0000788784 pseg:PSEGPowerLLCMember us-gaap:USTreasurySecuritiesMember 2019-12-31

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED June 30, 2020March 31, 2021
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		Name of Registrant, Address, and Telephone NumberState or other jurisdiction of Incorporation or OrganizationI.R.S. Employer
Identification  Number
001-09120Public Service Enterprise Group IncorporatedNew Jersey22-2625848
80 Park Plaza
Newark,New Jersey07102
973430-7000
Commission
File Number
001-00973		Name of Registrant, Address, and Telephone NumberState or other jurisdiction of Incorporation or Organization
I.R.S. Employer
Identification  Number
001-09120Public Service Enterprise Group IncorporatedNew Jersey22-2625848
80 Park Plaza
Newark,New Jersey07102
973430-7000
001-00973Public Service Electric and Gas CompanyNew Jersey22-1212800
80 Park Plaza
Newark,New Jersey07102
973430-7000
001-34232PSEG Power LLCDelaware22-3663480
80 Park Plaza
Newark,New Jersey07102
973430-7000
Securities registered pursuant to Section 12(b) of the Act:
Title of Each ClassTrading Symbol(s)
Name of Each Exchange

On Which Registered
Public Service Enterprise Group Incorporated
  Common Stock without par valuePEGNew York Stock Exchange
Public Service Electric and Gas Company
  9.25% First and Refunding Mortgage Bonds, Series CC, due 2021PEG21New York Stock Exchange
  8.00% First and Refunding Mortgage Bonds, due 2037PEG37DNew York Stock Exchange
  5.00% First and Refunding Mortgage Bonds, due 2037PEG37JNew York Stock Exchange
PSEG Power LLC

  8.625% Senior Notes, due 2031PEG31New York Stock Exchange
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 ☒ No ☐
Indicate by check mark whether the registrants have submitted electronically 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 such files). Yes ☒ No ☐
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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 IncorporatedLarge accelerated filer☒Accelerated filer☐Non-accelerated filer☐Smaller reporting company☐Emerging growth company☐
Public Service Enterprise Group IncorporatedLarge accelerated filer☒Accelerated filer☐Non-accelerated filer☐Smaller reporting company☐Emerging growth company☐
Public Service Electric and Gas CompanyLarge accelerated filer☐Accelerated filer☐Non-accelerated filer☒Smaller reporting company☐Emerging growth company☐
PSEG Power LLCLarge accelerated filer☐Accelerated filer☐Non-accelerated filer☒Smaller reporting company☐Emerging growth company☐
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 ☒
As of July 21, 2020,April 20, 2021, Public Service Enterprise Group Incorporated had outstanding 505,755,584505,479,706 shares of its sole class of Common Stock, without par value.
As of July 21, 2020,April 20, 2021, 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) 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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Page
ii
FILING FORMAT
iii
PART I. FINANCIAL INFORMATION
Item 1.Financial StatementsPage
FORWARD-LOOKING STATEMENTS
ii
FILING FORMAT
iii
PART I. FINANCIAL INFORMATION
Item 1.Financial Statements
Public Service Enterprise Group Incorporated
1
Public Service Electric and Gas Company
7
PSEG Power LLC
13
Notes to Condensed Consolidated Financial Statements
Note 1. Organization, Basis of Presentation and Significant Accounting Policies
19
Note 2. Recent Accounting Standards
20
Note 3. Revenues
2221
Note 4. Early Plant Retirements/Asset Dispositions
2825
Note 5. Variable Interest Entity (VIE)
2927
Note 6. Rate Filings
3027
Note 7. Leases
3128
Note 8. Financing Receivables
3228
Note 9. Trust Investments
3530
Note 10. Pension and Other Postretirement Benefits (OPEB)
4036
Note 11. Commitments and Contingent Liabilities
4238
Note 12. Debt and Credit Facilities
4743
Note 13. Financial Risk Management Activities
4845
Note 14. Fair Value Measurements
5349
Note 15. Other Income (Deductions)
6055
Note 16. Income Taxes
6156
Note 17. Accumulated Other Comprehensive Income (Loss), Net of Tax
6357
Note 18. Earnings Per Share (EPS) and Dividends
6760
Note 19. Financial Information by Business Segment
6861
Note 20. Related-Party Transactions
6962
Item 2.
7164
Executive Overview of 20202021 and Future Outlook
7164
8073
8676
8979
8979
Item 3.
8979
Item 4.
9080
PART II. OTHER INFORMATION
Item 1.
9181
Item 1A.
9181
Item 2.
9181
Item 5.
9181
Item 6.
9483
9584

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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:
•any inability to successfully develop, obtain regulatory approval for, or construct generation, transmission and distribution projects;
•lack of growth or slower growth in the number of customers or the failure of our Conservation Incentive Program to fully address a decline in customer demand;
•any equipment failures, accidents, severe weather events, acts of war or terrorism or other incidents, including pandemics such as the ongoing coronavirus pandemic, that may impact our ability to provide safe and reliable service to our customers;
•any inability to recover the carrying amount of our long-lived assets;
•any inability to maintain sufficient liquidity;
•the impact of cybersecurity attacks or intrusions;
•the impact of the ongoing coronavirus pandemic;
•the impact of our covenants in our debt instruments on our operations;
•adverse performance of our nuclear decommissioning and defined benefit plan trust fund investments and changes in funding requirements;
•risks associated with the timeline and ultimate outcome of our exploration of strategic alternatives relating to PSEG Power’s non-nuclear generating fleet;
•the failure to complete, or delays in completing, our proposed investment in the Ocean Wind offshore wind project, or following the completion of our initial investment in the project, the failure to realize the anticipated strategic and financial benefits of the project;
•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;
•market risks impacting the operation of our generating stations;
increases in competition in wholesale energy and capacity markets;
•changes in technology related to energy generation, distribution and consumption and changes in customer usage patterns;
economic downturns;
•third-party credit risk relating to our sale of generation output and purchase of fuel;
adverse performance•any inability of PSEG Power to meet its commitments under forward sale obligations;
•reliance on transmission facilities to maintain adequate transmission capacity for our nuclear decommissioning and defined benefit plan trust fund investments and changes in funding requirements;power generation fleet;
•the impact of changes in state and federal legislation and regulations on our business, including PSE&G’s ability to recover costs and earn returns on authorized investments;
•PSE&G’s proposed investment programs may not be fully approved by regulators and its capital investment may be lower than planned;
ii


•the absence of a long-term legislative or other solution for our New Jersey nuclear plants that sufficiently values them for their carbon-free, fuel diversity and resilience attributes, or the impact of the current or subsequent payments for such attributes being materially adversely modified through legal proceedings;
•
the impact on our New Jersey nuclear plants if such plants are not awarded Zero Emission Certificates (ZEC) in future periods, there is an adverse change in the amount of future ZEC payments, the ZEC program is overturned or modified through legal proceedings or if adverse changes are made to the capacity market construct;
adverse changes in energy industry laws, policies and regulations, including market structures and transmission planning;planning and transmission returns;
the impact of state and federal actions aimed at combating climate change on our natural gas assets;
•risks associated with our ownership and operation of nuclear facilities, including regulatory risks, such as compliance with the Atomic Energy Act and trade control, environmental and other regulations, as well as financial, environmental and health and safety risks;
•changes in federal and state environmental regulations and enforcement; and
•delays in receipt of, or an inability to receive, necessary licenses and permits;
the impact of any future rate proceedings;
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 PSEG 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;
any inability to successfully develop, obtain regulatory approval for, or construct generation, transmission and distribution projects;
any equipment failures, accidents, severe weather events or other incidents, including pandemics such as the ongoing coronavirus pandemic, that may 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;
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;
the impact of the ongoing coronavirus pandemic;
the impact of acts of war, terrorism, cybersecurity attacks or intrusions; and
failure to sell or otherwise dispose of all or a portion of PSEG Power’s non-nuclear generating fleet on terms that are favorable to us, or at all, or any delay of such transaction or transactions due to market conditions, the failure to satisfy conditions to closing or otherwise.
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 (PSEG Power). Information relating to any individual company is filed by such company on its own behalf. PSE&G and PSEG 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 PSEG 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 Six Months Ended 
  June 30, June 30, 
  2020 2019 2020 2019 
 OPERATING REVENUES$2,050
 $2,316
 $4,831
 $5,296
 
 OPERATING EXPENSES        
 Energy Costs595
 704
 1,501
 1,828
 
 Operation and Maintenance733
 750
 1,487
 1,506
 
 Depreciation and Amortization315
 307
 639
 621
 
 Loss on Asset Dispositions—
 395
 —
 395
 
 Total Operating Expenses1,643
 2,156
 3,627
 4,350
 
 OPERATING INCOME407
 160
 1,204
 946
 
 Income from Equity Method Investments3
 5
 6
 7
 
 Net Gains (Losses) on Trust Investments201
 39
 (20) 167
 
 Other Income (Deductions)38
 33
 42
 66
 
 Net Non-Operating Pension and Other Postretirement Benefit (OPEB) Credits (Costs)62
 33
 124
 66
 
 Interest Expense(151) (137) (304) (270) 
 INCOME BEFORE INCOME TAXES560
 133
 1,052
 982
 
 Income Tax Benefit (Expense)(109) 20
 (153) (129) 
 NET INCOME$451
 $153
 $899
 $853
 
 WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:        
 BASIC504
 504
 504
 504
 
 DILUTED507
 507
 507
 507
 
 NET INCOME PER SHARE:        
 BASIC$0.89
 $0.30
 $1.78
 $1.69
 
 DILUTED$0.89
 $0.30
 $1.77
 $1.68
 
          
Three Months Ended
March 31,
 20212020
OPERATING REVENUES$2,889 $2,781 
OPERATING EXPENSES
Energy Costs1,029 906 
Operation and Maintenance778 754 
Depreciation and Amortization341 324 
Total Operating Expenses2,148 1,984 
OPERATING INCOME741 797 
Income from Equity Method Investments3 3 
Net Gains (Losses) on Trust Investments60 (221)
Other Income (Deductions)25 4 
Net Non-Operating Pension and Other Postretirement Benefit (OPEB) Credits (Costs)82 62 
Interest Expense(146)(153)
INCOME BEFORE INCOME TAXES765 492 
Income Tax Benefit (Expense)(117)(44)
NET INCOME$648 $448 
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
BASIC504 504 
DILUTED507 507 
NET INCOME PER SHARE:
BASIC$1.29 $0.89 
DILUTED$1.28 $0.88 
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 Six Months Ended 
  June 30, June 30, 
  2020 2019 2020 2019 
 NET INCOME$451
 $153
 $899
 $853
 
 Other Comprehensive Income (Loss), net of tax        
 Unrealized Gains (Losses) on Available-for-Sale Securities, net of tax (expense) benefit of $(12), $(12), $(18) and $(25) for the three and six months ended 2020 and 2019, respectively20
 18
 28
 39
 
 Unrealized Gains (Losses) on Cash Flow Hedges, net of tax (expense) benefit of $(1), $5, $0 and $6 for the three and six months ended 2020 and 2019, respectively3
 (13) —
 (17) 
 Pension/OPEB adjustment, net of tax (expense) benefit of $(1), $(2), $(2) and $(6) for the three and six months ended 2020 and 2019, respectively3
 4
 6
 4
 
 Other Comprehensive Income (Loss), net of tax26
 9
 34
 26
 
 COMPREHENSIVE INCOME$477
 $162
 $933
 $879
 
          
Three Months Ended
 March 31,
 20212020
NET INCOME$648 $448 
Other Comprehensive Income (Loss), net of tax
Unrealized Gains (Losses) on Available-for-Sale Securities, net of tax (expense) benefit of $26 and $(6) for 2021 and 2020, respectively(42)8 
Unrealized Gains (Losses) on Cash Flow Hedges, net of tax (expense) benefit of $0 and $1 for 2021 and 2020, respectively1 (3)
Pension/OPEB adjustment, net of tax (expense) benefit of $(2) and $(1) for 2021 and 2020, respectively3 3 
Other Comprehensive Income (Loss), net of tax(38)8 
COMPREHENSIVE INCOME$610 $456 
See Notes to Condensed Consolidated Financial Statements.
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PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
Millions
(Unaudited)
 
      
  June 30,
2020		 December 31,
2019		 
 ASSETS 
 CURRENT ASSETS    
 Cash and Cash Equivalents$431
 $147
 
 Accounts Receivable, net of allowance of $117 in 2020 and $60 in 20191,239
 1,313
 
 Tax Receivable154
 21
 
 Unbilled Revenues, net of allowance of $4 in 2020192
 239
 
 Fuel219
 310
 
 Materials and Supplies, net597
 587
 
 Prepayments268
 79
 
 Derivative Contracts112
 113
 
 Regulatory Assets466
 351
 
 Assets Held for Sale29
 30
 
 Other35
 41
 
 Total Current Assets3,742
 3,231
 
 PROPERTY, PLANT AND EQUIPMENT47,157
 45,944
 
      Less: Accumulated Depreciation and Amortization(10,606) (10,100) 
 Net Property, Plant and Equipment36,551
 35,844
 
 NONCURRENT ASSETS    
 Regulatory Assets3,606
 3,677
 
 Operating Lease Right-of-Use Assets273
 282
 
 Long-Term Investments779
 812
 
 Nuclear Decommissioning Trust (NDT) Fund2,251
 2,216
 
 Long-Term Tax Receivable—
 150
 
 Long-Term Receivable of Variable Interest Entity (VIE)829
 813
 
 Rabbi Trust Fund259
 246
 
 Other Intangibles185
 149
 
 Derivative Contracts30
 24
 
 Other275
 286
 
 Total Noncurrent Assets8,487
 8,655
 
 TOTAL ASSETS$48,780
 $47,730
 
      
March 31,
2021		December 31,
2020
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents$803 $543 
Accounts Receivable, net of allowance of $232 in 2021 and $196 in 20201,476 1,410 
Tax Receivable7 63 
Unbilled Revenues, net of allowance of $7 in 2021 and $10 in 2020187 229 
Fuel129 277 
Materials and Supplies, net609 601 
Prepayments76 51 
Derivative Contracts29 60 
Regulatory Assets249 369 
Other30 27 
Total Current Assets3,595 3,630 
PROPERTY, PLANT AND EQUIPMENT49,063 48,569 
     Less: Accumulated Depreciation and Amortization(11,277)(10,984)
Net Property, Plant and Equipment37,786 37,585 
NONCURRENT ASSETS
Regulatory Assets3,832 3,872 
Operating Lease Right-of-Use Assets255 262 
Long-Term Investments512 536 
Nuclear Decommissioning Trust (NDT) Fund2,525 2,501 
Long-Term Tax Receivable43 0 
Long-Term Receivable of Variable Interest Entity (VIE)950 945 
Rabbi Trust Fund238 266 
Other Intangibles163 158 
Derivative Contracts19 9 
Other288 286 
Total Noncurrent Assets8,825 8,835 
TOTAL ASSETS$50,206 $50,050 
See Notes to Condensed Consolidated Financial Statements.
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PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
Millions
(Unaudited)

      
  June 30,
2020		 December 31,
2019		 
 LIABILITIES AND CAPITALIZATION 
 CURRENT LIABILITIES    
 Long-Term Debt Due Within One Year$2,093
 $1,365
 
 Commercial Paper and Loans1,165
 1,115
 
 Accounts Payable1,135
 1,358
 
 Derivative Contracts24
 36
 
 Accrued Interest122
 116
 
 Accrued Taxes127
 41
 
 Clean Energy Program231
 143
 
 Obligation to Return Cash Collateral107
 119
 
 Regulatory Liabilities194
 234
 
 Other585
 520
 
 Total Current Liabilities5,783
 5,047
 
 NONCURRENT LIABILITIES    
 Deferred Income Taxes and Investment Tax Credits (ITC)6,481
 6,256
 
 Regulatory Liabilities2,906
 3,002
 
 Operating Leases263
 273
 
 Asset Retirement Obligations1,185
 1,087
 
 OPEB Costs736
 734
 
 OPEB Costs of Servco641
 626
 
 Accrued Pension Costs893
 952
 
 Accrued Pension Costs of Servco168
 171
 
 Environmental Costs323
 349
 
 Derivative Contracts2
 1
 
 Long-Term Accrued Taxes86
 182
 
 Other242
 218
 
 Total Noncurrent Liabilities13,926
 13,851
 
 COMMITMENTS AND CONTINGENT LIABILITIES (See Note 11)


 


 
 CAPITALIZATION
   
 LONG-TERM DEBT13,580
 13,743
 
 STOCKHOLDERS’ EQUITY
   
 Common Stock, no par, authorized 1,000 shares; issued, 2020 and 2019—534 shares5,003
 5,003
 
 Treasury Stock, at cost, 2020 and 2019—30 shares(865) (831) 
 Retained Earnings11,808
 11,406
 
 Accumulated Other Comprehensive Loss(455) (489) 
 Total Stockholders’ Equity15,491
 15,089
 
 Total Capitalization29,071
 28,832
 
 TOTAL LIABILITIES AND CAPITALIZATION$48,780
 $47,730
 
  

   
March 31,
2021		December 31,
2020
LIABILITIES AND CAPITALIZATION
CURRENT LIABILITIES
Long-Term Debt Due Within One Year$1,429 $1,684 
Commercial Paper and Loans665 1,063 
Accounts Payable984 1,332 
Derivative Contracts26 21 
Accrued Interest173 126 
Accrued Taxes160 124 
Clean Energy Program86 143 
Obligation to Return Cash Collateral94 98 
Regulatory Liabilities271 294 
Other658 637 
Total Current Liabilities4,546 5,522 
NONCURRENT LIABILITIES
Deferred Income Taxes and Investment Tax Credits (ITC)6,630 6,502 
Regulatory Liabilities2,659 2,707 
Operating Leases244 252 
Asset Retirement Obligations1,224 1,212 
OPEB Costs727 730 
OPEB Costs of Servco706 699 
Accrued Pension Costs1,079 1,128 
Accrued Pension Costs of Servco223 226 
Environmental Costs245 286 
Derivative Contracts2 4 
Long-Term Accrued Taxes81 88 
Other217 214 
Total Noncurrent Liabilities14,037 14,048 
COMMITMENTS AND CONTINGENT LIABILITIES (See Note 11)00
CAPITALIZATION
LONG-TERM DEBT15,346 14,496 
STOCKHOLDERS’ EQUITY
Common Stock, no par, authorized 1,000 shares; issued, 2021 and 2020—534 shares5,013 5,031 
Treasury Stock, at cost, 2021 and 2020—30 shares(902)(861)
Retained Earnings12,708 12,318 
Accumulated Other Comprehensive Loss(542)(504)
Total Stockholders’ Equity16,277 15,984 
Total Capitalization31,623 30,480 
TOTAL LIABILITIES AND CAPITALIZATION$50,206 $50,050 
See Notes to Condensed Consolidated Financial Statements.
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PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Millions
(Unaudited)
      
  Six Months Ended 
  June 30, 
  2020 2019 
 CASH FLOWS FROM OPERATING ACTIVITIES    
 Net Income$899
 $853
 
 Adjustments to Reconcile Net Income to Net Cash Flows from Operating Activities:    
 Depreciation and Amortization639
 621
 
 Amortization of Nuclear Fuel93
 89
 
 
Loss on Asset Dispositions

—
 395
 
 
Emission Allowances and Renewable Energy Credit (REC) Compliance Accrual

65
 46
 
 Provision for Deferred Income Taxes (Other than Leases) and ITC104
 123
 
 Non-Cash Employee Benefit Plan (Credits) Costs(52) (5) 
 Leveraged Lease (Income) Loss, Adjusted for Rents Received and Deferred Taxes11
 (3) 
 Net (Gain) Loss on Lease Investments(2) 32
 
 Net Realized and Unrealized (Gains) Losses on Energy Contracts and Other Derivatives(1) (320) 
 Cost of Removal(44) (61) 
 Net Change in Regulatory Assets and Liabilities(70) 84
 
 Net (Gains) Losses and (Income) Expense from NDT Fund5
 (189) 
 Net Change in Certain Current Assets and Liabilities:    
           Tax Receivable16
 77
 
           Accrued Taxes115
 (10) 
           Cash Collateral32
 392
 
           Other Current Assets and Liabilities(60) (299) 
 Employee Benefit Plan Funding and Related Payments(6) (24) 
 Other(80) 23
 
 Net Cash Provided By (Used In) Operating Activities1,664
 1,824
 
 CASH FLOWS FROM INVESTING ACTIVITIES

   
 Additions to Property, Plant and Equipment(1,414) (1,604) 
 Purchase of Emission Allowances and RECs(50) (29) 
 Proceeds from Sales of Trust Investments1,163
 966
 
 Purchases of Trust Investments(1,184) (984) 
 Other52
 29
 
 Net Cash Provided By (Used In) Investing Activities(1,433) (1,622) 
 CASH FLOWS FROM FINANCING ACTIVITIES    
 Net Change in Commercial Paper(750) (651) 
 Proceeds from Short-Term Loans800
 —
 
 Issuance of Long-Term Debt975
 1,500
 
 Redemption of Long-Term Debt(406) (600) 
 Cash Dividends Paid on Common Stock(495) (475) 
 Other(64) (60) 
 Net Cash Provided By (Used In) Financing Activities60
 (286) 
 Net Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash291
 (84) 
 Cash, Cash Equivalents and Restricted Cash at Beginning of Period176
 199
 
 Cash, Cash Equivalents and Restricted Cash at End of Period$467
 $115
 
 Supplemental Disclosure of Cash Flow Information:    
 Income Taxes Paid (Received)$41
 $25
 
 Interest Paid, Net of Amounts Capitalized$288
 $256
 
 Accrued Property, Plant and Equipment Expenditures$331
 $456
 
      
Three Months Ended
March 31,
20212020
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income$648 $448 
Adjustments to Reconcile Net Income to Net Cash Flows from Operating Activities:
Depreciation and Amortization341 324 
Amortization of Nuclear Fuel49 47 
Emission Allowances and Renewable Energy Credit (REC) Compliance Accrual
43 33 
Provision for Deferred Income Taxes (Other than Leases) and ITC96 18 
Non-Cash Employee Benefit Plan (Credits) Costs(44)(26)
Leveraged Lease (Income), (Gains) and Losses, Adjusted for Rents Received and Deferred Taxes16 18 
Net Realized and Unrealized (Gains) Losses on Energy Contracts and Other Derivatives46 (106)
Cost of Removal(27)(24)
Net Change in Regulatory Assets and Liabilities(28)(80)
Net (Gains) Losses and (Income) Expense from NDT Fund(68)209 
Net Change in Certain Current Assets and Liabilities:
          Tax Receivable66 16 
          Accrued Taxes(44)71 
           Cash Collateral(44)55 
          Other Current Assets and Liabilities(30)120 
Employee Benefit Plan Funding and Related Payments(3)10 
Other10 20 
Net Cash Provided By (Used In) Operating Activities1,027 1,153 
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to Property, Plant and Equipment(633)(720)
Purchase of Emission Allowances and RECs(12)(29)
Proceeds from Sales of Trust Investments662 609 
Purchases of Trust Investments(660)(619)
Other19 35 
Net Cash Provided By (Used In) Investing Activities(624)(724)
CASH FLOWS FROM FINANCING ACTIVITIES
Net Change in Commercial Paper and Loans(598)(353)
Proceeds from Short-Term Loans500 300 
Payment of Short-Term Loans(300)0 
Issuance of Long-Term Debt900 600 
Redemption of Long-Term Debt(300)0 
Cash Dividends Paid on Common Stock(258)(248)
Other(78)(62)
Net Cash Provided By (Used In) Financing Activities(134)237 
Net Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash269 666 
Cash, Cash Equivalents and Restricted Cash at Beginning of Period572 176 
Cash, Cash Equivalents and Restricted Cash at End of Period$841 $842 
Supplemental Disclosure of Cash Flow Information:
Income Taxes Paid (Received)$(25)$(14)
Interest Paid, Net of Amounts Capitalized$95 $91 
Accrued Property, Plant and Equipment Expenditures$258 $378 
See Notes to Condensed Consolidated Financial Statements.
5

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PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
Millions
(Unaudited)
                 
   
Common
Stock
 
Treasury
Stock
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Income (Loss)
  
   Shs. Amount Shs. Amount Total 
 Balance as of March 31, 2020 534
 $4,994
 (30) $(868) $11,604
 $(481) $15,249
 
 Net Income —
 —
 —
 —
 451
 —
 451
 
 Other Comprehensive Income (Loss), net of tax (expense) benefit of $(14) —
 —
 —
 —
 —
 26
 26
 
 Comprehensive Income             477
 
 Cash Dividends at $0.49 per share on Common Stock —
 —
 —
 —
 (247) —
 (247) 
 Other —
 9
 —
 3
 —
 —
 12
 
 Balance as of June 30, 2020 534
 $5,003
 (30) $(865) $11,808
 $(455) $15,491
 
                 
 Balance as of March 31, 2019 534
 $4,969
 (30) $(839) $11,125
 $(441) $14,814
 
 Net Income —
 —
 —
 —
 153
 —
 153
 
 Other Comprehensive Income (Loss), net of tax (expense) benefit of $(9) —
 —
 —
 —
 —
 9
 9
 
 Comprehensive Income             162
 
 Cash Dividends at $0.47 per share on Common Stock —
 —
 —
 —
 (237) —
 (237) 
 Other —
 11
 —
 4
 —
 —
 15
 
 Balance as of June 30, 2019 534
 $4,980
 (30) $(835) $11,041
 $(432) $14,754
 
                 
                 
   
Common
Stock
 
Treasury
Stock
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Income (Loss)
  
   Shs. Amount Shs. Amount Total 
 Balance as of December 31, 2019 534
 $5,003
 (30) $(831) $11,406
 $(489) $15,089
 
 Net Income —
 —
 —
 —
 899
 —
 899
 
 Other Comprehensive Income (Loss), net of tax (expense) benefit of $(20) —
 —
 —
 —
 —
 34
 34
 
 Comprehensive Income             933
 
 Cumulative Effect Adjustment for Current Expected Credit Losses (CECL) —
 —
 —
 —
 (2) —
 (2) 
 Cash Dividends at $0.98 per share on Common Stock —
 —
 —
 —
 (495) —
 (495) 
 Other —
 —
 —
 (34) —
 —
 (34) 
 Balance as of June 30, 2020 534
 $5,003
 (30) $(865) $11,808
 $(455) $15,491
 
                 
 Balance as of December 31, 2018 534
 $4,980
 (30) $(808) $10,582
 $(377) $14,377
 
 Net Income —
 —
 —
 —
 853
 —
 853
 
 Cumulative Effect Adjustment to Reclassify Stranded Tax Effects Resulting from the Change in the Federal Corporate Income Tax Rate —
 —
 —
 —
 81
 (81) —
 
 Other Comprehensive Income (Loss), net of tax (expense) benefit of $(25) —
 —
 —
 —
 —
 26
 26
 
 Comprehensive Income             879
 
 Cash Dividends at $0.94 per share on Common Stock —
 —
 —
 —
 (475) —
 (475) 
 Other —
 —
 —
 (27) —
 —
 (27) 
 Balance as of June 30, 2019 534
 $4,980
 (30) $(835) $11,041
 $(432) $14,754
 
                 
 
 Common
Stock		 Treasury
Stock		Retained
Earnings		Accumulated
Other
Comprehensive
Income (Loss)
  Shs.Amount Shs.AmountTotal
Balance as of December 31, 2020 534 $5,031  (30)$(861)$12,318 $(504)$15,984 
Net Income — —  — — 648 — 648 
Other Comprehensive Income (Loss), net of tax (expense) benefit of $24 — —  — — — (38)(38)
Comprehensive Income  610 
Cash Dividends at $0.51 per share on Common Stock — —  — — (258)0 (258)
Other 0 (18) 0 (41)0 0 (59)
Balance as of March 31, 2021 534 $5,013  (30)$(902)$12,708 $(542)$16,277 
Balance as of December 31, 2019 534 $5,003  (30)$(831)$11,406 $(489)$15,089 
Net Income — —  — — 448 — 448 
Other Comprehensive Income (Loss), net of tax (expense) benefit of $(6) — —  — — — 8 8 
Comprehensive Income  456 
Cumulative Effect Adjustment for Current Expected Credit Losses (CECL)— — — — (2)— (2)
Cash Dividends at $0.49 per share on Common Stock — —  — — (248)0 (248)
Other 0 (9) 0 (37)0 0 (46)
Balance as of March 31, 2020 534 $4,994  (30)$(868)$11,604 $(481)$15,249 
See Notes to Condensed Consolidated Financial Statements.
6

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

          
  Three Months Ended Six Months Ended 
  June 30, June 30, 
  2020 2019 2020 2019 
 OPERATING REVENUES$1,456
 $1,382
 $3,339
 $3,414
 
 OPERATING EXPENSES        
 Energy Costs510
 529
 1,218
 1,476
 
 Operation and Maintenance380
 369
 766
 777
 
 Depreciation and Amortization217
 202
 439
 414
 
 Total Operating Expenses1,107
 1,100
 2,423
 2,667
 
 OPERATING INCOME349
 282
 916
 747
 
 Net Gains (Losses) on Trust Investments1
 —
 1
 1
 
 Other Income (Deductions)26
 19
 53
 38
 
 Net Non-Operating Pension and OPEB Credits (Costs)52
 29
 103
 59
 
 Interest Expense(98) (89) (194) (176) 
 INCOME BEFORE INCOME TAXES330
 241
 879
 669
 
 Income Tax Benefit (Expense)(47) (14) (156) (39) 
 NET INCOME$283
 $227
 $723
 $630
 
          
Three Months Ended
March 31,
20212020
OPERATING REVENUES$2,073 $1,883 
OPERATING EXPENSES
Energy Costs849 708 
Operation and Maintenance424 386 
Depreciation and Amortization241 222 
Total Operating Expenses1,514 1,316 
OPERATING INCOME559 567 
Net Gains (Losses) on Trust Investments1 0 
Other Income (Deductions)28 27 
Net Non-Operating Pension and OPEB Credits (Costs)66 51 
Interest Expense(98)(96)
INCOME BEFORE INCOME TAXES556 549 
Income Tax Benefit (Expense)(79)(109)
NET INCOME$477 $440 
See disclosures regarding Public Service Electric and Gas Company included in the Notes to Condensed Consolidated Financial Statements.
7

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

          
  Three Months Ended Six Months Ended 
  June 30, June 30, 
  2020 2019 2020 2019 
 NET INCOME$283
 $227
 $723
 $630
 
 Unrealized Gains (Losses) on Available-for-Sale Securities, net of tax (expense) benefit of $(1), $(1), $(1) and $(1) for three and six months ended 2020 and 2019, respectively1
 1
 1
 2
 
 COMPREHENSIVE INCOME$284
 $228
 $724
 $632
 
          
Three Months Ended
March 31,
 20212020
NET INCOME$477 $440 
Unrealized Gains (Losses) on Available-for-Sale Securities, net of tax (expense) benefit of $1 and $0 for 2021 and 2020, respectively(3)0 
COMPREHENSIVE INCOME$474 $440 
See disclosures regarding Public Service Electric and Gas Company included in the Notes to Condensed Consolidated Financial Statements.
8

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

      
  June 30,
2020		 December 31,
2019		 
 ASSETS 
 CURRENT ASSETS
   
 Cash and Cash Equivalents$258
 $21
 
 Accounts Receivable, net of allowance of $117 in 2020 and $60 in 2019872
 901
 
 Accounts Receivable—Affiliated Companies—
 1
 
 Unbilled Revenues, net of allowance of $4 in 2020192
 239
 
 Materials and Supplies, net212
 213
 
 Prepayments190
 35
 
 Regulatory Assets466
 351
 
 Other24
 28
 
 Total Current Assets2,214
 1,789
 
 PROPERTY, PLANT AND EQUIPMENT34,992
 33,900
 
 Less: Accumulated Depreciation and Amortization(6,886) (6,623) 
 Net Property, Plant and Equipment28,106
 27,277
 
 NONCURRENT ASSETS    
 Regulatory Assets3,606
 3,677
 
 Operating Lease Right-of-Use Assets100
 98
 
 Long-Term Investments236
 248
 
 Rabbi Trust Fund50
 48
 
 Other133
 129
 
 Total Noncurrent Assets4,125
 4,200
 
 TOTAL ASSETS$34,445
 $33,266
 
      
March 31,
2021		December 31,
2020
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents$631 $204 
Accounts Receivable, net of allowance of $232 in 2021 and $196 in 20201,085 1,004 
Unbilled Revenues, net of allowance of $7 in 2021 and $10 in 2020187 229 
Materials and Supplies, net220 217 
Prepayments22 14 
Regulatory Assets249 369 
Other17 13 
Total Current Assets2,411 2,050 
PROPERTY, PLANT AND EQUIPMENT36,771 36,300 
Less: Accumulated Depreciation and Amortization(7,292)(7,149)
Net Property, Plant and Equipment29,479 29,151 
NONCURRENT ASSETS
Regulatory Assets3,832 3,872 
Operating Lease Right-of-Use Assets96 99 
Long-Term Investments217 222 
Rabbi Trust Fund43 51 
Other139 136 
Total Noncurrent Assets4,327 4,380 
TOTAL ASSETS$36,217 $35,581 
See disclosures regarding Public Service Electric and Gas Company included in the Notes to Condensed Consolidated Financial Statements.
9

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

      
  June 30,
2020		 December 31,
2019		 
 LIABILITIES AND CAPITALIZATION 
 CURRENT LIABILITIES    
 Long-Term Debt Due Within One Year$693
 $259
 
 Commercial Paper and Loans—
 362
 
 Accounts Payable624
 639
 
 Accounts Payable—Affiliated Companies373
 390
 
 Accrued Interest101
 91
 
 Clean Energy Program231
 143
 
 Obligation to Return Cash Collateral107
 119
 
 Regulatory Liabilities194
 234
 
 Other490
 436
 
 Total Current Liabilities2,813
 2,673
 
 NONCURRENT LIABILITIES    
 Deferred Income Taxes and ITC4,369
 4,189
 
 Regulatory Liabilities2,906
 3,002
 
 Operating Leases88
 87
 
 Asset Retirement Obligations308
 303
 
 OPEB Costs495
 495
 
 Accrued Pension Costs461
 501
 
 Environmental Costs273
 294
 
 Long-Term Accrued Taxes19
 115
 
 Other161
 136
 
 Total Noncurrent Liabilities9,080
 9,122
 
 COMMITMENTS AND CONTINGENT LIABILITIES (See Note 11)


 


 
 CAPITALIZATION    
 LONG-TERM DEBT10,102
 9,568
 
 STOCKHOLDER’S EQUITY    
 Common Stock; 150 shares authorized; issued and outstanding, 2020 and 2019—132 shares892
 892
 
 Contributed Capital1,095
 1,095
 
 Basis Adjustment986
 986
 
 Retained Earnings9,474
 8,928
 
 Accumulated Other Comprehensive Income3
 2
 
 Total Stockholder’s Equity12,450
 11,903
 
 Total Capitalization22,552
 21,471
 
 TOTAL LIABILITIES AND CAPITALIZATION$34,445
 $33,266
 
      
March 31,
2021		December 31,
2020
LIABILITIES AND CAPITALIZATION
CURRENT LIABILITIES
Long-Term Debt Due Within One Year$134 $434 
Commercial Paper and Loans0 100 
Accounts Payable417 671 
Accounts Payable—Affiliated Companies488 479 
Accrued Interest116 101 
Clean Energy Program86 143 
Obligation to Return Cash Collateral94 98 
Regulatory Liabilities271 294 
Other554 530 
Total Current Liabilities2,160 2,850 
NONCURRENT LIABILITIES
Deferred Income Taxes and ITC4,617 4,524 
Regulatory Liabilities2,659 2,707 
Operating Leases86 88 
Asset Retirement Obligations315 314 
OPEB Costs481 485 
Accrued Pension Costs579 612 
Environmental Costs195 236 
Long-Term Accrued Taxes1 7 
Other153 154 
Total Noncurrent Liabilities9,086 9,127 
COMMITMENTS AND CONTINGENT LIABILITIES (See Note 11)00
CAPITALIZATION
LONG-TERM DEBT11,368 10,475 
STOCKHOLDER’S EQUITY
Common Stock; 150 shares authorized; issued and outstanding, 2021 and 2020—132 shares892 892 
Contributed Capital1,170 1,170 
Basis Adjustment986 986 
Retained Earnings10,555 10,078 
Accumulated Other Comprehensive Income0 3 
Total Stockholder’s Equity13,603 13,129 
Total Capitalization24,971 23,604 
TOTAL LIABILITIES AND CAPITALIZATION$36,217 $35,581 
See disclosures regarding Public Service Electric and Gas Company included in the Notes to Condensed Consolidated Financial Statements.
10

Table of Contents


PUBLIC SERVICE ELECTRIC AND GAS COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Millions
(Unaudited)
      
  Six Months Ended 
  June 30, 
  2020 2019 
 CASH FLOWS FROM OPERATING ACTIVITIES    
   Net Income$723
 $630
 
 Adjustments to Reconcile Net Income to Net Cash Flows from Operating Activities:    
 Depreciation and Amortization439
 414
 
 Provision for Deferred Income Taxes and ITC74
 10
 
 Non-Cash Employee Benefit Plan (Credits) Costs(51) (19) 
 Cost of Removal(44) (61) 
 Net Change in Regulatory Assets and Liabilities(70) 84
 
 Net Change in Certain Current Assets and Liabilities:
   
 Accounts Receivable and Unbilled Revenues69
 75
 
 Materials and Supplies1
 (21) 
 Prepayments(155) (194) 
 Accounts Payable39
 (97) 
 Accounts Receivable/Payable—Affiliated Companies, net(5) —
 
 Other Current Assets and Liabilities40
 27
 
 Employee Benefit Plan Funding and Related Payments—
 (15) 
 Other(61) 5
 
 Net Cash Provided By (Used In) Operating Activities999
 838
 
 CASH FLOWS FROM INVESTING ACTIVITIES    
 Additions to Property, Plant and Equipment(1,190) (1,258) 
 Proceeds from Sales of Trust Investments23
 19
 
 Purchases of Trust Investments(22) (17) 
 Solar Loan Investments—
 (1) 
 Other7
 4
 
 Net Cash Provided By (Used In) Investing Activities(1,182) (1,253) 
 CASH FLOWS FROM FINANCING ACTIVITIES    
 Net Change in Commercial Paper and Loans(362) (82) 
 Issuance of Long-Term Debt975
 750
 
 Redemption of Long-Term Debt—
 (250) 
 Cash Dividend Paid(175) —
 
 Other(11) (8) 
 Net Cash Provided By (Used In) Financing Activities427
 410
 
 Net Increase (Decrease) In Cash, Cash Equivalents and Restricted Cash244
 (5) 
 Cash, Cash Equivalents and Restricted Cash at Beginning of Period50
 61
 
 Cash, Cash Equivalents and Restricted Cash at End of Period$294
 $56
 
 Supplemental Disclosure of Cash Flow Information:    
 Income Taxes Paid (Received)$51
 $(107) 
 Interest Paid, Net of Amounts Capitalized$179
 $168
 
 Accrued Property, Plant and Equipment Expenditures$282
 $289
 
      
Three Months Ended
March 31,
 20212020
CASH FLOWS FROM OPERATING ACTIVITIES
  Net Income$477 $440 
Adjustments to Reconcile Net Income to Net Cash Flows from Operating Activities:
Depreciation and Amortization241 222 
Provision for Deferred Income Taxes and ITC32 53 
Non-Cash Employee Benefit Plan (Credits) Costs(39)(26)
Cost of Removal(27)(24)
Net Change in Regulatory Assets and Liabilities(28)(80)
Net Change in Certain Current Assets and Liabilities:
Accounts Receivable and Unbilled Revenues(39)20 
Materials and Supplies(3)0 
Prepayments(8)12 
Accounts Payable(99)(45)
Accounts Receivable/Payable—Affiliated Companies, net9 14 
Other Current Assets and Liabilities35 48 
Employee Benefit Plan Funding and Related Payments0 12 
Other(33)(11)
Net Cash Provided By (Used In) Operating Activities518 635 
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to Property, Plant and Equipment(586)(620)
Proceeds from Sales of Trust Investments16 10 
Purchases of Trust Investments(10)(10)
Solar Loan Investments2 2 
Other4 2 
Net Cash Provided By (Used In) Investing Activities(574)(616)
CASH FLOWS FROM FINANCING ACTIVITIES
Net Change in Commercial Paper and Loans(100)(362)
Issuance of Long-Term Debt900 600 
Redemption of Long-Term Debt(300)0 
Cash Dividend Paid0 (175)
Other(8)(6)
Net Cash Provided By (Used In) Financing Activities492 57 
Net Increase (Decrease) In Cash, Cash Equivalents and Restricted Cash436 76 
Cash, Cash Equivalents and Restricted Cash at Beginning of Period233 50 
Cash, Cash Equivalents and Restricted Cash at End of Period$669 $126 
Supplemental Disclosure of Cash Flow Information:
Income Taxes Paid (Received)$51 $11 
Interest Paid, Net of Amounts Capitalized$81 $74 
Accrued Property, Plant and Equipment Expenditures$218 $262 
See disclosures regarding Public Service Electric and Gas Company included in the Notes to Condensed Consolidated Financial Statements.
11

Table of Contents


PUBLIC SERVICE ELECTRIC AND GAS COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDER’S EQUITY
Millions
(Unaudited)
               
   Common Stock Contributed Capital Basis Adjustment Retained Earnings 
Accumulated
Other
Comprehensive
Income (Loss)
 
      Total 
 Balance as of March 31, 2020 $892
 $1,095
 $986
 $9,191
 $2
 $12,166
 
 Net Income —
 —
 —
 283
 —
 283
 
 Other Comprehensive Income (Loss), net of tax (expense) benefit of $(1) —
 —
 —
 —
 1
 1
 
 Comprehensive Income           284
 
 Balance as of June 30, 2020 $892
 $1,095
 $986
 $9,474
 $3
 $12,450
 
               
 Balance as of March 31, 2019 $892
 $1,095
 $986
 $8,331
 $—
 $11,304
 
 Net Income —
 —
 —
 227
 —
 227
 
 Other Comprehensive Income (Loss), net of tax (expense) benefit of $(1) —
 —
 —
 —
 1
 1
 
 Comprehensive Income           228
 
 Balance as of June 30, 2019 $892
 $1,095
 $986
 $8,558
 $1
 $11,532
 
               
               
   Common Stock Contributed Capital Basis Adjustment Retained Earnings 
Accumulated
Other
Comprehensive
Income (Loss)
 
      Total 
 Balance as of December 31, 2019 $892
 $1,095
 $986
 $8,928
 $2
 $11,903
 
 Net Income —
 —
 —
 723
 —
 723
 
 Other Comprehensive Income (Loss), net of tax (expense) benefit of $(1) —
 —
 —
 —
 1
 1
 
 Comprehensive Income           724
 
 Cumulative Effect Adjustment for CECL —
 —
 —
 (2) —
 (2) 
 Cash Dividend Paid —
 —
 —
 (175) —
 (175) 
 Balance as of June 30, 2020 $892
 $1,095
 $986
 $9,474
 $3
 $12,450
 
               
 Balance as of December 31, 2018 $892
 $1,095
 $986
 $7,928
 $(1) $10,900
 
 Net Income —
 —
 —
 630
 —
 630
 
 Other Comprehensive Income (Loss), net of tax (expense) benefit of $(1) —
 —
 —
 —
 2
 2
 
 Comprehensive Income           632
 
 Balance as of June 30, 2019 $892
 $1,095
 $986
 $8,558
 $1
 $11,532
 
               
 
 Common StockContributed CapitalBasis AdjustmentRetained EarningsAccumulated
Other
Comprehensive
Income (Loss)
   Total
Balance as of December 31, 2020 $892 $1,170 $986 $10,078 $3 $13,129 
Net Income — — — 477 — 477 
Other Comprehensive Income (Loss), net of tax (expense) benefit of $1 — — — — (3)(3)
Comprehensive Income  474 
Balance as of March 31, 2021 $892  $1,170 $986 $10,555 $0 $13,603 
Balance as of December 31, 2019 $892 $1,095 $986 $8,928 $2 $11,903 
Net Income — — — 440 — 440 
Other Comprehensive Income (Loss), net of tax (expense) benefit of $0 — — — — 0 0 
Comprehensive Income  440 
Cumulative Effect Adjustment for CECL— — — (2)— (2)
Cash Dividend Paid— — — (175)— (175)
Balance as of March 31, 2020 $892  $1,095 $986 $9,191 $2 $12,166 
See disclosures regarding Public Service Electric and Gas Company included in the Notes to Condensed Consolidated Financial Statements.
12

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

          
 
Three Months Ended Six Months Ended 
  June 30, June 30, 
  2020 2019 2020 2019 
 OPERATING REVENUES$683
 $1,083
 $1,903
 $2,499
 
 OPERATING EXPENSES        
 Energy Costs323
 411
 999
 1,197
 
 Operation and Maintenance225
 268
 466
 503
 
 Depreciation and Amortization91
 95
 185
 189
 
 Loss on Asset Dispositions—
 395
 —
 395
 
 Total Operating Expenses639
 1,169
 1,650
 2,284
 
 OPERATING INCOME (LOSS)44
 (86) 253
 215
 
 Income from Equity Method Investments3
 5
 6
 7
 
 Net Gains (Losses) on Trust Investments196
 38
 (24) 164
 
 Other Income (Deductions)12
 15
 (11) 28
 
 Net Non-Operating Pension and OPEB Credits (Costs)9
 3
 17
 6
 
 Interest Expense(30) (26) (64) (51) 
 INCOME (LOSS) BEFORE INCOME TAXES234
 (51) 177
 369
 
 Income Tax Benefit (Expense)(64) 11
 6
 (113) 
 NET INCOME (LOSS)$170
 $(40) $183
 $256
 
      

   
Three Months Ended
March 31,
 20212020
OPERATING REVENUES$1,167 $1,220 
OPERATING EXPENSES
Energy Costs682 676 
Operation and Maintenance222 241 
Depreciation and Amortization92 94 
Total Operating Expenses996 1,011 
OPERATING INCOME171 209 
Income from Equity Method Investments3 3 
Net Gains (Losses) on Trust Investments58 (220)
Other Income (Deductions)(4)(23)
Net Non-Operating Pension and OPEB Credits (Costs)12 8 
Interest Expense(27)(34)
INCOME (LOSS) BEFORE INCOME TAXES213 (57)
Income Tax Benefit (Expense)(52)70 
NET INCOME$161 $13 
See disclosures regarding PSEG Power LLC included in the Notes to Condensed Consolidated Financial Statements.
13

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

          
  Three Months Ended Six Months Ended 
  June 30, June 30, 
  2020 2019 2020 2019 
 NET INCOME (LOSS)$170
 $(40) $183
 $256
 
 Other Comprehensive Income (Loss), net of tax        
 Unrealized Gains (Losses) on Available-for-Sale Securities, net of tax (expense) benefit of $(12), $(11), $(16) and $(22) for the three and six months ended 2020 and 2019, respectively15
 15
 22
 31
 
 Pension/OPEB adjustment, net of tax (expense) benefit of $0, $(1), $(1) and $(5) for the three and six months ended 2020 and 2019, respectively3
 3
 5
 3
 
 Other Comprehensive Income (Loss), net of tax18
 18
 27
 34
 
 COMPREHENSIVE INCOME (LOSS)$188
 $(22) $210
 $290
 
          
Three Months Ended
March 31,
20212020
NET INCOME$161 $13 
Other Comprehensive Income (Loss), net of tax
Unrealized Gains (Losses) on Available-for-Sale Securities, net of tax (expense) benefit of $22 and $(4) for 2021 and 2020, respectively(32)7 
Pension/OPEB adjustment, net of tax (expense) benefit of $(1) for 2021 and 20202 2 
Other Comprehensive Income (Loss), net of tax(30)9 
COMPREHENSIVE INCOME$131 $22 
See disclosures regarding PSEG Power LLC included in the Notes to Condensed Consolidated Financial Statements.
14

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PSEG POWER LLC
CONDENSED CONSOLIDATED BALANCE SHEETS
Millions
(Unaudited)

      
  June 30,
2020		 December 31,
2019		 
 ASSETS 
 CURRENT ASSETS    
 Cash and Cash Equivalents$17
 $21
 
 Accounts Receivable313
 309
 
 Accounts Receivable—Affiliated Companies281
 408
 
 Short-Term Loan to Affiliate104
 149
 
 Fuel219
 310
 
 Materials and Supplies, net382
 372
 
 Prepayments12
 11
 
 Derivative Contracts112
 113
 
 Assets Held for Sale29
 28
 
 Other—
 5
 
 Total Current Assets1,469
 1,726
 
 PROPERTY, PLANT AND EQUIPMENT11,825
 11,699
 
 Less: Accumulated Depreciation and Amortization(3,502) (3,273) 
 Net Property, Plant and Equipment8,323
 8,426
 
 NONCURRENT ASSETS    
 Operating Lease Right-of-Use Assets67
 71
 
 Long-Term Investments67
 66
 
 NDT Fund2,251
 2,216
 
 Rabbi Trust Fund65
 62
 
 Other Intangibles185
 149
 
 Derivative Contracts30
 24
 
 Other51
 65
 
 Total Noncurrent Assets2,716
 2,653
 
 TOTAL ASSETS$12,508
 $12,805
 
      
March 31,
2021		December 31,
2020
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents$27 $27 
Accounts Receivable350 328 
Accounts Receivable—Affiliated Companies258 317 
Short-Term Loan to Affiliate403 161 
Fuel129 277 
Materials and Supplies, net387 382 
Prepayments26 16 
Derivative Contracts29 60 
Other1 2 
Total Current Assets1,610 1,570 
PROPERTY, PLANT AND EQUIPMENT11,882 11,872 
Less: Accumulated Depreciation and Amortization(3,756)(3,624)
Net Property, Plant and Equipment8,126 8,248 
NONCURRENT ASSETS
Operating Lease Right-of-Use Assets58 61 
NDT Fund2,525 2,501 
 Long-Term Investments66 64 
Other Intangibles163 158 
Rabbi Trust Fund62 66 
Derivative Contracts19 9 
Other25 27 
Total Noncurrent Assets2,918 2,886 
TOTAL ASSETS$12,654 $12,704 
See disclosures regarding PSEG Power LLC included in the Notes to Condensed Consolidated Financial Statements.
15

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PSEG POWER LLC
CONDENSED CONSOLIDATED BALANCE SHEETS
Millions
(Unaudited)

      
  June 30,
2020		 December 31,
2019		 
 LIABILITIES AND MEMBER’S EQUITY 
 CURRENT LIABILITIES    
 Long-Term Debt Due Within One Year$700
 $406
 
 Accounts Payable363
 505
 
 Accounts Payable—Affiliated Companies20
 5
 
 Derivative Contracts18
 31
 
 Accrued Interest17
 21
 
 Other101
 91
 
 Total Current Liabilities1,219
 1,059
 
 NONCURRENT LIABILITIES    
 Deferred Income Taxes and ITC1,901
 1,876
 
 Operating Leases57
 62
 
 Asset Retirement Obligations874
 781
 
 OPEB Costs194
 192
 
 Accrued Pension Costs270
 284
 
 Derivative Contracts2
 1
 
 Long-Term Accrued Taxes53
 115
 
 Other102
 111
 
 Total Noncurrent Liabilities3,453
 3,422
 
 COMMITMENTS AND CONTINGENT LIABILITIES (See Note 11)


 


 
 LONG-TERM DEBT1,736
 2,434
 
 MEMBER’S EQUITY
   
 Contributed Capital2,214
 2,214
 
 Basis Adjustment(986) (986) 
 Retained Earnings5,246
 5,063
 
 Accumulated Other Comprehensive Loss(374) (401) 
 Total Member’s Equity6,100
 5,890
 
 TOTAL LIABILITIES AND MEMBER’S EQUITY$12,508
 $12,805
 
      
March 31,
2021		December 31,
2020
LIABILITIES AND MEMBER’S EQUITY
CURRENT LIABILITIES
Long-Term Debt Due Within One Year$995 $950 
Accounts Payable417 459 
Accounts Payable—Affiliated Companies34 13 
Derivative Contracts26 21 
Accrued Interest37 16 
Other102 101 
Total Current Liabilities1,611 1,560 
NONCURRENT LIABILITIES
Deferred Income Taxes and ITC1,926 1,936 
Operating Leases48 51 
Asset Retirement Obligations905 895 
OPEB Costs197 197 
Accrued Pension Costs311 321 
Derivative Contracts2 4 
Long-Term Accrued Taxes57 57 
Other81 79 
Total Noncurrent Liabilities3,527 3,540 
COMMITMENTS AND CONTINGENT LIABILITIES (See Note 11)00
LONG-TERM DEBT1,348 1,392 
MEMBER’S EQUITY
Contributed Capital2,310 2,310 
Basis Adjustment(986)(986)
Retained Earnings5,293 5,307 
Accumulated Other Comprehensive Loss(449)(419)
Total Member’s Equity6,168 6,212 
TOTAL LIABILITIES AND MEMBER’S EQUITY$12,654 $12,704 
See disclosures regarding PSEG Power LLC included in the Notes to Condensed Consolidated Financial Statements.
16

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

      
  Six Months Ended 
  June 30, 
  2020 2019 
 CASH FLOWS FROM OPERATING ACTIVITIES    
 Net Income$183
 $256
 
 Adjustments to Reconcile Net Income to Net Cash Flows from Operating Activities:    
 Depreciation and Amortization185
 189
 
 Amortization of Nuclear Fuel93
 89
 
 Loss on Asset Dispositions—
 395
 
 Emission Allowances and REC Compliance Accrual65
 46
 
 Provision for Deferred Income Taxes and ITC7
 131
 
 Non-Cash Employee Benefit Plan (Credits) Costs(3) 9
 
 Interest Accretion on Asset Retirement Obligation21
 20
 
 Net Realized and Unrealized (Gains) Losses on Energy Contracts and Other Derivatives(1) (320) 
 Net (Gains) Losses and (Income) Expense from NDT Fund5
 (189) 
 Net Change in Certain Current Assets and Liabilities:    
 Fuel, Materials and Supplies70
 90
 
 Cash Collateral32
 392

 Accounts Receivable(14) 49
 
 Accounts Payable(92) (88) 
 Accounts Receivable/Payable—Affiliated Companies, net131
 90
 
 Other Current Assets and Liabilities4
 3
 
 Employee Benefit Plan Funding and Related Payments(3) (6) 
 Other(57) (6) 
 Net Cash Provided By (Used In) Operating Activities626
 1,150
 
 CASH FLOWS FROM INVESTING ACTIVITIES    
 Additions to Property, Plant and Equipment(218) (339) 
 Purchase of Emission Allowances and RECs(50) (29) 
 Proceeds from Sales of Trust Investments1,077
 901
 
 Purchases of Trust Investments(1,100) (921) 
 Short-Term Loan to Affiliate45
 (348) 
 Other23
 22
 
 Net Cash Provided By (Used In) Investing Activities(223) (714) 
 CASH FLOWS FROM FINANCING ACTIVITIES    
 Cash Dividend Paid—
 (250) 
 Redemption of Long-Term Debt(406) —
 
 Short-Term Loan from Affiliate—
 (193) 
 Other(1) (1) 
 Net Cash Provided By (Used In) Financing Activities(407) (444) 
 Net Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash(4) (8) 
 Cash, Cash Equivalents and Restricted Cash at Beginning of Period21
 22
 
 Cash, Cash Equivalents and Restricted Cash at End of Period$17
 $14
 
 Supplemental Disclosure of Cash Flow Information:    
 Income Taxes Paid (Received)$3
 $(10) 
 Interest Paid, Net of Amounts Capitalized$65
 $50
 
 Accrued Property, Plant and Equipment Expenditures$49
 $167
 
      
Three Months Ended
March 31,
 20212020
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income$161 $13 
Adjustments to Reconcile Net Income to Net Cash Flows from Operating Activities:
Depreciation and Amortization92 94 
Amortization of Nuclear Fuel49 47 
Emission Allowances and REC Compliance Accrual43 33 
Provision for Deferred Income Taxes and ITC11 (52)
Non-Cash Employee Benefit Plan (Credits) Costs(5)0 
Interest Accretion on Asset Retirement Obligation11 10 
Net Realized and Unrealized (Gains) Losses on Energy Contracts and Other Derivatives46 (106)
Net (Gains) Losses and (Income) Expense from NDT Fund(68)209 
Net Change in Certain Current Assets and Liabilities:
Fuel, Materials and Supplies143 102 
Cash Collateral(44)55 
Accounts Receivable3 20 
Accounts Payable(59)(44)
Accounts Receivable/Payable—Affiliated Companies, net83 68 
Other Current Assets and Liabilities13 21 
Employee Benefit Plan Funding and Related Payments(2)(1)
Other(2)15 
Net Cash Provided By (Used In) Operating Activities475 484 
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to Property, Plant and Equipment(46)(97)
Purchase of Emission Allowances and RECs(12)(29)
Proceeds from Sales of Trust Investments610 569 
Purchases of Trust Investments(621)(579)
Short-Term Loan to Affiliate(242)(365)
Other11 11 
Net Cash Provided By (Used In) Investing Activities(300)(490)
CASH FLOWS FROM FINANCING ACTIVITIES
Cash Dividend Paid(175)0 
Other0 (1)
Net Cash Provided By (Used In) Financing Activities(175)(1)
Net Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash0 (7)
Cash, Cash Equivalents and Restricted Cash at Beginning of Period27 21 
Cash, Cash Equivalents and Restricted Cash at End of Period$27 $14 
Supplemental Disclosure of Cash Flow Information:
Income Taxes Paid (Received)$11 $(16)
Interest Paid, Net of Amounts Capitalized$6 $7 
Accrued Property, Plant and Equipment Expenditures$40 $116 
See disclosures regarding PSEG Power LLC included in the Notes to Condensed Consolidated Financial Statements.
17

Table of Contents


PSEG POWER LLC
CONDENSED CONSOLIDATED STATEMENTS OF MEMBER’S EQUITY
Millions
(Unaudited)
             
   Contributed Capital Basis Adjustment 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Income (Loss)
  
     Total 
 Balance as of March 31, 2020 $2,214
 $(986) $5,076
 $(392) $5,912
 
 Net Income —
 —
 170
 —
 170
 
 Other Comprehensive Income (Loss), net of tax (expense) benefit of $(12) —
 —
 —
 18
 18
 
 Comprehensive Income         188
 
 Balance as of June 30, 2020 $2,214
 $(986) $5,246
 $(374) $6,100
 
             
 Balance as of March 31, 2019 $2,214
 $(986) $5,166
 $(372) $6,022
 
 Net Loss —
 —
 (40) —
 (40) 
 Other Comprehensive Income (Loss), net of tax (expense) benefit of $(12) —
 —
 —
 18
 18
 
 Comprehensive Loss         (22) 
 Balance as of June 30, 2019 $2,214
 $(986) $5,126
 $(354) $6,000
 
             
             
   Contributed Capital Basis Adjustment 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Income (Loss)
  
     Total 
 Balance as of December 31, 2019 $2,214
 $(986) $5,063
 $(401) $5,890
 
 Net Income —
 —
 183
 —
 183
 
 Other Comprehensive Income (Loss), net of tax (expense) benefit of $(17) —
 —
 —
 27
 27
 
 Comprehensive Income         210
 
 Balance as of June 30, 2020 $2,214
 $(986) $5,246
 $(374) $6,100
 
             
 Balance as of December 31, 2018 $2,214
 $(986) $5,051
 $(319) $5,960
 
 Net Income —
 —
 256
 —
 256
 
 Cumulative Effect Adjustment to Reclassify Stranded Tax Effects Resulting from the Change in the Federal Corporate Income Tax Rate —
 —
 69
 (69) —
 
 Other Comprehensive Income (Loss), net of tax (expense) benefit of $(27) —
 —
 —
 34
 34
 
 Comprehensive Income         290
 
 Cash Dividends Paid —
 —
 (250) —
 (250) 
 Balance as of June 30, 2019 $2,214
 $(986) $5,126
 $(354) $6,000
 
             
 
 Contributed Capital Basis AdjustmentRetained
Earnings		Accumulated
Other
Comprehensive
Income (Loss)
   Total
Balance as of December 31, 2020 $2,310  $(986)$5,307 $(419)$6,212 
Net Income —  — 161 — 161 
Other Comprehensive Income (Loss), net of tax (expense) benefit of $21 —  — — (30)(30)
Comprehensive Income  131 
Cash Dividends Paid —  — (175)— (175)
Balance as of March 31, 2021 $2,310  $(986)$5,293 $(449)$6,168 
Balance as of December 31, 2019 $2,214  $(986)$5,063 $(401)$5,890 
Net Income —  — 13 — 13 
Other Comprehensive Income (Loss), net of tax (expense) benefit of $(5) —  — — 9 9 
Comprehensive Income  22 
Balance as of March 31, 2020 $2,214  $(986)$5,076 $(392)$5,912 
See disclosures regarding PSEG Power LLC included in the Notes to Condensed Consolidated Financial Statements.
18

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



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 regulated solar generation projects and energy efficiency and related programs in New Jersey, which are regulated by the BPU.
•—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 regulated solar generation projects and energy efficiency and related programs in New Jersey, which are regulated by the BPU.
•
PSEG Power LLC (PSEG 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, PSEG Power owns and operates solar generation in various states. PSEG 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 Amended and Restated Operations Services Agreement (OSA); PSEG Energy Holdings L.L.C. (Energy Holdings), which primarily hasearns it revenues from its portfolio of lease investments and holds our investment in leveraged leases;offshore wind ventures; and PSEG Services Corporation (Services), which provides certain management, administrative and general services to PSEG and its subsidiaries at cost.
In December 2020, PSEG entered into a definitive agreement with Ørsted North America to acquire a 25% equity interest in Ørsted’s Ocean Wind project. Ocean Wind was selected by New Jersey to be the first offshore wind farm as part of the state’s intention to add 7,500 MW of offshore wind generating capacity by 2035. The Ocean Wind project could provide first power in late 2024. On March 31, 2021, the BPU approved PSEG’s investment in Ocean Wind and the acquisition was completed in April 2021. Additionally, PSEG and Ørsted each owns 50% of Garden State Offshore Energy LLC which holds rights to an offshore wind lease area. PSEG and Ørsted are exploring other offshore wind opportunities.
Basis of Presentation
The respective financial statements included herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (SEC) applicable to Quarterly Reports on Form 10-Q. Certain information and note disclosures normally included in financial statements prepared in accordance with accounting guidance 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, 2019.2020.
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, 2019.2020.
Significant Accounting Policies
Cash, Cash Equivalents and Restricted Cash
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, 2019)2020) and ending periods shown in the Condensed Consolidated Statements of Cash Flows for the sixthree months ended June 30, 2020.March 31, 2021. Restricted cash consists primarily of deposits received related to various construction projects at PSE&G.
19

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


          
  PSE&G PSEG Power Other (A) Consolidated 
  Millions 
 As of December 31, 2019        
 Cash and Cash Equivalents$21
 $21
 $105
 $147
 
 Restricted Cash in Other Current Assets11
 —
 —
 11
 
 Restricted Cash in Other Noncurrent Assets18
 —
 —
 18
 
 Cash, Cash Equivalents and Restricted Cash$50
 $21
 $105
 $176
 
 As of June 30, 2020        
 Cash and Cash Equivalents$258
 $17
 $156
 $431
 
 Restricted Cash in Other Current Assets15
 —
 —
 15
 
 Restricted Cash in Other Noncurrent Assets21
 —
 —
 21
 
 Cash, Cash Equivalents and Restricted Cash$294
 $17
 $156
 $467
 
          
(A)Includes amounts applicable to PSEG (parent company), Energy Holdings and Services.
Fuel Inventory
Fuel inventory at PSEG Power is valued at the lower of average cost or market and includes stored natural gas, coal, fuel oil and propane used to generate power and to satisfy obligations under PSEG Power’s gas supply contracts with PSE&G. The costs of fuel, including initial transportation costs, are included in inventory when purchased and charged to Energy Costs when used or sold.
PSE&GPSEG PowerOther (A)Consolidated
 Millions
As of December 31, 2020
Cash and Cash Equivalents$204 $27 $312 $543 
Restricted Cash in Other Current Assets7 0 0 7 
Restricted Cash in Other Noncurrent Assets22 0 0 22 
Cash, Cash Equivalents and Restricted Cash$233 $27 $312 $572 
As of March 31, 2021
Cash and Cash Equivalents$631 $27 $145 $803 
Restricted Cash in Other Current Assets14 0 0 14 
Restricted Cash in Other Noncurrent Assets24 0 0 24 
Cash, Cash Equivalents and Restricted Cash$669 $27 $145 $841 
In the first quarter of 2020,(A)Includes amounts applicable to PSEG Power recorded a $20 million lower of cost or market (LOCOM) adjustment to its fuel oil inventory due to the significant decline in market pricing. In the second quarter of 2020, PSEG Power reversed $9 million of the LOCOM adjustment recorded in the first quarter of 2020 due to recovery in the market price of oil. PSEG Power may continue to reverse the LOCOM adjustment in future quarters, limited to the adjustment recorded in the three months ended March 31, 2020, if the oil market recovers within the 2020 calendar year. However, downward adjustments in future quarters may be required if the market price of oil declines.(parent company), Energy Holdings and Services.
Property, Plant and Equipment
PSEG Power capitalizes costs, including those related to its jointly-owned facilities that increase the capacity, improve or extend the life of an existing asset; represent a newly acquired or constructed asset; or represent the replacement of a retired asset. The cost of maintenance, repair and replacement of minor items of property is charged to appropriate expense accounts as incurred. Environmental costs are capitalized if the costs mitigate or prevent future environmental contamination or if the costs improve existing assets’ environmental safety or efficiency. All other environmental expenditures are expensed as incurred. PSEG Power also capitalizes spare parts that meet specific criteria. Capitalized spares are depreciated over the remaining lives of their associated assets.
In March 2020, the NRC approved Peach Bottom’s second license extension for both units. Concurrent with the license extensions, PSEG Power has extended the useful life of the asset to match the 80-year life expectation and reassessed the related Asset Retirement Cost (ARC) and Asset Retirement Obligation (ARO) assumptions. This resulted in an increase to the ARC asset and ARO liability of $74 million, primarily due to lower discount rates offset by a longer discounting period as a result of the Peach Bottom units’ longer expected useful life.

Note 2. Recent Accounting Standards
New Standards Issued and Adopted
Measurement of Credit Losses on Financial InstrumentsSimplifying the Accounting for Income Taxes—Accounting Standards Update (ASU) 2016-13, updated by ASU 2018-19, 2019-04, 2019-05, 2019-11 and 2020-02 (ASU) 2019-12
This accounting standard provides a new modelupdates Accounting Standards Codification (ASC) 740 to simplify the accounting for recognizing credit losses on financial assets. The new model requires entitiesincome taxes, including the elimination of several exceptions and making other clarifications to use an estimate of expected credit losses that will be recognized as an impairment allowance rather than a direct write-downthe current guidance. Some of the amortized cost basis. The estimate of expected credit losses ismore pertinent modifications include a change to the tax accounting related to franchise taxes that are partially based on past events, current conditionsincome, an election to allocate the consolidated tax expense to a disregarded entity that is a member of a consolidated tax return filing group when those entities issue separate financial statements, and supportable forecasts over a reasonable period. For purchased financial assets with credit deterioration, a similar model is used; however, the initial allowance is addedmodifications and clarifications to the purchase price rather than reported as an allowance. Credit losses on available-for-sale debt securities are measured in a manner similar to current GAAP; however, this standard requires those credit losses

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be presented as an allowance, rather than a write-down. This new standard also requires additional disclosures of the allowance for credit losses by financial asset type, including disclosures of credit quality indicators for each class of financial asset disaggregated by year of origination.interim tax reporting.
The standard is effective for annual and interim periodsfiscal years beginning after December 15, 2019.2020. PSEG adopted this standard on January 1, 20202021. PSEG has elected to allocate the consolidated tax expense to all eligible entities that are included in a consolidated tax filing on a modified retrospectiveprospective basis. Upon adoption, PSE&G recorded an increase of $8 million toThis election is consistent with PSEG’s Tax Sharing Agreements with its allowance for credit losses, offset by a $6 million increase to Regulatory and Other Assets, and a $2 million cumulative effect charge to Retained Earnings. See Note 3. Revenues. There was no impact from adoption of this standard on the financial statements of PSEG Power.
Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement—ASU 2018-13
This accounting standard modifies the disclosure requirements for fair value measurements. Certain current disclosure requirements relating to Level 3 fair value measurements, and transfers between Level 1 and Level 2 fair value measurements have been eliminated. The standard also adds certain other disclosure requirements for Level 3 fair value measurements.
The standard is effective for annual and interim periods beginning after December 15, 2019. PSEG adopted this standard on January 1, 2020. Certain amendments in the standard have been applied prospectively in 2020. All other amendments of the standard were applied retrospectively to all periods presented.
Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract—ASU 2018-15
This accounting standard aligns the capitalization requirements for implementation costs incurred in a hosting arrangement that is a service contract with capitalization requirements for implementation costs incurred to develop or obtain internal-use software, including hosting arrangements that include an internal-use software license. The standard follows the guidance in Accounting Standard Codification 350—Intangibles—Goodwill and Other to determine which implementation costs to capitalize as an asset related to the service contract and which costs to expense. The standard requires the amortization of capitalized costs to be presented in Operation and Maintenance (O&M) Expense. In addition, the standard also adds presentation requirements for these costs in the statements of cash flows and financial position.
The standard is effective for annual and interim periods beginning after December 15, 2019. PSEG adopted this standard prospectively on January 1, 2020. PSEG, PSE&G and PSEG Power do not expect a material impact on their respective financial statements.
Targeted Improvements to Related Party Guidance for Variable Interest Entities (VIE)—ASU 2018-17
This accounting standard improves the VIE guidance in the area of decision-making fees. Consistent with how indirect interests held through related parties under common control are considered for determining whether a reporting entity must consolidate a VIE, indirect interests held through related parties in common control arrangements are considered on a proportional basis for determining whether fees paid to decision makers and service providers are variable interests.
This standard is effective for annual and interim periods beginning after December 15, 2019. The standard is required to be applied retrospectively with a cumulative effect adjustment to Retained Earnings at the beginning of the earliest period presented. PSEG adopted this standard on January 1, 2020.affiliated subsidiaries. Adoption of this standard did not have an impact on the financial statements of PSEG, PSE&G, and PSEG Power.
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.
This standard requires application on a prospective basis and disclosure of 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. PSEG early adopted this standard in the fourth quarter of 2019, and recorded an impairment loss of $16 million in O&M Expense.
Codification Improvements to Financial Instruments—ASU 2020-03
This accounting standard provides clarification of guidance for financial instruments and makes narrow scope amendments related to various issues. PSEG adopted this standard effective upon issuance. Adoption of this standard did not have an impact on the financial statements of PSEG, PSE&G and PSEG Power.

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Facilitation of the Effects of Reference Rate Reform on Financial Reporting—ASU 2020-04
This accounting standard provides optional expedients and exceptions for applying GAAP to contract modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or another reference rate expected to be discontinued. The standard is effective from its issuance date, March 12, 2020, through December 31, 2022. PSEG adopted this standard effective upon issuance. Adoption of this standard did not have an impact on the financial statements of PSEG, PSE&G and PSEG Power.
New Standards Issued But Not Yet Adopted as of June 30, 2020
Disclosure Framework—Changes to the Disclosure Requirements for Defined Benefit Plans—ASU 2018-14
This accounting standard modifies the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans, including the elimination of certain current disclosure requirements. Certain other disclosure requirements related to interest crediting rates have been added and certain clarifications were made to other disclosure requirements.
The standard is effective for fiscal years ending after December 15, 2020 and early adoption is permitted. Amendments in this standard will be applied on a retrospective basis to all periods presented. PSEG is currently analyzing the impact of this standard on its disclosures.
Simplifying the Accounting for Income Taxes—ASU 2019-12
This accounting standard simplifies the accounting for income taxes, including the elimination of certain exceptions to current requirements. Certain other requirements related to franchise taxes that are partially based on income, step-up of tax basis of goodwill and allocation of consolidated taxes to legal entities have been added and certain clarifications were made to other requirements.
The standard is effective for fiscal years beginning after December 15, 2020 and early adoption is permitted. Certain amendments in this standard will be applied on a retrospective basis to all periods presented. Certain other amendments will be applied on either a retrospective basis for all periods presented or a modified retrospective basis through a cumulative effect adjustment to Retained Earnings as of the beginning of the fiscal year of adoption. All other amendments will be applied on a prospective basis. PSEG is currently analyzing the impact of this standard on its financial statements.
Clarifying the Interactions between Investments-Equity Securities, Investments-Equity Method and Joint Ventures, and Derivatives and Hedging—ASU 2020-01
This accounting standard clarifies that an entity should consider transaction prices for purposes of measuring the fair value of certain equity securities immediately before applying or upon discontinuing the equity method. This accounting standard also clarifies that when accounting for contracts entered into to purchase equity securities, an entity should not consider whether, upon the settlement of the forward contract or exercise of the purchased option, the underlying securities would be accounted for under the equity method or the fair value option.
The standard is effective for fiscal years beginning after December 15, 2020. Amendments inPSEG adopted this standard will be applied prospectively. PSEG is currently analyzing the impactprospectively on January 1, 2021. Adoption of this standard did not have an impact on itsthe financial statements.statements of PSEG, PSE&G and PSEG Power.

Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity—ASU 2020-06
This accounting standard simplifies the accounting for convertible debt and convertible preferred stock by removing the requirements to separately present certain conversion features in equity. In addition, the ASU eliminates certain criteria that must be satisfied in order to classify a contract as equity, which is expected to decrease the number of freestanding instruments and embedded derivatives accounted for as assets or liabilities. The ASU also revises the guidance on calculating earnings per share, requiring use of the if-converted method for all convertible instruments and rescinding the ability to rebut the presumption of share settlement for instruments that may be settled in cash or other assets.
The standard is effective for fiscal years beginning after December 15, 2020. PSEG adopted this standard on January 1, 2021 on a modified retrospective basis. Adoption of this standard did not have an impact on the financial statements of PSEG, PSE&G and PSEG Power.
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Codification Improvements to Callable Debt Securities—ASU 2020-08
This accounting standard clarifies that an entity should reevaluate for each reporting period whether a purchased callable debt security that has multiple call dates is within the scope of certain guidance on nonrefundable fees and other costs related to receivables.
The standard is effective for fiscal years beginning after December 15, 2020. PSEG adopted this standard prospectively on January 1, 2021. Adoption of this standard did not have an impact on the financial statements of PSEG, PSE&G and PSEG Power.
Codification Improvements—ASU 2020-10
This accounting standard conforms, clarifies, simplifies, and provides technical corrections to various codification topics.
The standard is effective for fiscal years beginning after December 15, 2020. PSEG adopted this standard on January 1, 2021. Adoption of this standard did not have an impact on the financial statements of PSEG, PSE&G and PSEG Power.
Reference Rate Reform Scope Refinement—ASU 2021-01
This accounting standard clarifies certain guidance related to derivative instruments affected by the market-wide change in the interest rates even if those derivatives do not reference the LIBOR or another rate that is expected to be discontinued as a result of reference rate reform. The accounting standard also clarifies other aspects of the relief provided in the reference rate reform GAAP guidance.
The standard is effective upon issuance and allows for retrospective or prospective application with certain conditions. PSEG adopted this standard prospectively in January 2021. Adoption of this standard did not have an impact on the financial statements of PSEG, PSE&G and PSEG Power.

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 PSEG 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 tariffs which are satisfied as the product(s) and/or service(s) are delivered to the customer. The electric and gas commodity and delivery tariffs are recurring contracts in effect until modified through the regulatory approval process as appropriate. 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 tariff using a FERC-approved annual formula rate mechanism. The performance obligation of transmission service is satisfied and revenue is recognized as it is provided to the customer. The

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formula rate mechanism provides for an annual filing of an estimated revenue requirement with rates effective January 1 of each year and a 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 on average within 30 days 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.
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PSEG 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 PSEG 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. PSEG 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. PSEG 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 Condensed Consolidated Statements of Operations. The classification depends on the net hourly activity.
PSEG Power enters into capacity sales and capacity purchases through the ISOs. The transactions are reported on a net basis dependent on PSEG 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, PSEG Power sells capacity through bilateral contracts and the related revenue is reported on a gross basis and recognized over time upon delivery of the capacity.
In April 2019, PSEG Power’s Salem 1, Salem 2 and Hope Creek nuclear plants were awarded Zero Emission Certificates (ZECs) by the BPU. These nuclear plants are expected to receive ZEC revenue for approximately three years, through May 2022, from the electric distribution companies (EDCs) in New Jersey. PSEG Power recognizes revenue when the units generate electricity, which is when the performance obligation is satisfied. These revenues are included in PJM Interconnection, L.L.C. (PJM) Sales in the following tables. See Note 4. Early Plant Retirements/Asset Dispositions for additional information.
Gas Contracts—PSEG Power sells wholesale natural gas, primarily through an index 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 remains in effect 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, PSEG 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
PSEG 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.
PSEG 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.
Revenues Unrelated to Contracts with Customers
PSEG 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 13. Financial Risk Management

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Activities for further discussion. PSEG 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
22
            
  PSE&G PSEG Power Other  Eliminations Consolidated 
  Millions 
 Three Months Ended June 30, 2020          
 Revenues from Contracts with Customers          
 Electric Distribution$723
 $—
 $—
 $—
 $723
 
 Gas Distribution278
 —
 —
 (2) 276
 
 Transmission378
 —
 —
 —
 378
 
 Electricity and Related Product Sales          
 PJM          
 Third-Party Sales—
 346
 —
 —
 346
 
 Sales to Affiliates—
 111
 —
 (111) —
 
 New York ISO—
 24
 —
 —
 24
 
 ISO New England—
 25
 —
 —
 25
 
 Gas Sales          
 Third-Party Sales—
 15
 —
 —
 15
 
 Sales to Affiliates—
 124
 —
 (124) —
 
 Other Revenues from Contracts with Customers (A)83
 14
 141
 —
 238
 
 Total Revenues from Contracts with Customers1,462
 659
 141
 (237) 2,025
 
 Revenues Unrelated to Contracts with Customers (B)(6) 24
 7
 —
 25
 
 Total Operating Revenues$1,456
 $683
 $148
 $(237) $2,050
 
            

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Disaggregation of Revenues
PSE&GPSEG PowerOther EliminationsConsolidated
Millions
Three Months Ended March 31, 2021
Revenues from Contracts with Customers
Electric Distribution$707 $0 $0 $0 $707 
Gas Distribution896 0 0 (3)893 
Transmission399 0 0 0 399 
Electricity and Related Product Sales
 PJM
Third-Party Sales0 471 0 0 471 
         Sales to Affiliates0 88 0 (88)0 
New York ISO0 48 0 0 48 
ISO New England0 51 0 0 51 
Gas Sales
Third-Party Sales0 60 0 0 60 
Sales to Affiliates0 410 0 (410)0 
Other Revenues from Contracts with Customers (A)75 10 141 (1)225 
Total Revenues from Contracts with Customers2,077 1,138 141 (502)2,854 
Revenues Unrelated to Contracts with Customers (B)(4)29 10 0 35 
Total Operating Revenues$2,073 $1,167 $151 $(502)$2,889 
PSE&GPSEG PowerOther EliminationsConsolidated
Millions
Three Months Ended March 31, 2020
Revenues from Contracts with Customers
Electric Distribution$649 $0 $0 $0 $649 
Gas Distribution731 0 0 (2)729 
Transmission366 0 0 0 366 
Electricity and Related Product Sales
 PJM
Third-Party Sales0 368 0 0 368 
         Sales to Affiliates0 121 0 (121)0 
New York ISO0 25 0 0 25 
ISO New England0 48 0 0 48 
Gas Sales
Third-Party Sales0 29 0 0 29 
Sales to Affiliates0 354 0 (354)0 
Other Revenues from Contracts with Customers (A)82 10 144 (1)235 
Total Revenues from Contracts with Customers1,828 955 144 (478)2,449 
Revenues Unrelated to Contracts with Customers (B)55 265 12 0 332 
Total Operating Revenues$1,883 $1,220 $156 $(478)$2,781 
23
            
  PSE&G PSEG Power Other  Eliminations Consolidated 
  Millions 
 Six Months Ended June 30, 2020          
 Revenues from Contracts with Customers          
 Electric Distribution$1,372
 $—
 $—
 $—
 $1,372
 
 Gas Distribution1,009
 —
 —
 (4) 1,005
 
 Transmission744
 —
 —
 —
 744
 
 Electricity and Related Product Sales          
  PJM          
 Third-Party Sales—
 714
 —
 —
 714
 
          Sales to Affiliates—
 232
 —
 (232) —
 
 New York ISO—
 49
 —
 —
 49
 
 ISO New England—
 73
 —
 —
 73
 
 Gas Sales          
 Third-Party Sales—
 44
 —
 —
 44
 
 Sales to Affiliates—
 478
 —
 (478) —
 
 Other Revenues from Contracts with Customers (A)165
 24
 285
 (1) 473
 
 Total Revenues from Contracts with Customers3,290
 1,614
 285
 (715) 4,474
 
 Revenues Unrelated to Contracts with Customers (B)49
 289
 19
 —
 357
 
 Total Operating Revenues$3,339
 $1,903
 $304
 $(715) $4,831
 
            
            
  PSE&G PSEG Power Other  Eliminations Consolidated 
  Millions 
 Three Months Ended June 30, 2019          
 Revenues from Contracts with Customers          
 Electric Distribution$775
 $—
 $—
 $—
 $775
 
 Gas Distribution211
 —
 —
 (3) 208
 
 Transmission304
 —
 —
 —
 304
 
 Electricity and Related Product Sales          
 PJM          
 Third-Party Sales—
 423
 —
 —
 423
 
 Sales to Affiliates—
 130
 —
 (130) —
 
 New York ISO—
 29
 —
 —
 29
 
 ISO New England—
 27
 —
 —
 27
 
 Gas Sales          
 Third-Party Sales—
 11
 —
 —
 11
 
 Sales to Affiliates—
 102
 —
 (102) —
 
 Other Revenues from Contracts with Customers (A)68
 14
 134
 (1) 215
 
 Total Revenues from Contracts with Customers1,358
 736
 134
 (236) 1,992
 
 Revenues Unrelated to Contracts with Customers (B)24
 347
 (47) —
 324
 
 Total Operating Revenues$1,382
 $1,083
 $87
 $(236) $2,316
 
            

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(A)Includes primarily revenues from appliance repair services and the sale of solar renewable energy certificates (SRECs) at auction at PSE&G, solar power projects and energy management and fuel service contracts with LIPA at PSEG Power, and PSEG LI’s OSA with LIPA in Other.
(B)Includes primarily alternative revenues at PSE&G, derivative contracts and lease contracts at PSEG Power, and lease contracts in Other.
            
  PSE&G PSEG Power Other  Eliminations Consolidated 
  Millions 
 Six Months Ended June 30, 2019          
 Revenues from Contracts with Customers          
 Electric Distribution$1,517
 $—
 $—
 $—
 $1,517
 
 Gas Distribution1,142
 —
 —
 (6) 1,136
 
 Transmission592
 —
 —
 —
 592
 
 Electricity and Related Product Sales          
  PJM          
 Third-Party Sales—
 938
 —
 —
 938
 
          Sales to Affiliates—
 256
 —
 (256) —
 
 New York ISO—
 70
 —
 —
 70
 
 ISO New England—
 48
 —
 —
 48
 
 Gas Sales          
 Third-Party Sales—
 58
 —
 —
 58
 
 Sales to Affiliates—
 581
 —
 (581) —
 
 Other Revenues from Contracts with Customers (A)132
 24
 265
 (2) 419
 
 Total Revenues from Contracts with Customers3,383
 1,975
 265
 (845) 4,778
 
 Revenues Unrelated to Contracts with Customers (B)31
 524
 (37) —
 518
 
 Total Operating Revenues$3,414
 $2,499
 $228
 $(845) $5,296
 
            
(A)Includes primarily revenues from appliance repair services at PSE&G, solar power projects and energy management and fuel service contracts with LIPA at PSEG Power, and PSEG LI’s OSA with LIPA in Other.
(B)Includes primarily alternative revenues at PSE&G, derivative contracts and lease contracts at PSEG Power, and lease contracts in Other.
Contract Balances
PSE&G
PSE&G did not have any material contract balances (rights to consideration for services already provided or obligations to provide services in the future for consideration already received) as of June 30, 2020March 31, 2021 and December 31, 2019.2020. Substantially all of PSE&G’s accounts receivable and unbilled revenues result from contracts with customers that are priced at tariff rates. Allowances represented approximately 10 percent16% and 6 percent14% of accounts receivable (including unbilled revenues in 2020)revenues) as of June 30, 2020March 31, 2021 and December 31, 2019,2020, respectively. As of December 31, 2019, there was no allowance for unbilled revenues. Effective January 1, 2020, PSE&G adopted ASU 2016-13 and recorded an allowance for unbilled revenues. See Note 2. Recent Accounting Standards.
Accounts Receivable—Allowance for Credit Losses
PSE&G’s accounts receivable, including unbilled revenues, is primarily comprised of utility customer receivables for the provision of electric and gas service and appliance services, and are reported in the balance sheet as gross outstanding amounts adjusted for an allowance for credit losses. The allowance for credit losses reflects PSE&G’s best estimate of losses on the account balances. The allowance is based on PSE&G’s projection of accounts receivable aging, historical experience, economic factors and other currently available evidence, including the estimated impact of the ongoing coronavirus pandemic (COVID-19) on the outstanding balances as of June 30, 2020.March 31, 2021. PSE&G’s electric bad debt expense is recoverable through its Societal Benefits Clause mechanism. As of March 31, 2021, PSE&G deferred incremental gas bad debt expense for future regulatory recovery due to the impact of the ongoing pandemic. See Note 6. Rate Filings for additional information.

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The following provides a reconciliation of PSE&G’s allowance for credit losses for the three months ended March 31, 2021 and six months ended June 30, 2020:2020:
    
  Three Months Ended June 30, 2020 
  Millions 
 Balance as of March 31, 2020$80
 
 Utility Customer Accounts  
       Provision45
 
       Write-offs, net of Recoveries of $1 Million(4) 
 Balance as of June 30, 2020$121
 
    
  Six Months Ended June 30, 2020 
  Millions 
 Balance as of January 1, 2020 (A)$68
 
 Utility Customer Accounts  
      Provision77
 
      Write-offs, net of Recoveries of $3 Million(24) 
 Balance as of June 30, 2020$121
 
    
20212020
Millions
Balance at Beginning of Year$206 $68 (A)
Utility Customer and Other Accounts
Provision44 32 
 Write-offs, net of Recoveries of $2 million in 2021 and 2020(11)(20)
Balance at End of Period$239 $80 
(A)Includes an $8 million pre-tax increase atupon adoption of ASU 2016-13. See Note 2. Recent Accounting Standards.     
PSEG Power
PSEG Power generally collects consideration upon satisfaction of performance obligations, and therefore, PSEG Power had no material contract balances as of June 30, 2020March 31, 2021 and December 31, 2019.2020.
PSEG Power’s accounts receivable include amounts resulting from contracts with customers and other contracts which are out of scope of accounting guidance for revenues from contracts with customers. The majority of these accounts receivable are subject to master netting agreements. As a result, accounts receivable resulting from contracts with customers and receivables unrelated to contracts with customers are netted within Accounts Receivable and Accounts Payable on the Condensed Consolidated Balance Sheets.
PSEG Power’s accounts receivable consist mainly of revenues from wholesale load contracts and capacity sales which are executed in the different ISO regions. PSEG Power also sells energy and ancillary services directly to ISOs and other counterparties. In the wholesale energy markets in which PSEG Power operates, payment for services rendered and products transferred are typically due within 30 days of month of delivery. As such, there is little credit risk associated with these receivables. PSEG Power did not record an allowance for credit losses for these receivables as of June 30, 2020.March 31, 2021. PSEG Power monitors the status of its counterparties on an ongoing basis to assess whether there are any anticipated credit losses.
Other
PSEG LI did not have any material contract balances as of June 30, 2020March 31, 2021 and December 31, 2019.2020.
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Remaining Performance Obligations under Fixed Consideration Contracts
PSEG Power and PSE&G primarily record revenues as allowed by the guidance, which states that if an entity has a right to consideration from a customer in an amount that corresponds directly with the value to the customer of the entity’s performance completed to date, the entity may recognize revenue in the amount to which the entity has a right to invoice. PSEG has future performance obligations under contracts with fixed consideration as follows:
PSEG Power
As previously stated, capacity transactions with ISOs are reported on a net basis dependent on PSEG Power’s monthly net sale or purchase position through the individual ISOs.
Capacity Revenues from the PJM Annual Base Residual and Incremental Auctions—The Base Residual Auction is generally conducted annually three years in advance of the operating period. The 2022/2023 auction has yetis expected to be held and is not expected untilin the first half of 2021. PSEG Power expects to realize the following average capacity prices resulting from the base and

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incremental auctions, including unit specific bilateral contracts for previously cleared capacity obligations.
       
 Delivery Year $ per MW-Day MW Cleared 
 June 2020 to May 2021 $168 7,900
 
 June 2021 to May 2022 $180 7,100
 
       
Delivery Year$ per MW-DayMW Cleared
June 2020 to May 2021$1677,600 
June 2021 to May 2022$1667,800 
Capacity Payments from the ISO New England Forward Capacity Market (FCM)—The FCM Auction is conducted annually three years in advance of the operating period. The table below includes PSEG Power’s cleared capacity in the FCM Auction for the Bridgeport Harbor Station 5 (BH5), which cleared the 2019/2020 auction at $231/MW-day for seven years, and the planned retirement of Bridgeport Harbor Station 3 (BH3) in May 2021. PSEG Power expects to realize the following average capacity prices for capacity obligations to be satisfied resulting from the FCM Auctions which have been completed through May 20242025 and the seven-year rate lock for BH5 through May 2026:
       
 Delivery Year $ per MW-Day (A) MW Cleared 
 June 2020 to May 2021 $195 1,330
 
 June 2021 to May 2022 $192 950
 
 June 2022 to May 2023 $179 950
 
 June 2023 to May 2024 $152 930
 
 June 2024 to May 2025 $231 480
 
 June 2025 to May 2026 $231 480
 
       
Delivery Year$ per MW-Day (A)MW Cleared
June 2020 to May 2021$1951,330 
June 2021 to May 2022$192950 
June 2022 to May 2023$179950 
June 2023 to May 2024$152930 
June 2024 to May 2025$158950 
June 2025 to May 2026$231480 

(A)    Capacity cleared prices for BH5 through 2026 will be escalated based upon the Handy-Whitman Index. These adjustments are not included above.
(A)Capacity cleared prices for BH5 through 2026 will be escalated based upon the Handy-Whitman Index. These adjustments are not included above.
Bilateral capacity contracts—Capacity obligations pursuant to contract terms through 2029 are anticipated to result in revenues totaling $154$147 million.
Other
The LIPA OSA is a 12-year services contract ending in 2025 with annual fixed and incentive components. The fixed fee for the provision of services thereunder in 20202021 is $67$68 million and could increaseis updated each year based on the change in the Consumer Price Index.

Note 4. Early Plant Retirements/Asset Dispositions
Nuclear
In April 2019, PSEG Power’s Salem 1, Salem 2 and Hope Creek nuclear plants were awarded ZECs by the BPU. Pursuant to a process established by the BPU, ZECs are purchased from selected nuclear plants and recovered through a non-bypassable distribution charge in the amount of $0.004 per kilowatt-hour (KWh) used (which is equivalent to approximately $10 per megawatt hour (MWh) generated in payments to selected nuclear plants (ZEC payment)). TheseEach nuclear plant is expected to
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receive ZEC revenue for approximately three years, through May 2022.
In April 2021, PSEG Power’s Salem 1, Salem 2 and Hope Creek nuclear plants arewere awarded ZECs for the three-year eligibility period starting June 2022 at the same approximate $10 per MWh received during the current ZEC period through May 2022 referenced above. As a result, each nuclear plant is expected to receive ZEC revenue for approximately three years through May 2022,starting June 2022. The terms and will be obligatedconditions of this April 2021 ZEC award are generally similar to maintainthe current ZEC period as discussed above.
The award of ZECs attaches certain obligations, including an obligation to repay the ZECs in the event that a plant ceases operations during the approximate three-year period that period,it was awarded ZECs, subject to certain exceptions specified in the ZEC legislation. PSEG Power has and will continue to recognize revenue monthly as the nuclear plants generate electricity and satisfy their performance obligations. TheFurther, the ZEC payment may be adjusted by the BPU (a) at any time to offset environmental or fuel diversity payments that a selected nuclear plant may receive from another source or (b) at certain times specified in the ZEC legislation if the BPU determines that the purposes of the ZEC legislation can be achieved through a reduced charge that will nonetheless be sufficient to achieve the state’s air quality and other environmental objectives by preventing the retirement of nuclear plants.source. For instance, the New Jersey Division of Rate Counsel (New Jersey Rate Counsel), in written comments filed with the BPU, has advocated for the BPU to offset market benefits resulting from New Jersey’s rejoining the Regional Greenhouse Gas Initiative from the ZEC payment. PSEG intends to vigorously defend against these arguments. Due to its preliminary nature, PSEG cannot predict the outcome of this matter.
The BPU’s April 2019 decision awarding ZECs through May 2022 has been appealed by the New Jersey Rate Counsel. In March 2021, the New Jersey Appellate Division affirmed the BPU’s April 2019 decision granting ZECs for the first eligibility period. In April 2021, New Jersey Rate Counsel has petitioned to the New Jersey Supreme Court for further appellate review. PSEG cannot predict the outcome of this matter. The BPU issued an order in May 2020 outlining the process for applying for ZECs for the next three-year eligibility period starting in June 2022 and is expected to issue a decision regarding any ZEC applications and any change in the amount of future ZEC payments by April 2021. PSEG Power is not aware of any changes that would materially affect its ability to

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establish eligibility to be awarded ZECs under the application requirements that resulted in the award of ZECs to Salem 1, Salem 2 and Hope Creek in April 2019. However, PSEG Power cannot predict whether other plants besides Salem 1, Salem 2 and Hope Creek will apply for ZECs in the future. In the event that (i) the ZEC program is overturned or is otherwise materially adversely modified through legal process,process; or (ii) the terms and conditions of the subsequent period under the ZEC program, including the amount of ZEC payments that may be awarded, materially differ from those of the current ZEC period, or (iii) any of the Salem 1, Salem 2 and Hope Creek plants is not awarded ZEC payments by the BPUsufficiently valued for its environmental, fuel diversity or resilience attributes in future periods and does not otherwise experience a material financial change that would remove the need for such attributes to be sufficiently valued, PSEG Power will take all necessary steps to retirecease to operate all of these plants subsequent to the initial ZEC period at or prior to a scheduled refueling outage.plants. Alternatively, if alleven with sufficient valuation of the Salem 1, Salem 2 and Hope Creek plants are selected to continue to receive ZEC payments butthese attributes, if the financial condition of the plants is materially adversely impacted by changes in commodity prices, FERC’s changes to the capacity market construct (absent sufficient capacity revenues provided under a program approved by the BPU in accordance with a FERC-authorized capacity mechanism), or, in the case of the Salem nuclear plants, decisions by the EPA and state environmental regulators regarding the implementation of Section 316(b) of the Clean Water Act (CWA) and related state regulations, or other factors, PSEG Power would stillwill take all necessary steps to retirecease to operate all of these plants. The costs and accounting charges associated with any such retirement, which may include, among other things, accelerated Depreciation and Amortization Expense, impairment charges, potential penalties associated with the early terminationCeasing operations of capacity obligations and fuel contracts, accelerated asset retirement costs, severance costs, environmental remediation costs and,these plants would result in certain circumstances potential additional funding of the Nuclear Decommissioning Trust Fund, would bea material to both PSEGadverse impact on PSEG’s and PSEG Power.Power’s results of operations.
Non-Nuclear
OnIn July 31, 2020, PSEG announced that it is exploring strategic alternatives for PSEG Power’s non-nuclear generating fleet, which includes more than 6,750 MW of fossil generation located in New Jersey, Connecticut, New York and Maryland as well as the 467 MW Solar Source portfolio located in various states. PSEG intends to retain ownership of PSEG Power’s existing nuclear fleet. While the company is in the preliminary stageThe marketing of this evaluation, marketing a potential transaction in one or a series of steps anticipated to launchlaunched in the fourth quarter of this year,2020, and any potential transaction is expected to be completed sometime in 2021. As a result of the strategic review of PSEG Power’s non-nuclear generating assets, and the launch in the fourth quarter of 2020 of an associated marketing process for their potential disposition, PSEG Power has performed an impairment assessment of its PJM, NYISO and ISO-NE asset groupings, as well as for its solar assets, as of each quarter end. The assessments included probability weightings assigned to undiscounted cash flow scenarios of retaining the assets through the end of their estimated useful lives and a successful disposition of the non-nuclear assets in 2021. Estimates of cash flows associated with a sale scenario were based on management’s expectations of the fair value of such assets. The probability weighted aggregation of undiscounted cash flows for each of the asset groupings expected to result from the use and potential disposition of the asset groups exceeded their carrying value at the assessment dates. As such, it demonstrated that no impairment exists for any of the asset groupings and they continue to remain classified as held-for-use as of March 31, 2021. However, certain assumptions are subject to change as the potential sales and marketing process progresses. The net book value of the fossil generation and of the solar Property, Plant and Equipment (net of eligible investment tax credits) was approximately $4.5 billion and $550 million, respectively, as of March 31, 2021.
In May 2021, PSEG Power Ventures LLC (Power Ventures), a direct wholly owned subsidiary of PSEG Power, entered into a purchase agreement with Quattro Solar, LLC, an affiliate of LS Power, relating to the sale by Power Ventures of 100% of its ownership interest in PSEG Solar Source LLC (Solar Source) including its related assets and liabilities. The transaction is expected to close during the second or third quarter of 2021, subject to certain closing conditions, adjustments and regulatory approvals. As a result, the assets and liabilities of Solar Source will be classified as Assets Held for Sale beginning in the
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second quarter of 2021. The net carrying value of the assets and liabilities to be sold is approximately $500 million as of March 31, 2021.
There is no assurance that the strategic review will result in a sale or other disposition of all or any portion of thesethe fossil generation assets on terms that are favorable to us, or at all. Any transaction would be subject to market conditions and customary closing conditions, including the receipt of all required regulatory approvals. AManagement expects that a change in the held for useprobability of a successful disposition based upon further progression in the marketing process, but prior to meeting all necessary held-for-sale classification criteria, would result in an impairment of the remaining fossilISO-NE asset grouping, which would be material. Furthermore, a change to a held-for-sale classification from a held-for-use classification would result in an impairment of the PJM, NYISO and solar units may have a material adverse impact on PSEG’s and PSEG Power’s future financial results.ISO-NE asset groupings, which would be material.
In February 2020, PSEG Fossil LLC (Fossil), a direct wholly owned subsidiary of PSEG Power, entered into a Purchase Agreement with Yards Creek Energy, LLC (Yards Creek Energy), an affiliate of LS Power, relating to the sale by Fossil of its ownership interests in the Yards Creek generation facility and related assets, including the assumption by Yards Creek Energy of related liabilities. The transaction is expected to close during the second half of 2020, subject to customary closing conditions and regulatory approvals. As a result, $29 million and $28 million of Property, Plant and Equipment have been classified as Assets Held for Sale on PSEG’s and PSEG Power’s Condensed Consolidated Balance Sheets as of June 30, 2020 and December 31, 2019, respectively.
In September 2019, PSEG Power completed the sale of its ownership interests in the Keystone and Conemaugh generation plants and related assets and liabilities. PSEG Power recorded a pre-tax loss on disposition of approximately $400 million in the second quarter of 2019 as the sale price was less than book value.

Note 5. Variable Interest Entity (VIE)
VIE for which PSEG LI is the Primary Beneficiary
PSEG LI consolidates Servco, a marginally capitalized VIE, which was created for the purpose of operating LIPA’s T&D system in Long Island, New York as well as providing administrative support functions to LIPA. PSEG LI is the primary beneficiary of Servco because it directs the operations of Servco, the activity that most significantly impacts Servco’s economic performance and it has the obligation to absorb losses of Servco that could potentially be significant to Servco. Such losses would be immaterial to PSEG.
Pursuant to the OSA, Servco’s operating costs are reimbursablepaid entirely by LIPA, and therefore, PSEG LI’s risk is limited related to the activities of Servco. PSEG LI has no current obligation to provide direct financial support to Servco. In addition to reimbursementpayment of Servco’s operating costs as provided for in the OSA, PSEG LI receives an annual contract management fee. PSEG LI’s annual contractual management fee, in certain situations, could be partially offset by Servco’s annual storm costs not approved by the Federal Emergency Management Agency, limited contingent liabilities and penalties for failing to meet certain performance metrics.

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For transactions in which Servco acts as principal and controls the services provided to LIPA, such as transactions with its employees for labor and labor-related activities, including pension and OPEB-related transactions, Servco records revenues and the related pass-through expenditures separately in Operating Revenues and O&MOperation and Maintenance (O&M) Expense, respectively. Servco recorded $125$123 million and $118$127 million for the three months ended March 31, 2021 and $252 million and $233 million for the six months ended June 30, 2020, and 2019, respectively, of O&M costs, the full reimbursement of which was reflected in Operating Revenues. For transactions in which Servco acts as an agent for LIPA, it records revenues and the related expenses on a net basis, resulting in no impact on PSEG’s Condensed Consolidated Statement of Operations.

Note 6. Rate Filings
This Note should be read in conjunction with Note 7. Regulatory Assets and Liabilities to the Consolidated Financial Statements in the Annual Report on Form 10-K for the year ended December 31, 2019.2020.
In addition to items previously reported in the Annual Report on Form 10-K, significant regulatory orders received and currently pending rate filings with FERC and the BPU are as follows:
COVID-19 Deferral—BGSS—In July 2020,March 2021, the BPU authorized regulated utilities in the State of New Jerseygave final approval to create a COVID-19-related Regulatory Asset by deferring on their books and records the prudently incurred incremental costs related to COVID-19 beginning on March 9, 2020 through September 30, 2021, or 60 days after the New Jersey governor determines that the Public Health Emergency is no longer in effect, or in the absence of such a determination, 60 days from the time the Public Health Emergency automatically terminates by law, whichever is later. Deferred costs should be offset by any federal or state assistance that the utility may receive as a direct result of the COVID-19 pandemic. Utilities must file quarterly reports of the costs incurred and offsets, with the first quarterly report due on August 1, 2020 for the period ending June 30, 2020.
Each New Jersey utility regulated by the BPU must file a petition by December 31, 2021, or within 60 days of the close of the Regulatory Asset period as described above, whichever is later. Any potential rate recovery, including any prudency determinations and the appropriate period of recovery, will be addressed through that filing, or in the alternative, the utility may request that the BPU defer consideration of rate recovery for a future base rate case.
PSE&G will make its first filing on August 3, 2020 and is evaluating the order and the deferral amounts that would be allowed under the order and expects to record a deferral commencing in the third quarter of 2020.
Transmission Formula Rates—In June 2020, PSE&G filed its 2019 true-up adjustment pertaining to its transmission formula rates in effect for 2019. This filing resulted in an additional annual revenue requirement of $24 million more than the 2019 originally filed revenue.
In April 2020, the Internal Revenue Service (IRS) issued a Private Letter Ruling (PLR) to PSE&G concluding that certain excess deferred taxes previously classified as protected should be classified as unprotected. Unprotected excess deferred income taxes are not subject to the normalization rules allowing them to be refunded to customers sooner as agreed to with FERC and the BPU. In July 2020, FERC approved PSE&G’s request to allow the entire amount of these unprotected excess deferred income taxes be returned to customers in the 2019 true-up filing.
PSE&G had previously recognized the majority of the revenue requirement true-up in its 2019 Consolidated Statement of Operations, except for the revenue reduction resulting from the flowback of the additional unprotected excess deferred income taxes which reduces the revenue requirement by $37 million. The related revenue reduction for the excess deferred income tax adjustment will be recognized in the third quarter of 2020, and included as a 2021 reduction to transmission rates.
Basic Gas Supply Service (BGSS)—In June 2020, PSE&G made its annual BGSS filing with the BPU requesting to maintain the current BGSS rate of 32 cents. Ifcents per therm which had been provisionally approved the BGSS rate would remain in place beginningeffective October 1, 2020. This matter is pending.
Gas System Modernization Program II (GSMP II)—COVID-19 Deferral—PSE&G continues to make quarterly filings as required by the BPU and has recorded a Regulatory Asset as of March 31, 2021 of approximately $60 million for net incremental costs, including $35 million for incremental gas bad debt expense associated with customer accounts receivable, which PSE&G expects are probable of recovery under the BPU order.
Energy Strong II—In July 2020,April 2021, the BPU approved PSE&G’s filing for a $13 million revenue increase under this investment program, effective May, 2021.
GSMP II cost recoveryII—In March 2021, PSE&G updated its petition requesting approximately $18 millionpreviously filed in gas revenues on an annual basis, which included GSMP II investments in service as of February 29, 2020. The increase was effective July 16, 2020.
In JuneDecember 2020 PSE&G filed a GSMP II cost recovery petition seeking BPU approval to recover in gas base rates an estimated annual revenue increase of $22approximately $21 million effective DecemberJune 1, 2020. This increase represents2021 representing the return on and of GSMP II investments expected to beplaced in service through August 31, 2020. This request will be updated in September 2020 for actual costs.February 2021.
Tax Adjustment Credit (TAC)—In July 2020, the BPU gave final approval to PSE&G’s TAC filing that had been approved on a provisional basis in January 2020, with additional credits included in the final ruling. The final approval provides for a reduction to electric and gas revenues of $25 million and $29 million, respectively, on an annual basis effective July 16, 2020.
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As discussed above, PSE&G received a PLR from the IRS in April 2020 that concluded thatcertain excess deferred taxes previously classified as protected should be classified as unprotected. Unprotected excess deferred income taxes are not subject to the tax normalization rules allowing them to be refunded to customers sooner as agreed to with the BPU. As part of a procedural discovery to obtain the BPU’s final approval, PSE&G proposed that it change its current provisional TAC rates to increase the credit and start flowing back these unprotected amounts starting in July 2020 through December 31, 2024, which the BPU approved. This resulted in a total additional credit to electric and gas customers of $50 million and $46 million, respectively, of which $10 million and $19 million will be flowed back annually, effective July 16, 2020 for electric and gas, respectively.
Weather Normalization Charge (WNC)—In June 2020, PSE&G filed its 2019-2020 WNC petition seeking to recover an undercollection of $34 million from customers over the 2020-2021 Winter Period. The undercollection is the result of deficient revenues from the warmer-than-normal 2019-2020 Winter Period. This matter is pending.
Green Program Recovery Charge (GPRC)—In June 2020, PSE&G filed its 2020 GPRC cost recovery petition requesting recovery of approximately $67 million and $20 million in electric and gas revenues, respectively, on an annual basis. This matter is pending.
Transition Incentive Program—In 2019, the BPU approved an order establishing a Transition Incentive Program to serve as a bridge between the existing Solar Renewable Energy Certificate (SREC) program and a to-be-established successor program and created a new incentive mechanism known as Transition Renewable Incentive Certificates (TRECs). TRECs will be awarded to qualifying solar projects under the new program. In the TREC Order, the BPU directed the New Jersey EDCs to engage a TREC Administrator to acquire, on behalf of the EDCs. TRECs produced by eligible solar projects, which will be funded through a TREC charge to electric customers collected by the EDCs. The order allows the EDCs to recover their costs associated with the TREC program in an annual filing, subject to approval by the BPU. 
In April 2020, PSE&G filed for increased rates of approximately $23 million annually for recovery of its expected share of TREC costs. PSE&G’s filing proposes to recover the revenue requirements associated with the TREC Program as a new component of PSE&G’s existing electric GPRC. This matter is pending.

Note 7. Leases
PSEG and its subsidiaries are both a lessor and a lessee in operating leases. As of June 30, 2020,March 31, 2021, PSEG and its subsidiaries were lessors for leases classified as operating leases or leveraged leases. See Note 8. Financing Receivables. There was no significant change in amounts reported in Note 8. Leases in the Annual Report on Form 10-K for the year ended December 31, 20192020 for operating leases in which PSEG and its subsidiaries are lessees.
PSEG and its subsidiaries, as lessors, have lease agreements with lease and non-lease components, which are primarily related to generating facilities. Rental income from these leases is included in Operating Revenues.
PSEG Power
Certain of PSEG Power’s sales agreements related to its solar generating plants qualify as operating leases with remaining terms through 2043 with no extension terms. Lease income is based on solar energy generation; therefore, all rental income is variable under these leases.
Other
Energy Holdings is the lessor in leveraged leases. Leveraged lease accounting guidance is grandfathered for existing leveraged leases. If modified after January 1, 2019, such leveraged leases will be accounted for as operating, direct financing, or sales-type leases.See Note 8. Financing Receivables.
Energy Holdings is the lessor in antwo operating leaseleases for a domestic energy generation facilityfacilities with a remaining termterms through 2036.2036, one of which has an optional renewal period. Energy Holdings was previously the lessor in operating leases for real estate assets which were sold in March 2020.

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The following is the operating lease income for PSEG Power and Energy Holdings for the three and six months ended June 30, 2020March 31, 2021 and 2019:2020:
PSEG PowerEnergy HoldingsTotal
Millions
Operating Lease Income
Three Months Ended March 31, 2021
Fixed Lease Income$0 $5 $5 
Variable Lease Income5 0 5 
Total Operating Lease Income$5 $5 $10 
Three Months Ended March 31, 2020
Fixed Lease Income$0 $5 $5 
Variable Lease Income5 0 5 
Total Operating Lease Income$5 $5 $10 
        
  PSEG Power Energy Holdings Total 
  Millions 
 Operating Lease Income    

 
 Three Months Ended June 30, 2020      
 Fixed Lease Income$—
 $3
 $3
 
 Variable Lease Income8
 —
 8
 
 Total Operating Lease Income$8
 $3
 $11
 
 Six Months Ended June 30, 2020      
 Fixed Lease Income$—
 $8
 $8
 
 Variable Lease Income13
 —
 13
 
 Total Operating Lease Income$13
 $8
 $21
 
        
 Three Months Ended June 30, 2019      
 Fixed Lease Income$—
 $6
 $6
 
 Variable Lease Income8
 —
 8
 
 Total Operating Lease Income$8
 $6
 $14
 
 Six Months Ended June 30, 2019      
 Fixed Lease Income$—
 $11
 $11
 
 Variable Lease Income12
 —
 12
 
 Total Operating Lease Income$12
 $11
 $23
 
        


Note 8. Financing Receivables
PSE&G
PSE&G’s Solar Loan Programs are designed to help finance the installation of solar power systems throughout its electric service area. Interest income on the loans is recorded on an accrual basis. The loans are paid back with SRECs generated from the related installed solar electric system. PSE&G uses collection experience as a credit quality indicator for its Solar Loan Programs and conducts a comprehensive credit review for all prospective borrowers. As of June 30, 2020,March 31, 2021, none of the solar loans were impaired; however, in the event of a loan default or if a loan becomes impaired, the basis of the solar loan would be recovered through a regulatory recovery mechanism. As of June 30, 2020,March 31, 2021, none of the solar loans were delinquent and no loans are currently expected to become delinquent in light of the payment mechanism. Therefore, no current credit losses have been recorded for Solar Loan Programs I, II and III. A substantial portion of these amounts are noncurrent and reported in Long-Term Investments on PSEG’s and PSE&G’s Condensed Consolidated Balance Sheets. The following table reflects the outstanding loans by class of customer, none of which would be considered “non-performing.”
       
 Outstanding Loans by Class of Customer 
   As of As of 
 Consumer Loans June 30,
2020		 December 31,
2019		 
   Millions 
 Commercial/Industrial $154
 $156
 
 Residential 7
 8
 
 Total $161
 $164
 
 Current Portion (included in Accounts Receivable) (29) (28) 
 Noncurrent Portion (included in Long-Term Investments) $132
 $136
 
       
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As of
Outstanding Loans by Class of CustomersMarch 31,
2021		December 31,
2020
Millions
Commercial/Industrial$144 $145 
Residential6 6 
Total150 151 
Current Portion (included in Accounts Receivable)(29)(29)
Noncurrent Portion (included in Long-Term Investments)$121 $122 
The solar loans originated under three Solar Loan Programs are comprised as follows:
           
 Programs Balance as of June 30, 2020 Funding Provided Residential Loan Term Non-Residential Loan Term 
   Millions       
 Solar Loan I $24
 prior to 2013 10 years 15 years 
 Solar Loan II 77
 prior to 2015 10 years 15 years 
 Solar Loan III 60
 largely funded as of December 31, 2019 10 years 10 years 
 Total $161
       
           
ProgramsBalance as of March 31, 2021Funding ProvidedResidential Loan TermNon-Residential Loan Term
Millions
Solar Loan I$19 prior to 201310 years15 years
Solar Loan II69 prior to 201510 years15 years
Solar Loan III62 largely funded as of March 31, 202110 years10 years
Total$150 
The average life of loans paid in full is seveneight years, which is lower than the loan terms of 10 to 15 years due to the generation of SRECs being greater than expected and/or cash payments made to the loan. Payments on all outstanding loans were current as of June 30, 2020March 31, 2021 and have an average remaining life of approximately four years.
Energy Holdings
Energy Holdings, through several of its indirect subsidiaries, has investments in domestic energy and real estate assets subject primarily to leveraged lease accounting. A leveraged lease is typically comprised of an investment by an equity investor and debt provided by a third-party debt investor. The debt is recourse only to the assets subject to lease and is not included on PSEG’s Condensed Consolidated Balance Sheets. As an equity investor, Energy Holdings’ equity investments in the leases are comprised of the total expected lease receivables over the lease terms plus the estimated residual values at the end of the lease terms, reduced for any income not yet earned on the leases. This amount is included in Long-Term Investments on PSEG’s Condensed Consolidated Balance Sheets. The more rapid depreciation of the leased property for tax purposes creates tax cash flow that will be repaid to the taxing authority in later periods. As such, the liability for such taxes due is recorded in Deferred Income Taxes on PSEG’s Condensed Consolidated Balance Sheets.
In the second quarter of 2020, Energy Holdings completed its annual review of estimated residual values embedded in domestic energy leveraged leases and determined no impairments were necessary. During the second quarter of 2019, the outcome of Energy Holdings’ annual review indicated that the updated residual value estimate of the coal-fired Powerton lease was lower than the recorded residual value and the decline was deemed to be other than temporary as a result of expected future adverse market conditions. As a result, a pre-tax write-down of $58 million was reflected in Operating Revenues in the quarter ended June 30, 2019, calculated by comparing the gross investment in the leases before and after the revised residual estimates.
On July 22, 2020, wholly owned subsidiaries of PSEG Energy Holdings L.L.C. (the Sellers) entered into a Purchase Agreement with Midwest Generation, LLC (the Buyer) relating to the sale by Sellers of their ownership interests in the Powerton and Joliet generation facilities and related assets, including the assumption by the Buyer of related liabilities. The transaction is targeted to close during the second half of 2020, subject to customary closing conditions and regulatory approvals. PSEG will reclassify approximately $160 million of assets as Assets Held for Sale on its Condensed Consolidated Balance Sheet in the third quarter of 2020.Any gain or loss, net of taxes, resulting from the transaction is anticipated to be immaterial.
Leveraged leases outstanding as of June 30, 2020March 31, 2021 commenced in or prior to 2000. The following table shows Energy Holdings’ gross and net lease investment as of June 30, 2020March 31, 2021 and December 31, 2019.2020.
      
  As of As of 
  June 30,
2020		 December 31,
2019		 
  Millions 
 Lease Receivables (net of Non-Recourse Debt)$470
 $498
 
 Estimated Residual Value of Leased Assets198
 202
 
 Total Investment in Rental Receivables668
 700
 
 Unearned and Deferred Income(192) (203) 
 Gross Investments in Leases476
 497
 
 Deferred Tax Liabilities(323) (328) 
 Net Investments in Leases$153
 $169
 
      
As ofAs of
March 31,
2021		December 31,
2020
Millions
Lease Receivables (net of Non-Recourse Debt)$274 $299 
Estimated Residual Value of Leased Assets55 55 
Total Investment in Rental Receivables329 354 
Unearned and Deferred Income(100)(104)
Gross Investments in Leases229 250 
Deferred Tax Liabilities(60)(64)
Net Investments in Leases$169 $186 
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The corresponding receivables associated with the lease portfolio are reflected as follows, net of non-recourse debt. The ratings in the table represent the ratings of the entities providing payment assurance to Energy Holdings.
     
   
Lease Receivables, Net of
Non-Recourse Debt
 
 Counterparties' Standard & Poor's (S&P) Credit Rating as of June 30, 2020   
  As of June 30, 2020 
   Millions 
 AA $9
 
 A- 54
 
 BBB+ to BBB 237
 
 BB 132
 
 NR 38
 
 Total $470
 
     
Lease Receivables, Net of
Non-Recourse Debt
Counterparties' Standard & Poor's (S&P) Credit Rating as of March 31, 2021
As of March 31, 2021
Millions
AA$8 
A-51 
BBB+ to BBB178 
BB+37 
Total$274
The “BB” and the “NR” ratings“BB+” rating in the preceding table representrepresents a lease receivablesreceivable related to coal and gas-fired assets in Illinois and Pennsylvania, respectively.Merrill Creek Reservoir. Metropolitan Edison Company (a subsidiary of First Energy) is the lease counterparty. As of June 30, 2020,March 31, 2021, the gross investment in the leases of such assets, net of non-recourse debt,this lease was $235$23 million ($(25) ($18 million,, net of deferred taxes).
A more detailed description of such assets under lease is presented in the following table.
                 
 Asset Location 
Gross
Investment
 
%
Owned
 Total MW 
Fuel
Type
 
Counterparties’
S&P Credit
Ratings
 Counterparty 
     Millions           
 Powerton Station Units 5 and 6 IL $75
 64% 1,538
 Coal BB NRG Energy, Inc. 
 Joliet Station Units 7 and 8 IL $85
 64% 1,036
 Gas BB NRG Energy, Inc. 
 Shawville Station Units 1, 2, 3 and 4 PA $75
 100% 596
 Gas NR Shawville Power, LLC 
                 

The credit exposure for lessors is partially mitigated through various credit enhancement mechanisms within the lease structures. These credit enhancement features vary from lease to lease. The existing leveraged leases are either with counterparties with strong credit ratings, or with counterparties that are supplying parent guarantees or other credit support. PSEG believesrecorded no credit losses are necessary for the leveraged leases existing on June 30, 2020.March 31, 2021. Upon the occurrence of certain defaults, indirect subsidiaries of Energy Holdings would exercise their rights and seek recovery of their investment, potentially including stepping into the lease directly to protect their investments. While these actions could ultimately protect or mitigate the loss of value, they could require the use of significant capital and trigger certain material tax obligations which could, for certain leases, wholly or partially be mitigated by tax indemnification claims against the counterparty. A bankruptcy of a lessee would likely delay and potentially limit any efforts on the part of the lessors to assert their rights upon default and could delay the monetization of claims.
Additional factors that may impact future lease cash flows include, but are not limited to, new environmental legislation and regulation regarding air quality, water and other discharges in the process of generating electricity, market prices for fuel, electricity and capacity, overall financial condition of lease counterparties and their affiliates and the quality and condition of assets under lease.


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


Note 9. Trust Investments
Nuclear Decommissioning Trust (NDT) Fund
PSEG Power maintains an external master NDT to fund its share of decommissioning costs for its 5 nuclear facilities upon their respective termination of operation. The trust contains two separate funds: a qualified fund and a non-qualified fund. Section 468A of the Internal Revenue Code limits the amount of money that can be contributed into a qualified fund. The funds are managed by third-party investment managers who operate under investment guidelines developed by PSEG Power.
The following tables show the fair values and gross unrealized gains and losses for the securities held in the NDT Fund.
 As of March 31, 2021
CostGross
Unrealized
Gains		Gross
Unrealized
Losses		Fair
Value
 Millions
Equity Securities
Domestic$482 $308 $(1)$789 
International365 140 (8)497 
Total Equity Securities847 448 (9)1,286 
Available-for-Sale Debt Securities
Government636 13 (12)637 
Corporate587 21 (8)600 
Total Available-for-Sale Debt Securities1,223 34 (20)1,237 
Total NDT Fund Investments (A)$2,070 $482 $(29)$2,523 
(A)The NDT Fund Investments table excludes cash of $1 million and foreign currency of $1 million as of March 31, 2021, which are part of the NDT Fund.
30
          
  As of June 30, 2020 
  Cost 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
 
  Millions 
 Equity Securities        
 Domestic$436
 $244
 $(11) $669
 
 International395
 79
 (26) 448
 
 Total Equity Securities831
 323
 (37) 1,117
 
 Available-for-Sale Debt Securities        
 Government513
 33
 —
 546
 
 Corporate554
 35
 (2) 587
 
 Total Available-for-Sale Debt Securities1,067
 68
 (2) 1,133
 
 Total NDT Fund Investments (A)$1,898
 $391
 $(39) $2,250
 
          
(A)The NDT Fund Investments table excludes foreign currency of $1 million as of June 30, 2020, which is part of the NDT Fund.
          
  As of December 31, 2019 
  Cost 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
 
  Millions 
 Equity Securities        
 Domestic$425
 $238
 $(4) $659
 
 International400
 103
 (11) 492
 
 Total Equity Securities825
 341
 (15) 1,151
 
 Available-for-Sale Debt Securities        
 Government563
 16
 (2) 577
 
 Corporate470
 17
 (1) 486
 
 Total Available-for-Sale Debt Securities1,033
 33
 (3) 1,063
 
 Total NDT Fund Investments (A)$1,858
 $374
 $(18) $2,214
 
          

(A)The NDT Fund Investments table excludes foreign currency of $2 million as of December 31, 2019, which is part of the NDT Fund.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Table of Contents

As of December 31, 2020
CostGross
Unrealized
Gains		Gross
Unrealized
Losses		Fair
Value
Millions
Equity Securities
Domestic$519 $305 $(3)$821 
International388 152 (9)531 
Total Equity Securities907 457 (12)1,352 
Available-for-Sale Debt Securities
Government555 27 (1)581 
Corporate528 39 (1)566 
Total Available-for-Sale Debt Securities1,083 66 (2)1,147 
Total NDT Fund Investments (A)$1,990 $523 $(14)$2,499 
(A)The NDT Fund Investments table excludes foreign currency of $2 million as of December 31, 2020, which is part of the NDT Fund.
Net unrealized gains (losses) on debt securities of $38$8 million (after-tax) were included in Accumulated Other Comprehensive Loss on PSEG’s and PSEG Power’s Condensed Consolidated Balance Sheets as of June 30, 2020. An impairment of debt securities of $(3) million was included in Net Gains (Losses) on Trust Investments on PSEG Power’s Condensed Consolidated Statement of Operations for the six months ended June 30, 2020.March 31, 2021. The portion of net unrealized gains (losses) recognized during the second quarter and first half of 2020 related to equity securities still held as of June 30, 2020March 31, 2021 recognized during the first three months of 2021 was $172 million and $(1) million, respectively.$24 million.
The amounts in the preceding tables do not include receivables and payables for NDT Fund transactions which have not settled at the end of each period. Such amounts are included in Accounts Receivable and Accounts Payable on the Condensed Consolidated Balance Sheets as shown in the following table.
As ofAs of
March 31,
2021		December 31,
2020
Millions
Accounts Receivable$15 $11 
Accounts Payable$22 $12 
31


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


      
  As of As of 
  June 30,
2020		 December 31,
2019		 
  Millions 
 Accounts Receivable$13
 $11
 
 Accounts Payable$17
 $11
 
      

The following table shows the value of securities in the NDT Fund that have been in an unrealized loss position for less than and greater than 12 months.
As of March 31, 2021As of December 31, 2020
Less Than 12
Months		Greater Than 12
Months		Less Than 12
Months		Greater Than 12
Months
Fair
Value		Gross
Unrealized
Losses		Fair
Value		Gross
Unrealized
Losses		Fair
Value		Gross
Unrealized
Losses		Fair
Value		Gross
Unrealized
Losses
Millions
Equity Securities (A)
Domestic$56 $(1)$2 $0 $23 $(2)$6 $(1)
International42 (4)20 (4)26 (2)27 (7)
Total Equity Securities98 (5)22 (4)49 (4)33 (8)
Available-for-Sale Debt Securities
Government (B)299 (12)1 0 72 (1)0 0 
Corporate (C)203 (8)9 0 31 (1)7 0 
Total Available-for-Sale Debt Securities502 (20)10 0 103 (2)7 0 
NDT Trust Investments$600 $(25)$32 $(4)$152 $(6)$40 $(8)
(A)Equity Securities—Investments in marketable equity securities within the NDT Fund are primarily in common stocks within a broad range of industries and sectors. Unrealized gains and losses on these securities are recorded in Net Income.
(B)Debt Securities (Government)—Unrealized gains and losses on these securities are recorded in Accumulated Other Comprehensive Income (Loss). The unrealized losses on PSEG Power’s NDT investments in U.S. Treasury obligations and Federal Agency mortgage-backed securities were caused by interest rate changes. PSEG Power also has investments in municipal bonds. It is not expected that these securities will settle for less than their amortized cost. PSEG Power does not intend to sell these securities nor will it be more-likely-than-not required to sell before recovery of their amortized cost. PSEG Power did not recognize credit losses for U.S. Treasury obligations and Federal Agency mortgage-backed securities because these investments are guaranteed by the U.S. government or an agency of the U.S. government. PSEG Power did not recognize credit losses for municipal bonds because they are primarily investment grade securities.
(C)Debt Securities (Corporate)—Unrealized gains and losses on these securities are recorded in Accumulated Other Comprehensive Income (Loss). Unrealized losses were due to market declines. It is not expected that these securities would settle for less than their amortized cost. PSEG Power does not intend to sell these securities nor will it be more-likely-than-not required to sell before recovery of their amortized cost. PSEG Power did not recognize credit losses for these corporate bonds because they are primarily investment grade securities.
32
                  
  As of June 30, 2020 As of December 31, 2019 
  
Less Than 12
Months
 
Greater Than 12
Months
 
Less Than 12
Months
 
Greater Than 12
Months
 
  
Fair
Value
 
Gross
Unrealized
Losses
 
Fair
Value
 
Gross
Unrealized
Losses
 
Fair
Value
 
Gross
Unrealized
Losses
 
Fair
Value
 
Gross
Unrealized
Losses
 
  Millions 
 Equity Securities (A)                
 Domestic$53
 $(7) $5
 $(4) $21
 $(1) $6
 $(3) 
 International77
 (15) 23
 (11) 28
 (2) 34
 (9) 
 Total Equity Securities130
 (22) 28
 (15) 49
 (3) 40
 (12) 
 Available-for-Sale Debt Securities                
 Government (B)19
 —
 1
 —
 99
 (2) 30
 —
 
 Corporate (C)46
 (2) 9
 —
 49
 —
 12
 (1) 
 Total Available-for-Sale Debt Securities65
 (2) 10
 —
 148
 (2) 42
 (1) 
 NDT Trust Investments$195
 $(24) $38
 $(15) $197
 $(5) $82
 $(13) 
                  
(A)Equity Securities—Investments in marketable equity securities within the NDT Fund are primarily in common stocks within a broad range of industries and sectors. Unrealized gains and losses on these securities are recorded in Net Income.
(B)Debt Securities (Government)—Unrealized gains and losses on these securities are recorded in Accumulated Other Comprehensive Income (Loss). The unrealized losses on PSEG Power’s NDT investments in U.S. Treasury obligations and Federal Agency mortgage-backed securities were caused by interest rate changes. PSEG Power also has investments in municipal bonds. It is not expected that these securities will settle for less than their amortized cost. PSEG Power does not intend to sell these securities nor will it be more-likely-than-not required to sell before recovery of their amortized cost. PSEG Power did not recognize credit losses for U.S. Treasury obligations and Federal Agency mortgage-backed securities because these investments are guaranteed by the U.S. government or an agency of the U.S. government. PSEG Power did not recognize credit losses for municipal bonds because they are primarily investment grade securities.
(C)Debt Securities (Corporate)—Unrealized gains and losses on these securities are recorded in Accumulated Other Comprehensive Income (Loss). Unrealized losses were due to market declines. It is not expected that these securities would settle for less than their amortized cost. PSEG Power does not intend to sell these securities nor will it be more-likely-than-not required to sell before recovery of their amortized cost. PSEG Power did not recognize credit losses for these corporate bonds because they are primarily investment grade securities.

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


The proceeds from the sales of and the net gains (losses) on securities in the NDT Fund were:
          
  Three Months Ended Six Months Ended 
  June 30, June 30, 
  2020 2019 2020 2019 
  Millions 
 Proceeds from NDT Fund Sales (A)$493
 $427
 $1,048
 $880
 
 Net Realized Gains (Losses) on NDT Fund        
 Gross Realized Gains$32
 $18
 $70
 $63
 
 Gross Realized Losses(20) (13) (54) (32) 
 Net Realized Gains (Losses) on NDT Fund (B)$12
 $5
 $16
 $31
 
 Unrealized Gains (Losses) on Equity Securities182
 33
 (39) 132
 
 Impairment of Available-for-Sale Debt Securities (C)—
 —
 (3) —
 
 Net Gains (Losses) on NDT Fund Investments$194
 $38
 $(26) $163
 
          
Three Months Ended
March 31,
20212020
Millions
Proceeds from NDT Fund Sales (A)$597 $555 
Net Realized Gains (Losses) on NDT Fund
Gross Realized Gains$79 $38 
Gross Realized Losses(15)(34)
Net Realized Gains (Losses) on NDT Fund (B)64 4 
Unrealized Gains (Losses) on Equity Securities(7)(221)
Impairment of Available-for-Sale Debt Securities (C)0 (3)
Net Gains (Losses) on NDT Fund Investments$57 $(220)
(A)Includes activity in accounts related to the liquidation of funds being transitioned to new managers.within the trust.
(B)The cost of these securities was determined on the basis of specific identification.
(C)PSEG Power recognized an impairment of available-for-sale debt securities that it intends to sell. PSEG Power’s policy is to sell all such securities that are rated below investment grade.
(C)PSEG Power recognized an impairment of available-for-sale debt securities in 2020. PSEG Power’s policy is to sell all securities that are rated below investment grade.
The NDT Fund debt securities held as of June 30, 2020March 31, 2021 had the following maturities:
     
 Time Frame Fair Value 
   Millions 
 Less than one year $23
 
 1 - 5 years 257
 
 6 - 10 years 220
 
 11 - 15 years 75
 
 16 - 20 years 71
 
 Over 20 years 487
 
 Total NDT Available-for-Sale Debt Securities$1,133
 
     

Time FrameFair Value
Millions
Less than one year$18 
1 - 5 years329 
6 - 10 years238 
11 - 15 years79 
16 - 20 years92 
Over 20 years481 
Total NDT Available-for-Sale Debt Securities$1,237
PSEG Power periodically assesses individual debt securities whose fair value is less than amortized cost to determine whether the investments are impaired. For these securities, management considers its intent to sell or requirement to sell a security prior to expected recovery. In those cases where a sale is expected, any impairment would be recorded through earnings. For fixed income securities where there is no intent to sell or likely requirement to sell, management evaluates whether credit loss is a component of the impairment. If so, that portion is recorded through earnings while the noncredit loss component is recorded through Accumulated Other Comprehensive Income (Loss). Any subsequent recoveries of the noncredit loss component of the impairment would be recorded through Accumulated Other Comprehensive Income (Loss). Any subsequent recoveries of the credit loss component would be recognized through earnings. The assessment of fair market value compared to cost is applied on a weighted average basis taking into account various purchase dates and initial cost of the securities.
33

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


Rabbi Trust
PSEG maintains certain unfunded nonqualified benefit plans to provide supplemental retirement and deferred compensation benefits to certain key employees. Certain assets related to these plans have been set aside in a grantor trust commonly known as a “Rabbi Trust.”

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


The following tables show the fair values, gross unrealized gains and losses and amortized cost basis for the securities held in the Rabbi Trust.
          
  As of June 30, 2020 
  Cost 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
 
  Millions 
 Domestic Equity Securities$21
 $5
 $—
 $26
 
 Available-for-Sale Debt Securities        
 Government87
 10
 —
 97
 
 Corporate125
 11
 —
 136
 
 Total Available-for-Sale Debt Securities212
 21
 —
 233
 
 Total Rabbi Trust Investments$233
 $26
 $—
 $259
 
          
          
  As of December 31, 2019 
  Cost 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
 
  Millions 
 Domestic Equity Securities$21
 $7
 $—
 $28
 
 Available-for-Sale Debt Securities        
 Government100
 4
 —
 104
 
 Corporate107
 7
 —
 114
 
 Total Available-for-Sale Debt Securities207
 11
 —
 218
 
 Total Rabbi Trust Investments$228
 $18
 $—
 $246
 
          
As of March 31, 2021
CostGross
Unrealized
Gains		Gross
Unrealized
Losses		Fair
Value
Millions
Domestic Equity Securities$18 $10 $0 $28 
Available-for-Sale Debt Securities
Government100 2 (4)98 
Corporate109 5 (2)112 
Total Available-for-Sale Debt Securities209 7 (6)210 
Total Rabbi Trust Investments$227 $17 $(6)$238 

As of December 31, 2020
CostGross
Unrealized
Gains		Gross
Unrealized
Losses		Fair
Value
Millions
Domestic Equity Securities$21 $10 $0 $31 
Available-for-Sale Debt Securities
Government94 6 0 100 
Corporate123 12 0 135 
Total Available-for-Sale Debt Securities217 18 0 235 
Total Rabbi Trust Investments$238 $28 $0 $266 
Net unrealized gains (losses) on debt securities of $15 million (after-tax) were included in Accumulated Other Comprehensive Loss on PSEG’s Condensed Consolidated Balance Sheet were immaterial as of June 30, 2020.March 31, 2021. The portion of net unrealized gains (losses)losses recognized during the second quarter and first halfthree months of 20202021 related to equity securities still held as of June 30, 2020March 31, 2021 was $4 million and $(1) million, respectively.immaterial.
The amounts in the preceding tables do not include receivables and payables for Rabbi Trust Fund transactions which have not settled at the end of each period. Such amounts are included in Accounts Receivable and Accounts Payable on the Condensed Consolidated Balance Sheets as shown in the following table.
As ofAs of
March 31,
2021		December 31,
2020
 Millions
Accounts Receivable$1 $1 
Accounts Payable$2 $1 
      
  As of As of 
  June 30,
2020		 December 31,
2019		 
  Millions 
 Accounts Receivable$1
 $2
 
 Accounts Payable$—
 $—
 
      
34


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


The following table shows the value of securities in the Rabbi Trust Fund that have been in an unrealized loss position for less than 12 months and greater than 12 months.
 As of March 31, 2021As of December 31, 2020
 Less Than 12
Months		Greater Than 12
Months		Less Than 12
Months		Greater Than 12
Months
 Fair
Value		Gross
Unrealized
Losses		Fair
Value		Gross
Unrealized
Losses		Fair
Value		Gross
Unrealized
Losses		Fair
Value		Gross
Unrealized
Losses
 Millions
Available-for-Sale Debt Securities
Government (A)$61 $(4)$0 $0 $19 $0 $0 $0 
Corporate (B)44 (2)1 0 2 0 1 0 
Total Available-for-Sale Debt Securities105 (6)1 0 21 0 1 0 
Rabbi Trust Investments$105 $(6)$1 $0 $21 $0 $1 $0 
(A)
                  
  As of June 30, 2020 As of December 31, 2019 
  
Less Than 12
Months
 
Greater Than 12
Months
 
Less Than 12
Months
 
Greater Than 12
Months
 
  
Fair
Value
 
Gross
Unrealized
Losses
 
Fair
Value
 
Gross
Unrealized
Losses
 
Fair
Value
 
Gross
Unrealized
Losses
 
Fair
Value
 
Gross
Unrealized
Losses
 
  Millions 
 Available-for-Sale Debt Securities                
 Government (A)$6
 $—
 $1
 $—
 $26
 $—
 $3
 $—
 
 Corporate (B)9
 —
 1
 —
 11
 —
 2
 —
 
 Total Available-for-Sale Debt Securities15
 —
 2
 —
 37
 —
 5
 —
 
 Rabbi Trust Investments$15
 $—
 $2
 $—
 $37
 $—
 $5
 $—
 
                  

Debt Securities (Government)—Unrealized gains and losses on these securities are recorded in Accumulated Other Comprehensive Income (Loss). The unrealized losses on PSEG’s Rabbi Trust investments in U.S. Treasury obligations and Federal Agency mortgage-backed securities were caused by interest rate changes. PSEG also has investments in municipal bonds. It is not expected that these securities will settle for less than their amortized cost. PSEG does not intend to sell these securities nor will it be more-likely-than-not required to sell before recovery of their amortized cost. PSEG did not recognize credit losses for U.S. Treasury obligations and Federal Agency mortgage-backed securities because these investments are guaranteed by the U.S. government or an agency of the U.S. government. PSEG did not recognize credit losses for municipal bonds because they are primarily investment grade securities.
(A)Debt Securities (Government)—Unrealized gains and losses on these securities are recorded in Accumulated Other Comprehensive Income (Loss). The unrealized losses on PSEG’s Rabbi Trust investments in U.S. Treasury obligations and Federal Agency mortgage-backed securities were caused by interest rate changes. PSEG also has investments in municipal bonds. It is not expected that these securities will settle for less than their amortized cost. PSEG does not intend to sell these securities nor will it be more-likely-than-not required to sell before recovery of their amortized cost. PSEG did not recognize credit losses for U.S. Treasury obligations and Federal Agency mortgage-backed securities because these investments are guaranteed by the U.S. government or an agency of the U.S. government. PSEG did not recognize credit losses for municipal bonds because they are primarily investment grade securities.
(B)Debt Securities (Corporate)—Unrealized gains and losses on these securities are recorded in Accumulated Other Comprehensive Income (Loss). Unrealized losses were due to market declines. It is not expected that these securities would settle for less than their amortized cost. PSEG does not intend to sell these securities nor will it be more-likely-than-not required to sell before recovery of their amortized cost. PSEG did not recognize credit losses for these corporate bonds because they are primarily investment grade.
(B)Debt Securities (Corporate)—Unrealized gains and losses on these securities are recorded in Accumulated Other Comprehensive Income (Loss). Unrealized losses were due to market declines. It is not expected that these securities would settle for less than their amortized cost. PSEG does not intend to sell these securities nor will it be more-likely-than-not required to sell before recovery of their amortized cost. PSEG did not recognize credit losses for these corporate bonds because they are primarily investment grade.
The proceeds from the sales of and the net gains (losses) on securities in the Rabbi Trust Fund were:
          
  Three Months Ended Six Months Ended 
  June 30, June 30, 
  2020 2019 2020 2019 
  Millions 
 Proceeds from Rabbi Trust Sales (A)$61
 $42
 $115
 $86
 
 Net Realized Gains (Losses) on Rabbi Trust:        
 Gross Realized Gains$5
 $1
 $10
 $2
 
 Gross Realized Losses(2) —
 (3) (1) 
 Net Realized Gains (Losses) on Rabbi Trust (B)3
 1
 7
 1
 
 Unrealized Gains (Losses) on Equity Securities4
 —
 (1) 3
 
 Net Gains (Losses) on Rabbi Trust Investments$7
 $1
 $6
 $4
 
          

Three Months Ended
March 31,
20212020
Millions
Proceeds from Rabbi Trust Sales$65 $54 
Net Realized Gains (Losses) on Rabbi Trust:
Gross Realized Gains$5 $5 
Gross Realized Losses(2)(1)
Net Realized Gains (Losses) on Rabbi Trust (A)3 4 
Unrealized Gains (Losses) on Equity Securities0 (5)
Net Gains (Losses) on Rabbi Trust Investments$3 $(1)
(A)Includes activity in accounts related to the liquidation of funds being transitioned to new managers.
(B)The cost of these securities was determined on the basis of specific identification.

35

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


The Rabbi Trust debt securities held as of June 30, 2020March 31, 2021 had the following maturities:
     
 Time Frame Fair Value 
   Millions 
 Less than one year $1
 
 1 - 5 years 32
 
 6 - 10 years 32
 
 11 - 15 years 16
 
 16 - 20 years 32
 
 Over 20 years 120
 
 Total Rabbi Trust Available-for-Sale Debt Securities$233
 
     

Time FrameFair Value
Millions
Less than one year$0 
1 - 5 years42 
6 - 10 years25 
11 - 15 years10 
16 - 20 years27 
Over 20 years106 
Total Rabbi Trust Available-for-Sale Debt Securities$210
PSEG periodically assesses individual debt securities whose fair value is less than amortized cost to determine whether the investments are considered to be impaired. For these securities, management considers its intent to sell or requirement to sell a security prior to expected recovery. In those cases where a sale is expected, any impairment would be recorded through earnings. For fixed income securities where there is no intent to sell or likely requirement to sell, management evaluates whether credit loss is a component of the impairment. If so, that portion is recorded through earnings while the noncredit loss component is recorded through Accumulated Other Comprehensive Income (Loss). Any subsequent recoveries of the noncredit loss component of the impairment would be recorded through Accumulated Other Comprehensive Income (Loss). Any subsequent recoveries of the credit loss component would be recognized through earnings. The assessment of fair market value compared to cost is applied on a weighted average basis taking into account various purchase dates and initial cost of the securities.
The fair value of the Rabbi Trust related to PSEG, PSE&G, and PSEG Power areand PSEG’s other subsidiaries is detailed as follows:
      
  As of As of 
  June 30,
2020		 December 31,
2019		 
  Millions 
 PSE&G$50
 $48
 
 PSEG Power65
 62
 
 Other144
 136
 
 Total Rabbi Trust Investments$259
 $246
 
      
As ofAs of
March 31,
2021		December 31,
2020
 Millions
PSE&G$43 $51 
PSEG Power62 66 
Other133 149 
Total Rabbi Trust Investments$238 $266 


Note 10. Pension and Other Postretirement Benefits (OPEB)
PSEG sponsors qualified and nonqualified pension plans and OPEB plans covering PSEG’s and its participating affiliates’ current and former employees who meet certain eligibility criteria.
PSEG, PSE&G and PSEG Power are required to record the under or over funded positions of their defined benefit pension and OPEB plans on their respective balance sheets. Such funding positions of each PSEG company are required to be measured as of the date of their respective year-end Consolidated Balance Sheets.
The following table provides the components of net periodic benefit costs relating to all qualified and nonqualified pension and OPEB plans on an aggregate basis for PSEG, excluding Servco. Amounts shown do not reflect the impacts of capitalization and co-owner allocations. Only the service cost component is eligible for capitalization, when applicable.
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  Pension Benefits OPEB Pension Benefits OPEB 
  Three Months Ended Three Months Ended Six Months Ended Six Months Ended 
  June 30, June 30, June 30, June 30, 
  2020
 2019 2020
 2019 2020 2019 2020 2019 
  Millions 
 Components of Net Periodic Benefit (Credits) Costs                
 Service Cost (included in O&M Expense)$35
 $28
 $3
 $3
 $70
 $57
 $5
 $5
 
 Non-Service Components of Pension and OPEB (Credits) Costs                
 Interest Cost48
 58
 8
 11
 96
 116
 17
 22
 
 Expected Return on Plan Assets(110) (96) (9) (9) (221) (193) (19) (18) 
 Amortization of Net                
 Prior Service Credit(3) (4) (32) (32) (5) (9) (64) (64) 
 Actuarial Loss23
 27
 11
 12
 46
 54
 23
 25
 
 Non-Service Components of Pension and OPEB (Credits) Costs(42) (15) (22) (18) (84) (32) (43) (35) 
 Total Benefit (Credits) Costs$(7) $13
 $(19) $(15) $(14) $25
 $(38) $(30) 
                  

Pension BenefitsOPEB
Three Months EndedThree Months Ended
March 31,March 31,
2021202020212020
Millions
Components of Net Periodic Benefit (Credits) Costs
Service Cost (included in O&M Expense)$38 $35 $2 $2 
Non-Service Components of Pension and OPEB (Credits) Costs
Interest Cost35 48 5 9 
Expected Return on Plan Assets(119)(111)(10)(10)
Amortization of Net
Prior Service Credit0 (2)(32)(32)
Actuarial Loss26 23 11 12 
Non-Service Components of Pension and OPEB (Credits) Costs(58)(42)(26)(21)
Total Benefit (Credits) Costs$(20)$(7)$(24)$(19)
Pension and OPEB (credits) costs for PSE&G, PSEG Power and PSEG’s other subsidiaries, excluding Servco, are detailed as follows:
                  
  Pension Benefits OPEB Pension Benefits OPEB 
  Three Months Ended Three Months Ended Six Months Ended Six Months Ended 
  June 30, June 30, June 30, June 30, 
  2020 2019 2020 2019 2020 2019 2020 2019 
  Millions 
 PSE&G$(6) $6
 $(19) $(16) $(13) $13
 $(38) $(32) 
 PSEG Power(2) 4
 —
 1
 (3) 7
 —
 2
 
 Other1
 3
 —
 —
 2
 5
 —
 —
 
 Total Benefit (Credits) Costs$(7) $13
 $(19) $(15) $(14) $25
 $(38) $(30) 
                  

Pension BenefitsOPEB
Three Months EndedThree Months Ended
March 31,March 31,
2021202020212020
Millions
PSE&G$(16)$(7)$(23)$(19)
PSEG Power(4)(1)(1)0 
Other0 1 0 0 
Total Benefit (Credits) Costs$(20)$(7)$(24)$(19)
PSEG does not plan to contribute to its pension and OPEB plans in 2020. IRS minimum funding requirements for pension plans are determined based on the fund’s assets and liabilities at the end of a calendar year for the subsequent calendar year. As a result, the market downturn associated with the ongoing coronavirus pandemic is not expected to impact PSEG’s pension contributions in 2020.2021.
Servco Pension and OPEB
At the direction of LIPA, Servco sponsors benefit plans that cover its current and former employees who meet certain eligibility criteria. Under the OSA, all of these and any future employee benefit costs are to be funded by LIPA. See Note 5. Variable Interest Entity. These obligations, as well as the offsetting long-term receivable, are separately presented on the Condensed Consolidated Balance Sheet of PSEG.
Servco amounts are not included in any of the preceding pension and OPEB cost disclosures. Pension and OPEB costs of Servco are accounted for according to the OSA. Servco recognizes expenses for contributions to its pension plan trusts and for OPEB payments made to retirees. Operating Revenues are recognized for the reimbursement of these costs. Servco plans to
contribute $30$37 million into its pension plan during 2020. IRS minimum funding requirements for pension plans are determined based on the fund’s assets2021.Servco’s pension-related revenues and liabilities at the end of a calendar yearcosts were $9 million and $8 million for the subsequent calendar year. As a result,three months ended March 31, 2021 and 2020, respectively. The OPEB-related revenues earned and costs incurred were $3 million and $2 million for the market downturn associated with the ongoing coronavirus pandemic is not expected to impact Servco’s pension contributions in 2020.three months ended March 31, 2021 and 2020, respectively.

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Servco’s pension-related revenues and costs were $7 million for both the three months ended June 30, 2020 and 2019, and $15 million and $14 million for the six months ended June 30, 2020 and 2019, respectively. The OPEB-related revenues earned and costs incurred were $2 million for both the three months ended June 30, 2020 and 2019, and $4 million and $3 million for the six months ended June 30, 2020 and 2019, respectively.

Note 11. Commitments and Contingent Liabilities
Guaranteed Obligations
PSEG Power’s activities primarily involve the purchase and sale of energy and related products under transportation, physical, financial and forward contracts at fixed and variable prices. These transactions are with numerous counterparties and brokers that may require cash, cash-related instruments or guarantees as a form of collateral.
PSEG Power has unconditionally guaranteed payments to counterparties on behalf of its subsidiaries in commodity-related transactions in order to
•support current exposure, interest and other costs on sums due and payable in the ordinary course of business, and
•obtain credit.
PSEG Power is subject to
•counterparty collateral calls related to commodity contracts of its subsidiaries, and
•certain creditworthiness standards as guarantor under performance guarantees of its subsidiaries.
Under these agreements, guarantees cover lines of credit between entities and are often reciprocal in nature. The exposure between counterparties can move in either direction.
In order for PSEG Power to incur a liability for the face value of the outstanding guarantees,
•its subsidiaries would have to fully utilize the credit granted to them by every counterparty to whom PSEG Power has provided a guarantee, and
•the net position of the related contracts would have to be “out-of-the-money” (if the contracts are terminated, PSEG Power would owe money to the counterparties).
PSEG Power believes the probability of this result is unlikely. For this reason, PSEG Power believes that the current exposure at any point in time is a more meaningful representation of the potential liability under these guarantees. Current exposure consists of the net of accounts receivable and accounts payable and the forward value on open positions, less any collateral posted.
Changes in commodity prices can have a material impact on collateral requirements under such contracts, which are posted and received primarily in the form of cash and letters of credit. PSEG Power also routinely enters into futures and options transactions for electricity and natural gas as part of its operations. These futures contracts usually require a cash margin deposit with brokers, which can change based on market movement and in accordance with exchange rules.
In addition to the guarantees discussed above, PSEG Power has also provided payment guarantees to third parties and regulatory authorities on behalf of its affiliated companies. These guarantees support various other non-commodity related obligations.

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The following table shows the face value of PSEG Power’s outstanding guarantees, current exposure and margin positions as of June 30, 2020March 31, 2021 and December 31, 2019.2020.
As ofAs of
March 31, 2021December 31, 2020
Millions
Face Value of Outstanding Guarantees$1,788 $1,792 
Exposure under Current Guarantees$113 $128 
Letters of Credit Margin Posted$112 $128 
Letters of Credit Margin Received$51 $45 
Cash Deposited and Received
Counterparty Cash Collateral Deposited$0 $0 
Counterparty Cash Collateral Received$(4)$(5)
  Net Broker Balance Deposited (Received)$102 $59 
Additional Amounts Posted
Other Letters of Credit$42 $42 
      
  As of As of 
  June 30, 2020 December 31, 2019 
  Millions 
 Face Value of Outstanding Guarantees$1,828
 $1,854
 
 Exposure under Current Guarantees$113
 $171
 
      
 Letters of Credit Margin Posted$95
 $121
 
 Letters of Credit Margin Received$75
 $29
 
      
 Cash Deposited and Received:    
 Counterparty Cash Collateral Deposited$—
 $—
 
 Counterparty Cash Collateral Received$(4) $(4) 
   Net Broker Balance Deposited (Received)$16
 $48
 
      
 Additional Amounts Posted:    
 Other Letters of Credit$83
 $82
 
      
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As part of determining credit exposure, PSEG Power nets receivables and payables with the corresponding net fair values of energy contracts. See Note 13. Financial Risk Management Activities for further discussion. In accordance with PSEG’s accounting policy, where it is applicable, cash (received)/deposited is allocated against derivative asset and liability positions with the same counterparty on the face of the Condensed Consolidated Balance Sheet. The remaining balances of net cash (received)/deposited after allocation are generally included in Accounts Payable and Receivable, respectively.
In addition to amounts for outstanding guarantees, current exposure and margin positions, PSEG and PSEG Power have posted letters of credit to support PSEG Power’s various other non-energy contractual and environmental obligations. See the preceding table.
Environmental Matters
Passaic River
Lower Passaic River Study Area    
The U.S. Environmental Protection Agency (EPA) has determined that a 17-mile stretch of the Passaic River (Lower Passaic River Study Area (LPRSA)) in New Jersey is a “Superfund” site under the Federal Comprehensive Environmental Response, Compensation and Liability Act of 1980 (CERCLA). PSE&G and certain of its predecessors conducted operations at properties in this area, including at 1 site that was transferred to PSEG Power.
Certain Potentially Responsible Parties (PRPs), including PSE&G and PSEG Power, formed a Cooperating Parties Group (CPG) and agreed to conduct a Remedial Investigation and Feasibility Study of the LPRSA. The CPG allocated, on an interim basis, the associated costs among its members. The interim allocation is subject to change. In June 2019, the EPA conditionally approved the CPG’s Remedial Investigation. In MayDecember 2020, the CPG submitted a revised draftEPA conditionally approved the CPG’s Feasibility Study (FS) to the EPA, which evaluated various adaptive management scenarios for the remediation of only the upper 9 miles of the LPRSA and incorporatedLPRSA. In April 2021, the EPA’s comments on an earlier FS draft. The EPA’sEPA announced the tentative selection of its preferred adaptive management scenario will befor the upper 9 miles from the options presented in the FS. This tentative selection is subject to public review and comment prior to the EPA’s announcement of a final selection, which is expected in late 2020 or early 2021.
Separately, the EPA has released a Record of Decision (ROD) for the LPRSA’s lower 8.3 miles that requires the removal of sediments at an estimated cost of $2.3 billion (ROD Remedy). An EPA-commenced process to allocate the associated costs is underway and PSEG cannot predict the outcome. The allocation does not address certain costs incurred by the EPA for which they may be entitled to reimbursement and which may be material. Occidental Chemical Corporation, (OCC), one of the PRPs, has commenced the design of the ROD Remedy, but declined to participate in the allocation process. Instead, it filed suit against PSE&G and others seeking cost recovery and contribution under CERCLA but has not quantified alleged damages. The litigation is ongoing and PSEG cannot predict the outcome.
Two PRPs, Tierra Solutions, Inc. (Tierra) and Maxus Energy Corporation (Maxus), have filed for Chapter 11 bankruptcy. The trust representing the creditors in this proceeding has filed a complaint asserting claims against Tierra’s and Maxus’ current and former parent entities, among others. Any damages awarded may be used to fund the remediation of the LPRSA.

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As of June 30, 2020,March 31, 2021, PSEG has accrued approximately $65 million accrued for this matter. Of this amount, PSE&G has accrued $52 million as an Environmental Costs Liability of $52 million and a corresponding Regulatory Asset based on its continued ability to recover such costs in its rates. PSEG Power has accrued $13 million as an Other Noncurrent Liability with the corresponding O&M Expense.of $13 million.
The outcome of this matter is uncertain, and until (i) a final remedy for the entire LPRSA is selected and an agreement is reached by the PRPs to fund it, (ii) PSE&G’s and PSEG Power’s respective shares of the costs are determined, and (iii) PSE&G’s ability to recover the costs in its rates is determined, it is not possible to predict this matter’s ultimate impact on PSEG’s financial statements. It is possible that PSE&G and PSEG Power will record additional costs beyond what they have accrued, and that such costs could be material, but PSEG cannot at the current time estimate the amount or range of any additional costs.
Natural Resource Damage Claims
New Jersey and certain federal regulators have alleged that PSE&G, PSEG Power and 56 other PRPs may be liable for natural resource damages within the LPRSA. In particular, PSE&G, PSEG Power and other PRPs received notice from federal regulators of the regulators’ intent to move forward with a series of studies assessing potential damages to natural resources at the Diamond Alkali Superfund Site, which includes the LPRSA and the Newark Bay Study Area. PSE&G and PSEG Power are unable to estimate their respective portions of any possible loss or range of loss related to this matter.
Newark Bay Study Area
The EPA has established the Newark Bay Study Area, which is an extension of the LPRSA and includes Newark Bay and portions of surrounding waterways. The EPA has notified PSEG and 11 other PRPs of their potential liability. PSE&G and PSEG Power are unable to estimate their respective portions of any loss or possible range of loss related to this matter. In December 2018, PSEG Power completed the sale of the site of the Hudson electric generating station. PSEG Power contractually transferred all land rights and structures on the Hudson site to a third-party purchaser, along with the assumption of the environmental liabilities for the site.
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Natural Resource Damage Claims
New Jersey and certain federal regulators have alleged that PSE&G, PSEG Power and 56 other PRPs may be liable for natural resource damages within the LPRSA. In particular, PSE&G, PSEG Power and other PRPs received notice from federal regulators of the regulators’ intent to move forward with a series of studies assessing potential damages to natural resources at the Diamond Alkali Superfund Site, which includes the LPRSA and the Newark Bay Study Area. PSE&G and PSEG Power are unable to estimate their respective portions of any possible loss or range of loss related to this matter.
Manufactured Gas Plant (MGP) Remediation Program
PSE&G is working with the New Jersey Department of Environmental Protection (NJDEP) to assess, investigate and remediate environmental conditions at its former MGP sites. To date, 38 sites requiring some level of remedial action have been identified. Based on its current studies, PSE&G has determined that the estimated cost to remediate all MGP sites to completion could range between $346$300 million and $389$338 million on an undiscounted basis, through2023, including its $52 million share for the Passaic River as discussed above. Since no amount within the range is considered to be most likely, PSE&G has recorded a liability of $346$300 million as of June 30, 2020.March 31, 2021. Of this amount, $78$110 million was recorded in Other Current Liabilities and $268$190 million was reflected as Environmental Costs in Noncurrent Liabilities. PSE&G has recorded a $346$300 million Regulatory Asset with respect to these costs. PSE&G periodically updates its studies taking into account any new regulations or new information which could impact future remediation costs and adjusts its recorded liability accordingly. PSE&G is conductingcompleted sampling in the Passaic River to delineate coal tar from certain MGP sites that abut the Passaic River Superfund site. PSEG cannot determine at this time whether this will have an impact on the Passaic River Superfund remedy.
Clean Water Act (CWA)CWA Section 316(b) Rule
The EPA’s CWA Section 316(b) rule establishes requirements for the regulation of cooling water intakes at existing power plants and industrial facilities with a design flow of more than two million gallons of water per day. The EPA requires that National Pollutant Discharge Elimination System permits be renewed every five years and that each state Permitting Director manage renewal permits for its respective power generation facilities on a case by case basis. The NJDEP manages the permits under the New Jersey Pollutant Discharge Elimination System (NJPDES) program. Connecticut and New York also have permits to manage their respective pollutant discharge elimination system programs.
In June 2016, the NJDEP issued a final NJPDES permit for Salem. In July 2016, the Delaware Riverkeeper Network (Riverkeeper) filed an administrative hearing request challenging certain conditions of the permit, including the NJDEP’s application of the 316(b) rule. If the Riverkeeper’s challenge is successful, PSEG Power may be required to incur additional costs to comply with the CWA. Potential cooling water and/or service water system modification costs could be material and could adversely impact the economic competitiveness of this facility. The NJDEP had granted the hearing request but no hearing date has been established.
Jersey City, New Jersey Subsurface Feeder Cable Matter
In October 2016, a discharge of dielectric fluid from subsurface feeder cables located in the Hudson River near Jersey City, New Jersey, was identified and reported to the NJDEP. The feeder cables are located within a subsurface easement granted to

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PSE&G by the property owners, Newport Associates Development Company (NADC) and Newport Associates Phase I Developer Limited Partnership. The feeder cables are subject to agreements between PSE&G and Consolidated Edison Company of New York, Inc. (Con Edison) and are jointly owned by PSE&G and Con Edison. The impacted cable was repaired in September 2017. A federal response was initially led by the U.S. Coast Guard. The U.S. Coast Guard transitioned control of the federal response to the EPA, and the EPA ended the federal response to the matter in 2018. The investigation of small amounts of residual dielectric fluid believed to be contained with the marina sediment is ongoing as part of the NJDEP site remediation program. We are currently in discussionsIn August 2020, PSE&G finalized a settlement with the federal government regarding the reimbursement of costs associated with the federal response to this matter and payment of civil penalties inof an amount expected to be immaterial to the financial statements of PSEG and PSE&G.amount.
A lawsuit in federal court is pending to determine ultimate responsibility for the costs to address the leak among PSE&G, Con Edison and NADC. In addition, Con Edison filed counter claims against PSE&G and NADC, including seeking injunctive relief and damages. Based on the information currently available and depending on the outcome of the federal court action, PSE&G’s portion of the costs to address the leak may be material; however, PSE&G anticipates that it will recover its costs, other than civil penalties, through regulatory proceedings.
Basic Generation Service (BGS), BGSS and ZECs
Each year, PSE&G obtains its electric supply requirements through the annual New Jersey BGS auctions for two categories of customers whothat choose not to purchase electric supply from third-party suppliers. The first category, which represents about 80% of PSE&G’s load requirement, is residential and smaller commercial and industrial customers (BGS-Residential Small Commercial Pricing (RSCP)). The second category is larger customers that exceed a BPU-established load (kW) threshold (BGS-Commercial
40

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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(BGS-Commercial and Industrial Energy Pricing (CIEP)). Pursuant to applicable BPU rules, PSE&G enters into the Supplier Master AgreementAgreements with the winners of these RSCP and CIEP BGS auctions following the BPU’s approval of the auction results. PSE&G has entered into contracts with winning BGS suppliers, including PSEG Power, to purchase BGS for PSE&G’s load requirements. The winners of the auction (including PSEG Power) areRSCP and CIEP auctions have been responsible for fulfilling all the requirements of a PJM Load-Serving Entityload-serving entity including the provision of capacity, energy, ancillary services, transmission and any other services required by PJM. BGS suppliers assume all volume risk and customer migration risk and must satisfy New Jersey’s renewable portfolio standards. Beginning with the 2021 BGS auction, transmission will become the responsibility of the New Jersey EDCs, and will no longer be a component of the BGS auction product for either the RSCP or CIEP auctions. BGS suppliers serving load from the 2018, 2019 and 2020 BGS auctions had the option to transfer the transmission obligation to the New Jersey EDCs as of February 2021. Suppliers that did so will have their total BGS payment from the EDCs reduced to reflect the transfer of the transmission obligation to the EDCs.
The BGS-CIEP auction is for a one-year supply period from June 1 to May 31 with the BGS-CIEP auction price measured in dollars per MW-day for capacity. The final price for the BGS-CIEP auction year commencing June 1, 20202021 is $359.98$351.06 per MW-day, replacing the BGS-CIEP auction year price ending May 31, 20202021 of $281.78$359.98 per MW-day. Energy for BGS-CIEP is priced at hourly PJM locational marginal prices for the contract period.
PSE&G contracts for its anticipated BGS-RSCP load on a three-year rolling basis, whereby each year one-third of the load is procured for a three-year period. The contract prices in dollars per MWh for the BGS-RSCP supply, as well as the approximate load, are as follows:
Auction Year
2018201920202021
36-Month Terms EndingMay 2021May 2022May 2023May 2024(A) 
Load (MW)2,9002,8002,8002,900
$ per MWh$91.77$98.04$102.16$64.80
           
  Auction Year  
  2017 2018 2019 2020  
 36-Month Terms EndingMay 2020 May 2021 May 2022 May 2023(A)  
 Load (MW)2,800 2,900 2,800 2,800  
 $ per MWh$90.78 $91.77 $98.04 $102.16  
           

(A)
(A)Prices set in the 2020 BGS auction became effective on June 1, 2020 when the 2017 BGS auction agreements expired.
PSEG Power seeks to mitigate volatility in its results by contracting in advance for the sale of most of its anticipated electric output as well as its anticipated fuel needs. As part of its objective, PSEG Power has entered into contracts to directly supply PSE&G and other New Jersey EDCs with a portion of their respective BGS requirements through the New Jersey2021 BGS auction process, described above.will become effective on June 1, 2021 when the 2018 BGS auction agreements expire.
PSE&G has a full-requirements contract with PSEG Power to meet the gas supply requirements of PSE&G’s gas customers. PSEG Power has entered into hedges for a portion of these anticipated BGSS obligations, as permitted by the BPU. The BPU permits PSE&G to recover the cost of gas hedging up to 115 billion cubic feet or 80% of its residential gas supply annual requirements through the BGSS tariff. Current plans call for PSEG Power to hedge on behalf of PSE&G approximately 70 billion cubic feet or 50% of its residential gas supply annual requirements. For additional information, see Note 20. Related-Party Transactions.

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Pursuant to a process established by the BPU, New Jersey EDCs, including PSE&G, are required to purchase ZECs from eligible nuclear plants selected by the BPU. In April 2019, PSEG Power’s Salem 1, Salem 2 and Hope Creek nuclear plants were selected to receive ZEC revenue for approximately three years, through May 2022. In April 2021, PSEG Power’s Salem 1, Salem 2 and Hope Creek nuclear plants were awarded ZECs for the three-year eligibility period starting June 2022. PSE&G has implemented a tariff to collect a non-bypassable distribution charge in the amount of $0.004 per KWh from its retail distribution customers to be used to purchase the ZECs from these plants. PSE&G will purchase the ZECs on a monthly basis with payment to be made annually following completion of each energy year. The legislation also requires nuclear plants to reapply for any subsequent three-year periods and allows the BPU to adjust prospective ZEC payments.
Minimum Fuel Purchase Requirements
PSEG Power’s nuclear fuel strategy is to maintain certain levels of uranium and to make periodic purchases to support such levels. As such, the commitments referred to in the following table may include estimated quantities to be purchased that deviate from contractual nominal quantities. PSEG Power’s nuclear fuel commitments cover approximately 100% of its estimated uranium, enrichment and fabrication requirements through 2021 and a significant portion through 2022 at Salem, Hope Creek and Peach Bottom.
PSEG Power has various multi-year contracts for natural gas and firm transportation and storage capacity for natural gas that are primarily used to meet its obligations to PSE&G. When there is excess delivery capacity available beyond the needs of PSE&G’s customers, PSEG Power can use the gas to supply its fossil generating stations in New Jersey.
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As of June 30, 2020,March 31, 2021, the total minimum purchase requirements included in these commitments were as follows:
     
 Fuel Type PSEG Power’s Share of Commitments through 2024 
   Millions 
 Nuclear Fuel   
 Uranium $173
 
 Enrichment $333
 
 Fabrication $170
 
 Natural Gas $1,244
 
     

Fuel TypePSEG Power’s Share of Commitments through 2025
Millions
Nuclear Fuel
Uranium$192 
Enrichment$345 
Fabrication$177 
Natural Gas$1,259 
Pending FERC Matter
PSE&G has received requests for information and a Notice of Investigation from FERC’s Office of Enforcement concerning a transmission project. PSE&G retained outside counsel to assist with an internal investigation. PSE&G is fully cooperating with FERC’s requests for information and the investigation. It is not possible at this time to predict the outcome of this matter.
Pending Tropical Storm Matter
Following the effects of Tropical Storm Isaias, the New York Attorney General initiated an inquiry into PSEG LI’s preparation and response to the storm. In addition, the Department of Public Service (DPS) within the New York State Public Service Commission launched an investigation of state electric service providers, including PSEG LI, and other state telephone, cable and internet providers into their preparation and restoration efforts following Tropical Storm Isaias.Although the inquiry by the New York Attorney General remains pending, the DPS issued an interim storm investigation report. With respect to PSEG LI, the DPS’ report found that PSEG LI violated its Emergency Response Plan and DPS Regulations, and recommended that LIPA consider taking various actions, including terminating or renegotiating the OSA. LIPA also initiated its own review of PSEG LI’s performance and issued a report with recommendations for improvements to PSEG LI’s structure and processes, including a timeline for implementing those recommendations. That report also recommended that LIPA either renegotiate or terminate the OSA.
PSEG LI agreed with LIPA that it would fund approximately $6.5 million in claims by customers for food and medication spoilage costs incurred as a result of being without electric service during the storm.
In December 2020, LIPA filed a complaint against PSEG LI in New York State court alleging multiple breaches of the OSA in connection with PSEG LI’s preparation for and response to Tropical Storm Isaias seeking specific performance and $70 million in damages. Pursuant to recommendations by the New York State DPS, LIPA has initiated a series of actions to allow its board to determine whether to seek to terminate the OSA or instead continue with PSEG LI as its Service Provider.
PSEG LI is fully cooperating with the inquiries by the New York Attorney General and the DPS, and we cannot predict their outcome. PSEG LI also continues to work closely with LIPA to address the recommendations in LIPA’s report. PSEG LI intends to vigorously defend itself with regard to the allegations in LIPA’s complaint alleging breaches of the OSA; however, a decision in this proceeding requiring specific performance or the payment of damages by PSEG LI or resulting in the termination of the OSA could have a material adverse effect on PSEG’s results of operations and financial condition.
Pending BPU Audit of PSE&G
In September 2020, the BPU ordered the commencement of a comprehensive affiliate and management audit of PSE&G. Phase 1 of the planned audit will review affiliate relations and cost allocation between PSE&G and its affiliates, including an analysis of the relationship between PSE&G and PSEG Energy Resources & Trade, LLC, a wholly owned subsidiary of PSEG Power over the past ten years, and between PSE&G and PSEG LI. Phase 2 will be a comprehensive management audit, which will address, among other things, executive management, corporate governance, system operations, human resources, cyber security, compliance with customer protection requirements and customer safety. It is not possible at this time to predict the outcome of this matter.
Litigation
Sewaren 7 Construction
In June 2018, a complaint was filed in federal court in Newark, New Jersey against PSEG Fossil LLC, a wholly owned subsidiary of PSEG Power, regarding an ongoing dispute with Durr Mechanical Construction, Inc. (Durr), a contractor on the
42

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(UNAUDITED)
Table of Contents

Sewaren 7 project. Among other things, Durr seeks damages of $93 million and alleges that PSEG Power withheld money owed to Durr and that PSEG Power’s intentional conduct led to the inability of Durr to obtain prospective contracts. PSEG Power intends to vigorously defend against these allegations. In January 2021, the court partially granted PSEG Power’s motion to dismiss certain claims, reducing the amount claimed to $68 million. In December 2018, Durr filed for Chapter 11 bankruptcy in the federal court in the Southern District of New York (SDNY). The SDNY bankruptcy court has allowed the New Jersey litigation to proceed. PSEG Power has accrued an amount related to outstanding invoices which does not reflect an assessment of claims and potential counterclaims in this matter. Due to its preliminary nature, PSEG Power cannot predict the outcome of this matter.
Other Litigation and Legal Proceedings
PSEG and its subsidiaries are party to various lawsuits in the ordinary course of business. In view of the inherent difficulty in predicting the outcome of such matters, PSEG, PSE&G and PSEG Power generally cannot predict the eventual outcome of the pending matters, the timing of the ultimate resolution of these matters, or the eventual loss, fines or penalties related to each pending matter.
In accordance with applicable accounting guidance, a liability is accrued when those matters present loss contingencies that are both probable and reasonably estimable. In such cases, there may be an exposure to loss in excess of any amounts accrued. PSEG will continue to monitor the matter for further developments that could affect the amount of the accrued liability that has been previously established.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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Based on current knowledge, management does not believe that loss contingencies arising from pending matters, other than the matters described herein, could have a material adverse effect on PSEG’s, PSE&G’s or PSEG Power’s consolidated financial position or liquidity. However, in light of the inherent uncertainties involved in these matters, some of which are beyond PSEG’s control, and the large or indeterminate damages sought in some of these matters, an adverse outcome in one or more of these matters could be material to PSEG’s, PSE&G’s or PSEG Power’s results of operations or liquidity for any particular reporting period.
Ongoing Coronavirus Pandemic
PSE&G, PSEG Power and PSEG LI are providing essential services during this national emergency related to the ongoing coronavirus (COVID-19) pandemic. The ongoing coronavirusCOVID-19 pandemic and associated government actions and economic effects continue to impact our businesses. PSEG and its subsidiaries have incurred additional expenses to protect our employees and customers, and PSE&G is experiencing significantly higher bad debts and lower cash collections from customers due to the moratorium on shutoffs for residential customers that has not had a material impact on our results of operations, financial condition or cash flows for the six months endedbeen extended through June 30, 2020. However,2021. PSE&G has deferred the impact of these costs for future recovery. The potential future impact of the pandemic and the associated economic impacts, which could extend beyond the duration of the pandemic, could have risks that drive certain accounting considerations. The ultimate impact of the ongoing coronavirus pandemic is highly uncertain and cannot be predicted at this time.

Note 12. Debt and Credit Facilities
Long-Term Debt Financing Transactions
The following long-term debt transactions occurred in the sixthree months ended June 30, 2020:March 31, 2021:
PSE&G
•
issued $300 million of 2.45% Secured Medium-Term Notes, Series N, due January 2030,
issued $300$450 million of 3.15%0.95% Secured Medium-Term Notes, Series N, due January 2050, andMarch 2026,
•issued $375$450 million of 2.70%3.00% Secured Medium-Term Notes, Series N, due May 2050.March 2051, and
•retired $300 million of 1.90% Medium-Term Notes, Series K, at maturity.
Debt Covenants
PSEG Power’s existing credit agreements and senior notes contain covenants restricting the ability of PSEG Power and its subsidiaries that guarantee its indebtedness from consummating certain mergers, consolidations or asset sales. The disposal of PSEG Power’s non-nuclear generating fleet could, depending on the structure of such transaction, among other factors, trigger a default under one or more of these provisions. In March 2021, PSEG Power and its subsidiaries received waivers from the lenders and the administrative agent under their existing credit agreements permitting them to divest, in one or more transactions, some or all of its and its subsidiaries’ non-nuclear assets without breaching the terms of the agreements. For these reasons, or for other reasons, PSEG Power may decide, or be required, to seek amendments or waivers under its credit agreements and may redeem its outstanding senior notes, at a price equal to the principal amount thereof plus a make-whole
•
43
retired $406 million of 5.13% Senior Notes at maturity.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

premium. Whether such amendments, waivers or redemptions will be required will depend on a number of factors, including the structure of any transaction resulting from the strategic review, and any actual redemption price would depend on the applicable treasury rate in effect at such time. It is likewise possible that the ultimate outcome of the process may result in a transaction, or may result in no transaction at all, where the PSEG Power notes are not redeemed. If PSEG Power is required to redeem its senior notes, the cost of such redemption would be material.
Short-Term Liquidity
PSEG meets its short-term liquidity requirements, as well as those of PSEG Power, primarily through the issuance of commercial paper and, from time to time, short-term loans. PSE&G maintains its own separate commercial paper program to meet its short-term liquidity requirements. Each commercial paper program is fully back-stopped by its own separate credit facilities.
The commitments under the $4.2 billion credit facilities are provided by a diverse bank group. As of June 30, 2020,March 31, 2021, the total available credit capacity was $3.6$3.9 billion.
As of June 30, 2020,March 31, 2021, no single institution represented more than 9% of the total commitments in the credit facilities.
As of June 30, 2020,March 31, 2021, total credit capacity was in excess of the total anticipated maximum liquidity requirements over PSEG’s 12-month planning horizon.horizon, including access to meet redemptions.
Each of the credit facilities is restricted as to availability and use to the specific companies as listed in the following table; however, if necessary, the PSEG facilities can also be used to support its subsidiaries’ liquidity needs.
The total credit facilities and available liquidity as of March 31, 2021 were as follows:
As of March 31, 2021
Company/FacilityTotal
Facility		Usage (D)Available
Liquidity		Expiration
Date		Primary Purpose
Millions
PSEG
  5-year Credit Facilities (A)$1,500 $167 $1,333 Mar 2024Commercial Paper Support/Funding/Letters of Credit
Total PSEG$1,500 $167 $1,333 
PSE&G
  5-year Credit Facility (B)$600 $18 $582 Mar 2024Commercial Paper Support/Funding/Letters of Credit
Total PSE&G$600 $18 $582 
PSEG Power
  3-year Letter of Credit Facility$100 $32 $68 Sept 2021Letters of Credit
  3-year Letter of Credit Facility100 81 19 Sept 2022Letters of Credit
  5-year Credit Facilities (C)1,900 39 1,861 Mar 2024Funding/Letters of Credit
Total PSEG Power$2,100 $152 $1,948 
Total$4,200 $337 $3,863 
(A)PSEG facilities will be reduced by $9 million in March 2022.
(B)PSE&G facility will be reduced by $4 million in March 2022.
(C)PSEG Power facilities will be reduced by $12 million in March 2022.
(D)The primary use of PSEG’s and PSE&G’s credit facilities is to support their respective Commercial Paper Programs, under which as of March 31, 2021, PSEG had $165 million outstanding at a weighted average interest rate of 0.23%. PSE&G had no Commercial Paper outstanding as of March 31, 2021.
Short-Term Loans
PSEG
In March 2021, PSEG entered into a $500 million, 364-day variable rate term loan agreement. In March 2020, PSEG entered into a $300 million, 364-day variable rate term loan agreement which was prepaid in January 2021.
44

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The total credit facilities and available liquidity as of June 30, 2020 were as follows:
             
   As of June 30, 2020     
 Company/Facility 
Total
Facility
 Usage (D) 
Available
Liquidity
 
Expiration
Date
 Primary Purpose 
   Millions     
 PSEG           
   5-year Credit Facilities (A) $1,500
 $408
 $1,092
 Mar 2024 Commercial Paper Support/Funding/Letters of Credit 
 Total PSEG $1,500
 $408
 $1,092
     
 PSE&G           
   5-year Credit Facility (B) $600
 $17
 $583
 Mar 2024 Commercial Paper Support/Funding/Letters of Credit 
 Total PSE&G $600
 $17
 $583
     
 PSEG Power           
   3-year Letter of Credit Facilities $200
 $96
 $104
 Sept 2021 Letters of Credit 
   5-year Credit Facilities (C) 1,900
 40
 1,860
 Mar 2024 Funding/Letters of Credit 
 Total PSEG Power $2,100
 $136
 $1,964
     
 Total $4,200
 $561
 $3,639
     
             

(A)PSEG facilities will be reduced by $9 million in March 2022.
(B)PSE&G facility will be reduced by $4 million in March 2022.
(C)PSEG Power facilities will be reduced by $12 million in March 2022.
(D)The primary use of PSEG’s and PSE&G’s credit facilities is to support their respective Commercial Paper Programs, under which as of June 30, 2020, PSEG had $365 million outstanding at a weighted average interest rate of 0.4%. PSE&G had no commercial paper outstanding under its Commercial Paper Program as of June 30, 2020.
Except as otherwise noted in the table above, in March 2020, PSEG, PSE&G and PSEG Power and their respective lenders agreed to extend the expiration dates on their credit agreements from March 2023 to March 2024.
Short-Term Loans
PSEG
In March 2020, PSEG entered into a $300 million, 364-day variable rate term loan agreement and in April 2020 it entered into two 364-day variable rate term loan agreements for $200 million and $300 million.

Note 13. Financial Risk Management Activities
Derivative accounting guidance requires that a derivative instrument be recognized as either an asset or a liability at fair value, with changes in fair value of the derivative recognized in earnings each period. Other accounting treatments are available through special election and designation provided that the derivative instrument meets specific, restrictive criteria, both at the time of designation and on an ongoing basis. These alternative permissible treatments include normal purchases and normal sales (NPNS), cash flow hedge and fair value hedge accounting. PSEG, PSEG Power and PSE&G have applied the NPNS scope exception to certain derivative contracts for the forward sale of generation, power procurement agreements and fuel agreements. PSEG uses interest rate swaps and other derivatives, which are designated and qualifying as cash flow or fair value hedges. PSEG Power enters into additional contracts that are derivatives, but are not designated as either cash flow hedges or fair value hedges. These transactions are economic hedges and are recorded at fair market value with changes recognized in earnings.
Commodity Prices
Within PSEG and its affiliate companies, PSEG Power has the most exposure to commodity price risk. PSEG Power is exposed to commodity price risk primarily relating to changes in the market price of electricity, fossil fuels and other commodities. Fluctuations in market prices result from changes in supply and demand, fuel costs, market conditions, weather, state and federal regulatory policies, environmental policies, transmission availability and other factors. PSEG Power uses a variety of derivative and non-derivative instruments, such as financial options, futures, swaps, fuel purchases and forward purchases and

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
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sales of electricity, to manage the exposure to fluctuations in commodity prices and optimize the value of PSEG Power’s expected generation. PSEG Power also uses derivatives to hedge a portion of its anticipated BGSS obligations with PSE&G. For additional information see Note 11. Commitments and Contingent Liabilities. Changes in the fair market value of these derivative contracts are recorded in earnings.
Interest Rates
PSEG, PSEG Power and PSE&G are subject to the risk of fluctuating interest rates in the normal course of business. Exposure to this risk is managed by targeting a balanced debt maturity profile which limits refinancing in any given period or interest rate environment. In addition, they have used a mix of fixed and floating rate debt and interest rate swaps.
Fair Value Hedges
PSEG enters into fair value hedges to convert fixed-rate debt into variable-rate debt. The changes in fair value of the interest rate swaps are fully offset by changes in the fair value of the underlying forecasted interest payments of the debt. There were no outstanding fair value interest rate swaps as of June 30, 2020 and December 31, 2019.
Cash Flow Hedges
PSEG uses interest rate swaps and other derivatives, which are designated and effective as cash flow hedges, to manage its exposure to the variability of cash flows, primarily related to variable-rate debt instruments. As of June 30, 2020, PSEG had interest rate hedges outstanding totaling $700 million. These hedges convert PSEG’s $700 million variable-rate term loan due November 2020 into a fixed-rate loan.
The fair value of these hedges was $(6) million and $(5) million as of June 30, 2020 and December 31, 2019, respectively. The Accumulated Other Comprehensive Income (Loss) (after tax) related to outstanding and terminated interest rate derivatives designated as cash flow hedges was $(15)$(8) million and $(9) million as of June 30, 2020March 31, 2021 and December 31, 2019.2020, respectively. The after-tax unrealized losses on these hedges expected to be reclassified to earnings during the next 12 months are $(7)$(3) million.
Fair Values of Derivative Instruments
The following are the fair values of derivative instruments on the Condensed Consolidated Balance Sheets. The following tables also include disclosures for offsetting derivative assets and liabilities which are subject to a master netting or similar agreement. In general, the terms of the agreements provide that in the event of an early termination the counterparties have the right to offset amounts owed or owing under that and any other agreement with the same counterparty. Accordingly, and in accordance with PSEG’s accounting policy, these positions are offset on the Condensed Consolidated Balance Sheets of PSEG Power and PSEG. For additional information see Note 14. Fair Value Measurements. The following tabular disclosure does not include the offsetting of trade receivables and payables.
             
   As of June 30, 2020 
   PSEG Power (A) PSEG (A) Consolidated 
   Not Designated     Cash Flow Hedges   
 Balance Sheet Location 
Energy-
Related
Contracts
 
Netting
(B)
 Total
PSEG Power		 
Interest
Rate
Swaps
 
Total
Derivatives
 
   Millions 
 Derivative Contracts           
 Current Assets $595
 $(483) $112
 $—
 $112
 
 Noncurrent Assets 202
 (172) 30
 —
 30
 
 Total Mark-to-Market Derivative Assets $797
 $(655) $142
 $—
 $142
 
 Derivative Contracts           
 Current Liabilities $(501) $483
 $(18) $(6) $(24) 
 Noncurrent Liabilities (172) 170
 (2) —
 (2) 
 Total Mark-to-Market Derivative (Liabilities) $(673) $653
 $(20) $(6) $(26) 
 Total Net Mark-to-Market Derivative Assets (Liabilities) $124
 $(2) $122
 $(6) $116
 
             
45

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(UNAUDITED)
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As of March 31, 2021
PSEG Power (A)Consolidated
Not Designated
Balance Sheet LocationEnergy-
Related
Contracts		Netting
(B)		Total
PSEG Power		Total
Derivatives
Millions
Derivative Contracts
Current Assets$397 $(368)$29 $29 
Noncurrent Assets232 (213)19 19 
Total Mark-to-Market Derivative Assets$629 $(581)$48 $48 
Derivative Contracts
Current Liabilities$(436)$410 $(26)$(26)
Noncurrent Liabilities(204)202 (2)(2)
Total Mark-to-Market Derivative (Liabilities)$(640)$612 $(28)$(28)
Total Net Mark-to-Market Derivative Assets (Liabilities)$(11)$31 $20 $20 
As of December 31, 2020
PSEG Power (A)Consolidated
Not Designated
Balance Sheet LocationEnergy-
Related
Contracts		Netting
(B)		Total
PSEG Power		Total
Derivatives
 Millions
Derivative Contracts
Current Assets$464 $(404)$60 $60 
Noncurrent Assets93 (84)9 9 
Total Mark-to-Market Derivative Assets$557 $(488)$69 $69 
Derivative Contracts
Current Liabilities$(412)$391 $(21)$(21)
Noncurrent Liabilities(109)105 (4)(4)
Total Mark-to-Market Derivative (Liabilities)$(521)$496 $(25)$(25)
Total Net Mark-to-Market Derivative Assets (Liabilities)$36 $8 $44 $44 
(A)Substantially all of PSEG Power’s and PSEG’s derivative instruments are contracts subject to master netting agreements. Contracts not subject to master netting or similar agreements are immaterial and did not have any collateral posted or received as of March 31, 2021 and December 31, 2020.
(B)Represents the netting of fair value balances with the same counterparty (where the right of offset exists) and the application of collateral. All cash collateral (received) posted that has been allocated to derivative positions, where the right of offset exists, has been offset on the Condensed Consolidated Balance Sheets. As of March 31, 2021 and December 31, 2020, PSEG Power had net cash collateral (receipts) payments to counterparties of $98 million and $54 million, respectively. Of these net cash collateral (receipts) payments, $31 million and $8 million as of March 31, 2021 and December 31, 2020, respectively, were netted against the corresponding net derivative contract positions. Of the $31 million as of March 31, 2021, $(2) million was netted against current assets, $(12) million was netted against noncurrent assets, $44 million was netted against current liabilities and $1 million was netted against noncurrent liabilities. Of the $8 million as of December 31, 2020, $(13) million was netted against current assets and $21 million was netted against noncurrent liabilities.
46
             
   As of December 31, 2019 
   PSEG Power (A) PSEG (A) Consolidated 
   Not Designated     Cash Flow Hedges   
 Balance Sheet Location 
Energy-
Related
Contracts
 
Netting
(B)
 Total
PSEG Power		 
Interest
Rate
Swaps
 
Total
Derivatives
 
   Millions 
 Derivative Contracts           
 Current Assets $636
 $(523) $113
 $—
 $113
 
 Noncurrent Assets 163
 (139) 24
 —
 24
 
 Total Mark-to-Market Derivative Assets $799
 $(662) $137
 $—
 $137
 
 Derivative Contracts           
 Current Liabilities $(553) $522
 $(31) $(5) $(36) 
 Noncurrent Liabilities (139) 138
 (1) —
 (1) 
 Total Mark-to-Market Derivative (Liabilities) $(692) $660
 $(32) $(5) $(37) 
 Total Net Mark-to-Market Derivative Assets (Liabilities) $107
 $(2) $105
 $(5) $100
 
             

(A)Substantially all of PSEG Power’s and PSEG’s derivative instruments are contracts subject to master netting agreements. Contracts not subject to master netting or similar agreements are immaterial and did not have any collateral posted or received as of June 30, 2020 and December 31, 2019.
(B)
Represents the netting of fair value balances with the same counterparty (where the right of offset exists) and the application of collateral. All cash collateral (received) posted that has been allocated to derivative positions, where the right of offset exists, has been offset on the Condensed Consolidated Balance Sheets. As of June 30, 2020 and December 31, 2019, PSEG Power had net cash collateral (receipts) payments to counterparties of $12 million and $44 million, respectively. Of these net cash collateral (receipts) payments, $(2) million as of June 30, 2020 and December 31, 2019 were netted against the corresponding net derivative contract positions. The $(2) million as of June 30, 2020 was netted against noncurrent assets. Of the $(2) million as of December 31, 2019, $(1) million was netted against current assets and $(1) million was netted against noncurrent assets.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

Certain of PSEG Power’s derivative instruments contain provisions that require PSEG Power to post collateral. This collateral may be posted in the form of cash or credit support with thresholds contingent upon PSEG Power’s credit rating from each of the major credit rating agencies. The collateral and credit support requirements vary by contract and by counterparty. These credit risk-related contingent features stipulate that if PSEG Power were to be downgraded to a below investment grade rating by S&P or Moody’s, it would be required to provide additional collateral. A below investment grade credit rating for PSEG Power would represent a three level downgrade from its current Moody’s rating and a two level downgrade from its current S&P or Moody’s ratings.rating. This incremental collateral requirement can offset collateral requirements related to other derivative instruments that are assets with the same counterparty, where the contractual right of offset exists under applicable master agreements. PSEG Power also enters into commodity transactions on the New York Mercantile Exchange (NYMEX) and Intercontinental Exchange (ICE). The NYMEX and ICE clearing houses act as counterparties to each trade. Transactions on the NYMEX and ICE must adhere to comprehensive collateral and margin requirements.
The aggregate fair value of all derivative instruments with credit risk-related contingent features in a liability position that are not fully collateralized (excluding transactions on the NYMEX and ICE that are fully collateralized) was $25 million and $35$28 million as of June 30, 2020March 31, 2021 and December 31, 2019, respectively.2020. As of June 30, 2020March 31, 2021 and December 31, 2019,2020, PSEG Power had the contractual right of offset of $6$2 million and $2$3 million, respectively, related to derivative instruments that are assets with the same counterparty under master agreements and net of margin posted. If PSEG Power had been downgraded to a below investment grade rating, it would have had additional collateral obligations of $19$26 million and $33$25 million as of June 30, 2020March 31, 2021 and December 31, 2019,2020, respectively, related to its derivatives, net of the contractual right of offset under master agreements and the application of collateral.

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The following shows the effect on the Condensed Consolidated Statements of Operations and on Accumulated Other Comprehensive Income (AOCI) of derivative instruments designated as cash flow hedges for the three months ended March 31, 2021 and six months ended June 30, 2020 and 2019:2020:
             
 
Derivatives in Cash Flow
Hedging Relationships
 
Amount of Pre-Tax
Gain (Loss)
Recognized in AOCI on Derivatives
 
Location of
Pre-Tax Gain (Loss) Reclassified from AOCI into Income
 
Amount of Pre-Tax
Gain (Loss)
Reclassified from AOCI into Income
 
  Three Months Ended   Three Months Ended 
  June 30,   June 30, 
  2020 2019   2020 2019 
   Millions   Millions 
 PSEG           
 Interest Rate Swaps $—
 $(19) Interest Expense $(4) $(1) 
 Total PSEG $—
 $(19)   $(4) $(1) 
             
             
 
Derivatives in Cash Flow
Hedging Relationships
 
Amount of Pre-Tax
Gain (Loss)
Recognized in AOCI on Derivatives
 
Location of
Pre-Tax Gain (Loss) Reclassified from AOCI into Income
 
Amount of Pre-Tax
Gain (Loss)
Reclassified from AOCI into Income
 
  Six Months Ended   Six Months Ended 
  June 30,   June 30, 
  2020 2019   2020 2019 
   Millions   Millions 
 PSEG           
 Interest Rate Swaps $(6) $(24) Interest Expense $(6) $(1) 
 Total PSEG $(6) $(24)   $(6) $(1) 
             

Derivatives in Cash Flow
Hedging Relationships		Amount of Pre-Tax
Gain (Loss)
Recognized in AOCI on Derivatives		Location of
Pre-Tax Gain (Loss) Reclassified from AOCI into Income		Amount of Pre-Tax
Gain (Loss)
Reclassified from AOCI into Income
Three Months EndedThree Months Ended
March 31,March 31,
2021202020212020
MillionsMillions
PSEG
Interest Rate Swaps$0 $(6)Interest Expense$(1)$(2)
Total PSEG$0 $(6)$(1)$(2)
The effect of interest rate cash flow hedges is recorded in Interest Expense in PSEG’s Condensed Consolidated Statement of Operations. For the three months and six months ended June 30,March 31, 2021 and 2020, the amount of gain or loss on interest rate hedges reclassified from Accumulated Other Comprehensive Income (Loss) into income was $(3)$(1) million and $(4) million after-tax, respectively. The amount of gain or loss on interest rate hedges reclassified from Accumulated Other Comprehensive Income (Loss) into income for the three months and six months ended June 30, 2019 was immaterial.after-tax.
The following reconciles the Accumulated Other Comprehensive Income (Loss) for derivative activity included in the Accumulated Other Comprehensive Loss of PSEG on a pre-tax and after-tax basis.
       
 Accumulated Other Comprehensive Income (Loss) Pre-Tax After-Tax 
   Millions 
 Balance as of December 31, 2018 $(2) $(1) 
 Loss Recognized in AOCI (23) (17) 
 Less: Loss Reclassified into Income 4
 3
 
 Balance as of December 31, 2019 $(21) $(15) 
 Loss Recognized in AOCI (6) (4) 
 Less: Loss Reclassified into Income 6
 4
 
 Balance as of June 30, 2020 $(21) $(15) 
       
Accumulated Other Comprehensive Income (Loss)Pre-TaxAfter-Tax
Millions
Balance as of December 31, 2019$(21)$(15)
Loss Recognized in AOCI(6)(4)
Less: Loss Reclassified into Income14 10 
Balance as of December 31, 2020$(13)$(9)
Loss Recognized in AOCI0 0 
Less: Loss Reclassified into Income1 1 
Balance as of March 31, 2021$(12)$(8)
47


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Table of Contents                    


The following shows the effect on the Condensed Consolidated Statements of Operations of derivative instruments not designated as hedging instruments or as NPNS for the three months ended March 31, 2021 and six months ended June 30, 2020, and 2019, respectively. PSEG Power’s derivative contracts reflected in this table include contracts to hedge the purchase and sale of electricity and natural gas, and the purchase of fuel. The table does not include contracts that PSEG Power has designated as NPNS, such as its BGS contracts and certain other energy supply contracts that it has with other utilities and companies with retail load.
             
 Derivatives Not Designated as Hedges 
Location of Pre-Tax
Gain (Loss)
Recognized in Income
on Derivatives
 Pre-Tax Gain (Loss) Recognized in Income on Derivatives 
     Three Months Ended Six Months Ended 
     June 30, June 30, 
     2020 2019 2020 2019 
     Millions 
 PSEG and PSEG Power           
 Energy-Related Contracts Operating Revenues $(27) $322
 $204
 $461
 
 Energy-Related Contracts Energy Costs 2
 (61) (66) (74) 
 Total PSEG and PSEG Power   $(25) $261
 $138
 $387
 
             

Derivatives Not Designated as HedgesLocation of Pre-Tax
Gain (Loss)
Recognized in Income
on Derivatives		Pre-Tax Gain (Loss) Recognized in Income on Derivatives
Three Months Ended
March 31,
20212020
Millions
PSEG and PSEG Power
Energy-Related ContractsOperating Revenues$(46)$231 
Energy-Related ContractsEnergy Costs6 (68)
Total PSEG and PSEG Power$(40)$163 
The following table summarizes the net notional volume purchases/(sales) of open derivative transactions by commodity as of June 30, 2020March 31, 2021 and December 31, 2019.2020.
             
 Type Notional Total PSEG PSEG Power PSE&G 
     Millions 
 As of June 30, 2020           
 Natural Gas Dekatherm (Dth) 371
 —
 371
 —
 
 Electricity MWh (58) —
 (58) —
 
 Financial Transmission Rights (FTRs) MWh 30
 —
 30
 —
 
 Interest Rate Swaps U.S. Dollars 700
 700
 —
 —
 
 As of December 31, 2019           
 Natural Gas Dth 341
 —
 341
 —
 
 Electricity MWh (62) —
 (62) —
 
 FTRs MWh 13
 —
 13
 —
 
 Interest Rate Swaps U.S. Dollars 700
 700
 —
 —
 
             

TypeNotionalTotalPSEGPSEG PowerPSE&G
Millions
As of March 31, 2021
Natural GasDekatherm (Dth)308 0 308 0 
ElectricityMWh(66)0 (66)0 
Financial Transmission Rights (FTRs)MWh11 0 11 0 
As of December 31, 2020
Natural GasDth321 0 321 0 
ElectricityMWh(66)0 (66)0 
FTRsMWh20 0 20 0 
Credit Risk
Credit risk relates to the risk of loss that PSEG Power would incur as a result of non-performance by counterparties pursuant to the terms of their contractual obligations. PSEG has established credit policies that it believes significantly minimize credit risk. These policies include an evaluation of potential counterparties’ financial condition (including credit rating), collateral requirements under certain circumstances and the use of standardized agreements, which allow for the netting of positive and negative exposures associated with a single counterparty. In the event of non-performance or non-payment by a major counterparty, there may be a material adverse impact on PSEG Power’s and PSEG’s financial condition, results of operations or net cash flows.
The following table provides information on PSEG Power’s credit risk from wholesale counterparties, net of collateral, as of June 30, 2020.March 31, 2021. It further delineates that exposure by the credit rating of the counterparties, which is determined by the lowest rating from S&P, Moody’s or an internal scoring model. In addition, it provides guidance on the concentration of credit risk to individual counterparties and an indication of the quality of PSEG Power’s credit risk by credit rating of the counterparties.
As of June 30, 2020, 99%March 31, 2021, 91% of the net credit exposure for PSEG Power’s wholesale operations was with investment grade counterparties. Credit exposure is defined as any positive results of netting accounts receivable/accounts payable and the forward value of open positions (which includes all financial instruments including derivatives, NPNS and non-derivatives).
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RatingCurrent
Exposure		Securities Held as CollateralNet
Exposure		Number of
Counterparties
>10%		Net Exposure of
Counterparties
>10%
MillionsMillions
Investment Grade$234 $18 $216 1 $121 (A)
Non-Investment Grade41 19 22 0 0 
Total$275 $37 $238 1 $121 
              
 Rating 
Current
Exposure
 Securities Held as Collateral 
Net
Exposure
 
Number of
Counterparties
>10%
 
Net Exposure of
Counterparties
>10%
  
   Millions   Millions  
 Investment Grade $335
 $70
 $265
 3
 $136
(A) 
 Non-Investment Grade 2
 —
 2
 —
 —
   
 Total $337
 $70
 $267
 3
 $136
  
              
(A)
Represents net exposure of $50 million with PSE&G and $86 million with two non-affiliated counterparties.(A)Represents net exposure of $121 million with PSE&G.
As of June 30, 2020,March 31, 2021, collateral held from counterparties where PSEG Power had credit exposure included $3 million in cash collateral and $67$34 million in letters of credit.
As of June 30, 2020,March 31, 2021, PSEG Power had 136131 active counterparties.
PSE&G’s supplier master agreements are approved by the BPU and govern the terms of its electric supply procurement contracts. These agreements define a supplier’s performance assurance requirements and allow a supplier to meet its credit requirements with a certain amount of unsecured credit. The amount of unsecured credit is determined based on the supplier’s credit ratings from the major credit rating agencies and the supplier’s tangible net worth. The credit position is based on the initial market price, which is the forward price of energy on the day the procurement transaction is executed, compared to the forward price curve for energy on the valuation day. To the extent that the forward price curve for energy exceeds the initial market price, the supplier is required to post a parental guaranty or other security instrument such as a letter of credit or cash, as collateral to the extent the credit exposure is greater than the supplier’s unsecured credit limit. As of June 30, 2020,March 31, 2021, primarily all of the posted collateral was in the form of parental guarantees. The unsecured credit used by the suppliers represents PSE&G’s net credit exposure. PSE&G’s BGS suppliers’ credit exposure is calculated each business day.day As of June 30, 2020,March 31, 2021, PSE&G had no net credit exposure with suppliers, including PSEG Power.
PSE&G is permitted to recover its costs of procuring energy through the BPU-approved BGS tariffs. PSE&G’s counterparty credit risk is mitigated by its ability to recover realized energy costs through customer rates.

Note 14. Fair Value Measurements
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Accounting guidance for fair value measurement emphasizes that fair value is a market-based measurement, not an entity-specific measurement, and establishes a fair value hierarchy that distinguishes between assumptions based on market data obtained from independent sources and those based on an entity’s own assumptions. The hierarchy prioritizes the inputs to fair value measurement into three levels:
Level 1—measurements utilize quoted prices (unadjusted) in active markets for identical assets or liabilities that PSEG, PSE&G and PSEG Power have the ability to access. These consist primarily of listed equity securities and money market mutual funds, as well as natural gas futures contracts executed on NYMEX.
Level 2—measurements include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, and other observable inputs such as interest rates and yield curves that are observable at commonly quoted intervals. These consist primarily of non-exchange traded derivatives such as forward contracts or options and most fixed income securities.
Level 3—measurements use unobservable inputs for assets or liabilities, based on the best information available and might include an entity’s own data and assumptions. In some valuations, the inputs used may fall into different levels of the hierarchy. In these cases, the financial instrument’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. These consist primarily of certain electric load contracts and gas contracts.
Certain derivative transactions may transfer from Level 2 to Level 3 if inputs become unobservable and internal modeling techniques are employed to determine fair value. Conversely, measurements may transfer from Level 3 to Level 2 if the inputs become observable.
The following tables present information about PSEG’s, PSE&G’s and PSEG Power’s respective assets and (liabilities) measured at fair value on a recurring basis as of June 30, 2020March 31, 2021 and December 31, 2019,2020, including the fair value measurements and the levels of inputs used in determining those fair values. Amounts shown for PSEG include the amounts shown for PSE&G and PSEG Power.
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Recurring Fair Value Measurements as of March 31, 2021
DescriptionTotal
Netting (D)		Quoted Market Prices for Identical Assets
(Level 1)		Significant Other Observable Inputs (Level 2)Significant Unobservable Inputs (Level 3)
Millions
PSEG
Assets:
Cash Equivalents (A)$625 $0 $625 $0 $0 
Derivative Contracts:
Energy-Related Contracts (B)$48 $(581)$22 $604 $3 
NDT Fund (C)
Equity Securities$1,286 $0 $1,286 $0 $0 
Debt Securities—U.S. Treasury$270 $0 $0 $270 $0 
Debt Securities—Govt Other$367 $0 $0 $367 $0 
Debt Securities—Corporate$600 $0 $0 $600 $0 
Rabbi Trust (C)
Equity Securities$28 $0 $28 $0 $0 
Debt Securities—U.S. Treasury$65 $0 $0 $65 $0 
Debt Securities—Govt Other$33 $0 $0 $33 $0 
Debt Securities—Corporate$112 $0 $0 $112 $0 
Liabilities:
Derivative Contracts:
Energy-Related Contracts (B)$(28)$612 $(24)$(612)$(4)
PSE&G
Assets:
Cash Equivalents (A)$525 $0 $525 $0 $0 
Rabbi Trust (C)
Equity Securities$5 $0 $5 $0 $0 
Debt Securities—U.S. Treasury$12 $0 $0 $12 $0 
Debt Securities—Govt Other$6 $0 $0 $6 $0 
Debt Securities—Corporate$20 $0 $0 $20 $0 
PSEG Power
Assets:
Derivative Contracts:
Energy-Related Contracts (B)$48 $(581)$22 $604 $3 
NDT Fund (C)
Equity Securities$1,286 $0 $1,286 $0 $0 
Debt Securities—U.S. Treasury$270 $0 $0 $270 $0 
Debt Securities—Govt Other$367 $0 $0 $367 $0 
Debt Securities—Corporate$600 $0 $0 $600 $0 
Rabbi Trust (C)
Equity Securities$7 $0 $7 $0 $0 
Debt Securities—U.S. Treasury$17 $0 $0 $17 $0 
Debt Securities—Govt Other$9 $0 $0 $9 $0 
Debt Securities—Corporate$29 $0 $0 $29 $0 
Liabilities:
Derivative Contracts:
Energy-Related Contracts (B)$(28)$612 $(24)$(612)$(4)
50
             
   Recurring Fair Value Measurements as of June 30, 2020 
 Description Total 

Netting (E)
 
Quoted Market Prices for Identical Assets
(Level 1)
 Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) 
   Millions 
 PSEG           
 Assets:           
 Cash Equivalents (A) $280
 $—
 $280
 $—
 $—
 
 Derivative Contracts:           
 Energy-Related Contracts (B) $142
 $(655) $27
 $758
 $12
 
 NDT Fund (C)           
 Equity Securities $1,117
 $—
 $1,117
 $—
 $—
 
 Debt Securities—U.S. Treasury $178
 $—
 $—
 $178
 $—
 
 Debt Securities—Govt Other $368
 $—
 $—
 $368
 $—
 
 Debt Securities—Corporate $587
 $—
 $—
 $587
 $—
 
 Rabbi Trust (C)           
 Equity Securities $26
 $—
 $26
 $—
 $—
 
 Debt Securities—U.S. Treasury $53
 $—
 $—
 $53
 $—
 
 Debt Securities—Govt Other $44
 $—
 $—
 $44
 $—
 
 Debt Securities—Corporate $136
 $—
 $—
 $136
 $—
 
 Liabilities:           
 Derivative Contracts:           
 Energy-Related Contracts (B) $(20) $653
 $(59) $(612) $(2) 
 Interest Rate Swaps (D) $(6) $—
 $—
 $(6) $—
 
 PSE&G           
 Assets:           
 Cash Equivalents (A) $180
 $—
 $180
 $—
 $—
 
 Rabbi Trust (C)           
 Equity Securities $5
 $—
 $5
 $—
 $—
 
 Debt Securities—U.S. Treasury $10
 $—
 $—
 $10
 $—
 
 Debt Securities—Govt Other $8
 $—
 $—
 $8
 $—
 
 Debt Securities—Corporate $27
 $—
 $—
 $27
 $—
 
 PSEG Power 
         
 Assets:           
 Derivative Contracts:           
 Energy-Related Contracts (B) $142
 $(655) $27
 $758
 $12
 
 NDT Fund (C)           
 Equity Securities $1,117
 $—
 $1,117
 $—
 $—
 
 Debt Securities—U.S. Treasury $178
 $—
 $—
 $178
 $—
 
 Debt Securities—Govt Other $368
 $—
 $—
 $368
 $—
 
 Debt Securities—Corporate $587
 $—
 $—
 $587
 $—
 
 Rabbi Trust (C)           
 Equity Securities $7
 $—
 $7
 $—
 $—
 
 Debt Securities—U.S. Treasury $13
 $—
 $—
 $13
 $—
 
 Debt Securities—Govt Other $11
 $—
 $—
 $11
 $—
 
 Debt Securities—Corporate $34
 $—
 $—
 $34
 $—
 
 Liabilities:           
 Derivative Contracts:           
 Energy-Related Contracts (B) $(20) $653
 $(59) $(612) $(2) 
             


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


             
   Recurring Fair Value Measurements as of December 31, 2019 
 Description Total Netting  (E) 
Quoted Market Prices for Identical Assets
(Level 1)
 Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) 
   Millions 
 PSEG           
 Assets:           
 Cash Equivalents (A) $50
 $—
 $50
 $—
 $—
 
 Derivative Contracts:           
 Energy-Related Contracts (B) $137
 $(662) $19
 $770
 $10
 
 NDT Fund (C)           
 Equity Securities $1,151
 $—
 $1,150
 $1
 $—
 
 Debt Securities—U.S. Treasury $225
 $—
 $—
 $225
 $—
 
 Debt Securities—Govt Other $352
 $—
 $—
 $352
 $—
 
 Debt Securities—Corporate $486
 $—
 $—
 $486
 $—
 
 Rabbi Trust (C)           
 Equity Securities $28
 $—
 $28
 $—
 $—
 
 Debt Securities—U.S. Treasury $57
 $—
 $—
 $57
 $—
 
 Debt Securities—Govt Other $47
 $—
 $—
 $47
 $—
 
 Debt Securities—Corporate $114
 $—
 $—
 $114
 $—
 
 Liabilities:           
 Derivative Contracts:           
 Energy-Related Contracts (B) $(32) $660
 $(43) $(646) $(3) 
    Interest Rate Swaps (D) $(5) $—
 $—
 $(5) $—
 
 PSE&G           
 Assets:           
 Rabbi Trust (C)           
 Equity Securities $5
 $—
 $5
 $—
 $—
 
 Debt Securities—U.S. Treasury $11
 $—
 $—
 $11
 $—
 
 Debt Securities—Govt Other $9
 $—
 $—
 $9
 $—
 
 Debt Securities—Corporate $23
 $—
 $—
 $23
 $—
 
 PSEG Power           
 Assets:           
 Derivative Contracts:           
 Energy-Related Contracts (B) $137
 $(662) $19
 $770
 $10
 
 NDT Fund (C)           
 Equity Securities $1,151
 $—
 $1,150
 $1
 $—
 
 Debt Securities—U.S. Treasury $225
 $—
 $—
 $225
 $—
 
 Debt Securities—Govt Other $352
 $—
 $—
 $352
 $—
 
 Debt Securities—Corporate $486
 $—
 $—
 $486
 $—
 
 Rabbi Trust (C)           
 Equity Securities $8
 $—
 $8
 $—
 $—
 
 Debt Securities—U.S. Treasury $14
 $—
 $—
 $14
 $—
 
 Debt Securities—Govt Other $12
 $—
 $—
 $12
 $—
 
 Debt Securities—Corporate $28
 $—
 $—
 $28
 $—
 
 Liabilities:           
 Derivative Contracts:           
 Energy-Related Contracts (B) $(32) $660
 $(43) $(646) $(3) 
             

(A)Represents money market mutual funds.
(B)Level 1—These contracts represent natural gas futures contracts executed on NYMEX, and are being valued solely on settled pricing inputs which come directly from the exchange.
Recurring Fair Value Measurements as of December 31, 2020
DescriptionTotalNetting  (D)Quoted Market Prices for Identical Assets
(Level 1)		Significant Other Observable Inputs (Level 2)Significant Unobservable Inputs (Level 3)
Millions
PSEG
Assets:
Cash Equivalents (A)$312 $0 $312 $0 $0 
Derivative Contracts:
Energy-Related Contracts (B)$69 $(488)$26 $519 $12 
NDT Fund (C)
Equity Securities$1,352 $0 $1,351 $1 $0 
Debt Securities—U.S. Treasury$239 $0 $0 $239 $0 
Debt Securities—Govt Other$342 $0 $0 $342 $0 
Debt Securities—Corporate$566 $0 $0 $566 $0 
Rabbi Trust (C)
Equity Securities$31 $0 $31 $0 $0 
Debt Securities—U.S. Treasury$59 $0 $0 $59 $0 
Debt Securities—Govt Other$41 $0 $0 $41 $0 
Debt Securities—Corporate$135 $0 $0 $135 $0 
Liabilities:
Derivative Contracts:
Energy-Related Contracts (B)$(25)$496 $(33)$(483)$(5)
PSE&G
Assets:
Cash Equivalents (A)$50 $0 $50 $0 $0 
Rabbi Trust (C)
Equity Securities$6 $0 $6 $0 $0 
Debt Securities—U.S. Treasury$11 $0 $0 $11 $0 
Debt Securities—Govt Other$8 $0 $0 $8 $0 
Debt Securities—Corporate$26 $0 $0 $26 $0 
PSEG Power
Assets:
Derivative Contracts:
Energy-Related Contracts (B)$69 $(488)$26 $519 $12 
NDT Fund (C)
Equity Securities$1,352 $0 $1,351 $1 $0 
Debt Securities—U.S. Treasury$239 $0 $0 $239 $0 
Debt Securities—Govt Other$342 $0 $0 $342 $0 
Debt Securities—Corporate$566 $0 $0 $566 $0 
Rabbi Trust (C)
Equity Securities$8 $0 $8 $0 $0 
Debt Securities—U.S. Treasury$15 $0 $0 $15 $0 
Debt Securities—Govt Other$10 $0 $0 $10 $0 
Debt Securities—Corporate$33 $0 $0 $33 $0 
Liabilities:
Derivative Contracts:
Energy-Related Contracts (B)$(25)$496 $(33)$(483)$(5)
(A)Represents money market mutual funds.
(B)Level 1—These contracts represent natural gas futures contracts executed on NYMEX, and are being valued solely on settled pricing inputs which come directly from the exchange.
Level 2—Fair values for energy-related contracts are obtained primarily using a market-based approach. Most derivative contracts (forward purchase or sale contracts and swaps) are valued using settled prices from similar assets and liabilities from an exchange, such as NYMEX, ICE and Nodal Exchange, or auction prices. Prices used in
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the valuation process are also corroborated independently by management to determine that values are based on actual transaction data or, in the absence of transactions, bid and offers for the day. Examples may include certain exchange and non-exchange traded capacity and electricity contracts and natural gas physical or swap contracts based on market prices, basis adjustments and other premiums where adjustments and premiums are not considered significant to the overall inputs.
Level 3—Unobservable inputs are used for the valuation of certain contracts. See “Additional Information Regarding Level 3 Measurements” below for more information on the utilization of unobservable inputs.
(C)
The fair value measurement table excludes foreign currency in the NDT Fund of $1 million and $2 million as of June 30, 2020 and December 31, 2019, respectively.
(C)The fair value measurement table excludes cash of $1 million and foreign currency of $1 million in the NDT Fund as of March 31, 2021 and foreign currency of $2 million as of December 31, 2020. The NDT Fund maintains investments in various equity and fixed income securities. The Rabbi Trust maintains investments in a Russell 3000 index fund and various fixed income securities. These securities are generally valued with prices that are either exchange provided (equity securities) or market transactions for comparable securities and/or broker quotes (fixed income securities).
Level 1—Investments in marketable equity securities within the NDT Fund are primarily investments in common stocks across a broad range of industries and sectors. Most equity securities are priced utilizing the principal market close price or, in some cases, midpoint, bid or ask price. Certain other equity securities in the NDT and Rabbi Trust Funds consist primarily of investments in money market funds which seek a high level of current income as is consistent with the preservation of capital and the maintenance of liquidity. To pursue its goals, the funds normally invest in diversified portfolios of high quality, short-term, dollar-denominated debt securities and government securities. The funds’ net asset value is priced and published daily. The Rabbi Trust’s Russell 3000 index fund is valued based on quoted prices in an active market and can be redeemed daily without restriction.
Level 2—NDT and Rabbi Trust fixed income securities include investment grade corporate bonds, collateralized mortgage obligations, asset-backed securities and certain government and U.S. Treasury obligations or Federal Agency asset-backed securities and municipal bonds with a wide range of maturities. Since many fixed income securities do not trade on a daily basis, they are priced using an evaluated pricing methodology that varies by asset class and reflects observable market information such as the most recent exchange price or quoted bid for similar securities. Market-based standard inputs typically include benchmark yields, reported trades, broker/dealer quotes and issuer spreads. The preferred stocks are not actively traded on a daily basis and therefore, are also priced using an evaluated pricing methodology. Certain short-term investments are valued using observable market prices or market parameters such as time-to-maturity, coupon rate, quality rating and current yield.
(D)Interest rate swaps are valued using quoted prices on commonly quoted intervals, which are interpolated for periods different than the quoted intervals, as inputs to a market valuation model. Market inputs can generally be verified and model selection does not involve significant management judgment.
(E)Represents the netting of fair value balances with the same counterparty (where the right of offset exists) and the application of collateral. See Note 13. Financial Risk Management Activities for additional detail.
(D)Represents the netting of fair value balances with the same counterparty (where the right of offset exists) and the application of collateral. See Note 13. Financial Risk Management Activities for additional detail.
Additional Information Regarding Level 3 Measurements
For valuations that include both observable and unobservable inputs, if the unobservable input is determined to be significant to the overall inputs, the entire valuation is categorized in Level 3. This includes derivatives valued using indicative price quotations for contracts with tenors that extend into periods with no observable pricing. In instances where observable data is unavailable, consideration is given to the assumptions that market participants would use in valuing the asset or liability. This includes assumptions about market risks such as liquidity, volatility and contract duration. Such instruments are categorized in Level 3 because the model inputs generally are not observable. PSEG considers credit and nonperformancenon-performance risk in the valuation of derivative contracts categorized in Levels 2 and 3, including both historical and current market data, in its assessment of credit and nonperformancenon-performance risk by counterparty. The impacts of credit and nonperformancenon-performance risk were not material to the financial statements.
The fair value of PSEG Power’s electric load contracts in which load consumption may change hourly based on demand are measured using certain unobservable inputs, such as historic load variability and, accordingly, are categorized as Level 3. The fair value of PSEG Power’s gas physical contracts at certain illiquid delivery locations are measured using average historical basis and, accordingly, are categorized as Level 3. While these physical gas contracts have an unobservable component in their respective forward price curves, the fluctuations in fair value have been driven primarily by changes in the observable inputs.
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The following tables provide details surrounding significant Level 3 valuations as of June 30, 2020March 31, 2021 and December 31, 2019.2020.
Quantitative Information About Level 3 Fair Value Measurements
Significant
Level 3Fair Value as ofValuationUnobservableArithmetic
CommodityPositionMarch 31, 2021Technique(s) InputRangeAverage
Assets(Liabilities)
Millions
PSEG Power
ElectricityElectric Load Contracts$3 $(1)Discounted Cash FlowLoad Shaping Cost0% to 11%4%
GasGas Physical Contracts0 (1)Discounted Cash FlowHistorical Basis Adjustment-2% to -30%-10%
ElectricityOther (A)0 (2)
Total PSEG Power$3 $(4)
Total PSEG$3 $(4)
                 
   Quantitative Information About Level 3 Fair Value Measurements 
               
         Significant     
   Level 3 Fair Value as of Valuation Unobservable   Arithmetic 
 Commodity Position June 30, 2020 Technique(s)  Input Range Average 
     Assets (Liabilities)         
     Millions         
 PSEG Power               
 Electricity Electric Load Contracts $12
 $—
 Discounted Cash flow Load Shaping Cost 0% to 11% 4% 
 Gas Gas Physical Contracts —
 (2) Discounted Cash flow Historical Basis Adjustment -50% to 0% -27% 
 Total PSEG Power $12
 $(2)         
 Total PSEG   $12
 $(2)         
                 
Quantitative Information About Level 3 Fair Value Measurements
Significant
Level 3Fair Value as ofValuationUnobservableArithmetic
CommodityPositionDecember 31, 2020Technique(s) InputRangeAverage
Assets(Liabilities)
Millions
PSEG Power
ElectricityElectric Load Contracts$12 $0 Discounted Cash FlowLoad Shaping Cost0% to 11%4%
GasGas Physical Contracts0 (2)Discounted Cash Flow Historical Basis Adjustment-60% to -30%-43%
ElectricityOther (A)0 (3)
Total PSEG Power$12 $(5)
Total PSEG$12 $(5)
               
   Quantitative Information About Level 3 Fair Value Measurements 
             
         Significant   
     Fair Value as of Valuation Unobservable   
 Commodity Level 3 Position December 31, 2019 Technique(s)  Input Range 
     Assets (Liabilities)       
     Millions       
 PSEG Power             
 Electricity Electric Load Contracts $10
 $—
 Discounted Cash flow Historic Load Variability 0% to 10% 
 Gas Gas Physical Contracts —
 (3) Discounted Cash flow Average Historical Basis -50% to 0% 
 Total PSEG Power   $10
 $(3)       
 Total PSEG   $10
 $(3)       
               

(A)Other is comprised of a heat rate call option and capacity swaps.
As of June 30, 2020,March 31, 2021, significant unobservable inputs listed above would have a direct impact on the fair values of the above Level 3 instruments if they were adjusted. For energy-related contracts in cases where PSEG Power is a seller, an increase in the load variability would decrease the fair value. For gas-related contracts in cases where PSEG Power is a buyer, an increase in the average historical basis would increase the fair value.
53

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

A reconciliation of the beginning and ending balances of Level 3 derivative contracts and securities for the three months ended March 31, 2021 and six months ended June 30,March 31, 2020, and June 30, 2019, respectively, follows:

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


Changes in Level 3 Assets and (Liabilities) Measured at Fair Value on a Recurring Basis
for the Three Months and Six Months Ended June 30, 2020
March 31, 2021
               
   Three Months Ended June 30, 2020 
 Description Balance as of March 31, 2020 
Total Gains or (Losses)
Realized/Unrealized Included in Income (A)
 
Purchases
(Sales)
 
Issuances/
Settlements
(B)
 
Transfers
In/Out (C)
 Balance as of June 30, 2020 
   Millions 
 PSEG and PSEG Power           
 Net Derivative Assets (Liabilities) $19
 $(4) $—
 $(5) $—
 $10
 
               
   Six Months Ended June 30, 2020 
 Description Balance as of December 31, 2019 
Total Gains or (Losses)
Realized/Unrealized Included in Income (A)
 
Purchases
(Sales)
 
Issuances/
Settlements
(B)
 
Transfers
In/Out (C)
 Balance as of June 30, 2020 
   Millions 
 PSEG and PSEG Power           
 Net Derivative Assets (Liabilities) $7
 $9
 $—
 $(6) $—
 $10
 
               
Three Months Ended March 31, 2021
DescriptionBalance as of December 31, 2020Total Gains or (Losses)
Realized/Unrealized Included in Income (A)		Purchases
(Sales)		Issuances/
Settlements
(B)		Transfers
In/Out (C)		Balance as of March 31, 2021
Millions
PSEG and PSEG Power
Net Derivative Assets (Liabilities)$7 $(4)$0 $(4)$0 $(1)
Changes in Level 3 Assets and (Liabilities) Measured at Fair Value on a Recurring Basis
for the Three Months Ended March 31, 2020
Three Months Ended March 31, 2020
DescriptionBalance as of December 31, 2019Total Gains or (Losses)
Realized/Unrealized Included in Income (A)		Purchases
(Sales)		Issuances/
Settlements
(B)		Transfers
In/Out (C)		Balance as of March 31, 2020
Millions
PSEG and PSEG Power
Net Derivative Assets (Liabilities)$7 $13 $0 $(1)$0 $19 
(A)Unrealized gains (losses) in the following table represent the change in derivative assets and Six Months Ended June 30, 2019
               
   Three Months Ended June 30, 2019 
 Description Balance as of March 31, 2019 
Total Gains or (Losses)
Realized/Unrealized Included in Income (A)
 
Purchases
(Sales)
 
Issuances/
Settlements
(B)
 
Transfers
In/Out
(C)
 Balance as of June 30, 2019 
   Millions 
 PSEG and PSEG Power           
 Net Derivative Assets (Liabilities) $(2) $8
 $—
 $(2) $—
 $4
 
               
   Six Months Ended June 30, 2019 
 Description Balance as of December 31, 2018 
Total Gains or (Losses)
Realized/Unrealized Included in Income (A)
 
Purchases
(Sales)
 
Issuances/
Settlements
(B)
 
Transfers
In/Out (C)
 Balance as of June 30, 2019 
   Millions 
 PSEG and PSEG Power           
 Net Derivative Assets (Liabilities) $1
 $9
 $—
 $(6) $—
 $4
 
               
(A)Unrealized gains (losses) in the following table represent the change in derivative assets and liabilities still held as of June 30, 2020 and 2019.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Table of ContentsMarch 31, 2021 and 2020.

Three Months Ended March 31,
20212020
Total Gains (Losses)Unrealized Gains (Losses)Total Gains (Losses)Unrealized Gains (Losses)
Millions
PSEG and PSEG Power
Operating Revenues$(5)$(9)$18 $11 
Energy Costs1 1 (5)1 
Total$(4)$(8)$13 $12 

.(B)
                   
   Three Months Ended June 30, Six Months Ended June 30, 
   2020 2019 2020 2019 
   Total Gains (Losses) Unrealized Gains (Losses) Total Gains (Losses) Unrealized Gains (Losses) Total Gains (Losses) Unrealized Gains (Losses) Total Gains (Losses) Unrealized Gains (Losses) 
   Millions 
 PSEG and PSEG Power               
 Operating Revenues $(4) $(9) $11
 $9
 $14
 $2
 $17
 $9
 
 Energy Costs —
 —
 (3) (3) (5) 1
 (8) (6) 
 Total $(4) $(9) $8
 $6
 $9
 $3
 $9
 $3
 
                   

Includes settlements of $(4) million for the three months ended March 31, 2021 and $(1) million for the three months ended March 31, 2020, respectively.
(B)Includes settlements of $(5) million and $(6) million for the three months and six months ended June 30, 2020, respectively, and $(2) million and $(6) million for the three months and six months ended June 30, 2019, respectively.
(C)There were no transfers into or out of Level 3 during the three months and six months ended June 30, 2020 and 2019.
(C)There were no transfers into or out of Level 3 during the three months and three months ended March 31, 2021 and 2020.
As of June 30, 2020,March 31, 2021, PSEG carried $2.9$3.4 billion of net assets that are measured at fair value on a recurring basis, of which $10$(1) million of net assets wasliabilities were measured using unobservable inputs and classified as Level 3 within the fair value hierarchy.hierarchy were immaterial.
As of June 30, 2019,March 31, 2020, PSEG carried $2.5$2.7 billion of net assets that are measured at fair value on a recurring basis, of which $4$19 million of net assets was measured using unobservable inputs and classified as Level 3 within the fair value hierarchy.
Fair Value of Debt
The estimated fair values, were determined using the market quotations or valuescarrying amounts and methods used to determine fair value of instruments with similar terms, credit ratings, remaining maturities and redemptionslong-term debt as of June 30, 2020 and DecemberMarch 31, 2019.
          
  As of As of 
  June 30, 2020 December 31, 2019 
  
Carrying
Amount
 
Fair
Value
 
Carrying
Amount
 
Fair
Value
 
  Millions 
 Long-Term Debt:        
 PSEG (A) (B)$2,442
 $2,537
 $2,441
 $2,479
 
 PSE&G (B)10,795
 13,152
 9,827
 11,107
 
 PSEG Power (B)2,436
 2,840
 2,840
 3,137
 
 Total Long-Term Debt$15,673
 $18,529
 $15,108
 $16,723
 
          
(A)Includes floating-rate term loan of $700 million at PSEG as of June 30, 2020 and December 31, 2019. The fair value of the term loan debt (Level 2 measurement) approximates the carrying value because the interest payments are based on LIBOR rates that are reset monthly and the debt is redeemable at face value by PSEG at any time.
(B)Given that these bonds do not trade actively, the fair value amounts of taxable debt securities (primarily Level 2 measurements) are generally determined by a valuation model that is based on a conventional discounted cash flow methodology. The fair value amounts above do not represent the price at which the outstanding debt may be called for redemption by each issuer under their respective debt agreements.

2021
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(UNAUDITED)
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and December 31, 2020 are included in the following table and accompanying notes.
As ofAs of
March 31, 2021December 31, 2020
Carrying
Amount		Fair
Value		Carrying
Amount		Fair
Value
Millions
Long-Term Debt:
PSEG (A)$2,930 $3,013 $2,929 $3,092 
PSE&G (A)11,502 12,695 10,909 13,372 
PSEG Power (A)2,343 2,623 2,342 2,679 
Total Long-Term Debt$16,775 $18,331 $16,180 $19,143 
(A)Given that these bonds do not trade actively, the fair value amounts of taxable debt securities (primarily Level 2 measurements) are generally determined by a valuation model that is based on a conventional discounted cash flow methodology. The fair value amounts above do not represent the price at which the outstanding debt may be called for redemption by each issuer under their respective debt agreements.

Note 15. Other Income (Deductions)
PSE&GPSEG PowerOther (A)Consolidated
Millions
Three Months Ended March 31, 2021
NDT Fund Interest and Dividends$0 $13 $0 $13 
Allowance for Funds Used During Construction23 0 0 23 
Solar Loan Interest3 0 0 3 
Purchases of Tax Losses under New Jersey Technology Tax Benefit Transfer Program0 (16)0 (16)
Other2 (1)1 2 
  Total Other Income (Deductions)$28 $(4)$1 $25 
Three Months Ended March 31, 2020
NDT Fund Interest and Dividends$0 $13 $0 $13 
Allowance for Funds Used During Construction21 0 0 21 
Solar Loan Interest4 0 0 4 
Purchases of Tax Losses under New Jersey Technology Tax Benefit Transfer Program0 (35)0 (35)
Other2 (1)0 1 
Total Other Income (Deductions)$27 $(23)$0 $4 
(A)Other consists of activity at PSEG (as parent company), Energy Holdings, Services, PSEG LI and intercompany eliminations.
          
  PSE&G PSEG Power Other (A) Consolidated 
  Millions 
 Three Months Ended June 30, 2020        
 NDT Fund Interest and Dividends$—
 $14
 $—
 $14
 
 Allowance for Funds Used During Construction20
 —
 —
 20
 
 Solar Loan Interest4
 —
 —
 4
 
 Purchases of Tax Losses under New Jersey Technology Tax Benefit Transfer Program—
 (1) —
 (1) 
 Other2
 (1) —
 1
 
   Total Other Income (Deductions)$26
 $12
 $—
 $38
 
 Six Months Ended June 30, 2020        
 NDT Fund Interest and Dividends$—
 $27
 $—
 $27
 
 Allowance for Funds Used During Construction41
 —
 —
 41
 
 Solar Loan Interest8
 —
 —
 8
 
 Purchases of Tax Losses under New Jersey Technology Tax Benefit Transfer Program—
 (36) —
 (36) 
 Other4
 (2) —
 2
 
   Total Other Income (Deductions)$53
 $(11) $—
 $42
 
 Three Months Ended June 30, 2019        
 NDT Fund Interest and Dividends$—
 $16
 $—
 $16
 
 Allowance for Funds Used During Construction14
 —
 —
 14
 
 Solar Loan Interest4
 —
 —
 4
 
 Other1
 (1) (1) (1) 
   Total Other Income (Deductions)$19
 $15
 $(1) $33
 
 Six Months Ended June 30, 2019        
 NDT Fund Interest and Dividends$—
 $30
 $—
 $30
 
 Allowance for Funds Used During Construction27
 —
 —
 27
 
 Solar Loan Interest8
 —
 —
 8
 
 Other3
 (2) —
 1
 
 Total Other Income (Deductions)$38
 $28
 $—
 $66
 
          

(A)Other consists of activity at PSEG (as parent company), Energy Holdings, Services, PSEG LI and intercompany eliminations.

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Table of Contents                    


Note 16. Income Taxes
PSEG’s, PSE&G’s and PSEG Power’s effective tax rates for the three months ended March 31, 2021 and six months ended June 30, 2020 and 2019 were as follows:
          
  Three Months Ended Six Months Ended 
  June 30, June 30, 
  2020 2019 2020 2019 
 PSEG19.5% (15.0)% 14.5% 13.1% 
 PSE&G14.2% 5.8% 17.7% 5.8% 
 PSEG Power27.4% 21.6% (3.4)% 30.6% 
          

Three Months Ended
March 31,
20212020
PSEG15.3%8.9%
PSE&G14.2%19.9%
PSEG Power24.4%122.8%
For the three months and six months ended June 30, 2020,March 31, 2021, the differencesdifference in PSEG’s effective tax ratesrate as compared to the same periodsperiod in the prior year werewas due primarily to the reductionimpact of the additional trust tax on the NDT qualified fund net gains in 2021 and net losses in 2020 and a decrease in the 2020 flowbackbenefit due to lower purchases of PSE&G’s excess deferred income tax liabilities as PSE&G refunded all FERC-approved transmission-related excess deferred income taxes that are not subject to thenormalization rules in 2019. For the three months and six months ended June 30, 2020, the differences in PSEG’s effective tax rates as compared to the statutory tax rate of 28.11% were due primarily to the flowback of PSE&G’s excess deferred income tax liabilities and tax repair-related accumulated deferred income taxes, the benefit of purchasing 2019 net operating losses (NOLs) under the New Jersey Technology Tax Benefit Transfer Program, in 2020, and the tax benefit from changes in uncertain tax positions as a result of the settlement of the 2011-2016 federal income tax audits.
For the three months and six months ended June 30, 2020, the differences in PSE&G’s effective tax rates as compared to the same periodsoffset by an increase in the prior year were due primarily to the reduction in the 2020 flowback of PSE&G’s excess deferred income tax liabilities, as PSE&G refunded all FERC-approved transmission-related excess deferred income taxes that are not subject to the normalization rules in 2019. For the three months and six months ended June 30, 2020, the differences in PSE&G’s effective tax rates as compared to the statutory tax rate of 28.11% were due primarily to the2021 flowback of PSE&G’s excess deferred income tax liabilities and Clean Energy Future program investments. The difference in PSEG’s effective tax repair-related accumulatedrate as compared to the statutory tax rate of 28.11% was due primarily to an increase in the 2021 flowback of PSE&G’s excess deferred income taxes.tax liabilities and Clean Energy Future program investments and the benefit of purchasing 2020 NOLs under the New Jersey Technology Tax Benefit Transfer Program in 2021.
For the three months ended June 30, 2020,March 31, 2021, the difference in PSE&G’s effective tax rate as compared to the same period in the prior year was due to an increase in the 2021 flowback of PSE&G’s excess deferred income tax liabilities and Clean Energy Future program investments offset by an increase in bad debt flow-through. The difference in PSE&G’s effective tax rate as compared to the statutory tax rate of 28.11% was due primarily to an increase in the 2021 flowback of PSE&G’s excess deferred income tax liabilities and Clean Energy Future program investments.
For the three months ended March 31, 2021, the difference in PSEG Power’s effective tax rate as compared to the same period in the prior year was due primarily to higher pre-tax income fromthe impact the additional trust tax on the NDT qualified fund which is subject to an additional trust tax, partially offset by the tax benefit from changes in uncertain tax positions as a result of the settlement of the 2011-2016 federal income tax audits. For the six months ended June 30, 2020 the differences in PSEG Power’s effective tax rates as compared to the same period in the prior yearnet gains and the statutory tax rate of 28.11% were due primarily to the benefit of purchasing 2019NOLs under the New Jersey Technology Tax Benefit Transfer Program had on PSEG Power’s 2021 pre-tax income compared to the impact the additional trust tax benefit on the NDT qualified fund net losses and the benefit of purchasing more NOLs under the New Jersey Technology Tax Benefit Transfer Program in 2020 had on PSEG Power’s 2020 pre-tax loss. The difference in PSEG Power’s effective tax rate as compared to the statutory tax rate of 28.11% was due primarily to the benefit from changesof purchasing 2020 NOLs under the New Jersey Technology Tax Benefit Transfer Program in uncertain tax positions as a result2021 offset by the impact of the settlement of the 2011-2016 federal incomeadditional trust tax audits and the tax benefit of a pre-tax loss on the NDT qualified fund.
Tax Cuts and Jobs Act of 2017 (Tax Act)
Effective January 1, 2018, the Tax Act established tax laws including, but not limited to, a limitation on deductible interest and limitations on the utilization of NOLS, such as eliminating carrybacks.fund net gains.
In November 2018, the IRS issued proposed regulations addressing the interest disallowance rules contained in the Tax Act. For non-regulated businesses, these rules set a cap on the amount of interest that can be deducted in a given year. Any amount that is disallowed can be carried forward indefinitely. For 2018 and 2019, the tax deductibility of a portion of PSEG’s and PSEG Power’s interest expense was disallowed and was recorded as a deferred tax asset. Amounts recorded under the Tax Act and relevant statutes, including but not limited to depreciation and interest disallowance, are subject to change based on several factors, including but not limited to, the IRS and state taxing authorities issuing additional guidance and/or further clarification.
In JulyMarch 2020, the IRS issued final and proposed regulations addressing the limitation on deductible interest expense contained in the Tax Act. PSEG is in the process of analyzing these regulations, which may impact PSEG’s, PSE&G’s and PSEG Power’s financial condition and cash flows.
federal Coronavirus Aid, Relief, and Economic Security Act (CARES Act)
In March 2020, was enacted. Among other provisions, the CARES Act was signed into federal law. As applicable to PSEGallows a five-year carryback of any NOL generated in a taxable year beginning after December 31, 2017, and PSEG Power, the CARES Act favorably increases the limitation on the amount of interest that can be deducted in 2020. The increased limitation will allow a portion of the previously disallowed amounts to reduce PSEG’s and PSEG Power’s 2020 taxable income. The CARES Act also reversed certain NOL provisions from the Tax Act such as allowing five-year carrybacks of 2018, 2019 and 2020 NOLs.

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


IRS PLRbefore January 1, 2021.
In April 2020, the IRSInternal Revenue Service (IRS) issued a PLRPrivate Letter Ruling to PSE&G concluding that certain excess deferred taxes previously classified as protected should be classified as unprotected. Unprotected excess deferred income taxes are not subject to the normalization rules allowing them to be refunded to customers sooner as agreed to with FERC and the BPU. In July 2020, FERC and the BPU approved PSE&G’s requests to refund these unprotected excess deferred income taxes to customers. FERC approved the refund of these unprotected excess deferred income taxes within the 2019 true-up filing. The BPU approved the refund of these unprotected excess deferred income taxes within the next five years beginning in July 2020. See Note 6. Rate Filings for additional information.
Unrecognized Tax Benefits
In AprilJuly 2020, the Joint CommitteeIRS issued final and proposed regulations addressing the limitation on Taxation approveddeductible business interest expense contained in the Tax Cuts and Jobs Act of 2017 (Tax Act). These regulations retroactively allow depreciation to be added back in computing the 30% adjusted taxable income (ATI) cap, increasing the amount of interest that can be deducted by unregulated businesses in years before 2022. For 2022 and after, the regulations continue to disallow the addback of depreciation in the computation of ATI, effectively lowering the cap on the amount of deductible business interest and contain special rules in allocating interest between regulated and non-regulated businesses. The portion of PSEG’s nuclear carryback claim and federal tax returns forPSEG Power’s business interest expense that was disallowed in 2018 and 2019 under the years 2011 and 2012. previously issued proposed regulations will now be deductible in those respective years. These regulations remain uncertain in some respects.
In Junelate December 2020, the federal income tax audits for years 2011 through 2016Consolidated Appropriations Act (CAA), 2021 was enacted. PSEG does not believe the CAA will have a material impact on the financial condition and the nuclear carryback claim were concluded. As a result, in the second quartercash flows of 2020, PSEG, PSE&G and PSEG Power decreased their total unrecognizedPower.
PSEG expects that a prolonged coronavirus pandemic and economic recovery may result in additional federal or state tax benefits by $149 million, $83 million, and $63 million, respectively. As these unrecognized tax benefits primarily relate to temporary differences for which there are associated accumulated deferred income taxes, PSEG,legislation that can have a material impact on PSEG’s, PSE&G, and PSEG Power recorded $37 million, $9 million, and $25 million, respectively, of income statement benefits. The final cash settlement is expected to be completed within the next twelve months.
New Jersey State Tax Reform
In July 2018, the State of New Jersey made changes to its income tax laws, including imposing a temporary surtax on allocated corporate taxable income of 2.5% effective January 1, 2018 and 2019 and 1.5% in 2020 and 2021, as well as requiring corporate taxpayers to file in a combined reporting group as defined under New Jersey law starting in 2019. Both provisions include an exemption for public utilities. PSEG believes PSE&G meets the definition of a public utility and, therefore, will not be impacted by the temporary surtax or be included in the combined reporting group. There are certain aspects of the law that remain unclear. Any further guidance or clarification could impact PSEG’s&G’s and PSEG Power’s financial statements.

tax expense and cash tax position.
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Amounts recorded under the Tax Act, CARES Act and CAA, including depreciation and interest disallowance regulations, are subject to change based on several factors, including, among other things, whether the IRS or state taxing authorities issue additional guidance and/or further clarification. Any further guidance or clarification could impact PSEG’s, PSE&G’s and PSEG Power’s financial statements.
As of March 31, 2021, PSE&G had a $14 million New Jersey Corporate Business Tax NOL that is expected to be fully realized in the future. There are no other material tax carryforwards in other jurisdictions.
New Jersey State Tax Reform
In September 2020, New Jersey enacted its State Fiscal Year 2021 Budget, which amended the temporary surtax originally enacted into law in 2018, from 1.5% to 2.5% for 2020 and 2021 and extended the 2.5% surtax to 2023. PSE&G continues to be exempt and this amendment will not have a material impact on PSEG’s and PSEG Power’s financial statements.

Note 17. Accumulated Other Comprehensive Income (Loss), Net of Tax
           
 PSEG Three Months Ended June 30, 2020 
 Accumulated Other Comprehensive Income (Loss) Cash Flow Hedges Pension and OPEB Plans Available-for-Sale Securities Total 
   Millions 
 Balance as of March 31, 2020 $(18) $(496) $33
 $(481) 
 Other Comprehensive Income before Reclassifications —
 —
 30
 30
 
 Amounts Reclassified from Accumulated Other Comprehensive Income (Loss) 3
 3
 (10) (4) 
 Net Current Period Other Comprehensive Income (Loss) 3
 3
 20
 26
 
 Balance as of June 30, 2020 $(15) $(493) $53
 $(455) 
           
 PSEG Three Months Ended June 30, 2019 
 Accumulated Other Comprehensive Income (Loss) Cash Flow Hedges Pension and OPEB Plans Available-for-Sale Securities Total 
   Millions 
 Balance as of March 31, 2019 $(5) $(441) $5
 $(441) 
 Other Comprehensive Income (Loss) before Reclassifications (13) —
 21
 8
 
 Amounts Reclassified from Accumulated Other Comprehensive Income (Loss) —
 4
 (3) 1
 
 Net Current Period Other Comprehensive Income (Loss) (13) 4
 18
 9
 
 Balance as of June 30, 2019 $(18) $(437) $23
 $(432) 
     
 PSEG Six Months Ended June 30, 2020 
 Accumulated Other Comprehensive Income (Loss) Cash Flow Hedges Pension and OPEB Plans Available-for-Sale Securities Total 
   Millions 
 Balance as of December 31, 2019 $(15) $(499) $25
 $(489) 
 Other Comprehensive Income (Loss) before Reclassifications (4) —
 44
 40
 
 Amounts Reclassified from Accumulated Other Comprehensive Income (Loss) 4
 6
 (16) (6) 
 Net Current Period Other Comprehensive Income (Loss) —
 6
 28
 34
 
 Balance as of June 30, 2020 $(15) $(493) $53
 $(455) 
           
 PSEG Six Months Ended June 30, 2019 
 Accumulated Other Comprehensive Income (Loss) Cash Flow Hedges Pension and OPEB Plans Available-for-Sale Securities Total 
   Millions 
 Balance as of December 31, 2018 $(1) $(360) $(16) $(377) 
 Cumulative Effect Adjustment to Reclassify Stranded Tax Effects Resulting in the Change in the Federal Corporate Income Tax to Retained Earnings —
 (81) —
 (81) 
 Current Period Other Comprehensive Income (Loss)         
 Other Comprehensive Income (Loss) before Reclassifications (17) (3) 41
 21
 
 Amounts Reclassified from Accumulated Other Comprehensive Income (Loss) —
 7
 (2) 5
 
 Net Current Period Other Comprehensive Income (Loss) (17) 4
 39
 26
 
 Net Change in Accumulated Other Comprehensive Income (Loss) (17) (77) 39
 (55) 
 Balance as of June 30, 2019 $(18) $(437) $23
 $(432) 
           
PSEGThree Months Ended March 31, 2021
Accumulated Other Comprehensive Income (Loss)Cash Flow HedgesPension and OPEB PlansAvailable-for-Sale SecuritiesTotal
Millions
Balance as of December 31, 2020$(9)$(545)$50 $(504)
Other Comprehensive Income (Loss) before Reclassifications0 0 (40)(40)
Amounts Reclassified from Accumulated Other Comprehensive Income (Loss)1 3 (2)2 
Net Current Period Other Comprehensive Income (Loss)1 3 (42)(38)
Balance as of March 31, 2021$(8)$(542)$8 $(542)
PSEGThree Months Ended March 31, 2020
Accumulated Other Comprehensive Income (Loss)Cash Flow HedgesPension and OPEB PlansAvailable-for-Sale SecuritiesTotal
Millions
Balance as of December 31, 2019$(15)$(499)$25 $(489)
Other Comprehensive Income (Loss) before Reclassifications(4)0 14 10 
Amounts Reclassified from Accumulated Other Comprehensive Income (Loss)1 3 (6)(2)
Net Current Period Other Comprehensive Income (Loss)(3)3 8 8 
Balance as of March 31, 2020$(18)$(496)$33 $(481)
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 PSEG Power Three Months Ended June 30, 2020 
 Accumulated Other Comprehensive Income (Loss) Cash Flow Hedges Pension and OPEB Plans Available-for-Sale Securities Total 
   Millions 
 Balance as of March 31, 2020 $—
 $(418) $26
 $(392) 
 Other Comprehensive Income before Reclassifications —
 —
 24
 24
 
 Amounts Reclassified from Accumulated Other Comprehensive Income (Loss) —
 3
 (9) (6) 
 Net Current Period Other Comprehensive Income (Loss) —
 3
 15
 18
 
 Balance as of June 30, 2020 $—
 $(415) $41
 $(374) 
     
 PSEG Power Three Months Ended June 30, 2019 
 Accumulated Other Comprehensive Income (Loss) Cash Flow Hedges Pension and OPEB Plans Available-for-Sale Securities Total 
   Millions 
 Balance as of March 31, 2019 $—
 $(375) $3
 $(372) 
 Other Comprehensive Income before Reclassifications —
 —
 17
 17
 
 Amounts Reclassified from Accumulated Other Comprehensive Income (Loss) —
 3
 (2) 1
 
 Net Current Period Other Comprehensive Income (Loss) —
 3
 15
 18
 
 Balance as of June 30, 2019 $—
 $(372) $18
 $(354) 
           
 PSEG Power Six Months Ended June 30, 2020 
 Accumulated Other Comprehensive Income (Loss) Cash Flow Hedges Pension and OPEB Plans Available-for-Sale Securities Total 
   Millions 
 Balance as of December 31, 2019 $—
 $(420) $19
 $(401) 
 Other Comprehensive Income before Reclassifications —
 —
 35
 35
 
 Amounts Reclassified from Accumulated Other Comprehensive Income (Loss) —
 5
 (13) (8) 
 Net Current Period Other Comprehensive Income (Loss) —
 5
 22
 27
 
 Balance as of June 30, 2020 $—
 $(415) $41
 $(374) 
           
 PSEG Power Six Months Ended June 30, 2019 
 Accumulated Other Comprehensive Income (Loss) Cash Flow Hedges Pension and OPEB Plans Available-for-Sale Securities Total 
   Millions 
 Balance as of December 31, 2018 $—
 $(306) $(13) $(319) 
 Cumulative Effect Adjustment to Reclassify Stranded Tax Effects Resulting in the Change in the Federal Corporate Income Tax to Retained Earnings —
 (69) —
 (69) 
 Current Period Other Comprehensive Income (Loss)         
 Other Comprehensive Income (Loss) before Reclassifications —
 (3) 32
 29
 
 Amounts Reclassified from Accumulated Other Comprehensive Income (Loss) —
 6
 (1) 5
 
 Net Current Period Other Comprehensive Income (Loss) —
 3
 31
 34
 
 Net Change in Accumulated Other Comprehensive Income (Loss) —
 (66) 31
 (35) 
 Balance as of June 30, 2019 $—
 $(372) $18
 $(354) 
           

PSEG PowerThree Months Ended March 31, 2021
Accumulated Other Comprehensive Income (Loss)Cash Flow HedgesPension and OPEB PlansAvailable-for-Sale SecuritiesTotal
Millions
Balance as of December 31, 2020$0 $(459)$40 $(419)
Other Comprehensive Income (Loss) before Reclassifications0 0 (31)(31)
Amounts Reclassified from Accumulated Other Comprehensive Income (Loss)0 2 (1)1 
Net Current Period Other Comprehensive Income (Loss)0 2 (32)(30)
Balance as of March 31, 2021$0 $(457)$8 $(449)
PSEG PowerThree Months Ended March 31, 2020
Accumulated Other Comprehensive Income (Loss)Cash Flow HedgesPension and OPEB PlansAvailable-for-Sale SecuritiesTotal
Millions
Balance as of December 31, 2019$0 $(420)$19 $(401)
Other Comprehensive Income (Loss) before Reclassifications0 0 11 11 
Amounts Reclassified from Accumulated Other Comprehensive Income (Loss)0 2 (4)(2)
Net Current Period Other Comprehensive Income (Loss)0 2 7 9 
Balance as of March 31, 2020$0 $(418)$26 $(392)
PSEG Amounts Reclassified from Accumulated Other Comprehensive Income (Loss) to Income Statement
Three Months Ended
Description of Amounts Reclassified from Accumulated Other Comprehensive Income (Loss)Location of Pre-Tax Amount In Statement of OperationsMarch 31, 2021
Pre-Tax AmountTax (Expense) BenefitAfter-Tax Amount
Millions
Cash Flow Hedges
Interest Rate SwapsInterest Expense$(1)$0 $(1)
Total Cash Flow Hedges(1)0 (1)
Pension and OPEB Plans
Amortization of Prior Service (Cost) CreditNon-Operating Pension and OPEB Credits (Costs)5 (1)4 
Amortization of Actuarial LossNon-Operating Pension and OPEB Credits (Costs)(10)3 (7)
Total Pension and OPEB Plans(5)2 (3)
Available-for-Sale Debt Securities
Realized Gains (Losses)Net Gains (Losses) on Trust Investments3 (1)2 
Total Available-for-Sale Debt Securities3 (1)2 
Total$(3)$1 $(2)
58

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


PSEG Amounts Reclassified from Accumulated Other Comprehensive Income (Loss) to Income Statement
Three Months Ended
Description of Amounts Reclassified from Accumulated Other Comprehensive Income (Loss)Location of Pre-Tax Amount In Statement of OperationsMarch 31, 2020
Pre-Tax AmountTax (Expense) BenefitAfter-Tax Amount
Millions
Cash Flow Hedges
Interest Rate SwapsInterest Expense$(2)$1 $(1)
Total Cash Flow Hedges(2)1 (1)
Pension and OPEB Plans
Amortization of Prior Service (Cost) CreditNon-Operating Pension and OPEB Credits (Costs)6 (2)4 
Amortization of Actuarial LossNon-Operating Pension and OPEB Credits (Costs)(10)3 (7)
Total Pension and OPEB Plans(4)1 (3)
Available-for-Sale Debt Securities
Realized Gains (Losses) and ImpairmentsNet Gains (Losses) on Trust Investments9 (3)6 
Total Available-for-Sale Debt Securities9 (3)6 
Total$3 $(1)$2 
PSEG Power Amounts Reclassified from Accumulated Other Comprehensive Income (Loss) to Income Statement
Three Months Ended
Description of Amounts Reclassified from Accumulated Other Comprehensive Income (Loss)Location of Pre-Tax Amount In Statement of OperationsMarch 31, 2021
Pre-Tax AmountTax (Expense) BenefitAfter-Tax Amount
Millions
Pension and OPEB Plans
Amortization of Prior Service (Cost) CreditNon-Operating Pension and OPEB Credits (Costs)$5 $(1)$4 
Amortization of Actuarial LossNon-Operating Pension and OPEB Credits (Costs)(8)2 (6)
Total Pension and OPEB Plans(3)1 (2)
Available-for-Sale Debt Securities
Realized Gains (Losses)Net Gains (Losses) on Trust Investments2 (1)1 
Total Available-for-Sale Debt Securities2 (1)1 
Total$(1)$0 $(1)
59
                
 PSEG   Amounts Reclassified from Accumulated Other Comprehensive Income (Loss) to Income Statement 
    Three Months Ended Six Months Ended 
 Description of Amounts Reclassified from Accumulated Other Comprehensive Income (Loss) Location of Pre-Tax Amount In Statement of OperationsJune 30, 2020 June 30, 2020 
  Pre-Tax Amount Tax (Expense) Benefit After-Tax Amount Pre-Tax Amount Tax (Expense) Benefit After-Tax Amount 
    Millions 
 Cash Flow Hedges              
 Interest Rate Swaps Interest Expense$(4) $1
 $(3) $(6) $2
 $(4) 
 Total Cash Flow Hedges(4) 1
 (3) (6) 2
 (4) 
 Pension and OPEB Plans            
 Amortization of Prior Service (Cost) Credit Non-Operating Pension and OPEB Credits (Costs)6
 (1) 5
 12
 (3) 9
 
 Amortization of Actuarial Loss Non-Operating Pension and OPEB Credits (Costs)(10) 2
 (8) (20) 5
 (15) 
 Total Pension and OPEB Plans(4) 1
 (3) (8) 2
 (6) 
 Available-for-Sale Debt Securities            
 Realized Gains (Losses) and Impairments Net Gains (Losses) on Trust Investments17
 (7) 10
 26
 (10) 16
 
 Total Available-for-Sale Debt Securities17
 (7) 10
 26
 (10) 16
 
 Total  $9
 $(5) $4
 $12
 $(6) $6
 
                
                
 PSEG   Amounts Reclassified from Accumulated Other Comprehensive Income (Loss) to Income Statement 
    Three Months Ended Six Months Ended 
 Description of Amounts Reclassified from Accumulated Other Comprehensive Income (Loss) Location of Pre-Tax Amount In Statement of OperationsJune 30, 2019 June 30, 2019 
  Pre-Tax Amount Tax (Expense) Benefit After-Tax Amount Pre-Tax Amount Tax (Expense) Benefit After-Tax Amount 
    Millions 
 Cash Flow Hedges              
 Interest Rate Swaps Interest Expense$(1) $1
 $—
 $(1) $1
 $—
 
 Total Cash Flow Hedges(1) 1
 —
 (1) 1
 —
 
 Pension and OPEB Plans            
 Amortization of Prior Service (Cost) Credit Non-Operating Pension and OPEB Credits (Costs)6
 (2) 4
 13
 (4) 9
 
 Amortization of Actuarial Loss Non-Operating Pension and OPEB Credits (Costs)(11) 3
 (8) (23) 7
 (16) 
 Total Pension and OPEB Plans(5) 1
 (4) (10) 3
 (7) 
 Available-for-Sale Debt Securities            
 Realized Gains (Losses) Net Gains (Losses) on Trust Investments4
 (1) 3
 3
 (1) 2
 
 Total Available-for-Sale Debt Securities4
 (1) 3
 3
 (1) 2
 
 Total  $(2) $1
 $(1) $(8) $3
 $(5) 
                

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


PSEG Power Amounts Reclassified from Accumulated Other Comprehensive Income (Loss) to Income Statement
Three Months Ended
Description of Amounts Reclassified from Accumulated Other Comprehensive Income (Loss)Location of Pre-Tax Amount In Statement of OperationsMarch 31, 2020
Pre-Tax AmountTax (Expense) BenefitAfter-Tax Amount
Millions
Pension and OPEB Plans
Amortization of Prior Service (Cost) CreditNon-Operating Pension and OPEB Credits (Costs)$5 $(1)$4 
Amortization of Actuarial LossNon-Operating Pension and OPEB Credits (Costs)(8)2 (6)
Total Pension and OPEB Plans(3)1 (2)
Available-for-Sale Debt Securities
Realized Gains (Losses) and ImpairmentsNet Gains (Losses) on Trust Investments7 (3)4 
Total Available-for-Sale Debt Securities7 (3)4 
Total$4 $(2)$2 
                
 PSEG Power   Amounts Reclassified from Accumulated Other Comprehensive Income (Loss) to Income Statement 
    Three Months Ended Six Months Ended 
 Description of Amounts Reclassified from Accumulated Other Comprehensive Income (Loss) Location of Pre-Tax Amount In Statement of OperationsJune 30, 2020 June 30, 2020 
  Pre-Tax Amount Tax (Expense) Benefit After-Tax Amount Pre-Tax Amount Tax (Expense) Benefit After-Tax Amount 
    Millions 
 Pension and OPEB Plans            
 Amortization of Prior Service (Cost) Credit Non-Operating Pension and OPEB Credits (Costs)$6
 $(2) $4
 $11
 $(3) $8
 
 Amortization of Actuarial Loss Non-Operating Pension and OPEB Credits (Costs)(9) 2
 (7) (17) 4
 (13) 
 Total Pension and OPEB Plans(3) —
 (3) (6) 1
 (5) 
 Available-for-Sale Debt Securities            
 Realized Gains (Losses) and Impairments Net Gains (Losses) on Trust Investments14
 (5) 9
 21
 (8) 13
 
 Total Available-for-Sale Debt Securities14
 (5) 9
 21
 (8) 13
 
 Total  $11
 $(5) $6
 $15
 $(7) $8
 
                

                
 PSEG Power   Amounts Reclassified from Accumulated Other Comprehensive Income (Loss) to Income Statement 
    Three Months Ended Six Months Ended 
 Description of Amounts Reclassified from Accumulated Other Comprehensive Income (Loss) Location of Pre-Tax Amount In Statement of OperationsJune 30, 2019 June 30, 2019 
  Pre-Tax Amount Tax (Expense) Benefit After-Tax Amount Pre-Tax Amount Tax (Expense) Benefit After-Tax Amount 
    Millions 
 Pension and OPEB Plans            
 Amortization of Prior Service (Cost) Credit Non-Operating Pension and OPEB Credits (Costs)$5
 $(1) $4
 $11
 $(3) $8
 
 Amortization of Actuarial Loss Non-Operating Pension and OPEB Credits (Costs)(9) 2
 (7) (19) 5
 (14) 
 Total Pension and OPEB Plans(4) 1
 (3) (8) 2
 (6) 
 Available-for-Sale Debt Securities            
 Realized Gains (Losses) Net Gains (Losses) on Trust Investments3
 (1) 2
 2
 (1) 1
 
 Total Available-for-Sale Debt Securities3
 (1) 2
 2
 (1) 1
 
 Total  $(1) $—
 $(1) $(6) $1
 $(5) 
                



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


Note 18. Earnings Per Share (EPS) and Dividends
EPS
Diluted EPS is calculated by dividing Net Income by the weighted average number of shares of common stock outstanding, including shares issuable upon exercise of stock options outstanding or vesting of restricted stock awards granted under PSEG’s stock compensation plans and upon payment of performance share units or restricted stock units. The following table shows the effect of these stock options, performance share units and restricted stock units on the weighted average number of shares outstanding used in calculating diluted EPS:
                  
  Three Months Ended June 30, Six Months Ended June 30, 
  2020 2019 2020 2019 
  Basic Diluted Basic Diluted Basic Diluted Basic Diluted 
 
EPS Numerator (Millions):
                
 Net Income$451
 $451
 $153
 $153
 $899
 $899
 $853
 $853
 
 
EPS Denominator (Millions):
                
 Weighted Average Common Shares Outstanding504
 504
 504
 504
 504
 504
 504
 504
 
 Effect of Stock Based Compensation Awards—
 3
 —
 3
 —
 3
 —
 3
 
 Total Shares504
 507
 504
 507
 504
 507
 504
 507
 
                  
 EPS                
 Net Income$0.89
 $0.89
 $0.30
 $0.30
 $1.78
 $1.77
 $1.69
 $1.68
 
                  
Three Months Ended March 31,
20212020
BasicDilutedBasicDiluted
EPS Numerator (Millions):
Net Income$648 $648 $448 $448 
EPS Denominator (Millions):
Weighted Average Common Shares Outstanding504 504 504 504 
Effect of Stock Based Compensation Awards0 3 0 3 
Total Shares504 507 504 507 
EPS
Net Income$1.29 $1.28 $0.89 $0.88 
Dividends
60
          
  Three Months Ended Six Months Ended 
  June 30, June 30, 
 Dividend Payments on Common Stock2020 2019 2020 2019 
 Per Share$0.49
 $0.47
 $0.98
 $0.94
 
 In Millions$247
 $237
 $495
 $475
 
          
On July 21, 2020, the PSEG Board approved a $0.49 per share common stock dividend for the third quarter of 2020.


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

Dividends
Three Months Ended
 March 31,
Dividend Payments on Common Stock20212020
Per Share$0.51 $0.49 
In Millions$258 $248 
On April 20, 2021, the PSEG Board of Directors approved a $0.51 per share common stock dividend for the second quarter of 2021.

Note 19. Financial Information by Business Segment
PSE&GPSEG PowerOther (A)Eliminations (B)Consolidated Total
Millions
Three Months Ended March 31, 2021
Operating Revenues$2,073 $1,167 $151 $(502)$2,889 
Net Income477 161 10 0 648 
Gross Additions to Long-Lived Assets586 46 1 0 633 
Three Months Ended March 31, 2020
Operating Revenues$1,883 $1,220 $156 $(478)$2,781 
Net Income (Loss)440 13 (5)0 448 
Gross Additions to Long-Lived Assets620 97 3 0 720 
As of March 31, 2021
Total Assets$36,217 $12,654 $2,444 $(1,109)$50,206 
Investments in Equity Method Subsidiaries$0 $66 $0 $0 $66 
As of December 31, 2020
Total Assets$35,581 $12,704 $2,692 $(927)$50,050 
Investments in Equity Method Subsidiaries$0 $64 $0 $0 $64 
(A)Includes amounts applicable to Energy Holdings and PSEG LI, which are below the quantitative threshold for separate disclosure as reportable segments. Other also includes amounts applicable to PSEG (parent company) and Services.
(B)Intercompany eliminations primarily relate to intercompany transactions between PSE&G and PSEG Power. For a further discussion of the intercompany transactions between PSE&G and PSEG Power, see Note 20. Related-Party Transactions.

61
            
  PSE&G PSEG Power Other (A) Eliminations (B) Consolidated Total 
  Millions 
 Three Months Ended June 30, 2020          
 Total Operating Revenues$1,456
 $683
 $148
 $(237) $2,050
 
 Net Income (Loss)283
 170
 (2) —
 451
 
 Gross Additions to Long-Lived Assets570
 121
 3
 —
 694
 
 Six Months Ended June 30, 2020          
 Operating Revenues$3,339
 $1,903
 $304
 $(715) $4,831
 
 Net Income (Loss)723
 183
 (7) —
 899
 
 Gross Additions to Long-Lived Assets1,190
 218
 6
 —
 1,414
 
 Three Months Ended June 30, 2019          
 Total Operating Revenues$1,382
 $1,083
 $87
 $(236) $2,316
 
 Net Income (Loss)227
 (40) (34) —
 153
 
 Gross Additions to Long-Lived Assets633
 172
 4
 —
 809
 
 Six Months Ended June 30, 2019          
 Operating Revenues$3,414
 $2,499
 $228
 $(845) $5,296
 
 Net Income (Loss)630
 256
 (33) —
 853
 
 Gross Additions to Long-Lived Assets1,258
 339
 7
 —
 1,604
 
 As of June 30, 2020          
 Total Assets$34,445
 $12,508
 $2,618
 $(791) $48,780
 
 Investments in Equity Method Subsidiaries$—
 $67
 $1
 $—
 $68
 
 As of December 31, 2019          
 Total Assets$33,266
 $12,805
 $2,715
 $(1,056) $47,730
 
 Investments in Equity Method Subsidiaries$—
 $66
 $1
 $—
 $67
 
            
(A)Includes amounts applicable to Energy Holdings and PSEG LI, which are below the quantitative threshold for separate disclosure as reportable segments. Other also includes amounts applicable to PSEG (parent company) and Services.
(B)Intercompany eliminations primarily relate to intercompany transactions between PSE&G and PSEG Power. For a further discussion of the intercompany transactions between PSE&G and PSEG Power, see Note 20. Related-Party Transactions.


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


Note 20. Related-Party Transactions
The following discussion relates to intercompany transactions, which are eliminated during the PSEG consolidation process in accordance with GAAP.
PSE&G
The financial statements for PSE&G include transactions with related parties presented as follows:
          
  Three Months Ended Six Months Ended 
  June 30, June 30, 
 Related-Party Transactions2020 2019 2020 2019 
  Millions 
 Billings from Affiliates:        
 Net Billings from PSEG Power (A)$227
 $246
 $717
 $879
 
 Administrative Billings from Services (B)78
 80
 156
 155
 
 Total Billings from Affiliates$305
 $326
 $873
 $1,034
 
          

Three Months Ended
March 31,
Related-Party Transactions20212020
Millions
Billings from Affiliates:
Net Billings from PSEG Power (A)$495 $490 
Administrative Billings from Services (B)87 78 
Total Billings from Affiliates$582 $568 
      
  As of As of 
 Related-Party TransactionsJune 30, 2020 December 31, 2019 
  Millions 
 Receivable from PSEG (C)$—
 $1
 
 Payable to PSEG Power (A)$215
 $307
 
 Payable to Services (B)71
 83
 
 Payable to PSEG (C)87
 —
 
 Accounts Payable—Affiliated Companies$373
 $390
 
 Noncurrent Payable to PSEG Power (A)$11
 $—
 
 Working Capital Advances to Services (D)$33
 $33
 
 
Long-Term Accrued Taxes Payable 
$19
 $115
 
      

As ofAs of
Related-Party TransactionsMarch 31, 2021December 31, 2020
Millions
Payable to PSEG Power (A)$258 $273 
Payable to Services (B)83 95 
Payable to PSEG (C)147 111 
Accounts Payable—Affiliated Companies$488 $479 
Working Capital Advances to Services (D)$33 $33 
Long-Term Accrued Taxes Payable
$1 $7 
PSEG Power
The financial statements for PSEG Power include transactions with related parties presented as follows:
Three Months Ended
 March 31,
Related-Party Transactions20212020
Millions
Billings to Affiliates:
Net Billings to PSE&G (A)$495 $490 
Billings from Affiliates:
Administrative Billings from Services (B)$43 $45 
          
  Three Months Ended Six Months Ended 
  June 30, June 30, 
 Related-Party Transactions2020 2019 2020 2019 
  Millions 
 Billings to Affiliates:        
 Net Billings to PSE&G (A)$227
 $246
 $717
 $879
 
 Billings from Affiliates:        
 Administrative Billings from Services (B)$42
 $46
 $87
 $91
 
          
As ofAs of
Related-Party TransactionsMarch 31, 2021December 31, 2020
Millions
Receivable from PSE&G (A)$258 $273 
Receivable from PSEG (C)0 44 
Accounts Receivable—Affiliated Companies$258 $317 
Payable to Services (B)$22 $13 
Payable to PSEG (C)12 0 
Accounts Payable—Affiliated Companies$34 $13 
Short-Term Loan to (from) Affiliate (E)$403 $161 
Working Capital Advances to Services (D)$17 $17 
Long-Term Accrued Taxes Payable
$57 $57 

      
  As of As of 
 Related-Party TransactionsJune 30, 2020 December 31, 2019 
  Millions 
 Receivable from PSE&G (A)$215
 $307
 
 Receivable from PSEG (C)66
 101
 
 Accounts Receivable—Affiliated Companies$281
 $408
 
 Payable to Services (B)$20
 $5
 
 Accounts Payable—Affiliated Companies$20
 $5
 
 Short-Term Loan to (from) Affiliate (E)$104
 $149
 
 Noncurrent Receivable from PSE&G (A)$11
 $—
 
 Working Capital Advances to Services (D)$17
 $17
 
 
Long-Term Accrued Taxes Payable 
$53
 $115
 
      
62


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


(A)PSE&G has entered into a requirements contract with PSEG Power under which PSEG Power provides the gas supply services needed to meet PSE&G’s BGSS and other contractual requirements. PSEG Power has also entered into contracts to supply energy, capacity and ancillary services to PSE&G through the BGS auction process and sells ZECs to PSE&G under the ZEC program. The rates in the BGS and BGSS contracts and for the ZEC sales are prescribed by the BPU. BGS and BGSS sales are billed and settled on a monthly basis. ZEC sales are billed on a monthly basis and settled annually following completion of each energy year. In addition, PSEG Power and PSE&G provide certain technical services for each other generally at cost in compliance with FERC and BPU affiliate rules.
(B)Services provides and bills administrative services to PSE&G and PSEG Power at cost. In addition, PSE&G and PSEG Power have other payables to Services, including amounts related to certain common costs, which Services pays on behalf of each of the operating companies.
(C)PSEG files a consolidated federal income tax return with its affiliated companies. A tax allocation agreement exists between PSEG and each of its affiliated companies. The general operation of these agreements is that the subsidiary company will compute its taxable income on a stand-alone basis. If the result is a net tax liability, such amount shall be paid to PSEG. If there are NOLs and/or tax credits, the subsidiary shall receive payment for the tax savings from PSEG to the extent that PSEG is able to utilize those benefits.
(D)PSE&G and PSEG Power have advanced working capital to Services. The amounts are included in Other Noncurrent Assets on PSE&G’s and PSEG Power’s Condensed Consolidated Balance Sheets.
(E)PSEG Power’s short-term loans with PSEG are for working capital and other short-term needs. Interest Income and Interest Expense relating to these short-term funding activities were immaterial.

(A)PSE&G has entered into a requirements contract with PSEG Power under which PSEG Power provides the gas supply services needed to meet PSE&G’s BGSS and other contractual requirements. PSEG Power has also entered into contracts to supply energy, capacity and ancillary services to PSE&G through the BGS auction process and sells ZECs to PSE&G under the ZEC program. The rates in the BGS and BGSS contracts and for the ZEC sales are prescribed by the BPU. BGS and BGSS sales are billed and settled on a monthly basis. ZEC sales are billed on a monthly basis and settled annually following completion of each energy year. In addition, PSEG Power and PSE&G provide certain technical services for each other generally at cost in compliance with FERC and BPU affiliate rules.
(B)Services provides and bills administrative services to PSE&G and PSEG Power at cost. In addition, PSE&G and PSEG Power have other payables to Services, including amounts related to certain common costs, which Services pays on behalf of each of the operating companies.
(C)PSEG files a consolidated federal income tax return with its affiliated companies. A tax allocation agreement exists between PSEG and each of its affiliated companies. The general operation of these agreements is that the subsidiary company will compute its taxable income on a stand-alone basis. If the result is a net tax liability, such amount shall be paid to PSEG. If there are NOLs and/or tax credits, the subsidiary shall receive payment for the tax savings from PSEG to the extent that PSEG is able to utilize those benefits.
(D)PSE&G and PSEG Power have advanced working capital to Services. The amounts are included in Other Noncurrent Assets on PSE&G’s and PSEG Power’s Condensed Consolidated Balance Sheets.
(E)PSEG Power’s short-term loans with PSEG are for working capital and other short-term needs. Interest Income and Interest Expense relating to these short-term funding activities were immaterial.


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ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (MD&A)
ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (MD&A)
This combined MD&A is separately filed by Public Service Enterprise Group Incorporated (PSEG), Public Service Electric and Gas Company (PSE&G) and PSEG Power LLC (PSEG Power). Information contained herein relating to any individual company is filed by such company on its own behalf. PSE&G and PSEG Power each make representations only as to itself and make no representations whatsoever as to any other company.
PSEG’s business consists of two reportable segments, our principal direct wholly owned subsidiaries, which are:
•
•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 regulated solar generation projects and energy efficiency and related programs in New Jersey, which are regulated by the BPU, and
•—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 regulated solar generation projects and energy efficiency and related programs in New Jersey, which are regulated by the BPU, and
•
PSEG 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, PSEG Power owns and operates solar generation in various states. PSEG 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) transmission and distribution (T&D) system under an Amended and Restated Operations Services Agreement;Agreement (OSA); PSEG Energy Holdings L.L.C. (Energy Holdings), which primarily hasearns it revenues from its portfolio of lease investments and holds our investment in leveraged leases;offshore wind ventures; and PSEG Services Corporation (Services), which provides certain management, administrative and general services to PSEG and its subsidiaries at cost.
Our business discussion in Part I, Item 1. Business of our 20192020 Annual Report on 10-K (Form 10-K) provides a review of the regions and markets where we operate and compete, as well as our strategy for conducting our businesses within these markets, focusing on operational excellence, financial strength and making disciplined investments. Our risk factor discussion in Part I, Item 1A. Risk Factors of Form 10-K provides information about factors that could have a material adverse impact on our businesses. The following supplements that discussion and the discussion included in the Executive Overview of 20192020 and Future Outlook provided in Item 7 in our Form 10-K by describing significant events and business developments that have occurred during 20202021 and changes to the key factors that we expect may drive our future performance. The following discussion refers to the Condensed Consolidated Financial Statements (Statements) and the Related Notes to Condensed Consolidated Financial Statements (Notes). This discussion should be read in conjunction with such Statements, Notes and the Form 10-K.

EXECUTIVE OVERVIEW OF 20202021 AND FUTURE OUTLOOK
We are continuing our transformation into a primarily regulated electric and gas utility that is focused on meeting customer expectations and is aligned with public policy objectives promoting infrastructure investments to modernize and improve reliability and clean energy investments. Our business plan is designed to achievefocuses on achieving growth while controlling costs and managing the risks associated with regulatory changes, fluctuating commodity prices and changes in customer demand. OverIn furtherance of these goals, over the past few years, our investments have altered our business mix to reflect a higher percentage of earnings contribution by PSE&G. In May 2021, we entered into a purchase agreement to sell PSEG Power’s solar portfolio and we are continuing to explore strategic alternatives for PSEG Power’s more than 6,750 megawatts (MW) of fossil generation located in New Jersey, Connecticut, New York and Maryland. See Item 1. Note 4. Early Plant Retirements/Asset Dispositions for additional information.
PSE&G, PSEG Power and PSEG LI continue to provideare providing essential services during this national emergency related to the ongoing coronavirus (COVID-19) pandemic. We have implemented a comprehensive set of enhanced safety actions to help protect our employees, customers and communities, and we will continue to closely monitor developments and adjust as needed to ensure that we continue to provide reliable service while protecting the safety and health of our workforce and the communities we serve. We continue to be guided by the recommendations of health authorities at the federal, state and local levels. Employees who can perform their job duties remotely are doing so. Those employees who must report to a work site are wearing personal protective equipment (PPE) and practicing physical distancing measures. Extensive cleaning protocols are also in place. Earlier this year, we suspended non-essential work activities, while continuing to respond to customer outages
The COVID-19 pandemic and requests for emergency service as well as infrastructure maintenanceassociated government actions and upgrades. As New Jersey has relaxed its coronavirus response protocols over the past few months, we have initiated a phased re-starting of certain of these activities (i.e., inside premises appliance repair and monthly meter reading activities), while maintaining protocols for physical distancing and PPE. Similarly, we have also begun to formulate policies and protocols for the responsible reopening of our offices and work sites. Our “responsible reentry” policies and protocols willeconomic effects continue to focus on the health and safety ofimpact our businesses. We have incurred additional expenses to protect our employees and customers, and the communities we serve while also taking a cautiousPSE&G is experiencing significantly higher bad debts and measured approach toward reopening. We are continuing to assess the appropriate timeline for this process. In connection with their reopening plans, New Jersey, New York and Connecticut have issued advisories for anyone returning from states that have a significant degree of community-wide spread of COVID-19, referred tolower cash collections, as “designated states.” These advisories include exceptions for essential employees and we are assessing what impact this may have on members of

our workforce who may live in a designated state. We are also using enhanced physical distancing and safety protocols where there are impacts on members of our workforce who may live in or travel from a designated state.
discussed below. The ongoing coronavirus pandemic has not had a material impact on our results of operations, financial condition or cash flows for the six months ended June 30, 2020. However, the potential future impact of the pandemic and the associated economic
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impacts, which could extend beyond the duration of the pandemic, will depend on a number of factors outside of our control, includingcontrol. These include the duration and severity of the outbreak as well as third-party actions taken to contain its spread and mitigate its public health effects.effects, and governmental or regulatory actions regarding customer collections, potential limitations on rate increases, recovery of incremental costs, and other matters. While we currently cannot estimate the potential impact to our results of operations, financial condition and cash flows, this MD&A includes a discussion of potential effects of a prolonged outbreak.
PSE&G
At PSE&G, our focus is on enhancing reliability and resiliency of our T&D system, meeting customer expectations and supporting public policy objectives by investing capital in T&D infrastructure and clean energy programs. For the five-year period ending December 31, 2024,2025, PSE&G expects to invest between $11.5$13 billion to $15 billion, resulting in an expected compound annual growth in rate base growth of 6.5% to 8%. These rangesThe low end of the range assumes an extension of our Gas System Modernization Program (GSMP) and Clean Energy Future (CEF)-Energy Efficiency (EE) program at their average annual investment levels, as these programs are expected to continue at least at those current rates beyond their currently approved timeframes of 2023 and 2024, respectively. The range is driven by certain unapproved investment programs, including a to-be- filed extension of the Clean Energy Future (CEF)Strong program, which otherwise concludes in 2023, as well as the remaining portion of our CEF proposal (portion of Electric Vehicle (EV) and incremental reliabilityEnergy Storage (ES) programs) and resiliency investments anticipated in the 2024 timeframe that we intend to seek approvala potentially higher amount of investment for under the third phase of existing infrastructure programs.GSMP and CEF-EE beyond current levels. See below for a description of the CEF program.
In 2019, we commenced our BPU-approved Gas System Modernization Program II (GSMP II), an expanded, five-year program to invest $1.9 billion beginning in 2019 to replace approximately 875 miles of cast iron and unprotected steel mains in addition to other improvements to the gas system. Approximately $1.6 billion will be recovered through periodic rate roll-ins, with the remaining $300 million to be recovered through a future base rate proceeding. As part of the settlement approved by the BPU, PSE&G agreed to file for a base rate proceeding no later than December 2023, to maintain a base level of gas distribution capital expenditures of $155 million per year and to achieve certain leakage reduction targets.
Also in 2019, the BPU approved our Energy Strong II Program (ES II), an $842 million program to harden, modernize and improve the resiliency of our electric and gas distribution systems. This program began in the fourth quarter of 2019 and is expected to be completed by the end of 2023. Approximately $692 million of the program will be recovered through periodic rate recovery filings, with the balance to be recovered in our next distribution base rate case.
In October 2018, we filed our proposed CEF program with the BPU, a six-year estimated $3.5 billion investment covering four programs; (i) an Energy Efficiency (EE) program totaling $2.5 billion of investment designed to achieve energy efficiency targets required under New Jersey’s Clean Energy law; (ii) an Electric Vehicle (EV) infrastructure program; (iii) an Energy Storage (ES) program, which was submitted to the BPU together with the EV infrastructure program in a single filing; and (iv) an Energy Cloud (EC) program which will include installing approximately two million electric smart meters and associated infrastructure. In January 2020, New Jersey released its Energy Master Plan (EMP) which, among other things, recognizes the importance of the State’s EE targets and supported EVs, ES, and advanced metering infrastructure (AMI).
In FebruarySeptember 2020, PSE&G reached an agreementa settlement with parties in the CEF-EE matterproceeding, which was approved by the BPU approved. The settlement commits $1 billion over a three-year period, with the majority of the investment occurring over a five-year period. Costs will be recovered through annual rate-making, with returns aligned with our most recent base rate case and a ten-year amortization period.
The approval also included a Conservation Incentive Program, a mechanism that will provide for recovery of lost electric and gas variable margin revenues relative to (a) extend several existing EE programsa baseline of the test year in our last base rate case from July 2017 to June 2018. The deferral period for six months,this mechanism is effective beginning in June 2021 for electric and October 2021 for gas. PSE&G will suspend its gas Weather Normalization Charge (WNC) when the gas deferral period begins.
In January 2021, the BPU approved a settlement with an additional $111PSE&G and other parties in the CEF-Energy Cloud (EC) proceeding. The capital cost of the program, which includes implementation of AMI, is estimated to be approximately $700 million, investmentinvested over the coursenext four years.
Also in January 2021, the BPU approved a settlement with PSE&G and other parties in the CEF-EV proceeding for a majority of the programs, and (b) extend the timeline for reviewcomponents of the CEF-EE filing through September 2020. In June 2020,program. The approved investment under the BPU completed its stakeholder proceedings into certain aspectsprogram is for $166 million, primarily relating to preparatory work to deliver infrastructure to the charging point for three programs: residential smart charging; Level-2 mixed use charging; and direct current fast charging.
All of EEthe capital costs and issued a final order outlining its policies, including which EEexpenses of the CEF-EC and CEF-EV programs the State will manage and which will be managed byrecovered in PSE&G’s next base rate case, expected in the State’s utilities,second half of 2024. From the start of the program until the commencement of new base rates, the return on and of the capital portion of each of these programs, as well as expenses incurred to implement the CEF-EV program and operating costs and stranded costs associated with the retirement of existing meters under the CEF-EC program, will be included for recovery in those rates. The remaining component of our CEF-EV proposal, the vehicle innovation subprogram, as well as the utility cost recovery features, such as return on equity, amortization period, lost revenue recovery and potential incentives and penalties. The BPU’s order isoverall CEF-ES program, are being employedheld in abeyance pending future policy guidance from the resolution of PSE&G’s pending CEF-EE filing.
The BPU has also issued procedural schedules for the CEF-EC and CEF-EV/ES investment programs, both providing for evidentiary hearings in the fourth quarter of 2020. In April 2020, PSE&G filed with the BPU an update of its CEF-EC petition to revise certain assumptions, including an updated deployment schedule based on the procedural schedule.BPU.
We also continue to invest in transmission infrastructure in order to (i) maintain and enhance system integrity and grid reliability, grid security and safety, (ii) address an aging transmission infrastructure, (iii) leverage technology to improve the operation of the system, (iv) reduce transmission constraints, (v) meet growing demand and (vi) meet environmental requirements and standards set by various regulatory bodies. Our planned capital spending for transmission in 2020-20222021-2023 is $2.8$2.5 billion.
As noted above, PSE&G has been deemed by New Jersey to provide essential services during the ongoing coronavirus pandemic. Our capital programs, including GSMP II, ESEnergy Strong II and our transmission infrastructure investments, have not been materially impacted to date. However, a prolonged outbreak and the associated economic impacts, which could extend beyond the duration of the pandemic, could impact our ability to obtain necessary permits and approvals and could lead to shortages of necessary materials, supplies and labor. In addition, a determination by any state or federal regulatory authority that one or all of our projects is non-essential could require us to temporarily halt work. Any delay in our planned capital program could

impact our operational performance and could materially impact our results of operations and financial condition through decreased cost recovery.
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Further, the ongoing coronavirus pandemic has led many state and federal agencies to implement remote working protocols and divert resources to address the pandemic which, if prolonged, could impact regulatory agencies’ ability to review proposed programs and delay the timing of approvals for matters subject to regulatory approval, including our CEF program that is currently before the BPU and the approval of various clause recovery mechanisms.
PSE&G has experienced a reduction in demand from its commercial and industrial (C&I) customers, partially offset by increases in residential demand, and adverse changes to residential and C&I payment patterns, andpatterns. PSE&G expects these changes to continue during athe prolonged coronavirus pandemic. In addition, PSE&G has informed bothMarch 2021, the state formally extended its residential customers and state regulators that allmoratorium on non-safety related service disconnections for non-payment have been temporarily suspended. As a result,for residential customers through June 30, 2021. During the moratorium, PSE&G has seenexperienced a significant decrease in cash inflow and higher Accounts Receivable aging and an associated increase in bad debt expense, which we expect could extend beyond the duration of the coronavirus pandemic. PSE&G’s electric distribution bad debt expense is recoverable through its Societal Benefits Clause (SBC) mechanism. GasPSE&G has deferred its incremental gas distribution bad debt expense in excess of what is included in base rates could adversely impact PSE&G’s utility results from operations.Further, the implementation of actions to protect customers and employees, including physical distancing, mandatory PPE, and realignment of work crews, may have an adverse impact on operations and maintenance (O&M) costs. In addition, PSE&G has experiencedas a significant increase in the number of estimated C&I and residential customer bills, resulting from measures imposed by New Jersey to limit the spreadresult of COVID-19 which prevented PSE&G from physically entering customer properties to read meters. As partas a Regulatory Asset and will seek recovery of the New Jersey’s phased reopening plan, this limitation was liftedthat cost, as well as other net incremental COVID-19 costs, in July 2020. PSE&G expects to read the majority of customer meters in the third quarter of 2020 and make any appropriate adjustments to the amounts of customer bills relative to prior estimates, which adjustments are not expected to be material.its next base rate case. 
In July 2020, the BPU authorized regulated utilities in New Jersey, including PSE&G, to create a COVID-19-related Regulatory Asset by deferring on their books and records the prudently incurred incremental costs related to COVID-19 beginning on March 9, 2020 through September 30, 2021, or 60 days after the New Jersey governor determines that the Public Health Emergency is no longer in effect, or in the absence of such a determination, 60 days from the time the Public Health Emergency automatically terminates by law, whichever is later. Deferred costs are to be offset by any federal or state assistance that the utility may receive as a direct result of the COVID-19 pandemic. As of March 31, 2021, PSE&G is evaluating the order and the deferral amounts that would be allowedhas recorded a Regulatory Asset related to COVID-19 to defer incremental costs of $60 million, which PSE&G expects are probable of recovery under the order and expects to record a deferral commencing in the third quarter of 2020.BPU order.
While the impact on our results of operations, financial condition and cash flows for the sixthree months ended June 30, 2020March 31, 2021 has not been material, a prolonged coronavirus pandemic and the associated economic impacts, which could extend beyond the duration of the pandemic, could materially impact cash from operations, Accounts Receivable and bad debt expense.
PSEG Power
In July 2020, we announced that we are exploring strategic alternatives for PSEG Power’s non-nuclear generating fleet with the intention of accelerating the transformation of our business into a primarily regulated electric and gas utility, with a significantlycontracted generation business. It is expected to reduce overall business risk and earnings volatility, improve PSEG’s credit profile and is consistent with PSEG’s climate strategy and sustainability efforts, which is to focus on clean energy investments, methane reduction, and zero-carbon generation. PSEG intends to retain ownership of PSEG Power’s existing nuclear fleet. Since the announcement, we have engaged in proprietary activities relating to the potential divestiture of these assets and any potential transactions are expected to be completed sometime in 2021.
In May 2021, PSEG Power Ventures LLC (Power Ventures), a direct wholly owned subsidiary of PSEG Power, entered into a purchase agreement with Quattro Solar, LLC, an affiliate of LS Power, relating to the sale by Power Ventures of 100% of its ownership interest in PSEG Solar Source LLC including its related assets and liabilities. The transaction is expected to close during the second or third quarter of 2021, subject to certain closing conditions, adjustments and regulatory approvals.
There is no assurance that the strategic review will result in a sale or other disposition of all or any portion of the fossil generation assets on terms that are favorable to us, or at all. Any transaction would be subject to market conditions and customary closing conditions, including the receipt of all required regulatory approvals.
At PSEG Power, we strivehave sought to improve performanceachieve operational excellence and manage costs in order to optimize cash flow generation from our fleet in light of low wholesale power and gas prices, environmental considerations and competitive market forces that reward efficiency and reliability. PSEG Power continues to move its fleet toward improved efficiency and believes that its recently completed investment program enhances its competitive position with the addition of efficient, clean, reliable combined cycle gas turbine capacity. In the first sixthree months of 2020,2021, our natural gas and nuclear units generated 10.14.7 and 15.88.2 terawatt hours and operated at a capacity factor of 44.3%41.7% and 93.4%98.8%, respectively. Our commitments for load, such as basic generation service (BGS) in New Jersey and other bilateral supply contracts, are backed by this generation or may be combined with the use of physical commodity purchases and financial instruments from the market to optimize the economic efficiency of serving our obligations. PSEG Power’s hedging practices and abilityhelp to capitalize on market opportunities help it to balancemanage some of the volatility of the merchant power business. More than 70%75% of PSEG Power’s expected gross margin in 20202021 relates to hedging of our energy margin, our expected revenues from the capacity market mechanisms, Zero Emission Certificate (ZEC) revenues that commenced in April 2019 and certain ancillary service payments such as reactive power.
As discussed further below under “Wholesale Power Market Design,” FERC issued an order establishing new rules for PJM’s capacity market, extending the PJM Minimum Offer Price Rule (MOPR) to include both new and existing resources that receive or are entitled to receive certain out-of-market payments, with certain exemptions. PSEG Power’s New Jersey nuclear plants that receive ZEC payments will be subject to the new MOPR. In addition, as a result of FERC’s finding that default procurement auctions such as BGS could be considered subsidies, it is possible that other PSEG units could be subject to the MOPR. The MOPR’s floor prices are not expected to prevent either our nuclear or gas-fired units from clearing in the next
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Reliability Pricing Model (RPM) auction. We cannot predict whether additional changes will be made to the MOPR, or whether changes will occur in the PJM market that would impact our ability to clear any of these units in future RPM auctions.
PSEG LI
Following the effects of Tropical Storm Isaias, the New York Attorney General initiated an inquiry into PSEG LI’s preparation and response to the storm. In addition, the Department of Public Service (DPS) within the New York State Public Service Commission launched an investigation of state electric service providers, including PSEG LI, and other state telephone, cable and internet providers into their preparation and restoration efforts following Tropical Storm Isaias. Although the inquiry by the New York Attorney General remains pending, the DPS issued an interim storm investigation report. With respect to PSEG LI, the DPS’ report found that PSEG LI violated its Emergency Response Plan and DPS Regulations, and recommended that LIPA consider taking various actions, including terminating or renegotiating the OSA. LIPA also initiated its own review of PSEG LI’s performance and issued a report with recommendations for improvements to PSEG LI’s structure and processes, including a timeline for implementing those recommendations. That report also recommended that LIPA either renegotiate or terminate the OSA.
In December 2020, LIPA filed a complaint against PSEG LI in New York State court alleging multiple breaches of the OSA in connection with PSEG LI’s preparation for and response to Tropical Storm Isaias seeking specific performance and $70 million in damages. Pursuant to recommendations by the New York State DPS, LIPA has initiated a series of actions to allow its board to determine whether to seek to terminate the OSA or instead continue with PSEG LI as its Service Provider. LIPA and PSEG LI are engaged in settlement discussions concerning various amendments to the OSA during which the litigation has been tolled. If the parties reach a settlement agreement, any amendments to the OSA will require the approval of the New York Attorney General and the New York Comptroller.
PSEG LI is fully cooperating with the inquiries by the New York Attorney General and the DPS, and we cannot predict their outcome. PSEG LI also continues to work closely with LIPA to address the recommendations in LIPA’s report. In the first halfabsence of 2020, as a resultsettlement agreement and the required approvals, PSEG LI intends to vigorously defend itself with regard to the allegations in LIPA’s complaint alleging breaches of the ongoing coronavirus pandemic,OSA; however, a decision in this proceeding requiring specific performance or the payment of damages by PSEG Power experienced a decreaseLI or resulting in aggregate wholesale electric demand. An extended outbreakthe termination of the OSA could have a material adverse impacteffect on futurePSEG’s results of operations and cash flows.

PSEG Power has also implemented protocols to ensure the safety and health of employees at its generation facilities and contractors working at the facilities during planned outages. A prolonged unavailability of employees and contractors due to the ongoing coronavirus pandemic could materially and adversely impact our ability to operate our generation facilities, which would have a material impact on our business, results of operations and cash flows.
Strategic Alternatives for PSEG Power’s Non-Nuclear Fleet
On July 31, 2020, PSEG announced that it is exploring strategic alternatives for PSEG Power’s non-nuclear generating fleet, which includes more than 6,750 megawatts (MW) of fossil generation located in New Jersey, Connecticut, New York and Maryland as well as the 467 MW Solar Source portfolio located in various states. An exit from the fossil generation business would accelerate PSEG’s transition to a primarily regulated and contracted business, with a zero-carbon generation platform. It is expected to reduce overall business risk and earnings volatility, improve PSEG’s credit profile and is consistent with PSEG’s climate strategy and sustainability efforts, which is to focus on clean energy investments, methane reduction, and zero carbon generation. PSEG intends to retain ownership of PSEG Power’s existing nuclear fleet. While the company is in the preliminary stage of this evaluation, the marketing of a potential transaction in one or a series of steps, anticipated to launch in the fourth quarter of this year, is expected to be completed sometime in 2021. There is no assurance that the strategic review will result in a sale or other disposition of all or any portion of these assets on terms that are favorable to us, or at all. Any transaction would be subject to market conditions and customary closing conditions, including the receipt of all required regulatory approvals.financial condition.
Climate Strategy and Sustainability Efforts
For more than a century, our mission has been to provide safe access to an around-the-clock supply of reliable, affordable power.energy. Building on this mission, we believe in a future where customers universally use less energy, the energy they use is cleaner, and its delivery is more reliable and more resilient.In July 2019, we announced that we expect to cut carbon emissions at PSEG Power’s generation fleet by 80% by 2046, from 2005 levels. We have also announced our vision of attaining net-zeronet zero- carbon dioxide (CO2) emissions by 2050, assuming advances in technology, public policy and customer behavior.
PSE&G has also undertaken a number of initiatives that support the reduction of greenhouse gas (GHG) emissions and the implementation of energy efficiency initiatives. The first phase of our GSMP replaced approximately 450 miles of cast-iron and unprotected steel gas infrastructure, and the second phase of this program is expected to replace an additional 875 miles of gas pipes through 2023. The GSMP is designed to significantly reduce gas leaks in our distribution system, which would reduce the release of methane, a potent GHG, into the air. Through GSMP II, from 2018 through 2023 we expect an approximate 22% reduction in methane, and assuming a continuation of GSMP, we expect an approximate 60% reduction in methane emissions from 2011 through 2030. In addition, PSE&G’s CEF proposals,CEF-EE which are under reviewwas approved by the BPU in September 2020, the CEF-EC and CEF-EV programs, which were approved by the BPU in January 2021, and the proposed CEF-ES program are intended to support New Jersey’s EMP through programs designed to help customers increase their energy efficiency, support the expansion of the electric vehicle infrastructure in the State, install energy storage capacity to supplement solar generation and enhance grid resiliency, install smart meters and supporting infrastructure to allow for the integration of other clean energy technologies and to more efficiently respond to weather and other outage events. We also continue to assess physical risks of climate change and adapt our capital investment program to improve the reliability and resiliency of our system in an environment of increasing frequency and severity of weather events, notably through our investments in Energy Strong.
Offshore Wind
In December 2020, PSEG entered into a definitive agreement with Ørsted North America to acquire a 25% equity interest in Ørsted’s Ocean Wind project. Ocean Wind was selected by New Jersey to be the first offshore wind farm as part of the state’s intention to add 7,500 MW of offshore wind generating capacity by 2035. The Ocean Wind project could provide first power in late 2024. On March 31, 2021, the BPU approved PSEG’s investment in Ocean Wind and the acquisition was completed in April 2021. Additionally, PSEG and Ørsted each owns 50% of Garden State Offshore Energy LLC which holds rights to an offshore wind lease area. PSEG and Ørsted are exploring other offshore wind opportunities.
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Operational Excellence
We emphasize operational performance while developing opportunities in both our regulated and competitive and regulated businesses. Flexibility in our generating fleet has allowed us to take advantage of opportunities in a rapidly evolving market as we remain diligent in managing costs. In the first sixthree months of 2020,2021, our
utility continued its efforts to control costs while maintaining strong operational performance and has implemented protocols to ensure that we are providing essential services to our customers during the ongoing coronavirus pandemic in a safe and reliable manner, and
efficient combined cycle gas units improved our capacity factor across the natural gas fleet and were readily available to operate when needed, all while diligently managing costs.manner.
Financial Strength
Our financial strength is predicated on a solid balance sheet, positive operating cash flow and reasonable risk-adjusted returns on increased investment. Our financial position remained strong during the first sixthree months of 20202021 as we
•maintained sufficient liquidity,
•maintained solid investment grade credit ratings, and
•increased our indicative annual dividend for 20202021 to $1.96$2.04 per share.
In March 2020, PSEG entered into a $300 million, 364-day term loan agreement and in April 2020 it entered into two 364-day term loan agreements for $200 million and $300 million. These term loans provide an additional source of liquidity for our operations as we continue to monitor the impact of the ongoing coronavirus pandemic on the volatility and availability of the capital and commercial paper markets.
We expect to be able to fund our planned capital requirements, as described in Liquidity and Capital Resources and the impacts

of the Tax Cuts and Jobs Act of 2017 (Tax Act) without the issuance of new equity. Our planned capital requirements, which are driven by growth in our regulated utility, and the potential sale of our non-nuclear generation fleet are expected to improve our business and financial profile.
Financial Results
The results for PSEG, PSE&G and PSEG Power for the three months ended March 31, 2021 and six months ended June 30, 2020 and 2019 are presented as follows:
Three Months Ended
March 31,
Earnings (Losses)20212020
Millions
PSE&G$477 $440 
PSEG Power161 13 
Other (A)10 (5)
PSEG Net Income$648 $448 
PSEG Net Income Per Share (Diluted)$1.28 $0.88 
          
  Three Months Ended Six Months Ended 
  June 30, June 30, 
 Earnings (Losses)2020 2019 2020 2019 
  Millions 
 PSE&G$283
 $227
 $723
 $630
 
 PSEG Power (A)170
 (40) 183
 256
 
 Other (B)(2) (34) (7) (33) 
 PSEG Net Income$451
 $153
 $899
 $853
 
          
 PSEG Net Income Per Share (Diluted)$0.89
 $0.30
 $1.77
 $1.68
 
          
(A)Other includes after-tax activities at the parent company, PSEG LI, and Energy Holdings as well as intercompany eliminations.
(A)Includes an after-tax impairment charge of $284 million in the three months and six months ended June 30, 2019 related to the sale of PSEG Power’s interests in the Keystone and Conemaugh fossil generation plants. See Item 1. Note 4. Early Plant Retirements/Asset Dispositions for additional information.
(B)Other includes after-tax activities at the parent company, PSEG LI, and Energy Holdings as well as intercompany eliminations. Energy Holdings recorded an after-tax charge of $32 million in the second quarter of 2019 related to its investment in leveraged leases. See Item 1. Note 8. Financing Receivables for additional information.
PSEG Power’s results above include the Nuclear Decommissioning Trust (NDT) Fund activity and the impacts of non-trading commodity mark-to-market (MTM) activity, which consist of the financial impact from positions with future delivery dates.
The variances in our Net Income attributable to changes related to the NDT Fund and MTM are shown in the following table:
Three Months Ended
March 31,
20212020
Millions, after tax
NDT Fund Income (Expense) (A) (B)$32 $(135)
Non-Trading MTM Gains (Losses) (C)$(34)$77 
(A)NDT Fund Income (Expense) includes gains and losses on NDT securities which are recorded in Net Gains (Losses) on Trust Investments. See Item 1. Note 9. Trust Investments for additional information. NDT Fund Income (Expense) also includes interest and dividend income and other costs related to the NDT Fund recorded in Other Income (Deductions), interest accretion expense on PSEG Power’s nuclear Asset Retirement Obligation (ARO) recorded in Operation and Maintenance Expense and the depreciation related to the ARO asset recorded in Depreciation and Amortization (D&A) Expense.
(B)Net of tax (expense) benefit of $(23) million and $84 million for the three months ended March 31, 2021 and 2020, respectively.
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  Three Months Ended Six Months Ended 
  June 30, June 30, 
  2020 2019 2020 2019 
  Millions, after tax 
 NDT Fund Income (Expense) (A) (B)$118
 $25
 $(17) $101
 
 Non-Trading MTM Gains (Losses) (C)$(77) $152
 $—
 $228
 
          
(A)NDT Fund Income (Expense) includes gains(C)Net of tax (expense) benefit of $13 million and $(30) million for the three months ended March 31, 2021 and losses on NDT securities which are recorded in Net Gains (Losses) on Trust Investments. See Item 1. Note 9. Trust Investments for additional information. NDT Fund Income (Expense) also includes interest and dividend income and other costs related to the NDT Fund recorded in Other Income (Deductions), interest accretion expense on PSEG Power’s nuclear Asset Retirement Obligation (ARO) recorded in O&M Expense and the depreciation related to the ARO asset recorded in Depreciation and Amortization (D&A) Expense.
(B)Net of tax (expense) benefit of $(74) million and $(16) million for the three months and $10 million and $(67) million for the six months ended June 30, 2020, and 2019, respectively.
(C)
Net of tax (expense) benefit of $30 million and $(58) million for the three months and $0 million and $(88) million for the six months ended June 30, 2020 and 2019, respectively.
Our $298$200 million increase in Net Income for the three months ended June 30, 2020March 31, 2021 was driven primarily by
an asset impairment in 2019 related•net gains on NDT Fund equity securities as compared to the sale of PSEG Power’s interests in the Keystone and Conemaugh fossil generation plants (see Item 1. Note 4. Early Plant Retirements/Asset Dispositions),
highersignificant net unrealized gainslosses in 2020 on equity securities in the NDT Fund at PSEG Power,
•higher earnings due to continued investments in T&D programs at PSE&G, and

Table of Contents•


•
an impairment charge in 2019 related to a leveraged lease investment at Energy Holdings (see Item 1. Note 8. Financing Receivables),
Our $46 million increase in Net Income for the six months ended June 30, 2020 was driven primarily by
the above mentioned asset impairment in 2019 related to the sale of PSEG Power’s interestshigher average realized prices in the KeystonePJM, New England (NE) and Conemaugh fossil generation plants,New York (NY) regions coupled with higher volumes of electricity sold in the NE region at PSEG Power, and
higher earnings due to investments in T&D programs at PSE&G, and
•higher pension and OPEB credits,
•partially offset by MTM gains in 2019 at PSEG Power, and
net unrealized losses in 20202021 as compared to net unrealizedMTM gains on equity securities in the NDT Fund2020 at PSEG Power.
The greater emphasis on capital spending in recent years for projects at PSE&G relative to PSEG Power, particularly those on which we receive contemporaneous returns at PSE&G has yielded strong results, which when combined with the cash flow generated by PSEG Power, has allowed us to meet customer needs and address market conditions and investor expectations, reflecting our long-term approach to managing our company.expectations. We continue our focus on operational excellence, financial strength and disciplined investment. These guiding principles have provided the base from which we have been able to execute our strategic initiatives.
Disciplined Investment
We utilize rigorous criteria and consider a number of external factors, includingfocusing on the economic impact of the ongoing coronavirus pandemic,value for our stakeholders, as well as other impacts, when determining how and when to efficiently deploy capital. We principally explore opportunities for investment in areas that complement our existing business and provide reasonable risk-adjusted returns.returns and continuously assess and optimize our business mix as appropriate. In the first sixthree months of 2020,2021, we
•made additional investments in T&D infrastructure projects on time and on budget,
•continued to execute our Energy Efficiency and other existing BPU-approved utility programs, and
•continued to evaluate potential additional offshore wind opportunities, and
•continued the process to potentially sell PSEG Power’s non-nuclear generation business, which is expected to improve our business profile and accelerate our transition to a potential investment in offshore wind.primarily regulated electric and gas utility, with a significantly contracted energy business.
Regulatory, Legislative and Other Developments
In our pursuit of operational excellence, financial strength and disciplined investment, we closely monitor and engage with stakeholders on significant regulatory and legislative developments. Transmission planning rules and wholesale power market design are of particular importance to our results and we continue to advocate for policies and rules that promote fair and efficient electricity markets. For additional information about regulatory, legislative and other developments that may affect us, see Part I, Item 1. Business—Regulatory Issues in our Form 10-K and Item 5. Other Information in our Quarterly Report on Form 10-Q for the period ending March 31, 2020 (first quarter 2020 10-Q) and this Quarterly Report on Form 10-Q.
Transmission Rate Proceedings and Return on Equity (ROE)
In March 2020,2019, FERC issued a Notice of Proposed Rulemaking (NOPR) proposingInquiry seeking comments on improvements to revise itsFERC’s electric transmission incentives policy. Subsequently, in April 2021, FERC issued a supplemental notice of proposed rulemaking to eliminate the incentive policy to encouragefor Regional Transmission Organization (RTO) membership for transmitting utilities that have already received the development of infrastructure needed to ensure grid reliability and reduce congestion to lower the cost of powerincentive for consumers. The NOPR proposes to shift the focus in granting incentives from an approach based on the risks and challenges faced bythree or more years. PSE&G began receiving a project to an approach based on economic and reliability benefits to consumers. The NOPR proposes to retain several existing incentives, increase the 50 basis point adder for Regional Transmission Organization (RTO) participation to 100 basis pointsRTO membership in 2008. Elimination of the adder for RTO membership could reduce PSE&G’s annual Net Income and provide incentives for transmission technologies that enhance reliability, efficiency and capacity.annual cash inflows by approximately $30 million.
In May 2020, FERC issued an order revising an earlier order that established a new ROE policy for reviewing existing transmission ROEs. The revised methodology uses the Discounted Cash Flow (DCF) model, the Capital Asset Pricing model(CAPM) and the risk premiumRisk Premium model to determine if an existing base ROE is unjust and unreasonable and, if so, what replacement ROE is appropriate. FERC’s order indicated that it would not be bound by this revised methodology when considering the just and reasonableness of a utility’s ROE in future proceedings. We continue to analyze the potential impact of these methodologies.
ROE complaints have been pending before FERC regarding MISO transmission owners, the ISO New England Inc. transmission owners and utilities in other jurisdictions. In addition, over the past few years, several companies have negotiated settlements that have resulted in reduced ROEs.
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We are engaged in settlement discussions with the BPU Staff and the New Jersey Division of Rate Counsel (New Jersey Rate Counsel) about the level of PSE&G’s base transmission ROE; however, we cannot predict the outcome of these settlement

discussions.ROE and other formula rate matters. An adverse change to PSE&G’s base transmission ROE or ROE incentives could be material. We estimate that for each 25 basis point reduction in PSE&G’s base transmission ROE, and all other factors unchanged, PSE&G’s annual Net Income and annual cash inflows would decrease by approximately $15 million. While we cannot predict the outcome of the settlement discussions, it may result in a change to our base transmission ROE that is multiples of this sensitivity measure.
Wholesale Power Market Design
In December 2019, FERC issued an order establishing new rules for PJM’s capacity market, extending the PJM MOPR to include both new and existing resources that receive or are entitled to receive certain out-of-market payments, with certain exemptions.
PSEG Power’s New Jersey nuclear plants that receive ZEC payments will be subject to the new MOPR. In addition, as a result of FERC’s finding that default procurement auctions such as BGS could be considered subsidies, it is possible that other PSEG units could be subject to the MOPR. Resources that are subject to the MOPR continue to have the ability to justify a bid below the MOPR floor price under the unit-specific exemption. The MOPR floor prices are not expected to prevent either our nuclear units or gas-fired units from clearing in the next RPM auction. A FERC order issued inIn May 2020, authorizing enhancements to theFERC issued an order modifying PJM’s methodology used byfor pricing energy reserves. It also directed PJM to priceuse forward-looking energy reserves has created additional uncertainty regarding the impact of the MOPR expansion in future RPM auctions on PSEG Power’s nuclear units that receive ZECs. One of the findings made by FERC in that order willand ancillary service revenues,which can affect how the MOPR offer floors are calculated and could have the effect, in the future, of increasing the price floors for the plants and thereby increasing the risk of being unable to clear in an RPM auction.calculated. In addition, if one or more electric distribution zones in New Jersey (or another state) were to become fixed resource requirement (FRR) alternativeservice areas, procurements needed for that area could provide an alternate means for nuclear units whose ability to clear in RPM auctions was affected by the MOPR to provide capacity within PJM. We cannot predict whether additional changes will be made to the MOPR, or whether changes will occur in the PJM market that would impact our ability to clear any of these units in future RPM auctions.
States that have clean energy programs designed to achieve public policy goals that support such resources as solar, offshore wind and nuclear, are not prevented from pursuing those programs by the expanded MOPR and could choose to utilize the existing FRR approach authorized under the PJM tariff. Subsidized units that cannot clear in a RPM capacity auction because of the expanded MOPR could still count as capacity resources to a load serving entity (LSE) using the FRR approach. In a March 2020 order, the BPU initiated an investigation to examine whether New Jersey can achieve its long-term clean energy and environmental objectives under the current resource adequacy procurement paradigm and potential alternatives. One of the areas of inquiry concerns the potential creation of FRR service areas within New Jersey. We cannot predict the impact these rules or any measures taken by the BPU will have on the capacity market or our generating stations. See Part II, Item 5. Other Information.
In January 2020, New Jersey rejoined the Regional Greenhouse Gas Initiative (RGGI). As a result, generating plants operating in New Jersey, including those owned by PSEG Power, that emit CO2 emissions will be required to procure credits for each ton they emit. In response to RGGI, PJM initiated a process in 2019 to investigate the development of a carbon pricing mechanism that may mitigate the environmental and financial distortions that could occur when emissions “leak” from non-participating states to the RGGI states. If the process leads to a market solution, it could have a material impact on the value of PSEG Power’s generating fleet.
Environmental Regulation
We are subject to liability under environmental laws for the costs and penalties of remediating environmental contamination of property now or formerly owned by us and of property contaminated by hazardous substances that we generated. In particular, the historic operations of PSEG companies and the operations of numerous other companies along the Passaic and Hackensack Rivers are alleged by Federal and State agencies to have discharged substantial contamination into the Passaic River/Newark Bay Complex in violation of various statutes. We are also currently involved in a number of proceedings relating to sites where other hazardous substances may have been discharged and may be subject to additional proceedings in the future, and the costs and penalties of any such remediation efforts could be material.
For further information regarding the matters described above, as well as other matters that may impact our financial condition and results of operations, see Item 1. Note 11. Commitments and Contingent Liabilities.
Nuclear
In April 2019, PSEG Power’s Salem 1, Salem 2 and Hope Creek nuclear plants were awarded ZECs by the BPU. Pursuant to a process established by the BPU, ZECs are purchased from selected nuclear plants and recovered through a non-bypassable distribution charge in the amount of $0.004 per kilowatt-hour used (which is equivalent to approximately $10 per megawatt hour (MWh) generated in payments to selected nuclear plants (ZEC payment)). TheseEach nuclear plants areplant is expected to receive ZEC revenue for approximately three years, through May 2022.
In April 2021, PSEG Power’s Salem 1, Salem 2 and Hope Creek nuclear plants were awarded ZECs for the three-year eligibility period starting June 2022 at the same approximate $10 per MWh received during the current ZEC period through May 2022 referenced above. As a result, each nuclear plant is expected to receive ZEC revenue for approximately three years
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starting June 2022. The terms and will be obligatedconditions of this April 2021 ZEC award are generally similar to maintainthe current ZEC period as discussed above.
The award of ZECs attaches certain obligations, including an obligation to repay the ZECs in the event that a plant ceases operations during the approximate three-year period that period,it was awarded ZECs, subject to certain exceptions specified in the ZEC legislation. PSEG Power has and will continue to recognize revenue monthly as the nuclear plants generate electricity and satisfy their performance obligations. TheFurther, the ZEC payment may be adjusted by the BPU (a)

at any time to offset environmental or fuel diversity payments that a selected nuclear plant may receive from another source or (b) at certain times specified in the ZEC legislation if the BPU determines that the purposes of the ZEC legislation can be achieved through a reduced charge that will nonetheless be sufficient to achieve the State’s air quality and other environmental objectives by preventing the retirement of nuclear plants.source. For instance, the New Jersey Division of Rate Counsel (New Jersey Rate Counsel), in written comments filed with the BPU, has advocated for the BPU to offset market benefits resulting from New Jersey’s rejoining the RGGIRegional Greenhouse Gas Initiative from the ZEC payment. PSEG intends to vigorously defend against these arguments. Due to its preliminary nature, PSEG cannot predict the outcome of this matter.
The BPU’s April 2019 decision awarding ZECs through May 2022 has been appealed by the New Jersey Rate Counsel. In March 2021, the New Jersey Appellate Division affirmed the BPU’s April 2019 decision granting ZECs for the first eligibility period. In April 2021, New Jersey Rate Counsel has petitioned to the New Jersey Supreme Court for further appellate review. PSEG cannot predict the outcome of this matter. The BPU issued an order in May 2020 outlining the process for applying for ZECs for the next three-year eligibility period starting in June 2022 and is expected to issue a decision regarding any ZEC applications and any change in the amount of future ZEC payments by April 2021. PSEG Power is not aware of any changes that would materially affect its ability to establish eligibility to be awarded ZECs under the application requirements that resulted in the award of ZECs to Salem 1, Salem 2 and Hope Creek in April 2019. However, PSEG Power cannot predict whether other plants besides Salem 1, Salem 2 and Hope Creek will apply for ZECs in the future.
In the event that (i) the ZEC program is overturned or is otherwise materially adversely modified through legal process,process; or (ii) the terms and conditions of the subsequent period under the ZEC program, including the amount of ZEC payments that may be awarded, materially differ from those of the current ZEC period, or (iii) any of the Salem 1, Salem 2 and Hope Creek plants is not awarded ZEC payments by the BPUsufficiently valued for its environmental, fuel diversity or resilience attributes in future periods and does not otherwise experience a material financial change that would remove the need for such attributes to be sufficiently valued, PSEG Power will take all necessary steps to retirecease to operate all of these plants subsequent to the initial ZEC period at or prior to a scheduled refueling outage.plants. Alternatively, if alleven with sufficient valuation of the Salem 1, Salem 2 and Hope Creek plants are selected to continue to receive ZEC payments butthese attributes, if the financial condition of the plants is materially adversely impacted by changes in commodity prices, FERC’s changes to the capacity market construct (absent sufficient capacity revenues provided under a program approved by the BPU in accordance with a FERC-authorized capacity mechanism), or, in the case of the Salem nuclear plants, decisions by the EPA and state environmental regulators regarding the implementation of Section 316(b) of the Clean Water Act and related state regulations, or other factors, PSEG Power would stillwill take all necessary steps to retirecease to operate all of these plants. RetirementCeasing operations of these plants would result in a material adverse impact on PSEG’s and PSEG Power’s financial results.results of operations.
Nuclear Refueling OutageTax Legislation
On March 31, 2021, the White House released an overview of The Salem 1 nuclear generating plant is expected to enter into a scheduled refueling outageAmerican Jobs Plan and Made in October 2020. In lightAmerica Tax Plan. Although very few details of the COVID-19plans have been released, the Made in America Tax Plan includes an increase in the federal corporate tax rate and a minimum tax levied on book earnings. If either provision is enacted, it would have an unfavorable impact on PSEG’s and PSEG Power’s financial statements and would increase PSE&G’s customers’ bills.
A prolonged coronavirus pandemic we have implemented additional health protocols to protect the health and safety of our employees and contractors, including daily health screenings, increased hygiene, physical distancing, PPE requirements and close-contact monitoring. During this outage, the plant’s main generator stator, which has reached the end of its useful life, is expected to be replaced. The process for replacing Salem 1’s generator stator is highly complex. We also plan to perform additional reactor vessel inspections and upgrades. Limitations due to additional health protocols, delays in replacing the main generator stator due to its complexity, or adverse findings from the reactor vessel inspectionsfurther economic stimulus could result in an extended outage and in turn, lower revenues and increased costs,future federal or state legislation which could have a material impact on our effective tax rate and cash tax position.
The Consolidated Appropriations Act, 2021 (CAA) was enacted in late December 2020. The CAA provides a 30% investment tax credit for offshore wind projects that begin construction before December 31, 2025. Also, on December 31, 2020, Notice 2021-05 was issued. For qualifying offshore wind projects, the results of operationsnotice extends the four year continuity safe harbor to ten calendar years commencing the calendar year after which construction of the plant and PSEG Power.
California Solar Facilities
As part of its solar production portfolio, PSEG Power owns and operates two California-based solar facilities with an aggregate capacity of approximately 30 MW direct current whose output is sold to Pacific Gas and Electric Company (PG&E) under power purchase agreements (PPAs) with twenty year terms. In January 2019, PG&E and its parent company PG&E Corporation filed for Chapter 11 bankruptcy protection and in June 2020 the bankruptcy judge approved PG&E’s bankruptcy plan, which included the assumption of PSEG Power’s PPAs.
Offshore Wind
In June 2019, the BPU selected Ørsted US Offshore Wind’s Ocean Wind project as the winning bid in New Jersey’s initial solicitation for 1,100 MW of offshore wind generation. In October 2019, PSEG exercised its option on Ørsted’s Ocean Wind project, resulting in a period of exclusive negotiation for PSEG to potentially acquire a 25% equity interest in the project, subject to negotiations toward a joint venture agreement, advanced due diligence and any required regulatory approvals. Additionally, PSEG and Ørsted each owns 50% of Garden State Offshore Energy LLC (GSOE) which holds rights to an offshore wind lease area. PSEG and Ørsted are exploring other offshore wind opportunities through GSOE.
Tax Legislationbegins.
In July 2020, the IRSInternal Revenue Service (IRS) issued final and proposed regulations addressing the limitation on deductible business interest expense contained in the Tax Act. PSEG isCuts and Jobs Act (Tax Act). These regulations retroactively allow depreciation to be added back in computing the 30% adjusted taxable income (ATI) cap, increasing the amount of interest that can be deducted by unregulated businesses in years before 2022. For 2022 and after, the regulations continue to disallow the addback of depreciation in the processcomputation of analyzing these regulations, which may impactATI, effectively lowering the cap on the amount of deductible business interest. The portion of PSEG’s PSE&G’s and PSEG Power’s financial conditionbusiness interest expense that was disallowed in 2018 and cash flows.

2019 will now be deductible in those respective years.
In March 2020, the federal Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was enacted. We continue to assess the impact of the tax aspects of the CARES Act on our results of operations and cash flow. We expect that a prolonged coronavirus pandemic, the tax provisions of the CARES Act and any future coronavirus-related federal or state legislation could have a material impact on our effective tax rate and cash tax position.
For non-regulated businesses, the Tax Act enacted rules that set a cap on the amount of interest that can be deducted in a given year. Any amount that is disallowed can be carried forward indefinitely. For 2018 and 2019, the tax deductibility of a portion of PSEG’s and PSEG Power’s interest was disallowed but is expected to be realized in future periods. However, certain aspects of the law are unclear. Therefore, we recorded taxes based on our interpretation of the relevant statute. The CARES Act favorably increased the limitation on the amountallows a five-year carryback of interest that can deductedany net operating loss (NOL) generated in 2019a taxable year beginning after December 31, 2017 and 2020. While this will not impact 2019, the increased limitation will allow a portion of the previously disallowed amounts to reduce PSEG’s and PSEG Power’s 2020 taxable income. Amounts recorded under the Tax Act and the CARES Act, such as depreciation and interest disallowance, are subject to change based on several factors, including but not limited to, the IRS and state taxing authorities issuing additional guidance and/or further clarification. Any further guidance or clarification could impact PSEG’s, PSE&G’s and PSEG Power’s financial statements. For additional information, see Item 1. Note 16. Income Taxes.
In July 2018, New Jersey made changes to its income tax laws, including imposing a temporary surtax of 2.5% effectivebefore January 1, 2018 and 2019 and 1.5% in 2020 and 2021, as well as requiring corporate taxpayers to file in a combined reporting group as defined under New Jersey law starting in 2019. Both provisions include an exemption for public utilities. We believe PSE&G meets the definition of a public utility and, therefore, will not be impacted by the temporary surtax or be included in the combined reporting group. There are certain aspects of the law that are not clear. We anticipate New Jersey will be issuing clarifying guidance regarding combined reporting rules. Any further guidance or clarification could impact PSEG’s and PSEG Power’s financial statements.2021.
Future Outlook
Our future success will depend on our ability to continue to maintain strong operational and financial performance in an environment with low gas prices, to capitalize on or otherwise address regulatory and legislative developments that impact our business and to respond to the issues and challenges described below. In order to do this, we mustwill continue to:
•obtain approval of and execute on our utility capital investment program to enhance the resiliency of our infrastructure, maintain the reliability of the service we provide to our customers, and align our sustainability and climate goals with
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New Jersey’s energy policy,
•focus on controlling costs while maintaining safety, reliability and customer satisfaction and complying with applicable standards and requirements,
•deliver on our Human Capital Management strategy to attract, develop and retain a diverse, high-performing workforce,
•successfully manage our energy obligations and re-contract our open supply positions in response to changes in prices and demand,
obtain approval of and execute our utility capital investment program, including our CEF program and other investments that yield contemporaneous and reasonable risk-adjusted returns, while enhancing the resiliency of our infrastructure and maintaining the reliability mindful of the service we providecost and affordability impacts to our electric and gas distribution customers,
•advocate for the continuation of the ZEC programfederal and state programs to properly value New Jersey’s largest zero-carbon generation resource and measures to ensure the implementation by PJM, FERC and state regulators of market design and transmission planning rules that continue to promote fair and efficient electricity markets, including recognition of the cost of emissions,
•engage constructively with our multiple stakeholders, including regulators, government officials, customers, employees, investors, and suppliers and the communities in which we do business,
•finalize our strategic alternatives review for PSEG Power’s non-nuclear generating assets and successfully execute any transactions involving those assets as we transform our business mix into a mostly regulated utility and contracted generating company with a carbon-free nuclear and offshore wind fleet,
•successfully operate the LIPA T&D system and manage LIPA’s fuel supply and generation dispatch obligations.obligations, and
•manage the risks and opportunities in environmental, social and governance (ESG) matters, which is an integral part of our long-term strategy to be a clean energy leader for the benefit of all stakeholders.
In addition to the risks described elsewhere in this Form 10-Q the first quarter 2020 10-Q and in our Form 10-K, for 20202021 and beyond, the key issues and challenges we expect our business to confront include:
•regulatory and political uncertainty, both with regard to future energy policy, design of energy and capacity markets, transmission policy and environmental regulation, as well as with respect to the outcome of any legal, regulatory or other proceedings,
•the continuing impact of the ongoing coronavirus pandemic and the associated economic impact, which could extend beyond the duration of the pandemic,
the continuing impacts of the Tax and CARES Acts and •future changes in federal and state tax laws, including The American Jobs Plan and Made in America Tax Plan, and
•the impact of reductionschanges in demand, and lower natural gas and electricity prices, and increasing environmental compliance costs.expanded efforts to decarbonize several sectors of the economy.
We continually assess a broad range of strategic options to maximize long-term stockholder value.value and address the interests of our multiple stakeholders. In assessing our options, we consider a wide variety of factors, including the performance and prospects of our businesses; the views of employees, investors,

regulators, customers and rating agencies; our existing indebtedness and restrictions it imposes; and tax considerations, among other things. Strategic options available to us include:
the acquisition, construction or disposition of•investments in T&D facilities to enhance reliability, resiliency and modernize the system to meet the growing needs and increasingly higher expectations of customers, and clean energy investments and/or generation projects, including offshore wind opportunities,such as CEF-EE, CEF-EV and CEF-ES,
•the disposition or reorganizationrestructuring of our merchant generation business or portions thereof or other existing businesses or the acquisition or development of new businesses,
the expansion•investments in offshore wind with long-term contracts that provide predictability and a reasonable risk-adjusted return,
•continued operations of our geographic footprint,nuclear generation facilities, to the extent there is sufficient certainty that their operation will render an acceptable risk-adjusted return, and
investments in capital improvements•acquisitions, dispositions and additions, including the installation of environmental upgradesother transactions involving assets or businesses that could provide value to customers and retrofits, improvements to system resiliency, modernizing existing infrastructure and participation in transmission projects through FERC’s “open window” solicitation process.shareholders.
There can be no assurance, however, that we will successfully develop and execute any of the strategic options noted above, or any additional options we may consider in the future. The execution of any such strategic plan may not have the expected benefits or may have unexpected adverse consequences.



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RESULTS OF OPERATIONS
PSEG
Our results of operations are primarily comprised of the results of operations of our principal operating subsidiaries, PSE&G and PSEG Power, excluding charges related to intercompany transactions, which are eliminated in consolidation. For additional information on intercompany transactions, see Item 1. Note 20. Related-Party Transactions.
                  
  Three Months Ended 
Increase/
(Decrease)
 Six Months Ended 
Increase/
(Decrease)
 
  June 30,  June 30,  
  2020 2019 2020 vs. 2019 2020 2019 2020 vs. 2019 
  Millions Millions % Millions Millions % 
 Operating Revenues$2,050
 $2,316
 $(266) (11) $4,831
 $5,296
 $(465) (9) 
 Energy Costs595
 704
 (109) (15) 1,501
 1,828
 (327) (18) 
 Operation and Maintenance733
 750
 (17) (2) 1,487
 1,506
 (19) (1) 
 Depreciation and Amortization315
 307
 8
 3
 639
 621
 18
 3
 
 Loss on Asset Dispositions—
 395
 (395) N/A
 —
 395
 (395) N/A
 
 Income from Equity Method Investments3
 5
 (2) (40) 6
 7
 (1) (14) 
 Net Gains (Losses) on Trust Investments201
 39
 162
 N/A
 (20) 167
 (187) N/A
 
 Other Income (Deductions)38
 33
 5
 15
 42
 66
 (24) (36) 
 Net Non-Operating Pension and OPEB Credits (Costs)62
 33
 29
 88
 124
 66
 58
 88
 
 Interest Expense151
 137
 14
 10
 304
 270
 34
 13
 
 Income Tax (Benefit) Expense109
 (20) 129
 N/A
 153
 129
 24
 19
 
                  
Three Months EndedIncrease/
(Decrease)
March 31,
202120202021 vs. 2020
MillionsMillions%
Operating Revenues$2,889 $2,781 $108 4 
Energy Costs1,029 906 123 14 
Operation and Maintenance778 754 24 3 
Depreciation and Amortization341 324 17 5 
Income from Equity Method Investments3 3 — — 
Net Gains (Losses) on Trust Investments60 (221)281 N/A
Other Income (Deductions)25 4 21 N/A
Net Non-Operating Pension and OPEB Credits (Costs)82 62 20 32 
Interest Expense146 153 (7)(5)
Income Tax (Benefit) Expense117 44 73 N/A
The following discussions for PSE&G and PSEG Power provide a detailed explanation of their respective variances.

PSE&G
                  
  Three Months Ended 
Increase/
(Decrease)
 Six Months Ended 
Increase/
(Decrease)
 
  June 30,  June 30,  
  2020 2019 2020 vs. 2019 2020 2019 2020 vs. 2019 
  Millions Millions % Millions Millions % 
 Operating Revenues$1,456
 $1,382
 $74
 5
 $3,339
 $3,414
 $(75) (2) 
 Energy Costs510
 529
 (19) (4) 1,218
 1,476
 (258) (17) 
 Operation and Maintenance380
 369
 11
 3
 766
 777
 (11) (1) 
 Depreciation and Amortization217
 202
 15
 7
 439
 414
 25
 6
 
 Net Gains (Losses) on Trust Investments1
 —
 1
 N/A
 1
 1
 —
 —
 
 Other Income (Deductions)26
 19
 7
 37
 53
 38
 15
 39
 
 Net Non-Operating Pension and OPEB Credits (Costs)52
 29
 23
 79
 103
 59
 44
 75
 
 Interest Expense98
 89
 9
 10
 194
 176
 18
 10
 
 Income Tax Expense (Benefit)47
 14
 33
 N/A
 156
 39
 117
 N/A
 
                  
Three Months EndedIncrease/
(Decrease)
March 31,
202120202021 vs. 2020
MillionsMillions%
Operating Revenues$2,073 $1,883 $190 10 
Energy Costs849 708 141 20 
Operation and Maintenance424 386 38 10 
Depreciation and Amortization241 222 19 9 
Net Gains (Losses) on Trust Investments1 — 1 N/A
Other Income (Deductions)28 27 1 4 
Net Non-Operating Pension and OPEB Credits (Costs)66 51 15 29 
Interest Expense98 96 2 2 
Income Tax Expense (Benefit)79 109 (30)(28)
Three Months Ended June 30, 2020March 31, 2021 as Compared to 20192020
Operating Revenues increased $74$190 million due to changes in delivery, commodity, clause and other operating revenues.
Delivery Revenues increased $69$23 million due primarily to
•Transmission revenues were $66$26 million higher due to increased 2020an increase in revenue requirements attributable to higher rate base investment and the prior year flowback of certain excess deferred taxes that ended at year-end 2019.investment.
Gas•Electric distribution revenues increased by $11$12 million due primarily to a $26$10 million increase attributable to higher sales volumes and a $2 million increase in Green Program Recovery Charge (GPRC) collections.
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•Gas distribution revenues increased $9 million due primarily to a $57 million increase due to higher sales volumes and a $5$3 million increase from the GSMP I and GSMP II,in GPRC revenues. These increases were partially offset by a $20$51 million decrease in Weather Normalization Charges (WNCs).accrued WNC revenues in the first quarter of 2020.
•Electric distributionand Gas revenues increaseddecreased by $3$24 million due to a $7 millionnet increase due to higher volumes, partially offset by a $4 million decrease in the collectionflowback to customers of Green Program Recovery Charges (GPRC).
•
Gas and Electric revenues decreased by $11 million due to an increase in the flowback to customers of excess deferred tax liabilities and tax repair-related accumulated deferred income tax benefits resulting from rate reductions,excess deferred tax liabilities and tax repair-related accumulated deferred income tax benefits resulting from rate reductions, which is offset in Income Tax Expense.
Commodity Revenues decreased $34increased $144 million as a result of lower Electric revenues, partially offset by higher Gas revenues and higher Electric revenues. The changes in Commodity revenues for both electricgas and gaselectric are entirely offset by the changes in Energy Costs. PSE&G earns no margin on the provision of BGS or basic gas supply service (BGSS) and BGS to retail customers.
Electric•Gas commodity revenues decreased $60increased $102 million due primarily to higher BGSS sales volumes of $57 million and higher BGSS prices of $45 million.
•Electric commodity revenues increased $42 million due primarily to a $67 million increase in sales volumes, partially offset by $25 million in lower BGS prices, partially offset by $5 million in higher BGS sales volumes.
•
Gas commodity revenues increased $26 million due primarily to $42 million higher BGSS sales volumes, partially offset by a $15 million decrease in prices.
Clause Revenues increased $23 million due primarily to higher SBC revenues of $22 million and a $15$1 million reductionnet increase in Tax Adjustment Credit (TAC) deferrals and higher SBC revenues of $9 million.GPRC deferrals. The changes in theSBC revenues and TAC deferral and SBCGPRC deferral amounts are entirely offset by changes in the amortization of Regulatory Assets and Regulatory Liabilities and related costs in O&M, D&A, Interest and Income Tax Expenses. PSE&G does not earn margin on SBC revenues or TAC deferrals or SBC revenues.and GPRC deferrals.
Other Operating Revenues increasedwere flat. An $11 million decrease in Solar Renewable Energy Certificate (SREC) revenues was entirely offset by $16 million due primarily to an $11$8 million increase in solar renewable energy credit (SREC)Transition Renewable Energy Certificate (TREC) revenues and $4a $3 million increase in higher ZEC revenues billed since mid-April 2019. See Item 1. Note 11. Commitments and Contingent Liabilities.appliance service revenues. The changes in theseSREC and TREC components of revenues are entirely offset by changes to Energy Costs.

Table of Contents


Operating Expenses
Energy Costs decreased $19increased $141 million. This is entirely offset by changes in Commodity Revenues and Other Operating Revenues.
Operation and Maintenance increased $11$38 million due primarily to $10 million in COVID-19 related costs, an $8 million increase in gas bad debt expense and a net $3$21 million increase in clause and renewable-related expenditures. These increases were partially offset byexpenses, a $6$7 million decreaseincrease in appliance service costs, a $4 million increase in transmission expenditures, a $3 million increase in grounds maintenance for snow removal, a $2 million decreaseincrease in distribution corrective and preventative expendituresmaintenance and a $2$1 million decreaseincrease in transmission-relatedvegetation management expenditures.
Depreciation and Amortization increased $15$19 million due primarily to an $11a $13 million increase related to additional plant in service and a $3$5 million increase in the amortization of Regulatory Assets.
Other Income (Deductions) increased $7 million due primarily to an increase in the allowance for funds used during construction (AFUDC).
Net Non-Operating Pension and OPEB Credits (Costs) increased $23 $15 million due primarily to a $12 million decrease in interest cost and a $7 million increase in the expected return on plan assets, partially offset by a $9$2 million decrease in interest cost and a $3 million decreaseincrease in the amortization of the net actuarial loss partially offset by a $1 million decrease in the amortization of prior service credit.
Interest Expense increased $9 million due primarily to a $6 million increase from debt issuances in January and May 2020 and a $4 million increase from net debt issuances in May and August 2019.
Income Tax Expense increased $33 million due primarily to higher pre-tax income and an increase in bad debt flow-through.
Six Months Ended June 30, 2020 as Compared to 2019
Operating Revenues decreased $75 million due to changes in delivery, commodity, clause and other operating revenues.
Delivery Revenues increased $159 million due primarily to
Transmission revenues were $139 million higher due to increased 2020 revenue requirements attributable to higher rate base investment and the prior year flowback of certain excess deferred taxes that ended at year-end 2019.
Gas distribution revenues increased $26 million due primarily to a $36 million increase in WNCs and an $18 million increase from the GSMP I and GSMP II. These increases were partially offset by a $25 million reduction due to lower volumes and a $3 million decrease in GPRC revenues.
Electric distribution revenues decreased $4 million due primarily to a $7 million decrease attributable to lower sales volumes, partially offset by a $3 million increase in GPRC collections.
•
Electric and Gas revenues further decreased by $2 million due to a net increase in the flowback to customers of excess deferred tax liabilities and tax repair-related accumulated deferred income tax benefits resulting from rate reductions,which is offset in Income Tax Expense.
Commodity Revenues decreased $326 million as a result of lower Gas and Electric revenues. The changes in Commodity revenues for both gas and electric are entirely offset by the changes in Energy Costs. PSE&G earns no margin on the provision of BGSS and BGS to retail customers.
Electric commodity revenues decreased $190 million due primarily to $156 million in lower BGS prices and $38 million in lower BGS sales volumes.
Gas commodity revenues decreased $136 million due primarily to lower BGSS prices of $83 million and lower BGSS sales volumes of $53 million.
Clause Revenues increased $25 million due primarily to a $25 million increase in TAC deferrals and higher SBC revenues of $6 million. These increases were partially offset by a $7 million decrease in Margin Adjustment Clause (MAC) revenues. The changes in TAC deferral amounts, SBC and MAC revenues are entirely offset by changes in the amortization of Regulatory Assets and Regulatory Liabilities and related costs in O&M, D&A, Interest and Income Tax Expenses. PSE&G does not earn margin on TAC deferrals, SBC and MAC revenues.
Other Operating Revenues increased by $67 million due primarily to $42 million in ZEC revenues billed since mid-April 2019 and a $25 million increase in SREC revenues. See Item 1. Note 11. Commitments and Contingent Liabilities. The changes in these components of revenues are entirely offset by changes to Energy Costs.
Operating Expenses
Energy Costs decreased $258 million. This is entirely offset by changes in Commodity Revenues and Other Operating Revenues.

Operation and Maintenance decreased $11 million due primarily to a net $10 million decrease in clause and renewable-related expenditures, an $8 million decrease in appliance service costs, a $5 million decrease in distribution corrective and preventative maintenance expenditures, a $4 million decrease in injuries and damages, a $4 million decrease in transmission-related expenditures and a $3 million reduction in other operating expenses. These decreases were partially offset by $12 million of COVID-19 related costs and an $11 million increase in gas bad debt expense.
Depreciation and Amortization increased $25 million due primarily to a $22 million increase related to additional plant in service and a $2 million increase in the amortization of Regulatory Assets.
Other Income (Deductions) increased $15 million due primarily to an increase in AFUDC.
Net Non-Operating Pension and OPEB Credits (Costs) increased $44 milliondue primarilyto a $23 million increase in the expected return on plan assets, a $17 million decrease in interest cost and a $7 million decrease in the amortization of the net actuarial loss, partially offset by a $3 million decrease in the amortization of prior service credit.cost.
Interest Expense increased $18$2 million due primarily to a $12$1 million increase from net debt issuances in May and August 20192021 and a $10$3 million increase from net debt issuances in January and May 2020. These increases were partially offset by a decrease of $3$2 million due to a reduction in short-term borrowings.borrowings and a decrease in the allowance for funds used during construction.
Income Tax Expense increased $117decreased $30 million due primarily to higher pre-tax income and the reductionan increase in the 20202021 flowback of PSE&G’s excess deferred income tax liabilities as PSE&G refunded all FERC-approved, transmission-related excess deferred income taxes that are not subject to the normalization rulesand CEF program investments, partially offset by an increase in 2019.bad debt flow-through.

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PSEG Power
                  
  Three Months Ended 
Increase/
(Decrease)
 Six Months Ended 
Increase/
(Decrease)
 
  June 30,  June 30,  
  2020 2019
 2020 vs. 2019 2020 2019 2020 vs. 2019 
  Millions Millions % Millions Millions % 
 Operating Revenues$683
 $1,083
 $(400) (37) $1,903
 $2,499
 $(596) (24) 
 Energy Costs323
 411
 (88) (21) 999
 1,197
 (198) (17) 
 Operation and Maintenance225
 268
 (43) (16) 466
 503
 (37) (7) 
 Depreciation and Amortization91
 95
 (4) (4) 185
 189
 (4) (2) 
 Loss on Asset Dispositions—
 395
 (395) N/A
 —
 395
 (395) N/A
 
 Income from Equity Method Investments3
 5
 (2) (40) 6
 7
 (1) (14) 
 Net Gains (Losses) on Trust Investments196
 38
 158
 N/A
 (24) 164
 (188) N/A
 
 Other Income (Deductions)12
 15
 (3) (20) (11) 28
 (39) N/A
 
 Net Non-Operating Pension and OPEB Credits (Costs)9
 3
 6
 N/A
 17
 6
 11
 N/A
 
 Interest Expense30
 26
 4
 15
 64
 51
 13
 25
 
 Income Tax Expense (Benefit)64
 (11) 75
 N/A
 (6) 113
 (119) N/A
 
                  
Three Months EndedIncrease/
(Decrease)
March 31,
202120202021 vs. 2020
MillionsMillions%
Operating Revenues$1,167 $1,220 $(53)(4)
Energy Costs682 676 6 1 
Operation and Maintenance222 241 (19)(8)
Depreciation and Amortization92 94 (2)(2)
Income from Equity Method Investments3 3 — — 
Net Gains (Losses) on Trust Investments58 (220)278 N/A
Other Income (Deductions)(4)(23)19 (83)
Net Non-Operating Pension and OPEB Credits (Costs)12 8 4 50 
Interest Expense27 34 (7)(21)
Income Tax Expense (Benefit)52 (70)122 N/A
Three Months Ended June 30, 2020March 31, 2021 as Compared to 20192020
Operating Revenues decreased $400$53 million due primarily to changes in generation and gas supply revenues.
Generation Revenues decreased $435$128 million due primarily to
•a net decrease of $403$202 million due to MTM losses in 20202021 as compared to MTM gains in 2019.2020. Of this amount, there was a $310$167 million decrease due to changes in forward prices this yearin 2021 as compared to last year2020 coupled with a $93$35 million decrease due to more losses on positions reclassified to realized upon settlement in 2021 compared to gains in 2020, and
•a net decrease of $30$22 million in electricity sold primarily due to the transfer of responsibility for firm transmission services under the BGS contracts from the BGS suppliers to the Electric Distribution Companies (EDCs),
•partially offset by a net increase of $81 million due primarily to higher average realized prices in the PJM, NE and NY regions coupled with higher volumes of electricity sold in the NE region. This was partially offset by lower volumes of electricity sold in the PJM region, and
•a net increase of $10 million in capacity revenues due primarily to decreasesincreases in auction prices in the PJM region, and
a decrease of $16 million in electricity sold under our BGS contracts, primarily due to lower volumes coupled with lower prices,

partially offset by an increase of $16 milliondecreases in ZEC revenue due to increased generation atcapacity prices and higher load obligations in the Salem nuclear generating station.NE region.
Gas Supply Revenues increased $35$75 million due primarily to
•a net increase of $24$63 million in sales under the BGSS contract of which $28 million wasprimarily due to an increase inhigher sales volumes, partially offset by $4 million due to lower average sales prices, and
•a net increase of $12 million related to sales to third parties, of which $27$23 million was due to higher volumes sold,average sales prices, partially offset by $15a decrease of $11 million due to lower average sales prices.volumes sold.
Operating Expenses
Energy Costs represent the cost of generation, which includes fuel costs for generation as well as purchased energy in the market, and gas purchases to meet PSEG Power’s obligation under its BGSS contract with PSE&G. Energy Costs decreased $88increased $6 million due to
Generation costs decreased $113 million due primarily to
a net decrease of $86 million due to MTM gains in 2020 as compared to MTM losses in 2019. Of this amount, there was a $54 million decrease due to changes in forward prices this year as compared to last year coupled with a $36 million decrease due to more gains on positions reclassified to realized upon settlement,
a net decrease of $19 million in fuel costs due to lower usage of coal in the PJM region primarily due to the sale of our ownership interests in Keystone and Conemaugh generation plants coupled with lower volumes of gas in the PJM region. This was partially offset by utilization of higher volumes of gas in the New England (NE) region due to the commencement of commercial operations of Bridgeport Harbor Station Unit 5 (BH5) in June 2019, and
a decrease of $9 million due to a favorable lower of cost or market (LOCOM) adjustment on oil inventory due to the recovery in oil prices.
Gas costs increased $25$48 million due mainly to
•a net increase of $13$38 million in costs related to sales under the BGSS contract, of which $58 million was due to higher send out volumes, partially offset by a decrease of $20 million due to the lower average cost of gas, and
•a net increase of $8 million related to sales to third parties, of which $26 million was due to higher volumes sold, partially offset by $13 million due to a decrease in the average cost of gas, and
a net increase of $12 million related to sales under the BGSS contract, of which $27$18 million was due to an increase in sendout volumes, partially offset by $15 million due to a decrease in the average cost of gas.
Operation and Maintenance decreased $43gas, partially offset by a decrease of $10 million due primarily to a $34 million net decrease at our fossil plants due to the sale of our ownership interests in the Keystone and Conemaugh generation plants and lower planned outage costs in 2020. In addition, there was an $8 million net decrease due to lower outage costs at our nuclear plants.
Depreciation and Amortization decreased$4 million due primarily to a $3 million net decrease at our nuclear plants due to the Peach Bottom License Renewal that was approved by the NRC in March 2020, partially offset by an increased asset base. This decrease was coupled with a $2 million net decrease at our fossil plants, primarily due to the sale of our ownership interests in the Keystone and Conemaugh generation plants in 2019, partially offset by an increase due to BH5 being placed into service in June 2019.
Loss on Asset Dispositions of $395 million in 2019 was due to an asset impairment related to the sale of PSEG Power’s interests in the Keystone and Conemaugh fossil generation plants (see Item 1. Note 4. Early Plant Retirements/Asset Dispositions).
Net Gains (Losses) on Trust Investments increased $158 million due primarily to a $149 million increase resulting from net unrealized gains on equity investments in the NDT Fund and a $7 million increase in net realized gains on NDT Fund investments.
Net Non-Operating Pension and OPEB Credits (Costs) increased $6 million due to a $3 million decrease in interest cost, a $2 million increase in the expected return on plan assets, and a $1 million decrease in the amortization of the net actuarial loss.
Interest Expense increased $4 million due primarily to lower capitalized interest as a result of BH5 being place into service in 2019, partially offset by an April 2020 debt maturity.
Income Tax Expense increased $75 million due primarily to higher pre-tax income, including higher pre-tax income from the NDT qualified fund, which is subject to an additional trust tax, partially offset by the tax benefit from changes in uncertain tax positions as a result of the settlement of the 2011-2016 federal income tax audits.    

Six Months Ended June 30, 2020 as Compared to 2019
Operating Revenues decreased $596 million due primarily to changes in generation and gas supply revenues.volumes sold.
Generation Revenuescosts decreased $500$42 million due primarily to
•a net decrease of $336$48 million due to lowernet MTM gains in 2020 as2021 compared to 2019.MTM losses in 2020. Of this amount, there was a $218$32 million decrease due to changes in forward prices this yearin 2021 as compared to last year2020 coupled with a $118$16 million
75


decrease due to lossesgains on positions reclassified to realized upon settlement in 20202021 as compared to gainslosses in 2019,2020,
•a net decrease of $113$28 million due primarily to lower average realized prices in PJM, NE and New York (NY) regions coupled with lower volumes sold in the PJM regiontransmission costs primarily due to a $22 million impact from the saletransfer of our ownership interests in Keystone and Conemaugh generation plants. This was partially offset by higher volumes of electricity sold in the NE region, primarily dueresponsibility for firm transmission services under BGS contracts from BGS suppliers to the commencement of commercial operations of BH5EDCs, coupled with a $6 million decrease from changes in June 2019,BGS and other load, and
a net decrease of $65 million in capacity revenues due primarily to decreases in auction prices in the PJM region, partially offset by the commencement of commercial operations of BH5 in June 2019 in the NE region, and
•a decrease of $48 million in electricity sold under our BGS contracts primarily due to lower volumes coupled with lower prices,
partially offset by an increase of $67$20 million due to ZECs revenues that started in mid-April 2019.
Gas Supply Revenues decreased $96 million due primarily to
a decreaselower of $101 million in sales under the BGSS contract, of which $61 million was due to a decrease in sales volumes and $40 million was due to lower average sales prices,
partially offset by a net increase of $9 million related to sales to third parties, of which $57 million was due to higher volumes sold partially offset by $48 million due to lower average sales prices.
Operating Expenses
Energy Costs represent the cost of generation, which includes fuel costs for generation as well as purchased energyor market adjustment recorded in the market, and gas purchases to meet PSEG Power’s obligation under its BGSS contract with PSE&G. Energy Costs decreased $198 million due to
Generation costs decreased $123 million due primarily to
a net decreasefirst quarter of $106 million in fuel costs reflecting lower gas prices in the PJM and NY regions coupled with the utilization of lower volumes of coal in the PJM region primarily due to the sale of our ownership interests in the Keystone and Conemaugh generation plants, and lower volumes of gas used in the PJM region. This was partially offset by utilization of higher volumes of gas in the NE region at higher prices due to the commencement of commercial operations at BH5 in June 2019, and
a net decrease of $25 million due to less MTM losses in 2020 as compared to 2019 resulting from changes in forward prices this year as compared to last year,
partially offset by an $11 million increase due to a net LOCOM adjustment on oil inventory caused by a decrease in oil demand and pricing, earlier in 2020.
Gas costs• decreased $75 million due mainly to
a decrease of $86 million related to sales under the BGSS contract, of which $49 million was due to a decrease in sendout volumes and $37 million to a decrease in the average cost of gas,
partially offset by a net increase of $11$46 million related to sales to third parties,in fuel costs reflecting higher gas prices in the PJM, NY, and NE regions coupled with the utilization of which $53 million was due to higher volumes sold,of coal in the NE region. This was partially offset by $42 million due to a decreaseutilization of lower volumes of gas in the average cost of gas.PJM region.
Operation and Maintenance decreased $37$19 million due primarily to a net decrease at our fossil plants, due to the sale of our ownership interests in the Keystone and Conemaugh generation plants in 2019, coupled with lowerhigher planned outage costs in 2020.
Depreciation and Amortization decreased$4 million due primarily to a $3 million net decrease at our nuclear plants due to the Peach Bottom License Renewal that was approved by the NRC in March 2020 partially offset by an increased asset base. This decrease was coupled with a $2 million net decrease at our fossil plants, primarily due to the sale of our ownership interests in the Keystone and Conemaugh generation plants in 2019, partially offset by an increase due to BH5 being placed into service in June 2019.

Loss on Asset Dispositions of $395 million in 2019 was due to an asset impairment related to the sale of PSEG Power’s interests in the Keystone and Conemaugh fossil generation plants (see Item 1. Note 4. Early Plant Retirements/Asset Dispositions).nuclear plants.
Net Gains (Losses) on Trust Investments decreased $188increased $278 million due primarily to a $171$214 million decrease resulting fromin net unrealized losses in 2020 as compared to net unrealized gains in 2019 on equity investments in the NDT Fund, and a $15$60 million decreaseincrease in net realized gains on NDT Fund investments.
Other Income (Deductions) decreased $39increased $19 million primarily due to lower purchases of net operating losses (NOLs)NOL tax benefits in 20202021 under the New Jersey’sJersey Technology Tax Benefit Transfer Program.
Net Non-Operating Pension and OPEB Credits (Costs)increased $11$4 million due to a $5$3 million decrease in interest cost and a $1 million increase in the expected return on plan assets, a $5 million decrease in interest cost and a $2 million decrease in the amortization of the net actuarial loss, partially offset by a $1 million decrease in the amortization of prior service credit.assets.
Interest Expense increased $13decreased $7 million due primarily to lower capitalized interest as a result of BH5 being place into servicedebt maturities in 2019, partially offset by an April 2020 debt maturity.2020.
Income Tax Expense decreased $119increased $122 million due primarily to lowerhigher pre-tax income, including lower pre-tax income froman additional trust tax on the NDT qualified fund which is subjectnet gains, and the purchase of less New Jersey NOL tax benefits in 2021 as compared to an additional trust tax, the benefit from the 2019 NOLs purchased2020 under the New Jersey Technology Tax Benefit Transfer Program in 2020, and the tax benefit from changes in uncertain tax positions as a result of the settlement of the 2011-2016 federal income tax audits.    Program.
LIQUIDITY AND CAPITAL RESOURCES
The following discussion of our liquidity and capital resources is on a consolidated basis, noting the uses and contributions, where material, of our two direct major operating subsidiaries.
Operating Cash Flows
We continue to expect our operating cash flows combined with cash on hand and financing activities to be sufficient to fund planned capital expenditures and provide opportunities for shareholder dividends.
For the sixthree months ended June 30, 2020,March 31, 2021, our operating cash flow decreased$160 $126 million as compared to the same period in 2019.2020. The net decrease was primarily due to the net changes from our subsidiaries, as discussed below, offset by higher tax refunds in 2021 at the parent company and lower nettax refunds in 2021 as compared to tax payments in 2020 at the parent company and Energy Holdings.
Given the current economic challenges, PSE&G has informed both our residential customers and state regulators that all non-safety related service disconnections for non-payment will be temporarily suspended. In addition, the current economic conditions have adversely impacted residential and C&I customer payment patterns. WhileDuring the negative impact on customer payment patterns, includingmoratorium, PSE&G has experienced a significant decrease in cash inflow and higher Accounts Receivable aging and an associated increasingincrease in bad debt expense, did not have a material impact on our cash flows for the six months ended June 30, 2020,which we expect a prolonged adverse change to customer payment patterns could materially and adversely impact our cash flows from operationswill extend beyond the duration of the coronavirus pandemic. While the impact on our results of operations, financial condition and cash flows for the three months ended March 31, 2021 was not material, a prolonged coronavirus pandemic and the associated economic impacts, which could extend beyond the duration of the pandemic, could materially impact cash from operations, Accounts Receivable and bad debt expense.
PSE&G
PSE&G’s operating cash flow increased $161decreased $117 million from $838$635 million to $999$518 million for the sixthree months ended June 30, 2020,March 31, 2021, as compared to the same period in 2019,2020, due primarily to higher earningsaccounts receivable reflecting lower collections due to the economic impacts of the pandemic and the moratorium on collections, increases in 2020,electric energy and $136 millionvendor payables, and higher tax payments in decreased payments dueto lower BGS payments from decreased sales.2021. These increasesdecreases were partially offset by tax paymentsa net decrease in 2020 as compared to tax refunds in 2019 and a decrease of $154 million from increased regulatory deferrals including BGS due to lower sales, a Weather Normalization deferral resulting from a warmer than normal winter, and the Tax Adjustment Credit.deferrals.
PSEG Power
PSEG Power’s operating cash flow decreased $524$9 million from $1,150$484 million to $626$475 million for the sixthree months ended June 30, 2020,March 31, 2021, as compared to the same period in 2019,2020, due to a $360$99 million reduction related to counterparty cash collateral posting requirements, lowerand tax payments in 2021 as compared to tax refunds in 2020, partially offset by higher earnings and a $63$41 million decrease from net collections of counterparty receivables, a $20 milliondecrease increase in the usage of fuels, materials and supplies, and tax payments in 2020 as compared to tax refunds in 2019.supplies.
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Short-Term Liquidity
PSEG meets its short-term liquidity requirements, as well as those of PSEG Power, primarily through the issuance of commercial paper and, from time to time, short-term loans. PSE&G maintains its own separate commercial paper program to meet its short-term liquidity requirements. Each commercial paper program is fully back-stopped by its own separate credit facilities.

We continually monitor our liquidity and seek to add capacity as needed to meet our liquidity requirements. Each of our credit facilities is restricted as to availability and use to the specific companies as listed below; however, if necessary, the PSEG facilities can also be used to support our subsidiaries’ liquidity needs.
In March 2020, PSEG entered into a $300 million, 364-day term loan agreement andwhich was prepaid in April 2020 itJanuary 2021. In March 2021, PSEG entered into twoa $500 million, 364-day variable rate term loan agreements for $200 million and $300 million. Theseagreement. This term loans provide an additional source of liquidity for our operations as we continue to monitor the impact of the ongoing coronavirus pandemic on the volatility and availability of the capital and commercial paper markets. These term loans areloan is not included in the credit facility amounts presented in the following table.
Our total credit facilities and available liquidity as of June 30, 2020March 31, 2021 were as follows:
         
 Company/Facility As of June 30, 2020 
 
Total
Facility
 Usage 
Available
Liquidity
 
   Millions 
 PSEG $1,500
 $408
 $1,092
 
 PSE&G 600
 17
 583
 
 PSEG Power 2,100
 136
 1,964
 
 Total $4,200
 $561
 $3,639
 
         
Company/FacilityAs of March 31, 2021
Total
Facility		UsageAvailable
Liquidity
Millions
PSEG$1,500 $167 $1,333 
PSE&G600 18 582 
PSEG Power2,100 152 1,948 
Total$4,200 $337 $3,863 
As of June 30, 2020,March 31, 2021, our credit facility capacity was in excess of our projected maximum liquidity requirements over our 12 month planning horizon, as we continueincluding access to monitor the impact and volatility of the ongoing coronavirus pandemic on cash flows and capital market conditions.to meet redemptions. Our maximum liquidity requirements are based on stress scenarios that incorporate changes in commodity prices and thepotential impact of PSEG Power losing its investment grade credit rating from S&P or Moody’s, which would represent a three level downgrade from its current Moody’s rating and a two level downgrade from its current S&P or Moody’s ratings.rating. In the event of a deterioration of PSEG Power’s credit rating, certain of PSEG Power’s agreements allow the counterparty to demand further performance assurance. The potential additional collateral that we would be required to post under these agreements if PSEG Power were to lose its investment grade credit rating was approximately $845$818 million and $974$840 million as of June 30, 2020March 31, 2021 and December 31, 2019,2020, respectively.
For additional information, see Item 1. Note 12. Debt and Credit Facilities.
Long-Term Debt Financing
During the next twelve months,
•PSEG has a $700$300 million floating rate term loanof 2.00% Senior Notes maturing in November 2020,2021,
•
•PSE&G has$250 million of 3.50% Medium-Term Notes (MTN), Series G, maturing in August 2020, $9 million of 7.04% MTN, Series A, maturing in November 2020, $300 million of 1.90% MTN, Series K, maturing in March 2021 and $134 million of 9.25% Mortgage Bonds Series CC maturing in June 2021, and
•PSEG Power has $700 million of 3.00% Senior Notes maturing in June 2021 and $250 million of 4.15% Senior Notes maturing in September 2021. PSEG Power has a letter of credit backing $44 million of Pennsylvania Economic Development Financing Authority Variable Rate Demand Bonds which expires in March 2022.
•
PSEG Power has a $700 million3.00% Senior Note maturing in June 2021.
PSEG, PSEG Power, Energy Holdings, PSEG LI and Services participate in a corporate money pool, an aggregation of daily cash balances designed to efficiently manage their respective short-term liquidity needs, which are accounted for as intercompany loans. In April 2020, PSEG utilized external sources ofServco does not participate in the corporate money pool. Servco’s short-term liquidity including the commercial paper marketsneeds are met through an account funded and term loans, to repay a loan to PSEG Power through the money pool and PSEG Power used the proceeds from this loan repayment to redeem its $406 million of 5.13% Senior Notes at maturity.owned by LIPA.
For additional information see Item 1. Note 12. Debt and Credit Facilities.
Guarantor Financial Information
PSEG Power’s Senior Notes are fully and unconditionally guaranteed on a joint and several basis by its subsidiaries, PSEG Fossil LLC, PSEG Nuclear LLC and PSEG Energy Resources & Trade LLC. Each guarantor subsidiary is a wholly owned consolidated subsidiary of PSEG Power.
Summarized financial information is being presented, on a combined basis, only for PSEG Power (parent company) and the guarantors of PSEG Power’s Senior Notes, excluding investments in, and earnings (losses) from, subsidiaries that are not guarantors. All transactions between PSEG Power (parent company) and the guarantor subsidiaries are eliminated in the
77


combined summarized financial information. The required disclosures for the year-to-date interim period and the most recent

fiscal year have been moved outside the Notes to Condensed Consolidated Financial Statements and are provided in the following tables.
Three Months EndedYear Ended
March 31, 2021December 31, 2020
Millions
Operating Revenues (A)$1,151 $3,564 
Operating Income$171 $598 
Net Income$162 $597 
      
  Six Months Ended Year Ended 
  June 30, 2020 December 31, 2019 
  Millions 
 Operating Revenues (A)$1,867
 $4,315
 
 Operating Income$250
 $451
 
 Net Income$191
 $484
 
      
(A)Operating Revenues include sales to affiliates of $710 million and $1,463 million, respectively for the six months ended June 30, 2020 and year ended December 31, 2019, respectively.
(A)Operating Revenues include sales to affiliates of $498 million and $1,218 million, respectively for the three months ended March 31, 2021 and year ended December 31, 2020, respectively.
       
   As of As of 
   June 30, 2020December 31, 2019 
   Millions 
 Current Receivables from Subsidiaries and Affiliates $2,274
 $2,456
 
 Total Current Assets $3,289
 $3,559
 
 Noncurrent Receivables from Affiliates $28
 $17
 
 Total Noncurrent Assets $7,056
 $7,025
 
       
 Current Payables to Subsidiaries and Affiliates $249
 $218
 
 Total Current Liabilities $1,373
 $1,155
 
 Noncurrent Payables to Affiliates $53
 $115
 
 Total Noncurrent Liabilities $4,274
 $4,934
 
       
As ofAs of
March 31, 2021December 31, 2020
Millions
Current Receivables from Subsidiaries and Affiliates$2,525 $2,350 
Total Current Assets$3,397 $3,365 
Noncurrent Receivables from Affiliates$17 $17 
Total Noncurrent Assets$7,178 $7,228 
Current Payables to Subsidiaries and Affiliates$286 $258 
Total Current Liabilities$1,800 $1,734 
Noncurrent Payables to Affiliates$57 $57 
Total Noncurrent Liabilities$3,974 $4,027 
Pension and NDT Fund Obligations
IRS minimum funding requirements for pension plans are determined based on the fundfund’s assets and liabilities at the end of a calendar year for the subsequent calendar year. As a result, the market downturn associated with the ongoing coronavirus pandemic is not expected to impact our pension contributions in 2020. In the event of a prolonged economic downturn associated with the ongoing coronavirus pandemic, our contributions to the pension plans may increase in future periods to meet IRS minimum funding requirements. PSEG had accumulated funding credits totaling approximately $600 million through 2019,2020, which represent historical contributions in excess of IRS minimum funding requirements, and these credits can be applied to offset any future cash contribution obligations.
In addition, the NRC requires a biennial filing of the NDT fund balances against the decommissioning liability estimate. Any funding shortfalls are required to be cured prior to the next NRC reporting period. The market downturn associated with the ongoing coronavirus pandemic is not currently expected to result in any supplemental required funding of the NDT Fund. To the extent of a prolonged economic downturn associated with the ongoing coronavirus pandemic, our funding requirements may increase in future periods to meet NRC minimum funding requirements.
Common Stock Dividends
On July 21, 2020,April 20, 2021, our Board of Directors declared a $0.49$0.51 dividend per share of common stock for the thirdsecond quarter of 2020.2021. This reflects an indicative annual dividend rate of $1.96$2.04 per share. We expect to continue to pay cash dividends on our common stock; however, the declaration and payment of future dividends to holders of our common stock will be at the discretion of the Board of Directors and will depend upon many factors, including our financial condition, earnings, capital requirements of our businesses, alternate investment opportunities, legal requirements, regulatory constraints, industry practice the impact of the ongoing coronavirus pandemic on our business and the capital and credit markets and other factors that the Board of Directors deems relevant. For additional information related to cash dividends on our common stock, see Item 1. Note 18. Earnings Per Share (EPS) and Dividends.
Credit Ratings
If the rating agencies lower or withdraw our credit ratings, such revisions may adversely affect the market price of our securities and serve to materially increase our cost of capital and limit access to capital. Credit Ratings shown are for securities that we typically issue. Outlooks are shown for Issuer Credit Ratings (Moody’s) and Corporate Credit Ratings (S&P) and can

be Stable, Negative, or Positive. There is no assurance that the ratings will continue for any given period of time or that they will not be revised by the rating agencies, if in their
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respective judgments, circumstances warrant. Each rating given by an agency should be evaluated independently of the other agencies’ ratings. The ratings should not be construed as an indication to buy, hold or sell any security.
Moody’s (A)S&P (B)
PSEGMoody’s (A)S&P (B)
PSEG
OutlookStableStable
Senior NotesBaa1BBB
Commercial PaperP2A2
PSE&G
OutlookStableStable
Mortgage BondsAa3A
Commercial PaperP1A2
PSEG Power
OutlookStableStable
Senior NotesBaa1BBB+
(A)Moody’s ratings range from Aaa (highest) to C (lowest) for long-term securities and P1 (highest) to NP (lowest) for short-term securities.OutlookStableStable
Senior NotesBaa1BBB
Commercial PaperP2A2
PSE&G
(B)S&P ratings range from AAA (highest) to D (lowest) for long-term securities and A1 (highest) to D (lowest) for short-term securities.OutlookStableStable
Mortgage BondsAa3A
Commercial PaperP1A2
PSEG Power
OutlookStableStable
Senior NotesBaa1BBB

(A)Moody’s ratings range from Aaa (highest) to C (lowest) for long-term securities and P1 (highest) to NP (lowest) for short-term securities.
(B)S&P ratings range from AAA (highest) to D (lowest) for long-term securities and A1 (highest) to D (lowest) for short-term securities.

CAPITAL REQUIREMENTS
We expect that all of our capital requirements over the next three years will come from a combination of internally generated funds and external debt financing. There were no material changes to our projected capital expenditures at PSEG Power and Services as compared to amounts disclosed in our 2020 Form 10-K. See Executive Overview of 2020 and Future Outlook for additional information.
PSE&G
During the sixthree months ended June 30, 2020,March 31, 2021, PSE&G made capital expenditures of $1,190$586 million, primarily for T&D system reliability. This does not include expenditures for cost of removal, net of salvage, of $44$27 million, which are included in operating cash flows.
PSEG Power
During the sixthree months ended June 30, 2020,March 31, 2021, PSEG Power made capital expenditures of $114$36 million, excluding $104$10 million for nuclear fuel, primarily related to various nuclear and solarfossil projects.

ACCOUNTING MATTERS
For information related to recent accounting matters, see Item 1. Note 2. Recent Accounting Standards.


ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The risk inherent in our market-risk sensitive instruments and positions is the potential loss arising from adverse changes in commodity prices, equity security prices and interest rates as discussed in the Notes to Condensed Consolidated Financial Statements. It is our policy to use derivatives to manage risk consistent with business plans and prudent practices. We have a Risk Management Committee comprised of executive officers who utilize a risk oversight function to ensure compliance with our corporate policies and risk management practices.
Additionally, we are exposed to counterparty credit losses in the event of non-performance or non-payment. We have a credit management process, which is used to assess, monitor and mitigate counterparty exposure. In the event of non-performance or

non-payment by a major counterparty, there may be a material adverse impact on our financial condition, results of operations or net cash flows.
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Commodity Contracts
The availability and price of energy-related commodities are subject to fluctuations from factors such as weather, environmental policies, changes in supply and demand, state and federal regulatory policies, market rules and other events. To reduce price risk caused by market fluctuations, we enter into supply contracts and derivative contracts, including forwards, futures, swaps and options with approved counterparties. These contracts, in conjunction with physical sales and other services, help reduce risk and optimize the value of owned electric generation capacity.
Value-at-Risk (VaR) Models
VaR represents the potential losses, under normal market conditions, for instruments or portfolios due to changes in market factors, for a specified time period and confidence level. We estimate VaR across our commodity businesses.
MTM VaR consists of MTM derivatives that are economic hedges. The MTM VaR calculation does not include market risks associated with activities that are subject to accrual accounting, primarily our generating facilities and some load-serving activities.
The VaR models used are variance/covariance models adjusted for the change of positions with 95% and 99.5% confidence levels and a one-day holding period for the MTM activities. The models assume no new positions throughout the holding periods; however, we actively manage our portfolio.
From AprilJanuary through June 2020,March 2021, MTM VaR was relatively stable between a low of $9$7 million and a high of $15$24 million at the 95% confidence level. The range of VaR was narrowerslightly wider for the three months ended June 30, 2020March 31, 2021 as compared with the year ended December 31, 2019.2020.
       
   MTM VaR 
   Three Months Ended June 30, 2020 Year Ended December 31, 2019 
   Millions 
 95% Confidence Level, Loss could exceed VaR one day in 20 days     
 Period End $9
 $9
 
 Average for the Period $11
 $12
 
 High $15
 $35
 
 Low $9
 $5
 
 99.5% Confidence Level, Loss could exceed VaR one day in 200 days     
 Period End $14
 $14
 
 Average for the Period $18
 $19
 
 High $24
 $54
 
 Low $14
 $8
 
       
MTM VaR
Three Months Ended March 31, 2021Year Ended December 31, 2020
Millions
95% Confidence Level, Loss could exceed VaR one day in 20 days
Period End$8 $16 
Average for the Period$14 $10 
High$24 $18 
Low$7 $5 
99.5% Confidence Level, Loss could exceed VaR one day in 200 days
Period End$13 $24 
Average for the Period$22 $16 
High$38 $29 
Low$11 $8 
See Item 1. Note 13. Financial Risk Management Activities for a discussion of credit risk.

ITEM 4.CONTROLS AND PROCEDURES
ITEM 4.CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
PSEG, PSE&G and PSEG Power
We have established and maintain disclosure controls and procedures as defined under Rule 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) that are designed to provide reasonable assurance that information required to be disclosed in the reports that are filed or submitted under the Exchange Act is recorded, processed, summarized and reported and is accumulated and communicated to the Chief Executive Officer (CEO) and Chief Financial Officer (CFO) of each respective company, as appropriate, by others within the entities to allow timely decisions regarding required disclosure. We have established a disclosure committee which includes several key management employees and which reports directly to the CFO and CEO of each of PSEG, PSE&G and PSEG Power. The committee monitors and evaluates the effectiveness of these disclosure controls and procedures. The CFO and CEO of each of PSEG, PSE&G and PSEG Power have evaluated the effectiveness of the disclosure controls and procedures and, based on this evaluation, have concluded that disclosure controls and procedures at each respective company were effective at a reasonable assurance level as of the end of the period covered by the report.
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Internal Controls
PSEG, PSE&G and PSEG Power
There have been no changes in internal control over financial reporting that occurred during the secondfirst quarter of 20202021 that have materially affected, or are reasonably likely to materially affect, each registrant’s internal control over financial reporting.


PART II. OTHER INFORMATION

ITEM 1.LEGAL PROCEEDINGS
ITEM 1.LEGAL PROCEEDINGS
We are party to various lawsuits and environmental and regulatory matters, including in the ordinary course of business. For information regarding material legal proceedings, including updates to information reported in Item 3 of Part I of the Form 10-K, see Part I, Item 1. Note 11. Commitments and Contingent Liabilities and Item 5. Other Information in the first quarter 2020 10-Q and in this Quarterly Form 10-Q.Information.

ITEM 1A.RISK FACTORS
ITEM 1A.RISK FACTORS
The discussion of our business and operations in this Quarterly Report on Form 10-Q should be read together with the risk factors contained in Part I, Item 1A of our Form 10-K, and Part II, Item 1A in the first quarter 2020 10-Q, which describes various risks and uncertainties that could have a material adverse impact on our business, prospects, financial position, results of operations or cash flows and could cause results to differ materially from those expressed elsewhere in this report. We expect that the risks and uncertainties described in this Form 10-Q our first quarter 2020 10-Q and our Form 10-K will be further adversely impacted by the ongoing coronavirus pandemic and any related, sustained economic downturn, which could extend beyond the duration of the pandemic.

ITEM 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
ITEM 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
In November 2019,December 2020, we entered into a share repurchase plan that complies with Rule 10b5-1 of the Exchange Act, as amended, solely with respect to the repurchase of shares to satisfy obligations under equity compensation awards that are expected to vestbe issued in 2020.2021 and the repurchase of shares to satisfy purchases by employees under the Employee Stock Purchase Plan during 2021. The following table indicates our common share repurchases in the open market during the first quarter of 2021. There are no remaining shares available for repurchase under the plan.

Three Months Ended March 31, 2021Total Number of Shares PurchasedAverage Price Paid per Share
January 1 - January 311,000,000 $56.22
February 1 - February 28— — 
March 1 - March 31— — 

ITEM 5. OTHER INFORMATION
Certain information reported in the Form 10-K is updated below. Additionally, certain information is provided for new matters that have arisen subsequent to the filing of the Form 10-K. References are to the related pages on the Form 10-K and the first quarter 2020 10-Q.10-K.
Federal Regulation
Capacity Market Issues—PJMTransmission Rate Proceedings
In March 2019, FERC issued a Notice of Inquiry (NOI) seeking comment on improvements to FERC’s electric transmission incentives policy to ensure that it appropriately encourages the development of the infrastructure needed to ensure grid reliability and reduce congestion to lower the cost of power for consumers. The NOI is intended to examine whether existing incentives, such as the 50 basis point adder for RTO membership, should continue to be granted and whether new incentives should be established. The NOI includes the consideration of incentives for economic efficiency and reliability benefits, RTO membership, improvements to existing transmission facilities, consideration of the costs and benefits of projects in awarding incentives, and determination of whether to review incentive applications on a case-specific or standardized basis. However, in April 2021, FERC issued a supplemental notice of proposed rulemaking to eliminate the incentive for RTO membership for transmitting utilities that have already received the incentive for three or more years. PSE&G began receiving a 50 basis point
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adder for RTO membership in 2008. Elimination of the adder for RTO membership could be material to PSE&G.
Energy Clearing Prices
December 31, 20192020 Form 10-K page 16 and March 31, 2020 Form 10-Q page 81.13. In DecemberApril 2019, FERC issued an order establishingdirecting PJM and NYISO to change their rules governing pricing for fast-start resources. In its Order, FERC found that current fast-start pricing practices are unjust and unreasonable because they do not allow prices to reflect the marginal cost of serving load. FERC required PJM and NYISO to make various changes to their respective tariffs to allow the start-up costs of fast-start resources to be reflected in prices, among other things. In August 2019, PJM stated that new rules for PJM’s capacity market. In this new order, FERC extended the PJM MOPR, which currently appliestariff provisions would apply fast-start pricing to new natural gas-fired generators, to include both new and existing resources that receive or are entitled to receive certain out-of-market payments, with certain exemptions. 
PSEG Power’s New Jersey nuclear plants that receive ZEC payments will be subject to the new MOPR. In addition, as a result of FERC’s finding that default procurement auctions such as BGS could be considered subsidies, it is possible that other PSEG units could be subject to the MOPR. Resources that are subject to the MOPR continue to have the ability to justify a bid below the MOPR floor price under the unit-specific exemption. The MOPR floor prices are not expected to prevent either our nuclear or gas-fired units from clearingall eligible fast-start resources. However, in the next RPM auction. A FERC order issued in May 2020 authorizing enhancements to the methodology used by PJM to price energy reserves has created additional uncertainty regarding the impact of the MOPR expansion in future RPM auctions on PSEG Power’s nuclear units that receive ZECs. One of the findings made by FERC in that order will affect how the MOPR offer floors are calculated and could have the effect, in the future, of increasing the price floors for the plants and thereby increasing the risk of being unable to clear in an RPM auction. In addition, if one or more electric distribution zones in New Jersey (or another state) were to become FRR service areas, procurements needed for that area could provide an alternate means for nuclear units whose ability to clear in RPM auctions was affected by the MOPR to provide capacity within PJM.

We cannot predict whether additional changes will be made to the MOPR, or whether changes will occur in the PJM market that would impact our ability to clear any of these units in future RPM auctions.
Transmission Rate Proceedings and Return on Equity
December 31, 2019 Form 10-K page 17 and March 31, 2020 Form 10-Q page 82. In JuneJanuary 2020, FERC issued a cybersecurity incentives policy white paper, which recognizesdecided to hold the importance of infrastructure securityproceeding in abeyance in order to allow PJM and proposes a new framework for providing transmission incentivesits stakeholders to utilities for cybersecurity investmentsaddress FERC’s concern that exceed the requirements of the Critical Infrastructure Protection Reliability Standards. FERC is seeking comments from the industry on the proposals contained in the white paper. We cannot predict the outcome of this matter.
PJM’s pricing and dispatch are misaligned. In November 2019,December 2020, FERC issued an order establishing a new ROE policy for reviewing existing transmission ROEs.accepting aspects of PJM’s proposed reforms, but also directed PJM to submit an additional filing that includes an implementation date. In February 2021, PJM submitted the additional filing and requested an effective date of May 1, 2021. The new methodology uses the DCF model and CAPM to determine if an existing base ROE is unjust and unreasonable and, if so, what replacement ROE is appropriate. PSE&G joined the PJM Transmission Owners in requesting rehearing of FERC’s order on the grounds that the new methodology is flawed. In May 2020, FERC partially granted rehearing of the November 2019 order and again revised the ROE methodology by reinstating the risk premium model with the CAPM and DCF models. FERC’s order indicated that it wouldrules will not be bound by this revised methodology when considering the just and reasonableness of a utility’s ROE in future proceedings.implemented until FERC issues an order approving PJM’s final compliance filing. We will continue to analyze the potential impact of these methodologies.
ROE complaints have been pending before FERC regarding MISO transmission owners, the ISO New England Inc. transmission owners and utilitiesparticipate in other jurisdictions. In addition, over the past few years, several companies have negotiated settlements that have resulted in reduced ROEs.
We are engaged in settlement discussions with the BPU Staff and the New Jersey Rate Counsel about the level of PSE&G’s base transmission ROE; however, we cannot predict the outcome of these settlement discussions. An adverse change to PSE&G’s base transmission ROE or ROE incentives could be material.this proceeding.
State Regulation
Energy Efficiency Initiatives
December 31, 2019 Form 10-K page 19. In May 2018, the New Jersey governor signed legislation that requires the State’s electric and gas utilities to implement energy efficiency programs that are expected to achieve energy savings targets for electric and gas usage within five years of the utilities’ implementation of those BPU-approved energy efficiency programs. Numerous stakeholders, including public utilities like PSE&G, have been engaged in several stakeholder proceedings being conducted by the BPU Staff to establish the final policies, rules, and guidelines that will govern the conduct of these energy efficiency initiatives. In June 2020, the BPU issued an order finalizing this stakeholder process, setting forth its conclusions and directives regarding utility energy efficiency programs, including the appropriate scope of utility programs versus programs run by the State, as well as utility cost recovery and the measurement of utility performance in achieving the State’s energy savings goals.
BGSBGSS Process
December 31, 20192020 Form 10-K page 19.16. InJuly 2020, the State’s electric distribution companies (EDCs) filed their annual proposal for the conduct of the February 2021 BGS auction covering electric supply for energy years 2022 through 2024. In prior years, September 2019, the BPU formally opened a stakeholder proceeding to explore gas capacity procurement and BGSrelated issues with respect to service to all New Jersey natural gas customers, whether served through BGSS or a third- party supplier. In addition, the BPU directed that the proceeding review whether, and to what extent, third-party suppliers expressed concerns regarding transmission costs incurred by BGS participants that are collected fromproviding savings to New Jersey customers but not paid toon their natural gas supply. In 2019, the BGS suppliers due to several unresolved proceedings at FERC. To address these concerns,Board Staff conducted a public hearing and interested parties, including PSE&G, submitted oral and written comments while also answering the EDCs are proposing,Staff’s specific questions concerning, among other things, capacity procurement (e.g., timing, price, sufficiency); the sufficiency of pipeline capacity within New Jersey; the cost impacts if gas distribution companies were made responsible for securing incremental capacity for their transportation customers; and economic benefits to remove transmission from the BGS product through the transfer of specific PJM billing items from the BGS supplier (who would remain the LSE) to the EDC. Ifresidential customers. In early 2020, the BPU approves this proposal in November/December 2020, the EDCs, rather than the BGS suppliers, will be responsible for transmission and transmission-related costs on a going forward basis. The EDCs are also proposing to remove transmission from the BGS product for prior BGS contracts via contract amendments. BGS suppliers would be able to execute such amendments at their option. Each EDC will collect from its BGS customers the amounts required to meet its transmission payment obligations to PJM through a specific transmission charge.
Environmental Matters
Hazardous Air Pollutants Regulation
In February 2012, theEPA published Mercury Air Toxics Standards (MATS) for both newly-built and existing electric generating sources under the National Emission Standard for Hazardous Air Pollutants provisions of the Clean Air Act. The MATS established allowable levels for mercury as well as other hazardous air pollutants (HAPS) and went into effect in April 2015. In June 2015, the U.S. Supreme Court heldannounced that it was unreasonable for the EPA to refuse to consider the materiality of costshad retained a consultant, and in determining whether to regulate hazardous air pollutants from power plants. In April 2016, the EPA released the final Supplemental FindingFebruary 2021 that considers the materiality of costs in determiningwhether to regulate hazardous air pollutants from power plants in response to the U.S. Supreme Court’s ruling.consultant issued discovery requests focused on PSE&G’s June 2020 BGSS filing. The 2016 Supplemental Finding determined that HAPS fromproceeding remains open.


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Table of Contents


existing electric generating units should be regulated and that theenvironmental and health benefits derived from the reduction in emissions of both HAPS and co-benefit pollutants far outweighed the cost of compliance. Industry participants and various state authorities filed petitions with the D.C. Circuit challenging the EPA’s Supplemental Finding.
In May 2020, the EPA finalized a revised Supplemental Finding that reversed the 2016 Supplemental Finding, concluding that it was not “appropriate and necessary” to regulate HAPS from electric generating sources. However, the EPA retained the emission standards and other requirements of MATS. A major coal mining company filed a lawsuit to force the EPA to vacate MATS. We have filed as intervenors to the coal mining company’s suit to challenge the company’s attempt to vacate MATS. In addition, we have joined a challenge against the EPA’s revised Supplemental Finding in the D.C. Circuit Court. We cannot predict the outcome of this matter.


ITEM 6.EXHIBITS
ITEM 6.EXHIBITS
A listing of exhibits being filed with this document is as follows:
a. PSEG:
Exhibit 101.INS:Inline XBRL Instance Document - The Instance Document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
Exhibit 101.SCH:Inline XBRL Taxonomy Extension Schema
Exhibit 101.CAL:Inline XBRL Taxonomy Extension Calculation Linkbase
Exhibit 101.LAB:Inline XBRL Taxonomy Extension Labels Linkbase
Exhibit 101.PRE:Inline XBRL Taxonomy Extension Presentation Linkbase
Exhibit 101.DEF:Inline XBRL Taxonomy Extension Definition Document
Exhibit 104:Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
b. PSE&G:
Exhibit 101.INS:Inline XBRL Instance Document - The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
Exhibit 101.SCH:Inline XBRL Taxonomy Extension Schema
Exhibit 101.CAL:Inline XBRL Taxonomy Extension Calculation Linkbase
Exhibit 101.LAB:Inline XBRL Taxonomy Extension Labels Linkbase
Exhibit 101.PRE:Inline XBRL Taxonomy Extension Presentation Linkbase
Exhibit 101.DEF:Inline XBRL Taxonomy Extension Definition Document
Exhibit 104:Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
c. PSEG Power:
Exhibit 101.INS:Inline XBRL Instance Document - The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
Exhibit 101.SCH:Inline XBRL Taxonomy Extension Schema
Exhibit 101.CAL:Inline XBRL Taxonomy Extension Calculation Linkbase
Exhibit 101.LAB:Inline XBRL Taxonomy Extension Labels Linkbase
Exhibit 101.PRE:Inline XBRL Taxonomy Extension Presentation Linkbase
Exhibit 101.DEF:Inline XBRL Taxonomy Extension Definition Document
Exhibit 104:Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)



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SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. The signature of the undersigned company shall be deemed to relate only to matters having reference to such company and any subsidiaries thereof.
 
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
(Registrant)
By:
/S/ ROSE M. CHERNICK
Rose M. Chernick

Vice President and Controller

(Principal Accounting Officer)
Date: July 31, 2020May 5, 2021


SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. The signature of the undersigned company shall be deemed to relate only to matters having reference to such company and any subsidiaries thereof.
 
PUBLIC SERVICE ELECTRIC AND GAS COMPANY
(Registrant)
By:
/S/ ROSE M. CHERNICK
Rose M. Chernick

Vice President and Controller

(Principal Accounting Officer)
Date: July 31, 2020May 5, 2021


SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. The signature of the undersigned company shall be deemed to relate only to matters having reference to such company and any subsidiaries thereof.
 
PSEG POWER LLC
(Registrant)
By:
/S/ ROSE M. CHERNICK
Rose M. Chernick

Vice President and Controller

(Principal Accounting Officer)
Date: July 31, 2020May 5, 2021



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