Document
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
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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.
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Public Service Enterprise Group Incorporated | Large accelerated filer x | Accelerated filer o | Non-accelerated filer o | Smaller reporting company o | Emerging growth company o |
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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 |
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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.
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FILING FORMAT | |
PART I. FINANCIAL INFORMATION | |
Item 1. | Financial Statements | |
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| Notes to Condensed Consolidated Financial Statements | |
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| 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 | |
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Item 3. | | |
Item 4. | | |
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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:
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• | fluctuations in wholesale power and natural gas markets, including the potential impacts on the economic viability of our generation units; |
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• | our ability to obtain adequate fuel supply; |
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• | any inability to manage our energy obligations with available supply; |
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• | increases in competition in wholesale energy and capacity markets; |
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• | changes in technology related to energy generation, distribution and consumption and customer usage patterns; |
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• | third-party credit risk relating to our sale of generation output and purchase of fuel; |
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• | adverse performance of our decommissioning and defined benefit plan trust fund investments and changes in funding requirements; |
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• | changes in state and federal legislation and regulations; |
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• | the impact of pending and any future rate case proceedings; |
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• | regulatory, financial, environmental, health and safety risks associated with our ownership and operation of nuclear facilities; |
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• | adverse changes in energy industry laws, policies and regulations, including market structures and transmission planning; |
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• | changes in federal and state environmental regulations and enforcement; |
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• | delays in receipt of, or an inability to receive, necessary licenses and permits; |
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• | adverse outcomes of any legal, regulatory or other proceeding, settlement, investigation or claim applicable to us and/or the energy industry; |
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• | changes in tax laws and regulations; |
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• | the impact of our holding company structure on our ability to meet our corporate funding needs, service debt and pay dividends; |
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• | lack of growth or slower growth in the number of customers or changes in customer demand; |
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• | any inability of Power to meet its commitments under forward sale obligations; |
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• | reliance on transmission facilities that we do not own or control and the impact on our ability to maintain adequate transmission capacity; |
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• | any inability to successfully develop or construct generation, transmission and distribution projects; |
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• | any equipment failures, accidents, severe weather events or other incidents that impact our ability to provide safe and reliable service to our customers; |
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• | 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; |
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• | any inability to maintain sufficient liquidity; |
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• | any inability to realize anticipated tax benefits or retain tax credits; |
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• | challenges associated with recruitment and/or retention of key executives and a qualified workforce; |
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• | the impact of our covenants in our debt instruments on our operations; and |
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• | 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.
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 |
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| Operation and Maintenance | | 754 |
| | 717 |
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| Depreciation and Amortization | | 280 |
| | 828 |
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| Total Operating Expenses | | 1,986 |
| | 2,413 |
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| OPERATING INCOME | | 832 |
| | 178 |
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| Income from Equity Method Investments | | 2 |
| | 3 |
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| Net Gains (Losses) on Trust Investments | | (22 | ) | | 28 |
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| Other Income (Deductions) | | 32 |
| | 32 |
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| 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 |
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| WEIGHTED AVERAGE COMMON SHARES OUTSTANDING: | | | | | |
| BASIC | | 504 |
| | 505 |
| |
| DILUTED | | 507 |
| | 508 |
| |
| NET INCOME PER SHARE: | | | | | |
| BASIC | | $ | 1.11 |
| | $ | 0.23 |
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| DILUTED | | $ | 1.10 |
| | $ | 0.22 |
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| DIVIDENDS PAID PER SHARE OF COMMON STOCK | | $ | 0.45 |
| | $ | 0.43 |
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| | | | | | |
See Notes to Condensed Consolidated Financial Statements.
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Millions
(Unaudited)
|
| | | | | | | | | | |
| | | | | | |
| | | Three Months Ended | |
| | | March 31, | |
| | | 2018 | | 2017 | |
| NET INCOME | | $ | 558 |
| | $ | 114 |
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| 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 |
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| Pension/Other Postretirement Benefit Costs (OPEB) adjustment, net of tax (expense) benefit of $(3) and $(4) for 2018 and 2017, respectively | | 8 |
| | 6 |
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| Other Comprehensive Income (Loss), net of tax | | (6 | ) | | 21 |
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| COMPREHENSIVE INCOME | | $ | 552 |
| | $ | 135 |
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| | | | | | |
See Notes to Condensed Consolidated Financial Statements.
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
Millions
(Unaudited)
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| | | | | | | | | |
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| | March 31, 2018 | | December 31, 2017 | |
| ASSETS | |
| CURRENT ASSETS | | | | |
| Cash and Cash Equivalents | $ | 118 |
| | $ | 313 |
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| Accounts Receivable, net of allowances of $62 in 2018 and $59 in 2017 | 1,320 |
| | 1,348 |
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| Tax Receivable | 121 |
| | 127 |
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| Unbilled Revenues | 196 |
| | 296 |
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| Fuel | 162 |
| | 289 |
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| Materials and Supplies, net | 574 |
| | 577 |
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| Prepayments | 114 |
| | 118 |
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| Derivative Contracts | 43 |
| | 29 |
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| Regulatory Assets | 139 |
| | 211 |
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| Other | 19 |
| | 4 |
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| Total Current Assets | 2,806 |
| | 3,312 |
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| PROPERTY, PLANT AND EQUIPMENT | 42,033 |
| | 41,231 |
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| Less: Accumulated Depreciation and Amortization | (9,628 | ) | | (9,434 | ) | |
| Net Property, Plant and Equipment | 32,405 |
| | 31,797 |
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| NONCURRENT ASSETS | | | | |
| Regulatory Assets | 3,208 |
| | 3,222 |
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| Long-Term Investments | 938 |
| | 932 |
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| Nuclear Decommissioning Trust (NDT) Fund | 2,051 |
| | 2,133 |
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| Long-Term Receivable of Variable Interest Entity (VIE) | 690 |
| | 686 |
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| Rabbi Trust Fund | 225 |
| | 231 |
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| Goodwill | 16 |
| | 16 |
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| Other Intangibles | 131 |
| | 114 |
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| Derivative Contracts | 48 |
| | 7 |
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| Other | 272 |
| | 266 |
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| Total Noncurrent Assets | 7,579 |
| | 7,607 |
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| TOTAL ASSETS | $ | 42,790 |
| | $ | 42,716 |
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| | | | | |
See Notes to Condensed Consolidated Financial Statements.
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 |
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| Commercial Paper and Loans | 594 |
| | 542 |
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| Accounts Payable | 1,295 |
| | 1,694 |
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| Derivative Contracts | 10 |
| | 16 |
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| Accrued Interest | 147 |
| | 103 |
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| Accrued Taxes | 173 |
| | 48 |
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| Clean Energy Program | 85 |
| | 128 |
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| Obligation to Return Cash Collateral | 136 |
| | 129 |
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| Regulatory Liabilities | 34 |
| | 47 |
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| Other | 474 |
| | 461 |
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| Total Current Liabilities | 3,948 |
| | 4,168 |
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| NONCURRENT LIABILITIES | | | | |
| Deferred Income Taxes and Investment Tax Credits (ITC) | 5,329 |
| | 5,240 |
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| Regulatory Liabilities | 2,942 |
| | 2,948 |
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| Asset Retirement Obligations | 1,037 |
| | 1,024 |
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| OPEB Costs | 1,432 |
| | 1,455 |
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| OPEB Costs of Servco | 550 |
| | 542 |
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| Accrued Pension Costs | 508 |
| | 537 |
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| Accrued Pension Costs of Servco | 126 |
| | 129 |
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| Environmental Costs | 342 |
| | 357 |
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| Derivative Contracts | 2 |
| | 5 |
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| Long-Term Accrued Taxes | 176 |
| | 175 |
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| Other | 222 |
| | 221 |
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| Total Noncurrent Liabilities | 12,666 |
| | 12,633 |
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| COMMITMENTS AND CONTINGENT LIABILITIES (See Note 10) |
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| CAPITALIZATION |
| | | |
| LONG-TERM DEBT | 12,072 |
| | 12,068 |
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| STOCKHOLDERS’ EQUITY |
| | | |
| Common Stock, no par, authorized 1,000 shares; issued, 2018 and 2017—534 shares | 4,946 |
| | 4,961 |
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| Treasury Stock, at cost, 2018—30 shares; 2017—29 shares | (816 | ) | | (763 | ) | |
| Retained Earnings | 10,385 |
| | 9,878 |
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| Accumulated Other Comprehensive Loss | (411 | ) | | (229 | ) | |
| Total Stockholders’ Equity | 14,104 |
| | 13,847 |
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| Total Capitalization | 26,176 |
| | 25,915 |
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| TOTAL LIABILITIES AND CAPITALIZATION | $ | 42,790 |
| | $ | 42,716 |
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See Notes to Condensed Consolidated Financial Statements.
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 |
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| Emission Allowances and Renewable Energy Credit (REC) Compliance Accrual
| 24 |
| | 26 |
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| 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 |
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| 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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
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.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
|
| | | | | | | | | | | | | | | | | |
| | | | | | | | | |
| | 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 Customers—Accounting 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
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
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
Leases—ASU 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
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
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 Instruments—ASU 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 Impairment—ASU 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
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
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.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
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 | — |
| |