Early Plant Retirements Early Plant Retirements

9 Months Ended

Sep. 30, 2018

Early Plant Retirements [Line Items]

Fossil

On June 1, 2017, Power completed its previously announced retirement of the generation operations of the existing coal/gas units at the Hudson and Mercer generating stations.

As of June 1, 2017, Power recognized total Depreciation and Amortization of $964 million for the Hudson and Mercer units to reflect the significant shortening of their expected economic useful lives in 2017. In the three and nine months ended September 30, 2017, Power recognized pre-tax charges of $1 million and $10 million, respectively, in Energy Costs primarily for coal inventory lower of cost or market adjustments. In the three and nine months ended September 30, 2017, Power also recognized pre-tax charges in O&M of $8 million and $12 million, respectively, of shut down costs and a net increase in the Asset Retirement Obligation liability due to settlements and changes in cash flow estimates, partially offset by changes in employee-related severance costs. In 2018, no material costs were recorded. Power is exploring various opportunities with

these sites, including using the sites for alternative industrial activity or the disposition of one or both of the sites. 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.

PSEG and Power continue to monitor their other coal assets, including the 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 certain 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 held for use classification of our remaining coal units may have a material adverse impact on PSEG’s and Power’s future financial results.

Nuclear

Since 2013, several nuclear generating stations in the United States have closed or announced early retirement due to economic reasons, or have announced being at risk for early retirement. In September 2018, Exelon, a co-owner of the Salem units, shut down its Oyster Creek nuclear plant located in New Jersey, one year earlier than previously planned for economic reasons. In addition, First Energy announced in March 2018 the early retirement of four nuclear units at the Davis-Besse, Perry Nuclear and Beaver Valley nuclear plants in Ohio and Pennsylvania by 2021. These closures and retirements are generally due to the decline in market prices of energy, resulting from low natural gas prices driven by the growth of shale gas production since 2007, the continuing cost of regulatory compliance and enhanced security for nuclear facilities, both federal and state-level policies that provide financial incentives to construct renewable energy such as wind and solar and the failure to adequately compensate nuclear generating stations for the attributes they bring similar to renewable energy production. These trends have significantly reduced the revenues of nuclear generating stations while limiting their ability to reduce the unit cost of production. This may result in the electric generation industry experiencing a further shift from nuclear generation to natural gas-fired generation, creating less diversity of the generation fleet.

In May 2018, the governor of New Jersey signed legislation that would provide a safety net in order to prevent the loss of environmental attributes from selected nuclear generating stations referred to as the ZEC (Zero Emissions Certificate) program. The legislation calls for the BPU to establish a collection process for a customer charge, determine eligibility and certification of need, and potentially select nuclear plants to receive ZECs starting in April 2019. The law mandates each New Jersey electric distribution company (EDC), including PSE&G, to purchase ZECs and recover its procurement of ZECs through a non-bypassable charge (ZEC charge) in the amount of $0.004 per kilowatt-hour.

In the ordinary course, management, and in the case of the Salem units the co-owner, each makes a number of decisions that impact the operation of Power’s nuclear units beyond the current year, including whether and to what extent these units participate in RPM capacity auctions, commitments relating to refueling outages and significant capital expenditures, and decisions regarding our hedging arrangements. When considering whether to make these future commitments, management’s decisions will primarily be influenced by the financial outlook of the units, including the progress, timing and continued outlook for selection of the units under the newly enacted legislation in the state of New Jersey. Power and Exelon have agreed to continue to assess and, when appropriate, approve the funding of individual capital projects to ensure compliance with regulatory requirements and the safe operation of the Salem generating station and that the funding of previously postponed projects may be restored as a result of the legislation enacted in New Jersey sufficiently values the attributes of nuclear generation and Salem benefits from such legislation.

Power believes it may be unable to cover its costs and would be inadequately compensated for its market and operational risks at the Salem and Hope Creek nuclear units, which would result in Power retiring these units early if (i) energy market prices continue to be depressed, (ii) there are adverse impacts from potential changes to the capacity market construct being considered by FERC, or (iii) Salem and/or Hope Creek are not selected to participate in the ZEC program or the ZEC program does not adequately compensate our nuclear generating stations for their attributes. The costs associated with any such retirement, which may include, among other things, accelerated depreciation and amortization or impairment charges, accelerated asset retirement costs, severance costs, environmental remediation costs and additional funding of the NDT Fund would be material to both PSEG and Power. If any or all of the Salem and Hope Creek units were shut down, it would significantly alter New Jersey’s energy supply predominately by increasing New Jersey’s reliance on natural gas generation. Such a decrease in fuel diversity could also increase the market’s vulnerability to price fluctuations and power disruptions in times of high demand.

The following table provides the balance sheet amounts by generating station as of September 30, 2018 for significant assets and liabilities associated with Power’s owned share of its nuclear assets.




	As of September 30, 2018
	Hope Creek			Salem			Support Facilities and Other (A)		Peach Bottom
	Millions
Assets
Materials and Supplies Inventory	$	83		$	72		$	—	$	42
Nuclear Production, net of Accumulated Depreciation	684			642			199		775
Nuclear Fuel In-Service, net of Accumulated Depreciation	155			72			—		103
Construction Work in Progress (including nuclear fuel)	144			156			2		87
Total Assets	$	1,066		$	942		$	201	$	1,007
Liability
Asset Retirement Obligation	$	313		$	258		$	—	$	213
Total Liabilities	$	313		$	258		$	—	$	213
Net Assets	$	753		$	684		$	201	$	794
NRC License Renewal Term	2046			2036/2040			N/A		2033/2034
% Owned	100		%	57		%	Various		50		%

(A)Includes Hope Creek’s and Salem’s shared support facilities and other nuclear development capital.

The precise timing of any potential early retirement and resulting financial statement impact may be affected by a number of factors, including co-owner considerations, the results of any transmission system reliability study assessments and decommissioning trust fund requirements and other commitments, as well as future energy prices. Power maintains a NDT Fund that funds its decommissioning obligations. See Note 8. Trust Investments.

Power [Member]