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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, 1996
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
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(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, 1996
----- -----------------------------
Common Stock, without par value 244,697,930
As of April 30, 1996, 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
----
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, 1996 and 1995 ................. 1
Consolidated Balance Sheets as of March 31, 1996, 1995
and December 31, 1995 ....................................... 2
Consolidated Statements of Cash Flows for the Three and
Twelve Months Ended March 31, 1996 and 1995 ................. 4
Consolidated Statements of Retained Earnings for the
Three and Twelve Months Ended March 31, 1996 and 1995 ....... 5
Public Service Electric and Gas Company (PSE&G):
Consolidated Statements of Income for the Three and
Twelve Months Ended March 31, 1996 and 1995 ................. 6
Consolidated Balance Sheets as of March 31, 1996,
1995 and December 31, 1995 .................................. 7
Consolidated Statements of Cash Flows for the Three and
Twelve Months Ended March 31, 1996 and 1995 ................. 9
Consolidated Statements of Retained Earnings for the
Three and Twelve Months Ended March 31, 1996 and 1995 ....... 10
Notes to Consolidated Financial Statements - Enterprise......... 11
Notes to Consolidated Financial Statements - PSE&G.............. 21
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Enterprise ....................................... 22
PSE&G ............................................ 37
i
TABLE OF CONTENTS
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Page
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings ................................... 38
Item 4. Submission of Matters to a Vote of
Security Holders .................................... 40
Item 5. Other Information ................................... 41
Item 6. Exhibits and Reports on Form 8-K .................... 48
Signatures - Public Service Enterprise Group Incorporated ..... 50
Signatures - Public Service Electric and Gas Company .......... 50
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
Alternative Rate Plan.. New Jersey Partners in Power Plan
BPU.................... New Jersey Board of Public Utilities
Capital................ PSEG Capital Corporation
CEA.................... Community Energy Alternatives Incorporated
CERCLA................. Federal Comprehensive Environmental
Response, Compensation and Liability
Act of 1980
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.................. National Energy Policy Act of 1992
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
KKR.................... Kohlberg, Kravis, Roberts and Co.
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
----------------------- -------------------------------------------
NBU.................... Nuclear Business Unit
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
NML.................... Nuclear Mutual Limited
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
OAL.................... Office of Administrative Law
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
Ratepayer Advocate..... New Jersey Division of Ratepayer Advocate
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, 1996 and 1995 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,
--------------------------- ---------------------------
1996 1995 1996 1995
------------- ------------ ------------ ------------
OPERATING REVENUES
Electric ................................ $ 958,333 $ 945,038 $ 4,034,137 $ 3,795,409
Gas ..................................... 796,916 634,478 1,848,841 1,611,349
Nonutility Activities ................... 110,533 96,752 470,689 396,496
------------- ------------ ------------ ------------
Total Operating Revenues ........... 1,865,782 1,676,268 6,353,667 5,803,254
------------- ------------ ------------ ------------
OPERATING EXPENSES
Operation
Fuel for Electric Generation and
Interchanged Power .................... 216,075 208,110 899,747 736,672
Gas Purchased and Materials for Gas
Produced............................... 456,732 344,193 1,074,078 907,593
Other ................................... 284,274 253,906 1,149,126 1,122,251
Maintenance................................ 95,416 64,045 343,981 295,650
Depreciation and Amortization.............. 174,468 164,256 684,443 642,045
Taxes
Federal Income Taxes .................... 101,426 106,789 348,729 298,866
New Jersey Gross Receipts Taxes ......... 188,436 176,789 624,608 568,653
Other ................................... 26,132 23,845 82,757 82,044
------------- ------------ ------------ ------------
Total Operating Expenses ........... 1,542,959 1,341,933 5,207,469 4,653,774
------------- ------------ ------------ ------------
OPERATING INCOME .......................... 322,823 334,335 1,146,198 1,149,480
------------- ------------ ------------ ------------
OTHER INCOME
Allowance for Funds Used During
Construction - Equity ................. -- 1,482 3,842 12,483
Miscellaneous - net ..................... 1,278 2,002 7,317 7,277
------------- ------------ ------------ ------------
Total Other Income ................. 1,278 3,484 11,159 19,760
------------- ------------ ------------ ------------
INCOME BEFORE INTEREST CHARGES AND
DIVIDENDS ON PREFERRED SECURITIES ....... 324,101 337,819 1,157,357 1,169,240
------------- ------------ ------------ ------------
INTEREST CHARGES
Long-Term Debt .......................... 109,141 111,604 431,603 458,650
Short-Term Debt ......................... 7,189 4,827 35,184 24,955
Other ................................... 6,883 6,705 29,350 16,659
------------- ------------ ------------ ------------
Total Interest Charges ............. 123,213 123,136 496,137 500,264
Allowance for Funds Used During
Construction - Debt and Capitalized
Interest .............................. (5,457) (10,106) (32,559) (36,586)
------------- ------------ ------------ ------------
Net Interest Charges ............... 117,756 113,030 463,578 463,678
------------- ------------ ------------ ------------
Preferred Securities Dividend
Requirements........................... 12,241 12,197 49,470 44,064
Preferred Stock Redemption Premium....... -- -- 474 --
------------- ------------ ------------ ------------
NET INCOME ......................... $ 194,104 $ 212,592 $ 643,835 $ 661,498
============= ============ ============ ============
SHARES OF COMMON STOCK OUTSTANDING
End of Period ........................... 244,697,930 244,697,930 244,697,930 244,697,930
Average for Period ...................... 244,697,930 244,697,930 244,697,930 244,697,930
EARNINGS PER AVERAGE SHARE OF COMMON STOCK. $0.79 $0.87 $2.63 $2.70
============= ============ ============ ============
DIVIDENDS PAID PER SHARE OF COMMON STOCK .. $0.54 $0.54 $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 1996 1995 1995
- ------ ------------ ------------ ------------
UTILITY PLANT - Original cost
Electric ............................................. $ 13,189,429 $ 12,470,514 $ 13,095,103
Gas .................................................. 2,458,045 2,344,557 2,442,572
Common ............................................... 511,760 515,113 517,104
------------ ------------ ------------
Total ........................................... 16,159,234 15,330,184 16,054,779
Less: accumulated depreciation and amortization...... 5,559,788 5,229,300 5,440,414
------------ ------------ ------------
Net ............................................. 10,599,446 10,100,884 10,614,365
Nuclear Fuel in Service, net of accumulated
amortization $255,283; $305,655; and
$297,435, respectively ............................. 171,218 201,637 180,018
------------ ------------ ------------
Net Utility Plant in Service .................... 10,770,664 10,302,521 10,794,383
Construction Work in Progress, including Nuclear
Fuel in Process - $108,015; $53,396; and
$104,743, respectively ............................ 352,452 753,774 369,082
Plant Held for Future Use ............................ 23,966 23,861 23,966
------------ ------------ ------------
Net Utility Plant ............................... 11,147,082 11,080,156 11,187,431
------------ ------------ ------------
INVESTMENTS AND OTHER NONCURRENT ASSETS
Long-Term Investments, net of amortization -
$7,320, $3,024, and $7,213, and net of valuation
allowances - $21,392, $17,105 and $21,302 respectively 1,842,395 1,653,183 1,822,160
Oil and Gas Property, Plant and Equipment, net of
accumulated depreciation and amortization - $808,183,
$767,792 and $786,736, respectively ................ 615,654 580,765 608,015
Real Estate Property and Equipment, net of accumulated
depreciation - $5,506; $15,200 and $5,063, and
net of valuation allowance -- $8,227, $23,306 and
$8,228, respectively ............................... 75,188 112,036 75,558
Other Plant, net of accumulated depreciation and
amortization - $6,805; $4,888 and $6,531,
respectively ....................................... 27,975 36,077 27,997
Nuclear Decommissioning and Other Special Funds ...... 286,795 242,330 276,348
Other Assets - net ................................... 53,865 85,502 55,974
------------ ------------ ------------
Total Investments and Other Noncurrent Assets.... 2,901,872 2,709,893 2,866,052
------------ ------------ ------------
CURRENT ASSETS
Cash and Cash Equivalents ............................ 546,532 131,137 76,233
Accounts Receivable:
Customer Accounts Receivable ....................... 623,926 490,106 525,404
Other Accounts Receivable .......................... 304,014 207,168 260,713
Less: allowance for doubtful accounts .............. 38,123 39,734 37,641
Unbilled Revenues .................................... 177,175 152,744 246,876
Fuel, at average cost ................................ 88,022 167,020 253,360
Materials and Supplies, net of inventory valuation
reserves $18,200, $18,200 and $20,100, respectively. 148,033 150,640 144,970
Deferred Income Taxes ................................ 29,734 25,135 27,571
Miscellaneous Current Assets ......................... 51,751 26,891 62,631
------------ ------------ ------------
Total Current Assets ............................ 1,931,064 1,311,107 1,560,117
------------ ------------ ------------
DEFERRED DEBITS
Property Abandonments - net .......................... 65,439 83,817 70,120
Oil and Gas Property Write-Down ...................... 34,790 39,944 36,078
Unamortized Debt Expense ............................. 148,767 131,300 123,833
Deferred OPEB Costs .................................. 250,544 192,727 167,189
Underrecovered Electric Energy and Gas Costs - net.... 207,843 171,238 170,565
Unrecovered Environmental Costs ...................... 127,368 136,151 130,070
Unrecovered Plant and Regulatory Study Costs ......... 34,856 35,661 35,150
Unrecovered SFAS 109 Deferred Income Taxes ........... 766,908 794,665 769,136
Deferred Decontamination and Decommissioning Costs ... 49,872 53,016 49,872
Other ................................................ 28,724 25,570 5,826
------------ ------------ ------------
Total Deferred Debits ........................... 1,715,111 1,664,089 1,557,839
------------ ------------ ------------
Total ........................................... $ 17,695,129 $ 16,765,245 $ 17,171,439
============ ============ ============
<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 1996 1995 1995
- ------------------------------ ------------ ------------ --------------
CAPITALIZATION
Common Equity
Common Stock .................................... $ 3,801,157 $ 3,801,157 $ 3,801,157
Retained Earnings ............................... 1,705,753 1,590,464 1,643,785
------------ ------------ ------------
Total Common Equity .......................... 5,506,910 5,391,621 5,444,942
Subsidiaries' Securities and Obligations
Preferred Securities
Preferred Stock Without Mandatory Redemption..... 324,994 384,994 324,994
Preferred Stock With Mandatory Redemption ....... 150,000 150,000 150,000
Monthly Income Preferred Securities ............. 210,000 150,000 210,000
Long-Term Debt .................................... 5,110,163 5,264,646 5,189,791
------------ ------------ ------------
Total Capitalization ......................... 11,302,067 11,341,261 11,319,727
------------ ------------ ------------
OTHER LONG-TERM LIABILITIES
Decontamination, Decommissioning, and Low Level
Radwaste Costs .................................. 49,890 57,664 50,449
Environmental Costs ............................... 96,302 108,576 96,272
Capital Lease Obligations ......................... 52,934 53,612 53,111
------------ ------------ ------------
Total Other Long-Term Liabilities............. 199,126 219,852 199,832
------------ ------------ ------------
CURRENT LIABILITIES
Long-Term Debt due within one year ................ 92,639 364,773 90,630
Commercial Paper and Loans ........................ 1,022,318 238,223 849,567
Book Overdrafts ................................... 63,372 51,913 70,014
Accounts Payable .................................. 526,078 373,159 567,787
New Jersey Gross Receipts Taxes Accrued ........... 188,937 175,261 --
Other Taxes Accrued ............................... 90,189 142,238 34,678
Interest Accrued .................................. 108,556 120,540 108,245
Estimated Liability for Vacation Pay .............. 40,589 40,621 17,089
Customer Deposits ................................. 32,300 32,457 32,785
Liability for Injuries and Damages ................ 44,338 31,784 38,141
Miscellaneous Environmental Liabilities ........... 17,694 15,305 16,954
Other ............................................. 94,825 77,712 95,907
------------ ------------ ------------
Total Current Liabilities .................... 2,321,835 1,663,986 1,921,797
------------ ------------ ------------
DEFERRED CREDITS
Accumulated Deferred Income Taxes ................. 3,144,616 2,912,922 3,094,620
Accumulated Deferred Investment Tax Credits ....... 387,320 407,494 392,324
Deferred OPEB Costs ............................... 250,544 192,727 167,189
Other ............................................. 89,621 27,003 75,950
------------ ------------ ------------
Total Deferred Credits ....................... 3,872,101 3,540,146 3,730,083
------------ ------------ ------------
COMMITMENTS AND CONTINGENCIES (note 2)
Total ........................................ $ 17,695,129 $ 16,765,245 $ 17,171,439
============ ============ ============
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands of Dollars)
Three Months Ended Twelve Months Ended
March 31, March 31,
-------------------------- --------------------------
1996 1995 1996 1995
------------ ----------- ----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income .............................. $ 194,104 $ 212,592 $ 643,835 $ 661,498
Adjustments to reconcile net income to
net cash flows from operating activities:
Depreciation and Amortization ........... 174,468 164,256 684,443 642,045
Amortization of Nuclear Fuel ............ 8,905 23,120 60,813 94,719
(Deferral) Recovery of Electric Energy
and Gas Costs - net ................... (37,278) 1,325 (36,605) (51,034)
Unrealized Gains on
Investments - net...................... (10,103) (19,421) (37,350) (46,500)
Provision for Deferred Income
Taxes - net............................ 31,482 16,456 160,118 110,129
Investment Tax Credits - net ............ (5,004) (4,972) (20,174) (20,358)
Allowance for Funds Used During
Construction - Debt and Equity and
Capitalized Interest................... (5,457) (11,588) (36,401) (49,069)
Proceeds from Leasing Activities - net... 11,212 (14,487) 63,351 25,893
Changes in certain current assets
and liabilities:
Net (increase) decrease in Accounts
Receivable and Unbilled Revenues..... (71,640) (1,157) (256,708) 83,450
Net decrease (increase) in Inventory -
Fuel and Materials and Supplies...... 162,275 99,552 81,605 (34,999)
Net (decrease) increase in
Accounts Payable..................... (41,709) (60,312) 152,919 (13,289)
Net change in Prepaid/Accrued
Taxes................................ 252,256 273,350 (38,373) (267,678)
Net change in Other Current Assets
and liabilities...................... 30,090 27,661 (9,576) 20,200
Other ................................... 6,797 (7,275) 82,316 30,878
------------ ----------- ----------- ------------
Net cash provided by operating
activities ......................... 700,398 699,100 1,494,213 1,185,885
------------ ----------- ----------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to Utility Plant,
excluding AFDC ........................ (96,349) (128,027) (618,205) (809,519)
Additions to Oil and Gas Property,
Plant and Equipment, excluding
Capitalized Interest .................. (23,346) (21,304) (129,771) (133,763)
Net (increase) decrease in Long-Term
Investments and Real Estate ........... (7,361) (6,113) (82,512) 31,566
Increase in Decommissioning and Other
Special Funds, excluding interest ..... (7,391) (7,390) (29,618) (36,976)
Cost of Plant Removal - net ............. (11,101) (2,103) (38,672) (28,357)
Other ................................... (2,586) 248 27,065 7,950
------------ ----------- ----------- ------------
Net cash used in investing
activities ......................... (148,134) (164,689) (871,713) (969,099)
------------ ----------- ----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in
Short-Term Debt ....................... 172,751 (253,363) 784,095 119,721
(Decrease) increase in Book Overdrafts .. (6,642) (34,663) 11,459 13,286
Issuance of Long-Term Debt .............. 352,451 -- 508,771 449,800
Redemption of Long-Term Debt ............ (430,070) (50,976) (935,388) (547,422)
Long-Term Debt Issuance and
Redemption Costs ...................... (38,319) -- (47,496) (29,811)
Redemption of Preferred Stock ........... -- -- (60,000) (75,000)
Issuance of Monthly Income
Preferred Securities .................. -- -- 60,000 150,000
Cash Dividends Paid on Common Stock ..... (132,138) (132,138) (528,548) (528,548)
Other ................................... 2 -- 2 (843)
------------ ----------- ----------- -----------
Net cash used in financing
activities ...................... (81,965) (471,140) (207,105) (448,817)
------------ ----------- ----------- -----------
Net increase (decrease) in Cash and
Cash Equivalents ........................ 470,299 63,271 415,395 (232,031)
Cash and Cash Equivalents at Beginning
of Period ............................... 76,233 67,866 131,137 363,168
------------ ----------- ----------- -----------
Cash and Cash Equivalents at
End of Period........................... $ 546,532 $ 131,137 $ 546,532 $ 131,137
============ =========== =========== ===========
Income Taxes Paid ......................... $ 7,288 $ 15,136 $ 177,528 $ 166,910
Interest Paid ............................. $ 110,258 $ 94,409 $ 497,113 $ 437,932
<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,
--------------------------- ---------------------------
1996 1995 1996 1995
------------ ------------ ------------ ------------
Balance at Beginning of Period ............ $ 1,643,785 $ 1,510,010 $ 1,590,464 $ 1,458,357
Add Net Income ............................ 194,104 212,592 643,835 661,498
------------ ------------ ------------ ------------
Total ................................ 1,837,889 1,722,602 2,234,299 2,119,855
------------ ------------ ------------ ------------
Deduct:
Cash Dividends on Common Stock .......... 132,138 132,138 528,548 528,548
Adjustment to Retained Earnings ......... (2) -- (2) 843
------------ ------------ ------------ ------------
Total Deductions ..................... 132,136 132,138 528,546 529,391
------------ ------------ ------------ ------------
Balance at End of Period .................. $ 1,705,753 $ 1,590,464 $ 1,705,753 $ 1,590,464
============ -=-========= ============ ============
<FN>
See Notes to Consolidated Financial Statements.
PUBLIC SERVICE ELECTRIC AND GAS COMPANY
The financial statements included herein as of March 31, 1996 and 1995 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,
--------------------------- ---------------------------
1996 1995 1996 1995
------------- ------------ ------------ ------------
OPERATING REVENUES
Electric ................................ $ 958,333 $ 945,038 $ 4,034,137 $ 3,795,409
Gas ..................................... 796,916 634,478 1,848,841 1,611,349
------------- ------------ ------------ ------------
Total Operating Revenues ........... 1,755,249 1,579,516 5,882,978 5,406,758
------------- ------------ ------------ ------------
OPERATING EXPENSES
Operation
Fuel for Electric Generation and
Interchanged Power.................. 216,075 208,110 899,747 736,672
Gas Purchased and Materials for
Gas Produced ........................ 456,732 344,193 1,074,078 915,754
Other ................................. 242,764 220,217 971,947 964,758
Maintenance ............................. 95,416 64,045 343,981 295,650
Depreciation and Amortization ........... 152,508 143,593 600,029 559,960
Taxes
Federal Income Taxes .................. 94,629 102,284 313,873 283,384
New Jersey Gross Receipts Taxes ....... 188,436 176,789 624,608 568,653
Other ................................. 23,587 21,853 72,543 75,838
------------- ------------ ------------ ------------
Total Operating Expenses ........... 1,470,147 1,281,084 4,900,806 4,400,669
------------- ------------ ------------ ------------
OPERATING INCOME .......................... 285,102 298,432 982,172 1,006,089
------------- ------------ ------------ ------------
OTHER INCOME
Allowance for Funds Used During
Construction - Equity ................ -- 1,482 3,842 12,483
Miscellaneous - net ..................... 1,273 1,851 7,150 6,931
------------- ------------ ------------ ------------
Total Other Income ................. 1,273 3,333 10,992 19,414
------------- ------------ ------------ ------------
INCOME BEFORE INTEREST CHARGES AND
DIVIDENDS ON PREFERRED SECURITIES ....... 286,375 301,765 993,164 1,025,503
------------- ------------ ------------ ------------
INTEREST CHARGES
Long-Term Debt .......................... 91,512 91,492 357,604 370,059
Short-Term Debt ......................... 4,034 1,950 22,824 17,866
Other ................................... 6,755 6,531 28,769 16,101
------------- ------------ ------------ ------------
Total Interest Charges ............. 102,301 99,973 409,197 404,026
Allowance for Funds Used During
Construction - Debt ..................... (4,291) (8,619) (26,615) (28,581)
------------- ------------ ------------ ------------
Net Interest Charges ...................... 98,010 91,354 382,582 375,445
Monthly Income Preferred Securities
Dividend Requirements ................... 4,715 3,515 16,864 5,195
------------- ------------ ------------ ------------
NET INCOME ................................ 183,650 206,896 593,718 644,863
------------- ------------ ------------ ------------
Preferred Stock Dividend Requirements ..... 7,526 8,682 32,606 38,869
Preferred Stock Redemption Premium.......... -- -- 474 --
------------- ------------ ------------ ------------
EARNINGS AVAILABLE TO PUBLIC SERVICE
ENTERPRISE GROUP INCORPORATED............ $ 176,124 $ 198,214 $ 560,638 $ 605,994
============= ============ ============ ============
<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 1996 1995 1995
- ------ ------------ ------------ -------------
UTILITY PLANT - Original cost
Electric ........................................... $ 13,189,429 $ 12,470,514 $ 13,095,103
Gas ................................................ 2,458,045 2,344,557 2,442,572
Common ............................................. 511,760 515,113 517,104
------------ ------------ ------------
Total ............................................. 16,159,234 15,330,184 16,054,779
Less: accumulated depreciation and amortization...... 5,559,788 5,229,300 5,440,414
------------ ------------ ------------
Net ............................................... 10,599,446 10,100,884 10,614,365
Nuclear Fuel in Service, net of accumulated
amortization - $255,283; $305,655; and
$297,435, respectively ............................. 171,218 201,637 180,018
------------ ------------ ------------
Net Utility Plant in Service ...................... 10,770,664 10,302,521 10,794,383
Construction Work in Progress, including Nuclear Fuel
in Process - $108,015; $53,396; and $104,743,
respectively ....................................... 352,452 753,774 369,082
Plant Held for Future Use ............................ 23,966 23,861 23,966
------------ ------------ ------------
Net Utility Plant ............................. 11,147,082 11,080,156 11,187,431
------------ ------------ ------------
INVESTMENTS AND OTHER NONCURRENT ASSETS
Long-Term Investments, net of amortization - $7,320;
$3,024; and $6,009, respectively ................... 135,550 76,812 119,474
Nuclear Decommissioning and Other Special Funds ...... 286,795 242,330 276,348
Other Plant, net of accumulated depreciation and
amortization - $1,936; $1,149; and
$1,905, respectively................................ 24,990 32,886 24,976
------------ ------------ ------------
Total Investments and Other Noncurrent Assets......... 447,335 352,028 420,798
------------ ------------ ------------
CURRENT ASSETS
Cash and Cash Equivalents .......................... 508,173 82,990 32,373
Accounts Receivable:
Customer Accounts Receivable ...................... 623,926 490,106 525,404
Other Accounts Receivable ......................... 189,677 112,327 163,976
Less: allowance for doubtful accounts.............. 38,123 39,734 37,641
Unbilled Revenues .................................. 177,175 152,744 246,876
Fuel, at average cost .............................. 88,022 167,020 253,360
Materials and supplies, net of inventory valuation
reserves - $18,200; $18,200; and $20,100,
respectively ...................................... 146,772 149,193 143,741
Deferred Income Taxes .............................. 29,734 25,135 27,571
Miscellaneous Current Assets ....................... 25,124 19,706 37,130
------------ ------------ ------------
Total Current Assets .......................... 1,750,480 1,159,487 1,392,790
------------ ------------ ------------
DEFERRED DEBITS
Property Abandonments - net ........................ 65,439 83,817 70,120
Oil and Gas Property Write-Down .................... 34,790 39,944 36,078
Unamortized Debt Expense ........................... 147,165 128,905 122,049
Deferred OPEB Costs ................................ 250,544 192,727 167,189
Underrecovered Electric Energy and Gas Costs - net.. 207,843 171,238 170,565
Unrecovered Environmental Costs .................... 127,368 136,151 130,070
Unrecovered Plant and Regulatory Study Costs ....... 34,856 35,661 35,150
Deferred Decontamination and Decommissioning Costs.. 49,872 53,016 49,872
Unrecovered SFAS 109 Deferred Income Taxes ......... 766,908 794,665 769,136
Other .............................................. 27,867 25,564 5,700
------------ ------------ ------------
Total Deferred Debits ......................... 1,712,652 1,661,688 1,555,929
------------ ------------ ------------
Total .......................................... $ 15,057,549 $ 14,253,359 $ 14,556,948
============ ============ ============
<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 1996 1995 1995
- ------------------------------ ------------ ------------ ------------
CAPITALIZATION
Common Equity
Common Stock ...................................... $ 2,563,003 $ 2,563,003 $ 2,563,003
Contributed Capital from Enterprise ............... 594,395 534,395 594,395
Retained Earnings ................................. 1,418,653 1,360,215 1,372,729
------------ ------------ ------------
Total Common Equity ............................ 4,576,051 4,457,613 4,530,127
Preferred Stock without mandatory redemption .......... 324,994 384,994 324,994
Preferred Stock with mandatory redemption ............. 150,000 150,000 150,000
Monthly Income Preferred Securities of Subsidiary ..... 210,000 150,000 210,000
Long-Term Debt ........................................ 4,523,614 4,587,740 4,586,268
------------ ------------ ------------
Total Capitalization ........................... 9,784,659 9,730,347 9,801,389
------------ ------------ ------------
OTHER LONG-TERM LIABILITIES
Decontamination, Decommissioning and Low Level
Radwaste Costs ................................... 49,890 57,664 50,449
Environmental Costs ................................. 96,302 108,576 96,272
Capital Lease Obligations ........................... 52,934 53,612 53,111
------------ ------------ ------------
Total Other Long-Term Liabilities .............. 199,126 219,852 199,832
------------ ------------ ------------
CURRENT LIABILITIES
Long-Term Debt due within one year .................. 2,000 210,200 --
Commercial Paper and Loans .......................... 736,281 94,200 567,316
Book Overdrafts ..................................... 63,372 51,913 70,014
Accounts Payable .................................... 435,457 287,958 481,632
Accounts Payable - Associated Companies ............. 70,613 81,783 8,011
New Jersey Gross Receipts Taxes Accrued ............. 188,937 175,261 --
Other Taxes Accrued ................................. 35,634 39,291 32,767
Interest Accrued .................................... 86,948 96,179 95,811
Estimated Liability for Vacation Pay ................ 40,589 40,621 17,089
Customer Deposits ................................... 32,300 32,457 32,785
Liability for Injuries and Damages .................. 44,338 31,784 38,141
Miscellaneous Environmental Liabilities ............. 17,694 15,305 16,954
Other ............................................... 62,543 48,132 50,751
------------ ------------ ------------
Total Current Liabilities ...................... 1,816,706 1,205,084 1,411,271
------------ ------------ ------------
DEFERRED CREDITS
Accumulated Deferred Income Taxes ................... 2,555,817 2,497,959 2,535,603
Accumulated Deferred Investment Tax Credits ......... 365,867 385,010 370,610
Deferred OPEB Costs ................................. 250,544 192,727 167,189
Other ............................................... 84,830 22,380 71,054
------------ ------------ ------------
Total Deferred Credits ......................... 3,257,058 3,098,076 3,144,456
------------ ------------ ------------
COMMITMENTS AND CONTINGENCIES (note 2)
Total ............................................ $ 15,057,549 $ 14,253,359 $ 14,556,948
============ ============ ============
PUBLIC SERVICE ELECTRIC AND GAS COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands of Dollars)
Three Months Ended Twelve Months Ended
March 31, March 31,
--------------------------- ---------------------------
1996 1995 1996 1995
------------ ------------ ------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income ............................. $ 183,650 $ 206,896 $ 593,718 $ 644,863
Adjustments to reconcile net income
to net cash flows from operating
activities:
Depreciation and Amortization ........ 152,508 143,593 600,029 559,960
Amortization of Nuclear Fuel ......... 8,905 23,120 60,813 94,719
(Deferral) Recovery of Electric
Energy and Gas Costs - net ......... (37,278) 1,325 (36,605) (51,034)
Provision for Deferred Income
Taxes - net ........................ 22,442 16,148 85,615 87,838
Investment Tax Credits - net ......... (4,743) (4,711) (19,143) (19,317)
Allowance for Funds Used During
Construction - Debt and Equity ..... (4,291) (10,101) (30,457) (41,064)
Changes in certain current assets
and liabilities:
Net decrease (increase) in Accounts
Receivable and Unbilled Revenues . (54,040) 33,589 (237,212) 114,235
Net decrease (increase) in Inventory -
Fuel and Materials and Supplies... 162,307 99,477 81,419 (34,873)
Net increase (decrease) in
Accounts Payable ................. 16,427 (16,941) 136,329 (73,877)
Net change in Prepaid/Accrued
Taxes ............................ 199,612 178,522 10,019 (276,606)
Net change in Other Current Assets
and Liabilities .................. 34,916 22,899 9,917 27,538
Other ................................ 3,386 (9,720) 70,264 9,762
------------ ----------- ----------- ------------
Net cash provided by operating
activities ....................... 683,801 684,096 1,324,706 1,042,144
------------ ----------- ----------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to Utility Plant,
excluding AFDC ....................... (96,349) (128,027) (618,205) (809,519)
Net (increase) decrease in
Long-Term Investments ................ (18,770) (10,926) (73,033) 50,226
Increase in Decommissioning Funds
and Other Special Funds,
excluding interest ................... (7,391) (7,390) (29,618) (36,976)
Cost of Plant Removal - net ............ (11,101) (2,103) (38,672) (28,357)
Other .................................. (14) (7) 852 2,186
------------ ----------- ----------- ------------
Net cash used in investing
activities ....................... (133,625) (148,453) (758,676) (822,440)
------------ ----------- ----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in
Short-Term Debt ...................... 168,965 (307,559) 642,081 (7,761)
(Decrease) increase in Book
Overdrafts ........................... (6,642) (34,663) 11,459 13,286
Issuance of Long-Term Debt ............. 352,451 -- 508,771 449,800
Redemption of Long-Term Debt............ (413,105) -- (781,097) (411,150)
Long-Term Debt Issuance and
Redemption Costs ..................... (38,319) -- (46,781) (29,731)
Redemption of Preferred Stock .......... -- -- (60,000) (75,000)
Issuance of Monthly Income
Preferred Securities ................. -- -- 60,000 150,000
Contributed Capital..................... -- -- 60,000 --
Cash Dividends Paid .................... (137,726) (138,882) (534,806) (545,669)
Other .................................. -- 953 (474) (842)
------------ ----------- ----------- ------------
Net cash used in financing
activities ..................... (74,376) (480,151) (140,847) (457,067)
------------ ----------- ----------- ------------
Net increase (decrease) in Cash and
Cash Equivalents ....................... 475,800 55,492 425,183 (237,363)
Cash and Cash Equivalents at Beginning
of Period .............................. 32,373 27,498 82,990 320,353
------------ ----------- ----------- ------------
Cash and Cash Equivalents at End
of Period .............................. $ 508,173 82,990 $ 508,173 $ 82,990
============ =========== =========== ============
Income Taxes Paid ........................ $ 9,049 $ 27,005 $ 261,917 $ 235,615
Interest Paid ............................ $ 101,605 $ 85,972 $ 415,142 $ 350,566
<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,
--------------------------- ---------------------------
1996 1995 1996 1995
------------ ------------ ------------ ------------
Balance at Beginning of Period ........... $ 1,372,729 $ 1,292,201 $ 1,360,215 $ 1,261,863
Add: Net Income ......................... 183,650 206,896 593,718 644,863
------------ ------------ ------------ ------------
Total ............................... 1,556,379 1,499,097 1,953,933 1,906,726
------------ ------------ ------------ ------------
Deduct: Cash Dividends
Preferred Stock, at required rates ..... 7,526 8,682 32,606 38,869
Common Stock ........................... 130,200 130,200 502,200 506,800
Adjustment to Retained Earnings......... -- -- 474 842
------------ ------------ ------------ ------------
Total Deductions .................... 137,726 138,882 535,280 546,511
------------ ------------ ------------ ------------
Balance at End of Period ................. $ 1,418,653 $ 1,360,215 $ 1,418,653 $ 1,360,215
============ ============ ============ ============
<FN>
See Notes to Consolidated Financial Statements.
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. RATE MATTERS
Alternative Rate Plan
On January 16, 1996, PSE&G filed a proposal, the "New Jersey
Partners in Power" Plan (Plan) with the New Jersey Board of Public
Utilities (BPU) for major changes in utility regulation that include an
immediate $50 million rate reduction for PSE&G's electric customers,
various types of rate freezes, elimination of fuel adjustment
mechanisms, assurances that future price increases related to
controllable costs will be lower than the rate of inflation and funding
of up to an aggregate of $55 million in two economic development
initiatives.
The seven-year Plan, if approved, would give PSE&G the mechanisms
and incentives to compete more effectively on several fronts, including
the ability to develop revenue from non-regulated products and services,
accelerate or modify depreciation schedules to help mitigate any
potential stranded asset issues and more aggressively manage the control
of costs. In addition, the Plan would provide the foundation for ongoing
price flexibility without the need for prolonged, adversarial regulatory
proceedings.
On April 24, 1996, the BPU orally approved intervenor status and
participatory status for twenty-two entities in the proceeding in which
it will consider the proposed Plan. A BPU determination on the process
and procedures to be used to decide the case is being awaited. PSE&G
cannot predict what other actions, if any, may be taken by the BPU with
respect to the Plan or when final action on the proposal may be
completed.
Salem Investigation
On March 14, 1996, the BPU issued an order regarding its
investigation into the continuing outage of the Salem Nuclear Generating
Station. The BPU's order:
1. declared PSE&G's rates related to Salem Unit 1 interim as of March
14, 1996, and subject to refund, pending further hearings referred
to below;
2. required PSE&G to file briefs with regard to why the BPU should
not declare rates related to Salem Unit 2 interim and subject to
refund. Such briefs were filed by PSE&G on April 14, 1996 and
supported PSE&G's position that Unit 2's rates should not be
declared interim and subject to refund;
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3. required PSE&G to furnish certain other financial information
related to the rate treatment of each Salem unit as well as
replacement power costs associated with the outage. In addition,
PSE&G must provide updates of monthly actual replacement power
data for each respective unit and updates on the status of the
outage, including the anticipated return to service date for each
unit. On April 4, 1996, PSE&G filed with the BPU the requested
financial information related to actual net plant investment
included in the last base rate case for each Salem unit, operation
and maintenance expenses in current electric base rates for each
Salem unit and replacement power costs associated with the outage
of the Salem units to date. The filing supported a base revenue
requirement of $205 million as well as replacement power costs and
additional on-going costs of $214 million. This information was
based upon facts and circumstances which existed at the date of
filing and did not contain any adjustments necessary to reflect
costs which would continue to safely maintain either or both units
in a shutdown mode; and
4. required further proceedings to determine if each Salem unit
remains "used and useful" for rate making purposes.
In April and early May, the Board held evidentiary hearings for
purposes of permitting the cross-examination of witnesses pertaining
solely to the issue of whether rates related to Salem Unit 2 should be
interim and subject to refund. During the hearings, PSE&G's witnesses
testified as to the scheduled return date of Salem Unit 2 and stated
that the Nuclear Regulatory Commission (NRC) has concluded that the
overall restart plan, if implemented effectively, should adequately
address the numerous Salem issues to support a safe plant restart.
PSE&G's witnesses also stated that the remaining work activities to
achieve a Salem Unit 2 restart are known and understood by PSE&G
management, do not present any novel engineering issues and that such
restart is achievable using standard outage processes and management
techniques. An expedited briefing schedule, with briefs due in late May
and reply briefs due in early June, has been established. PSE&G cannot
predict the outcome of these hearings.
The issue of whether or not Salem Unit 1, and possibly Salem Unit
2, are no longer used and useful will be addressed in a separate hearing
before the BPU or the Office of Administrative Law (OAL). The date for
such hearing has yet to be determined. Neither Enterprise nor PSE&G
can predict the outcome of this proceeding. Removal of Salem Unit 1
and/or Salem Unit 2 from base rates could have a material adverse effect
on PSE&G's financial position, results of operations and net cash flows.
PSE&G will oppose the issuance of any order to remove either Salem unit
from base rates and believes that in the event of a unit's removal from
base rates, all of the replacement power costs attributable to such unit
would be recoverable through its Electric Levelized Energy Adjustment
Clause (LEAC) and that the estimated $12 million Nuclear Performance
Standard (NPS) penalty for 1996 would be substantially reduced. (see
Note 2, Commitments and Contingent Liabilities of Notes).
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Levelized Gas Adjustment Charge
On April 24, 1996, the BPU orally approved PSE&G's 1995/96
Levelized Gas Adjustment Charge (LGAC), which would finalize the interim
rates approved by the BPU on December 20, 1995. The approved LGAC rates
are to remain in effect through December 31, 1996.
Electric Levelized Energy Adjustment Clause
By Order dated May 5, 1995, the BPU approved PSE&G's LEAC. Such
Order also required that a hearing be convened regarding the April 1994
Salem 1 shutdown to determine whether PSE&G should be allowed to recover
replacement power costs of approximately $8 million, which have been
deferred. On October 18, 1995, this matter was ordered to be
transferred to the OAL for a hearing which is scheduled for June 7,
1996. PSE&G cannot predict the outcome of this proceeding.
Other Rate Matters
On July 21, 1995, the BPU initiated a generic proceeding to
expeditiously adopt specific standards to guide utility "off-tariff"
negotiated rate agreement programs. Such proceeding would consider
minimum prices, confidentiality, maximum contract duration, filing
requirements and such other standards as may be necessary for compliance
with the law. A Written Summary Decision and Order was issued on
October 27, 1995, which required each New Jersey electric utility,
including PSE&G, to file initial minimum tariffs, consistent with the
terms of such Order, and further, indicated that such Order will be
supplemented by a Final Decision and Order to fully discuss and explain
the rationale for the BPU's overall decision. On November 13, 1995,
PSE&G filed its compliance filing. PSE&G cannot predict what impact,
if any, the generic tariff may have on its electric revenues and
earnings.
In September 1994, the BPU initiated a generic proceeding regarding
overrecovery of capacity costs associated with electric utility power
purchases from cogenerators and small power producers. The initial
phase of the proceeding, which has been transferred to the OAL, seeks
to determine whether there was any such overrecovery and, if so, the
amount overrecovered. Hearings were initiated during the first quarter
of 1996 and are currently in progress.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The New Jersey Division of Ratepayer Advocate has intervened in the
proceeding and alleges, among other things, that PSE&G has overrecovered
such costs in an amount ranging from $250 to $300 million during the
period from August 1991 to December 1994. PSE&G denies such
overrecovery because all relevant capacity cost recovery mechanisms have
been previously reviewed and approved by the BPU. Additionally, PSE&G
contends that a review of any individual cost item is inappropriate and
is proscribed as retroactive ratemaking.
While PSE&G cannot predict the outcome of this proceeding, the
final resolution of this issue may impact the financial position,
results of operations or net cash flows of Enterprise and PSE&G
prospectively.
NOTE 2. COMMITMENTS AND CONTINGENT LIABILITIES
Nuclear Performance Standard
The BPU has established a 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 Units 1 and 2 -- 42.59%;
Hope Creek -- 95%; and Peach Bottom Units 2 and 3 -- 42.49%. PSE&G
operates Salem Units 1 and 2 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.)
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.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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. PSE&G's Alternative Rate Plan proposes the elimination
of the NPS. (See Note 1 - Rate Matters of Notes).
Based upon current projections and assumptions regarding PSE&G's
five nuclear units during 1996, including the return of Salem 2 by the
end of August and the continued outage of Salem 1 for the remainder of
the year, the 1996 aggregate capacity factor would be approximately 57%,
which would result in a penalty of approximately $12 million. Both of
the Salem units are currently out of service and their return dates are
subject to completion of testing, analysis, repair activity and NRC
concurrence that they are prepared to restart.
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 $ 8.0
-------- --------
Property Damage:
Nuclear Mutual Limited.............. $ 500.0 $ 9.2
Nuclear Electric Insurance
Ltd. (NEIL II)..................... 1,400.0 8.3(D)
Nuclear Electric Insurance
Ltd. (NEIL III).................... 850.0 9.2
-------- --------
$2,750.0 $ 26.7
-------- --------
Replacement Power:
Nuclear Electric Insurance
Ltd (NEIL I)....................... $ 3.5 (E) $ 11.4
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(A) Retrospective premium program under the Price-Anderson liability
provisions of the Atomic Energy Act of 1954, as amended (Price-
Anderson). Subject to retrospective assessment with respect to
loss from an incident at any licensed nuclear reactor in the
United States. Assessment adjusted for inflation effective August
20, 1993.
(B) Limit of liability for each nuclear incident under Price-
Anderson.
(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) In the event of a second industry loss triggering NEIL II -
coverage, the maximum retrospective premium assessment can
increase to $18.5 million.
(E) Represents limit of coverage available to co-owners of Salem and
Hope Creek, for each plant. Each co-owner purchases its own
policy. PSE&G is currently covered for its percent ownership
interest of this limit for each plant.
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.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Further, a recent decision by the U.S. Supreme Court, not involving
PSE&G, held that the Price Anderson Act did not preclude awards based
on state law claims for punitive damages.
PSE&G is a member of two industry mutual insurance companies:
Nuclear Mutual Limited (NML), and Nuclear Electric Insurance Limited
(NEIL). NML provides the primary property insurance at Salem and Hope
Creek. NEIL provides excess property insurance through its NEIL II and
NEIL III policies and replacement power coverage through its NEIL I
policy. Both companies may make retrospective premium assessments in
case of adverse loss experience. PSE&G's maximum potential liabilities
under these assessments are included in the table and notes above.
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 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 down.
Construction and Fuel Supplies
PSE&G has substantial commitments as part of its ongoing
construction program which include 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 strategies, 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 its electric Integrated Resource Plan (IRP), PSE&G periodically
reevaluates its forecasts of future customers, load and peak growth,
sources of electric generating capacity and demand side management (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.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Based on PSE&G's construction program, construction expenditures
are expected to aggregate approximately $2.8 billion, which includes
$428 million for nuclear fuel and $84 million of Allowance for Funds
used During Construction (AFDC) during the years 1996 through 2000. The
estimate of construction requirements is based on expected project
completion dates and includes anticipated escalation due to inflation
of approximately 3%, annually. Therefore, construction delays or higher
inflation levels could cause significant 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 1996 through 2000.
Hazardous Waste
Certain Federal and State laws authorize the United States
Environmental Protection Agency (EPA) and the New Jersey Department of
Environmental Protection (NJDEP), among other agencies, to issue orders
and bring enforcement actions to compel responsible parties to take
investigative and remedial actions at any site that is determined to
present an imminent and substantial danger to the public or the
environment because of an actual or threatened release of one or more
hazardous substances. Because of the nature of PSE&G's business,
including the production of electricity, the distribution of gas and,
formerly, the manufacture of gas, various by-products and substances are
or were produced or handled which contain constituents classified as
hazardous. PSE&G generally provides for the disposal or processing of
such substances through licensed independent contractors. However,
these statutory provisions impose joint and several responsibility
without regard to fault on all responsible parties, including the
generators of the hazardous substances, for certain investigative and
remediation costs at sites where these substances were disposed of or
processed. PSE&G has been notified with respect to a number of such
sites and the remediation of these potentially hazardous sites is
receiving greater attention from the government agencies involved.
Generally, actions directed at funding such site investigations and
remediation include all suspected or known responsible parties. PSE&G
does not expect its expenditures for any such site to have a material
adverse effect on its financial position, results of operations or net
cash flows.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 overall 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.
NOTE 3. LONG-TERM DEBT
Enterprise's long-term debt aggregated $5.1 billion as of March 31,
1996, of which $4.5 billion was attributable to PSE&G and $600 million
to Enterprise Diversified Holdings Incorporated (EDHI), the parent of
Enterprise's nonutility businesses.
On January 30, 1996, PSE&G issued the following series of its First
and Refunding Mortgage Bonds (Bonds): $200 million principal amount of
its 6-3/4% Series VV due 2016 and $150 million principal amount of its
6-1/4% WW due 2007. PSE&G applied the net proceeds from the sale of new
Bonds, together with other funds, to defease in substance: $196.0
million aggregate principal amount of its 8-3/4% Series EE Bonds due
2021 and $148.5 million aggregate principal amount of its 8-3/4% Series
HH Bonds due 2022. In addition, PSE&G retired $65 million of its 8-1/2%
Series LL Bonds due 2022 and exercised a $2.5 million optional cash
sinking fund.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 4. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
Natural Gas and Crude Oil Hedging
Energy Development Corporation (EDC) sold natural gas futures
contracts outstanding at March 31, 1996 and 1995 which hedged 12,630,000
mmbtu and 9,020,000 mmbtu, respectively. Such amounts represented
approximately 18% of EDC's anticipated domestic natural gas production
for the remainder of 1996 and 17% of EDC's production for 1995,
respectively, at average sales prices of $1.83 per mmbtu and $1.95 per
mmbtu, respectively.
At March 31, 1996, EDC sold crude oil futures contracts outstanding
which hedged 1.1 million barrels of oil representing approximately 39%
of EDC's anticipated domestic oil production in 1996 at an average price
of $17.81 per barrel.
The deferred unrealized (losses) gains at March 31, 1996 and 1995
related to EDC's futures contracts were ($7.0) million and $1.7 million,
respectively.
Through March 31, 1996 and 1995, U.S. Energy Partners (USEP)
entered into futures contracts and swaps to buy 2,440,000 mmbtu and
3,140,000 mmbtu of natural gas at average prices of $1.81 and $1.79 per
mmbtu, respectively, related to fixed-price sales commitments. Such
contracts, together with physical purchase contracts, hedged
approximately 86% and 84% of fixed-price sales commitments at March 31,
1996 and 1995. USEP had deferred unrealized hedge gains of $2.1 million
and $15 thousand at March 31, 1996 and 1995, respectively.
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
Note 3. Long-Term Debt
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
ENTERPRISE
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 1995, 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.
Overview
As of March 31, 1996, PSE&G comprised 85% of Enterprise's assets.
For the three months and twelve months ended March 31, 1996, PSE&G
revenues were 95% and 92%, respectively, of Enterprise's revenues and
PSE&G's earnings available to Enterprise for such periods were 91% and
87%, respectively, of Enterprise's net income.
On December 6, 1995, Enterprise announced that it will pursue the
divestiture of Energy Development Corporation (EDC) during 1996 through
either a sale or spin-off. On March 13, 1996, Enterprise filed a Form
S-1 Registration Statement with the SEC, which has not yet become
effective, to position Enterprise to undertake an initial public
offering of up to 20 percent of EDC and subsequently spin-off the
remainder of EDC in a tax-free transaction to Enterprise shareholders.
Enterprise continues to solicit offers from the private marketplace with
the intention of further evaluating its alternatives. No determination
has yet been made as to which path will be undertaken and a decision is
anticipated over the next few months.
Competition
The regulatory structure which has historically embraced the
electric and gas industry is in the process of transition. Legislative
and regulatory initiatives, at both the federal and state levels, are
designed to promote competition and will continue to impose additional
pressures on PSE&G's ability to retain customers. In addition, new
technology and interest in self generation and cogeneration have
provided customers with alternative sources of energy.
Over the last several years, the gas industry has been transformed.
Today, commercial and industrial customers can negotiate their own gas
purchases directly with producers or brokers, while PSE&G is required
to provide intrastate transportation of such purchased gas to the
customers' facilities. Although PSE&G is not providing gas sales
service to certain commercial and industrial customers, to date there
has been no negative impact on earnings since sales service and
transportation service tariffs result in the same non-fuel revenue per
therm. Additionally, as a result of this restructuring, PSE&G has been
able to negotiate lower cost gas supplies for those customers who
continue to be part of its bundled rate schedules. A potential
significant competitive challenge could emerge if interstate pipeline
companies are permitted to expand their facilities into PSE&G territory
and provide intrastate transportation to customers. However, this type
of expansion would require federal and state regulatory approvals not
currently in existence.
The restructuring of the electric industry is more complex and
evolving at a slower pace than that of the gas industry. Federal
legislation, such as the National Energy Policy Act of 1992 (EPAct) has
eased restrictions on independent power producers (IPP) in an effort to
increase competition in the wholesale electric generation market. As the
barriers to entry in the power production business have been lowered,
the construction of cogeneration facilities and independent power
production facilities has been growing, with the result of creating
lower cost alternatives for large commercial and industrial customers.
Presently, PSE&G is in the process of assessing the potential for
individual arrangements with commercial and industrial customers which
have such competitive alternatives, but PSE&G believes that it does not
currently have a material exposure with respect to such customers.
Further, EPAct authorized the Federal Energy Regulatory Commission
(FERC) to mandate utilities to transport and deliver or "wheel" energy
for the supply of bulk power to wholesale customers. On April 24, 1996,
the FERC issued final rules, to become effective on July 9, 1996,
requiring all public utilities owning, controlling or operating
transmission lines to file non-discriminatory open access tariffs that
offer others the same transmission service they provide to themselves.
Transmission services covered by the final rule include network and
point-to-point services, as well as ancillary services. The final rules
include a pro forma tariff setting minimum terms and conditions of
service for non-discriminatory open access transmission service. Public
utilities are required both to offer service to others under the pro
forma tariff and to use the pro forma tariff for their own wholesale
energy sales and purchases. No later than December 31, 1996, intra-pool
transactions for power pools must be under a joint, pool-wide pro forma
tariff. The final rules also provide public utilities with the
opportunity to seek full recovery of prudently incurred, legitimate and
verifiable wholesale stranded costs resulting from customer use of open
access transmission service to move to another supplier. To be eligible
for recovery, stranded costs must be associated with wholesale
requirement contracts signed before July 11, 1994. After that date,
recovery must be specifically provided for in the contract. The FERC
ruled that stranded costs should be recovered from a utility's departing
customers. The FERC also stated that if costs are stranded by retail
wheeling, utilities should look to the states first to recover those
costs. FERC will become involved only if state regulators lack
authority under state law provide for stranded cost recovery. (See the
discussion of Phase II of the New Jersey Energy Master Plan, below).
There is opposition in Congress and among Northeastern governors
to this FERC ruling due to environmental concerns. The assumption is
that as deregulation occurs there will be a race to purchase the
cheapest power available. That power will likely come from older, coal-
burning generating facilities in the Midwest that are subject to very
few pollution control requirements. To sell more of their cheap
electricity, these facilities will have to increase their power
production which will, in turn, increase the release of pollutants that
eventually make their way to New Jersey and other Northeastern States
due to the prevailing westerly winds and the jet stream. A New Jersey
Congressman is currently gathering co-sponsors to a resolution to block
the implementation of this rule and send it back to FERC to be rewritten
in a way that will protect air quality in the Northeast.
In the wholesale electric market, other competitive pressures, such
as municipalization, may also have an impact on utilities in the
evolving electric power industry. Municipalization involves the
acquisition and operation of existing investor-owned facilities by a
municipal utility (MUNI) through condemnation, purchase or lease or the
construction and operation of duplicate, parallel facilities within a
municipal boundary. As a result, utilities, such as PSE&G, could lose
customers (residential, commercial and industrial) in the municipality
that is served by the MUNI, as well as lose the municipal entity itself
as a customer.
EPAct granted the states sole authority to mandate retail wheeling.
The BPU has not yet authorized retail wheeling for the State of New
Jersey. New Jersey regulators have been reviewing existing regulations
in an effort to develop a revised regulatory structure that would afford
public utilities, such as PSE&G, increased flexibility to meet the
competitive challenges of the future. Phase I of the New Jersey Energy
Master Plan (Phase I), a two-phase plan to better manage the future
energy needs of the State, has been completed. Phase I called for
legislation that would allow New Jersey utilities to propose, subject
to BPU approval, alternatives to 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 the
New Jersey Gross Receipts and Franchise Tax (NJGRT) currently assessed
on retail energy utility sales, upon all energy producers.
On June 1, 1995, the BPU issued its Order initiating a formal Phase
II proceeding of the Master Plan. The proceeding will address wholesale
and retail competition in New Jersey. The Phase II draft report for the
New Jersey Energy Master Plan proposing policy restructuring is expected
by the end of May 1996 with a final report expected to be issued by the
end of 1996. This report is expected to address the recovery of any
stranded costs attributable to power wheeling.
Recoverability of stranded costs for PSE&G will be largely
dependent on the final Phase II report and on the rules to be
established by the BPU. Stranded costs that could result as the
industry moves to a more competitive environment include investments in
generating facilities, transmission assets, purchase power agreements
where the price being paid under such an agreement exceeds the market
price for electricity and regulatory assets for which recovery is based
solely on continued cost based regulation. At this time, management
cannot predict the level of stranded costs, if any, or the extent to
which the BPU will allow recovery of such costs.
A joint task force of the BPU and the New Jersey Treasury
Department has proposed replacing the current gross receipts and
franchise tax on electric and gas utilities with a combination of New
Jersey's existing corporate business tax, New Jersey's existing state
sales and use tax and a transitional tax which will be phased out over
a five or six year time frame. After the phase-out is completed, the
proposal is expected to significantly reduce the tax burden on electric
and gas utilities and improve their competitive position vis a vis non-
utility energy providers and energy providers in other states.
Increased competition and the shift of risks and opportunities
between rate payers and PSE&G resulting from PSE&G's filing of its
proposed Alternative Rate Plan (See Note 1, Rate Matters of Notes) will
increase the emphasis upon electric operational reliability, efficiency
and cost. While the incremental cost of nuclear production is less
expensive than PSE&G's other sources of generation, comparatively high
embedded costs for nuclear plants increase the need for PSE&G to
optimize the utilization of its nuclear generating capacity in order to
make its actual generation output cost competitive.
Nuclear Operations
Both of the Salem units are currently out of service and their
return dates are subject to completion of testing, analysis, repair
activity and NRC concurrence that they are prepared to restart. Restart
of Salem 1 will be delayed as a result of the ongoing steam generator
inspection and analysis. PSE&G is currently considering three repair
and replacement options for the steam generators in Salem 1. The first
option, repairing of degraded tubes by sleeving, has an estimated cost
of $19 to $38 million (PSE&G's share would be $8 to $16 million) and
would permit Salem 1 to operate for up to one cycle. This option would,
however, require further repair expenditures to permit the unit to
continue to operate after this 18 month period. The second option,
replacing the steam generators with unused steam generators from a
utility that had previously canceled a new plant, has an estimated cost
of $150 to $170 million (PSE&G's share would be $64 to $72 million) and
would permit the plant to operate for the remainder of its license term.
The third option would combine the first option's repair with
replacement by a newly constructed steam generator at the end of three
years and would cost of $169 to $208 million (PSE&G's share would be $72
to $88 million). This option could involve additional inspections,
repairs and/or mid-cycle outage costs. Implementation of one or more
of these options may enable Salem 1 to return to service by mid-1997.
Evaluations of the repair/replacement options and decisions by the Salem
co-owners on the preferred course of action are expected to be completed
by the end of the second quarter of 1996. Completion of the
repair/replacement option selected is not expected to materially
increase PSE&G's current construction program (See Construction and Fuel
Supplies). Salem 2, which is also undergoing steam generator inspection
and analysis is scheduled to return to service by the end of August
1996. The inability to successfully return these units to continuous,
safe operation could have a material effect on the financial position,
results of operation and net cash flows of Enterprise and PSE&G.
Results of Operations
Earnings per share of Enterprise Common Stock were $0.79 for the
three months ended March 31, 1996, a decrease of $.08 per share of
Common Stock from the comparable 1995 period.
Earnings per share of Enterprise Common Stock were $2.63 for the
twelve-month period ended March 31, 1996, a decrease of $.07 per share
of Common Stock from the comparable 1995 period.
The decrease in first quarter and twelve-month earnings was
primarily due to higher maintenance expenses associated with the
shutdown of Salem Nuclear Generating Station, the scheduled refueling
outage of the Hope Creek Nuclear Generating Station, increased
depreciation expense due to more plant in service and a decrease in the
Allowance for Funds Used During Construction due to a decrease in
construction work in progress.
These negative variances were partially offset by increased off-system
gas sales and increased residential sales during this winter season.
PSE&G - Earnings Available to Enterprise
Increase or (Decrease)
-----------------------------------
Three Months Twelve Months
Ended March 31, Ended March 31,
1996 vs. 1995 1996 vs. 1995
---------------- ---------------
Per Per
Amount Share Amount Share
------ ------ ------ ------
(Millions, except Per Share Data)
PSE&G
Revenues (net of fuel costs and gross
receipts taxes).............................. $ 43 $ .18 $ 99 $ .40
Other operation expenses....................... (23) (.09) (7) (.03)
Maintenance expenses........................... (31) (.13) (48) (.20)
Depreciation and amortization expenses......... (9) (.04) (40) (.16)
Federal income taxes........................... 8 .03 (30) (.12)
Interest charges............................... (2) (.01) (5) (.02)
Allowance for Funds used During Construction
(AFDC)......................................... (6) (.02) (11) (.04)
Preferred Securities Dividend Requirements..... -- -- (5) (.02)
Other income and expenses...................... (2) (.01) 2 .01
----- ----- ----- -----
Earnings Available to Enterprise............... $ (22) $(.09) $(45) $ (.18)
===== ===== ===== =====
PSE&G - Revenues
Electric
Revenues increased $13 million, or 1%, and $239 million, or 6% for
the three and twelve-month periods ended March 31, 1996 over the
comparable periods of 1995 primarily due to a higher recovery of energy
costs, increased residential and commercial sales due to colder weather
during the current heating season and the continued moderate growth in
the economy during the last few years. The significant components of
these changes follow:
Increase or (Decrease)
-----------------------------------
Three Months Twelve Months
Ended March 31, Ended March 31,
1996 vs. 1995 1996 vs. 1995
---------------- ---------------
(Millions)
Kilowatthour sales............................... $ 4 $ 30
Recovery of energy costs......................... 8 156
NJGRT............................................ 4 16
Other operating revenues......................... (3) 37
----- -----
Total Electric Revenues.......................... $ 13 $ 239
===== =====
Gas
Revenues increased $162 million, or 26%, and $237 million, or 15%
for the three and twelve-month periods ended March 31, 1996 over the
comparable periods of 1995 primarily due to a higher recovery of fuel
costs, increased residential sales due to colder weather during the
current heating season and increased cogeneration sales. Other operating
revenues increased due to an increase in off-system sales. Off-system
sales are sales of excess gas to brokers and other utilities which are
not part of PSE&G's firm customer base. The significant components of
these changes follow:
Increase or (Decrease)
-----------------------------------
Three Months Twelve Months
Ended March 31, Ended March 31,
1996 vs. 1995 1996 vs. 1995
---------------- ---------------
(Millions)
Therm sales................................... $ 29 $ (9)
Recovery of fuel costs........................ 120 163
NJGRT......................................... 8 42
Other operating revenues...................... 5 41
----- -----
Total Gas Revenues................ $ 162 $ 237
===== =====
PSE&G - Expense
Fuel Expenses
Variances in fuel expenses do not directly affect earnings because
of fuel adjustment clauses which are part of PSE&G's rates (See Note 1 -
Rate Matters of Notes). However, if the proposed Alternative Rate Plan
is adopted as filed, future changes in electric fuel and replacement
power costs could impact earnings.
Other Operation Expenses
During the first quarter of 1996, other operation expenses
increased $23 million or 10% from the comparable 1995 period due to
increased costs associated with the Hope Creek refueling outage,
increased labor costs for electric distribution related to emergency
work, increased labor expenses for the gas business as a result of
colder weather conditions and higher uncollectibles and conservation
costs.
For the twelve months ended March 31, 1996, other operation
expenses increased $7 million or 1% from the comparable 1995 period due
to restart and outage costs at Salem, higher conservation costs for both
the electric and gas business and higher administrative and general
expenses for the Peach Bottom Station.
Maintenance Expenses
Maintenance expenses increased $31 million and $48 million for the
three and twelve-month periods ended March 31, 1996 from the same
periods ended March 31, 1995. The three and twelve-month increases are
due to refueling outage expenses and increased labor expenses associated
with the shutdown of the Salem Nuclear Generating Station and the
refueling and maintenance outage of the Hope Creek Nuclear Generating
Station.
Depreciation and Amortization Expenses
Depreciation and amortization expenses increased $9 million and $40
million for the three and twelve-month periods ended March 31, 1996 from
the same periods ended March 31, 1995. The three and twelve-month
increases are primarily due to the placement in service of the repowered
Bergen Generating Station, completed in September 1995, and additions
to plant in service.
Federal Income Taxes
Federal income taxes decreased $8 million and increased $31 million
for the three and twelve-month periods ended March 31, 1996 from the
same periods ended March 31, 1995. The three month decrease is
primarily due to the decrease in 1996 pre-tax income and the twelve-
month increase is principally due to the receipt of a non-taxable
insurance benefit in 1994.
Interest Charges
Interest charges for the three and twelve-month period ended March
31, 1996 increased $2 million and $5 million compared to the same period
ended March 31, 1995. The three and twelve-month increases are
primarily due to a higher daily balance of short-term debt outstanding
at higher interest rates.
Allowance for Funds Used During Construction
For the first quarter of 1996, there was a $6 million decrease in
AFDC from the first quarter of 1995. This was principally due to a
lower AFDC rate and a decrease in construction work in progress, due
primarily to the completion of the repowering of Bergen Generating
Station and its placement into service in September 1995.
For the twelve months ended March 31, 1996, there was an $11
million decrease in AFDC from the twelve months ended March 31, 1995.
This was principally due to a decrease in construction work in progress,
due primarily to the completion of the repowering of Bergen Generating
Station and its placement into service in September 1995.
Preferred Securities
Dividend requirements on preferred securities increased $5 million
for the twelve month period ended March 31, 1996 over the comparable
twelve month period of 1995. The increase is due to the issuance of
higher rate Monthly Income Preferred Securities used to redeem certain
issues of PSE&G Preferred Stock.
EDHI - Earnings Available to Enterprise
Increase or (Decrease)
-----------------------------------
Three Months Twelve Months
Ended March 31, Ended March 31,
1996 vs. 1995 1996 vs. 1995
---------------- ---------------
Per Per
Amount Share Amount Share
------ ------ ------ ------
(Millions, except Per Share Data)
PSRC..................... (2) (.01) (7) (.03)
CEA...................... (2) (.01) (4) (.02)
EDC...................... 9 .03 40 .16
EGDC..................... (1) -- (1) --
----- ----- ----- -----
Total............ 4 .01 28 .11
===== ===== ===== =====
The net income of EDHI was $18 million for the quarter ended March
31, 1996, a $4 million increase over the comparable 1995 quarter. The
increase is primarily due to Energy Development Corporation (EDC), which
saw its income increase $9 million due to higher oil and gas prices and
volumes. Public Service Resources Corporation 's (PSRC) income
decreased $2 million due to lower income from limited partnerships,
partially offset by an increase in market values of securities.
Community Energy Alternative Incorporated 's (CEA) income decreased $2
million due to higher development expenses.
The net income of EDHI was $83 million for the twelve month period
ended March 31, 1996, an increase of $28 million over the twelve month
period ended March 31, 1995. This is primarily due to EDC, which saw
its income increase $40 million, of which $23 million was due to the
realization of a settlement related to a take-or-pay sales contract.
The remaining increase was due to higher gas prices and higher oil
prices and volumes.
Dividends
Dividends paid to holders of PSE&G's Preferred Stock during the
three and twelve month periods ended March 31, 1996 decreased $1.2
million and $6.3 million, respectively, over the comparable 1995
periods. The three and twelve-month decreases are due to the redemption
of certain series of preferred stock. (See Liquidity and Capital
Resources.)
Dividends payable to holders of Monthly Income Preferred Securities
of Public Service Electric and Gas Capital, L.P. (Partnership), a
limited partnership of which PSE&G is the general partner, increased
$1.2 million and $11.7 million during the three and twelve month periods
ended March 31, 1996 over the comparable 1995 periods. The three and
twelve-month increases are due to the issuance of additional securities.
Liquidity and Capital Resources
Enterprise's liquidity is affected by maturing debt, investment and
acquisition activities, the capital requirements of PSE&G's and EDHI's
construction and investment programs, 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, 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 plants 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 Contingent Liabilities of the Notes.)
PSE&G
For the three-month period ended March 31, 1996, PSE&G had utility
plant additions, including AFDC, of $101 million, a decrease of $37
million from the corresponding period in 1995. For the twelve-month
period ended March 31, 1996, PSE&G had utility plant additions,
including AFDC, of $649 million, a decrease of $202 million from the
corresponding period in 1995. Construction expenditures were related
to improvements in PSE&G's existing power plants, transmission and
distribution system, gas system and common facilities. PSE&G also
expended, for the cost of plant removal (net of salvage), $11 million
and $39 million for the three-month and twelve-month periods ended March
31, 1996, respectively, compared to $2 million and $28 million for the
corresponding periods in 1995.
PSE&G expects that it will be able to internally generate all of
its capital requirements, including construction expenditures, over the
next five years and reduce its debt outstanding by approximately $1
billion, assuming adequate and timely recovery of costs, as to which no
assurances can be given. (See Note 1 -- Rate Matters and Note 2 --
Commitments and Contingent Liabilities of Notes.)
EDHI
During the next five years, a majority of EDHI's capital
requirements are expected to be provided from operational cash flows.
CEA is expected to be the primary vehicle for EDHI's business growth.
A significant portion of CEA's growth is expected to occur in the
international arena due to the current and anticipated growth in
electric capacity required in certain regions of the world. EDC will
continue to pursue a program to grow its reserve base through a
combination of strategic acquisitions, high potential exploration
activities and exploitation of its acquired properties and new
discoveries. For discussion regarding the potential divestiture of EDC,
see Overview.
PSRC will continue to limit new investments to those related to
energy businesses, while Enterprise Group Development Corporation (EGDC)
will continue to 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. In addition, any divestiture of EDC will require
the renegotiation of existing loan agreements of Enterprise Capital
Funding Corporation (Funding). Any inability to extend or replace
maturing debt and or existing agreements at current levels and interest
rates may affect future earnings and result in an increase in EDHI's
cost of capital.
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, 1996, $58 million remained as
PSRC's unfunded commitment subject to call.
EDHI and each of its subsidiaries are subject to restrictive
business and financial covenants contained in existing debt agreements
and are required to not exceed various debt to equity ratios which vary
from 3:1 to 1.75:1. EDHI is also required to maintain a twelve-months
earnings before interest and taxes to interest (EBIT) coverage ratio of
at least 1.35:1. As of March 31, 1996 and 1995, EDHI had a consolidated
debt to equity ratio of 1.11:1 and 1.13:1, respectively, and for the
twelve months ended March 31, 1996 and 1995, EBIT coverage ratios, as
defined to exclude the effects of EGDC, of 2.60:1 and 1.87:1,
respectively. Compliance with applicable financial covenants will depend
upon future financial position and levels of earnings, as to which no
assurance can be given.
Long-Term Investments and Real Estate
Long-Term investments and real estate increased $7 million for the
three-month period ended March 31, 1996 primarily due to an increase
in Public Service Conservation Resources Corporation 's (PSCRC) long-
term investments. 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.
Long-Term investments and real estate increased $83 million for the
twelve-month period ended March 31, 1996 primarily due to an increase
in PSCRC's long-term investments. 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.
PSRC, through its Kohlberg, Kravis, Roberts and Co. (KKR) Leveraged
Buy-Out Fund, was the beneficial owner of common stock in First
Interstate Bank, which had a book value of $6.2 million. On April 1,
1996, First Interstate Bank was acquired by Wells Fargo Bank and,
subsequent to that merger, the investment was sold by KKR resulting in
a PSRC after-tax gain of approximately $11.8 million.
PSRC, through its KKR Leveraged Buy-Out Fund, was also the
beneficial owner of common stock in a company which has suffered
earnings disappointments. In April 1996, PSRC recorded an after-tax
valuation allowance of approximately $4.6 million against this
investment.
Continuing its program of prudently exiting the real estate
business, EGDC signed an agreement in April 1996 to sell an office
project located in Valley Forge, Pennsylvania for approximately the book
value ($9.5 million) of the project. The sale is expected to close in
July 1996.
Internal Generation of Cash from Operations
Enterprise's cash from operations is generated primarily from the
operating activities of PSE&G.
Enterprise's cash provided by operations for three months ended
March 31, 1996 in the amount of $700 million was substantially the same
as the corresponding period in 1995. The increase in PSE&G's revenues
(partially offset by the increase in accounts receivable and unbilled
revenues), was substantially offset by an increase in PSE&G's operation
and maintenance expense (mainly gas purchased and the Salem outage and
Hope Creek refueling, respectively). For additional information see
Results of Operations.
Enterprise's cash provided by operations for twelve months ended
March 31, 1996 increased $308 million to $1.494 billion from the
corresponding period in 1995. This increase is primarily due to the
increase in PSE&G's revenues partially offset by an increase in accounts
receivable and unbilled revenues and a decrease in PSE&G's gross
receipts taxes. For additional information see Results of Operations.
External Financings - PSE&G
The BPU has authorized PSE&G to issue approximately $4.375 billion
aggregate amount of additional Bonds/MTNs/Preferred Stock/Preferred
Securities through 1997 for refunding purposes. Under its Mortgage,
PSE&G may issue new Bonds against retired Bonds and, as of March 31,
1996, up to $2.840 billion aggregate amount of new Bonds against
previous additions and improvements to utility plant, provided that the
ratio of earnings to fixed charges is at least 2:1. At March 31, 1996
the ratio was 2.70:1.
In January 1996, PSE&G issued $350 million of Bonds. The net
proceeds from the sale were deposited in an escrow account for the
purpose of refunding certain higher cost bonds at their respective first
optional redemption dates in November 1996 and February 1997.
On April 23, 1996, PSE&G filed a registration statement with the
SEC relating to the sale of up to $350 million of Quarterly Income
Preferred Securities. The proceeds from these securities will be used
for general corporate purposes and to redeem outstanding preferred
stock.
The BPU has authorized PSE&G to issue and have outstanding at any
one time through January 1, 1997 not more than $1 billion of its short-
term obligations, consisting of commercial paper and other unsecured
borrowings from banks and other lenders. On March 31, 1996, PSE&G had
$632 million of short-term debt outstanding.
To provide liquidity for its commercial paper program, PSE&G has
a $500 million one year revolving credit agreement expiring in August
1996 and a $500 million five year revolving credit agreement expiring
in August 2000 with a group of commercial banks, which provides for
borrowing up to one year. On March 31, 1996, there were no borrowings
outstanding under these credit agreements. PSE&G expects to be able to
renew the credit agreement expiring in 1996.
PSCRC has a $30 million revolving credit facility supported by a
PSE&G subscription agreement in an aggregate amount of $30 million which
terminates on March 6, 1997. As of March 31, 1996, PSCRC had $30
million outstanding under this facility.
In March 1996, PSCRC entered into a secured term loan facility for
loans maturing in three to five years up to $40 million. The agreement
terminates in March 1998. As of March 31, 1996, there was $2 million
outstanding under this facility.
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. The credit facility expires on June 28, 1996, however, an
extension is currently being negotiated. PSE&G has guaranteed repayment
of Fuelco's respective obligations. As of March 31, 1996, Fuelco had
commercial paper of $80 million outstanding under such program.
External Financings - EDHI
Funding has a commercial paper program, supported by a commercial
bank letter of credit and credit facility, in the amount of $225 million
expiring in March 1998. As of March 31, 1996, Funding had $186 million
of borrowings outstanding under this commercial paper program.
Additionally, Funding has a $225 million revolving credit facility
expiring in March 1998. As of March 31, 1996, Funding had $100 million
of borrowings outstanding under this facility.
PSEG Capital Corporation's (Capital) MTN program provides for an
aggregate principal amount of up to $650 million of MTNs so that its
total debt outstanding at any time, including MTNs, would not exceed
such amount. At March 31, 1996, Capital had total debt outstanding of
$461 million, including $355 million of MTNs.
PSE&G
The information required by this item is incorporated herein by
reference to the following portions of Enterprise's Management's
Discussion and Analysis of Financial Condition and Results of
Operations, insofar as they relate to PSE&G and its subsidiaries:
Overview; Competition; Nuclear Operations; Results of Operations;
Dividends; Liquidity and Capital Resources; Long-Term Investments and
Real Estate; Internal Generation of Cash from Operations; and External
Financings.
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 SEC on Form 10-K for 1995 (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.
As previously reported in a current report on Form 8-K filed on
March 14, 1996, PSE&G and the three other co-owners of Salem filed suit
in February 1996 in the United States District Court for the District
of New Jersey against Westinghouse Electric Corporation (Westinghouse)
seeking damages to recover the cost of replacing the steam generators
at Salem Units 1 and 2. The suit alleges fraud and breach of contract
by Westinghouse in the sale, installation and maintenance of the
generators. Westinghouse filed an answer and $2.5 million counterclaim
for unpaid work related to services at Salem on April 30, 1996.
As also reported in the March 14th Form 8-K, the co-owners of Salem
have filed lawsuits against Enterprise and PSE&G in the United States
District Court for the Eastern District of Pennsylvania and in the New
Jersey Superior Court alleging mismanagement by PSE&G in its operation
of Salem and are seeking unspecified compensatory and punitive damages.
PSE&G's answers regarding these matters are presently required to be
filed in late May. While PSE&G cannot predict the outcome of these
proceedings, PSE&G believes it has operated Salem in accordance with the
requirements of the owners agreement and applicable law. PSE&G believes
it has substantial and valid defenses and will vigorously oppose both
of these actions.
As reported in the Form 10-K at page 39 and in the March 14th Form
8-K, three shareholder derivative action civil complaints have been
filed against Enterprise and certain of its directors and officers
seeking to recover unspecified damages for alleged losses purportedly
arising out of PSE&G's operations of Salem and Hope Creek. Enterprise's
answers with respect to these actions are expected to be required to be
filed in June 1996.
In addition, see the following at the pages indicated:
(1) Page 11. Proceedings before the BPU relating to PSE&G's
proposed Alternative Rate Plan, Docket No. E096010028. Form 10-K, Page
73.
PART II. OTHER INFORMATION - (Continued)
Item 1. Legal Proceedings - (Concluded)
- ------ -------------------------------
(2) Page 13. Proceedings before the BPU relating to PSE&G's LGAC
filed October 2, 1995, Docket No. GR9510456. Form 10-K, Page 75.
(3) Page 13. Proceedings before the BPU relating to recovery of
replacement power costs in connection with the April 1994 Salem 1
shutdown, Docket No. ER94070293. Form 10-K, Page 75.
(4) Page 13. Generic proceeding before the BPU relating to recovery
of capacity costs associated with power purchases from cogenerators,
Docket No. EX93060255. Form 10-K, Page 76.
(5) Page 13. Generic proceedings before the BPU relating to
standards for "off tariff" negotiated rate agreement programs, Docket
No. EX95070320. Form 10-K, Page 76.
Item 4. Submission of Matters to a Vote of Security Holders
- ------ ---------------------------------------------------
Enterprise's Annual Meeting of Stockholders was held on April 16,
1996. 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
Forrest J. Remick.............. 197,707,113 4,533,230
Class II- Term expiring 1999
T. J. Dermot Dunphy............ 197,876,136 4,364,207
Raymond V. Gilmartin........... 197,863,646 4,376,697
Josh S. Weston................. 197,806,930 4,433,413
Votes Votes
Votes For Against Abstaining
--------- --------- ----------
Proposal 2 -
Appointment of Deloitte &
Touche LLP as Independent
Auditors for 1996........ 199,726,538 1,070,013 1,443,792
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 1995 (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.
Credit Ratings
Form 10-K, Page 5, Paragraph 6
------------------------------
As a component of issuing ratings, each rating agency issues its
opinion of the credit trend or outlook for the entity being rated. For
PSE&G, each of the four rating agencies currently evaluate that trend
or outlook as negative.
PSE&G - Nuclear Operations
Form 10-K, Page 10, Paragraph 4
-------------------------------
The scheduled 1996, 1997, and 1998 refueling outages, each
estimated at eight to ten weeks duration, for PSE&G's five licensed
nuclear units are expected to commence in the following months:
REFUELING OUTAGES
--------------------------------------------
1996 1997 1998
------------- ------------- -------------
Salem 1.......... -- -- --
Salem 2.......... -- -- February
Hope Creek....... -- September --
Peach Bottom 2... September -- September
Peach Bottom 3... -- September --
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
PART II. OTHER INFORMATION - (Continued)
Item 5. Other Information - (Continued)
- ------ ------------------------------
Form 10-K, Page 10 thru Page 12
-------------------------------
With respect to Salem 1, the most recent inspection of the steam
generators is not complete, but partial results from eddy current
inspections in February 1996 show indications of degradation in a
significant number of tubes. PSE&G has removed several tubes for
laboratory examination to confirm the results of the inspections. PSE&G
has been evaluating several options which include repair of degraded
tubes by sleeving at locations found to contain crack-like indications,
replacement of the steam generators with existing unused steam
generators from a utility that had previously canceled a new plant, or
repair for an interim period and then replacement of the steam
generators with newly constructed steam generators. These evaluations
are expected to be completed in the second quarter of 1996.
Implementation of one or more of these options may enable the return to
service of Salem unit 1 by mid-1997.
The preliminary results of the Salem 2 inspections confirm that
the condition of the Salem 2 steam generators is well within current
repair limits. PSE&G had also removed several tubes from Salem 2 steam
generators for laboratory analysis to confirm the results of testing.
Repairs to Salem 2 steam generators will be completed in the Second
Quarter of 1996 to support the scheduled return to service by the end
of August 1996.
PSE&G had planned to return Salem 1 to service in the second
quarter of 1996 and Salem 2 in the third quarter of 1996. As a result
of the extent of the previously discovered degradation in the Salem 1
steam generators, PSE&G is focusing its efforts on the return of Salem
2 to service by the end of August 1996. The conduct of the additional
steam generator inspections and testing on Salem 2 is not expected to
affect the timing of its restart. The timing of the restart is subject
to completion of the requirements of the restart plan to the
satisfaction of PSE&G and the NRC, which encompasses a review and
improvement of personnel, process and equipment issues.
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
PART II. OTHER INFORMATION - (Continued)
Item 5. Other Information - (Continued)
- ------ -------------------------------
Form 10-K, Page 10 thru Page 12 - (Continued)
---------------------------------------------
The restart plan status is as follows:
Two of the five NRC Confirmatory Action Letter
requirements were recognized as complete by the NRC on
February 13, 1996. A third item has been addressed by
PSE&G and approval by the NRC is pending;
Comprehensive action plans concerning people and process
issues are approximately 85% task complete;
A detailed Salem 2 schedule integrating equipment
maintenance, upgrades and testing has been developed and
work is on schedule.
Based on the above, PSE&G is not aware of any constraints which
will prevent Salem 2 from returning to service by the end of August
1996.
Based upon current projections and assumptions regarding PSE&G's
five nuclear units during 1996, including the return of Hope Creek on
March 25, 1996, the return of Salem 2 by the end of August 1996, and the
continued outage of Salem 1 for the remainder of the year, the 1996
aggregate capacity factor would be approximately 57%, which would result
in a penalty of approximately $12 million.
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
PART II. OTHER INFORMATION - (Continued)
Item 5. Other Information - (Continued)
- ------ -------------------------------
PSE&G - Nuclear Operations - Hope Creek
Form 10-K, Page 12, Paragraph 7
-------------------------------
Hope Creek completed its sixth refueling and maintenance outage on
March 25, 1996.
PSE&G - Nuclear Operations - Hope Creek
Form 10-K, Page 13, Paragraph 4
-------------------------------
By letter dated January 29, 1996, the NRC requested a meeting with
PSE&G senior management to discuss its concerns regarding declining
trends in performance at Hope Creek. Meetings were held with senior NRC
officials on May 6th and 7th to discuss performance at both Hope Creek
and Salem. The NRC acknowledged fundamental changes in PSE&G's nuclear
business unit and that those changes provided an overall positive
impression. The NRC said that PSE&G must demonstrate it has adequately
maintained the design and licensing basis of both units, a generic issue
presently being pursued by the NRC. The NRC staff indicated that it
will continue to closely monitor performance at Salem and Hope Creek,
including emergency preparedness performance and the effectiveness of
PSE&G's corrective action program.
PSE&G - Nuclear Operations - Other Nuclear Matters
Form 10-K, Page 14, Paragraph 5
-------------------------------
In a separate matter, as a result of several Boiling Water Reactors
(BWR) experiencing clogging of some emergency core cooling system
suction strainers, which supply water from the suppression pool for
emergency cooling of the core and related structures, the NRC issued a
Bulletin dated May 6, 1996 to operators of BWRs requesting measures be
taken to minimize the potential for clogging. The NRC has proposed
three resolution options, with a request that actions be completed by
the end of the unit's first refueling outage after January 1997.
Alternative resolution options will be subject to NRC approval. PSE&G
expects to submit its planned actions and schedules within 180 days.
PSE&G cannot predict what other actions, if any, the NRC may take on
this matter.
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
PART II. OTHER INFORMATION - (Continued)
Item 5. Other Information - (Continued)
- ------ -------------------------------
PSE&G - Nuclear Fuel
Form 10-K, Page 16, Paragraph 2
-------------------------------
PECO has also advised PSE&G that it has contracted for the
following segments of the nuclear fuel supply cycle for Peach Bottom 2
and 3 through the following years:
Nuclear Unit Conversion Enrichment Fabrication
Peach Bottom 2 (1) (2) 1999
Peach Bottom 3 (1) (2) 1998
(1) PECO has commitments for 100% of its conversion services for
Peach Bottom through 1997. Approximately 40% of the conversion service
requirements are covered through 2001. PECO does not anticipate any
difficulties in obtaining necessary conversion services for Peach
Bottom.
(2) PECO has commitments for enrichment services for Peach Bottom
under contract with the United States Enrichment Corporation. The
commitments represent 100% of the enrichment requirements through 1998
and 70% through 1999. PECO does not anticipate any difficulties in
obtaining necessary enrichment services for Peach Bottom.
Environmental Controls
Form 10-K, Page 22, Paragraph 1
-------------------------------
During 1995, PSE&G expended approximately $118 million for capital
related expenditures to improve the environment and comply with changing
regulations. It is estimated that PSE&G will expend approximately $50
million, $32 million, $27 million, $27 million and $13 million in the
years 1996 through 2000, respectively, for such purposes.
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
PART II. OTHER INFORMATION - (Continued)
Item 5. Other Information - (Continued)
- ------ -------------------------------
FORM 10-K, Page, 26, Paragraph 6
--------------------------------
By letter dated April 30, 1996, EPA submitted a letter to PSE&G
directing that PSE&G provide information concerning the nature and
quantity of hazardous substances and/or wastes which may have been
generated, treated, stored or disposed of at two PSE&G facilities
formerly located adjacent to the Passaic River Site. The two facilities
are PSE&G's former Harrison Gas Plant and Essex Generating Station.
Federal Comprehensive Environmental Response, Compensation and Liability
Act of 1980 (CERCLA) provides that EPA is authorized to direct any
person to submit such information if there is a reasonable basis to
believe that a release of a hazardous substance occurred at a subject
facility. PSE&G is currently in the process of preparing to respond to
the EPA's request for these facilities.
NEW MATTERS
-----------
During a recent NRC inspection, Hope Creek received four potential
violations: two of the potential violations concerned failure to
properly implement corrective actions, another concerned a safety
evaluation for a service water system design change, and the last
concerned a violation of Technical Specifications for control rod
testing. An NRC enforcement conference has been scheduled for June 11,
1996. PSE&G cannot predict what actions, if any, the NRC may take on
this matter.
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
PART II. OTHER INFORMATION - (Continued)
Item 5. Other Information - (Continued)
- ------ -------------------------------
New Information
- ----------------
Employee Relations
Form 10-K, Page 19
------------------
PSE&G reached agreement for new contracts with its two largest
unions, the International Brotherhood of Electrical Workers Local Union
94 (IBEW) and Local 855 of the Public Utility Construction and Gas
Appliance Workers (Local 855). The six year agreements, which were
effective May 1, 1996, provide for both incremental increases in base
wages as well as a series of two percent lump-sum increases over the
next five years. The agreements allow for some crossover work between
the IBEW and Local 855. These crossover areas addressed in the
agreements include meter installation/repair work, joint trenching and
markouts.
PSE&G also reached agreement for new contracts with the Office and
Professional Employees International Union (OPEIU), Local 153 and the
Consolidated Gas Workers Union. These agreements call for increases of
14% over the six years, annual two percent lump-sum payments over the
first five years of the contract, improvements in shift premiums, travel
and meal allowances and adjustments in medical coverages designed to
provide employees with more options while increasing cost-efficiency.
PSE&G has not yet reached an agreement with the Utility Co-workers
Association (representing approximately 1,100 employees). Negotiations
are still in progress.
The negotiated agreements provide for the Pension Plan to be
amended effective May 1, 1996 to allow employees the option to retire
early upon attainment of age 55 and completion of 25 or more years of
service. Also, between May 1, 1996 and April 30, 1997, early retirement
without reduction will be available to employees who have attained age
50 and have completed 30 or more years of service. This change, coupled
with other benefit modifications, will have a direct impact upon PSE&G's
Pension and Postretirement Benefit Plans. Presently, the impact has not
been quantified, however, it may have a material effect on results of
operations for Enterprise and PSE&G.
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
PART II.
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
------- ------------------------------------------------------
4(A) Supplemental Indenture dated October 1, 1995
between PSE&G and First Fidelity Bank, National
Association, New Jersey, as Trustee, providing for
the issue of First and Refunding Mortgage Bonds,
Pollution Control Series U.
4(B) Supplemental Indenture dated October 1, 1995
between PSE&G and First Fidelity Bank, National
Association, New Jersey, as Trustee, providing for
the issue of First and Refunding Mortgage Bonds,
Pollution Control Series V.
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(A) Financial Data Schedule (Enterprise)
27(B) Financial Data Schedule (PSE&G)
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
(b) Reports on Form 8-K.
Registrant Date of Report Item Reported
- ---------- -------------- -------------
Enterprise
and PSE&G 1-19-96 Item 5. Other events (Rate
Matters/ Regulation, PSE&G -
Nuclear Operations/Salem and
Hope Creek, Credit Ratings).
Enterprise
and PSE&G 3-14-96 Item 5. Other events (PSE&G -
Nuclear and PSE&G Operations
- Hope Creek/Nuclear
Performance Standard, Rate
Matters/ Regulation, and
Legal Proceedings).
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 15, 1996