Document

Table of Contents


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549 
FORM 10-Q
(Mark One)
ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED September 30, 2016
OR
¨ 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
 
Registrants, State of Incorporation,
Address, and Telephone Number
  
I.R.S. Employer
Identification No.
001-09120
  
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
(A New Jersey Corporation)
80 Park Plaza
Newark, New Jersey 07102
973 430-7000
http://www.pseg.com
  
22-2625848
001-00973
  
PUBLIC SERVICE ELECTRIC AND GAS COMPANY
(A New Jersey Corporation)
80 Park Plaza
Newark, New Jersey 07102
973 430-7000
http://www.pseg.com
  
22-1212800
001-34232
  
PSEG POWER LLC
(A Delaware Limited Liability Company)
80 Park Plaza
Newark, New Jersey 07102
973 430-7000
http://www.pseg.com
  
22-3663480
 
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 ý No ¨
Indicate by check mark whether the registrants have submitted electronically and posted on their corporate Web site, if any, 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 and post such files). Yes ý No ¨
Indicate by check mark whether each registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Public Service Enterprise Group Incorporated
Large accelerated filer x
Accelerated filer o
Non-accelerated filer o
Smaller reporting company o
 
 
 
 
 
Public Service Electric and Gas Company
Large accelerated filer o
Accelerated filer o
Non-accelerated filer x
Smaller reporting company o
 
 
 
 
 
PSEG Power LLC
Large accelerated filer o
Accelerated filer o
Non-accelerated filer x
Smaller reporting company o
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 ý
As of October 18, 2016, Public Service Enterprise Group Incorporated had outstanding 505,896,218 shares of its sole class of Common Stock, without par value.
As of October 18, 2016, Public Service Electric and Gas Company had issued and outstanding 132,450,344 shares of Common Stock, without nominal or par value, all of which were privately held, beneficially and of record by Public Service Enterprise Group Incorporated.
Public Service Electric and Gas Company and PSEG Power LLC are wholly owned subsidiaries of Public Service Enterprise Group Incorporated and meet the conditions set forth in General Instruction H(1) (a) and (b) of Form 10-Q. Each is filing its Quarterly Report on Form 10-Q with the reduced disclosure format authorized by General Instruction H.




Table of Contents


 
  
Page
FILING FORMAT
PART I. FINANCIAL INFORMATION
 
Item 1.
Financial Statements
 
 
 
 
 
Notes to Condensed Consolidated Financial Statements
 
 
 
 
Note 3. Early Plant Retirements
 
Note 4. Variable Interest Entities (VIEs)
 
Note 5. Rate Filings
 
Note 6. Financing Receivables
 
Note 7. Available-for-Sale Securities
 
Note 8. Pension and Other Postretirement Benefits (OPEB)
 
Note 9. Commitments and Contingent Liabilities
 
Note 10. Debt and Credit Facilities
 
Note 11. Financial Risk Management Activities
 
Note 12. Fair Value Measurements
 
Note 13. Other Income and Deductions
 
Note 14. Income Taxes
 
Note 15. Accumulated Other Comprehensive Income (Loss), Net of Tax
 
Note 16. Earnings Per Share (EPS) and Dividends
 
Note 17. Financial Information by Business Segments
 
Note 18. Related-Party Transactions
 
Note 19. Guarantees of Debt
Item 2.
 
Executive Overview of 2016 and Future Outlook
 
 
 
 
Item 3.
Item 4.
 
 
PART II. OTHER INFORMATION
 
Item 1.
Item 1A.
Item 2.
Item 5.
Item 6.
 


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FORWARD-LOOKING STATEMENTS
Certain of the matters discussed in this report about our and our subsidiaries’ future performance, including, without limitation, future revenues, earnings, strategies, prospects, consequences and all other statements that are not purely historical constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ materially from those anticipated. Such statements are based on management’s beliefs as well as assumptions made by and information currently available to management. When used herein, the words “anticipate,” “intend,” “estimate,” “believe,” “expect,” “plan,” “should,” “hypothetical,” “potential,” “forecast,” “project,” variations of such words and similar expressions are intended to identify forward-looking statements. Factors that may cause actual results to differ are often presented with the forward-looking statements themselves. Other factors that could cause actual results to differ materially from those contemplated in any forward-looking statements made by us herein are discussed in filings we make with the United States Securities and Exchange Commission (SEC), including our Annual Report on Form 10-K and subsequent reports on Form 10-Q and Form 8-K and available on our website: http://www.pseg.com. These factors include, but are not limited to:
adverse changes in the demand for or ongoing low pricing of the capacity and energy that we sell into wholesale electricity markets,
adverse changes in energy industry law, policies and regulations, including market structures and transmission planning,
any inability of our transmission and distribution businesses to obtain adequate and timely rate relief and regulatory approvals from federal and state regulators, including prudency reviews, disallowances and changes in authorized returns,
any deterioration in our credit quality or the credit quality of our counterparties,
changes in federal and state environmental regulations and enforcement that could increase our costs or limit our operations,
adverse outcomes of any legal, regulatory or other proceeding, settlement, investigation or claim applicable to us and/or the energy industry,
changes in nuclear regulation and/or general developments in the nuclear power industry, including various impacts from any accidents or incidents experienced at our facilities or by others in the industry, that could limit operations or increase the cost of our nuclear generating units,
actions or activities at one of our nuclear units located on a multi-unit site that might adversely affect our ability to continue to operate that unit or other units located at the same site,
any inability to manage our energy obligations, available supply and risks,
delays or unforeseen cost escalations in our construction and development activities, or the inability to recover the carrying amount of our assets,
availability of capital and credit at commercially reasonable terms and conditions and our ability to meet cash needs,
increases in competition in energy supply markets as well as for transmission projects,
changes in technology, such as distributed generation, storage and micro grids, and greater reliance on these technologies,
changes in customer behaviors, including increases in energy efficiency, net-metering and demand response,
adverse performance of our decommissioning and defined benefit plan trust fund investments and changes in funding requirements,
any equipment failures, accidents, severe weather events or other incidents that impact our ability to provide safe and reliable service to our customers, and any inability to obtain sufficient insurance coverage or recover insurance proceeds with respect to such events,
acts of terrorism, cybersecurity attacks or intrusions that could adversely impact our businesses,
delays in receipt of necessary permits and approvals for our construction and development activities,
any inability to achieve, or continue to sustain, our expected levels of operating performance,
changes in the cost of, or interruption in the supply of, fuel and other commodities necessary to the operation of our generating units,
economic recessions,
an inability to realize anticipated tax benefits or retain tax credits,
challenges associated with recruitment and/or retention of a qualified workforce, and
changes in the credit quality and the ability of lessees to meet their obligations under our domestic leveraged leases.
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

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consequences to, or effects on, us or our business prospects, financial condition or results of operations. 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 if internal estimates change, unless otherwise required by applicable securities laws.
The forward-looking statements contained in this report are intended to qualify for the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.

FILING FORMAT
This combined Quarterly Report on Form 10-Q is separately filed by Public Service Enterprise Group Incorporated (PSEG), Public Service Electric and Gas Company (PSE&G) and PSEG Power LLC (Power). Information relating to any individual company is filed by such company on its own behalf. PSE&G and Power are each only responsible for information about itself and its subsidiaries.
Discussions throughout the document refer to PSEG and its direct operating subsidiaries, PSE&G and Power. Depending on the context of each section, references to “we,” “us,” and “our” relate to PSEG or to the specific company or companies being discussed.


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PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Millions, except per share data
(Unaudited)

 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Nine Months Ended
 
 
 
September 30,
 
September 30,
 
 
 
2016
 
2015
 
2016
 
2015
 
 
OPERATING REVENUES
$
2,450

 
$
2,688

 
$
6,971

 
$
8,137

 
 
OPERATING EXPENSES
 
 
 
 
 
 
 
 
 
Energy Costs
866

 
815

 
2,326

 
2,577

 
 
Operation and Maintenance
776

 
746

 
2,215

 
2,170

 
 
Depreciation and Amortization
231

 
313

 
679

 
960

 
 
Total Operating Expenses
1,873

 
1,874

 
5,220

 
5,707

 
 
OPERATING INCOME
577

 
814

 
1,751

 
2,430

 
 
Income from Equity Method Investments
3

 
3

 
9

 
10

 
 
Other Income
47

 
47

 
139

 
171

 
 
Other Deductions
(8
)
 
(14
)
 
(39
)
 
(36
)
 
 
Other-Than-Temporary Impairments
(5
)
 
(30
)
 
(25
)
 
(45
)
 
 
Interest Expense
(99
)
 
(96
)
 
(288
)
 
(291
)
 
 
INCOME BEFORE INCOME TAXES
515

 
724

 
1,547

 
2,239

 
 
Income Tax Expense
(188
)
 
(285
)
 
(562
)
 
(869
)
 
 
NET INCOME
$
327

 
$
439

 
$
985

 
$
1,370

 
 
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
 
 
 
 
 
 
 
 
 
BASIC
505

 
505

 
505

 
505

 
 
DILUTED
508

 
508

 
508

 
508

 
 
NET INCOME PER SHARE:
 
 
 
 
 
 
 
 
 
BASIC
$
0.65

 
$
0.87

 
$
1.95

 
$
2.71

 
 
DILUTED
$
0.64

 
$
0.87

 
$
1.94

 
$
2.70

 
 
DIVIDENDS PAID PER SHARE OF COMMON STOCK
$
0.41

 
$
0.39

 
$
1.23

 
$
1.17

 
 
 
 
 
 
 
 
 
 
 
See Notes to Condensed Consolidated Financial Statements.

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PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Millions
(Unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Nine Months Ended
 
 
 
September 30,
 
September 30,
 
 
 
2016
 
2015
 
2016
 
2015
 
 
NET INCOME
$
327

 
$
439

 
$
985

 
$
1,370

 
 
Other Comprehensive Income (Loss), net of tax
 
 
 
 
 
 
 
 
 
Unrealized Gains (Losses) on Available-for-Sale Securities, net of tax (expense) benefit of $(24), $33, $(50) and $35 for the three and nine months ended 2016 and 2015, respectively
24

 
(31
)
 
50

 
(32
)
 
 
Unrealized Gains (Losses) on Cash Flow Hedges, net of tax (expense) benefit of $0, $(1), $(1) and $6 for the three and nine months ended 2016 and 2015, respectively
1

 

 
2

 
(9
)
 
 
Pension/Other Postretirement Benefit Costs (OPEB) adjustment, net of tax (expense) benefit of $(5), $(5), $(17) and $(17) for the three and nine months ended 2016 and 2015, respectively
9

 
9

 
25

 
25

 
 
Other Comprehensive Income (Loss), net of tax
34

 
(22
)
 
77

 
(16
)
 
 
COMPREHENSIVE INCOME
$
361

 
$
417

 
$
1,062

 
$
1,354

 
 
 
 
 
 
 
 
 
 
 
See Notes to Condensed Consolidated Financial Statements.


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PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
Millions
(Unaudited)
 
 
 
 
 
 
 
 
 
September 30,
2016
 
December 31,
2015
 
 
ASSETS
 
 
CURRENT ASSETS
 
 
 
 
 
Cash and Cash Equivalents
$
450

 
$
394

 
 
Accounts Receivable, net of allowances of $67 in 2016 and 2015
1,031

 
1,068

 
 
Tax Receivable
23

 
305

 
 
Unbilled Revenues
180

 
197

 
 
Fuel
366

 
463

 
 
Materials and Supplies, net
591

 
513

 
 
Prepayments
145

 
135

 
 
Derivative Contracts
149

 
242

 
 
Regulatory Assets
253

 
164

 
 
Other
21

 
13

 
 
Total Current Assets
3,209

 
3,494

 
 
PROPERTY, PLANT AND EQUIPMENT
38,225

 
35,494

 
 
     Less: Accumulated Depreciation and Amortization
(9,421
)
 
(8,955
)
 
 
Net Property, Plant and Equipment
28,804

 
26,539

 
 
NONCURRENT ASSETS
 
 
 
 
 
Regulatory Assets
3,124

 
3,196

 
 
Long-Term Investments
1,066

 
1,233

 
 
Nuclear Decommissioning Trust (NDT) Fund
1,857

 
1,754

 
 
Long-Term Tax Receivable
177

 
171

 
 
Long-Term Receivable of Variable Interest Entity (VIE)
509

 
495

 
 
Other Special Funds
243

 
227

 
 
Goodwill
16

 
16

 
 
Other Intangibles
154

 
102

 
 
Derivative Contracts
86

 
77

 
 
Other
243

 
231

 
 
Total Noncurrent Assets
7,475

 
7,502

 
 
TOTAL ASSETS
$
39,488

 
$
37,535

 
 
 
 
 
 
 
See Notes to Condensed Consolidated Financial Statements.


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PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
Millions
(Unaudited)

 
 
 
 
 
 
 
 
 
September 30,
2016
 
December 31,
2015
 
 
LIABILITIES AND CAPITALIZATION
 
 
CURRENT LIABILITIES
 
 
 
 
 
Long-Term Debt Due Within One Year
$

 
$
734

 
 
Commercial Paper and Loans
255

 
364

 
 
Accounts Payable
1,363

 
1,369

 
 
Derivative Contracts
40

 
76

 
 
Accrued Interest
127

 
96

 
 
Accrued Taxes
214

 
42

 
 
Clean Energy Program
185

 
142

 
 
Obligation to Return Cash Collateral
132

 
128

 
 
Regulatory Liabilities
96

 
123

 
 
Regulatory Liabilities of VIEs
9

 
42

 
 
Other
383

 
459

 
 
Total Current Liabilities
2,804

 
3,575

 
 
NONCURRENT LIABILITIES
 
 
 
 
 
Deferred Income Taxes and Investment Tax Credits (ITC)
8,661

 
8,166

 
 
Regulatory Liabilities
151

 
175

 
 
Asset Retirement Obligations
708

 
679

 
 
OPEB Costs
1,207

 
1,228

 
 
OPEB Costs of Servco
395

 
375

 
 
Accrued Pension Costs
400

 
487

 
 
Accrued Pension Costs of Servco
108

 
114

 
 
Environmental Costs
430

 
415

 
 
Derivative Contracts
13

 
27

 
 
Long-Term Accrued Taxes
197

 
212

 
 
Other
241

 
181

 
 
Total Noncurrent Liabilities
12,511

 
12,059

 
 
COMMITMENTS AND CONTINGENT LIABILITIES (See Note 9)


 


 
 
CAPITALIZATION

 
 
 
 
LONG-TERM DEBT
10,697

 
8,834

 
 
STOCKHOLDERS’ EQUITY

 
 
 
 
Common Stock, no par, authorized 1,000 shares; issued, 2016 and 2015—534 shares
4,928

 
4,915

 
 
Treasury Stock, at cost, 2016—29 shares; 2015—28 shares
(714
)
 
(671
)
 
 
Retained Earnings
9,480

 
9,117

 
 
Accumulated Other Comprehensive Loss
(218
)
 
(295
)
 
 
Total Common Stockholders’ Equity
13,476

 
13,066

 
 
Noncontrolling Interest

 
1

 
 
Total Stockholders’ Equity
13,476

 
13,067

 
 
Total Capitalization
24,173

 
21,901

 
 
TOTAL LIABILITIES AND CAPITALIZATION
$
39,488

 
$
37,535

 
 
 


 
 
 
See Notes to Condensed Consolidated Financial Statements.

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PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Millions
(Unaudited)
 
 
 
 
 
 
 
 
Nine Months Ended
 
 
 
September 30,
 
 
 
2016
 
2015
 
 
CASH FLOWS FROM OPERATING ACTIVITIES
 
 
 
 
 
Net Income
$
985

 
$
1,370

 
 
Adjustments to Reconcile Net Income to Net Cash Flows from Operating Activities:
 
 
 
 
 
Depreciation and Amortization
679

 
960

 
 
Amortization of Nuclear Fuel
154

 
162

 
 
 Impairment Costs
102

 

 
 
Provision for Deferred Income Taxes (Other than Leases) and ITC
445

 
230

 
 
Non-Cash Employee Benefit Plan Costs
95

 
121

 
 
Leveraged Lease (Income) Loss, Adjusted for Rents Received and Deferred Taxes
(12
)
 
6

 
 
Loss on Leases, Net of Tax
86

 

 
 
Net Unrealized (Gains) Losses on Energy Contracts and Other Derivatives
96

 
(87
)
 
 
Change in Accrued Storm Costs
(6
)
 
15

 
 
Net Change in Other Regulatory Assets and Liabilities
(66
)
 
26

 
 
Cost of Removal
(109
)
 
(82
)
 
 
Net Realized (Gains) Losses and (Income) Expense from NDT Fund
(12
)
 
(2
)
 
 
Net Change in Certain Current Assets and Liabilities:
 
 
 
 
 
          Tax Receivable
282

 
206

 
 
          Accrued Taxes
202

 
127

 
 
          Margin Deposit
(4
)
 
142

 
 
          Other Current Assets and Liabilities
(229
)
 
15

 
 
Employee Benefit Plan Funding and Related Payments
(81
)
 
(87
)
 
 
Other
154

 
106

 
 
Net Cash Provided By (Used In) Operating Activities
2,761

 
3,228

 
 
CASH FLOWS FROM INVESTING ACTIVITIES


 
 
 
 
Additions to Property, Plant and Equipment
(2,985
)
 
(2,782
)
 
 
Proceeds from Sales of Capital Leases and Investments

 
12

 
 
Proceeds from Sales of Available-for-Sale Securities
551

 
1,120

 
 
Investments in Available-for-Sale Securities
(576
)
 
(1,163
)
 
 
Other
(44
)
 
(28
)
 
 
Net Cash Provided By (Used In) Investing Activities
(3,054
)
 
(2,841
)
 
 
CASH FLOWS FROM FINANCING ACTIVITIES
 
 
 
 
 
Net Change in Commercial Paper and Loans
(109
)
 
20

 
 
Issuance of Long-Term Debt
1,975

 
600

 
 
Redemption of Long-Term Debt
(824
)
 
(300
)
 
 
Redemption of Securitization Debt

 
(191
)
 
 
Cash Dividends Paid on Common Stock
(622
)
 
(592
)
 
 
Other
(71
)
 
(55
)
 
 
Net Cash Provided By (Used In) Financing Activities
349

 
(518
)
 
 
Net Increase (Decrease) in Cash and Cash Equivalents
56

 
(131
)
 
 
Cash and Cash Equivalents at Beginning of Period
394

 
402

 
 
Cash and Cash Equivalents at End of Period
$
450

 
$
271

 
 
Supplemental Disclosure of Cash Flow Information:
 
 
 
 
 
Income Taxes Paid (Received)
$
(274
)
 
$
292

 
 
Interest Paid, Net of Amounts Capitalized
$
252

 
$
265

 
 
Accrued Property, Plant and Equipment Expenditures
$
579

 
$
321

 
 
 
 
 
 
 
See Notes to Condensed Consolidated Financial Statements.

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PUBLIC SERVICE ELECTRIC AND GAS COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Millions
(Unaudited)

 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Nine Months Ended
 
 
 
September 30,
 
September 30,
 
 
 
2016
 
2015
 
2016
 
2015
 
 
OPERATING REVENUES
$
1,684

 
$
1,766

 
$
4,746

 
$
5,234

 
 
OPERATING EXPENSES
 
 
 
 
 
 
 
 
 
Energy Costs
721

 
740

 
1,979

 
2,176

 
 
Operation and Maintenance
376

 
391

 
1,110

 
1,171

 
 
Depreciation and Amortization
137

 
231

 
412

 
712

 
 
Total Operating Expenses
1,234

 
1,362

 
3,501

 
4,059

 
 
OPERATING INCOME
450

 
404

 
1,245

 
1,175

 
 
Other Income
22

 
22

 
61

 
59

 
 
Other Deductions
(1
)
 

 
(3
)
 
(2
)
 
 
Interest Expense
(72
)
 
(67
)
 
(214
)
 
(203
)
 
 
INCOME BEFORE INCOME TAXES
399

 
359

 
1,089

 
1,029

 
 
Income Tax Expense
(144
)
 
(137
)
 
(393
)
 
(398
)
 
 
NET INCOME
$
255

 
$
222

 
$
696

 
$
631

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


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PUBLIC SERVICE ELECTRIC AND GAS COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Millions
(Unaudited)

 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Nine Months Ended
 
 
 
September 30,
 
September 30,
 
 
 
2016
 
2015
 
2016
 
2015
 
 
NET INCOME
$
255

 
$
222

 
$
696

 
$
631

 
 
Unrealized Gains (Losses) on Available-for-Sale Securities, net of tax (expense) benefit of $0 and $0 for the three and nine months ended 2016 and 2015, respectively

 

 
1

 
(1
)
 
 
COMPREHENSIVE INCOME
$
255

 
$
222

 
$
697

 
$
630

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


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PUBLIC SERVICE ELECTRIC AND GAS COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
Millions
(Unaudited)

 
 
 
 
 
 
 
 
September 30,
2016
 
December 31,
2015
 
 
ASSETS
 
 
CURRENT ASSETS

 
 
 
 
Cash and Cash Equivalents
$
406

 
$
198

 
 
Accounts Receivable, net of allowances of $67 in 2016 and 2015
806

 
787

 
 
Accounts Receivable—Affiliated Companies
28

 
222

 
 
Unbilled Revenues
180

 
197

 
 
Materials and Supplies
190

 
148

 
 
Prepayments
94

 
31

 
 
Regulatory Assets
253

 
164

 
 
Derivative Contracts

 
13

 
 
Other
20

 
9

 
 
Total Current Assets
1,977

 
1,769

 
 
PROPERTY, PLANT AND EQUIPMENT
25,617

 
23,732

 
 
Less: Accumulated Depreciation and Amortization
(5,701
)
 
(5,504
)
 
 
Net Property, Plant and Equipment
19,916

 
18,228

 
 
NONCURRENT ASSETS
 
 
 
 
 
Regulatory Assets
3,124

 
3,196

 
 
Long-Term Investments
305

 
330

 
 
Other Special Funds
54

 
49

 
 
Other
110

 
105

 
 
Total Noncurrent Assets
3,593

 
3,680

 
 
TOTAL ASSETS
$
25,486

 
$
23,677

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


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PUBLIC SERVICE ELECTRIC AND GAS COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
Millions
(Unaudited)

 
 
 
 
 
 
 
 
September 30,
2016
 
December 31,
2015
 
 
LIABILITIES AND CAPITALIZATION
 
 
CURRENT LIABILITIES
 
 
 
 
 
Long-Term Debt Due Within One Year
$

 
$
171

 
 
Commercial Paper and Loans

 
153

 
 
Accounts Payable
702

 
724

 
 
Accounts Payable—Affiliated Companies
214

 
292

 
 
Accrued Interest
83

 
70

 
 
Clean Energy Program
185

 
142

 
 
Derivative Contracts
4

 

 
 
Obligation to Return Cash Collateral
132

 
128

 
 
Regulatory Liabilities
96

 
123

 
 
Regulatory Liabilities of VIEs
9

 
42

 
 
Other
276

 
297

 
 
Total Current Liabilities
1,701

 
2,142

 
 
NONCURRENT LIABILITIES
 
 
 
 
 
Deferred Income Taxes and ITC
5,703

 
5,181

 
 
OPEB Costs
908

 
937

 
 
Accrued Pension Costs
147

 
202

 
 
Regulatory Liabilities
151

 
175

 
 
Environmental Costs
364

 
365

 
 
Asset Retirement Obligations
220

 
218

 
 
Derivative Contracts

 
11

 
 
Long-Term Accrued Taxes
92

 
109

 
 
Other
114

 
114

 
 
Total Noncurrent Liabilities
7,699

 
7,312

 
 
COMMITMENTS AND CONTINGENT LIABILITIES (See Note 9)


 


 
 
CAPITALIZATION
 
 
 
 
 
LONG-TERM DEBT
7,816

 
6,650

 
 
STOCKHOLDER’S EQUITY
 
 
 
 
 
Common Stock; 150 shares authorized; issued and outstanding, 2016 and 2015—132 shares
892

 
892

 
 
Contributed Capital
695

 
695

 
 
Basis Adjustment
986

 
986

 
 
Retained Earnings
5,695

 
4,999

 
 
Accumulated Other Comprehensive Income
2

 
1

 
 
Total Stockholder’s Equity
8,270

 
7,573

 
 
Total Capitalization
16,086

 
14,223

 
 
TOTAL LIABILITIES AND CAPITALIZATION
$
25,486

 
$
23,677

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


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Table of Contents


PUBLIC SERVICE ELECTRIC AND GAS COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Millions
(Unaudited)
 
 
 
 
 
 
 
 
Nine Months Ended
 
 
 
September 30,
 
 
 
2016
 
2015
 
 
CASH FLOWS FROM OPERATING ACTIVITIES
 
 
 
 
 
  Net Income
$
696

 
$
631

 
 
Adjustments to Reconcile Net Income to Net Cash Flows from Operating Activities:
 
 
 
 
 
Depreciation and Amortization
412

 
712

 
 
Provision for Deferred Income Taxes and ITC
482

 
96

 
 
Non-Cash Employee Benefit Plan Costs
55

 
71

 
 
Cost of Removal
(109
)
 
(82
)
 
 
Change in Accrued Storm Costs
(6
)
 
15

 
 
Net Change in Other Regulatory Assets and Liabilities
(66
)
 
26

 
 
Net Change in Certain Current Assets and Liabilities:

 
 
 
 
Accounts Receivable and Unbilled Revenues
2

 
30

 
 
Materials and Supplies
(42
)
 
(13
)
 
 
Prepayments
(63
)
 
(67
)
 
 
Accounts Payable
(30
)
 
34

 
 
Accounts Receivable/Payable—Affiliated Companies, net
154

 
190

 
 
Other Current Assets and Liabilities
(6
)
 
(18
)
 
 
Employee Benefit Plan Funding and Related Payments
(64
)
 
(72
)
 
 
Other
(14
)
 
(35
)
 
 
Net Cash Provided By (Used In) Operating Activities
1,401

 
1,518

 
 
CASH FLOWS FROM INVESTING ACTIVITIES
 
 
 
 
 
Additions to Property, Plant and Equipment
(2,035
)
 
(1,946
)
 
 
Proceeds from Sales of Available-for-Sale Securities
16

 
16

 
 
Investments in Available-for-Sale Securities
(17
)
 
(18
)
 
 
Other
6

 
13

 
 
Net Cash Provided By (Used In) Investing Activities
(2,030
)
 
(1,935
)
 
 
CASH FLOWS FROM FINANCING ACTIVITIES
 
 
 
 
 
Net Change in Short-Term Debt
(153
)
 
20

 
 
Issuance of Long-Term Debt
1,275

 
600

 
 
Redemption of Long-Term Debt
(271
)
 
(300
)
 
 
Redemption of Securitization Debt

 
(191
)
 
 
Other
(14
)
 
(8
)
 
 
Net Cash Provided By (Used In) Financing Activities
837

 
121

 
 
Net Increase (Decrease) In Cash and Cash Equivalents
208

 
(296
)
 
 
Cash and Cash Equivalents at Beginning of Period
198

 
310

 
 
Cash and Cash Equivalents at End of Period
$
406

 
$
14

 
 
Supplemental Disclosure of Cash Flow Information:
 
 
 
 
 
Income Taxes Paid (Received)
$
(279
)
 
$
(29
)
 
 
Interest Paid, Net of Amounts Capitalized
$
194

 
$
186

 
 
Accrued Property, Plant and Equipment Expenditures
$
404

 
$
251

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

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Table of Contents



PSEG POWER LLC
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Millions
(Unaudited)
 
 
 
 
 
 
 
 
 
 
 
 

Three Months Ended
 
Nine Months Ended
 
 
 
September 30,
 
September 30,
 
 
 
2016
 
2015
 
2016
 
2015
 
 
OPERATING REVENUES
$
1,075

 
$
1,096

 
$
3,102

 
$
3,846

 
 
OPERATING EXPENSES
 
 
 
 
 
 
 
 
 
Energy Costs
462

 
367

 
1,481

 
1,669

 
 
Operation and Maintenance
289

 
263

 
807

 
748

 
 
Depreciation and Amortization
86

 
75

 
245

 
226

 
 
Total Operating Expenses
837

 
705

 
2,533

 
2,643

 
 
OPERATING INCOME
238

 
391

 
569

 
1,203

 
 
Income from Equity Method Investments
3

 
3

 
9

 
11

 
 
Other Income
23

 
25

 
74

 
109

 
 
Other Deductions
(6
)
 
(14
)
 
(33
)
 
(32
)
 
 
Other-Than-Temporary Impairments
(5
)
 
(30
)
 
(25
)
 
(45
)
 
 
Interest Expense
(24
)
 
(30
)
 
(66
)
 
(94
)
 
 
INCOME BEFORE INCOME TAXES
229

 
345

 
528

 
1,152

 
 
Income Tax Benefit (Expense)
(90
)
 
(139
)
 
(208
)
 
(445
)
 
 
NET INCOME
$
139

 
$
206

 
$
320

 
$
707

 
 
 
 
 
 
 


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


11


Table of Contents


PSEG POWER LLC
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Millions
(Unaudited)

 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Nine Months Ended
 
 
 
September 30,
 
September 30,
 
 
 
2016
 
2015
 
2016
 
2015
 
 
NET INCOME
$
139

 
$
206

 
$
320

 
$
707

 
 
Other Comprehensive Income (Loss), net of tax
 
 
 
 
 
 
 
 
 
Unrealized Gains (Losses) on Available-for-Sale Securities, net of tax (expense) benefit of $(23), $32, $(48) and $33 for the three and nine months ended 2016 and 2015, respectively
22

 
(29
)
 
47

 
(29
)
 
 
Unrealized Gains (Losses) on Cash Flow Hedges, net of tax (expense) benefit of $0, $(1), $0 and $6 for the three and nine months ended 2016 and 2015, respectively

 

 

 
(9
)
 
 
Pension/OPEB adjustment, net of tax (expense) benefit of $(5), $(5), $(15) and $(15) for the three and nine months ended 2016 and 2015, respectively
7

 
7

 
21

 
21

 
 
Other Comprehensive Income (Loss), net of tax
29

 
(22
)
 
68

 
(17
)
 
 
COMPREHENSIVE INCOME
$
168

 
$
184

 
$
388

 
$
690

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


12


Table of Contents


PSEG POWER LLC
CONDENSED CONSOLIDATED BALANCE SHEETS
Millions
(Unaudited)
 
 
 
 
 
 
 
 
 
September 30,
2016
 
December 31,
2015
 
 
ASSETS
 
 
CURRENT ASSETS
 
 
 
 
 
Cash and Cash Equivalents
$
12

 
$
12

 
 
Accounts Receivable
174

 
217

 
 
Accounts Receivable—Affiliated Companies
126

 
276

 
 
Short-Term Loan to Affiliate
514

 
363

 
 
Fuel
366

 
463

 
 
Materials and Supplies, net
399

 
363

 
 
Derivative Contracts
149

 
223

 
 
Prepayments
16

 
25

 
 
Other
3

 
7

 
 
Total Current Assets
1,759

 
1,949

 
 
PROPERTY, PLANT AND EQUIPMENT
12,271

 
11,354

 
 
Less: Accumulated Depreciation and Amortization
(3,564
)
 
(3,227
)
 
 
Net Property, Plant and Equipment
8,707

 
8,127

 
 
NONCURRENT ASSETS
 
 
 
 
 
NDT Fund
1,857

 
1,754

 
 
Long-Term Investments
106

 
119

 
 
Goodwill
16

 
16

 
 
Other Intangibles
154

 
102

 
 
Other Special Funds
60

 
55

 
 
Derivative Contracts
86

 
77

 
 
Other
65

 
51

 
 
Total Noncurrent Assets
2,344

 
2,174

 
 
TOTAL ASSETS
$
12,810

 
$
12,250

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


13


Table of Contents


PSEG POWER LLC
CONDENSED CONSOLIDATED BALANCE SHEETS
Millions
(Unaudited)

 
 
 
 
 
 
 
 
September 30,
2016
 
December 31,
2015
 
 
LIABILITIES AND MEMBER’S EQUITY
 
 
CURRENT LIABILITIES
 
 
 
 
 
Long-Term Debt Due Within One Year
$

 
$
553

 
 
Accounts Payable
477

 
432

 
 
Accounts Payable—Affiliated Companies
156

 
33

 
 
Derivative Contracts
36

 
76

 
 
Accrued Interest
43

 
25

 
 
Other
82

 
107

 
 
Total Current Liabilities
794

 
1,226

 
 
NONCURRENT LIABILITIES
 
 
 
 
 
Deferred Income Taxes and ITC
2,375

 
2,347

 
 
Asset Retirement Obligations
485

 
457

 
 
OPEB Costs
238

 
230

 
 
Derivative Contracts
13

 
16

 
 
Accrued Pension Costs
143

 
166

 
 
Long-Term Accrued Taxes
79

 
35

 
 
Other
162

 
87

 
 
Total Noncurrent Liabilities
3,495

 
3,338

 
 
COMMITMENTS AND CONTINGENT LIABILITIES (See Note 9)


 


 
 
LONG-TERM DEBT
2,381

 
1,684

 
 
MEMBER’S EQUITY

 
 
 
 
Contributed Capital
2,214

 
2,214

 
 
Basis Adjustment
(986
)
 
(986
)
 
 
Retained Earnings
5,084

 
5,014

 
 
Accumulated Other Comprehensive Loss
(172
)
 
(240
)
 
 
Total Member’s Equity
6,140

 
6,002

 
 
TOTAL LIABILITIES AND MEMBER’S EQUITY
$
12,810

 
$
12,250

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


14


Table of Contents


PSEG POWER LLC
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Millions
(Unaudited)

 
 
 
 
 
 
 
 
Nine Months Ended
 
 
 
September 30,
 
 
 
2016
 
2015
 
 
CASH FLOWS FROM OPERATING ACTIVITIES
 
 
 
 
 
Net Income
$
320

 
$
707

 
 
Adjustments to Reconcile Net Income to Net Cash Flows from Operating Activities:
 
 
 
 
 
Depreciation and Amortization
245

 
226

 
 
Amortization of Nuclear Fuel
154

 
162

 
 
Provision for Deferred Income Taxes and ITC
(34
)
 
109

 
 
Net Unrealized (Gains) Losses on Energy Contracts and Other Derivatives
96

 
(87
)
 
 
Impairment Costs
102

 

 
 
Non-Cash Employee Benefit Plan Costs
28

 
36

 
 
Net Realized (Gains) Losses and (Income) Expense from NDT Fund
(12
)
 
(2
)
 
 
Net Change in Certain Current Assets and Liabilities:
 
 
 
 
 
Fuel, Materials and Supplies
(27
)
 
113

 
 
Margin Deposit
(4
)
 
142


 
Accounts Receivable
(11
)
 
54

 
 
Accounts Payable
(29
)
 
(99
)
 
 
Accounts Receivable/Payable—Affiliated Companies, net
235

 
115

 
 
Other Current Assets and Liabilities
20

 
(26
)
 
 
Employee Benefit Plan Funding and Related Payments
(10
)
 
(9
)
 
 
Other
187

 
117

 
 
Net Cash Provided By (Used In) Operating Activities
1,260

 
1,558

 
 
CASH FLOWS FROM INVESTING ACTIVITIES
 
 
 
 
 
Additions to Property, Plant and Equipment
(923
)
 
(797
)
 
 
Proceeds from Sales of Available-for-Sale Securities
490

 
1,057

 
 
Investments in Available-for-Sale Securities
(512
)
 
(1,083
)
 
 
Short-Term Loan—Affiliated Company, net
(151
)
 
(281
)
 
 
Other
(55
)
 
(46
)
 
 
Net Cash Provided By (Used In) Investing Activities
(1,151
)
 
(1,150
)
 
 
CASH FLOWS FROM FINANCING ACTIVITIES
 
 
 
 
 
Issuance of Long-Term Debt
700

 

 
 
Cash Dividend Paid
(250
)
 
(400
)
 
 
Redemption of Long-Term Debt
(553
)
 

 
 
Other
(6
)
 
(2
)
 
 
Net Cash Provided By (Used In) Financing Activities
(109
)
 
(402
)
 
 
Net Increase (Decrease) in Cash and Cash Equivalents

 
6

 
 
Cash and Cash Equivalents at Beginning of Period
12

 
9

 
 
Cash and Cash Equivalents at End of Period
$
12

 
$
15

 
 
Supplemental Disclosure of Cash Flow Information:
 
 
 
 
 
Income Taxes Paid (Received)
$
(7
)
 
$
284

 
 
Interest Paid, Net of Amounts Capitalized
$
51

 
$
76

 
 
Accrued Property, Plant and Equipment Expenditures
$
175

 
$
70

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


15

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Table of Contents


Note 1. Organization and Basis of Presentation
Organization
Public Service Enterprise Group (PSEG) is a holding company with a diversified business mix within the energy industry. Its operations are primarily in the Northeastern and Mid-Atlantic United States and in other select markets. PSEG’s principal direct wholly owned subsidiaries are:
Public Service Electric and Gas Company (PSE&G)—which is a public utility engaged principally in the transmission of electricity and distribution of electricity and natural gas in certain areas of New Jersey. PSE&G is subject to regulation by the New Jersey Board of Public Utilities (BPU) and the Federal Energy Regulatory Commission (FERC). PSE&G also invests in solar generation projects and has implemented energy efficiency and demand response programs in New Jersey, which are regulated by the BPU.
PSEG Power LLC (Power)—which is a multi-regional, wholesale energy supply company that integrates its generating asset operations and gas supply commitments with its wholesale energy, fuel supply and energy transacting functions primarily in the Northeast and Mid-Atlantic United States through its principal direct wholly owned subsidiaries. Power’s subsidiaries are subject to regulation by FERC, the Nuclear Regulatory Commission (NRC), the Environmental Protection Agency (EPA) and the states in which they operate.
PSEG’s other direct wholly owned subsidiaries include PSEG Energy Holdings L.L.C. (Energy Holdings), which primarily has investments in leveraged leases; 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.
Basis of Presentation
The 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 principles 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, 2015.
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 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, 2015.

Note 2. Recent Accounting Standards
New Standards Issued But Not Yet Adopted
Revenue from Contracts with Customers
This accounting standard clarifies the principles for recognizing revenue and removes inconsistencies in revenue recognition requirements; improves comparability of revenue recognition practices across entities, industries, jurisdictions and capital markets; and provides improved disclosures.
The guidance provides a five-step model to be used for recognizing revenue for the transfer of promised goods and services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services.
The standard was originally to be effective for annual and interim reporting periods beginning after December 15, 2016; however, the Financial Accounting Standards Board issued new guidance deferring the effective date by one year to periods beginning after December 31, 2017. Early application will be permitted as of the original effective date. PSEG is currently analyzing the impact of this standard on its financial statements and disclosures as well as the transition method to use to adopt the guidance. PSEG is considering the impacts of outstanding industry related issues currently being addressed by the AICPA’s Revenue Recognition Working Group and the FASB’s Transition Resource Group, including its ability to recognize revenue for

16

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Table of Contents

certain contracts where there is uncertainty regarding collection, bundled price sales contracts and accounting for contributions in aid of construction.
Recognition and Measurement of Financial Assets and Financial Liabilities
This accounting standard will change how entities measure equity investments that are not consolidated or accounted for under the equity method. Under the new guidance, equity investments (other than those accounted for using the equity method) will be measured at fair value through Net Income instead of Other Comprehensive Income (Loss). Entities that have elected the fair value option for financial liabilities will present changes in fair value due to a change in their own credit risk through Other Comprehensive Income (Loss). For equity investments which do not have readily determinable fair values, the impairment assessment will be simplified by requiring a qualitative assessment to identify impairments. The new standard also changes certain disclosures.
The standard is effective for annual and interim reporting periods beginning after December 15, 2017. PSEG is currently analyzing the impact of this standard on our financial statements; however, PSEG expects increased volatility in Net Income due to changes in fair value of our equity securities within the Nuclear Decommissioning Trust (NDT) and Rabbi Trust Funds.
Leases
This accounting standard replaces existing lease accounting guidance and requires lessees to recognize all leases with a term greater than 12 months on the balance sheet using a right-of-use asset approach. At lease commencement, a lessee will recognize a lease asset and corresponding lease obligation. A lessee will classify its leases as either finance leases or operating leases based on whether control of the underlying assets has transferred to the lessee. A lessor will classify its leases as operating or direct financing leases, or as sales-type leases based on whether control of the underlying assets has transferred to the lessee. Both the lessee and lessor models require additional disclosure of key information. The standard requires lessees and lessors to apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. However, existing guidance related to leveraged leases will not change.
The standard is effective for annual and interim periods beginning after December 15, 2018 with retrospective application to previously issued financial statements for 2018 and 2017. Early application is permitted. PSEG is currently analyzing the impact of this standard on its financial statements.
Stock Compensation-Improvements to Employee Share-Based Payment Accounting
This accounting standard was issued to simplify aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows.
Under the new guidance, all excess tax benefits and tax deficiencies will be recognized in income tax expense rather than recognized in additional paid in capital. In the statement of cash flows, excess tax benefits and deficiencies will be classified with other income tax cash flows as an operating activity rather than a financing activity as currently classified. In addition, the minimum statutory tax withholding requirements were simplified in order to facilitate equity classification of the award.
The standard is effective for annual and interim reporting periods beginning after December 15, 2017. Early adoption is permitted for an entity in any interim or annual period. An entity that elects early adoption must adopt all of the amend