Item 5. OTHER INFORMATION

Certain information reported in the Form 10-K is updated below. Additionally, certain information is provided for new matters that have arisen subsequent to the filing of the Form 10-K and first and second quarter 2021 10-Qs. References are to the related pages on the Form 10-K and the first quarter and second quarter 2021 Form 10-Qs.

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Federal Regulation

Energy Clearing Prices

December 31, 2020 Form 10-K page 13, March 31, 2021 Form 10-Q page 82 and June 30, 2021 Form 10-Q page 91. In May 2020, FERC issued an order approving PJM’s proposal to modify the curves used for pricing reserves with FERC. The reforms include a consolidation of synchronized reserve products, improved use of existing capability for locational reserve needs, better alignment of reserve products in day-ahead and real-time markets, a downward-sloping operating reserve demand curve, and increased penalty factors to ensure use of all supply prior to a reserve shortage. These reforms are currently planned for implementation in May 2022. However, in August 2021, FERC filed a motion with the Court of Appeals for the D.C. Circuit (D.C. Circuit) seeking the D.C. Circuit’s approval to remand the case to allow FERC an opportunity to reassess its orders on PJM’s reserves reforms. We cannot predict the outcome of this proceeding and, specifically, whether FERC will modify PJM’s rules governing reserve pricing.

Capacity Market Issues

December 31, 2020 Form 10-K page 13 and June 30, 2021 Form 10-Q page 91. In July 2021, PJM submitted to FERC a proposal to replace the current MOPR, which applies to both new and existing resources that receive certain out-of-market payments, with new provisions that accommodate state public policy programs that do not attempt to set the price of capacity. Under the PJM proposal, PSEG Power’s New Jersey nuclear plants that receive ZEC payments would not be subject to the MOPR. In September 2021, FERC issued a notice that it was not able to act on PJM’s proposed changes to the MOPR because of a split among the Commissioners on the lawfulness of PJM’s proposal. Therefore, PJM’s rules became automatically effective as of September 29, 2021 and will apply to the next base residual auction, which has been delayed until January 25, 2022 in order to allow entities additional time to meet the pre-auction deadlines.

In a second order related to the auction, FERC found that the current rules related to the Market Seller Offer Cap were unjust and unreasonable and ultimately eliminated the default offer cap. In its place, FERC adopted a unit-specific approach to reviewing certain capacity market offers. These new rules could result in lower capacity prices since market offers for many resource types will need to be approved by the Market Monitor and PJM.

Transmission Rate Proceedings and Return on Equity

December 31, 2020 Form 10-K page 14 and June 30, 2021 Form 10-Q page 91. In October 2021, FERC approved a settlement agreement effective August 1, 2021 between PSE&G, the BPU and the New Jersey Rate Counsel related to the level of PSE&G’s base transmission ROE and other formula rate matters. The settlement reduces PSE&G’s base ROE from 11.18% to 9.9%. As a result of this settlement, PSE&G’s projects Net Income will decrease by approximately $50 million to $60 million during the first twelve months following the August 1, 2021 implementation date. The agreement provides that the settling parties will not seek changes to PSE&G’s transmission formula rate for three years. We will be implementing the effects of the settlement agreement over the next several months.

State Regulation

New Jersey Solar Initiatives

December 31, 2020 Form 10-K page 16 and June 30, 2021 Form 10-Q page 92. In July 2021, the BPU issued an order formally establishing the Successor Solar Incentive (SuSI) Program to serve as the permanent program for providing solar incentives to qualified solar electric generation facilities. The program provides for administratively-set incentive payments applicable to net-metered projects of 5 MW or less and an annual competitive solicitation applicable to grid-supply projects and net-metered C&I projects in excess of 5 MW. The SuSI Program commenced on August 28, 2021.

Environmental Matters

Environmental Justice

December 31, 2020 Form 10-K page 18. In September 2020, the New Jersey governor signed legislation that enacted an environmental justice process for applicants seeking environmental permits, including those emission permits regulated under Title V of the Clean Air Act, for facilities located in what the law defines as overburdened communities. In September 2021, the New Jersey Department of Environmental Protection (NJDEP) issued an administrative order requiring an environmental justice review of certain permit applications pursuant to the New Jersey Environmental Justice (EJ) Law. The order will remain in effect until implementing regulations under the EJ Law are promulgated, which are expected to be issued as early as Spring 2022. The impacts of the NJDEP’s action are being evaluated for both PSE&G and PSEG Power and the outcome cannot be determined at this time.

CO****2 Regulation under the Clean Air Act

December 31, 2020 Form 10-K page 18. In June 2019, the EPA issued its final Affordable Clean Energy (ACE) rule as a

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replacement for the repealed Clean Power Plan, a GHG emission regulation for existing power plants. The ACE rule narrowly defines the “best system of emissions reductions” (BSER) as heat improvements to be applied only to an individual unit, excluding other potential mechanisms to address climate change. In September 2019, a coalition of power companies, including PSEG, filed a Petition for Review of the ACE rule with the D.C. Circuit challenging the EPA’s narrow interpretation of BSER. In January 2021, the D.C. Circuit vacated the ACE rule and remanded the rulemaking to the EPA for further consideration. In October 2021, the U.S. Supreme Court agreed to review the 2021 D.C. Circuit’s decision vacating the ACE Rule. We cannot predict the outcome of this matter or estimate its impact on our business or results of operations.

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