Financing Receivables

12 Months Ended

Dec. 31, 2011

Financing Receivables

Note 8. Financing Receivables

PSE&G

PSE&G sponsors a solar loan program designed to help finance the installation of solar power systems throughout its electric service area. The loans are generally paid back with Solar Renewable Energy Certificates (SRECS) generated from the installed solar electric system. The following table reflects the outstanding short and long-term loans by class of customer, none of which would be considered "non-performing."

Credit Risk Profile Based on Payment Activity
	As of December 31,
Consumer Loans	2011		2010
	Millions
Commercial/Industrial	$	106	$	62
Residential		10		4
	$	116	$	66

Energy Holdings

Energy Holdings had a net investment in domestic energy and real estate assets subject primarily to leveraged lease accounting of $165 million and $356 million as of December 31, 2011 and 2010, respectively (See Note 7. Long-Term Investments).

The corresponding receivables associated with the lease portfolio are reflected below, net of non-recourse debt. The ratings in the table represent the ratings of the entities providing payment assurance to Energy Holdings. "Not Rated" counterparties relate to investments in leases of commercial real estate properties.

	Lease Receivables, Net of Non-Recourse Debt
	As of December 31,
Counterparties' Credit Rating (S&P)	2011		2010
	Millions
AAA - AA	$	21	$	21
A		110		112
BBB - BB		316		316
B - B-		299		430
Not Rated		17		17
	$	763	$	896

The "B" and "B-" ratings above represent lease receivables underlying coal fired assets in Illinois and Pennsylvania. As of December 31, 2011, the gross investment in the leases of such assets, net of non-recourse debt, was $550 million ($37 million, net of deferred taxes). A more detailed description of such assets under lease is presented in the table below.

			Gross		%				Fuel
Asset	Location		Investment		Owned		Total		Type		Counterparty
			Millions				MW
Powerton Station Units 5 and 6		IL	$	134		64%		1,538		Coal	Edison Mission Energy
Joliet Station Units 7 and 8		IL	$	84		64%		1,044		Coal	Edison Mission Energy
Keystone Station Units 1 and 2		PA	$	112		17%		1,711		Coal	GenOn REMA, LLC
Conemaugh Station Units 1 and 2		PA	$	112		17%		1,711		Coal	GenOn REMA, LLC
Shawville Station Units 1, 2, 3 and 4		PA	$	108		100%		603		Coal	GenOn REMA, LLC

Although all payments of equity rent, debt service and other fees are current, no assurances can be given that all payments in accordance with the lease contracts will continue. Factors which may impact future lease cash flows include, but are not limited to, new environmental legislation and regulation regarding air quality, water and other discharges in the process of generating electricity, market prices for fuel and electricity, overall financial condition of lease counterparties and the quality and condition of assets under lease. Of our facilities under lease to GenOn REMA, LLC (GenOn REMA), PSEG believes Keystone has adequate environmental controls installed and Conemaugh has flue gas desulfurization controls and mercury controls, with the final component, selective catalytic reduction (SCR) equipment for Nitrogen Oxide (NO_x) scheduled to be installed in 2014.

GenOn REMA's Shawville facility recently received approval to delay until July 31, 2015, the implementation requirements under a renewed National Pollutant Discharge Elimination System (NPDES) permit to reduce thermal impacts from the plant. Those requirements could include the installation of cooling towers. There are also interim milestones that could trigger regulatory action prior to July 31, 2015 if changes are not made. The lessee is continuing to evaluate the economics of installing cooling towers and other environmental capital expenditures while considering its options under the lease which could include termination for economic obsolescence. In the event of an early termination for obsolescence, the lessee would be required to pay equal to the difference between the pre-determined termination value ($218 million in December 2011 and declining each month thereafter) as specified in the lease agreement and the proceeds received in connection with the sale of the facility to a third party.

With respect to Edison Mission Energy's (EME) Midwest Generation leases on the efficient Powerton and Joliet coal units in Illinois, the lessees completed investments in low NOx burners and Selective Non-Catalytic Reduction system and plan to utilize a Trona system to reduce sulfur. EME and these units remain in litigation with the United States Environmental Protection Agency (EPA) and the State of Illinois regarding certain environmental matters, but EME has announced that the above actions should enable compliance with pending environmental rules. The federal district court has dismissed the new source review claims in reference to Powerton and Joliet, but the opacity claims remain active. The EPA and the State of Illinois have appealed this dismissal to the United States Seventh Circuit Court of Appeals. EME is opposing the appeal. EME continues to contest the opacity claims. The federal district court has stayed proceedings in connection with the opacity claims until the appeal is determined.

The credit exposure to the lessors is partially mitigated through various credit enhancement mechanisms within the lease transactions. These credit enhancement features vary from lease to lease. Some of the leasing transactions include covenants that restrict the flow of dividends from the lessee to its parent, over-collateralization of the lessee with non-leased assets, historical and forward cash flow coverage tests that prohibit discretionary capital expenditures and dividend payments to the parent/lessee if stated minimum coverage ratios are not met and similar cash flow restrictions if ratings are not maintained at stated levels. These covenants are designed to maintain cash reserves in the transaction entity for the benefit of the non-recourse lenders and the lessor/equity participants in the event of a temporary market downturn or degradation in operating performance of the leased assets. In the event of a default in any of the lease transactions, Energy Holdings would exercise its rights and attempt to seek recovery of its investment. The results of such efforts may not be known for a period of time. A bankruptcy of a lessee and failure to recover adequate value could lead to a foreclosure of the lease. If foreclosures were to occur, Energy Holdings could potentially record a pre-tax write-off up to its gross investment in these facilities and may also be required to pay significant cash tax liabilities.

As a result of Dynegy's corporate reorganization in September 2011, Energy Holdings evaluated its likely recovery under the lease arrangements for the Roseton and Danskammer facilities leased to subsidiaries of Dynegy Holdings LLC (DH). Considering the overall value of the underlying assets subject to lease, Energy Holdings fully reserved its $264 million gross investment. This gross charge was reflected as a reduction to third quarter Operating Revenues and resulted in an after-tax charge of approximately $170 million. On November 7, 2011, DH, including the lessee entities in our Danskammer and Roseton leveraged lease transactions (Dynegy leases), filed for relief under Chapter 11 of the Bankruptcy Code. DH filed a Restructuring Support Agreement (RSA) between Dynegy, DH and holders of approximately 40% of DH's outstanding senior unsecured and subordinated notes and debentures as part of its bankruptcy filings. DH expects the terms of the RSA, which are set forth in DH's proposed plan of reorganization, to become effective in August 2012 assuming confirmation of its plan of reorganization by the Bankruptcy Court.

On December 13, 2011, Energy Holdings and Dynegy reached a settlement agreement resolving disputes that had arisen between them with regard to DH's rejection of the Dynegy leases. The settlement agreement assigns to Dynegy our rights to certain future payments or distributions related to the Dynegy leases; it also resolves our claims under our Tax Indemnity Agreement with DH. The terms of the settlement agreement include a cash payment of $7.5 million, which was received on January 4, 2012, and the allowance of a $110 million claim against DH payable through a mix of cash, senior secured notes and mandatorily convertible notes following confirmation of the DH plan of reorganization by the Bankruptcy Court. The Bankruptcy Court approved the settlement agreement and DH's rejection of the Dynegy leases by an order that became effective on December 30, 2011. The rejection of the leases triggered the reclassification of $30 million of the deferred tax liability to current status. The ultimate amount recognized from our claim could change based upon the final outcome of the Bankruptcy Court's review of DH's plan of reorganization and the respective fair values of the securities received pursuant to the plan of reorganization. The amounts received will be reflected as an increase in Operating Revenues.

A Bankruptcy Examiner was appointed on January 11, 2012 to investigate events surrounding Dynegy's reorganization that it completed prior to the filing of its Chapter 11 petition. The Examiner's report could impact the potential approval and overall timing of the Court's review of Dynegy's plan of reorganization which could impact both the outcome and timing of the realization of our settlement claim.

Upon the effective date of the order authorizing the Dynegy lease rejections, the leases no longer qualified for leveraged lease accounting treatment under GAAP since the lease agreements were effectively terminated. As a result, Energy Holdings wrote off the $264 million gross lease investment against the aforementioned reserve. As the owner of the two plants, Energy Holdings' lessor entities ceased leveraged lease accounting, and recorded the generation assets and related nonrecourse project debt on their balance sheets at their respective fair values. (See Note 17. Fair Value Measurements) The lessor entities were consolidated by Energy Holdings as of December 31, 2011.

PSE&G [Member]

Financing Receivables

Note 8. Financing Receivables

PSE&G

PSE&G sponsors a solar loan program designed to help finance the installation of solar power systems throughout its electric service area. The loans are generally paid back with Solar Renewable Energy Certificates (SRECS) generated from the installed solar electric system. The following table reflects the outstanding short and long-term loans by class of customer, none of which would be considered "non-performing."

Credit Risk Profile Based on Payment Activity
	As of December 31,
Consumer Loans	2011		2010
	Millions
Commercial/Industrial	$	106	$	62
Residential		10		4
	$	116	$	66

Energy Holdings

Energy Holdings had a net investment in domestic energy and real estate assets subject primarily to leveraged lease accounting of $165 million and $356 million as of December 31, 2011 and 2010, respectively (See Note 7. Long-Term Investments).

The corresponding receivables associated with the lease portfolio are reflected below, net of non-recourse debt. The ratings in the table represent the ratings of the entities providing payment assurance to Energy Holdings. "Not Rated" counterparties relate to investments in leases of commercial real estate properties.

	Lease Receivables, Net of Non-Recourse Debt
	As of December 31,
Counterparties' Credit Rating (S&P)	2011		2010
	Millions
AAA - AA	$	21	$	21
A		110		112
BBB - BB		316		316
B - B-		299		430
Not Rated		17		17
	$	763	$	896

The "B" and "B-" ratings above represent lease receivables underlying coal fired assets in Illinois and Pennsylvania. As of December 31, 2011, the gross investment in the leases of such assets, net of non-recourse debt, was $550 million ($37 million, net of deferred taxes). A more detailed description of such assets under lease is presented in the table below.

			Gross		%				Fuel
Asset	Location		Investment		Owned		Total		Type		Counterparty
			Millions				MW
Powerton Station Units 5 and 6		IL	$	134		64%		1,538		Coal	Edison Mission Energy
Joliet Station Units 7 and 8		IL	$	84		64%		1,044		Coal	Edison Mission Energy
Keystone Station Units 1 and 2		PA	$	112		17%		1,711		Coal	GenOn REMA, LLC
Conemaugh Station Units 1 and 2		PA	$	112		17%		1,711		Coal	GenOn REMA, LLC
Shawville Station Units 1, 2, 3 and 4		PA	$	108		100%		603		Coal	GenOn REMA, LLC

Although all payments of equity rent, debt service and other fees are current, no assurances can be given that all payments in accordance with the lease contracts will continue. Factors which may impact future lease cash flows include, but are not limited to, new environmental legislation and regulation regarding air quality, water and other discharges in the process of generating electricity, market prices for fuel and electricity, overall financial condition of lease counterparties and the quality and condition of assets under lease. Of our facilities under lease to GenOn REMA, LLC (GenOn REMA), PSEG believes Keystone has adequate environmental controls installed and Conemaugh has flue gas desulfurization controls and mercury controls, with the final component, selective catalytic reduction (SCR) equipment for Nitrogen Oxide (NO_x) scheduled to be installed in 2014.

GenOn REMA's Shawville facility recently received approval to delay until July 31, 2015, the implementation requirements under a renewed National Pollutant Discharge Elimination System (NPDES) permit to reduce thermal impacts from the plant. Those requirements could include the installation of cooling towers. There are also interim milestones that could trigger regulatory action prior to July 31, 2015 if changes are not made. The lessee is continuing to evaluate the economics of installing cooling towers and other environmental capital expenditures while considering its options under the lease which could include termination for economic obsolescence. In the event of an early termination for obsolescence, the lessee would be required to pay equal to the difference between the pre-determined termination value ($218 million in December 2011 and declining each month thereafter) as specified in the lease agreement and the proceeds received in connection with the sale of the facility to a third party.

With respect to Edison Mission Energy's (EME) Midwest Generation leases on the efficient Powerton and Joliet coal units in Illinois, the lessees completed investments in low NOx burners and Selective Non-Catalytic Reduction system and plan to utilize a Trona system to reduce sulfur. EME and these units remain in litigation with the United States Environmental Protection Agency (EPA) and the State of Illinois regarding certain environmental matters, but EME has announced that the above actions should enable compliance with pending environmental rules. The federal district court has dismissed the new source review claims in reference to Powerton and Joliet, but the opacity claims remain active. The EPA and the State of Illinois have appealed this dismissal to the United States Seventh Circuit Court of Appeals. EME is opposing the appeal. EME continues to contest the opacity claims. The federal district court has stayed proceedings in connection with the opacity claims until the appeal is determined.

The credit exposure to the lessors is partially mitigated through various credit enhancement mechanisms within the lease transactions. These credit enhancement features vary from lease to lease. Some of the leasing transactions include covenants that restrict the flow of dividends from the lessee to its parent, over-collateralization of the lessee with non-leased assets, historical and forward cash flow coverage tests that prohibit discretionary capital expenditures and dividend payments to the parent/lessee if stated minimum coverage ratios are not met and similar cash flow restrictions if ratings are not maintained at stated levels. These covenants are designed to maintain cash reserves in the transaction entity for the benefit of the non-recourse lenders and the lessor/equity participants in the event of a temporary market downturn or degradation in operating performance of the leased assets. In the event of a default in any of the lease transactions, Energy Holdings would exercise its rights and attempt to seek recovery of its investment. The results of such efforts may not be known for a period of time. A bankruptcy of a lessee and failure to recover adequate value could lead to a foreclosure of the lease. If foreclosures were to occur, Energy Holdings could potentially record a pre-tax write-off up to its gross investment in these facilities and may also be required to pay significant cash tax liabilities.

As a result of Dynegy's corporate reorganization in September 2011, Energy Holdings evaluated its likely recovery under the lease arrangements for the Roseton and Danskammer facilities leased to subsidiaries of Dynegy Holdings LLC (DH). Considering the overall value of the underlying assets subject to lease, Energy Holdings fully reserved its $264 million gross investment. This gross charge was reflected as a reduction to third quarter Operating Revenues and resulted in an after-tax charge of approximately $170 million. On November 7, 2011, DH, including the lessee entities in our Danskammer and Roseton leveraged lease transactions (Dynegy leases), filed for relief under Chapter 11 of the Bankruptcy Code. DH filed a Restructuring Support Agreement (RSA) between Dynegy, DH and holders of approximately 40% of DH's outstanding senior unsecured and subordinated notes and debentures as part of its bankruptcy filings. DH expects the terms of the RSA, which are set forth in DH's proposed plan of reorganization, to become effective in August 2012 assuming confirmation of its plan of reorganization by the Bankruptcy Court.

On December 13, 2011, Energy Holdings and Dynegy reached a settlement agreement resolving disputes that had arisen between them with regard to DH's rejection of the Dynegy leases. The settlement agreement assigns to Dynegy our rights to certain future payments or distributions related to the Dynegy leases; it also resolves our claims under our Tax Indemnity Agreement with DH. The terms of the settlement agreement include a cash payment of $7.5 million, which was received on January 4, 2012, and the allowance of a $110 million claim against DH payable through a mix of cash, senior secured notes and mandatorily convertible notes following confirmation of the DH plan of reorganization by the Bankruptcy Court. The Bankruptcy Court approved the settlement agreement and DH's rejection of the Dynegy leases by an order that became effective on December 30, 2011. The rejection of the leases triggered the reclassification of $30 million of the deferred tax liability to current status. The ultimate amount recognized from our claim could change based upon the final outcome of the Bankruptcy Court's review of DH's plan of reorganization and the respective fair values of the securities received pursuant to the plan of reorganization. The amounts received will be reflected as an increase in Operating Revenues.

A Bankruptcy Examiner was appointed on January 11, 2012 to investigate events surrounding Dynegy's reorganization that it completed prior to the filing of its Chapter 11 petition. The Examiner's report could impact the potential approval and overall timing of the Court's review of Dynegy's plan of reorganization which could impact both the outcome and timing of the realization of our settlement claim.

Upon the effective date of the order authorizing the Dynegy lease rejections, the leases no longer qualified for leveraged lease accounting treatment under GAAP since the lease agreements were effectively terminated. As a result, Energy Holdings wrote off the $264 million gross lease investment against the aforementioned reserve. As the owner of the two plants, Energy Holdings' lessor entities ceased leveraged lease accounting, and recorded the generation assets and related nonrecourse project debt on their balance sheets at their respective fair values. (See Note 17. Fair Value Measurements) The lessor entities were consolidated by Energy Holdings as of December 31, 2011.