-----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, P93Vy+WBeEk7jWyusGEVVZnaUmlmTNjC6kYosbtyiphi2fuLDFYlSMgv/HV3VhJY pw+x50jXohgpBU+am01KlA== 0000950123-94-000422.txt : 19940302 0000950123-94-000422.hdr.sgml : 19940302 ACCESSION NUMBER: 0000950123-94-000422 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 19931231 FILED AS OF DATE: 19940225 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PUBLIC SERVICE ENTERPRISE GROUP INC CENTRAL INDEX KEY: 0000788784 STANDARD INDUSTRIAL CLASSIFICATION: 4931 IRS NUMBER: 222625848 STATE OF INCORPORATION: NJ FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 34 SEC FILE NUMBER: 001-09120 FILM NUMBER: 94513222 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: 4931 IRS NUMBER: 222625848 STATE OF INCORPORATION: NJ FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 34 SEC FILE NUMBER: 001-00973 FILM NUMBER: 94513234 BUSINESS ADDRESS: STREET 1: 80 PARK PLZ STREET 2: PO BOX 570 CITY: NEWARK STATE: NJ ZIP: 07101 BUSINESS PHONE: 2014307000 10-K 1 FORM 10-K PSE&G, PS ENTERPRISES 1 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ FORM 10-K /X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1993 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 Identification No.) incorporation or organization) 80 PARK PLAZA, P.O. BOX 1171 07101-1171 NEWARK, NEW JERSEY (Zip Code) (Address of principal executive offices) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 201 430-7000 SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NAME OF EACH EXCHANGE TITLE OF EACH CLASS ON WHICH REGISTERED - ----------------------------------------------------------------- ---------------------------- New York Stock Exchange Common Stock without par value Philadelphia Stock Exchange
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 Identification No.) incorporation or organization) 80 PARK PLAZA, P.O. BOX 570 07101-0570 NEWARK, NEW JERSEY (Zip Code) (Address of principal executive offices)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 201 430-7000 DOCUMENTS INCORPORATED BY REFERENCE
PART OF FORM 10-K DOCUMENTS INCORPORATED BY REFERENCE - -------------------------------------------------------------------------------------------- III Portions of the definitive Proxy Statement for the Annual Meeting of Stockholders of Public Service Enterprise Group Incorporated to be held April 19, 1994, which definitive Proxy Statement is expected to be filed with the Securities and Exchange Commission on or about March 1, 1994, as specified herein.
- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NAME OF EACH EXCHANGE ON TITLE OF EACH CLASS TITLE OF EACH CLASS WHICH REGISTERED - ------------------------------ --------------------------- ------------------------ Cumulative Preferred Stock First and Refunding $100 par value Series: Mortgage Bonds Series Due: 4.08% 8 3/4% Z 1999 4.18% 9 3/4% AA 2020 4.30% 9 1/8% BB 2005 5.05% 9 1/4% CC 2021 5.28% 8 7/8% DD 2003 5.97% 8 3/4% EE 2021 6.80% 7 7/8% FF 2001 7.40% 7 1/8% GG 1997 7.52% 8 3/4% HH 2022 8.08% 7 5/8% II 2000 7.80% 6 % JJ 1995 7.70% 6 7/8% KK 1997 New York Stock Exchange 8.16% 8 1/2% LL 2022 7.44% 6 7/8% MM 2003 6 % NN 1998 Cumulative Preferred Stock 7 1/2% OO 2023 $25 par Series: 6 1/2% PP 2004 6 % QQ 2000 6.75% 6 1/8% RR 2002 7 % SS 2024 8 % 2037 5 % 2037
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
REGISTRANT TITLE OF CLASS ------------------------------------- ------------------------------------- Public Service Enterprise Group None Incorporated Public Service Electric and Gas 6.92% Cumulative Preferred Stock $100 Company par value
Indicate by check mark whether the registrants (1) have 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 registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days. Yes X No . ----- ---- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. X ----- The aggregate market value of the Common Stock of Public Service Enterprise Group Incorporated held by non-affiliates as of January 31, 1994 was $7,704,989,000 based upon the New York Stock Exchange Composite Transaction closing price. The number of shares outstanding of Enterprise's sole class of common stock, as of the latest practicable date, was as follows:
CLASS OUTSTANDING AT JANUARY 31, 1994 - --------------------------------------------- --------------------------------------------- Common Stock, without par value 243,737,149
As of January 31, 1994 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 Enterprise. 3 TABLE OF CONTENTS
PAGE ---- Table of Contents........................................................................ i Glossary of Terms........................................................................ iv PART I Item 1. Business.................................................................. 1 General................................................................... 1 Enterprise................................................................ 1 PSE&G..................................................................... 1 Industry Issues........................................................... 2 Competition............................................................... 2 Construction and Capital Requirements..................................... 5 PSE&G..................................................................... 5 EDHI...................................................................... 6 Financing Activities...................................................... 6 Federal Income Taxes...................................................... 7 Credit Ratings............................................................ 7 PSE&G..................................................................... 8 Rate Matters.............................................................. 8 Nuclear Performance Standard.............................................. 8 Electric Operations....................................................... 8 Nuclear Operations........................................................ 9 Other Nuclear Matters..................................................... 11 Pennsylvania -- New Jersey -- Maryland Interconnection.................... 11 Other Power Purchases..................................................... 11 DSM....................................................................... 12 Electric Fuel Supply...................................................... 13 Gas Operations............................................................ 16 Employee Relations........................................................ 17 Regulation................................................................ 17 Environmental Controls.................................................... 19 Air Pollution Control..................................................... 20 Water Pollution Control................................................... 21 Control of Hazardous Substances........................................... 24 Certain Operating Statistics of PSE&G..................................... 30 Electric.................................................................. 30 Gas....................................................................... 31 EDHI...................................................................... 32 EDC....................................................................... 32 CEA....................................................................... 32 PSRC...................................................................... 33 EGDC...................................................................... 33 Capital................................................................... 33 Funding................................................................... 34 Item 2. Properties................................................................ 34 PSE&G..................................................................... 34 Electric Properties....................................................... 35 Gas Properties............................................................ 36 Office Buildings and Facilities........................................... 36 Item 3. Legal Proceedings......................................................... 37 Item 4. Submission of Matters to a Vote of Security Holders....................... 37 Item 10. Executive Officers of the Registrants..................................... 37
i 4
PAGE ---- PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters..... 38 Item 6. Selected Financial Data................................................... 39 Enterprise................................................................ 39 PSE&G..................................................................... 39 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.............................................................. 40 Enterprise................................................................ 40 Overview.................................................................. 40 PSE&G Energy and Fuel Adjustment Clauses.................................. 41 Enterprise Earnings....................................................... 41 PSE&G..................................................................... 41 EDHI...................................................................... 42 Dividends................................................................. 42 Revenues.................................................................. 43 PSE&G Electric............................................................ 43 PSE&G Gas................................................................. 43 EDHI...................................................................... 44 PSE&G Electric Energy Costs............................................... 45 Gas Supply Costs.......................................................... 45 Liquidity and Capital Resources........................................... 46 PSE&G..................................................................... 46 EDHI...................................................................... 46 Construction, Investments and Other Capital Requirements Forecast......... 47 Internal Generation of Cash from Operations............................... 48 External Financings....................................................... 48 PSE&G..................................................................... 50 Gas Supply Costs.......................................................... 50 Liquidity and Capital Resources........................................... 51 Internal Generation of Cash from Operations............................... 51 Item 8. Financial Statements and Supplementary Data............................... 52 Financial Statement Responsibility (Enterprise)........................... 52 Financial Statement Responsibility (PSE&G)................................ 53 Independent Auditors' Report (Enterprise)................................. 54 Independent Auditors' Report (PSE&G)...................................... 55 Consolidated Statements of Income (Enterprise)............................ 56 Consolidated Balance Sheets (Enterprise).................................. 57 Consolidated Statements of Cash Flows (Enterprise)........................ 59 Consolidated Statements of Retained Earnings (Enterprise)................. 60 Consolidated Statements of Income (PSE&G)................................. 61 Consolidated Balance Sheets (PSE&G)....................................... 62 Consolidated Statements of Cash Flows (PSE&G)............................. 64 Consolidated Statements of Retained Earnings (PSE&G)...................... 65 Notes to Consolidated Financial Statements (Enterprise)................... 66 Notes to Consolidated Financial Statements (PSE&G)........................ 92
ii 5
PAGE ---- PART III Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.............................................................. 96 Item 10. Directors and Executive Officers of the Registrants....................... 96 Directors of the Registrants.............................................. 96 Enterprise................................................................ 96 PSE&G..................................................................... 96 Executive Officers of the Registrants..................................... 97 Item 11. Executive Compensation.................................................... 99 Enterprise................................................................ 99 PSE&G..................................................................... 99 Summary Compensation Table................................................ 100 Option Grants in Last Fiscal Year (1993).................................. 101 Aggregated Option Exercises in Last Fiscal Year (1993).................... 101 Employment Contracts and Arrangements..................................... 101 Compensation Committee Interlocks and Insider Participation............... 102 Compensation of Directors and Certain Business Relationships.............. 102 Compensation Pursuant to Pension Plans.................................... 102 Item 12. Security Ownership of Certain Beneficial Owners and Management............ 103 Enterprise................................................................ 103 PSE&G..................................................................... 103 Item 13. Certain Relationships and Related Transactions............................ 104 Enterprise................................................................ 104 PSE&G..................................................................... 104 PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.......... 105 Schedule V -- Property, Plant and Equipment (Enterprise)......................... 107 Schedule VI -- Accumulated Depreciation, Depletion and Amortization of Property, Plant and Equipment (Enterprise).................................................... 110 Schedule VIII -- Valuation and Qualifying Accounts (Enterprise)..................... 113 Schedule V -- Property, Plant and Equipment (PSE&G).............................. 114 Schedule VI -- Accumulated Depreciation, Depletion and Amortization of Property, Plant and Equipment (PSE&G)......................................................... 117 Schedule VIII -- Valuation and Qualifying Accounts (PSE&G).......................... 120 Signatures -- Public Service Enterprise Group Incorporated............................... 121 Signatures -- Public Service Electric and Gas Company.................................... 122 Exhibit Index............................................................................ 123 Enterprise.......................................................................... 124 PSE&G............................................................................... 130
iii 6 GLOSSARY OF TERMS The following is a glossary of frequently used abbreviations or acronyms that are found through this report:
TERM MEANING - ----------------------------------- -------------------------------------------------------- ACO................................ Administrative Consent Order Advisory Council................... Advisory Council on Electricity Planning and Procurement AFDC............................... Allowance for Funds used During Construction AMT................................ Alternative Minimum Tax Bonds.............................. First and Refunding Mortgage Bonds BRC................................ New Jersey Board of Regulatory Commissioners BTA................................ Best Technology Available CAA................................ Clean Air Act Capital............................ PSEG Capital Corporation CEA................................ Community Energy Alternatives Incorporated CEA USA............................ CEA USA, Inc. CEA New Jersey..................... CEA New Jersey, Inc. CERCLA............................. Federal Comprehensive Environmental Response, Compensation and Liability Act of 1980 CORP............................... New Jersey Commission on Radiation Protection DGW................................ Discharge to Ground Water DOE................................ United States Department of Energy DRBC............................... Delaware River Basin Commission DRIP............................... Enterprise's Dividend Reinvestment and Stock Purchase Plan DSM................................ Demand Side Management DSM Plan........................... DSM Incentive Resource Plan DSW................................ Discharge to Surface Water EBIT............................... Twelve months earnings before interest and taxes to interest ECRA............................... New Jersey Environmental Cleanup Responsibility Act EDC................................ Energy Development Corporation EDHI............................... Enterprise Diversified Holdings Incorporated EGDC............................... Enterprise Group Development Corporation EMF................................ Electric and Magnetic Fields Enterprise......................... Public Service Enterprise Group Incorporated EPA................................ United States Environmental Protection Agency EWG................................ Exempt Wholesale Generator FASB............................... Financial Accounting Standards Board FERC............................... Federal Energy Regulatory Commission Fuelco............................. PSE&G Fuel Corporation Funding............................ Enterprise Capital Funding Corporation FWPCA.............................. Federal Water Pollution Control Act GEMS............................... Gloucester Environmental Management Services, Inc. Hope Creek......................... Hope Creek Nuclear Generating Station IRP................................ Integrated Electric Resource Plan IRS................................ Internal Revenue Service Kwh................................ Kilowatthours LEAC............................... Electric Levelized Energy Adjustment Clause LGAC............................... Levelized Gas Adjustment Clause LLRW............................... Low Level Radioactive Waste LLRWPA............................. Low Level Radioactive Waste Policy Act LNG................................ Liquefied Natural Gas LPG................................ Liquid Petroleum Air Gas LTIP............................... Long-Term Incentive Plan
iv 7
TERM MEANING - ----------------------------------- -------------------------------------------------------- MD&A............................... Management's Discussion and Analysis of Financial Position and Results of Operations MICP............................... Management Incentive Compensation Plan Mortgage........................... First and Refunding Mortgage MTNs............................... Medium-Term Notes MW................................. Megawatts MWH................................ Megawatthours NAAQS.............................. National Ambient Air Quality Standards Need Assessment Act................ New Jersey Electric Facility Need Assessment Act NEIL............................... Nuclear Electric Insurance Limited NEPA............................... National Energy Policy Act NJAPCC............................. New Jersey Air Pollution Control Code NJDEPE............................. New Jersey Department of Environmental Protection and Energy NJGRT.............................. New Jersey Gross Receipts and Franchise Tax NJPDES............................. New Jersey Pollution Discharge Elimination System NJWPCA............................. New Jersey Water Pollution Control Act NOC................................ Nuclear Oversight Committee NOx................................ Nitrogen Oxides NPDES.............................. National Pollutant Discharge Elimination System Non-Jurisdictional Customer........ Electric resale customer whose rate schedule has been approved by FERC. Also includes off-system sales to other utilities NRC................................ Nuclear Regulatory Commission NUG................................ Nonutility Generators NWPA............................... Nuclear Waste Policy Act of 1982 OI................................. Nuclear Regulatory Commission's Office of Investigation OPEB............................... Other Postemployment Benefits PDER............................... Pennsylvania Department of Environmental Resources Peach Bottom....................... Peach Bottom Atomic Power Station, Unit 2 and 3 PECO............................... PECO Energy Inc. Penelec............................ Pennsylvania Electric Company PJM................................ Pennsylvania -- New Jersey -- Maryland Interconnection PJP................................ PJP Landfill in Jersey City, Hudson County, New Jersey PPUC............................... Pennsylvania Public Utility Commission Price Anderson..................... Price-Anderson liability provisions of the Atomic Energy Act of 1954, as amended PRPs............................... Potentially Responsible Parties PSE&G.............................. Public Service Electric and Gas Company PSCRC.............................. Public Service Conservation Resources Corporation PSRC............................... Public Service Resources Corporation PUHCA.............................. Public Utility Holding Company Act PURPA.............................. Public Utility Regulatory Policy Act of 1978 QFs................................ Qualifying Facilities RAR................................ Revenue Agent's Report RCRA............................... Federal Resource Conservation and Recovery Act of 1976 Remediation Program................ PSE&G Gas Plant Remediation Program RI/FS.............................. Remedial Investigation and Feasibility Study ROD................................ Record of Decision Salem.............................. Salem Nuclear Generating Station, Unit 1 and 2 SALP............................... Systematic Assessment of Licensee Performance SARA............................... Superfund Amendments and Reauthorization of 1986
v 8
TERM MEANING - ----------------------------------- -------------------------------------------------------- SEC................................ Securities and Exchange Commission SFAS 71............................ Statement of Financial Accounting Standards No. 71, "Accounting for the Effects of Certain Types of Regulations." SFAS 106........................... Statement of Financial Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions" SFAS 107........................... Statement of Financial Accounting Standards No. 107 "Disclosures About Fair Value of Financial Instruments" SFAS 109........................... Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" SNG Plant.......................... Synthetic Natural Gas Plant 636 Orders......................... Orders No. 636 and No. 636-A of FERC Spill Act.......................... New Jersey Spill Compensation and Control Act Standard........................... The BRC's nuclear performance standard established for nuclear generating stations owned by New Jersey utilities TRA-86............................. Tax Reform Act of 1986 TSF................................ Temporary Storage Facility USDOT.............................. United States Department of Transportation USEC............................... United States Enrichment Corporation
vi 9 PART I ITEM 1. BUSINESS. GENERAL ENTERPRISE Public Service Enterprise Group Incorporated (Enterprise), incorporated under the laws of the State of New Jersey with its principal executive offices located at 80 Park Plaza, Newark, New Jersey 07101, is a public utility holding company that neither owns nor operates any physical properties. Enterprise has two direct wholly-owned subsidiaries, Public Service Electric and Gas Company (PSE&G) and Enterprise Diversified Holdings Incorporated (EDHI). Enterprise's principal subsidiary, PSE&G, is an operating public utility providing electric and gas service in certain areas in the State of New Jersey. Enterprise has claimed an exemption from regulation by the Securities and Exchange Commission (SEC) as a registered holding company under the Public Utility Holding Company Act of 1935 (PUHCA), except for Section 9(a)(2) thereof which relates to the acquisition of voting securities of an electric or gas utility company. PSE&G is subject to direct regulation by the New Jersey Board of Regulatory Commissioners (BRC) and the Federal Energy Regulatory Commission (FERC). PSE&G has a nonutility finance subsidiary, PSE&G Fuel Corporation (Fuelco), providing financing not to exceed $150 million aggregate principal amount at any one time of a 42.49% undivided interest in the nuclear fuel acquired for Peach Bottom Atomic Power Station Units 2 and 3 (Peach Bottom) and guaranteed by PSE&G. PSE&G has also organized a nonutility subsidiary Public Service Conservation Resources Corporation (PSCRC) to offer Demand Side Management (DSM) services to utility customers. EDHI is the parent of Enterprise's other nonutility businesses: Energy Development Corporation (EDC), an oil and gas exploration, development, production and marketing company; Community Energy Alternatives Incorporated (CEA), an investor in and developer of cogeneration and power production facilities; Public Service Resources Corporation (PSRC), which makes diversified passive investments; Enterprise Group Development Corporation (EGDC), a diversified nonresidential real estate development and investment business; PSEG Capital Corporation (Capital), which has provided up to $750 million of privately-placed debt financing on the basis of a support agreement from Enterprise; and Enterprise Capital Funding Corporation (Funding), which provides privately-placed debt financing on the basis of the consolidated financial position of EDHI without direct support from Enterprise. As of December 31, 1993 and December 31, 1992, respectively, PSE&G comprised 86% and 83% of Enterprise's assets. For the years 1993, 1992 and 1991, PSE&G's revenues were 93%, 93% and 94%, respectively, of Enterprise's revenues and PSE&G's earnings available to Enterprise for such years were 96%, 88% and 95%, respectively, of Enterprise's net income. PSE&G will continue as the principal business of Enterprise for the foreseeable future. Financial information with respect to business segments of PSE&G and Enterprise is set forth in Note 15 -- Financial Information by Business Segments of Notes to Consolidated Financial Statements. PSE&G PSE&G, a New Jersey corporation with its principal executive offices at 80 Park Plaza, Newark, New Jersey 07101, is an operating public utility company engaged principally in the generation, transmission, distribution and sale of electric energy service and in the production, transmission, distribution and sale of gas service in New Jersey. PSE&G supplies electric and gas service in areas of New Jersey in which approximately 5,500,000 persons reside, approximately 70% of the State's population. PSE&G is Enterprise's principal operating subsidiary. (See General -- Enterprise.) PSE&G's electric and gas service area is a corridor of approximately 2,600 square miles running diagonally across New Jersey from Bergen County in the northeast to an area below the City of Camden in the southwest. The greater portion of the area is served with both electricity and gas, but some parts are served with electricity only and other parts with gas only. This heavily populated, commercialized and industrialized territory encompasses most of New Jersey's largest municipalities, including its six largest cities -- Newark, Jersey City, Paterson, Elizabeth, Trenton and Camden -- in addition to approximately 300 suburban and rural 1 10 communities. It contains a diversified mix of commerce and industry, including major facilities of many corporations of national prominence. Under the general laws of New Jersey, PSE&G has the right to use the public highways, streets and alleys in New Jersey for the erection, laying and maintenance of poles, conduits and wires necessary for its electric operations. PSE&G must, however, first obtain the consent in writing of the owners of the soil for the purpose of erecting poles. In incorporated cities and towns, PSE&G must obtain from the municipality a designation of the streets in which the poles are to be placed and the manner of placing them. PSE&G's rights are also subject to regulation by municipal authorities with respect to street openings and the use of streets for erection of poles in incorporated cities and towns. PSE&G, by virtue of a special charter granted by the State of New Jersey to one of its predecessors, has the right to use the roads, streets, highways and public grounds in New Jersey for pipes and conduits for distributing gas. PSE&G believes that it has all the franchises (including consents) necessary for its electric and gas operations in the territory it serves. Such franchises are non-exclusive. For discussion of the significant changes which PSE&G's electric and gas utility businesses have been and are undergoing, see Competition and Regulation. INDUSTRY ISSUES Enterprise and PSE&G are affected by many issues that are common to the electric and gas industries, such as: an increasingly competitive energy marketplace; sales retention and growth potential in a mature service territory and need to contain costs (see Regulation and Competition); deregulation and unbundling of energy supplies and services (see Competition); ability to obtain adequate and timely rate relief and other necessary regulatory approvals (see PSE&G -- Rate Matters and Regulation); costs of construction (see Construction and Capital Requirements and Competition); operating restrictions, increased costs and construction delays attributable to environmental regulations (see Environmental Controls); controversies regarding electric and magnetic fields (EMF); nuclear decommissioning and the availability of reprocessing and storage facilities for spent nuclear fuel (see Electric Fuel Supply); and credit market concerns with these issues. COMPETITION Overview The energy utility industry is an industry in transition. Changes in Federal law and regulation are encouraging new entrants to the traditional markets of electric and gas utilities. New technology is creating opportunity for new energy services. Customers are more aware and sophisticated about their choices and dissatisfied with the often limited range of options available from the local utility and are turning elsewhere. Competition has now arrived and, as a consequence, the traditional utility structure -- consisting of a vertically integrated system and functioning as a natural monopoly -- is being dramatically altered. Current Federal energy laws are designed to decrease oil imports by increasing production of non-conventional sources of domestic energy, making more efficient use of all energy and shifting the use of energy to more abundant domestic sources. Among other things, these laws are designed to (1) increase ceiling prices on newly-discovered natural gas, (2) encourage conservation of energy through certain financial incentives, including incentives by individual utilities to customers to help them to conserve energy, (3) require state regulatory authorities to consider certain standards on rate design and certain other utility practices, (4) require interconnections of power systems and wheeling of power for wholesale transactions and (5) encourage development of alternative energy generation. Federal and State laws designed to reduce air and water pollution and control hazardous substances have had the effect of increasing the costs of operation and replacement of existing utility plant. (See Environmental Controls.) Retention of existing customers and potential sales growth will depend upon the ability of 2 11 PSE&G to contain costs, meet customer expectations and respond to changing economic conditions. Competition from cogenerators and independent power producers (IPP), as permitted by PURPA, continues to impact upon PSE&G. Further, as a result of changes brought about by NEPA, discussed below, electric customers and suppliers, including PSE&G and its customers, have increased opportunities for purchase and sale of electricity from and to sellers and buyers outside of traditional franchised territories. Electric In the electric utility industry, competitive pressures began with the enactment of the Public Utility Regulatory Policies Act of 1978 ("PURPA"). This law, together with subsequent changes in federal regulation, has increasingly opened the electric utility industry to competition. PURPA created a class of generating facilities exempt from federal and state public utility regulation -- cogeneration and small power producers known as "qualifying facilities" (QFs) -- and created an instant market for them. The Federal Energy Policy Act of 1992 (NEPA), by facilitating the development of the independent power industry, will lead to even stronger competition. NEPA provides FERC with increased authority to order 'wheeling' of wholesale, but not retail, electric power on the transmission systems of electric utilities, provided that certain requirements are met. In order to facilitate the transition to increased competition in wholesale power markets made possible by NEPA, FERC has, in a Notice of Inquiry, requested comments on a wide array of policy and legal questions related to wholesale transmission pricing. NEPA also amends PUHCA to permit a new class of wholesale generators who are exempt from PUCHA regulation (EWG). NEPA permits both independent companies and utility affiliates to participate in the development of EWG projects regardless of the location and ownership of other generating resources. The transmission access provisions apply to wholesale, but not retail, 'wheeling' of power, subject to FERC review. See Construction and Capital Requirements, Financing Activities and Electric Operations -- Other Power Purchases and the discussion below of New Jersey Gross Receipts and Franchise Tax (NJGRT). For information concerning the activities of CEA, which is an owner-developer of QFs under PURPA, see EDHI -- CEA. Another key factor in determining how competition will affect PSE&G's electric business is the extent to which New Jersey public utility regulation may be modified to be reflective of these new competitive realities. To this end, the BRC convened an Advisory Council on Electricity Planning and Procurement (Advisory Council). The Advisory Council issued a report in July 1993 which recommended that the BRC institute a rulemaking proceeding to adopt rules for integrated resource planning. The Advisory Council could not reach agreement on a new process for supply-side procurement but suggested several general principles that the BRC should consider. The Advisory Council acknowledged in its report that, with the adoption of integrated resource planning and a new procurement process, the Electric Facility Need Assessment Act (Need Assessment Act) could be modified. Further, the Advisory Council recommended that the BRC consider the need for legislation to allow alternatives to traditional ratemaking. PSE&G cannot predict what other actions, if any, the BRC may take in response to these recommendations. (See Regulation and Note 2 -- Rate Matters of Notes to Consolidated Financial Statements). Gas The natural gas industry and its regulation have also been dramatically altered. This restructuring, which began in 1978, has occurred in a series of steps. In 1985, FERC issued Order 436 which generally required each interstate gas pipeline company to make its pipeline capacity available on an equal basis to all parties who wish to transport natural gas through the pipeline, if the pipeline company elected to provide transportation of natural gas for any party other than through a full certification procedure at FERC. In response to the United States Court of Appeals order overturning Order 436 in 1987, FERC issued subsequent orders adopting the same basic provisions as Order 436. With the issuance of its Order Nos. 636 and 636-A (636 Orders) the FERC has dramatically accelerated the pace at which the natural gas industry is being transformed from an industry driven by regulation to one driven by competitive market forces. The principal thrust of Orders 636 is to require interstate natural gas 3 12 pipelines to reconfigure their services such that services provided to third party shippers are fully comparable to the services that pipelines have historically provided in their role as gas merchants. To this end, Orders 636 required the unbundling of interstate pipeline services (i.e., transportation service and sales service bundled together for one price) in order to develop a more competitive interstate natural gas industry. While unbundling of services provides PSE&G with greater access to lower cost gas supplies, it also results in pipeline transition costs being borne by pipeline ratepayers and their customers. The 636 Orders also prohibit buy/sell transactions; essentially mandate the implementation of straight fixed/variable rate design (which allocates all of the pipeline's fixed costs to the demand portion of the rate); abolish capacity brokering programs; establish a right of first refusal mechanism for long-term, firm transportation contracts; and create a formal capacity release program. Currently, each pipeline has completed the restructuring of its services in order to comply with the 636 Orders. Furthermore, numerous parties have appealed the 636 Orders to the U.S. Court of Appeals for the Eleventh Circuit and for the D.C. Circuit. PSE&G has been granted status as an intervenor in these appeals. However, the appeals have not had the effect of staying the 636 Orders. PSE&G's gas business will also be affected by the extent to which New Jersey public utility regulation may be modified to be reflective of these new competitive realities. On November 10, 1993, the BRC adopted a proposal for the unbundling of traditional services provided by the local gas distribution companies within the State of New Jersey. The proposal was developed as a guideline with the intention of encouraging and promoting unrestricted access to natural gas and natural gas related services in New Jersey for all customer classes except, at this time, the residential end user. The guidelines are directed at developing a more competitive environment for the natural gas industry within the state. The action by the BRC requires that local distribution companies within New Jersey file modifications to their tariffs for gas service which comply with the guidelines by April 1, 1994. These regulatory changes, coupled with other economic factors, have made and are expected to make the gas supply business extremely competitive. However, the changes provide PSE&G, as a large pipeline customer, the opportunity to convert its remaining pipeline sales contracts to transportation agreements and purchase the natural gas supplies directly from a producer or other seller. Most of PSE&G's sales contracts have been converted during the past year. Fluctuation in the price of oil results in the loss of gas sales, at certain times, to customers with dual fuel capability. In addition, other companies supply gas service in certain portions of PSE&G's electric territory and others supply electricity in parts of PSE&G's gas service area. Also, as discussed above, as a result of deregulation, pipeline customers, such as PSE&G, have the opportunity to convert a portion of their pipeline sales contracts to transportation agreements and purchase the natural gas supplies directly from a producer or other seller of natural gas, increasing competition in the gas market by encouraging pipelines to act as non-discriminatory transporters of natural gas. Aggressive competition in the gas supply business is expected to continue. Customers As of December 31, 1993, PSE&G provided service to approximately 1,900,000 electric customers and 1,500,000 gas customers. PSE&G is not dependent on a single customer or a few customers for its electric or gas sales. For the year ended December 31, 1993, PSE&G's operating revenues aggregated $5.3 billion, of which 70% was from its electric operations and 30% from its gas operations. These revenues were derived as follows:
ELECTRIC GAS --------- --- Residential................................................ 33% 53 % Commercial................................................. 43 32 Industrial................................................. 21 13 Transportation Service Gas................................. -- 1 Other...................................................... 3 1 --- --- Total................................................. 100% 100% --- --- --- ---
4 13 In July 1993, PSE&G and its largest industrial customer submitted a proposed electric tariff modification to the BRC, providing for a $9 million or 23% rate discount, with PSE&G's shareholders absorbing $2.4 million or 27% of the discount. The proposed tariff modification was designed to dissuade the customer from buying its electricity supply from a third party nonutility generator. In December 1993, following extensive proceedings, the BRC recognized the need for flexible pricing in a competitive market, approved the requested discount but required PSE&G's shareholders to absorb $3.8 million or 42% of such discount. The decision allows PSE&G a special tariff for certain large customers. Customers of PSE&G, as well as those of other New Jersey electric and gas utilities, pay NJGRT which, in effect, adds approximately 13% to their bills. The NJGRT is a unit tax based on electric kilowatt hour and gas therm sales. This tax differential coupled with the increasing ability of large volume electric and gas companies to obtain their energy supplies from nonutility sources not subject to NJGRT could result in a significant decrease in PSE&G's revenues and earnings. PSE&G's business is seasonal in that sales of electricity are higher during the summer months because of air conditioning requirements and sales of gas are greater in the winter months due to the use of gas for space-heating purposes. CONSTRUCTION AND CAPITAL REQUIREMENTS PSE&G 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 customer load and peak growth and the sources of electric generating capacity load and DSM to meet such projected growth (see DSM). The IRP takes into account assumptions concerning future customer demand, effectiveness of conservation and load management activities, the long-term condition of and projected additions to PSE&G's plants and capacity available from electric utilities and other non-utility suppliers. Based on PSE&G's current IRP and PSE&G's construction program, construction expenditures are expected to aggregate approximately $4.2 billion during the years 1994 through 1998, including $483 million for nuclear fuel and $133 million of allowance for funds used during construction (AFDC) and capitalized interest. For additional information, see Management's Discussion and Analysis of Financial Position and Results of Operation (MD&A) -- Liquidity and Capital Resources and Note 12 -- Commitments and Contingent Liabilities -- Construction and Fuel Supplies of Notes to Consolidated Financial Statements. PSE&G's estimate of its electric construction expenditures, including AFDC, for the years 1994 through 1998, described above, recognizes the current and planned results of PSE&G's IRP which is designed to reduce the rate of growth in its electric system peak demand and improve system load factor without restricting the continued economic development of PSE&G's service area. PSE&G's DSM Plan includes rebates for high efficiency appliances and heating equipment, audits, loans, seal-ups and for larger customers, an overall standard offer for eligible DSM end-users. PSE&G's 1993 IRP includes a demand forecast of the average compound annual rate of growth through the year 2003 of electric system peak demand of 1.1%. (See PSE&G -- Other Power Purchases and DSM.) Aggressive conservation and load management efforts are expected to reduce the system peak by 860 megawatts (MW) by 1998. By the year 2003, 1,323 MW are expected to be saved through these programs. The second component of PSE&G's consists of expected additions to nonutility generation (NUG) from cogenerators, independent power producers and refuse burning generators. These additions are projected to be 139 MW and are scheduled for service by 1998. NUG projects are expected to grow from approximately 4% of 5 14 efficient additions at Bergen Generating Station would allow PSE&G to retire approximately 750 MW of older, less efficient generating units by 2000, if economically and environmentally desirable. (See Note 12 -- Commitments and Contingent Liabilities of Notes to Consolidated Financial Statements.) In addition, PSE&G's construction program is also focusing on upgrading electric and gas transmission and distribution systems and constructing new transmission and distribution facilities to serve new load. Gross additions to PSE&G's utility plant during the three-year period ended December 31, 1993 amounted to approximately $2.5 billion, including $83 million of AFDC. Retirements of utility plant for the same period totaled $500 million. In 1993, construction expenditures amounted to $890 million, including $27 million of AFDC. Retirements for 1993 aggregated $102 million. EDHI Following a 1992 focused audit (see Regulation) of Enterprise's nonutility businesses which concluded that such businesses had not harmed PSE&G, in April 1993, the BRC accepted a Focused Audit Implementation Plan in which Enterprise agreed, among other things, that it will not permit its investments in EDHI, as defined in the agreement, to exceed 20% of its consolidated assets without prior notice to the BRC and that debt supported by a support agreement (see Financing Activities) between Enterprise and Capital will be limited to $750 million, with a good faith effort to eliminate such support over the next six to ten years. (See Regulation and MD&A -- Liquidity and Capital Resources.) As of December 31, 1993 and 1992, respectively, EDHI's long-term investments and property, plant and equipment were as follows:
1993 1992 ------ ------ (MILLIONS OF DOLLARS) Long-Term Investments: (net of valuation allowances) PSRC..................................................... $1,277 $1,396 CEA...................................................... 207 153 EGDC..................................................... 30 29 ------ ------ 1,514 1,578 ------ ------
Property, Plant and Equipment (net of accumulated depreciation and amortization and valuation allowances):
1993 1992 ------ ------ (MILLIONS OF DOLLARS) EDC...................................................... 506 507 EGDC..................................................... 91 203 PSRC..................................................... 20 22 Other.................................................... 2 2 ------ ------ 619 734 ------ ------ Total............................................ $2,133 $2,312 ------ ------ ------ ------
For further discussion of capital requirements, investments and internal generation of cash from operations, see MD&A -- Liquidity and Capital Resources, and Note 7 -- Long-Term Investments, of Notes to Consolidated Financial Statements. For a discussion of sinking fund payments and maturities through 1998 see Note 6 -- Schedule of Consolidated Long-Term Debt. FINANCING ACTIVITIES For a discussion of issuance, book value and market value of Enterprise's Common Stock and external financing activities of Enterprise, PSE&G and EDHI for the year 1993, see MD&A -- Liquidity and Capital Resources. Enterprise's Common Stock is listed on the New York and Philadelphia Stock Exchanges. 6 15 In 1988, Enterprise entered into a support agreement with Capital which provides, among other things, that Enterprise (i) maintain its ownership, directly or indirectly, of all outstanding common stock of Capital, (ii) cause Capital to have at all times a positive tangible net worth of at least $100,000 and (iii) make sufficient contributions of liquid assets to Capital in order to permit it to pay its debt obligations. Capital borrows on behalf of EDC, CEA, PSRC and EGDC and Funding borrows on behalf of EDC, CEA and PSRC. Capital and Funding enter into financial agreements with banks and other lenders in providing funds to the operating subsidiaries. The operating subsidiaries generate cash from operating activities and short-term investments are made on behalf of the operating subsidiaries only if such funds cannot be employed in intercompany loans. Intercompany borrowing rates are established with reference to market rates of interest at Capital's and Funding's respective cost of funds. As of December 31, 1993, EDHI's consolidated long-term debt and short-term commercial paper and loan debt was $892 million and $151 million, respectively. For further discussion of long-term debt and short-term debt, see Note 11 -- Short-Term Debt (Commercial Paper and Loans) and Note 12 -- Schedule of Long-Term Debt of Notes to Consolidated Financial Statements. FEDERAL INCOME TAXES For information regarding Federal income taxes, see Note 1 -- Organization and Summary of Significant Accounting Policies, Note 2 -- Rate Matters and Note 9 -- Federal Income Taxes of Notes to Consolidated Financial Statements. CREDIT RATINGS The current ratings of securities of Enterprise's subsidiaries set forth below reflect the respective views of the rating agency furnishing the same, from whom an explanation of the significance of such ratings may be obtained. There is no assurance that such ratings will continue for any given period of time or that they will not be revised downward or withdrawn entirely by such rating agencies, if, in their respective judgment, circumstances so warrant. Any such downward revision or withdrawal of such ratings, or any of them, may have an adverse effect on the market price of Enterprise's Common Stock and PSE&G's securities and serve to increase the cost of capital of PSE&G and EDHI.
STANDARD DUFF PSE&G MOODY'S & POOR'S & PHELPS ------------------------------------------------------- ------- -------- -------- Mortgage Bonds......................................... A2 A- A Debenture Bonds........................................ A3 BBB+ A- Preferred Stock........................................ A3 BBB+ A- Commercial Paper....................................... P1 A2 Duff 1 Fuelco: Commercial Paper....................................... P1 A2 Duff 1 EDHI ---- Capital: Senior Debt............................................ Baa2 BBB BBB+ Funding: Commercial Paper(A).................................... P1 A1+ Duff 1+
(A) Supported by commercial bank letter of credit (see MD&A and Note 11 -- Short-Term Debt (Commercial Paper and Loans) of Notes to Consolidated Financial Statements.) 7 16 PSE&G RATE MATTERS For information concerning PSE&G's rate matters, see Note 2 -- PSE&G Rate Matters of Notes to Consolidated Financial Statements. For information concerning PSE&G Energy and Fuel Adjustment Clauses, see MD&A. For information concerning PSE&G's Under (Over) recovered Electric Energy and Gas Fuel Costs, see Note 5 -- Deferred Items of Notes to Consolidated Financial Statements. NUCLEAR PERFORMANCE STANDARD PSE&G is subject to a BRC imposed nuclear performance standard with respect to the five nuclear generating stations in which it has ownership interests: Salem 1 and Salem 2 -- 42.59% each; Hope Creek -- 95% and Peach Bottom 2 and Peach Bottom 3 -- 42.49% each. PSE&G operates Salem and Hope Creek and Peach Bottom is operated by PECO Energy Inc., formerly known as Philadelphia Electric Company, (PECO). The following table sets forth the capacity factor in accordance with the nuclear performance standard of each of PSE&G's nuclear units for the years indicated:
NUCLEAR UNITS 1993 1992 1991 --------------------------------------------------------------- ---- ---- ---- Capacity Factors: Salem 1...................................................... 60% 54% 70% Salem 2...................................................... 57% 49% 82% Hope Creek................................................... 95% 76% 80% Peach Bottom 2............................................... 84% 61% 55% Peach Bottom 3............................................... 70% 80% 57% Aggregate capacity factor of nuclear units..................... 77% 66% 71%
For information concerning such standard, see Note 12 -- Commitments and Contingent Liabilities of Notes to Consolidated Financial Statements. ELECTRIC OPERATIONS The following table sets forth certain information as to PSE&G's installed generating capacity as of December 31, 1993:
INSTALLED SOURCE CAPACITY(MW) PERCENTAGE ----------------------------------------------------------- ------------ ---------- Conventional Steam Electric Oil-fired(a)............................................. 2,359 23 Coal-fired New Jersey(b)................................. 1,227 12 Coal-fired Pennsylvania (mine mouth)(c).................. 770 7 Combustion Turbine(d)...................................... 2,872 27 Combined Cycle............................................. 249 2 Diesel(c).................................................. 5 Nuclear(c) New Jersey............................................... 1,921 18 Pennsylvania............................................. 886 9 Pumped Storage(c)(d)....................................... 190 2 ------------ --- Total(e)......................................... 10,479 100 ------------ --- ------------ ---
(a) Units with aggregate capacity of 1,406 MW can also burn gas. (b) Can also burn gas. (c) PSE&G share of jointly-owned facilities. 8 17 (d) Primarily used for peaking purposes. (e) Excludes 583 MW of nonutility generation contracted for purchase by PSE&G. For additional information, see Item 2. Properties -- PSE&G -- Electric Properties. The capacity available at any time may be less than the installed capacity because of temporary outages for inspection, maintenance, repairs, legal and regulatory requirements or unforeseen circumstances. The maximum one-hour demand (peak load) which PSE&G experienced in 1993 was 9,147 MW (a record) which occurred on July 8, 1993 when PSE&G's customers used a total of 180,643 megawatthours (MWH) of electricity. (For information concerning sales, output and capacity factors, see Certain Operating Statistics.) The peak load in 1992 was 8,445 MW on July 14, 1992, when the day's output was 157,795 MWH of electricity. For additional information see Pennsylvania -- New Jersey -- Maryland Interconnection. NUCLEAR OPERATIONS Operation of nuclear generating units involves continuous close regulation by the Nuclear Regulatory Commission (NRC). Such regulation involves testing, evaluation and modification of all aspects of plant operation in light of NRC safety and environmental requirements and continuous demonstrations to the NRC that plant operations meet applicable requirements. The NRC has the ultimate authority to determine whether any nuclear generating unit may operate. For information concerning the performance of the nuclear units, see Nuclear Performance Standard. The scheduled 1994, 1995, and 1996 refueling outages, each estimated at eight to ten weeks duration, for PSE&G's five licensed nuclear units are expected to commence in the following months:
REFUELING OUTAGES ----------------------------------------------- 1994 1995 1996 ------------- ------------- ------------- Salem 1............................... -- March September Salem 2............................... September -- March Hope Creek............................ March September -- Peach Bottom 2........................ September -- September Peach Bottom 3........................ -- September --
Salem The outage of a Salem unit causes PSE&G to incur replacement power costs of approximately $4 million to $6 million per month. Such amounts vary, however, depending upon the availability of other generation, the cost of purchased energy and other factors including modifications to maintenance schedules of other units. On September 1, 1993, the NRC furnished PSE&G with its latest periodic Systematic Assessment of Licensee Performance (SALP) report on Salem for the period between December 29, 1991 and June 19, 1993. Salem received a rating "1", the highest rating category, in three functional areas, and received a rating of "2" in the four remaining areas. The NRC noted an improvement over the last rating period in the Radiological Controls area and a declining trend in the Emergency Preparedness area with good performance overall. In order to improve Salem's materiel condition, plant and personnel performance and address the NRC's concerns expressed in its October 1990 SALP report, the Salem owners, including PSE&G, are in the process of augmenting plans to improve Salem's materiel condition, upgrade procedures and enhance personnel performance. PSE&G's share of the plan's capital requirements are reflected in the current estimate of nuclear construction capital requirements for the period 1994-1998. (See MD&A -- Liquidity and Capital Resources.) The planned improvements are expected to coincide with plant operating schedules over such five-year period. (See PSE&G -- Nuclear Performance Standard.) 9 18 Hope Creek An outage at Hope Creek causes PSE&G to incur replacement energy costs of approximately $10 million to $16 million per month. Such amounts vary, however, depending upon the availability of other generation, the cost of purchased energy and other factors including modifications to maintenance schedules of other units. On September 1, 1993, the NRC furnished PSE&G with its latest periodic SALP report on Hope Creek for the period between December 29, 1991 and June 19, 1993. Hope Creek received a rating "1", the highest rating category, in six functional areas, and received a rating of "2" in the one remaining area. The NRC noted an improvement over the last rating period in the Maintenance/Surveillance and Engineering/Technical Support areas and a declining trend in the Emergency Preparedness area, with excellent performance overall. As a result of an NRC inspection in July 1991 at Hope Creek, an enforcement conference was held with the NRC on September 9, 1991 to discuss, among other things, three potential violations relating to reports PSE&G submitted to the NRC regarding reliability of motor operated valves at Hope Creek. Two violations with no civil penalty were issued to PSE&G on October 10, 1991. The third potential violation was investigated by the NRC's Office of Investigation (OI). By letter dated October 20, 1993, the NRC advised PSE&G that OI concluded that the PSE&G reports on motor operated valves which were the subject of its investigation were incomplete and contained inaccurate information. An enforcement conference was conducted on December 20, 1993 to review this matter. PSE&G presented its position on the issues to demonstrate that the reports were complete and accurate and that no violation had occurred. PSE&G cannot predict what actions, if any, the NRC may take in this matter. Peach Bottom The outage of a Peach Bottom unit causes PSE&G to incur additional replacement energy costs of approximately $4 million to $6 million per month per unit. Such amounts vary, however, depending upon the availability of other generation, the cost of purchased energy and other factors including modifications to maintenance schedules of other units. On March 19, 1993, the NRC issued its SALP Report on the performance of activities at Peach Bottom for the period August 4, 1991 through October 31, 1992. Peach Bottom earning a rating of '1', the highest rating category, in each of the areas of emergency preparedness and security and safeguards. The areas of plant operations and radiological controls received a rating of '2' improving. Each of the other three functional areas received a rating of '2'. Except for the rating in the areas of plant operations and radiological controls (each previously rated '2'), these were the same ratings as those received in the prior SALP Report. The SALP Report further stated that many of the programmatic weaknesses identified during the previous assessment period have either been eliminated or performance has been improved. The SALP Report stated that fundamental problems with the quality of root-cause analysis noted during the last two periods have been resolved and that Peach Bottom's root-cause analysis capabilities now constitute a strength. In addition, the SALP Report stated that licensed operators staffing and training continued to strengthen, contributing to improved plant operations performance. This assessment also highlighted several areas needing improvement. Increased management attention is needed to address weaknesses in plant performance monitoring and engineering and technical support. Enterprise and PSE&G have been advised by PECO that by letter dated June 23, 1993, PECO submitted a request to the NRC to rerate the authorized maximum reactor core power level of both Peach Bottom units by 5% from 3,293 megawatts thermal (Mwt) to 3,458 Mwt. The analyses and evaluations supporting this request were completed using generic guidelines approved by the NRC. If the request is approved, the associated hardware changes will be implemented on Peach Bottom 2 during its planned 1994 refueling outage and on Peach Bottom 3 during its planned 1995 refueling outage. 10 19 OTHER NUCLEAR MATTERS As a by-product of their operations, nuclear generating units, including those in which PSE&G owns an interest, produce low level radioactive waste (LLRW). Such wastes include rags, plastic, paper and other materials of which proper disposal must be made. Such materials are presently accumulated on site and shipped to a federally licensed permanent disposal facility. Under provisions of the federal Low Level Radioactive Waste Policy Act, as amended, (LLRWPA), access to such federally licensed facilities may be, but has not been, denied. The LLRWPA further requires that each state must provide for disposal of LLRW by January 1, 1996. To date, New Jersey has complied with the LLRWPA by entering into a compact with the State of Connecticut and certifying its capability to manage, store or dispose of LLRW requiring disposal. PSE&G has been advised that to date Pennsylvania has met such requirements by entering into a compact with West Virginia, Maryland, Delaware and the District of Columbia. In June 1991, New Jersey enacted legislation providing for funding of the estimated $80 million cost of establishing such facility by 1998. The LLRWPA will permit the State to recover the costs of such facility through fees paid by LLRW generators. PSE&G's overall share is expected to be 30% to 40% of the estimated total $80 million. PSE&G is currently disposing of its LLRW at a disposal facility in Barnwell, S.C., which is expected to remain available to PSE&G through June 1994 as long as certain contract conditions are met. After such time, and until New Jersey provides for the disposal of LLRW, PSE&G must provide on-site storage facilities. A LLRW storage facility to be operational in 1994 is under construction by PSE&G for Salem and Hope Creek radioactive waste. PENNSYLVANIA -- NEW JERSEY -- MARYLAND INTERCONNECTION PSE&G is a member of the Pennsylvania -- New Jersey -- Maryland Interconnection (PJM) which integrates the bulk power generation and transmission supply operations of eleven utilities in Pennsylvania, New Jersey, Delaware, Maryland, Virginia and the District of Columbia and, in turn, is interconnected with other major electric utility companies in the northeastern part of the United States. The PJM is operated as one system and provides for the purchase and sale of power among members on the basis of reliability of service and operating economy. As a result, the most economical mix of generating capability available is used to meet PJM daily load requirements and PSE&G's output, as shown under Electric Fuel Supply, reflects purchased power because at times it is more economical for PSE&G to purchase power from PJM and others than to produce it. As of December 31, 1993, the aggregate installed generating capacity of the PJM companies was 55,575 MW. The peak one-hour demand experienced by the PJM power pool was 46,429 MW which occurred on July 8, 1993. The 1993 peak was 559 MW higher than the previous peak of 45,870 MW, which occurred on July 23, 1991. PSE&G's capacity obligations to the PJM system vary from year to year due to changes in system characteristics. PSE&G expects to have sufficient installed capacity to meet its obligations during the 1994-95 period. A sustained cold wave swept across the Midwest and through the Mid-Atlantic states during the week of January 17, 1994. Faced with customer demands that far exceeded expectations and cold weather related problems with their generators and fuel supplies, PJM's utility companies imported large blocks of power over their transmission systems from utilities throughout the Eastern Interconnection System. The Eastern Interconnection System, of which PJM is a member, had forecast a maximum one-hour demand on its system of 334,000 MW, while the actual demand was 375,000 MW. In order to protect the reliability of its bulk electric supply system, PJM had to institute emergency procedures, including a 5% voltage reduction, as well as rolling blackouts, to certain firm customers. During this week, the peak one-hour demand experienced by the PJM power pool was 41,351 MW, which occurred on January 18, 1994. OTHER POWER PURCHASES As previously noted, an element of PSE&G's IRP is the purchase of electricity directly from certain utilities and NUGs. During 1993, PSE&G purchased approximately 21.1% of its total electric output from these sources, with NUGs providing 9.4% of PSE&G's total electrical energy. Two-party purchases are expected to provide about 15% of such requirements by 1998 as resource recovery, cogeneration and other 11 20 NUG facilities are constructed. Such two-party purchases reflect an increase in NUGs and a decrease in net utility purchases. PSE&G is also a party to the Mid-Atlantic Area Coordination Agreement which provides for review and evaluation of plans for generation and transmission facilities and other matters relevant to reliability of the bulk electric supply systems in the Mid-Atlantic area. PSE&G expects to be able to continue to meet the demand for electricity on its system through operation of available equipment and by power purchases. However, if periods of unusual demand should coincide with outages of equipment, PSE&G could find it necessary at times to reduce voltage or curtail load in order to safeguard the continued operation of its system. DSM As previously indicated, PSE&G is increasingly relying on DSM as an integral part of its IRP. In order to encourage DSM, the BRC adopted rules in late 1991 providing special incentives to encourage utilities to offer these load management conservation services. The rules are designed to place DSM on an equal footing with supply side or energy production investments. Both NEPA and the New Jersey Energy Master Plan call for conservation to play a significant role in meeting New Jersey's energy needs over the coming decade. PSE&G's DSM Incentive Resource Plan (DSM Plan) has been approved by the BRC. The IRP calls for PSE&G to utilize conservation and DSM to meet over half of incremental resource needs for the next decade. (See Construction and Capital Requirements.) PSE&G's DSM Plan is designed to encourage investment in energy-saving DSM activities in New Jersey. These activities involve new techniques and technologies, such as high-efficiency lighting and motors, that help reduce customer demand for energy. The DSM Plan presents a two-phase approach -- a core program that includes many of the conservation programs now available to customers and a performance-based program that would offer payments for introducing DSM technology and services that result in measurable energy savings. The performance-based proposal uses a standard offer technique that would provide direct payments for kilowatthours of electricity and therms of gas saved through investments in DSM. Over the first two years, the DSM Plan is designed to save about 150 megawatts of peak load capacity and about six million therms of natural gas. PSE&G's current electric resource/demand forecast projects 607 MW of passive DSM and 806 MW of active DSM required by the year 2004. In December 1992, the BRC approved the recovery by PSE&G of all of its DSM Plan costs through its Levelized Energy Adjustment Clause (LEAC) and Levelized Gas Adjustment Clause (LGAC). In addition, PSE&G may recover through its LEAC and LGAC lost revenues associated with the reduced consumption of electricity and natural gas. See Note 2 -- Rate Matters of Notes to Consolidated Financial Statements. PSE&G has established PSCRC to offer DSM services to utility customers. 12 21 ELECTRIC FUEL SUPPLY The following table indicates PSE&G's kilowatthour (Kwh) output by source of energy:
ACTUAL ESTIMATED SOURCE 1993 1994 ------------------------------------------------------------------ ------ --------- Nuclear New Jersey facilities........................................... 32% 29% Pennsylvania facilities......................................... 15 14 Fossil Coal New Jersey facilities........................................ 9 9 Pennsylvania facilities...................................... 13 12 Natural Gas..................................................... 5 8 Residual Oil.................................................... 1 1 Net PJM Interchange............................................... 4 5 Two-Party Purchases (Including NUGs).............................. 21 22 ------ --- Total................................................... 100% 100% ------ --- ------ ---
PSE&G's cost of fuel used to generate electricity in the periods shown below was as follows:
COAL ------------------------------------------ NEW JERSEY PENNSYLVANIA NATURAL NUCLEAR OIL FACILITIES FACILITIES GAS ------- ------------------- ------------------ ------------------ ------- CENTS/ CENTS/ CENTS/ CENTS/ CENTS/ MILLION $/ MILLION MILLION MILLION MILLION YEAR BTU BARREL BTU $/TON BTU $/TON BTU BTU - ---- ------- ------ ------- ----- ------- ----- ------- ------- 1991 63.3 23.51 383.6 60.10 221.8 42.52 172.3 186.1 1992 60.8 21.70 351.7 58.24 214.0 32.98 133.4 207.4 1993 59.3 23.44 384.5 55.45 203.8 33.73 136.6 221.7
Substantially all of PSE&G's electric sales are made under rates which are designed to permit the recovery of increases in energy costs over base costs on a current annual basis. (See PSE&G -- Rate Matters -- Adjustment Clauses.) Oil PSE&G uses residual oil in its conventional fossil-fired, steam-electric units. The supply of residual oil is furnished by one contract supplier, which contract expires December 31, 1994, supplemented by occasional spot market purchases. PSE&G uses distillate fuel in its combustion turbines which is acquired by spot market purchases. PSE&G does not presently anticipate any difficulties in obtaining oil supplies. Natural Gas PSE&G utilizes surplus gas, available from its long-term, high load factor gas contracts and from various short-term purchases, to replace other fuels for electric generation. In October 1990, the BRC approved a Stipulation whereby the method of pricing natural gas to the electric department of PSE&G was set at a rate consisting of a fixed contribution to rates of firm gas customers of $2.4 million per month and a variable charge equal to the cost of gas to PSE&G's gas department plus $0.01 for each dekatherm of natural gas used as fuel for electric generation. This rate is subject to change by the BRC as part of PSE&G's LGAC. (See PSE&G Rate Matters.) Presently, there are no effective legal restrictions on the use of natural gas for electric generation in existing plants. However, approval by FERC is required for the interstate transportation of natural gas, either by virtue of existing blanket authority or through individual proceedings. (See Competition and Gas Supply.) 13 22 Coal Approximately 40% of PSE&G's coal supply for its New Jersey facilities is obtained under a contract which expires in 1999. The balance of the supply is contracted on an annual basis from various suppliers, many of whom PSE&G has dealt with on a continuing basis for a number of years, and is supplemented by spot market purchases. Since 1971, the New Jersey Air Pollution Control Code (NJAPCC) has permitted the burning of coal with a sulfur content of up to 1% at existing coal-fired generating stations including PSE&G's three coal-fired New Jersey units, Hudson 2 and Mercer 1 and 2. The weighted monthly average sulfur content of the coal received at Hudson Station and at Mercer Station must not exceed 1.0% (dry weight basis). PSE&G has been able to obtain sufficient quantities of 1% or less sulfur coal and does not presently anticipate any difficulties in obtaining adequate coal supplies to replace expiring contracts. (See Environmental Controls -- Air Pollution Control). PSE&G has approximately a 23% interest in the Keystone and Conemaugh coal-fired generating stations located in western Pennsylvania and operated by Pennsylvania Electric Company (Penelec). At least 67%, optionally up to 100%, of the fuel required by the Keystone station is supplied by one coal company under a contract which expires December 31, 2004. At least 20% of the fuel required by Conemaugh station is supplied by another coal company under a contract which expires on December 31, 1997. In addition, approximately 50% of Conemaugh's coal requirements is supplied under a mix of short-term contracts which expire on September 30, 1994 and January 31, 1995. The balance of the fuel requirements for each station is supplied through spot purchases obtained from local suppliers. Penelec has advised PSE&G that it does not expect any difficulties in obtaining adequate coal supplies. (See Environmental Controls). Nuclear Fuel The supply of fuel for nuclear generating units involves the mining and milling of uranium ore to uranium concentrate, conversion of the uranium concentrate to uranium hexafluoride, enrichment of that gas, conversion of the enriched gas to fuel pellets and fabrication of fuel assemblies. After spent fuel is removed from a nuclear reactor, it is placed in temporary storage for cooling in a spent fuel pool at the nuclear station site. Under the Nuclear Waste Policy Act of 1982, as amended, (NWPA), the Federal government has a contractual obligation for transportation and ultimate disposal of the spent fuel, as discussed below. PSE&G has several long-term contracts with ore operators to process uranium ore to uranium concentrate to meet the current projected requirements for the Salem and Hope Creek units fully through the year 2000 and, thereafter, 60% of their requirements through the year 2002. Present contracts for conversion, enrichment and fabrication services meet the fuel cycle requirements for Salem and Hope Creek units through the years shown in the following table:
NUCLEAR UNIT CONVERSION ENRICHMENT FABRICATION ---------------------------------------------- ---------- ---------- ----------- Salem 1....................................... 2000 (1) 2004 Salem 2....................................... 2000 (1) 2005 Hope Creek.................................... 2000 (1) 2000
(1) 100% coverage through 1998 and, 30% through 2001. PSE&G has exercised its option to remain uncommitted under the United States Enrichment Corporation (USEC) enrichment contract from 1999 -- 2002; however, this action does not exclude USEC enrichment services from consideration in this period. PSE&G does not anticipate any difficulties in obtaining necessary enrichment service for its Salem and Hope Creek units. As a result of NEPA, all utilities owning nuclear units will be responsible to co-fund with the United States Government a decontamination and decommissioning fund for the United States Department of Energy (DOE) enrichment facilities. Both PSE&G and PECO are responsible for making annual payments into this fund through 2008, with payments based on enrichment services purchased. (See Note 3 -- PSE&G Nuclear Decommissioning and Amortization of Nuclear Fuel). 14 23 PSE&G has been advised by PECO that it has contracts for uranium concentrates which will satisfy the fuel requirements of Peach Bottom 2 and 3 through 1996. PSE&G has also been advised by PECO that its contracts for uranium concentrates will be allocated to Peach Bottom 2 and 3, and two other nuclear generating units in which PSE&G does not have an interest, on an as needed basis. PECO has also advised PSE&G that it has contracted for the following segments of the nuclear fuel supply cycle for Peach Bottom 2 and 3 through the following years:
NUCLEAR UNIT CONVERSION ENRICHMENT FABRICATION ---------------------------------------------- ---------- ---------- ----------- Peach Bottom 2................................ 1997 2008 1999 Peach Bottom 3................................ 1997 2008 1998
PECO has exercised an option under its current enrichment contract to terminate enrichment services for the years 2000 thru 2002 for Peach Bottom and another of its nuclear facilities. The Federal government's present policy is that spent nuclear fuel will be accepted for long-term storage at government-owned and operated repositories. At present no such repositories are in service. In conformity with the NWPA, PSE&G entered into contracts with the DOE for the disposal of spent nuclear fuel from Salem and Hope Creek. Similarly, PECO contracted with the DOE in connection with Peach Bottom 2 and 3. Under these contracts, the DOE will take title to the spent fuel at the site, then transport it and provide for its permanent disposal at a cost to utilities with nuclear facilities of one mil per Kwh of nuclear generation, subject to such escalation as may be required to assure full cost recovery by the Federal government. In addition, a one-time payment was made to the DOE for permanently discharged spent fuels irradiated prior to 1983. Under this legislation, the Federal government must commence the acceptance of these materials for permanent off-site storage no later than 1998. In December 1989, the DOE announced that it would not be able to open a permanent, high-level nuclear waste storage facility until 2010, at the earliest. The DOE stated it would seek legislation from Congress for the construction of a temporary storage facility (TSF) which would accept spent nuclear fuel from utilities in 1998 or soon thereafter. On October 18, 1990, the NRC determined that spent nuclear fuel generated in any reactor can be stored safely and without significant environmental impacts in reactor facility storage pools or in independent spent fuel storage installations located at reactor or away-from-reactor sites for at least 30 years beyond the licensed life for operation (which may include the term of a revised or renewed license). The DOE has stated that neither the NWPA nor its contracts imposes an unconditional obligation to accept spent fuel by 1998 and indicated that such obligation is conditional upon commencement of TSF operations. The DOE has also stated its belief that it will have a TSF operational by 1998. Salem 1 and 2 have adequate on-site temporary storage capability through March 1998 and March 2002, respectively, when operational full core discharge capability requirements are considered. PSE&G has developed an integrated strategy to meet the longer term Salem and Hope Creek spent fuel storage needs. PSE&G plans to replace the existing high density racks in the spent fuel pools of Salem 1 and 2 with maximum density racks. The Salem re-racking project commenced in early 1992 and is expected to extend the storage capability through March 2008 for Salem 1 and March 2012 for Salem 2. When the Hope Creek pool is fully racked, it will have the capacity to hold spent fuel through September 2007. PECO has advised PSE&G that spent fuel racks at Peach Bottom 2 have storage capacity until 1997 for Unit 2 and 1998 for Unit 3 and that expansion of storage capacity beyond such dates, including the viability of rod consolidation, are being investigated. In accordance with NWPA, utilities owning an interest in nuclear generating facilities are required to determine the costs and methods of funding the costs necessary to decommission such facilities upon commencement of operation. As a general practice, a utility funding such costs places funds in trust accounts it maintains. The utility recovers from its customers the amounts paid into the trust fund over a period of years. For information concerning enrichment of nuclear fuel and nuclear decommissioning costs, see Note 3 -- PSE&G Nuclear Decommissioning and Amortization of Nuclear Fuel of Notes to Consolidated Financial Statements. 15 24 GAS OPERATIONS PSE&G supplies its gas customers principally with natural gas. PSE&G supplements natural gas with purchased refinery gas and liquefied petroleum gas produced from propane. The adequacy of supply of all types of gas is affected by the nationwide availability of all sources for energy production. As of December 31, 1993, the daily gas capacity of PSE&G was as follows:
TYPE OF GAS THERMS PER DAY -------------------------------------------------------------- -------------- Natural gas................................................... 22,731,000 Liquefied petroleum gas....................................... 2,200,000 Refinery gas.................................................. 400,000 -------------- Total............................................... 25,331,000 -------------- --------------
About 40% of the daily gas capacity is high load factor natural gas and is available every day of the year. The remainder comes from field storage, liquefied natural gas, seasonal sales, contract peaking supply, propane and refinery gas. PSE&G's total gas sold to and transported for its various customer classes in 1993 was 3.7 billion therms which consisted of approximately 96% natural gas. Included in this amount is 561 million therms of gas delivered to customers under PSE&G's transportation tariffs and individual cogeneration contracts. (See Certain Operating Statistics of PSE&G). During 1993, PSE&G purchased approximately 3.4 billion therms of gas for its combined gas and electric operations directly from natural gas producers and marketers including Enterprise's wholly-owned indirect subsidiary EDC, and the balance from traditional pipeline suppliers. These supplies were transported to New Jersey by PSE&G's traditional pipeline suppliers: Transcontinental Gas Pipe Line Corporation, Texas Eastern Transmission Corporation, Tennessee Gas Pipeline Company and Columbia Gas Transmission Corporation. This diversification of supply sources provides PSE&G with reliability of supply, purchasing flexibility and lower overall costs. PSE&G's supply contracts expire at various times over approximately the next seven to ten years. PSE&G does not presently anticipate any difficulty in negotiating replacement contracts. Since the quantities of gas available to the Company under its supply contracts are more than adequate in warm months, PSE&G nominates part of such quantities for storage, to be withdrawn during the winter season, under storage contracts with its principal suppliers. Underground storage capacity currently is approximately 764 million therms. The BRC directed that the terms of the contracts relating to PSE&G's gas purchases from EDC be renegotiated. (See Regulation.) In PSE&G's last base rate case, the BRC established a new pricing mechanism for sales from EDC to PSE&G and also provided that PSE&G discontinue gas purchases from EDC no later than September 30, 1994. PSE&G does not presently anticipate any difficulty in obtaining adequate supplies of natural gas. PSE&G's annual average cost of natural gas sendout is shown below:
CENTS PER YEAR MILLION BTU(A) ------------------------------------------------------ -------------- 1991.................................................. 311.38 1992.................................................. 311.16 1993.................................................. 340.78
(A) Excludes contribution by electric department for gas reservation charge and natural gas refunds from suppliers. Substantially all of PSE&G's gas sales are made under rates which are designed to permit the recovery of projected increases in the cost of natural gas and gas from supplemental sources, when compared to levels included in base rates, on a current annual basis. (See PSE&G -- Rate Matters -- Adjustment Clauses.) The demand for gas by PSE&G's customers is affected by customer conservation, economic conditions, the weather, the price relationship between gas and alternative fuels and other factors not within PSE&G's 16 25 control. Presently, the majority of gas sold in interstate commerce has become deregulated. The ability of gas prices to respond to market conditions has improved in recent years because of actions taken by the FERC. Pipeline companies are able to adjust their gas rates up or down through their purchased gas adjustment mechanism more often than the semi-annual filings of prior years. As previously discussed, FERC orders provided pipeline customers, such as PSE&G, with the opportunity to convert a portion of their pipeline sales contracts to transportation agreements and purchase natural gas supplies directly from a producer or other seller of natural gas. This regulatory framework has increased competition in the gas market by encouraging pipeline companies to act as non-discriminatory transporters of natural gas. PSE&G has used these regulations to lower its overall gas costs through the displacement of higher cost contract supplies with lower cost spot gas purchases and long-term producer contract supplies. (See PSE&G -- Competition.) PSE&G was able to meet all of the demands of its firm customers during the 1992-93 winter season and expects to continue to meet such energy-related demands of its firm customers during the 1993-94 winter season. However, the sufficiency of supply could be affected by several factors not within PSE&G's control, including curtailments of natural gas by its suppliers, the severity of the winter, the extent of energy conservation by its customers and the availability of feedstocks for the production of supplements to its natural gas supply. During the 1993-94 heating season through February 7, 1994, it was necessary for PSE&G to interrupt service to 'interruptible' customers as permitted by the applicable tariff for 22 days. During the 1992-93 heating season, service to such customers was interrupted for 11 days. EMPLOYEE RELATIONS Enterprise has no employees. As of December 31, 1993, Enterprise's subsidiaries employed 12,428 persons, of which 12,027 were employed by PSE&G, 17 by PSCRC, 244 by EDC, 107 by CEA, 10 by PSRC and 28 by EDHI. Enterprise and EDHI and its subsidiaries reimburse PSE&G for the costs of services provided by employees of PSE&G. For information concerning employee pension plan and other post-employment benefits, see Note 1 -- Organization and Summary of Significant Accounting Policies, Note 13 -- Postretirement Benefits Other Than Pensions and Note 14 -- Pension Plan of Notes to Consolidated Financial Statements. REGULATION Enterprise has claimed an exemption from regulation by the SEC as a registered holding company under PUHCA, except for Section 9(a)(2) thereof, which relates to the acquisition of 5% or more of the voting securities of an electric or gas utility company. Enterprise is not subject to direct regulation by the BRC, except potentially with respect to certain transfers of control and reporting requirements, and is not subject to regulation by the FERC. The BRC may also impose certain requirements with respect to affiliate transactions among PSE&G, Enterprise and its nonutility subsidiaries. (See EDHI.) As a New Jersey public utility, PSE&G is subject to comprehensive regulation by the BRC including, among other matters, regulation of intrastate rates and service and the issuance and sale of securities. As a participant in the ownership and operation of certain generation and transmission facilities in Pennsylvania, PSE&G is subject to regulation by the Pennsylvania Public Utility Commission (PPUC) in limited respects in regard to such facilities. PSE&G is subject to regulation by FERC and by the Economic Regulatory Administration, both within DOE, with respect to certain matters, including regulation by FERC with respect to interstate sales and exchanges of electric transmission, capacity and energy, including cogeneration and small power production projects being constructed pursuant to PURPA, and accounts, records and reports. PSE&G is also subject to regulation by the United States Department of Transportation (USDOT) with respect to safety standards for pipeline facilities and the transportation of gas under the Natural Gas Pipeline Safety Act of 1968. In addition, the Need Assessment Act provides that no public utility shall commence construction of any electric facility (as defined in the Need Assessment Act) without having first obtained from the Division of Energy Planning and Conservation within the New Jersey Department of Environmental Protection and 17 26 Energy (NJDEPE) a certificate of need. A certificate of need, if granted, is valid for three years, renewable subject to review by the Commissioner of the NJDEPE. Under the Need Assessment Act, no state or local agency may issue any license or permit required for any such construction or substantial expansion prior to the issuance of the certificate of need. An electric facility is defined under the Need Assessment Act as any electric power generating unit or combination of units at a single site with a capacity of 100 MW or more or any such units added to an existing electric generating facility which will increase its installed capacity by 25% or by more than 100 MW, whichever is smaller. A certificate of need shall be issued only if the NJDEPE Commissioner determines that the proposed facility is necessary to meet the projected need for electricity in the area to be served and that no more efficient, economical or environmentally sound alternative is available. For a discussion of the repowering of Bergen Generating Station, see Note 12 -- Commitments and Contingent Liabilities of Notes to Consolidated Financial Statements. For information concerning nuclear insurance coverages, the BRC's nuclear performance standard (Standard) and assessments and the Price-Anderson Amendments Act of 1988, as amended, see Note 12 -- Commitments and Contingent Liabilities of Notes to Consolidated Financial Statements. The New Jersey Public Utility Accident Fault Determination Act (Fault Act) requires the BRC to make a determination of fault with regard to any past or future accident at any electric generating or transmission facility prior to granting a request by any utility for a rate increase to cover accident-related costs in excess of $10 million. Fault, as defined in the Fault Act, means any negligent action or omission of any party which either contributed substantially to causing the accident or failing to mitigate its severity. However, the Fault Act allows the affected utility to file for non-accident related rate increases during such fault determination hearings and to recover contributions to federally mandated or voluntary cost-sharing plans and allows the BRC to authorize the recovery of certain fault-related repair, clean-up, power replacement and damage costs if substantiated by the evidence presented and if authorized in writing by the BRC. The Fault Act could have a material adverse effect on PSE&G's financial position if such an accident were to occur at a PSE&G facility and it was ultimately determined that the accident was due to the fault of PSE&G and the BRC were to deny recovery of all or a portion of the costs related thereto. PSE&G has included net replacement power costs related to a turbine generator failure at Salem 2 on November 9, 1991 in its current LEAC. The cost of this replacement power, net of insurance recoveries, is significantly below the $10 million threshold discussed above, which would require hearings and actions under the Fault Act. However, the BRC Staff believes such costs are above this $10 million threshhold and accordingly, in January 1994, advised PSE&G that it believes that appropriate rate treatment of the net replacement power cost should be addressed by the BRC. No additional action has been taken on this matter. PSE&G believes that any separate regulatory treatment regarding the net replacement power costs is not required and would be contrary to the Standard and the Fault Act. PSE&G cannot predict the amount or timing of recovery associated with the net replacement power costs for Salem. Under New Jersey law, the BRC is required to audit all or a portion of the operating procedures and other internal workings of every gas or electric utility subject to its jurisdiction, including PSE&G, at least once every six years. Under the law, the audit may be performed either by the BRC staff or under the supervision of designated members of such staff by an independent management consulting firm, chosen by the utility from a list provided by the BRC containing at least five such firms, two of which must be of nationally recognized stature. The BRC may, upon completion of the audit and after notice and hearing, order the utility to adopt such new practices and procedures that it shall find reasonable and necessary to promote efficient and adequate service to meet public convenience and necessity. The last such management audit of PSE&G, completed in 1991, concluded that, when compared with other leading U.S. electric and gas utilities, PSE&G was among the best, particularly in the areas of senior management leadership and responsiveness to external constituencies. The audit also made a number of recommendations, the majority of which have been implemented. A particular recommendation calling for the elimination of the use of shared management to fulfill certain functions on behalf of both PSE&G and EDHI was implemented by year end 1992 with the transfer of approximately 35 management positions from PSE&G to EDHI. In addition, in 1992 the BRC, as a follow-up to such management audit, conducted a focused audit of Enterprise's nonutility businesses to ascertain whether diversified activities have harmed PSE&G. Enterprise 18 27 has consistently maintained a clear and distinct separation of its utility and nonutility operations and its diversification activities have not in any way adversely affected the utility. On April 14, 1993, the BRC accepted the revised Focused Audit Implementation Plan addressing the 18 recommendations of the BRC's auditors regarding operations and intercompany relationships between PSE&G and EDHI's nonutility businesses. Among other things, such Plan provides: (1) that Enterprise will not permit EDHI's nonutility investments to exceed 20% of Enterprise's consolidated assets without prior notice to the BRC (such assets presently being approximately 15%); (2) a restructuring of the PSE&G Board to include nonemployee Enterprise directors with an annual certification by such Board that the business and financing plans of EDHI will not adversely affect PSE&G; (3) Enterprise agreement to limit debt supported by the Support Agreement between Enterprise and Capital to $750 million together with an agreement to make a good faith effort to eliminate such support over a six to ten year period; and (4) the payment by EDHI to PSE&G of an affiliation fee of $2 million a year which will be applied by PSE&G through its LGAC and LEAC to reduce utility rates. Such fee is predicated on $750 million of supported debt outstanding and will be proportionately reduced as such debt is repaid. The issue of Enterprise sharing the benefits of consolidated tax savings with PSE&G or its ratepayers was not resolved by the Plan and remains open. Enterprise believes that PSE&G's taxes should be treated on a stand-alone basis for ratemaking purposes, based on the separate nature of the utility and nonutility businesses. However, neither Enterprise nor PSE&G is able to predict what action, if any, the BRC may take concerning consolidation of tax benefits in future proceedings. (See MD&A -- Overview and Part III. Item 10 -- Directors and Executive Officers of the Registrants.) Construction and operation of nuclear generating facilities are regulated by the NRC. For additional information relating to regulation by the NRC, see Construction and Capital Requirements, PSE&G -- Rate Matters and Electric Operations. In addition, the Federal Emergency Management Agency is responsible for the review in conjunction with the NRC of certain aspects of emergency planning relating to the operation of nuclear plants. EDC is exempt from direct regulation by the BRC and FERC except that certain FERC approval is required to transport its gas interstate from its discovery fields. Pursuant to an agreement approved by the BRC in December 1987 and re-affirmed by a BRC Order in August 1990, EDC has provided a source of firm gas supply to PSE&G which in 1993 accounted for approximately 9.6% of EDC's gas sales. The BRC in December 1992, ordered that the terms of the contract be renegotiated and that sales by EDC to PSE&G be discontinued by September 30, 1994. (See PSE&G -- Gas Operations and EDHI -- EDC). CEA invests in and participates in the development of domestic and foreign cogeneration and power production facilities, which include QFs under PURPA and an EWG under PUHCA. The BRC has authority to regulate power sales agreements within the BRC's pricing guidelines to utilities in the State of New Jersey and ascertain that the terms and conditions of agreements with New Jersey utilities are fair and reasonable. For additional information, see EDHI. ENVIRONMENTAL CONTROLS PSE&G, like most industrial enterprises, is subject to regulation with respect to the environmental effects of its operations, including air and water quality control, limitations on land use, disposal of wastes, aesthetics and other matters, by various federal, regional, state and local authorities, including the United States Environmental Protection Agency (EPA), the USDOT, NJDEPE, the New Jersey Department of Health, the BRC, the Interstate Sanitation Commission, the Hackensack Meadowlands Development Commission, the Pinelands Commission, the Delaware River Basin Commission (DRBC), the United States Coast Guard, the United States Army Corps of Engineers, the Delaware Department of Natural Resources and Environmental Control and, with regard to its ownership interest in the Keystone, Conemaugh and Peach Bottom generating stations in Pennsylvania, by the PPUC and the Pennsylvania Department of Environmental Resources (PDER). EDC, CEA and EGDC are also subject to similar regulation. Environmental laws generally require air emissions and water discharges to meet specified limits. They also impose potential joint and several liability, without regard to fault, on the generators of various hazardous substances to clean up property affected by the production and discharge of such substances. Environmental 19 28 controls also require, in many instances, balancing the need for additional quantities of energy against the need to protect the environment. The necessity to comply with environmental standards has caused PSE&G to modify the day-to-day operation of its facilities, to participate financially in the cleanup of various properties that have been contaminated and to modify, supplement and replace existing equipment and facilities. Further, compliance with environmental requirements has resulted in significant delays with respect to construction of facilities. During 1993, PSE&G expended approximately $253 million of capital related to improving the environment, and it is estimated that PSE&G will expend approximately $313 million, $168 million, $196 million, $159 million and $146 million in the years 1994 through 1998, respectively, for such purposes. Such amounts are included in PSE&G's estimates of construction expenditures. (See MD&A -- Liquidity and Capital Resources.) Preconstruction analyses and projections of the environmental effects of contemplated activities and emissions are frequently required by the permitting agency. Before licensing approvals and permits are granted, the agency usually requests a modeling analysis of the effects of a specific action, and of its effect in combination with other existing and permitted activities and may request the applicant to address emerging environmental issues. Such environmental reviews have caused delays in the proceedings for licensing facilities and more such delays can be expected in the future. An emerging environmental issue with respect to the construction and operation of electric transmission and distribution lines is the possible adverse health effects of EMF exposure. In September 1990, the New Jersey Commission on Radiation Protection (CORP) decided against setting a limit on magnetic fields produced by high-voltage power lines citing the lack of convincing evidence required to determine dangerous levels. Proposed power regulations are currently under study by CORP to cover new power lines and allow existing power lines to continue to function regardless of new rule changes. As revised, the rules would authorize the NJDEPE to screen all new power line projects of 100 kilovolts or more using a principle of "as low as reasonably achievable" to demonstrate that all steps within reason, including modest cost, were taken to reduce EMFs. The outcome of EMF study and/or regulations and the public concerns will affect PSE&G's design and location of future electric power lines and facilities and the cost thereof. Such amounts as may be necessary to comply with these new EMF rules and address public concerns cannot be determined at this time, but such amounts could be material. The New Jersey Environmental Rights Act provides that any person may maintain a court action against any other person to enforce, or to restrain the violation of, any statute, regulation or ordinance which is designed to prevent or minimize pollution, impairment or destruction of the environment, or where no such requirement exists, to protect the environment from pollution, impairment or destruction. Certain Federal legislation confers similar rights on individuals. The principal laws and regulations relating to the protection of the environment which affect PSE&G's operations are described below. AIR POLLUTION CONTROL The Federal Clean Air Act (CAA) imposes stringent emission requirements across the United States, including requirements related to the emissions of sulfur dioxide and nitrogen oxide (NOx). Additional requirements are being developed under the CAA by Federal and State agencies, the costs of which cannot be quantified, but could be material. PSE&G's two wholly-owned and operated coal-fired generating stations in New Jersey are presently expected to be able to meet CAA sulfur dioxide requirements with only modest expenditures. PSE&G's New Jersey generating stations are located in a severe non-attainment area for ozone, and the CAA requires that reductions be made in NOx from major sources in this area. A requirement for these areas is that each state impose reasonable available control technologies on major sources of NOx effective May 1995. The NJDEPE Regulations which were adopted in November 1993 will result in capital expenditures of approximately $120 million over a period of years. Additional reductions of NOx emissions will be needed continuing through the attainment dates of 2005 and 2007 to bring the area into attainment with ozone standards. The necessary reductions will be based upon modeling results and regulatory agency discussions currently underway and could result in additional changes to equipment, in methods of operation or in fuel. PSE&G also has a 22.5% interest in Conemaugh and a 22.84% interest in Keystone coal-fired generating stations located in western Pennsylvania. In order to comply with the CAA, the station's co-owners, including PSE&G, have formally approved the installation of scrubbers (flue gas desulfurization systems) at 20 29 Conemaugh. PSE&G's share of the Conemaugh scrubber cost at year-end 1993 is now estimated at approximately $77 million including cost of removal. Such amount is included in PSE&G's estimate of construction expenditures. Construction at Conemaugh is scheduled for completion by January 1, 1995 for Unit 1 and a year later for Unit 2. Conemaugh and Keystone will also be required to reduce NOx emissions. At year-end 1993, PSE&G's share of capital costs for NOx emission controls are estimated at approximately $8 million for Keystone and $8.6 million for Conemaugh. Permitting of all major stationary sources will also be required under the CAA. This new national air pollution emission source operating permit program will require some PSE&G facilities to assess emissions, install continuous emission monitors and/or make changes in facility operations or technology in order to comply with permit conditions. All such amounts which can be quantified and which may be necessary to comply with the revised CAA requirements through 1998 are included in PSE&G's estimate of construction expenditures. PSE&G expects to request the BRC to allow the recovery of all such CAA costs from electric customers, although no assurances can be given as to what action may be taken by the BRC. In addition, the revised CAA requirements will increase the cost of producing electricity for the Pennsylvania and Ohio Valley Region generating units supplying electricity to the PJM and New Jersey. All of PSE&G's current purchased power costs are included in PSE&G's LEAC. In non-attainment areas, one of the effects of the CAA is to allow construction or expansion of a facility only upon a showing that any additional emissions from the source will be more than offset by reductions in similar emissions from existing sources. In prevention of significant deterioration areas, construction or expansion of a facility would be permitted only if emissions from the source, together with emissions from other expected new sources, would not violate air quality increments for particulates and sulfur dioxide that are more stringent than the national ambient air quality standards (NAAQS). All these requirements may affect PSE&G's ability to locate, construct or expand generating facilities in the future. NJDEPE is using the NJAPCC to achieve compliance with the NAAQS adopted by EPA under the CAA. The NJAPCC currently establishes ambient air quality standards and emission limitations for six pollutants, all of which have EPA approval. In addition, the NJAPCC provides stringent requirements restricting the sulfur content in coal and oil fuels. (See PSE&G -- Electric Fuel Supply-Coal.) During 1993, the incremental costs of complying with the low-sulfur requirements added $24 million to fuel costs and PSE&G estimates that during 1994 such costs will add an additional $24 million. The increased cost of purchasing low-sulfur fuel is offset by rates which are designed to permit the recovery of fuel costs on a current annual basis. (See PSE&G -- Electric Fuel Supply and Note 2 -- Rate Matters of Notes to Consolidated Financial Statements.) WATER POLLUTION CONTROL The Federal Water Pollution Control Act (FWPCA) provides for the imposition of technology and water-quality based effluent limitations to regulate the discharge of pollutants into the waters of the United States. Certain PSE&G facilities are directly regulated by permits issued pursuant to FWPCA. Under the FWPCA, compliance with the above-referenced applicable limitation is to be achieved under the National Pollutant Discharge Elimination System (NPDES) permit program, which has been administered by NJDEPE since 1982 pursuant to the New Jersey Water Pollution Control Act (NJWPCA). The NJWPCA authorizes NJDEPE to regulate discharges of pollutants to surface and ground waters of the State. The NPDES permit program, administered by the NJDEPE, is referred to as the New Jersey Pollutant Discharge Elimination System (NJPDES) program. The NJPDES program provides for Discharge to Surface Water (DSW) permits and Discharge to Ground Water (DGW) permits, among others. Section 304(l) of the FWPCA requires all States to implement more stringent controls on the discharges of toxics to certain water-bodies deemed contaminated by toxic discharges. Four PSE&G electric generating stations (Bergen, Hudson, Kearny and Sewaren) have completed effluent characterization studies to satisfy 304(l) requirements. A final permit has been issued for a fifth station, Linden, which required similar 304(l) studies. 21 30 The FWPCA also includes specific provisions relating to discharges of heat and the design, location, construction and capacity of intake structures for cooling water. Pursuant to Section 316(a) and (b) of the FWPCA, if the permittee can demonstrate that the aquatic ecosystem is protected, then alternate thermal limits may be imposed and/or the intake structure may be found to be the Best Technology Available (BTA). PSE&G has submitted applications to EPA and NJDEPE seeking variances from thermal limits and BTA determinations in connection with six of its electric generating stations pursuant to Section 316(a) and (b). If PSE&G's applications with respect to these generating stations do not receive favorable action, NJDEPE may impose requirements for closed-cycle cooling, e.g. cooling towers, or other structural modifications and/or operational restrictions at these facilities. (See MD&A -- Liquidity and Capital Resources.) The NJDEPE regulations relating to DGW require permits for some of PSE&G's facilities and may require the monitoring of ground water at such locations. PSE&G has applied for DGW permits at certain facilities as discussed below. The total cost to comply with all applicable requirements of DGW permits at all PSE&G facilities covered by NJPDES -- DGW permits cannot be accurately estimated at this time, but aggregate annual ground water monitoring cost is not expected to be material. PSE&G has NJPDES DSW permits for its Bergen, Hudson, Kearny, Essex, Linden, Sewaren, Edison, Mercer, Burlington, Salem and Hope Creek electric generating stations and its Harrison gas facilities. Adjudicatory hearing requests are pending before the NJDEPE to resolve one or more contested issues in the above-referenced permits for Linden as discussed below. Discussed below are pending actions or proceedings relating to specific facilities or sites. Bergen, Hudson, Kearny, Linden and Sewaren Stations In January 1990, NJDEPE issued modified NJPDES DSW permits for Bergen, Hudson, Kearny and Sewaren Stations which reflected agreements reached on all contested issues with regard to permits issued in 1985-86, other than those related to thermal discharge and intake structures. These permits also included requirements pursuant to Section 304(l) of the FWPCA for additional monitoring and analysis of discharges of certain pollutants as well as dilution studies on the receiving waters. PSE&G requested an adjudicatory hearing to contest certain permit conditions. In October 1991, the NJDEPE issued a draft NJPDES permit for Sewaren Station which would impose water quality-based effluent limits both on pollutants identified as a result of a monitoring program instituted pursuant to Section 304(l) in non-contact cooling water and treatment plant discharges, which could have significant adverse impact on the operations of this station. PSE&G submitted comments addressing factual and legal issues raised by the draft permit. PSE&G cannot anticipate whether more stringent permit limits will be imposed in subsequent renewals/modifications to these permits as a result of this monitoring program. At Linden, numerous terms and conditions in a 1986 DSW permit were contested. Agreement in principle with respect to these matters has been reached and is reflected in the 1990 and 1992 draft permits. In January 1990, Linden received a draft permit with regard to Section 304(1) of the FWPCA. A second draft permit was issued in March 1992, which proposed monitoring programs similar to those conducted at the other four stations. A final permit and a draft permit modification were issued with respect to Linden Station in March 1993. PSE&G filed extensive comments on the 1992 draft permit addressing certain terms and conditions with the NJDEPE on the 1992 draft permit, many of which are reflected in the 1993 draft permit modification. In June, 1993, the NJDEPE issued a final Major Modification to Linden's DSW permit incorporating conditions consistent with the comments PSE&G previously filed on the 1992 draft permit. PSE&G is evaluating whether to rescind its request for an adjudicatory hearing based on these changes. PSE&G filed four hearing requests on permits issued in 1990 which incorporated requirements relating to Section 304(1). Stipulations of Settlement resolving all contested issues in the Bergen, Hudson, Kearny and Sewaren adjudicatory hearing requests concerning these permits have been executed. It is anticipated that the issues relating to the Bergen permit will be similarly resolved in the near future. NJDEPE advised PSE&G in January 1986 that, with respect to PSE&G's Bergen, Hudson, Kearny, Sewaren and Linden Stations, the demonstrations and reports previously submitted to EPA supporting 22 31 PSE&G's Section 316(a) variance requests and Section 316(b) determinations no longer provided adequate information upon which decisions could be made. PSE&G submitted supplemental Section 316(a) demonstrations in the spring of 1988, and submitted supplemental Section 316(b) demonstrations in November 1988 for Bergen, Hudson and Kearny Stations. In October 1989, PSE&G submitted supplemental Section 316(b) demonstrations for both Linden and Sewaren Stations and a supplemental Section 316(a) demonstration for Sewaren. The Linden supplemental Section 316(a) demonstration was submitted January 1990. To date, the NJDEPE has not responded to these submittals. PSE&G received a final DGW permit for Bergen in February 1987. A hearing request was filed and all issues but one were resolved amicably thereafter in 1987. PSE&G may ultimately contest the single unresolved issue contained in the final Bergen DGW permit. Mercer Station A draft DGW permit was issued by NJDEPE for Mercer Generating Station in February 1987. NJDEPE has taken no further action. Salem Station A final permit resolving all contested issues in the 1985 DSW permit, other than those relating to Section 316, became effective in April 1989. As required by the FWPCA, over the past 15 years, PSE&G has submitted to the EPA and NJDEPE its demonstrations which concluded that structural modifications including cooling towers are not required at Salem to achieve satisfactory environmental effects. In October 1990, the NJDEPE issued a draft NJPDES Permit to the Salem Station which required a number of new and more stringent conditions including the immediate shutdown of both Salem units while the station was retrofitted for closed-cycle cooling. In response to the 1990 Draft Permit, PSE&G submitted extensive written comments to the NJDEPE regarding the ecological effects of Station operations, and the nature, scope, and costs of retrofitting the station for closed-cycle cooling. The estimated cost for closed-cycle cooling, based on natural draft and forced draft technologies, range from $720 million to $2 billion including operation and maintenance costs and the cost of replacement power during the construction periods, of which PSE&G's share would be 42.59%. These comments demonstrated that Salem was not having and would not have an adverse environmental impact and that closed-cycle cooling was an inappropriate solution. To resolve the NJDEPE's concerns, PSE&G also developed and submitted a supplement to the permit renewal application setting forth an alternative approach that would protect aquatic life in the Delaware Estuary and provide broad-ranging ecological benefits. PSE&G proposed intake screen modifications to reduce fish losses, a study of sound deterrent systems to divert fish from the intake and a limit on intake flow of 3,024 million gallons per day. In addition, PSE&G proposed conservation measures, including the restoration of up to 10,000 acres of degraded wetlands and the installation of fish ladders to allow fish to reach upstream spawning areas. Finally, PSE&G proposed a comprehensive biological monitoring program to expand existing knowledge of the Delaware Estuary and to monitor station impacts. In June 1993, the NJDEPE issued Salem a revised Draft Permit which reconsidered the requirement for closed-cycle cooling and adopted alternative measures proposed by PSE&G with certain modifications. The public comment period on the revised Draft Permit closed January 15, 1994. The NJDEPE has received a very substantial number of comments on the revised Draft Permit from a wide variety of interests. These comments have included a large number of suggestions to the NJDEPE for changes in the permit terms including: requiring, directly or indirectly, closed cycle cooling at the station instead of the existing once- through cooling system, seasonal reductions of the water flow through the plant, the use of different technologies at the intake structures of the plant, restoration of a greater number of acres of degraded wetlands, additional control of pollutant discharges and the payment of natural resource damages for the past or future cropping of aquatic biota at Salem. The comments to the NJDEPE have also made a variety of claims as to alleged legal defects in the revised Draft Permit including: failure to comply with applicable standards under Section 316 of FWPCA, failure to assure consistency with applicable Coastal Zone 23 32 Management Plans, failure to comply with requirements of the DRBC and failure to comply with procedural requirements of New Jersey and federal law. In September 1993, PSE&G filed extensive comments in support of the terms of the revised Draft Permit. On January 15, 1994, PSE&G filed extensive comments with the NJDEPE which sought to respond to comments opposing the issuance of a final permit with terms materially different than those found in the revised Draft Permit. NJDEPE has stated that it intends to issue a final permit in the second quarter of 1994, but no assurances can be given as to when or in what manner NJDEPE will act on the issuance of a final permit. The EPA has authority to veto the issuance of a final permit by the NJDEPE and action by EPA also cannot be predicted. Certain environmental groups have also petitioned EPA to veto any final permit that does not require closed-cycle cooling and to withdraw NJDEPE's permitting authority under FWPCA. If a final permit embodying the alternative measures is issued, additional permits from various agencies will be required for implementation, as to which no assurance can be given. Estimated capital cost of compliance with the revised Draft Permit is approximately $75 million, of which PSE&G's share would be 42.59%. PSE&G would request the BRC to allow the recovery in rates from electric customers of all costs associated with constructing cooling towers at Salem or implementing other modifications and conservation measures that may be ultimately required. PSE&G intends to vigorously defend its demonstrations, as submitted. PSE&G also is prepared to pursue all available legal remedies, including exercising its right to seek a stay, pending further administrative and judicial review, of any conditions that may be imposed by a final permit. (See MD&A -- Liquidity and Capital Resources -- Construction, Investment and other Capital Requirements Forecast.) Hope Creek Station Hope Creek's existing permit has been in effect since October 1985. PSE&G submitted an application for renewal in March 1990. The existing permit remains in effect pending NJDEPE action expected in 1994. PSE&G cannot predict what new permit terms and conditions NJDEPE may seek to impose in the renewed permit. CONTROL OF HAZARDOUS SUBSTANCES PSE&G Manufactured Gas Plant Remediation Program For information regarding PSE&G's Manufactured Gas Plant Remediation Program, see Note 12 -- Commitments and Contingent Liabilities of Notes to Consolidated Financial Statements. Other Sites In 1989, PSE&G publicly announced its decision to close the Synthetic Natural Gas Plant (SNG Plant) in Linden, New Jersey. The SNG Plant, which was operated by PSE&G, was jointly owned by PSE&G (90%) and the Elizabethtown Gas Company (10%). The decision to close the SNG Plant triggered certain environmental compliance activities under the New Jersey Environmental Cleanup Responsibility Act (ECRA). PSE&G has completed the first stage of the required site sampling activities at this facility. During field work activities, certain soil and ground water contamination has been identified. The costs of any necessary cleanup are not currently estimable, but such costs are not expected to be material. The Federal Comprehensive Environmental Response, Compensation and Liability Act of 1980 (CERCLA), as amended by the Superfund Amendments and Reauthorization Act of 1986 (SARA), and the Federal Resource Conservation and Recovery Act of 1976 (RCRA) authorize EPA to issue orders and/or to bring an enforcement action to compel responsible parties to take investigative and/or cleanup actions at any site that is determined to present an imminent and substantial danger to the public or to the environment because of an actual or threatened release of one or more hazardous substances. The New Jersey Spill Compensation and Control Act (Spill Act) and the New York Environmental Conservation Law provide similar authority to NJDEPE and the New York Attorney General, respectively. Because of the nature of 24 33 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 under one or more of the above laws. PSE&G generally provides for the disposal or processing of such substances through licensed independent contractors. However, these statutory provisions impose joint and several liability without regard to fault on all allegedly responsible parties, including the generators of the hazardous substances for certain investigative and cleanup costs at sites where these substances were disposed or processed. PSE&G has been notified with respect to a number of such sites and the cleanup of these potentially hazardous sites is receiving greater attention from the government agencies involved. Generally, actions directed at funding such site investigations and cleanups include all suspected or known allegedly responsible parties. PSE&G's past operations suggest that some remedial action may be required. PSE&G does not expect its expenditures for any such site to be material. Presently, such actions involving PSE&G include the following: (1) In United States and New Jersey v. Alcan Aluminum, et al., Civil Action Nos. 88-4646 (NHP) and 88-4670 (NHP), in the U. S. District Court for the District of New Jersey, on March 21, 1989, a Consent Decree was entered with EPA and NJDEPE, obligating potentially responsible parties (PRPs), including PSE&G, to implement both a bioremediation treatability study and a two-stage subsurface remedial action, i.e., excavation and bioremediation, at the Renora Superfund Site in Edison, Middlesex County, New Jersey. The excavation and off-site removal of soils contaminated with polychlorinated biphenyls has been completed. However, because the treatability study showed that bioremediation would fail at this site, on March 18, 1991, the Consent Decree was modified to eliminate that remedial action. Instead, EPA required new treatability studies on solidification technologies, and a Phase II Feasibility Study (FS II) incorporating that new data. These new studies proved that all on-site soil treatment technologies would fail, and on October 8, 1992, the PRPs submitted FS II for EPA's and NJDEPE's comments. The PRPs' are awaiting either the agencies' final comments on FS II or their agreement on an alternative remedial action addressing the remaining on-site soil contamination. (2) Claim by U. S. Department of the Interior, dated March 5, 1985, under CERCLA with respect to the Pennsylvania Avenue and Fountain Avenue municipal landfills in Brooklyn, New York for damages to natural resources. The U.S. Government alleges damages of approximately $200 million. (3) Claim by EPA, Region III, dated December 25, 1984, under CERCLA with respect to a site operated by Sealand Ltd. in Mount Pleasant Township, New Castle County, Delaware. PSE&G and other companies have entered into an Administrative Consent Order (ACO) obligating the signatories thereto to fund an RI/FS. In September 1991, EPA entered a Record of Decision (ROD) which determined that no further action was required at the site. The State of Delaware has filed comments objecting to this ROD and has hired a consultant which has recommended that additional actions be taken at the site based on its review of EPA's files. The State of Delaware has not taken any action to date on this report. (4) At the Duane Marine Salvage Corporation Superfund Site in Perth Amboy, Middlesex County, New Jersey, the PRPs, including PSE&G, had completed an EPA-approved surface removal action during 1986, and EPA had required no further response actions. However, NJDEPE ordered that an RI/FS be performed to address or disprove the alleged subsurface contamination, and following negotiations with the PRPs, including PSE&G an ACO was executed. The PRPs have submitted the RI/FS, as revised, and, during May 1993, the second revised Draft Feasibility Study, and currently are awaiting NJDEPE's selection of a remedial action. (5) Spill Act Directive issued by NJDEPE on July 7, 1987 to PRPs, including PSE&G, with respect to a site formerly owned and operated by Borne Chemical Company in Elizabeth, Union County, New Jersey, ordering certain interim actions directed at both site security and the off-site removal of certain hazardous substances. Certain PRPs, including PSE&G, signed an ACO with NJDEPE to secure the site, which has been completed. After further negotiations, certain other PRPs, including PSE&G, signed a further ACO requiring them to perform a removal action at the site, which was completed on June 22, 1992. The PRPs have entered into negotiations with NJDEPE regarding the terms of a third ACO which will obligate the PRPs, including PSE&G, to conduct an RI/FS. 25 34 (6) A second Directive pursuant to the Spill Act was issued by NJDEPE on August 22, 1989 to PRPs, including PSE&G, with respect to the PJP Landfill in Jersey City, Hudson County, New Jersey (PJP), ordering payment of operating and maintenance costs of approximately $150,000 and reasserting claims made in an initial March 1989 Directive for all past and future costs associated with investigations and remediation of the alleged contamination. Additionally, in May 1990, also pursuant to the Spill Act, NJDEPE issued a Multi-Site Directive concerning four sites, including PJP. With respect to the PJP site, NJDEPE reasserted demands for payment made in the earlier Directives. The NJDEPE alleges that it has spent approximately $23 million in interim remedial measures at the PJP site. The NJDEPE also alleges that it will incur approximately $2 million in costs to complete a remedial investigation of the PJP site. PSE&G is currently evaluating the NJDEPE's claim and is working with other PRPs to resolve the claim. PSE&G has made a good faith payment of approximately $21,000 to NJDEPE pursuant to the Multi-Site Directive in accord once with actions taken by certain other PRPs named in these Directives. (7) Prospective enforcement action by NJDEPE with respect to a site formerly owned by the Township of Hillsborough, Somerset County, New Jersey and used for a sanitary landfill and presently owned by PSE&G. NJPDES-DGW permits were issued by NJDEPE to PSE&G and to the adjoining property owner to install monitoring wells on these premises. As required by the foregoing permits, groundwater monitoring wells were established and groundwater monitored. In accordance with a subsequent New Jersey Supreme Court decision in a case to which PSE&G was not a party, the subject NJPDES -- DGW permit was determined to be invalid, effective April 19, 1989. However, the NJDEPE has recommended that any existing ground water monitoring wells be maintained pending the NJDEPE's drafting of groundwater regulations which may affect the former landfill site. (8) In State of New Jersey, Department of Environmental Protection v. Gloucester Environmental Management Services, Inc. (GEMS), et al., Docket No. 84-0152 (SSB), in the U.S. District Court for the District of New Jersey, the Fourth Amended Complaint was filed October 28, 1986, naming PSE&G and approximately forty other alleged generators of hazardous waste materials as defendants. PSE&G investigated possible involvement with the GEMS site in Gloucester Township, Camden County, in response to an earlier inquiry from EPA. That investigation revealed that certain waste materials originating at a PSE&G facility may have contained asbestos and may have been taken to the GEMS site by an independent contractor performing removal work for PSE&G. PSE&G agreed to participate in the partial settlement of the litigation which includes the Phase I remediation of the landfill and contributed $150,000 toward the estimated Phase I cost of approximately $32.5 million. (9) Claim by EPA, Region III, dated December 15, 1987, under CERCLA with respect to a Superfund Site in Philadelphia, Pennsylvania, owned and formerly operated by Metal Bank, Inc., as a non-ferrous scrap reclamation facility. PSE&G, together with several other similarly situated utilities, is alleged to be liable either to conduct an RI/FS and undertake the necessary cleanup, if any, or to reimburse EPA for the cost of performing these functions. On May. 29, 1991, these utilities, including PSE&G, entered into an ACO with the EPA to perform an RI/FS, Docket No. III-91-34-DC, which is currently underway. (10) Inquiry and prospective enforcement action by EPA, Region II, dated March 19, 1987, with respect to a site known as the Florence Land Recontouring (FLR) Landfill Site in the Townships of Florence, Mansfield and Springfield, Burlington County, New Jersey. In December 1989, the NJDEPE issued Directive and Notice to Insurers (1989 Directive) to PSE&G and twenty-six other respondents. The 1989 Directive requires the respondents to arrange for certain remedial measures at the FLR Site and to pay the NJDEPE a total of approximately $7.5 million in estimated remedial construction activities and administration costs regarding future operations and maintenance. In May 1990, pursuant to the Spill Act, the NJDEPE issued Multi-Site Directive and Notice to Insurers Number One (1990 Directive) in the matter of four sites including the FLR Site. The 1990 Directive, as it relates to the FLR Site, directs eighteen of the twenty-seven respondents named in the 1989 Directive to undertake the same remedial measures and pay the same costs as set forth in the 1989 Directive. PSE&G is currently evaluating the NJDEPE's claim and is working in concert with other PRPs to address the NJDEPE Directives. 26 35 (11) Claim by EPA, Region II, under CERCLA with respect to a Superfund Site known as the Lone Pine Landfill in Freehold Township, Monmouth County, New Jersey. EPA investigation regarding this site disclosed that certain hazardous waste materials generated by approximately 200 alleged generators and transported to a site known as the SCP Scientific Chemical Processing Site, Wilson Avenue, Essex County, Newark, New Jersey (SCP-Newark), were allegedly subsequently transshipped, taken to and disposed of at the Lone Pine Landfill. PSE&G's prior investigation in response to an earlier inquiry from EPA regarding the SCP-Newark Site revealed that certain waste materials originating at a PSE&G facility were received by Scientific Chemical Processing, Inc. for processing and disposal. A consent decree was entered in the U.S. District Court for the District of New Jersey in March 1990 approving the terms of a settlement under which PSE&G agreed to participate as a de minimis settlor and contributed approximately $27,000, toward an estimated on site remediation cost of $40 million. A second Consent Decree was lodged with the United States District Court for the District of New Jersey in July 1991 seeking approval of the terms of a settlement under which PSE&G agreed to participate as a de minimis settlor and contributed approximately $27,000 toward an off-site investigation/remediation cost of approximately $17 million. PSE&G cannot determine, at this time, whether the off-site investigation activities will result in the identification of further off-site remediation costs. (12) Inquiry and prospective enforcement action by NJDEPE against PSE&G regarding PSE&G's property in Hamilton Township, Mercer County, New Jersey, adjacent to PSE&G's Trenton Switching Station. PSE&G is implementing a site investigation, including installation of ground water monitoring wells, to determine the scope of a remedial action plan. (13) Inquiry and prospective enforcement action by EPA, Region II, dated March 9, 1987, under CERCLA regarding a site formerly owned and/or operated by Atlantic Resources Corporation in Sayreville, Middlesex County, New Jersey. (14) Inquiry and prospective enforcement action by EPA, Region II, dated November 9, 1987, under CERCLA regarding PSE&G's possible use of the Sharkey Landfill in Parsippany-Troy Hills, Morris County, New Jersey, for waste disposal during the period between 1945 and 1973. (15) Inquiry and prospective enforcement action by EPA, Region II, dated November 16, 1987, under CERCLA regarding PSE&G's possible use of the Curcio Scrap Metal facility in Saddle Brook Township, Bergen County, New Jersey, for scrap reclamation since 1981. (16) Inquiry and prospective enforcement action by EPA, Region II, dated May 2, 1988, under CERCLA regarding PSE&G's possible use of Higgins Disposal Service Site in Kingston, Franklin Township, Somerset County, New Jersey. (17) Inquiry and prospective enforcement actions by EPA, Region II and NJDEPE, dated April 8, 1988 and February 6, 1991, respectively, under CERCLA and the Spill Act regarding PSE&G's possible use of Global Landfill Site in Old Bridge Township, Middlesex County, New Jersey (Global Site). In March 1991, the NJDEPE issued Directive and Notice to Insurers Number Two (Directive Two) to 24 Insurers and 52 Respondents, including PSE&G. Directive Two seeks recovery of past and anticipated future NJDEPE response costs ($37.4 million) incurred and to be incurred in connection with an investigation and remediation of the Global Site. PSE&G's alleged liability is based on assertions that it generated asbestos-containing materials which were disposed of at the Global Site. In May 1991, PSE&G entered into an agreement with the NJDEPE and 29 other Directive Two Respondents effecting a partial settlement of the foregoing costs in the amount of $1.3 million. PSE&G's financial contribution to the foregoing partial settlement ($4,500) is subject to a subsequent reallocation based upon the parties' further development of information concerning their respective proportionate waste contributions to the Global Site. The New Jersey Department of Law and Public Safety and PRPs who participated in the partial settlement set forth above have concluded negotiations concerning a resolution of the balance of the response costs sought pursuant to Directive Two. In connection with those negotiations, the PRPs are currently attempting to secure the information necessary to determine their respective proportionate waste contributions to the Global Site for the purpose of further establishing proportionate shares of any future settlement. The New Jersey Department of Law and Public Safety and the Directive Two Respondents continue to conduct negotiations regarding resolution of the balance of the 27 36 response costs sought pursuant to Directive Two. In August 1993, the NJDEPE and various participating PRPs, including PSE&G, executed a Consent Decree whereby the participating PRPs agreed to perform the remedial design and remedial action for the operable unit one remedy as specified in an ROD dated September 11, 1991 (approximate total cost $30 million). The Consent Decree was executed and entered by the United States District Court for the District of New Jersey on November 15, 1993. Subject to a subsequent reallocation, the various parties to the Consent Decree have agreed that PSE&G's contribution under the Consent Decree settlement will be $300,000. (18) Inquiry and prospective enforcement action by EPA, Region II dated March 6, 1989, under CERCLA regarding PSE&G's possible use of the Port Washington Landfill in North Hempstead, New York. (19) Spill Act inquiry and prospective enforcement action issued by NJDEPE on July 14, 1989 to PRPs, including PSE&G, regarding PSE&G's possible use of Combe Fill North Sanitary Landfill in Mt. Olive Township, Morris County, New Jersey. (20) Spill Act inquiry and prospective enforcement action issued by NJDEPE on December 5, 1989 to PRPs, including PSE&G, regarding PSE&G's possible use of Combe Fill South Sanitary Landfill in Washington and Chester Townships, Morris County, New Jersey (Combe Site). In July 1991, the New Jersey Department of Law and Public Safety, Division of Law, issued Directive and Notice To Insurers Number One (Directive One) to 50 Insurers and 20 Respondents, including PSE&G, seeking from the Respondents payment of $5.5 million of NJDEPE's anticipated costs of remedial action and of administrative oversight at the Combe Site. The $5.5 million represents the NJDEPE's 10% share of such anticipated costs pursuant to a cooperative agreement with the United States regarding the selected remedial action. Therefore, total site remediation costs approximate $50 million. Further, the Directive One Respondents are directed to perform the operation and maintenance of the remedial action including all remedial facilities on the Combe Site. PSE&G's alleged liability is based on the assertion that PSE&G-generated waste oil and water, containing hazardous substances, was transported to the Combe Site and applied to Combe Site roads for dust control. (21) In United States of America v. Superior Tube Company, et al., Docket No. 89-7421 in the U.S. District Court for the Eastern District of Pennsylvania, PSE&G was served in March 1990 with a Third Party Complaint. Pursuant to CERCLA, the United States filed suit against Superior Tube Company (Superior) and others seeking recovery of past and future costs incurred or to be incurred in the cleanup of the Moyer Landfill located in Pennsylvania. Superior filed a Third Party Complaint naming approximately 150 third party defendants, including PSE&G. Superior alleges that PSE&G generated, transported, arranged for the disposal of and/or caused to be deposited certain hazardous substances at the Moyer Landfill. On the basis of those allegations, Superior seeks contribution and/or indemnification from the third party defendants, including PSE&G, on the United States' action against it. PSE&G has recently participated in negotiations concerning resolution of the United States' and Superior Tube's claims. (22) Spill Act Multi-Site Directive (Directive) issued by the NJDEPE in May 1990 to PRPs, including PSE&G, listing four separate sites, including the former bulking and transfer facility called the Marvin Jonas Transfer Station (Sewell Site) in Deptford Township, Gloucester County, New Jersey. With regard to the Sewell Site, this Directive ordered approximately 350 PRPs, including PSE&G, to enter into an ACO with NJDEPE, requiring them to remediate the Sewell Site. Certain PRPs, including PSE&G, have completed the interim actions directed at both site security and off-site disposal of containers, trailers and contaminated surface soils. PRPs, including PSE&G, are currently fulfilling the terms of a Memorandum of Agreement (MOA) entered into with NJDEPE on July 13, 1993. The MOA obligates PRPs to conduct an RI/FS and, if necessary, a remedial action which, when completed to NJDEPE's standards, will satisfy the Directive. (23) In Transtech Industries, Inc. et al v. A&Z Septic Clean et al., Docket No. 2-90-2578(HAA), filed on October 5, 1992, in the U.S. District Court for the District of New Jersey, PSE&G has been named a defendant in a Complaint which has been filed pursuant to CERCLA, against several hundred parties seeking recovery of past and future response costs incurred or to be incurred in the investigation and/or remediation of the Kin-Buc Landfill, located in Edison Township, Middlesex County, New Jersey. Plaintiffs allege that all 28 37 named defendants, including PSE&G, are PRPs as generators and/or transporters of various hazardous substances ultimately deposited at the Kin-Buc Landfill. (24) Ongoing and prospective enforcement action by EPA, Region II, dated November 27, 1992, under CERCLA regarding PSE&G's possible use of the Custom Distribution Services Site in Perth Amboy, Middlesex County, New Jersey. (25) Inquiry and prospective CERCLA enforcement action by EPA, Region II, dated November 25, 1992, regarding PSE&G's possible use of the Scientific Chemical Processing Superfund Site, Carlstadt, New Jersey. (26) Inquiries and prospective enforcement action by EPA, Region II, dated May 7, 1992 and June 24, 1993, regarding the Company's possible use of the Bridgeport Rental and Oil Services site located in Logan Township, Gloucester County, New Jersey. 29 38 CERTAIN OPERATING STATISTICS OF PSE&G ELECTRIC
YEARS ENDED DECEMBER 31, --------------------------------------- 1993 1992 1991 ----------- ----------- ----------- Sources of Electric Energy (1,000 Kwh): Generation: Fossil............................................. 11,116,606 12,079,984 13,377,558 Nuclear............................................ 19,094,252 16,344,009 17,439,043 Pumped Storage........................................ 260,693 256,483 306,127 Other (principally Combustion Turbines)............... 537,210 280,523 465,855 Less Synchronous Condenser Operation.................. 11,860 8,307 22,204 Net Two Party Purchases............................... 9,535,968 10,582,483 8,401,441 Net PJM Interchange................................... 3,072,536 2,435,069 2,878,900 ----------- ----------- ----------- Subtotal...................................... 43,605,405 41,970,244 42,846,720 Less pumping energy used.............................. 383,927 386,880 461,311 ----------- ----------- ----------- Total energy available........................ 43,221,478 41,583,364 42,385,409 Less Company use (electric operations) and energy lost or unaccounted for................................. 2,695,690 2,553,619 2,677,975 ----------- ----------- ----------- Total Electric Energy Sold.................... 40,525,788 39,029,745 39,707,434 ----------- ----------- ----------- ----------- ----------- ----------- Costs of Electric Fuel (cents per Kwh): Fossil................................................ 1.89 1.89 2.10 Nuclear............................................... .64 .66 .68 Other (principally Combustion Turbines)............... 3.18 4.16 3.99 Two Party Purchases................................... 3.67 3.21 3.98 Net PJM Interchange................................... 3.74 2.77 2.72 ----------- ----------- ----------- Weighted average cost......................... 1.78 1.73 1.84 ----------- ----------- ----------- ----------- ----------- ----------- Sales (1,000 Kwh): Residential........................................ 10,631,402 9,816,046 10,505,547 Commercial......................................... 18,096,312 17,454,352 17,596,569 Industrial......................................... 9,203,839 9,298,741 9,406,109 Other.............................................. 348,342 344,557 340,619 Non-Jurisdictional................................. 2,245,893 2,116,049 1,858,590 ----------- ----------- ----------- Total......................................... 40,525,788 39,029,745 39,707,434 ----------- ----------- ----------- ----------- ----------- ----------- Average Number of Customers: Residential........................................... 1,630,330 1,623,396 1,615,342 Commercial............................................ 214,892 213,510 212,867 Industrial............................................ 9,320 9,287 8,283 Other................................................. 7,549 7,374 7,207 ----------- ----------- ----------- Total......................................... 1,862,091 1,853,567 1,843,699 ----------- ----------- ----------- ----------- ----------- ----------- Operating Revenues (thousands of dollars) Residential........................................... $ 1,175,875 $ 1,037,099 $ 1,116,699 Commercial............................................ 1,678,011 1,554,956 1,575,547 Industrial............................................ 710,206 683,750 728,411 Other sales........................................... 52,756 49,273 47,999 ----------- ----------- ----------- Subtotal...................................... 3,616,848 3,325,078 3,468,656 Other Electric Revenues............................... 76,235 82,740 51,150 ----------- ----------- ----------- Total Electric Operating Revenues............. $ 3,693,083 $ 3,407,818 $ 3,519,806 ----------- ----------- ----------- ----------- ----------- ----------- Sources of Electric Energy at time of Peak Load (1,000 Kw): Generation............................................ 6,894 6,665 7,655 Purchased and net Interchanged........................ 2,253 1,780 1,430 ----------- ----------- ----------- Peak Load..................................... 9,147 8,445 9,085 ----------- ----------- ----------- ----------- ----------- ----------- Installed Generating Capacity at time of Peak Load(1,000 Kw): Fossil................................................ 4,356 4,686 4,595 Nuclear............................................... 2,807 2,807 2,807 Pumped Storage........................................ 190 180 180 Combustion Turbines................................... 3,121 2,810 2,810 Other................................................. 5 5 5 ----------- ----------- ----------- Total......................................... 10,479 10,488 10,397 ----------- ----------- ----------- ----------- ----------- ----------- Total Electric Operating Expenses per Kwh of Total Sales (cents per Kwh)....................................... 7.29 7.35 7.20 Temperature Humidity Index Hours........................ 20,372 14,466 19,113 Load Factor............................................. 51.1% 53.2% 50.9% Capacity Factor......................................... 33.8% 31.5% 33.1%
30 39 GAS
YEARS ENDED DECEMBER 31, ------------------------------------ 1993 1992 1991 ---------- ---------- ---------- Sources of Gas Supply (1,000 Therms): Sendout: Natural Gas........................................... 2,996,727 2,856,734 2,331,338 Refinery Gas.......................................... 159,131 158,121 166,021 Other Manufactured Gas................................ 702 1,358 1,470 ---------- ---------- ---------- Gas purchased and produced (1,000 Therms)(A)............. 3,156,560 3,016,213 2,498,829 Less Company use (gas operations) and gas lost or unaccounted for..................................... 48,782 65,779 58,648 ---------- ---------- ---------- Total Gas Sold................................... 3,107,778 2,950,434 2,440,181 ---------- ---------- ---------- ---------- ---------- ---------- Gas Fuel Costs (cents per therm): Natural Gas(B)........................................... 34.09 31.12 31.14 Refinery Gas............................................. 26.47 23.60 20.73 Other Manufactured Gas................................... 84.19 126.14 -- ---------- ---------- ---------- Weighted average cost............................ 33.71 30.77 30.53 ---------- ---------- ---------- ---------- ---------- ---------- Sales (1,000 Therms): Residential.............................................. 1,280,128 1,265,270 1,140,887 Commercial............................................... 943,054 939,021 893,069 Industrial............................................... 876,421 739,508 399,385 Other.................................................... 8,175 6,635 6,840 ---------- ---------- ---------- Total Sales of Gas............................... 3,107,778 2,950,434 2,440,181 ---------- ---------- ---------- Transportation Service................................... 557,403 543,097 381,497 ---------- ---------- ---------- Total Gas Sold and Transported................... 3,665,181 3,493,531 2,821,678 ---------- ---------- ---------- ---------- ---------- ---------- Average Number of Customers: Residential.............................................. 1,317,294 1,305,708 1,294,974 Commercial............................................... 161,161 159,402 162,527 Industrial............................................... 9,988 10,220 7,216 Other.................................................... 15 15 15 ---------- ---------- ---------- Total............................................ 1,489,458 1,475,345 1,464,732 ---------- ---------- ---------- ---------- ---------- ---------- Transportation Service Gas (TSG) Firm.................... 178 153 116 Non-Firm.............................................. 151 128 122 Co-generation......................................... 2 2 1 ---------- ---------- ---------- Total TSG........................................ 331 283 239 ---------- ---------- ---------- ---------- ---------- ---------- Operating Revenues (thousands of dollars): Residential.............................................. $ 780,195 $ 809,559 $ 699,696 Commercial............................................... 460,340 481,960 426,110 Industrial............................................... 299,762 243,527 138,394 Other sales.............................................. 3,545 3,040 3,157 ---------- ---------- ---------- Subtotal......................................... 1,543,842 1,538,086 1,267,357 Transportation Service................................... 37,081 34,739 27,036 Other Revenues........................................... 13,418 13,356 13,456 ---------- ---------- ---------- Total Gas Operating Revenues..................... $1,594,341 $1,586,181 $1,307,849 ---------- ---------- ---------- ---------- ---------- ---------- Total Gas Operating Expenses per therm sold (cents per therm)................................................... 47.04 50.58 49.92 Maximum 24-hour Gas Sendout (1,000 Therms)................. 21,159 19,571 18,188 Daily Capacity at Time of Peak Sendout (1,000 Therms)(reflects curtailments)........................... 27,148 25,833 25,088 Degree Days................................................ 4,594 4,784 4,327
(A) Reflects changes in holder stock. (B) Excludes contribution by electric department for gas reservation charge and natural gas refunds from suppliers. 31 40 EDHI EDHI, a wholly-owned, direct subsidiary of Enterprise, is incorporated under the laws of New Jersey and is the parent of EDC, CEA, PSRC, EGDC, Capital and Funding. EDHI's principal executive offices are located at One Riverfront Plaza, Newark, New Jersey 07102. EDHI intends to focus its efforts on its energy related core businesses, placing greater emphasis on its investment in the independent energy market. For a discussion of the impact on EDHI of PSE&G's Focused Audit Implementation Plan, see Regulation. EDC EDC, a New Jersey corporation, has its principal executive offices at 1000 Louisiana Street, Suite 2900, Houston, Texas 77002. EDC is an oil and gas exploration, development, production and marketing company with principal operations both onshore and offshore in the southern United States and has a growing international production base. EDC has been pursuing a program to attain and maintain its reserve base at approximately 900 billion cubic feet equivalent, both by acquiring proved oil and gas reserves, as well as through exploratory and development drilling. Year-end 1993 proven reserves were 538 billion cubic feet of gas and 45 million barrels of oil, a decrease of 3% and an increase of 20%, respectively, compared to 1992. As of December 31, 1993 and 1992, EDC's consolidated assets aggregated $679 million and $703 million, respectively. (See Regulation and Note 1 -- Summary of Significant Accounting Policies of Notes to Consolidated Financial Statements.) CEA CEA, a New Jersey corporation, has its principal executive offices at 1200 East Ridgewood Avenue, Ridgewood, New Jersey 07450. CEA invests in and participates in the development of cogeneration and power production facilities, which include QFs under PURPA and a foreign EWG. Pursuant to EDHI's business plan, CEA is expected to be the primary vehicle for its business growth. CEA's two direct subsidiaries, CEA New Jersey, Inc. (CEA New Jersey) and CEA USA, Inc. (CEA USA), hold certain of its investments. CEA New Jersey's subsidiaries invest in projects selling power to New Jersey utilities including PSE&G. CEA USA's subsidiaries invest in projects selling power to other domestic and foreign utilities. CEA and/or its subsidiaries and affiliates have investments in 18 cogeneration or power projects and one anthracite coal mine which are in operation or under development. Completion of the projects under construction cannot be assured. CEA continuously evaluates the status of project development and construction in light of the realities of timely completion and the costs incurred. As of December 31, 1993 and 1992, the status of CEA's projects was as follows:
1993 1992 ----------------------- ----------------------- NUMBER OF CEA'S SHARE NUMBER OF CEA'S SHARE STATUS PROJECTS (MW) PROJECTS (MW) --------- ----------- --------- ----------- In Operation....................................... 17(A) 408 15(A) 215 Under Construction................................. 2 70 2 118 Advanced Development............................... -- -- 3 531
(A) Includes one anthracite coal mine. CEA's investments in QF projects have been undertaken with other participants because CEA, together with any other utility affiliate, may not own more than 50% of a QF under applicable law subsequent to the in-service date. CEA's projects are diversified geographically and technologically and are generally financed through non-recourse debt. CEA is an investor in these projects and the electricity produced by the facilities is not part of PSE&G's installed capacity. However, some of such power is being purchased by PSE&G pursuant to long-term contracts with the applicable projects. As of December 31, 1993 and 1992, CEA's consolidated assets aggregated $211 million and $161 million, respectively. 32 41 PSRC PSRC, a New Jersey corporation, has its principal executive offices at One Riverfront Plaza, Newark, New Jersey 07102. PSRC makes diversified passive investments in assets that can provide funds for future growth as well as provide incremental earnings for Enterprise. Investments have been made in leveraged and direct financing leases, project financings, venture capital funds, leveraged buyout funds, real estate limited partnerships and marketable securities. The maturities of the portfolio's investments are also fairly diverse, with some having terms exceeding 30 years. PSRC's leveraged lease investments include various asset sectors from aircraft to nuclear power plants. Some of the transactions in which PSRC and its subsidiaries participate involve other equity investors. Pursuant to EDHI's business plan, PSRC will limit new investments to existing commitments and investments related to EDHI's core business. In January 1994, in response to regulatory changes occurring at both the national and state levels regarding the sale and distribution of natural gas (see Competition), PSRC formed a gas marketing subsidiary, Public Service Gas Marketing Company, which has entered into a partnership with two major utilities to market natural gas and associated services on an unregulated basis to commercial and industrial gas consumers nationwide. PSRC expects that the partnership will commence its marketing activities late in the first quarter of 1994. PSRC is a limited partner in various partnerships and is committed to make investments from time to time, upon the request of the respective general partners. On December 31, 1993, $139.5 million remained as PSRC's unfunded commitment subject to call. As of year end 1993 and 1992 PSRC investments aggregated $1.3 billion and $1.4 billion, respectively and were as follows:
INVESTMENTS 1993 1992 ----------------------------------------------------------- ------ ------ Lease Agreements........................................... $ 831 $ 823 Limited Partnerships....................................... 374 380 Securities................................................. 82 198 Valuation Allowances....................................... (10) (5) ------ ------ Total............................................ $1,277 $1,396 ------ ------ ------ ------
EGDC EGDC, a New Jersey corporation having its principal executive offices at One Riverfront Plaza, Newark, New Jersey 07102, is a diversified nonresidential real estate development and investment business. EGDC has investments in 11 commercial real estate properties (seven of which are developed) in several states. EGDC's strategy is to preserve and build the value of its assets to allow for the controlled disposition of its properties as the real estate market improves. As of December 31, 1993 and 1992, EGDC's consolidated assets aggregated $203 million and $260 million, respectively. In 1993, EGDC recorded a $77.6 million property impairment ($50.5 million after taxes) related to certain of its properties, including properties upon which EGDC's management altered its intent from a long-term investment strategy to a hold for sale status, reflecting such properties on its books at their net realizable value. For further discussion of EGDC, see MD&A -- Enterprise Earnings -- EDHI. CAPITAL Capital, a New Jersey corporation, has its principal executive offices at 80 Park Plaza, Newark, New Jersey 07101. Capital serves as a financing vehicle for EDHI's businesses, borrowing on their behalf on the basis of a support agreement with Enterprise. Intercompany borrowing rates are established with reference to market rates of interest at Capital's cost of funds. Capital will not have more than $750 million of debt 33 42 outstanding at any time. In 1993, Enterprise agreed with the BRC to make a good faith effort to eliminate such Enterprise support within six to ten years. Capital's assets consist principally of demand notes of EDC, CEA, PSRC and EGDC. As of December 31, 1993 and 1992, Capital had privately placed $724.5 million and $750 million, respectively, of its long-term debt. For additional information, see Construction and Capital Requirements -- Financing Activities and MD&A -- Liquidity and Capital Resources -- EDHI. FUNDING Funding, a New Jersey corporation, has its principal executive offices at 80 Park Plaza, Newark, New Jersey 07101. Funding serves as a financing vehicle for EDHI's businesses (excluding EGDC), borrowing on their behalf, as well as investing their short-term funds. Short-term investments are made only if the funds cannot be employed in intercompany loans. Intercompany borrowing rates are established with reference to market rates of interest at Funding's cost of funds. Funding is providing both long and short-term capital for the nonutility businesses other than EGDC on the basis of an unconditional guaranty from EDHI, but without direct support from Enterprise. As of December 31, 1993 and 1992, Funding's assets consisted principally of demand notes of EDC, CEA and PSRC and their subsidiaries, all of which are pledged to Funding's lenders and which aggregated $296 million and $561 million, respectively. For additional information, see MD&A -- Liquidity and Capital Resources -- EDHI. ITEM 2. PROPERTIES. PSE&G The statements under this Item as to ownership of properties are made without regard to leases, tax and assessment liens, judgments, easements, rights of way, contracts, reservations, exceptions, conditions, immaterial liens and encumbrances and other outstanding rights affecting such properties, none of which is considered to be significant in the operations of PSE&G, except that PSE&G's First and Refunding Mortgage, (Mortgage), securing the bonds issued thereunder, constitutes a direct first mortgage lien on substantially all of such property. PSE&G maintains insurance coverage against loss or damage to its principal plants and properties, subject to certain exceptions, to the extent such property is usually insured and insurance is available at a reasonable cost. For a discussion of nuclear insurance, see Note 12 -- Commitments and Contingent Liabilities of Notes to Consolidated Financial Statements. The electric lines and gas mains of PSE&G are located over or under public highways, streets, alleys or lands, except where they are located over or under property owned by PSE&G or occupied by it under easements or other rights. These easements and rights are deemed by PSE&G to be adequate for the purposes for which they are being used. Generally, where payments are minor in amount, no examinations of underlying titles as to the rights of way for transmission or distribution lines or mains have been made. 34 43 ELECTRIC PROPERTIES As of December 31, 1993, PSE&G's share of installed generating capacity was 10,479 MW, as shown in the following table:
INSTALLED NET MEGAWATT PRINCIPAL HEAT GENERATION CAPACITY NAME AND LOCATION CAPACITY FUEL USED RATE (000 MWH) FACTOR(a) - -------------------------------------------- ------- --------- ------ --------- --------- Fossil Bergen, Ridgefield, N.J. ................... 570 Gas 13,349 438 8.8 Burlington, Burlington, N.J. ............... 180 Oil 24,901 19 1.2 Conemaugh, New Florence, PA. 22.50%(c)...... 382 Coal 9,366 2,445 73.1 Hudson, Jersey City, N.J. .................. 983 Coal 10,875 2,348 53.3 Kearny, Kearny, N.J. ....................... 292 Oil 14,590 77 3.0 Keystone, Shelocta, PA. 22.84%(c)........... 388 Coal 9,643 2,717 79.9 Linden, Linden, N.J. ....................... 481 Oil 22,022 71 1.7 Mercer, Hamilton, N.J. ..................... 627 Coal 9,787 2,660 48.4 Sewaren, Woodbridge Twp., N.J. ............. 453 Gas 13,612 342 8.6 ------- ------ --------- --------- Total Fossil........................... 4,356 10,953 11,117 29.1 ------- ------ --------- --------- Nuclear (Capacity factor calculated in accordance with industries maximum dependable capability standards) Hope Creek, Lower Alloways Creek, N.J. 95%(b)(c)................................. 979 Nuclear 10,729 8,362 97.7 Peach Bottom, Peach Bottom PA. 42.49%(b).... 886 Nuclear 10,803 5,904 76.5 Salem, Lower Alloways Creek, N.J. 42.59%(b)................................. 942 Nuclear 10,707 4,828 58.9 ------- ------ --------- --------- Total Nuclear(c)....................... 2,807 10,748 19,094 78.0 ------- ------ --------- --------- Combustion Turbine Bayonne, N.J. .............................. 42 Oil 19,551 0.8 Bergen, Ridgefield, N.J. ................... 59 Oil 12,520 1 Burlington, N.J. ........................... 632 Gas 9,477 224 Edison, Edison Township, N.J. .............. 504 Gas 14,476 31 Essex, Newark, N.J. ........................ 621 Gas 13,501 232 Hudson, Jersey City, N.J. .................. 134 Oil -- (.1) Kearny, Kearny, N.J. ....................... 510 Oil 16,880 38 Linden, Linden, N.J. ....................... 326 Oil 21,218 10 Mercer, Hamilton, N.J. ..................... 124 Oil 91,226 0.2 National Park, National Park, N.J. ......... 19 Oil 31,260 0.1 Salem, Lower Alloways Creek, N.J. 42.59%(b)................................. 16 Oil 28,398 0.1 Sewaren, Woodbridge Township, N.J. ......... 134 Oil -- (.4) ------- ------ --------- --------- Total Combustion Turbine............... 3,121 12,388 536.7 2.0 ------- ------ --------- --------- Diesel Conemaugh, New Florence, PA., 22.50%(b)..... 3 Oil 9,901 .3 1.1 Keystone, Shelocta, PA., 22.84%(b).......... 2 Oil 9,286 .6 4.1 ------- ------ --------- --------- Total Diesel........................... 5 9,464 .9 2.3 ------- ------ --------- --------- Pumped Storage Yards Creek, Blairstown, N.J., 50%(b)....... 190 261 15.7 ------- ------ --------- --------- --------- Total PSE&G............................ 10,479 10,620 31,010 33.8 ------- ------ --------- --------- ------- ------ --------- ---------
(a) Net generation divided by the product of weighted average generating capacity times total hours. (b) PSE&G's share of jointly-owned facility. (c) Excludes energy for pumping and synchronous condensers. 35 44 For information regarding construction see Item 1. Business -- Construction and Capital Expenditures. As of December 31, 1993, PSE&G owned 40 switching stations with an aggregate installed capacity of 31,249,000 kilovolt-amperes, and 224 substations with an aggregate installed capacity of 7,194,000 kilovolt-amperes. In addition, 6 substations having an aggregate installed capacity of 133,000 kilovolt-amperes were operated on leased property. All of these facilities are located in New Jersey. Also at that date, PSE&G owned undivided interests in similar jointly-owned facilities at jointly-owned generating facilities in New Jersey and Pennsylvania as indicated in the table above. As of December 31, 1993, PSE&G's transmission and distribution system included 148,272 circuit miles, of which 33,937 miles were underground, and 776,484 poles, of which 531,952 poles were jointly-owned. Approximately 99% of this property is located in New Jersey. In addition, as of December 31, 1993, PSE&G owned 4 electric distribution headquarters and 5 subheadquarters and leased 2 subheadquarters in 4 operating divisions all located in New Jersey. Also, PSE&G leases electric transmission headquarters and owns subheadquarters. GAS PROPERTIES As of December 31, 1993, the daily gas capacity of PSE&G's 100%-owned peaking facilities (the maximum daily gas delivery available during the three peak winter months) consisted of liquid petroleum air gas (LPG) and liquefied natural gas (LNG) and aggregated 2,973,000 therms (approximately 297,300 Mcf. on an equivalent basis of 1,000 Btu/cubic foot) as shown in the following table:
DAILY CAPACITY PLANT LOCATION (THERMS) ------------------------------------------ ------------------ -------------- Burlington LNG............................ Burlington, N.J. 773,000 Camden LPG................................ Camden, N.J. 280,000 Central LPG............................... Edison Twp., N.J. 960,000 Harrison LPG.............................. Harrison, N.J. 960,000 -------------- Total........................... 2,973,000 -------------- --------------
As of December 31, 1993, PSE&G owned and operated approximately 15,172 miles of gas mains, owned 12 gas distribution headquarters and one subheadquarter and leased one other subheadquarter all in two operating regions located in New Jersey and owned one meter shop in New Jersey serving all such areas. In addition, PSE&G operated 61 natural gas metering or regulating stations, all located in New Jersey, of which 26 were located on land owned by customers or natural gas pipeline companies supplying PSE&G with natural gas and were operated under lease, easement or other similar arrangement. In some instances, portions of the metering and regulating facilities were owned by pipeline companies. OFFICE BUILDINGS AND FACILITIES PSE&G leases substantially all of a 26-story office tower for its corporate headquarters at 80 Park Plaza, Newark, N. J., together with an adjoining three-story building. PSE&G also leases other office space at various locations throughout New Jersey for district offices and offices for various corporate groups and services. PSE&G also owns various other sites for training, testing, parking, records storage, research, repair and maintenance, warehouse facilities and for other purposes related to its business. EDHI owns no real property. EDHI leases its corporate headquarters at One Riverfront Plaza, Newark, New Jersey 07102. For a brief general description of the properties of the subsidiaries of EDHI, see Item 1. Business -- EDHI. 36 45 ITEM 3. LEGAL PROCEEDINGS. See the following under Business, at the pages indicated: (1) Page 3. Proceedings before FERC relating to competition and electric wholesale power markets. (Inquiry Concerning the Pricing Policy for Transmission Services Provided by Utilities Under the Federal Power Act, Docket No. RM93-19(NOI).) (2) Page 3. Proceedings before FERC relating to restructuring of natural gas industry pursuant to Orders 636. (In Re Pipeline Service Obligations and Revisions to Regulations Governing Self-Implementing Transportation Under Part 284 of the Commission's Regulations, Docket No. RM91-11-000). (3) Page 8. Proceedings before the BRC relating to PSE&G's LGAC, filed November 3, 1993, in Docket No. GR91071226J. (4) Page 18. Appeal by an association of competitors of PSE&G of the NJDEPE's air permit for Phase I of the repowering of PSE&G's Bergen station to the Appellate Division of the New Jersey Superior Court. (5) Page 22. Requests filed in 1974 and later supplemented, to EPA and NJDEPE to establish thermal discharges and intake structures for PSE&G's electric generating stations (Sewaren Generating Station, NJ 0000680; Bergen Generating Station, NJ 0000621; Hudson Generating Station, NJ 0000647; Kearny Generating Station, NJ 0000655; Salem Generating Station, NJ 0005622; Linden Generating Station, NJ 0000663). (6) Page 24. On November 7, 1988, PSE&G filed a lawsuit in the United States District Court for the District of New Jersey against Associated Electric & Gas Insurance Services, Ltd., Certain Underwriters at Lloyd's London, and Certain London Market Companies (PSE&G v. AEGIS, et al., Civ. Action No. 884811.) The suit seeks insurance coverage from these insurers for claims that have been made against PSE&G by the NJDEPE and certain private parties. The claims concern alleged contamination at former gas manufacturing plant sites in New Jersey that are either currently owned by PSE&G or that were previously owned by PSE&G or one of its predecessors. (7) Pages 24 through 29. Various administrative actions, claims, litigation and requests for information by federal and/or state agencies, and/or private parties, under CERCLA, RCRA, and state environmental laws to compel PRPs, which may include PSE&G, to provide information with respect to transportation and disposal of hazardous substances and wastes, and/or to undertake or contribute to the costs of investigative and/or cleanup actions at various locations because of actual or threatened releases of one or more potentially hazardous substances and/or wastes. As part of one of the administrative actions by NJDEPE, PSE&G has signed ACO's with NJDEPE in the matter of its former gas plant sites: South Amboy, Morristown, Bordentown, Gloucester, Bayonne (Hobart Avenue), Woodbury, Riverton and Paterson. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. Enterprise and PSE&G, inapplicable. ITEM 10. EXECUTIVE OFFICERS OF THE REGISTRANTS. Enterprise and PSE&G. Information regarding executive officers required by this Item is set forth in Part III, Item 10 hereof. 37 46 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. Enterprise's Common Stock is listed on the New York Stock Exchange, Inc. and the Philadelphia Stock Exchange, Inc. All of PSE&G's common stock is owned by Enterprise, its corporate parent. As of December 31, 1993, there were 192,999 holders of record of Enterprise Common Stock. The following table indicates the high and low sale prices for Enterprise's Common Stock, as reported in The Wall Street Journal as Composite Transactions and dividends paid for the periods indicated:
DIVIDEND HIGH LOW PER SHARE ---- --- --------- Common Stock: 1993 First Quarter..................................... 34 1/4 30 .54 Second Quarter.................................... 35 31 7/8 .54 Third Quarter..................................... 36 1/8 34 .54 Fourth Quarter.................................... 35 1/4 30 .54 1992 First Quarter..................................... 29 1/2 26 1/2 .54 Second Quarter.................................... 28 1/8 25 3/8 .54 Third Quarter..................................... 28 3/8 26 5/8 .54 Fourth Quarter.................................... 31 3/8 27 3/8 .54
Since 1986, PSE&G has made regular cash payments to Enterprise in the form of dividends on outstanding shares of PSE&G's Common Stock. PSE&G has paid quarterly dividends on its common stock in each year commencing in 1948, the year of the distribution of PSE&G's common stock by Public Service Corporation of New Jersey, the former parent of PSE&G. Beginning in 1992, EDHI has made regular cash payments to Enterprise in the form of dividends on outstanding shares of EDHI's common stock. Enterprise has paid quarterly dividends in each year commencing with the corporate restructuring of PSE&G when Enterprise became the owner of all the outstanding common stock of PSE&G. While the Board of Directors of Enterprise intends to continue the practice of paying dividends quarterly, amounts and dates of such dividends as may be declared will necessarily be dependent upon Enterprise's future earnings, financial requirements and other factors. The ability of Enterprise to declare and to pay dividends is contingent upon its receipt of dividend payments from its subsidiaries. PSE&G has restrictions on the payments of dividends which are contained in its Restated Certificate of Incorporation, as amended, certain of the indentures supplemental to its Mortgage and certain debenture bond indentures. Under these restrictions, dividends on PSE&G's common stock may be paid only out of PSE&G's earned surplus and may not reduce PSE&G's earned surplus to less than $10,000,000. PSE&G dividends on common stock would be limited to 75% of Earnings Available for Public Service Enterprise Group Incorporated if payment thereof would reduce PSE&G's Stock Equity to less than 33 1/3% of PSE&G's Total Capitalization and would be limited to 50% of Earnings Available for Public Service Enterprise Group Incorporated if payment thereof would reduce Stock Equity to less than 25% of PSE&G's Total Capitalization, as each of said terms is defined in PSE&G's said debenture bond indentures. None of these restrictions presently limits the payment of dividends out of current earnings. The amount of Enterprise's and PSE&G's consolidated retained earnings free of these restrictions at December 31, 1993 was $1.351 billion and $1.171 billion, respectively. 38 47 ITEM 6. SELECTED FINANCIAL DATA. ENTERPRISE The information presented below should be read in conjunction with Enterprise Consolidated Financial Statements and Notes thereto.
YEAR ENDED DECEMBER 31, ----------------------------------------------------------------------- 1993 1992 1991 1990 1989 ----------- ----------- ----------- ----------- ----------- (THOUSANDS OF DOLLARS, WHERE APPLICABLE) Total Operating Revenues.... $ 5,705,559 $ 5,356,781 $ 5,091,658 $ 4,799,239 $ 4,804,279 Net Income.................. $ 600,933 $ 504,117 $ 543,035 $ 403,663 $ 523,435 Earnings per average share of Common Stock........... $ 2.50 $ 2.17 $ 2.43 $ 1.90 $ 2.53 Dividends paid per share of Common Stock.............. $ 2.16 $ 2.16 $ 2.13 $ 2.09 $ 2.05 As of December 31: Total Assets.............. $16,305,164 $14,754,709 $14,452,565 $13,693,469 $12,799,398 Long-Term Liabilities: Capital Lease Obligations....... $ 52,530 $ 53,104 $ 54,617 $ 54,073 $ 54,513 Long-Term Debt....... $ 5,256,321 $ 4,977,579 $ 5,128,373 $ 4,668,024 $ 4,293,578 Preferred Stock with mandatory redemption...... $ 150,000 $ 75,000 $ -- $ -- $ -- Ratio of Earnings to Fixed Charges plus Preferred Stock Dividend Requirements (A).......... 2.59 2.30 2.54 2.09 2.60
(A) Fixed charges include the preferred stock dividend requirements of PSE&G. PSE&G The information presented below should be read in conjunction with PSE&G Consolidated Financial Statements and Notes thereto.
YEAR ENDED DECEMBER 31, ----------------------------------------------------------------------- 1993 1992 1991 1990 1989 ----------- ----------- ----------- ----------- ----------- (THOUSANDS OF DOLLARS, WHERE APPLICABLE) Total Operating Revenues.... $ 5,287,424 $ 4,994,000 $ 4,807,892 $ 4,569,164 $ 4,642,383 Net Income.................. $ 614,868 $ 475,936 $ 545,479 $ 537,619 $ 544,374 As of December 31: Total Assets.............. $13,959,806 $12,250,834 $12,008,058 $11,632,429 $11,116,262 Long-Term Liabilities: Capital Lease Obligations....... $ 52,530 $ 53,104 $ 53,617 $ 54,073 $ 54,513 Long-Term Debt....... $ 4,364,437 $ 3,978,138 $ 3,933,389 $ 3,733,444 $ 3,524,210 Preferred Stock with mandatory redemption...... $ 150,000 $ 75,000 $ -- $ -- $ -- Ratio of Earnings to Fixed Charges................... 3.30 2.70 3.20 3.10 3.21 Ratio of Earnings to Fixed Charges plus Preferred Stock Dividend Requirements.............. 2.89 2.43 2.86 2.79 2.88
39 48 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. ENTERPRISE Following are the significant factors affecting the consolidated financial condition and the results of operations of Public Service Enterprise Group Incorporated (Enterprise) and its subsidiaries. This discussion refers to the Consolidated Financial Statements and related Notes of Enterprise and should be read in conjunction with such statements and notes. OVERVIEW Enterprise has two direct wholly-owned subsidiaries, Public Service Electric and Gas Company (PSE&G) and Enterprise Diversified Holdings Incorporated (EDHI). Enterprise's principal subsidiary, PSE&G, is an operating public utility providing electric and gas service in certain areas in the State of New Jersey. PSE&G has a finance subsidiary, PSE&G Fuel Corporation (Fuelco), providing financing, unconditionally guaranteed by PSE&G, of up to $150 million aggregate principal amount at any one time of a 42.49% interest in the nuclear fuel acquired for Peach Bottom Atomic Power Station Units 2 and 3 (Peach Bottom). PSE&G also has a nonutility subsidiary, Public Service Conservation Resources Corporation (PSCRC), which offers demand side management (DSM) services to utility customers. EDHI is the parent of Enterprise's other nonutility businesses: Energy Development Corporation (EDC), an oil and gas exploration, development, production and marketing company; Community Energy Alternatives Incorporated (CEA), an investor in and developer of cogeneration and power production facilities; Public Service Resources Corporation (PSRC), which makes diversified passive investments; and Enterprise Group Development Corporation (EGDC), a diversified nonresidential real estate development and investment business. EDHI also has two finance subsidiaries: PSEG Capital Corporation (Capital), which has provided up to $750 million of privately-placed debt financing on the basis of a support agreement from Enterprise and Enterprise Capital Funding Corporation (Funding), which provides privately-placed debt financing guaranteed by EDHI but without direct support from Enterprise. As of December 31, 1993 and December 31, 1992, PSE&G comprised 86% and 83%, respectively, of Enterprise assets. For the years 1993, 1992 and 1991, PSE&G revenues were 93%, 93% and 94%, respectively, of Enterprise revenues and PSE&G earnings available to Enterprise for such years were 96%, 88% and 95%, respectively, of Enterprise net income. Pursuant to the Focused Audit Implementation Plan approved by the New Jersey Board of Regulatory Commissioners (BRC) regarding operations and intercompany relationships between PSE&G and EDHI, in 1993 Enterprise agreed with the BRC, among other things, that it will not permit its investment in EDHI to exceed 20% of its consolidated assets without prior notice to the BRC, that the PSE&G Board will make an annual certification that the business and financing plans of EDHI will not adversely affect PSE&G, that debt supported by the support agreement between Enterprise and Capital will be limited to $750 million, that a good faith effort will be made to eliminate such support over the next six to ten years and that EDHI will pay PSE&G an affiliation fee of $2 million a year, to be proportionately reduced as the amount of debt under the support agreement is reduced. The major factors which will affect Enterprise's future results include general and regional economic conditions, PSE&G's customer retention and growth, the ability of PSE&G and EDHI to meet competitive pressures and to contain costs, the adequacy and timeliness of required regulatory approvals, including rate relief to PSE&G, continued access to the capital markets and continued favorable regulatory treatment of consolidated tax benefits. (See Note 2 -- Rate Matters and Note 12 -- Commitments and Contingent Liabilities of Notes to Consolidated Financial Statements.) 40 49 PSE&G ENERGY AND FUEL ADJUSTMENT CLAUSES PSE&G has fuel and energy tariff rate adjustment clauses which are designed to permit adjustments for changes in electric energy and gas supply costs and certain other costs as approved by the BRC, when compared to cost recovery included in base rates. Charges under the clauses are primarily based on energy and gas supply costs which are normally projected over twelve-month periods. The changes in the Levelized Gas Adjustment Clause (LGAC) and the Levelized Energy Adjustment Clause (LEAC) do not directly affect earnings because such costs are adjusted monthly to match amounts recovered through revenues. However, the carrying of underrecovered costs ultimately increases financing costs. PSE&G is also required to pay interest on net overrecovered costs. Under the clauses, if actual costs differ from the costs recovered, the amount of the underrecovery or overrecovery is deferred and is reflected in the average cost used to determine the fuel and energy tariff rate adjustment for the period in which it is recovered or repaid. Actual costs otherwise includable in the LEAC are subject to adjustment by the BRC in accordance with PSE&G's nuclear performance standard. (See Note 2 -- Rate Matters and Note 12 -- Commitments and Contingent Liabilities of Notes to Consolidated Financial Statements.) ENTERPRISE EARNINGS Earnings per share of Enterprise Common Stock were $2.50 in 1993, $2.17 in 1992 and $2.43 in 1991. The changes are summarized as follows:
1993 VS. 1992 1992 VS. 1991 -------------- -------------- PER PER AMOUNT SHARE AMOUNT SHARE ------ ----- ------ ----- (MILLIONS, EXCEPT PER SHARE DATA) PSE&G Revenues (net of fuel costs and gross receipts taxes)......... $ 347 $1.49 $ (43) $(.19) Peach Bottom Settlement (net of Federal income taxes of $17 million)................................................... (33) (.14) 33 .15 Other operation expenses...................................... (62) (.26) (49) (.22) Maintenance expenses.......................................... 3 .01 8 .03 Depreciation and amortization expenses........................ (15) (.06) (22) (.10) Federal income taxes.......................................... (113) (.49) 53 .24 Other taxes................................................... (1) -- (9) (.04) Other income.................................................. -- -- 2 .01 Interest charges.............................................. 12 .05 (36) (.16) Allowance for Funds Used During Construction (AFDC)........... -- -- (4) (.02) Preferred Stock Dividend Requirements......................... (6) (.02) (3) (.01) Other income and expenses..................................... 1 -- (2) (.01) ------ ----- ------ ----- Earnings Available to Enterprise........................... 133 .58 (72) (.32) ------ ----- ------ ----- EDHI............................................................ (36) (.16) 33 .14 ------ ----- ------ ----- Net Income............................................ $ 97 .42 $ (39) (.18) ------ ----- ------ ----- ------ ------ Effect of additional shares of Enterprise Common Stock issued... (.09) (.08) ----- ----- Total................................................. $ .33 $(.26) ----- ----- ----- -----
The average shares of Enterprise Common Stock outstanding were 240,663,599 for 1993 and 232,306,492 for 1992. PSE&G In 1993, excluding the $33 million net effect of the 1992 settlement of litigation against Philadelphia Electric Company, now known as PECO Energy Company (PECO) in connection with the 1987 shutdown of Peach Bottom by the Nuclear Regulatory Commission (1992 Settlement), PSE&G's earnings available to Enterprise increased by $166 million. The principal contributing factors to the increase in earnings available to Enterprise were PSE&G's higher electric and gas base rates that became effective January 1, 1993 and a 41 50 substantial increase in electric kilowatthour sales. (See PSE&G Electric and Gas Revenues, below.) The increase in electric sales was primarily due to the abnormally warm weather. Partially offsetting the increase in earnings were higher other operation expenses (comprised primarily of labor and employee benefits costs and miscellaneous nuclear production costs), higher depreciation and amortization and higher Federal income taxes resulting from increased pre-tax operating income and an increase in the Federal corporate income tax rate, effective January 1993. (See Note 9 -- Federal Income Taxes of Notes to Consolidated Financial Statements.) In 1992, excluding the $33 million net effect of the 1992 Settlement, PSE&G's earnings available to Enterprise declined by $105 million. This decline was principally due to the 1.7% decrease in electric kilowatthour sales resulting from significantly cooler weather during 1992 and higher other operation expenses (comprised primarily of labor and employee benefits costs and miscellaneous nuclear production costs). Also contributing to the decrease in earnings were increased interest charges resulting from timing of refunding operations and higher depreciation and amortization expenses. Partially offsetting the decrease in earnings were lower maintenance expenses at certain of PSE&G's fossil fuel generating stations and at Peach Bottom and lower Federal income taxes resulting from lower pre-tax operating income. EDHI The net income of EDHI was $24 million in 1993, a decrease of $36 million from 1992. As a result of a management review of each of EGDC's property's current value and the potential for increasing such value through operating and other improvements, EGDC recorded an impairment related to certain properties, including properties upon which management revised its intent from a long-term investment strategy to a short-term hold for sale status, reflecting such properties on its books at their net realizable value. This impairment reduced EDHI earnings by $51 million, after tax, or 21 cents per share of Enterprise Common Stock. Partially offsetting this decrease was an increase in the earnings of EDC due to the higher price of natural gas. Exclusive of the recorded impairment, EDHI net income would have been $75 million for 1993. The net income of EDHI was $60 million in 1992, an increase of $33 million from 1991. The increase in EDHI net income was due primarily to an increase in EDC net income of $23 million resulting from higher natural gas prices and volumes and an $8 million increase in CEA net income due to improved performance of certain projects and the sale of its interest in various projects. DIVIDENDS The ability of Enterprise to declare and pay dividends is contingent upon its receipt of dividend payments from its subsidiaries. PSE&G has made regular payments to Enterprise in the form of dividends on outstanding shares of its common stock since Enterprise was formed in 1986. In addition, commencing in 1992, EDHI has also made payments to Enterprise in the form of dividends on its outstanding common stock. Dividends paid to holders of Enterprise Common Stock increased $18 million during 1993 compared to 1992 and increased $27 million during 1992 compared to 1991. The increase in the 1993 dividend payment over 1992 was due to the issuance of additional shares of Enterprise Common Stock. The increase in the 1992 dividend payment over 1991 was due to the issuance of additional shares of Enterprise Common Stock and a one cent per share increase in the quarterly dividend rate for the first three quarters of 1992 compared to the same periods of 1991. Dividends paid to holders of PSE&G Preferred Stock increased $6 million during 1993 compared to 1992 and $3 million during 1992 compared to 1991. The increase in 1993 dividend payments over 1992 dividend payments was due to the issuance and sale of 750,000 shares of 5.97% Preferred Stock on March 17, 1993 and the issuance and sale of 750,000 shares of 7.44% Preferred Stock on June 23, 1992, while the increase in 1992 dividend payments over 1991 dividend payments was due to the issuance and sale of the 7.44% Preferred Stock. 42 51 REVENUES PSE&G ELECTRIC Revenues increased $285 million, or 8.4%, in 1993 from 1992; 1992 revenues decreased $92 million, or 2.6%, compared to 1991. The significant components of these changes follow:
INCREASE OR (DECREASE) ------------------------------- 1993 VS. 1992 1992 VS. 1991 ------------- ------------- (MILLIONS) Kilowatthour sales..................................... $ 67 $ (65) Base rate increase effective January 1, 1993........... 244 -- Tax Reform Act of 1986 (TRA-86)........................ 13 (6) Recovery of energy costs............................... (52) (6) New Jersey Gross Receipts and Franchise Taxes (NJGRT).............................................. 17 (15) Other operating revenues............................... (4) -- ------ ------ Total Electric Revenues...................... $ 285 $ (92) ------ ------ ------ ------
Changes in kilowatthour sales by customer category are described below:
INCREASE OR (DECREASE) ------------------------------ 1992 VS. 1993 VS. 1992 1991 ------------- ------------ Residential............................................ 8.3% (6.6)% Commercial............................................. 3.7 (0.8) Industrial............................................. (1.0) (1.1)
1993 -- The increase in electric revenues over 1992 was primarily due to the base rate increase which became effective January 1, 1993, partially offset by the larger LEAC credit also effective January 1, 1993. Abnormally warm weather resulted in a significant increase in weather sensitive sales during 1993. Increased competition from nonutility generators (NUGs) and an unscheduled maintenance shutdown at PSE&G's largest industrial customer negatively impacted industrial sales. 1992 -- The reduction in electric revenues from 1991 was due to a 1.7% reduction in kilowatthour sales resulting from reduced weather-sensitive load. Industrial and commercial sales also declined reflecting the effect of New Jersey's weak economy. Competition from NUGs continued to negatively impact industrial sales. PSE&G GAS Revenues increased $8 million, or 0.5%, during 1993 over 1992; 1992 revenues increased $278 million or 21.3% over 1991. The significant components of these changes follow:
INCREASE OR (DECREASE) ------------------------------ 1992 VS. 1993 VS. 1992 1991 ------------- ------------ (MILLIONS) Therm sales............................................ $ (29) $ 36 Base rate increase effective January 1, 1993........... 48 -- TRA-86................................................. -- 3 Recovery of fuel costs................................. 15 216 NJGRT.................................................. (5) 16 Other operating revenues............................... (21) 7 ------ ------ Total Gas Revenues........................... $ 8 $278 ------ ------ ------ ------
43 52 Changes in gas sold or transported by customer category are described below:
INCREASE OR (DECREASE) ------------------------------- 1993 VS. 1992 1992 VS. 1991 ------------- ------------- Residential............................................ 1.2% 10.9% Commercial............................................. .4 5.1 Industrial............................................. 18.5 85.2 Transportation Service................................. 2.6 42.4
1993 -- The increase in gas revenues over 1992 was primarily attributable to the base rate increase which became effective January 1, 1993 and the higher recovery of fuel related costs. Sales to cogenerators was the largest contributor to the increase in industrial sales as cogeneration average customer usage for electric generation continues to increase. Transportation service sales reflect the movement of some interruptible customers to transportation service. 1992 -- Revenues for 1992 increased over 1991 due principally to the recovery of fuel costs resulting from higher levels of weather-sensitive therm sales and an increase in the LGAC authorized by the BRC, effective January 1, 1992. The increase in residential and firm commercial sales, which represent the majority of PSE&G gas revenues, was principally attributable to the colder weather. Higher industrial and transportation service sales over 1991 were due to cogeneration customer growth. EDHI EDHI revenues increased $33 million, or 8% during 1993 over 1992; 1992 revenues increased $72 million, or 22% in 1992 over 1991. The significant components contributing to such results were as follows:
INCREASE OR (DECREASE) ------------------------------- 1993 VS. 1992 1992 VS. 1991 ------------- ------------- (MILLIONS) EDC.................................................... $ 30 $35 CEA.................................................... 10 15 PSRC................................................... (11) 15 EGDC................................................... 4 7 ------ --- Total EDHI Revenues.......................... $ 33 $72 ------ --- ------ ---
1993 -- EDC was the largest contributor to the EDHI revenue increase due to the higher price of natural gas, partially offset by lower sales to PSE&G. CEA revenues increased as a result of greater income from partnership operating projects. PSRC revenues decreased due to unrealized losses on investments and lower income from leases. 1992 -- The increase in 1992 revenues over 1991 was due to higher revenues of each of EDHI's operating subsidiaries. EDC's higher revenues were principally attributable to increased sales and higher gas prices in 1992. CEA's increased revenues were derived from higher partnership income and gains on the sales of certain partnership interests in 1992. PSRC's greater revenues were attributable to increased gains on investments and higher income from partnerships and leases, net of pre-tax valuation allowances and a write-off totaling $35 million, primarily related to the loss on its investment in the Second National Federal Savings Bank of Salisbury, Maryland. EGDC's increased revenues resulted from higher rental and partnership income. 44 53 PSE&G ELECTRIC ENERGY COSTS Electric energy costs decreased $59 million or 7.7% in 1993 compared to 1992 and $5 million or .6% in 1992 compared to 1991. The significant components of these changes follow:
INCREASE OR (DECREASE) ------------------------------- 1993 VS. 1992 1992 VS. 1991 ------------- ------------- (MILLIONS) Change in prices paid for fuel and power purchases..... $ 18 $ 7 Kilowatthour generation................................ 29 (20) Adjustment of actual costs to match recoveries through revenues(A).......................................... (106) 8 ------------- ------ Total Electric Energy Costs.................. $ (59) $ (5) ------------- ------ ------------- ------
(A) Reflects the change in the deferred over(under)recovered energy costs, which in the years 1993, 1992 and 1991 amounted to $(93) million, $13 million and $5 million, respectively. (See PSE&G Energy and Fuel Adjustment Clauses and Note 2 -- Rate Matters of Notes to Consolidated Financial Statements.) 1993 -- The decrease in total costs was the result of an adjustment in the recovery of energy costs resulting from the base rate case decision effective January 1, 1993, partially offset by a 17% increase in nuclear kilowatthour generation and an 11% increase in purchased power costs. 1992 -- The decrease in total costs resulted from lower kilowatthour generation due primarily to a reduction in weather-sensitive load. Higher prices paid for fuel and power purchases resulted principally from the need to purchase power due to outages at various times of the Salem Nuclear Generating Station, Units 1 and 2 (Salem 1 and 2), in which PSE&G owns 42.59% of undivided interest. Kilowatthour generation from the Salem units declined 31% in 1992 compared to 1991. (See Note 12 -- Commitments and Contingent Liabilities -- Nuclear Performance Standard of Notes to Consolidated Financial Statements.) GAS SUPPLY COSTS Gas supply costs increased $39 million or 4.6% in 1993 compared to 1992 and $223 million or 35.0% in 1992 compared to 1991. The significant components of these changes follow:
INCREASE OR (DECREASE) ------------------------------- 1993 VS. 1992 1992 VS. 1991 ------------- ------------- (MILLIONS) Change in prices paid for gas supplies................. $ 117 $ 25 Therm sendout.......................................... 41 147 Refunds from pipeline suppliers........................ 33 (33) Adjustment of actual costs to match recoveries through revenues(A).......................................... (152) 84 ------------- ------------- Total Gas Supply Costs....................... $ 39 $ 223 ------------- ------------- ------------- -------------
(A) Reflects the change in the deferred over(under)recovered gas supply costs, which in the years 1993, 1992 and 1991 amounted to $(100) million, $52 million and $(32) million, respectively. (See PSE&G Energy and Fuel Adjustment Clauses and Note 2 -- Rate Matters of Notes to Consolidated Financial Statements.) 1993 -- The increase in total costs was principally due to greater sales to NUGs and other customers, higher gas costs and higher therm sendout resulting from the colder 1993 winter season compared to the 1992 winter season. The increase in costs was reduced by deferred underrecovered 1993 gas costs resulting from the BRC approved adjustment in PSE&G's LGAC, effective January 1, 1993 of $71 million on an annualized basis through December 31, 1993. The adjustment reflects lower gas costs and the inclusion of $15.1 million of conservation program costs in LGAC. In addition, gas customers received $45 million of credits during the first quarter of 1993. 45 54 1992 -- The increase in total costs was principally due to greater therm sendout resulting from the colder 1992 weather compared to 1991 and increased sales to NUGs. LIQUIDITY AND CAPITAL RESOURCES Enterprise's liquidity is affected by maturing debt (see Note 6 -- Schedule of Consolidated Long-Term Debt of Notes to Consolidated Financial Statements), investment and acquisition activities and the capital requirements of PSE&G's construction program. Capital resources available to meet such requirements depend upon the factors noted above under Overview. PSE&G For 1993, PSE&G had utility plant additions, including AFDC, of $890 million, an increase of $63 million versus 1992 additions of $827 million. Additions in 1992 increased $14 million from 1991 additions of $813 million. AFDC for 1993, 1992 and 1991 amounted to $27 million, $26 million and $30 million, respectively. Construction expenditures were related to improvements in PSE&G's existing power plants, transmission and distribution system, gas system and common facilities. Construction expenditures from 1994 through 1998 are expected to aggregate $4.2 billion. (See Construction, Investments and Other Capital Requirements Forecast below.) PSE&G expects that it will be able to generate internally a majority of its capital requirements including construction expenditures over the next five years, assuming adequate and timely rate relief as to which no assurances can be given. (See Note 2 -- Rate Matters and Note 12 -- Commitments and Contingent Liabilities of Notes to Consolidated Financial Statements.) Legislation effective January 1, 1992 phases in an acceleration of payment of the NJGRT during 1992-94, so that for 1994 and for each year thereafter PSE&G will be paying its estimated current year's NJGRT liability in April of each such year. In April 1993, PSE&G paid $899 million (its 1992 NJGRT plus 50% of its estimated 1993 NJGRT). In April 1994, PSE&G will be required to pay approximately $850 million (the remainder of its 1993 NJGRT plus its 1994 estimated NJGRT). Pending collection from customers, PSE&G is required to finance such NJGRT payments. EDHI During the next five years, a majority of EDHI's capital requirements are expected to be provided from operational cash flows. EDHI intends to focus its efforts on CEA and EDC, its energy-related core businesses. CEA is expected to be the primary vehicle for its business growth and EDC is projected to attain and maintain a reserve base at approximately 900 billion cubic feet equivalent, approximately 11% above the year-end 1993 level. PSRC will limit new investments, while EGDC will exit the real estate business in a prudent manner. This strategy places greater emphasis on its investment in the independent energy market. 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. PSRC is a limited partner in various partnerships and is committed to make investments from time to time, upon the request of the respective general partners. On December 31, 1993, $139.5 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 vary from 3:1 to 1.75:1. EDHI is also required to maintain a twelve months earnings before interest and taxes to interest (EBIT) coverage ratio of at least 1.35:1. As of December 31, 1993 and 1992, EDHI had consolidated debt to equity ratios of 1.34:1 and 1.84:1 and, for the years ended December 31, 1993 and 1992, EBIT coverage ratios, which exclude the effect of EGDC, of 2.13:1 and 1.88:1, respectively. Compliance with applicable financial covenants will depend upon future levels of earnings, among other things, as to which no assurance can be given. (See Construction, Investments and Other Capital Requirements Forecast and Note 6 -- Schedule of Consolidated Long-Term Debt of Notes to Consolidated Financial Statements.) 46 55 CONSTRUCTION, INVESTMENTS AND OTHER CAPITAL REQUIREMENTS FORECAST The estimated construction requirements of PSE&G, including AFDC, investments and other capital requirements of PSE&G and EDHI for 1994 through 1998 are based on expected project completion dates and include anticipated escalation due to inflation of approximately 4% for utility projects and are as follows:
1994 1995 1996 1997 1998 TOTAL ------ ------ ------ ------ ------ ------ (MILLIONS OF DOLLARS) PSE&G ELECTRIC Nuclear Production Facilities...... $ 114 $ 82 $ 87 $ 95 $ 87 $ 465 Nuclear Fuel....................... 74 102 99 94 114 483 Transmission and Distribution...... 218 196 204 216 221 1,055 Other Production................... 321 138 139 170 252 1,020 Conservation and Other............. 47 42 91 17 41 238 ------ ------ ------ ------ ------ ------ Total Electric..................... 774 560 620 592 715 3,261 ------ ------ ------ ------ ------ ------ GAS Production Facilities.............. 2 2 2 -- -- 6 Transmission and Distribution...... 144 136 140 142 142 704 ------ ------ ------ ------ ------ ------ Total Gas.......................... 146 138 142 142 142 710 ------ ------ ------ ------ ------ ------ Miscellaneous Corporate.............. 56 47 45 46 48 242 ------ ------ ------ ------ ------ ------ Total Construction Requirements of PSE&G.... 976 745 807 780 905 4,213 ------ ------ ------ ------ ------ ------ EDHI................................. 326 177 193 194 285 1,175 ------ ------ ------ ------ ------ ------ Mandatory Retirement of Securities: PSE&G.............................. 60 310 -- 300 118 788 EDHI............................... 106 190 91 125 204 716 ------ ------ ------ ------ ------ ------ 166 500 91 425 322 1,504 ------ ------ ------ ------ ------ ------ Working Capital and Other-net...... 247 90 56 33 17 443 ------ ------ ------ ------ ------ ------ Total Capital Requirements......... $1,715 $1,512 $1,147 $1,432 $1,529 $7,335 ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
While the above forecast includes capital costs to comply with revised Clean Air Act (CAA) requirements through 1998, it does not include additional requirements being developed under the CAA by Federal and State agencies. Such additional costs cannot be reasonably estimated at this time. PSE&G believes that such CAA costs would be recoverable from electric customers. Not included in PSE&G's estimated construction expenses is the capital cost of compliance with the New Jersey Department of Environmental Protection and Energy (NJDEPE) draft permit issued October 3, 1990 pursuant to the Federal Water Pollution Control Act with respect to Salem 1 and 2 which, if adopted as proposed, would require the immediate shutdown of both units pending retrofit with cooling towers. On June 24, 1993, NJDEPE issued a revised draft permit that would permit Salem to continue to operate with once-through cooling and would require PSE&G to make certain plant modifications and to take certain other actions to enhance the ecology of the affected water body. The public comment period with respect to the revised draft permit expired on January 15, 1994. While a final permit is expected to be issued sometime in the second quarter of 1994, no assurances can be given as to the timing of any final agency determination. The capital cost of complying with the revised permit is estimated at approximately $75 million, PSE&G's share of which is included in the above forecast. Nevertheless, if cooling towers are ultimately required, PSE&G estimates that it would take at least four years, and between $720 million and $2.0 billion in capital, operation and maintenance costs and replacement power costs to retrofit Salem with cooling towers. PSE&G's share of any 47 56 such costs would be 42.59%. In addition, the estimate does not include costs associated with the proposed Phase II of the repowering of PSE&G's Bergen Generating Station. INTERNAL GENERATION OF CASH FROM OPERATIONS Although net income increased $97 million for 1993 (See Enterprise Earnings and Revenues), net cash provided by operating activities decreased by $332 million from 1992 to $1.008 billion. This decrease was primarily due to an underrecovery of electric energy and gas costs through PSE&G's LEAC and LGAC, increased NJGRT payments and a decrease in amortization of property abandonments and write-downs. Partially offsetting these cash outflows were the increase in net income, increases in deferred income taxes and inventory decreases in fuel and materials and supplies. Although net income decreased $39 million for 1992 (See Enterprise Earnings and Revenues), Enterprise's cash provided by operating activities increased by $185 million from 1991 to $1.340 billion. This increase was primarily due to greater recovery of electric energy and gas costs through PSE&G's LEAC and LGAC and increases in accounts payable. Partially offsetting these cash inflows were inventory increases in fuel and materials and supplies and decreases in deferred income taxes. EXTERNAL FINANCINGS CASH FLOWS FROM FINANCING ACTIVITIES
1993 1992 1991 ------- ------- ----- (MILLIONS OF DOLLARS) Enterprise: Issuance of Common Stock(A)....................... $ 273 $ 237 $ 219 ------- ------- ----- Cash Dividends paid on Common Stock(B)............ (522) (503) (476) ------- ------- ----- PSE&G:(C) Net increase (decrease) in Short-Term Debt(D)..... 275 92 (321) Issuance of Long-Term Debt(E)..................... 1,973 850 750 Redemptions of Long-Term Debt and Other Obligations.................................... (1,717) (1,032) (171) (Deferral) Amortization of Debt Expense -- net.... (58) (13) 5 Issuance of Preferred Stock(F).................... 75 75 -- Other............................................. (1) (1) -- ------- ------- ----- Total PSE&G............................... 547 (29) 263 ------- ------- ----- EDHI:(G) Net decrease in Short-Term Debt................... (90) (89) (49) Issuance of Long-Term Debt........................ 165 30 264 Redemptions of Long-Term Debt..................... (367) (27) (81) Other............................................. (6) (4) 2 ------- ------- ----- Total EDHI................................ (298) (90) 136 ------- ------- ----- Net cash provided by (used in) financing activities........................................ $ -- $ (385) $ 142 ------- ------- ----- ------- ------- -----
(A) During 1993, Enterprise issued and sold 4,400,000 shares of Common Stock through a public offering through underwriters and 3,892,505 shares of Common Stock through its Dividend Reinvestment and Stock Purchase Plan (DRIP) and various employee benefit plans. The net proceeds from such sales, aggregating approximately $273 million, were used by Enterprise to make equity investments of $179 million in PSE&G and $94 million in EDHI. PSE&G utilized such funds for general corporate purposes, including payment of a portion of its construction expenditures. EDHI used the funds for general corporate purposes, including the payment of outstanding debt obligations. Book value per share was $21.07 at December 31, 1993 compared to $20.32 at December 31, 1992. (See Note 4 -- Schedule of Consolidated Capital Stock of Notes to Consolidated Financial Statements.) 48 57 (B) See DIVIDENDS. (C) Under the terms of PSE&G's First and Refunding Mortgage (Mortgage) and its Restated Certificate of Incorporation, as amended, at December 31, 1993, PSE&G would qualify to issue an additional $4.488 billion of First and Refunding Mortgage Bonds (Bonds) at a rate of 7.375% or $4.101 billion of Preferred Stock at a rate of 7.0%. In addition, as a prerequisite to the issuance of additional Bonds, PSE&G's Mortgage requires a 2:1 ratio of earnings to fixed charges as computed thereunder. For the twelve months ended December 31, 1993 such ratio was 3.30:1. The BRC has authorized PSE&G to issue not more than $800 million of its short-term obligations at any one time outstanding, consisting of commercial paper and other unsecured borrowings from banks and other lenders through December 31, 1994. On December 31, 1993, PSE&G had $424 million of short-term debt outstanding. PSE&G has a $600 million revolving credit agreement with a group of commercial banks which expires on September 17, 1994. On December 31, 1993, there was no short-term debt outstanding under this credit agreement. (D) Includes commercial paper issued and/or redeemed by Fuelco and guaranteed by PSE&G pursuant to a commercial paper program supported by a bank revolving credit facility to finance the acquisition of a 42.49% undivided interest in the nuclear fuel for Peach Bottom. Fuelco has a $150 million commercial paper program through June 1996. On December 31, 1993, Fuelco had $109 million of its commercial paper outstanding. (E) Enterprise's long-term debt aggregated $5.256 billion as of December 31, 1993, of which $4.364 billion was attributable to PSE&G and $892 million to EDHI. During 1993, PSE&G issued $1.973 billion principal amount of its Bonds. The net proceeds of these Bonds were used by PSE&G to refund and redeem certain of its higher-cost and maturing debt obligations including reimbursement of its treasury for funds expended for such purposes and for the payment of a portion of PSE&G's construction expenditures. During 1993, PSE&G redeemed or paid at maturity $1.7 billion aggregate principal amount of its Bonds and Debenture Bonds. In February 1994, PSE&G issued $50 million principal amount of its Bonds to service and secure an equal principal amount of tax-exempt revenue bonds issued by the Pollution Control Financing Authority of Salem County, New Jersey to finance pollution control facilities at the Hope Creek Generating Station. Under authority granted by the BRC, expiring December 31, 1994, PSE&G is authorized to issue an additional $495 million principal amount of Bonds after giving effect to the 1994 issuance of Bonds. For more detail see Note 6 -- Schedule of Consolidated Long-Term Debt of Notes to Consolidated Financial Statements. (F) In March 1993, PSE&G sold 750,000 shares of Preferred Stock ($100 Par). The net proceeds of $75 million were used by PSE&G for general corporate purposes. In February 1994, PSE&G sold 600,000 shares of Preferred Stock -- $25 Par and 600,000 shares of Preferred Stock ($100 Par). The net proceeds of $15 million from the sale of the Preferred Stock -- $25 Par were used by PSE&G to redeem all of the 150,000 outstanding shares of PSE&G's 8.08% Preferred Stock ($100 Par). The net proceeds of $60 million from the sale of the Preferred Stock ($100 Par) were added to the general funds of PSE&G and used to pay a portion of its then outstanding short-term debt obligations, which were principally incurred to fund a portion of its construction expenditures. Under authority granted by the BRC, expiring December 31, 1995, PSE&G is authorized to issue an additional $330 million of Preferred Stock after giving effect to the 1994 issuances of Preferred Stock. (See Note 4 -- Schedule of Consolidated Capital Stock of Notes to Consolidated Financial Statements.) 49 58 (G) Funding has a commercial paper program, supported by a commercial bank letter of credit and revolving credit facility, through November 18, 1995 in the amount of $225 million. As of December 31, 1993, Funding had $45 million outstanding under its commercial paper program. Funding has a $225 million revolving credit facility which terminates on November 18, 1995. As of December 31, 1993, Funding had no debt outstanding under this facility. In February 1993, Funding repaid $60 million of its 9.43% Series A Notes. In March 1993, Funding privately placed an aggregate of $60 million principal amount of its Senior Notes. In May 1993, Capital amended its Medium-Term Notes (MTNs) program to provide for an aggregate principal amount of up to $750 million of MTNs, provided that its total debt outstanding at any time, including MTNs, shall not exceed such amount. During 1993, $88 million principal amount of Capital's MTNs were repaid, $42.5 million sinking fund payments on Capital's long-term debt obligations were made and $105 million principal amount of MTNs were issued. At December 31, 1993, Capital had $517 million of MTNs outstanding and total debt outstanding of $724.5 million. For additional detail see Note 6 -- Long-Term Debt of Notes to Consolidated Financial Statements. PSE&G Following are the significant factors affecting the consolidated financial condition and the results of operations of PSE&G and its subsidiaries. This discussion refers to the Consolidated Financial Statements and related Notes 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 Management's Discussion and Analysis of Financial Condition and Results of Operations, insofar as they relate to PSE&G and its subsidiaries: Overview; PSE&G Energy and Fuel Adjustment Clauses; Enterprise Earnings; Dividends; Revenues -- PSE&G Electric, PSE&G Gas; PSE&G Electric Energy Costs; Liquidity and Capital Resources, PSE&G; Construction, Investments and Other Capital Requirements Forecast; and External Financings. GAS SUPPLY COSTS Gas supply costs increased $17 million or 1.8% in 1993 compared to 1992 and $216 million or 31.4% in 1992 compared to 1991. The significant components of these changes follow:
INCREASE OR (DECREASE) ------------------------------ 1993 VS. 1992 1992 VS. 1991 ------------- ------------- (MILLIONS) Change in prices paid for gas supplies...................... $ 93 $ 7 Therm sendout............................................... 43 158 Refunds from pipeline suppliers............................. 33 (33) Adjustment of actual costs to match recoveries through revenues(A)....................................... (152) 84 ------ ------ Total Gas Supply Costs............................ $ 17 $ 216 ------ ------ ------ ------
(A) Reflects the change in the deferred over(under)recovered gas supply costs, which in the years 1993, 1992 and 1991 amounted to $(100) million, $52 million and $(32) million, respectively. (See PSE&G Energy and Fuel Adjustment Clauses and Note 2 -- Rate Matters of Notes to Consolidated Financial Statements.) 1993 -- The increase in total costs was principally due to greater sales to cogenerators and other customers, higher gas costs and higher therm sendout resulting from the colder 1993 winter season compared to the 1992 winter season. The increase in costs was reduced by deferred underrecovered 1993 gas costs resulting from the BRC approved adjustment in PSE&G's LGAC, effective January 1, 1993, of $71 million on an annualized basis through December 31, 1993. The adjustment reflects lower gas costs and the inclusion of $15.1 million of conservation program costs in LGAC. In addition, gas customers received $45 million of credits during the first quarter of 1993. 50 59 1992 -- The increase in total costs was principally due to greater therm sendout resulting from the colder 1992 weather compared to 1991 and increased sales to cogenerators. LIQUIDITY AND CAPITAL RESOURCES INTERNAL GENERATION OF CASH FROM OPERATIONS Although net income increased $139 million for 1993 (See Enterprise Earnings -- PSE&G and Revenues -- PSE&G Electric and PSE&G Gas), PSE&G's net cash provided by operating activities decreased by $376 million from 1992 to $811 million. This decrease was primarily due to an underrecovery of electric energy and gas costs through PSE&G's LEAC and LGAC, increased NJGRT payments, and a decrease in amortization of property abandonments and write-down. Partially offsetting these cash outflows were increases in deferred income taxes and decreases in fuel and materials and supplies inventories. Although net income decreased $70 million for 1992 (See Enterprise Earnings -- PSE&G and Revenues -- PSE&G Electric and PSE&G Gas), PSE&G's net cash provided by operating activities increased by $128 million from 1991 to $1.187 billion. This increase was primarily due to greater recovery of electric energy and gas costs through PSE&G's LEAC and LGAC and increases in accounts payable. Partially offsetting these cash inflows were the decrease in net income, increases in fuel and materials and supplies inventories and decreases in deferred income taxes. 51 60 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA FINANCIAL STATEMENT RESPONSIBILITY Management of Enterprise is responsible for the preparation, integrity and objectivity of the consolidated financial statements and related notes of Enterprise. The consolidated financial statements and related notes are prepared in accordance with generally accepted accounting principles. The financial statements reflect estimates based upon the judgment of management where appropriate. Management believes that the consolidated financial statements and related notes present fairly Enterprise's financial position and results of operations. Information in other parts of this Annual Report is also the responsibility of management and is consistent with these consolidated financial statements and related notes. The firm of Deloitte & Touche, independent auditors, is engaged to audit Enterprise's consolidated financial statements and related notes and issue a report thereon. Deloitte & Touche's audit is conducted in accordance with generally accepted auditing standards. Management has made available to Deloitte & Touche all the corporation's financial records and related data, as well as the minutes of directors' meetings. Furthermore, management believes that all representations made to Deloitte & Touche during its audit were valid and appropriate. Management has established and maintains a system of internal accounting controls to provide reasonable assurance that assets are safeguarded, and that transactions are executed in accordance with management's authorization and recorded properly for the prevention and detection of fraudulent financial reporting, so as to maintain the integrity and reliability of the financial statements. The system is designed to permit preparation of consolidated financial statements and related notes in accordance with generally accepted accounting principles. The concept of reasonable assurance recognizes that the costs of a system of internal accounting controls should not exceed the related benefits. Management believes the effectiveness of this system is enhanced by an ongoing program of continuous and selective training of employees. In addition, management has communicated to all employees its policies on business conduct, safeguarding assets and internal controls. The Internal Auditing Department of PSE&G conducts audits and appraisals of accounting and other operations of Enterprise and its subsidiaries and evaluates the effectiveness of cost and other controls and recommends to management, where appropriate, improvements thereto. Management has considered the internal auditors' and Deloitte & Touche's recommendations concerning the corporation's system of internal accounting controls and has taken actions that, in its opinion, are cost-effective in the circumstances to respond appropriately to these recommendations. Management believes that, as of December 31, 1993, the corporation's system of internal accounting controls is adequate to accomplish the objectives discussed herein. The Board of Directors of Enterprise carries out its responsibility of financial overview through its Audit Committee, which presently consists of six directors who are neither employees of Enterprise nor its affiliates. The Audit Committee meets periodically with management as well as with representatives of the internal auditors and Deloitte & Touche. The Audit Committee reviews the work of each to ensure that their respective responsibilities are being carried out and discusses related matters. Both the internal auditors and Deloitte & Touche periodically meet alone with the Audit Committee and have free access to the Audit Committee, and its individual members, at any time. E. JAMES FERLAND ROBERT C. MURRAY E. James Ferland Robert C. Murray Chairman of the Board, Vice President and President and Chief Chief Financial Officer Executive Officer PATRICIA A. RADO Patricia A. Rado Vice President and Comptroller Principal Accounting Officer February 18, 1994
52 61 FINANCIAL STATEMENT RESPONSIBILITY Management of PSE&G is responsible for the preparation, integrity and objectivity of the consolidated financial statements and related notes of PSE&G. The consolidated financial statements and related notes are prepared in accordance with generally accepted accounting principles. The financial statements reflect estimates based upon the judgment of management where appropriate. Management believes that the consolidated financial statements and related notes present fairly PSE&G's financial position and results of operations. Information in other parts of this Annual Report is also the responsibility of management and is consistent with these consolidated financial statements and related notes. The firm of Deloitte & Touche, independent auditors, is engaged to audit PSE&G's consolidated financial statements and related notes and issue a report thereon. Deloitte & Touche's audit is conducted in accordance with generally accepted auditing standards. Management has made available to Deloitte & Touche all the corporation's financial records and related data, as well as the minutes of directors' meetings. Furthermore, management believes that all representations made to Deloitte & Touche during its audit were valid and appropriate. Management has established and maintains a system of internal accounting controls to provide reasonable assurance that assets are safeguarded, and that transactions are executed in accordance with management's authorization and recorded properly for the prevention and detection of fraudulent financial reporting, so as to maintain the integrity and reliability of the financial statements. The system is designed to permit preparation of consolidated financial statements and related notes in accordance with generally accepted accounting principles. The concept of reasonable assurance recognizes that the costs of a system of internal accounting controls should not exceed the related benefits. Management believes the effectiveness of this system is enhanced by an ongoing program of continuous and selective training of employees. In addition, management has communicated to all employees its policies on business conduct, safeguarding assets and internal controls. The Internal Auditing Department conducts audits and appraisals of accounting and other operations and evaluates the effectiveness of cost and other controls and recommends to management, where appropriate, improvements thereto. Management has considered the internal auditors' and Deloitte & Touche's recommendations concerning the corporation's system of internal accounting controls and has taken actions that are cost-effective in the circumstances to respond appropriately to these recommendations. Management believes that, as of December 31, 1993, the corporation's system of internal accounting controls is adequate to accomplish the objectives discussed herein. The Board of Directors carries out its responsibility of financial overview through the Audit Committee of Enterprise, which presently consists of six directors who are neither employees of Enterprise nor its affiliates. The Enterprise Audit Committee meets periodically with management as well as with representatives of the internal auditors and Deloitte & Touche. The Audit Committee reviews the work of each to ensure that their respective responsibilities are being carried out and discusses related matters. Both the internal auditors and Deloitte & Touche periodically meet alone with the Audit Committee and have free access to the Audit Committee, and its individual members, at any time. E. JAMES FERLAND ROBERT C. MURRAY E. James Ferland Robert C. Murray Chairman of the Board Senior Vice President and and Chief Executive Officer Chief Financial Officer PATRICIA A. RADO Patricia A. Rado Vice President and Comptroller Principal Accounting Officer February 18, 1994
53 62 INDEPENDENT AUDITORS' REPORT To the Stockholders and Board of Directors of Public Service Enterprise Group Incorporated: We have audited the accompanying consolidated balance sheets of Public Service Enterprise Group Incorporated and its subsidiaries as of December 31, 1993 and 1992, and the related consolidated statements of income, retained earnings, and cash flows for each of the three years in the period ended December 31, 1993. Our audits also included the consolidated financial statement schedules listed in the Index in Item 14(a)(1). These consolidated financial statements and the consolidated financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements and consolidated financial statement schedules based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Public Service Enterprise Group Incorporated and its subsidiaries at December 31, 1993 and 1992, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1993 in conformity with generally accepted accounting principles. Also, in our opinion, such consolidated financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly in all material respects the information set forth therein. We have also previously audited, in accordance with generally accepted auditing standards, the consolidated balance sheets as of December 31, 1991, 1990, and 1989, and the related consolidated statements of income, retained earnings, and cash flows for the years ended December 31, 1990 and 1989 (none of which are presented herein) and we expressed unqualified opinions on those consolidated financial statements. In our opinion, the information set forth in the Selected Financial Data for each of the five years in the period ended December 31, 1993 for the Company, presented in Item 6, is fairly stated in all material respects, in relation to the consolidated financial statements from which it has been derived. As discussed in Note 1 to the Consolidated Financial Statements, in 1993 the Company changed its method of accounting for income taxes to conform with Statement of Financial Accounting Standards No. 109 and changed its method of accounting for the costs of postretirement benefits other than pensions to conform with Statement of Financial Accounting Standards No. 106. DELOITTE & TOUCHE February 18, 1994 Parsippany, New Jersey 54 63 INDEPENDENT AUDITORS' REPORT To the Board of Directors of Public Service Electric and Gas Company: We have audited the accompanying consolidated balance sheets of Public Service Electric & Gas Company and its subsidiaries as of December 31, 1993 and 1992, and the related consolidated statements of income, retained earnings, and cash flows for each of the three years in the period ended December 31, 1993. Our audits also included the consolidated financial statement schedules listed in the Index in Item 14(a)(2). These consolidated financial statements and the consolidated financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements and consolidated financial statement schedules based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Public Service Electric & Gas Company and its subsidiaries at December 31, 1993 and 1992, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1993 in conformity with generally accepted accounting principles. Also, in our opinion, such consolidated financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly in all material respects the information set forth therein. We have also previously audited, in accordance with generally accepted auditing standards, the consolidated balance sheets as of December 31, 1991, 1990, and 1989, and the related consolidated statements of income, retained earnings, and cash flows for the years ended December 31, 1990 and 1989 (none of which are presented herein) and we expressed unqualified opinions on those consolidated financial statements. In our opinion, the information set forth in the Selected Financial Data for each of the five years in the period ended December 31, 1993 for the Company, presented in Item 6, is fairly stated in all material respects, in relation to the consolidated financial statements from which it has been derived. As discussed in Note 1 to the Consolidated Financial Statements, in 1993 the Company changed its method of accounting for income taxes to conform with Statement of Financial Accounting Standards No. 109 and changed its method of accounting for the costs of postretirement benefits other than pensions to conform with Statement of Financial Accounting Standards No. 106. DELOITTE & TOUCHE February 18, 1994 Parsippany, New Jersey 55 64 PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, ----------------------------------------- 1993 1992 1991 ----------- ----------- ----------- (THOUSANDS OF DOLLARS) OPERATING REVENUES Electric............................................... $ 3,693,083 $ 3,407,819 $ 3,500,043 Gas.................................................... 1,594,341 1,586,181 1,307,849 Nonutility Activities.................................. 418,135 362,781 283,766 ----------- ----------- ----------- Total Operating Revenues........................ 5,705,559 5,356,781 5,091,658 ----------- ----------- ----------- OPERATING EXPENSES Operation Fuel for Electric Generation and Net Interchanged Power............................................. 717,136 776,571 781,191 Gas Purchased and Materials for Gas Produced......... 897,885 858,737 636,058 Other................................................ 1,012,757 924,942 867,182 Maintenance............................................ 304,403 307,726 315,372 Depreciation and Amortization.......................... 600,264 642,548 585,919 Property Impairment (note 16).......................... 77,637 -- -- Taxes Federal Income Taxes (note 9)........................ 314,759 221,694 264,856 New Jersey Gross Receipts Taxes...................... 597,898 585,770 583,071 Other................................................ 75,973 72,658 60,855 ----------- ----------- ----------- Total Operating Expenses........................ 4,598,712 4,390,646 4,094,504 ----------- ----------- ----------- OPERATING INCOME......................................... 1,106,847 966,135 997,154 ----------- ----------- ----------- OTHER INCOME Allowance for Funds Used During Construction -- Equity............................... 12,265 12,828 7,092 Peach Bottom Settlement -- net of Federal income taxes $16,985.............................................. -- 32,970 -- Miscellaneous -- net................................... (3,778) 30,188 15,024 ----------- ----------- ----------- Total Other Income.............................. 8,487 75,986 22,116 ----------- ----------- ----------- INCOME BEFORE INTEREST CHARGES AND DIVIDENDS ON PREFERRED STOCK.................................................. 1,115,334 1,042,121 1,019,270 ----------- ----------- ----------- INTEREST CHARGES (note 6) Long-Term Debt......................................... 469,120 479,898 437,701 Short-Term Debt........................................ 13,860 14,858 35,000 Other.................................................. 19,554 29,269 12,576 ----------- ----------- ----------- Total Interest Charges.......................... 502,534 524,025 485,277 Allowance for Funds Used During Construction -- Debt and Capitalized Interest................................... (20,833) (17,928) (38,054) ----------- ----------- ----------- Net Interest Charges..................................... 481,701 506,097 447,223 ----------- ----------- ----------- Preferred Stock Dividend Requirements (note 4)........... 38,114 31,907 29,012 ----------- ----------- ----------- Income before cumulative effect of accounting change..... 595,519 504,117 543,035 Cumulative effect of change in accounting for income taxes (note 9)............................................... 5,414 -- -- ----------- ----------- ----------- Net Income............................................... $ 600,933 $ 504,117 $ 543,035 ----------- ----------- ----------- ----------- ----------- ----------- SHARES OF COMMON STOCK OUTSTANDING End of Year............................................ 243,688,256 235,395,751 226,700,852 Average for Year....................................... 240,663,599 232,306,492 223,565,239 EARNINGS PER AVERAGE SHARE OF COMMON STOCK Income before cumulative effect of accounting change... $ 2.48 $ 2.17 $ 2.43 Cumulative effect of change in accounting for income taxes................................................ .02 -- -- ----------- ----------- ----------- TOTAL EARNINGS PER AVERAGE SHARE OF COMMON STOCK......... $ 2.50 $ 2.17 $ 2.43 ----------- ----------- ----------- ----------- ----------- ----------- DIVIDENDS PAID PER SHARE OF COMMON STOCK................. $ 2.16 $ 2.16 $ 2.13 ----------- ----------- ----------- ----------- ----------- -----------
See Notes to Consolidated Financial Statements 56 65 PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED CONSOLIDATED BALANCE SHEETS ASSETS
DECEMBER 31, --------------------------- 1993 1992 ----------- ----------- (THOUSANDS OF DOLLARS) UTILITY PLANT-ORIGINAL COST Electric.................................................................. $11,920,894 $11,565,669 Gas....................................................................... 2,177,841 2,044,944 Common.................................................................... 520,285 479,972 ----------- ----------- Total.............................................................. 14,619,020 14,090,585 Less accumulated depreciation and amortization.............................. 4,772,942 4,386,738 ----------- ----------- Net......................................................................... 9,846,078 9,703,847 Nuclear Fuel in Service, net of accumulated amortization -- 1993, $284,162; 1992, $223,857.......................................... 205,237 252,299 ----------- ----------- Net Utility Plant in Service....................................... 10,051,315 9,956,146 Construction Work in Progress, including Nuclear Fuel in Process -- 1993, $98,780; 1992, $68,789.............................................. 735,356 492,914 Plant Held for Future Use (principally land)................................ 17,709 22,252 ----------- ----------- Net Utility Plant.................................................. 10,804,380 10,471,312 ----------- ----------- INVESTMENTS AND OTHER PROPERTY (notes 3,7 and 10) Long-Term Investments, net of valuation allowance -- 1993, $18,018; 1992, $17,548.............................................. 1,613,823 1,650,248 Oil and Gas Property, Plant and Equipment, net of accumulated depreciation and amortization -- 1993, $695,791; 1992, $663,915...................... 506,047 506,814 Real Estate, Property and Equipment, net of accumulated depreciation -- 1993, $10,840; 1992, $11,146............................ 110,661 225,289 Other Plant, net of accumulated depreciation and amortization -- 1993, $4,307; 1992, $3,073.............................................. 45,501 26,260 Nuclear Decommissioning and Other Special Funds........................... 189,282 134,524 Other Investments -- net.................................................. 103,537 79,616 ----------- ----------- Total Investments and Other Property............................... 2,568,851 2,622,751 ----------- ----------- CURRENT ASSETS Cash and Cash Equivalents (note 8)........................................ 46,880 31,674 Accounts Receivable: Customer Accounts Receivable............................................ 446,629 395,991 Other Accounts Receivable............................................... 233,307 214,195 Less allowance for doubtful accounts.................................... 27,932 24,059 Unbilled Revenues......................................................... 244,497 248,742 Fuel, at average cost..................................................... 285,943 263,743 Materials and Supplies, at average cost................................... 172,438 211,076 Prepayments............................................................... 82,586 63,026 Deferred Income Taxes (note 9)............................................ 12,934 -- ----------- ----------- Total Current Assets............................................... 1,497,282 1,404,388 ----------- ----------- DEFERRED DEBITS (note 5) Property Abandonments -- net.............................................. 105,536 122,261 Oil and Gas Property Write-Down........................................... 46,386 51,540 Unamortized Debt Expense.................................................. 121,278 62,134 Deferred Debit -- OPEB (notes 1 and 13)................................... 58,593 -- Unrecovered Environmental Costs (notes 2 and 12).......................... 138,531 108,047 Unrecovered Plant and Regulatory Study Costs.............................. 35,196 23,091 Under (Over) Recovered Electric Energy and Gas Costs -- net............... 62,034 (122,736) Unrecovered SFAS 109 Deferred Income Taxes (note 9)....................... 789,795 -- Deferred Decontamination and Decommissioning Costs (note 3)............... 56,055 -- Other..................................................................... 21,247 11,921 ----------- ----------- Total Deferred Debits.............................................. 1,434,651 256,258 ----------- ----------- Total............................................................ $16,305,164 $14,754,709 ----------- ----------- ----------- -----------
See Notes to Consolidated Financial Statements 57 66 PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED CONSOLIDATED BALANCE SHEETS CAPITALIZATION AND LIABILITIES
DECEMBER 31, --------------------------- 1993 1992 ----------- ----------- (THOUSANDS OF DOLLARS) CAPITALIZATION (notes 4 and 6) Common Equity Common Stock................................................. $ 3,772,662 $ 3,499,183 Retained Earnings............................................ 1,361,018 1,282,931 ----------- ----------- Total Common Equity..................................... 5,133,680 4,782,114 Subsidiaries' Securities and Obligations Preferred Stock Without Mandatory Redemption................................. 429,994 429,994 With Mandatory Redemption.................................... 150,000 75,000 Long-Term Debt (note 6)...................................... 5,256,321 4,977,579 Capital Lease Obligations (note 10).......................... 52,530 53,104 ----------- ----------- Total Capitalization.................................... 11,022,525 10,317,791 ----------- ----------- OTHER LONG-TERM LIABILITIES Decontamination and Decommisioning Costs (note 3)............... 56,055 -- Unrecovered Environmental Costs (notes 2 and 12)................ 111,000 93,169 ----------- ----------- Total Other Long-Term Liabilities....................... 167,055 93,169 ----------- ----------- CURRENT LIABILITIES Long-Term Debt and Capital Lease Obligations due within one year......................................................... 168,638 393,071 Commercial Paper and Loans (note 11)............................ 577,636 391,982 Accounts Payable................................................ 557,761 473,977 New Jersey Gross Receipts Taxes Accrued......................... 263,357 555,329 Other Taxes Accrued............................................. 39,610 41,557 Interest Accrued................................................ 107,027 116,165 Other........................................................... 157,751 134,768 ----------- ----------- Total Current Liabilities............................... 1,871,780 2,106,849 ----------- ----------- DEFERRED CREDITS Accumulated Deferred Income Taxes (note 9)...................... 2,702,386 1,711,089 Accumulated Deferred Investment Tax Credits (note 9)............ 432,713 444,368 Deferred Credit -- OPEB (notes 1 and 13)........................ 58,593 -- Materials and Supplies.......................................... 11,847 24,018 Other........................................................... 38,265 57,425 ----------- ----------- Total Deferred Credits.................................. 3,243,804 2,236,900 ----------- ----------- COMMITMENTS AND CONTINGENT LIABILITIES (note 12) Total................................................... $16,305,164 $14,754,709 ----------- ----------- ----------- -----------
58 67 PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, --------------------------------------- 1993 1992 1991 ---------- --------- ---------- (THOUSANDS OF DOLLARS) CASH FLOWS FROM OPERATING ACTIVITIES: Net Income......................................... $ 600,933 $ 504,117 $ 543,035 Adjustments to reconcile net income to net cash flows from operating activities: Depreciation and Amortization................... 600,264 642,548 585,919 Amortization of Nuclear Fuel.................... 102,718 91,903 96,420 (Deferral) Recovery of Electric Energy and Gas Costs -- net.......................... (184,770) 121,371 (36,146) Loss From Property Impairments.................. 77,637 -- -- Cumulative Effect of Change in Accounting for Income Taxes.................................. (5,414) -- -- Amortization of Discounts on Property Abandonments and Disallowance.............................. (7,801) (11,293) (11,754) Unrealized Gains on Investments -- net.......... (8,694) (24,843) (11,264) Provision for Deferred Income Taxes -- net...... 168,406 56,846 114,681 Investment Tax Credits -- net................... (11,655) (20,342) (19,779) Allowance for Funds Used During Construction -- Debt and Equity and Capitalized Interest...... (33,098) (30,756) (45,146) Proceeds from Leasing Activities -- net......... 14,780 30,295 17,463 Changes in certain current assets and liabilities Net increase in Accounts Receivable and Unbilled Revenues.......................... (61,632) (75,275) (50,052) Net decrease (increase) in Inventory -- Fuel and Materials and Supplies................. 16,438 (37,084) 63,043 Net increase (decrease) in Accounts Payable... 83,784 60,853 (52,535) Net (decrease) increase in Accrued Taxes...... (293,919) 37,892 (7,736) Net change in Other Current Assets and Liabilities................................ (18,649) 6,658 (16,592) Other........................................... (31,662) (12,987) (14,437) ---------- --------- ---------- Net cash provided by operating activities............................... 1,007,666 1,339,903 1,155,120 ---------- --------- ---------- CASH FLOWS FROM INVESTING ACTIVITIES: Additions to Utility Plant, excluding AFDC......... (863,294) (800,344) (783,175) Additions to Oil and Gas Property, Plant and Equipment, excluding Capitalized Interest....... (87,968) (32,337) (183,673) Net decrease (increase) in Long-Term Investments and Real Estate................................. 66,659 (61,099) (304,541) Increase in Decommissioning and Other Special Funds, excluding interest....................... (45,508) (9,262) (11,665) Cost of Plant Removal -- net....................... (47,791) (40,111) (44,199) Other.............................................. (14,938) (6,000) 11,278 ---------- --------- ---------- Net cash used in investing activities...... (992,840) (949,153) (1,315,975) ---------- --------- ---------- CASH FLOWS FROM FINANCING ACTIVITIES: Net increase (decrease) in Short-Term Debt......... 185,654 2,932 (369,809) Issuance of Long-Term Debt......................... 2,137,700 880,000 1,013,794 Redemption of Long-Term Debt and Other Obligations..................................... (2,083,965) (1,058,637) (252,241) Issuance of Preferred Stock........................ 75,000 75,000 -- (Deferral) Amortization of Debt Expense -- net..... (59,144) (12,490) 4,562 Issuance of Common Stock........................... 273,479 237,045 218,736 Cash Dividends Paid on Common Stock................ (521,572) (503,197) (476,099) Other.............................................. (6,772) (5,719) 2,838 ---------- --------- ---------- Net cash provided by (used in) financing activities............................... 380 (385,066) 141,781 ---------- --------- ---------- Net increase (decrease) in Cash and Cash Equivalents........................................ 15,206 5,684 (19,074) Cash and Cash Equivalents at Beginning of Year....... 31,674 25,990 45,064 ---------- --------- ---------- Cash and Cash Equivalents at End of Year............. $ 46,880 $ 31,674 $ 25,990 ---------- --------- ---------- ---------- --------- ---------- Income Taxes Paid.................................... $ 140,172 $ 143,211 $ 148,171 Interest Paid........................................ $ 458,956 $ 486,396 $ 436,994
See Notes to Consolidated Financial Statements 59 68 PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
FOR THE YEARS ENDED DECEMBER 31, ---------------------------------------- 1993 1992 1991 ---------- ---------- ---------- (THOUSANDS OF DOLLARS) BALANCE JANUARY 1...................................... $1,282,931 $1,282,029 $1,203,772 ADD NET INCOME......................................... 600,933 504,117 543,035 ---------- ---------- ---------- Total........................................ 1,883,864 1,786,146 1,746,807 ---------- ---------- ---------- DEDUCT Cash Dividends on Common Stock(A).................... 521,572 503,197 476,099 Adjustments to Retained Earnings..................... 1,274 18 (11,321) ---------- ---------- ---------- Total Deductions............................. 522,846 503,215 464,778 ---------- ---------- ---------- BALANCE DECEMBER 31.................................... $1,361,018 $1,282,931 $1,282,029 ---------- ---------- ---------- ---------- ---------- ----------
(A) The ability of Enterprise to declare and pay dividends is contingent upon its receipt of dividend payments from its subsidiaries. PSE&G, Enterprise's principal subsidiary, has restrictions on the payment of dividends which are contained in its Restated Certificate of Incorporation, as amended, certain of the indentures supplemental to its Mortgage, and certain debenture bond indentures. However, none of these restrictions presently limits the payment of dividends out of current earnings. The amount of PSE&G's restricted retained earnings at December 31, 1993 was $10 million. See Notes to Consolidated Financial Statements. 60 69 PUBLIC SERVICE ELECTRIC AND GAS COMPANY CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, ---------------------------------------- 1993 1992 1991 ---------- ---------- ---------- (THOUSANDS OF DOLLARS) OPERATING REVENUES Electric............................................. $3,693,083 $3,407,819 $3,500,043 Gas.................................................. 1,594,341 1,586,181 1,307,849 ---------- ---------- ---------- Total Operating Revenues..................... 5,287,424 4,994,000 4,807,892 ---------- ---------- ---------- OPERATING EXPENSES Operation Fuel for Electric Generation and Net Interchanged Power........................................... 717,136 776,571 781,191 Gas Purchased and Materials for Gas Produced...... 919,870 903,360 687,365 Other............................................. 880,943 818,606 769,786 Maintenance.......................................... 304,403 307,726 315,372 Depreciation and Amortization........................ 509,206 552,011 493,097 Taxes Federal Income Taxes (note 9)..................... 308,790 195,464 255,760 New Jersey Gross Receipts Taxes................... 597,898 585,770 583,071 Other............................................. 67,593 65,968 57,086 ---------- ---------- ---------- Total Operating Expenses..................... 4,305,839 4,205,476 3,942,728 ---------- ---------- ---------- OPERATING INCOME....................................... 981,585 788,524 865,164 ---------- ---------- ---------- OTHER INCOME Allowance for Funds Used During Construction -- Equity............................ 12,265 12,828 7,092 Peach Bottom Settlement -- net of Federal income taxes -- $16,985.................................. -- 32,970 -- Miscellaneous -- net................................. (3,841) 29,927 15,814 ---------- ---------- ---------- Total Other Income........................... 8,424 75,725 22,906 ---------- ---------- ---------- INCOME BEFORE INTEREST CHARGES AND DIVIDENDS ON PREFERRED STOCK...................................... 990,009 864,249 888,070 ---------- ---------- ---------- INTEREST CHARGES (note 6) Long-Term Debt....................................... 364,252 368,496 337,235 Short-Term Debt...................................... 6,414 5,920 15,941 Other................................................ 19,290 27,486 12,297 ---------- ---------- ---------- Total Interest Charges....................... 389,956 401,902 365,473 Allowance for Funds Used During Construction -- Debt... (14,815) (13,589) (22,882) ---------- ---------- ---------- Net Interest Charges................................... 375,141 388,313 342,591 ---------- ---------- ---------- Net Income............................................. 614,868 475,936 545,479 ---------- ---------- ---------- Preferred Stock Dividend Requirements (note 4)......... 38,114 31,907 29,012 ---------- ---------- ---------- EARNINGS AVAILABLE TO PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED......................................... $ 576,754 $ 444,029 $ 516,467 ---------- ---------- ---------- ---------- ---------- ----------
See Notes to Consolidated Financial Statements. 61 70 PUBLIC SERVICE ELECTRIC AND GAS COMPANY CONSOLIDATED BALANCE SHEETS ASSETS
DECEMBER 31, --------------------------- 1993 1992 ----------- ----------- (THOUSANDS OF DOLLARS) UTILITY PLANT-ORIGINAL COST Electric........................................................ $11,920,894 $11,565,669 Gas............................................................. 2,177,841 2,044,944 Common.......................................................... 520,285 479,972 ----------- ----------- Total................................................... 14,619,020 14,090,585 Less accumulated depreciation and amortization.................... 4,772,942 4,386,738 ----------- ----------- Net............................................................... 9,846,078 9,703,847 Nuclear Fuel in Service, net of accumulated amortization -- 1993, $284,162; 1992, $223,857............................... 205,237 252,299 ----------- ----------- Net Utility Plant in Service............................ 10,051,315 9,956,146 Construction Work in Progress, including Nuclear Fuel in Process -- 1993, $98,780; 1992, $68,789.................................... 735,356 492,914 Plant Held for Future Use (principally land)...................... 17,709 22,252 ----------- ----------- Net Utility Plant....................................... 10,804,380 10,471,312 ----------- ----------- INVESTMENTS AND OTHER PROPERTY Other Plant, net of accumulated depreciation and amortization -- 1993, $1,444; 1992, $639..................................... 43,543 24,397 Nuclear Decommissioning and Other Special Funds................. 189,282 134,524 Long-Term Investments........................................... 99,380 72,400 ----------- ----------- Total Investments and Other Property.................... 332,205 231,321 ----------- ----------- CURRENT ASSETS Cash and Cash Equivalents (note 8).............................. 17,673 13,326 Accounts Receivable: Customer Accounts Receivable................................. 446,629 395,991 Other Accounts Receivable.................................... 163,663 127,230 Less: allowance for doubtful accounts........................ 27,932 24,059 Unbilled Revenues............................................... 244,497 248,742 Fuel, at average cost........................................... 285,943 263,743 Materials and Supplies, at average cost......................... 170,910 210,030 Prepayments..................................................... 78,480 60,156 Deferred Income Taxes (note 9).................................. 12,934 -- ----------- ----------- Total Current Assets.................................... 1,392,797 1,295,159 ----------- ----------- DEFERRED DEBITS (note 5) Property Abandonments -- net.................................... 105,536 122,261 Oil and Gas Property Write-Down................................. 46,386 51,540 Unamortized Debt Expense........................................ 117,057 58,924 Unrecovered SFAS 109 Deferred Income Taxes (note 9)............. 789,795 -- Deferred Decontamination and Decommissioning Costs (note 3)..... 56,055 -- Deferred Debit -- OPEB (notes 1 and 13)......................... 58,593 -- Unrecovered Environmental Costs (notes 2 and 12)................ 138,531 108,047 Unrecovered Plant and Regulatory Study Costs.................... 35,196 23,091 Under (Over) Recovered Electric Energy and Gas Costs -- net..... 62,034 (122,736) Other........................................................... 21,241 11,915 ----------- ----------- Total Deferred Debits................................... 1,430,424 253,042 ----------- ----------- Total................................................. $13,959,806 $12,250,834 ----------- ----------- ----------- -----------
See Notes to Consolidated Financial Statements. 62 71 PUBLIC SERVICE ELECTRIC AND GAS COMPANY CONSOLIDATED BALANCE SHEETS CAPITALIZATION AND LIABILITIES
DECEMBER 31, ------------------------- 1993 1992 ----------- ----------- (THOUSANDS OF DOLLARS) CAPITALIZATION (notes 4 and 6) Common Equity Common Stock................................................... $ 2,563,003 $ 2,563,003 Contributed Capital from Enterprise............................ 534,395 359,725 Retained Earnings.............................................. 1,180,532 1,097,734 ----------- ----------- Total Common Equity....................................... 4,277,930 4,020,462 Preferred Stock without mandatory redemption........................ 429,994 429,994 Preferred Stock with mandatory redemption........................... 150,000 75,000 Long-Term Debt (note 6)............................................. 4,364,437 3,978,138 Capital Lease Obligations (note 10)................................. 52,530 53,104 ----------- ----------- Total Capitalization...................................... 9,274,891 8,556,698 ----------- ----------- OTHER LONG-TERM LIABILITIES Decontamination and Decommissioning Costs (note 3)................ 56,055 -- Unrecovered Environmental Costs (note 2 and 12)................... 111,000 93,169 ----------- ----------- Total Other Long-Term Liabilities......................... 167,055 93,169 ----------- ----------- CURRENT LIABILITIES Long-Term Debt and Capital Lease Obligations due within one year........................................................... 62,274 192,212 Commercial Paper and Loans (note 11).............................. 532,728 257,536 Accounts Payable.................................................. 519,296 434,561 Accounts Payable -- Associated Companies (note 17)................ 5,674 18,535 New Jersey Gross Receipts Taxes Accrued........................... 263,357 555,329 Other Taxes Accrued............................................... 33,710 27,857 Interest Accrued.................................................. 96,257 103,988 Other.......................................................... 122,924 110,869 ----------- ----------- Total Current Liabilities................................. 1,636,220 1,700,887 ----------- ----------- DEFERRED CREDITS Accumulated Deferred Income Taxes (note 9)........................ 2,368,778 1,403,115 Accumulated Deferred Investment Tax Credits (note 9).............. 408,929 427,337 Deferred Credit -- OPEB (notes 1 and 13).......................... 58,593 -- Materials and Supplies (note 5)................................... 11,847 24,018 Other............................................................. 33,493 45,610 ----------- ----------- Total Deferred Credits.................................... 2,881,640 1,900,080 ----------- ----------- COMMITMENTS AND CONTINGENT LIABILITIES (note 12) Total..................................................... $13,959,806 $12,250,834 ----------- ----------- ----------- -----------
63 72 PUBLIC SERVICE ELECTRIC AND GAS COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, -------------------------------------- 1993 1992 1991 ----------- ----------- ---------- (THOUSANDS OF DOLLARS) CASH FLOWS FROM OPERATING ACTIVITIES: Net Income................................................. $ 614,868 $ 475,936 $ 545,479 Adjustments to reconcile net income to net cash flows from operating activities: Depreciation and Amortization........................... 509,206 552,011 493,097 Amortization of Nuclear Fuel............................ 102,718 91,903 96,420 (Deferral) Recovery of Electric Energy and Gas Costs -- net.......................................... (184,770) 121,371 (36,146) Amortization of Discounts on Property Abandonments and Disallowance.......................................... (7,801) (11,293) (11,754) Provision for Deferred Income Taxes -- net.............. 175,868 21,839 97,278 Investment Tax Credits -- net........................... (18,408) (19,089) (20,229) Allowance for Funds Used During Construction -- Debt and Equity................................................ (27,080) (26,417) (29,974) Changes in certain current assets and liabilities Net increase in Accounts Receivable and Unbilled Revenues........................................... (78,953) (54,792) (52,087) Net decrease (increase) in Inventory -- Fuel and Materials and Supplies............................. 16,920 (36,775) 62,773 Net increase (decrease) in Accounts Payable........... 71,874 69,629 (56,885) Net (decrease) increase in Accrued Taxes.............. (286,119) 20,227 778 Net change in Other Current Assets and Liabilities.... (26,934) (1,063) (12,022) Other................................................... (50,309) (16,060) (16,874) ----------- ----------- ---------- Net cash provided by operating activities............. 811,080 1,187,427 1,059,854 ----------- ----------- ---------- CASH FLOWS FROM INVESTING ACTIVITIES: Additions to Utility Plant, excluding AFDC................. (863,294) (800,344) (783,175) Net increase in Other Investments.......................... (26,980) (20,438) (31,788) Net increase in Decommissioning Funds and Other Special Funds, excluding interest............................... (45,508) (9,262) (11,665) Cost of Plant Removal -- net............................... (47,791) (40,111) (44,199) Other...................................................... (13,607) (4,572) -- ----------- ----------- ---------- Net cash used in investing activities................. (997,180) (874,727) (870,827) ----------- ----------- ---------- CASH FLOWS FROM FINANCING ACTIVITIES: Net increase (decrease) in Short-Term Debt................. 275,192 91,679 (320,961) Issuance of Long-Term Debt................................. 1,972,700 850,000 750,000 Redemption of Long-Term Debt and Other Obligations......... (1,716,913) (1,032,118) (170,658) Issuance of Preferred Stock................................ 75,000 75,000 -- (Deferral) Amortization of Debt Expense -- net............. (58,133) (13,367) 4,666 Contributed Capital by Enterprise.......................... 174,670 239,725 60,000 Cash Dividends Paid........................................ (531,314) (517,907) (507,013) Other...................................................... (755) (402) 1 ----------- ----------- ---------- Net cash provided by (used in) financing activities... 190,447 (307,390) (183,965) ----------- ----------- ---------- Net increase in Cash and Cash Equivalents.................... 4,347 5,310 5,062 Cash and Cash Equivalents at Beginning of Year............... 13,326 8,016 2,954 ----------- ----------- ---------- Cash and Cash Equivalents at End of Year..................... $ 17,673 $ 13,326 $ 8,016 ----------- ----------- ---------- ----------- ----------- ---------- Income Taxes Paid............................................ $ 172,869 $ 209,258 $ 193,347 Interest Paid................................................ $ 356,620 $ 374,049 $ 337,669
See Notes to Consolidated Financial Statements. 64 73 PUBLIC SERVICE ELECTRIC AND GAS COMPANY CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
FOR THE YEARS ENDED DECEMBER 31, ---------------------------------------- 1993 1992 1991 ---------- ---------- ---------- (THOUSANDS OF DOLLARS) BALANCE JANUARY 1...................................... $1,097,734 $1,140,117 $1,101,651 ADD NET INCOME......................................... 614,868 475,936 545,479 ---------- ---------- ---------- Total........................................ 1,712,602 1,616,053 1,647,130 ---------- ---------- ---------- DEDUCT CASH DIVIDENDS(A) Preferred Stock, at required rates................... 38,114 31,907 29,012 Common Stock......................................... 493,200 486,000 478,001 Adjustments to Retained Earnings..................... 756 412 -- ---------- ---------- ---------- Total Deductions............................. 532,070 518,319 507,013 ---------- ---------- ---------- BALANCE DECEMBER 31.................................... $1,180,532 $1,097,734 $1,140,117 ---------- ---------- ---------- ---------- ---------- ----------
(A) The Company has restrictions on the payment of dividends which are contained in its Restated Certificate of Incorporation, as amended, certain of the indentures supplemental to its Mortgage, and certain debenture bond indentures. However, none of these restrictions presently limits the payment of dividends out of current earnings. The amount of the Company's restricted retained earnings at December 31, 1993 was $10 million. See Notes to Consolidated Financial Statements. 65 74 PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ORGANIZATION Enterprise has two direct wholly-owned subsidiaries, Public Service Electric and Gas Company (PSE&G) and Enterprise Diversified Holdings Incorporated (EDHI). Enterprise's principal subsidiary, PSE&G, is an operating public utility providing electric and gas service in certain areas in the State of New Jersey. PSE&G has a finance subsidiary, PSE&G Fuel Corporation (Fuelco), providing financing, unconditionally guaranteed by PSE&G, of up to $150 million aggregate principal amount at any one time of a 42.49% interest in the nuclear fuel acquired for Peach Bottom Atomic Power Station Units 2 and 3 (Peach Bottom). PSE&G also has a nonutility subsidiary, Public Service Conservation Resources Corporation (PSCRC) which offers demand side management (DSM) services to utility customers. EDHI is the parent of Enterprise's other nonutility businesses: Energy Development Corporation (EDC), an oil and gas exploration, development, production and marketing company; Community Energy Alternatives Incorporated (CEA), an investor in and developer of cogeneration and power production facilities; Public Service Resources Corporation (PSRC), which makes diversified passive investments; and Enterprise Group Development Corporation (EGDC), a diversified nonresidential real estate development and investment business. EDHI also has two finance subsidiaries: PSEG Capital Corporation (Capital), and Enterprise Capital Funding Corporation (Funding). Enterprise has claimed an exemption from regulation by the Securities and Exchange Commission (SEC) as a registered holding company under the Public Utility Holding Company Act of 1935, except for Section 9(a)(2) which relates to the acquisition of voting securities of an electric or gas utility company. Also, Enterprise is not subject to direct regulation by the New Jersey Board of Regulatory Commissioners (BRC) or the Federal Energy Regulatory Commission (FERC). CONSOLIDATION POLICY The consolidated financial statements include the accounts of Enterprise and its subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. Certain reclassifications of prior years' data have been made to conform with the current presentation. REGULATION -- PSE&G The accounting and rates of PSE&G are subject, in certain respects, to the requirements of the BRC and FERC. As a result, PSE&G maintains its accounts in accordance with their prescribed Uniform Systems of Accounts, which are the same. The applications of generally accepted accounting principles by PSE&G differ in certain respects from applications by non-regulated businesses. UTILITY PLANT AND RELATED DEPRECIATION -- PSE&G Additions to utility plant and replacements of units of property are capitalized at original cost. The cost of maintenance, repairs and replacements of minor items of property is charged to appropriate expense accounts. At the time units of depreciable properties are retired or otherwise disposed of, the original cost less net salvage value is charged to accumulated depreciation. For financial reporting purposes, depreciation is computed under the straight-line method. Depreciation is based on estimated average remaining lives of the several classes of depreciable property. These estimates are reviewed on a periodic basis and necessary adjustments are made as approved by the BRC. Depreciation provisions stated in percentages of original cost of depreciable property were 3.46% in 1993 and 3.48% in 1992 and 1991. 66 75 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) DECONTAMINATION AND DECOMMISSIONING -- PSE&G In September 1993, FERC issued Order No. 557 on the accounting and ratemaking treatment of special assessments levied under the National Energy Policy Act (NEPA). Order No. 557 provides that special assessments are a necessary and reasonable current cost of fuel and shall be fully recoverable in rates in the same manner as other fuel costs. While PSE&G expects to recover such special assessments through its Levelized Energy Adjustment Clause (LEAC) no assurances can be given that the BRC will authorize such recovery from customers. PSE&G cannot predict what actions the BRC will take concerning any recovery associated with this matter. AMORTIZATION OF NUCLEAR FUEL -- PSE&G Nuclear energy burnup costs are charged to fuel expense on a units-of-production basis over the estimated life of the fuel. Rates for the recovery of fuel used at all nuclear units include a provision of one mill per kilowatthour (Kwh) of nuclear generation for spent fuel disposal costs. (See Note 3 -- PSE&G Nuclear Decommissioning and Amortization of Nuclear Fuel.) REVENUES AND FUEL COSTS -- PSE&G Revenues are recorded based on services rendered to customers during each accounting period. PSE&G records unbilled revenues representing the estimated amount customers will be billed for services rendered from the time meters were last read to the end of the respective accounting period. Rates include projected fuel costs for electric generation, purchased and interchanged power, gas purchased and materials used for gas production. Any under or overrecoveries, together with interest (in the case of overrecoveries), are deferred and included in operations in the period in which they are reflected in rates. LONG-TERM INVESTMENTS PSRC has invested in marketable securities and limited partnerships investing in securities, which are stated at fair value, and various leases and other limited partnerships. EGDC is a participant in the nonresidential real estate markets. CEA is an investor in and developer of cogeneration and power production facilities. (See Note 7 -- Long-Term Investments.) OIL AND GAS ACCOUNTING -- EDC EDC uses the successful efforts method of accounting under which proved leasehold costs are capitalized and amortized over the proved developed and undeveloped reserves on a units-of-production basis. Drilling and equipping costs, except exploratory dry holes, are capitalized and depreciated over the proved developed reserves on a units-of-production basis. Estimated future abandonment costs of offshore proved properties are depreciated on a units-of-production basis over the proved developed reserves. Unproved leasehold costs are capitalized and not amortized, pending an evaluation of their exploration potential. Unproved leasehold and producing properties costs are assessed periodically to determine if an impairment of the cost of significant individual properties has occurred. The cost of an impairment is charged to expense in the period in which it occurs. Costs incurred for exploratory dry holes, exploratory geological and geophysical work and delay rentals are charged to expense as incurred. INCOME TAXES Enterprise and its subsidiaries file a consolidated Federal income tax return and income taxes are allocated to Enterprise's subsidiaries based on taxable income or loss of each. 67 76 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Investment tax credits are deferred and amortized over the useful lives of the related property including nuclear fuel. Deferred income taxes are provided for differences between book and taxable income. For periods prior to January 1, 1993, PSE&G provided deferred income taxes to the extent permitted for ratemaking purposes. Effective January 1, 1993, Enterprise and its subsidiaries adopted Statement of Financial Accounting Standards No. 109 "Accounting for Income Taxes" (SFAS 109). Under SFAS 109, deferred income taxes are provided for all temporary differences between the financial statement carrying amounts and the tax bases of existing assets and liabilities irrespective of the treatment for ratemaking purposes. (See Note 9 -- Federal Income Taxes.) ALLOWANCE FOR FUNDS USED DURING CONSTRUCTION (AFDC) AND CAPITALIZED INTEREST PSE&G -- AFDC represents the cost of debt and equity funds used to finance the construction of new utility facilities. The amount of AFDC capitalized is also reported in the Consolidated Statements of Income as a reduction of interest charges for the borrowed funds component and as other income for the equity funds component. The rates used for calculating AFDC in 1993, 1992 and 1991 were 6.96%, 7.80% and 7.50%, respectively. These rates are within the limits set by the FERC. EDHI -- The operating subsidiaries of EDHI capitalize interest costs allocable to construction expenditures at the average cost of borrowed funds. PENSION PLAN AND OTHER POSTRETIREMENT BENEFITS The employees of PSE&G and participating affiliates, after completing one year of service, are covered by a noncontributory trusteed pension plan (Pension Plan). The policy is to fund pension costs accrued. PSE&G also provides certain health care and life insurance benefits to active and retired employees. The portion of such costs pertaining to retirees amounted to $28 million, $24 million and $24 million in 1993, 1992 and 1991, respectively. The current cost of these benefits is charged to expense when paid and is currently being recovered from ratepayers. On January 1, 1993, Enterprise and PSE&G adopted Statement of Financial Accounting Standards No. 106, "Employers Accounting for Postretirement Benefits Other Than Pensions" (SFAS 106), which requires that the expected cost of employees' postretirement health care benefits be charged to expense during the years in which employees render service. PSE&G elected to amortize over 20 years its unfunded obligation at January 1, 1993. The effect of EDHI's adoption of SFAS 106 was not material. Prior to 1993, Enterprise and PSE&G recognized postretirement health care costs in the year in which the benefits were paid. (See Note 13 -- Postretirement Benefits Other Than Pensions and Note 14 -- Pension Plan.) NOTE 2. RATE MATTERS BASE RATES On December 31, 1992, the BRC approved a settlement of PSE&G's base rate case that effectively provides additional annual base revenues of $295 million. At such time, the BRC also approved annual reductions of $66 million and $71 million, respectively, in PSE&G's LEAC and Levelized Gas Adjustment Clause (LGAC). The BRC also approved stipulations resolving all electric and gas cost of service/rate design issues. The new base rates became effective January 1, 1993. The settlement agreement allows PSE&G a 12% return on common equity and a 10.08% return on rate base. In July 1993, PSE&G and its largest industrial customer submitted a proposed electric tariff modification to the BRC, providing for a $9 million or 23% rate discount, with PSE&G's shareholders absorbing $2.4 million or 27% of the discount. The proposed tariff modification was designed to dissuade the customer from buying its electricity supply from a third party nonutility generator. In December 1993, following extensive proceedings, the BRC recognized the need for flexible pricing in a competitive market, approved the 68 77 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) requested discount but required PSE&G's shareholders to absorb $3.8 million or 42% of such discount. The decision allows PSE&G a special tariff for certain large customers. LEVELIZED GAS ADJUSTMENT CLAUSE On December 8, 1993, the BRC approved an interim LGAC settlement which provides for an increase of $75.3 million for the approximate ten-month period ending September 1994. The LGAC increase principally reflects recent increases in the cost of natural gas. PSE&G GAS PLANT REMEDIATION PROGRAM On September 15, 1993, the BRC issued a written order allowing the continued collection of costs incurred by PSE&G to identify and clean up its former gas plant sites (Remediation Costs). The decision 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 are subject to verification and audit in PSE&G's 1992-1993 LGAC. The audit is currently ongoing. The order also approved a mechanism for costs incurred since October 1, 1992. This mechanism allows the recovery of actual costs plus carrying charges, net of insurance recoveries, over a seven-year period through a rider to PSE&G's LEAC and LGAC. Sixty percent of such costs will be charged to gas customers and forty percent charged to electric customers. On November 1, 1993, the Public Advocate of New Jersey filed a motion requesting the BRC to reconsider its September 15, 1993 order. On January 21, 1994, the BRC denied the motion. (See Note 12 -- Commitments and Contingent Liabilities.) CONSOLIDATED TAX BENEFITS The BRC does not directly regulate Enterprise's nonutility activities. However, in a case affecting another utility in which neither Enterprise nor PSE&G were parties, the BRC considered the extent to which tax savings generated by nonutility affiliates included in the consolidated tax return of that utility's holding company should be considered in setting that utility's rates. On September 30, 1992, the BRC approved an order in such case treating certain consolidated tax savings generated after June 30, 1990 by that utility's nonutility affiliates as a reduction of its rate base. On December 31, 1992 the BRC issued an order approving a stipulation in PSE&G's 1992 base rate proceeding which resolved the case without separate quantification of the consolidated tax issue. The stipulation does not provide final resolution of the consolidated tax issue for any subsequent base rate filing. While Enterprise continues to account for these entities on a stand-alone basis, resulting in a realization of the tax benefits by the entity generating the benefit, an ultimate unfavorable resolution of the consolidated tax issue could reduce PSE&G's future revenue and net income and the future net income of Enterprise. In addition, an unfavorable resolution may adversely impact Enterprise's nonutility investment strategy. Enterprise believes that PSE&G's taxes should be treated on a stand-alone basis for ratemaking purposes, based on the separate nature of the utility and nonutility businesses. However, neither Enterprise nor PSE&G is able to predict what action, if any, the BRC may take concerning consolidation of tax benefits in future rate proceedings. (See Note 9 -- Federal Income Taxes.) NOTE 3. PSE&G NUCLEAR DECOMMISSIONING AND AMORTIZATION OF NUCLEAR FUEL PSE&G's 1992 base rate decision by the BRC utilized studies based on the prompt removal/dismantlement method of decommissioning for all of PSE&G's nuclear generating stations. This method consists of removing all fuel, source material and all other radioactive materials with activity levels above accepted release limits from the nuclear sites. PSE&G has an ownership interest in five nuclear units: Salem 1 and Salem 2 -- 42.59% each, Hope Creek -- 95% and Peach Bottom 2 and 3 -- 42.49% each. In accordance with rate orders received from the BRC, PSE&G has established an external master nuclear decommissioning trust for all of its nuclear units. The Internal Revenue Service (IRS) has ruled that payments to the trust are tax deductible. PSE&G's total estimated cost of decommissioning its share of these 69 78 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) nuclear units is estimated at $681 million in year-end 1990 dollars, (the year that the site specific estimate was prepared), excluding contingencies. The 1992 base rate decision provided that $15.6 million of such costs are to be collected through base rates and an additional annual amount of $7.0 million in 1993 and $14.0 million in 1994 and thereafter are to be recovered through PSE&G's LEAC. At December 31, 1993 and 1992, the accumulated provision for depreciation and amortization included reserves for nuclear decommissioning for PSE&G's units of $211 million and $179 million, respectively. As of December 31, 1993 and 1992, PSE&G has contributed $155 million and $109 million, respectively, into external qualified and nonqualified nuclear decommissioning trust funds. URANIUM ENRICHMENT DECONTAMINATION AND DECOMMISSIONING FUND In accordance with the NEPA, domestic utilities that own nuclear generating stations are required to pay a cumulative total of $150 million each year into a decontamination and decommissioning fund, based on their past purchases of enriched nuclear fuel from the United States Department of Energy (DOE) Uranium Enrichment Enterprise (now a federal government corporation known as the United States Enrichment Corporation (USEC)). These amounts are being collected over a period of 15 years or until $2.25 billion has been collected. Under this legislation, the nuclear facilities operated by PSE&G, Salem and Hope Creek, aggregate 2.82% of the total amount of enrichment services sold to the domestic commercial nuclear industry and the nuclear facilities operated by PECO Energy Company, formerly known as Philadelphia Electric Company (PECO), Peach Bottom and other nuclear facilities not co-owned by PSE&G, aggregate 3.89%. In 1993, PSE&G paid approximately $4 million and deferred the balance of $56 million. PSE&G has included these costs in its LEAC. PSE&G cannot predict the outcome, amount or timing of any recovery associated with this matter. SPENT NUCLEAR FUEL DISPOSAL COSTS In accordance with the Nuclear Waste Policy Act, PSE&G has entered into contracts with the USEC for the disposal of spent nuclear fuel. Payments made to the USEC for disposal costs are based on nuclear generation and are included in Fuel for Electric Generation and Net Interchanged Power in the Statements of Income. These costs are recovered through the LEAC. 70 79 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) NOTE 4. SCHEDULE OF CONSOLIDATED CAPITAL STOCK
CURRENT REDEMPTION DECEMBER 31, OUTSTANDING PRICE ----------------------- (THOUSANDS OF DOLLARS) SHARES PER SHARE 1993 1992 - --------------------------------------------------- ----------- ---------- ---------- ---------- ENTERPRISE COMMON STOCK (no par) -- authorized 500,000,000 shares; issued and outstanding at December 31, 1993, 243,688,256 shares, at December 31, 1992, 235,395,751 shares, and at December 31, 1991, 226,700,852 shares (note A). $3,772,662 $3,499,183 ---------- ---------- ---------- ---------- ENTERPRISE PREFERRED STOCK (note B) PSE&G CUMULATIVE PREFERRED STOCK (note C) Without Mandatory Redemption (note D) $100 par value -- Series 4.08%.................................... 250,000 $103.00 $ 25,000 $ 25,000 4.18%.................................... 249,942 103.00 24,994 24,994 4.30%.................................... 250,000 102.75 25,000 25,000 5.05%.................................... 250,000 103.00 25,000 25,000 5.28%.................................... 250,000 103.00 25,000 25,000 6.80%.................................... 250,000 102.00 25,000 25,000 7.40%.................................... 500,000 101.00 50,000 50,000 7.52%.................................... 500,000 101.00 50,000 50,000 8.08%.................................... 150,000 101.00 15,000 15,000 7.80%.................................... 750,000 101.00 75,000 75,000 7.70%.................................... 600,000 100.79 60,000 60,000 8.16%.................................... 300,000 100.74 30,000 30,000 ---------- ---------- Total Preferred Stock without Mandatory Redemption.............. $ 429,994 $ 429,994 ---------- ---------- ---------- ---------- With Mandatory Redemption (notes D, E and F) $100 par value -- Series 7.44%.................................... 750,000 $103.72 $ 75,000 $ 75,000 5.97%.................................... 750,000 102.99 75,000 -- ---------- ---------- Preferred Stock with Mandatory Redemption......................... $ 150,000 $ 75,000 ---------- ---------- ---------- ----------
NOTES TO SCHEDULE OF CONSOLIDATED CAPITAL STOCK (A) Total authorized and unissued shares include 7,571,442 shares of Enterprise Common Stock reserved for issuance through Enterprise's Dividend Reinvestment and Stock Purchase Plan (DRIP) and various employee benefit plans. In 1993, 8,292,505 shares of Enterprise Common Stock were issued and sold for $273,479,342, including a public offering of 4,400,000 shares issued and sold for $142,670,000; in 1992, 8,694,899 shares were issued and sold for $237,045,247, including a public offering of 5,000,000 shares issued and sold for $132,025,000; in 1991, 8,228,647 shares were issued and sold for $218,735,528, including a public offering of 5,000,000 shares issued and sold for $129,950,000. (B) Enterprise has authorized a class of 50,000,000 shares of Preferred Stock without par value, none of which is outstanding. (C) As of December 31, 1993, there were 1,700,060 shares of $100 par value and 10,000,000 shares of $25 par value Cumulative Preferred Stock which were authorized and unissued, and which upon issuance may or may not provide for mandatory sinking fund redemption. If dividends upon any shares of Preferred Stock are in arrears in an amount equal to the annual dividend thereon, voting rights for the election of a majority of PSE&G's Board of Directors become operative and continue until all 71 80 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) accumulated and unpaid dividends thereon have been paid, whereupon all such voting rights cease, subject to being again revived from time to time. In January 1994, PSE&G called for redemption on March 1, 1994 all of the outstanding shares of two series of securities: 300,000 shares of its 8.16% Cumulative Preferred Stock ($100 Par) and 150,000 shares of its 8.08% Cumulative Preferred Stock ($100 Par). In February 1994, PSE&G issued and sold 600,000 shares of 6.92% Cumulative Preferred Stock ($100 Par) which may not be redeemed before February 1, 2004 and 600,000 shares of 6.75% Cumulative Preferred Stock -- $25 Par which may not be redeemed before February 1, 1999. The net proceeds from the sale of the 6.75% Cumulative Preferred Stock -- $25 Par will be used by PSE&G to redeem the outstanding shares of the 8.08% Cumulative Preferred Stock ($100 Par). (D) At December 31, 1993, the annual dividend requirement and embedded dividend for Preferred Stock without mandatory redemption were $29,012,000 and 6.75%, respectively and for Preferred Stock with mandatory redemption were $10,057,500 and 6.71%, respectively. (E) In March 1993, PSE&G sold 750,000 shares of 5.97% Cumulative Preferred Stock ($100 Par). PSE&G will be required to redeem through the operation of a sinking fund 37,500 shares, plus accumulated dividends, on March 1 of each year commencing March 1, 2003 and shall redeem the remaining shares on March 1, 2008, plus accumulated dividends. (F) In accordance with the requirements of Statement of Financial Accounting Standards No. 107, "Disclosures about Fair Value of Financial Instruments" (SFAS 107), the estimated fair value was determined using the ready market price for the Preferred Stock at the end of 1993. As of December 31, 1993, the estimated fair value of the Preferred Stock was $158 million. As of December 31, 1992, the estimated fair value of the Preferred Stock was $78 million. NOTE 5. DEFERRED ITEMS PROPERTY ABANDONMENTS The BRC has authorized PSE&G to recover after-tax property abandonment costs from its customers. The following table reflects the application of Statement of Financial Accounting Standards No. 90, "Regulated Enterprises -- Accounting for Abandonments and Disallowances of Plant Costs" (SFAS 90), as amended, on property abandonments for which no return is earned. The net-of-tax discount rate used was between 4.443% and 7.801%. As part of its base rate decision of December 31, 1992, the BRC required the elimination of the amortization of the abandonment cost for Hope Creek Unit 2 as of December 31, 1992. The net remaining balance was transferred to the LEAC. (See Note 2 -- Rate Matters.) The following table reflects the property abandonments and related tax effects on which no return is earned.
DECEMBER 31, --------------------------------------- 1993 1992 ------------------ ------------------ DISCOUNTED DISCOUNTED PROPERTY ABANDONMENTS COST TAXES COST TAXES ------------------------------------------------ -------- ------- -------- ------- (THOUSANDS OF DOLLARS) Atlantic Project................................ $ 81,475 $34,229 $ 92,282 $38,778 LNG Project..................................... 11,362 4,227 15,231 5,738 Uranium Projects................................ 12,699 5,442 14,450 6,168 Other........................................... -- -- 298 -- -------- ------- -------- ------- $105,536 $43,898 $122,261 $50,684 -------- ------- -------- ------- -------- ------- -------- -------
72 81 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) UNDER (OVER) RECOVERED ELECTRIC ENERGY AND GAS COSTS -- NET Recoveries of electric energy and gas costs are determined by the BRC under the LEAC and LGAC. PSE&G's deferred fuel balances as of December 31, 1993 and December 31, 1992, reflect an underrecovery of $62.0 million and an overrecovery of $122.7 million, respectively. UNRECOVERED PLANT AND REGULATORY STUDY COSTS Amounts shown in the consolidated balance sheets consist of costs associated with developing, consolidating and documenting the specific design basis of PSE&G's jointly-owned nuclear generating stations, as well as PSE&G's share of costs associated with the cancellation of the Hydrogen Water Chemistry System Project at Peach Bottom. PSE&G has received both BRC and FERC approval to defer and amortize, over the remaining life of the Salem and Hope Creek nuclear units, costs associated with configuration baseline documentation projects. PSE&G has received FERC approval to defer and amortize over the remaining life of the applicable Peach Bottom units, costs associated with the configuration baseline documentation and the cancelled Hydrogen Water Chemistry System Projects. While PSE&G expects the BRC to authorize recovery of such costs from electric customers, no assurances can be given. OIL AND GAS PROPERTY WRITE-DOWN On December 31, 1992, the BRC approved the recovery of the EDC write-down through PSE&G's LGAC over a ten year period beginning January 1, 1993. At December 31, 1993, the remaining balance to be amortized was $46 million. UNAMORTIZED DEBT EXPENSE Gains and losses and the cost of redeeming long-term debt for PSE&G are deferred and amortized over the life of the applicable debt. NOTE 6. SCHEDULE OF CONSOLIDATED LONG-TERM DEBT
DECEMBER 31, -------------------------- INTEREST RATES DUE 1993 1992 - ----------------- ------------------------------------------------- ---------- ---------- (THOUSANDS OF DOLLARS) PSE&G FIRST AND REFUNDING MORTGAGE BONDS (note A) 4 3/8% - 9 1/8% 1993............................................. $ -- $ 190,000 4 5/8% 1994............................................. 60,000 60,000 4 3/4% - 6% 1995............................................. 310,000 310,000 9 3/4% 1996............................................. -- 75,000 6 1/4% - 7 1/8% 1997............................................. 300,000 375,000 6% - 7% 1998............................................. 100,000 75,000 6% - 8 7/8% 1999-2003........................................ 1,200,000 798,600 6.30% - 9 1/8% 2004-2008........................................ 438,900 530,400 6.80% - 10 3/8% 2009-2013........................................ 73,710 137,710 8.10% - 10 1/2% 2014-2018........................................ 310,200 745,400 7 1/2% - 9 3/4% 2019-2023........................................ 1,068,500 822,500 5.20% - 7% 2024-2028........................................ 387,000 -- 5.55% 2033............................................. 145,200 -- 5% - 8% 2037............................................. 15,001 15,001 MEDIUM-TERM NOTES 7.15% - 7.18% 2023............................................. 40,500 -- ---------- ---------- Total First and Refunding Mortgage Bonds............................... $4,449,011 $4,134,611 ---------- ----------
73 82 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, -------------------------- INTEREST RATES DUE 1993 1992 - ----------------- ------------------------------------------------- ---------- ---------- (THOUSANDS OF DOLLARS) DEBENTURE BONDS UNSECURED 7 3/4% 1996............................................. $ -- $ 41,994 6% 1998............................................. 18,195 18,195 ---------- ---------- Total Debenture Bonds.................................................. 18,195 60,189 ---------- ---------- Principal Amount Outstanding (note F).................................. 4,467,206 4,194,800 Amounts Due Within One Year (note B)................................... (61,700) (191,700) Net Unamortized Discount............................................... (41,069) (24,962) ---------- ---------- Total Long-Term Debt of PSE&G.......................................... 4,364,437 3,978,138 ---------- ---------- EDHI CAPITAL (note C) 8.95% - 9.72% 1993............................................. -- 88,000 7.40% 1994............................................. 50,000 50,000 5.65% - 9.55% 1995............................................. 112,000 112,000 9.00% 1996............................................. 20,000 20,000 5.79% - 5.92% 1997............................................. 27,000 -- 9.875% - 10.05% 1998............................................. 282,500 325,000 6.54% - 9.93% 1999-2000........................................ 233,000 155,000 ---------- ---------- Principal Amount Outstanding (note F).................................. 724,500 750,000 Amounts Due Within One Year (note B)................................... (92,436) (130,431) Net Unamortized Discount............................................... (1,746) (1,571) ---------- ---------- Total Long-Term Debt of Capital........................................ 630,318 617,998 ---------- ---------- FUNDING (note D) 9.43% 1993............................................. -- 60,000 9.54% 1995............................................. 35,000 35,000 9.55% 1996............................................. 28,000 28,000 6.85% - 9.59% 1997............................................. 55,000 40,000 9.95% 1998............................................. 83,000 83,000 7.58% 1999............................................. 45,000 -- 4.5625% - 5.0% Bank Loans 1994-95.......................................... -- 175,000 ---------- ---------- Principal Amount Outstanding (note F).................................. 246,000 421,000 Amounts Due Within One Year (note B)................................... -- (60,000) ---------- ---------- Total Long-Term Debt of Funding........................................ 246,000 361,000 ---------- ---------- EGDC MORTGAGE NOTES 5.18% - 7.736% 1994............................................. 13,638 13,678 5.75% 1998............................................. 9,050 10,280 10.625% - 12.75% 2012............................................. 6,806 6,913 ---------- ---------- Principal Amount Outstanding (note F).................................. 29,494 30,871 Amounts Due Within One Year (note B)................................... (13,928) (10,428) ---------- ---------- Total Long-Term Debt of EGDC........................................... 15,566 20,443 ---------- ---------- Total Long-Term Debt of EDHI........................................... 891,884 999,441 ---------- ---------- Consolidated Long-Term Debt (note E)................................... $5,256,321 $4,977,579 ---------- ---------- ---------- ----------
NOTES: (A) PSE&G's Mortgage, securing the Bonds, constitutes a direct first mortgage lien on substantially all PSE&G property and franchises. 74 83 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) In January 1994, PSE&G called for redemption on March 1, 1994 all of its First and Refunding Mortgage Bonds 4 5/8% Series due 1994. In February 1994, PSE&G issued $50 million principal amount of its First and Refunding Mortgage Bonds Pollution Control Series O due 2032. (B) The aggregate principal amounts of mandatory requirements for sinking funds and maturities for each of the five years following December 31, 1993 are as follows:
SINKING FUNDS MATURITIES ----------------- ---------------------------------------------------- YEAR PSE&G CAPITAL PSE&G CAPITAL EGDC FUNDING TOTAL (THOUSANDS OF DOLLARS) 1994................ $1,700 $ 42,500 $ 60,000 $ 49,936 $13,928 $ -- $ 168,064 1995................ 200 42,500 310,000 112,000 305 35,000 500,005 1996................ 200 42,500 -- 20,000 320 28,000 91,020 1997................ 200 42,500 300,000 27,000 337 55,000 425,037 1998................ 200 37,500 100,000 75,000 8,551 83,000 304,251 ------ -------- -------- -------- ------- -------- --------- $2,500 $207,500 $770,000 $283,936 $23,441 $201,000 $1,488,377 ------ -------- -------- -------- ------- -------- --------- ------ -------- -------- -------- ------- -------- ---------
For sinking fund purposes, certain First and Refunding Mortgage Bond issues require annually the retirement of an aggregate $13.3 million principal amount of bonds or the utilization of bondable property additions at 60% of cost. The portion expected to be met by property additions has been excluded from the table above. (C) Capital is providing up to $750 million debt financing for EDHI's businesses on the basis of a support agreement with Enterprise. (D) Funding provides debt financing for EDHI's businesses other than EGDC on the basis of unconditional guarantees from EDHI. (E) At December 31, 1993, the annual interest requirement on long-term debt was $421.2 million of which $327.5 million was the requirement for Bonds. The embedded interest cost on long-term debt on such date was 8.06%. (F) In accordance with the requirements of SFAS 107, the estimated fair value was determined using market quotations or values of debt with similar terms, credit ratings and remaining maturities at the end of 1992. As of December 31, 1993, the estimated fair value of PSE&G's and EDHI's long-term debt was $4.7 billion and $1.2 billion, respectively. As of December 31, 1992, the estimated fair value of PSE&G's and EDHI's long-term debt was $4.4 billion and $1.3 billion, respectively. 75 84 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) NOTE 7. LONG-TERM INVESTMENTS Long-Term Investments are primarily those of EDHI. A summary of Long-Term Investments is as follows:
1993 1992 ------ ------ (MILLIONS OF DOLLARS) Lease Agreements (see Note 10 -- Leasing Activities): Leveraged Leases.............................................. $ 738 $ 718 Direct-Financing Leases....................................... 85 93 Other Leases.................................................. 8 12 ------ ------ Total.................................................... 831 823 ------ ------ Partnerships: General Partnerships.......................................... 152 135 Limited Partnerships.......................................... 433 428 ------ ------ Total.................................................... 585 563 ------ ------ Joint Ventures..................................................... 35 11 Securities......................................................... 82 198 Valuation Allowances............................................... (18) (17) Corporate-owned Life Insurance (PSE&G)............................. 99 72 ------ ------ Total Long-Term Investments.............................. $1,614 $1,650 ------ ------ ------ ------
PSRC's leveraged leases are reported net of principal and interest on nonrecourse loans and unearned income, including deferred tax credits. Income and deferred tax credits are recognized at a level rate of return from each lease during the periods in which the net investment is positive. Partnership investments are those of PSRC, EGDC and CEA and are undertaken with other investors. PSRC is a limited partner in various partnerships and is committed to make investments from time to time, upon the request of the respective general partners. As of December 31, 1993, $139.5 million remained as PSRC's unfunded commitment subject to call. PSRC has invested in marketable securities and limited partnerships investing in securities, which are stated at fair value. Realized investment gains and losses on the sale of investment securities are determined utilizing the specific cost identification method. NOTE 8. CASH AND CASH EQUIVALENTS The December 31, 1993 and 1992 balances consist primarily of working funds and highly liquid marketable securities (commercial paper) with a maturity of three months or less. 76 85 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) NOTE 9. FEDERAL INCOME TAXES A reconciliation of reported Net Income with pretax income and of Federal income tax expense with the amount computed by multiplying pretax income by the statutory Federal income tax rates of 35% in 1993 and 34% in 1992 and 1991 is as follows:
1993 1992 1991 -------- -------- -------- (THOUSANDS OF DOLLARS) Net Income......................................... $600,933 $504,117 $543,035 Preferred stock dividend requirements.............. 38,114 31,907 29,012 SFAS 109 Cumulative Effect......................... (5,414) -- -- -------- -------- -------- Subtotal................................. 633,633 536,024 572,047 -------- -------- -------- Federal income taxes: Operating income: Current provision................................ 152,076 152,225 146,408 Provision for deferred income taxes -- net(A).... 186,467 91,104 137,955 Investment tax credits -- net.................... (23,784) (21,635) (19,507) -------- -------- -------- Total included in operating income................. 314,759 221,694 264,856 Miscellaneous other income: Current provision................................ (15,419) 4,721 (11,396) Provision for deferred income taxes(A)........... 9,815 19,261 10,906 SFAS 90 deferred income taxes(A)................... 2,948 2,690 4,967 -------- -------- -------- Total Federal income tax provisions................ 312,103 248,366 269,333 -------- -------- -------- Pretax income...................................... $945,736 $784,390 $841,380 -------- -------- -------- -------- -------- --------
Reconciliation between total Federal income tax provisions and tax computed at the statutory tax rate on pretax income: Tax computed at the statutory rate................. $331,008 $266,693 $286,069 -------- -------- -------- Increase (decrease) attributable to flow through of certain tax adjustments: Depreciation.................................. 9,002 15,614 9,229 Amortization of plant abandonments and write-downs................................. (2,239) (18,867) (4,497) Amortization of investment tax credits........... (23,784) (20,681) (22,004) Other............................................ (1,884) 5,607 536 -------- -------- -------- Subtotal........................................... (18,905) (18,327) (16,736) -------- -------- -------- Total Federal income tax provisions................ $312,103 $248,366 $269,333 -------- -------- -------- -------- -------- -------- Effective Federal income tax rate.................. 33.0% 31.7% 32.0%
(A) The provision for deferred income taxes represents the tax effects of the following items:
1993 1992 1991 -------- -------- -------- (THOUSANDS OF DOLLARS) Deferred Credits: Additional tax depreciation and amortization..... $112,814 $136,073 $123,122 Leasing Activities............................... 34,958 56,087 41,741 Property Abandonments............................ (6,632) (34,739) (11,582) Oil and Gas Property Write-Down.................. (2,451) (6,393) (6,393) Deferred fuel costs -- net....................... 63,330 (40,148) 9,285 Other............................................ (2,789) 2,175 (2,345) -------- -------- -------- Total.............................................. $199,230 $113,055 $153,828 -------- -------- -------- -------- -------- --------
77 86 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Since 1987, Enterprise's Federal alternative minimum tax (AMT) liability has exceeded its regular Federal income tax liability. This excess can be carried forward indefinitely to offset regular income tax liability in future years. Enterprise expects to utilize these AMT credits in the future as regular tax liability exceeds AMT. As of December 31, 1993, 1992 and 1991, Enterprise had AMT credits of $247 million, $212 million and $185 million, respectively. Since 1986, Enterprise has filed a consolidated Federal income tax return on behalf of itself and its subsidiaries. Prior to 1986, PSE&G filed consolidated tax returns. On March 20, 1992, the Internal Revenue Service (IRS) issued a Revenue Agents Report (RAR) following completion of examination of PSE&G's consolidated tax return for 1985 and Enterprise's consolidated tax returns for 1986 and 1987, proposing various adjustments for such years which would increase Enterprise's consolidated Federal income tax liability by approximately $121 million, exclusive of interest and penalties, of which approximately $118 million is attributable to PSE&G. Interest after taxes on these proposed adjustments is currently estimated to be approximately $82 million as of December 31, 1993 and will continue to accrue at the Federal rate for large corporate underpayments, currently 9% annually. The most significant of these proposed adjustments relates to the IRS contention that PSE&G's Hope Creek nuclear unit is a partnership with a short 1986 taxable year. In addition, the IRS contends that the tax in-service date of that unit is four months later than the date claimed by PSE&G. On June 19, 1992, Enterprise and PSE&G filed a protest with the IRS disagreeing with certain of the proposed adjustments (including those related to Hope Creek) contained in the RAR for taxable years 1985 through 1987 and continues to contest these issues. Any tax adjustments resulting from the RAR would reduce Enterprise's and PSE&G's respective deferred credits for accumulated deferred income taxes. Enterprise expects PSE&G to recover all interest paid with respect to tax adjustments attributable to PSE&G from PSE&G's customers through rates. While PSE&G believes that assessments attributable to it are generally recoverable from its customers in rates, no assurances can be given as to what regulatory treatment may be afforded by the BRC. On January 1, 1993, Enterprise adopted SFAS 109 without restating prior years' financial statements which resulted in Enterprise recording a $5.4 million cumulative effect increase in its net income. Under SFAS 109, deferred taxes are provided at the enacted statutory tax rate for all temporary differences between the financial statement carrying amounts and the tax bases of existing assets and liabilities irrespective of the treatment for ratemaking purposes. Since management believes that it is probable that the effects of SFAS 109 on PSE&G, principally the accumulated tax benefits that previously have been treated as a flow-through item to customers, will be recovered from utility customers in the future, an offsetting regulatory asset was established. As of December 31, 1993, PSE&G had recorded a deferred tax liability and an offsetting regulatory asset of $790 million representing the future revenue expected to be recovered through rates based upon established regulatory practices which permit recovery of current taxes payable. This amount was determined using the 1993 Federal income tax rate of 35%. 78 87 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) SFAS 109 The following is an analysis of accumulated deferred income taxes:
ACCUMULATED DEFERRED INCOME TAXES 1993 1992 - ---------------------------------------------------------------------- ---------- ---------- (THOUSANDS OF DOLLARS) Assets: Current (net)....................................................... $ 12,934 $ -- Non-Current: Unrecovered Investment Tax Credits............................... 143,125 -- Nuclear Decommissioning.......................................... 25,211 24,305 Hope Creek Cost Disallowance..................................... 20,231 29,468 Uncollectibles................................................... 9,776 -- Vacation Pay..................................................... 6,721 6,424 AMT Credit....................................................... 246,862 212,453 Real Estate Impairment........................................... 27,173 -- Other............................................................ 14,880 1,209 ---------- ---------- Total Non-Current........................................... $ 493,979 $ 273,859 ---------- ---------- Total Assets.......................................................... $ 506,913 $ 273,859 ---------- ---------- ---------- ---------- Liabilities: Non-Current: Plant Related Items.............................................. $2,169,861 $1,395,725 Leasing Activities............................................... 520,286 451,733 Property Abandonments............................................ 32,206 50,684 Oil and Gas Property Write-Down.................................. 16,790 24,518 Deferred Electric Energy & Gas Costs............................. 20,133 (44,415) Unamortized Debt Expense......................................... 38,768 17,082 Taxes Recoverable Through Future Rates........................... 270,518 -- Other............................................................ 127,803 89,621 ---------- ---------- Total Non-Current........................................... $3,196,365 $1,984,948 ---------- ---------- Total Liabilities..................................................... $3,196,365 $1,984,948 ---------- ---------- ---------- ---------- Summary -- Accumulated Deferred Income Taxes Net Current Assets.................................................. $ 12,934 $ -- Net Deferred Liability.............................................. $2,702,386 $1,711,089 ---------- ---------- Total............................................................ $2,689,452 $1,711,089 ---------- ---------- ---------- ----------
The Revenue Reconciliation Act of 1993, enacted in August 1993, increased the Federal corporate income tax rate from 34% to 35% effective January 1, 1993. This resulted in an increase in Federal income tax expense for Enterprise of $18.1 million for the year 1993. NOTE 10. LEASING ACTIVITIES As Lessee The Consolidated Balance Sheets include assets and related obligations applicable to capital leases where PSE&G is a lessee. The total amortization of the leased assets and interest on the lease obligations equals the net minimum lease payments included in rent expense for capital leases. Capital leases of PSE&G relate primarily to its corporate headquarters and other capital equipment. Certain of the leases contain renewal and purchase options and also contain escalation clauses. Enterprise and its other subsidiaries are not lessees in any capitalized leases. 79 88 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Utility plant includes the following amounts for capital leases at December 31:
1993 1992 ------- ------- (THOUSANDS OF DOLLARS) Common Plant............................................. $56,812 $56,812 Less: Accumulated Amortization........................... 3,708 3,196 ------- ------- Net Assets under Capital Leases.......................... $53,104 $53,616 ------- ------- ------- -------
Future minimum lease payments for noncancelable capital and operating leases at December 31, 1993 were:
CAPITAL OPERATING LEASES LEASES ------- ------- (THOUSANDS OF DOLLARS) 1994..................................................... $13,015 $14,353 1995..................................................... 13,016 14,056 1996..................................................... 13,017 12,942 1997..................................................... 13,017 10,982 1998..................................................... 13,018 7,820 Later Years.............................................. 212,521 24,184 ------- ------- Minimum Lease Payments................................... 277,604 $84,337 ------- ------- Less: Amount representing estimated executory costs, together with any profit thereon, included in minimum lease payments............................. 138,876 ------- Net minimum lease payments............................... 138,728 Less: Amount representing interest....................... 85,624 ------- Present value of net minimum lease payments(A)........... $53,104 ------- -------
(A) Reflected in the Consolidated Balance Sheets in Capital Lease Obligations of $52.530 million and in Long-Term Debt and Capital Lease Obligations due within one year of $574 thousand. The following schedule shows the composition of rent expense included in Operating Expenses:
FOR THE YEARS ENDED DECEMBER 31, ------------------------------- 1993 1992 1991 ------- ------- ------- (THOUSANDS OF DOLLARS) Interest on Capital Lease Obligations................. $ 6,074 $ 6,129 $ 6,205 Amortization of Utility Plant under Capital Leases.... 513 457 439 ------- ------- ------- Net minimum lease payments relating to Capital Leases.............................................. 6,587 6,586 6,644 Other Lease payments.................................. 22,095 21,739 26,290 ------- ------- ------- Total Rent Expense.................................... $28,682 $28,325 $32,934 ------- ------- ------- ------- ------- -------
80 89 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) AS LESSOR PSRC's net investments in leveraged and direct financing leases are composed of the following elements:
DECEMBER 31, 1993 DECEMBER 31, 1992 ---------------------------------- ---------------------------------- (MILLIONS OF DOLLARS) DIRECT DIRECT LEVERAGED FINANCING LEVERAGED FINANCING LEASES LEASES TOTAL LEASES LEASES TOTAL --------- --------- ------ --------- --------- ------ Lease rents receivable.......... $ 980 $ 114 $1,094 $ 1,015 $ 130 $1,145 Estimated residual value........ 595 12 607 599 12 611 --------- --------- ------ --------- --------- ------ 1,575 126 1,701 1,614 142 1,756 Unearned and deferred income.... (837) (41) (878) (896) (49) (945) --------- --------- ------ --------- --------- ------ Total investments............... 738 85 823 718 93 811 Deferred taxes.................. (267) (20) (287) (225) (18) (243) --------- --------- ------ --------- --------- ------ Net investments................. $ 471 $ 65 $ 536 $ 493 $ 75 $ 568 --------- --------- ------ --------- --------- ------ --------- --------- ------ --------- --------- ------
PSRC's other leases are with various regional, state and city authorities for transportation equipment and aggregated $8 million and $12 million as of December 31, 1993 and 1992, respectively. NOTE 11. SHORT-TERM DEBT (COMMERCIAL PAPER AND LOANS) Commercial paper represents unsecured bearer promissory notes sold through dealers at a discount with a term of nine months or less. PSE&G Certain information regarding commercial paper follows:
1993 1992 1991 -------- -------- -------- (THOUSANDS OF DOLLARS) Principal amount outstanding at end of year........ $532,728 $257,536 $165,857 Maximum principal amount outstanding at any month-end........................................ $532,728 $549,914 $499,171 Average daily outstanding.......................... $310,400 $279,900 $400,000 Weighted average annual interest rate.............. 3.20% 3.76% 5.98% Weighted average interest rate for commercial paper outstanding at year-end.......................... 3.34% 3.64% 4.99%
PSE&G has authorization from the BRC to issue and have outstanding not more than $800 million of its short-term obligations at any one time, consisting of commercial paper and other unsecured borrowings from banks and other lenders. This authorization expires December 31, 1994. PSE&G expects to be able to renew such authority. PSE&G has a $600 million revolving credit agreement with a group of banks which expires in September 1994. As of December 31, 1993, there was no short-term debt outstanding under this agreement. 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 in June 1996. PSE&G has guaranteed repayment of Fuelco's respective obligations. As of December 31, 1993, 1992 and 1991, Fuelco had commercial paper of $108.7 million, $122.5 million and $135.9 million, respectively, outstanding under such program, which amounts are included in the table above. 81 90 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) EDHI Certain information regarding commercial paper follows:
1993 1992 1991 -------- -------- -------- (THOUSANDS OF DOLLARS) Amount outstanding at end of year.................. $ 44,908 $134,446 $223,193 Maximum amount outstanding at any month-end........ $150,321 $204,558 $326,537 Average daily outstanding.......................... $ 91,800 $156,400 $243,700 Weighted average annual interest rate.............. 3.24% 3.78% 5.92% Weighted average interest rate for commercial paper outstanding at year-end.......................... 3.47% 3.76% 5.04%
At December 31, 1993, Funding had a $225 million commercial paper program supported by a direct pay commercial bank letter of credit and revolving credit facility and a $225 million revolving credit facility each of which expires in November 1995. ENTERPRISE At each of December 31, 1993, 1992 and 1991, Enterprise had $25 million of lines of credit supported by compensating balances under informal arrangements with banks. At each of December 31, 1993, 1992 and 1991, Enterprise had no line of credit compensated for by fees. NOTE 12. COMMITMENTS AND CONTINGENT LIABILITIES NUCLEAR PERFORMANCE STANDARD The BRC has established a nuclear performance standard (Standard) 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. The penalty/reward under the Standard is a percentage of replacement power costs. (See table below.) The Standard 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%.......................................................... BRC Intervenes
Under the Standard, 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 Standard does not specifically have a gross negligence provision, the BRC 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 Standard. During 1993, the five nuclear units in which PSE&G has an ownership interest aggregated a 77% combined capacity factor. In accordance with the Standard, PSE&G's combined capacity factor exceeded the 75% reward threshold, entitling PSE&G to a reward of approximately $3.9 million. PSE&G will petition the BRC to recover this reward through the LEAC commencing on June 30, 1994. 82 91 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (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 ASSESSMENTS TOTAL FOR A SITE SINGLE TYPE AND SOURCE OF COVERAGES COVERAGES INCIDENT - ------------------------------------------------------------------- --------- ---------- (MILLIONS OF DOLLARS) Public Liability: American Nuclear Insurers........................................ $ 200.0 $ -- Indemnity(A)..................................................... 9,195.9 210.2 --------- ---------- $9,395.9 (B) $210.2 --------- ---------- Nuclear Worker Liability: American Nuclear Insurers(C)..................................... $ 200.0 $ 8.3 --------- ---------- Property Damage: Nuclear Mutual Limited........................................... $ 500.0 $ 17.4 American Nuclear Insurers........................................ 765.0 (D) -- Nuclear Electric Insurance Ltd. (NEIL I)......................... 85.0 (E) -- Nuclear Electric Insurance Ltd. (NEIL II)........................ 1,400.0 (F) 10.9(G) --------- ---------- $2,750.0 $ 28.3 --------- ---------- Replacement Power: Nuclear Electric Insurance Ltd. ................................. $ 3.5 (H) $ 11.3
(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. (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 $100 million sublimit for premature decommissioning costs. (E) New policy effective January 1, 1994. (F) Includes up to $250 million for premature decommissioning costs. (G) In the event of a second industry loss triggering NEIL coverage, the maximum retrospective premium assessment can increase to $23.4 million. (H) Weekly indemnity for 52 weeks which commences after the first 21 weeks of an outage. Beyond the first 52 weeks of coverage indemnity of $2.3 million per week for 104 weeks is afforded. Total coverage amounts to $425.9 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 $9.4 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 83 92 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 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. PSE&G purchases all property insurance available, 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 $28.3 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 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, 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 $2.3 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 $11.3 million. NUCLEAR FUEL As a result of the NEPA, all United States nuclear utilities are responsible to co-fund with the United States Government a decontamination and decommissioning fund for DOE nuclear fuel enrichment facilities. PSE&G is responsible for making annual payments into this fund for 15 years beginning in 1993. In September 1993, PSE&G paid its $4 million annual assessment based on its proportionate share of the five nuclear units in which it has an ownership interest. PSE&G deferred such amount and expects to recover it, together with its estimated $56 million future liability, from customers through its LEAC. (See Note 3 -- PSE&G Nuclear Decommissioning and Amortization of Nuclear Fuel -- Uranium Enrichment Decontamination and Decommissioning Fund.) 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 cogeneration and other nonutility capacity projected to be available. Based on PSE&G's 1994-1998 construction program, construction expenditures are expected to aggregate approximately $4.2 billion, which includes $483 million for nuclear fuel and $133 million of AFDC and capitalized interest during the years 1994 through 1998. The estimate of construction requirements is based on expected project completion dates and includes anticipated escalation due to inflation of approximately 4%, annually. Therefore, construction delays or higher inflation levels could cause significant increases in these 84 93 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) amounts. PSE&G expects to generate internally a majority of the funds necessary to satisfy its construction expenditures over the next five years, assuming adequate and timely rate relief, 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 1994 through 1998. BERGEN STATION REPOWERING PSE&G is presently engaged in Phase I of a construction project to renovate (or "repower") the Bergen Station pursuant to an air pollution control permit issued by New Jersey Department of Environmental Protection and Energy (NJDEPE) on May 27, 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. Phase II of the project, if it is undertaken by PSE&G, would increase the capacity of Bergen by an additional 650 MW. On July 12, 1993, an association of competitors of PSE&G appealed the NJDEPE's issuance of the air permit for Phase I of the project to the Appellate Division of the New Jersey Superior Court, alleging that PSE&G is first required to obtain a Certificate of Need under the New Jersey Need Assessment Act (Need Assessment Act). The NJDEPE determined that the Need Assessment Act was inapplicable to this renovation project. Obtaining a Certificate of Need would be a complex procedure entailing proceedings of at least a two year duration before the NJDEPE, the outcome of which could not be assured. As of December 31, 1993, Phase I of the renovation project was about 20% complete and PSE&G had spent approximately $169 million on this effort. The final cost is estimated to be approximately $400 million. Briefs have been filed in the appeal and PSE&G believes that a Certificate of Need is not required for Phase I of the project. However, if a Certificate of Need were ultimately required by the courts after exhaustion of all appeals, the permits needed to operate the plant could not be issued until after a Certificate of Need was obtained. PSE&G intends to continue this renovation project and to vigorously defend its position through all available means. ENVIRONMENT GENERAL Certain Federal and State laws authorize the United States Environmental Protection Agency (EPA) and the NJDEPE, 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, 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 be material. PSE&G MANUFACTURED GAS PLANT REMEDIATION PROGRAM In March 1988, NJDEPE 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, NJDEPE and PSE&G have identified 38 former gas 85 94 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) plant sites. PSE&G is currently working with NJDEPE under a program to assess, investigate and, if necessary, remediate environmental concerns at its former gas plant 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. Costs incurred through December 31, 1993 for the Remediation Program amounted to $44.5 million, net of insurance recoveries. In addition, at December 31, 1993, PSE&G's liability for estimated remediation costs, net of insurance recoveries, through 1996 aggregated $111 million. In accordance with a Stipulation approved by the BRC on January 21, 1992, PSE&G is recovering $32 million of its actual remediation costs to reflect costs incurred through September 30, 1992, net of insurance recoveries, over a six-year period. In its 1992-93 LGAC, PSE&G refunded $0.3 million during the 1993 LGAC year and will recover $5.3 million in each of its next three LGAC periods ending in 1996, net of insurance recoveries. The regulatory treatment of the remediation costs covered by this Stipulation was not changed in the BRC's September 15, 1993 written order, allowing continued collection under the terms of the January 21, 1992 Stipulation. The decision of September 15, 1993 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 are subject to verification and audit in PSE&G's 1992-93 LGAC. The audit is currently ongoing. The order also approved a mechanism for costs incurred since October 1, 1992, allowing the recovery of actual costs plus carrying charges, net of insurance recoveries, over a seven-year period through PSE&G's LEAC and LGAC, with 60% charged to gas customers and 40% charged to electric customers. On November 1, 1993, the Public Advocate of New Jersey filed a motion requesting the BRC to reconsider its September 15, 1993 order. On January 21,1994, the BRC denied the motion. In November 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 September 1994 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. NOTE 13. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS On January 1, 1993, Enterprise and PSE&G adopted SFAS 106, which requires that the expected cost of employees' postretirement health care and insurance benefits be charged to expense during the years in which employees render service. PSE&G elected to amortize over 20 years its unfunded obligation of $609.3 million at January 1, 1993. Prior to 1993, Enterprise and PSE&G recognized postretirement health care and insurance costs in the year that the benefits were paid. The following table discloses the significant components of the January 1, 1993, accumulated postretirement benefit obligation amortization:
JANUARY 1, 1993 NET POSTRETIREMENT BENEFIT OBLIGATION --------------- ------------------------------------------------------------------------------- (MILLIONS) Accumulated postretirement benefit obligation (PSE&G).......................... $(609.3) Unrecognized transition obligation (PSE&G)..................................... 578.8 --------------- Accrued postretirement obligation.............................................. $ (30.5) --------------- ---------------
86 95 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The following table discloses the significant components of the net periodic postretirement benefit obligation:
NET PERIODIC POSTRETIREMENT BENEFIT OBLIGATION 1993 ---------------------------------------------- ---- (MILLIONS) Service cost................................................................ $ 11.7 Interest on accumulated postretirement obligation........................... 44.4 Amortization of transition obligations...................................... 30.5 Deferral of current expense................................................. (58.6) -------- Annual net expense................................................. $ 28.0 -------- --------
The discount rate used in determining the PSE&G net periodic postretirement benefit cost was 7.5%. A one-percentage-point increase in the assumed health care cost trend rate for each year would increase the aggregate of the service and interest cost components of net periodic postretirement health care cost by approximately $2.4 million, or 6.0%, and increase the accumulated postretirement benefit obligation as of December 31, 1993 by $29.3 million, or 6.0%. The assumed health care cost trend rates used in measuring the accumulated postretirement benefit obligation in 1993 were: medical costs for pre-age sixty-five retirees -- 13.5%, medical costs for post-age retirees -- 9.5%, prescription drugs -- 18% and dental costs -- 7.5%, such rates are assumed to gradually decline to 5.5%, 5.0%, 5.5% and 5.0%, respectively, in 2010. In its recent base rate case, PSE&G requested full recovery of the costs associated with postretirement benefits other than pensions (OPEB) on an accrual basis, in accordance with SFAS 106. The BRC's December 31, 1992 base rate order, provided that (1) PSE&G's pay-as-you-go basis OPEB costs will continue to be included in cost of service and will be recoverable in base rates on a pay-as-you-go basis; (2) prudently incurred OPEB costs, that are accounted for on an accrual basis in accordance with SFAS 106, will be recoverable in future rates; (3) PSE&G should account for the differences between its OPEB costs on an accrual basis and the pay-as-you-go basis being recovered in rates as a regulatory asset; (4) the issue of cash versus accrual accounting will be revisited and in the event that the Financial Accounting Standards Board (FASB) or the SEC requires the use of accrual accounting for OPEB costs for ratemaking purposes, the regulatory asset will be recoverable, through rates, over an appropriate amortization period. Accordingly, PSE&G is accounting for the differences between its SFAS 106 accruals cost and the cash cost currently recovered through rates as a regulatory asset. OPEB costs charged to expense during 1993 were $28 million and accrued OPEB costs deferred were $58.6 million, including an increase of $25 million due to the recognition of PSE&G's obligation for life insurance benefits. The amount of the unfunded liability, at December 31, 1993, as shown below, is $657.0 million and funding options are currently being explored. The primary effect of adopting SFAS 106 on Enterprise's and PSE&G's financial reporting is on the presentation of their financial positions with minimal effect on their results of operations. In accordance with SFAS 106 disclosure requirements, a reconciliation of the funded status of the plan as of December 31, 1993, is as follows: 87 96 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1993 ----------------- (MILLIONS) Accumulated postretirement benefit obligation: Retirees................................................... $(406.4) Fully eligible active plan participants.................... (35.0) Other active plan participants............................. (215.6) ----------------- Total.............................................. (657.0) ----------------- Plan assets at fair value.................................... -- ----------------- Accumulated postretirement benefit obligation in excess of plan assets................................................ (657.0) Unrecognized net loss from past experience different from that assumed and from changes in assumptions............... $ 19.6 Unrecognized prior service cost.............................. -- Unrecognized transition obligation........................... 578.8 ----------------- Accrued postretirement obligation............................ $ (58.6) ----------------- -----------------
The discount rate used in determining the accumulated postretirement benefit obligation as of December 31, 1993 was 7.25%. During January 1993 and subsequent to the receipt of the Order, the FASB's Emerging Issues Task Force (EITF) concluded that deferral of such costs is acceptable, provided regulators allow SFAS 106 costs in rates within approximately five years of the adoption of SFAS 106 for financial reporting purposes, with any cost deferrals recovered in approximately twenty years. PSE&G intends to request the BRC for full SFAS 106 recovery in accordance with the EITF's view of such standard and believes that it is probable that any deferred costs will be recovered from utility customers within such twenty year time period. NOTE 14. PENSION PLAN The discount rate, expected long-term return on assets and average compensation growth used in determining the Pension Plan's funded status as of December 31, 1993 and 1992, and net pension costs for 1993, 1992 and 1991, were as follows:
1993 1992 ---- ---- Discount Rate Used to Determine Pension Cost......................... 7 1/2% 7 1/2% Discount Rate Used to Determine Benefit Obligations.................. 7 1/4% 7 1/2% Expected Long-Term Return on Assets.................................. 8% 8% Average Compensation Growth to Determine Pension Cost................ 6% 6% Average Compensation Growth to Determine Benefit Obligations......... 5.5% 6%
88 97 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The following table shows the Pension Plan's funded status:
DECEMBER 31, ------------------------- 1993 1992 ----------- ----------- (THOUSANDS OF DOLLARS) Actuarial present value of benefit obligations: Accumulated benefit obligations, including vested benefits of $1,045,035 in 1993 and $993,867 in 1992............. $(1,144,214) $(1,065,842) Effect of projected future compensation................... (346,416) (332,843) ----------- ----------- Projected benefit obligations............................... (1,490,630) (1,398,685) Plan assets at fair value, primarily listed equity and debt securities................................................ 1,312,619 1,172,775 ----------- ----------- Projected benefit obligations in excess of plan assets...... (178,011) (225,910) Unrecognized net gain (loss) from past experience and effects of changes in assumptions......................... (20,981) 18,326 Prior service cost not yet recognized in net pension cost... 113,397 121,998 Unrecognized net obligations being recognized over 16.7 years..................................................... 77,486 85,586 ----------- ----------- Accrued pension expense..................................... $ (8,109) $ -- ----------- ----------- ----------- -----------
The net pension cost for the years ending December 31, 1993, 1992 and 1991, include the following components:
1993 1992 1991 --------- -------- -------- (THOUSANDS OF DOLLARS) Service cost-benefits earned during year.......... $ 42,948 $ 36,125 $ 33,652 Interest cost on projected benefit obligations.... 103,118 94,233 89,324 Return on assets.................................. (166,916) (62,323) (191,996) Net amortization and deferral..................... 90,958 (14,035) 119,020 --------- -------- -------- Total............................................. $ 70,108 $ 54,000 $ 50,000 --------- -------- -------- --------- -------- --------
Supplemental pension costs in 1993, 1992 and 1991, were $168,000, $299,000 and $419,000, respectively. See Note 1 -- Organization and Summary of Significant Accounting Policies. 89 98 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) NOTE 15. FINANCIAL INFORMATION BY BUSINESS SEGMENTS Information related to the segments of Enterprise's business is detailed below:
NONUTILITY ELECTRIC GAS ACTIVITIES(A) TOTAL ----------- ---------- ---------- ----------- (THOUSANDS OF DOLLARS) FOR THE YEAR ENDED DECEMBER 31, 1993 Operating Revenues...................... $ 3,693,083 $1,594,341 $ 440,120 $ 5,727,544 Eliminations (Intersegment Revenues).... -- -- (21,985) (21,985) ----------- ---------- ---------- ----------- Total Operating Revenues................ 3,693,083 1,594,341 418,135 5,705,559 ----------- ---------- ---------- ----------- Depreciation and Amortization........... 439,831 69,375 91,058 600,264 Operating Income Before Income Taxes.... 1,117,739 173,916 135,472 1,427,127 Capital Expenditures.................... 738,362 152,012 94,014 984,388 December 31, 1993 Net Utility Plant....................... 9,451,581 1,352,799 -- 10,804,380 Oil and Gas Property, Plant & Equipment............................. -- -- 506,047 506,047 Other Corporate Assets.................. 2,291,596 863,830 1,839,311 4,994,737 ----------- ---------- ---------- ----------- Total Assets............................ $11,743,177 $2,216,629 $2,345,358 $16,305,164 ----------- ---------- ---------- ----------- ----------- ---------- ---------- ----------- FOR THE YEAR ENDED DECEMBER 31, 1992 Operating Revenues...................... $ 3,407,819 $1,586,181 $ 407,404 $ 5,401,404 Eliminations (Intersegment Revenues).... -- -- (44,623) (44,623) ----------- ---------- ---------- ----------- Total Operating Revenues................ 3,407,819 1,586,181 362,781 5,356,781 ----------- ---------- ---------- ----------- Depreciation and Amortization........... 435,104 116,907 90,537 642,548 Operating Income Before Income Taxes.... 861,066 124,893 206,783 1,192,742 Capital Expenditures.................... 668,537 158,224 61,048 887,809 December 31, 1992 Net Utility Plant....................... 9,224,543 1,246,769 -- 10,471,312 Oil and Gas Property, Plant & Equipment............................. -- -- 506,814 506,814 Other Corporate Assets.................. 1,295,073 484,449 1,997,061 3,776,583 ----------- ---------- ---------- ----------- Total Assets............................ $10,519,616 $1,731,218 $2,503,875 $14,754,709 ----------- ---------- ---------- ----------- ----------- ---------- ---------- ----------- FOR THE YEAR ENDED DECEMBER 31, 1991 Operating Revenues...................... $ 3,500,043 $1,307,849 $ 335,073 $ 5,142,965 Eliminations (Intersegment Revenues).... -- -- (51,307) (51,307) ----------- ---------- ---------- ----------- Total Operating Revenues................ 3,500,043 1,307,849 283,766 5,091,658 ----------- ---------- ---------- ----------- Depreciation and Amortization........... 399,574 93,523 92,822 585,919 Operating Income Before Income Taxes.... 1,007,342 115,259 144,223 1,266,824 Capital Expenditures.................... 672,852 140,297 249,078 1,062,227 December 31, 1991 Net Utility Plant....................... 9,006,125 1,176,456 -- 10,182,581 Oil and Gas Property, Plant & Equipment............................. -- -- 563,190 563,190 Other Corporate Assets.................. 1,254,559 570,918 1,881,317 3,706,794 ----------- ---------- ---------- ----------- Total Assets............................ $10,260,684 $1,747,374 $2,444,507 $14,452,565 ----------- ---------- ---------- ----------- ----------- ---------- ---------- -----------
(A) The Nonutility Activities include amounts applicable to Enterprise, the parent corporation. 90 99 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) NOTE 16. PROPERTY IMPAIRMENT OF ENTERPRISE GROUP DEVELOPMENT CORPORATION As a result of a management review of each property's current value and the potential for increasing such value through operating and other improvements, EGDC recorded an impairment related to certain of its properties, including properties upon which EDHI's management revised its intent from a long-term investment strategy to a hold for sale status, reflecting such properties on its books at their net realizable value. This impairment reduced the estimated value of EGDC's properties by $77.6 million and net income by $50.5 million, after tax, or 21 cents per share of Enterprise common stock. EGDC's real estate held for sale of $33.8 million and $6.7 million at December 31, 1993 and 1992 are presented in "Other Investments -- net" and "Current Assets", respectively, in the accompanying consolidated balance sheets. NOTE 17. JOINTLY-OWNED FACILITIES -- UTILITY PLANT PSE&G, has ownership interests and is responsible for providing its share of the necessary financing for the following jointly-owned facilities. All amounts reflect the share of jointly-owned projects and the corresponding direct expenses are included in Consolidated Statements of Income as an operating expense. (See Note 1 -- Organization and Summary of Significant Accounting Policies.)
PLANT OWNERSHIP IN ACCUMULATED PLANT UNDER PLANT -- DECEMBER 31, 1993 INTEREST SERVICE DEPRECIATION CONSTRUCTION - ------------------------------------------------ ------- --------- ------------ ------------ (THOUSANDS OF DOLLARS) Coal Generating Conemaugh..................................... 22.50% $ 103,938 $ 35,101 $ 63,428 Keystone...................................... 22.84 101,543 30,385 4,742 Nuclear Generating Peach Bottom.................................. 42.49 699,445 265,679 26,545 Salem......................................... 42.59 1,003,872 343,925 33,134 Hope Creek.................................... 95.00 4,096,287 819,595 20,439 Nuclear Support Facilities.................... Various 153,147 23,414 3,523 Pumped Storage Generating Yards Creek................................... 50.00 20,636 8,353 3,487 Transmission Facilities......................... Various 119,979 32,359 9 Merrill Creek Reservoir......................... 13.91 37,117 8,876 -- Linden Gas Plant................................ 90.00 15,871 17,630 --
NOTE 18. SELECTED QUARTERLY DATA (UNAUDITED) The information shown below in the opinion of Enterprise includes all adjustments, consisting only of normal recurring accruals, necessary to a fair presentation of such amounts. Due to the seasonal nature of the utility business, quarterly amounts vary significantly during the year.
CALENDAR MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, QUARTER --------------------- --------------------- --------------------- --------------------- ENDED 1993 1992 1993 1992 1993 1992 1993 1992 - -------------------------- --------- --------- --------- --------- --------- --------- --------- --------- (THOUSANDS WHERE APPLICABLE) Operating Revenues........ $1,594,708 $1,512,450 $1,246,337 $1,190,798 $1,402,037 $1,248,772 $1,462,477 $1,404,761 Operating Income.......... $ 336,505 $ 268,653 $ 248,658 $ 207,355 $ 318,785 $ 259,385 $ 202,899 $ 230,742 Net Income................ $ 215,418 $ 186,333 $ 119,782 $ 87,358 $ 192,231 $ 138,127 $ 73,502 $ 92,299 Earnings Per Share of Common Stock............ $ 0.91 $ 0.81 $ 0.49 $ 0.38 $ 0.79 $ 0.59 $ 0.30 $ 0.39 Average Shares of Common Stock Outstanding....... 236,919 229,567 240,920 231,993 241,889 233,192 242,848 234,442
91 100 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. Organization and Summary of Significant Accounting Policies, Note 2. Rate Matters, Note 3. PSE&G Nuclear Decommissioning and Amortization of Nuclear Fuel, Note 4. Schedule of Consolidated Capital Stock, Note 5. Deferred Items, Note 6. Schedule of Consolidated Long-Term Debt, Note 7. Long-Term Investments, Note 8. Cash and Cash Equivalents, Note 10. Leasing Activities -- As Lessee, Note 11. Short-Term Debt (Commercial Paper and Loans), Note 12. Commitments and Contingent Liabilities, Note 13. Postretirement Benefits Other Than Pensions, Note 14. Pension Plan and Other Postemployment Benefits, Note 15. Financial Information by Business Segments and Note 17. Jointly-Owned Facilities -- Utility Plant. NOTE 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ORGANIZATION PSE&G is an operating public utility, providing electric and gas service in certain areas of New Jersey. PSE&G is the principal subsidiary of Enterprise, which owns all of PSE&G's common stock (without nominal or par value). Of the 150,000,000 authorized shares of such common stock at December 31, 1993, 1992 and 1991, there were 132,450,344 shares outstanding, with an aggregate value of $2,563,003,000. Enterprise has claimed an exemption from regulation by the Securities and Exchange Commission as a registered holding company under the Public Utility Holding Company Act of 1935, except for Section 9(a)(2) which relates to the acquisition of voting securities of an electric or gas utility company. PSE&G has a nonutility finance subsidiary, Fuelco, providing financing, unconditionally guaranteed by PSE&G, not to exceed $150 million aggregate principal amount at any one time of a 42.49% undivided interest in the nuclear fuel acquired for Peach Bottom. PSE&G also has organized a nonutility subsidiary, PSCRC, which offers DSM services to utility customers. CONSOLIDATION POLICY The consolidated financial statements include the accounts of PSE&G and its subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. Certain reclassifications of prior years' data have been made to conform with the current presentation. NOTE 6. SCHEDULE OF CONSOLIDATED LONG-TERM DEBT At December 31, 1993, the annual interest requirement on long-term debt was $331.5 million, of which $327.5 million was the requirement for Bonds. The embedded interest cost on long-term debt was 7.85%. NOTE 8. CASH AND CASH EQUIVALENTS The December 31, 1993 and 1992 balances consist primarily of working funds. 92 101 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) NOTE 9. FEDERAL INCOME TAXES A reconciliation of reported Net Income with pretax income and of Federal income tax expense with the amount computed by multiplying pretax income by the statutory Federal income tax rates of 35% in 1993 and 34% in 1992 and 1991 is as follows:
1993 1992 1991 -------- -------- -------- (THOUSANDS OF DOLLARS) Net Income......................................... $614,868 $475,936 $545,479 -------- -------- -------- Federal income taxes: Operating income: Current provision............................. 177,314 214,887 194,583 Provision for deferred income taxes-net(A).... 149,884 (334) 81,406 Investment tax credits -- net................. (18,408) (19,089) (20,229) -------- -------- -------- Total included in operating income................. 308,790 195,464 255,760 Miscellaneous other income: Current provision................................ (15,419) 4,718 (11,397) Provision for deferred income taxes(A)........... 9,815 19,261 10,906 SFAS 90 deferred income taxes(A)................... 2,948 2,690 4,967 -------- -------- -------- Total Federal income tax provisions................ 306,134 222,133 260,236 -------- -------- -------- Pretax income...................................... $921,002 $698,069 $805,715 -------- -------- -------- -------- -------- --------
Reconciliation between total Federal income tax provisions and tax computed at the statutory tax rate on pretax income:
1993 1992 1991 -------- -------- -------- (THOUSANDS OF DOLLARS) Tax expense at the statutory rate.................. $322,351 $237,343 $273,943 -------- -------- -------- Increase (decrease) attributable to flow through of certain tax adjustments: Depreciation.................................. 9,002 15,614 9,229 Amortization of plant abandonments and write-downs................................. (2,239) (18,867) (4,497) Amortization of investment tax credits........ (18,408) (18,408) (20,868) Other......................................... (4,572) 6,451 2,429 -------- -------- -------- Subtotal........................................... (16,217) (15,210) (13,707) -------- -------- -------- Total Federal income tax provisions................ $306,134 $222,133 $260,236 -------- -------- -------- -------- -------- -------- Effective Federal income tax rate.................. 33.2% 31.8% 32.3%
(A) The provision for deferred income taxes represents the tax effects of the following items:
1993 1992 1991 -------- -------- -------- (THOUSANDS OF DOLLARS) Deferred Credits: Additional tax depreciation and amortization......... $104,195 $ 94,757 $ 98,445 Property Abandonments................................ (6,632) (34,739) (11,582) Oil and Gas Property Write-Down...................... (2,451) (6,393) (6,393) Deferred fuel costs-net.............................. 63,330 (40,148) 9,285 Other................................................ 4,205 8,140 7,524 -------- -------- -------- Total........................................ $162,647 $ 21,617 $ 97,279 -------- -------- -------- -------- -------- --------
93 102 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) SFAS 109 The following is an analysis of accumulated deferred income taxes:
ACCUMULATED DEFERRED INCOME TAXES 1993 1992 ---------- ---------- THOUSANDS OF DOLLARS) Assets: Current (net)....................................................... $ 12,934 $ -- Non-Current: Unrecovered Investment Tax Credits............................... 143,125 -- Nuclear Decommissioning.......................................... 25,211 24,305 Hope Creek Cost Disallowance..................................... 20,231 29,468 Uncollectibles................................................... 9,776 -- Vacation Pay..................................................... 6,721 6,424 Other............................................................ 14,880 1,209 ---------- ---------- Total Non-Current........................................... $ 219,944 $ 61,406 ---------- ---------- Total Assets.......................................................... $ 232,878 $ 61,406 ---------- ---------- ---------- ---------- Liabilities: Non-Current: Plant Related Items.............................................. $2,075,359 $1,328,997 Property Abandonments............................................ 32,206 50,684 Oil and Gas Property Write-Down.................................. 16,790 24,518 Deferred Electric Energy & Gas Costs............................. 20,133 (44,415) Unamortized Debt Expense......................................... 38,768 17,082 Taxes Recoverable Through Future Rates (Net)..................... 270,518 -- Other............................................................ 134,948 87,655 ---------- ---------- Total Non-Current........................................... $2,588,722 $1,464,521 ---------- ---------- Total Liabilities..................................................... $2,588,722 $1,464,521 ---------- ---------- ---------- ---------- Summary -- Accumulated Deferred Income Taxes Net Current Assets.................................................. $ 12,934 $ -- Net Deferred Liability.............................................. $2,368,778 $1,403,115 ---------- ---------- Total............................................................ $2,355,844 $1,403,115 ---------- ---------- ---------- ----------
The Revenue Reconciliation Act of 1993, enacted in August 1993, increased the Federal corporate income tax rate from 34% to 35% effective January 1, 1993. This resulted in an increase in Federal income tax expense for PSE&G of $9.2 million for the year ended December 31, 1993. The balance of Federal income tax payable by PSE&G to Enterprise was zero and $7 million, as of December 31, 1993 and December 31, 1992, respectively. 94 103 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) NOTE 18. SELECTED QUARTERLY DATA (UNAUDITED) The information shown below, in the opinion of PSE&G, includes all adjustments, consisting only of normal recurring accruals, necessary to a fair presentation of such amounts. Due to the seasonal nature of the utility business, quarterly amounts vary significantly during the year.
CALENDAR MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, QUARTER ---------------------- ---------------------- ---------------------- ---------------------- ENDED 1993 1992 1993 1992 1993 1992 1993 1992 - ---------------------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- (THOUSANDS OF DOLLARS) Operating Revenues.... $1,502,247 $1,427,081 $1,147,901 $1,097,623 $1,291,192 $1,151,180 $1,346,084 $1,318,116 Operating Income...... $ 294,734 $ 224,915 $ 206,056 $ 156,350 $ 279,173 $ 211,479 $ 201,622 $ 195,780 Net Income............ $ 204,404 $ 179,796 $ 113,849 $ 72,901 $ 188,575 $ 128,563 $ 108,040 $ 94,676 Earnings Available to Public Service Enterprise Group Incorporated........ $ 195,582 $ 172,543 $ 104,092 $ 65,539 $ 178,808 $ 119,919 $ 98,272 $ 86,028
NOTE 19. ACCOUNTS PAYABLE TO ASSOCIATED COMPANIES -- NET The balances at December 31, consisted of the following:
1993 1992 ------- ------- (THOUSANDS OF DOLLARS) Public Service Enterprise Group Incorporated..................... $ 582 $15,264 Energy Development Corporation(A)................................ 5,698 4,849 Other............................................................ (606) (1,578) ------- ------- Total.................................................. $ 5,674 $18,535 ------- ------- ------- -------
(A) Liability for gas purchased. 95 104 PART III ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. Enterprise and PSE&G, none. ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANTS. DIRECTORS OF THE REGISTRANTS ENTERPRISE The information required by Item 10 of Form 10-K with respect to present directors who are nominees for election as directors at Enterprise's Annual Meeting of Stockholders to be held on April 19, 1994, and directors whose terms will continue beyond the meeting, is set forth under the heading "Election of Directors" in Enterprise's definitive Proxy Statement for such Annual Meeting of Stockholders, which definitive Proxy Statement is expected to be filed with the Securities and Exchange Commission on or about March 1, 1994 and which information set forth under said heading is incorporated herein by this reference thereto. The information with respect to present directors who have reached the mandatory retirement age for directors and thus will not be standing for election follows. There is shown as to each information as to the period of service as a director of Enterprise (and PSE&G prior to the formation of Enterprise), age as of April 19, 1994, present committee memberships, business experience during the last five years and other present directorships. ROBERT R. FERGUSON, JR. has been a director since 1981. Age 70. Director of Enterprise and PSE&G. Was Chairman of the Board, President and Chief Executive Officer of First Fidelity Bancorporation, Newark, New Jersey, from December 1988 until his retirement in February 1990; Chairman of the Board of First Fidelity, Inc., from March 1988 until February 1990, and Chairman of the Board of First Fidelity Bank, N.A., New Jersey from 1984 until February 1990. Was Chairman of the Board of First Fidelity Bancorporation from March 1988 to December 1988, and President and Chief Executive Officer, First Fidelity Bancorporation, from 1985 to March 1988. WILLIAM E. MARFUGGI has been a director since 1980. Age 70. Director of Enterprise and its subsidiary, EDHI. Was Chairman of Tri-Maintenance & Contractors, Inc. (provides property management and facility maintenance services) from August 1989 until 1993. Was Chairman of the Board of Victory Optical Manufacturing Company and Plaza Sunglasses Inc., both of Newark, New Jersey, from 1973 until 1989. PSE&G Pursuant to the Focused Audit Implementation Plan (see Item 1. Business -- Regulation), effective July 20, 1993, Harold W. Borden, Jr., Thomas M. Crimmins, Jr., Robert J. Dougherty, Jr., Robert C. Murray, R. Edwin Selover and Rudolph D. Stys, each of whom is an officer of PSE&G, resigned as directors of PSE&G and the persons shown below, except for Lawrence R. Codey and E. James Ferland, each of whom remained as a director, were elected as directors of PSE&G to serve until the next Annual Meeting of Stockholders of PSE&G, to be held April 19, 1994, and until each of their successors are duly elected and qualified. There is shown as to each present director information as to the period of service as a director of PSE&G, age as of April 19, 1994, present committee memberships, business experience during the last five years and other present directorships. LAWRENCE R. CODEY has been a director since 1988. Age 49. Member of Executive Committee. Has been President and Chief Operating Officer of PSE&G since September 1991. Was Senior Vice President-Electric of PSE&G from January 1989 to September 1991. Director of Enterprise. Director of Sealed Air Corporation, The Trust Company of New Jersey, United Water Resources Inc., Hackensack Water Company, Rivervale Realty Company Inc. and Blue Cross & Blue Shield of New Jersey. 96 105 ROBERT R. FERGUSON, JR. has been a director since July 20, 1993. Was previously a director from 1981 to February 1988. For additional information, see Enterprise, above. E. JAMES FERLAND has been a director since 1986, and Chairman of the Board, President and Chief Executive Officer of Enterprise since July 1986, Chairman of the Board and Chief Executive Officer of PSE&G since September 1991, and Chairman of the Board and Chief Executive Officer of EDHI since June 1989. Age 52. Chairman of Executive Committee. President of PSE&G from July 1986 to September 1991. Director of Enterprise and of EDHI and its subsidiaries, CEA, EDC, PSRC, EGDC, Capital and Funding. Director of First Fidelity Bancorporation, First Fidelity Bank, N.A., Foster Wheeler Corporation and The Hartford Steam Boiler Inspection and Insurance Company. RAYMOND V. GILMARTIN has been a director since July 20, 1993. Age 53. Director of Enterprise. Has been Chairman of the Board, President and Chief Executive Officer of Becton Dickinson and Company, Franklin Lakes, New Jersey (manufactures medical devices and diagnostic systems) since November 1992. Was President and Chief Executive Officer of Becton Dickinson and Company from February 1989 to November 1992 and President from September 1987 to February 1989. Director of Becton Dickinson and Company and Capital Holding Corp. SHIRLEY A. JACKSON has been a director since July 20, 1993. Was previously a director from 1987 to February 1988. Age 47. Director of Enterprise. Has been Professor of Physics, Rutgers University, since 1991 and has been a theoretical physics consultant since 1991 and was a theoretical physicist from 1976 to 1991 at AT&T Bell Laboratories (performs research and development in areas related to telecommunications for American Telephone and Telegraph Company). Director of Core States Financial Corporation, Core States/New Jersey National Bank, New Jersey Resources Corporation and Sealed Air Corporation. Trustee of Massachusetts Institute of Technology. IRWIN LERNER has been a director since July 20, 1993. Was previously a director from 1981 to February 1988. Age 63. Director of Enterprise. Was Chairman, Board of Directors and Executive Committee from January 1993 to September 1993 and President and Chief Executive Officer from 1980 to December 1992 of Hoffmann-La Roche Inc., Nutley, New Jersey (manufactures pharmaceuticals, vitamins, fine chemicals and provides home health care and diagnostic products and services). Director of Humana Inc. and Affymax, N.V. JAMES C. PITNEY has been a director since July 20, 1993. Was previously a director from 1979 to February 1988. Age 67. Member of Executive Committee. Director of Enterprise. Has been a partner in the law firm of Pitney, Hardin, Kipp & Szuch, Morristown, New Jersey, since 1958, Director of Seligman Capital Fund, Inc., Seligman Cash Management Fund, Inc., Seligman Common Stock Fund, Inc., Seligman Communications and Information Fund, Inc., Seligman Frontier Fund, Inc., Seligman Growth Fund, Inc., Seligman High Income Fund Series, Inc., Seligman Income Fund, Inc., Seligman Mutual Benefit Portfolios, Inc., Seligman New Jersey Tax-Exempt Fund, Inc., Seligman Pennsylvania Tax-Exempt Fund Series, Seligman Tax-Exempt Fund Series, Inc., Seligman Tax-Exempt Series Trust, Inc., Seligman Quality Fund, Inc., Seligman Select Municipal Fund, Inc. and Tri-Continental Corporation. EXECUTIVE OFFICERS OF THE REGISTRANTS The following table sets forth certain information concerning the executive officers of Enterprise and PSE&G, respectively. 97 106
AGE EFFECTIVE DATE DECEMBER 31, FIRST ELECTED NAME 1993 OFFICE TO PRESENT POSITION - ------------------------------------ ---------------------------------- ------------------------- E. James Ferland........ 51 Chairman of the Board, President July 1986 to present and Chief Executive Officer (Enterprise) Chairman of the Board and Chief July 1986 to present Executive Officer (PSE&G) President (PSE&G) June 1986 to September 1991 Chairman of the Board and Chief June 1989 to present Executive Officer (EDHI) Lawrence R. Codey....... 49 President and Chief Operating September 1991 to Officer (PSE&G) present Senior Vice President -- Electric January 1989 to (PSE&G) September 1991 Robert C. Murray........ 48 Vice President and Chief Financial January 1992 to present Officer (Enterprise) Senior Vice President -- Finance January 1992 to present and Chief Financial Officer (PSE&G) Managing Director of Morgan January 1987 to July 1991 Stanley & Co. Incorporated Patricia A. Rado........ 51 Vice President and Comptroller April 1993 to present (Enterprise) Vice President and Comptroller April 1993 to present (PSE&G) Controller of Yankee Energy July 1989 to April 1993 Systems Inc. Director -- Accounting January 1988 of Northeast Utilities to June 1989 Paul H. Way............. 56 President, Chief Operating Officer February 1993 to present and Director (EDHI) Senior Vice President (EDHI) June 1992 to February 1993 Senior Vice President -- Corporate April 1988 to Performance (PSE&G) June 1992 R. Edwin Selover........ 48 Vice President and General Counsel April 1988 to present (Enterprise) Senior Vice President and General January 1988 to present Counsel (PSE&G) Francis J. Riepl........ 57 Treasurer (Enterprise) March 1987 to present Vice President and Treasurer March 1987 to present (PSE&G) Harold W. Borden, Jr.... 49 Senior Vice President -- External January 1990 to present Affairs (PSE&G) Assistant Vice President and January 1983 to Associate General Counsel December 1989 (PSE&G) Thomas M. Crimmins, 50 Senior Vice President -- Customer September 1991 to Jr.................... Operations (PSE&G) present Vice President -- Nuclear May 1989 to Engineering (PSE&G) September 1991 Vice President -- Power January 1987 to May 1989 Production, Pennsylvania Power and Light Company
98 107
AGE EFFECTIVE DATE DECEMBER 31, FIRST ELECTED NAME 1993 OFFICE TO PRESENT POSITION - ------------------------------------ ---------------------------------- ------------------------- Robert J. Dougherty, 42 Senior Vice President -- Electric September 1991 to present Jr. .................. (PSE&G) Senior Vice President -- Customer September 1989 to Operations (PSE&G) September 1991 Vice President -- Marketing January 1988 to (PSE&G) September 1989 Rudolph D. Stys......... 58 Senior Vice President -- Gas January 1989 to present (PSE&G)
ITEM 11. EXECUTIVE COMPENSATION ENTERPRISE The information required by Item 11 of Form 10-K is set forth under the heading "Executive Compensation" in Enterprise's definitive Proxy Statement for the Annual Meeting of Stockholders to be held April 19, 1994, which definitive Proxy Statement is expected to be filed with the Securities and Exchange Commission on or about March 1, 1994 and such information set forth under such heading is incorporated herein by this reference thereto. PSE&G Information regarding the compensation of the Chief Executive Officer and the four most highly compensated executive officers of PSE&G as of December 31, 1993 is set forth below. Amounts shown were paid or awarded for all services rendered to Enterprise and its subsidiaries and affiliates including PSE&G. 99 108 SUMMARY COMPENSATION TABLE
LONG-TERM COMPENSATION --------------------- AWARDS ANNUAL COMPENSATION ---------- PAYOUTS ----------------------- SECURITIES ------- BONUS/ANNUAL UNDERLYING LTIP ALL OTHER SALARY INCENTIVE OPTIONS PAYOUTS COMPENSATION NAME AND PRINCIPAL POSITION YEAR $(1) AWARD($)(2) (#)(3) ($) ($)(4) - --------------------------- ---- ------- ------------ ---------- ------- ------------ E. James Ferland........... 1993 622,606 (5) 5,800 28,072 8,007 Chairman of the Board, 1992 620,691 244,759 5,600 27,588 7,610 President and CEO of 1991 562,836 220,481 5,200 75,204 7,350 Enterprise Lawrence R. Codey.......... 1993 378,545 (5) 2,800 9,570 7,218 President and Chief 1992 336,208 102,919 2,700 6,270 6,789 Operating Officer of PSE&G 1991 276,545 114,668 2,000 27,157 6,443 Robert C. Murray........... 1993 288,889 75,000(5)(6) 2,000 3,190 7,264 Vice President and Chief 1992 263,410 70,463 3,200 0 5,064 Financial Officer of 1991 0(7) 0(7) 0(7) 0(7) 0(7) Enterprise and Senior Vice President- Finance and Chief Financial Officer of PSE&G Robert J. Dougherty, 1993 259,004 (5) 2,000 5,104 6,422 Jr. ..................... Senior Vice President- 1992 222,415 59,916 1,600 0 5,995 Electric of PSE&G 1991 183,220 61,349 1,100 0 4,929 R. Edwin Selover........... 1993 231,113 (5) 1,400 0 7,840 Vice President and General 1992 228,621 44,918 1,300 0 7,576 Counsel of Enterprise and 1991 206,207 48,889 1,200 18,801 5,876 Senior Vice President and General Counsel of PSE&G
- --------------- (1) Due to pay schedules, 1992 amounts reflect one additional pay period per individual compared to 1993 and 1991. (2) Amount awarded in given year was earned under Management Incentive Compensation Plan (MICP) and determined in following year with respect to the given year based on individual performance and financial and operating performance of Enterprise and PSE&G, including comparison to other companies. Award is accounted for as market-priced phantom stock with dividend reinvestment at 95% of market price, with payment made over three years beginning in second year following grant. (3) Granted under Long-Term Incentive Plan in tandem with equal number of performance units and dividend equivalents which may provide cash payments, dependent upon future financial performance of Enterprise in comparison to other companies and dividend payments by Enterprise, to assist officers in exercising options granted. (4) Employer contribution to Thrift and Tax-Deferred Savings Plan and value of 5% discount on phantom stock dividend reinvestment under MICP:
FERLAND CODEY MURRAY DOUGHERTY SELOVER -------------- -------------- ------------- ------------- --------------- THRIFT MICP THRIFT MICP THRIFT MICP THRIFT MICP THRIFT MICP ------ ----- ------ ----- ------ ---- ------ ---- ------ ------ 1993............ 5,900 2,107 5,896 1,322 7,078 186 5,907 515 6,630 1,210 1992............ 5,725 1,885 5,725 1,064 5,064 0 5,562 433 6,588 988 1991............ 5,558 1,792 5,558 884 0 0 4,588 340 4,940 936
(5) The 1993 MICP award amount has not yet been determined. The target award is 40% of salary for Mr. Ferland, 30% for Mr. Codey, 25% for Messrs. Murray and Dougherty and 20% for Mr. Selover. The target award is adjusted to reflect Enterprise's comparative return on common equity, PSE&G's comparative electric and gas costs and individual performance. (6) Amount paid pursuant to Mr. Murray's employment agreement. (See below). (7) Mr. Murray commenced employment January 6, 1992. 100 109 OPTION GRANTS IN LAST FISCAL YEAR (1993)
INDIVIDUAL GRANTS POTENTIAL REALIZABLE -------------------------------------------------- VALUE AT ASSUMED ANNUAL NUMBER OF % OF TOTAL RATES OF STOCK PRICE SECURITIES OPTIONS APPRECIATION FOR OPTION UNDERLYING GRANTED TO EXERCISE OR TERM(2) OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION ----------------------- NAME GRANTED(1) FISCAL YEAR ($/SH) DATE 0%($) 5%($) 10%($) - ------------------------- ----------- ------------ ----------- ---------- ----- ------- ------- E. James Ferland......... 5,800 25.4 30.50 1/05/03 0 111,251 281,933 Lawrence R. Codey........ 2,800 12.3 30.50 1/05/03 0 53,708 136,106 Robert C. Murray......... 2,000 8.8 30.50 1/05/03 0 38,363 97,218 Robert J. Dougherty, Jr..................... 2,000 8.8 30.50 1/05/03 0 38,363 97,218 R. Edwin Selover......... 1,400 6.1 30.50 1/05/03 0 26,854 68,053
- --------------- (1) Granted under Long-Term Incentive Plan in tandem with equal number of performance units and dividend equivalents which may provide cash payments, dependent on future financial performance of Enterprise in comparison to other companies and dividend payments by Enterprise, to assist individuals in exercising options, with exercisability commencing January 1, 1996. (2) All options reported have a ten-year term, as noted. Amounts shown represent hypothetical future values at such term based upon hypothetical price appreciation of Enterprise Common Stock and may not necessarily be realized. Actual values which may be realized, if any, upon any exercise of such options, will be based on the market price of Enterprise Common Stock at the time of any such exercise and thus are dependent upon future performance of Enterprise Common Stock. AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR (1993) AND FISCAL YEAR-END OPTION VALUES (12/31/93)
VALUE OF UNEXERCISED NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS SHARES OPTIONS AT FY-END(#)(1) AT FY-END($)(3) ACQUIRED VALUE -------------------------- -------------------------- ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE NAME (#)(1) ($)(2) (#) (#) ($) ($) - ------------------------- ----------- -------- ----------- ------------- ----------- ------------- E. James Ferland......... 4,400 10,450 0 16,600 0 53,372 Lawrence R. Codey........ 1,500 8,063 700 7,500 5,425 22,949 Robert C. Murray......... 500 2,813 0 4,700 0 12,679 Robert J. Dougherty, Jr..................... 800 3,900 0 4,700 0 13,642 R. Edwin Selover......... 0 0 2,200 3,900 11,550 12,431
- --------------- (1) Does not reflect any options granted and/or exercised after year-end (12/31/93). The net effect of any such grants and exercises is reflected in the table appearing under Security Ownership of Directors and Management. (2) Represents difference between exercise price and market price of Enterprise Common Stock on date of exercise. (3) Represents difference between market price of Enterprise Common Stock and the respective exercise prices of the options at fiscal year-end (12/31/93). Such amounts may not necessarily be realized. Actual values which may be realized, if any, upon any exercise of such options will be based on the market price of Enterprise Common Stock at the time of any such exercise and thus are dependent upon future performance of Enterprise Common Stock. EMPLOYMENT CONTRACTS AND ARRANGEMENTS Employment agreements were entered into with Messrs. Ferland and Murray at the time of their employment. For Mr. Ferland, the remaining applicable provisions of these agreements provide for additional 101 110 credited service for pension purposes in the amount of 22 years. The principal remaining applicable terms of the agreement with Mr. Murray provide for payment of severance in the amount of one year's salary, if discharged without cause during his first five years of employment, for lump sum cash payments of $75,000 in 1993, $50,000 in 1994 and $25,000 in 1995 to align Mr. Murray with MICP payments for other executive officers, and additional years of credited service for pension purposes for allied work experience of five years after completion of five years of employment, and up to fifteen years after completion of ten years of service. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION PSE&G does not have a compensation committee. Decisions regarding compensation of PSE&G's executive officers are made by the Organization and Compensation Committee of Enterprise. Hence, during 1993 the PSE&G Board of Directors did not have, and no officer, employee or former officer of PSE&G participated in any deliberations of such Board, concerning executive officer compensation. In December 1993, Mr. Codey was elected as a director of Sealed Air Corporation, the President and Chief Executive Officer of which, T.J. Dermot Dunphy, served as a director and member of the Organization and Compensation Committee of Enterprise during 1993. COMPENSATION OF DIRECTORS AND CERTAIN BUSINESS RELATIONSHIPS A director who is not an officer of Enterprise or its subsidiaries and affiliates, including PSE&G, is paid an annual retainer of $20,000 and a fee of $1,000 for attendance at any Board or committee meeting, inspection trip, conference or other similar activity relating to Enterprise, PSE&G or EDHI. Enterprise has a Retirement Plan for outside directors. Each of the outside directors of PSE&G is also an outside director of Enterprise. Under this Plan, directors with five years of service who have not been employees of Enterprise or its subsidiaries, who leave service after age 65, or for disability, receive an annual retirement benefit payable for life equal to the annual Board retainer in effect at the time the director's service terminates. The benefit payment is prorated for directors with less than 10 years of service on the Board. Dr. Shirley A. Jackson, a director of Enterprise and PSE&G, is the liaison member for the Board of Directors on and Chair of PSE&G's Nuclear Oversight Committee (NOC). The NOC met five times during 1993, with each meeting lasting two days. In accordance with the compensation policy for all NOC members, Dr. Jackson receives an annual retainer of $28,000 and $1,000 per day for each NOC meeting attended. COMPENSATION PURSUANT TO PENSION PLANS PENSION PLAN TABLE
AVERAGE LENGTH OF SERVICE FINAL ----------------------------------------------- COMPENSATION 30 YEARS 35 YEARS 40 YEARS 45 YEARS - ------------ -------- -------- -------- -------- $ 300,000 $180,000 $195,000 $210,000 $225,000 400,000 240,000 260,000 280,000 300,000 500,000 300,000 325,000 350,000 375,000 600,000 360,000 390,000 420,000 450,000 700,000 420,000 455,000 490,000 525,000 800,000 480,000 520,000 560,000 600,000 900,000 540,000 585,000 630,000 675,000 1,000,000 600,000 650,000 700,000 750,000
The above table illustrates annual retirement benefits expressed in terms of single life annuities based on the average final compensation and service shown and retirement at age 65. A person's annual retirement benefit is based upon a percentage that is equal to years of credited service plus 30, but not more than 75%, times average final compensation at the earlier of retirement, attainment of age 65 or death. These amounts are reduced by Social Security benefits and certain retirement benefits from other employers. Pensions in the form of joint and survivor annuities are also available. Average final compensation, for purposes of retirement benefits of executive officers, is generally equivalent to the average of the aggregate of the salary and bonus amounts reported in the Summary 102 111 Compensation Table above under 'Annual Compensation' for the five years preceeding retirement, not to exceed 120% of the average annual salary for such five year period. Messrs. Ferland, Codey, Murray, Dougherty and Selover will have accrued approximately 48, 41, 39, 48 and 43 years of credited service, respectively, as of age 65. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. ENTERPRISE The information required by Item 12 of Form 10-K with respect to directors and executive officers is set forth under the heading 'Security Ownership of Directors and Management' in Enterprise's definitive Proxy Statement for the Annual Meeting of Stockholders to be held April 19, 1994, which definitive Proxy Statement is expected to be filed with the Securities and Exchange Commission on or about March 7, 1994 and such information set forth under such heading is incorporated herein by this reference thereto. PSE&G All of PSE&G's 132,450,344 outstanding shares of Common Stock are owned beneficially and of record by PSE&G's parent, Enterprise, 80 Park Plaza, P.O. Box 1171, Newark, New Jersey. The following table sets forth beneficial ownership of Enterprise Common Stock by the directors and executive officers named below as of February 23, 1994. None of these amounts exceed 1% of the Enterprise Common Stock outstanding at such date. No director or executive officer owns any PSE&G Preferred Stock of any class.
AMOUNT AND NATURE OF NAME BENEFICIAL OWNERSHIP ----------------------------------------------------------- -------------------- Lawrence R. Codey.......................................... 7,583(1) Robert J. Dougherty, Jr.................................... 1,486(2) Robert R. Ferguson, Jr..................................... 1,006 E. James Ferland........................................... 33,034(3) Raymond V. Gilmartin....................................... 1,000 Shirley A. Jackson......................................... 431 Irwin Lerner............................................... 3,303 Robert C. Murray........................................... 3,477(4) James C. Pitney............................................ 2,527 R. Edwin Selover........................................... 3,591(5) All directors and executive officers (15) as a group....... 66,062(6)
- --------------- (1) Disclaims beneficial ownership of 472 shares. Has options to purchase 8,700 additional shares. (2) Includes the equivalent of 588 shares held under Thrift and Tax-Deferred Savings Plan. Has options to purchase 6,500 additional shares. (3) Includes the equivalent of 8,087 shares held under Thrift and Tax-Deferred Savings Plan. Has options to purchase 16,800 additional shares. (4) Includes the equivalent of 377 shares held under Thrift and Tax-Deferred Savings Plan. Has options to purchase 5,400 additional shares. (5) Disclaims beneficial ownership of 273 shares. Has options to purchase 6,200 additional shares. (6) Includes 745 shares owned by relatives as to which beneficial ownership is disclaimed. Also includes the equivalent of 9,711 shares held under Thrift and Tax-Deferred Savings Plan. All directors and executive officers as a group have options to purchase 55,600 additional shares. 103 112 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. ENTERPRISE The information required by Item 13 of Form 10-K is set forth under the heading "Executive Compensation" in Enterprise's definitive Proxy Statement for the Annual Meeting of Stockholders to be held April 19, 1994, which definitive Proxy Statement is expected to be filed with the Securities and Exchange Commission on or about March 1, 1994. Such information set forth under such heading is incorporated herein by this reference thereto. PSE&G None. 104 113 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K. (a) Financial Statements: (1) Enterprise Consolidated Statements of Income for the years ended December 31, 1993, 1992, and 1991, on page 55. Enterprise Consolidated Balance Sheets for the years ended December 31, 1993 and 1992, on pages 56 and 57. Enterprise Consolidated Statements of Cash Flows for the years ended December 31, 1993, 1992 and 1991 on page 58. Enterprise Statements of Retained Earnings for the years ended December 31, 1993, 1992 and 1991 on page 59. Enterprise Notes to Consolidated Financial Statements on pages 65 through 90. (2) PSE&G Consolidated Statements of Income for the years ended December 31, 1993, 1992 and 1991, on page 60. PSE&G Consolidated Balance Sheets for the years ended December 31, 1993 and 1992, on pages 61 and 62. PSE&G Consolidated Statements of Cash Flows for the years ended December 31, 1993, 1992 and 1991 on page 63. PSE&G Statements of Retained Earnings for the years ended December 31, 1993, 1992 and 1991 on page 64. PSE&G Notes to Consolidated Financial Statements on pages 91 through 94. (b) The following documents are filed as a part of this report: (1) Enterprise Financial Statement Schedules: Schedule V -- Property, Plant and Equipment for each of the three years in the period ended December 31, 1993 (pages 105 through 107). Schedule VI -- Accumulated Depreciation, Depletion, and Amortization of Property, Plant and Equipment for each of the three years in the period ended December 31, 1993 (pages 108 through 110). Schedule VIII -- Valuation and Qualifying Accounts for each of the three years in the period ended December 31, 1993 (page 111). Schedules other than those listed above are omitted for the reason that they are not required or are not applicable, or the required information is shown in the consolidated financial statements or notes thereto. (2) PSE&G Financial Statement Schedules: Schedule V -- Property, Plant and Equipment for each of the three years in the period ended December 31, 1993 (pages 112 through 114). Schedule VI -- Accumulated Depreciation, Depletion, and Amortization of Property, Plant and Equipment for each of the three years in the period ended December 31, 1993 (pages 115 through 117). Schedule VIII -- Valuation and Qualifying Accounts for each of the three years in the period ended December 31, 1993 (page 118). 105 114 Schedules other than those listed above are omitted for the reason that they are not required or are not applicable, or the required information is shown in the consolidated financial statements or notes thereto. (c) The following exhibits are filed herewith: (1) Enterprise: 10a(5)(ii) -- Limited Supplemental Plan for Certain Employees. *10a(14) -- Letter Agreement with Patricia A. Rado dated March 24, 1993. 12 -- Computation of Ratios of Earnings to Fixed Charges. 21 -- Subsidiaries of Registrant. 23 -- Independent Auditors' Consent.
(See Exhibit Index on pages 121 through 127). (2) PSE&G: 10a(5)(ii) -- Limited Supplemental Plan for Certain Employees. *10a(13) -- Letter Agreement with Patricia A. Rado dated March 24, 1993. 12(a) -- Computation of Ratios of Earnings to Fixed Charges. 12(b) -- Computation of Ratios of Earnings to Fixed Charges Plus Preferred Stock Dividend Requirements. 23 -- Independent Auditors' Consent.
(See Exhibit Index on pages 128 through 133). (d) The following reports on Form 8-K were filed by the registrant(s) named below during the last quarter of 1993 and the 1994 period covered by this report under Item 5:
REGISTRANT DATE OF REPORT ITEM REPORTED - --------------------- ------------------ ------------------------------------------------- PSE&G December 1, 1993 Item 5. Other Events (Earnings Statement Safe Harbor) Enterprise and PSE&G January 21, 1994 Item 5. Other Events (Credit Ratings and Unaudited Operating Results)
- --------------- * Indicates employment agreement. 106 115 SCHEDULE V PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED SCHEDULE V -- PROPERTY, PLANT AND EQUIPMENT YEAR ENDED DECEMBER 31, 1993
- ----------------------------------------------------------------------------------------------------------------------- COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F - ----------------------------------------------------------------------------------------------------------------------- OTHER BALANCE AT CHANGES-- BEGINNING ADD (DEDUCT)-- BALANCE AT OF ADDITIONS AT DESCRIBE END OF CLASSIFICATION PERIOD COST RETIREMENTS (A) PERIOD - ----------------------------------------------------------------------------------------------------------------------- (THOUSANDS OF DOLLARS) Utility Plant Electric Plant in Service Intangible............................ $ 4,596 $ 2,224 $ -- $ -- $ 6,820 Steam Production...................... 1,668,198 108,360 (13,310) 5 1,763,253 Nuclear Production.................... 5,819,755 67,412 (16,010) 2,117(B) 5,873,274 Pumped Storage Production............. 20,063 (14) -- -- 20,049 Other Production...................... 350,526 30,099 (363) 380,262 Transmission.......................... 1,024,843 10,996 (2,846) 1,157 1,034,150 Distribution.......................... 2,573,226 168,436 (16,329) (1,131) 2,724,202 General............................... 104,462 15,291 1,299 430 118,884 ---------- ------------ ----------- -------------- ---------- Total Electric Plant in Service........................ 11,565,669 402,804 (50,157) 2,578 11,920,894 ---------- ------------ ----------- -------------- ---------- Gas Plant in Service Manufactured Gas Production........... 77,942 (15) 123 (229) 77,821 Local Storage......................... 9,709 (5) (69) -- 9,635 Transmission.......................... 57,405 5,990 -- -- 63,395 Distribution.......................... 1,870,462 127,991 (5,409) -- 1,993,044 General............................... 29,426 4,581 (61) -- 33,946 ---------- ------------ ----------- -------------- ---------- Total Gas Plant in Service....... 2,044,944 138,542 (5,416) (229) 2,177,841 ---------- ------------ ----------- -------------- ---------- Common Plant in Service Capital Leases........................ 56,812 -- -- -- 56,812 General............................... 423,160 49,332 (8,581) (438) 463,473 ---------- ------------ ----------- -------------- ---------- Total Common Plant in Service.... 479,972 49,332 (8,581) (438) 520,285 ---------- ------------ ----------- -------------- ---------- Nuclear Fuel in Service.................. 476,156 55,657 (42,414) -- 489,399 ---------- ------------ ----------- -------------- ---------- Total Utility Plant in Service... 14,566,741 646,335 (106,568) 1,911 15,108,419 ---------- ------------ ----------- -------------- ---------- Construction Work in Progress............ 492,914 242,457(C) -- (15) 735,356 Plant Held for Future Use................ 22,252 1,582 -- (6,125) 17,709 ---------- ------------ ----------- -------------- ---------- Total Utility Plant.............. $15,081,907 $890,374 $ (106,568) $ (4,229) $15,861,484 ---------- ------------ ----------- -------------- ---------- ---------- ------------ ----------- -------------- ---------- EDC's Oil and Gas Property, Plant and Equipment................................ $1,170,729 $ 91,052 $ (59,943) $ -- $1,201,838 ---------- ------------ ----------- -------------- ---------- ---------- ------------ ----------- -------------- ---------- EGDC's/PSRC's Real Estate.................. $ 240,396 $ 2,271 $ (1,102) $ (103,379)(D) $ 138,186 ---------- ------------ ----------- -------------- ---------- ---------- ------------ ----------- -------------- ---------- Other Plant................................ $ 29,333 $ 14,302 $ (22) $ 6,195 $ 49,808 ---------- ------------ ----------- -------------- ---------- ---------- ------------ ----------- -------------- ----------
NOTES: (A) Interaccount and interdepartment transfers. (B) Includes amortization of discount on the Hope Creek indirect disallowance of $2,113,299. (C) Additions to Construction Work in Progress (CWIP) is net of transfers of completed construction of $249,363,488. (D) Includes $77.6 million EGDC property impairment and reclassifications of $33.8 million to assets held for sale. Descriptions of Utility Plant and Related Depreciation and Amortization -- PSE&G and Oil and Gas Accounting -- EDC are set forth in Note 1 -- Organization and Summary of Significant Accounting Policies of Notes to Consolidated Financial Statements. 107 116 SCHEDULE V PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED SCHEDULE V -- PROPERTY, PLANT AND EQUIPMENT YEAR ENDED DECEMBER 31, 1992
- --------------------------------------------------------------------------------------------------------------------- COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F - --------------------------------------------------------------------------------------------------------------------- OTHER BALANCE AT CHANGES-- BEGINNING ADD (DEDUCT)-- BALANCE AT OF ADDITIONS AT DESCRIBE END OF CLASSIFICATION PERIOD COST RETIREMENTS (A) PERIOD - --------------------------------------------------------------------------------------------------------------------- (THOUSANDS OF DOLLARS) Utility Plant Electric Plant in Service Intangible......................... $ 4,675 $ (79) $ -- $ -- $ 4,596 Steam Production................... 1,618,630 59,160 (9,592) 1,668,198 Nuclear Production................. 5,721,768 136,596 (34,094) (4,515)(B) 5,819,755 Pumped Storage Production.......... 19,968 135 (4) (36) 20,063 Other Production................... 322,527 36,077 (8,114) 36 350,526 Transmission....................... 960,958 69,454 (6,093) 524 1,024,843 Distribution....................... 2,418,494 172,408 (17,143) (533) 2,573,226 General............................ 84,983 20,431 (1,739) 787 104,462 ---------- ------------ --------- -------------- ---------- Total Electric Plant in Service....................... 11,152,003 494,182 (76,779) (3,737) 11,565,669 ---------- ------------ --------- -------------- ---------- Gas Plant in Service Manufactured Gas Production........ 55,371 22,580 (9) -- 77,942 Local Storage...................... 9,376 333 -- -- 9,709 Transmission....................... 44,249 13,156 -- -- 57,405 Distribution....................... 1,759,079 117,154 (5,771) -- 1,870,462 General............................ 26,422 3,433 (429) -- 29,426 ---------- ------------ --------- -------------- ---------- Total Gas Plant in Service....... 1,894,497 156,656 (6,209) -- 2,044,944 ---------- ------------ --------- -------------- ---------- Common Plant in Service Capital Leases..................... 56,812 -- -- -- 56,812 General............................ 376,534 58,563 (11,156) (781) 423,160 ---------- ------------ --------- -------------- ---------- Total Common Plant in Service.... 433,346 58,563 (11,156) (781) 479,972 ---------- ------------ --------- -------------- ---------- Nuclear Fuel in Service............... 387,242 161,666 (72,752) -- 476,156 ---------- ------------ --------- -------------- ---------- Total Utility Plant in Service... 13,867,088 871,067 (166,896) (4,518) 14,566,741 ---------- ------------ --------- -------------- ---------- Construction Work in Progress......... 537,228 (44,314)(C) -- 492,914 Plant Held for Future Use............. 22,244 8 -- 22,252 ---------- ------------ --------- -------------- ---------- Total Utility Plant.............. $14,426,560 $826,761 $(166,896) $ (4,518) $15,081,907 ---------- ------------ --------- -------------- ---------- ---------- ------------ --------- -------------- ---------- EDC's Oil and Gas Property, Plant and Equipment(D).......................... $1,151,527(D) $ 34,246 $ (15,044) $ -- $1,170,729 ---------- ------------ --------- -------------- ---------- ---------- ------------ --------- -------------- ---------- EGDC's/PSRC's Real Estate............... $ 163,358 $ 25,557 $ (378) $ 51,859(D) $ 240,396 ---------- ------------ --------- -------------- ---------- ---------- ------------ --------- -------------- ---------- Other Plant............................. $ 23,444 $ 593 $ -- $ (42) $ 29,333 ---------- ------------ --------- -------------- ---------- ---------- ------------ --------- -------------- ----------
NOTES: (A) Interaccount and interdepartment transfers. (B) Includes amortization of discount on the Hope Creek indirect disallowance of $1,676,456, and an increase in the Hope Creek indirect disallowance of 6,191,172 resulting from the rate case settlement. (C) Additions to Construction Work in Progress (CWIP) is net of transfers of completed construction of $358,917,902. (D) Consolidation of partnership interests. Descriptions of Utility Plant and Related Depreciation and Amortization -- PSE&G and Oil and Gas Accounting -- EDC are set forth in Note 1 -- Organization and Summary of Significant Accounting Policies of Notes to Consolidated Financial Statements. 108 117 SCHEDULE V PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED SCHEDULE V -- PROPERTY, PLANT AND EQUIPMENT YEAR ENDED DECEMBER 31, 1991
- ----------------------------------------------------------------------------------------------------------------------- COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F - ----------------------------------------------------------------------------------------------------------------------- OTHER BALANCE AT CHANGES-- BEGINNING ADD (DEDUCT)-- BALANCE AT OF ADDITIONS AT DESCRIBE END OF CLASSIFICATION PERIOD COST RETIREMENTS (A) PERIOD - ----------------------------------------------------------------------------------------------------------------------- (THOUSANDS OF DOLLARS) Utility Plant Electric Plant in Service Intangible....................... $ 3,800 $ 875 $ -- $ -- $ 4,675 Steam Production................. 1,394,187 245,951 (88,805) 67,297 1,618,630 Nuclear Production............... 5,591,338 137,803 (8,931) 1,558(B) 5,721,768 Pumped Storage Production........ 20,096 27 (155) -- 19,968 Other Production................. 291,479 37,021 (5,973) -- 322,527 Transmission..................... 948,567 14,563 (2,172) -- 960,958 Distribution..................... 2,292,726 142,689 (16,875) (46) 2,418,494 General.......................... 66,928 18,634 (557) (22) 84,983 ---------- ------------ ----------- -------------- ---------- Total Electric Plant in Service..................... 10,609,121 597,563 (123,468) 68,787 11,152,003 ---------- ------------ ----------- -------------- ---------- Gas Plant in Service Manufactured Gas Production...... 55,944 258 (830) (1) 55,371 Local Storage.................... 10,654 11 (1,289) -- 9,376 Transmission..................... 34,389 9,860 -- -- 44,249 Distribution..................... 1,652,625 112,508 (6,053) (1) 1,759,079 General.......................... 23,673 2,970 (221) -- 26,422 ---------- ------------ ----------- -------------- ---------- Total Gas Plant in Service..... 1,777,285 125,607 (8,393) (2) 1,894,497 ---------- ------------ ----------- -------------- ---------- Common Plant in Service Capital Leases................... 57,226 -- (414) -- 56,812 General.......................... 335,761 49,125 (12,518) 4,166 376,534 ---------- ------------ ----------- -------------- ---------- Total Common Plant in Service..................... 392,987 49,125 (12,932) 4,166 433,346 ---------- ------------ ----------- -------------- ---------- Nuclear Fuel in Service............. 386,190 85,423 (84,371) -- 387,242 ---------- ------------ ----------- -------------- ---------- Total Utility Plant in Service..................... 13,165,583 857,718 (229,164) 72,951 13,867,088 ---------- ------------ ----------- -------------- ---------- Construction Work in Progress....... 576,904 (39,692)(C) -- 16 537,228 Plant Held for Future Use........... 94,387 (4,877) -- (67,266) 22,244 ---------- ------------ ----------- -------------- ---------- Total Utility Plant............ $13,836,874 $813,149 $ (229,164) $ 5,701 $14,426,560 ---------- ------------ ----------- -------------- ---------- ---------- ------------ ----------- -------------- ---------- EDC's Oil and Gas Property, Plant and Equipment (D)....................... $ 965,969 $188,955 $ (1,844) $ (1,553) $1,151,527 ---------- ------------ ----------- -------------- ---------- ---------- ------------ ----------- -------------- ---------- EGDC's/PSRC's Real Estate............. $ 135,386 $ 5,022 $ -- $ 22,950(D) $ 163,358 ---------- ------------ ----------- -------------- ---------- ---------- ------------ ----------- -------------- ---------- Other Plant........................... $ 28,326 $ 277 $ (5,159) $ -- $ 23,444 ---------- ------------ ----------- -------------- ---------- ---------- ------------ ----------- -------------- ----------
NOTES: (A) Interaccount and interdepartment transfers. (B) Includes amortization of discount on the Hope Creek indirect disallowance of $1,686,000. (C) Additions to Construction Work in Progress (CWIP) is net of transfers of completed construction of $477,201,000. (D) Consolidation of partnership interests. Descriptions of Utility Plant and Related Depreciation and Amortization -- PSE&G and Oil and Gas Accounting -- EDC are set forth in Note 1 -- Organization and Summary of Significant Accounting Policies of Notes to Consolidated Financial Statements. 109 118 SCHEDULE VI PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED SCHEDULE VI -- ACCUMULATED DEPRECIATION, DEPLETION, AND AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT YEAR ENDED DECEMBER 31, 1993
- ----------------------------------------------------------------------------------------------------------------------- COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F - ----------------------------------------------------------------------------------------------------------------------- BALANCE OTHER AT CHANGES-- BEGINNING CHARGED TO ADD (DEDUCT)-- BALANCE AT OF COSTS AND DESCRIBE END OF DESCRIPTION PERIOD EXPENSES RETIREMENTS (A) PERIOD - ----------------------------------------------------------------------------------------------------------------------- (THOUSANDS OF DOLLARS) Accumulated Depreciation and Amortization of Utility Plant Electric Plant in Service Intangible............................. $ 1,816 $ 1,751 $ -- $ -- $ 3,567 Steam Production....................... 460,768 58,575 (41,273) 478,070 Nuclear Production..................... 1,302,035 184,933 (9,981) (25,304) 1,451,683 Pumped Storage Production.............. 7,531 479 8,010 Other Production....................... 227,408 14,572 (369) -- 241,611 Transmission........................... 338,283 23,106 (2,385) -- 359,004 Distribution........................... 927,488 91,767 (27,873) -- 991,382 General................................ 8,560 3,304 (1,295) 10,569 Nuclear Decommissioning................ 136,137 31,762 -- 25,304 193,203 --------- ------------ ----------- -------------- ---------- Total Electric Plant in Service... 3,410,026 410,249 (83,176) 0 3,737,099 --------- ------------ ----------- -------------- ---------- Gas Plant in Service Manufactured Gas Production............ 62,878 5,424 (9,010) (154) 59,138 Local Storage.......................... 12,416 395 (69) -- 12,742 Transmission........................... 12,856 1,465 -- -- 14,321 Distribution........................... 762,453 50,617 (12,499) -- 800,571 General................................ 3,305 792 (61) -- 4,036 --------- ------------ ----------- -------------- ---------- Total Gas Plant in Service........ 853,908 58,693 (21,639) (154) 890,808 --------- ------------ ----------- -------------- ---------- Common Plant in Service Capital Leases......................... 3,195 513 -- -- 3,708 General................................ 119,609 29,797 (8,079) -- 141,327 --------- ------------ ----------- -------------- ---------- Total Common Plant in Service..... 122,804 30,310 (8,079) -- 145,035 --------- ------------ ----------- -------------- ---------- Nuclear Fuel in Service................... 223,857 102,718 (42,413) -- 284,162 Plant Held for Future Use................. -- -- -- -- --------- ------------ ----------- -------------- ---------- Total Accumulated Depreciation and Amortization.................... $4,610,595 $601,970 $ (155,307) $ (154) $5,057,104 --------- ------------ ----------- -------------- ---------- --------- ------------ ----------- -------------- ---------- Accumulated Depreciation and Amortization of EDC's Oil and Gas Property, Plant and Equipment................................. $ 663,915(B) $ 87,260 $ (55,384) $ -- $ 695,791 --------- ------------ ----------- -------------- ---------- --------- ------------ ----------- -------------- ---------- Accumulated Depreciation and Amortization of EGDC's/PSRC's Real Estate................. $ 11,146 $ 4,579 $ (116) $ (4,769)(B) $ 10,840 --------- ------------ ----------- -------------- ---------- --------- ------------ ----------- -------------- ---------- Accumulated Depreciation and Amortization of Other Plant............................... $ 3,073 $ 1,100 $ (18) $ 152 $ 4,307 --------- ------------ ----------- -------------- ---------- --------- ------------ ----------- -------------- ----------
NOTES: (A) Interaccount and interdepartment transfers. (B) Reclassification of accumulated depreciation for real estate held for sale to other investments -- net. 110 119 SCHEDULE VI PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED SCHEDULE VI -- ACCUMULATED DEPRECIATION, DEPLETION, AND AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT YEAR ENDED DECEMBER 31, 1992
- -------------------------------------------------------------------------------------------------------------------------- COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F - -------------------------------------------------------------------------------------------------------------------------- ADDITIONS OTHER BALANCE AT CHARGED TO CHANGES-- BALANCE AT BEGINNING OF COSTS AND ADD(DEDUCT)-- END OF DESCRIPTION PERIOD EXPENSES RETIREMENTS DESCRIBE (A) PERIOD - -------------------------------------------------------------------------------------------------------------------------- (THOUSANDS OF DOLLARS) Accumulated Depreciation and Amortization of Utility Plant Electric Plant in Service Intangible................................ $ 1,013 $ 803 $ -- $ -- $ 1,816 Steam Production.......................... 438,663 41,700 (19,595) -- 460,768 Nuclear Production........................ 1,157,525 182,636 (38,126) -- 1,302,035 Pumped Storage Production................. 7,043 488 7,531 Other Production.......................... 221,775 13,757 (8,124) -- 227,408 Transmission.............................. 321,884 22,224 (5,825) -- 338,283 Distribution.............................. 868,499 86,483 (27,494) -- 927,488 General................................... 7,551 2,859 (1,850) -- 8,560 Nuclear Decommissioning................... 112,462 23,675 -- -- 136,137 ------------ ---------- ----------- -------------- ---------- Total Electric Plant in Service......... 3,136,415 374,625 (101,014) -- 3,410,026 ------------ ---------- ----------- -------------- ---------- Gas Plant in Service Manufactured Gas Production............... 64,834 4,343 (6,299) -- 62,878 Local Storage............................. 12,033 383 -- -- 12,416 Transmission.............................. 11,562 1,294 -- -- 12,856 Distribution.............................. 702,249 72,629 (12,425) -- 762,453 General................................... 3,033 698 (426) -- 3,305 ------------ ---------- ----------- -------------- ---------- Total Gas Plant in Service.............. 793,711 79,347 (19,150) -- 853,908 ------------ ---------- ----------- -------------- ---------- Common Plant in Service Capital Leases............................ 2,738 457 -- -- 3,195 General................................... 102,968 27,291 (10,650) -- 119,609 ------------ ---------- ----------- -------------- ---------- Total Common Plant in Service........... 105,706 27,748 (10,650) -- 122,804 ------------ ---------- ----------- -------------- ---------- Nuclear Fuel in Service...................... 208,147 91,903 (76,193) -- 223,857 Plant Held for Future Use.................... -- -- -- -- -- ------------ ---------- ----------- -------------- ---------- Total Accumulated Depreciation and Amortization......................... $ 4,243,979 $ 573,623 $ (207,007) $ -- $4,610,595 ------------ ---------- ----------- -------------- ---------- ------------ ---------- ----------- -------------- ---------- Accumulated Depreciation and Amortization of EDC's Oil and Gas Property, Plant and Equipment.................................... $ 588,333(B) $ 86,492 $ (10,910) $ -- $ 663,915 ------------ ---------- ----------- -------------- ---------- ------------ ---------- ----------- -------------- ---------- Accumulated Depreciation and Amortization of EGDC's/PSRC's Real Estate.................... $ 7,402 $ 3,098 $ (381) $ 1,027 $ 11,146 ------------ ---------- ----------- -------------- ---------- ------------ ---------- ----------- -------------- ---------- Accumulated Depreciation and Amortization of Other Plant.................................. $ 2,987 $ 124 $ -- $ (38) $ 3,073 ------------ ---------- ----------- -------------- ---------- ------------ ---------- ----------- -------------- ----------
NOTES: (A) Interaccount and interdepartment transfers. 111 120 SCHEDULE VI PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED SCHEDULE VI -- ACCUMULATED DEPRECIATION, DEPLETION, AND AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT YEAR ENDED DECEMBER 31, 1991
- ---------------------------------------------------------------------------------------------------------------------- COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F - ---------------------------------------------------------------------------------------------------------------------- BALANCE OTHER AT ADDITIONS CHANGES-- BALANCE BEGINNING CHARGED TO ADD (DEDUCT)-- AT OF COSTS AND DESCRIBE END OF DESCRIPTION PERIOD EXPENSES RETIREMENTS (A) PERIOD - ---------------------------------------------------------------------------------------------------------------------- (THOUSANDS OF DOLLARS) Accumulated Depreciation and Amortization of Utility Plant Electric Plant in Service Intangible............................. $ 253 $ 760 $ -- $ -- $ 1,013 Steam Production....................... 486,361 37,164 (112,184) 27,322 438,663 Nuclear Production..................... 989,649 179,594 (11,718) -- 1,157,525 Pumped Storage Production.............. 6,719 482 (158) -- 7,043 Other Production....................... 214,718 13,028 (5,971) -- 221,775 Transmission........................... 303,717 21,455 (3,288) -- 321,884 Distribution........................... 813,438 81,736 (26,675) -- 868,499 General................................ 5,957 2,192 (598) -- 7,551 Nuclear Decommissioning................ 90,110 22,352 -- -- 112,462 --------- ---------- ----------- -------------- --------- Total Electric Plant in Service...................... 2,910,922 358,763 (160,592) 27,322 3,136,415 --------- ---------- ----------- -------------- --------- Gas Plant in Service Manufactured Gas Production......... 64,132 3,842 (3,140) -- 64,834 Local Storage....................... 12,914 408 (1,289) -- 12,033 Transmission........................ 10,613 949 -- 11,562 Distribution........................ 645,912 68,177 (11,840) -- 702,249 General............................. 2,619 634 (220) -- 3,033 --------- ---------- ----------- -------------- --------- Total Gas Plant in Service..... 736,190 74,010 (16,489) -- 793,711 --------- ---------- ----------- -------------- --------- Common Plant in Service Capital Leases...................... 2,713 439 (414) -- 2,738 General............................. 89,848 24,687 (11,567) -- 102,968 --------- ---------- ----------- -------------- --------- Total Common Plant in Service...................... 92,561 25,126 (11,981) -- 105,706 --------- ---------- ----------- -------------- --------- Nuclear Fuel in Service................ 196,098 96,420 (84,371) 208,147 Plant Held for Future Use.............. 27,322 -- -- (27,322) -- --------- ---------- ----------- -------------- --------- Total Accumulated Depreciation and Amortization............. $3,963,093 $ 554,319 $ (273,433) $ -- $4,243,979 --------- ---------- ----------- -------------- --------- --------- ---------- ----------- -------------- --------- Accumulated Depreciation and Amortization of EDC's Oil and Gas Property, Plant and Equipment....... $ 500,831 $ 88,443 $ (307) $ (634) $ 588,333 --------- ---------- ----------- -------------- --------- --------- ---------- ----------- -------------- --------- Accumulated Depreciation and Amortization of EGDC's Real Estate Property and Equipment.............................. $ 4,648 $ 1,790 $ -- $ 964 $ 7,402 --------- ---------- ----------- -------------- --------- --------- ---------- ----------- -------------- --------- Accumulated Depreciation and Amortization of Other Plant......................... $ 3,701 $ 338 $ (1,052) $ -- $ 2,987 --------- ---------- ----------- -------------- --------- --------- ---------- ----------- -------------- ---------
NOTES: (A) Interaccount and interdepartment transfers. 112 121 SCHEDULE VIII PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED SCHEDULE VIII -- VALUATION AND QUALIFYING ACCOUNTS YEARS ENDED DECEMBER 31, 1993 -- DECEMBER 31, 1991
- ---------------------------------------------------------------------------------------------------------------------------- COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E - ---------------------------------------------------------------------------------------------------------------------------- ADDITIONS -------------------------------- CHARGED TO BALANCE AT CHARGED TO OTHER BALANCE AT BEGINNING OF COST AND ACCOUNTS-- DEDUCTIONS-- END OF DESCRIPTION PERIOD EXPENSES DESCRIBE DESCRIBE PERIOD - ---------------------------------------------------------------------------------------------------------------------------- (THOUSANDS OF DOLLARS) 1993 Allowance for Doubtful Accounts........... $ 24,059 $ 31,625 $ -- $27,752(A) $ 27,932 ------------ ---------- --------------- ----------- ---------- ------------ ---------- --------------- ----------- ---------- Discount on Property Abandonments......... $ 21,951 $ -- $ -- $ 5,688(B) $ 16,263 ------------ ---------- --------------- ----------- ---------- ------------ ---------- --------------- ----------- ---------- Valuation Allowances...................... $ 21,509 $ 17,887 $ -- $ 4,693 $ 34,703 ------------ ---------- --------------- ----------- ---------- ------------ ---------- --------------- ----------- ---------- 1992 Allowance for Doubtful Accounts........... $ 21,241 $ 29,488 $ -- $26,670(A) $ 24,059 ------------ ---------- --------------- ----------- ---------- ------------ ---------- --------------- ----------- ---------- Discount on Property Abandonments......... $ 31,567 $ -- $ -- $ 9,616(B) $ 21,951 ------------ ---------- --------------- ----------- ---------- ------------ ---------- --------------- ----------- ---------- Valuation Allowances...................... $ 16,696 $ 42,859 $ -- $38,046 $ 21,509 ------------ ---------- --------------- ----------- ---------- ------------ ---------- --------------- ----------- ---------- 1991 Allowance for Doubtful Accounts........... $ 19,642 $ 29,098 $ -- $27,499(A) $ 21,241 ------------ ---------- --------------- ----------- ---------- ------------ ---------- --------------- ----------- ---------- Discount on Property Abandonments......... $ 41,635 $ -- $ -- $10,068(B) $ 31,567 ------------ ---------- --------------- ----------- ---------- ------------ ---------- --------------- ----------- ---------- Valuation Allowances...................... $ 8,890 $ 7,806 $ -- $ -- $ 16,696 ------------ ---------- --------------- ----------- ---------- ------------ ---------- --------------- ----------- ----------
NOTES: (A) Accounts Receivable/Investments written off. (B) Amortization of discount to income. 113 122 SCHEDULE V PUBLIC SERVICE ELECTRIC AND GAS COMPANY SCHEDULE V -- PROPERTY, PLANT, AND EQUIPMENT YEAR ENDED DECEMBER 31, 1993
- ----------------------------------------------------------------------------------------------------------------------- COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F - ----------------------------------------------------------------------------------------------------------------------- BALANCE AT OTHER BEGINNING CHANGES-- BALANCE AT OF ADDITIONS AT ADD (DEDUCT)-- END OF CLASSIFICATION PERIOD COST RETIREMENTS DESCRIBE (A) PERIOD - ----------------------------------------------------------------------------------------------------------------------- (THOUSANDS OF DOLLARS) Utility Plant Electric Plant in Service Intangible....................... $ 4,596 $ 2,224 $ -- $ -- $ 6,820 Steam Production................. 1,668,198 108,360 (13,310) 5 1,763,253 Nuclear Production............... 5,819,755 67,412 (16,010) 2,117(B) 5,873,274 Pumped Storage Production........ 20,063 (14) -- -- 20,049 Other Production................. 350,526 30,099 (363) -- 380,262 Transmission..................... 1,024,843 10,996 (2,846) 1,157 1,034,150 Distribution..................... 2,573,226 168,436 (16,329) (1,131) 2,724,202 General.......................... 104,462 15,291 (1,299) 430 118,884 ---------- ------------ ----------- -------------- ---------- Total Electric Plant in Service................... 11,565,669 402,804 (50,157) 2,578 11,920,894 ---------- ------------ ----------- -------------- ---------- Gas Plant in Service Manufactured Gas Production...... 77,942 (15) 123 (229) 77,821 Local Storage.................... 9,709 (5) (69) -- 9,635 Transmission..................... 57,405 5,990 -- -- 63,395 Distribution..................... 1,870,462 127,991 (5,409) -- 1,993,044 General.......................... 29,426 4,581 (61) -- 33,946 ---------- ------------ ----------- -------------- ---------- Total Gas Plant in Service................... 2,044,944 138,542 (5,416) (229) 2,177,841 ---------- ------------ ----------- -------------- ---------- Common Plant in Service Capital Leases................... 56,812 56,812 General.......................... 423,160 49,332 (8,581) (438) 463,473 ---------- ------------ ----------- -------------- ---------- Total Common Plant in Service................... 479,972 49,332 (8,581) (438) 520,285 ---------- ------------ ----------- -------------- ---------- Nuclear Fuel in Service............. 476,156 55,657 (42,414) -- 489,399 ---------- ------------ ----------- -------------- ---------- Total Utility Plant in Service................... 14,566,741 646,335 (106,568) 1,911 15,108,419 ---------- ------------ ----------- -------------- ---------- Construction Work in Progress....... 492,914 242,457(C) -- (15) 735,356 Plant Held for Future Use........... 22,252 1,582 -- (6,125) 17,709 ---------- ------------ ----------- -------------- ---------- Total Utility Plant......... $15,081,907 $890,374 $ (106,568) $ (4,229) $15,861,484 ---------- ------------ ----------- -------------- ---------- ---------- ------------ ----------- -------------- ---------- Other Plant........................... $ 25,036 $ 13,612 $ (4) $ 6,343 $ 44,987 ---------- ------------ ----------- -------------- ---------- ---------- ------------ ----------- -------------- ----------
NOTES: (A) Interaccount and interdepartment transfers. (B) Includes amortization of discount on the Hope Creek indirect disallowance of $2,113,299. (C) Additions to Construction Work in Progress (CWIP) is net of transfers of completed construction of $249,363,488. Description of Utility Plant and Related Depreciation and Amortization is set forth in Note 1 -- Organization and Summary of Significant Accounting Policies of Notes to Consolidated Financial Statements. 114 123 SCHEDULE V PUBLIC SERVICE ELECTRIC AND GAS COMPANY SCHEDULE V -- PROPERTY, PLANT, AND EQUIPMENT YEAR ENDED DECEMBER 31, 1992
- ----------------------------------------------------------------------------------------------------------------------- COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F - ----------------------------------------------------------------------------------------------------------------------- BALANCE AT OTHER BEGINNING CHANGES-- BALANCE AT OF ADDITIONS AT ADD (DEDUCT)-- END OF CLASSIFICATION PERIOD COST RETIREMENTS DESCRIBE (A) PERIOD - ----------------------------------------------------------------------------------------------------------------------- (THOUSANDS OF DOLLARS) Utility Plant Electric Plant in Service Intangible....................... $ 4,675 $ (79) $ -- $ -- $ 4.596 Steam Production................. 1,618,630 59,160 (9,592) 1,668,198 Nuclear Production............... 5,721,768 136,596 (34,094) (4,515)(B) 5,819,755 Pumped Storage Production........ 19,968 135 (4) (36) 20,063 Other Production................. 322,527 36,077 (8,114) 36 350,526 Transmission..................... 960,958 69,454 (6,093) 524 1,024,843 Distribution..................... 2,418,494 172,408 (17,143) (533) 2,573,226 General.......................... 84,983 20,431 (1,739) 787 104,462 ---------- ------------ ----------- -------------- ---------- Total Electric Plant in Service..................... 11,152,003 494,182 (76,779) (3,737) 11,565,669 ---------- ------------ ----------- -------------- ---------- Gas Plant in Service Manufactured Gas Production......... 55,371 22,580 (9) -- 77,942 Local Storage....................... 9,376 333 -- -- 9,709 Transmission........................ 44,249 13,156 -- -- 57,405 Distribution........................ 1,759,079 117,154 (5,771) -- 1,870,462 General............................. 26,422 3,433 (429) -- 29,426 ---------- ------------ ----------- -------------- ---------- Total Gas Plant in Service..... 1,894,497 156,656 (6,209) -- 2,044,944 ---------- ------------ ----------- -------------- ---------- Common Plant in Service Capital Leases...................... 56,812 -- -- -- 56,812 General............................. 376,534 58,563 (11,156) (781) 423,160 ---------- ------------ ----------- -------------- ---------- Total Common Plant in Service..................... 433,346 58,563 (11,156) (781) 479,972 ---------- ------------ ----------- -------------- ---------- Nuclear Fuel in Service............. 387,242 161,666 (72,752) -- 476,156 ---------- ------------ ----------- -------------- ---------- Total Utility Plant in Service..................... 13,867,088 871,067 (166,896) (4,518) 14,566,741 ---------- ------------ ----------- -------------- ---------- Construction Work in Progress....... 537,228 (44,314)(C) -- -- 492,914 Plant Held for Future Use........... 22,244 8 -- -- 22,252 ---------- ------------ ----------- -------------- ---------- Total Utility Plant............ $14,426,560 $826,761 $ (166,896) $ (4,518) $15,081,907 ---------- ------------ ----------- -------------- ---------- ---------- ------------ ----------- -------------- ---------- Other Plant........................... $ 20,462 $ 4,570 $ -- $ 4 $ 25,036 ---------- ------------ ----------- -------------- ---------- ---------- ------------ ----------- -------------- ----------
NOTES: (A) Interaccount and interdepartment transfers. (B) Includes amortization of discount on the Hope Creek indirect disallowance of $1,676,456, and an increase in the Hope Creek indirect disallowance of $6,191,172 resulting from the recent rate case settlement. (C) Additions to Construction Work in Progress (CWIP) is net of transfers of completed construction of $358,917,902. Description of Utility Plant and Related Depreciation and Amortization is set forth in Note 1 -- Organization and Summary of Significant Accounting Policies of Notes to Consolidated Financial Statements. 115 124 SCHEDULE V PUBLIC SERVICE ELECTRIC AND GAS COMPANY SCHEDULE V -- PROPERTY, PLANT, AND EQUIPMENT YEAR ENDED DECEMBER 31, 1991
- ----------------------------------------------------------------------------------------------------------------------- COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F - ----------------------------------------------------------------------------------------------------------------------- BALANCE AT OTHER BEGINNING CHANGES-- BALANCE AT OF ADDITIONS AT ADD (DEDUCT)-- END OF CLASSIFICATION PERIOD COST RETIREMENTS DESCRIBE (A) PERIOD - ----------------------------------------------------------------------------------------------------------------------- (THOUSANDS OF DOLLARS) Utility Plant Electric Plant in Service Intangible........................ $ 3,800 $ 875 $ -- $ -- $ 4,675 Steam Production.................. 1,394,187 245,951 (88,805) 67,297 1,618,630 Nuclear Production................ 5,591,338 137,803 (8,931) 1,558(B) 5,721,768 Pumped Storage Production......... 20,096 27 (155) -- 19,968 Other Production.................. 291,479 37,021 (5,973) -- 322,527 Transmission...................... 948,567 14,563 (2,172) -- 960,958 Distribution...................... 2,292,726 142,689 (16,875) (46) 2,418,494 General........................... 66,928 18,634 (557) (22) 84,983 ---------- ------------ ----------- -------------- ---------- Total Electric Plant in Service.................... 10,609,121 597,563 (123,468) 68,787 11,152,003 ---------- ------------ ----------- -------------- ---------- Gas Plant in Service Manufactured Gas Production....... 55,944 258 (830) (1) 55,371 Local Storage..................... 10,654 11 (1,289) -- 9,376 Transmission...................... 34,389 9,860 -- -- 44,249 Distribution...................... 1,652,625 112,508 (6,053) (1) 1,759,079 General........................... 23,673 2,970 (221) -- 26,422 ---------- ------------ ----------- -------------- ---------- Total Gas Plant in Service... 1,777,285 125,607 (8,393) (2) 1,894,497 ---------- ------------ ----------- -------------- ---------- Common Plant in Service Capital Leases.................... 57,226 (414) -- 56,812 General........................... 335,761 49,125 (12,518) 4,166 376,534 ---------- ------------ ----------- -------------- ---------- Total Common Plant in Service.................... 392,987 49,125 (12,932) 4,166 433,346 ---------- ------------ ----------- -------------- ---------- Nuclear Fuel in Service.............. 386,190 85,423 (84,371) -- 387,242 ---------- ------------ ----------- -------------- ---------- Total Utility Plant in Service.................... 13,165,583 857,718 (229,164) 72,951 13,867,088 ---------- ------------ ----------- -------------- ---------- Construction Work in Progress........ 576,904 (39,692)(C) -- 16 537,228 Plant Held for Future Use............ 94,387 (4,877) -- (67,266) 22,244 ---------- ------------ ----------- -------------- ---------- Total Utility Plant.......... $13,836,874 $813,149 $ (229,164) $ 5,701 $14,426,560 ---------- ------------ ----------- -------------- ---------- ---------- ------------ ----------- -------------- ---------- Other Plant............................ $ 25,570 $ -- $ (1,093) $ (4,015) $ 20,462 ---------- ------------ ----------- -------------- ---------- ---------- ------------ ----------- -------------- ----------
NOTES: (A) Interaccount and interdepartment transfers. (B) Includes amortization of discount on the Hope Creek indirect disallowance of $1,686,000. (C) Additions to Construction Work in Progress (CWIP) is net of transfers of completed construction of $447,201,000. Description of Utility Plant and Related Depreciation and Amortization is set forth in Note 1 -- Organization and Summary of Significant Accounting Policies of Notes to Consolidated Financial Statements. 116 125 SCHEDULE VI PUBLIC SERVICE ELECTRIC AND GAS COMPANY SCHEDULE VI -- ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT YEAR ENDED DECEMBER 31, 1993
- ----------------------------------------------------------------------------------------------------------------------- COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F - ----------------------------------------------------------------------------------------------------------------------- BALANCE AT ADDITIONS OTHER BALANCE BEGINNING CHARGED TO CHANGES-- AT OF COSTS AND ADD (DEDUCT)-- END OF DESCRIPTION PERIOD EXPENSES RETIREMENTS DESCRIBE (A) PERIOD - ----------------------------------------------------------------------------------------------------------------------- (THOUSANDS OF DOLLARS) Accumulated Depreciation and Amortization of Utility Plant Electric Plant in Service Intangible......................... $ 1,816 $ 1,751 $ -- $ -- $ 3,567 Steam Production................... 460,768 58,575 (41,273) 478,070 Nuclear Production................. 1,302,035 184,933 (9,981) (25,304) 1,451,683 Pumped Storage Production.......... 7,531 479 -- -- 8,010 Other Production................... 227,408 14,572 (369) -- 241,611 Transmission....................... 338,283 23,106 (2,385) -- 359,004 Distribution....................... 927,488 91,767 (27,873) -- 991,382 General............................ 8,560 3,304 (1,295) -- 10,569 Nuclear Decommissioning............ 136,137 31,762 -- 25,304 193,203 --------- ------------ ----------- -------------- --------- Total Electric Plant in Service....................... 3,410,026 410,249 (83,176) -- 3,737,099 --------- ------------ ----------- -------------- --------- Gas Plant in Service Manufactured Gas Production........ 62,878 5,424 (9,010) (154) 59,138 Local Storage...................... 12,416 395 (69) -- 12,742 Transmission....................... 12,856 1,465 -- -- 14,321 Distribution....................... 762,453 50,617 (12,499) -- 800,571 General............................ 3,305 792 (61) -- 4,036 --------- ------------ ----------- -------------- --------- Total Gas Plant in Service....... 853,908 58,693 (21,639) (154) 890,808 --------- ------------ ----------- -------------- --------- Common Plant in Service Capital Leases..................... 3,195 513 -- -- 3,708 General............................ 119,609 29,797 (8,079) -- 141,327 --------- ------------ ----------- -------------- --------- Total Common Plant in Service.... 122,804 30,310 (8,079) -- 145,035 --------- ------------ ----------- -------------- --------- Nuclear Fuel in Service............... 223,857 102,718 (42,413) -- 284,162 --------- ------------ ----------- -------------- --------- Total Accumulated Depreciation and Amortization.............. $4,610,595 $601,970 $ (155,307) $ (154) $5,057,104 --------- ------------ ----------- -------------- --------- --------- ------------ ----------- -------------- --------- Accumulated Depreciation and Amortization of Other Plant........... $ 639 $ 651 $ -- $ 154 $ 1,444 --------- ------------ ----------- -------------- --------- --------- ------------ ----------- -------------- ---------
NOTE: (A) Interaccount and interdepartment transfers. 117 126 SCHEDULE VI PUBLIC SERVICE ELECTRIC AND GAS COMPANY SCHEDULE VI -- ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT YEAR ENDED DECEMBER 31, 1992
- --------------------------------------------------------------------------------------------------------------------- COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F - --------------------------------------------------------------------------------------------------------------------- BALANCE ADDITIONS OTHER AT CHARGED CHANGES-- BALANCE BEGINNING TO ADD (DEDUCT)-- AT OF COST AND DESCRIBE END OF DESCRIPTION PERIOD EXPENSES RETIREMENTS (A) PERIOD - --------------------------------------------------------------------------------------------------------------------- (THOUSANDS OF DOLLARS) Accumulated Depreciation and Amortization of Utility Plant Electric Plant in Service Intangible.......................... $ 1,013 $ 803 $ -- $ -- $ 1,816 Steam Production.................... 438,663 41,700 (19,595) -- 460,768 Nuclear Production.................. 1,157,525 182,636 (38,126) -- 1,302,035 Pumped Storage Production........... 7,043 488 -- -- 7,531 Other Production.................... 221,775 13,757 (8,124) -- 227,408 Transmission........................ 321,884 22,224 (5,825) -- 338,283 Distribution........................ 868,499 86,483 (27,494) -- 927,488 General............................. 7,551 2,859 (1,850) -- 8,560 Nuclear Decommissioning............. 112,462 23,675 -- -- 136,137 --------- --------- ----------- -------------- --------- Total Electric Plant in Service...................... 3,136,415 374,625 (101,014) -- 3,410,026 --------- --------- ----------- -------------- --------- Gas Plant in Service Manufactured Gas Production......... 64,834 4,343 (6,299) -- 62,878 Local Storage....................... 12,033 383 -- -- 12,416 Transmission........................ 11,562 1,294 -- -- 12,856 Distribution........................ 702,249 72,629 (12,425) -- 762,453 General............................. 3,033 698 (426) -- 3,305 --------- --------- ----------- -------------- --------- Total Gas Plant in Service..... 793,711 79,347 (19,150) -- 853,908 --------- --------- ----------- -------------- --------- Common Plant in Service Capital Leases...................... 2,738 457 -- -- 3,195 General............................. 102,968 27,291 (10,650) -- 119,609 --------- --------- ----------- -------------- --------- Total Common Plant in Service...................... 105,706 27,748 (10,650) -- 122,804 --------- --------- ----------- -------------- --------- Nuclear Fuel in Service................ 208,147 91,903 (76,193) -- 223,857 --------- --------- ----------- -------------- --------- Total Accumulated Depreciation and Amortization............. $4,243,979 $ 573,623 $ (207,007) $ -- $4,610,595 --------- --------- ----------- -------------- --------- --------- --------- ----------- -------------- --------- Accumulated Depreciation and Amortization of Other Plant......................... $ 695 $ (56) $ -- $ -- $ 639 --------- --------- ----------- -------------- --------- --------- --------- ----------- -------------- ---------
NOTE: (A) Interaccount and interdepartment transfers. 118 127 SCHEDULE VI PUBLIC SERVICE ELECTRIC AND GAS COMPANY SCHEDULE VI -- ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT YEAR ENDED DECEMBER 31, 1991
- ---------------------------------------------------------------------------------------------------------------------- COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F - ---------------------------------------------------------------------------------------------------------------------- BALANCE AT ADDITIONS OTHER BALANCE BEGINNING CHARGED TO CHANGES-- AT OF COSTS AND ADD (DEDUCT)-- END OF DESCRIPTION PERIOD EXPENSES RETIREMENTS DESCRIBE (A) PERIOD - ---------------------------------------------------------------------------------------------------------------------- (THOUSANDS OF DOLLARS) Accumulated Depreciation and Amortization of Utility Plant Electric Plant in Service Intangible................................ $ 253 $ 760 $ -- $ -- $ 1,013 Steam Production.......................... 486,361 37,164 (112,184) 27,322 438,663 Nuclear Production........................ 989,649 179,594 (11,718) -- 1,157,525 Pumped Storage Production................. 6,719 482 (158) -- 7,043 Other Production.......................... 214,718 13,028 (5,971) -- 221,775 Transmission.............................. 303,717 21,455 (3,288) -- 321,884 Distribution.............................. 813,438 81,736 (26,675) -- 868,499 General................................... 5,957 2,192 (598) -- 7,551 Nuclear Decommissioning................... 90,110 22,352 -- -- 112,462 --------- ---------- ----------- -------------- --------- Total Electric Plant in Service......... 2,910,922 358,763 (160,592) 27,322 3,136,415 --------- ---------- ----------- -------------- --------- Gas Plant in Service Manufactured Gas Production............... 64,132 3,842 (3,140) -- 64,834 Local Storage............................. 12,914 408 (1,289) -- 12,033 Transmission.............................. 10,613 949 -- -- 11,562 Distribution.............................. 645,912 68,177 (11,840) -- 702,249 General................................... 2,619 634 (220) -- 3,033 --------- ---------- ----------- -------------- --------- Total Gas Plant in Service.............. 736,190 74,010 (16,489) -- 793,711 --------- ---------- ----------- -------------- --------- Common Plant in Service Capital Leases............................ 2,713 439 (414) -- 2,738 General................................... 89,848 24,687 (11,567) -- 102,968 --------- ---------- ----------- -------------- --------- Total Common Plant in Service........... 92,561 25,126 (11,981) -- 105,706 --------- ---------- ----------- -------------- --------- Nuclear Fuel in Service...................... 196,098 96,420 (84,371) -- 208,147 Plant Held for Future Use.................... 27,322 -- -- (27,322) -- --------- ---------- ----------- -------------- --------- Total Accumulated Depreciation and Amortization......................... $3,963,093 $ 554,319 $ (273,433) $ -- $4,243,979 --------- ---------- ----------- -------------- --------- --------- ---------- ----------- -------------- --------- Accumulated Depreciation and Amortization of Other Plant.................................. $ 1,627 $ 91 $ (1,023) $ -- $ 695 --------- ---------- ----------- -------------- --------- --------- ---------- ----------- -------------- ---------
NOTE: (A) Interaccount and interdepartment transfers. 119 128 SCHEDULE VIII PUBLIC SERVICE ELECTRIC AND GAS COMPANY SCHEDULE VIII -- VALUATION AND QUALIFYING ACCOUNTS YEARS ENDED DECEMBER 31, 1993 -- DECEMBER 31, 1991
- ----------------------------------------------------------------------------------------------------------- COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E - ----------------------------------------------------------------------------------------------------------- ADDITIONS ----------------------- CHARGED BALANCE AT CHARGED TO TO OTHER BALANCE AT BEGINNING OF COST AND ACCOUNTS-- DEDUCTIONS-- END OF DESCRIPTION PERIOD EXPENSES DESCRIBE DESCRIBE PERIOD - ----------------------------------------------------------------------------------------------------------- (THOUSANDS OF DOLLARS) 1993 Allowance for Doubtful Accounts... $ 24,059 $ 31,625 -- $27,752(A) $ 27,932 ------------ ---------- --------- ----------- ---------- ------------ ---------- --------- ----------- ---------- Discount on Property Abandonments.................... $ 21,951 $ -- $ -- $ 5,688(B) $ 16,263 ------------ ---------- --------- ----------- ---------- ------------ ---------- --------- ----------- ---------- 1992 Allowance for Doubtful Accounts... $ 21,241 $ 29,488 $ -- $26,670(A) $ 24,059 ------------ ---------- --------- ----------- ---------- ------------ ---------- --------- ----------- ---------- Discount on Property Abandonments.................... $ 31,567 $ -- $ -- $ 9,616(B) $ 21,951 ------------ ---------- --------- ----------- ---------- ------------ ---------- --------- ----------- ---------- 1991 Allowance for Doubtful Accounts... $ 19,642 $ 29,098 $ -- $27,499(A) $ 21,241 ------------ ---------- --------- ----------- ---------- ------------ ---------- --------- ----------- ---------- Discount on Property Abandonments.................... $ 41,635 $ -- $ -- $10,068(B) $ 31,567 ------------ ---------- --------- ----------- ---------- ------------ ---------- --------- ----------- ----------
Notes: (A) Accounts Receivable written off. (B) Amortization of discount to income. 120 129 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED By E. JAMES FERLAND ------------------------------- E. James Ferland Chairman of the Board, President and Chief Executive Officer Date: February 25, 1994 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE - --------------------------------------------- --------------------------- ------------------ E. JAMES FERLAND Chairman of the Board, February 25, 1994 - --------------------------------------------- President and Chief E. James Ferland Executive Officer (Principal Executive Officer) ROBERT C. MURRAY Vice President and Chief February 25, 1994 - --------------------------------------------- Financial Officer Robert C. Murray (Principal Financial Officer) PATRICIA A. RADO Vice President and February 25, 1994 - --------------------------------------------- Comptroller (Principal Patricia A. Rado Accounting Officer) LAWRENCE R. CODEY Director February 25, 1994 - --------------------------------------------- Lawrence R. Codey ERNEST H. DREW Director February 25, 1994 - --------------------------------------------- Ernest H. Drew T. J. DERMOT DUNPHY Director February 25, 1994 - --------------------------------------------- T. J. Dermot Dunphy ROBERT R. FERGUSON, JR. Director February 25, 1994 - --------------------------------------------- Robert R. Ferguson, Jr. RAYMOND V. GILMARTIN Director February 25, 1994 - --------------------------------------------- Raymond V. Gilmartin SHIRLEY A. JACKSON Director February 25, 1994 - --------------------------------------------- Shirley A. Jackson IRWIN LERNER Director February 25, 1994 - --------------------------------------------- Irwin Lerner WILLIAM E. MARFUGGI Director February 25, 1994 - --------------------------------------------- William E. Marfuggi MARILYN M. PFALTZ Director February 25, 1994 - --------------------------------------------- Marilyn M. Pfaltz JAMES C. PITNEY Director February 25, 1994 - --------------------------------------------- James C. Pitney JOSH S. WESTON Director February 25, 1994 - --------------------------------------------- Josh S. Weston
121 130 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. PUBLIC SERVICE ELECTRIC AND GAS COMPANY By E. JAMES FERLAND -------------------------------- E. James Ferland Chairman of the Board and Chief Executive Officer Date: February 25, 1994 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE - --------------------------------------------- ---------------------------- ------------------ E. JAMES FERLAND Chairman of the Board and February 25, 1994 - --------------------------------------------- Chief Executive Officer E. James Ferland and Director (Principal Executive Officer) LAWRENCE R. CODEY President and Chief February 25, 1994 - --------------------------------------------- Operating Officer and Lawrence R. Codey Director ROBERT C. MURRAY Senior Vice February 25, 1994 - --------------------------------------------- President-Finance and Robert C. Murray Chief Financial Officer and Director (Principal Financial Officer) PATRICIA A. RADO Vice President and February 25, 1994 - --------------------------------------------- Comptroller (Principal Patricia A. Rado Accounting Officer) ROBERT R. FERGUSON, JR. Director February 25, 1994 - --------------------------------------------- Robert R. Ferguson, Jr. RAYMOND V. GILMARTIN Director February 25, 1994 - --------------------------------------------- Raymond V. Gilmartin SHIRLEY A. JACKSON Director February 25, 1994 - --------------------------------------------- Shirley A. Jackson IRWIN LERNER Director February 25, 1994 - --------------------------------------------- Irwin Lerner JAMES C. PITNEY Director February 25, 1994 - --------------------------------------------- James C. Pitney
122 131 EXHIBIT INDEX Certain Exhibits previously filed with the Commission and the appropriate securities exchanges are indicated as set forth below. Such Exhibits are not being refiled, but are included because inclusion is desirable for convenient reference. (a) Filed by PSE&G with Form 8-A under the Securities Exchange Act of 1934, on the respective dates indicated, File No. 1-973. (b) Filed by PSE&G with Form 8-K under the Securities Exchange Act of 1934, on the respective dates indicated, File No. 1-973. (c) Filed by PSE&G with Form 10-K under the Securities Exchange Act of 1934, on the respective dates indicated, File No. 1-973. (d) Filed by PSE&G with Form 10-Q under the Securities Exchange Act of 1934, on the respective dates indicated, File No. 1-973. (e) Filed by Enterprise with Form 10-K under the Securities Exchange Act of 1934, on the respective dates indicated, File No. 1-9120. (f) Filed with registration statement of PSE&G under the Securities Exchange Act of 1934, File No. 1-973, effective July 1, 1935, relating to the registration of various issues of securities. (g) Filed with registration statement of PSE&G under the Securities Act of 1933, No. 2-4995, effective May 20, 1942, relating to the issuance of $15,000,000 First and Refunding Mortgage Bonds, 3% Series due 1972. (h) Filed with registration statement of PSE&G under the Securities Act of 1933, No. 2-7568, effective July 1, 1948, relating to the proposed issuance of 200,000 shares of Cumulative Preferred Stock. (i) Filed with registration statement of PSE&G under the Securities Act of 1933, No. 2-8381, effective April 18, 1950, relating to the issuance of $26,000,000 First and Refunding Mortgage Bonds, 2 3/4% Series due 1980. (j) Filed with registration statement of PSE&G under the Securities Act of 1933, No. 2-12906, effective December 4, 1956, relating to the issuance of 1,000,000 shares of Common Stock. (k) Filed with registration statement of PSE&G under the Securities Act of 1933, No. 2-59675, effective September 1, 1977, relating to the issuance of $60,000,000 First and Refunding Mortgage Bonds, 8 1/8% Series I due 2007. (l) Filed with registration statement of PSE&G under the Securities Act of 1933, No. 2-60925, effective March 30, 1978, relating to the issuance of 750,000 shares of Common Stock through an Employee Stock Purchase Plan. (m) Filed with registration statement of PSE&G under the Securities Act of 1933, No. 2-65521, effective October 10, 1979, relating to the issuance of 3,000,000 shares of Common Stock. (n) Filed with registration statement of PSE&G under the Securities Act of 1933, No. 2-74018, filed on June 16, 1982, relating to the Thrift Plan of PSE&G. (o) Filed with registration statement of Public Service Enterprise Group Incorporated under the Securities Act of 1933, No. 33-2935 filed January 28, 1986, relating to PSE&G's plan to form a holding company as part of a corporate restructuring. (p) Filed with registration statement of PSE&G under the Securities Act of 1933, No. 33-13209 filed April 9, 1987, relating to the registration of $575,000,000 First and Refunding Mortgage Bonds pursuant to Rule 415. 123 132 ENTERPRISE
EXHIBIT NUMBER - -------------------------------------------- PREVIOUS FILING THIS -------------------------------- FILING COMMISSION EXCHANGES - --------- -------------- -------------- 3a (o) 3a (o) 3a Certificate of Incorporation Public Service Enterprise Group Incorporated 3b (e) 3b (e) 3b Copy of By-Laws of Public Service Enterprise 4/11/88 Group Incorporated, as in effect May 1, 1987 3c (e) 3c (e) 3c Certificate of Amendment of Certificate of 4/11/88 Incorporation of Public Service Enterprise Group Incorporated, effective April 23, 1987 4a(1) (f) B-1 (c) 4b(1) Indenture between PSE&G and Fidelity Union Trust 2/18/81 Company, (now First Fidelity Bank, National Association), as Trustee, dated August 1, 1924, securing First and Refunding Mortgage Bonds Indentures between PSE&G and First Fidelity Bank, National Association, as Trustee, supplemental to Exhibit 4a(1), dated as follows: 4a(2) (i) 7(1a) (c) 4b(2) April 1, 1927 2/18/81 4a(3) (k) 2b(3) (c) 4b(3) June 1, 1937 2/18/81 4a(4) (k) 2b(4) (c) 4b(4) July 1, 1937 2/18/81 4a(5) (k) 2b(5) (c) 4b(5) December 19, 1939 2/18/81 4a(6) (g) B-10 (c) 4b(6) March 1, 1942 2/18/81 4a(7) (k) 2b(7) (c) 4b(7) June 1, 1949 2/18/81 4a(8) (k) 2b(8) (c) 4b(8) May 1, 1950 2/18/81 4a(9) (k) 2b(9) (c) 4b(9) October 1, 1953 2/18/81 4a(10) (k) 2b(10) (c) 4b(10) May 1, 1954 2/18/81 4a(11) (j) 4b(16) (c) 4b(11) November 1, 1956 2/18/81 4a(12) (k) 2b(12) (c) 4b(12) September 1, 1957 2/18/81 4a(13) (k) 2b(13) (c) 4b(13) August 1, 1958 2/18/81 4a(14) (k) 2b(14) (c) 4b(14) June 1, 1959 2/18/81 4a(15) (k) 2b(15) (c) 4b(15) September 1, 1960 2/18/81
124 133
EXHIBIT NUMBER - -------------------------------------------- PREVIOUS FILING THIS -------------------------------- FILING COMMISSION EXCHANGES - --------- -------------- -------------- 4a(16) (k) 2b(16) (c) 4b(16) August 1, 1962 2/18/81 4a(17) (k) 2b(17) (c) 4b(17) June 1, 1963 2/18/81 4a(18) (k) 2b(18) (c) 4b(18) September 1, 1964 2/18/81 4a(19) (k) 2b(19) (c) 4b(19) September 1, 1965 2/18/81 4a(20) (k) 2b(20) (c) 4b(20) June 1, 1967 2/18/81 4a(21) (k) 2b(21) (c) 4b(21) June 1, 1968 2/18/81 4a(22) (k) 2b(22) (c) 4b(22) April 1, 1969 2/18/91 4a(23) (k) 2b(23) (c) 4b(23) March 1, 1970 2/18/81 4a(24) (k) 2b(24) (c) 4b(24) May 15, 1971 2/18/81 4a(25) (k) 2b(25) (c) 4b(25) November 15, 1971 2/18/81 4a(26) (k) 2b(26) (c) 4b(26) April 1, 1972 2/18/81 4a(27) (a) 2 (c) 4b(27) March 1, 1974 3/29/74 2/18/81 4a(28) (a) 2 (c) 4b(28) October 1, 1974 10/11/74 2/18/81 4a(29) (a) 2 (c) 4b(29) April 1, 1976 4/6/76 2/18/81 4a(30) (a) 2 (c) 4b(30) September 1, 1976 9/16/76 2/18/81 4a(31) (k) 2b(31) (c) 4b(31) October 1, 1976 2/18/81 4a(32) (a) 2 (c) 4b(32) June 1, 1977 6/29/77 2/18/81 4a(33) (l) 2b(33) (c) 4b(33) September 1, 1977 2/18/81 4a(34) (a) 2 (c) 4b(34) November 1, 1978 11/21/78 2/18/81 4a(35) (a) 2 (c) 4b(35) July 1, 1979 7/25/79 2/18/81 4a(36) (m) 2d(36) (c) 4b(36) September 1, 1979 (No. 1) 2/18/81 4a(37) (m) 2d(37) (c) 4b(37) September 1, 1979 (No. 2) 2/18/81
125 134
EXHIBIT NUMBER - -------------------------------------------- PREVIOUS FILING THIS -------------------------------- FILING COMMISSION EXCHANGES - --------- -------------- -------------- 4a(38) (a) 2 (c) 4b(38) November 1, 1979 12/3/79 2/18/81 4a(39) (a) 2 (c) 4b(39) June 1, 1980 6/10/80 2/18/81 4a(40) (a) 2 (a) 2 August 1, 1981 8/19/81 8/19/81 4a(41) (b) 4e (b) 4e April 1, 1982 4/29/82 5/5/82 4a(42) (a) 2 (a) 2 September 1, 1982 9/17/82 9/20/82 4a(43) (a) 2 (a) 2 December 1, 1982 12/21/82 12/21/82 4a(44) (d) 4(ii) (d) 4(ii) June 1, 1983 7/26/83 7/27/83 4a(45) (a) 4 (a) 4 August 1, 1983 8/19/83 8/19/83 4a(46) (d) 4(ii) (d) 4(ii) July 1, 1984 8/14/84 8/17/84 4a(47) (d) 4(ii) (d) 4(ii) September 1, 1984 11/2/84 11/9/84 4a(48) (b) 4(ii) (b) 4(ii) November 1, 1984 (No. 1) 1/4/85 1/9/85 4a(49) (b) 4(ii) (b) 4(ii) November 1, 1984 (No. 2) 1/4/85 1/9/85 4a(50) (a) 2 (a) 2 July 1, 1985 8/2/85 8/2/85 4a(51) (c) 4a(51) (c) 4a(51) January 1, 1986 2/11/86 2/11/86 4a(52) (a) 2 (a) 2 March 1, 1986 3/28/86 3/28/86 4a(53) (a) 2(a) (a) 2(a) April 1, 1986 (No. 1) 5/1/86 5/1/86 4a(54) (a) 2(b) (a) 2(b) April 1, 1986 (No. 2) 5/1/86 5/1/86 4a(55) (p) 4a(55) (p) 4a(55) March 1, 1987 4/9/87 4/9/87 4a(56) (a) 4 (a) 4 July 1, 1987 (No. 1) 8/17/87 8/17/87 4a(57) (d) 4 (d) 4 July 1, 1987 (No. 2) 11/13/87 11/20/87 4a(58) (a) 4 (a) 4 May 1, 1988 5/17/88 5/18/88 4a(59) (a) 4 (a) 4 September 1, 1988 9/27/88 9/28/88
126 135
EXHIBIT NUMBER - -------------------------------------------- PREVIOUS FILING THIS -------------------------------- FILING COMMISSION EXCHANGES - --------- -------------- -------------- 4a(60) (a) 4 (a) 4 July 1, 1989 7/25/89 7/26/89 4a(61) (a) 4 (a) 4 July 1, 1990 (No. 1) 7/25/90 7/26/90 4a(62) (a) 4 (a) 4 July 1, 1990 (No. 2) 7/25/90 7/26/90 4a(63) (a) 4 (a) 4 June 1, 1991 (No. 1) 7/1/91 7/2/91 4a(64) (a) 4 (a) 4 June 1, 1991 (No. 2) 7/1/91 7/2/91 4a(65) (a) 4 (a) 4 November 1, 1991 (No. 1) 12/2/91 12/3/91 4a(66) (a) 4 (a) 4 November 1, 1991 (No. 2) 12/2/91 12/3/91 4a(67) (a) 4 (a) 4 November 1, 1991 (No. 3) 12/2/91 12/3/91 4a(68) (a) 4 (a) 4 February 1, 1992 (No. 1) 2/27/92 2/28/92 4a(69) (a) 4 (a) 4 February 1, 1992 (No. 2) 2/27/92 2/28/92 4a(70) (a) 4 (a) 4 June 1, 1992 (No. 1) 6/17/92 6/11/92 4a(71) (a) 4 (a) 4 June 1, 1992 (No. 2) 6/17/92 6/11/92 4a(72) (a) 4 (a) 4 June 1, 1992 (No. 3) 6/17/92 6/11/92 4a(73) (a) 4 (a) 4 January 1, 1993 (No.1) 2/2/93 2/2/93 4a(74) (a) 4 (a) 4 January 1, 1993 (No. 2) 2/2/93 2/2/93 4a(75) (a) 4 (a) 4 March 1, 1993 3/17/93 3/18/93 4a(76) (b) 4 (a) 4 May 1, 1993 5/27/93 5/28/93 4a(77) (a) 4 (a) 4 May 1, 1993 (No. 2) 5/25/93 5/25/93 4a(78) (a) 4 (a) 4 May 1, 1993 (No. 3) 5/25/93 5/25/93 4a(79) (b) 4 (b) 4 July 1, 1993 12/1/93 12/1/93 4a(80) (a) 4 (a) 4 August 1, 1993 8/3/93 8/3/93 4a(81) (b) 4 (b) 4 September 1, 1993 12/1/93 12/1/93
127 136
EXHIBIT NUMBER - -------------------------------------------- PREVIOUS FILING THIS -------------------------------- FILING COMMISSION EXCHANGES - --------- -------------- -------------- 4a(82) (b) 4 (b) 4 September 1, 1993 (No. 2) 12/1/93 12/1/93 4a(83) (b) 4 (b) 4 November 1, 1993 12/1/93 12/1/93 4a(84) (a) 4 (a) 4 February 1, 1994 2/3/94 2/14/94 4b(1) (h) 7(12) (c) 4c(1) Indenture between PSE&G and Federal Trust 2/18/81 Company, as Trustee (Midlantic National Bank, Successor Trustee) dated July 1, 1948, providing for 6% Debenture Bonds due 1998 4b(2) (l) 2c(8) (c) 4c(8) Indenture between PSE&G and The Chase Manhattan 2/18/81 Bank (National Association), as Trustee, dated August 15, 1971, providing for 7 3/4% Debenture Bonds due 1996 4b(3) (b) 4 (b) 4 Indenture of Trust between PSE&G and The Chase 12/1/93 12/1/93 Manhattan Bank (National Association), as Trustee, providing for Secured Medium-Term Notes dated July 1, 1993 9 Inapplicable 10a(1) (c) 10c(1) (c) 10c(1) Directors' Deferred Compensation Plan 3/17/82 3/19/82 10a(2) (c) 10c(2) (c) 10c(2) Officers' Deferred Compensation Plan 3/17/82 3/19/82 10a(3) (c) 10c(3) (c) 10c(3) Supplemental Death Benefits Plan for officers 3/17/82 3/19/82 10a(4) (c) 10c(4) (c) 10c(4) Description of additional retirement benefits 3/17/82 3/19/82 for certain officers 10a(5)(i) (c) 10b(5) (c) 10b(5) Limited Supplemental Death Benefits and 3/31/83 4/8/83 Retirement Plan 10a(5)(ii) Limited Supplemental Benefits Plan for Certain Employees 10a(6)(i) (c) 10a(6) (c) 10a(6) Description of additional retirement benefits 3/10/87 4/16/87 for certain officers 10a(6)(ii) (c) 10a(6)(1) (c) 10a(6)(1) Description of additional retirement benefits 3/30/90 3/30/90 for certain officers. 10a(6)(iii) (c) 10a(6)(2) (c) 10a(6)(2) Description of additional retirement benefits 3/30/92 4/27/92 for a certain officer. 10a(7) (o) 10g (o) 10g Management Incentive Compensation Plan 10a(8) (c) 10a(8) (c) 10a(8) Long-Term Incentive Plan 3/30/89 4/18/89 10a(9) (c) 10a(9) (c) 10a(9) Public Service Enterprise Group Incorporated 3/30/89 4/18/89 Pension Plan for Outside Directors 10a(10) (c) 10a(11) (c) 10a(11) Letter Agreement with E. James Ferland dated 2/10/93 2/11/93 April 16, 1986 10a(11) (c) 10a(12) (c) 10a(12) Letter Agreement with Paul H. Way dated March 2/10/93 2/11/93 28, 1988
128 137
EXHIBIT NUMBER - -------------------------------------------- PREVIOUS FILING THIS -------------------------------- FILING COMMISSION EXCHANGES - --------- -------------- -------------- 10a(12) (c) 10a(13) (c) 10a(13) Letter Agreement with Thomas M. Crimmins, Jr. 2/10/93 2/11/93 dated April 5, 1989 10a(13) (c) 10a(15) (c) 10a(15) Letter Agreement with Robert C. Murray dated 2/10/93 2/11/93 December 17, 1991 10a(14) Letter agreement with Patricia A. Rado dated March 24, 1993 11 Inapplicable 12 Computation of Ratios of Earnings to Fixed Charges 13 Inapplicable 16 Inapplicable 18 Inapplicable 19 Inapplicable 21 Subsidiaries of Registrant 22 Inapplicable 23 Independent Auditors' Consent 24 Inapplicable 27 Inapplicable 28 Inapplicable
129 138 PSE&G
EXHIBIT NUMBER - -------------------------------------------- PREVIOUS FILING THIS -------------------------------- FILING COMMISSION EXCHANGES - --------- -------------- -------------- 3a(1) (b) 3a (b) 3a Restated Certificate of Incorporation of PSE&G, 8/28/86 8/29/86 effective May 1, 1986 3a(2) (c) 3a(2) (c) 3a(2) Certificate of Amendment of Certificate of 4/10/87 Restated Certificate of Incorporation of PSE&G filed February 18, 1987 with the State of New Jersey adopting limitations of liability provisions in accordance with an amendment to New Jersey Business Corporation Act 3a(3) (a) 3(a)3 (a) 3(a)3 Certificate of Amendment of Restated Certificate 2/3/94 2/14/94 of Incorporation of PSE&G filed June 17, 1992 with the State of New Jersey establishing the 7.44% Cumulative Preferred Stock ($100 Par) as a series of the Preferred Stock 3a(4) (a) 3(a)4 (a) 3(a)4 Certificate of Amendment of Restated Certificate 2/3/94 2/14/94 of Incorporation of PSE&G filed March 11, 1993 with the State of New Jersey establishing the 5.97% Cumulative Preferred Stock ($100 Par) as a series of Preferred Stock 3a(5) (a) 3(a)5 (a) 3(a)5 Certificate of Amendment of Restated Certificate 2/3/94 2/14/94 of Incorporation of PSE&G filed January 27, 1994 with the State of New Jersey establishing the 6.92% Cumulative Preferred Stock ($100 Par) and the 6.75% Cumulative Preferred Stock -- $25 Par as series of Preferred Stock 3b (c) 3b (c) 3b Copy of By-Laws of PSE&G, as in effect February 4/11/88 16, 1988 4a(1) (f) B-1 (c) 4b(1) Indenture between PSE&G and Fidelity Union Trust 2/18/81 Company, (now First Fidelity Bank, National Association), as Trustee, dated August 1, 1924, securing First and Refunding Mortgage Bonds Indentures between PSE&G and First Fidelity Bank, National Association, as Trustee, supplemental to Exhibit 4a(1), dated as follows: 4a(2) (i) 7(1a) (c) 4b(2) April 1, 1927 2/18/81 4a(3) (k) 2b(3) (c) 4b(3) June 1, 1937 2/18/81 4a(4) (k) 2b(4) (c) 4b(4) July 1, 1937 2/18/81 4a(5) (k) 2b(5) (c) 4b(5) December 19, 1939 2/18/81 4a(6) (g) B-10 (c) 4b(6) March 1, 1942 2/18/81 4a(7) (k) 2b(7) (c) 4b(7) June 1, 1949 2/18/81 4a(8) (k) 2b(8) (c) 4b(8) May 1, 1950 2/18/81
130 139
EXHIBIT NUMBER - -------------------------------------------- PREVIOUS FILING THIS -------------------------------- FILING COMMISSION EXCHANGES - --------- -------------- -------------- 4a(9) (k) 2b(9) (c) 4b(9) October 1, 1953 2/18/81 4a(10) (k) 2b(10) (c) 4b(10) May 1, 1954 2/18/81 4a(11) (j) 4b(16) (c) 4b(11) November 1, 1956 2/18/81 4a(12) (k) 2b(12) (c) 4b(12) September 1, 1957 2/18/81 4a(13) (k) 2b(13) (c) 4b(13) August 1, 1958 2/18/81 4a(14) (k) 2b(14) (c) 4b(14) June 1, 1959 2/18/81 4a(15) (k) 2b(15) (c) 4b(15) September 1, 1960 2/18/81 4a(16) (k) 2b(16) (c) 4b(16) August 1, 1962 2/18/81 4a(17) (k) 2b(17) (c) 4b(17) June 1, 1963 2/18/81 4a(18) (k) 2b(18) (c) 4b(18) September 1, 1964 2/18/81 4a(19) (k) 2b(19) (c) 4b(19) September 1, 1965 2/18/81 4a(20) (k) 2b(20) (c) 4b(20) June 1, 1967 2/18/81 4a(21) (k) 2b(21) (c) 4b(21) June 1, 1968 2/18/81 4a(22) (k) 2b(22) (c) 4b(22) April 1, 1969 2/18/81 4a(23) (k) 2b(23) (c) 4b(23) March 1, 1970 2/18/81 4a(24) (k) 2b(24) (c) 4b(24) May 15, 1971 2/18/81 4a(25) (k) 2b(25) (c) 4b(25) November 15, 1971 2/18/81 4a(26) (k) 2b(26) (c) 4b(26) April 1, 1972 2/18/81 4a(27) (a) 2 (c) 4b(27) March 1, 1974 3/29/74 2/18/81 4a(28) (a) 2 (c) 4b(28) October 1, 1974 10/11/74 2/18/81 4a(29) (a) 2 (c) 4b(29) April 1, 1976 4/6/76 2/18/81 4a(30) (a) 2 (c) 4b(30) September 1, 1976 9/16/76 2/18/81
131 140
EXHIBIT NUMBER - -------------------------------------------- PREVIOUS FILING THIS -------------------------------- FILING COMMISSION EXCHANGES - --------- -------------- -------------- 4a(31) (k) 2b(31) (c) 4b(31) October 1, 1976 2/18/81 4a(32) (a) 2 (c) 4b(32) June 1, 1977 6/29/77 2/18/81 4a(33) (l) 2b(33) (c) 4b(33) September 1, 1977 2/18/81 4a(34) (a) 2 (c) 4b(34) November 1, 1978 11/21/78 2/18/81 4a(35) (a) 2 (c) 4b(35) July 1, 1979 7/25/79 2/18/81 4a(36) (m) 2d(36) (c) 4b(36) September 1, 1979 (No. 1) 2/18/81 4a(37) (m) 2d(37) (c) 4b(37) September 1, 1979 (No. 2) 2/18/81 4a(38) (a) 2 (c) 4b(38) November 1, 1979 12/3/79 2/18/81 4a(39) (a) 2 (c) 4b(39) June 1, 1980 6/10/80 2/18/81 4a(40) (a) 2 (a) 2 August 1, 1981 8/19/81 8/19/81 4a(41) (b) 4e (b) 4e April 1, 1982 4/29/82 5/5/82 4a(42) (a) 2 (a) 2 September 1, 1982 9/17/82 9/20/82 4a(43) (a) 2 (a) 2 December 1, 1982 12/21/82 12/21/82 4a(44) (d) 4(ii) (d) 4(ii) June 1, 1983 7/26/83 7/27/83 4a(45) (a) 4 (a) 4 August 1, 1983 8/19/83 8/19/83 4a(46) (d) 4(ii) (d) 4(ii) July 1, 1984 8/14/84 8/17/84 4a(47) (d) 4(ii) (d) 4(ii) September 1, 1984 11/2/84 11/9/84 4a(48) (b) 4(ii) (b) 4(ii) November 1, 1984 (No. 1) 1/4/85 1/9/85 4a(49) (b) 4(ii) (b) 4(ii) November 1, 1984 (No. 2) 1/4/85 1/9/85 4a(50) (a) 2 (a) 2 July 1, 1985 8/2/85 8/2/85 4a(51) (c) 4a(51) (c) 4a(51) January 1, 1986 2/11/86 2/11/86 4a(52) (a) 2 (a) 2 March 1, 1986 3/28/86 3/28/86
132 141
EXHIBIT NUMBER - -------------------------------------------- PREVIOUS FILING THIS -------------------------------- FILING COMMISSION EXCHANGES - --------- -------------- -------------- 4a(53) (a) 2(a) (a) 2(a) April 1, 1986 (No. 1) 5/1/86 5/1/86 4a(54) (a) 2(b) (a) 2(b) April 1, 1986 (No. 2) 5/1/86 5/1/86 4a(55) (p) 4a(55) (p) 4a(55) March 1, 1987 4/9/87 4/9/87 4a(56) (a) 4 (a) 4 July 1, 1987 (No. 1) 8/17/87 8/17/87 4a(57) (d) 4 (d) 4 July 1, 1987 (No. 2) 11/13/87 11/20/87 4a(58) (a) 4 (a) 4 May 1, 1988 5/17/88 5/18/88 4a(59) (a) 4 (a) 4 September 1, 1988 9/27/88 9/28/88 4a(60) (a) 4 (a) 4 July 1, 1989 7/25/89 7/26/89 4a(61) (a) 4 (a) 4 July 1, 1990 (No. 1) 7/25/90 7/26/90 4a(62) (a) 4 (a) 4 July 1, 1990 (No. 2) 7/25/90 7/26/90 4a(63) (a) 4 (a) 4 June 1, 1991 (No. 1) 7/1/91 7/2/91 4a(64) (a) 4 (a) 4 June 1, 1991 (No. 2) 7/1/91 7/2/91 4a(65) (a) 4 (a) 4 November 1, 1991 (No. 1) 12/2/91 12/3/91 4a(66) (a) 4 (a) 4 November 1, 1991 (No. 2) 12/2/91 12/3/91 4a(67) (a) 4 (a) 4 November 1, 1991 (No. 3) 12/2/91 12/3/91 4a(68) (a) 4 (a) 4 February 1, 1992 (No. 1) 2/27/92 2/28/92 4a(69) (a) 4 (a) 4 February 1, 1992 (No. 2) 2/27/92 2/28/92 4a(70) (a) 4 (a) 4 June 1, 1992 (No. 1) 6/17/92 6/11/92 4a(71) (a) 4 (a) 4 June 1, 1992 (No. 2) 6/17/92 6/11/92 4a(72) (a) 4 (a) 4 June 1, 1992 (No. 3) 6/17/92 6/11/92 4a(73) (a) 4 (a) 4 January 1, 1993 (No.1) 2/2/93 2/2/93 4a(74) (a) 4 (a) 4 January 1, 1993 (No. 2) 2/2/93 2/2/93
133 142
EXHIBIT NUMBER - -------------------------------------------- PREVIOUS FILING THIS -------------------------------- FILING COMMISSION EXCHANGES - --------- -------------- -------------- 4a(75) (a) 4 (a) 4 March 1, 1993 3/17/93 3/18/93 4a(76) (b) 4 (a) 4 May 1, 1993 5/27/93 5/28/93 4a(77) (a) 4 (a) 4 May 1, 1993 (No. 2) 5/25/93 5/25/93 4a(78) (a) 4 (a) 4 May 1, 1993 (No. 3) 5/25/93 5/25/93 4a(79) (b) 4 (b) 4 July 1, 1993 12/1/93 12/1/93 4a(80) (a) 4 (a) 4 August 1, 1993 8/3/93 8/3/93 4a(81) (b) 4 (b) 4 September 1, 1993 12/1/93 12/1/93 4a(82) (a) 4 (a) 4 September 1, 1993 (No. 2) 12/1/93 12/1/93 4a(83) (b) 4 (b) 4 November 1, 1993 12/1/93 12/1/93 4a(84) (a) 4 (a) 4 February 1, 1994 2/3/94 2/14/94 4b(1) (h) 7(12) (c) 4c(1) Indenture between PSE&G and Federal Trust 2/18/81 Company, as Trustee, (Midlantic National Bank, Successor Trustee) dated July 1, 1948, providing for 6% Debenture Bonds due 1998 4b(2) (l) 2c(8) (c) 4c(8) Indenture between PSE&G and the Chase Manhattan 2/18/81 Bank (National Association), as Trustee, dated August 15, 1971, providing for 7 3/4% Debenture Bonds due 1996 4b(3) (b) 4 (b) 4 Indenture of Trust between the Company and The 12/1/93 12/1/93 Chase Manhattan Bank (National Association), as Trustee, providing for Secured Medium-Term Notes dated July 1, 1993 9 Inapplicable 10a(1) (c) 10c(1) (c) 10c(1) Directors' Deferred Compensation Plan 3/17/82 3/19/82 10a(2) (c) 10c(2) (c) 10c(2) Officers' Deferred Compensation Plan 3/17/82 3/19/82 10a(3) (c) 10c(3) (c) 10c(3) Supplemental Death Benefits Plan for officers 3/17/82 3/19/82 10a(4) (c) 10c(4) (c) 10c(4) Description of additional retirement for certain 3/17/82 3/19/82 officers 10a(5)(i) (c) 10b(5) (c) 10b(5) Limited Supplemental Death Benefits and 3/31/83 4/8/83 Retirement Plan 10a(5)(ii) Limited Supplemental Benefits Plan for Certain Employees
134 143
EXHIBIT NUMBER - -------------------------------------------- PREVIOUS FILING THIS -------------------------------- FILING COMMISSION EXCHANGES - --------- -------------- -------------- 10a(6)(i) (c) 10a(6) (c) 10a(6) Description of additional retirement benefits 3/10/87 4/16/87 for certain officers 10a(6)(ii) (c) 10a(6)(1) (c) 10a(6)(1) Description of additional retirement benefit for 3/30/90 3/30/90 certain officers. 10a(6)(iii) (c) 10a(6)(2) (c) 10a(6)(2) Description of additional retirement benefit for 3/30/92 4/27/92 a certain officer. 10a(7) (o) 10g (o) 10g Management Incentive Compensation Plan 10a(8) (c) 10a(8) (c) 10a(8) Long-Term Incentive Plan 3/30/89 4/18/89 10a(9) (c) 10a(9) (c) 10a(9) Public Service Enterprise Group Incorporated 3/30/89 4/18/89 Pension Plan for Outside Directors 10a(10) (c) 10a(9) (c) 10a(9) Letter Agreement with E. James Ferland dated 2/10/93 2/11/93 April 16, 1986 10a(11) (c) 10a(10) (c) 10a(10) Letter Agreement with Thomas M. Crimmins, Jr. 2/10/93 2/11/93 dated April 5, 1989 10a(12) (c) 10a(12) (c) 10a(12) Letter Agreement with Robert C. Murray dated 2/10/93 2/11/93 December 17, 1991 10a(13) Letter agreement with Patricia A. Rado dated March 24, 1993. 11 Inapplicable 12(a) Computation of Ratios of Earnings to Fixed Charges 12(b) Computation of Ratios of Earnings to Fixed Charges Plus Preferred Stock Dividend Requirements 13 Inapplicable 16 Inapplicable 18 Inapplicable 19 Inapplicable 21 Inapplicable 22 Inapplicable 23 Independent Auditors' Consent 24 Inapplicable 27 Inapplicable 28 Inapplicable
135 EX-10.A5II 2 EX-10.A5II 1 EXHIBIT 10A(5)(II) LIMITED SUPPLEMENTAL BENEFITS PLAN FOR CERTAIN EMPLOYEES OF PUBLIC SERVICE ELECTRIC AND GAS COMPANY March 31, 1993 2 LIMITED SUPPLEMENTAL BENEFITS PLAN FOR CERTAIN EMPLOYEES OF PUBLIC SERVICE ELECTRIC AND GAS COMPANY TABLE OF CONTENTS
PAGE ------ 1. PURPOSE................................................... 1 2. DEFINITIONS OF TERMS USED IN THE PLAN..................... 1 3. DEATH BENEFIT............................................. 2 4. RETIREMENT BENEFIT........................................ 3 5. ADMINISTRATION OF ACCOUNTS................................ 4 6. DESIGNATION OF BENEFICIARIES.............................. 4 7. LIMITATION OF BENEFITS.................................... 5 8. COMMITTEE MAY MAKE CERTAIN LUMP-SUM DISTRIBUTIONS........................................... 6 9. PLAN DOES NOT CONSTITUTE AN EMPLOYMENT AGREEMENT............................................... 6 10. AMENDMENT OR TERMINATION OF THE PLAN....................... 6 11. WHAT CONSTITUTES NOTICE.................................... 6 12. ADVANCE DISCLAIMER OF WAIVER............................... 6 13. EFFECT OF INVALIDITY OF ANY PART OF THE PLAN............... 6 14. PLAN BINDING ON ANY SUCCESSOR.............................. 6 15. FUNCTION OF THE COMMITTEE.................................. 6 16. COMPANY SHALL PAY LEGAL FEES............................... 6 17. LAW GOVERNING THE PLAN..................................... 7 18. MISCELLANEOUS.............................................. 7
i 3 LIMITED SUPPLEMENTAL BENEFITS PLAN FOR CERTAIN EMPLOYEES OF PUBLIC SERVICE ELECTRIC AND GAS COMPANY 1. PURPOSE. The purpose of this Plan is to assist the Company in attracting and retaining a stable pool of key managerial talent and to encourage long-term key employee commitment to the Company by providing selected employees of the Company with certain limited supplemental death and retirement benefits as defined herein. The Plan is intended to provide such benefits to a select group of management or highly compensated employees within the meaning of ERISA. 2. DEFINITIONS OF TERMS USED IN THE PLAN. As used in the Plan, the following words and phrases shall have the meanings indicated: (a) "ACCOUNT" -- Any account established pursuant to Paragraph 3(b) or 4(e) of the Plan. (b) "ANNUITY" -- A fully-funded contract with an independent insurance company purchased by the Company pursuant to Paragraph 4(e) of the Plan. (c) "ASSETS" -- All amounts that have been credited to an Employee's Account in accordance with Paragraph 3(b), 4(e), or 5(b) of the Plan. (d) "BENEFICIARY" -- The individual(s) and/or entity(ies) designated in writing by a Participant in the form attached to the Plan as Schedule A. (e) "CHANGE IN CONTROL" -- For the purposes of the Plan, a Change in Control of the Company shall be deemed to have occurred upon the happening of any one of the following events: (i) A filing with the U.S. Securities and Exchange Commission disclosing that any individual, group or other entity (except for any employee benefit plan sponsored by the Company or Enterprise or any trust related to such a plan) is the beneficial owner, directly or indirectly, of 10% or more of the Voting Stock of Enterprise; (ii) The purchase by any individual, group or other entity (other than by Enterprise or an affiliate of Enterprise) pursuant to a tender or exchange offer that results in such individual, group or entity being the beneficial owner, directly or indirectly, of 10% or more of the Voting Stock of Enterprise; (iii) Approval by the stockholders of Enterprise or the Company, as the case may be, of any merger or consolidation of Enterprise or the Company in which the common stockholders of Enterprise or of the Company, as the case may be, do not continue substantially the same proportionate ownership of the common stock of the surviving entity; (iv) Approval by stockholders of the sale or transfer of the Company to an unrelated entity; (v) The sale or transfer, or taking by eminent domain or otherwise, of all or substantially all of the assets of the Company; or (vi) A change in the majority of the Board of Directors of the Company or of Enterprise within any twelve (12) month period. Except that a Change in Control shall not be deemed to have occurred with respect to the events noted in items (iii), (iv) or (v) hereof if the transaction, or in the case of the event noted in item (vi) hereof, if the election or nomination for election by the stockholders of each new director, shall have been approved by a vote of three-fourths of the directors of the Company with respect to Company directors and of the directors of Enterprise, with respect to Enterprise directors, then still in office who were in office prior to the event, or in the case of item (vi) hereof, at the beginning of the twelve (12) month period. (f) "CODE" -- The Internal Revenue Code of 1986, as amended. (g) "COMMITTEE" -- The Employee Benefits Committee of the Company as selected by its Board of Directors. (h) "COMPANY" -- Public Service Electric and Gas Company. 4 (i) "COMPENSATION" -- (i) For the purposes of calculating the Death Benefit pursuant to Paragraph 3 of the Plan, as to any Participant, Compensation shall be equal to the annual rate of salary of the Participant in effect at the date of death; and (ii) For the purposes of calculating the Retirement Benefit pursuant to Paragraph 4 of the Plan, as to any Participant, Compensation shall be equal to the average of the total remuneration paid to such Participant for services rendered to the Company, excluding the Company's cost for any public or private employee benefit plan (including, without limitation, the Long-Term Incentive Compensation Plan of Enterprise) but including all elective contributions that are made by the Company on behalf of a Participant which are not includable in income under Code Sections 125 or 401(k), for the five years ending at the earlier of such Participant's date of Retirement or attainment of normal retirement age under the Pension Plan; provided, however, that for the purposes of Paragraph 4 of the Plan, Compensation with respect to any Participant shall not exceed the amount which is 120% of the average annual base salary of the Participant for the applicable five-year period. (j) "ENTERPRISE" -- Public Service Enterprise Group Incorporated. (k) "ERISA" -- The Employee Retirement Income Security Act of 1974, as amended. (l) "PARTICIPANT" -- Each employee of the Company nominated by the Chief Executive Officer and designated by the Board of Directors of the Company. The Chief Executive Officer of the Company shall nominate such select and key employees of the Company upon such terms as he shall deem appropriate due to the employee's responsibilities and opportunity to contribute substantially to the financial and operating objectives of the Company. (m) "PENSION PLAN" -- The Pension Plan of Public Service Electric and Gas Company. (n) "PLAN" -- The Limited Supplemental Benefits Plan for Certain Employees of Public Service Electric and Gas Company. (o) "RETIREMENT" -- For the purposes of the Plan, Retirement of a Participant shall be deemed to have occurred upon either (i) termination of the Participant's service with the Company with the right to an immediate benefit under the Pension Plan or (ii) upon a Change in Control of the Company. Retirement shall not include termination of service with the right to a deferred pension. (p) "RETIREMENT PLAN" -- Any pension plan within the meaning of ERISA, excluding (i) the Pension Plan and all defined contribution plans maintained by the Company, except insofar as any such defined contribution plan may provide supplementary benefits to the Pension Plan, (ii) this Plan and (iii) all deferred compensation plans, tax credit employee stock ownership plans and thrift plans, and all other profit-sharing plans which are not the principal retirement benefit of a plan sponsor, maintained by sponsors other than the Company. (q) "VOTING STOCK" -- Outstanding stock of a corporation entitled to vote in the election of the directors of that corporation. 3. DEATH BENEFIT. (a) AMOUNT OF BENEFIT -- If a Participant dies while in the active employment of the Company, the Company shall provide a death benefit to such Participant's Beneficiary in an amount equal to 150% of the Participant's Compensation, adjusted to the nearest $1,000, or to the next highest $1,000 if such Compensation is a multiple of $500 but not of $1,000. (b) ESTABLISHMENT OF ACCOUNT -- Upon the death of a Participant during employment with the Company, the Company shall establish an Account for the benefit of such Participant's Beneficiary. Such Account shall initially be credited with an amount equal to the benefit provided under Paragraph 3(a) and shall be held and administered as provided in Paragraph 5 of the Plan. 2 5 4. RETIREMENT BENEFIT. (a) GENERAL -- At Retirement, the Company shall provide each Participant with a retirement benefit calculated as provided in this Paragraph 4. (b) DETERMINATION OF BENEFIT -- (i) The Participant's Compensation shall be multiplied by an amount equal to one one-hundredth of the sum of (A) the number of the Participant's years of credited service under the Pension Plan at Retirement, (B) the number of any additional years of service credit to which the Participant may be entitled from the Company under any written arrangement with the Company, and (C) 30; but, in no event, shall the multiple be greater than 0.75. (ii) The amount determined under subparagraph (i) of this Paragraph 4(b) shall be reduced by the sum of (A) the amount the Participant would be entitled to at Retirement as an annual pension benefit under the Pension Plan calculated as a single life annuity without reduction for any pre-retirement survivor's option coverage or any reduction for early retirement, (B) 100% of the amount of the unreduced annual Social Security benefit to which the Participant would be entitled at age 65 (or such other age which may be established by the Social Security Administration from time to time as the earliest age at which a Participant may receive an unreduced benefit thereunder), assuming that the Participant has no earnings from the date of Retirement to age 65 (or such other applicable age), or, if greater, any disability benefit under Social Security to which the Participant may be entitled, and (C) the aggregate of the annual benefits to which the Participant is entitled under all Retirement Plans as of the date the Participant is employed by the Company, such Social Security Benefits and benefits under all Retirement Plans to be calculated as single life annuities without any reductions, under rules, procedures and equivalents determined by the Committee. To determine the amounts referred to under (B) and (C) above, the Participant shall file a declaration of all such amounts with the Employee Benefits Department of the Company in such form as the Committee may require from time to time. No benefit shall be paid under the Plan until such a declaration, in satisfactory form, shall be filed with the Employee Benefits Department. If a Participant is granted a disability Social Security benefit, he shall notify the Employee Benefits Department thereof within 30 days thereof, and the Participant's retirement benefit under this Plan shall be adjusted accordingly. The Company shall be entitled to rely on such statements in making payment, and if any such statement is incorrect or is not furnished, the Company shall be entitled to reimbursement from the Participant, the Beneficiary or their legal representatives for any overpayment and may reduce or suspend future payments to recover any such overpayment. In the event it is established to the satisfaction of the Committee, in its sole discretion, that any such statement was intentionally false or omitted, the Participant or Beneficiary shall be entitled to no further payments under the Plan, and the Company shall be entitled to recover any payments made hereunder. (c) FORMS OF BENEFIT -- The annual amount determined under paragraph (b) of this Paragraph 4 shall be paid in one of the following forms: (i) a single life annuity in monthly installments equal to one twelfth of such annual amount; (ii) a joint and survivor annuity in monthly installments based upon such annual amount and calculated in accordance with any post-retirement survivorship option available under the Pension Plan; (iii) a 10-year certain level payment annuity in monthly installments which is the actuarial equivalent to the single life annuity under (i), as determined by the actuary for the Pension Plan according to mortality assumptions used for the Pension Plan on the basis of a current interest rate assumption determined from time to time by the Committee; or (iv) a 10-year certain increasing payment annuity paid in accordance with Paragraph 5(c) of the Plan based upon the lump-sum amount which is the actuarial equivalent to the single life annuity under (i), as determined by the actuary for the Pension Plan according to mortality 3 6 assumptions used for the Pension Plan on the basis of a current market rate interest assumption determined from time to time by the Committee. The Committee in its sole discretion shall determine the form of benefit payment for each Participant. (d) CHANGE IN CONTROL -- (i) If there shall occur a Change in Control, then each Participant who has not already retired under the Pension Plan shall be entitled to a retirement benefit under this Plan calculated as if such Participant had retired under the Pension Plan as of the date of such Change in Control. (ii) The retirement benefit to be paid pursuant to Paragraph 4(d)(i) shall be paid to the Participant in a 10-year certain level payment annuity paid in accordance with Paragraph 5(c) of the Plan based upon the lump-sum amount which is the actuarial equivalent to the single-life annuity under Paragraph 4(c)(i) of the Plan as determined by the actuary for the Pension Plan according to mortality assumptions used for the Pension Plan on the basis of a current market rate interest assumption determined from time to time by the Committee. (iii) Notwithstanding anything contained in the Plan to the contrary, if a Change in Control shall occur, the Company shall purchase from an independent insurance company fully paid annuities which shall provide for the payment to all Participants and Beneficiaries of all accrued benefits under the Plan. (e) ESTABLISHMENT OF ACCOUNT -- If payment is made under either Paragraph 4(c)(iii) or 4(c)(iv) of the Plan, upon Retirement, the Company shall establish an Account for the benefit of the Participant and any Beneficiary. Such Account shall initially be credited with an amount equal to the amount of the lump-sum payment determined under Paragraph 4(c)(iii) or 4(c)(iv), as applicable, and shall be administered as provided in Paragraph 5 of the Plan. (f) DISABILITY RETIREMENT -- If a Participant retires for disability under the Pension Plan, payment of the Participant's retirement benefit and any joint and survivor benefit under Paragraph 4(c)(ii) of the Plan shall be subject to the same conditions as the disability pension under the Pension Plan. 5. ADMINISTRATION OF ACCOUNTS. (a) GENERAL -- Accounts shall be established under the Plan only pursuant to Paragraphs 3(b) and 4(e) hereof. All Accounts shall be administered in accordance with the provisions of this Paragraph 5. (b) INTEREST ON ASSETS IN THE ACCOUNT -- The Assets credited to a Participant's Account shall accrue interest at a market rate of interest as may be determined from time to time by the Committee. (c) TIMING OF THE DISTRIBUTION(S) -- A Participant or Beneficiary shall receive the distribution of the Participant's Account in the form of monthly distributions over a ten-year period commencing in the month following the month of the Participant's death in the case of a death benefit, or over a ten-year period commencing in the month of the Participant's Retirement in the case of a retirement benefit. The amount of each installment shall be determined by dividing the then unpaid balance in the Participant's Account, including accrued and unpaid interest, by the number of installments remaining to be paid. (d) REQUEST FOR CHANGE IN DISTRIBUTION -- A Participant, Beneficiary or legal representative may request a change in the timing, frequency or amount of payments made from a Participant's Account by filing a written request therefor with the Committee. The Committee may, in its sole discretion, grant such request only if the Committee determines that an emergency beyond the control of the Participant, Beneficiary or legal representative exists and which would cause such Participant, Beneficiary or legal representative severe financial hardship if the payment of such benefits were not approved. Any such distribution for hardship shall be limited to the amount needed to meet such emergency. The Committee shall inform the Participant, Beneficiary or legal representative of its decision within sixty (60) days of receipt of the written request. 6. DESIGNATION OF BENEFICIARIES (a) GENERAL -- To designate an individual(s) and/or entity(ies) to receive the benefits of the Plan with respect to a Participant, such Participant must file a written designation in the form of Schedule A to 4 7 the Plan with the Committee. Subject to the restrictions of this Paragraph 6, a Participant may change such designation by filing a subsequent written designation. (b) DEATH BENEFIT -- By designation on Section 1 of a Schedule A filed with the Committee, a Participant may name an individual(s) and/or entity(ies) to receive a death benefit under Paragraph 3 of the Plan with respect to such Participant. A Participant may change such designation by filing a subsequent notification in the form of Schedule A. (c) RETIREMENT BENEFITS -- (i) SINGLE LIFE ANNUITY. If a Participant's retirement benefit under the Plan is paid as a single life annuity under Paragraph 4(c)(i) of the Plan, there shall be no Beneficiary with respect to such benefit and all retirement benefits shall cease upon the Participant's death. (ii) JOINT AND SURVIVOR ANNUITY. If a Participant's retirement benefit under Paragraph 4(c)(ii) of the Plan and the Participant's pension under the Pension Plan are both paid as joint and survivor annuities, any survivor annuity under the Plan shall be paid to the same beneficiary entitled to any post-retirement survivorship benefit under the Pension Plan. If the Participant's pension under the Pension Plan is paid as a single life annuity, any survivor annuity paid under Paragraph 4(c)(ii) of the Plan shall be paid to the Beneficiary designated in Section 2 of Schedule A to the Plan. If a Beneficiary designated by the Participant under Paragraph 4(c)(ii) of the Plan predeceases the Participant within five years from the date of Participant's Retirement, the Participant's retirement benefit hereunder will automatically revert and return to a single life annuity commencing the first day of the month following the month in which the designated Beneficiary died. If, however, the Beneficiary predeceases the Participant more than five years after Participant's Retirement, the Participant's reduced retirement benefit shall continue during his life and no survivor benefit shall be paid. The election of such Beneficiary must be made prior to Retirement and may not be changed thereafter. (iii) 10-YEAR CERTAIN ANNUITIES. If a Participant's Retirement benefit is paid as a 10-year certain level payment annuity under Paragraph 4(c)(iii) or Paragraph 4(d)(ii) of the Plan, or a 10-year certain increasing payment annuity under Paragraph 4(c)(iv), the Beneficiary or Beneficiaries with respect to such benefit shall be as specified in Section 1 of the most recent Schedule A filed with the Committee. (d) DESIGNATION BY LAST REMAINING BENEFICIARY -- After a Participant's death, if there is only one remaining Beneficiary with respect to a death benefit under Paragraph 3 of the Plan or a 10-year certain annuity under Paragraph 4(c)(iii), 4(c)(iv) or 4(d)(ii) of the Plan, such Beneficiary shall be entitled to designate in writing to the Committee an individual to be paid any remainder of such benefit under the Plan at such Beneficiary's death. If no such further designation is made, such remainder shall be paid to such Beneficiary's estate. In the event of such Beneficiary's death, and regardless of whether any such further designation has been made, the Committee in its sole discretion may require any such remainder to be paid as a lump sum. 7. LIMITATION OF BENEFITS. (a) The Plan shall be unfunded with respect to all benefits to be paid hereunder. In addition, except as provided in Paragraphs 4(d)(iii) and 16(b), the Company shall not be required to segregate any amounts credited to any Account, which shall be established merely as an accounting convenience; title to and beneficial ownership of any Assets credited to any Account shall at all times remain in the Company, and no Participant, Beneficiary or legal representative shall have any interest whatsoever in any specific assets of the Company. (b) The payment of any death or survivorship benefit under this Plan shall be contingent upon such evidence of death as may be required by the Committee. (c) If the Company should terminate the Plan pursuant to Paragraph 10 hereof, the Company's obligation to pay any benefits under the Plan shall likewise terminate; provided, however, that, 5 8 except as otherwise provided in said Paragraph 10, the Company may not terminate the Plan with respect to any Participant subsequent to that Participant's Retirement or death. 8. COMMITTEE MAY MAKE CERTAIN LUMP-SUM DISTRIBUTIONS. The Committee reserves the right to make a lump-sum distribution, notwithstanding any other provision of the Plan, if the total benefit payable to a Participant, Beneficiary or legal representative is $20,000 or less at any time, except that this $20,000 limitation shall not apply to benefits payable pursuant to Section 4(d) hereof. 9. PLAN DOES NOT CONSTITUTE AN EMPLOYMENT AGREEMENT. The Plan shall not constitute a contract for the continued employment of any Participant by the Company. The Company reserves the right to modify a Participant's Compensation at any time and from time to time as it considers appropriate and to terminate any Participant's employment for any reason at any time notwithstanding the Plan. 10.AMENDMENT OR TERMINATION OF THE PLAN. The Board of Directors of the Company may, in its sole discretion, amend, modify or terminate the Plan at any time, provided, however, that no such amendment, modification or termination shall deprive any Participant or Beneficiary of a previously acquired right unless such Participant or Beneficiary or his legal representative shall consent to such change. No right to a death benefit under the Plan shall accrue until a Participant's death and no right to a retirement benefit shall accrue until a Participant's Retirement. 11.WHAT CONSTITUTES NOTICE. Any notice to a Participant, a Beneficiary or any legal representative hereunder shall be given in writing, by personal delivery, overnight express service or by United States mail, postage prepaid, addressed to such person's last known address. Any notice to the Company or the Committee hereunder (including the filing of Schedule A) shall be given by delivering it in person or by overnight express service, or depositing it in the United States mail, postage prepaid, to the Secretary of the Employee Benefits Committee, Public Service Electric and Gas Company, 80 Park Plaza, T21F, P.O. Box 570, Newark, New Jersey, 07101. 12. ADVANCE DISCLAIMER OF WAIVER. Failure by the Company or the Committee to insist upon strict compliance with any of the terms, covenants or conditions hereof shall not be deemed a waiver of any such term, covenant or condition, nor shall any waiver or relinquishment of any right or power hereunder at any one or more times be deemed a waiver or relinquishment of any such right or power at any other time or times. 13. EFFECT OF INVALIDITY OF ANY PART OF THE PLAN. The invalidity or unenforceability of any provision hereof shall in no way affect the validity or enforceability of any other provision of the Plan. 14. PLAN BINDING ON ANY SUCCESSOR. Except as otherwise provided herein, the Plan shall inure to the benefit of and be binding upon the Company, its successors and assigns, including but not limited to any corporation which may acquire all or substantially all of the Company's assets and business or with or into which the Company may be consolidated or merged. 15. FUNCTION OF THE COMMITTEE. The Plan shall be administered by the Committee and the Committee shall be the final arbiter of any question that may arise under the Plan. 16. COMPANY SHALL PAY LEGAL FEES. (a) In the event of a Change in Control, the Company shall pay the legal fees and expenses of any Participant, Beneficiary or legal representative thereof incurred in any action to enforce such person's right to receive a benefit under the Plan. (b) In the event of a Change in Control, the Company shall establish a trust for the benefit of Participants and persons claiming through them which shall be funded in an initial amount of $1,000,000 from which the Committee shall, according to reasonable rules that the Committee shall establish, pay the legal fees and expenses incurred by any Participant, Beneficiary or legal 6 9 representative thereof in enforcing his rights under the Plan. The Company shall contribute such additional sums to such trust as shall be necessary to pay such legal fees and expenses. 17. LAW GOVERNING THE PLAN. Except to the extent federal law applies, the Plan shall be governed by the laws of the State of New Jersey without giving effect to principles of conflicts of law. 18. MISCELLANEOUS. (a) The masculine pronoun shall mean the feminine wherever appropriate. (b) The headings are for convenience only. In the event of a conflict between the headings of a paragraph and its contents, the contents shall control. 7 EX-10.A12 3 EX-10.A12 1 EXHIBIT 10(A)(12) MARCH 24, 1993 MS. PATRICIA A. RADO 47 MILDRED AVENUE WATERBURY, CONNECTICUT 06708 Dear Pat: In conjunction with your employment as Vice President and Comptroller of Public Service Electric and Gas Company (PSE&G), effective April 12, 1993, the agreed terms of employment are as follows: 1. Your salary shall commence at the annual rate of $130,000 on your date of employment. 2. You shall be entitled to those benefits from time to time available to officers and employees of PSE&G generally, except as otherwise provided in this letter. Elected officers are eligible for a minimum of four weeks of vacation per year. In addition, financial counseling will be available to you. 3. PSE&G will compensate you for reasonably incurred moving, relocation and temporary living expenses (including reimbursement of any sales commission on your existing principal residence and including, if you desire, the purchase of your principal residence) in accordance with PSE&G's Relocation Program. Reasonable temporary living expenses will be compensated for a period up to 90 days. 4. You may be discharged with or without cause at any time. "Cause" shall mean (i) the willful or negligent dereliction of, and continued failure by you to perform your duties with PSE&G and Enterprise (other than any such failure resulting from your incapacity due to physical or mental illness), after a written demand for performance is delivered to you by the Board of Directors or the Chief Executive Officer of PSE&G or Enterprise which identifies the manner in which the Board or CEO believes that you have not so performed your duties, or (ii) any conduct constituting a felony or moral turpitude. 5. Your participation in PSE&G's Management Incentive Compensation Plan (MICP) will begin effective as of your Date of Employment (DOE). The presently established target incentive award for the position of Vice President and Comptroller is 16% of current salary. This may be adjusted from time to time in accordance with established plan procedures. In addition, to provide an appropriate transition adjustment, because any MICP awards are paid out one third annually over a three-year period, PSE&G will pay to you a lump sum cash payment in January, 1994 of $15,000. Copies of the MICP and the calculation determining the 1991 corporate factor are attached for your information. 6. In light of your allied work experience, you shall be granted credited service, in addition to that earned as a result of your employment by PSE&G, for the purpose of determining the amount (but not the vesting) of any pension benefits from PSE&G in accordance with the following schedule:
ADDITIONAL YEARS OF DATE OF TERMINATION OF EMPLOYMENT CREDITED SERVICE - --------------------------------------------------------------------------- ------------------- On or after DOE plus 5 years and prior to DOE plus 6 years................. 5 On or after DOE plus 6 years and prior to DOE plus 7 years................. 6 On or after DOE plus 7 years and prior to DOE plus 8 years................. 7 On or after DOE plus 8 years and prior to DOE plus 9 years................. 8 On or after DOE plus 9 years and prior to DOE plus 10 years................ 9 On or after DOE plus 10 years.............................................. 10
The additional credited service shown in the table above is not cumulative, but is applied from the table depending upon when you retire. For example, assuming you are currently age 50, the additional credited service set forth above, together with the Board's current policy of granting 5 years of additional credited service to officers who retire between age 60 and age 65 1/2, and your actual credited service, will afford you a total of 25 years of credited service at age 60, and 30 years of credited service at age 65. Under PSE&G's pension programs as presently in effect, you would be eligible to retire at age 55 with a reduced pension or at age 60 with an unreduced pension, dependent upon your actual date of birth and the Date of Employment. PSE&G's basic pension plan also requires five years of service for vesting purposes. 1 2 7. Your employment is contingent upon a satisfactory reference investigation and successful completion of PSE&G's customary medical examination. As part of PSE&G's requirement for a work force that is free from the influence of foreign chemical substances, the medical examination will include definitive analysis of a freshly voided urine specimen for the presence of commonly abused drugs, including marijuana. If the foregoing is in accordance with your understanding, please sign the enclosed copy of this letter and return it to me. Sincerely, ROBERT C. MURRAY Agreed to this day of March, 1993 PATRICIA A. RADO - --------------------- Patricia A. Rado 2 EX-12 4 EX-12 1 EXHIBIT 12 PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES PLUS PREFERRED STOCK DIVIDEND REQUIREMENTS
YEAR ENDED DECEMBER 31, ------------------------------------------------------------- 1989(A) 1990(A) 1991(A) 1992 1993 --------- --------- --------- --------- --------- (THOUSANDS OF DOLLARS) Net Income....................... $ 523,435 $ 403,662 $ 543,035 $ 504,117 $ 595,519(A) Plus Income Taxes................ 207,644 144,652 274,146 253,276 316,010 --------- --------- --------- --------- --------- Net Income Before Income Taxes... 731,079 548,314 817,181 757,393 911,529 --------- --------- --------- --------- --------- Fixed Charges and Preferred Stock Dividend Requirements: Interest Charges............... 408,661 457,017 478,321 524,025 502,534 Interest Factor in Rentals..... 8,908 9,162 9,311 9,591 11,090 Preferred Stock Dividend Requirements (Pre-tax)...... 39,729 38,544 42,676 46,748 58,112 --------- --------- --------- --------- --------- Total.................. 457,298 504,723 530,308 580,364 571,736 --------- --------- --------- --------- --------- Earnings Before Fixed Charges and Preferred Stock Dividend Requirements................... $1,188,377 $1,053,037 $1,347,489 $1,337,757 $1,483,265 --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- Ratio............................ 2.60 2.09 2.54 2.30 2.59
(A) Excludes cumulative effect of $5.4 million change in accounting for EDHI's income taxes. (See Note 9 -- Federal Income Taxes of Notes to Consolidated Financial Statements.) 1 EX-12.A 5 EX-12.A 1 EXHIBIT 12(A) PUBLIC SERVICE ELECTRIC AND GAS COMPANY COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
YEAR ENDED DECEMBER 31, ------------------------------------------------------------- 1989 1990 1991 1992 1993 --------- --------- --------- --------- --------- (THOUSANDS OF DOLLARS) Net Income....................... $ 544,374 $ 537,619 $ 545,479 $ 475,936 $ 614,868 Plus Income Taxes................ 214,299 209,360 261,912 223,782 307,414 --------- --------- --------- --------- --------- Net Income Before Income Taxes... 758,673 746,979 807,391 699,718 922,282 --------- --------- --------- --------- --------- Fixed Charges Interest Charges............... 333,717 346,020 358,517 401,902 389,956 Interest Factor in Rentals..... 8,908 9,162 9,311 9,591 11,090 --------- --------- --------- --------- --------- Total.................. 342,625 355,182 367,828 411,493 401,046 --------- --------- --------- --------- --------- Earnings Before Fixed Charges.... $1,101,298 $1,102,161 $1,175,219 $1,111,211 $1,323,328 --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- Ratio............................ 3.21 3.10 3.20 2.70 3.30 ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
2 EX-12.B 6 EX-12.B 1 EXHIBIT 12(B) PUBLIC SERVICE ELECTRIC AND GAS COMPANY COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES PLUS PREFERRED STOCK DIVIDEND REQUIREMENTS
YEAR ENDED DECEMBER 31, -------------------------------------------------------------- 1989 1990 1991 1992 1993 ---------- ---------- ---------- ---------- ---------- (THOUSANDS OF DOLLARS) Net Income........................... $ 544,374 $ 537,619 $ 545,479 $ 475,936 $ 614,868 Plus Income Taxes.................... 214,299 209,361 261,912 223,782 307,414 ---------- ---------- ---------- ---------- ---------- Net Income Before Income Taxes....... 758,673 746,980 807,391 699,718 922,282 ---------- ---------- ---------- ---------- ---------- Fixed Charges and Preferred Stock Dividend Requirements: Interest Charges................... 333,717 346,020 358,517 401,902 389,956 Interest Factor in Rentals......... 8,908 9,162 9,311 9,591 11,090 Preferred Stock Dividend Requirements (Pre-tax).......... 40,236 40,116 42,703 46,675 56,957 ---------- ---------- ---------- ---------- ---------- Total...................... 382,861 395,298 410,531 458,168 458,003 ---------- ---------- ---------- ---------- ---------- Earnings Before Fixed Charges and Preferred Stock Dividend........... $1,101,298 $1,102,162 $1,175,219 $1,111,211 $1,313,328 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Ratio................................ 2.88 2.79 2.86 2.43 2.89 ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
3 EX-21 7 EX-21 1 EXHIBIT 21 PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED SIGNIFICANT SUBSIDIARIES
STATE OF NAME OWNERSHIP % INCORPORATION - --------------------------------------------------------------------- ----------- ------------- Public Service Electric and Gas Company.............................. 100 New Jersey
The remaining subsidiaries of Public Service Enterprise Group Incorporated are not significant subsidiaries as defined in Regulation S-X. EX-23.A 8 EX-23.A 1 ENTERPRISE EXHIBIT 23 PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in Registration Statements Nos. 33-44581, 33-44582, 33-45491 and 33-4781 of Public Service Enterprise Group Incorporated on Form S-8 and Registration Statement No. 33-49123 of Public Service Enterprise Group Incorporated on Form S-3 of our report dated February 18, 1994, appearing in this Annual Report on Form 10-K of Public Service Enterprise Group Incorporated for the year ended December 31, 1993. DELOITTE & TOUCHE Parsippany, New Jersey February 25, 1994 EX-23.B 9 EX-23.B 1 PSE&G EXHIBIT 23 PUBLIC SERVICE ELECTRIC AND GAS COMPANY INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in Registration Statements Nos. 33-49367 and 33-50197, 33-50199 and 33-51309 of Public Service Electric and Gas Company on Forms S-3 of our report dated February 18, 1994 appearing in this Annual Report on Form 10-K of Public Service Electric and Gas Company for the year ended December 31, 1993. DELOITTE & TOUCHE Parsippany, New Jersey February 25, 1994 -----END PRIVACY-ENHANCED MESSAGE-----