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Cover and table of contents

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED September 30, 2021

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM TO


Commission File Number	Name of Registrant, Address, and Telephone Number			State or other jurisdiction of Incorporation or Organization	I.R.S. Employer Identification Number
001-09120	Public Service Enterprise Group Incorporated			New Jersey	22-2625848
	80 Park Plaza
	Newark,	New Jersey	07102
	973	430-7000

001-00973	Public Service Electric and Gas Company			New Jersey	22-1212800
	80 Park Plaza
	Newark,	New Jersey	07102
	973	430-7000

001-34232	PSEG Power LLC			Delaware	22-3663480
	80 Park Plaza
	Newark,	New Jersey	07102
	973	430-7000

Securities registered pursuant to Section 12(b) of the Act:


Title of Each Class	Trading Symbol(s)	Name of Each Exchange On Which Registered
Public Service Enterprise Group Incorporated
Common Stock without par value	PEG	New York Stock Exchange
Public Service Electric and Gas Company
8.00% First and Refunding Mortgage Bonds, due 2037	PEG37D	New York Stock Exchange
5.00% First and Refunding Mortgage Bonds, due 2037	PEG37J	New York Stock Exchange

Indicate by check mark whether the registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrants have submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrants were required to submit such files). Yes ☒ No ☐

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Indicate by check mark whether each registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Public Service Enterprise Group Incorporated	Large accelerated filer	☒	Accelerated filer	☐	Non-accelerated filer	☐	Smaller reporting company	☐	Emerging growth company	☐

Public Service Electric and Gas Company	Large accelerated filer	☐	Accelerated filer	☐	Non-accelerated filer	☒	Smaller reporting company	☐	Emerging growth company	☐

PSEG Power LLC	Large accelerated filer	☐	Accelerated filer	☐	Non-accelerated filer	☒	Smaller reporting company	☐	Emerging growth company	☐

If any of the registrants is an emerging growth company, indicate by check mark if such registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether any of the registrants is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of October 19, 2021, Public Service Enterprise Group Incorporated had outstanding 505,663,672 shares of its sole class of Common Stock, without par value.

As of October 19, 2021, Public Service Electric and Gas Company had issued and outstanding 132,450,344 shares of Common Stock, without nominal or par value, all of which were privately held, beneficially and of record, by Public Service Enterprise Group Incorporated.

Public Service Electric and Gas Company and PSEG Power LLC are wholly owned subsidiaries of Public Service Enterprise Group Incorporated and meet the conditions set forth in General Instruction H(1) of Form 10-Q. Each is filing its Quarterly Report on Form 10-Q with the reduced disclosure format authorized by General Instruction H.

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		Page
FORWARD-LOOKING STATEMENTS		ii
FILING FORMAT		iii
PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements
	Public Service Enterprise Group Incorporated	1
	Public Service Electric and Gas Company	7
	PSEG Power LLC	13
	Notes to Condensed Consolidated Financial Statements
	Note 1. Organization, Basis of Presentation and Significant Accounting Policies	19
	Note 2. Recent Accounting Standards	20
	Note 3. Revenues	22
	Note 4. Early Plant Retirements/Asset Dispositions and Impairments	28
	Note 5. Variable Interest Entities (VIEs)	30

	Note 6. Rate Filings	30
	Note 7. Leases	32
	Note 8. Financing Receivables	33
	Note 9. Trust Investments	35
	Note 10. Pension and Other Postretirement Benefits (OPEB)	41
	Note 11. Commitments and Contingent Liabilities	43
	Note 12. Debt and Credit Facilities	49
	Note 13. Financial Risk Management Activities	50
	Note 14. Fair Value Measurements	55
	Note 15. Other Income (Deductions)	62
	Note 16. Income Taxes	63
	Note 17. Accumulated Other Comprehensive Income (Loss), Net of Tax	65
	Note 18. Earnings Per Share (EPS) and Dividends	69
	Note 19. Financial Information by Business Segment	70
	Note 20. Related-Party Transactions	71
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	73
	Executive Overview of 2021 and Future Outlook	73
	Results of Operations	83
	Liquidity and Capital Resources	89
	Capital Requirements	91
	Accounting Matters	92
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	92
Item 4.	Controls and Procedures	93
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	93
Item 1A.	Risk Factors	93
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	93
Item 5.	Other Information	93
Item 6.	Exhibits	96
	Signatures	97

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FORWARD-LOOKING STATEMENTS

Certain of the matters discussed in this report about our and our subsidiaries’ future performance, including, without limitation, future revenues, earnings, strategies, prospects, consequences and all other statements that are not purely historical constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ materially from those anticipated. Such statements are based on management’s beliefs as well as assumptions made by and information currently available to management. When used herein, the words “anticipate,” “intend,” “estimate,” “believe,” “expect,” “plan,” “should,” “hypothetical,” “potential,” “forecast,” “project,” variations of such words and similar expressions are intended to identify forward-looking statements. Factors that may cause actual results to differ are often presented with the forward-looking statements themselves. Other factors that could cause actual results to differ materially from those contemplated in any forward-looking statements made by us herein are discussed in filings we make with the United States Securities and Exchange Commission (SEC), including our Annual Report on Form 10-K and subsequent reports on Form 10-Q and Form 8-K. These factors include, but are not limited to:

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

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the absence of a long-term legislative or other solution for our New Jersey nuclear plants that sufficiently values them for their carbon-free, fuel diversity and resilience attributes, or the impact of the current or subsequent payments for such attributes being materially adversely modified through legal proceedings;
adverse changes in energy industry laws, policies and regulations, including market structures and transmission planning and transmission returns;
risks associated with our ownership and operation of nuclear facilities, including regulatory risks, such as compliance with the Atomic Energy Act and trade control, environmental and other regulations, as well as financial, environmental and health and safety risks;
changes in federal and state environmental regulations and enforcement;
changes in tax laws and regulations; and
delays in receipt of, or an inability to receive, necessary licenses and permits.

All of the forward-looking statements made in this report are qualified by these cautionary statements and we cannot assure you that the results or developments anticipated by management will be realized or even if realized, will have the expected consequences to, or effects on, us or our business, prospects, financial condition, results of operations or cash flows. Readers are cautioned not to place undue reliance on these forward-looking statements in making any investment decision. Forward-looking statements made in this report apply only as of the date of this report. While we may elect to update forward-looking statements from time to time, we specifically disclaim any obligation to do so, even in light of new information or future events, unless otherwise required by applicable securities laws.

The forward-looking statements contained in this report are intended to qualify for the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.

FILING FORMAT

This combined Quarterly Report on Form 10-Q is separately filed by Public Service Enterprise Group Incorporated (PSEG), Public Service Electric and Gas Company (PSE&G) and PSEG Power LLC (PSEG Power). Information relating to any individual company is filed by such company on its own behalf. PSE&G and PSEG Power are each only responsible for information about itself and its subsidiaries.

Discussions throughout the document refer to PSEG and its direct operating subsidiaries, PSE&G and PSEG Power. Depending on the context of each section, references to “we,” “us,” and “our” relate to PSEG or to the specific company or companies being discussed.

iii

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PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Millions, except per share data

(Unaudited)



	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2021		2020		2021		2020
OPERATING REVENUES	$	1,903	$	2,370	$	6,666	$	7,201
OPERATING EXPENSES
Energy Costs	860		775		2,495		2,276
Operation and Maintenance	807		767		2,368		2,254
Depreciation and Amortization	283		317		946		956
(Gains) Losses on Asset Dispositions and Impairments	2,158		(122)		2,615		(122)
Total Operating Expenses	4,108		1,737		8,424		5,364
OPERATING INCOME (LOSS)	(2,205)		633		(1,758)		1,837
Income from Equity Method Investments	3		4		12		10
Net Gains (Losses) on Trust Investments	(17)		107		124		87
Other Income (Deductions)	35		39		93		81
Net Non-Operating Pension and Other Postretirement Benefit (OPEB) Credits (Costs)	82		62		246		186
Interest Expense	(144)		(149)		(437)		(453)
INCOME (LOSS) BEFORE INCOME TAXES	(2,246)		696		(1,720)		1,748
Income Tax Benefit (Expense)	682		(121)		627		(274)
NET INCOME (LOSS)	$	(1,564)	$	575	$	(1,093)	$	1,474
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
BASIC	504		504		504		504
DILUTED	504		507		504		507
NET INCOME (LOSS) PER SHARE:
BASIC	$	(3.10)	$	1.15	$	(2.17)	$	2.93
DILUTED	$	(3.10)	$	1.14	$	(2.17)	$	2.91

See Notes to Condensed Consolidated Financial Statements.

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PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Millions

(Unaudited)



	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2021		2020		2021		2020
NET INCOME (LOSS)	$	(1,564)	$	575	$	(1,093)	$	1,474
Other Comprehensive Income (Loss), net of tax
Unrealized Gains (Losses) on Available-for-Sale Securities, net of tax (expense) benefit of $5, $3, $21 and $(15) for the three and nine months ended 2021 and 2020, respectively	(7)		(4)		(33)		24
Unrealized Gains (Losses) on Cash Flow Hedges, net of tax (expense) benefit of $0, $(1), $(1) and $(1) for the three and nine months ended 2021 and 2020, respectively	1		4		2		4
Pension/OPEB adjustment, net of tax (expense) benefit of $(1), $(1), $(4) and $(3) for the three and nine months ended 2021 and 2020, respectively	4		3		11		9
Other Comprehensive Income (Loss), net of tax	(2)		3		(20)		37
COMPREHENSIVE INCOME (LOSS)	$	(1,566)	$	578	$	(1,113)	$	1,511

See Notes to Condensed Consolidated Financial Statements.

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PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED

CONDENSED CONSOLIDATED BALANCE SHEETS

Millions

(Unaudited)



	September 30, 2021		December 31, 2020
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents	$	1,811	$	543
Accounts Receivable, net of allowance of $280 in 2021 and $196 in 2020	1,440		1,410
Tax Receivable	9		63
Unbilled Revenues, net of allowance of $7 in 2021 and $10 in 2020	167		229
Fuel	270		277
Materials and Supplies, net	449		601
Prepayments	139		51
Derivative Contracts	137		60
Regulatory Assets	272		369
Assets Held for Sale	2,050		—
Other	71		27
Total Current Assets	6,815		3,630
PROPERTY, PLANT AND EQUIPMENT	43,075		48,569
Less: Accumulated Depreciation and Amortization	(9,496)		(10,984)
Net Property, Plant and Equipment	33,579		37,585
NONCURRENT ASSETS
Regulatory Assets	3,983		3,872
Operating Lease Right-of-Use Assets	206		262
Long-Term Investments	578		536
Nuclear Decommissioning Trust (NDT) Fund	2,595		2,501
Long-Term Tax Receivable	47		—
Long-Term Receivable of Variable Interest Entity (VIE)	949		945
Rabbi Trust Fund	243		266
Other Intangibles	133		158
Derivative Contracts	16		9
Other	282		286
Total Noncurrent Assets	9,032		8,835
TOTAL ASSETS	$	49,426	$	50,050

See Notes to Condensed Consolidated Financial Statements.

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PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED

CONDENSED CONSOLIDATED BALANCE SHEETS

Millions

(Unaudited)



	September 30, 2021		December 31, 2020
LIABILITIES AND CAPITALIZATION
CURRENT LIABILITIES
Long-Term Debt Due Within One Year	$	1,650	$	1,684
Commercial Paper and Loans	3,705		1,063
Accounts Payable	1,168		1,332
Derivative Contracts	56		21
Accrued Interest	164		126
Accrued Taxes	86		124
Clean Energy Program	188		143
Obligation to Return Cash Collateral	218		98
Regulatory Liabilities	345		294
Liabilities Held for Sale	126		—
Other	399		637
Total Current Liabilities	8,105		5,522
NONCURRENT LIABILITIES
Deferred Income Taxes and Investment Tax Credits (ITC)	5,524		6,502
Regulatory Liabilities	2,665		2,707
Operating Leases	196		252
Asset Retirement Obligations	1,260		1,212
OPEB Costs	702		730
OPEB Costs of Servco	722		699
Accrued Pension Costs	975		1,128
Accrued Pension Costs of Servco	207		226
Environmental Costs	248		286
Derivative Contracts	17		4
Long-Term Accrued Taxes	109		88
Other	202		214
Total Noncurrent Liabilities	12,827		14,048
COMMITMENTS AND CONTINGENT LIABILITIES (See Note 11)
CAPITALIZATION
LONG-TERM DEBT	14,425		14,496
STOCKHOLDERS’ EQUITY
Common Stock, no par, authorized 1,000 shares; issued, 2021 and 2020—534 shares	5,039		5,031
Treasury Stock, at cost, 2021 and 2020—30 shares	(898)		(861)
Retained Earnings	10,452		12,318
Accumulated Other Comprehensive Loss	(524)		(504)
Total Stockholders’ Equity	14,069		15,984
Total Capitalization	28,494		30,480
TOTAL LIABILITIES AND CAPITALIZATION	$	49,426	$	50,050

See Notes to Condensed Consolidated Financial Statements.

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PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Millions

(Unaudited)



	Nine Months Ended
	September 30,
	2021		2020
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (Loss)	$	(1,093)	$	1,474
Adjustments to Reconcile Net Income to Net Cash Flows from Operating Activities:
Depreciation and Amortization	946		956
Amortization of Nuclear Fuel	143		144
(Gains) Losses on Asset Dispositions and Impairments	2,615		(122)
Emission Allowances and Renewable Energy Credit (REC) Compliance Accrual	116		115
Provision for Deferred Income Taxes (Other than Leases) and ITC	(955)		40
Non-Cash Employee Benefit Plan (Credits) Costs	(134)		(79)
Leveraged Lease (Income), (Gains) and Losses, Adjusted for Rents Received and Deferred Taxes	7		(155)
Net Realized and Unrealized (Gains) Losses on Energy Contracts and Other Derivatives	996		81

Cost of Removal	(88)		(77)
Net Change in Regulatory Assets and Liabilities	(47)		4
Net (Gains) Losses and (Income) Expense from NDT Fund	(154)		(107)
Net Change in Certain Current Assets and Liabilities:
Tax Receivable	56		68

Accrued Taxes	(103)		228
Cash Collateral	(945)		(12)
Other Current Assets and Liabilities	(193)		19
Employee Benefit Plan Funding and Related Payments	(18)		(12)
Other	29		(48)
Net Cash Provided By (Used In) Operating Activities	1,178		2,517
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to Property, Plant and Equipment	(2,046)		(2,092)
Purchase of Emission Allowances and RECs	(83)		(94)
Proceeds from Sales of Trust Investments	1,657		1,796
Purchases of Trust Investments	(1,655)		(1,817)
Proceeds from Sales of Long-Lived Assets and Lease Investments	565		300
Other	(21)		52
Net Cash Provided By (Used In) Investing Activities	(1,583)		(1,855)
CASH FLOWS FROM FINANCING ACTIVITIES
Net Change in Commercial Paper and Loans	442		(1,115)
Proceeds from Short-Term Loans	2,500		800
Payment of Short-Term Loans	(300)		(500)
Issuance of Long-Term Debt	1,325		2,450
Redemption of Long-Term Debt	(1,428)		(656)
Cash Dividends Paid on Common Stock	(773)		(743)
Other	(73)		(75)
Net Cash Provided By (Used In) Financing Activities	1,693		161
Net Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash	1,288		823
Cash, Cash Equivalents and Restricted Cash at Beginning of Period	572		176
Cash, Cash Equivalents and Restricted Cash at End of Period	$	1,860	$	999
Supplemental Disclosure of Cash Flow Information:
Income Taxes Paid (Received)	$	340	$	176
Interest Paid, Net of Amounts Capitalized	$	380	$	384
Accrued Property, Plant and Equipment Expenditures	$	288	$	449

See Notes to Condensed Consolidated Financial Statements.

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PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Millions

(Unaudited)



	Common Stock			Treasury Stock			Retained Earnings		Accumulated Other Comprehensive Income (Loss)
	Shs.	Amount		Shs.	Amount		Total
Balance as of June 30, 2021	534	$	5,026	(30)	$	(899)	$	12,273	$	(522)	$	15,878
Net Loss	—	—		—	—		(1,564)		—		(1,564)
Other Comprehensive Income (Loss), net of tax (expense) benefit of $4	—	—		—	—		—		(2)		(2)
Comprehensive Loss											(1,566)
Cash Dividends at $0.51 per share on Common Stock	—	—		—	—		(257)		—		(257)
Other	—	13		—	1		—		—		14
Balance as of September 30, 2021	534	$	5,039	(30)	$	(898)	$	10,452	$	(524)	$	14,069

Balance as of June 30, 2020	534	$	5,003	(30)	$	(865)	$	11,808	$	(455)	$	15,491
Net Income	—	—		—	—		575		—		575
Other Comprehensive Income (Loss), net of tax (expense) benefit of $1	—	—		—	—		—		3		3
Comprehensive Income											578
Cash Dividends at $0.49 per share on Common Stock	—	—		—	—		(248)		—		(248)
Other	—	13		—	2		—		—		15
Balance as of September 30, 2020	534	$	5,016	(30)	$	(863)	$	12,135	$	(452)	$	15,836



	Common Stock			Treasury Stock			Retained Earnings		Accumulated Other Comprehensive Income (Loss)
	Shs.	Amount		Shs.	Amount		Total
Balance as of December 31, 2020	534	$	5,031	(30)	$	(861)	$	12,318	$	(504)	$	15,984
Net Loss	—	—		—	—		(1,093)		—		(1,093)
Other Comprehensive Income (Loss), net of tax (expense) benefit of $16	—	—		—	—		—		(20)		(20)
Comprehensive Loss											(1,113)
Cash Dividends at $1.53 per share on Common Stock	—	—		—	—		(773)		—		(773)
Other	—	8		—	(37)		—		—		(29)
Balance as of September 30, 2021	534	$	5,039	(30)	$	(898)	$	10,452	$	(524)	$	14,069

Balance as of December 31, 2019	534	$	5,003	(30)	$	(831)	$	11,406	$	(489)	$	15,089
Net Income	—	—		—	—		1,474		—		1,474
Other Comprehensive Income (Loss), net of tax (expense) benefit of $(19)	—	—		—	—		—		37		37
Comprehensive Income											1,511
Cumulative Effect Adjustment for Current Expected Credit Losses (CECL)	—	—		—	—		(2)		—		(2)
Cash Dividends at $1.47 per share on Common Stock	—	—		—	—		(743)		—		(743)
Other	—	13		—	(32)		—		—		(19)
Balance as of September 30, 2020	534	$	5,016	(30)	$	(863)	$	12,135	$	(452)	$	15,836

See Notes to Condensed Consolidated Financial Statements.

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PUBLIC SERVICE ELECTRIC AND GAS COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Millions

(Unaudited)



	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2021		2020		2021		2020
OPERATING REVENUES	$	1,820	$	1,660	$	5,407	$	4,999
OPERATING EXPENSES
Energy Costs	698		663		2,056		1,881
Operation and Maintenance	422		409		1,239		1,175
Depreciation and Amortization	226		218		698		657
Gain on Asset Dispositions	(4)		—		(4)		—
Total Operating Expenses	1,342		1,290		3,989		3,713
OPERATING INCOME	478		370		1,418		1,286
Net Gains (Losses) on Trust Investments	—		1		1		2
Other Income (Deductions)	20		28		72		81
Net Non-Operating Pension and OPEB Credits (Costs)	67		51		199		154
Interest Expense	(102)		(97)		(301)		(291)
INCOME BEFORE INCOME TAXES	463		353		1,389		1,232
Income Tax Benefit (Expense)	(74)		(40)		(214)		(196)
NET INCOME	$	389	$	313	$	1,175	$	1,036

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

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PUBLIC SERVICE ELECTRIC AND GAS COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Millions

(Unaudited)



	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2021		2020		2021		2020
NET INCOME	$	389	$	313	$	1,175	$	1,036
Unrealized Gains (Losses) on Available-for-Sale Securities, net of tax (expense) benefit of $0, $0, $1 and $(1) for the three and nine months ended 2021 and 2020, respectively	—		—		(2)		1
COMPREHENSIVE INCOME	$	389	$	313	$	1,173	$	1,037

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

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PUBLIC SERVICE ELECTRIC AND GAS COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS

Millions

(Unaudited)



	September 30, 2021		December 31, 2020
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents	$	461	$	204
Accounts Receivable, net of allowance of $280 in 2021 and $196 in 2020	1,041		1,004

Accounts Receivable—Affiliated Companies	2		—
Unbilled Revenues, net of allowance of $7 in 2021 and $10 in 2020	167		229
Materials and Supplies, net	233		217
Prepayments	103		14
Regulatory Assets	272		369

Other	56		13
Total Current Assets	2,335		2,050
PROPERTY, PLANT AND EQUIPMENT	37,922		36,300
Less: Accumulated Depreciation and Amortization	(7,513)		(7,149)
Net Property, Plant and Equipment	30,409		29,151
NONCURRENT ASSETS
Regulatory Assets	3,983		3,872
Operating Lease Right-of-Use Assets	93		99
Long-Term Investments	188		222
Rabbi Trust Fund	43		51
Other	128		136
Total Noncurrent Assets	4,435		4,380
TOTAL ASSETS	$	37,179	$	35,581

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

Table of Contents

PUBLIC SERVICE ELECTRIC AND GAS COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS

Millions

(Unaudited)



	September 30, 2021		December 31, 2020
LIABILITIES AND CAPITALIZATION
CURRENT LIABILITIES
Long-Term Debt Due Within One Year	$	—	$	434
Commercial Paper and Loans	—		100
Accounts Payable	527		671
Accounts Payable—Affiliated Companies	129		479
Accrued Interest	113		101
Clean Energy Program	188		143

Obligation to Return Cash Collateral	218		98
Regulatory Liabilities	345		294
Other	340		530
Total Current Liabilities	1,860		2,850
NONCURRENT LIABILITIES
Deferred Income Taxes and ITC	4,811		4,524
Regulatory Liabilities	2,665		2,707
Operating Leases	83		88
Asset Retirement Obligations	316		314
OPEB Costs	467		485
Accrued Pension Costs	513		612
Environmental Costs	194		236

Long-Term Accrued Taxes	24		7
Other	151		154
Total Noncurrent Liabilities	9,224		9,127
COMMITMENTS AND CONTINGENT LIABILITIES (See Note 11)
CAPITALIZATION
LONG-TERM DEBT	11,793		10,475
STOCKHOLDER’S EQUITY
Common Stock; 150 shares authorized; issued and outstanding, 2021 and 2020—132 shares	892		892
Contributed Capital	1,170		1,170
Basis Adjustment	986		986
Retained Earnings	11,253		10,078
Accumulated Other Comprehensive Income	1		3
Total Stockholder’s Equity	14,302		13,129
Total Capitalization	26,095		23,604
TOTAL LIABILITIES AND CAPITALIZATION	$	37,179	$	35,581

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

Table of Contents

PUBLIC SERVICE ELECTRIC AND GAS COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Millions

(Unaudited)



	Nine Months Ended
	September 30,
	2021		2020
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income	$	1,175	$	1,036
Adjustments to Reconcile Net Income to Net Cash Flows from Operating Activities:
Depreciation and Amortization	698		657

Provision for Deferred Income Taxes and ITC	96		58
Non-Cash Employee Benefit Plan (Credits) Costs	(117)		(77)
Cost of Removal	(88)		(77)
Net Change in Regulatory Assets and Liabilities	(47)		4
Net Change in Certain Current Assets and Liabilities:
Accounts Receivable and Unbilled Revenues	25		8
Materials and Supplies	(16)		—
Prepayments	(89)		(57)
Accounts Payable	(73)		46
Accounts Receivable/Payable—Affiliated Companies, net	(211)		(88)
Other Current Assets and Liabilities	(4)		(9)
Employee Benefit Plan Funding and Related Payments	(6)		(1)
Other	(60)		(76)
Net Cash Provided By (Used In) Operating Activities	1,283		1,424
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to Property, Plant and Equipment	(1,818)		(1,777)
Proceeds from Sales of Trust Investments	29		32
Purchases of Trust Investments	(22)		(32)
Solar Loan Investments	16		5
Other	10		9
Net Cash Provided By (Used In) Investing Activities	(1,785)		(1,763)
CASH FLOWS FROM FINANCING ACTIVITIES
Net Change in Commercial Paper and Loans	(100)		(362)
Issuance of Long-Term Debt	1,325		1,350
Redemption of Long-Term Debt	(434)		(250)
Cash Dividend Paid	—		(175)
Other	(13)		(17)
Net Cash Provided By (Used In) Financing Activities	778		546
Net Increase (Decrease) In Cash, Cash Equivalents and Restricted Cash	276		207
Cash, Cash Equivalents and Restricted Cash at Beginning of Period	233		50
Cash, Cash Equivalents and Restricted Cash at End of Period	$	509	$	257
Supplemental Disclosure of Cash Flow Information:
Income Taxes Paid (Received)	$	188	$	143
Interest Paid, Net of Amounts Capitalized	$	279	$	261
Accrued Property, Plant and Equipment Expenditures	$	252	$	366

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

Table of Contents

PUBLIC SERVICE ELECTRIC AND GAS COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDER’S EQUITY

Millions

(Unaudited)



	Common Stock		Contributed Capital			Basis Adjustment		Retained Earnings		Accumulated Other Comprehensive Income (Loss)
					Total
Balance as of June 30, 2021	$	892	$	1,170		$	986	$	10,864	$	1	$	13,913
Net Income	—		—			—		389		—		389
Other Comprehensive Income (Loss), net of tax (expense) benefit of $0	—		—			—		—		—		—
Comprehensive Income												389

Balance as of September 30, 2021	$	892	$	1,170		$	986	$	11,253	$	1	$	14,302

Balance as of June 30, 2020	$	892	$	1,095		$	986	$	9,474	$	3	$	12,450
Net Income	—		—			—		313		—		313
Other Comprehensive Income (Loss), net of tax (expense) benefit of $0	—		—			—		—		—		—
Comprehensive Income												313
Balance as of September 30, 2020	$	892	$	1,095		$	986	$	9,787	$	3	$	12,763



	Common Stock		Contributed Capital			Basis Adjustment		Retained Earnings		Accumulated Other Comprehensive Income (Loss)
					Total
Balance as of December 31, 2020	$	892	$	1,170		$	986	$	10,078	$	3	$	13,129
Net Income	—		—			—		1,175		—		1,175
Other Comprehensive Income (Loss), net of tax (expense) benefit of $1	—		—			—		—		(2)		(2)
Comprehensive Income												1,173

Balance as of September 30, 2021	$	892	$	1,170		$	986	$	11,253	$	1	$	14,302

Balance as of December 31, 2019	$	892	$	1,095		$	986	$	8,928	$	2	$	11,903
Net Income	—		—			—		1,036		—		1,036
Other Comprehensive Income (Loss), net of tax (expense) benefit of $(1)	—		—			—		—		1		1
Comprehensive Income												1,037
Cumulative Effect Adjustment for CECL	—		—			—		(2)		—		(2)
Cash Dividend Paid	—		—			—		(175)		—		(175)
Balance as of September 30, 2020	$	892	$	1,095		$	986	$	9,787	$	3	$	12,763

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

Table of Contents

PSEG POWER LLC

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Millions

(Unaudited)



	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2021		2020		2021		2020
OPERATING REVENUES	$	51	$	746	$	1,598	$	2,649
OPERATING EXPENSES
Energy Costs	290		290		1,243		1,289
Operation and Maintenance	230		213		711		679
Depreciation and Amortization	50		91		225		276
(Gains) Losses on Asset Dispositions and Impairments	2,162		(122)		2,619		(122)
Total Operating Expenses	2,732		472		4,798		2,122
OPERATING INCOME (LOSS)	(2,681)		274		(3,200)		527
Income from Equity Method Investments	3		4		12		10
Net Gains (Losses) on Trust Investments	(17)		103		120		79
Other Income (Deductions)	16		11		20		—
Net Non-Operating Pension and OPEB Credits (Costs)	12		8		35		25
Interest Expense	(19)		(28)		(70)		(92)
INCOME (LOSS) BEFORE INCOME TAXES	(2,686)		372		(3,083)		549
Income Tax Benefit (Expense)	753		(118)		828		(112)
NET INCOME (LOSS)	$	(1,933)	$	254	$	(2,255)	$	437

See disclosures regarding PSEG Power LLC included in the Notes to Condensed Consolidated Financial Statements.

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PSEG POWER LLC

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Millions

(Unaudited)



	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2021		2020		2021		2020
NET INCOME (LOSS)	$	(1,933)	$	254	$	(2,255)	$	437
Other Comprehensive Income (Loss), net of tax
Unrealized Gains (Losses) on Available-for-Sale Securities, net of tax (expense) benefit of $4, $2, $18 and $(14) for the three and nine months ended 2021 and 2020, respectively	(6)		(2)		(26)		20
Pension/OPEB adjustment, net of tax (expense) benefit of $(1), $(1), $(3) and $(2) for the three and nine months ended 2021 and 2020, respectively	3		2		8		7
Other Comprehensive Income (Loss), net of tax	(3)		—		(18)		27
COMPREHENSIVE INCOME (LOSS)	$	(1,936)	$	254	$	(2,273)	$	464

See disclosures regarding PSEG Power LLC included in the Notes to Condensed Consolidated Financial Statements.

Table of Contents

PSEG POWER LLC

CONDENSED CONSOLIDATED BALANCE SHEETS

Millions

(Unaudited)



	September 30, 2021		December 31, 2020
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents	$	2	$	27
Accounts Receivable	345		328
Accounts Receivable—Affiliated Companies	3		317
Short-Term Loan to Affiliate	—		161
Fuel	270		277
Materials and Supplies, net	214		382
Prepayments	12		16
Derivative Contracts	137		60
Assets Held for Sale	2,050		—
Other	1		2
Total Current Assets	3,034		1,570
PROPERTY, PLANT AND EQUIPMENT	4,736		11,872
Less: Accumulated Depreciation and Amortization	(1,737)		(3,624)
Net Property, Plant and Equipment	2,999		8,248
NONCURRENT ASSETS
Operating Lease Right-of-Use Assets	18		61
NDT Fund	2,595		2,501
Long-Term Investments	64		64
Other Intangibles	133		158
Rabbi Trust Fund	63		66
Derivative Contracts	16		9
Other	28		27
Total Noncurrent Assets	2,917		2,886
TOTAL ASSETS	$	8,950	$	12,704

See disclosures regarding PSEG Power LLC included in the Notes to Condensed Consolidated Financial Statements.

Table of Contents

PSEG POWER LLC

CONDENSED CONSOLIDATED BALANCE SHEETS

Millions

(Unaudited)



	September 30, 2021		December 31, 2020
LIABILITIES AND MEMBER’S EQUITY
CURRENT LIABILITIES
Long-Term Debt Due Within One Year	$	1,350	$	950
Accounts Payable	445		459
Accounts Payable—Affiliated Companies	63		13
Short-Term Loan from Affiliate	862		—
Derivative Contracts	56		21
Accrued Interest	29		16
Liabilities Held for Sale	126		—
Other	59		101
Total Current Liabilities	2,990		1,560
NONCURRENT LIABILITIES
Deferred Income Taxes and ITC	628		1,936
Operating Leases	9		51
Asset Retirement Obligations	941		895
OPEB Costs	185		197
Accrued Pension Costs	281		321
Derivative Contracts	17		4
Long-Term Accrued Taxes	63		57
Other	72		79
Total Noncurrent Liabilities	2,196		3,540
COMMITMENTS AND CONTINGENT LIABILITIES (See Note 11)
LONG-TERM DEBT	—		1,392
MEMBER’S EQUITY
Contributed Capital	2,310		2,310
Basis Adjustment	(986)		(986)
Retained Earnings	2,877		5,307
Accumulated Other Comprehensive Loss	(437)		(419)
Total Member’s Equity	3,764		6,212
TOTAL LIABILITIES AND MEMBER’S EQUITY	$	8,950	$	12,704

See disclosures regarding PSEG Power LLC included in the Notes to Condensed Consolidated Financial Statements.

Table of Contents

PSEG POWER LLC

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Millions

(Unaudited)



	Nine Months Ended
	September 30,
	2021		2020
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (Loss)	$	(2,255)	$	437
Adjustments to Reconcile Net Income (Loss) to Net Cash Flows from Operating Activities:
Depreciation and Amortization	225		276
Amortization of Nuclear Fuel	143		144
(Gains) Losses on Asset Dispositions and Impairments	2,619		(122)
Emission Allowances and REC Compliance Accrual	116		115
Provision for Deferred Income Taxes and ITC	(1,108)		(1)
Non-Cash Employee Benefit Plan (Credits) Costs	(15)		(4)
Interest Accretion on Asset Retirement Obligation	33		31
Net Realized and Unrealized (Gains) Losses on Energy Contracts and Other Derivatives	996		81

Net (Gains) Losses and (Income) Expense from NDT Fund	(154)		(107)
Net Change in Certain Current Assets and Liabilities:
Fuel, Materials and Supplies	(79)		(30)
Cash Collateral	(945)		(12)
Accounts Receivable	22		43
Accounts Payable	10		(51)
Accounts Receivable/Payable—Affiliated Companies, net	244		242
Other Current Assets and Liabilities	(7)		9
Employee Benefit Plan Funding and Related Payments	(7)		(6)
Other	(4)		(45)
Net Cash Provided By (Used In) Operating Activities	(166)		1,000
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to Property, Plant and Equipment	(222)		(307)
Purchase of Emission Allowances and RECs	(83)		(94)
Proceeds from Sales of Trust Investments	1,554		1,673
Purchases of Trust Investments	(1,565)		(1,695)
Proceeds from Sales of Long-Lived Assets	565		151
Short-Term Loan to Affiliate	161		(184)
Other	39		32
Net Cash Provided By (Used In) Investing Activities	449		(424)
CASH FLOWS FROM FINANCING ACTIVITIES

Cash Dividend Paid	(175)		(175)
Redemption of Long-Term Debt	(994)		(406)
Short-Term Loan from Affiliate	862		—
Other	—		(1)
Net Cash Provided By (Used In) Financing Activities	(307)		(582)
Net Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash	(24)		(6)
Cash, Cash Equivalents and Restricted Cash at Beginning of Period	27		21
Cash, Cash Equivalents and Restricted Cash at End of Period	$	3	$	15
Supplemental Disclosure of Cash Flow Information:
Income Taxes Paid (Received)	$	195	$	83
Interest Paid, Net of Amounts Capitalized	$	53	$	71
Accrued Property, Plant and Equipment Expenditures	$	36	$	83

See disclosures regarding PSEG Power LLC included in the Notes to Condensed Consolidated Financial Statements.

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PSEG POWER LLC

CONDENSED CONSOLIDATED STATEMENTS OF MEMBER’S EQUITY

Millions

(Unaudited)



	Contributed Capital		Basis Adjustment		Retained Earnings		Accumulated Other Comprehensive Income (Loss)
			Total
Balance as of June 30, 2021	$	2,310	$	(986)	$	4,810	$	(434)	$	5,700
Net Loss	—		—		(1,933)		—		(1,933)
Other Comprehensive Income (Loss), net of tax (expense) benefit of $3	—		—		—		(3)		(3)
Comprehensive Loss									(1,936)

Balance as of September 30, 2021	$	2,310	$	(986)	$	2,877	$	(437)	$	3,764

Balance as of June 30, 2020	$	2,214	$	(986)	$	5,246	$	(374)	$	6,100
Net Income	—		—		254		—		254
Other Comprehensive Income (Loss), net of tax (expense) benefit of $1	—		—		—		—		—
Comprehensive Income									254
Cash Dividends Paid	—		—		(175)		—		(175)
Balance as of September 30, 2020	$	2,214	$	(986)	$	5,325	$	(374)	$	6,179



	Contributed Capital		Basis Adjustment		Retained Earnings		Accumulated Other Comprehensive Income (Loss)
			Total
Balance as of December 31, 2020	$	2,310	$	(986)	$	5,307	$	(419)	$	6,212
Net Loss	—		—		(2,255)		—		(2,255)
Other Comprehensive Income (Loss), net of tax (expense) benefit of $15	—		—		—		(18)		(18)
Comprehensive Loss									(2,273)
Cash Dividends Paid	—		—		(175)		—		(175)
Balance as of September 30, 2021	$	2,310	$	(986)	$	2,877	$	(437)	$	3,764

Balance as of December 31, 2019	$	2,214	$	(986)	$	5,063	$	(401)	$	5,890
Net Income	—		—		437		—		437
Other Comprehensive Income (Loss), net of tax (expense) benefit of $(16)	—		—		—		27		27
Comprehensive Income									464
Cash Dividends Paid	—		—		(175)		—		(175)
Balance as of September 30, 2020	$	2,214	$	(986)	$	5,325	$	(374)	$	6,179

See disclosures regarding PSEG Power LLC included in the Notes to Condensed Consolidated Financial Statements.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Table of Contents

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

Organization

Public Service Enterprise Group Incorporated (PSEG) is a holding company with a diversified business mix within the energy industry. Its operations are primarily in the Northeastern and Mid-Atlantic United States and in other select markets. PSEG’s principal direct wholly owned subsidiaries are:

Public Service Electric and Gas Company (PSE&G)—which is a public utility engaged principally in the transmission of electricity and distribution of electricity and natural gas in certain areas of New Jersey. PSE&G is subject to regulation by the New Jersey Board of Public Utilities (BPU) and the Federal Energy Regulatory Commission (FERC). PSE&G also invests in regulated solar generation projects and energy efficiency and related programs in New Jersey, which are regulated by the BPU.
PSEG Power LLC (PSEG Power)**—which is a multi-regional energy supply company that integrates the operations of its merchant nuclear and fossil generating assets with its power marketing businesses and fuel supply functions through competitive energy sales in well-developed energy markets primarily in the Northeast and Mid-Atlantic United States through its principal direct wholly owned subsidiaries. PSEG Power’s subsidiaries are subject to regulation by FERC, the Nuclear Regulatory Commission (NRC), the Environmental Protection Agency (EPA) and the states in which they operate.

PSEG’s other direct wholly owned subsidiaries are: PSEG Long Island LLC (PSEG LI), which operates the Long Island Power Authority’s (LIPA) electric transmission and distribution (T&D) system under an Amended and Restated Operations Services Agreement (OSA); PSEG Energy Holdings L.L.C. (Energy Holdings), which earns it revenues from its portfolio of lease investments and holds our investment in offshore wind ventures; and PSEG Services Corporation (Services), which provides certain management, administrative and general services to PSEG and its subsidiaries at cost.

In August 2021, PSEG entered into two agreements to sell PSEG Power’s 6,750 MW fossil generating portfolio to newly formed subsidiaries of Arclight Energy Partners Fund VII LP, a fund controlled by ArcLight Capital Partners. The transactions are subject to customary regulatory approvals at the federal and state levels and are expected to be completed late in the fourth quarter of 2021 or the first quarter of 2022. See Note 4. Early Plant Retirements/Asset Dispositions and Impairments for more details on the transactions.

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

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

Basis of Presentation

The respective financial statements included herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (SEC) applicable to Quarterly Reports on Form 10-Q. Certain information and note disclosures normally included in financial statements prepared in accordance with accounting guidance generally accepted in the United States (GAAP) have been condensed or omitted pursuant to such rules and regulations. These Condensed Consolidated Financial Statements and Notes to Condensed Consolidated Financial Statements (Notes) should be read in conjunction with, and update and supplement matters discussed in, the Annual Report on Form 10-K for the year ended December 31, 2020.

The unaudited condensed consolidated financial information furnished herein reflects all adjustments which are, in the opinion of management, necessary to fairly state the results for the interim periods presented. All such adjustments are of a normal recurring nature. All significant intercompany accounts and transactions are eliminated in consolidation. The year-end Condensed Consolidated Balance Sheets were derived from the audited Consolidated Financial Statements included in the Annual Report on Form 10-K for the year ended December 31, 2020.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Table of Contents

Significant Accounting Policies

Cash, Cash Equivalents and Restricted Cash

The following provides a reconciliation of cash, cash equivalents and restricted cash reported within the Condensed Consolidated Balance Sheets that sum to the total of the same such amounts for the beginning (December 31, 2020) and ending periods shown in the Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2021. Restricted cash consists primarily of deposits received related to various construction projects at PSE&G.



	PSE&G		PSEG Power		Other (A)		Consolidated
	Millions
As of December 31, 2020
Cash and Cash Equivalents	$	204	$	27	$	312	$	543
Restricted Cash in Other Current Assets	7		—		—		7
Restricted Cash in Other Noncurrent Assets	22		—		—		22
Cash, Cash Equivalents and Restricted Cash	$	233	$	27	$	312	$	572

As of September 30, 2021
Cash and Cash Equivalents	$	461	$	2	$	1,348	$	1,811
Restricted Cash in Other Current Assets	33		1		—		34
Restricted Cash in Other Noncurrent Assets	15		—		—		15
Cash, Cash Equivalents and Restricted Cash	$	509	$	3	$	1,348	$	1,860

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

Property, Plant and Equipment

PSEG Power capitalizes costs, including those related to its jointly-owned facilities that increase the capacity, improve or extend the life of an existing asset; represent a newly acquired or constructed asset; or represent the replacement of a retired asset. The cost of maintenance, repair and replacement of minor items of property is charged to appropriate expense accounts as incurred. Environmental costs are capitalized if the costs mitigate or prevent future environmental contamination or if the costs improve existing assets’ environmental safety or efficiency. All other environmental expenditures are expensed as incurred. PSEG Power also capitalizes spare parts that meet specific criteria. Capitalized spares are depreciated over the remaining lives of their associated assets.

In April 2021, the BPU awarded Zero Emission Certificates (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 Power reassessed the Asset Retirement Cost (ARC) and Asset Retirement Obligation (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.

Note 2. Recent Accounting Standards

New Standards Issued and Adopted

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

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

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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

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

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

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

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

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

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

Codification Improvements to Callable Debt Securities—ASU 2020-08

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

Codification Improvements—ASU 2020-10

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

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

Reference Rate Reform Scope Refinement—ASU 2021-01

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

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

New Standards Issued But Not Yet Adopted as of September 30, 2021

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

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

The standard is effective for fiscal years beginning after December 15, 2021 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.

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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.

The standard is effective for fiscal years beginning after December 15, 2021 and early adoption is permitted. Amendments in this standard will be applied either retrospectively or prospectively. PSEG is currently analyzing the impact of this standard on its financial statements.

Note 3. Revenues

Nature of Goods and Services

The following is a description of principal activities by reportable segment from which PSEG, PSE&G and PSEG Power generate their revenues.

PSE&G

Revenues from Contracts with Customers

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

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

Other Revenues from Contracts with Customers

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

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

Revenues Unrelated to Contracts with Customers

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

PSEG Power

Revenues from Contracts with Customers

Electricity and Related Products—Wholesale and retail load contracts are executed in the different Independent System Operator (ISO) regions for the bundled supply of energy, capacity, renewable energy credits (RECs) and ancillary services representing PSEG Power’s performance obligations. Revenue for these contracts is recognized over time as the bundled service is provided to the customer. Transaction terms generally run from several months to three years. PSEG Power also sells to the ISOs energy and ancillary services which are separately transacted in the day-ahead or real-time energy markets. The energy and ancillary services performance obligations are typically satisfied over time as delivered and revenue is recognized accordingly. PSEG Power generally reports electricity sales and purchases conducted with those individual ISOs net on an hourly basis in either Operating Revenues or Energy Costs in its Condensed Consolidated Statements of Operations. The classification depends on the net hourly activity.

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

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

Gas Contracts—PSEG Power sells wholesale natural gas, primarily through an index based full-requirements Basic Gas Supply Service (BGSS) contract with PSE&G to meet the gas supply requirements of PSE&G’s customers. The BGSS contract remains in effect unless terminated by either party with a two-year notice. The performance obligation is primarily delivery of gas which is satisfied over time. Revenue is recognized as gas is delivered. Based upon the availability of natural gas, storage and pipeline capacity beyond PSE&G’s daily needs, PSEG Power also sells gas and pipeline capacity to other counterparties under bilateral contracts. The performance obligation under these contracts is satisfied over time upon delivery of the gas or capacity, and revenue is recognized accordingly.

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 RECs from its solar facilities. Contract terms ranged from 15 to 30 years. The performance obligations were generally solar power and RECs which were transferred to customers upon generation. Revenue was recognized upon generation of the solar power. See Note 4. Early Plant Retirements/Asset Dispositions and Impairments.

PSEG Power has entered into long-term contracts with LIPA for energy management and fuel procurement services. Revenue is recognized over time as services are rendered.

Revenues Unrelated to Contracts with Customers

PSEG Power’s revenues unrelated to contracts with customers include electric, gas and certain energy-related transactions accounted for in accordance with Derivatives and Hedging accounting guidance. See Note 13. Financial Risk Management Activities for further discussion. Prior to the sale of Solar Source, PSEG Power was also a party to solar contracts that qualified as leases and were accounted for in accordance with lease accounting guidance. See Note 4. Early Plant Retirements/Asset Dispositions and Impairments.

Other

Revenues from Contracts with Customers

PSEG LI has a contract with LIPA which generates revenues. PSEG LI’s subsidiary, Long Island Electric Utility Servco, LLC (Servco) records costs which are recovered from LIPA and records the recovery of those costs as revenues when Servco is a principal in the transaction.

Revenues Unrelated to Contracts with Customers

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

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Disaggregation of Revenues



	PSE&G		PSEG Power		Other		Eliminations		Consolidated
	Millions
Three Months Ended September 30, 2021
Revenues from Contracts with Customers
Electric Distribution	$	1,181	$	—	$	—	$	—	$	1,181
Gas Distribution	142		—		—		(4)		138
Transmission	409		—		—		—		409
Electricity and Related Product Sales
PJM
Third-Party Sales	—		622		—		—		622
Sales to Affiliates	—		65		—		(65)		—
New York ISO	—		69		—		—		69
ISO New England	—		49		—		—		49
Gas Sales
Third-Party Sales	—		47		—		—		47
Sales to Affiliates	—		58		—		(58)		—
Other Revenues from Contracts with Customers (A)	80		5		159		—		244
Total Revenues from Contracts with Customers	1,812		915		159		(127)		2,759
Revenues Unrelated to Contracts with Customers (B)	8		(864)		—		—		(856)
Total Operating Revenues	$	1,820	$	51	$	159	$	(127)	$	1,903



	PSE&G		PSEG Power		Other		Eliminations		Consolidated
	Millions
Nine Months Ended September 30, 2021
Revenues from Contracts with Customers
Electric Distribution	$	2,653	$	—	$	—	$	—	$	2,653
Gas Distribution	1,294		—		—		(9)		1,285
Transmission	1,213		—		—		—		1,213
Electricity and Related Product Sales
PJM
Third-Party Sales	—		1,501		—		—		1,501
Sales to Affiliates	—		215		—		(215)		—
New York ISO	—		166		—		—		166
ISO New England	—		118		—		—		118
Gas Sales
Third-Party Sales	—		135		—		—		135
Sales to Affiliates	—		578		—		(578)		—
Other Revenues from Contracts with Customers (A)	236		27		445		(2)		706
Total Revenues from Contracts with Customers	5,396		2,740		445		(804)		7,777
Revenues Unrelated to Contracts with Customers (B)	11		(1,142)		20		—		(1,111)
Total Operating Revenues	$	5,407	$	1,598	$	465	$	(804)	$	6,666

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	PSE&G		PSEG Power		Other		Eliminations		Consolidated
	Millions
Three Months Ended September 30, 2020
Revenues from Contracts with Customers
Electric Distribution	$	1,157	$	—	$	—	$	—	$	1,157
Gas Distribution	116		—		—		(4)		112
Transmission	370		—		—		—		370
Electricity and Related Product Sales
PJM
Third-Party Sales	—		464		—		—		464
Sales to Affiliates	—		123		—		(123)		—
New York ISO	—		36		—		—		36
ISO New England	—		13		—		—		13
Gas Sales
Third-Party Sales	—		14		—		—		14
Sales to Affiliates	—		50		—		(50)		—
Other Revenues from Contracts with Customers (A)	76		13		162		(2)		249
Total Revenues from Contracts with Customers	1,719		713		162		(179)		2,415
Revenues Unrelated to Contracts with Customers (B)	(59)		33		(19)		—		(45)
Total Operating Revenues	$	1,660	$	746	$	143	$	(179)	$	2,370



	PSE&G		PSEG Power		Other		Eliminations		Consolidated
	Millions
Nine Months Ended September 30, 2020
Revenues from Contracts with Customers
Electric Distribution	$	2,529	$	—	$	—	$	—	$	2,529
Gas Distribution	1,125		—		—		(8)		1,117
Transmission	1,114		—		—		—		1,114
Electricity and Related Product Sales
PJM
Third-Party Sales	—		1,178		—		—		1,178
Sales to Affiliates	—		355		—		(355)		—
New York ISO	—		85		—		—		85
ISO New England	—		86		—		—		86
Gas Sales
Third-Party Sales	—		58		—		—		58
Sales to Affiliates	—		528		—		(528)		—
Other Revenues from Contracts with Customers (A)	241		37		447		(3)		722
Total Revenues from Contracts with Customers	5,009		2,327		447		(894)		6,889
Revenues Unrelated to Contracts with Customers (B)	(10)		322		—		—		312
Total Operating Revenues	$	4,999	$	2,649	$	447	$	(894)	$	7,201

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

(B)Includes primarily alternative revenues at PSE&G, derivative contracts and lease contracts at PSEG Power, and lease contracts in Other.

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Contract Balances

PSE&G

PSE&G did not have any material contract balances (rights to consideration for services already provided or obligations to provide services in the future for consideration already received) as of September 30, 2021 and December 31, 2020. Substantially all of PSE&G’s accounts receivable and unbilled revenues result from contracts with customers that are priced at tariff rates. Allowances represented approximately 19% and 14% of accounts receivable (including unbilled revenues) as of September 30, 2021 and December 31, 2020, respectively.

Accounts Receivable—Allowance for Credit Losses

PSE&G’s accounts receivable, including unbilled revenues, is primarily comprised of utility customer receivables for the provision of electric and gas service and appliance services, and are reported in the balance sheet as gross outstanding amounts adjusted for an allowance for credit losses. The allowance for credit losses reflects PSE&G’s best estimate of losses on the account balances. The allowance is based on PSE&G’s projection of accounts receivable aging, historical experience, economic factors and other currently available evidence, including the estimated impact of the ongoing coronavirus pandemic (COVID-19) on the outstanding balances as of September 30, 2021. PSE&G’s electric bad debt expense is recoverable through its Societal Benefits Clause (SBC) mechanism. As of September 30, 2021, PSE&G deferred incremental gas bad debt expense for future regulatory recovery due to the impact of the ongoing pandemic. See Note 6. Rate Filings for additional information.

The following provides a reconciliation of PSE&G’s allowance for credit losses for the three months and nine months ended September 30, 2021 and 2020:



		Three Months Ended September 30, 2021
Balance as of June 30, 2021		$	260
Utility Customer and Other Accounts
	Provision	46
	Write-offs, net of Recoveries of $4 million	(19)
Balance as of September 30, 2021		$	287
		Nine Months Ended September 30, 2021
Balance as of January 1, 2021		$	206
Utility Customer and Other Accounts
	Provision	124
	Write-offs, net of Recoveries of $11 million	(43)
Balance as of September 30, 2021		$	287



		Three Months Ended September 30, 2020
Balance as of June 30, 2020		$	121
Utility Customer and Other Accounts
	Provision	43
	Write-offs, net of Recoveries of $1 million	(6)
Balance as of September 30, 2020		$	158
		Nine Months Ended September 30, 2020
Balance as of January 1, 2020 (A)		$	68
Utility Customer and Other Accounts
	Provision	120
	Write-offs, net of Recoveries of $4 million	(30)
Balance as of September 30, 2020		$	158

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

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PSEG Power

PSEG Power generally collects consideration upon satisfaction of performance obligations, and therefore, PSEG Power had no material contract balances as of September 30, 2021 and December 31, 2020.

PSEG Power’s accounts receivable include amounts resulting from contracts with customers and other contracts which are out of scope of accounting guidance for revenues from contracts with customers. The majority of these accounts receivable are subject to master netting agreements. As a result, accounts receivable resulting from contracts with customers and receivables unrelated to contracts with customers are netted within Accounts Receivable and Accounts Payable on the Condensed Consolidated Balance Sheets.

PSEG Power’s accounts receivable consist mainly of revenues from wholesale load contracts and capacity sales which are executed in the different ISO regions. PSEG Power also sells energy and ancillary services directly to ISOs and other counterparties. In the wholesale energy markets in which PSEG Power operates, payment for services rendered and products transferred are typically due within 30 days of delivery. As such, there is little credit risk associated with these receivables. PSEG Power did not record an allowance for credit losses for these receivables as of September 30, 2021 or December 31, 2020. PSEG Power monitors the status of its counterparties on an ongoing basis to assess whether there are any anticipated credit losses.

Other

PSEG LI did not have any material contract balances as of September 30, 2021 and December 31, 2020.

Remaining Performance Obligations under Fixed Consideration Contracts

PSEG Power and PSE&G primarily record revenues as allowed by the guidance, which states that if an entity has a right to consideration from a customer in an amount that corresponds directly with the value to the customer of the entity’s performance completed to date, the entity may recognize revenue in the amount to which the entity has a right to invoice. PSEG has future performance obligations under contracts with fixed consideration as follows:

PSEG Power

As previously stated, capacity transactions with ISOs are reported on a net basis dependent on PSEG Power’s monthly net sale or purchase position through the individual ISOs.

Capacity Revenues from the PJM Annual Base Residual and Incremental Auctions—The Base Residual Auction is generally conducted annually three years in advance of the operating period. The 2022/2023 auction was held in June 2021 and the 2023/2024 auction is expected to be held in December 2021. 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 MW-Day	MW Cleared (A)
June 2021 to May 2022	$166	7,700
June 2022 to May 2023	$98	6,300

(A)Of the existing MWs cleared, an approximate average of 3,400 MWs are expected to be transferred with the sale of PSEG Power’s fossil generation portfolio.

Capacity Payments from the ISO New England Forward Capacity Market (FCM)—The FCM Auction is conducted annually three years in advance of the operating period. The table below includes PSEG Power’s cleared capacity in the FCM Auction for the Bridgeport Harbor Station 5 (BH5), which cleared the 2019/2020 auction at $231/MW-day for seven years, and the retirement of Bridgeport Harbor Station 3 effective May 31, 2021. PSEG Power expects to realize the following average capacity prices for capacity obligations to be satisfied resulting from the FCM Auctions which have been completed through May 2025 and the seven-year rate lock for BH5 through May 2026:



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

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

(B) Of the existing MWs cleared, the majority of these MWs are expected to be transferred with the sale of PSEG Power’s fossil generation portfolio.

Bilateral capacity contracts—Capacity obligations pursuant to contract terms through 2029 are anticipated to result in revenues totaling $123 million. Approximately $44 million of these revenues are expected to be transferred with the sale of PSEG Power’s fossil generation portfolio.

Other

The LIPA OSA is a 12-year services contract ending in 2025 with annual fixed and incentive components. The fixed fee for the provision of services thereunder in 2021 is $68 million and is updated each year based on the change in the Consumer Price Index. See Note 11. Commitments and Contingent Liabilities for additional information.

Note 4. Early Plant Retirements/Asset Dispositions and Impairments

Nuclear

In April 2019, PSEG Power’s Salem 1, Salem 2 and Hope Creek nuclear plants were awarded ZECs by the BPU. Pursuant to a process established by the BPU, ZECs are purchased from selected nuclear plants and recovered through a non-bypassable distribution charge in the amount of $0.004 per kilowatt-hour (KWh) used (which is equivalent to approximately $10 per megawatt hour (MWh) generated in payments to selected nuclear plants (ZEC payment)). Each nuclear plant is expected to receive ZEC revenue for approximately three years, through May 2022.

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

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

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

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

Non-Nuclear

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

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In May 2021, Power Ventures entered into a purchase agreement with Quattro Solar, LLC, an affiliate of LS Power, relating to the sale by Power Ventures of 100% of its ownership interest in Solar Source including its related assets and liabilities. The transaction closed in June 2021. As a result of the sale, PSEG Power recorded a pre-tax gain on sale of approximately $62 million, which is inclusive of the recognition of previously deferred unamortized investment tax credits (ITC) of $185 million, and income tax expense of approximately $63 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 LP, a fund controlled by ArcLight Capital Partners, LLC for aggregate consideration of approximately $1,920 million. The transactions are subject to customary regulatory approvals at the federal and state levels, which are not cross-conditioned between the two agreements and may be completed independently. The transactions are expected to be completed late in the fourth quarter of 2021 or the first quarter of 2022.

As a result of the Board of Directors’ approval of the transactions, PSEG Power’s fossil generating assets and liabilities to be disposed were reclassified to Assets and Liabilities Held for Sale in August 2021, and accordingly, PSEG Power ceased recording depreciation expense. PSEG Power recorded a pre-tax impairment loss on sale of approximately $2,162 million as the purchase price is lower than the carrying value. This is in addition to the $519 million pre-tax impairment for the ISO-NE asset grouping recorded in the second quarter of 2021 as that asset grouping failed the impairment assessment prior to being classified as held for sale. As such, the total pre-tax loss on sale in 2021 is anticipated to be approximately $2,681 million. Further adjustments may be required as a result of any purchase price or working capital adjustments, primarily related to the timing of when the transactions close. In addition to the impairment loss, PSEG Power has also recorded approximately $13 million in pre-tax severance and retention charges, environmental accruals and other adjustments.

As of September 30, 2021, PSEG Power’s fossil generation assets and liabilities held for sale, including anticipated working capital, were $2,050 million and $126 million, respectively, as follows:



			As of September 30, 2021
		Millions
Current Assets (A)			$	264
Property, Plant and Equipment			1,749
Noncurrent Assets			37
	Total Assets Held for Sale		$	2,050

Current Liabilities (B)			$	49
Noncurrent Liabilities (C)			77
	Total Liabilities Held for Sale		$	126

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

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

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

These held for sale balances represent all of the assets and liabilities expected to transfer to the buyer at closing. PSEG Power will retain ownership of certain assets and liabilities excluded from the transactions primarily related to obligations under certain environmental regulations, including possible remediation obligations under the New Jersey Industrial Site Recovery Act and the Connecticut Transfer Act. The amounts for any such environmental remediation are not currently estimable, but may be material.

In addition to the impairment loss and other related costs, in October 2021 PSEG Power redeemed all of its outstanding debt obligations and incurred a pre-tax loss of $298 million for the make whole provision payable upon early redemption and other non-cash debt extinguishment costs. See Note 12. Debt and Credit Facilities for more detail on PSEG Power’s debt extinguishment.

In September 2020, PSEG Power completed the sale of its ownership interest in the Yards Creek generation facility. PSEG

Power recorded a pre-tax gain on disposition of approximately $122 million in the third quarter of 2020 as the sale price was

greater than book value.

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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 Operation and Maintenance (O&M) Expense, respectively. Servco recorded $142 million and $145 million for the three months and $394 million and $397 million for the nine months ended September 30, 2021 and 2020, respectively, of O&M costs, the full reimbursement of which was reflected in Operating Revenues. For transactions in which Servco acts as an agent for LIPA, it records revenues and the related expenses on a net basis, resulting in no impact on PSEG’s Condensed Consolidated Statement of Operations.

VIE for which PSEG is not the Primary Beneficiary

PSEG holds a 25% equity interest in Ocean Wind JV HoldCo, LLC (OWH), which holds the Ocean Wind project that is expected to achieve full commercial operation in 2025. For additional information, see Note 1. Organization, Basis of Presentation and Significant Accounting Policies. OWH is considered a VIE since its equity investments at risk are not sufficient to permit this entity to finance its activities without additional subordinated financial support. Since PSEG does not have voting control or the power to direct the activities of OWH that most significantly impact its economic performance, PSEG has determined that it is not the primary beneficiary and therefore will account for this investment under the equity method of accounting. PSEG’s maximum exposure to loss is currently limited to the $98 million carrying amount of its investment in OWH as of September 30, 2021, which is included in Long-Term Investments on PSEG’s Condensed Consolidated Balance Sheet.

Note 6. Rate Filings

This Note should be read in conjunction with Note 7. Regulatory Assets and Liabilities to the Consolidated Financial Statements in the Annual Report on Form 10-K for the year ended December 31, 2020.

In addition to items previously reported in the Annual Report on Form 10-K, significant regulatory orders received and currently pending rate filings with FERC and the BPU are as follows:

**BGSS—**In March 2021, the BPU gave final approval to PSE&G’s request to maintain the current BGSS rate of 32 cents per therm which had been provisionally approved effective October 1, 2020.

In June 2021, PSE&G made its annual BGSS filing with the BPU requesting to maintain the current BGSS rate of 32 cents. This matter is pending.

On November 1, 2021, PSE&G, along with other New Jersey gas distribution companies (GDCs), filed with the BPU for a waiver of previous orders and authorizations as may be necessary to permit the GDCs to self-implement periodic BGSS rate increases of up to 5% of the monthly bill of a typical residential customer using 100 therms per month, to be effective December 1, 2021. If the joint motion waiver request is approved by the BPU, PSE&G expects to implement a 5% increase resulting in a BGSS rate of 36 cents per therm, to be effective December 1, 2021. This matter is pending.

**Community Solar Energy Pilot (CSEP) Program—**In May 2021, PSE&G made its initial filing for recovery of costs related to the CSEP program. New Jersey’s Clean Energy Act provided for the establishment of a "Community Solar Energy Pilot Program” which permits electric customers to participate in a solar energy project that is remotely located from their properties but is within their electric public utility service territory. The program allows for a credit to the customer's utility bill equal to the electricity generated attributable to the customer's participation in the solar energy project. PSE&G’s filing proposes to

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recover an initial revenue requirement of $0.4 million associated with the CSEP Program as a new component of PSE&G’s existing electric Green Program Recovery Charge (GPRC). This matter is pending.

**COVID-19 Deferral—**PSE&G continues to make quarterly filings as required by the BPU and has recorded a Regulatory Asset as of September 30, 2021 of approximately $95 million for net incremental costs, including $49 million for incremental gas bad debt expense associated with customer accounts receivable, which PSE&G expects are probable of recovery under the BPU order. In September 2021, the BPU extended the period to December 31, 2022 during which incremental costs attributable to COVID-19 could be deferred as Regulatory Assets.

**Energy Strong (ES) II—**In April 2021, the BPU approved PSE&G’s filing for a $13 million revenue increase under this investment program, effective May 2021. This increase represents the return on and of ES II electric investments placed in service through January 2021.

**GPRC—**In June 2021, the BPU approved as final the GPRC rates approved by the Board on a provisional basis in January 2021. In July 2021, PSE&G filed its 2021 GPRC cost recovery petition requesting BPU approval to recover a $2 million increase in each of electric and gas base rates annual revenues. This matter is pending.

Gas System Modernization Program **II (GSMP II)—**In May 2021, the BPU approved PSE&G’s December 2020 cost recovery petition to recover in gas base rates an annual revenue increase of approximately $21 million effective June 1, 2021. This increase represents the return on and of GSMP II investments placed in service through February 2021.

In September 2021, PSE&G updated its June 2021 GSMP II cost recovery petition seeking BPU approval to recover in gas base rates an estimated annual revenue increase of $28 million effective December 1, 2021. This increase represents the return on and of GSMP II investments in service through August 31, 2021. This matter is pending.

**Remediation Adjustment Charge (RAC)—**In July 2021, the BPU approved PSE&G’s RAC 28 filing requesting recovery of approximately $35 million in net manufactured gas plant remediation expenditures incurred from August 1, 2019 through July 31, 2020.

**SBC—**In August 2021, the BPU approved PSE&G’s 2020 SBC filing to recover electric and gas costs incurred under its Energy Efficiency and Renewable Energy (EE & RE) and Social Programs. The new rates reflect no change to the overall SBC rates to customers but allowed a decrease in the EE & RE sub-component to be added to the Social Programs rate. The remaining rate increase requested by PSE&G for recovery of its Social Programs costs associated with its electric bad debt costs was deferred to the next SBC filing. As of September 30, 2021, PSE&G had approximately $112 million in deferred electric bad debt costs.

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

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

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

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

originally filed revenue.

In October 2021, FERC approved a settlement agreement effective August 1, 2021 reached with the BPU Staff and the New Jersey Rate Counsel with respect to the level of PSE&G’s base transmission return on equity (ROE) and other formula rate matters. The settlement reduces PSE&G’s base ROE from 11.18% to 9.9% and provides that the settling parties will not seek changes to the transmission formula rate for three years. As a result of FERC’s approval of the settlement, PSE&G made the required compliance filing for which final approval is still pending. As of September 30, 2021, PSE&G recorded a reduction of approximately $21 million in transmission revenues and a corresponding Regulatory Liability as a result of the impact of the settlement for the third quarter of 2021.

In October 2021, PSE&G also filed its 2021 Annual Formula Rate Update with FERC for its 2022 transmission revenues under the prior methodology and an ROE at 11.18%. PSE&G will update this filing incorporating the revised 9.9% ROE and other changes in formula rate matters, which will result in an approximate $150 million decrease in annual transmission revenue effective January 1, 2022.

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**Weather Normalization Charge (WNC)—**In September 2021, the BPU provisionally approved PSE&G’s 2021-2022 WNC petition to refund a $2 million overcollection from the 2020-2021 Winter Period. The overcollection will be refunded to PSE&G gas customers during the 2021-2022 Winter Period.

**ZEC Program—**In October 2021, PSE&G filed a petition with the BPU requesting to refund a total of approximately $4 million, including interest, for overcollections resulting from the ZEC program. For the 2021 energy year, PSE&G purchased approximately $157 million in ZECs including interest, from the eligible nuclear plants selected by the BPU with the final payment made in August 2021. As a result of the collections and required ZEC payments, there were overcollected revenues, including interest which PSE&G now seeks to return to customers in 2022.

Note 7. Leases

PSEG and its subsidiaries are both a lessor and a lessee in operating leases. As of September 30, 2021, PSEG and its subsidiaries were lessors for leases classified as operating leases or leveraged leases. See Note 8. Financing Receivables. There was no significant change in amounts reported in Note 8. Leases in the Annual Report on Form 10-K for the year ended December 31, 2020 for operating leases in which PSE&G and Services are lessees. As a result of completion of the sale of the Solar Source units in June 2021, PSEG Power’s Operating Lease Right-of-Use Assets and Operating Lease Liabilities were both reduced by $33 million. See Note 4. Early Plant Retirements/Asset Dispositions and Impairments.

PSEG and its subsidiaries, as lessors, have lease agreements with lease and non-lease components, which are primarily related to generating facilities**.** Rental income from these leases is included in Operating Revenues.

PSEG Power

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

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

Other

Energy Holdings is the lessor in leveraged leases. See Note 8. 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.

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The following is the operating lease income for PSEG Power and Energy Holdings for the three and nine months ended September 30, 2021 and 2020:



	PSEG Power		Energy Holdings		Total
	Millions
Operating Lease Income
Three Months Ended September 30, 2021
Fixed Lease Income	$	—	$	5	$	5
Variable Lease Income	—		—		—
Total Operating Lease Income	$	—	$	5	$	5
Nine Months Ended September 30, 2021
Fixed Lease Income	$	—	$	16	$	16
Variable Lease Income	12		—		12
Total Operating Lease Income	$	12	$	16	$	28

Three Months Ended September 30, 2020
Fixed Lease Income	$	—	$	4	$	4
Variable Lease Income	8		—		8
Total Operating Lease Income	$	8	$	4	$	12
Nine Months Ended September 30, 2020
Fixed Lease Income	$	—	$	12	$	12
Variable Lease Income	21		—		21
Total Operating Lease Income	$	21	$	12	$	33

Note 8. Financing Receivables

PSE&G

PSE&G’s Solar Loan Programs are designed to help finance the installation of solar power systems throughout its electric service area. Interest income on the loans is recorded on an accrual basis. The loans are paid back with SRECs generated from the related installed solar electric system. PSE&G uses collection experience as a credit quality indicator for its Solar Loan Programs and conducts a comprehensive credit review for all prospective borrowers. As of September 30, 2021, none of the solar loans were impaired; however, in the event of a loan default or if a loan becomes impaired, the basis of the solar loan would be recovered through a regulatory recovery mechanism. As of September 30, 2021, none of the solar loans were delinquent and no loans are currently expected to become delinquent in light of the payment mechanism. Therefore, no current credit losses have been recorded for Solar Loan Programs I, II and III. A substantial portion of these amounts are noncurrent and reported in Long-Term Investments on PSEG’s and PSE&G’s Condensed Consolidated Balance Sheets. The following table reflects the outstanding loans by class of customer, none of which would be considered “non-performing.”



	As of
Outstanding Loans by Class of Customers	September 30, 2021		December 31, 2020
	Millions
Commercial/Industrial	$	122	$	145
Residential	5		6
Total	127		151
Current Portion (included in Accounts Receivable)	(30)		(29)
Noncurrent Portion (included in Long-Term Investments)	$	97	$	122

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



Programs	Balance as of September 30, 2021		Funding Provided	Residential Loan Term	Non-Residential Loan Term
	Millions
Solar Loan I	$	16	prior to 2013	10 years	15 years
Solar Loan II	58		prior to 2015	10 years	15 years
Solar Loan III	53		largely funded as of September 30, 2021	10 years	10 years
Total	$	127

The average life of loans paid in full is eight years, which is lower than the loan terms of 10 to 15 years due to the generation of SRECs being greater than expected and/or cash payments made to the loan. Payments on all outstanding loans were current as of September 30, 2021 and have an average remaining life of approximately four years.

Energy Holdings

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 Condensed Consolidated Balance Sheets. As an equity investor, Energy Holdings’ equity investments in the leases are comprised of the total expected lease receivables over the lease terms plus the estimated residual values at the end of the lease terms, reduced for any income not yet earned on the leases. This amount is included in Long-Term Investments on PSEG’s Condensed Consolidated Balance Sheets. The more rapid depreciation of the leased property for tax purposes creates tax cash flow that will be repaid to the taxing authority in later periods. As such, the liability for such taxes due is recorded in Deferred Income Taxes on PSEG’s Condensed Consolidated Balance Sheets.

Leveraged leases outstanding as of September 30, 2021 commenced in or prior to 2000. The following table shows Energy Holdings’ gross and net lease investment as of September 30, 2021 and December 31, 2020.



	As of
	September 30, 2021		December 31, 2020
	Millions
Lease Receivables (net of Non-Recourse Debt)	$	274	$	299
Estimated Residual Value of Leased Assets	45		55
Total Investment in Rental Receivables	319		354
Unearned and Deferred Income	(91)		(104)
Gross Investments in Leases	228		250
Deferred Tax Liabilities	(54)		(64)
Net Investments in Leases	$	174	$	186

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The corresponding receivables associated with the lease portfolio are reflected as follows, net of non-recourse debt. The ratings in the table represent the ratings of the entities providing payment assurance to Energy Holdings.



		Lease Receivables, Net of Non-Recourse Debt
Counterparties' Standard & Poor's (S&P) Credit Rating as of September 30, 2021
	As of September 30, 2021
		Millions
AA		$	8
A-		51
BBB+ to BBB		178
BB+		37
Total		$	274

The “BB+” rating in the preceding table represents a lease receivable related to Merrill Creek Reservoir. Metropolitan Edison Company (a subsidiary of First Energy) is the lease counterparty. As of September 30, 2021, the gross investment in this lease was $24 million ($19 million, net of deferred taxes).

PSEG recorded no credit losses for the leveraged leases existing on September 30, 2021. Upon the occurrence of certain defaults, indirect subsidiaries of Energy Holdings would exercise their rights and seek recovery of their investment, potentially including stepping into the lease directly to protect their investments. While these actions could ultimately protect or mitigate the loss of value, they could require the use of significant capital and trigger certain material tax obligations which could, for certain leases, wholly or partially be mitigated by tax indemnification claims against the counterparty. A bankruptcy of a lessee would likely delay and potentially limit any efforts on the part of the lessors to assert their rights upon default and could delay the monetization of claims.

Note 9. Trust Investments

Nuclear Decommissioning Trust (NDT) Fund

PSEG Power maintains an external master NDT to fund its share of decommissioning costs for its 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. The funds are managed by third-party investment managers who operate under investment guidelines developed by PSEG Power.

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



	As of September 30, 2021
	Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
	Millions
Equity Securities
Domestic	$	486	$	322	$	(3)	$	805
International	346		116		(10)		452
Total Equity Securities	832		438		(13)		1,257
Available-for-Sale Debt Securities
Government	707		13		(7)		713
Corporate	608		20		(4)		624
Total Available-for-Sale Debt Securities	1,315		33		(11)		1,337
Total NDT Fund Investments (A)	$	2,147	$	471	$	(24)	$	2,594

(A)The NDT Fund Investments table excludes foreign currency of $1 million as of September 30, 2021, which is part of the NDT Fund.

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

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

Net unrealized gains (losses) on debt securities of $13 million (after-tax) were included in Accumulated Other Comprehensive Loss on PSEG’s and PSEG Power’s Condensed Consolidated Balance Sheets as of September 30, 2021. The portion of net unrealized gains (losses) recognized in the third quarter and first nine months of 2021 related to equity securities still held as of September 30, 2021 was $(18) million and $69 million, respectively.

The amounts in the preceding tables do not include receivables and payables for NDT Fund transactions which have not settled at the end of each period. Such amounts are included in Accounts Receivable and Accounts Payable on the Condensed Consolidated Balance Sheets as shown in the following table.



	As of		As of
	September 30, 2021		December 31, 2020
	Millions
Accounts Receivable	$	21	$	11
Accounts Payable	$	29	$	12

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



	As of September 30, 2021								As of December 31, 2020
	Less Than 12 Months				Greater Than 12 Months				Less Than 12 Months				Greater Than 12 Months
	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
	Millions
Equity Securities (A)
Domestic	$	41	$	(3)	$	—	$	—	$	23	$	(2)	$	6	$	(1)
International	83		(8)		9		(2)		26		(2)		27		(7)
Total Equity Securities	124		(11)		9		(2)		49		(4)		33		(8)
Available-for-Sale Debt Securities
Government (B)	325		(4)		48		(3)		72		(1)		—		—
Corporate (C)	222		(3)		15		(1)		31		(1)		7		—
Total Available-for-Sale Debt Securities	547		(7)		63		(4)		103		(2)		7		—
NDT Trust Investments	$	671	$	(18)	$	72	$	(6)	$	152	$	(6)	$	40	$	(8)

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

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

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

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



	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2021		2020		2021		2020
	Millions
Proceeds from NDT Fund Sales (A)	$	387	$	583	$	1,522	$	1,631
Net Realized Gains (Losses) on NDT Fund
Gross Realized Gains	$	32	$	91	$	194	$	161
Gross Realized Losses	(17)		(23)		(55)		(77)
Net Realized Gains (Losses) on NDT Fund (B)	15		68		139		84
Net Unrealized Gains (Losses) on Equity Securities	(33)		34		(20)		(5)
Impairment of Available-for-Sale Debt Securities (C)	—		—		—		(3)
Net Gains (Losses) on NDT Fund Investments	$	(18)	$	102	$	119	$	76

(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 September 30, 2021 had the following maturities:



Time Frame	Fair Value
	Millions
Less than one year	$	22
1 - 5 years	352
6 - 10 years	231
11 - 15 years	81
16 - 20 years	91
Over 20 years	560
Total NDT Available-for-Sale Debt Securities	$	1,337

PSEG Power periodically assesses individual debt securities whose fair value is less than amortized cost to determine whether the investments are impaired. For these securities, management considers its intent to sell or requirement to sell a security prior to expected recovery. In those cases where a sale is expected, any impairment would be recorded through earnings. For fixed income securities where there is no intent to sell or likely requirement to sell, management evaluates whether credit loss is a component of the impairment. If so, that portion is recorded through earnings while the noncredit loss component is recorded through Accumulated Other Comprehensive Income (Loss). Any subsequent recoveries of the noncredit loss component of the impairment would be recorded through Accumulated Other Comprehensive Income (Loss). Any subsequent recoveries of the credit loss component would be recognized through earnings. The assessment of fair market value compared to cost is applied on a weighted average basis taking into account various purchase dates and initial cost of the securities.

Rabbi Trust

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

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

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	As of September 30, 2021
	Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
	Millions
Domestic Equity Securities	$	16	$	11	$	—	$	27
Available-for-Sale Debt Securities
Government	104		3		(2)		105
Corporate	106		5		—		111
Total Available-for-Sale Debt Securities	210		8		(2)		216

Total Rabbi Trust Investments	$	226	$	19	$	(2)	$	243



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

Net unrealized gains (losses) on debt securities of $4 million (after-tax) were included in Accumulated Other Comprehensive Loss on PSEG’s Condensed Consolidated Balance Sheet as of September 30, 2021. The portion of net unrealized gains recognized during the third quarter and first nine months of 2021 related to equity securities still held as of September 30, 2021 was immaterial.

The amounts in the preceding tables do not include receivables and payables for Rabbi Trust Fund transactions which have not settled at the end of each period. Such amounts are included in Accounts Receivable and Accounts Payable on the Condensed Consolidated Balance Sheets as shown in the following table.



	As of		As of
	September 30, 2021		December 31, 2020
	Millions
Accounts Receivable	$	1	$	1
Accounts Payable	$	1	$	1

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



	As of September 30, 2021								As of December 31, 2020
	Less Than 12 Months				Greater Than 12 Months				Less Than 12 Months				Greater Than 12 Months
	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
	Millions
Available-for-Sale Debt Securities
Government (A)	$	61	$	(1)	$	6	$	(1)	$	19	$	—	$	—	$	—
Corporate (B)	34		—		1		—		2		—		1		—
Total Available-for-Sale Debt Securities	95		(1)		7		(1)		21		—		1		—

Rabbi Trust Investments	$	95	$	(1)	$	7	$	(1)	$	21	$	—	$	1	$	—

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

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

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



	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2021		2020		2021		2020
	Millions
Proceeds from Rabbi Trust Sales	$	41	$	50	$	135	$	165
Net Realized Gains (Losses) on Rabbi Trust:
Gross Realized Gains	$	4	$	4	$	11	$	14
Gross Realized Losses	(3)		(1)		(6)		(4)
Net Realized Gains (Losses) on Rabbi Trust (A)	1		3		5		10
Net Unrealized Gains (Losses) on Equity Securities	—		2		—		1

Net Gains (Losses) on Rabbi Trust Investments	$	1	$	5	$	5	$	11

(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 September 30, 2021 had the following maturities:



Time Frame	Fair Value
	Millions
Less than one year	$	—
1 - 5 years	42
6 - 10 years	25
11 - 15 years	10
16 - 20 years	24
Over 20 years	115
Total Rabbi Trust Available-for-Sale Debt Securities	$	216

PSEG periodically assesses individual debt securities whose fair value is less than amortized cost to determine whether the investments are considered to be impaired. For these securities, management considers its intent to sell or requirement to sell a security prior to expected recovery. In those cases where a sale is expected, any impairment would be recorded through earnings. For fixed income securities where there is no intent to sell or likely requirement to sell, management evaluates whether credit loss is a component of the impairment. If so, that portion is recorded through earnings while the noncredit loss component is recorded through Accumulated Other Comprehensive Income (Loss). Any subsequent recoveries of the noncredit loss component of the impairment would be recorded through Accumulated Other Comprehensive Income (Loss). Any subsequent recoveries of the credit loss component would be recognized through earnings. The assessment of fair market value compared to cost is applied on a weighted average basis taking into account various purchase dates and initial cost of the securities.

The fair value of the Rabbi Trust related to PSE&G, PSEG Power and PSEG’s other subsidiaries is detailed as follows:



	As of		As of
	September 30, 2021		December 31, 2020
	Millions
PSE&G	$	43	$	51
PSEG Power	63		66
Other	137		149
Total Rabbi Trust Investments	$	243	$	266

Note 10. Pension and Other Postretirement Benefits (OPEB)

PSEG sponsors qualified and nonqualified pension plans and OPEB plans covering PSEG’s and its participating affiliates’ current and former employees who meet certain eligibility criteria.

PSEG, PSE&G and PSEG Power are required to record the under or over funded positions of their defined benefit pension and OPEB plans on their respective balance sheets. Such funding positions of each PSEG company are required to be measured as of the date of their respective year-end Consolidated Balance Sheets.

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

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	Pension Benefits				OPEB				Pension Benefits				OPEB
	Three Months Ended				Three Months Ended				Nine Months Ended				Nine Months Ended
	September 30,				September 30,				September 30,				September 30,
	2021		2020		2021		2020		2021		2020		2021		2020
	Millions
Components of Net Periodic Benefit (Credits) Costs
Service Cost (included in O&M Expense)	$	37	$	36	$	3	$	2	$	113	$	106	$	7	$	7
Non-Service Components of Pension and OPEB (Credits) Costs
Interest Cost	35		48		5		8		105		144		16		25
Expected Return on Plan Assets	(119)		(111)		(10)		(10)		(357)		(332)		(31)		(29)
Amortization of Net
Prior Service Credit	—		(3)		(33)		(32)		—		(8)		(97)		(96)
Actuarial Loss	26		23		11		12		77		69		33		35
Non-Service Components of Pension and OPEB (Credits) Costs	(58)		(43)		(27)		(22)		(175)		(127)		(79)		(65)
Total Benefit (Credits) Costs	$	(21)	$	(7)	$	(24)	$	(20)	$	(62)	$	(21)	$	(72)	$	(58)

Pension and OPEB credits for PSE&G, PSEG Power and PSEG’s other subsidiaries, excluding Servco, are detailed as follows:



	Pension Benefits				OPEB				Pension Benefits				OPEB
	Three Months Ended				Three Months Ended				Nine Months Ended				Nine Months Ended
	September 30,				September 30,				September 30,				September 30,
	2021		2020		2021		2020		2021		2020		2021		2020
	Millions
PSE&G	$	(16)	$	(7)	$	(23)	$	(19)	$	(48)	$	(20)	$	(69)	$	(57)
PSEG Power	(4)		(1)		(1)		—		(13)		(4)		(2)		—
Other	(1)		1		—		(1)		(1)		3		(1)		(1)
Total Benefit (Credits) Costs	$	(21)	$	(7)	$	(24)	$	(20)	$	(62)	$	(21)	$	(72)	$	(58)

PSEG does not plan to contribute to its pension and OPEB plans in 2021.

Servco Pension and OPEB

At the direction of LIPA, Servco sponsors benefit plans that cover its current and former employees who meet certain eligibility criteria. Under the OSA, all of these and any future employee benefit costs are to be funded by LIPA. See Note 5. Variable Interest Entities. These obligations, as well as the offsetting long-term receivable, are separately presented on the Condensed Consolidated Balance Sheet of PSEG.

Servco amounts are not included in any of the preceding pension and OPEB cost disclosures. Pension and OPEB costs of Servco are accounted for according to the OSA. Servco recognizes expenses for contributions to its pension plan trusts and for OPEB payments made to retirees. Operating Revenues are recognized for the reimbursement of these costs. As of September 30, 2021, Servco completed its entire 2021 annual planned contribution into its pension plan. Servco’s pension-related revenues and costs were $18 million and $15 million for the three months ended September 30, 2021 and 2020, and $37 million and $30 million for the nine months ended September 30, 2021 and 2020, respectively. The OPEB-related revenues earned and costs incurred were $3 million for each of the three months ended September 30, 2021 and 2020, and $8 million and $7 million for the nine months ended September 30, 2021 and 2020, respectively.

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Note 11. Commitments and Contingent Liabilities

Guaranteed Obligations

PSEG Power’s activities primarily involve the purchase and sale of energy and related products under transportation, physical, financial and forward contracts at fixed and variable prices. These transactions are with numerous counterparties and brokers that may require cash, cash-related instruments or guarantees as a form of collateral.

PSEG Power has unconditionally guaranteed payments to counterparties on behalf of its subsidiaries in commodity-related transactions in order to

support current exposure, interest and other costs on sums due and payable in the ordinary course of business, and
obtain credit.

PSEG Power is subject to

counterparty collateral calls related to commodity contracts of its subsidiaries, and
certain creditworthiness standards as guarantor under performance guarantees of its subsidiaries.

Under these agreements, guarantees cover lines of credit between entities and are often reciprocal in nature. The exposure between counterparties can move in either direction.

In order for PSEG Power to incur a liability for the face value of the outstanding guarantees,

its subsidiaries would have to fully utilize the credit granted to them by every counterparty to whom PSEG Power has provided a guarantee, and
the net position of the related contracts would have to be “out-of-the-money” (if the contracts are terminated, PSEG Power would owe money to the counterparties).

PSEG Power believes the probability of this result is unlikely. For this reason, PSEG Power believes that the current exposure at any point in time is a more meaningful representation of the potential liability under these guarantees. Current exposure consists of the net of accounts receivable and accounts payable and the forward value on open positions, less any collateral posted.

Changes in commodity prices can have a material impact on collateral requirements under such contracts, which are posted and received primarily in the form of cash and letters of credit. PSEG Power also routinely enters into futures and options transactions for electricity and natural gas as part of its operations. These futures contracts usually require a cash margin deposit with brokers, which can change based on market movement and in accordance with exchange rules.

In addition to the guarantees discussed above, PSEG Power has also provided payment guarantees to third parties and regulatory authorities on behalf of its affiliated companies. These guarantees support various other non-commodity related obligations.

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The following table shows the face value of PSEG Power’s outstanding guarantees, current exposure and margin positions as of September 30, 2021 and December 31, 2020.



	As of		As of
	September 30, 2021		December 31, 2020
	Millions
Face Value of Outstanding Guarantees	$	1,704	$	1,792
Exposure under Current Guarantees	$	245	$	128

Letters of Credit Margin Posted	$	85	$	128
Letters of Credit Margin Received	$	27	$	45

Cash Deposited and Received
Counterparty Cash Collateral Deposited	$	61	$	—
Counterparty Cash Collateral Received	$	(1)	$	(5)
Net Broker Balance Deposited (Received)	$	939	$	59

Additional Amounts Posted
Other Letters of Credit	$	40	$	42

As part of determining credit exposure, PSEG Power nets receivables and payables with the corresponding net fair values of energy contracts. See Note 13. Financial Risk Management Activities for further discussion. In accordance with PSEG’s accounting policy, where it is applicable, cash (received)/deposited is allocated against derivative asset and liability positions with the same counterparty on the face of the Condensed Consolidated Balance Sheet. The remaining balances of net cash (received)/deposited after allocation are generally included in Accounts Payable and Receivable, respectively.

In addition to amounts for outstanding guarantees, current exposure and margin positions, PSEG and PSEG Power have posted letters of credit to support PSEG Power’s various other non-energy contractual and environmental obligations. See the preceding table.

Environmental Matters

Passaic River

Lower Passaic River Study Area

The U.S. Environmental Protection Agency (EPA) has determined that a 17-mile stretch of the Passaic River (Lower Passaic River Study Area (LPRSA)) in New Jersey is a “Superfund” site under the Federal Comprehensive Environmental Response, Compensation and Liability Act of 1980 (CERCLA). PSE&G and certain of its predecessors conducted operations at properties in this area, including at one site that was transferred to PSEG Power.

Certain Potentially Responsible Parties (PRPs), including PSE&G and PSEG Power, formed a Cooperating Parties Group (CPG) and agreed to conduct a Remedial Investigation and Feasibility Study of the LPRSA. The CPG allocated, on an interim basis, the associated costs among its members. The interim allocation is subject to change. In June 2019, the EPA conditionally approved the CPG’s Remedial Investigation. In September 2021, the EPA approved the CPG’s Feasibility Study (FS), which evaluated various adaptive management scenarios for the remediation of only the upper 9 miles of the LPRSA. In October 2021, the EPA announced a Record of Decision (ROD) outlining its selection of an adaptive management scenario for the upper 9 miles from the options presented in the FS (the Upper 9 ROD Remedy). Specifically, the Upper 9 ROD Remedy calls for dredging and capping contaminated sediments from certain areas of the upper 9 miles at an estimated cost of $550 million, and then assessing the results. Based on the results, the EPA may determine that additional remediation work will be required in the future. The cost estimates in the Upper 9 ROD Remedy are substantively identical to those in the proposed remediation plan that the EPA issued in April 2021. PSEG has previously adjusted its accrued liability based on the cost estimates in the proposed remediation plan, so no additional accrual adjustment is warranted for the Upper 9 ROD Remedy.

Separately, the EPA has released a ROD for the LPRSA’s lower 8.3 miles that requires the removal of sediments at an estimated cost of $2.3 billion (the Lower 8.3 ROD Remedy). An EPA-commenced process to allocate the associated costs is underway and PSEG cannot predict the outcome. The allocation does not address certain costs incurred by the EPA for which they may be entitled to reimbursement and which may be material. Occidental Chemical Corporation, one of the PRPs, has commenced the design of the Lower 8.3 ROD Remedy, but declined to participate in the allocation process. Instead, it filed suit against PSE&G and others seeking cost recovery and contribution under CERCLA but has not quantified alleged damages. The litigation is ongoing and PSEG cannot predict the outcome.

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Two PRPs, Tierra Solutions, Inc. (Tierra) and Maxus Energy Corporation (Maxus), have filed for Chapter 11 bankruptcy. The trust representing the creditors in this proceeding has filed a complaint asserting claims against Tierra’s and Maxus’ current and former parent entities, among others. Any damages awarded may be used to fund the remediation of the LPRSA.

As of September 30, 2021, PSEG has approximately $66 million accrued for this matter. Of this amount, 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 11 other PRPs of their potential liability. PSE&G and PSEG Power are unable to estimate their respective portions of any loss or possible range of loss related to this matter. In December 2018, PSEG Power completed the sale of the site of the Hudson electric generating station. PSEG Power contractually transferred all land rights and structures on the Hudson site to a third-party purchaser, along with the assumption of the environmental liabilities for the site.

Natural Resource Damage Claims

New Jersey and certain federal regulators have alleged that PSE&G, PSEG Power and 56 other PRPs may be liable for natural resource damages within the LPRSA. In particular, PSE&G, PSEG Power and other PRPs received notice from federal regulators of the regulators’ intent to move forward with a series of studies assessing potential damages to natural resources at the Diamond Alkali Superfund Site, which includes the LPRSA and the Newark Bay Study Area. PSE&G and PSEG Power are unable to estimate their respective portions of any possible loss or range of loss related to this matter.

Manufactured Gas Plant (MGP) Remediation Program

PSE&G is working with the New Jersey Department of Environmental Protection (NJDEP) to assess, investigate and remediate environmental conditions at its former MGP sites. To date, 38 sites requiring some level of remedial action have been identified. Based on its current studies, PSE&G has determined that the estimated cost to remediate all MGP sites to completion could range between $243 million and $271 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 $243 million as of September 30, 2021. Of this amount, $53 million was recorded in Other Current Liabilities and $190 million was reflected as Environmental Costs in Noncurrent Liabilities. PSE&G has recorded a $243 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.

CWA Section 316(b) Rule

The EPA’s CWA Section 316(b) rule establishes requirements for the regulation of cooling water intakes at existing power plants and industrial facilities with a design flow of more than two million gallons of water per day. The EPA requires that National Pollutant Discharge Elimination System permits be renewed every five years and that each state Permitting Director manage renewal permits for its respective power generation facilities on a case by case basis. The NJDEP manages the permits under the New Jersey Pollutant Discharge Elimination System (NJPDES) program. Connecticut and New York also have permits to manage their respective pollutant discharge elimination system programs.

In June 2016, the NJDEP issued a final NJPDES permit for Salem. In July 2016, the Delaware Riverkeeper Network (Riverkeeper) filed an administrative hearing request challenging certain conditions of the permit, including the NJDEP’s application of the 316(b) rule. If the Riverkeeper’s challenge is successful, PSEG Power may be required to incur additional costs to comply with the CWA. Potential cooling water and/or service water system modification costs could be material and could adversely impact the economic competitiveness of this facility. The NJDEP granted the hearing request but no hearing date has been established.

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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.

Basic Generation Service (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, which represents about 82% of PSE&G’s load requirement, is residential and smaller commercial and industrial customers (BGS-Residential Small Commercial Pricing (RSCP)). The second category is larger customers that exceed a BPU-established load (kW) threshold (BGS-Commercial and Industrial Energy Pricing (CIEP)). Pursuant to applicable BPU rules, PSE&G enters into the Supplier Master Agreements with the winners of these RSCP and CIEP BGS auctions to purchase BGS for PSE&G’s load requirements. The winners of the RSCP and CIEP auctions have been responsible for fulfilling all the requirements of a PJM load-serving entity including the provision of capacity, energy, ancillary services, transmission and any other services required by PJM. BGS suppliers assume all volume risk and customer migration risk and must satisfy New Jersey’s renewable portfolio standards. Beginning with the 2021 BGS auction, transmission became the responsibility of the New Jersey EDCs, and is no longer a component of the BGS auction product for either the RSCP or CIEP auctions. BGS suppliers serving load from the 2018, 2019 and 2020 BGS auctions had the option to transfer the transmission obligation to the New Jersey EDCs as of February 2021. Suppliers that did so have their total BGS payment from the EDCs reduced to reflect the transfer of the transmission obligation to the EDCs.

The BGS-CIEP auction is for a one-year supply period from June 1 to May 31 with the BGS-CIEP auction price measured in dollars per MW-day for capacity. The final price for the BGS-CIEP auction year commencing June 1, 2021 is $351.06 per MW-day, replacing the BGS-CIEP auction year price ending May 31, 2021 of $359.98 per MW-day. Energy for BGS-CIEP is priced at hourly PJM locational marginal prices for the contract period.

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



	Auction Year
	2018	2019	2020	2021
36-Month Terms Ending	May 2021	May 2022	May 2023	May 2024	(A)
Load (MW)	2,900	2,800	2,800	2,900
$ per MWh	$91.77	$98.04	$102.16	$64.80

(A)Prices set in the 2021 BGS auction became effective on June 1, 2021 when the 2018 BGS auction agreements expired.

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

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billion cubic feet or 50% of its residential gas supply annual requirements. For additional information, see Note 20. Related-Party Transactions.

Pursuant to a process established by the BPU, New Jersey EDCs, including PSE&G, are required to purchase ZECs from eligible nuclear plants selected by the BPU. In April 2019, PSEG Power’s Salem 1, Salem 2 and Hope Creek nuclear plants were selected to receive ZEC revenue for approximately three years, through May 2022. In April 2021, PSEG Power’s Salem 1, Salem 2 and Hope Creek nuclear plants were awarded ZECs for the three-year eligibility period starting June 2022. PSE&G has implemented a tariff to collect a non-bypassable distribution charge in the amount of $0.004 per KWh from its retail distribution customers to be used to purchase the ZECs from these plants. PSE&G will purchase the ZECs on a monthly basis with payment to be made annually following completion of each energy year. The legislation also requires nuclear plants to reapply for any subsequent three-year periods and allows the BPU to adjust prospective ZEC payments.

Minimum Fuel Purchase Requirements

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

PSEG Power has various multi-year contracts for natural gas and firm transportation and storage capacity for natural gas that are primarily used to meet its obligations to PSE&G. When there is excess delivery capacity available beyond the needs of PSE&G’s customers, PSEG Power can use the gas to supply its fossil generating stations in New Jersey.

As of September 30, 2021, the total minimum purchase requirements included in these commitments were as follows:



Fuel Type	PSEG Power’s Share of Commitments through 2025
	Millions
Nuclear Fuel
Uranium	$	216
Enrichment	$	300
Fabrication	$	169
Natural Gas (A)	$	1,167

(A)Approximately $31 million of commitments for natural gas are expected to be transferred with the sale of PSEG Power’s fossil generation portfolio.

Pending FERC Matter

PSE&G has received subpoenas for information and a Notice of Investigation from FERC’s Office of Enforcement concerning the Roseland-Pleasant Valley transmission project. PSE&G is fully cooperating with FERC’s requests for information and the investigation. It is not possible at this time to predict the outcome of this matter.

Pending Tropical Storm Matter

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

In agreement with LIPA, PSEG LI funded approximately $7 million in claims by customers for food and medication spoilage costs incurred as a result of being without electric service during the storm.

In December 2020, LIPA filed a complaint against PSEG LI in New York State court alleging multiple breaches of the OSA in connection with PSEG LI’s preparation for and response to Tropical Storm Isaias seeking specific performance and $70 million in damages. In June 2021, LIPA and PSEG LI executed a non-binding term sheet, which is expected to guide amendments to the OSA. The term sheet includes several changes to the OSA, including shifting a portion of PSEG LI’s fixed revenues to

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incentive compensation and subjecting a portion of revenue to the potential imposition of penalties by the DPS due to certain performance failures by PSEG LI, and resolves all of LIPA’s claims related to Tropical Storm Isaias and the DPS investigation. Any amendments to the OSA will require the approval of the New York Attorney General and the New York Comptroller. The OSA contract term will continue through 2025, with a mutual option to extend. No assurances can be given regarding reaching final settlement agreement, obtaining New York approvals and the closing of the inquiry by the Attorney General.

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

BPU Audit of PSE&G

In September 2020, the BPU ordered the commencement of a comprehensive affiliate and management audit of PSE&G. It has been more than ten years since the BPU last conducted a management and affiliate audit of this kind of PSE&G, which is initiated periodically as required by New Jersey statutes/regulations. Phase 1 of the planned audit will review affiliate relations and cost allocation between PSE&G and its affiliates, including an analysis of the relationship between PSE&G and PSEG Energy Resources & Trade, LLC, a wholly owned subsidiary of PSEG Power over the past ten years, and between PSE&G and PSEG LI. Phase 2 will be a comprehensive management audit, which will address, among other things, executive management, corporate governance, system operations, human resources, cyber security, compliance with customer protection requirements and customer safety. The audit officially began in late May 2021 and is in the data collection phase. It is not possible at this time to predict the outcome of this matter.

Litigation

Sewaren 7 Construction

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

Other Litigation and Legal Proceedings

PSEG and its subsidiaries are party to various lawsuits in the ordinary course of business. In view of the inherent difficulty in predicting the outcome of such matters, PSEG, PSE&G and PSEG Power generally cannot predict the eventual outcome of the pending matters, the timing of the ultimate resolution of these matters, or the eventual loss, fines or penalties related to each pending matter.

In accordance with applicable accounting guidance, a liability is accrued when those matters present loss contingencies that are both probable and reasonably estimable. In such cases, there may be an exposure to loss in excess of any amounts accrued. PSEG will continue to monitor the matter for further developments that could affect the amount of the accrued liability that has been previously established.

Based on current knowledge, management does not believe that loss contingencies arising from pending matters, other than the matters described herein, could have a material adverse effect on PSEG’s, PSE&G’s or PSEG Power’s consolidated financial position or liquidity. However, in light of the inherent uncertainties involved in these matters, some of which are beyond PSEG’s control, and the large or indeterminate damages sought in some of these matters, an adverse outcome in one or more of these matters could be material to PSEG’s, PSE&G’s or PSEG Power’s results of operations or liquidity for any particular reporting period.

Ongoing Coronavirus Pandemic

PSE&G, PSEG Power and PSEG LI are providing essential services during this national emergency related to the ongoing coronavirus (COVID-19) pandemic. The 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

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moratorium on shutoffs for residential customers that has been extended through December 31, 2021. PSE&G has deferred the impact of these costs for future recovery. The potential future impact of the pandemic and the associated economic impacts, which could extend beyond the duration of the pandemic, could have risks that drive certain accounting considerations. The ultimate impact of the ongoing coronavirus pandemic is highly uncertain and cannot be predicted at this time.

Note 12. Debt and Credit Facilities

Long-Term Debt Financing Transactions

The following long-term debt transactions occurred in the nine months ended September 30, 2021:

PSE&G

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

PSEG Power

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

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

Short-Term Liquidity

PSEG meets its short-term liquidity requirements, as well as those of PSEG Power, primarily through the issuance of commercial paper and, from time to time, short-term loans. PSE&G maintains its own separate commercial paper program to meet its short-term liquidity requirements. Each commercial paper program is fully back-stopped by its own separate credit facilities.

The commitments under the $4.1 billion credit facilities are provided by a diverse bank group. As of September 30, 2021, the total available credit capacity was $2.8 billion.

As of September 30, 2021, no single institution represented more than 8% of the total commitments in the credit facilities.

As of September 30, 2021, total credit capacity was in excess of the total 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.

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The total credit facilities and available liquidity as of September 30, 2021 were as follows:



	As of September 30, 2021
Company/Facility	Total Facility		Usage (D)		Available Liquidity		Expiration Date	Primary Purpose
	Millions
PSEG
5-year Credit Facilities (A)	$	1,500	$	1,207	$	293	Mar 2024	Commercial Paper Support/Funding/Letters of Credit
Total PSEG	$	1,500	$	1,207	$	293
PSE&G
5-year Credit Facility (B)	$	600	$	18	$	582	Mar 2024	Commercial Paper Support/Funding/Letters of Credit
Total PSE&G	$	600	$	18	$	582
PSEG Power
3-year Letter of Credit Facility	$	100	$	86	$	14	Sept 2022	Letters of Credit
5-year Credit Facilities (C)	1,900		37		1,863		Mar 2024	Funding/Letters of Credit
Total PSEG Power	$	2,000	$	123	$	1,877
Total	$	4,100	$	1,348	$	2,752

(A)PSEG facilities will be reduced by $9 million in March 2022.

(B)PSE&G facility will be reduced by $4 million in March 2022.

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

(D)The primary use of PSEG’s and PSE&G’s credit facilities is to support their respective Commercial Paper Programs, under which as of September 30, 2021, PSEG had $1.2 billion outstanding at a weighted average interest rate of 0.22%. PSE&G had no Commercial Paper outstanding as of September 30, 2021.

Debt Covenants

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

Short-Term Loans

PSEG

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

During the third quarter of 2021, PSEG Power experienced a substantial increase in net cash collateral postings related to hedge positions that are out-of-the-money due to an increase in energy market prices, from $343 million at the end of June to $999 million at the end of September. PSEG issued short-term borrowings, including commercial paper, in order to satisfy the increase in collateral postings and to prepare for the PSEG Power debt redemption. In October, PSEG Power borrowed $755 million from its credit facility to support its Senior Notes redemption and additional collateral postings, as needed.

Note 13. Financial Risk Management Activities

Derivative accounting guidance requires that a derivative instrument be recognized as either an asset or a liability at fair value, with changes in fair value of the derivative recognized in earnings each period. Other accounting treatments are available through special election and designation provided that the derivative instrument meets specific, restrictive criteria, both at the time of designation and on an ongoing basis. These alternative permissible treatments include normal purchases and normal sales (NPNS), cash flow hedge and fair value hedge accounting. PSEG, PSEG Power and PSE&G have applied the NPNS scope exception to certain derivative contracts for the forward sale of generation, power procurement agreements and fuel

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agreements. PSEG uses interest rate swaps and other derivatives, which are designated and qualifying as cash flow or fair value hedges. PSEG Power enters into additional contracts that are derivatives, but are not designated as either cash flow hedges or fair value hedges. These transactions are economic hedges and are recorded at fair market value with changes recognized in earnings.

Commodity Prices

Within PSEG and its affiliate companies, PSEG Power has the most exposure to commodity price risk. PSEG Power is exposed to commodity price risk primarily relating to changes in the market price of electricity, fossil fuels and other commodities. Fluctuations in market prices result from changes in supply and demand, fuel costs, market conditions, weather, state and federal regulatory policies, environmental policies, transmission availability and other factors. PSEG Power uses a variety of derivative and non-derivative instruments, such as financial options, futures, swaps, fuel purchases and forward purchases and sales of electricity, to manage the exposure to fluctuations in commodity prices and optimize the value of PSEG Power’s expected generation. PSEG Power also uses derivatives to hedge a portion of its anticipated BGSS obligations with PSE&G. For additional information see Note 11. Commitments and Contingent Liabilities. Changes in the fair market value of these derivative contracts are recorded in earnings.

Interest Rates

PSEG, PSEG Power and PSE&G are subject to the risk of fluctuating interest rates in the normal course of business. Exposure to this risk is managed by targeting a balanced debt maturity profile which limits refinancing in any given period or interest rate environment. In addition, they have used a mix of fixed and floating rate debt and interest rate swaps.

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.

The Accumulated Other Comprehensive Income (Loss) (after tax) related to terminated interest rate derivatives designated as cash flow hedges was $(7) million and $(9) million as of September 30, 2021 and December 31, 2020, respectively. The after-tax unrealized losses on these hedges expected to be reclassified to earnings during the next 12 months are $(3) million.

Fair Values of Derivative Instruments

The following are the fair values of derivative instruments on the Condensed Consolidated Balance Sheets. The following tables also include disclosures for offsetting derivative assets and liabilities which are subject to a master netting or similar agreement. In general, the terms of the agreements provide that in the event of an early termination the counterparties have the right to offset amounts owed or owing under that and any other agreement with the same counterparty. Accordingly, and in accordance with PSEG’s accounting policy, these positions are offset on the Condensed Consolidated Balance Sheets of PSEG Power and PSEG. For additional information see Note 14. Fair Value Measurements. The following tabular disclosure does not include the offsetting of trade receivables and payables.



	As of September 30, 2021
	PSEG Power (A)						Consolidated
	Not Designated
Balance Sheet Location	Energy- Related Contracts		Netting (B)		Total PSEG Power		Total Derivatives
	Millions
Derivative Contracts
Current Assets	$	2,006	$	(1,869)	$	137	$	137
Noncurrent Assets	449		(433)		16		16
Total Mark-to-Market Derivative Assets	$	2,455	$	(2,302)	$	153	$	153
Derivative Contracts
Current Liabilities	$	(2,601)	$	2,545	$	(56)	$	(56)
Noncurrent Liabilities	(691)		674		(17)		(17)
Total Mark-to-Market Derivative (Liabilities)	$	(3,292)	$	3,219	$	(73)	$	(73)
Total Net Mark-to-Market Derivative Assets (Liabilities)	$	(837)	$	917	$	80	$	80

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

(A)Substantially all of PSEG Power’s and PSEG’s derivative instruments are contracts subject to master netting agreements. Contracts not subject to master netting or similar agreements are immaterial and did not have any collateral posted or received as of September 30, 2021 and December 31, 2020.

(B)Represents the netting of fair value balances with the same counterparty (where the right of offset exists) and the application of collateral. All cash collateral (received) posted that has been allocated to derivative positions, where the right of offset exists, has been offset on the Condensed Consolidated Balance Sheets. As of September 30, 2021 and December 31, 2020, PSEG Power had net cash collateral (receipts) payments to counterparties of $999 million and $54 million, respectively. Of these net cash collateral (receipts) payments, $917 million and $8 million as of September 30, 2021 and December 31, 2020, respectively, were netted against the corresponding net derivative contract positions. Of the $917 million as of September 30, 2021, $676 million was netted against current liabilities and $241 million was netted against noncurrent liabilities. Of the $8 million as of December 31, 2020, $(13) million was netted against current assets and $21 million was netted against noncurrent liabilities.

Certain of PSEG Power’s derivative instruments contain provisions that require PSEG Power to post collateral. This collateral may be posted in the form of cash or credit support with thresholds contingent upon PSEG Power’s credit rating from each of the major credit rating agencies. The collateral and credit support requirements vary by contract and by counterparty. These credit risk-related contingent features stipulate that if PSEG Power were to be downgraded to a below investment grade rating by S&P or Moody’s, it would be required to provide additional collateral. A below investment grade credit rating for PSEG Power would represent a two level downgrade from its current Moody’s and S&P ratings. This incremental collateral requirement can offset collateral requirements related to other derivative instruments that are assets with the same counterparty, where the contractual right of offset exists under applicable master agreements. PSEG Power also enters into commodity transactions on the New York Mercantile Exchange (NYMEX) and Intercontinental Exchange (ICE). The NYMEX and ICE clearing houses act as counterparties to each trade. Transactions on the NYMEX and ICE must adhere to comprehensive collateral and margin requirements.

The aggregate fair value of all derivative instruments with credit risk-related contingent features in a liability position that are not fully collateralized (excluding transactions on the NYMEX and ICE that are fully collateralized) was $154 million as of September 30, 2021 and $28 million as of December 31, 2020. As of September 30, 2021 and December 31, 2020, PSEG Power had the contractual right of offset of $29 million and $3 million, respectively, related to derivative instruments that are assets with the same counterparty under master agreements and net of margin posted. If PSEG Power had been downgraded to a below investment grade rating, it would have had additional collateral obligations of $125 million and $25 million as of September 30, 2021 and December 31, 2020, respectively, related to its derivatives, net of the contractual right of offset under master agreements and the application of collateral.

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The following shows the effect on the Condensed Consolidated Statements of Operations and on Accumulated Other Comprehensive Income (AOCI) of derivative instruments designated as cash flow hedges for the three months and nine months ended September 30, 2021 and 2020:



Derivatives in Cash Flow Hedging Relationships		Amount of Pre-Tax Gain (Loss) Recognized in AOCI on Derivatives					Location of Pre-Tax Gain (Loss) Reclassified from AOCI into Income		Amount of Pre-Tax Gain (Loss) Reclassified from AOCI into Income
	Three Months Ended							Three Months Ended
	September 30,							September 30,
	2021			2020				2021			2020
		Millions							Millions
PSEG

Interest Rate Swaps		$	—		$	—	Interest Expense		$	(1)		$	(5)
Total PSEG		$	—		$	—			$	(1)		$	(5)



Derivatives in Cash Flow Hedging Relationships		Amount of Pre-Tax Gain (Loss) Recognized in AOCI on Derivatives					Location of Pre-Tax Gain (Loss) Reclassified from AOCI into Income		Amount of Pre-Tax Gain (Loss) Reclassified from AOCI into Income
	Nine Months Ended							Nine Months Ended
	September 30,							September 30,
	2021			2020				2021			2020
		Millions							Millions
PSEG

Interest Rate Swaps		$	—		$	(6)	Interest Expense		$	(3)		$	(11)
Total PSEG		$	—		$	(6)			$	(3)		$	(11)

The effect of interest rate cash flow hedges is recorded in Interest Expense in PSEG’s Condensed Consolidated Statement of Operations. For the three months and nine months ended September 30, 2021, the amount of loss on interest rate hedges reclassified from Accumulated Other Comprehensive Income (Loss) into income was $(1) million and $(2) million after-tax, respectively. For the three months and nine months ended September 30, 2020, the amount of loss on interest rate hedges reclassified from Accumulated Other Comprehensive Income (Loss) into income was $(4) million and $(8) million after-tax, respectively.

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



Accumulated Other Comprehensive Income (Loss)	Pre-Tax		After-Tax
	Millions



Balance as of December 31, 2019	$	(21)	$	(15)
Loss Recognized in AOCI	(6)		(4)
Less: Loss Reclassified into Income	14		10
Balance as of December 31, 2020	$	(13)	$	(9)
Loss Recognized in AOCI	—		—
Less: Loss Reclassified into Income	3		2
Balance as of September 30, 2021	$	(10)	$	(7)

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The following shows the effect on the Condensed Consolidated Statements of Operations of derivative instruments not designated as hedging instruments or as NPNS for the three months and nine months ended September 30, 2021 and 2020, respectively. PSEG Power’s derivative contracts reflected in this table include contracts to hedge the purchase and sale of electricity and natural gas, and the purchase of fuel. The table does not include contracts that PSEG Power has designated as NPNS, such as its BGS contracts and certain other energy supply contracts that it has with other utilities and companies with retail load.



Derivatives Not Designated as Hedges	Location of Pre-Tax Gain (Loss) Recognized in Income on Derivatives	Pre-Tax Gain (Loss) Recognized in Income on Derivatives
		Three Months Ended				Nine Months Ended
		September 30,				September 30,
		2021		2020		2021		2020
		Millions
PSEG and PSEG Power
Energy-Related Contracts	Operating Revenues	$	(897)	$	(49)	$	(1,316)	$	155
Energy-Related Contracts	Energy Costs	116		15		197		(51)
Total PSEG and PSEG Power		$	(781)	$	(34)	$	(1,119)	$	104

The following table summarizes the net notional volume purchases/(sales) of open derivative transactions by commodity as of September 30, 2021 and December 31, 2020.



Type	Notional	Total	PSEG	PSEG Power	PSE&G
		Millions
As of September 30, 2021
Natural Gas	Dekatherm (Dth)	117	—	117	—
Electricity	MWh	(71)	—	(71)	—
Financial Transmission Rights (FTRs)	MWh	27	—	27	—

As of December 31, 2020
Natural Gas	Dth	321	—	321	—
Electricity	MWh	(66)	—	(66)	—
FTRs	MWh	20	—	20	—

Credit Risk

Credit risk relates to the risk of loss that PSEG Power would incur as a result of non-performance by counterparties pursuant to the terms of their contractual obligations. PSEG has established credit policies that it believes significantly minimize credit risk. These policies include an evaluation of potential counterparties’ financial condition (including credit rating), collateral requirements under certain circumstances and the use of standardized agreements, which allow for the netting of positive and negative exposures associated with a single counterparty. In the event of non-performance or non-payment by a major counterparty, there may be a material adverse impact on PSEG Power’s and PSEG’s financial condition, results of operations or net cash flows.

The following table provides information on PSEG Power’s credit risk from wholesale counterparties, net of collateral, as of September 30, 2021. It further delineates that exposure by the credit rating of the counterparties, which is determined by the lowest rating from S&P, Moody’s or an internal scoring model. In addition, it provides guidance on the concentration of credit risk to individual counterparties and an indication of the quality of PSEG Power’s credit risk by credit rating of the counterparties.

As of September 30, 2021, 96% of the net credit exposure for PSEG Power’s wholesale operations was with investment grade counterparties. Credit exposure is defined as any positive results of netting accounts receivable/accounts payable and the forward value of open positions (which includes all financial instruments including derivatives, NPNS and non-derivatives).

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Rating	Current Exposure		Securities Held as Collateral		Net Exposure		Number of Counterparties >10%	Net Exposure of Counterparties >10%
	Millions							Millions
Investment Grade	$	147	$	14	$	133	2	$	38	(A)
Non-Investment Grade	7		1		6		—	—
Total	$	154	$	15	$	139	2	$	38

(A)Represents net exposure of $21 million with PSE&G and $17 million with a non-affiliated counterparty.

As of September 30, 2021, collateral held from counterparties where PSEG Power had credit exposure included $15 million in letters of credit.

As of September 30, 2021, PSEG Power had 114 active counterparties.

PSE&G’s supplier master agreements are approved by the BPU and govern the terms of its electric supply procurement contracts. These agreements define a supplier’s performance assurance requirements and allow a supplier to meet its credit requirements with a certain amount of unsecured credit. The amount of unsecured credit is determined based on the supplier’s credit ratings from the major credit rating agencies and the supplier’s tangible net worth. The credit position is based on the initial market price, which is the forward price of energy on the day the procurement transaction is executed, compared to the forward price curve for energy on the valuation day. To the extent that the forward price curve for energy exceeds the initial market price, the supplier is required to post a parental guaranty or other security instrument such as a letter of credit or cash, as collateral to the extent the credit exposure is greater than the supplier’s unsecured credit limit. As of September 30, 2021, PSEG held parental guaranties, letters of credit and cash as security. PSE&G’s BGS suppliers’ credit exposure is calculated each business day. As of September 30, 2021, PSE&G had credit exposure of $233 million with its suppliers, including $18 million 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.

Note 14. Fair Value Measurements

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Accounting guidance for fair value measurement emphasizes that fair value is a market-based measurement, not an entity-specific measurement, and establishes a fair value hierarchy that distinguishes between assumptions based on market data obtained from independent sources and those based on an entity’s own assumptions. The hierarchy prioritizes the inputs to fair value measurement into three levels:

Level 1—measurements utilize quoted prices (unadjusted) in active markets for identical assets or liabilities that PSEG, PSE&G and PSEG Power have the ability to access. These consist primarily of listed equity securities and money market mutual funds, as well as natural gas futures contracts executed on NYMEX.

Level 2—measurements include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, and other observable inputs such as interest rates and yield curves that are observable at commonly quoted intervals. These consist primarily of non-exchange traded derivatives such as forward contracts or options and most fixed income securities.

Level 3—measurements use unobservable inputs for assets or liabilities, based on the best information available and might include an entity’s own data and assumptions. In some valuations, the inputs used may fall into different levels of the hierarchy. In these cases, the financial instrument’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. These consist primarily of certain electric load contracts and gas contracts.

Certain derivative transactions may transfer from Level 2 to Level 3 if inputs become unobservable and internal modeling techniques are employed to determine fair value. Conversely, measurements may transfer from Level 3 to Level 2 if the inputs become observable.

The following tables present information about PSEG’s, PSE&G’s and PSEG Power’s respective assets and (liabilities) measured at fair value on a recurring basis as of September 30, 2021 and December 31, 2020, including the fair value measurements and the levels of inputs used in determining those fair values. Amounts shown for PSEG include the amounts shown for PSE&G and PSEG Power.

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	Recurring Fair Value Measurements as of September 30, 2021
Description	Total		Netting (D)		Quoted Market Prices for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	Millions
PSEG
Assets:
Cash Equivalents (A)	$	1,525	$	—	$	1,525	$	—	$	—
Derivative Contracts:
Energy-Related Contracts (B)	$	153	$	(2,302)	$	145	$	2,304	$	6

NDT Fund (C)
Equity Securities	$	1,257	$	—	$	1,257	$	—	$	—
Debt Securities—U.S. Treasury	$	324	$	—	$	—	$	324	$	—
Debt Securities—Govt Other	$	389	$	—	$	—	$	389	$	—
Debt Securities—Corporate	$	624	$	—	$	—	$	624	$	—

Rabbi Trust (C)
Equity Securities	$	27	$	—	$	27	$	—	$	—
Debt Securities—U.S. Treasury	$	73	$	—	$	—	$	73	$	—
Debt Securities—Govt Other	$	32	$	—	$	—	$	32	$	—
Debt Securities—Corporate	$	111	$	—	$	—	$	111	$	—

Liabilities:
Derivative Contracts:
Energy-Related Contracts (B)	$	(73)	$	3,219	$	(128)	$	(3,155)	$	(9)

PSE&G
Assets:
Cash Equivalents (A)	$	260	$	—	$	260	$	—	$	—


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




PSEG Power
Assets:
Derivative Contracts:
Energy-Related Contracts (B)	$	153	$	(2,302)	$	145	$	2,304	$	6
NDT Fund (C)
Equity Securities	$	1,257	$	—	$	1,257	$	—	$	—
Debt Securities—U.S. Treasury	$	324	$	—	$	—	$	324	$	—
Debt Securities—Govt Other	$	389	$	—	$	—	$	389	$	—
Debt Securities—Corporate	$	624	$	—	$	—	$	624	$	—

Rabbi Trust (C)
Equity Securities	$	7	$	—	$	7	$	—	$	—
Debt Securities—U.S. Treasury	$	19	$	—	$	—	$	19	$	—
Debt Securities—Govt Other	$	8	$	—	$	—	$	8	$	—
Debt Securities—Corporate	$	29	$	—	$	—	$	29	$	—

Liabilities:
Derivative Contracts:
Energy-Related Contracts (B)	$	(73)	$	3,219	$	(128)	$	(3,155)	$	(9)

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

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

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

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

PSE&G
Assets:
Cash Equivalents (A)	$	50	$	—	$	50	$	—	$	—
Rabbi Trust (C)
Equity Securities	$	6	$	—	$	6	$	—	$	—
Debt Securities—U.S. Treasury	$	11	$	—	$	—	$	11	$	—
Debt Securities—Govt Other	$	8	$	—	$	—	$	8	$	—
Debt Securities—Corporate	$	26	$	—	$	—	$	26	$	—

PSEG Power
Assets:
Derivative Contracts:
Energy-Related Contracts (B)	$	69	$	(488)	$	26	$	519	$	12
NDT Fund (C)
Equity Securities	$	1,352	$	—	$	1,351	$	1	$	—
Debt Securities—U.S. Treasury	$	239	$	—	$	—	$	239	$	—
Debt Securities—Govt Other	$	342	$	—	$	—	$	342	$	—
Debt Securities—Corporate	$	566	$	—	$	—	$	566	$	—

Rabbi Trust (C)
Equity Securities	$	8	$	—	$	8	$	—	$	—
Debt Securities—U.S. Treasury	$	15	$	—	$	—	$	15	$	—
Debt Securities—Govt Other	$	10	$	—	$	—	$	10	$	—
Debt Securities—Corporate	$	33	$	—	$	—	$	33	$	—

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

(A)Represents money market mutual funds.

(B)Level 1—These contracts represent natural gas futures contracts executed on NYMEX, and are being valued solely on settled pricing inputs which come directly from the exchange.

Level 2—Fair values for energy-related contracts are obtained primarily using a market-based approach. Most derivative contracts (forward purchase or sale contracts and swaps) are valued using settled prices from similar assets and liabilities from an exchange, such as NYMEX, ICE and Nodal Exchange, or auction prices. Prices used in

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the valuation process are also corroborated independently by management to determine that values are based on actual transaction data or, in the absence of transactions, bid and offers for the day. Examples may include certain exchange and non-exchange traded capacity and electricity contracts and natural gas physical or swap contracts based on market prices, basis adjustments and other premiums where adjustments and premiums are not considered significant to the overall inputs.

Level 3—Unobservable inputs are used for the valuation of certain contracts. See “Additional Information Regarding Level 3 Measurements” below for more information on the utilization of unobservable inputs.

(C)The fair value measurement table excludes foreign currency of $1 million and $2 million in the NDT Fund as of September 30, 2021 and December 31, 2020, respectively. The NDT Fund maintains investments in various equity and fixed income securities. The Rabbi Trust maintains investments in a Russell 3000 index fund and various fixed income securities. These securities are generally valued with prices that are either exchange provided (equity securities) or market transactions for comparable securities and/or broker quotes (fixed income securities).

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

Level 2—NDT and Rabbi Trust fixed income securities include investment grade corporate bonds, collateralized mortgage obligations, asset-backed securities and certain government and U.S. Treasury obligations or Federal Agency asset-backed securities and municipal bonds with a wide range of maturities. Since many fixed income securities do not trade on a daily basis, they are priced using an evaluated pricing methodology that varies by asset class and reflects observable market information such as the most recent exchange price or quoted bid for similar securities. Market-based standard inputs typically include benchmark yields, reported trades, broker/dealer quotes and issuer spreads. The preferred stocks are not actively traded on a daily basis and therefore, are also priced using an evaluated pricing methodology. Certain short-term investments are valued using observable market prices or market parameters such as time-to-maturity, coupon rate, quality rating and current yield.

(D)Represents the netting of fair value balances with the same counterparty (where the right of offset exists) and the application of collateral. See Note 13. Financial Risk Management Activities for additional detail.

Additional Information Regarding Level 3 Measurements

For valuations that include both observable and unobservable inputs, if the unobservable input is determined to be significant to the overall inputs, the entire valuation is categorized in Level 3. This includes derivatives valued using indicative price quotations for contracts with tenors that extend into periods with no observable pricing. In instances where observable data is unavailable, consideration is given to the assumptions that market participants would use in valuing the asset or liability. This includes assumptions about market risks such as liquidity, volatility and contract duration. Such instruments are categorized in Level 3 because the model inputs generally are not observable. PSEG considers credit and 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.

The fair value of PSEG Power’s electric load contracts in which load consumption may change hourly based on demand are measured using certain unobservable inputs, such as historic load variability and, accordingly, are categorized as Level 3. The fair value of PSEG Power’s gas physical contracts at certain illiquid delivery locations are measured using average historical basis and, accordingly, are categorized as Level 3. While these physical gas contracts have an unobservable component in their respective forward price curves, the fluctuations in fair value have been driven primarily by changes in the observable inputs.

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The following tables provide details surrounding significant Level 3 valuations as of September 30, 2021 and December 31, 2020.



	Quantitative Information About Level 3 Fair Value Measurements

							Significant
	Level 3	Fair Value as of				Valuation	Unobservable		Arithmetic
Commodity	Position	September 30, 2021				Technique(s)	Input	Range	Average
		Assets		(Liabilities)
		Millions



PSEG Power

Electricity	Electric Load Deals	$	—	$	(9)	Discounted Cash Flow	Historic Load Variability	0% to 9%	4%
Gas	Other (A)	6		—

Total PSEG Power		$	6	$	(9)
Total PSEG		$	6	$	(9)



	Quantitative Information About Level 3 Fair Value Measurements

							Significant
	Level 3	Fair Value as of				Valuation	Unobservable		Arithmetic
Commodity	Position	December 31, 2020				Technique(s)	Input	Range	Average
		Assets		(Liabilities)
		Millions



PSEG Power
Electricity	Electric Load Contracts	$	12	$	—	Discounted Cash Flow	Load Shaping Cost	0% to 11%	4%
Gas	Gas Physical Contracts	—		(2)		Discounted Cash Flow	Historical Basis Adjustment	-60% to -30%	-43%
Electricity	Other (B)	—		(3)
Total PSEG Power		$	12	$	(5)
Total PSEG		$	12	$	(5)

(A)Other is comprised primarily of physical gas contracts and capacity swaps.

(B)Other is comprised primarily of heat rate call options and capacity swaps.

As of September 30, 2021, significant unobservable inputs listed above would have a direct impact on the fair values of the above Level 3 instruments if they were adjusted. For energy-related contracts in cases where PSEG Power is a seller, an increase in the load variability would decrease the fair value. For gas-related contracts in cases where PSEG Power is a buyer, an increase in the average historical basis would increase the fair value.

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A reconciliation of the beginning and ending balances of Level 3 derivative contracts and securities for the three months and nine months ended September 30, 2021 and September 30, 2020, respectively, follows:

Changes in Level 3 Assets and (Liabilities) Measured at Fair Value on a Recurring Basis

for the Three Months and Nine Months Ended September 30, 2021



	Three Months Ended September 30, 2021
Description	Balance as of June 30, 2021		Total Gains or (Losses) Realized/Unrealized Included in Income (A)		Purchases (Sales)		Issuances/ Settlements (B)		Transfers In/Out (C)		Balance as of September 30, 2021
	Millions
PSEG and PSEG Power
Net Derivative Assets (Liabilities)	$	(8)	$	—	$	—	$	5	$	—	$	(3)





	Nine Months Ended September 30, 2021
Description	Balance as of December 31, 2020		Total Gains or (Losses) Realized/Unrealized Included in Income (A)		Purchases (Sales)		Issuances/ Settlements (B)		Transfers In/Out (C)		Balance as of September 30, 2021
	Millions
PSEG and PSEG Power
Net Derivative Assets (Liabilities)	$	7	$	(13)	$	—	$	3	$	—	$	(3)

Changes in Level 3 Assets and (Liabilities) Measured at Fair Value on a Recurring Basis

for the Three Months and Nine Months Ended September 30, 2020



	Three Months Ended September 30, 2020
Description	Balance as of June 30, 2020		Total Gains or (Losses) Realized/Unrealized Included in Income (A)		Purchases (Sales)		Issuances/ Settlements (B)		Transfers In/Out (C)		Balance as of September 30, 2020
	Millions
PSEG and PSEG Power
Net Derivative Assets (Liabilities)	$	10	$	(2)	$	—	$	(8)	$	—	$	—





	Nine Months Ended September 30, 2020
Description	Balance as of December 31, 2019		Total Gains or (Losses) Realized/Unrealized Included in Income (A)		Purchases (Sales)		Issuances/ Settlements (B)		Transfers In/Out (C)		Balance as of September 30, 2020
	Millions
PSEG and PSEG Power
Net Derivative Assets (Liabilities)	$	7	$	7	$	—	$	(14)	$	—	$	—

(A)Unrealized gains (losses) in the following table represent the change in derivative assets and liabilities still held as of September 30, 2021 and 2020.

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	Three Months Ended September 30,								Nine Months Ended September 30,
	2021				2020				2021				2020
	Total Gains (Losses)		Unrealized Gains (Losses)		Total Gains (Losses)		Unrealized Gains (Losses)		Total Gains (Losses)		Unrealized Gains (Losses)		Total Gains (Losses)		Unrealized Gains (Losses)
	Millions
PSEG and PSEG Power
Operating Revenues	$	(8)	$	(3)	$	(2)	$	(11)	$	(20)	$	(19)	$	12	$	(9)
Energy Costs	8		8		—		1		7		7		(5)		2
Total	$	—	$	5	$	(2)	$	(10)	$	(13)	$	(12)	$	7	$	(7)

(B)Includes settlements of $5 million and $3 million for the three months and nine months ended September 30, 2021, respectively, and $(8) million and $(14) million for the three months and nine months ended September 30, 2020, respectively.

(C)There were no transfers into or out of Level 3 during the three months and nine months ended September 30, 2021 and 2020.

As of September 30, 2021, PSEG carried $4.4 billion of net assets that are measured at fair value on a recurring basis, of which $(3) million of net liabilities were measured using unobservable inputs and classified as Level 3 within the fair value hierarchy.

As of September 30, 2020, PSEG carried $3.5 billion of net assets that are measured at fair value on a recurring basis, of which balances measured using unobservable inputs and classified as Level 3 within the fair value hierarchy were immaterial.

Fair Value of Debt

The estimated fair values, carrying amounts and methods used to determine fair value of long-term debt as of September 30, 2021 and December 31, 2020 are included in the following table and accompanying notes.



	As of				As of
	September 30, 2021				December 31, 2020
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
	Millions
Long-Term Debt (A):
PSEG	$	2,932	$	3,019	$	2,929	$	3,092
PSE&G	11,793		13,410		10,909		13,372
PSEG Power (B)	1,350		1,625		2,342		2,679

Total Long-Term Debt	$	16,075	$	18,054	$	16,180	$	19,143

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

(B)In October 2021, PSEG redeemed all of PSEG Power’s outstanding Senior Notes. See Note 12. Debt and Credit Facilities for additional information

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Note 15. Other Income (Deductions)



	PSE&G		PSEG Power		Other (A)		Consolidated
	Millions
Three Months Ended September 30, 2021
NDT Fund Interest and Dividends	$	—	$	18	$	—	$	18
Allowance for Funds Used During Construction	16		—		—		16
Solar Loan Interest	3		—		—		3

Other	1		(2)		(1)		(2)
Total Other Income (Deductions)	$	20	$	16	$	(1)	$	35
Nine Months Ended September 30, 2021
NDT Fund Interest and Dividends	$	—	$	45	$	—	$	45
Allowance for Funds Used During Construction	58		—		—		58
Solar Loan Interest	10		—		—		10
Purchases of Tax Losses under New Jersey Technology Tax Benefit Transfer Program	—		(19)		—		(19)
Other	4		(6)		1		(1)
Total Other Income (Deductions)	$	72	$	20	$	1	$	93
Three Months Ended September 30, 2020
NDT Fund Interest and Dividends	$	—	$	12	$	—	$	12
Allowance for Funds Used During Construction	24		—		—		24
Solar Loan Interest	3		—		—		3

Other	1		(1)		—		—
Total Other Income (Deductions)	$	28	$	11	$	—	$	39
Nine Months Ended September 30, 2020
NDT Fund Interest and Dividends	$	—	$	39	$	—	$	39
Allowance for Funds Used During Construction	65		—		—		65
Solar Loan Interest	11		—		—		11
Purchases of Tax Losses under New Jersey Technology Tax Benefit Transfer Program	—		(36)		—		(36)
Other	5		(3)		—		2
Total Other Income (Deductions)	$	81	$	—	$	—	$	81

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

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Note 16. 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:



	Three Months Ended						Nine Months Ended
PSEG	September 30,						September 30,
	2021			2020			2021			2020
	Millions
Pre-Tax Income (Loss)	$	(2,246)		$	696		$	(1,720)		$	1,748
Tax Computed at Statutory Rate @ 21%	$	(472)		$	146		$	(361)		$	367
Increase (Decrease) Attributable to Flow-Through of Certain Tax Adjustments:
State Income Taxes (net of federal income tax)	(160)			70			(142)			102
NDT Fund	(1)			12			17			10
Tax Credit Amortization/ITC Recapture	(2)			(4)			29			(12)
Tax Adjustment Credit	(60)			(63)			(181)			(151)
Other	13			(40)			11			(42)
Subtotal	(210)			(25)			(266)			(93)
Total Income Tax Expense (Benefit)	$	(682)		$	121		$	(627)		$	274
Effective Income Tax Rate	30.4		%	17.4		%	36.5		%	15.7		%

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:



	Three Months Ended						Nine Months Ended
PSE&G	September 30,						September 30,
	2021			2020			2021			2020
	Millions
Pre-Tax Income	$	463		$	353		$	1,389		$	1,232
Tax Computed at Statutory Rate @ 21%	$	97		$	74		$	292		$	259
Increase (Decrease) Attributable to Flow-Through of Certain Tax Adjustments:
State Income Taxes (net of federal income tax)	33			24			96			78
Tax Adjustment Credit	(60)			(63)			(181)			(151)
Other	4			5			7			10
Subtotal	(23)			(34)			(78)			(63)
Total Income Tax Expense (Benefit)	$	74		$	40		$	214		$	196
Effective Income Tax Rate	16.0		%	11.3		%	15.4		%	15.9		%

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



	Three Months Ended						Nine Months Ended
PSEG Power	September 30,						September 30,
	2021			2020			2021			2020
	Millions
Pre-Tax Income (Loss)	$	(2,686)		$	372		$	(3,083)		$	549
Tax Computed at Statutory Rate @ 21%	$	(564)		$	78		$	(647)		$	115
Increase (Decrease) Attributable to Flow-Through of Certain Tax Adjustments:
State Income Taxes (net of federal income tax)	(191)			30			(236)			9
NDT Fund	(1)			12			17			10
Tax Credit Amortization/ITC Recapture	—			(2)			36			(6)
Audit Settlement	—			—			(2)			(22)
Other	3			—			4			6
Subtotal	(189)			40			(181)			(3)
Total Income Tax Expense (Benefit)	$	(753)		$	118		$	(828)		$	112
Effective Income Tax Rate	28.0		%	31.7		%	26.9		%	20.4		%

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

Amounts recorded under the Tax Cuts and Jobs Act of 2017, Coronavirus Aid, Relief, and Economic Security Act and Consolidated Appropriations Act, 2021 are subject to change based on several factors, including, among other things, whether the Internal Revenue Service or state taxing authorities issue additional guidance and/or further clarification. Any further guidance or clarification could impact PSEG’s, PSE&G’s and PSEG Power’s financial statements.

As of September 30, 2021, PSE&G had a $19 million New Jersey Corporate Business Tax net operating loss (NOL) that is expected to be fully realized in the future. There are no other material tax carryforwards in other jurisdictions.

New Jersey State Tax Reform

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

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Note 17. Accumulated Other Comprehensive Income (Loss), Net of Tax



PSEG	Three Months Ended September 30, 2021
Accumulated Other Comprehensive Income (Loss)	Cash Flow Hedges		Pension and OPEB Plans		Available-for-Sale Securities		Total
	Millions
Balance as of June 30, 2021	$	(8)	$	(538)	$	24	$	(522)
Other Comprehensive Income (Loss) before Reclassifications	—		—		(4)		(4)
Amounts Reclassified from Accumulated Other Comprehensive Income (Loss)	1		4		(3)		2
Net Current Period Other Comprehensive Income (Loss)	1		4		(7)		(2)
Balance as of September 30, 2021	$	(7)	$	(534)	$	17	$	(524)

PSEG	Three Months Ended September 30, 2020
Accumulated Other Comprehensive Income (Loss)	Cash Flow Hedges		Pension and OPEB Plans		Available-for-Sale Securities		Total
	Millions
Balance as of June 30, 2020	$	(15)	$	(493)	$	53	$	(455)
Other Comprehensive Income (Loss) before Reclassifications	—		—		3		3
Amounts Reclassified from Accumulated Other Comprehensive Income (Loss)	4		3		(7)		—
Net Current Period Other Comprehensive Income (Loss)	4		3		(4)		3
Balance as of September 30, 2020	$	(11)	$	(490)	$	49	$	(452)

PSEG	Nine Months Ended September 30, 2021
Accumulated Other Comprehensive Income (Loss)	Cash Flow Hedges		Pension and OPEB Plans		Available-for-Sale Securities		Total
	Millions
Balance as of December 31, 2020	$	(9)	$	(545)	$	50	$	(504)
Other Comprehensive Income (Loss) before Reclassifications	—		—		(28)		(28)
Amounts Reclassified from Accumulated Other Comprehensive Income (Loss)	2		11		(5)		8
Net Current Period Other Comprehensive Income (Loss)	2		11		(33)		(20)
Balance as of September 30, 2021	$	(7)	$	(534)	$	17	$	(524)

PSEG	Nine Months Ended September 30, 2020
Accumulated Other Comprehensive Income (Loss)	Cash Flow Hedges		Pension and OPEB Plans		Available-for-Sale Securities		Total
	Millions
Balance as of December 31, 2019	$	(15)	$	(499)	$	25	$	(489)
Other Comprehensive Income (Loss) before Reclassifications	(4)		—		47		43
Amounts Reclassified from Accumulated Other Comprehensive Income (Loss)	8		9		(23)		(6)
Net Current Period Other Comprehensive Income (Loss)	4		9		24		37
Balance as of September 30, 2020	$	(11)	$	(490)	$	49	$	(452)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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PSEG Power	Three Months Ended September 30, 2021
Accumulated Other Comprehensive Income (Loss)	Cash Flow Hedges		Pension and OPEB Plans		Available-for-Sale Securities		Total
	Millions
Balance as of June 30, 2021	$	—	$	(454)	$	20	$	(434)
Other Comprehensive Income (Loss) before Reclassifications	—		—		(4)		(4)
Amounts Reclassified from Accumulated Other Comprehensive Income (Loss)	—		3		(2)		1
Net Current Period Other Comprehensive Income (Loss)	—		3		(6)		(3)
Balance as of September 30, 2021	$	—	$	(451)	$	14	$	(437)

PSEG Power	Three Months Ended September 30, 2020
Accumulated Other Comprehensive Income (Loss)	Cash Flow Hedges		Pension and OPEB Plans		Available-for-Sale Securities		Total
	Millions
Balance as of June 30, 2020	$	—	$	(415)	$	41	$	(374)
Other Comprehensive Income (Loss) before Reclassifications	—		—		3		3
Amounts Reclassified from Accumulated Other Comprehensive Income (Loss)	—		2		(5)		(3)
Net Current Period Other Comprehensive Income (Loss)	—		2		(2)		—
Balance as of September 30, 2020	$	—	$	(413)	$	39	$	(374)

PSEG Power	Nine Months Ended September 30, 2021
Accumulated Other Comprehensive Income (Loss)	Cash Flow Hedges		Pension and OPEB Plans		Available-for-Sale Securities		Total
	Millions
Balance as of December 31, 2020	$	—	$	(459)	$	40	$	(419)
Other Comprehensive Income (Loss) before Reclassifications	—		—		(22)		(22)
Amounts Reclassified from Accumulated Other Comprehensive Income (Loss)	—		8		(4)		4
Net Current Period Other Comprehensive Income (Loss)	—		8		(26)		(18)
Balance as of September 30, 2021	$	—	$	(451)	$	14	$	(437)

PSEG Power	Nine Months Ended September 30, 2020
Accumulated Other Comprehensive Income (Loss)	Cash Flow Hedges		Pension and OPEB Plans		Available-for-Sale Securities		Total
	Millions
Balance as of December 31, 2019	$	—	$	(420)	$	19	$	(401)
Other Comprehensive Income (Loss) before Reclassifications	—		—		38		38
Amounts Reclassified from Accumulated Other Comprehensive Income (Loss)	—		7		(18)		(11)
Net Current Period Other Comprehensive Income (Loss)	—		7		20		27
Balance as of September 30, 2020	$	—	$	(413)	$	39	$	(374)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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PSEG			Amounts Reclassified from Accumulated Other Comprehensive Income (Loss) to Income Statement
			Three Months Ended						Nine Months Ended
Description of Amounts Reclassified from Accumulated Other Comprehensive Income (Loss)		Location of Pre-Tax Amount In Statement of Operations	September 30, 2021						September 30, 2021
	Pre-Tax Amount		Tax (Expense) Benefit		After-Tax Amount		Pre-Tax Amount		Tax (Expense) Benefit		After-Tax Amount
			Millions
Cash Flow Hedges
Interest Rate Swaps		Interest Expense	$	(1)	$	—	$	(1)	$	(3)	$	1	$	(2)
Total Cash Flow Hedges			(1)		—		(1)		(3)		1		(2)
Pension and OPEB Plans
Amortization of Prior Service (Cost) Credit		Non-Operating Pension and OPEB Credits (Costs)	5		(2)		3		16		(5)		11
Amortization of Actuarial Loss		Non-Operating Pension and OPEB Credits (Costs)	(10)		3		(7)		(31)		9		(22)
Total Pension and OPEB Plans			(5)		1		(4)		(15)		4		(11)
Available-for-Sale Debt Securities
Realized Gains (Losses)		Net Gains (Losses) on Trust Investments	4		(1)		3		8		(3)		5
Total Available-for-Sale Debt Securities			4		(1)		3		8		(3)		5
Total			$	(2)	$	—	$	(2)	$	(10)	$	2	$	(8)



PSEG			Amounts Reclassified from Accumulated Other Comprehensive Income (Loss) to Income Statement
			Three Months Ended						Nine Months Ended
Description of Amounts Reclassified from Accumulated Other Comprehensive Income (Loss)		Location of Pre-Tax Amount In Statement of Operations	September 30, 2020						September 30, 2020
	Pre-Tax Amount		Tax (Expense) Benefit		After-Tax Amount		Pre-Tax Amount		Tax (Expense) Benefit		After-Tax Amount
			Millions
Cash Flow Hedges
Interest Rate Swaps		Interest Expense	$	(5)	$	1	$	(4)	$	(11)	$	3	$	(8)
Total Cash Flow Hedges			(5)		1		(4)		(11)		3		(8)
Pension and OPEB Plans
Amortization of Prior Service (Cost) Credit		Non-Operating Pension and OPEB Credits (Costs)	6		(2)		4		18		(5)		13
Amortization of Actuarial Loss		Non-Operating Pension and OPEB Credits (Costs)	(10)		3		(7)		(30)		8		(22)
Total Pension and OPEB Plans			(4)		1		(3)		(12)		3		(9)
Available-for-Sale Debt Securities
Realized Gains (Losses) and Impairments		Net Gains (Losses) on Trust Investments	11		(4)		7		37		(14)		23
Total Available-for-Sale Debt Securities			11		(4)		7		37		(14)		23
Total			$	2	$	(2)	$	—	$	14	$	(8)	$	6

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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PSEG Power			Amounts Reclassified from Accumulated Other Comprehensive Income (Loss) to Income Statement
			Three Months Ended						Nine Months Ended
Description of Amounts Reclassified from Accumulated Other Comprehensive Income (Loss)		Location of Pre-Tax Amount In Statement of Operations	September 30, 2021						September 30, 2021
	Pre-Tax Amount		Tax (Expense) Benefit		After-Tax Amount		Pre-Tax Amount		Tax (Expense) Benefit		After-Tax Amount
			Millions
Pension and OPEB Plans
Amortization of Prior Service (Cost) Credit		Non-Operating Pension and OPEB Credits (Costs)	$	5	$	(1)	$	4	$	15	$	(4)	$	11
Amortization of Actuarial Loss		Non-Operating Pension and OPEB Credits (Costs)	(9)		2		(7)		(26)		7		(19)
Total Pension and OPEB Plans			(4)		1		(3)		(11)		3		(8)
Available-for-Sale Debt Securities
Realized Gains (Losses)		Net Gains (Losses) on Trust Investments	3		(1)		2		6		(2)		4
Total Available-for-Sale Debt Securities			3		(1)		2		6		(2)		4
Total			$	(1)	$	—	$	(1)	$	(5)	$	1	$	(4)



PSEG Power			Amounts Reclassified from Accumulated Other Comprehensive Income (Loss) to Income Statement
			Three Months Ended						Nine Months Ended
Description of Amounts Reclassified from Accumulated Other Comprehensive Income (Loss)		Location of Pre-Tax Amount In Statement of Operations	September 30, 2020						September 30, 2020
	Pre-Tax Amount		Tax (Expense) Benefit		After-Tax Amount		Pre-Tax Amount		Tax (Expense) Benefit		After-Tax Amount
			Millions



Pension and OPEB Plans
Amortization of Prior Service (Cost) Credit		Non-Operating Pension and OPEB Credits (Costs)	$	5	$	(2)	$	3	$	16	$	(5)	$	11
Amortization of Actuarial Loss		Non-Operating Pension and OPEB Credits (Costs)	(8)		3		(5)		(25)		7		(18)
Total Pension and OPEB Plans			(3)		1		(2)		(9)		2		(7)
Available-for-Sale Debt Securities
Realized Gains (Losses) and Impairments		Net Gains (Losses) on Trust Investments	9		(4)		5		30		(12)		18
Total Available-for-Sale Debt Securities			9		(4)		5		30		(12)		18
Total			$	6	$	(3)	$	3	$	21	$	(10)	$	11

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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Note 18. 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. The following table shows the effect of these dilutive potential shares on the weighted average number of shares outstanding used in calculating diluted EPS:



	Three Months Ended September 30,								Nine Months Ended September 30,
	2021				2020				2021				2020
	Basic		Diluted		Basic		Diluted		Basic		Diluted		Basic		Diluted
EPS Numerator (Millions):
Net Income (Loss)	$	(1,564)	$	(1,564)	$	575	$	575	$	(1,093)	$	(1,093)	$	1,474	$	1,474
EPS Denominator (Millions):
Weighted Average Common Shares Outstanding	504		504		504		504		504		504		504		504
Effect of Stock Based Compensation Awards	—		—		—		3		—		—		—		3
Total Shares	504		504		504		507		504		504		504		507

EPS
Net Income (Loss)	$	(3.10)	$	(3.10)	$	1.15	$	1.14	$	(2.17)	$	(2.17)	$	2.93	$	2.91

Approximately 3 million potentially dilutive shares were excluded from total shares used to calculate the diluted loss per share for the three months and nine months ended September 30, 2021 as their impact was antidilutive.

Dividends



	Three Months Ended				Nine Months Ended
	September 30,				September 30,
Dividend Payments on Common Stock	2021		2020		2021		2020
Per Share	$	0.51	$	0.49	$	1.53	$	1.47
In Millions	$	257	$	248	$	773	$	743

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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Note 19. Financial Information by Business Segment



	PSE&G		PSEG Power		Other (A)		Eliminations (B)		Consolidated Total
	Millions
Three Months Ended September 30, 2021
Total Operating Revenues	$	1,820	$	51	$	159	$	(127)	$	1,903
Net Income (Loss) (C)	389		(1,933)		(20)		—		(1,564)
Gross Additions to Long-Lived Assets	599		140		4		—		743
Nine Months Ended September 30, 2021
Operating Revenues	$	5,407	$	1,598	$	465	$	(804)	$	6,666
Net Income (Loss) (C)	1,175		(2,255)		(13)		—		(1,093)
Gross Additions to Long-Lived Assets	1,818		222		6		—		2,046
Three Months Ended September 30, 2020
Total Operating Revenues	$	1,660	$	746	$	143	$	(179)	$	2,370
Net Income (Loss) (D)	313		254		8		—		575
Gross Additions to Long-Lived Assets	587		89		2		—		678
Nine Months Ended September 30, 2020
Operating Revenues	$	4,999	$	2,649	$	447	$	(894)	$	7,201
Net Income (Loss) (D)	1,036		437		1		—		1,474
Gross Additions to Long-Lived Assets	1,777		307		8		—		2,092
As of September 30, 2021
Total Assets	$	37,179	$	8,950	$	4,558	$	(1,261)	$	49,426
Investments in Equity Method Subsidiaries	$	—	$	64	$	98	$	—	$	162
As of December 31, 2020
Total Assets	$	35,581	$	12,704	$	2,692	$	(927)	$	50,050
Investments in Equity Method Subsidiaries	$	—	$	64	$	—	$	—	$	64

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

(B)Intercompany eliminations primarily relate to intercompany transactions between PSE&G and PSEG Power. For a further discussion of the intercompany transactions between PSE&G and PSEG Power, see Note 20. Related-Party Transactions.

(C)Includes after-tax impairment losses and other charges related to the pending sale of the Fossil generating assets at PSEG Power of $1,563 million and $1,936 million for the three and nine months ended September 30, 2021, respectively. See Note 4. Early Plant Retirements/Asset Dispositions and Impairments for additional information. Also includes net after-tax losses of $478 million and $718 million for the three and nine months ended September 30, 2021 related to the impacts of non-trading commodity mark-to-market activity, which consist of the financial impact from positions with future delivery dates.

(D)Includes an after-tax gain of $86 million in the three and nine months ended September 30, 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.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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Note 20. Related-Party Transactions

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

PSE&G

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



	Three Months Ended				Nine Months Ended
	September 30,				September 30,
Related-Party Transactions	2021		2020		2021		2020
	Millions
Billings from Affiliates:
Net Billings from PSEG Power (A)	$	121	$	148	$	788	$	865
Administrative Billings from Services (B)	102		82		281		238
Total Billings from Affiliates	$	223	$	230	$	1,069	$	1,103



	As of		As of
Related-Party Transactions	September 30, 2021		December 31, 2020
	Millions
Receivable from PSEG Power (A)	$	1	$	—
Receivable from Other	1		—
Accounts Receivable—Affiliated Companies	$	2	$	—
Payable to PSEG Power (A)	$	—	$	273
Payable to Services (B)	86		95
Payable to PSEG (C)	43		111
Accounts Payable—Affiliated Companies	$	129	$	479

Working Capital Advances to Services (D)	$	33	$	33
Long-Term Accrued Taxes Payable	$	24	$	7

PSEG Power

The financial statements for PSEG Power include transactions with related parties presented as follows:



	Three Months Ended				Nine Months Ended
	September 30,				September 30,
Related-Party Transactions	2021		2020		2021		2020
	Millions
Billings to Affiliates:
Net Billings to PSE&G (A)	$	121	$	148	$	788	$	865
Billings from Affiliates:
Administrative Billings from Services (B)	$	42	$	40	$	131	$	127

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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	As of		As of
Related-Party Transactions	September 30, 2021		December 31, 2020
	Millions
Receivable from PSE&G (A)	$	—	$	273
Receivable from PSEG (C)	—		44
Receivable from Other	3		—
Accounts Receivable—Affiliated Companies	$	3	$	317
Payable to Services (B)	$	23	$	13
Payable to PSEG (C)	39		—
Payable to PSE&G (A)	1		—
Accounts Payable—Affiliated Companies	$	63	$	13
Short-Term Loan to (from) Affiliate (E)	$	(862)	$	161

Working Capital Advances to Services (D)	$	17	$	17
Long-Term Accrued Taxes Payable	$	63	$	57

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

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

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

(D)PSE&G and PSEG Power have advanced working capital to Services. The amounts are included in Other Noncurrent Assets on PSE&G’s and PSEG Power’s Condensed Consolidated Balance Sheets.

(E)PSEG Power’s short-term loans with PSEG are for working capital and other short-term needs. Interest Income and Interest Expense relating to these short-term funding activities were immaterial.

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Next: Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (MD&A)