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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 June 30, 2017
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, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Public Service Enterprise Group Incorporated
Large accelerated filer x
Accelerated filer o
Non-accelerated filer o
Smaller reporting company o
Emerging growth company  o
 
 
 
 
 
 
Public Service Electric and Gas Company
Large accelerated filer o
Accelerated filer o
Non-accelerated filer x
Smaller reporting company o
Emerging growth company  o
 
 
 
 
 
 
PSEG Power LLC
Large accelerated filer o
Accelerated filer o
Non-accelerated filer x
Smaller reporting company o
Emerging growth company  o
If any of the registrants is an emerging growth company, indicate by check mark if such registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨ 
Indicate by check mark whether any of the registrants is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No ý
As of July 18, 2017, Public Service Enterprise Group Incorporated had outstanding 505,889,953 shares of its sole class of Common Stock, without par value.
As of July 18, 2017, 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 Entity (VIE)
 
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 2017 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. These factors include, but are not limited to:
fluctuations in wholesale power and natural gas markets, including the potential impacts on the economic viability of our generation units;
our ability to obtain adequate fuel supply;
any inability to manage our energy obligations with available supply;
increases in competition in wholesale energy and capacity markets;
changes in technology related to energy generation, distribution and consumption and customer usage patterns;
economic downturns;
third-party credit risk relating to our sale of generation output and purchase of fuel;
adverse performance of our decommissioning and defined benefit plan trust fund investments and changes in funding requirements;
changes in state and federal legislation and regulations;
the impact of pending rate case proceedings;
regulatory, financial, environmental, health and safety risks associated with our ownership and operation of nuclear facilities;
adverse changes in energy industry laws, policies and regulations, including market structures and transmission planning;
changes in federal and state environmental regulations and enforcement;
delays in receipt of, or an inability to receive, necessary licenses and permits;
adverse outcomes of any legal, regulatory or other proceeding, settlement, investigation or claim applicable to us and/or the energy industry;
changes in tax laws and regulations;
the impact of our holding company structure on our ability to meet our corporate funding needs, service debt and pay dividends;
lack of growth or slower growth in the number of customers or changes in customer demand;
any inability of Power to meet its commitments under forward sale obligations;
reliance on transmission facilities that we do not own or control and the impact on our ability to maintain adequate transmission capacity;
any inability to successfully develop or construct generation, transmission and distribution projects;
any equipment failures, accidents, severe weather events or other incidents that impact our ability to provide safe and reliable service to our customers;
our inability to exercise control over the operations of generation facilities in which we do not maintain a controlling interest;

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any inability to maintain sufficient liquidity;
any inability to realize anticipated tax benefits or retain tax credits;
challenges associated with recruitment and/or retention of key executives and a qualified workforce;
the impact of our covenants in our debt instruments on our operations; and
the impact of acts of terrorism, cybersecurity attacks or intrusions.

All of the forward-looking statements made in this report are qualified by these cautionary statements and we cannot assure you that the results or developments anticipated by management will be realized or even if realized, will have the expected consequences to, or effects on, us or our business, prospects, financial condition, results of operations or cash flows. Readers are cautioned not to place undue reliance on these forward-looking statements in making any investment decision. Forward-looking statements made in this report apply only as of the date of this report. While we may elect to update forward-looking statements from time to time, we specifically disclaim any obligation to do so, even in light of new information or future events, unless otherwise required by applicable securities laws.
The forward-looking statements contained in this report are intended to qualify for the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.

FILING FORMAT
This combined Quarterly Report on Form 10-Q is separately filed by Public Service Enterprise Group Incorporated (PSEG), Public Service Electric and Gas Company (PSE&G) and PSEG Power LLC (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
 
Six Months Ended
 
 
 
June 30,
 
June 30,
 
 
 
2017
 
2016
 
2017
 
2016
 
 
OPERATING REVENUES
$
2,133

 
$
1,905

 
$
4,725

 
$
4,521

 
 
OPERATING EXPENSES
 
 
 
 
 
 
 
 
 
Energy Costs
588

 
624

 
1,462

 
1,460

 
 
Operation and Maintenance
708

 
710

 
1,420

 
1,439

 
 
Depreciation and Amortization
641

 
224

 
1,469

 
448

 
 
Total Operating Expenses
1,937

 
1,558

 
4,351

 
3,347

 
 
OPERATING INCOME
196

 
347

 
374

 
1,174

 
 
Income from Equity Method Investments
5

 
4

 
8

 
6

 
 
Other Income
70

 
44

 
142

 
92

 
 
Other Deductions
(9
)
 
(10
)
 
(20
)
 
(31
)
 
 
Other-Than-Temporary Impairments
(3
)
 
(10
)
 
(4
)
 
(20
)
 
 
Interest Expense
(91
)
 
(97
)
 
(189
)
 
(189
)
 
 
INCOME BEFORE INCOME TAXES
168

 
278

 
311

 
1,032

 
 
Income Tax Expense
(59
)
 
(91
)
 
(88
)
 
(374
)
 
 
NET INCOME
$
109

 
$
187

 
$
223

 
$
658

 
 
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
 
 
 
 
 
 
 
 
 
BASIC
505

 
505

 
505

 
505

 
 
DILUTED
507

 
508

 
507

 
508

 
 
NET INCOME PER SHARE:
 
 
 
 
 
 
 
 
 
BASIC
$
0.22

 
$
0.37

 
$
0.44

 
$
1.30

 
 
DILUTED
$
0.22

 
$
0.37

 
$
0.44

 
$
1.30

 
 
DIVIDENDS PAID PER SHARE OF COMMON STOCK
$
0.43

 
$
0.41

 
$
0.86

 
$
0.82

 
 
 
 
 
 
 
 
 
 
 
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
 
Six Months Ended
 
 
 
June 30,
 
June 30,
 
 
 
2017
 
2016
 
2017
 
2016
 
 
NET INCOME
$
109

 
$
187

 
$
223

 
$
658

 
 
Other Comprehensive Income (Loss), net of tax
 
 
 
 
 
 
 
 
 
Unrealized Gains (Losses) on Available-for-Sale Securities, net of tax (expense) benefit of $(9), $(10), $(25) and $(26) for the three and six months ended 2017 and 2016, respectively
10

 
10

 
25

 
26

 
 
Unrealized Gains (Losses) on Cash Flow Hedges, net of tax (expense) benefit of $0, $0, $0 and $(1) for the three and six months ended 2017 and 2016, respectively

 
(1
)
 

 
1

 
 
Pension/Other Postretirement Benefit Costs (OPEB) adjustment, net of tax (expense) benefit of $(4), $(6), $(8) and $(12) for the three and six months ended 2017 and 2016, respectively
6

 
8

 
12

 
16

 
 
Other Comprehensive Income (Loss), net of tax
16

 
17

 
37

 
43

 
 
COMPREHENSIVE INCOME
$
125

 
$
204

 
$
260

 
$
701

 
 
 
 
 
 
 
 
 
 
 
See Notes to Condensed Consolidated Financial Statements.


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PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
Millions
(Unaudited)
 
 
 
 
 
 
 
 
 
June 30,
2017
 
December 31,
2016
 
 
ASSETS
 
 
CURRENT ASSETS
 
 
 
 
 
Cash and Cash Equivalents
$
430

 
$
423

 
 
Accounts Receivable, net of allowances of $61 in 2017 and $68 in 2016
1,021

 
1,161

 
 
Tax Receivable
9

 
78

 
 
Unbilled Revenues
210

 
260

 
 
Fuel
270

 
326

 
 
Materials and Supplies, net
577

 
561

 
 
Prepayments
273

 
76

 
 
Derivative Contracts
113

 
163

 
 
Regulatory Assets
276

 
199

 
 
Other
9

 
7

 
 
Total Current Assets
3,188

 
3,254

 
 
PROPERTY, PLANT AND EQUIPMENT
38,794

 
39,337

 
 
     Less: Accumulated Depreciation and Amortization
(9,157
)
 
(10,051
)
 
 
Net Property, Plant and Equipment
29,637

 
29,286

 
 
NONCURRENT ASSETS
 
 
 
 
 
Regulatory Assets
3,349

 
3,319

 
 
Long-Term Investments
961

 
1,050

 
 
Nuclear Decommissioning Trust (NDT) Fund
1,968

 
1,859

 
 
Long-Term Tax Receivable
111

 
104

 
 
Long-Term Receivable of Variable Interest Entity (VIE)
600

 
589

 
 
Other Special Funds
224

 
217

 
 
Goodwill
16

 
16

 
 
Other Intangibles
120

 
98

 
 
Derivative Contracts
90

 
24

 
 
Other
260

 
254

 
 
Total Noncurrent Assets
7,699

 
7,530

 
 
TOTAL ASSETS
$
40,524

 
$
40,070

 
 
 
 
 
 
 
See Notes to Condensed Consolidated Financial Statements.


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

 
 
 
 
 
 
 
 
 
June 30,
2017
 
December 31,
2016
 
 
LIABILITIES AND CAPITALIZATION
 
 
CURRENT LIABILITIES
 
 
 
 
 
Long-Term Debt Due Within One Year
$
900

 
$
500

 
 
Commercial Paper and Loans

 
388

 
 
Accounts Payable
1,293

 
1,459

 
 
Derivative Contracts
8

 
13

 
 
Accrued Interest
99

 
97

 
 
Accrued Taxes
46

 
31

 
 
Clean Energy Program
200

 
142

 
 
Obligation to Return Cash Collateral
134

 
132

 
 
Regulatory Liabilities
51

 
88

 
 
Other
433

 
426

 
 
Total Current Liabilities
3,164

 
3,276

 
 
NONCURRENT LIABILITIES
 
 
 
 
 
Deferred Income Taxes and Investment Tax Credits (ITC)
8,755

 
8,658

 
 
Regulatory Liabilities
99

 
118

 
 
Clean Energy Program
27

 

 
 
Asset Retirement Obligations
744

 
726

 
 
OPEB Costs
1,304

 
1,324

 
 
OPEB Costs of Servco
467

 
452

 
 
Accrued Pension Costs
525

 
568

 
 
Accrued Pension Costs of Servco
124

 
128

 
 
Environmental Costs
378

 
401

 
 
Derivative Contracts
1

 
3

 
 
Long-Term Accrued Taxes
192

 
180

 
 
Other
205

 
211

 
 
Total Noncurrent Liabilities
12,821

 
12,769

 
 
COMMITMENTS AND CONTINGENT LIABILITIES (See Note 9)


 


 
 
CAPITALIZATION

 
 
 
 
LONG-TERM DEBT
11,621

 
10,895

 
 
STOCKHOLDERS’ EQUITY

 
 
 
 
Common Stock, no par, authorized 1,000 shares; issued, 2017 and 2016—534 shares
4,929

 
4,936

 
 
Treasury Stock, at cost, 2017 and 2016—29 shares
(747
)
 
(717
)
 
 
Retained Earnings
8,962

 
9,174

 
 
Accumulated Other Comprehensive Loss
(226
)
 
(263
)
 
 
Total Stockholders’ Equity
12,918

 
13,130

 
 
Total Capitalization
24,539

 
24,025

 
 
TOTAL LIABILITIES AND CAPITALIZATION
$
40,524

 
$
40,070

 
 
 


 
 
 
See Notes to Condensed Consolidated Financial Statements.

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PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Millions
(Unaudited)
 
 
 
 
 
 
 
 
Six Months Ended
 
 
 
June 30,
 
 
 
2017
 
2016
 
 
CASH FLOWS FROM OPERATING ACTIVITIES
 
 
 
 
 
Net Income
$
223

 
$
658

 
 
Adjustments to Reconcile Net Income to Net Cash Flows from Operating Activities:
 
 
 
 
 
Depreciation and Amortization
1,469

 
448

 
 
Amortization of Nuclear Fuel
101

 
105

 
 
Renewable Energy Credit (REC) Compliance Accrual
51

 
50

 
 
Provision for Deferred Income Taxes (Other than Leases) and ITC
91

 
334

 
 
Non-Cash Employee Benefit Plan Costs
45

 
63

 
 
Leveraged Lease (Income) Loss, Adjusted for Rents Received and Deferred Taxes
(30
)
 
(30
)
 
 
Net (Gain) Loss on Lease Investments
45

 

 
 
Net Realized and Unrealized (Gains) Losses on Energy Contracts and Other Derivatives
(42
)
 
153

 
 
Net Change in Regulatory Assets and Liabilities
(124
)
 
(125
)
 
 
Cost of Removal
(47
)
 
(74
)
 
 
Net Realized (Gains) Losses and (Income) Expense from NDT Fund
(58
)
 
(2
)
 
 
Net Change in Certain Current Assets and Liabilities:
 
 
 
 
 
          Tax Receivable
69

 
301

 
 
          Accrued Taxes
15

 
94

 
 
          Margin Deposit
59

 
(46
)
 
 
          Other Current Assets and Liabilities
(56
)
 
(120
)
 
 
Employee Benefit Plan Funding and Related Payments
(49
)
 
(78
)
 
 
Other
(6
)
 
(9
)
 
 
Net Cash Provided By (Used In) Operating Activities
1,756

 
1,722

 
 
CASH FLOWS FROM INVESTING ACTIVITIES


 
 
 
 
Additions to Property, Plant and Equipment
(1,981
)
 
(1,971
)
 
 
Purchase of Emissions Allowances and RECs
(29
)
 
(36
)
 
 
Proceeds from Sales of Available-for-Sale Securities
711

 
392

 
 
Investments in Available-for-Sale Securities
(726
)
 
(407
)
 
 
Other
36

 
18

 
 
Net Cash Provided By (Used In) Investing Activities
(1,989
)
 
(2,004
)
 
 
CASH FLOWS FROM FINANCING ACTIVITIES
 
 
 
 
 
Net Change in Commercial Paper and Loans
(388
)
 
(364
)
 
 
Issuance of Long-Term Debt
1,125

 
1,550

 
 
Redemption of Long-Term Debt

 
(171
)
 
 
Cash Dividends Paid on Common Stock
(435
)
 
(415
)
 
 
Other
(62
)
 
(64
)
 
 
Net Cash Provided By (Used In) Financing Activities
240

 
536

 
 
Net Increase (Decrease) in Cash and Cash Equivalents
7

 
254

 
 
Cash and Cash Equivalents at Beginning of Period
423

 
394

 
 
Cash and Cash Equivalents at End of Period
$
430

 
$
648

 
 
Supplemental Disclosure of Cash Flow Information:
 
 
 
 
 
Income Taxes Paid (Received)
$
(30
)
 
$
(276
)
 
 
Interest Paid, Net of Amounts Capitalized
$
189

 
$
176

 
 
Accrued Property, Plant and Equipment Expenditures
$
513

 
$
513

 
 
 
 
 
 
 

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
 
Six Months Ended
 
 
 
June 30,
 
June 30,
 
 
 
2017
 
2016
 
2017
 
2016
 
 
OPERATING REVENUES
$
1,368

 
$
1,350

 
$
3,180

 
$
3,062

 
 
OPERATING EXPENSES
 
 
 
 
 
 
 
 
 
Energy Costs
472

 
529

 
1,225

 
1,258

 
 
Operation and Maintenance
351

 
352

 
718

 
734

 
 
Depreciation and Amortization
166

 
136

 
337

 
275

 
 
Total Operating Expenses
989

 
1,017

 
2,280

 
2,267

 
 
OPERATING INCOME
379

 
333

 
900

 
795

 
 
Other Income
22

 
19

 
47

 
39

 
 
Other Deductions
(1
)
 
(1
)
 
(2
)
 
(2
)
 
 
Interest Expense
(69
)
 
(74
)
 
(144
)
 
(142
)
 
 
INCOME BEFORE INCOME TAXES
331

 
277

 
801

 
690

 
 
Income Tax Expense
(123
)
 
(98
)
 
(294
)
 
(249
)
 
 
NET INCOME
$
208

 
$
179

 
$
507

 
$
441

 
 
 
 
 
 
 
 
 
 
 
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
 
Six Months Ended
 
 
 
June 30,
 
June 30,
 
 
 
2017
 
2016
 
2017
 
2016
 
 
NET INCOME
$
208

 
$
179

 
$
507

 
$
441

 
 
Unrealized Gains (Losses) on Available-for-Sale Securities, net of tax (expense) benefit of $0, $0, $1 and $0 for the three and six months ended 2017 and 2016, respectively

 
1

 
(1
)
 
1

 
 
COMPREHENSIVE INCOME
$
208

 
$
180

 
$
506

 
$
442

 
 
 
 
 
 
 
 
 
 
 
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)

 
 
 
 
 
 
 
 
June 30,
2017
 
December 31,
2016
 
 
ASSETS
 
 
CURRENT ASSETS

 
 
 
 
Cash and Cash Equivalents
$
192

 
$
390

 
 
Accounts Receivable, net of allowances of $61 in 2017 and $68 in 2016
755

 
810

 
 
Accounts Receivable—Affiliated Companies
20

 
76

 
 
Unbilled Revenues
210

 
260

 
 
Materials and Supplies
198

 
180

 
 
Prepayments
193

 
9

 
 
Regulatory Assets
276

 
199

 
 
Other
6

 
6

 
 
Total Current Assets
1,850

 
1,930

 
 
PROPERTY, PLANT AND EQUIPMENT
27,562

 
26,347

 
 
Less: Accumulated Depreciation and Amortization
(5,930
)
 
(5,760
)
 
 
Net Property, Plant and Equipment
21,632

 
20,587

 
 
NONCURRENT ASSETS
 
 
 
 
 
Regulatory Assets
3,349

 
3,319

 
 
Long-Term Investments
293

 
299

 
 
Other Special Funds
45

 
43

 
 
Other
104

 
110

 
 
Total Noncurrent Assets
3,791

 
3,771

 
 
TOTAL ASSETS
$
27,273

 
$
26,288

 
 
 
 
 
 
 
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)

 
 
 
 
 
 
 
 
June 30,
2017
 
December 31,
2016
 
 
LIABILITIES AND CAPITALIZATION
 
 
CURRENT LIABILITIES
 
 
 
 
 
Long-Term Debt Due Within One Year
$
400

 
$

 
 
Accounts Payable
587

 
718

 
 
Accounts Payable—Affiliated Companies
146

 
260

 
 
Accrued Interest
78

 
76

 
 
Clean Energy Program
200

 
142

 
 
Derivative Contracts

 
5

 
 
Obligation to Return Cash Collateral
134

 
132

 
 
Regulatory Liabilities
51

 
88

 
 
Other
301

 
296

 
 
Total Current Liabilities
1,897

 
1,717

 
 
NONCURRENT LIABILITIES
 
 
 
 
 
Deferred Income Taxes and ITC
6,232

 
5,873

 
 
OPEB Costs
983

 
1,009

 
 
Accrued Pension Costs
223

 
250

 
 
Regulatory Liabilities
99

 
118

 
 
Clean Energy Program
27

 

 
 
Environmental Costs
310

 
332

 
 
Asset Retirement Obligations
215

 
213

 
 
Long-Term Accrued Taxes
115

 
130

 
 
Other
112

 
116

 
 
Total Noncurrent Liabilities
8,316

 
8,041

 
 
COMMITMENTS AND CONTINGENT LIABILITIES (See Note 9)


 


 
 
CAPITALIZATION
 
 
 
 
 
LONG-TERM DEBT
7,842

 
7,818

 
 
STOCKHOLDER’S EQUITY
 
 
 
 
 
Common Stock; 150 shares authorized; issued and outstanding, 2017 and 2016—132 shares
892

 
892

 
 
Contributed Capital
945

 
945

 
 
Basis Adjustment
986

 
986

 
 
Retained Earnings
6,395

 
5,888

 
 
Accumulated Other Comprehensive Income

 
1

 
 
Total Stockholder’s Equity
9,218

 
8,712

 
 
Total Capitalization
17,060

 
16,530

 
 
TOTAL LIABILITIES AND CAPITALIZATION
$
27,273

 
$
26,288

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


9


Table of Contents


PUBLIC SERVICE ELECTRIC AND GAS COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Millions
(Unaudited)
 
 
 
 
 
 
 
 
Six Months Ended
 
 
 
June 30,
 
 
 
2017
 
2016
 
 
CASH FLOWS FROM OPERATING ACTIVITIES
 
 
 
 
 
  Net Income
$
507

 
$
441

 
 
Adjustments to Reconcile Net Income to Net Cash Flows from Operating Activities:
 
 
 
 
 
Depreciation and Amortization
337

 
275

 
 
Provision for Deferred Income Taxes and ITC
330

 
290

 
 
Non-Cash Employee Benefit Plan Costs
25

 
36

 
 
Cost of Removal
(47
)
 
(74
)
 
 
Net Change in Other Regulatory Assets and Liabilities
(124
)
 
(125
)
 
 
Net Change in Certain Current Assets and Liabilities:

 
 
 
 
Accounts Receivable and Unbilled Revenues
108

 
50

 
 
Materials and Supplies
(15
)
 
(14
)
 
 
Prepayments
(184
)
 
(165
)
 
 
Accounts Payable
(30
)
 
(29
)
 
 
Accounts Receivable/Payable—Affiliated Companies, net
(72
)
 
181

 
 
Other Current Assets and Liabilities
16

 
17

 
 
Employee Benefit Plan Funding and Related Payments
(42
)
 
(62
)
 
 
Other
(39
)
 
(13
)
 
 
Net Cash Provided By (Used In) Operating Activities
770

 
808

 
 
CASH FLOWS FROM INVESTING ACTIVITIES
 
 
 
 
 
Additions to Property, Plant and Equipment
(1,389
)
 
(1,355
)
 
 
Proceeds from Sales of Available-for-Sale Securities
28

 
12

 
 
Investments in Available-for-Sale Securities
(29
)
 
(13
)
 
 
Solar Loan Investments
(3
)
 
2

 
 
Other
5

 

 
 
Net Cash Provided By (Used In) Investing Activities
(1,388
)
 
(1,354
)
 
 
CASH FLOWS FROM FINANCING ACTIVITIES
 
 
 
 
 
Net Change in Short-Term Debt

 
(153
)
 
 
Issuance of Long-Term Debt
425

 
850

 
 
Redemption of Long-Term Debt

 
(171
)
 
 
Other
(5
)
 
(10
)
 
 
Net Cash Provided By (Used In) Financing Activities
420

 
516

 
 
Net Increase (Decrease) In Cash and Cash Equivalents
(198
)
 
(30
)
 
 
Cash and Cash Equivalents at Beginning of Period
390

 
198

 
 
Cash and Cash Equivalents at End of Period
$
192

 
$
168

 
 
Supplemental Disclosure of Cash Flow Information:
 
 
 
 
 
Income Taxes Paid (Received)
$
(75
)
 
$
(255
)
 
 
Interest Paid, Net of Amounts Capitalized
$
144

 
$
134

 
 
Accrued Property, Plant and Equipment Expenditures
$
319

 
$
381

 
 
 
 
 
 
 
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
 
Six Months Ended
 
 
 
June 30,
 
June 30,
 
 
 
2017
 
2016
 
2017
 
2016
 
 
OPERATING REVENUES
$
929

 
$
714

 
$
2,213

 
$
2,027

 
 
OPERATING EXPENSES
 
 
 
 
 
 
 
 
 
Energy Costs
397

 
381

 
1,104

 
1,019

 
 
Operation and Maintenance
254

 
265

 
484

 
518

 
 
Depreciation and Amortization
465

 
80

 
1,115

 
159

 
 
Total Operating Expenses
1,116

 
726

 
2,703

 
1,696

 
 
OPERATING INCOME (LOSS)
(187
)
 
(12
)
 
(490
)
 
331

 
 
Income from Equity Method Investments
5

 
4

 
8

 
6

 
 
Other Income
46

 
25

 
84

 
51

 
 
Other Deductions
(7
)
 
(9
)
 
(14
)
 
(27
)
 
 
Other-Than-Temporary Impairments
(3
)
 
(10
)
 
(4
)
 
(20
)
 
 
Interest Expense
(13
)
 
(20
)
 
(29
)
 
(42
)
 
 
INCOME (LOSS) BEFORE INCOME TAXES
(159
)
 
(22
)
 
(445
)
 
299

 
 
Income Tax Benefit (Expense)
62

 
11

 
178

 
(118
)
 
 
NET INCOME (LOSS)
$
(97
)
 
$
(11
)
 
$
(267
)
 
$
181

 
 
 
 
 
 
 


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


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Table of Contents


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

 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Six Months Ended
 
 
 
June 30,
 
June 30,
 
 
 
2017
 
2016
 
2017
 
2016
 
 
NET INCOME (LOSS)
$
(97
)
 
$
(11
)
 
$
(267
)
 
$
181

 
 
Other Comprehensive Income (Loss), net of tax
 
 
 
 
 
 
 
 
 
Unrealized Gains (Losses) on Available-for-Sale Securities, net of tax (expense) benefit of $ $(9), $(9), $(27) and $(25) for the three and six months ended 2017 and 2016, respectively
10

 
9

 
29

 
25

 
 
Pension/OPEB adjustment, net of tax (expense) benefit of $(3), $(5), $(7) and $(10) for the three and six months ended 2017 and 2016, respectively
5

 
7

 
10

 
14

 
 
Other Comprehensive Income (Loss), net of tax
15

 
16

 
39

 
39

 
 
COMPREHENSIVE INCOME (LOSS)
$
(82
)
 
$
5

 
$
(228
)
 
$
220

 
 
 
 
 
 
 
 
 
 
 
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)
 
 
 
 
 
 
 
 
 
June 30,
2017
 
December 31,
2016
 
 
ASSETS
 
 
CURRENT ASSETS
 
 
 
 
 
Cash and Cash Equivalents
$
29

 
$
11

 
 
Accounts Receivable
207

 
276

 
 
Accounts Receivable—Affiliated Companies
139

 
205

 
 
Short-Term Loan to Affiliate
233

 
87

 
 
Fuel
270

 
326

 
 
Materials and Supplies, net
379

 
381

 
 
Derivative Contracts
112

 
162

 
 
Prepayments
10

 
10

 
 
Other
3

 
2

 
 
Total Current Assets
1,382

 
1,460

 
 
PROPERTY, PLANT AND EQUIPMENT
10,881

 
12,655

 
 
Less: Accumulated Depreciation and Amortization
(3,055
)
 
(4,135
)
 
 
Net Property, Plant and Equipment
7,826

 
8,520

 
 
NONCURRENT ASSETS
 
 
 
 
 
NDT Fund
1,968

 
1,859

 
 
Long-Term Investments
91

 
102

 
 
Goodwill
16

 
16

 
 
Other Intangibles
120

 
98

 
 
Other Special Funds
55

 
53

 
 
Derivative Contracts
90

 
24

 
 
Other
71

 
61

 
 
Total Noncurrent Assets
2,411

 
2,213

 
 
TOTAL ASSETS
$
11,619

 
$
12,193

 
 
 
 
 
 
 
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)

 
 
 
 
 
 
 
 
June 30,
2017
 
December 31,
2016
 
 
LIABILITIES AND MEMBER’S EQUITY
 
 
CURRENT LIABILITIES
 
 
 
 
 
Accounts Payable
$
536

 
$
539

 
 
Accounts Payable—Affiliated Companies
20

 
25

 
 
Derivative Contracts
8

 
8

 
 
Accrued Interest
20

 
20

 
 
Other
95

 
88

 
 
Total Current Liabilities
679

 
680

 
 
NONCURRENT LIABILITIES
 
 
 
 
 
Deferred Income Taxes and ITC
1,979

 
2,170

 
 
Asset Retirement Obligations
526

 
511

 
 
OPEB Costs
256

 
251

 
 
Derivative Contracts
1

 
3

 
 
Accrued Pension Costs
179

 
191

 
 
Long-Term Accrued Taxes
93

 
77

 
 
Other
126

 
129

 
 
Total Noncurrent Liabilities
3,160

 
3,332

 
 
COMMITMENTS AND CONTINGENT LIABILITIES (See Note 9)


 


 
 
LONG-TERM DEBT
2,384

 
2,382

 
 
MEMBER’S EQUITY

 
 
 
 
Contributed Capital
2,214

 
2,214

 
 
Basis Adjustment
(986
)
 
(986
)
 
 
Retained Earnings
4,340

 
4,782

 
 
Accumulated Other Comprehensive Loss
(172
)
 
(211
)
 
 
Total Member’s Equity
5,396

 
5,799

 
 
TOTAL LIABILITIES AND MEMBER’S EQUITY
$
11,619

 
$
12,193

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


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Table of Contents


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

 
 
 
 
 
 
 
 
Six Months Ended
 
 
 
June 30,
 
 
 
2017
 
2016
 
 
CASH FLOWS FROM OPERATING ACTIVITIES
 
 
 
 
 
Net Income (Loss)
$
(267
)
 
$
181

 
 
Adjustments to Reconcile Net Income (Loss) to Net Cash Flows from Operating Activities:
 
 
 
 
 
Depreciation and Amortization
1,115

 
159

 
 
Amortization of Nuclear Fuel
101

 
105

 
 
Provision for Deferred Income Taxes and ITC
(226
)
 
37

 
 
Interest Accretion on Asset Retirement Obligation
15

 
13

 
 
Net Realized and Unrealized (Gains) Losses on Energy Contracts and Other Derivatives
(42
)
 
153

 
 
Renewable Energy Credit (REC) Compliance Accrual
51

 
50

 
 
Non-Cash Employee Benefit Plan Costs
14

 
19

 
 
Net Realized (Gains) Losses and (Income) Expense from NDT Fund
(58
)
 
(2
)
 
 
Net Change in Certain Current Assets and Liabilities:
 
 
 
 
 
Fuel, Materials and Supplies
58

 
86

 
 
Margin Deposit
59

 
(46
)

 
Accounts Receivable
36

 
(12
)
 
 
Accounts Payable
(14
)
 
(10
)
 
 
Accounts Receivable/Payable—Affiliated Companies, net
75

 
179

 
 
Other Current Assets and Liabilities
7

 
11

 
 
Employee Benefit Plan Funding and Related Payments
(4
)
 
(10
)
 
 
Other
12

 
4

 
 
Net Cash Provided By (Used In) Operating Activities
932

 
917

 
 
CASH FLOWS FROM INVESTING ACTIVITIES
 
 
 
 
 
Additions to Property, Plant and Equipment
(576
)
 
(598
)
 
 
Purchase of Emissions Allowances and RECs
(29
)
 
(36
)
 
 
Proceeds from Sales of Available-for-Sale Securities
602

 
346

 
 
Investments in Available-for-Sale Securities
(616
)
 
(359
)
 
 
Short-Term Loan—Affiliated Company, net
(146
)
 
(972
)
 
 
Other
30

 
12

 
 
Net Cash Provided By (Used In) Investing Activities
(735
)
 
(1,607
)
 
 
CASH FLOWS FROM FINANCING ACTIVITIES
 
 
 
 
 
Issuance of Long-Term Debt

 
700

 
 
Cash Dividend Paid
(175
)
 

 
 
Other
(4
)
 
(6
)
 
 
Net Cash Provided By (Used In) Financing Activities
(179
)
 
694

 
 
Net Increase (Decrease) in Cash and Cash Equivalents
18

 
4

 
 
Cash and Cash Equivalents at Beginning of Period
11

 
12

 
 
Cash and Cash Equivalents at End of Period
$
29

 
$
16

 
 
Supplemental Disclosure of Cash Flow Information:
 
 
 
 
 
Income Taxes Paid (Received)
$
66

 
$
(53
)
 
 
Interest Paid, Net of Amounts Capitalized
$
29

 
$
38

 
 
Accrued Property, Plant and Equipment Expenditures
$
194

 
$
132

 
 
 
 
 
 
 
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 Incorporated (PSEG) is a holding company with a diversified business mix within the energy industry. Its operations are primarily in the Northeastern and Mid-Atlantic United States and in other select markets. PSEG’s principal direct wholly owned subsidiaries are:
Public Service Electric and Gas Company (PSE&G)—which is a public utility engaged principally in the transmission of electricity and distribution of electricity and natural gas in certain areas of New Jersey. PSE&G is subject to regulation by the New Jersey Board of Public Utilities (BPU) and the Federal Energy Regulatory Commission (FERC). PSE&G also invests in 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 energy supply company that integrates the operations of its merchant nuclear and fossil generating assets with its power marketing businesses through competitive energy sales in well-developed energy markets and fuel supply functions primarily in the Northeast and Mid-Atlantic United States through its principal direct wholly owned subsidiaries. In addition, Power owns and operates solar generation in various states. 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) electric transmission and distribution (T&D) system under an Operations Services Agreement (OSA); and PSEG Services Corporation (Services), which provides certain management, administrative and general services to PSEG and its subsidiaries at cost.
Basis of Presentation
The 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, 2016.
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, 2016.

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 is effective for annual and interim reporting periods beginning after December 15, 2017. Early application is permitted. PSEG expects the new guidance to result in more detailed disclosures of revenue compared to current guidance, and possible changes in presentation.

16

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
table of contents


PSE&G’s regulated revenue recorded under tariffs, including the sale of default supply of electric and gas commodity, and the transmission and distribution of electricity and distribution of gas to retail residential and commercial and industrial customers, is in scope of the new accounting standard. PSEG expects no change in revenue recognition of PSE&G’s regulated revenue recorded under tariffs. Revenue from contracts with customers will be recorded as electricity or gas is delivered to the customer. PSEG continues to evaluate contracts under its other revenue streams.
Certain implementation issues are currently being finalized by the AICPA’s Financial Reporting Executive Committee, including the ability to recognize revenue for certain contracts where there is uncertainty regarding collection from customers and accounting for contributions in aid of construction. Upon formal resolution of the implementation issues noted above, and upon completion of contract evaluations, PSEG will elect its transition method.
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 expects to record a cumulative effect adjustment by reclassifying the after-tax net unrealized gain (loss) related to equity investments from Accumulated Other Comprehensive Income to Retained Earnings as of January 1, 2018, and expects increased volatility in Net Income due to changes in fair value of its equity securities within the nuclear decommissioning (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.
Measurement of Credit Losses on Financial Instruments
This accounting standard provides a new model for recognizing credit losses on financial assets carried at amortized cost. The new model requires entities to use an estimate of expected credit losses that will be recognized as an impairment allowance rather than a direct write-down of the amortized cost basis. The estimate of expected credit losses is to be based on past events, current conditions and supportable forecasts over a reasonable period. For purchased financial assets with credit deterioration, a similar model is to be used; however, the initial allowance will be added to the purchase price rather than reported as an allowance. Credit losses on available-for-sale securities should be measured in a manner similar to current GAAP; however, this standard requires those credit losses to be presented as an allowance, rather than a write-down. This new standard also requires additional disclosures of credit quality indicators for each class of financial asset disaggregated by year of origination.
The standard is effective for annual and interim periods beginning after December 15, 2019; however, entities may adopt early beginning in the annual or interim periods after December 15, 2018. PSEG is currently analyzing the impact of this standard on its financial statements.
Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments
This accounting standard reduces the diversity in practice in how certain cash receipts and cash payments are presented and classified in the Statement of Cash Flows.
The standard is effective for annual and interim periods beginning after December 15, 2017; however, entities may adopt early, including in an interim period. PSEG is currently analyzing the impact of this standard on its financial statements.

17

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
table of contents


Statement of Cash Flows: Restricted Cash
This accounting standard requires entities to explain the change during the period in the total of cash and cash equivalents and include amounts described as restricted cash or restricted cash equivalents in their reconciliation of beginning-of-period and end-of-period amounts in the Statement of Cash Flows.
The standard is effective for annual and interim periods beginning after December 15, 2017; however, entities may adopt early, including in an interim period. PSEG is currently analyzing the impact of this standard on its financial statements including its future disclosure requirements.
Business Combinations: Clarifying the Definition of a Business
This accounting standard was issued mainly to provide more consistency in how the definition of a business is applied to acquisitions or dispositions. The new guidance will generally reduce the number of transactions that will require treatment as a business combination. The definition of a business now includes a filter that would consider whether substantially all the fair value of the gross assets acquired or disposed of is concentrated in a single identifiable asset or a group of similar identifiable assets. If this condition is met, the transaction would not qualify as a business.
The standard is effective for annual and interim periods beginning after December 15, 2017; however, entities may adopt it for transactions that have closed before the effective date but have not been reported in financial statements that have been issued or made available for issuance. PSEG does not have any current transactions impacted by this guidance and expects future acquisitions of individual solar plants will not qualify as business combinations. PSEG does not expect this guidance to materially impact its financial statements upon adoption.
Simplifying the Test for Goodwill Impairment
This accounting standard requires an entity to perform its annual or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. Additionally, an entity should consider income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable.
An entity should apply this standard on a prospective basis and will be required to disclose the nature of and reason for the change in accounting principle upon transition. The new standard is effective for impairment tests for periods beginning January 1, 2020. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. PSEG is currently assessing the impact of this guidance upon its financial statements.
Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost (OPEB)
This accounting standard was issued to improve the presentation of net periodic pension cost and net periodic OPEB cost.
Under the new guidance, entities are required to report the service cost component in the same line item or items as other compensation costs arising from services rendered by their employees during the period. The other components of net benefit cost are required to be presented in the Statement of Operations separately from the service cost component after Operating Income. Additionally, only the service cost component will be eligible for capitalization, when applicable.
The standard requires the amendments to be applied retrospectively for the presentation of the service cost component and the other cost components of net periodic pension cost and net periodic OPEB cost in the Statement of Operations and prospectively, on and after the effective date, for the capitalization of the service cost component of net periodic pension and OPEB costs.
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. PSEG is currently analyzing the impact of this standard on its financial statements.
Premium Amortization on Purchased Callable Debt Securities
This accounting standard was issued to shorten the amortization period for certain callable debt securities held at a premium. Specifically, the standard requires the premium to be amortized to the earliest call date. The amendments do not require an accounting change for securities held at a discount; the discount continues to be amortized to maturity.
The standard is effective for annual and interim reporting periods beginning after December 15, 2018. Early adoption is permitted for an entity in any interim or annual period. If an entity early adopts the standard in an interim period, any
adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. An entity should apply this standard on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the

18

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
table of contents


beginning of the period of adoption. Additionally, in the period of adoption, an entity should provide disclosures about a change in accounting principle.
PSEG is currently analyzing the impact of this standard on its financial statements.
Stock Compensation - Scope of Modification Accounting
This accounting standard provides clarity and reduces both diversity in practice and complexity when applying the stock compensation guidance to a change in the terms or conditions of a stock-based payment award. Specifically, the standard provides guidance as to which changes to the terms or conditions of a stock-based payment award require an entity to apply modification accounting.
The standard is effective for all entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. Early adoption is permitted, including adoption in any interim period, for reporting periods for which financial statements have not yet been issued. This standard should be applied prospectively to an award modified on or after the adoption date. PSEG plans to adopt this standard effective January 1, 2018.