Stock Based Compensation

12 Months Ended

Dec. 31, 2021

Share-based Compensation Arrangement by Share-based Payment Award [Line Items]

Stock Based Compensation

Stock Based Compensation

PSEG’s 2021 Long-Term Incentive Plan (2021 LTIP), approved by shareholders on April 20, 2021 and the Amended and Restated 2004 Long-Term Incentive Plan ((LTIP 2004) under which no new grants have been made effective April 20, 2021), are broad-based equity compensation programs that provide for grants of various long-term incentive compensation awards, such as stock options, stock appreciation rights, performance share units, restricted stock, restricted stock units, cash awards or any combination thereof. The types of long-term incentive awards that have been granted under the LTIP are non-qualified options to purchase shares of PSEG’s common stock, restricted stock unit awards and performance share unit awards. The type of equity award that is granted and the details of that award may vary from time to time and is subject to the approval of the Organization and Compensation Committee of PSEG’s Board of Directors (O&CC), the LTIP’s administrative committee.

The 2021 LTIP currently provides for the issuance of equity awards with respect to 8 million shares of common stock. As of December 31, 2021, approximately 8 million shares were available for future awards under the 2021 LTIP.

In addition, on April 20, 2021 shareholders approved the PSEG 2021 Equity Compensation Plan for Outside Directors (2021 BOD Plan) and the PSEG 2007 Equity Compensation Plan for Outside Directors (2007 BOD Plan) was closed to new awards.

Under the 2021 BOD Plan, the only equity instrument which may be granted are Restricted Stock Units (RSUs) and the Board member must defer the award until they have achieved their stock ownership requirement.

Stock Options

Under the 2021 LTIP, non-qualified options to acquire shares of PSEG common stock may be granted to officers and other key employees selected by the O&CC. Option awards are granted with an exercise price equal to the market price of PSEG’s common stock at the grant date. The options generally vest over four years of continuous service. Vesting schedules may be accelerated upon the occurrence of certain events, such as a change-in-control (unless substituted with an equity award of equal value), retirement, death or disability. Options are exercisable over a period of time designated by the O&CC (but not prior to one year or longer than ten years from the date of grant) and are subject to such other terms and conditions as the O&CC determines. Payment by option holders upon exercise of an option may be made in cash or, with the consent of the O&CC, by delivering previously acquired shares of PSEG common stock. No options have been granted since 2009.

RSUs

Under both the 2021 LTIP and 2004 LTIP (LTIPs), PSEG has granted RSU awards to officers and other key employees. These awards, which are bookkeeping entries only, are subject to risk of forfeiture until vested by continued employment. Until distributed, the units are credited with dividend equivalent units (DEUs) proportionate to the dividends paid on PSEG common stock. Distributions are made in shares of common stock. The RSU grants for 2021 and 2020 generally vest at the end of three years. Vesting may be accelerated (pro-rated basis or full vesting) upon certain events such as change-in-control, retirement, disability or death.

Performance Share Units (PSUs)

Under the LTIPs, PSEG has granted PSUs to officers and other key employees. These provide for distribution in shares of PSEG common stock based on achievement of certain financial goals over a three-year performance period. Following the end of the performance period, the payout varies from 0% to 200% of the number of PSUs granted depending on PSEG’s performance with respect to certain financial targets, including targets related to comparative performance against other companies in a peer group of energy companies. The PSUs are credited with DEUs proportionate to the dividends paid on PSEG common stock. Distributions are made in shares of common stock. Vesting may be accelerated on a pro-rated basis for the period of the employee’s service during the performance period as a result of certain events, such as change-in-control, retirement, death or disability.

Stock-Based Compensation

PSEG recognizes compensation expense for stock options based on their grant date fair values, which are determined using the Black-Scholes option-pricing model. Stock option awards are expensed on a tranche-specific basis over the requisite service period of the award. Ultimately, compensation expense for stock options is recognized for awards that vest.

PSEG recognizes compensation expense for RSUs over the vesting period based on the grant date fair value of the shares, which is equal to the closing market price of PSEG’s common stock on the date of the grant.

PSEG recognizes compensation expense for the total shareholder return (TSR) target for its PSU awards based on the grant date fair values of the award, which are determined using the Monte Carlo model. The following table provides the assumptions used to calculate the grant date fair value of the TSR portion of the PSU awards for 2021, 2020 and 2019:

Grant Date	Risk-Free Interest Rate	Volatility
February 16, 2021	0.22%	27.31%
February 18, 2020	1.36%	15.00%
February 19, 2019	2.47%	16.74%

The accrual of compensation cost is based on the probable achievement of the performance conditions, which result in a payout from 0% to 200% of the initial grant. PSEG recognizes compensation expense for the return on invested capital target for its PSUs based on the grant date fair value of the awards, which is equal to the market price of PSEG’s common stock on the date of the grant. The accrual during the year of grant is estimated at 100% of the original grant. Such accrual may be adjusted to reflect the actual outcome.

	2021		2020		2019
	Millions
Compensation Cost included in O&M Expense	$	28	$	35	$	33
Income Tax Benefit Recognized in Consolidated Statement of Operations	$	8	$	10	$	9

For 2021, 2020 and 2019, PSEG also recorded excess tax benefits of $2 million, $2 million and $5 million, respectively.

PSEG recognizes compensation cost of awards issued over the shorter of the original vesting period or the period beginning on the date of grant and ending on the date an individual is eligible for retirement and the award vests.

Stock Options

As of January 1, 2019, there were 231,933 stock options outstanding, all of which were exercised in 2019 at a weighted average price of $33.49. There were no stock options granted or vested in 2021, 2020 and 2019.

Activity for options exercised for the years ended December 31, 2021, 2020 and 2019 is shown below:

	2021		2020		2019
	Millions
Total Intrinsic Value of Options Exercised	$	—	$	—	$	5
Cash Received from Options Exercised	$	—	$	—	$	8
Tax Benefit Realized from Options Exercised	$	—	$	—	$	1

RSUs

Changes in RSUs for the year ended December 31, 2021 are summarized as follows:

	Shares	Weighted Average Grant Date Fair Value		Weighted Average Remaining Years Contractual Term	Aggregate Intrinsic Value
Non-vested as of January 1, 2021	222,898	$	54.21
Granted	239,249	$	58.02
Vested	268,423	$	55.00
Canceled/Forfeited	13,893	$	57.80
Non-vested as of December 31, 2021	179,831	$	57.83	1.2	$	12,000,123

The weighted average grant date fair value per share for RSUs during the years ended December 31, 2021, 2020 and 2019 was $58.02, $58.85 and $56.24 per share, respectively.

The total intrinsic value of RSUs distributed during the years ended December 31, 2021, 2020 and 2019 was $17 million, $11 million and $16 million, respectively.

As of December 31, 2021, there was approximately $4 million of unrecognized compensation cost related to the RSUs, which is expected to be recognized over a weighted average period of 1.1 years. DEUs of 21,801 accrued on the RSUs during the year.

PSUs

Changes in PSUs for the year ended December 31, 2021 are summarized as follows:

	Shares	Weighted Average Grant Date Fair Value		Weighted Average Remaining Years Contractual Term	Aggregate Intrinsic Value
Non-vested as of January 1, 2021	475,841	$	54.88
Granted	373,418	$	65.57
Vested	337,332	$	59.49
Canceled/Forfeited	35,573	$	58.08
Non-vested as of December 31, 2021	476,354	$	59.76	1.6	$	31,787,102

The weighted average grant date fair value per share for PSUs during the years ended December 31, 2021, 2020 and 2019 was $65.57, $51.79 and $62.17 per share, respectively.

The total intrinsic value of PSUs distributed during the years ended December 31, 2021, 2020 and 2019 was $28 million, $19 million and $17 million, respectively.

As of December 31, 2021, there was approximately $23 million of unrecognized compensation cost related to the PSUs, which is expected to be recognized over a weighted average period of 1.6 years. DEUs of 37,371 accrued on the PSUs during the year.

Outside Directors

Under the closed 2007 BOD Plan and the new 2021 BOD Plan, annually, on the first business day of May, each non-employee member of the Board of Directors is awarded stock units based on the amount of annual compensation to be paid at the closing price of PSEG common stock on that date. DEUs are credited quarterly and distributions will occur as specified by their election in accordance with the provisions of the BOD Plan.

The fair value of these awards is recorded as compensation expense in the Consolidated Statements of Operations. Compensation expense for the plan was immaterial for each of the years ended December 31, 2021, 2020 and 2019.

ESPP

PSEG maintains an ESPP for all eligible employees of PSEG and its subsidiaries. Under the ESPP, shares of PSEG common stock may be purchased at 95% of the fair market value for represented employees and 90% for non-represented employees through payroll deductions. Dividends are to be paid out in cash unless the participant elects the dividends to be reinvested at fair market price. All employees are required to hold the shares purchased under the ESPP for at least three months from the purchase date. In any year, employees may purchase shares having a value not exceeding 10% of their base pay. Compensation expense recognized under this program was $2 million for the year ended December 31, 2021 and $1 million for each of the years ended December 31, 2020 and 2019.

During the years ended December 31, 2021, 2020 and 2019, employees purchased 326,634 shares, 373,682 shares and 280,077 shares, respectively, at an average price of $56.87, $47.26 and $54.67 per share, respectively. As of December 31, 2021, 1.9 million shares were available for future issuance under this plan.

Public Service Electric and Gas Company

Share-based Compensation Arrangement by Share-based Payment Award [Line Items]

Stock Based Compensation

Stock Based Compensation

PSEG’s 2021 Long-Term Incentive Plan (2021 LTIP), approved by shareholders on April 20, 2021 and the Amended and Restated 2004 Long-Term Incentive Plan ((LTIP 2004) under which no new grants have been made effective April 20, 2021), are broad-based equity compensation programs that provide for grants of various long-term incentive compensation awards, such as stock options, stock appreciation rights, performance share units, restricted stock, restricted stock units, cash awards or any combination thereof. The types of long-term incentive awards that have been granted under the LTIP are non-qualified options to purchase shares of PSEG’s common stock, restricted stock unit awards and performance share unit awards. The type of equity award that is granted and the details of that award may vary from time to time and is subject to the approval of the Organization and Compensation Committee of PSEG’s Board of Directors (O&CC), the LTIP’s administrative committee.

The 2021 LTIP currently provides for the issuance of equity awards with respect to 8 million shares of common stock. As of December 31, 2021, approximately 8 million shares were available for future awards under the 2021 LTIP.

In addition, on April 20, 2021 shareholders approved the PSEG 2021 Equity Compensation Plan for Outside Directors (2021 BOD Plan) and the PSEG 2007 Equity Compensation Plan for Outside Directors (2007 BOD Plan) was closed to new awards.

Under the 2021 BOD Plan, the only equity instrument which may be granted are Restricted Stock Units (RSUs) and the Board member must defer the award until they have achieved their stock ownership requirement.

Stock Options

Under the 2021 LTIP, non-qualified options to acquire shares of PSEG common stock may be granted to officers and other key employees selected by the O&CC. Option awards are granted with an exercise price equal to the market price of PSEG’s common stock at the grant date. The options generally vest over four years of continuous service. Vesting schedules may be accelerated upon the occurrence of certain events, such as a change-in-control (unless substituted with an equity award of equal value), retirement, death or disability. Options are exercisable over a period of time designated by the O&CC (but not prior to one year or longer than ten years from the date of grant) and are subject to such other terms and conditions as the O&CC determines. Payment by option holders upon exercise of an option may be made in cash or, with the consent of the O&CC, by delivering previously acquired shares of PSEG common stock. No options have been granted since 2009.

RSUs

Under both the 2021 LTIP and 2004 LTIP (LTIPs), PSEG has granted RSU awards to officers and other key employees. These awards, which are bookkeeping entries only, are subject to risk of forfeiture until vested by continued employment. Until distributed, the units are credited with dividend equivalent units (DEUs) proportionate to the dividends paid on PSEG common stock. Distributions are made in shares of common stock. The RSU grants for 2021 and 2020 generally vest at the end of three years. Vesting may be accelerated (pro-rated basis or full vesting) upon certain events such as change-in-control, retirement, disability or death.

Performance Share Units (PSUs)

Under the LTIPs, PSEG has granted PSUs to officers and other key employees. These provide for distribution in shares of PSEG common stock based on achievement of certain financial goals over a three-year performance period. Following the end of the performance period, the payout varies from 0% to 200% of the number of PSUs granted depending on PSEG’s performance with respect to certain financial targets, including targets related to comparative performance against other companies in a peer group of energy companies. The PSUs are credited with DEUs proportionate to the dividends paid on PSEG common stock. Distributions are made in shares of common stock. Vesting may be accelerated on a pro-rated basis for the period of the employee’s service during the performance period as a result of certain events, such as change-in-control, retirement, death or disability.

Stock-Based Compensation

PSEG recognizes compensation expense for stock options based on their grant date fair values, which are determined using the Black-Scholes option-pricing model. Stock option awards are expensed on a tranche-specific basis over the requisite service period of the award. Ultimately, compensation expense for stock options is recognized for awards that vest.

PSEG recognizes compensation expense for RSUs over the vesting period based on the grant date fair value of the shares, which is equal to the closing market price of PSEG’s common stock on the date of the grant.

PSEG recognizes compensation expense for the total shareholder return (TSR) target for its PSU awards based on the grant date fair values of the award, which are determined using the Monte Carlo model. The following table provides the assumptions used to calculate the grant date fair value of the TSR portion of the PSU awards for 2021, 2020 and 2019:

Grant Date	Risk-Free Interest Rate	Volatility
February 16, 2021	0.22%	27.31%
February 18, 2020	1.36%	15.00%
February 19, 2019	2.47%	16.74%

The accrual of compensation cost is based on the probable achievement of the performance conditions, which result in a payout from 0% to 200% of the initial grant. PSEG recognizes compensation expense for the return on invested capital target for its PSUs based on the grant date fair value of the awards, which is equal to the market price of PSEG’s common stock on the date of the grant. The accrual during the year of grant is estimated at 100% of the original grant. Such accrual may be adjusted to reflect the actual outcome.

	2021		2020		2019
	Millions
Compensation Cost included in O&M Expense	$	28	$	35	$	33
Income Tax Benefit Recognized in Consolidated Statement of Operations	$	8	$	10	$	9

For 2021, 2020 and 2019, PSEG also recorded excess tax benefits of $2 million, $2 million and $5 million, respectively.

PSEG recognizes compensation cost of awards issued over the shorter of the original vesting period or the period beginning on the date of grant and ending on the date an individual is eligible for retirement and the award vests.

Stock Options

As of January 1, 2019, there were 231,933 stock options outstanding, all of which were exercised in 2019 at a weighted average price of $33.49. There were no stock options granted or vested in 2021, 2020 and 2019.

Activity for options exercised for the years ended December 31, 2021, 2020 and 2019 is shown below:

	2021		2020		2019
	Millions
Total Intrinsic Value of Options Exercised	$	—	$	—	$	5
Cash Received from Options Exercised	$	—	$	—	$	8
Tax Benefit Realized from Options Exercised	$	—	$	—	$	1

RSUs

Changes in RSUs for the year ended December 31, 2021 are summarized as follows:

	Shares	Weighted Average Grant Date Fair Value		Weighted Average Remaining Years Contractual Term	Aggregate Intrinsic Value
Non-vested as of January 1, 2021	222,898	$	54.21
Granted	239,249	$	58.02
Vested	268,423	$	55.00
Canceled/Forfeited	13,893	$	57.80
Non-vested as of December 31, 2021	179,831	$	57.83	1.2	$	12,000,123

The weighted average grant date fair value per share for RSUs during the years ended December 31, 2021, 2020 and 2019 was $58.02, $58.85 and $56.24 per share, respectively.

The total intrinsic value of RSUs distributed during the years ended December 31, 2021, 2020 and 2019 was $17 million, $11 million and $16 million, respectively.

As of December 31, 2021, there was approximately $4 million of unrecognized compensation cost related to the RSUs, which is expected to be recognized over a weighted average period of 1.1 years. DEUs of 21,801 accrued on the RSUs during the year.

PSUs

Changes in PSUs for the year ended December 31, 2021 are summarized as follows:

	Shares	Weighted Average Grant Date Fair Value		Weighted Average Remaining Years Contractual Term	Aggregate Intrinsic Value
Non-vested as of January 1, 2021	475,841	$	54.88
Granted	373,418	$	65.57
Vested	337,332	$	59.49
Canceled/Forfeited	35,573	$	58.08
Non-vested as of December 31, 2021	476,354	$	59.76	1.6	$	31,787,102

The weighted average grant date fair value per share for PSUs during the years ended December 31, 2021, 2020 and 2019 was $65.57, $51.79 and $62.17 per share, respectively.

The total intrinsic value of PSUs distributed during the years ended December 31, 2021, 2020 and 2019 was $28 million, $19 million and $17 million, respectively.

As of December 31, 2021, there was approximately $23 million of unrecognized compensation cost related to the PSUs, which is expected to be recognized over a weighted average period of 1.6 years. DEUs of 37,371 accrued on the PSUs during the year.

Outside Directors

Under the closed 2007 BOD Plan and the new 2021 BOD Plan, annually, on the first business day of May, each non-employee member of the Board of Directors is awarded stock units based on the amount of annual compensation to be paid at the closing price of PSEG common stock on that date. DEUs are credited quarterly and distributions will occur as specified by their election in accordance with the provisions of the BOD Plan.

The fair value of these awards is recorded as compensation expense in the Consolidated Statements of Operations. Compensation expense for the plan was immaterial for each of the years ended December 31, 2021, 2020 and 2019.

ESPP

PSEG maintains an ESPP for all eligible employees of PSEG and its subsidiaries. Under the ESPP, shares of PSEG common stock may be purchased at 95% of the fair market value for represented employees and 90% for non-represented employees through payroll deductions. Dividends are to be paid out in cash unless the participant elects the dividends to be reinvested at fair market price. All employees are required to hold the shares purchased under the ESPP for at least three months from the purchase date. In any year, employees may purchase shares having a value not exceeding 10% of their base pay. Compensation expense recognized under this program was $2 million for the year ended December 31, 2021 and $1 million for each of the years ended December 31, 2020 and 2019.

During the years ended December 31, 2021, 2020 and 2019, employees purchased 326,634 shares, 373,682 shares and 280,077 shares, respectively, at an average price of $56.87, $47.26 and $54.67 per share, respectively. As of December 31, 2021, 1.9 million shares were available for future issuance under this plan.