Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2018

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

The following tables present information about PSEG’s, PSE&G’s and Power’s respective assets and (liabilities) measured at fair value on a recurring basis as of June 30, 2018 and December 31, 2017, including the fair value measurements and the levels of inputs used in determining those fair values. Amounts shown for PSEG include the amounts shown for PSE&G and Power.




	Recurring Fair Value Measurements as of June 30, 2018
Description	Total			Netting (D)			Quoted Market Prices for Identical Assets (Level 1)			Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
	Millions
PSEG
Assets:
Energy-Related Contracts (B)	$	45		$	(343	)	$	16		$	365		$	7
NDT Fund (C)
Equity Securities	$	1,081		$	—		$	1,079		$	2		$	—
Debt Securities—U.S. Treasury	$	211		$	—		$	—		$	211		$	—
Debt Securities—Govt Other	$	306		$	—		$	—		$	306		$	—
Debt Securities—Corporate	$	450		$	—		$	—		$	450		$	—
Rabbi Trust (C)
Equity Securities	$	24		$	—		$	24		$	—		$	—
Debt Securities—U.S. Treasury	$	58		$	—		$	—		$	58		$	—
Debt Securities—Govt Other	$	36		$	—		$	—		$	36		$	—
Debt Securities—Corporate	$	106		$	—		$	—		$	106		$	—
Liabilities:
Derivative Contracts:
Energy-Related Contracts (B)	$	(24	)	$	341		$	(8	)	$	(354	)	$	(3	)
PSE&G
Assets:
Rabbi Trust (C)
Equity Securities	$	4		$	—		$	4		$	—		$	—
Debt Securities—U.S. Treasury	$	12		$	—		$	—		$	12		$	—
Debt Securities—Govt Other	$	8		$	—		$	—		$	8		$	—
Debt Securities—Corporate	$	21		$	—		$	—		$	21		$	—
Power
Assets:
Derivative Contracts:
Energy-Related Contracts (B)	$	45		$	(343	)	$	16		$	365		$	7
NDT Fund (C)
Equity Securities	$	1,081		$	—		$	1,079		$	2		$	—
Debt Securities—U.S. Treasury	$	211		$	—		$	—		$	211		$	—
Debt Securities—Govt Other	$	306		$	—		$	—		$	306		$	—
Debt Securities—Corporate	$	450		$	—		$	—		$	450		$	—
Rabbi Trust (C)
Equity Securities	$	6		$	—		$	6		$	—		$	—
Debt Securities—U.S. Treasury	$	14		$	—		$	—		$	14		$	—
Debt Securities—Govt Other	$	9		$	—		$	—		$	9		$	—
Debt Securities—Corporate	$	27		$	—		$	—		$	27		$	—
Liabilities:
Derivative Contracts:
Energy-Related Contracts (B)	$	(24	)	$	341		$	(8	)	$	(354	)	$	(3	)




	Recurring Fair Value Measurements as of December 31, 2017
Description	Total			Netting (D)			Quoted Market Prices for Identical Assets (Level 1)			Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
	Millions
PSEG
Assets:
Cash Equivalents (A)	$	223		$	—		$	223		$	—		$	—
Derivative Contracts:
Energy-Related Contracts (B)	$	36		$	(433	)	$	15		$	442		$	12
NDT Fund (C)
Equity Securities	$	1,147		$	—		$	1,145		$	2		$	—
Debt Securities—U.S. Treasury	$	314		$	—		$	—		$	314		$	—
Debt Securities—Govt Other	$	270		$	—		$	—		$	270		$	—
Debt Securities—Corporate	$	402		$	—		$	—		$	402		$	—
Rabbi Trust (C)
Equity Securities	$	27		$	—		$	27		$	—		$	—
Debt Securities—U.S. Treasury	$	51		$	—		$	—		$	51		$	—
Debt Securities—Govt Other	$	34		$	—		$	—		$	34		$	—
Debt Securities—Corporate	$	119		$	—		$	—		$	119		$	—
Liabilities:
Derivative Contracts:
Energy-Related Contracts (B)	$	(21	)	$	477		$	(8	)	$	(485	)	$	(5	)
PSE&G
Assets:
Cash Equivalents (A)	$	223		$	—		$	223		$	—		$	—
Rabbi Trust (C)
Equity Securities	$	5		$	—		$	5		$	—		$	—
Debt Securities—U.S. Treasury	$	10		$	—		$	—		$	10		$	—
Debt Securities—Govt Other	$	7		$	—		$	—		$	7		$	—
Debt Securities—Corporate	$	24		$	—		$	—		$	24		$	—
Liabilities:
Power
Assets:
Derivative Contracts:
Energy-Related Contracts (B)	$	36		$	(433	)	$	15		$	442		$	12
NDT Fund (C)
Equity Securities	$	1,147		$	—		$	1,145		$	2		$	—
Debt Securities—U.S. Treasury	$	314		$	—		$	—		$	314		$	—
Debt Securities—Govt Other	$	270		$	—		$	—		$	270		$	—
Debt Securities—Corporate	$	402		$	—		$	—		$	402		$	—
Rabbi Trust (C)
Equity Securities	$	6		$	—		$	6		$	—		$	—
Debt Securities—U.S. Treasury	$	13		$	—		$	—		$	13		$	—
Debt Securities—Govt Other	$	8		$	—		$	—		$	8		$	—
Debt Securities—Corporate	$	30		$	—		$	—		$	30		$	—
Liabilities:
Derivative Contracts:
Energy-Related Contracts (B)	$	(21	)	$	477		$	(8	)	$	(485	)	$	(5	)


(A)	Represents money market mutual funds.


(B)	Level 1—These contracts represent natural gas futures contracts executed on NYMEX, and are being valued solely on settled pricing inputs which come directly from the exchange.

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

Level 3—Unobservable inputs are used for the valuation of certain contracts. See “Additional Information Regarding Level 3 Measurements” below for more information on the utilization of unobservable inputs.

(C)

As of June 30, 2018, the fair value measurement table excludes foreign currency of $1 million, which is part of the NDT Fund. The NDT Fund maintains investments in various equity and fixed income securities. The Rabbi Trust maintains investments in various fixed income securities and a Russell 3000 index fund. These securities are generally valued with prices that are either exchange provided (equity securities) or market transactions for comparable securities and/or broker quotes (fixed income securities).

Level 1—Investments in marketable equity securities within the NDT Fund are primarily investments in common stocks across a broad range of industries and sectors. Most equity securities are priced utilizing the principal market close price or, in some cases, midpoint, bid or ask price. Certain other equity securities in the NDT and Rabbi Trust Funds consist primarily of investments in Dreyfus money market funds which seek a high level of current income as is consistent with the preservation of capital and the maintenance of liquidity. To pursue its goals, the funds normally invest in diversified portfolios of high quality, short-term, dollar-denominated debt securities and government securities. The funds’ Net Asset Value is priced and published daily. The Rabbi Trust also has an equity index fund which is valued based on quoted prices in an active market.

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

(D)

Represents the netting of fair value balances with the same counterparty (where the right of offset exists) and the application of collateral. All cash collateral received or posted that has been allocated to derivative positions, where the right of offset exists, has been offset in the Condensed Consolidated Balance Sheets. As of June 30, 2018 and December 31, 2017, Power had net cash collateral/margin payments to counterparties of $122 million and $146 million, respectively. Of these net cash collateral/margin payments $(2) million as of June 30, 2018 and $44 million as of December 31, 2017 were netted against the corresponding net derivative contract positions. The $(2) million of cash collateral as of June 30, 2018 was netted against assets. Of the $44 million of cash collateral as of December 31, 2017, $(3) million was netted against assets and $47 million was netted against liabilities.

Schedule of Quantitative Information About Level 3 Fair Value Measurements

Quantitative Information About Level 3 Fair Value Measurements

Significant

Fair Value as of

Valuation

Unobservable

Commodity

Level 3 Position

June 30, 2018

Technique(s)

Input

Range

Assets

(Liabilities)

Millions

Power

Electricity

Electric Load Contracts

)

Discounted Cash flow

Historic Load Variability

0% to 10%

Gas

Gas Physical Contracts

—

Discounted Cash flow

Average Historical Basis

-40% to 0%

Total Power

)

Total PSEG

)




	Quantitative Information About Level 3 Fair Value Measurements

								Significant
		Fair Value as of					Valuation	Unobservable
Commodity	Level 3 Position	December 31, 2017					Technique(s)	Input	Range
		Assets		(Liabilities)
		Millions
Power
Electricity	Electric Load Contracts	$	1	$	(3	)	Discounted Cash flow	Historic Load Variability	0% to 10%
Gas	Gas Physical Contracts	11		(2		)	Discounted Cash flow	Average Historical Basis	-40% to -10%
Total Power		$	12	$	(5	)
Total PSEG		$	12	$	(5	)

Significant unobservable inputs listed above would have a direct impact on the fair values of the above Level 3 instruments if they were adjusted. For energy-related contracts in cases where Power is a seller, an increase in the load variability would decrease the fair value. For gas-related contracts in cases where Power is a buyer, an increase in the average historical basis would increase the fair value.

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

A reconciliation of the beginning and ending balances of Level 3 derivative contracts and securities for the three months and six months ended June 30, 2018 and June 30, 2017, respectively, follows:

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

for the Three Months and Six Months Ended June 30, 2018




	Three Months Ended June 30, 2018
			Total Gains or (Losses) Realized/Unrealized
Description	Balance as of April 1, 2018		Included in Income (A)			Included in Regulatory Assets/ Liabilities (B)		Purchases (Sales)		Issuances/ Settlements (C)		Transfers In/Out (D)		Balance as of June 30, 2018
	Millions
PSEG
Net Derivative Assets (Liabilities)	$	7	$	(3	)	$	—	$	—	$	—	$	—	$	4
Power
Net Derivative Assets (Liabilities)	$	7	$	(3	)	$	—	$	—	$	—	$	—	$	4

	Six Months Ended June 30, 2018
			Total Gains or (Losses) Realized/Unrealized
Description	Balance as of January 1, 2018		Included in Income (A)			Included in Regulatory Assets/ Liabilities (B)		Purchases (Sales)		Issuances/ Settlements (C)		Transfers In/Out (D)		Balance as of June 30, 2018
	Millions
PSEG
Net Derivative Assets (Liabilities)	$	7	$	(4	)	$	—	$	—	$	1	$	—	$	4
Power
Net Derivative Assets (Liabilities)	$	7	$	(4	)	$	—	$	—	$	1	$	—	$	4

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

for the Three Months and Six Months Ended June 30, 2017




	Three Months Ended June 30, 2017
				Total Gains or (Losses) Realized/Unrealized
Description	Balance as of April 1, 2017			Included in Income (E)		Included in Regulatory Assets/ Liabilities (B)			Purchases (Sales)		Issuances/ Settlements (C)			Transfers In/Out (D)			Balance as of June 30, 2017
	Millions
PSEG
Net Derivative Assets (Liabilities)	$	3		$	7	$	(1	)	$	—	$	(3	)	$	—		$	6
PSE&G
Net Derivative Assets (Liabilities)	$	1		$	—	$	(1	)	$	—	$	—		$	—		$	—
Power
Net Derivative Assets (Liabilities)	$	2		$	7	$	—		$	—	$	(3	)	$	—		$	6

	Six Months Ended June 30, 2017
				Total Gains or (Losses) Realized/Unrealized
Description	Balance as of January 1, 2017			Included in Income (E)		Included in Regulatory Assets/ Liabilities (B)			Purchases (Sales)		Issuances/ Settlements (C)			Transfers In/Out (D)			Balance as of June 30, 2017
	Millions
PSEG
Net Derivative Assets (Liabilities)	$	1		$	26	$	5		$	—	$	(25	)	$	(1	)	$	6
PSE&G
Net Derivative Assets (Liabilities)	$	(5	)	$	—	$	5		$	—	$	—		$	—		$	—
Power
Net Derivative Assets (Liabilities)	$	6		$	26	$	—		$	—	$	(25	)	$	(1	)	$	6

(A)

PSEG’s and Power’s gains(losses) attributable to changes in net derivative assets and liabilities for the three months and six months ended June 30, 2018 include $(7) million and $1 million, respectively, in Operating Revenues and $4 million and $(5) million, respectively, in Energy Costs. Both the $(7) million and $1 million in Operating Revenues are unrealized. Of the $4 million and $(5) million in Energy Costs, $3 million and $(6) million are unrealized. Unrealized gains (losses) represent the change in derivative assets and liabilities still held at the end of the reporting period.


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


(C)	Represents $1 million in settlements for the six months ended June 30, 2018. Represents settlements of $(3) million and $(25) million for the three months and six months ended June 30, 2017, respectively.


(D)	During the three months and six months ended June 30, 2018, there were no transfers into or out of Level 3. During the six months ended June 30, 2017, $(1) million of net derivatives were transferred from Level 2 to Level 3. There were no transfers into or out of Level 3 during the three months ended June 30, 2017.

(E)

PSEG’s and Power’s gains(losses) attributable to changes in net derivative assets and liabilities for the three months and six months ended June 30, 2017 include $3 million and $17 million, respectively, in Operating Revenues and $4 million and $9 million, respectively, in Energy Costs. Of the $3 million and $17 million in Operating Revenues, $2 million and $(2) million, respectively, are unrealized. Of the $4 million and $9 million in Energy Costs, $2 million and $3 million are unrealized.

Schedule of Fair Value of Debt

The estimated fair values were determined using the market quotations or values of instruments with similar terms, credit ratings, remaining maturities and redemptions as of June 30, 2018 and December 31, 2017.




	As of				As of
	June 30, 2018				December 31, 2017
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
	Millions
Long-Term Debt:
PSEG (A) (B)	$	2,091	$	2,042	$	2,091	$	2,081
PSE&G (B)	8,886		9,055		8,591		9,322
Power (B)	3,083		3,249		2,386		2,659
Total Long-Term Debt	$	14,060	$	14,346	$	13,068	$	14,062


(A)	Includes floating rate term loan of $700 million. The fair values of the term loan debt (Level 2 measurement) approximate the carrying values because the interest payments are based on LIBOR rates that are reset monthly and the debt is redeemable at face value by PSEG at any time.

(B)

Given that these bonds do not trade actively, the fair value amounts of taxable debt securities (primarily Level 2 measurements) are generally determined by a valuation model that is based on a conventional discounted cash flow methodology and utilizes assumptions of current market pricing curves. In order to incorporate the credit risk into the discount rates, pricing is obtained (i.e. U.S. Treasury rate plus credit spread) based on expected new issue pricing across each of the companies’ respective debt maturity spectrum. The credit spreads of various tenors obtained from this information are added to the appropriate benchmark U.S. Treasury rates in order to determine the current market yields for the various tenors. The yields are then converted into discount rates of various tenors that are used for discounting the respective cash flows of the same tenor for each bond or note.