Cover and table of contents

318K characters. Original on sec.gov · Markdown

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 June 30, 2023

☐ 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

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 ☐

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	☐

(Cover continued on next page)

Table of Contents

(Cover continued from previous page)

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 July 17, 2023, Public Service Enterprise Group Incorporated had outstanding 499,111,056 shares of its sole class of Common Stock, without par value.

As of July 17, 2023, 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 is a wholly owned subsidiary of Public Service Enterprise Group Incorporated and meets the conditions set forth in General Instruction H(1) of Form 10-Q. Public Service Electric and Gas Company is filing its Quarterly Report on Form 10-Q with the reduced disclosure format authorized by General Instruction H.

Table of Contents


		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
	Notes to Condensed Consolidated Financial Statements
	Note 1. Organization, Basis of Presentation and Significant Accounting Policies	13
	Note 2. Revenues	14
	Note 3. Early Plant Retirements/Asset Dispositions and Impairments	20
	Note 4. Variable Interest Entity (VIE)	21

	Note 5. Rate Filings	21
	Note 6. Leases	23
	Note 7. Financing Receivables	23
	Note 8. Trust Investments	25
	Note 9. Pension and Other Postretirement Benefits (OPEB)	31
	Note 10. Commitments and Contingent Liabilities	33
	Note 11. Debt and Credit Facilities	38
	Note 12. Financial Risk Management Activities	40
	Note 13. Fair Value Measurements	44
	Note 14. Other Income (Deductions)	49
	Note 15. Income Taxes	50
	Note 16. Accumulated Other Comprehensive Income (Loss), Net of Tax	52
	Note 17. Earnings Per Share (EPS) and Dividends	54
	Note 18. Financial Information by Business Segment	55
	Note 19. Related-Party Transactions	57
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	58
	Executive Overview of 2023 and Future Outlook	58
	Results of Operations	64
	Liquidity and Capital Resources	69
	Capital Requirements	71
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	72
Item 4.	Controls and Procedures	73
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	73
Item 1A.	Risk Factors	73
Item 5.	Other Information	73
Item 6.	Exhibits	76
	Signatures	77

Table of Contents

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 transmission and distribution, and our nuclear generation projects;
the physical, financial and transition risks related to climate change, including risks relating to potentially increased legislative and regulatory burdens, changing customer preferences and lawsuits;
any equipment failures, accidents, critical operating technology or business system failures, severe weather events, acts of war, terrorism or other acts of violence, sabotage, physical attacks or security breaches, cyberattacks or other incidents 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;
disruptions or cost increases in our supply chain, including labor shortages;
any inability to maintain sufficient liquidity or access sufficient capital on commercially reasonable terms;
the impact of cybersecurity attacks or intrusions or other disruptions to our information technology, operational or other systems;
a material shift away from natural gas toward increased electrification and a reduction in the use of natural gas;
failure to attract and retain a qualified workforce;
inflation, including increases in the costs of equipment, materials, fuel and labor;
the impact of our covenants in our debt instruments and credit agreements on our business;
adverse performance of our defined benefit plan trust funds and Nuclear Decommissioning Trust Fund and increases in funding requirements and pension costs;
fluctuations in, or third party default risk in wholesale power and natural gas markets, including the potential impacts on the economic viability of our generation units;
our ability to obtain adequate nuclear fuel supply;
changes in technology related to energy generation, distribution and consumption and changes in customer usage patterns;
third-party credit risk relating to and purchase of nuclear fuel;
any inability to meet our commitments under forward sale obligations and Regional Transmission Organization rules;
reliance on transmission facilities to maintain adequate transmission capacity for our nuclear 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;

Table of Contents

our ability to advocate for and our receipt of appropriate regulatory guidance to ensure long-term support for our nuclear fleet;
adverse changes in and non-compliance with energy industry laws, policies, regulations and standards, including market structures and transmission planning and transmission returns;
risks associated with our ownership and operation of nuclear facilities, including increased nuclear fuel storage costs, 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 laws and regulations and enforcement;
delays in receipt of, or an inability to receive, necessary licenses and permits and siting approvals; and
changes in tax laws and regulations.

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.

From time to time, PSEG and PSE&G release important information via postings on their corporate Investor Relations website at https://investor.pseg.com. Investors and other interested parties are encouraged to visit the Investor Relations website to review new postings. You can sign up for automatic email alerts regarding new postings at the bottom of the webpage at https://investor.pseg.com or by navigating to the Email Alerts webpage at https://investor.pseg.com/resources/email-alerts/default.aspx. The information on https://investor.pseg.com and https://investor.pseg.com/resources/email-alerts/default.aspx is not incorporated herein and is not part of this Form 10-Q.

FILING FORMAT

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

Discussions throughout the document refer to PSEG and its direct operating subsidiaries. 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

Table of Contents

PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Millions, except per share data

(Unaudited)



	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2023		2022		2023		2022
OPERATING REVENUES	$	2,421	$	2,076	$	6,176	$	4,389
OPERATING EXPENSES
Energy Costs	604		765		1,686		2,010
Operation and Maintenance	744		751		1,487		1,545
Depreciation and Amortization	279		269		561		552
(Gains) Losses on Asset Dispositions and Impairments	—		(5)		—		38
Total Operating Expenses	1,627		1,780		3,734		4,145
OPERATING INCOME	794		296		2,442		244
Income from Equity Method Investments	—		7		1		11
Net Gains (Losses) on Trust Investments	57		(187)		103		(255)
Other Income (Deductions)	49		38		91		43
Net Non-Operating Pension and Other Postretirement Benefit (OPEB) Credits (Costs)	29		94		57		188
Interest Expense	(185)		(150)		(365)		(287)
INCOME (LOSS) BEFORE INCOME TAXES	744		98		2,329		(56)
Income Tax (Expense) Benefit	(153)		33		(451)		185
NET INCOME	$	591	$	131	$	1,878	$	129
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
BASIC	497		497		497		499
DILUTED	500		500		500		502
NET INCOME PER SHARE:
BASIC	$	1.19	$	0.26	$	3.78	$	0.26
DILUTED	$	1.18	$	0.26	$	3.76	$	0.26

See Notes to Condensed Consolidated Financial Statements.

Table of Contents

PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Millions

(Unaudited)



	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2023		2022		2023		2022
NET INCOME	$	591	$	131	$	1,878	$	129
Other Comprehensive Income (Loss), net of tax
Unrealized Gains (Losses) on Available-for-Sale Securities, net of tax (expense) benefit of $6, $30, $(11) and $69 for the three and six months ended 2023 and 2022, respectively	(8)		(46)		18		(107)
Unrealized Gains (Losses) on Cash Flow Hedges, net of tax (expense) benefit of $(5), $(1), $(4) and $(1) for the three and six months ended 2023 and 2022, respectively	11		—		10		1
Pension/OPEB adjustment, net of tax (expense) benefit of $(1), $0, $(3) and $0 for the three and six months ended 2023 and 2022, respectively	4		1		7		1
Other Comprehensive Income (Loss), net of tax	7		(45)		35		(105)
COMPREHENSIVE INCOME	$	598	$	86	$	1,913	$	24

See Notes to Condensed Consolidated Financial Statements.

Table of Contents

PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED

CONDENSED CONSOLIDATED BALANCE SHEETS

Millions

(Unaudited)



	June 30, 2023		December 31, 2022
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents	$	547	$	465
Accounts Receivable, net of allowance of $290 in 2023 and $323 in 2022	1,422		1,944
Tax Receivable	8		79
Unbilled Revenues, net of allowance of $4 in 2023 and $16 in 2022	190		322
Fuel	200		420
Materials and Supplies, net	645		540
Prepayments	365		93
Derivative Contracts	91		18
Regulatory Assets	358		369
Assets Held for Sale	—		20
Other	37		33
Total Current Assets	3,863		4,303
PROPERTY, PLANT AND EQUIPMENT	47,193		45,924
Less: Accumulated Depreciation and Amortization	(10,333)		(9,982)
Net Property, Plant and Equipment	36,860		35,942
NONCURRENT ASSETS
Regulatory Assets	4,813		4,404
Operating Lease Right-of-Use Assets	170		176
Long-Term Investments	302		624
Nuclear Decommissioning Trust (NDT) Fund	2,383		2,230
Long-Term Tax Receivable	—		5
Long-Term Receivable of Variable Interest Entity (VIE)	562		551
Rabbi Trust Fund	185		183
Intangibles	14		14
Derivative Contracts	62		15
Other	291		271
Total Noncurrent Assets	8,782		8,473
TOTAL ASSETS	$	49,505	$	48,718

See Notes to Condensed Consolidated Financial Statements.

Table of Contents

PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED

CONDENSED CONSOLIDATED BALANCE SHEETS

Millions

(Unaudited)



	June 30, 2023		December 31, 2022
LIABILITIES AND CAPITALIZATION
CURRENT LIABILITIES
Long-Term Debt Due Within One Year	$	2,075	$	1,575
Commercial Paper and Loans	1,197		2,200
Accounts Payable	1,050		1,271
Derivative Contracts	66		124
Accrued Interest	141		134
Accrued Taxes	11		12
Clean Energy Program	229		145
Obligation to Return Cash Collateral	92		290
Regulatory Liabilities	339		384
Other	550		545
Total Current Liabilities	5,750		6,680
NONCURRENT LIABILITIES
Deferred Income Taxes and Investment Tax Credits (ITC)	6,345		5,725
Regulatory Liabilities	2,157		2,240
Operating Leases	166		169
Asset Retirement Obligations	1,525		1,499
OPEB Costs	400		410
OPEB Costs of Servco	466		455
Accrued Pension Costs	691		705
Accrued Pension Costs of Servco	81		82
Environmental Costs	219		231
Derivative Contracts	8		33
Long-Term Accrued Taxes	57		66
Other	193		199
Total Noncurrent Liabilities	12,308		11,814
COMMITMENTS AND CONTINGENT LIABILITIES (See Note 10)
CAPITALIZATION
LONG-TERM DEBT	16,394		16,495
STOCKHOLDERS’ EQUITY
Common Stock, no par, authorized 1,000 shares; issued, 2023 and 2022—534 shares	5,054		5,065
Treasury Stock, at cost, 2023 and 2022—37 shares	(1,386)		(1,377)
Retained Earnings	11,900		10,591
Accumulated Other Comprehensive Loss	(515)		(550)
Total Stockholders’ Equity	15,053		13,729
Total Capitalization	31,447		30,224
TOTAL LIABILITIES AND CAPITALIZATION	$	49,505	$	48,718

See Notes to Condensed Consolidated Financial Statements.

Table of Contents

PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Millions (Unaudited)



	Six Months Ended
	June 30,
	2023		2022
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income	$	1,878	$	129
Adjustments to Reconcile Net Income to Net Cash Flows from Operating Activities:
Depreciation and Amortization	561		552
Amortization of Nuclear Fuel	94		93
Losses on Asset Dispositions and Impairments	—		38
Emission Allowances and Renewable Energy Credit (REC) Compliance Accrual	5		40
Provision for Deferred Income Taxes and ITC	377		(379)
Non-Cash Employee Benefit Plan (Credits) Costs	19		(120)
Net Realized and Unrealized (Gains) Losses on Energy Contracts and Other Derivatives	(1,066)		951
Cost of Removal	(82)		(63)
Net Change in Regulatory Assets and Liabilities	(189)		(188)
Net (Gains) Losses and (Income) Expense from NDT Fund	(132)		222
Net Change in Certain Current Assets and Liabilities:
Tax Receivable	71		1
Accrued Taxes	(3)		(98)
Prepayments	(270)		(199)
Cash Collateral	1,095		(1,244)
Obligation to Return Cash Collateral	(198)		552
Other Current Assets and Liabilities	283		130
Employee Benefit Plan Funding and Related Payments	(21)		(16)
Other	(13)		(45)
Net Cash Provided By (Used In) Operating Activities	2,409		356
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to Property, Plant and Equipment	(1,444)		(1,291)
Proceeds from Sales of Trust Investments	721		862
Purchases of Trust Investments	(742)		(876)
Proceeds from Sales of Equity Method Investments	290		—
Proceeds from Sales of Long-Lived Assets	20		1,890
Other	36		(54)
Net Cash Provided By (Used In) Investing Activities	(1,119)		531
CASH FLOWS FROM FINANCING ACTIVITIES
Net Change in Commercial Paper and Loans	247		(956)
Proceeds from Short-Term Loans	750		2,000
Payment of Short-Term Loans	(2,000)		(1,250)
Issuance of Long-Term Debt	900		1,750
Payment of Long-Term Debt	(500)		—
Payments for Share Repurchase Program	—		(500)
Cash Dividends Paid on Common Stock	(569)		(541)
Other	(32)		(7)
Net Cash Provided By (Used In) Financing Activities	(1,204)		496
Net Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash	86		1,383
Cash, Cash Equivalents and Restricted Cash at Beginning of Period	511		863
Cash, Cash Equivalents and Restricted Cash at End of Period	$	597	$	2,246
Supplemental Disclosure of Cash Flow Information:
Income Taxes Paid (Received)	$	63	$	325
Interest Paid, Net of Amounts Capitalized	$	347	$	276
Accrued Property, Plant and Equipment Expenditures	$	413	$	381

See Notes to Condensed Consolidated Financial Statements.

Table of Contents

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 March 31, 2023	534	$	5,045	(37)	$	(1,391)	$	11,594	$	(522)	$	14,726
Net Income	—	—		—	—		591		—		591
Other Comprehensive Income (Loss), net of tax (expense) benefit of $0	—	—		—	—		—		7		7
Comprehensive Income											598
Cash Dividends at $0.57 per share on Common Stock	—	—		—	—		(285)		—		(285)
Other	—	9		—	5		—		—		14
Balance as of June 30, 2023	534	$	5,054	(37)	$	(1,386)	$	11,900	$	(515)	$	15,053

Balance as of March 31, 2022	534	$	4,978	(37)	$	(1,336)	$	10,366	$	(410)	$	13,598
Net Income	—	—		—	—		131		—		131
Other Comprehensive Income (Loss), net of tax (expense) benefit of $29	—	—		—	—		—		(45)		(45)
Comprehensive Income											86
Cash Dividends at $0.54 per share on Common Stock	—	—		—	—		(270)		—		(270)
Payments for Share Repurchase Program	—	50		—	(50)		—		—		—
Other	—	10		—	4		—		—		14
Balance as of June 30, 2022	534	$	5,038	(37)	$	(1,382)	$	10,227	$	(455)	$	13,428



	Common Stock			Treasury Stock			Retained Earnings		Accumulated Other Comprehensive Income (Loss)
	Shs.	Amount		Shs.	Amount		Total
Balance as of December 31, 2022	534	$	5,065	(37)	$	(1,377)	$	10,591	$	(550)	$	13,729
Net Income	—	—		—	—		1,878		—		1,878
Other Comprehensive Income (Loss), net of tax (expense) benefit of $(18)	—	—		—	—		—		35		35
Comprehensive Income											1,913
Cash Dividends at $1.14 per share on Common Stock	—	—		—	—		(569)		—		(569)
Other	—	(11)		—	(9)		—		—		(20)
Balance as of June 30, 2023	534	$	5,054	(37)	$	(1,386)	$	11,900	$	(515)	$	15,053

Balance as of December 31, 2021	534	$	5,045	(30)	$	(896)	$	10,639	$	(350)	$	14,438
Net Income	—	—		—	—		129		—		129
Other Comprehensive Income (Loss), net of tax (expense) benefit of $68	—	—		—	—		—		(105)		(105)
Comprehensive Income											24
Cash Dividends at $1.08 per share on Common Stock	—	—		—	—		(541)		—		(541)
Payments for Share Repurchase Program	—	—		(7)	(500)		—		—		(500)
Other	—	(7)		—	14		—		—		7
Balance as of June 30, 2022	534	$	5,038	(37)	$	(1,382)	$	10,227	$	(455)	$	13,428

See Notes to Condensed Consolidated Financial Statements.

Table of Contents

PUBLIC SERVICE ELECTRIC AND GAS COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Millions

(Unaudited)



	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2023		2022		2023		2022
OPERATING REVENUES	$	1,662	$	1,668	$	3,955	$	3,952
OPERATING EXPENSES
Energy Costs	551		630		1,535		1,598
Operation and Maintenance	429		434		889		897
Depreciation and Amortization	240		227		484		468
Total Operating Expenses	1,220		1,291		2,908		2,963
OPERATING INCOME	442		377		1,047		989
Net Gains (Losses) on Trust Investments	—		(2)		—		(2)
Other Income (Deductions)	23		22		44		41
Net Non-Operating Pension and OPEB Credits (Costs)	28		71		56		141
Interest Expense	(123)		(107)		(236)		(210)
INCOME BEFORE INCOME TAXES	370		361		911		959
Income Tax Expense	(34)		(56)		(88)		(145)
NET INCOME	$	336	$	305	$	823	$	814

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 COMPREHENSIVE INCOME

Millions

(Unaudited)



	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2023		2022		2023		2022
NET INCOME	$	336	$	305	$	823	$	814
Unrealized Gains (Losses) on Available-for-Sale Securities, net of tax (expense) benefit of $0, $1, $0 and $2 for the three and six months ended 2023 and 2022, respectively	—		(1)		1		(4)
COMPREHENSIVE INCOME	$	336	$	304	$	824	$	810

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)



	June 30, 2023		December 31, 2022
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents	$	126	$	220
Accounts Receivable, net of allowance of $290 in 2023 and $323 in 2022	976		1,075


Unbilled Revenues, net of allowance of $4 in 2023 and $16 in 2022	190		322
Materials and Supplies, net	405		307
Prepayments	235		7
Regulatory Assets	358		369

Other	37		32
Total Current Assets	2,327		2,332
PROPERTY, PLANT AND EQUIPMENT	42,272		41,045
Less: Accumulated Depreciation and Amortization	(8,449)		(8,215)
Net Property, Plant and Equipment	33,823		32,830
NONCURRENT ASSETS
Regulatory Assets	4,813		4,404
Operating Lease Right-of-Use Assets	85		86
Long-Term Investments	132		143
Rabbi Trust Fund	33		32
Other	134		133
Total Noncurrent Assets	5,197		4,798
TOTAL ASSETS	$	41,347	$	39,960

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)



	June 30, 2023		December 31, 2022
LIABILITIES AND CAPITALIZATION
CURRENT LIABILITIES
Long-Term Debt Due Within One Year	$	575	$	825
Commercial Paper and Loans	298		—
Accounts Payable	695		703
Accounts Payable—Affiliated Companies	296		485
Accrued Interest	122		113
Clean Energy Program	229		145

Obligation to Return Cash Collateral	92		290
Regulatory Liabilities	339		384
Other	450		416
Total Current Liabilities	3,096		3,361
NONCURRENT LIABILITIES
Deferred Income Taxes and ITC	5,638		5,348
Regulatory Liabilities	2,157		2,240
Operating Leases	76		77
Asset Retirement Obligations	384		384
OPEB Costs	246		255
Accrued Pension Costs	392		397
Environmental Costs	162		173

Long-Term Accrued Taxes	8		9
Other	165		163
Total Noncurrent Liabilities	9,228		9,046
COMMITMENTS AND CONTINGENT LIABILITIES (See Note 10)
CAPITALIZATION
LONG-TERM DEBT	12,517		11,871
STOCKHOLDER’S EQUITY
Common Stock; 150 shares authorized; issued and outstanding, 2023 and 2022—132 shares	892		892
Contributed Capital	1,170		1,170
Basis Adjustment	986		986
Retained Earnings	13,462		12,639
Accumulated Other Comprehensive Income (Loss)	(4)		(5)
Total Stockholder’s Equity	16,506		15,682
Total Capitalization	29,023		27,553
TOTAL LIABILITIES AND CAPITALIZATION	$	41,347	$	39,960

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)



	Six Months Ended
	June 30,
	2023		2022
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income	$	823	$	814
Adjustments to Reconcile Net Income to Net Cash Flows from Operating Activities:
Depreciation and Amortization	484		468

Provision for Deferred Income Taxes and ITC	65		80
Non-Cash Employee Benefit Plan (Credits) Costs	7		(90)
Cost of Removal	(82)		(63)
Net Change in Regulatory Assets and Liabilities	(189)		(188)
Net Change in Certain Current Assets and Liabilities:
Accounts Receivable and Unbilled Revenues	229		11
Materials and Supplies	(97)		(27)
Prepayments	(228)		(201)
Accounts Payable	(67)		71
Accounts Receivable/Payable—Affiliated Companies, net	(189)		(133)
Obligation to Return Cash Collateral	(198)		552
Other Current Assets and Liabilities	40		52
Employee Benefit Plan Funding and Related Payments	(11)		(8)
Other	(44)		(26)
Net Cash Provided By (Used In) Operating Activities	543		1,312
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to Property, Plant and Equipment	(1,336)		(1,171)
Proceeds from Sales of Trust Investments	3		9
Purchases of Trust Investments	(2)		(8)
Solar Loan Investments	11		13
Other	1		3
Net Cash Provided By (Used In) Investing Activities	(1,323)		(1,154)
CASH FLOWS FROM FINANCING ACTIVITIES
Net Change in Commercial Paper and Loans	298		—
Issuance of Long-Term Debt	900		500
Redemption of Long-Term Debt	(500)		—

Other	(8)		(5)
Net Cash Provided By (Used In) Financing Activities	690		495
Net Increase (Decrease) In Cash, Cash Equivalents and Restricted Cash	(90)		653
Cash, Cash Equivalents and Restricted Cash at Beginning of Period	266		339
Cash, Cash Equivalents and Restricted Cash at End of Period	$	176	$	992
Supplemental Disclosure of Cash Flow Information:
Income Taxes Paid (Received)	$	65	$	104
Interest Paid, Net of Amounts Capitalized	$	218	$	200
Accrued Property, Plant and Equipment Expenditures	$	390	$	349

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 March 31, 2023	$	892	$	1,170		$	986	$	13,126	$	(4)	$	16,170
Net Income	—		—			—		336		—		336
Other Comprehensive Income (Loss), net of tax (expense) benefit of $0	—		—			—		—		—		—
Comprehensive Income												336

Balance as of June 30, 2023	$	892	$	1,170		$	986	$	13,462	$	(4)	$	16,506

Balance as of March 31, 2022	$	892	$	1,170		$	986	$	12,033	$	(2)	$	15,079
Net Income	—		—			—		305		—		305
Other Comprehensive Income (Loss), net of tax (expense) benefit of $1	—		—			—		—		(1)		(1)
Comprehensive Income												304


Balance as of June 30, 2022	$	892	$	1,170		$	986	$	12,338	$	(3)	$	15,383



	Common Stock		Contributed Capital			Basis Adjustment		Retained Earnings		Accumulated Other Comprehensive Income (Loss)
					Total
Balance as of December 31, 2022	$	892	$	1,170		$	986	$	12,639	$	(5)	$	15,682
Net Income	—		—			—		823		—		823
Other Comprehensive Income (Loss), net of tax (expense) benefit of $0	—		—			—		—		1		1
Comprehensive Income												824

Balance as of June 30, 2023	$	892	$	1,170		$	986	$	13,462	$	(4)	$	16,506

Balance as of December 31, 2021	$	892	$	1,170		$	986	$	11,524	$	1	$	14,573
Net Income	—		—			—		814		—		814
Other Comprehensive Income (Loss), net of tax (expense) benefit of $2	—		—			—		—		(4)		(4)
Comprehensive Income												810


Balance as of June 30, 2022	$	892	$	1,170		$	986	$	12,338	$	(3)	$	15,383

See disclosures regarding Public Service Electric and Gas Company 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 public utility holding company that, acting through its wholly owned subsidiaries, is a predominantly regulated electric and gas utility and a nuclear generation business. PSEG’s principal operating subsidiaries are:

Public Service Electric and Gas Company (PSE&G)—which is a public utility engaged principally in the transmission of electricity and distribution of electricity and natural gas in certain areas of New Jersey. PSE&G is subject to regulation by the New Jersey Board of Public Utilities (BPU), the Federal Energy Regulatory Commission (FERC) and other federal and New Jersey state regulators. PSE&G also invests in regulated solar generation projects and energy efficiency (EE) and related programs in New Jersey, which are regulated by the BPU.
PSEG Power LLC (PSEG Power)**—which is an energy supply company that integrates the operations of its merchant nuclear generating assets with its fuel supply functions through competitive energy sales via its principal direct wholly owned subsidiaries. PSEG Power’s subsidiaries are subject to regulation by FERC, the Nuclear Regulatory Commission (NRC), and other federal regulators and state regulators in the states in which they operate.

PSEG’s other direct wholly owned subsidiaries are: PSEG Energy Holdings L.L.C. (Energy Holdings), which primarily holds lease investments; PSEG Long Island LLC (PSEG LI), which operates the Long Island Power Authority’s (LIPA) electric transmission and distribution (T&D) system under an Operations Services Agreement (OSA); and PSEG Services Corporation (Services), which provides certain management, administrative and general services to PSEG and its subsidiaries at cost.

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, 2022.

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, 2022.

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, 2022) and ending periods shown in the Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2023. Restricted cash consists primarily of deposits received related to various construction projects at PSE&G.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Table of Contents



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

As of June 30, 2023
Cash and Cash Equivalents	$	126	$	421	$	547
Restricted Cash in Other Current Assets	30		—		30
Restricted Cash in Other Noncurrent Assets	20		—		20
Cash, Cash Equivalents and Restricted Cash	$	176	$	421	$	597

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

Note 2. Revenues

Nature of Goods and Services

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

PSE&G

Revenues from Contracts with Customers

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

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

Other Revenues from Contracts with Customers

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

Revenues Unrelated to Contracts with Customers

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

PSEG Power & Other

Revenues from Contracts with Customers

Electricity and Related Products—PSEG Power owns generation solely within PJM Interconnection, L.L.C. (PJM), which facilitates the dispatch of energy and energy-related products. Prior to the sale of the fossil generation assets in 2022, PSEG Power also had significant sales in the New York Independent System Operator (NYISO) and the New England Independent System Operator (ISO-NE) regions.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Table of Contents

PSEG Power primarily sells to the Independent System Operators (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. Historically, wholesale load contracts have been executed in the different ISO regions for the bundled supply of energy, capacity, renewable energy credits (RECs) and ancillary services representing PSEG Power’s performance obligations. Revenue for these contracts is recognized over time as the bundled service is provided to the customer. PSEG generally reports electricity sales and purchases conducted with those individual ISOs net on an hourly basis in either Operating Revenues or Energy Costs in its Condensed Consolidated Statements of Operations. The classification depends on the net hourly activity.

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

In December 2022, PJM called its first ISO-wide Maximum Generation Emergency Action, which triggered a Performance Assessment Interval (PAI) event. During the PAI, PSEG Power’s Salem 2 nuclear plant incurred penalties due to an unplanned outage during the second day of the event. Our remaining nuclear plants earned bonus payments during the entire event. Additional revenue has been recorded in 2023 upon clarification from the ISO on expected bonus payments and receipts to date. The estimated impact of Salem 2’s penalties and bonuses earned by the other units was not material to PSEG’s financial results in 2022 or 2023.

PSEG Power’s Salem 1, Salem 2 and Hope Creek nuclear plants have been awarded Zero Emission Certificates (ZECs) by the BPU through May 2025. These nuclear plants are expected to receive ZEC revenue from the electric distribution companies (EDCs) in New Jersey. PSEG Power recognizes revenue when the units generate electricity, which is when the performance obligation is satisfied. These revenues are included in PJM Sales in the following tables. See Note 3. Early Plant Retirements/Asset Dispositions and Impairments for additional information.

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

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

Other Revenues from Contracts with Customers

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 12. Financial Risk Management Activities for further discussion.

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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Table of Contents

Disaggregation of Revenues



	PSE&G		PSEG Power & Other (A)		Eliminations		Consolidated
	Millions
Three Months Ended June 30, 2023
Revenues from Contracts with Customers
Electric Distribution	$	784	$	—	$	—	$	784
Gas Distribution	274		—		—		274
Transmission	447		—		—		447
Electricity and Related Product Sales
PJM
Third-Party Sales	—		211		—		211
Sales to Affiliates	—		27		(27)		—
NYISO	—		—		—		—
ISO-NE	—		3		—		3
Gas Sales
Third-Party Sales	—		26		—		26
Sales to Affiliates	—		115		(115)		—
Other Revenues from Contracts with Customers (B)	94		153		(1)		246
Total Revenues from Contracts with Customers	1,599		535		(143)		1,991
Revenues Unrelated to Contracts with Customers (C)	63		367		—		430
Total Operating Revenues	$	1,662	$	902	$	(143)	$	2,421



	PSE&G		PSEG Power & Other (A)		Eliminations		Consolidated
	Millions
Six Months Ended June 30, 2023
Revenues from Contracts with Customers
Electric Distribution	$	1,514	$	—	$	—	$	1,514
Gas Distribution	1,233		—		—		1,233
Transmission	872		—		—		872
Electricity and Related Product Sales
PJM
Third-Party Sales	—		487		—		487
Sales to Affiliates	—		58		(58)		—
NYISO	—		—		—		—
ISO-NE	—		6		—		6
Gas Sales
Third-Party Sales	—		112		—		112
Sales to Affiliates	—		648		(648)		—
Other Revenues from Contracts with Customers (B)	172		306		(2)		476
Total Revenues from Contracts with Customers	3,791		1,617		(708)		4,700
Revenues Unrelated to Contracts with Customers (C)	164		1,312		—		1,476
Total Operating Revenues	$	3,955	$	2,929	$	(708)	$	6,176

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Table of Contents



	PSE&G		PSEG Power & Other (A)		Eliminations		Consolidated
	Millions
Three Months Ended June 30, 2022
Revenues from Contracts with Customers
Electric Distribution	$	836	$	—	$	—	$	836
Gas Distribution	317		—		—		317
Transmission	396		—		—		396
Electricity and Related Product Sales
PJM
Third-Party Sales	—		475		—		475
Sales to Affiliates	—		35		(35)		—
NYISO	—		—		—		—
ISO-NE	—		3		—		3
Gas Sales
Third-Party Sales	—		77		—		77
Sales to Affiliates	—		202		(202)		—
Other Revenues from Contracts with Customers (B)	94		150		—		244
Total Revenues from Contracts with Customers	1,643		942		(237)		2,348
Revenues Unrelated to Contracts with Customers (C)	25		(297)		—		(272)
Total Operating Revenues	$	1,668	$	645	$	(237)	$	2,076



	PSE&G		PSEG Power & Other (A)		Eliminations		Consolidated
	Millions
Six Months Ended June 30, 2022
Revenues from Contracts with Customers
Electric Distribution	$	1,556	$	—	$	—	$	1,556
Gas Distribution	1,364		—		(1)		1,363
Transmission	788		—		—		788
Electricity and Related Product Sales
PJM
Third-Party Sales	—		1,057		—		1,057
Sales to Affiliates	—		91		(91)		—
NYISO	—		88		—		88
ISO-NE	—		89		—		89
Gas Sales
Third-Party Sales	—		213		—		213
Sales to Affiliates	—		728		(728)		—
Other Revenues from Contracts with Customers (B)	179		296		(1)		474
Total Revenues from Contracts with Customers	3,887		2,562		(821)		5,628
Revenues Unrelated to Contracts with Customers (C)	65		(1,304)		—		(1,239)
Total Operating Revenues	$	3,952	$	1,258	$	(821)	$	4,389

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

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

(C)Includes primarily alternative revenues at PSE&G principally from the CIP program and derivative contracts and lease contracts at PSEG Power & Other.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Table of Contents

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 June 30, 2023 and December 31, 2022. Substantially all of PSE&G’s accounts receivable and unbilled revenues result from contracts with customers that are priced at tariff rates. Allowances represented approximately 20% of accounts receivable (including unbilled revenues) as of June 30, 2023 and December 31, 2022.

Accounts Receivable—Allowance for Credit Losses

PSE&G’s accounts receivable, including unbilled revenues, is primarily comprised of utility customer receivables for the provision of electric and gas service and appliance services, and are reported on the balance sheet as gross outstanding amounts adjusted for an allowance for credit losses. The allowance for credit losses reflects PSE&G’s best estimate of losses on the account balances. The allowance is based on PSE&G’s projection of accounts receivable aging, historical experience, economic factors and other currently available evidence, including the estimated impact of the COVID-19 pandemic on the outstanding balances as of June 30, 2023. PSE&G’s electric bad debt expense is recoverable through its Societal Benefits Clause (SBC) mechanism. As of June 30, 2023, PSE&G had a deferred balance of $137 million from electric bad debts recorded as a Regulatory Asset. In addition, as of June 30, 2023, PSE&G had deferred incremental gas bad debt expense of $68 million as a Regulatory Asset for future regulatory recovery due to the impact of the coronavirus pandemic. See Note 5. Rate Filings for additional information.

The following provides a reconciliation of PSE&G’s allowance for credit losses for the three months and six months ended June 30, 2023 and 2022:




		Three Months Ended June 30, 2023
		Millions
Balance as of March 31, 2023		$	319
Utility Customer and Other Accounts
	Provision	15
	Write-offs, net of Recoveries of $6 million	(40)
Balance as of June 30, 2023		$	294

		Six Months Ended June 30, 2023
		Millions
Balance as of January 1, 2023		$	339
Utility Customer and Other Accounts
	Provision	24
	Write-offs, net of Recoveries of $13 million	(69)
Balance as of June 30, 2023		$	294

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Table of Contents




		Three Months Ended June 30, 2022
		Millions
Balance as of March 31, 2022		$	351
Utility Customer and Other Accounts
	Provision	6
	Write-offs, net of Recoveries of $14 million	(22)
Balance as of June 30, 2022		$	335

		Six Months Ended June 30, 2022
		Millions
Balance as of January 1, 2022		$	337
Utility Customer and Other Accounts
	Provision	39
	Write-offs, net of Recoveries of $22 million	(41)
Balance as of June 30, 2022		$	335

PSEG Power & Other

PSEG Power generally collects consideration upon satisfaction of performance obligations, and therefore, PSEG Power had no material contract balances as of June 30, 2023 and December 31, 2022.

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 energy and ancillary services sold directly to ISOs, wholesale load contracts and capacity sales which are executed in the different ISO regions, and other counterparties. In the wholesale energy markets in which PSEG Power operates, payment for services rendered and products transferred are typically due within 30 days of delivery. As such, there is little credit risk associated with these receivables. PSEG Power did not record an allowance for credit losses for these receivables as of June 30, 2023 or December 31, 2022. PSEG Power monitors the status of its counterparties on an ongoing basis to assess whether there are any anticipated credit losses.

PSEG LI did not have any material contract balances as of June 30, 2023 and December 31, 2022.

Remaining Performance Obligations under Fixed Consideration Contracts

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

Capacity Revenues from the PJM Annual Base Residual and Incremental Auctions—The Base Residual Auction is generally conducted annually three years in advance of the operating period. The 2023/2024 auction was held in June 2022. In February 2023, the results of the 2024/2025 auction held in December 2022 were released. 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
June 2023 to May 2024	$50	3,700
June 2024 to May 2025	$55	3,500

Capacity transactions with the PJM Regional Transmission Organization are reported on a net basis dependent on PSEG

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Table of Contents

Power’s monthly net sale or purchase position.

Bilateral capacity contracts—Capacity obligations pursuant to contract terms through 2029 are anticipated to result in revenues totaling $27 million.

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

Note 3. Early Plant Retirements/Asset Dispositions and Impairments

Nuclear

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

In April 2021, PSEG Power’s Salem 1, Salem 2 and Hope Creek nuclear plants were awarded ZECs for the three-year eligibility period starting June 2022 at the same approximate $10 per MWh received during the prior ZEC period through May 2022 referenced above. As a result, each nuclear plant is receiving ZEC revenue for an additional three years starting June 2022. The terms and conditions of this April 2021 ZEC award are the same as the ZEC period through May 2022. In May 2021, the New Jersey Division of Rate Counsel filed an appeal with the New Jersey Appellate Division of the BPU’s April 2021 decision. PSEG cannot predict the outcome of this matter.

The award of ZECs attaches certain obligations, including an obligation to repay the ZECs in the event that a plant ceases operations during the period that it was awarded ZECs, subject to certain exceptions specified in the ZEC legislation. PSEG Power has and will continue to recognize revenue monthly as the nuclear plants generate electricity and satisfy their performance obligations. Further, the ZEC payment may be adjusted by the BPU at any time to offset environmental or fuel diversity payments that a selected nuclear plant may receive from another source.

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

PSEG Power may take all necessary steps to cease to operate all of these plants and will incur associated costs and accounting charges in the event that the financial condition of the plants is materially adversely impacted in the future. This decision may be based upon market conditions, including energy and capacity revenues, insufficient government financial support, or, in the case of the Salem nuclear plants, decisions by the Environmental Protection Agency and state environmental regulators regarding the implementation of Section 316(b) of the Clean Water Act (CWA) and related state regulations, or other factors. The associated costs and accounting charges may include, among other things, one-time impairment charges or accelerated Depreciation and Amortization Expense on the remaining carrying value of the plants, potential penalties associated with the early termination of capacity obligations and fuel contracts, accelerated asset retirement costs, severance costs, environmental remediation costs and, in certain circumstances potential additional funding of the Nuclear Decommissioning Trust Fund, which would result in a material adverse impact on PSEG’s results of operations.

Non-Nuclear

In May 2023, PSEG sold its 25% equity interest in Ocean Wind JV HoldCo, LLC. The sale proceeds approximated PSEG’s carrying value of the investment; therefore, no material gain or loss was recognized upon disposition.

In May 2023, PSEG Power entered into an agreement to sell its 50% ownership interest in Kalaeloa. The sale of PSEG Power’s limited and general partnership ownership interests closed in May and July 2023, respectively. The sale proceeds approximated PSEG Power's carrying value of the investment; therefore, no material gain or loss was recognized upon disposition.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Table of Contents

In March 2023, Energy Holdings completed the sale of one of its domestic energy generating facilities and recorded an immaterial pre-tax gain.

In February 2022, PSEG completed the sale of its fossil generating portfolio. As defined in each agreement, adjustments were required as a result of purchase price and working capital adjustments, including an adjustment for positive or negative cash flow of the fossil generating assets based on actual performance starting after December 31, 2021 through the respective closing dates. As a result, in 2022 PSEG Power recorded a pre-tax impairment of approximately $43 million.

PSEG Power has retained 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 (ISRA) and the Connecticut Transfer Act (CTA). The amounts for any such environmental remediation are not currently estimable, but will likely be material.

Note 4. Variable Interest Entity (VIE)

VIE for which PSEG LI is the Primary Beneficiary

PSEG LI consolidates Servco, a marginally capitalized VIE, which was created for the purpose of operating LIPA’s T&D system in Long Island, New York as well as providing administrative support functions to LIPA. PSEG LI is the primary beneficiary of Servco because it directs the operations of Servco, the activity that most significantly impacts Servco’s economic 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 $129 million for each of the three months ended June 30, 2023 and 2022 and $257 million and $252 million for the six months ended June 30, 2023 and 2022, respectively, of O&M costs, the full reimbursement of which was reflected in Operating Revenues. For transactions in which Servco acts as an agent for LIPA, it records revenues and the related expenses on a net basis, resulting in no impact on PSEG’s Condensed Consolidated Statement of Operations.

Note 5. 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, 2022.

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

**BGSS—**In January and February 2023, PSE&G filed with the BPU two self-implementing BGSS rate reductions of 15 cents and 3 cents per therm, effective February 1, 2023 and March 1, 2023, respectively. These reductions resulted in a new BGSS rate of approximately 47 cents per therm effective March 1, 2023. In April 2023, the BPU gave final approval to PSE&G’s BGSS rate of 47 cents per therm.

In June 2023, PSE&G made its annual BGSS filing with the BPU requesting a decrease to its BGSS rate to approximately 40 cents per therm, effective October 1, 2023. This matter is pending.

CIP**—**In February 2023, the BPU gave final approval for PSE&G to recover approximately $52 million of deficient electric revenues that resulted from the 12-month period ended May 31, 2022, with approximately $18 million approved for recovery for the first year starting on the effective date of June 15, 2022 and the remaining $34 million to be recovered starting in June 2023.

In April 2023, the BPU gave final approval for PSE&G to recover approximately $53 million of deficient gas revenues that resulted from the 12-month period ended September 30, 2022, over one year effective October 1, 2022.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Table of Contents

In May 2023, the BPU provisionally approved PSE&G's updated annual electric CIP petition to recover approximately $72 million of deficient electric revenues over two years that resulted from the 12-month period ended May 31, 2023, with new rates effective June 1, 2023.

In June 2023, PSE&G filed a gas CIP recovery petition seeking BPU approval to recover estimated deficient gas revenues of approximately $99 million for the 12-month period ending September 30, 2023, and an additional $11 million carryover underrecovery from the prior CIP period for a total request of $110 million. The revenue deficiency is the result of lower actual and estimated revenues as compared to a baseline established in PSE&G’s most recent distribution base rate proceeding. New rates are proposed to be effective October 1, 2023 and PSE&G expects to recover its deficiency over a one year period. This matter is pending.

**COVID-19 Deferral—**In May and June 2023, the BPU issued two Orders to all public utilities in New Jersey that stipulated a filing deadline for recovery of COVID-19 Regulatory Asset balances, and set forth certain filing requirements primarily related to recovery proposals to be included by each utility in their COVID-19 filings.

In July 2023, PSE&G filed a petition with the BPU in compliance with those Orders requesting recovery of its incremental costs associated with the COVID-19 pandemic. This matter is pending.

As of June 30, 2023, PSE&G has deferred approximately $131 million as a Regulatory Asset for its net incremental costs, including $68 million for incremental gas bad debt expense associated with customer accounts receivable. PSE&G expects its COVID-19 Regulatory Asset balance is probable of recovery under the BPU orders.

**Energy Strong II—**In April 2023, the BPU approved PSE&G’s updated filing for annual electric and gas revenue increases of $16 million and $4 million, respectively, effective May 1, 2023. These increases represent the return on and of Energy Strong II investments placed in service through January 2023.

In May 2023, PSE&G filed a petition seeking BPU approval to recover an annualized increase in electric revenue requirement of approximately $15 million associated with capitalized electric investment costs of the Energy Strong II program. This increase represents the return on and of actual and forecasted investments through July 31, 2023. This matter is pending.

**Gas System Modernization Program II (GSMP II)—**In May 2023, the BPU approved PSE&G’s updated GSMP II cost recovery filing to recover an annual gas revenue increase of approximately $11 million effective June 1, 2023. This increase represents the return on and of GSMP II investments placed in service through February 2023.

**Green Program Recovery Charges (GPRC)—**In May 2023, the BPU approved PSE&G’s 2022 updated GPRC filing for annual electric and gas revenue increases of $87 million and $5 million, respectively, with new rates effective June 1, 2023.

Additionally in May 2023, the BPU approved PSE&G’s petition to increase its Clean Energy Future-EE sub program investment (a component of GPRC) by $280 million and approved a nine-month extension to make investments.

In June 2023, PSE&G filed its 2023 GPRC cost recovery petition requesting BPU approval for recovery of increases of $38 million and $20 million in annual electric and gas revenues, respectively. This matter is pending.

**Pension—**In February 2023, the BPU approved an accounting order authorizing PSE&G to modify its method for calculating the amortization of the net actuarial gain or loss component of pension expense for ratemaking purposes. This methodology change for ratemaking purposes is effective for the calendar year ending December 31, 2023 and forward. As of June 30, 2023, PSE&G has deferred $30 million as a Regulatory Asset under this methodology.

**Remediation Adjustment Charge (RAC)—**In January 2023, PSE&G filed its RAC 30 petition with the BPU seeking recovery of approximately $44 million of net Manufactured Gas Plant (MGP) expenditures incurred from August 1, 2021 through July 31, 2022. This matter is pending.

**SBC—**In January 2023, PSE&G filed a petition to increase its annual electric and gas rates by approximately $52 million and $32 million, respectively, in order to recover electric and gas costs incurred or expected to be incurred through February 2024 under its EE and Renewable Energy and Social Programs. The increase to electric rates includes the impact of increased bad debt expense as a result of the negative economic impact of the coronavirus pandemic and the resulting impact of moratoriums on collections. This matter is pending.

**Tax Adjustment Credit (TAC)—**In July 2023, the BPU approved PSE&G’s updated 2022 TAC filing to increase annual electric revenues by approximately $17 million and decrease annual gas revenues by approximately $42 million, with new rates effective August 1, 2023.

**Transmission Formula Rates—**In June 2023, PSE&G filed with FERC its 2022 true-up adjustment pertaining to its transmission formula rates in effect for calendar year 2022, as established by its 2022 annual forecast filing. The June 2023 true-up filing resulted in a decrease in the 2022 annual revenue requirement of approximately $21 million less than the revenue

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Table of Contents

requirement numbers contained in the forecast filing. PSE&G had previously recognized the majority of the lower revenue requirement in its 2022 Consolidated Statement of Operations.

**ZEC Program—**In January 2023, the BPU approved PSE&G’s petition to set the ZEC refund component of the tariff rate to zero effective February 1, 2023 as overcollections for the ZEC Energy Year ended May 31, 2022 totaling $1.3 million, including interest, were refunded to customers in 2022 through January 2023.

Note 6. Leases

PSEG and its subsidiaries are both a lessor and a lessee in operating leases. As of June 30, 2023, PSEG and its subsidiaries were lessors for leases classified as operating leases or leveraged leases. See Note 7. 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, 2022 for operating leases in which PSEG and its subsidiaries are lessees.

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

A wholly owned subsidiary of PSEG Power is the lessor in an operating lease for certain parcels of land with terms through 2050, plus five optional renewal periods of ten years.

Energy Holdings is the lessor in leveraged leases. See Note 7. Financing Receivables.

Energy Holdings is the lessor in an operating lease for a domestic energy generation facility with remaining terms through 2036, and in real estate assets with remaining terms through 2049. As of June 30, 2023, Energy Holdings’ property subject to these leases had a total carrying value of $30 million.

In March 2023, Energy Holdings completed the sale of one of its domestic energy generating facilities and recorded an immaterial pre-tax gain.

The following is the operating lease income for the three months and six months ended June 30, 2023 and 2022:



	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2023		2022		2023		2022
					Millions
Fixed Lease Income	$	6	$	8	$	12	$	16
Total Operating Lease Income	$	6	$	8	$	12	$	16

Note 7. 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 June 30, 2023, none of the solar loans were impaired; however, in the event of a loan default, the basis of the solar loan would be recovered through a regulatory recovery mechanism. Therefore, no current credit losses have been recorded for Solar Loan Programs I, II and III. A substantial portion of these loan amounts are noncurrent and reported in Long-Term Investments on PSEG’s and PSE&G’s Condensed Consolidated Balance Sheets. The following table reflects the outstanding loans by class of customer, none of which would be considered “non-performing.”

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Table of Contents



	As of
Outstanding Loans by Class of Customer	June 30, 2023		December 31, 2022
	Millions
Commercial/Industrial	$	74	$	85
Residential	3		4
Total	77		89
Current Portion (included in Accounts Receivable)	(26)		(27)
Noncurrent Portion (included in Long-Term Investments)	$	51	$	62

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



Programs	Balance as of June 30, 2023		Funding Provided	Residential Loan Term	Non-Residential Loan Term
	Millions
Solar Loan I	$	7	prior to 2013	10 years	15 years
Solar Loan II	36		prior to 2015	10 years	15 years
Solar Loan III	34		largely funded as of June 30, 2023	10 years	10 years
Total	$	77

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 June 30, 2023 and have an average remaining life of approximately three years. There are no remaining residential loans outstanding under the Solar Loan I program.

Energy Holdings

Energy Holdings, 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, 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 June 30, 2023 commenced in or prior to 2000. The following table shows Energy Holdings’ gross and net lease investments as of June 30, 2023 and December 31, 2022.



	As of
	June 30, 2023		December 31, 2022
	Millions
Lease Receivables (net of Non-Recourse Debt)	$	223	$	249
Unearned and Deferred Income	(68)		(74)
Gross Investments in Leases	155		175
Deferred Tax Liabilities	(35)		(39)
Net Investments in Leases	$	120	$	136

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Table of Contents

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 June 30, 2023
	As of June 30, 2023
		Millions
AA		$	7
A-		43
BBB+ to BBB		173
Total		$	223

PSEG recorded no credit losses for the leveraged leases existing on June 30, 2023. Upon the occurrence of certain defaults, indirect subsidiaries of Energy Holdings would exercise their rights and seek recovery of their investments, potentially including stepping into the lease directly to protect their investments. While these actions could ultimately protect or mitigate the loss of value, they could require the use of significant capital and trigger certain material tax obligations which could, for certain leases, wholly or partially be mitigated by tax indemnification claims against the counterparty. A bankruptcy of a lessee would likely delay and potentially limit any efforts on the part of the lessors to assert their rights upon default and could delay the monetization of claims.

Note 8. 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 June 30, 2023
	Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
	Millions
Equity Securities
Domestic	$	458	$	300	$	(5)	$	753
International	361		94		(19)		436
Total Equity Securities	819		394		(24)		1,189
Available-for-Sale Debt Securities
Government	742		1		(82)		661
Corporate	585		1		(55)		531
Total Available-for-Sale Debt Securities	1,327		2		(137)		1,192
Total NDT Fund Investments (A)	$	2,146	$	396	$	(161)	$	2,381

(A)The NDT Fund Investments table excludes cash and foreign currency of $2 million as of June 30, 2023, which is part of the NDT Fund.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Table of Contents



	As of December 31, 2022
	Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
	Millions
Equity Securities
Domestic	$	476	$	232	$	(12)	$	696
International	336		68		(28)		376
Total Equity Securities	812		300		(40)		1,072
Available-for-Sale Debt Securities
Government	721		—		(94)		627
Corporate	597		1		(69)		529
Total Available-for-Sale Debt Securities	1,318		1		(163)		1,156
Total NDT Fund Investments (A)	$	2,130	$	301	$	(203)	$	2,228

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

Net unrealized gains (losses) on debt securities of $(80) million (after-tax) were included in Accumulated Other Comprehensive Loss on PSEG’s Condensed Consolidated Balance Sheet as of June 30, 2023. The portion of net unrealized gains (losses) recognized in the second quarter and first six months of 2023 related to equity securities still held as of June 30, 2023 was $59 million and $114 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
	June 30, 2023		December 31, 2022
	Millions
Accounts Receivable	$	32	$	14
Accounts Payable	$	23	$	6

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Table of Contents

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



	As of June 30, 2023								As of December 31, 2022
	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	$	29	$	(3)	$	8	$	(2)	$	90	$	(10)	$	9	$	(2)
International	39		(4)		41		(15)		88		(12)		38		(16)
Total Equity Securities	68		(7)		49		(17)		178		(22)		47		(18)
Available-for-Sale Debt Securities
Government (B)	206		(6)		406		(76)		301		(27)		292		(67)
Corporate (C)	136		(3)		336		(52)		221		(21)		249		(48)
Total Available-for-Sale Debt Securities	342		(9)		742		(128)		522		(48)		541		(115)
NDT Trust Investments	$	410	$	(16)	$	791	$	(145)	$	700	$	(70)	$	588	$	(133)

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

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

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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Table of Contents

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



	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2023		2022		2023		2022
	Millions
Proceeds from NDT Fund Sales (A)	$	308	$	341	$	704	$	814
Net Realized Gains (Losses) on NDT Fund
Gross Realized Gains	$	25	$	21	$	46	$	50
Gross Realized Losses	(28)		(31)		(55)		(65)
Net Realized Gains (Losses) on NDT Fund (B)	(3)		(10)		(9)		(15)
Net Unrealized Gains (Losses) on Equity Securities	60		(170)		111		(231)

Net Gains (Losses) on NDT Fund Investments	$	57	$	(180)	$	102	$	(246)

(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.

The NDT Fund debt securities held as of June 30, 2023 had the following maturities:



Time Frame	Fair Value
	Millions
Less than one year	$	20
1 - 5 years	293
6 - 10 years	220
11 - 15 years	66
16 - 20 years	101
Over 20 years	492
Total NDT Available-for-Sale Debt Securities	$	1,192

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.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Table of Contents



	As of June 30, 2023
	Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
	Millions
Domestic Equity Securities	$	13	$	8	$	—	$	21
Available-for-Sale Debt Securities
Government	111		—		(19)		92
Corporate	85		—		(13)		72
Total Available-for-Sale Debt Securities	196		—		(32)		164

Total Rabbi Trust Investments	$	209	$	8	$	(32)	$	185



	As of December 31, 2022
	Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
	Millions
Domestic Equity Securities	$	14	$	6	$	—	$	20
Available-for-Sale Debt Securities
Government	110		—		(21)		89
Corporate	89		—		(15)		74
Total Available-for-Sale Debt Securities	199		—		(36)		163
Total Rabbi Trust Investments	$	213	$	6	$	(36)	$	183

Net unrealized gains (losses) on debt securities of $(23) million (after-tax) were included in Accumulated Other Comprehensive Loss on PSEG’s Condensed Consolidated Balance Sheet as of June 30, 2023. The portion of net unrealized gains (losses) recognized during the second quarter and first six months of 2023 related to equity securities still held as of June 30, 2023 was $1 million and $2 million, respectively.

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



	As of		As of
	June 30, 2023		December 31, 2022
	Millions
Accounts Receivable	$	1	$	1
Accounts Payable	$	1	$	—

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Table of Contents

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



	As of June 30, 2023								As of December 31, 2022
	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)	$	16	$	(1)	$	75	$	(18)	$	32	$	(5)	$	57	$	(16)
Corporate (B)	14		(1)		55		(12)		35		(5)		39		(10)
Total Available-for-Sale Debt Securities	30		(2)		130		(30)		67		(10)		96		(26)

Rabbi Trust Investments	$	30	$	(2)	$	130	$	(30)	$	67	$	(10)	$	96	$	(26)

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

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

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



	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2023		2022		2023		2022
	Millions
Proceeds from Rabbi Trust Sales	$	11	$	20	$	17	$	48
Net Realized Gains (Losses) on Rabbi Trust:
Gross Realized Gains	$	3	$	2	$	4	$	3
Gross Realized Losses	(4)		(4)		(5)		(6)
Net Realized Gains (Losses) on Rabbi Trust (A)	(1)		(2)		(1)		(3)
Net Unrealized Gains (Losses) on Equity Securities	1		(5)		2		(6)

Net Gains (Losses) on Rabbi Trust Investments	$	—	$	(7)	$	1	$	(9)

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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Table of Contents

The Rabbi Trust debt securities held as of June 30, 2023 had the following maturities:



Time Frame	Fair Value
	Millions
Less than one year	$	7
1 - 5 years	25
6 - 10 years	20
11 - 15 years	10
16 - 20 years	14
Over 20 years	88
Total Rabbi Trust Available-for-Sale Debt Securities	$	164

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 and PSEG Power & Other is detailed as follows:



	As of		As of
	June 30, 2023		December 31, 2022
	Millions
PSE&G	$	33	$	32
PSEG Power & Other	152		151
Total Rabbi Trust Investments	$	185	$	183

Note 9. Pension and Other Postretirement Benefits (OPEB)

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

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

The following table provides the components of net periodic benefit costs (credits) relating to all qualified and nonqualified pension and OPEB plans on an aggregate basis for PSEG, excluding Servco. Net periodic benefit costs are reduced in 2023 as a result of an accounting order from the BPU authorizing PSE&G to modify its method for calculating the amortization of the net actuarial gain or loss component of pension expense for rate making purposes. See Note 5. Rate Filings. Amounts shown do not reflect the impacts of capitalization, co-owner allocations and the 2023 BPU accounting order. Only the service cost component is eligible for capitalization, when applicable.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Table of Contents



	Pension Benefits				OPEB				Pension Benefits				OPEB
	Three Months Ended				Three Months Ended				Six Months Ended				Six Months Ended
	June 30,				June 30,				June 30,				June 30,
	2023		2022		2023		2022		2023		2022		2023		2022
	Millions
Components of Net Periodic Benefit (Credits) Costs
Service Cost (included in O&M Expense)	$	23	$	36	$	1	$	1	$	45	$	71	$	2	$	3
Non-Service Components of Pension and OPEB (Credits) Costs
Interest Cost	69		41		11		7		138		83		21		13
Expected Return on Plan Assets	(96)		(121)		(9)		(10)		(191)		(242)		(17)		(21)
Amortization of Net
Prior Service Credit	—		—		(13)		(32)		—		—		(26)		(64)
Actuarial Loss (Gain)	24		15		—		3		48		30		(1)		7
Non-Service Components of Pension and OPEB (Credits) Costs	(3)		(65)		(11)		(32)		(5)		(129)		(23)		(65)
Total Benefit (Credits) Costs	$	20	$	(29)	$	(10)	$	(31)	$	40	$	(58)	$	(21)	$	(62)

Pension and OPEB (credits) costs for PSE&G and PSEG Power & Other are detailed as follows:



	Pension Benefits				OPEB				Pension Benefits				OPEB
	Three Months Ended				Three Months Ended				Six Months Ended				Six Months Ended
	June 30,				June 30,				June 30,				June 30,
	2023		2022		2023		2022		2023		2022		2023		2022
	Millions
PSE&G	$	14	$	(17)	$	(10)	$	(28)	$	27	$	(35)	$	(20)	$	(55)
PSEG Power & Other	6		(12)		—		(3)		13		(23)		(1)		(7)
Total Benefit (Credits) Costs	$	20	$	(29)	$	(10)	$	(31)	$	40	$	(58)	$	(21)	$	(62)

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

In July 2023, PSEG and Fiduciary Counselors Inc., as independent fiduciary of the Pension Plan of Public Service Enterprise Group Incorporated and Pension Plan of Public Service Enterprise Group Incorporated II (together, the Plans), entered into a commitment agreement (for a “lift-out”) with The Prudential Insurance Company of America (the Insurer) under which the Plans agreed to purchase a nonparticipating single premium group annuity contract that will transfer to the Insurer approximately $1 billion of the Plans’ defined benefit pension obligations and associated Plan assets related to certain pension benefits. The contract covers approximately 2,000 retirees from PSEG Power & Other, excluding Services (Participants). To the extent provided in the contract, the Insurer has made an irrevocable commitment, and will be solely responsible, to pay benefits of each Participant that are due on and after December 31, 2023. The transaction will result in no changes to the amount of benefits payable to Participants.

As a result of the transaction, PSEG expects to recognize a one-time settlement charge in the range of $315 million to $360 million ($225 million to $260 million, net of tax) in the third quarter of 2023 related to the immediate recognition of unamortized net actuarial loss associated with the portion of the pension involved in the transaction. The charge is subject to finalization based on actuarial and other assumptions. PSEG expects the transaction to be completed in August 2023, subject to the satisfaction of closing conditions.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Table of Contents

Servco Pension and OPEB

Servco sponsors a qualified pension plan and OPEB plan covering its employees who meet certain eligibility criteria. Under the OSA, employee benefit costs for these plans are funded by LIPA. See Note 4. Variable Interest Entity. These obligations, as well as the offsetting long-term receivable, are separately presented on the Condensed Consolidated Balance Sheet of PSEG.

Servco amounts are not included in any of the preceding pension and OPEB cost disclosures. Pension and OPEB costs of Servco are accounted for according to the OSA. Servco recognizes expenses for contributions to its pension plan trusts and for OPEB payments made to retirees. Operating Revenues are recognized for the reimbursement of these costs. Servco’s pension-related revenues and costs were $4 million and $7 million for the three months ended June 30, 2023 and 2022, respectively, and $9 million and $15 million for the six months ended June 30, 2023 and 2022, respectively. The OPEB-related revenues earned and costs incurred were $3 million for each of the three months ended June 30, 2023 and 2022, and $6 million and $5 million for the six months ended June 30, 2023 and 2022, respectively.

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

Note 10. 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.

The following table shows the face value of PSEG Power’s outstanding guarantees, current exposure and margin positions as of June 30, 2023 and December 31, 2022.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Table of Contents



	As of		As of
	June 30, 2023		December 31, 2022
	Millions
Face Value of Outstanding Guarantees	$	1,445	$	1,601
Exposure under Current Guarantees	$	80	$	198

Letters of Credit Margin Posted	$	13	$	87
Letters of Credit Margin Received	$	85	$	38

Cash Deposited and Received
Counterparty Cash Collateral Deposited	$	—	$	—
Counterparty Cash Collateral Received	$	(7)	$	(1)
Net Broker Balance Deposited (Received)	$	433	$	1,522

Additional Amounts Posted
Other Letters of Credit	$	180	$	156

As part of determining credit exposure, PSEG Power nets receivables and payables with the corresponding net fair values of energy contracts. See Note 12. 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.

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

Occidental Chemical Corporation (Occidental) has voluntarily commenced design of the cleanup plan for the Lower 8.3 miles, and has received an EPA Unilateral Administrative Order directing it to design the cleanup plan for the Upper 9 miles. It has filed two lawsuits against PSE&G and others to attempt to recover costs associated with this work and to obtain a declaratory judgement of parties’ shares of any future costs. One lawsuit is currently paused, and the other is currently proceeding. PSEG cannot predict the outcome of the litigation.

The EPA has announced a proposed settlement with 85 parties who have agreed to pay $150 million to resolve their LPRSA CERCLA liability, in whole or in part. It is uncertain whether the settlement will be finalized as currently proposed. PSE&G and PSEG Power are not included in the proposed settlement, but the EPA sent PSE&G, Occidental, and several other Potentially Responsible Parties (PRPs) a letter in March 2022 inviting them to submit to the EPA individually or jointly an offer to fund or participate in the next stages of the remediation. PSEG submitted a good faith offer to the EPA in June 2022 on behalf of PSE&G and PSEG Power. PSEG understands that the EPA is evaluating its offer.

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.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Table of Contents

As of June 30, 2023, PSEG has approximately $66 million accrued for this matter. PSE&G has an Environmental Costs Liability of $53 million and a corresponding Regulatory Asset based on its assessment of the continued ability to recover such costs in its rates. PSEG Power has an Environmental Liability of $13 million.

The outcome of this matter is uncertain, and until (i) a final remedy for the entire LPRSA is selected and an agreement is reached by the PRPs to fund it, (ii) PSE&G’s and PSEG Power’s respective shares of the costs are determined, and (iii) PSE&G’s ability to recover the costs in its rates is determined, it is not possible to predict this matter’s ultimate impact on PSEG’s financial statements. It is possible that PSE&G and PSEG Power will record additional costs beyond what they have accrued, and that such costs could be material, but PSEG cannot at the current time estimate the amount or range of any additional costs.

Newark Bay Study Area

The EPA has established the Newark Bay Study Area, which is an extension of the LPRSA and includes Newark Bay and portions of surrounding waterways. The EPA has notified PSEG and 21 other PRPs of their potential liability. PSE&G and PSEG Power are unable to estimate their respective portions of any loss or possible range of loss related to this matter. In December 2018, PSEG Power completed the sale of the site of the Hudson electric generating station. PSEG Power contractually transferred all land rights and structures on the Hudson site to a third-party purchaser, along with the assumption of the environmental liabilities for the site.

Natural Resource Damage Claims

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

Hackensack River

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

MGP Remediation Program

PSE&G is working with the New Jersey Department of Environmental Protection (NJDEP) to assess, investigate and remediate environmental conditions at its former MGP sites. To date, 38 sites requiring some level of remedial action have been identified. Based on its current studies, PSE&G has determined that the estimated cost to remediate all MGP sites to completion could range between $198 million and $219 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 $198 million as of June 30, 2023. Of this amount, $39 million was recorded in Other Current Liabilities and $159 million was reflected as Environmental Costs in Noncurrent Liabilities. PSE&G has recorded a $198 million Regulatory Asset with respect to these costs. PSE&G periodically updates its studies taking into account any new regulations or new information which could impact future remediation costs and adjusts its recorded liability accordingly. PSE&G completed sampling in the Passaic River in 2020 to delineate coal tar from certain MGP sites that abut the Passaic River Superfund site. PSEG cannot determine at this time the magnitude of any impact on the Passaic River Superfund remedy.

Legacy Environmental Obligations at Former Fossil Generating Sites

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

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

CWA Section 316(b) Rule

The EPA’s CWA Section 316(b) rule establishes requirements for the design and operation of cooling water intake structures at

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Table of Contents

existing power plants and industrial facilities with a design flow of more than two million gallons of water per day.

In June 2016, the NJDEP issued a final New Jersey Pollutant Discharge Elimination System permit for Salem. In July 2016, the Delaware Riverkeeper Network (Riverkeeper) filed an administrative hearing request challenging certain conditions of the permit, including the NJDEP’s application of the 316(b) rule. If the Riverkeeper’s challenge is successful, PSEG Power may be required to incur additional costs to comply with the CWA. Potential cooling water and/or service water system modification costs could be material and could adversely impact the economic competitiveness of this facility. The NJDEP granted the hearing request and may schedule a hearing after considering dispositive motions.

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 is residential and smaller commercial and industrial customers (BGS-Residential Small Commercial Pricing (RSCP)). The second category is larger customers that exceed a BPU-established load (kW) threshold (BGS-Commercial and Industrial Energy Pricing (CIEP)). Pursuant to applicable BPU rules, PSE&G enters into the Supplier Master Agreements with the winners of these RSCP and CIEP BGS auctions to purchase BGS for PSE&G’s load requirements. The winners of the RSCP and CIEP auctions are responsible for fulfilling all the requirements of a PJM load-serving entity including the provision of capacity, energy, ancillary services and any other services required by PJM. BGS suppliers assume all volume risk and customer migration risk and must satisfy New Jersey’s renewable portfolio standards.

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

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



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

(A)Prices set in the 2023 BGS auction became effective on June 1, 2023 when the 2020 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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Table of Contents

permits PSE&G to recover the cost of gas hedging up to 115 billion cubic feet or 80% of its residential gas supply annual requirements through the BGSS tariff. Current plans call for PSEG Power to hedge on behalf of PSE&G approximately 70 billion cubic feet or 50% of its residential gas supply annual requirements. For additional information, see Note 19. 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 minimum nuclear fuel commitments cover approximately 100% of its estimated uranium, enrichment and fabrication requirements through 2026 and a significant portion through 2027 at Salem, Hope Creek and Peach Bottom. Additionally, available contractual volume flexibility provides for approximately 100% coverage of expected requirements through 2027.

PSEG Power has various multi-year contracts for natural gas and firm transportation and storage capacity for natural gas that are primarily used to meet its obligations to PSE&G.

As of June 30, 2023, the total minimum purchase requirements included in these commitments were as follows:



Fuel Type	PSEG Power’s Share of Commitments through 2027
	Millions
Nuclear Fuel
Uranium	$	379
Enrichment	$	309
Fabrication	$	183
Natural Gas	$	1,135

Pending FERC Matter

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

BPU Audit of PSE&G

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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Table of Contents

Litigation

Sewaren 7 Construction

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

Other Litigation and Legal Proceedings

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

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

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

Note 11. Debt and Credit Facilities

Long-Term Debt Financing Transactions

The following long-term debt transactions occurred in the six months ended June 30, 2023:

PSE&G

issued $500 million of 4.65% Secured Medium-Term Notes (Green Bond), Series P, due March 2033,
issued $400 million of 5.13% Secured Medium-Term Notes (Green Bond), Series P, due March 2053, and
retired $500 million of 2.38% Secured Medium-Term Notes Series I, at maturity.

Short-Term Liquidity

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

The commitments under the $4.2 billion credit facilities are provided by a diverse bank group. As of June 30, 2023, the total available credit capacity was $3.5 billion.

As of June 30, 2023, no single institution represented more than 10% of the total commitments in the credit facilities.

As of June 30, 2023, PSEG’s liquidity position, including credit facilities and access to external financing, was expected to be sufficient to meet its projected stressed requirements over a 12-month planning horizon.

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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Table of Contents

The total committed credit facilities and available liquidity as of June 30, 2023 were as follows:



	As of June 30, 2023
Company/Facility	Total Facility		Usage (B)		Available Liquidity		Expiration Date	Primary Purpose
	Millions
PSEG
Revolving Credit Facility (A)	$	1,500	$	152	$	1,348	Mar 2027	Commercial Paper Support/Funding/Letters of Credit
Total PSEG	$	1,500	$	152	$	1,348
PSE&G
Revolving Credit Facility	$	1,000	$	318	$	682	Mar 2027	Commercial Paper Support/Funding/Letters of Credit
Total PSE&G	$	1,000	$	318	$	682
PSEG Power
Revolving Credit Facility (A)	$	1,250	$	39	$	1,211	Mar 2027	Funding/Letters of Credit
Letter of Credit Facility	100		—		100		Apr 2025	Letters of Credit
Letter of Credit Facility	200		86		114		Sept 2024	Letters of Credit
Letter of Credit Facility	100		66		34		Apr 2024	Letters of Credit
Total PSEG Power	$	1,650	$	191	$	1,459
Total (C)	$	4,150	$	661	$	3,489

(A)Master Credit Facility with sub-limits of $1.5 billion for PSEG and $1.25 billion for PSEG Power; sub-limits can be adjusted pursuant to the terms of the Master Credit Facility agreement. The PSEG sub-limit includes a sustainability linked pricing based mechanism with potential increases or decreases, which are not expected to be material, depending on performance relative to targeted methane emission reductions.

(B)The primary use of PSEG’s and PSE&G’s credit facilities is to support their respective Commercial Paper Programs, under which as of June 30, 2023, PSEG had $149 million outstanding at a weighted average interest rate of 5.53% and PSE&G had $298 million outstanding at a weighted average interest rate of 5.49%.

(C)Amounts do not include uncommitted credit facilities or 364-day term loans.

A subsidiary of PSEG Power has an uncommitted credit facility for $150 million, which can be drawn to fund its cash collateral postings. As of June 30, 2023, there were no amounts outstanding under this facility.

Net Cash Collateral Postings

During the second half of 2021 and continuing into 2023, forward energy prices have demonstrated considerable price volatility. This has led to significant variations in PSEG Power’s collateral requirements. As of June 30, 2023, net cash collateral postings were approximately $426 million. While currently off their highs experienced during 2022, collateral postings could remain volatile in the future.

Short-Term Loans

PSEG

In January 2023, PSEG repaid $750 million of the $1.5 billion 364-day variable rate term loan that was issued in April 2022 and in April 2023 the remaining $750 million matured. In April 2023, PSEG entered into a new 364-day variable rate term loan agreement for $750 million. In May 2023, PSEG’s $500 million 364-day variable rate term loan matured.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Table of Contents

Note 12. Financial Risk Management Activities

Derivative accounting guidance requires that a derivative instrument be recognized as either an asset or a liability at fair value, with changes in fair value of the derivative recognized in earnings each period. Other accounting treatments are available through special election and designation provided that the derivative instrument meets specific, restrictive criteria, both at the time of designation and on an ongoing basis. These alternative permissible treatments include normal purchases and normal sales (NPNS) cash flow hedge and fair value hedge accounting. PSEG and PSE&G have applied the NPNS scope exception to certain derivative contracts for the forward sale of generation, power procurement agreements and fuel agreements. PSEG uses interest rate swaps and other derivatives, which are designated and qualifying as cash flow or fair value hedges. PSEG Power enters into additional contracts that are derivatives, but are not designated as either cash flow hedges or fair value hedges. These transactions are economic hedges and are recorded at fair market value with changes recognized in earnings.

Commodity Prices

Within PSEG and its affiliate companies, PSEG Power has the most exposure to commodity price risk. PSEG Power is exposed to commodity price risk primarily relating to changes in the market price of electricity, natural gas and other commodities. Fluctuations in market prices result from changes in supply and demand, fuel costs, market conditions, weather, state and federal regulatory policies, environmental policies, transmission availability and other factors. PSEG Power uses a variety of derivative and non-derivative instruments, such as financial options, futures, swaps, fuel purchases and forward purchases and sales of electricity, to manage the exposure to fluctuations in commodity prices and optimize the value of PSEG Power’s expected generation. PSEG Power also uses derivatives to hedge a portion of its anticipated BGSS obligations with PSE&G. For additional information see Note 10. Commitments and Contingent Liabilities. Changes in the fair market value of these derivative contracts are recorded in earnings.

Interest Rates

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

Cash Flow Hedges

PSEG uses interest rate swaps and other derivatives, which are designated and effective as cash flow hedges, to manage its exposure to the variability of cash flows, primarily related to variable-rate debt instruments. The fair value of these hedges were $13 million and $1 million as of June 30, 2023 and December 31, 2022, respectively. As of June 30, 2023, PSEG had interest rate hedges outstanding totaling $900 million. PSEG executed these interest rate swaps to convert a portion of PSEG Power’s $1.25 billion variable rate term loan due March 2025 into fixed rate loans.

The Accumulated Other Comprehensive Income (Loss) (after tax) related to outstanding and terminated interest rate derivatives designated as cash flow hedges was $7 million and $(3) million as of June 30, 2023 and December 31, 2022, respectively. The after-tax unrealized gains on these hedges expected to be reclassified to earnings during the next 12 months are $5 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. For additional information see Note 13. Fair Value Measurements.

Substantially all derivative instruments are contracts subject to master netting agreements. Contracts not subject to master netting or similar agreements are immaterial and did not have any collateral posted or received as of June 30, 2023 and December 31, 2022. The following tabular disclosure does not include the offsetting of trade receivables and payables.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Table of Contents



	As of June 30, 2023
	PSEG		PSEG Power						Consolidated
	Cash Flow Hedges		Not Designated
Balance Sheet Location	Interest Rate Swaps		Energy- Related Contracts		Netting (A)		Total PSEG Power		Total Derivatives
	Millions
Derivative Contracts
Current Assets	$	11	$	767	$	(687)	$	80	$	91
Noncurrent Assets	2		633		(573)		60		62
Total Mark-to-Market Derivative Assets	$	13	$	1,400	$	(1,260)	$	140	$	153
Derivative Contracts
Current Liabilities	$	—	$	(919)	$	853	$	(66)	$	(66)
Noncurrent Liabilities	—		(698)		690		(8)		(8)
Total Mark-to-Market Derivative (Liabilities)	$	—	$	(1,617)	$	1,543	$	(74)	$	(74)
Total Net Mark-to-Market Derivative Assets (Liabilities)	$	13	$	(217)	$	283	$	66	$	79



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

(A) 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 June 30, 2023 and December 31, 2022, PSEG Power had net cash collateral (receipts) payments to counterparties of $426 million and $1,521 million, respectively. Of these net cash collateral (receipts) payments, $283 million and $1,111 million as of June 30, 2023 and December 31, 2022, respectively, were netted against the corresponding net derivative contract positions. Of the $283 million as of June 30, 2023, $(5) million was netted against current assets, $(1) million against noncurrent assets, $171 million against current liabilities and $118 million against noncurrent liabilities. Of the $1,111 million as of December 31, 2022, $616 million was netted against current liabilities and $495 million 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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Table of Contents

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 $76 million as of June 30, 2023 and $190 million as of December 31, 2022. As of June 30, 2023 and December 31, 2022, PSEG Power had the contractual right of offset of $5 million and $41 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 $71 million and $149 million as of June 30, 2023 and December 31, 2022, respectively, related to its derivatives, net of the contractual right of offset under master agreements and the application of collateral.

The following shows the effect on the Condensed Consolidated Statements of Operations and on Accumulated Other Comprehensive Loss (AOCL) of derivative instruments designated as cash flow hedges for the three months and six months ended June 30, 2023 and 2022:



Derivatives in Cash Flow Hedging Relationships		Amount of Pre-Tax Gain (Loss) Recognized in AOCL on Derivatives					Location of Pre-Tax Gain (Loss) Reclassified from AOCL into Income		Amount of Pre-Tax Gain (Loss) Reclassified from AOCL into Income
	Three Months Ended							Three Months Ended
	June 30,							June 30,
	2023			2022				2023			2022
		Millions							Millions
PSEG

Interest Rate Swaps		$	17		$	—	Interest Expense		$	1		$	(1)
Total PSEG		$	17		$	—			$	1		$	(1)



Derivatives in Cash Flow Hedging Relationships		Amount of Pre-Tax Gain (Loss) Recognized in AOCL on Derivatives					Location of Pre-Tax Gain (Loss) Reclassified from AOCL into Income		Amount of Pre-Tax Gain (Loss) Reclassified from AOCL into Income
	Six Months Ended							Six Months Ended
	June 30,							June 30,
	2023			2022				2023			2022
		Millions							Millions
PSEG

Interest Rate Swaps		$	14		$	—	Interest Expense		$	—		$	(2)
Total PSEG		$	14		$	—			$	—		$	(2)

The effect of interest rate cash flow hedges is recorded in Interest Expense in PSEG’s Condensed Consolidated Statement of Operations. For the six months ended June 30, 2023 and 2022, the amount of loss on interest rate hedges reclassified from Accumulated Other Comprehensive Loss into income was less than $1 million and $(1) million after-tax, respectively.

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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Table of Contents



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



Balance as of December 31, 2021	$	(9)	$	(6)
Loss Recognized in AOCL	—		—
Less: Loss Reclassified into Income	5		3
Balance as of December 31, 2022	$	(4)	$	(3)
Gain Recognized in AOCL	14		10
Less: Loss Reclassified into Income	—		—
Balance as of June 30, 2023	$	10	$	7

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 six months ended June 30, 2023 and 2022, 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.



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				Six Months Ended
		June 30,				June 30,
		2023		2022		2023		2022
		Millions				Millions
Energy-Related Contracts	Operating Revenues	$	339	$	(354)	$	1,241	$	(1,398)
Energy-Related Contracts	Energy Costs	(1)		(1)		—		(1)
Total		$	338	$	(355)	$	1,241	$	(1,399)

The following table summarizes the net notional volume purchases/(sales) of open derivative transactions by commodity as of June 30, 2023 and December 31, 2022.



		As of	As of
Type	Notional	June 30, 2023	December 31, 2022
		Millions
Natural Gas	Dekatherm (Dth)	52	49
Electricity	MWh	(63)	(60)
Financial Transmission Rights (FTRs)	MWh	31	24
Interest Rate Swaps	U.S. Dollars	900	1,050

Credit Risk

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

As of June 30, 2023, nearly 100% of the net credit exposure for PSEG Power’s wholesale operations was with investment grade counterparties. There were two counterparties with credit exposure greater than 10% of the total. These credit exposures were with PSE&G and one non-affiliated counterparty. The PSE&G credit exposure is eliminated in consolidation. See Note 19. Related-Party Transactions for additional information.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Table of Contents

PSE&G’s supplier master agreements are approved by the BPU and govern the terms of its electric supply procurement contracts. These agreements define a supplier’s performance assurance requirements and allow a supplier to meet its credit requirements with a certain amount of unsecured credit. The amount of unsecured credit is determined based on the supplier’s credit ratings from the major credit rating agencies and the supplier’s tangible net worth. The credit position is based on the initial market price, which is the forward price of energy on the day the procurement transaction is executed, compared to the forward price curve for energy on the valuation day. To the extent that the forward price curve for energy exceeds the initial market price, the supplier is required to post a parental guarantee or other security instrument such as a letter of credit or cash, as collateral to the extent the credit exposure is greater than the supplier’s unsecured credit limit. As of June 30, 2023, PSEG held parental guarantees, letters of credit and cash as security. PSE&G’s BGS suppliers’ credit exposure is calculated each business day. As of June 30, 2023, PSE&G had no unsecured mark-to-market credit exposure with its suppliers.

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 13. Fair Value Measurements

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

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

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

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

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

The following tables present information about PSEG’s and PSE&G’s respective assets and (liabilities) measured at fair value on a recurring basis as of June 30, 2023 and December 31, 2022, including the fair value measurements and the levels of inputs used in determining those fair values. Amounts shown for PSEG include the amounts shown for PSE&G.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Table of Contents



	Recurring Fair Value Measurements as of June 30, 2023
Description	Total		Netting (E)		Quoted Market Prices for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	Millions
PSEG
Assets:
Cash Equivalents (A)	$	480	$	—	$	480	$	—	$	—
Derivative Contracts:
Energy-Related Contracts (B)	$	140	$	(1,260)	$	5	$	1,395	$	—
Interest Rate Swaps (C)	$	13	$	—	$	—	$	13	$	—
NDT Fund (D)
Equity Securities	$	1,189	$	—	$	1,189	$	—	$	—
Debt Securities—U.S. Treasury	$	277	$	—	$	—	$	277	$	—
Debt Securities—Govt Other	$	384	$	—	$	—	$	384	$	—
Debt Securities—Corporate	$	531	$	—	$	—	$	531	$	—

Rabbi Trust (D)
Equity Securities	$	21	$	—	$	21	$	—	$	—
Debt Securities—U.S. Treasury	$	59	$	—	$	—	$	59	$	—
Debt Securities—Govt Other	$	33	$	—	$	—	$	33	$	—
Debt Securities—Corporate	$	72	$	—	$	—	$	72	$	—

Liabilities:
Derivative Contracts:
Energy-Related Contracts (B)	$	(74)	$	1,543	$	(1)	$	(1,612)	$	(4)

PSE&G
Assets:
Cash Equivalents (A)	$	100	$	—	$	100	$	—	$	—


Rabbi Trust (D)
Equity Securities	$	4	$	—	$	4	$	—	$	—
Debt Securities—U.S. Treasury	$	11	$	—	$	—	$	11	$	—
Debt Securities—Govt Other	$	6	$	—	$	—	$	6	$	—
Debt Securities—Corporate	$	12	$	—	$	—	$	12	$	—

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Table of Contents



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

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

Liabilities:
Derivative Contracts:
Energy-Related Contracts (B)	$	(154)	$	3,432	$	(3)	$	(3,537)	$	(46)
Interest Rate Swaps (C)	$	(3)	$	—	$	—	$	(3)	$	—
PSE&G
Assets:
Cash Equivalents (A)	$	165	$	—	$	165	$	—	$	—
Rabbi Trust (D)
Equity Securities	$	3	$	—	$	3	$	—	$	—
Debt Securities—U.S. Treasury	$	10	$	—	$	—	$	10	$	—
Debt Securities—Govt Other	$	6	$	—	$	—	$	6	$	—
Debt Securities—Corporate	$	13	$	—	$	—	$	13	$	—

(A)Represents money market mutual funds.

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

Level 2—Fair values for energy-related contracts are obtained primarily using a market-based approach. Most derivative contracts (forward purchase or sale contracts and swaps) are valued using settled prices from similar assets and liabilities from an exchange, such as NYMEX, ICE and Nodal Exchange, or auction prices. Prices used in the valuation process are also corroborated independently by management to determine that values are based on actual transaction data or, in the absence of transactions, bid and offers for the day. Examples may include certain exchange and non-exchange traded capacity and electricity contracts and natural gas physical or swap contracts based on market prices, basis adjustments and other premiums where adjustments and premiums are not considered significant to the overall inputs.

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

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

(D)The fair value measurement table excludes cash and foreign currency of $2 million in the NDT Fund as of June 30, 2023 and December 31, 2022. 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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Table of Contents

securities are generally valued with prices that are either exchange provided (equity securities) or market transactions for comparable securities and/or broker quotes (fixed income securities).

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

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

(E)Represents the netting of fair value balances with the same counterparty (where the right of offset exists) and the application of collateral. See Note 12. Financial Risk Management Activities for additional detail.

Additional Information Regarding Level 3 Measurements

For valuations that include both observable and unobservable inputs, if the unobservable input is determined to be significant to the overall inputs, the entire valuation is categorized in Level 3. This includes derivatives valued using indicative price quotations for contracts with tenors that extend into periods with no observable pricing. In instances where observable data is unavailable, consideration is given to the assumptions that market participants would use in valuing the asset or liability. This includes assumptions about market risks such as liquidity, volatility and contract duration. Such instruments are categorized in Level 3 because the model inputs generally are not observable. PSEG considers credit and non-performance risk in the valuation of derivative contracts categorized in Levels 2 and 3, including both historical and current market data, in its assessment of credit and non-performance risk by counterparty. The impacts of credit and non-performance risk were not material to the financial statements.

As of June 30, 2023, PSEG carried $3.1 billion of net assets that are measured at fair value on a recurring basis, of which $4 million of net liabilities were measured using unobservable inputs and classified as Level 3 within the fair value hierarchy and are considered immaterial.

As of June 30, 2022, PSEG carried $4.5 billion of net assets that are measured at fair value on a recurring basis, of which $10 million of net liabilities were measured using unobservable inputs and classified as Level 3 within the fair value hierarchy and are considered immaterial.

There were no transfers to or from Level 3 during the six months ended June 30, 2023 and 2022, respectively.

Fair Value of Debt

The estimated fair values, carrying amounts and methods used to determine the fair value of long-term debt as of June 30, 2023 and December 31, 2022 are included in the following table and accompanying notes.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Table of Contents



	As of				As of
	June 30, 2023				December 31, 2022
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
	Millions
Long-Term Debt:
PSEG (A)	$	4,127	$	3,828	$	4,124	$	3,808
PSE&G (A)	13,092		11,603		12,696		11,106
PSEG Power (B)	1,250		1,250		1,250		1,250
Total Long-Term Debt	$	18,469	$	16,681	$	18,070	$	16,164

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

(B)Private term loan with book value approximating fair value (Level 2 measurement).

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Table of Contents

Note 14. Other Income (Deductions)



	PSE&G		PSEG Power & Other (A)		Consolidated
	Millions
Three Months Ended June 30, 2023
NDT Fund Interest and Dividends	$	—	$	19	$	19
Allowance for Funds Used During Construction	15		—		15
Solar Loan Interest	2		—		2
Other Interest	5		9		14
Other	1		(2)		(1)
Total Other Income (Deductions)	$	23	$	26	$	49
Six Months Ended June 30, 2023
NDT Fund Interest and Dividends	$	—	$	34	$	34
Allowance for Funds Used During Construction	30		—		30
Solar Loan Interest	4		—		4
Other Interest	7		16		23
Other	3		(3)		—
Total Other Income (Deductions)	$	44	$	47	$	91
Three Months Ended June 30, 2022
NDT Fund Interest and Dividends	$	—	$	16	$	16
Allowance for Funds Used During Construction	15		—		15
Solar Loan Interest	3		—		3
Other Interest	2		2		4
Other	2		(2)		—
Total Other Income (Deductions)	$	22	$	16	$	38
Six Months Ended June 30, 2022
NDT Fund Interest and Dividends	$	—	$	30	$	30
Allowance for Funds Used During Construction	30		—		30
Solar Loan Interest	6		—		6
Purchases of Tax Losses under New Jersey Technology Tax Benefit Transfer Program	—		(27)		(27)
Other Interest	2		2		4
Other	3		(3)		—
Total Other Income (Deductions)	$	41	$	2	$	43

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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Table of Contents

Note 15. 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						Six Months Ended
PSEG	June 30,						June 30,
	2023			2022			2023			2022
	Millions
Pre-Tax Income (Loss)	$	744		$	98		$	2,329		$	(56)
Tax Computed at Statutory Rate @ 21%	$	156		$	21		$	489		$	(12)
Increase (Decrease) Attributable to Flow-Through of Certain Tax Adjustments:
State Income Taxes (net of federal income tax)	50			6			158			(22)
NDT Fund	7			(18)			13			(24)
Uncertain Tax Positions	(1)			—			(7)			(2)
Leasing Activities	—			—			(17)			—
GPRC-CEF-EE	(8)			(8)			(24)			(14)
Tax Credits	(3)			(2)			(5)			(4)
Estimated Annual Effective Tax Rate Interim Period Adjustment	7			4			(16)			(8)
TAC	(51)			(32)			(126)			(106)
Other	(4)			(4)			(14)			7
Subtotal	(3)			(54)			(38)			(173)
Total Income Tax Expense (Benefit)	$	153		$	(33)		$	451		$	(185)
Effective Income Tax Rate	20.6		%	(33.7)		%	19.4		%	N/A

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						Six Months Ended
PSE&G	June 30,						June 30,
	2023			2022			2023			2022
	Millions
Pre-Tax Income	$	370		$	361		$	911		$	959
Tax Computed at Statutory Rate @ 21%	$	78		$	76		$	191		$	201
Increase (Decrease) Attributable to Flow-Through of Certain Tax Adjustments:
State Income Taxes (net of federal income tax)	30			25			68			67
Uncertain Tax Positions	(6)			—			(6)			—
Tax Credits	(3)			(2)			(5)			(4)
GPRC-CEF-EE	(8)			(8)			(24)			(14)
TAC	(51)			(32)			(126)			(106)
Other	(6)			(3)			(10)			1
Subtotal	(44)			(20)			(103)			(56)
Total Income Tax Expense (Benefit)	$	34		$	56		$	88		$	145
Effective Income Tax Rate	9.2		%	15.5		%	9.7		%	15.1		%

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Table of Contents

PSEG’s and PSE&G’s total income tax expense (benefit) for interim periods is determined using an estimated annual effective tax rate, adjusted for discrete items, if any, that are taken into account in the relevant period. Each quarter, PSEG and PSE&G update the respective estimated annual effective tax rates, and if the estimated tax rate changes, PSEG and PSE&G make cumulative adjustments.

A prolonged economic recovery can result in the enactment of additional federal and state tax legislation. Enactment of additional legislation and clarification of prior enacted tax laws could impact PSEG’s and PSE&G’s financial statements.

In August 2022, the IRA was signed into law. The IRA made certain changes to existing energy tax credit laws and enacted a new 15% corporate alternative minimum tax (CAMT), effective in 2023. Changes to the energy tax credit laws include: increases to the PTC rate, a new PTC for electricity generation using nuclear energy, expanded technologies that are eligible for energy tax credits, and the transferability of the energy tax credits. See Note 3. Early Plant Retirements/Asset Dispositions and Impairments for additional information on the nuclear PTC.

Since the enactment of the IRA, the U.S. Treasury issued various Notices that provide interim guidance on several provisions of the IRA, including the CAMT. The Notices state that the U.S. Treasury anticipates issuing additional guidance including proposed and final regulations. Many aspects of the IRA remain unclear and in need of further guidance; therefore, the impact the IRA will have on PSEG's and PSE&G's financial statements is subject to continued evaluation.

In April 2023, the U.S. Treasury issued Revenue Procedure 2023-15 that provides a safe harbor method of accounting to determine the annual repair tax deduction for gas transmission and distribution property. The impact, if any, this may have on PSEG and PSE&G’s financial statements has not yet been determined.

As of June 30, 2023, PSEG had a $44 million state net operating loss (NOL) and PSE&G had a $50 million New Jersey Corporate Business Tax NOL that are both expected to be fully realized in the future.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Table of Contents

Note 16. Accumulated Other Comprehensive Income (Loss), Net of Tax



	Three Months Ended June 30, 2023
Accumulated Other Comprehensive Income (Loss)	Cash Flow Hedges		Pension and OPEB Plans		Available-for-Sale Securities		Total
	Millions
Balance as of March 31, 2023	$	(4)	$	(423)	$	(95)	$	(522)
Other Comprehensive Income (Loss) before Reclassifications	12		—		(12)		—
Amounts Reclassified from Accumulated Other Comprehensive Income (Loss)	(1)		4		4		7
Net Current Period Other Comprehensive Income (Loss)	11		4		(8)		7
Balance as of June 30, 2023	$	7	$	(419)	$	(103)	$	(515)

	Three Months Ended June 30, 2022
Accumulated Other Comprehensive Income (Loss)	Cash Flow Hedges		Pension and OPEB Plans		Available-for-Sale Securities		Total
	Millions
Balance as of March 31, 2022	$	(5)	$	(355)	$	(50)	$	(410)
Other Comprehensive Income (Loss) before Reclassifications	—		—		(53)		(53)
Amounts Reclassified from Accumulated Other Comprehensive Income (Loss)	—		1		7		8
Net Current Period Other Comprehensive Income (Loss)	—		1		(46)		(45)
Balance as of June 30, 2022	$	(5)	$	(354)	$	(96)	$	(455)


	Six Months Ended June 30, 2023
Accumulated Other Comprehensive Income (Loss)	Cash Flow Hedges		Pension and OPEB Plans		Available-for-Sale Securities		Total
	Millions
Balance as of December 31, 2022	$	(3)	$	(426)	$	(121)	$	(550)
Other Comprehensive Income (Loss) before Reclassifications	10		—		8		18
Amounts Reclassified from Accumulated Other Comprehensive Income (Loss)	—		7		10		17
Net Current Period Other Comprehensive Income (Loss)	10		7		18		35
Balance as of June 30, 2023	$	7	$	(419)	$	(103)	$	(515)

	Six Months Ended June 30, 2022
Accumulated Other Comprehensive Income (Loss)	Cash Flow Hedges		Pension and OPEB Plans		Available-for-Sale Securities		Total
	Millions
Balance as of December 31, 2021	$	(6)	$	(355)	$	11	$	(350)
Other Comprehensive Income (Loss) before Reclassifications	—		—		(118)		(118)
Amounts Reclassified from Accumulated Other Comprehensive Income (Loss)	1		1		11		13
Net Current Period Other Comprehensive Income (Loss)	1		1		(107)		(105)
Balance as of June 30, 2022	$	(5)	$	(354)	$	(96)	$	(455)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Table of Contents



		Amounts Reclassified from Accumulated Other Comprehensive Income (Loss) to Income Statement
		Three Months Ended						Six Months Ended
		June 30, 2023						June 30, 2023
Description of Amounts Reclassified from Accumulated Other Comprehensive Income (Loss)	Location of Pre-Tax Amount In Statement of Operations	Pre-Tax Amount		Tax (Expense) Benefit		After-Tax Amount		Pre-Tax Amount		Tax (Expense) Benefit		After-Tax Amount
		Millions
Cash Flow Hedges
Interest Rate Swaps	Interest Expense	$	1	$	—	$	1	$	—	$	—	$	—
Total Cash Flow Hedges		1		—		1		—		—		—
Pension and OPEB Plans
Amortization of Prior Service (Cost) Credit	Non-Operating Pension and OPEB Credits (Costs)	2		(1)		1		4		(1)		3
Amortization of Actuarial Loss	Non-Operating Pension and OPEB Credits (Costs)	(7)		2		(5)		(14)		4		(10)
Total Pension and OPEB Plans		(5)		1		(4)		(10)		3		(7)
Available-for-Sale Debt Securities
Realized Gains (Losses)	Net Gains (Losses) on Trust Investments	(7)		3		(4)		(17)		7		(10)
Total Available-for-Sale Debt Securities		(7)		3		(4)		(17)		7		(10)
Total		$	(11)	$	4	$	(7)	$	(27)	$	10	$	(17)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Table of Contents



		Amounts Reclassified from Accumulated Other Comprehensive Income (Loss) to Income Statement
		Three Months Ended						Six Months Ended
		June 30, 2022						June 30, 2022
Description of Amounts Reclassified from Accumulated Other Comprehensive Income (Loss)	Location of Pre-Tax Amount In Statement of Operations	Pre-Tax Amount		Tax (Expense) Benefit		After-Tax Amount		Pre-Tax Amount		Tax (Expense) Benefit		After-Tax Amount
		Millions
Cash Flow Hedges
Interest Rate Swaps	Interest Expense	$	(1)	$	1	$	—	$	(2)	$	1	$	(1)
Total Cash Flow Hedges		(1)		1		—		(2)		1		(1)
Pension and OPEB Plans
Amortization of Prior Service (Cost) Credit	Non-Operating Pension and OPEB Credits (Costs)	5		(2)		3		10		(3)		7
Amortization of Actuarial Loss	Non-Operating Pension and OPEB Credits (Costs)	(6)		2		(4)		(11)		3		(8)
Total Pension and OPEB Plans		(1)		—		(1)		(1)		—		(1)
Available-for-Sale Debt Securities
Realized Gains (Losses)	Net Gains (Losses) on Trust Investments	(12)		5		(7)		(18)		7		(11)
Total Available-for-Sale Debt Securities		(12)		5		(7)		(18)		7		(11)
Total		$	(14)	$	6	$	(8)	$	(21)	$	8	$	(13)

Note 17. Earnings Per Share (EPS) and Dividends

EPS

Basic EPS is calculated by dividing Net Income by the weighted average number of shares of common stock outstanding. Diluted EPS is calculated by dividing Net Income 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 June 30,								Six Months Ended June 30,
	2023				2022				2023				2022
	Basic		Diluted		Basic		Diluted		Basic		Diluted		Basic		Diluted
EPS Numerator (Millions):
Net Income	$	591	$	591	$	131	$	131	$	1,878	$	1,878	$	129	$	129
EPS Denominator (Millions):
Weighted Average Common Shares Outstanding	497		497		497		497		497		497		499		499
Effect of Stock Based Compensation Awards	—		3		—		3		—		3		—		3
Total Shares	497		500		497		500		497		500		499		502

EPS
Net Income	$	1.19	$	1.18	$	0.26	$	0.26	$	3.78	$	3.76	$	0.26	$	0.26

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Table of Contents

Dividends



	Three Months Ended				Six Months Ended
	June 30,				June 30,
Dividend Payments on Common Stock	2023		2022		2023		2022
Per Share	$	0.57	$	0.54	$	1.14	$	1.08
In Millions	$	285	$	270	$	569	$	541

On July 17, 2023, PSEG’s Board of Directors approved a $0.57 per share common stock dividend for the third quarter of 2023.

Note 18. Financial Information by Business Segment

Basis of Organization

PSEG’s and PSE&G’s operating segments were determined by management in accordance with GAAP. These segments were determined based on how the Chief Operating Decision Maker (CODM) (the Chief Executive Officer (CEO) for PSEG and PSE&G), measures performance based on segment Net Income and how resources are allocated to each business.

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

PSE&G

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

PSEG Power & Other

This reportable segment is comprised primarily of PSEG Power which earns revenues primarily by bidding energy, capacity and ancillary services into the markets for these products and by selling energy, capacity and ancillary services on a wholesale basis under contract to power marketers and to load-serving entities. PSEG Power also enters into bilateral contracts for energy, capacity, FTRs, gas, emission allowances and other energy-related contracts to optimize the value of its portfolio of generating assets and its electric and gas supply obligations. In addition, PSEG Power’s Salem 1, Salem 2 and Hope Creek nuclear plants receive ZEC revenue from the EDCs in New Jersey including PSE&G.

This reportable segment also includes amounts applicable to PSEG LI, which generates revenues under its contract with LIPA, primarily for the recovery of costs when Servco is a principal in the transaction (see Note 4. Variable Interest Entity for additional information) as well as fixed and variable fee components under the contract, and Energy Holdings which holds an immaterial portfolio of remaining lease investments. Other also includes amounts applicable to PSEG (parent company) and Services.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Table of Contents



	PSE&G		PSEG Power & Other		Eliminations (A)		Consolidated Total
	Millions
Three Months Ended June 30, 2023
Operating Revenues	$	1,662	$	902	$	(143)	$	2,421
Net Income (B)	336		255		—		591
Gross Additions to Long-Lived Assets	660		45		—		705
Six Months Ended June 30, 2023
Operating Revenues	$	3,955	$	2,929	$	(708)	$	6,176
Net Income (B)	823		1,055		—		1,878
Gross Additions to Long-Lived Assets	1,336		108		—		1,444
Three Months Ended June 30, 2022
Operating Revenues	$	1,668	$	645	$	(237)	$	2,076
Net Income (Loss) (B)	305		(174)		—		131
Gross Additions to Long-Lived Assets	543		62		—		605
Six Months Ended June 30, 2022
Operating Revenues	$	3,952	$	1,258	$	(821)	$	4,389
Net Income (Loss) (B)	814		(685)		—		129
Gross Additions to Long-Lived Assets	1,171		120		—		1,291
As of June 30, 2023
Total Assets	$	41,347	$	8,505	$	(347)	$	49,505
Investments in Equity Method Subsidiaries	$	—	$	15	$	—	$	15
As of December 31, 2022
Total Assets	$	39,960	$	9,285	$	(527)	$	48,718
Investments in Equity Method Subsidiaries	$	—	$	306	$	—	$	306

(A)Intercompany eliminations primarily relate to intercompany transactions between PSE&G and PSEG Power. For a further discussion of the intercompany transactions between PSE&G and PSEG Power, see Note 19. Related-Party Transactions.

(B)Includes net after-tax gains (losses) of $212 million and $(74) million for the three months and $767 million and $(682) million for the six months ended June 30, 2023 and 2022, respectively, at PSEG Power related to the impacts of non-trading commodity mark-to-market activity, which consist of the financial impact from positions with future delivery dates.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Table of Contents

Note 19. 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				Six Months Ended
	June 30,				June 30,
Related-Party Transactions	2023		2022		2023		2022
	Millions
Billings from Affiliates:
Net Billings from PSEG Power (A)	$	114	$	232	$	675	$	812
Administrative Billings from Services (B)	118		113		220		212
Total Billings from Affiliates	$	232	$	345	$	895	$	1,024



	As of		As of
Related-Party Transactions	June 30, 2023		December 31, 2022
	Millions



Payable to PSEG Power (A)	$	192	$	313
Payable to Services (B)	88		98
Payable to PSEG (C)	16		74
Accounts Payable—Affiliated Companies	$	296	$	485
Noncurrent Payable to PSEG Power (A)	$	10	$	—
Working Capital Advances to Services (D)	$	33	$	33
Long-Term Accrued Taxes Payable	$	8	$	9

(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. Since June 1, 2022, PSEG Power had no contracts to supply energy, capacity and ancillary services to PSE&G through the BGS auction process. In addition, PSEG Power sells ZECs to PSE&G from its nuclear units under the ZEC program as approved by the BPU. The rates in the BGS and BGSS contracts and for the ZEC sales are prescribed by the BPU. BGS and BGSS sales are billed and settled on a monthly basis. ZEC sales are billed on a monthly basis and settled annually following completion of each energy year. In addition, PSEG Power and PSE&G provide certain technical services for each other generally at cost in compliance with FERC and BPU affiliate rules.

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

(C)PSEG 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. In addition, PSEG pays all payroll taxes and receives reimbursement from its affiliated companies for their respective portions.

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

Table of Contents

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