-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, E3ncci089sUTC/Q85rrqiCiJs7bwSrbo7/rRh6riFryhiqf+ywaR9GWr0Yq9Btp1 wS9bo85xJNTHQV/CJaNFcQ== 0000788784-95-000006.txt : 19950517 0000788784-95-000006.hdr.sgml : 19950516 ACCESSION NUMBER: 0000788784-95-000006 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19950331 FILED AS OF DATE: 19950512 SROS: NYSE SROS: PHLX FILER: COMPANY DATA: COMPANY CONFORMED NAME: PUBLIC SERVICE ENTERPRISE GROUP INC CENTRAL INDEX KEY: 0000788784 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC & OTHER SERVICES COMBINED [4931] IRS NUMBER: 222625848 STATE OF INCORPORATION: NJ FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-09120 FILM NUMBER: 95537830 BUSINESS ADDRESS: STREET 1: 80 PARK PLZ STREET 2: P O BOX 1171 CITY: NEWARK STATE: NJ ZIP: 07101 BUSINESS PHONE: 2014307000 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PUBLIC SERVICE ELECTRIC & GAS CO CENTRAL INDEX KEY: 0000081033 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC & OTHER SERVICES COMBINED [4931] IRS NUMBER: 221212800 STATE OF INCORPORATION: NJ FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-00973 FILM NUMBER: 95537919 BUSINESS ADDRESS: STREET 1: 80 PARK PLZ STREET 2: PO BOX 570 CITY: NEWARK STATE: NJ ZIP: 07101 BUSINESS PHONE: 2014307000 10-Q 1 FORM 10-Q PSE&G, PS ENTERPRISE ============================================================================= FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 /X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1995 Commission file number 1-9120 Public Service Enterprise Group Incorporated ------------------------------------------------------ (Exact name of registrant as specified in its charter) New Jersey 22-2625848 - ------------------------------- ------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 80 Park Plaza, P. O. Box 1171, Newark, New Jersey 07101-1171 - ------------------------------------------------- ------------ (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: 201 430-7000 ------------ Commission file number 1-973 Public Service Electric and Gas Company ------------------------------------------------------ (Exact name of registrant as specified in its charter) New Jersey 22-1212800 - ------------------------------- ------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 80 Park Plaza, P. O. Box 570, Newark, New Jersey 07101-0570 - ------------------------------------------------ ------------ (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: 201 430-7000 ------------ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ---- ---- The number of shares outstanding of Public Service Enterprise Group Incorporated's sole class of common stock, as of the latest practicable date, was as follows: Class Outstanding at April 30, 1995 ----- ----------------------------- Common Stock, without par value 244,697,930 As of April 30, 1995, Public Service Electric and Gas Company had issued and outstanding 132,450,344 shares of Common Stock, without nominal or par value, all of which were privately held, beneficially and of record by Public Service Enterprise Group Incorporated. ============================================================================ TABLE OF CONTENTS ----------------- Page ---- PART I. FINANCIAL INFORMATION Item 1. Financial Statements Public Service Enterprise Group Incorporated (Enterprise): Consolidated Statements of Income for the Three and Twelve Months Ended March 31, 1995 and 1994 .................... 1 Consolidated Balance Sheets as of March 31, 1995, 1994 and December 31, 1994 .......................................... 2 Consolidated Statements of Cash Flows for the Three and Twelve Months Ended March 31, 1995 and 1994 .................... 4 Consolidated Statements of Retained Earnings for the Three and Twelve Months Ended March 31, 1995 and 1994 .......... 5 Public Service Electric and Gas Company (PSE&G): Consolidated Statements of Income for the Three and Twelve Months Ended March 31, 1995 and 1994 .................... 6 Consolidated Balance Sheets as of March 31, 1995, 1994 and December 31, 1994 ..................................... 7 Consolidated Statements of Cash Flows for the Three and Twelve Months Ended March 31, 1995 and 1994 .................... 9 Consolidated Statements of Retained Earnings for the Three and Twelve Months Ended March 31, 1995 and 1994 .......... 10 Notes to Consolidated Financial Statements - Enterprise............ 11 Notes to Consolidated Financial Statements - PSE&G................. 18 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Enterprise .......................................... 19 PSE&G ............................................... 37 i TABLE OF CONTENTS ----------------- Page ---- PART II. OTHER INFORMATION Item 1. Legal Proceedings ........................................ 39 Item 4. Submission of Matters to a Vote of Security Holders ......................................... 39 Item 5. Other Information ........................................ 40 Item 6. Exhibits and Reports on Form 8-K ......................... 43 Signatures - Public Service Enterprise Group Incorporated ......... 44 Signatures - Public Service Electric and Gas Company .............. 44 ii GLOSSARY OF TERMS The following is a glossary of frequently used abbreviations or acronyms that are found in this report:
TERM MEANING ----------------------- ---------------------------------------------- AFDC................... Allowance for Funds used During Construction BPU.................... New Jersey Board of Public Utilities Capital................ PSEG Capital Corporation CEA.................... Community Energy Alternatives Incorporated DSM.................... Demand Side Management DSM Plan............... DSM Incentive Resource Plan EBIT................... Earnings before interest and taxes EDC.................... Energy Development Corporation EDHI................... Enterprise Diversified Holdings Incorporated EGDC................... Enterprise Group Development Corporation Enterprise............. Public Service Enterprise Group Incorporated EPA.................... United States Environmental Protection Agency EPACT.................. Energy Policy Act Fault Act.............. New Jersey Public Utility Accident Fault Determination Act FERC................... Federal Energy Regulatory Commission Fuelco................. PSE&G Fuel Corporation Funding................ Enterprise Capital Funding Corporation IRP.................... Integrated Electric Resource Plan Hope Creek............. Hope Creek Nuclear Generating Station KWH.................... Kilowatthours LEAC................... Electric Levelized Energy Adjustment Clause LGAC................... Levelized Gas Adjustment Charge MD&A................... Management's Discussion and Analysis of Financial Condition and Results of Operations MIPS................... Monthly Income Preferred Securities Mortgage............... First and Refunding Mortgage of PSE&G MTNs................... Medium-Term Notes MW..................... Megawatts MWH.................... Megawatthours
iii
TERM MEANING ----------------------- -------------------------------------------------- NEIL................... Nuclear Electric Insurance Limited NJDEP.................. New Jersey Department of Environmental Protection NJGRT.................. New Jersey Gross Receipts and Franchise Tax NJNAA.................. New Jersey Need Assessment Act NJPDES................. New Jersey Pollution Discharge Elimination System NOPR................... Notice of Proposal Rulemaking NPS.................... The BPU's nuclear performance standard established for nuclear generating stations owned by New Jersey electric utilities NRC.................... Nuclear Regulatory Commission Partnership............ Public Service Electric and Gas Capital, L.P. Peach Bottom........... Peach Bottom Atomic Power Station, Units 2 and 3 PECO................... PECO Energy, Inc. PJM.................... Pennsylvania -- New Jersey -- Maryland Interconnection Price Anderson......... Price-Anderson liability provisions of the Atomic Energy Act of 1954, as amended PSE&G.................. Public Service Electric and Gas Company PSCRC.................. Public Service Conservation Resources Corporation PSRC................... Public Service Resources Corporation RAC.................... Remediation Adjustment Charge Remediation Program.... PSE&G Gas Plant Remediation Program Salem.................. Salem Nuclear Generating Station, Units 1 and 2 SEC.................... Securities and Exchange Commission Ventures............... Enterprise Ventures and Service Corporation
iv PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED The financial statements included herein as of March 31, 1995 and 1994 and for the periods then ended are unaudited but, in the opinion of Enterprise's management, reflect all adjustments, consisting only of normal recurring accruals, necessary for a fair presentation. CONSOLIDATED STATEMENTS OF INCOME (Thousands of Dollars)
Three Months Ended Twelve Months Ended March 31, March 31, --------------------------- --------------------------- 1995 1994 1995 1994 ------------- ------------ ------------ ------------ OPERATING REVENUES Electric ................................ $ 942,575 $ 888,310 $ 3,787,378 $ 3,709,225 Gas ..................................... 634,478 801,657 1,611,349 1,765,919 Nonutility Activities ................... 96,752 104,458 396,496 430,132 ------------- ------------ ------------ ------------ Total Operating Revenues ........... 1,673,805 1,794,425 5,795,223 5,905,276 ------------- ------------ ------------ ------------ OPERATING EXPENSES Operation Fuel for Electric Generation and Interchanged Power .................... 208,110 167,201 736,672 697,776 Gas Purchased and Materials for Gas Produced............................... 344,193 460,556 907,593 1,029,469 Other ................................... 253,248 249,840 1,119,671 1,030,221 Maintenance................................ 64,045 76,475 295,650 323,555 Depreciation and Amortization.............. 162,451 155,545 636,594 608,221 Property Impairment........................ -- -- -- 77,637 Taxes Federal Income Taxes .................... 106,789 120,474 298,866 330,339 New Jersey Gross Receipts Taxes ......... 176,789 191,303 568,653 609,107 Other ................................... 23,845 24,083 82,044 79,661 ------------- ------------ ------------ ------------ Total Operating Expenses ........... 1,339,470 1,445,477 4,645,743 4,785,986 ------------- ------------ ------------ ------------ OPERATING INCOME .......................... 334,335 348,948 1,149,480 1,119,290 ------------- ------------ ------------ ------------ OTHER INCOME Allowance for Funds Used During Construction - Equity ................. 1,482 1,788 12,483 11,415 Miscellaneous - net ..................... 2,002 1,155 7,277 (4,798) ------------- ------------ ------------ ------------ Total Other Income ................. 3,484 2,943 19,760 6,617 ------------- ------------ ------------ ------------ INCOME BEFORE INTEREST CHARGES AND DIVIDENDS ON PREFERRED SECURITIES ....... 337,819 351,891 1,169,240 1,125,907 ------------- ------------ ------------ ------------ INTEREST CHARGES Long-Term Debt .......................... 111,604 112,112 458,650 462,508 Short-Term Debt ......................... 4,827 3,834 24,955 15,290 Other ................................... 6,705 2,851 16,659 16,682 ------------- ------------ ------------ ------------ Total Interest Charges ............. 123,136 118,797 500,264 494,480 Allowance for Funds Used During Construction - Debt and Capitalized Interest .............................. (10,106) (7,313) (36,586) (23,787) ------------- ------------ ------------ ------------ Net Interest Charges ............... 113,030 111,484 463,678 470,693 ------------- ------------ ------------ ------------ Preferred Securities Dividend Requirements........................... 12,197 10,280 44,064 39,572 ------------- ------------ ------------ ------------ NET INCOME ......................... $ 212,592 $ 230,127 $ 661,498 $ 615,642 ============= ============ ============ ============ SHARES OF COMMON STOCK OUTSTANDING End of Period ........................... 244,697,930 244,697,930 244,697,930 244,697,930 Average for Period ...................... 244,697,930 243,776,766 244,697,930 242,354,605 EARNINGS PER AVERAGE SHARE OF COMMON STOCK. $0.87 $0.94 $2.70 $2.54 ============= ============ ============ ============ DIVIDENDS PAID PER SHARE OF COMMON STOCK .. $.54 $.54 $2.16 $2.16 ============= ============ ============ ============ See Notes to Consolidated Financial Statements.
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED CONSOLIDATED BALANCE SHEETS (Thousands of Dollars)
March 31, March 31, December 31, ASSETS 1995 1994 1994 - ------ ------------ ------------ ------------ UTILITY PLANT - Original cost Electric ..................................................... $ 12,470,514 $ 11,993,662 $ 12,345,919 Gas .......................................................... 2,344,557 2,194,430 2,318,233 Common ....................................................... 515,113 519,449 545,131 ------------ ------------ ------------ Total ................................................... 15,330,184 14,707,541 15,209,283 Less: accumulated depreciation and amortization.............. 5,229,300 4,874,555 5,147,105 ------------ ------------ ------------ Net ..................................................... 10,100,884 9,832,986 10,062,178 Nuclear Fuel in Service, net of accumulated amortization - $305,655; $299,212; and $302,906, respectively ............. 201,637 198,130 205,273 ------------ ------------ ------------ Net Utility Plant in Service ............................ 10,302,521 10,031,116 10,267,451 Construction Work in Progress, including Nuclear Fuel in Process - $53,396; $88,942; and $65,429, respectively ...... 753,774 784,411 806,934 Plant Held for Future Use .................................... 23,861 17,847 23,860 ------------ ------------ ------------ Net Utility Plant ....................................... 11,080,156 10,833,374 11,098,245 ------------ ------------ ------------ INVESTMENTS AND OTHER PROPERTY Long-Term Investments, net of amortization - $17,105, $16,648, and $2,365, respectively ................. 1,653,183 1,616,593 1,625,952 Oil and Gas Property, Plant and Equipment, net of accumulated depreciation and amortization - $767,792, $716,201 and $748,245, respectively ..................................... 580,765 522,644 577,913 Real Estate Property and Equipment, net of accumulated depreciation - $15,200; $11,684 and $14,242, and net of valuation allowance -- $23,306, $16,685 and $23,264, respectively ...................................... 112,036 110,642 115,210 Other Plant, net of accumulated depreciation and amortization - $4,888; $3,928 and $4,653, respectively ..... 36,077 28,401 36,063 Nuclear Decommissioning and Other Special Funds .............. 242,330 198,540 233,022 Other Assets - net ........................................... 85,502 103,619 85,478 ------------ ------------ ------------ Total Investments and Other Property .................... 2,709,893 2,580,439 2,673,638 ------------ ------------ ------------ CURRENT ASSETS Cash and Cash Equivalents .................................... 131,137 363,168 67,866 Accounts Receivable: Customer Accounts Receivable ............................... 490,106 614,785 434,207 Other Accounts Receivable .................................. 207,168 186,494 211,779 Less: Allowance for Doubtful Accounts .................... 39,734 31,774 40,915 Unbilled Revenues ............................................ 152,744 124,229 204,056 Fuel, at average cost ........................................ 167,020 113,174 268,927 Materials and Supplies, net of inventory valuation reserves - $18,200, $8,525 and $18,200, respectively .................. 150,640 169,487 148,285 Deferred Income Taxes ........................................ 25,135 14,834 25,311 Miscellaneous Current Assets ................................. 26,891 31,522 37,356 ------------ ------------ ------------ Total Current Assets .................................... 1,311,107 1,585,919 1,356,872 ------------ ------------ ------------ DEFERRED DEBITS Property Abandonments - net .................................. 83,817 101,300 88,269 Oil and Gas Property Write-Down .............................. 39,944 45,098 41,232 Unamortized Debt Expense ..................................... 131,300 118,078 134,599 Deferred OPEB Costs .......................................... 192,727 140,770 116,476 Under Recovered Electric Energy and Gas Costs - net .......... 171,238 120,204 172,563 Unrecovered Environmental Costs (note 2_) .................... 136,151 137,292 138,435 Unrecovered Plant and Regulatory Study Costs ................. 35,661 35,182 37,128 Unrecovered SFAS 109 Deferred Income Taxes ................... 794,665 789,881 791,393 Deferred Decontamination and Decommissioning Costs ........... 53,016 61,108 53,016 Other ........................................................ 25,570 65,114 15,574 ------------ ------------ ------------ Total Deferred Debits ................................... 1,664,089 1,614,027 1,588,685 ------------ ------------ ------------ Total ................................................... $ 16,765,245 $ 16,613,759 $ 16,717,440 ============ ============ ============ See Notes to Consolidated Financial Statements.
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED CONSOLIDATED BALANCE SHEETS (Thousands of Dollars)
March 31, March 31, December 31, CAPITALIZATION AND LIABILITIES 1995 1994 1994 - ------------------------------ ------------ ------------ -------------- CAPITALIZATION Common Equity Common Stock .................................... $ 3,801,157 $ 3,801,157 $ 3,801,157 Retained Earnings ............................... 1,590,464 1,458,357 1,510,010 ------------ ------------ ------------ Total Common Equity .......................... 5,391,621 5,259,514 5,311,167 Subsidiaries' Securities and Obligations Preferred Securities Preferred Stock Without Mandatory Redemption..... 384,994 459,994 384,994 Preferred Stock With Mandatory Redemption ....... 150,000 150,000 150,000 Monthly Income Preferred Securities ............. 150,000 -- 150,000 Long-Term Debt .................................... 5,264,646 5,599,071 5,180,657 ------------ ------------ ------------ Total Capitalization ......................... 11,341,261 11,468,579 11,176,818 ------------ ------------ ------------ OTHER LONG-TERM LIABILITIES Decontamination, Decommissioning, and Low Level Radwaste Costs .................................. 57,664 61,108 56,149 Environmental Costs (note 2) ...................... 108,576 112,851 105,684 Capital Lease Obligations ......................... 53,612 52,966 53,770 ------------ ------------ ------------ Total Other Long-Term Liabilities............. 219,852 226,925 215,603 ------------ ------------ ------------ CURRENT LIABILITIES Long-Term Debt due within one year ................ 364,773 127,970 499,738 Commercial Paper and Loans ........................ 238,223 118,502 491,586 Book Overdrafts ................................... 51,913 38,627 86,576 Accounts Payable .................................. 373,159 386,448 433,471 New Jersey Gross Receipts Taxes Accrued ........... 175,261 454,482 -- Other Taxes Accrued ............................... 142,238 130,695 44,149 Interest Accrued .................................. 120,540 129,176 107,962 Estimated Liability for Vacation Pay .............. 40,621 40,490 27,080 Customer Deposits ................................. 32,457 35,669 33,698 Liability for Injuries and Damages ................ 31,784 29,559 29,814 Miscellaneous Environmental Liabilities ........... 15,305 4,795 15,365 Other ............................................. 77,712 52,860 87,480 ------------ ------------ ------------ Total Current Liabilities .................... 1,663,986 1,549,273 1,856,919 ------------ ------------ ------------ DEFERRED CREDITS Accumulated Deferred Income Taxes ................. 2,912,922 2,742,076 2,905,390 Accumulated Deferred Investment Tax Credits ....... 407,494 427,852 412,466 Deferred OPEB Costs ............................... 192,727 140,770 116,476 Other ............................................. 27,003 58,284 33,768 ------------ ------------ ------------ Total Deferred Credits ....................... 3,540,146 3,368,982 3,468,100 ------------ ------------ ------------ COMMITMENTS AND CONTINGENCIES (note 2) Total ........................................ $ 16,765,245 $ 16,613,759 $ 16,717,440 ============ ============ ============
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED CONSOLIDATED STATEMENTS OF CASH FLOWS (Thousands of Dollars)
Three Months Ended Twelve Months Ended March 31, March 31, -------------------------- -------------------------- 1995 1994 1995 1994 ------------ ----------- ----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES: Net Income .............................. $ 212,592 $ 230,127 $ 661,498 $ 615,642 Adjustments to reconcile net income to net cash flows from operating activities: Depreciation and Amortization ........... 162,451 155,545 636,594 608,221 Amortization of Nuclear Fuel ............ 23,120 23,574 94,719 99,055 Recovery (Deferral) of Electric Energy and Gas Costs - net ................... 1,325 (58,170) (51,034) (195,095) Loss from Property Impairments .......... -- -- -- 77,637 Amortization of Discounts on Property Abandonments and Disallowance.......... (1,547) (1,767) (6,523) (7,391) Unrealized (Gains) Losses on Investments - net...................... (19,421) 750 (46,500) (6,016) Provision for Deferred Income Taxes - net............................ 16,456 45,246 110,129 178,091 Investment Tax Credits - net ............ (4,972) (4,861) (20,358) (19,447) Allowance for Funds Used During Construction - Debt and Equity and Capitalized Interest................... (11,588) (9,101) (49,069) (35,202) Proceeds from Leasing Activities - net... (14,487) (12,698) 25,893 7,528 Changes in certain current assets and liabilities: Net (increase) decrease in Accounts Receivable and Unbilled Revenues..... (1,157) (167) 83,450 (8,804) Net decrease (increase) in Inventory - Fuel and Materials and Supplies...... 99,552 175,720 (34,999) 38,183 Net (decrease) increase in Accounts Payable..................... (60,312) (132,813) (13,289) 62,269 Net change in Prepaid/Accrued Taxes................................ 273,350 282,210 (267,678) (262,028) Net change in Other Current Assets and liabilities...................... 27,661 44,209 20,200 (5,320) Other ................................... (3,923) 7,201 42,852 (43,545) ------------ ----------- ----------- ------------ Net cash provided by operating activities ......................... 699,100 745,005 1,185,885 1,103,778 ------------ ----------- ----------- ------------ CASH FLOWS FROM INVESTING ACTIVITIES: Additions to Utility Plant, excluding AFDC ........................ (128,027) (167,682) (809,519) (905,177) Additions to Oil and Gas Property, Plant and Equipment, excluding Capitalized Interest .................. (21,304) (37,064) (133,763) (112,468) Net (increase) decrease in Long-Term Investments and Real Estate ........... (6,113) 20,737 31,566 97,648 Increase in Decommissioning and Other Special Funds, excluding interest ..... (7,390) (5,808) (36,976) (17,006) Cost of Plant Removal - net ............. (2,103) (7,708) (28,357) (46,731) Other ................................... 248 (548) 7,950 (2,013) ------------ ----------- ----------- ------------ Net cash used in investing activities ......................... (164,689) (198,073) (969,099) (985,747) ------------ ----------- ----------- ------------ CASH FLOWS FROM FINANCING ACTIVITIES: Net (decrease) increase in Short-Term Debt ....................... (253,363) (459,134) 119,721 (146,402) (Decrease) increase in Book Overdrafts . (34,663) (24,365) 13,286 7,009 Issuance of Long-Term Debt .............. -- 400,000 449,800 1,977,700 Redemption of Long-Term Debt ............ (50,976) (97,344) (547,422) (1,969,674) Long-Term Debt Issuance and Redemption Costs ...................... -- -- (29,811) (55,138) Issuance of Preferred Stock ............. -- 75,000 -- 75,000 Redemption of Preferred Stock ........... -- (45,000) (75,000) (45,000) Issuance of Monthly Income Preferred Securities .................. -- -- 150,000 -- Issuance of Common Stock ................ -- 28,495 -- 126,946 Cash Dividends Paid on Common Stock ..... (132,138) (131,660) (528,548) (523,622) Other ................................... -- (1,128) (843) (7,857) ------------ ----------- ----------- ----------- Net cash used in financing activities ...................... (471,140) (255,136) (448,817) (561,038) ------------ ----------- ----------- ----------- Net increase (decrease) in Cash and Cash Equivalents ........................ 63,271 291,796 (232,031) (443,007) Cash and Cash Equivalents at Beginning of Period ............................... 67,866 71,372 363,168 806,175 ------------ ----------- ----------- ----------- Cash and Cash Equivalents at End of Period............................ $ 131,137 $ 363,168 $ 131,137 $ 363,168 ============ =========== =========== =========== Income Taxes Paid ......................... $ 15,136 $ 3,330 $ 166,910 $ 135,584 Interest Paid ............................. $ 94,409 $ 89,350 $ 437,932 $ 458,124 See Notes to Consolidated Financial Statements.
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED CONSOLIDATED STATEMENTS OF RETAINED EARNINGS (Thousand of Dollars)
Three Months Ended Twelve Months Ended March 31, March 31, --------------------------- --------------------------- 1995 1994 1995 1994 ------------ ------------ ------------ ------------ Balance at Beginning of Period ............ $ 1,510,010 $ 1,361,018 $ 1,458,357 $ 1,368,695 Add Net Income ............................ 212,592 230,127 661,498 615,642 ------------ ------------ ------------ ------------ Total ................................ 1,722,602 1,591,145 2,119,855 1,984,337 ------------ ------------ ------------ ------------ Deduct: Cash Dividends on Common Stock .......... 132,138 131,660 528,548 523,622 Capital Stock Expenses .................. -- 1,128 843 2,358 ------------ ---------- ------------ ------------ Total Deductions ..................... 132,138 132,788 529,391 525,980 ------------ ---------- ------------ ------------ Balance at End of Period .................. $ 1,590,464 $1,458,357 $ 1,590,464 $ 1,458,357 ============ ========== ============ ============ See Notes to Consolidated Financial Statements.
PUBLIC SERVICE ELECTRIC AND GAS COMPANY The financial statements included herein as of March 31, 1995 and 1994 and for the periods then ended are unaudited but, in the opinion of PSE&G's management, reflect all adjustments, consisting only of normal recurring accruals, necessary for a fair presentation. CONSOLIDATED STATEMENTS OF INCOME (Thousands of Dollars)
Three Months Ended Twelve Months Ended March 31, March 31, --------------------------- --------------------------- 1995 1994 1995 1994 ------------- ------------ ------------ ------------ OPERATING REVENUES Electric ................................ $ 942,575 $ 888,310 $ 3,787,378 $ 3,709,225 Gas ..................................... 634,478 801,657 1,611,349 1,765,919 ------------- ------------ ------------ ------------ Total Operating Revenues ........... 1,577,053 1,689,967 5,398,727 5,475,144 ------------- ------------ ------------ ------------ OPERATING EXPENSES Operation Fuel for Electric Generation and Interchanged Power.................. 208,110 167,201 736,672 697,776 Gas Purchased and Materials for Gas Produced ........................ 344,193 465,140 915,754 1,048,948 Other ................................. 219,559 214,980 962,178 893,435 Maintenance ............................. 64,045 76,475 295,650 323,555 Depreciation and Amortization ........... 141,788 134,311 554,509 519,311 Taxes Federal Income Taxes .................. 102,284 113,429 283,384 321,565 New Jersey Gross Receipts Taxes ....... 176,789 191,303 568,653 609,107 Other ................................. 21,853 22,115 75,838 69,583 ------------- ------------ ------------ ------------ Total Operating Expenses ........... 1,278,621 1,384,954 4,392,638 4,483,280 ------------- ------------ ------------ ------------ OPERATING INCOME .......................... 298,432 305,013 1,006,089 991,864 ------------- ------------ ------------ ------------ OTHER INCOME Allowance for Funds Used During Construction - Equity ................ 1,482 1,788 12,483 11,415 Miscellaneous - net ..................... 1,851 1,153 6,931 (4,912) ------------- ------------ ------------ ------------ Total Other Income ................. 3,333 2,941 19,414 6,503 ------------- ------------ ------------ ------------ INCOME BEFORE INTEREST CHARGES AND DIVIDENDS ON PREFERRED SECURITIES ....... 301,765 307,954 1,025,503 998,367 ------------- ------------ ------------ ------------ INTEREST CHARGES Long-Term Debt .......................... 91,492 88,327 370,059 360,588 Short-Term Debt ......................... 1,950 2,259 17,866 8,145 Other ................................... 6,531 1,286 16,101 14,861 ------------- ------------ ------------ ------------ Total Interest Charges ............. 99,973 91,872 404,026 383,594 Allowance for Funds Used During Construction - Debt ..................... (8,619) (5,357) (28,581) (17,130) ------------- ------------ ------------ ------------ Net Interest Charges ...................... 91,354 86,515 375,445 366,464 Monthly Income Preferred Securities Dividend Requirements ................... 3,515 -- 5,195 -- ------------- ------------ ------------ ------------ NET INCOME ................................ 206,896 221,439 644,863 631,903 ------------- ------------ ------------ ------------ Preferred Stock Dividend Requirements ..... 8,682 10,280 38,869 39,572 ------------- ------------ ------------ ------------ EARNINGS AVAILABLE TO PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED............ $ 198,214 $ 211,159 $ 605,994 $ 592,331 ============= ============ ============ ============ See Notes to Consolidated Financial Statements.
PUBLIC SERVICE ELECTRIC AND GAS COMPANY CONSOLIDATED BALANCE SHEETS (Thousands of Dollars)
March 31, March 31, December 31, ASSETS 1995 1994 1994 - ------ ------------ ------------ ------------- UTILITY PLANT - Original cost Electric ................................................. $ 12,470,514 $ 11,993,662 $ 12,345,919 Gas ...................................................... 2,344,557 2,194,430 2,318,233 Common ................................................... 515,113 519,449 545,131 ------------ ------------ ------------ Total ................................................... 15,330,184 14,707,541 15,209,283 Less: accumulated depreciation and amortization............ 5,229,300 4,874,555 5,147,105 ------------ ------------ ------------ Net ..................................................... 10,100,884 9,832,986 10,062,178 Nuclear Fuel in Service, net of accumulated amortization - $305,655; $299,212; and $302,906, respectively ........... 201,637 198,130 205,273 ------------ ------------ ------------ Net Utility Plant in Service ............................ 10,302,521 10,031,116 10,267,451 Construction Work in Progress, including Nuclear Fuel in Process - $53,396; $88,942; and $65,429, respectively ............................................. 753,774 784,411 806,934 Plant Held for Future Use .................................. 23,861 17,847 23,860 ------------ ------------ ------------ Net Utility Plant ................................... 11,080,156 10,833,374 11,098,245 ------------ ------------ ------------ INVESTMENTS AND OTHER PROPERTY Long-Term Investments, net of amortization - $3,024; $1,027; and $2,365, respectively ......................... 76,812 127,038 65,886 Nuclear Decommissioning and Other Special Funds ............ 242,330 198,540 233,022 Other Plant, net of accumulated depreciation and amortization - $1,149; $1,942; and $1,127, respectively... 32,886 26,344 32,879 ------------ ------------ ------------ Total Investments and Other Property ....................... 352,028 351,922 331,787 ------------ ------------ ------------ CURRENT ASSETS Cash and Cash Equivalents ................................ 82,990 320,353 27,498 Accounts Receivable: Customer Accounts Receivable ........................... 490,106 614,785 434,207 Other Accounts Receivable .............................. 112,327 122,438 151,684 Less: Allowance for Doubtful Accounts ................. 39,734 31,774 40,915 Unbilled Revenues ........................................ 152,744 124,229 204,056 Fuel, at average cost .................................... 167,020 113,174 268,927 Materials and supplies, net of inventory valuation reserves - $18,200; $8,525; and $18,200, respectively .. 149,193 168,166 146,763 Deferred Income Taxes .................................... 25,135 14,834 25,311 Miscellaneous Current Assets ............................. 19,706 25,629 30,407 ------------ ------------ ------------ Total Current Assets ................................ 1,159,487 1,471,834 1,247,938 ------------ ------------ ------------ DEFERRED DEBITS Property Abandonments - net .............................. 83,817 101,300 88,269 Oil and Gas Property Write-Down .......................... 39,944 45,098 41,232 Unamortized Debt Expense ................................. 128,905 114,320 132,342 Deferred OPEB Costs ...................................... 192,727 140,770 116,476 Under Recovered Electric Energy and Gas Costs - net ...... 171,238 120,204 172,563 Unrecovered Environmental Costs (note 2) ................. 136,151 137,292 138,435 Unrecovered Plant and Regulatory Study Costs ............. 35,661 35,182 37,128 Deferred Decontamination and Decommissioning Costs........ 53,016 61,108 53,016 Unrecovered SFAS 109 Deferred Income Taxes ............... 794,665 789,881 791,393 Other .................................................... 25,564 65,114 15,574 ------------ ------------ ------------ Total Deferred Debits ............................... 1,661,688 1,610,269 1,586,428 ------------ ------------ ------------ Total ................................................ $ 14,253,359 $ 14,267,399 $ 14,264,398 ============ ============ ============ See Notes to Consolidated Financial Statements.
PUBLIC SERVICE ELECTRIC AND GAS COMPANY CONSOLIDATED BALANCE SHEETS (Thousands of Dollars)
March 31, March 31, December 31, CAPITALIZATION AND LIABILITIES 1995 1994 1994 - ------------------------------ ------------ ------------ ------------ CAPITALIZATION Common Equity Common Stock ........................................... $ 2,563,003 $ 2,563,003 $ 2,563,003 Contributed Capital by Enterprise ...................... 534,395 534,395 534,395 Retained Earnings ...................................... 1,360,215 1,261,863 1,292,201 ------------ ------------ ------------ Total Common Equity ................................. 4,457,613 4,359,261 4,389,599 Preferred Stock without mandatory redemption ............... 384,994 459,994 384,994 Preferred Stock with mandatory redemption .................. 150,000 150,000 150,000 Monthly Income Preferred Securities of Subsidiary .......... 150,000 -- 150,000 Long-Term Debt ............................................. 4,587,740 4,759,090 4,486,787 ------------ ------------ ------------ Total Capitalization ................................ 9,730,347 9,728,345 9,561,380 ------------ ------------ ------------ OTHER LONG-TERM LIABILITIES Decontamination, Decommissioning, and Low Level Radwaste Costs ........................................ 57,664 61,108 56,149 Environmental Costs (note 2) ............................. 108,576 112,851 105,684 Capital Lease Obligations ................................ 53,612 52,966 53,770 ------------ ------------ ------------ Total Other Long-Term Liabilities ................... 219,852 226,925 215,603 ------------ ------------ ------------ CURRENT LIABILITIES Long-Term Debt due within one year ....................... 210,200 200 310,200 Commercial Paper and Loans ............................... 94,200 101,961 401,759 Book Overdrafts .......................................... 51,913 38,627 86,576 Accounts Payable ......................................... 287,958 353,076 370,005 Accounts Payable - Associated Companies .................. 81,783 90,542 16,677 New Jersey Gross Receipts Taxes Accrued .................. 175,261 454,482 -- Other Taxes Accrued ...................................... 39,291 36,676 36,030 Interest Accrued ......................................... 96,179 100,559 95,721 Estimated Liability for Vacation Pay ..................... 40,621 40,490 27,080 Customer Deposits ........................................ 32,457 35,669 33,698 Liability for Injuries and Damages ....................... 31,784 29,559 29,814 Miscellaneous Environmental Liabilities .................. 15,305 4,795 15,365 Other .................................................... 48,132 21,490 50,778 ------------ ------------ ------------ Total Current Liabilities ........................... 1,205,084 1,308,126 1,473,703 ------------ ------------ ------------ DEFERRED CREDITS Accumulated Deferred Income Taxes ........................ 2,497,959 2,405,337 2,478,539 Accumulated Deferred Investment Tax Credits .............. 385,010 404,327 389,721 Deferred OPEB Costs ...................................... 192,727 140,770 116,476 Other .................................................... 22,380 53,569 28,976 ------------ ------------ ------------ Total Deferred Credits .............................. 3,098,076 3,004,003 3,013,712 ------------ ------------ ------------ COMMITMENTS AND CONTINGENCIES (note 2) Total ................................................. $ 14,253,359 $ 14,267,399 $ 14,264,398 ============ ============ ============
PUBLIC SERVICE ELECTRIC AND GAS COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS (Thousands of Dollars)
Three Months Ended Twelve Months Ended March 31, March 31, --------------------------- --------------------------- 1995 1994 1995 1994 ------------ ------------ ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net Income ............................. $ 206,896 $ 221,439 $ 644,863 $ 631,903 Adjustments to reconcile net income to net cash flows from operating activities: Depreciation and Amortization ........ 141,788 134,311 554,509 519,311 Amortization of Nuclear Fuel ......... 23,120 23,574 94,719 99,055 Recovery (Deferral) of Electric Energy and Gas Costs - net ......... 1,325 (58,170) (51,034) (195,095) Amortization of Discounts on Property Abandonments and Disallowance ...... (1,547) (1,767) (6,523) (7,391) Provision for Deferred Income Taxes - net ........................ 16,148 36,473 87,838 173,421 Investment Tax Credits - net ......... (4,711) (4,602) (19,317) (18,408) Allowance for Funds Used During Construction - Debt and Equity ..... (10,101) (7,145) (41,064) (28,545) Changes in certain current assets and liabilities: Net decrease (increase) in Accounts Receivable and Unbilled Revenues . 33,589 (5,755) 114,235 (15,490) Net decrease (increase) in Inventory - Fuel and Materials and Supplies... 99,477 175,513 (34,873) 38,153 Net (decrease) increase in Accounts Payable ................. (16,941) (42,852) (73,877) 70,526 Net change in Prepaid/Accrued Taxes ............................ 178,522 194,091 (276,606) (274,819) Net change in Other Current Assets and Liabilities .................. 22,899 31,606 27,538 (12,336) Other ................................ (6,368) 5,742 21,736 (50,552) ------------ ----------- ----------- ------------ Net cash provided by operating activities ....................... 684,096 702,458 1,042,144 929,733 ------------ ----------- ----------- ------------ CASH FLOWS FROM INVESTING ACTIVITIES: Additions to Utility Plant, excluding AFDC ....................... (128,027) (167,682) (809,519) (905,177) Net (increase) decrease in Long-Term Investments ................ (10,926) (10,484) 50,226 (40,445) Increase in Decommissioning Funds and Other Special Funds, excluding interest ................... (7,390) (5,808) (36,976) (17,006) Cost of Plant Removal - net ............ (2,103) (7,708) (28,357) (46,731) Other .................................. (7) (501) 2,186 (1,207) ------------ ----------- ----------- ------------ Net cash used in investing activities ....................... (148,453) (192,183) (822,440) (1,010,566) ------------ ----------- ----------- ------------ CASH FLOWS FROM FINANCING ACTIVITIES: Net decrease in Short-Term Debt ........ (307,559) (430,767) (7,761) (12,853) (Decrease) increase in Book Overdrafts ........................... (34,663) (24,365) 13,286 7,009 Issuance of Long-Term Debt ............. -- 400,000 449,800 1,872,700 Redemption of Long-Term Debt............ -- (66,847) (411,150) (1,689,042) Long-Term Debt Issuance and Redemption Costs ..................... -- -- (29,731) (54,271) Issuance of Preferred Stock ............ -- 75,000 -- 75,000 Redemption of Preferred Stock .......... -- (45,000) (75,000) (45,000) Issuance of Monthly Income Preferred Securities ................. -- -- 150,000 -- Cash Dividends Paid ................... (138,882) (138,980) (545,669) (542,472) Other .................................. 953 (1,128) (842) (1,407) ------------ ----------- ----------- ------------ Net cash used in financing activities ..................... (480,151) (232,087) (457,067) (390,336) ------------ ----------- ----------- ------------ Net increase (decrease) in Cash and Cash Equivalents ....................... 55,492 278,188 (237,363) (471,169) Cash and Cash Equivalents at Beginning of Period .............................. 27,498 42,165 320,353 791,522 ------------ ----------- ----------- ------------ Cash and Cash Equivalents at End of Period .............................. $ 82,990 320,353 $ 82,990 $ 320,353 ============ =========== =========== ============ Income Taxes Paid ........................ $ 27,005 $ 586 $ 235,615 $ 164,066 Interest Paid ............................ $ 85,972 $ 81,273 $ 350,566 $ 360,330 See Notes to Consolidated Financial Statements.
PUBLIC SERVICE ELECTRIC AND GAS COMPANY CONSOLIDATED STATEMENT OF RETAINED EARNINGS (Thousands of Dollars)
Three Months Ended Twelve Months Ended March 31, March 31, --------------------------- --------------------------- 1995 1994 1995 1994 ------------ ------------ ------------ ------------ Balance at Beginning of Period ........... $ 1,292,201 $ 1,180,532 $ 1,261,863 $ 1,173,840 Add: Net Income ......................... 206,896 221,439 644,863 631,903 ------------ ------------ ------------ ------------ Total ............................... 1,499,097 1,401,971 1,906,726 1,805,743 ------------ ------------ ------------ ------------ Deduct: Cash Dividends Preferred Stock, at required rates ..... 8,682 10,280 38,869 39,572 Common Stock ........................... 130,200 128,700 506,800 502,900 Capital Stock Expenses ................. -- 1,128 842 1,408 ------------ ------------ ------------ ------------ Total Deductions .................... 138,882 140,108 546,511 543,880 ------------ ------------ ------------ ------------ Balance at End of Period ................. $ 1,360,215 $ 1,261,863 $ 1,360,215 $ 1,261,863 ============ ============ ============ ============ See Notes to Consolidated Financial Statements.
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1. RATE MATTERS Levelized Gas Adjustment Charge PSE&G credited $30 million and $20 million in February and March 1995, respectively, to its firm gas sales customers. The opportunity to provide these credits was principally due to abnormally warm winter weather, lower gas prices and a lower current short-term price forecast. Electric Levelized Energy Adjustment Clause On May 5, 1995, the Board of Public Utilities (BPU) approved PSE&G's Levelized Energy Adjustment Clause (LEAC) in the amount of $129.4 million which includes the recovery of $98 Million previously approved by the BPU, over the period November 1994 through May 1995. The BPU also approved PSE&G's recovery of the electric allocation of the Remediation Adjustment Clause (RAC) costs from electric customers through the LEAC of $2 million for costs incurred during the period October 1, 1992 through July 31, 1994 with respect to PSE&G's Manufactured Gas Plant Remediation Program. All recovery of costs through PSE&G's rates are subject to audit and verification by the BPU. Further the BPU adopted the Administrative Law Judge recommendations that (1) the issue of alleged overearnings is not a LEAC issue and PSE&G is not earning in excess of its allowed rate of return; (2) a hearing to be convened regarding the April 1994 Salem 1 shutdown to determine replacement power costs and whether any limitations imposed by the New Jersey Public Utility Fault Determination Act should be triggered; (3) a reduction of the 1993 Nuclear Performance Standard (NPS) reward to $1.9 million from $3.9 million; and (4) a decrease of $700 thousand in Demand Side Management (DSM) program costs. In addition, the BPU established an additional review period for the accounting associated with the appropriateness of PSE&G's gas to electric transfer and pricing calculations pertaining to the 1993 agreement with PSE&G's largest industrial customer. PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) NOTE 2. COMMITMENTS AND CONTINGENCIES Nuclear Performance Standard The BPU has established a Nuclear Performance Standard (NPS) for nuclear generating stations owned by New Jersey electric utilities, including the five nuclear units in which PSE&G has an ownership interest: Salem -- 42.59%; Hope Creek -- 95%; and Peach Bottom -- 42.49%. PSE&G operates Salem and Hope Creek, while Peach Bottom is operated by PECO Energy, Inc. (PECO). The penalty/reward under the NPS is a percentage of replacement power costs. (See table below.) The NPS provides that the penalties will be calculated to the edge of each capacity factor range. For example, a 30% penalty applies to replacement power costs incurred in the 55% to 65% range and a 40% penalty applies to replacement power costs in the 45% to 55% range.
CAPACITY FACTOR RANGE REWARD PENALTY - ----------------------------------------------------- ------ ------- Equal to or greater than 75%......................... 30% -- Equal to or greater than 65% and less than 75%....... None None Equal to or greater than 55% and less than 65%....... -- 30% Equal to or greater than 45% and less than 55%....... -- 40% Equal to or greater than 40% and less than 45%....... -- 50% Below 40%............................................ BPU Intervenes
Under the NPS, the capacity factor is calculated annually using maximum dependable capability of the five nuclear units in which PSE&G owns an interest. This method takes into account actual operating conditions of the units. While the NPS does not specifically have a gross negligence provision, the BPU has indicated that it would consider allegations of gross negligence brought upon a sufficient factual basis. A finding of gross negligence could result in penalties other than those prescribed under the NPS. During 1994, the five nuclear units in which PSE&G has an ownership interest aggregated a 74% combined capacity factor. PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) NOTE 2. COMMITMENTS AND CONTINGENCIES - (CONTINUED) Nuclear Insurance Coverages and Assessments PSE&G's insurance coverages and maximum retrospective assessments for its nuclear operations are as follows:
PSE&G MAXIMUM TOTAL ASSESSMENTS SITE FOR A SINGLE TYPE AND SOURCE OF COVERAGES COVERAGES INCIDENT - -------------------------------------------- --------- ------------- (MILLIONS OF DOLLARS) Public Liability: American Nuclear Insurers.................. $ 200.0 $ -- Indemnity(A)............................... 8,720.3 210.2 -------- -------- $8,920.3 (B) $ 210.2 -------- -------- Nuclear Worker Liability: American Nuclear Insurers(C)............... $ 200.0 $ 8.2 -------- -------- Property Damage: Nuclear Mutual Limited..................... $ 500.0 $ 11.6 Nuclear Electric Insurance Ltd. (NEIL II).. 1,400.0 (D) 8.2 (E) Nuclear Electric Insurers Ltd. (NEIL III).. 850.0 6.7 -------- -------- $2,750.0 $ 26.5 -------- -------- Replacement Power: Nuclear Electric Insurance Ltd (NEIL I).... $ 3.5 (F) $ 12.4
(A) Retrospective premium program under the Price-Anderson liability provisions of the Atomic Energy Act of 1954, as amended (Price-Anderson). Subject to retrospective assessment with respect to loss from an incident at any licensed nuclear reactor in the United States. Assessment adjusted for inflation effective August 20, 1993. PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) NOTE 2. COMMITMENTS AND CONTINGENCIES - (CONTINUED) (B) Limit of liability for each nuclear incident under Price-Anderson. (C) Industry aggregate limit representing the potential liability from workers claiming exposure to the hazard of nuclear radiation. This policy includes automatic reinstatements up to an aggregate of $200 million, thereby providing total coverage of $400 million. This policy does not increase PSE&G's obligation under Price-Anderson. (D) Includes up to $250 million for premature decommissioning costs. (E) In the event of a second industry loss triggering NEIL II - coverage, the maximum retrospective premium assessment can increase to $17.5 million. (F) Weekly indemnity for 52 weeks which commences after the first 21 weeks of an outage. Beyond the first 52 weeks of coverage, indemnity of $2.8 million per week for 104 weeks is afforded. Total coverage amounts to $473.2 million over three years. Price-Anderson sets the "limit of liability" for claims that could arise from an incident involving any licensed nuclear facility in the nation. The "limit of liability" is based on the number of licensed nuclear reactors and is adjusted at least every five years based on the Consumer Price Index. The current "limit of liability" is $8.9 billion. All utilities owning a nuclear reactor, including PSE&G, have provided for this exposure through a combination of private insurance and mandatory participation in a financial protection pool as established by Price-Anderson. Under Price-Anderson, each party with an ownership interest in a nuclear reactor can be assessed its share of $79.3 million per reactor per incident, payable at $10 million per reactor per incident per year. If the damages exceed the "limit of liability," the President is to submit to Congress a plan for providing additional compensation to the injured parties. Congress could impose further revenue raising measures on the nuclear industry to pay claims. PSE&G's maximum aggregate assessment per incident is $210.2 million (based on PSE&G's ownership interests in Hope Creek, Peach Bottom and Salem) and its maximum aggregate annual assessment per incident is $26.5 million. PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) NOTE 2. COMMITMENTS AND CONTINGENCIES - (CONTINUED) PSE&G purchases property insurance, including decontamination expense coverage and premature decommissioning coverage, with respect to loss or damage to its nuclear facilities. PECO has advised PSE&G that it maintains similar insurance coverage with respect to Peach Bottom. Under the terms of the various insurance agreements, PSE&G could be subject to a maximum retrospective assessment for a single incident of up to $26.5 million. Certain of the policies also provide that the insurer may suspend coverage with respect to all nuclear units on a site without notice if the Nuclear Regulatory Commission (NRC) suspends or revokes the operating license for any unit on a site, issues a shutdown order with respect to such unit or issues a confirmatory order keeping such unit shut down. PSE&G is a member of an industry mutual insurance company, Nuclear Electric Insurance Limited (NEIL), which provides replacement power cost coverage in the event of a major accidental outage at a nuclear station. The policies provide for a weekly indemnity payment of $3.5 million for 52 weeks, subject to a 21- week waiting period. The policies provide for weekly indemnity payments of $2.8 million for a 104-week period beyond the first year's indemnity. The premium for this coverage is subject to retrospective assessment for adverse loss experience. Under the policies, PSE&G's present maximum share of any retrospective assessment in any year is $12.4 million. Construction and Fuel Supplies PSE&G has substantial commitments as part of its ongoing construction program which includes capital requirements for nuclear fuel. PSE&G's construction program is continuously reviewed and periodically revised as a result of changes in economic conditions, revised load forecasts, changes in the scheduled retirement dates of existing facilities, changes in business plans, site changes, cost escalations under construction contracts, requirements of regulatory authorities and laws, the timing of and amount of electric and gas rate changes and the ability of PSE&G to raise necessary capital. Pursuant to an integrated electric resource plan (IRP), PSE&G periodically reevaluates its forecasts of future customers, load and peak growth, sources of electric generating capacity and DSM to meet such projected growth, including the need to construct new electric generating capacity. The IRP takes into account assumptions concerning future demands of customers, effectiveness of conservation and load management activities, the long-term condition of PSE&G's plants, capacity available from electric utilities and other suppliers and the amounts of co-generation and other non-utility capacity projected to be available. Based on PSE&G's construction program, construction expenditures are expected to aggregate approximately $3.2 billion, which includes $484 million for nuclear fuel and $78 million of Allowance for Funds used During Construction (AFDC) during the years 1995 through 1999. The estimate of construction requirements is based on expected project completion dates and includes anticipated escalation due to inflation of approximately 3%, annually. Therefore, construction delays or higher inflation levels could cause PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) NOTE 2. COMMITMENTS AND CONTINGENCIES - (CONTINUED) significant increases in these amounts. PSE&G expects to generate internally the funds necessary to satisfy its construction expenditures over the next five years, assuming adequate and timely recovery of costs, as to which no assurances can be given. In addition, PSE&G does not presently anticipate any difficulties in obtaining sufficient sources of fuel for electric generation or adequate gas supplies during the years 1995 through 1999. Bergen Station Repowering PSE&G is presently engaged in a construction project to renovate (or "repower") the Bergen Station pursuant to an air pollution control permit issued by the New Jersey Department of Environmental Protection (NJDEP) in May 1993. The current effort would maintain the existing electric supply of the station (with a small increase from 629 MW to 669 MW), improve operational reliability and efficiency and significantly improve the environmental effects of operation of the facility. As of March 31, 1995, the repowering project was about 99% complete and PSE&G had spent approximately $311 million on this effort. In order for PSE&G to recover its costs for the project, PSE&G would need either the BPU's authorization to recover such costs in its rates or be successful in selling the station's output in the emerging wholesale market. In a petition to the BPU filed on March 1, 1995, regarding the deferral of any proposed rate treatment for the Bergen Project, PSE&G agreed that it will not seek implementation of the rate treatment plan for a minimum of 90 days from the date of filing of such plan. All parties to the November 1, 1994 LEAC Stipulation have consented to the requested delay. Hazardous Waste Certain Federal and State laws authorize the United States Environmental Protection Agency (EPA) and the NJDEP, among other agencies, to issue orders and bring enforcement actions to compel responsible parties to take investigative and remedial actions at any site that is determined to present an imminent and substantial danger to the public or the environment because of an actual or threatened release of one or more hazardous substances. Because of the nature of PSE&G's business, including the production of electricity, the distribution of gas and, formerly, the manufacture of gas, various by-products and substances are or were produced or handled which contain constituents classified as hazardous. PSE&G generally provides for the disposal or processing of such substances through licensed independent contractors. However, these statutory provisions impose joint and several responsibility without regard to fault on all responsible parties, including the generators of the hazardous substances, for certain investigative and remediation costs at sites where these substances were disposed of or processed. PSE&G has been notified with respect to a number of such sites and the remediation of these potentially hazardous sites is receiving greater attention from the government agencies involved. Generally, PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) NOTE 2. COMMITMENTS AND CONTINGENCIES - (CONTINUED) actions directed at funding such site investigations and remediation include all suspected or known responsible parties. PSE&G does not expect its expenditures for any such site to have a material effect on its financial position, results of operations or net cash flows. PSE&G Manufactured Gas Plant Remediation Program In 1988, NJDEP notified PSE&G that it had identified the need for PSE&G, pursuant to a formal arrangement, to systematically investigate and, if necessary, resolve environmental concerns extant at PSE&G's former manufactured gas plant sites. To date, NJDEP and PSE&G have identified 38 former gas plant sites. PSE&G is currently working with NJDEP under a program to assess, investigate and, if necessary, remediate environmental concerns at these sites (Remediation Program). The Remediation Program is periodically reviewed and revised by PSE&G based on regulatory requirements, experience with the Remediation Program and available technologies. The cost of the Remediation Program cannot be reasonably estimated, but experience to date indicates that costs of at least $20 million per year could be incurred over a period of more than 30 years and that the overall cost could be material to PSE&G's financial position, results of operations or net cash flows. Costs incurred through March 31, 1995 for the Remediation Program amounted to $54.4 million. In addition, at March 31, 1995, PSE&G's estimated liability for estimated remediation costs aggregated $108.6 million. In accordance with a Stipulation approved by the BPU in January 1992, PSE&G is recovering $32 million of its actual remediation costs to reflect costs incurred through September 30, 1992 over a six-year period. PSE&G will recover $5.3 million in each of its next two Levelized Gas Adjustment Charge (LGAC) periods ending in 1996. As of March 31, 1995, PSE&G has recovered $24.7 million through its LGAC. In a September 1993 BPU order related to the recovery of certain Remediation Program costs, the BPU concluded that PSE&G had met its burden of proof for establishing the reasonableness and prudence of remediation costs incurred in operating and decommissioning these facilities in the past. The remediation costs incurred during the period July 1, 1992 through September 30, 1992 were subject to audit and verification in PSE&G's 1992-93 LGAC and the audit resulted in no disallowance of any costs. Also in 1988, PSE&G filed suit against certain of its insurers to recover the costs associated with addressing and resolving environmental issues of the Remediation Program. PSE&G has settled its claim with one insurer and there is a trial scheduled for the third quarter of 1995 with the remaining insurers. Pending full recovery of Remediation Program costs through rates or under its insurance policies, neither of which can be assured, PSE&G will be required to finance the unreimbursed costs of its Remediation Program. PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONCLUDED) NOTE 2. COMMITMENTS AND CONTINGENCIES - (Concluded) Public Service Resources Corporation PSRC has leased three wide-body aircraft to Continental Airlines (Continental) through direct-finance leases. The leases for two A-300 aircraft expire December 2000, while the lease for one DC 10-30 aircraft expires June 2002. At March 31, 1995, PSRC had investments in the A-300 leases and the DC 10- 30 lease of $41.6 million and $32.6 million, respectively. Continental has failed to make full payment of its required lease payments due since February 1, 1995, has advised PSRC of its intent to seek the termination of the A-300 leases and has returned the A-300 aircraft to PSRC. Effective February 1, 1995, Continental has reduced its rental payments due under all three leases by approximately 50%. Continental indicated that termination payments under these leases could include debt securities convertible into equity in lieu of full cash payments. Under the leases, PSRC rents receivable and pre-tax lease income in 1995 would have been $9.4 million and $4.1 million, respectively for the A- 300 aircraft and $5.5 million and $2.7 million, respectively for the DC 10-30 aircraft. PSRC has informed Continental that it expects all of Continental's lease obligations to be satisfied in full. Negotiations are continuing concerning this matter. No assurances can be given that PSRC will be able to obtain new leases, sell or otherwise dispose of any such aircraft on satisfactory terms in the event of an unscheduled lease termination. Management believes the ultimate resolution of this matter will not have a material effect on its financial position, results of operations or net cash flows. NOTE 3. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT Security Swap In March 1995, certain equity securities, in which PSRC had an ownership interest through a partnership and which were subject to a swap to the S&P 500 return, were exchanged for equity securities of another entity. Consequently, PSRC terminated the security swap and realized a before tax gain of $3.5 million. PUBLIC SERVICE ELECTRIC AND GAS COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS PSE&G Except as modified below, the Notes to Consolidated Financial Statements of Enterprise are incorporated herein by reference insofar as they relate to PSE&G and its subsidiaries: Note 1. Rate Matters Note 2. Commitments and Contingencies PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Following are the significant changes in or additions to information reported in Enterprise's Annual Report to the Securities and Exchange Commission (SEC) on Form 10-K for 1994, affecting the consolidated financial condition and the results of operations of Enterprise and its subsidiaries. This discussion refers to the Consolidated Financial Statements and related Notes to Consolidated Financial Statements (Notes) of Enterprise and should be read in conjunction with such statements and notes. As of March 31, 1995, PSE&G comprised 85% of Enterprise's assets. For the three month and twelve months ended March 31, 1995, PSE&G's revenues were 94% and 93%, respectively, of Enterprise's revenues and PSE&G's earnings available to Enterprise for such periods were 93% and 92%, respectively, of Enterprise's net income. COMPETITION Ongoing initiatives affecting PSE&G's electric and gas utility businesses associated with the continuing transition to a competitive market environment will have an increasingly significant impact on Enterprise and PSE&G. Federal legislation, including the Energy Policy Act (EPACT), as well as regulatory initiatives at both the federal and state levels that are designed to promote competition and lessen regulation of the energy supply industry can be expected to result in additional pressures on customer retention due to energy prices, especially with respect to larger industrial and commercial customers. Growth potential of traditional gas and electric sales is limited in PSE&G's mature service territory. The shift of rate regulation from traditional concepts based upon rate base/rate of return to concepts based upon market competition and service is accelerating. As a result, added emphasis will be placed upon cost reduction. Utilities and their regulators will need to develop flexible rate-making strategies to minimize adverse impacts which might otherwise occur to revenues and earnings and to maximize potential opportunities presented by deregulation. The manner in which regulators address evolving competitive issues will also affect utility credit quality and the carrying value of assets. The transition to a competitive market environment will cause changes from traditional utility rate-making and is likely to affect utilities' ability to recover costs, resulting in these costs being "stranded." Stranded costs are costs and liabilities that were incurred by regulated utilities as a result of the regulatory compact among utilities, regulators and customers which are no longer recoverable from such customers due to changes in the regulatory framework that allow such customers to change electric suppliers before paying for the costs the utility has incurred on their behalf. Potential stranded costs include but are not limited to: generation assets; long-term purchase power and fuel contracts; "regulatory assets" -- Statement of Financial Accounting Standards No. 71, "Accounting for the Effects of Certain Types of Regulation" (SFAS 71), which are expenses that have been deferred pending PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) recovery from customers; and costs which regulators have ordered utilities to incur to fulfill a variety of broader social purposes including such things as DSM costs. More competitive electric wholesale markets, proposals to authorize retail wheeling or direct retail access within utility franchise areas, but not New Jersey to date, as well as the recent Federal Energy Regulatory Commission's (FERC) Notices of Proposed Rulemaking (NOPR) have raised stranded costs and open access as the most significant issues in the transition to a more competitive wholesale power market. If changes in rate regulation ultimately require a recognition of any such stranded costs, asset write-downs for utilities, including PSE&G, may occur. At this time, management cannot predict the level of transition costs or stranded costs resulting from industry deregulation, if any, or whether utility regulators will allow recovery of any such transition costs from customers. In addition, PSE&G cannot presently quantify what the financial statement impact may be if depreciation expense is determined absent regulation. However, if any such amounts are not recovered, the impact on the financial position, results of operations or net cash flows of PSE&G and Enterprise could be material. FERC's recent NOPR on open access would fundamentally change the electric utility industry by providing wholesale customers with competitive open access to the interstate transmission system. However, in the NOPR, FERC states its position that utilities should be entitled to full recovery of legitimate and verifiable stranded costs at the Federal and state levels. Competition will force utilities, including PSE&G, to operate more cost effective and efficient plants, particularly in light of the technological advantages available to new entrants, which unlike utilities, do not operate older, less efficient units. Recovery of related costs by utilities, including PSE&G, will depend upon the decisions of the regulators, which cannot be predicted, or the ability to sell the electricity generated by such plants in the emerging wholesale power market. For discussion of PSE&G's renovation project at Bergen, see Note 2 - Commitments and Contingencies of Notes. Competition may also have an adverse impact upon the economics of certain regulatory-created incentives such as DSM. As a result of such competitive forces, Enterprise announced a corporate reorganization, effective March 1, 1995, that includes the creation of a new ventures and services corporation, Enterprise Ventures and Services Corporation (Ventures), as a subsidiary of PSE&G to develop and market new energy-related products and services and the establishment of three separate businesses: fossil generation; electric and gas transmission and distribution; and customer services. Previously, in the Fall of 1994, PSE&G reorganized its nuclear operations as a separate business unit. As a result of the evolution of the currently vertically integrated electric and gas structure, fossil and nuclear generating units will eventually operate in a deregulated and fully competitive market, where profitability will be entirely dependent on the ability to generate electricity at low cost. PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Transmission will likely evolve into a more regional common carrier service, with current ownership and control of transmission lines probably moving to ownership alone. Electric and gas distribution will likely evolve into a common carrier service with incentive regulation based on reliability. Customer services, such as meter reading, billing and collection and appliance services, will likely ultimately become nonregulated, fully competitive businesses operating without franchise boundaries. Ventures is expected to be the foundation for new businesses through the development of energy-related products and services that may be marketed beyond traditional boundaries. The BPU presented its final, first phase of the New Jersey Energy Master Plan to Governor Whitman March 1995, which acknowledges the need for regulatory flexibility as competition unfolds and calls for legislation that would allow New Jersey utilities to propose, subject to BPU approval, alternatives to existing rate base/rate of return pricing, allow for pricing flexibility under certain standards for customers with competitive options and equalize the impact of tax policies, such as New Jersey Gross Receipts and Franchise Tax (NJGRT) currently assessed on retail energy utility sales, upon all energy producers. Management cannot predict the ultimate form of any legislative or regulatory changes which may be adopted as a result of this Energy Master Plan. PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- (CONTINUED) ENTERPRISE EARNINGS Earnings per share of Enterprise Common Stock were 87 cents for the quarter ended March 31, 1995, a decrease of seven cents per share of Common Stock from the comparable 1994 quarter. Earnings per share of Enterprise Common Stock were $2.70 for the twelve-month period ended March 31, 1995, an increase of 16 cents per share of Common Stock from the comparable 1994 period. (See Liquidity and Capital Resources - External Financing.) The changes are summarized as follows:
Increase or (Decrease) ------------------------------------------------------ Three Months Ended Twelve Months Ended March 31, March 31, 1995 vs. 1994 1995 vs. 1994 ----------------------- ----------------------- Per Per Amount Share Amount Share -------- -------- -------- -------- (Millions, except Per Share Data) PSE&G Revenues (net of fuel costs and gross receipts taxes) ....................... $ (18) $ (0.08) $ 58 $ 0.24 Other operation expenses ................ (5) (0.02) (69) (0.28) Maintenance expenses .................... 12 0.05 28 0.12 Depreciation and amortization expenses .. (6) (0.03) (29) (0.12) Federal income taxes .................... 11 0.05 38 0.16 Interest charges ........................ (8) (0.03) (20) (0.09) Allowance for Funds used During Construction (AFDC).................... 3 0.01 13 0.05 Preferred Securities Dividend Requirements .......................... (2) -- (5) (0.02) -------- -------- -------- -------- Earnings Available to Enterprise ........ (13) (0.06) 14 0.06 -------- -------- -------- -------- EDHI EDC ..................................... (8) (0.03) (39) (0.16) CEA...................................... (2) -- 1 -- PSRC .................................... 4 0.02 16 0.07 EGDC...(A)............................... 1 -- 54 0.22 -------- -------- -------- -------- Subtotal ................................ (5) (0.01) 32 0.13 -------- -------- -------- -------- Net Income .............................. $ (18) (0.07) $ 46 0.19 ======== -------- ======== -------- Effect of additional shares of Enterprise Common Stock Issued .................... -- (.03) -------- --------- Total ................................. -- $ .16 ======== ========= Average Shares of Common Stock Outstanding 1995 ........................ 244,697,930 244,697,930 Average Shares of Common Stock Outstanding 1994 ........................ 243,776,766 242,354,605 (A) Includes the 1994 impact of an impairment of assets of $51 Million, after tax, by EGDC in December 1993. (See EDHI, below.)
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) ENTERPRISE EARNINGS - (Continued) PSE&G Earnings available to Enterprise decreased by $13 million for the quarter ended March 31, 1995 from the quarter ended March 31, 1994. The decrease was primarily due to lower firm therm gas sales (15.7%) and lower electric kilowatthour (KWH) sales to customers (1.4%) resulting from the significantly warmer weather in comparison to the same period in 1994, partially offset by a modest improvement in New Jersey's economy. In addition, the other major factors adversely affecting earnings were higher other operation expenses comprised primarily of higher nuclear production expenses, increased depreciation and amortization expenses due to more utility plant in service, higher interest charges due to higher average daily balances of short-term debt and higher interest rates. Partially offsetting the decrease in earnings were lower maintenance expenses at Mercer and Hope Creek generating stations. Hope Creek nuclear station expenses were higher in 1994 due to a refueling outage during the first quarter of 1994. Earnings available to Enterprise increased by $14 million for the twelve- month period ended March 31, 1995 from the comparable twelve-month period of 1994. The increase was primarily due to electric KWH commercial sales, which increased .9% principally due to weather and a modest improvement in New Jersey's economy. Also benefiting earnings was the decrease in Federal income tax expense resulting from the receipt of a nontaxable insurance benefit partially offset by higher pre-tax operating income and lower maintenance expenses due to higher expenses at Hope Creek nuclear generating station due to a refueling outage in the first quarter of 1994. In addition, higher AFDC was a benefit to earnings due to greater construction, partially offset by a slightly reduced 1994 AFDC rate. The major factors adversely affecting earnings were higher other operation expenses comprised primarily of miscellaneous nuclear production expenses, increased depreciation and amortization expenses due to more utility plant in service and higher interest charges due to a higher average daily balance of short-term debt outstanding and higher interest rates. PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) ENTERPRISE EARNINGS - (Concluded) EDHI The net income of EDHI was $14 million for the quarter ended March 31, 1995, a decrease of $5 million from the quarter ended March 31, 1994. EDHI's earnings decreased due to lower gas prices and volumes of EDC, partially offset by increased income from partnership investments of PSRC. The net income of EDHI was $56 million for the twelve-month period ended March 31, 1995, an increase of $32 million over the twelve-month period ended March 31, 1994. Excluding the impact of an impairment of assets of $51 million, after tax, by EGDC in December 1993, EDHI's earnings decreased by $18 million. Lower EDC earnings resulting from lower gas prices and volumes were partially offset by higher PSRC earnings due to lower Federal income taxes (the effect of a 1993 Federal income tax increase recorded in August 1993) and increased income from partnership investments. To the extent that the prices at which EDC is able to sell gas remain low, EDHI's earnings may continue to be negatively impacted. PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) DIVIDENDS Over the past several years, Enterprise has reduced its dividend payout ratio. Management believes this is a prudent policy which needs to be continued. Dividends paid to holders of Enterprise Common Stock during the three and twelve month periods ended March 31, 1995 increased $.5 million, and $4.9 million, respectively, over the comparable 1994 periods. The increase in dividend payments was due to the issuance of additional shares of Enterprise Common Stock. (See Liquidity and Capital Resources.) Dividends paid to holders of PSE&G's Preferred Stock, during the three and twelve month periods ended March 31, 1995 decreased $1.6 million and $.7 million, respectively, over the comparable 1994 periods. The decrease in such dividends was due to reduced expense resulting from the redemption of certain higher cost series of Preferred Stock. (See Liquidity and Capital Resources.) Dividends payable to holders of Monthly Income Preferred Securities (MIPS) of Public Service Electric and Gas Capital, L.P. (Partnership), a limited partnership of which PSE&G is the general partner, aggregated $3.5 million and $5.2 million, respectively during the three and twelve-month periods ended March 31, 1995. PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) REVENUES PSE&G ELECTRIC Revenues increased $54 million, or 6%, and $78 million, or 2%, for the three and twelve- month periods ended March 31, 1995 from the same periods ended March 31, 1994. The significant components of these changes follow: Increase or (Decrease) ---------------------------------------- Three Months Ended Twelve Months Ended March 31, March 31, 1995 vs. 1994 1995 vs. 1994 ------------------- ------------------- (Millions) Kilowatthour sales .............. $ 3 $ 40 Recovery of energy costs ........ 41 33 NJGRT ........................... - (5) Other operating revenues ........ 10 10 ----- ----- Total Electric Revenues ....... $ 54 $ 78 ===== ===== Changes in megawatthour sales by customer category are described below: Megawatthours Increase or (Decrease) ---------------------------------------- Three Months Ended Twelve Months Ended March 31, March 31, 1995 vs. 1994 1995 vs. 1994 ------------------- ------------------- Residential ..................... 18.2 0.7% (77.0) (0.7)% Commercial ...................... (22.8) (0.5) 157.0 0.9 Industrial ...................... (126.5) (5.7) (84.0) (0.9) PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) REVENUES - (Continued) PSE&G ELECTRIC - (Concluded) The electric revenue increases of 6% and 2%, respectively, during the three and twelve-month periods ended March 31, 1995 over the comparable three and twelve-month periods of 1994, were due to a higher recovery of energy costs and a higher recovery of costs associated with DSM. Also affecting the increase in revenues for the twelve-months, were higher commercial sales resulting from a modestly improving New Jersey economy. Residential sales decreased due to significantly warmer winter weather in 1995 vs. 1994. PSE&G GAS Revenues decreased $167 million, or 21%, and $155 million, or 9%, for the three and twelve-month periods ended March 31, 1995 from the same periods ended March 31, 1994. The significant components of these changes follow: Increase or (Decrease) ---------------------------------------- Three Months Ended Twelve Months Ended March 31, March 31, 1995 vs. 1994 1995 vs. 1994 ------------------- ------------------- (Millions) Therm sales...................... $ (31) $ (1) Recovery of fuel costs .......... (121) (129) NJGRT ........................... (15) (35) Other operating revenues ........ - 10 ------ ------ Total Gas Revenues ............ $ (167) $ (155) ====== ====== Changes in gas sold and transported by customer category are described below: Kilotherms Increase or (Decrease) ---------------------------------------- Three Months Ended Twelve Months Ended March 31, March 31, 1995 vs. 1994 1995 vs. 1994 ------------------- ------------------- Residential ..................... (114.0) (16.9)% (131.1) (9.7)% Commercial ...................... (35.4) (8.2) (65.4) (6.7) Industrial ...................... (20.1) (7.6) (13.6) (1.5) Transportation Service .......... 41.5 31.6 56.7 10.7 PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) REVENUES - (Concluded) PSE&G GAS - (Concluded) The gas revenue decreases of 21% and 9%, respectively, for the three and twelve-month periods ended March 31, 1995 from the comparable three and twelve- month periods of 1994 were primarily attributable to a lower recovery of fuel related costs. The decrease in sales revenues was due to a warmer than normal 1995 winter in comparison to a colder than normal 1994 winter. Transportation Service sales increased due to significantly fewer storm-related service interruptions in 1995 and the movement of customers from firm and non-firm rate classes. EDHI EDHI's revenues decreased $12 million, or 11%, during the first quarter of 1995 compared to the first quarter of 1994, and $45 million, or 10%, during the twelve month period ended March 31, 1995 compared to the twelve month period ended March 31, 1994. The significant factors contributing to such results are as follows: Increase or (Decrease) ---------------------------------------- Three Months Ended Twelve Months Ended March 31, March 31, 1995 vs. 1994 1995 vs. 1994 ------------------- ------------------- (Millions) EDC ............................. $(17) $(63) CEA ............................. - 13 PSRC ............................ 5 8 EGDC ............................ - (3) ----- ----- TOTAL................ $ (12) $ (45) ===== ===== The 11% decrease in revenues for the quarter ended March 31, 1995 compared to the quarter ended March 31, 1994 was due to lower gas prices and volumes of EDC partially offset by higher PSRC income from partnership investments. The 10% decrease in revenues for the twelve months ended March 31, 1995 compared to the twelve-month period ended March 31, 1994 was primarily due to lower gas prices and volumes of EDC and lower rents of EDGC due to sales of properties, partially offset by greater income from CEA power projects and higher PSRC income from partnership investments. PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) ELECTRIC ENERGY COSTS Electric energy costs increased $41 million, or 24%, and $39 million, or 6%, in the first quarter and twelve months ended March 31, 1995, respectively, from the comparable 1994 periods. The significant components of these changes follow: Increase or (Decrease) ---------------------------------------- Three Months Ended Twelve Months Ended March 31, March 31, 1995 vs. 1994 1995 vs. 1994 ------------------- ------------------- (Millions) Changes in prices paid for fuel and power purchases ............. $ (16) $(35) Kilowatthour generation ............ -- 2 Adjustment of actual costs to match recoveries through revenues (A) ..................... 57 72 ----- ----- Total Electric Energy Costs ... $ 41 $ 39 ===== ===== (A) Reflects the change in deferred over(under) recovered energy costs. The increases in total costs were principally due to the overrecovery of energy costs stemming from an increase in LEAC rates for the period November 1994 through May 1995, partially offset by a decrease in fossil fuel costs. PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) GAS SUPPLY COSTS Gas supply costs decreased $116 million, or 25%, and $122 million, or 12% in the first quarter and twelve months ended March 31, 1995 respectively, from the comparable 1994 periods. The significant components of these changes follow: Increase or (Decrease) ---------------------------------------- Three Months Ended Twelve Months Ended March 31, March 31, 1995 vs. 1994 1995 vs. 1994 ------------------- ------------------- (Millions) Changes in prices paid for gas supplies .................... $ (52) $(103) Therm sendout ...................... (64) (78) Refunds from pipeline suppliers .... (2) (16) Adjustment of actual costs to match recoveries through revenues (A) ..................... 2 75 ----- ----- Total Gas Supply Costs ........ $(116) $(122) ===== ===== (A) Reflects the change in deferred over (under) recovered gas costs. The decreases in total costs were principally due to the lower price of natural gas and lower therm sendout resulting from the warmer 1995 winter season compared to the 1994 winter season. PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) LIQUIDITY AND CAPITAL RESOURCES Enterprise's liquidity is affected by maturing debt, investment and acquisition activities, the capital requirements of PSE&G's construction program, permitted regulatory recovery of expenses and collection of revenues. Capital resources available to meet such requirements depend upon general and regional economic conditions, PSE&G's customer retention and growth depends upon the ability of PSE&G and EDHI to meet competitive pressures and to contain costs, the adequacy and timeliness of rate relief, cost recovery and necessary regulatory approvals, the ability to continue to operate and maintain nuclear programs in accordance with NRC and BPU requirements, the impact of environmental regulations, continued access to the capital markets and continued favorable regulatory treatment of consolidated tax benefits. (For additional information see the discussion of Competition above and Note 2, Commitments and Contingencies of the Notes.) PSE&G For the three-month period ended March 31, 1995, PSE&G had utility plant additions, including AFDC, of $138 million, a decrease of $37 million from the corresponding period in 1994. For the twelve-month period ended March 31, 1995, PSE&G had utility plant additions, including AFDC, of $851 million, a decrease of $83 million from the corresponding period in 1994. Construction expenditures were related to improvements in PSE&G's existing power plants, transmission and distribution system, gas system and common facilities. PSE&G's expenditures for the cost of plant removal (net of salvage) decreased $6 million and $18 million for the three-month and twelve-month periods ended March 31, 1995 from the corresponding periods in 1994. PSE&G expects that it will be able to generate internally all of its capital requirements including construction expenditures over the next five years and significantly reduce its debt outstanding, assuming adequate and timely recovery of costs, as to which no assurances can be given. Decommissioning and other special funds, excluding interest, increased $2 million and $20 million for the three-month and twelve-month periods ended March 31, 1995 from the corresponding periods in 1994. EDHI During the next five years, a majority of EDHI's capital requirements are expected to be provided from operational cash flows. EDHI's focus is on CEA and EDC, its energy-related core businesses. CEA is expected to be the primary vehicle for EDHI's business growth, both domestically and internationally. A significant portion of CEA's growth is expected to occur in the international PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) arena, due to the current and anticipated growth in electric capacity required in certain regions of the world. EDC is projected to grow its reserve base, principally through exploration and drilling, in order to maintain an annual production level of 130-140 billion cubic feet equivalent (BCFE). For the three-month period ended March 31, 1995, EDC had additions to oil and gas property, plant and equipment, excluding capitalized interest, of $21 million, a decrease of $16 million from the corresponding period in 1994. For the twelve-month period ended March 31, 1995, EDC had additions to oil and gas property, plant, and equipment, excluding capitalized interest, of $134 million, an increase of $21 million compared to the corresponding period in 1994. Two CEA projects under construction as of December 31, 1994 were placed in operation on February 1, 1995 and April 6, 1995. PSRC will limit new investments to those which support EDHI's core businesses, while EGDC will exit the real estate business in a prudent manner. Over the next several years, EDHI and its subsidiaries will also be required to refinance a portion of their maturing debt in order to meet their capital requirements. Any inability to extend or replace maturing debt at current levels and interest rates may affect future earnings and result in an increase in EDHI's cost of capital. In March 1995, a partnership in which EGDC is an 80% partner, successfully negotiated an extension of a mortgage financing maturing on February 28, 1995. The extension amount of $33.6 million ($40.2 million at December 31, 1994) matures on February 28, 2002 with principal payments totaling $1.5 to $2.0 million annually. EGDC has guaranteed $10.0 million of the current mortgage loan, with a support agreement from EDHI. Such guaranteed amount is reduced for monthly principal repayments made by the partnership. PSRC is a limited partner in various limited partnerships and is committed to make investments from time to time, upon the request of the respective general partners. At March 31, 1995, $109 million remained as PSRC's unfunded commitment subject to call. EDHI and each of its subsidiaries are subject to restrictive business and financial covenants contained in existing debt agreements and are required to not exceed various debt to equity ratios which range from 3:1 to 1.75:1. EDHI is also required to maintain a twelve month earnings before interest and taxes to interest (EBIT) coverage ratio of at least 1.35:1. As of March 31, 1995 and 1994, EDHI had consolidated debt to equity ratios, including contingent obligations, of 1.13:1 and 1.24:1 and, for the twelve months ended March 31, 1995 and 1994, EBIT coverage ratios, as defined to exclude the effects of EGDC, of 1.87:1 and 2.23:1, respectively. Compliance with applicable financial covenants will depend upon future levels of earnings, among other things, as to which no assurance can be given. PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) LONG TERM INVESTMENTS AND REAL ESTATE Long-Term Investments and Real Estate, increased $6 million for the three- month period ended March 31, 1995 due to PSRC and EGDC partnership investments, partially offset by CEA capital returns from partnerships. For the three-month period ended March 31, 1994, a $21 million decrease was caused by returns of capital from CEA and PSRC partnerships and PSRC security sales. Long-Term Investments and Real Estate decreased $32 million for the twelve- month period ended March 31, 1995 primarily due to a net decrease in PSE&G's investment in an insurance contract, partially offset by PSRC and CEA investments in partnerships. For the twelve-month period ended March 31, 1994, a $98 million decrease was caused by PSRC security sales, partially offset by additional CEA partnership investments. In April 1995, EGDC entered into agreements for the sale of three properties with an aggregate book value of approximately $80 million. Such agreements are subject to customary due diligence periods of up to 90 days. No assurances can be given as to the ultimate consummation of such sales by EGDC. However, Enterprise does not expect such sales to have a significant effect on its results of operations. INTERNAL GENERATION OF CASH FROM OPERATIONS Enterprise's cash provided by operating activities for the three months ended March 31, 1995 decreased $46 million to $699 million when compared to the corresponding period in 1994. This decrease was primarily due to a smaller increase in inventory - fuel and materials and supplies of $76 million, a decrease in net income of $18 million, higher unrealized gains on investments of $20 million, a smaller increase in deferred income taxes of $29 million, a negative net change in certain other current assets and liabilities of $17 million, and a negative net change in certain noncurrent assets and liabilities, primarily deferred amounts, of $11 million. Partially offsetting these cash outflows were a smaller decrease in accounts payable of $73 million and lower recovery of electric energy and gas costs through PSE&G's LEAC and LGAC of $59 million. (For additional information see Enterprise Earnings, Revenues, Electric Energy Costs and Gas Supply Costs.) PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Enterprise's cash provided by operating activities for the twelve months ended March 31, 1995 increased $82 million to $1.186 billion when compared to the corresponding period in 1994. This increase was primarily due to a higher recovery of electric energy and gas costs through PSE&G's LEAC and LGAC of $144 million, a decrease in accounts receivable of $92 million, an increase in net income of $46 million, greater depreciation and amortization of $28 million, a positive net change in certain other current assets and liabilities of $26 million, and a positive net change in certain noncurrent assets and liabilities, primarily deferred amounts, of $86 million. Partially offsetting these cash inflows were a loss from property impairments of $78 million in 1993, lower unrealized gains on investments of $40 million, a smaller increase in deferred income taxes of $68 million, an increase in inventory - fuel and materials and supplies of $73 million, and a decrease in accounts payable of $76 million. (For additional information see Enterprise Earnings and Revenues, Electric Energy Costs and Gas Supply Costs.) EXTERNAL FINANCINGS ENTERPRISE CONSOLIDATED CASH FLOWS FROM FINANCING ACTIVITIES
Three Months Ended Twelve Months Ended March 31, March 31, ------------------ ------------------- 1995 1994 1995 1994 ------- ------- ------ ----- (MILLIONS OF DOLLARS) Enterprise (Parent Company): Issuance of Common Stock(A)....................... $ -- $ 28 $ -- $ 127 Cash Dividends paid on Common Stock(B)............ (132) (132) (529) (524) ------- ------- ------- ------ Total Enterprise (Parent Company)......... (132) (104) (529) (397) ------- ------- ------- ------ PSE&G:(C) Net decrease in Short-Term Debt(D)................ (308) (431) (8) (13) (Decrease) increase in Book Overdrafts............. (35) (24) 13 7 Issuance of Long-Term Debt(E)..................... -- 400 450 1,873 Redemption of Long-Term Debt...................... -- (67) (411) (1,689) Long-Term Debt Issuance and Redemption Costs...... -- -- (30) (54) Issuance of Preferred Stock(F).................... -- 75 -- 75 Redemption of Preferred Stock..................... -- (45) (75) (45) Issuance of Monthly Income Preferred Securities .................................... -- -- 150 -- Other............................................. 2 (1) (1) (1) ------- ------- ------- ------ Total PSE&G............................... (341) (93) 88 153 ------- ------- ------- ------ EDHI:(G) Net increase (decrease) in Short-Term Debt........ 54 (28) 128 (134) Issuance of Long-Term Debt........................ -- -- -- 105 Redemptions of Long-Term Debt..................... (52) (30) (136) (281) Other............................................. -- -- -- (7) ------- ------- ------- ------ Total EDHI................................ 2 (58) (8) (317) ------- ------- ------- ------ Net cash used in financing activities............... $ (471) $ (255) $ (449) $ (561) ======== ======= ======= ======
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) (A) Book value per share was $22.03 at March 31, 1995, compared to $21.49 at March 31, 1994. (B) See Dividends. (C) The BPU has authorized PSE&G to issue $370 million of First and Refunding Mortgage Bonds (Bonds)/Medium-Term Notes (MTNs) through 1996 for refunding purposes. On April 5, 1995 PSE&G issued $100 million of its MTNs for the purpose of redeeming $100 million of its Series JJ Bonds which mature on June 1, 1995. The BPU has authorized PSE&G to issue and have outstanding at any one time not more than $1 billion of its short-term obligations, consisting of commercial paper and other unsecured borrowings from banks and other lenders through January 1, 1997. On March 31, 1995, PSE&G had no short- term debt outstanding. PSE&G has an $800 million revolving credit agreement with a group of commercial banks through September 14, 1995. On March 31, 1995, there were no short-term borrowings outstanding under this credit agreement. Public Service Conservation Resources Corporation (PSCRC) has a $30 million revolving credit facility supported by a PSE&G subscription agreement with an aggregate purchase price of $30 million which terminates on March 6, 1996. As of March 31, 1995 PSCRC had $8.7 million outstanding under this facility. (D) PSE&G Fuel Corporation (Fuelco) has a $150 million commercial paper program to finance a 42.49% share of Peach Bottom nuclear fuel, supported by a $150 million revolving credit facility with a group of banks, which expires on June 28, 1996. PSE&G has guaranteed repayment of Fuelco's respective obligations. As of March 31, 1995, Fuelco had commercial paper of $85.5 million outstanding under such program. (E) Enterprise's long-term debt aggregated $5.265 billion as of March 31, 1995, of which $4.588 billion was attributable to PSE&G and $677 million to EDHI. (F) The BPU has authorized PSE&G to issue not more than $180 million of Preferred Stock through 1995. PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Concluded) (G) Funding has a commercial paper program, supported by a commercial bank letter of credit and credit facility, in the amount of $225 million. As of March 31, 1995, Funding had $144 million of borrowings outstanding under this program. Funding has a $225 million revolving credit facility. As of March 31, 1995, Funding had no borrowings outstanding under this facility. In March 1995, Funding amended its letter of credit and revolving credit facility in order to adjust pricing and extend the maturity to March 1998. Capital's MTN program has previously provided for an aggregate principal amount of up to $750 million of MTNs so that its total debt outstanding at any time, including MTNs, would not exceed such amount. Effective January 31, 1995, Capital will not have more than $650 million of debt outstanding at any time. At March 31, 1995, Capital had total debt outstanding of $615 million, including $467 million of MTNs. PUBLIC SERVICE ELECTRIC AND GAS COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Following are changes in or additions to the significant factors reported in PSE&G's Annual Report to the SEC on Form 10-K for 1994, affecting the consolidated financial condition of PSE&G and its subsidiaries as reflected in their consolidated results of operations. This discussion refers to the consolidated financial statements and related notes herein of PSE&G and should be read in conjunction with such statements and notes. Except as modified below, the information required by this item is incorporated herein by reference to the following portions of Enterprise's MD&A, insofar as they relate to PSE&G and its subsidiaries: Competition; Enterprise Earnings - PSE&G; Dividends; Revenues - PSE&G Electric, PSE&G Gas; Electric Energy Costs; Liquidity and Capital Resources - PSE&G, Long Term Investments and Real Estate and External Financings. GAS SUPPLY COSTS Gas supply costs decreased $121 million, or 26%, and $133 million, or 13%, in the first quarter and twelve months ended March 31, 1995, respectively, from the comparable 1994 periods. The significant components of these changes follow: Increase or (Decrease) ---------------------------------------- Three Months Ended Twelve Months Ended March 31, March 31, 1995 vs. 1994 1995 vs. 1994 ------------------- ------------------- (Millions) Changes in prices paid for gas supplies .................... $ (56) $(113) Therm sendout ...................... (65) (79) Refunds from pipeline suppliers .... (2) (16) Adjustment of actual costs to match recoveries through revenues (A) ..................... 2 75 ----- ----- Total Gas Supply Costs ........ $(121) $(133) ===== ===== (A) Reflects the change in deferred over (under) recovered gas costs. The decrease in total costs was principally due to the lower price of natural gas and lower therm sendout resulting from the warmer 1995 winter season compared to the 1994 winter season. PUBLIC SERVICE ELECTRIC AND GAS COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Concluded) LIQUIDITY AND CAPITAL RESOURCES INTERNAL GENERATION OF CASH FROM OPERATIONS PSE&G's cash provided by operating activities for the three months ended March 31, 1995 decreased $18 million to $684 million when compared to the corresponding period in 1994. This decrease was primarily due to a smaller increase in inventory - fuel and materials and supplies of $76 million, a decrease in net income of $15 million, a smaller increase in deferred income taxes of $20 million, a negative net change in certain other current assets and liabilities of $9 million, and a negative net change in certain noncurrent assets and liabilities, primarily deferred amounts, of $12 million. Partially offsetting these cash outflows were a smaller decrease in accounts payable of $26 million, a decrease in accounts receivable of $39 million and lower recovery of electric energy and gas costs through PSE&G's LEAC and LGAC of $59 million. (For additional information see Enterprise Earnings, Revenues and Electric Energy Costs and PSE&G Gas Supply Costs.) PSE&G's cash provided by operating activities for the twelve months ended March 31, 1995 increased $112 million to $1.042 billion when compared to the corresponding period in 1994. This increase was primarily due to a higher recovery of electric energy and gas costs through PSE&G's LEAC and LGAC of $144 million, a decrease in accounts receivable of $130 million, greater depreciation and amortization of $35 million, a positive net change in certain other current assets and liabilities of $40 million, and a positive net change in certain noncurrent assets and liabilities, primarily deferred amounts, of $72 million. Partially offsetting these cash inflows were a smaller increase in deferred income taxes of $86 million, an increase in inventory - fuel and materials and supplies of $73 million, and a decrease in accounts payable of $144 million. (For additional information see Enterprise Earnings, Revenues and Electric Energy Costs and PSE&G Gas Supply Costs.) PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED PART II. OTHER INFORMATION Item 1. Legal Proceedings - ------ ----------------- Certain information reported under Item 1 of Part I of Enterprise's and PSE&G's Annual Reports to the Securities and Exchange Commission on Form 10-K for 1994 (the "Form 10-K") is updated herein at the respective pages indicated. References are to the related pages and paragraph(s) of the Form 10-Q. (1) Page 11 - Proceedings before the BPU relating to PSE&G's LGAC. Form 10-K, Page 75. (2) Page 11 - Proceedings before the BPU relating to PSE&G's LEAC. Form 10-K, Page 75. (3) Page 40 - Proceedings before FERC relating to competition and electric wholesale markets. Form 10-K, Page 3. (4) Page 40 - Requests filed in 1974 and later supplemented, to EPA and NJDEP to establish thermal discharge and intake structures for PSE&G's electric generating stations. Form 10-K, Page 24. Item 4. Submission of Matters to a Vote of Security Holders - ------ --------------------------------------------------- Enterprise's Annual Meeting of Stockholders was held on April 18, 1995. Proxies for the meeting were solicited pursuant to Regulation 14A under the Securities Exchange Act of 1934, there was no solicitation of proxies in opposition to management's nominees as listed in the proxy statement and all of management's nominees were elected to the board of directors. Details of the voting are provided below: Votes Votes For Withheld --------- -------- Proposal 1 - Election of Directors Class I - Term expiring 1997 Lawrence R. Codey.............. 198,720,225 2,408,487 Class II - Term expiring 1998 E. James Ferland............... 198,699,038 2,429,674 Irwin Lerner................... 198,853,996 2,285,716 Marilyn M. Pfaltz.............. 198,788,397 2,340,315 Richard J. Swift............... 198,839,411 2,290,301 Votes Votes Votes For Against Abstaining --------- --------- ---------- Proposal 2 - Appointment of Deloitte & Touche LLP as Independent Auditors for 1995........ 198,578,345 1,151,108 1,414,938 There were no broker non-votes with respect to either item. PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED PART II. OTHER INFORMATION - (Continued) Item 5. Other Information - ------ ----------------- Certain information reported under Item 1 of Part I of Enterprise's and PSE&G's Annual Reports to the Securities and Exchange Commission on Form 10-K for 1994 (the "Form 10-K") is updated below. References are to the related pages and paragraph(s) of the Form 10-K as printed and distributed. Competition - Electric Form 10-K, Page 3, Paragraph 3 ------------------------------ In March 1995, FERC issued a NOPR which, if adopted, would require electric utilities, including PSE&G, to provide open access to the interstate transmission network pursuant to non-discriminatory tariffs available to all wholesale sellers and buyers of electric energy. Utilities would be required to offer transmission to eligible customers comparable to the service they provide themselves and to take service under the tariffs for their own wholesale sales and purchases. Further, transmission and ancillary service components would be unbundled and, when buying or selling power, utilities would have to rely on the same network for transmission system information as their customers. The NOPR states FERC's general principle that utilities, should be entitled to full recovery of legitimate and verifiable stranded costs at the federal and state levels and reiterates its prior proposal that such costs be directly assigned to departing customers. The NOPR further provides that stranded costs due to retail wheeling are a state matter, while stranded costs due to wholesale wheeling, municipalization or change from retail to wholesale customer are within FERC's jurisdiction. PSE&G cannot predict the impact of any regulations that may be adopted. See Management's Discussion and Analysis -- Competition. PSE&G - Nuclear Operations - Salem Form 10-K, Page 11, Paragraph 3 -------------------------------- On March 21, 1995, representatives of the NRC Staff met with the Boards of Directors of Enterprise and PSE&G to reiterate the previously expressed concerns with regard to Salem's operations, including plant material conditions that required operators to operate various systems manually, maintenance backlog, root cause analysis, quality assurance, engineering, repeat equipment failures, procedure adherence, four events over the past four years causing the NRC to conduct four Augmented Inspected Team reviews, leadership, employee concerns, attention to balance of plant, management oversight and vertical communication with employees and oversight of contractors. The NRC staff acknowledged that PSE&G had made efforts to improve Salem's operations, including making senior management changes, but indicated that demonstrated sustained results have not yet been achieved. PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED PART II. OTHER INFORMATION - (Continued) Item 5. Other Information - (Continued) - ------ ------------------------------- Form 10-K, Page 11, Paragraph 3 - (Concluded) --------------------------------------------- Also in March 1995, the Institute of Nuclear Power Operations (INPO) reported an assessment of Salem's operations that indicated that improvement was needed in a wide range of areas, with significant improvement required in areas such as equipment performance and plant material conditions, management and supervision, engineering activities and training. On April 21, 1995, the NRC commenced an inspection, expected to take about four weeks, to assess how effectively Salem is currently performing from a safety perspective in the areas of problem identification; prioritizing and conducting work on plant equipment; and management oversight of plant performance. This inspection is currently ongoing. As previously stated, PSE&G is in agreement with the assessment of the NRC staff, as well as that of INPO, that Salem's operations must be further improved in order to assure continued reliable operation. PSE&G is fully committed to take whatever action is needed to improve Salem's operations and is committed to safe and conservative operations before production. PSE&G cannot predict what further action, if any, the NRC may take in respect of Salem's operations. PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED PART II. OTHER INFORMATION - (Continued) Item 5. Other Information - (Continued) - ------ ------------------------------- New Matters ----------- On April 12, 1995, PSE&G received notification of a Level II violation including an $80,000 civil penalty for an incident that occurred in December, 1992 in which two former Salem station managers did not properly respond to safety concerns raised by two employees. The incident was thoroughly investigated and brought to the NRC's attention by PSE&G at that time. PSE&G has agreed to pay the penalty and has instituted several measures to reinforce to personnel that their concerns about safety and all issues relating to the operation of the nuclear facilities can be openly brought to management's attention. PSE&G has been notified of an NRC enforcement conference to be held on June 1, 1995 pertaining to valves that were incorrectly positioned after a plant modification was installed in May 1993 and several examples of inadequate root cause determination of events, which led to insufficient corrective actions at Salem. During this enforcement conference, PSE&G will address the issues identified and ensure they are clearly understood, establish the safety significance of the issues and discuss the mitigating factors related to these issues. Enterprise cannot predict what action, if any, the NRC may take as a result of this meeting. PSE&G - Nuclear Operations - Hope Creek Form 10-K, Page 12 ------------------- New Information --------------- A small amount of low-level radioactive materials was released to the atmosphere at Hope Creek Generating Station on April 5, 1995. The release did not exceed federal limits nor pose any danger to the public or plant employees; however, a trailer driven offsite had exceeded the limit for releasing materials and was later cleaned. PSE&G and the NRC have investigated the event and met on this issue. An enforcement conference is currently scheduled for the end of June 1995. The equipment responsible for generating the release has been secured until the NRC has had the opportunity to review corrective actions. Additionally, similar equipment will be reviewed for deficiencies. PSE&G will also be holding meetings with New Jersey and local government officials to address any concerns relating to the incident. PSE&G cannot predict what actions, if any, the NRC will take as a result of this event. PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED PART II. OTHER INFORMATION - (Continued) Item 5. Other Information - (Concluded) - ------ ------------------------------- Environmental Controls - Water Pollution Control - Salem Station Form 10-K, Page 24, Paragraphs 4 and 5 -------------------------------------- In March 1995, the State of Delaware agreed to withdraw its hearing request related to the Salem Station New Jersey Pollution Discharge Elimination System (NJPDES) permit in return for PSE&G funding a number of environmental projects in Delaware, similar to and including certain NJPDES permit conservation measures, which is not expected to materially increase the cost of compliance with the permit. In May 1995, PSE&G resolved all issues with the remaining intervenors, thus eliminating a hearing and any further challenge to the Salem permit. Item 6. Exhibits and Reports on Form 8-K - ------ -------------------------------- (a) A listing of exhibits being filed with this document is as follows: Exhibit Number Document ------- ---------------------------------------------------------- 12 Computation of Ratios of Earnings to Fixed Charges plus Preferred Securities Dividend Requirements (Enterprise). 12(A) Computation of Ratios of Earnings to Fixed Charges (PSE&G). 12(B) Computation of Ratios of Earnings to Fixed Charges plus Preferred Securities Dividend Requirements (PSE&G). 27 Financial Data Schedules. (b) Reports on Form 8-K. None. PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED SIGNATURES ---------- Pursuant to the requirements of the Securities Exchange Act of 1934, the registrants have duly caused these reports to be signed on their respective behalf by the undersigned thereunto duly authorized. PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED PUBLIC SERVICE ELECTRIC AND GAS COMPANY -------------------------------------------- (Registrants) By: PATRICIA A. RADO -------------------------------------- Patricia A. Rado Vice President and Controller (Principal Accounting Officer) Date: May 12, 1995 EX-12 2 EX-12
EXHIBIT 12 PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES PLUS PREFERRED SECURITIES DIVIDEND REQUIREMENTS 12 Months YEARS ENDED DECEMBER 31, Ended ---------------------------------------------------------------- March 31, 1990(A) 1991(A) 1992(A) 1993 1994 1995 --------- --------- ---------- ---------- ---------- --------- (THOUSANDS OF DOLLARS) Net Income........................ $ 403,663 $ 543,035 $ 504,117 $ 595,519(A) $ 679,033 $ 661,498 Plus Income Taxes (B)............. 144,652 274,146 253,276 316,010 322,824 308,501 --------- --------- ---------- ---------- ---------- ---------- Income Before Income Taxes........ 548,315 817,181 757,393 911,529 1,001,857 969,999 --------- --------- ---------- ---------- ---------- ---------- Fixed Charges and Preferred Securities Dividend Requirements: Interest Charges (C)............ 457,017 478,321 524,025 502,534 495,925 500,264 Interest Factor in Rentals...... 9,162 9,311 9,591 11,090 12,120 12,143 Preferred Securities Dividend Requirements (Pre-tax) (D).... 38,544 42,676 46,748 58,112 60,566 62,358 --------- --------- ---------- ---------- ---------- ---------- Total................... 504,723 530,308 580,364 571,736 568,611 574,765 --------- --------- ---------- ---------- ---------- ---------- Earnings Before Fixed Charges and Preferred Securities Dividend Requirements.................. $1,053,038 $1,347,489 $1,337,757 $1,483,265 $1,570,468 $1,544,764 ========== ========== ========== ========== ========== ========== Ratio............................. 2.09 2.54 2.30 2.59 2.76 2.69 ==== ==== ==== ==== ==== ==== (A) Excludes cumulative effect of $5.4 million credit to income reflecting a change in income taxes. (See Note 9 -- Federal Income Taxes of Notes to Consolidated Financial Statements.) (B) Includes state income taxes and federal income taxes for other incomes. (C) Excludes 1991 and 1992 interest expense on decommissioning costs of $6,956 and $5,208, respectively. Effective January 1, 1992, accounting was changed to follow Federal Energy Regulatory Commission guidelines. (D) Includes a reduction for tax-deductible preferred dividends in accordance with Sections 244(a) and 11(b) of the Internal Revenue Code of 1986, as amended, before applying accounting Rule S-K of Regulation 229.503, Item 503 (d)(6).
EX-12.A 3 EX-12.A
EXHIBIT 12(A) PUBLIC SERVICE ELECTRIC AND GAS COMPANY COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES 12 Months YEARS ENDED DECEMBER 31, Ended -------------------------------------------------------------- March 31, 1990 1991 1992 1993 1994 1995 ---------- ---------- ---------- ---------- ---------- --------- (THOUSANDS OF DOLLARS) Net Income....................... $ 537,619 $ 545,479 $ 475,936 $ 614,868 $ 659,406 $ 644,863 Plus Income Taxes (A)............ 209,360 261,912 223,782 307,414 301,447 289,775 ---------- ---------- ---------- ---------- ---------- ---------- Income Before Income Taxes....... 746,979 807,391 699,718 922,282 960,853 934,638 ---------- ---------- ---------- ---------- ---------- ---------- Fixed Charges Interest Charges (B)........... 346,020 358,517 401,902 389,956 395,925 404,026 Interest Factor in Rentals..... 9,162 9,311 9,591 11,090 12,120 12,143 ---------- ---------- ---------- ---------- ---------- ---------- Total.................. 355,182 367,828 411,493 401,046 408,045 416,169 ---------- ---------- ---------- ---------- ---------- ---------- Earnings Before Fixed Charges.... $1,102,161 $1,175,219 $1,111,211 $1,323,328 $1,368,898 $1,350,807 ========== ========== ========== ========== ========== ========== Ratio............................ 3.10 3.20 2.70 3.30 3.35 3.25 ==== ==== ==== ==== ==== ==== (A) Includes state income taxes and federal income taxes for other income. (B) Excludes 1991 and 1992 interest expense on decommissioning costs of $6,956 and $5,208, respectively. Effective January 1, 1992, accounting was changed to follow Federal Energy Regulatory Commission guidelines.
EX-12.B 4 EX-12.B
EXHIBIT 12(B) PUBLIC SERVICE ELECTRIC AND GAS COMPANY COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES PLUS PREFERRED SECURITIES DIVIDEND REQUIREMENTS 12 Months YEARS ENDED DECEMBER 31, Ended ------------------------------------------------------------- March 31, 1990 1991 1992 1993 1994 1995 ---------- ---------- ---------- ---------- ---------- --------- (THOUSANDS OF DOLLARS) Net Income............................ $ 537,619 $ 545,479 $ 475,936 $ 614,868 $ 659,406 $ 644,863 Plus Income Taxes (A)................. 209,361 261,912 223,782 307,414 301,447 289,775 ---------- ---------- --------- ---------- ---------- ---------- Income Before Income Taxes............ 746,980 807,391 699,718 922,282 960,853 934,638 ---------- ---------- --------- ---------- ---------- ---------- Fixed Charges and Preferred Securities Dividend Requirements: Interest Charges (B)................ 346,020 358,517 401,902 389,956 395,925 404,026 Interest Factor in Rentals.......... 9,162 9,311 9,591 11,090 12,120 12,143 Preferred Securities Dividend Requirements (Pre-tax) (C)........ 40,116 42,703 46,675 56,957 60,910 62,715 ---------- ---------- --------- ---------- ---------- ---------- Total....................... 395,298 410,531 458,168 458,003 468,955 478,884 ---------- ---------- --------- ---------- ---------- ---------- Earnings Before Fixed Charges and Preferred Securities Dividend Requirements........................ $1,102,162 $1,175,219 $1,111,211 $1,323,328 $1,368,898 $1,350,807 ========== ========== ========== ========== ========== ========== Ratio................................. 2.79 2.86 2.43 2.89 2.92 2.82 ==== ==== ==== ==== ==== ==== (A) Includes state income taxes and federal income taxes for other income. (B) Excludes 1991 and 1992 interest expense on decommissioning costs of $6,956 and $5,208, respectively. Effective January 1, 1992, accounting was changed to follow Federal Energy Regulatory Commission guidelines. (C) Includes a reduction for tax-deductible preferred dividends in accordance with Sections 244(a) and 11(b) of the Internal Revenue Code of 1986, as amended, before applying accounting Rule S-K of Regulation 229.503, Item 503 (d)(6).
EX-27.A 5 FDS ENTERPRISE
UT This schedule contains summary financial information extracted from SEC Form 10-Q and is qualified in its entirety by reference to such financial statements. The referenced financial statements are unaudited but, in the opinion of Enterprise's management, reflect all adjustments, consisting only of normal recurring accruals. 0000788784 PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED 1000 3-MOS DEC-31-1994 JAN-01-1995 MAR-31-1995 PER-BOOK 11,080,156 2,709,893 1,311,107 1,664,089 0 16,765,245 3,801,157 0 1,590,464 5,391,621 300,000 384,994 5,264,646 0 0 238,223 364,773 0 53,612 0 4,767,376 16,765,245 1,673,805 109,148 1,230,916 1,339,470 334,335 3,484 317,819 123,136 212,592 12,197 212,592 132,138 111,604 699,100 .87 .87
State Income Taxes of $1,765 and Federal Income Taxes for Other Income of $594 were incorporated into this line item for FDS purposes. In the referenced financial statements, State Income Taxes are included in Taxes - Other and Federal Income Taxes for Other Income are included in Other Income - Miscellaneous.
EX-27.B 6 FDS PSE&G
UT This schedule contains summary financial information extracted from SEC form 10-Q and is qualified in its entirety by reference to such financial statements. The financial statements are unaudited but, in the opinion of PSE&G's management, reflect all adjustments, consisting only of normal recurring accruals. 0000081033 PUBLIC SERVICE ELECTRIC AND GAS COMPANY 1000 3-MOS DEC-31-1994 JAN-01-1995 MAR-31-1995 PER-BOOK 11,080,156 352,028 1,159,487 1,661,688 0 14,253,359 2,563,003 0 1,360,215 4,457,613 300,000 384,994 4,587,740 0 0 94,200 210,200 0 53,612 0 4,165,000 14,253,359 1,577,053 103,682 1,175,533 1,278,621 298,432 3,333 301,765 99,973 206,896 8,682 198,214 130,200 91,492 684,096 0 0
State Income Taxes of $804 and Federal Income Taxes for Other Income of $594 were incorporated into this line item for FDS purposes. In the referenced financial statements, State Income Taxes are included in Taxes - Other and Federal Income Taxes for Other Income are included in Other Income - Miscellaneous.
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