PSEG-3/31/2015-Q1

Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549 
FORM 10-Q
(Mark One)
ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED March 31, 2015
OR
¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM          TO

Commission
File Number
 
Registrants, State of Incorporation,
Address, and Telephone Number
  
I.R.S. Employer
Identification No.
001-09120
  
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
(A New Jersey Corporation)
80 Park Plaza, P.O. Box 1171
Newark, New Jersey 07101-1171
973 430-7000
http://www.pseg.com
  
22-2625848
001-00973
  
PUBLIC SERVICE ELECTRIC AND GAS COMPANY
(A New Jersey Corporation)
80 Park Plaza, P.O. Box 570
Newark, New Jersey 07101-0570
973 430-7000
http://www.pseg.com
  
22-1212800
001-34232
  
PSEG POWER LLC
(A Delaware Limited Liability Company)
80 Park Plaza
Newark, New Jersey 07102-4194
973 430-7000
http://www.pseg.com
  
22-3663480
 
Indicate by check mark whether the registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days. Yes ý No ¨
Indicate by check mark whether the registrants have submitted electronically and posted on their corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrants were required to submit and post such files). Yes ý No ¨
Indicate by check mark whether each registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Public Service Enterprise Group Incorporated
Large accelerated filer x
Accelerated filer o
Non-accelerated filer o
Smaller reporting company o
 
 
 
 
 
Public Service Electric and Gas Company
Large accelerated filer o
Accelerated filer o
Non-accelerated filer x
Smaller reporting company o
 
 
 
 
 
PSEG Power LLC
Large accelerated filer o
Accelerated filer o
Non-accelerated filer x
Smaller reporting company o
Indicate by check mark whether any of the registrants is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No ý
As of April 21, 2015, Public Service Enterprise Group Incorporated had outstanding 505,862,575 shares of its sole class of Common Stock, without par value.
As of April 21, 2015, 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.
Public Service Electric and Gas Company and PSEG Power LLC are wholly owned subsidiaries of Public Service Enterprise Group Incorporated and meet the conditions set forth in General Instruction H(1) (a) and (b) of Form 10-Q. Each is filing its Quarterly Report on Form 10-Q with the reduced disclosure format authorized by General Instruction H.




Table of Contents

 
  
Page
 
 
PART I. FINANCIAL INFORMATION
 
Item 1.
Financial Statements
 
 
 
 
 
Notes to Condensed Consolidated Financial Statements
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 2.
 
Executive Overview of 2015 and Future Outlook
 
 
 
 
Item 3.
Item 4.
 
 
PART II. OTHER INFORMATION
 
Item 1.
Item 1A.
Item 2.
Item 5.
Item 6.
 


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FORWARD-LOOKING STATEMENTS
Certain of the matters discussed in this report about our and our subsidiaries' future performance, including, without limitation, future revenues, earnings, strategies, prospects, consequences and all other statements that are not purely historical constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ materially from those anticipated. Such statements are based on management's beliefs as well as assumptions made by and information currently available to management. When used herein, the words “anticipate,” “intend,” “estimate,” “believe,” “expect,” “plan,” “should,” “hypothetical,” “potential,” “forecast,” “project,” variations of such words and similar expressions are intended to identify forward-looking statements. Factors that may cause actual results to differ are often presented with the forward-looking statements themselves. Other factors that could cause actual results to differ materially from those contemplated in any forward-looking statements made by us herein are discussed in filings we make with the United States Securities and Exchange Commission (SEC), including our Annual Report on Form 10-K and subsequent reports on Form 10-Q and Form 8-K and available on our website: http://www.pseg.com. These factors include, but are not limited to:
adverse changes in the demand for or the price of the capacity and energy that we sell into wholesale electricity markets,
adverse changes in energy industry law, policies and regulations, including market structures and transmission planning,
any inability of our transmission and distribution businesses to obtain adequate and timely rate relief and regulatory approvals from federal and state regulators,
changes in federal and state environmental regulations and enforcement that could increase our costs or limit our operations,
changes in nuclear regulation and/or general developments in the nuclear power industry, including various impacts from any accidents or incidents experienced at our facilities or by others in the industry, that could limit operations of our nuclear generating units,
actions or activities at one of our nuclear units located on a multi-unit site that might adversely affect our ability to continue to operate that unit or other units located at the same site,
any inability to manage our energy obligations, available supply and risks,
adverse outcomes of any legal, regulatory or other proceeding, settlement, investigation or claim applicable to us and/or the energy industry,
any deterioration in our credit quality or the credit quality of our counterparties,
availability of capital and credit at commercially reasonable terms and conditions and our ability to meet cash needs,
changes in the cost of, or interruption in the supply of, fuel and other commodities necessary to the operation of our generating units,
delays in receipt of necessary permits and approvals for our construction and development activities,
delays or unforeseen cost escalations in our construction and development activities,
any inability to achieve, or continue to sustain, our expected levels of operating performance,
any equipment failures, accidents, severe weather events or other incidents that impact our ability to provide safe and reliable service to our customers, and any inability to obtain sufficient insurance coverage or recover proceeds of insurance with respect to such events,
acts of terrorism, cybersecurity attacks or intrusions that could adversely impact our businesses,
increases in competition in energy supply markets as well as for transmission projects,
any inability to realize anticipated tax benefits or retain tax credits,
challenges associated with recruitment and/or retention of a qualified workforce,
adverse performance of our decommissioning and defined benefit plan trust fund investments and changes in funding requirements,
changes in technology, such as distributed generation and micro grids, and greater reliance on these technologies, and
changes in customer behaviors, including increases in energy efficiency, net-metering and demand response.

All of the forward-looking statements made in this report are qualified by these cautionary statements and we cannot assure you that the results or developments anticipated by management will be realized or even if realized, will have the expected consequences to, or effects on, us or our business prospects, financial condition or results of operations. Readers are cautioned not to place undue reliance on these forward-looking statements in making any investment decision. Forward-looking statements made in this report apply only as of the date of this report. While we may elect to update forward-looking statements from time to time, we specifically disclaim any obligation to do so, even if internal estimates change, unless otherwise required by applicable securities laws.

The forward-looking statements contained in this report are intended to qualify for the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.

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PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Millions, except per share data
(Unaudited)
 
 
 
 
 
 
 
 
 
Three Months Ended
 
 
 
March 31,
 
 
 
2015
 
2014
 
 
OPERATING REVENUES
$
3,135

 
$
3,223

 
 
OPERATING EXPENSES
 
 
 
 
 
Energy Costs
1,094

 
1,356

 
 
Operation and Maintenance
663

 
856

 
 
Depreciation and Amortization
330

 
306

 
 
Total Operating Expenses
2,087

 
2,518

 
 
OPERATING INCOME
1,048

 
705

 
 
Income from Equity Method Investments
3

 
4

 
 
Other Income
48

 
48

 
 
Other Deductions
(12
)
 
(12
)
 
 
Other-Than-Temporary Impairments
(5
)
 
(2
)
 
 
Interest Expense
(98
)
 
(97
)
 
 
INCOME BEFORE INCOME TAXES
984

 
646

 
 
Income Tax Expense
(398
)
 
(260
)
 
 
NET INCOME
$
586

 
$
386

 
 
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
 
 
 
 
 
BASIC
506

 
506

 
 
DILUTED
508

 
508

 
 
NET INCOME PER SHARE:
 
 
 
 
 
BASIC
$
1.16

 
$
0.76

 
 
DILUTED
$
1.15

 
$
0.76

 
 
DIVIDENDS PAID PER SHARE OF COMMON STOCK
$
0.39

 
$
0.37

 
 
 
 
 
 
 

See Notes to Condensed Consolidated Financial Statements.

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PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Millions
(Unaudited)
 
 
 
 
 
 
 
 
 
Three Months Ended
 
 
 
March 31,
 
 
 
2015
 
2014
 
 
NET INCOME
$
586

 
$
386

 
 
Other Comprehensive Income (Loss), net of tax
 
 
 
 
 
Unrealized Gains (Losses) on Available-for-Sale Securities, net of tax (expense) benefit of $(13) and $(3) for 2015 and 2014, respectively
14

 
2

 
 
Unrealized Gains (Losses) on Cash Flow Hedges, net of tax (expense) benefit of $7 and $(2) for 2015 and 2014, respectively
(9
)
 
2

 
 
Pension/Other Postretirement Benefit Costs (OPEB) adjustment, net of tax (expense) benefit of $(6) and $(2) for 2015 and 2014, respectively
8

 
4

 
 
Other Comprehensive Income (Loss), net of tax
13

 
8

 
 
COMPREHENSIVE INCOME
$
599

 
$
394

 
 
 
 
 
 
 

See Notes to Condensed Consolidated Financial Statements.


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PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
Millions
(Unaudited)
 
 
 
 
 
 
 
 
 
March 31,
2015
 
December 31,
2014
 
 
ASSETS
 
 
CURRENT ASSETS
 
 
 
 
 
Cash and Cash Equivalents
$
1,008

 
$
402

 
 
Accounts Receivable, net of allowances of $58 and $52 in 2015 and 2014, respectively
1,437

 
1,254

 
 
Tax Receivable
31

 
211

 
 
Unbilled Revenues
252

 
284

 
 
Fuel
266

 
538

 
 
Materials and Supplies, net
483

 
484

 
 
Prepayments
80

 
108

 
 
Derivative Contracts
87

 
240

 
 
Deferred Income Taxes

 
11

 
 
Regulatory Assets
258

 
323

 
 
Regulatory Assets of Variable Interest Entities (VIEs)
187

 
249

 
 
Other
70

 
15

 
 
Total Current Assets
4,159

 
4,119

 
 
PROPERTY, PLANT AND EQUIPMENT
32,805

 
32,196

 
 
     Less: Accumulated Depreciation and Amortization
(8,827
)
 
(8,607
)
 
 
Net Property, Plant and Equipment
23,978

 
23,589

 
 
NONCURRENT ASSETS
 
 
 
 
 
Regulatory Assets
3,164

 
3,192

 
 
Long-Term Investments
1,287

 
1,307

 
 
Nuclear Decommissioning Trust (NDT) Fund
1,821

 
1,780

 
 
Long-Term Receivable of VIE
592

 
580

 
 
Other Special Funds
235

 
212

 
 
Goodwill
16

 
16

 
 
Other Intangibles
87

 
84

 
 
Derivative Contracts
108

 
77

 
 
Restricted Cash of VIEs
25

 
24

 
 
Other
355

 
353

 
 
Total Noncurrent Assets
7,690

 
7,625

 
 
TOTAL ASSETS
$
35,827

 
$
35,333

 
 
 
 
 
 
 

See Notes to Condensed Consolidated Financial Statements.


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PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
Millions
(Unaudited)
 
 
 
 
 
 
 
 
 
March 31,
2015
 
December 31,
2014
 
 
LIABILITIES AND CAPITALIZATION
 
 
CURRENT LIABILITIES
 
 
 
 
 
Long-Term Debt Due Within One Year
$
793

 
$
624

 
 
Securitization Debt of VIEs Due Within One Year
201

 
259

 
 
Accounts Payable
1,006

 
1,178

 
 
Derivative Contracts
94

 
132

 
 
Accrued Interest
119

 
95

 
 
Accrued Taxes
343

 
21

 
 
Deferred Income Taxes
87

 
173

 
 
Clean Energy Program
86

 
142

 
 
Obligation to Return Cash Collateral
130

 
121

 
 
Regulatory Liabilities
162

 
186

 
 
Other
601

 
547

 
 
Total Current Liabilities
3,622

 
3,478

 
 
NONCURRENT LIABILITIES
 
 
 
 
 
Deferred Income Taxes and Investment Tax Credits (ITC)
7,436

 
7,303

 
 
Regulatory Liabilities
272

 
258

 
 
Regulatory Liabilities of VIEs
46

 
39

 
 
Asset Retirement Obligations
754

 
743

 
 
Other Postretirement Benefit (OPEB) Costs
1,257

 
1,277

 
 
OPEB Costs of Servco
462

 
452

 
 
Accrued Pension Costs
408

 
440

 
 
Accrued Pension Costs of Servco
128

 
126

 
 
Environmental Costs
427

 
417

 
 
Derivative Contracts
25

 
33

 
 
Long-Term Accrued Taxes
215

 
208

 
 
Other
127

 
112

 
 
Total Noncurrent Liabilities
11,557

 
11,408

 
 
COMMITMENTS AND CONTINGENT LIABILITIES (See Note 8)


 


 
 
CAPITALIZATION
 
 
 
 
 
LONG-TERM DEBT
 
 
 
 
 
Total Long-Term Debt
8,090

 
8,261

 
 
STOCKHOLDERS’ EQUITY

 
 
 
 
Common Stock, no par, authorized 1,000,000,000 shares; issued, 2015 and 2014—533,556,660 shares
4,873

 
4,876

 
 
Treasury Stock, at cost, 2015— 27,743,445 shares; 2014— 27,720,068 shares
(662
)
 
(635
)
 
 
Retained Earnings
8,616

 
8,227

 
 
Accumulated Other Comprehensive Loss
(270
)
 
(283
)
 
 
Total Common Stockholders’ Equity
12,557

 
12,185

 
 
Noncontrolling Interest
1

 
1

 
 
Total Stockholders’ Equity
12,558

 
12,186

 
 
Total Capitalization
20,648

 
20,447

 
 
TOTAL LIABILITIES AND CAPITALIZATION
$
35,827

 
$
35,333

 
 
 


 
 
 

See Notes to Condensed Consolidated Financial Statements.

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Table of Contents

PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Millions
(Unaudited)
 
 
 
 
 
 
 
 
Three Months Ended
 
 
 
March 31,
 
 
 
2015
 
2014
 
 
CASH FLOWS FROM OPERATING ACTIVITIES
 
 
 
 
 
Net Income
$
586

 
$
386

 
 
Adjustments to Reconcile Net Income to Net Cash Flows from Operating Activities:
 
 
 
 
 
Depreciation and Amortization
330

 
306

 
 
Amortization of Nuclear Fuel
55

 
54

 
 
Provision for Deferred Income Taxes (Other than Leases) and ITC
63

 
(39
)
 
 
Non-Cash Employee Benefit Plan Costs
41

 
11

 
 
Leveraged Lease Income, Adjusted for Rents Received and Deferred Taxes
4

 
(22
)
 
 
Net Realized and Unrealized (Gains) Losses on Energy Contracts and Other Derivatives
37

 
224

 
 
Change in Accrued Storm Costs
7

 
(1
)
 
 
Net Change in Other Regulatory Assets and Liabilities
(29
)
 
177

 
 
Cost of Removal
(26
)
 
(25
)
 
 
Net Realized (Gains) Losses and (Income) Expense from NDT Fund
(12
)
 
(23
)
 
 
Net Change in Certain Current Assets and Liabilities:
 
 
 
 
 
          Tax Receivable
180

 
(2
)
 
 
          Accrued Taxes
322

 
273

 
 
          Margin Deposit
14

 
(261
)
 
 
          Other Current Assets and Liabilities
109

 
70

 
 
Employee Benefit Plan Funding and Related Payments
(47
)
 
(32
)
 
 
Other
45

 
20

 
 
Net Cash Provided By (Used In) Operating Activities
1,679

 
1,116

 
 
CASH FLOWS FROM INVESTING ACTIVITIES


 
 
 
 
Additions to Property, Plant and Equipment
(747
)
 
(609
)
 
 
Proceeds from Sales of Available-for-Sale Securities
609

 
257

 
 
Investments in Available-for-Sale Securities
(638
)
 
(269
)
 
 
Other
(3
)
 
(8
)
 
 
Net Cash Provided By (Used In) Investing Activities
(779
)
 
(629
)
 
 
CASH FLOWS FROM FINANCING ACTIVITIES
 
 
 
 
 
Net Change in Commercial Paper and Loans

 
(60
)
 
 
Redemption of Securitization Debt
(58
)
 
(54
)
 
 
Cash Dividends Paid on Common Stock
(197
)
 
(187
)
 
 
Other
(39
)
 
(24
)
 
 
Net Cash Provided By (Used In) Financing Activities
(294
)
 
(325
)
 
 
Net Increase (Decrease) in Cash and Cash Equivalents
606

 
162

 
 
Cash and Cash Equivalents at Beginning of Period
402

 
493

 
 
Cash and Cash Equivalents at End of Period
$
1,008

 
$
655

 
 
Supplemental Disclosure of Cash Flow Information:
 
 
 
 
 
Income Taxes Paid (Received)
$
(175
)
 
$
15

 
 
Interest Paid, Net of Amounts Capitalized
$
74

 
$
79

 
 
Accrued Property, Plant and Equipment Expenditures
$
276

 
$
247

 
 
 
 
 
 
 

See Notes to Condensed Consolidated Financial Statements.

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Table of Contents


PUBLIC SERVICE ELECTRIC AND GAS COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Millions
(Unaudited)

 
 
 
 
 
 
 
 
Three Months Ended
 
 
 
March 31,
 
 
 
2015
 
2014
 
 
OPERATING REVENUES
$
2,002

 
$
2,145

 
 
OPERATING EXPENSES
 
 
 
 
 
Energy Costs
892

 
1,045

 
 
Operation and Maintenance
412

 
462

 
 
Depreciation and Amortization
247

 
227

 
 
Total Operating Expenses
1,551

 
1,734

 
 
OPERATING INCOME
451

 
411

 
 
Other Income
18

 
14

 
 
Other Deductions
(1
)
 

 
 
Interest Expense
(69
)
 
(68
)
 
 
INCOME BEFORE INCOME TAXES
399

 
357

 
 
Income Tax Expense
(157
)
 
(143
)
 
 
EARNINGS AVAILABLE TO PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
$
242

 
$
214

 
 
 
 
 
 
 

See disclosures regarding Public Service Electric and Gas Company included in the Notes to Condensed Consolidated Financial Statements.


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PUBLIC SERVICE ELECTRIC AND GAS COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Millions
(Unaudited)

 
 
 
 
 
 
 
 
Three Months Ended
 
 
 
March 31,
 
 
 
2015
 
2014
 
 
NET INCOME
$
242

 
$
214

 
 
Unrealized Gains (Losses) on Available-for-Sale Securities, net of tax (expense) benefit of $0 and $0 for 2015 and 2014, respectively

 

 
 
COMPREHENSIVE INCOME
$
242

 
$
214

 
 
 
 
 
 
 

See disclosures regarding Public Service Electric and Gas Company included in the Notes to Condensed Consolidated Financial Statements.


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Table of Contents

PUBLIC SERVICE ELECTRIC AND GAS COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
Millions
(Unaudited)

 
 
 
 
 
 
 
 
March 31,
2015
 
December 31,
2014
 
 
ASSETS
 
 
CURRENT ASSETS

 
 
 
 
Cash and Cash Equivalents
$
336

 
$
310

 
 
Accounts Receivable, net of allowances of $58 and $52 in 2015 and 2014, respectively
1,038

 
864

 
 
Accounts Receivable-Affiliated Companies
9

 
274

 
 
Unbilled Revenues
252

 
284

 
 
Materials and Supplies
142

 
133

 
 
Prepayments
5

 
42

 
 
Regulatory Assets
258

 
323

 
 
Regulatory Assets of VIEs
187

 
249

 
 
Derivative Contracts

 
18

 
 
Deferred Income Taxes

 
24

 
 
Other
15

 
7

 
 
Total Current Assets
2,242

 
2,528

 
 
PROPERTY, PLANT AND EQUIPMENT
21,610

 
21,103

 
 
Less: Accumulated Depreciation and Amortization
(5,263
)
 
(5,183
)
 
 
Net Property, Plant and Equipment
16,347

 
15,920

 
 
NONCURRENT ASSETS
 
 
 
 
 
Regulatory Assets
3,164

 
3,192

 
 
Long-Term Investments
353

 
348

 
 
Other Special Funds
55

 
53

 
 
Derivative Contracts
7

 
8

 
 
Restricted Cash of VIEs
25

 
24

 
 
Other
152

 
150

 
 
Total Noncurrent Assets
3,756

 
3,775

 
 
TOTAL ASSETS
$
22,345

 
$
22,223

 
 
 
 
 
 
 

See disclosures regarding Public Service Electric and Gas Company included in the Notes to Condensed Consolidated Financial Statements.


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PUBLIC SERVICE ELECTRIC AND GAS COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
Millions
(Unaudited)

 
 
 
 
 
 
 
 
March 31,
2015
 
December 31,
2014
 
 
LIABILITIES AND CAPITALIZATION
 
 
CURRENT LIABILITIES
 
 
 
 
 
Long-Term Debt Due Within One Year
$
471

 
$
300

 
 
Securitization Debt of VIEs Due Within One Year
201

 
259

 
 
Accounts Payable
524

 
574

 
 
Accounts Payable—Affiliated Companies
338

 
379

 
 
Accrued Interest
75

 
68

 
 
Clean Energy Program
86

 
142

 
 
Deferred Income Taxes
96

 
165

 
 
Obligation to Return Cash Collateral
130

 
121

 
 
Regulatory Liabilities
162

 
186

 
 
Other
461

 
381

 
 
Total Current Liabilities
2,544

 
2,575

 
 
NONCURRENT LIABILITIES
 
 
 
 
 
Deferred Income Taxes and ITC
4,652

 
4,575

 
 
Other Postretirement Benefit (OPEB) Costs
943

 
967

 
 
Accrued Pension Costs
155

 
173

 
 
Regulatory Liabilities
272

 
258

 
 
Regulatory Liabilities of VIEs
46

 
39

 
 
Environmental Costs
375

 
364

 
 
Asset Retirement Obligations
295

 
290

 
 
Long-Term Accrued Taxes
122

 
116

 
 
Other
71

 
67

 
 
Total Noncurrent Liabilities
6,931

 
6,849

 
 
COMMITMENTS AND CONTINGENT LIABILITIES (See Note 8)


 


 
 
CAPITALIZATION
 
 
 
 
 
LONG-TERM DEBT
 
 
 
 
 
Total Long-Term Debt
5,841

 
6,012

 
 
STOCKHOLDER’S EQUITY
 
 
 
 
 
Common Stock; 150,000,000 shares authorized; issued and outstanding, 2015 and 2014—132,450,344 shares
892

 
892

 
 
Contributed Capital
695

 
695

 
 
Basis Adjustment
986

 
986

 
 
Retained Earnings
4,454

 
4,212

 
 
Accumulated Other Comprehensive Income
2

 
2

 
 
Total Stockholder’s Equity
7,029

 
6,787

 
 
Total Capitalization
12,870

 
12,799

 
 
TOTAL LIABILITIES AND CAPITALIZATION
$
22,345

 
$
22,223

 
 
 
 
 
 
 

See disclosures regarding Public Service Electric and Gas Company included in the Notes to Condensed Consolidated Financial Statements.


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Table of Contents

PUBLIC SERVICE ELECTRIC AND GAS COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Millions
(Unaudited)

 
 
 
 
 
 
 
 
Three Months Ended
 
 
 
March 31,
 
 
 
2015
 
2014
 
 
CASH FLOWS FROM OPERATING ACTIVITIES
 
 
 
 
 
  Net Income
$
242

 
$
214

 
 
Adjustments to Reconcile Net Income to Net Cash Flows from Operating Activities:
 
 
 
 
 
Depreciation and Amortization
247

 
227

 
 
Provision for Deferred Income Taxes and ITC
29

 
31

 
 
Non-Cash Employee Benefit Plan Costs
24

 
6

 
 
Cost of Removal
(26
)
 
(25
)
 
 
Change in Accrued Storm Costs
7

 
(1
)
 
 
Net Change in Other Regulatory Assets and Liabilities
(29
)
 
177

 
 
Net Change in Certain Current Assets and Liabilities:
 
 
 
 
 
Accounts Receivable and Unbilled Revenues
(142
)
 
(264
)
 
 
Materials and Supplies
(9
)
 
(11
)
 
 
Prepayments
37

 
18

 
 
Accounts Payable
16

 
14

 
 
Accounts Receivable/Payable—Affiliated Companies, net
253

 
120

 
 
Other Current Assets and Liabilities
77

 
112

 
 
Employee Benefit Plan Funding and Related Payments
(37
)
 
(29
)
 
 
Other
(12
)
 
(10
)
 
 
Net Cash Provided By (Used In) Operating Activities
677

 
579

 
 
CASH FLOWS FROM INVESTING ACTIVITIES
 
 
 
 
 
Additions to Property, Plant and Equipment
(599
)
 
(481
)
 
 
Proceeds from Sales of Available-for-Sale Securities
4

 
5

 
 
Investments in Available-for-Sale Securities
(5
)
 
(3
)
 
 
Solar Loan Investments
(2
)
 
(2
)
 
 
Other
9

 

 
 
Net Cash Provided By (Used In) Investing Activities
(593
)
 
(481
)
 
 
CASH FLOWS FROM FINANCING ACTIVITIES
 
 
 
 
 
Net Change in Short-Term Debt

 
(60
)
 
 
Redemption of Securitization Debt
(58
)
 
(54
)
 
 
Contributed Capital

 
175

 
 
Net Cash Provided By (Used In) Financing Activities
(58
)
 
61

 
 
Net Increase (Decrease) In Cash and Cash Equivalents
26

 
159

 
 
Cash and Cash Equivalents at Beginning of Period
310

 
18

 
 
Cash and Cash Equivalents at End of Period
$
336

 
$
177

 
 
Supplemental Disclosure of Cash Flow Information:
 
 
 
 
 
Income Taxes Paid (Received)
$
(180
)
 
$
(37
)
 
 
Interest Paid, Net of Amounts Capitalized
$
58

 
$
62

 
 
Accrued Property, Plant and Equipment Expenditures
$
226

 
$
185

 
 
 
 
 
 
 

See disclosures regarding Public Service Electric and Gas Company included in the Notes to Condensed Consolidated Financial Statements.

10


Table of Contents


PSEG POWER LLC
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Millions
(Unaudited)
 
 
 
 
 
 
 
 

Three Months Ended
 
 
 
March 31,
 
 
 
2015
 
2014
 
 
OPERATING REVENUES
$
1,725

 
$
1,700

 
 
OPERATING EXPENSES
 
 
 
 
 
Energy Costs
893

 
1,044

 
 
Operation and Maintenance
172

 
302

 
 
Depreciation and Amortization
76

 
72

 
 
Total Operating Expenses
1,141

 
1,418

 
 
OPERATING INCOME
584

 
282

 
 
Income from Equity Method Investments
3

 
4

 
 
Other Income
29

 
33

 
 
Other Deductions
(11
)
 
(10
)
 
 
Other-Than-Temporary Impairments
(5
)
 
(2
)
 
 
Interest Expense
(31
)
 
(32
)
 
 
INCOME BEFORE INCOME TAXES
569

 
275

 
 
Income Tax Expense
(234
)
 
(111
)
 
 
EARNINGS AVAILABLE TO PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
$
335

 
$
164

 
 
 


 
 
 

See disclosures regarding PSEG Power LLC included in the Notes to Condensed Consolidated Financial Statements.


11


Table of Contents

PSEG POWER LLC
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Millions
(Unaudited)

 
 
 
 
 
 
 
 
Three Months Ended
 
 
 
March 31,
 
 
 
2015
 
2014
 
 
NET INCOME
$
335

 
$
164

 
 
Other Comprehensive Income (Loss), net of tax
 
 
 
 
 
Unrealized Gains (Losses) on Available-for-Sale Securities, net of tax (expense) benefit of $(13) and $(2) for 2015 and 2014, respectively
14

 
2

 
 
Unrealized Gains (Losses) on Cash Flow Hedges, net of tax (expense) benefit of $7 and $(1) for 2015 and 2014, respectively
(9
)
 
1

 
 
Pension/OPEB adjustment, net of tax (expense) benefit of $(5) and $(2) for 2015 and 2014, respectively
7

 
3

 
 
Other Comprehensive Income (Loss), net of tax
12

 
6

 
 
COMPREHENSIVE INCOME
$
347

 
$
170

 
 
 
 
 
 
 

See disclosures regarding PSEG Power LLC included in the Notes to Condensed Consolidated Financial Statements.


12


Table of Contents

PSEG POWER LLC
CONDENSED CONSOLIDATED BALANCE SHEETS
Millions
(Unaudited)
 
 
 
 
 
 
 
 
 
March 31,
2015
 
December 31,
2014
 
 
ASSETS
 
 
CURRENT ASSETS
 
 
 
 
 
Cash and Cash Equivalents
$
24

 
$
9

 
 
Accounts Receivable
357

 
334

 
 
Accounts Receivable—Affiliated Companies
288

 
313

 
 
 Tax Receivable
3

 
3

 
 
Short-Term Loan to Affiliate
1,055

 
584

 
 
Fuel
266

 
538

 
 
Materials and Supplies, net
338

 
350

 
 
Derivative Contracts
72

 
207

 
 
Prepayments
28

 
17

 
 
Other
51

 
4

 
 
Total Current Assets
2,482

 
2,359

 
 
PROPERTY, PLANT AND EQUIPMENT
10,825

 
10,732

 
 
Less: Accumulated Depreciation and Amortization
(3,348
)
 
(3,217
)
 
 
Net Property, Plant and Equipment
7,477

 
7,515

 
 
NONCURRENT ASSETS
 
 
 
 
 
Nuclear Decommissioning Trust (NDT) Fund
1,821

 
1,780

 
 
Long-Term Investments
121

 
121

 
 
Goodwill
16

 
16

 
 
Other Intangibles
87

 
84

 
 
Other Special Funds
57

 
49

 
 
Derivative Contracts
98

 
62

 
 
Other
61

 
60

 
 
Total Noncurrent Assets
2,261

 
2,172

 
 
TOTAL ASSETS
$
12,220

 
$
12,046

 
 
 
 
 
 
 

See disclosures regarding PSEG Power LLC included in the Notes to Condensed Consolidated Financial Statements.


13


Table of Contents

PSEG POWER LLC
CONDENSED CONSOLIDATED BALANCE SHEETS
Millions
(Unaudited)

 
 
 
 
 
 
 
 
March 31,
2015
 
December 31,
2014
 
 
LIABILITIES AND MEMBER’S EQUITY
 
 
CURRENT LIABILITIES
 
 
 
 
 
Long-Term Debt Due Within One Year
$
300

 
$
300

 
 
Accounts Payable
343

 
424

 
 
 Accounts Payable-Affiliated Companies
208

 
118

 
 
Derivative Contracts
94

 
132

 
 
Deferred Income Taxes
12

 
43

 
 
Accrued Interest
43

 
27

 
 
Other
131

 
140

 
 
Total Current Liabilities
1,131

 
1,184

 
 
NONCURRENT LIABILITIES
 
 
 
 
 
Deferred Income Taxes and Investment Tax Credits (ITC)
2,144

 
2,065

 
 
Asset Retirement Obligations
456

 
450

 
 
Other Postretirement Benefit (OPEB) Costs
251

 
248

 
 
Derivative Contracts
25

 
33

 
 
Accrued Pension Costs
144

 
153

 
 
Long-Term Accrued Taxes
42

 
41

 
 
Other
78

 
71

 
 
Total Noncurrent Liabilities
3,140

 
3,061

 
 
COMMITMENTS AND CONTINGENT LIABILITIES (See Note 8)


 


 
 
LONG-TERM DEBT
 
 
 
 
 
Total Long-Term Debt
2,244

 
2,243

 
 
MEMBER’S EQUITY
 
 
 
 
 
Contributed Capital
2,214

 
2,214

 
 
Basis Adjustment
(986
)
 
(986
)
 
 
Retained Earnings
4,693

 
4,558

 
 
Accumulated Other Comprehensive Loss
(216
)
 
(228
)
 
 
Total Member’s Equity
5,705

 
5,558

 
 
TOTAL LIABILITIES AND MEMBER’S EQUITY
$
12,220

 
$
12,046

 
 
 
 
 
 
 

See disclosures regarding PSEG Power LLC included in the Notes to Condensed Consolidated Financial Statements.


14


Table of Contents

PSEG POWER LLC
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Millions
(Unaudited)
 
 
 
 
 
 
 
 
 
Three Months Ended
 
 
 
March 31,
 
 
 
2015
 
2014
 
 
CASH FLOWS FROM OPERATING ACTIVITIES
 
 
 
 
 
Net Income
$
335

 
$
164

 
 
Adjustments to Reconcile Net Income to Net Cash Flows from Operating Activities:
 
 
 
 
 
Depreciation and Amortization
76

 
72

 
 
Amortization of Nuclear Fuel
55

 
54

 
 
Provision for Deferred Income Taxes and ITC
37

 
(71
)
 
 
Net Realized and Unrealized (Gains) Losses on Energy Contracts and Other Derivatives
37

 
224

 
 
Non-Cash Employee Benefit Plan Costs
13

 
3

 
 
Net Realized (Gains) Losses and (Income) Expense from NDT Fund
(12
)
 
(23
)
 
 
Net Change in Certain Current Assets and Liabilities:
 
 
 
 
 
Fuel, Materials and Supplies
284

 
289

 
 
Margin Deposit
14

 
(261
)

 
Accounts Receivable
(16
)
 
(19
)
 
 
Accounts Payable
(55
)
 
(70
)
 
 
Accounts Receivable/Payable—Affiliated Companies, net
86

 
279

 
 
Accrued Interest Payable
16

 
15

 
 
Other Current Assets and Liabilities
(56
)
 
(4
)
 
 
Employee Benefit Plan Funding and Related Payments
(6
)
 
(2
)
 
 
Other
42

 
24

 
 
Net Cash Provided By (Used In) Operating Activities
850

 
674

 
 
CASH FLOWS FROM INVESTING ACTIVITIES
 
 
 
 
 
Additions to Property, Plant and Equipment
(139
)
 
(126
)
 
 
Proceeds from Sales of Available-for-Sale Securities
594

 
247

 
 
Investments in Available-for-Sale Securities
(608
)
 
(259
)
 
 
Short-Term Loan—Affiliated Company, net
(471
)
 
(152
)
 
 
Other
(11
)
 
(5
)
 
 
Net Cash Provided By (Used In) Investing Activities
(635
)
 
(295
)
 
 
CASH FLOWS FROM FINANCING ACTIVITIES
 
 
 
 
 
Cash Dividend Paid
(200
)
 
(375
)
 
 
Net Cash Provided By (Used In) Financing Activities
(200
)
 
(375
)
 
 
Net Increase (Decrease) in Cash and Cash Equivalents
15

 
4

 
 
Cash and Cash Equivalents at Beginning of Period
9

 
6

 
 
Cash and Cash Equivalents at End of Period
$
24

 
$
10

 
 
Supplemental Disclosure of Cash Flow Information:
 
 
 
 
 
Income Taxes Paid (Received)
$
5

 
$
(93
)
 
 
Interest Paid, Net of Amounts Capitalized
$
16

 
$
16

 
 
Accrued Property, Plant and Equipment Expenditures
$
50

 
$
62

 
 
 
 
 
 
 

See disclosures regarding PSEG Power LLC included in the Notes to the Condensed Consolidated Financial Statements.


15


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS    
(UNAUDITED)
Table of Contents

This combined Form 10-Q is separately filed by Public Service Enterprise Group Incorporated (PSEG), Public Service Electric and Gas Company (PSE&G) and PSEG Power LLC (Power). Information relating to any individual company is filed by such company on its own behalf. PSE&G and Power each is only responsible for information about itself and its subsidiaries.

Note 1. Organization and Basis of Presentation
Organization
PSEG is a holding company with a diversified business mix within the energy industry. Its operations are primarily in the Northeastern and Mid-Atlantic United States and in other select markets. PSEG’s principal direct wholly owned subsidiaries are:
PSE&G—which is an operating public utility engaged principally in the transmission of electricity and distribution of electricity and natural gas in certain areas of New Jersey. PSE&G is subject to regulation by the New Jersey Board of Public Utilities (BPU) and the Federal Energy Regulatory Commission (FERC). PSE&G also invests in solar generation projects and has implemented energy efficiency and demand response programs in New Jersey, which are regulated by the BPU.
Power—which is a multi-regional, wholesale energy supply company that integrates its generating asset operations and gas supply commitments with its wholesale energy, fuel supply and energy trading functions through its principal direct wholly owned subsidiaries. Power’s subsidiaries are subject to regulation by the FERC, the Nuclear Regulatory Commission (NRC) and the states in which they operate.
PSEG's other direct wholly owned subsidiaries include PSEG Energy Holdings L.L.C. (Energy Holdings), which primarily has investments in leveraged leases; PSEG Long Island LLC (PSEG LI), which operates the Long Island Power Authority's (LIPA) transmission and distribution (T&D) system under an Operations Services Agreement (OSA); and PSEG Services Corporation (Services), which provides certain management, administrative and general services to PSEG and its subsidiaries at cost.
Basis of Presentation
The respective financial statements included herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (SEC) applicable to Quarterly Reports on Form 10-Q. Certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (GAAP) have been condensed or omitted pursuant to such rules and regulations. These Condensed Consolidated Financial Statements and Notes to Condensed Consolidated Financial Statements (Notes) should be read in conjunction with, and update and supplement matters discussed in, the Annual Report on Form 10-K for the year ended December 31, 2014.
The unaudited condensed consolidated financial information furnished herein reflects all adjustments which are, in the opinion of management, necessary to fairly state the results for the interim periods presented. All such adjustments are of a normal recurring nature. All intercompany accounts and transactions are eliminated in consolidation. The year-end Condensed Consolidated Balance Sheets were derived from the audited Consolidated Financial Statements included in the Annual Report on Form 10-K for the year ended December 31, 2014.

Note 2. Recent Accounting Standards
New Standards Issued But Not Yet Adopted
Revenue from Contracts with Customers
This accounting standard was issued to clarify the principles for recognizing revenue and to develop a common standard that would remove inconsistencies in revenue requirements; improve comparability of revenue recognition practices across entities, industries, jurisdictions and capital markets; and provide improved disclosures.
The guidance provides a five-step model to be used for recognizing revenue for the transfer of promised goods and services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services.
The update is effective for annual and interim reporting periods beginning after December 15, 2016 although the Financial Accounting Standards Board is expected to issue an exposure draft deferring the effective date to periods beginning after December 31, 2017. Early application is not permitted. We are currently analyzing the impact of this standard on our financial statements.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS    
(UNAUDITED)
Table of Contents

Amendments to the Consolidation Analysis
This standard was issued to respond to concerns regarding the current accounting for consolidation of certain legal entities. Under the new standard, all legal entities are subject to reevaluation under a revised consolidation model which will determine whether limited partnerships and similar legal entities are variable interest entities (VIEs) or voting interest entities; eliminate the presumption that a general partner should consolidate a limited partnership; affect the consolidation analysis of reporting entities that are involved with VIEs and provide a scope exception from consolidation guidance for reporting entities with interests in certain legal entities who must comply with other requirements.
The update is effective for annual and interim reporting periods beginning after December 15, 2015. We are currently analyzing the impact of this standard on our financial statements.
Simplifying the Presentation of Debt Issuance Costs
This standard was issued to simplify presentation of debt issuance costs. The standard will require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by this standard.
The update is effective for annual and interim reporting periods beginning after December 15, 2015.

Note 3. Variable Interest Entities (VIEs)
Variable Interest Entities for which PSE&G is the Primary Beneficiary
PSE&G is the primary beneficiary and consolidates two marginally capitalized VIEs, PSE&G Transition Funding LLC (Transition Funding) and PSE&G Transition Funding II LLC (Transition Funding II), which were created for the purpose of issuing transition bonds and purchasing bond transitional property of PSE&G, which is pledged as collateral to a trustee. PSE&G acts as the servicer for these entities to collect securitization transition charges authorized by the BPU. These funds are remitted to Transition Funding and Transition Funding II and are used for interest and principal payments on the transition bonds and related costs.
The assets and liabilities of Transition Funding and Transition Funding II are presented separately on the face of the Condensed Consolidated Balance Sheets of PSEG and PSE&G because the assets of these VIEs are restricted and can only be used to settle their respective obligations. No Transition Funding or Transition Funding II creditor has any recourse to the general credit of PSE&G in the event the transition charges are not sufficient to cover the bond principal and interest payments of Transition Funding or Transition Funding II.
PSE&G’s maximum exposure to loss is equal to its equity investment in these VIEs which was $16 million as of March 31, 2015 and December 31, 2014. The risk of actual loss to PSE&G is considered remote. PSE&G did not provide any financial support to Transition Funding or Transition Funding II during the first three months of 2015 or in 2014. PSE&G does not have any contractual commitments or obligations to provide financial support to Transition Funding or Transition Funding II.
Variable Interest Entity for which PSEG LI is the Primary Beneficiary
PSEG LI consolidates Long Island Electric Utility Servco, LLC (Servco), a marginally capitalized VIE, which was created for the purpose of operating LIPA's T&D system in Long Island, New York as well as providing administrative support functions to LIPA. PSEG LI is the primary beneficiary of Servco because it directs the operations of Servco, the activity that most significantly impacts Servco's economic performance and it has the obligation to absorb losses of Servco that could potentially be significant to Servco. Such losses would be immaterial to PSEG.
Pursuant to the OSA, Servco's operating costs are reimbursable entirely by LIPA, and therefore, PSEG LI's risk is limited related to the activities of Servco. PSEG LI has no current obligation to provide direct financial support to Servco. In addition to reimbursement of Servco’s operating costs as provided for in the OSA, PSEG LI receives an annual contract management fee. PSEG LI’s annual contractual management fee, in certain situations, could be partially offset by Servco's annual storm costs not approved by the Federal Emergency Management Agency, limited contingent liabilities and penalties for failing to meet certain performance metrics.
PSEG recognized a long-term receivable primarily related to future funding by LIPA of Servco’s recognized pension and other postretirement benefit (OPEB) liabilities. This receivable is presented separately on the Condensed Consolidated Balance Sheet of PSEG as a noncurrent asset because it is restricted. See Note 7. Pension and Other Postretirement Benefits for additional information.

17


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS    
(UNAUDITED)
Table of Contents

For transactions in which Servco acts as principal, such as transactions with its employees for labor and labor-related activities, including pension and OPEB-related transactions, Servco records revenues and the related pass-through expenditures separately in Operating Revenues and Operation and Maintenance (O&M) Expense, respectively. Servco recorded $82 million and $89 million for the three months ended March 31, 2015 and 2014, respectively, of O&M costs, the full reimbursement of which was reflected in Operating Revenues. For transactions in which Servco acts as an agent for LIPA, it records revenues and the related expenses on a net basis, resulting in no impact on PSEG's Condensed Consolidated Statement of Operations.

Note 4. Rate Filings
The following information discusses significant updates regarding orders and pending rate filings. This Note should be read in conjunction with Note 5. Regulatory Assets and Liabilities to the Consolidated Financial Statements in the Annual Report on Form 10-K for the year ended December 31, 2014.
In addition to items previously reported in the Annual Report on Form 10-K, significant 2015 regulatory orders received and currently pending rate filings with the FERC and the BPU by PSE&G are as follows:
Energy Strong Recovery Filing—In March 2015, PSE&G filed an Energy Strong cost recovery petition seeking BPU approval to recover in base rates estimated annual increases in electric revenues of $6 million and gas revenues of $17 million. These increases represent estimated Energy Strong investment costs expected to be in service as of May 31, 2015. The petition requests rates to be effective September 1, 2015, consistent with the BPU Order of approval of the Energy Strong program.
Basic Gas Supply Service (BGSS)—On April 15, 2015, the BPU issued an Order approving PSE&G’s provisional BGSS rate of 45 cents per therm which had been implemented on October 1, 2014. In March 2015, PSE&G filed a letter with the BPU to extend the 28 cents per therm bill credit for one additional month through April 30, 2015, which is estimated to provide an additional approximate $20 million to customers.
Weather Normalization Clause—On April 15, 2015, the BPU approved PSE&G's final filing with respect to excess revenues collected during the colder than normal 2013-2014 Winter Period (October 1, 2013 through May 31, 2014). Effective October 1, 2014, PSEG had commenced returning $45 million in revenues to its customers during the 2014-2015 Winter Period.

Note 5. Financing Receivables
PSE&G
PSE&G sponsors a solar loan program designed to help finance the installation of solar power systems throughout its electric service area. The loans are generally paid back with Solar Renewable Energy Certificates generated from the installed solar electric system. A substantial portion of these amounts are noncurrent and reported in Long-Term Investments on PSEG's and PSE&G's Condensed Consolidated Balance Sheets. The following table reflects the outstanding loans by class of customer, none of which are considered “non-performing.”
 
 
 
 
 
 
 
 
Credit Risk Profile Based on Payment Activity
 
 
 
 
As of
 
As of
 
 
Consumer Loans
 
March 31,
2015
 
December 31,
2014
 
 
 
 
Millions
 
 
Commercial/Industrial
$
191

 
$
188

 
 
Residential
 
13

 
13

 
 
Total
 
$
204

 
$
201

 
 
 
 
 
 
 
 


18


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS    
(UNAUDITED)
Table of Contents

Energy Holdings
Energy Holdings, through several of its indirect subsidiary companies, has investments in domestic energy and real estate assets subject primarily to leveraged lease accounting. A leveraged lease is typically comprised of an investment by an equity investor and debt provided by a third party debt investor. The debt is recourse only to the assets subject to lease and is not included on PSEG’s Condensed Consolidated Balance Sheets. As an equity investor, Energy Holdings’ investments in the leases are comprised of the total expected lease receivables on its investments over the lease terms plus the estimated residual values at the end of the lease terms, reduced for any income not yet earned on the leases. This amount is included in Long-Term Investments on PSEG’s Condensed Consolidated Balance Sheets. The more rapid depreciation of the leased property for tax purposes creates tax cash flow that will be repaid to the taxing authority in later periods. As such, the liability for such taxes due is recorded in Deferred Income Taxes on PSEG’s Condensed Consolidated Balance Sheets. 
The following table shows Energy Holdings’ gross and net lease investment as of March 31, 2015 and December 31, 2014, respectively.
 
 
 
 
 
 
 
 
As of
 
As of
 
 
 
March 31,
2015
 
December 31,
2014
 
 
 
Millions
 
 
Lease Receivables (net of Non-Recourse Debt)
$
663

 
$
691

 
 
Estimated Residual Value of Leased Assets
525

 
525

 
 
Unearned and Deferred Income
(377
)
 
(380
)
 
 
Gross Investment in Leases
811

 
836

 
 
Deferred Tax Liabilities
(717
)
 
(738
)
 
 
Net Investment in Leases
$
94

 
$
98

 
 
 
 
 
 
 
The corresponding receivables associated with the lease portfolio are reflected in the following table, net of non-recourse debt. The ratings in the table represent the ratings of the entities providing payment assurance to Energy Holdings. "Not Rated" counterparties represent investments in lease receivables related to commercial real estate properties.
 
 
 
 
 
 
 
 
Lease Receivables, Net of
Non-Recourse Debt
 
 
Counterparties’ Credit Rating (Standard & Poor's (S&P))
 
As of
 
 
As of March 31, 2015
 
March 31, 2015
 
 
 
 
Millions
 
 
AA
 
$
18

 
 
AA-
 
29

 
 
BBB+ — BBB-
 
316

 
 
BB-
 
134

 
 
B-
 
164

 
 
Not Rated
 
2

 
 
Total
 
$
663

 
 
 
 
 
 
The “BB-” and the "B-" ratings in the preceding table represent lease receivables related to coal-fired assets in Illinois and Pennsylvania, respectively. As of March 31, 2015, the gross investment in the leases of such assets, net of non-recourse debt, was $573 million ($(9) million, net of deferred taxes). A more detailed description of such assets under lease is presented in the following table.

19


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS    
(UNAUDITED)
Table of Contents

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Asset
 
Location
 
Gross
Investment
 
%
Owned
 
Total
 
Fuel
Type
 
Counter-parties’
S&P Credit
Ratings
 
Counterparty
 
 
 
 
 
 
Millions
 
 
 
MW
 
 
 
 
 
 
 
 
Powerton Station Units 5 and 6
 
IL
 
$
134

 
64
%
 
1,538

 
Coal
 
BB-
 
NRG Energy, Inc.
 
 
Joliet Station Units 7 and 8
 
IL
 
$
84

 
64
%
 
1,044

 
Coal
 
BB-
 
NRG Energy, Inc.
 
 
Keystone Station Units 1 and 2
 
PA
 
$
121

 
17
%
 
1,711

 
Coal
 
B-
 
NRG REMA LLC
 
 
Conemaugh Station Units 1 and 2
 
PA
 
$
121

 
17
%
 
1,711

 
Coal
 
B-
 
NRG REMA LLC
 
 
Shawville Station Units 1, 2, 3 and 4
 
PA
 
$
113

 
100
%
 
603

 
Coal
 
B-
 
NRG REMA LLC
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The credit exposure for lessors is partially mitigated through various credit enhancement mechanisms within the lease transactions. These credit enhancement features vary from lease to lease and may include letters of credit or affiliate guarantees. Upon the occurrence of certain defaults, indirect subsidiary companies of Energy Holdings would exercise their rights and attempt to seek recovery of their investment, potentially including stepping into the lease directly to protect their investments. While these actions could ultimately protect or mitigate the loss of value, they could require the use of significant capital investments and trigger certain material tax obligations. A bankruptcy of a lessee would likely delay any efforts on the part of the lessors to assert their rights upon default and could delay the monetization of claims. Failure to recover adequate value could ultimately lead to a foreclosure on the assets under lease by the lenders. If foreclosures were to occur, Energy Holdings could potentially record a pre-tax write-off up to its gross investment in these facilities and may also be required to pay significant cash tax liabilities to the Internal Revenue Service.
Although all lease payments are current, no assurances can be given that future payments in accordance with the lease contracts will continue. Factors which may impact future lease cash flows include, but are not limited to, new environmental legislation and regulation regarding air quality, water and other discharges in the process of generating electricity, market prices for fuel, electricity and capacity, overall financial condition of lease counterparties and the quality and condition of assets under lease.
In early 2014, NRG REMA LLC, an indirect subsidiary of NRG Energy, Inc. (NRG) had disclosed its plan to place the Shawville generating facility in a “long-term protective layup” by April 2015 as it evaluated its alternatives under the lease. However, NRG has since notified PJM that it intends to deactivate the coal-fired units at the Shawville generating facility by May 2015 and has disclosed that it expects to return the Shawville units to service no later than the summer of 2016 with the ability to use natural gas.

Note 6. Available-for-Sale Securities
Nuclear Decommissioning Trust (NDT) Fund
Power maintains an external master nuclear decommissioning trust to fund its share of decommissioning for its five nuclear facilities upon termination of operation. The trust contains a qualified fund and a non-qualified fund. Section 468A of the Internal Revenue Code limits the amount of money that can be contributed into a qualified fund. The trust funds are managed by third party investment advisers who operate under investment guidelines developed by Power.

20


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS    
(UNAUDITED)
Table of Contents

Power classifies investments in the NDT Fund as available-for-sale. The following tables show the fair values and gross unrealized gains and losses for the securities held in the NDT Fund.