Early Plant Retirements Early Plant Retirements

12 Months Ended

Dec. 31, 2016

Restructuring Cost and Reserve [Line Items]

Early Plant Retirements [Text Block]

Early Plant Retirements

On October 3, 2016, Power determined that it would cease generation operations of the existing coal/gas units at the Hudson and Mercer generating stations on June 1, 2017. Power has filed deactivation notices with PJM for these existing units at both stations and final must-offer exception requests for the 2020-2021 PJM capacity auction to the PJM Independent Market Monitor. Power expects the units to continue to be available to generate electricity and receive previously cleared capacity payments through the date the units cease operations. The exact timing of the early retirement of these units may be impacted by operational and other conditions that could subsequently arise. 

PSEG and Power undertake their annual five-year strategic planning process primarily during the third and fourth quarters of each year. The primary factors considered during this process that contributed to the decision to retire these units early include significant declines in revenues and margin caused by a sustained period of depressed wholesale power prices and reduced capacity factors caused by lower natural gas prices making coal generation less economically competitive than natural gas-fired generation. Despite experiencing recent warmer than normal weather in PJM this summer, Power did not experience the usual increase in electricity prices in PJM as it had in past hot summers. This trend has a further adverse economic impact to these units because they generally dispatch and earn energy margin on peak hot and cold days. In addition, the upcoming PJM capacity auction in May 2017 for the capacity period from June 2020 to May 2021 will be the first to require all generating units to meet the increased operating performance standards of PJM’s new capacity performance regulations. During the current annual five-year strategic planning process, Power determined, on October 3, 2016, that the costs to upgrade the existing units at the Hudson and Mercer stations to comply with these higher reliability standards to be too significant and not economic given current market conditions, including anticipated future capacity prices, current forward energy prices and past operational performance results of the units. While these units have the capability to run on both coal and natural gas, they have higher operating costs and fuel consumption as well as longer start-up times compared to newer combined cycle gas units.

The decision to retire the Hudson and Mercer units early had and will continue to have a material effect on PSEG’s and Power’s results of operations. In 2016, PSEG and Power recognized the following pre-tax charges in Energy Costs, Operation and Maintenance and Depreciation expense during the period following the announcement of the early retirement of the plants:

	Year Ended December 31, 2016
	Millions
Statement of Operations Expense (pre-tax)
Energy Costs
Coal Inventory Lower of Cost or Market Adjustments and Capacity Penalties	$	62
Operation and Maintenance
Materials and Supplies Obsolescence	31
Write-down of Construction Work in Progress	14
Other (A)	8
Depreciation and Amortization
Depreciation including Asset Retirement Costs	571
Total Pre-Tax Expense	$	686

(A) Includes severance and miscellaneous costs. Power recorded $7 million of severance expense which it expects to pay in 2017.

In addition to these charges, Power expects to recognize the remaining Depreciation and Amortization of $958 million in 2017 due to the significant shortening of the expected economic useful lives of Hudson and Mercer. Additional employee-related salary continuance and severance costs and various miscellaneous costs may also be incurred during the period prior to retirement. Finally, Power currently anticipates using the sites for alternative industrial activity. However, if Power determines not to use the sites for alternative industrial activity, the early retirement of the units at such sites would trigger obligations under certain environmental regulations, including possible remediation. The amounts for any such environmental remediation are neither currently probable nor estimable but may be material.

Because the Hudson and Mercer generating units will cease operations significantly before the end of their previously estimated useful lives, Power performed a recoverability test for its portfolio of generating assets in the PJM region to determine if an impairment exists. As of September 30, 2016, the estimated undiscounted future cash flows of the PJM asset group exceeded the carrying amount and no impairment was identified. For additional information on impairment of long-lived assets, see Note 1. Organization, Basis of Presentation and Summary of Significant Accounting Policies.

In addition, Power has reduced the estimated useful life of Bridgeport Harbor Station unit 3 from 2025 to the summer of 2021 as it is more likely than not it will retire the unit by this time. The change in the estimated useful life is not expected to have a material impact on Power’s future financial results. PSEG and Power continue to monitor their Keystone and Conemaugh generating stations to assess their economic viability through the end of their designated useful lives and their continued classification as held for use. The precise timing of a change in useful lives may be dependent upon events out of PSEG’s and Power’s control and may impact their ability to operate or maintain these assets in the future. These generating stations may be impacted by factors such as environmental legislation, co-owner capital requirements and continued depressed wholesale power prices or capacity factors, among other things. Any early retirement or change in the classification as held for use of our remaining coal units may have a material adverse impact on PSEG’s and Power’s future financial results.

Power [Member]

Restructuring Cost and Reserve [Line Items]

Early Plant Retirements [Text Block]

Early Plant Retirements

On October 3, 2016, Power determined that it would cease generation operations of the existing coal/gas units at the Hudson and Mercer generating stations on June 1, 2017. Power has filed deactivation notices with PJM for these existing units at both stations and final must-offer exception requests for the 2020-2021 PJM capacity auction to the PJM Independent Market Monitor. Power expects the units to continue to be available to generate electricity and receive previously cleared capacity payments through the date the units cease operations. The exact timing of the early retirement of these units may be impacted by operational and other conditions that could subsequently arise. 

PSEG and Power undertake their annual five-year strategic planning process primarily during the third and fourth quarters of each year. The primary factors considered during this process that contributed to the decision to retire these units early include significant declines in revenues and margin caused by a sustained period of depressed wholesale power prices and reduced capacity factors caused by lower natural gas prices making coal generation less economically competitive than natural gas-fired generation. Despite experiencing recent warmer than normal weather in PJM this summer, Power did not experience the usual increase in electricity prices in PJM as it had in past hot summers. This trend has a further adverse economic impact to these units because they generally dispatch and earn energy margin on peak hot and cold days. In addition, the upcoming PJM capacity auction in May 2017 for the capacity period from June 2020 to May 2021 will be the first to require all generating units to meet the increased operating performance standards of PJM’s new capacity performance regulations. During the current annual five-year strategic planning process, Power determined, on October 3, 2016, that the costs to upgrade the existing units at the Hudson and Mercer stations to comply with these higher reliability standards to be too significant and not economic given current market conditions, including anticipated future capacity prices, current forward energy prices and past operational performance results of the units. While these units have the capability to run on both coal and natural gas, they have higher operating costs and fuel consumption as well as longer start-up times compared to newer combined cycle gas units.

The decision to retire the Hudson and Mercer units early had and will continue to have a material effect on PSEG’s and Power’s results of operations. In 2016, PSEG and Power recognized the following pre-tax charges in Energy Costs, Operation and Maintenance and Depreciation expense during the period following the announcement of the early retirement of the plants:

	Year Ended December 31, 2016
	Millions
Statement of Operations Expense (pre-tax)
Energy Costs
Coal Inventory Lower of Cost or Market Adjustments and Capacity Penalties	$	62
Operation and Maintenance
Materials and Supplies Obsolescence	31
Write-down of Construction Work in Progress	14
Other (A)	8
Depreciation and Amortization
Depreciation including Asset Retirement Costs	571
Total Pre-Tax Expense	$	686

(A) Includes severance and miscellaneous costs. Power recorded $7 million of severance expense which it expects to pay in 2017.

In addition to these charges, Power expects to recognize the remaining Depreciation and Amortization of $958 million in 2017 due to the significant shortening of the expected economic useful lives of Hudson and Mercer. Additional employee-related salary continuance and severance costs and various miscellaneous costs may also be incurred during the period prior to retirement. Finally, Power currently anticipates using the sites for alternative industrial activity. However, if Power determines not to use the sites for alternative industrial activity, the early retirement of the units at such sites would trigger obligations under certain environmental regulations, including possible remediation. The amounts for any such environmental remediation are neither currently probable nor estimable but may be material.

Because the Hudson and Mercer generating units will cease operations significantly before the end of their previously estimated useful lives, Power performed a recoverability test for its portfolio of generating assets in the PJM region to determine if an impairment exists. As of September 30, 2016, the estimated undiscounted future cash flows of the PJM asset group exceeded the carrying amount and no impairment was identified. For additional information on impairment of long-lived assets, see Note 1. Organization, Basis of Presentation and Summary of Significant Accounting Policies.

In addition, Power has reduced the estimated useful life of Bridgeport Harbor Station unit 3 from 2025 to the summer of 2021 as it is more likely than not it will retire the unit by this time. The change in the estimated useful life is not expected to have a material impact on Power’s future financial results. PSEG and Power continue to monitor their Keystone and Conemaugh generating stations to assess their economic viability through the end of their designated useful lives and their continued classification as held for use. The precise timing of a change in useful lives may be dependent upon events out of PSEG’s and Power’s control and may impact their ability to operate or maintain these assets in the future. These generating stations may be impacted by factors such as environmental legislation, co-owner capital requirements and continued depressed wholesale power prices or capacity factors, among other things. Any early retirement or change in the classification as held for use of our remaining coal units may have a material adverse impact on PSEG’s and Power’s future financial results.