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FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1995
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
incorporation or organization) Identification No.)
80 Park Plaza, P. O. Box 1171, Newark, New Jersey 07101-1171
- ------------------------------------------------- ------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 201 430-7000
------------
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
incorporation or organization) Identification No.)
80 Park Plaza, P. O. Box 570, Newark, New Jersey 07101-0570
- ------------------------------------------------ ------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 201 430-7000
------------
Indicate by check mark whether the registrant (1) has 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
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes x No
---- ----
The number of shares outstanding of Public Service Enterprise Group
Incorporated's sole class of common stock, as of the latest practicable date,
was as follows:
Class Outstanding at April 30, 1995
----- -----------------------------
Common Stock, without par value 244,697,930
As of April 30, 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.
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TABLE OF CONTENTS
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Page
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Public Service Enterprise Group Incorporated (Enterprise):
Consolidated Statements of Income for the Three and
Twelve Months Ended March 31, 1995 and 1994 .................... 1
Consolidated Balance Sheets as of March 31, 1995, 1994
and December 31, 1994 .......................................... 2
Consolidated Statements of Cash Flows for the Three and
Twelve Months Ended March 31, 1995 and 1994 .................... 4
Consolidated Statements of Retained Earnings for the
Three and Twelve Months Ended March 31, 1995 and 1994 .......... 5
Public Service Electric and Gas Company (PSE&G):
Consolidated Statements of Income for the Three and
Twelve Months Ended March 31, 1995 and 1994 .................... 6
Consolidated Balance Sheets as of March 31, 1995,
1994 and December 31, 1994 ..................................... 7
Consolidated Statements of Cash Flows for the Three and
Twelve Months Ended March 31, 1995 and 1994 .................... 9
Consolidated Statements of Retained Earnings for the
Three and Twelve Months Ended March 31, 1995 and 1994 .......... 10
Notes to Consolidated Financial Statements - Enterprise............ 11
Notes to Consolidated Financial Statements - PSE&G................. 18
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Enterprise .......................................... 19
PSE&G ............................................... 37
i
TABLE OF CONTENTS
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Page
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings ........................................ 39
Item 4. Submission of Matters to a Vote of
Security Holders ......................................... 39
Item 5. Other Information ........................................ 40
Item 6. Exhibits and Reports on Form 8-K ......................... 43
Signatures - Public Service Enterprise Group Incorporated ......... 44
Signatures - Public Service Electric and Gas Company .............. 44
ii
GLOSSARY OF TERMS
The following is a glossary of frequently used abbreviations or acronyms that
are found in this report:
TERM MEANING
----------------------- ----------------------------------------------
AFDC................... Allowance for Funds used During Construction
BPU.................... New Jersey Board of Public Utilities
Capital................ PSEG Capital Corporation
CEA.................... Community Energy Alternatives Incorporated
DSM.................... Demand Side Management
DSM Plan............... DSM Incentive Resource Plan
EBIT................... Earnings before interest and taxes
EDC.................... Energy Development Corporation
EDHI................... Enterprise Diversified Holdings Incorporated
EGDC................... Enterprise Group Development Corporation
Enterprise............. Public Service Enterprise Group Incorporated
EPA.................... United States Environmental Protection Agency
EPACT.................. Energy Policy Act
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
IRP.................... Integrated Electric Resource Plan
Hope Creek............. Hope Creek Nuclear Generating Station
KWH.................... Kilowatthours
LEAC................... Electric Levelized Energy Adjustment Clause
LGAC................... Levelized Gas Adjustment Charge
MD&A................... Management's Discussion and Analysis of Financial
Condition and Results of Operations
MIPS................... Monthly Income Preferred Securities
Mortgage............... First and Refunding Mortgage of PSE&G
MTNs................... Medium-Term Notes
MW..................... Megawatts
MWH.................... Megawatthours
iii
TERM MEANING
----------------------- --------------------------------------------------
NEIL................... Nuclear Electric Insurance Limited
NJDEP.................. New Jersey Department of Environmental Protection
NJGRT.................. New Jersey Gross Receipts and Franchise Tax
NJNAA.................. New Jersey Need Assessment Act
NJPDES................. New Jersey Pollution Discharge Elimination System
NOPR................... Notice of Proposal Rulemaking
NPS.................... The BPU's nuclear performance standard established
for nuclear generating stations owned by
New Jersey electric utilities
NRC.................... Nuclear Regulatory Commission
Partnership............ Public Service Electric and Gas Capital, L.P.
Peach Bottom........... Peach Bottom Atomic Power Station, Units 2 and 3
PECO................... PECO Energy, Inc.
PJM.................... Pennsylvania -- New Jersey -- Maryland
Interconnection
Price Anderson......... Price-Anderson liability provisions of the Atomic
Energy Act of 1954, as amended
PSE&G.................. Public Service Electric and Gas Company
PSCRC.................. Public Service Conservation Resources Corporation
PSRC................... Public Service Resources Corporation
RAC.................... Remediation Adjustment Charge
Remediation Program.... PSE&G Gas Plant Remediation Program
Salem.................. Salem Nuclear Generating Station, Units 1 and 2
SEC.................... Securities and Exchange Commission
Ventures............... Enterprise Ventures and Service Corporation
iv
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
The financial statements included herein as of March 31, 1995 and 1994 and for the periods then ended are unaudited
but, in the opinion of Enterprise's management, reflect all adjustments, consisting only of normal recurring accruals,
necessary for a fair presentation.
CONSOLIDATED STATEMENTS OF INCOME
(Thousands of Dollars)
Three Months Ended Twelve Months Ended
March 31, March 31,
--------------------------- ---------------------------
1995 1994 1995 1994
------------- ------------ ------------ ------------
OPERATING REVENUES
Electric ................................ $ 942,575 $ 888,310 $ 3,787,378 $ 3,709,225
Gas ..................................... 634,478 801,657 1,611,349 1,765,919
Nonutility Activities ................... 96,752 104,458 396,496 430,132
------------- ------------ ------------ ------------
Total Operating Revenues ........... 1,673,805 1,794,425 5,795,223 5,905,276
------------- ------------ ------------ ------------
OPERATING EXPENSES
Operation
Fuel for Electric Generation and
Interchanged Power .................... 208,110 167,201 736,672 697,776
Gas Purchased and Materials for Gas
Produced............................... 344,193 460,556 907,593 1,029,469
Other ................................... 253,248 249,840 1,119,671 1,030,221
Maintenance................................ 64,045 76,475 295,650 323,555
Depreciation and Amortization.............. 162,451 155,545 636,594 608,221
Property Impairment........................ -- -- -- 77,637
Taxes
Federal Income Taxes .................... 106,789 120,474 298,866 330,339
New Jersey Gross Receipts Taxes ......... 176,789 191,303 568,653 609,107
Other ................................... 23,845 24,083 82,044 79,661
------------- ------------ ------------ ------------
Total Operating Expenses ........... 1,339,470 1,445,477 4,645,743 4,785,986
------------- ------------ ------------ ------------
OPERATING INCOME .......................... 334,335 348,948 1,149,480 1,119,290
------------- ------------ ------------ ------------
OTHER INCOME
Allowance for Funds Used During
Construction - Equity ................. 1,482 1,788 12,483 11,415
Miscellaneous - net ..................... 2,002 1,155 7,277 (4,798)
------------- ------------ ------------ ------------
Total Other Income ................. 3,484 2,943 19,760 6,617
------------- ------------ ------------ ------------
INCOME BEFORE INTEREST CHARGES AND
DIVIDENDS ON PREFERRED SECURITIES ....... 337,819 351,891 1,169,240 1,125,907
------------- ------------ ------------ ------------
INTEREST CHARGES
Long-Term Debt .......................... 111,604 112,112 458,650 462,508
Short-Term Debt ......................... 4,827 3,834 24,955 15,290
Other ................................... 6,705 2,851 16,659 16,682
------------- ------------ ------------ ------------
Total Interest Charges ............. 123,136 118,797 500,264 494,480
Allowance for Funds Used During
Construction - Debt and Capitalized
Interest .............................. (10,106) (7,313) (36,586) (23,787)
------------- ------------ ------------ ------------
Net Interest Charges ............... 113,030 111,484 463,678 470,693
------------- ------------ ------------ ------------
Preferred Securities Dividend
Requirements........................... 12,197 10,280 44,064 39,572
------------- ------------ ------------ ------------
NET INCOME ......................... $ 212,592 $ 230,127 $ 661,498 $ 615,642
============= ============ ============ ============
SHARES OF COMMON STOCK OUTSTANDING
End of Period ........................... 244,697,930 244,697,930 244,697,930 244,697,930
Average for Period ...................... 244,697,930 243,776,766 244,697,930 242,354,605
EARNINGS PER AVERAGE SHARE OF COMMON STOCK. $0.87 $0.94 $2.70 $2.54
============= ============ ============ ============
DIVIDENDS PAID PER SHARE OF COMMON STOCK .. $.54 $.54 $2.16 $2.16
============= ============ ============ ============
<FN>
See Notes to Consolidated Financial Statements.
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
CONSOLIDATED BALANCE SHEETS
(Thousands of Dollars)
March 31, March 31, December 31,
ASSETS 1995 1994 1994
- ------ ------------ ------------ ------------
UTILITY PLANT - Original cost
Electric ..................................................... $ 12,470,514 $ 11,993,662 $ 12,345,919
Gas .......................................................... 2,344,557 2,194,430 2,318,233
Common ....................................................... 515,113 519,449 545,131
------------ ------------ ------------
Total ................................................... 15,330,184 14,707,541 15,209,283
Less: accumulated depreciation and amortization.............. 5,229,300 4,874,555 5,147,105
------------ ------------ ------------
Net ..................................................... 10,100,884 9,832,986 10,062,178
Nuclear Fuel in Service, net of accumulated amortization -
$305,655; $299,212; and $302,906, respectively ............. 201,637 198,130 205,273
------------ ------------ ------------
Net Utility Plant in Service ............................ 10,302,521 10,031,116 10,267,451
Construction Work in Progress, including Nuclear Fuel in
Process - $53,396; $88,942; and $65,429, respectively ...... 753,774 784,411 806,934
Plant Held for Future Use .................................... 23,861 17,847 23,860
------------ ------------ ------------
Net Utility Plant ....................................... 11,080,156 10,833,374 11,098,245
------------ ------------ ------------
INVESTMENTS AND OTHER PROPERTY
Long-Term Investments, net of amortization -
$17,105, $16,648, and $2,365, respectively ................. 1,653,183 1,616,593 1,625,952
Oil and Gas Property, Plant and Equipment, net of accumulated
depreciation and amortization - $767,792, $716,201 and
$748,245, respectively ..................................... 580,765 522,644 577,913
Real Estate Property and Equipment, net of accumulated
depreciation - $15,200; $11,684 and $14,242, and
net of valuation allowance -- $23,306, $16,685 and
$23,264, respectively ...................................... 112,036 110,642 115,210
Other Plant, net of accumulated depreciation and
amortization - $4,888; $3,928 and $4,653, respectively ..... 36,077 28,401 36,063
Nuclear Decommissioning and Other Special Funds .............. 242,330 198,540 233,022
Other Assets - net ........................................... 85,502 103,619 85,478
------------ ------------ ------------
Total Investments and Other Property .................... 2,709,893 2,580,439 2,673,638
------------ ------------ ------------
CURRENT ASSETS
Cash and Cash Equivalents .................................... 131,137 363,168 67,866
Accounts Receivable:
Customer Accounts Receivable ............................... 490,106 614,785 434,207
Other Accounts Receivable .................................. 207,168 186,494 211,779
Less: Allowance for Doubtful Accounts .................... 39,734 31,774 40,915
Unbilled Revenues ............................................ 152,744 124,229 204,056
Fuel, at average cost ........................................ 167,020 113,174 268,927
Materials and Supplies, net of inventory valuation reserves -
$18,200, $8,525 and $18,200, respectively .................. 150,640 169,487 148,285
Deferred Income Taxes ........................................ 25,135 14,834 25,311
Miscellaneous Current Assets ................................. 26,891 31,522 37,356
------------ ------------ ------------
Total Current Assets .................................... 1,311,107 1,585,919 1,356,872
------------ ------------ ------------
DEFERRED DEBITS
Property Abandonments - net .................................. 83,817 101,300 88,269
Oil and Gas Property Write-Down .............................. 39,944 45,098 41,232
Unamortized Debt Expense ..................................... 131,300 118,078 134,599
Deferred OPEB Costs .......................................... 192,727 140,770 116,476
Under Recovered Electric Energy and Gas Costs - net .......... 171,238 120,204 172,563
Unrecovered Environmental Costs (note 2_) .................... 136,151 137,292 138,435
Unrecovered Plant and Regulatory Study Costs ................. 35,661 35,182 37,128
Unrecovered SFAS 109 Deferred Income Taxes ................... 794,665 789,881 791,393
Deferred Decontamination and Decommissioning Costs ........... 53,016 61,108 53,016
Other ........................................................ 25,570 65,114 15,574
------------ ------------ ------------
Total Deferred Debits ................................... 1,664,089 1,614,027 1,588,685
------------ ------------ ------------
Total ................................................... $ 16,765,245 $ 16,613,759 $ 16,717,440
============ ============ ============
<FN>
See Notes to Consolidated Financial Statements.
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
CONSOLIDATED BALANCE SHEETS
(Thousands of Dollars)
March 31, March 31, December 31,
CAPITALIZATION AND LIABILITIES 1995 1994 1994
- ------------------------------ ------------ ------------ --------------
CAPITALIZATION
Common Equity
Common Stock .................................... $ 3,801,157 $ 3,801,157 $ 3,801,157
Retained Earnings ............................... 1,590,464 1,458,357 1,510,010
------------ ------------ ------------
Total Common Equity .......................... 5,391,621 5,259,514 5,311,167
Subsidiaries' Securities and Obligations
Preferred Securities
Preferred Stock Without Mandatory Redemption..... 384,994 459,994 384,994
Preferred Stock With Mandatory Redemption ....... 150,000 150,000 150,000
Monthly Income Preferred Securities ............. 150,000 -- 150,000
Long-Term Debt .................................... 5,264,646 5,599,071 5,180,657
------------ ------------ ------------
Total Capitalization ......................... 11,341,261 11,468,579 11,176,818
------------ ------------ ------------
OTHER LONG-TERM LIABILITIES
Decontamination, Decommissioning, and Low Level
Radwaste Costs .................................. 57,664 61,108 56,149
Environmental Costs (note 2) ...................... 108,576 112,851 105,684
Capital Lease Obligations ......................... 53,612 52,966 53,770
------------ ------------ ------------
Total Other Long-Term Liabilities............. 219,852 226,925 215,603
------------ ------------ ------------
CURRENT LIABILITIES
Long-Term Debt due within one year ................ 364,773 127,970 499,738
Commercial Paper and Loans ........................ 238,223 118,502 491,586
Book Overdrafts ................................... 51,913 38,627 86,576
Accounts Payable .................................. 373,159 386,448 433,471
New Jersey Gross Receipts Taxes Accrued ........... 175,261 454,482 --
Other Taxes Accrued ............................... 142,238 130,695 44,149
Interest Accrued .................................. 120,540 129,176 107,962
Estimated Liability for Vacation Pay .............. 40,621 40,490 27,080
Customer Deposits ................................. 32,457 35,669 33,698
Liability for Injuries and Damages ................ 31,784 29,559 29,814
Miscellaneous Environmental Liabilities ........... 15,305 4,795 15,365
Other ............................................. 77,712 52,860 87,480
------------ ------------ ------------
Total Current Liabilities .................... 1,663,986 1,549,273 1,856,919
------------ ------------ ------------
DEFERRED CREDITS
Accumulated Deferred Income Taxes ................. 2,912,922 2,742,076 2,905,390
Accumulated Deferred Investment Tax Credits ....... 407,494 427,852 412,466
Deferred OPEB Costs ............................... 192,727 140,770 116,476
Other ............................................. 27,003 58,284 33,768
------------ ------------ ------------
Total Deferred Credits ....................... 3,540,146 3,368,982 3,468,100
------------ ------------ ------------
COMMITMENTS AND CONTINGENCIES (note 2)
Total ........................................ $ 16,765,245 $ 16,613,759 $ 16,717,440
============ ============ ============
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands of Dollars)
Three Months Ended Twelve Months Ended
March 31, March 31,
-------------------------- --------------------------
1995 1994 1995 1994
------------ ----------- ----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income .............................. $ 212,592 $ 230,127 $ 661,498 $ 615,642
Adjustments to reconcile net income to
net cash flows from operating activities:
Depreciation and Amortization ........... 162,451 155,545 636,594 608,221
Amortization of Nuclear Fuel ............ 23,120 23,574 94,719 99,055
Recovery (Deferral) of Electric Energy
and Gas Costs - net ................... 1,325 (58,170) (51,034) (195,095)
Loss from Property Impairments .......... -- -- -- 77,637
Amortization of Discounts on Property
Abandonments and Disallowance.......... (1,547) (1,767) (6,523) (7,391)
Unrealized (Gains) Losses on
Investments - net...................... (19,421) 750 (46,500) (6,016)
Provision for Deferred Income
Taxes - net............................ 16,456 45,246 110,129 178,091
Investment Tax Credits - net ............ (4,972) (4,861) (20,358) (19,447)
Allowance for Funds Used During
Construction - Debt and Equity and
Capitalized Interest................... (11,588) (9,101) (49,069) (35,202)
Proceeds from Leasing Activities - net... (14,487) (12,698) 25,893 7,528
Changes in certain current assets
and liabilities:
Net (increase) decrease in Accounts
Receivable and Unbilled Revenues..... (1,157) (167) 83,450 (8,804)
Net decrease (increase) in Inventory -
Fuel and Materials and Supplies...... 99,552 175,720 (34,999) 38,183
Net (decrease) increase in
Accounts Payable..................... (60,312) (132,813) (13,289) 62,269
Net change in Prepaid/Accrued
Taxes................................ 273,350 282,210 (267,678) (262,028)
Net change in Other Current Assets
and liabilities...................... 27,661 44,209 20,200 (5,320)
Other ................................... (3,923) 7,201 42,852 (43,545)
------------ ----------- ----------- ------------
Net cash provided by operating
activities ......................... 699,100 745,005 1,185,885 1,103,778
------------ ----------- ----------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to Utility Plant,
excluding AFDC ........................ (128,027) (167,682) (809,519) (905,177)
Additions to Oil and Gas Property,
Plant and Equipment, excluding
Capitalized Interest .................. (21,304) (37,064) (133,763) (112,468)
Net (increase) decrease in Long-Term
Investments and Real Estate ........... (6,113) 20,737 31,566 97,648
Increase in Decommissioning and Other
Special Funds, excluding interest ..... (7,390) (5,808) (36,976) (17,006)
Cost of Plant Removal - net ............. (2,103) (7,708) (28,357) (46,731)
Other ................................... 248 (548) 7,950 (2,013)
------------ ----------- ----------- ------------
Net cash used in investing
activities ......................... (164,689) (198,073) (969,099) (985,747)
------------ ----------- ----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (decrease) increase in
Short-Term Debt ....................... (253,363) (459,134) 119,721 (146,402)
(Decrease) increase in Book Overdrafts . (34,663) (24,365) 13,286 7,009
Issuance of Long-Term Debt .............. -- 400,000 449,800 1,977,700
Redemption of Long-Term Debt ............ (50,976) (97,344) (547,422) (1,969,674)
Long-Term Debt Issuance and
Redemption Costs ...................... -- -- (29,811) (55,138)
Issuance of Preferred Stock ............. -- 75,000 -- 75,000
Redemption of Preferred Stock ........... -- (45,000) (75,000) (45,000)
Issuance of Monthly Income
Preferred Securities .................. -- -- 150,000 --
Issuance of Common Stock ................ -- 28,495 -- 126,946
Cash Dividends Paid on Common Stock ..... (132,138) (131,660) (528,548) (523,622)
Other ................................... -- (1,128) (843) (7,857)
------------ ----------- ----------- -----------
Net cash used in financing
activities ...................... (471,140) (255,136) (448,817) (561,038)
------------ ----------- ----------- -----------
Net increase (decrease) in Cash and
Cash Equivalents ........................ 63,271 291,796 (232,031) (443,007)
Cash and Cash Equivalents at Beginning
of Period ............................... 67,866 71,372 363,168 806,175
------------ ----------- ----------- -----------
Cash and Cash Equivalents at
End of Period............................ $ 131,137 $ 363,168 $ 131,137 $ 363,168
============ =========== =========== ===========
Income Taxes Paid ......................... $ 15,136 $ 3,330 $ 166,910 $ 135,584
Interest Paid ............................. $ 94,409 $ 89,350 $ 437,932 $ 458,124
<FN>
See Notes to Consolidated Financial Statements.
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
(Thousand of Dollars)
Three Months Ended Twelve Months Ended
March 31, March 31,
--------------------------- ---------------------------
1995 1994 1995 1994
------------ ------------ ------------ ------------
Balance at Beginning of Period ............ $ 1,510,010 $ 1,361,018 $ 1,458,357 $ 1,368,695
Add Net Income ............................ 212,592 230,127 661,498 615,642
------------ ------------ ------------ ------------
Total ................................ 1,722,602 1,591,145 2,119,855 1,984,337
------------ ------------ ------------ ------------
Deduct:
Cash Dividends on Common Stock .......... 132,138 131,660 528,548 523,622
Capital Stock Expenses .................. -- 1,128 843 2,358
------------ ---------- ------------ ------------
Total Deductions ..................... 132,138 132,788 529,391 525,980
------------ ---------- ------------ ------------
Balance at End of Period .................. $ 1,590,464 $1,458,357 $ 1,590,464 $ 1,458,357
============ ========== ============ ============
<FN>
See Notes to Consolidated Financial Statements.
PUBLIC SERVICE ELECTRIC AND GAS COMPANY
The financial statements included herein as of March 31, 1995 and 1994 and for the periods then ended are unaudited
but, in the opinion of PSE&G's management, reflect all adjustments, consisting only of normal recurring accruals,
necessary for a fair presentation.
CONSOLIDATED STATEMENTS OF INCOME
(Thousands of Dollars)
Three Months Ended Twelve Months Ended
March 31, March 31,
--------------------------- ---------------------------
1995 1994 1995 1994
------------- ------------ ------------ ------------
OPERATING REVENUES
Electric ................................ $ 942,575 $ 888,310 $ 3,787,378 $ 3,709,225
Gas ..................................... 634,478 801,657 1,611,349 1,765,919
------------- ------------ ------------ ------------
Total Operating Revenues ........... 1,577,053 1,689,967 5,398,727 5,475,144
------------- ------------ ------------ ------------
OPERATING EXPENSES
Operation
Fuel for Electric Generation and
Interchanged Power.................. 208,110 167,201 736,672 697,776
Gas Purchased and Materials for
Gas Produced ........................ 344,193 465,140 915,754 1,048,948
Other ................................. 219,559 214,980 962,178 893,435
Maintenance ............................. 64,045 76,475 295,650 323,555
Depreciation and Amortization ........... 141,788 134,311 554,509 519,311
Taxes
Federal Income Taxes .................. 102,284 113,429 283,384 321,565
New Jersey Gross Receipts Taxes ....... 176,789 191,303 568,653 609,107
Other ................................. 21,853 22,115 75,838 69,583
------------- ------------ ------------ ------------
Total Operating Expenses ........... 1,278,621 1,384,954 4,392,638 4,483,280
------------- ------------ ------------ ------------
OPERATING INCOME .......................... 298,432 305,013 1,006,089 991,864
------------- ------------ ------------ ------------
OTHER INCOME
Allowance for Funds Used During
Construction - Equity ................ 1,482 1,788 12,483 11,415
Miscellaneous - net ..................... 1,851 1,153 6,931 (4,912)
------------- ------------ ------------ ------------
Total Other Income ................. 3,333 2,941 19,414 6,503
------------- ------------ ------------ ------------
INCOME BEFORE INTEREST CHARGES AND
DIVIDENDS ON PREFERRED SECURITIES ....... 301,765 307,954 1,025,503 998,367
------------- ------------ ------------ ------------
INTEREST CHARGES
Long-Term Debt .......................... 91,492 88,327 370,059 360,588
Short-Term Debt ......................... 1,950 2,259 17,866 8,145
Other ................................... 6,531 1,286 16,101 14,861
------------- ------------ ------------ ------------
Total Interest Charges ............. 99,973 91,872 404,026 383,594
Allowance for Funds Used During
Construction - Debt ..................... (8,619) (5,357) (28,581) (17,130)
------------- ------------ ------------ ------------
Net Interest Charges ...................... 91,354 86,515 375,445 366,464
Monthly Income Preferred Securities
Dividend Requirements ................... 3,515 -- 5,195 --
------------- ------------ ------------ ------------
NET INCOME ................................ 206,896 221,439 644,863 631,903
------------- ------------ ------------ ------------
Preferred Stock Dividend Requirements ..... 8,682 10,280 38,869 39,572
------------- ------------ ------------ ------------
EARNINGS AVAILABLE TO PUBLIC SERVICE
ENTERPRISE GROUP INCORPORATED............ $ 198,214 $ 211,159 $ 605,994 $ 592,331
============= ============ ============ ============
<FN>
See Notes to Consolidated Financial Statements.
PUBLIC SERVICE ELECTRIC AND GAS COMPANY
CONSOLIDATED BALANCE SHEETS
(Thousands of Dollars)
March 31, March 31, December 31,
ASSETS 1995 1994 1994
- ------ ------------ ------------ -------------
UTILITY PLANT - Original cost
Electric ................................................. $ 12,470,514 $ 11,993,662 $ 12,345,919
Gas ...................................................... 2,344,557 2,194,430 2,318,233
Common ................................................... 515,113 519,449 545,131
------------ ------------ ------------
Total ................................................... 15,330,184 14,707,541 15,209,283
Less: accumulated depreciation and amortization............ 5,229,300 4,874,555 5,147,105
------------ ------------ ------------
Net ..................................................... 10,100,884 9,832,986 10,062,178
Nuclear Fuel in Service, net of accumulated amortization -
$305,655; $299,212; and $302,906, respectively ........... 201,637 198,130 205,273
------------ ------------ ------------
Net Utility Plant in Service ............................ 10,302,521 10,031,116 10,267,451
Construction Work in Progress, including Nuclear Fuel
in Process - $53,396; $88,942; and $65,429,
respectively ............................................. 753,774 784,411 806,934
Plant Held for Future Use .................................. 23,861 17,847 23,860
------------ ------------ ------------
Net Utility Plant ................................... 11,080,156 10,833,374 11,098,245
------------ ------------ ------------
INVESTMENTS AND OTHER PROPERTY
Long-Term Investments, net of amortization - $3,024;
$1,027; and $2,365, respectively ......................... 76,812 127,038 65,886
Nuclear Decommissioning and Other Special Funds ............ 242,330 198,540 233,022
Other Plant, net of accumulated depreciation and
amortization - $1,149; $1,942; and $1,127, respectively... 32,886 26,344 32,879
------------ ------------ ------------
Total Investments and Other Property ....................... 352,028 351,922 331,787
------------ ------------ ------------
CURRENT ASSETS
Cash and Cash Equivalents ................................ 82,990 320,353 27,498
Accounts Receivable:
Customer Accounts Receivable ........................... 490,106 614,785 434,207
Other Accounts Receivable .............................. 112,327 122,438 151,684
Less: Allowance for Doubtful Accounts ................. 39,734 31,774 40,915
Unbilled Revenues ........................................ 152,744 124,229 204,056
Fuel, at average cost .................................... 167,020 113,174 268,927
Materials and supplies, net of inventory valuation
reserves - $18,200; $8,525; and $18,200, respectively .. 149,193 168,166 146,763
Deferred Income Taxes .................................... 25,135 14,834 25,311
Miscellaneous Current Assets ............................. 19,706 25,629 30,407
------------ ------------ ------------
Total Current Assets ................................ 1,159,487 1,471,834 1,247,938
------------ ------------ ------------
DEFERRED DEBITS
Property Abandonments - net .............................. 83,817 101,300 88,269
Oil and Gas Property Write-Down .......................... 39,944 45,098 41,232
Unamortized Debt Expense ................................. 128,905 114,320 132,342
Deferred OPEB Costs ...................................... 192,727 140,770 116,476
Under Recovered Electric Energy and Gas Costs - net ...... 171,238 120,204 172,563
Unrecovered Environmental Costs (note 2) ................. 136,151 137,292 138,435
Unrecovered Plant and Regulatory Study Costs ............. 35,661 35,182 37,128
Deferred Decontamination and Decommissioning Costs........ 53,016 61,108 53,016
Unrecovered SFAS 109 Deferred Income Taxes ............... 794,665 789,881 791,393
Other .................................................... 25,564 65,114 15,574
------------ ------------ ------------
Total Deferred Debits ............................... 1,661,688 1,610,269 1,586,428
------------ ------------ ------------
Total ................................................ $ 14,253,359 $ 14,267,399 $ 14,264,398
============ ============ ============
<FN>
See Notes to Consolidated Financial Statements.
PUBLIC SERVICE ELECTRIC AND GAS COMPANY
CONSOLIDATED BALANCE SHEETS
(Thousands of Dollars)
March 31, March 31, December 31,
CAPITALIZATION AND LIABILITIES 1995 1994 1994
- ------------------------------ ------------ ------------ ------------
CAPITALIZATION
Common Equity
Common Stock ........................................... $ 2,563,003 $ 2,563,003 $ 2,563,003
Contributed Capital by Enterprise ...................... 534,395 534,395 534,395
Retained Earnings ...................................... 1,360,215 1,261,863 1,292,201
------------ ------------ ------------
Total Common Equity ................................. 4,457,613 4,359,261 4,389,599
Preferred Stock without mandatory redemption ............... 384,994 459,994 384,994
Preferred Stock with mandatory redemption .................. 150,000 150,000 150,000
Monthly Income Preferred Securities of Subsidiary .......... 150,000 -- 150,000
Long-Term Debt ............................................. 4,587,740 4,759,090 4,486,787
------------ ------------ ------------
Total Capitalization ................................ 9,730,347 9,728,345 9,561,380
------------ ------------ ------------
OTHER LONG-TERM LIABILITIES
Decontamination, Decommissioning, and Low Level
Radwaste Costs ........................................ 57,664 61,108 56,149
Environmental Costs (note 2) ............................. 108,576 112,851 105,684
Capital Lease Obligations ................................ 53,612 52,966 53,770
------------ ------------ ------------
Total Other Long-Term Liabilities ................... 219,852 226,925 215,603
------------ ------------ ------------
CURRENT LIABILITIES
Long-Term Debt due within one year ....................... 210,200 200 310,200
Commercial Paper and Loans ............................... 94,200 101,961 401,759
Book Overdrafts .......................................... 51,913 38,627 86,576
Accounts Payable ......................................... 287,958 353,076 370,005
Accounts Payable - Associated Companies .................. 81,783 90,542 16,677
New Jersey Gross Receipts Taxes Accrued .................. 175,261 454,482 --
Other Taxes Accrued ...................................... 39,291 36,676 36,030
Interest Accrued ......................................... 96,179 100,559 95,721
Estimated Liability for Vacation Pay ..................... 40,621 40,490 27,080
Customer Deposits ........................................ 32,457 35,669 33,698
Liability for Injuries and Damages ....................... 31,784 29,559 29,814
Miscellaneous Environmental Liabilities .................. 15,305 4,795 15,365
Other .................................................... 48,132 21,490 50,778
------------ ------------ ------------
Total Current Liabilities ........................... 1,205,084 1,308,126 1,473,703
------------ ------------ ------------
DEFERRED CREDITS
Accumulated Deferred Income Taxes ........................ 2,497,959 2,405,337 2,478,539
Accumulated Deferred Investment Tax Credits .............. 385,010 404,327 389,721
Deferred OPEB Costs ...................................... 192,727 140,770 116,476
Other .................................................... 22,380 53,569 28,976
------------ ------------ ------------
Total Deferred Credits .............................. 3,098,076 3,004,003 3,013,712
------------ ------------ ------------
COMMITMENTS AND CONTINGENCIES (note 2)
Total ................................................. $ 14,253,359 $ 14,267,399 $ 14,264,398
============ ============ ============
PUBLIC SERVICE ELECTRIC AND GAS COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands of Dollars)
Three Months Ended Twelve Months Ended
March 31, March 31,
--------------------------- ---------------------------
1995 1994 1995 1994
------------ ------------ ------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income ............................. $ 206,896 $ 221,439 $ 644,863 $ 631,903
Adjustments to reconcile net income
to net cash flows from operating
activities:
Depreciation and Amortization ........ 141,788 134,311 554,509 519,311
Amortization of Nuclear Fuel ......... 23,120 23,574 94,719 99,055
Recovery (Deferral) of Electric
Energy and Gas Costs - net ......... 1,325 (58,170) (51,034) (195,095)
Amortization of Discounts on Property
Abandonments and Disallowance ...... (1,547) (1,767) (6,523) (7,391)
Provision for Deferred Income
Taxes - net ........................ 16,148 36,473 87,838 173,421
Investment Tax Credits - net ......... (4,711) (4,602) (19,317) (18,408)
Allowance for Funds Used During
Construction - Debt and Equity ..... (10,101) (7,145) (41,064) (28,545)
Changes in certain current assets
and liabilities:
Net decrease (increase) in Accounts
Receivable and Unbilled Revenues . 33,589 (5,755) 114,235 (15,490)
Net decrease (increase) in Inventory -
Fuel and Materials and Supplies... 99,477 175,513 (34,873) 38,153
Net (decrease) increase in
Accounts Payable ................. (16,941) (42,852) (73,877) 70,526
Net change in Prepaid/Accrued
Taxes ............................ 178,522 194,091 (276,606) (274,819)
Net change in Other Current Assets
and Liabilities .................. 22,899 31,606 27,538 (12,336)
Other ................................ (6,368) 5,742 21,736 (50,552)
------------ ----------- ----------- ------------
Net cash provided by operating
activities ....................... 684,096 702,458 1,042,144 929,733
------------ ----------- ----------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to Utility Plant,
excluding AFDC ....................... (128,027) (167,682) (809,519) (905,177)
Net (increase) decrease in
Long-Term Investments ................ (10,926) (10,484) 50,226 (40,445)
Increase in Decommissioning Funds
and Other Special Funds,
excluding interest ................... (7,390) (5,808) (36,976) (17,006)
Cost of Plant Removal - net ............ (2,103) (7,708) (28,357) (46,731)
Other .................................. (7) (501) 2,186 (1,207)
------------ ----------- ----------- ------------
Net cash used in investing
activities ....................... (148,453) (192,183) (822,440) (1,010,566)
------------ ----------- ----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net decrease in Short-Term Debt ........ (307,559) (430,767) (7,761) (12,853)
(Decrease) increase in Book
Overdrafts ........................... (34,663) (24,365) 13,286 7,009
Issuance of Long-Term Debt ............. -- 400,000 449,800 1,872,700
Redemption of Long-Term Debt............ -- (66,847) (411,150) (1,689,042)
Long-Term Debt Issuance and
Redemption Costs ..................... -- -- (29,731) (54,271)
Issuance of Preferred Stock ............ -- 75,000 -- 75,000
Redemption of Preferred Stock .......... -- (45,000) (75,000) (45,000)
Issuance of Monthly Income
Preferred Securities ................. -- -- 150,000 --
Cash Dividends Paid ................... (138,882) (138,980) (545,669) (542,472)
Other .................................. 953 (1,128) (842) (1,407)
------------ ----------- ----------- ------------
Net cash used in financing
activities ..................... (480,151) (232,087) (457,067) (390,336)
------------ ----------- ----------- ------------
Net increase (decrease) in Cash and
Cash Equivalents ....................... 55,492 278,188 (237,363) (471,169)
Cash and Cash Equivalents at Beginning
of Period .............................. 27,498 42,165 320,353 791,522
------------ ----------- ----------- ------------
Cash and Cash Equivalents at End
of Period .............................. $ 82,990 320,353 $ 82,990 $ 320,353
============ =========== =========== ============
Income Taxes Paid ........................ $ 27,005 $ 586 $ 235,615 $ 164,066
Interest Paid ............................ $ 85,972 $ 81,273 $ 350,566 $ 360,330
<FN>
See Notes to Consolidated Financial Statements.
PUBLIC SERVICE ELECTRIC AND GAS COMPANY
CONSOLIDATED STATEMENT OF RETAINED EARNINGS
(Thousands of Dollars)
Three Months Ended Twelve Months Ended
March 31, March 31,
--------------------------- ---------------------------
1995 1994 1995 1994
------------ ------------ ------------ ------------
Balance at Beginning of Period ........... $ 1,292,201 $ 1,180,532 $ 1,261,863 $ 1,173,840
Add: Net Income ......................... 206,896 221,439 644,863 631,903
------------ ------------ ------------ ------------
Total ............................... 1,499,097 1,401,971 1,906,726 1,805,743
------------ ------------ ------------ ------------
Deduct: Cash Dividends
Preferred Stock, at required rates ..... 8,682 10,280 38,869 39,572
Common Stock ........................... 130,200 128,700 506,800 502,900
Capital Stock Expenses ................. -- 1,128 842 1,408
------------ ------------ ------------ ------------
Total Deductions .................... 138,882 140,108 546,511 543,880
------------ ------------ ------------ ------------
Balance at End of Period ................. $ 1,360,215 $ 1,261,863 $ 1,360,215 $ 1,261,863
============ ============ ============ ============
<FN>
See Notes to Consolidated Financial Statements.
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. RATE MATTERS
Levelized Gas Adjustment Charge
PSE&G credited $30 million and $20 million in February and March 1995,
respectively, to its firm gas sales customers. The opportunity to provide these
credits was principally due to abnormally warm winter weather, lower gas prices
and a lower current short-term price forecast.
Electric Levelized Energy Adjustment Clause
On May 5, 1995, the Board of Public Utilities (BPU) approved PSE&G's
Levelized Energy Adjustment Clause (LEAC) in the amount of $129.4 million which
includes the recovery of $98 Million previously approved by the BPU, over the
period November 1994 through May 1995. The BPU also approved PSE&G's recovery
of the electric allocation of the Remediation Adjustment Clause (RAC) costs from
electric customers through the LEAC of $2 million for costs incurred during the
period October 1, 1992 through July 31, 1994 with respect to PSE&G's
Manufactured Gas Plant Remediation Program. All recovery of costs through
PSE&G's rates are subject to audit and verification by the BPU. Further the BPU
adopted the Administrative Law Judge recommendations that (1) the issue of
alleged overearnings is not a LEAC issue and PSE&G is not earning in excess of
its allowed rate of return; (2) a hearing to be convened regarding the April
1994 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; and (4) a decrease of $700
thousand in Demand Side Management (DSM) program costs. In addition, the BPU
established an additional review period for the accounting associated with 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.
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 2. COMMITMENTS AND CONTINGENCIES
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 -- 42.59%; Hope
Creek -- 95%; and Peach Bottom -- 42.49%. PSE&G operates Salem and Hope Creek,
while Peach Bottom is operated by PECO Energy, Inc. (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.
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 2. COMMITMENTS AND CONTINGENCIES - (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.
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 2. COMMITMENTS AND CONTINGENCIES - (CONTINUED)
(B) Limit of liability for each nuclear incident under Price-Anderson.
(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.
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 2. COMMITMENTS AND CONTINGENCIES - (CONTINUED)
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.
PSE&G is a member of an industry mutual insurance company, Nuclear Electric
Insurance Limited (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 co-generation and other non-utility capacity projected to be
available.
Based on PSE&G's construction program, construction expenditures are
expected to aggregate approximately $3.2 billion, which includes $484 million
for nuclear fuel and $78 million of Allowance for Funds used During Construction
(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
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 2. COMMITMENTS AND CONTINGENCIES - (CONTINUED)
significant increases 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 New Jersey Department of Environmental Protection (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.
As of March 31, 1995, the repowering project was about 99% complete and
PSE&G had spent approximately $311 million on this effort. In order for PSE&G
to recover its costs for the project, PSE&G would need either the BPU's
authorization to recover such costs in its rates or be successful in selling the
station's output in the emerging wholesale market.
In a petition to the BPU filed on March 1, 1995, regarding the deferral of
any proposed rate treatment for the Bergen Project, PSE&G agreed that it will
not seek implementation of the rate treatment plan for a minimum of 90 days from
the date of filing of such plan. All parties to the November 1, 1994 LEAC
Stipulation have consented to the requested delay.
Hazardous Waste
Certain Federal and State laws authorize the United States Environmental
Protection Agency (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,
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 2. COMMITMENTS AND CONTINGENCIES - (CONTINUED)
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 March 31, 1995 for the Remediation Program amounted
to $54.4 million. In addition, at March 31, 1995, PSE&G's estimated liability
for estimated remediation costs aggregated $108.6 million.
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 Levelized Gas Adjustment Charge (LGAC)
periods ending in 1996. As of March 31, 1995, PSE&G has recovered $24.7 million
through its LGAC.
In a September 1993 BPU order related to the recovery of certain
Remediation Program costs, the BPU 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 and the
audit resulted in no disallowance of any costs.
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 the third quarter of 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 ENTERPRISE GROUP INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONCLUDED)
NOTE 2. COMMITMENTS AND CONTINGENCIES - (Concluded)
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 March 31, 1995, PSRC had investments in the A-300 leases and the DC 10-
30 lease of $41.6 million and $32.6 million, respectively. Continental has
failed to make full payment of its required lease payments due since February
1, 1995, has advised PSRC of its intent to seek the termination of the A-300
leases and has returned the A-300 aircraft to PSRC. Effective February 1, 1995,
Continental has reduced its rental payments due under all three leases by
approximately 50%. Continental indicated that termination 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. Management
believes the ultimate resolution of this matter will not have a material effect
on its financial position, results of operations or net cash flows.
NOTE 3. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
Security Swap
In March 1995, certain equity securities, in which PSRC had an ownership
interest through a partnership and which were subject to a swap to the S&P 500
return, were exchanged for equity securities of another entity. Consequently,
PSRC terminated the security swap and realized a before tax gain of $3.5
million.
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. Rate Matters
Note 2. Commitments and Contingencies
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Following are the significant changes in or additions to information
reported in Enterprise's Annual Report to the Securities and Exchange Commission
(SEC) on Form 10-K for 1994, affecting the consolidated financial condition and
the results of operations of Enterprise and its subsidiaries. This discussion
refers to the Consolidated Financial Statements and related Notes to
Consolidated Financial Statements (Notes) of Enterprise and should be read in
conjunction with such statements and notes.
As of March 31, 1995, PSE&G comprised 85% of Enterprise's assets. For the
three month and twelve months ended March 31, 1995, PSE&G's revenues were 94%
and 93%, respectively, of Enterprise's revenues and PSE&G's earnings available
to Enterprise for such periods were 93% and 92%, respectively, of Enterprise's
net income.
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 Energy Policy Act (EPACT), 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 of traditional gas and electric sales 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 rate-making
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 rate-making 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
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
recovery from customers; and costs which regulators have ordered utilities to
incur to fulfill a variety of broader social purposes including such things as
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) Notices of Proposed Rulemaking (NOPR) have raised stranded costs and open
access as the most significant issues in the transition to a more competitive
wholesale power market. 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.
FERC's recent NOPR on open access would fundamentally change the electric
utility industry by providing wholesale customers with competitive open access
to the interstate transmission system. However, in the NOPR, FERC states its
position that utilities should be entitled to full recovery of legitimate and
verifiable stranded costs at the Federal and state levels. 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 2 -
Commitments and Contingencies of Notes. Competition may also have an adverse
impact upon the economics of certain regulatory-created incentives such as DSM.
As a result of such competitive forces, Enterprise announced a corporate
reorganization, effective March 1, 1995, that includes the creation of a new
ventures and services corporation, Enterprise 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 separate businesses: 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 separate business unit.
As a result of the evolution of the currently vertically integrated
electric and gas structure, fossil and nuclear generating units will eventually
operate in a deregulated and fully competitive market, where profitability will
be entirely dependent on the ability to generate electricity at low cost.
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
Transmission will likely evolve into a more regional common carrier service,
with current ownership and control of transmission lines probably moving to
ownership alone. Electric and gas distribution will likely evolve into a common
carrier service with incentive regulation based on reliability. Customer
services, such as meter reading, billing and collection and appliance services,
will likely ultimately become nonregulated, fully competitive businesses
operating without franchise boundaries. 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 boundaries.
The BPU presented its final, first phase of the New Jersey Energy Master
Plan to Governor Whitman March 1995, 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)
currently assessed on retail energy utility sales, upon all energy producers.
Management cannot predict the ultimate form of any legislative or regulatory
changes which may be adopted as a result of this Energy Master Plan.
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS -- (CONTINUED)
ENTERPRISE EARNINGS
Earnings per share of Enterprise Common Stock were 87 cents for the quarter ended March 31,
1995, a decrease of seven cents per share of Common Stock from the comparable 1994 quarter.
Earnings per share of Enterprise Common Stock were $2.70 for the twelve-month period ended
March 31, 1995, an increase of 16 cents per share of Common Stock from the comparable 1994 period.
(See Liquidity and Capital Resources - External Financing.) The changes are summarized as follows:
Increase or (Decrease)
------------------------------------------------------
Three Months Ended Twelve Months Ended
March 31, March 31,
1995 vs. 1994 1995 vs. 1994
----------------------- -----------------------
Per Per
Amount Share Amount Share
-------- -------- -------- --------
(Millions, except Per Share Data)
PSE&G
Revenues (net of fuel costs and gross
receipts taxes) ....................... $ (18) $ (0.08) $ 58 $ 0.24
Other operation expenses ................ (5) (0.02) (69) (0.28)
Maintenance expenses .................... 12 0.05 28 0.12
Depreciation and amortization expenses .. (6) (0.03) (29) (0.12)
Federal income taxes .................... 11 0.05 38 0.16
Interest charges ........................ (8) (0.03) (20) (0.09)
Allowance for Funds used During
Construction (AFDC).................... 3 0.01 13 0.05
Preferred Securities Dividend
Requirements .......................... (2) -- (5) (0.02)
-------- -------- -------- --------
Earnings Available to Enterprise ........ (13) (0.06) 14 0.06
-------- -------- -------- --------
EDHI
EDC ..................................... (8) (0.03) (39) (0.16)
CEA...................................... (2) -- 1 --
PSRC .................................... 4 0.02 16 0.07
EGDC...(A)............................... 1 -- 54 0.22
-------- -------- -------- --------
Subtotal ................................ (5) (0.01) 32 0.13
-------- -------- -------- --------
Net Income .............................. $ (18) (0.07) $ 46 0.19
======== -------- ======== --------
Effect of additional shares of Enterprise
Common Stock Issued .................... -- (.03)
-------- ---------
Total ................................. -- $ .16
======== =========
Average Shares of Common Stock
Outstanding 1995 ........................ 244,697,930 244,697,930
Average Shares of Common Stock
Outstanding 1994 ........................ 243,776,766 242,354,605
(A) Includes the 1994 impact of an impairment of assets of $51 Million, after tax, by EGDC in December 1993.
(See EDHI, below.)
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
ENTERPRISE EARNINGS - (Continued)
PSE&G
Earnings available to Enterprise decreased by $13 million for the quarter
ended March 31, 1995 from the quarter ended March 31, 1994. The decrease was
primarily due to lower firm therm gas sales (15.7%) and lower electric
kilowatthour (KWH) sales to customers (1.4%) resulting from the significantly
warmer weather in comparison to the same period in 1994, partially offset by a
modest improvement in New Jersey's economy. In addition, the other major
factors adversely affecting earnings were higher other operation expenses
comprised primarily of higher nuclear production expenses, increased
depreciation and amortization expenses due to more utility plant in service,
higher interest charges due to higher average daily balances of short-term debt
and higher interest rates. Partially offsetting the decrease in earnings were
lower maintenance expenses at Mercer and Hope Creek generating stations. Hope
Creek nuclear station expenses were higher in 1994 due to a refueling outage
during the first quarter of 1994.
Earnings available to Enterprise increased by $14 million for the twelve-
month period ended March 31, 1995 from the comparable twelve-month period of
1994. The increase was primarily due to electric KWH commercial sales, which
increased .9% principally due to weather and a modest improvement in New
Jersey's economy. Also benefiting 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 and lower maintenance
expenses due to higher expenses at Hope Creek nuclear generating station due to
a refueling outage in the first quarter of 1994. 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, increased depreciation and amortization expenses
due to more utility plant in service and higher interest charges due to a higher
average daily balance of short-term debt outstanding and higher interest rates.
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
ENTERPRISE EARNINGS - (Concluded)
EDHI
The net income of EDHI was $14 million for the quarter ended March 31,
1995, a decrease of $5 million from the quarter ended March 31, 1994. EDHI's
earnings decreased due to lower gas prices and volumes of EDC, partially offset
by increased income from partnership investments of PSRC.
The net income of EDHI was $56 million for the twelve-month period ended
March 31, 1995, an increase of $32 million over the twelve-month period ended
March 31, 1994. Excluding the impact of an impairment of assets of $51 million,
after tax, by EGDC in December 1993, EDHI's earnings decreased by $18 million.
Lower EDC earnings resulting from lower gas prices and volumes were partially
offset by higher PSRC earnings due to lower Federal income taxes (the effect of
a 1993 Federal income tax increase recorded in August 1993) and increased income
from partnership investments.
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.
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
DIVIDENDS
Over the past several years, Enterprise has reduced its dividend payout
ratio. Management believes this is a prudent policy which needs to be
continued.
Dividends paid to holders of Enterprise Common Stock during the three and
twelve month periods ended March 31, 1995 increased $.5 million, and $4.9
million, respectively, over the comparable 1994 periods. The increase in
dividend payments was due to the issuance of additional shares of Enterprise
Common Stock. (See Liquidity and Capital Resources.)
Dividends paid to holders of PSE&G's Preferred Stock, during the three and
twelve month periods ended March 31, 1995 decreased $1.6 million and $.7
million, respectively, over the comparable 1994 periods. The decrease in such
dividends was due to reduced expense 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 $3.5 million and
$5.2 million, respectively during the three and twelve-month periods ended March
31, 1995.
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
REVENUES
PSE&G ELECTRIC
Revenues increased $54 million, or 6%, and $78 million, or 2%, for the
three and twelve- month periods ended March 31, 1995 from the same periods ended
March 31, 1994. The significant components of these changes follow:
Increase or (Decrease)
----------------------------------------
Three Months Ended Twelve Months Ended
March 31, March 31,
1995 vs. 1994 1995 vs. 1994
------------------- -------------------
(Millions)
Kilowatthour sales .............. $ 3 $ 40
Recovery of energy costs ........ 41 33
NJGRT ........................... - (5)
Other operating revenues ........ 10 10
----- -----
Total Electric Revenues ....... $ 54 $ 78
===== =====
Changes in megawatthour sales by customer category are described below:
Megawatthours
Increase or (Decrease)
----------------------------------------
Three Months Ended Twelve Months Ended
March 31, March 31,
1995 vs. 1994 1995 vs. 1994
------------------- -------------------
Residential ..................... 18.2 0.7% (77.0) (0.7)%
Commercial ...................... (22.8) (0.5) 157.0 0.9
Industrial ...................... (126.5) (5.7) (84.0) (0.9)
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
REVENUES - (Continued)
PSE&G ELECTRIC - (Concluded)
The electric revenue increases of 6% and 2%, respectively, during the three
and twelve-month periods ended March 31, 1995 over the comparable three and
twelve-month periods of 1994, were due to a higher recovery of energy costs and
a higher recovery of costs associated with DSM. Also affecting the increase in
revenues for the twelve-months, were higher commercial sales resulting from a
modestly improving New Jersey economy. Residential sales decreased due to
significantly warmer winter weather in 1995 vs. 1994.
PSE&G GAS
Revenues decreased $167 million, or 21%, and $155 million, or 9%, for the
three and twelve-month periods ended March 31, 1995 from the same periods ended
March 31, 1994. The significant components of these changes follow:
Increase or (Decrease)
----------------------------------------
Three Months Ended Twelve Months Ended
March 31, March 31,
1995 vs. 1994 1995 vs. 1994
------------------- -------------------
(Millions)
Therm sales...................... $ (31) $ (1)
Recovery of fuel costs .......... (121) (129)
NJGRT ........................... (15) (35)
Other operating revenues ........ - 10
------ ------
Total Gas Revenues ............ $ (167) $ (155)
====== ======
Changes in gas sold and transported by customer category are described
below:
Kilotherms
Increase or (Decrease)
----------------------------------------
Three Months Ended Twelve Months Ended
March 31, March 31,
1995 vs. 1994 1995 vs. 1994
------------------- -------------------
Residential ..................... (114.0) (16.9)% (131.1) (9.7)%
Commercial ...................... (35.4) (8.2) (65.4) (6.7)
Industrial ...................... (20.1) (7.6) (13.6) (1.5)
Transportation Service .......... 41.5 31.6 56.7 10.7
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
REVENUES - (Concluded)
PSE&G GAS - (Concluded)
The gas revenue decreases of 21% and 9%, respectively, for the three and
twelve-month periods ended March 31, 1995 from the comparable three and twelve-
month periods of 1994 were primarily attributable to a lower recovery of fuel
related costs. The decrease in sales revenues was due to a warmer than normal
1995 winter in comparison to a colder than normal 1994 winter. Transportation
Service sales increased due to significantly fewer storm-related service
interruptions in 1995 and the movement of customers from firm and non-firm rate
classes.
EDHI
EDHI's revenues decreased $12 million, or 11%, during the first quarter of
1995 compared to the first quarter of 1994, and $45 million, or 10%, during the
twelve month period ended March 31, 1995 compared to the twelve month period
ended March 31, 1994. The significant factors contributing to such results are
as follows:
Increase or (Decrease)
----------------------------------------
Three Months Ended Twelve Months Ended
March 31, March 31,
1995 vs. 1994 1995 vs. 1994
------------------- -------------------
(Millions)
EDC ............................. $(17) $(63)
CEA ............................. - 13
PSRC ............................ 5 8
EGDC ............................ - (3)
----- -----
TOTAL................ $ (12) $ (45)
===== =====
The 11% decrease in revenues for the quarter ended March 31, 1995 compared
to the quarter ended March 31, 1994 was due to lower gas prices and volumes of
EDC partially offset by higher PSRC income from partnership investments.
The 10% decrease in revenues for the twelve months ended March 31, 1995
compared to the twelve-month period ended March 31, 1994 was primarily due to
lower gas prices and volumes of EDC and lower rents of EDGC due to sales of
properties, partially offset by greater income from CEA power projects and
higher PSRC income from partnership investments.
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
ELECTRIC ENERGY COSTS
Electric energy costs increased $41 million, or 24%, and $39 million, or
6%, in the first quarter and twelve months ended March 31, 1995, respectively,
from the comparable 1994 periods. The significant components of these changes
follow:
Increase or (Decrease)
----------------------------------------
Three Months Ended Twelve Months Ended
March 31, March 31,
1995 vs. 1994 1995 vs. 1994
------------------- -------------------
(Millions)
Changes in prices paid for fuel
and power purchases ............. $ (16) $(35)
Kilowatthour generation ............ -- 2
Adjustment of actual costs to
match recoveries through
revenues (A) ..................... 57 72
----- -----
Total Electric Energy Costs ... $ 41 $ 39
===== =====
(A) Reflects the change in deferred over(under) recovered energy costs.
The increases in total costs were principally due to the overrecovery of
energy costs stemming from an increase in LEAC rates for the period November
1994 through May 1995, partially offset by a decrease in fossil fuel costs.
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
GAS SUPPLY COSTS
Gas supply costs decreased $116 million, or 25%, and $122 million, or 12%
in the first quarter and twelve months ended March 31, 1995 respectively, from
the comparable 1994 periods. The significant components of these changes
follow:
Increase or (Decrease)
----------------------------------------
Three Months Ended Twelve Months Ended
March 31, March 31,
1995 vs. 1994 1995 vs. 1994
------------------- -------------------
(Millions)
Changes in prices paid for
gas supplies .................... $ (52) $(103)
Therm sendout ...................... (64) (78)
Refunds from pipeline suppliers .... (2) (16)
Adjustment of actual costs to
match recoveries through
revenues (A) ..................... 2 75
----- -----
Total Gas Supply Costs ........ $(116) $(122)
===== =====
(A) Reflects the change in deferred over (under) recovered gas costs.
The decreases in total costs were principally due to the lower price of
natural gas and lower therm sendout resulting from the warmer 1995 winter season
compared to the 1994 winter season.
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
LIQUIDITY AND CAPITAL RESOURCES
Enterprise's liquidity is affected by maturing debt, 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 general and
regional economic conditions, PSE&G's customer retention and growth depends upon
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 NRC and BPU requirements, the impact of
environmental regulations, continued access to the capital markets and continued
favorable regulatory treatment of consolidated tax benefits. (For additional
information see the discussion of Competition above and Note 2, Commitments and
Contingencies of the Notes.)
PSE&G
For the three-month period ended March 31, 1995, PSE&G had utility plant
additions, including AFDC, of $138 million, a decrease of $37 million from the
corresponding period in 1994. For the twelve-month period ended March 31, 1995,
PSE&G had utility plant additions, including AFDC, of $851 million, a decrease
of $83 million from the corresponding period in 1994. Construction expenditures
were related to improvements in PSE&G's existing power plants, transmission and
distribution system, gas system and common facilities. PSE&G's expenditures for
the cost of plant removal (net of salvage) decreased $6 million and $18 million
for the three-month and twelve-month periods ended March 31, 1995 from the
corresponding periods in 1994. PSE&G expects that it will be able to generate
internally all of its capital requirements including construction expenditures
over the next five years and significantly reduce its debt outstanding, assuming
adequate and timely recovery of costs, as to which no assurances can be given.
Decommissioning and other special funds, excluding interest, increased $2
million and $20 million for the three-month and twelve-month periods ended March
31, 1995 from the corresponding periods in 1994.
EDHI
During the next five years, a majority of EDHI's capital requirements are
expected to be provided from operational cash flows. 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
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
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). For the
three-month period ended March 31, 1995, EDC had additions to oil and gas
property, plant and equipment, excluding capitalized interest, of $21 million,
a decrease of $16 million from the corresponding period in 1994. For the
twelve-month period ended March 31, 1995, EDC had additions to oil and gas
property, plant, and equipment, excluding capitalized interest, of $134 million,
an increase of $21 million compared to the corresponding period in 1994. Two
CEA projects under construction as of December 31, 1994 were placed in operation
on February 1, 1995 and April 6, 1995.
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.
In March 1995, a partnership in which EGDC is an 80% partner, successfully
negotiated an extension of a mortgage financing maturing on February 28, 1995.
The extension amount of $33.6 million ($40.2 million at December 31, 1994)
matures on February 28, 2002 with principal payments totaling $1.5 to $2.0
million annually. EGDC has guaranteed $10.0 million of the current mortgage
loan, with a support agreement from EDHI. Such guaranteed amount is reduced for
monthly principal repayments made by the partnership.
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 March 31, 1995, $109 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 range from 3:1 to 1.75:1. EDHI
is also required to maintain a twelve month earnings before interest and taxes
to interest (EBIT) coverage ratio of at least 1.35:1. As of March 31, 1995 and
1994, EDHI had consolidated debt to equity ratios, including contingent
obligations, of 1.13:1 and 1.24:1 and, for the twelve months ended March 31,
1995 and 1994, EBIT coverage ratios, as defined to exclude the effects of EGDC,
of 1.87:1 and 2.23:1, respectively. Compliance with applicable financial
covenants will depend upon future levels of earnings, among other things, as to
which no assurance can be given.
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
LONG TERM INVESTMENTS AND REAL ESTATE
Long-Term Investments and Real Estate, increased $6 million for the three-
month period ended March 31, 1995 due to PSRC and EGDC partnership investments,
partially offset by CEA capital returns from partnerships. For the three-month
period ended March 31, 1994, a $21 million decrease was caused by returns of
capital from CEA and PSRC partnerships and PSRC security sales.
Long-Term Investments and Real Estate decreased $32 million for the twelve-
month period ended March 31, 1995 primarily due to a net decrease in PSE&G's
investment in an insurance contract, partially offset by PSRC and CEA
investments in partnerships. For the twelve-month period ended March 31, 1994,
a $98 million decrease was caused by PSRC security sales, partially offset by
additional CEA partnership investments.
In April 1995, EGDC entered into agreements for the sale of three
properties with an aggregate book value of approximately $80 million. Such
agreements are subject to customary due diligence periods of up to 90 days. No
assurances can be given as to the ultimate consummation of such sales by EGDC.
However, Enterprise does not expect such sales to have a significant effect on
its results of operations.
INTERNAL GENERATION OF CASH FROM OPERATIONS
Enterprise's cash provided by operating activities for the three months
ended March 31, 1995 decreased $46 million to $699 million when compared to the
corresponding period in 1994. This decrease was primarily due to a smaller
increase in inventory - fuel and materials and supplies of $76 million, a
decrease in net income of $18 million, higher unrealized gains on investments
of $20 million, a smaller increase in deferred income taxes of $29 million, a
negative net change in certain other current assets and liabilities of $17
million, and a negative net change in certain noncurrent assets and liabilities,
primarily deferred amounts, of $11 million. Partially offsetting these cash
outflows were a smaller decrease in accounts payable of $73 million and lower
recovery of electric energy and gas costs through PSE&G's LEAC and LGAC of $59
million. (For additional information see Enterprise Earnings, Revenues,
Electric Energy Costs and Gas Supply Costs.)
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
Enterprise's cash provided by operating activities for the twelve months
ended March 31, 1995 increased $82 million to $1.186 billion when compared to
the corresponding period in 1994. This increase was primarily due to a higher
recovery of electric energy and gas costs through PSE&G's LEAC and LGAC of $144
million, a decrease in accounts receivable of $92 million, an increase in net
income of $46 million, greater depreciation and amortization of $28 million, a
positive net change in certain other current assets and liabilities of $26
million, and a positive net change in certain noncurrent assets and liabilities,
primarily deferred amounts, of $86 million. Partially offsetting these cash
inflows were a loss from property impairments of $78 million in 1993, lower
unrealized gains on investments of $40 million, a smaller increase in deferred
income taxes of $68 million, an increase in inventory - fuel and materials and
supplies of $73 million, and a decrease in accounts payable of $76 million.
(For additional information see Enterprise Earnings and Revenues, Electric
Energy Costs and Gas Supply Costs.)
EXTERNAL FINANCINGS
ENTERPRISE CONSOLIDATED CASH FLOWS FROM FINANCING ACTIVITIES
Three Months Ended Twelve Months Ended
March 31, March 31,
------------------ -------------------
1995 1994 1995 1994
------- ------- ------ -----
(MILLIONS OF DOLLARS)
Enterprise (Parent Company):
Issuance of Common Stock(A)....................... $ -- $ 28 $ -- $ 127
Cash Dividends paid on Common Stock(B)............ (132) (132) (529) (524)
------- ------- ------- ------
Total Enterprise (Parent Company)......... (132) (104) (529) (397)
------- ------- ------- ------
PSE&G:(C)
Net decrease in Short-Term Debt(D)................ (308) (431) (8) (13)
(Decrease) increase in Book Overdrafts............. (35) (24) 13 7
Issuance of Long-Term Debt(E)..................... -- 400 450 1,873
Redemption of Long-Term Debt...................... -- (67) (411) (1,689)
Long-Term Debt Issuance and Redemption Costs...... -- -- (30) (54)
Issuance of Preferred Stock(F).................... -- 75 -- 75
Redemption of Preferred Stock..................... -- (45) (75) (45)
Issuance of Monthly Income Preferred
Securities .................................... -- -- 150 --
Other............................................. 2 (1) (1) (1)
------- ------- ------- ------
Total PSE&G............................... (341) (93) 88 153
------- ------- ------- ------
EDHI:(G)
Net increase (decrease) in Short-Term Debt........ 54 (28) 128 (134)
Issuance of Long-Term Debt........................ -- -- -- 105
Redemptions of Long-Term Debt..................... (52) (30) (136) (281)
Other............................................. -- -- -- (7)
------- ------- ------- ------
Total EDHI................................ 2 (58) (8) (317)
------- ------- ------- ------
Net cash used in financing activities............... $ (471) $ (255) $ (449) $ (561)
======== ======= ======= ======
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
(A) Book value per share was $22.03 at March 31, 1995, compared to $21.49 at
March 31, 1994.
(B) See Dividends.
(C) The BPU has authorized PSE&G to issue $370 million of First and Refunding
Mortgage Bonds (Bonds)/Medium-Term Notes (MTNs) through 1996 for refunding
purposes.
On April 5, 1995 PSE&G issued $100 million of its MTNs for the purpose of
redeeming $100 million of its Series JJ Bonds which mature on June 1, 1995.
The BPU has authorized PSE&G to issue and have outstanding at any one time
not more than $1 billion of its short-term obligations, consisting of
commercial paper and other unsecured borrowings from banks and other
lenders through January 1, 1997. On March 31, 1995, PSE&G had no short-
term debt outstanding.
PSE&G has an $800 million revolving credit agreement with a group of
commercial banks through September 14, 1995. On March 31, 1995, there were
no short-term borrowings outstanding under this credit agreement.
Public Service Conservation Resources Corporation (PSCRC) has a $30 million
revolving credit facility supported by a PSE&G subscription agreement with
an aggregate purchase price of $30 million which terminates on March 6,
1996. As of March 31, 1995 PSCRC had $8.7 million outstanding under this
facility.
(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 March 31, 1995, Fuelco had commercial paper of $85.5
million outstanding under such program.
(E) Enterprise's long-term debt aggregated $5.265 billion as of March 31, 1995,
of which $4.588 billion was attributable to PSE&G and $677 million to EDHI.
(F) The BPU has authorized PSE&G to issue not more than $180 million of
Preferred Stock through 1995.
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Concluded)
(G) Funding has a commercial paper program, supported by a commercial bank
letter of credit and credit facility, in the amount of $225 million. As
of March 31, 1995, Funding had $144 million of borrowings outstanding under
this program.
Funding has a $225 million revolving credit facility. As of March 31,
1995, Funding had no borrowings outstanding under this facility.
In March 1995, Funding amended its letter of credit and revolving credit
facility in order to adjust pricing and extend the maturity to March 1998.
Capital's MTN program has previously provided for an aggregate principal
amount of up to $750 million of MTNs so that its total debt outstanding at
any time, including MTNs, would not exceed such amount. Effective January
31, 1995, Capital will not have more than $650 million of debt outstanding
at any time. At March 31, 1995, Capital had total debt outstanding of $615
million, including $467 million of MTNs.
PUBLIC SERVICE ELECTRIC AND GAS COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Following are changes in or additions to the significant factors reported
in PSE&G's Annual Report to the SEC on Form 10-K for 1994, affecting the
consolidated financial condition of PSE&G and its subsidiaries as reflected in
their consolidated results of operations. This discussion refers to the
consolidated financial statements and related notes herein 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 MD&A,
insofar as they relate to PSE&G and its subsidiaries: Competition; Enterprise
Earnings - PSE&G; Dividends; Revenues - PSE&G Electric, PSE&G Gas; Electric
Energy Costs; Liquidity and Capital Resources - PSE&G, Long Term Investments and
Real Estate and External Financings.
GAS SUPPLY COSTS
Gas supply costs decreased $121 million, or 26%, and $133 million, or 13%,
in the first quarter and twelve months ended March 31, 1995, respectively, from
the comparable 1994 periods. The significant components of these changes
follow:
Increase or (Decrease)
----------------------------------------
Three Months Ended Twelve Months Ended
March 31, March 31,
1995 vs. 1994 1995 vs. 1994
------------------- -------------------
(Millions)
Changes in prices paid for
gas supplies .................... $ (56) $(113)
Therm sendout ...................... (65) (79)
Refunds from pipeline suppliers .... (2) (16)
Adjustment of actual costs to
match recoveries through
revenues (A) ..................... 2 75
----- -----
Total Gas Supply Costs ........ $(121) $(133)
===== =====
(A) Reflects the change in deferred over (under) recovered gas costs.
The decrease in total costs was principally due to the lower price of
natural gas and lower therm sendout resulting from the warmer 1995 winter
season compared to the 1994 winter season.
PUBLIC SERVICE ELECTRIC AND GAS COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Concluded)
LIQUIDITY AND CAPITAL RESOURCES
INTERNAL GENERATION OF CASH FROM OPERATIONS
PSE&G's cash provided by operating activities for the three months ended
March 31, 1995 decreased $18 million to $684 million when compared to the
corresponding period in 1994. This decrease was primarily due to a smaller
increase in inventory - fuel and materials and supplies of $76 million, a
decrease in net income of $15 million, a smaller increase in deferred income
taxes of $20 million, a negative net change in certain other current assets and
liabilities of $9 million, and a negative net change in certain noncurrent
assets and liabilities, primarily deferred amounts, of $12 million. Partially
offsetting these cash outflows were a smaller decrease in accounts payable of
$26 million, a decrease in accounts receivable of $39 million and lower recovery
of electric energy and gas costs through PSE&G's LEAC and LGAC of $59 million.
(For additional information see Enterprise Earnings, Revenues and Electric
Energy Costs and PSE&G Gas Supply Costs.)
PSE&G's cash provided by operating activities for the twelve months ended
March 31, 1995 increased $112 million to $1.042 billion when compared to the
corresponding period in 1994. This increase was primarily due to a higher
recovery of electric energy and gas costs through PSE&G's LEAC and LGAC of $144
million, a decrease in accounts receivable of $130 million, greater depreciation
and amortization of $35 million, a positive net change in certain other current
assets and liabilities of $40 million, and a positive net change in certain
noncurrent assets and liabilities, primarily deferred amounts, of $72 million.
Partially offsetting these cash inflows were a smaller increase in deferred
income taxes of $86 million, an increase in inventory - fuel and materials and
supplies of $73 million, and a decrease in accounts payable of $144 million.
(For additional information see Enterprise Earnings, Revenues and Electric
Energy Costs and PSE&G Gas Supply Costs.)
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
- ------ -----------------
Certain information reported under Item 1 of Part I of Enterprise's and
PSE&G's Annual Reports to the Securities and Exchange Commission on Form 10-K
for 1994 (the "Form 10-K") is updated herein at the respective pages indicated.
References are to the related pages and paragraph(s) of the Form 10-Q.
(1) Page 11 - Proceedings before the BPU relating to PSE&G's LGAC. Form
10-K, Page 75.
(2) Page 11 - Proceedings before the BPU relating to PSE&G's LEAC. Form
10-K, Page 75.
(3) Page 40 - Proceedings before FERC relating to competition and
electric wholesale markets. Form 10-K, Page 3.
(4) Page 40 - Requests filed in 1974 and later supplemented, to EPA and
NJDEP to establish thermal discharge and intake structures
for PSE&G's electric generating stations. Form 10-K, Page
24.
Item 4. Submission of Matters to a Vote of Security Holders
- ------ ---------------------------------------------------
Enterprise's Annual Meeting of Stockholders was held on April 18, 1995.
Proxies for the meeting were solicited pursuant to Regulation 14A under the
Securities Exchange Act of 1934, there was no solicitation of proxies in
opposition to management's nominees as listed in the proxy statement and all of
management's nominees were elected to the board of directors. Details of the
voting are provided below:
Votes
Votes For Withheld
--------- --------
Proposal 1 - Election of Directors
Class I - Term expiring 1997
Lawrence R. Codey.............. 198,720,225 2,408,487
Class II - Term expiring 1998
E. James Ferland............... 198,699,038 2,429,674
Irwin Lerner................... 198,853,996 2,285,716
Marilyn M. Pfaltz.............. 198,788,397 2,340,315
Richard J. Swift............... 198,839,411 2,290,301
Votes Votes
Votes For Against Abstaining
--------- --------- ----------
Proposal 2 - Appointment of Deloitte &
Touche LLP as Independent
Auditors for 1995........ 198,578,345 1,151,108 1,414,938
There were no broker non-votes with respect to either item.
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
PART II. OTHER INFORMATION - (Continued)
Item 5. Other Information
- ------ -----------------
Certain information reported under Item 1 of Part I of Enterprise's and
PSE&G's Annual Reports to the Securities and Exchange Commission on Form 10-K
for 1994 (the "Form 10-K") is updated below. References are to the related
pages and paragraph(s) of the Form 10-K as printed and distributed.
Competition - Electric
Form 10-K, Page 3, Paragraph 3
------------------------------
In March 1995, FERC issued a NOPR which, if adopted, would require
electric utilities, including PSE&G, to provide open access to the interstate
transmission network pursuant to non-discriminatory tariffs available to all
wholesale sellers and buyers of electric energy. Utilities would be required
to offer transmission to eligible customers comparable to the service they
provide themselves and to take service under the tariffs for their own wholesale
sales and purchases. Further, transmission and ancillary service components
would be unbundled and, when buying or selling power, utilities would have to
rely on the same network for transmission system information as their customers.
The NOPR states FERC's general principle that utilities, should be
entitled to full recovery of legitimate and verifiable stranded costs at the
federal and state levels and reiterates its prior proposal that such costs be
directly assigned to departing customers. The NOPR further provides that
stranded costs due to retail wheeling are a state matter, while stranded costs
due to wholesale wheeling, municipalization or change from retail to wholesale
customer are within FERC's jurisdiction. PSE&G cannot predict the impact of any
regulations that may be adopted. See Management's Discussion and Analysis --
Competition.
PSE&G - Nuclear Operations - Salem
Form 10-K, Page 11, Paragraph 3
--------------------------------
On March 21, 1995, representatives of the NRC Staff met with the Boards of
Directors of Enterprise and PSE&G to reiterate the previously expressed concerns
with regard to Salem's operations, including plant material conditions that
required operators to operate various systems manually, maintenance backlog,
root cause analysis, quality assurance, engineering, repeat equipment failures,
procedure adherence, four events over the past four years causing the NRC to
conduct four Augmented Inspected Team reviews, leadership, employee concerns,
attention to balance of plant, management oversight and vertical communication
with employees and oversight of contractors. The NRC staff acknowledged that
PSE&G had made efforts to improve Salem's operations, including making senior
management changes, but indicated that demonstrated sustained results have not
yet been achieved.
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
PART II. OTHER INFORMATION - (Continued)
Item 5. Other Information - (Continued)
- ------ -------------------------------
Form 10-K, Page 11, Paragraph 3 - (Concluded)
---------------------------------------------
Also in March 1995, the Institute of Nuclear Power Operations (INPO)
reported an assessment of Salem's operations that indicated that improvement was
needed in a wide range of areas, with significant improvement required in areas
such as equipment performance and plant material conditions, management and
supervision, engineering activities and training.
On April 21, 1995, the NRC commenced an inspection, expected to take about
four weeks, to assess how effectively Salem is currently performing from a
safety perspective in the areas of problem identification; prioritizing and
conducting work on plant equipment; and management oversight of plant
performance. This inspection is currently ongoing.
As previously stated, PSE&G is in agreement with the assessment of the NRC
staff, as well as that of INPO, that Salem's operations must be further improved
in order to assure continued reliable operation. PSE&G is fully committed to
take whatever action is needed to improve Salem's operations and is committed
to safe and conservative operations before production.
PSE&G cannot predict what further action, if any, the NRC may take in
respect of Salem's operations.
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
PART II. OTHER INFORMATION - (Continued)
Item 5. Other Information - (Continued)
- ------ -------------------------------
New Matters
-----------
On April 12, 1995, PSE&G received notification of a Level II violation
including an $80,000 civil penalty for an incident that occurred in December,
1992 in which two former Salem station managers did not properly respond to
safety concerns raised by two employees. The incident was thoroughly
investigated and brought to the NRC's attention by PSE&G at that time. PSE&G
has agreed to pay the penalty and has instituted several measures to reinforce
to personnel that their concerns about safety and all issues relating to the
operation of the nuclear facilities can be openly brought to management's
attention.
PSE&G has been notified of an NRC enforcement conference to be held on
June 1, 1995 pertaining to valves that were incorrectly positioned after a plant
modification was installed in May 1993 and several examples of inadequate root
cause determination of events, which led to insufficient corrective actions at
Salem. During this enforcement conference, PSE&G will address the issues
identified and ensure they are clearly understood, establish the safety
significance of the issues and discuss the mitigating factors related to these
issues. Enterprise cannot predict what action, if any, the NRC may take as a
result of this meeting.
PSE&G - Nuclear Operations - Hope Creek
Form 10-K, Page 12
-------------------
New Information
---------------
A small amount of low-level radioactive materials was released to the
atmosphere at Hope Creek Generating Station on April 5, 1995. The release did
not exceed federal limits nor pose any danger to the public or plant employees;
however, a trailer driven offsite had exceeded the limit for releasing materials
and was later cleaned. PSE&G and the NRC have investigated the event and met
on this issue. An enforcement conference is currently scheduled for the end of
June 1995. The equipment responsible for generating the release has been
secured until the NRC has had the opportunity to review corrective actions.
Additionally, similar equipment will be reviewed for deficiencies. PSE&G will
also be holding meetings with New Jersey and local government officials to
address any concerns relating to the incident. PSE&G cannot predict what
actions, if any, the NRC will take as a result of this event.
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
PART II. OTHER INFORMATION - (Continued)
Item 5. Other Information - (Concluded)
- ------ -------------------------------
Environmental Controls - Water Pollution Control - Salem Station
Form 10-K, Page 24, Paragraphs 4 and 5
--------------------------------------
In March 1995, the State of Delaware agreed to withdraw its hearing request
related to the Salem Station New Jersey Pollution Discharge Elimination System
(NJPDES) permit in return for PSE&G funding a number of environmental projects
in Delaware, similar to and including certain NJPDES permit conservation
measures, which is not expected to materially increase the cost of compliance
with the permit. In May 1995, PSE&G resolved all issues with the remaining
intervenors, thus eliminating a hearing and any further challenge to the Salem
permit.
Item 6. Exhibits and Reports on Form 8-K
- ------ --------------------------------
(a) A listing of exhibits being filed with this document is as follows:
Exhibit
Number Document
------- ----------------------------------------------------------
12 Computation of Ratios of Earnings to Fixed Charges plus
Preferred Securities Dividend Requirements (Enterprise).
12(A) Computation of Ratios of Earnings to Fixed Charges (PSE&G).
12(B) Computation of Ratios of Earnings to Fixed Charges plus
Preferred Securities Dividend Requirements (PSE&G).
27 Financial Data Schedules.
(b) Reports on Form 8-K.
None.
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrants have duly caused these reports to be signed on their respective
behalf by the undersigned thereunto duly authorized.
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
PUBLIC SERVICE ELECTRIC AND GAS COMPANY
--------------------------------------------
(Registrants)
By: PATRICIA A. RADO
--------------------------------------
Patricia A. Rado
Vice President and Controller
(Principal Accounting Officer)
Date: May 12, 1995