$	3,555		$	211			$	195
Actual Return on Plan Assets	541			87			31				5
Employer Contributions	233			425			75				72
Gross Benefits Paid	(248		)	(236		)	(69		)		(67		)
Medicare Subsidy Receipts	—			—			5				6
Fair Value of Assets at End of Year	$	4,357		$	3,831		$	253			$	211
Funded Status:
Funded Status (Plan Assets less Benefit Obligation)	$	(878	)	$	(741	)	$	(1,285	)		$	(1,127	)
Additional Amounts Recognized in the Consolidated Balance Sheets:
Noncurrent Assets	$	6		$	—		$	—		—	$	—
Current Accrued Benefit Cost	(8		)	(7		)	—				—
Noncurrent Accrued Benefit Cost	(876		)	(734		)	(1,285		)		(1,127		)
Amounts Recognized	$	(878	)	$	(741	)	$	(1,285	)		$	(1,127	)
Additional Amounts Recognized in Accumulated Other Comprehensive Income (Loss), Regulated Assets and Deferred Assets (A):
Net Transition Obligation	$	—		$	—		$	—			$	2
Prior Service Cost	(139		)	(158		)	(67		)		(81		)
Net Actuarial Loss	2,174			1,991			527				390
Total	$	2,035		$	1,833		$	460			$	311

(A) Includes $827 million ($485 million, after-tax) and $745 million ($438 million, after-tax) in Accumulated Other Comprehensive Loss related to Pension and OPEB as of December 31, 2012 and 2011, respectively.

The pension benefits table above provides information relating to the funded status of all qualified and nonqualified pension plans and OPEB plans on an aggregate basis. As of December 31, 2012, PSEG had funded approximately 83% of its projected benefit obligation. This percentage does not include $185 million of assets in the Rabbi Trust as of December 31, 2012, which are used to partially fund the nonqualified pension plans. The fair values of the Rabbi Trust assets are included in the Consolidated Balance Sheets.

Accumulated Benefit Obligation

The accumulated benefit obligation for all PSEG’s defined benefit pension plans was $4.9 billion as of December 31, 2012 and $4.3 billion as of December 31, 2011.

The following table provides the components of net periodic benefit cost for the years ended December 31, 2012, 2011 and 2010.

	Pension Benefits Years Ended December 31,									Other Benefits Years Ended December 31,
	2012			2011			2010			2012			2011			2010
	Millions
Components of Net Periodic Benefit Cost:
Service Cost	$	101		$	92		$	87		$	17		$	14		$	16
Interest Cost	223			228			231			65			61			72
Expected Return on Plan Assets	(306		)	(334		)	(266		)	(17		)	(18		)	(14		)
Amortization of Net
Transition Obligation	—			—			—			2			4			27
Prior Service Cost	(18		)	(11		)	—			(14		)	(13		)	13
Actuarial Loss	167			119			122			31			14			8
Net Periodic Benefit Cost	$	167		$	94		$	174		$	84		$	62		$	122
Special Termination Benefits	1			—			—			—			—			—
Effect of Regulatory Asset	—			—			—			19			19			19
Total Benefit Costs, Including Effect of Regulatory Asset	$	168		$	94		$	174		$	103		$	81		$	141

Pension costs and OPEB costs for PSEG, Power and PSE&G are detailed as follows:

	Pension Benefits Years Ended December 31,						Other Benefits Years Ended December 31,
	2012		2011		2010		2012		2011		2010
	Millions
Power	$	52	$	29	$	54	$	18	$	12	$	17
PSE&G	97		51		97		82		67		120
Other	19		14		23		3		2		4
Total Benefit Costs	$	168	$	94	$	174	$	103	$	81	$	141

The following table provides the pre-tax changes recognized in Accumulated Other Comprehensive Income (Loss), Regulatory Assets and Deferred Assets:

	Pension						OPEB
	2012			2011			2012			2011
	Millions
Net Actuarial (Gain) Loss in Current Period	$	350		$	547		$	169		$	192
Amortization of Net Actuarial Gain (Loss)	(167		)	(119		)	(32		)	(14		)
Prior Service Credit in Current Period	—			(165		)	—			(17		)
Amortization of Prior Service Credit	19			11			14			13
Amortization of Transition Asset	—			—			(2		)	(4		)
Total	$	202		$	274		$	149		$	170

Amounts that are expected to be amortized from Accumulated Other Comprehensive Loss, Regulatory Assets and Deferred Assets into Net Periodic Benefit Cost in 2013 are as follows:

	Pension Benefits			Other Benefits
	2013			2013
	Millions
Actuarial (Gain) Loss	$	188		$	43
Prior Service Cost	$	(19	)	$	(14	)

The following assumptions were used to determine the benefit obligations and net periodic benefit costs:

	Pension Benefits						Other Benefits
	2012		2011		2010		2012			2011			2010
Weighted-Average Assumptions Used to Determine Benefit Obligations as of December 31:
Discount Rate	4.20	%	5.00	%	5.51	%	4.20		%	5.00		%	5.50		%
Rate of Compensation Increase	4.61	%	4.61	%	4.61	%	4.61		%	4.61		%	4.61		%
Weighted-Average Assumptions Used to Determine Net Periodic Benefit Cost for Years Ended December 31:
Discount Rate	5.00	%	5.40	%	5.91	%	5.00		%	5.38		%	5.90		%
Expected Return on Plan Assets	8.00	%	8.50	%	8.50	%	8.00		%	8.50		%	8.50		%
Rate of Compensation Increase	4.61	%	4.61	%	4.61	%	4.61		%	4.61		%	4.61		%
Assumed Health Care Cost Trend Rates as of December 31:
Administrative Expense							3.00		%	5.00		%	5.00		%
Dental Costs							6.00		%	6.00		%	6.00		%
Pre-65 Medical Costs
Immediate Rate							8.88		%	8.00		%	7.75		%
Ultimate Rate							5.00		%	5.00		%	5.00		%
Year Ultimate Rate Reached							2023			2016			2015
Post-65 Medical Costs
Immediate Rate							7.98		%	8.25		%	8.75		%
Ultimate Rate							5.00		%	5.00		%	5.00		%
Year Ultimate Rate Reached							2019			2017			2016
Effect of a 1% Increase in the Assumed Rate of Increase in Health Care Benefit Costs:
							Millions
Total of Service Cost and Interest Cost							$	12		$	11		$	10
Postretirement Benefit Obligation							$	180		$	155		$	122
Effect of a 1% Decrease in the Assumed Rate of Increase in Health Care Benefit Costs:
Total of Service Cost and Interest Cost							$	(9	)	$	(9	)	$	(8	)
Postretirement Benefit Obligation							$	(149	)	$	(128	)	$	(102	)

Plan Assets

All the investments of pension plans and OPEB plans are held in a trust account by the trustee and consist of an undivided interest in an investment account of the Master Trust. The investments in the pension and OPEB plans are measured at fair value within a hierarchy that prioritizes the inputs to fair value measurements into three levels. See Note 17. Fair Value Measurements for more information on fair value guidance. Use of the Master Trust permits the commingling of pension plan assets and OPEB plan assets for investment and administrative purposes. Although assets of both plans are commingled in the Master Trust, the Trustee maintains supporting records for the purpose of allocating the net gain or loss of the investment account to the respective participating plans. The net investment income of the investment assets is allocated by the Trustee to each participating plan based on the relationship of the interest of each plan to the total of the interests of the participating plans. As of December 31, 2012, the pension plan interest and OPEB plan interest in such assets of the Master Trust were approximately 94% and 6%, respectively.

The following tables present information about the investments measured at fair value on a recurring basis as of December 31, 2012 and 2011, including the fair value measurements and the levels of inputs used in determining those fair values.

	Recurring Fair Value Measurements as of December 31, 2012
			Quoted Market Prices for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
Description	Total		(Level 1)		(Level 2)		(Level 3)
	Millions
Temporary Investment Funds (A)	$	67	$	—	$	67	$	—
Common Stocks (B)
Commingled—United States	1,928		1,928		—		—
Commingled—International	839		839		—		—
Other	431		431		—		—
Bonds (C)
Government (United States & Foreign)	623		—		623		—
Other	691		—		691		—
Private Equity (E)	31		—		—		31
Total	$	4,610	$	3,198	$	1,381	$	31

	Recurring Fair Value Measurements as of December 31, 2011
			Quoted Market Prices for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
Description	Total		(Level 1)		(Level 2)		(Level 3)
	Millions
Temporary Investment Funds (A)	$	32	$	—	$	32	$	—
Common Stocks (B)
Commingled—United States	1,653		1,653		—		—
Commingled—International	603		603		—		—
Other	356		356		—		—
Bonds (C)
Government (United States & Foreign)	662		—		662		—
Other	663		—		663		—
Pooled Real Estate (D)	36		—		—		36
Private Equity (E)	37		—		—		37
Total	$	4,042	$	2,612	$	1,357	$	73

(A) Certain temporary investment funds are valued using inputs such as time-to-maturity, coupon rate, quality rating and current yield (primarily Level 2).

(B) Wherever possible, fair values of equity investments in stocks and in commingled funds are derived from quoted market prices as substantially all of these instruments have active markets (primarily Level 1). Most investments in stocks are priced utilizing the principal market close price or in some cases midpoint, bid or ask price.

(C) Investments in fixed income securities including bond funds are priced using an evaluated pricing approach or the most recent exchange or quoted bid (primarily Level 2).

(D) The fair value of real estate investments is based on annual independent appraisals. The investments are also valued internally every quarter by the investment managers based on significant changes in property operations and market conditions (primarily Level 3).

(E) Limited partnership interests in private equity funds are valued using significant unobservable inputs as there is little, if any, market activity. In addition, there may be transfer restrictions on private equity securities. The process for determining the fair value of such securities relied on commonly accepted valuation techniques, including the use of earnings multiples based on comparable public securities, industry-specific non-earnings-based multiples and discounted cash flow models. These inputs require significant management judgment or estimation (primarily Level 3).

Reconciliations of the beginning and ending balances of the Pension and OPEB Plans’ Level 3 assets for the years ended December 31, 2012 and 2011 follow:

	Balance as of January 1, 2012		Purchases/ (Sales)			Transfer In/ (Out)		Actual Return on Asset Sales		Actual Return on Assets Still Held			Balance as of December 31, 2012
	Millions
Pooled Real Estate	$	36	$	(38	)	$	—	$	2	$	—		$	—
Private Equity	$	37	$	(6	)	$	—	$	5	$	(5	)	$	31

	Balance as of January 1, 2011		Purchases/ (Sales)			Transfer In/ (Out) (A)			Actual Return on Asset Sales		Actual Return on Assets Still Held			Balance as of December 31, 2011
	Millions
Temporary Investment Funds	$	23	$	—		$	(23	)	$	—	$	—		$	—
Commingled Bonds—United States	$	8	$	(8	)	$	—		$	—	$	—		$	—
Pooled Real Estate	$	48	$	(18	)	$	—		$	1	$	5		$	36
Private Equity	$	38	$	(5	)	$	—		$	7	$	(3	)	$	37

(A) During the year ended December 31, 2011, $23 million of the temporary investment funds in the Pension and OPEB Fund were transferred from Level 3 to Level 2, due to more observable pricing for the underlying securities. As per PSEG’s policy, this transfer was recognized as of the beginning of the first quarter (i.e. the quarter in which the transfer occurred).

The following table provides the percentage of fair value of total plan assets for each major category of plan assets held for the qualified pension and OPEB plans as of the measurement date, December 31:

	As of December 31,
Investments	2012		2011
Equity Securities	69	%	64	%
Fixed Income Securities	29		33
Real Estate Assets	—		1
Other Investments	2		2
Total Percentage	100	%	100	%

PSEG utilizes forecasted returns, risk, and correlation of all asset classes in order to develop a portfolio designed to produce the maximum return opportunity per unit of risk. In 2011, PSEG completed its latest asset/liability study. The results from the study indicated that a long-term target asset allocation of 70% equities and 30% fixed income is consistent with the funds’ financial objectives. Derivative financial instruments are used by the plans’ investment managers primarily to rebalance the fixed income/equity allocation of the portfolio and hedge the currency risk component of foreign investments. The expected long-term rate of return on plan assets was 8.00% as of December 31, 2012 and will remain unchanged for 2013. This expected return was determined based on the study discussed above and considered the plans’ historical annualized rate of return since inception, which was an annualized return of 9.3%.

Plan Contributions

PSEG may contribute up to $145 million into its pension plans and $14 million into its OPEB plan for calendar year 2013.

Estimated Future Benefit Payments

The following pension benefit and postretirement benefit payments are expected to be paid to plan participants.

Year	Pension Benefits		Other Benefits
	Millions
2013	$	254	$	79
2014	260		80
2015	267		82
2016	274		84
2017	284		85
2018-2022	1,592		459
Total	$	2,931	$	869

401(k) Plans

PSEG sponsors two 401(k) plans, which are Employee Retirement Income Security Act defined contribution retirement plans. Eligible represented employees of PSEG's subsidiaries participate in the PSEG Employee Savings Plan (Savings Plan), while eligible non-represented employees of PSEG's subsidiaries participate in the PSEG Thrift and Tax-Deferred Savings Plan (Thrift Plan). Eligible employees may contribute up to 50% of their compensation to these plans. PSEG matches 50% of such employee contributions up to 7% of pay for Savings Plan participants and up to 8% of pay for Thrift Plan participants.

The amount paid for employer matching contributions to the plans for PSEG, Power and PSE&G are detailed as follows:

	Thrift Plan and Savings Plan
	Years Ended December 31,
	2012		2011		2010
	Millions
Power	$	10	$	8	$	5
PSE&G	18		14		9
Other	4		2		3
Total Employer Matching Contributions	$	32	$	24	$	17