Financing Receivables

6 Months Ended

Jun. 30, 2017

Schedule of Financial Receivables [Line Items]

PSE&G

PSE&G sponsors a solar loan program designed to help finance the installation of solar power systems throughout its electric service area. The loans are generally paid back with solar renewable energy certificates generated from the installed solar electric system. A substantial portion of these amounts are noncurrent and reported in Long-Term Investments on PSEG’s and PSE&G’s Condensed Consolidated Balance Sheets. The following table reflects the outstanding loans by class of customer, none of which are considered “non-performing.”




Outstanding Loans by Class of Customer
	As of		As of
Consumer Loans	June 30, 2017		December 31, 2016
	Millions
Commercial/Industrial	$	167	$	164
Residential	11		11
Total	$	178	$	175

Energy Holdings

Energy Holdings, through several of its indirect subsidiary companies, has investments in domestic energy and real estate assets subject primarily to leveraged lease accounting. A leveraged lease is typically comprised of an investment by an equity investor and debt provided by a third-party debt investor. The debt is recourse only to the assets subject to lease and is not included on PSEG’s Condensed Consolidated Balance Sheets. As an equity investor, Energy Holdings’ equity investments in the leases are comprised of the total expected lease receivables over the lease terms plus the estimated residual values at the end of the lease terms, reduced for any income not yet earned on the leases. This amount is included in Long-Term Investments on PSEG’s Condensed Consolidated Balance Sheets. The more rapid depreciation of the leased property for tax purposes creates tax cash flow that will be repaid to the taxing authority in later periods. As such, the liability for such taxes due is recorded in Deferred Income Taxes on PSEG’s Condensed Consolidated Balance Sheets.

During the third quarter of 2016, Energy Holdings completed its annual review of estimated residual values embedded in the

NRG REMA, LLC (REMA) leveraged leases. The outcome indicated that the revised residual value estimates were lower than the recorded residual values and the decline was deemed to be other than temporary due to the adverse economic conditions experienced by coal generation in PJM, as discussed in Note 3. Early Plant Retirements, negatively impacting the economic outlook of the leased assets. As a result, a pre-tax write-down of $137 million was reflected in Operating Revenues in the quarter ended September 30, 2016, calculated by comparing the gross investment in the leases before and after the revised residual estimates. During the fourth quarter of 2016, Energy Holdings recorded a $10 million pre-tax charge for its best estimate of loss related to the leveraged lease receivables as a result of the current liquidity issues facing REMA, which was reflected in Operating Revenues and is included in Gross Investments in Leases as of December 31, 2016.

During the first quarter of 2017, due to continuing liquidity issues facing REMA, economic challenges facing coal generation in PJM, and based upon an ongoing review of available alternatives as well as certain recent discussions with REMA management, Energy Holdings recorded an additional $55 million pre-tax charge for its current best estimate of loss related to the lease receivables, which was reflected in Operating Revenues and is included in Gross Investments in Leases as of June 30, 2017.

In June 2017, GenOn Energy, Inc. (GenOn) and certain of its subsidiaries filed voluntary petitions for relief under Chapter 11 of the United States Bankruptcy Code. GenOn is a subsidiary of NRG Energy, Inc. and is the parent of REMA. REMA was not included in the GenOn filing. Energy Holdings continues to monitor the restructuring of GenOn and its possible impacts on REMA. During the second quarter of 2017, Energy Holdings completed its review of estimated residual values embedded in its leveraged lease portfolio of generating assets and the outcome indicated that one of the residual value estimates was lower than the recorded residual value due to a further deterioration of market conditions and changes to operating cost estimates. This decline was determined to be other than temporary. As a result, a pre-tax write-down of $7 million was recorded in the quarter ended June 30, 2017. In addition, based on an ongoing review of (i) the liquidity challenges facing REMA and (ii) available alternatives, Energy Holdings recorded an additional $15 million pre-tax charge for its current best estimate of loss related to lease receivables. The second quarter 2017 pre-tax write-down and additional charge were reflected in Operating Revenues and are included in Gross Investment in Leases for June 30, 2017.

The following table shows Energy Holdings’ gross and net lease investment as of June 30, 2017 and December 31, 2016, respectively.




	As of			As of
	June 30, 2017			December 31, 2016
	Millions
Lease Receivables (net of Non-Recourse Debt)	$	559		$	629
Estimated Residual Value of Leased Assets	333			346
Total Investment in Rental Receivables	892			975
Unearned and Deferred Income	(315		)	(326		)
Gross Investment in Leases	577			649
Deferred Tax Liabilities	(619		)	(674		)
Net Investment in Leases	$	(42	)	$	(25	)

The corresponding receivables associated with the lease portfolio are reflected in the following table, net of non-recourse debt. The ratings in the table represent the ratings of the entities providing payment assurance to Energy Holdings.




	Lease Receivables, Net of Non-Recourse Debt
Counterparties’ Credit Rating Standard & Poor’s (S&P) as of June 30, 2017
	As of June 30, 2017
	Millions
AA	$	15
BBB+ — BBB-	317
BB-	133
CC	94
Total	$	559

The “BB-” and the “CC” ratings in the preceding table represent lease receivables related to coal and gas-fired assets in Illinois and Pennsylvania, respectively. As of June 30, 2017, the gross investment in the leases of such assets, net of non-recourse debt, was $348 million ($(159) million, net of deferred taxes). A more detailed description of such assets under lease, as of June 30, 2017, is presented in the following table.




Asset	Location	Gross Investment		% Owned		Total MW	Fuel Type	Counterparties’ S&P Credit Ratings	Counterparty
		Millions
Powerton Station Units 5 and 6	IL	$	134	64	%	1,538	Coal	BB-	NRG Energy, Inc.
Joliet Station Units 7 and 8	IL	$	83	64	%	1,036	Gas	BB-	NRG Energy, Inc.
Keystone Station Units 1 and 2	PA	$	20	17	%	1,711	Coal	CC (A)	REMA
Conemaugh Station Units 1 and 2	PA	$	20	17	%	1,711	Coal	CC (A)	REMA
Shawville Station Units 1, 2, 3 and 4	PA	$	91	100	%	596	Gas	CC (A)	REMA

(A)

REMA’s parent company, GenOn, and certain of its subsidiaries (which did not include REMA) filed voluntary petitions for relief under Chapter 11 of the U.S. Bankruptcy Code. GenOn is currently engaged in a balance sheet restructuring, which will take an undetermined time to complete. On June 16, 2017, Moody’s downgraded the GenOn Corporate Family Rating to D-PD and provided a rating of Caa1 for REMA.

The credit exposure for lessors is partially mitigated through various credit enhancement mechanisms within the lease structures. These credit enhancement features vary from lease to lease and may include letters of credit or affiliate guarantees. Upon the occurrence of certain defaults, indirect subsidiary companies of Energy Holdings would exercise their rights and seek recovery of their investment, potentially including stepping into the lease directly to protect their investments. While these actions could ultimately protect or mitigate the loss of value, they could require the use of significant capital and trigger certain material tax obligations which could wholly or partially be mitigated by tax indemnification claims against the counterparty. A bankruptcy of a lessee would likely delay and potentially limit any efforts on the part of the lessors to assert their rights upon default and could delay the monetization of claims. Failure to recover adequate value could ultimately lead to a foreclosure on the assets under lease by the lenders. Although all lease payments are current, PSEG cannot predict the outcome of GenOn’s restructuring process or the possible related impact on REMA. PSEG continues to monitor any changes to REMA’s and GenOn’s status and potential impacts on Energy Holdings’ lease investments. If lease rejections or foreclosures were to occur, Energy Holdings could potentially record additional pre-tax write-offs up to its gross investment in these facilities and may also be required to accelerate and pay material deferred tax liabilities to the Internal Revenue Service.

Additional factors that may impact future lease cash flows include, but are not limited to, new environmental legislation and regulation regarding air quality, water and other discharges in the process of generating electricity, market prices for fuel, electricity and capacity, overall financial condition of lease counterparties and their affiliates and the quality and condition of assets under lease.

PSE And G [Member]

Schedule of Financial Receivables [Line Items]

Financing Receivables

PSE&G




Outstanding Loans by Class of Customer
	As of		As of
Consumer Loans	June 30, 2017		December 31, 2016
	Millions
Commercial/Industrial	$	167	$	164
Residential	11		11
Total	$	178	$	175

Energy Holdings

During the third quarter of 2016, Energy Holdings completed its annual review of estimated residual values embedded in the

The following table shows Energy Holdings’ gross and net lease investment as of June 30, 2017 and December 31, 2016, respectively.




	As of			As of
	June 30, 2017			December 31, 2016
	Millions
Lease Receivables (net of Non-Recourse Debt)	$	559		$	629
Estimated Residual Value of Leased Assets	333			346
Total Investment in Rental Receivables	892			975
Unearned and Deferred Income	(315		)	(326		)
Gross Investment in Leases	577			649
Deferred Tax Liabilities	(619		)	(674		)
Net Investment in Leases	$	(42	)	$	(25	)




	Lease Receivables, Net of Non-Recourse Debt
Counterparties’ Credit Rating Standard & Poor’s (S&P) as of June 30, 2017
	As of June 30, 2017
	Millions
AA	$	15
BBB+ — BBB-	317
BB-	133
CC	94
Total	$	559




Asset	Location	Gross Investment		% Owned		Total MW	Fuel Type	Counterparties’ S&P Credit Ratings	Counterparty
		Millions
Powerton Station Units 5 and 6	IL	$	134	64	%	1,538	Coal	BB-	NRG Energy, Inc.
Joliet Station Units 7 and 8	IL	$	83	64	%	1,036	Gas	BB-	NRG Energy, Inc.
Keystone Station Units 1 and 2	PA	$	20	17	%	1,711	Coal	CC (A)	REMA
Conemaugh Station Units 1 and 2	PA	$	20	17	%	1,711	Coal	CC (A)	REMA
Shawville Station Units 1, 2, 3 and 4	PA	$	91	100	%	596	Gas	CC (A)	REMA

(A)