Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2011

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


	Recurring Fair Value Measurements as of September 30, 2011
Description	Total			Cash Collateral Netting (E)			Quoted Market Prices for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
	Millions
PSEG
Assets:
Derivative Contracts:
Energy-Related Contracts (A)	$	119		$	(10	)	$	0	$	99		$	30
Interest Rate Swaps (B)	$	69		$	0		$	0	$	69		$	0
NDT Funds: (C)
Equity Securities	$	575		$	0		$	575	$	0		$	0
Debt Securities—Govt Obligations	$	355		$	0		$	0	$	355		$	0
Debt Securities—Other	$	284		$	0		$	0	$	284		$	0
Other Securities	$	66		$	0		$	1	$	65		$	0
Rabbi Trusts—Mutual Funds (C)	$	170		$	0		$	17	$	153		$	0
Liabilities:
Derivative Contracts:
Energy-Related Contracts (A)	$	(122	)	$	0		$	0	$	(88	)	$	(34	)
Interest Rate Swaps (B)	$	(3	)	$	0		$	0	$	(3	)	$	0
Power
Assets:
Derivative Contracts:
Energy-Related Contracts (A)	$	119		$	(10	)	$	0	$	99		$	30
NDT Funds: (C)
Equity Securities	$	575		$	0		$	575	$	0		$	0
Debt Securities—Govt Obligations	$	355		$	0		$	0	$	355		$	0
Debt Securities—Other	$	284		$	0		$	0	$	284		$	0
Other Securities	$	66		$	0		$	1	$	65		$	0
Rabbi Trusts—Mutual Funds (C)	$	33		$	0		$	3	$	30		$	0
Liabilities:
Derivative Contracts:
Energy-Related Contracts (A)	$	(96	)	$	0		$	0	$	(88	)	$	(8	)
PSE&G
Assets:
Rabbi Trust—Mutual Funds (C)	$	57		$	0		$	6	$	51		$	0
Liabilities:
Derivative Contracts:
Energy Related Contracts (A)	$	(26	)	$	0		$	0	$	0		$	(26	)


	Recurring Fair Value Measurements as of December 31, 2010
Description	Total			Cash Collateral Netting (E)			Quoted Market Prices of Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
	Millions
PSEG
Assets:
Derivative Contracts:
Energy-Related Contracts (A)	$	222		$	(135	)	$	0	$	228		$	129
Interest Rate Swaps (B)	$	39		$	0		$	0	$	39		$	0
NDT Funds: (C)
Equity Securities	$	735		$	0		$	735	$	0		$	0
Debt Securities-Govt Obligations	$	303		$	0		$	0	$	303		$	0
Debt Securities-Other	$	255		$	0		$	0	$	255		$	0
Other Securities	$	70		$	0		$	0	$	62		$	8
Rabbi Trusts—Mutual Funds (C)	$	160		$	0		$	18	$	142		$	0
Other Long-Term Investments (D)	$	2		$	0		$	2	$	0		$	0
Liabilities:
Derivative Contracts:
Energy-Related Contracts (A)	$	(125	)	$	74		$	0	$	(117	)	$	(82	)
Power
Assets:
Derivative Contracts:
Energy-Related Contracts (A)	$	205		$	(135	)	$	0	$	228		$	112
NDT Funds: (C)
Equity Securities	$	735		$	0		$	735	$	0		$	0
Debt Securities-Govt Obligations	$	303		$	0		$	0	$	303		$	0
Debt Securities-Other	$	255		$	0		$	0	$	255		$	0
Other Securities	$	70		$	0		$	0	$	62		$	8
Rabbi Trusts—Mutual Funds (C)	$	32		$	0		$	4	$	28		$	0
Liabilities:
Derivative Contracts:
Energy-Related Contracts (A)	$	(113	)	$	74		$	0	$	(117	)	$	(70	)
PSE&G
Assets:
Derivative Contracts:
Energy-Related Contracts (A)	$	17		$	0		$	0	$	0		$	17
Rabbi Trusts—Mutual Funds (C)	$	54		$	0		$	6	$	48		$	0
Liabilities:
Derivative Contracts:
Energy-Related Contracts (A)	$	(12	)	$	0		$	0	$	0		$	(12	)

(A)

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

Level 3—For energy-related contracts, which include more complex agreements where limited observable inputs or pricing information is available, modeling techniques are employed using assumptions reflective of contractual terms, current market rates, forward price curves, discount rates and risk factors, as applicable. For certain energy-related option contracts where daily settled option prices are not observable, a traditional Black-Scholes valuation methodology is used which incorporates an internally developed volatility curve that is considered a significant unobservable input. Fair values of other energy contracts may be based on broker quotes that we cannot corroborate with actual market transaction data. We considered the creditworthiness of our counterparties in the valuation of our energy-related contracts and the impacts are immaterial.

(B)

Interest rate swaps are valued using quoted prices on commonly quoted intervals, which are interpolated for periods different than the quoted intervals, as inputs to a market valuation model. Market inputs can generally be verified and model selection does not involve significant management judgment.

(C)

Power's NDT funds maintain investments in various equity and fixed income securities classified as "available for sale." These securities are valued using quoted market prices, broker or dealer quotations or alternative pricing sources with reasonable levels of price transparency. All fair value measurements for the fund securities are provided by the trustees of these funds. Investments in marketable equity securities within the NDT funds are primarily investments in common stocks across a broad range of industries and sectors. Most equity securities are priced utilizing the principal market close price or in some cases midpoint, bid or ask price (primarily Level 1).

Power's NDT investments in fixed income securities are primarily with investment grade corporate bonds and United States Treasury obligations or Federal Agency mortgage-backed securities with a wide range of maturities. Fixed income securities are priced using an evaluated pricing methodology that reflects observable market information such as the most recent exchange price or quoted bid for similar securities (primarily Level 2). Short-term investments and certain commingled temporary investments are valued using observable market prices or market parameters such as time-to-maturity, coupon rate, quality rating and current yield (primarily Level 2).

The Rabbi Trust mutual funds are mainly invested in a United States bond index fund, an S&P 500 index fund and a commingled temporary investment fund. The equity index fund is valued based on quoted prices in an active market (Level 1) while the bond index fund is valued using recent exchange prices or a quoted bid (Level 2).

(D)	Other long-term investments consist of equity securities and are valued using a market based approach based on quoted market prices.

(E)	Cash collateral netting represents collateral amounts netted against derivative assets and liabilities as permitted under the accounting guidance for Offsetting of Amounts Related to Certain Contracts.

A Reconciliation Of The Beginning And Ending Balances Of Level 3 Derivative Contracts And Securities

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

for the Three Months Ended September 30, 2011


				Total Gains or (Losses) Realized/Unrealized
Description	Balance as of July 1, 2011			Included in Income (A)		Included in Regulatory Assets/ Liabilities (B)			Purchases, (Sales) (C)		(Issuances) Settlements (D)		Transfers In (Out)		Balance as of September 30, 2011
	Millions
PSEG
Net Derivative Assets (Liabilities)	$	(3	)	$	13	$	(27	)	$	10	$	3	$	0	$	(4	)
Power
Net Derivative Assets (Liabilities)	$	(4	)	$	13	$	0		$	10	$	3	$	0	$	22
PSE&G
Net Derivative Assets (Liabilities)	$	1		$	0	$	(27	)	$	0	$	0	$	0	$	(26	)

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

for the Nine Months Ended September 30, 2011


			Total Gains or (Losses) Realized/Unrealized
Description	Balance as of January 1, 2011		Included in Income (E)			Included in Regulatory Assets/ Liabilities (B)			Purchases, (Sales) (C)		(Issuances) Settlements (D)			Transfers In (Out)			Balance as of September 30, 2011
	Millions
PSEG
Net Derivative Assets (Liabilities)	$	47	$	(27	)	$	(31	)	$	29	$	(22	)	$	0		$	(4	)
NDT Funds	$	8	$	0		$	0		$	0	$	0		$	(8	)	$	0
Power
Net Derivative Assets	$	42	$	(27	)	$	0		$	29	$	(22	)	$	0		$	22
NDT Funds	$	8	$	0		$	0		$	0	$	0		$	(8	)	$	0
PSE&G
Net Derivative Assets (Liabilities)	$	5	$	0		$	(31	)	$	0	$	0		$	0		$	(26	)

A reconciliation of the beginning and ending balances of Level 3 derivative contracts and securities for the three months and nine months ended September 30, 2010 follows:

Changes in Level 3 Assets and (Liabilities) Measured at Fair Value on a Recurring Basis for the Three Months Ended September 30, 2010


			Total Gains or (Losses) Realized/Unrealized
Description	Balance as of July 1, 2010		Included in Income (A)		Included in Regulatory Assets/ Liabilities (B)			Purchases, (Sales) and Settlements			Balance as of September 30, 2010
	Millions
PSEG
Net Derivative Assets	$	168	$	33	$	(11	)	$	(2	)	$	188
NDT Funds	$	6	$	0	$	0		$	3		$	9
Rabbi Trust Funds	$	16	$	0	$	0		$	(16	)	$	0
Power
Net Derivative Assets	$	117	$	33	$	0		$	(2	)	$	148
NDT Funds	$	6	$	0	$	0		$	3		$	9
Rabbi Trust Funds	$	3	$	0	$	0		$	(3	)	$	0
PSE&G
Net Derivative Assets	$	51	$	0	$	(11	)	$	0		$	40
Rabbi Trust Funds	$	5	$	0	$	0		$	(5	)	$	0

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

for the Nine Months Ended September 30, 2010


			Total Gains or (Losses) Realized/Unrealized
Description	Balance as of January 1, 2010		Included in Income (E)		Included in Regulatory Assets/ Liabilities (B)		Purchases, (Sales) and Settlements			Balance as of September 30, 2010
	Millions
PSEG
Net Derivative Assets	$	105	$	61	$	34	$	(12	)	$	188
NDT Funds	$	9	$	0	$	0	$	0		$	9
Rabbi Trust Funds	$	14	$	0	$	0	$	(14	)	$	0
Power
Net Derivative Assets	$	99	$	61	$	0	$	(12	)	$	148
NDT Funds	$	9	$	0	$	0	$	0		$	9
Rabbi Trust Funds	$	3	$	0	$	0	$	(3	)	$	0
PSE&G
Net Derivative Assets	$	6	$	0	$	34	$	0		$	40
Rabbi Trust Funds	$	5	$	0	$	0	$	(5	)	$	0

(A)

PSEG's and Power's gains and losses are mainly attributable to changes in net derivative assets and liabilities of which $12 million and $17 million are included in Operating Income, $1 million and $14 million are included in OCI, and less than $1 million and $2 million are included in Income from Discontinued Operations in 2011 and 2010, respectively. Of the $12 million in Operating Income in 2011, $31 million is unrealized and $(19) million is realized. Of the $17 million in Operating Income in 2010, $32 million is unrealized and $(15) million is realized.

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

(C)	Represents $10 million in purchases for the three months ended September 30, 2011. Includes $65 million in purchases and $(36) million in sales for the nine months ended September 30, 2011.

(D)	Includes $(5) million in issuances and $8 million in settlements for the three months ended September 30, 2011. Includes $(25) million in issuances and $3 million in settlements for the nine months ended September 30, 2011.

(E)

PSEG's and Power's gains and losses are mainly attributable to changes in net derivative assets and liabilities of which $(28) million and $8 million are included in Operating Income, $(2) million and $28 million are included in OCI, and $3 million and $25 million are included in Income from Discontinued Operations in 2011 and 2010, respectively. Of the $(28) million in Operating Income in 2011, $(25) million is unrealized and $(3) million is realized. Of the $8 million in Operating Income in 2010, $9 million is unrealized and $(1) million is realized.

Fair Value Of Debt


	September 30, 2011				December 31, 2010
	Carrying Amount		Fair Value (A)		Carrying Amount		Fair Value (A)
	Millions
Long-Term Debt:
PSEG (Parent)	$	40	$	66	$	10	$	39
Power -Recourse Debt		3,350		3,710		3,455		3,831
PSE&G		4,535		5,099		4,283		4,615
Transition Funding (PSE&G)		948		1,080		1,090		1,245
Transition Funding II (PSE&G)		50		54		55		59
Energy Holdings:
Project Level, Non-Recourse Debt		46		46		47		47

Total Long-Term Debt	$	8,969	$	10,055	$	8,940	$	9,836

(A)	Fair value excludes unamortized discounts, including amounts related to the Debt Exchange between Power and Energy Holdings that is deferred at the PSEG parent level since the exchange was between subsidiaries of the same parent company.

- Definition

Tabular disclosure of assets, including [financial] instruments measured at fair value that are classified in stockholders' equity, if any, by class that are measured at fair value on a recurring basis. The disclosures contemplated herein include the fair value measurements at the reporting date by the level within the fair value hierarchy in which the fair value measurements in their entirety fall, segregating fair value measurements using quoted prices in active markets for identical assets (Level 1), significant other observable inputs (Level 2), and significant unobservable inputs (Level 3).

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- Definition

Tabular disclosure of the fair value measurement of assets using significant unobservable inputs (Level 3), a reconciliation of the beginning and ending balances, separately presenting changes during the period attributable to the following: (1) total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings (or changes in net assets) and gains or losses recognized in other comprehensive income, and a description of where those gains or losses included in earnings (or changes in net assets) are reported in the statement of income (or activities); (2) purchases, sales, issuances, and settlements (each type disclosed separately); and (3) transfers in and transfers out of Level 3 (for example, transfers due to changes in the observability of significant inputs), by class of asset.

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