Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

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Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

This combined Form 10-K is separately filed by PSEG and PSE&G. Information contained herein relating to any individual company is filed by such company on its own behalf. PSE&G makes representations only as to itself and makes no representations as to any other company.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

Public Service Enterprise Group Incorporated

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Public Service Enterprise Group Incorporated and subsidiaries (the “Company” or PSEG) as of December 31, 2021 and 2020, the related consolidated statements of operations, comprehensive income, stockholders' equity, and cash flows, for each of the three years in the period ended December 31, 2021, the related notes and the consolidated financial statement schedule listed in the Index at Item 15(B)(a) (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 24, 2022, expressed an unqualified opinion on the Company's internal control over financial reporting.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Asset Retirement Obligations (“AROs”) - Nuclear Decommissioning- Refer to Notes 4 and 13 to the financial statements

Critical Audit Matter Description

PSEG’s wholly-owned subsidiary PSEG Power LLC (PSEG Power) owns and operates nuclear plants and has recorded associated asset retirement obligations (AROs) for their eventual decommissioning. In estimating its AROs for the nuclear plants, PSEG Power develops probability-weighted cash flow scenarios which, on a unit-by-unit basis, consider multiple outcome scenarios that include significant estimates and assumptions, and are based on third-party decommissioning cost estimates, cost escalation rates, inflation rates, and discount rates. Management updates its cost studies triennially unless circumstances warrant more frequent updates. The most recent cost study was performed in 2021.

We identified nuclear decommissioning AROs as a critical audit matter because of the significant estimates and assumptions made by management and management’s specialist in determining the recorded AROs. Auditing each of these assumptions required a high degree of auditor judgment and, for certain assumptions and cost studies, the use of environmental and fair value specialists.

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How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the nuclear decommissioning ARO included the following, among others:

We tested the effectiveness of controls over assumptions used in the calculation, including the evaluation of retirement date assumptions, cost estimates, and the probability weighting of the various cash flow scenarios.
We evaluated management’s assumptions used in calculating the recorded nuclear decommissioning ARO balance including estimates of spent fuel cost reimbursements and weighted probabilities of various cash flow scenarios considering potential early retirement of the New Jersey nuclear plants and decommissioning methods.
With the assistance of our environmental specialists and internal fair value specialists, we evaluated management’s judgments related to significant assumptions used in calculating the ARO including estimated decommissioning costs, discount rate, and inflation rate by:

◦Evaluating the experience, qualifications, and objectivity of management’s specialist;

◦Understanding the methodology used by management in developing estimates of the nuclear ARO;

◦Assessing the basis of and supporting evidence for information used in the determination of significant ARO assumptions;

◦Testing the mathematic accuracy of the models used to calculate the ARO;

We evaluated the disclosures related to the estimated nuclear decommissioning costs, including the balances recorded.

Asset Dispositions –Sale of Fossil Assets — Refer to Note 4 to the financial statements

Critical Audit Matter Description

As disclosed in Note 4, in August 2021, PSEG entered into agreements to sell PSEG Power’s entire portfolio of fossil generating assets to newly formed subsidiaries of ArcLight Energy Partners Fund VII, L.P. As a result of the Board of Directors’ approval of the transactions, PSEG fossil generating assets and liabilities to be disposed were reclassified to Assets and Liabilities Held for Sale. During 2021, PSEG recorded impairment losses of approximately $2,691 million associated with the planned disposition of the fossil assets.

We identified the accounting for the sale of the fossil assets as a critical audit matter because the transaction relates to accounts and disclosures that are material to the financial statements and the evaluation of the applicable accounting guidance was complex. Further, auditing the transactions involved extensive audit effort, including the use of professionals with specialized skill and knowledge to assist in performing procedures related to the timing of recognition of the impairments and in the evaluation of the presentation and disclosure in the financial statements.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the accounting for the sale of the fossil assets included the following, among others:

We tested the effectiveness of controls over management’s impairment tests, including considerations of asset groupings, the timing of impairment charges recorded, the significant inputs utilized to determine estimated undiscounted cash flows, and the weighted probabilities assigned to the outcome of various scenarios.
We tested the effectiveness of controls over management’s evaluation for the accounting for sale of the assets, including considerations as to the timing of meeting the classification of assets and liabilities held for sale, the amounts recorded as assets and liabilities held for sale, impairment charges recorded, and evaluation of the presentation and disclosure in the financial statements.
For impairment tests performed prior to the signing of the sale agreements, we evaluated the weighted probabilities assigned to the outcomes of various cash flow scenarios. Additionally, with the assistance of our fair value specialists, we evaluated the significant inputs and assumptions utilized within management’s impairment tests, including forward power prices, fuel costs, dispatch rates and estimates of the fair value to be received upon any disposition of assets.
We obtained and read the sale agreements and, with the assistance of professionals with specialized skills and knowledge, evaluated management’s conclusions on the accounting treatment for the sale agreements.
We evaluated the disclosures related to the sale of fossil assets, including the balances recorded.

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Regulatory Assets and Liabilities – Income Taxes —Refer to Notes 1, 7, and 22 to the financial statements

Critical Audit Matter Description

PSEG’s subsidiary, Public Service Electric and Gas Company (PSE&G), is an electric and gas transmission and distribution utility regulated by the Board of Public Utilities (BPU) and the Federal Energy Regulatory Commission. Management believes that PSE&G’s transmission and distribution businesses continue to meet the accounting requirements for rate-regulated entities, and PSE&G’s financial statements reflect the economic effects of cost-based rate regulation. Through the rate-making process, PSE&G’s rates to customers also include the recovery of income tax expense associated with PSE&G’s electric and gas distribution and electric transmission operations. PSE&G has recorded regulatory liabilities for excess accumulated deferred income taxes (ADIT) which will be refunded to customers in future periods. PSE&G’s most recent electric and gas distribution base rate case, concluded in 2018, established the tax adjustment credit (TAC) that provides for the refund of these excess ADIT regulatory liabilities as well as the flow through to customers of historical and current accumulated deferred income taxes for tax-deductible repairs. The flow through of the tax benefits results in lower revenues and lower income tax expense, as well as the recognition of a regulatory asset as management believes it is probable that the accumulated tax benefits treated as a flow-through item to PSE&G customers will be recovered from customers in the future.

We identified the accounting for the TAC as a critical audit matter due to the complexity in accounting for the impact of rate regulation on income tax expense. Auditing management’s assertion that the TAC regulatory assets are probable of future recovery, and that the accounting for the TAC is accurately recorded and reported, requires auditor judgment and specialized knowledge of accounting matters specific to rate regulation. Further, the determination of the estimated benefit of current tax-deductible repairs under the Internal Revenue Code, and the resulting impacts on the TAC regulatory asset and income tax expense recorded in the financial statements, is complex, and required a high degree of auditor judgment and the involvement of our income tax specialists.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures to evaluate the accounting for the TAC and the associated regulatory assets, regulatory liabilities, and income tax expense included the following, among others:

We tested the effectiveness of controls over the calculation of the amounts refunded through the TAC, including controls over the monitoring and evaluation of regulatory developments that may affect the likelihood of recovering the TAC regulatory assets in future rates.
We evaluated management’s analysis over the assertion that the TAC regulatory assets are probable of recovery.
We evaluated relevant regulatory orders related to the ratemaking treatment of income taxes.
With the assistance of our income tax specialists, we tested the accuracy of income tax expense, regulatory assets and regulatory liabilities associated with the TAC.
We evaluated the financial statement presentation and disclosures related to TAC, including the balances recorded and regulatory developments.



/s/ DELOITTE & TOUCHE LLP

Parsippany, New Jersey
February 24, 2022

We have served as the Company's auditor since 1934.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Sole Stockholder of

Public Service Electric and Gas Company

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Public Service Electric and Gas Company and subsidiaries (the "Company" or PSE&G) as of December 31, 2021 and 2020, the related consolidated statements of operations, comprehensive income, common stockholder’s equity, and cash flows, for each of the three years in the period ended December 31, 2021, the related notes and the consolidated financial statement schedule listed in the Index at Item 15(B)(b) (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Regulatory Assets and Liabilities – Income Taxes —Refer to Notes 1, 7, and 22 to the financial statements

Critical Audit Matter Description

PSE&G’s electric and gas transmission and distribution businesses are regulated by the Board of Public Utilities (BPU) and Federal Energy Regulatory Commission. Management believes that PSE&G’s transmission and distribution businesses continue to meet the accounting requirements for rate-regulated entities, and PSE&G’s financial statements reflect the economic effects of cost-based rate regulation. Through the rate-making process, PSE&G’s rates to customers also include the recovery of income tax expense associated with PSE&G’s electric and gas distribution and electric transmission operations. PSE&G has recorded regulatory liabilities for excess accumulated deferred income taxes (ADIT) which will be refunded to customers in future periods. PSE&G’s most recent electric and gas distribution base rate case, concluded in 2018, established the Tax Adjustment Credit (TAC) that provides for the refund of these excess ADIT regulatory liabilities as well as the flow through to customers of historical and current accumulated deferred income taxes for tax-deductible repairs. The flow through of the current tax benefits results in lower revenues and lower income tax expense, as well as the recognition of a regulatory asset as management believes it is probable that the accumulated tax benefits treated as a flow-through item to PSE&G customers will be recovered from customers in the future.

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How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures to evaluate PSE&G’s accounting for the TAC and the associated regulatory assets, regulatory liabilities, and income tax expense included the following, among others:

We tested the effectiveness of controls over the calculation of the amounts refunded through the TAC, including controls over the monitoring and evaluation of regulatory developments that may affect the likelihood of recovering the TAC regulatory asset in future rates.
We evaluated management’s analysis over the assertion that the TAC regulatory assets are probable of recovery.
We evaluated relevant regulatory orders related to the ratemaking treatment of income taxes.
With the assistance of our income tax specialists, we tested the accuracy of income tax expense, regulatory assets and regulatory liabilities associated with the TAC.
We evaluated the financial statement presentation and disclosures related to TAC, including the balances recorded and regulatory developments.



/s/ DELOITTE & TOUCHE LLP

Parsippany, New Jersey
February 24, 2022

We have served as the Company's auditor since 1934.

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PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED

CONSOLIDATED STATEMENTS OF OPERATIONS

Millions, except per share data



	Years Ended December 31,
	2021		2020		2019
OPERATING REVENUES	$	9,722	$	9,603	$	10,076
OPERATING EXPENSES
Energy Costs	3,499		3,056		3,372
Operation and Maintenance	3,226		3,115		3,111
Depreciation and Amortization	1,216		1,285		1,248
(Gains) Losses on Asset Dispositions and Impairments	2,637		(123)		402
Total Operating Expenses	10,578		7,333		8,133
OPERATING INCOME (LOSS)	(856)		2,270		1,943
Income from Equity Method Investments	16		14		14
Net Gains (Losses) on Trust Investments	194		253		260
Other Income (Deductions)	98		115		125
Net Non-Operating Pension and Other Postretirement Benefit (OPEB) Credits (Costs)	328		249		177
Loss on Extinguishment of Debt	(298)		—		—
Interest Expense	(571)		(600)		(569)
INCOME (LOSS) BEFORE INCOME TAXES	(1,089)		2,301		1,950
Income Tax Benefit (Expense)	441		(396)		(257)
NET INCOME (LOSS)	$	(648)	$	1,905	$	1,693
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
BASIC	504		504		504
DILUTED	504		507		507
NET INCOME (LOSS) PER SHARE:
BASIC	$	(1.29)	$	3.78	$	3.35
DILUTED	$	(1.29)	$	3.76	$	3.33

See Notes to Consolidated Financial Statements.

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PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Millions



	Years Ended December 31,
		2021		2020		2019
NET INCOME (LOSS)		$	(648)	$	1,905	$	1,693
Other Comprehensive Income (Loss), net of tax
Unrealized Gains (Losses) on Available-for-Sale Securities, net of tax (expense) benefit of $25, $(16) and $(26) for the years ended 2021, 2020 and 2019, respectively		(39)		25		41
Unrealized Gains (Losses) on Cash Flow Hedges, net of tax (expense) benefit of $(1), $(2) and $6 for the years ended 2021, 2020 and 2019, respectively		3		6		(14)
Pension/OPEB adjustment, net of tax (expense) benefit of $(75), $18 and $18 for the years ended 2021, 2020 and 2019, respectively		190		(46)		(58)
Other Comprehensive Income (Loss), net of tax		154		(15)		(31)
COMPREHENSIVE INCOME (LOSS)		$	(494)	$	1,890	$	1,662

See Notes to Consolidated Financial Statements.

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PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED

CONSOLIDATED BALANCE SHEETS

Millions



	December 31,
	2021		2020
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents	$	818	$	543
Accounts Receivable, net of allowance of $325 in 2021 and $196 in 2020	1,859		1,410
Tax Receivable	9		63
Unbilled Revenues, net of allowance of $12 in 2021 and $10 in 2020	217		229
Fuel	296		277
Materials and Supplies, net	448		601
Prepayments	63		51
Derivative Contracts	72		60

Regulatory Assets	364		369
Assets Held for Sale	2,060		—
Other	44		27
Total Current Assets	6,250		3,630
PROPERTY, PLANT AND EQUIPMENT	43,684		48,569
Less: Accumulated Depreciation and Amortization	(9,318)		(10,984)
Net Property, Plant and Equipment	34,366		37,585
NONCURRENT ASSETS
Regulatory Assets	3,605		3,872
Operating Lease Right-of-Use Assets	201		262
Long-Term Investments	541		536
Nuclear Decommissioning Trust (NDT) Fund	2,637		2,501
Long-Term Tax Receivable	47		—
Long-Term Receivable of Variable Interest Entity	828		945
Rabbi Trust Fund	242		266
Intangibles	20		158
Derivative Contracts	28		9
Other	234		286
Total Noncurrent Assets	8,383		8,835
TOTAL ASSETS	$	48,999	$	50,050

See Notes to Consolidated Financial Statements.

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PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED

CONSOLIDATED BALANCE SHEETS

Millions



	December 31,
	2021		2020
LIABILITIES AND CAPITALIZATION
CURRENT LIABILITIES
Long-Term Debt Due Within One Year	$	700	$	1,684
Commercial Paper and Loans	3,519		1,063
Accounts Payable	1,315		1,332
Derivative Contracts	17		21
Accrued Interest	121		126
Accrued Taxes	67		124
Clean Energy Program	146		143
Obligation to Return Cash Collateral	179		98
Regulatory Liabilities	388		294
Liabilities Held for Sale	144		—
Other	476		637
Total Current Liabilities	7,072		5,522
NONCURRENT LIABILITIES
Deferred Income Taxes and Investment Tax Credits (ITC)	5,759		6,502
Regulatory Liabilities	2,497		2,707
Operating Leases	191		252
Asset Retirement Obligations	1,573		1,212
Other Postretirement Benefit (OPEB) Costs	572		730
OPEB Costs of Servco	640		699
Accrued Pension Costs	318		1,128
Accrued Pension Costs of Servco	174		226

Environmental Costs	245		286
Derivative Contracts	17		4
Long-Term Accrued Taxes	100		88
Other	184		214
Total Noncurrent Liabilities	12,270		14,048
COMMITMENTS AND CONTINGENT LIABILITIES (See Note 15)
CAPITALIZATION
LONG-TERM DEBT	15,219		14,496
STOCKHOLDERS’ EQUITY
Common Stock, no par, authorized 1,000 shares; issued, 2021 and 2020—534 shares	5,045		5,031
Treasury Stock, at cost, 2021 and 2020—30 shares	(896)		(861)
Retained Earnings	10,639		12,318
Accumulated Other Comprehensive Loss	(350)		(504)


Total Stockholders’ Equity	14,438		15,984
Total Capitalization	29,657		30,480
TOTAL LIABILITIES AND CAPITALIZATION	$	48,999	$	50,050

See Notes to Consolidated Financial Statements.

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PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED

CONSOLIDATED STATEMENTS OF CASH FLOWS

Millions



	Years Ended December 31,
	2021		2020		2019
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (Loss)	$	(648)	$	1,905	$	1,693
Adjustments to Reconcile Net Income (Loss) to Net Cash Flows from Operating Activities:
Depreciation and Amortization	1,216		1,285		1,248
Amortization of Nuclear Fuel	187		184		178
(Gains) Losses on Asset Dispositions and Impairments	2,637		(123)		402
Loss on Extinguishment of Debt	298		—		—
Emission Allowances and Renewable Energy Credit (REC) Compliance Accrual	138		151		108
Provision for Deferred Income Taxes (Other than Leases) and ITC	(817)		139		180
Non-Cash Employee Benefit Plan (Credits) Costs	(178)		(105)		(48)
Leveraged Lease (Income), (Gains) and Losses, Adjusted for Rents Received and Deferred Taxes	(11)		(135)		18
Net Realized and Unrealized (Gains) Losses on Energy Contracts and Other Derivatives	614		80		(290)
Cost of Removal	(121)		(106)		(108)
Net Change in Regulatory Assets and Liabilities	(271)		(101)		25
Net (Gains) Losses and (Income) Expense from NDT Fund	(229)		(278)		(296)
Net Change in Certain Current Assets and Liabilities:
Tax Receivable	56		107		77
Accrued Taxes	(127)		124		(9)
Cash Collateral	(790)		(10)		349
Other Current Assets and Liabilities	(238)		73		(145)
Employee Benefit Plan Funding and Related Payments	(25)		(18)		(39)
Other	45		(70)		36
Net Cash Provided By (Used In) Operating Activities	1,736		3,102		3,379
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to Property, Plant and Equipment	(2,719)		(2,923)		(3,166)
Purchase of Emissions Allowances and RECs	(98)		(111)		(98)
Proceeds from Sales of Trust Investments	2,100		2,234		1,787
Purchases of Trust Investments	(2,092)		(2,250)		(1,814)
Proceeds from Sales of Long-Lived Assets and Lease Investments	569		301		70
Contributions to Equity Method Investments	(111)		—		—
Other	107		73		76
Net Cash Provided By (Used In) Investing Activities	(2,244)		(2,676)		(3,145)
CASH FLOWS FROM FINANCING ACTIVITIES
Net Change in Commercial Paper	256		(352)		99
Proceeds from Short-Term Loans	2,500		800		—
Repayment of Short-Term Loans	(300)		(500)		—
Issuance of Long-Term Debt	2,825		2,450		1,900
Redemption of Long-Term Debt	(3,082)		(1,365)		(1,250)
Premium Paid on Early Extinguishment of Debt	(294)		—		—
Cash Dividends Paid on Common Stock	(1,031)		(991)		(950)
Other	(75)		(72)		(56)
Net Cash Provided By (Used In) Financing Activities	799		(30)		(257)
Net Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash	291		396		(23)
Cash, Cash Equivalents and Restricted Cash at Beginning of Period	572		176		199
Cash, Cash Equivalents and Restricted Cash at End of Period	$	863	$	572	$	176
Supplemental Disclosure of Cash Flow Information:
Income Taxes Paid (Received)	$	425	$	297	$	41
Interest Paid, Net of Amounts Capitalized	$	547	$	568	$	539
Accrued Property, Plant and Equipment Expenditures	$	331	$	387	$	499

See Notes to Consolidated Financial Statements.

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PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Millions



	Common Stock			Treasury Stock			Retained Earnings		Accumulated Other Comprehensive Income (Loss)
	Shs.	Amount		Shs.	Amount		Total
Balance as of December 31, 2018	534	$	4,980	(30)	$	(808)	$	10,582	$	(377)	$	14,377
Net Income	—	—		—	—		1,693		—		1,693
Cumulative Effect Adjustment to Reclassify Stranded Tax Effects Resulting in the Change in the Federal Corporate Income Tax Rate	—	—		—	—		81		(81)		—
Other Comprehensive Income (Loss), net of tax (expense) benefit of $(2)	—	—		—	—		—		(31)		(31)
Comprehensive Income											1,662
Cash Dividends at $1.88 per share on Common Stock	—	—		—	—		(950)		—		(950)
Other	—	23		—	(23)		—		—		—
Balance as of December 31, 2019	534	$	5,003	(30)	$	(831)	$	11,406	$	(489)	$	15,089
Net Income	—	—		—	—		1,905		—		1,905
Other Comprehensive Income (Loss), net of tax (expense) benefit of $0	—	—		—	—		—		(15)		(15)
Comprehensive Income											1,890
Cumulative Effect Adjustment for Current Expected Credit Losses (CECL)	—	—		—	—		(2)		—		(2)
Cash Dividends at $1.96 per share on Common Stock	—	—		—	—		(991)		—		(991)
Other	—	28		—	(30)		—		—		(2)
Balance as of December 31, 2020	534	$	5,031	(30)	$	(861)	$	12,318	$	(504)	$	15,984
Net Loss	—	—		—	—		(648)		—		(648)
Other Comprehensive Income (Loss), net of tax (expense) benefit of $(51)	—	—		—	—		—		154		154
Comprehensive Loss											(494)

Cash Dividends at $2.04 per share on Common Stock	—	—		—	—		(1,031)		—		(1,031)
Other	—	14		—	(35)		—		—		(21)
Balance as of December 31, 2021	534	$	5,045	(30)	$	(896)	$	10,639	$	(350)	$	14,438

See Notes to Consolidated Financial Statements.

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PUBLIC SERVICE ELECTRIC AND GAS COMPANY

CONSOLIDATED STATEMENTS OF OPERATIONS

Millions



	Years Ended December 31,
	2021		2020		2019
OPERATING REVENUES	$	7,122	$	6,608	$	6,625
OPERATING EXPENSES
Energy Costs	2,688		2,469		2,738
Operation and Maintenance	1,692		1,614		1,581
Depreciation and Amortization	928		887		837
Gain on Asset Dispositions	(4)		(1)		—
Total Operating Expenses	5,304		4,969		5,156
OPERATING INCOME	1,818		1,639		1,469
Net Gains (Losses) on Trust Investments	2		3		2
Other Income (Deductions)	88		108		83
Non-Operating Pension and OPEB Credits (Costs)	264		205		150
Interest Expense	(402)		(388)		(361)
INCOME BEFORE INCOME TAXES	1,770		1,567		1,343
Income Tax Benefit (Expense)	(324)		(240)		(93)
NET INCOME	$	1,446	$	1,327	$	1,250

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

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PUBLIC SERVICE ELECTRIC AND GAS COMPANY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Millions



	Years Ended December 31,
		2021		2020		2019
NET INCOME		$	1,446	$	1,327	$	1,250
Other Comprehensive Income (Loss), net of tax
Unrealized Gains (Losses) on Available-for-Sale Securities, net of tax (expense) benefit of $1, $0 and $(1) for the years ended 2021, 2020 and 2019, respectively		(2)		1		3
COMPREHENSIVE INCOME		$	1,444	$	1,328	$	1,253

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

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PUBLIC SERVICE ELECTRIC AND GAS COMPANY

CONSOLIDATED BALANCE SHEETS

Millions



	December 31,
	2021		2020
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents	$	294	$	204
Accounts Receivable, net of allowance of $325 in 2021 and $196 in 2020	1,050		1,004


Unbilled Revenues, net of allowance of $12 in 2021 and $10 in 2020	217		229
Materials and Supplies, net	233		217
Prepayments	15		14
Regulatory Assets	364		369




Other	33		13
Total Current Assets	2,206		2,050
PROPERTY, PLANT AND EQUIPMENT	38,588		36,300
Less: Accumulated Depreciation and Amortization	(7,640)		(7,149)
Net Property, Plant and Equipment	30,948		29,151
NONCURRENT ASSETS
Regulatory Assets	3,605		3,872
Operating Lease Right-of-Use Assets	92		99
Long-Term Investments	181		222
Rabbi Trust Fund	43		51


Other	123		136
Total Noncurrent Assets	4,044		4,380
TOTAL ASSETS	$	37,198	$	35,581

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

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PUBLIC SERVICE ELECTRIC AND GAS COMPANY

CONSOLIDATED BALANCE SHEETS

Millions



	December 31,
	2021		2020
LIABILITIES AND CAPITALIZATION
CURRENT LIABILITIES
Long-Term Debt Due Within One Year	$	—	$	434
Commercial Paper and Loans	—		100
Accounts Payable	571		671

Accounts Payable—Affiliated Companies	418		479
Accrued Interest	107		101
Clean Energy Program	146		143

Obligation to Return Cash Collateral	179		98
Regulatory Liabilities	388		294
Other	376		530
Total Current Liabilities	2,185		2,850
NONCURRENT LIABILITIES
Deferred Income Taxes and ITC	4,874		4,524
Regulatory Liabilities	2,497		2,707
Operating Leases	83		88
Asset Retirement Obligations	363		314
OPEB Costs	354		485
Accrued Pension Costs	132		612


Environmental Costs	191		236

Long-Term Accrued Taxes	6		7
Other	145		154
Total Noncurrent Liabilities	8,645		9,127
COMMITMENTS AND CONTINGENT LIABILITIES (See Note 15)
CAPITALIZATION
LONG-TERM DEBT	11,795		10,475
STOCKHOLDER’S EQUITY
Common Stock; 150 shares authorized; issued and outstanding, 2021 and 2020—132 shares	892		892
Contributed Capital	1,170		1,170
Basis Adjustment	986		986
Retained Earnings	11,524		10,078
Accumulated Other Comprehensive Income	1		3
Total Stockholder’s Equity	14,573		13,129
Total Capitalization	26,368		23,604
TOTAL LIABILITIES AND CAPITALIZATION	$	37,198	$	35,581

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

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PUBLIC SERVICE ELECTRIC AND GAS COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS

Millions



	Years Ended December 31,
	2021		2020		2019
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income	$	1,446	$	1,327	$	1,250
Adjustments to Reconcile Net Income to Net Cash Flows from Operating Activities:
Depreciation and Amortization	928		887		837

Provision for Deferred Income Taxes and ITC	116		53		(28)
Non-Cash Employee Benefit Plan (Credits) Costs	(156)		(103)		(62)
Cost of Removal	(121)		(106)		(108)
Net Change in Other Regulatory Assets and Liabilities	(271)		(101)		25
Net Change in Certain Current Assets and Liabilities
Accounts Receivable and Unbilled Revenues	(34)		(100)		(18)
Materials and Supplies	(16)		(2)		(14)
Prepayments	(1)		21		(9)
Accounts Payable	(71)		44		(59)
Accounts Receivable/Payable—Affiliated Companies, net	(32)		80		203
Other Current Assets and Liabilities	10		60		62
Employee Benefit Plan Funding and Related Payments	(10)		(4)		(21)
Other	(64)		(103)		(23)
Net Cash Provided By (Used In) Operating Activities	1,724		1,953		2,035
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to Property, Plant and Equipment	(2,447)		(2,507)		(2,542)
Proceeds from Sales of Trust Investments	35		40		36
Purchases of Trust Investments	(29)		(40)		(34)
Solar Loan Investments	29		13		8
Other	16		12		10
Net Cash Provided By (Used In) Investing Activities	(2,396)		(2,482)		(2,522)
CASH FLOWS FROM FINANCING ACTIVITIES
Net Change in Commercial Paper and Loans	(100)		(262)		90
Issuance of Long-Term Debt	1,325		1,350		1,150
Redemption of Long-Term Debt	(434)		(259)		(500)
Contributed Capital	—		75		—
Cash Dividend Paid	—		(175)		(250)
Other	(13)		(17)		(14)
Net Cash Provided By (Used In) Financing Activities	778		712		476
Net Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash	106		183		(11)
Cash, Cash Equivalents and Restricted Cash at Beginning of Period	233		50		61
Cash, Cash Equivalents and Restricted Cash at End of Period	$	339	$	233	$	50
Supplemental Disclosure of Cash Flow Information:
Income Taxes Paid (Received)	$	266	$	157	$	(48)
Interest Paid, Net of Amounts Capitalized	$	383	$	369	$	343
Accrued Property, Plant and Equipment Expenditures	$	294	$	323	$	335

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

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PUBLIC SERVICE ELECTRIC AND GAS COMPANY

CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDER’S EQUITY

Millions



	Common Stock		Contributed Capital		Basis Adjustment		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total
Balance as of December 31, 2018	$	892	$	1,095	$	986	$	7,928	$	(1)	$	10,900
Net Income	—		—		—		1,250		—		1,250
Other Comprehensive Income (Loss), net of tax (expense) benefit of $(1)	—		—		—		—		3		3
Comprehensive Income											1,253
Cash Dividends Paid	—		—		—		(250)		—		(250)
Balance as of December 31, 2019	$	892	$	1,095	$	986	$	8,928	$	2	$	11,903
Net Income	—		—		—		1,327		—		1,327
Other Comprehensive Income (Loss), net of tax (expense) benefit of $0	—		—		—		—		1		1
Comprehensive Income											1,328
Cumulative Effect Adjustment for CECL	—		—		—		(2)		—		(2)
Cash Dividends Paid	—		—		—		(175)		—		(175)
Contributed Capital	—		75		—		—		—		75
Balance as of December 31, 2020	$	892	$	1,170	$	986	$	10,078	$	3	$	13,129
Net Income	—		—		—		1,446		—		1,446
Other Comprehensive Income (Loss), net of tax (expense) benefit of $1	—		—		—		—		(2)		(2)
Comprehensive Income											1,444



Balance as of December 31, 2021	$	892	$	1,170	$	986	$	11,524	$	1	$	14,573

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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Note 1. Organization, Basis of Presentation and Summary of Significant Accounting Policies

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 two reportable segments, our 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 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. 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 Energy Holdings L.L.C. (Energy Holdings), which holds our investments in offshore wind ventures and legacy portfolio of lease investments; 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); and PSEG Services Corporation (Services), which provides certain management, administrative and general services to PSEG and its subsidiaries at cost.

In August 2021, PSEG entered into two agreements to sell PSEG Power’s 6,750 megawatts (MW) fossil generating portfolio to newly formed subsidiaries of ArcLight Energy Partners Fund VII, L.P., a fund controlled by ArcLight Capital Partners, LLC. In February 2022, PSEG completed the sale of this fossil generating portfolio. See Note 4. Early Plant Retirements/Asset Dispositions and Impairments for more details on the transactions.

In May 2021, PSEG Power Ventures LLC (Power Ventures), a direct wholly owned subsidiary of PSEG Power, entered into a purchase agreement with Quattro Solar, LLC, an affiliate of LS Power, relating to the sale by Power Ventures of 100% of its ownership interest in PSEG Solar Source LLC (Solar Source) including its related assets and liabilities. The transaction closed in June 2021.

In December 2020, PSEG entered into a definitive agreement with Ørsted North America Inc. (Ørsted) to acquire a 25% equity interest in Ørsted’s Ocean Wind project which is currently in development. Ocean Wind was selected by New Jersey to be the first offshore wind farm as part of the State’s intention to add 7,500 MW of offshore wind generating capacity by 2035. The Ocean Wind project is expected to achieve full commercial operation in 2025. On March 31, 2021, the BPU approved PSEG’s investment in Ocean Wind and the acquisition was completed in April 2021. Additionally, PSEG and Ørsted each owns 50% of Garden State Offshore Energy LLC which holds rights to an offshore wind lease area. PSEG and Ørsted are exploring other offshore wind opportunities.

Basis of Presentation

The respective financial statements included herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (SEC) applicable to Annual Reports on Form 10-K and in accordance with accounting guidance generally accepted in the United States (GAAP).

Significant Accounting Policies

Principles of Consolidation

Each company consolidates those entities in which it has a controlling interest or is the primary beneficiary. See Note 5. Variable Interest Entities. Entities over which the companies exhibit significant influence, but do not have a controlling interest and/or are not the primary beneficiary, are accounted for under the equity method of accounting. For investments in which significant influence does not exist and the investor is not the primary beneficiary, the cost method of accounting is applied. All significant intercompany accounts and transactions are eliminated in consolidation.

PSE&G and PSEG Power also have undivided interests in certain jointly-owned facilities, with each responsible for paying its respective ownership share of construction costs, fuel purchases and operating expenses. PSE&G and PSEG Power consolidate

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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their portion of any revenues and expenses related to their respective jointly-owned facilities in the appropriate revenue and expense categories.

Accounting for the Effects of Regulation

In accordance with accounting guidance for rate-regulated entities, PSE&G’s financial statements reflect the economic effects of regulation. PSE&G defers the recognition of costs (a Regulatory Asset) or records the recognition of obligations (a Regulatory Liability) if it is probable that, through the rate-making process, there will be a corresponding increase or decrease in future rates. Accordingly, PSE&G has deferred certain costs and recoveries, which are being amortized over various future periods. To the extent that collection of any such costs or payment of liabilities becomes no longer probable as a result of changes in regulation, the associated Regulatory Asset or Liability is charged or credited to income. Management believes that PSE&G’s T&D businesses continue to meet the accounting requirements for rate-regulated entities. For additional information, see Note 7. Regulatory Assets and Liabilities.

Cash, Cash Equivalents and Restricted Cash

The following provides a reconciliation of cash, cash equivalents and restricted cash reported within the Consolidated Balance Sheets that sum to the total of the same such amounts in the Consolidated Statements of Cash Flows for the years ended December 31, 2020 and 2021. Restricted cash consists primarily of deposits received related to various construction projects at PSE&G.



	PSE&G		Other (A)		Consolidated
	Millions
As of December 31, 2020
Cash and Cash Equivalents	$	204	$	339	$	543
Restricted Cash in Other Current Assets	7		—		7
Restricted Cash in Other Noncurrent Assets	22		—		22
Cash, Cash Equivalents and Restricted Cash	$	233	$	339	$	572
As of December 31, 2021
Cash and Cash Equivalents	$	294	$	524	$	818
Restricted Cash in Other Current Assets	28		—		28
Restricted Cash in Other Noncurrent Assets	17		—		17
Cash, Cash Equivalents and Restricted Cash	$	339	$	524	$	863

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

Derivative Instruments

Each company uses derivative instruments to manage risk pursuant to its business plans and prudent practices.

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. Changes in the fair market value of the derivative contracts are recorded in earnings.

Determining whether a contract qualifies as a derivative requires that management exercise significant judgment, including assessing the contract’s market liquidity. PSEG has determined that contracts to purchase and sell certain products do not meet the definition of a derivative under the current authoritative guidance since they do not provide for net settlement, or the markets are not sufficiently liquid to conclude that physical forward contracts are readily convertible to cash.

Under current authoritative guidance, all derivatives are recognized on the balance sheet at their fair value, except for derivatives that are designated as normal purchases and normal sales (NPNS). Further, derivatives that qualify for hedge accounting can be designated as fair value or cash flow hedges. For fair value hedges, changes in fair values for both the derivative and the underlying hedged exposure are recognized in earnings each period.

Certain offsetting derivative assets and liabilities 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, these positions are offset on the Consolidated Balance Sheets of PSEG.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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For cash flow hedges, the gain or loss on a derivative instrument designated and qualifying as a cash flow hedge is deferred in Accumulated Other Comprehensive Income (Loss) until earnings are affected by the variability of cash flows of the hedged transaction.

For derivative contracts that do not qualify or are not designated as cash flow or fair value hedges or as NPNS, changes in fair value are recorded in current period earnings. PSEG does not currently elect fair value or cash flow hedge accounting on its commodity derivative positions.

Contracts that qualify for, and are designated, as NPNS are accounted for upon settlement. Contracts which qualify for NPNS are contracts for which physical delivery is probable, they will not be financially settled, and the quantities under contract are expected to be used or sold in the normal course of business over a reasonable period of time.

For additional information regarding derivative financial instruments, see Note 18. Financial Risk Management Activities.

Revenue Recognition

PSE&G’s regulated electric and gas revenues are recorded primarily based on services rendered to customers. PSE&G records unbilled revenues for the estimated amount customers will be billed for services rendered from the time meters were last read to the end of the respective accounting period. The unbilled revenue is estimated each month based on usage per day, the number of unbilled days in the period, estimated seasonal loads based upon the time of year and the variance of actual degree-days and temperature-humidity-index hours of the unbilled period from expected norms.

Regulated revenues from the transmission of electricity are recognized as services are provided based on a FERC-approved annual formula rate mechanism. This mechanism provides for an annual filing of estimated revenue requirement with rates effective January 1 of each year. After completion of the annual period ending December 31, PSE&G files a true-up whereby it compares its actual revenue requirement to the original estimate to determine any over or under collection of revenue. PSE&G records the estimated financial statement impact of the difference between the actual and the filed revenue requirement as a refund or deferral for future recovery when such amounts are probable and can be reasonably estimated in accordance with accounting guidance for rate-regulated entities.

The majority of PSEG Power’s revenues relate to bilateral contracts, which are accounted for on the accrual basis as the energy is delivered. PSEG Power’s revenue also includes changes in the value of energy derivative contracts that are not designated as NPNS. See Note 18. Financial Risk Management Activities for further discussion.

PJM Interconnection, L.L.C. (PJM), the Independent System Operator-New England (ISO-NE) and the New York Independent System Operator (NYISO) facilitate the dispatch of energy and energy-related products. PSEG generally reports electricity sales and purchases conducted with those individual Independent System Operators (ISOs) at PSEG Power on a net hourly basis in either Revenues or Energy Costs in its Consolidated Statement of Operations, the classification of which depends on the net hourly activity. Capacity revenue and expense are also reported net based on PSEG Power’s monthly net sale or purchase position in the individual ISOs.

PSEG LI is the primary beneficiary of Long Island Electric Utility Servco, LLC (Servco). For transactions in which Servco acts as principal, Servco records revenues and the related pass-through expenditures separately in Operating Revenues and Operation and Maintenance (O&M) Expense, respectively. See Note 5. Variable Interest Entities for further information.

For additional information regarding Revenues, see Note 3. Revenues.

Depreciation and Amortization (D&A)

PSE&G calculates depreciation under the straight-line method based on estimated average remaining lives of the several classes of property. These estimates are reviewed on a periodic basis and necessary adjustments are made as approved by the BPU or FERC. The average depreciation rate stated as a percentage of original cost of depreciable property was as follows:



	2021		2020		2019
	Avg Rate		Avg Rate		Avg Rate
Electric Transmission	2.29	%	2.41	%	2.41	%
Electric Distribution	2.56	%	2.55	%	2.54	%
Gas Distribution	1.84	%	1.84	%	1.85	%

PSEG calculates depreciation on its nuclear generation-related assets under the straight-line method based on the assets’ estimated useful lives of approximately 60 years to 80 years.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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Allowance for Funds Used During Construction (AFUDC) and Interest Capitalized During Construction (IDC)

AFUDC represents the cost of debt and equity funds used to finance the construction of new utility assets at PSE&G. IDC represents the cost of debt used to finance construction at PSEG’s other subsidiaries. The amount of AFUDC or IDC capitalized as Property, Plant and Equipment is included as a reduction of interest charges or other income for the equity portion. The amounts and average rates used to calculate AFUDC or IDC for the years ended December 31, 2021, 2020 and 2019 were as follows:



	AFUDC/IDC Capitalized
	2021				2020				2019
	Millions		Avg Rate		Millions		Avg Rate		Millions		Avg Rate
PSE&G	$	93	7.37	%	$	112	7.86	%	$	81	7.22	%
Other	$	9	4.90	%	$	10	4.60	%	$	27	4.60	%

Income Taxes

PSEG and its subsidiaries file a consolidated federal income tax return and income taxes are allocated to PSEG’s subsidiaries based on the taxable income or loss of each subsidiary on a separate return basis in accordance with a tax-sharing agreement between PSEG and each of its affiliated subsidiaries. Allocations between PSEG and its subsidiaries are recorded through intercompany accounts. Investment tax credits deferred in prior years are being amortized over the useful lives of the related property.

Uncertain income tax positions are accounted for using a benefit recognition model with a two-step approach, a more-likely-than-not recognition criterion and a measurement attribute that measures the position as the largest amount of tax benefit that is greater than 50% likely of being realized upon ultimate settlement. If it is not more-likely-than-not that the benefit will be sustained on its technical merits, no benefit will be recorded. Uncertain tax positions that relate only to timing of when an item is included on a tax return are considered to have met the recognition threshold. See Note 22. Income Taxes for further discussion.

Impairment of Long-Lived Assets and Leveraged Leases

Management evaluates long-lived assets for impairment whenever events or changes in circumstances, such as significant adverse changes in regulation, business climate, counterparty credit worthiness or market conditions, including prolonged periods of adverse commodity and capacity prices or a current expectation that a long-lived asset will be sold or disposed of significantly before the end of its previously estimated useful life, could potentially indicate an asset’s or asset group’s carrying amount may not be recoverable. In such an event, an undiscounted cash flow analysis is performed to determine if an impairment exists. When a long-lived asset’s or asset group’s carrying amount exceeds the associated undiscounted estimated future cash flows, the asset/asset group is considered impaired to the extent that its fair value is less than its carrying amount. An impairment would result in a reduction of the value of the long-lived asset/asset group through a non-cash charge to earnings.

For PSEG, cash flows for long-lived assets and asset groups are determined at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. The cash flows from the nuclear generation units are evaluated at the ISO regional portfolio level and, effective in August 2021 for the PJM assets, do not include PSEG’s fossil generating assets as they are classified as Held for Sale. In certain cases, generating assets are evaluated on an individual basis where those assets are individually contracted on a long-term basis with a third party and operations are independent of other generation assets, such as PSEG Power’s Kalaeloa facility. See Note 4. Early Plant Retirements/Asset Dispositions and Impairments for more information on impairment assessments performed on PSEG’s long-lived assets.

Energy Holdings’ leveraged leases are comprised of Lease Receivables (net of non-recourse debt), the estimated residual value of leased assets, and unearned and deferred income. Residual values are the estimated values of the leased assets at the end of the respective lease per the original lease terms, net of any subsequent impairments. A review of the residual valuations, which are calculated by discounting the cash flows related to the leased assets after the lease term, is performed at least annually for each asset subject to lease using specific assumptions tailored to each asset. Those valuations are compared to the recorded residual values to determine if an impairment is warranted.

Accounts Receivable—Allowance for Credit Losses

PSE&G’s accounts receivable, including unbilled revenues, are 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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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outstanding balances as of December 31, 2021. PSE&G’s electric bad debt expense is recovered through the Societal Benefits Clause (SBC) mechanism and incremental gas bad debt has been deferred for future recovery through the COVID-19 Regulatory Asset. See Note 3. Revenues and Note 7. Regulatory Assets and Liabilities.

Accounts receivable are charged off in the period in which the receivable is deemed uncollectible. Recoveries of accounts receivable are recorded when it is known they will be received.

Materials and Supplies and Fuel

PSEG and PSE&G’s materials and supplies are carried at average cost and charged to inventory when purchased and expensed or capitalized to Property, Plant and Equipment, as appropriate, when installed or used. Fuel inventory at PSEG is valued at the lower of average cost or market and includes stored natural gas and propane used to generate power and to satisfy obligations under PSEG Power’s gas supply contracts with PSE&G. As of December 31, 2021, all of PSEG Power’s fuel oil was classified as Held for Sale. See Note 4. Early Plant Retirements/Asset Dispositions and Impairments for additional information. The costs of fuel, including initial transportation costs, are included in inventory when purchased and charged to Energy Costs when used or sold. The cost of nuclear fuel is capitalized within Property, Plant and Equipment and amortized to fuel expense using the units-of-production method.

Property, Plant and Equipment

PSE&G’s additions to and replacements of existing property, plant and equipment are capitalized at cost. The cost of maintenance, repair and replacement of minor items of property is charged to expense as incurred. At the time units of depreciable property are retired or otherwise disposed of, the original cost, adjusted for net salvage value, is charged to accumulated depreciation.

PSEG capitalizes costs related to its generating assets, 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 also capitalizes spare parts for its generating assets that meet specific criteria. Capitalized spares are depreciated over the remaining lives of their associated assets.

Leases

PSEG and its subsidiaries, when acting as lessee or lessor, determine if an arrangement is a lease at inception. PSEG assesses contracts to determine if the arrangement conveys (i) the right to control the use of the identified property, (ii) the right to obtain substantially all of the economic benefits from the use of the property, and (iii) the right to direct the use of the property.

PSEG and its subsidiaries are neither the lessee nor the lessor in any material leases that are not classified as operating leases.

Lessee—Operating Lease Right-of-Use Assets represent the right to use an underlying asset for the lease term and Operating Lease Liabilities represent the obligation to make lease payments arising from the lease. Operating Lease Right-of-Use Assets and Operating Lease Liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term.

The current portion of Operating Lease Liabilities is included in Other Current Liabilities. Operating Lease Right-of-Use Assets and noncurrent Operating Lease Liabilities are included as separate captions in Noncurrent Assets and Noncurrent Liabilities, respectively, on the Consolidated Balance Sheets of PSEG and PSE&G. PSEG and its subsidiaries do not recognize Operating Lease Right-of-Use Assets and Operating Lease Liabilities for leases where the term is twelve months or less.

PSEG and its subsidiaries recognize the lease payments on a straight-line basis over the term of the leases and variable lease payments in the period in which the obligations for those payments are incurred.

As lessee, most of the operating leases of PSEG and its subsidiaries do not provide an implicit rate; therefore, incremental borrowing rates are used based on the information available at commencement date in determining the present value of lease payments. The implicit rate is used when readily determinable. PSE&G’s incremental borrowing rates are based on secured borrowing rates. PSEG’s incremental borrowing rates are generally unsecured rates. Having calculated simulated secured rates for each of PSEG and PSEG Power, it was determined that the difference between the unsecured borrowing rates and the simulated secured rates had an immaterial effect on their recorded Operating Lease Right-of-Use Assets and Operating Lease Liabilities. Services, PSEG LI and other subsidiaries of PSEG that do not borrow funds or issue debt may enter into leases. Since these companies do not have credit ratings and related incremental borrowing rates, PSEG has determined that it is appropriate for these companies to use the incremental borrowing rate of PSEG, the parent company.

Lease terms may include options to extend or terminate the lease when it is reasonably certain that such options will be exercised.

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PSEG and its subsidiaries have lease agreements with lease and non-lease components. For real estate, equipment and vehicle leases, the lease and non-lease components are accounted for as a single lease component.

Lessor—Property subject to operating leases, where PSEG or one of its subsidiaries is the lessor, is included in Property, Plant and Equipment and rental income from these leases is included in Operating Revenues.

PSEG and its subsidiaries have lease agreements with lease and non-lease components, which are primarily related to domestic energy generation, real estate assets and land. PSEG and subsidiaries account for the lease and non-lease components as a single lease component. See Note 8. Leases for detailed information on leases.

Energy Holdings is the lessor in leveraged leases. Leveraged lease accounting guidance is grandfathered for existing leveraged leases. Energy Holdings’ leveraged leases are accounted for in Operating Revenues and in Noncurrent Long-Term Investments. If modified after January 1, 2019, those leveraged leases will be accounted for as operating or financing leases. See Note 9. Long-Term Investments and Note 10. Financing Receivables.

Trust Investments

These securities comprise the Nuclear Decommissioning Trust (NDT) Fund, a master independent external trust account maintained to provide for the costs of decommissioning upon termination of operations of PSEG’s nuclear facilities and amounts that are deposited to fund a Rabbi Trust which was established to meet the obligations related to non-qualified pension plans and deferred compensation plans.

Unrealized gains and losses on equity security investments are recorded in Net Income. The debt securities are classified as available-for-sale with the unrealized gains and losses recorded as a component of Accumulated Other Comprehensive Income (Loss). Realized gains and losses on both equity and available-for-sale debt security investments are recorded in earnings and are included with the unrealized gains and losses on equity securities in Net Gains (Losses) on Trust Investments. Other-than-temporary impairments on NDT and Rabbi Trust debt securities are also included in Net Gains (Losses) on Trust Investments. See Note 11. Trust Investments for further discussion.

Pension and Other Postretirement Benefits (OPEB) Plans

The market-related value of plan assets held for the qualified pension and OPEB plans is equal to the fair value of those assets as of year-end. Fair value is determined using quoted market prices and independent pricing services based upon the security type as reported by the trustee at the measurement date (December 31) as well as investments in unlisted real estate which are valued via third-party appraisals.

PSEG recognizes a long-term receivable primarily related to future funding by LIPA of Servco’s recognized pension and OPEB liabilities. This receivable is presented separately on the Consolidated Balance Sheet of PSEG as a noncurrent asset.

Pursuant to the OSA, Servco records expense for contributions to its pension plan trusts and for OPEB payments made to retirees.

See Note 14. Pension and Other Postretirement Benefits (OPEB) and Savings Plans for further discussion.

Basis Adjustment

PSE&G has recorded a Basis Adjustment in its Consolidated Balance Sheet related to the generation assets that were transferred from PSE&G to PSEG Power in August 2000 at the price specified by the BPU. Because the transfer was between affiliates, the transaction was recorded at the net book value of the assets and liabilities rather than the transfer price. The difference between the total transfer price and the net book value of the generation-related assets and liabilities, $986 million, net of tax, was recorded as a Basis Adjustment on PSE&G’s and PSEG Power’s Consolidated Balance Sheets. The $986 million is an addition to PSE&G’s Common Stockholder’s Equity and a reduction of PSEG Power’s Member’s Equity. These amounts are eliminated on PSEG’s consolidated financial statements.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

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Note 2. Recent Accounting Standards

New Standards Adopted in 2021

Simplifying the Accounting for Income Taxes—Accounting Standards Update (ASU) 2019-12

This accounting standard updates Accounting Standards Codification (ASC) 740 to simplify the accounting for income taxes, including the elimination of several exceptions and making other clarifications to the current guidance. Some of the more pertinent modifications include a change to the tax accounting related to franchise taxes that are partially based on income, an election to allocate the consolidated tax expense to a disregarded entity that is a member of a consolidated tax return filing group when those entities issue separate financial statements, and modifications and clarifications to interim tax reporting.

The standard is effective for fiscal years beginning after December 15, 2020. PSEG adopted this standard on January 1, 2021. PSEG has elected to allocate the consolidated tax expense to all eligible entities that are included in a consolidated tax filing on a prospective basis. This election is consistent with PSEG’s Tax Sharing Agreements with its affiliated subsidiaries. Adoption of this standard did not have an impact on the financial statements of PSEG and PSE&G.

Clarifying the Interactions between Investments-Equity Securities, Investments-Equity Method and Joint Ventures, and Derivatives and Hedging—ASU 2020-01

This accounting standard clarifies that an entity should consider transaction prices for purposes of measuring the fair value of certain equity securities immediately before applying or upon discontinuing the equity method. This accounting standard also clarifies that when accounting for contracts entered into to purchase equity securities, an entity should not consider whether, upon the settlement of the forward contract or exercise of the purchased option, the underlying securities would be accounted for under the equity method or the fair value option.

The standard is effective for fiscal years beginning after December 15, 2020. PSEG adopted this standard prospectively on January 1, 2021. Adoption of this standard did not have an impact on the financial statements of PSEG and PSE&G.

Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity—ASU 2020-06

This accounting standard simplifies the accounting for convertible debt and convertible preferred stock by removing the requirements to separately present certain conversion features in equity. In addition, the ASU eliminates certain criteria that must be satisfied in order to classify a contract as equity, which is expected to decrease the number of freestanding instruments and embedded derivatives accounted for as assets or liabilities. The ASU also revises the guidance on calculating earnings per share, requiring use of the if-converted method for all convertible instruments and rescinding the ability to rebut the presumption of share settlement for instruments that may be settled in cash or other assets.

The standard is effective for fiscal years beginning after December 15, 2021. PSEG early adopted this standard on January 1, 2021 on a modified retrospective basis. Adoption of this standard did not have an impact on the financial statements of PSEG and PSE&G.

Codification Improvements to Callable Debt Securities—ASU 2020-08

This accounting standard clarifies that an entity should reevaluate for each reporting period whether a purchased callable debt security that has multiple call dates is within the scope of certain guidance on nonrefundable fees and other costs related to receivables.

Codification Improvements—ASU 2020-10

This accounting standard conforms, clarifies, simplifies, and provides technical corrections to various codification topics.

The standard is effective for fiscal years beginning after December 15, 2020. PSEG adopted this standard on January 1, 2021. Adoption of this standard did not have an impact on the financial statements of PSEG and PSE&G.

Reference Rate Reform Scope Refinement—ASU 2021-01

This accounting standard clarifies certain guidance related to derivative instruments affected by the market-wide change in the interest rates even if those derivatives do not reference the LIBOR or another rate that is expected to be discontinued as a result of reference rate reform. The accounting standard also clarifies other aspects of the relief provided in the reference rate reform GAAP guidance.

The standard is effective upon issuance and allows for retrospective or prospective application with certain conditions. PSEG adopted this standard prospectively in January 2021. Adoption of this standard did not have an impact on the financial statements of PSEG and PSE&G.

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New Standards Issued But Not Yet Adopted as of December 31, 2021

Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options—ASU 2021-04

This accounting standard clarifies an issuer’s accounting for certain modifications or exchanges of freestanding equity-classified written call options that remain equity-classified after modification or exchange. It provides guidance on how an issuer would determine whether it should recognize the modification or exchange as an adjustment to equity or an expense.

The standard is effective for fiscal years beginning after December 15, 2021. PSEG adopted this standard prospectively on January 1, 2022. Adoption of this standard did not have an impact on the financial statements of PSEG and PSE&G.

Lessors-Certain Leases with Variable Lease Payments—ASU 2021-05

This accounting standard improves an area of the lease guidance related to a lessor’s accounting for certain leases with variable lease payments. It amends the lessor lease classification requirements and, as a result, a lessor is now required to classify and account for a lease with variable payments as an operating lease if (i) the lease would have been classified as a sales-type lease or a direct financing lease and (ii) the lessor would have otherwise recognized a day-one loss. A day-one loss or profit is not recognized under operating lease accounting.

Business Combinations – Accounting for Contract Assets and Contract Liabilities from Contracts with Customers—ASU 2021-08

This accounting standard amends the business combination guidance by requiring entities to apply the revenue recognition standard to recognize and measure contract assets and contract liabilities in a business combination.

The standard is effective for fiscal years beginning after December 15, 2022 and early adoption is permitted. Amendments in this standard will be applied prospectively to business combinations occurring on or after the effective date of the amendments. PSEG is currently analyzing the impact of this standard on its financial statements.

Government Assistance – Disclosures by Business Entities about Government Assistance—ASU 2021-10

This accounting standard increases transparency in financial reporting by requiring business entities to disclose, in notes to financial statements, certain information when they (i) have received government assistance and (ii) use a grant or contribution accounting model by analogy to other accounting guidance.

Note 3. Revenues

Nature of Goods and Services

The following is a description of principal activities by reportable segment from which PSEG and PSE&G 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.

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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 the Conservation Incentive Program (CIP), weather normalization, green energy program true-ups and transmission formula rate true-ups, are not a material source of PSE&G revenues.

Other

Revenues from Contracts with Customers

Electricity and Related Products—Wholesale load contracts have been executed in the different 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 generally reports electricity sales and purchases conducted with those individual ISOs net on an hourly basis in either Operating Revenues or Energy Costs in its Consolidated Statements of Operations. The classification depends on the net hourly activity.

PSEG Power enters into capacity sales and capacity purchases through the ISOs. The transactions are reported on a net basis dependent on PSEG Power’s monthly net sale or purchase position through the individual ISOs. The performance obligations with the ISOs are satisfied over time upon delivery of the capacity and revenue is recognized accordingly. In addition to capacity sold through the ISOs, PSEG Power sells capacity through bilateral contracts and the related revenue is reported on a gross basis and recognized over time upon delivery of the capacity.

In April 2019, PSEG Power’s Salem 1, Salem 2 and Hope Creek nuclear plants were awarded Zero Emission Certificates (ZECs) by the BPU. These nuclear plants are expected to receive ZEC revenue for approximately three years, through May 2022, from the electric distribution companies (EDCs) in New Jersey. In April 2021, PSEG Power’s Salem 1, Salem 2 and Hope Creek nuclear plants were awarded ZECs by the BPU for the three year eligibility period starting June 2022. PSEG Power recognizes revenue when the units generate electricity, which is when the performance obligation is satisfied. These revenues are included in PJM Sales in the following tables. See Note 4. Early Plant Retirements/Asset Dispositions and Impairments 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.

PSEG LI Contract—PSEG LI has a contract with LIPA which generates revenues. PSEG LI’s subsidiary, 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.

Other Revenues from Contracts with Customers

Prior to the sale of Solar Source in June 2021, PSEG Power entered into bilateral contracts to sell solar power and solar renewable energy certificates (SRECs) from its solar facilities. Contract terms ranged from 15 to 30 years. The performance obligations were generally solar power and SRECs which were transferred to customers upon generation. Revenue was recognized upon generation of the solar power. See Note 4. Early Plant Retirements/Asset Dispositions and Impairments.

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.

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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 18. Financial Risk Management Activities for further discussion. Prior to the sale of Solar Source, PSEG Power was also a party to solar contracts that qualified as leases and were accounted for in accordance with lease accounting guidance. See Note 4. Early Plant Retirements/Asset Dispositions and Impairments.

Energy Holdings generates lease revenues which are recorded pursuant to lease accounting guidance.

Disaggregation of Revenues



	PSE&G		Other		Eliminations		Consolidated
	Millions
Year Ended December 31, 2021
Revenues from Contracts with Customers
Electric Distribution	$	3,279	$	—	$	—	$	3,279
Gas Distribution	1,875		—		(13)		1,862
Transmission	1,611		—		—		1,611
Electricity and Related Product Sales
PJM
Third-Party Sales	—		2,003		—		2,003
Sales to Affiliates	—		265		(265)		—
NYISO	—		247		—		247
ISO-NE	—		172		—		172
Gas Sales
Third-Party Sales	—		181		—		181
Sales to Affiliates	—		886		(886)		—
Other Revenues from Contracts with Customers (A)	343		620		(3)		960
Total Revenues from Contracts with Customers	7,108		4,374		(1,167)		10,315
Revenues Unrelated to Contracts with Customers (B)	14		(607)		—		(593)
Total Operating Revenues	$	7,122	$	3,767	$	(1,167)	$	9,722



	PSE&G		Other		Eliminations		Consolidated
	Millions
Year Ended December 31, 2020
Revenues from Contracts with Customers
Electric Distribution	$	3,130	$	—	$	—	$	3,130
Gas Distribution	1,646		—		(12)		1,634
Transmission	1,485		—		—		1,485
Electricity and Related Product Sales
PJM
Third-Party Sales	—		1,551		—		1,551
Sales to Affiliates	—		447		(447)		—
NYISO	—		124		—		124
ISO-NE	—		126		—		126
Gas Sales
Third-Party Sales	—		83		—		83
Sales to Affiliates	—		771		(771)		—
Other Revenues from Contracts with Customers (A)	338		632		(4)		966
Total Revenues from Contracts with Customers	6,599		3,734		(1,234)		9,099
Revenues Unrelated to Contracts with Customers (B)	9		495		—		504
Total Operating Revenues	$	6,608	$	4,229	$	(1,234)	$	9,603

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	PSE&G		Other		Eliminations		Consolidated
	Millions
Year Ended December 31, 2019
Revenues from Contracts with Customers
Electric Distribution	$	3,224	$	—	$	—	$	3,224
Gas Distribution	1,870		—		(15)		1,855
Transmission	1,181		—		—		1,181
Electricity and Related Product Sales
PJM
Third-Party Sales	—		1,785		—		1,785
Sales to Affiliates	—		536		(536)		—
NYISO	—		143		—		143
ISO-NE	—		137		—		137
Gas Sales
Third-Party Sales	—		92		—		92
Sales to Affiliates	—		927		(927)		—
Other Revenues from Contracts with Customers (A)	284		612		(5)		891
Total Revenues from Contracts with Customers	6,559		4,232		(1,483)		9,308
Revenues Unrelated to Contracts with Customers (B)	66		702		—		768
Total Operating Revenues	$	6,625	$	4,934	$	(1,483)	$	10,076

(A)Includes primarily revenues from appliance repair services and the sale of SRECs at auction at PSE&G, PSEG Power’s solar power projects and energy management and fuel service contracts with LIPA and PSEG LI’s OSA with LIPA in Other.

(B)Includes primarily alternative revenues at PSE&G and derivative contracts and lease contracts in Other. For the years ended December 31, 2021, 2020 and 2019, Other includes losses of $9 million, $26 million and $58 million, respectively, related to Energy Holdings’ investments in leases. For additional information, see Note 9. Long-Term Investments.

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 December 31, 2021 and 2020. Substantially all of PSE&G’s accounts receivable and unbilled revenues result from contracts with customers that are priced at tariff rates. Allowances represented approximately 21% and 14% of accounts receivable (including unbilled revenues) as of December 31, 2021 and 2020, respectively.

Accounts Receivable—Allowance for Credit Losses

PSE&G’s accounts receivable, including unbilled revenues, is primarily comprised of utility customer receivables for the provision of electric and gas service and appliance services, and are reported in the balance sheet as gross outstanding amounts adjusted for an allowance for credit losses. The allowance for credit losses reflects PSE&G’s best estimate of losses on the account balances. The allowance is based on PSE&G’s projection of accounts receivable aging, historical experience, economic factors and other currently available evidence, including the estimated impact of the ongoing coronavirus pandemic (COVID-19) on the outstanding balances as of December 31, 2021. PSE&G’s electric bad debt expense is recoverable through its SBC mechanism. As of December 31, 2021, PSE&G deferred incremental gas bad debt expense for future regulatory recovery due to the impact of the ongoing pandemic. See Note 7. Regulatory Assets and Liabilities for additional information.

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The following provides a reconciliation of PSE&G’s allowance for credit losses for the years ended December 31, 2021 and 2020.










	Years Ended December 31,
	2021		2020
	Millions
Balance at Beginning of Year	$	206	$	68	(A)
Utility Customer and Other Accounts
Provision	195		175
Write-offs, net of Recoveries of $17 million and $5 million	(64)		(37)
Balance at End of Year	$	337	$	206

(A)Includes an $8 million pre-tax increase upon adoption of ASU 2016-13.

Other

PSEG Power generally collects consideration upon satisfaction of performance obligations, and therefore, PSEG Power had no material contract balances as of December 31, 2021 and 2020.

PSEG Power’s accounts receivable include amounts resulting from contracts with customers and other contracts which are out of scope of accounting guidance for revenues from contracts with customers. The majority of these accounts receivable are subject to master netting agreements. As a result, accounts receivable resulting from contracts with customers and receivables unrelated to contracts with customers are netted within Accounts Receivable and Accounts Payable on the 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 December 31, 2021 and 2020. PSEG Power monitors the status of its counterparties on an ongoing basis to assess whether there are any anticipated credit losses.

PSEG LI did not have any material contract balances as of December 31, 2021 and 2020.

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:

Other

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 was held in June 2021 and the 2023/2024 auction will be held in June 2022. PSEG Power expects to realize the following average capacity prices resulting from the base and incremental auctions, including unit specific bilateral contracts for previously cleared capacity obligations.



Delivery Year	$ per Megawatt (MW)-Day	MW Cleared (A)
June 2021 to May 2022	$166	7,700
June 2022 to May 2023	$98	6,300

(A)Of the existing MWs cleared, an approximate average of 3,500 MWs were transferred with the sale of PSEG Power’s fossil generation portfolio in February 2022.

Capacity Payments from the ISO-NE 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 or seven years, and the retirement of Bridgeport Harbor Station 3 effective May 31, 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 2025 and the

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seven-year rate lock for BH5 through May 2026:



Delivery Year	$ per MW-Day (A)	MW Cleared (B)
June 2021 to May 2022	$192	950
June 2022 to May 2023	$179	950
June 2023 to May 2024	$152	930
June 2024 to May 2025	$158	950
June 2025 to May 2026	$231	480

(A)Capacity cleared prices for BH5 through 2026 will be escalated based upon the Handy-Whitman Index. These adjustments are not included above.

(B)Of the existing MWs cleared, the majority of these MWs were transferred with the sale of PSEG Power’s fossil generation portfolio in February 2022.

Bilateral capacity contracts—Capacity obligations pursuant to contract terms through 2029 are anticipated to result in revenues totaling $109 million. Approximately $44 million of these revenues were transferred with the sale of PSEG Power’s fossil generation portfolio.

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 2022 is approximately $70 million and is updated each year based on the change in the Consumer Price Index (CPI). See Note 15. Commitments and Contingent Liabilities for information related to the status of an amended OSA.

Note 4. Early Plant Retirements/Asset Dispositions and Impairments

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)). Each nuclear plant is expected to receive ZEC revenue for approximately three years, through May 2022,

In April 2021, PSEG Power’s Salem 1, Salem 2 and Hope Creek nuclear plants were awarded ZECs for the three-year eligibility period starting June 2022 at the same approximate $10 per MWh received during the current ZEC period through May 2022 referenced above. As a result, each nuclear plant is expected to receive ZEC revenue for an additional three years starting June 2022. The terms and conditions of this April 2021 ZEC award are the same as the current ZEC period as discussed above.

The award of ZECs attaches certain obligations, including an obligation to repay the ZECs in the event that a plant ceases operations during the period that it was awarded ZECs, subject to certain exceptions specified in the ZEC legislation. PSEG Power has and will continue to recognize revenue monthly as the nuclear plants generate electricity and satisfy their performance obligations. Further, the ZEC payment may be adjusted by the BPU at any time to offset environmental or fuel diversity payments that a selected nuclear plant may receive from another source. For instance, the New Jersey Division of Rate Counsel (New Jersey Rate Counsel), in written comments filed with the BPU, has advocated for the BPU to offset market benefits resulting from New Jersey’s rejoining the Regional Greenhouse Gas Initiative from the ZEC payment. PSEG intends to vigorously defend against these arguments. Due to its preliminary nature, PSEG cannot predict the outcome of this matter.

In May 2021, the New Jersey Rate Counsel filed an appeal with the New Jersey Appellate Division of the BPU’s April 2021 decision. PSEG cannot predict the outcome of this matter.

In the event that (i) the ZEC program is overturned or is otherwise materially adversely modified through legal process; or (ii) any of the Salem 1, Salem 2 and Hope Creek plants is not sufficiently valued for its environmental, fuel diversity or resilience attributes in future periods and does not otherwise experience a material financial change that would remove the need for such attributes to be sufficiently valued, PSEG Power will take all necessary steps to cease to operate all of these plants. Alternatively, even with sufficient valuation of these attributes, if the financial condition of the plants is materially adversely impacted by changes in commodity prices, FERC’s changes to the capacity market construct (absent sufficient capacity revenues provided under a program approved by the BPU in accordance with a FERC-authorized capacity mechanism), or, in the case of the Salem nuclear plants, decisions by the EPA and state environmental regulators regarding the implementation of Section 316(b) of the Clean Water Act (CWA) and related state regulations, or other factors, PSEG Power will take all

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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 D&A 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 NDT Fund, which would result in a material adverse impact on PSEG’s results of operations.

Non-Nuclear

In July 2020, PSEG announced that it was exploring strategic alternatives for PSEG Power’s non-nuclear generating fleet, which included 6,750 MW of fossil generation located in New Jersey, Connecticut, New York and Maryland and, prior to the sale of Solar Source in June 2021, included a 467 MW Solar Source portfolio located in various states.

In May 2021, Power Ventures entered into a purchase agreement with Quattro Solar, LLC, an affiliate of LS Power, relating to the sale by Power Ventures of 100% of its ownership interest in Solar Source including its related assets and liabilities. The transaction closed in June 2021. As a result of the sale, PSEG Power recorded a pre-tax gain on sale of approximately $63 million, which is inclusive of the recognition of previously deferred unamortized investment tax credits (ITC) of $185 million, and income tax expense of approximately $62 million primarily due to the recapture of ITC on units that operated for less than five years.

In August 2021, PSEG entered into two agreements to sell PSEG Power’s 6,750 MW fossil generating portfolio, one agreement for the sale of assets in New Jersey and Maryland and another agreement for the sale of assets located in New York and Connecticut, to newly formed subsidiaries of ArcLight Energy Partners Fund VII, L.P., a fund controlled by ArcLight Capital Partners, LLC for aggregate consideration of approximately $1,920 million. In February 2022, PSEG completed the sale of this fossil generating portfolio.

As a result of the Board of Directors’ approval of the transactions, PSEG’s fossil generating assets and liabilities to be disposed were reclassified to Assets and Liabilities Held for Sale in August 2021, and accordingly, PSEG ceased recording depreciation expense for these assets. In 2021, PSEG recorded a pre-tax impairment loss on sale of approximately $2,691 million as the purchase price was lower than the carrying value in 2021. In addition to the impairment loss, all of PSEG Power’s outstanding debt obligations were redeemed and PSEG incurred a pre-tax loss of $298 million for the make-whole provision payable upon early redemption and other non-cash debt extinguishment costs and also recorded approximately $13 million in pre-tax severance and retention charges, environmental accruals and other adjustments. See Note 16. Debt and Credit Facilities for more detail on the debt extinguishment.

Further adjustments may be required as a result of any purchase price or working capital adjustments, including an adjustment for positive or negative cash flow of the fossil generating assets based on actual performance starting after December 31, 2021 as defined in each agreement; therefore, any future impairment is not estimable as of December 31, 2021 but may be material. In January 2022, PSEG Power recorded an additional impairment of approximately $20 million.

As of December 31, 2021, PSEG Power’s fossil generation assets and liabilities Held for Sale, including anticipated working capital, were $2,060 million and $144 million, respectively, as follows:



			As of December 31, 2021
		Millions
Current Assets (A)			$	264
Property, Plant and Equipment			1,742
Noncurrent Assets			54
	Total Assets Held for Sale		$	2,060

Current Liabilities (B)			$	57
Noncurrent Liabilities (C)			87
	Total Liabilities Held for Sale		$	144

(A)Primarily includes Fuel, Materials and Supplies, Prepayments and Other Current Assets.

(B)Primarily includes Accounts Payable and Other Current Liabilities.

(C)Primarily includes Asset Retirement Obligations (AROs), Accrued Pension Costs and Other Noncurrent Liabilities.

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These Held for Sale balances represent all of the assets and liabilities expected to transfer to the buyer at closing. PSEG Power will retain ownership of certain assets and liabilities excluded from the transactions primarily related to obligations under certain environmental regulations, including possible remediation obligations under the New Jersey Industrial Site Recovery Act and the Connecticut Transfer Act. Fulfilling the requirements under these regulations will span multiple years and may require sampling of environmental media to understand the extent of any required remediation. The amounts for any such environmental remediation are not estimable, but may be material.

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 Entities (VIEs)

VIE for which PSEG LI is the Primary Beneficiary

PSEG LI consolidates Servco, a marginally capitalized VIE, which was created for the purpose of operating LIPA’s T&D system in Long Island, New York as well as providing administrative support functions to LIPA. PSEG LI is the primary beneficiary of Servco because it directs the operations of Servco, the activity that most significantly impacts Servco’s economic performance and it has the obligation to absorb losses of Servco that could potentially be significant to Servco. Such losses would be immaterial to PSEG.

Pursuant to the OSA, Servco’s operating costs are 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. In 2021, 2020 and 2019, Servco recorded $511 million, $520 million and $490 million, 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 Consolidated Statement of Operations.

VIE for which PSEG is not the Primary Beneficiary

PSEG holds a 25% equity interest in Ocean Wind JV HoldCo, LLC (OWH), which holds the Ocean Wind project that is expected to achieve full commercial operation in 2025. For additional information, see Note 1. Organization, Basis of Presentation and Summary of Significant Accounting Policies. OWH is considered a VIE since its equity investments at risk are not sufficient to permit this entity to finance its activities without additional subordinated financial support. Since PSEG does not have voting control or the power to direct the activities of OWH that most significantly impact its economic performance, PSEG has determined that it is not the primary beneficiary and therefore will account for this investment under the equity method. As of December 31, 2021, PSEG’s carrying amount of its investment in OWH was $111 million, which is included in Long-Term Investments on PSEG’s Consolidated Balance Sheet. PSEG’s maximum exposure to loss is limited to the carrying amount of its investment and additional planned funding of approximately $250 million to support continued project development to its final investment decision.

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Note 6. Property, Plant and Equipment and Jointly-Owned Facilities

Information related to Property, Plant and Equipment as of December 31, 2021 and 2020 is detailed below:



	2021		2020
	Millions
PSE&G
Electric Transmission	$	15,544	$	14,075
Electric Distribution	10,223		9,622
Gas Distribution and Transmission	9,818		9,081
Construction Work in Progress	1,196		1,783
Other	1,807		1,739
Total PSE&G	38,588		36,300
Nuclear Production	3,656		3,296
Nuclear Fuel in Service	762		748
Fossil Production	—		6,581
Construction Work in Progress	177		248
Other	501		1,396
Total	$	43,684	$	48,569

The above table excludes amounts as of December 31, 2021 which have been classified as Held for Sale. For additional information see Note 4. Early Plant Retirements/Asset Dispositions and Impairments.

PSE&G and PSEG Power have ownership interests in and are responsible for providing their respective shares of the necessary financing for the following jointly-owned facilities to which they are a party. All amounts reflect PSE&G’s or PSEG Power’s share of the jointly-owned projects and the corresponding direct expenses are included in the Consolidated Statements of Operations as Operating Expenses.



			As of December 31,
			2021				2020
	Ownership				Accumulated				Accumulated
	Interest		Plant		Depreciation		Plant		Depreciation
			Millions
PSE&G:
Transmission Facilities	Various		$	165	$	66	$	161	$	63
PSEG Power:
Nuclear Generating:
Peach Bottom	50	%	$	1,452	$	481	$	1,405	$	455
Salem	57	%	$	1,468	$	449	$	1,321	$	387
Nuclear Support Facilities	Various		$	226	$	107	$	226	$	97
Pumped Storage Facilities:
Merrill Creek Reservoir	14	%	$	1	$	—	$	1	$	—

PSEG Power holds undivided ownership interests in the jointly-owned facilities above. PSEG Power is entitled to shares of the generating capability and output of each unit equal to its respective ownership interests. PSEG Power also pays its ownership share of additional construction costs, fuel inventory purchases and operating expenses. PSEG Power’s share of expenses for the jointly-owned facilities is included in the appropriate expense category. Each owner is responsible for any financing with respect to its pro rata share of capital expenditures.

PSEG Power co-owns Salem and Peach Bottom with Exelon Generation. PSEG Power is the operator of Salem and Exelon Generation is the operator of Peach Bottom. A committee appointed by the co-owners provides oversight. Proposed O&M budgets and requests for major capital expenditures are reviewed and approved as part of the normal PSEG Power governance process.

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PSEG Power is a minority owner in the Merrill Creek Reservoir and Environmental Preserve in Warren County, New Jersey. Merrill Creek Owners Group is the owner-operator of this facility. The operator submits separate capital and O&M budgets, subject to PSEG Power’s approval as part of the normal PSEG Power governance process.

Note 7. Regulatory Assets and Liabilities

PSE&G prepares its financial statements in accordance with GAAP for regulated utilities as described in Note 1. Organization, Basis of Presentation and Summary of Significant Accounting Policies. PSE&G has deferred certain costs based on rate orders issued by the BPU or FERC or based on PSE&G’s experience with prior rate proceedings. Most of PSE&G’s Regulatory Assets and Liabilities as of December 31, 2021 are supported by written orders, either explicitly or implicitly through the BPU’s treatment of various cost items. These costs will be recovered and amortized over various future periods.

Regulatory Assets and other investments and costs incurred under our various infrastructure filings and clause mechanisms are subject to prudence reviews and can be disallowed in the future by regulatory authorities. To the extent that collection of any infrastructure or clause mechanism revenue, Regulatory Assets or payments of Regulatory Liabilities is no longer probable, the amounts would be charged or credited to income.

PSE&G had the following Regulatory Assets and Liabilities:



	As of December 31,
	2021		2020
	Millions
Regulatory Assets
Current
New Jersey Clean Energy Program	$	146	$	143
Electric Energy Costs—Basic Generation Service (BGS)	67		60
2018 Distribution Base Rate Case Regulatory Assets (BRC)	56		56
Tax Adjustment Credit (TAC)	44		—
Conservation Incentive Program (CIP)	36		—
Formula Rate True-up	13		23
SBC	—		82


Other	2		5
Total Current Regulatory Assets	364		369
Noncurrent
Deferred Income Tax Regulatory Assets	$	1,064	$	1,014
Pension and OPEB Costs	1,043		1,489
Manufactured Gas Plant (MGP) Remediation Costs	220		320
Green Program Recovery Charges (GPRC)	211		139
Asset Retirement Obligation	191		184
Electric Transmission and Gas Cost of Removal	174		189
Remediation Adjustment Charge (RAC) (Other SBC)	156		134
SBC (Electric Bad Debt)	139		—
COVID-19 Deferral	116		51
Deferred Storm Costs	109		99
BRC	47		103



Other	135		150
Total Noncurrent Regulatory Assets	3,605		3,872
Total Regulatory Assets	$	3,969	$	4,241

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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	As of December 31,
	2021		2020
	Millions
Regulatory Liabilities
Current
Deferred Income Tax Regulatory Liabilities	$	288	$	250

Formula Rate True-up	42		—
GPRC	19		1
ZEC Liability	11		17
Gas Costs—BGSS	5		20


Other	23		6
Total Current Regulatory Liabilities	388		294
Noncurrent
Deferred Income Tax Regulatory Liabilities	$	2,443	$	2,670


Other	54		37
Total Noncurrent Regulatory Liabilities	2,497		2,707
Total Regulatory Liabilities	$	2,885	$	3,001

All Regulatory Assets and Liabilities are excluded from PSE&G’s rate base unless otherwise noted. The Regulatory Assets and Liabilities in the table above are defined as follows:

Asset Retirement Obligation: These costs represent the differences between rate-regulated cost of removal accounting and asset retirement accounting under GAAP. These costs will be recovered in future rates as assets are retired.
BRC:** Represents deferred costs, primarily comprised of storm costs incurred in the cleanup of major storms from 2010 through 2018, which are being amortized over five years pursuant to the 2018 Distribution Base Rate Case Settlement.
CIP:** The CIP reduces the impact on distribution revenues from changes in sales volumes and demand for most customers. The CIP, which is calculated annually, provides for a true-up of current period revenue as compared to revenue established in PSE&G’s most recent distribution base rate proceeding. Recovery under the CIP is subject to certain limitations, including an actual versus allowed return on equity (ROE) test and ceilings on customer rate increases. The CIP became effective in June 2021 for electric revenues and October 2021 for gas revenues. The gas CIP replaced the Weather Normalization Clause.
COVID-19 Deferral:** These amounts represent incremental costs related to COVID-19 as authorized for deferral in an order issued by the BPU to all New Jersey regulated utilities in July 2020. The BPU authorized such utilities to create a COVID-19-related Regulatory Asset by deferring on their books and records the prudently incurred incremental costs related to COVID-19 during the Regulatory Asset period, beginning on March 9, 2020 through September 30, 2021, or 60 days after the New Jersey governor determines that the Public Health Emergency is no longer in effect, or in the absence of such a determination, 60 days from the time the Public Health Emergency automatically terminates by law, whichever is later. Deferred costs are to be offset by any federal or state assistance that the utility may receive as a direct result of the COVID-19 pandemic. Utilities must file quarterly reports of the costs incurred and offsets. Each participating utility 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. In September 2021, the BPU extended the deferral period to December 31, 2022. 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.
Deferred Income Tax Regulatory Assets: These amounts relate to deferred income taxes arising from utility operations that have not been included in customer rates relating to depreciation, ITCs and other flow-through items, including the flowback to customers of accumulated deferred income taxes related to tax repair deductions. As part of its base rate case settlement with the BPU and the establishment of the TAC mechanism in 2018, PSE&G agreed to a ten-year flowback to customers of its accumulated deferred income taxes from previously realized tax repair

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deductions which resulted in the recognition of a $581 million Regulatory Asset and Regulatory Liability as of September 30, 2018. In addition, PSE&G agreed to the current flowback of tax benefits from ongoing tax repair deductions as realized which results in the recording of a Regulatory Asset upon flowback. For the years ended December 31, 2021, 2020 and 2019, PSE&G had provided $22 million, $31 million and $58 million, respectively, in current tax repair flowbacks to customers. The recovery and amortization of the tax repair-related Deferred Income Tax Regulatory Assets will be determined in PSE&G’s subsequent base rate cases.

Deferred Income Tax Regulatory Liabilities: These liabilities primarily relate to amounts due to customers for excess deferred income taxes as a result of the reduction in the federal corporate income tax rate provided in the Tax Cuts and Jobs Act of 2017 (Tax Act), and accumulated deferred income taxes from previously realized distribution-related tax repair deductions. As part of its settlement with its regulators, PSE&G agreed to refund the excess deferred income taxes as follows:
Unprotected distribution-related excess deferred income taxes are being refunded to customers over five years through PSE&G’s TAC mechanism as approved in its 2018 distribution base rate proceeding. As of December 31, 2021, the balance remaining to be flowed back to customers was approximately $371 million with the remaining flowback period through 2024.
Protected distribution-related excess deferred income taxes are being refunded to customers over the remaining useful life of distribution property, plant and equipment through PSE&G’s TAC mechanism. As of December 31, 2021, the balance remaining to be flowed back to customers was approximately $905 million.
Previously realized distribution-related tax repair deductions are being refunded to customers over ten years through PSE&G’s TAC mechanism. As of December 31, 2021, the balance remaining to be flowed back to customers was approximately $462 million through 2028.
Protected transmission-related excess deferred income taxes are being refunded to customers over the remaining useful life of transmission property, plant and equipment through PSE&G’s transmission formula rate mechanism. As of December 31, 2021, the balance remaining to be flowed back to customers was approximately $939 million.
Unprotected transmission-related deferred income taxes were fully refunded to customers in 2019 and 2020.
Deferred Storm Costs:** Incremental costs incurred in the restoration and related costs from major storms in 2019, 2020 and 2021 for which PSE&G will seek recovery in its next base rate proceeding.
Electric and Gas Cost of Removal:** PSE&G accrues and collects in rates for the cost of removing, dismantling and disposing of its T&D assets upon retirement. The Regulatory Asset or Liability for non-legally required cost of removal represents the difference between amounts collected in rates and costs actually incurred.
Electric Energy Costs**—BGS: These costs represent the over or under recovered amounts associated with BGS, as approved by the BPU. Pursuant to BPU requirements, PSE&G serves as the supplier of last resort for electric customers within its service territory that are not served by another supplier. Pricing for those services are set by the BPU as a pass-through, resulting in no margin for PSE&G’s operations. Over or under recovered balances with interest are returned or recovered through monthly filings.
Formula Rate True-Up:** PSE&G’s transmission revenues are earned under a FERC-approved annual formula rate mechanism which 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.
Gas Costs**—BGSS: These costs represent the over or under recovered amounts associated with BGSS, as approved by the BPU. Pursuant to BPU requirements, PSE&G serves as the supplier of last resort for gas customers within its service territory that are not served by another supplier. Pricing for those services are set by the BPU as a pass-through, resulting in no margin for PSE&G’s operations. Over or under collected balances are returned or recovered through an annual filing. Interest is accrued only on over recovered balances.
GPRC:** This amount represents costs of the over or under collected balances associated with various Energy Efficiency and Renewable Energy (EE & RE) Programs. PSE&G files annually with the BPU for recovery of amounts that include a return on and of its investment over the lives of the underlying investments and capital assets which range from five to ten years. Interest is accrued monthly on any over or under recovered balances. Approved

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components of the GPRC include: Carbon Abatement, Energy Efficiency Economic Stimulus Program (EEE), EEE Extension Program, EEE Extension II Program, Solar Generation Investment Program (Solar 4 All®), Solar 4 All® Extension, Solar 4 All® Extension II, Solar Loan II Program, Solar Loan III Program, Energy Efficiency (EE) 2017 Program, Clean Energy Future–Energy Efficiency (CEF-EE), the Transition Renewable Energy Certificate (TRECs) Program and Clean Energy Act Studies (CEAS).

MGP Remediation Costs: Represents the low end of the range for the remaining environmental investigation and remediation program cleanup costs for MGPs that are probable of recovery in future rates. Once these costs are incurred, they are recovered through the RAC in the SBC over a seven year period with interest.
New Jersey Clean Energy Program:** The BPU approved future funding requirements for EE and RE Programs. The BPU funding requirements are recovered through the SBC.
Pension and OPEB Costs:** Pursuant to the adoption of accounting guidance for employers’ defined benefit pension and OPEB plans, PSE&G recorded the unrecognized costs for defined benefit pension and other OPEB plans on the balance sheet as a Regulatory Asset. These costs represent net actuarial gains or losses and prior service costs which have not been expensed. These costs are amortized and recovered in future rates.
RAC (Other SBC):** Costs incurred to clean up MGPs which are recovered over seven years with interest through an annual filing.
SBC:** The SBC, as authorized by the BPU and the New Jersey Electric Discount and Energy Competition Act, includes costs related to PSE&G’s electric and gas business as follows: (1) the Universal Service Fund (USF); (2) EE & RE Programs; (3) Electric bad debt expense; and (4) the RAC for incurred MGP remediation expenditures. Over or under recovered balances with interest are to be returned or recovered through an annual filing.
TAC:** This represents the over or under collected balances associated with the return of excess accumulated deferred income taxes and the flowback of previously realized and current tax repair deductions under a mechanism approved by the BPU in PSE&G’s 2018 Distribution Base Rate Case Settlement. Over or under collected balances are returned or recovered through an annual filing. PSE&G includes a return component on the flowback of the excess accumulated deferred income taxes and the previously realized tax repairs. Interest is accrued monthly on any over or under recovered balances.
ZEC Liability:** This represents amounts to be returned to customers for overcollections, including interest associated with the ZEC program whereby PSE&G purchases ZECs from eligible nuclear plants.

Significant 2021 regulatory orders received and currently pending rate filings with the BPU by PSE&G are as follows:

BGS**—**In January 2022, the BPU approved changes to BGS rates as a result of the FERC-approved changes to transmission charges, primarily as a result of the decrease in PSE&G’s transmission formula rate ROE. PSE&G’s BGS customers will be credited over a 12-month period effective February 1, 2022.
BGSS**—**In March 2021, the BPU gave final approval to PSE&G’s request to maintain the current BGSS rate of 32 cents per therm which had been provisionally approved effective October 1, 2020.

In June 2021, PSE&G made its annual BGSS filing with the BPU requesting to maintain the current BGSS rate of 32 cents and increase its BGSS Balancing Charge from 8.6 cents to 9.3 cents per therm which the BPU approved on a provisional basis in November 2021.

Under BGSS Orders issued by the BPU, New Jersey gas distribution companies (GDCs) may self-implement up to a 5% BGSS rate increase effective December 1 of the current year, and February 1 of the following year, with one month’s advance notice to the BPU and New Jersey Rate Counsel, and implement a decrease in its BGSS rate at any time during the year upon five days’ notice to the BPU and New Jersey Rate Counsel.

In November 2021, the BPU approved a waiver filed by PSE&G, along with other New Jersey GDCs, that allowed the GDCs to self-implement a BGSS increase of up to 5% effective December 1, 2021. As a result, PSE&G implemented a 5% increase resulting in a BGSS rate of 36 cents per therm, in addition to the provisionally approved increase in the BGSS Balancing Charge, both with effective dates of December 1, 2021. In December 2021, PSE&G gave notice of a second 5% self-implementing increase, effective February 1, 2022, resulting in a BGSS rate of 41 cents per therm.

CEF-Energy Cloud (EC) or Advanced Metering Infrastructure (AMI) Initiative****—**In January 2021, the BPU approved PSE&G’s CEF-EC filing to spend $707 million in order to provide its 2.3 million electric customers with

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smart meters over the next four years. All of the capital and operating costs of the program will be recovered in PSE&G’s next base rate case, expected in the second half of 2024. From the start of the program until the commencement of new base rates, the return on and of the capital portion of the program will be included for recovery in those rates, as well as operating costs and stranded costs associated with the retirement of the existing meters.

CEF-Electric Vehicles (EV)****—**In January 2021, the BPU approved a program for PSE&G to provide investments of approximately $166 million for EV charging infrastructure. All of the capital and operating costs of the program will be recovered in PSE&G’s next base rate case. From the start of the program until the commencement of new base rates, the return on and of the capital portion of the program will be included for recovery in those rates, as well as operating costs.
Community Solar Energy Pilot (CSEP) Program, a New Component of the GPRC****—**In May 2021, PSE&G made its initial filing for recovery of costs related to the CSEP program. New Jersey’s Clean Energy Act provided for the establishment of a "Community Solar Energy Pilot Program” which permits electric customers to participate in a solar energy project that is remotely located from their properties but is within their electric public utility service territory. The program allows for a credit to the customer's utility bill equal to the electricity generated attributable to the customer's participation in the solar energy project. PSE&G’s filing proposes to recover an initial revenue requirement of $0.4 million associated with the CSEP Program as a new component of PSE&G’s existing electric Green Program Recovery Charge (GPRC). This matter is pending.
CIP****—**In February 2022, PSE&G filed its initial electric CIP cost recovery petition seeking BPU approval to recover estimated deficient electric revenues of approximately $52 million. The filing is based on a twelve month period ending May 31, 2022, with actual results through November 2021 and forecasted amounts through May 2022. The revenue deficiency is the result of lower estimated revenues as compared to a baseline revenue calculated by utilizing approved determinants from PSE&G’s last base rate case applied to current distribution rates. Due to the savings test requirement also approved with the CIP filing, PSE&G expects to recover its $52 million request over two years. New rates are proposed to be effective June 1, 2022. This matter is pending.
COVID-19 Deferral****—**PSE&G continues to make quarterly filings as required by the BPU and has recorded a Regulatory Asset as of December 31, 2021 of approximately $116 million for net incremental costs, including $64 million for incremental gas bad debt expense associated with customer accounts receivable, which PSE&G expects are probable of recovery under the BPU order. In September 2021, the BPU extended the period to December 31, 2022 during which incremental costs attributable to COVID-19 could be deferred as Regulatory Assets.
Energy Strong (ES) II****—**In April 2021, the BPU approved PSE&G’s filing for a $13 million revenue increase under this investment program, effective May 2021. This increase represents the return on and of ES II electric investments placed in service through January 2021.

In November, 2021, PSE&G filed a petition seeking BPU approval to recover the annualized increases in electric and gas revenue requirements associated with capitalized investment costs of the ES II Program through January 31, 2022. In February 2022, the petition was updated to reflect the actual investments and costs, and requests annual electric and gas revenue increases of $15 million and $1 million, respectively, with rates effective no earlier than May 1, 2022. This matter is pending.

GPRC****—**In June 2021, the BPU approved as final the GPRC rates approved by the BPU on a provisional basis in January 2021. In July 2021, PSE&G filed its 2021 GPRC cost recovery petition requesting BPU approval to recover a $2 million increase in each of electric and gas base rates annual revenues. This matter is pending.
Gas System Modernization Program** **II (GSMP II)****—**In May 2021, the BPU approved PSE&G’s December 2020 cost recovery petition to recover in gas base rates an annual revenue increase of approximately $21 million effective June 1, 2021. This increase represents the return on and of GSMP II investments placed in service through February 2021.

In November 2021, the BPU approved PSE&G’s updated September 2021 GSMP II cost recovery petition to recover in gas base rates an annual revenue increase of approximately $28 million effective December 1, 2021. This increase represents the return on and of GSMP II investments in service through August 31, 2021.

In December 2021, PSE&G filed its next semiannual GSMP II cost recovery petition seeking BPU approval to recover in gas base rates an estimated annual revenue increase of approximately $27 million effective June 1, 2022.

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This increase represents the return on and of GSMP II investments placed in service through February 28, 2022. This request will be updated in March 2022 for actual costs.

RAC**—**In July 2021, the BPU approved PSE&G’s RAC 28 filing requesting recovery of approximately $35 million in net MGP remediation expenditures incurred from August 1, 2019 through July 31, 2020.
SBC****—**In August 2021, the BPU approved PSE&G’s 2020 SBC filing to recover electric and gas costs incurred under its EE & RE and Social Programs. The new rates reflect no change to the overall SBC rates to customers but allowed a decrease in the EE & RE sub-component to be added to the Social Programs rate. The remaining rate increase requested by PSE&G for recovery of its Social Programs costs associated with its electric bad debt costs was deferred to the next SBC filing. As of December 31, 2021, PSE&G had approximately $139 million in deferred electric bad debt costs.

In September 2021, the BPU approved the USF/Lifeline component of the SBC effective October 1, 2021, which provides for the recovery of costs provided to assist customers in paying their bills.

Solar Successor Incentive (SuSi) Program, a New Component of the GPRC**—In July 2021, the BPU approved an order establishing the SuSi Program as a replacement to the bridge Transition Renewable Energy Certificates program approved in 2019. In its SuSI Order, the BPU directed the New Jersey EDCs to engage a SuSI Administrator to acquire, on behalf of the EDCs, Solar Renewable Energy Certificate-IIs (SREC-IIs), produced by eligible solar generation projects, which will be funded through a SuSI charge to electric customers collected by the EDCs. The order allows the EDCs to recover their costs associated with the SuSI program in an annual filing, subject to approval by the BPU.

In December 2021, PSE&G filed for new rates of approximately $38 million for recovery of its expected share of SREC-II costs. PSE&G has requested that these costs be recovered as a new component of PSE&G’s existing electric GPRC, which is updated on an annual basis.

TAC—In August 2021, the BPU approved PSE&G’s updated 2020 TAC filing which provides for changes in the TAC electric and gas credits, which will result in an annual decrease of approximately $22 million in electric revenues and an annual increase of approximately $57 million in gas revenues.

In October 2021, PSE&G made its annual 2021 TAC filing requesting BPU approval to reduce electric and gas revenues by approximately $15 million and $31 million, respectively, on an annual basis. This matter is pending.

Transmission Formula Rates—In June 2021, PSE&G filed its 2020 true-up adjustment pertaining to its transmission formula rates in effect for 2020. This filing resulted in an additional annual revenue requirement of $13 million more than the 2020 originally filed revenue.

In October 2021, FERC approved a settlement agreement effective August 1, 2021 reached with the BPU Staff and the New Jersey Rate Counsel with respect to the level of PSE&G’s base transmission ROE and other formula rate matters. The settlement reduces PSE&G’s base ROE from 11.18% to 9.9% and provides that the settling parties will not seek changes to the transmission formula rate for three years. As a result of FERC’s approval of the settlement, PSE&G made the required compliance filing which was accepted by FERC in December 2021.

In 2021, PSE&G had recorded a reduction of approximately $64 million in 2021 transmission revenues as a result of the settlement.

In November 2021, PSE&G also filed its 2021 Annual Formula Rate Update with FERC for its 2022 transmission revenues under the revised ROE at 9.9% and with other settlement changes in formula rate matters, which will result in an approximate $150 million decrease in annual transmission revenue effective January 1, 2022.

Weather Normalization Charge (WNC)****—**In September 2021, the BPU provisionally approved PSE&G’s 2021-2022 WNC petition to refund a $2 million overcollection from the 2020-2021 Winter Period. The overcollection will be refunded to PSE&G gas customers during the 2021-2022 Winter Period. For the 2021-2022 Winter Period, the WNC was replaced by the CIP program.
ZEC Program****—**In October 2021, PSE&G filed a petition with the BPU requesting to refund a total of approximately $4 million, including interest, for overcollections resulting from the ZEC program. For the 2021 energy year, PSE&G purchased approximately $157 million in ZECs including interest, from the eligible nuclear plants selected by the BPU with the final payment made in August 2021. As a result of the collections and required ZEC payments, there were overcollected revenues, including interest of $4 million, which PSE&G now seeks to return to customers in 2022. This matter is pending.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Table of Contents

Note 8. Leases

As of December 31, 2021, PSEG and its subsidiaries were both a lessee and a lessor in operating leases.

Lessee

PSE&G

PSE&G has operating leases for office space for customer service centers, rooftops and land for its Solar 4 All® facilities, equipment, vehicles and land for certain electric substations. These leases have remaining lease terms through 2040, some of which include options to extend the leases for up to five 5-year terms or one 10-year term; and two include options to extend the leases for one 45-year and one 48-year term, respectively. Some leases have fixed rent payments that have escalations based on certain indices, such as the CPI. Certain leases contain variable payments.

Other

PSEG Power has operating leases for buildings, merchant transmission and equipment. These leases have remaining terms through 2025, one of which includes an option to extend the lease for up to one 5-year term. One lease has fixed rent payments that has escalations based on the CPI Index. Certain leases contain variable payments. Except for operating lease costs, the following tables for lessees exclude amounts in 2021 which have been classified as Held for Sale. For additional information see Note 4. Early Plant Retirements/Asset Dispositions and Impairments.

Services has operating leases for real estate and office equipment. These leases have remaining terms through 2030. Services’ lease for its headquarters, which ends in 2030, includes options to extend for two 5-year terms.

Operating Lease Costs

The following amounts relate to total operating lease costs, including both amounts recognized in the Consolidated Statements of Operations during the years ended December 31, 2021, 2020 and 2019 and any amounts capitalized as part of the cost of another asset, and the cash flows arising from lease transactions.



	PSE&G			Other			Total
	Millions
Operating Lease Costs





Year Ended December 31, 2021
Long-term Lease Costs	$	24		$	26		$	50
Short-term Lease Costs	36			6			42
Variable Lease Costs	2			18			20
Total Operating Lease Costs	$	62		$	50		$	112



Year Ended December 31, 2021
Cash Paid for Amounts Included in the Measurement of Operating Lease Liabilities	$	17		$	26		$	43

Weighted Average Remaining Lease Term in Years	12			8			9
Weighted Average Discount Rate	3.4		%	4.1		%	3.8		%

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Table of Contents



	PSE&G			Other			Total
	Millions
Operating Lease Costs





Year Ended December 31, 2020
Long-term Lease Costs	$	26		$	28		$	54
Short-term Lease Costs	38			7			45
Variable Lease Costs	2			29			31
Total Operating Lease Costs	$	66		$	64		$	130



Year Ended December 31, 2020
Cash Paid for Amounts Included in the Measurement of Operating Lease Liabilities	$	17		$	28		$	45

Weighted Average Remaining Lease Term in Years	12			11			11
Weighted Average Discount Rate	3.5		%	4.3		%	4.0		%



	PSE&G			Other			Total
	Millions
Operating Lease Costs





Year Ended December 31, 2019
Long-term Lease Costs	$	24		$	28		$	52
Short-term Lease Costs	14			10			24
Variable Lease Costs	2			20			22
Total Operating Lease Costs	$	40		$	58		$	98



Year Ended December 31, 2019
Cash Paid for Amounts Included in the Measurement of Operating Lease Liabilities	$	16		$	26		$	42

Weighted Average Remaining Lease Term in Years	13			11			12
Weighted Average Discount Rate	3.6		%	4.3		%	4.1		%

Operating lease liabilities as of December 31, 2021 had the following maturities on an undiscounted basis:



	PSE&G		Other		Total
	Millions
2022	$	15	$	25	$	40
2023	12		20		32
2024	10		16		26
2025	9		16		25
2026	8		15		23
Thereafter	63		60		123
Total Minimum Lease Payments	$	117	$	152	$	269

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Table of Contents

The following is a reconciliation of the undiscounted cash flows to the discounted Operating Lease Liabilities recognized on the Consolidated Balance Sheets:



	As of December 31, 2021
	PSE&G		Other		Total
	Millions
Undiscounted Cash Flows	$	117	$	152	$	269
Reconciling Amount due to Discount Rate	(22)		(23)		(45)
Total Discounted Operating Lease Liabilities	$	95	$	129	$	224

	As of December 31, 2020
	PSE&G		Other		Total
	Millions
Undiscounted Cash Flows	$	127	$	239	$	366
Reconciling Amount due to Discount Rate	(26)		(54)		(80)
Total Discounted Operating Lease Liabilities	$	101	$	185	$	286

As of December 31, 2021, the current portions of Operating Lease Liabilities included in Other Current Liabilities were $33 million and $12 million for PSEG and PSE&G, respectively. As of December 31, 2020, the current portions of Operating Lease Liabilities included in Other Current Liabilities were $34 million and $13 million for PSEG and PSE&G, respectively.

Lessor

Other

In the third quarter of 2021, PSEG Nuclear, LLC, a wholly owned subsidiary of PSEG Power, entered into an operating lease as the lessor to lease certain parcels of land with terms of 28 years from commencement, plus five optional renewal periods of ten years.

Prior to the sale of Solar Source, certain of PSEG Power’s sales agreements related to its solar generating plants qualified as operating leases. Lease income was based on solar energy generation; therefore, all rental income recorded under these leases was variable.

Energy Holdings is the lessor in leveraged leases. See Note 9. Long-Term Investments and Note 10. Financing Receivables.

Energy Holdings is the lessor in two operating leases for domestic energy generation facilities with remaining terms through 2036, one of which has an optional renewal period and real estate assets with remaining terms through 2049. As of December 31, 2021, Energy Holdings’ property subject to these leases had a total carrying value of $124 million.

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 the years ended December 31, 2021, 2020 and 2019:



Operating Lease Income	Millions




Year Ended December 31, 2021
Fixed Lease Income	$	23
Variable Lease Income	12
Total Operating Lease Income	$	35

Year Ended December 31, 2020
Fixed Lease Income	$	15
Variable Lease Income	26
Total Operating Lease Income	$	41

Year Ended December 31, 2019
Fixed Lease Income	$	22
Variable Lease Income	23
Total Operating Lease Income	$	45

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Table of Contents

Operating leases had the following minimum future fixed lease receipts as of December 31, 2021:



	Millions
2022	$	18
2023	18
2024	19
2025	19
2026	50
Thereafter	183
Total Minimum Future Lease Receipts	$	307

Note 9. Long-Term Investments

Long-Term Investments as of December 31, 2021 and 2020 included the following:



	As of December 31,
	2021		2020
	Millions
PSE&G
Life Insurance and Supplemental Benefits	$	89	$	100
Solar Loans	92		122
Other
Lease Investments	187		250
Equity Method Investments	173		64
Total Long-Term Investments	$	541	$	536

(A)During the three years ended December 31, 2021, 2020 and 2019, dividends from these investments were $17 million, $15 million and $15 million, respectively.

Leases

Energy Holdings, through its indirect subsidiaries, has investments in 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 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 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 Consolidated Balance Sheets.

In September 2020, wholly owned subsidiaries of PSEG Energy Holdings L.L.C. (the Sellers) completed the sale of their ownership interests in the Powerton and Joliet generation facilities and related assets, including the assumption by the purchaser of related liabilities. The loss, net of taxes, resulting from the transaction was immaterial. In December 2020, the leveraged lease relating to our interest in the Shawville facilities was modified and extended. Accordingly, the Shawville leveraged lease was reclassified as an operating lease and the underlying assets were recorded in Property, Plant and Equipment.

In the second quarter of 2020, Energy Holdings completed its annual review of estimated residual values embedded in domestic energy leveraged leases and determined no impairments were necessary. During the second quarter of 2019, the outcome of Energy Holdings’ annual review indicated that the updated residual value estimate of the coal-fired Powerton lease was lower than the recorded residual value and the decline was deemed to be other than temporary as a result of expected future adverse market conditions. As a result, a pre-tax write-down of $58 million was reflected in Operating Revenues in 2019, calculated by comparing the gross investment in the leases before and after the revised residual estimates.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Table of Contents

Leveraged leases outstanding as of December 31, 2021 commenced in or prior to 2000.The following table shows Energy Holdings’ gross and net lease investment as of December 31, 2021 and 2020.



	As of December 31,
	2021		2020
	Millions
Lease Receivables (net of Non-Recourse Debt)	$	274	$	299
Estimated Residual Value of Leased Assets	—		55
Total Investment in Rental Receivables	274		354
Unearned and Deferred Income	(87)		(104)
Gross Investments in Leases	187		250
Deferred Tax Liabilities	(42)		(64)
Net Investments in Leases	$	145	$	186

The pre-tax income (loss) and income tax effects related to investments in leases, excluding gains and losses on sales and the impacts of the Tax Act, were as follows:



	Years Ended December 31,
	2021		2020		2019
	Millions
Pre-Tax Income (Loss) from Leases	$	13	$	18	$	(39)
Income Tax Expense (Benefit) on Income (Loss) from Leases	$	3	$	2	$	(22)

Equity Method Investment

PSEG had a 25% equity interest in Ørsted’s Ocean Wind project of $111 million as of December 31, 2021. For additional information see Note 5. Variable Interest Entities.

PSEG also had a 50% ownership interest in Kalaeloa, a combined-cycle generation facility in Hawaii of $62 million and $64 million as of December 31, 2021 and 2020, respectively.

Note 10. 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 December 31, 2021, none of the solar loans were impaired; however, in the event of a loan default or if a loan becomes impaired, the basis of the solar loan would be recovered through a regulatory recovery mechanism. As of December 31, 2021, none of the solar loans were delinquent. Therefore, no current credit losses have been recorded for Solar Loan Programs I, II and III. A substantial portion of these loan amounts are noncurrent and reported in Long-Term Investments on PSEG’s and PSE&G’s Consolidated Balance Sheets. The following table reflects the outstanding loans by class of customer, none of which would be considered “non-performing.”



	As of December 31,
Outstanding Loans by Class of Customer	2021		2020
	Millions
Commercial/Industrial	$	116	$	145
Residential	5		6
Total	121		151
Current Portion (included in Accounts Receivable)	(29)		(29)
Noncurrent Portion (included in Long-Term Investments)	$	92	$	122

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Table of Contents

The solar loans originated under three Solar Loan Programs are comprised as follows:



Programs	Balance as of December 31, 2021		Funding Provided	Residential Loan Term	Non-Residential Loan Term
	Millions
Solar Loan I	$	14	prior to 2013	10 years	15 years
Solar Loan II	56		prior to 2015	10 years	15 years
Solar Loan III	51		largely funded as of December 31, 2021	10 years	10 years
Total	$	121

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 December 31, 2021 and have an average remaining life of approximately four years.

Energy Holdings

Energy Holdings had net investments in assets subject to leveraged lease accounting of $145 million as of December 31, 2021 and $186 million as of December 31, 2020 (see Note 9. Long-Term Investments).

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’ Credit Rating Standard & Poor’s (S&P) as of December 31, 2021	As of December 31, 2021
	Millions
AA	$	8
A-	51
BBB+ to BBB	215
Total	$	274

PSEG recorded no credit losses for the leveraged leases existing on December 31, 2021. Upon the occurrence of certain defaults, indirect subsidiaries of Energy Holdings would exercise their rights and seek recovery of their investments, 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.

Note 11. Trust Investments

NDT Fund

In accordance with NRC regulations, entities owning an interest in nuclear generating facilities are required to determine the costs and funding methods necessary to decommission such facilities upon termination of operation. As a general practice, each nuclear owner places funds in independent external trust accounts it maintains to provide for decommissioning. PSEG Power is required to file periodic reports with the NRC demonstrating that its NDT Fund meets the formula-based minimum NRC funding requirements. PSEG Power maintains an external master NDT to fund its share of decommissioning costs for its five 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. PSEG Power’s share of decommissioning costs related to its five nuclear units was estimated to be between $3.0 billion and $3.4 billion, including contingencies. The liability for decommissioning recorded on a discounted basis as of December 31, 2021 was approximately $1.2 billion and is included in the ARO. The funds are managed by third-party investment managers who operate under investment guidelines developed by PSEG Power.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Table of Contents

The following tables show the fair values and gross unrealized gains and losses for the securities held in the NDT Fund.



	As of December 31, 2021
	Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
	Millions
Equity Securities
Domestic	$	491	$	363	$	(3)	$	851
International	346		119		(15)		450
Total Equity Securities	837		482		(18)		1,301
Available-for-Sale Debt Securities
Government	683		12		(8)		687
Corporate	637		16		(6)		647
Total Available-for-Sale Debt Securities	1,320		28		(14)		1,334
Total NDT Fund Investments (A)	$	2,157	$	510	$	(32)	$	2,635

(A) The NDT Fund Investments table excludes foreign currency of $2 million as of December 31, 2021,

which is part of the NDT Fund.



	As of December 31, 2020
	Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
	Millions
Equity Securities
Domestic	$	519	$	305	$	(3)	$	821
International	388		152		(9)		531
Total Equity Securities	907		457		(12)		1,352
Available-for-Sale Debt Securities
Government	555		27		(1)		581
Corporate	528		39		(1)		566
Total Available-for-Sale Debt Securities	1,083		66		(2)		1,147
Total NDT Fund Investments (A)	$	1,990	$	523	$	(14)	$	2,499

(A) The NDT Fund Investments table excludes foreign currency of $2 million as of December 31, 2020, which is part of the NDT Fund.

Net unrealized gains on debt securities of $8 million (after-tax) were included in Accumulated Other Comprehensive Loss on PSEG’s Consolidated Balance Sheet as of December 31, 2021. The portion of net unrealized gains recognized during 2021 related to equity securities still held at the end of December 31, 2021 was $130 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 Consolidated Balance Sheets as shown in the following table.



	As of December 31,
	2021		2020
	Millions
Accounts Receivable	$	11	$	11
Accounts Payable	$	11	$	12

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Table of Contents

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 December 31, 2021								As of December 31, 2020
	Less Than 12 Months				Greater Than 12 Months				Less Than 12 Months				Greater Than 12 Months
	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
	Millions
Equity Securities (A)
Domestic	$	69	$	(3)	$	—	$	—	$	23	$	(2)	$	6	$	(1)
International	76		(13)		9		(2)		26		(2)		27		(7)
Total Equity Securities	145		(16)		9		(2)		49		(4)		33		(8)
Available-for-Sale Debt Securities
Government (B)	332		(5)		67		(3)		72		(1)		—		—
Corporate (C)	306		(4)		30		(2)		31		(1)		7		—
Total Available-for-Sale Debt Securities	638		(9)		97		(5)		103		(2)		7		—
NDT Trust Investments	$	783	$	(25)	$	106	$	(7)	$	152	$	(6)	$	40	$	(8)

(A)Equity Securities—Investments in marketable equity securities within the NDT Fund are primarily in common stocks within a broad range of industries and sectors. Unrealized gains and losses on these securities are recorded in Net Income.

(B)Debt Securities (Government)—Unrealized gains and losses on these securities are recorded in Accumulated Other Comprehensive Income (Loss). The unrealized losses on PSEG Power’s NDT investments in U.S. Treasury obligations and Federal Agency mortgage-backed securities were caused by interest rate changes. PSEG Power also has investments in municipal bonds. It is not expected that these securities will settle for less than their amortized cost. PSEG Power does not intend to sell these securities nor will it be more-likely-than-not required to sell before recovery of their amortized cost. PSEG Power did not recognize credit losses for U.S. Treasury obligations and Federal Agency mortgage-backed securities because these investments are guaranteed by the U.S. government or an agency of the U.S. government. PSEG Power did not recognize credit losses for municipal bonds because they are primarily investment grade securities.

(C)Debt Securities (Corporate)—Unrealized gains and losses on these securities are recorded in Accumulated Other Comprehensive Income (Loss). Unrealized losses were due to market declines. It is not expected that these securities would settle for less than their amortized cost. PSEG Power does not intend to sell these securities nor will it be more-likely-than-not required to sell before recovery of their amortized cost. PSEG Power did not recognize credit losses for these corporate bonds because they are primarily investment grade securities.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Table of Contents

The proceeds from the sales of and the net gains on securities in the NDT Fund were:



	Years Ended December 31,
	2021		2020		2019
	Millions
Proceeds from Sales (A)	$	1,930	$	2,031	$	1,614
Net Realized Gains (Losses):
Gross Realized Gains	$	236	$	214	$	107
Gross Realized Losses	(70)		(94)		(53)
Net Realized Gains (Losses) on NDT Fund (B)	166		120		54
Net Unrealized Gains (Losses) on Equity Securities	19		120		196
Impairment of Available-for-Sale Debt Securities (C)	—		(3)		—
Net Gains (Losses) on NDT Fund Investments	$	185	$	237	$	250

(A)Includes activity in accounts related to the liquidation of funds being transitioned within the trust.

(B)The cost of these securities was determined on the basis of specific identification.

(C)PSEG Power recognized an impairment of available-for-sale debt securities in 2020. PSEG Power’s policy is to sell all securities that are rated below investment grade.

The NDT Fund debt securities held as of December 31, 2021 had the following maturities:



Time Frame	Fair Value
	Millions
Less than one year	$	24
1 - 5 years	335
6 - 10 years	234
11 - 15 years	84
16 - 20 years	113
Over 20 years	544
Total NDT Available-for-Sale Debt Securities	$	1,334

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.”

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Table of Contents

The following tables show the fair values, gross unrealized gains and losses and amortized cost basis for the securities held in the Rabbi Trust.



	As of December 31, 2021
	Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
	Millions
Domestic Equity Securities	$	14	$	12	$	—	$	26
Available-for-Sale Debt Securities
Government	107		1		(1)		107
Corporate	105		5		(1)		109
Total Available-for-Sale Debt Securities	212		6		(2)		216
Total Rabbi Trust Investments	$	226	$	18	$	(2)	$	242



	As of December 31, 2020
	Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
	Millions
Domestic Equity Securities	$	21	$	10	$	—	$	31
Available-for-Sale Debt Securities
Government	94		6		—		100
Corporate	123		12		—		135
Total Available-for-Sale Debt Securities	217		18		—		235
Total Rabbi Trust Investments	$	238	$	28	$	—	$	266

Net unrealized gains (losses) on debt securities of $3 million (after-tax) were included in Accumulated Other Comprehensive Loss on PSEG’s Consolidated Balance Sheet as of December 31, 2021. The portion of net unrealized gains recognized during 2021 related to equity securities still held at the end of December 31, 2021 was $1 million.

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 Consolidated Balance Sheets as shown in the following table.



	As of December 31,
	2021		2020
	Millions
Accounts Receivable	$	1	$	1
Accounts Payable	$	—	$	1

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Table of Contents

The following table shows the value of securities in the Rabbi Trust Fund that have been in an unrealized loss position for less than and greater than 12 months:



	As of December 31, 2021								As of December 31, 2020
	Less Than 12 Months				Greater Than 12 Months				Less Than 12 Months				Greater Than 12 Months
	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
	Millions




Available-for-Sale Debt Securities
Government (A)	$	57	$	—	$	16	$	(1)	$	19	$	—	$	—	$	—
Corporate (B)	40		(1)		5		—		2		—		1		—
Total Available-for-Sale Debt Securities	97		(1)		21		(1)		21		—		1		—
Rabbi Trust Investments	$	97	$	(1)	$	21	$	(1)	$	21	$	—	$	1	$	—

(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:



	Years Ended December 31,
	2021		2020		2019
	Millions
Proceeds from Rabbi Trust Sales	$	170	$	203	$	173
Net Realized Gains (Losses):
Gross Realized Gains	$	16	$	19	$	7
Gross Realized Losses	(8)		(6)		(3)
Net Realized Gains (Losses) on Rabbi Trust (A)	8		13		4
Net Unrealized Gains (Losses) on Equity Securities	1		3		6
Net Gains (Losses) on Rabbi Trust Investments	$	9	$	16	$	10

(A)The cost of these securities was determined on the basis of specific identification.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Table of Contents

The Rabbi Trust debt securities held as of December 31, 2021 had the following maturities:



Time Frame	Fair Value
	Millions
Less than one year	$	—
1 - 5 years	40
6 - 10 years	24
11 - 15 years	10
16 - 20 years	25
Over 20 years	117
Total Rabbi Trust Available-for-Sale Debt Securities	$	216

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 and PSE&G are detailed as follows:



	As of December 31,		As of December 31,
	2021		2020
	Millions
PSE&G	$	43	$	51
Other	199		215
Total Rabbi Trust Investments	$	242	$	266

Note 12. Intangibles

As of December 31, 2021 and 2020, PSEG had intangible assets of $20 million and $158 million, respectively, related to emissions allowances and RECs. Emissions allowances and RECs are recorded at cost and evaluated for impairment at least annually. Emissions expense includes impairments of emissions allowances, if any, and costs for emissions, which is recorded as emissions occur. As load is served under contracts requiring energy from renewable sources, the related expense is recorded.

The changes to PSEG’s intangible assets during 2020 and 2021 are as follows:



	Emissions Allowances		RECs		Total Intangibles
	Millions
Balance as of January 1, 2020	$	104	$	45	$	149
Retirements	(9)		(93)		(102)
Purchases	17		94		111
Balance as of December 31, 2020	$	112	$	46	$	158
Retirements	(58)		(114)		(172)
Purchases	9		89		98
Sales and Transfers (A)	(62)		(1)		(63)
Impairments	(1)		—		(1)
Balance as of December 31, 2021	$	—	$	20	$	20

(A)Includes $52 million classified as Assets Held for Sale. See Note 4. Early Plant Retirements/Asset Dispositions and Impairments.

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Note 13. Asset Retirement Obligations (AROs)

PSEG and PSE&G recognize liabilities for the expected cost of retiring long-lived assets for which a legal obligation exists to remove or dispose of an asset or some component of an asset at retirement. These AROs are recorded at fair value in the period in which they are incurred and are capitalized as part of the carrying amount of the related long-lived assets. PSEG’s subsidiaries, except for PSE&G, accrete the ARO liability to reflect the passage of time with the corresponding expense recorded in O&M. PSE&G, as a rate-regulated entity, recognizes Regulatory Assets or Liabilities as a result of timing differences between the recording of costs and costs recovered through the rate-making process.

PSE&G has conditional AROs primarily for legal obligations related to the removal of treated wood poles and the requirement to seal natural gas pipelines at all sources of gas when the pipelines are no longer in service. PSE&G does not record an ARO for its protected steel and poly-based natural gas lines, as management believes that these categories of gas lines have an indeterminable life.

PSEG’s other ARO liability primarily relates to decommissioning of its nuclear power plants in accordance with NRC requirements. PSEG has an independent external trust that is intended to fund decommissioning of its nuclear facilities upon termination of operation. For additional information, see Note 11. Trust Investments. PSEG also identified conditional AROs primarily related to PSEG’s fossil generation units, including liabilities for removal of asbestos, stored hazardous liquid material and underground storage tanks from industrial power sites, and demolition of certain plants, and the restoration of the sites at which they reside, when the plants are no longer in service. To estimate the fair value of its other AROs, PSEG uses a probability weighted, discounted cash flow model which, on a unit by unit basis, considers multiple outcome scenarios that include significant estimates and assumptions, and are based on third-party decommissioning cost estimates, cost escalation rates, inflation rates and discount rates.

Updated nuclear cost studies are obtained triennially unless new information necessitates more frequent updates. The most recent cost study was done in 2021. When assumptions are revised to calculate fair values of existing AROs, generally, the ARO balance and corresponding long-lived asset are adjusted which impact the amount of accretion and depreciation expense recognized in future periods. For PSE&G, Regulatory Assets and Regulatory Liabilities result when accretion and amortization are adjusted to match rates established by regulators resulting in the regulatory deferral of any gain or loss.

The changes to the ARO liabilities for PSEG and PSE&G during 2020 and 2021 are presented in the following table:



	PSEG		PSE&G		Other
	Millions
ARO Liability as of January 1, 2020	$	1,087	$	303	$	784
Liabilities Settled	(9)		(7)		(2)

Accretion Expense	42		—		42
Accretion Expense Deferred and Recovered in Rate Base (A)	17		17		—
Revision to Present Values of Estimated Cash Flows	75		1		74
ARO Liability as of December 31, 2020	$	1,212	$	314	$	898
Liabilities Settled	(15)		(14)		(1)
Adjustments (B)	(37)		—		(37)
Accretion Expense	44		—		44
Accretion Expense Deferred and Recovered in Rate Base (A)	16		16		—
Revision to Present Values of Estimated Cash Flows	353		47		306
ARO Liability as of December 31, 2021	$	1,573	$	363	$	1,210

(A)Not reflected as expense in Consolidated Statements of Operations.

(B)Represents amounts related to the sale of the solar plants and the fossil generating assets classified as Held for Sale.

During 2021, PSE&G recorded an increase to its ARO liabilities primarily due to the impact of increases in labor rates and other costs, partially offset by decreases from changes in inflation and discount rate assumptions. Those changes had no impact on PSE&G’s Consolidated Statement of Operations.

In April 2021, the BPU awarded ZECs to PSEG Power’s Salem 1, Salem 2 and Hope Creek nuclear plants for an additional three years through May 2025. Concurrent with the BPU’s decision, PSEG reassessed the Asset Retirement Cost (ARC) and

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ARO assumptions related to the Salem and Hope Creek units. This resulted in an increase to the ARC asset and ARO liability of $51 million, primarily due to lower discount rates and higher inflation. See Note 4. Early Plant Retirements/Asset Dispositions and Impairments for additional information on ZECs.

In December 2021, PSEG recorded an additional increase to its ARO liabilities primarily due to changes in decommissioning assumptions related to its nuclear units of $255 million. The changes in the decommissioning assumptions relate to the inclusion of certain spent fuel costs and previously assumed levels of reimbursement by the federal government as prescribed under the Nuclear Waste Policy Act. These changes had an immaterial impact on PSEG’s Consolidated Statement of Operations. In addition, PSEG reviewed its probabilities of early retirement on its nuclear units and concluded that no adjustments were necessary as of December 31, 2021.

In early 2020, the NRC approved Peach Bottom’s second license extension for both units. Concurrent with the license extensions, PSEG extended the useful life of the asset to match the 80-year life expectation and reassessed the related ARC and 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 14. Pension, Other Postretirement Benefits (OPEB) and Savings Plans

PSEG sponsors and Services administers 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’s qualified pension plans consist of two qualified defined benefit pension plans, Pension Plan and Pension Plan II. Each of the qualified pension plans include a Final Average Pay and two Cash Balance components. In addition, represented and non-represented employees are eligible for participation in PSEG’s two defined contribution plans.

PSEG and PSE&G 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 are required to be measured as of the date of its respective year-end Consolidated Balance Sheets. For underfunded plans, the liability is equal to the difference between the plan’s benefit obligation and the fair value of plan assets. For defined benefit pension plans, the benefit obligation is the projected benefit obligation. For OPEB plans, the benefit obligation is the accumulated postretirement benefit obligation. In addition, GAAP requires that the total unrecognized costs for defined benefit pension and OPEB plans be recorded as an after-tax charge to Accumulated Other Comprehensive Income (Loss), a separate component of Stockholders’ Equity. However, for PSE&G, because the amortization of the unrecognized costs is being collected from customers, the accumulated unrecognized costs are recorded as a Regulatory Asset. The unrecognized costs represent actuarial gains or losses and prior service costs which have not been expensed. The charge to Accumulated Other Comprehensive Income (Loss) and the Regulatory Asset for PSE&G are amortized and recorded as net periodic pension cost in the Consolidated Statements of Operations.

Amounts for Servco are not included in any of the following pension and OPEB benefit information for PSEG and its affiliates but rather are separately disclosed later in this note.

The following table provides a roll-forward of the changes in the benefit obligation and the fair value of plan assets during each of the two years in the periods ended December 31, 2021 and 2020. It also provides the funded status of the plans and the amounts recognized and amounts not recognized on the Consolidated Balance Sheets at the end of both years.

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	Pension Benefits				Other Benefits
	2021		2020		2021		2020
	Millions
Change in Benefit Obligation
Benefit Obligation at Beginning of Year (A)	$	7,507	$	6,892	$	1,306	$	1,285
Service Cost	151		141		9		9
Interest Cost	140		192		22		34
Actuarial (Gain) Loss (B)	(199)		615		(90)		32
Gross Benefits Paid	(359)		(333)		(50)		(50)
Plan Amendments	—		—		—		(4)

Benefit Obligation at End of Year (A)	$	7,240	$	7,507	$	1,197	$	1,306
Change in Plan Assets
Fair Value of Assets at Beginning of Year	$	6,368	$	5,929	$	564	$	540
Actual Return on Plan Assets	886		761		79		70
Employer Contributions	11		11		13		4
Gross Benefits Paid	(359)		(333)		(50)		(50)

Fair Value of Assets at End of Year	$	6,906	$	6,368	$	606	$	564
Funded Status
Funded Status (Plan Assets less Benefit Obligation)	$	(334)	$	(1,139)	$	(591)	$	(742)
Additional Amounts Recognized in the Consolidated Balance Sheets
Current Accrued Benefit Cost (C)	$	(16)	$	(11)	$	(19)	$	(12)
Noncurrent Accrued Benefit Cost	(318)		(1,128)		(572)		(730)
Amounts Recognized	$	(334)	$	(1,139)	$	(591)	$	(742)
Additional Amounts Recognized in Accumulated Other Comprehensive Income (Loss), Regulated Assets and Deferred Assets (D)
Prior Service Credit	$	—	$	—	$	(181)	$	(310)
Net Actuarial Loss	1,643		2,354		193		364
Total	$	1,643	$	2,354	$	12	$	54

(A)Represents projected benefit obligation for pension benefits and the accumulated postretirement benefit obligation for other benefits. The vested benefit obligation is the actuarial present value of the vested benefits to which the employee is currently entitled but based on the employee’s expected date of separation or retirement.

(B)For pension benefits, the net actuarial gain in 2021 was due primarily to an increase in the discount rate. For OPEB, the net actuarial gain in 2021 was due primarily to an increase in the discount rate coupled with lower than expected claims experience. For pension benefits, the net actuarial loss in 2020 was due primarily to a decrease in the discount rate. For OPEB, the net actuarial loss in 2020 was due primarily to a decrease in the discount rate, partially offset by actuarial gains driven by lower than expected claims experience.

(C)Includes ($5) million and ($7) million for pension benefits and other benefits, respectively, as of December 31, 2021 classified as Held for Sale. For additional information, see Note 4. Early Plant Retirements/Asset Dispositions and Impairments.

(D)Includes $495 million ($355 million, after-tax) and $760 million ($545 million, after-tax) in Accumulated Other Comprehensive Loss related to Pension and OPEB as of December 31, 2021 and 2020, respectively. Also includes Regulatory Assets of $1,043 million and Deferred Assets of $117 million as of December 31, 2021 and Regulatory Assets of $1,489 million and Deferred Assets of $159 million as of December 31, 2020.

The pension benefits table above provides information relating to the funded status of the qualified and nonqualified pension and OPEB plans on an aggregate basis. As of December 31, 2021, PSEG had funded approximately 95% of its projected pension benefit obligation. This percentage does not include $242 million of assets in the Rabbi Trust as of December 31, 2021, which provide funding for the nonqualified pension plans and certain deferred compensation. The nonqualified pension plans included in the projected benefit obligation in the above table were $174 million.

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Accumulated Benefit Obligation

The accumulated benefit obligation for all PSEG’s defined benefit pension plans was $7.1 billion as of December 31, 2021 and $7.3 billion as of December 31, 2020.

The following table provides the components of net periodic benefit cost relating to all qualified and nonqualified pension and OPEB plans on an aggregate basis for PSEG, excluding Servco for the years ended December 31, 2021, 2020 and 2019. Amounts shown do not reflect the impacts of capitalization and co-owner allocations. Only the service cost component is eligible for capitalization, when applicable.



	Pension Benefits Years Ended December 31,						Other Benefits Years Ended December 31,
	2021		2020		2019		2021		2020		2019
	Millions
Components of Net Periodic Benefit (Credits) Costs
Service Cost (included in O&M Expense)	$	151	$	141	$	123	$	9	$	9	$	10
Non-Service Components of Pension and OPEB (Credits) Costs
Interest Cost	140		192		218		22		34		45
Expected Return on Plan Assets	(476)		(443)		(408)		(42)		(39)		(36)
Amortization of Net
Prior Service Credit	—		(10)		(18)		(129)		(128)		(128)
Actuarial Loss	103		92		96		44		47		50
Non-Service Components of Pension and OPEB (Credits) Costs	(233)		(169)		(112)		(105)		(86)		(69)
Total Benefit (Credits) Costs	$	(82)	$	(28)	$	11	$	(96)	$	(77)	$	(59)

Pension costs and OPEB costs for PSEG and PSE&G are detailed as follows:



	Pension Benefits Years Ended December 31,						Other Benefits Years Ended December 31,
	2021		2020		2019		2021		2020		2019
	Millions
PSE&G	$	(64)	$	(27)	$	—	$	(92)	$	(76)	$	(62)
Other	(18)		(1)		11		(4)		(1)		3
Total Benefit (Credits) Costs	$	(82)	$	(28)	$	11	$	(96)	$	(77)	$	(59)

The following table provides the pre-tax changes recognized in Accumulated Other Comprehensive Income (Loss), Regulatory Assets and Deferred Assets:



	Pension				OPEB
	2021		2020		2021		2020
	Millions
Net Actuarial (Gain) Loss in Current Period	$	(608)	$	296	$	(127)	$	2
Amortization of Net Actuarial Gain (Loss)	(103)		(92)		(44)		(47)
Prior Service Cost (Credit) in Current Period	—		—		—		(5)
Amortization of Prior Service Credit	—		10		129		128
Total	$	(711)	$	214	$	(42)	$	78

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The following assumptions were used to determine the benefit obligations and net periodic benefit costs:



	Pension Benefits						Other Benefits
	2021		2020		2019		2021		2020		2019
Weighted-Average Assumptions Used to Determine Benefit Obligations as of December 31
Discount Rate	2.94	%	2.61	%	3.30	%	2.82	%	2.46	%	3.20	%
Rate of Compensation Increase	4.40	%	4.40	%	3.90	%	4.40	%	4.40	%	3.90	%
Cash Balance Interest Crediting Rate	6.00	%	6.00	%	6.00	%	N/A		N/A		N/A
Weighted-Average Assumptions Used to Determine Net Periodic Benefit Cost for Years Ended December 31
Discount Rate	2.61	%	3.30	%	4.41	%	2.46	%	3.20	%	4.31	%
Service Cost Interest Rate	2.94	%	3.49	%	4.58	%	2.76	%	3.50	%	4.48	%
Interest Cost Interest Rate	1.91	%	2.87	%	4.03	%	1.70	%	2.87	%	3.91	%
Expected Return on Plan Assets	7.70	%	7.70	%	7.80	%	7.69	%	7.70	%	7.79	%
Rate of Compensation Increase	4.40	%	3.90	%	3.90	%	4.40	%	3.90	%	3.90	%
Cash Balance Interest Crediting Rate	6.00	%	6.00	%	6.00	%	N/A		N/A		N/A
Assumed Health Care Cost Trend Rates as of December 31

Health Care Costs
Immediate Rate							6.14	%	6.37	%	6.68	%
Ultimate Rate							4.75	%	4.75	%	4.75	%
Year Ultimate Rate Reached							2029		2029		2029

Plan Assets

The investments of pension and OPEB plans are held in a trust account by the Trustee and consist of an undivided interest in an investment account of the Master Trust. The investments in the pension and OPEB plans are measured at fair value within a hierarchy that prioritizes the inputs to fair value measurements into three levels. See Note 19. Fair Value Measurements for more information on fair value guidance. Use of the Master Trust permits the commingling of pension plan assets and OPEB plan assets for investment and administrative purposes. Although assets of the plans are commingled in the Master Trust, the Trustee maintains supporting records for the purpose of allocating the net gain or loss of the investment account to the respective participating plans. The net investment income of the investment assets is allocated by the Trustee to each participating plan based on the relationship of the interest of each plan to the total of the interests of the participating plans. As of December 31, 2021, the pension plan interest and OPEB plan interest in such assets of the Master Trust were approximately 92% and 8%, respectively.

The following tables present information about the investments measured at fair value on a recurring basis as of December 31, 2021 and 2020, including the fair value measurements and the levels of inputs used in determining those fair values.

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	Recurring Fair Value Measurements as of December 31, 2021
			Quoted Market Prices for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
Description	Total		(Level 1)		(Level 2)		(Level 3)
	Millions
Cash Equivalents (A)	$	45	$	45	$	—	$	—
Equity Securities
Common Stock (B)	1,959		1,959		—		—
Commingled (C)	1,948		1,085		863		—
Preferred Stock (B)	2		2		—		—
Other (D)	2		2		—		—
Debt Securities (E)
U.S. Treasury	1,761		—		1,761		—


Commingled	4		4		—		—
Subtotal Fair Value	$	5,721	$	3,097	$	2,624	$	—
Measured at net asset value practical expedient
Commingled—Equities (F)	1,403
Real Estate Investment (G)	372
Private Equity (H)	3
Total Fair Value (I)	$	7,499



	Recurring Fair Value Measurements as of December 31, 2020
			Quoted Market Prices for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
Description	Total		(Level 1)		(Level 2)		(Level 3)
	Millions
Cash Equivalents (A)	$	85	$	85	$	—	$	—
Equity Securities
Common Stock (B)	1,763		1,763		—		—
Commingled (C)	1,964		1,025		939		—
Preferred Stock (B)	10		10		—		—
Other (D)	1		1		—		—
Debt Securities (E)
U.S. Treasury	419		—		419		—
Government—Other	258		—		258		—
Corporate	823		—		823		—
Commingled	4		4		—		—
Subtotal Fair Value	$	5,327	$	2,888	$	2,439	$	—
Measured at net asset value practical expedient
Commingled—Equities (F)	1,283
Real Estate Investment (G)	306
Private Equity (H)	5
Total Fair Value (I)	$	6,921

(A)The Collective Investment Fund publishes a daily net asset value (NAV) which participants may use for daily redemptions without restrictions (Level 1).

(B)Common stocks and preferred stocks are measured using observable data in active markets and considered Level 1.

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(C)Commingled Funds that allow daily redemption at their daily published NAV without restrictions are classified as Level 1. Commingled Funds that publish daily NAV but with certain near-term redemption restrictions which prevent redemption at the published daily NAV are classified as Level 2.

(D)Investment in a publicly traded limited partnership.

(E)Debt securities include mainly investment grade corporate and municipal bonds, U.S. Treasury obligations and Federal Agency asset-backed securities with a wide range of maturities. These investments are valued using an evaluated pricing approach 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 or the most recent quotes for similar securities which are a Level 2 measure.

(F)Certain commingled equity funds are not included in the fair value hierarchy as they are measured at fair value using the NAV per share (or its equivalent) practical expedient. These funds do not meet the definition of readily determinable fair value due to the frequency of publishing NAV (monthly). The objectives of these funds are mainly tracking the S&P Index or achieving long-term growth through investment in foreign equity securities and the Morgan Stanley Capital International Index.

(G)The unlisted real estate fund invests in office, apartment, industrial and retail space. The fund is valued using the NAV per unit of funds. The investment value of the real estate properties is determined on a quarterly basis by independent market appraisers engaged by the board of directors of the fund. The ability to redeem funds is subject to the availability of cash arising from net investment income, allocations and the sale of investments in the normal course of business. The fund’s NAV is published quarterly. In addition, redemptions require one quarter advance notice prior to redemption and are fulfilled quarterly. The fund, therefore, does not meet the definition of readily determinable fair value. The purpose of the fund is to acquire, own, hold for investment and ultimately dispose of investments in real estate and real estate-related assets with the intention of achieving current income, capital appreciation or both.

(H)Private equity investments primarily include various limited partnerships that invest in either operating companies through acquisitions or developing a portfolio of non-U.S. distressed investments to maximize total return on capital. These investments are valued at NAV (or its equivalent) on a quarterly basis and have significant redemption restrictions preventing redemption until fund liquidation and limited ability to sell these investments. Fund liquidation is not expected to occur for several more years. These investments are not included in the fair value hierarchy in accordance with the guidance on NAV practical expedient.

(I)Excludes net receivables of $11 million and $10 million as of December 31, 2021 and 2020, respectively, which consist of interest, dividends and receivables and payables related to pending securities sales and purchases. In addition, the table excludes cash and foreign currency of $2 million and $1 million as of December 31, 2021 and 2020, respectively.

The following table provides the percentage of fair value of total plan assets for each major category of plan assets held for the qualified pension and OPEB plans as of the measurement date, December 31:



	As of December 31,
Investments	2021		2020
Equity Securities	71	%	72	%
Debt Securities	23		22
Other Investments	6		6
Total Percentage	100	%	100	%

PSEG utilizes forecasted returns, risk, and correlation of all asset classes in order to develop an efficient portfolio. PSEG’s long-term target asset allocation of 54% equities, 18% real assets and 28% fixed income is consistent with the funds’ financial objectives. Certain investments in real assets (14% as of December 31, 2021) are made through investing in equity securities and tracked as equities when reporting fair value; however, they are viewed by their asset class, real assets, in our target asset allocation. Derivative financial instruments are used by the plans’ investment managers primarily to adjust the fixed income duration of the portfolio and hedge the currency risk component of foreign investments. The expected long-term rate of return on plan assets was 7.7% for 2021 and will be 7.2% for 2022. This expected return includes a premium for active management.

Plan Contributions

PSEG does not plan to contribute to its pension and OPEB plans in 2022. Internal Revenue Service (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

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subsequent calendar year. As a result, the market volatility in 2021 associated with the ongoing coronavirus pandemic is not expected to impact PSEG’s pension contributions in 2022.

Estimated Future Benefit Payments

The following pension benefit and postretirement benefit payments are expected to be paid to plan participants.



Year	Pension Benefits		Other Benefits
	Millions
2022	$	402	$	82
2023	386		82
2024	397		82
2025	405		81
2026	414		80
2027-2031	2,154		368
Total	$	4,158	$	775

401(k) Plans

PSEG sponsors two 401(k) plans, which are defined contribution retirement plans subject to the Employee Retirement Income Security Act (ERISA). Eligible represented employees of PSEG’s subsidiaries participate in the PSEG Employee Savings Plan (Savings Plan), while eligible non-represented employees of PSEG’s subsidiaries participate in the PSEG Thrift and Tax-Deferred Savings Plan (Thrift Plan). Eligible employees may contribute up to 50% of their annual eligible compensation to these plans, not to exceed the IRS maximums, including any catch-up contributions for those employees age 50 and above. PSEG matches 50% of such employee contributions up to 7% of pay for Savings Plan participants and up to 8% of pay for Thrift Plan participants. The amounts paid for employer matching contributions to the plans for PSEG and PSE&G are detailed as follows:



	Thrift Plan and Savings Plan
	Years Ended December 31,
	2021		2020		2019
	Millions
PSE&G	$	28	$	27	$	25
Other	16		16		15
Total Employer Matching Contributions	$	44	$	43	$	40

Servco Pension and OPEB

Servco sponsors a qualified pension plan and OPEB plan covering its employees who meet certain eligibility criteria. Under the OSA, employee benefit costs for these plans are funded by LIPA. See Note 5. Variable Interest Entities. These obligations, as well as the offsetting long-term receivable, are separately presented on the Consolidated Balance Sheet of PSEG.

The following table provides a roll-forward of the changes in Servco’s benefit obligation and the fair value of its plan assets during the years ended December 31, 2021 and 2020. It also provides the funded status of the plans and the amounts recognized and amounts not recognized on the Consolidated Balance Sheets at the end of both years.

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	Pension Benefits				Other Benefits
	2021		2020		2021		2020
	Millions
Change in Benefit Obligation
Benefit Obligation at Beginning of Year (A)	$	569	$	453	$	699	$	626
Service Cost	38		33		23		20
Interest Cost	14		14		18		20
Actuarial (Gain) Loss (B)	(18)		74		(89)		42
Gross Benefits Paid	(7)		(5)		(11)		(9)
Plan Amendments	—		—		—		—
Benefit Obligation at End of Year (A)	$	596	$	569	$	640	$	699
Change in Plan Assets
Fair Value of Assets at Beginning of Year	$	343	$	282	$	—	$	—
Actual Return on Plan Assets	49		36		—		—
Employer Contributions	37		30		11		9
Gross Benefits Paid	(7)		(5)		(11)		(9)
Fair Value of Assets at End of Year	$	422	$	343	$	—	$	—
Funded Status
Funded Status (Plan Assets less Benefit Obligation)	$	(174)	$	(226)	$	(640)	$	(699)
Additional Amounts Recognized in the Consolidated Balance Sheets
Accrued Pension Costs of Servco	$	(174)	$	(226)	N/A		N/A
OPEB Costs of Servco	N/A		N/A		(640)		(699)
Amounts Recognized (C)	$	(174)	$	(226)	$	(640)	$	(699)

(B)For pension benefits, the net actuarial gain in 2021 was due primarily to an increase in the discount rate. For OPEB, the net actuarial gain in 2021 was due primarily to updated assumptions. For pension benefits, the net actuarial loss in 2020 was due primarily to a decrease in the discount rate. For OPEB, the net actuarial loss in 2020 was due primarily to a decrease in the discount rate, partially offset by actuarial gains driven by lower than expected participation experience.

(C)Amounts equal to the accrued pension and OPEB costs of Servco are offset in Long-Term Receivable of VIE on PSEG’s Consolidated Balance Sheets.

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. The pension-related revenues and costs for 2021, 2020 and 2019 were $37 million, $30 million and $28 million, respectively. Servco has contributed its entire planned contribution amount to its pension plan trusts during 2021. The OPEB-related revenues earned and costs incurred were $11 million, $9 million and $6 million in 2021, 2020 and 2019, respectively. The following assumptions were used to determine the benefit obligations of Servco:



	Pension Benefits						Other Benefits
	2021		2020		2019		2021		2020		2019
Weighted-Average Assumptions Used to Determine Benefit Obligations as of December 31
Discount Rate	3.21	%	2.98	%	3.52	%	3.28	%	3.08	%	3.60	%
Rate of Compensation Increase	3.95	%	3.95	%	3.25	%	3.95	%	3.95	%	3.25	%
Cash Balance Interest Crediting Rate	3.75	%	3.75	%	3.75	%	N/A		N/A		N/A
Assumed Health Care Cost Trend Rates as of December 31
Health Care Costs
Immediate Rate							6.48	%	6.70	%	6.94	%
Ultimate Rate							4.75	%	4.75	%	4.75	%
Year Ultimate Rate Reached							2029		2029		2029

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Plan Assets

All the investments of Servco’s pension plans are held in a trust account by the Trustee and consist of an undivided interest in an investment account of the Servco Master Trust. The investments in the pension are measured at fair value within a hierarchy that prioritizes the inputs to fair value measurements into three levels. See Note 19. Fair Value Measurements for more information on fair value guidance.

The following tables present information about Servco’s investments measured at fair value on a recurring basis as of December 31, 2021 and 2020, including the fair value measurements and the levels of inputs used in determining those fair values.



	Recurring Fair Value Measurements as of December 31, 2021
			Quoted Market Prices for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
Description	Total		(Level 1)		(Level 2)		(Level 3)
	Millions
Cash Equivalents	$	1	$	1	$	—	$	—
Equity Securities
Common Stock (A)	34		34		—		—
Commingled (B)	285		—		285		—
Commingled Bonds (B)	102		—		102		—
Total	$	422	$	35	$	387	$	—



	Recurring Fair Value Measurements as of December 31, 2020
			Quoted Market Prices for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
Description	Total		(Level 1)		(Level 2)		(Level 3)
	Millions
Cash Equivalents	$	1	$	1	$	—	$	—
Commingled Equities (B)	259		—		259		—
Commingled Bonds (B)	83		—		83		—
Total	$	343	$	1	$	342	$	—

(A)Common stocks are measured using observable data in active markets and considered Level 1.

(B)Investments in commingled equity and bond funds have a readily determinable fair value as they publish a daily NAV available to investors which is the basis for current transactions and contain certain redemption restrictions requiring advance notice of one to two days for withdrawals (Level 2).

The following table provides the percentage of fair value of total plan assets for each major category of plan assets held for the qualified pension and OPEB plans of Servco as of the measurement date, December 31:



	As of December 31,
Investments	2021		2020
Equity Securities	76	%	76	%
Debt Securities	24		24
Total Percentage	100	%	100	%

Servco utilizes forecasted returns, risk, and correlation of all asset classes in order to develop an efficient portfolio. Servco’s long-term target asset allocation of 60% equities, 15% real assets and 25% fixed income is consistent with the funds’ financial objectives. Certain investments in real assets (16% at December 2021) are made through investing in equity securities and tracked as equities when reporting fair value; however, they are viewed by their asset class, real assets, in our target asset

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allocation. The expected long-term rate of return on plan assets was 7.6% for 2021 and will be the same for 2022. This expected return includes a premium for active management.

Plan Contributions

Servco plans to contribute $30 million into its pension plan during 2022. 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 volatility in 2021 associated with the ongoing coronavirus pandemic is not expected to impact Servco’s pension contributions in 2022.

Estimated Future Benefit Payments

The following pension benefit and postretirement benefit payments are expected to be paid to Servco’s plan participants:



Year	Pension Benefits		Other Benefits
	Millions
2022	$	10	$	9
2023	12		11
2024	14		13
2025	17		14
2026	19		16
2027-2031	136		104
Total	$	208	$	167

Servco 401(k) Plans

Servco sponsors two 401(k) plans, which are defined contribution retirement plans subject to ERISA. Eligible non-represented employees of Servco participate in the Long Island Electric Utility Servco LLC Incentive Thrift Plan I (Thrift Plan I), and eligible represented employees of Servco participate in the Long Island Electric Utility Servco LLC Incentive Thrift Plan II (Thrift Plan II). Participants in the plans may contribute up to 50% of their eligible compensation to these plans, not to exceed the IRS maximums, including any catch-up contributions for those employees age 50 and above. Servco does not provide an employer match or core contribution for employees in Thrift Plan II. For employees in Thrift Plan I, Servco matches 50% of such employee contributions up to 8% of eligible compensation and provides core contributions (based on years of service and age) to employees who do not participate in Servco’s Retirement Income Plan. The amounts expensed by Servco for employer matching contributions for the years ended December 31, 2021, 2020 and 2019 were $9 million, $9 million and $8 million, respectively, and pursuant to the OSA, Servco recognizes Operating Revenues for the reimbursement of these costs.

Note 15. 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,

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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.

The following table shows the face value of PSEG Power’s outstanding guarantees, current exposure and margin positions as of December 31, 2021 and 2020.



	As of December 31, 2021		As of December 31, 2020
	Millions
Face Value of Outstanding Guarantees	$	1,959	$	1,792
Exposure under Current Guarantees	$	176	$	128

Letters of Credit Margin Posted	$	80	$	128
Letters of Credit Margin Received	$	242	$	45

Cash Deposited and Received
Counterparty Cash Collateral Deposited	$	60	$	—
Counterparty Cash Collateral Received	$	(1)	$	(5)
Net Broker Balance Deposited (Received)	$	785	$	59

Additional Amounts Posted
Other Letters of Credit	$	67	$	42

As part of determining credit exposure, PSEG Power nets receivables and payables with the corresponding net fair values of energy contracts. See Note 18. 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 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 one 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

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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 September 2021, the EPA approved the CPG’s Feasibility Study (FS), which evaluated various adaptive management scenarios for the remediation of only the upper 9 miles of the LPRSA. In October 2021, the EPA announced a Record of Decision (ROD) outlining its selection of an adaptive management scenario for the upper 9 miles from the options presented in the FS (the Upper 9 ROD Remedy). Specifically, the Upper 9 ROD Remedy calls for dredging and capping contaminated sediments from certain areas of the upper 9 miles at an estimated cost of $550 million, and then assessing the results. Based on the results, the EPA may determine that additional remediation work will be required in the future. The cost estimates in the Upper 9 ROD Remedy are substantively identical to those in the proposed remediation plan that the EPA issued in April 2021. PSEG has previously adjusted its accrued liability based on the cost estimates in the proposed remediation plan, so no additional accrual adjustment is warranted for the Upper 9 ROD Remedy.

Separately, the EPA has released a ROD for the LPRSA’s lower 8.3 miles that requires the removal of sediments at an estimated cost of $2.3 billion (the Lower 8.3 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, one of the PRPs, has commenced the design of the Lower 8.3 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.

As of December 31, 2021, PSEG has approximately $66 million accrued for this matter. PSE&G has an Environmental Costs Liability of $53 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.

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, 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 $220 million and $249 million on an undiscounted basis, including its $53 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 $220 million as of December 31, 2021. Of this amount, $33 million was recorded in Other Current Liabilities and $187 million was reflected as Environmental Costs in Noncurrent Liabilities. PSE&G has recorded a $220 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 completed sampling in the Passaic River in 2020

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to delineate coal tar from certain MGP sites that abut the Passaic River Superfund site. PSEG cannot determine at this time the magnitude of any impact on the Passaic River Superfund remedy.

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 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 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.

BGS, BGSS and ZECs

Each year, PSE&G obtains its electric supply requirements through annual New Jersey BGS auctions for two categories of customers that choose not to purchase electric supply from third-party suppliers. The first category 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 Agreements with the winners of these RSCP and CIEP BGS auctions to purchase BGS for PSE&G’s load requirements. The winners of the RSCP and CIEP auctions have been 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. Beginning with the 2021 BGS auction, transmission became the responsibility of the New Jersey EDCs, and is no longer a component of the BGS auction product for either the RSCP or CIEP auctions. BGS suppliers serving load from the 2018, 2019 and 2020 BGS auctions had the option to transfer the transmission obligation to the New Jersey EDCs as of February 2021. Suppliers that did so had their total BGS payment from the EDCs reduced to reflect the transfer of the transmission obligation to the EDCs.

The BGS-CIEP auction is for a one-year supply period from June 1 to May 31 with the BGS-CIEP auction price measured in dollars per MW-day for capacity. The final price for the BGS-CIEP auction year commencing June 1, 2022 is $276.26 per MW-day, replacing the BGS-CIEP auction year price ending May 31, 2022 of $351.06 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:

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	Auction Year
	2019	2020	2021	2022
36-Month Terms Ending	May 2022	May 2023	May 2024	May 2025	(A)
Load (MW)	2,800	2,800	2,900	2,800
$ per MWh	$98.04	$102.16	$64.80	$76.30

(A)Prices set in the 2022 BGS auction will become effective on June 1, 2022 when the 2019 BGS auction agreements expire.

PSE&G has a full-requirements contract with PSEG Power to meet the gas supply requirements of PSE&G’s gas customers. PSEG Power has entered into hedges for a portion of these anticipated BGSS obligations, as permitted by the BPU. The BPU permits PSE&G to recover the cost of gas hedging up to 115 billion cubic feet or 80% of its residential gas supply annual requirements through the BGSS tariff. Current plans call for PSEG Power to hedge on behalf of PSE&G approximately 70 billion cubic feet or 50% of its residential gas supply annual requirements. For additional information, see Note 26. 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 were selected to receive ZEC revenue for approximately three years, through May 2022. In April 2021, PSEG Power’s Salem 1, Salem 2 and Hope Creek nuclear plants were awarded ZECs for the three-year eligibility period starting June 2022. PSE&G has implemented a tariff to collect a non-bypassable distribution charge in the amount of $0.004 per KWh from its retail distribution customers to be used to purchase the ZECs from these plants. PSE&G will purchase the ZECs on a monthly basis with payment to be made annually following completion of each energy year. The legislation also requires nuclear plants to reapply for any subsequent three-year periods and allows the BPU to adjust prospective ZEC payments.

Minimum Fuel Purchase Requirements

PSEG Power’s nuclear fuel strategy is to maintain certain levels of uranium and to make periodic purchases to support such levels. As such, the commitments referred to in the following table may include estimated quantities to be purchased that deviate from contractual nominal quantities. PSEG Power’s nuclear fuel commitments cover approximately 100% of its estimated uranium, enrichment and fabrication requirements through 2022 and a significant portion through 2023 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.

As of December 31, 2021, the total minimum purchase requirements included in these commitments were as follows:



Fuel Type	PSEG Power’s Share of Commitments through 2026
	Millions
Nuclear Fuel
Uranium	$	226
Enrichment	$	331
Fabrication	$	193
Natural Gas (A)	$	1,266

(A)Approximately $39 million of commitments related to natural gas were transferred with the sale of PSEG Power’s fossil generation plants in February 2022.

Pending FERC Matters

FERC has been conducting a non-public investigation of the Roseland-Pleasant Valley transmission project. In November 2021, FERC staff presented PSE&G with its non-public preliminary findings, alleging that PSE&G violated a FERC regulation. PSE&G disagrees with FERC staff’s allegations and believes it has factual and legal defenses that refute these allegations. PSE&G has the opportunity to respond to these preliminary findings. The matter is pending and the investigation is ongoing. We are unable to predict the outcome or estimate the range of possible loss related to this matter; however, depending on the success of PSE&G’s factual and legal arguments, the potential financial and other penalties that PSE&G may incur could be material to PSEG’s and PSE&G’s results of operations and financial condition.

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Pending Tropical Storm Matter

Following the effects of Tropical Storm Isaias, the New York Attorney General (AG) initiated an inquiry into PSEG LI’s preparation and response to the storm. In addition, the Department of Public Service (DPS) within the New York State Public Service Commission launched an investigation of the State’s electric service providers’, including PSEG LI’s, preparation and response to the storm. The DPS issued an interim storm investigation report finding that PSEG LI violated its Emergency Response Plan and DPS Regulations, and recommended that LIPA consider taking various actions, including terminating or renegotiating the OSA. LIPA also issued a report with recommendations for improvements to PSEG LI’s structure and processes, and recommended that LIPA either renegotiate or terminate the OSA.

PSEG LI agreed with LIPA that it would fund approximately $7 million in claims by customers for food and medication spoilage costs incurred as a result of being without electric service during the storm.

In December 2020, LIPA filed a complaint against PSEG LI in New York State court alleging multiple breaches of the OSA in connection with PSEG LI’s preparation for and response to Tropical Storm Isaias seeking specific performance and $70 million in damages. In June 2021, LIPA and PSEG LI executed a non-binding term sheet, which is expected to guide amendments to the OSA. The term sheet includes several changes to the OSA, including shifting a portion of PSEG LI’s fixed revenues to incentive compensation and subjecting a portion of revenue to the potential imposition of penalties by the DPS due to certain performance failures by PSEG LI, and resolves all of LIPA’s claims related to Tropical Storm Isaias and the DPS investigation. An amended OSA based on the term sheet was agreed to by both parties and approved by the LIPA Board in December 2021. In January 2022, the New York AG approved the Amended OSA and it has been submitted to the New York Comptroller for approval, which approval must occur by April 1, 2022 (such date is subject to amendment by mutual agreement of PSEG LI and LIPA) in order for the Amended OSA to become binding and effective. Such approval would result in retroactive effectiveness to January 1, 2022 for purposes of compensation. The OSA contract term will continue through 2025, with a mutual option to extend for five years. No assurances can be given regarding obtaining the New York Comptroller approval and the closing of the inquiry by the AG.

In the event that the Amended OSA is not approved by the New York Comptroller on April 1, 2022, PSEG LI intends to vigorously defend itself with regard to the allegations in LIPA’s complaint alleging breaches of the OSA. A decision in this proceeding requiring specific performance or the payment of damages by PSEG LI or resulting in the termination of the OSA could have a material adverse effect on PSEG’s results of operations and financial condition.

BPU Audit of PSE&G

In September 2020, the BPU ordered the commencement of a comprehensive affiliate and management audit of PSE&G. It has been more than ten years since the BPU last conducted a management and affiliate audit of this kind of PSE&G, which is initiated periodically as required by New Jersey statutes/regulations. 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. The audit officially began in late May 2021 and is in the data collection phase. It is not possible at this time to predict the outcome of this matter.

Litigation

Sewaren 7 Construction

In June 2018, a complaint was filed in federal court in Newark, New Jersey against PSEG Fossil LLC, a wholly owned subsidiary of PSEG Power, regarding an ongoing dispute with Durr Mechanical Construction, Inc. (Durr), a contractor on the Sewaren 7 project. Among other things, Durr seeks damages of $93 million and alleges that PSEG Power withheld money owed to Durr and that PSEG Power’s intentional conduct led to the inability of Durr to obtain prospective contracts. PSEG Power intends to vigorously defend against these allegations. In January 2021, the court partially granted PSEG Power’s motion to dismiss certain claims, reducing the amount claimed to $68 million. In December 2018, Durr filed for Chapter 11 bankruptcy in the federal court in the Southern District of New York (SDNY). The SDNY bankruptcy court has allowed the New Jersey litigation to proceed. PSEG Power has accrued an amount related to outstanding invoices which does not reflect an assessment of claims and potential counterclaims in this matter. Due to its preliminary nature, PSEG Power cannot predict the outcome of this matter.

Other Litigation and Legal Proceedings

PSEG and its subsidiaries are party to various lawsuits in the ordinary course of business. In view of the inherent difficulty in predicting the outcome of such matters, PSEG and PSE&G generally cannot predict the eventual outcome of the pending

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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 or PSE&G’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 COVID-19 pandemic and associated government actions and economic effects continue to impact our businesses. PSEG and its subsidiaries have incurred additional expenses to protect our employees and customers, and PSE&G is experiencing significantly higher bad debts and lower cash collections from customers due to the moratorium on shutoffs for residential customers that has been extended through December 31, 2021. PSE&G has deferred the impact of these costs for future recovery. The potential future impact of the pandemic and the associated economic impacts, which could extend beyond the duration of the pandemic, could have risks that drive certain accounting considerations. The ultimate impact of the ongoing coronavirus pandemic is highly uncertain and cannot be predicted at this time.

Nuclear Insurance Coverages and Assessments

PSEG Power is a member of the joint underwriting association, American Nuclear Insurers (ANI), which provides nuclear liability insurance coverage at the Salem and Hope Creek site and the Peach Bottom site. The ANI policies are designed to satisfy the financial protection requirements outlined in the Price-Anderson Act, which sets the limit of liability for claims that could arise from an incident involving any licensed nuclear facility in the United States. The limit of liability per incident per site is composed of primary and excess layers. As of December 31, 2021, nuclear sites were required to purchase $450 million of primary liability coverage for each site (through ANI). The primary layer is supplemented by an excess layer, which is an industry self-insurance pool. In the event a nuclear site, which is part of the industry self-insurance pool, has a claim that exceeds the primary layer, each licensee would be assessed a prorated share of the excess layer. The excess layer limit is $13.1 billion. PSEG Power’s maximum aggregate assessment per incident is $433 million (based on PSEG Power’s ownership interests in Salem, Hope Creek and Peach Bottom) and its maximum aggregate annual assessment per incident is $65 million. If the damages exceed the limit of liability, Congress could impose further revenue-raising measures on the nuclear industry to pay claims. Further, a decision by the U.S. Supreme Court, not involving PSEG Power, held that the Price-Anderson Act did not preclude punitive damage awards based on state law claims.

PSEG Power is also a member of an industry mutual insurance company, Nuclear Electric Insurance Limited (NEIL), which provides the property, decontamination and decommissioning liability insurance at the Salem and Hope Creek site and the Peach Bottom site. NEIL also provides replacement power coverage through its accidental outage policy. NEIL policies may make retrospective premium assessments in the case of adverse loss experience. The current maximum aggregate annual retrospective premium obligation for PSEG Power is approximately $46 million. NEIL requires its members to maintain an investment grade credit rating or to ensure collectability of their annual retrospective premium obligation by providing a financial guarantee, letter of credit, deposit premium, or some other means of assurance. Certain provisions in the NEIL policies provide that the insurer may suspend coverage with respect to all nuclear units on a site without notice if the NRC suspends or revokes the operating license for any unit on that site, issues a shutdown order with respect to such unit or issues a confirmatory order keeping such unit down.

The ANI and NEIL policies all include coverage for claims arising out of acts of terrorism. However, NEIL policies are subject to an industry aggregate limit of $3.2 billion plus such additional amounts as NEIL recovers for such losses from reinsurance, indemnity and any other source applicable to such losses.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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Note 16. Debt and Credit Facilities

Long-Term Debt



			As of December 31,
		Maturity	2021		2020
			Millions
PSEG



Senior Notes:
2.00%		2021	$	—	$	300
2.65%		2022	700		700
0.84%		2023	750		—
2.88%		2024	750		750
0.80%		2025	550		550
1.60%		2030	550		550
2.45%		2031	750		—
8.63%	(A)	2031	96		96
Total Senior Notes			4,146		2,946
Principal Amount Outstanding			4,146		2,946
Amounts Due Within One Year			(700)		(300)
Net Unamortized Discount and Debt Issuance Costs			(22)		(17)
Total Long-Term Debt of PSEG			$	3,424	$	2,629

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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		As of December 31,
	Maturity	2021		2020
		Millions
PSE&G
First and Refunding Mortgage Bonds (B):
9.25%	2021	$	—	$	134
8.00%	2037	7		7
5.00%	2037	8		8
Total First and Refunding Mortgage Bonds		15		149
Medium-Term Notes (B):
1.90%	2021	—		300
2.38%	2023	500		500
3.25%	2023	325		325
3.75%	2024	250		250
3.15%	2024	250		250
3.05%	2024	250		250
3.00%	2025	350		350
2.25%	2026	425		425
0.95%	2026	450		—
3.00%	2027	425		425
3.70%	2028	375		375
3.65%	2028	325		325
3.20%	2029	375		375
2.45%	2030	300		300
1.90%	2031	425		—
5.25%	2035	250		250
5.70%	2036	250		250
5.80%	2037	350		350
5.38%	2039	250		250
5.50%	2040	300		300
3.95%	2042	450		450
3.65%	2042	350		350
3.80%	2043	400		400
4.00%	2044	250		250
4.05%	2045	250		250
4.15%	2045	250		250
3.80%	2046	550		550
3.60%	2047	350		350
4.05%	2048	325		325
3.85%	2049	375		375
3.20%	2049	400		400
3.15%	2050	300		300
2.70%	2050	375		375
2.05%	2050	375		375
3.00%	2051	450		—
Total MTNs		11,875		10,850
Principal Amount Outstanding		11,890		10,999
Amounts Due Within One Year		—		(434)
Net Unamortized Discount and Selling Expense		(95)		(90)
Total Long-Term Debt of PSE&G		$	11,795	$	10,475

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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			As of December 31,
		Maturity	2021		2020
			Millions
PSEG Power
Senior Notes:
3.00%		2021	$	—	$	700
4.15%		2021	—		250
3.85%		2023	—		700
4.30%		2023	—		250
8.63%	(A)	2031	—		404
Total Senior Notes (C)			—		2,304
Pollution Control Notes:
Floating Rate (C)		2022	—		44
Total Pollution Control Notes			—		44
Principal Amount Outstanding			—		2,348
Amounts Due Within One Year			—		(950)
Net Unamortized Discount and Debt Issuance Costs			—		(6)
Total Long-Term Debt of PSEG Power			$	—	$	1,392

(A)In December 2020, PSEG issued $96 million principal amount of 8.63% Senior Notes due 2031 to holders of a like principal amount of 8.63% Senior Notes due 2031 originally issued by PSEG Power who validly tendered their notes pursuant to an offer to exchange. Upon consummation of the offer to exchange, the PSEG Power notes accepted in the exchange were cancelled. The transaction resulted in a non-cash financing activity for both PSEG and PSEG Power.

(B)Secured by essentially all property of PSE&G pursuant to its First and Refunding Mortgage.

(C)All outstanding Senior Notes and the Pennsylvania Economic Development Financing Authority Variable Rate Bonds (PEDFA) of PSEG Power were redeemed during 2021 as described below.

Long-Term Debt Maturities

The aggregate principal amounts of maturities for each of the five years following December 31, 2021 are as follows:



Year	PSEG		PSE&G		Total

2022	$	700	$	—	$	700
2023	750		825		1,575
2024	750		750		1,500
2025	550		350		900
2026	—		875		875
Thereafter	1,396		9,090		10,486
Total	$	4,146	$	11,890	$	16,036

Long-Term Debt Financing Transactions

During 2021, PSEG and its subsidiaries had the following Long-Term Debt issuances, maturities and redemptions:

PSEG

issued $750 million of 0.84% Senior Notes due November 2023,
issued $750 million of 2.45% Senior Notes due November 2031, and
retired $300 million of 2.00% Senior Notes at maturity.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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PSE&G

issued $450 million of 0.95% Secured Medium-Term Notes, Series N, due March 2026,
issued $450 million of 3.00% Secured Medium-Term Notes, Series N, due March 2051,
issued $425 million of 1.90% Secured Medium-Term Notes, Series N, due August 2031,
retired $300 million of 1.90% Secured Medium-Term Notes, Series K, at maturity, and
retired $134 million of 9.25% Mortgage Bonds, Series CC, at maturity.

PSEG Power

redeemed in May at par $700 million of 3.00% Senior Notes due to mature in June 2021,
redeemed in June at par $250 million of 4.15% Senior Notes due to mature in September 2021, and
redeemed in August $44 million of PEDFA Variable Rate Bonds.

In October 2021, PSEG redeemed all remaining outstanding Senior Notes of PSEG Power due to covenants that could trigger a default from the sale of PSEG Power’s fossil generating assets. This included $700 million of 3.85% Senior Notes due to mature in June 2023, $250 million of 4.30% Senior Notes due to mature in November 2023, and $404 million of 8.63% Senior Notes due to mature in April 2031. These Senior Notes were redeemed at a redemption price that included a "make-whole" premium of approximately $294 million plus any interest accrued and unpaid to the redemption date, in each case, calculated in accordance with the indenture governing the Senior Notes. The debt redemption and “make whole” premium were funded with a short-term loan from PSEG and borrowings under PSEG Power’s credit facility. In addition, approximately $4 million of other non-cash debt extinguishment costs were recorded in October 2021.

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 $4.1 billion credit facilities are provided by a diverse bank group. As of December 31, 2021, the total available credit capacity was $2.9 billion.

As of December 31, 2021, no single institution represented more than 8% of the total commitments in the credit facilities.

As of December 31, 2021, the total credit capacity was in excess of the anticipated maximum liquidity requirements over PSEG’s 12-month planning horizon, including access to external financing to meet redemptions.

Each of the credit facilities is restricted as to availability and use to the specific companies as listed in the following table; however, if necessary, the PSEG facilities can also be used to support its subsidiaries’ liquidity needs.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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The total credit facilities and available liquidity as of December 31, 2021 were as follows:



	As of December 31, 2021
Company/Facility	Total Facility		Usage (E)		Available Liquidity		Expiration Date	Primary Purpose
	Millions
PSEG
5-year Credit Facilities (A)	$	1,500	$	1,022	$	478	Mar 2024	Commercial Paper Support/Funding/Letters of Credit
Total PSEG	$	1,500	$	1,022	$	478
PSE&G
5-year Credit Facility (B)	$	600	$	18	$	582	Mar 2024	Commercial Paper Support/Funding/Letters of Credit
Total PSE&G	$	600	$	18	$	582
PSEG Power
3-year Letter of Credit Facility (C)	$	100	$	87	$	13	Sept 2023	Letters of Credit
5-year Credit Facilities (D)	1,900		58		1,842		Mar 2024	Funding/Letters of Credit
Total PSEG Power	$	2,000	$	145	$	1,855
Total	$	4,100	$	1,185	$	2,915

(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)In December 2021, PSEG Power extended its letter of credit facility for one year from September 2022 to September 2023.

(D)PSEG Power facilities will be reduced by $12 million in March 2022.

(E)The primary use of PSEG’s and PSE&G’s credit facilities is to support their respective Commercial Paper Programs, under which as of December 31, 2021, PSEG had $1.0 billion outstanding at a weighted average interest rate of 0.33%. PSE&G had no Commercial Paper outstanding as of December 31, 2021.

Debt Covenants

PSEG Power’s existing credit agreements contain covenants restricting the ability of PSEG Power and its subsidiaries that guarantee its indebtedness from consummating certain mergers, consolidations or asset sales. In March 2021, each of PSEG and PSEG Power and its subsidiaries received waivers from the lenders and the administrative agent under their existing credit agreements permitting them to divest, in one or more transactions, some or all of its and its subsidiaries’ non-nuclear assets without breaching the terms of the agreements.

Short-Term Loans

PSEG

In August 2021, PSEG entered into a $1.25 billion, 364-day variable rate term loan agreement. In March and May 2021, PSEG entered into two 364-day variable rate term loan agreements for $500 million and $750 million, respectively. In March 2020, PSEG entered into a $300 million, 364-day variable rate term loan agreement which was prepaid in January 2021.

During the second half of 2021, PSEG Power experienced a substantial increase in net cash collateral postings related to hedge positions that are out-of-the-money due to an increase in energy market prices, from $343 million at the end of June to $844 million at the end of December. PSEG issued short-term borrowings, including commercial paper, in order to satisfy the increase in collateral postings and to prepare for the PSEG Power debt redemption. In October, PSEG Power borrowed $755 million from its credit facility to support its Senior Notes redemption and additional cash collateral postings, as needed. In November, PSEG issued $1.5 billion of Senior Notes, using a portion of the funds to provide support to PSEG Power for paying off the $755 million loan from the credit facility.

Fair Value of Debt

The estimated fair values, carrying amounts and methods used to determine fair value of long-term debt as of December 31, 2021 and 2020 are included in the following table and accompanying notes as of December 31, 2021 and 2020. See Note 19. Fair Value Measurements for more information on fair value guidance and the hierarchy that prioritizes the inputs to fair value measurements into three levels.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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	December 31, 2021				December 31, 2020
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
	Millions
Long-Term Debt (A):
PSEG	$	4,124	$	4,172	$	2,929	$	3,092
PSE&G	11,795		13,374		10,909		13,372
PSEG Power (B)	—		—		2,342		2,679
Total Long-Term Debt	$	15,919	$	17,546	$	16,180	$	19,143

(A)Given that these bonds do not trade actively, the fair value amounts of taxable debt securities (primarily Level 2 measurements) are generally determined by a valuation model that is based on a conventional discounted cash flow methodology. The fair value amounts above do not represent the price at which the outstanding debt may be called for redemption by each issuer under their respective debt agreements.

(B)In October 2021, PSEG redeemed all of PSEG Power’s outstanding Senior Notes.

Note 17. Schedule of Consolidated Capital Stock



	As of December 31,
	Outstanding Shares		Book Value
	2021	2020	2021		2020
	Millions
PSEG Common Stock (no par value) (A)
Authorized 1,000 shares	504	504	$	4,149	$	4,170

(A)PSEG did not issue any new shares under the Dividend Reinvestment and Stock Purchase Plan or the Employee Stock Purchase Plan (ESPP) in 2021 or 2020.

As of December 31, 2021, PSE&G had an aggregate of 7.5 million shares of $100 par value and 10 million shares of $25 par value Cumulative Preferred Stock, which were authorized and unissued and which, upon issuance, may or may not provide for mandatory sinking fund redemption.

Note 18. 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 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 15. Commitments and Contingent Liabilities. Changes in the fair market value of these derivative contracts are recorded in earnings.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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Interest Rates

PSEG 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.

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. There were no outstanding interest rate hedges as of December 31, 2021 and 2020.

The Accumulated Other Comprehensive Income (Loss) (after tax) related to outstanding and terminated interest rate derivatives designated as cash flow hedges was $(6) million and $(9) million as of December 31, 2021 and December 31, 2020, respectively. The after-tax unrealized losses on these hedges expected to be reclassified to earnings during the next 12 months are $(3) million.

Fair Values of Derivative Instruments

The following are the fair values of derivative instruments on the 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 Consolidated Balance Sheets of PSEG. For additional information see Note 19. Fair Value Measurements.

Substantially all 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 December 31, 2021 and 2020. The following tabular disclosure does not include the offsetting of trade receivables and payables.



	As of December 31, 2021
	Not Designated
Balance Sheet Location	Energy- Related Contracts		Netting (A)		Total Derivatives
	Millions
Derivative Contracts
Current Assets	$	816	$	(744)	$	72
Noncurrent Assets	546		(518)		28
Total Mark-to-Market Derivative Assets	$	1,362	$	(1,262)	$	100
Derivative Contracts
Current Liabilities	$	(1,055)	$	1,038	$	(17)
Noncurrent Liabilities	(856)		839		(17)
Total Mark-to-Market Derivative (Liabilities)	$	(1,911)	$	1,877	$	(34)
Total Net Mark-to-Market Derivative Assets (Liabilities)	$	(549)	$	615	$	66

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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	As of December 31, 2020
	Not Designated
Balance Sheet Location	Energy- Related Contracts		Netting (A)		Total Derivatives
	Millions
Derivative Contracts
Current Assets	$	464	$	(404)	$	60
Noncurrent Assets	93		(84)		9
Total Mark-to-Market Derivative Assets	$	557	$	(488)	$	69
Derivative Contracts
Current Liabilities	$	(412)	$	391	$	(21)
Noncurrent Liabilities	(109)		105		(4)
Total Mark-to-Market Derivative (Liabilities)	$	(521)	$	496	$	(25)
Total Net Mark-to-Market Derivative Assets (Liabilities)	$	36	$	8	$	44

(A) Represents the netting of fair value balances with the same counterparty (where the right of offset exists) and the application of cash collateral. All cash collateral (received) posted that has been allocated to derivative positions, where the right of offset exists, has been offset on the Consolidated Balance Sheets. As of December 31, 2021 and 2020, PSEG Power had net cash collateral payments to counterparties of $844 million and $54 million, respectively. Of these net cash collateral (receipts) payments, $615 million as of December 31, 2021 and $8 million as of December 31, 2020 were netted against the corresponding net derivative contract positions. Of the $615 million as of December 31, 2021, $(30) million was netted against current assets, $(13) million was netted against non-current assets, $323 million was netted against current liabilities and $335 million was netted against noncurrent liabilities. Of the $8 million as of December 31, 2020, $(13) million was netted against current assets and $21 million was netted against noncurrent liabilities.

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 two level downgrade from its current Moody’s and S&P 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 $75 million and $28 million as of December 31, 2021 and 2020, respectively. As of December 31, 2021 and 2020, PSEG Power had the contractual right of offset of $29 million and $3 million, respectively, related to derivative instruments that are assets with the same counterparty under master agreements and net of margin posted. If PSEG Power had been downgraded to a below investment grade rating, it would have had additional collateral obligations of $46 million and $25 million as of December 31, 2021 and 2020, 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 Consolidated Statements of Operations and on Accumulated Other Comprehensive Loss (AOCL) of derivative instruments designated as cash flow hedges for the years ended December 31, 2021, 2020 and 2019.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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		Amount of Pre-Tax Gain (Loss) Recognized in AOCL on Derivatives						Location of Pre-Tax Gain (Loss) Reclassified from AOCL into Income		Amount of Pre-Tax Gain (Loss) Reclassified from AOCL into Income
Derivatives in Cash Flow Hedging Relationships	Years Ended December 31,								Years Ended December 31,
		2021		2020		2019				2021		2020		2019
		Millions								Millions
Interest Rate Swaps		$	—	$	(6)	$	(23)	Interest Expense		$	(4)	$	(14)	$	(4)
Total		$	—	$	(6)	$	(23)			$	(4)	$	(14)	$	(4)

The effect of interest rate cash flow hedges is recorded in Interest Expense in PSEG’s Consolidated Statement of Operations. For the year ended December 31, 2021, the amount of loss on interest rate hedges reclassified from Accumulated Other Comprehensive Income (Loss) into income was $3 million, $10 million and $3 million after tax as of December 31, 2021, 2020 and 2019, respectively.

The following reconciles the Accumulated Other Comprehensive Income (Loss) for derivative activity included in the AOCL of PSEG on a pre-tax and after-tax basis.



Accumulated Other Comprehensive Income (Loss)	Pre-Tax		After-Tax
	Millions
Balance as of December 31, 2019	$	(21)	$	(15)
Loss Recognized in AOCI	(6)		(4)
Less: Loss Reclassified into Income	14		10
Balance as of December 31, 2020	$	(13)	$	(9)
Loss Recognized in AOCI	—		—
Less: Loss Reclassified into Income	4		3
Balance as of December 31, 2021	$	(9)	$	(6)

The following shows the effect on the Consolidated Statements of Operations of derivative instruments not designated as hedging instruments or as NPNS for the years ended December 31, 2021, 2020 and 2019. PSEG Power’s derivative contracts reflected in this table include contracts to hedge the purchase and sale of electricity and natural gas, and the purchase of fuel. The table does not include contracts that PSEG Power has designated as NPNS, such as its BGS contracts and certain other energy supply contracts that it has with other utilities and companies with retail load.



Derivatives Not Designated as Hedges	Location of Pre-Tax Gain (Loss) Recognized in Income on Derivatives	Pre-Tax Gain (Loss) Recognized in Income on Derivatives
		Years Ended December 31,
		2021		2020		2019
		Millions
Energy-Related Contracts	Operating Revenues	$	993	$	279	$	560
Energy-Related Contracts	Energy Costs	(126)		(142)		(119)
Total		$	867	$	137	$	441

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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The following table summarizes the net notional volume purchases/(sales) of open derivative transactions by commodity as of December 31, 2021 and 2020.



		As of December 31,
Type	Notional	2021	2020
		Millions
Natural Gas	Dekatherm (Dth)	47	321
Electricity	MWh	(76)	(66)
Financial Transmission Rights (FTRs)	MWh	27	20

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’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 December 31, 2021. It further delineates that exposure by the credit rating of the counterparties, which is determined by the lowest rating from S&P, Moody’s or an internal scoring model. In addition, it provides guidance on the concentration of credit risk to individual counterparties and an indication of the quality of PSEG Power’s credit risk by credit rating of the counterparties.

As of December 31, 2021, 99.8% 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).



Rating	Current Exposure		Securities held as Collateral		Net Exposure		Number of Counterparties >10%	Net Exposure of Counterparties >10% (A)
	Millions							Millions
Investment Grade	$	356	$	185	$	171	1	$	143
Non-Investment Grade	2		1		1		—	—
Total	$	358	$	186	$	172	1	$	143

(A)Represents net exposure with PSE&G.

As of December 31, 2021, collateral held from counterparties where PSEG Power had credit exposure included $186 million in letters of credit.

As of December 31, 2021, PSEG Power had 106 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 December 31, 2021, PSEG held parental guaranties, letters of credit and cash as security. PSE&G’s BGS suppliers’ credit exposure is calculated each business day. As of December 31, 2021, PSE&G had credit exposure of $68 million with its suppliers. As of December 31, 2021, PSE&G had no net credit exposure with 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.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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Note 19. 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 and PSE&G’s respective assets and (liabilities) measured at fair value on a recurring basis as of December 31, 2021 and December 31, 2020, including the fair value measurements and the levels of inputs used in determining those fair values. Amounts shown for PSEG include the amounts shown for PSE&G.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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	Recurring Fair Value Measurements as of December 31, 2021
Description	Total		Netting (D)		Quoted Market Prices for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	Millions
PSEG
Assets:
Cash Equivalents (A)	$	615	$	—	$	615	$	—	$	—
Derivative Contracts:
Energy-Related Contracts (B)	$	100	$	(1,262)	$	25	$	1,336	$	1
NDT Fund (C)
Equity Securities	$	1,301	$	—	$	1,301	$	—	$	—
Debt Securities—U.S. Treasury	$	314	$	—	$	—	$	314	$	—
Debt Securities—Govt Other	$	373	$	—	$	—	$	373	$	—
Debt Securities—Corporate	$	647	$	—	$	—	$	647	$	—

Rabbi Trust (C)
Equity Securities	$	26	$	—	$	26	$	—	$	—
Debt Securities—U.S. Treasury	$	73	$	—	$	—	$	73	$	—
Debt Securities—Govt Other	$	34	$	—	$	—	$	34	$	—
Debt Securities—Corporate	$	109	$	—	$	—	$	109	$	—

Liabilities:
Derivative Contracts:
Energy-Related Contracts (B)	$	(34)	$	1,877	$	(26)	$	(1,880)	$	(5)

PSE&G
Assets:
Cash Equivalents (A)	$	250	$	—	$	250	$	—	$	—


Rabbi Trust (C)
Equity Securities	$	5	$	—	$	5	$	—	$	—
Debt Securities—U.S. Treasury	$	13	$	—	$	—	$	13	$	—
Debt Securities—Govt Other	$	6	$	—	$	—	$	6	$	—
Debt Securities—Corporate	$	19	$	—	$	—	$	19	$	—

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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	Recurring Fair Value Measurements as of December 31, 2020
Description	Total		Netting (D)		Quoted Market Prices for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	Millions
PSEG
Assets:
Cash Equivalents (A)	$	312	$	—	$	312	$	—	$	—
Derivative Contracts:
Energy-Related Contracts (B)	$	69	$	(488)	$	26	$	519	$	12

NDT Fund (C)
Equity Securities	$	1,352	$	—	$	1,351	$	1	$	—
Debt Securities—U.S. Treasury	$	239	$	—	$	—	$	239	$	—
Debt Securities—Govt Other	$	342	$	—	$	—	$	342	$	—
Debt Securities—Corporate	$	566	$	—	$	—	$	566	$	—

Rabbi Trust (C)
Equity Securities	$	31	$	—	$	31	$	—	$	—
Debt Securities—U.S. Treasury	$	59	$	—	$	—	$	59	$	—
Debt Securities—Govt Other	$	41	$	—	$	—	$	41	$	—
Debt Securities—Corporate	$	135	$	—	$	—	$	135	$	—

Liabilities:
Derivative Contracts:
Energy-Related Contracts (B)	$	(25)	$	496	$	(33)	$	(483)	$	(5)

PSE&G
Assets:
Cash Equivalents (A)	$	50	$	—	$	50	$	—	$	—


Rabbi Trust (C)
Equity Securities	$	6	$	—	$	6	$	—	$	—
Debt Securities—U.S. Treasury	$	11	$	—	$	—	$	11	$	—
Debt Securities—Govt Other	$	8	$	—	$	—	$	8	$	—
Debt Securities—Corporate	$	26	$	—	$	—	$	26	$	—

(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 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)As of each of December 31, 2021 and 2020, the fair value measurement table excludes foreign currency of $2 million in the NDT Fund. 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).

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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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. Certain 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)Represents the netting of fair value balances with the same counterparty (where the right of offset exists) and the application of collateral. See Note 18. 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 non-performance risk in the valuation of derivative contracts categorized in Levels 2 and 3, including both historical and current market data, in its assessment of credit and non-performance risk by counterparty. The impacts of credit and non-performance risk were not material to the financial statements.

As of December 31, 2021, PSEG carried $3.6 billion of net assets that were measured at fair value on a recurring basis, of which $4 million of net liabilities were measured using unobservable inputs and classified as Level 3 within the fair value hierarchy and are considered immaterial.

As of December 31, 2020, PSEG carried $3.1 billion of net assets that were measured at fair value on a recurring basis, of which $7 million of net assets were measured using unobservable inputs and classified as Level 3 within the fair value hierarchy and are considered immaterial.

There were no transfers in 2021 and 2020 to or from Level 3.

Note 20. Stock Based Compensation

PSEG’s 2021 Long-Term Incentive Plan (2021 LTIP), approved by shareholders on April 20, 2021 and the Amended and Restated 2004 Long-Term Incentive Plan ((LTIP 2004) under which no new grants have been made effective April 20, 2021), are broad-based equity compensation programs that provide for grants of various long-term incentive compensation awards, such as stock options, stock appreciation rights, performance share units, restricted stock, restricted stock units, cash awards or any combination thereof. The types of long-term incentive awards that have been granted under the LTIP are non-qualified options to purchase shares of PSEG’s common stock, restricted stock unit awards and performance share unit awards. The type of equity award that is granted and the details of that award may vary from time to time and is subject to the approval of the Organization and Compensation Committee of PSEG’s Board of Directors (O&CC), the LTIP’s administrative committee.

The 2021 LTIP currently provides for the issuance of equity awards with respect to 8 million shares of common stock. As of December 31, 2021, approximately 8 million shares were available for future awards under the 2021 LTIP.

In addition, on April 20, 2021 shareholders approved the PSEG 2021 Equity Compensation Plan for Outside Directors (2021 BOD Plan) and the PSEG 2007 Equity Compensation Plan for Outside Directors (2007 BOD Plan) was closed to new awards.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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Under the 2021 BOD Plan, the only equity instrument which may be granted are Restricted Stock Units (RSUs) and the Board member must defer the award until they have achieved their stock ownership requirement.

Stock Options

Under the 2021 LTIP, non-qualified options to acquire shares of PSEG common stock may be granted to officers and other key employees selected by the O&CC. Option awards are granted with an exercise price equal to the market price of PSEG’s common stock at the grant date. The options generally vest over four years of continuous service. Vesting schedules may be accelerated upon the occurrence of certain events, such as a change-in-control (unless substituted with an equity award of equal value), retirement, death or disability. Options are exercisable over a period of time designated by the O&CC (but not prior to one year or longer than ten years from the date of grant) and are subject to such other terms and conditions as the O&CC determines. Payment by option holders upon exercise of an option may be made in cash or, with the consent of the O&CC, by delivering previously acquired shares of PSEG common stock. No options have been granted since 2009.

RSUs

Under both the 2021 LTIP and 2004 LTIP (LTIPs), PSEG has granted RSU awards to officers and other key employees. These awards, which are bookkeeping entries only, are subject to risk of forfeiture until vested by continued employment. Until distributed, the units are credited with dividend equivalent units (DEUs) proportionate to the dividends paid on PSEG common stock. Distributions are made in shares of common stock. The RSU grants for 2021 and 2020 generally vest at the end of three years. Vesting may be accelerated (pro-rated basis or full vesting) upon certain events such as change-in-control, retirement, disability or death.

Performance Share Units (PSUs)

Under the LTIPs, PSEG has granted PSUs to officers and other key employees. These provide for distribution in shares of PSEG common stock based on achievement of certain financial goals over a three-year performance period. Following the end of the performance period, the payout varies from 0% to 200% of the number of PSUs granted depending on PSEG’s performance with respect to certain financial targets, including targets related to comparative performance against other companies in a peer group of energy companies. The PSUs are credited with DEUs proportionate to the dividends paid on PSEG common stock. Distributions are made in shares of common stock. Vesting may be accelerated on a pro-rated basis for the period of the employee’s service during the performance period as a result of certain events, such as change-in-control, retirement, death or disability.

Stock-Based Compensation

PSEG recognizes compensation expense for stock options based on their grant date fair values, which are determined using the Black-Scholes option-pricing model. Stock option awards are expensed on a tranche-specific basis over the requisite service period of the award. Ultimately, compensation expense for stock options is recognized for awards that vest.

PSEG recognizes compensation expense for RSUs over the vesting period based on the grant date fair value of the shares, which is equal to the closing market price of PSEG’s common stock on the date of the grant.

PSEG recognizes compensation expense for the total shareholder return (TSR) target for its PSU awards based on the grant date fair values of the award, which are determined using the Monte Carlo model. The following table provides the assumptions used to calculate the grant date fair value of the TSR portion of the PSU awards for 2021, 2020 and 2019:



Grant Date	Risk-Free Interest Rate	Volatility

February 16, 2021	0.22%	27.31%
February 18, 2020	1.36%	15.00%
February 19, 2019	2.47%	16.74%

The accrual of compensation cost is based on the probable achievement of the performance conditions, which result in a payout from 0% to 200% of the initial grant. PSEG recognizes compensation expense for the return on invested capital target for its PSUs based on the grant date fair value of the awards, which is equal to the market price of PSEG’s common stock on the date of the grant. The accrual during the year of grant is estimated at 100% of the original grant. Such accrual may be adjusted to reflect the actual outcome.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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	2021		2020		2019
	Millions
Compensation Cost included in O&M Expense	$	28	$	35	$	33
Income Tax Benefit Recognized in Consolidated Statement of Operations	$	8	$	10	$	9

For 2021, 2020 and 2019, PSEG also recorded excess tax benefits of $2 million, $2 million and $5 million, respectively.

PSEG recognizes compensation cost of awards issued over the shorter of the original vesting period or the period beginning on the date of grant and ending on the date an individual is eligible for retirement and the award vests.

Stock Options

As of January 1, 2019, there were 231,933 stock options outstanding, all of which were exercised in 2019 at a weighted average price of $33.49. There were no stock options granted or vested in 2021, 2020 and 2019.

Activity for options exercised for the years ended December 31, 2021, 2020 and 2019 is shown below:



	2021		2020		2019
	Millions
Total Intrinsic Value of Options Exercised	$	—	$	—	$	5
Cash Received from Options Exercised	$	—	$	—	$	8
Tax Benefit Realized from Options Exercised	$	—	$	—	$	1

RSUs

Changes in RSUs for the year ended December 31, 2021 are summarized as follows:



	Shares	Weighted Average Grant Date Fair Value		Weighted Average Remaining Years Contractual Term	Aggregate Intrinsic Value
Non-vested as of January 1, 2021	222,898	$	54.21
Granted	239,249	$	58.02
Vested	268,423	$	55.00
Canceled/Forfeited	13,893	$	57.80
Non-vested as of December 31, 2021	179,831	$	57.83	1.2	$	12,000,123

The weighted average grant date fair value per share for RSUs during the years ended December 31, 2021, 2020 and 2019 was $58.02, $58.85 and $56.24 per share, respectively.

The total intrinsic value of RSUs distributed during the years ended December 31, 2021, 2020 and 2019 was $17 million, $11 million and $16 million, respectively.

As of December 31, 2021, there was approximately $4 million of unrecognized compensation cost related to the RSUs, which is expected to be recognized over a weighted average period of 1.1 years. DEUs of 21,801 accrued on the RSUs during the year.

PSUs

Changes in PSUs for the year ended December 31, 2021 are summarized as follows:



	Shares	Weighted Average Grant Date Fair Value		Weighted Average Remaining Years Contractual Term	Aggregate Intrinsic Value
Non-vested as of January 1, 2021	475,841	$	54.88
Granted	373,418	$	65.57
Vested	337,332	$	59.49
Canceled/Forfeited	35,573	$	58.08
Non-vested as of December 31, 2021	476,354	$	59.76	1.6	$	31,787,102

The weighted average grant date fair value per share for PSUs during the years ended December 31, 2021, 2020 and 2019 was $65.57, $51.79 and $62.17 per share, respectively.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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The total intrinsic value of PSUs distributed during the years ended December 31, 2021, 2020 and 2019 was $28 million, $19 million and $17 million, respectively.

As of December 31, 2021, there was approximately $23 million of unrecognized compensation cost related to the PSUs, which is expected to be recognized over a weighted average period of 1.6 years. DEUs of 37,371 accrued on the PSUs during the year.

Outside Directors

Under the closed 2007 BOD Plan and the new 2021 BOD Plan, annually, on the first business day of May, each non-employee member of the Board of Directors is awarded stock units based on the amount of annual compensation to be paid at the closing price of PSEG common stock on that date. DEUs are credited quarterly and distributions will occur as specified by their election in accordance with the provisions of the BOD Plan.

The fair value of these awards is recorded as compensation expense in the Consolidated Statements of Operations. Compensation expense for the plan was immaterial for each of the years ended December 31, 2021, 2020 and 2019.

ESPP

PSEG maintains an ESPP for all eligible employees of PSEG and its subsidiaries. Under the ESPP, shares of PSEG common stock may be purchased at 95% of the fair market value for represented employees and 90% for non-represented employees through payroll deductions. Dividends are to be paid out in cash unless the participant elects the dividends to be reinvested at fair market price. All employees are required to hold the shares purchased under the ESPP for at least three months from the purchase date. In any year, employees may purchase shares having a value not exceeding 10% of their base pay. Compensation expense recognized under this program was $2 million for the year ended December 31, 2021 and $1 million for each of the years ended December 31, 2020 and 2019.

During the years ended December 31, 2021, 2020 and 2019, employees purchased 326,634 shares, 373,682 shares and 280,077 shares, respectively, at an average price of $56.87, $47.26 and $54.67 per share, respectively. As of December 31, 2021, 1.9 million shares were available for future issuance under this plan.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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Note 21. Other Income (Deductions)



	PSE&G		Other (A)		Consolidated Total
	Millions
Year Ended December 31, 2021
NDT Fund Interest and Dividends	$	—	$	59	$	59
Allowance for Funds Used During Construction	71		—		71
Solar Loan Interest	13		—		13
Donations	(1)		(21)		(22)
Purchase of Tax Losses under New Jersey Technology Tax Benefit Transfer Program	—		(19)		(19)
Other	5		(9)		(4)
Total Other Income (Deductions)	$	88	$	10	$	98
Year Ended December 31, 2020
NDT Fund Interest and Dividends	$	—	$	52	$	52
Allowance for Funds Used During Construction	87		—		87
Solar Loan Interest	15		—		15
Donations	—		(3)		(3)
Purchase of Tax Losses under New Jersey Technology Tax Benefit Transfer Program	—		(36)		(36)
Other	6		(6)		—
Total Other Income (Deductions)	$	108	$	7	$	115
Year Ended December 31, 2019
NDT Fund Interest and Dividends	$	—	$	57	$	57
Allowance for Funds Used During Construction	59		—		59
Solar Loan Interest	16		—		16
Donations	—		(11)		(11)
Other	8		(4)		4
Total Other Income (Deductions)	$	83	$	42	$	125

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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Note 22. Income Taxes

A reconciliation of reported income tax expense for PSEG with the amount computed by multiplying pre-tax income by the statutory federal income tax rate of 21% is as follows:



	Years Ended December 31,
PSEG	2021			2020			2019
	Millions
Net Income (Loss)	$	(648)		$	1,905		$	1,693
Income Taxes:
Operating Income:
Current (Benefit) Expense:
Federal	$	407		$	385		$	84
State	(3)			48			18
Total Current	404			433			102
Deferred Expense (Benefit):
Federal	(700)			(164)			3
State	(136)			141			132
Total Deferred	(836)			(23)			135
ITC	(9)			(14)			20
Total Income Tax Expense (Benefit)	$	(441)		$	396		$	257
Pre-Tax Income (Loss)	$	(1,089)		$	2,301		$	1,950
Tax Computed at Statutory Rate @ 21%	$	(229)		$	483		$	410
Increase (Decrease) Attributable to Flow-Through of Certain Tax Adjustments:
State Income Taxes (net of federal income tax)	(109)			147			117
Uncertain Tax Positions	19			3			—
NDT Fund	23			32			34
Plant-Related Items	(7)			(9)			(2)
Tax Credits	29			(18)			(18)
Audit Settlement	(8)			(27)			—
Leasing Activities	(1)			(35)			—
GPRC-CEF-EE	(13)			—			—
TAC	(171)			(205)			(272)
Bad Debt Flow-Through	27			28			—
Other	(1)			(3)			(12)
Subtotal	(212)			(87)			(153)
Total Income Tax Expense (Benefit)	$	(441)		$	396		$	257
Effective Income Tax Rate	40.5		%	17.2		%	13.2		%

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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The following is an analysis of deferred income taxes for PSEG:



	As of December 31,
PSEG	2021		2020
	Millions
Deferred Income Taxes
Assets:
Noncurrent:
Regulatory Liability Excess Deferred Tax	$	439	$	485
OPEB	107		135
Bad Debt	67		40
Related to Uncertain Tax Positions	30		29
Interest Disallowance Carryforward	—		39
Operating Leases	48		60
Other	253		130
Total Noncurrent Assets	$	944	$	918

Liabilities:
Noncurrent:
Plant-Related Items	$	4,701	$	5,163
New Jersey Corporate Business Tax	939		1,016
Leasing Activities	113		133
AROs and NDT Fund	270		324
Taxes Recoverable Through Future Rates (net)	120		114
Pension Costs	169		97
Operating Leases	43		55
Other	271		247
Total Noncurrent Liabilities	$	6,626	$	7,149
Summary of Accumulated Deferred Income Taxes:
Net Noncurrent Deferred Income Tax Liabilities	$	5,682	$	6,231
ITC	77		271
Net Total Noncurrent Deferred Income Taxes and ITC	$	5,759	$	6,502

The deferred tax effect of certain assets and liabilities is presented in the table above net of the deferred tax effect associated with the respective regulatory deferrals.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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A reconciliation of reported income tax expense for PSE&G with the amount computed by multiplying pre-tax income by the statutory federal income tax rate of 21% is as follows:



	Years Ended December 31,
PSE&G	2021			2020			2019
	Millions
Net Income	$	1,446		$	1,327		$	1,250
Income Taxes:
Operating Income:
Current (Benefit) Expense:
Federal	$	208		$	179		$	121
State	1			8			—
Total Current	209			187			121
Deferred Expense (Benefit):
Federal	(33)			(71)			(156)
State	153			128			117
Total Deferred	120			57			(39)
ITC	(5)			(4)			11
Total Income Tax Expense	$	324		$	240		$	93
Pre-Tax Income	$	1,770		$	1,567		$	1,343
Tax Computed at Statutory Rate @ 21%	$	372		$	329		$	282
Increase (Decrease) Attributable to Flow-Through of Certain Tax Adjustments:
State Income Taxes (net of federal income tax)	122			106			92
Uncertain Tax Positions	2			4			1
Plant-Related Items	(7)			(9)			(2)
Tax Credits	(8)			(9)			(8)
Audit Settlement	(1)			(2)			—
GPRC-CEF-EE	(13)			—			—
TAC	(171)			(205)			(272)
Bad Debt Flow-Through	27			28			—
Other	1			(2)			—
Subtotal	(48)			(89)			(189)
Total Income Tax Expense	$	324		$	240		$	93
Effective Income Tax Rate	18.3		%	15.3		%	6.9		%

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Table of Contents

The following is an analysis of deferred income taxes for PSE&G:



	As of December 31,
PSE&G	2021		2020
	Millions
Deferred Income Taxes
Assets:
Noncurrent:
Regulatory Liability Excess Deferred Tax	$	439	$	485
OPEB	61		82
Bad Debt	67		40
Operating Leases	20		21
Other	57		52
Total Noncurrent Assets	$	644	$	680
Liabilities:
Noncurrent:
Plant-Related Items	$	4,006	$	3,874
New Jersey Corporate Business Tax	863		721
Pension Costs	180		166
Taxes Recoverable Through Future Rates (net)	120		114
Conservation Costs	75		61
Operating Leases	19		21
Related to Uncertain Tax Positions	1		5
Other	178		161
Total Noncurrent Liabilities	$	5,442	$	5,123
Summary of Accumulated Deferred Income Taxes:
Net Noncurrent Deferred Income Tax Liabilities	$	4,798	$	4,443
ITC	76		81
Net Total Noncurrent Deferred Income Taxes and ITC	$	4,874	$	4,524

The deferred tax effect of certain assets and liabilities is presented in the table above net of the deferred tax effect associated with the respective regulatory deferrals.

PSEG and PSE&G each provide deferred taxes at the enacted statutory tax rate for all temporary differences between the financial statement carrying amounts and the tax bases of assets and liabilities irrespective of the treatment for rate-making purposes. Management believes that it is probable that the accumulated tax benefits that previously have been treated as a flow-through item to PSE&G customers will be recovered from or refunded to PSE&G’s customers in the future. See Note 7. Regulatory Assets and Liabilities.

The 2018 decrease in the federal tax rate resulted in PSE&G recording excess deferred income taxes. As of December 31, 2020, the balance was approximately $1.7 billion with a Regulatory Liability of approximately $2.4 billion. In 2021, PSE&G returned approximately $238 million of excess deferred income taxes and previously realized and current period deferred income taxes related to tax repair deductions to its customers with a reduction to tax expense of approximately $171 million. The flowback to customers of the excess deferred income taxes and previously realized tax repair deductions resulted in a decrease of approximately $215 million in the Regulatory Liability. The current period tax repair deduction reduces tax expense and revenue and recognizes a Regulatory Asset as PSE&G believes it is probable that the current period tax repair deductions flowed through to the customers will be recovered from customers in the future. See Note 7. Regulatory Assets and Liabilities for additional information.

In March 2020, the federal Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was enacted. Among other provisions, the CARES Act allows a five-year carryback of any net operating loss (NOL) generated in a taxable year beginning after December 31, 2017, and before January 1, 2021.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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In April 2020, the 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 and the BPU approved PSE&G’s requests to refund these unprotected excess deferred income taxes to customers. FERC approved the refund of these unprotected excess deferred income taxes within the 2019 true-up filing. The BPU approved the refund of these unprotected excess deferred income taxes beginning in July 2020 through December 31, 2024.

In July 2020, the IRS issued final and proposed regulations addressing the limitation on deductible business interest expense contained in the Tax Act. These regulations retroactively allow depreciation to be added back in computing the 30% adjusted taxable income (ATI) cap, increasing the amount of interest that can be deducted by unregulated businesses in years before 2022. For 2022 and after, the regulations continue to disallow the addback of depreciation in the computation of ATI, effectively lowering the cap on the amount of deductible business interest and contain special rules in allocating interest between regulated and non-regulated businesses. The portion of PSEG’s and PSEG Power’s business interest expense that was disallowed in 2018 and 2019 under the previously issued proposed regulations will now be deductible in those respective years.

In March 2021, PSEG amended its 2018 federal income tax return to deduct the previously disallowed business interest expense in accordance with the final and proposed regulations issued in July 2020. The 2018 amended return generated a NOL that was carried back to 2013 as provided by the CARES Act.

PSEG expects that a prolonged economic recovery may result in additional federal or state tax legislation that can have a material impact on PSEG’s and PSE&G’s tax expense and cash tax position.

Amounts recorded under the Tax Act and CARES Act are subject to change based on several factors, including whether the IRS or state taxing authorities issue additional guidance and/or further clarification. Any further guidance or clarification could impact PSEG’s and PSE&G’s financial statements.

As of December 31, 2021, PSE&G had a $15 million New Jersey Corporate Business Tax NOL that is expected to be fully realized in the future. There are no other material tax carryforwards in other jurisdictions.

PSEG recorded the following amounts related to its unrecognized tax benefits, which were primarily comprised of amounts recorded for PSE&G and PSEG’s other subsidiaries:



2021	PSEG		PSE&G
	Millions
Total Amount of Unrecognized Tax Benefits as of January 1, 2021	$	147	$	30
Increases as a Result of Positions Taken in a Prior Period	58		8
Decreases as a Result of Positions Taken in a Prior Period	(19)		(12)
Increases as a Result of Positions Taken during the Current Period	6		1
Decreases as a Result of Positions Taken during the Current Period	—		—
Decreases as a Result of Settlements with Taxing Authorities	—		—
Decreases due to Lapses of Applicable Statute of Limitations	—		—
Total Amount of Unrecognized Tax Benefits as of December 31, 2021	$	192	$	27
Accumulated Deferred Income Taxes Associated with Unrecognized Tax Benefits	(76)		(15)
Regulatory Asset—Unrecognized Tax Benefits	(7)		(7)
Total Amount of Unrecognized Tax Benefits that if Recognized, would Impact the Effective Tax Rate (including Interest and Penalties)	$	109	$	5

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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2020	PSEG		PSE&G
	Millions
Total Amount of Unrecognized Tax Benefits as of January 1, 2020	$	321	$	124
Increases as a Result of Positions Taken in a Prior Period	33		21
Decreases as a Result of Positions Taken in a Prior Period	(91)		(51)
Increases as a Result of Positions Taken during the Current Period	—		—
Decreases as a Result of Positions Taken during the Current Period	—		—
Decreases as a Result of Settlements with Taxing Authorities	(116)		(64)
Decreases due to Lapses of Applicable Statute of Limitations	—		—
Total Amount of Unrecognized Tax Benefits as of December 31, 2020	$	147	$	30
Accumulated Deferred Income Taxes Associated with Unrecognized Tax Benefits	(69)		(12)
Regulatory Asset—Unrecognized Tax Benefits	(15)		(15)
Total Amount of Unrecognized Tax Benefits that if Recognized, would Impact the Effective Tax Rate (including Interest and Penalties)	$	63	$	3

In April 2020, the Joint Committee on Taxation approved PSEG’s nuclear carryback claim and federal tax returns for the years 2011 and 2012. In June 2020, the federal income tax audits for years 2011 through 2016 and the nuclear carryback claim were concluded.



2019	PSEG		PSE&G
	Millions
Total Amount of Unrecognized Tax Benefits as of January 1, 2019	$	318	$	108
Increases as a Result of Positions Taken in a Prior Period	17		5
Decreases as a Result of Positions Taken in a Prior Period	(37)		(1)
Increases as a Result of Positions Taken during the Current Period	27		12
Decreases as a Result of Positions Taken during the Current Period	—		—
Decreases as a Result of Settlements with Taxing Authorities	(4)		—
Decreases due to Lapses of Applicable Statute of Limitations	—		—
Total Amount of Unrecognized Tax Benefits as of December 31, 2019	$	321	$	124
Accumulated Deferred Income Taxes Associated with Unrecognized Tax Benefits	(184)		(71)
Regulatory Asset—Unrecognized Tax Benefits	(46)		(46)
Total Amount of Unrecognized Tax Benefits that if Recognized, would Impact the Effective Tax Rate (including Interest and Penalties)	$	91	$	7

PSEG and its subsidiaries include accrued interest and penalties related to uncertain tax positions required to be recorded as Income Tax Expense in the Consolidated Statements of Operations. Accumulated interest and penalties that are recorded on the Consolidated Balance Sheets on uncertain tax positions were as follows:



	Accumulated Interest and Penalties on Uncertain Tax Positions as of December 31,
	2021		2020		2019
	Millions
PSEG	$	31	$	29	$	40
PSE&G	$	9	$	9	$	16

It is reasonably possible that total unrecognized tax benefits will significantly increase or decrease within the next twelve months due to either agreements with various taxing authorities upon audit, the expiration of the Statute of Limitations, or other pending tax matters. These potential increases or decreases are as follows:

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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Possible Decrease in Total Unrecognized Tax Benefits	Over the next 12 Months
	Millions
PSEG	$	25
PSE&G	$	15

A description of income tax years that remain subject to examination by material jurisdictions, where an examination has not already concluded are:



	PSEG	PSE&G
United States
Federal	2017-2020	N/A
New Jersey	2011-2020	2011-2020
Pennsylvania	2017-2020	2018-2020
Connecticut	2018-2020	N/A
Maryland	2018-2020	N/A
New York	2017-2020	N/A

New Jersey State Tax Reform

In September 2020, New Jersey enacted its State Fiscal Year 2021 Budget, which amended the temporary surtax originally enacted into law in 2018, from 1.5% to 2.5% for 2020 and 2021 and extended the 2.5% surtax to 2023. PSE&G continues to be exempt and this amendment will not have a material impact on PSEG’s and PSEG Power’s financial statements.

Note 23. Accumulated Other Comprehensive Income (Loss), Net of Tax



PSEG	Other Comprehensive Income (Loss)
Accumulated Other Comprehensive Income (Loss)	Cash Flow Hedges		Pension and OPEB Plans		Available-for -Sale Securities		Total
	Millions
Balance as of December 31, 2018	$	(1)	$	(360)	$	(16)	$	(377)
Cumulative Effect Adjustment to Reclassify Stranded Tax Effects Resulting in the Change in the Federal Corporate Income Tax to Retained Earnings	—		(81)		—		(81)
Current Period Other Comprehensive Income (Loss)
Other Comprehensive Income (Loss) before Reclassifications	(17)		(70)		49		(38)
Amounts Reclassified from Accumulated Other Comprehensive Income (Loss)	3		12		(8)		7
Net Current Period Other Comprehensive Income (Loss)	(14)		(58)		41		(31)
Net Change in Accumulated Other Comprehensive Income (Loss)	(14)		(139)		41		(112)
Balance as of December 31, 2019	$	(15)	$	(499)	$	25	$	(489)
Other Comprehensive Income (Loss) before Reclassifications	(4)		(58)		51		(11)
Amounts Reclassified from Accumulated Other Comprehensive Income (Loss)	10		12		(26)		(4)
Net Current Period Other Comprehensive Income (Loss)	6		(46)		25		(15)
Balance as of December 31, 2020	$	(9)	$	(545)	$	50	$	(504)
Other Comprehensive Income (Loss) before Reclassifications	—		176		(33)		143
Amounts Reclassified from Accumulated Other Comprehensive Income (Loss)	3		14		(6)		11
Net Current Period Other Comprehensive Income (Loss)	3		190		(39)		154
Balance as of December 31, 2021	$	(6)	$	(355)	$	11	$	(350)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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PSEG		Amounts Reclassified from Accumulated Other Comprehensive Income (Loss) to Income Statement
		Year Ended December 31, 2019
Description of Amounts Reclassified from Accumulated Other Comprehensive Income (Loss)	Location of Pre-Tax Amount in Statement of Operations	Pre-Tax Amount		Tax (Expense) Benefit		After-Tax Amount
		Millions
Cash Flow Hedges
Interest Rate Swaps	Interest Expense	$	(4)	$	1	$	(3)
Total Cash Flow Hedges		(4)		1		(3)
Pension and OPEB Plans
Amortization of Prior Service (Cost) Credit	Non-Operating Pension and OPEB Credits (Costs)	26		(7)		19
Amortization of Actuarial Loss	Non-Operating Pension and OPEB Credits (Costs)	(43)		12		(31)
Total Pension and OPEB Plans		(17)		5		(12)
Available-for-Sale Securities
Realized Gains (Losses)	Net Gains (Losses) on Trust Investments	13		(5)		8
Total Available-for-Sale Securities		13		(5)		8
Total		$	(8)	$	1	$	(7)




PSEG		Amounts Reclassified from Accumulated Other Comprehensive Income (Loss) to Income Statement
		Year Ended December 31, 2020
Description of Amounts Reclassified from Accumulated Other Comprehensive Income (Loss)	Location of Pre-Tax Amount in Statement of Operations	Pre-Tax Amount		Tax (Expense) Benefit		After-Tax Amount
		Millions
Cash Flow Hedges
Interest Rate Swaps	Interest Expense	$	(14)	$	4	$	(10)
Total Cash Flow Hedges		(14)		4		(10)
Pension and OPEB Plans
Amortization of Prior Service (Cost) Credit	Non-Operating Pension and OPEB Credits (Costs)	24		(7)		17
Amortization of Actuarial Loss	Non-Operating Pension and OPEB Credits (Costs)	(40)		11		(29)
Total Pension and OPEB Plans		(16)		4		(12)
Available-for-Sale Securities
Realized Gains (Losses) and Impairments	Net Gains (Losses) on Trust Investments	42		(16)		26
Total Available-for-Sale Securities		42		(16)		26
Total		$	12	$	(8)	$	4

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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PSEG		Amounts Reclassified from Accumulated Other Comprehensive Income (Loss) to Income Statement
		Year Ended December 31, 2021
Description of Amounts Reclassified from Accumulated Other Comprehensive Income (Loss)	Location of Pre-Tax Amount in Statement of Operations	Pre-Tax Amount		Tax (Expense) Benefit		After-Tax Amount
		Millions
Cash Flow Hedges

Interest Rate Swaps	Interest Expense	$	(4)	$	1	$	(3)
Total Cash Flow Hedges		(4)		1		(3)
Pension and OPEB Plans
Amortization of Prior Service (Cost) Credit	Non-Operating Pension and OPEB Credits (Costs)	21		(6)		15
Amortization of Actuarial Loss	Non-Operating Pension and OPEB Credits (Costs)	(41)		12		(29)
Total Pension and OPEB Plans		(20)		6		(14)
Available-for-Sale Securities
Realized Gains (Losses)	Net Gains (Losses) on Trust Investments	9		(3)		6
Total Available-for-Sale Securities		9		(3)		6
Total		$	(15)	$	4	$	(11)

Note 24. Earnings Per Share (EPS) and Dividends

EPS

Basic EPS is calculated by dividing Net Income (Loss) by the weighted average number of shares of common stock outstanding. Diluted EPS is calculated by dividing Net Income (Loss) by the weighted average number of shares of common stock outstanding, plus dilutive potential shares related to PSEG’s stock based compensation. For additional information on PSEG’s stock compensation plans see Note 20. Stock Based Compensation. The following table shows the effect of these dilutive potential shares on the weighted average number of shares outstanding used in calculating diluted EPS:



	Years Ended December 31,
	2021				2020				2019
	Basic		Diluted		Basic		Diluted		Basic		Diluted
EPS Numerator:
(Millions)
Net Income (Loss)	$	(648)	$	(648)	$	1,905	$	1,905	$	1,693	$	1,693
EPS Denominator:
(Millions)
Weighted Average Common Shares Outstanding	504		504		504		504		504		504
Effect of Stock Based Compensation Awards	—		—		—		3		—		3
Total Shares	504		504		504		507		504		507
EPS:
Net Income (Loss)	$	(1.29)	$	(1.29)	$	3.78	$	3.76	$	3.35	$	3.33

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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Approximately 3 million potentially dilutive shares were excluded from total shares used to calculate the diluted loss per share for the year ended December 31, 2021 as their impact was antidilutive.

For additional information on all the types of long-term incentive awards, see Note 20. Stock Based Compensation.

Dividends



	Years Ended December 31,
Dividend Payments on Common Stock	2021		2020		2019
Per Share	$	2.04	$	1.96	$	1.88
in Millions	$	1,031	$	991	$	950

On February 15, 2022, PSEG’s Board of Directors approved a $0.54 per share common stock dividend for the first quarter of 2022.

Note 25. Financial Information by Business Segment

Basis of Organization

PSEG’s and PSE&G’s operating segments were determined by management in accordance with GAAP. These segments were determined based on how management measures performance based on segment Net Income, as illustrated in the following table, and how resources are allocated to each business. PSEG’s reportable segments are PSE&G and PSEG Power. PSE&G represents a single reportable segment and therefore no separate segment information is provided for PSE&G.

PSE&G

PSE&G earns revenues from its tariffs, under which it provides electric transmission and electric and gas distribution services to residential, C&I customers in New Jersey. The rates charged for electric transmission are regulated by FERC while the rates charged for electric and gas distribution are regulated by the BPU. Revenues are also earned from several other activities such as investments in energy efficiency equipment on customers’ premises, solar investments, the appliance service business and other miscellaneous services.

PSEG Power

PSEG Power earns revenues primarily by bidding energy, capacity and ancillary services into the markets for these products and by selling energy, capacity and ancillary services on a wholesale basis under contract to power marketers and to load-serving entities. A significant portion of PSEG Power’s revenue is obtained from the various ISOs in which PSEG Power operates. The ISOs act similarly to a clearing house for all of its members in that all revenues paid out are collected from market participants based on their consumption of energy and energy-related products. PSEG Power also enters into bilateral contracts for energy, capacity, FTRs, gas, emission allowances and other energy-related contracts to optimize the value of its portfolio of generating assets and its electric and gas supply obligations. In addition, PSEG Power’s Salem 1, Salem 2 and Hope Creek nuclear plants receive ZEC revenue from the EDCs in New Jersey including PSE&G.

Other

This category includes amounts applicable to Energy Holdings and PSEG LI, which are below the quantitative threshold for separate disclosure as reportable segments. Other also includes amounts applicable to PSEG (parent corporation) and Services.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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	PSE&G		PSEG Power		Other (A)		Eliminations (B)		Consolidated Total
	Millions
Year Ended December 31, 2021
Operating Revenues	$	7,122	$	3,147	$	620	$	(1,167)	$	9,722
Depreciation and Amortization	928		256		32		—		1,216
Operating Income (Loss)	1,818		(2,711)		37		—		(856)
Income from Equity Method Investments	—		16		—		—		16
Interest Income	14		2		8		(4)		20
Interest Expense	402		78		95		(4)		571
Income (Loss) before Income Taxes	1,770		(2,808)		(51)		—		(1,089)
Income Tax Expense (Benefit)	324		(752)		(13)		—		(441)
Net Income (Loss) (C) (D)	$	1,446	$	(2,056)	$	(38)	$	—	$	(648)
Gross Additions to Long-Lived Assets	$	2,447	$	259	$	13	$	—	$	2,719
As of December 31, 2021
Total Assets	$	37,198	$	9,777	$	5,150	$	(3,126)	$	48,999
Investments in Equity Method Subsidiaries	$	—	$	62	$	111	$	—	$	173



	PSE&G		PSEG Power		Other (A)		Eliminations (B)		Consolidated Total
	Millions
Year Ended December 31, 2020
Operating Revenues	$	6,608	$	3,634	$	595	$	(1,234)	$	9,603
Depreciation and Amortization	887		368		30		—		1,285
Operating Income (Loss)	1,639		603		28		—		2,270
Income from Equity Method Investments	—		14		—		—		14
Interest Income	17		6		5		(3)		25
Interest Expense	388		121		94		(3)		600
Income (Loss) before Income Taxes	1,567		782		(48)		—		2,301
Income Tax Expense (Benefit)	240		188		(32)		—		396
Net Income (Loss) (C) (D)	$	1,327	$	594	$	(16)	$	—	$	1,905
Gross Additions to Long-Lived Assets	$	2,507	$	404	$	12	$	—	$	2,923
As of December 31, 2020
Total Assets	$	35,581	$	12,704	$	2,692	$	(927)	$	50,050
Investments in Equity Method Subsidiaries	$	—	$	64	$	—	$	—	$	64

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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	PSE&G		PSEG Power		Other (A)		Eliminations (B)		Consolidated Total
	Millions
Year Ended December 31, 2019
Operating Revenues	$	6,625	$	4,385	$	549	$	(1,483)	$	10,076
Depreciation and Amortization	837		377		34		—		1,248
Operating Income (Loss)	1,469		448		26		—		1,943
Income from Equity Method Investments	—		14		—		—		14
Interest Income	18		7		6		(5)		26
Interest Expense	361		119		94		(5)		569
Income (Loss) before Income Taxes	1,343		671		(64)		—		1,950
Income Tax Expense (Benefit)	93		203		(39)		—		257
Net Income (Loss) (C) (D)	$	1,250	$	468	$	(25)	$	—	$	1,693
Gross Additions to Long-Lived Assets	$	2,542	$	607	$	17	$	—	$	3,166
As of December 31, 2019
Total Assets	$	33,266	$	12,805	$	2,715	$	(1,056)	$	47,730
Investments in Equity Method Subsidiaries	$	—	$	66	$	1	$	—	$	67

(A)Includes amounts applicable to Energy Holdings and PSEG LI, which are below the quantitative threshold for separate disclosure as reportable segments. Other also includes amounts applicable to PSEG (parent corporation) and Services.

(B)Intercompany eliminations primarily relate to intercompany transactions between PSE&G and PSEG Power. For a further discussion of the intercompany transactions between PSE&G and PSEG Power, see Note 26. Related-Party Transactions.

(C)Includes after-tax impairment losses and other charges, including debt extinguishment costs, related to the sale of the fossil generating assets at PSEG Power of $2,158 million in the year ended December 31, 2021. Includes an after-tax gain of $86 million in the year ended December 31, 2020 related to the sale of PSEG Power’s interest in the Yards Creek generation facility and an after-tax loss of $286 million in the year ended December 31, 2019 related to the sale of PSEG Power’s ownership interests in the Keystone and Conemaugh fossil generation plants. See Note 4. Early Plant Retirements/Asset Dispositions and Impairments for additional information.

(D)Includes net after-tax losses of $446 million and $58 million in the years ended December 31, 2021 and 2020 and a net after-tax gain of $205 million in the year ended December 31, 2019 at PSEG Power related to the impacts of non-trading commodity mark-to-market activity, which consists of the financial impact from positions with future delivery dates.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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Note 26. Related-Party Transactions

The following discussion relates to intercompany transactions, which are eliminated during the PSEG consolidation process in accordance with GAAP.

PSE&G

The financial statements for PSE&G include transactions with related parties presented as follows:



	Years Ended December 31,
Related Party Transactions	2021		2020		2019
	Millions
Billings from Affiliates:
Net Billings from PSEG Power (A)	$	1,144	$	1,207	$	1,512
Administrative Billings from Services (B)	394		337		310
Total Billings from Affiliates	$	1,538	$	1,544	$	1,822



	Years Ended December 31,
Related Party Transactions	2021		2020
	Millions

Payable to PSEG Power (A)	$	244	$	273
Payable to Services (B)	111		95
Payable to PSEG (C)	63		111
Accounts Payable—Affiliated Companies	$	418	$	479
Working Capital Advances to Services (D)	$	33	$	33
Long-Term Accrued Taxes Payable	$	6	$	7

(A)PSE&G has entered into a requirements contract with PSEG Power under which PSEG Power provides the gas supply services needed to meet PSE&G’s BGSS and other contractual requirements. PSEG Power has also entered into contracts to supply energy, capacity and ancillary services to PSE&G through the BGS auction process and sells ZECs to PSE&G under the ZEC program. The rates in the BGS and BGSS contracts and for the ZEC sales are prescribed by the BPU. BGS and BGSS sales are billed and settled on a monthly basis. ZEC sales are billed on a monthly basis and settled annually following completion of each energy year. In addition, PSEG Power and PSE&G provide certain technical services for each other generally at cost in compliance with FERC and BPU affiliate rules.

(B)Services provides and bills administrative services to PSE&G at cost. In addition, PSE&G has other payables to Services, including amounts related to certain common costs, which Services pays on behalf of PSE&G.

(C)PSEG files a consolidated federal income tax return with its affiliated companies. A tax allocation agreement exists between PSEG and each of its affiliated companies. The general operation of these agreements is that the subsidiary company will compute its taxable income on a stand-alone basis. If the result is a net tax liability, such amount shall be paid to PSEG. If there are NOLs and/or tax credits, the subsidiary shall receive payment for the tax savings from PSEG to the extent that PSEG is able to utilize those benefits.

(D)PSE&G has advanced working capital to Services. The amount is included in Other Noncurrent Assets on PSE&G’s Consolidated Balance Sheets.

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