Document and Entity Information
Document and Entity Information | ||
3 Months Ended
Mar. 31, 2010 | Apr. 15, 2010
| |
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | 2010-03-31 | |
Document Fiscal Year Focus | 2,010 | |
Document Fiscal Period Focus | Q1 | |
Trading Symbol | PEG | |
Entity Registrant Name | PUBLIC SERVICE ENTERPRISE GROUP INC | |
Entity Central Index Key | 0000788784 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 505,952,194 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (USD $) | ||
In Millions, except Share data in Thousands | 3 Months Ended
Mar. 31, 2010 | 3 Months Ended
Mar. 31, 2009 |
OPERATING REVENUES | $3,680 | $3,920 |
OPERATING EXPENSES | ||
Energy Costs | 1,768 | 2,068 |
Operation and Maintenance | 704 | 674 |
Depreciation and Amortization | 232 | 207 |
Taxes Other Than Income Taxes | 42 | 44 |
Total Operating Expenses | 2,746 | 2,993 |
OPERATING INCOME | 934 | 927 |
Income from Equity Method Investments | 3 | 10 |
Other Income | 43 | 71 |
Other Deductions | (16) | (54) |
Other-Than-Temporary Impairments | (1) | (61) |
Interest Expense | (116) | (145) |
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES | 847 | 748 |
Income Tax Expense | (356) | (304) |
NET INCOME | $491 | $444 |
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING (THOUSANDS): | ||
BASIC | 505,950 | 505,986 |
DILUTED | 507,147 | 506,548 |
EARNINGS PER SHARE: | ||
BASIC | 0.97 | 0.88 |
DILUTED | 0.97 | 0.88 |
DIVIDENDS PAID PER SHARE OF COMMON STOCK | 0.3425 | 0.3325 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS (USD $) | ||
In Millions | 3 Months Ended
Mar. 31, 2010 | 12 Months Ended
Dec. 31, 2009 |
CURRENT ASSETS | ||
Cash and Cash Equivalents | $312 | $350 |
Accounts Receivable, net of allowances of $76 and $79 in 2010 and 2009, respectively | 1,492 | 1,229 |
Unbilled Revenues | 286 | 411 |
Fuel | 497 | 806 |
Materials and Supplies, net | 365 | 361 |
Prepayments | 100 | 161 |
Restricted Cash of Variable Interest Entities (VIEs) | 3 | 0 |
Derivative Contracts | 309 | 243 |
Other | 105 | 85 |
Total Current Assets | 3,469 | 3,646 |
PROPERTY, PLANT AND EQUIPMENT | 22,455 | 22,069 |
Less: Accumulated Depreciation and Amortization | (6,772) | (6,629) |
Net Property, Plant and Equipment | 15,683 | 15,440 |
NONCURRENT ASSETS | ||
Regulatory Assets | 4,347 | 4,402 |
Regulatory Assets of VIEs | 1,313 | 1,367 |
Long-Term Investments | 1,964 | 2,032 |
Nuclear Decommissioning Trust (NDT) Funds | 1,252 | 1,199 |
Other Special Funds | 151 | 149 |
Goodwill | 16 | 16 |
Other Intangibles | 133 | 123 |
Derivative Contracts | 214 | 123 |
Restricted Cash of VIEs | 19 | 17 |
Other | 214 | 216 |
Total Noncurrent Assets | 9,623 | 9,644 |
TOTAL ASSETS | 28,775 | 28,730 |
CURRENT LIABILITIES | ||
Long-Term Debt Due Within One Year | 67 | 323 |
Securitization Debt of VIEs Due Within One Year | 200 | 198 |
Commercial Paper and Loans | 0 | 530 |
Accounts Payable | 1,002 | 1,081 |
Derivative Contracts | 169 | 201 |
Accrued Interest | 149 | 102 |
Accrued Taxes | 502 | 90 |
Clean Energy Program | 178 | 166 |
Obligation to Return Cash Collateral | 102 | 95 |
Other | 431 | 428 |
Total Current Liabilities | 2,800 | 3,214 |
NONCURRENT LIABILITIES | ||
Deferred Income Taxes and Investment Tax Credits (ITC) | 4,416 | 4,139 |
Regulatory Liabilities | 410 | 397 |
Regulatory Liabilities of VIEs | 8 | 7 |
Asset Retirement Obligations | 447 | 439 |
Other Postretirement Benefit (OPEB) Costs | 1,091 | 1,095 |
Accrued Pension Costs | 856 | 1,094 |
Clean Energy Program | 349 | 400 |
Environmental Costs | 699 | 704 |
Derivative Contracts | 65 | 40 |
Long-Term Accrued Taxes | 377 | 538 |
Other | 141 | 140 |
Total Noncurrent Liabilities | 8,859 | 8,993 |
COMMITMENTS AND CONTINGENT LIABILITIES (See Note 7) | ||
LONG-TERM DEBT | ||
Long-Term Debt | 6,790 | 6,481 |
Securitization Debt of VIEs | 1,098 | 1,145 |
Project Level, Non-Recourse Debt | 18 | 19 |
Total Long-Term Debt | 7,906 | 7,645 |
SUBSIDIARY'S PREFERRED STOCK WITHOUT MANDATORY REDEMPTION | 0 | 80 |
STOCKHOLDERS' EQUITY | ||
Common Stock, no par, authorized 1,000,000,000 shares; issued, 2010 and 2009-533,556,660 shares | 4,793 | 4,788 |
Treasury Stock, at cost, 2010-27,621,816 shares; 2009-27,567,030 shares | (590) | (588) |
Retained Earnings | 5,022 | 4,704 |
Accumulated Other Comprehensive Loss | (24) | (116) |
Total Common Stockholders' Equity | 9,201 | 8,788 |
Noncontrolling Interest | 9 | 10 |
Total Stockholders' Equity | 9,210 | 8,798 |
Total Capitalization | 17,116 | 16,523 |
TOTAL LIABILITIES AND CAPITALIZATION | $28,775 | $28,730 |
1_CONDENSED CONSOLIDATED BALANC
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $) | ||
In Millions, except Share data | Mar. 31, 2010
| Dec. 31, 2009
|
Accounts Receivable, allowances | $76 | $79 |
Common Stock, no par | $0 | $0 |
Common Stock, authorized | 1,000,000,000 | 1,000,000,000 |
Common Stock, issued | 533,556,660 | 533,556,660 |
Treasury Stock, shares | 27,621,816 | 27,567,030 |
2_CONDENSED CONSOLIDATED STATEM
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) | ||
In Millions | 3 Months Ended
Mar. 31, 2010 | 3 Months Ended
Mar. 31, 2009 |
CASH FLOWS FROM OPERATING ACTIVITIES | ||
Net Income | $491 | $444 |
Adjustments to Reconcile Net Income to Net Cash Flows from Operating Activities: | ||
Depreciation and Amortization | 232 | 207 |
Amortization of Nuclear Fuel | 34 | 29 |
Provision for Deferred Income Taxes (Other than Leases) and ITC | 41 | 19 |
Non-Cash Employee Benefit Plan Costs | 78 | 87 |
Leveraged Lease Income, Adjusted for Rents Received and Deferred Taxes | (114) | (106) |
Realized and Unrealized Gains on Energy Contracts and Other Derivatives | (112) | (48) |
Over Recovery of Electric Energy Costs (BGS and NTC) and Gas Costs | 8 | 60 |
Over Recovery of Societal Benefits Charge (SBC) | 30 | 44 |
Cost of Removal | (19) | (9) |
Net Realized (Gains) Losses and (Income) Expense from NDT Funds | (24) | 39 |
Net Change in Certain Current Assets and Liabilities | 727 | 927 |
Employee Benefit Plan Funding and Related Payments | (276) | (281) |
Other | (24) | (23) |
Net Cash Provided By Operating Activities | 1,072 | 1,389 |
CASH FLOWS FROM INVESTING ACTIVITIES | ||
Additions to Property, Plant and Equipment | (427) | (402) |
Proceeds from the Sale of Capital Leases and Investments | 106 | 140 |
Proceeds from NDT Funds Sales | 181 | 559 |
Investment in NDT Funds | (189) | (568) |
Restricted Funds | 0 | 105 |
Other | 11 | 1 |
Net Cash Used In Investing Activities | (318) | (165) |
CASH FLOWS FROM FINANCING ACTIVITIES | ||
Net Change in Commercial Paper and Loans | (530) | (19) |
Issuance of Long-Term Debt | 344 | 209 |
Redemption of Long-Term Debt | (300) | (10) |
Repayment of Non-Recourse Debt | (1) | (281) |
Redemption of Securitization Debt | (44) | (42) |
Cash Dividends Paid on Common Stock | (173) | (168) |
Redemption of Preferred Securities | (80) | 0 |
Other | (8) | (2) |
Net Cash Used In Financing Activities | (792) | (313) |
Net Increase (Decrease) in Cash and Cash Equivalents | (38) | 911 |
Cash and Cash Equivalents at Beginning of Period | 350 | 321 |
Cash and Cash Equivalents at End of Period | 312 | 1,232 |
Supplemental Disclosure of Cash Flow Information: | ||
Income Taxes Paid | 24 | 9 |
Interest Paid, Net of Amounts Capitalized | $79 | $76 |
Organization and Basis of Prese
Organization and Basis of Presentation | |
3 Months Ended
Mar. 31, 2010 | |
Organization and Basis of Presentation | Note 1. Organization and Basis of Presentation Organization PSEG is a holding company with a diversified business mix within the energy industry. Its operations are primarily in the Northeastern and Mid Atlantic United States and in other select markets. PSEGs four principal direct wholly owned subsidiaries are: Powerwhich is a multi-regional, wholesale energy supply company that integrates its generating asset operations and gas supply commitments with its wholesale energy, fuel supply, energy trading and marketing and risk management functions through three principal direct wholly owned subsidiaries. Powers subsidiaries are subject to regulation by the Federal Energy Regulatory Commission (FERC), the Nuclear Regulatory Commission (NRC) and the states in which they operate. PSEGwhich is an operating public utility engaged principally in the transmission of electricity and distribution of electricity and natural gas in certain areas of New Jersey. PSEG is subject to regulation by the New Jersey Board of Public Utilities (BPU) and FERC. Pursuant to applicable BPU orders, PSEG is also investing in the development of solar generation projects and energy efficiency programs within its service territory. PSEG Energy Holdings L.L.C. (Energy Holdings)which owns and operates primarily domestic projects engaged in the generation of energy and has invested in energy-related leveraged leases through its direct wholly owned subsidiaries. Certain Energy Holdings subsidiaries are subject to regulation by FERC and the states in which they operate. Energy Holdings is also investing in solar generation projects and exploring opportunities for other investments in renewable generation. PSEG Services Corporation (Services)which provides management and administrative and general services to PSEG and its subsidiaries. Basis of Presentation The respective financial statements included herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (SEC) applicable to Quarterly Reports on Form 10-Q. Certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (GAAP) have been condensed or omitted pursuant to such rules and regulations. These Condensed Consolidated Financial Statements and Notes to Condensed Consolidated Financial Statements (Notes) should be read in conjunction with, and update and supplement matters discussed in the Annual Report on Form 10-K for the year ended December31, 2009. The unaudited condensed consolidated financial information furnished herein reflects all adjustments which are, in the opinion of management, necessary to fairly state the results for the interim periods presented. All such adjustments are of a normal recurring nature. The year-end Condensed Consolidated Balance Sheets were derived from the audited Consolidated Financial Statements included in the Annual Report on Form 10-K for the year ended December31, 2009. Reclassifications Certain reclassifications have been made to the prior period financial statements to |
Recent Accounting Standards
Recent Accounting Standards | |
3 Months Ended
Mar. 31, 2010 | |
Recent Accounting Standards | Note 2. Recent Accounting Standards New Standards Adopted during 2010 During 2010, we have adopted the following new accounting standards. The new standards adopted did not have a material impact on our financial statements. The following is a summary of the requirements and impacts of the new standards. Accounting for Variable Interest Entities This accounting standard amends the criteria used to determine which enterprise has a controlling financial interest in a VIE. The amended standard includes the following provisions: requires an enterprise to qualitatively assess whether it should consolidate a VIE based on whether it has (i)the power to direct the activities of a VIE that most significantly impact the economic performance of a VIE, and (ii)has the obligation to absorb losses or the right to receive benefits of the VIE that could potentially be significant to the VIE, requires an ongoing reconsideration of the primary beneficiary, amends the VIE reconsideration events (triggering events), and requires additional disclosures for the enterprise that consolidates a VIE (the primary beneficiary)to present separately on the face of the consolidated balance sheet (i)assets of the consolidated VIE that can be used only to settle obligations of the consolidated VIE and (ii)liabilities of a consolidated VIE for which creditors have no recourse to the general credit of the primary beneficiary. There was no impact on our financial statements of the initial adoption of the new guidance for VIEs, other than presentation. In accordance with the guidance, we will continuously assess the primary beneficiaries. See Note 3. Variable Interest Entities for further information. Improving Disclosures about Fair Value Measurements requires disclosure of transfers between Level 1 and Level 2 and reasons for transfer, requires disaggregation beyond the financial statement line item when disclosing fair value instruments in the hierarchy table, and requires gross presentation in level 3 rollforward (purchases, sales, issuances, and settlements) effective January1, 2011. We did not have any transfers between level 1 and 2. We disclose the fair value instruments by appropriate classes, as required by this standard. See Note 10. Fair Value Measurements for further information. |
Variable Interest Entities
Variable Interest Entities | |
3 Months Ended
Mar. 31, 2010 | |
Variable Interest Entities | Note 3. Variable Interest Entities Variable Interest Entities for which PSEG is the Primary Beneficiary PSEG is the primary beneficiary and consolidates two marginally capitalized VIEs, PSEG Transition Funding LLC (Transition Funding) and PSEG Transition Funding II LLC (Transition Funding II), which were created for the purpose of issuing transition bonds and purchasing bond transitional property of PSEG, which is pledged as collateral to the trustee. PSEG acts as the servicer for these entities to collect securitization transition charges authorized by the BPU. These funds are remitted to Transition Funding and Transition Funding II and are used for interest and principal payments on the transition bonds and related costs. The assets and liabilities of these VIEs are presented separately on the face of the Condensed Consolidated Balance Sheets of PSEG and PSEG because the Transition Funding and Transition Funding II assets are restricted and can only be used to settle the obligations of Transition Funding and Transition Funding II, respectively. The Transition Funding and Transition Funding II creditors do not have any recourse to the general credit of PSEG in the event the transition charges are not sufficient to cover the bond principal and interest payments of Transition Funding and Transition Funding II, respectively. PSEGs maximum exposure to loss is equal to its equity investment in these VIEs which was $16 million as of March31, 2010 and December31, 2009. The risk of actual loss to PSEG is considered remote. PSEG did not provide any financial support to Transition Funding and Transition Funding II during the first quarter of 2010 or in 2009. Further, PSEG does not have any contractual commitments or obligations to provide financial support to Transition Funding and Transition Funding II. Other Variable Interest PSEG has a long-term electricity and capacity purchase agreement with a potential VIE. We have requested the information necessary to determine whether the entity was a VIE and whether PSEG is the primary beneficiary; however, the information has not been made available. Since the counterparty has not supplied PSEG with electricity or capacity during the first quarter of 2010 or the 2009 year, we have not been required to make any payments. PSEG is not subject to any risk of loss. Variable Interest Entity for which Energy Holdings is the Primary Beneficiary Energy Holdings has variable interests through its equity investment in a project for renewable energy where it is also the primary beneficiary. Energy Holdings has the power to direct the activities of the entity that most significantly impact the entitys economic performance. Energy Holdings also has the obligation to fund up to $15 million in operating losses of the VIE through 2011. As of March31, 2010, $7 million has been extended in the form of a note receivable. As a result, Energy Holdings consolidates the assets and liabilities of this project which are disclosed below (excluding intercompany balances which are eliminated in consolidation): Asof March31, Asof December31, 2010 2009 Millions |
Asset Dispositions
Asset Dispositions | |
3 Months Ended
Mar. 31, 2010 | |
Asset Dispositions | Note 4. Asset Dispositions Leveraged Leases During the first quarter of 2010, Energy Holdings sold its interest in two leveraged leases, including one international lease for which the IRS has indicated its intention to disallow certain tax deductions taken in prior years. During the first quarter of 2009, Energy Holdings sold its interest in four leveraged leases, including two international leases for which the IRS has indicated its intention to disallow certain tax deductions taken in prior years. ThreeMonthsEnded March31, 2010 2009 Millions Proceeds from sales $ 106 $ 140 Gain (Loss) on the sales, after-tax $ 8 $ 12 Proceeds from the sales of the international leases was used to reduce the tax exposure related to these lease investments. For additional information see Note 7. Commitments and Contingent Liabilities. |
Available-for-Sale Securities
Available-for-Sale Securities | |
3 Months Ended
Mar. 31, 2010 | |
Available-for-Sale Securities | Note 5. Available-for-Sale Securities NDT Funds Power maintains an external master nuclear decommissioning trust to fund its share of decommissioning for its five nuclear facilities upon termination of operation. The trust contains two separate funds: a qualified fund and a non-qualified fund. Section468A of the Internal Revenue Code limits the amount of money that can be contributed into a qualified fund. The trust funds are managed by third party investment advisors who operate under investment guidelines developed by Power. Power classifies investments in the NDT Funds as available-for-sale. The following tables show the fair values and gross unrealized gains and losses for the securities held in the NDT Funds: As of March31, 2010 Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value Millions Equity Securities $ 474 $ 192 $ (5 ) $ 661 Debt Securities Government Obligations 320 5 (3 ) 322 Other Debt Securities 222 11 (2 ) 231 Total Debt Securities 542 16 (5 ) 553 Other Securities 38 0 0 38 Total Available-for-Sale Securities $ 1,054 $ 208 $ (10 ) $ 1,252 As of December31, 2009 Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value Millions Equity Securities $ 475 $ 180 $ (5 ) $ 650 Debt Securities Government Obligations 296 4 (3 ) 297 Other Debt Securities 209 10 (3 ) 216 Total Debt Securities 505 14 (6 ) 513 Other Securities 37 0 (1 ) 36 Total Available-for-Sale Securities $ 1,017 $ 194 $ (12 ) $ 1,199 The following table shows the value of securities in the NDT Funds that have been in an unrealized loss position for less than and greater than 12 months: AsofMarch31,2010 Less Than 12Months AsofMarch31,2010 Greater Than 12Months AsofDecember31,2009 Less Than 12 Months AsofDecember31,2009 Greater Than 12Months Fair Value Gross Unrealized Losses Fair Value Gross Unrealized Losses Fair Value Gross Unrealized Losses Fair Value Gross Unrealized Losses Millions Equity Securities(A) $ 54 $ (5 ) $ 0 $ 0 $ 61 $ (5 ) $ 0 $ 0 Debt Securities Government Obligations(B) 102 (1 ) 30 (2 ) 78 (2 ) 15 (1 ) Other Debt Securities(C) 55 (2 ) 0 0 59 (3 ) 0 0 Total Debt Securities 157 (3 ) 30 ( |
Pension and OPEB
Pension and OPEB | |
3 Months Ended
Mar. 31, 2010 | |
Pension and OPEB | Note 6. Pension and OPEB PSEG sponsors several qualified and nonqualified pension plans and other postretirement benefit plans covering PSEGs and its participating affiliates current and former employees who meet certain eligibility criteria. The following table provides the components of net periodic benefit costs relating to all qualified and nonqualified pension and OPEB plans on an aggregate basis. OPEB costs are presented net of the federal subsidy expected for prescription drugs under the Medicare Prescription Drug Improvement and Modernization Act of 2003. New Federal health care legislation enacted in March 2010 eliminates the tax deductibility of retiree health care costs beginning in 2013, to the extent of federal subsidies received by plan sponsors that provide retiree prescription drug benefits equivalent to Medicare Part D coverage. See Note 12. Income Taxes for additional information. PensionBenefits ThreeMonthsEnded OPEB ThreeMonthsEnded March31, March31, 2010 2009 2010 2009 Millions Components of Net Periodic Benefit Costs: Service Cost $ 22 $ 19 $ 4 $ 3 Interest Cost 58 59 18 18 Expected Return on Plan Assets (67 ) (54 ) (4 ) (3 ) Amortization of Net Transition Obligation 0 0 7 7 Prior Service Cost 0 2 3 4 Actuarial Loss 30 28 2 (1 ) Net Periodic Benefit Cost $ 43 $ 54 $ 30 $ 28 Effect of Regulatory Asset 0 0 5 5 Total Benefit Costs, Including Effect of Regulatory Asset $ 43 $ 54 $ 35 $ 33 Pension and OPEB costs for PSEG, Power and PSEG are detailed as follows: Pension ThreeMonthsEnded March31, OPEB ThreeMonthsEnded March31, 2010 2009 2010 2009 Millions Power $ 13 $ 16 $ 4 $ 3 PSEG 24 30 30 29 Other 6 8 1 1 Total Benefit Costs $ 43 $ 54 $ 35 $ 33 PSEG Contributions to Pension Plans for Calendar Year 2010 Contributionsforthe ThreeMonthsEnded March 31, 2010 Expected Full Year Contributions Millions Pension Plans $ 249 $ 415 Postretirement Healthcare Plan $ 7 $ 11 |
Commitments and Contingent Liab
Commitments and Contingent Liabilities | |
3 Months Ended
Mar. 31, 2010 | |
Commitments and Contingent Liabilities | Note 7. Commitments and Contingent Liabilities Guaranteed Obligations Powers activities primarily involve the purchase and sale of energy and related products under transportation, physical, financial and forward contracts at fixed and variable prices. These transactions are with numerous counterparties and brokers that may require cash, cash-related instruments or guarantees. Power has unconditionally guaranteed payments to counterparties by its subsidiaries in commodity-related transactions in order to support current exposure, interest and other costs on sums due and payable in the ordinary course of business, and obtain credit. Under these agreements, guarantees cover lines of credit between entities and are often reciprocal in nature. The exposure between counterparties can move in either direction. In order for Power to incur a liability for the face value of the outstanding guarantees, its subsidiaries would haveto fully utilize the credit granted to them by every counterparty to whom Power has provided a guarantee, and all of the related contracts would have to be out-of-the-money (if the contracts are terminated, Power would owe money to the counterparties). Power believes the probability of this is unlikely. For this reason, the current exposure at any point in time is a more meaningful representation of the potential liability under these guarantees. This current exposure consists of the net of accounts receivable and accounts payable and the forward value on open positions, less any collateral posted. Power is subject to counterparty collateral calls related to commodity contracts, and certain creditworthiness standards as guarantor under performance guarantees of its subsidiaries. Changes in commodity prices can have a material impact on collateral requirements under such contracts, which are posted and received primarily in the form of cash and letters of credit. Power also routinely enters into futures and options transactions for electricity and natural gas as part of its operations. These futures contracts usually require a cash margin deposit with brokers, which can change based on market movement and in accordance with exchange rules. The face value of outstanding guarantees, current exposure and margin positions as of March31, 2010 and December31, 2009 are shown below: As of March31, 2010 As of December31, 2009 Millions Face Value of Outstanding Guarantees $ 1,833 $ 1,783 Exposure Under Current Guarantees $ 400 $ 403 Letters of Credit Margin Posted $ 201 $ 122 Letters of Credit Margin Received $ 178 $ 123 Cash Deposited and Received Counterparty Cash Margin Deposited $ 0 $ 0 Counterparty Cash Margin Received (152 ) (90 ) Net Broker Balance Received (24 ) (31 ) In the event Power were to lose its investment grade rating: Additional Collateral That Could be Required $ 968 $ 986 Liquidity Available Under PSEG and Powers Credit Facilities to Post Collateral $ 2,648 |
Changes in Capitalization
Changes in Capitalization | |
3 Months Ended
Mar. 31, 2010 | |
Changes in Capitalization | Note 8. Changes in Capitalization The following capital transactions occurred in the first three months of 2010: Power converted $44 million of its senior Notes servicing and securing the 4.00% Pollution Control Bonds of the Pennsylvania Economic Development Authority (PEDFA) to variable rate in January 2009 when the PEDFA Bonds were converted to variable rate demand bonds. Power reacquired the PEDFA Bonds in December 2009. In January 2010, Power caused the PEDFA Bonds to be converted from Alternative Minimum Tax (AMT) to non-AMT status and to be remarketed as variable rate demand bonds backed by a letter of credit expiring in January 2011. paid a cash dividend of $175 million to PSEG in March. PSEG redeemed all of its $80 million of outstanding preferred stock in March, paid $300 million of floating rate (Libor + .875%) First and Refunding Mortgage Bonds at maturity in March, issued $300 million of 5.50% Medium-Term Notes (MTNs), Series G due March 2040 in March, and paid $44 million of Transition Fundings securitization debt. Energy Holdings paid $1 million of nonrecourse project debt. In April 2010, Power issued $300 million of 2.50% unsecured Senior Notes due April 2013 and $250 million of 5.125% unsecured Senior Notes due April 2020. Power used a portion of the proceeds from these transactions to redeem its $161 million of 6.50% MTNs due 2014 and $48 million of 6.00% MTNs due 2013. Also in April 2010, Power completed an exchange offer with eligible holders of its 7.75% Senior Notes due 2011 in order to manage long-term debt maturities. Under this transaction, an aggregate principal amount of $195 million of Powers 7.75% Senior Notes was exchanged for total consideration from Power of $208 million. The $208 million was comprised of $156 million in newly issued 5.125% Senior Notes due April 2020 and cash payments of $52 million. Since the debt exchange was treated as a debt modification, the resulting premium of $13 million was deferred and will be amortized over the term of the newly issued debt. The deferred amount is reflected as an offset to Long-Term Debt on Powers Condensed Consolidated Balance Sheet. |
Financial Risk Management Activ
Financial Risk Management Activities | |
3 Months Ended
Mar. 31, 2010 | |
Financial Risk Management Activities | Note 9. Financial Risk Management Activities The operations of PSEG, Power and PSEG are exposed to market risks from changes in commodity prices, interest rates and equity prices that could affect their results of operations and financial condition. Exposure to these risks is managed through normal operating and financing activities and, when appropriate, through hedging transactions. Hedging transactions use derivative instruments to create a relationship in which changes to the value of the assets, liabilities or anticipated transactions exposed to market risks are expected to be offset by changes in the value of these derivative instruments. Commodity Prices The availability and price of energy commodities are subject to fluctuations due to weather, environmental policies, changes in supply and demand, state and federal regulatory policies, market conditions, transmission availability and other events. Power uses physical and financial transactions in the wholesale energy markets to mitigate the effects of adverse movements in fuel and electricity prices. Contracts that do not qualify for hedge accounting or normal purchases/normal sales treatment are marked to market with changes in fair value recorded in the income statement. The fair value for the majority of these contracts is obtained from quoted market sources. Modeling techniques using assumptions reflective of current market rates, yield curves and forward prices are used to interpolate certain prices when no quoted market exists. The financial effect of using such modeling techniques is not material to PSEGs or Powers financial statements. Cash Flow Hedges Power uses forward sale and purchase contracts, swaps, futures and firm transmission right contracts to hedge forecasted energy sales from its generation stations and the related load obligations and the price of fuel to meet its fuel purchase requirements. These derivative transactions are designated and effective as cash flow hedges. As of March31, 2010 and December31, 2009, the fair value and the impact on Accumulated Other Comprehensive Income (Loss) associated with these hedges was as follows: As of March31, 2010 As of December31, 2009 Millions Fair Value of Cash Flow Hedges $ 440 $ 286 Impact on Accumulated Other Comprehensive Income (Loss) (after tax) $ 261 $ 184 The expiration date of the longest-dated cash flow hedge at Power is in 2012. Powers after-tax unrealized gains on these derivatives that are expected to be reclassified to earnings during the 12 months ending March31, 2011 and March31, 2012 are $167 million and $93 million, respectively. Ineffectiveness associated with these hedges was $(2) million at March31, 2010. Trading Derivatives In general, the main purpose of Powers wholesale marketing operation is to optimize the value of the output of the generating facilities via various products and services available in the markets we serve. Power does engage in some trading of electricity and energy-related products where such transactions are not associated with the output or fuel purchase requirements of our facilit |
Fair Value Measurements
Fair Value Measurements | |
3 Months Ended
Mar. 31, 2010 | |
Fair Value Measurements | Note 10. Fair Value Measurements PSEG, Power and PSEG adopted accounting guidance for Fair Value Measurements for financial assets and liabilities effective January1, 2008 and for nonrecurring fair value measurements of non-financial assets and liabilities effective January1, 2009. The fair value measurements guidance defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement guidance emphasizes that fair value is a market-based measurement, not an entity-specific measurement, and establishes a fair value hierarchy that distinguishes between assumptions based on market data obtained from independent sources and those based on an entitys own assumptions. The hierarchy prioritizes the inputs to fair value measurement into three levels: Level 1measurements utilize quoted prices (unadjusted) in active markets for identical assets or liabilities that PSEG, Power and PSEG have the ability to access. These consist primarily of listed equity securities. Level 2measurements include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, and other observable inputs such as interest rates and yield curves that are observable at commonly quoted intervals. These consist primarily of non-exchange traded derivatives such as forward contracts or options and most fixed income securities. Level 3measurements use unobservable inputs for assets or liabilities, based on the best information available and might include an entitys own data and assumptions. In some valuations, the inputs used may fall into different levels of the hierarchy. In these cases, the financial instruments level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. These consist mainly of various financial transmission rights, other longer term capacity and transportation contracts and certain commingled securities. In addition to establishing a measurement framework, the fair value measurement guidance nullified the prior guidance which did not allow an entity to recognize an unrealized gain or loss at the inception of a derivative instrument unless the fair value of that instrument was obtained from a quoted market price in an active market or was otherwise evidenced by comparison to other observable current market transactions or based on a valuation technique incorporating observable market data. The following tables present information about PSEGs, Powers and PSEGs respective assets and (liabilities) measured at fair value on a recurring basis at March31, 2010 and December31, 2009, including the fair value measurements and the levels of inputs used in determining those fair values. Amounts shown for PSEG include the amounts shown for Power and PSEG. Recurring Fair Value Measurements as of March31, 201 |
Other Income and Deductions
Other Income and Deductions | |
3 Months Ended
Mar. 31, 2010 | |
Other Income and Deductions | Note 11. Other Income and Deductions Power PSEG Other(A) Consolidated Total Millions Other Income: Three Months Ended March31, 2010 NDT Fund Gains, Interest, Dividend and Other Income $ 38 $ 0 $ 0 $ 38 Other 1 5 (1 ) 5 Total Other Income $ 39 $ 5 $ (1 ) $ 43 Three Months Ended March31, 2009 NDT Fund Gains, Interest, Dividend and Other Income $ 67 $ 0 $ 0 $ 67 Other 3 1 0 4 Total Other Income $ 70 $ 1 $ 0 $ 71 Power PSEG Other(A) Consolidated Total Millions Other Deductions: Three Months Ended March31, 2010 NDT Fund Losses and Expenses $ 13 $ 0 $ 0 $ 13 Other 1 1 1 3 Total Other Deductions $ 14 $ 1 $ 1 $ 16 Three Months Ended March31, 2009 NDT Fund Losses and Expenses $ 46 $ 0 $ 0 $ 46 Other 4 1 3 8 Total Other Deductions $ 50 $ 1 $ 3 $ 54 (A) Other primarily consists of activity at PSEG (as parent company), Energy Holdings, Services and intercompany eliminations. |
Income Taxes
Income Taxes | |
3 Months Ended
Mar. 31, 2010 | |
Income Taxes | Note 12. Income Taxes ThreeMonthsEnded March31, Effective Tax Rate 2010 2009 Millions PSEG 42.0 % 40.6 % Power 41.6 % 39.4 % PSEG 40.6 % 40.7 % The change in PSEGs and Powers effective tax rates were due primarily to the impacts of new health care legislation enacted in March 2010 and increased earnings related to the NDT Funds. The new legislation includes various health care-related provisions which will go into effect over the next several years. One of the provisions eliminates the tax deductibility of retiree health care costs, to the extent of federal subsidies received by plan sponsors that provide retiree prescription drug benefits equivalent to Medicare Part D coverage. Although this change does not take effect immediately, the accounting impact must be recognized when the legislation is signed. As a result, in the first quarter of 2010, PSEG recorded noncash after tax charges of $9 million for income tax expense to establish the related deferred tax liabilities, primarily related to Power. There was no immediate impact on PSEGs income tax expense or effective tax rate since the related amount of $78 million was deferred as a Regulatory Asset to be collected and amortized over future periods. Unrecognized Tax Benefits As of March31,2010 Millions PSEG $ 649 PSEG $ 39 Tax deposits associated with disputed tax assessments $ 320 Possible Increase in Unrecognized benefits related to Leasing tax issue $ 305 Possible Decrease in Unrecognized benefits related to Leasing tax issue $ 803 Possible Increase (Decrease) in Total Unrecognized Tax Benefits Including interest Overthenext 12 Months Millions PSEG $ 2 Power 20 PSEG (2 ) Energy Holdings (128 ) Services (26 ) $ (134 ) PSEG and PSEG have unrecognized tax benefits as of March31, 2010. PSEG made tax deposits with the IRS to defray interest costs associated with disputed tax assessments associated with certain lease investments. The deposits are fully refundable and are recorded as a reduction to the Long-Term Accrued Taxes in PSEGs Condensed Consolidated Balance Sheets, but are not reflected in the PSEG unrecognized tax benefits. PSEG materially reduced its unrecognized tax benefits by terminating some leases involved in the IRS lease issue. (see Note 7. Commitments and Contingent Liabilities). It is reasonably possible that unrecognized tax benefits associated with the leasing tax issue discussed in Note7. Commitments and Contingent Liabilities will change significantly. This change could be triggered by a settlement with the IRS or developments in other litigated cases. Based upon these developments, unrecognized tax benefits could increase or decrease. It is not possible to predict the magnitude, timing or direction of any such change. It is reasonably possible that the total unrecognized tax benefits (including interest) at PSEG will decrease within the next 12 months due to either agreement with various taxing authorities upon audit |
Comprehensive Income, Net of Ta
Comprehensive Income, Net of Tax | |
3 Months Ended
Mar. 31, 2010 | |
Comprehensive Income, Net of Tax | Note 13. Comprehensive Income, Net of Tax Comprehensive Income Power(A) PSEG Other(B) ConsolidatedTotal Millions Three Months Ended March31, 2010 Net Income $ 364 $ 118 $ 9 $ 491 Other Comprehensive Income 91 0 1 92 Comprehensive Income $ 455 $ 118 $ 10 $ 583 Three Months Ended March31, 2009 Net Income $ 314 $ 124 $ 6 $ 444 Other Comprehensive Income 144 0 2 146 Comprehensive Income $ 458 $ 124 $ 8 $ 590 (A) Changes at Power primarily relate to changes in unrealized gains and losses on derivative contracts that qualify for hedge accounting in 2010 and 2009 and NDT Fund activity, as detailed below. (B) Other consists of activity at PSEG (as parent company), Energy Holdings, Services and intercompany eliminations. Accumulated Other Comprehensive Income (Loss) Balance as of December31,2009 Power PSEG Other Balanceasof March31,2010 Millions Three Months Ended March31, 2010 Derivative Contracts $ 180 $ 78 $ 0 $ 0 $ 258 Pension and OPEB Plans (400 ) 6 0 0 (394 ) NDT Funds 91 7 0 0 98 Other 13 0 0 1 14 Accumulated Other Income (Loss) $ (116 ) $ 91 $ 0 $ 1 $ (24 ) Balanceasof December31,2008 Power PSEG Other Balanceasof March31,2009 Millions Three Months Ended March31, 2009 Derivative Contracts $ 172 $ 136 $ 0 $ 1 $ 309 Pension and OPEB Plans (371 ) 6 0 0 (365 ) NDT Funds 18 2 0 0 20 Other 4 0 0 1 5 Accumulated Other Income (Loss) $ (177 ) $ 144 $ 0 $ 2 $ (31 ) |
Earnings Per Share
Earnings Per Share (EPS) | |
3 Months Ended
Mar. 31, 2010 | |
Earnings Per Share (EPS) | Note 14. Earnings Per Share (EPS) Diluted EPS is calculated by dividing Net Income by the weighted average number of shares of common stock outstanding, including shares issuable upon exercise of stock options outstanding or vesting of restricted stock awards granted under our stock compensation plans and upon payment of performance units or restricted stock units. The following table shows the effect of these stock options, performance units and restricted stock units on the weighted average number of shares outstanding used in calculating diluted EPS: Three Months Ended March31, 2010 2009 Basic Diluted Basic Diluted EPS Numerator (Millions): Net Income $ 491 $ 491 $ 444 $ 444 EPS Denominator (Thousands): Weighted Average Common Shares Outstanding 505,950 505,950 505,986 505,986 Effect of Stock Options 0 141 0 192 Effect of Stock Performance Share Units 0 991 0 334 Effect of Restricted Stock Units 0 65 0 36 Total Shares 505,950 507,147 505,986 506,548 EPS: Net Income $ 0.97 $ 0.97 $ 0.88 $ 0.88 ThreeMonthsEnded March31, Dividend payments on Common Stock 2010 2009 Per Share $ 0.3425 $ 0.3325 in Millions $ 173 $ 168 |
Financial Information by Busine
Financial Information by Business Segments | |
3 Months Ended
Mar. 31, 2010 | |
Financial Information by Business Segments | Note 15. Financial Information by Business Segments Power PSEG Energy Holdings Other(A) Consolidated Millions Three Months Ended March31, 2010 Total Operating Revenues $ 2,303 $ 2,444 $ 36 $ (1,103 ) $ 3,680 Net Income 364 118 7 2 491 Preferred Securities Dividends 0 (1 ) 0 1 0 Segment Earnings 364 117 7 3 491 Gross Additions to Long-Lived Assets 174 217 35 1 427 Three Months Ended March 31, 2009 Total Operating Revenues $ 2,464 $ 2,735 $ 44 $ (1,323 ) $ 3,920 Net Income (Loss) 314 124 11 (5 ) 444 Preferred Securities Dividends 0 (1 ) 0 1 0 Segment Earnings (Loss) 314 123 11 (4 ) 444 Gross Additions to Long-Lived Assets 208 194 2 (2 ) 402 As of March31, 2010 Total Assets $ 10,460 $ 16,489 $ 2,643 $ (817 ) $ 28,775 Investments in Equity Method Subsidiaries $ 36 $ 0 $ 178 $ 0 $ 214 As of December31, 2009 Total Assets $ 10,333 $ 16,533 $ 2,605 $ (741 ) $ 28,730 Investments in Equity Method Subsidiaries $ 36 $ 0 $ 176 $ 0 $ 212 (A) Other activities include amounts applicable to PSEG (as parent company), Services and intercompany eliminations, primarily relating to intercompany transactions between Power and PSEG. No gains or losses are recorded on any intercompany transactions; rather, all intercompany transactions are priced in accordance with applicable regulations, including affiliate pricing rules, or at cost or, in the case of the BGS and BGSS contracts between Power and PSEG, at rates prescribed by the BPU. For a further discussion of the intercompany transactions between Power and PSEG, see Note 16. Related-Party Transactions. The net losses primarily relate to financing and certain administrative and general costs. |
Related-Party Transactions
Related-Party Transactions | |
3 Months Ended
Mar. 31, 2010 | |
Related-Party Transactions | Note 16. Related-Party Transactions The following discussion relates to intercompany transactions, which are eliminated during the PSEG consolidation process in accordance with GAAP. Power The financial statements for Power include transactions with related parties presented as follows: ThreeMonthsEnded March31, Related Party Transactions 2010 2009 Millions Revenue from Affiliates: Billings to PSEG through BGSS(A) $ 818 $ 970 Billings to PSEG through BGS(A) 273 344 Total Revenue from Affiliates $ 1,091 $ 1,314 Expense Billings from Affiliates: Administrative Billings from Services(B) $ (36 ) $ (40 ) Total Expense Billings from Affiliates $ (36 ) $ (40 ) Related Party Transactions March31,2010 December31,2009 Millions Receivables from PSEG through BGS and BGSS Contracts(A) $ 272 $ 404 Receivables from PSEG Related to Gas Supply Hedges for BGSS(A) 162 120 Payable to Services(B) (25 ) (27 ) Tax Sharing Payable to PSEG(C) (205 ) (28 ) Current Unrecognized Tax Receivable from PSEG(C) 20 3 Payable to PSEG (2 ) (13 ) Accounts ReceivableAffiliated Companies, net $ 222 $ 459 Short-Term Loan to (from) Affiliate (Demand Note to (from) PSEG)(D) $ 509 $ (194 ) Working Capital Advances to Services(E) $ 17 $ 17 Long-Term Accrued Taxes Receivable(C) $ 22 $ 39 PSEG The financials statements for PSEG include transactions with related parties presented as follows: ThreeMonthsEnded March31, Related Party Transactions 2010 2009 Millions Expense Billings from Affiliates: Billings From Power through BGSS(A) $ (818 ) $ (970 ) Billings to PSEG through BGS(A) (273 ) (344 ) Administrative Billings from Services(B) (50 ) (66 ) Total Expense Billings from Affiliates $ (1,141 ) $ (1,380 ) Related Party Transactions March31,2010 December31,2009 Millions Payable to Power through BGS and BGSS Contracts(A) $ (272 ) $ (404 ) Payable to Power Related to Gas Supply Hedges for BGSS(A) (162 ) (120 ) Payable to Power for SREC Liability(F) (7 ) (7 ) Payable to Services(B) (31 ) (42 ) Tax Sharing Receivable from (Payable to) PSEG(C) (52 ) 13 Current Unrecognized Tax Receivable from PSEG(C) 71 61 Receivable from PSEG 1 3 Accounts PayableAffiliated Companies, net $ (452 ) $ (496 ) Working Capital Advances to Services(E) $ 33 $ 33 Long-Term Accrued Taxes Payable(C) $ (109 ) $ (96 ) (A) PSEG has entered into a requi |
Guarantees of Debt
Guarantees of Debt | |
3 Months Ended
Mar. 31, 2010 | |
Guarantees of Debt | Note 17. Guarantees of Debt Each series of Powers Senior Notes, Pollution Control Notes and its syndicated revolving credit facilities are fully and unconditionally and jointly and severally guaranteed by PSEG Fossil LLC (Fossil), PSEG Nuclear LLC (Nuclear), and PSEG Energy Resources Trade LLC (ERT). The following table presents condensed financial information for the guarantor subsidiaries, as well as Powers non-guarantor subsidiaries. Power Guarantor Subsidiaries Other Subsidiaries Consolidating Adjustments Consolidated Total Millions Three Months Ended March31, 2010 Operating Revenues $ 0 $ 2,474 $ 145 $ (316 ) $ 2,303 Operating Expenses (2 ) 1,822 160 (316 ) 1,664 Operating Income 2 652 (15 ) 0 639 Equity Earnings (Losses) of Subsidiaries 377 (14 ) 0 (363 ) 0 Other Income 9 41 0 (11 ) 39 Other Deductions (1 ) (13 ) 0 0 (14 ) Other-Than-Temporary Impairments 0 (1 ) 0 0 (1 ) Interest Expense (31 ) (14 ) (6 ) 11 (40 ) Income Tax Benefit (Expense) 8 (274 ) 7 0 (259 ) Net Income (Loss) $ 364 $ 377 $ (14 ) $ (363 ) $ 364 Three Months Ended March31, 2010 Net Cash Provided By (Used In) Operating Activities $ 343 $ 999 $ (14 ) $ (380 ) $ 948 Net Cash Provided By (Used In) Investing Activities $ (170 ) $ (1010 ) $ 0 $ 506 $ (674 ) Net Cash Provided By (Used In) Financing Activities $ (174 ) $ 8 $ (31 ) $ (128 ) $ (325 ) Three Months Ended March31, 2009 Operating Revenues $ 0 $ 2,660 $ 121 $ (317 ) $ 2,464 Operating Expenses 3 2,050 120 (317 ) 1,856 Operating Income (Loss) (3 ) 610 1 0 608 Equity Earnings (Losses) of Subsidiaries 328 (10 ) 0 (318 ) 0 Other Income 23 82 0 (35 ) 70 Other Deductions 0 (50 ) 0 0 (50 ) Other-Than-Temporary Impairments 0 (60 ) 0 0 (60 ) Interest Expense (53 ) (17 ) (15 ) 35 (50 ) Income Tax Benefit (Expense) 19 (227 ) 4 0 (204 ) Net Income (Loss) $ 314 $ 328 $ (10 ) $ (318 ) $ 314 Three Months Ended March31, 2009 Net Cash Provided By (Used In) Operating Activities $ 415 $ 1,267 $ (29 ) $ (413 ) $ 1,240 Net Cash Provided By (Used In) Investing Activities $ (91 ) $ (1,175 ) $ 153 $ 114 $ (999 ) Net Cash Provi |