Income Taxes

12 Months Ended

Dec. 31, 2012

Income Taxes

Income Taxes

A reconciliation of reported income tax expense for PSEG with the amount computed by multiplying pre-tax income by the statutory federal income tax rate of 35% is as follows:

	Years Ended December 31,
	2012			2011			2010
	Millions
Net Income	$	1,275		$	1,503		$	1,564
Income (Loss) from Discontinued Operations, including Gain on Disposal, net of tax benefit	—			96			7
Income from Continuing Operations	1,275			1,407			1,557
Preferred Dividends	—			—			(1		)
Income from Continuing Operations, excluding Preferred Dividends	$	1,275		$	1,407		$	1,558
Income Taxes:
Operating Income:
Current Expense:
Federal	$	(204	)	$	258		$	(166	)
State	(2		)	32			157
Total Current	(206		)	290			(9		)
Deferred Expense:
Federal	758			501			992
State	125			191			79
Total Deferred	883			692			1,071
Investment Tax Credit	59			(5		)	(3		)
Total Income Taxes	$	736		$	977		$	1,059
Pre-Tax Income	$	2,011		$	2,384		$	2,617
Tax Computed at Statutory Rate @ 35%	$	704		$	834		$	916
Increase (Decrease) Attributable to Flow-Through of Certain Tax Adjustments:
State Income Taxes (net of federal income tax)	115			146			154
Uncertain Tax Positions	4			19			30
Manufacturing Deduction	—			(15		)	(24		)
Nuclear Decommissioning Trust	10			14			10
Plant-Related Items	(5		)	(6		)	(3		)
Tax Credits	(10		)	(5		)	(2		)
Audit Settlement	(71		)	—			—
Other	(11		)	(10		)	(22		)
Sub-Total	32			143			143
Total Income Tax Provision	$	736		$	977		$	1,059
Effective Income Tax Rate	36.6		%	41.0		%	40.5		%

The following is an analysis of deferred income taxes for PSEG:

	As of December 31,
	2012		2011
	Millions
Deferred Income Taxes
Assets:
Current (net)	$	49	$	—
Noncurrent:
Unrecovered Investment Tax Credit	$	30	$	15
Accumulated Other Comprehensive Income (Loss)	40		39
Cumulative Effect of a Change in Accounting Principle	11		11
OPEB	200		208
Cost of Removal	51		51
Contractual Liabilities & Environmental Costs	35		35
MTC	18		26
Related to Uncertain Tax Positions	75		104
Capital Loss	35		—
Other	82		44
Total Non-Current Assets	$	577	$	533
Total Assets	$	626	$	533
Liabilities:
Current (net)	$	72	$	170
Noncurrent:
Plant-Related Items	$	4,685	$	3,894
Nuclear Decommissioning	209		155
New Jersey Corporate Business Tax	343		180
Securitization	371		495
Leasing Activities	656		527
Partnership Activity	17		18
Conservation Costs	101		97
Pension Costs	180		129
AROs	297		302
Taxes Recoverable Through Future Rate (net)	165		158
Total Noncurrent Liabilities	$	7,024	$	5,955
Total Liabilities	$	7,096	$	6,125
Summary of Accumulated Deferred Income Taxes:
Net Current Deferred Income Tax Assets	$	49	$	—
Net Current Deferred Income Tax Liability	$	72	$	170
Net Noncurrent Deferred Income Tax Liabilities	$	6,447	$	5,422
Investment Tax Credit (ITC)	95		36
Net Total Noncurrent Deferred Income Taxes and ITC	$	6,542	$	5,458

A reconciliation of reported income tax expense for Power with the amount computed by multiplying pre-tax income by the statutory federal income tax rate of 35% is as follows:

	Years Ended December 31,
	2012			2011			2010
	Millions
Net Income	$	647		$	1,098		$	1,143
Income (Loss) from Discontinued Operations, net of tax	—			96			7
Income from Continuing Operations	$	647		$	1,002		$	1,136
Income Taxes:
Operating Income:
Current Expense:
Federal	$	83		$	400		$	12
State	53			40			127
Total Current	136			440			139
Deferred Expense:
Federal	262			151			598
State	35			94			41
Total Deferred	297			245			639
Total Income Taxes	$	433		$	685		$	778
Pre-Tax Income	$	1,080		$	1,687		$	1,914
Tax Computed at Statutory Rate @ 35%	$	378		$	591		$	670
Increase (Decrease) Attributable to Flow-Through of Certain Tax Adjustments:
State Income Taxes (net of federal income tax)	55			87			109
Manufacturing Deduction	—			(15		)	(24		)
Nuclear Decommissioning Trust	10			14			10
Uncertain Tax Positions	(6		)	11			10
Audit Settlement	(1		)	—			—
Other	(3		)	(3		)	3
Sub-Total	55			94			108
Total Income Tax Provision	$	433		$	685		$	778
Effective Income Tax Rate	40.1		%	40.6		%	40.6		%

The following is an analysis of deferred income taxes for Power:

	As of December 31,
	2012		2011
	Millions
Deferred Income Taxes
Assets:
Noncurrent:
Cumulative Effect of a Change in Accounting Principle	$	11	$	11
Pension Costs	38		53
Accumulated Other Comprehensive Income (Loss)	40		39
Cost of Removal	51		51
Contractual Liabilities & Environmental Costs	35		35
Related to Uncertain Tax Positions	27		4
Capital Loss	12		—
Other	2		22
Total Noncurrent Assets	$	216	$	215
Total Assets	$	216	$	215
Liabilities:
Current (net)	$	16	$	53
Noncurrent:
Plant-Related Items	$	1,253	$	1,013
New Jersey Corporate Business Tax	28		7
Nuclear Decommissioning	209		155
AROs	297		302
Total Noncurrent Liabilities	$	1,787	$	1,477
Total Liabilities	$	1,803	$	1,530
Summary of Accumulated Deferred Income Taxes:
Net Current Deferred Income Tax Liabilities	$	16	$	53
Net Noncurrent Deferred Income Tax Liabilities	$	1,571	$	1,262
Investment Tax Credit (ITC)	4		4
Net Total Noncurrent Deferred Income Taxes and ITC	$	1,575	$	1,266

A reconciliation of reported income tax expense for PSE&G with the amount computed by multiplying pre-tax income by the statutory federal income tax rate of 35% is as follows:

	Years Ended December 31,
	2012			2011			2010
	Millions
Net Income	$	528		$	521		$	358
Preferred Dividends	—			—			(1		)
Income from Continuing Operations, excluding Preferred Dividends	$	528		$	521		$	359
Income Taxes:
Operating Income:
Current Expense:
Federal	$	(217	)	$	(225	)	$	(211	)
State	9			(6		)	(1		)
Total Current	(208		)	(231		)	(212		)
Deferred Expense:
Federal	409			483			384
State	83			92			63
Total Deferred	492			575			447
Investment Tax Credit	23			(4		)	(3		)
Total Income Taxes	$	307		$	340		$	232
Pre-Tax Income	$	835		$	861		$	591
Tax Computed at Statutory Rate @ 35%	$	292		$	301		$	207
Increase (Decrease) Attributable to Flow-Through of Certain Tax Adjustments:
State Income Taxes (net of federal income tax)	52			56			40
Uncertain Tax Positions	7			(1		)	(1		)
Plant-Related Items	(4		)	(6		)	(3		)
Tax Credits	(3		)	(4		)	(2		)
Audit Settlement	(31		)	—			—
Other	(6		)	(6		)	(9		)
Sub-Total	15			39			25
Total Income Tax Provision	$	307		$	340		$	232
Effective Income Tax Rate	36.8		%	39.5		%	39.2		%

The following is an analysis of deferred income taxes for PSE&G:

	As of December 31,
	2012		2011
	Millions
Deferred Income Taxes
Assets:
Current (net)	$	49	$	—
Noncurrent:
Unrecovered ITC	$	18	$	10
OPEB	189		197
MTC	18		26
Related to Uncertain Tax Positions	15		30
Other	42		13
Total Noncurrent Assets	$	282	$	276
Total Assets	$	331	$	276
Liabilities:
Current (net)	$	60	$	32
Noncurrent:
Plant-Related Items	$	3,374	$	2,875
New Jersey Corporate Business Tax	253		146
Securitization	371		495
Conservation Costs	101		97
Pension Costs	189		151
Taxes Recoverable Through Future Rate (net)	165		158
Total Noncurrent Liabilities	$	4,453	$	3,922
Total Liabilities	$	4,513	$	3,954
Summary of Accumulated Deferred Income Taxes:
Net Current Deferred Income Tax Assets	$	49	$	—
Net Current Deferred Income Tax Liability	$	60	$	32
Net Noncurrent Deferred Income Tax Liability	$	4,171	$	3,646
Investment Tax Credit (ITC)	52		29
Net Total Noncurrent Deferred Income Taxes and ITC	$	4,223	$	3,675

As of December 31, 2012, PSE&G had New Jersey State income tax net operating loss (NOL) carryforwards of $1.5 billion, on which a deferred tax asset of $87 million was recorded, which will expire between 2031 and 2033. We believe that it is more-likely-than-not that the benefit from the state NOL carryforwards will be realized.

Each of PSEG, Power and PSE&G provide deferred taxes at the enacted statutory tax rate for all temporary differences between the financial statement carrying amounts and the tax bases of existing assets and liabilities irrespective of the treatment for rate-making purposes. Management believes that it is probable that the accumulated tax benefits that previously have been treated as a flow-through item to PSE&G customers will be recovered from or refunded to PSE&G’s customers in the future. These amounts were determined using the enacted federal income tax rate of 35% and state income tax rate of 9%. For additional information, see Note 6. Regulatory Assets and Liabilities.

The Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010 include various health care-related provisions which will go into effect over the next several years. One of the provisions eliminates the tax deductibility of retiree health care costs, to the extent of federal subsidies received by plan sponsors that provide retiree prescription drug benefits equivalent to Medicare Part D coverage. Although this change does not take effect immediately, the accounting impact was required to be recognized when the legislation was signed. As a result, in the first quarter of 2010, PSEG recorded non-cash after tax charges of $9 million for income tax expense to establish the related deferred tax liabilities, primarily related to Power. There was no immediate impact on PSE&G’s income tax expense or effective tax rate since the related amount of $78 million was deferred as a Regulatory Asset to be collected and amortized over future periods.

Two other tax provisions were enacted during 2010 that had a significant impact on PSEG’s cash position. The Small Business Jobs Act of 2010 extended the tax deduction for 50% bonus depreciation through 2010 for qualified property. The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 included a provision making qualified property placed into service after September 8, 2010 and before January 1, 2012, eligible for 100% bonus depreciation for tax purposes. In addition, qualified property placed into service in 2012 is eligible for 50% bonus depreciation for tax purposes. On January 2, 2013, the President signed into law the American Taxpayer Relief Act of 2012 that further extends 50% bonus depreciation for property placed in service before January 1, 2014. These provisions contain rules which afford certain projects which have a long production period, the benefit of bonus depreciation. These provisions will also generate cash for PSEG through tax benefits related to accelerated depreciation, most of which was realized in 2011. These tax benefits would have otherwise been received over an estimated average 20 year period.

With respect to ITC, for financial statement periods including 2010 and 2011, the law provided an option to claim either a grant or the ITC.  Accordingly, in those periods, the ITC was accounted for as a reduction of the book basis of the related assets as opposed to being recorded in tax expense. In 2012 the law changed and the grant option is no longer available; as such, the accumulated deferred ITC generated in 2012 was recorded as a noncurrent deferred tax liability, which was included in Deferred Income Taxes and ITC on PSEG's and PSE&G's Consolidated Balance Sheets as of December 31, 2012.

PSEG recorded the following amounts related to its unrecognized tax benefits, which was primarily comprised of amounts recorded for Power, PSE&G and Energy Holdings:

2012	PSEG			Power			PSE&G			Energy Holdings
	Millions
Total Amount of Unrecognized Tax Benefits as of January 1, 2012	$	825		$	121		$	113		$	555
Increases as a Result of Positions Taken in a Prior Period	92			27			55			9
Decreases as a Result of Positions Taken in a Prior Period	(173		)	(7		)	(47		)	(119		)
Increases as a Result of Positions Taken during the Current Period	47			3			42			—
Decreases as a Result of Positions Taken during the Current Period	—			—			—			—
Decreases as a Result of Settlements with Taxing Authorities	(389		)	(10		)	—			(344		)
Decreases due to Lapses of Applicable Statute of Limitations	—			—			—			—
Total Amount of Unrecognized Tax Benefits as of December 31, 2012	$	402		$	134		$	163		$	101
Accumulated Deferred Income Taxes Associated with Unrecognized Tax Benefits	(264		)	(93		)	(133		)	(35		)
Regulatory Asset—Unrecognized Tax Benefits	(30		)	—			(30		)	—
Total Amount of Unrecognized Tax Benefits that if Recognized, would Impact the Effective Tax Rate (including Interest and Penalties)	$	108		$	41		$	—		$	66

2011	PSEG			Power			PSE&G			Energy Holdings
	Millions
Total Amount of Unrecognized Tax Benefits as of January 1, 2011	$	756		$	101		$	82		$	539
Increases as a Result of Positions Taken in a Prior Period	58			24			14			17
Decreases as a Result of Positions Taken in a Prior Period	(22		)	(9		)	—			(12		)
Increases as a Result of Positions Taken during the Current Period	37			8			18			11
Decreases as a Result of Positions Taken during the Current Period	(4		)	(3		)	(1		)	—
Decreases as a Result of Settlements with Taxing Authorities	—			—			—			—
Decreases due to Lapses of Applicable Statute of Limitations	—			—			—			—
Total Amount of Unrecognized Tax Benefits as of December 31, 2011	$	825		$	121		$	113		$	555
Accumulated Deferred Income Taxes Associated with Unrecognized Tax Benefits	(379		)	(77		)	(65		)	(213		)
Regulatory Asset—Unrecognized Tax Benefits	(20		)	—			(20		)	—
Total Amount of Unrecognized Tax Benefits that if Recognized, would Impact the Effective Tax Rate (including Interest and Penalties)	$	426		$	44		$	28		$	342

2010	PSEG			Power			PSE&G			Energy Holdings
	Millions
Total Amount of Unrecognized Tax Benefits as of January 1, 2010	$	836		$	(42	)	$	35		$	820
Increases as a Result of Positions Taken in a Prior Period	290			111			79			90
Decreases as a Result of Positions Taken in a Prior Period	(450		)	(29		)	(38		)	(383		)
Increases as a Result of Positions Taken during the Current Period	82			63			6			12
Decreases as a Result of Positions Taken during the Current Period	(2		)	(2		)	—			—
Decreases as a Result of Settlements with Taxing Authorities	—			—			—			—
Decreases due to Lapses of Applicable Statute of Limitations	—			—			—			—
Total Amount of Unrecognized Tax Benefits as of December 31, 2010	$	756		$	101		$	82		$	539
Accumulated Deferred Income Taxes Associated with Unrecognized Tax Benefits	(332		)	(67		)	(38		)	(204		)
Regulatory Asset—Unrecognized Tax Benefits	(16		)	—			(16		)	—
Total Amount of Unrecognized Tax Benefits that if Recognized, would Impact the Effective Tax Rate (including Interest and Penalties)	$	408		$	34		$	28		$	335

On June 26, 2009, September 15, 2008 and December 17, 2007, PSEG made tax deposits with the IRS in the amount of $140 million, $80 million and $100 million, respectively, to defray potential interest costs associated with disputed tax assessments associated with certain lease investments (see Note 13. Commitments and Contingent Liabilities). The $320 million of deposits were fully refundable and were recorded in Current Accrued Taxes on PSEG’s Consolidated Balance Sheets in the years in which the deposits were made, but are not reflected in the amounts shown above. On January 31, 2012, PSEG signed a specific matter closing agreement with the IRS regarding this matter. Based on this agreement, these deposits have been applied against tax and interest due pursuant to the closing agreement.

PSEG and its subsidiaries include all accrued interest and penalties related to uncertain tax positions required to be recorded, as income tax expense. Interest and penalties on uncertain tax positions were as follows:

	Interest and Penalties on Uncertain Tax Positions Years Ended December 31,
	2012			2011			2010
	Millions
Power	$	(2	)	$	(11	)	$	(17	)
PSE&G	1			(24		)	(20		)
Energy Holdings	39			420			407
Other	—			10			9
Total	$	38		$	395		$	379

It is reasonably possible that total unrecognized tax benefits will decrease within the next twelve months due to either agreements with various taxing authorities upon audit or the expiration of the Statute of Limitations. These potential decreases are as follows:

Possible Decrease in Total Unrecognized Tax Benefits including Interest	Over the next 12 Months
	Millions
PSEG	$	75
Power	$	5
PSE&G	$	—

As a result of a change in accounting method for the capitalization of indirect costs, PSEG reduced the net amount of its uncertain tax positions (including interest) by $97 million, approximately $43 million of which related to PSE&G. Pursuant to an agreement signed with the IRS on January 31, 2012, this matter is settled and there will be a resulting increase in uncertain tax positions within the next twelve months. These amounts are not included in the table above.

A description of income tax years that remain subject to examination by material jurisdictions, where an examination has not already concluded are:

	PSEG	Power	PSE&G
United States
Federal	2007-2011	N/A	N/A
New Jersey	2006-2011	N/A	2006-2011
Pennsylvania	2001-2011	N/A	2000-2011
Connecticut	2002-2011	N/A	N/A
Texas	2007-2011	N/A	N/A
California	2003-2011	N/A	N/A
New York	2009-2011	2009-2011	N/A

Power [Member]

Income Taxes

Income Taxes

A reconciliation of reported income tax expense for PSEG with the amount computed by multiplying pre-tax income by the statutory federal income tax rate of 35% is as follows:

	Years Ended December 31,
	2012			2011			2010
	Millions
Net Income	$	1,275		$	1,503		$	1,564
Income (Loss) from Discontinued Operations, including Gain on Disposal, net of tax benefit	—			96			7
Income from Continuing Operations	1,275			1,407			1,557
Preferred Dividends	—			—			(1		)
Income from Continuing Operations, excluding Preferred Dividends	$	1,275		$	1,407		$	1,558
Income Taxes:
Operating Income:
Current Expense:
Federal	$	(204	)	$	258		$	(166	)
State	(2		)	32			157
Total Current	(206		)	290			(9		)
Deferred Expense:
Federal	758			501			992
State	125			191			79
Total Deferred	883			692			1,071
Investment Tax Credit	59			(5		)	(3		)
Total Income Taxes	$	736		$	977		$	1,059
Pre-Tax Income	$	2,011		$	2,384		$	2,617
Tax Computed at Statutory Rate @ 35%	$	704		$	834		$	916
Increase (Decrease) Attributable to Flow-Through of Certain Tax Adjustments:
State Income Taxes (net of federal income tax)	115			146			154
Uncertain Tax Positions	4			19			30
Manufacturing Deduction	—			(15		)	(24		)
Nuclear Decommissioning Trust	10			14			10
Plant-Related Items	(5		)	(6		)	(3		)
Tax Credits	(10		)	(5		)	(2		)
Audit Settlement	(71		)	—			—
Other	(11		)	(10		)	(22		)
Sub-Total	32			143			143
Total Income Tax Provision	$	736		$	977		$	1,059
Effective Income Tax Rate	36.6		%	41.0		%	40.5		%

The following is an analysis of deferred income taxes for PSEG:

	As of December 31,
	2012		2011
	Millions
Deferred Income Taxes
Assets:
Current (net)	$	49	$	—
Noncurrent:
Unrecovered Investment Tax Credit	$	30	$	15
Accumulated Other Comprehensive Income (Loss)	40		39
Cumulative Effect of a Change in Accounting Principle	11		11
OPEB	200		208
Cost of Removal	51		51
Contractual Liabilities & Environmental Costs	35		35
MTC	18		26
Related to Uncertain Tax Positions	75		104
Capital Loss	35		—
Other	82		44
Total Non-Current Assets	$	577	$	533
Total Assets	$	626	$	533
Liabilities:
Current (net)	$	72	$	170
Noncurrent:
Plant-Related Items	$	4,685	$	3,894
Nuclear Decommissioning	209		155
New Jersey Corporate Business Tax	343		180
Securitization	371		495
Leasing Activities	656		527
Partnership Activity	17		18
Conservation Costs	101		97
Pension Costs	180		129
AROs	297		302
Taxes Recoverable Through Future Rate (net)	165		158
Total Noncurrent Liabilities	$	7,024	$	5,955
Total Liabilities	$	7,096	$	6,125
Summary of Accumulated Deferred Income Taxes:
Net Current Deferred Income Tax Assets	$	49	$	—
Net Current Deferred Income Tax Liability	$	72	$	170
Net Noncurrent Deferred Income Tax Liabilities	$	6,447	$	5,422
Investment Tax Credit (ITC)	95		36
Net Total Noncurrent Deferred Income Taxes and ITC	$	6,542	$	5,458

A reconciliation of reported income tax expense for Power with the amount computed by multiplying pre-tax income by the statutory federal income tax rate of 35% is as follows:

	Years Ended December 31,
	2012			2011			2010
	Millions
Net Income	$	647		$	1,098		$	1,143
Income (Loss) from Discontinued Operations, net of tax	—			96			7
Income from Continuing Operations	$	647		$	1,002		$	1,136
Income Taxes:
Operating Income:
Current Expense:
Federal	$	83		$	400		$	12
State	53			40			127
Total Current	136			440			139
Deferred Expense:
Federal	262			151			598
State	35			94			41
Total Deferred	297			245			639
Total Income Taxes	$	433		$	685		$	778
Pre-Tax Income	$	1,080		$	1,687		$	1,914
Tax Computed at Statutory Rate @ 35%	$	378		$	591		$	670
Increase (Decrease) Attributable to Flow-Through of Certain Tax Adjustments:
State Income Taxes (net of federal income tax)	55			87			109
Manufacturing Deduction	—			(15		)	(24		)
Nuclear Decommissioning Trust	10			14			10
Uncertain Tax Positions	(6		)	11			10
Audit Settlement	(1		)	—			—
Other	(3		)	(3		)	3
Sub-Total	55			94			108
Total Income Tax Provision	$	433		$	685		$	778
Effective Income Tax Rate	40.1		%	40.6		%	40.6		%

The following is an analysis of deferred income taxes for Power:

	As of December 31,
	2012		2011
	Millions
Deferred Income Taxes
Assets:
Noncurrent:
Cumulative Effect of a Change in Accounting Principle	$	11	$	11
Pension Costs	38		53
Accumulated Other Comprehensive Income (Loss)	40		39
Cost of Removal	51		51
Contractual Liabilities & Environmental Costs	35		35
Related to Uncertain Tax Positions	27		4
Capital Loss	12		—
Other	2		22
Total Noncurrent Assets	$	216	$	215
Total Assets	$	216	$	215
Liabilities:
Current (net)	$	16	$	53
Noncurrent:
Plant-Related Items	$	1,253	$	1,013
New Jersey Corporate Business Tax	28		7
Nuclear Decommissioning	209		155
AROs	297		302
Total Noncurrent Liabilities	$	1,787	$	1,477
Total Liabilities	$	1,803	$	1,530
Summary of Accumulated Deferred Income Taxes:
Net Current Deferred Income Tax Liabilities	$	16	$	53
Net Noncurrent Deferred Income Tax Liabilities	$	1,571	$	1,262
Investment Tax Credit (ITC)	4		4
Net Total Noncurrent Deferred Income Taxes and ITC	$	1,575	$	1,266

A reconciliation of reported income tax expense for PSE&G with the amount computed by multiplying pre-tax income by the statutory federal income tax rate of 35% is as follows:

	Years Ended December 31,
	2012			2011			2010
	Millions
Net Income	$	528		$	521		$	358
Preferred Dividends	—			—			(1		)
Income from Continuing Operations, excluding Preferred Dividends	$	528		$	521		$	359
Income Taxes:
Operating Income:
Current Expense:
Federal	$	(217	)	$	(225	)	$	(211	)
State	9			(6		)	(1		)
Total Current	(208		)	(231		)	(212		)
Deferred Expense:
Federal	409			483			384
State	83			92			63
Total Deferred	492			575			447
Investment Tax Credit	23			(4		)	(3		)
Total Income Taxes	$	307		$	340		$	232
Pre-Tax Income	$	835		$	861		$	591
Tax Computed at Statutory Rate @ 35%	$	292		$	301		$	207
Increase (Decrease) Attributable to Flow-Through of Certain Tax Adjustments:
State Income Taxes (net of federal income tax)	52			56			40
Uncertain Tax Positions	7			(1		)	(1		)
Plant-Related Items	(4		)	(6		)	(3		)
Tax Credits	(3		)	(4		)	(2		)
Audit Settlement	(31		)	—			—
Other	(6		)	(6		)	(9		)
Sub-Total	15			39			25
Total Income Tax Provision	$	307		$	340		$	232
Effective Income Tax Rate	36.8		%	39.5		%	39.2		%

The following is an analysis of deferred income taxes for PSE&G:

	As of December 31,
	2012		2011
	Millions
Deferred Income Taxes
Assets:
Current (net)	$	49	$	—
Noncurrent:
Unrecovered ITC	$	18	$	10
OPEB	189		197
MTC	18		26
Related to Uncertain Tax Positions	15		30
Other	42		13
Total Noncurrent Assets	$	282	$	276
Total Assets	$	331	$	276
Liabilities:
Current (net)	$	60	$	32
Noncurrent:
Plant-Related Items	$	3,374	$	2,875
New Jersey Corporate Business Tax	253		146
Securitization	371		495
Conservation Costs	101		97
Pension Costs	189		151
Taxes Recoverable Through Future Rate (net)	165		158
Total Noncurrent Liabilities	$	4,453	$	3,922
Total Liabilities	$	4,513	$	3,954
Summary of Accumulated Deferred Income Taxes:
Net Current Deferred Income Tax Assets	$	49	$	—
Net Current Deferred Income Tax Liability	$	60	$	32
Net Noncurrent Deferred Income Tax Liability	$	4,171	$	3,646
Investment Tax Credit (ITC)	52		29
Net Total Noncurrent Deferred Income Taxes and ITC	$	4,223	$	3,675

As of December 31, 2012, PSE&G had New Jersey State income tax net operating loss (NOL) carryforwards of $1.5 billion, on which a deferred tax asset of $87 million was recorded, which will expire between 2031 and 2033. We believe that it is more-likely-than-not that the benefit from the state NOL carryforwards will be realized.

Each of PSEG, Power and PSE&G provide deferred taxes at the enacted statutory tax rate for all temporary differences between the financial statement carrying amounts and the tax bases of existing assets and liabilities irrespective of the treatment for rate-making purposes. Management believes that it is probable that the accumulated tax benefits that previously have been treated as a flow-through item to PSE&G customers will be recovered from or refunded to PSE&G’s customers in the future. These amounts were determined using the enacted federal income tax rate of 35% and state income tax rate of 9%. For additional information, see Note 6. Regulatory Assets and Liabilities.

The Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010 include various health care-related provisions which will go into effect over the next several years. One of the provisions eliminates the tax deductibility of retiree health care costs, to the extent of federal subsidies received by plan sponsors that provide retiree prescription drug benefits equivalent to Medicare Part D coverage. Although this change does not take effect immediately, the accounting impact was required to be recognized when the legislation was signed. As a result, in the first quarter of 2010, PSEG recorded non-cash after tax charges of $9 million for income tax expense to establish the related deferred tax liabilities, primarily related to Power. There was no immediate impact on PSE&G’s income tax expense or effective tax rate since the related amount of $78 million was deferred as a Regulatory Asset to be collected and amortized over future periods.

Two other tax provisions were enacted during 2010 that had a significant impact on PSEG’s cash position. The Small Business Jobs Act of 2010 extended the tax deduction for 50% bonus depreciation through 2010 for qualified property. The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 included a provision making qualified property placed into service after September 8, 2010 and before January 1, 2012, eligible for 100% bonus depreciation for tax purposes. In addition, qualified property placed into service in 2012 is eligible for 50% bonus depreciation for tax purposes. On January 2, 2013, the President signed into law the American Taxpayer Relief Act of 2012 that further extends 50% bonus depreciation for property placed in service before January 1, 2014. These provisions contain rules which afford certain projects which have a long production period, the benefit of bonus depreciation. These provisions will also generate cash for PSEG through tax benefits related to accelerated depreciation, most of which was realized in 2011. These tax benefits would have otherwise been received over an estimated average 20 year period.

With respect to ITC, for financial statement periods including 2010 and 2011, the law provided an option to claim either a grant or the ITC.  Accordingly, in those periods, the ITC was accounted for as a reduction of the book basis of the related assets as opposed to being recorded in tax expense. In 2012 the law changed and the grant option is no longer available; as such, the accumulated deferred ITC generated in 2012 was recorded as a noncurrent deferred tax liability, which was included in Deferred Income Taxes and ITC on PSEG's and PSE&G's Consolidated Balance Sheets as of December 31, 2012.

PSEG recorded the following amounts related to its unrecognized tax benefits, which was primarily comprised of amounts recorded for Power, PSE&G and Energy Holdings:

2012	PSEG			Power			PSE&G			Energy Holdings
	Millions
Total Amount of Unrecognized Tax Benefits as of January 1, 2012	$	825		$	121		$	113		$	555
Increases as a Result of Positions Taken in a Prior Period	92			27			55			9
Decreases as a Result of Positions Taken in a Prior Period	(173		)	(7		)	(47		)	(119		)
Increases as a Result of Positions Taken during the Current Period	47			3			42			—
Decreases as a Result of Positions Taken during the Current Period	—			—			—			—
Decreases as a Result of Settlements with Taxing Authorities	(389		)	(10		)	—			(344		)
Decreases due to Lapses of Applicable Statute of Limitations	—			—			—			—
Total Amount of Unrecognized Tax Benefits as of December 31, 2012	$	402		$	134		$	163		$	101
Accumulated Deferred Income Taxes Associated with Unrecognized Tax Benefits	(264		)	(93		)	(133		)	(35		)
Regulatory Asset—Unrecognized Tax Benefits	(30		)	—			(30		)	—
Total Amount of Unrecognized Tax Benefits that if Recognized, would Impact the Effective Tax Rate (including Interest and Penalties)	$	108		$	41		$	—		$	66

2011	PSEG			Power			PSE&G			Energy Holdings
	Millions
Total Amount of Unrecognized Tax Benefits as of January 1, 2011	$	756		$	101		$	82		$	539
Increases as a Result of Positions Taken in a Prior Period	58			24			14			17
Decreases as a Result of Positions Taken in a Prior Period	(22		)	(9		)	—			(12		)
Increases as a Result of Positions Taken during the Current Period	37			8			18			11
Decreases as a Result of Positions Taken during the Current Period	(4		)	(3		)	(1		)	—
Decreases as a Result of Settlements with Taxing Authorities	—			—			—			—
Decreases due to Lapses of Applicable Statute of Limitations	—			—			—			—
Total Amount of Unrecognized Tax Benefits as of December 31, 2011	$	825		$	121		$	113		$	555
Accumulated Deferred Income Taxes Associated with Unrecognized Tax Benefits	(379		)	(77		)	(65		)	(213		)
Regulatory Asset—Unrecognized Tax Benefits	(20		)	—			(20		)	—
Total Amount of Unrecognized Tax Benefits that if Recognized, would Impact the Effective Tax Rate (including Interest and Penalties)	$	426		$	44		$	28		$	342

2010	PSEG			Power			PSE&G			Energy Holdings
	Millions
Total Amount of Unrecognized Tax Benefits as of January 1, 2010	$	836		$	(42	)	$	35		$	820
Increases as a Result of Positions Taken in a Prior Period	290			111			79			90
Decreases as a Result of Positions Taken in a Prior Period	(450		)	(29		)	(38		)	(383		)
Increases as a Result of Positions Taken during the Current Period	82			63			6			12
Decreases as a Result of Positions Taken during the Current Period	(2		)	(2		)	—			—
Decreases as a Result of Settlements with Taxing Authorities	—			—			—			—
Decreases due to Lapses of Applicable Statute of Limitations	—			—			—			—
Total Amount of Unrecognized Tax Benefits as of December 31, 2010	$	756		$	101		$	82		$	539
Accumulated Deferred Income Taxes Associated with Unrecognized Tax Benefits	(332		)	(67		)	(38		)	(204		)
Regulatory Asset—Unrecognized Tax Benefits	(16		)	—			(16		)	—
Total Amount of Unrecognized Tax Benefits that if Recognized, would Impact the Effective Tax Rate (including Interest and Penalties)	$	408		$	34		$	28		$	335

On June 26, 2009, September 15, 2008 and December 17, 2007, PSEG made tax deposits with the IRS in the amount of $140 million, $80 million and $100 million, respectively, to defray potential interest costs associated with disputed tax assessments associated with certain lease investments (see Note 13. Commitments and Contingent Liabilities). The $320 million of deposits were fully refundable and were recorded in Current Accrued Taxes on PSEG’s Consolidated Balance Sheets in the years in which the deposits were made, but are not reflected in the amounts shown above. On January 31, 2012, PSEG signed a specific matter closing agreement with the IRS regarding this matter. Based on this agreement, these deposits have been applied against tax and interest due pursuant to the closing agreement.

PSEG and its subsidiaries include all accrued interest and penalties related to uncertain tax positions required to be recorded, as income tax expense. Interest and penalties on uncertain tax positions were as follows:

	Interest and Penalties on Uncertain Tax Positions Years Ended December 31,
	2012			2011			2010
	Millions
Power	$	(2	)	$	(11	)	$	(17	)
PSE&G	1			(24		)	(20		)
Energy Holdings	39			420			407
Other	—			10			9
Total	$	38		$	395		$	379

It is reasonably possible that total unrecognized tax benefits will decrease within the next twelve months due to either agreements with various taxing authorities upon audit or the expiration of the Statute of Limitations. These potential decreases are as follows:

Possible Decrease in Total Unrecognized Tax Benefits including Interest	Over the next 12 Months
	Millions
PSEG	$	75
Power	$	5
PSE&G	$	—

As a result of a change in accounting method for the capitalization of indirect costs, PSEG reduced the net amount of its uncertain tax positions (including interest) by $97 million, approximately $43 million of which related to PSE&G. Pursuant to an agreement signed with the IRS on January 31, 2012, this matter is settled and there will be a resulting increase in uncertain tax positions within the next twelve months. These amounts are not included in the table above.

A description of income tax years that remain subject to examination by material jurisdictions, where an examination has not already concluded are:

	PSEG	Power	PSE&G
United States
Federal	2007-2011	N/A	N/A
New Jersey	2006-2011	N/A	2006-2011
Pennsylvania	2001-2011	N/A	2000-2011
Connecticut	2002-2011	N/A	N/A
Texas	2007-2011	N/A	N/A
California	2003-2011	N/A	N/A
New York	2009-2011	2009-2011	N/A

PSE&G [Member]

Income Taxes

Income Taxes

A reconciliation of reported income tax expense for PSEG with the amount computed by multiplying pre-tax income by the statutory federal income tax rate of 35% is as follows:

	Years Ended December 31,
	2012			2011			2010
	Millions
Net Income	$	1,275		$	1,503		$	1,564
Income (Loss) from Discontinued Operations, including Gain on Disposal, net of tax benefit	—			96			7
Income from Continuing Operations	1,275			1,407			1,557
Preferred Dividends	—			—			(1		)
Income from Continuing Operations, excluding Preferred Dividends	$	1,275		$	1,407		$	1,558
Income Taxes:
Operating Income:
Current Expense:
Federal	$	(204	)	$	258		$	(166	)
State	(2		)	32			157
Total Current	(206		)	290			(9		)
Deferred Expense:
Federal	758			501			992
State	125			191			79
Total Deferred	883			692			1,071
Investment Tax Credit	59			(5		)	(3		)
Total Income Taxes	$	736		$	977		$	1,059
Pre-Tax Income	$	2,011		$	2,384		$	2,617
Tax Computed at Statutory Rate @ 35%	$	704		$	834		$	916
Increase (Decrease) Attributable to Flow-Through of Certain Tax Adjustments:
State Income Taxes (net of federal income tax)	115			146			154
Uncertain Tax Positions	4			19			30
Manufacturing Deduction	—			(15		)	(24		)
Nuclear Decommissioning Trust	10			14			10
Plant-Related Items	(5		)	(6		)	(3		)
Tax Credits	(10		)	(5		)	(2		)
Audit Settlement	(71		)	—			—
Other	(11		)	(10		)	(22		)
Sub-Total	32			143			143
Total Income Tax Provision	$	736		$	977		$	1,059
Effective Income Tax Rate	36.6		%	41.0		%	40.5		%

The following is an analysis of deferred income taxes for PSEG:

	As of December 31,
	2012		2011
	Millions
Deferred Income Taxes
Assets:
Current (net)	$	49	$	—
Noncurrent:
Unrecovered Investment Tax Credit	$	30	$	15
Accumulated Other Comprehensive Income (Loss)	40		39
Cumulative Effect of a Change in Accounting Principle	11		11
OPEB	200		208
Cost of Removal	51		51
Contractual Liabilities & Environmental Costs	35		35
MTC	18		26
Related to Uncertain Tax Positions	75		104
Capital Loss	35		—
Other	82		44
Total Non-Current Assets	$	577	$	533
Total Assets	$	626	$	533
Liabilities:
Current (net)	$	72	$	170
Noncurrent:
Plant-Related Items	$	4,685	$	3,894
Nuclear Decommissioning	209		155
New Jersey Corporate Business Tax	343		180
Securitization	371		495
Leasing Activities	656		527
Partnership Activity	17		18
Conservation Costs	101		97
Pension Costs	180		129
AROs	297		302
Taxes Recoverable Through Future Rate (net)	165		158
Total Noncurrent Liabilities	$	7,024	$	5,955
Total Liabilities	$	7,096	$	6,125
Summary of Accumulated Deferred Income Taxes:
Net Current Deferred Income Tax Assets	$	49	$	—
Net Current Deferred Income Tax Liability	$	72	$	170
Net Noncurrent Deferred Income Tax Liabilities	$	6,447	$	5,422
Investment Tax Credit (ITC)	95		36
Net Total Noncurrent Deferred Income Taxes and ITC	$	6,542	$	5,458

A reconciliation of reported income tax expense for Power with the amount computed by multiplying pre-tax income by the statutory federal income tax rate of 35% is as follows:

	Years Ended December 31,
	2012			2011			2010
	Millions
Net Income	$	647		$	1,098		$	1,143
Income (Loss) from Discontinued Operations, net of tax	—			96			7
Income from Continuing Operations	$	647		$	1,002		$	1,136
Income Taxes:
Operating Income:
Current Expense:
Federal	$	83		$	400		$	12
State	53			40			127
Total Current	136			440			139
Deferred Expense:
Federal	262			151			598
State	35			94			41
Total Deferred	297			245			639
Total Income Taxes	$	433		$	685		$	778
Pre-Tax Income	$	1,080		$	1,687		$	1,914
Tax Computed at Statutory Rate @ 35%	$	378		$	591		$	670
Increase (Decrease) Attributable to Flow-Through of Certain Tax Adjustments:
State Income Taxes (net of federal income tax)	55			87			109
Manufacturing Deduction	—			(15		)	(24		)
Nuclear Decommissioning Trust	10			14			10
Uncertain Tax Positions	(6		)	11			10
Audit Settlement	(1		)	—			—
Other	(3		)	(3		)	3
Sub-Total	55			94			108
Total Income Tax Provision	$	433		$	685		$	778
Effective Income Tax Rate	40.1		%	40.6		%	40.6		%

The following is an analysis of deferred income taxes for Power:

	As of December 31,
	2012		2011
	Millions
Deferred Income Taxes
Assets:
Noncurrent:
Cumulative Effect of a Change in Accounting Principle	$	11	$	11
Pension Costs	38		53
Accumulated Other Comprehensive Income (Loss)	40		39
Cost of Removal	51		51
Contractual Liabilities & Environmental Costs	35		35
Related to Uncertain Tax Positions	27		4
Capital Loss	12		—
Other	2		22
Total Noncurrent Assets	$	216	$	215
Total Assets	$	216	$	215
Liabilities:
Current (net)	$	16	$	53
Noncurrent:
Plant-Related Items	$	1,253	$	1,013
New Jersey Corporate Business Tax	28		7
Nuclear Decommissioning	209		155
AROs	297		302
Total Noncurrent Liabilities	$	1,787	$	1,477
Total Liabilities	$	1,803	$	1,530
Summary of Accumulated Deferred Income Taxes:
Net Current Deferred Income Tax Liabilities	$	16	$	53
Net Noncurrent Deferred Income Tax Liabilities	$	1,571	$	1,262
Investment Tax Credit (ITC)	4		4
Net Total Noncurrent Deferred Income Taxes and ITC	$	1,575	$	1,266

A reconciliation of reported income tax expense for PSE&G with the amount computed by multiplying pre-tax income by the statutory federal income tax rate of 35% is as follows:

	Years Ended December 31,
	2012			2011			2010
	Millions
Net Income	$	528		$	521		$	358
Preferred Dividends	—			—			(1		)
Income from Continuing Operations, excluding Preferred Dividends	$	528		$	521		$	359
Income Taxes:
Operating Income:
Current Expense:
Federal	$	(217	)	$	(225	)	$	(211	)
State	9			(6		)	(1		)
Total Current	(208		)	(231		)	(212		)
Deferred Expense:
Federal	409			483			384
State	83			92			63
Total Deferred	492			575			447
Investment Tax Credit	23			(4		)	(3		)
Total Income Taxes	$	307		$	340		$	232
Pre-Tax Income	$	835		$	861		$	591
Tax Computed at Statutory Rate @ 35%	$	292		$	301		$	207
Increase (Decrease) Attributable to Flow-Through of Certain Tax Adjustments:
State Income Taxes (net of federal income tax)	52			56			40
Uncertain Tax Positions	7			(1		)	(1		)
Plant-Related Items	(4		)	(6		)	(3		)
Tax Credits	(3		)	(4		)	(2		)
Audit Settlement	(31		)	—			—
Other	(6		)	(6		)	(9		)
Sub-Total	15			39			25
Total Income Tax Provision	$	307		$	340		$	232
Effective Income Tax Rate	36.8		%	39.5		%	39.2		%

The following is an analysis of deferred income taxes for PSE&G:

	As of December 31,
	2012		2011
	Millions
Deferred Income Taxes
Assets:
Current (net)	$	49	$	—
Noncurrent:
Unrecovered ITC	$	18	$	10
OPEB	189		197
MTC	18		26
Related to Uncertain Tax Positions	15		30
Other	42		13
Total Noncurrent Assets	$	282	$	276
Total Assets	$	331	$	276
Liabilities:
Current (net)	$	60	$	32
Noncurrent:
Plant-Related Items	$	3,374	$	2,875
New Jersey Corporate Business Tax	253		146
Securitization	371		495
Conservation Costs	101		97
Pension Costs	189		151
Taxes Recoverable Through Future Rate (net)	165		158
Total Noncurrent Liabilities	$	4,453	$	3,922
Total Liabilities	$	4,513	$	3,954
Summary of Accumulated Deferred Income Taxes:
Net Current Deferred Income Tax Assets	$	49	$	—
Net Current Deferred Income Tax Liability	$	60	$	32
Net Noncurrent Deferred Income Tax Liability	$	4,171	$	3,646
Investment Tax Credit (ITC)	52		29
Net Total Noncurrent Deferred Income Taxes and ITC	$	4,223	$	3,675

As of December 31, 2012, PSE&G had New Jersey State income tax net operating loss (NOL) carryforwards of $1.5 billion, on which a deferred tax asset of $87 million was recorded, which will expire between 2031 and 2033. We believe that it is more-likely-than-not that the benefit from the state NOL carryforwards will be realized.

Each of PSEG, Power and PSE&G provide deferred taxes at the enacted statutory tax rate for all temporary differences between the financial statement carrying amounts and the tax bases of existing assets and liabilities irrespective of the treatment for rate-making purposes. Management believes that it is probable that the accumulated tax benefits that previously have been treated as a flow-through item to PSE&G customers will be recovered from or refunded to PSE&G’s customers in the future. These amounts were determined using the enacted federal income tax rate of 35% and state income tax rate of 9%. For additional information, see Note 6. Regulatory Assets and Liabilities.

The Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010 include various health care-related provisions which will go into effect over the next several years. One of the provisions eliminates the tax deductibility of retiree health care costs, to the extent of federal subsidies received by plan sponsors that provide retiree prescription drug benefits equivalent to Medicare Part D coverage. Although this change does not take effect immediately, the accounting impact was required to be recognized when the legislation was signed. As a result, in the first quarter of 2010, PSEG recorded non-cash after tax charges of $9 million for income tax expense to establish the related deferred tax liabilities, primarily related to Power. There was no immediate impact on PSE&G’s income tax expense or effective tax rate since the related amount of $78 million was deferred as a Regulatory Asset to be collected and amortized over future periods.

Two other tax provisions were enacted during 2010 that had a significant impact on PSEG’s cash position. The Small Business Jobs Act of 2010 extended the tax deduction for 50% bonus depreciation through 2010 for qualified property. The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 included a provision making qualified property placed into service after September 8, 2010 and before January 1, 2012, eligible for 100% bonus depreciation for tax purposes. In addition, qualified property placed into service in 2012 is eligible for 50% bonus depreciation for tax purposes. On January 2, 2013, the President signed into law the American Taxpayer Relief Act of 2012 that further extends 50% bonus depreciation for property placed in service before January 1, 2014. These provisions contain rules which afford certain projects which have a long production period, the benefit of bonus depreciation. These provisions will also generate cash for PSEG through tax benefits related to accelerated depreciation, most of which was realized in 2011. These tax benefits would have otherwise been received over an estimated average 20 year period.

With respect to ITC, for financial statement periods including 2010 and 2011, the law provided an option to claim either a grant or the ITC.  Accordingly, in those periods, the ITC was accounted for as a reduction of the book basis of the related assets as opposed to being recorded in tax expense. In 2012 the law changed and the grant option is no longer available; as such, the accumulated deferred ITC generated in 2012 was recorded as a noncurrent deferred tax liability, which was included in Deferred Income Taxes and ITC on PSEG's and PSE&G's Consolidated Balance Sheets as of December 31, 2012.

PSEG recorded the following amounts related to its unrecognized tax benefits, which was primarily comprised of amounts recorded for Power, PSE&G and Energy Holdings:

2012	PSEG			Power			PSE&G			Energy Holdings
	Millions
Total Amount of Unrecognized Tax Benefits as of January 1, 2012	$	825		$	121		$	113		$	555
Increases as a Result of Positions Taken in a Prior Period	92			27			55			9
Decreases as a Result of Positions Taken in a Prior Period	(173		)	(7		)	(47		)	(119		)
Increases as a Result of Positions Taken during the Current Period	47			3			42			—
Decreases as a Result of Positions Taken during the Current Period	—			—			—			—
Decreases as a Result of Settlements with Taxing Authorities	(389		)	(10		)	—			(344		)
Decreases due to Lapses of Applicable Statute of Limitations	—			—			—			—
Total Amount of Unrecognized Tax Benefits as of December 31, 2012	$	402		$	134		$	163		$	101
Accumulated Deferred Income Taxes Associated with Unrecognized Tax Benefits	(264		)	(93		)	(133		)	(35		)
Regulatory Asset—Unrecognized Tax Benefits	(30		)	—			(30		)	—
Total Amount of Unrecognized Tax Benefits that if Recognized, would Impact the Effective Tax Rate (including Interest and Penalties)	$	108		$	41		$	—		$	66

2011	PSEG			Power			PSE&G			Energy Holdings
	Millions
Total Amount of Unrecognized Tax Benefits as of January 1, 2011	$	756		$	101		$	82		$	539
Increases as a Result of Positions Taken in a Prior Period	58			24			14			17
Decreases as a Result of Positions Taken in a Prior Period	(22		)	(9		)	—			(12		)
Increases as a Result of Positions Taken during the Current Period	37			8			18			11
Decreases as a Result of Positions Taken during the Current Period	(4		)	(3		)	(1		)	—
Decreases as a Result of Settlements with Taxing Authorities	—			—			—			—
Decreases due to Lapses of Applicable Statute of Limitations	—			—			—			—
Total Amount of Unrecognized Tax Benefits as of December 31, 2011	$	825		$	121		$	113		$	555
Accumulated Deferred Income Taxes Associated with Unrecognized Tax Benefits	(379		)	(77		)	(65		)	(213		)
Regulatory Asset—Unrecognized Tax Benefits	(20		)	—			(20		)	—
Total Amount of Unrecognized Tax Benefits that if Recognized, would Impact the Effective Tax Rate (including Interest and Penalties)	$	426		$	44		$	28		$	342

2010	PSEG			Power			PSE&G			Energy Holdings
	Millions
Total Amount of Unrecognized Tax Benefits as of January 1, 2010	$	836		$	(42	)	$	35		$	820
Increases as a Result of Positions Taken in a Prior Period	290			111			79			90
Decreases as a Result of Positions Taken in a Prior Period	(450		)	(29		)	(38		)	(383		)
Increases as a Result of Positions Taken during the Current Period	82			63			6			12
Decreases as a Result of Positions Taken during the Current Period	(2		)	(2		)	—			—
Decreases as a Result of Settlements with Taxing Authorities	—			—			—			—
Decreases due to Lapses of Applicable Statute of Limitations	—			—			—			—
Total Amount of Unrecognized Tax Benefits as of December 31, 2010	$	756		$	101		$	82		$	539
Accumulated Deferred Income Taxes Associated with Unrecognized Tax Benefits	(332		)	(67		)	(38		)	(204		)
Regulatory Asset—Unrecognized Tax Benefits	(16		)	—			(16		)	—
Total Amount of Unrecognized Tax Benefits that if Recognized, would Impact the Effective Tax Rate (including Interest and Penalties)	$	408		$	34		$	28		$	335

On June 26, 2009, September 15, 2008 and December 17, 2007, PSEG made tax deposits with the IRS in the amount of $140 million, $80 million and $100 million, respectively, to defray potential interest costs associated with disputed tax assessments associated with certain lease investments (see Note 13. Commitments and Contingent Liabilities). The $320 million of deposits were fully refundable and were recorded in Current Accrued Taxes on PSEG’s Consolidated Balance Sheets in the years in which the deposits were made, but are not reflected in the amounts shown above. On January 31, 2012, PSEG signed a specific matter closing agreement with the IRS regarding this matter. Based on this agreement, these deposits have been applied against tax and interest due pursuant to the closing agreement.

PSEG and its subsidiaries include all accrued interest and penalties related to uncertain tax positions required to be recorded, as income tax expense. Interest and penalties on uncertain tax positions were as follows:

	Interest and Penalties on Uncertain Tax Positions Years Ended December 31,
	2012			2011			2010
	Millions
Power	$	(2	)	$	(11	)	$	(17	)
PSE&G	1			(24		)	(20		)
Energy Holdings	39			420			407
Other	—			10			9
Total	$	38		$	395		$	379

It is reasonably possible that total unrecognized tax benefits will decrease within the next twelve months due to either agreements with various taxing authorities upon audit or the expiration of the Statute of Limitations. These potential decreases are as follows:

Possible Decrease in Total Unrecognized Tax Benefits including Interest	Over the next 12 Months
	Millions
PSEG	$	75
Power	$	5
PSE&G	$	—

As a result of a change in accounting method for the capitalization of indirect costs, PSEG reduced the net amount of its uncertain tax positions (including interest) by $97 million, approximately $43 million of which related to PSE&G. Pursuant to an agreement signed with the IRS on January 31, 2012, this matter is settled and there will be a resulting increase in uncertain tax positions within the next twelve months. These amounts are not included in the table above.

A description of income tax years that remain subject to examination by material jurisdictions, where an examination has not already concluded are:

	PSEG	Power	PSE&G
United States
Federal	2007-2011	N/A	N/A
New Jersey	2006-2011	N/A	2006-2011
Pennsylvania	2001-2011	N/A	2000-2011
Connecticut	2002-2011	N/A	N/A
Texas	2007-2011	N/A	N/A
California	2003-2011	N/A	N/A
New York	2009-2011	2009-2011	N/A