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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, 2018
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
Newark, New Jersey 07102
973 430-7000
http://www.pseg.com
  
22-2625848
001-00973
  
PUBLIC SERVICE ELECTRIC AND GAS COMPANY
(A New Jersey Corporation)
80 Park Plaza
Newark, New Jersey 07102
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
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, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth 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
Emerging growth company  o
 
 
 
 
 
 
Public Service Electric and Gas Company
Large accelerated filer o
Accelerated filer o
Non-accelerated filer x
Smaller reporting company o
Emerging growth company  o
 
 
 
 
 
 
PSEG Power LLC
Large accelerated filer o
Accelerated filer o
Non-accelerated filer x
Smaller reporting company o
Emerging growth company  o
If any of the registrants is an emerging growth company, indicate by check mark if such registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨ 
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 17, 2018, Public Service Enterprise Group Incorporated had outstanding 505,217,435 shares of its sole class of Common Stock, without par value.
As of April 17, 2018, 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.



 
 
Page
FILING FORMAT
PART I. FINANCIAL INFORMATION
 
Item 1.
Financial Statements
 
 
 
 
 
Notes to Condensed Consolidated Financial Statements
 
 
Note 1. Organization, Basis of Presentation and Significant Accounting Policies
 
Note 2. Recent Accounting Standards
 
Note 3. Revenues
 
Note 4. Early Plant Retirements
 
Note 5. Variable Interest Entity (VIE)
 
Note 6. Rate Filings
 
Note 7. Financing Receivables
 
Note 8. Trust Investments
 
Note 9. Pension and Other Postretirement Benefits (OPEB)
 
Note 10. Commitments and Contingent Liabilities
 
Note 11. Debt and Credit Facilities
 
Note 12. Financial Risk Management Activities
 
Note 13. Fair Value Measurements
 
Note 14. Other Income (Deductions)
 
Note 15. Income Taxes
 
Note 16. Accumulated Other Comprehensive Income (Loss), Net of Tax
 
Note 17. Earnings Per Share (EPS) and Dividends
 
Note 18. Financial Information by Business Segment
 
Note 19. Related-Party Transactions
 
Note 20. Guarantees of Debt
Item 2.
 
Executive Overview of 2018 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. These factors include, but are not limited to:
fluctuations in wholesale power and natural gas markets, including the potential impacts on the economic viability of our generation units;
our ability to obtain adequate fuel supply;
any inability to manage our energy obligations with available supply;
increases in competition in wholesale energy and capacity markets;
changes in technology related to energy generation, distribution and consumption and customer usage patterns;
economic downturns;
third-party credit risk relating to our sale of generation output and purchase of fuel;
adverse performance of our decommissioning and defined benefit plan trust fund investments and changes in funding requirements;
changes in state and federal legislation and regulations;
the impact of pending and any future rate case proceedings;
regulatory, financial, environmental, health and safety risks associated with our ownership and operation of nuclear facilities;
adverse changes in energy industry laws, policies and regulations, including market structures and transmission planning;
changes in federal and state environmental regulations and enforcement;
delays in receipt of, or an inability to receive, necessary licenses and permits;
adverse outcomes of any legal, regulatory or other proceeding, settlement, investigation or claim applicable to us and/or the energy industry;
changes in tax laws and regulations;
the impact of our holding company structure on our ability to meet our corporate funding needs, service debt and pay dividends;
lack of growth or slower growth in the number of customers or changes in customer demand;
any inability of Power to meet its commitments under forward sale obligations;
reliance on transmission facilities that we do not own or control and the impact on our ability to maintain adequate transmission capacity;
any inability to successfully develop or construct generation, transmission and distribution projects;
any equipment failures, accidents, severe weather events or other incidents that impact our ability to provide safe and reliable service to our customers;
our inability to exercise control over the operations of generation facilities in which we do not maintain a controlling interest;

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any inability to recover the carrying amount of our long-lived assets and leveraged leases;
any inability to maintain sufficient liquidity;
any inability to realize anticipated tax benefits or retain tax credits;
challenges associated with recruitment and/or retention of key executives and a qualified workforce;
the impact of our covenants in our debt instruments on our operations; and
the impact of acts of terrorism, cybersecurity attacks or intrusions.
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, results of operations or cash flows. 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 in light of new information or future events, 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.

FILING FORMAT
This combined Quarterly Report on 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 are each only responsible for information about itself and its subsidiaries.
Discussions throughout the document refer to PSEG and its direct operating subsidiaries, PSE&G and Power. Depending on the context of each section, references to “we,” “us,” and “our” relate to PSEG or to the specific company or companies being discussed.


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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,
 
 
 
 
2018
 
2017
 
 
OPERATING REVENUES
 
$
2,818

 
$
2,591

 
 
OPERATING EXPENSES
 
 
 
 
 
 
Energy Costs
 
952

 
868

 
 
Operation and Maintenance
 
754

 
717

 
 
Depreciation and Amortization
 
280

 
828

 
 
Total Operating Expenses
 
1,986

 
2,413

 
 
OPERATING INCOME
 
832

 
178

 
 
Income from Equity Method Investments
 
2

 
3

 
 
Net Gains (Losses) on Trust Investments
 
(22
)
 
28

 
 
Other Income (Deductions)
 
32

 
32

 
 
Non-Operating Pension and OPEB Credits (Costs)
 
19

 

 
 
Interest Expense
 
(103
)
 
(98
)
 
 
INCOME BEFORE INCOME TAXES
 
760

 
143

 
 
Income Tax Expense
 
(202
)
 
(29
)
 
 
NET INCOME
 
$
558

 
$
114

 
 
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
 
 
 
 
 
 
BASIC
 
504

 
505

 
 
DILUTED
 
507

 
508

 
 
NET INCOME PER SHARE:
 
 
 
 
 
 
BASIC
 
$
1.11

 
$
0.23

 
 
DILUTED
 
$
1.10

 
$
0.22

 
 
DIVIDENDS PAID PER SHARE OF COMMON STOCK
 
$
0.45

 
$
0.43

 
 
 
 
 
 
 
 
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,
 
 
 
 
2018
 
2017
 
 
NET INCOME
 
$
558

 
$
114

 
 
Other Comprehensive Income (Loss), net of tax
 
 
 
 
 
 
Unrealized Gains (Losses) on Available-for-Sale Securities, net of tax (expense) benefit of $9 and $(16) for 2018 and 2017, respectively
 
(14
)
 
15

 
 
Pension/Other Postretirement Benefit Costs (OPEB) adjustment, net of tax (expense) benefit of $(3) and $(4) for 2018 and 2017, respectively
 
8

 
6

 
 
Other Comprehensive Income (Loss), net of tax
 
(6
)
 
21

 
 
COMPREHENSIVE INCOME
 
$
552

 
$
135

 
 
 
 
 
 
 
 
See Notes to Condensed Consolidated Financial Statements.


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PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
Millions
(Unaudited)
 
 
 
 
 
 
 
 
 
March 31,
2018
 
December 31,
2017
 
 
ASSETS
 
 
CURRENT ASSETS
 
 
 
 
 
Cash and Cash Equivalents
$
118

 
$
313

 
 
Accounts Receivable, net of allowances of $62 in 2018 and $59 in 2017
1,320

 
1,348

 
 
Tax Receivable
121

 
127

 
 
Unbilled Revenues
196

 
296

 
 
Fuel
162

 
289

 
 
Materials and Supplies, net
574

 
577

 
 
Prepayments
114

 
118

 
 
Derivative Contracts
43

 
29

 
 
Regulatory Assets
139

 
211

 
 
Other
19

 
4

 
 
Total Current Assets
2,806

 
3,312

 
 
PROPERTY, PLANT AND EQUIPMENT
42,033

 
41,231

 
 
     Less: Accumulated Depreciation and Amortization
(9,628
)
 
(9,434
)
 
 
Net Property, Plant and Equipment
32,405

 
31,797

 
 
NONCURRENT ASSETS
 
 
 
 
 
Regulatory Assets
3,208

 
3,222

 
 
Long-Term Investments
938

 
932

 
 
Nuclear Decommissioning Trust (NDT) Fund
2,051

 
2,133

 
 
Long-Term Receivable of Variable Interest Entity (VIE)
690

 
686

 
 
Rabbi Trust Fund
225

 
231

 
 
Goodwill
16

 
16

 
 
Other Intangibles
131

 
114

 
 
Derivative Contracts
48

 
7

 
 
Other
272

 
266

 
 
Total Noncurrent Assets
7,579

 
7,607

 
 
TOTAL ASSETS
$
42,790

 
$
42,716

 
 
 
 
 
 
 
See Notes to Condensed Consolidated Financial Statements.


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PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
Millions
(Unaudited)

 
 
 
 
 
 
 
 
 
March 31,
2018
 
December 31,
2017
 
 
LIABILITIES AND CAPITALIZATION
 
 
CURRENT LIABILITIES
 
 
 
 
 
Long-Term Debt Due Within One Year
$
1,000

 
$
1,000

 
 
Commercial Paper and Loans
594

 
542

 
 
Accounts Payable
1,295

 
1,694

 
 
Derivative Contracts
10

 
16

 
 
Accrued Interest
147

 
103

 
 
Accrued Taxes
173

 
48

 
 
Clean Energy Program
85

 
128

 
 
Obligation to Return Cash Collateral
136

 
129

 
 
Regulatory Liabilities
34

 
47

 
 
Other
474

 
461

 
 
Total Current Liabilities
3,948

 
4,168

 
 
NONCURRENT LIABILITIES
 
 
 
 
 
Deferred Income Taxes and Investment Tax Credits (ITC)
5,329

 
5,240

 
 
Regulatory Liabilities
2,942

 
2,948

 
 
Asset Retirement Obligations
1,037

 
1,024

 
 
OPEB Costs
1,432

 
1,455

 
 
OPEB Costs of Servco
550

 
542

 
 
Accrued Pension Costs
508

 
537

 
 
Accrued Pension Costs of Servco
126

 
129

 
 
Environmental Costs
342

 
357

 
 
Derivative Contracts
2

 
5

 
 
Long-Term Accrued Taxes
176

 
175

 
 
Other
222

 
221

 
 
Total Noncurrent Liabilities
12,666

 
12,633

 
 
COMMITMENTS AND CONTINGENT LIABILITIES (See Note 10)


 


 
 
CAPITALIZATION

 
 
 
 
LONG-TERM DEBT
12,072

 
12,068

 
 
STOCKHOLDERS’ EQUITY

 
 
 
 
Common Stock, no par, authorized 1,000 shares; issued, 2018 and 2017—534 shares
4,946

 
4,961

 
 
Treasury Stock, at cost, 2018—30 shares; 2017—29 shares
(816
)
 
(763
)
 
 
Retained Earnings
10,385

 
9,878

 
 
Accumulated Other Comprehensive Loss
(411
)
 
(229
)
 
 
Total Stockholders’ Equity
14,104

 
13,847

 
 
Total Capitalization
26,176

 
25,915

 
 
TOTAL LIABILITIES AND CAPITALIZATION
$
42,790

 
$
42,716

 
 
 


 
 
 
See Notes to Condensed Consolidated Financial Statements.

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PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Millions
(Unaudited)
 
 
 
 
 
 
 
 
Three Months Ended
 
 
 
March 31,
 
 
 
2018
 
2017
 
 
CASH FLOWS FROM OPERATING ACTIVITIES
 
 
 
 
 
Net Income
$
558

 
$
114

 
 
Adjustments to Reconcile Net Income to Net Cash Flows from Operating Activities:
 
 
 
 
 
Depreciation and Amortization
280

 
828

 
 
Amortization of Nuclear Fuel
50

 
54

 
 
Emission Allowances and Renewable Energy Credit (REC) Compliance Accrual

24

 
26

 
 
Provision for Deferred Income Taxes (Other than Leases) and ITC
76

 
(85
)
 
 
Non-Cash Employee Benefit Plan Costs
17

 
23

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

 
(15
)
 
 
Net (Gain) Loss on Lease Investments

 
32

 
 
Net Realized and Unrealized (Gains) Losses on Energy Contracts and Other Derivatives
(119
)
 
(5
)
 
 
Net Change in Regulatory Assets and Liabilities
(6
)
 
(60
)
 
 
Cost of Removal
(38
)
 
(24
)
 
 
Net (Gains) Losses and (Income) Expense from NDT Fund
12

 
(23
)
 
 
Net Change in Certain Current Assets and Liabilities:
 
 
 
 
 
          Tax Receivable
6

 
69

 
 
          Accrued Taxes
125

 
143

 
 
          Margin Deposit
25

 
(4
)
 
 
          Other Current Assets and Liabilities
160

 
163

 
 
Employee Benefit Plan Funding and Related Payments
(36
)
 
(28
)
 
 
Other
2

 
(11
)
 
 
Net Cash Provided By (Used In) Operating Activities
1,140

 
1,197

 
 
CASH FLOWS FROM INVESTING ACTIVITIES


 
 
 
 
Additions to Property, Plant and Equipment
(1,053
)
 
(1,062
)
 
 
Purchase of Emissions Allowances and RECs
(17
)
 
(15
)
 
 
Proceeds from Sales of Trust Investments
397

 
298

 
 
Purchases of Trust Investments
(407
)
 
(307
)
 
 
Other
7

 
7

 
 
Net Cash Provided By (Used In) Investing Activities
(1,073
)
 
(1,079
)
 
 
CASH FLOWS FROM FINANCING ACTIVITIES
 
 
 
 
 
Net Change in Commercial Paper and Loans
52

 
(73
)
 
 
Cash Dividends Paid on Common Stock
(227
)
 
(218
)
 
 
Other
(73
)
 
(56
)
 
 
Net Cash Provided By (Used In) Financing Activities
(248
)
 
(347
)
 
 
Net Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash
(181
)
 
(229
)
 
 
Cash, Cash Equivalents and Restricted Cash at Beginning of Period
315

 
426

 
 
Cash, Cash Equivalents and Restricted Cash at End of Period
$
134

 
$
197

 
 
Supplemental Disclosure of Cash Flow Information:
 
 
 
 
 
Income Taxes Paid (Received)
$
(4
)
 
$
(80
)
 
 
Interest Paid, Net of Amounts Capitalized
$
73

 
$
77

 
 
Accrued Property, Plant and Equipment Expenditures
$
544

 
$
492

 
 
 
 
 
 
 

See Notes to Condensed Consolidated Financial Statements.

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

 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
 
 
 
March 31,
 
 
 
 
2018
 
2017
 
 
OPERATING REVENUES
 
$
1,845

 
$
1,826

 
 
OPERATING EXPENSES
 
 
 
 
 
 
Energy Costs
 
782

 
762

 
 
Operation and Maintenance
 
391

 
370

 
 
Depreciation and Amortization
 
190

 
171

 
 
Total Operating Expenses
 
1,363

 
1,303

 
 
OPERATING INCOME
 
482

 
523

 
 
Net Gains (Losses) on Trust Investments
 

 
2

 
 
Other Income (Deductions)
 
20

 
22

 
 
Non-Operating Pension and OPEB Credits (Costs)
 
15

 
(2
)
 
 
Interest Expense
 
(81
)
 
(75
)
 
 
INCOME BEFORE INCOME TAXES
 
436

 
470

 
 
Income Tax Expense
 
(117
)
 
(171
)
 
 
NET INCOME
 
$
319

 
$
299

 
 
 
 
 
 
 
 
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,
 
 
 
 
2018
 
2017
 
 
NET INCOME
 
$
319

 
$
299

 
 
Unrealized Gains (Losses) on Available-for-Sale Securities, net of tax (expense) benefit of $0 and $1 for 2018 and 2017, respectively
 
(1
)
 
(1
)
 
 
COMPREHENSIVE INCOME
 
$
318

 
$
298

 
 
 
 
 
 
 
 
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,
2018
 
December 31,
2017
 
 
ASSETS
 
 
CURRENT ASSETS

 
 
 
 
Cash and Cash Equivalents
$
48

 
$
242

 
 
Accounts Receivable, net of allowances of $62 in 2018 and $59 in 2017
961

 
882

 
 
Unbilled Revenues
196

 
296

 
 
Materials and Supplies
199

 
197

 
 
Prepayments
22

 
44

 
 
Regulatory Assets
139

 
211

 
 
Other
17

 
4

 
 
Total Current Assets
1,582

 
1,876

 
 
PROPERTY, PLANT AND EQUIPMENT
29,689

 
29,117

 
 
Less: Accumulated Depreciation and Amortization
(6,154
)
 
(6,101
)
 
 
Net Property, Plant and Equipment
23,535

 
23,016

 
 
NONCURRENT ASSETS
 
 
 
 
 
Regulatory Assets
3,208

 
3,222

 
 
Long-Term Investments
284

 
280

 
 
Rabbi Trust Fund
45

 
46

 
 
Other
120

 
114

 
 
Total Noncurrent Assets
3,657

 
3,662

 
 
TOTAL ASSETS
$
28,774

 
$
28,554

 
 
 
 
 
 
 
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,
2018
 
December 31,
2017
 
 
LIABILITIES AND CAPITALIZATION
 
 
CURRENT LIABILITIES
 
 
 
 
 
Long-Term Debt Due Within One Year
$
750

 
$
750

 
 
Accounts Payable
613

 
728

 
 
Accounts Payable—Affiliated Companies
385

 
340

 
 
Accrued Interest
92

 
78

 
 
Clean Energy Program
85

 
128

 
 
Obligation to Return Cash Collateral
136

 
129

 
 
Regulatory Liabilities
34

 
47

 
 
Other
327

 
311

 
 
Total Current Liabilities
2,422

 
2,511

 
 
NONCURRENT LIABILITIES
 
 
 
 
 
Deferred Income Taxes and ITC
3,443

 
3,391

 
 
OPEB Costs
1,078

 
1,103

 
 
Accrued Pension Costs
207

 
226

 
 
Regulatory Liabilities
2,942

 
2,948

 
 
Environmental Costs
268

 
283

 
 
Asset Retirement Obligations
214

 
212

 
 
Long-Term Accrued Taxes
93

 
91

 
 
Other
112

 
114

 
 
Total Noncurrent Liabilities
8,357

 
8,368

 
 
COMMITMENTS AND CONTINGENT LIABILITIES (See Note 10)


 


 
 
CAPITALIZATION
 
 
 
 
 
LONG-TERM DEBT
7,843

 
7,841

 
 
STOCKHOLDER’S EQUITY
 
 
 
 
 
Common Stock; 150 shares authorized; issued and outstanding, 2018 and 2017—132 shares
892

 
892

 
 
Contributed Capital
1,095

 
1,095

 
 
Basis Adjustment
986

 
986

 
 
Retained Earnings
7,180

 
6,861

 
 
Accumulated Other Comprehensive Income
(1
)
 

 
 
Total Stockholder’s Equity
10,152

 
9,834

 
 
Total Capitalization
17,995

 
17,675

 
 
TOTAL LIABILITIES AND CAPITALIZATION
$
28,774

 
$
28,554

 
 
 
 
 
 
 
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 CASH FLOWS
Millions
(Unaudited)
 
 
 
 
 
 
 
 
Three Months Ended
 
 
 
March 31,
 
 
 
2018
 
2017
 
 
CASH FLOWS FROM OPERATING ACTIVITIES
 
 
 
 
 
  Net Income
$
319

 
$
299

 
 
Adjustments to Reconcile Net Income to Net Cash Flows from Operating Activities:
 
 
 
 
 
Depreciation and Amortization
190

 
171

 
 
Provision for Deferred Income Taxes and ITC
40

 
160

 
 
Non-Cash Employee Benefit Plan Costs
9

 
13

 
 
Cost of Removal
(38
)
 
(24
)
 
 
Net Change in Regulatory Assets and Liabilities
(6
)
 
(60
)
 
 
Net Change in Certain Current Assets and Liabilities:

 
 
 
 
Accounts Receivable and Unbilled Revenues
24

 
(34
)
 
 
Materials and Supplies
(2
)
 
(7
)
 
 
Prepayments
22

 
3

 
 
Accounts Payable
(12
)
 
(12
)
 
 
Accounts Receivable/Payable—Affiliated Companies, net
40

 
15

 
 
Other Current Assets and Liabilities
39

 
40

 
 
Employee Benefit Plan Funding and Related Payments
(33
)
 
(25
)
 
 
Other
(15
)
 
(24
)
 
 
Net Cash Provided By (Used In) Operating Activities
577

 
515

 
 
CASH FLOWS FROM INVESTING ACTIVITIES
 
 
 
 
 
Additions to Property, Plant and Equipment
(750
)
 
(748
)
 
 
Proceeds from Sales of Trust Investments
5

 
10

 
 
Purchases of Trust Investments
(5
)
 
(10
)
 
 
Solar Loan Investments
(9
)
 
(4
)
 
 
Other
2

 
2

 
 
Net Cash Provided By (Used In) Investing Activities
(757
)
 
(750
)
 
 
CASH FLOWS FROM FINANCING ACTIVITIES
 
 
 
 
 
Other

 
(1
)
 
 
Net Cash Provided By (Used In) Financing Activities

 
(1
)
 
 
Net Increase (Decrease) In Cash, Cash Equivalents and Restricted Cash
(180
)
 
(236
)
 
 
Cash, Cash Equivalents and Restricted Cash at Beginning of Period
244

 
393

 
 
Cash, Cash Equivalents and Restricted Cash at End of Period
$
64

 
$
157

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

 
$
(26
)
 
 
Interest Paid, Net of Amounts Capitalized
$
65

 
$
65

 
 
Accrued Property, Plant and Equipment Expenditures
$
326

 
$
287

 
 
 
 
 
 
 
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,
 
 
 
 
2018
 
2017
 
 
OPERATING REVENUES
 
$
1,403

 
$
1,269

 
 
OPERATING EXPENSES
 
 
 
 
 
 
Energy Costs
 
746

 
692

 
 
Operation and Maintenance
 
246

 
232

 
 
Depreciation and Amortization
 
82

 
650

 
 
Total Operating Expenses
 
1,074

 
1,574

 
 
OPERATING INCOME (LOSS)
 
329

 
(305
)
 
 
Income from Equity Method Investments
 
2

 
3

 
 
Net Gains (Losses) on Trust Investments
 
(22
)
 
19

 
 
Other Income (Deductions)
 
11

 
11

 
 
Non-Operating Pension and OPEB Credits (Costs)
 
4

 
2

 
 
Interest Expense
 
(7
)
 
(16
)
 
 
INCOME (LOSS) BEFORE INCOME TAXES
 
317

 
(286
)
 
 
Income Tax Benefit (Expense)
 
(83
)
 
116

 
 
NET INCOME (LOSS)
 
$
234

 
$
(170
)
 
 
 
 


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


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

 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
 
 
 
March 31,
 
 
 
 
2018
 
2017
 
 
NET INCOME (LOSS)
 
$
234

 
$
(170
)
 
 
Other Comprehensive Income (Loss), net of tax
 
 
 
 
 
 
Unrealized Gains (Losses) on Available-for-Sale Securities, net of tax (expense) benefit of $8 and $(18) for 2018 and 2017, respectively
 
(11
)
 
19

 
 
Pension/OPEB adjustment, net of tax (expense) benefit of $(3) and $(4) for 2018 and 2017, respectively
 
6

 
5

 
 
Other Comprehensive Income (Loss), net of tax
 
(5
)
 
24

 
 
COMPREHENSIVE INCOME (LOSS)
 
$
229

 
$
(146
)
 
 
 
 
 
 
 
 
See disclosures regarding PSEG Power LLC included in the Notes to Condensed Consolidated Financial Statements.


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Table of Contents


PSEG POWER LLC
CONDENSED CONSOLIDATED BALANCE SHEETS
Millions
(Unaudited)
 
 
 
 
 
 
 
 
 
March 31,
2018
 
December 31,
2017
 
 
ASSETS
 
 
CURRENT ASSETS
 
 
 
 
 
Cash and Cash Equivalents
$
11

 
$
32

 
 
Accounts Receivable
301

 
380

 
 
Accounts Receivable—Affiliated Companies
215

 
221

 
 
Fuel
162

 
289

 
 
Materials and Supplies, net
370

 
376

 
 
Derivative Contracts
43

 
29

 
 
Prepayments
12

 
11

 
 
Other
4

 
3

 
 
Total Current Assets
1,118

 
1,341

 
 
PROPERTY, PLANT AND EQUIPMENT
11,980

 
11,755

 
 
Less: Accumulated Depreciation and Amortization
(3,291
)
 
(3,159
)
 
 
Net Property, Plant and Equipment
8,689

 
8,596

 
 
NONCURRENT ASSETS
 
 
 
 
 
NDT Fund
2,051

 
2,133

 
 
Long-Term Investments
86

 
87

 
 
Goodwill
16

 
16

 
 
Other Intangibles
131

 
114

 
 
Rabbi Trust Fund
56

 
57

 
 
Derivative Contracts
48

 
7

 
 
Other
68

 
67

 
 
Total Noncurrent Assets
2,456

 
2,481

 
 
TOTAL ASSETS
$
12,263

 
$
12,418

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


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Table of Contents


PSEG POWER LLC
CONDENSED CONSOLIDATED BALANCE SHEETS
Millions
(Unaudited)

 
 
 
 
 
 
 
 
March 31,
2018
 
December 31,
2017
 
 
LIABILITIES AND MEMBER’S EQUITY
 
 
CURRENT LIABILITIES
 
 
 
 
 
Long-Term Debt Due Within One Year
$
250

 
$
250

 
 
Accounts Payable
510

 
712

 
 
Accounts Payable—Affiliated Companies
69

 
57

 
 
Short-Term Loan from Affiliate
35

 
281

 
 
Derivative Contracts
10

 
16

 
 
Accrued Interest
43

 
20

 
 
Other
108

 
99

 
 
Total Current Liabilities
1,025

 
1,435

 
 
NONCURRENT LIABILITIES
 
 
 
 
 
Deferred Income Taxes and ITC
1,434

 
1,406

 
 
Asset Retirement Obligations
821

 
810

 
 
OPEB Costs
285

 
283

 
 
Derivative Contracts
2

 
5

 
 
Accrued Pension Costs
176

 
184

 
 
Long-Term Accrued Taxes
46

 
52

 
 
Other
141

 
140

 
 
Total Noncurrent Liabilities
2,905

 
2,880

 
 
COMMITMENTS AND CONTINGENT LIABILITIES (See Note 10)


 


 
 
LONG-TERM DEBT
2,137

 
2,136

 
 
MEMBER’S EQUITY

 
 
 
 
Contributed Capital
2,214

 
2,214

 
 
Basis Adjustment
(986
)
 
(986
)
 
 
Retained Earnings
5,320

 
4,911

 
 
Accumulated Other Comprehensive Loss
(352
)
 
(172
)
 
 
Total Member’s Equity
6,196

 
5,967

 
 
TOTAL LIABILITIES AND MEMBER’S EQUITY
$
12,263

 
$
12,418

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


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Table of Contents


PSEG POWER LLC
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Millions
(Unaudited)

 
 
 
 
 
 
 
 
Three Months Ended
 
 
 
March 31,
 
 
 
2018
 
2017
 
 
CASH FLOWS FROM OPERATING ACTIVITIES
 
 
 
 
 
Net Income (Loss)
$
234

 
$
(170
)
 
 
Adjustments to Reconcile Net Income (Loss) to Net Cash Flows from Operating Activities:
 
 
 
 
 
Depreciation and Amortization
82

 
650

 
 
Amortization of Nuclear Fuel
50

 
54

 
 
Provision for Deferred Income Taxes and ITC
33

 
(226
)
 
 
Interest Accretion on Asset Retirement Obligation
10

 
8

 
 
Net Realized and Unrealized (Gains) Losses on Energy Contracts and Other Derivatives
(119
)
 
(5
)
 
 
Emission Allowances and Renewable Energy Credit (REC) Compliance Accrual

24

 
26

 
 
Non-Cash Employee Benefit Plan Costs
6

 
7

 
 
Net (Gains) Losses and (Income) Expense from NDT Fund
12

 
(23
)
 
 
Net Change in Certain Current Assets and Liabilities:
 
 
 
 
 
Fuel, Materials and Supplies
133

 
155

 
 
Margin Deposit
25

 
(4
)

 
Accounts Receivable
93

 
24

 
 
Accounts Payable
(89
)
 
(18
)
 
 
Accounts Receivable/Payable—Affiliated Companies, net
25

 
71

 
 
Other Current Assets and Liabilities
30

 
33

 
 
Employee Benefit Plan Funding and Related Payments
(2
)
 
(2
)
 
 
Other
(5
)
 

 
 
Net Cash Provided By (Used In) Operating Activities
542

 
580

 
 
CASH FLOWS FROM INVESTING ACTIVITIES
 
 
 
 
 
Additions to Property, Plant and Equipment
(299
)
 
(307
)
 
 
Purchase of Emissions Allowances and RECs
(17
)
 
(15
)
 
 
Proceeds from Sales of Trust Investments
377

 
259

 
 
Purchases of Trust Investments
(389
)
 
(268
)
 
 
Short-Term Loan—Affiliated Company

 
(70
)
 
 
Other
11

 
7

 
 
Net Cash Provided By (Used In) Investing Activities
(317
)
 
(394
)
 
 
CASH FLOWS FROM FINANCING ACTIVITIES
 
 
 
 
 
Cash Dividend Paid

 
(175
)
 
 
Short-Term Loan—Affiliated Company
(246
)
 

 
 
Other

 
(4
)
 
 
Net Cash Provided By (Used In) Financing Activities
(246
)
 
(179
)
 
 
Net Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash
(21
)
 
7

 
 
Cash, Cash Equivalents and Restricted Cash at Beginning of Period
32

 
11

 
 
Cash, Cash Equivalents and Restricted Cash at End of Period
$
11

 
$
18

 
 
Supplemental Disclosure of Cash Flow Information:
 
 
 
 
 
Income Taxes Paid (Received)
$
2

 
$
19

 
 
Interest Paid, Net of Amounts Capitalized
$
2

 
$
5

 
 
Accrued Property, Plant and Equipment Expenditures
$
218

 
$
205

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


15

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Note 1. Organization, Basis of Presentation and Significant Accounting Policies
Organization
Public Service Enterprise Group Incorporated (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:
Public Service Electric and Gas Company (PSE&G)—which is a 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 energy efficiency and related programs in New Jersey, which are regulated by the BPU.
PSEG Power LLC (Power)—which is a multi-regional energy supply company that integrates the operations of its merchant nuclear and fossil generating assets with its power marketing businesses and fuel supply functions through competitive energy sales in well-developed energy markets primarily in the Northeast and Mid-Atlantic United States through its principal direct wholly owned subsidiaries. In addition, Power owns and operates solar generation in various states. Power’s subsidiaries are subject to regulation by FERC, the Nuclear Regulatory Commission (NRC), the Environmental Protection Agency (EPA) and the states in which they operate.
PSEG’s other direct wholly owned subsidiaries are: PSEG Long Island LLC (PSEG LI), which operates the Long Island Power Authority’s (LIPA) electric transmission and distribution (T&D) system under an Operations Services Agreement (OSA); PSEG Energy Holdings L.L.C. (Energy Holdings), which primarily has investments in leveraged leases; and PSEG Services Corporation (Services), which provides certain management, administrative and general services to PSEG and its subsidiaries at cost.
Basis of Presentation
The 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, 2017.
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 significant 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, 2017.
Significant Accounting Policies
Cash, Cash Equivalents and Restricted Cash
Cash equivalents consist of short-term, highly liquid investments with original maturities of three months or less. Restricted cash consists primarily of deposits received related to various construction projects at PSE&G.
The following provides a reconciliation of cash, cash equivalents and restricted cash reported within the Condensed Consolidated Balance Sheets that sum to the total of the same such amounts for the beginning (December 31, 2017) and ending periods shown in the Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2018.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
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PSE&G
 
Power
 
Other (A)
 
Consolidated
 
 
 
Millions
 
 
As of December 31, 2017
 
 
 
 
 
 
 
 
 
Cash and Cash Equivalents
$
242

 
$
32

 
$
39

 
$
313

 
 
Restricted Cash in Other Current Assets

 

 

 

 
 
Restricted Cash in Other Noncurrent Assets
2

 

 

 
2

 
 
Cash, Cash Equivalents and Restricted Cash
$
244

 
$
32

 
$
39

 
$
315

 
 
As of March 31, 2018
 
 
 
 
 
 
 
 
 
Cash and Cash Equivalents
$
48

 
$
11

 
$
59

 
$
118

 
 
Restricted Cash in Other Current Assets
14

 

 

 
14

 
 
Restricted Cash in Other Noncurrent Assets
2

 

 

 
2

 
 
Cash, Cash Equivalents and Restricted Cash
$
64

 
$
11

 
$
59

 
$
134

 
 
 
 
 
 
 
 
 
 
 
(A)
Includes amounts applicable to PSEG (parent corporation), Energy Holdings and Services.

Note 2. Recent Accounting Standards
New Standards Issued and Adopted
Revenue from Contracts With CustomersAccounting Standard Update (ASU) 2014-09, updated by ASUs 2015-14, 2016-08, 2016-10, 2016-12, 2016-20, 2017-13, 2017-14
This accounting standard, and related updates, were adopted on January 1, 2018 using the full retrospective transition method. There was no effect on net income as a result of adoption. However, certain retrospective adjustments were recorded in accordance with the new standard. At PSE&G, retrospective adjustments increased Operating Revenues by $14 million, Energy Costs by $9 million, and Operation and Maintenance (O&M) Expense by $5 million for the three months ended March 31, 2017. At Power, retrospective adjustments reduced Operating Revenues and Energy Costs by $15 million for the three months ended March 31, 2017. For disclosure requirements under this standard, including Nature of Goods and Services, Disaggregation of Revenues, and Remaining Performance Obligations under Fixed Consideration Contracts, see Note 3. Revenues.
Recognition and Measurement of Financial Assets and Financial Liabilities—ASU 2016-01
Power maintains an external master trust fund to provide for the costs of decommissioning upon termination of operations of its nuclear facilities. In addition, PSEG maintains a grantor trust which was established to meet the obligations related to its non-qualified pension plans and deferred compensation plans, commonly referred to as a “Rabbi Trust.”
This accounting standard was adopted on January 1, 2018. Under the new guidance, equity investments in Power’s Nuclear Decommissioning Trust (NDT) and PSEG’s Rabbi Trust Funds are now measured at fair value with the unrealized gains and losses recognized through Net Income instead of Other Comprehensive Income (Loss). The debt securities in these trusts continue to be classified as available-for-sale with the unrealized gains and losses recorded as a component of Accumulated Other Comprehensive Income (Loss). Realized gains and losses on both equity and available-for-sale debt security investments are recorded in earnings and are included with the unrealized gains and losses on equity securities in Net Gains (Losses) on Trust Investments. Other-than-temporary impairments on NDT and Rabbi Trust securities are also included in Net Gains (Losses) on Trust Investments. A cumulative effect adjustment was made to reclassify the net unrealized gains related to equity investments of $342 million ($176 million, net of tax) from Accumulated Other Comprehensive Income to Retained Earnings on January 1, 2018. See Note 16. Accumulated Other Comprehensive Income (Loss), Net of Tax and Note 8. Trust Investments for further discussion.
Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments—ASU 2016-15
This accounting standard reduces the diversity in practice in how certain cash receipts and cash payments are presented and classified in the Statement of Cash Flows.
PSEG adopted this standard on January 1, 2018 using a retrospective transition method and had no changes in its presentation of its Statement of Cash Flows for each period presented.
Statement of Cash Flows:  Restricted Cash—ASU 2016-18
This accounting standard was adopted on January 1, 2018. PSEG will continue the current balance sheet classification of restricted cash or restricted cash equivalents. PSEG has provided a reconciliation of cash and cash equivalents and restricted

17

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(UNAUDITED)
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cash or restricted cash equivalents and has included a description of these amounts in Note 1. Organization, Basis of Presentation and Significant Accounting Policies. The effect of adoption on the March 31, 2017 Consolidated Statements of Cash Flows was immaterial.
Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost (OPEB)—ASU 2017-07
This accounting standard was adopted on January 1, 2018. Under the new guidance, entities are required to report the service cost component in the same line item or items as other compensation costs arising from services rendered by their employees during the period. The other components of net benefit cost are required to be presented in the Statement of Operations separately from the service cost component after Operating Income. Additionally, only the service cost component will be eligible for capitalization, when applicable. As a result of adopting this standard, PSE&G reduced its charge to expense for the three months ended March 31, 2018 by approximately $14 million. For the three months ended March 31, 2017, the Condensed Consolidated Statements of Operations were recast to show retrospective adjustments of the non-service cost component of net benefit credits (costs) of $(2) million and $2 million at PSE&G and Power, respectively, from O&M Expense to a new line item after Operating Income entitled Non-Operating Pension and OPEB Credits (Costs). See Note 9. Pension and Other Postretirement Benefits (OPEB).
Stock Compensation - Scope of Modification Accounting—ASU 2017-09
This accounting standard was adopted on January 1, 2018. The standard will be applied prospectively to awards modified on or after January 1, 2018. PSEG does not expect a material impact from adoption of this new standard.
New Standards Issued But Not Yet Adopted
LeasesASU 2016-02
This accounting standard replaces existing lease accounting guidance and requires lessees to recognize all leases with a term greater than 12 months on the balance sheet using a right-of-use asset approach. At lease commencement, a lessee will recognize a lease asset and corresponding lease obligation. A lessee will classify its leases as either finance leases or operating leases based on whether control of the underlying assets has transferred to the lessee. A lessor will classify its leases as operating or direct financing leases, or as sales-type leases based on whether control of the underlying assets has transferred to the lessee. Both the lessee and lessor models require additional disclosure of key information. The standard requires lessees and lessors to apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. However, existing guidance related to leveraged leases will not change.
ASU 2018-01 permits an entity to elect an optional transition practical expedient to exclude evaluation of land easements that exist or expired before the adoption of ASU 2016-02 and that were not previously accounted for as leases.
The standard is effective for annual and interim periods beginning after December 15, 2018 with retrospective application to previously issued financial statements for 2018 and 2017. Early application is permitted. PSEG is currently analyzing the impact of this standard on its consolidated financial statements.
Derivatives and Hedging: Targeted Improvements to Accounting for Hedging Activities—ASU 2017-12
This accounting standard’s amendments more closely align hedge accounting with the companies’ risk management activities in the financial statements. The amendments expand hedge accounting for both non-financial and financial risk components by permitting contractually specified components to be designated as the hedged risk in a cash flow hedge involving the purchase or sale of non-financial assets or variable rate financial instruments. Additionally, the amendments ease the operational burden of applying hedge accounting by allowing more time to prepare hedge documentation, and allowing effectiveness assessments to be performed on a qualitative basis after hedge inception.
The new guidance is effective for annual and interim periods beginning after December 15, 2018. The standard requires using a modified retrospective method upon adoption. Early adoption is permitted. PSEG is currently analyzing the impact of this standard on its consolidated financial statements. 
Premium Amortization on Purchased Callable Debt Securities—ASU 2017-08
This accounting standard was issued to shorten the amortization period for certain callable debt securities held at a premium. Specifically, the standard requires the premium to be amortized to the earliest call date. The amendments do not require an accounting change for securities held at a discount; the discount continues to be amortized to maturity.
The standard is effective for annual and interim reporting periods beginning after December 15, 2018. Early adoption is permitted for an entity in any interim or annual period. If an entity early adopts the standard in an interim period, any

18

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Table of Contents     



adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. An entity should apply this standard on a modified retrospective basis through a cumulative effect adjustment directly to retained earnings as of the beginning of the period of adoption. Additionally, in the period of adoption, an entity should provide disclosures about a change in accounting principle. PSEG is currently analyzing the impact of this standard on its financial statements.
Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income—ASU 2018-02
This accounting standard would affect any entity that is required to apply the provisions of the Accounting Standards Codification topic, “Income Statement-Reporting Comprehensive Income,” and has items of other comprehensive income for which the related tax effects are presented in other comprehensive income as required by GAAP. Specifically, this standard would allow entities to record a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the newly enacted federal corporate income tax rate. The amount of the reclassification would be the difference between the historical corporate income tax rate and the newly enacted 21% corporate income tax rate.
The standard is effective for all entities for annual periods and interim periods within those annual periods beginning after December 15, 2018. Early adoption is permitted for an entity in any interim or annual period for public business entities for reporting periods for which financial statements have not yet been issued or made available for issuance.
An entity would be able to choose to apply this standard retrospectively to each period (or periods) in which the effect of the change in the U.S. federal corporate income tax rate in the new tax legislation enacted in 2017 is recognized or apply the standard in the reporting period adopted. PSEG is currently analyzing the impact this standard, if adopted, could have on its consolidated financial statements.
Measurement of Credit Losses on Financial InstrumentsASU 2016-13
This accounting standard provides a new model for recognizing credit losses on financial assets carried at amortized cost. The new model requires entities to use an estimate of expected credit losses that will be recognized as an impairment allowance rather than a direct write-down of the amortized cost basis. The estimate of expected credit losses is to be based on past events, current conditions and supportable forecasts over a reasonable period. For purchased financial assets with credit deterioration, a similar model is to be used; however, the initial allowance will be added to the purchase price rather than reported as an allowance. Credit losses on available-for-sale securities should be measured in a manner similar to current GAAP; however, this standard requires those credit losses to be presented as an allowance, rather than a write-down. This new standard also requires additional disclosures of credit quality indicators for each class of financial asset disaggregated by year of origination.
The standard is effective for annual and interim periods beginning after December 15, 2019; however, entities may adopt early beginning in the annual or interim periods after December 15, 2018. PSEG is currently analyzing the impact of this standard on its financial statements.
Simplifying the Test for Goodwill ImpairmentASU 2017-04
This accounting standard requires an entity to perform its annual or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. Additionally, an entity should consider income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable.
An entity should apply this standard on a prospective basis and will be required to disclose the nature of and reason for the change in accounting principle upon transition. The new standard is effective for impairment tests for periods beginning January 1, 2020. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. PSEG is currently assessing the impact of this guidance upon its financial statements.

Note 3. Revenues
Nature of Goods and Services
The following is a description of principal activities by reportable segment from which PSEG, PSE&G and Power generate their revenues.
PSE&G
Revenues from Contracts with Customers
Electric and Gas Distribution and Transmission Revenues—PSE&G sells gas and electricity to customers under default commodity supply tariffs. PSE&G’s regulated electric and gas default commodity supply and distribution services are separate

19

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



tariffs which are satisfied as the product(s) and/or services are delivered to the customer. The electric and gas commodity and delivery tariffs are recurring contracts in effect until cancellation by the customer. Revenue is recognized over time as the service is rendered to the customer. Included in PSE&G’s regulated revenues are unbilled electric and gas revenues which represent the estimated amount customers will be billed for services rendered from the most recent meter reading to the end of the respective accounting period.
PSE&G’s transmission revenues are earned under a separate FERC tariff. The performance obligation of transmission service is satisfied over time as it is provided to and consumed by the customer. Revenue is recognized upon delivery of the transmission service. PSE&G’s revenues from the transmission of electricity are recorded based on a FERC-approved annual formula rate mechanism. This mechanism provides for an annual filing of an estimated revenue requirement with rates effective January 1 of each year and a mechanism true-up to that estimate based on actual revenue requirements. The true-up mechanism is an alternative revenue which is outside the scope of revenue from contracts with customers.
Other Revenues from Contracts with Customers
Other revenues from contracts with customers, which are not a material source of PSE&G revenues, are generated primarily from appliance repair services and solar generation projects. The performance obligations under these contracts are satisfied and revenue is recognized as control of products is delivered or services are rendered.
Payment for services rendered and products transferred are typically due within 30 days of month of delivery.
Revenues Unrelated to Contracts with Customers
Other PSE&G revenues unrelated to contracts with customers are derived from alternative revenue mechanisms recorded pursuant to regulatory accounting guidance. These revenues, which include weather normalization, green energy program true-ups and transmission formula rate true-ups, are not a material source of PSE&G revenues.
Power
Revenues from Contracts with Customers
Electricity and Related Products—Wholesale and retail load contracts are executed in the different Independent System Operator (ISO) regions for the bundled supply of energy, capacity, renewable energy credits (RECs) and ancillary services representing Power’s performance obligations. Revenue for these contracts is recognized over time as the bundled service is provided to the customer. Transaction terms generally run from several months to three years. Power also sells to the ISOs energy and ancillary services which are separately transacted in the day-ahead or real-time energy markets. The energy and ancillary services performance obligations are typically satisfied over time as delivered and revenue is recognized accordingly. Power generally reports electricity sales and purchases conducted with those individual ISOs net on an hourly basis in either Operating Revenues or Energy Costs in its Consolidated Statements of Operations. The classification depends on the net hourly activity.
Power enters into capacity sales and capacity purchases through the ISOs. The transactions are reported on a net basis dependent on Power’s monthly net sale or purchase position through the individual ISOs. The performance obligations with the ISOs are satisfied over time upon delivery of the capacity and revenue is recognized accordingly. In addition to capacity sold through the ISOs, Power sells capacity through bilateral contracts and the related revenue is recognized over time upon delivery of the capacity.
Gas Contracts—Power sells wholesale natural gas, primarily through an indexed based full requirements Basic Gas Supply Service (BGSS) contract with PSE&G to meet the gas supply requirements of PSE&G’s customers. The BGSS contract, which extends through March 2019, will renew year-to-year thereafter unless terminated by either party with a two year notice. The performance obligation is primarily delivery of gas which is satisfied over time. Revenue is recognized as gas is delivered. Based upon the availability of natural gas, storage and pipeline capacity beyond PSE&G’s daily needs, Power also sells gas and pipeline capacity to other counterparties under bilateral contracts. The performance obligation under these contracts is satisfied over time upon delivery of the gas or capacity, and revenue is recognized accordingly.
Other Revenues from Contracts with Customers
Power enters into bilateral contracts to sell solar power and solar RECs from its solar facilities. Contract terms range from 15 to 30 years. The performance obligations are generally solar power and RECs which are transferred to customers upon generation. Revenue is recognized upon generation of the solar power.
Power has entered into long-term contracts with LIPA for energy management and fuel procurement services. Revenue is recognized over time as services are rendered.

20

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



Revenues Unrelated to Contracts with Customers
Power’s revenues unrelated to contracts with customers include electric, gas and certain energy-related transactions accounted for in accordance with Derivatives and Hedging accounting guidance. See Note 12. Financial Risk Management Activities for further discussion. Power is also a party to solar contracts that qualify as leases and are accounted for in accordance with lease accounting guidance.
Other
Revenues from Contracts with Customers
PSEG LI has a contract with LIPA which generates revenues. PSEG LI’s subsidiary, Long Island Electric Utility Servco, LLC (Servco) records costs which are recovered from LIPA and records the recovery of those costs as revenues when Servco is a principal in the transaction.     
Revenues Unrelated to Contracts with Customers
Energy Holdings generates lease revenues which are recorded pursuant to lease accounting guidance.
Disaggregation of Revenues
 
 
 
 
 
 
 
 
 
 
 
 
 
 
PSE&G
 
Power
 
Other 
 
Eliminations
 
Consolidated
 
 
 
Millions
 
 
Three Months Ended March 31, 2018
 
 
 
 
 
 
 
 
 
 
 
Revenues from Contracts with Customers
 
 
 
 
 
 
 
 
 
 
 
Electric Distribution
$
690

 
$

 
$

 
$

 
$
690

 
 
Gas Distribution
759

 

 

 
(3
)
 
756

 
 
Transmission
312

 

 

 

 
312

 
 
Electricity and Related Product Sales
 
 
 
 
 
 
 
 


 
 
 PJM
 
 
 
 
 
 
 
 


 
 
Third Party Sales

 
498

 

 

 
498

 
 
         Sales to Affiliates

 
176

 

 
(176
)
 

 
 
New York ISO

 
59

 

 

 
59

 
 
ISO New England

 
47

 

 

 
47

 
 
Gas Sales
 
 
 
 
 
 
 
 


 
 
Third Party Sales