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, 2022 and 2021, the related consolidated statements of operations, comprehensive income (loss), stockholders' equity, and cash flows, for each of the three years in the period ended December 31, 2022, 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 financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, 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, 2022, 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 21, 2023, 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 Matter

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.

Accounting for the Effects of Regulation – Refer to Notes 1 and 7 to the financial statements

Critical Audit Matter Description

PSEG’s subsidiary, Public Service Electric and Gas Company (PSE&G), is regulated by the New Jersey Board of Public Utilities (BPU) and the Federal Energy Regulatory Commission (FERC), which have jurisdiction with respect to PSE&G’s electric and gas distribution and electric transmission businesses, respectively. 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.

As a utility subject to cost-based rate regulation, PSE&G is required to defer the recognition of costs as a regulatory asset or recognize obligations as a regulatory liability if the rates established are designed to recover the costs and if it is probable that such rates can be charged or collected in future periods. This accounting can result in the recognition of revenues and expenses in different time periods than that of enterprises that are not regulated. Further, regulatory assets and other investments and costs incurred under various 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 revenue or regulatory assets or payments of regulatory liabilities is no

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longer probable, the amounts would be charged or credited to income. Significant judgment can be required to determine if otherwise recognizable revenues and incurred costs qualify to be presented as a regulatory asset or liability. As of December 31, 2022, PSE&G has approximately $4.8 billion and $2.6 billion recorded as regulatory assets and regulatory liabilities, respectively.

We identified the accounting for the effects of rate regulation as a critical audit matter due to the significant judgments made by management in assessing the probable recovery of regulatory assets and incurred costs or the likelihood of refunds of regulatory liabilities. These judgments include assumptions regarding the outcome of future decisions by the BPU or FERC. Auditing these judgments required specialized knowledge of accounting for rate regulation and the ratemaking process due to its inherent complexities.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures to evaluate the accounting for the effects of cost-based rate regulation, including the probable recovery or refund of regulatory assets and liabilities, included the following, among others:

We tested the effectiveness of management's controls over the evaluation of the likelihood of (1) the recovery in future rates of costs deferred as regulatory assets, and (2) a refund or a future reduction in rates that should be reported as regulatory liabilities. We tested the effectiveness of management's controls over the initial recognition of amounts as regulatory assets or liabilities and the monitoring and evaluation of regulatory developments that may affect the likelihood of recovering costs in future rates or of a future reduction in rates.
We obtained and read relevant regulatory orders issued by the BPU and FERC for PSE&G and other publicly available information to assess the likelihood of recovery in future rates or of a future reduction in rates based on precedents of the treatment of similar costs under similar circumstances. We evaluated the external information and compared it to management’s recorded regulatory asset and liability balances for completeness.
For regulatory matters in process, we inspected associated documents and testimony filed with the BPU or FERC for any evidence that might contradict management's assertions.
We evaluated the financial statement presentation and disclosures related to the impacts of cost-based rate-regulation, including the balances recorded and regulatory developments.



/s/ DELOITTE & TOUCHE LLP

Morristown, New Jersey
February 21, 2023

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, 2022 and 2021, 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, 2022, 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, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, 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 Matter

Accounting for the Effects of Regulation – Refer to Notes 1 and 7 to the financial statements

Critical Audit Matter Description

PSE&G is regulated by the New Jersey Board of Public Utilities (BPU) and the Federal Energy Regulatory Commission (FERC), which have jurisdiction with respect to PSE&G’s electric and gas distribution and electric transmission businesses, respectively. 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.

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otherwise recognizable revenues and incurred costs qualify to be presented as a regulatory asset or liability. As of December 31, 2022, PSE&G has approximately $4.8 billion and $2.6 billion recorded as regulatory assets and regulatory liabilities, respectively.

How the Critical Audit Matter Was Addressed in the Audit

We tested the effectiveness of management's controls over the evaluation of the likelihood of (1) the recovery in future rates of costs deferred as regulatory assets, and (2) a refund or a future reduction in rates that should be reported as regulatory liabilities. We tested the effectiveness of management's controls over the initial recognition of amounts as regulatory assets or liabilities and the monitoring and evaluation of regulatory developments that may affect the likelihood of recovering costs in future rates or of a future reduction in rates.
We obtained and read relevant regulatory orders issued by the BPU and FERC for PSE&G and other publicly available information to assess the likelihood of recovery in future rates or of a future reduction in rates based on precedents of the treatment of similar costs under similar circumstances. We evaluated the external information and compared it to management’s recorded regulatory asset and liability balances for completeness.
For regulatory matters in process, we inspected associated documents and testimony filed with the BPU or FERC for any evidence that might contradict management's assertions.
We evaluated the financial statement presentation and disclosures related to the impacts of cost-based rate-regulation, including the balances recorded and regulatory developments.



/s/ DELOITTE & TOUCHE LLP

Morristown, New Jersey
February 21, 2023

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,
	2022		2021		2020
OPERATING REVENUES	$	9,800	$	9,722	$	9,603
OPERATING EXPENSES
Energy Costs	4,018		3,499		3,056
Operation and Maintenance	3,178		3,226		3,115
Depreciation and Amortization	1,100		1,216		1,285
(Gains) Losses on Asset Dispositions and Impairments	123		2,637		(123)
Total Operating Expenses	8,419		10,578		7,333
OPERATING INCOME (LOSS)	1,381		(856)		2,270
Income from Equity Method Investments	14		16		14
Net Gains (Losses) on Trust Investments	(265)		194		253
Other Income (Deductions)	124		98		115
Net Non-Operating Pension and Other Postretirement Benefit (OPEB) Credits (Costs)	376		328		249
Loss on Extinguishment of Debt	—		(298)		—
Interest Expense	(628)		(571)		(600)
INCOME (LOSS) BEFORE INCOME TAXES	1,002		(1,089)		2,301
Income Tax Benefit (Expense)	29		441		(396)
NET INCOME (LOSS)	$	1,031	$	(648)	$	1,905
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
BASIC	498		504		504
DILUTED	501		504		507
NET INCOME (LOSS) PER SHARE:
BASIC	$	2.07	$	(1.29)	$	3.78
DILUTED	$	2.06	$	(1.29)	$	3.76

See Notes to Consolidated Financial Statements.

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PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

Millions



	Years Ended December 31,
		2022		2021		2020
NET INCOME (LOSS)		$	1,031	$	(648)	$	1,905
Other Comprehensive Income (Loss), net of tax
Unrealized Gains (Losses) on Available-for-Sale Securities, net of tax (expense) benefit of $85, $25 and $(16) for the years ended 2022, 2021 and 2020, respectively		(132)		(39)		25
Unrealized Gains (Losses) on Cash Flow Hedges, net of tax (expense) benefit of $(2), $(1) and $(2) for the years ended 2022, 2021 and 2020, respectively		3		3		6
Pension/OPEB adjustment, net of tax (expense) benefit of $28, $(75) and $18 for the years ended 2022, 2021 and 2020, respectively		(71)		190		(46)
Other Comprehensive Income (Loss), net of tax		(200)		154		(15)
COMPREHENSIVE INCOME (LOSS)		$	831	$	(494)	$	1,890

See Notes to Consolidated Financial Statements.

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PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED

CONSOLIDATED BALANCE SHEETS

Millions



	December 31,
	2022		2021
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents	$	465	$	818
Accounts Receivable, net of allowance of $323 in 2022 and $325 in 2021	1,944		1,859
Tax Receivable	79		9
Unbilled Revenues, net of allowance of $16 in 2022 and $12 in 2021	322		217
Fuel	420		296
Materials and Supplies, net	540		448
Prepayments	93		63
Derivative Contracts	18		72

Regulatory Assets	369		364
Assets Held for Sale	20		2,060
Other	33		44
Total Current Assets	4,303		6,250
PROPERTY, PLANT AND EQUIPMENT	45,924		43,684
Less: Accumulated Depreciation and Amortization	(9,982)		(9,318)
Net Property, Plant and Equipment	35,942		34,366
NONCURRENT ASSETS
Regulatory Assets	4,404		3,605
Operating Lease Right-of-Use Assets	176		201
Long-Term Investments	624		541
Nuclear Decommissioning Trust (NDT) Fund	2,230		2,637
Long-Term Tax Receivable	5		47
Long-Term Receivable of Variable Interest Entity	551		828
Rabbi Trust Fund	183		242
Intangibles	14		20
Derivative Contracts	15		28
Other	271		234
Total Noncurrent Assets	8,473		8,383
TOTAL ASSETS	$	48,718	$	48,999

See Notes to Consolidated Financial Statements.

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PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED

CONSOLIDATED BALANCE SHEETS

Millions



	December 31,
	2022		2021
LIABILITIES AND CAPITALIZATION
CURRENT LIABILITIES
Long-Term Debt Due Within One Year	$	1,575	$	700
Commercial Paper and Loans	2,200		3,519
Accounts Payable	1,271		1,315
Derivative Contracts	124		17
Accrued Interest	134		121
Accrued Taxes	12		67
New Jersey Clean Energy Program	145		146
Obligation to Return Cash Collateral	290		179
Regulatory Liabilities	384		388
Liabilities Held for Sale	—		144
Other	545		476
Total Current Liabilities	6,680		7,072
NONCURRENT LIABILITIES
Deferred Income Taxes and Investment Tax Credits (ITC)	5,725		5,759
Regulatory Liabilities	2,240		2,497
Operating Leases	169		191
Asset Retirement Obligations	1,499		1,573
Other Postretirement Benefit (OPEB) Costs	410		572
OPEB Costs of Servco	455		640
Accrued Pension Costs	705		318
Accrued Pension Costs of Servco	82		174

Environmental Costs	231		245
Derivative Contracts	33		17
Long-Term Accrued Taxes	66		100
Other	199		184
Total Noncurrent Liabilities	11,814		12,270
COMMITMENTS AND CONTINGENT LIABILITIES (See Note 15)
CAPITALIZATION
LONG-TERM DEBT	16,495		15,219
STOCKHOLDERS’ EQUITY
Common Stock, no par, authorized 1,000 shares; issued, 2022 and 2021—534 shares	5,065		5,045
Treasury Stock, at cost, 2022 and 2021—37 and 30 shares, respectively	(1,377)		(896)
Retained Earnings	10,591		10,639
Accumulated Other Comprehensive Loss	(550)		(350)


Total Stockholders’ Equity	13,729		14,438
Total Capitalization	30,224		29,657
TOTAL LIABILITIES AND CAPITALIZATION	$	48,718	$	48,999

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,
	2022		2021		2020

CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (Loss)	$	1,031	$	(648)	$	1,905
Adjustments to Reconcile Net Income (Loss) to Net Cash Flows from Operating Activities:
Depreciation and Amortization	1,100		1,216		1,285
Amortization of Nuclear Fuel	183		187		184
(Gains) Losses on Asset Dispositions and Impairments	123		2,637		(123)
Loss on Extinguishment of Debt	—		298		—
Emission Allowances and Renewable Energy Credit (REC) Compliance Accrual	55		138		151
Provision for Deferred Income Taxes (Other than Leases) and ITC	(264)		(817)		139
Non-Cash Employee Benefit Plan (Credits) Costs	(239)		(178)		(105)
Leveraged Lease (Income), (Gains) and Losses, Adjusted for Rents Received and Deferred Taxes	15		(11)		(135)
Net Realized and Unrealized (Gains) Losses on Energy Contracts and Other Derivatives	639		614		80
Cost of Removal	(129)		(121)		(106)
Net Change in Regulatory Assets and Liabilities	(316)		(271)		(101)
Net (Gains) Losses and (Income) Expense from NDT Fund	202		(229)		(278)
Net Change in Certain Current Assets and Liabilities:
Cash Collateral	(677)		(790)		(10)
Obligation to Return Cash Collateral	111		81		(21)
Accrued Taxes	(94)		(127)		124
Other Current Assets and Liabilities	(187)		(263)		201
Employee Benefit Plan Funding and Related Payments	(35)		(25)		(18)
Other	(15)		45		(70)
Net Cash Provided By (Used In) Operating Activities	1,503		1,736		3,102
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to Property, Plant and Equipment	(2,888)		(2,719)		(2,923)
Proceeds from Sales of Trust Investments	1,586		2,100		2,234
Purchases of Trust Investments	(1,611)		(2,092)		(2,250)
Proceeds from Sales of Long-Lived Assets and Lease Investments	1,918		569		301
Contributions to Equity Method Investments	(124)		(111)		—
Other	18		9		(38)
Net Cash Provided By (Used In) Investing Activities	(1,101)		(2,244)		(2,676)
CASH FLOWS FROM FINANCING ACTIVITIES
Net Change in Commercial Paper	(819)		256		(352)
Proceeds from Short-Term Loans	2,000		2,500		800
Repayment of Short-Term Loans	(2,500)		(300)		(500)
Issuance of Long-Term Debt	2,850		2,825		2,450
Redemption of Long-Term Debt	(700)		(3,082)		(1,365)
Payments for Share Repurchase Program	(500)		—		—
Premium Paid on Early Extinguishment of Debt	—		(294)		—
Cash Dividends Paid on Common Stock	(1,079)		(1,031)		(991)
Other	(6)		(75)		(72)
Net Cash Provided By (Used In) Financing Activities	(754)		799		(30)
Net Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash	(352)		291		396
Cash, Cash Equivalents and Restricted Cash at Beginning of Period	863		572		176
Cash, Cash Equivalents and Restricted Cash at End of Period	$	511	$	863	$	572
Supplemental Disclosure of Cash Flow Information:
Income Taxes Paid (Received)	$	353	$	425	$	297
Interest Paid, Net of Amounts Capitalized	$	602	$	547	$	568
Accrued Property, Plant and Equipment Expenditures	$	366	$	331	$	387

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, 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
Net Income	—	—		—	—		1,031		—		1,031
Other Comprehensive Income (Loss), net of tax (expense) benefit of $111	—	—		—	—		—		(200)		(200)
Comprehensive Income											831

Cash Dividends at $2.16 per share on Common Stock	—	—		—	—		(1,079)		—		(1,079)
Payments for Share Repurchase Program	—	—		(7)	(500)		—		—		(500)
Other	—	20		—	19		—		—		39
Balance as of December 31, 2022	534	$	5,065	(37)	$	(1,377)	$	10,591	$	(550)	$	13,729

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,
	2022		2021		2020
OPERATING REVENUES	$	7,935	$	7,122	$	6,608
OPERATING EXPENSES
Energy Costs	3,270		2,688		2,469
Operation and Maintenance	1,838		1,692		1,614
Depreciation and Amortization	935		928		887
Gain on Asset Dispositions	—		(4)		(1)
Total Operating Expenses	6,043		5,304		4,969
OPERATING INCOME	1,892		1,818		1,639
Net Gains (Losses) on Trust Investments	(2)		2		3
Other Income (Deductions)	88		88		108
Non-Operating Pension and OPEB Credits (Costs)	281		264		205
Interest Expense	(427)		(402)		(388)
INCOME BEFORE INCOME TAXES	1,832		1,770		1,567
Income Tax Benefit (Expense)	(267)		(324)		(240)
NET INCOME	$	1,565	$	1,446	$	1,327

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,
		2022		2021		2020
NET INCOME		$	1,565	$	1,446	$	1,327
Other Comprehensive Income (Loss), net of tax
Unrealized Gains (Losses) on Available-for-Sale Securities, net of tax (expense) benefit of $2, $1 and $0 for the years ended 2022, 2021 and 2020, respectively		(6)		(2)		1
COMPREHENSIVE INCOME		$	1,559	$	1,444	$	1,328

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,
	2022		2021
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents	$	220	$	294
Accounts Receivable, net of allowance of $323 in 2022 and $325 in 2021	1,075		1,050


Unbilled Revenues, net of allowance of $16 in 2022 and $12 in 2021	322		217
Materials and Supplies, net	307		233
Prepayments	7		15
Regulatory Assets	369		364




Other	32		33
Total Current Assets	2,332		2,206
PROPERTY, PLANT AND EQUIPMENT	41,045		38,588
Less: Accumulated Depreciation and Amortization	(8,215)		(7,640)
Net Property, Plant and Equipment	32,830		30,948
NONCURRENT ASSETS
Regulatory Assets	4,404		3,605
Operating Lease Right-of-Use Assets	86		92
Long-Term Investments	143		181
Rabbi Trust Fund	32		43


Other	133		123
Total Noncurrent Assets	4,798		4,044
TOTAL ASSETS	$	39,960	$	37,198

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,
	2022		2021
LIABILITIES AND CAPITALIZATION
CURRENT LIABILITIES
Long-Term Debt Due Within One Year	$	825	$	—

Accounts Payable	703		571

Accounts Payable—Affiliated Companies	485		418
Accrued Interest	113		107
New Jersey Clean Energy Program	145		146

Obligation to Return Cash Collateral	290		179
Regulatory Liabilities	384		388
Other	416		376
Total Current Liabilities	3,361		2,185
NONCURRENT LIABILITIES
Deferred Income Taxes and ITC	5,348		4,874
Regulatory Liabilities	2,240		2,497
Operating Leases	77		83
Asset Retirement Obligations	384		363
OPEB Costs	255		354
Accrued Pension Costs	397		132


Environmental Costs	173		191

Long-Term Accrued Taxes	9		6
Other	163		145
Total Noncurrent Liabilities	9,046		8,645
COMMITMENTS AND CONTINGENT LIABILITIES (See Note 15)
CAPITALIZATION
LONG-TERM DEBT	11,871		11,795
STOCKHOLDER’S EQUITY
Common Stock; 150 shares authorized; issued and outstanding, 2022 and 2021—132 shares	892		892
Contributed Capital	1,170		1,170
Basis Adjustment	986		986
Retained Earnings	12,639		11,524
Accumulated Other Comprehensive Income (Loss)	(5)		1
Total Stockholder’s Equity	15,682		14,573
Total Capitalization	27,553		26,368
TOTAL LIABILITIES AND CAPITALIZATION	$	39,960	$	37,198

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,
	2022		2021		2020
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income	$	1,565	$	1,446	$	1,327
Adjustments to Reconcile Net Income to Net Cash Flows from Operating Activities:
Depreciation and Amortization	935		928		887

Provision for Deferred Income Taxes and ITC	137		116		53
Non-Cash Employee Benefit Plan (Credits) Costs	(179)		(156)		(103)
Cost of Removal	(129)		(121)		(106)
Net Change in Other Regulatory Assets and Liabilities	(316)		(271)		(101)
Net Change in Certain Current Assets and Liabilities
Accounts Receivable and Unbilled Revenues	(132)		(34)		(100)
Materials and Supplies	(73)		(16)		(2)
Prepayments	8		(1)		21
Accounts Payable	96		(71)		44
Accounts Receivable/Payable—Affiliated Companies, net	18		(32)		80
Obligation to Return Cash Collateral	111		81		(21)
Other Current Assets and Liabilities	44		(71)		81
Employee Benefit Plan Funding and Related Payments	(17)		(10)		(4)
Other	(40)		(64)		(103)
Net Cash Provided By (Used In) Operating Activities	2,028		1,724		1,953
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to Property, Plant and Equipment	(2,590)		(2,447)		(2,507)
Proceeds from Sales of Trust Investments	12		35		40
Purchases of Trust Investments	(10)		(29)		(40)
Solar Loan Investments	34		29		13
Other	11		16		12
Net Cash Provided By (Used In) Investing Activities	(2,543)		(2,396)		(2,482)
CASH FLOWS FROM FINANCING ACTIVITIES
Net Change in Commercial Paper and Loans	—		(100)		(262)
Issuance of Long-Term Debt	900		1,325		1,350
Redemption of Long-Term Debt	—		(434)		(259)
Contributed Capital	—		—		75
Cash Dividends Paid	(450)		—		(175)
Other	(8)		(13)		(17)
Net Cash Provided By (Used In) Financing Activities	442		778		712
Net Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash	(73)		106		183
Cash, Cash Equivalents and Restricted Cash at Beginning of Period	339		233		50
Cash, Cash Equivalents and Restricted Cash at End of Period	$	266	$	339	$	233
Supplemental Disclosure of Cash Flow Information:
Income Taxes Paid (Received)	$	137	$	266	$	157
Interest Paid, Net of Amounts Capitalized	$	409	$	383	$	369
Accrued Property, Plant and Equipment Expenditures	$	331	$	294	$	323

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, 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
Net Income	—		—		—		1,565		—		1,565
Other Comprehensive Income (Loss), net of tax (expense) benefit of $2	—		—		—		—		(6)		(6)
Comprehensive Income											1,559

Cash Dividends Paid	—		—		—		(450)		—		(450)

Balance as of December 31, 2022	$	892	$	1,170	$	986	$	12,639	$	(5)	$	15,682

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

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

Organization

Public Service Enterprise Group Incorporated (PSEG) is a public utility holding company that, acting through its wholly owned subsidiaries, is a predominantly regulated electric and gas utility and a nuclear generation business. PSEG’s principal operating 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 (EE) and related programs in New Jersey, which are regulated by the BPU.
PSEG Power LLC (PSEG Power)**—which is an energy supply company that integrates the operations of its merchant nuclear generating assets with its fuel supply functions through competitive energy sales via 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 investments in offshore wind ventures and legacy 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 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 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.

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 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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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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, 2021 and 2022. Restricted cash consists primarily of deposits received related to a construction project at PSE&G.



	PSE&G		PSEG Power & Other (A)		Consolidated
	Millions
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
As of December 31, 2022
Cash and Cash Equivalents	$	220	$	245	$	465
Restricted Cash in Other Current Assets	27		—		27
Restricted Cash in Other Noncurrent Assets	19		—		19
Cash, Cash Equivalents and Restricted Cash	$	266	$	245	$	511

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

Derivative Instruments

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

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.

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.

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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. If a contract no longer meets the requirements for NPNS designation, the changes in fair value since inception, and ongoing changes, of the contract and similar contracts in that portfolio, are recorded in current period earnings.

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.

As of December 31, 2022, PSEG Power owns generation within PJM Interconnection, L.L.C. (PJM), which facilitates the dispatch of energy and energy-related products. Prior to the sale of the fossil generation assets, PSEG Power also had significant sales in the New York Independent System Operator (NYISO) and the New England Independent System Operator (ISO-NE) regions. PSEG generally reports electricity sales and purchases conducted with the 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:



	2022		2021		2020
	Avg Rate		Avg Rate		Avg Rate
Electric Transmission	2.18	%	2.29	%	2.41	%
Electric Distribution	2.56	%	2.56	%	2.55	%
Gas Distribution	1.93	%	1.84	%	1.84	%

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.

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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amounts and average rates used to calculate AFUDC or IDC for the years ended December 31, 2022, 2021 and 2020 were as follows:



	AFUDC/IDC Capitalized
	2022				2021				2020
	Millions		Avg Rate		Millions		Avg Rate		Millions		Avg Rate
PSE&G	$	84	7.39	%	$	93	7.37	%	$	112	7.86	%
Other	$	4	2.24	%	$	9	4.90	%	$	10	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 (ITC) 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

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 portfolio level. See Note 4. Early Plant Retirements/Asset Dispositions and Impairments for more information on impairment assessments performed on PSEG’s long-lived assets.

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 coronavirus pandemic on the outstanding balances as of December 31, 2022. 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 coronavirus (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. 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.

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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 spare parts 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.

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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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.

Note 2. Recent Accounting Standards

New Standards Adopted in 2022

Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options—Accounting Standards Update (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.

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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.

Reference Rate Reform—Deferral of the Sunset Date—ASU 2022-06

This accounting standard defers the sunset date for applying the relief in the reference rate reform guidance to December 31, 2024 from December 31, 2022. It addresses entities’ concerns that without the deferral the relief may not cover the period when a significant number of modifications could take place, given the decision by the United Kingdom’s Financial Conduct Authority and the administrator of the London Interbank Offered Rate (LIBOR) to publish overnight USD LIBOR settings through June 30, 2023 rather than December 31, 2021.

The standard is effective upon its issuance in December 2022 and PSEG adopted this standard upon issuance. Adoption of this standard did not have an impact on the financial statements of PSEG and PSE&G.

New Standards Issued But Not Yet Adopted as of December 31, 2022

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 adopted this standard prospectively on January 1, 2023. Adoption of this standard did not have an impact on the financial statements of PSEG and PSE&G.

Derivative and Hedging: Fair Value Hedging-Portfolio Layer Method—ASU 2022-01

This accounting standard amends the derivative and hedging guidance on fair value hedge accounting of interest rate risk for portfolios of financial assets. The standard allows entities to expand their use of the portfolio layer method (previously known as the last of layer method) for fair value hedges of interest rate risk. Under this guidance, entities can now hedge all financial assets under the portfolio layer method and designate multiple hedged layers within a single closed portfolio. The standard also clarifies the accounting for fair value hedge basis adjustments in portfolio layer hedges and how these adjustments should be disclosed.

The standard is effective for fiscal years beginning after December 15, 2022 and early adoption is permitted. Amendments in this standard will be applied: (i) prospectively to designation of multiple hedged layers of a single closed portfolio, (ii) on a modified retrospective basis for amendments related to hedge basis adjustments under the portfolio layer method, and (iii) on a prospective or retrospective basis for the amendments related to disclosures. PSEG adopted this standard prospectively on January 1, 2023. Adoption of this standard did not have an impact on the financial statements of PSEG and PSE&G.

Financial Instruments—Credit Losses: Troubled Debt Restructurings and Vintage Disclosures—ASU 2022-02

This accounting standard eliminates the accounting guidance for troubled debt restructurings by creditors that have adopted the current expected credit losses guidance and enhances the disclosure requirements for certain loan refinancings and restructurings by creditors made to borrowers experiencing financial difficulty. It also amends the guidance on vintage disclosures to require disclosure of current-period gross write-offs by year of origination for financing receivables and net investment in leases.

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, except for the transition method related to the recognition and measurement of troubled debt restructurings where there is an option to apply a modified retrospective transition method. PSEG adopted this standard prospectively on January 1, 2023. Adoption of this standard did not have an impact on the financial statements of PSEG and PSE&G.

Fair Value Measurement: Equity Securities Subject to Contractual Sale Restrictions—ASU 2022-03

This accounting standard improves financial reporting for investors and other financial statement users by increasing comparability of financial information across reporting entities that have investments in equity securities measured at fair value that are subject to contractual restrictions preventing the sale of those securities. It clarifies that a contractual sale restriction

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should not be considered in measuring fair value. It also requires entities with investments in equity securities subject to contractual sale restrictions to disclose certain qualitative and quantitative information about such securities.

The standard is effective for fiscal years beginning after December 15, 2023 and early adoption is permitted. Amendments in this standard will be applied prospectively. PSEG is currently analyzing the impact of this standard on its financial statements.

Supplier Finance Programs—ASU 2022-04

This accounting standard enhances the transparency about the use of supplier finance programs for investors and other allocators of capital. It requires the buyer in a supplier finance program to disclose information about the key terms of the program, outstanding confirmed amounts as of the end of the period, a rollforward of such amounts during each annual period, and a description of where in the financial statements outstanding amounts are presented.

The standard is effective for fiscal years beginning after December 15, 2022, except for the disclosure of rollforward information, which is effective for fiscal years beginning after December 15, 2023. Early adoption is permitted. Amendments in this standard will be applied retrospectively to each period in which a balance sheet is presented, except for the amendment on rollforward information, which will be applied prospectively. PSEG adopted this standard retrospectively on January 1, 2023, except for the disclosure of rollforward information. Adoption of this standard did not have an impact on the financial statements of PSEG and PSE&G.

Note 3. Revenues

Nature of Goods and Services

The following is a description of principal activities by which PSEG and its subsidiaries generate their revenues.

PSE&G

Revenues from Contracts with Customers

Electric and Gas Distribution and Transmission Revenues—PSE&G sells gas and electricity to customers under default commodity supply tariffs. PSE&G’s regulated electric and gas default commodity supply and distribution services are separate tariffs which are satisfied as the product(s) and/or service(s) are delivered to the customer. The electric and gas commodity and delivery tariffs are recurring contracts in effect until modified through the regulatory approval process as appropriate. Revenue is recognized over time as the service is rendered to the customer. Included in PSE&G’s regulated revenues are unbilled electric and gas revenues which represent the estimated amount customers will be billed for services rendered from the most recent meter reading to the end of the respective accounting period.

PSE&G’s transmission revenues are earned under a separate tariff using a FERC-approved annual formula rate mechanism. The performance obligation of transmission service is satisfied and revenue is recognized as it is provided to the customer. The formula rate mechanism provides for an annual filing of an estimated revenue requirement with rates effective January 1 of each year and a true-up to that estimate based on actual revenue requirements. The true-up mechanism is an alternative revenue which is outside the scope of revenue from contracts with customers.

Other Revenues from Contracts with Customers

Other revenues from contracts with customers, which are not a material source of PSE&G revenues, are generated primarily from appliance repair services and solar generation projects. The performance obligations under these contracts are satisfied and revenue is recognized as control of products is delivered or services are rendered.

Payment for services rendered and products transferred are typically due on average within 30 days of delivery.

Revenues Unrelated to Contracts with Customers

Other PSE&G revenues unrelated to contracts with customers are derived from alternative revenue mechanisms recorded pursuant to regulatory accounting guidance. These revenues, which include the Conservation Incentive Program (CIP), green energy program true-ups and transmission formula rate true-ups, are not a material source of PSE&G revenues.

PSEG Power & Other

Revenues from Contracts with Customers

Electricity and Related Products—PSEG Power 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. In addition, 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

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service is provided to the customer. Transaction terms generally run from several months to three years. 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 December 2022, PJM called its first ISO-wide Maximum Generation Emergency Action, which triggered a Performance Assessment Interval (PAI) event. During the PAI, PSEG Power’s Salem 2 nuclear plant incurred penalties due to an unplanned outage during the second day of the event. Our remaining nuclear plants earned bonus payments during the entire event. The estimated net impact of Salem 2’s penalties and bonuses earned by the other units was not material to PSEG’s financial results.

PSEG Power’s Salem 1, Salem 2 and Hope Creek nuclear plants have been awarded Zero Emission Certificates (ZECs) by the BPU through May 2025. These nuclear plants are expected to receive ZEC revenue from the electric distribution companies (EDCs) in New Jersey. PSEG Power recognizes revenue when the units generate electricity, which is when the performance obligation is satisfied. These revenues are included in PJM 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. 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 is primarily the delivery of gas which is satisfied over time. Revenue is recognized as gas is delivered or pipeline capacity is released.

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. These performance obligations were transferred as part of the sale of Solar Source. 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.

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. These performance obligations were transferred as part of the sale of Solar Source. See Note 4. Early Plant Retirements/Asset Dispositions and Impairments.

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

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Disaggregation of Revenues



	PSE&G		PSEG Power & Other (A)		Eliminations		Consolidated
	Millions
Year Ended December 31, 2022
Revenues from Contracts with Customers
Electric Distribution	$	3,503	$	—	$	—	$	3,503
Gas Distribution	2,357		—		(1)		2,356
Transmission	1,589		—		—		1,589
Electricity and Related Product Sales
PJM
Third-Party Sales	—		2,152		—		2,152
Sales to Affiliates	—		151		(151)		—
NYISO	—		88		—		88
ISO-NE	—		96		—		96
Gas Sales
Third-Party Sales	—		458		—		458
Sales to Affiliates	—		1,243		(1,243)		—
Other Revenues from Contracts with Customers (B)	390		605		(6)		989
Total Revenues from Contracts with Customers	7,839		4,793		(1,401)		11,231
Revenues Unrelated to Contracts with Customers (C)	96		(1,527)		—		(1,431)
Total Operating Revenues	$	7,935	$	3,266	$	(1,401)	$	9,800



	PSE&G		PSEG Power & Other (A)		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 (B)	343		620		(3)		960
Total Revenues from Contracts with Customers	7,108		4,374		(1,167)		10,315
Revenues Unrelated to Contracts with Customers (C)	14		(607)		—		(593)
Total Operating Revenues	$	7,122	$	3,767	$	(1,167)	$	9,722

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	PSE&G		PSEG Power & Other (A)		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 (B)	338		632		(4)		966
Total Revenues from Contracts with Customers	6,599		3,734		(1,234)		9,099
Revenues Unrelated to Contracts with Customers (C)	9		495		—		504
Total Operating Revenues	$	6,608	$	4,229	$	(1,234)	$	9,603

(A)Includes revenues applicable to PSEG Power, PSEG LI and Energy Holdings.

(B)Includes primarily revenues from appliance repair services and the sale of SRECs at auction at PSE&G. PSEG Power & Other includes PSEG Power’s energy management fee with LIPA and PSEG LI’s OSA with LIPA. PSEG Power & Other also includes PSEG Power’s solar power projects in 2021 and 2020.

(C)Includes primarily alternative revenues at PSE&G principally from the CIP program in 2022 and derivative contracts and lease contracts at PSEG Power & Other. For the years ended December 31, 2021 and 2020, PSEG Power & Other includes losses of $9 million and $26 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, 2022 and 2021. 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 20% and 21% of accounts receivable (including unbilled revenues) as of December 31, 2022 and 2021, 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 on 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 COVID-19 pandemic on the outstanding balances as of December 31, 2022. PSE&G’s electric bad debt expense is recoverable through its SBC mechanism. As of December 31, 2022, PSE&G had a deferred balance of $145 million from electric bad debts recorded as a Regulatory Asset. In addition, as of December 31, 2022, PSE&G had deferred incremental gas bad debt expense of $68 million recorded as a Regulatory Asset for future regulatory recovery due to the impact of the coronavirus 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, 2022 and 2021.










	Years Ended December 31,
	2022		2021
	Millions
Balance at Beginning of Year	$	337	$	206
Utility Customer and Other Accounts
Provision	114		195
Write-offs, net of Recoveries of $46 million and $17 million for 2022 and 2021, respectively	(112)		(64)
Balance at End of Year	$	339	$	337

PSEG Power & Other

PSEG Power generally collects consideration upon satisfaction of performance obligations, and therefore, PSEG Power had no material contract balances as of December 31, 2022 and 2021.

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 energy and ancillary services sold directly to ISOs, wholesale load contracts and capacity sales which are executed in the different ISO regions, 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, 2022 and 2021. 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, 2022 and 2021.

Remaining Performance Obligations under Fixed Consideration Contracts

PSEG primarily records 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:

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 was 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
June 2022 to May 2023	$97	3,300
June 2023 to May 2024	$49	3,700

Capacity transactions with the PJM Regional Transmission Organization are reported on a net basis dependent on PSEG Power’s monthly net sale or purchase position.

Bilateral capacity contracts—Capacity obligations pursuant to contract terms through 2028 are anticipated to result in revenues totaling $36 million.

Amended OSA—In April 2022, PSEG LI entered into an amended OSA with LIPA. The OSA remains a 12-year services contract ending in 2025 with annual fixed and variable components. The fixed fee for the provision of services thereunder in 2023 is approximately $42 million and is updated each year based on the change in the Consumer Price Index (CPI).

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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 received ZEC revenue for approximately three years, through May 2022. That first eligibility period related to the award of ZECs from the April 2019 BPU Order has concluded.

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 prior ZEC period through May 2022 referenced above. As a result, each nuclear plant is receiving 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 ZEC period through May 2022. In May 2021, the New Jersey Division of 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.

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.

In August 2022, the Inflation Reduction Act (IRA) was signed into law expanding incentives promoting carbon-free generation. The enacted legislation established the production tax credit (PTC) for electricity generation using nuclear energy set to begin in 2024 through 2032. The expected PTC rate is up to $15/MWh subject to adjustment based upon a facility’s gross receipts. The PTC rate and the gross receipts cap are subject to annual inflation adjustments. The U.S. Treasury is expected to clarify the definition of gross receipts prior to when the eligibility period begins in 2024. We are continuing to analyze the impact of the IRA on our nuclear units, including additional future guidance from the U.S. Treasury and the interactions with PTCs on expected ZEC payments.

PSEG Power may take all necessary steps to cease to operate all of these plants and will incur associated costs and accounting charges in the event that the financial condition of the plants is materially adversely impacted in the future. This decision may be based upon market conditions, including energy and capacity revenues, insufficient government financial support, 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. The associated costs and accounting charges 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 May 2021, 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 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 ITCs 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

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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.

As defined in each agreement, further adjustments were 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 through the closing dates. As a result, in 2022 PSEG Power recorded an additional pre-tax impairment of approximately $50 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.

These Held for Sale balances represent all of the assets and liabilities that were transferred to the buyer at closing. PSEG Power has retained ownership of certain liabilities excluded from the transactions primarily related to obligations under certain environmental regulations, including remediation obligations under the New Jersey Industrial Site Recovery Act and the Connecticut Transfer Act. It will require multiple years and comprehensive environmental sampling to understand the extent of and to carry out the required remediation. The full remediation costs are not estimable, but will likely be material.

In 2022, Energy Holdings recorded pre-tax impairments of $78 million related to one of its domestic energy generating facilities and its real estate assets.

In 2020, PSEG Power completed the sale of its ownership interest in the Yards Creek generation facility and recorded a pre-tax gain on disposition of approximately $122 million as the sale price was greater 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 2022, 2021 and

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2020, Servco recorded $516 million, $511 million and $520 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 Ørsted North America Inc.’s (Ørsted) Ocean Wind 1 project that is expected to achieve full commercial operation in 2025. 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 accounts for this investment under the equity method. As of December 31, 2022 and 2021, PSEG’s carrying amount of its investment in OWH was $225 million and $111 million, respectively, 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.

In January 2023, PSEG agreed to sell to Ørsted its 25% equity interest in OWH. The sale proceeds approximate PSEG’s carrying value of the investment and no material gain or loss is expected upon disposition nor is the sale contingent upon Ørsted electing to proceed to the construction phase of the project. The sale is contingent upon finalization of a purchase and sale agreement with Ørsted as well as other closing conditions and any potential state regulatory approval that may be required to close on the transaction. The sale is expected to close in the first half of 2023. PSEG has no further obligation to make any capital contributions to the project prior to closing on the transaction.

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

Information related to Property, Plant and Equipment as of December 31, 2022 and 2021 is detailed below:



	2022		2021
	Millions
PSE&G
Electric Transmission	$	16,393	$	15,544
Electric Distribution	10,785		10,223
Gas Distribution and Transmission	10,616		9,818
Construction Work in Progress	1,336		1,196
Other	1,915		1,807
Total PSE&G	41,045		38,588
Nuclear Production	3,567		3,656
Nuclear Fuel in Service	758		762
Construction Work in Progress	177		177
Other	377		501
Total	$	45,924	$	43,684

The above table excludes amounts as of December 31, 2021 which were 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.

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			As of December 31,
			2022				2021
	Ownership				Accumulated				Accumulated
	Interest		Plant		Depreciation		Plant		Depreciation
			Millions
PSE&G:
Transmission Facilities	Various		$	164	$	67	$	165	$	66
PSEG Power:
Nuclear Generating:
Peach Bottom	50	%	$	1,444	$	506	$	1,452	$	481
Salem	57	%	$	1,455	$	516	$	1,468	$	449
Nuclear Support Facilities	Various		$	228	$	119	$	226	$	107
Other	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 Constellation Energy Generation, LLC. PSEG Power is the operator of Salem and Constellation Energy Generation, LLC 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.

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 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, 2022 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.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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PSE&G had the following Regulatory Assets and Liabilities:



	As of December 31,
	2022		2021
	Millions
Regulatory Assets
Current
New Jersey Clean Energy Program	$	145	$	146
Electric Energy Costs—Basic Generation Service (BGS)	54		67
Tax Adjustment Credit (TAC)	52		44
Conservation Incentive Program (CIP)	51		36

2018 Distribution Base Rate Case Regulatory Assets (BRC)	47		56
Societal Benefits Clause (SBC)	20		—


Other	—		15
Total Current Regulatory Assets	369		364
Noncurrent
Pension and OPEB Costs	$	1,405	$	1,043
Deferred Income Tax Regulatory Assets	1,168		1,064
Green Program Recovery Charges (GPRC)	447		211
Manufactured Gas Plant (MGP) Remediation Costs	206		220
Asset Retirement Obligation (ARO)	200		191
Electric Transmission and Gas Cost of Removal	156		174
SBC (Electric Bad Debt)	145		139
COVID-19 Deferral	137		116
Remediation Adjustment Charge (RAC) (Other SBC)	134		156
Deferred Storm Costs	109		109
Clean Energy Future-Energy Cloud (CEF-EC) (Advanced Metering Infrastructure (AMI))	80		5
CIP	72		12
BRC	—		47
Other	145		118
Total Noncurrent Regulatory Assets	4,404		3,605
Total Regulatory Assets	$	4,773	$	3,969



	As of December 31,
	2022		2021
	Millions
Regulatory Liabilities
Current
Deferred Income Tax Regulatory Liabilities	$	302	$	288

Gas Costs—Basic Gas Supply Service (BGSS)	35		5
GPRC	24		19

Formula Rate True-up	1		42


Other	22		34
Total Current Regulatory Liabilities	384		388
Noncurrent
Deferred Income Tax Regulatory Liabilities	$	2,196	$	2,443
Formula Rate True-up	31		9

Other	13		45
Total Noncurrent Regulatory Liabilities	2,240		2,497
Total Regulatory Liabilities	$	2,624	$	2,885

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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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:

ARO: 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 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.
CEF-EC (AMI Initiative): In January 2021, the BPU approved PSE&G’s CEF-EC filing to provide its 2.3 million electric customers with smart meters. 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 is included for recovery in those rates, as well as operating and stranded costs associated with the accelerated retirement of the existing non-AMI electric meters which PSE&G expects to conclude by the end of 2024. As of December 31, 2022 and 2021, the net book value of these meters was $168 million and $192 million, respectively.
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. In December 2022, the BPU extended the deferral period to March 15, 2023. 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 may file a petition documenting its prudently incurred incremental COVID-19 costs within 60 days of the close of the extended March 15, 2023 Regulatory Asset period. 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 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, 2022, 2021 and 2020, PSE&G had provided $35 million, $22 million and $31 million, respectively, in current tax repair flowbacks to customers. The recovery and amortization of the tax repair-related Deferred Income Tax Regulatory Assets is being recovered through the TAC regulatory mechanism.
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:

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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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, 2022, the balance remaining to be flowed back to customers was approximately $203 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, 2022, the balance remaining to be flowed back to customers was approximately $882 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, 2022, the balance remaining to be flowed back to customers was approximately $425 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, 2022, the balance remaining to be flowed back to customers was approximately $933 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 from 2019 through 2022 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 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, Clean Energy Act Studies (CEAS), Community Solar Energy Program (CSEP) and the Successor Solar Incentive Program (SuSI).
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.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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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; (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.

Significant 2022 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 of return on equity. PSE&G’s BGS customers are being credited over a 12-month period effective February 1, 2022.
BGSS**—**In April 2022, the BPU gave final approval to PSE&G’s request to maintain the BGSS rate of approximately 41 cents per therm which had been provisionally approved effective February 1, 2022.

In September 2022, the BPU approved on a provisional basis PSE&G’s June 2022 request to increase its BGSS rate to approximately 65 cents per therm, effective October 1, 2022.

In January 2023, PSE&G filed a self-implementing BGSS rate reduction of 15 cents per therm with the BPU. This reduction resulted in a new BGSS rate of approximately 50 cents per therm effective February 1, 2023.

CIP****—**In February 2023, the BPU gave final approval for PSE&G to recover approximately $52 million of deficient electric revenues over two years, with approximately $18 million approved for recovery for the first year starting on the effective date of June 15, 2022.

In September 2022, the BPU provisionally approved PSE&G’s initial gas CIP cost recovery petition to recover over a one year period deficient gas revenues of approximately $53 million with new rates effective October 1, 2022. The revenue deficiency is the result of lower estimated revenues as compared to a baseline established in PSE&G’s most recent distribution base rate proceeding.

In February 2023, PSE&G filed its annual electric CIP petition seeking BPU approval to recover estimated deficient electric revenues of approximately $54 million based on the twelve month period ending May 31, 2023 with new rates proposed to be effective June 1, 2023. This matter is pending.

**CSEP Program, a New Component of the GPRC—**In June 2022, the BPU approved PSE&G’s filing to recover its initial electric revenue requirement of $0.4 million related to the CSEP Program with the new rate effective July 1, 2022.
**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, 2022 of approximately $137 million for net incremental costs, including $68 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 December 2022, the BPU approved an extension of the COVID deferral period until March 15, 2023 and ordered all New Jersey regulated utilities to file petitions documenting its prudently incurred incremental COVID-19 costs no later than 60 days thereafter.

**Energy Strong II (ES II)—**In May 2022, the BPU approved PSE&G’s updated filing for annual electric and gas revenue increases of $17 million and $1 million, respectively, effective June 1, 2022. These increases represent the return on and of Energy Strong II investments placed in service through January 2022.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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In November 2022, PSE&G filed its annual 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, with rates to be effective May 1, 2023. In February 2023, PSE&G updated its petition for actual investments through January 31, 2023 requesting annual electric and gas revenue increases of $16 million and $4 million, respectively. This matter is pending.

**Gas System Modernization Program (GSMP II)—**In May 2022, the BPU approved PSE&G’s filing for an annual gas revenue increase of $25 million effective June 1, 2022. This increase represents the return on and of GSMP II investments placed in service through February 2022.

In November 2022, the BPU approved PSE&G’s updated GSMP II cost recovery filing to recover an annual gas revenue increase of $23 million effective December 1, 2022. This increase represents the return on and of GSMP II investments placed in service through August 31, 2022.

In December 2022, 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 $11 million effective June 1, 2023.

**GPRC—**In June 2022, the BPU approved PSE&G’s updated filing for an annual electric revenue decrease of approximately $4 million and a gas revenue increase of approximately $1 million, with new rates effective June 15, 2022.

In July 2022, PSE&G filed its 2022 GPRC cost recovery petition requesting BPU approval to recover increases of $110 million and $8 million in annual electric and gas revenues, respectively. This matter is pending.

In September 2022, PSE&G filed a petition which requested an increase of $320 million in its total program investment spending for the CEF-EE component of GPRC and a nine month extension to the program to make the investments. This matter is pending.

**Pension—**In February 2023, the BPU approved an accounting order authorizing PSE&G to modify its method for calculating the amortization of the net actuarial gain or loss component of pension expense for ratemaking purposes. This methodology change for ratemaking purposes is effective for the calendar year ending December 31, 2023 and forward.
**RAC—**In September 2022, the BPU approved PSE&G’s RAC 29 filing allowing recovery of approximately $44 million of net MGP remediation expenditures incurred from August 1, 2020 through July 31, 2021.

In January 2023, PSE&G filed its RAC 30 petition with the BPU seeking recovery of approximately $44 million of net MGP expenditures incurred from August 1, 2021 through July 31, 2022. This matter is pending.

**SuSI Program, a New Component of the GPRC—**In June 2022, the BPU approved PSE&G’s filing to recover an annual electric revenue increase of $38 million effective June 15, 2022. These costs will be recovered as a new component of PSE&G’s existing electric GPRC.
SBC—**In January 2023, PSE&G filed a petition to increase its annual electric and gas rates by approximately $52 million and $32 million, respectively, in order to recover electric and gas costs incurred or expected to be incurred through February 2024 under its EE and Renewable Energy and Social Programs. The increase to electric rates includes the impact of increased bad debt expense as a result of the negative economic impact of the coronavirus pandemic and the resulting impact of moratoriums on collections. This matter is pending.
TAC—**In June 2022, the BPU approved PSE&G’s annual 2021 TAC filing to increase annual electric and gas revenues by approximately $15 million and $31 million, respectively. The new rates were effective June 15, 2022.

In October 2022, PSE&G made its annual 2022 TAC filing requesting BPU approval to increase electric revenues and decrease gas revenues by approximately $17 million and $70 million, respectively, on an annual basis starting January 1, 2023. This matter is pending.

Transmission Formula Rates—**In June 2022, PSE&G filed its 2021 true-up adjustment pertaining to its transmission formula rates in effect for 2021. This filing resulted in a decrease in the 2021 annual revenue requirement of $1 million less than the 2021 original and updated filings, incorporating the FERC-approved settlement agreement effective August 1, 2021.

In October 2022, PSE&G filed its Annual Transmission Formula Rate Update with FERC which will result in $69 million in increased annual transmission revenue effective January 1, 2023, subject to true-up.

**ZEC Program—**In April 2022, the BPU approved PSE&G’s petition to refund a total of $4 million to customers,

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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including interest, for overcollections resulting from the ZEC program for the energy year ended May 31, 2021.

In January 2023, the BPU approved PSE&G’s petition to set the ZEC refund component of the tariff rate to zero effective February 1, 2023. For the ZEC Energy Year ended May 31, 2022, PSE&G purchased approximately $161 million in ZECs including interest, from the eligible nuclear plants selected by the BPU with the final payment made in August 2022. As a result of the collections and required ZEC payments, there were overcollected revenues, including interest totaling $1.3 million, which PSE&G refunded to customers over the remainder of 2022 through January 2023 through its existing rates.

Note 8. Leases

As of December 31, 2022, 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 four 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.

PSEG Power & 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. Certain leases contain variable payments.

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, 2022, 2021 and 2020 and any amounts capitalized as part of the cost of another asset, and the cash flows arising from lease transactions.



	PSE&G			PSEG Power & Other			Total
	Millions
Operating Lease Costs





Year Ended December 31, 2022
Long-term Lease Costs	$	31		$	25		$	56
Short-term Lease Costs	21			5			26
Variable Lease Costs	2			11			13
Total Operating Lease Costs	$	54		$	41		$	95



Year Ended December 31, 2022
Cash Paid for Amounts Included in the Measurement of Operating Lease Liabilities	$	17		$	25		$	42

Weighted Average Remaining Lease Term in Years	11			7			9
Weighted Average Discount Rate	3.5		%	4.1		%	3.9		%

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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	PSE&G			PSEG Power & 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		%



	PSE&G			PSEG Power & 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		%

Operating lease liabilities as of December 31, 2022 had the following maturities on an undiscounted basis:



	PSE&G		PSEG Power & Other		Total
	Millions
2023	$	15	$	20	$	35
2024	12		16		28
2025	10		15		25
2026	8		15		23
2027	8		16		24
Thereafter	56		44		100
Total Minimum Lease Payments	$	109	$	126	$	235

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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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, 2022
	PSE&G		PSEG Power & Other		Total
	Millions
Undiscounted Cash Flows	$	109	$	126	$	235
Reconciling Amount due to Discount Rate	(20)		(18)		(38)
Total Discounted Operating Lease Liabilities	$	89	$	108	$	197

	As of December 31, 2021
	PSE&G		PSEG Power & 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, 2022, the current portions of Operating Lease Liabilities included in Other Current Liabilities were $28 million and $12 million for PSEG and PSE&G, respectively. 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.

Lessor

PSEG Power & Other

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 in real estate assets with remaining terms through 2049. In 2022, Energy Holdings recorded pre-tax impairments of $78 million related to one of its domestic energy generating facilities and its real estate assets. As of December 31, 2022, Energy Holdings’ property subject to these leases had a total carrying value of $51 million, including Assets Held for Sale of $20 million.

Energy Holdings was previously the lessor in operating leases for real estate assets which were sold in March 2020.

PSEG Nuclear, LLC, a wholly owned subsidiary of PSEG Power, is the lessor in an operating lease for 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 in June 2021, 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.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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The following is the operating lease income for the years ended December 31, 2022, 2021 and 2020:



Operating Lease Income	Millions




Year Ended December 31, 2022
Fixed Lease Income	$	31
Variable Lease Income	—
Total Operating Lease Income	$	31

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

Operating leases had the following minimum future fixed lease receipts as of December 31, 2022:



	Millions
2023	$	19
2024	19
2025	19
2026	19
2027	14
Thereafter	124
Total Minimum Future Lease Receipts	$	214

Note 9. Long-Term Investments

Long-Term Investments as of December 31, 2022 and 2021 included the following:



	As of December 31,
	2022		2021
	Millions
PSE&G
Life Insurance and Supplemental Benefits	$	81	$	89
Solar Loans	62		92
PSEG Power & Other
Lease Investments	175		187
Equity Method Investments (A)	306		173
Total Long-Term Investments	$	624	$	541

(A)During the three years ended December 31, 2022, 2021 and 2020, dividends from these investments were $8 million, $17 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, 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

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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.

Leveraged leases outstanding as of December 31, 2022 commenced in or prior to 2000.The following table shows Energy Holdings’ gross and net lease investment as of December 31, 2022 and 2021.



	As of December 31,
	2022		2021
	Millions
Lease Receivables (net of Non-Recourse Debt)	$	249	$	274
Estimated Residual Value of Leased Assets	—		—
Total Investment in Rental Receivables	249		274
Unearned and Deferred Income	(74)		(87)
Gross Investments in Leases	175		187
Deferred Tax Liabilities	(39)		(42)
Net Investments in Leases	$	136	$	145

The pre-tax income 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,
	2022		2021		2020
	Millions
Pre-Tax Income from Leases	$	13	$	13	$	18
Income Tax Expense on Income from Leases	$	3	$	3	$	2

Equity Method Investment

PSEG had a 25% equity interest in Ørsted’s Ocean Wind 1 project of $225 million and $111 million as of December 31, 2022 and 2021, respectively. 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 $71 million and $62 million as of December 31, 2022 and 2021, respectively.

PSEG has also invested in certain funds sponsored by Energy Impact Partners LP, totaling $10 million as of December 31, 2022.

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, 2022, none of the solar loans were impaired; however, in the event of a loan default, the basis of the solar loan would be recovered through a regulatory recovery mechanism. 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.”

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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	As of December 31,
Outstanding Loans by Class of Customer	2022		2021
	Millions
Commercial/Industrial	$	85	$	116
Residential	4		5
Total	89		121
Current Portion (included in Accounts Receivable)	(27)		(29)
Noncurrent Portion (included in Long-Term Investments)	$	62	$	92

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



Programs	Balance as of December 31, 2022		Funding Provided	Residential Loan Term	Non-Residential Loan Term
	Millions
Solar Loan I	$	9	prior to 2013	10 years	15 years
Solar Loan II	42		prior to 2015	10 years	15 years
Solar Loan III	38		largely funded as of December 31, 2022	10 years	10 years
Total	$	89

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, 2022 and have an average remaining life of approximately three years. There are no remaining residential loans outstanding under the Solar Loan I program.

Energy Holdings

Energy Holdings had net investments in assets subject to leveraged lease accounting of $136 million as of December 31, 2022 and $145 million as of December 31, 2021 (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, 2022	As of December 31, 2022
	Millions
AA	$	8
A-	47
BBB+ to BBB	194
Total	$	249

PSEG recorded no credit losses for the leveraged leases existing on December 31, 2022. 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

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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, 2022 was approximately $1.1 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.

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, 2022
	Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
	Millions
Equity Securities
Domestic	$	476	$	232	$	(12)	$	696
International	336		68		(28)		376
Total Equity Securities	812		300		(40)		1,072
Available-for-Sale Debt Securities
Government	721		—		(94)		627
Corporate	597		1		(69)		529
Total Available-for-Sale Debt Securities	1,318		1		(163)		1,156
Total NDT Fund Investments (A)	$	2,130	$	301	$	(203)	$	2,228

(A) The NDT Fund Investments table excludes cash and foreign currency of $2 million as of December 31, 2022,

which is part of 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 cash and foreign currency of $2 million as of December 31, 2021, which is part of the NDT Fund.

Net unrealized gains (losses) on debt securities of $(95) million (after-tax) were included in Accumulated Other Comprehensive Loss on PSEG’s Consolidated Balance Sheet as of December 31, 2022. The portion of net unrealized gains (losses) recognized during 2022 related to equity securities still held at the end of December 31, 2022 was $(163) 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.

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	As of December 31,
	2022		2021
	Millions
Accounts Receivable	$	14	$	11
Accounts Payable	$	6	$	11

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



	As of December 31, 2022								As of December 31, 2021
	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	$	90	$	(10)	$	9	$	(2)	$	69	$	(3)	$	—	$	—
International	88		(12)		38		(16)		76		(13)		9		(2)
Total Equity Securities	178		(22)		47		(18)		145		(16)		9		(2)
Available-for-Sale Debt Securities
Government (B)	301		(27)		292		(67)		332		(5)		67		(3)
Corporate (C)	221		(21)		249		(48)		306		(4)		30		(2)
Total Available-for-Sale Debt Securities	522		(48)		541		(115)		638		(9)		97		(5)
NDT Trust Investments	$	700	$	(70)	$	588	$	(133)	$	783	$	(25)	$	106	$	(7)

(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 corporate bonds because they are primarily investment grade securities.

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



	Years Ended December 31,
	2022		2021		2020
	Millions
Proceeds from Sales (A)	$	1,521	$	1,930	$	2,031
Net Realized Gains (Losses):
Gross Realized Gains	$	86	$	236	$	214
Gross Realized Losses	(136)		(70)		(94)
Net Realized Gains (Losses) on NDT Fund (B)	(50)		166		120
Net Unrealized Gains (Losses) on Equity Securities	(205)		19		120
Impairment of Available-for-Sale Debt Securities (C)	—		—		(3)
Net Gains (Losses) on NDT Fund Investments	$	(255)	$	185	$	237

(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, 2022 had the following maturities:



Time Frame	Fair Value
	Millions
Less than one year	$	12
1 - 5 years	319
6 - 10 years	221
11 - 15 years	62
16 - 20 years	96
Over 20 years	446
Total NDT Available-for-Sale Debt Securities	$	1,156

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.”

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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, 2022
	Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
	Millions
Domestic Equity Securities	$	14	$	6	$	—	$	20
Available-for-Sale Debt Securities
Government	110		—		(21)		89
Corporate	89		—		(15)		74
Total Available-for-Sale Debt Securities	199		—		(36)		163
Total Rabbi Trust Investments	$	213	$	6	$	(36)	$	183



	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

Net unrealized gains (losses) on debt securities of $(26) million (after-tax) were included in Accumulated Other Comprehensive Loss on PSEG’s Consolidated Balance Sheet as of December 31, 2022. The portion of net unrealized gains (losses) recognized during 2022 related to equity securities still held at the end of December 31, 2022 was $(6) 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,
	2022		2021
	Millions
Accounts Receivable	$	1	$	1
Accounts Payable	$	—	$	—

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



	As of December 31, 2022								As of December 31, 2021
	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)	$	32	$	(5)	$	57	$	(16)	$	57	$	—	$	16	$	(1)
Corporate (B)	35		(5)		39		(10)		40		(1)		5		—
Total Available-for-Sale Debt Securities	67		(10)		96		(26)		97		(1)		21		(1)
Rabbi Trust Investments	$	67	$	(10)	$	96	$	(26)	$	97	$	(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 corporate bonds because they are primarily investment grade.

The proceeds from the sales of and the net gains (losses) on securities in the Rabbi Trust Fund were:



	Years Ended December 31,
	2022		2021		2020
	Millions
Proceeds from Rabbi Trust Sales	$	65	$	170	$	203
Net Realized Gains (Losses):
Gross Realized Gains	$	5	$	16	$	19
Gross Realized Losses	(9)		(8)		(6)
Net Realized Gains (Losses) on Rabbi Trust (A)	(4)		8		13
Net Unrealized Gains (Losses) on Equity Securities	(6)		1		3
Net Gains (Losses) on Rabbi Trust Investments	$	(10)	$	9	$	16

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

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The Rabbi Trust debt securities held as of December 31, 2022 had the following maturities:



Time Frame	Fair Value
	Millions
Less than one year	$	—
1 - 5 years	29
6 - 10 years	23
11 - 15 years	7
16 - 20 years	16
Over 20 years	88
Total Rabbi Trust Available-for-Sale Debt Securities	$	163

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,
	2022		2021
	Millions
PSE&G	$	32	$	43
PSEG Power & Other	151		199
Total Rabbi Trust Investments	$	183	$	242

Note 12. Intangibles

As of December 31, 2022 and 2021, PSEG had intangible assets of $14 million and $20 million, respectively, related to RECs, which are recorded at cost and evaluated for impairment at least annually. As load is served under contracts requiring energy from renewable sources, the related expense is recorded.

The changes to PSEG’s intangible assets during 2021 and 2022 are as follows:



	Emissions Allowances		RECs		Total Intangibles
	Millions
Balance as of January 1, 2021	$	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
Retirements	—		(76)		(76)
Purchases	—		70		70
Balance as of December 31, 2022	$	—	$	14	$	14

(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 related to PSEG’s retained fossil generation sites primarily related to liabilities for removal of asbestos. 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 2021 and 2022 are presented in the following table:



	PSEG		PSE&G		PSEG Power & Other
	Millions
ARO Liability as of January 1, 2021	$	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
Liabilities Settled	$	(15)	$	(15)	$	—

Accretion Expense	50		—		50
Accretion Expense Deferred and Recovered in Rate Base (A)	17		17		—
Revision to Present Values of Estimated Cash Flows	(126)		19		(145)
ARO Liability as of December 31, 2022	$	1,499	$	384	$	1,115

(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.

In February 2022, the NRC issued an order related to its review of the subsequent license renewal (SLR) application for the Peach Bottom nuclear units. While the NRC had previously granted the SLR to the Peach Bottom units, the NRC was responding to pending motions that had not previously been adjudicated. In its decision, the NRC concluded that the previous environmental review required by the National Environmental Policy Act (NEPA) was incomplete because it did not adequately address environmental impacts resulting from extending the units’ licenses by 20 years. As a result, at the direction of the NRC, the NRC staff changed the expiration dates for the licenses back to 2033 and 2034, until the completion of the NEPA analysis. The NRC directed, however, that the subsequently renewed licenses themselves remain in effect. The NRC also stated that it

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fully expects that the staff will complete its update of the NEPA analysis before 2033. As such, at this time, PSEG has not adjusted the useful lives or the assumed shutdown probabilities assigned to the ARO of the units as PSEG believes that the licenses will be updated to reflect the approved 2053 and 2054 expiration dates within the current license period. PSEG will continue to monitor this matter for further developments and any change to the estimated useful lives and ARO probabilities could have an adverse financial statement impact, which may be material.

In August 2022, the IRA was signed into law expanding incentives promoting carbon-free generation. The enacted legislation established a PTC for electricity generation using nuclear energy set to begin in 2024 through 2032. As a result, PSEG reassessed the Asset Retirement Cost (ARC) and ARO assumptions related to its nuclear units. This resulted in a decrease to the ARC asset and ARO liability of $145 million primarily due to an adjustment in the assumed estimated timing of cash flows associated with decommissioning the units. See Note 4. Early Plant Retirements/Asset Dispositions and Impairments for additional information on PTCs.

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 ARC and 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.

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 their 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, 2022 and 2021. 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
	2022		2021		2022		2021
	Millions
Change in Benefit Obligation
Benefit Obligation at Beginning of Year (A)	$	7,240	$	7,507	$	1,197	$	1,306
Service Cost	142		151		6		9
Interest Cost	167		140		26		22
Actuarial (Gain) Loss (B)	(1,517)		(199)		(314)		(90)
Gross Benefits Paid	(382)		(359)		(61)		(50)
Other	(22)		—		(3)		—
Benefit Obligation at End of Year (A)	$	5,628	$	7,240	$	851	$	1,197
Change in Plan Assets
Fair Value of Assets at Beginning of Year	$	6,906	$	6,368	$	606	$	564
Actual Return on Plan Assets	(1,606)		886		(139)		79
Employer Contributions	11		11		23		13
Gross Benefits Paid	(382)		(359)		(61)		(50)
Other	(18)		—		—		—
Fair Value of Assets at End of Year	$	4,911	$	6,906	$	429	$	606
Funded Status
Funded Status (Plan Assets less Benefit Obligation)	$	(717)	$	(334)	$	(422)	$	(591)
Additional Amounts Recognized in the Consolidated Balance Sheets
Current Accrued Benefit Cost (C)	$	(12)	$	(16)	$	(12)	$	(19)
Noncurrent Accrued Benefit Cost	(705)		(318)		(410)		(572)
Amounts Recognized	$	(717)	$	(334)	$	(422)	$	(591)
Additional Amounts Recognized in Accumulated Other Comprehensive Income (Loss), Regulated Assets and Deferred Assets (D)
Prior Service Credit	$	—	$	—	$	(52)	$	(181)
Net Actuarial Loss	2,151		1,643		41		193
Total	$	2,151	$	1,643	$	(11)	$	12

(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 gains in 2022 and 2021 were due primarily to an increase in the discount rate. For OPEB, the net actuarial gain in 2022 was due primarily to an increase in the discount rate and other assumption updates. 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.

(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 $594 million ($426 million, after-tax) and $495 million ($355 million, after-tax) in Accumulated Other Comprehensive Loss related to Pension and OPEB as of December 31, 2022 and 2021, respectively. Also includes Regulatory Assets of $1,405 million and Deferred Assets of $141 million as of December 31, 2022 and Regulatory Assets of $1,043 million and Deferred Assets of $117 million as of December 31, 2021.

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, 2022, PSEG had funded approximately 87% of its projected pension benefit obligation. This percentage does not include $183 million of assets in the Rabbi Trust as of December 31, 2022, 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 $137 million.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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Accumulated Benefit Obligation

The accumulated benefit obligation for all PSEG’s defined benefit pension plans was $5.5 billion as of December 31, 2022 and $7.1 billion as of December 31, 2021.

The following table provides the components of net periodic benefit relating to all qualified and nonqualified pension and OPEB plans on an aggregate basis for PSEG, excluding Servco for the years ended December 31, 2022, 2021 and 2020. 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,
	2022		2021		2020		2022		2021		2020
	Millions
Components of Net Periodic Benefit (Credits) Costs
Service Cost (included in O&M Expense)	$	142	$	151	$	141	$	6	$	9	$	9
Non-Service Components of Pension and OPEB (Credits) Costs
Interest Cost	167		140		192		26		22		34
Expected Return on Plan Assets	(484)		(476)		(443)		(42)		(42)		(39)
Amortization of Net
Prior Service Credit	—		—		(10)		(129)		(129)		(128)
Actuarial Loss	60		103		92		15		44		47
Non-Service Components of Pension and OPEB (Credits) Costs	(257)		(233)		(169)		(130)		(105)		(86)
Total Benefit (Credits) Costs	$	(115)	$	(82)	$	(28)	$	(124)	$	(96)	$	(77)

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,
	2022		2021		2020		2022		2021		2020
	Millions
PSE&G	$	(70)	$	(64)	$	(27)	$	(109)	$	(92)	$	(76)
PSEG Power & Other	(45)		(18)		(1)		(15)		(4)		(1)
Total Benefit (Credits) Costs	$	(115)	$	(82)	$	(28)	$	(124)	$	(96)	$	(77)

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



	Pension				Other Benefits
	2022		2021		2022		2021
	Millions
Net Actuarial (Gain) Loss in Current Period	$	568	$	(608)	$	(138)	$	(127)
Amortization of Net Actuarial Gain (Loss)	(60)		(103)		(14)		(44)
Prior Service Cost (Credit) in Current Period	—		—		—		—
Amortization of Prior Service Credit	—		—		129		129
Total	$	508	$	(711)	$	(23)	$	(42)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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



	Pension Benefits						Other Benefits
	2022		2021		2020		2022		2021		2020

Weighted-Average Assumptions Used to Determine Benefit Obligations as of December 31
Discount Rate	5.20	%	2.94	%	2.61	%	5.16	%	2.82	%	2.46	%
Rate of Compensation Increase	4.40	%	4.40	%	4.40	%	4.40	%	4.40	%	4.40	%
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	2.94	%	2.61	%	3.30	%	2.82	%	2.46	%	3.20	%
Service Cost Interest Rate	3.19	%	2.94	%	3.49	%	3.06	%	2.76	%	3.50	%
Interest Cost Interest Rate	2.37	%	1.91	%	2.87	%	2.21	%	1.70	%	2.87	%
Expected Return on Plan Assets	7.20	%	7.70	%	7.70	%	7.20	%	7.69	%	7.70	%
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
Assumed Health Care Cost Trend Rates as of December 31

Health Care Costs
Immediate Rate							6.98	%	6.14	%	6.37	%
Ultimate Rate							4.75	%	4.75	%	4.75	%
Year Ultimate Rate Reached							2032		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, 2022, 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, 2022 and 2021, including the fair value measurements and the levels of inputs used in determining those fair values.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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	Recurring Fair Value Measurements as of December 31, 2022
			Quoted Market Prices for Identical Assets		Significant Other Observable Inputs
Description	Total		(Level 1)		(Level 2)
	Millions
Cash Equivalents (A)	$	36	$	36	$	—
Equity Securities
Common Stock (B)	1,231		1,231		—
Commingled (C)	1,346		—		1,346


Debt Securities (D)
U.S. Treasury	1,351		—		1,351


Commingled	4		4		—
Subtotal Fair Value	$	3,968	$	1,271	$	2,697
Measured at net asset value practical expedient
Commingled—Equities (E)	965
Real Estate Investment (F)	395
Private Equity (G)	3
Total Fair Value (H)	$	5,331



	Recurring Fair Value Measurements as of December 31, 2021
			Quoted Market Prices for Identical Assets		Significant Other Observable Inputs
Description	Total		(Level 1)		(Level 2)
	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 (I)	2		2		—
Debt Securities (D)
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 (E)	1,403
Real Estate Investment (F)	372
Private Equity (G)	3
Total Fair Value (H)	$	7,499

(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.

(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)Debt securities include mainly U.S. Treasury obligations. 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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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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.

(E)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.

(F)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.

(G)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.

(H)Excludes net receivables of $7 million and $11 million as of December 31, 2022 and 2021, 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 as of each of December 31, 2022 and 2021.

(I)Investment in a publicly traded limited partnership.

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	2022		2021
Equity Securities	67	%	71	%
Debt Securities	25		23
Other Investments	8		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 (12% as of December 31, 2022) 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 7.2% for 2022 and will be 8.1% for 2023. This expected return includes a premium for active management.

Plan Contributions

PSEG does not plan to contribute to its pension and OPEB plans in 2023. 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 subsequent calendar year.

Estimated Future Benefit Payments

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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Year	Pension Benefits		Other Benefits
	Millions
2023	$	424	$	77
2024	400		75
2025	405		74
2026	411		72
2027	418		70
2028-2032	2,124		309
Total	$	4,182	$	677

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,
	2022		2021		2020
	Millions
PSE&G	$	28	$	28	$	27
PSEG Power & Other	14		16		16
Total Employer Matching Contributions	$	42	$	44	$	43

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, 2022 and 2021. 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.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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	Pension Benefits				Other Benefits
	2022		2021		2022		2021
	Millions
Change in Benefit Obligation
Benefit Obligation at Beginning of Year (A)	$	596	$	569	$	640	$	699
Service Cost	38		38		21		23
Interest Cost	17		14		19		18
Actuarial (Gain) Loss (B)	(189)		(18)		(215)		(89)
Gross Benefits Paid	(10)		(7)		(10)		(11)
Benefit Obligation at End of Year (A)	$	452	$	596	$	455	$	640
Change in Plan Assets
Fair Value of Assets at Beginning of Year	$	422	$	343	$	—	$	—
Actual Return on Plan Assets	(72)		49		—		—
Employer Contributions	30		37		10		11
Gross Benefits Paid	(10)		(7)		(10)		(11)
Fair Value of Assets at End of Year	$	370	$	422	$	—	$	—
Funded Status
Funded Status (Plan Assets less Benefit Obligation)	$	(82)	$	(174)	$	(455)	$	(640)
Additional Amounts Recognized in the Consolidated Balance Sheets
Accrued Pension Costs of Servco	$	(82)	$	(174)	N/A		N/A
OPEB Costs of Servco	N/A		N/A		(455)		(640)
Amounts Recognized (C)	$	(82)	$	(174)	$	(455)	$	(640)

(B)For pension benefits and OPEB, the net actuarial gains in 2022 were due primarily to an increase in the discount rate. 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.

(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 2022, 2021 and 2020 were $30 million, $37 million and $30 million, respectively. Servco has contributed its entire planned contribution amount to its pension plan trusts during 2022. The OPEB-related revenues earned and costs incurred were $10 million, $11 million and $9 million in 2022, 2021 and 2020, respectively. The following assumptions were used to determine the benefit obligations of Servco:



	Pension Benefits						Other Benefits
	2022		2021		2020		2022		2021		2020
Weighted-Average Assumptions Used to Determine Benefit Obligations as of December 31
Discount Rate	5.30	%	3.21	%	2.98	%	5.34	%	3.28	%	3.08	%
Rate of Compensation Increase	3.95	%	3.95	%	3.95	%	3.95	%	3.95	%	3.95	%
Cash Balance Interest Crediting Rate	4.30	%	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							6.71	%	6.48	%	6.70	%
Ultimate Rate							4.75	%	4.75	%	4.75	%
Year Ultimate Rate Reached							2032		2029		2029

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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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, 2022 and 2021, including the fair value measurements and the levels of inputs used in determining those fair values.



	Recurring Fair Value Measurements as of December 31, 2022
			Quoted Market Prices for Identical Assets		Significant Other Observable Inputs
Description	Total		(Level 1)		(Level 2)
	Millions
Cash Equivalents	$	1	$	1	$	—
Equity Securities
Common Stock (A)	25		25		—
Commingled (B)	251		—		251
Commingled Bonds (B)	93		—		93
Total	$	370	$	26	$	344



	Recurring Fair Value Measurements as of December 31, 2021
			Quoted Market Prices for Identical Assets		Significant Other Observable Inputs
Description	Total		(Level 1)		(Level 2)
	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

(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	2022		2021
Equity Securities	75	%	76	%
Debt Securities	25		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 (15% at December 31, 2022) 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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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allocation. The expected long-term rate of return on plan assets was 7.60% for 2022 and will be 8.0% for 2023. This expected return includes a premium for active management.

Plan Contributions

Servco plans to contribute $18 million into its pension plan during 2023.

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
2023	$	12	$	10
2024	14		12
2025	17		14
2026	19		15
2027	22		17
2028-2032	149		112
Total	$	233	$	180

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 amount expensed by Servco for employer matching contributions was $9 million for each of the years ended December 31, 2022, 2021 and 2020. 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,

its subsidiaries would have to fully utilize the credit granted to them by every counterparty to whom PSEG Power has provided a guarantee, and

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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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, 2022 and 2021.



	As of December 31, 2022		As of December 31, 2021
	Millions
Face Value of Outstanding Guarantees	$	1,601	$	1,959
Exposure under Current Guarantees	$	198	$	176

Letters of Credit Margin Posted	$	87	$	80
Letters of Credit Margin Received	$	38	$	242

Cash Deposited and Received
Counterparty Cash Collateral Deposited	$	—	$	60
Counterparty Cash Collateral Received	$	(1)	$	(1)
Net Broker Balance Deposited (Received)	$	1,522	$	785

Additional Amounts Posted
Other Letters of Credit	$	156	$	67

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.

The EPA has announced two separate cleanup plans for the Lower 8.3 miles and Upper 9 miles of the LPRSA. The EPA’s plan for the Lower 8.3 miles involves dredging and capping sediments at an estimated cost of $2.3 billion, and its plan for the Upper 9 miles involves dredging and capping sediments at an estimated cost of $550 million. Additional cleanup work may be required depending on the results of these initial phases of work.

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In December 2022, the EPA announced a proposed settlement with 85 parties who have agreed to pay $150 million to resolve their LPRSA CERCLA liability, in whole or in part. The EPA has explained that the settlement was the outcome of an EPA-sponsored process where the EPA hired a cost allocator to recommend shares of LPRSA cleanup costs. The allocator’s Final Allocation Recommendation Report is available on the EPA’s website, and the proposed settlement is subject to public comment and judicial review. It is uncertain whether the settlement will be finalized as currently proposed, and the allocation did not address certain costs incurred by the EPA for which it may be entitled to reimbursement and which may be material. PSE&G and PSEG Power are not included in the proposed settlement, but the EPA sent PSE&G, Occidental Chemical Corporation, and several other PRPs a letter in March 2022 inviting them to submit to the EPA individually or jointly an offer to fund or participate in the next stages of the remediation. PSEG submitted a good faith offer to the EPA in June 2022 on behalf of PSE&G and PSEG Power. PSEG understands that the EPA is evaluating its offer. The EPA may commence the next phases of remediation itself and seek to recover the costs from PSE&G or others, or it may take enforcement action to compel PSE&G or others to fund or participate in the remediation.

Occidental Chemical Corporation has commenced the design of the Lower 8.3 Record of Decision 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 Potentially Responsible Parties (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, 2022, 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.

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 21 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.

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.

Hackensack River

In September 2022, the EPA announced it had designated the lower 18.75 miles of the Hackensack River a federal Superfund site. PSE&G and certain of its predecessors conducted operations at properties in this area, including at the Hudson, Bergen and Kearny generating stations that were transferred to PSEG Power. PSEG Power subsequently contractually transferred all land rights and structures on the Hudson generating station site to a third-party purchaser, along with the assumption of the environmental liabilities for that site. The ultimate impact of this action on PSE&G and PSEG Power is currently unknown, but could be material.

MGP Remediation Program

PSE&G is working with the New Jersey Department of Environmental Protection (NJDEP) to assess, investigate and remediate environmental conditions at its former MGP sites. To date, 38 sites requiring some level of remedial action have been identified. Based on its current studies, PSE&G has determined that the estimated cost to remediate all MGP sites to completion

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could range between $206 million and $226 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 $206 million as of December 31, 2022. Of this amount, $35 million was recorded in Other Current Liabilities and $171 million was reflected as Environmental Costs in Noncurrent Liabilities. PSE&G has recorded a $206 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 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.

Legacy Environmental Obligations at Former Fossil Generating Sites

PSEG Power has retained ownership of certain liabilities excluded from the 2022 sale of its fossil generation portfolio. These liabilities primarily relate to obligations under the New Jersey Industrial Site Recovery Act (ISRA) and the Connecticut Transfer Act (CTA) to investigate and remediate PSEG Power’s two formerly owned generating station sites in Connecticut, and six formerly owned generating station sites in New Jersey. In addition, PSEG Power still owns two former generating station sites in New Jersey that triggered ISRA in 2015.

PSEG Power is in the process of fulfilling its obligations under ISRA and the CTA to investigate these sites. It will require multiple years and comprehensive environmental sampling to understand the extent of and to carry out the required remediation. The full remediation costs at each of the ten sites are not estimable, but will likely be material.

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.

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 and scheduled a hearing in September 2023.

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 are responsible for fulfilling all the requirements of a PJM load-serving entity including the provision of capacity, energy, ancillary

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services and any other services required by PJM. BGS suppliers assume all volume risk and customer migration risk and must satisfy New Jersey’s renewable portfolio standards.

The BGS-CIEP auction is for a one-year supply period from June 1 to May 31 with the BGS-CIEP auction price measured in dollars per MW-day for capacity. The final price for the BGS-CIEP auction year commencing June 1, 2023 is $330.72 per MW-day, replacing the BGS-CIEP auction year price ending May 31, 2023 of $276.26 per MW-day. Energy for BGS-CIEP is priced at hourly PJM locational marginal prices for the contract period.

PSE&G contracts for its anticipated BGS-RSCP load on a three-year rolling basis, whereby each year one-third of the load is procured for a three-year period. The contract prices in dollars per MWh for the BGS-RSCP supply, as well as the approximate load, are as follows:



	Auction Year
	2020	2021	2022	2023
36-Month Terms Ending	May 2023	May 2024	May 2025	May 2026	(A)
Load (MW)	2,800	2,900	2,800	2,800
$ per MWh	$102.16	$64.80	$76.30	$93.11

(A)Prices set in the 2023 BGS auction will become effective on June 1, 2023 when the 2020 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 2024 and a significant portion through 2025 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, 2022, the total minimum purchase requirements included in these commitments were as follows:



Fuel Type	PSEG Power’s Share of Commitments through 2027
	Millions
Nuclear Fuel
Uranium	$	390
Enrichment	$	327
Fabrication	$	189
Natural Gas	$	1,310

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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. PSE&G is 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.

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 audit reviews 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 is 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 data collection (written discovery and interviews) has concluded. The BPU Audit Staff are in the process of finalizing their report. 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, which at the time was 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 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 or PSE&G’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.

Coronavirus 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 shut-offs for residential customers that was extended through March 15, 2022. Although collections and shut-offs re-commenced in mid-March 2022, in late March 2022, New Jersey passed legislation that provided protection from shut-offs to customers who applied for payment assistance programs with those applying for assistance protected from shut-offs while awaiting their application determination.

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PSE&G has deferred the impact of the COVID-19 costs for future recovery, and in December 2022, the BPU determined that the deferral period will end on March 15, 2023. 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 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, 2022, 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 $13.2 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.

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Note 16. Debt and Credit Facilities

Long-Term Debt



			As of December 31,
		Maturity	2022		2021
			Millions
PSEG



Senior Notes:
2.65%		2022	$	—	$	700
0.84%		2023	750		750
2.88%		2024	750		750
0.80%		2025	550		550
5.85%		2027	700		—
1.60%		2030	550		550
2.45%		2031	750		750
8.63%	(A)	2031	96		96
Total Senior Notes			4,146		4,146
Principal Amount Outstanding			4,146		4,146
Amounts Due Within One Year			(750)		(700)
Net Unamortized Discount and Debt Issuance Costs			(22)		(22)
Total Long-Term Debt of PSEG			$	3,374	$	3,424

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		As of December 31,
	Maturity	2022		2021
		Millions
PSE&G
First and Refunding Mortgage Bonds (B):
8.00%	2037	$	7	$	7
5.00%	2037	8		8
Total First and Refunding Mortgage Bonds		15		15
Medium-Term Notes (B):
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
0.95%	2026	450		450
2.25%	2026	425		425
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		425
3.10%	2032	500		—
4.90%	2032	400		—
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		450
Total MTNs		12,775		11,875
Principal Amount Outstanding		12,790		11,890
Amounts Due Within One Year		(825)		—
Net Unamortized Discount and Selling Expense		(94)		(95)
Total Long-Term Debt of PSE&G		$	11,871	$	11,795

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		As of December 31,
	Maturity	2022		2021
		Millions
PSEG Power
Term Loan:
Variable Rate	2025	$	1,250	$	—
Total Term Loan		1,250		—

Total Long-Term Debt of PSEG Power		$	1,250	$	—

(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.

Long-Term Debt Maturities

The aggregate principal amounts of maturities for each of the five years following December 31, 2022 are as follows:



Year	PSEG		PSE&G		PSEG Power		Total
	Millions
2023	$	750	$	825	$	—	$	1,575
2024	750		750		—		1,500
2025	550		350		1,250		2,150
2026	—		875		—		875
2027	700		425		—		1,125
Thereafter	1,396		9,565		—		10,961
Total	$	4,146	$	12,790	$	1,250	$	18,186

Long-Term Debt Financing Transactions

During 2022, PSEG and its subsidiaries had the following Long-Term Debt issuances and maturity:

PSEG

issued $700 million of 5.85% Senior Notes due November 2027, and
retired $700 million of 2.65% Senior Notes at maturity.

PSE&G

issued $500 million of 3.10% Secured Medium-Term Notes, Series P, due March 2032, and
issued $400 million of 4.90% Secured Medium-Term Notes, Series P, due December 2032.

PSEG Power

entered into a $1.25 billion variable rate term loan agreement due March 2025.

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.

In March 2022, PSEG and PSEG Power amended and consolidated revolving credit agreements with total borrowing capacity of $3.4 billion into a single revolving credit agreement (Master Credit Facility). The Master Credit Facility extends the maturity

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of the existing credit agreements through March 2027 and provides for $2.75 billion of credit capacity, with an initial PSEG sub-limit of $1.5 billion and an initial PSEG Power sub-limit of $1.25 billion. Sub-limits can be adjusted subject to the terms of the Master Credit Facility. The PSEG sub-limit includes a sustainability linked pricing based mechanism with potential increases or decreases, which are not expected to be material, depending on performance relative to targeted methane emission reductions.

The commitments under the $4.2 billion credit facilities are provided by a diverse bank group. As of December 31, 2022, the total available credit capacity was $3.7 billion.

As of December 31, 2022, no single institution represented more than 10% of the total commitments in the credit facilities.

As of December 31, 2022, 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.

The total credit facilities and available liquidity as of December 31, 2022 were as follows:



	As of December 31, 2022
Company/Facility	Total Facility		Usage (B)		Available Liquidity		Expiration Date	Primary Purpose
	Millions
PSEG
Revolving Credit Facility (A)	$	1,500	$	202	$	1,298	Mar 2027	Commercial Paper Support/Funding/Letters of Credit
Total PSEG	$	1,500	$	202	$	1,298
PSE&G
Revolving Credit Facility	$	1,000	$	18	$	982	Mar 2027	Commercial Paper Support/Funding/Letters of Credit
Total PSE&G	$	1,000	$	18	$	982
PSEG Power
Revolving Credit Facility (A)	$	1,250	$	63	$	1,187	Mar 2027	Funding/Letters of Credit
Letter of Credit Facility	100		32		$	68	Apr 2024	Letters of Credit
Letter of Credit Facility	200		120		$	80	Sept 2024	Letters of Credit
Letter of Credit Facility	100		26		$	74	Apr 2025	Letters of Credit
Total PSEG Power	$	1,650	$	241	$	1,409
Total (C)	$	4,150	$	461	$	3,689

(A)Master Credit Facility with sub-limits of $1.5 billion for PSEG and $1.25 billion for PSEG Power.

(B)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, 2022, PSEG had $200 million outstanding at a weighted average interest rate of 4.4%. PSE&G had no Commercial Paper outstanding as of December 31, 2022.

(C)Amounts do not include uncommitted credit facilities.

In September 2022, a subsidiary of PSEG Power entered into an uncommitted credit facility for $200 million, which can be drawn to fund its cash collateral postings. As of December 31, 2022, there were no amounts outstanding under this facility.

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.

Net Cash Collateral Postings

During the second half of 2021 and continuing throughout 2022, forward energy prices have demonstrated considerable price volatility and have increased dramatically. This has led to significantly higher variation in PSEG Power’s daily collateral requirements which have also increased substantially over that time period for hedge positions that are out-of-the money. PSEG Power’s net cash collateral postings related to these hedge positions increased from $343 million at the end of June 2021 to $1.5 billion at the end of December 2022. Subsequent to December 2022, collateral postings have decreased but PSEG Power continued to experience significant fluctuations in its daily collateral requirements. Net cash collateral postings were approximately $700 million as of February 17, 2023. As historical lower-priced trades continue to settle through 2024,

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collateral is expected to be returned as PSEG Power satisfies its obligations under those contracts. Proceeds from the sale of Fossil, the closing of a $1.25 billion term loan in March 2022 at PSEG Power, and short-term borrowings at PSEG have contributed to available liquidity to help support PSEG Power’s collateral requirements in 2022.

Short-Term Loans

PSEG

In March and May 2021, PSEG entered into two 364-day variable rate term loan agreements for $500 million and $750 million, respectively. In August 2021, PSEG entered into a $1.25 billion 364-day variable rate term loan agreement. In March 2022, the $500 million term loan matured and PSEG repaid the $750 million term loan due in May 2022. In July 2022, PSEG repaid the $1.25 billion term loan due in August 2022.

In April 2022 and May 2022, PSEG entered into 364-day variable rate term loan agreements for $1.5 billion and $500 million, respectively. In January 2023, PSEG repaid $750 million of the $1.5 billion term loan due in April 2023.

Fair Value of Debt

The estimated fair values, carrying amounts and methods used to determine the fair values of long-term debt as of December 31, 2022 and 2021 are included in the following table and accompanying notes as of December 31, 2022 and 2021. 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.



	December 31, 2022				December 31, 2021
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
	Millions
Long-Term Debt:
PSEG (A)	$	4,124	$	3,808	$	4,124	$	4,172
PSE&G (A)	12,696		11,106		11,795		13,374
PSEG Power (B)	1,250		1,250		—		—
Total Long-Term Debt	$	18,070	$	16,164	$	15,919	$	17,546

(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 using market-based measurements that are processed through a rules-based pricing 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)Private term loan with book value approximating fair value (Level 2 measurement).

Note 17. Schedule of Consolidated Capital Stock



	As of December 31,
	Outstanding Shares		Book Value
	2022	2021	2022		2021
	Millions
PSEG Common Stock (no par value) (A)
Authorized 1,000 shares	497	504	$	3,688	$	4,149

(A)PSEG did not issue any new shares under the Dividend Reinvestment and Stock Purchase Plan or the Employee Stock Purchase Plan (ESPP) in 2022 or 2021.

As of December 31, 2022, 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.

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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 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, natural gas 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. In December 2022, PSEG sold seven tranches of a physical load transaction that previously had qualified for NPNS resulting in a taint of our physical load portfolio since it was determined that the transaction no longer met the scope exception. As such, the fair value of the remaining open positions resulted in a loss of $38 million recorded in earnings. Additionally, prospective changes in the fair market value of these derivative contracts are recorded in earnings.

Interest Rates

PSEG, PSE&G and PSEG Power 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. PSEG, PSE&G and PSEG Power may use a mix of fixed and floating rate debt, interest rate swaps and interest rate lock agreements.

Cash Flow Hedges

PSEG uses interest rate swaps and other derivatives, which are designated and effective as cash flow hedges, to manage its exposure to the variability of cash flows, primarily related to variable-rate debt instruments. As of December 31, 2022, PSEG had interest rate hedges outstanding totaling $1.05 billion that were executed during the latter half of 2022. PSEG executed these interest rate swaps to convert PSEG Parent’s $500 million variable rate term loan due May 2023 and a portion of PSEG Power’s $1.25 billion variable rate term loan due March 2025 into fixed rate loans. The fair value of these hedges was $1 million as of December 31, 2022 and there were no outstanding interest rate hedges as of December 31, 2021.

In October 2022, PSEG also entered into three Treasury lock agreements with a notional amount of $350 million to fix the Treasury yield component of the interest cost of financing associated with a then anticipated long-term debt issuance. The associated long-term debt of $700 million was priced on November 4, 2022, and PSEG elected, in accordance with the terms of the Treasury lock agreements, to settle these agreements with an immaterial cash payment to the counterparties which PSEG expensed.

The Accumulated Other Comprehensive Income (Loss) (after tax) related to outstanding and terminated interest rate derivatives designated as cash flow hedges was $(3) million and $(6) million as of December 31, 2022 and December 31, 2021, respectively. The after-tax unrealized losses on these hedges expected to be reclassified to earnings during the next 12 months are immaterial.

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

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netting or similar agreements are immaterial and did not have any collateral posted or received as of December 31, 2022 and 2021. The following tabular disclosure does not include the offsetting of trade receivables and payables.



	As of December 31, 2022
	PSEG		PSEG Power						Consolidated
	Cash Flow Hedges		Not Designated
Balance Sheet Location	Interest Rate Swaps		Energy- Related Contracts		Netting (A)		Total PSEG Power		Total Derivatives
	Millions
Derivative Contracts
Current Assets	$	4	$	1,721	$	(1,707)	$	14	$	18
Noncurrent Assets	—		629		(614)		15		15
Total Mark-to-Market Derivative Assets	$	4	$	2,350	$	(2,321)	$	29	$	33
Derivative Contracts
Current Liabilities	$	—	$	(2,447)	$	2,323	$	(124)	$	(124)
Noncurrent Liabilities	(3)		(1,139)		1,109		(30)		(33)
Total Mark-to-Market Derivative (Liabilities)	$	(3)	$	(3,586)	$	3,432	$	(154)	$	(157)
Total Net Mark-to-Market Derivative Assets (Liabilities)	$	1	$	(1,236)	$	1,111	$	(125)	$	(124)



	As of December 31, 2021
	PSEG Power				Consolidated
	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

(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, 2022 and 2021, PSEG Power had net cash collateral payments to counterparties of $1,521 million and $844 million, respectively. Of these net cash collateral (receipts) payments, $1,111 million as of December 31, 2022 and $615 million as of December 31, 2021 were netted against the corresponding net derivative contract positions. Of the $1,111 million as of December 31, 2022, $616 million was netted against current liabilities and $495 million was netted against noncurrent liabilities. 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.

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

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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 $190 million and $75 million as of December 31, 2022 and 2021, respectively. As of December 31, 2022 and 2021, PSEG Power had the contractual right of offset of $41 million and $29 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 $149 million and $46 million as of December 31, 2022 and 2021, 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, 2022, 2021 and 2020.



		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,
		2022		2021		2020				2022		2021		2020
		Millions								Millions
Interest Rate Swaps		$	—	$	—	$	(6)	Interest Expense		$	(5)	$	(4)	$	(14)
Total		$	—	$	—	$	(6)			$	(5)	$	(4)	$	(14)

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, 2022, the amount of loss on interest rate hedges reclassified from Accumulated Other Comprehensive Income (Loss) into income was $3 million, $3 million and $10 million after tax as of December 31, 2022, 2021 and 2020, 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, 2020	$	(13)	$	(9)
Loss Recognized in AOCI	—		—
Less: Loss Reclassified into Income	4		3
Balance as of December 31, 2021	$	(9)	$	(6)
Loss Recognized in AOCI	—		—
Less: Loss Reclassified into Income	5		3
Balance as of December 31, 2022	$	(4)	$	(3)

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, 2022, 2021 and 2020. 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.

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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,
		2022		2021		2020
		Millions
Energy-Related Contracts	Operating Revenues	$	(1,748)	$	(993)	$	279
Energy-Related Contracts	Energy Costs	2		126		(142)
Total		$	(1,746)	$	(867)	$	137

The amounts for the year ended December 31, 2021 in the above table have been revised from amounts reported in our December 31, 2021 Form 10-K to correct a typographical error for which Operating Revenues were inadvertently presented as a gain and Operating Expenses as a loss. This correction has no impact on the previously reported consolidated financial statements as of and for the year ended December 31, 2021.

The following table summarizes the net notional volume purchases/(sales) of open derivative transactions by commodity as of December 31, 2022 and 2021.



		As of December 31,
Type	Notional	2022	2021
		Millions
Natural Gas	Dekatherm (Dth)	49	47
Electricity	MWh	(60)	(76)
Financial Transmission Rights (FTRs)	MWh	24	27
Interest Rate Swaps	U.S. Dollars	1,050	—

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.

As of December 31, 2022, nearly 100% of the net credit exposure for PSEG Power’s wholesale operations was with investment grade counterparties and there was only one counterparty with credit exposure that was greater than 10% of the total. This credit exposure was with PSE&G, which eliminates in consolidation. See Note 26. Related-Party Transactions for additional information.

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 guarantee 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, 2022, PSEG held parental guarantees, letters of credit and cash as security. PSE&G’s BGS suppliers’ credit exposure is calculated each business day. As of December 31, 2022, PSE&G had unsecured credit exposure of $102 million with its suppliers. As of December 31, 2022, 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.

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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 and PSE&G 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.

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, 2022 and December 31, 2021, 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.

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	Recurring Fair Value Measurements as of December 31, 2022
Description	Total		Netting (E)		Quoted Market Prices for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	Millions
PSEG
Assets:
Cash Equivalents (A)	$	385	$	—	$	385	$	—	$	—
Derivative Contracts:
Energy-Related Contracts (B)	$	29	$	(2,321)	$	42	$	2,307	$	1
Interest Rate Swaps (C)	$	4	$	—	$	—	$	4	$	—
NDT Fund (D)
Equity Securities	$	1,072	$	—	$	1,072	$	—	$	—
Debt Securities—U.S. Treasury	$	288	$	—	$	—	$	288	$	—
Debt Securities—Govt Other	$	339	$	—	$	—	$	339	$	—
Debt Securities—Corporate	$	529	$	—	$	—	$	529	$	—

Rabbi Trust (D)
Equity Securities	$	20	$	—	$	20	$	—	$	—
Debt Securities—U.S. Treasury	$	57	$	—	$	—	$	57	$	—
Debt Securities—Govt Other	$	32	$	—	$	—	$	32	$	—
Debt Securities—Corporate	$	74	$	—	$	—	$	74	$	—

Liabilities:
Derivative Contracts:
Energy-Related Contracts (B)	$	(154)	$	3,432	$	(3)	$	(3,537)	$	(46)
Interest Rate Swaps (C)	$	(3)	$	—	$	—	$	(3)	$	—
PSE&G
Assets:
Cash Equivalents (A)	$	165	$	—	$	165	$	—	$	—


Rabbi Trust (D)
Equity Securities	$	3	$	—	$	3	$	—	$	—
Debt Securities—U.S. Treasury	$	10	$	—	$	—	$	10	$	—
Debt Securities—Govt Other	$	6	$	—	$	—	$	6	$	—
Debt Securities—Corporate	$	13	$	—	$	—	$	13	$	—

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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	Recurring Fair Value Measurements as of December 31, 2021
Description	Total		Netting (E)		Quoted Market Prices for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	Millions
PSEG
Assets:
Cash Equivalents (A)	$	615	$	—	$	615	$	—	$	—
Derivative Contracts:
Energy-Related Contracts (B)	$	100	$	(1,262)	$	25	$	1,336	$	1

NDT Fund (D)
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 (D)
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 (D)
Equity Securities	$	5	$	—	$	5	$	—	$	—
Debt Securities—U.S. Treasury	$	13	$	—	$	—	$	13	$	—
Debt Securities—Govt Other	$	6	$	—	$	—	$	6	$	—
Debt Securities—Corporate	$	19	$	—	$	—	$	19	$	—

(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)Interest rate swaps are valued using quoted prices on commonly quoted intervals, which are interpolated for periods different than the quoted intervals, as inputs to a market valuation model. Market inputs can generally be verified and model selection does not involve significant management judgement.

(D)As of December 31, 2022 and 2021, the fair value measurement table excludes cash and foreign currency of $2 million in the NDT Fund. The NDT Fund maintains investments in various equity and fixed income securities. The

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Rabbi Trust maintains investments in a Russell 3000 index fund and various fixed income securities. These securities are generally valued with prices that are either exchange provided (equity securities) or market transactions for comparable securities and/or broker quotes (fixed income securities).

Level 1—Investments in marketable equity securities within the NDT Fund are primarily investments in common stocks across a broad range of industries and sectors. Most equity securities are priced utilizing the principal market close price or, in some cases, midpoint, bid or ask price. Certain other equity securities in the NDT and Rabbi Trust Funds consist primarily of investments in money market funds which seek a high level of current income as is consistent with the preservation of capital and the maintenance of liquidity. To pursue its goals, the funds normally invest in diversified portfolios of high quality, short-term, dollar-denominated debt securities and government securities. The funds’ net asset value is priced and published daily. The Rabbi Trust’s Russell 3000 index fund is valued based on quoted prices in an active market and can be redeemed daily without restriction.

Level 2—NDT and Rabbi Trust fixed income securities include investment grade corporate bonds, collateralized mortgage obligations, asset-backed securities and certain government and U.S. Treasury obligations or Federal Agency asset-backed securities and municipal bonds with a wide range of maturities. Since many fixed income securities do not trade on a daily basis, they are priced using an evaluated pricing methodology that varies by asset class and reflects observable market information such as the most recent exchange price or quoted bid for similar securities. Market-based standard inputs typically include benchmark yields, reported trades, broker/dealer quotes and issuer spreads. 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.

(E)Represents the netting of fair value balances with the same counterparty (where the right of offset exists) and the application of collateral. See Note 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, 2022, PSEG carried $2.7 billion of net assets that were measured at fair value on a recurring basis, of which $45 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, 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.

There were no transfers in 2022 and 2021 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 (PSUs), restricted stock, restricted stock units (RSUs), 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, 2022, approximately 7 million shares were available for future awards under the 2021 LTIP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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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.

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 2022 and 2021 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.

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 performance period of three years. 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 2022, 2021 and 2020:



Grant Date	Risk-Free Interest Rate	Volatility

February 15, 2022	1.76%	27.34%
February 16, 2021	0.22%	27.31%
February 18, 2020	1.36%	15.00%

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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	2022		2021		2020
	Millions
Compensation Cost included in O&M Expense	$	29	$	28	$	35
Income Tax Benefit Recognized in Consolidated Statement of Operations	$	8	$	8	$	10

For each of the years 2022, 2021 and 2020, PSEG also recorded excess tax benefits of $2 million.

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

There were no stock options granted or vested in 2022, 2021 and 2020.

RSUs

Changes in RSUs for the year ended December 31, 2022 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, 2022	179,831	$	57.83
Granted	265,359	$	64.44
Vested	220,825	$	62.54
Canceled/Forfeited	8,125	$	60.85
Non-vested as of December 31, 2022	216,240	$	61.02	1.2	$	13,249,024

The weighted average grant date fair value per share for RSUs during the years ended December 31, 2022, 2021 and 2020 was $64.44, $58.02 and $58.85 per share, respectively.

The total intrinsic value of RSUs distributed during the years ended December 31, 2022, 2021 and 2020 was $19 million, $17 million and $11 million, respectively.

As of December 31, 2022, there was approximately $6 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 26,904 accrued on the RSUs during the year.

PSUs

Changes in PSUs for the year ended December 31, 2022 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, 2022	476,354	$	59.76
Granted	433,860	$	68.90
Vested	467,510	$	61.31
Canceled/Forfeited	45,694	$	62.08
Non-vested as of December 31, 2022	397,010	$	67.65	1.7	$	24,324,782

The weighted average grant date fair value per share for PSUs during the years ended December 31, 2022, 2021 and 2020 was $68.90, $65.57 and $51.79 per share, respectively.

The total intrinsic value of PSUs distributed during the years ended December 31, 2022, 2021 and 2020 was $18 million, $28 million and $19 million, respectively.

As of December 31, 2022, there was approximately $27 million of unrecognized compensation cost related to the PSUs, which is expected to be recognized over a weighted average period of 1.7 years. DEUs of 41,862 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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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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 $2 million for the year ended December 31, 2022, and immaterial for each of the years ended December 31, 2021 and 2020.

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 each of the years ended December 31, 2022 and 2021 and $1 million for the year ended December 31, 2020.

During the years ended December 31, 2022, 2021 and 2020, employees purchased 321,429 shares, 326,634 shares and 373,682 shares, respectively, at an average price of $57.72, $56.87 and $47.26 per share, respectively. As of December 31, 2022, 1.6 million shares were available for future issuance under this plan.

Note 21. Other Income (Deductions)



	PSE&G		PSEG Power & Other (A)		Consolidated
	Millions
Year Ended December 31, 2022
NDT Fund Interest and Dividends	$	—	$	62	$	62
AFUDC	65		—		65
Solar Loan Interest	10		—		10
Donations	—		(1)		(1)
Purchases of Tax Losses under New Jersey Technology Tax Benefit Transfer Program	—		(27)		(27)
Other	13		2		15
Total Other Income (Deductions)	$	88	$	36	$	124
Year Ended December 31, 2021
NDT Fund Interest and Dividends	$	—	$	59	$	59
AFUDC	71		—		71
Solar Loan Interest	13		—		13
Donations	(1)		(21)		(22)
Purchases 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
AFUDC	87		—		87
Solar Loan Interest	15		—		15
Donations	—		(3)		(3)
Purchases of Tax Losses under New Jersey Technology Tax Benefit Transfer Program	—		(36)		(36)
Other	6		(6)		—
Total Other Income (Deductions)	$	108	$	7	$	115

(A)PSEG Power & Other consists of activity at PSEG Power, Energy Holdings, PSEG LI, Services, PSEG (as parent company) 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	2022			2021			2020
	Millions
Net Income (Loss)	$	1,031		$	(648)		$	1,905
Income Taxes:
Operating Income:
Current (Benefit) Expense:
Federal	$	262		$	407		$	385
State	(30)			(3)			48
Total Current	232			404			433
Deferred Expense (Benefit):
Federal	(335)			(700)			(164)
State	80			(136)			141
Total Deferred	(255)			(836)			(23)
ITC	(6)			(9)			(14)
Total Income Tax Expense (Benefit)	$	(29)		$	(441)		$	396
Pre-Tax Income (Loss)	$	1,002		$	(1,089)		$	2,301
Tax Computed at Statutory Rate @ 21%	$	210		$	(229)		$	483
Increase (Decrease) Attributable to Flow-Through of Certain Tax Adjustments:
State Income Taxes (net of federal income tax)	41			(109)			147
Uncertain Tax Positions	(22)			19			3
NDT Fund	(22)			23			32
Plant-Related Items	(6)			(7)			(9)
Tax Credits	(10)			29			(18)
Audit Settlement	—			(8)			(27)
Leasing Activities	—			(1)			(35)
GPRC-CEF-EE	(37)			(13)			—
TAC	(193)			(171)			(205)
Bad Debt Flow-Through	(1)			27			28
Other	11			(1)			(3)
Subtotal	(239)			(212)			(87)
Total Income Tax Expense (Benefit)	$	(29)		$	(441)		$	396
Effective Income Tax Rate	(2.9)		%	40.5		%	17.2		%

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	2022		2021
	Millions
Deferred Income Taxes
Assets:
Noncurrent:
Regulatory Liability Excess Deferred Tax	$	390	$	439
OPEB	74		107
Bad Debt	66		67
Related to Uncertain Tax Positions	1		30

Operating Leases	42		48
Other	378		253
Total Noncurrent Assets	$	951	$	944

Liabilities:
Noncurrent:
Plant-Related Items	$	4,663	$	4,701
New Jersey Corporate Business Tax	1,009		939
Leasing Activities	99		113
AROs and NDT Fund	161		270
Taxes Recoverable Through Future Rates (net)	149		120
Pension Costs	164		169
Operating Leases	37		43

Other	324		271
Total Noncurrent Liabilities	$	6,606	$	6,626
Summary of Accumulated Deferred Income Taxes:
Net Noncurrent Deferred Income Tax Liabilities	$	5,655	$	5,682
ITC	70		77
Net Total Noncurrent Deferred Income Taxes and ITC	$	5,725	$	5,759

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	2022			2021			2020
	Millions
Net Income	$	1,565		$	1,446		$	1,327
Income Taxes:
Operating Income:
Current (Benefit) Expense:
Federal	$	130		$	208		$	179
State	—			1			8
Total Current	130			209			187
Deferred Expense (Benefit):
Federal	(17)			(33)			(71)
State	159			153			128
Total Deferred	142			120			57
ITC	(5)			(5)			(4)
Total Income Tax Expense	$	267		$	324		$	240
Pre-Tax Income	$	1,832		$	1,770		$	1,567
Tax Computed at Statutory Rate @ 21%	$	385		$	372		$	329
Increase (Decrease) Attributable to Flow-Through of Certain Tax Adjustments:
State Income Taxes (net of federal income tax)	126			122			106
Uncertain Tax Positions	2			2			4
Plant-Related Items	(6)			(7)			(9)
Tax Credits	(9)			(8)			(9)
Audit Settlement	—			(1)			(2)
GPRC-CEF-EE	(37)			(13)			—
TAC	(193)			(171)			(205)
Bad Debt Flow-Through	(1)			27			28
Other	—			1			(2)
Subtotal	(118)			(48)			(89)
Total Income Tax Expense	$	267		$	324		$	240
Effective Income Tax Rate	14.6		%	18.3		%	15.3		%

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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



	As of December 31,
PSE&G	2022		2021
	Millions
Deferred Income Taxes
Assets:
Noncurrent:
Regulatory Liability Excess Deferred Tax	$	390	$	439
OPEB	42		61
Related to Uncertain Tax Positions	3		—
Bad Debt	66		67
Operating Leases	19		20
Other	53		57
Total Noncurrent Assets	$	573	$	644
Liabilities:
Noncurrent:
Plant-Related Items	$	4,174	$	4,006
New Jersey Corporate Business Tax	1,011		863
Pension Costs	195		180
Taxes Recoverable Through Future Rates (net)	149		120
Conservation Costs	81		75
Operating Leases	18		19
Related to Uncertain Tax Positions	—		1
Other	223		178
Total Noncurrent Liabilities	$	5,851	$	5,442
Summary of Accumulated Deferred Income Taxes:
Net Noncurrent Deferred Income Tax Liabilities	$	5,278	$	4,798
ITC	70		76
Net Total Noncurrent Deferred Income Taxes and ITC	$	5,348	$	4,874

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, 2022, the balance was approximately $1.5 billion with a Regulatory Liability of approximately $2.0 billion. In 2022, PSE&G returned approximately $269 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 $193 million. The flowback to customers of the excess deferred income taxes and previously realized tax repair deductions resulted in a decrease of approximately $234 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.

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In April 2020, the IRS issued a private letter ruling to PSE&G concluding that certain excess deferred taxes previously classified as protected should be classified as unprotected. Unprotected excess deferred income taxes are not subject to the normalization rules allowing them to be refunded to customers sooner as agreed to with FERC and the BPU. In July 2020, FERC and the BPU approved PSE&G’s requests to refund these unprotected excess deferred income taxes to customers. FERC approved the refund of these unprotected excess deferred income taxes within the 2019 true-up filing. The BPU approved the refund of these unprotected excess deferred income taxes 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. In December 2022, the carryback claim was approved by the IRS, which resulted in a $28 million income statement benefit and the closure of PSEG’s federal tax years through 2018.

In August 2022, the IRA was signed into law. The IRA made certain changes to existing energy tax credit laws and enacted a new 15% corporate alternative minimum tax, effective in 2023. Changes to the energy tax credit laws include: increases to the PTC rate, a new PTC for electricity generation using nuclear energy, expanded technologies that are eligible for energy tax credits, and the transferability of the energy tax credits. See Note 4. Early Plant Retirements/Asset Dispositions and Impairments for additional information on the nuclear PTC.

Since the enactment of the IRA, the U.S. Treasury issued various Notices that provide interim guidance on several provisions of the IRA. The Notices state that the U.S. Treasury anticipates issuing additional guidance and proposed and final regulations. Until the U.S. Treasury issues additional clarity to many of the provisions, the impact that the IRA will have on PSEG’s and PSE&G’s financial statements is not determinable.

The enactment of additional federal or state tax legislation and clarification of previously enacted tax laws could impact PSEG’s and PSE&G’s financial statements.

As of December 31, 2022, PSEG had a $60 million state NOL and PSE&G had a $29 million New Jersey Corporate Business Tax NOL that are both expected to be fully realized in the future.

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:



2022	PSEG		PSE&G
	Millions
Total Amount of Unrecognized Tax Benefits as of January 1, 2022	$	192	$	27
Increases as a Result of Positions Taken in a Prior Period	9		2
Decreases as a Result of Positions Taken in a Prior Period	(40)		(2)
Increases as a Result of Positions Taken during the Current Period	1		1
Decreases as a Result of Positions Taken during the Current Period	—		—
Decreases as a Result of Settlements with Taxing Authorities	(28)		—
Decreases due to Lapses of Applicable Statute of Limitations	(4)		1
Total Amount of Unrecognized Tax Benefits as of December 31, 2022	$	130	$	29
Accumulated Deferred Income Taxes Associated with Unrecognized Tax Benefits	(37)		(15)
Regulatory Asset—Unrecognized Tax Benefits	(8)		(8)
Total Amount of Unrecognized Tax Benefits that if Recognized, would Impact the Effective Tax Rate (including Interest and Penalties)	$	85	$	6

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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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



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 2020, the IRS approved PSEG’s nuclear carryback claim and federal tax returns for the years 2011 through 2016. In 2022, the IRS approved PSEG’s 2018 carryback claim, which resulted in the closure of PSEG’s federal tax years through 2018.

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,
	2022		2021		2020
	Millions
PSEG	$	38	$	31	$	29
PSE&G	$	8	$	9	$	9

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	$	12
PSE&G	$	11

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	2019-2021	N/A
New Jersey	2011-2021	2011-2021
Pennsylvania	2017-2021	2019-2021
Connecticut	2019-2021	N/A
Maryland	2019-2021	N/A
New York	2017-2021	N/A

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, 2019	$	(15)	$	(499)	$	25	$	(489)
Current Period Other Comprehensive Income (Loss)
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)
Other Comprehensive Income (Loss) before Reclassifications	—		(72)		(158)		(230)
Amounts Reclassified from Accumulated Other Comprehensive Income (Loss)	3		1		26		30
Net Current Period Other Comprehensive Income (Loss)	3		(71)		(132)		(200)
Balance as of December 31, 2022	$	(3)	$	(426)	$	(121)	$	(550)

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, 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




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)

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, 2022
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	$	(5)	$	2	$	(3)
Total Cash Flow Hedges		(5)		2		(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)	(22)		6		(16)
Total Pension and OPEB Plans		(1)		—		(1)
Available-for-Sale Securities
Realized Gains (Losses)	Net Gains (Losses) on Trust Investments	(43)		17		(26)
Total Available-for-Sale Securities		(43)		17		(26)
Total		$	(49)	$	19	$	(30)

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,
	2022				2021				2020
	Basic		Diluted		Basic		Diluted		Basic		Diluted
EPS Numerator:
(Millions)
Net Income (Loss)	$	1,031	$	1,031	$	(648)	$	(648)	$	1,905	$	1,905
EPS Denominator:
(Millions)
Weighted Average Common Shares Outstanding	498		498		504		504		504		504
Effect of Stock Based Compensation Awards	—		3		—		—		—		3
Total Shares	498		501		504		504		504		507
EPS:
Net Income (Loss)	$	2.07	$	2.06	$	(1.29)	$	(1.29)	$	3.78	$	3.76

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.

From time to time, PSEG may repurchase shares to satisfy obligations under equity compensation awards and repurchase shares to satisfy purchases by employees under the ESPP. In December 2022, for such purposes, PSEG entered into a share repurchase plan that complies with Rule 10b5-1 under the Securities Exchange Act of 1934, as amended. There were no common share repurchases in the open market during the fourth quarter of 2022.

In September 2021, PSEG announced a $500 million share repurchase program, authorized by the Board of Directors. In December 2021, under this authorization PSEG entered into an open market share repurchase plan for $250 million of its common shares. During January and through mid-February 2022, PSEG purchased the full $250 million of common stock under the open market share repurchase plan, representing approximately 3.8 million shares.

In March 2022, under this same authorization, PSEG entered into a Master Confirmation and Supplemental Confirmation with an investment banking firm to effect an accelerated share repurchase agreement (ASR Agreement) for the remaining authorized $250 million of shares of PSEG’s outstanding common stock. Under the ASR Agreement, PSEG received initial delivery of approximately 3.0 million shares of common stock in mid-March, representing approximately 80% of the total number of shares of common stock initially underlying the ASR Agreement. In mid-May 2022, the investment banking firm exercised its right to accelerate the termination of the contract pursuant to the terms of the ASR Agreement and PSEG received approximately 0.6 million shares, representing the balance of the shares owed to PSEG under the ASR Agreement.

Through the open market share repurchase plan and an accelerated share repurchase program, the $500 million share repurchase program authorized in September 2021 was completed, resulting in an aggregate repurchase of approximately 7.4 million shares.

Dividends



	Years Ended December 31,
Dividend Payments on Common Stock	2022		2021		2020
Per Share	$	2.16	$	2.04	$	1.96
in Millions	$	1,079	$	1,031	$	991

On February 14, 2023, PSEG’s Board of Directors approved a $0.57 per share common stock dividend for the first quarter of 2023.

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 the Chief Operating Decision Maker (CODM) (the Chief Executive Officer (CEO) for PSEG and PSE&G), measures performance based on segment Net Income and how resources are allocated to each business.

Following completion of the sale of the PSEG Power Fossil portfolio in February 2022 and as a result of the transition to a new CEO, our designated CODM, effective September 1, 2022, various changes have been made to the content and manner in which the new CEO reviews financial information for purposes of assessing business performance and allocating resources. Based on management’s analysis, PSE&G and PSEG Power were determined to remain operating segments of PSEG. However, PSEG has revised its reportable segments for the year ended December 31, 2022 to PSE&G and PSEG Power & Other. PSE&G continues to be PSEG’s principal reportable segment. The PSEG Power & Other reportable segment includes amounts related to the PSEG Power operating segment as well as amounts applicable to Energy Holdings, PSEG LI, PSEG (parent corporation) and Services, which do not meet the definition of operating segments individually or in the aggregate and are immaterial to PSEG’s consolidated assets and results. All prior period comparative information has been restated to reflect the change in segment presentation.

PSE&G

PSE&G earns revenues from its tariffs, under which it provides electric transmission and electric and gas distribution services to residential, commercial and industrial 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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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other activities such as investments in EE equipment on customers’ premises, solar investments, the appliance service business and other miscellaneous services.

PSEG Power & Other

This reportable segment is comprised primarily of PSEG Power which 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. 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.

This reportable segment also includes amounts applicable to PSEG LI, which generates revenues under its contract with LIPA, primarily for the recovery of costs when Servco is a principal in the transaction (see Note 5. Variable Interest Entities for additional information) as well as fixed and variable fee components under the contract, and Energy Holdings which holds an immaterial portfolio of remaining lease investments. Other also includes amounts applicable to PSEG (parent corporation) and Services.



	PSE&G		PSEG Power & Other		Eliminations (A)		Consolidated Total
	Millions
Year Ended December 31, 2022
Operating Revenues	$	7,935	$	3,266	$	(1,401)	$	9,800
Depreciation and Amortization	935		165		—		1,100
Operating Income (Loss)	1,892		(511)		—		1,381
Income from Equity Method Investments	—		14		—		14
Interest Income	19		13		(1)		31
Interest Expense	427		202		(1)		628
Income (Loss) before Income Taxes	1,832		(830)		—		1,002
Income Tax Expense (Benefit)	267		(296)		—		(29)
Net Income (Loss) (B) (C)	$	1,565	$	(534)	$	—	$	1,031
Gross Additions to Long-Lived Assets	$	2,590	$	298	$	—	$	2,888
As of December 31, 2022
Total Assets	$	39,960	$	9,285	$	(527)	$	48,718
Investments in Equity Method Subsidiaries	$	—	$	306	$	—	$	306

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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	PSE&G		PSEG Power & Other		Eliminations (A)		Consolidated Total
	Millions
Year Ended December 31, 2021
Operating Revenues	$	7,122	$	3,767	$	(1,167)	$	9,722
Depreciation and Amortization	928		288		—		1,216
Operating Income (Loss)	1,818		(2,674)		—		(856)
Income from Equity Method Investments	—		16		—		16
Interest Income	14		6		—		20
Interest Expense	402		169		—		571
Income (Loss) before Income Taxes	1,770		(2,859)		—		(1,089)
Income Tax Expense (Benefit)	324		(765)		—		(441)
Net Income (Loss) (B) (C)	$	1,446	$	(2,094)	$	—	$	(648)
Gross Additions to Long-Lived Assets	$	2,447	$	272	$	—	$	2,719
As of December 31, 2021
Total Assets	$	37,198	$	12,258	$	(457)	$	48,999
Investments in Equity Method Subsidiaries	$	—	$	173	$	—	$	173



	PSE&G		PSEG Power & Other		Eliminations (A)		Consolidated Total
	Millions
Year Ended December 31, 2020
Operating Revenues	$	6,608	$	4,229	$	(1,234)	$	9,603
Depreciation and Amortization	887		398		—		1,285
Operating Income (Loss)	1,639		631		—		2,270
Income from Equity Method Investments	—		14		—		14
Interest Income	17		10		(2)		25
Interest Expense	388		214		(2)		600
Income (Loss) before Income Taxes	1,567		734		—		2,301
Income Tax Expense (Benefit)	240		156		—		396
Net Income (Loss) (B) (C)	$	1,327	$	578	$	—	$	1,905
Gross Additions to Long-Lived Assets	$	2,507	$	416	$	—	$	2,923
As of December 31, 2020
Total Assets	$	35,581	$	14,988	$	(519)	$	50,050
Investments in Equity Method Subsidiaries	$	—	$	64	$	—	$	64

(A)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.

(B)Include after-tax impairments of $92 million related to certain Energy Holdings investments and additional adjustments related to the sale of PSEG Power’s fossil generation assets in the year ended December 31, 2022. 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. See Note 4. Early Plant Retirements/Asset Dispositions and Impairments for additional information.

(C)Includes net after-tax losses of $457 million, $446 million and $58 million in the years ended December 31, 2022, 2021 and 2020, respectively 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	2022		2021		2020
	Millions
Billings from Affiliates:
Net Billings from PSEG Power (A)	$	1,388	$	1,144	$	1,207
Administrative Billings from Services (B)	445		394		337
Total Billings from Affiliates	$	1,833	$	1,538	$	1,544



	Years Ended December 31,
Related Party Transactions	2022		2021
	Millions

Payable to PSEG Power (A)	$	313	$	244
Payable to Services (B)	98		111
Payable to PSEG (C)	74		63
Accounts Payable—Affiliated Companies	$	485	$	418
Working Capital Advances to Services (D)	$	33	$	33
Long-Term Accrued Taxes Payable	$	9	$	6

(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. As of June 1, 2022, PSEG Power had no contracts to supply energy, capacity and ancillary services to PSE&G through the BGS auction process. In addition, PSEG Power sells ZECs to PSE&G from its nuclear units under the ZEC program as approved by the BPU. 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 pays all payroll taxes and receives reimbursement from its affiliated companies for their respective portions. In addition, 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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