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

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

This combined MD&A is separately filed by Public Service Enterprise Group Incorporated (PSEG) and Public Service Electric and Gas Company (PSE&G). Information contained herein relating to any individual company is filed by such company on its own behalf.

PSEG’s business consists of two reportable segments, PSE&G and PSEG Power LLC (PSEG Power) & Other, primarily comprised of our principal direct wholly owned subsidiaries, which are:

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, and
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.

The PSEG Power & Other reportable segment also includes amounts related to the parent company as well as PSEG’s other direct wholly owned subsidiaries, which 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) 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.

Our business discussion in Item 1. Business of our 2022 Annual Report on 10-K (Form 10-K) provides a review of the regions and markets where we operate and compete, as well as our strategy for conducting our businesses within these markets, focusing on operational excellence, financial strength and making disciplined investments. Our risk factor discussion in Item 1A. Risk Factors of Form 10-K provides information about factors that could have a material adverse impact on our businesses. The following supplements that discussion and the discussion included in the Executive Overview of 2022 and Future Outlook provided in Item 7 in our Form 10-K by describing significant events and business developments that have occurred during 2023 and changes to the key factors that we expect may drive our future performance. The following discussion refers to the Condensed Consolidated Financial Statements (Statements) and the Related Notes to Condensed Consolidated Financial Statements (Notes). This discussion should be read in conjunction with such Statements, Notes and the Form 10-K.

EXECUTIVE OVERVIEW OF 2023 AND FUTURE OUTLOOK

We are a public utility holding company that, acting through our wholly owned subsidiaries, is a predominantly regulated electric and gas utility and a nuclear generation business. Our business plan focuses on achieving growth by allocating capital primarily toward regulated investments in an effort to continue to improve the sustainability and predictability of our business. We are focused on investing to modernize our energy infrastructure, improve reliability and resilience, increase EE and deliver cleaner energy to meet customer expectations and be well aligned with public policy objectives. In furtherance of these goals, our investments in PSE&G have adjusted our business mix to reflect a higher percentage of earnings contribution by PSE&G. See Item 1. Note 3. Early Plant Retirements/Asset Dispositions and Impairments for additional information. In addition, the passage of the Inflation Reduction Act (IRA) established a Production Tax Credit (PTC) for existing nuclear facilities from 2024 through 2032 which is expected to provide downside price protection for our nuclear generation fleet.

PSE&G

At PSE&G, our focus is on investing capital in T&D infrastructure and clean energy programs to enhance the reliability and resiliency of our T&D system, meet customer expectations and support public policy objectives. For the years 2023-2027, PSE&G’s capital investment program is estimated to be in a range of $15.5 billion to $18 billion, resulting in an expected compound annual growth in rate base of 6% to 7.5% from year-end 2022 to year-end 2027. This represents the majority of PSEG’s total capital investment program of $16.3 billion to $18.9 billion. The low end of PSE&G’s range includes an extension of our Gas System Modernization Program (GSMP) and Clean Energy Future (CEF)-EE program at their current average annual investment levels plus inflation, as these programs are expected to continue beyond their currently approved timeframes. The upper end of our capital investment range includes an extension of our Energy Strong program, which otherwise concludes in 2024, as well as the remaining portion of our CEF proposal (portion of Electric Vehicle (EV) and Energy Storage (ES) programs) and a potentially higher amount of investments for GSMP and CEF-EE beyond current levels. In May 2023, the

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BPU approved a $280 million nine-month extension of our CEF-EE program through June 2024. We also filed for a three-year extension of GSMP in March 2023 which would provide for continuation of the program. The $2.5 billion proposal provides for acceleration of the replacement of the remaining cast iron and unprotected steel main in our system as well as initiating projects to introduce renewable natural gas and hydrogen blending into our existing distribution system. A remaining component of our CEF-EV program related to medium and heavy duty charging infrastructure has been the subject of a stakeholder process that the BPU began in 2021 and we expect that this effort will result in PSE&G submitting a filing targeting infrastructure investments for the medium and heavy duty EV market in 2023. In September 2022, the BPU released a draft Storage Incentive Program proposal and is currently undertaking a stakeholder process to receive comments. In the meantime, our CEF-ES program is being held in abeyance. Pursuant to our GSMP II and Energy Strong II programs, we are required to file a distribution base rate case no later than December 31, 2023. Among other things, the rate case will recover capital expenditures associated with these programs that are not already in rates, as well as the Advanced Metering Infrastructure and EV programs, other investments that are not recovered through periodic rate roll-ins, and several other cost and return factors. We expect to conclude the case in the second half of 2024.

PSEG Power

At PSEG Power, we seek to produce low-cost electricity by efficiently operating our nuclear generation assets, mitigate volatility by contracting in advance for a significant portion of their output and support public policies that preserve these existing nuclear generating plants. During the first six months of 2023, our nuclear units generated 16.1 terawatt hours and operated at a capacity factor of 95.8%.

More than 90% of PSEG Power’s expected gross margin in 2023 relates to hedged energy margin, known capacity revenues, Zero Emission Certificate (ZEC) revenues and, certain gas operations and ancillary service payments such as reactive power, which limits our exposure to uncontracted market prices. Over the past two years, forward energy prices have demonstrated considerable price volatility. This has led to significant variations in our 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. PSEG continues to maintain sufficient liquidity as described in Liquidity and Capital Resources.

Climate Strategy and Sustainability Efforts

For more than a century, our purpose has been to provide safe access to an around-the-clock supply of reliable, affordable energy. Today, our vision is to power a future where people use less energy, and it is cleaner, safer and delivered more reliably than ever. We have established a net zero greenhouse gas (GHG) emissions by 2030 goal that includes direct GHG emissions (Scope 1) and indirect GHG emissions from operations (Scope 2) across our business operations, assuming advances in technology, public policy and customer behavior. Scope 1 emissions include power generation, methane leaks, vehicle fleet emissions, and sulfur hexafluoride and refrigerant leaks. Scope 2 emissions include both gas and electric purchased energy for our PSE&G facilities and line losses. We have also committed to the United Nations-backed Race to Zero campaign. Therefore, we continue to evaluate the criteria for science-based emission reduction targets encompassing Scopes 1, 2 and 3 emissions (the majority of which are associated with the downstream use of energy products) in relation to the Science Based Targets initiative (SBTi).

PSE&G has undertaken a number of initiatives that support the reduction of GHG emissions and the implementation of EE initiatives. PSE&G’s approved CEF-EE, CEF-Energy Cloud and CEF-EV programs and the proposed CEF-ES program are intended to support New Jersey’s Energy Master Plan (EMP) through programs designed to help customers increase their EE, support the expansion of the EV infrastructure in the State, install energy storage capacity to supplement solar generation and enhance grid resiliency, install smart meters and supporting infrastructure to allow for the integration of other clean energy technologies and to more efficiently respond to weather and other outage events.

In addition, PSE&G is committed to the safe and reliable delivery of natural gas to approximately 1.9 million customers throughout New Jersey and we are equally committed to reducing GHG emissions associated with such operations. The first phase of our GSMP replaced approximately 450 miles of cast-iron and unprotected steel gas main infrastructure, and the second phase of this program replaced an additional 1,090 miles of gas pipes and was completed in the first quarter of 2023. The GSMP is designed to significantly reduce natural gas leaks in our distribution system, which would reduce the release of methane, a potent GHG, into the air. Through GSMP II, from 2018 through 2023 we reduced methane leaks by approximately 22% system wide and assuming continuation of GSMP, we expect to achieve an overall reduction in methane emissions of at least 60% over the 2011 through 2030 period. We also continue to assess physical risks of climate change and adapt our capital investment program to improve the reliability and resiliency of our system in an environment of increasing frequency and severity of weather events, notably through our investments in our Energy Strong program and Infrastructure Advancement Program and our investments in transmission infrastructure upgrades. These investments have shown benefits in recent severe weather events, including Tropical Storm Ida in 2021, which brought significant flooding to our service territory but did not result in the loss of any of our electric distribution substations.

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We also continue to focus on providing cleaner energy for our customers by working to preserve the economic viability of our nuclear units, which provide over 85% of the carbon-free energy in New Jersey. These efforts include reducing market risk by advocating for state and federal policies, such as the IRA discussed below, that recognize the value of our nuclear fleet’s carbon-free generation and its contribution to grid reliability.

Offshore Wind

In May 2023, PSEG sold to Ørsted North America Inc. (Ørsted) 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.

Additionally, PSEG and Ørsted each owns 50% of Garden State Offshore Energy LLC (GSOE) which holds rights to an offshore wind lease area just south of New Jersey. PSEG is evaluating its options for the potential sale of its interest in GSOE.

In April 2023, the BPU issued an order requesting that PJM conduct a second public policy transmission solicitation process utilizing the State Agreement Approach for transmission projects to support New Jersey’s expanded offshore wind goal. This goal, announced in a September 2022 executive order issued by Governor Murphy, is to develop an additional 3.5 gigawatts (GWs) of offshore wind generation, to bring New Jersey’s overall goal to 11 GWs. The solicitation will seek to procure both onshore and offshore transmission solutions. PJM stated that the solicitation process is tentatively expected to commence in 2024.

Financial Results

The results for PSEG, PSE&G and PSEG Power & Other for the three months and six months ended June 30, 2023 and 2022 are presented as follows:



	Three Months Ended				Six Months Ended
	June 30,				June 30,
Earnings (Losses)	2023		2022		2023		2022
	Millions
PSE&G	$	336	$	305	$	823	$	814
PSEG Power & Other (A)	255		(174)		1,055		(685)
PSEG Net Income	$	591	$	131	$	1,878	$	129

PSEG Net Income Per Share (Diluted)	$	1.18	$	0.26	$	3.76	$	0.26

(A)Other includes after-tax activities at the parent company, PSEG LI, and Energy Holdings as well as intercompany eliminations.

PSEG Power’s results above include the Nuclear Decommissioning Trust (NDT) Fund activity and the impacts of non-trading commodity mark-to-market (MTM) activity, which consist of the financial impact from positions with future delivery dates.

The variances in our Net Income attributable to changes related to the NDT Fund and MTM are shown in the following table:



	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2023		2022		2023		2022
	Millions, after tax
NDT Fund Income (Expense) (A) (B)	$	35	$	(117)	$	60	$	(163)
Non-Trading MTM Gains (Losses) (C)	$	212	$	(74)	$	767	$	(682)

(A)NDT Fund Income (Expense) includes gains and losses on NDT securities which are recorded in Net Gains (Losses) on Trust Investments. See Item 1. Note 8. Trust Investments for additional information. NDT Fund Income (Expense) also includes interest and dividend income and other costs related to the NDT Fund recorded in Other Income (Deductions), interest accretion expense on PSEG Power’s nuclear Asset Retirement Obligation (ARO) recorded in Operation and Maintenance (O&M) Expense and the depreciation related to the ARO asset recorded in Depreciation and Amortization (D&A) Expense.

(B)Net of tax (expense) benefit of $(23) million and $68 million for the three months and $(40) million and $94 million for the six months ended June 30, 2023 and 2022, respectively.

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(C)Net of tax (expense) benefit of $(84) million and $30 million for the three months and $(301) million and $267 million for the six months ended June 30, 2023 and 2022, respectively.

Our Net Income for the three months and six months ended June 30, 2023 increased as compared to the comparable periods in 2022 driven primarily by

MTM gains in 2023 as compared to MTM losses in 2022 due to changing energy prices,
unrealized gains in 2023 as compared to unrealized losses in 2022 on equity securities in the NDT Fund, and
higher earnings due to continued investments in T&D clause programs at PSE&G,
partially offset by lower pension and other postretirement benefit (OPEB) credits in 2023.

Regulatory, Legislative and Other Developments

We closely monitor and engage with stakeholders on significant regulatory and legislative developments.

Wholesale Power Market Design

In February 2023, FERC issued an order accepting PJM’s proposal to recalculate the market clearing price for one particular capacity zone for the December 2022 Base Residual Auction. FERC also accepted PJM’s tariff revisions to allow it to implement similar changes in future auctions. A number of parties have appealed the FERC Order to the D.C. Circuit Court of Appeals and we cannot predict the outcome.

Transmission Rate Proceedings and Return on Equity (ROE)

Under current FERC rules, PSE&G continues to earn a 50 basis point adder to its base ROE for its membership in PJM as a transmission owner. In April 2021, FERC proposed eliminating this ROE adder for Regional Transmission Owner participation. FERC has not acted on the proposal. If the adder was eliminated it would reduce PSE&G’s annual Net Income and annual cash inflows by approximately $30 million to $40 million.

New Jersey Stakeholder Proceedings

In February 2023, New Jersey Governor Murphy issued executive orders (EOs) that establish or accelerate previously established 2050 targets for clean-sourced energy, building electrification, and EV adoption goals, with new target dates of 2030 or 2035, as applicable. The EOs direct the BPU and other state agencies to collaborate with stakeholders to develop plans to reach the targets and convene a stakeholder proceeding to develop a plan for gas distribution utilities to reach the target of 50% natural gas emissions reductions over 2006 levels by 2030. We are unable to predict the outcomes of this proceeding, but it could have a material impact on our business, results of operations and cash flows.

Environmental Regulation

We are subject to liability under environmental laws for the costs and penalties of remediating contamination of property now or formerly owned by us and of property contaminated by hazardous substances that we generated. In particular, the historic operations of PSEG companies and the operations of numerous other companies along the Passaic and Hackensack Rivers are alleged by federal and state agencies to have discharged substantial contamination into the Passaic River/Newark Bay Complex in violation of various statutes. In addition, PSEG Power has retained ownership of certain liabilities excluded from the sale of its fossil generation portfolio, primarily related to obligations under New Jersey and Connecticut state law to investigate and remediate the sites. We are also currently involved in a number of proceedings relating to sites where other hazardous substances may have been discharged and may be subject to additional proceedings in the future, and the costs and penalties of any such remediation efforts could be material.

For further information regarding the matters described above, as well as other matters that may impact our financial condition and results of operations, see Item 1. Note 10. Commitments and Contingent Liabilities.

Nuclear

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 megawatt hour (MWh) received during the prior ZEC period through May 2022. 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 used (which is equivalent to approximately $10 per MWh generated in payments to selected nuclear plants (ZEC payment)). As previously noted, in August 2022, the IRA was signed into law expanding incentives promoting carbon-free generation. The enacted legislation established the PTC for electricity generation using existing 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. We are continuing to analyze the impact of the IRA on our nuclear units, including future guidance from the U.S. Treasury and the impact of PTCs on expected ZEC payments. See Item 1. Note 3. Early Plant Retirements/Asset Dispositions and Impairments for additional information.

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Current Inflationary Environment

The current inflationary environment has prompted the Federal Reserve to tighten monetary policy resulting in higher interest rates, which have impacted financial markets, reducing the value of fixed income investments and created uncertainty about the future economic outlook weakening equity markets. These factors resulted in negative returns on our pension assets during 2022, which resulted in materially higher pension costs in 2023 and are expected to have impacts on future years. The higher interest rates translated into a higher discount rate for our pension obligations, which lowered our pension liability and positively affected our funded ratio, which remains strong.

In February 2023, PSE&G received 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 ratemaking purposes. This order mitigates some of the volatility in earnings and customer rates related to our pension trust performance, and is effective for calendar year 2023 and forward. As a result of this order, PSEG’s 2023 pension expense, net of amounts capitalized, was reduced by $59 million, resulting in a pension credit of $16 million.

On July 31, 2023, PSEG entered into a commitment agreement with The Prudential Insurance Company of America (the Insurer) under which certain PSEG pension plans agreed to purchase a 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. See Note 9. Pension and Other Postretirement Benefits (OPEB) for additional information.

Further, higher interest rates on borrowings will contribute to higher interest expense on variable rate debt and impact long-term rates on future financing plans. As of June 30, 2023, PSEG had entered into floating-to-fixed interest rate swaps totaling $900 million in order to reduce the volatility in interest expense related to a portion of a $1.25 billion variable rate term loan at PSEG Power due March 2025.

Inflation will also result in upward pressure on operating costs and capital spending.

Tax Legislation

Future federal and state tax legislation and clarification of existing legislation could have a material impact on our effective tax rate and cash tax position.

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.

The IRA enacted a new 15% corporate alternative minimum tax (CAMT), effective in 2023, a PTC for existing nuclear generation facilities and allows energy tax credits to be transferable. In June 2023, the U.S. Treasury issued proposed regulations on the transferability of certain credits that may affect PSEG’s post 2023 operations, financial condition and cash flows. Many aspects of the IRA remain unclear and in need of further guidance; therefore, we continue to analyze the impact the IRA will have on PSEG’s and PSE&G’s results of operations, financial condition and cash flows, which could be material.

Future Outlook

Our future success will depend on our ability to continue to maintain strong operational and financial performance to capitalize on or otherwise address regulatory and legislative developments that impact our business and to respond to the issues and challenges described below. In order to do this, we will continue to:

seek approval of and execute on our utility capital investment program to modernize our infrastructure, improve the reliability and resilience of the service we provide to our customers, and align our sustainability and climate goals with New Jersey’s energy policy,
seek a fair return for our T&D investments through our transmission formula rate, existing rate incentives, distribution infrastructure and clean energy investment programs and periodic distribution base rate case proceedings,
focus on controlling costs while maintaining safety, reliability and customer satisfaction and complying with applicable standards and requirements,
manage the risks and opportunities in federal and state clean energy policies, which is an integral part of our long-term strategy,
successfully manage our obligations and re-contract our open positions in response to changes in prices and demand,
advocate for appropriate regulatory guidance on the federal nuclear PTC to ensure long-term support for New Jersey’s largest carbon-free generation resource, and adapt our hedging program accordingly,

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engage constructively with our multiple stakeholders, including regulators, government officials, customers, employees, investors, suppliers and the communities in which we do business, and
deliver on our human capital management strategy to attract, develop and retain a diverse, high-performing workforce.

In addition to the risks described elsewhere in this Form 10-Q and in our Form 10-K, for 2023 and beyond, the key issues and challenges we expect our business to confront include:

regulatory and political uncertainty, both with regard to transmission planning and rates policy, the role of distribution utilities and decarbonization impacts, future energy policy, design of energy and capacity markets, and environmental regulation, as well as with respect to the outcome of any legal, regulatory or other proceedings,
the current inflationary environment and associated volatility in the financial markets, including the impact on our pension fund performance and interest rates on our future financing plans,
increases in commodity prices and customer rates, which may adversely affect customer collections and future regulatory proceedings,
the increasing frequency, sophistication and magnitude of cybersecurity attacks against us and our respective vendors and business partners who may have our sensitive information and/or access to our environment, and the increasing frequency and magnitude of physical attacks on electric and gas infrastructure,
future changes in federal and state tax laws or any other associated tax guidance, and
the impact of changes in demand, natural gas and electricity prices, and expanded efforts to decarbonize several sectors of the economy.

We continually assess a broad range of strategic options to maximize long-term shareholder value and address the interests of our multiple stakeholders. We consider a wide variety of factors when determining how and when to efficiently deploy capital, including the performance and prospects of our businesses; returns and the sustainability and predictability of future earnings streams; the views of investors, regulators, public policy initiatives, rating agencies, customers and employees; our existing indebtedness and restrictions it imposes; and tax considerations, among other things. Strategic options available to us include:

investments in PSE&G, including T&D facilities to enhance reliability, resiliency and modernize the system to meet the growing needs and increasingly higher expectations of customers, and clean energy investments such as CEF-EE, CEF-EV, CEF-ES and Solar,
continued operation of our nuclear generation facilities that are supported through the PTC through 2032 and can enable certain enhancements to the units as well as potential license extensions,
investments in competitive, regulated transmission investments through PJM processes and BPU solicitations related to enabling offshore wind that provide revenue predictability and reasonable risk-adjusted returns, and
acquisitions, dispositions, development and other transactions involving our common stock, assets or businesses that could provide value to customers and shareholders.

There can be no assurance, however, that we will successfully develop and execute any of the strategic options noted above, or any additional options we may consider in the future. The execution of any such strategic plan may not have the expected benefits or may have unexpected adverse consequences.

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RESULTS OF OPERATIONS

PSEG

Our results of operations are comprised of the results of operations of our reportable segments, PSE&G and PSEG Power & Other, excluding charges related to intercompany transactions, which are eliminated in consolidation. For additional information on intercompany transactions, see Item 1. Note 19. Related-Party Transactions.



	Three Months Ended				Increase/ (Decrease)				Six Months Ended				Increase/ (Decrease)
	June 30,						June 30,
	2023		2022		2023 vs. 2022				2023		2022		2023 vs. 2022
	Millions				Millions			%	Millions				Millions		%
Operating Revenues	$	2,421	$	2,076	$	345		17	$	6,176	$	4,389	$	1,787	41
Energy Costs	604		765		(161)			(21)	1,686		2,010		(324)		(16)
Operation and Maintenance	744		751		(7)			(1)	1,487		1,545		(58)		(4)
Depreciation and Amortization	279		269		10			4	561		552		9		2
(Gains) Losses on Asset Dispositions and Impairments	—		(5)		5			N/A	—		38		(38)		N/A
Income from Equity Method Investments	—		7		(7)			N/A	1		11		(10)		(91)
Net Gains (Losses) on Trust Investments	57		(187)		244			N/A	103		(255)		358		N/A
Other Income (Deductions)	49		38		11			29	91		43		48		N/A
Net Non-Operating Pension and OPEB Credits (Costs)	29		94		(65)			(69)	57		188		(131)		(70)
Interest Expense	185		150		35			23	365		287		78		27
Income Tax Expense (Benefit)	153		(33)		186			N/A	451		(185)		636		N/A

The following discussions for PSE&G and PSEG Power & Other provide a detailed explanation of their respective variances.

PSE&G



	Three Months Ended				Increase/ (Decrease)				Six Months Ended				Increase/ (Decrease)
	June 30,						June 30,
	2023		2022		2023 vs. 2022				2023		2022		2023 vs. 2022
	Millions				Millions			%	Millions				Millions		%
Operating Revenues	$	1,662	$	1,668	$	(6)		—	$	3,955	$	3,952	$	3	—
Energy Costs	551		630		(79)			(13)	1,535		1,598		(63)		(4)
Operation and Maintenance	429		434		(5)			(1)	889		897		(8)		(1)
Depreciation and Amortization	240		227		13			6	484		468		16		3
Net Gains (Losses) on Trust Investments	—		(2)		2			N/A	—		(2)		2		N/A
Other Income (Deductions)	23		22		1			5	44		41		3		7
Net Non-Operating Pension and OPEB Credits (Costs)	28		71		(43)			(61)	56		141		(85)		(60)
Interest Expense	123		107		16			15	236		210		26		12
Income Tax Expense (Benefit)	34		56		(22)			(39)	88		145		(57)		(39)

Three Months Ended June 30, 2023 as Compared to Three Months Ended June 30, 2022

Operating Revenues decreased $6 million due to changes in delivery, commodity, clause and other operating revenues.

Delivery Revenues increased $57 million due primarily to

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Transmission revenues were $32 million higher due primarily to an increase in revenue requirements attributable to higher rate base investment.
Electric and gas distribution revenues increased $25 million due primarily to increases of $31 million from Conservation Incentive Program (CIP) decoupling, $10 million from GSMP II and Energy Strong II collections, and $12 million due to a reduction in the flowback to customers of excess deferred tax liabilities and tax repair-related accumulated deferred income tax benefits resulting from rate reductions, which is offset in Income Tax Expense. These increases were partially offset by lower sales volumes of $27 million.

Commodity Revenues decreased $86 million as a result of lower Electric and Gas revenues. The changes in Commodity revenues for both electric and gas are entirely offset by the changes in Energy Costs. PSE&G earns no margin on the provision of basic generation service (BGS) and BGSS to retail customers.

Electric commodity revenues decreased $47 million due primarily to $30 million in lower BGS prices and $17 million in lower sales volumes.
Gas commodity revenues decreased $39 million due primarily to $23 million from lower BGSS prices and $13 million from lower BGSS sales volumes.

Clause Revenues increased $14 million due primarily to a $17 million increase in Green Program Recovery Charge (GPRC) deferrals, partially offset by lower Societal Benefit Clause (SBC) revenues of $3 million. The changes in GPRC deferral amounts and SBC revenues are entirely offset by changes in the amortization of Regulatory Assets and Regulatory Liabilities and related costs in O&M, D&A, Interest and Income Tax Expenses. PSE&G does not earn margin on GPRC deferrals or on SBC revenue.

Other Operating Revenues increased $9 million due primarily to an increase from appliance services and a net increase from renewable energy credit (REC) programs. The changes in revenues from REC programs are entirely offset by changes to Energy Costs.

Operating Expenses

Energy Costs decreased $79 million. This is primarily offset by changes in Commodity Revenues and Other Operating Revenues.

Operation and Maintenance decreased $5 million due primarily to $11 million in lower Distribution and Transmission expenditures and a $6 million reduction in damages, partially offset by increases of $8 million for voluntary severance costs and $6 million for higher clause and renewable expenditures.

Depreciation and Amortization increased $13 million due primarily to increases in depreciation due to higher plant placed in service and software amortization.

Net Non-Operating Pension and OPEB Credits (Costs) decreased $43 million due primarily to a $21 million increase in interest cost, a $17 million decrease in the expected return on plan assets and a $16 million decrease in the amortization of net prior service credits, partially offset by an $11 million decrease in the amortization of the net actuarial loss.

Interest Expense increased $16 million due primarily to March 2023 and December 2022 debt issuances.

Income Tax Expense decreased $22 million due primarily to increased tax benefits in the second quarter 2023 from the flowback of excess deferred income tax benefits.

Six Months Ended June 30, 2023 as Compared to Six Months Ended June 30, 2022

Operating Revenues increased $3 million due to changes in delivery, commodity, clause and other operating revenues.

Delivery Revenues increased $110 million due primarily to

Transmission revenues were $56 million higher due primarily to an increase in revenue requirements attributable to higher rate base investment.
Electric and gas distribution revenues increased $54 million due primarily to increases of $69 million from CIP decoupling, $38 million due to a reduction in the flowback to customers of excess deferred tax liabilities and tax repair-related accumulated deferred income tax benefits resulting from rate reductions, which is offset in Income Tax Expense, and $33 million in GSMP II and Energy Strong II collections. These increases were partially offset by lower sales volumes of $80 million and $5 million in lower GPRC collections.

Commodity Revenues decreased $76 million as a result of lower Gas and Electric revenues. The changes in Commodity revenues for both gas and electric are entirely offset by the changes in Energy Costs. PSE&G earns no margin on the provision of BGSS and basic generation service (BGS) to retail customers.

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Gas commodity revenues decreased $53 million due primarily to $92 million from lower BGSS sales volumes, partially offset by an increase of $39 million from higher BGSS prices.
Electric commodity revenues decreased $23 million due to $12 million from lower BGS prices and $11 million from lower sales volumes.

Clause Revenues decreased $49 million due primarily to a $36 million net decrease in Tax Adjustment Credit (TAC) and GPRC deferrals and lower SBC revenues of $15 million. The changes in TAC and GPRC deferral amounts and Societal Benefit Clause (SBC) revenues are entirely offset by changes in the amortization of Regulatory Assets and Regulatory Liabilities and related costs in O&M, D&A, Interest and Income Tax Expenses. PSE&G does not earn margin on TAC and GPRC deferrals or on SBC revenue.

Other Operating Revenues increased $18 million due primarily to an increase from appliance services and a net increase from REC programs. The changes in revenues from REC programs are entirely offset by changes to Energy Costs.

Operating Expenses

Energy Costs decreased $63 million. This is primarily offset by changes in Commodity Revenues and Other Operating Revenues.

Operation and Maintenance decreased $8 million due primarily to $23 million in lower Distribution expenditures and an $8 million reduction in damages, partially offset by increases of $17 million for voluntary severance costs and $9 million for higher clause and renewable expenditures.

Depreciation and Amortization increased $16 million due primarily to increases in depreciation due to higher plant placed in service and software amortization, partially offset by a decrease in the amortization of Regulatory Assets.

Other Income (Deductions) increased $3 million due primarily to an increase in investment income.

Net Non-Operating Pension and OPEB Credits (Costs) decreased $85 million due primarily to a $42 million increase in interest cost, a $35 million decrease in the expected return on plan assets and a $31 million decrease in the amortization of net prior service credits, partially offset by a $23 million decrease in the amortization of the net actuarial loss.

Interest Expense increased $26 million due primarily to March 2023 and March and December 2022 debt issuances.

Income Tax Expense decreased $57 million due primarily to lower pre-tax income, increased tax benefits from CEF program investments, the flowback of excess deferred income tax benefits and flow-through items in 2023.

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PSEG Power & Other



	Three Months Ended				Increase/ (Decrease)				Six Months Ended				Increase/ (Decrease)
	June 30,						June 30,
	2023		2022		2023 vs. 2022				2023		2022		2023 vs. 2022
	Millions				Millions			%	Millions				Millions		%
Operating Revenues	$	902	$	645	$	257		40	$	2,929	$	1,258	$	1,671	N/A
Energy Costs	196		372		(176)			(47)	859		1,233		(374)		(30)
Operation and Maintenance	315		317		(2)			(1)	598		648		(50)		(8)
Depreciation and Amortization	39		42		(3)			(7)	77		84		(7)		(8)
(Gains) Losses on Asset Dispositions and Impairments	—		(5)		5			N/A	—		38		(38)		N/A
Income from Equity Method Investments	—		7		(7)			N/A	1		11		(10)		(91)
Net Gains (Losses) on Trust Investments	57		(185)		242			N/A	103		(253)		356		N/A
Other Income (Deductions)	27		16		11			69	49		2		47		N/A
Net Non-Operating Pension and OPEB Credits (Costs)	1		23		(22)			(96)	1		47		(46)		(98)
Interest Expense	63		43		20			47	131		77		54		70
Income Tax Expense (Benefit)	119		(89)		208			N/A	363		(330)		693		N/A

Three Months Ended June 30, 2023 as Compared to Three Months Ended June 30, 2022

Operating Revenues increased $257 million due primarily to changes in generation and gas supply and other operating revenues.

Generation Revenues increased $445 million due primarily to

a net increase of $414 million due to MTM gains in 2023 as compared to MTM losses in 2022. Of this amount, there was a $553 million increase due to changes in forward prices in 2023 as compared to 2022, partially offset by a $139 million decrease due to positions reclassified to realized upon settlement, and
a net increase of $59 million due primarily to higher average realized prices and volumes sold in 2023 in the PJM region,
partially offset by a net decrease of $49 million due primarily to lower volumes of electricity sold under the BGS contracts, which ended in May 2023, and other load contracts.

Gas Supply Revenues decreased $189 million due primarily to

a net decrease of $90 million related to sales to third parties, due primarily to $66 million from lower sales prices, and $24 million from lower sales volumes,
a net decrease of $82 million in sales under the BGSS contract due primarily to $57 million from lower prices, and $25 million due to lower sales volumes, and
a net decrease of $17 million due to lower MTM gains in 2023 as compared to 2022 due primarily to changes in forward prices.

Operating Expenses

Energy Costs represent the cost of generation, which includes fuel costs for generation as well as purchased energy in the market, and gas purchases to meet PSEG Power’s obligation under its BGSS contract with PSE&G. Energy Costs decreased $176 million primarily due to

Gas costs decreased $170 million due mainly to

a net decrease of $91 million related to sales to third parties, due primarily to $69 million from the lower average cost of gas, and $22 million due to lower volumes sold, and
a net decrease of $78 million related primarily to sales under the BGSS contract, of which $55 million was due to

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lower average cost of gas, and $23 million due to lower send out volumes.

Income from Equity Method Investments decreased $7 million due primarily to the sale of our ownership interest in Kalaeloa in May 2023.

Net Gains (Losses) on Trust Investments increased $242 million due primarily to NDT investments with $60 million of net unrealized gains on equity securities in 2023 as compared to $170 million of net unrealized losses in 2022 and a decrease of $7 million in net realized losses.

Other Income (Deductions) increased $11 million due primarily to interest income.

Non-Operating Pension and OPEB Credits (Costs) decreased $22 million due to a decrease in the expected return on plan assets, an increase in interest cost, a decrease in the amortization of the net prior service credit and an increase in the amortization of the net actuarial loss, partially offset by lower co-owner charges.

Interest Expense increased $20 million due primarily to the replacement of maturing debt at the parent company at higher rates, as well as higher rates on PSEG Power and parent company variable rate term loans.

Income Tax Expense (Benefit) increased $208 million due primarily to higher pre-tax income in 2023 and increased tax expense in 2023 on gains from the NDT qualified fund.

Six Months Ended June 30, 2023 as Compared to Six Months Ended June 30, 2022

Operating Revenues increased $1,671 million due primarily to changes in generation and gas supply and other operating revenues.

Generation Revenues increased $1,872 million due primarily to

a net increase of $2,054 million due to MTM gains in 2023 as compared to MTM losses in 2022. Of this amount, there was a $1,746 million increase due to changes in forward prices in 2023 as compared to 2022 coupled with a $308 million increase due to positions reclassified to realized upon settlement,
partially offset by a net decrease of $109 million due primarily to lower volumes of electricity sold under the BGS contracts, which ended in May 2023, and other load contracts,
a net decrease of $39 million in capacity revenue due primarily to the sale of the fossil generating plants coupled with lower capacity prices in the PJM region, partially offset by decreases in capacity expenses due to lower load volumes served, and
a net decrease of $37 million due primarily to volumes sold in the New England and New York regions in 2022 related to the fossil generating plants sold in February 2022, partially offset by higher average realized prices and volumes sold in 2023 in the PJM region.

Gas Supply Revenues decreased $207 million due primarily to

a net decrease of $123 million related to sales to third parties, primarily due to lower sales prices,
a net decrease of $44 million in sales under the BGSS contract due primarily to $114 million from lower sales volumes, partially offset by $70 million due to higher prices, and
a net decrease of $40 million due to MTM losses in 2023 as compared to MTM gains in 2022 primarily due to positions reclassified to realized upon settlement, coupled with changes in forward prices.

Operating Expenses

Generation costs decreased $226 million due primarily to

a net decrease of $191 million in fuel and emission costs due primarily to the sale of the fossil generating plants, and
a net decrease of $22 million in energy purchases due primarily to lower REC requirements caused by decreases in load served in the PJM region.

Gas costs decreased $148 million due mainly to

a net decrease of $115 million related to sales to third parties, primarily due to the lower average cost of gas, and

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a net decrease of $32 million related primarily to sales under the BGSS contract, of which $100 million was due to lower send out volumes, partially offset by $68 million due to the higher average cost of gas.

Operation and Maintenance decreased $50 million due primarily to the sale of the fossil generating plants in February 2022.

Losses on Asset Dispositions and Impairments reflects a $38 million impairment loss due primarily to the sale of the fossil generating plants in February 2022. See Item 1. Note 3. Early Plant Retirements/Asset Dispositions and Impairments.

Income from Equity Method Investments decreased $10 million primarily due to the sale of our ownership interest in Kalaeloa in May 2023.

Net Gains (Losses) on Trust Investments increased $356 million due primarily to NDT investments with $111 million of net unrealized gains on equity securities in 2023 as compared to $231 million of net unrealized losses in 2022 and a decrease of $6 million in net realized losses.

Other Income (Deductions) increased $47 million due primarily to purchases of net operating loss tax benefits under the New Jersey Technology Tax Benefit Transfer Program in 2022 and higher interest income.

Non-Operating Pension and OPEB Credits (Costs) decreased $46 million due to a decrease in the expected return on plan assets, an increase in interest cost, a decrease in the amortization of the net prior service credit and an increase in the amortization of the net actuarial loss, partially offset by lower co-owner charges.

Interest Expense increased $54 million due primarily to the replacement of maturing debt at the parent company at higher rates, the issuance of a PSEG Power term loan in March 2022, as well as higher rates on PSEG Power and parent company variable rate term loans.

Income Tax Expense (Benefit) increased $693 million due primarily to higher pre-tax income in 2023.

LIQUIDITY AND CAPITAL RESOURCES

The following discussion of our liquidity and capital resources is on a consolidated basis, noting the uses and contributions, where material, of our two direct major operating subsidiaries.

Operating Cash Flows

We continue to expect our operating cash flows combined with cash on hand and financing activities to be sufficient to fund planned capital expenditures and shareholder dividends.

For the six months ended June 30, 2023, our operating cash flow increased $2,053 million as compared to the same period in 2022. The net increase was primarily due to an inflow of $1,095 million in net cash collateral postings in 2023 as compared to a $1,244 million outflow in 2022 at PSEG Power and higher tax payments in 2022, partially offset by a net change at PSE&G, as discussed below.

PSE&G

PSE&G’s operating cash flow decreased $769 million from $1,312 million to $543 million for the six months ended June 30, 2023, as compared to the same period in 2022. The decrease was due primarily to lower cash collateral postings received from BGS suppliers, and an increase in vendor and electric energy payments and increases in materials and supplies to primarily support our electric Advanced Metering Infrastructure program. This was partially offset by a decrease in net accounts receivable due to improved collections following the delays from COVID-19 moratoriums.

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.

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

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 our 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.

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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. These term loans are not included in the credit facility amounts presented in the following table.

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



Company/Facility	As of June 30, 2023
Total Facility	Usage		Available Liquidity
	Millions
PSEG	$	1,500	$	152	$	1,348
PSE&G	1,000		318		682
PSEG Power	1,650		191		1,459
Total	$	4,150	$	661	$	3,489

We continually monitor our liquidity and seek to add capacity as needed to meet our liquidity requirements, including to satisfy any additional collateral requirements. As of June 30, 2023, our liquidity position, including our credit facilities and access to external financing, was expected to be sufficient to meet our projected stressed requirements over our 12-month planning horizon. PSEG analyzes its liquidity requirements using stress scenarios that consider different events, including changes in commodity prices and the potential impact of PSEG Power losing its investment grade credit rating from S&P or Moody’s, which would represent a two level downgrade from its current Moody’s and S&P ratings. In the event of a deterioration of PSEG Power’s credit rating, certain of PSEG Power’s agreements allow the counterparty to demand further performance assurance. The potential additional collateral that we would be required to post under these agreements if PSEG Power were to lose its investment grade credit rating was approximately $709 million and $878 million as of June 30, 2023 and December 31, 2022, respectively.

For additional information, see Item 1. Note 11. Debt and Credit Facilities.

Long-Term Debt Financing

During the next twelve months,

PSEG has $750 million of 0.84% Senior Notes maturing in November 2023,
PSEG has $750 million of 2.88% Senior Notes maturing in June 2024,
PSE&G has $325 million of 3.25% Medium-Term Notes, Series M, due September 2023, and
PSE&G has $250 million of 3.75% Medium-Term Notes, Series I, due March 2024.

PSEG, PSEG Power, Energy Holdings, PSEG LI and Services participate in a corporate money pool, an aggregation of daily cash balances designed to efficiently manage their respective short-term liquidity needs, which are accounted for as intercompany loans. Long Island Electric Utility Servco, LLC (Servco) does not participate in the corporate money pool. Servco’s short-term liquidity needs are met through an account funded and owned by LIPA.

For additional information see Item 1. Note 11. Debt and Credit Facilities.

Common Stock Dividends

On July 17, 2023, PSEG’s Board of Directors approved a $0.57 per share common stock dividend for the third quarter of 2023. This reflects an indicative annual dividend rate of $2.28 per share. We expect to continue to pay cash dividends on our common stock; however, the declaration and payment of future dividends to holders of our common stock will be at the discretion of the Board of Directors and will depend upon many factors, including our financial condition, earnings, capital requirements of our businesses, alternate investment opportunities, legal requirements, regulatory constraints, industry practice and other factors that the Board of Directors deems relevant. For additional information related to cash dividends on our common stock, see Item 1. Note 17. Earnings Per Share (EPS) and Dividends.

Credit Ratings

If the rating agencies lower or withdraw our credit ratings, such revisions may adversely affect the market price of our securities and serve to materially increase our cost of capital and limit access to capital. Credit Ratings shown are for securities that we typically issue. Outlooks are shown for the credit ratings at each entity and can be Stable, Negative, or Positive. There is no assurance that the ratings will continue for any given period of time or that they will not be revised by the rating agencies, if in

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their respective judgments, circumstances warrant. Each rating given by an agency should be evaluated independently of the other agencies’ ratings. The ratings should not be construed as an indication to buy, hold or sell any security.



	Moody’s (A)	S&P (B)
PSEG
Outlook	Stable	Stable
Senior Notes	Baa2	BBB
Commercial Paper	P2	A2
PSE&G
Outlook	Stable	Stable
Mortgage Bonds	A1	A
Commercial Paper	P2	A2
PSEG Power
Outlook	Stable	Stable
Issuer Rating	Baa2	BBB

(A)Moody’s ratings range from Aaa (highest) to C (lowest) for long-term securities and P1 (highest) to NP (lowest) for short-term securities.

(B)S&P ratings range from AAA (highest) to D (lowest) for long-term securities and A1 (highest) to D (lowest) for short-term securities.

CAPITAL REQUIREMENTS

We expect that all of our capital requirements over the next three years will come from a combination of internally generated funds and external debt financing. There were no material changes to our projected capital expenditures as compared to amounts disclosed in our 2022 Form 10-K.

PSE&G

During the six months ended June 30, 2023, PSE&G made capital expenditures of $1,336 million, primarily for T&D system reliability and advanced electric metering. This excludes cost of removal, net of salvage, of $82 million associated with capital replacements, and expenditures for EE programs of approximately $203 million, which are included in operating cash flows.

PSEG Power & Other

During the six months ended June 30, 2023, PSEG Power & Other made capital expenditures of $61 million, excluding $47 million for nuclear fuel, primarily related to various nuclear projects at PSEG Power and various information technology projects at Services.

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