Public Service Enterprise Group
Lehman Brothers
CEO Energy/Power Conference
September 4, 2008
Forward-Looking Statement
Readers are cautioned that statements contained in this presentation about our and our subsidiaries' future performance, including
future revenues, earnings, strategies, prospects and all other statements that are not purely historical, are forward-looking
statements for purposes of the safe harbor provisions under The Private Securities Litigation Reform Act of 1995. Although we
believe that our expectations are based on reasonable assumptions, we can give no assurance they will be achieved. The results or
events predicted in these statements may differ materially from actual results or events. Factors which could cause results or events
to differ from current expectations include, but are not limited to:
Adverse changes in energy industry, policies and regulation, including market rules that may adversely affect our operating results.
Any inability of our energy transmission and distribution businesses to obtain adequate and timely rate relief and/or regulatory
approvals from federal and/or state regulators.
Changes in federal and/or state environmental regulations that could increase our costs or limit operations of our generating units.
Changes in nuclear regulation and/or developments in the nuclear power industry generally, that could limit operations of our nuclear
generating units.
Actions or activities at one of our nuclear units that might adversely affect our ability to continue to operate that unit or other units at
the same site.
Any inability to balance successfully our energy obligations, available supply and trading risks.
Any deterioration in our credit quality.
Any inability to realize anticipated tax benefits or retain tax credits.
Increases in the cost of or interruption in the supply of fuel and other commodities necessary to the operation of our generating units.
Delays or cost escalations in our construction and development activities.
Adverse capital market performance of our decommissioning and defined benefit plan trust funds.
Changes in technology and/or increased customer conservation.
For further information, please refer to our Annual Report on Form 10-K, including Item 1A. Risk Factors, and subsequent reports on
Form 10-Q and Form 8-K filed with the Securities and Exchange Commission. These documents address in further detail our
business, industry issues and other factors that could cause actual results to differ materially from those indicated in this
presentation. In addition, any forward-looking statements included herein represent our estimates only as of today and should not
be relied upon as representing our estimates as of any subsequent date. While we may elect to update forward-looking statements
from time to time, we specifically disclaim any obligation to do so, even if our estimates change, unless otherwise required by
applicable securities laws.
2
GAAP Disclaimer
PSEG presents Operating Earnings in addition to its Net Income reported
in accordance with accounting principles generally accepted in the United
States (GAAP). Operating Earnings is a non-GAAP financial measure
that differs from Net Income because it excludes the impact of the sale of
certain non-core domestic and international assets, costs stemming from
the terminated merger agreement with Exelon Corporation and material
impairments and lease-transaction-related charges. PSEG presents
Operating Earnings because management believes that it is appropriate
for investors to consider results excluding these items in addition to the
results reported in accordance with GAAP. PSEG believes that the non-
GAAP financial measure of Operating Earnings provides a consistent and
comparable measure of performance of its businesses to help
shareholders understand performance trends. This information is
not intended to be viewed as an alternative to GAAP information. The last
slide in this presentation includes a list of items excluded from Net
Income to reconcile to Operating Earnings, with a reference to that slide
included on each of the slides where the non-GAAP information appears.
3
PSEG Overview
Ralph Izzo
Chairman, President and Chief Executive Officer
Our platform …
… provides earnings stability, multiple growth opportunities and
substantial cash flow.
Stable electric and gas
distribution and
transmission company
rated top quartile for
reliability, providing
service in mature
service territory in New
Jersey.
Major electric generation
company with 13,300
MW* of base-load,
intermediate and load
following capability
operating in attractive
markets in the Northeast
with operating control of
additional 2,000 MW of
capacity in Texas.
Redeployment of capital
through the sale of
international assets.
Focused on managing
lease portfolio and
potential investment in
renewables.
2007 Operating
Earnings:
$949M**
$115M**
$376M**
2008 Guidance:
$1,040M - $1,140M
$45M – $60M
$350M – $370M
* 2007 capacity
** See page 65 for Items excluded from Net Income to reconcile to Operating Earnings
5
Our focus is to maximize benefits from existing assets …
… and build a substantial platform for ongoing growth.
Produce and
deliver safe,
reliable,
economic
and clean
energy.
Support
competitive
market
structures
through
strong
regulatory
relationships.
Maintain
strong
balance
sheet to
support
investment
goals.
Operational
Excellence
Regulatory and
Market Environment
Meet
shareholder
objectives for
growth with
reasonable
risk.
Growth with
Manageable Risk
6
Major influences on business environment remain:
PSEG Power’s base-load
nuclear assets well
situated in carbon
constrained environment
PSE&G pursuing
investments in energy
efficiency and
renewables
PSEG Global investing in
Compressed Air Energy
Storage (CAES)
Significant new
transmission capital
program to improve
reliability
New peaking capacity in
CT
Capital investment in
coal fleet to meet
environmental
requirements maintains
critical infrastructure
and expands capability
Potential to leverage
existing brownfield
sites; potential for new
nuclear
Climate Change
Infrastructure
Requirements
Capacity Needs
PSEG assets are well positioned to meet the needs of customers
and shareholders in a challenging environment.
7
PSEG – 2008 Highlights
Solid earnings growth:
Maintaining guidance of $2.80 - $3.05 per share.
Steady and consistently solid operations.
Improved risk profile:
SAESA sale closed.
Lease reserves:
Substantial book reserves recognized for tax risk.
Litigation option preserved.
Ratings outlook for PSEG, PSE&G and Holdings moved to Stable from Negative.
Significant growth of FERC regulated transmission business.
$750 million share repurchase program approved.
Discretionary cash position, above and beyond share repurchase, remains
strong.
Dividend increase of 10% in January – with room for growth.
8
Spending for the next four years …
PSE&G
Other
PSEG Power
* As per 2006 10-K
** As per 2007 10-K; also includes plans for PSEG Energy Holdings; forecast includes discretionary capital expenditures at PSE&G ($500M) and PSEG Energy Holdings ($100M).
PSEG Energy
Holdings
$ 4.5B
$ 7.3B
… has increased primarily at PSE&G to support reliability.
(2008 – 2011)
(2008 – 2011)
Capital Expenditures
$0.0
$2.0
$4.0
$6.0
$8.0
$10.0
2007 Forecast*
2008 Forecast**
9
$0.0
$2.0
$4.0
$6.0
Sources
Uses
Shareholder
Dividend
PSE&G
Dividend
Discretionary
Cash*
Parent Sources and Uses
(2008 – 2011 Forecast)
Power
Dividend
$2.5B
At PSEG, we forecast $2.5B of discretionary cash through
2011.
Cash flow from Power is the primary driver of discretionary cash.
* Forecast includes some use of cash to meet potential IRS tax liability.
10
PSEG’s current stock price…
… implies a low valuation for PSEG Power.
PSE&G
2008 Earnings Guidance $350M - $370M
Indicative 2008 P/E Multiple 12.5x – 13.5x
Resulting Value/Share $8.60 - $9.80/Share
PSEG Power
Stock Price as of 8/28/08 (per share) $41.69
Less Indicative Value of PSE&G, Energy Holdings $10.67 - $11.87
Implied PSEG Power Value (per share) $29.82 - $31.02
Implied Power Enterprise Value $18.1B - - $18.7B
Implied EV as a Multiple of:
2008 EBITDA 8.4x – 9.1x
Open EBITDA 6.5x – 7.2x
Plus $10 Carbon 6.0x – 6.7x
Plus $20 Carbon 5.7x – 6.2x
(1) Reflects 2Q 2008 charge ($0.96 per share) for potential tax liability at Resources; excludes incremental value of Texas
generating assets (2,000 MW of combined cycle capacity)
Energy Holdings
Book Equity Value/Share(1) $2.07
11
PSEG Power
Tom O’Flynn
Executive Vice President and Chief Financial Officer
Low-cost portfolio
Strong cash generator
Regional focus in competitive,
liquid markets
Assets favorably located
Many units east of PJM constraints
Southern NEPOOL/ Connecticut
Near customers/load centers
80% of fossil capacity has dual fuel
capabilities
Integrated generation and portfolio
management optimizes asset-
based revenues
… we continue to like the assets we have and their location.
Right set of assets, right markets at the right time …
18%
47 %
8 %
26 %
Fuel Diversity – 2007
Coal
Gas
Oil
Nuclear
Pumped
Storage
1%
Energy Produced - 2007
54%
25%
19%
Oil 1%
Pumped
Storage
1%
Nuclear
Coal
Gas
Total GWh: 53,200
Total MW: 13,300
13
Sources: Preliminary 2007 EIA 906920 (generation & emission); eGRID 2006 (PJM Interconnection Data); EIA 2006 (ownership)
Power’s fleet has a low carbon profile …
… which is well positioned for virtually any form of carbon restrictions.
14
Digesting power market volatility
PJM market - slight tightening in reserve margins
forecast over next 5 years
Oil price volatility affecting price of natural gas and on-
peak power prices
Recent vacating of CAIR has depressed forward power
prices, but a replacement rule is expected
Power prices not responding to change in price of coal
Divergence in price of coal and power not sustainable over
long term.
15
Coal and natural gas prices have driven LMPs …
… however, there appears to be a divergence between coal, natural gas and
power prices.
Central Appalachian Coal ($/Ton)
Natural Gas Henry Hub ($/MMbtu)
Electric PJM Western Hub RTC Price ($/MWh)
On Peak Heat Rate Expansion (MWh/MMBTU)
Forward prices as of 8/11/08
$40
$50
$60
$70
$80
$90
$100
$110
$120
$130
2009
2010
2011
$7.0
$7.5
$8.0
$8.5
$9.0
$9.5
$10.0
$10.5
$11.0
$11.5
$12.0
2009
2010
2011
$55
$60
$65
$70
$75
$80
$85
$90
$95
2009
2010
2011
8.5
9.0
9.5
10.0
10.5
2009
2010
2011
16
At Power, strong cash generation and declining
capital expenditures …
… should result in substantial discretionary cash.
Cash from
Ops
Net
Financing
Dividends
to Parent
Investments
Power Sources and Uses
(2008 – 2011 Forecast)
Power Cash Flow
Cash
from Ops
Declining Investments
Net Cash
Flow
Asset
Sales
Incremental debt
capacity while
maintaining target
credit measures
($2.0)
($1.0)
$0.0
$1.0
$2.0
2007
2008
2009
2010
2011
$0.0
$2.0
$4.0
$6.0
$8.0
$10.0
Sources
Uses
17
Power’s open EBITDA is approximately $2.6 - $2.8 billion …
… which will vary depending upon market drivers.
$1.0
$1.5
$2.0
$2.5
$3.0
2008 Forecasted EBITDA $2.05B - $2.25B
~ $40M
$1/MWh
~ $74 - $78/MWh
(PJM-West)
Energy
Gas ~$9.50 to $10.00/MB
Coal ~ $4.50 to $5.50/MB
Fuel
~ $1.0B – $1.05B
O&M
Capacity
~ $120M
$10/KW-yr
~ $175 - $185/MW-day
EBITDA
Impact
Sensitivity
Assumption
* Open EBITDA reflects unhedged results of Power at market prices shown above. Energy EBITDA Impact is based on coal and nuclear generation.
18
PSE&G
PSE&G operates in an attractive market …
NJ is ranked 2nd nationally in personal
income per capita
Mid-Atlantic ReliabilityOne Award winner
six years running
Solid regulatory relationships on traditional
utility matters
(0.2%)
1.6%
Historical Annual
Load Growth
2003 - 2007
3,502 M Therms
44,709 GWh
Electric Sales and Gas Sold
and Transported
0.4%
1.7 Million
Gas
1.0%
2.1 Million
Electric
Projected Annual
Load Growth
2008 - 2012
Customers
1.3%
Historical Annual Load Growth
2003-2007
10,378*
Billing Peak (MW)
1,429
Network Circuit
Miles
1.4%
Projected Annual Load Growth
2008 - 2012
Electric and Gas Distribution Statistics (12/31/07)
Transmission Statistics (12/31/07)
… and through a disciplined capital allocation process and highly
skilled workforce, has become a recognized leader in delivering safe
and reliable service.
*Billing Peak includes adjustment for Voltage Reduction
N
E
W
S
N
E
W
S
COMBINED ELECTRIC &
GAS TERRITORIES
ELECTRIC TERRITORY
GAS TERRITORY
KEY
20
PSE&G’s capital program is focused on improving reliability.
2008
2007
2009
2010
2011
2012
2006 10-K
June 2007 10-Q
2007 10-K
5-year capital program: $3.0B
5-year capital program: $4.1B
5-year capital program: $5.3B
$10,200
$6,400
TOTAL
4,900
3,330
Electric
3,060
2,240
Gas
2,240
830
Transmission
2012 Base Plan
2007 Actual
PSE&G Rate Base ($ millions)
21
PSE&G’s capital program
Transmission
Electric and
Gas
Distribution
New
Programs
Future investment associated with meeting State energy
efficiency and renewable goals dependent on receiving
regulatory support before committing new capital, e.g. $485M
investment budgeted for AMI through 2012.
BPU approved $105M investment in solar in April 2008; PSEG
forecast includes $225M capital for solar through 2011 and
$170M for energy efficiency.
Investments focused on improving customer support,
enhancing efficiency and upgrading infrastructure
Expect to file electric and gas rate case in 2009 with rates
effective in 2010
Rate base growth supported by investment in new 500kV
lines to improve reliability ($900M) and upgrade of sub-
transmission system ($250M)
Received FERC approval for CWIP in rate base and 125 bps
adder to ROE on $600M - $650M Susquehanna line. Base ROE
increased by 50 bps for membership in RTO.
22
$0.0
$2.0
$4.0
$6.0
Sources
Uses
($1.5)
($0.5)
$0.5
$1.5
2007
2008
2009
2010
2011
Cash from
Ops
Net
Financing
Dividends
to Parent
Investments
PSE&G Sources and Uses
(2008 – 2011 Forecast)
PSE&G Cash Flow
Cash from
Ops
Growing Investments
Net Cash
Flow
At PSE&G, cash flow will be primarily directed towards
attractive reinvestment opportunities.
PSE&G expected to maintain capitalization ratios of 48% equity
and 52% debt.
23
PSEG Energy Holdings
Holdings’ portfolio has a diverse asset base . . .
Two businesses focused on maximizing value of existing investments
$45M - $60M projected 2008 operating earnings contribution
~ 70% of earnings from Global, targeting no international exposure by 2009
~ 30% of earnings from Resources
… with improved stability.
PSEG
Resources
49%
Chile & Peru
Distribution
Texas
Merchant
Generation
Other US
Generation
Two 1,000 MW CCGTs
1 in Central Texas (South Zone)
1 in West Texas
2007 Operating Earnings*
86% of the portfolio is
in energy-related
leveraged leases
2008 Guidance - Operating Earnings
12%
22%
17%
Texas
Merchant
Generation
54%
PSEG
Resources
28%
Other US
Generation
18%
~390MW owned in
CA, HI, NH
fully contracted
$ 115M
$ 45M - $60M
* See page 65 for Items excluded from Net Income to reconcile to Operating Earnings
Two companies sold
and SAESA in Disc
Ops. in 2007
25
Impact of Lease Reserves
2Q 2008 results include a charge of $490 million:
$135 million after-tax increase to the interest reserve recorded in
Income Tax Expense.
$355 million after-tax charge reflecting a change in assumptions
relating to the amount paid and timing of cash flow for certain leases
in the portfolio. This charge will be recognized in income over the
remaining terms of the affected leases.
Reserves represent our view of most of the book exposure related
to the leases under challenge. In addition, our forecast of cash
available includes potential cash outflows of $900 - $950 million
over 2 – 3 years.
Based on status of discussions with IRS, PSEG anticipates that it
will pay in 2008, the taxes, interest and penalties claimed by the
IRS for 1997-2000 audit cycle ($300 - $350 million) and
subsequently commence litigation to recover a refund.
Evaluating August 5th Global settlement offer from IRS – response
due October 7th.
26
Cash from
Ops
Net
Financing
LILO/SILO
Investments*
Holdings Sources and Uses*
(2008 – 2011 Forecast)
Asset
Sales
* Investments exclude Intercompany loans.
At Holdings, asset sales remain a significant source of
cash in 2008.
Flexibility exists to finance potential Resources’ tax liability.
$0.0
$0.2
$0.4
$0.6
$0.8
$1.0
$1.2
$1.4
$1.6
Sources
Uses
27
PSEG
Markets, assets and use of cash flow …
* See page 65 for Items excluded from Net Income to reconcile to Operating Earnings
… should continue to drive annual earnings guidance growth
of 8 - 9%.
$1.73
$2.71
$2.80 - $3.05
$3.05 - $3.35
2008
Guidance
2009
Guidance
+ 8 - 9%
2006 Operating
Earnings*
2007 Operating
Earnings*
2010E
29
Our recent 10% dividend increase continues 100-year
history of paying common dividends.
Payout objective of 40 – 50% provides opportunity for growth with
earnings.
* Indicated annual dividend rate
*
44%
Payout
Ratio
40 – 50%
43%
66%
63%
?
$1.12
$1.14
$1.29
$1.17
$1.00
$1.25
$1.50
2005
2006
2007
2008
2009E
30
PSEG – Share Repurchase Authorized
Board authorized the repurchase of up to $750 million of common stock
during an 18 month period.
Improved risk profile:
Sale of most of international assets completed.
Recognition of substantial book reserves for leases.
Credit ratings in line with objectives.
Represents commitment to making investments that provide best available
return to shareholders.
Maintains financial flexibility to pursue higher value opportunities to grow
the business, when available.
31
Fitting the pieces together - PSEG value proposition
PSEG well positioned in current business environment
Process improvement programs support efforts to:
- maintain reliability
- control costs
- provide value to the customer
Asset mix provides opportunities in attractive markets
Strengthened balance sheet supports capital investment
Return of cash to shareholders through dividends and share
repurchase provides discipline to investment process
Earnings growth and yield offer opportunity for double
digit shareholder returns of 10 – 13%
32
APPENDIX
PSEG Power
Baseload units
Load following units
Peaking units
Salem
Hope
Creek
Keystone
Conemaugh
Hudson 2
Linden 1,2
Burlington 8-9-11
Edison 1-2-3
Essex 10-11-12
Bergen 1
Sewaren 1-4
Hudson 1
Mercer1, 2
Bergen 2
… position the company to serve full requirement load contracts.
Sewaren 6
Mercer 3
Kearny 10-11
Linden 5-8 / Essex 9
Burlington 12 / Kearny 12
Peach
Bottom
Bridgeport
New
Haven
Nuclear
Coal
Combined Cycle
Steam
GT Peaking
Power’s assets along the dispatch curve …
BEC
Illustrative
Yards
Creek
National Park
X
X
Ancillary Revenue
X
X
X
X
Capacity Revenue
X
X
Energy Revenue
X
X
Dual Fuel
2% to 10%
Peaking CF
30% to 50%
Combined Cycle CF
50% to 70%
85% to 90%
Coal CF
90% to 92%
Nuclear CF
35
Operated by PSEG Nuclear
PSEG Ownership: 100%
Technology:
Boiling Water Reactor
Total Capacity: 1,061MW
Owned Capacity: 1,061MW
License Expiration: 2026
Operated by PSEG Nuclear
Ownership: PSEG - 57%,
Exelon – 43%
Technology:
Pressurized Water Reactor
Total Capacity: 2,304MW
Owned Capacity: 1,323MW
License Expiration: 2016 and
2020
Operated by Exelon
PSEG Ownership: 50%
Technology:
Boiling Water Reactor
Total Capacity: 2,224MW
Owned Capacity: 1,112MW
License Expiration: 2033
and 2034
Hope Creek
Salem Units 1 and 2
Peach Bottom Units 2 and 3
Our five unit nuclear fleet …
… is a critical element of Power’s success.
36
Total Fossil Output
(GWh)
… through a low-cost portfolio in which the majority of the output is
from coal facilities.
Fossil operations contribute to earnings …
A Diverse 9,800 MW Fleet (MW)
4,300
Steam / Peaking
3,150
Combined Cycle
2,350
Coal
Right Assets – Right Location
• Fuel diversity
• Technical diversity
• Near load centers
Operation of 2,000 MW Texas Portfolio
• Shared best practices
• Leverage scale
0
5,000
10,000
15,000
20,000
25,000
30,000
2004
2005
2006
2007
`
37
Total Power Output (GWh)
… we are expanding the output of our existing fleet.
Through our ongoing focus on operational excellence …
Strong Performance
• Continued growth in output
• Improved fleet performance
3,500
Nuclear
4,300
Peaking / Steam
3,150
Combined Cycle
2,350
Coal
A Diverse 13,300 MW Fleet*
* 2007 capacity
0
10,000
20,000
30,000
40,000
50,000
60,000
2004
2005
2006
2007
Year
Nuclear
Coal
CC
Peaking/Steam
38
Power’s eastern coal plants are in the right areas …
… and after capital investments, anticipate increased capacity factors.
System Interface
Power is also making considerable
investments beyond the pollution
control facilities for its coal assets.
Power’s New Jersey coal units are
mid-merit, with capacity factors
averaging 50% to 60%.
Capacity (MW)
Coal Units
1,578
Total
372
Bridgeport
648
Mercer 1&2
558
Hudson 2
Mercer 1&2
Hudson 2
Bridgeport Harbor 3
39
On-Peak Versus Gas
Off-Peak Versus Coal
$/MWh
$/MWh
Current market dynamics …
… have led to stronger prices.
$/MB
$/MB
Forward prices as of 8/23/08
$0
$20
$40
$60
$80
$100
2004
2005
2006
2007
2008
Est
$0
$5
$10
$15
$20
PJM Western Hub On-Peak Prices
Gas $/MB
$0
$20
$40
$60
$80
2004
2005
2006
2007
2008
Est
$0
$2
$4
$6
$8
PJM Western Hub Off-Peak Prices
Coal $/MB
40
Through the new capacity constructs, and repricing at
market prices …
… Power expects to maintain strong margins.
Power’s capacity is located in three Northeast markets.
Delivery Year ($MW/Day)
** Majority of Power’s assets
(a) – includes APS
Total Capacity 13,300MW*
(~ 1,000 - 1,500 MW under RMR)
The RPM Auction to date has provided strong price signals in PJM.
$174.29
$174.29
$174.29
2010 / 2011
$110.00
$110.00
$110.00
2011 / 2012
$102.04
$191.32 (a)
$191.32
2009 / 2010
$111.92
---
$148.80
2008 / 2009
2007 / 2008
Zones
$40.80
Rest of Pool
---
MAAC
$197.67
Eastern MAAC**
NY
NE
PJM
* 2007 capacity
41
The implementation of carbon legislation is one means
of addressing the critical issue of global warming …
$14.4
100%
Total
$0.0
$0.0
0%
Nuclear
$3.2
$8.0
40%
Gas CC
$1.2
$12.0
10%
CTs
$10.0
$20.0
50%
Coal
Impact
($/MWh)
$/MWh
On margin
(Illustrative)
Dispatch curve implication @ $20/ton**
By Fuel Type
$12.0
$18.0
$30.0
@$30/ton
$8.0
$12.0
$20.0
@$20/ton
$4.0
$6.0
$10.0
@$10/ton
Price ($/MWh)
0.4
0.6
1.0
Carbon tons/MWh
CC
CTs
Coal
PSEG Power Generation by Fuel
54%
25%
19%
Oil 1%
Pumped
Storage
1%
Nuclear
Coal
Gas
2007 Total GWh: 53,200*
… and will put additional upward pressure on energy prices.
** For illustrative purposes – potential impact of CO2 on power prices with current dispatch – not an indication of net effect on income.
* Excludes 2,000MW of combined cycle generation in Texas under PSEG Power’s operating control.
42
Ancillary services
Capacity
Congestion
Load shape
RECs
Transmission
Risk premium
Full Requirements
Round the Clock
PJM West
Forward Energy
Price
$33 - $34
$36 - $37
$55.59
$55.05
$65.41
$44 - $46
~ $21
~ $18
~ $21
$102.51
$67 - $70
~ $32
$98.88
~ $41
$58-$60
$68 - $71
~ $43
$111.50
Increase in Full Requirements Component Due to:
Increased Congestion (East/West Basis)
Increase in Capacity Markets/RPM
Volatility in Market Increases Risk Premium
Power’s fleet diversity and location ...
Market Perspective – BGS Auction Results
… has enabled successful participation in each BGS auction and
cushioned customer impacts.
* BGS prices reflect PSE&G Zone
2003
2004
2005
2006
2007
2008
43
Power’s hedging program provides near-term stability from
market volatility …
… while remaining open to long-term market forces.
Estimated EPS
impact of $10/MWh
PJM West around the
clock price change*
Contracted Capacity
Estimated EPS
impact of $30/MW-
day capacity price
change*
* As of July 2008; Assuming normal market commodity correlations
Power has
contracted for a
considerable
percentage of its
output over the
next three years
at increasing
prices.
The pricing for
most of Power’s
capacity has been
fixed through May
of 2011, with the
completion of
auctions in PJM
and NE.
$0.30 - $0.70
$0.15 - $0.45
$0.05 - $0.15
$0.01 - $0.02
$0.05 - $0.15
$0.00 - $0.01
$0.00 - $0.01
$0.00 - $0.01
Contracted Energy
Price
(right
scale)
%
sold
(left
scale)
%
sold
(left
scale)
Price
(right
scale)
0%
25%
50%
75%
100%
2008
2009
2010
2011
$40
$50
$60
$70
$80
0%
25%
50%
75%
100%
2008
2009
2010
2011
$0
$50
$100
$150
44
Historical and Contracted Nuclear Fuel Cost
While nuclear fuel has recently been volatile…
… Power’s hedging strategy has mitigated market price
increases, with 100% hedged through 2011.
Contracted
$0
$2
$4
$6
$8
$10
2004
2005
2006
2007
2008
2009
2010
2011
45
0
6,000
12,000
18,000
2008
2009
2010
2011
Hedged
Coal
Total Output
85-95%
75-85%
55-65%
Power has contracts for supply of its coal through 2010 …
… and after installation of pollution control equipment, Power
anticipates increasing flexibility in fuel choices.
Coal Output
Percent coal hedged as
of August 15th , 2008
20-30%
46
RGGI
States
Cooperative effort by Northeast states to
design a regional cap-and-trade program to
reduce carbon dioxide (CO2) emissions
Full participants – CT, MA, MD, ME, NH, VT, NY,
NJ, RI, and DE
Observers – PA, DC, eastern Canadian Provinces
and New Brunswick
Timeline
April 2003 process proposed by Governor Pataki
2003 – 2006 – Stakeholder process
December 20, 2005 Final 7 state MOU
March 23, 2006 – Draft Model Rule
August 15, 2006 – Final Model Rule & amended
MOU
2007-2008 – State level adoption
First RGGI allowance auction September 2008
January 1, 2009 – Implementation
The Regional Greenhouse Gas Initiative (RGGI) …
Participating
Observer
… is a potential influence on market prices.
ME
NY
DE
NH
VT
MA
NJ
RI
PA
MD
CT
47
CO
2
Emissions vs. RGGI Cap
(Actuals through 2007)
140
150
160
170
180
190
200
2010
2012
2014
2016
2018
RGGI Cap
Projected
Actual &
Forecast CO
2
Actual
The RGGI cap shows headroom …
Affected Sources
Fossil-fired electric generating
units with a capacity of 25MW and
larger
Targets and Timing
Three-year compliance periods
with the first running from 2009-
2011
Stabilization of CO2 emissions at
recent levels through 2015 (~188
million tons per year)
Achieve a 10% reduction of CO2
emissions below recent levels by
2019
This translates into ~13% reduction
below 1990 levels or ~35%
reduction from BAU* levels by
2020
* BAU = Business as usual
With RGGI
BAU
2000
2002
2004
2006
2008
… when viewed in comparison to historical emissions.
130
48
RGGI’s CO2 pricing projections …
… reflect moderate prices, based on the headroom in the cap.
$0
$2
$4
$6
$8
$10
2009
2011
2013
2015
2017
2019
2021
2023
2025
RGGI - ICF Base
RGGI - ICF Base (Rev. Oct-06)
49
PSE&G
Regulated electric transmission, electric and gas distribution system
Characteristics
FERC regulation for electric transmission (formula rates)
NJ BPU regulation for electric and gas distribution
Managing recovery lag on electric and gas distribution investments
PSE&G’s base investment plan …
2007 Actual
Rate Base = $6.4 B
2012 Base Plan
Rate Base = $10.2 B
Equity Ratio ~ 48%
… coupled with fair regulatory treatment provides a solid foundation for
projected future earnings growth from 2008 – 2012 of 7 - 8%.
PSE&G Rate Base
Gas
Distribution
35%
Electric
Transmission
13%
Electric
Distribution
52%
Gas
Distribution
30%
Electric
Transmission
22%
Electric
Distribution
48%
51
By 2018, NJ’s load is expected to grow by 4,000 MW …
Projects to NY
The Neptune HVDC project (685
MW) connecting Sayreville to
Long Island
The Linden VFT project (330
MW) connecting Linden to
Staten Island
The Bergen O66 project (670
MW) connecting Bergen to
ConEd's West 49th Street
substation
The Bergen Q75 project (1,200
MW) connecting Bergen to
ConEd's West 49th Street
substation
Linden S104 project (200 MW)
connecting Linden to Goethals
Projects to NJ
PSEG’s evaluation of
the proposed backbone
transmission projects:
Northern 500kV
route into Jefferson
and Roseland
Central 765kV route
into Deans
Southern 500kV
route into Salem
… yet the net import capability into NJ is only increasing by ~1,900 MW
indicating need for additional generation, DSM or transmission imports
requiring RTEP investment.
Total Import
Capability
~ 5,000 MW
Total Export
Capability
~ 3,100 MW
2008-2018 NJ Summer Peak
Annual Growth Rate = 1.8%
Sources: Imports: PSE&G Estimates; Exports: PJM 2008 Regional Transmission Expansion Plan; and Load Growth: PJM 2008 Load Forecast Report
52
Transmission opportunities will require substantial
deployment of capital.
Transmission Growth
PJM approval was received for the $600-$650
million Susquehanna to Roseland line in October
2007
Siting and permitting process underway
FERC approved Incentive rate filing:
125 BPS adder to ROE
100% CWIP in Rate Base
FERC approval of the MAPP projects also mandates
an additional $100 million of capital at Salem/Hope
Creek
FERC approval of Sub Transmission to
Transmission system reliability investments
represents about $250 million through 2012, post-
2012 ~$60 million/year
Other approved RTEP projects ~$250 million also
contribute meaningfully to improved reliability and
earnings growth
Backbone projects are in preliminary stages but
present real opportunity to improve reliability
throughout the state, with the potential investment of
~ $1.5B through 2015
When coupled with formula rate design and additional incentives, it
is expected to provide current return on forecasted capital
expenditures thereby improving profitability.
Branchburg
Roseland
Jefferson
New Freedom
Smithburg
Deans
MAPP
Hope Creek
Salem
Project
I-765
Interstate
Project
53
RGGI enabling legislation was signed into law in January
2008.
Solar Initiative
$105 million pilot program to finance installation of PV Solar
approximately 40% subscribed.
AMI
Pilot acknowledged as being consistent with Energy Master Plan.
Stakeholder process developed to enroll key constituents in
providing input into a final Technical Evaluation Report.
Pilot to test Mesh and BPL technologies
Section 13 of the RGGI Law permits utilities to invest and/or
offer programs in renewables, conservation and energy
efficiency .
Carbon Abatement Filing – June 2008
Four-year $46 million program intended to demonstrate PSE&G
capabilities
Demand Response Filing – August 2008
Five sub-programs that ultimately represent 392 MWs and $93 million of
investment by 2013
Our four programs will prove our capabilities at reducing carbon in
an economic manner.
54
Even with our planned investments, delivery prices to
customers ...
Note: 2007 Rates are based on tariff rates in effect on December 31, 2007; Regional Average may not include Electric Transmission for all firms.
… are already lower than regional average, and are expected to
grow less than inflation.
Electricity
Gas
2007-2012 Growth = 0.7%
Inflation = 2.1%
2007-2012 Growth = 1.4%
Inflation = 2.1%
Distribution
Transmission
Source: Rates from PSE&G, NYPSC and PAPUC; Inflation from Moody’s Economy.com, February 2008
6.8
5.5
5.1
0.00
4.00
8.00
2007
2012
2007
Regional
Average
0.48
0.45
0.42
0.00
0.20
0.40
0.60
2007
2012
2007
Regional
Average
55
PSEG Energy Holdings
Texas assets are a driver of Global’s results.
Two 1,000MW combined cycle facilities
- Two of the most efficient gas-fired plants in
Texas, on-line in 2001
- Forced outage rate less than 2%
Market Environment:
Bilateral forward market
Day ahead balancing and ancillary services
bid market
No capacity payments…margins derived
from energy and ancillary services
Nodal market transition begins in 2009
Natural gas units on the margin 90%
Reserve margins have been decreasing
Assets favorably located
15%
4,700
3,820
880
1.9%
4,100
West
Odessa
-8%
21%
Reserve
Margin
2007*
1.9%
1.9%
Annual
Growth
14,796
20,280
Total
Gas
Nuclear,
Coal, Wind**
Hydro
Load
Zone
12,161
2,635
16,000
Houston
12,680
7,600
16,750
South
Guadalupe
* Reserve Margins calculated on data provided by Global Energy.
** Wind is based on 8.7% of installed capacity (ERCOT Peak reliability %).
Odessa
Midland
Guadalupe
Austin
San Antonio
57
Due to market uncertainty …
Key drivers behind decision to remain largely unhedged beyond 2008:
Oversold market: Many generators seeking a hedge, limited appetite among hedge providers.
Market uncertainty:
Uncertainty relating to move to a nodal pricing market.
Impact of wind generation in western ERCOT.
Transmission maintenance: Extensive maintenance of 345kV line near Global’s Odessa unit.
Texas CCGT Generation Output
… Global’s Texas assets are hedged to a lesser degree beyond 2008.
2008 Hedged
Spark Spread*
$19-22/MWh
* As of July 31, 2008
0%
20%
40%
60%
80%
100%
2008
2009
2010
2011
58
As renewable opportunities emerge …
… Global will focus on developing a renewable presence in core
markets.
Emerging aggressive RPS
targets in core PSEG markets
create an opportunity
PSEG is well positioned to
participate
Familiarity with infrastructure
development, asset
management, energy policy,
project financing and power
markets
Experience with domestic and
international renewable assets
PSEG Global is pursuing
potential development of wind,
biomass and solar projects,
primarily in core markets
Cumulative 2008-2011 planned
investment in renewables of
~$500 million
PSEG’s newly created entity, PSEG Renewable Generation, along with a private developer,
submitted a proposal in response to a New Jersey BPU Office of Clean Energy Solicitation,
to develop a 350 MW, 96 turbine wind farm approximately 16 miles off the southern New
Jersey shore
The proposal is subject to receipt of all required permits, financing and other conditions
National Renewable Portfolio Standards (RPS)
59
Resources is focused on managing its current investment
portfolio …
… as earnings reflect potential resolution of tax matters.
PSEG Resources - Earnings Profile
Dealt with most of exposure related to cross border leases in 2nd quarter
2008.
$355 million charge to reflect potential changes to timing of tax cash flow.
$135 million increase to interest reserve.
$58M
$15M-
$20M
$0M
($10M) –
($20M)
$25M-
$35M
(Net Income)
-20
0
20
40
60
2007
2008E
2009E
2010E
2011E
60
PSEG Resources – Traditional lease investments
* Includes booked residual
USA
Reliant
Power Plant
Aug-00
2026 & 2034
Y
423
302.6
USA
Dynegy
Power Plant
May-01
2031 & 2035
Y
362.3
260.5
USA
EME 2
Power Plant
Aug-00
2030 & 2034
Y
332.6
214.9
USA
Merrill Creek
Reservoir
Jun-88
2032
N
327
122.5
USA
Grand Gulf
Nuc. Plant
Dec-88
2015
N
133.5
103.1
USA
Qwest
Real Estate
Dec-91
2012
Y
130.9
84.9
NETH
Dutch Rail
Rail Cars
Oct-92
2010
Y
48.7
48.6
USA
Renaissance Ctr
Real Estate
Apr-88
2021
Y
62.5
38.1
USA
Wal-Mart
Real Estate
Sep-91
2007-2013
Y
54.0
34.6
USA
E-D Centers
Real Estate
Jun-90
2020 & 2021
Y
29.6
25.0
USA
Whitehorn
Power Plant
Feb-00
2009
Y
17
15.4
USA
Wal-Path
Real Estate
Apr-91
2021
Y
15.6
11.5
TOTAL
1,937.0
1,261.7
50%
55%
$671
$525
Discounted Value @ 6%
Discounted Value @ 8%
% Total Lease Portfolio
Average Life: 18.5 Years
Residual
2008-2035 Pre-tax
Cash Flow*
($ million)
Book Investment
as of 7/31/08
($ million)
Country
Agreement
Property Type
Start
Lease
Termination
61
PSEG
PSEG’s generating portfolio is well positioned …
… across multiple attractive markets.
Open Capacity
PSEG
2007 Total US Generation
15,700 MW
PSEG Power
2007 Total Capacity
13,300 MW
PSEG Global
2007 Total Owned Capacity
2,400 MW
NY
NE
PJM
Texas
CA
Other
PJM
Other
Texas
NE
NY
PSEG Power
2007 Energy Produced
53,200
GWh
Nuclear
54%
Coal
25%
Gas
19%
Oil 1%
Pumped
Storage
1%
Gas
92%
Oil 8%
PSEG Global
2007 Energy Produced
9,800
GWh
Nuclear
46%
Gas
30%
Coal
21%
PSEG
2007 Energy Produced
63,000
GWh
Oil 2%
Pumped
Storage
1%
+
+
=
=
63
PSEG’s generation portfolio provides attractive cash …
Combined fleet represents 15,700 MW of competitive generation
Assets are positioned in four attractive merchant markets
Growth opportunity available
Existing assets positioned for incremental growth
Site expansion capability
$1,993
TOTAL
$104
PSEG Global
(Texas)
$1,889
PSEG Power
PSEG Generation
2007 EBITDA ($M)
$2,700 - $2,900
TOTAL
~$100
PSEG Global
(Texas)
$2,600 - $2,800
PSEG Power
PSEG Generation
Open EBITDA* ($M)
… with opportunity for additional growth in a disciplined manner.
* Open EBITDA reflects unhedged results at PSEG Power and PSEG Global at market prices and current volume.
64
Items Excluded from Net Income to Reconcile to Operating Earnings
Please see Slide 3 for an explanation of PSEG’s use of Operating Earnings as a non-GAAP financial measure and how
it differs from Net Income.
2007
2006
2007
2006
Merger related Costs:
PSE&G
-
$
(1)
$
-
$
Enterprise
-
(7)
(0.02)
Total Merger related Costs
-
$
(8)
$
-
$
(0.02)
$
Impact of Asset Sales:
Loss on Sale of RGE
-
(178)
-
$
(0.35)
$
Chilquinta & Luz Del Sur
(23)
-
(0.05)
-
Write down of Turboven
(7)
-
(0.01)
-
Premium on bond redemption
(28)
(7)
(0.06)
(0.02)
Total Impact of Asset Sales
(58)
$
(185)
$
(0.12)
$
(0.37)
$
Discontinued Operations:
Power - Lawrenceburg
(8)
$
(239)
$
(0.02)
$
(0.47)
$
Holdings:
SAESA
(33)
57
(0.06)
0.11
Electroandes
57
16
0.11
0.03
Elcho and Skawina
-
226
-
0.45
Total Holdings
24
$
299
$
0.05
$
0.59
$
Total Discontinued Operations
16
$
60
$
0.03
$
0.12
$
Years Ended Dec. 31,
Years Ended Dec. 31,
($ millions)
(EPS)
65