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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1994
COMMISSION FILE NUMBER 1-9120
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
(Exact name of registrant as specified in its charter)
NEW JERSEY 22-2625848
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
80 PARK PLAZA, P.O. BOX 1171 07101-1171
NEWARK, NEW JERSEY (Zip Code)
(Address of principal executive offices)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 201 430-7000
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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Common Stock without par value New York Stock Exchange
Philadelphia Stock Exchange
COMMISSION FILE NUMBER 1-973
PUBLIC SERVICE ELECTRIC AND GAS COMPANY
(Exact name of registrant as specified in its charter)
NEW JERSEY 22-1212800
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
80 PARK PLAZA, P.O. BOX 570 07101-0570
NEWARK, NEW JERSEY (Zip Code)
(Address of principal executive offices)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 201 430-7000
DOCUMENTS INCORPORATED BY REFERENCE
PART OF FORM 10-K DOCUMENTS INCORPORATED BY REFERENCE
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III Portions of the definitive Proxy Statement for the Annual
Meeting of Stockholders of Public Service Enterprise Group
Incorporated to be held April 18, 1995, which definitive
Proxy Statement is expected to be filed with the Securities
and Exchange Commission on or about March 1, 1995, as
specified herein.
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SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS TITLE OF EACH CLASS WHICH REGISTERED
------------------- -------------------- ------------------------
Cumulative Preferred Stock First and Refunding
$100 par value Series: Mortgage
Bonds Series Due:
4.08% 8 3/4% Z 1999
4.18% 9 3/4% AA 2020
4.30% 9 1/8% BB 2005
5.05% 9 1/4% CC 2021
5.28% 8 7/8% DD 2003
5.97% 8 3/4% EE 2021
6.80% 7 7/8% FF 2001
7.40% 7 1/8% GG 1997
7.44% 8 3/4% HH 2022
7.52% 7 5/8% II 2000
7.70% 6 % JJ 1995
6 7/8% KK 1997 New York Stock Exchange
8 1/2% LL 2022
6 7/8% MM 2003
6 % NN 1998
Cumulative Preferred Stock 7 1/2% OO 2023
$25 par Series: 6 1/2% PP 2004
6 % QQ 2000
6.75% 6 1/8% RR 2002
7 % SS 2024
7 3/8% TT 2014
6 3/4% UU 2006
8 % 2037
5 % 2037
Monthly Income Preferred
Securities
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
REGISTRANT TITLE OF CLASS
------------------------------------- -------------------------------------
Public Service Enterprise Group None
Incorporated
Public Service Electric and Gas 6.92% Cumulative Preferred Stock $100
Company par value
Medium-Term Notes, Series A
Indicate by check mark whether the registrants (1) have filed all reports required to be filed by Section 13
or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the
registrants were required to file such reports), and (2) have been subject to such filing requirements for the past
90 days. Yes X No .
----- ----
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not
contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. X
-----
The aggregate market value of the Common Stock of Public Service Enterprise Group Incorporated held by
non-affiliates as of January 31, 1995 was $7,031,387,787 based upon the New York Stock Exchange Composite Transaction
closing price.
The number of shares outstanding of Enterprise's sole class of common stock, as of the latest practicable date,
was as follows:
CLASS OUTSTANDING AT JANUARY 31, 1995
------------------------------- -------------------------------
Common Stock, without par value 244,697,930
As of January 31, 1995, Public Service Electric and Gas Company had issued and outstanding 132,450,344 shares
of Common Stock, without nominal or par value, all of which were privately held, beneficially and of record by Public
Service Enterprise Group Incorporated (Enterprise).
TABLE OF CONTENTS
PAGE
----
Table of Contents................................................... i
Glossary of Terms................................................... v
PART I
Item 1. Business............................................. 1
General.............................................. 1
Enterprise......................................... 1
PSE&G.............................................. 2
Industry Issues...................................... 3
Competition.......................................... 3
Overview........................................... 3
Electric........................................... 4
Gas................................................ 5
Construction and Capital Requirements................ 6
PSE&G.............................................. 6
EDHI............................................... 7
Financing Activities................................. 7
Federal Income Taxes................................. 8
Credit Ratings....................................... 8
PSE&G................................................ 9
Rate Matters....................................... 9
Nuclear Performance Standard....................... 9
Customers.......................................... 10
Integrated Resource Plan........................... 11
Pennsylvania -- New Jersey -- Maryland
Interconnection................................ 11
Power Purchases.................................. 11
Demand Side Management........................... 12
Electric Generating Capacity....................... 13
Nuclear Operations................................. 14
Salem............................................ 14
Hope Creek....................................... 16
Peach Bottom..................................... 16
Other Nuclear Matters............................ 17
Electric Fuel Supply and Disposal.................. 18
Nuclear Fuel..................................... 19
Coal............................................. 20
Natural Gas...................................... 20
Oil.............................................. 20
Nuclear Fuel Disposal............................ 21
Low Level Radioactive Waste (LLRW)............... 22
Gas Operations and Supply.......................... 23
i
PAGE
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Employee Relations................................... 25
Regulation........................................... 25
Environmental Controls............................... 28
Air Pollution Control.............................. 29
Water Pollution Control............................ 31
Control of Hazardous Substances.................... 34
Financial Statistics of Enterprise................... 42
Operating Statistics of PSE&G........................ 43
EDHI................................................. 44
EDC................................................ 44
CEA................................................ 44
PSRC............................................... 45
EGDC............................................... 46
Capital............................................ 46
Funding............................................ 46
Item 2. Properties........................................... 47
PSE&G.............................................. 47
Electric Properties.............................. 48
Gas Properties................................... 49
Office Buildings and Facilities.................... 50
Item 3. Legal Proceedings.................................... 51
Item 4. Submission of Matters to a Vote of Security
Holders............................................ 52
Item 10. Executive Officers of the Registrants................ 52
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters................................ 53
Item 6. Selected Financial Data............................. 55
Enterprise........................................ 55
PSE&G............................................. 55
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations............... 56
Enterprise.......................................... 56
Overview.......................................... 56
PSE&G Energy and Fuel Adjustment Clauses.......... 57
Competition....................................... 57
Enterprise Earnings............................... 59
PSE&G........................................... 60
EDHI............................................ 60
Dividends......................................... 61
ii
PAGE
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Revenues.......................................... 62
PSE&G Electric................................ 62
PSE&G Gas..................................... 63
EDHI.......................................... 65
Electric Energy Costs............................. 66
Gas Supply Costs.................................. 66
Liquidity and Capital Resources................... 68
PSE&G........................................... 68
EDHI............................................ 68
Long-Term Investments and Real Estate........... 63
Construction, Investments and Other Capital
Requirements Forecast......................... 70
Internal Generation of Cash from Operations..... 71
External Financings............................. 71
PSE&G............................................... 75
Gas Supply Costs.................................. 75
Liquidity and Capital Resources................... 76
Internal Generation of Cash from Operations..... 76
Item 8. Financial Statements and Supplementary Data......... 77
Financial Statement Responsibility (Enterprise)... 77
Financial Statement Responsibility (PSE&G)........ 79
Independent Auditors' Report (Enterprise)......... 81
Independent Auditors' Report (PSE&G).............. 82
Consolidated Statements of Income (Enterprise).... 83
Consolidated Balance Sheets (Enterprise).......... 84
Consolidated Statements of Cash Flows (Enterprise) 86
Consolidated Statements of Retained Earnings
(Enterprise).................................... 87
Consolidated Statements of Income (PSE&G)......... 88
Consolidated Balance Sheets (PSE&G)............... 89
Consolidated Statements of Cash Flows (PSE&G)..... 91
Consolidated Statements of Retained Earnings
(PSE&G).......................................... 92
Notes to Consolidated Financial Statements
(Enterprise)..................................... 93
Notes to Consolidated Financial Statements (PSE&G). 132
iii
PAGE
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PART III
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure................ 136
Item 10. Directors and Executive Officers of the Registrants.. 136
Directors of the Registrants....................... 136
Enterprise....................................... 136
PSE&G............................................ 136
Executive Officers of the Registrants................ 137
Item 11. Executive Compensation............................... 139
Enterprise......................................... 139
PSE&G.............................................. 139
Summary Compensation Table....................... 140
Option Grants in Last Fiscal Year (1994)......... 141
Aggregated Option Exercises in Last Fiscal
Year (1994) and Fiscal Year-End Option
Values (12/31/94).............................. 141
Employment Contracts and Arrangements............ 142
Compensation Committee Interlocks and Insider
Participation.................................. 142
Compensation of Directors and Certain Business
Relationships.................................. 142
Compensation Pursuant to Pension Plans........... 143
Item 12. Security Ownership of Certain Beneficial Owners and
Management......................................... 144
Enterprise......................................... 144
PSE&G.............................................. 144
Item 13. Certain Relationships and Related Transactions....... 145
Enterprise......................................... 145
PSE&G.............................................. 145
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K........................................ 146
Schedule VIII -- Valuation and Qualifying Accounts (Enterprise)... 149
Schedule VIII -- Valuation and Qualifying Accounts (PSE&G)........ 150
Signatures -- Public Service Enterprise Group Incorporated..... 151
Signatures -- Public Service Electric and Gas Company.......... 152
Exhibit Index..................................................... 153
Enterprise........................................................ 154
PSE&G............................................................. 160
iv
GLOSSARY OF TERMS
The following is a glossary of frequently used abbreviations or acronyms that
are found in this report:
TERM MEANING
----------------------- ----------------------------------------------
ACO.................... Administrative Consent Order
AFDC................... Allowance for Funds used During Construction
AMT.................... Alternative Minimum Tax
BCFE................... Billion Cubic Feet Equivalent
Bonds.................. First and Refunding Mortgage Bonds
BPU.................... New Jersey Board of Public Utilities
BTA.................... Best Technology Available
BWA.................... Boiling Water Reactor
CAA.................... Federal Clean Air Act
Capital................ PSEG Capital Corporation
CEA.................... Community Energy Alternatives Incorporated
CEA USA................ CEA USA, Inc.
CEA New Jersey......... CEA New Jersey, Inc.
CERCLA................. Federal Comprehensive Environmental Response,
Compensation and Liability Act of 1980
Certificate............ Certificate of Need under the NJNAA
CORP................... New Jersey Commission on Radiation Protection
DGW.................... Discharge to Ground Water
DOE.................... United States Department of Energy
DRIP................... Enterprise's Dividend Reinvestment and Stock
Purchase Plan
DSM.................... Demand Side Management
DSM Plan............... DSM Incentive Resource Plan
DSW.................... Discharge to Surface Water
EBIT................... Earnings before interest and taxes
ECRA................... New Jersey Environmental Cleanup Responsibility Act
EDC.................... Energy Development Corporation
EDHI................... Enterprise Diversified Holdings Incorporated
EGDC................... Enterprise Group Development Corporation
EITF................... FASB's Emerging Issues Task Force
EMF.................... Electric and Magnetic Fields
Enterprise............. Public Service Enterprise Group Incorporated
EPA.................... United States Environmental Protection Agency
v
TERM MEANING
---------------------- --------------------------------------------------
EWGs................... Exempt Wholesale Generators
FASB................... Financial Accounting Standards Board
Fault Act.............. New Jersey Public Utility Accident
Fault Determination Act
FERC................... Federal Energy Regulatory Commission
Fuelco................. PSE&G Fuel Corporation
Funding................ Enterprise Capital Funding Corporation
FWPCA.................. Federal Water Pollution Control Act
GE..................... General Electric
GEMS................... Gloucester Environmental Management Services, Inc.
Hope Creek............. Hope Creek Nuclear Generating Station
IEPNJ.................. Independent Energy Producers of New Jersey
IPP.................... Independent Power Producers
IRP.................... Integrated Resource Plan
IRS.................... Internal Revenue Service
KWH.................... Kilowatthours
LEAC................... Electric Levelized Energy Adjustment Clause
LGAC................... Levelized Gas Adjustment Charge
LLRW................... Low Level Radioactive Waste
LLRWPA................. Low Level Radioactive Waste Policy Act, as amended
LNG.................... Liquefied Natural Gas
LPG.................... Liquid Petroleum Air Gas
LTIP................... Long-Term Incentive Plan
MD&A................... Management's Discussion and Analysis of Financial
Condition and Results of Operations
MICP................... Management Incentive Compensation Plan
MIPS................... Monthly Income Preferred Securities
Mortgage............... First and Refunding Mortgage of PSE&G
MTNs................... Medium-Term Notes
MW..................... Megawatts
MWH.................... Megawatthours
NAAQS.................. National Ambient Air Quality Standards
NEIL................... Nuclear Electric Insurance Limited
NEPA................... National Energy Policy Act of 1992
NJAPCC................. New Jersey Air Pollution Control Code
NJDEP.................. New Jersey Department of Environmental Protection
NJEDA.................. New Jersey Economic Development Authority
NJGRT.................. New Jersey Gross Receipts and Franchise Tax
NJNAA.................. New Jersey Need Assessment Act
vi
TERM MEANING
----------------------- --------------------------------------------------
NJPDES................. New Jersey Pollution Discharge Elimination System
NJWPCA................. New Jersey Water Pollution Control Act
NOC.................... Nuclear Oversight Committee
NOx.................... Nitrogen Oxides
NPDES.................. National Pollutant Discharge Elimination System
NPS.................... The BPU's nuclear performance standard established
for nuclear generating stations owned by
New Jersey electric utilities
NRC.................... Nuclear Regulatory Commission
NUGs................... Nonutility Generators
NWPA................... Nuclear Waste Policy Act of 1982, as amended
OAL.................... Office of Administrative Law of the State of
New Jersey
OPEB................... Other Postretirement Benefits
Partnership............ Public Service Electric and Gas Capital, L.P.
Peach Bottom........... Peach Bottom Atomic Power Station, Units 2 and 3
PECO................... PECO Energy Inc.
Penelec................ Pennsylvania Electric Company
PJM.................... Pennsylvania -- New Jersey -- Maryland
Interconnection
PJP.................... PJP Landfill in Jersey City, New Jersey
PPUC................... Pennsylvania Public Utility Commission
Price Anderson......... Price-Anderson liability provisions of the Atomic
Energy Act of 1954, as amended
PRPs................... Potentially Responsible Parties
PSE&G.................. Public Service Electric and Gas Company
PSCRC.................. Public Service Conservation Resources Corporation
PSRC................... Public Service Resources Corporation
PUHCA.................. Public Utility Holding Company Act of 1935
PURPA.................. Public Utility Regulatory Policies Act of 1978
QFs.................... Qualifying Facilities
RAC.................... Remediation Adjustment Charge
RACT................... Reasonable Available Control Technologies
RAR.................... Revenue Agent's Report
RCRA................... Federal Resource Conservation and Recovery Act
of 1976
vii
TERM MEANING
----------------------- --------------------------------------------------
Remediation Program.... PSE&G Gas Plant Remediation Program
RI/FS.................. Remedial Investigation and Feasibility Study
ROD.................... Record of Decision
Salem.................. Salem Nuclear Generating Station, Units 1 and 2
SALP................... Systematic Assessment of Licensee Performance
SEC.................... Securities and Exchange Commission
SFAS 71................ Statement of Financial Accounting Standards
No. 71, "Accounting for the Effects of Certain
Types of Regulation"
SFAS 106............... Statement of Financial Accounting Standards
No. 106, "Employers' Accounting for Postretirement
Benefits Other than Pensions"
SFAS 107............... Statement of Financial Accounting Standards
No. 107, "Disclosures About Fair Value of
Financial Instruments"
SFAS 109............... Statement of Financial Accounting Standards
No. 109, "Accounting for Income Taxes"
SNG Plant.............. Synthetic Natural Gas Plant
636 Orders............. Orders No. 636 and No. 636-A of FERC
Spill Act.............. New Jersey Spill Compensation and Control Act
USDOT.................. United States Department of Transportation
USEC................... United States Enrichment Corporation
USEP................... U.S. Energy Partners
viii
PART I
ITEM 1. BUSINESS.
General
Enterprise
Public Service Enterprise Group Incorporated (Enterprise), incorporated
under the laws of the State of New Jersey with its principal executive offices
located at 80 Park Plaza, Newark, New Jersey 07101, is a public utility holding
company that neither owns nor operates any physical properties. Enterprise has
two direct wholly-owned subsidiaries, Public Service Electric and Gas Company
(PSE&G) and Enterprise Diversified Holdings Incorporated (EDHI). Enterprise's
principal subsidiary, PSE&G, is an operating public utility providing electric
and gas service in certain areas in the State of New Jersey. Enterprise has
claimed an exemption from regulation by the Securities and Exchange Commission
(SEC) as a registered holding company under the Public Utility Holding Company
Act of 1935 (PUHCA), except for Section 9(a)(2) thereof which relates to the
acquisition of voting securities of an electric or gas utility company. PSE&G
is subject to direct regulation by the New Jersey Board of Public Utilities
(BPU) and the Federal Energy Regulatory Commission (FERC). EDHI is the parent
of Enterprise's nonutility businesses: Energy Development Corporation (EDC),
an oil and gas exploration and production and marketing company; Community
Energy Alternatives Incorporated (CEA), an investor in and developer of
cogeneration and independent power production facilities; Public Service
Resources Corporation (PSRC), which has made primarily passive investments;
Enterprise Group Development Corporation (EGDC), a diversified nonresidential
real estate development and investment business; PSEG Capital Corporation
(Capital), which has provided up to $750 million debt financing on the basis
of a minimum net worth maintenance agreement from Enterprise; and Enterprise
Capital Funding Corporation (Funding), which provides privately placed debt
financing on the basis of the consolidated financial position of EDHI without
direct support from Enterprise. As of December 31, 1994 and December 31, 1993,
respectively, PSE&G comprised 85% and 86% of Enterprise's assets. PSE&G's 1994,
1993 and 1992 revenues were 93% of Enterprise's revenues and PSE&G's earnings
available to Enterprise for such years were 91%, 96% and 88%, respectively, of
Enterprise's net income. Electric and gas production and distribution will
continue as the principal business of Enterprise for the foreseeable future.
Financial information with respect to business segments of PSE&G and
Enterprise is set forth in Note 15 -- Financial Information by Business
Segments of Notes to Consolidated Financial Statements.
PSE&G
PSE&G, a New Jersey corporation with its principal executive offices at
80 Park Plaza, Newark, New Jersey 07101, is an operating public utility company
engaged principally in the generation, transmission, distribution and sale of
electric energy service and in the production, transmission, distribution and
sale of gas service in New Jersey. PSE&G supplies electric and gas service in
areas of New Jersey in which approximately 5,500,000 persons, about 70% of the
State's population, reside. (See General -- Enterprise.)
PSE&G's electric and gas service area is a corridor of approximately 2,600
square miles running diagonally across New Jersey from Bergen County in the
northeast to an area below the City of Camden in the southwest. The greater
portion of this area is served with both electricity and gas, but some parts
are served with electricity only and other parts with gas only. This heavily
populated, commercialized and industrialized territory encompasses most of New
Jersey's largest municipalities, including its six largest cities -- Newark,
Jersey City, Paterson, Elizabeth, Trenton and Camden -- in addition to
approximately 300 suburban and rural communities. It contains a diversified mix
of commerce and industry, including major facilities of many corporations of
national prominence.
Under the general laws of New Jersey, PSE&G has the right to use the
public highways, streets and alleys in New Jersey for erecting, laying and
maintaining poles, conduits and wires necessary for its electric operations.
PSE&G must, however, first obtain the consent in writing of the owners of the
soil for the purpose of erecting poles. In incorporated cities and towns, PSE&G
must obtain from the municipality a designation of the streets in which the
poles are to be placed and the manner of placing them. PSE&G's rights are also
subject to regulation by municipal authorities with respect to street openings
and the use of streets for erecting poles in incorporated cities and towns.
PSE&G, by virtue of a special charter granted by the State of New Jersey
to one of its predecessors, has the right to use the roads, streets, highways
and public grounds in New Jersey for pipes and conduits for distributing gas.
PSE&G believes that it has all the franchises (including consents)
necessary for its electric and gas operations in the territory it serves. Such
franchises are non-exclusive.
For discussion of the significant changes which PSE&G's electric and gas
utility businesses have been and are undergoing, see Competition and
Regulation.
Industry Issues
Enterprise and PSE&G are affected by many issues that are common to the
electric and gas industries, such as: an increasingly competitive energy
marketplace, sales retention and growth potential in a mature service territory
and need to contain costs (see Regulation and Competition); deregulation and
the unbundling of energy supplies and services (see Competition); ability to
obtain adequate and timely rate relief, cost recovery, and other necessary
regulatory approvals (see PSE&G -- Rate Matters; Regulation and Item 7,
Management's Discussion and Analysis of Financial Condition and Results of
Operations (MD&A) - Competition); costs of construction (see Construction and
Capital Requirements); operating restrictions, increased costs and construction
delays attributable to environmental regulations (see Environmental Controls);
controversies regarding electric and magnetic fields (EMF) (see Environmental
Controls); nuclear decommissioning and the availability of reprocessing and
storage facilities for spent nuclear fuel (see Electric Fuel Supply and
Disposal); and credit market concerns with these issues.
Competition
Overview
The energy utility industry is in transition. Changes in Federal law and
regulation are encouraging new entrants to the traditional markets of electric
and gas utilities. New technologies are creating opportunities for new energy
services. Customers, more aware and sophisticated about their choices and
dissatisfied with the often limited range of options available from the local
utility, are increasingly turning elsewhere for energy supplies and services.
Competition has arrived and, as a consequence, the traditional utility
structure -- consisting of a vertically integrated system and functioning as
a natural monopoly -- is being dramatically altered. Further, PSE&G's ability
to meet competition and shift costs among customer categories is impacted by
State regulation, including the historic utility mandate to serve all
customers. (See MD&A -- Competition.)
Federal energy laws and regulations are designed to make more efficient
use of all energy, introduce price competition and encourage the use of
nonconventional energy sources and to limit oil imports by increasing
production of domestic energy resources. Among other things, these actions (1)
encourage development of alternative energy generation, (2) require wheeling
of power for wholesale transactions, (3) require state regulatory authorities
to consider certain standards on rate design and certain other utility
practices, (4) encourage conservation of energy through certain financial
incentives, including incentives by individual utilities to customers to help
them to conserve energy and (5) deregulate prices on natural gas.
Also, Federal and State laws designed to reduce air and water pollution
and control hazardous substances have had the effect of increasing the costs
of operation and replacement of existing utility plants. (See Environmental
Controls.)
Competition from nonutility generators (NUGs), such as
cogenerators,independent power producers (IPP) and exempt wholesale generators
(EWGs), as permitted by the Public Utility Regulatory Policies Act of 1978
(PURPA) and the National Energy Policy Act of 1992 (NEPA), continues to impact
upon PSE&G. As a result of changes brought about by NEPA, along with proposals
in some states to authorize retail wheeling, discussed below, electric
customers and suppliers, including PSE&G and its customers, have increased
opportunities for purchase and sale of electricity from and to sellers and
buyers outside of traditional franchised territories. Retention of existing
customers and potential sales growth will depend upon the ability of PSE&G to
contain costs, meet customer expectations and respond to changing economic
conditions and energy regulation. As a result of such competitive forces,
Enterprise announced a corporate reorganization on February 22, 1995, effective
March 1, 1995, that includes the creation of a new ventures and services
corporation ("Ventures") as a subsidiary of PSE&G to develop and market new
energy-related products and services and the establishment of three new
separate business units: fossil generation; electric and gas transmission and
distribution; and customer services. Previously in the Fall of 1994, PSE&G
reorganized its nuclear operations as a business unit, (see Nuclear
Operations). Ventures is expected to be the foundation for new businesses
through the development of energy-related products and services that may be
marketed beyond traditional boundries. It will include such existing
businesses as Public Service Conservation Resources Corporation (PSCRC)
offering demand side management (DSM) services (see PSE&G Demand Side
Management) and U.S. Energy Partners (USEP) a natural gas marketing company
(see EDHI -- PSRC). (See PSE&G -- Customers and MD&A -- Competition.)
Competition may also adversely impact upon the economics of certain
regulatory-created incentives, such DSM and conservation. For additional
information, including a discussion of the potential effects of competition
upon rates, cost recovery and assets, see MD&A -- Competition.
Electric
In the electric utility industry, competitive pressures began with the
enactment of PURPA. This law, together with subsequent changes in Federal
regulation, has increasingly opened the electric utility industry to
competition. PURPA created a class of generating facilities exempt from
federal and state public utility regulation -- cogeneration and small power
producers known as "qualifying facilities" (QFs) -- and created an instant
market for them by requiring regulated utilities to purchase their excess power
production. NEPA, by facilitating the development of the wholesale power
market, has lead to even stronger competition. The increasing competitiveness
of the electric wholesale markets, along with consideration of retail wheeling
or "direct retail access" within utility franchise areas in several states, but
not New Jersey to date, has brought to the forefront the issue of potential
stranded costs within the electric utility industry (see MD&A - Competition).
NEPA provides FERC with increased authority to order "wheeling" of
wholesale, but not retail, electric power on the transmission systems of
electric utilities, provided that certain requirements are met. In order to
facilitate the transition to increased competition in wholesale power markets
made possible by NEPA, FERC has, in a Notice of Inquiry, requested comments on
a wide array of policy and legal questions related to wholesale transmission
pricing, alternative power pooling institutions and stranded costs. NEPA also
amended PUHCA to permit EWGs, which are not subject to PUHCA regulation. NEPA
permits both independent companies and utility affiliates to participate in the
development of EWGs' projects regardless of the location and ownership of other
generating resources. The transmission access provisions apply to wholesale,
but not retail, "wheeling" of power, subject to FERC review. See PSE&G --
Integrated Resource Plan, Construction and Capital Requirements, Financing
Activities and PSE&G -- Customers. For information concerning the activities
of CEA, which is an owner-developer of QFs and EWGs, see EDHI -- CEA.
Another key factor in determining how competition will affect PSE&G's
electric business is the extent to which New Jersey public utility regulation
may be modified to be reflective of these new competitive realities. The BPU
in November 1994 issued the first phase of a draft revised Energy Master Plan.
The revised Energy Master Plan acknowledges the need for regulatory flexibility
that is responsive to the competitive realities of today's energy marketplace
and the competitive pressures being experienced by energy customers in New
Jersey. The revised Energy Master Plan calls for legislation that would allow
PSE&G and other New Jersey utilities to propose, subject to BPU approval,
alternatives to existing rate base/rate-of-return pricing and allow for pricing
flexibility under certain standards for customers with competitive options and
for the equalization of the impact of tax policy upon energy producers (see
PSE&G -- Customers). The revised Energy Master Plan also calls for integrated
resource planning and a competitive supply procurement process for electric
utilities as measures that would accommodate competition and support the
State's environmental and energy conservation goals. Repeal of the Certificate
of Need (Certificate) process for new electric capacity also is recommended
(see Regulation).
PSE&G is in agreement with the essential elements of this first phase of
the revised Energy Master Plan and is encouraged that the plan acknowledges the
need for legislation that would provide much needed regulatory flexibility in
meeting the needs of customers and New Jersey's economy. PSE&G has supported
such legislation in the past and will review the precise terms and conditions
of any proposed legislation. The BPU is expected to begin consideration of a
second phase of the revised Energy Master Plan during the second quarter of
1995. This second phase is expected to address the future structure of the
utility industry, including retail wheeling and wholesale competition. PSE&G
intends to actively participate in the public debate concerning the revised
Energy Master Plan. PSE&G cannot predict the impact of any regulatory or
legislative changes which might ultimately be adopted.
Gas
Competition in the natural gas industry was dramatically accelerated with
the issuance by FERC of its Order Nos. 636 and 636-A (636 Orders) which
transformed it from an industry driven by regulation to one driven by
competitive market forces. The principal effect of the 636 Orders has been to
cause interstate natural gas pipelines to reconfigure their services so that
services provided to third-party shippers are now fully comparable to the
services that pipelines had historically provided in their role as gas
merchants. To this end, the 636 Orders required the unbundling of interstate
pipeline services (i.e., transportation service and sales service bundled
together for one price) in order to develop a more competitive interstate
natural gas industry. While unbundling of services provides PSE&G and certain
of its customers with greater access to lower cost gas supplies, it also
results in pipeline transition costs being borne by pipeline ratepayers and
their customers. Although each pipeline has completed the restructuring of its
services in order to comply with the 636 Orders, numerous parties have appealed
the 636 Orders to the U.S. Court of Appeals for the Eleventh Circuit and for
the D.C. Circuit. PSE&G has been granted status as an intervenor in these
appeals, which remain pending. However, the appeals have not had the effect of
staying the 636 Orders.
In November 1993, the BPU adopted a proposal for the unbundling of
traditional services provided by the local gas distribution companies, such as
PSE&G, within the State of New Jersey in order to promote unrestricted access
to natural gas and related services in New Jersey for all customer classes
except the residential end user.
On November 30, 1994, the BPU approved PSE&G's proposed new rate
schedules, effective December 1, 1994, to implement the BPU guidelines on
unbundled gas services. This will enable PSE&G's industrial and commercial gas
customers, who represent about half of PSE&G's sales volumes, to participate
in the competitive market. The transportation rate schedules produce the same
non-fuel revenue per therm as the customers' existing sales service rate
schedules. Thus, PSE&G's earnings are unaffected whether the customers remain
on sales service or convert to transportation service. PSE&G cannot predict
how its gas business may be affected in the future should additional
modifications to the New Jersey public utility regulations be made. (See Note
2 - Rate Matters of Notes to Consolidated Financial Statements.)
Construction and Capital Requirements
PSE&G
PSE&G has substantial commitments as part of its ongoing construction
program which includes capital requirements for nuclear fuel. PSE&G's
construction program is continuously reviewed and periodically revised as a
result of changes in economic conditions, revised load forecasts, changes in
the scheduled retirement dates of existing facilities, changes in business
plans, site changes, cost escalations under construction contracts,
requirements of regulatory authorities and laws, the timing of and amount of
electric and gas rate changes and the ability of PSE&G to raise necessary
capital.
Based on PSE&G's current IRP and construction program, construction
expenditures are expected to aggregate approximately $3.2 billion during the
years 1995 through 1999, including $484 million for nuclear fuel and
$78 million of allowance for funds used during construction (AFDC). For
additional information, see MD&A -- Liquidity and Capital Resources and Note
12 -- Commitments and Contingent Liabilities -- Construction and Fuel Supplies
of Notes to Consolidated Financial Statements.
PSE&G's estimate of its electric construction expenditures, including
AFDC, for the years 1995 through 1999, described above, recognizes the current
and planned results of PSE&G's Demand Side Management (DSM) Incentive Resource
Plan (DSM Plan) which is designed to reduce the rate of growth in its electric
system peak demand and improve system load factor without restricting the
continued economic development of PSE&G's service area. PSE&G's DSM Plan
includes rebates for high efficiency appliances and heating equipment, audits,
loans, seal-ups and for larger customers, an overall standard offer for
eligible DSM end-users. PSE&G's 1994 IRP includes a demand forecast average
compound annual rate of growth through the year 2004 of electric system peak
demand of 0.6%. Aggressive conservation and load management efforts are
expected to reduce the system peak by 843 Megawatts (MW) by 1998. By the year
2004, 1,412 MW are expected to be saved through these programs. It is
important to note that, through its "Standard Offer" program, PSE&G only pays
for its verified, audited conservation (see PSE&G -- Integrated Resource Plan).
PSE&G's construction program focuses on upgrading electric and gas
transmission and distribution systems and constructing new transmission and
distribution facilities to serve new load. Gross additions to PSE&G's utility
plant during the three-year period ended December 31, 1994 amounted to
approximately $2.5 billion, including $92 million of AFDC.
EDHI
As of December 31, 1994 and 1993, EDHI's long-term investments aggregated
$1.6 billion and $1.5 billion, respectively. Its property, plant and equipment
(net of accumulated depreciation and amortization and valuation allowances)
aggregated $.7 billion and $.6 billion, respectively. As of December 31, 1994
and December 31, 1993, respectively, EDHI comprised 15% and 14% of Enterprise's
assets.
Enterprise has an agreement in place with the BPU that it will not permit
its investments in EDHI, as defined in the agreement, to exceed 20% of its
consolidated assets without prior notice to the BPU and that debt supported
by a minimum net worth maintenance agreement (see EDHI -- Capital) between
Enterprise and Capital will be limited to $750 million, with a good faith
effort to eliminate such support over a six-to-ten-year period from April 1993.
Effective January 31, 1995, the maximum amount of Capital debt that may be
outstanding was reduced to $650 million. As of December 31, 1994, Capital's
long-term and short-term portion of long-term debt was $478 million and $154
million, respectively. (See Regulation and MD&A -- Liquidity and Capital
Resources.)
For further discussion of capital requirements, investments and internal
generation of cash from operations, see MD&A -- Liquidity and Capital
Resources, and Note 7 -- Long-Term Investments, of Notes to Consolidated
Financial Statements. For a discussion of sinking fund payments and maturities
through 1999, see Note 6 -- Schedule of Consolidated Debt of Notes to
Consolidated Financial Statements.
Financing Activities
For a discussion of issuance, book value and market value of Enterprise's
Common Stock and external financing activities of Enterprise, PSE&G and EDHI
for the year 1994, see MD&A -- Liquidity and Capital Resources and Item 5. -
Market for Registrant's Common Equity and Related Stockholder Matters.
Enterprise's Common Stock is listed on the New York and Philadelphia Stock
Exchanges.
For a discussion of Capital and Funding, see EDHI -- Capital and EDHI -
Funding. For further discussion of long-term debt and short-term debt, see
Note 6 -- Schedule of Consolidated Debt of Notes to Consolidated Financial
Statements.
Federal Income Taxes
For information regarding Federal income taxes, see Note 1 --
Organization and Summary of Significant Accounting Policies, Note 2 -- Rate
Matters and Note 10 -- Federal Income Taxes of Notes to Consolidated Financial
Statements.
Credit Ratings
The current ratings of securities of Enterprise's subsidiaries set forth
below reflect the respective views of the rating agency furnishing the same,
from whom an explanation of the significance of such ratings may be obtained.
There is no assurance that such ratings will continue for any given period of
time or that they will not be revised downward or withdrawn entirely by such
rating agencies, if, in their respective judgments, circumstances so warrant.
Any such downward revision or withdrawal of such ratings, or any of them, may
have an adverse effect on the market price of Enterprise's Common Stock and
PSE&G's securities and serve to increase the cost of capital of PSE&G and EDHI.
STANDARD DUFF
PSE&G MOODY'S & POOR'S & PHELPS FITCH
- ----- ------- -------- -------- -----
Mortgage Bonds............... A2 A- A A-
Debenture Bonds.............. A3 BBB+ A- BBB+
Preferred Stock.............. A3 BBB+ A- BBB+
Commercial Paper............. P1 A2 Duff 1
Fuelco: Commercial Paper..... P1 A2 Duff 1
As a component of the ratings noted above, each rating agency issues its
opinion of the credit trend or outlook for the entity being rated. For PSE&G,
these opinions are as follows: Moody's -- negative; Standard & Poor's --
stable; Duff & Phelps -- stable; and Fitch -- stable.
EDHI
- ----
Capital: Senior Debt......... Baa2 BBB BBB+
Funding: Commercial Paper(A). P1 A1+ Duff 1+
(A) Supported by commercial bank letter of credit (see MD&A -- Liquidity and
Capital Resources and Note 6-- Schedule of Consolidated Debt --
Short-Term of Notes to Consolidated Financial Statements.)
PSE&G
Rate Matters
For information concerning PSE&G's rate matters, see Note 2 -- Rate
Matters of Notes to Consolidated Financial Statements.
For information concerning PSE&G's Energy Remediation and Fuel Adjustment
Clauses, see MD&A. For information concerning PSE&G's Under (Over) recovered
Electric Energy and Gas Fuel Costs, see Note 5 -- Deferred Items of Notes to
Consolidated Financial Statements.
For a discussion of the repowering of Bergen Generating Station, see Note
12 -- Commitments and Contingent Liabilities of Notes to Consolidated Financial
Statements.
Nuclear Performance Standard
The BPU has established a nuclear performance standard (NPS) for nuclear
generating stations owned by New Jersey electric utilities, including the five
nuclear units in which PSE&G has an ownership interest: Salem Nuclear
Generating Station, Units 1 and 2 (Salem 1 and 2) -- 42.59%; Hope Creek Nuclear
Generating Station (Hope Creek) -- 95%; and Peach Bottom Atomic Power Station,
Units 2 and 3 (Peach Bottom 2 and 3) -- 42.49%. PSE&G operates Salem and Hope
Creek, while Peach Bottom is operated by PECO Energy, Inc. (PECO). The
following table sets forth the capacity factor in accordance with the NPS of
each of PSE&G's nuclear units for the years indicated:
NUCLEAR UNITS 1994 1993 1992
- -------------- ---- ---- ----
Capacity Factors:
Salem 1...................................... 59% 60% 54%
Salem 2...................................... 58 57 49
Hope Creek................................... 77 95 76
Peach Bottom 2............................... 80 84 61
Peach Bottom 3............................... 98 70 80
Aggregate capacity factor of nuclear units... 74 77 66
For information concerning such NPS, see Note 12 -- Commitments and
Contingent Liabilities of Notes to Consolidated Financial Statements.
Customers
As of December 31, 1994, PSE&G provided service to approximately 1,900,000
electric customers and 1,500,000 gas customers. PSE&G is not dependent on a
single customer or a few customers for its electric or gas sales. For the year
ended December 31, 1994, PSE&G's operating revenues aggregated $5.5 billion,
of which 68% was from its electric operations and 32% from its gas operations.
These revenues were derived as follows:
Revenues
------------------
Electric Gas
--------- ------
(Millions of Dollars)
Residential........................................ $1,187 $ 890
Commercial......................................... 1,735 511
Industrial......................................... 693 312
Transportation Service - Gas....................... -- 35
Other.............................................. 118 31
------ ------
Total........................................... $3,733 $1,779
====== ======
Customers of PSE&G, as well as those of other New Jersey electric and gas
utilities, pay New Jersey Gross Receipts and Franchise Tax (NJGRT) which, in
effect, adds approximately 13% to their bills. The NJGRT is a unit tax based
on electric kilowatthour and gas therm sales. This tax differential provides
an incentive to large-volume electric and gas customers to seek to obtain their
energy supplies from nonutility sources not subject to NJGRT. To the extent
this occurs, it could result in a significant decrease in PSE&G's revenues and
earnings. (See Competition.)
In January 1995, PSE&G and its second-largest industrial customer
submitted a petition to the BPU to approve a tariff modification for this
customer that would vary the electric price hourly to reflect changes in
PSE&G's marginal cost of energy. The proposed pricing would result in a bill
reduction for the customer of approximately $7 million or about 25%. This
reduction in revenues would be partially offset by a proposed decrease of $1.8
million in PSE&G's State tax liability. Under the agreement between the
customer and PSE&G, the customer will forego an opportunity to relocate to
another state and remain a PSE&G customer for ten years. BPU approval is
pending. A tariff modification to reduce electric costs of PSE&G's largest
industrial customer by approximately $9 million, or about 23%, was approved by
the BPU in December 1993.
PSE&G has signed each of its three existing wholesale electric customers,
aggregating 40 mw of load, to new 5-year full service agreements with mid-term
extension options. Two of these agreements are pending approval by FERC.
Beginning in 1995, under the terms of a previously negotiated 10-year wholesale
power transaction negotiated in 1992, PSE&G will receive $12.5 million in
annual revenues from Old Dominion Electric Cooperative.
PSE&G's business is seasonal in that sales of electricity are higher
during the summer months because of air conditioning requirements and sales of
gas are greater in the winter months due to the use of gas for space-heating
purposes.
Integrated Resource Plan
Pursuant to its IRP, PSE&G periodically reevaluates its forecasted
customer load and peak growth and the sources of electric generating capacity
and DSM to meet such projected growth (see Demand Side Management below). The
IRP takes into account assumptions concerning future customer demand, future
cost trends, especially fuel and purchased power expenses, effectiveness of
conservation and load management activities, the long-term condition of and
projected additions to PSE&G's plants and capacity available from other
electric utilities and nonutility suppliers. PSE&G's IRP consists principally
of plant additions, power purchases through PJM and NUGs and DSM.
Pennsylvania -- New Jersey -- Maryland Interconnection
PSE&G is a member of Pennsylvania -- New Jersey -- Maryland
Interconnection (PJM) which integrates the bulk power generation and
transmission supply operations of 11 utilities in Pennsylvania, New Jersey,
Delaware, Maryland, Virginia and the District of Columbia, and in turn is
interconnected with other major electric utility companies in the northeastern
part of the United States. The PJM is operated as one system and provides for
the purchase and sale of power among members on the basis of reliability of
service and operating economy. As a result, the most economical mix of
generating capability available is used to meet PJM daily load requirements.
PSE&G's output, as shown under Electric Fuel Supply, reflects purchased power
because at times it is more economical for PSE&G to purchase power from PJM and
others than to produce it. As of December 31, 1994, the aggregate installed
generating capacity of the PJM companies was 56,073 MW. The peak one-hour
demand experienced by the PJM power pool was 45,992 MW which occurred on July
8, 1994. The 1994 peak was 437 MW lower than the record-setting 1993 summer
peak of 46,429 MW which occurred on July 8, 1993. PSE&G's capacity obligations
to PJM system vary from year to year due to changes in system characteristics.
PSE&G expects to have sufficient installed capacity to meet its obligations
during the 1995-96 period.
Power Purchases
A component of PSE&G's IRP consists of expected capacity additions from
NUGs. These additions are projected to be 57 MW and are scheduled for service
by 1998. NUG projects are expected to comprise approximately 7% of resources
by 2004. This availability of NUG generation will reduce the need for PSE&G
to build or acquire additional generation.
PSE&G is also a party to the Mid-Atlantic Area Coordination Agreement
which provides for review and evaluation of plans for generation and
transmission facilities and other matters relevant to reliability of the bulk
electric supply systems in the Mid-Atlantic area.
PSE&G expects to be able to continue to meet the demand for electricity
on its system through operation of available equipment and by power purchases.
However, if periods of unusual demand should coincide with outages of
equipment, PSE&G could find it necessary at times to reduce voltage or curtail
load in order to safeguard the continued operation of its system.
Demand Side Management
Integrated resource planning brings together demand-side and supply-side
strategies. In order to encourage DSM, the BPU adopted rules in late 1991
providing special incentives to encourage utilities to offer these load
management conservation services. The rules are designed to place DSM on an
equal regulatory footing with supply side or energy production investments.
Both NEPA and the revised Energy Master Plan call for conservation to play a
significant role in meeting New Jersey's energy needs over the coming decade.
PSE&G's DSM Plan has been approved by the BPU. The IRP calls for PSE&G to
utilize conservation and DSM to meet most of the incremental resource needs for
the next decade (see Competition).
PSE&G's DSM Plan is designed to encourage investment in energy-saving DSM
activities in New Jersey. These activities involve new techniques and
technologies, such as high-efficiency lighting and motors, that help reduce
customer demand for energy. The DSM Plan presents a two-phase approach -- a
core program that includes many of the conservation programs now available to
customers and a performance-based program that offers payments for introducing
DSM technology and services that result in measurable energy savings. The
performance-based proposal uses a technique that provides direct payments for
kilowatthours of electricity and therms of gas saved through investments in
DSM. PSE&G's IRP projects 597 MW of passive DSM and 815 MW of active DSM by
the year 2004.
PSE&G has established a wholly owned subsidiary, Public Service
Conservation Resources Corporation (PSCRC), to offer DSM services. PSCRC has
its principal office at 9 Campus Drive, Parsippany, N.J. 07054. PSCRC
finances, markets and develops energy conservation projects, mostly within the
PSE&G service territory. At December 31, 1994, assets totaled $49.6 million,
of which $38.1 million were project assets and work in progress.
Electric Generating Capacity
The following table sets forth certain information as to PSE&G's installed
generating capacity as of December 31, 1994:
INSTALLED
SOURCE CAPACITY(MW) PERCENTAGE
- --------------- ------------ ----------
Conventional Steam Electric
Oil-fired(a)............................. 2,359 23
Coal-fired New Jersey(b)................. 1,242 12
Coal-fired Pennsylvania (mine mouth)(c).. 770 7
Combustion Turbine(d)...................... 2,875 27
Combined Cycle............................. 249 2
Diesel(c).................................. 5
Nuclear(c)
New Jersey............................... 1,921 18
Pennsylvania............................. 886 9
Pumped Storage(c)(d)....................... 190 2
------ ----
Total(e)......................... 10,497 100
====== ====
(a) Units with aggregate capacity of 1,406 MW can also burn gas.
(b) Can also burn gas.
(c) PSE&G share of jointly owned facilities.
(d) Primarily used for peaking purposes.
(e) Excludes 664 MW of nonutility generation and temporary capacity sales
of 173 MW to Baltimore Gas and Electric and 111 MW to General Public
Utilities.
For additional information, see Item 2. Properties -- PSE&G -- Electric
Properties.
The capacity available at any time may be less than the installed capacity
because of temporary outages for inspection, maintenance, repairs, legal and
regulatory requirements or unforeseen circumstances.
The maximum one-hour demand (peak load) which PSE&G experienced in 1994
was 9,001 MW, which occurred on June 15, 1994 when PSE&G's customers used a
total of 172,362 Megawatthours (MWH) of electricity. (For information
concerning sales, output and capacity factors, see Operating Statistics.) The
peak load in 1993 was 9,147 MW, a record which occurred on July 8, 1993, when
the day's output was 180,643 MWH of electricity.
Nuclear Operations
Operation of nuclear generating units involves continuous close regulation
by the Nuclear Regulatory Commission (NRC). Such regulation involves testing,
evaluation and modification of all aspects of plant operation in light of NRC
safety and environmental requirements and continuous demonstrations to the NRC
that plant operations meet applicable requirements. The NRC has the ultimate
authority to determine whether any nuclear generating unit may operate. For
information concerning the performance of the nuclear units, see Nuclear
Performance Standard and Note 12 -- Commitments and Contingent Liabilities of
Notes to Consolidated Financial Statements.
The scheduled 1995, 1996, and 1997 refueling outages, each estimated at
eight to ten weeks duration, for PSE&G's five licensed nuclear units are
expected to commence in the following months:
REFUELING OUTAGES
-----------------------------------------------
1995 1996 1997
------------- ------------- -------------
Salem 1................... April September --
Salem 2................... -- March September
Hope Creek................ September -- March
Peach Bottom 2............ -- September --
Peach Bottom 3............ September -- September
Salem
The outage of a Salem unit causes PSE&G to incur replacement power costs
of approximately $4 million to $6 million per month. Such amounts vary,
however, depending upon the availability of other generation, the cost of
purchased energy and other factors including modifications to maintenance
schedules of other units. Operations at the Salem units continue to present
challenges for PSE&G. These units have experienced equipment failures and
personnel errors that have precipitated or contributed to plant events or trips
which have lead to a number of outages over the units' lifetimes.
As a result of the NRC investigation following the reactor shutdown of
Salem 1 in April 1994, PSE&G was fined $500,000 for violations relating to the
failure to identify and correct significant conditions adverse to quality at
the facility related to spurious steam flow signals and inoperable atmospheric
relief valves, both of which, the NRC concluded, lead to unnecessary safety
injections during the event; the failure to identify and correct significant
conditions adverse to quality at the facility related to providing adequate
training, guidance and procedures for the operators to cope with the event; and
the failure by supervisors to exercise appropriate command and control of the
operations staff and the reactor during the event. On November 1, 1994, PSE&G
responded to the violations and paid the fine.
On January 3, 1995, the NRC provided PSE&G with its latest Systematic
Assessment of Licensee Performance (SALP) report on Salem for the period
between June 20, 1993 and November 5, 1994. SALP is a process pursuant to
which the NRC periodically reviews the performance of nuclear power plant
operations. The Salem SALP report was issued under the revised SALP process
in which the number of assessment areas has been reduced from seven to four:
Operations, Maintenance, Engineering and Plant Support (the Plant Support area
includes security, emergency preparedness, radiological controls, fire
protection, chemistry and housekeeping). Ratings range from a high of "1" to
a low of "3" for each assessment area. Salem received a rating of "3" in the
Operations and Maintenance areas, a rating of "2" in Engineering, and a rating
of "1" in the Plant Support area. The NRC noted an overall decline in
performance, and evidenced particular concern with plant and operator
challenges caused by repetitive equipment problems and personnel errors. The
NRC also noted that although PSE&G has initiated several comprehensive actions
within the past year to improve plant performance, and some recent incremental
gains have been made, these efforts have yet to noticeably change overall
performance at Salem.
PSE&G's own assessments, as well as those by the NRC and the Institute of
Nuclear Power Operations indicate that additional efforts are required to
further improve operating performance, and PSE&G is committed to taking the
necessary actions to address Salem's performance needs. It is anticipated that
the NRC will maintain a close watch on Salem's performance and corrective
actions related to the April reactor shutdown. No assurance can be given as
to what, if any, further or additional actions may be taken or required by the
NRC to improve Salem's performance.
PSE&G is taking significant steps to address performance shortfalls at
Salem. In 1993, a comprehensive performance assessment team identified areas
of weakness through an in-depth investigation of common causes and events.
Corrective action plans and effectiveness measures were then initiated in 1994
and are ongoing, along with additional measures designed to achieve a change
in Salem's performance. Personnel performance is being addressed through
improved supervisory training and increased monitoring of work activities,
improved operational command and control and the reorganization and increased
staffing of Salem Station. PSE&G has established a goal of safe, uneventful
operation to be achieved through enhanced self-assessment and corrective action
processes, resolution of long-standing equipment problems, improved independent
oversight of plant operations and improved root-cause analysis of plant
problems. In furtherance of these goals, PSE&G has reorganized the operational
structure of its Nuclear Department and recruited a new chief nuclear officer.
In addition, Enterprise has strengthened oversight of nuclear plant operations
by establishing a standing Nuclear Committee of its Board of Directors. (see
Item 10. -- Directors and Executive Officers of the Registrants).
On February 6, 1995, Enterprise and PSE&G received a request from the NRC
for a meeting of its representatives with their respective Boards of Directors
to discuss the need for continued improvements in equipment reliability and
staff performance. This meeting is scheduled for mid-March. Enterprise cannot
predict what actions, if any, the NRC may take as a result of this meeting.
Hope Creek
An outage at Hope Creek causes PSE&G to incur replacement energy costs of
approximately $10 million to $16 million per month. Such amounts vary, however,
depending upon the availability of other generation, the cost of purchased
energy and other factors including modifications to maintenance schedules of
other units.
The NRC's latest periodic SALP report on Hope Creek was received in
September 1993 and covered the period between December 29, 1991 and June 19,
1993. This report was issued under prior SALP procedures. Hope Creek received
a rating of "1" in six functional areas, and received a rating of "2" in the
one remaining area. The NRC noted an improvement over the prior rating period
in the Maintenance/Surveillance and Engineering/Technical Support areas and a
declining trend in the Emergency Preparedness area, with excellent performance
overall.
As a result of an internal allegation report, PSE&G submitted a License
Event Report to the NRC on October 14, 1994 which stated that in 1992, the Hope
Creek control room was understaffed for approximately three minutes and a
decision was made by those involved that the incident did not warrant
initiation of NRC reporting documentation. A meeting with Region I NRC
personnel was held on October 18, 1994 in which the NRC expressed a high degree
of concern over the issue. The NRC's Office of Investigation has since looked
into the event, as well as an internal investigation by PSE&G as to the
validity of the allegation. The NRC's Senior Resident Inspector has indicated
to PSE&G that a Notice of Violation would likely be issued. A second meeting
with the NRC was held on February 3, 1995, with resolution of this issue
pending completion of the NRC's investigation. PSE&G cannot predict what other
action the NRC may take in this matter.
Peach Bottom
The outage of a Peach Bottom unit causes PSE&G to incur additional
replacement energy costs of approximately $4 million to $6 million per month
per unit. Such amounts vary, however, depending upon the availability of other
generation, the cost of purchased energy and other factors including
modifications to maintenance schedules of other units.
PSE&G has been advised by PECO that on June 29, 1994, the NRC issued its
periodic SALP Report for Peach Bottom for the period November 1, 1992 to April
30, 1994. The Report was issued under the revised SALP process described above
for Salem. PECO has advised PSE&G that Peach Bottom received a rating of "1"
in the area of Plant Operations; the areas of Engineering, Maintenance, and
Plant Support received ratings of "2" overall, the NRC found continued
improvement in performance during the period; the NRC stated that enhancement
in problem identification and resolution, good control of refuelings and
outages and excellent oversight by plant management of day-to-day activities
in a manner that ensured safe operation of the units contributed to the
improvement; despite the overall improvement, the NRC noted that some areas
require continued management attention and that management needs to continue
to encourage plant personnel at all levels to identify existing, and sometimes
longstanding, problems so that priorities can be established, and effective
corrective actions implemented; the NRC also noted instances of personnel
inattention to detail and failure to follow procedures which warranted
additional management attention. PECO has advised PSE&G that it has taken and
is taking actions to address the weaknesses discussed in the SALP Report.
PSE&G has been advised by PECO that on October 18, 1994, the NRC held an
enforcement conference to discuss a violation at Peach Bottom. An emergency
service water valve was left closed and unattended for approximately 45 minutes
during testing, which would have prevented safety-related equipment from
receiving the proper cooling flow in an emergency. On November 21, 1994, PECO
received a Level III violation for this incident, including a civil penalty of
$87,500. PSE&G cannot predict what other actions, if any, the NRC may take in
this matter.
PSE&G has been advised by PECO that, by letter dated October 18, 1994, the
NRC has approved PECO's request to re-rate the authorized maximum reactor core
power levels of both Peach Bottom units by 5% to 3,458 MW from the current
limits of 3,293 MW. The amendment of the Peach Bottom 2 facility operating
license was effective upon the date of the NRC approval letter and the hardware
changes were completed during the fall 1994 refueling outage. The amendment
of the Peach Bottom 3 facility operating license will be effective upon the
implementation of associated hardware changes, which are to be completed during
Peach Bottom 3's next refueling outage scheduled for the fall of 1995.
Other Nuclear Matters
In October 1990, General Electric (GE) reported that crack indications
were discovered near the seam welds of the core shroud assembly in a GE Boiling
Water Reactor (BWR) located outside the United States. As a result, GE issued
a letter requesting that the owners of GE BWR plants take interim corrective
actions, including a review of fabrication records and visual examinations of
accessible areas of the core shroud seam welds. PSE&G (Hope Creek) and PECO
(Peach Bottom) are participating in a GE BWR Owners' Group to evaluate this
issue and develop long-term corrective actions. During the spring 1994
refueling outage, PSE&G inspected the shroud of Hope Creek in accordance with
GE's recommendations and found no cracks. PSE&G is working closely with GE and
the BWR Owners' Group on coordination of inspections, evaluations and repair
options, if required. PSE&G expects minimal impact due to the age and
materials of the Hope Creek shroud and the historical maintenance of low
conductivity water chemistry. For these reasons, Hope Creek has been placed
in the lowest susceptibility category by the BWR Owners' Group.
PECO has advised PSE&G that Peach Bottom 3 was examined in October 1993
during the last refueling outage and crack indications were identified at two
locations. On November 3, 1993, PECO presented its findings to the NRC and
provided justification for continued operation of Unit 3 for another two-year
cycle with crack indications. PECO has also advised that Peach Bottom 2 was
examined in October 1994 during its refueling outage. Although some crack
indications were identified, they were considered to be much less severe than
those previously found on Unit 3, and no repairs were required to operate Unit
2 for another two-year cycle.
Electric Fuel Supply and Disposal
The following table indicates PSE&G's KWH output by source of energy:
ACTUAL ESTIMATED
SOURCE 1994 1995
------ ------ ---------
Nuclear
New Jersey facilities.......................... 28% 30%
Pennsylvania facilities........................ 17 14
Fossil
Coal
New Jersey facilities........................... 7 11
Pennsylvania facilities......................... 12 12
Natural Gas..................................... 7 6
Residual Oil.................................... 2 1
Net PJM Interchange and Utility Purchases
and NUGs........................................ 27 26
---- ----
Total................................................. 100% 100%
==== ====
PSE&G's cost of fuel used to generate electricity in the periods shown below was as follows:
NATURAL
COAL GAS
---------------------------------------- --------
NEW JERSEY PENNSYLVANIA
NUCLEAR FACILITIES FACILITIES OIL
------- ------------------- ------------------- -------------------
CENTS/ CENTS/ CENTS/ CENTS/ CENTS/
MILLION MILLION MILLION MILLION $/ MILLION
YEAR BTU $/TON BTU $/TON BTU BTU BARREL BTU
- ---- ------- ------- ------- ------- ------- ------- ------ -------
1992 60.8 58.24 214.0 32.98 133.4 207.4 21.70 351.7
1993 59.3 55.45 203.8 33.73 136.6 221.7 23.44 384.5
1994 62.3 56.31 213.8 34.78 140.7 197.8 22.19 361.02
Substantially all of PSE&G's electric sales are made under rates which are designed to permit the
recovery of increases in energy costs over base costs on a current annual basis. (See PSE&G --
Rate Matters -- Adjustment Clauses.)
Nuclear Fuel
The supply of fuel for nuclear generating units involves the mining and
milling of uranium ore to uranium concentrate, conversion of the uranium
concentrate to uranium hexafluoride, enrichment of that gas, conversion of the
enriched gas to fuel pellets and fabrication of fuel assemblies.
PSE&G has several long-term contracts with ore operators to process
uranium ore to uranium concentrate to meet the currently projected requirements
for the Salem and Hope Creek units fully through the year 2000 and, thereafter,
60% of their requirements through the year 2002.
Present contracts for conversion, enrichment and fabrication services
meet the fuel cycle requirements for Salem and Hope Creek units through the
years shown in the following table:
NUCLEAR UNIT CONVERSION ENRICHMENT FABRICATION
- ------------ ---------- ---------- -----------
Salem 1..................... 2000 (1) 2004
Salem 2..................... 2000 (1) 2005
Hope Creek.................. 2000 (1) 2000
(1) 100% coverage through 1998; approximately 50% through 2002; and
approximately 30% through 2004. PSE&G does not anticipate
any difficulties in obtaining necessary enrichment service for
its Salem and Hope Creek units.
PSE&G has been advised by PECO that it has contracts for the purchase of
uranium which will satisfy the fuel requirements of Peach Bottom 2 and 3
through 2002. PSE&G has also been advised by PECO that it has contracts for
uranium concentrates which will be allocated to Peach Bottom 2 and 3 and two
other nuclear generating units in which PSE&G does not have an interest, on an
as-needed basis.
PECO has also advised PSE&G that it has contracted for the following
segments of the nuclear fuel supply cycle for Peach Bottom 2 and 3 through the
following years:
NUCLEAR UNIT CONVERSION ENRICHMENT FABRICATION
- ------------ ---------- ---------- -----------
Peach Bottom 2.............. 1997 2008 1999
Peach Bottom 3.............. 1997 2008 1998
Coal
Approximately 40% of PSE&G's coal supply for its New Jersey facilities is
obtained under a contract which expires in 1999. The balance of the supply is
contracted annually from various suppliers, many of whom PSE&G has dealt with
on a continuing basis for a number of years, and is supplemented by spot market
purchases. The New Jersey Air Pollution Control Code (NJAPCC) permits the
burning of coal with a sulfur content of up to 1% at existing coal-fired
generating stations including PSE&G's three coal-fired New Jersey units, Hudson
2 and Mercer 1 and 2. The weighted monthly average sulfur content of the coal
received at Hudson Station and at Mercer Station must not exceed 1.0% (dry
weight basis). PSE&G has been able to obtain sufficient quantities of 1% (or
less) sulfur coal and does not presently anticipate any difficulties in
obtaining adequate coal supplies to replace expiring contracts. (See
Environmental Controls -- Air Pollution Control).
PSE&G has an approximately 23% interest in the Keystone and Conemaugh
coal-fired generating stations located in western Pennsylvania and operated by
Pennsylvania Electric Company (Penelec). At least 67%, optionally up to 100%,
of the fuel required by the Keystone station is supplied by one coal company
under a contract which expires December 31, 2004. At least 18% of the fuel
required by Conemaugh station is supplied by another coal company under a
contract which expires on December 31, 1997. In addition, approximately 51% of
Conemaugh's coal requirements is supplied under a mix of short-term contracts
which expire on March 31, 1995 and September 30, 1995. The balance of the fuel
requirements for each station is supplied through spot purchases obtained from
local suppliers. Penelec has advised PSE&G that it does not expect any
difficulties in obtaining adequate coal supplies. (See Environmental Controls).
Natural Gas
PSE&G utilizes natural gas available from various spot, short-term and
long-term gas contracts, to replace other fuels for electric generation.
Presently, there are no effective legal restrictions on the use of natural gas
for electric generation in existing plants. However, approval by FERC is
required for the interstate transportation of natural gas, either by virtue of
existing blanket authority or through individual proceedings. PSE&G does not
expect any difficulties in obtaining natural gas supplies.
Oil
PSE&G uses residual oil in its conventional fossil-fired, steam-electric
units. The supply of residual oil is furnished by contract suppliers,
supplemented by occasional spot market purchases. PSE&G uses distillate fuel
in its combustion turbines which is acquired by spot market purchases. PSE&G
does not presently anticipate any difficulties in obtaining oil supplies.
Nuclear Fuel Disposal
As a result of NEPA, all utilities owning nuclear units will be
responsible to co-fund with the Federal government a decontamination and
decommissioning fund for the United States Department of Energy (DOE)
enrichment facilities. Both PSE&G and PECO are responsible for making annual
payments into this fund through 2008, with payments based on enrichment
services purchased from the DOE prior to 1993. (See Note 3 -- PSE&G Nuclear
Decommissioning and Amortization of Nuclear Fuel of Notes to Consolidated
Financial Statements.)
After spent fuel is removed from a nuclear reactor, it is placed in
temporary storage for cooling in a spent fuel pool at the nuclear station site.
Under the Nuclear Waste Policy Act of 1982, as amended, (NWPA), the Federal
government has entered into contracts for transportation and ultimate disposal
of the spent fuel. The Federal government's present policy is that spent
nuclear fuel will be accepted for long-term storage at government-owned and
operated repositories. At present, no such repositories are in service or
under construction.
In conformity with the NWPA, PSE&G entered into contracts with the DOE for
the disposal of spent nuclear fuel from Salem and Hope Creek. Similarly, PECO
contracted with the DOE in connection with Peach Bottom 2 and 3. Under these
contracts, the DOE will take title to the spent fuel at the site, then
transport it and provide for its permanent disposal at a cost of one mil per
KWH of nuclear generation, subject to such escalation as may be required to
assure full cost recovery by the Federal government. In addition, a one-time
payment was made to the DOE for permanently discharged spent fuels irradiated
prior to 1983. In December 1989, the DOE announced that it would not be able
to open a permanent, high-level nuclear waste storage facility until 2010, at
the earliest. The DOE stated it would seek legislation from Congress for the
construction of a temporary storage facility which would accept spent nuclear
fuel from utilities in 1998 or soon thereafter.
On May 25, 1994, the DOE published a Notice of Inquiry indicating its
preliminary view on waste acceptance. The DOE stated that, despite provisions
of NWPA to the contrary, it has no statutory obligation to accept spent nuclear
fuel beginning in 1998 in the absence of an operational repository or other
facility constructed under the NWPA although the DOE may have created an
expectation that it would begin accepting such spent nuclear fuel in 1998. The
Notice of Inquiry is intended to elicit the views of the affected parties on
the DOE's preliminary view on the 1998 obligation issue, the need for an
interim, away-from-reactor storage facility prior to repository operations and
options for offsetting, through the use of a nuclear waste fund, a portion of
the financial burden that may be incurred by utilities to store spent fuel at
reactor sites beyond 1998. Pursuant to NRC rules, spent nuclear fuel generated
in any reactor can be stored safely and without significant environmental
impact in reactor facility storage pools or in independent spent fuel storage
installations located at reactor or away-from-reactor sites for at least 30
years beyond the licensed life for operation (which may include the term of
a revised or renewed license).
In June 1994, two separate lawsuits were filed by a group of states and
a group of utilities, respectively, in the U. S. Court of Appeals for the
District of Columbia Circuit to compel DOE to accept spent fuel by 1998. On
July 19, 1994, the BPU voted to join the lawsuit brought by the group of
states. PSE&G is not a party to the lawsuit brought by the group of utilities.
Salem 1 and 2 have adequate on-site temporary storage capability through
March 1998 and March 2002, respectively, when operational full core discharge
capability requirements are considered. PSE&G has developed an integrated
strategy to meet the longer term Salem and Hope Creek spent fuel storage needs.
In May 1994, PSE&G received a license from the NRC to replace the existing high
density racks in the spent fuel pools of Salem 1 and 2 with maximum density
racks. The Salem re-racking project is ongoing and is expected to extend the
storage capability through March 2008 for Salem 1 and March 2012 for Salem 2,
considering operational full core discharge requirements. The Hope Creek pool
is fully racked and it has capacity to hold spent fuel through September 2007,
considering operational full core discharge requirements. PECO has advised
PSE&G that spent fuel racks at Peach Bottom have storage capacity until 2000
for Unit 2 and 1999 for Unit 3 prior to loss of full core reserve occurring,
and that expansion of storage capacity beyond such dates is being investigated.
In accordance with NWPA, utilities owning an interest in nuclear
generating facilities are required to determine the costs and methods of
funding the costs necessary to decommission such facilities upon termination
of operation. As a general practice, a utility funding such costs places funds
in trust accounts it maintains. The utility recovers from its customers the
amounts paid into the trust fund over a period of years. For information
concerning enrichment of nuclear fuel and nuclear decommissioning costs, see
Note 3 -- PSE&G Nuclear Decommissioning and Amortization of Nuclear Fuel of
Notes to Consolidated Financial Statements.
Low Level Radioactive Waste (LLRW)
As a by-product of their operations, nuclear generating units, including
those in which PSE&G owns an interest, produce LLRW. Such wastes include
paper, plastics, protective clothing, water purification materials and other
materials of which proper disposal must be made. Prior to July 1, 1994, such
materials were accumulated on site and disposed of at a federally licensed
permanent disposal facility. However, in accordance with the Low Level
Radioactive Waste Policy Act, as amended (LLRWPA), operating disposal sites
have exercised their authority to either cease operations or deny access to
LLRW generated in states which are not members of the regional compact in which
they are located. For PSE&G and all other New Jersey LLRW generators, this
means that since July 1, 1994, LLRW must be temporarily stored on site until
New Jersey provides for permanent disposal.
In 1991, New Jersey enacted legislation providing for funding of the
estimated $90 million cost of establishing a disposal facility. The State
would recover the costs through fees paid by LLRW generators. PSE&G's overall
share is expected to be about 40% of the total cost and has provided about $4.8
million to date. New Jersey has introduced a volunteer siting process as its
plan for establishing a LLRW disposal facility by the year 2000. Public
meetings have been held across the state in an effort to provide information
to and obtain feedback from the public. The plan is expected to be approved
in early 1995 and an official invitation to municipalities to become volunteer
hosts for a disposal facility will be announced sometime in 1995.
Until New Jersey provides for disposal, PSE&G will temporarily store LLRW
in an on-site facility completed in September 1994 at a total cost of $7.1
million. This facility will provide five years' storage for LLRW from Hope
Creek and Salem. PECO has advised PSE&G that as of July 1, 1994, the Peach
Bottom plants are also providing temporary on-site storage with adequate space
for at least five years. PECO has also advised that Pennsylvania is pursuing
its own LLRW site development via state-selected candidate sites, along with
a volunteer plan option. PSE&G will continue to accrue monies for stored LLRW
from Salem, Hope Creek and Peach Bottom to cover expenses with a concurrent
liability for the amount to be paid at the time of ultimate disposal when New
Jersey and Pennsylvania provide disposal facilities.
Gas Operations and Supply
PSE&G supplies its gas customers principally with natural gas. PSE&G
supplements natural gas with purchased refinery gas and liquefied petroleum gas
produced from propane. The adequacy of supply of all types of gas is affected
by the nationwide availability of all sources for energy production.
As of December 31, 1994, the daily gas capacity of PSE&G was as follows:
Type of Gas Therms Per Day
------------------------------------ --------------
Natural gas......................... 23,191,270
Liquefied petroleum gas............. 2,200,000
Refinery gas........................ 400,000
-----------
Total........................... 25,791,270
===========
About 40% of the daily gas capacity is high load factor natural gas and
is available every day of the year. The remainder comes from field storage,
liquefied natural gas, seasonal sales, contract peaking supply, propane and
refinery gas.
PSE&G's total gas sold to and transported for its various customer classes
in 1994 was 3.8 billion therms which consisted of approximately 96% natural
gas. Included in this amount is 1.3 billion therms of gas delivered to
customers under PSE&G's transportation tariffs and individual cogeneration
contracts. (See Operating Statistics of PSE&G). During 1994, PSE&G purchased
approximately 3.5 billion therms of gas for its combined gas and electric
operations directly from natural gas producers and marketers and the balance
from interstate pipeline suppliers. These supplies were transported to New
Jersey by PSE&G's four interstate pipeline suppliers. This diversification of
supply sources provides PSE&G with reliability of supply, purchasing
flexibility and lower overall costs.
PSE&G's gas supply contracts expire at various times over the next two to
ten years. PSE&G does not presently anticipate any difficulty in negotiating
replacement contracts. Since the quantities of gas available to PSE&G under its
supply contracts are more than adequate in warm months, PSE&G nominates part
of such quantities for storage, to be withdrawn during the winter season, under
storage contracts with its principal suppliers. Underground storage capacity
currently is approximately 770 million therms. PSE&G does not presently
anticipate any difficulty in obtaining adequate supplies of natural gas.
PSE&G's annual average cost of natural gas sendout is shown below:
Cents Per
Year Million BTU(A)
---------------------------------- --------------
1994............................. 338.09
1993.............................. 340.85
1992.............................. 311.16
(A) Excludes contribution by electric department for gas reservation charge
and natural gas refunds from suppliers.
Substantially all of PSE&G's gas sales are made under rates which are
designed to permit the recovery of projected increases in the cost of natural
gas and gas from supplemental sources, when compared to levels included in base
rates, on a current annual basis. (See Note 2 -- Rate Matters of Notes to
Consolidated Financial Statements.)
The demand for gas by PSE&G's customers is affected by customer
conservation, economic conditions, weather, the price relationship between gas
and alternative fuels and other factors not within PSE&G's control. Presently,
the majority of gas sold in interstate commerce has become deregulated. The
ability of gas prices to respond to market conditions has improved in recent
years because of actions taken by the FERC. Pipeline companies are able to
adjust their gas rates up or down through their purchased gas adjustment
mechanism more often than the semi-annual filings of prior years. As
previously discussed, FERC's 636 Orders provided pipeline customers, such as
PSE&G, with the opportunity to convert a portion of their pipeline sales
contracts to transportation agreements and purchase natural gas supplies
directly from a producer or other seller of natural gas. This regulatory
framework has increased competition in the gas market by encouraging pipeline
companies to act as non-discriminatory transporters of natural gas. PSE&G has
used these regulations to lower its overall gas costs through the displacement
of higher cost contract supplies with lower cost spot gas purchases and
long-term producer contract supplies. (See Competition.)
PSE&G was able to meet all of the demands of its firm customers during the
1993-94 winter season and expects to continue to meet such energy-related
demands of its firm customers during the 1994-95 winter season. However, the
sufficiency of supply could be affected by several factors not within PSE&G's
control, including curtailments of natural gas by its suppliers, the severity
of the winter, the extent of energy conservation by its customers and the
availability of feedstocks for the production of supplements to its natural gas
supply. During the 1994-95 heating season through February 13, 1995, it was
necessary for PSE&G to interrupt service to 'interruptible' customers for eight
days as permitted by the applicable tariff. During the 1993-94 heating season,
service to such customers was interrupted for 25 days.
Employee Relations
Enterprise has no employees. As of December 31, 1994, PSE&G and its
subsidiaries employed 11,919 persons. Four-year bargaining agreements between
PSE&G and its unions, representing approximately 7,000 employees, will expire
April 30, 1996. EDHI and its subsidiaries employed 471 persons, of which 37
are represented by unions. Enterprise and EDHI and its subsidiaries reimburse
PSE&G for the costs of services provided by employees of PSE&G. PSE&G, EDHI
and their subsidiaries believe that they maintain satisfactory relationships
with their employees.
For information concerning the employee pension plan and other
postretirement benefits, see Note 1 -- Organization and Summary of Significant
Accounting Policies, Note 13 -- Postretirement Benefits Other Than Pensions and
Note 14 -- Pension Plan of Notes to Consolidated Financial Statements.
Regulation
Enterprise has claimed an exemption from regulation by the SEC as a
registered holding company under PUHCA, except for Section 9(a)(2) thereof,
which relates to the acquisition of 5% or more of the voting securities of an
electric or gas utility company. Enterprise is not subject to direct regulation
by the BPU, except potentially with respect to certain transfers of control and
reporting requirements, and is not subject to regulation by the FERC. The BPU
may also impose certain requirements with respect to affiliate transactions
between and among PSE&G, Enterprise and Enterprise's nonutility subsidiaries.
(See EDHI.)
As a New Jersey public utility, PSE&G is subject to comprehensive
regulation by the BPU including, among other matters, regulation of intrastate
rates and service and the issuance and sale of securities. As a participant in
the ownership and operation of certain generation and transmission facilities
in Pennsylvania, PSE&G is subject to regulation by the Pennsylvania Public
Utility Commission (PPUC) in limited respects in regard to such facilities.
PSE&G is subject to regulation by FERC and by the Economic Regulatory
Administration, both within DOE, with respect to certain matters, including
regulation by FERC with respect to interstate sales and exchanges of electric
transmission, capacity and energy, including cogeneration and small power
production projects being constructed pursuant to PURPA, and accounts, records
and reports. PSE&G is also subject to regulation by the United States
Department of Transportation (USDOT) with respect to safety standards for
pipeline facilities and the transportation of gas under the Natural Gas
Pipeline Safety Act of 1968.
In addition, the New Jersey Need Assessment Act (NJNAA) provides that no
public utility shall commence construction of any electric facility (as defined
in the NJNAA) without having first obtained from the Division of Energy
Planning and Conservation within the New Jersey Department of Environmental
Protection (NJDEP) a Certificate. A Certificate, if granted, is valid for three
years, renewable subject to review by the Commissioner of the NJDEP. Under the
NJNAA, no state or local agency may issue any license or permit required for
any such construction or substantial expansion prior to the issuance of the
Certificate. An electric facility is defined under the NJNAA as any electric
power generating unit or combination of units at a single site with a capacity
of 100 MW or more or any such units added to an existing electric generating
facility which will increase its installed capacity by 25% or by more than 100
MW, whichever is smaller. Under NJNAA, a Certificate shall be issued only if
the NJDEP Commissioner determines that the proposed facility is necessary to
meet the projected need for electricity in the area to be served and that no
more efficient, economical or environmentally sound alternative is available.
For a discussion of the repowering of Bergen Generating Station, see Note 12
- -- Commitments and Contingent Liabilities of Notes to Consolidated Financial
Statements.
For information concerning nuclear insurance coverages, the BPU's NPS and
assessments and the Price-Anderson Amendments Act of 1988, as amended, see Note
12 -- Commitments and Contingent Liabilities of Notes to Consolidated Financial
Statements.
The New Jersey Public Utility Accident Fault Determination Act (Fault Act)
requires the BPU to make a determination of fault with regard to any accident
at any electric generating or transmission facility prior to granting a request
by any utility for a rate increase to cover accident-related costs in excess
of $10 million. Fault, as defined in the Fault Act, means any negligent action
or omission of any party which either contributed substantially to causing the
accident or failed to mitigate its severity.
However, the Fault Act allows the affected utility to file for non-accident
related rate increases during such fault determination hearings and to recover
contributions to federally mandated or voluntary cost-sharing plans and allows
the BPU to authorize the recovery of certain fault-related repair, clean-up,
power replacement and damage costs if substantiated by the evidence presented
and if authorized in writing by the BPU. The Fault Act could have a material
adverse effect on PSE&G's financial position if such an accident were to occur
at a PSE&G facility, it was ultimately determined that the accident was due to
the fault of PSE&G and the BPU were to deny recovery of all or a portion of the
costs related thereto. See Note 2 - Rate Matters -- LEAC of Notes to
Consolidated Financial Statements.
Under New Jersey law, the BPU is required to audit all or a portion of the
operating procedures and other internal workings of every gas or electric
utility subject to its jurisdiction, including PSE&G, at least once every six
years. Under the law, the audit may be performed either by the BPU Staff or
under the supervision of designated members of such Staff by an independent
management consulting firm, chosen by the utility from a list provided by the
BPU. The BPU may, upon completion of the audit and after notice and hearing,
order the utility to adopt such new practices and procedures that it shall find
reasonable and necessary to promote efficient and adequate service to meet
public convenience and necessity. The last such management audit of PSE&G was
completed in 1991.
In 1992, as a follow-up to its 1991 management audit, the BPU conducted
a focused audit of Enterprise's nonutility businesses to ascertain whether
nonutility activities had harmed PSE&G. Enterprise has consistently maintained
a clear and distinct separation of its utility and nonutility operations and
believes that its nonutility activities have not in any way adversely affected
the utility. The results of the focused audit confirmed that there has been
no harm to PSE&G as a result of Enterprise's nonutility activities. However,
as a result of recommendations made by the BPU's auditors regarding operations
and intercompany relationships between PSE&G and EDHI's nonutility businesses,
the BPU approved a plan which, among other things, provides: (1) that
Enterprise will not permit EDHI's nonutility investments to exceed 20% of
Enterprise's consolidated assets without prior notice to the BPU (such assets
presently being approximately 15%); (2) for a restructuring of the PSE&G Board
to include nonemployee Enterprise directors with an annual certification by
such Board that the business and financing plans of EDHI will not adversely
affect PSE&G; (3) for an Enterprise agreement to (a) limit debt supported by
the minimum net worth maintenance agreement between Enterprise and Capital to
$750 million, and (b) make a good- faith effort to eliminate such support over
a six to ten year period from April 1993; and (4) the payment by EDHI to PSE&G
of an affiliation fee of up to $2 million a year which will be applied by PSE&G
through its LGAC and LEAC to reduce utility rates. Effective January 31, 1995,
such fee is predicated on up to $650 million of supported debt outstanding and
will be proportionately reduced as such debt is repaid.
The issue of Enterprise sharing the benefits of consolidated tax savings
with PSE&G or its ratepayers was not resolved by this plan and remains open.
Enterprise believes that PSE&G's taxes should be treated on a stand-alone
basis for ratemaking purposes, based on the separate nature of the utility and
nonutility businesses. However, neither Enterprise nor PSE&G is able to predict
what action, if any, the BPU may take concerning consolidation of tax benefits
in future proceedings. (See Note 2 -- Rate Matters - Consolidated Tax Benefits
of Notes to Consolidated Financial Statements.)
Construction and operation of nuclear generating facilities are regulated
by the NRC. For additional information relating to regulation by the NRC, see
Construction and Capital Requirements, Rate Matters and Nuclear Operations. In
addition, the Federal Emergency Management Agency is responsible for the review
in conjunction with the NRC of certain aspects of emergency planning relating
to the operation of nuclear plants.
CEA invests in and participates in the development of domestic and foreign
cogeneration and power production facilities, which include QFs and EWGs. For
additional information, see EDHI -- CEA.
The BPU has authority to regulate power sales agreements within the BPU's
pricing guidelines to utilities in the State of New Jersey and ascertain that
the terms and conditions of agreements with New Jersey utilities are fair and
reasonable. For additional information, see EDHI.
Environmental Controls
PSE&G, like most industrial enterprises, is subject to regulation with
respect to the environmental effects of its operations, including air and water
quality control, limitations on land use, disposal of wastes, aesthetics and
other matters, by various federal, regional, state and local authorities,
including the United States Environmental Protection Agency (EPA), the USDOT,
NJDEP, the New Jersey Department of Health, the BPU, the Interstate Sanitation
Commission, the Hackensack Meadowlands Development Commission, the Pinelands
Commission, the Delaware River Basin Commission, the United States Coast Guard,
the United States Army Corps of Engineers, the Delaware Department of Natural
Resources and Environmental Control and, with regard to its ownership interest
in the Keystone, Conemaugh and Peach Bottom generating stations in
Pennsylvania, by the PPUC and the Pennsylvania Department of Environmental
Resources. EDC, CEA and EGDC are also subject to similar regulation.
Environmental laws generally require air emissions and water discharges
to meet specified limits. They also impose potential joint and several
liability, without regard to fault, on the generators of various hazardous
substances to clean up property affected by the production and discharge of
such substances. Environmental controls also require, in many instances,
balancing the need for additional quantities of energy against the need to
protect the environment. The necessity to comply with environmental standards
has caused PSE&G to modify the day-to-day operation of its facilities, to
participate financially in the cleanup of various properties that have been
contaminated and to modify, supplement and replace existing equipment and
facilities. Further, compliance with environmental requirements has resulted
in significant delays with respect to construction of facilities. During 1994,
PSE&G expended approximately $255 million of capital related to improving the
environment. It is estimated that PSE&G will expend approximately $169
million, $142 million, $54 million, $53 million and $54 million in the years
1995 through 1999, respectively, for such purposes. Such amounts are included
in PSE&G's estimates of construction expenditures. (See MD&A -- Liquidity and
Capital Resources.)
Preconstruction analyses and projections of the environmental effects of
contemplated activities and emissions are frequently required by the permitting
agency. Before licensing approvals and permits are granted, the agency usually
requests a modeling analysis of the effects of a specific action, and of its
effect in combination with other existing and permitted activities and may
request the applicant to address emerging environmental issues. Such
environmental reviews have caused delays in the proceedings for licensing
facilities and more such delays can be expected in the future. An emerging
environmental issue with respect to the construction and operation of electric
transmission and distribution lines is the possible adverse health effects of
EMF exposure. In September 1990, the New Jersey Commission on Radiation
Protection (CORP) decided against setting a limit on magnetic fields produced
by high-voltage power lines citing the lack of convincing evidence required to
determine dangerous levels. Proposed power regulations are currently under
study by CORP to cover new power lines and allow existing power lines to
continue to function regardless of new rule changes. As revised, the rules
would authorize the NJDEP to screen all new power line projects of 100
kilovolts or more using a principle of "as low as reasonably achievable" to
demonstrate that all steps within reason, including modest cost, were taken to
reduce EMFs. The outcome of EMF study and/or regulations and the public
concerns will affect PSE&G's design and location of future electric power lines
and facilities and the cost thereof. Such amounts as may be necessary to comply
with these new EMF rules and address public concerns cannot be determined at
this time, but such amounts could be material.
The New Jersey Environmental Rights Act provides that any person may
maintain a court action against any other person to enforce, or to restrain the
violation of, any statute, regulation or ordinance which is designed to prevent
or minimize pollution, impairment or destruction of the environment, or where
no such requirement exists, to protect the environment from pollution,
impairment or destruction. Certain Federal legislation confers similar rights
on individuals. The principal laws and regulations relating to the protection
of the environment which affect PSE&G's operations are described below.
Air Pollution Control
The Federal Clean Air Act (CAA) imposes stringent emission requirements
across the United States, including requirements related to the emissions of
sulfur dioxide and nitrogen oxides (NOx). Additional requirements are being
developed under the CAA by Federal and State agencies, the costs of which
cannot be quantified, but could be material. PSE&G's two wholly-owned and
operated coal-fired generating stations in New Jersey are presently expected
to be able to meet CAA sulfur dioxide requirements with only modest
expenditures. PSE&G's New Jersey generating stations are located in a severe
non-attainment area for ozone and the CAA requires that reductions be made in
NOx from major sources in this area. A requirement for these areas is that each
state impose reasonable available control technologies (RACT) on major sources
of NOx effective May 1995.
All of PSE&G's fossil steam and combustion turbine generating units are
subject to RACT requirements. NJDEP RACT Regulations were adopted in November
1993 and will result in capital expenditures of approximately $90 million over
a period of years. Such amount is included in PSE&G's estimate of construction
expenditures. Additional reductions of NOx emissions will likely be needed
continuing through the attainment dates of 2005 and 2007 to bring the area into
attainment with ozone standards. The necessary reductions will be based upon
modeling results and regulatory agency discussions currently underway and could
result in additional changes to equipment, in methods of operation or in fuel.
PSE&G also has an approximately 23% interest in Conemaugh and Keystone,
coal-fired generating stations located in western Pennsylvania. With respect
to Conemaugh, in order to comply with the CAA, the station's co-owners,
including PSE&G, have formally approved the installation of scrubbers (flue gas
desulfurization systems). PSE&G's share of the remaining Conemaugh scrubber
cost is estimated at $78.6 million including cost of removal. Such amount is
included in PSE&G's estimate of construction expenditures. Construction at
Conemaugh Unit 2 is scheduled for completion by January 1, 1996. Conemaugh and
Keystone will also be required to reduce NOx emissions. PSE&G's share of
capital costs for NOx emission controls are included in PSE&G's estimate of
construction expenditures and are estimated at approximately $8.2 million for
Keystone and $9.1 million for Conemaugh.
Permitting of all major stationary sources will also be required under the
CAA. This national air pollution emission source operating permit program will
require some PSE&G facilities to assess emissions, install continuous emission
monitors and/or make changes in facility operations or technology in order to
comply with permit conditions. All such amounts which can be quantified and
which may be necessary to comply with the revised CAA requirements through 1999
are included in PSE&G's estimate of construction expenditures. PSE&G expects
to request the BPU to allow the recovery of all such CAA costs from electric
customers, although no assurances can be given as to what action may be taken
by the BPU. In addition, the revised CAA requirements will increase the cost
of producing electricity for the Pennsylvania and Ohio Valley Region generating
units supplying electricity to the PJM and New Jersey. All of PSE&G's current
purchased power costs are included in PSE&G's LEAC. (See Note 2 -- Rate
Matters of Notes to Consolidated Financial Statements.)
In non-attainment areas, one of the effects of the CAA is to allow
construction or expansion of a facility only upon a showing that any additional
emissions from the source will be more than offset by reductions in similar
emissions from existing sources. In prevention of significant deterioration
areas, construction or expansion of a facility would be permitted only if
emissions from the source, together with emissions from other expected new
sources, would not violate air quality increments for particulates and sulfur
dioxide that are more stringent than the National Ambient Air Quality Standards
(NAAQS). All of these requirements may affect PSE&G's ability to locate,
construct or expand generating facilities in the future.
NJDEP is using the New Jersey Air Pollution Control Code (NJAPCC) to
achieve compliance with the NAAQS adopted by EPA under the CAA. The NJAPCC
currently establishes ambient air quality standards and emission limitations
for six pollutants, all of which have EPA approval. In addition, the NJAPCC
provides stringent requirements restricting the sulfur content in coal and oil
fuels. (See PSE&G -- Electric Fuel Supply and Disposal -- Coal.) The increased
cost of purchasing low-sulfur fuel is offset by rates which are designed to
permit the recovery of fuel costs on a current annual basis. (See PSE&G --
Electric Fuel Supply and Disposal and Note 2 -- Rate Matters of Notes to
Consolidated Financial Statements.)
Water Pollution Control
The Federal Water Pollution Control Act (FWPCA) provides for the
imposition of technology and water-quality based effluent limitations to
regulate the discharge of pollutants into the waters of the United States.
Certain PSE&G facilities are directly regulated by permits issued pursuant to
FWPCA.
Under the FWPCA, compliance with the above-referenced applicable
limitation is to be achieved under the National Pollutant Discharge Elimination
System (NPDES) permit program, which is administered by NJDEP pursuant to the
New Jersey Water Pollution Control Act (NJWPCA). The NJWPCA authorizes NJDEP
to regulate discharges of pollutants to surface and ground waters of the State.
The NPDES permit program, administered by the NJDEP, is referred to as the New
Jersey Pollutant Discharge Elimination System (NJPDES) program. The NJPDES
program provides for Discharge to Surface Water (DSW) permits and Discharge to
Ground Water (DGW) permits, among others.
Section 304(l) of the FWPCA requires all states to implement more
stringent controls on discharges of toxics to certain water-bodies deemed
contaminated by toxic discharges. Although five PSE&G electric generating
stations (Bergen, Hudson, Kearny, Linden and Sewaren) were originally subject
to requirements imposed pursuant to Section 304(l), the NJDEP and EPA have
proposed delisting these stations from the 304(l) program for the present time.
No final action on this proposal has been taken.
The FWPCA also includes specific provisions relating to discharges of heat
and the design, location, construction and capacity of intake structures for
cooling water. Pursuant to Section 316(a) and (b) of the FWPCA, if the
permittee can demonstrate that the aquatic ecosystem is protected, then
alternate thermal limits may be imposed and/or the intake structure may be
found to be the Best Technology Available (BTA). PSE&G has submitted
applications to EPA and NJDEP seeking variances from thermal limits and BTA
determinations in connection with six of its electric generating stations
pursuant to Section 316(a) and (b). If PSE&G's applications with respect to
these generating stations do not receive favorable action, NJDEP may impose
requirements for closed-cycle cooling, e.g., cooling towers, or other
structural modifications and/or operational restrictions at these facilities.
The NJDEP regulations relating to DGW require permits for some of PSE&G's
facilities and may require the monitoring of ground water at such locations.
PSE&G has applied for DGW permits at certain facilities as discussed below. The
total cost to comply with all applicable requirements of DGW permits at all
PSE&G facilities covered by NJPDES -- DGW permits cannot be accurately
estimated at this time, but aggregate annual ground water monitoring cost is
not expected to be material.
PSE&G has NJPDES DSW permits for its Bergen, Hudson, Kearny, Essex,
Linden, Sewaren, Edison, Mercer, Burlington, Salem and Hope Creek electric
generating stations and its Harrison gas facilities. Adjudicatory hearing
requests are pending before the NJDEP to resolve one or more contested issues
in the above-referenced permits for Linden and are discussed below.
Discussed below are pending actions or proceedings relating to specific
facilities or sites.
In 1991, the NJDEP issued a draft NJPDES permit for Sewaren Station which
would impose water quality-based effluent limits both on pollutants identified
as a result of a monitoring program instituted pursuant to Section 304(l) in
non-contact cooling water and treatment plant discharges, which could have
significant adverse impact on the operations of this station. PSE&G submitted
comments addressing factual and legal issues raised by the draft permit. The
NJDEP and the EPA have proposed delisting Sewaren and the NJDEP has indicated
its intent to reissue a draft permit which would not impose water-quality-based
effluent limits.
In August 1994, the Bergen County Utilities Authority issued a significant
industrial user permit for the discharge of cooling tower blowdown and other
sources associated with the newly repowered Bergen Unit. This permit will
replace the expired NJPDES DSW permit.
In 1993, the NJDEP issued a final Major Modification to Linden's DSW
permit incorporating conditions consistent with the comments PSE&G previously
filed on the 1992 draft permit. PSE&G is evaluating whether to rescind its
request for an adjudicatory hearing based on these changes.
NJDEP advised PSE&G in 1986 that, with respect to PSE&G's Bergen, Hudson,
Kearny, Sewaren and Linden Stations, the demonstrations and reports previously
submitted to EPA supporting PSE&G's Section 316(a) variance requests and
Section 316(b) determinations no longer provided adequate information upon
which decisions could be made. PSE&G submitted supplemental Section 316(a) and
Section 316(b) demonstrations in 1988 for Bergen, Hudson and Kearny Stations.
In 1989, PSE&G submitted supplemental Section 316(b) demonstrations for both
Linden and Sewaren Stations and a supplemental Section 316(a) demonstration for
Sewaren. The Linden supplemental Section 316(a) demonstration was submitted in
1990. To date, the NJDEP has not responded to these submittals.
PSE&G received a final DGW permit for Bergen in 1987. A hearing request
was filed and all issues but one were resolved amicably thereafter in 1987.
PSE&G may ultimately contest the single unresolved issue contained in the final
Bergen DGW permit.
A draft DGW permit was issued by NJDEP for Mercer Generating Station in
1987. NJDEP has taken no further action.
Salem Station
As required by the FWPCA, over the past 15 years, PSE&G has submitted to
the EPA and NJDEP its demonstrations which concluded that structural
modifications including cooling towers, are not required at Salem to achieve
satisfactory environmental effects. In 1990, the NJDEP issued a draft NJPDES
Permit to the Salem Station which required closed-cycle cooling. In response
to the 1990 Draft Permit, PSE&G submitted extensive written comments to the
NJDEP regarding the ecological effects of station operations demonstrating that
Salem was not having and would not have an adverse environmental impact and
that closed-cycle cooling was an inappropriate solution.
To resolve the NJDEP's concerns, PSE&G also developed and submitted a
supplement to the permit renewal application setting forth an alternative
approach that would protect aquatic life in the Delaware Estuary and provide
other ecological benefits. PSE&G proposed intake screen modifications to
reduce fish losses, a study of sound deterrent systems to divert fish from the
intake and a limit on intake flow. In addition, PSE&G proposed conservation
measures, including the restoration of up to 10,000 acres of degraded wetlands
and the installation of fish ladders to allow fish to reach upstream spawning
areas. Finally, PSE&G proposed a comprehensive biological monitoring program
to expand existing knowledge of the Delaware Estuary and to monitor station
impacts.
In June 1993, the NJDEP issued Salem a revised draft permit which
reconsidered the requirement for closed-cycle cooling and adopted alternative
measures proposed by PSE&G with certain modifications. A final five-year
permit, with essentially the same provisions as the revised draft permit, was
issued on July 20, 1994 with an effective date of September 1, 1994. The EPA,
which has authority to review the final permit issued by the NJDEP, completed
its review and has not raised any objections.
Certain environmental groups and other entities, including the State of
Delaware, have filed requests for hearings with the NJDEP challenging the final
permit. The NJDEP granted the hearing requests on certain of the issues and
PSE&G has been named as a respondent along with the NJDEP in these matters
which are pending in the Office of Administrative Law of the State of New
Jersey (OAL).
PSE&G is implementing the final permit. Additional permits from various
agencies are required to be obtained to implement the permit. No assurances
can be given as to receipt of any such additional permits. The estimated
capital cost of compliance with the final permit is approximately $100 million,
of which PSE&G's share is 42.59% and is included in PSE&G's 1995-1999
construction program. PSE&G will request the BPU to allow the recovery in
rates from electric customers of all costs associated with the modifications
and conservation measures required by the permit. (See MD&A -- Liquidity and
Capital Resources -- Construction, Investments and Other Capital Requirements
Forecast.)
Hope Creek Station
Hope Creek's existing permit has been in effect since 1985. PSE&G
submitted an application for renewal in 1990. The existing permit remains in
effect pending NJDEP action expected in 1995. PSE&G cannot predict what new
terms and conditions NJDEP may seek to impose in the renewed permit.
Control of Hazardous Substances
PSE&G Manufactured Gas Plant Remediation Program
For information regarding PSE&G's Manufactured Gas Plant Remediation
Program, see Note 12 -- Commitments and Contingent Liabilities of Notes to
Consolidated Financial Statements.
Other Sites
PSE&G's 1989 decision to close the Synthetic Natural Gas Plant (SNG Plant)
in Linden, New Jersey (jointly owned by PSE&G (90%) and the Elizabethtown Gas
Company (10%)) triggered certain environmental compliance activities under the
New Jersey Environmental Cleanup Responsibility Act (ECRA). PSE&G has completed
the first stage of the required site sampling activities at this facility.
During field work activities, certain soil and ground water contamination has
been identified. The costs of any necessary cleanup are not currently
estimable, but such costs are not expected to have a material effect on its
financial position, results of operations or net cash flows.
A preliminary review of possible mercury contamination at the Kearny
Generating Station concluded that additional study and investigations are
required. PSE&G filed an application in January 1995 for a Memorandum of
Agreement with NJDEP for the conduct of the additional study and investigation.
A work plan detailing additional sampling will be developed in early 1995 and
submitted to the NJDEP. Soil sampling and surveys will begin after approval
of the detailed work plan with completion estimated for the end of the third
quarter 1995.
The Federal Comprehensive Environmental Response, Compensation and
Liability Act of 1980 (CERCLA), as amended by the Superfund Amendments and
Reauthorization Act of 1986 and the Federal Resource Conservation and Recovery
Act of 1976 (RCRA), authorize EPA to issue orders and/or to bring an
enforcement action to compel responsible parties to take investigative and/or
cleanup actions at any site that is determined to present an imminent and
substantial danger to the public or to the environment because of an actual or
threatened release of one or more hazardous substances. The New Jersey Spill
Compensation and Control Act (Spill Act) and the New York Environmental
Conservation Law provide similar authority to NJDEP and the New York Attorney
General, respectively. Because of the nature of PSE&G's business, including
the production of electricity, the distribution of gas and, formerly, the
manufacture of gas, various by-products and substances are or were produced or
handled which contain constituents classified as hazardous under one or more
of the above laws. PSE&G generally provides for the disposal or processing of
such substances through licensed independent contractors. However, these
statutory provisions impose joint and several liability without regard to fault
on all allegedly responsible parties, including the generators of the hazardous
substances for certain investigative and cleanup costs at sites where these
substances were disposed of or processed. PSE&G has been notified with respect
to a number of such sites and the cleanup of these potentially hazardous sites
is receiving greater attention from the government agencies involved.
Generally, actions directed at funding such site investigations and cleanups
include suspected or known allegedly responsible parties. PSE&G's past
operations suggest that some remedial action may be required. PSE&G does not
expect its expenditures for any such site to have a material effect on its
financial position, results of operations or net cash flows.
Presently, such actions involving PSE&G include the following:
(1) In United States and New Jersey v. Alcan Aluminum, et al., Civil
Action Nos. 88-4646 (NHP) and 88-4670 (NHP), in the U. S. District Court for
the District of New Jersey, in 1989, a Consent Decree was entered with EPA and
NJDEP, obligating potentially responsible parties (PRPs), including PSE&G, to
implement both a bioremediation treatability study and a two-stage subsurface
remedial action, i.e., excavation and bioremediation, at the Renora Superfund
Site in Edison, Middlesex County, New Jersey. The excavation and off-site
removal of soils contaminated with polychlorinated biphenyls has been
completed. However, because the treatability study showed that bioremediation
would fail at this site, in 1991, the Consent Decree was modified to eliminate
that remedial action. Instead, EPA required new treatability studies on
solidification technologies, and a Phase II Feasibility Study (FS II)
incorporating that new data. These new studies proved that all on-site soil
treatment technologies would fail, and in 1992, the PRPs submitted FS II for
EPA's and NJDEP's comments. An amended Record of Decision (ROD) issued by EPA
in October 1994 requires additional excavation and off-site removal of soil,
the estimated cost of which is approximately $2.8 million. Based upon
discussions held among the parties to date, it appears that PSE&G's
responsibility for clean-up costs at this site will approximate 10% of such
costs.
(2) 1985 claim by U. S. Department of the Interior under CERCLA with
respect to the Pennsylvania Avenue and Fountain Avenue municipal landfills in
Brooklyn, New York for damages to natural resources. The U.S. Government
alleges damages of approximately $200 million. To PSE&G's knowledge, there has
been no action on this matter since 1988.
(3) Claim by EPA, Region III, under CERCLA with respect to a site operated
by Sealand Ltd. in Mount Pleasant Township, New Castle County, Delaware. PSE&G
and other companies have entered into an Administrative Consent Order (ACO)
obligating the signatories thereto to fund a Remedial Investigation and
Feasibility Study (RI/FS). PSE&G's share of the costs of actions taken at this
site have approximated 25% of such costs. In 1991, EPA entered a ROD which
determined that no further action was required at the site. The State of
Delaware has filed comments objecting to this ROD and has hired a consultant
which has recommended that additional actions be taken at the site based on its
review of EPA's files. The State of Delaware required the PRPs to conduct
additional groundwater analyses during 1994 and is presently reviewing the
results to determine whether any future actions are required at this site.
(4) At the Duane Marine Salvage Corporation Superfund Site in Perth Amboy,
Middlesex County, New Jersey, the PRPs, including PSE&G, had completed an
EPA-approved surface removal action during 1986 and EPA had required no further
response actions. However, NJDEP ordered that an RI/FS be performed to address
or disprove an alleged subsurface contamination and, following negotiations
with the PRPs, including PSE&G, an ACO was executed. The PRPs have submitted
an RI/FS and a second revised Draft Feasibility Study. In 1994, NJDEP selected
a remedy for the site, the total cost of which is estimated to be $1,500,000.
Based upon the claims made and activities taken to date, PSE&G anticipates that
its obligations with respect to this site will be de minimis.
(5) Spill Act Directive issued by NJDEP in 1987 to PRPs, including PSE&G,
with respect to a site formerly owned and operated by Borne Chemical Company
in Elizabeth, Union County, New Jersey, ordering certain interim actions
directed at both site security and the off-site removal of certain hazardous
substances. Certain PRPs, including PSE&G, signed an ACO with NJDEP to secure
the site, which has been completed. After further negotiations, certain other
PRPs, including PSE&G, signed a further ACO requiring them to perform a removal
action at the site, which was completed in 1992. In 1994, NJDEP issued a third
Directive requiring the performance of an RI/FS. The PRPs have entered into
negotiations with NJDEP regarding the terms of the RI/FS oversight document.
Based upon the claims made and activities taken to date, PSE&G anticipates that
its obligations with respect to this site will be de minimis.
(6) A second Directive pursuant to the Spill Act was issued by NJDEP in
1989 to PRPs, including PSE&G, with respect to the PJP Landfill in Jersey City,
Hudson County, New Jersey (PJP), ordering payment of operating and maintenance
costs of approximately $150,000 and reasserting claims made in an initial
Directive for all past and future costs associated with investigations and
remediation of the alleged contamination. Additionally, in 1990, also pursuant
to the Spill Act, NJDEP issued a Multi-Site Directive concerning four sites,
including PJP. With respect to the PJP site, NJDEP reasserted demands for
payment made in the earlier Directives. The NJDEP alleges that it has spent
approximately $23 million in interim remedial measures at the PJP site. The
NJDEP also alleges that it will incur approximately $2 million in costs to
complete a remedial investigation of the PJP site. PSE&G has made a good-faith
payment of approximately $21,000 to NJDEP pursuant to the Multi-Site Directive
in accordance with actions taken by certain other PRPs named in these
Directives. The NJDEP has filed a cost recovery action in Superior Court
against certain of the other PRPs named in the Directives. Based upon the
claims made and activities taken to date, PSE&G anticipates that its
obligations with respect to this site will be de minimis.
(7) Prospective enforcement action by NJDEP with respect to a site
formerly owned by the Township of Hillsborough, Somerset County, New Jersey and
used for a sanitary landfill and presently owned by PSE&G. NJPDES-DGW permits
were issued by NJDEP to PSE&G and to the adjoining property owner to install
monitoring wells on these premises. As required by the foregoing permits,
groundwater monitoring wells were established and groundwater monitored. In
accordance with a subsequent New Jersey Supreme Court decision in a case to
which PSE&G was not a party, the subject NJPDES -- DGW permit was determined
to be invalid. However, the NJDEP has recommended that any existing ground
water monitoring wells be maintained pending the NJDEP's drafting of
groundwater regulations which may affect the former landfill site.
(8) In State of New Jersey, Department of Environmental Protection v.
Gloucester Environmental Management Services, Inc. (GEMS), et al., Docket No.
84-0152 (SSB), in the U.S. District Court for the District of New Jersey, the
Fourth Amended Complaint was filed, naming PSE&G and approximately forty other
alleged generators of hazardous waste materials as defendants. PSE&G
investigated possible involvement with the GEMS site in Gloucester Township,
Camden County, in response to an earlier inquiry from EPA. That investigation
revealed that certain waste materials originating at a PSE&G facility may have
contained asbestos and may have been taken to the GEMS site by an independent
contractor performing removal work for PSE&G. PSE&G agreed to participate in
the partial settlement of the litigation which includes the Phase I remediation
of the landfill and contributed $150,000 toward the estimated Phase I cost of
approximately $32.5 million.
(9) Claim by EPA, Region III, under CERCLA with respect to a Superfund
Site in Philadelphia, Pennsylvania, owned and formerly operated by Metal Bank,
Inc., as a non-ferrous scrap reclamation facility. PSE&G, together with several
other similarly situated utilities, is alleged to be liable either to conduct
an RI/FS and undertake the necessary cleanup, if any, or to reimburse EPA for
the cost of performing these functions. In 1991 these utilities, including
PSE&G, entered into an ACO with the EPA to perform an RI/FS, Docket No.
III-91-34-DC. The RI/FS was recently completed and the RI/FS Report was
submitted to EPA on October 14, 1994. The RI/FS Report proposes various
remedial alternatives for consideration by EPA in its selection of a remedy for
the site. The alternatives proposed in the RI/FS range in cost from
approximately $2 million to approximately $90 million. However, the RI/FS
proposes a remedy ranging in cost from $15 to $30 million. It is expected that
during 1995 EPA will select a remedy and issue a ROD memorializing this remedy
selection. At that time it is anticipated that EPA will assess a claim against
PSE&G and the other similarly situated utility companies, and perhaps others
as well, for the performance or funding of the selected remedy. PSE&G's share
of the costs of the proposed remedy is approximately $7 million or
approximately 26% of the total.
(10) Inquiry and prospective enforcement action by EPA, Region II, with
respect to a site known as the Florence Land Recontouring (FLR) Landfill Site
in the Townships of Florence, Mansfield and Springfield, Burlington County, New
Jersey. In 1989 the NJDEP issued Directive and Notice to Insurers (1989
Directive) to PSE&G and twenty-six other respondents. The 1989 Directive
requires the respondents to arrange for certain remedial measures at the FLR
Site and to pay the NJDEP a total of approximately $7.5 million in estimated
remedial construction activities and administration costs regarding future
operations and maintenance. In 1990, pursuant to the Spill Act, the NJDEP
issued Multi-Site Directive and Notice to Insurers Number One (1990 Directive)
in the matter of four sites including the FLR Site. The 1990 Directive, as it
relates to the FLR Site, directs eighteen of the twenty-seven respondents named
in the 1989 Directive to undertake the same remedial measures and pay the same
costs as set forth in the 1989 Directive. PSE&G is currently evaluating the
NJDEP's claim and is working in concert with other PRPs to address the NJDEP
Directives. Based upon the claims made and activities taken to date, PSE&G
anticipates that its obligations with respect to this site will be de minimis.
(11) Claim by EPA, Region II, under CERCLA with respect to a Superfund
Site known as the Lone Pine Landfill in Freehold Township, Monmouth County, New
Jersey. EPA investigation regarding this site disclosed that certain hazardous
waste materials generated by approximately 200 alleged generators and
transported to a site known as the SCP Scientific Chemical Processing Site,
Wilson Avenue, Newark, Essex County, New Jersey (SCP-Newark), were allegedly
subsequently transshipped, taken to and disposed of at the Lone Pine Landfill.
PSE&G's prior investigation in response to an earlier inquiry from EPA
regarding the SCP-Newark Site revealed that certain waste materials originating
at a PSE&G facility were received by Scientific Chemical Processing, Inc. for
processing and disposal. A consent decree was entered in the U.S. District
Court for the District of New Jersey in 1990 approving the terms of a
settlement under which PSE&G agreed to participate as a de minimis settlor.
A second Consent Decree was lodged with the United States District Court for
the District of New Jersey in 1991 seeking approval of the terms of a
settlement under which PSE&G agreed to participate as a de minimis settlor
toward an off-site investigation/remediation cost. PSE&G cannot determine, at
this time, whether the off-site investigation activities will result in the
identification of further off-site remediation costs. Based upon the claims
made and activities taken to date, PSE&G anticipates that its obligations with
respect to this site will be de minimis.
(12) Inquiry and prospective enforcement action by NJDEP against PSE&G
regarding PSE&G's property in Hamilton Township, Mercer County, New Jersey,
adjacent to PSE&G's Trenton Switching Station. PSE&G is implementing a
groundwater monitoring program at the site.
(13) 1987 inquiry and prospective enforcement action by EPA, Region II,
under CERCLA regarding a site formerly owned and/or operated by Atlantic
Resources Corporation in Sayreville, Middlesex County, New Jersey. To PSE&G's
knowledge, there has been no action taken on this matter since the initial
filing by the EPA.
(14) In U.S. v. CDMG Realty Co., et al., Civil Action No. 89-4246 (NHP)
(RJH), pending in the United States District Court for the District of New
Jersey, PSE&G and over 60 other entities were joined in January 1995 as
additional third-party defendants. Third-party plaintiffs, an association of
44 entities, are essentially seeking contribution and/or indemnification for
the expenses they have incurred and will incur as a result of having settled
the direct claims of the NJDEP and EPA related to the investigation and
remediation of Sharkey's Landfill, located in Parsippany-Troy Hills, Morris
County, New Jersey. The claims are all alleged to be brought pursuant to
CERCLA, and PSE&G is alleged to have arranged for the disposal of industrial
wastes at Sharkey's Landfill.
(15) 1987 Inquiry and prospective enforcement action by EPA, Region II,
under CERCLA regarding PSE&G's possible use of the Curcio Scrap Metal facility
in Saddle Brook Township, Bergen County, New Jersey, for scrap reclamation
since 1981. To PSE&G's knowledge, there has been no action taken on this
matter since the initial filing by the EPA.
(16) 1988 inquiry and prospective enforcement action by EPA, Region II,
under CERCLA regarding PSE&G's possible use of Higgins Disposal Service Site
in Kingston, Franklin Township, Somerset County, New Jersey. To PSE&G's
knowledge, there has been no action taken on this matter since the initial
filing by the EPA.
(17) Inquiry and prospective enforcement actions by EPA, Region II and
NJDEP, under CERCLA and the Spill Act regarding PSE&G's possible use of Global
Landfill Site in Old Bridge Township, Middlesex County, New Jersey (Global
Site). In 1991, the NJDEP issued Directive and Notice to Insurers Number Two
(Directive Two) to 24 Insurers and 52 Respondents, including PSE&G. Directive
Two seeks recovery of past and anticipated future NJDEP response costs ($37.4
million) incurred and to be incurred in connection with an investigation and
remediation of the Global Site. PSE&G's alleged liability is based on
assertions that it generated asbestos-containing materials which were disposed
of at the Global Site. In 1991, PSE&G entered into an agreement with the NJDEP
and 29 other Directive Two Respondents effecting a partial settlement of the
foregoing costs subject to a subsequent reallocation based upon the parties'
further development of information concerning their respective proportionate
waste contributions to the Global Site. The New Jersey Department of Law and
Public Safety and PRPs who participated in the partial settlement set forth
above have concluded negotiations concerning a resolution of the balance of the
response costs sought pursuant to Directive Two. In connection with those
negotiations, the PRPs are currently attempting to secure the information
necessary to determine their respective proportionate waste contributions to
the Global Site for the purpose of further establishing proportionate shares
of any future settlement. Negotiations are ongoing regarding resolution of the
balance of the response costs sought pursuant to Directive Two. In 1993, the
NJDEP and various participating PRPs, including PSE&G, executed a Consent
Decree whereby the participating PRPs agreed to perform the remedial design and
remedial action for the operable unit one remedy as specified in a 1991 ROD
(approximate total cost $30 million). The Consent Decree was executed and
entered by the United States District Court for the District of New Jersey in
1993. Subject to a subsequent reallocation, the various parties to the Consent
Decree have agreed that PSE&G's contribution under the Consent Decree
settlement will be $300,000 (approximately 1% of the total cost).
(18) 1989 inquiry and prospective enforcement action by EPA, Region II
under CERCLA regarding PSE&G's possible use of the Port Washington Landfill in
North Hempstead, New York. To PSE&G's knowledge, there has been no action
taken on this matter since the initial filing by the EPA (NJDEP).
(19) 1989 Spill Act inquiry and prospective enforcement action issued by
NJDEP to PRPs, including PSE&G, regarding PSE&G's possible use of Combe Fill
North Sanitary Landfill in Mt. Olive Township, Morris County, New Jersey. To
PSE&G's knowledge, there has been no action taken on this matter since the
initial filing by the NJDEP.
(20) Spill Act inquiry and prospective enforcement action issued by NJDEP
to PRPs, including PSE&G, regarding PSE&G's possible use of Combe Fill South
Sanitary Landfill in Washington and Chester Townships, Morris County, New
Jersey (Combe Site). In 1991, the New Jersey Department of Law and Public
Safety, Division of Law, issued Directive and Notice To Insurers Number One
(Directive One) to 50 Insurers and 20 Respondents, including PSE&G, seeking
from the Respondents payment of $5.5 million of NJDEP's anticipated costs of
remedial action and of administrative oversight at the Combe Site. The $5.5
million represents the NJDEP's 10% share of such anticipated costs pursuant to
a cooperative agreement with the United States regarding the selected remedial
action. Therefore, total site remediation costs approximate $50 million.
Further, the Directive One Respondents are directed to perform the operation
and maintenance of the remedial action including all remedial facilities on the
Combe Site. PSE&G's alleged liability is based on the assertion that
PSE&G-generated waste oil and water, containing hazardous substances, was
transported to the Combe Site and applied to Combe Site roads for dust control.
Based upon the claims made and activities taken to date, PSE&G anticipates that
its obligations, if any, with respect to this site will be deminimis.
(21) In United States of America v. Superior Tube Company, et al., Docket
No. 89-7421 in the U.S. District Court for the Eastern District of
Pennsylvania, PSE&G was served in 1990 with a Third-Party Complaint. Pursuant
to CERCLA, the United States filed suit against Superior Tube Company
(Superior) and others seeking recovery of past and future costs incurred or to
be incurred in the cleanup of the Moyer Landfill located in Pennsylvania.
Superior filed a Third-Party Complaint naming approximately 150 third-party
defendants, including PSE&G.
Superior alleges that PSE&G generated, transported, arranged for the
disposal of and/or caused to be deposited certain hazardous substances at the
Moyer Landfill. On the basis of those allegations, Superior seeks contribution
and/or indemnification from the third-party defendants, including PSE&G, on the
United States' action against it. PSE&G has recently participated in
negotiations concerning resolution of the United States' and Superior Tube's
claims. Based upon the claims made and activities taken to date, PSE&G
anticipates that its obligations with respect to this site will be de minimis.
(22) Spill Act Multi-Site Directive (Directive) issued by the NJDEP to
PRPs, including PSE&G, listing four separate sites, including the former
bulking and transfer facility called the Marvin Jonas Transfer Station (Sewell
Site) in Deptford Township, Gloucester County, New Jersey. With regard to the
Sewell Site, this Directive ordered approximately 350 PRPs, including PSE&G,
to enter into an ACO with NJDEP, requiring them to remediate the Sewell Site.
Certain PRPs, including PSE&G, have completed the interim actions directed at
both site security and off-site disposal of containers, trailers and
contaminated surface soils. PRPs, including PSE&G, are currently fulfilling the
terms of a Memorandum of Agreement (MOA) entered into with NJDEP in July 1993
to conduct an RI/FS and, if necessary, take remedial action. An RI/FS Work
Plan has been approved by the NJDEP and the RI/FS is expected to be conducted
during 1995. Based upon the claims made and activities taken to date, PSE&G
anticipates that its obligations with respect to this site will be de minimis.
(23) In Transtech Industries, Inc. et al v. A&Z Septic Clean et al.,
Docket No. 2-90-2578(HAA), filed on October 5, 1992, in the U.S. District Court
for the District of New Jersey, PSE&G has been named a defendant in a Complaint
which has been filed pursuant to CERCLA, against several hundred parties
seeking recovery of past and future response costs incurred or to be incurred
in the investigation and/or remediation of the Kin-Buc Landfill, located in
Edison Township, Middlesex County, New Jersey. Plaintiffs allege that all named
defendants, including PSE&G, are PRPs as generators and/or transporters of
various hazardous substances ultimately deposited at the Kin-Buc Landfill.
Based upon the claims made and activities taken to date, PSE&G anticipates that
its obligations with respect to this site will be de minimis.
(24) Ongoing and prospective enforcement action by EPA, Region II, under
CERCLA regarding PSE&G's possible use of the Custom Distribution Services Site
in Perth Amboy, Middlesex County, New Jersey.
(25) 1992 inquiry and prospective CERCLA enforcement action by EPA, Region
II, regarding PSE&G's possible use of the Scientific Chemical Processing
Superfund Site, Carlstadt, New Jersey.
(26) 1993 inquiries and prospective enforcement action by EPA, Region II,
regarding PSE&G's possible use of the Bridgeport Rental and Oil Services site
located in Logan Township, Gloucester County, New Jersey.
Enterprise
- ----------
Consolidated Financial Statistics (A)
(Thousands of Dollars where applicable) 1994 1993 1992 1991 1990
- ---------------------------------------------- ------------ ----------- ------------ ------------ ------------
Selected Income Information
Operating Revenues
Electric...................................... $ 3,733,113 $ 3,693,083 $ 3,407,819 $ 3,519,806 $ 3,380,742
Gas........................................... 1,778,528 1,594,341 1,586,181 1,307,849 1,236,747
Nonutility Activities......................... 404,202 418,135 362,781 283,766 230,075
- ------------------------------------------------------------------------------------------------------------------
Total Operating Revenues...................... $ 5,915,843 $ 5,705,559 $ 5,356,781 $ 5,111,421 $ 4,847,564
- ------------------------------------------------------------------------------------------------------------------
Net Income.................................... $ 679,033 $ 600,933 $ 504,117 $ 543,035 $ 403,663
- ------------------------------------------------------------------------------------------------------------------
Earnings per average share of Common Stock.... $ 2.78 $ 2.50 $ 2.17 $ 2.43 $ 1.90
Dividends Paid per Share...................... $ 2.16 $ 2.16 $ 2.16 $ 2.13 $ 2.09
Payout Ratio.................................. 78% 86% 100% 88% 110%
Rate of Return on Average Common Equity(B).... 12.94% 11.91% 10.69% 12.24% 9.66%
Ratio of Earnings to Fixed Charges............ 2.76 2.59 2.30 2.54 2.09
Book Value per Common Share(C)................ $ 21.70 $ 21.07 $ 20.32 $ 20.04 $ 19.44
Gross Utility Plant........................... $16,566,058 $15,861,484 $15,081,907 $14,426,560 $12,836,874
Accumulated Depreciation and Amoritzation
of Utility Plant............................ $ 5,467,813 $ 5,057,104 $ 4,610,595 $ 4,243,979 $ 3,963,093
Total Assets.................................. $16,717,440 $16,329,656 $14,777,732 $14,804,354 $13,713,248
- ------------------------------------------------------------------------------------------------------------------
Consolidated Capitalization
Common Stock.................................. $ 3,801,157 $ 3,772,662 $ 3,499,183 $ 3,262,138 $ 3,043,402
Retained Earnings............................. 1,510,010 1,361,018 1,282,931 1,282,029 1,203,772
- ------------------------------------------------------------------------------------------------------------------
Common Equity................................. 5,311,167 5,133,680 4,782,114 4,544,167 4,247,174
Long-Term Debt................................ 5,180,657 5,256,321 4,977,579 5,128,373 4,668,024
Preferred Stock without Mandatory Redemption.. 384,994 429,994 429,994 429,994 429,994
Preferred Stock with Mandatory Redemption..... 150,000 150,000 75,000 -- --
Monthly Income Preferred Securities........... 150,000 -- -- -- --
- ------------------------------------------------------------------------------------------------------------------
Total Capitalization.......................... $11,176,818 $10,969,995 $10,264,687 $10,102,534 $ 9,345,192
==================================================================================================================
(A) See Management's Discussion and Analysis of Financial Condition and Results of Operations and Notes to
Consolidated Financial Statements.
(B) Net Income for a twelve-month period divided by the thirteen-month average of Common Equity.
(C) Total Common Equity divided by end-of-period Common Shares outstanding.
Operating Statistics
PSE&G
- -----
(Thousands of Dollars where applicable) 1994 1993 1992 1991 1990
- ---------------------------------------------- ------------ ----------- ------------ ------------ ------------
Electric
Revenues from Sales of Electricity:
Residential................................. $ 1,187,103 $ 1,175,875 $ 1,037,099 $ 1,116,699 $ 1,038,906
Commercial.................................. 1,734,901 1,678,011 1,554,956 1,575,547 1,516,755
Industrial.................................. 693,535 710,206 683,750 728,411 697,571
Public Street Lighting...................... 52,353 51,019 47,729 46,400 45,418
----------- ----------- ----------- ----------- -----------
Total Revenues from Sales to Customers........ 3,667,892 3,615,111 3,323,534 3,467,057 3,298,650
Interdepartmental........................... 1,710 1,737 1,544 1,599 1,652
Non-Jurisdictional Sales.................... 35,223 48,625 51,313 19,763 48,325
----------- ----------- ----------- ----------- -----------
Total Revenues from Sales of Electricity...... 3,704,825 3,665,473 3,376,391 3,488,419 3,348,627
Other Electric Revenues....................... 28,288 27,610 31,428 31,387 32,115
----------- ----------- ----------- ----------- -----------
Total Operating Revenues................. $ 3,733,113 $ 3,693,083 $ 3,407,819 $ 3,519,806 $ 3,380,742
=========== =========== =========== =========== ===========
Sales of Electricity - megawatthours:
Residential................................. 10,594,134 10,631,402 9,816,046 10,505,547 9,875,569
Commercial.................................. 18,466,863 18,096,312 17,454,352 17,596,569 17,054,495
Industrial.................................. 9,249,233 9,203,839 9,298,741 9,406,109 9,457,985
Public Street Lighting...................... 334,726 329,828 325,545 320,900 314,936
----------- ----------- ----------- ----------- -----------
Total Sales to Customers...................... 38,644,956 38,261,381 36,894,684 37,829,125 36,702,985
Interdepartmental........................... 17,755 18,514 19,012 19,719 19,822
Non-Jurisdictional Sales.................... 1,320,170 2,245,884 2,116,049 1,858,590 1,625,016
----------- ----------- ----------- ----------- -----------
Total Sales of Electricity............... 39,982,881 40,525,779 39,029,745 39,707,434 38,347,823
=========== =========== =========== =========== ===========
Gas
Revenues from Sales of Gas:
Residential................................. $ 889,541 $ 780,195 $ 809,559 $ 699,696 $ 667,077
Commercial.................................. 510,829 460,340 481,960 426,110 406,577
Industrial.................................. 312,405 299,762 243,527 138,394 130,273
Street Lighting............................. 491 467 468 468 385
----------- ----------- ----------- ----------- -----------
Total Revenues from Sales to Customers........ 1,713,266 1,540,764 1,535,514 1,264,668 1,204,312
Interdepartmental............................ 3,976 3,078 2,572 2,689 2,157
----------- ----------- ----------- ----------- -----------
Total Revenues from Sales of Gas.............. 1,717,242 1,543,842 1,538,086 1,267,357 1,206,469
Transportation Service Revenues............... 35,057 37,081 34,739 27,036 15,654
Other Gas Revenues............................ 26,229 13,418 13,356 13,456 14,624
----------- ----------- ----------- ----------- -----------
Total Operating Revenues................. $ 1,778,528 $ 1,594,341 $ 1,586,181 $ 1,307,849 $ 1,236,747
=========== =========== =========== =========== ===========
Sales of Gas - kilotherms:
Residential................................. 1,337,267 1,280,128 1,265,270 1,140,887 1,097,034
Commercial.................................. 945,950 943,054 939,021 893,069 837,650
Industrial.................................. 912,689 876,421 739,508 399,385 341,467
Street Lighting............................. 668 666 668 666 657
----------- ----------- ----------- ----------- -----------
Total Sales to Customers...................... 3,196,574 3,100,269 2,944,467 2,434,007 2,276,808
Interdepartmental............................. 9,316 7,509 5,967 6,174 5,144
----------- ----------- ----------- ----------- -----------
Total Sales of Gas............................ 3,205,890 3,107,778 2,950,434 2,440,181 2,281,952
Transportation Service........................ 544,539 557,403 543,097 381,497 182,056
----------- ----------- ----------- ----------- -----------
Total Gas Sold and Transported........... 3,750,429 3,665,181 3,493,531 2,821,678 2,464,008
=========== =========== =========== =========== ===========
EDHI
EDHI, a wholly owned, direct subsidiary of Enterprise, is incorporated
under the laws of New Jersey and is the parent company of EDC, CEA, PSRC, EGDC,
Capital and Funding. EDHI's principal executive offices are located at One
Riverfront Plaza, Newark, New Jersey 07102. EDHI's focus is on its energy-
related core businesses, with emphasis on its investment in the independent
energy market. For a discussion of the impact on EDHI of Enterprise's agreement
with the BPU regarding utility/nonutility activities, see Regulation.
EDC
EDC, a New Jersey corporation, has its principal executive offices at 1000
Louisiana Street, Suite 2900, Houston, Texas 77002. EDC is an oil and gas
exploration and production and marketing company with principal operations both
onshore and offshore in the southern United States and has a growing
international production base. EDC has been pursuing a program to grow its
reserve base in order to maintain an annual production level of 130-140 Billion
Cubic Feet Equivalent (BCFE) through a combination of exploratory and
development activities. EDC's worldwide 1994 production totaled 108 BCFE.
Year-end 1994 proved reserves were 594 billion cubic feet of gas and 49 million
barrels of oil, increases of 10% and 9%, respectively, compared to 1993. As of
December 31, 1994 and 1993, EDC's consolidated assets aggregated $729 million
and $679 million, respectively. EDC is exempt from direct regulation by the
BPU and FERC except that certain FERC approval is required to transport its gas
interstate from its discovery fields. EDC had provided a source of firm gas
supply to PSE&G which in 1994 accounted for approximately 7% of EDC's gas
sales volumes. Sales by EDC to PSE&G were discontinued on September 30, 1994
pursuant to an agreement with the BPU. (See PSE&G -- Gas Operations and Supply,
Regulation and Note 1 -- Summary of Significant Accounting Policies of Notes
to Consolidated Financial Statements.)
CEA
CEA, a New Jersey corporation, has its principal executive offices at 1200
East Ridgewood Avenue, Ridgewood, New Jersey 07450. CEA invests in and
participates in the development of cogeneration and power production
facilities, which include QFs and a foreign EWG. CEA is expected to be the
primary vehicle for EDHI's business growth for the foreseeable future, with
emphasis on international projects. CEA's two direct subsidiaries, CEA New
Jersey, Inc. (CEA New Jersey) and CEA USA, Inc. (CEA USA), hold certain of its
investments. CEA New Jersey's subsidiaries invest in projects in New Jersey
selling power to PSE&G. CEA USA's subsidiaries invest in projects selling
power to other domestic and foreign utilities. CEA and/or its subsidiaries and
affiliates have investments in 17 commercially operating cogeneration or power
projects, one anthracite coal mine and one project scheduled for start-up in
the first quarter of 1995. CEA continuously evaluates the status of project
development and construction in light of the realities of timely completion and
the costs incurred.
CEA's investments in QF projects have been undertaken with other
participants because CEA, together with any other utility affiliate, may not
own more than 50% of a QF under applicable law subsequent to the in-service
date. Projects involving EWGs are not restricted to a 50% investment
limitation. CEA's projects are diversified internationally and technologically
and are generally financed through non-recourse debt. CEA is an investor in
these projects and the electricity produced by the facilities is not part of
PSE&G's installed capacity. However, some of such power is being purchased by
PSE&G pursuant to long-term contracts with the applicable projects.
As of December 31, 1994 and 1993, CEA's consolidated assets aggregated
$232 million and $211 million, respectively. (See Note 7 -- Long-Term
Investments of Notes to Consolidated Financial Statements.)
PSRC
PSRC, a New Jersey corporation, has its principal executive offices at One
Riverfront Plaza, Newark, New Jersey 07102. PSRC makes primarily passive
investments in assets that can provide funds for future growth as well as
provide incremental earnings for Enterprise. Investments have been made in
leveraged and direct financing leases, project financings, venture capital
funds, leveraged buyout funds, real estate limited partnerships and
securities. The maturities of the portfolio's investments are also fairly
diverse, with some having terms exceeding 30 years. PSRC's leveraged lease
investments include a wide range of asset sectors. Some of the transactions in
which PSRC and its subsidiaries participate involve other equity investors.
PSRC plans to limit new investments to existing commitments and investments
related to EDHI's core business. For information concerning PSRC's three
direct-finance leases with Continental Airlines, see Note 12 -- Commitment and
Contingent Liabilities of Notes to Consolidated Financial Statements.
In January 1994, in response to regulatory changes occurring at both
the national and state levels regarding the sale and distribution of natural
gas (see Competition), PSRC formed a gas marketing subsidiary, Public Service
Gas Marketing Company, which has entered into a partnership with another major
utility to market natural gas and associated services on an unregulated basis
to commercial and industrial gas consumers nationwide. The partnership, USEP,
commenced its marketing activities in May 1994 and had sold approximately 4.9
mmbtu of gas through December 1994.
PSRC is a limited partner in various partnerships and is committed to make
investments from time to time, upon the request of the respective general
partners. On December 31, 1994, $134 million remained as PSRC's unfunded
commitment subject to call. As of year-end 1994 and 1993, PSRC's long-term
investments aggregated $1.3 billion.
EGDC
EGDC, a New Jersey corporation having its principal executive offices at
One Riverfront Plaza, Newark, New Jersey 07102, is a diversified nonresidential
real estate development and investment business. EGDC has investments in ten
commercial real estate properties (five of which are developed) in several
states. EGDC's strategy is to preserve and build the value of its assets to
allow for the controlled disposition of its properties as the real estate
market improves. As of December 31, 1994 and 1993, EGDC's consolidated assets
aggregated $189 million and $203 million, respectively.
For further discussion of EGDC, see MD&A -- Liquidity and Capital
Resources -- EDHI.
Capital
Capital, a New Jersey corporation, has its principal executive offices at
80 Park Plaza, Newark, New Jersey 07101. Capital serves as a financing vehicle
for EDHI's businesses, borrowing on their behalf on the basis of a minimum net
worth maintenance agreement with Enterprise. That agreement provides, among
other things, that Enterprise (i) maintain its ownership, directly or
indirectly, of all outstanding common stock of Capital, (ii) cause Capital to
have at all times a positive tangible net worth of at least $100,000 and (iii)
make sufficient contributions of liquid assets to Capital in order to permit
it to pay its debt obligations. In 1993, Enterprise agreed with the BPU to
make a good-faith effort to eliminate such Enterprise support within six to ten
years. Intercompany borrowing rates are established with reference to
Capital's cost of funds. Effective January 31, 1995, Capital will not have more
than $650 million of debt outstanding at any time. Capital's assets consist
principally of demand notes of EDC, CEA, PSRC and EGDC. As of December 31, 1994
and 1993, Capital had outstanding $632 million and $724.5 million,
respectively, of its long-term debt. For additional information, see
Construction and Capital Requirements -- Financing Activities and MD&A --
Liquidity and Capital Resources -- EDHI.
Funding
Funding, a New Jersey corporation, has its principal executive offices at
80 Park Plaza, Newark, New Jersey 07101. Funding serves as a financing vehicle
for EDHI's businesses (excluding EGDC), borrowing on their behalf, as well as
investing their short-term funds. Short-term investments are made only if the
funds cannot be employed in intercompany loans. Intercompany borrowing rates
are established with reference to Funding's cost of funds. Funding is providing
both long and short-term capital for the nonutility businesses other than EGDC
on the basis of an unconditional guaranty from EDHI, but without direct support
from Enterprise. As of December 31, 1994 and 1993, Funding's assets consisted
principally of demand notes of EDC, CEA and PSRC and their subsidiaries, all
of which are pledged to Funding's lenders and which aggregated $334 million and
$289 million, respectively. For additional information, see MD&A -- Liquidity
and Capital Resources -- EDHI.
ITEM 2. PROPERTIES
PSE&G
The statements under this Item as to ownership of properties are made
without regard to leases, tax and assessment liens, judgments, easements,
rights of way, contracts, reservations, exceptions, conditions, immaterial
liens and encumbrances and other outstanding rights affecting such properties,
none of which is considered to be significant in the operations of PSE&G,
except that PSE&G's First and Refunding Mortgage (Mortgage), securing the bonds
issued thereunder, constitutes a direct first mortgage lien on substantially
all of such property.
PSE&G maintains insurance coverage against loss or damage to its principal
plants and properties, subject to certain exceptions, to the extent such
property is usually insured and insurance is available at a reasonable cost.
For a discussion of nuclear insurance, see Note 12 -- Commitments and
Contingent Liabilities of Notes to Consolidated Financial Statements.
The electric lines and gas mains of PSE&G are located over or under public
highways, streets, alleys or lands, except where they are located over or under
property owned by PSE&G or occupied by it under easements or other rights. These
easements and rights are deemed by PSE&G to be adequate for the purposes for
which they are being used. Generally, where payments are minor in amount, no
examinations of underlying titles as to the rights of way for transmission or
distribution lines or mains have been made.
Electric Properties
As of December 31, 1994, PSE&G's share of installed generating capacity was
10,497 MW, as shown in the following table:
INSTALLED NET
MEGAWATT PRINCIPAL HEAT GENERATION CAPACITY
NAME AND LOCATION CAPACITY FUEL USED RATE (000 MWH) FACTOR(a)
- -------------------------------------------- --------- --------- ------ --------- ---------
Fossil
Bergen, Ridgefield, NJ ..................... 570 Gas 14,433 305 6.1
Burlington, Burlington, NJ ................. 180 Oil 16,921 57 3.6
Conemaugh, New Florence, PA - 22.50%(b)(c).. 382 Coal 9,488 2,463 73.6
Hudson, Jersey City, NJ .................... 983 Coal 10,975 2,611 30.3
Kearny, Kearny, NJ ......................... 292 Oil 14,349 101 3.9
Keystone, Shelocta, PA - 22.84%(b)(c)....... 388 Coal 9,647 2,381 70.1
Linden, Linden, NJ ......................... 481 Oil 16,540 177 4.2
Mercer, Hamilton, NJ ....................... 642 Coal 10,130 2,297 40.8
Sewaren, Woodbridge Twp., NJ ............... 453 Gas 13,480 441 11.1
------- ------ --------- ---------
Total Fossil........................... 4,371 10,953 10,833 28.5
------- ------ --------- ---------
Nuclear (Capacity factor calculated in
accordance with industries maximum
dependable capability standards)
Hope Creek, Lower Alloways Creek, NJ
95%(b)(c)................................. 979 Nuclear 10,751 6,752 78.9
Peach Bottom, Peach Bottom PA - 42.49%(b)... 886 Nuclear 10,798 6,873 89.3
Salem, Lower Alloways Creek, NJ
42.59%(b)................................. 942 Nuclear 11,032 4,809 58.5
------- ------ --------- ---------
Total Nuclear(b)(c).................... 2,807 10,842 18,434 75.4
------- ------ --------- ---------
Combustion Turbine
Bayonne, NJ ................................ 42 Oil 14,130 0.9
Bergen, Ridgefield, NJ ..................... 61 Oil 14,716 1.0
Burlington, NJ ............................. 629 Gas 9,291 413.7
Edison, Edison Township, NJ ................ 504 Gas 15,299 12.7
Essex, Newark, NJ .......................... 617 Gas 13,855 189.5
Hudson, Jersey City, NJ .................... 134 Oil 26,703 1.7
Kearny, Kearny, NJ ......................... 501 Oil 16,478 40.0
Linden, Linden, NJ ......................... 329 Oil 18,494 10.0
Mercer, Hamilton, NJ ....................... 134 Oil 47,299 1.0
National Park, National Park, NJ ........... 21 Oil 43,551 0.1
Salem, Lower Alloways Creek, NJ
42.59%(b)................................. 18 Oil 23,603 0.2
Sewaren, Woodbridge Township, NJ ........... 134 Oil 35,332 2.0
------- ------ --------- ---------
Total Combustion Turbine............... 3,124 11,432 672.8 0.2
------- ------ --------- ---------
Diesel
Conemaugh, New Florence, PA - 22.50%(b)..... 3 Oil 10,226 0.2 0.7
Keystone, Shelocta, PA - 22.84%(b).......... 2 Oil 10,261 0.7 4.0
------- ------ --------- ---------
Total Diesel........................... 5 10,254 0.9 2.0
------- ------ --------- ---------
Pumped Storage
Yards Creek, Blairstown, NJ - 50%(b)(c)..... 190 367 22.0
------- ------ --------- ---------
Total PSE&G............................ 10,497(d) 10,739 30,308(e) 33.0
======= ====== ========= =========
(a) Net generation divided by the product of weighted average generating capacity times total hours.
(b) PSE&G's share of jointly owned facility.
(c) Excludes energy for pumping and synchronous condensers.
(d) Excludes 664 MW of nonutility generation and temporary capacity sales of 173 MW to Baltimore Gas and
Electric and 111 MW to General Public Utilities.
(e) Excludes 4,876 of NUGs.
For information regarding construction see Item 1. Business --
Construction and Capital Expenditures.
As of December 31, 1994, PSE&G owned 40 switching stations with an
aggregate installed capacity of 31,351,000 kilovolt-amperes, and 224
substations with an aggregate installed capacity of 7,277,000 kilovolt-amperes.
In addition, 6 substations having an aggregate installed capacity of 139,250
kilovolt-amperes were operated on leased property. All of these facilities are
located in New Jersey. Also at that date, PSE&G owned undivided interests in
similar jointly owned facilities at jointly owned generating facilities in New
Jersey and Pennsylvania as indicated in the table above.
As of December 31, 1994, PSE&G's transmission and distribution system
included 149,533 circuit miles, of which 34,868 miles were underground, and
782,031 poles, of which 533,017 poles were jointly owned. Approximately 99% of
this property is located in New Jersey.
In addition, as of December 31, 1994, PSE&G owned 4 electric distribution
headquarters and five subheadquarters in four operating divisions all located
in New Jersey.
Gas Properties
As of December 31, 1994, the daily gas capacity of PSE&G's 100%-owned
peaking facilities (the maximum daily gas delivery available during the three
peak winter months) consisted of liquid petroleum air gas (LPG) and liquefied
natural gas (LNG) and aggregated 2,973,000 therms (approximately 297,300 Mcf.
on an equivalent basis of 1,000 Btu/cubic foot) as shown in the following
table:
Daily Capacity
Plant Location (Therms)
- -------------------------------- ------------------ --------------
Burlington LNG.................. Burlington, N.J. 773,000
Camden LPG...................... Camden, N.J. 280,000
Central LPG..................... Edison Twp., N.J. 960,000
Harrison LPG.................... Harrison, N.J. 960,000
---------
Total........................... 2,973,000
=========
As of December 31, 1994, PSE&G owned and operated approximately 15,406
miles of gas mains, owned 12 gas distribution headquarters and one
subheadquarters and leased one other subheadquarters all in two operating
regions located in New Jersey and owned one meter shop in New Jersey serving
all such areas. In addition, PSE&G operated 61 natural gas metering or
regulating stations, all located in New Jersey, of which 28 were located on
land owned by customers or natural gas pipeline companies supplying PSE&G with
natural gas and were operated under lease, easement or other similar
arrangement. In some instances, portions of the metering and regulating
facilities were owned by pipeline companies.
Office Buildings and Facilities
PSE&G leases substantially all of a 26-story office tower for its
corporate headquarters at 80 Park Plaza, Newark, N. J., together with an
adjoining three-story building. PSE&G also leases other office space at various
locations throughout New Jersey for district offices and offices for various
corporate groups and services. PSE&G also owns various other sites for
training, testing, parking, records storage, research, repair and maintenance,
warehouse facilities and for other purposes related to its business.
EDHI owns no real property. EDHI leases its corporate headquarters at One
Riverfront Plaza, Newark, New Jersey 07102. For a brief general description of
the properties of the subsidiaries of EDHI, see Item 1. Business -- EDHI.
ITEM 3. LEGAL PROCEEDINGS
See the following, at the pages indicated:
(1) Page 4. Proceedings before FERC relating to competition and electric
wholesale power markets. (Inquiry Concerning the Pricing Policy for
Transmission Services Provided by Utilities Under the Federal Power Act, Docket
No. RM93-19.)
(2) Page 5. Proceedings before FERC relating to restructuring of natural
gas industry pursuant to Orders 636. (In Re Pipeline Service Obligations and
Revisions to Regulations Governing Self-Implementing Transportation Under Part
284 of the Commission's Regulations, Docket No. RM91-11-000).
(3) Page 10. Proceedings before the BPU relating to PSE&G's Second
Largest Customer, filed January 6, 1995, in Docket No. ER95010005.
(4) Page 31. Requests filed in 1974 and later supplemented, to EPA and
NJDEP to establish thermal discharges and intake structures for PSE&G's
electric generating stations (Sewaren Generating Station, NJ 0000680; Hudson
Generating Station, NJ 0000647; Kearny Generating Station, NJ 0000655; Salem
Generating Station, NJ 0005622; Linden Generating Station, NJ 0000663).
(5) Pages 35 through 41. Various administrative actions, claims,
litigation and requests for information by federal and/or state agencies,
and/or private parties, under CERCLA, RCRA, and state environmental laws to
compel PRPs, which may include PSE&G, to provide information with respect to
transportation and disposal of hazardous substances and wastes, and/or to
undertake or contribute to the costs of investigative and/or cleanup actions
at various locations because of actual or threatened releases of one or more
potentially hazardous substances and/or wastes.
(6) Page 98. Proceedings before the BPU relating to PSE&G's LGAC, filed
July 1, 1994, in Docket No. GR94070292.
(7) Page 98. Proceedings before the BPU relating to PSE&G's LEAC, filed
July 1, 1994, in Docket No. ER94070293.
(8) Page 123. On November 7, 1988, PSE&G filed a lawsuit in the United
States District Court for the District of New Jersey against Associated
Electric & Gas Insurance Services, Ltd., Certain Underwriters at Lloyd's of
London, and Certain London Market Companies (PSE&G v. AEGIS, et al., Civ.
Action No. 884811.) The suit seeks insurance coverage from these insurers for
claims that have been made against PSE&G by the NJDEP and certain private
parties. The claims concern alleged contamination at former gas manufacturing
plant sites in New Jersey that are either currently owned by PSE&G or that were
previously owned by PSE&G or one of its predecessors.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Enterprise and PSE&G, inapplicable.
ITEM 10. EXECUTIVE OFFICERS OF THE REGISTRANTS
Enterprise and PSE&G. Information regarding executive officers required
by this Item is set forth in Part III, Item 10 hereof.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
Enterprise's Common Stock is listed on the New York Stock Exchange, Inc.
and the Philadelphia Stock Exchange, Inc. All of PSE&G's common stock is owned
by Enterprise, its corporate parent. As of December 31, 1994, there were
185,941 holders of record of Enterprise Common Stock.
The following table indicates the high and low sale prices for
Enterprise's Common Stock, as reported in The Wall Street Journal as Composite
Transactions and dividends paid for the periods indicated:
Dividend
High Low Per Share
------ ------- ---------
Common Stock:
1994
First Quarter........................ 32 27 1/4 .54
Second Quarter....................... 29 1/4 25 .54
Third Quarter........................ 28 5/8 23 7/8 .54
Fourth Quarter....................... 27 1/8 25 .54
1993
First Quarter........................ 34 1/4 30 .54
Second Quarter....................... 35 31 7/8 .54
Third Quarter........................ 36 1/8 34 .54
Fourth Quarter....................... 35 1/4 30 .54
Since 1986, PSE&G has made regular cash payments to Enterprise in the form
of dividends on outstanding shares of PSE&G's Common Stock. PSE&G has paid
quarterly dividends on its common stock in each year commencing in 1948, the
year of the distribution of PSE&G's common stock by Public Service Corporation
of New Jersey, the former parent of PSE&G. Beginning in 1992, EDHI has made
regular cash payments to Enterprise in the form of dividends on outstanding
shares of EDHI's common stock. Enterprise has paid quarterly dividends in each
year commencing with the corporate restructuring of PSE&G when Enterprise
became the owner of all the outstanding common stock of PSE&G. While the Board
of Directors of Enterprise intends to continue the practice of paying dividends
quarterly, amounts and dates of such dividends as may be declared will
necessarily be dependent upon Enterprise's future earnings, financial
requirements and other factors.
The ability of Enterprise to declare and to pay dividends is contingent
upon its receipt of dividend payments from its subsidiaries. PSE&G has
restrictions on the payments of dividends which are contained in its Restated
Certificate of Incorporation, as amended, certain of the indentures
supplemental to its Mortgage and certain debenture bond indentures. Under these
restrictions, dividends on PSE&G's common stock may be paid only out of PSE&G's
earned surplus and may not reduce PSE&G's earned surplus to less than $10
million. PSE&G dividends on common stock would be limited to 75% of Earnings
Available for Public Service Enterprise Group Incorporated if payment thereof
would reduce PSE&G's Stock Equity to less than 33 1/3% of PSE&G's Total
Capitalization and would be limited to 50% of Earnings Available for Public
Service Enterprise Group Incorporated if payment thereof would reduce Stock
Equity to less than 25% of PSE&G's Total Capitalization, as each of said terms
is defined in said PSE&G's debenture bond indentures. Further, under an
indenture relating to the loan to PSE&G of the proceeds of the monthly income
preferred securities (MIPS) of Public Service Electric and Gas Capital, L.P.
(see Note 4. -- Schedule of Consolidated Capital Stock and Other Securities of
Notes to Consolidated Financial Statements), dividends may not be paid on
PSE&G's capital stock as long as any payments on PSE&G's deferrable interest
subordinated debentures issued under said indenture have been deferred or there
is a default under said indenture or PSE&G's guarantee relating to the MIPS.
None of these restrictions presently limits the payment of dividends out of
current earnings. The amount of Enterprise's and PSE&G's consolidated retained
earnings free of these restrictions at December 31, 1994 was $1.5 billion and
$1.3 billion, respectively.
ITEM 6. SELECTED FINANCIAL DATA
Enterprise
The information presented below should be read in conjunction with Enterprise Consolidated Financial
Statements and Notes thereto.
YEARS ENDED DECEMBER 31,
-----------------------------------------------------------------------
1994 1993 1992 1991 1990
----------- ----------- ----------- ----------- -----------
(THOUSANDS OF DOLLARS, WHERE APPLICABLE)
Total Operating Revenues.... $ 5,915,843 $ 5,705,559 $ 5,356,781 $ 5,111,421 $ 4,847,564
Net Income.................. $ 679,033 $ 600,933 $ 504,117 $ 543,035 $ 403,663
Earnings per average share
of Common Stock........... $ 2.78 $ 2.50 $ 2.17 $ 2.43 $ 1.90
Dividends paid per share of
Common Stock.............. $ 2.16 $ 2.16 $ 2.16 $ 2.13 $ 2.09
As of December 31:
Total Assets.............. $16,717,440 $16,329,656 $14,777,732 $14,804,354 $13,713,248
Long-Term Liabilities:
Long-Term Debt....... $ 5,180,657 $ 5,256,321 $ 4,977,579 $ 5,128,373 $ 4,668,024
Other Long-Term
Liabilities........ $ 215,603 $ 220,159 $ 53,617 $ 54,073 $ 54,512
Preferred Stock with
mandatory redemption...... $ 150,000 $ 150,000 $ 75,000 $ -- $ --
Monthly Income Preferred
Securities................ $ 150,000 $ -- $ -- $ -- $ --
Ratio of Earnings to Fixed
Charges plus Preferred
Securities Dividend
Requirements (A).......... 2.76 2.59 2.30 2.54 2.09
(A) Fixed charges include the preferred securities dividend requirements of PSE&G.
PSE&G
The information presented below should be read in conjunction with PSE&G Consolidated Financial
Statements and Notes thereto.
YEARS ENDED DECEMBER 31,
-----------------------------------------------------------------------
1994 1993 1992 1991 1990
----------- ----------- ----------- ----------- -----------
(THOUSANDS OF DOLLARS, WHERE APPLICABLE)
Total Operating Revenues.... $ 5,511,641 $ 5,287,424 $ 4,994,000 $4,827,655 $ 4,617,489
Net Income.................. $ 659,406 $ 614,868 $ 475,936 $ 545,479 $ 537,619
As of December 31:
Total Assets.............. $14,264,398 $13,984,298 $12,273,857 $12,027,971 $11,652,208
Long-Term Liabilities:
Long-Term Debt....... $ 4,486,787 $ 4,364,437 $ 3,978,138 $ 3,933,389 $ 3,733,444
Other Long-Term
Liabilities........ $ 215,603 $ 220,159 $ 53,617 $ 54,073 $ 54,512
Preferred Stock with
mandatory redemption...... $ 150,000 $ 150,000 $ 75,000 $ -- $ --
Monthly Income Preferred
Securities................ $ 150,000 $ -- $ -- $ -- $ --
Ratio of Earnings to Fixed
Charges................... 3.35 3.30 2.70 3.20 3.10
Ratio of Earnings to Fixed
Charges plus Preferred
Securities Dividend
Requirements.............. 2.92 2.89 2.43 2.86 2.79
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
ENTERPRISE
Following are the significant factors affecting the consolidated financial
condition and the results of operations of Public Service Enterprise Group
Incorporated (Enterprise) and its subsidiaries. This discussion refers to the
Consolidated Financial Statements and related Notes of Enterprise and should
be read in conjunction with such statements and notes.
Overview
Enterprise has two direct wholly owned subsidiaries, Public Service
Electric and Gas Company (PSE&G) and Enterprise Diversified Holdings
Incorporated (EDHI). Enterprise's principal subsidiary, PSE&G, is an operating
public utility providing electric and gas service in certain areas in the State
of New Jersey.
EDHI is the parent of Enterprise's nonutility businesses: Energy
Development Corporation (EDC), an oil and gas exploration and production and
marketing company; Community Energy Alternatives Incorporated (CEA), an
investor in and developer of cogeneration and independent power production
(IPP) facilities and exempt wholesale generators (EWGs); Public Service
Resources Corporation (PSRC), which has made primarily passive investments; and
Enterprise Group Development Corporation (EGDC), a diversified nonresidential
real estate development and investment business. EDHI also has two finance
subsidiaries: PSEG Capital Corporation (Capital), which provides privately
placed debt financing on the basis of a minimum net worth maintenance agreement
from Enterprise and Enterprise Capital Funding Corporation (Funding), which
provides privately placed debt financing guaranteed by EDHI but without direct
support from Enterprise.
As of December 31, 1994 and December 31, 1993, PSE&G comprised 85% and
86%, respectively, of Enterprise assets. For each of the years 1994, 1993 and
1992, PSE&G revenues were 93% of Enterprise's revenues and PSE&G's earnings
available to Enterprise for such years were 91%, 96% and 88%, respectively, of
Enterprise's net income.
The major factors which will affect Enterprise's future results include
general and regional economic conditions, PSE&G's customer retention and
growth, the ability of PSE&G and EDHI to meet competitive pressures and to
contain costs, the adequacy and timeliness of rate relief, cost recovery and
necessary regulatory approvals, the ability to continue to operate and maintain
nuclear programs in accordance with Nuclear Regulatory Commission (NRC) and New
Jersey Board of Public Utilities (BPU) requirements, the impact of
environmental regulations, continued access to the capital markets and
continued favorable regulatory treatment of consolidated tax benefits. (See
Note 2 -- Rate Matters, Note 10 -- Federal Income Taxes and Note 12 --
Commitments and Contingent Liabilities of Notes to Consolidated Financial
Statements ("Notes").)
PSE&G Energy and Fuel Adjustment Clauses
PSE&G has fuel and energy tariff rate adjustment clauses which are
designed to permit adjustments for changes in electric energy and gas supply
costs and certain other costs as approved by the BPU, when compared to cost
recovery included in base rates. Charges under the clauses are primarily based
on energy and gas supply costs which are normally projected over twelve-month
periods. The changes in the Levelized Gas Adjustment Charge (LGAC) and the
electric Levelized Energy Adjustment Clause (LEAC) do not directly affect
earnings because such costs are adjusted monthly to match amounts recovered
through revenues. However, the carrying of underrecovered costs ultimately
increases financing costs. PSE&G is also required to pay interest on net
overrecovered costs. Under the clauses, if actual costs differ from the costs
recovered, the amount of the underrecovery or overrecovery is deferred and is
reflected in the average cost used to determine the fuel and energy tariff rate
adjustment for the period in which it is recovered or repaid. Actual costs
otherwise includable in the LEAC are subject to adjustment by the BPU in
accordance with its nuclear performance standard (NPS). (See Note 2 -- Rate
Matters and Note 12 -- Commitments and Contingent Liabilities of Notes.)
Competition
Ongoing initiatives affecting PSE&G's electric and gas utility businesses
associated with the continuing transition to a competitive market environment
will have an increasingly significant impact on Enterprise and PSE&G. Federal
legislation, including the National Energy Policy Act (NEPA), as well as
regulatory initiatives at both the federal and state levels that are designed
to promote competition and lessen regulation of the energy supply industry can
be expected to result in additional pressures on customer retention due to
energy prices, especially with respect to larger industrial and commercial
customers. Growth potential is limited in PSE&G's mature service territory.
The shift of rate regulation from traditional concepts based upon rate
base/rate of return to concepts based upon market competition and service is
accelerating. As a result, added emphasis will be placed upon cost reduction.
Utilities and their regulators will need to develop flexible ratemaking
strategies to minimize adverse impacts which might otherwise occur to revenues
and earnings and to maximize potential opportunities presented by deregulation.
The manner in which regulators address evolving competitive issues will also
affect utility credit quality and the carrying value of assets.
The transition to a competitive market environment will cause changes
from traditional utility ratemaking and is likely to affect utilities' ability
to recover costs, resulting in these costs being "stranded." Stranded costs
are costs and liabilities that were incurred by regulated utilities as a result
of the regulatory compact among utilities, regulators and customers which are
no longer recoverable from such customers due to changes in the regulatory
framework that allow such customers to change electric suppliers before paying
for the costs the utility has incurred on their behalf. Potential stranded
costs include but are not limited to: generation assets; long-term purchase
power and fuel contracts; "regulatory assets" -- Statement of Financial
Accounting Standards No. 71, "Accounting for the Effects of Certain Types of
Regulation" (SFAS 71), which are expenses that have been deferred pending
recovery from customers; and costs which regulators have ordered utilities to
incur to fulfill a variety of broader social purposes (including such things
as energy conservation costs such as demand-side management (DSM) costs). More
competitive electric wholesale markets, proposals to authorize retail wheeling
or direct retail access within utility franchise areas, but not New Jersey to
date, as well as the recent Federal Energy Regulatory Commission's (FERC)
notice of proposed rulemaking on stranded costs have brought to the forefront
the issue of potential stranded costs. If changes in rate regulation
ultimately require a recognition of any such stranded costs, asset write-downs
for utilities, including PSE&G, may occur. At this time, management cannot
predict the level of transition costs or stranded costs resulting from industry
deregulation, if any, or whether utility regulators will allow recovery of any
such transition costs from customers. In addition, PSE&G cannot presently
quantify what the financial statement impact may be if depreciation expense is
determined absent regulation. However, if any such amounts are not recovered,
the impact on the financial position, results of operations or net cash flows
of PSE&G and Enterprise could be material. (See Note 1 -- Organization and
Summary of Significant Accounting Policies and 2 -- Rate Matters of Notes.)
Further, competition will force utilities, including PSE&G, to operate
more cost effective and efficient plants, particularly in light of the
technological advantages available to new entrants, which unlike utilities, do
not operate older, less efficient units. Recovery of related costs by
utilities, including PSE&G, will depend upon the decisions of the regulators,
which cannot be predicted, or the ability to sell the electricity generated by
such plants in the emerging wholesale power market. For discussion of PSE&G's
renovation project at Bergen, see Note 12 - Commitments and Contingent
Liabilities of Notes.
The BPU has issued the first phase of a draft revised Energy Master Plan
which acknowledges the need for regulatory flexibility as competition unfolds
and calls for legislation that would allow New Jersey utilities to propose,
subject to BPU approval, alternatives to existing rate base/rate of return
pricing, allow for pricing flexibility under certain standards for customers
with competitive options and equalize the impact of tax policies, such as New
Jersey Gross Receipts and Franchise Tax (NJGRT), upon energy producers.
Management cannot predict the ultimate form of any legislative or regulatory
changes which may be adopted as a result of this revised Energy Master Plan.
Enterprise Earnings
Earnings per share of Enterprise Common Stock were $2.78 in 1994, $2.50
in 1993 and $2.17 in 1992. The changes are summarized as follows:
1994 vs. 1993 1993 vs. 1992
---------------- ---------------
Per Per
Amount Share Amount Share
------ ------ ------ ------
(Millions, except Per Share Data)
PSE&G
Revenues (net of fuel costs and gross
receipts taxes).......................... $ 144 $ .60 $ 347 $1.49
Peach Bottom Settlement (net of Federal
income taxes)........................... -- -- (33) (.14)
Other operation expenses.................. (77) (.32) (62) (.26)
Maintenance expenses...................... (3) (.02) 3 .01
Depreciation and amortization expenses.... (29) (.12) (15) (.06)
Federal income taxes...................... 14 .06 (113) (.49)
Other taxes............................... (9) (.04) (1) --
Interest charges.......................... (6) (.02) 12 .05
Allowance for Funds used During
Construction (AFDC)...................... 11 .05 -- --
Preferred Securities Dividend
Requirements............................ (4) (.02) (6) (.02)
Other income and expenses................. 1 -- 1 --
------ ----- ----- ----
Earnings Available to Enterprise.......... 42 .17 133 .58
EDHI
PSRC................................. 14 .06 (07) (.04)
CEA.................................. 2 .01 3 .01
EDC.................................. (34) (.14) 17 .07
EGDC................................. 54 .22 (49) (.20)
----- ----- ----- -----
Subtotal.................................. 36 .15 (36) (.16)
----- ----- ----- -----
Net Income................................ $ 78 .32 $ 97 .42
===== =====
Effect of additional shares of
Enterprise Common Stock issued........... (.04) (.09)
----- ----
Total........................... $.28 $.33
===== ====
The average shares of Enterprise Common Stock outstanding were
244,470,794 for 1994, 240,663,599 for 1993 and 232,306,492 for 1992,
respectively.
PSE&G
In 1994, PSE&G's earnings available to Enterprise increased by $42
million. The increase was primarily due to higher electric commercial sales
and firm gas residential and commercial sales. Electric kilowatthour (KWH)
commercial sales increased 2% and total gas therms sold and transported
increased 2.3%, respectively, principally due to weather and a modest
improvement in New Jersey's economy. Also benefitting earnings was the
decrease in Federal income tax expense resulting from the receipt of a
nontaxable insurance benefit partially offset by higher pre-tax operating
income. In addition, higher AFDC was a benefit to earnings due to greater
construction, partially offset by a slightly reduced 1994 AFDC rate. The major
factors adversely affecting earnings were higher other operation expenses,
comprised primarily of miscellaneous nuclear production expenses,
employee benefits expenses and increased accruals for uncollectible customer
accounts, increased depreciation and amortization expenses due to more utility
plant in service, higher interest charges due to a higher average daily balance
of short-term debt outstanding at higher interest rates and higher maintenance
expenses, principally at Hope Creek nuclear station due to the spring 1994
refueling outage.
In 1993, excluding the $33 million net effect of the settlement of
litigation against Philadelphia Electric Company, now known as PECO Energy,
Inc. (PECO), in connection with the 1987 shutdown of Peach Bottom Atomic Power
Station, Units 2 and 3 (Peach Bottom) by the NRC, PSE&G's earnings available
to Enterprise increased by $166 million. The principal contributing factors
to the increase in earnings available to Enterprise were PSE&G's higher
electric and gas base rates that became effective January 1, 1993 and a
substantial increase in electric KWH sales. (See Revenues below.) The
increase in electric sales was primarily due to the abnormally warm summer
weather. Partially offsetting the increase in earnings were higher other
operation expenses (comprised primarily of labor and employee benefits costs
and miscellaneous nuclear production costs), higher depreciation and
amortization and higher Federal income taxes resulting from increased pre-tax
operating income and an increase in the Federal corporate income tax rate,
effective January 1993. (See Note 10 -- Federal Income Taxes of Notes.)
EDHI
The net income of EDHI was $60 million in 1994. Excluding the impact of
an impairment of assets of $51 million, after tax, by EGDC in 1993, EDHI's
earnings in 1994 decreased $15 million in comparison to 1993. Increased income
from PSRC (higher investment income, lower income taxes compared to 1993 which
included the effects of a Federal income tax increase and lower interest
charges) and CEA (higher income from operating plants) was offset by lower EDC
earnings (lower gas volumes and prices and higher exploration and development
expenditures due to increased drilling activities).
To the extent that the prices at which EDC is able to sell gas remain low,
EDHI's earnings may continue to be negatively impacted. For information
concerning certain of PSRC's direct-finance aircraft leases, see Note 12 --
Commitments and Contingent Liabilities of Notes.
The net income of EDHI was $24 million in 1993, a decrease of $36 million
from 1992. The decrease in EDHI's net income was due primarily to EGDC's
recording of an impairment related to certain real estate properties, including
properties upon which management revised its intent from a long-term investment
strategy to a short-term hold for sale status, reflecting such properties at
their net realizable value. This impairment reduced EDHI's earnings by $51
million, after tax, or 21 cents per share of Enterprise Common Stock. Partially
offsetting this decrease was an increase in the earnings of EDC due to the
higher price of natural gas. Exclusive of the recorded impairment, EDHI's net
income would have been $75 million for 1993.
Dividends
The ability of Enterprise to declare and pay dividends is contingent upon
its receipt of dividend payments from its subsidiaries. PSE&G has made regular
payments to Enterprise in the form of dividends on outstanding shares of its
common stock since Enterprise was formed in 1986. In addition, commencing in
1992, EDHI has also made payments to Enterprise in the form of dividends on its
outstanding common stock.
Dividends paid to holders of Enterprise Common Stock increased $6 million
during 1994 compared to 1993 and increased $18 million during 1993 compared to
1992. The increase in dividend payments for 1994 over 1993 and for 1993 over
1992, respectively, was due to the issuance of additional shares of Enterprise
Common Stock.
Dividends paid to holders of PSE&G's Preferred Stock increased $2 million
during 1994 compared to 1993 and $6 million during 1993 compared to 1992. The
increase in such dividends was due to the issuance of additional shares of
PSE&G's Preferred Stock, partially offset by reduced dividend requirements
resulting from the redemption of certain higher cost series of Preferred Stock.
(See Liquidity and Capital Resources.)
Dividends payable to holders of Monthly Income Preferred Securities (MIPS)
of Public Service Electric and Gas Capital, L.P. (Partnership), a limited
partnership of which PSE&G is the general partner, aggregated $2 million for
1994. (See Note 4 -- Schedule of Consolidated Capital Stock and Other
Securities of Notes.)
Revenues
PSE&G Electric
Revenues increased $40 million, or 1.1%, in 1994 from 1993; 1993 revenues
increased $285 million, or 8.4%, compared to 1992. The significant components
of these changes follow:
Increase or (Decrease)
------------------------------
1994 vs. 1993 1993 vs. 1992
------------- -------------
(Millions)
Kilowatthour sales....................... $ 69 $ 67
Base rate increase effective January 1,
1993................................... - 244
Tax Reform Act of 1986................... - 13
Recovery of energy costs................. (26) (52)
NJGRT.................................... (4) 17
Other operating revenues................. 1 (4)
----- -----
Total Electric Revenues.................. $ 40 $ 285
===== =====
Changes in kilowatthour sales by customer category are described below:
Increase or (Decrease)
-----------------------------
1994 vs. 1993 1993 vs. 1992
------------- -------------
Residential.............................. (0.4)% 8.3%
Commercial............................... 2.0 3.7
Industrial............................... 0.5 (1.0)
Total Sales of Electricity
to Customers........................... 1.0 3.7
1994 -- The increase in electric revenues was primarily due to higher
kilowatthour sales, partially offset by lower recovery of energy costs. The
increase in kilowatthour sales is due to higher commercial and industrial sales
as a result of an improving economy. Residential sales were below last year's
levels due to the abnormally warm summer weather experienced in 1993.
1993 -- The increase in electric revenues over 1992 was primarily due to
the base rate increase which became effective January 1, 1993, partially offset
by the larger LEAC credit also effective January 1, 1993. Abnormally warm
summer weather resulted in a significant increase in weather sensitive sales
during 1993. Increased competition from nonutility generators (NUGs) and an
unscheduled maintenance shutdown at PSE&G's largest industrial customer
negatively impacted industrial sales.
PSE&G Gas
Revenues increased $184 million, or 11.6%, during 1994 over 1993; 1993
revenues increased $8 million, or 0.5%, over 1992. The significant components
of these changes follow:
Increase or (Decrease)
------------------------------
1994 vs. 1993 1993 vs. 1992
------------- -------------
(Millions)
Therm sales.............................. $ 61 $ (29)
Base rate increase effective
January 1, 1993........................ - 48
Recovery of fuel costs................... 121 15
NJGRT.................................... (12) (5)
Other operating revenues................. 14 (21)
----- -----
Total Gas Revenues............. $ 184 $ 8
===== =====
Changes in gas revenues sold and transported by customer category are
described below:
Increase or (Decrease)
-------------------------------
1994 vs. 1993 1993 vs. 1992
------------- -------------
Residential.............................. 4.5% 1.2%
Commercial............................... .3 .4
Industrial............................... 4.1 18.5
Transportation Service................... (2.3) 2.6
Total Gas Sold and Transported........... 2.3 4.9
1994 -- The increase in gas revenues was primarily due to an increase in
the recovery of fuel costs, principally due to higher fuel rates, higher sales
and significantly lower customer refunds. Residential, commercial and
industrial sales increased due to favorable weather conditions and an improving
economy. Sales to cogenerators was the largest contributor to the increase in
industrial sales as cogeneration average customer usage continues to increase.
Transportation sales decreased due to storm-related service interruptions in
January and February.
1993 -- The increase in gas revenues over 1992 was primarily attributable
to the base rate increase which became effective January 1, 1993 and the higher
recovery of fuel-related costs. Sales to cogenerators was the largest
contributor to the increase in industrial sales as cogeneration average
customer usage for electric generation continued to increase. Transportation
service sales reflect the movement of some interruptible customers to
transportation service.
EDHI
EDHI revenues decreased $23 million, or 5%, during 1994 from 1993; 1993
revenues increased $30 million, or 7%, over 1992. The significant components
contributing to such results were as follows:
Increase or (Decrease)
------------------------------
1994 vs. 1993 1993 vs. 1992
------------- -------------
(Millions)
EDC...................................... $ (46) $ 30
CEA...................................... 17 10
PSRC..................................... 10 (11)
EGDC..................................... (4) 1
----- ----
Total EDHI Revenues............ $ (23) $ 30
===== ====
1994 -- EDC's revenues decreased due to lower natural gas volumes ($29
million) and prices ($17 million). CEA's revenues increased as a result of
greater income from operating projects. PSRC's revenues increased due to
higher income from partnerships.
1993 -- EDC was the largest contributor to the EDHI revenue increase due
to the higher price of natural gas. CEA revenues increased as a result of
greater income from operating projects. PSRC revenues decreased due to
unrealized losses on investments and lower income from leases.
Electric Energy Costs
Electric energy costs decreased $21 million, or 3.0%, in 1994 compared
to 1993 and $59 million, or 7.7%, in 1993 compared to 1992. The significant
components of these changes follow:
Increase or (Decrease)
-------------------------------
1994 vs. 1993 1993 vs. 1992
------------- -------------
(Millions)
Change in prices paid for fuel
and power purchases................. $ 12 $ 18
Kilowatthour generation............... 9 29
Adjustment of actual costs to match
recoveries through revenues(A)...... (42) (106)
----- ----
Total Electric Energy Costs.... $ (21) $ (59)
===== =====
(A) Reflects the change in the deferred over(under)recovered energy costs,
which in the years 1994, 1993 and 1992 amounted to $(135) million, $(93)
million and $13 million, respectively. (See PSE&G Energy and Fuel
Adjustment Clauses and Note 2 -- Rate Matters of Notes.)
1994 -- The decrease in total costs was principally due to the
underrecovery of energy costs, partially offset by a 12% increase in purchased
power costs and a 1% increase in kilowatthour generation.
1993 -- The decrease in total costs was the result of an adjustment in the
recovery of energy costs resulting from the base rate case decision effective
January 1, 1993, partially offset by a 17% increase in nuclear kilowatthour
generation and an 11% increase in purchased power costs.
Gas Supply Costs
Gas supply costs increased $126 million, or 14.0%, in 1994 compared to
1993 and $39 million, or 4.6%, in 1993 compared to 1992. The significant
components of these changes follow:
Increase or (Decrease)
------------------------------
1994 vs. 1993 1993 vs. 1992
------------- -------------
(Millions)
Change in prices paid for gas supplies... $ (10) $ 117
Therm sendout............................ 31 41
Refunds from pipeline suppliers.......... (21) 33
Adjustment of actual costs to match
recoveries through revenues(A)......... 126 (152)
----- -----
Total Gas Supply Costs......... $ 126 $ 39
===== =====
(A) Reflects the change in the deferred over(under)recovered gas supply costs,
which in the years 1994, 1993 and 1992 amounted to $26 million, $(100)
million and $52 million, respectively. (See PSE&G Energy and Fuel
Adjustment Clauses and Note 2 -- Rate Matters of Notes.)
1994 -- The increase in total costs was principally due to the
overrecovery of fuel costs and increased sales to nonutility generators (NUGs),
partially offset by lower gas prices.
1993 -- The increase in total costs was principally due to greater sales
to NUGs and other customers, higher gas costs and higher therm sendout
resulting from the colder 1993 winter season compared to the 1992 winter
season. The increase in costs was reduced by deferred underrecovered 1993 gas
costs resulting from the BPU approved adjustment in PSE&G's LGAC, effective
January 1, 1993 of $71 million on an annualized basis through December 31,
1993. The adjustment reflects lower gas costs and the inclusion of $15.1
million of conservation program costs in LGAC. In addition, gas customers
received $45 million of credits during the first quarter of 1993.
Liquidity and Capital Resources
Enterprise's liquidity is affected by maturing debt (see Note 6 --
Schedule of Consolidated Debt of Notes), investment and acquisition activities,
the capital requirements of PSE&G's construction program, permitted regulatory
recovery of expenses and collection of revenues. Capital resources available to
meet such requirements depend upon the factors noted above under Overview. (See
Construction, Investments and Other Capital Requirements Forecast below.)
PSE&G
For 1994, PSE&G had utility plant additions, including AFDC, of $887
million, a decrease of $3 million versus 1993 additions of $890 million.
Additions in 1993 increased $63 million from 1992 additions of $827 million.
AFDC for 1994, 1993 and 1992 amounted to $38 million, $27 million and $26
million, respectively. Construction expenditures were related to improvements
in PSE&G's existing power plants, transmission and distribution system, gas
system and common facilities. PSE&G also expended $34 million, $48 million and
$40 million for the cost of plant removal (net of salvage) in 1994, 1993 and
1992, respectively. Construction expenditures from 1995 through 1999 are
expected to aggregate $3.2 billion. Forecasted construction expenditures are
related to improvements in PSE&G's existing power plants, transmission and
distribution system, gas system and common facilities. (See Construction,
Investments and Other Capital Requirements Forecast below.)
Decommissioning and other special funds, excluding interest, increased $35
million, $46 million and $9 million in 1994, 1993 and 1992, respectively. (See
Note 3 -- PSE&G Nuclear Decommissioning and Amortization of Nuclear Fuel of
Notes.)
PSE&G expects that it will be able to generate internally a majority of
its capital requirements including construction expenditures over the next five
years, assuming adequate and timely recovery of costs as to which no assurances
can be given. (See Note 2 -- Rate Matters and Note 12 -- Commitments and
Contingent Liabilities of Notes.)
EDHI
During the next five years, a majority of EDHI's capital requirements are
expected to be provided from operational cash flows. (See Construction,
Investments and Other Capital Requirements Forecast below.) EDHI's focus is
on CEA and EDC, its energy-related core businesses. CEA is expected to be the
primary vehicle for EDHI's business growth, both domestically and
internationally. A significant portion of CEA's growth is expected to occur
in the international arena, due to the current and anticipated growth in
electric capacity required in certain regions of the world. EDC is projected
to grow its reserve base, principally through exploration and drilling, in
order to maintain an annual production level of 130-140 billion cubic feet
equivalent (BCFE). EDC's worldwide 1994 production totaled 108 BCFE and at
year end had proved reserves of 888 BCFE. EDC expended approximately $188
million, $109 million and $56 million in 1994, 1993 and 1992, respectively, to
acquire, discover or develop domestic and international reserves. Of these
expenditures, $154 million, $91 million and $36 million in 1994, 1993 and 1992,
respectively, were capitalized. These amounts included capitalized interest of
$4 million, $3 million and $4 million, respectively.
PSRC will limit new investments to those which support EDHI's core
businesses, while EGDC will exit the real estate business in a prudent manner.
Over the next several years, EDHI and its subsidiaries will also be required to
refinance a portion of their maturing debt in order to meet their capital
requirements. Any inability to extend or replace maturing debt at current
levels and interest rates may affect future earnings and result in an increase
in EDHI's cost of capital.
A partnership, in which EGDC is an 80% partner ($21 million equity
investment), is currently negotiating to extend or replace a mortgage financing
of $40.2 million which is maturing on February 28, 1995. EGDC has guaranteed
$5.3 million of the financing. No assurances can be given that EGDC or the
partnership will be able to extend this loan or obtain a replacement loan in
the amount of the existing loan. Failure to extend or replace the existing loan
at the current outstanding loan balance, or at current interest rates, may
result in an increase in the amount of capital which EGDC will require.
PSRC is a limited partner in various limited partnerships and is committed
to make investments from time to time, upon the request of the respective
general partners. At December 31, 1994, $134 million remained as PSRC's
unfunded commitment subject to call.
EDHI and each of its subsidiaries are subject to restrictive business and
financial covenants contained in existing debt agreements and are required to
not exceed various debt to equity ratios which vary from 3:1 to 1.75:1. EDHI is
also required to maintain a twelve-months earnings (before interest and taxes)
to interest (EBIT) coverage ratio of at least 1.35:1. As of December 31, 1994
and 1993, EDHI had consolidated debt to equity ratios of 1.15:1 and 1.34:1 and,
for the years ended December 31, 1994, 1993 and 1992, EBIT coverage ratios, as
defined to exclude the effects of EGDC of 1.94:1, 2.13:1 and 1.88:1,
respectively. Compliance with applicable financial covenants will depend upon
future levels of earnings, among other things, as to which no assurance can be
given. (See Note 6 -- Schedule of Consolidated Debt and Note 16 -- Property
Impairment of Enterprise Group Development Corporation of Notes.)
Long-Term Investments and Real Estate
Long-Term Investments and Real Estate, which are primarily those of EDHI,
decreased $58 million and $67 million in 1994 and 1993, respectively, and
increased $61 million in 1992. The decrease in 1994 is primarily due to a $73
million net decrease in PSE&G's investment in an insurance contract, partially
offset by an increase in Public Service Conservation Resources Corporation's (a
PSE&G subsidiary) Long-Term Investments of $23 million. The decrease in 1993
is due primarily to EDHI's decrease in Long-Term Investments of $63 million.
The increase in 1992 is due primarily to EDHI's increase in investments in real
estate of $77 million. (For more details, see Note 7 -- Long-Term Investments
and Note 11 -- Leasing Activities - As Lessor of Notes.)
Construction, Investments and Other Capital Requirements Forecast
The estimated construction requirements of PSE&G, including AFDC, investments and other capital requirements
of PSE&G and EDHI for 1995 through 1999 are based on expected project completion dates, included anticipated
escalation due to inflation of approximately 3% for utility projects and are as follows:
1995 1996 1997 1998 1999 TOTAL
------ ------ ------ ------ ------ ------
(MILLIONS OF DOLLARS)
PSE&G
ELECTRIC
Nuclear Production Facilities...... $ 89 $ 85 $ 66 $ 65 $ 66 $ 371
Nuclear Fuel....................... 96 90 87 112 99 484
Transmission and Distribution...... 165 185 175 163 175 863
Other Production................... 166 118 42 52 58 436
Conservation and Other............. 45 39 37 33 29 183
------ ------ ------ ------ ------ ------
Total Electric..................... 561 517 407 425 427 2,337
------ ------ ------ ------ ------ ------
GAS
Production Facilities.............. 2 2 - - - 4
Transmission and Distribution...... 136 141 143 143 143 706
------ ------ ------ ------ ------ ------
Total Gas.......................... 138 143 143 143 143 710
------ ------ ------ ------ ------ ------
Miscellaneous Corporate.............. 46 38 35 35 35 189
------ ------ ------ ------ ------ ------
Total Construction
Requirements of PSE&G.... 745 698 585 603 605 3,236
------ ------ ------ ------ ------ ------
EDHI................................. 242 175 125 153 149 844
------ ------ ------ ------ ------ ------
Mandatory Retirement of Securities:
PSE&G.............................. 310 - 300 118 100 828
EDHI............................... 190 91 125 196 200 802
------ ------ ------ ------ ------ ------
500 91 425 314 300 1,630
------ ------ ------ ------ ------ ------
Working Capital and Other-net...... 101 43 41 21 21 227
------ ------ ------ ------ ------ ------
Total Capital Requirements......... $1,588 $1,007 $1,176 $1,091 $1,075 $5,937
====== ====== ====== ====== ====== ======
While the above forecast includes capital costs to comply with revised
Federal Clean Air Act (CAA) requirements through 1999, it does not include
additional requirements being developed under the CAA by Federal and State
agencies. Such additional costs cannot be reasonably estimated at this time.
PSE&G believes that such CAA costs would be recoverable from electric customers.
Internal Generation of Cash from Operations
Enterprise's cash provided by operating activities for 1994 increased $200
million to $1.232 billion when compared to 1993. This increase was primarily
due to the increase in net income of $78 million, higher recovery of electric
energy and gas costs through PSE&G's LEAC and LGAC of $74 million, a decrease in
accounts receivable of $152 million, a decrease in accrued taxes of $35 million,
a positive net change in certain other current assets and liabilities of $57
million and a positive net change in certain noncurrent assets and liabilities,
primarily deferred amounts, of $61 million. Partially offsetting these cash
inflows were a decrease in accounts payable of $181 million and the loss from
property impairments in 1993 of $78 million. (For additional information see
Enterprise Earnings and Revenues.)
Although net income increased in 1993 (see Enterprise Earnings and
Revenues), net cash provided by operating activities decreased by $292 million
from 1992 to $1.032 billion. This decrease was primarily due to an
underrecovery of electric energy and gas costs through PSE&G's LEAC and LGAC of
$306 million, a decrease in accrued taxes of $332 million (primarily increased
NJGRT payments), and a decrease in depreciation and amortization of $42 million.
Partially offsetting these cash outflows were the increase in net income of $97
million, increases in deferred income taxes of $112 million, inventory decreases
in fuel and materials and supplies of $54 million, increases in accounts
payable of $57 million and a loss from property impairments of $78 million.
External Financings
ENTERPRISE CONSOLIDATED CASH FLOWS FROM FINANCING ACTIVITIES
1994 1993 1992
------- ------- ------
(MILLIONS OF DOLLARS)
Enterprise (Parent Company):
Issuance of Common Stock(A)....................... $ 28 $ 273 $ 237
Cash Dividends paid on Common Stock(B)............ (528) (522) (503)
------- ------- -------
Total Enterprise (Parent Company)......... (500) (249) (266)
------- ------- -------
PSE&G:(C)
Net (decrease) increase in Short-Term Debt(D)..... (131) 275 92
Increase (decrease) in Book Overdrafts............ 24 (10) 24
Issuance of Long-Term Debt(E)..................... 850 1,973 850
Redemptions of Long-Term Debt..................... (479) (1,716) (1,032)
Long-Term Debt Issuance and Redemption Costs...... (30) (68) (19)
Issuance of Preferred Stock(F).................... 75 75 75
Redemption of Preferred Stock..................... (120) - -
Issuance of Monthly Income Preferred
Securities (G)................................. 150 - -
Other............................................. (2) (6) (6)
------- ------- -------
Total PSE&G............................... 337 523 (16)
------- ------- -------
EDHI:(H)
Net increase (decrease) in Short-Term Debt........ 45 (90) (89)
Issuance of Long-Term Debt........................ 165 30
Redemptions of Long-Term Debt..................... (115) (367) (27)
Other............................................. - (4) -
------- ------- -------
Total EDHI................................ (70) (296) (86)
------- ------- -------
Net cash used in financing activities............... $ (233) $ (22) $ (368)
======= ======= =======
(A) During 1994, Enterprise issued 1,009,674 shares of Common Stock through its
Dividend Reinvestment and Stock Purchase Plan (DRIP) and various employee
benefit plans. The net proceeds from such sales, aggregating approximately
$28 million, were used by Enterprise to make equity investments in its
subsidiaries. Book value per share was $21.70 at December 31, 1994,
compared to $21.07 at December 31, 1993. (See Note 4 -- Schedule of
Consolidated Capital Stock and Other Securities of Notes.)
(B) See Dividends.
(C) Under the terms of PSE&G's Mortgage and Restated Certificate of
Incorporation at December 31, 1994, PSE&G would qualify to issue an
additional $3.511 billion of its First and Refunding Mortgage Bonds
(Bonds) at a rate of 8.875% or $3.017 billion of Preferred Stock at a
rate of 8.750%. PSE&G's Restated Certificate of Incorporation currently
limits the issuance of Preferred Stock to $1.0 billion, of which $535
million is outstanding.
In addition, as a prerequisite to the issuance of additional Bonds,
PSE&G's Mortgage requires a 2:1 ratio of earnings to fixed charges
as computed thereunder. For 1994, such ratio was 3.62:1. The ratio
of earnings to fixed charges as required by the Securities and Exchange
Commission was 3.35:1.
The BPU has authorized PSE&G to issue $370 million of Bonds/Medium-Term
Notes (MTNs) through 1996 for refunding purposes.
The BPU has authorized PSE&G to issue not more than $1 billion of its
short-term obligations at any one time outstanding, consisting of
commercial paper and other unsecured borrowings from banks and other
lenders through January 1, 1997. On December 31, 1994, PSE&G had $308
million of short-term debt outstanding.
PSE&G renewed and increased to $800 million a revolving credit
agreement with a group of commercial banks through September 14, 1995.
On December 31, 1994, there were no short-term borrowings outstanding
under this credit agreement.
For additional detail, see Note 4 -- Schedule of Consolidated Capital
Stock and Other Securities and Note 6 -- Schedule of Consolidated Debt of
Notes.
(D) PSE&G Fuel Corporation (Fuelco) has a $150 million commercial paper
program to finance a 42.49% share of Peach Bottom nuclear fuel,
supported by a $150 million revolving credit facility with a group
of banks, which expires on June 28, 1996. PSE&G has guaranteed
repayment of Fuelco's respective obligations. As of December 31,
1994, Fuelco had commercial paper of $93.7 million outstanding under
such program.
(E) Enterprise's long-term debt aggregated $5.181 billion as of December 31,
1994, of which $4.487 billion was attributable to PSE&G and $694 million
to EDHI.
During 1994, PSE&G issued a total of $850 million principal amount of
its Bonds/MTNs. The net proceeds from the sale of the Bonds were used by
PSE&G to redeem or defease $474 million of its higher cost Bonds and to
pay a portion of its current construction program.
For additional detail see Note 6 -- Schedule of Consolidated Debt of
Notes.
(F) In February 1994, PSE&G issued and sold $75 million of its
Cumulative Preferred Stock. In March 1994, PSE&G used the funds
from the above sale to redeem $45 million of its higher priced
Preferred Stock. The remaining funds were added to the general
funds of PSE&G and used to pay a portion of its then outstanding
short-term debt obligations, which were principally incurred to
fund a portion of its construction expenditures. In December 1994,
PSE&G redeemed an additional $75 million of its Preferred Stock.
The BPU has authorized PSE&G to issue not more than $180 million
of Preferred Stock through 1995.
For additional detail see Note 4 -- Schedule of Consolidated Capital Stock
and Other Securities of Notes.
(G) In November 1994, Public Service Electric and Gas Capital, L.P.
(Partnership) issued $150 million of Monthly Income Preferred Securities
(MIPS), the proceeds of which were loaned to PSE&G and used to redeem $75
million of Preferred Stock and the payment of construction expenditures.
For additional detail see Note 4 -- Schedule of Consolidated Capital Stock
and Other Securities of Notes.
(H) Funding has a commercial paper program, supported by a commercial bank
letter of credit and credit facility, through November 18, 1995 in the
amount of $225 million. As of December 31, 1994, Funding had $90
million of borrowings outstanding under this program.
Funding has a $225 million revolving credit facility which terminates
on November 18, 1995. As of December 31, 1994, Funding had no
borrowings outstanding under this facility.
Funding is in the process of amending its letter of credit and revolving
credit facility in order to adjust pricing and extend the maturity to
early 1998.
Capital's MTN program provides for an aggregate principal amount of up
to $750 million of MTNs provided that its total debt outstanding at any
time, including MTNs, shall not exceed such amount. Effective January
31, 1995, Capital will not have more than $650 million of debt outstanding
at any time. In November 1994, Capital repaid $50 million of its 7.40%
MTNs. At December 31, 1994, Capital had $467 million of MTNs outstanding
and total debt outstanding of $632 million.
For additional detail see Note 6 -- Schedule of Consolidated Debt of
Notes.
PSE&G
Following are the significant factors affecting the consolidated financial
condition and the results of operations of PSE&G and its subsidiaries. This
discussion refers to the Consolidated Financial Statements and related Notes
of PSE&G and should be read in conjunction with such statements and notes.
Except as modified below, the information required by this item is
incorporated herein by reference to the following portions of Enterprise's
Management's Discussion and Analysis of Financial Condition and Results of
Operations, insofar as they relate to PSE&G and its subsidiaries: Overview;
PSE&G Energy and Fuel Adjustment Clauses; Enterprise Earnings: Dividends;
Revenues -- PSE&G Electric, PSE&G Gas; PSE&G Electric Energy Costs; Liquidity
and Capital Resources, PSE&G, Long-Term Investments and Real Estate;
Construction, Investments and Other Capital Requirements Forecast; and External
Financings.
Gas Supply Costs
Gas supply costs increased $117 million or 12.7% in 1994 compared to 1993
and $17 million or 1.8% in 1993 compared to 1992. The significant components
of these changes follow:
Increase or (Decrease)
-----------------------------
1994 vs.1993 1993 vs. 1992
------------- -------------
(Millions)
Change in prices paid for gas supplies... $ (20) $ 93
Therm sendout............................ 32 43
Refunds from pipeline suppliers.......... (21) 33
Adjustment of actual costs to match
recoveries through revenues (A)........ 126 (152)
----- -----
Total Gas Supply Costs......... $ 117 $ 17
===== =====
(A) Reflects the change in the deferred over(under)recovered gas supply costs,
which in the years 1994, 1993 and 1992 amounted to $26 million, $(100)
million and $52 million, respectively. (See PSE&G Energy and Fuel
Adjustment Clauses and Note 2 -- Rate Matters of Notes.)
1994 -- The increase in total costs was principally due to the
overrecovery of fuel costs and increased sales to NUGs, partially offset by
lower gas prices.
1993 -- The increase in total costs was principally due to greater sales
to cogenerators and other customers, higher gas costs and higher therm sendout
resulting from the colder 1993 winter season compared to the 1992 winter
season. The increase in costs was reduced by deferred underrecovered 1993 gas
costs resulting from the BPU approved adjustment in PSE&G's LGAC, effective
January 1, 1993, of $71 million on an annualized basis through December 31,
1993. The adjustment reflects lower gas costs and the inclusion of $15.1
million of conservation program costs in LGAC. In addition, gas customers
received $45 million of credits during the first quarter of 1993.
Liquidity and Capital Resources
Internal Generation of Cash from Operations
PSE&G's cash provided by operating activities increased $229 million to
$1,061 million for 1994 compared to the corresponding period in 1993. This
increase was primarily due to an increase in net income of $45 million, a
decrease in accounts receivable of $154 million, a greater recovery of electric
energy and gas costs through PSE&G's LEAC and LGAC of $74 million, an increase
in depreciation and amortization of $38 million, a decrease in accrued taxes
of $25 million, a positive net change in certain other current assets and
liabilities of $64 million and a positive net change in certain noncurrent
assets and liabilities, primarily deferred amounts, of $69 million, partially
offset by a decrease in accounts payable of $183 million and a decrease in
deferred income taxes of $68 million. (For additional information see PSE&G -
Earnings and Revenues.)
Although net income increased for 1993 (See Enterprise Earnings -- PSE&G
and Revenues -- PSE&G Electric and PSE&G Gas), PSE&G's net cash provided by
operating activities decreased by $338 million from 1992 to $832 million. This
decrease was primarily due to an underrecovery of electric energy and gas costs
through PSE&G's LEAC and LGAC of $306 million, a decrease in accrued taxes of
$306 million (primarily increased NJGRT payments), a decrease in depreciation
and amortization of $43 million and a negative net change in certain other
current assets and liabilities of $28 million and a negative net change in
certain noncurrent assets and liabilities, primarily deferred amounts, of $32
million. Partially offsetting these cash outflows were the increase in net
income of $139 million, an increase in deferred income taxes of $154 million,
a decrease in fuel and materials and supplies inventories of $54 million and
an increase in accounts payable of $36 million.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
FINANCIAL STATEMENT RESPONSIBILITY
Management of Enterprise is responsible for the preparation, integrity and
objectivity of the consolidated financial statements and related notes of
Enterprise. The consolidated financial statements and related notes are
prepared in accordance with generally accepted accounting principles. The
financial statements reflect estimates based upon the judgment of management
where appropriate. Management believes that the consolidated financial
statements and related notes present fairly Enterprise's financial position and
results of operations. Information in other parts of this Annual Report is also
the responsibility of management and is consistent with these consolidated
financial statements and related notes.
The firm of Deloitte & Touche LLP, independent auditors, is engaged to
audit Enterprise's consolidated financial statements and related notes and
issue a report thereon. Deloitte & Touche's audit is conducted in accordance
with generally accepted auditing standards. Management has made available to
Deloitte & Touche LLP, all the corporation's financial records and related
data, as well as the minutes of directors' meetings. Furthermore, management
believes that all representations made to Deloitte & Touche LLP, during its
audit were valid and appropriate.
Management has established and maintains a system of internal accounting
controls to provide reasonable assurance that assets are safeguarded, and that
transactions are executed in accordance with management's authorization and
recorded properly for the prevention and detection of fraudulent financial
reporting, so as to maintain the integrity and reliability of the financial
statements. The system is designed to permit preparation of consolidated
financial statements and related notes in accordance with generally accepted
accounting principles. The concept of reasonable assurance recognizes that the
costs of a system of internal accounting controls should not exceed the related
benefits. Management believes the effectiveness of this system is enhanced by
an ongoing program of continuous and selective training of employees. In
addition, management has communicated to all employees its policies on business
conduct, safeguarding assets and internal controls.
The Internal Auditing Department of PSE&G conducts audits and appraisals
of accounting and other operations of Enterprise and its subsidiaries and
evaluates the effectiveness of cost and other controls and recommends to
management, where appropriate, improvements thereto. Management has considered
the internal auditors' and Deloitte & Touche's recommendations concerning the
corporation's system of internal accounting controls and has taken actions
that, in its opinion, are cost-effective in the circumstances to respond
appropriately to these recommendations. Management believes that, as of
December 31, 1994, the corporation's system of internal accounting controls is
adequate to accomplish the objectives discussed herein.
The Board of Directors of Enterprise carries out its responsibility of
financial overview through its Audit Committee, which presently consists of
six directors who are not employees of Enterprise or any of its affiliates. The
Audit Committee meets periodically with management as well as with
representatives of the internal auditors and Deloitte & Touche LLP. The Audit
Committee reviews the work of each to ensure that its respective
responsibilities are being carried out and discusses related matters. Both the
internal auditors and Deloitte & Touche LLP periodically meet alone with the
Audit Committee and have free access to the Audit Committee, and its individual
members, at any time.
E. JAMES FERLAND ROBERT C. MURRAY
E. James Ferland Robert C. Murray
Chairman of the Board, Vice President and
President and Chief Chief Financial Officer
Executive Officer
PATRICIA A. RADO
Patricia A. Rado
Vice President and Controller
Principal Accounting Officer
February 14, 1995
FINANCIAL STATEMENT RESPONSIBILITY
Management of PSE&G is responsible for the preparation, integrity and
objectivity of the consolidated financial statements and related notes of
PSE&G. The consolidated financial statements and related notes are prepared in
accordance with generally accepted accounting principles. The financial
statements reflect estimates based upon the judgment of management where
appropriate. Management believes that the consolidated financial statements
and related notes present fairly PSE&G's financial position and results of
operations. Information in other parts of this Annual Report is also the
responsibility of management and is consistent with these consolidated
financial statements and related notes.
The firm of Deloitte & Touche LLP, independent auditors, is engaged to
audit PSE&G's consolidated financial statements and related notes and issue a
report thereon. Deloitte & Touche's audit is conducted in accordance with
generally accepted auditing standards. Management has made available to
Deloitte & Touche LLP, all the corporation's financial records and related
data, as well as the minutes of directors' meetings. Furthermore, management
believes that all representations made to Deloitte & Touche LLP, during its
audit were valid and appropriate.
Management has established and maintains a system of internal accounting
controls to provide reasonable assurance that assets are safeguarded, and that
transactions are executed in accordance with management's authorization and
recorded properly for the prevention and detection of fraudulent financial
reporting, so as to maintain the integrity and reliability of the financial
statements. The system is designed to permit preparation of consolidated
financial statements and related notes in accordance with generally accepted
accounting principles. The concept of reasonable assurance recognizes that the
costs of a system of internal accounting controls should not exceed the related
benefits. Management believes the effectiveness of this system is enhanced by
an ongoing program of continuous and selective training of employees. In
addition, management has communicated to all employees its policies on business
conduct, safeguarding assets and internal controls.
The Internal Auditing Department conducts audits and appraisals of
accounting and other operations and evaluates the effectiveness of cost and
other controls and recommends to management, where appropriate, improvements
thereto. Management has considered the internal auditors' and Deloitte &
Touche's recommendations concerning the corporation's system of internal
accounting controls and has taken actions that are cost-effective in the
circumstances to respond appropriately to these recommendations. Management
believes that, as of December 31, 1994, the corporation's system of internal
accounting controls is adequate to accomplish the objectives discussed herein.
The Board of Directors carries out its responsibility of financial
overview through the Audit Committee of Enterprise, which presently consists
of six directors who are not employees of Enterprise or any of its affiliates.
The Enterprise Audit Committee meets periodically with management as well as
with representatives of the internal auditors and Deloitte & Touche LLP. The
Audit Committee reviews the work of each to ensure that their respective
responsibilities are being carried out and discusses related matters. Both the
internal auditors and Deloitte & Touche LLP, periodically meet alone with the
Audit Committee and have free access to the Audit Committee, and its individual
members, at any time.
E. JAMES FERLAND ROBERT C. MURRAY
E. James Ferland Robert C. Murray
Chairman of the Board Senior Vice President and
and Chief Executive Officer Chief Financial Officer
PATRICIA A. RADO
Patricia A. Rado
Vice President and Controller
Principal Accounting Officer
February 14, 1995
INDEPENDENT AUDITORS' REPORT
To the Stockholders and Board of Directors of
Public Service Enterprise Group Incorporated:
We have audited the accompanying consolidated balance sheets of Public
Service Enterprise Group Incorporated and its subsidiaries as of December 31,
1994 and 1993, and the related consolidated statements of income, retained
earnings, and cash flows for each of the three years in the period ended
December 31, 1994. Our audits also included the consolidated financial
statement schedules listed in the Index in Item 14(b)(1). These consolidated
financial statements and the consolidated financial statement schedules are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements and consolidated
financial statement schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Public Service Enterprise
Group Incorporated and its subsidiaries at December 31, 1994 and 1993, and the
results of their operations and their cash flows for each of the three years
in the period ended December 31, 1994 in conformity with generally accepted
accounting principles. Also, in our opinion, such consolidated financial
statement schedules, when considered in relation to the basic consolidated
financial statements taken as a whole, present fairly in all material respects
the information set forth therein.
We have also previously audited, in accordance with generally accepted
auditing standards, the consolidated balance sheets as of December 31, 1992,
1991, and 1990, and the related consolidated statements of income, retained
earnings, and cash flows for the years ended December 31, 1991 and 1990 (none
of which are presented herein) and we expressed unqualified opinions on those
consolidated financial statements. In our opinion, the information set forth
in the Selected Financial Data for each of the five years in the period ended
December 31, 1994 for the Company, presented in Item 6, is fairly stated in all
material respects, in relation to the consolidated financial statements from
which it has been derived.
DELOITTE & TOUCHE LLP
February 14, 1995
Parsippany, New Jersey
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
Public Service Electric and Gas Company:
We have audited the accompanying consolidated balance sheets of Public
Service Electric & Gas Company and its subsidiaries as of December 31, 1994 and
1993, and the related consolidated statements of income, retained earnings, and
cash flows for each of the three years in the period ended December 31, 1994.
Our audits also included the consolidated financial statement schedules listed
in the Index in Item 14(b)(2). These consolidated financial statements and the
consolidated financial statement schedules are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements and consolidated financial statement
schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Public Service Electric & Gas
Company and its subsidiaries at December 31, 1994 and 1993, and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1994 in conformity with generally accepted accounting
principles. Also, in our opinion, such consolidated financial statement
schedules, when considered in relation to the basic consolidated financial
statements taken as a whole, present fairly in all material respects the
information set forth therein.
We have also previously audited, in accordance with generally accepted
auditing standards, the consolidated balance sheets as of December 31, 1992,
1991, and 1990, and the related consolidated statements of income, retained
earnings, and cash flows for the years ended December 31, 1991 and 1990 (none
of which are presented herein) and we expressed unqualified opinions on those
consolidated financial statements. In our opinion, the information set forth
in the Selected Financial Data for each of the five years in the period ended
December 31, 1994 for the Company, presented in Item 6, is fairly stated in all
material respects, in relation to the consolidated financial statements from
which it has been derived.
DELOITTE & TOUCHE LLP
February 14, 1995
Parsippany, New Jersey
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------------------
1994 1993 1992
------------ ------------ ------------
(THOUSANDS OF DOLLARS)
OPERATING REVENUES
Electric............................................... $ 3,733,113 $ 3,693,083 $ 3,407,819
Gas.................................................... 1,778,528 1,594,341 1,586,181
Nonutility Activities.................................. 404,202 418,135 362,781
------------ ------------ ------------
Total Operating Revenues........................ 5,915,843 5,705,559 5,356,781
------------ ------------ ------------
OPERATING EXPENSES
Operation
Fuel for Electric Generation and Interchanged
Power............................................. 695,763 717,136 776,571
Gas Purchased and Materials for Gas Produced......... 1,023,956 897,885 858,737
Other................................................ 1,116,263 1,012,757 924,942
Maintenance............................................ 308,080 304,403 307,726
Depreciation and Amortization.......................... 629,688 600,264 642,548
Property Impairment (note 16).......................... -- 77,637 --
Taxes
Federal Income Taxes (note 10)....................... 312,551 313,680 221,469
New Jersey Gross Receipts Taxes...................... 583,167 597,898 585,770
Other................................................ 82,282 77,052 72,883
------------ ------------ -----------
Total Operating Expenses........................ 4,751,750 4,598,712 4,390,646
------------ ------------ -----------
OPERATING INCOME......................................... 1,164,093 1,106,847 966,135
------------ ------------ -----------
OTHER INCOME
Allowance for Funds Used During
Construction -- Equity............................... 12,789 12,265 12,828
Peach Bottom Settlement -- net of Federal income taxes
1992, $16,985 (note 2)............................... -- -- 32,970
Miscellaneous -- net................................... 6,430 (3,778) 30,188
------------ ------------ -----------
Total Other Income.............................. 19,219 8,487 75,986
------------ ------------ -----------
INCOME BEFORE INTEREST CHARGES AND DIVIDENDS ON
PREFERRED SECURITIES................................... 1,183,312 1,115,334 1,042,121
------------ ------------ -----------
INTEREST CHARGES (note 6)
Long-Term Debt......................................... 459,158 469,120 479,898
Short-Term Debt........................................ 23,962 13,860 14,858
Other.................................................. 12,805 19,554 29,269
------------ ------------ -----------
Total Interest Charges.......................... 495,925 502,534 524,025
Allowance for Funds Used During Construction -- Debt and
Capitalized Interest................................... (33,793) (20,833) (17,928)
------------ ------------ -----------
Net Interest Charges..................................... 462,132 481,701 506,097
------------ ------------ -----------
Preferred Securities Dividend Requirements (note 4)...... 42,147 38,114 31,907
------------ ------------ -----------
Income before cumulative effect of accounting change..... 679,033 595,519 504,117
Cumulative effect of change in accounting for income taxes
(note 10).............................................. -- 5,414 --
------------ ------------ -----------
Net Income............................................... $ 679,033 $ 600,933 $ 504,117
============ ============ ===========
SHARES OF COMMON STOCK OUTSTANDING
End of Year............................................ 244,697,930 243,688,256 235,395,751
Average for Year....................................... 244,470,794 240,663,599 232,306,492
EARNINGS PER AVERAGE SHARE OF COMMON STOCK
Income before cumulative effect of accounting change... $ 2.78 $ 2.48 $ 2.17
Cumulative effect of change in accounting for income
taxes................................................ -- .02 --
------------ ------------ -----------
TOTAL EARNINGS PER AVERAGE SHARE OF COMMON STOCK......... $ 2.78 $ 2.50 $ 2.17
============ ============ ===========
DIVIDENDS PAID PER SHARE OF COMMON STOCK................. $ 2.16 $ 2.16 $ 2.16
============ ============ ===========
See Notes to Consolidated Financial Statements.
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
CONSOLIDATED BALANCE SHEETS
ASSETS
DECEMBER 31,
---------------------------
1994 1993
----------- -----------
(THOUSANDS OF DOLLARS)
UTILITY PLANT-ORIGINAL COST (note 15)
Electric.................................................................. $12,345,919 $11,920,894
Gas....................................................................... 2,318,233 2,177,841
Common.................................................................... 545,131 520,285
----------- -----------
Total.............................................................. 15,209,283 14,619,020
Less accumulated depreciation and amortization.............................. 5,147,105 4,772,942
----------- -----------
Net......................................................................... 10,062,178 9,846,078
Nuclear Fuel in Service, net of accumulated amortization --
1994, $302,906; 1993, $275,638.......................................... 205,273 205,237
----------- -----------
Net Utility Plant in Service....................................... 10,267,451 10,051,315
Construction Work in Progress, including Nuclear Fuel in Process --
1994, $65,429; 1993, $98,780.............................................. 806,934 735,356
Plant Held for Future Use................................................... 23,860 17,709
----------- -----------
Net Utility Plant.................................................. 11,098,245 10,804,380
----------- -----------
INVESTMENTS AND OTHER NONCURRENT ASSETS (notes 3, 7, 8, 11,12 and 16)
Long-Term Investments, net of amortization --
1994, $2,365; 1993, $572, and net of valuation allowances --
1994, $17,104; 1993, $18,018, respectively.............................. 1,625,952 1,630,996
Oil and Gas Property, Plant and Equipment, net of accumulated depreciation
and amortization -- 1994, $748,245; 1993, $695,791...................... 577,913 506,047
Real Estate, Property and Equipment, net of accumulated depreciation --
1994, $14,242; 1993, $10,840, and net of valuation allowances --
1994, $23,264; 1993, $16,684, respectively.............................. 115,210 110,661
Other Plant, net of accumulated depreciation and amortization --
1994, $4,653; 1993, $3,735.............................................. 36,063 28,327
Nuclear Decommissioning and Other Special Funds........................... 233,022 189,282
Other Assets - net........................................................ 85,478 103,538
----------- -----------
Total Investments and Other Noncurrent Assets...................... 2,673,638 2,568,851
----------- -----------
CURRENT ASSETS
Cash and Cash Equivalents (note 9)........................................ 67,866 71,372
Accounts Receivable:
Customer Accounts Receivable............................................ 434,207 446,629
Other Accounts Receivable............................................... 211,779 230,373
Less: allowance for doubtful accounts.................................. 40,915 27,932
Unbilled Revenues......................................................... 204,056 244,497
Fuel, at average cost..................................................... 268,927 285,943
Materials and Supplies, net of inventory valuation reserves --
1994, $18,200; 1993, $8,525, respectively............................... 148,285 172,438
Deferred Income Taxes (note 10)........................................... 25,311 12,934
Miscellaneous Current Assets.............................................. 37,356 49,860
----------- -----------
Total Current Assets............................................... 1,356,872 1,486,114
----------- -----------
DEFERRED DEBITS (note 5)
Property Abandonments -- net.............................................. 88,269 105,536
Oil and Gas Property Write-Down........................................... 41,232 46,386
Unamortized Debt Expense.................................................. 134,599 121,278
Deferred OPEB Costs (notes 1 and 13)...................................... 116,476 58,593
Underrecovered Electric Energy and Gas Costs -- net....................... 172,563 62,034
Unrecovered Environmental Costs (notes 2 and 12).......................... 135,499 138,531
Unrecovered Plant and Regulatory Study Costs.............................. 37,128 35,196
Unrecovered SFAS 109 Deferred Income Taxes (note 10)...................... 791,393 789,795
Deferred Decontamination and Decommissioning Costs (note 3)............... 53,016 56,055
Other..................................................................... 18,510 56,907
----------- -----------
Total Deferred Debits.............................................. 1,588,685 1,470,311
----------- -----------
Total............................................................ $16,717,440 $16,329,656
=========== ===========
See Notes to Consolidated Financial Statements.
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
CONSOLIDATED BALANCE SHEETS
CAPITALIZATION AND LIABILITIES
DECEMBER 31,
---------------------------
1994 1993
----------- -----------
(THOUSANDS OF DOLLARS)
CAPITALIZATION (notes 4, 5 and 6)
Common Equity
Common Stock.................................. $ 3,801,157 $ 3,772,662
Retained Earnings............................. 1,510,010 1,361,018
----------- -----------
Total Common Equity...................... 5,311,167 5,133,680
Subsidiaries' Securities and Obligations
Preferred Securities
Preferred Stock Without Mandatory Redemption.. 384,994 429,994
Preferred Stock With Mandatory Redemption..... 150,000 150,000
Monthly Income Preferred Securities........... 150,000 --
Long-Term Debt................................... 5,180,657 5,256,321
----------- -----------
Total Capitalization..................... 11,176,818 10,969,995
----------- -----------
OTHER LONG-TERM LIABILITIES
Decontamination and Decommissioning Costs (note 3) 56,149 56,055
Environmental Costs (notes 2 and 12).............. 105,684 111,000
Capital Lease Obligations......................... 53,770 53,104
----------- -----------
Total Other Long-Term Liabilities......... 215,603 220,159
----------- -----------
CURRENT LIABILITIES
Long-Term Debt due within one year................ 499,738 168,064
Commercial Paper and Loans (note 6)............... 491,586 577,636
Book Overdrafts................................... 86,576 62,992
Accounts Payable.................................. 433,471 519,261
New Jersey Gross Receipts Taxes Accrued........... -- 263,357
Other Taxes Accrued............................... 44,149 39,610
Interest Accrued.................................. 107,962 107,027
Estimated Liability for Vacation Pay.............. 27,080 26,993
Customer Deposits................................. 33,698 36,668
Liability for Injuries and Damages................ 29,814 28,338
Miscellaneous Environmental Liabilities........... 15,365 4,475
Other............................................. 87,480 61,277
----------- ----------
Total Current Liabilities................. 1,856,919 1,895,698
----------- ----------
DEFERRED CREDITS
Accumulated Deferred Income Taxes (note 10)....... 2,905,390 2,702,386
Accumulated Deferred Investment Tax Credits ...... 412,466 432,713
Deferred OPEB Costs (notes 1 and 13).............. 116,476 58,593
Other............................................. 33,768 50,112
----------- ----------
Total Deferred Credits.................... 3,468,100 3,243,804
----------- ----------
COMMITMENTS AND CONTINGENT LIABILITIES (note 12)
Total..................................... $16,717,440 $16,329,656
=========== ===========
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31,
---------------------------------------
1994 1993 1992
---------- ---------- ---------
(THOUSANDS OF DOLLARS)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income......................................... $ 679,033 $ 600,933 $ 504,117
Adjustments to reconcile net income to net cash
flows from operating activities:
Depreciation and Amortization................... 629,688 600,264 642,548
Amortization of Nuclear Fuel.................... 95,173 102,718 91,903
(Deferral) Recovery of Electric Energy
and Gas Costs -- net.......................... (110,529) (184,770) 121,371
Loss from Property Impairments.................. -- 77,637 --
Cumulative Effect of Change in Accounting for
Income Taxes.................................. -- (5,414) --
Amortization of Discounts on Property
Abandonments and Disallowance................. (6,743) (7,801) (11,293)
Unrealized Gains on Investments -- net.......... (26,329) (8,694) (24,843)
Provision for Deferred Income Taxes -- net...... 138,919 168,406 56,846
Investment Tax Credits -- net................... (20,247) (11,655) (20,342)
Allowance for Funds Used During Construction --
Debt and Equity and Capitalized Interest...... (46,582) (33,098) (30,756)
Proceeds from Leasing Activities -- net......... 27,682 14,780 30,295
Changes in certain current assets and liabilities
Net decrease (increase) in Accounts Receivable
and Unbilled Revenues...................... 84,440 (68,382) (68,525)
Net decrease (increase) in Inventory -- Fuel
and Materials and Supplies................. 41,169 16,438 (37,083)
Net (decrease) increase in Accounts Payable... (85,790) 95,331 38,589
Net (decrease) increase in Accrued Taxes...... (258,818) (293,919) 37,892
Net change in Other Current Assets and
Liabilities................................ 36,748 (19,505) 8,263
Other........................................... 53,976 (11,598) (14,538)
---------- ---------- ----------
Net cash provided by operating
activities............................... 1,231,790 1,031,671 1,324,444
---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to Utility Plant, excluding AFDC......... (849,174) (863,294) (800,344)
Additions to Oil and Gas Property, Plant and
Equipment, excluding Capitalized Interest....... (149,523) (87,968) (32,337)
Net decrease (increase) in Long-Term Investments
and Real Estate................................. 58,416 66,659 (61,099)
Increase in Decommissioning and Other Special
Funds, excluding interest....................... (35,394) (45,508) (9,262)
Cost of Plant Removal -- net....................... (33,962) (47,791) (40,111)
Other.............................................. 7,154 (14,938) (6,000)
---------- ---------- ----------
Net cash used in investing activities...... (1,002,483) (992,840) (949,153)
---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (decrease) increase in Short-Term Debt......... (86,050) 185,654 2,932
Increase (decrease) in Book Overdrafts............. 23,584 (10,078) 24,009
Issuance of Long-Term Debt......................... 849,800 2,137,700 880,000
Redemption of Long-Term Debt....................... (593,790) (2,083,453) (1,058,179)
Long-Term Debt Issuance and Redemption Costs....... (29,811) (72,114) (19,753)
Issuance of Preferred Stock........................ 75,000 75,000 75,000
Redemption of Preferred Stock...................... (120,000) -- --
Issuance of Monthly Income Preferred Securities.... 150,000 -- --
Issuance of Common Stock........................... 28,495 273,479 237,045
Cash Dividends Paid on Common Stock................ (528,071) (521,572) (503,197)
Other.............................................. (1,970) (6,772) (5,719)
---------- ---------- ----------
Net cash used in financing activities...... (232,813) (22,156) (367,862)
---------- ---------- ----------
Net (decrease) increase in Cash and Cash
Equivalents........................................ (3,506) 16,675 7,429
Cash and Cash Equivalents at Beginning of Year....... 71,372 54,697 47,268
---------- ---------- ----------
Cash and Cash Equivalents at End of Year............. $ 67,866 $ 71,372 $ 54,697
========== ========== ==========
Income Taxes Paid.................................... $ 155,104 $ 140,172 $ 143,211
Interest Paid........................................ $ 432,873 $ 458,956 $ 486,396
See Notes to Consolidated Financial Statements.
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
FOR THE YEARS ENDED DECEMBER 31,
----------------------------------------
1994 1993 1992
---------- ---------- ----------
(THOUSANDS OF DOLLARS)
BALANCE JANUARY 1...................................... $1,361,018 $1,282,931 $1,282,029
ADD NET INCOME......................................... 679,033 600,933 504,117
---------- ---------- ----------
Total........................................ 2,040,051 1,883,864 1,786,146
---------- ---------- ----------
DEDUCT
Dividends on Common Stock(A)......................... 528,071 521,572 503,197
Capital Stock Expenses............................... 1,970 1,274 18
---------- ---------- ----------
Total Deductions............................. 530,041 522,846 503,215
---------- ---------- ----------
BALANCE DECEMBER 31.................................... $1,510,010 $1,361,018 $1,282,931
========== ========== ==========
(A) The ability of Enterprise to declare and pay dividends is contingent upon its receipt of dividend
payments from its subsidiaries. PSE&G, Enterprise's principal subsidiary, has restrictions on the
payment of dividends which are contained in its Restated Certificate of Incorporation, as amended,
certain of the indentures supplemental to its Mortgage, and certain debenture bond and other
indentures. However, none of these restrictions presently limits the payment of dividends out of
current earnings. The amount of PSE&G's restricted retained earnings at December 31, 1994, 1993
and 1992 was $10 million.
See Notes to Consolidated Financial Statements.
PUBLIC SERVICE ELECTRIC AND GAS COMPANY
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31,
----------------------------------------
1994 1993 1992
---------- ---------- ----------
(THOUSANDS OF DOLLARS)
OPERATING REVENUES
Electric............................................. $3,733,113 $3,693,083 $3,407,819
Gas.................................................. 1,778,528 1,594,341 1,586,181
---------- ---------- ----------
Total Operating Revenues..................... 5,511,641 5,287,424 4,994,000
---------- ---------- ----------
OPERATING EXPENSES
Operation
Fuel for Electric Generation and Interchanged
Power........................................... 695,763 717,136 776,571
Gas Purchased and Materials for Gas Produced...... 1,036,701 919,870 903,360
Other............................................. 957,599 880,943 818,606
Maintenance.......................................... 308,080 304,403 307,726
Depreciation and Amortization........................ 547,032 509,206 552,011
Taxes
Federal Income Taxes (note 10).................... 294,529 308,790 195,464
New Jersey Gross Receipts Taxes................... 583,167 597,898 585,770
Other............................................. 76,100 67,593 65,968
---------- ---------- ----------
Total Operating Expenses..................... 4,498,971 4,305,839 4,205,476
---------- ---------- ----------
OPERATING INCOME....................................... 1,012,670 981,585 788,524
---------- ---------- ----------
OTHER INCOME
Allowance for Funds Used During
Construction -- Equity............................ 12,789 12,265 12,828
Peach Bottom Settlement -- net of Federal income
taxes -- 1992, $16,985 (note 2)................... -- -- 32,970
Miscellaneous -- net................................. 6,233 (3,841) 29,927
---------- ---------- ----------
Total Other Income........................... 19,022 8,424 75,725
---------- ---------- ----------
INCOME BEFORE INTEREST CHARGES AND DIVIDENDS ON
PREFERRED SECURITIES................................. 1,031,692 990,009 864,249
---------- ---------- ----------
INTEREST CHARGES (note 6)
Long-Term Debt....................................... 366,894 364,252 368,496
Short-Term Debt...................................... 18,175 6,414 5,920
Other................................................ 10,856 19,290 27,486
---------- ---------- ----------
Total Interest Charges....................... 395,925 389,956 401,902
Allowance for Funds Used During Construction -- Debt... (25,319) (14,815) (13,589)
---------- ---------- ----------
Net Interest Charges................................... 370,606 375,141 388,313
---------- ---------- ----------
Monthly Income Preferred Securities
Dividend Requirements (note 4)....................... 1,680 -- --
---------- ---------- ----------
Net Income............................................. 659,406 614,868 475,936
---------- ---------- ----------
Preferred Stock Dividend Requirements (note 4)......... 40,467 38,114 31,907
---------- ---------- ----------
EARNINGS AVAILABLE TO PUBLIC SERVICE ENTERPRISE GROUP
INCORPORATED......................................... $ 618,939 $ 576,754 $ 444,029
========== ========== ==========
See Notes to Consolidated Financial Statements.
PUBLIC SERVICE ELECTRIC AND GAS COMPANY
CONSOLIDATED BALANCE SHEETS
ASSETS
DECEMBER 31,
---------------------------
1994 1993
----------- -----------
(THOUSANDS OF DOLLARS)
UTILITY PLANT-ORIGINAL COST (note 15)
Electric........................................................ $12,345,919 $11,920,894
Gas............................................................. 2,318,233 2,177,841
Common.......................................................... 545,131 520,285
----------- -----------
Total................................................... 15,209,283 14,619,020
Less accumulated depreciation and amortization.................... 5,147,105 4,772,942
----------- -----------
Net............................................................... 10,062,178 9,846,078
Nuclear Fuel in Service, net of accumulated amortization --
1994, $302,906; 1993, $275,638............................... 205,273 205,237
----------- -----------
Net Utility Plant in Service............................ 10,267,451 10,051,315
Construction Work in Progress, including Nuclear Fuel in
Process -- 1994, $65,429; 1993, $98,780......................... 806,934 735,356
Plant Held for Future Use......................................... 23,860 17,709
----------- -----------
Net Utility Plant....................................... 11,098,245 10,804,380
----------- -----------
INVESTMENTS AND OTHER NONCURRENT ASSETS
Long-Term Investments, net of amortization --
1994, $2,365; 1993, $572, respectively...................... 65,886 116,554
Nuclear Decommissioning and Other Special Funds (note 3)........ 233,022 189,282
Other Plant, net of accumulated depreciation and amortization --
1994, $1,127; 1993, $872................................... 32,879 26,369
----------- -----------
Total Investments and Other Noncurrent Assets........... 331,787 332,205
----------- -----------
CURRENT ASSETS
Cash and Cash Equivalents (note 9).............................. 27,498 42,165
Accounts Receivable:
Customer Accounts Receivable................................. 434,207 446,629
Other Accounts Receivable.................................... 151,684 160,729
Less: allowance for doubtful accounts........................ 40,915 27,932
Unbilled Revenues............................................... 204,056 244,497
Fuel, at average cost........................................... 268,927 285,943
Materials and Supplies, net of inventory valuation reserves --
1994, $18,200; 1993, $8,525, respectively..................... 146,763 170,910
Deferred Income Taxes (note 10)................................. 25,311 12,934
Miscellaneous Current Assets.................................... 30,407 45,754
----------- -----------
Total Current Assets.................................... 1,247,938 1,381,629
----------- -----------
DEFERRED DEBITS (note 5)
Property Abandonments -- net.................................... 88,269 105,536
Oil and Gas Property Write-Down................................. 41,232 46,386
Unamortized Debt Expense........................................ 132,342 117,057
Deferred OPEB Costs (notes 1 and 13)............................ 116,476 58,593
Underrecovered Electric Energy and Gas Costs -- net............. 172,563 62,034
Unrecovered Environmental Costs (notes 2 and 12)................ 135,499 138,531
Unrecovered Plant and Regulatory Study Costs.................... 37,128 35,196
Deferred Decontamination and Decommissioning Costs (note 3)..... 53,016 56,055
Unrecovered SFAS 109 Deferred Income Taxes (note 10)............ 791,393 789,795
Other........................................................... 18,510 56,901
----------- -----------
Total Deferred Debits................................... 1,586,428 1,466,084
----------- -----------
Total................................................. $14,264,398 $13,984,298
=========== ===========
See Notes to Consolidated Financial Statements.
PUBLIC SERVICE ELECTRIC AND GAS COMPANY
CONSOLIDATED BALANCE SHEETS
CAPITALIZATION AND LIABILITIES
DECEMBER 31,
-------------------------
1994 1993
----------- -----------
(THOUSANDS OF DOLLARS)
CAPITALIZATION (notes 4, 5 and 6)
Common Equity
Common Stock................................... $ 2,563,003 $ 2,563,003
Contributed Capital from Enterprise........... 534,395 534,395
Retained Earnings............................. 1,292,201 1,180,532
----------- -----------
Total Common Equity...................... 4,389,599 4,277,930
Preferred Stock without mandatory redemption....... 384,994 429,994
Preferred Stock with mandatory redemption.......... 150,000 150,000
Monthly Income Preferred Securities of
Subsidiary....................................... 150,000 --
Long-Term Debt..................................... 4,486,787 4,364,437
----------- -----------
Total Capitalization..................... 9,561,380 9,222,361
----------- -----------
OTHER LONG-TERM LIABILITIES
Decontamination and Decommissioning Costs (note 3) 56,149 56,055
Environmental Costs (notes 2 and 12)............. 105,684 111,000
Capital Lease Obligations (note 11).............. 53,770 53,104
----------- -----------
Total Other Long-Term Liabilities......... 215,603 220,159
----------- -----------
CURRENT LIABILITIES
Long-Term Debt due within one year................ 310,200 61,700
Commercial Paper and Loans (note 6)............... 401,759 532,728
Book Overdrafts................................... 86,576 62,992
Accounts Payable.................................. 370,005 480,796
Accounts Payable - Associated Companies (note 19). 16,677 5,674
New Jersey Gross Receipts Taxes Accrued........... -- 263,357
Other Taxes Accrued............................... 36,030 33,710
Interest Accrued.................................. 95,721 96,257
Estimated Liability for Vacation Pay.............. 27,080 26,993
Customer Deposits................................. 33,698 36,668
Liability for Injuries and Damages................ 29,814 28,338
Miscellaneous Environmental Liabilities........... 15,365 4,475
Other............................................. 50,778 26,450
----------- -----------
Total Current Liabilities................. 1,473,703 1,660,138
----------- -----------
DEFERRED CREDITS
Accumulated Deferred Income Taxes (note 10)....... 2,478,539 2,368,778
Accumulated Deferred Investment Tax Credits ...... 389,721 408,929
Deferred OPEB Costs (notes 1 and 13).............. 116,476 58,593
Other............................................. 28,976 45,340
----------- -----------
Total Deferred Credits.................... 3,013,712 2,881,640
----------- -----------
COMMITMENTS AND CONTINGENT LIABILITIES (note 12)
Total..................................... $14,264,398 $13,984,298
=========== ===========
PUBLIC SERVICE ELECTRIC AND GAS COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31,
---------------------------------------
1994 1993 1992
----------- ----------- -----------
(THOUSANDS OF DOLLARS)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income................................................. $ 659,406 $ 614,868 $ 475,936
Adjustments to reconcile net income to net cash flows from
operating activities:
Depreciation and Amortization........................... 547,032 509,206 552,011
Amortization of Nuclear Fuel............................ 95,173 102,718 91,903
(Deferral) Recovery of Electric Energy and Gas
Costs -- net.......................................... (110,529) (184,770) 121,371
Amortization of Discounts on Property Abandonments and
Disallowance.......................................... (6,743) (7,801) (11,293)
Provision for Deferred Income Taxes -- net.............. 108,163 175,868 21,839
Investment Tax Credits -- net........................... (19,208) (18,408) (19,089)
Allowance for Funds Used During Construction -- Debt and
Equity................................................ (38,108) (27,080) (26,417)
Changes in certain current assets and liabilities
Net decrease (increase) in Accounts Receivable
and Unbilled Revenues.............................. 74,891 (78,953) (54,792)
Net decrease (increase) in Inventory -- Fuel and
Materials and Supplies............................. 41,163 16,920 (36,775)
Net (decrease) increase in Accounts Payable........... (99,788) 83,421 47,365
Net (decrease) increase in Accrued Taxes.............. (261,037) (286,119) 20,227
Net change in Other Current Assets and Liabilities.... 36,245 (27,790) 492
Other................................................... 33,846 (39,872) (12,115)
----------- ----------- -----------
Net cash provided by operating activities............. 1,060,506 832,208 1,170,663
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to Utility Plant, excluding AFDC................. (849,174) (863,294) (800,344)
Net decrease (increase) in Long-Term Investments........... 50,668 (26,980) (20,438)
Net increase in Decommissioning Funds and Other Special
Funds, excluding interest............................... (35,394) (45,508) (9,262)
Cost of Plant Removal -- net............................... (33,962) (47,791) (40,111)
Other...................................................... 1,692 (13,607) (4,572)
----------- ----------- -----------
Net cash used in investing activities................. (866,170) (997,180) (874,727)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (decrease) increase in Short-Term Debt................. (130,969) 275,192 91,679
Increase (decrease) in Book Overdrafts..................... 23,584 (10,078) 24,009
Issuance of Long-Term Debt................................. 849,800 1,972,700 850,000
Redemption of Long-Term Debt............................... (478,950) (1,716,401) (1,031,660)
Long-Term Debt Issuance and Redemption Costs............... (29,731) (68,227) (19,314)
Issuance of Preferred Stock................................ 75,000 75,000 75,000
Redemption of Preferred Stock.............................. (120,000) - -
Issuance of Monthly Income Preferred Securities............ 150,000 - -
Contributed Capital by Enterprise.......................... 174,670 239,725
Cash Dividends Paid........................................ (545,767) (531,314) (517,907)
Other...................................................... (1,970) (754) (402)
----------- ----------- -----------
Net cash (used in) provided by financing activities... (209,003) 170,788 (288,881)
----------- ----------- -----------
Net (decrease) increase in Cash and Cash Equivalents......... (14,667) 5,816 7,055
Cash and Cash Equivalents at Beginning of Year............... 42,165 36,349 29,294
----------- ----------- -----------
Cash and Cash Equivalents at End of Year..................... $ 27,498 $ 42,165 $ 36,349
=========== =========== ===========
Income Taxes Paid............................................ $ 209,196 $ 172,869 209,258
Interest Paid................................................ $ 345,867 $ 356,620 $ 374,049
See Notes to Consolidated Financial Statements.
PUBLIC SERVICE ELECTRIC AND GAS COMPANY
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
FOR THE YEARS ENDED DECEMBER 31,
----------------------------------------
1994 1993 1992
---------- ---------- ----------
(THOUSANDS OF DOLLARS)
BALANCE JANUARY 1...................................... $1,180,532 $1,097,734 $1,140,117
ADD NET INCOME......................................... 659,406 614,868 475,936
---------- ---------- ----------
Total........................................ 1,839,938 1,712,602 1,616,053
---------- ---------- ----------
DEDUCT CASH DIVIDENDS(A)
Preferred Stock, at required rates................... 40,467 38,114 31,907
Common Stock......................................... 505,300 493,200 486,000
CAPITAL STOCK EXPENSES................................. 1,970 756 412
---------- ---------- ----------
Total Deductions............................. 547,737 532,070 518,319
---------- ---------- ----------
BALANCE DECEMBER 31.................................... $1,292,201 $1,180,532 $1,097,734
========== ========== ==========
(A) The Company has restrictions on the payment of dividends which are contained in its Restated
Certificate of Incorporation, as amended, certain of the indentures supplemental to its
Mortgage, and certain debenture bond indentures. However, none of these restrictions presently
limits the payment of dividends out of current earnings. The amount of the Company's restricted
retained earnings at December 31, 1994, 1993 and 1992 was $10 million.
See Notes to Consolidated Financial Statements.
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Enterprise has two direct wholly owned subsidiaries, Public Service
Electric and Gas Company (PSE&G) and Enterprise Diversified Holdings
Incorporated (EDHI). Enterprise's principal subsidiary, PSE&G, is an operating
public utility providing electric and gas service in certain areas in the State
of New Jersey. Enterprise owns all of PSE&G's common stock (without nominal
or par value). Of the 150,000,000 authorized shares of such common stock at
December 31, 1994, 1993 and 1992, there were 132,450,344 shares outstanding,
with an aggregate book value of $2.6 billion.
PSE&G has a finance subsidiary, PSE&G Fuel Corporation (Fuelco), providing
financing, unconditionally guaranteed by PSE&G, of up to $150 million aggregate
principal amount at any one time of a 42.49% interest in the nuclear fuel
acquired for Peach Bottom Atomic Power Station Units 2 and 3 (Peach Bottom).
PSE&G also has a nonutility subsidiary, Public Service Conservation Resources
Corporation (PSCRC) which offers demand side management (DSM) services to
utility customers. In 1994, Public Service Electric and Gas Capital, L.P.
(Partnership), a limited partnership in which PSE&G is the general partner, was
formed for the purpose of issuing monthly income preferred securities (MIPS).
(See Note 4 -- Schedule of Consolidated Capital Stock and Other Securities.)
EDHI is the parent of Enterprise's nonutility businesses: Energy
Development Corporation (EDC), an oil and gas exploration and production and
marketing company; Community Energy Alternatives Incorporated (CEA), an
investor in and developer of cogeneration and independent power production
facilities; Public Service Resources Corporation (PSRC), which makes primarily
passive investments; and Enterprise Group Development Corporation (EGDC), a
diversified nonresidential real estate development and investment business.
EDHI also has two finance subsidiaries: PSEG Capital Corporation (Capital), and
Enterprise Capital Funding Corporation (Funding).
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Consolidation Policy
The consolidated financial statements include the accounts of Enterprise
and its subsidiaries. All significant intercompany accounts and transactions
have been eliminated in consolidation. Certain reclassifications of prior
years' data have been made to conform with the current presentation.
Regulation -- PSE&G
The accounting and rates of PSE&G are subject, in certain respects, to
the requirements of the New Jersey Board of Public Utilities (BPU) and the
Federal Energy Regulatory Commission (FERC). As a result, PSE&G maintains its
accounts in accordance with their prescribed Uniform Systems of Accounts, which
are the same. The applications of Generally Accepted Accounting Principles by
PSE&G differ in certain respects from applications by non-regulated businesses.
PSE&G prepares its financial statements in accordance with the provisions of
Statement of Financial Accounting Standards No. 71 -- "Accounting for the
Effects of Certain Types of Regulation" (SFAS 71). In general, SFAS 71
recognizes that accounting for rate-regulated enterprises should reflect the
relationship of costs and revenues. As a result, a regulated utility may defer
recognition of cost (a regulatory asset) or recognize an obligation (a
regulatory liability) if it is probable that, through the rate-making process,
there will be a corresponding increase or decrease in revenues. Accordingly,
PSE&G has deferred certain costs, which will be amortized over various periods.
To the extent that collection of such costs or payment of liabilities is no
longer probable as a result of changes in regulation and/or PSE&G's competitive
position, the associated regulatory asset or liability will be reversed with
a charge or credit to income. (See Note 5 -- Deferred Items.)
Amounts charged to operations for depreciation expense reflect
estimated useful lives and methods, that include estimated cost of removal and
salvage, prescribed and approved by regulators rather than those that might
otherwise apply to unregulated enterprises. PSE&G cannot presently quantify
what the financial statement impact may be if depreciation expense is
determined absent regulation.
Utility Plant and Related Depreciation -- PSE&G
Additions to utility plant and replacements of units of property are
capitalized at original cost. The cost of maintenance, repairs and replacements
of minor items of property is charged to appropriate expense accounts. At the
time units of depreciable properties are retired or otherwise disposed of, the
original cost less net salvage value is charged to accumulated depreciation.
For financial reporting purposes, depreciation is computed under the
straight-line method. Depreciation is based on estimated average remaining
lives of the several classes of depreciable property. These estimates are
reviewed on a periodic basis and necessary adjustments are made as approved by
the BPU. Depreciation provisions stated in percentages of original cost of
depreciable property were 3.51% in 1994, 3.46% in 1993 and 3.48% in 1992.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Decontamination and Decommissioning -- PSE&G
In September 1993, FERC issued Order No. 557 on the accounting and
rate-making treatment of special assessments levied under the National Energy
Policy Act of 1992 (NEPA). Order No. 557 provides that special assessments are
a necessary and reasonable current cost of fuel and shall be fully recoverable
in rates in the same manner as other fuel costs. While PSE&G expects to
recover such special assessments through its electric Levelized Energy
Adjustment Clause (LEAC) no assurances can be given that the BPU will authorize
such recovery from customers. (See Note 3 -- PSE&G Nuclear Decommissioning and
Amortization of Nuclear Fuel - Uranium, Decontamination and Decommissioning
Fund.)
Amortization of Nuclear Fuel -- PSE&G
Nuclear energy burnup costs are charged to fuel expense on a
units-of-production basis over the estimated life of the fuel. Rates for the
recovery of fuel used at all nuclear units include a provision of one mill per
kilowatthour (KWH) of nuclear generation for spent fuel disposal costs. (See
Note 3 -- PSE&G Nuclear Decommissioning and Amortization of Nuclear Fuel.)
Revenues and Fuel Costs -- PSE&G
Revenues are recorded based on services rendered to customers during each
accounting period. PSE&G records unbilled revenues representing the estimated
amount customers will be billed for services rendered from the time meters were
last read to the end of the respective accounting period. Rates include
projected fuel costs for electric generation, purchased and interchanged power,
gas purchased and materials used for gas production. Any under or
overrecoveries, together with interest (in the case of net overrecoveries), are
deferred and included in operations in the period in which they are reflected
in rates.
Long-Term Investments
PSRC has invested in securities and limited partnerships investing in
securities, which are recorded at fair value, and various leases and other
limited partnerships. EGDC is a participant in the nonresidential real estate
markets. CEA is an investor in and developer of cogeneration and power
production facilities. (See Note 7 -- Long-Term Investments.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Derivatives
Gains and losses on hedges of existing assets or liabilities are included
in the carrying amounts of those assets and liabilities and are ultimately
recognized in income as part of those carrying amounts. Gains and losses
related to qualifying hedges of firm commitments or anticipated transactions
also are deferred and recognized in income or as adjustments of carrying
amounts when the hedged transaction occurs.
PSRC's security derivatives are recorded at fair value. Realized and
unrealized changes in fair values are recognized in revenues in the period in
which the changes occur. (See Note 8 -- Financial Instruments and Risk
Management.)
Oil and Gas Accounting -- EDC
EDC uses the successful efforts method of accounting under which proved
leasehold costs are capitalized and amortized over the proved developed and
undeveloped reserves on a units-of-production basis. Drilling and equipping
costs, except exploratory dry holes, are capitalized and depreciated over the
proved developed reserves on a units-of-production basis. Estimated future
abandonment costs of offshore proved properties are depreciated on a
units-of-production basis over the proved developed reserves. Unproved
leasehold costs are capitalized and not amortized, pending an evaluation of the
exploration results. Unproved leasehold and producing properties costs are
assessed periodically to determine if an impairment of the cost of significant
individual properties has occurred. The cost of an impairment is charged to
expense. Costs incurred for exploratory dry holes, exploratory geological and
geophysical work and delay rentals are charged to expense as incurred.
Income Taxes
Enterprise and its subsidiaries file a consolidated Federal income tax
return and income taxes are allocated to Enterprise's subsidiaries based on
taxable income or loss of each. Investment tax credits are deferred and
amortized over the useful lives of the related property, including nuclear
fuel.
Effective January 1, 1993, Enterprise and its subsidiaries adopted
Statement of Financial Accounting Standards No. 109 "Accounting for Income
Taxes" (SFAS 109). Under SFAS 109, deferred income taxes are provided for all
temporary differences between the financial statement carrying amounts and the
tax bases of existing assets and liabilities irrespective of the treatment for
rate-making purposes. For periods prior to January 1, 1993, PSE&G provided
deferred income taxes to the extent permitted for rate-making purposes. (See
Note 10 -- Federal Income Taxes.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Allowance for Funds Used During Construction and Capitalized Interest
PSE&G -- Allowance for Funds Used During Construction (AFDC) represents
the cost of debt and equity funds used to finance the construction of new
utility facilities. The amount of AFDC capitalized is reported in the
Consolidated Statements of Income as a reduction of interest charges for the
borrowed funds component and as other income for the equity funds component.
The rates used for calculating AFDC in 1994, 1993 and 1992 were 6.48%, 6.96%
and 7.80%, respectively. These rates are within the limits set by FERC.
EDHI -- The operating subsidiaries of EDHI capitalize interest costs
allocable to construction expenditures at the average cost of borrowed funds.
Pension Plan and Other Postretirement Benefits
The employees of PSE&G and participating affiliates, after completing one
year of service, are covered by a noncontributory trusteed pension plan
(Pension Plan). The policy is to fund pension costs accrued. PSE&G also
provides certain health care and life insurance benefits to active and retired
employees. The portion of such costs pertaining to retirees amounted to $29
million, $28 million, and $24 million in 1994, 1993 and 1992, respectively. The
current cost of these benefits is charged to expense when paid and is currently
being recovered from ratepayers.
On January 1, 1993, Enterprise and PSE&G adopted Statement of Financial
Accounting Standards No. 106, "Employers Accounting for Postretirement Benefits
Other Than Pensions" (SFAS 106), which requires that the expected cost of
employees' postretirement health care benefits be charged to expense during the
years in which employees render service. Prior to 1993, Enterprise and PSE&G
recognized postretirement health care costs in the year in which the benefits
were paid. PSE&G elected to amortize over 20 years its unfunded obligation at
January 1, 1993. (See Note 13 -- Postretirement Benefits Other Than Pensions
and Note 14 -- Pension Plan.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 2. RATE MATTERS
Levelized Gas Adjustment Charge
On July 1, 1994, PSE&G petitioned the BPU to increase its Levelized Gas
Adjustment Charge (LGAC) rates to recover an additional $23.7 million, to be
effective October 1, 1994. On August 4, 1994, the matter was transmitted to
the Office of Administrative Law of the State of New Jersey (OAL) for
adjudication. Due to recent projections of lower gas prices, the parties
reached a stipulated settlement on October 6, 1994 which provides for the
implementation of the Gas Remediation Adjustment Charge (RAC) with an equal
corresponding offsetting adjustment to the current LGAC rate. These LGAC and
RAC rates, when combined, produce a charge which results in a zero increase to
the firm customers for the LGAC period ending September 30, 1995. The
settlement was approved by the BPU on December 21, 1994.
The BPU, on January 24, 1995, approved PSE&G's proposal to credit a total
of $50 million to its firm gas sales customers during February and March 1995.
Specifically, PSE&G will credit approximately $30 million in February and $20
million in March 1995. The opportunity to provide these credits was due
principally to abnormally warm winter weather, lower gas prices and a lower
current short-term price forecast.
Electric Levelized Energy Adjustment Clause
On July 1, 1994, PSE&G petitioned the BPU to increase its LEAC rates,
effective October 1, 1994, to recover an additional $130 million of energy
costs. A significant part of the need for an increase is the larger percentage
of power that PSE&G is obligated to purchase under prior BPU approved contracts
with non-regulated power producers. On November 1, 1994, the parties reached
a stipulated settlement which provides for the implementation of provisional
LEAC rates, subject to refund, designed to recover an additional $98 million
over the period November 1994 through May 1995. The stipulation provided
sufficient rate relief to recover current fuel costs and to begin to reduce the
accumulated underrecovered balance while affording the parties the opportunity
to continue litigating unresolved issues of: a) rate treatment for the Bergen
repowering project (See Note 12 -- Commitments and Contingent Liabilities -
Bergen Station Repowering); b) an alleged overearnings issue; c) recovery of
the costs related to the April 7, 1994 shutdown at Salem 1 nuclear unit; and
d) the appropriateness of PSE&G's gas to electric transfer and pricing
calculations pertaining to the 1993 agreement with PSE&G's largest industrial
customer (Bayway Decision and Order). This stipulation was approved by the BPU
without modification and became effective on November 4, 1994.
With respect to the litigated issues outlined above, an Administrative Law
Judge (ALJ) decision was filed with the BPU on January 30, 1995 recommending
that (1) the issue of alleged overearnings is not a LEAC issue and PSE&G is not
earning in excess of its rate of return; (2) a hearing convene regarding the
Salem 1 shutdown to determine replacement power costs and whether any
limitations imposed by the New Jersey Public Utility Fault Determination Act
should be triggered; (3) a reduction of the 1993 Nuclear Performance Standard
(NPS) reward to $1.9 million from $3.9 million be made; (4) the joint position
of the parties on gas to electric pricing and the accounting procedures
approved by the BPU in its Bayway Decision and Order should not be revised; (5)
a decrease of $700 thousand in DSM program costs; and (6) the BPU should
address the RAC costs in the LEAC. PSE&G filed exceptions to the ALJ's
decision on February 14, 1995 addressing the 1993 NPS reward; DSM estimates;
replacement power costs for the April 7, 1994 Salem outage and the treatment
of RAC charges. However, neither Enterprise nor PSE&G is able to predict what
action, if any, the BPU may take concerning the ALJ's decision. (See Note 3 --
PSE&G Nuclear Decommissioning and Amortization of Nuclear Fuel.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
On July 7, 1994, the BPU approved a stipulation which made permanent the
LEAC rates that went into effect on January 1, 1993 on an interim basis and
closed out the previous LEAC for the period ended December 31, 1992. The
stipulation also provided a credit of $2.5 million to the deferred fuel balance
for LEAC customers in resolution of all outstanding issues related to the
November 9, 1991 Salem 2 turbine generator outage and a credit of $1.3 million
to reflect an adjustment of estimated New Jersey Gross Receipts and Franchise
Tax (NJGRT) unit tax rates to actual unit tax rates.
Remediation Adjustment Charge
In accordance with the BPU Order dated September 15, 1993 and the BPU
approved Technical Conference Decision and Order dated November 4, 1993, PSE&G
proposed to recover, effective October 1, 1994, $3.7 million from its gas
customers and $2.4 million from its electric customers for costs incurred
during the period October 1, 1992 through July 31, 1994 with respect to PSE&G's
Manufactured Gas Plant Remediation Program (Remediation Program). Pursuant to
the above-referenced Board Order and Technical Conference Stipulation, costs
are to be included in a RAC and are amortized over a rolling seven-year period,
60 percent to be recovered through the gas RAC and the remaining 40 percent to
be recovered through the electric RAC. This Remediation Program has been and
continues to be carried out under the direction and supervision of the New
Jersey Department of Environmental Protection (NJDEP). On December 21, 1994,
the BPU approved a LGAC Stipulation allowing PSE&G to recover $3.1 million of
Remediation Program costs from gas customers. (See Note 12 -- Commitments and
Contingent Liabilities of Notes.) All recovery of costs through PSE&G rates are
subject to audit and verification by the BPU.
Consolidated Tax Benefits
In a case affecting another utility in which neither Enterprise nor PSE&G
were parties, the BPU considered the extent to which tax savings generated by
nonutility affiliates included in the consolidated tax return of that utility's
holding company should be considered in setting that utility's rates. On
September 30, 1992, the BPU approved an order in such case treating certain
consolidated tax savings generated after June 30, 1990 by that utility's
nonutility affiliates as a reduction of its rate base. On December 31, 1992 the
BPU issued an order approving a stipulation in PSE&G's 1992 base rate
proceeding which resolved the case without separate quantification of the
consolidated tax issue. The stipulation does not provide final resolution of
the consolidated tax issue for any subsequent base rate filing. While
Enterprise continues to account for these entities on a stand-alone basis,
resulting in a realization of the tax benefits by the entity generating the
benefit, an ultimate unfavorable resolution of the consolidated tax issue could
reduce PSE&G's and Enterprise's future revenue and net income. In addition, an
unfavorable resolution may adversely impact Enterprise's nonutility investment
strategy. Enterprise believes that PSE&G's taxes should be treated on a
stand-alone basis for rate-making purposes, based on the separate nature of the
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
utility and nonutility businesses. However, neither Enterprise nor PSE&G is
able to predict what action, if any, the BPU may take concerning consolidation
of tax benefits in future rate proceedings. (See Note 10 -- Federal Income
Taxes.)
Peach Bottom Settlement
In the first quarter of 1992, Enterprise and PSE&G allocated 75% of the
net proceeds of the Peach Bottom settlement to income attributable to
shareholders and deferred 25% attributable to ratepayers. Pursuant to the base
rate case settlement, such allocations were adjusted in December 1992 to an
equal sharing of the benefits of the Peach Bottom settlement.
NOTE 3. PSE&G NUCLEAR DECOMMISSIONING AND AMORTIZATION OF NUCLEAR FUEL
The BPU decision in PSE&G's 1992 base rate case utilized studies based on
the prompt removal/dismantlement method of decommissioning for all of PSE&G's
nuclear generating stations. This method consists of removing all fuel, source
material and all other radioactive materials with activity levels above
accepted release limits from the nuclear sites. PSE&G has an ownership interest
in five nuclear units: Salem 1 and Salem 2 -- 42.59% each, Hope Creek -- 95%
and Peach Bottom 2 and 3 -- 42.49% each. In accordance with rate orders
received from the BPU, PSE&G has established an external master nuclear
decommissioning trust for all of its nuclear units. The Internal Revenue
Service (IRS) has ruled that payments to the trust are tax deductible. PSE&G's
total estimated cost of decommissioning its share of these 5 nuclear units is
estimated at $681 million in year-end 1990 dollars (the year that the site
specific estimate was prepared), excluding contingencies. The 1992 base rate
decision provided that $15.6 million of such costs are to be collected through
base rates and an additional annual amount of $7.0 million in 1993 and $14
million each year thereafter are to be recovered through PSE&G's LEAC. At
December 31, 1994 and 1993, the accumulated provision for depreciation and
amortization included reserves for nuclear decommissioning for PSE&G's units
of $249 million and $211 million, respectively. As of December 31, 1994 and
1993, PSE&G has contributed $190 million and $155 million, respectively, into
external qualified and nonqualified nuclear decommissioning trust funds.
Based upon current regulatory requirements, PSE&G must file a
decommissioning cost update by January 1, 1996 based on a site-specific study
or upon the generic NRC guidelines.
The staff of the Securities and Exchange Commission (SEC) has questioned
certain of the current accounting practices of the electric utility industry,
including PSE&G, regarding the recognition, measurement and classification of
decommissioning costs for nuclear generating stations in the financial
statements of electric utilities. In response to these questions, the
Financial Accounting Standards Board (FASB) has agreed to review the accounting
for removal costs, including decommissioning. If current electric utility
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
industry accounting practices for such decommissioning are changed: (1) annual
provisions for decommissioning could increase, (2) the estimated cost for
decommissioning could be recorded as a liability rather than as accumulated
depreciation and (3) trust fund income from the external decommissioning trusts
could be reported as investment income rather than as a reduction to
decommissioning expense.
Uranium Enrichment Decontamination and Decommissioning Fund
In accordance with NEPA, domestic utilities that own nuclear generating
stations are required to pay a cumulative total of $150 million each year
(adjusted for inflation) into a decontamination and decommissioning fund, based
on their past purchases of enrichment services from the United States
Department of Energy (DOE) Uranium Enrichment Enterprise (now a federal
government corporation known as the United States Enrichment Corporation
(USEC)). These amounts are being collected over a period of 15 years or until
$2.25 billion (adjusted for inflation) has been collected. Under this
legislation, PSE&G's obligation for the nuclear generating stations in which
it has an interest is $66 million (adjusted for inflation). To date, PSE&G has
paid $13 million, resulting in a balance due of $53 million. PSE&G has
deferred the expenditures incurred to date as part of deferred underrecovered
electric energy costs and expects to recover its costs in the next LEAC. PSE&G
cannot predict the outcome, amount or timing of any recovery associated with
this matter. In addition, as of December 31, 1994, PSE&G has recorded a
liability of $3 million relating to low level radioactive waste costs incurred
at its nuclear generating stations.
Spent Nuclear Fuel Disposal Costs
In accordance with the Nuclear Waste Policy Act (NWPA), PSE&G has entered
into contracts with the DOE for the disposal of spent nuclear fuel. Payments
made to the DOE for disposal costs are based on nuclear generation and are
included in Fuel for Electric Generation and Interchanged Power in the
Statements of Income. These costs are recovered through the LEAC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 4. SCHEDULE OF CONSOLIDATED CAPITAL STOCK AND OTHER SECURITIES
CURRENT
REDEMPTION
OUTSTANDING PRICE DECEMBER 31, DECEMBER 31,
(THOUSANDS OF DOLLARS) SHARES PER SHARE 1994 1993
- --------------------------------------------------- ----------- ---------- ------------ ------------
ENTERPRISE COMMON STOCK (no par) - note (A) --
authorized 500,000,000 shares; issued and
outstanding at December 31, 1994, 244,697,930
shares, at December 31, 1993, 243,688,256 shares,
and at December 31, 1992, 235,395,751 shares. 3,801,157 3,772,662
ENTERPRISE PREFERRED SECURITIES (note B)
PSE&G CUMULATIVE PREFERRED SECURITIES (note C)
Without Mandatory Redemption (notes D and E)
$100 par value series
4.08%.................................... 250,000 103.00 25,000 25,000
4.18%.................................... 249,942 103.00 24,994 24,994
4.30%.................................... 250,000 102.75 25,000 25,000
5.05%.................................... 250,000 103.00 25,000 25,000
5.28%.................................... 250,000 103.00 25,000 25,000
6.80%.................................... 250,000 102.00 25,000 25,000
6.92%.................................... 600,000 103.46 60,000 -
7.40%.................................... 500,000 101.00 50,000 50,000
7.52%.................................... 500,000 101.00 50,000 50,000
7.80%.................................... 750,000 - - 75,000
7.70%.................................... 600,000 100.79 60,000 60,000
8.08%.................................... 150,000 - - 15,000
8.16%.................................... 300,000 - - 30,000
--------- ---------
$25 par value series
6.75%.................................... 600,000 - 15,000 -
--------- ---------
Total Preferred Stock without
Mandatory Redemption................... 384,994 429,994
========= =========
With Mandatory Redemption (notes D and F)
$100 par value series
7.44%.................................... 750,000 103.72 75,000 75,000
5.97%.................................... 750,000 102.99 75,000 75,000
--------- ---------
Total Preferred Stock With
Mandatory Redemption (note G).......... 150,000 150,000
========= =========
Monthly Income Preferred Securities (notes F and G)
9.375%................................... 6,000,000 25.00 150,000 -
---------
Total Monthly Income Preferred Securities 150,000 -
=========
(A) Total authorized and unissued shares include 7,302,488 shares of Enterprise Common Stock reserved
for issuance through Enterprise's Dividend Reinvestment and Stock Purchase Plan and various
employee benefit plans. In 1994, 1,009,674 shares of Enterprise Common Stock were issued and
sold for $28,495,122 and in 1993, 8,292,505 shares were issued and sold for $273,479,342, including
a public offering of 4,400,000 shares issued and sold for $142,670,000.
(B) Enterprise has authorized a class of 50,000,000 shares of Preferred Stock without par value, none of
which is outstanding.
(C) As of December 31, 1994, there were 2,300,058 shares of $100 par value and 9,400,000 shares
of $25 par value Cumulative Preferred Stock which were authorized and unissued, and which upon
issuance may or may not provide for mandatory sinking fund redemption. If dividends upon any shares
of Preferred Stock are in arrears in an amount equal to the annual dividend thereon, voting rights
for the election of a majority of PSE&G's Board of Directors become operative and continue until
all accumulated and unpaid dividends thereon have been paid, whereupon all such voting rights
cease, subject to being again revived from time to time.
(D) At December 31, 1994, the annual dividend requirement and embedded dividend for Preferred Stock
without mandatory redemption were $24,666,763 and 6.39%, respectively, and for Preferred Stock
with mandatory redemption were $10,057,500 and 6.75%, respectively.
At December 31, 1993, the annual dividend requirement and embedded dividend for Preferred Stock
without mandatory redemption were $29,012,000 and 6.75%, respectively and for Preferred Stock with
mandatory redemption were $10,057,500 and 6.71%, respectively.
(E) In February 1994, PSE&G sold 600,000 shares of its 6.92% Cumulative Preferred Stock ($100 Par)
and 600,000 shares of its 6.75% Cumulative Preferred Stock ($25 par). PSE&G redeemed the 150,000
shares of its outstanding 8.08% Cumulative Preferred Stock ($100 par) on March 1, 1994 at a
redemption price of $101.00. In addition, PSE&G redeemed on March 1, 1994, all of the 300,000
shares of its outstanding 8.16% Cumulative Preferred Stock ($100 par), at a redemption price
of $100.74. On December 16, 1994, PSE&G redeemed all of the outstanding 750,000 shares of its
7.80% cumulative preferred stock ($100 par), at a redemption price of $101.00.
(F) Public Service Electric and Gas Capital, L.P. (Partnership) was formed for the purpose of issuing
Monthly Income Preferred Securities (MIPS). The proceeds of MIPS sales are lent to PSE&G and evidenced
by PSE&G's Deferrable Interest Subordinated Debentures. If and for as long as payments on PSE&G's
Deferred Interest Subordinated Debentures have been deferred, or PSE&G has defaulted on the indenture
related thereto or its guarantee thereof, PSE&G may not pay any dividends on its Capital Stock. On
November 9, 1994, the Partnership issued 6,000,000 of its 9-3/8% MIPS, Series A, with a stated
liquidation preference of $25 each.
(G) For information concerning fair value of financial instruments, see Note 8 -- Financial Instruments and
Risk Management.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 5. DEFERRED ITEMS
Property Abandonments
The BPU has authorized PSE&G to recover after-tax property abandonment costs from its
customers. The following table reflects the application of Statement of Financial Accounting
Standards No. 90, "Regulated Enterprises -- Accounting for Abandonments and Disallowances
of Plant Costs," as amended (SFAS 90), on property abandonments, and related tax effects,
for which no return is earned. The net-of-tax discount rate used was between 4.443% and 7.801%.
(See Note 2 -- Rate Matters.) The following table reflects property abandonments:
DECEMBER 31, 1994 DECEMBER 31, 1993
------------------ ------------------
DISCOUNTED DISCOUNTED
PROPERTY ABANDONMENTS COST TAXES COST TAXES
- ------------------------------------------------ ---------- ------- ---------- -------
(THOUSANDS OF DOLLARS)
Atlantic Project................................ $ 70,130 $29,453 $81,475 $34,229
LNG Project..................................... 7,287 2,635 11,362 4,227
Uranium Projects................................ 10,852 4,677 12,699 5,442
-------- ------- -------- -------
$ 88,269 $36,765 $105,536 $43,898
======== ======= ======== =======
Under (Over) Recovered Electric Energy and Gas Costs -- net
Recoveries of electric energy and gas costs are determined by the BPU under the LEAC and LGAC.
PSE&G's deferred fuel balances as of December 31, 1994 and December 31, 1993, reflect underrecovered
costs as follows:
DECEMBER 31,
-------------------
1994 1993
------ ------
(Thousands of Dollars)
Underrecovered Electric Energy Costs......... $172.0 $ 35.2
Underrecovered Gas Fuel Costs................ .6 26.8
------ ------
Total................................... $172.6 $ 62.0
====== ======
Unrecovered Plant and Regulatory Study Costs
Amounts shown in the consolidated balance sheets consist of costs
associated with developing, consolidating and documenting the specific design
basis of PSE&G's jointly owned nuclear generating stations, as well as PSE&G's
share of costs associated with the cancellation of the Hydrogen Water Chemistry
System Project at Peach Bottom. PSE&G has received both BPU and FERC approval
to defer and amortize, over the remaining life of the Salem and Hope Creek
nuclear units, costs associated with configuration baseline documentation
projects. PSE&G has received FERC approval to defer and amortize over the
remaining life of the applicable Peach Bottom units, costs associated with the
configuration baseline documentation and the cancelled Hydrogen Water Chemistry
System Projects. While PSE&G expects the BPU to authorize recovery of such
costs from electric customers, no assurances can be given.
Unamortized Debt Expense
Gains and losses and the costs of issuing and redeeming long-term debt for
PSE&G are deferred and amortized over the life of the applicable debt.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Oil and Gas Property Write-Down
On December 31, 1992, the BPU approved the recovery of the EDC write-down
through PSE&G's LGAC over a ten-year period beginning January 1, 1993. At
December 31, 1994 and 1993, the remaining balance to be amortized was $41.2
million and $46.4, respectively.
NOTE 6. SCHEDULE OF CONSOLIDATED DEBT
LONG-TERM
DECEMBER DECEMBER
INTEREST RATES DUE 1994 1993
- ----------------- ------------------------------------------------- ---------- ----------
(THOUSANDS OF DOLLARS)
PSE&G
FIRST AND REFUNDING MORTGAGE BONDS (note A)
4 5/8% 1994............................................. $ -- $ 60,000
4 3/4% - 6% 1995............................................. 310,000 310,000
6 7/8% - 7 1/8% 1997............................................. 300,000 300,000
6% 1998............................................. 100,000 100,000
8 3/4% 1999............................................. 100,000 100,000
6% - 8 7/8% 2000-2004........................................ 1,400,000 1,400,000
6.30% - 9 1/8% 2005-2009........................................ 359,310 184,510
6.80% - 10 1/2% 2010-2014........................................ 198,500 313,300
6.45% - 8.10% 2015-2019........................................ 29,600 25,000
7% - 9 3/4% 2020-2024........................................ 1,244,500 1,368,500
5.2% - 6.55% 2025-2029........................................ 179,955 87,000
5.45% - 6.40% 2030-2034........................................ 487,445 145,200
5% - 8% 2037............................................. 15,001 15,001
MEDIUM-TERM NOTES
7.15% - 7.18% 2023............................................. 40,500 40,500
8.10% - 8.16% 2009............................................. 60,000 --
---------- ----------
Total First and Refunding Mortgage Bonds.......................... $4,824,811 $4,449,011
========== ==========
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER DECEMBER
INTEREST RATES DUE 1994 1993
- ----------------- ---- ---------- ----------
(THOUSANDS OF DOLLARS)
DEBENTURE BONDS UNSECURED
6% 1998............................................. $ 18,195 $ 18,195
---------- ----------
Total Debenture Bonds.................................................. 18,195 18,195
---------- ----------
Principal Amount Outstanding (note F).................................. 4,843,006 4,467,206
Amounts Due Within One Year (note B)................................... (310,200) (61,700)
Net Unamortized Discount............................................... (46,019) (41,069)
---------- ----------
Total Long-Term Debt of PSE&G (note G)............................ 4,486,787 4,364,437
---------- ----------
EDHI
CAPITAL (note C)
Senior Notes
9.875% - 10.05% 1998............................................. 165,000 207,500
Medium-Term Notes
7.40% 1994............................................. -- 50,000
5.65% - 9.55% 1995............................................. 112,000 112,000
9.00% 1996............................................. 20,000 20,000
5.79% - 5.91% 1997............................................. 27,000 27,000
9.00% 1998............................................. 75,000 75,000
8.95% - 9.93% 1999............................................. 155,000 155,000
6.54% 2000............................................. 78,000 78,000
---------- ----------
Principal Amount Outstanding (note F).................................. 632,000 724,500
Amounts Due Within One Year (note B)................................... (154,405) (92,436)
Net Unamortized Discount............................................... (1,278) (1,746)
---------- ----------
Total Long-Term Debt of Capital................................... 476,317 630,318
---------- ----------
FUNDING (note D)
9.54% 1995............................................. 35,000 35,000
9.55% 1996............................................. 28,000 28,000
6.85% - 9.59% 1997............................................. 55,000 55,000
9.95% 1998............................................. 83,000 83,000
7.58% 1999............................................. 45,000 45,000
---------- ----------
Principal Amount Outstanding (note F).................................. 246,000 246,000
Amounts Due Within One Year (note B)................................... (35,000) --
---------- ----------
Total Long-Term Debt of Funding................................... 211,000 246,000
---------- ----------
EGDC MORTGAGE NOTES
5.18% - 7.736% 1994............................................. -- 13,638
5.75% 1998............................................. -- 9,050
10.625% - 12.75% 2012............................................. 6,686 6,806
---------- ----------
Principal Amount Outstanding (note F).................................. 6,686 29,494
Amounts Due Within One Year (note B)................................... (133) (13,928)
---------- ----------
Total Long-Term Debt of EGDC........................................... 6,553 15,566
---------- ----------
Total Long-Term Debt of EDHI........................................... 693,870 891,884
---------- ----------
Consolidated Long-Term Debt (note E).............................. $5,180,657 $5,256,321
========== ==========
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTES:
(A) PSE&G's Mortgage, securing the Bonds, constitutes a direct first mortgage
lien on substantially all PSE&G'S property and franchises.
(B) The aggregate principal amounts of mandatory requirements for sinking funds
and maturities for each of the five years following December 31, 1994 are
as follows:
SINKING FUNDS MATURITIES
----------------- ----------------------------------------------------
YEAR PSE&G CAPITAL PSE&G CAPITAL EGDC FUNDING TOTAL
(THOUSANDS OF DOLLARS)
1995................ $ 200 $ 42,500 $310,000 $112,000 $ 133 $ 35,000 $ 499,833
1996................ 200 42,500 -- 20,000 149 28,000 90,849
1997................ 300 42,500 300,000 27,000 166 55,000 424,966
1998................ 300 37,500 118,195 75,000 184 83,000 314,179
1999................ 300 -- 100,000 155,000 205 45,000 300,505
------ -------- -------- -------- ------- -------- ---------
$1,300 $165,000 $828,195 $389,000 $ 837 $246,000 $1,630,332
====== ======== ======== ======== ======= ======== ==========
(C) Capital has provided up to $750 million debt financing for EDHI's businesses on the basis of a net
worth maintenance agreement with Enterprise. Effective January 31, 1995, Capital will not have more
than $650 million of debt outstanding at any one time.
(D) Funding provides debt financing for EDHI's businesses other than EGDC on the basis of unconditional
guarantees from EDHI.
(E) At December 31, 1994 and 1993, the annual interest requirement on long-term debt was $422.7 million and
$421.2 million, of which $335.6 million and $327.5 million was the requirement for Bonds. The embedded
interest cost on long-term debt on such date was 7.79% and 8.06%, respectively.
(F) For information concerning fair value of financial instruments, see Note 8 -- Financial Instruments and
Risk Management.
(G) At December 31, 1994 and 1993, PSE&G's annual interest requirement on long-term debt was $343.3 million
and $331.5 million, of which $335.6 million and $327.5 million, respectively, was the requirement for Bonds.
The embedded interest cost on long-term debt was 7.59% and 7.85%, respectively.
SHORT-TERM (Commercial Paper and Loans)
Commercial paper represents unsecured bearer promissory notes sold through
dealers at a discount with a term of nine months or less.
Bank loans represent PSE&G's unsecured promissory notes issued under
informal credit arrangements with various banks and have a term of eleven
months or less.
PSE&G
- -----
1994 1993 1992
------ ------ ------
(Millions of Dollars)
Principal amount outstanding at end of year,
primarily commercial paper...................... $ 402 $ 533 $ 258
Weighted average interest rate for Short-Term
Debt at year-end................................ 6.07% 3.34% 3.64%
PSE&G has authorization from the BPU to issue and have outstanding not more than $1 billion of its
short-term obligations at any one time, consisting of commercial paper and other unsecured borrowings
from banks and other lenders. This authorization expires January 1, 1997.
PSE&G has an $800 million revolving credit agreement with a group of banks which expires September
14, 1995. As of December 31, 1994, there was no short-term debt outstanding under this agreement.
Fuelco has a $150 million commercial paper program to finance a 42.49% share of Peach Bottom nuclear
fuel, supported by a $150 million revolving credit facility with a group of banks, which expires in
June 1996. PSE&G has guaranteed repayment of Fuelco's respective obligations. As of December 31,
1994, 1993 and 1992, Fuelco had commercial paper of $93.7 million, $108.7 million and $122.5 million,
respectively, outstanding under such program, which amounts are included in the table above.
EDHI
- ----
1994 1993 1992
------ ------ ------
(Millions of Dollars)
Principal amount outstanding at end of year....... $ 90 $ 45 $ 134
Weighted average interest rate for Short-Term
Debt at year-end................................ 5.97% 3.47% 3.76%
At December 31, 1994, Funding had a $225 million commercial paper program supported by a direct pay
commercial bank letter of credit and revolving credit facility and a $225 million revolving credit facility,
each of which expires in November 1995.
ENTERPRISE
- ----------
At each of December 31, 1994, 1993 and 1992, Enterprise had a $25 million line of credit supported by
compensating balances under an informal arrangement with a bank. At each of December 31, 1994, 1993 and
1992, Enterprise had no lines of credit compensated for by fees.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 7. LONG-TERM INVESTMENTS
Long-Term Investments are primarily those of EDHI. A summary of Long-Term
Investments is as follows:
1994 1993
------ ------
(MILLIONS OF DOLLARS)
Lease Agreements (see Note 11 - Leasing Activities):
Leveraged Leases................................ $ 789 $ 738
Direct-Financing Leases......................... 76 85
Other Leases.................................... 6 8
------ ------
Total...................................... 871 831
------ ------
Partnerships:
General Partnerships............................ 157 152
Limited Partnerships............................ 437 433
------ ------
Total...................................... 594 585
------ ------
Joint Ventures....................................... 37 35
Securities........................................... 75 82
Valuation Allowances................................. (17) (18)
Other Investments.................................... 66 116
------ ------
Total Long-Term Investments................ $1,626 $1,631
====== ======
PSRC's leveraged leases are reported net of principal and interest on
nonrecourse loans and unearned income, including deferred tax credits. Income
and deferred tax credits are recognized at a level rate of return from each
lease during the periods in which the net investment is positive. For
information concerning PSRC's three direct-finance leases with Continental
Airlines, see Note 12 -- Commitment and Contingent Liabilities of Notes.
Partnership investments are those of PSRC, EGDC and CEA and are undertaken
with other investors. PSRC is a limited partner in various partnerships and is
committed to make investments from time to time, upon the request of the
respective general partners. As of December 31, 1994, $134 million remained as
PSRC's unfunded commitment subject to call.
PSRC has invested in securities and limited partnerships investing in
securities, which are recorded at fair value. Realized investment gains and
losses on the sale of investment securities are determined utilizing the
specific cost identification method. (See Note 8 -- Financial Instruments and
Risk Management.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 8. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
Enterprise's operations give rise to exposure to market risks from changes
in crude oil and natural gas prices, interest rates, foreign exchange rates and
security prices of investments recorded at fair value. Enterprise's policy is
to use derivatives for the purpose of managing market risk consistent with its
business plans and prudent practices. Enterprise does not hold or issue
financial instruments for trading purposes.
The notional amounts of derivatives summarized below do not represent
amounts exchanged by the parties and, thus, are not a measure of the exposure
of Enterprise through its use of derivatives. The amounts exchanged, under the
terms of the derivatives, are calculated on the basis of the notional amounts.
Enterprise limits its exposure to credit-related losses in the event of
nonperformance by counterparties by limiting its counterparties to those with
high credit ratings.
Natural Gas Hedging
EDC sold futures contracts outstanding at December 31, 1994 which hedged
10,650,000 mmbtu representing approximately 13% of anticipated domestic natural
gas production in 1995 at an average sales price of $1.95 per mmbtu. The
deferred unrealized gain at December 31, 1994 related to EDC's futures
contracts was $2.6 million. EDC did not have any outstanding futures contracts
at December 31, 1993.
Interest Rate Swap
Capital entered into an interest rate swap on December 7, 1990 to allow
EDHI to borrow at floating rates and effectively swap them into fixed rates.
The interest differential to be received or paid under the interest rate swap
agreement is accrued over the life of the agreement as an adjustment to the
interest expense of the related borrowing. The swap terminates on December 11,
1995.
1994 1993
--------- ---------
(Thousands of Dollars)
Pay-fixed swap
Notional amount............................... $100,000 $100,000
Pay rate...................................... 8.0% 8.0%
Average receive rate.......................... 4.1% 3.5%
Year-end receive rate......................... 6.8% 3.4%
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Foreign Exchange
During 1994, PSRC entered into a forward purchase contract for foreign
currency to hedge an EDC firm purchase commitment denominated in pound
sterling. The EDC commitment related to the acquisition of Industrial Scotland
Energy Limited (ISE) for approximately 21 million pounds. The realized gain
of approximately $800 thousand on the forward purchase contract for foreign
currency was used to reduce the net acquisition cost allocated to ISE's assets
upon completion of the acquisition in June 1994.
Currently, substantially all of Enterprise's foreign revenues and expenses
are denominated in U.S. dollars.
Security Swap
During 1994, PSRC entered into two agreements to swap portions of its
ownership interest in certain equity securities, held in a partnership, to the
S&P 500 return. The purpose of the swap was to minimize PSRC's exposure to the
potential price volatility of such equity securities. One agreement with a
notional amount of $17.6 million expires in June 1995; the other agreement,
with a notional amount of $12.9 million, expires in September 1995.
The notional amount swapped and the year end gain during 1994 for these
two agreements were as follows:
Notional Year End
Amount Fair Value Gain
-------- ----------------------
(Thousands of Dollars)
$30,489 $ 3,801
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Fair Value of Financial Instruments
The estimated fair value was determined using the market quotations or values of securities
with similar terms, credit ratings, remaining maturities and redemptions at the end of 1994 and
1993, respectively.
1994 1993
------------------------ ------------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
---------- ---------- ---------- ----------
(Millions of Dollars)
Long-Term Debt:
EDHI.................................... $ 884,686 $ 900,000 $ 999,994 $1,200,000
PSE&G................................... 4,843,006 4,500,000 4,467,206 4,700,000
Preferred Securities Subject to
Mandatory Redemption:
PSE&G Cumulative Preferred Securities... 150,000 145,900 150,000 158,000
Monthly Income Preferred Securities..... 150,000 158,300 -- --
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 9. CASH AND CASH EQUIVALENTS
The December 31, 1994 and 1993 balances consist primarily of working funds
and highly liquid marketable securities (commercial paper) with a maturity of
three months or less.
NOTE 10. FEDERAL INCOME TAXES
A reconciliation of reported Net Income with pretax income and of Federal
income tax expense with the amount computed by multiplying pretax income by the
statutory Federal income tax rates of 35% in 1994 and 1993 and 34% in 1992 is
as follows:
1994 1993 1992
---------- -------- --------
(THOUSANDS OF DOLLARS)
Net Income......................................... $ 679,033 $600,933 $504,117
Preferred securities dividend requirements......... 40,467 38,114 31,907
SFAS 109 Cumulative Effect......................... -- (5,414) --
---------- -------- --------
Subtotal................................. 719,500 633,633 536,024
---------- -------- --------
Federal income taxes:
Operating income:
Current provision................................ 162,521 151,208 151,509
Provision for deferred income taxes -- net(A).... 173,327 186,256 91,595
Investment tax credits -- net.................... (23,297) (23,784) (21,635)
---------- -------- --------
Total included in operating income................. 312,551 313,680 221,469
Miscellaneous other income:
Current provision................................ (8,186) (14,340) 4,946
Provision for deferred income taxes(A)........... 10,422 9,815 19,261
SFAS 90 deferred income taxes(A)................... 2,530 2,948 2,690
---------- -------- --------
Total Federal income tax provisions................ 317,317 312,103 248,366
---------- -------- --------
Pretax income...................................... $1,036,817 $945,736 $784,390
========== ======== ========
Reconciliation between total Federal income tax provisions and tax computed
at the statutory tax rate on pretax income:
1994 1993 1992
-------- -------- --------
(THOUSANDS OF DOLLARS)
Tax computed at the statutory rate................. $362,887 $331,008 $266,693
-------- -------- --------
Increase (decrease) attributable to flow through of
certain tax adjustments:
Depreciation.................................. (4,597) 3,347 19,330
Amortization of plant abandonments and
write-downs................................. (2,046) (2,239) (18,867)
Amortization of investment tax credits........... (23,297) (23,784) (20,681)
Other............................................ (15,630) 3,771 1,891
-------- -------- --------
Subtotal........................................... (45,570) (18,905) (18,327)
-------- -------- --------
Total Federal income tax provisions................ $317,317 $312,103 $248,366
======== ======== ========
Effective Federal income tax rate.................. 30.6% 33.0% 31.7%
(A) The provision for deferred income taxes represents the tax effects of the
following items:
1994 1993 1992
-------- -------- --------
(THOUSANDS OF DOLLARS)
Deferred Credits:
Additional tax depreciation and amortization..... $109,106 $112,814 $136,073
Leasing Activities............................... 60,129 34,958 56,087
Property Abandonments............................ (6,606) (6,632) (34,739)
Oil and Gas Property Write-Down.................. (2,451) (2,451) (6,393)
Deferred fuel costs -- net....................... 39,361 63,330 (40,148)
Other............................................ (13,260) (3,000) 2,666
-------- -------- --------
Total.............................................. $186,279 $199,019 $113,546
======== ======== ========
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Since 1987, Enterprise's Federal alternative minimum tax (AMT) liability
has exceeded its regular Federal income tax liability. This excess can be
carried forward indefinitely to offset regular income tax liability in future
years. Enterprise expects to utilize these AMT credits in the future as regular
tax liability exceeds AMT. As of December 31, 1994, 1993 and 1992, Enterprise
had AMT credits of $256 million, $247 million and $212 million, respectively.
Since 1986, Enterprise has filed a consolidated Federal income tax return
on behalf of itself and its subsidiaries. Prior to 1986, PSE&G filed
consolidated tax returns. On March 20, 1992, the Internal Revenue Service (IRS)
issued a Revenue Agent's Report (RAR) following completion of examination of
PSE&G's consolidated tax return for 1985 and Enterprise's consolidated tax
returns for 1986 and 1987, proposing various adjustments for such years which
would increase Enterprise's consolidated Federal income tax liability by
approximately $121 million, exclusive of interest and penalties, of which
approximately $118 million is attributable to PSE&G. Interest after taxes on
these proposed adjustments is currently estimated to be approximately $97
million as of December 31, 1994 and will continue to accrue at the Federal rate
for large corporate underpayments, currently 11% annually.
The most significant of these proposed adjustments relates to the IRS
contention that PSE&G's Hope Creek nuclear unit is a partnership with a short
1986 taxable year. In addition, the IRS contends that the tax in-service date
of that unit is four months later than the date claimed by PSE&G. In June
1992, Enterprise and PSE&G filed a protest with the IRS disagreeing with
certain of the proposed adjustments (including those related to Hope Creek)
contained in the RAR for taxable years 1985 through 1987 and continue to
contest these issues. Any tax adjustments resulting from the RAR would reduce
Enterprise's and PSE&G's respective deferred credits for accumulated deferred
income taxes. While PSE&G believes that assessments attributable to it are
generally recoverable from its customers in rates, no assurances can be given
as to what regulatory treatment may be afforded by the BPU.
On January 1, 1993, Enterprise adopted SFAS 109 without restating prior
years' financial statements which resulted in Enterprise recording a $5.4
million cumulative effect increase in its net income. Under SFAS 109, deferred
taxes are provided at the enacted statutory tax rate for all temporary
differences between the financial statement carrying amounts and the tax bases
of existing assets and liabilities irrespective of the treatment for ratemaking
purposes. Since management believes that it is probable that the effects of
SFAS 109 on PSE&G, principally the accumulated tax benefits that previously
have been treated as a flow-through item to customers, will be recovered from
utility customers in the future, an offsetting regulatory asset was
established. As of December 31, 1994, PSE&G had recorded a deferred tax
liability and an offsetting regulatory asset of $791 million representing the
future revenue expected to be recovered through rates based upon established
regulatory practices which permit recovery of current taxes payable. This
amount was determined using the 1994 Federal income tax rate of 35%.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SFAS 109
The following is an analysis of accumulated deferred income taxes:
ACCUMULATED DEFERRED INCOME TAXES 1994 1993
----------------------------------------- ---------- ----------
(THOUSANDS OF DOLLARS)
Assets:
Current (net)................................... $ 25,311 $ 12,934
Non-Current:
Unrecovered Investment Tax Credits......... 136,402 143,125
Nuclear Decommissioning.................... 25,082 25,211
Hope Creek Cost Disallowance............... 10,127 20,231
Construction Period Interest and Taxes..... 15,913 9,811
Vacation Pay............................... 6,822 6,721
AMT Credit................................. 255,828 246,862
Real Estate Impairment..................... 20,932 27,173
Other...................................... 6,863 14,845
---------- ----------
Total Non-Current..................... $ 477,969 $ 493,979
---------- ----------
Total Assets.................................... $ 503,280 $ 506,913
========== ==========
Liabilities:
Non-Current:
Plant Related Items........................ $2,268,688 $2,169,861
Leasing Activities......................... 580,415 520,286
Property Abandonments...................... 26,971 32,206
Oil and Gas Property Write-Down............ 14,925 16,790
Deferred Electric Energy & Gas Costs....... 59,884 20,133
Unamortized Debt Expense................... 37,599 38,768
Taxes Recoverable Through Future
Rates (net).............................. 270,684 270,518
Other...................................... 124,193 127,803
---------- ----------
Total Non-Current..................... $3,383,359 $3,196,365
---------- ----------
Total Liabilities............................... $3,383,359 $3,196,365
========== ==========
Summary -- Accumulated Deferred Income Taxes
Net Current Assets........................... $ 25,311 $ 12,934
Net Deferred Liability....................... $2,905,390 $2,702,386
---------- ----------
Total..................................... $2,880,079 $2,689,452
========== ==========
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 11. LEASING ACTIVITIES
As Lessee
The Consolidated Balance Sheets include assets and related obligations
applicable to capital leases under which PSE&G is a lessee. The total
amortization of the leased assets and interest on the lease obligations equals
the net minimum lease payments included in rent expense for capital leases.
Capital leases of PSE&G relate primarily to its corporate headquarters and
other capital equipment. Certain of the leases contain renewal and purchase
options and also contain escalation clauses.
Enterprise and its other subsidiaries are not lessees in any capitalized
leases.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Utility plant includes the following amounts for capital leases at
December 31:
1994 1993
------- -------
(THOUSANDS OF DOLLARS)
Common Plant............................................. $58,610 $56,812
Less: Accumulated Amortization........................... 4,840 3,708
------- -------
Net Assets under Capital Leases.......................... $53,770 $53,104
======= =======
Future minimum lease payments for noncancelable capital and operating leases at
December 31, 1994 were:
CAPITAL OPERATING
LEASES LEASES
------- ---------
(THOUSANDS OF DOLLARS)
1995..................................................... $ 13,174 $ 15,013
1996..................................................... 13,174 13,933
1997..................................................... 13,175 11,945
1998..................................................... 13,176 8,631
1999..................................................... 13,177 6,442
Later Years.............................................. 202,064 18,426
-------- --------
Minimum Lease Payments................................... 267,940 $ 74,390
========
Less: Amount representing estimated executory costs,
together with any profit thereon, included in
minimum lease payments............................. 132,453
--------
Net minimum lease payments............................... 135,487
Less: Amount representing interest....................... 81,717
--------
Present value of net minimum lease payments(A)........... $ 53,770
========
(A) Reflected in the Consolidated Balance Sheets for 1994 and 1993 were Capital Lease Obligations of
$53.770 million and $53.104 million which includes Capital Lease Obligations due within one year of
$659 thousand and $574 thousand, respectively.
The following schedule shows the composition of rent expense included in Operating Expenses:
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------
1994 1993 1992
------- ------- -------
(THOUSANDS OF DOLLARS)
Interest on Capital Lease Obligations................. $ 6,156 $ 6,074 $ 6,129
Amortization of Utility Plant under Capital Leases.... 588 513 457
------- ------- -------
Net minimum lease payments relating to Capital
Leases.............................................. 6,744 6,587 6,586
Other Lease payments.................................. 28,447 22,095 21,739
------- ------- -------
Total Rent Expense.................................... $35,191 $28,682 $28,325
======= ======= =======
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
As Lessor
PSRC's net investments in leveraged and direct financing leases are composed of the following elements:
DECEMBER 31, 1994 DECEMBER 31, 1993
---------------------------------- ----------------------------------
(MILLIONS OF DOLLARS)
DIRECT DIRECT
LEVERAGED FINANCING LEVERAGED FINANCING
LEASES LEASES TOTAL LEASES LEASES TOTAL
--------- --------- ------- --------- --------- -------
Lease rents receivable.......... $ 990 $ 92 $ 1,082 $ 980 $ 114 $ 1,094
Estimated residual value........ 622 13 635 595 12 607
-------- ------- ------- -------- ------- -------
1,612 105 1,717 1,575 126 1,701
Unearned and deferred income.... (823) (29) (852) (837) (41) (878)
-------- ------- ------- -------- ------- -------
Total investments............... 789 76 865 738 85 823
Deferred taxes.................. (333) (20) (353) (267) (20) (287)
-------- ------- ------- -------- ------- -------
Net investments................. $ 456 $ 56 $ 512 $ 471 $ 65 $ 536
======== ======= ======= ======== ======= =======
PSRC's other leases are with various regional, state and city authorities for transportation equipment and
aggregated $6 million and $8 million as of December 31, 1994 and 1993, respectively.
For information concerning PSRC's three direct-finance leases with Continental Airlines, see Note 12 --
Commitments and Contingent Liabilities -- Public Service Resources Corporation.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 12. COMMITMENTS AND CONTINGENT LIABILITIES
Nuclear Performance Standard
The BPU has established an NPS for nuclear generating stations owned by
New Jersey electric utilities, including the five nuclear units in which PSE&G
has an ownership interest: Salem -- 42.59%; Hope Creek -- 95%; and Peach
Bottom -- 42.49%. PSE&G operates Salem and Hope Creek, while Peach Bottom is
operated by PECO.
The penalty/reward under the NPS is a percentage of replacement power
costs. (See table below.) The NPS provides that the penalties will be
calculated to the edge of each capacity factor range. For example, a 30%
penalty applies to replacement power costs incurred in the 55% to 65% range and
a 40% penalty applies to replacement power costs in the 45% to 55% range.
CAPACITY FACTOR RANGE REWARD PENALTY
- ----------------------------------------------------- ------ -------
Equal to or greater than 75%......................... 30% --
Equal to or greater than 65% and less than 75%....... None None
Equal to or greater than 55% and less than 65%....... -- 30%
Equal to or greater than 45% and less than 55%....... -- 40%
Equal to or greater than 40% and less than 45%....... -- 50%
Below 40%............................................ BPU Intervenes
Under the NPS, the capacity factor is calculated annually using maximum
dependable capability of the five nuclear units in which PSE&G owns an
interest. This method takes into account actual operating conditions of the
units.
While the NPS does not specifically have a gross negligence provision, the
BPU has indicated that it would consider allegations of gross negligence
brought upon a sufficient factual basis. A finding of gross negligence could
result in penalties other than those prescribed under the NPS. During
1994, the five nuclear units in which PSE&G has an ownership interest
aggregated a 74% combined capacity factor.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Nuclear Insurance Coverages and Assessments
PSE&G's insurance coverages and maximum retrospective assessments for its
nuclear operations are as follows:
PSE&G MAXIMUM
TOTAL ASSESSMENTS
SITE FOR A SINGLE
TYPE AND SOURCE OF COVERAGES COVERAGES INCIDENT
- -------------------------------------------- --------- -------------
(MILLIONS OF DOLLARS)
Public Liability:
American Nuclear Insurers.................. $ 200.0 $ --
Indemnity(A)............................... 8,720.3 210.2
-------- --------
$8,920.3 (B) $ 210.2
-------- --------
Nuclear Worker Liability:
American Nuclear Insurers(C)............... $ 200.0 $ 8.2
-------- --------
Property Damage:
Nuclear Mutual Limited..................... $ 500.0 $ 11.6
Nuclear Electric Insurance Ltd. (NEIL II).. 1,400.0 (D) 8.2 (E)
Nuclear Electric Insurers Ltd. (NEIL III).. 850.0 6.7
-------- --------
$2,750.0 $ 26.5
-------- --------
Replacement Power:
Nuclear Electric Insurance Ltd (NEIL I).... $ 3.5 (F) $ 12.4
(A) Retrospective premium program under the Price-Anderson liability
provisions of the Atomic Energy Act of 1954, as amended (Price-Anderson).
Subject to retrospective assessment with respect to loss from an incident
at any licensed nuclear reactor in the United States. Assessment adjusted
for inflation effective August 20, 1993.
(B) Limit of liability for each nuclear incident under Price-Anderson.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(C) Industry aggregate limit representing the potential liability from workers
claiming exposure to the hazard of nuclear radiation. This policy
includes automatic reinstatements up to an aggregate of $200 million,
thereby providing total coverage of $400 million. This policy does not
increase PSE&G's obligation under Price-Anderson.
(D) Includes up to $250 million for premature decommissioning costs.
(E) In the event of a second industry loss triggering NEIL II - coverage, the
maximum retrospective premium assessment can increase to $17.5 million.
(F) Weekly indemnity for 52 weeks which commences after the first 21 weeks of
an outage. Beyond the first 52 weeks of coverage, indemnity of $2.8
million per week for 104 weeks is afforded. Total coverage amounts to
$473.2 million over three years.
Price-Anderson sets the "limit of liability" for claims that could arise
from an incident involving any licensed nuclear facility in the nation. The
"limit of liability" is based on the number of licensed nuclear reactors and
is adjusted at least every five years based on the Consumer Price Index. The
current "limit of liability" is $8.9 billion. All utilities owning a nuclear
reactor, including PSE&G, have provided for this exposure through a combination
of private insurance and mandatory participation in a financial protection pool
as established by Price-Anderson. Under Price-Anderson, each party with an
ownership interest in a nuclear reactor can be assessed its share of $79.3
million per reactor per incident, payable at $10 million per reactor per
incident per year. If the damages exceed the "limit of liability," the
President is to submit to Congress a plan for providing additional compensation
to the injured parties. Congress could impose further revenue raising measures
on the nuclear industry to pay claims. PSE&G's maximum aggregate assessment per
incident is $210.2 million (based on PSE&G's ownership interests in Hope Creek,
Peach Bottom and Salem) and its maximum aggregate annual assessment per
incident is $26.5 million.
PSE&G purchases property insurance, including decontamination expense
coverage and premature decommissioning coverage, with respect to loss or damage
to its nuclear facilities. PECO has advised PSE&G that it maintains similar
insurance coverage with respect to Peach Bottom. Under the terms of the various
insurance agreements, PSE&G could be subject to a maximum retrospective
assessment for a single incident of up to $26.5 million. Certain of the
policies also provide that the insurer may suspend coverage with respect to all
nuclear units on a site without notice if the Nuclear Regulatory Commission
(NRC) suspends or revokes the operating license for any unit on a site, issues
a shutdown order with respect to such unit or issues a confirmatory order
keeping such unit shut down.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
PSE&G is a member of an industry mutual insurance company, NEIL, which
provides replacement power cost coverage in the event of a major accidental
outage at a nuclear station. The policies provide for a weekly indemnity
payment of $3.5 million for 52 weeks, subject to a 21-week waiting period. The
policies provide for weekly indemnity payments of $2.8 million for a 104-week
period beyond the first year's indemnity. The premium for this coverage is
subject to retrospective assessment for adverse loss experience. Under the
policies, PSE&G's present maximum share of any retrospective assessment in any
year is $12.4 million.
Construction and Fuel Supplies
PSE&G has substantial commitments as part of its ongoing construction
program which includes capital requirements for nuclear fuel. PSE&G's
construction program is continuously reviewed and periodically revised as a
result of changes in economic conditions, revised load forecasts, changes in
the scheduled retirement dates of existing facilities, changes in business
plans, site changes, cost escalations under construction contracts,
requirements of regulatory authorities and laws, the timing of and amount of
electric and gas rate changes and the ability of PSE&G to raise necessary
capital. Pursuant to an integrated electric resource plan (IRP), PSE&G
periodically reevaluates its forecasts of future customers, load and peak
growth, sources of electric generating capacity and DSM to meet such projected
growth, including the need to construct new electric generating capacity. The
IRP takes into account assumptions concerning future demands of customers,
effectiveness of conservation and load management activities, the long-term
condition of PSE&G's plants, capacity available from electric utilities and
other suppliers and the amounts of cogeneration and other nonutility capacity
projected to be available.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Based on PSE&G's 1995-1999 construction program, construction expenditures
are expected to aggregate approximately $3.2 billion, which includes $484
million for nuclear fuel and $78 million of AFDC during the years 1995 through
1999. The estimate of construction requirements is based on expected project
completion dates and includes anticipated escalation due to inflation of
approximately 3%, annually. Therefore, construction delays or higher inflation
levels could cause significant increase in these amounts. PSE&G expects to
generate internally the funds necessary to satisfy its construction
expenditures over the next five years, assuming adequate and timely recovery
of costs, as to which no assurances can be given. In addition, PSE&G does not
presently anticipate any difficulties in obtaining sufficient sources of fuel
for electric generation or adequate gas supplies during the years 1995 through
1999.
Bergen Station Repowering
PSE&G is presently engaged in a construction project to renovate (or
"repower") the Bergen Station pursuant to an air pollution control permit
issued by the NJDEP in May 1993. The current effort would maintain the existing
electric supply of the station (with a small increase from 629 MW to 669 MW),
improve operational reliability and efficiency and significantly improve the
environmental effects of operation of the facility.
In July 1993, an association of competitors of PSE&G appealed the NJDEP's
issuance of the air permit for the project to the Appellate Division of the New
Jersey Superior Court, alleging that PSE&G is first required to obtain a
Certificate of Need (Certificate) under the New Jersey Need Assessment Act
(NJNAA). The NJDEP determined that the NJNAA was inapplicable to this
renovation project. The Appellate Division of New Jersey Superior Court
affirmed this determination. The New Jersey Supreme Court has denied
certification of the petition for review of this decision.
As of December 31, 1994, the repowering project was about 95% complete and
PSE&G had spent approximately $291 million on this effort. The final cost is
estimated to be approximately $400 million. In order for PSE&G to recover its
costs for the project, PSE&G would need either BPU authorization to recover
such costs in its rates or be successful in selling the station's output in the
emerging wholesale market.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Hazardous Waste
Certain Federal and State laws authorize the EPA and the NJDEP, among
other agencies, to issue orders and bring enforcement actions to compel
responsible parties to take investigative and remedial actions at any site that
is determined to present an imminent and substantial danger to the public or
the environment because of an actual or threatened release of one or more
hazardous substances. Because of the nature of PSE&G's business, including the
production of electricity, the distribution of gas and, formerly, the
manufacture of gas, various by-products and substances are or were produced or
handled which contain constituents classified as hazardous. PSE&G generally
provides for the disposal or processing of such substances through licensed
independent contractors. However, these statutory provisions impose joint and
several responsibility without regard to fault on all responsible parties,
including the generators of the hazardous substances, for certain investigative
and remediation costs at sites where these substances were disposed of or
processed. PSE&G has been notified with respect to a number of such sites and
the remediation of these potentially hazardous sites is receiving greater
attention from the government agencies involved. Generally, actions directed
at funding such site investigations and remediation include all suspected or
known responsible parties. PSE&G does not expect its expenditures for any such
site to have a material effect on its financial position, results of operations
or net cash flows.
PSE&G Manufactured Gas Plant Remediation Program
In 1988, NJDEP notified PSE&G that it had identified the need for PSE&G,
pursuant to a formal arrangement, to systematically investigate and, if
necessary, resolve environmental concerns extant at PSE&G's former manufactured
gas plant sites. To date, NJDEP and PSE&G have identified 38 former gas plant
sites. PSE&G is currently working with NJDEP under a program to assess,
investigate and, if necessary, remediate environmental concerns at these sites
(Remediation Program). The Remediation Program is periodically reviewed and
revised by PSE&G based on regulatory requirements, experience with the
Remediation Program and available technologies. The cost of the Remediation
Program cannot be reasonably estimated, but experience to date indicates that
costs of at least $20 million per year could be incurred over a period of more
than 30 years and that the overall cost could be material to PSE&G's financial
position, results of operations or net cash flows.
Costs incurred through December 31, 1994 for the Remediation Program
amounted to $51.4 million. In addition, at December 31, 1994, PSE&G's
estimated liability for estimated remediation costs aggregated $105.7 million
through 1997.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In accordance with a Stipulation approved by the BPU in January 1992,
PSE&G is recovering $32 million of its actual remediation costs to reflect
costs incurred through September 30, 1992 over a six-year period. PSE&G will
recover $5.3 million in each of its next two LGAC periods ending in 1996. The
regulatory treatment of the remediation costs covered by this Stipulation was
not changed in the BPU's September 15, 1993 written order, allowing continued
collection under the terms of the January 1992 Stipulation. As of December 31,
1994, PSE&G has recovered $22.2 million through its LGAC.
The September 1993 decision concluded that PSE&G had met its burden of
proof for establishing the reasonableness and prudence of remediation costs
incurred in operating and decommissioning these facilities in the past. The
remediation costs incurred during the period July 1, 1992 through September 30,
1992 were subject to audit and verification in PSE&G's 1992-93 LGAC. The audit
has been completed and resulted in no disallowance of any costs. (See Note 2
- - Rate Matters - Remediation Adjustment Charge). A final Board Order was
received on November 4, 1994, memorializing the above September 15, 1993
Stipulation.
Also in 1988, PSE&G filed suit against certain of its insurers to recover
the costs associated with addressing and resolving environmental issues of the
Remediation Program. PSE&G has settled its claim with one insurer and there is
a trial scheduled for March 1995 with the remaining insurers. Pending full
recovery of Remediation Program costs through rates or under its insurance
policies, neither of which can be assured, PSE&G will be required to finance
the unreimbursed costs of its Remediation Program.
Public Service Resources Corporation
PSRC has leased three wide-body aircraft to Continental Airlines
(Continental) through direct-finance leases. The leases for two A-300 aircraft
expire December 2000, while the lease for one DC 10-30 aircraft expires June
2002. At December 31, 1994, PSRC had investments in the A-300 leases and the
DC 10-30 lease of $43.0 million and $33.1 million, respectively. Continental
has failed to make full payment of its required lease payments due February 1,
1995 and has advised PSRC of its intent to seek the termination of the A-300
leases and return the A-300 aircraft to PSRC. Continental also advised PSRC
of its intention, effective February 1, 1995, to reduce its rental payments due
under all three leases by approximately 50%. Continental indicated that
payments under these leases could include debt securities convertible into
equity in lieu of full cash payments. Under the leases, PSRC rents receivable
and pre-tax lease income in 1995 would have been $9.4 million and $4.1 million,
respectively for the A-300 aircraft and $5.5 million and $2.7 million,
respectively for the DC 10-30 aircraft. PSRC has informed Continental that it
expects all of Continental's lease obligations to be satisfied in full.
Negotiations are continuing concerning this matter. No assurances can be given
that PSRC will be able to obtain new leases, sell or otherwise dispose of any
such aircraft on satisfactory terms in the event of an unscheduled lease
termination. Enterprise believes the ultimate resolution of this matter will
not have a material effect on its financial position, results of operations or
net cash flows.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 13. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
On January 1, 1993, Enterprise and PSE&G adopted SFAS 106, which requires
that the expected cost of employees' postretirement health care and insurance
benefits be charged to expense during the years in which employees render
service. PSE&G elected to amortize over 20 years of its unfunded obligation of
$609.3 million at January 1, 1993. Prior to 1993, Enterprise and PSE&G
recognized postretirement health care and insurance costs in the year that the
benefits were paid. The following table discloses the significant components
of the net periodic postretirement benefit obligation:
DECEMBER 31,
----------------------
NET PERIODIC POSTRETIREMENT BENEFIT OBLIGATION 1994 1993
- ---------------------------------------------------- --------- ---------
(MILLIONS)
Service cost......................................... $ 11.1 $ 11.7
Interest on accumulated postretirement obligation.... 45.4 44.4
Amortization of transition obligations............... 30.5 30.5
Deferral of current expense.......................... (57.8) (58.6)
------ ------
Annual net expense.............................. $ 29.2 $ 28.0
====== ======
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The discount rate used in determining the PSE&G net periodic
postretirement benefit cost was 7.25% and 7.50% for 1994 and 1993,
respectively.
A one-percentage-point increase in the assumed health care cost trend rate
for each year would increase the aggregate of the service and interest cost
components of net periodic postretirement health care cost by approximately
$4.7 million, or 10.5%, and increase the accumulated postretirement benefit
obligation as of December 31, 1994 by $54.4 million, or 11.3%.
The assumed health care cost trend rates used in measuring the accumulated
postretirement benefit obligation in 1994 were: medical costs for pre-age
sixty-five retirees -- 13.5%, medical costs for post-age retirees -- 9.5% and
dental costs -- 7.5%; such rates are assumed to gradually decline to 5.5%, 5.0%
and 5.0%, respectively, in 2010. The medical costs above include a provision
for prescription drugs.
In its 1992 base rate case, PSE&G requested full recovery of the costs
associated with postretirement benefits other than pensions (OPEB) on an
accrual basis, in accordance with SFAS 106. The BPU's December 31, 1992 base
rate order provided that (1) PSE&G's pay-as-you-go basis OPEB costs will
continue to be included in cost of service and will be recoverable in base
rates on a pay-as-you-go basis; (2) prudently incurred OPEB costs, that are
accounted for on an accrual basis in accordance with SFAS 106, will be
recoverable in future rates; (3) PSE&G should account for the differences
between its OPEB costs on an accrual basis and the pay-as-you-go basis being
recovered in rates as a regulatory asset; and (4) the issue of cash versus
accrual accounting will be revisited and in the event that FASB or the SEC
requires the use of accrual accounting for OPEB costs for ratemaking purposes,
the regulatory asset will be recoverable, through rates, over an appropriate
amortization period.
Accordingly, PSE&G is accounting for the differences between its SFAS 106
accrual cost and the cash cost currently recovered through rates as a
regulatory asset. OPEB costs charged to expenses during 1994 were $29.2 million
and accrued OPEB costs deferred were $57.8 million. The amount of the unfunded
liability, at December 31, 1994, as shown below, is $585.9 million and funding
options are currently being explored. The primary effect of adopting SFAS 106
on Enterprise's and PSE&G's financial reporting is on the presentation of their
financial positions with minimal effect on their results of operations.
During January 1993 and subsequent to the receipt of the Order, the FASB's
Emerging Issues Task Force (EITF) concluded that deferral of such costs is
acceptable, provided regulators allow SFAS 106 costs in rates within
approximately five years of the adoption of SFAS 106 for financial reporting
purposes, with any cost deferrals recovered in approximately twenty years.
PSE&G intends to request the BPU for full SFAS 106 recovery in accordance with
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
the EITF's view of such standard and believes that it is probable that any
deferred costs will be recovered from utility customers within such twenty-year
time period. As of December 31, 1994, PSE&G has deferred $116.4 million of
such costs.
In accordance with SFAS 106 disclosure requirements, a reconciliation of
the funded status of the plan is as follows:
DECEMBER 31,
----------------------
1994 1993
-------- --------
(MILLIONS)
Accumulated postretirement benefit obligation:
Retirees........................................... $(379.2) $(406.4)
Fully eligible active plan participants............ (45.7) (35.0)
Other active plan participants..................... (161.0) (215.6)
------- -------
Total.......................................... (585.9) (657.0)
Plan assets at fair value.......................... -- --
------- -------
Accumulated postretirement benefit obligation
in excess of plan assets......................... (585.9) (657.0)
Unrecognized net (gain)/loss from past experience
different from that assumed and from changes
in assumptions................................... (78.8) 19.6
Unrecognized prior service cost.................... -- --
Unrecognized transition obligation................. 548.3 578.8
------- -------
Accrued postretirement obligation.................. $(116.4) $ (58.6)
======= =======
The discount rate used in determining the accumulated postretirement
benefit obligation as of December 31, 1994 was 8.50% and 7.25% for 1994 and
1993, respectively.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 14. PENSION PLAN
The discount rates, expected long-term rates of return on assets and
average compensation growth rates used in determining the Pension Plan's funded
status and net pension cost as of December 31, 1994 and 1993 were as follows:
1994 1993
------ ------
Funded Status:
- -------------
Discount Rate used to Determine Benefit Obligations...... 8-1/2% 7-1/4%
Average Compensation Growth to Determine
Benefit Obligations.................................... 4.5% 5.5%
Net Pension Cost:
- ----------------
Discount Rate............................................ 7-1/4% 7-1/2%
Expected Long-Term Return on Assets...................... 8% 8%
Average Compensation Growth.............................. 5.5% 6%
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table shows the Pension Plan's funded status:
DECEMBER 31,
-------------------------
1994 1993
----------- -----------
(THOUSANDS OF DOLLARS)
Actuarial present value of benefit obligations:
Accumulated benefit obligations, including vested benefits
of $1,151,677 in 1994 and $1,045,035 in 1993........... $(1,235,930) $(1,144,214)
Effect of projected future compensation................... (261,846) (346,416)
----------- -----------
Projected benefit obligations............................... (1,497,776) (1,490,630)
Plan assets at fair value, primarily listed equity and debt
securities................................................ 1,270,116 1,312,619
----------- -----------
Projected benefit obligations in excess of plan assets...... (227,660) (178,011)
Unrecognized net gain (loss) from past experience and
effects of changes in assumptions......................... 32,815 (20,981)
Prior service cost not yet recognized in net pension cost... 119,783 113,397
Unrecognized net obligations being recognized over
16.7 years................................................ 69,387 77,486
----------- -----------
Accrued pension expense..................................... $ (5,675) $ (8,109)
=========== ===========
The net pension cost for the years ending December 31, 1994, 1993 and 1992, include the following
components:
1994 1993 1992
-------- -------- --------
(THOUSANDS OF DOLLARS)
Service cost - benefits earned during year......... $ 42,904 $ 42,948 $ 36,125
Interest cost on projected benefit obligations..... 108,394 103,118 94,233
Return on assets................................... 5,022 (166,916) (62,323)
Net amortization and deferral...................... (90,752) 90,958 (14,035)
-------- -------- --------
Total.............................................. $ 65,568 $ 70,108 $ 54,000
======== ======== ========
See Note 1 -- Organization and Summary of Significant Accounting Policies.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 15. FINANCIAL INFORMATION BY BUSINESS SEGMENTS
Information related to the segments of Enterprise's business is detailed below:
NONUTILITY
ELECTRIC GAS ACTIVITIES(A) TOTAL
----------- ---------- ------------- -----------
(THOUSANDS OF DOLLARS)
FOR THE YEAR ENDED DECEMBER 31, 1994
Operating Revenues...................... $ 3,733,113 $1,778,528 $ 416,947 $ 5,928,588
Eliminations (Intersegment Revenues).... -- -- (12,745) (12,745)
----------- ---------- ---------- -----------
Total Operating Revenues................ 3,733,113 1,778,528 404,202 5,915,843
----------- ---------- ---------- -----------
Depreciation and Amortization........... 467,570 79,462 82,656 629,688
Operating Income Before Income Taxes.... 1,083,155 226,196 172,800 1,482,151
Capital Expenditures.................... 734,100 153,183 168,741 1,056,024
December 31, 1994
Net Utility Plant....................... 9,642,177 1,456,068 -- 11,098,245
Oil and Gas Property, Plant &
Equipment............................. -- -- 577,913 577,913
Other Corporate Assets.................. 2,589,348 576,806 1,875,128 5,041,282
----------- ---------- ---------- -----------
Total Assets............................ $12,231,525 $2,032,874 $2,453,041 $16,717,440
=========== ========== ========== ===========
FOR THE YEAR ENDED DECEMBER 31, 1993
Operating Revenues...................... $ 3,693,083 $1,594,341 $ 440,120 $ 5,727,544
Eliminations (Intersegment Revenues).... -- -- (21,985) (21,985)
----------- ---------- ---------- -----------
Total Operating Revenues................ 3,693,083 1,594,341 418,135 5,705,559
----------- ---------- ---------- -----------
Depreciation and Amortization........... 439,831 69,375 91,058 600,264
Operating Income Before Income Taxes.... 1,117,739 173,916 135,472 1,427,127
Capital Expenditures.................... 738,362 152,012 94,014 984,388
December 31, 1993
Net Utility Plant....................... 9,451,581 1,352,799 -- 10,804,380
Oil and Gas Property, Plant &
Equipment............................. -- -- 506,047 506,047
Other Corporate Assets.................. 2,313,394 866,524 1,839,311 5,019,229
----------- ---------- ---------- -----------
Total Assets............................ $11,764,975 $2,219,323 $2,345,358 $16,329,656
=========== ========== ========== ===========
FOR THE YEAR ENDED DECEMBER 31, 1992
Operating Revenues...................... $ 3,407,819 $1,586,181 $ 407,404 $ 5,401,404
Eliminations (Intersegment Revenues).... -- -- (44,623) (44,623)
----------- ---------- ---------- -----------
Total Operating Revenues................ 3,407,819 1,586,181 362,781 5,356,781
----------- ---------- ---------- -----------
Depreciation and Amortization........... 435,104 116,907 90,537 642,548
Operating Income Before Income Taxes.... 861,066 124,893 206,783 1,192,742
Capital Expenditures.................... 668,537 158,224 61,048 887,809
December 31, 1992
Net Utility Plant....................... 9,224,543 1,246,769 -- 10,471,312
Oil and Gas Property, Plant &
Equipment............................. -- -- 506,814 506,814
Other Corporate Assets.................. 1,315,564 486,981 1,997,061 3,799,606
----------- ---------- ---------- -----------
Total Assets............................ $10,540,107 $1,733,750 $2,503,875 $14,777,732
=========== ========== ========== ===========
(A) The Nonutility Activities include amounts applicable to Enterprise, the parent corporation.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Information related to Property, Plant and Equipment of PSE&G is detailed below:
DECEMBER DECEMBER DECEMBER
1994 1993 1992
----------- ----------- -----------
(Thousands of Dollars)
Utility Plant - Original Cost
Electric Plant in Service
Steam Production....................... $ 1,810,674 $ 1,763,253 $ 1,668,198
Nuclear Production..................... 5,931,049 5,873,274 5,819,755
Transmission........................... 1,078,928 1,034,150 1,024,843
Distribution........................... 2,877,862 2,724,202 2,573,226
Other.................................. 647,406 526,015 479,647
----------- ----------- ------------
Total Electric Plant in Service.... 12,345,919 11,920,894 11,565,669
----------- ----------- -----------
Gas Plant in Service
Transmission........................... 62,213 63,395 57,405
Distribution........................... 2,131,816 1,993,044 1,870,462
Other.................................. 124,204 121,402 117,077
----------- ----------- -----------
Total Gas Plant in Service......... 2,318,233 2,177,841 2,044,944
----------- ----------- -----------
Common Plant in Service
Capital Leases......................... 58,610 56,812 56,812
General................................ 486,521 463,473 423,160
----------- ----------- -----------
Total Common Plant in Service...... 545,131 520,285 479,972
----------- ----------- -----------
TOTAL......................... $15,209,283 $14,619,020 $14,090,585
=========== =========== ===========
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONCLUDED)
NOTE 16. PROPERTY IMPAIRMENT OF ENTERPRISE GROUP DEVELOPMENT CORPORATION
As a result of a management review of each property's current value and
the potential for increasing such value through operating and other
improvements, EGDC recorded an impairment in 1993 related to certain of its
properties, including properties upon which EDHI's management revised its
intent from a long-term investment strategy to a hold for sale status,
reflecting such properties on its books at their net realizable value. This
impairment reduced the estimated value of EGDC's properties by $77.6 million
and 1993 net income by $50.5 million, after tax, or 21 cents per share of
Enterprise Common Stock. EGDC's real estate held for sale of $13.5 million and
$33.8 million at December 31, 1994 and 1993 are presented in "Other Assets --
net," respectively, in the accompanying consolidated balance sheets.
NOTE 17. JOINTLY OWNED FACILITIES -- UTILITY PLANT
PSE&G has ownership interests in and is responsible for providing its
share of the necessary financing for the following jointly owned facilities.
All amounts reflect the share of PSE&G's jointly owned projects and the
corresponding direct expenses are included in Consolidated Statements of Income
as operating expenses. (See Note 1 -- Organization and Summary of Significant
Accounting Policies.)
OWNERSHIP PLANT IN ACCUMULATED PLANT UNDER
PLANT -- DECEMBER 31, 1994 INTEREST SERVICE DEPRECIATION CONSTRUCTION
- ------------------------------------------------ --------- --------- ------------ ------------
% (THOUSANDS OF DOLLARS)
Coal Generating
Conemaugh..................................... 22.50 $ 176,463 $ 35,044 $ 16,150
Keystone...................................... 22.84 111,360 30,935 2,615
Nuclear Generating
Peach Bottom.................................. 42.49 729,317 286,565 28,239
Salem......................................... 42.59 1,021,588 358,492 39,550
Hope Creek.................................... 95.00 4,120,538 938,535 5,104
Nuclear Support Facilities.................... Various 158,400 28,211 6,342
Pumped Storage Generating
Yards Creek................................... 50.00 23,645 8,721 2,886
Transmission Facilities......................... Various 120,274 34,720 9
Merrill Creek Reservoir......................... 13.91 37,184 10,492 --
Linden Gas Plant................................ 90.00 15,872 18,532 --
NOTE 18. SELECTED QUARTERLY DATA (UNAUDITED)
The information shown below, in the opinion of Enterprise, includes all
adjustments, consisting onlyof normal recurring accruals, necessary to a fair
presentation of such amounts. Due to the seasonal nature of the utility
business, quarterly amounts vary significantly during the year.
CALENDAR MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
QUARTER ---------------------- ---------------------- ---------------------- ----------------------
ENDED 1994 1993 1994 1993 1994 1993 1994 1993
- -------------------------- ---------- ---------- ---------- ---------- ---------- ----------- ---------- ----------
(THOUSANDS WHERE APPLICABLE)
Operating Revenues........ $1,794,425 $1,594,708 $1,278,363 $1,246,337 $1,374,976 $1,402,037 $1,468,079 $1,462,477
Operating Income.......... $ 348,948 $ 336,505 $ 252,725 $ 248,658 $ 311,920 $ 318,785 $ 250,500 $ 202,899
Net Income................ $ 230,127 $ 215,418 $ 129,885 $ 119,782 $ 187,178 $ 192,231 $ 131,843 $ 73,502
Earnings Per Share of
Common Stock............ $ 0.94 $ 0.91 $ 0.53 $ 0.49 $ 0.76 $ 0.79 $ 0.54 $ 0.30
Average Shares of Common
Stock Outstanding....... 243,777 236,919 244,698 240,920 244,698 241,889 244,698 242,848
PUBLIC SERVICE ELECTRIC AND GAS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PSE&G
Except as modified below, the Notes to Consolidated Financial Statements
of Enterprise are incorporated herein by reference insofar as they relate to
PSE&G and its subsidiaries:
Note 1. - Organization and Summary of Significant Accounting Policies
Note 2. - Rate Matters
Note 3. - PSE&G Nuclear Decommissioning and Amortization of Nuclear Fuel
Note 4. - Schedule of Consolidated Capital Stock and Other Securities
Note 5. - Deferred Items
Note 6. - Schedule of Consolidated Debt
Note 7. - Long-Term Investments
Note 8. - Financial Instruments and Risk Management
Note 11. - Leasing Activities -- As Lessee
Note 12. - Commitments and Contingent Liabilities
Note 13. - Postretirement Benefits Other Than Pensions
Note 14. - Pension Plan
Note 15. - Financial Information by Business Segments
Note 17. - Jointly Owned Facilities -- Utility Plant
NOTE 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Consolidation Policy
The consolidated financial statements include the accounts of PSE&G and
its subsidiaries. All significant intercompany accounts and transactions have
been eliminated in consolidation. Certain reclassifications of prior years'
data have been made to conform with the current presentation.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 9. CASH AND CASH EQUIVALENTS
The December 31, 1994 and 1993 balances consist primarily of working funds.
NOTE 10. FEDERAL INCOME TAXES
A reconciliation of reported Net Income with pretax income and of Federal income tax expense
with the amount computed by multiplying pretax income by the statutory Federal income tax rates of
35% in 1994 and 1993 and 34% in 1992 is as follows:
1994 1993 1992
-------- -------- --------
(THOUSANDS OF DOLLARS)
Net Income......................................... $659,406 $614,868 $475,936
-------- -------- --------
Federal income taxes:
Operating income:
Current provision............................. 230,709 177,314 214,887
Provision for deferred income taxes-net(A).... 83,028 149,884 (334)
Investment tax credits -- net................. (19,208) (18,408) (19,089)
-------- -------- --------
Total included in operating income................. 294,529 308,790 195,464
Miscellaneous other income:
Current provision................................ (8,186) (15,419) 4,718
Provision for deferred income taxes(A)........... 10,422 9,815 19,261
SFAS 90 deferred income taxes(A)................... 2,530 2,948 2,690
-------- -------- --------
Total Federal income tax provisions................ 299,295 306,134 222,133
-------- -------- --------
Pretax income...................................... $958,701 $921,002 $698,069
======== ======== ========
Reconciliation between total Federal income tax provisions and tax computed at the statutory tax
rate on pretax income:
1994 1993 1992
-------- -------- --------
(THOUSANDS OF DOLLARS)
Tax expense at the statutory rate.................. $335,546 $322,351 $237,343
-------- -------- --------
Increase (decrease) attributable to flow-through of
certain tax adjustments:
Depreciation.................................. (4,597) 3,347 19,330
Amortization of plant abandonments and
write-downs................................. (2,046) (2,239) (18,867)
Amortization of investment tax credits........ (19,208) (18,408) (18,408)
Other......................................... (10,400) 1,083 2,735
-------- -------- --------
Subtotal........................................... (36,251) (16,217) (15,210)
-------- -------- --------
Total Federal income tax provisions................ $299,295 $306,134 $222,133
======== ======== ========
Effective Federal income tax rate.................. 31.2% 33.2% 31.8%
(A) The provision for deferred income taxes represents the tax effects of the following items:
1994 1993 1992
-------- -------- --------
(THOUSANDS OF DOLLARS)
Deferred Credits:
Additional tax depreciation and amortization......... $ 85,335 $ 92,693 $ 94,757
Property Abandonments................................ (6,606) (6,632) (34,739)
Oil and Gas Property Write-Down...................... (2,451) (2,451) (6,393)
Deferred fuel costs-net.............................. 39,361 63,330 (40,148)
Other................................................ (19,659) 15,707 8,140
-------- -------- --------
Total........................................ $ 95,980 $162,647 $ 21,617
======== ======== ========
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SFAS 109
The following is an analysis of accumulated deferred income taxes:
ACCUMULATED DEFERRED INCOME TAXES 1994 1993
---------- ----------
(THOUSANDS OF DOLLARS)
Assets:
Current (net)....................................................... $ 25,311 $ 12,934
Non-Current:
Unrecovered Investment Tax Credits............................... 136,402 143,125
Nuclear Decommissioning.......................................... 25,082 25,211
Hope Creek Cost Disallowance..................................... 10,127 20,231
Construction Period Interest and Taxes........................... 15,913 9,811
Vacation Pay..................................................... 6,822 6,721
Other............................................................ 6,863 14,845
---------- ----------
Total Non-Current........................................... $ 201,209 $ 219,944
---------- ----------
Total Assets.......................................................... $ 226,520 $ 232,878
========== ==========
Liabilities:
Non-Current:
Plant Related Items.............................................. $2,157,206 $2,075,359
Property Abandonments............................................ 26,971 32,206
Oil and Gas Property Write-Down.................................. 14,925 16,790
Deferred Electric Energy & Gas Costs............................. 59,884 20,133
Unamortized Debt Expense......................................... 37,599 38,768
Taxes Recoverable Through Future Rates (Net)..................... 270,684 270,518
Other............................................................ 112,479 134,948
---------- ----------
Total Non-Current........................................... $2,679,748 $2,588,722
---------- ----------
Total Liabilities..................................................... $2,679,748 $2,588,722
========== ==========
Summary -- Accumulated Deferred Income Taxes
Net Current Assets.................................................. $ 25,311 $ 12,934
Net Deferred Liability.............................................. $2,478,539 $2,368,778
---------- ----------
Total............................................................ $2,453,228 $2,355,844
========== ==========
The balance of Federal income tax payable by PSE&G to Enterprise was $15.6 million and zero, as of
December 31, 1994 and December 31, 1993, respectively.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONCLUDED)
NOTE 18. SELECTED QUARTERLY DATA (UNAUDITED)
The information shown below, in the opinion of PSE&G, includes all
adjustments, consisting only of normal recurring accruals, necessary to a fair
presentation of such amounts. Due to the seasonal nature of the utility
business, quarterly amounts vary significantly during the year.
CALENDAR MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
QUARTER ---------------------- ---------------------- ---------------------- ----------------------
ENDED 1994 1993 1994 1993 1994 1993 1994 1993
- ---------------------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
(THOUSANDS OF DOLLARS)
Operating Revenues.... $1,689,967 $1,502,247 $1,181,655 $1,147,901 $1,282,952 $1,291,192 $1,357,067 $1,346,084
Operating Income...... $ 305,013 $ 294,734 $ 218,225 $ 206,056 $ 282,782 $ 279,173 $ 206,650 $ 201,622
Net Income............ $ 221,439 $ 204,404 $ 128,113 $ 113,849 $ 190,378 $ 188,575 $ 119,476 $ 108,040
Earnings Available to
Public Service
Enterprise Group
Incorporated........ $ 211,159 $ 195,582 $ 117,969 $ 104,092 $ 180,234 $ 178,808 $ 109,577 $ 98,272
NOTE 19. ACCOUNTS PAYABLE TO ASSOCIATED COMPANIES -- NET
The balance at December 31, 1994 and 1993 consisted of the following:
1994 1993
------- -------
(THOUSANDS OF DOLLARS)
Public Service Enterprise Group Incorporated (A).......... $17,678 $ 582
Energy Development Corporation............................ (336) 5,698
Other..................................................... (665) (606)
------- -------
Total.............................................. $16,677 $ 5,674
======= =======
(A) Principally Federal income taxes related to PSE&G's taxable income.
PART III
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
Enterprise and PSE&G, none.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANTS
DIRECTORS OF THE REGISTRANTS
Enterprise
The information required by Item 10 of Form 10-K with respect to present
directors who are nominees for election as directors at Enterprise's Annual
Meeting of Stockholders to be held on April 18, 1995, and directors whose terms
will continue beyond the meeting, is set forth under the heading "Election of
Directors" in Enterprise's definitive Proxy Statement for such Annual Meeting
of Stockholders, which definitive Proxy Statement is expected to be filed with
the Securities and Exchange Commission on or about March 1, 1995 and which
information set forth under said heading is incorporated herein by this
reference thereto.
PSE&G
There is shown as to each present director information as to the period
of service as a director of PSE&G, age as of April 18, 1995, present committee
memberships, business experience during the last five years and other present
directorships.
LAWRENCE R. CODEY has been a director since 1988. Age 50. Member of
Executive Committee. Has been President and Chief Operating Officer of PSE&G
since September 1991. Was Senior Vice President-Electric of PSE&G from January
1989 to September 1991. Director of Enterprise. Director of Sealed Air
Corporation, The Trust Company of New Jersey, United Water Resources Inc.,
and Blue Cross & Blue Shield of New Jersey.
E. JAMES FERLAND has been a director since 1986, and Chairman of the
Board, President and Chief Executive Officer of Enterprise since July 1986,
Chairman of the Board and Chief Executive Officer of PSE&G since September
1991, and Chairman of the Board and Chief Executive Officer of EDHI since June
1989. Age 53. Chairman of Executive Committee. President of PSE&G from July
1986 to September 1991. Director of Enterprise and of EDHI and its
subsidiaries, CEA, EDC, PSRC, EGDC, Capital and Funding. Director of First
Fidelity Bancorporation, First Fidelity Bank, N.A., Foster Wheeler Corporation
and The Hartford Steam Boiler Inspection and Insurance Company.
RAYMOND V. GILMARTIN has been a director since July 20, 1993. Age 54.
Director of Enterprise. Has been Chairman of the Board, President and Chief
Executive Officer of Merck & Co., Inc. Whitehouse Station, New Jersey
(discovers, develops, produces and markets human and animal health products)
since November 1994. Was President and Chief Executive Officer of Merck & Co.,
Inc. from June 1994 to November 1994. Was Chairman of the Board, President and
Chief Executive Officer of Becton Dickinson and Company (manufactures medical
devices and diagnostic systems) from November 1992 to June 1994 and President
and Chief Executive Officer of Becton Dickinson and Company from February 1989
to November 1992. Director of Merck & Co., Inc. and Providian Corporation.
SHIRLEY A. JACKSON has been a director since July 20, 1993. Was previously
a director from 1987 to February 1988. Age 48. Director of Enterprise. Has been
Professor of Physics, Rutgers University, since 1991 and has been a theoretical
physics consultant since 1991 and was a theoretical physicist from 1976 to 1991
at AT&T Bell Laboratories (performs research and development in areas related
to telecommunications for AT&T Corp.). Director of Core States Financial
Corporation, Core States/New Jersey National Bank, New Jersey Resources
Corporation and Sealed Air Corporation. Trustee of Massachusetts Institute of
Technology.
IRWIN LERNER has been a director since July 20, 1993. Was previously a
director from 1981 to February 1988. Age 64. Director of Enterprise. Was
Chairman, Board of Directors and Executive Committee from January 1993 to
September 1993 and President and Chief Executive Officer from 1980 to December
1992 of Hoffmann-La Roche Inc., Nutley, New Jersey (manufactures
pharmaceuticals, vitamins, fine chemicals and provides home health care and
diagnostic products and services). Director of Humana Inc. and Affymax, N.V.
JAMES C. PITNEY has been a director since July 20, 1993. Was previously
a director from 1979 to February 1988. Age 68. Member of Executive Committee.
Director of Enterprise. Has been a partner in the law firm of Pitney, Hardin,
Kipp & Szuch, Morristown, New Jersey, since 1958, Director of Tri-Continental
Corporation and sixteen funds of the Seligman family of funds.
Executive Officers of the Registrants
The following table sets forth certain information concerning the
executive officers of Enterprise and PSE&G, respectively.
AGE EFFECTIVE DATE
DECEMBER 31, FIRST ELECTED
NAME 1994 OFFICE TO PRESENT POSITION
- ------------------------------------ ---------------------------------- -------------------------
E. James Ferland........ 52 Chairman of the Board, President July 1986 to present
and Chief Executive Officer
(Enterprise)
Chairman of the Board and Chief July 1986 to present
Executive Officer (PSE&G)
President (PSE&G) June 1986 to September 1991
Chairman of the Board and Chief June 1989 to present
Executive Officer (EDHI)
Lawrence R. Codey....... 50 President and Chief Operating September 1991 to present
Officer (PSE&G)
Senior Vice President -- Electric January 1989 to September 1991
(PSE&G)
Robert C. Murray........ 49 Vice President and Chief Financial January 1992 to present
Officer (Enterprise)
Senior Vice President -- Finance January 1992 to present
and Chief Financial Officer
(PSE&G)
Managing Director of Morgan January 1987 to July 1991
Stanley & Co. Incorporated
Patricia A. Rado........ 52 Vice President and Controller April 1993 to present
(Enterprise)
Vice President and Controller April 1993 to present
(PSE&G)
Controller of Yankee Energy July 1989 to April 1993
Systems Inc.
Paul H. Way............. 57 President, Chief Operating February 1993 to present
Officer and Director (EDHI)
Senior Vice President (EDHI) June 1992 to February 1993
Senior Vice President -- April 1988 to
Corporate Performance (PSE&G) June 1992
R. Edwin Selover........ 49 Vice President and General April 1988 to present
Counsel (Enterprise)
Senior Vice President and General January 1988 to present
Counsel (PSE&G)
Francis J. Riepl........ 58 Treasurer (Enterprise) March 1987 to present
Vice President and Treasurer March 1987 to present
(PSE&G)
Harold W. Borden, Jr.... 50 Senior Vice President -- External January 1990 to present
Affairs (PSE&G)
Thomas M. Crimmins, Jr. . 51 Senior Vice President -- September 1991 to present
Customer Operations (PSE&G)
Vice President -- Nuclear May 1989 to
Engineering (PSE&G) September 1991
AGE EFFECTIVE DATE
DECEMBER 31, FIRST ELECTED
NAME 1994 OFFICE TO PRESENT POSITION
- ------------------------------------ ---------------------------------- -------------------------
Robert J. Dougherty, Jr. 43 Senior Vice President -- Electric September 1991 to present
(PSE&G)
Senior Vice President -- Customer September 1989 to
Operations (PSE&G) September 1991
Leon R. Eliason 55 Chief Nuclear Officer and October 1994 to
President - Nuclear Business present
Unit (PSE&G)
President, Power Supply Business January 1993 to
Unit, Northern States Power September 1994
Vice President, Nuclear Genera- July 1990 to
tion, Northern States Power January 1993
General Manager, Nuclear Opera- 1980 to June 1990
tions, Prairie Island and Monti-
cello Nuclear Station, Northern
States Power
Rudolph D. Stys......... 59 Senior Vice President -- Gas January 1989 to present
(PSE&G)
ITEM 11. EXECUTIVE COMPENSATION
ENTERPRISE
The information required by Item 11 of Form 10-K is set forth under the
heading "Executive Compensation" in Enterprise's definitive Proxy Statement for
the Annual Meeting of Stockholders to be held April 18, 1995, which definitive
Proxy Statement is expected to be filed with the Securities and Exchange
Commission on or about March 1, 1995 and such information set forth under such
heading is incorporated herein by this reference thereto.
PSE&G
Information regarding the compensation of the Chief Executive Officer and
the four most highly compensated executive officers of PSE&G as of December 31,
1994 is set forth below. Amounts shown were paid or awarded for all services
rendered to Enterprise and its subsidiaries and affiliates including PSE&G.
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
---------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
----------------------- --------- ---------
SECURITIES
BONUS/ANNUAL UNDERLYING LTIP ALL OTHER
SALARY INCENTIVE OPTIONS PAYOUTS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR $(1) AWARD($)(2) (#)(3) ($)(4) ($)(5)
- --------------------------- ---- ------- ------------ ---------- ------- ------------
E. James Ferland........... 1994 652,492 (6) 5,400 127,140 5,628
Chairman of the Board, 1993 622,606 265,316 5,800 28,072 7,678
President and CEO of 1992 620,691 244,759 5,600 27,588 7,610
Enterprise
Lawrence R. Codey.......... 1994 398,468 (6) 2,500 48,900 5,351
President and Chief 1993 378,545 109,585 2,800 9,570 6,981
Operating Officer of PSE&G 1992 336,208 102,919 2,700 6,270 6,789
Robert C. Murray........... 1994 303,832 50,000(6)(7) 1,800 26,895 4,944
Vice President and Chief 1993 288,889 154,032(6)(8) 2,000 3,190 7,264
Financial Officer of 1992 263,410 70,463 3,200 0 5,064
Enterprise and
Senior Vice President-
Finance and Chief Financial
Officer of PSE&G
Robert J. Dougherty, Jr. .. 1994 273,946 (6) 1,800 26,895 4,227
Senior Vice President- 1993 259,004 65,703 2,000 5,104 6,341
Electric of PSE&G 1992 222,415 59,916 1,600 0 5,995
R. Edwin Selover........... 1994 241,074 (6) 1,300 29,340 5,512
Vice President and General 1993 231,113 51,040 1,400 0 7,594
Counsel of Enterprise and 1992 228,621 44,914 1,300 0 7,576
Senior Vice President and
General Counsel of PSE&G
(1) Due to pay schedules, 1992 amounts reflect one additional pay period per individual compared to 1994
and 1993.
(2) Amount awarded in given year was earned under Management Incentive Compensation Plan (MICP) and
determined in following year with respect to the given year based on individual performance and
financial and operating performance of Enterprise and PSE&G, including comparison to other
companies. Award is accounted for as market-priced phantom stock with dividend reinvestment at
95% of market price, with payment made over three years beginning in second year following grant.
(3) Granted under Long-Term Incentive Plan (LTIP) in tandem with equal number of performance units and
dividend equivalents which may provide cash payments, dependent upon future financial performance of
Enterprise in comparison to other companies and dividend payments by Enterprise, to assist officers in
exercising options granted. The grant is made at the beginning of a three-year performance period and
cash payment of the value of such performance units and dividend equivalents is made following such period
in proportion to the options, if any, exercised at such time.
(4) Amount paid in proportion to options exercised, if any, based on value of previously granted performance
units and dividend equivalents, each as measured during three-year period ending the year prior to the
year in which payment is made.
(5) Includes employer contribution to Thrift and Tax-Deferred Savings Plan and value of 5% discount on phantom stock
dividend reinvestment under MICP:
FERLAND CODEY MURRAY DOUGHERTY SELOVER
-------------- -------------- ------------- ------------- ---------------
THRIFT MICP THRIFT MICP THRIFT MICP THRIFT MICP THRIFT MICP
$ $ $ $ $ $ $ $ $ $
------ ----- ------ ----- ------ ---- ------ ---- ------ ------
1994............ 3,751 1,877 4,197 1,154 4,504 440 3,752 475 4,506 1,006
1993............ 5,900 1,778 5,896 1,085 7,078 186 5,907 434 6,630 964
1992............ 5,725 1,885 5,725 1,064 5,064 0 5,562 433 6,588 988
(6) The 1994 MICP award amount has not yet been determined. The target award is 40% of salary for Mr. Ferland,
30% for Mr. Codey, 25% for Messrs. Murray and Dougherty and 20% for Mr. Selover. The target award is
adjusted to reflect Enterprise's comparative return on capital, PSE&G's comparative electric and gas costs
and individual performance.
(7) Amount paid pursuant to Mr. Murray's employment agreement.
(8) Includes $75,000 paid pursuant to Mr. Murray's employment agreement.
OPTION GRANTS IN LAST FISCAL YEAR (1994)
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
-------------------------------------------------- VALUE AT ASSUMED ANNUAL
NUMBER OF % OF TOTAL RATES OF STOCK PRICE
SECURITIES OPTIONS APPRECIATION FOR OPTION
UNDERLYING GRANTED TO EXERCISE OR TERM(2)
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION -----------------------
NAME GRANTED(1) FISCAL YEAR ($/SH) DATE 0%($) 5%($) 10%($)
- ------------------------- ----------- ------------ ----------- ---------- ----- ------- -------
E. James Ferland......... 5,400 28.1 31.375 1/04/94 0 106,550 270,020
Lawrence R. Codey........ 2,500 13.0 31.375 1/04/94 0 49,329 125,009
Robert C. Murray......... 1,800 9.4 31.375 1/04/94 0 35,517 90,007
Robert J. Dougherty,
Jr..................... 1,800 9.4 31.375 1/04/94 0 35,517 90,007
R. Edwin Selover......... 1,300 6.8 31.375 1/04/94 0 25,651 65,005
(1) Granted under LTIP in tandem with equal number of performance units and dividend equivalents which may
provide cash payments, dependent on future financial performance of Enterprise in comparison to other
companies and dividend payments by Enterprise, to assist individuals in exercising options, with exercisability
commencing January 1, 1997. Cash payment is made, based on the value, if any, of performance units awarded and
dividend equivalents accrued, if any, as measured during the three-year period ending the year prior to the year
in which payment, if any, is made, only if the specified performance level is achieved, dividend equivalents have
accrued and options are exercised.
(2) All options reported have a ten-year term, as noted. Amounts shown represent hypothetical future values
at such term based upon hypothetical price appreciation of Enterprise Common Stock and may not
necessarily be realized. Actual values which may be realized, if any, upon any exercise of such
options, will be based on the market price of Enterprise Common Stock at the time of any such exercise
and thus are dependent upon future performance of Enterprise Common Stock.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR (1994) AND
FISCAL YEAR-END OPTION VALUES (12/31/94)
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT FY-END(#)(1) AT FY-END($)(3)
ACQUIRED VALUE -------------------------- --------------------------
ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
NAME (#)(1) ($)(2) (#) (#) ($) ($)
- ------------------------- ----------- -------- ----------- ------------- ----------- -------------
E. James Ferland......... 5,200 19,874 0 16,800 0 0
Lawrence R. Codey........ 2,000 6,500 700 8,000 1,575 0
Robert C. Murray......... 1,100 2,200 0 5,400 0 0
Robert J. Dougherty, Jr.. 1,100 0 0 5,400 0 0
R. Edwin Selover......... 1,200 3,450 2,200 4,000 2,700 0
(1) Does not reflect any options granted and/or exercised after year-end (12/31/94). The net effect of any
such grants and exercises is reflected in the table appearing under Security Ownership of Directors and
Management.
(2) Represents difference between exercise price and market price of Enterprise Common Stock on date of
exercise.
(3) Represents difference between market price of Enterprise Common Stock and the respective exercise prices
of the options at fiscal year-end (12/31/94). Such amounts may not necessarily be realized. Actual values
which may be realized, if any, upon any exercise of such options will be based on the market price of
Enterprise Common Stock at the time of any such exercise and thus are dependent upon future performance of
Enterprise Common Stock.
Employment Contracts and Arrangements
Employment agreements were entered into with Messrs. Ferland and Murray
at the time of their employment. For Mr. Ferland, the remaining applicable
provisions of these agreements provide for additional credited service for
pension purposes in the amount of 22 years. The principal remaining applicable
terms of the agreement with Mr. Murray provide for payment of severance in the
amount of one year's salary, if discharged without cause during his first five
years of employment, for a lump sum cash payment of $25,000 in 1995 to align
Mr. Murray with MICP payments for other executive officers, and additional
years of credited service for pension purposes for allied work experience of
five years after completion of five years of employment, and up to fifteen
years after completion of ten years of service.
Compensation Committee Interlocks and Insider Participation
PSE&G does not have a compensation committee. Decisions regarding
compensation of PSE&G's executive officers are made by the Organization and
Compensation Committee of Enterprise. Hence, during 1994 the PSE&G Board of
Directors did not have, and no officer, employee or former officer of PSE&G
participated in any deliberations of such Board, concerning executive officer
compensation.
Compensation of Directors and Certain Business Relationships
A director who is not an officer of Enterprise or its subsidiaries and
affiliates, including PSE&G, is paid an annual retainer of $22,000 and a fee
of $1,200 for attendance at any Board or committee meeting, inspection trip,
conference or other similar activity relating to Enterprise, PSE&G or EDHI.
Each of the directors of PSE&G is also a director of Enterprise. No additional
retainer is paid for service as a director of PSE&G. Effective July 1, 1994,
50 percent of the annual retainer is payable each January in Enterprise Common
Stock for the twelve-month period beginning the preceding July 1 and ending the
following June 30.
Enterprise has a Retirement Plan for outside directors. Under this Plan,
directors with five years of service who have not been employees of Enterprise
or its subsidiaries, who leave service after age 65, or for disability, receive
an annual retirement benefit payable for life equal to the annual Board
retainer in effect at the time the director's service terminates. The benefit
payment is prorated for directors with less than 10 years of service on the
Board.
During 1994, Dr. Shirley A. Jackson, a director of Enterprise and PSE&G,
was the liaison member for the Board of Directors on and Chair of PSE&G's
Nuclear Oversight Committee (NOC). The NOC met three times during 1994, with
two meetings lasting two days and one meeting lasting three days. In accordance
with the compensation policy for all NOC members, Dr. Jackson received an
annual retainer of $28,000 and $1,000 per day for each NOC meeting attended.
COMPENSATION PURSUANT TO PENSION PLANS
PENSION PLAN TABLE
AVERAGE LENGTH OF SERVICE
FINAL -----------------------------------------------
COMPENSATION 30 YEARS 35 YEARS 40 YEARS 45 YEARS
- ------------ -------- -------- -------- --------
$ 300,000 $180,000 $195,000 $210,000 $225,000
400,000 240,000 260,000 280,000 300,000
500,000 300,000 325,000 350,000 375,000
600,000 360,000 390,000 420,000 450,000
700,000 420,000 455,000 490,000 525,000
800,000 480,000 520,000 560,000 600,000
900,000 540,000 585,000 630,000 675,000
1,000,000 600,000 650,000 700,000 750,000
The above table illustrates annual retirement benefits expressed in terms
of single life annuities based on the average final compensation and service
shown and retirement at age 65. A person's annual retirement benefit is based
upon a percentage that is equal to years of credited service plus 30, but not
more than 75%, times average final compensation at the earlier of retirement,
attainment of age 65 or death. These amounts are reduced by Social Security
benefits and certain retirement benefits from other employers. Pensions in the
form of joint and survivor annuities are also available.
Average final compensation, for purposes of retirement benefits of
executive officers, is generally equivalent to the average of the aggregate of
the salary and bonus amounts reported in the Summary Compensation Table above
under 'Annual Compensation' for the five years preceding retirement, not to
exceed 120% of the average annual salary for such five year period. Messrs.
Ferland, Codey, Murray, Dougherty and Selover will have accrued approximately
48, 41, 39, 48 and 43 years of credited service, respectively, as of age 65.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Enterprise
The information required by Item 12 of Form 10-K with respect to directors
and executive officers is set forth under the heading 'Security Ownership of
Directors and Management' in Enterprise's definitive Proxy Statement for the
Annual Meeting of Stockholders to be held April 18, 1995 which definitive Proxy
Statement is expected to be filed with the Securities and Exchange Commission
on or about March 1, 1995 and such information set forth under such heading is
incorporated herein by this reference thereto.
PSE&G
All of PSE&G's 132,450,344 outstanding shares of Common Stock are owned
beneficially and of record by PSE&G's parent, Enterprise, 80 Park Plaza, P.O.
Box 1171, Newark, New Jersey.
The following table sets forth beneficial ownership of Enterprise Common
Stock, including options, by the directors and executive officers named below
as of January 31, 1995. None of these amounts exceed 1% of the Enterprise
Common Stock outstanding at such date. No director or executive officer owns
any PSE&G Preferred Stock of any class.
AMOUNT AND NATURE OF
NAME BENEFICIAL OWNERSHIP
----------------------------------------------- --------------------
Lawrence R. Codey.............................. 18,611(1)
Robert J. Dougherty, Jr. ...................... 10,147(2)
E. James Ferland............................... 56,335(3)
Raymond V. Gilmartin........................... 1,415
Shirley A. Jackson............................. 1,488
Irwin Lerner................................... 3,996
Robert C. Murray............................... 11,555(4)
James C. Pitney................................ 3,154
R. Edwin Selover............................... 11,191(5)
All directors and executive officers (15)
as a group................................... 148,561(6)
- ---------------
(1) Includes options to purchase 11,500 additional shares, 3,400 of which are
currently exercisable.
(2) Includes the equivalent of 639 shares held under Thrift and Tax-Deferred
Savings Plan. Include options to purchase 7,400 additional shares, 1,600 of
which are currently exercisable.
(3) Includes the equivalent of 8,788 shares held under Thrift and Tax-Deferred
Savings Plan. Includes options to purchase 22,600 additional shares, 5,600
of which are currently exercisable.
(4) Includes the equivalent of 555 shares held under Thrift and Tax-Deferred
Savings Plan. Includes options to purchase 7,400 additional shares, 1,600
of which are currently exercisable.
(5) Disclaims beneficial ownership of 273 shares. Includes options to
purchase 7,600 additional shares, 3,500 of which are currently
exercisable.
(6) Includes 275 shares owned by relatives as to which beneficial ownership
is disclaimed. Also includes the equivalent of 10,699 shares held under
Thrift and Tax-Deferred Savings Plan. Includes options to purchase 78,400
additional shares, of which 21,000 are currently exercisable.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Enterprise
The information required by Item 13 of Form 10-K is set forth under the
heading "Executive Compensation" in Enterprise's definitive Proxy Statement for
the Annual Meeting of Stockholders to be held April 18, 1995, which definitive
Proxy Statement is expected to be filed with the Securities and Exchange
Commission on or about March 1, 1995. Such information set forth under such
heading is incorporated herein by this reference thereto.
PSE&G
None.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Financial Statements:
(1) Enterprise Consolidated Statements of Income for the years ended
December 31, 1994, 1993, and 1992, on page 83.
Enterprise Consolidated Balance Sheets for the years ended
December 31, 1994 and 1993, on pages 84 and 85.
Enterprise Consolidated Statements of Cash Flows for the
years ended December 31, 1994, 1993 and 1992 on page 86.
Enterprise Statements of Retained Earnings for the years
ended December 31, 1994, 1993 and 1992 on page 87.
Enterprise Notes to Consolidated Financial Statements on
pages 93 through 131.
(2) PSE&G Consolidated Statements of Income for the years ended
December 31, 1994, 1993 and 1992, on page 88.
PSE&G Consolidated Balance Sheets for the years ended
December 31, 1994 and 1993, on pages 89 and 90.
PSE&G Consolidated Statements of Cash Flows for the years
ended December 31, 1994, 1993 and 1992 on page 91.
PSE&G Statements of Retained Earnings for the years ended
December 31, 1994, 1993 and 1992 on page 92.
PSE&G Notes to Consolidated Financial Statements on pages
132 through 135.
(b) The following documents are filed as a part of this report:
(1) Enterprise Financial Statement Schedules:
Schedule VIII -- Valuation and Qualifying Accounts for each of
the three years in the period ended
December 31, 1994 (page 149).
(2) PSE&G Financial Statement Schedules:
Schedule VIII -- Valuation and Qualifying Accounts for each of
the three years in the period ended December 31,
1994 (page 150).
Schedules other than those listed above are omitted for the reason
that they are not required or are not applicable, or the required
information is shown in the consolidated financial statements or notes
thereto.
(c) The following exhibits are filed herewith:
(1) Enterprise:
[S] [C]
4b(4) -- Indenture dated November 1, 1994
10a(15) -- Letter Agreement, as amended, with
Leon R. Eliason dated September 14, 1994
12 -- Computation of Ratios of Earnings to Fixed Charges.
21 -- Subsidiaries of Registrant.
23 -- Independent Auditors' Consent.
27 -- Financial Data Schedule
(See Exhibit Index on pages 153 through 159).
(2) PSE&G:
[S] [C]
3b -- Copy of By-Laws of PSE&G, as in effect
September 1, 1994
4b(4) -- Indenture dated November 1, 1994
10a(14) -- Letter Agreement, as amended, with
Leon R. Eliason dated September 14, 1994
12(a) -- Computation of Ratios of Earnings to Fixed Charges.
12(b) -- Computation of Ratios of Earnings to Fixed Charges
Plus Preferred Stock Dividend Requirements.
23 -- Independent Auditors' Consent.
27 -- Financial Data Schedule
(See Exhibit Index on page 153 and pages 160 through 165).
(d) The following reports on Form 8-K were filed by the registrant(s)
named below during the last quarter of 1994 and the 1995
period covered by this report under Item 5:
REGISTRANT DATE OF REPORT ITEM REPORTED
- ------------------- ----------------- --------------------------------
Enterprise and PSE&G October 6, 1994 Item 5. Other Events (NRC fine
for the Salem Unit No. 1 event
and electric Levelized Energy
Adjustment Charge).
SCHEDULE VIII
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
SCHEDULE VIII -- VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 1994 -- DECEMBER 31, 1992
- ----------------------------------------------------------------------------------------------------------------------------
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- ----------------------------------------------------------------------------------------------------------------------------
ADDITIONS
----------------------------------
CHARGED TO
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
BEGINNING OF COST AND OTHER ACCOUNTS- DEDUCTIONS- END OF
DESCRIPTION PERIOD EXPENSES DESCRIBE DESCRIBE PERIOD
- ----------------------------------------------------------------------------------------------------------------------------
(THOUSANDS OF DOLLARS)
1994
Allowance for Doubtful Accounts........... $ 27,932 $ 50,140 $ -- $37,157(A) $ 40,915
============ ========== =============== =========== ==========
Discount on Property Abandonments......... $ 16,263 $ -- $ -- $ 4,840(B) $ 11,423
============ ========== =============== =========== ==========
Valuation Allowances...................... $ 34,703 $ 6,827 $ 4,500 $ 5,662 $ 40,368
============ ========== =============== =========== ==========
Inventory Valuation Reserve............... $ 8,525 $ 9,675 $ -- $ -- $ 18,200
1993
Allowance for Doubtful Accounts........... $ 24,059 $ 31,625 $ -- $27,752(A) $ 27,932
============ ========== =============== =========== ==========
Discount on Property Abandonments......... $ 21,951 $ -- $ -- $ 5,688(B) $ 16,263
============ ========== =============== =========== ==========
Valuation Allowances...................... $ 21,509 $ 17,887 $ -- $ 4,693 $ 34,703
============ ========== =============== =========== ==========
Inventory Valuation Reserve............... $ -- $ 8,525 $ -- $ -- $ 8,525
1992
Allowance for Doubtful Accounts........... $ 21,241 $ 29,488 $ -- $26,670(A) $ 24,059
========== ========= =============== =========== ==========
Discount on Property Abandonments......... $ 31,567 $ -- $ -- $ 9,616(B) $ 21,951
============ ========== =============== =========== ==========
Valuation Allowances...................... $ 16,696 $ 42,859 $ -- $38,046 $ 21,509
============ ========== =============== =========== ==========
Inventory Valuation Reserve............... $ -- $ -- $ -- $ -- $ --
NOTES:
(A) Accounts Receivable/Investments written off.
(B) Amortization of discount to income.
SCHEDULE VIII
PUBLIC SERVICE ELECTRIC AND GAS COMPANY
SCHEDULE VIII -- VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 1994 -- DECEMBER 31, 1992
- ----------------------------------------------------------------------------------------------------------------------------
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- ----------------------------------------------------------------------------------------------------------------------------
ADDITIONS
----------------------------------
CHARGED TO
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
BEGINNING OF COST AND OTHER ACCOUNTS- DEDUCTIONS- END OF
DESCRIPTION PERIOD EXPENSES DESCRIBE DESCRIBE PERIOD
- ----------------------------------------------------------------------------------------------------------------------------
(THOUSANDS OF DOLLARS)
1994
Allowance for Doubtful Accounts........... $ 27,932 $ 50,140 $ -- $37,157(A) $ 40,915
============ ========== =============== =========== ==========
Discount on Property Abandonments......... $ 16,263 $ -- $ -- $ 4,840(B) $ 11,423
============ ========== =============== =========== ==========
Inventory Valuation Reserve............... $ 8,525 $ 9,675 $ -- $ -- $ 18,200
1993
Allowance for Doubtful Accounts........... $ 24,059 $ 31,625 $ -- $27,752(A) $ 27,932
============ ========== =============== =========== ==========
Discount on Property Abandonments......... $ 21,951 $ -- $ -- $ 5,688(B) $ 16,263
============ ========== =============== =========== ==========
Inventory Valuation Reserve............... $ -- $ 8,525 $ -- $ -- $ 8,525
1992
Allowance for Doubtful Accounts........... $ 21,241 $ 29,488 $ -- $26,670(A) $ 24,059
============ ========== =============== =========== ==========
Discount on Property Abandonments......... $ 31,567 $ -- $ -- $ 9,616(B) $ 21,951
============ ========== =============== =========== ==========
Inventory Valuation Reserve............... $ -- $ -- $ -- $ -- $ --
NOTES:
(A) Accounts Receivable/Investments written off.
(B) Amortization of discount to income.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
PUBLIC SERVICE ENTERPRISE GROUP
INCORPORATED
By E. JAMES FERLAND
-------------------------------
E. James Ferland
Chairman of the Board, President
Date: February 23, 1995 and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
E. JAMES FERLAND
- -------------------------------- Chairman of the Board, February 23, 1995
E. James Ferland President and Chief
Executive Officer and
Director (Principal
Executive Officer)
ROBERT C. MURRAY
- -------------------------------- Vice President and Chief February 23, 1995
Robert C. Murray Financial Officer
(Principal Financial
Officer)
PATRICIA A. RADO
- -------------------------------- Vice President and February 23, 1995
Patricia A. Rado Controller (Principal
Accounting Officer)
LAWRENCE R. CODEY
- -------------------------------- Director February 23, 1995
Lawrence R. Codey
ERNEST H. DREW
- -------------------------------- Director February 23, 1995
Ernest H. Drew
T. J. DERMOT DUNPHY
- -------------------------------- Director February 23, 1995
T. J. Dermot Dunphy
RAYMOND V. GILMARTIN
- -------------------------------- Director February 23, 1995
Raymond V. Gilmartin
SHIRLEY A. JACKSON
- -------------------------------- Director February 23, 1995
Shirley A. Jackson
IRWIN LERNER
- -------------------------------- Director February 23, 1995
Irwin Lerner
MARILYN M. PFALTZ
- -------------------------------- Director February 23, 1995
Marilyn M. Pfaltz
JAMES C. PITNEY
- -------------------------------- Director February 23, 1995
James C. Pitney
RICHARD J. SWIFT
- -------------------------------- Director February 23, 1995
Richard J. Swift
JOSH S. WESTON
- -------------------------------- Director February 23, 1995
Josh S. Weston
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
PUBLIC SERVICE ELECTRIC AND GAS
COMPANY
By E. JAMES FERLAND
-------------------------------
E. James Ferland
Chairman of the Board and
Chief Executive Officer
Date: February 23, 1995
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
E. JAMES FERLAND
- -------------------------------- Chairman of the Board and February 23, 1995
E. James Ferland Chief Executive Officer
and Director (Principal
Executive Officer)
LAWRENCE R. CODEY
- -------------------------------- President and Chief February 23, 1995
Lawrence R. Codey Operating Officer and
Director
ROBERT C. MURRAY
- -------------------------------- Senior Vice President - February 23, 1995
Robert C. Murray Finance and Chief
Financial Officer
(Principal Financial
Officer)
PATRICIA A. RADO
- -------------------------------- Vice President and February 23, 1995
Patricia A. Rado Controller (Principal
Accounting Officer)
RAYMOND V. GILMARTIN
- -------------------------------- Director February 23, 1995
Raymond V. Gilmartin
SHIRLEY A. JACKSON
- -------------------------------- Director February 23, 1995
Shirley A. Jackson
IRWIN LERNER
- -------------------------------- Director February 23, 1995
Irwin Lerner
JAMES C. PITNEY
- -------------------------------- Director February 23, 1995
James C. Pitney
EXHIBIT INDEX
Certain Exhibits previously filed with the Commission and the appropriate
securities exchanges are indicated as set forth below. Such Exhibits are not
being refiled, but are included because inclusion is desirable for convenient
reference.
(a) Filed by PSE&G with Form 8-A under the Securities Exchange Act
of 1934, on the respective dates indicated, File No. 1-973.
(b) Filed by PSE&G with Form 8-K under the Securities Exchange Act
of 1934, on the respective dates indicated, File No. 1-973.
(c) Filed by PSE&G with Form 10-K under the Securities Exchange Act
of 1934, on the respective dates indicated, File No. 1-973.
(d) Filed by PSE&G with Form 10-Q under the Securities Exchange Act
of 1934, on the respective dates indicated, File No. 1-973.
(e) Filed by Enterprise with Form 10-K under the Securities Exchange
Act of 1934, on the respective dates indicated, File No. 1-9120.
(f) Filed with registration statement of PSE&G under the Securities
Exchange Act of 1934, File No. 1-973, effective July 1, 1935, relating to
the registration of various issues of securities.
(g) Filed with registration statement of PSE&G under the Securities
Act of 1933, No. 2-4995, effective May 20, 1942, relating to the issuance
of $15,000,000 First and Refunding Mortgage Bonds, 3% Series due 1972.
(h) Filed with registration statement of PSE&G under the Securities
Act of 1933, No. 2-7568, effective July 1, 1948, relating to the proposed
issuance of 200,000 shares of Cumulative Preferred Stock.
(i) Filed with registration statement of PSE&G under the Securities
Act of 1933, No. 2-8381, effective April 18, 1950, relating to the
issuance of $26,000,000 First and Refunding Mortgage Bonds, 2 3/4%
Series due 1980.
(j) Filed with registration statement of PSE&G under the Securities
Act of 1933, No. 2-12906, effective December 4, 1956, relating to the
issuance of 1,000,000 shares of Common Stock.
(k) Filed with registration statement of PSE&G under the Securities
Act of 1933, No. 2-59675, effective September 1, 1977, relating to the
issuance of $60,000,000 First and Refunding Mortgage Bonds, 8 1/8%
Series I due 2007.
(l) Filed with registration statement of PSE&G under the Securities
Act of 1933, No. 2-60925, effective March 30, 1978, relating to the
issuance of 750,000 shares of Common Stock through an Employee Stock
Purchase Plan.
(m) Filed with registration statement of PSE&G under the Securities
Act of 1933, No. 2-65521, effective October 10, 1979, relating to the
issuance of 3,000,000 shares of Common Stock.
(n) Filed with registration statement of PSE&G under the Securities
Act of 1933, No. 2-74018, filed on June 16, 1982, relating to the Thrift
Plan of PSE&G.
(o) Filed with registration statement of Public Service Enterprise
Group Incorporated under the Securities Act of 1933, No. 33-2935 filed
January 28, 1986, relating to PSE&G's plan to form a holding company as
part of a corporate restructuring.
(p) Filed with registration statement of PSE&G under the Securities
Act of 1933, No. 33-13209 filed April 9, 1987, relating to the
registration of $575,000,000 First and Refunding Mortgage Bonds
pursuant to Rule 415.
ENTERPRISE
EXHIBIT NUMBER
- --------------------------------------------
PREVIOUS FILING
THIS --------------------------------
FILING COMMISSION EXCHANGES
- --------- -------------- --------------
3a (o) 3a (o) 3a Certificate of Incorporation Public Service
Enterprise Group Incorporated
3b (e) 3b (e) 3b Copy of By-Laws of Public Service Enterprise
4/11/88 Group Incorporated, as in effect May 1, 1987
3c (e) 3c (e) 3c Certificate of Amendment of Certificate of
4/11/88 Incorporation of Public Service Enterprise Group
Incorporated, effective April 23, 1987
4a(1) (f) B-1 (c) 4b(1) Indenture between PSE&G and Fidelity Union Trust
2/18/81 Company, (now First Fidelity Bank, National
Association), as Trustee, dated August 1, 1924,
securing First and Refunding Mortgage Bonds
Indentures between PSE&G and First Fidelity
Bank, National Association, as Trustee,
supplemental to Exhibit 4a(1), dated as follows:
4a(2) (i) 7(1a) (c) 4b(2) April 1, 1927
2/18/81
4a(3) (k) 2b(3) (c) 4b(3) June 1, 1937
2/18/81
4a(4) (k) 2b(4) (c) 4b(4) July 1, 1937
2/18/81
4a(5) (k) 2b(5) (c) 4b(5) December 19, 1939
2/18/81
4a(6) (g) B-10 (c) 4b(6) March 1, 1942
2/18/81
4a(7) (k) 2b(7) (c) 4b(7) June 1, 1949
2/18/81
4a(8) (k) 2b(8) (c) 4b(8) May 1, 1950
2/18/81
4a(9) (k) 2b(9) (c) 4b(9) October 1, 1953
2/18/81
4a(10) (k) 2b(10) (c) 4b(10) May 1, 1954
2/18/81
4a(11) (j) 4b(16) (c) 4b(11) November 1, 1956
2/18/81
4a(12) (k) 2b(12) (c) 4b(12) September 1, 1957
2/18/81
4a(13) (k) 2b(13) (c) 4b(13) August 1, 1958
2/18/81
4a(14) (k) 2b(14) (c) 4b(14) June 1, 1959
2/18/81
4a(15) (k) 2b(15) (c) 4b(15) September 1, 1960
2/18/81
EXHIBIT NUMBER
- --------------------------------------------
PREVIOUS FILING
THIS --------------------------------
FILING COMMISSION EXCHANGES
- --------- -------------- --------------
4a(16) (k) 2b(16) (c) 4b(16) August 1, 1962
2/18/81
4a(17) (k) 2b(17) (c) 4b(17) June 1, 1963
2/18/81
4a(18) (k) 2b(18) (c) 4b(18) September 1, 1964
2/18/81
4a(19) (k) 2b(19) (c) 4b(19) September 1, 1965
2/18/81
4a(20) (k) 2b(20) (c) 4b(20) June 1, 1967
2/18/81
4a(21) (k) 2b(21) (c) 4b(21) June 1, 1968
2/18/81
4a(22) (k) 2b(22) (c) 4b(22) April 1, 1969
2/18/91
4a(23) (k) 2b(23) (c) 4b(23) March 1, 1970
2/18/81
4a(24) (k) 2b(24) (c) 4b(24) May 15, 1971
2/18/81
4a(25) (k) 2b(25) (c) 4b(25) November 15, 1971
2/18/81
4a(26) (k) 2b(26) (c) 4b(26) April 1, 1972
2/18/81
4a(27) (a) 2 (c) 4b(27) March 1, 1974
3/29/74 2/18/81
4a(28) (a) 2 (c) 4b(28) October 1, 1974
10/11/74 2/18/81
4a(29) (a) 2 (c) 4b(29) April 1, 1976
4/6/76 2/18/81
4a(30) (a) 2 (c) 4b(30) September 1, 1976
9/16/76 2/18/81
4a(31) (k) 2b(31) (c) 4b(31) October 1, 1976
2/18/81
4a(32) (a) 2 (c) 4b(32) June 1, 1977
6/29/77 2/18/81
4a(33) (l) 2b(33) (c) 4b(33) September 1, 1977
2/18/81
4a(34) (a) 2 (c) 4b(34) November 1, 1978
11/21/78 2/18/81
4a(35) (a) 2 (c) 4b(35) July 1, 1979
7/25/79 2/18/81
4a(36) (m) 2d(36) (c) 4b(36) September 1, 1979 (No. 1)
2/18/81
4a(37) (m) 2d(37) (c) 4b(37) September 1, 1979 (No. 2)
2/18/81
EXHIBIT NUMBER
- --------------------------------------------
PREVIOUS FILING
THIS --------------------------------
FILING COMMISSION EXCHANGES
- --------- -------------- --------------
4a(38) (a) 2 (c) 4b(38) November 1, 1979
12/3/79 2/18/81
4a(39) (a) 2 (c) 4b(39) June 1, 1980
6/10/80 2/18/81
4a(40) (a) 2 (a) 2 August 1, 1981
8/19/81 8/19/81
4a(41) (b) 4e (b) 4e April 1, 1982
4/29/82 5/5/82
4a(42) (a) 2 (a) 2 September 1, 1982
9/17/82 9/20/82
4a(43) (a) 2 (a) 2 December 1, 1982
12/21/82 12/21/82
4a(44) (d) 4(ii) (d) 4(ii) June 1, 1983
7/26/83 7/27/83
4a(45) (a) 4 (a) 4 August 1, 1983
8/19/83 8/19/83
4a(46) (d) 4(ii) (d) 4(ii) July 1, 1984
8/14/84 8/17/84
4a(47) (d) 4(ii) (d) 4(ii) September 1, 1984
11/2/84 11/9/84
4a(48) (b) 4(ii) (b) 4(ii) November 1, 1984 (No. 1)
1/4/85 1/9/85
4a(49) (b) 4(ii) (b) 4(ii) November 1, 1984 (No. 2)
1/4/85 1/9/85
4a(50) (a) 2 (a) 2 July 1, 1985
8/2/85 8/2/85
4a(51) (c) 4a(51) (c) 4a(51) January 1, 1986
2/11/86 2/11/86
4a(52) (a) 2 (a) 2 March 1, 1986
3/28/86 3/28/86
4a(53) (a) 2(a) (a) 2(a) April 1, 1986 (No. 1)
5/1/86 5/1/86
4a(54) (a) 2(b) (a) 2(b) April 1, 1986 (No. 2)
5/1/86 5/1/86
4a(55) (p) 4a(55) (p) 4a(55) March 1, 1987
4/9/87 4/9/87
4a(56) (a) 4 (a) 4 July 1, 1987 (No. 1)
8/17/87 8/17/87
4a(57) (d) 4 (d) 4 July 1, 1987 (No. 2)
11/13/87 11/20/87
4a(58) (a) 4 (a) 4 May 1, 1988
5/17/88 5/18/88
4a(59) (a) 4 (a) 4 September 1, 1988
9/27/88 9/28/88
EXHIBIT NUMBER
- --------------------------------------------
PREVIOUS FILING
THIS --------------------------------
FILING COMMISSION EXCHANGES
- --------- -------------- --------------
4a(60) (a) 4 (a) 4 July 1, 1989
7/25/89 7/26/89
4a(61) (a) 4 (a) 4 July 1, 1990 (No. 1)
7/25/90 7/26/90
4a(62) (a) 4 (a) 4 July 1, 1990 (No. 2)
7/25/90 7/26/90
4a(63) (a) 4 (a) 4 June 1, 1991 (No. 1)
7/1/91 7/2/91
4a(64) (a) 4 (a) 4 June 1, 1991 (No. 2)
7/1/91 7/2/91
4a(65) (a) 4 (a) 4 November 1, 1991 (No. 1)
12/2/91 12/3/91
4a(66) (a) 4 (a) 4 November 1, 1991 (No. 2)
12/2/91 12/3/91
4a(67) (a) 4 (a) 4 November 1, 1991 (No. 3)
12/2/91 12/3/91
4a(68) (a) 4 (a) 4 February 1, 1992 (No. 1)
2/27/92 2/28/92
4a(69) (a) 4 (a) 4 February 1, 1992 (No. 2)
2/27/92 2/28/92
4a(70) (a) 4 (a) 4 June 1, 1992 (No. 1)
6/17/92 6/11/92
4a(71) (a) 4 (a) 4 June 1, 1992 (No. 2)
6/17/92 6/11/92
4a(72) (a) 4 (a) 4 June 1, 1992 (No. 3)
6/17/92 6/11/92
4a(73) (a) 4 (a) 4 January 1, 1993 (No.1)
2/2/93 2/2/93
4a(74) (a) 4 (a) 4 January 1, 1993 (No. 2)
2/2/93 2/2/93
4a(75) (a) 4 (a) 4 March 1, 1993
3/17/93 3/18/93
4a(76) (b) 4 (a) 4 May 1, 1993
5/27/93 5/28/93
4a(77) (a) 4 (a) 4 May 1, 1993 (No. 2)
5/25/93 5/25/93
4a(78) (a) 4 (a) 4 May 1, 1993 (No. 3)
5/25/93 5/25/93
4a(79) (b) 4 (b) 4 July 1, 1993
12/1/93 12/1/93
4a(80) (a) 4 (a) 4 August 1, 1993
8/3/93 8/3/93
4a(81) (b) 4 (b) 4 September 1, 1993
12/1/93 12/1/93
EXHIBIT NUMBER
- --------------------------------------------
PREVIOUS FILING
THIS --------------------------------
FILING COMMISSION EXCHANGES
- --------- -------------- --------------
4a(82) (b) 4 (b) 4 September 1, 1993 (No. 2)
12/1/93 12/1/93
4a(83) (b) 4 (b) 4 November 1, 1993
12/1/93 12/1/93
4a(84) (a) 4 (a) 4 February 1, 1994
2/3/94 2/14/94
4a(85) (a) 4 (a) 4 March 1, 1994 (No. 1)
3/15/94 3/16/94
4a(86) (a) 4 (a) 4 March 1, 1994 (No. 2)
3/15/94 3/16/94
4a(87) (d) 4 (d) 4 May 1, 1994
11/8/94 12/2/94
4a(88) (d) 4 (d) 4 June 1, 1994
11/8/94 12/2/94
4a(89) (d) 4 (d) 4 August 1, 1994
11/8/94 12/2/94
4a(90) (d) 4 (d) 4 October 1, 1994 (No. 1)
11/8/94 12/2/94
4a(91) (d) 4 (d) 4 October 1, 1994 (No. 2)
11/8/94 12/2/94
4b(1) (h) 7(12) (c) 4c(1) Indenture between PSE&G and Federal Trust
2/18/81 Company, as Trustee (Midlantic National Bank,
Successor Trustee) dated July 1, 1948, providing
for 6% Debenture Bonds due 1998
4b(2) (l) 2c(8) (c) 4c(8) Indenture between PSE&G and The Chase Manhattan
2/18/81 Bank (National Association), as Trustee, dated
August 15, 1971, providing for 7 3/4% Debenture
Bonds due 1996
4b(3) (b) 4 (b) 4 Indenture of Trust between PSE&G and The Chase
12/1/93 12/1/93 Manhattan Bank (National Association), as
Trustee, providing for Secured Medium-Term Notes
dated July 1, 1993
4b(4) Indenture between PSE&G and First Fidelity Bank,
National Association, as Trustee, dated November 1,
1994, providing for Deferrable Interest Subordinated
Debentures in Series
9 Inapplicable
10a(1) (c) 10c(1) (c) 10c(1) Directors' Deferred Compensation Plan
3/17/82 3/19/82
10a(2) (c) 10c(2) (c) 10c(2) Officers' Deferred Compensation Plan
3/17/82 3/19/82
10a(3) (c) 10c(3) (c) 10c(3) Supplemental Death Benefits Plan for officers
3/17/82 3/19/82
10a(4) (c) 10c(4) (c) 10c(4) Description of additional retirement benefits
3/17/82 3/19/82 for certain officers
10a(5)(i) (c) 10b(5) (c) 10b(5) Limited Supplemental Death Benefits and
3/31/83 4/8/83 Retirement Plan
10a(5)(ii) (c) 10a(5)(ii) (c) 10a(5)(ii) Limited Supplemental Benefits Plan for Certain
2/25/94 3/1/94 Employees
10a(6)(i) (c) 10a(6) (c) 10a(6) Description of additional retirement benefits
3/10/87 4/16/87 for certain officers
10a(6)(ii) (c) 10a(6)(1) (c) 10a(6)(1) Description of additional retirement benefits
3/30/90 3/30/90 for certain officers.
10a(6)(iii) (c) 10a(6)(2) (c) 10a(6)(2) Description of additional retirement benefits
3/30/92 4/27/92 for a certain officer.
EXHIBIT NUMBER
- --------------------------------------------
PREVIOUS FILING
THIS --------------------------------
FILING COMMISSION EXCHANGES
- --------- -------------- --------------
10a(7) (o) 10g (o) 10g Management Incentive Compensation Plan
10a(8) (c) 10a(8) (c) 10a(8) Long-Term Incentive Plan
3/30/89 4/18/89
10a(9) (c) 10a(9) (c) 10a(9) Public Service Enterprise Group Incorporated
3/30/89 4/18/89 Pension Plan for Outside Directors
10a(10) (c) 10a(11) (c) 10a(11) Letter Agreement with E. James Ferland dated
2/10/93 2/11/93 April 16, 1986
10a(11) (c) 10a(12) (c) 10a(12) Letter Agreement with Paul H. Way dated March
2/10/93 2/11/93 28, 1988
10a(12) (c) 10a(13) (c) 10a(13) Letter Agreement with Thomas M. Crimmins, Jr.
2/10/93 2/11/93 dated April 5, 1989
10a(13) (c) 10a(15) (c) 10a(15) Letter Agreement with Robert C. Murray dated
2/10/93 2/11/93 December 17, 1991
10a(14) (c) 10a(14) (c) 10a(14) Letter agreement with Patricia A. Rado dated
2/26/94 3/9/94 March 24, 1993
10a(15) Letter Agreement, as amended, with Leon R. Eliason
dated September 14, 1994
11 Inapplicable
12 Computation of Ratios of Earnings to Fixed
Charges
13 Inapplicable
16 Inapplicable
18 Inapplicable
21 Subsidiaries of the Registrant
22 Inapplicable
23 Independent Auditors' Consent
24 Inapplicable
27 Financial Data Schedule
28 Inapplicable
99 Inapplicable
PSE&G
EXHIBIT NUMBER
- --------------------------------------------
PREVIOUS FILING
THIS --------------------------------
FILING COMMISSION EXCHANGES
- --------- -------------- --------------
3a(1) (b) 3a (b) 3a Restated Certificate of Incorporation of PSE&G,
8/28/86 8/29/86 effective May 1, 1986
3a(2) (c) 3a(2) (c) 3a(2) Certificate of Amendment of Certificate of
4/10/87 Restated Certificate of Incorporation of PSE&G
filed February 18, 1987 with the State of New
Jersey adopting limitations of liability
provisions in accordance with an amendment to
New Jersey Business Corporation Act
3a(3) (a) 3(a)3 (a) 3(a)3 Certificate of Amendment of Restated Certificate
2/3/94 2/14/94 of Incorporation of PSE&G filed June 17, 1992
with the State of New Jersey, establishing the
7.44% Cumulative Preferred Stock ($100 Par) as a
series of the Preferred Stock
3a(4) (a) 3(a)4 (a) 3(a)4 Certificate of Amendment of Restated Certificate
2/3/94 2/14/94 of Incorporation of PSE&G filed March 11, 1993
with the State of New Jersey, establishing the
5.97% Cumulative Preferred Stock ($100 Par) as a
series of Preferred Stock
3a(5) (a) 3(a)5 (a) 3(a)5 Certificate of Amendment of Restated Certificate
2/3/94 2/14/94 of Incorporation of PSE&G filed January 27, 1994
with the State of New Jersey, establishing the
6.92% Cumulative Preferred Stock ($100 Par) and
the 6.75% Cumulative Preferred Stock -- $25 Par as
series of Preferred Stock
3b Copy of By-Laws of PSE&G, as in effect September 1,
1994
4a(1) (f) B-1 (c) 4b(1) Indenture between PSE&G and Fidelity Union Trust
2/18/81 Company, (now First Fidelity Bank, National
Association), as Trustee, dated August 1, 1924,
securing First and Refunding Mortgage Bonds
Indentures between PSE&G and First Fidelity
Bank, National Association, as Trustee,
supplemental to Exhibit 4a(1), dated as follows:
4a(2) (i) 7(1a) (c) 4b(2) April 1, 1927
2/18/81
4a(3) (k) 2b(3) (c) 4b(3) June 1, 1937
2/18/81
4a(4) (k) 2b(4) (c) 4b(4) July 1, 1937
2/18/81
4a(5) (k) 2b(5) (c) 4b(5) December 19, 1939
2/18/81
4a(6) (g) B-10 (c) 4b(6) March 1, 1942
2/18/81
4a(7) (k) 2b(7) (c) 4b(7) June 1, 1949
2/18/81
4a(8) (k) 2b(8) (c) 4b(8) May 1, 1950
2/18/81
EXHIBIT NUMBER
- --------------------------------------------
PREVIOUS FILING
THIS --------------------------------
FILING COMMISSION EXCHANGES
- --------- -------------- --------------
4a(9) (k) 2b(9) (c) 4b(9) October 1, 1953
2/18/81
4a(10) (k) 2b(10) (c) 4b(10) May 1, 1954
2/18/81
4a(11) (j) 4b(16) (c) 4b(11) November 1, 1956
2/18/81
4a(12) (k) 2b(12) (c) 4b(12) September 1, 1957
2/18/81
4a(13) (k) 2b(13) (c) 4b(13) August 1, 1958
2/18/81
4a(14) (k) 2b(14) (c) 4b(14) June 1, 1959
2/18/81
4a(15) (k) 2b(15) (c) 4b(15) September 1, 1960
2/18/81
4a(16) (k) 2b(16) (c) 4b(16) August 1, 1962
2/18/81
4a(17) (k) 2b(17) (c) 4b(17) June 1, 1963
2/18/81
4a(18) (k) 2b(18) (c) 4b(18) September 1, 1964
2/18/81
4a(19) (k) 2b(19) (c) 4b(19) September 1, 1965
2/18/81
4a(20) (k) 2b(20) (c) 4b(20) June 1, 1967
2/18/81
4a(21) (k) 2b(21) (c) 4b(21) June 1, 1968
2/18/81
4a(22) (k) 2b(22) (c) 4b(22) April 1, 1969
2/18/81
4a(23) (k) 2b(23) (c) 4b(23) March 1, 1970
2/18/81
4a(24) (k) 2b(24) (c) 4b(24) May 15, 1971
2/18/81
4a(25) (k) 2b(25) (c) 4b(25) November 15, 1971
2/18/81
4a(26) (k) 2b(26) (c) 4b(26) April 1, 1972
2/18/81
4a(27) (a) 2 (c) 4b(27) March 1, 1974
3/29/74 2/18/81
4a(28) (a) 2 (c) 4b(28) October 1, 1974
10/11/74 2/18/81
4a(29) (a) 2 (c) 4b(29) April 1, 1976
4/6/76 2/18/81
4a(30) (a) 2 (c) 4b(30) September 1, 1976
9/16/76 2/18/81
EXHIBIT NUMBER
- --------------------------------------------
PREVIOUS FILING
THIS --------------------------------
FILING COMMISSION EXCHANGES
- --------- -------------- --------------
4a(31) (k) 2b(31) (c) 4b(31) October 1, 1976
2/18/81
4a(32) (a) 2 (c) 4b(32) June 1, 1977
6/29/77 2/18/81
4a(33) (l) 2b(33) (c) 4b(33) September 1, 1977
2/18/81
4a(34) (a) 2 (c) 4b(34) November 1, 1978
11/21/78 2/18/81
4a(35) (a) 2 (c) 4b(35) July 1, 1979
7/25/79 2/18/81
4a(36) (m) 2d(36) (c) 4b(36) September 1, 1979 (No. 1)
2/18/81
4a(37) (m) 2d(37) (c) 4b(37) September 1, 1979 (No. 2)
2/18/81
4a(38) (a) 2 (c) 4b(38) November 1, 1979
12/3/79 2/18/81
4a(39) (a) 2 (c) 4b(39) June 1, 1980
6/10/80 2/18/81
4a(40) (a) 2 (a) 2 August 1, 1981
8/19/81 8/19/81
4a(41) (b) 4e (b) 4e April 1, 1982
4/29/82 5/5/82
4a(42) (a) 2 (a) 2 September 1, 1982
9/17/82 9/20/82
4a(43) (a) 2 (a) 2 December 1, 1982
12/21/82 12/21/82
4a(44) (d) 4(ii) (d) 4(ii) June 1, 1983
7/26/83 7/27/83
4a(45) (a) 4 (a) 4 August 1, 1983
8/19/83 8/19/83
4a(46) (d) 4(ii) (d) 4(ii) July 1, 1984
8/14/84 8/17/84
4a(47) (d) 4(ii) (d) 4(ii) September 1, 1984
11/2/84 11/9/84
4a(48) (b) 4(ii) (b) 4(ii) November 1, 1984 (No. 1)
1/4/85 1/9/85
4a(49) (b) 4(ii) (b) 4(ii) November 1, 1984 (No. 2)
1/4/85 1/9/85
4a(50) (a) 2 (a) 2 July 1, 1985
8/2/85 8/2/85
4a(51) (c) 4a(51) (c) 4a(51) January 1, 1986
2/11/86 2/11/86
4a(52) (a) 2 (a) 2 March 1, 1986
3/28/86 3/28/86
EXHIBIT NUMBER
- --------------------------------------------
PREVIOUS FILING
THIS --------------------------------
FILING COMMISSION EXCHANGES
- --------- -------------- --------------
4a(53) (a) 2(a) (a) 2(a) April 1, 1986 (No. 1)
5/1/86 5/1/86
4a(54) (a) 2(b) (a) 2(b) April 1, 1986 (No. 2)
5/1/86 5/1/86
4a(55) (p) 4a(55) (p) 4a(55) March 1, 1987
4/9/87 4/9/87
4a(56) (a) 4 (a) 4 July 1, 1987 (No. 1)
8/17/87 8/17/87
4a(57) (d) 4 (d) 4 July 1, 1987 (No. 2)
11/13/87 11/20/87
4a(58) (a) 4 (a) 4 May 1, 1988
5/17/88 5/18/88
4a(59) (a) 4 (a) 4 September 1, 1988
9/27/88 9/28/88
4a(60) (a) 4 (a) 4 July 1, 1989
7/25/89 7/26/89
4a(61) (a) 4 (a) 4 July 1, 1990 (No. 1)
7/25/90 7/26/90
4a(62) (a) 4 (a) 4 July 1, 1990 (No. 2)
7/25/90 7/26/90
4a(63) (a) 4 (a) 4 June 1, 1991 (No. 1)
7/1/91 7/2/91
4a(64) (a) 4 (a) 4 June 1, 1991 (No. 2)
7/1/91 7/2/91
4a(65) (a) 4 (a) 4 November 1, 1991 (No. 1)
12/2/91 12/3/91
4a(66) (a) 4 (a) 4 November 1, 1991 (No. 2)
12/2/91 12/3/91
4a(67) (a) 4 (a) 4 November 1, 1991 (No. 3)
12/2/91 12/3/91
4a(68) (a) 4 (a) 4 February 1, 1992 (No. 1)
2/27/92 2/28/92
4a(69) (a) 4 (a) 4 February 1, 1992 (No. 2)
2/27/92 2/28/92
4a(70) (a) 4 (a) 4 June 1, 1992 (No. 1)
6/17/92 6/11/92
4a(71) (a) 4 (a) 4 June 1, 1992 (No. 2)
6/17/92 6/11/92
4a(72) (a) 4 (a) 4 June 1, 1992 (No. 3)
6/17/92 6/11/92
4a(73) (a) 4 (a) 4 January 1, 1993 (No.1)
2/2/93 2/2/93
4a(74) (a) 4 (a) 4 January 1, 1993 (No. 2)
2/2/93 2/2/93
EXHIBIT NUMBER
- --------------------------------------------
PREVIOUS FILING
THIS --------------------------------
FILING COMMISSION EXCHANGES
- --------- -------------- --------------
4a(75) (a) 4 (a) 4 March 1, 1993
3/17/93 3/18/93
4a(76) (b) 4 (a) 4 May 1, 1993
5/27/93 5/28/93
4a(77) (a) 4 (a) 4 May 1, 1993 (No. 2)
5/25/93 5/25/93
4a(78) (a) 4 (a) 4 May 1, 1993 (No. 3)
5/25/93 5/25/93
4a(79) (b) 4 (b) 4 July 1, 1993
12/1/93 12/1/93
4a(80) (a) 4 (a) 4 August 1, 1993
8/3/93 8/3/93
4a(81) (b) 4 (b) 4 September 1, 1993
12/1/93 12/1/93
4a(82) (a) 4 (a) 4 September 1, 1993 (No. 2)
12/1/93 12/1/93
4a(83) (b) 4 (b) 4 November 1, 1993
12/1/93 12/1/93
4a(84) (a) 4 (a) 4 February 1, 1994
2/3/94 2/14/94
4a(85) (a) 4 (a) 4 March 1, 1994 (No. 1)
3/15/94 3/16/94
4a(86) (a) 4 (a) 4 March 1, 1994 (No. 2)
3/15/94 3/16/94
4a(87) (d) 4 (d) 4 May 1, 1994
11/8/94 12/2/94
4a(88) (d) 4 (d) 4 June 1, 1994
11/8/94 12/2/94
4a(89) (d) 4 (d) 4 August 1, 1994
11/8/94 12/2/94
4a(90) (d) 4 (d) 4 October 1, 1994 (No. 1)
11/8/94 12/2/94
4a(91) (d) 4 (d) 4 October 1, 1994 (No. 2)
11/8/94 12/2/94
4b(1) (h) 7(12) (c) 4c(1) Indenture between PSE&G and Federal Trust
2/18/81 Company, as Trustee, (Midlantic National Bank,
Successor Trustee) dated July 1, 1948, providing
for 6% Debenture Bonds due 1998
4b(2) (l) 2c(8) (c) 4c(8) Indenture between PSE&G and the Chase Manhattan
2/18/81 Bank (National Association), as Trustee, dated
August 15, 1971, providing for 7 3/4% Debenture
Bonds due 1996
4b(3) (b) 4 (b) 4 Indenture of Trust between the Company and The
12/1/93 12/1/93 Chase Manhattan Bank (National Association), as
Trustee, providing for Secured Medium-Term Notes
dated July 1, 1993
4b(4) Indenture between PSE&G and First Fidelity Bank,
National Association, as Trustee, dated November 1,
1994, providing for Deferrable Interest Subordinated
Debentures in Series
9 Inapplicable
10a(1) (c) 10c(1) (c) 10c(1) Directors' Deferred Compensation Plan
3/17/82 3/19/82
10a(2) (c) 10c(2) (c) 10c(2) Officers' Deferred Compensation Plan
3/17/82 3/19/82
Supplemental Benefits Plan for Certain
2/25/94 3/1/94 Employees
EXHIBIT NUMBER
- --------------------------------------------
PREVIOUS FILING
THIS --------------------------------
FILING COMMISSION EXCHANGES
- --------- -------------- --------------
10a(3) (c) 10c(3) (c) 10c(3) Supplemental Death Benefits Plan for officers
3/17/82 3/19/82
10a(4) (c) 10c(4) (c) 10c(4) Description of additional retirement for certain
3/17/82 3/19/82 officers
10a(5)(i) (c) 10b(5) (c) 10b(5) Limited Supplemental Death Benefits and
3/31/83 4/8/83 Retirement Plan
10a(5)(ii) (c) 10a(5)(ii) (c) 10a(5)(ii) Limited S-----
10a(6)(i) (c) 10a(6) (c) 10a(6) Description of additional retirement benefits
3/10/87 4/16/87 for certain officers
10a(6)(ii) (c) 10a(6)(1) (c) 10a(6)(1) Description of additional retirement benefit for
3/30/90 3/30/90 certain officers.
10a(6)(iii) (c) 10a(6)(2) (c) 10a(6)(2) Description of additional retirement benefit for
3/30/92 4/27/92 a certain officer.
10a(7) (o) 10g (o) 10g Management Incentive Compensation Plan
10a(8) (c) 10a(8) (c) 10a(8) Long-Term Incentive Plan
3/30/89 4/18/89
10a(9) (c) 10a(9) (c) 10a(9) Public Service Enterprise Group Incorporated
3/30/89 4/18/89 Pension Plan for Outside Directors
10a(10) (c) 10a(9) (c) 10a(9) Letter Agreement with E. James Ferland dated
2/10/93 2/11/93 April 16, 1986
10a(11) (c) 10a(10) (c) 10a(10) Letter Agreement with Thomas M. Crimmins, Jr.
2/10/93 2/11/93 dated April 5, 1989
10a(12) (c) 10a(12) (c) 10a(12) Letter Agreement with Robert C. Murray dated
2/10/93 2/11/93 December 17, 1991
10a(13) (c) 10a(13) (c) 10a(13) Letter agreement with Patricia A. Rado dated
2/26/94 3/9/94 March 24, 1993.
10a(14) Letter Agreement, as amended, with Leon R. Eliason
dated September 14, 1994
11 Inapplicable
12(a) Computation of Ratios of Earnings to Fixed
Charges
12(b) Computation of Ratios of Earnings to Fixed
Charges Plus Preferred Stock Dividend
Requirements
13 Inapplicable
16 Inapplicable
19 Inapplicable
21 Inapplicable
22 Inapplicable
23 Independent Auditors' Consent
24 Inapplicable
27 Financial Data Schedule
28 Inapplicable
99 Inapplicable