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PEG Pseg Power

Filed: 30 Oct 20, 5:09pm
false2020Q30000788784--12-31false2020Q30000081033--12-31false2020Q30001158659--12-310000788784pseg:RabbiTrustsEquitySecuritiesMutualFundsMemberus-gaap:FairValueInputsLevel3Memberpseg:PSEGPowerLLCMember2019-12-31
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 September 30, 2020
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
001-09120  Public Service Enterprise Group IncorporatedNew Jersey22-2625848
80 Park Plaza
Newark,New Jersey07102
973430-7000
001-00973  Public Service Electric and Gas CompanyNew Jersey22-1212800
80 Park Plaza
Newark,New Jersey07102
973430-7000
001-34232  PSEG 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 ☐
(Cover continued on next page)




(Cover continued from previous page)
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 filerAccelerated filerNon-accelerated filerSmaller reporting companyEmerging growth company
Public Service Electric and Gas CompanyLarge accelerated filerAccelerated filerNon-accelerated filerSmaller reporting companyEmerging growth company
PSEG Power LLCLarge accelerated filerAccelerated filerNon-accelerated filerSmaller reporting companyEmerging 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 October 20, 2020, Public Service Enterprise Group Incorporated had outstanding 505,847,992 shares of its sole class of Common Stock, without par value.
As of October 20, 2020, 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.


Page
FILING FORMAT
PART I. FINANCIAL INFORMATION
Item 1.Financial Statements
Notes to Condensed Consolidated Financial Statements
Note 1. Organization, Basis of Presentation and Significant Accounting Policies
Note 2. Recent Accounting Standards
Note 3. Revenues
Note 4. Early Plant Retirements/Asset Dispositions
Note 5. Variable Interest Entity (VIE)
Note 6. Rate Filings
Note 7. Leases
Note 8. Financing Receivables
Note 9. Trust Investments
Note 10. Pension and Other Postretirement Benefits (OPEB)
Note 11. Commitments and Contingent Liabilities
Note 12. Debt and Credit Facilities
Note 13. Financial Risk Management Activities
Note 14. Fair Value Measurements
Note 15. Other Income (Deductions)
Note 16. Income Taxes
Note 17. Accumulated Other Comprehensive Income (Loss), Net of Tax
Note 18. Earnings Per Share (EPS) and Dividends
Note 19. Financial Information by Business Segment
Note 20. Related-Party Transactions
Item 2.
Executive Overview of 2020 and Future Outlook
Item 3.
Item 4.
PART II. OTHER INFORMATION
Item 1.
Item 1A.
Item 2.
Item 5.
Item 6.
i

FORWARD-LOOKING STATEMENTS
Certain of the matters discussed in this report about our and our subsidiaries’ future performance, including, without limitation, future revenues, earnings, strategies, prospects, consequences and all other statements that are not purely historical constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ materially from those anticipated. Such statements are based on management’s beliefs as well as assumptions made by and information currently available to management. When used herein, the words “anticipate,” “intend,” “estimate,” “believe,” “expect,” “plan,” “should,” “hypothetical,” “potential,” “forecast,” “project,” variations of such words and similar expressions are intended to identify forward-looking statements. Factors that may cause actual results to differ are often presented with the forward-looking statements themselves. Other factors that could cause actual results to differ materially from those contemplated in any forward-looking statements made by us herein are discussed in filings we make with the United States Securities and Exchange Commission (SEC), including our Annual Report on Form 10-K and subsequent reports on Form 10-Q and Form 8-K. These factors include, but are not limited to:
fluctuations in wholesale power and natural gas markets, including the potential impacts on the economic viability of our generation units;
our ability to obtain adequate fuel supply;
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 customer usage patterns;
economic downturns;
third-party credit risk relating to our sale of generation output and purchase of fuel;
adverse performance of our nuclear decommissioning and defined benefit plan trust fund investments and changes in funding requirements;
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;
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;
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;
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;
ii

any inability of PSEG Power to meet its commitments under forward sale obligations;
reliance on transmission facilities that we do not own or control and the impact on our ability to maintain adequate transmission capacity;
any inability to successfully develop, 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.

iii




PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Millions, except per share data
(Unaudited)
Three Months EndedNine Months Ended
September 30,September 30,
 2020201920202019
OPERATING REVENUES$2,370 $2,302 $7,201 $7,598 
OPERATING EXPENSES
Energy Costs775 753 2,276 2,581 
Operation and Maintenance767 745 2,254 2,251 
Depreciation and Amortization317 307 956 928 
(Gain) Loss on Asset Dispositions(122)(122)402 
Total Operating Expenses1,737 1,812 5,364 6,162 
OPERATING INCOME633 490 1,837 1,436 
Income from Equity Method Investments10 10 
Net Gains (Losses) on Trust Investments107 (3)87 164 
Other Income (Deductions)39 35 81 101 
Net Non-Operating Pension and Other Postretirement Benefit (OPEB) Credits (Costs)62 55 186 121 
Interest Expense(149)(147)(453)(417)
INCOME BEFORE INCOME TAXES696 433 1,748 1,415 
Income Tax Benefit (Expense)(121)(30)(274)(159)
NET INCOME$575 $403 $1,474 $1,256 
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
BASIC504 504 504 504 
DILUTED507 507 507 507 
NET INCOME PER SHARE:
BASIC$1.15 $0.80 $2.93 $2.49 
DILUTED$1.14 $0.79 $2.91 $2.47 
See Notes to Condensed Consolidated Financial Statements.
1


PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Millions
(Unaudited)
 
Three Months EndedNine Months Ended
 September 30,September 30,
 2020201920202019
NET INCOME$575 $403 $1,474 $1,256 
Other Comprehensive Income (Loss), net of tax
Unrealized Gains (Losses) on Available-for-Sale Securities, net of tax (expense) benefit of $3, $(5), $(15) and $(30) for the three and nine months ended 2020 and 2019, respectively(4)10 24 49 
Unrealized Gains (Losses) on Cash Flow Hedges, net of tax (expense) benefit of $(1), $0, $(1) and $6 for the three and nine months ended 2020 and 2019, respectively(16)
Pension/OPEB adjustment, net of tax (expense) benefit of $(1), $7, $(3) and $1 for the three and nine months ended 2020 and 2019, respectively(17)(13)
Other Comprehensive Income (Loss), net of tax(6)37 20 
COMPREHENSIVE INCOME$578 $397 $1,511 $1,276 
See Notes to Condensed Consolidated Financial Statements.
2

PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
Millions
(Unaudited)
 
September 30,
2020
December 31,
2019
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents$966 $147 
Accounts Receivable, net of allowance of $154 in 2020 and $60 in 20191,299 1,313 
Tax Receivable102 21 
Unbilled Revenues, net of allowance of $4 in 2020175 239 
Fuel309 310 
Materials and Supplies, net608 587 
Prepayments128 79 
Derivative Contracts46 113 
Regulatory Assets342 351 
Assets Held for Sale30 
Other48 41 
Total Current Assets4,023 3,231 
PROPERTY, PLANT AND EQUIPMENT47,949 45,944 
     Less: Accumulated Depreciation and Amortization(10,900)(10,100)
Net Property, Plant and Equipment37,049 35,844 
NONCURRENT ASSETS
Regulatory Assets3,669 3,677 
Operating Lease Right-of-Use Assets270 282 
Long-Term Investments608 812 
Nuclear Decommissioning Trust (NDT) Fund2,359 2,216 
Long-Term Tax Receivable150 
Long-Term Receivable of Variable Interest Entity (VIE)830 813 
Rabbi Trust Fund261 246 
Other Intangibles228 149 
Derivative Contracts17 24 
Other262 286 
Total Noncurrent Assets8,504 8,655 
TOTAL ASSETS$49,576 $47,730 
See Notes to Condensed Consolidated Financial Statements.
3

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

 
September 30,
2020
December 31,
2019
LIABILITIES AND CAPITALIZATION
CURRENT LIABILITIES
Long-Term Debt Due Within One Year$2,093 $1,365 
Commercial Paper and Loans300 1,115 
Accounts Payable1,332 1,358 
Derivative Contracts36 
Accrued Interest171 116 
Accrued Taxes238 41 
Clean Energy Program187 143 
Obligation to Return Cash Collateral103 119 
Regulatory Liabilities306 234 
Other522 520 
Total Current Liabilities5,260 5,047 
NONCURRENT LIABILITIES
Deferred Income Taxes and Investment Tax Credits (ITC)6,334 6,256 
Regulatory Liabilities2,773 3,002 
Operating Leases260 273 
Asset Retirement Obligations1,198 1,087 
OPEB Costs737 734 
OPEB Costs of Servco649 626 
Accrued Pension Costs862 952 
Accrued Pension Costs of Servco159 171 
Environmental Costs316 349 
Derivative Contracts
Long-Term Accrued Taxes110 182 
Other289 218 
Total Noncurrent Liabilities13,688 13,851 
COMMITMENTS AND CONTINGENT LIABILITIES (See Note 11)
CAPITALIZATION
LONG-TERM DEBT14,792 13,743 
STOCKHOLDERS’ EQUITY
Common Stock, no par, authorized 1,000 shares; issued, 2020 and 2019—534 shares5,016 5,003 
Treasury Stock, at cost, 2020 and 2019—30 shares(863)(831)
Retained Earnings12,135 11,406 
Accumulated Other Comprehensive Loss(452)(489)
Total Stockholders’ Equity15,836 15,089 
Total Capitalization30,628 28,832 
TOTAL LIABILITIES AND CAPITALIZATION$49,576 $47,730 
See Notes to Condensed Consolidated Financial Statements.
4

PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Millions
(Unaudited)
Nine Months Ended
September 30,
20202019
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income$1,474 $1,256 
Adjustments to Reconcile Net Income to Net Cash Flows from Operating Activities:
Depreciation and Amortization956 928 
Amortization of Nuclear Fuel144 137 
(Gain) Loss on Asset Dispositions
(122)402 
Emission Allowances and Renewable Energy Credit (REC) Compliance Accrual
115 80 
Provision for Deferred Income Taxes (Other than Leases) and ITC40 139 
Non-Cash Employee Benefit Plan (Credits) Costs(79)(26)
Leveraged Lease (Income), (Gains) and Losses, Adjusted for Rents Received and Deferred Taxes(155)24 
Net Realized and Unrealized (Gains) Losses on Energy Contracts and Other Derivatives81 (201)
Cost of Removal(77)(87)
Net Change in Regulatory Assets and Liabilities54 
Net (Gains) Losses and (Income) Expense from NDT Fund(107)(195)
Net Change in Certain Current Assets and Liabilities:
          Tax Receivable68 77 
          Accrued Taxes228 (11)
           Cash Collateral(12)301 
          Other Current Assets and Liabilities19 (155)
Employee Benefit Plan Funding and Related Payments(12)(33)
Other(48)19 
Net Cash Provided By (Used In) Operating Activities2,517 2,709 
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to Property, Plant and Equipment(2,092)(2,383)
Purchase of Emission Allowances and RECs(94)(73)
Proceeds from Sales of Trust Investments1,796 1,374 
Purchases of Trust Investments(1,817)(1,402)
Proceeds from Sales of Long-Lived Assets and Lease Investments300 70 
Other52 55 
Net Cash Provided By (Used In) Investing Activities(1,855)(2,359)
CASH FLOWS FROM FINANCING ACTIVITIES
Net Change in Commercial Paper(1,115)(670)
Proceeds from Short-Term Loans800 
Payment of Short-Term Loans(500)
Issuance of Long-Term Debt2,450 1,900 
Redemption of Long-Term Debt(656)(850)
Cash Dividends Paid on Common Stock(743)(713)
Other(75)(60)
Net Cash Provided By (Used In) Financing Activities161 (393)
Net Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash823 (43)
Cash, Cash Equivalents and Restricted Cash at Beginning of Period176 199 
Cash, Cash Equivalents and Restricted Cash at End of Period$999 $156 
Supplemental Disclosure of Cash Flow Information:
Income Taxes Paid (Received)$176 $31 
Interest Paid, Net of Amounts Capitalized$384 $345 
Accrued Property, Plant and Equipment Expenditures$449 $514 
See Notes to Condensed Consolidated Financial Statements.
5

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.AmountTotal
Balance as of June 30, 2020 534 $5,003 (30)$(865)$11,808 $(455)$15,491 
Net Income — — — — 575 — 575 
Other Comprehensive Income (Loss), net of tax (expense) benefit of $1 — — — — — 
Comprehensive Income  578 
Cash Dividends at $0.49 per share on Common Stock — — — — (248)(248)
Other 13 15 
Balance as of September 30, 2020 534 $5,016  (30)$(863)$12,135 $(452)$15,836 
Balance as of June 30, 2019 534 $4,980 (30)$(835)$11,041 $(432)$14,754 
Net Income — — — — 403 — 403 
Other Comprehensive Income (Loss), net of tax (expense) benefit of $2 — — — — — (6)(6)
Comprehensive Income  397 
Cash Dividends at $0.47 per share on Common Stock — — — — (238)(238)
Other 12 
Balance as of September 30, 2019 534 $4,989  (30)$(832)$11,206 $(438)$14,925 
 
 Common
Stock
 Treasury
Stock
Retained
Earnings
Accumulated
Other
Comprehensive
Income (Loss)
  Shs.Amount Shs.AmountTotal
Balance as of December 31, 2019 534 $5,003  (30)$(831)$11,406 $(489)$15,089 
Net Income — —  — — 1,474 — 1,474 
Other Comprehensive Income (Loss), net of tax (expense) benefit of $(19) — —  — — — 37 37 
Comprehensive Income  1,511 
Cumulative Effect Adjustment for Current Expected Credit Losses (CECL)— — — — (2)— (2)
Cash Dividends at $1.47 per share on Common Stock — —  — — (743)(743)
Other 13  (32)(19)
Balance as of September 30, 2020 534 $5,016  (30)$(863)$12,135 $(452)$15,836 
Balance as of December 31, 2018 534 $4,980  (30)$(808)$10,582 $(377)$14,377 
Net Income — —  — — 1,256 — 1,256 
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 $(23) — —  — — — 20 20 
Comprehensive Income  1,276 
Cash Dividends at $1.41 per share on Common Stock — —  — — (713)(713)
Other  (24)(15)
Balance as of September 30, 2019 534 $4,989  (30)$(832)$11,206 $(438)$14,925 
See Notes to Condensed Consolidated Financial Statements.
6


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

Three Months EndedNine Months Ended
September 30,September 30,
2020201920202019
OPERATING REVENUES$1,660 $1,604 $4,999 $5,018 
OPERATING EXPENSES
Energy Costs663 618 1,881 2,094 
Operation and Maintenance409 388 1,175 1,165 
Depreciation and Amortization218 206 657 620 
Total Operating Expenses1,290 1,212 3,713 3,879 
OPERATING INCOME370 392 1,286 1,139 
Net Gains (Losses) on Trust Investments
Other Income (Deductions)28 22 81 60 
Net Non-Operating Pension and OPEB Credits (Costs)51 46 154 105 
Interest Expense(97)(92)(291)(268)
INCOME BEFORE INCOME TAXES353 368 1,232 1,037 
Income Tax Benefit (Expense)(40)(24)(196)(63)
NET INCOME$313 $344 $1,036 $974 
See disclosures regarding Public Service Electric and Gas Company included in the Notes to Condensed Consolidated Financial Statements.
7

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

Three Months EndedNine Months Ended
September 30,September 30,
 2020201920202019
NET INCOME$313 $344 $1,036 $974 
Unrealized Gains (Losses) on Available-for-Sale Securities, net of tax (expense) benefit of $0, $0, $(1) and $(1) for the three and nine months ended 2020 and 2019, respectively
COMPREHENSIVE INCOME$313 $345 $1,037 $977 
See disclosures regarding Public Service Electric and Gas Company included in the Notes to Condensed Consolidated Financial Statements.
8


PUBLIC SERVICE ELECTRIC AND GAS COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
Millions
(Unaudited)
September 30,
2020
December 31,
2019
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents$224 $21 
Accounts Receivable, net of allowance of $154 in 2020 and $60 in 2019948 901 
Accounts Receivable—Affiliated Companies
Unbilled Revenues, net of allowance of $4 in 2020175 239 
Materials and Supplies, net213 213 
Prepayments92 35 
Regulatory Assets342 351 
Other33 28 
Total Current Assets2,027 1,789 
PROPERTY, PLANT AND EQUIPMENT35,658 33,900 
Less: Accumulated Depreciation and Amortization(7,030)(6,623)
Net Property, Plant and Equipment28,628 27,277 
NONCURRENT ASSETS
Regulatory Assets3,669 3,677 
Operating Lease Right-of-Use Assets102 98 
Long-Term Investments225 248 
Rabbi Trust Fund51 48 
Other131 129 
Total Noncurrent Assets4,178 4,200 
TOTAL ASSETS$34,833 $33,266 
See disclosures regarding Public Service Electric and Gas Company included in the Notes to Condensed Consolidated Financial Statements.
9

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

September 30,
2020
December 31,
2019
LIABILITIES AND CAPITALIZATION
CURRENT LIABILITIES
Long-Term Debt Due Within One Year$443 $259 
Commercial Paper and Loans362 
Accounts Payable713 639 
Accounts Payable—Affiliated Companies272 390 
Accrued Interest115 91 
Clean Energy Program187 143 
Obligation to Return Cash Collateral103 119 
Regulatory Liabilities306 234 
Other432 436 
Total Current Liabilities2,571 2,673 
NONCURRENT LIABILITIES
Deferred Income Taxes and ITC4,463 4,189 
Regulatory Liabilities2,773 3,002 
Operating Leases90 87 
Asset Retirement Obligations311 303 
OPEB Costs495 495 
Accrued Pension Costs441 501 
Environmental Costs266 294 
Long-Term Accrued Taxes20 115 
Other168 136 
Total Noncurrent Liabilities9,027 9,122 
COMMITMENTS AND CONTINGENT LIABILITIES (See Note 11)
CAPITALIZATION
LONG-TERM DEBT10,472 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 Earnings9,787 8,928 
Accumulated Other Comprehensive Income
Total Stockholder’s Equity12,763 11,903 
Total Capitalization23,235 21,471��
TOTAL LIABILITIES AND CAPITALIZATION$34,833 $33,266 
See disclosures regarding Public Service Electric and Gas Company included in the Notes to Condensed Consolidated Financial Statements.
10

PUBLIC SERVICE ELECTRIC AND GAS COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Millions
(Unaudited)
Nine Months Ended
September 30,
 20202019
CASH FLOWS FROM OPERATING ACTIVITIES
  Net Income$1,036 $974 
Adjustments to Reconcile Net Income to Net Cash Flows from Operating Activities:
Depreciation and Amortization657 620 
Provision for Deferred Income Taxes and ITC58 10 
Non-Cash Employee Benefit Plan (Credits) Costs(77)(39)
Cost of Removal(77)(87)
Net Change in Regulatory Assets and Liabilities54 
Net Change in Certain Current Assets and Liabilities:
Accounts Receivable and Unbilled Revenues105 
Materials and Supplies(16)
Prepayments(57)(97)
Accounts Payable46 (77)
Accounts Receivable/Payable—Affiliated Companies, net(88)
Other Current Assets and Liabilities(9)66 
Employee Benefit Plan Funding and Related Payments(1)(19)
Other(76)(21)
Net Cash Provided By (Used In) Operating Activities1,424 1,481 
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to Property, Plant and Equipment(1,777)(1,866)
Proceeds from Sales of Trust Investments32 27 
Purchases of Trust Investments(32)(25)
Solar Loan Investments
Other
Net Cash Provided By (Used In) Investing Activities(1,763)(1,855)
CASH FLOWS FROM FINANCING ACTIVITIES
Net Change in Commercial Paper and Loans(362)(262)
Issuance of Long-Term Debt1,350 1,150 
Redemption of Long-Term Debt(250)(500)
Cash Dividend Paid(175)
Other(17)(14)
Net Cash Provided By (Used In) Financing Activities546 374 
Net Increase (Decrease) In Cash, Cash Equivalents and Restricted Cash207 
Cash, Cash Equivalents and Restricted Cash at Beginning of Period50 61 
Cash, Cash Equivalents and Restricted Cash at End of Period$257 $61 
Supplemental Disclosure of Cash Flow Information:
Income Taxes Paid (Received)$143 $(82)
Interest Paid, Net of Amounts Capitalized$261 $240 
Accrued Property, Plant and Equipment Expenditures$366 $348 
See disclosures regarding Public Service Electric and Gas Company included in the Notes to Condensed Consolidated Financial Statements.
11

PUBLIC SERVICE ELECTRIC AND GAS COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDER’S EQUITY
Millions
(Unaudited)
 
 Common StockContributed CapitalBasis AdjustmentRetained EarningsAccumulated
Other
Comprehensive
Income (Loss)
   Total
Balance as of June 30, 2020 $892 $1,095 $986 $9,474 $$12,450 
Net Income — — — 313 — 313 
Other Comprehensive Income (Loss), net of tax (expense) benefit of $0 — — — — 
Comprehensive Income 313 
Balance as of September 30, 2020 $892  $1,095 $986 $9,787 $$12,763 
Balance as of June 30, 2019 $892 $1,095 $986 $8,558 $$11,532 
Net Income — — — 344 — 344 
Other Comprehensive Income (Loss), net of tax (expense) benefit of $0 — — — — 
Comprehensive Income 345 
Balance as of September 30, 2019 $892  $1,095 $986 $8,902 $$11,877 
 
 Common StockContributed CapitalBasis AdjustmentRetained EarningsAccumulated
Other
Comprehensive
Income (Loss)
   Total
Balance as of December 31, 2019 $892 $1,095 $986 $8,928 $$11,903 
Net Income — — — 1,036 — 1,036 
Other Comprehensive Income (Loss), net of tax (expense) benefit of $(1) — — — — 
Comprehensive Income  1,037 
Cumulative Effect Adjustment for CECL— — — (2)— (2)
Cash Dividend Paid— — — (175)— (175)
Balance as of September 30, 2020 $892  $1,095 $986 $9,787 $$12,763 
Balance as of December 31, 2018 $892 $1,095 $986 $7,928 $(1)$10,900 
Net Income — — — 974 — 974 
Other Comprehensive Income (Loss), net of tax (expense) benefit of $(1) — — — — 
Comprehensive Income  977 
Balance as of September 30, 2019 $892  $1,095 $986 $8,902 $$11,877 
See disclosures regarding Public Service Electric and Gas Company included in the Notes to Condensed Consolidated Financial Statements.
12



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

Three Months EndedNine Months Ended
September 30,September 30,
 2020201920202019
OPERATING REVENUES$746 $771 $2,649 $3,270 
OPERATING EXPENSES
Energy Costs290 359 1,289 1,556 
Operation and Maintenance213 233 679 736 
Depreciation and Amortization91 93 276 282 
(Gain) Loss on Asset Dispositions(122)(122)402 
Total Operating Expenses472 692 2,122 2,976 
OPERATING INCOME274 79 527 294 
Income from Equity Method Investments10 10 
Net Gains (Losses) on Trust Investments103 (4)79 160 
Other Income (Deductions)11 15 43 
Net Non-Operating Pension and OPEB Credits (Costs)25 14 
Interest Expense(28)(34)(92)(85)
INCOME BEFORE INCOME TAXES372 67 549 436 
Income Tax Benefit (Expense)(118)(14)(112)(127)
NET INCOME$254 $53 $437 $309 
See disclosures regarding PSEG Power LLC included in the Notes to Condensed Consolidated Financial Statements.
13

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

Three Months EndedNine Months Ended
September 30,September 30,
2020201920202019
NET INCOME$254 $53 $437 $309 
Other Comprehensive Income (Loss), net of tax
Unrealized Gains (Losses) on Available-for-Sale Securities, net of tax (expense) benefit of $2, $(4), $(14) and $(26) for the three and nine months ended 2020 and 2019, respectively(2)20 38 
Pension/OPEB adjustment, net of tax (expense) benefit of $(1), $5, $(2) and $0 for the three and nine months ended 2020 and 2019, respectively(12)(9)
Other Comprehensive Income (Loss), net of tax(5)27 29 
COMPREHENSIVE INCOME$254 $48 $464 $338 
See disclosures regarding PSEG Power LLC included in the Notes to Condensed Consolidated Financial Statements.
14

PSEG POWER LLC
CONDENSED CONSOLIDATED BALANCE SHEETS
Millions
(Unaudited)

September 30,
2020
December 31,
2019
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents$15 $21 
Accounts Receivable304 309 
Accounts Receivable—Affiliated Companies154 408 
Short-Term Loan to Affiliate333 149 
Fuel309 310 
Materials and Supplies, net392 372 
Prepayments22 11 
Derivative Contracts46 113 
Assets Held for Sale28 
Other
Total Current Assets1,577 1,726 
PROPERTY, PLANT AND EQUIPMENT11,949 11,699 
Less: Accumulated Depreciation and Amortization(3,644)(3,273)
Net Property, Plant and Equipment8,305 8,426 
NONCURRENT ASSETS
Operating Lease Right-of-Use Assets64 71 
 Long-Term Investments66 66 
NDT Fund2,359 2,216 
Rabbi Trust Fund65 62 
Other Intangibles228 149 
Derivative Contracts17 24 
Other38 65 
Total Noncurrent Assets2,837 2,653 
TOTAL ASSETS$12,719 $12,805 
See disclosures regarding PSEG Power LLC included in the Notes to Condensed Consolidated Financial Statements.
15

PSEG POWER LLC
CONDENSED CONSOLIDATED BALANCE SHEETS
Millions
(Unaudited)

September 30,
2020
December 31,
2019
LIABILITIES AND MEMBER’S EQUITY
CURRENT LIABILITIES
Long-Term Debt Due Within One Year$950 $406 
Accounts Payable458 505 
Accounts Payable—Affiliated Companies22 
Derivative Contracts31 
Accrued Interest39 21 
Other96 91 
Total Current Liabilities1,571 1,059 
NONCURRENT LIABILITIES
Deferred Income Taxes and ITC1,891 1,876 
Operating Leases54 62 
Asset Retirement Obligations885 781 
OPEB Costs194 192 
Accrued Pension Costs263 284 
Derivative Contracts
Long-Term Accrued Taxes58 115 
Other136 111 
Total Noncurrent Liabilities3,482 3,422 
COMMITMENTS AND CONTINGENT LIABILITIES (See Note 11)
LONG-TERM DEBT1,487 2,434 
MEMBER’S EQUITY
Contributed Capital2,214 2,214 
Basis Adjustment(986)(986)
Retained Earnings5,325 5,063 
Accumulated Other Comprehensive Loss(374)(401)
Total Member’s Equity6,179 5,890 
TOTAL LIABILITIES AND MEMBER’S EQUITY$12,719 $12,805 
See disclosures regarding PSEG Power LLC included in the Notes to Condensed Consolidated Financial Statements.
16

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

Nine Months Ended
September 30,
 20202019
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income$437 $309 
Adjustments to Reconcile Net Income to Net Cash Flows from Operating Activities:
Depreciation and Amortization276 282 
Amortization of Nuclear Fuel144 137 
(Gain) Loss on Asset Dispositions(122)402 
Emission Allowances and REC Compliance Accrual115 80 
Provision for Deferred Income Taxes and ITC(1)157 
Non-Cash Employee Benefit Plan (Credits) Costs(4)
Interest Accretion on Asset Retirement Obligation31 30 
Net Realized and Unrealized (Gains) Losses on Energy Contracts and Other Derivatives81 (201)
Net (Gains) Losses and (Income) Expense from NDT Fund(107)(195)
Net Change in Certain Current Assets and Liabilities:
Fuel, Materials and Supplies(30)(29)
Cash Collateral(12)301 
Accounts Receivable43 48 
Accounts Payable(51)(62)
Accounts Receivable/Payable—Affiliated Companies, net242 80 
Other Current Assets and Liabilities20 
Employee Benefit Plan Funding and Related Payments(6)(9)
Other(45)
Net Cash Provided By (Used In) Operating Activities1,000 1,362 
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to Property, Plant and Equipment(307)(507)
Purchase of Emission Allowances and RECs(94)(73)
Proceeds from Sales of Trust Investments1,673 1,277 
Purchases of Trust Investments(1,695)(1,306)
Proceeds from Sales of Long-Lived Assets151 70 
Short-Term Loan to Affiliate(184)(86)
Other32 40 
Net Cash Provided By (Used In) Investing Activities(424)(585)
CASH FLOWS FROM FINANCING ACTIVITIES
Cash Dividend Paid(175)(525)
Redemption of Long-Term Debt(406)0
Short-Term Loan from Affiliate(193)
Other(1)(1)
Net Cash Provided By (Used In) Financing Activities(582)(719)
Net Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash(6)58 
Cash, Cash Equivalents and Restricted Cash at Beginning of Period21 22 
Cash, Cash Equivalents and Restricted Cash at End of Period$15 $80 
Supplemental Disclosure of Cash Flow Information:
Income Taxes Paid (Received)$83 $(37)
Interest Paid, Net of Amounts Capitalized$71 $60 
Accrued Property, Plant and Equipment Expenditures$83 $166 
See disclosures regarding PSEG Power LLC included in the Notes to Condensed Consolidated Financial Statements.
17

PSEG POWER LLC
CONDENSED CONSOLIDATED STATEMENTS OF MEMBER’S EQUITY
Millions
(Unaudited)
 
 Contributed Capital Basis AdjustmentRetained
Earnings
Accumulated
Other
Comprehensive
Income (Loss)
   Total
Balance as of June 30, 2020 $2,214 $(986)$5,246 $(374)$6,100 
Net Income — — 254 — 254 
Other Comprehensive Income (Loss), net of tax (expense) benefit of $1 — — — 
Comprehensive Income  254 
Cash Dividends Paid —  — (175)— (175)
Balance as of September 30, 2020 $2,214  $(986)$5,325 $(374)$6,179 
Balance as of June 30, 2019 $2,214 $(986)$5,126 $(354)$6,000 
Net Income — — 53 — 53 
Other Comprehensive Income (Loss), net of tax (expense) benefit of $1 — — — (5)(5)
Comprehensive Income  48 
Cash Dividends Paid — — (275)— (275)
Balance as of September 30, 2019 $2,214  $(986)$4,904 $(359)$5,773 
 
 Contributed Capital Basis AdjustmentRetained
Earnings
Accumulated
Other
Comprehensive
Income (Loss)
   Total
Balance as of December 31, 2019 $2,214  $(986)$5,063 $(401)$5,890 
Net Income —  — 437 — 437 
Other Comprehensive Income (Loss), net of tax (expense) benefit of $(16) —  — — 27 27 
Comprehensive Income  464 
Cash Dividends Paid —  — (175)— (175)
Balance as of September 30, 2020 $2,214  $(986)$5,325 $(374)$6,179 
Balance as of December 31, 2018 $2,214  $(986)$5,051 $(319)$5,960 
Net Income —  — 309 — 309 
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 $(26) —  — — 29 29 
Comprehensive Income  338 
Cash Dividends Paid —  — (525)— (525)
Balance as of September 30, 2019 $2,214  $(986)$4,904 $(359)$5,773 
See disclosures regarding PSEG Power LLC included in the Notes to Condensed Consolidated Financial Statements.
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(UNAUDITED)
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Note 1. Organization, Basis of Presentation and Significant Accounting Policies
Organization
Public Service Enterprise Group Incorporated (PSEG) is a holding company with a diversified business mix within the energy industry. Its operations are primarily in the Northeastern and Mid-Atlantic United States and in other select markets. PSEG’s principal direct wholly owned subsidiaries are:
Public Service Electric and Gas Company (PSE&G)—which is a public utility engaged principally in the transmission of electricity and distribution of electricity and natural gas in certain areas of New Jersey. PSE&G is subject to regulation by the New Jersey Board of Public Utilities (BPU) and the Federal Energy Regulatory Commission (FERC). PSE&G also invests in 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 Operations Services Agreement (OSA); PSEG Energy Holdings L.L.C. (Energy Holdings), which primarily has investments in leveraged leases; and PSEG Services Corporation (Services), which provides certain management, administrative and general services to PSEG and its subsidiaries at cost.
Basis of Presentation
The 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.
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.
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) and ending periods shown in the Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2020. Restricted cash consists primarily of deposits received related to various construction projects at PSE&G.
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(UNAUDITED)
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PSE&GPSEG PowerOther (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 September 30, 2020
Cash and Cash Equivalents$224 $15 $727 $966 
Restricted Cash in Other Current Assets11 11 
Restricted Cash in Other Noncurrent Assets22 22 
Cash, Cash Equivalents and Restricted Cash$257 $15 $727 $999 
(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.
In the first quarter of 2020, 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. No adjustment was recorded in the third quarter of 2020. PSEG Power may continue to reverse the LOCOM adjustment in the fourth quarter of 2020, limited to the adjustment recorded in the three months ended March 31, 2020, if oil market pricing has additional recovery within the 2020 calendar year. However, downward adjustments in future quarters may be required if the market price of oil declines.
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 InstrumentsAccounting Standards Update (ASU) 2016-13, updated by ASU 2018-19, 2019-04, 2019-05, 2019-11 and 2020-02
This accounting standard provides a new model for recognizing credit losses on financial assets. The new model requires entities to use an estimate of expected credit losses that will be recognized as an impairment allowance rather than a direct write-down of the amortized cost basis. The estimate of expected credit losses is based on past events, current conditions and supportable forecasts over a reasonable period. For purchased financial assets with credit deterioration, a similar model is used; however, the initial allowance is added to the purchase price rather than reported as an allowance. Credit losses on available-
20


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(UNAUDITED)
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for-sale debt securities are measured in a manner similar to current GAAP; however, this standard requires those credit losses 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.
The standard is effective for annual and interim periods beginning after December 15, 2019. PSEG adopted this standard on January 1, 2020 on a modified retrospective basis. Upon adoption, PSE&G recorded an increase of $8 million to 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 FrameworkChanges to the Disclosure Requirements for Fair Value MeasurementASU 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 ContractASU 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. 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 ImpairmentASU 2017-04
This accounting standard requires an entity to perform its annual or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. Additionally, an entity should consider income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable.
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 InstrumentsASU 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 ReportingASU 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 September 30, 2020
Disclosure FrameworkChanges to the Disclosure Requirements for Defined Benefit PlansASU 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 TaxesASU 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 HedgingASU 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 in this standard will be applied prospectively. PSEG is currently analyzing the impact of this standard on its financial statements.
Accounting for Convertible Instruments and Contracts in an Entity’s Own EquityASU 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. Amendments in this standard 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. Early adoption is permitted. PSEG does not currently have any convertible debt or convertible preferred stock outstanding.
Codification Improvements to Callable Debt SecuritiesASU 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 and early adoption is not permitted. Amendments
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Table of Contents                    

in this standard will be applied prospectively. PSEG is currently analyzing the impact of this standard on its financial statements.

Note 3. Revenues
Nature of Goods and Services
The following is a description of principal activities by reportable segment from which PSEG, PSE&G and 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 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.
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
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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 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
PSE&GPSEG PowerOtherEliminationsConsolidated
Millions
Three Months Ended September 30, 2020
Revenues from Contracts with Customers
Electric Distribution$1,157 $$$$1,157 
Gas Distribution116 (4)112 
Transmission370 370 
Electricity and Related Product Sales
PJM
Third-Party Sales464 464 
Sales to Affiliates123 (123)
New York ISO36 36 
ISO New England13 13 
Gas Sales
Third-Party Sales14 14 
Sales to Affiliates50 (50)
Other Revenues from Contracts with Customers (A)76 13 162 (2)249 
Total Revenues from Contracts with Customers1,719 713 162 (179)2,415 
Revenues Unrelated to Contracts with Customers (B)(59)33 (19)(45)
Total Operating Revenues$1,660 $746 $143 $(179)$2,370 
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PSE&GPSEG PowerOther EliminationsConsolidated
Millions
Nine Months Ended September 30, 2020
Revenues from Contracts with Customers
Electric Distribution$2,529 $$$$2,529 
Gas Distribution1,125 (8)1,117 
Transmission1,114 1,114 
Electricity and Related Product Sales
 PJM
Third-Party Sales1,178 1,178 
         Sales to Affiliates355 (355)
New York ISO85 85 
ISO New England86 86 
Gas Sales
Third-Party Sales58 58 
Sales to Affiliates528 (528)
Other Revenues from Contracts with Customers (A)241 37 447 (3)722 
Total Revenues from Contracts with Customers5,009 2,327 447 (894)6,889 
Revenues Unrelated to Contracts with Customers (B)(10)322 312 
Total Operating Revenues$4,999 $2,649 $447 $(894)$7,201 
PSE&GPSEG PowerOther EliminationsConsolidated
Millions
Three Months Ended September 30, 2019
Revenues from Contracts with Customers
Electric Distribution$1,096 $$$$1,096 
Gas Distribution130 (5)125 
Transmission295 295 
Electricity and Related Product Sales
PJM
Third-Party Sales488 488 
Sales to Affiliates160 (160)
New York ISO38 38 
ISO New England37 37 
Gas Sales
Third-Party Sales12 12 
Sales to Affiliates58 (58)
Other Revenues from Contracts with Customers (A)64 13 141 (1)217 
Total Revenues from Contracts with Customers1,585 806 141 (224)2,308 
Revenues Unrelated to Contracts with Customers (B)19 (35)10 (6)
Total Operating Revenues$1,604 $771 $151 $(224)$2,302 
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PSE&GPSEG PowerOther EliminationsConsolidated
Millions
Nine Months Ended September 30, 2019
Revenues from Contracts with Customers
Electric Distribution$2,613 $$$$2,613 
Gas Distribution1,272 (11)1,261 
Transmission887 887 
Electricity and Related Product Sales
 PJM
Third-Party Sales1,426 1,426 
         Sales to Affiliates416 (416)
New York ISO108 108 
ISO New England85 85 
Gas Sales
Third-Party Sales70 70 
Sales to Affiliates639 (639)
Other Revenues from Contracts with Customers (A)196 37 406 (3)636 
Total Revenues from Contracts with Customers4,968 2,781 406 (1,069)7,086 
Revenues Unrelated to Contracts with Customers (B)50 489 (27)512 
Total Operating Revenues$5,018 $3,270 $379 $(1,069)$7,598 
(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 September 30, 2020 and December 31, 2019. 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 12% and 6% of accounts receivable (including unbilled revenues in 2020) as of September 30, 2020 and December 31, 2019, 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 ReceivableAllowance 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 on the outstanding balances as of September 30, 2020. PSE&G’s electric bad debt expense is recoverable through its Societal Benefits Clause mechanism. As of September 30, 2020, PSE&G deferred approximately $19 million of 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 and nine months ended September 30, 2020:
Three Months Ended September 30, 2020
Millions
Balance as of June 30, 2020$121 
Utility Customer and Other Accounts
     Provision43 
     Write-offs, net of Recoveries of $1 million(6)
Balance as of September 30, 2020$158 
Nine Months Ended September 30, 2020
Millions
Balance as of January 1, 2020 (A)$68 
Utility Customer and Other Accounts
     Provision120 
     Write-offs, net of Recoveries of $4 million(30)
Balance as of September 30, 2020$158 
(A)Includes an $8 million pre-tax increase upon 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 September 30, 2020 and December 31, 2019.
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 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 September 30, 2020. 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 September 30, 2020 and December 31, 2019.
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 yet to be held and is not expected until mid-2021. PSEG Power expects to realize the following average capacity prices resulting from the base and incremental
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auctions, including unit specific bilateral contracts for previously cleared capacity obligations.
 
Delivery Year$ per MW-DayMW Cleared
June 2020 to May 2021$1677,600 
June 2021 to May 2022$1807,000 
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 2024 and the seven-year rate lock for BH5 through May 2026:
 
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$231480 
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.
Bilateral capacity contracts—Capacity obligations pursuant to contract terms through 2029 are anticipated to result in revenues totaling $146 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 2020 is $67 million and is 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)). These nuclear plants are expected to receive ZEC revenue for approximately three years, through May 2022, and will be obligated to maintain operations during that period, subject to 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. 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. For instance, the 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 decision awarding ZECs has been appealed by the New Jersey Rate Counsel. PSEG cannot predict the outcome of this matter.
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In October 2020, PSEG Power filed with the BPU its ZEC applications for Salem 1, Salem 2 and Hope Creek for the three-year eligibility period starting in June 2022. No other plants applied for ZECs for this eligibility period. The BPU’s schedule to consider these applications includes the BPU Staff issuing their preliminary findings regarding ZEC eligibility and the value of ZEC payments for this period in December 2020, followed by public and evidentiary hearings and a final BPU decision by April 2021. PSEG Power is not aware of any changes from its ZEC application for the first eligibility period that would materially affect its ability to establish eligibility to be awarded ZECs during the second eligibility period. PSEG cannot predict the outcome of either the BPU Staff’s preliminary findings or the BPU’s final determination.
In the event that (i) the ZEC program is overturned or is otherwise materially adversely modified through legal process; (ii) the amount of ZEC payments that may be awarded or other terms and conditions of the second ZEC eligibility period proposed by the BPU Staff in the December 2020 preliminary findings or by the BPU in its final decision 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 BPU and does not otherwise experience a material financial change, PSEG Power will take all necessary steps to cease to operate all of these plants. Alternatively, if all of the Salem 1, Salem 2 and Hope Creek plants are selected to continue to receive ZEC payments but 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 will take all necessary steps to cease to operate all of these plants and will incur associated costs and accounting charges. These may include, among other things, one-time impairment charges or accelerated Depreciation and Amortization Expense on the remaining carrying value of the plants, potential penalties associated with the early termination of capacity obligations and fuel contracts, accelerated asset retirement costs, severance costs, environmental remediation costs and, in certain circumstances potential additional funding of the Nuclear Decommissioning Trust Fund, which would be material to both PSEG and PSEG Power.
Non-Nuclear
In July 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 PSEG is in the preliminary stage of this evaluation, the marketing of a potential transaction in one or a series of steps is anticipated to launch in the fourth quarter of this year, and any potential transaction is expected to be completed sometime in 2021. As a result, PSEG Power performed a recoverability test for impairment of its portfolio of generating assets in the PJM, NYISO and NEPOOL regions using a weighted probability cash flow analysis that considers the likelihood of a potential sale or disposition or continuing to operate the assets through their remaining estimated useful lives. As of September 30, 2020, the estimated undiscounted future cash flows of each of the asset groups exceeded the carrying amount and no impairment was identified. However, certain assumptions are subject to change as the potential sales and marketing process progresses.
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. A change in the held-for-use classification of the remaining fossil and solar units may have a material adverse impact on PSEG’s and PSEG Power’s future financial results.
In September 2020, PSEG Power completed the sale of its ownership interest in the Yards Creek generation facility. PSEG Power recorded a pre-tax gain on disposition of approximately $122 million in the third quarter of 2020 as the sale price was greater than book value.
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
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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 paid 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 payment 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.
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&M Expense, respectively. Servco recorded $145 million and $124 million for the three months and $397 million and $357 million for the nine months ended September 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.
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—In July 2020, the BPU authorized regulated utilities in the State of New Jersey 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. In October 2020, the BPU broadened the scope of the docket to include all pandemic issues in a generic proceeding that will include submission of public comments and consideration of, among other things, the timing and scope of current and planned clean energy programs. other utility filings and mechanisms; utility financial strength; customer concerns; regulatory compliance and priorities; and ensuring the continued provision of safe and adequate service at just and reasonable rates, while recognizing the ramifications from the COVID-19 pandemic.
Each New Jersey utility regulated by the BPU must file a petition documenting its prudently incurred incremental COVID-19 costs 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 has made two quarterly filings as required by the BPU and recorded a Regulatory Asset of approximately $35 million in the third quarter of 2020 for net incremental costs which PSE&G believes are recoverable under the BPU order.
Clean Energy Future-Energy Efficiency (CEF-EE), a New Component of the Green Program Recovery Charge (GPRC)—In September 2020, the BPU approved PSE&G’s CEF-EE filing which provides for energy efficient investments of $1 billion over a three-year period. Costs will be recovered through the GPRC, with returns aligned with PSE&G’s most recent base rate case and a ten-year amortization period.
The approval also included a Conservation Incentive Program (CIP), a mechanism that will provide for recovery of lost electric and gas variable margin revenues. The CIP is effective in June 2021 for electric and October 2021 for gas. PSE&G will suspend its gas Weather Normalization Charge (WNC) when the gas CIP deferral period begins.
Transition Incentive Program, a New Component of the GPRC—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 the Transition Renewable Energy Certificate (TRECs) Program. 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
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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 August 2020, the BPU approved PSE&G’s request for increased rates of approximately $23 million annually for recovery of its expected share of TREC costs. These costs will be recovered as a new component of PSE&G’s existing electric GPRC, which is updated on an annual basis.
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.
Transmission Formula Rates—In October 2020, PSE&G filed its 2020 Annual Transmission Formula Rate Update with FERC which will result in $119 million in increased annual transmission revenue effective January 1, 2021, subject to true-up.
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. As a result of the FERC approval, PSE&G recorded a revenue reduction of approximately $38 million in the third quarter of 2020, fully offset by a reduction in Income Tax Expense. The refund will be provided to transmission ratepayers as a reduction to the 2021 transmission rates.
Basic Gas Supply Service (BGSS)—In September 2020, the BPU provisionally approved PSE&G’s request to maintain the current BGSS rate of 32 cents. This rate is subject to final approval.
Gas System Modernization Program II (GSMP II)—In July 2020, the BPU approved PSE&G’s GSMP II cost recovery petition requesting approximately $18 million 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 September 2020, PSE&G updated its GSMP II cost recovery petition seeking BPU approval to recover in gas base rates an estimated annual revenue increase of approximately $20 million effective December 1, 2020. This increase represents the return on and of GSMP II investments placed in service through August 31, 2020. This matter is pending.
Tax Adjustment Credit (TAC)—In October 2020, PSE&G made its annual 2020 TAC filing. The TAC allows for the flowback to customers of excess accumulated deferred income taxes resulting from the reduction of the federal income tax rates provided in the Tax Cuts and Jobs Act of 2017 (Tax Act) as well as the accumulated deferred income taxes from previously realized tax repair deductions and tax benefits from future tax repair deductions as realized. The 2020 TAC filing requests BPU approval to reduce electric revenues by approximately $23 million and increase gas revenues by $49 million on an annual basis starting January 1, 2021. This matter is pending.
In July 2020, the BPU gave final approval to PSE&G’s 2019 TAC filing that had been approved on a provisional basis in January 2020, with additional credits included in the final ruling. The final approval resulted in a reduction to electric and gas revenues of $25 million and $29 million, respectively, on an annual basis, effective July 16, 2020.
As discussed above, PSE&G received a PLR from the IRS in April 2020 that concluded that certain 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 in 2020 for electric and gas, respectively.
WNC—In September 2020, the BPU approved a provisional rate effective October 1, 2020 for the collection of $10 million from customers over the 2020-2021 Winter Period for the estimated undercollection resulting from the warmer-than-normal 2019-2020 Winter Period.
Remediation Adjustment Charge (RAC)—In September 2020, the BPU approved PSE&G’s RAC 27 filing requesting recovery of approximately $53 million in net manufactured gas plant remediation expenditures from August 1, 2018 through July 31, 2019.
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Note 7. Leases
PSEG and its subsidiaries are both a lessor and a lessee in operating leases. As of September 30, 2020, 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, 2019 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.
Energy Holdings is the lessor in an operating lease for a domestic energy generation facility with a remaining term through 2036. Energy Holdings was previously the lessor in operating leases for real estate assets which were sold in March 2020.
The following is the operating lease income for PSEG Power and Energy Holdings for the three and nine months ended September 30, 2020 and 2019:
PSEG PowerEnergy HoldingsTotal
Millions
Operating Lease Income
Three Months Ended September 30, 2020
Fixed Lease Income$$$
Variable Lease Income
Total Operating Lease Income$8 $4 $12 
Nine Months Ended September 30, 2020
Fixed Lease Income$$12 $12 
Variable Lease Income21 21 
Total Operating Lease Income$21 $12 $33 
Three Months Ended September 30, 2019
Fixed Lease Income$$$
Variable Lease Income
Total Operating Lease Income$7 $6 $13 
Nine Months Ended September 30, 2019
Fixed Lease Income$$17 $17 
Variable Lease Income19 19 
Total Operating Lease Income$19 $17 $36 

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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 September 30, 2020, 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 September 30, 2020, 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.”
As ofAs of
Outstanding Loans by Class of CustomersSeptember 30,
2020
December 31,
2019
Millions
Commercial/Industrial$144 $156 
Residential
Total151 164 
Current Portion (included in Accounts Receivable)(28)(28)
Noncurrent Portion (included in Long-Term Investments)$123 $136 
The solar loans originated under three Solar Loan Programs are comprised as follows:
ProgramsBalance as of September 30, 2020Funding ProvidedResidential Loan TermNon-Residential Loan Term
Millions
Solar Loan I$22 prior to 201310 years15 years
Solar Loan II72 prior to 201510 years15 years
Solar Loan III57 largely funded as of December 31, 201910 years10 years
Total$151 
The average life of loans paid in full is eight 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 September 30, 2020 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
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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.
In September 2020, wholly owned subsidiaries of PSEG Energy Holdings L.L.C. (the Sellers) completed the sale to Midwest Generation, LLC (the Buyer) of the Sellers’ ownership interests in the Powerton and Joliet generation facilities and related assets, including the assumption by the Buyer of related liabilities. The loss, net of taxes, resulting from the transaction was immaterial.
Leveraged leases outstanding as of September 30, 2020 commenced in or prior to 2000. The following table shows Energy Holdings’ gross and net lease investment as of September 30, 2020 and December 31, 2019.
As ofAs of
September 30,
2020
December 31,
2019
Millions
Lease Receivables (net of Non-Recourse Debt)$334 $498 
Estimated Residual Value of Leased Assets124 202 
Total Investment in Rental Receivables458 700 
Unearned and Deferred Income(141)(203)
Gross Investments in Leases317 497 
Deferred Tax Liabilities(131)(328)
Net Investments in Leases$186 $169 
The corresponding receivables associated with the lease portfolio are reflected as follows, net of non-recourse debt. The ratings in the table represent the ratings of the entities providing payment assurance to Energy Holdings.
Lease Receivables, Net of
Non-Recourse Debt
Counterparties' Standard & Poor's (S&P) Credit Rating as of September 30, 2020
As of September 30, 2020
Millions
AA$
A-54 
BBB+ to BBB236 
NR35 
Total$334 
The “NR” rating in the preceding table represent lease receivables related to Shawville Units 1, 2, 3 and 4. The Shawville Units, wholly owned by PSEG, are 596 MW gas-fired assets located in Pennsylvania and Shawville Power, LLC is the lease counterparty. As of September 30, 2020, the gross investment in the lease of Shawville assets, net of non-recourse debt, was $72 million ($4 million, net of deferred taxes). The credit exposure for that lease is partially mitigated through a letter of credit supporting the lease payments that are required within the lease structure.
PSEG believes no credit losses are necessary for the leveraged leases existing on September 30, 2020. 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.
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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 September 30, 2020
CostGross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
 Millions
Equity Securities
Domestic$517 $257 $(13)$761 
International381 101 (24)458 
Total Equity Securities898 358 (37)1,219 
Available-for-Sale Debt Securities
Government527 30 557 
Corporate550 35 (3)582 
Total Available-for-Sale Debt Securities1,077 65 (3)1,139 
Total NDT Fund Investments (A)$1,975 $423 $(40)$2,358 
(A)The NDT Fund Investments table excludes foreign currency of $1 million as of September 30, 2020, which is part of the NDT Fund.
As of December 31, 2019
CostGross
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.
Net unrealized gains (losses) on debt securities of $36 million (after-tax) were included in Accumulated Other Comprehensive Loss on PSEG’s and PSEG Power’s Condensed Consolidated Balance Sheets as of September 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 nine months ended September 30, 2020. The portion of net unrealized gains related to equity securities still held as of September 30, 2020 recognized during the third quarter and first nine months of 2020 was $48 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.
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As ofAs of
September 30,
2020
December 31,
2019
Millions
Accounts Receivable$13 $11 
Accounts Payable$26 $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 September 30, 2020As 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$142 $(10)$$(3)$21 $(1)$$(3)
International68 (13)26 (11)28 (2)34 (9)
Total Equity Securities210 (23)30 (14)49 (3)40 (12)
Available-for-Sale Debt Securities
Government (B)63 99 (2)30 
Corporate (C)54 (2)(1)49 12 (1)
Total Available-for-Sale Debt Securities117 (2)(1)148 (2)42 (1)
NDT Trust Investments$327 $(25)$39 $(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.
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The proceeds from the sales of and the net gains (losses) on securities in the NDT Fund were:
Three Months EndedNine Months Ended
September 30,September 30,
2020201920202019
Millions
Proceeds from NDT Fund Sales (A)$583 $365 $1,631 $1,245 
Net Realized Gains (Losses) on NDT Fund
Gross Realized Gains$91 $27 $161 $90 
Gross Realized Losses(23)(11)(77)(43)
Net Realized Gains (Losses) on NDT Fund (B)68 16 84 47 
Unrealized Gains (Losses) on Equity Securities34 (21)(5)111 
Impairment of Available-for-Sale Debt Securities (C)(3)
Net Gains (Losses) on NDT Fund Investments$102 $(5)$76 $158 
(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.
(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.
The NDT Fund debt securities held as of September 30, 2020 had the following maturities:
Time FrameFair Value
 Millions
Less than one year$25 
1 - 5 years276 
6 - 10 years205 
11 - 15 years79 
16 - 20 years76 
Over 20 years478 
Total NDT Available-for-Sale Debt Securities$1,139 
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.
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.”
The following tables show the fair values, gross unrealized gains and losses and amortized cost basis for the securities held in the Rabbi Trust.
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As of September 30, 2020
CostGross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
Millions
Domestic Equity Securities$20 $$$27 
Available-for-Sale Debt Securities
Government91 100 
Corporate124 10 134 
Total Available-for-Sale Debt Securities215 19 234 
Total Rabbi Trust Investments$235 $26 $0 $261 
As of December 31, 2019
CostGross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
Millions
Domestic Equity Securities$21 $$$28 
Available-for-Sale Debt Securities
Government100 104 
Corporate107 114 
Total Available-for-Sale Debt Securities207 11 218 
Total Rabbi Trust Investments$228 $18 $0 $246 
Net unrealized gains (losses) on debt securities of $13 million (after-tax) were included in Accumulated Other Comprehensive Loss on PSEG’s Condensed Consolidated Balance Sheet as of September 30, 2020. The portion of net unrealized gains recognized during the third quarter and first nine months of 2020 related to equity securities still held as of September 30, 2020 was $2 million and less than $1 million, respectively.
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
September 30,
2020
December 31,
2019
 Millions
Accounts Receivable$$
Accounts Payable$$
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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 September 30, 2020As 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)$21 $$$$26 $$$
Corporate (B)18 11 
Total Available-for-Sale Debt Securities39 37 
Rabbi Trust Investments$39 $0 $2 $0 $37 $0 $5 $0 
(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.
The proceeds from the sales of and the net gains on securities in the Rabbi Trust Fund were:
Three Months EndedNine Months Ended
September 30,September 30,
2020201920202019
Millions
Proceeds from Rabbi Trust Sales (A)$50 $43 $165 $129 
Net Realized Gains (Losses) on Rabbi Trust:
Gross Realized Gains$$$14 $
Gross Realized Losses(1)(2)(4)(3)
Net Realized Gains (Losses) on Rabbi Trust (B)3 1 10 2 
Unrealized Gains (Losses) on Equity Securities
Net Gains (Losses) on Rabbi Trust Investments$5 $2 $11 $6 
(A)Includes activity in accounts related to the liquidation of funds being transitioned to new managers.
(B)The cost of these securities was determined on the basis of specific identification.
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The Rabbi Trust debt securities held as of September 30, 2020 had the following maturities:
Time FrameFair Value
 Millions
Less than one year$
1 - 5 years35 
6 - 10 years35 
11 - 15 years14 
16 - 20 years32 
Over 20 years118 
Total Rabbi Trust Available-for-Sale Debt Securities$234 
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 is detailed as follows:
As ofAs of
September 30,
2020
December 31,
2019
 Millions
PSE&G$51 $48 
PSEG Power65 62 
Other145 136 
Total Rabbi Trust Investments$261 $246 

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 BenefitsOPEBPension BenefitsOPEB
Three Months EndedThree Months EndedNine Months EndedNine Months Ended
September 30,September 30,September 30,September 30,
20202019202020192020201920202019
Millions
Components of Net Periodic Benefit (Credits) Costs
Service Cost (included in O&M Expense)$36 $33 $$$106 $90 $$
Non-Service Components of Pension and OPEB (Credits) Costs
Interest Cost48 51 12 144 167 25 34 
Expected Return on Plan Assets(111)(108)(10)(9)(332)(301)(29)(27)
Amortization of Net
Prior Service Credit(3)(4)(32)(32)(8)(13)(96)(96)
Actuarial Loss23 21 12 13 69 75 35 38 
Non-Service Components of Pension and OPEB (Credits) Costs(43)(40)(22)(16)(127)(72)(65)(51)
Total Benefit (Credits) Costs$(7)$(7)$(20)$(14)$(21)$18 $(58)$(44)
Pension and OPEB (credits) costs for PSE&G, PSEG Power and PSEG’s other subsidiaries, excluding Servco, are detailed as follows:
Pension BenefitsOPEBPension BenefitsOPEB
Three Months EndedThree Months EndedNine Months EndedNine Months Ended
September 30,September 30,September 30,September 30,
20202019202020192020201920202019
Millions
PSE&G$(7)$(6)$(19)$(14)$(20)$$(57)$(46)
PSEG Power(1)(2)(4)
Other(1)(1)
Total Benefit (Credits) Costs$(7)$(7)$(20)$(14)$(21)$18 $(58)$(44)
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.
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. As of September 30, 2020, Servco completed its entire 2020 annual planned contribution into its pension plan. 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 did not impact
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Servco’s pension contributions in 2020. Servco’s pension-related revenues and costs were $15 million and $14 million for the three months ended September 30, 2020 and 2019, respectively, and $30 million and $28 million for the nine months ended September 30, 2020 and 2019, respectively. The OPEB-related revenues earned and costs incurred were $3 million and $1 million for the three months ended September 30, 2020 and 2019, and $7 million and $4 million for the nine months ended September 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 September 30, 2020 and December 31, 2019.
As ofAs of
September 30, 2020December 31, 2019
Millions
Face Value of Outstanding Guarantees$1,828 $1,854 
Exposure under Current Guarantees$86 $171 
Letters of Credit Margin Posted$135 $121 
Letters of Credit Margin Received$42 $29 
Cash Deposited and Received:
Counterparty Cash Collateral Deposited$$
Counterparty Cash Collateral Received$(1)$(4)
  Net Broker Balance Deposited (Received)$57 $48 
Additional Amounts Posted:
Other Letters of Credit$52 $82 
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 May 2020, the CPG submitted a revised draft 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 incorporated the EPA’s comments on an earlier FS draft. The EPA’s selection of its preferred adaptive management scenario will be subject to public review and comment prior to the EPA’s announcement of a final selection, which is expected in 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 September 30, 2020, PSEG has approximately $65 million accrued for this matter. Of this amount, PSE&G has 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 an Other Noncurrent Liability 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.
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 $339 million and $377 million on an undiscounted basis through 2023, 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 $339 million as of September 30, 2020. Of this amount, $78 million was recorded in Other Current Liabilities and $261 million was reflected as Environmental Costs in Noncurrent Liabilities. PSE&G has recorded a $339 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 conducting 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) 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 PSE&G by the property owners, Newport Associates Development Company (NADC) and Newport Associates Phase I
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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. In 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 of an immaterial 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
PSE&G obtains its electric supply requirements through the annual New Jersey BGS auctions for two categories of customers who 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 and Industrial Energy Pricing (CIEP)). Pursuant to applicable BPU rules, PSE&G enters into the Supplier Master Agreement with the winners of these 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) are responsible for fulfilling all the requirements of a PJM Load-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.
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, 2020 is $359.98 per MW-day, replacing the BGS-CIEP auction year price ending May 31, 2020 of $281.78 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
2017201820192020
36-Month Terms EndingMay 2020May 2021May 2022May 2023(A) 
Load (MW)2,8002,9002,8002,800
$ per MWh$90.78$91.77$98.04$102.16
(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 Jersey BGS auction process, described above.
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.
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
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were selected to receive ZEC revenue for approximately three years, through May 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.
As of September 30, 2020, the total minimum purchase requirements included in these commitments were as follows:
Fuel TypePSEG Power’s Share of Commitments through 2024
Millions
Nuclear Fuel
Uranium$180 
Enrichment$279 
Fabrication$152 
Natural Gas$1,164 
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 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. LIPA also initiated its own review of PSEG LI’s performance. PSEG LI agreed with LIPA that it would fund claims by customers for food and medication spoilage costs incurred as a result of being without electric service during the storm up to the amount of incentive compensation earned by PSEG LI in 2020. PSEG LI does not expect the claims to be material. PSEG LI is fully cooperating in each of these inquiries, which remain ongoing. PSEG LI cannot predict their outcome.
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
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subsidiary of PSEG Power, regarding an ongoing dispute with Durr Mechanical Construction, Inc. (Durr), a contractor on the 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 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.
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 coronavirus pandemic has not had a material impact on our results of operations, financial condition or cash flows for the nine months ended September 30, 2020. However, 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 nine months ended September 30, 2020:
PSEG
issued $550 million of 0.80% Senior Notes due August 2025, and
issued $550 million of 1.60% Senior Notes due August 2030.
PSE&G
issued $300 million of 2.45% Secured Medium-Term Notes, Series N, due January 2030,
issued $300 million of 3.15% Secured Medium-Term Notes, Series N, due January 2050,
issued $375 million of 2.70% Secured Medium-Term Notes, Series N, due May 2050,
issued $375 million of 2.05% Secured Medium-Term Notes, Series N, due August 2050, and
retired $250 million of 3.50% Medium-Term Notes, Series G, at maturity.
PSEG Power
retired $406 million of 5.13% Senior Notes at maturity.
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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.
The commitments under the $4.2 billion credit facilities are provided by a diverse bank group. As of September 30, 2020, the total available credit capacity was $4.0 billion.
As of September 30, 2020, no single institution represented more than 9% of the total commitments in the credit facilities.
As of September 30, 2020, total credit capacity was in excess of the total anticipated maximum liquidity requirements over PSEG’s 12-month planning horizon.
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 September 30, 2020 were as follows:
As of September 30, 2020
Company/FacilityTotal
Facility
Usage (D)Available
Liquidity
Expiration
Date
Primary Purpose
Millions
PSEG
  5-year Credit Facilities (A)$1,500 $13 $1,487 Mar 2024Commercial Paper Support/Funding/Letters of Credit
Total PSEG$1,500 $13 $1,487 
PSE&G
  5-year Credit Facility (B)$600 $17 $583 Mar 2024Commercial Paper Support/Funding/Letters of Credit
Total PSE&G$600 $17 $583 
PSEG Power
  3-year Letter of Credit Facilities$200 $136 $64 Sept 2021Letters of Credit
  5-year Credit Facilities (C)1,900 39 1,861 Mar 2024Funding/Letters of Credit
Total PSEG Power$2,100 $175 $1,925 
Total$4,200 $205 $3,995 
(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 September 30, 2020, PSEG and PSE&G had no commercial paper outstanding.
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. In April 2020, PSEG entered into two 364-day variable rate term loan agreements for $200 million and $300 million which were prepaid in August 2020.
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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 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 September 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 September 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 $(2) million and $(5) million as of September 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 $(11) million and $(15) million as of September 30, 2020 and December 31, 2019, respectively. The after-tax unrealized losses on these hedges expected to be reclassified to earnings during the next 12 months are $(4) 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.
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As of September 30, 2020
PSEG Power (A)PSEG (A)Consolidated
Not DesignatedCash Flow Hedges
Balance Sheet LocationEnergy-
Related
Contracts
Netting
(B)
Total
PSEG Power
Interest
Rate
Swaps
Total
Derivatives
Millions
Derivative Contracts
Current Assets$383 $(337)$46 $$46 
Noncurrent Assets133 (116)17 17 
Total Mark-to-Market Derivative Assets$516 $(453)$63 $0 $63 
Derivative Contracts
Current Liabilities$(333)$327 $(6)$(2)$(8)
Noncurrent Liabilities(126)125 (1)(1)
Total Mark-to-Market Derivative (Liabilities)$(459)$452 $(7)$(2)$(9)
Total Net Mark-to-Market Derivative Assets (Liabilities)$57 $(1)$56 $(2)$54 
As of December 31, 2019
PSEG Power (A)PSEG (A)Consolidated
Not DesignatedCash Flow Hedges
Balance Sheet LocationEnergy-
Related
Contracts
Netting
(B)
Total
PSEG Power
Interest
Rate
Swaps
Total
Derivatives
 Millions
Derivative Contracts
Current Assets$636 $(523)$113 $$113 
Noncurrent Assets163 (139)24 24 
Total Mark-to-Market Derivative Assets$799 $(662)$137 $0 $137 
Derivative Contracts
Current Liabilities$(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 September 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 September 30, 2020 and December 31, 2019, PSEG Power had net cash collateral (receipts) payments to counterparties of $56 million and $44 million, respectively. Of these net cash collateral (receipts) payments, $(1) million and $(2) million as of September 30, 2020 and December 31, 2019, respectively, were netted against the corresponding net derivative contract positions. Of the $(1) million as of September 30, 2020, $(11) million was netted against current assets, $(1) million was netted against noncurrent assets, and $11 million was netted against noncurrent liabilities. Of the $(2) million as of December 31, 2019, $(1) million was netted against current assets and $(1) million was netted against noncurrent assets.
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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 S&P or Moody’s ratings. 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 $16 million and $35 million as of September 30, 2020 and December 31, 2019, respectively. As of September 30, 2020 and December 31, 2019, PSEG Power had the contractual right of offset of $11 million and $2 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 $5 million and $33 million as of September 30, 2020 and December 31, 2019, respectively, related to its derivatives, net of the contractual right of offset under master agreements and the application of collateral.
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 and nine months ended September 30, 2020 and 2019:
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
September 30,September 30,
2020201920202019
MillionsMillions
PSEG
Interest Rate Swaps$$Interest Expense$(5)$(1)
Total PSEG$0 $0 $(5)$(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
Nine Months EndedNine Months Ended
September 30,September 30,
2020201920202019
MillionsMillions
PSEG
Interest Rate Swaps$(6)$(24)Interest Expense$(11)$(2)
Total PSEG$(6)$(24)$(11)$(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 nine months ended September 30, 2020, the amount of gain or loss on interest rate hedges reclassified from Accumulated Other Comprehensive Income (Loss) into income was $(4) million and $(8) 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 nine months ended September 30, 2019 was $(1) million.
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.
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Accumulated Other Comprehensive Income (Loss)Pre-TaxAfter-Tax
Millions
Balance as of December 31, 2018$(2)$(1)
Loss Recognized in AOCI(23)(17)
Less: Loss Reclassified into Income
Balance as of December 31, 2019$(21)$(15)
Loss Recognized in AOCI(6)(4)
Less: Loss Reclassified into Income11 
Balance as of September 30, 2020$(16)$(11)
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 and nine months ended September 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 HedgesLocation of Pre-Tax
Gain (Loss)
Recognized in Income
on Derivatives
Pre-Tax Gain (Loss) Recognized in Income on Derivatives
Three Months EndedNine Months Ended
September 30,September 30,
2020201920202019
Millions
PSEG and PSEG Power
Energy-Related ContractsOperating Revenues$(49)$(76)$155 $385 
Energy-Related ContractsEnergy Costs15 (3)(51)(77)
Total PSEG and PSEG Power$(34)$(79)$104 $308 
The following table summarizes the net notional volume purchases/(sales) of open derivative transactions by commodity as of September 30, 2020 and December 31, 2019.
TypeNotionalTotalPSEGPSEG PowerPSE&G
Millions
As of September 30, 2020
Natural GasDekatherm (Dth)266 266 
ElectricityMWh(58)(58)
Financial Transmission Rights (FTRs)MWh26 26 
Interest Rate SwapsU.S. Dollars700 700 
As of December 31, 2019
Natural GasDth341 341 
ElectricityMWh(62)(62)
FTRsMWh13 13 
Interest Rate SwapsU.S. Dollars700 700 
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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 September 30, 2020. 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 September 30, 2020, 99% 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).
RatingCurrent
Exposure
Securities Held as CollateralNet
Exposure
Number of
Counterparties
>10%
Net Exposure of
Counterparties
>10%
MillionsMillions
Investment Grade$244 $34 $210 $120 (A)
Non-Investment Grade  
Total$246 $34 $212 3 $120 
(A)Represents net exposure of $50 million with PSE&G and $70 million with two non-affiliated counterparties.
As of September 30, 2020, collateral held from counterparties where PSEG Power had credit exposure included $1 million in cash collateral and $33 million in letters of credit.
As of September 30, 2020, PSEG Power had 128 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 September 30, 2020, 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. As of September 30, 2020, 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.
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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 September 30, 2020 and December 31, 2019, 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 September 30, 2020
DescriptionTotal
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)$810 $$810 $$
Derivative Contracts:
Energy-Related Contracts (B)$63 $(453)$28 $486 $
NDT Fund (C)
Equity Securities$1,219 $$1,218 $$
Debt Securities—U.S. Treasury$203 $$$203 $
Debt Securities—Govt Other$354 $$$354 $
Debt Securities—Corporate$582 $$$582 $
Rabbi Trust (C)
Equity Securities$27 $$27 $$
Debt Securities—U.S. Treasury$57 $$$57 $
Debt Securities—Govt Other$43 $$$43 $
Debt Securities—Corporate$134 $$$134 $
Liabilities:
Derivative Contracts:
Energy-Related Contracts (B)$(7)$452 $(17)$(440)$(2)
Interest Rate Swaps (D)$(2)$$$(2)$
PSE&G
Assets:
Cash Equivalents (A)$135 $$135 $$
Rabbi Trust (C)
Equity Securities$$$$$
Debt Securities—U.S. Treasury$11 $$$11 $
Debt Securities—Govt Other$$$$$
Debt Securities—Corporate$27 $$$27 $
PSEG Power
Assets:
Derivative Contracts:
Energy-Related Contracts (B)$63 $(453)$28 $486 $
NDT Fund (C)
Equity Securities$1,219 $$1,218 $$
Debt Securities—U.S. Treasury$203 $$$203 $
Debt Securities—Govt Other$354 $$$354 $
Debt Securities—Corporate$582 $$$582 $
Rabbi Trust (C)
Equity Securities$$$$$
Debt Securities—U.S. Treasury$14 $$$14 $
Debt Securities—Govt Other$11 $$$11 $
Debt Securities—Corporate$33 $$$33 $
Liabilities:
Derivative Contracts:
Energy-Related Contracts (B)$(7)$452 $(17)$(440)$(2)
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Recurring Fair Value Measurements as of December 31, 2019
DescriptionTotalNetting  (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 $$1,150 $$
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)$$$(5)$
PSE&G
Assets:
Rabbi Trust (C)
Equity Securities$$$$$
Debt Securities—U.S. Treasury$11 $$$11 $
Debt Securities—Govt Other$$$$$
Debt Securities—Corporate$23 $$$23 $
PSEG Power
Assets:
Derivative Contracts:
Energy-Related Contracts (B)$137 $(662)$19 $770 $10 
NDT Fund (C)
Equity Securities$1,151 $$1,150 $$
Debt Securities—U.S. Treasury$225 $$$225 $
Debt Securities—Govt Other$352 $$$352 $
Debt Securities—Corporate$486 $$$486 $
Rabbi Trust (C)
Equity Securities$$$$$
Debt Securities—U.S. Treasury$14 $$$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.
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 September 30, 2020 and December 31, 2019, respectively. 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.
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 nonperformance 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 nonperformance risk by counterparty. The impacts of credit and nonperformance 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 September 30, 2020 and December 31, 2019.
Quantitative Information About Level 3 Fair Value Measurements
Significant
Level 3Fair Value as ofValuationUnobservableArithmetic
CommodityPositionSeptember 30, 2020Technique(s) InputRangeAverage
Assets(Liabilities)
Millions
PSEG Power
ElectricityElectric Load Contracts$$(1)Discounted Cash flowLoad Shaping Cost0% to 12%4%
GasGas Physical Contracts(1)Discounted Cash flowHistorical Basis Adjustment(50)% to (20)%(31)%
Total PSEG Power$2 $(2)
Total PSEG$2 $(2)
Quantitative Information About Level 3 Fair Value Measurements
Significant
Fair Value as ofValuationUnobservable
CommodityLevel 3 PositionDecember 31, 2019Technique(s) InputRange
Assets(Liabilities)
Millions
PSEG Power
ElectricityElectric Load Contracts$10 $Discounted Cash flowHistoric Load Variability0% to 10%
GasGas Physical Contracts(3)Discounted Cash flowAverage Historical Basis(50)% to 0%
Total PSEG Power$10 $(3)
Total PSEG$10 $(3)
As of September 30, 2020, 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.
A reconciliation of the beginning and ending balances of Level 3 derivative contracts and securities for the three months and nine months ended September 30, 2020 and September 30, 2019, respectively, follows:

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Changes in Level 3 Assets and (Liabilities) Measured at Fair Value on a Recurring Basis
for the Three Months and Nine Months Ended September 30, 2020
Three Months Ended September 30, 2020
DescriptionBalance as of June 30, 2020Total Gains or (Losses)
Realized/Unrealized Included in Income (A)
Purchases
(Sales)
Issuances/
Settlements
(B)
Transfers
In/Out (C)
Balance as of September 30, 2020
Millions
PSEG and PSEG Power
Net Derivative Assets (Liabilities)$10 $(2)$$(8)$$
Nine Months Ended September 30, 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 September 30, 2020
Millions
PSEG and PSEG Power
Net Derivative Assets (Liabilities)$$$$(14)$$
Changes in Level 3 Assets and (Liabilities) Measured at Fair Value on a Recurring Basis
for the Three Months and Nine Months Ended September 30, 2019
Three Months Ended September 30, 2019
DescriptionBalance as of June 30, 2019Total Gains or (Losses)
Realized/Unrealized Included in Income (A)
Purchases
(Sales)
Issuances/
Settlements
(B)
Transfers
In/Out
(C)
Balance as of September 30, 2019
Millions
PSEG and PSEG Power
Net Derivative Assets (Liabilities)$$$$(4)$$
Nine Months Ended September 30, 2019
DescriptionBalance as of December 31, 2018Total Gains or (Losses)
Realized/Unrealized Included in Income (A)
Purchases
(Sales)
Issuances/
Settlements
(B)
Transfers
In/Out (C)
Balance as of September 30, 2019
Millions
PSEG and PSEG Power
Net Derivative Assets (Liabilities)$$10 $$(10)$$
(A)Unrealized gains (losses) in the following table represent the change in derivative assets and liabilities still held as of September 30, 2020 and 2019.
.




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Three Months Ended September 30,Nine Months Ended September 30,
2020201920202019
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$(2)$(11)$(2)$(4)$12 $(9)$14 $
Energy Costs(5)(4)(4)
Total$(2)$(10)$$(2)$$(7)$10 $
(B)Includes settlements of $(8) million and $(14) million for the three months and nine months ended September 30, 2020, respectively, and $(3) million and $(9) million for the three months and nine months ended September 30, 2019, respectively.
(C)There were no transfers into or out of Level 3 during the three months and nine months ended September 30, 2020 and 2019.
As of September 30, 2020, PSEG carried $3.5 billion of net assets that are measured at fair value on a recurring basis, of which balances measured using unobservable inputs and classified as Level 3 within the fair value hierarchy were immaterial.
As of September 30, 2019, PSEG carried $2.4 billion of net assets that are measured at fair value on a recurring basis, of which $1 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 values of instruments with similar terms, credit ratings, remaining maturities and redemptions as of September 30, 2020 and December 31, 2019.
As ofAs of
September 30, 2020December 31, 2019
Carrying
Amount
Fair
Value
Carrying
Amount
Fair
Value