ML18096A646
| ML18096A646 | |
| Person / Time | |
|---|---|
| Site: | Salem, Hope Creek  |
| Issue date: | 12/31/1991 |
| From: | Ferland E PUBLIC SERVICE ENTERPRISE GROUP |
| To: | |
| Shared Package | |
| ML18096A644 | List: |
| References | |
| NUDOCS 9204270203 | |
| Download: ML18096A646 (52) | |
Text
Public Service Enterprise Group Incorporated (Enterprise) is a diversified public utility holding company. Public Service Electric and Gas Company (PSE&G),
the principal subsidiary of Enterprise, is a regulated utility providing electric and gas service to more than two million customers and more than five and a half million residents of New Jersey. It is the state's largest utility and one of America's largest combined electric and gas companies.
Enterprise Diversified Holdings Incorporated, a subsidiary of Enterprise, is the parent company of Enterprise's nonutility businesses. These activities include investments, oil and gas exploration and production, cogeneration and small*
power production, and commercial real estate investment and development
- About the Cover Contents Ron Boerum,GE Senior Facility Engineer, examines highly sophisti-2 cated and sensitive time measuring devices for space laboratory 5
applications at General Electric Aerospace in Camden. Technology 15 has always been a leading New Jersey industry, demanding in-depth 21 understanding of needs and close cooperation between the cus-48 tomers' plant operating staff and PSE&G.
49 Text printed on recycled paper.
Letter to Shareowners Our Customers Review of Operations Financial Statements Officers and Directors Corporate and Stock Information
(Thousands of Dollars where applicable) 1991 1990
% Change Total Operating Revenues
$ 5,093,210
$ 4,800,135 6
Total Operating Expenses
$ 4,094,840
$ 3,826,655 7
Net Income 544,251 542,278 Common Stock Shares Outstanding-Average (Thousands) 223,565 211,981 5
Shares Outstanding-Year-end (Thousands) 226,701 2 18,472 4
Earnings Per Average Share
$ 2.43
$ 2.56 (5)
Dividends Paid Per Share
$ 2.13
$ 2.09 2
Book Value Per Share -
Year-end
$21.01
$20.44 3
Market Price Per Share -
Year-end
$29.375
$26.375 11 Ratio of Earnings to Fixed Charges 2.54 2.50 Ratio of Earnings to Fixed Charges -
PSE&G 3.20 3.10 Gross Additions to Utility Plant 813,149 968,023 (16)
Total Utility Plant
$14,426,560
$13,836,874 4
See Notes to Consolidated Financial Statements.
Net Income Dollars in Millions Annual Diviclencl Payout ancl Earnings Per Share In Dollars*
85 86 87 88 89 90 91 85 86 87 88 1
89 90 91 Annual Dividend Payout Earnings Per Share
- Adjusted to reflect 3 for 2 common stock split effective July I, 1987.
Dividends have been increased annually for 16 consecutive years.
Dear Shareowner P
ublic Service Enterprise Group enjoyed a success-f~I 1991 despite the e~fects of a continuing reces-s10n and weak financial results by two of our diversified companies.
Total 1991 earnings were $544.3 million, up from 1990's record level of $542.3 million. This was due in large measure to unusually warm weather. During the summer of 1991, we experienced a record-breaking 41 days with tempera-tures in the 90-degree-plus range, almost twice the normal number for our service area. Electric and gas sales for the year were up 3.1 % and 6. 9% respectively, but on a weather-adjusted basis, our sales for the year increased only one percent for electric and about two percent for gas.
Per-share earnings decreased 13 cents to $2.43, from $2.56 in 1990, due in part to 11.6 million additional average shares outstanding. Public Service Electric and Gas Company (PSE&G) earnings for the year were $516.5 million, compared to $508.6 million in 1990. Earnings for Enterprise Diversified Holdings Incorporated (Holdings) were $27.8 million, compared to $33.7 million in 1990.
Enterprise's Board of Directors in November increased the quarterly common stock dividend from 53 to 54 cents per share. It was our 16th consecutive annual dividend increase.
Need for Higher Rates Despite PSE&G's good earnings in 1991, the cumulative effect of six years of inflation on our costs and the addition of $1.6 billion of new plant since our last base rate increases made it necessary for PSE&G to file in November for higher electric and gas rates.
The last time we requested an overall increase in PSE&G base rates was in late 1985. Since the end of that case in early 1987, PSE&G has invested approximately $1.6 billion in electric and gas facilities to ensure continued reliable and reasonably priced electricity and gas to our customers. This investment included 1,435 miles of additional gas mains, 18 electric dis-tribution substations, 9,630 miles of electric distribution lines and 18 miles of transmission lines.
During the same period: we added 200,000 customers and responded to their assorted service demands; our gas peak sendout increased from 17.8 million therms to 18.2 million therms; and we have seen our electric peak demand increase from 7,721 MW to 9,085 MW Over this same interval, we have reduced our work force by approximately 600.
2 Today, with more customers and fewer employees, we are providing reliable, safe, efficient service at rates that are lower than they were in 1985 -
even though the New Jersey Con-sumer Price Index has risen 30 percent during that time. We have been able to provide this service at economically attrac-tive rates because our employees have aggressively managed our operating and maintenance costs over this period. This cost containment effort will continue, but it will not fully offset the need for higher electric and gas rates.
To help cover the costs associated with new investment, as well as to offset the effects of inflation on our expenses over this extended interval, we have petitioned the New Jersey Board of Regulatory Commissioners (BRC) for a $669 million annual increase in electric and gas rates. The request, which would not go into effect until late 1992, at the earliest, calls for an electric revenue increase of $507 million (14. 9%) and a gas revenue increase of $162 million (10.7% ).
We have worked hard to maintain our position as the low-cost energy service provider in New Jersey, while at the sa.
time providing shareholders a fair return on investment. Wi are proud to have been able to maintain stable rates in the face of inflationary pressures over the past six years. And we will continue to work hard to enhance the value of shareholder investment in Enterprise.
Service Indicators The number of customer complaints to the BRC and to the officers of our business decreased by nearly 20 percent, com-pared to 1990, and was the lowest number since we started to keep such records in 1978. This is the best indicator that 1991 was a good year.
A broader measure, our customer satisfaction indices, were also up. The results of our annual customer attitude survey show that our Customer Satisfaction Index (CSI) is up from 1990 survey results. The CSI is a weighted evaluation of cus-tomer attitudes concerning the quality of our business relation-ships, the quality of our social responsibility efforts and the price we charge for our products and services.
In addition, a very encouraging report on PSE&G's perfor-mance was contained in a management audit performed during the year for the BRC. We received an outstanding assessment
- 1.es Ferland, Chairman of the Board, President and Chief Executive Officer (left),
meets with Schering-Plough Vice President and Treasurer Jack L.
Wyszomierski at the pharmaceutical firm's Kenilworth, New Jersey, facility. PSE&G manage-ment at all levels main-tains customer contacts in a continuing program to improve mutual understanding and cooperation.
from the auditors. The auditors concluded that, when com-pared to other leading U.S. electric and gas utilities, "PSE&G is among the best."
Nuclear Performance PSE&G operates thr~e nuclear units -
Salem 1 and 2 and Hope Creek, at Artificial Island in southern New Jersey-and we have an ownership interest in the Peach Bottom 2 and 3 units operated by the Philadelphia Electric Company in Penn-sylvania. In 1991, the aggregate capacity factor of all five units was 71 %. The aggregate capacity factor of the three PSE&G-operated units was at a record level of 78%.
The high performance level attained by these units in 1991 despite a turbine failure and fire in November that re-in severe damage to Salem 2 's turbine and generator, nonnuclear components. Fortunately, fire damage was contained, as our operators on the scene safely shut down the unit and the plant fire brigade quickly controlled the fire. There 3
were no injuries and no damage to the nuclear part of the unit.
Most of the cost of equipment repair and replacement power is covered by insurance.
We expect Salem 2 to return to service during the second quarter of 1992.
Nonutility Businesses The results for Holdings' companies were mixed in 1991, but on balance were disappointing.
Energy Development Corporation, our oil and gas explora-tion and development subsidiary, had particularly disappointing results for the year, as mild weather and a continuation of the national recession combined to push natural gas prices to the lowest levels in 15 years. While we remain optimistic about the long-term outlook for this business, a continuation of record low natural gas prices will put extreme pressure on the near-term financial prospects for this company.
Our real estate subsidiary, Enterprise Group Development Corporation, continued to suffer from depressed conditions in the real estate market.
On the positive side, the results of Public Service Resources Corporation, our investment company, and Community En-ergy Alternatives Incorporated, our cogeneration and small-power production subsidiary, have shown good progress.
_J
Our efforts over the last several years have focused on estab-lishing and growing these diversified businesses. In 1992, we will shift our emphasis from growth to increased profitability.
Our aim is for steady improvement in income and return for these companies over the next five years.
With this strategy, we anticipate that the nonutility busi-nesses will contribute some 10-15% of consolidated income by the mid-1990s, up from 5% in 1991.
Other Issues An encouraging step taken by the New Jersey State Legislature in 1991 was the change of the New Jersey Gross Receipts and Franchise Tax to an energy usage tax. It is a change that we have long sought.
Under the new law, our customers will pay a fixed tax for each kilowatthour of electricity or therm of natural gas used, rather than a tax driven by energy price. Over a period of sev-eral years, this should diminish the competitive advantage enjoyed by nonutility suppliers of electricity and natural gas over utilities, which alone are subject to this tax.
Another issue I discussed last year remains unresolved: our opposition to the construction of cooling towers at our Salem Generating Station. In late 1990, the New Jersey Department of Environmental Protection and Energy issued a draft permit requiring the construction of cooling towers to eliminate the potential for future harm to the aquatic life in the Delaware River. We will continue to press our belief that construction of cooling towers would be an unwarranted expense for our cus-tomers, and that there are less-costly alternatives that ade-quately address the Department's concerns.
Look to the Future 1992 will be an extremely challenging year, given our need for rate relief and the likelihood that the recession will continue through much of the year. Further, record low natural gas prices will continue to suppress the earnings of Energy Devel-opment Corporation. Our principal objectives are to obtain timely and adequate rate relief and to manage our utility and nonutility company expenses as efficiently as possible.
We will continue to meet the challenges of the future by improving efficiency and increasing the reliability and desir-ability of our services, while minimizing the impact of our operations on the environment.
4 To help us meet our ambitious goals, over the past three years we have introduced a significant number of individual quality initiatives aimed at improving specific aspects of the business. Now, after careful study and in order to further en-hance customer satisfaction, we are integrating these initia-tives and expanding them into an ongoing total quality process that will incorporate the principle of continuous improvement into everything we do.
Just as an appropriate rate increase will give us the financial resources to maintain strong capitalization, good cash flow and solid credit ratings, a well-planned and implemented total quality improvement process will enable us to better deploy our resources to the benefit of our employees and customers, and to provide a fair return to our investors.
PSE&G Elects President Before I conclude this letter, I want to note a very important management change at PSE&G in 1991. In September, the Board of Directors elected Lawrence R. Codey president
- chief operating officer of PSE&G and a director of Enterpn Larry, formerly senior vice president - electric, brings unique qualifications to his new position. He has headed both of PSE&G's two principal business units -
electric and gas -
and, as a former corporate rate counsel, has considerable knowl-edge of the state's regulatory process.
This appointment not only will enhance an already excellent management team, it also will position our company to better manage the challenges that we and our entire industry face in the coming years.
E. James Ferland Chairman of the Board, President and Chief Executive Officer February 10, 1992
Working with Our Customers Shifts in demographics and work styles present new challenges to our notions of premier service. One response:
evening and weekend meter readings to serve our customers better. (I.)
An overwhelming ma-jority of customers give PSE&G a positive rating on the job the company is doing in providing electric and gas service.
This exceeds the average rating given to utilities nationwide. (r.)
F or several years, we have been describing in our Annual Reports the changes taking place in our industry and their effects on our company.
These changes are driven by new state and federal legislation, new energy regulations and the develop-ment of competition in both our gas and electric businesses.
To successfully adapt and prosper in this evolving economic climate, we are not merely altering PSE&G to meet new regu-latory requirements and competitive challenges; we are making fundamental changes in the many ways we supply service and interact with our customers.
Change, however, is not confined to PSE&G or to energy suppliers. Many of our industrial and commercial customers also are experiencing significant shifts in their business envi-ronments because of the recession and the emergence of global economic forces and international competition in their markets.
We recognize that, just as PSE&G is managing change, so are our customers, large and small. For their well-being and our own, we must not only provide them with the highest qual-ity service that meets their needs at reasonable cost, but we also must help them use energy efficiently, with as little impact on the environment as possible. To accomplish this, we have to understand their operations, procedures and energy needs just as well as they do.
In this portion of our Annual Report, we will explore some of the many changes we have instituted as part of a continuing effort to meet customer expectations better with our products and services.
6 Positive Rating on Providing Electric and Gas Service Percent Electricity Gas Changing Our Style 100 75 50 25 PSE&G 1990
- PSE&G 1991
- Average All Utilities 1991 It wasn't so long ago that a customer's power needs were deter-mined standing outside the customer's premises. All resi-dential customers were treated more or less the same. For commercial and industrial customers, it was only a little more complicated -
a matter of calculating the size of the building and factoring in the nature of the business while allowing a margin for future growth.
But times have changed. Starting in 1987, when PSE&G developed its current "core values" -
the first of which fo-cuses on Customer Satisfaction -
we began to look more intensely at customer expectations.
Today, the PSE&G representative works from the inside, standing on the factory floor, in the customer's back office computer room or in the resident's living room.
On the factory floor, the representative is surrounded by huge machines, operating at high speed, turning out a vast array of products and controlled by tiny electronic micro-processors that are highly sensitive to routine power line dis-turbances that once would have gone unnoticed.
In the computer operations center, the representative hears a steady hum from rows and rows of computers, all of them totally dependent on reliable, uninterrupted power to per~.
their tasks.
feedback directly from business customers, our officers visit their facilities and their executives visit oun.
A group of business customers (I.) dilcuss their gas supply needs, while becoming familiar with our gas distribution system. PSE.tG's Jack Hainthaler (2nd from right) and Joe Jansen (r.)
explain the role of our Gas System Operations Center In Newark. the control site for gas distribution for our entire service area. The day-long program allo included a visit to our Electric System Opera-tions Center In Newark.
Our area development staff helped put together a single group of high-level state, county, city, and telephone company representatives to sit down with Merrill Lynch to address the volumi-nous details required to make a major relocation decision.
Then, to address their special energy require-ments, our marketing and electric distribution people came up with a unique proposal tailored to their needs. The result: a highly reliable network service, with potential cost savings.
Reliable
.nd in the home, the representative is surrounded by sensi-tive, power-hungry electronic devices, many of which were unheard of just a decade ago. In the family room, a maze of audio and video equipment covers an entire wall. In the kitchen, a microwave oven, the electric range and the dish-washer are all controlled by digital timers -
circuits that can be set to cook, bake and clean at precisely the correct time. A heat pump, which can function as an air conditioner in summer or as a heater in winter, maintains the desired temperature. An electric alarm system provides security.
If a power failure occurs -
momentary or extended -
there will be customer satisfaction problems today that never existed before.
The factory owner will have to shut down operations until the production line can be recalibrated.
The computer firm may have scrambled an entire day's work.
The homeowner will return to a house filled with blinking digital indicators; dinner still uncooked in the microwave oven.
These are but a few examples of how customers rely on PSE&G. In a world increasingly dependent on the availability and reliability of energy and constantly in search of easier ways to do business, there are more and more opportunities to o satisfy a customer, even with service that would have
- totally acceptable just a few short years ago.
9 At an October press conference, PSE&G un-veiled a new economic development campaign to attract businesses and jobs to New Jersey. Held at the new offices of Merrill Lynch in Jersey City (r.), the event was attended by Gov. Jim Florio (center-left, with Jim Ferland).
The announcement received widespread press coverage, and advertising support gen-erated over 5,000 inqui-ries in late 1991.
In this time of changing expectations and increasing compe-tition, PSE&G must better understand how energy is being used, what the customer's perception of satisfactory service is, what types of services the customer prefers and how the cus-tomer wants that service supplied.
Setting the Mark To determine the best ways to do this, we compare our operat-ing methods with those of the best in our industry and with other leading businesses throughout America. This "bench-marking" allows us to gauge our performance -
indicating where we exceed the mark, where we measure up and where we need to improve.
Our benchmarking studies confirm that best-in-class compa-nies have a culture and value system that makes customer satis-faction their primary mission. They also define customer satisfaction by what the customer says it is, not by some inter-nal performance index.
To learn what satisfies the customer, we ask him or her.
We send questionnaires to gas and/or electric customers to determine their satisfaction with our service, how they judge that service, how much they are impacted by the cost of energy and what their future business prospects are.
We invite customers to participate in focus groups to eval-uate new products and services. This ongoing process is designed to gauge market reaction to our existing product line and determine where we have opportunities for future expan-sion of those offerings.
Decline in Customer Complaints Thousands 86 87 88 89 90 91 Constant analysis of customer inquiries has led PSE&G to revise practices and increase the authority of customer service representatives 16 like Kathy Johnson (c.)
to resolve inquiries.
Consumer Advisory 12 Panels (r.) provide a forum for customers to meet with management and propose changes.
8 Measures like these have contributed to a sharp decrease (I.) in executive and regulatory board 4
complaints.
We do spot surveys of customers who have experienced service problems, asking questions such as, "How fast and efficiently did PSE&G respond after your service was inter-rupted?" The results of these inquiries help us improve our response times.
Each year we also evaluate the responses of a large sampling of our entire customer base to determine their attitudes about PSE&G. These results consistently have been very positive.
More than 90% rate PSE&G as good or excellent at supplying electric and gas service, with especially high marks for reli-ability and prompt response to calls for service.
These and many other survey techniques are used through-out the company. As the surveys are completed, their results are compared with results from previous years, pinpointing trends in the level of customer satisfaction with P SE&G.
The Personal Touch Added to this survey data is a wide array of information com-piled from visit to customer locations. Our marketing represen-tatives chalked up some 10,000 visits to our largest industrial and commercial customers over the past two years.
The visits were designed to gather information about com-mercial and industrial customers in our service area. To help us satisfy the customer's needs on both sides of the meter, the program focuses on total business needs, not just energy needs.
With this broader perspective, we then fashion solutions for specific business problems.
10 A program involving our executive officers is an extensio.
of this effort. PSE&G officers tour customer facilities and discuss customers' expectations with them. Here, too, the discussions focus on the customers' total business needs.
The executive program opens a communications window between PSE&G and its customers at the highest corporate levels. It improves chances that future problems can be solved through quick and smooth intercompany communications.
Large industrial and commercial users are just one part of the customer spectrum. Also in operation are programs to stimulate two-way, ongoing communication with small busi-ness and residential customers. One of these is a series of meetings with consumer representatives from throughout PSE&G 's service territory.
These company-sponsored consumer panels represent a cross-section of our customers on a broad range of issues. The panels focus mainly on parts of the business that often are not clear to the public: such as billing literature, environmental concerns, safety and the needs of special interest groups within the community.
Since the panels were formed in 1982, they have made 80 recommendations that have been implemented by the company, including enlarging print size whenever possible on comm.
cation to senior citizens, providing recording devices with special numbers to accept customer meter readings and insti-tuting plain-language customer bil ls.
For 1\\io Dyeing and Finishing Company, one of the largest dye boules in Paterson, we did an eneqy audit to analy7.e energy use and improve overall eflk:icocy. We then worbd with 1\\io to implcmart many of the cost-saving recommen-dations.
We prorided 1\\io with electJotecbnology........
natives to their aunm drying processes to speed up drying and reduce operating cosCI.
And we arranpd con-tacts to help 1\\io to meet IOreian competition by eKpOrting its products when domestic demand was slow.
Use of computers and other microchip-controlled devices at home and at work has led to a demand for cleaner, more reliable power, freer from surges and voltage drops that would once have gone unnoticed.
Reliability PSE&G Compared with Other Utilities Average intenuptions per customer 2
1.8 1.6 1.4 1.2
- a Storm-tracking com-puters (c.), automatic switching equipment and other measures improve reliability. PSE&G has the best regional record in providing reliable service at a low cost to customers, as shown in the combined index at right.
I 0.8 0.6 0.4 0.2 0
40 60 80 100 Cost in dollars per customer to maintain service 0
120 140 emographic data also help us to design our service offer-ings to meet the evolving needs of a changing society. For example, among residential customers, more and more often there is no one home for daytime service calls during the work week because both spouses are employed, or because of single-parent households. And today, the language spoken in homes in our service area is less likely to be English.
From each of these information-gathering methods -
sur-veys, customer visits, consultations and analyses -
we add another piece to the mosaic illustrating customer expectations.
Each technique fills in data needed to develop new products and services to meet rising customer expectations.
Changing Our Ways Based on the wealth of information we gather, PSE&G is mak-ing changes today to meet the customer needs of tomorrow.
Meter readers now schedule weekend visits to accommodate working couples. Customer service centers stay open in the evening for the same reason. And where the need exists at customer service centers, translators are available to help our representatives and our customers communicate.
tl uring power outages, the company supplies customers a carefully calculated estimate of restoration time, so the omer can plan to cope with the outage most effectively.
13
- PSE&G Other Utilities We are planning a program to offer oil-to-gas conversion customers the opportunity to have their old oil tanks removed or filled with sand or foam, eliminating hazardous waste problems and avoiding conflicts with state environmental regulations.
We're working with electronic equipment and appliance associations to provide solutions to the problems caused to modern electronic equipment by power interruptions.
We utilize computerized lightning tracking systems to cut response time to outages during major storms. The equipment tracks the path of the storm as it approaches our service area, allowing our managers to deploy repair crews at appropriate locations even before the storm hits.
The company also has expanded its use of protective devices such as shield wire, which reduces lightning damage, and animal guards, which help prevent animals from damaging power devices and causing service outages. Both of these maintenance improvements increase the reliability and quality of energy service and help us reduce our customer outages total for the year. In fact, we reduced customer outages by two percent in 1991.
We've developed conservation initiatives to support the state's energy master plan goals and to increase the role of conserva-tion in meeting New Jersey's energy needs in the coming dec-ade. The proposals will allow PSE&G and the customer to share in the financial rewards of conserving energy, which benefits the company, the customer and the environment.
We've also expanded the scope of our promotion of electric and natural gas vehicles. In addition to using electric and natu-ral gas vehicles within our own service fleet, we now have projects underway with NJ Transit and New Jersey Bell Tele-phone Company.
At our electrotechnology demonstration facility in Edison, we provide hands-on demonstrations to show industrial cus-tomers how to reduce their hazardous waste and air emission problems through new and innovative production techniques.
Customers who own their own electric distribution substa-tions told us of the problems they encounter in maintaining those stations. We now offer them maintenance packages designed to provide the service level they require at a price they can afford.
Responding to the results of the benchmark studies that evaluated the practices of best-in-class companies, we now employ industry specialists to better help our customers with energy problems. We also have an experienced person serving as a PSE&G liaison for large customers to help them with their energy needs at their multiple locations in the state.
And we introduced a new Business Enhancement Program to help improve business opportunities in New Jersey. Through this program, PSE&G, in partnership with local, county and state governmental agencies, offers innovative solutions to businesses with energy, environmental, fi nancial, technical and other business problems. The goal of the program is to keep the companies in business -
and in New Jersey.
14 New services require greater understanding of customer needs but offer revenue opportunities.
At PSE&G's Electrotech-nology Demonstration Facility, manager Mike Perna (I.) shows cus-tomers how infrared drying and ultraviolet curing can speed pro-cesses and reduce costs.
Substation maintenance programs for larger plants, such as this Squibb facility in New Brunswick (r.), provide these customers with the benefits of our em-ployees' skills and experience.
Continuing to Improve Late in 1991, building on the experience gained from these and other ongoing activities, PSE&G introduced a program to inte-grate all these customer satisfaction initiatives into a corporate-wide quality improvement process.
This process will consolidate and integrate many existing programs aimed at boosting quality levels in every part of our business. It will ensure that customers' needs guide our employees' decisions and foster the continuous improvement of existing offerings and a steady stream of innovations to meet developing customer needs.
In effect, through a proactive focus on customers, PSE&G is forming a partnership with our customers. By analyzing how gas and electric energy impact their lifestyles and their bottom lines, we help them better use their resources, increase their productivity, improve their profits and grow-in PSE&G's service area. Done correctly, it's a partnership from which everyone benefits. 0
1 Financial Results and Business Highlights er reliability of PSE&G's natural gas-powered vehicles (NGVs) and refueling equipment is the subject of discus-sion between newly elected president and chief operating officer Larry Codey (c.), Anita Fleischer and Greg Dunlap, managers in the Gas Business Develop-ment unit responsible for marketing NGVs and coordinating state environmental testing of the vehicles.
onsolidated earnings for 1991 were $544.3 million, or $2.43 per share of common stock, based on 224 million average shares outstanding. In 1990, earn-ings were $542.3 million, or $2.56 per share, based on 212 million average common shares outstanding.
The results were favorably impacted by abnormal weather patterns -
cooler weather in the first quarter and a record-setting hot summer -
that boosted gas and electric sales throughout PSE&G 's service area.
The favorable impact of weather on earnings was mostly offset by higher expenses for federal income taxes, higher maintenance costs due to a refueling outage at Hope Creek, higher nuclear production expenses, labor and employee bene-fit costs, interest charges and depreciation and amortization nses. Earnings per share were reduced as a result of the nee of additional shares in 1991.
Another effect on earnings was the weak financial results of Enterprise's nonutility businesses. Collectively, the nonutility businesses of Enterprise Diversified Holdings Incorporated 15 (Holdings) produced $28 million of earnings, or approximately 12 cents per share, a decrease of $6 million and three cents per share compared to 1990. Energy Development Corporation's (EDC) earnings were particularly impacted as prices for natu-ral gas reached a 15-year low. The EDC shortfa ll was partially offset by the higher investment income of Public Service Resources Corporation (PSRC).
Overall, Enterprise's consolidated revenues in 1991 were
$5.1 billion, an increase over the $4.8 billion recorded in 1990.
PSE&G 's electric revenues accounted for $3.5 billion, gas revenues accounted for $ 1.3 billion, and Holdings' nonutility businesses added the remaining $.3 billion.
PSE&G electric sales increased 3.1 % compared to 1990 sales. Residential electric sales increased 6.4%; commercial sales increased 3.2%; while industrial sales were down by 0.5%.
PSE&G gas sales for the year were up 6.9%. Residential sales were up 4.0%; commercial up 6.6%; and industrial up 17.0%. Gas transportation service increased 109.5% compared to 1990 results. Total gas sold or transported increased 14.5%.
Cash flow remained strong and the utility met 81.1 % of its
$783 million construction expenditures through internally generated cash.
At year-end, the book value of Enterprise's common stock was $21.01 per share, up from $20.44 at the end of 1990. This increase was achieved by retaining earnings in the business and by selling additional common stock above book value.
There were 226.7 million shares outstanding at year-end 1991.
In March, Enterprise sold five million shares of its common stock, raising approximately $130 million of new equity capi-tal. In addition, Enterprise sold approximately three million shares of common stock through its Dividend Reinvestment Program, raising about $89 million in additional equity.
The proceeds of these sales were used by Enterprise to make additional equity investments in its subsidiaries -
Public Service Electric and Gas Company and Enterprise Diversified Holdings Incorporated. These equity infusions enabled both subsidiaries to increase their assets while maintaining strong capital structures.
PSE&G's earnings to fixed charges coverage ratio was 3.2 times, up from 3.1 times in 1990.
During the year, PSE&G sold $750 million in mortgage bonds. Proceeds were used for general corporate purposes, including repayment of short-term obligations and refunding of certain higher-cost debt securities. PSE&G called $125 million in mortgage bonds in July, 1991 for early redemption. Mort-gage and debenture bond maturities in 1991, including sinking funds, totaled approximately $169 million. Approximately
$170 million of high-cost mortgage and debenture bonds were redeemed in early 1992. These early redemptions will save the company about $21 million in interest charges.
In June, Enterprise Capital Funding Corporation (Funding) raised $151 million of long-term debt through the sale of guar-anteed senior notes. The proceeds were used to make loans to the subsidiaries of Holdings.
In the fourth quarter, the Board of Directors increased the common stock dividend from 53 cents to 54 cents per share, a change in the annualized dividend rate from $2.12 to $2.16.
The increase of approximately 2% marked the sixteenth con-secutive year in which the company has raised the dividend on its common stock.
In November, PSE&G petitioned the New Jersey Board of Regulatory Commissioners (BRC) for an increase of $669 million in electric and gas base rates on an annual basis. The company last filed for an overall base rate increase in 1985.
Since that time, the company has added $1.6 billion in new utility plant to service the increasing demands of its electric and gas customers.
16 The petition for a 13.6% overall increase reflected an elec-tric revenue increase of $507 million or 14.9%, and a gas revenue increase of $162 million or 10.7%.
The petition also asked the BRC to approve a return on common equity of 13.25% and a return on rate base of 10.89%.
PSE&G is currently allowed a 13% return on common equity and 10.65% return on rate base.
The test year for the case will be the 12 months ending June 30, 1992. It is expected that hearings will be conducted on the rate request during the Spring and Summer of 1992. A deci-sion is not expected before late in 1992 at the earliest.
Electric he electric business maintained high reliability of service in the face of unusually strong customer demand for electricity during the hot summer of 1991. The results turned in by employees were outstanding.
During the summer months there were 41 days of 90-deg or higher temperatures, almost twice the normal number for our service area. The continuous hot weather resulted in a record summer demand for electricity, including a new all-time peak of 9,085 MW on July 23.
Despite the demand, system reliability remained excellent throughout the period. Extended interruptions of customer service (two minutes or longer) from May through August declined by over 10% compared to the same period in 1990.
For the entire year, the number of customers interrupted for an extended period declined by 16,387 from 1990. This was the lowest number of extended interruptions since 1981, when the customer base was much smaller.
In large part, the electric business was able to deal success-fully with the high demand because of the exceptional per-formance of its nuclear units. Although Salem Unit 1 was forced off line in June by a lightning strike to the main power transformer, work crews made the necessary repairs within a week and the unit was back performing at near-peak capac-ity. Overall, the nuclear department's Artificial Island units performed at 89% capacity factor for the critical May-to-September time period.
Performance of gas turbine generating units was especially good, with the lowest forced outage rate in recent years -
seven percent.
Our fossil fuel units also performed very well during the entire summer. On the day of our system peak of 9,085 MW, we were able to meet our own demand while selling 3,050 MW to New York and New England.
In November, Salem Unit 2 suffered significant equipment damage when, as a result of a failure of protection devices, a turbine failure and fire caused severe damage to the unit's turbine generator. The incident occurred on the nonnuclear side of Salem 2. There was no impact on the nuclear side of the operations. The unit's reactor was shut down safely and automatically.
It is estimated that the unit will return to service in the sec-ond quarter of 1992, and that the equipment repair costs could total between $65 and $75 million. Insurance is expected to cover most of this cost, as well as most replacement power costs.
is outage of Salem 2 had only a modest effect on the pany's Nuclear Performance Standard results for the year.
In the aggregate, the company's nuclear units achieved a 71 %
capacity factor in 1991. This is a level at which no penalty or reward applies.
17 Other electric business highlights include:
> Initiation of the Burlington# 10 Unit rehabilitation project.
The existing combustion turbines will be replaced with clean, efficient, state-of-the-art models. In addition to lessening the environmental impact of the facility, improved efficiencies and a change in fuel from oil to natural gas will save approximately
$30 million per year.
> Opening of an Electrotechnology Demonstration Facility at the Edison Training and Development Center. The facility performs product testing and demonstrations for industrial and commercial customers. It currently showcases two electrotech-nologies -
an ultraviolet curing system and an infrared oven.
Customers can test actual products, which helps them decide on the best technology for their needs.
> Achievement of international recognition as a leader in the evaluation and application of robotic devices in the electric utility industry. The technology put to use during the year saved between $2 and $3 for every $1 spent on hardware.
> Development by PSE&G of a combustion oil-water emulsi-fication process to significantly reduce nitrogen oxide (NOX) emissions from combustion turbine generating units. NOX reductions of more than 50% were obtained using the fuel produced by this process.
> Purchase of eight electric-powered General Motors service vehicles as part of a three-to-five-year test of performance, reliability, operating costs and design features.
> Establishment of a statewide Emergency Response Center to be used by the BRC as a command center during major emergencies.
PSE&G linemen (I.)
joined in a count of os-prey fledglings hatched on company transmis-sion towers near the nuclear plants.
Compressors being installed at the Harrison (c.) and Central gas plants will increase peaking capacity and improve reliability and air quality.
Performance of com-pany-operated nuclear plants continued to exceed national averages.
The capacity factor of the three plants was a record 78%. (Chart)
Nuclear Performance Percent Capacity Factor 87 88 89 90
- PSE&G Operated Nuclear Plants
- U.S. Average for all Nuclear Plants 100 91
Gas hile maintaining a strong natural gas market-ing program and continuing careful cost control efforts, our gas business also sought out nontraditional utility gas sales opportuni-ties during 1991.
We continued to aggressively market the advantages of nat-ural gas heat for the home. The effort resulted in approximately 12,000 conversions from oil heat in the residential market.
Industrial and commercial conversions accounted for addi-tional sales of 48.5 million therms of natural gas for the year.
We entered into a joint venture with Elizabethtown Gas to provide 536 million therms of natural gas annually to a non-utility generator of electricity, at a site in Elizabethtown's service territory. This customer has the capacity to generate 614 MW of electricity, which will be transmitted by cable under the Arthur Kill to Consolidated Edison Company in Staten Island. Once this facility is in operation, it will be the largest gas user in New Jersey, aside from our own generating units.
The gas unit also installed three miles of 12" transmission main to provide natural gas to two additional electric cogener-ation facilities in Sayreville. The two facilities will consume approximately 380 million therms of natural gas per year.
We continued to make headway in the natural gas vehicle market. New Jersey Bell Telephone Company has converted 25 of its fleet vehicles to compressed natural gas fuel. Working with New Jersey Bell, PSE&G will install a refueling station at the telephone company's garage in Newark. In 1991, PSE&G put into operation 30 of our own service vans fueled by natural gas. In addition, a refueling station at NJ Transit's Orange garage was opened to service five new natural gas buses.
Our development group, working with the Gas Research Institute, installed and monitored a natural gas-powered,
engine-driven heat pump in Maplewood, as part of a nation-wide study. The pump is designed to enhance customer comfort by maintaining a more constant temperature than conventional heating and air conditioning equipment, and at the same time achieve a low operating cost.
The business unit also worked with the Gas Research Insti-tute to host the field test of a 25-ton rooftop air conditioning unit. The unit was installed at the gas district headquarters in Orange. It is powered by an automotive engine fueled by natu-ral gas. If tests prove successful, the manufacturer of the unit plans to go into production.
Among other gas business highlights were:
> Upgrading of LPA (liquid propane air) peaking facilities at the Harrison and Central gas plants. LPA is used to augment natural gas supplies on the coldest days of the winter, when 1 demand for heating in homes and businesses is at its peak.
18 The project enhances system reliability and increases plant efficiency. It also will reduce air emissions by eliminating oil-fired boilers.
> Upgrading several metering stations in conjunction with two pipeline companies. Filter scrubbers were installed in the system, resulting in increased metering capacity and also in enhanced product quality.
> Continuing work with the New Jersey Department of Envi-ronmental Protection and Energy (DEPE) to investigate an.
where necessary remediate 38 former manufactured gas pl sites. Eleven sites were worked on in 1991. The company expended approximately $8.3 million on its Gas Plant Reme-diation Program.
Enterprise Diversified Holdings Incorporated A
ssets of the nonutility businesses increased to
$2.8 billion at year-end 1991, a 16.7% increase over the 1990 year-end level of $2.4 billion.
Holdings' assets represented about 19% of Enter-prise's overall assets at the end of 1991.
While in the past several years Holdings has experienced growth in assets, current plans call for Holdings and its non-utility businesses to focus their efforts on asset management and maintaining portfolios essentially at present levels. Their primary objective is to increase net income and improve earn-ings performance.
Public Service Resources Corporation Public Service Resources Corporation (PSRC) makes diversi-fied investments in various sectors such as leveraged leases, limited partnerships and marketable securities.
Currently, approximately 56% of its investments is in lever-aged leases, including energy-related projects (such as nuclear power plants and the Merrill Creek Reservoir), a communica-tions satellite, commercial real estate, transportation equip-ment, and modern wide-body, fuel-efficient, low-noise aircraft.
Some 24% of its portfolio is in limited partnerships, includ-ing interests in solar electric generating systems, venture capi-tal and leveraged buyout funds, real estate partnerships, an ethylene production facility and securities investment partnerships.
In addition, about 20% of the portfolio is invested in equity and debt securities.
During 1991, PSRC continued to grow and diversify its portfolio, increasing assets by 20% to $1.4 billion.
.gy Development Corporation Energy Development Corporation (EDC), an oil and gas explo-ration, development and production company based in Hous-ton, Texas, continued to expand its proven reserve base in 1991 through a combination of acquisitions and exploratory and development activities.
EDC's operated properties are generally located both onshore and offshore in the Gulf of Mexico area. Through several purchases in 1991, EDC acquired proven reserves amounting to 145 billion cubic feet equivalent in the Gulf Coast and in the Hugoton Basin of Oklahoma and Kansas, increasing its reserves by about 22%.
During 1991, EDC's assets rose about 9% to $1.0 billion.
During the summer, however, gas prices were at their lowest level in 15 years. As a result, EDC voluntarily curtailed spot gas sales.
Enterprise Group Development Corporation Enterprise Group Development Corporation (EGDC) is a real estate development and investment business that invests in commercial office, retail and industrial properties over a wide geographical area.
During 1991, because of depressed real estate sales and rental and leasing markets, EGDC made no new commitments for additional properties and concentrated on the completion and management of developed properties to maximize their long-term value. It has interests in 12 properties in five states, including office buildings, warehouses and shopping centers.
At year-end, EGDC's assets totaled $238 million.
Allocation of Assets at December 31, 1991 Enterprise Total Assets
$14.8 Billion Total assets of Enterprise grew by 5.7% in 1991, despite the continuing recession. Assets of the nonutility business increased by 16.7%.
PSE&G
- Electric 69%
Gas 12%
Holdings PSRC 9%
- EDC7%
- EGDC2%
CEA 1%
10.3 Billion 1.7 Billion 1,357 Million 1,038 Million 238 Million 152 Million Under the direction of Everett L. Morris (c.),
president and chief operating officer of Holdings, the nonutility subsidiaries will focus on increasing net income and improving earnings performance. Confer-ring with Mr. Morris are Eileen A. Moran, presi-dent, PSRC, and John W. Nabial, comptroller, Holdings.
19
Community Energy Alternatives Incorporated At year-end 1991, Community Energy Alternatives Incorpo-rated (CEA), a developer of cogeneration and small-power projects, had invested in 23 projects, of which 17 were in operation. These projects all have been undertaken through partnerships or joint ventures. During the year, construction was started on the Newark Bay Cogeneration Facility, which will be fueled by natural gas and will have a capacity of 137 MW The Eagle Point Cogeneration Facility, which is fueled by natural gas and has a capacity of 225 MW, attained com-mercial operating status in May, 1991. CEA owns 50% of the Newark Bay and Eagle Point facilities.
Also this year, a settlement was reached in an environmen-tal-related dispute over permits for the 27 MW small power production facility in Hanford, California, in which CEA owns a 50% interest. As a result of the settlement, the plant resumed operation in August, 1991, after an eight-month delay.
The capacity of projects currently operating or under con-struction in which CEA has invested total 954 MW, of which CEA's share is 319 MW. Projects that are under active develop-ment total 1,260 MW, of which CEA's share will be 384 MW.
At the end of the year, CEA's assets totaled $152 million. 0 The Bay Area IV power plant in California (I.), a jointly-owned project of CEA, contributes to meeting conservation and environmental goals.
Offshore oil and natural gas facilities (c.) are part of Energy Development Corporation's reserves, which have increased tenfold in four years.
Purchase of power through the PJM grid system helps maintain low rates. (r.) The Enter-prise Board of Directors visited the PJM control center in October, 1991.
20
21 Management's Discussion and Analysis 28 Financial Statement Responsibility 29 Independent Auditor's Report 30 Consolidated Statements of Income 31 Consolidated Statements of Cash Flows 32 Consolidated Balance Sheets 34 Consolidated Statements of Retained Earnings 35 Notes to Consolidated Financial Statements 46 Consolidated Financial Statistics 47 Operating Statistics 48 Officers and Directors 49 Corporate and Stock Information 21 Management's Discussion and Analysis of Financial Condition and Results of Operations Following are the significant factors affecting the consolidated financial condition and the results of operations of Public Service Enterprise Group Incorporated (Enterprise) and its subsidiaries.
This discussion refers to the consolidated financial statements and related notes of Enterprise and should be read in conjunction with such statements and notes.
Overview Enterprise has two wholly-owned subsidiaries, Public Service Elec-tric and Gas Company (PSE&G) and Enterprise Diversified Hold-ings Incorporated (Holdings). Enterprise's principal subsidiary, PSE&G, is an operating public utility providing electric and gas service in certain areas in the State of New Jersey. Holdings is the parent of Enterprise's nonutility businesses: Public Service Re-sources Corporation (PSRC), which makes diversified passive in-vestments; Energy Development Corporation (EDC), an oil and gas exploration, development and production company; Community Energy Alternatives Incorporated (CEA), an investor in and devel-oper of cogeneration and small power production facilities; and Enterprise Group Development Corporation (EGDC), a diversified nonresidential real estate development and investment business.
Holdings also has two subsidiaries that provide debt financing:
PSE&G Capital Corporation (Capital), and Enterprise Capital Fund-ing Corporation (Funding). As of December 31, 1991, PSE&G com-prised 81 % of Enterprise's assets, 94 % of Enterprise's revenues and 95% of Enterprise's net income.
Rate Matters - Base Rates On November 14, 1991, PSE&G petitioned the Board of Regulatory Commissioners of the State of New Jersey (BRC) for a $669 million increase in its electric and gas base rates, based on a test year of the twelve months ending June 30, 1992. The overall 13.6% request calls for an electric revenue increase of $507 million or 14.9%, and a gas revenue increase of $162 million or 10.7%. The petition also asks the BRC to approve a return on common equity of 13.25% and a return on rate base of 10.89%. PSE&G is currently allowed a 13%
return on common equity and 10.65% return on rate base. As of February 1993, PSE&G's current base rates will have been in effect for over six years, except for minor revisions to reflect tax law changes. Adequate and timely rate relief is needed by PSE&G to earn a reasonable return and maintain current credit ratings. Any rate relief is not expected to be effective until late 1992 at the earli-est. (See Note 2 -
Rate Matters of Notes to Consolidated Financial Statements.)
PSE&G Energy and Fuel Adjustment Clauses PSE&G has fuel and energy tariff rate adjustment clauses which are designed to permit adjustments for changes in electric energy and gas supply costs, as approved by the BRC, when compared to levels included in base rates. Charges under the clauses are based upon energy and gas supply costs which are normally projected over twelve-month periods. The changes in the Levelized Gas Adjustment Clause (LGAC), and the electric Levelized Energy Adjustment Clause (LEAC) do not directly affect earnings because such costs
are adjusted monthly to match amounts recovered through revenues.
However, the carrying of underrecovered fuel costs ultimately in-creases financing costs. Under the clauses, if actual costs differ from the costs recovered, the amount of the underrecovery or over-recovery is deferred and is reflected in the average cost used to determine the fuel and energy tariff rate adjustment for the period in which it is recovered or repaid. In addition, actual costs otherwise includable in the LEAC are subject to adjustment by the BRC in accordance with PSE&G's nuclear performance standard.
PSEr.G Gas Plant Remediation Program The overall costs of investigation and remediation of PSE&G's former manufactured gas plant sites (Remediation Costs) cannot be reasonably estimated, but experience to date indicates that costs of at least $20 million per year could be incurred for a period of more than 20 years and the overall costs could be material. In accordance with a Stipulation approved by the BRC on January 21, 1992, PSE&G will recover $15.9 million of such Remediation Costs during the 1991-92 LGAC period and $7.9 million in each of its next four LGAC periods ending in 1996, net of insurance recoveries. The current base rate case will evaluate the reasonableness and regulatory treat-ment of the Remediation Costs covered by this Stipulation. As of December 31, 1991, PSE&G had incurred $28 million of such Reme-diation Costs and recorded a liability of $108 million for 1992-1995.
Any reasonable estimate of Remediation Costs to be incurred beyond this time cannot be made. Absent insurance recovery, denial of the recovery of any unamortized balance of such costs by the BRC would require an immediate write-off. (For additional information see Note 11 -
Commitments and Contingent Liabilities -
PSE&G Manufactured Gas Plant Remediation Program, of Notes to Consoli-dated Financial Statements.)
Consolidated Tax Benefits The BRC does not directly regulate Enterprise's nonutility activities.
However, in a case in which neither Enterprise nor PSE&G were parties, the BRC approved a settlement that treats certain tax losses generated by nonutility businesses and included in the consolidated return of a utility holding company as a reduction of that utility's rate base. Historically, the Internal Revenue Service (IRS) had taken the view that such action would violate its normalization rules, but has apparently withdrawn from this position. The recognition of any portion of the consolidated tax losses in setting utility rates would reduce PSE&G's revenues and net income and therefore result in a reduction of the net income of Enterprise. Enterprise believes that PSE&G's taxes should be treated on a stand-alone basis for ratemak-ing purposes, based on the separate nature of the utility and non-utility businesses and prior BRC decisions. However, neither Enterprise nor PSE&G is able to predict what action, if any, the IRS or the BRC may take concerning consolidation of tax benefits, or the effect, if any, on Enterprise or its affiliates of any such action.
New Jersey Gross Receipts Taxes PSE&G, as well a all other New Jersey electric and gas utilities, pays a New Jersey Gross Receipts and Franchise Tax (NJGRT) that, in effect, adds approximately 13% to the bills of most utility cus-tomers and creates a competitive advantage for nonutility generators and supplit::rs. Increased access of large volume electric and gas customers to nonutility sources not subject to NJGRT, including cogeneration and gas transportation service, could result in a signifi-cant decrease in PSE&G's revenues and earnings. On June 30, 1991,
New Jersey enacted legislation that, effective January 1, 1992, r placed the revenue based NJGRT with a unit tax based on electric kilowatthour sales and gas therm sales. Over a period of several years, this unit based tax should diminish the competitive advantage alternative energy suppliers enjoy over utilities in New Jersey. For additional information see Liquidity and Capital Resources -
Capital Requirements -
PSE&G.
Net Income Earnings per share of common stock were $2.43 in 1991, $2.56 in 1990 and $2.62 in 1989. The changes are summarized as follows:
(Millions of Dollars except per share amounts)
PSE&G Revenues (net of fuel costs and gross receipts taxes)
Capacity deficiency credit Other operation expenses Maintenance expenses Depreciation and Amortization expenses Interest charges Federal income taxes Other taxes Other income and expenses Total Holdings Net Income Effect of additional shares of Enterprise common stock issued Total 1991 vs. 1990 1990 VS. 1989 Cents Cents Amount per Share Amount per Share
$ 147
$.68 (1 1)
(.05)
(23)
(.10)
(29)
(. 14)
(2 1)
(. 10)
(14)
(.07)
(53)
(.24) 7
.03 5
.03 8
.04 (6)
(.03)
$ 2
.01
(. 14)
$(.13)
$ 32 11 (55) 30 (17)
(10) 4 (7) 5 (7) 7
$.15
.05
(.26)
.15
(.08)
(.05)
.02
(.03)
.02
(.06)
$(.06)
The Average Shares of Common Stock Outstanding were 223,565,239 for 1991, 211,981,434 for 1990 and 206,878,500 for 1989.
PSEr.G The increase in PSE&G's net income during 1991 was due principally to increased revenues resulting from a 3.1 % increase in electric kilowatthour sales resulting from the warmer weather during the second and third quarters of 1991 and an increase of 14.5% in gas therm sales resulting from the cooler weather during the first quarter of 1991. Partially offsetting the increase in revenues were higher federal income taxes, higher maintenance costs due to a refueling outage at Hope Creek nuclear generating station, higher nuclear production expenses, labor and employee benefits costs, interest charges and depreciation and amortization expenses. The increase in net income, being principally due to weather-related sales, is not necessarily indicative of future results. Any increase in future earn-ings will be principally dependent on increased sales and rate relief, neither of which can be assured.
22 The decrease in earnings in 1990 compared to 1989 was due primarily to lower electric kilowatthour sales in 1990 of 1.5% r.
suiting principally from the cooler summer weather, when com to 1989, and a decrease in firm gas revenues of 10.7% due to the 1990 warm weather, higher labor and pension costs, uncollectible customer accounts, interest expense and depreciation and amortiza-tion expenses.
r discussion of certain other matters that may affect future net income, see Note 11 -
Commitments and Contingent Liabilities of Notes to Consolidated Financial Statements.
Holdings The net income of Holdings was $28 million in 1991, a decrease of
$6 million from 1990, and represented 5% of Enterprise's 1991 net income. The decrease in Holding's net income was due primarily to lower net income at EDC of$16 million resulting from curtailment of natural gas sales due to lower prices and a $5 million increase in EGDC's net loss, principally due to a property write-off. Partially offsetting this decrease was PSRC's higher net income of $14 mil-lion, principally resulting from increased income on its investments.
EDC sells a significant portion of its gas in the spot market. Spot market prices for natural gas during 1991 dropped to a 15-year low.
Such prices are generally affected by supply and demand, competing energy sources (such as oil), and seasonal factors, including weather.
As a result of low gas prices during 1991, EDC significantly cur-tailed its natural gas sales. Prices during 1992 are expected to re-main depressed and further curtailments may occur. Continuation of the soft natural gas market could result in EDC being required to write down a portion of the book cost of its reserves in the future, which write-down could be material.
For information concerning PSRC's $34 million investment in Second National Federal Savings Bank, see Note 11 -
Commit-ments and Contingent Liabilities -
Public Service Resources Cor-
.on of Notes to Consolidated Financial Statements.
DC continues to see a deterioration of the real estate market ally, including a softening of demand for rentable space in many of the markets in which it operates. EGDC management ex-pects the resulting downward trend in rental rates combined with fixed or increasing operating costs, to continue to negatively impact earnings, to require additional funding of project loans to meet debt covenants and to reduce future gains, if any, upon any disposition of properties. For information concerning the acceleration of a nonre-course loan to a partnership project in which EGDC has invested approximately $26 million, see Note 11 -
Commitments and Con-tigent Liabilities -
Enterprise Group Development Corporation of Notes to Consolidated Financial Statements.
Source of 1991 Revenues Per Dollar
.68 Electric Revenues
.26 Gas Revenues
.06 Diversified Revenues Distribution of 1991 Revenues Per Dollar
.28 Fuel, Purchased Power & Gas
.18 Taxes
.13 Materials and Services
.13 Reinvested in Business
. IO Dividends
.09 Salaries & Wages
.09 Interest 23 The net income of Holdings was $34 million in 1990 and $27 million in 1989, representing approximately 5% of Enterprise's net income in each of those years. Holding's net income increased dur-ing 1990 compared to 1989 due primarily to EDC's higher produc-tion and sales of natural gas resulting from its acquisition of a gas and oil company in November 1989 and the acquisition of producing natural gas wells in late 1990, partially offset by voluntary curtail-ments of gas production and sales by EDC due to low gas prices beginning during 1990 and by lower net income of PSRC due to a lower return on investments and higher interest expense.
Holdings has adopted a business strategy whereby asset growth will be held to existing capital commitments and asset replacement, as the nonutility subsidiaries concentrate on improving operations and managing existing portfolios in an effort to increase profitability.
Future earnings will be dependent on a number of factors, including those discussed above. (For additional information, see Liquidity and Capital Resources.)
Dividends The ability of Enterprise to declare and pay dividends is contingent upon its receipt of dividend payments from its subsidiaries. PSE&G has made regular cash payments to Enterprise in the form of divi-dends on outstanding shares of its common stock since Enterprise was formed in 1986. Dividends paid to holders of Enterprise's Com-mon Stock increased $34 million during 1991 compared to 1990 and
$18 million during 1990 compared to 1989. The increase in dividend payments during 1991, 1990 and 1989 was due to the issuance of additional shares of Enterprise Common Stock and a one cent per share increase in the quarterly rate of dividends paid in each of those years.
Revenues PSE&G - Electric Revenues increased $168 million or 5.0% during 1991; 1990 revenues increased $53 million or 1.6% compared to 1989. The significant components of these changes follow:
Increase or (Decrease)
(Millions of Dollars) 1991 VS. 1990 1990 vs. 1989 Ki lowatthour sales
$ 77
$( 16)
Peach Bottom revenue credits
( I) 50 Changes in base rates (TRA-86) 25 24 Recovery of energy costs 49 (4)
Gross receipts taxes ( JGRT) 19 5
Other revenues
( I)
(6)
Total Electric Revenues
$168
$ 53 1991 -
Revenues increased in 1991 primarily due to a 3.1 % increase in kilowatthour sales resulting from cooler winter weather and warmer spring and summer weather compared with 1990. The higher recovery of energy costs and higher gross receipts taxes are both a result of the higher sales volume, while base rate increases effective September 5, 1990 and January 1, 1991 reflect the expira-tion of the amortization related to the Tax Reform Act of 1986 (TRA-86). (See Note 2 -
Rate Matters of Notes to Consolidated Financial Statements.)
1990 -
Revenues increased in 1990 compared to 1989 as a result of completion of refunds of revenue credits to customers in 1989 in accordance with a 1989 BRC Stipulation applicable to the extended outage of the Peach Bottom nuclear generating station, the end of
revenue credits attributable to the TRA-86 and the increase in base rates, effective September 5, 1990.
Changes in kilowatthour sales by customer category are described below:
Residential Commercial Industrial Increase or (Decrease) 1991 vs. 1990 6.4%
- 3. 2 (0 5) 1990 vs. 1989 (08)%
0.6 (5.8) 1991 -
The 3. 1 % rise in total kilowatthour sales in 1991 was due primarily to weather-sensitive sales. The residential and commercial categories were also bolstered by the slight increase in average cus-tomers. The industrial sector continued to decline due to the effect of the economic recession and increased competition from nonutility generators.
1990 -
Total kilowatthour sales declined 1.5% in 1990 compared to 1989 resulting from the loss of weather-sensitive sales due to warmer winter weather and cooler summer weather during 1990.
The industrial sector decrease reflected the slowdown of New Jersey's economy, the loss of two large customers to cogeneration competitors in July and September 1989, the temporary scheduled shutdown of a major customer's faci lity from April to July 1990 and the loss of one wholesale customer.
PSE&G-Gas Revenues increased $71 million or 5.7% during 1991; 1990 revenues decreased $126 million or 9.2% compared to 1989. The significant components of these changes follow:
(Millions of Dollars)
T herm sales Changes in base rates (TRA-86)
Recovery of fuel costs Gross receipts taxes (NJGRT)
Other operating revenues Tota 1 Gas Revenues Increase or (Decrease) 1991 vs. 1990
$31 5
17 7
II
$7 1 J 990 VS. 1989
$(31)
(87)
(20) 12
$( 126) 1991 -
Revenues increased due to the 14.5% rise in therms sold or transported. Colder weather enhanced fi rm gas sales. In addition, therm sales for cogeneration and gas transported for others increased significantly over 1990. Recovery of fuel costs reflected an increase in the LGAC charge coupled with a higher level of therm sales.
Higher NJGRT were the result of the higher level of therm sales.
Other operating revenues, primarily revenues from gas transported for others, increased as the volume of gas transported more than doubled.
1990- Revenues declined as a result of 6.3% lower therms sold or transported due to the record-setting warm weather in 1990. Par-tially offsetting this decrease in therm sales was an increase in other operating revenues, primarily resulting from the sale of gas to two cogeneration plants and an increase in customers.
Changes in therm sales by customer category are described below:
Residential Commercial Industrial Transportation Service Increase or (Decrease) 1991 vs. 1990 4.0%
6.6 17.0 109.5 1990 VS. 1989
( 12.5)%
(4.0)
(0.4) 21.7 1991 -
Total therm sales, including transportation service, were 14.5% above last year. Weather-sensitive residential and commercial sales increased due to the colder weather in 1991. Interruptible sales in the commercial and industrial classifications were down reflecting movement of some customers to the transportation service sales category. Cogeneration sales in the commercial and industrial cate-gories increased 22.0% and 93.4%, respectively. In addition, there was an increase in the use of gas by fi rm commercial customers and residential customers with heating. Cogeneration sales during 1991 comprised 19.4% of commercial sales and 45.6% of industrial sales.
Transportation service sales more than doubled reflecting both customer growth this year and resolution of the prior year's pipeline supply constraints.
1990- Total therm sales, including transportation service, were reduced from 1989 due to the record-setting warm winter weather.
The industrial sales decrease was due to the slowdown in the manu-facturing sector of New Jersey's economy and the movement of some customers to transportation service. Industrial cogeneration sales increased 65.1 % and comprised 27.6% of industrial sales in 1990.
24 Electric Kilowatthour Sales Percent 26.9 27.1 28.0 89 90 91 Residential Industrial Commercial Nonutility Activities Gas Therm Sales Percent 50.8 35.3 89 90 Residential Commercial 48.2 46.9 36.8 36.7 91 Industrial Revenues increased $54 million in 1991 over 1990 and $68 million in 1990 over 1989. EDC was the largest contributor to higher reve-nues in both 1991 and 1990 as its gas sales continued to increase despite voluntary curtailments resulting from depressed spot market prices for gas. (See Net Income -
Holdings.) PSRC's income from investments contributed significantly to Holdings' increased reve-nues during 1991. CEA's modest increase in revenues was due to higher project income. EGDC's revenues for 1991 declined from 1990 as losses from partnerships increased from the prior year.
The increase in revenues during 1990 over 1989 was due prim.
to EDC's increased sales of natural gas and oil resulting from its acquisition of a gas and oil company in November 1989 and the acquisition of producing gas leases in Louisiana in October 1990, and PSRC's higher investment income.
Electric energy costs increased $64 million or 9% in 1991 compared to 1990 and decreased $23 million or 3% in 1990 compared to 1989.
The significant components of these changes follow:
(Millions of Dollars)
Change in prices paid for fuel and power purchases Kilowatthour generation Adjustment of actual costs to match recoveries through revenues (A)
Total Electric Energy Costs Increase or (Decrease) 1991 vs. 1990
$122 17 (75)
$ 64 1990 vs. 1989
$(55)
(13) 45
$(23)
(A) Reflects the change in the deferred overrecovered energy costs, which in the years 1991, 1990 and 1989 amounted to $5 million, $80 million and $35 million.
respectively. (See PSE&G Energy and Fuel Adjustment Clauses.)
1991 -
The increase was primarily due to increased weather-sensi-tive load with a corresponding megawatthour increase of 3% over 1990 due to purchase power agreements with other utilities and cogeneration purchases.
1990-The decrease was primarily due to the weather and the economic slowdown in New Jersey and PSE&G's ability to optimize its mix of internal energy sources.
Supply Costs upply costs increased $10 million or 2% in 1991 and decreased
$84 million or 12% in 1990. The significant components of these changes follow:
(Millions of Dollars)
Change in prices paid for gas supplies Therm sendout Refunds from pipeline suppliers Adjustment of actual costs to match recoveries through revenues (A)
Total Gas Supply Costs Increase or (Decrease) 1991 vs. 1990
$(26) 54 40 (58)
$ 10 1990 VS. J989
$( 18)
(69)
(9) 12
$(84)
(A) Reflects the change in the deferred (underrecovered)/overrecovered gas supply costs, which in the years 1991, 1990 and 1989 amounted to $(32) million, $26 million and $14 million, respectively. (See PSE&G Energy and Fuel Adjustment Clauses.)
1991 -
The increase was due to weather-sensitive firm sales, in-creased sales to cogenerators and higher volumes of transported gas.
1990- Gas supply costs declined primarily due to the warmer winter and spring weather.
Liquidity and Capital Resources Overview Enterprise's liquidity is affected by maturing debt, Holdings' invest-ments and acquisition activities and the capital requirements of G's construction program. Capital resources available to meet equirements depend upon general and regional economic tions, PSE&G's customer growth, the adequacy of timely rate relief to PSE&G and continued access to the capital markets.
25 Capital Requirements PSE&G For 1991, PSE&G had utility plant additions, excluding allowance for funds used during construction (AFDC) of $783 million, a de-crease of $151 million versus 1990 additions of $934 million. 1990 additions increased $290 million over 1989 additions of $644 mil-lion. The increase in 1990 reflects the acquisition of a 42.49% undi-vided interest in nuclear fuel for Peach Bottom by PSE&G's wholly-owned subsidiary, PSE&G Fuel Corporation (Fuelco) for $156.7 million on June 29, 1990. Allowance for funds used during con-struction for 1991, 1990 and 1989 amounted to $30 million, $34 million and $30 million, respectively. Construction funds were used to continue to improve PSE&G's existing power plants, transmission and distribution system, gas system and common faci lities. The construction expenditures from 1992 through 1996 are expected to aggregate $4.8 billion. (See Enterprise Construction, Investments and Other Capital Requirements Forecast below.)
PSE&G expects that it will be able to generate internally a major-ity of its capital requirements including construction expenditures over the next five years, assuming adequate rate relief. (See Rate Matters -
Base Rates and Note 2 -
Rate Matters of Notes to Con-solidated Financial Statements.)
Legislation effective January 1, 1992, wi ll phase in an accelera-tion of NJGRT unit tax during 1992-94, so that for 1994 and for each year thereafter PSE&G will be paying its estimated current year's NJGRT liability in April of such year. PSE&G currently pays its NJGRT in arrears during the year following the year of collection from customers in approximately three equal payments. This phase-in will require PSE&G to pay its 1991 NJGRT tax liability in April, 1992 with one payment and to pay approximately 150% of its esti-mated annual NJGRT liability in each of the years 1993 and 1994.
PSE&G has requested that the BRC allow for the timely recovery in rates from its electric and gas customers of any costs, primarily financing costs attributable to the acceleration of payments, asso-ciated with this legislation, although such recovery cannot be as-sured. (See New Jersey Gross Receipts Taxes.)
Holdings Holdings' investment in oil and gas property, plant and equipment increased by $100 million in 1991, compared to a $187 million increase in 1990. Holdings' investment in PSRC's investments in-creased by $232 million in 1991, compared to a $333 million in-crease in 1990. Holdings' investment in EGDC's real estate property and investments increased by $18 million in 1991, compared to a
$25 million increase in 1990.
PSRC is a limited partner in two leveraged buyout funds and is committed to make investments from time to time, upon the request of the general partner, in such amounts as the general partner may require up to an aggregate of $250 million. As of December 31, 1991, $134 million had been invested in such funds and $116 million remained as PSRC's unfunded commitment subject to call.
EGDC and three of the joint ventures in which it is a partner are also currently negotiating to extend or replace certain financings which are maturing before December 31, 1992. Such loans aggregate
$118.7 million, of which EGDC's share is $77.7 million. Failure to extend or replace existing nonrecourse loans at the currently out-standing loan balance, or at current interest rates, may result in an increase in the amount of capital which EGDC will require. For
a~di~i~~al information see Note 11 -
Commitments and Contingent Liab1ht1es -
Enterprise Group Development Corporation of Notes to Consolidated Financial Statements.
CEA's projects are financed with construction and term loans which are typically nonrecourse to the partners. In certain instances the partn~rships may need to refund and replace loans (typically construction loans) as they mature. Holdings has guaranteed CEA's 50% share ($80.6 million) of one such construction loan which m~tu_res March 31, 1992. Failure to extend or replace this loan in the ex1stmg amount when it matures may result in an increase in the amount of capital which CEA will require. In 1991, CEA and its partners converted a total of $238 million of debt from construction to nonrecourse term financing.
. Over the next several years, Holdings is expected to meet a major-ity of its capital requirements from operating cash flows. Holdings and i~s su?~idiaries will also be required to refinance maturing debt.
Any mab1hty to extend or replace maturing debt at current levels and interest rates may affect Holdings' future earnings and result in an increase in the cost of capital required by Holdings.
Holdings and each of its subsidiaries are subject to restrictive business and financial covenants contained in existing debt agree-me?ts and are required to not exceed various debt to equity ratios which vary from 3: I to 2: I. Holdings is also required to maintain a twelve months earnings before interest and taxes to interest (EBIT) coverage ratio of at least 1.35: I. As of December 31, 1991, 1990, and 1989, Holdings had debt to equity ratios of 1.68: 1, I. 98: I and 1.98: 1 and, for the years ended on those dates, EBIT ratios of 1.39: I, 1.42: I and 1.41: I, respectively. Compliance with applicable financial co_venants will depend upon future levels of earnings, among other thmgs, as to which no assurance can be given. (See Net Income -
Holding~ and Enterprise Construction, Investments and Other Capi-tal Reqmrements Forecast and Note 5 -
Schedule of Consolidated Long-Term Debt and Note 10- Short-Term Debt (Commercial Paper and Loans) of Notes to Consolidated Financial Statements.)
Enterprise Construction, Investments and Other Capital Requirements Forecast The estimated construction, including Allowance for Funds Used during Construction (AFDC), investments and other capital require-ments of PSE&G and Holdings for 1992 through 1996 are based on expected project completion dates and include anticipated escalation due to inflation of approximately 4% for utility projects and are as follows:
(Millions of Dollars)
PSE&G Electric Nuclear Production Facilities Nuclear Fuel Transmission and Distribution Other Production Total Electric Gas Production Facilities Transmission and Distribution Total Gas 1992 1993 147
$ 135 95 92 266 271 246 358 754 856 10 2
140 122 150 124 1994 1995 1996 Total 108
$ 118
$ 114
$ 622 79 108 102 476 252 250 252 1,291 330 194 300 1,428 769 670 768 3,8 17 4
2 2
20 125 115 120 622 129 117 122 642 Miscellaneous Corporate 65 67 64 66 Total Construction Requirements of PSE&G (including AFDC) (A) 969 1,047 962 853 964 4,795 Holdings Investments of Non-utility Subsidiaries (including Capitalized Interest) 78 210 195 187 102 772 Mandatory Retirement of Securities:
PSE&G 418 212 212 62 363 1,267 Holdings 2
201 206 259 91 759 420 413 418 321 454 2,026 Working Capital and Other
-net 114 270 214 40 20 658 Total Capital Requirements
$1,581
$1,940
$1,789
$ 1,401 $ 1,540
$8,251 (A) PSE&G's AFDC (included above) 38 53 71 41 37
$ 240 While the above estimate includes capital costs to comply with revised Clean Air Act (CAA) requirements through 1996, it does not include additional requirements being developed under the CAA by Federal and State agencies. Such additional costs cannot be reason-ably estimated at this time, but could be material. PSE&G will re-quest the BRC to allow the recovery of all such CAA costs from electric customers.
Not included in PSE&G's estimated construction expenses is.
capital cost of compliance with the New Jersey Department of ronmental Protection (now known as the Department of Environ-mental Protection and Energy (NJDEPE) Draft Permit issued October 3, 1990 pursuant to the Federal Water Pollution Control Act with respect to Salem Generating Station which, if adopted as pro-posed, would require the immediate shutdown of both Salem Units pending retrofitting the Station with cooling towers. PSE&G believes that cooling towers are not needed and cannot be legally required 26 and is prepared to pursue all available legal remedies. Nevertheless, if cooling towers are ultimately required, PSE&G estimates that it would take at least four years, and between $1 billion and $2.7 billion in capital, operation and maintenance costs and replacement power costs to retrofit Salem with cooling towers. PSE&G owns 42.59% of Salem and would be responsible for its share of such costs. PSE&G will request the BRC to allow the recovery in rates from electric customers of all costs associated with constructing cooling towers at Salem.
Also n~t included are any expenditures that may be necessary to comply with any new regulatory requirements and to address public concerns associated with electric and magnetic fields, which amounts cannot be determined at this time, but could be material.
See also Note 11 -
Commitments and Contingent Liabilities of Notes to Consolidated Financial Statements.
Internal Generation of Cash from Operations Although net income increased $2 million (See Net Income and Revenues), Enterprise's net cash provided by operating activit *. e decreased $82 million to $1.21 l billion for 1991 from 1990.
decrease was primarily due to decreases in accounts payable, nat gas refunds to customers and increases in accounts receivable. Par-tially offsetting these cash outflows were decreases in fuel and ma-terials and supplies inventories, increases in deferred income taxes and smaller decreases in accrued taxes.
1990, Enterprise's net cash provided by operating activities increased $159 million from 1989 to $1.293 billion. This increase was primarily due to increased collections of accounts receivable and the greater recovery of electric energy and gas costs through PSE&G's LEAC and LGAC. Partially offsetting these cash inflows were increases in fuel and materials and supplies inventories, de-creases in accrued taxes, and decreased proceeds from PSRC's leasing activities.
External Financings Cash Flows from Financing Activities (Millions of Dollars) 1991 1990 1989 Enterprise:
Issuance of Common Stock (A)
$ 219
$ 185
$ 148 Cash Dividends paid on Common Stock (476)
(442)
(424)
PSE&G: (B)
Net (decrease) increase in Short-Term Debt (32 l)(C) 159(C) 138 Issuance of Long-Term Debt 750(D) 250 100 Redemptions of Long-Term Debt and Other Obligations (17 1)
(57)
(59)
Other 5
6 6
Total PSE&G 263 358 185 Holdings:(E)
Net (decrease) increase in Short-Term Debt (49) 56 88 Issuance of Long-Term Debt 264 245 286 Redemptions of Long-Term Debt (82)
Other 4
133 301 378 et cash provided by financi ng activities
$ 139
$ 402
$ 287 (A) During 1991, Enterprise issued and sold 5,000,000 shares of Common Stock through a public offering through underwriters and 3,228,647 shares of Common Stock through its Dividend Reinvestment and Stock Purchase Plan (DRIP). The net proceeds were used to make equity investments in PSE&G and Holdings. PSE&G and Holdings utilized such funds provided to repay a portion of their respective short-term debt obligations then outstanding. Enterprise expects to consummate the sale of 5,000,000 additional shares of its Common Stock, shortly. The net proceeds from such sale will be used by Enterprise to make additional equity investment in PSE&G.
PSE&G expects to utilize funds provided by such investment to repay a portion of its short-term obligations then outstanding. Enterprise has authorized 5,719,389 aggregate shares of Common Stock for issuance and sale under its DRIP and various PSE&G employee benefit plans. Enterprise expects to receive approximately $80 million from the sale of such shares during 1992. Book value per share of Common Stock was
$21.01 as of December 31, 1991 compared to $20.44 as of December 31, 1990. (See Note 3 -
Schedule of Consolidated Capital Stock of Notes to Consolidated Financial Statements.)
(B) At December 31, 1991, PSE&G could issue an additional $2.828 billion of First and Refunding Mortgage Bonds (Bonds) at a rate of 8.590% or $2.740 billion of Preferred Stock at a rate of 8.0% under the terms of PSE&G's Mortgage and Restated Certificate of Incorporation. On January 9, 1992, PSE&G filed a petition with the BRC requesting the authorization to issue an additional $1.650 billion principal amount of Bonds through December 31, 1993. PSE&G currently has effective shelf registration statements filed with the SEC (with related BRC authorization) to issue and sell not more than $250 million of Bonds and $170 million aggregate par value of Preferred Stock.
PSE&G has BRC authorization to redeem up to $288 million aggregate principal amount of certain series of its Bonds through December 31, 1992 and has requested authority to redeem up to $821 million of certain other series of Bonds and Debenture Bond s~~a~ugh December 31, 1993. Such redemptions would be made only if ing February 1992, the BRC raised the amount of short-term debt that PSE&G orized to issue and have outstanding from $500 million to $800 million (exclu-f commercial paper of Fuelco, described in note (C) below). PSE&G has a $600 million revolving credit agreement with a group of commercial banks which expires in December 1992. As of December 31, 1991 there was no short-term debt outstanding thereunder. PSE&G expects to be able to renew this facility upon expiration.
27 (C) Includes commercial paper issued and/or redeemed by Fuelco and guaranteed by PSE&G pursuant to a $200 million commercial paper program supported by a bank revolving credit facility to finance the acquisition of a 42.49% undivided interest in the nuclear fuel acquired for Peach Bottom.
(D) In June and November 1991, PSE&G issued $300 million and $450 million, respectively, of Bonds. The net proceeds of the sales were used by PSE&G for general corporate purposes, including payment of a portion of its short-term obligations, and the refunding of certain higher-cost debt securities.
(E) Funding has a $241 million commercial paper program supported by a commercial bank letter of credit and credit facility which expires on August 1992. As of December 31, 1991, Funding had $223 million outstanding under the program. In addition, Funding has a $300 million three-year revolving credit facility which currently termi-nates in 1993 with repayments due thereafter in four equal semi-annual payments. As of December 31, 1991, Funding had $200 million of long-term debt outstanding under this facility. Funding presently expects both the commercial paper program and the revolving credit facility to be renewed upon expiration.
In June 1991, Funding privately placed $151 million of its Guaranteed Senior Notes.
During 1991, Capital redeemed at maturity $80 million aggregate principal amount of its medium term notes, which had been issued in 1988. In November Capital privately placed $50 million of its 7.40% medium term notes due November 1994. The net proceeds to Funding and Capital were used to make intercompany loans to Holdings' nonutility subsidiaries. (See Note 5 of Notes to Consolidated Financial Statements -
Schedule of Consolidated Long-Term Debt.)
PSE&G's Customer Accounts Receivable At December 31, 1991and1990, PSE&G's customer accounts receiv-able were $377 million and $373 million, respectively, excluding unbilled revenues. The net write-off of PSE&G's uncollectible accounts in 1991 was $27 million, an increase of $1 million over the previous year. The net write-off per $100 of revenues was 59 cents, up 2 cents from 1990, primarily as a result of the deteriorating eco-nomic situation in New Jersey and lower availability of Low Income Home Energy Assistance Funds and other subsidized funding for low income customers than in previous years. The net increase in PSE&G's 1991 LEAC and LGAC billings, the continued economic slowdown in New Jersey and a BRC requirement prohibiting the termination of electric and gas service during winter months to financially needy customers is expected to continue to have an ad-verse impact upon the level of receivables, uncollectible accounts and net write-offs.
Effect of Inflation During the years 1987-1990 the rate of increase in the Average Consumer Price Index (CPI) moved steadily from 3.7% in 1987 to 5.2% in 1990. During 1991 the CPI increase slowed to 4.2%. Infla-tionary periods cause the purchasing power of the dollar to decline.
As a result, there is a negative impact on the operations of Enter-prise as the cost of replacing PSE&G 's utility plant would be higher than historical cost, the amount permitted to be recovered under the rate regulatory process. The historical costs reported in current financial statements represent dollars of varying purchasing power as such financial statements combine dollars spent at various times in the past with dollars currently being spent. PSE&G cannot auto-matically increase its rates to keep pace with inflation. The regula-tory process results in a time lag during which increased operating expenses are not fully recovered. PSE&G anticipates recovery of the increased cost of facilities when replacement actually occurs.
Other Matters For information concerning financial accounting standards that have been issued or proposed by the Financial Accounting Standards Board but not yet adopted by Enterprise, see Note 1 -
Organization and Summary of Significant Accounting Policies of Notes to Con-solidated Financial Statements.
Financial Statement Responsibility Management of Enterprise is responsible for the preparation, integ-rity and objectivity of the consolidated fi nancial statements and related notes of Enterprise. The consolidated financial statements and related notes are prepared in accordance with generally accepted accounting principles. The financial statements reflect estimates based upon the judgment of management where appropriate. Man-agement believes that the consolidated financial statements and related notes present fairly and consistently Enterprise's fi nancial position and results of operations. Information in other parts of this Annual Report is also the responsibility of management and is con-sistent with these consolidated financial statements and related notes.
The fi rm of Deloitte & Touche, independent certified public accountants, is engaged to audit Enterprise's consolidated fi nancial statements and related notes and issue a report thereon. Deloitte &
Touche's audit is conducted in accordance with generally accepted auditing standards and includes a review of internal accounting controls and tests of transactions. Management has made available to Deloitte & Touche all the corporation's fi nancial records and related data, as well as the minutes of directors' meetings. Further-more, management believes that all representations made to Deloitte
& Touche during their audit were valid and appropriate.
Management has established and maintains a system of internal accounting controls to provide reasonable assurance that assets are safeguarded, and transactions are executed in accordance with man-agement's authorization and recorded properly for the prevention and detection of fraudulent fi nancial reporting so as to maintain the integrity and reliability of the fi nancial statements. The system is designed to permit preparation of consolidated fi nancial statements and related notes in accordance with generally accepted accounting principles. The concept of reasonable assurance recognizes that the costs of a system of internal accounting controls should not exceed the related benefits. Management believes the effectiveness of this system is enhanced by an ongoing program of continuous and selec-tive training of employees. In addition, management has communi-cated to all employees its policies on business conduct, assets and internal controls.
The Internal Auditing Department conducts audits and appraisals of accounting and other operations and evaluates the effectiveness of cost and other controls and recommends to management, where appropriate, improvements thereto. Management has considered the internal auditors' and Deloitte & Touche's recommendations con-cerning the corporation's system of internal accounting controls and has taken actions that are cost-effective in the circumstances to respond appropriately to these recommendations. Management believes that, as of December 31, 1991, the corporation's system of internal accounting controls is adequate to accomplish the objectives discussed herein.
The Board of Directors carries out its responsibility of financial overview through the Audit Committee, which presently consists of five directors who are not employees of Enterprise. The Audit Com-mittee meets periodically with management as well as with repre-sentatives of the internal auditor and Deloitte & Touche. The Committee reviews the work of each to ensure that their respective responsibilities are being carried out and discusses related matters.
Both the internal auditors and Deloitte & Touche periodically meet alone with the Audit Committee and have free access to the Audit Committee, and its individual members, at any time.
28 E. James Ferland Chairman of the Board, President and Chief Executive Officer Richard E. Hallett Vice President and Comptroller Principal Accounting Officer February IO, 1992
~~~3:-
Yice President and Chief Financial Officer
Independent Auditors' Report Deloitte&
Touche To the Stockholders and Board of Directors of Public Service Enterprise Group Incorporated:
We have audited the accompanying consolidated balance sheets of Public Service Enterprise Group Incorporated and its subsidiaries as of December 31, 1991 and 1990, and the related consolidated state-ments of income, retained earnings, and cash flows for each of the three years in the period ended December 31, 1991. These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial state-ments based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and per-form the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reason-able basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Public Ser-vice Enterprise Group Incorporated and its subsidiaries at December 31, 1991 and 1990, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1991 in conformity with generally accepted accounting principles.
Deloitte & Touche February 10, 1992 Parsippany, New Jersey 07054 29
l Consolidated Statements of Income (Thousands of Dollars)
For the Years Ended December 31, Operating Revenues (note 2)
Electric Gas Nonutility Activities Total Operating Revenues Operating Expenses Operation Fuel for Electric Generation and Net Interchanged Power Gas Purchased and Materials for Gas Produced Other Maintenance Depreciation and Amortization (note 4)
Taxes Federal Income Taxes (note 8)
New Jersey Gross Receipts Taxes Other Total Operating Expenses Operating Income Other Income Allowance for Funds Used During Construction -
Equity Miscellaneous -
net (note 4)
Total Other Income Income Before Interest Charges and Dividends on Preferred Stock Interest Charges (note 5)
Long-Term Debt Short-Term Debt Other Total Interest Charges Allowance for Funds Used During Construction -
Debt and Capitalized Interest Net Interest Charges Preferred Stock Dividend Requirements Net Income Shares of Common Stock Outstanding End of Year Average for Year Earnings per Average Share of Common Stock Dividends Paid per Share of Common Stock See Notes to Consolidated Financial Statements.
30 1991
$3,500,043 1,307,849 285,318 5,093,210 781,191 636,058 840,017 315,372 612,820 265,456 583,071 60,855 4,094,840 998,370 7,092 15,024 22,116 1,020,486 437,701 35,000 12,576 485,277 (38,054) 447,223 29,012
$ 544,251 226,700,852 223,565,239
$2.43
$2.13 1990 1989
$3,332,417
$3,279,913 1,236,747 1,362,470 230,971 162,469 4,800,135 4,804,852 717,370 740,665 626,156 710,549 802,594 730,707 285,871 316,200 561,484 524,514 208,385 208,261 558,642 574,145 66,153 60,001 3,826,655 3,865,042 973,480 939,810 16,987 10,519 27,506 26,154 1,000,986 965,964 404,289 370,643 37,845 19,598 20,091 21,565 462,225 411,806 (32,529)
(16,991) 429,696 394,815 29,012 29,012
$ 542,278
$ 542,137 218,472,205 211,100,418 211,981,434 206,878,500
$2.56
$2.62
$2.09
$2.05
'olidated Statements of Cash Flows (Thousands of Dollars)
For the Years Ended December 31, Cash Flows from Operating Activities:
Net Income Adjustments to reconcile net income to net cash flows from operating activities:
Depreciation and Amortization Amortization of Nuclear Fuel (Deferral) Recovery of Electric Energy and Gas Costs -
net Amortization of Discounts on Property Abandonments and Disallowance Provision for Deferred Income Taxes -
net Investment Tax Credits -
net Allowance for Funds Used During Construction -
Debt and Equity and Capitalized Interest Proceeds from Leasing Activities Changes in certain current assets and liabilities Net (increase) decrease in Accounts Receivable and Unbilled Revenues Net decrease (increase) in Inventory-Fuel and Materials and Supplies Net (decrease) increase in Accounts Payable Net (decrease) increase in Accrued Taxes Net change in Other Current Assets and Liabilities Other Net cash provided by operating activities Flows from Investing Activities:
ons to Utility Plant, excluding AFDC ons to Oil and Gas Property, Plant and Equipment, excluding Capitalized Interest Net increase in Long-Term Investments and Real Estate Property and Equipment Increase in Decommissioning and Other Special Funds Cost of Plant Removal -
net Other Net cash used in investing activities Cash Flows from Financing Activities:
Net (decrease) increase in Short-Term Debt Issuance of Long-Term Debt Redemption of Long-Term Debt and Other Obligations Issuance of Common Stock Cash Dividends Paid on Common Stock Other Net cash provided by fi nancing activities Net (decrease) increase in Cash and Cash Equivalents Cash and Cash Equivalents at Beginning of Year Cash and Cash Equivalents at End of Year Income Taxes Paid Interest Paid See Notes to Consolidated Financial Statements.
31 1991
$ 544,251 612,820 96,420 (36,146)
(11,754) 115,281 (19,779)
(45,146) 17,463 (50,052) 61,369 (52,317)
(7,736)
(16,592) 2,633 1,210,715 (783,175)
(209,985)
(304,075)
(11,665)
(44,199)
(14,018)
(1,367,117)
(369,809) 1,013,794 (252,241) 218,736 (476,099) 4,616 138,997 (17,405) 60,491 43,086
$ 148,171
$ 436,994 1990 1989
$ 542,278
$ 542,137 561,484 524,514 89,03 1 63,394 105,992 60,023 (13,566)
(15,443) 74,678 70,541 (16,549)
(24,424)
(49,516)
(33,655) 14,785 56,561 66,835 (134,070)
(1 16,294)
(53,85 1) 94,162 72,543 (47,252) 33,262 (11,006) 3,009
( 1,662)
(30,498) 1,293,400 I, 134,043 (933,803)
(644,21 8)
(286, 169)
(378,555)
(339,60 1)
(337,909)
(23,86 1)
(57,952)
(9 1,627)
(49,327)
(42,678) 47,748
( I, 717, 739)
( 1,420,2 13) 214,535 225,7 17 495,000 386,270 (56,852)
(59,430) 185,428 147,63 1 (442,466)
(423,958) 5,935 10,78 1 401,580 287,0 11 (22,759) 841 83,250 82,409 60,491 83,250
$ 135,804 93,783
$ 397,785
$ 370,573
Consolidated Balance Sheets (Thousands of Dollars)
December 31, Assets Utility Plant -
Original cost Electric Gas Common Total Less Accumulated Depreciation and Amortization Net Nuclear Fuel in Service, net of accumulated amortization -
1991, $208,147; 1990, $196,098 Net Utility Plant in Service Construction Work in Progress, including Nuclear Fuel in Process -
1991, $143,881; 1990, $174,975 Plant Held for Future Use, net of accumulated depreciation -
1991, $ (Land); 1990, $27,322 Net Utility Plant Investments and Other Property (notes 6 and 11)
Long-Term Investments, net of valuation allowance -
1991, $15,355; 1990, $8,665 Oil and Gas Property, Plant and Equipment, net of accumulated depreciation and amortization -
1991 $615,224; 1990, $500,527 Real Estate Property and Equipment, net of accumulated depreciation -
1991, $7,402; 1990, $4,648; and valuation allowance -
1991, $1,341; 1990, $225 Other Plant, net of accumulated depreciation and amortization-1991, $2,987; 1990, $3,701 Nuclear Decommissioning and Other Special Funds Other Investments -
net Total Investments and Other Property Current Assets Cash and Cash Equivalents (note 7)
Accounts Receivable, net of allowance for doubtful accounts -
1991, $21,241; 1990, $19,642 Unbilled Revenues Fuel, at average cost Materials and Supplies, at average cost (note 4)
Prepayments Total Current Assets Deferred Debits (note 4)
Property Abandonments -
net Oil and Gas Property Write-Down (note 11)
Unamortized Debt Expense Deferred Take-or-Pay Gas Costs Unrecovered Environmental Costs (note 11 )
Unamortized Loss on Sale of Naphtha Other Total Deferred Debits Total See Notes to Consolidated Financial Statements.
32 1991 1990
$11,152,003
$10,609,121 1,894,497 1,777,285 433,346 392,987 13,479,846 12,779,393 4,035,832 3,739,673 9,444,014 9,039,720 179,095 190,092 9,623,109 9,229,812 537,228 576,904 22,244 67,065 10,182,581 9,873,781 1,616,644 1,294,843 895,066 794,979 154,615 139 20,457
~8,
117,422 69,326 69,110 2,873,530 2,412,871 43,086 60,491 518,492 505,663 241,102 203,879 219,569 242,515 240,999 279,422 61,085 55,058 1,324,333 1,347,028 171,286 200,704 64,985 78,431 49,644 54,206 17,849 23,939 136,235 23,729 2,700 6,300 1,226 2,321 443,925 389,630
$14,824,369
$14,023,310
(Thousands of Dollars)
December 3I, Capltalization and Liabillties Capltalizatlon (notes 3 and 5)
Common Equity Common Stock Retained Earnings Total Common Equity Subsidiaries' Securities and Obligations Preferred Stock Without Mandatory Redemption Long-Term Debt (note 5)
Capital Lease Obligations (note 9)
Total Capitalization Current Liabilities Long-Term Debt and Capital Lease Obligations due within one year Commercial Paper and Loans (note 10)
Accounts Payable New Jersey Gross Receipts Taxes Accrued Other Taxes Accrued est Accrued Deferred Credits Accumulated Deferred Income Taxes (note 8)
Depreciation and Amortization Leasing Activities Property Abandonments (note 4)
Oil and Gas Property Write-Down (note I I)
Deferred Electric Energy and Gas Costs -
net Unamortized Debt Expense Other Total Accumulated Deferred Income Taxes Accumulated Deferred Investment Tax Credits (note 8)
Deferred Take-or-Pay Gas Costs (note 4)
Unrecovered Environmental Costs (note 11)
Overrecovered Electric Energy and Gas Costs -
net (note 4)
Materials and Supplies (note 4)
Other Total Deferred Credits Co111111it111ents and Contingent Liabillties (note I l)
Total 33 1991 1990
$ 3,262,138
$ 3,043,402 1,501,085 1,421,611 4,763,223 4,465,013 429,994 429,994 5,128,373 4,668,024 53,617 54,073 10,375,207 9,617,I04 420,401 118,741 389,050 758,859 413,124 465,441 535,766 527,575 23,228 39,155 121,351 133,755 120,983 I 19,144 2,023,903 2,I62,670 1,334,395 1,204,384 233,599 192,038 83,287 94,870 30,911 37,304 (4,266)
(13,55 1) 13,466 14,864 17,939 22,580 1,709,331 1,552,489 464,710 484,489 12,511 23,939 107,990 1,365 37,511 36,188 51,712 93,164 93,396 2,425,259 2,243,536
$14,824,369
$14,023,310
Consolidated Statements of Retained Earnings (Thousands of Dollars)
For the Years Ended December 31, 1991 1990 1989 Balance January 1
$1,421,611
$1,332,739
$ 1,2 13,260 Add Net Income 544,251 542,278 542, 137 Total 1,965,862 1,875,017 1,755,397 Deduct Cash Dividends on Common Stock (A) 476,099 442,466 423,958 Adjustments to Retained Earnings (11,322) 10,940
( 1,300)
Total Deductions 464,777 453,406 422,658 Balance December 31
$1,501,085
$ 1,421,6 11
$ 1,332,739 (A) The ability of Enterprise to declare and pay dividends is contingent upon its receipt of dividend payments from its subsidiaries. PSE&G, Enterprise's principal subsidiary, has restrictions on the payment of dividends which are contained in its Charter. certain of the indentures supplemental to its Mortgage, and certain debenture bond indentures.
However, none of these restrictions presently limits the payment of dividends out of current earnings. The amount of PSE&G's restricted retained earnings at December 31, 1991 was $10 million.
See Notes to Consolidated Financial Statements.
34
es to Consolidated Financial Statements
- 1. Organization and Summary of Significant Accounting Policies Organization Public Service Enterprise Group Incorporated (Enterprise) has two wholly-owned subsidiaries, Public Service Electric and Gas Com-pany (PSE&G) and Enterprise Diversified Holdings Incorporated (Holdings). Enterprise's principal subsidiary, PSE&G, is a public utility operating in the State of New Jersey. Holdings was incorpo-rated on June 20, 1989, and on July 1, 1989 became the parent of Enterprise's nonutility subsidiaries: Public Service Resources Cor-poration (PSRC), Energy Development Corporation (EDC), Com-munity Energy Alternatives Incorporated (CEA), Enterprise Group Development Corporation (EGDC), and PSEG Capital Corporation (Capital). Enterprise Capital Funding Corporation (Funding), a wholly-owned subsidiary of Holdings, was also formed on June 20, 1989. PSE&G Fuel Corporation (Fuelco) was organized in June 1990, as a wholly-owned subsidiary of PSE&G.
Enterprise has claimed an exemption from regulation by the Secu-rities and Exchange Commission as a registered holding company under the Public Utility Holding Company Act of 1935, except for on 9(a~(2) which relates to the acquisition of voting securities electric or gas utility company. Also, Enterprise is not subject gulation by the New Jersey Board of Regulatory Commissioners (BRC) or the Federal Energy Regulatory Commission (FERC).
Consolidation Policy The consolidated fi nancial statements include the accounts of Enter-prise and its subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. Certain reclassi-fications of prior years' data have been made to conform with the current presentation.
Regulation - PSE&G The accounting and rates of PSE&G are subject in certain respects to the requirements of the BRC and FERC. As a result, PSE&G maintains its accounts in accordance with their prescribed Uni form Systems of Accounts, which are the same. The applications of gen-erally accepted accounting principles by PSE&G differ in certain respects from applications by nonregulated businesses.
Utility Plant and Related Depreciation - PSE&G Additions to utility plant and replacements of units of property are capitalized at original cost. The cost of maintenance, repairs and replacements of minor items of property is charged to appropriate expense accounts. At the time units of depreciable properties are retired or otherwise disposed of, the original cost less net salvage value 1s charged to accumulated depreciation.
r financ ~ a l reporting purposes, depreciation is computed under ra 1 g ht~ l me method. Depreciation is based on estimated average
. 111111g lives o_f the several classes of depreciable property. These estimates are reviewed on a periodic basis and necessary adjust-ments are made as approved by the BRC. Depreciation provisions stated 111 percentages of original cost of depreciable property were 3.48% 111 1991 and 1990, and 3.47% in 1989.
35 Nuclear Decommissioning Funds - PSE&G Depreciation applicable to nuclear plant includes estimated costs of decommissioning. At December 31, 1991 and 1990, the accumulated provision for depreciation and amortization included reserves for nuclear decommissioning of $155.5 million and $133.0 million. In accordance with orders from the BRC, PSE&G has established ex-ternal nuclear decommissioning trust funds for all nuclear units. The Internal Revenue Service (IRS) has ruled that payments into quali-fied funds are tax deductible. As of December 31, 1991 and 1990, PSE&G has contributed $93 million and $78 mil lion into external qualified and nonqualified nuclear decommissioning trust funds.
Amortization of Nuclear Fuel-PSE&G uclear energy burnup costs are charged to fuel expense on a units-of-production basis over the estimated li fe of the fuel. Rates for the recovery of fuel used at all nuclear units include a provision of one mill per kilowatthour of nuclear generation for spent fuel disposal costs, which is paid quarterly to the United States Department of Energy.
Revenues and Fuel Costs - PSE&G Revenues are recorded based on services rendered to customers during each accounting period. PSE&G records unbilled revenues representing the estimated amount customers will be billed for services rendered from the time meters were last read to the end of the respective accounting period.
Rates include projected fuel costs for electric generation, pur-chased and interchanged power, gas purchased and materials used for gas production.
Any under-or overrecoveries, together with interest, are deferred and included in operations in the period in which they are reflected in rates.
Oil and Gas Accounting - EDC EDC follows the full-cost method of accounting. Under this method, all exploration and development costs for successful and unsuccessful wells are capitalized and amortized on the units-of-production basis.
Long-Term Investments-Holdings PSRC_ has_ invested in marketable securities and limited partnerships 111vest111g 111 securities, which are stated at fair value, and various leases and other limited partnerships. (See Note 6 -
Long-Term Investments). EGDC is a participant in the nonresidential real estate markets. CEA is an investor and developer of cogeneration and small power production facilities.
Income Taxes Enterprise and its subsidiaries fi le a consolidated Federal income tax return and income taxes are allocated to Enterprise's subsidiaries based on taxable income or loss of each.
Deferred income taxes are provided for differences between book and taxable income. For PSE&G, deferred income taxes are pro-vided to the extent permitted for ratemaking purposes.
Investment tax credits are deferred and amortized over the useful lives of the related property including nuclear fuel.
In December 1987, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 96 (SFAS 96), "Accounting for Income Taxes," which requires the recognition of deferred tax liabilities adjusted for the effects of enacted changes in tax laws or rates. The effective date of SFAS 96 was for fiscal years beginning after December 15, 1988, subse-quently deferred to 1991. However, SFAS 108, Accounting for ~n come Taxes -
Deferral of the Effective Date of SFAS 96, was issued in December 1991 and defers the effective date of SFAS 96 to fiscal years beginning after December 15, 1992. FASB is continuing its deliberations and has issued an Exposure Draft (ED) that would also amend SFAS 96. The ED was issued in July 1991 and FASB is ex-pected to issue a Statement by the end of the second quarter of 1992.
As a result of the accounting and ratemaking requirements of the BRC and FERC, the primary effect of adopting SFAS 96 or the prosposed amendment upon Enterprise's financial reporting will be on the presentation of its financial position with minimal effect on its income statement.
Allowance for Funds Used During Construction (AFDC) and Capitalized Interest PSE&G -
AFDC represents the cost of debt and equity funds used to finance the construction of new utility facilities. The amount of AFDC capitalized is also reported in the Consolidated Statements of Income as a reduction of interest charges for the borrowed funds component and as other income for the equity funds component.
The rates used for calculating AFDC in 1991, 1990 and 1989 were 7.50%, 10.17% and 10.68%, respectively. These rates are within the limits set by the FERC.
Holdings -
The operating subsidiaries of Holdings capitalize costs allocable to construction expenditures at the cost of borrowed funds.
Pension Plan and Other Post* Employment Benefits The employees of PSE&G and participating affiliates completing one year of service are covered by a noncontributory trusteed pen-sion plan. The policy is to fund pension costs accrued. PSE&:G also provides certain health care and life insurance ben~~t s to active and retired employees. The portion of such costs pertammg to retirees amounted to $23, $22 and $22 million in 1991, 1990 and 1989, respectively. The current cost of these benefits is charged to expense when paid and is currently being recovered from ratepayers. (See Note 12-Pension Plan and Other Post-Employment Benefits.)
In December 1990, FASB issued Statement of Financial Account-ing Standards No. 106 (SFAS 106), "Employers' Accounting for Postretirement Benefits Other than Pensions" which requires employ-ers to change from a "cash basis" to an "accrual basis" of accounting for post-employment benefits. SFAS 106 is effective for fiscal years beginning after December 15, 1992.
As permitted by SFAS 106, Enterprise expects to elect a 20 y~ar transition option. Upon adoption of SFAS 106, PSE&G expects its annual net cost to increase by five to seven times over the 1991 cost level. It is believed that the increased post-employment costs result-ing from the adoption of SFAS 106 will be recovered by PSE&G through the normal regulatory process; however, the BRC has n~t yet issued an order regarding the proper accounting and ra~emaking treatment for such costs. Funding options that currently exist are being explored. The amount of unfunded liability is significant and partial rate recovery has been requested in PSE&G's pending b rate case as an initial transition.
Because of ratemaking requirements of the BRC and FERC, the primary effect of adopting SFAS 106 on ~nterpr.ise's fina?cial r~-.
porting is expected to be on the presentat10n of its fi.nancial pos1t1on with minimal effect on its income statement, assuming adequate and timely rate recovery.
- 2. Rate Matters Base Rates On November 14, 1991, PSE&G filed with the BRC a request for rate relief of $669 million ($507 million for electric and $162 million for gas) on an annual basis. Any rate relief is not expected to be ef~~c tive until late 1992 at the earliest. Included in the base rate pet1t1on are requests for recovery of increased depreciation and nuclear decommissioning costs reflected in detailed studies filed with the BRC during August 1991, recognition of cost of required changes associated with accounting for post-employment expenses, recovery of the 1986 write-down of the value of oil and gas reserves and the recovery of the cost of the gas plant remediation program, as well as the costs related to the acceleration of gross receipts tax payments resulting from recent legislation.
Electric Levelized Energy Adiustment Clause (LEAC)
On July 30, 1991, the BRC approved a Stipulation which provided that PSE&G maintain its current LEAC rates through Decembe __ '
1992. The Stipulation included the recovery by PSE&G of $20.
million, including interest, resulting from the delay in implemen
- a base rate increase related to the Tax Reform Act of 1986 (TRA-86) for the period January 1, 1990 through September 4, 1990.
Levelized Gas Adiustment Clause (LGAC)
On July 16, 1991, PSE&G filed a request with the BRC to continue its current LGAC rate through September 30, 1992, which matter remains pending. On October 24, 1991, the BRC approved an in-terim stipulation which permitted PSE&G to return a total of $56 million as credits to gas customer bills during November and De-cember 1991. On January 21, 1992, the BRC approved a Stipulation which provided for recovery of $15.9 million of PSE&G's former manufactured gas plant remediation costs (Remediation Costs) dur-ing the 1991-1992 LGAC period and a customer credit of $22 million during March 1992. During the next four LGAC periods ending with the 1995-96 LGAC, PSE&G will be allowed to recover $7.9 million of Remediation Costs for each period, net of insurance re-coveries. In connection with the base rate filing of November 14, 1991, the BRC will evaluate the reasonableness and regulatory treat-ment of the Remediation Costs covered by this Stipulation. (See
- Note 11 -
Commitments and Contingent Liabilities PSE&G Manu-factured Gas Plant Remediation Program.)
36
chedule of Consolidated Capital Stock (Thousands of Dollars)
Enterprise Common Stock Current Redemption Outstanding Price Shares Per Share Common Stock (no par) -
authorized 500,000,000 shares (note A); issued and outstanding at December 31, 1991, 226,700,852 shares, at December 31, 1990, 218,472,205 shares, and at December 31, 1989, 211,100,418 shares (5,000,000 shares issued for
$129,950,000 and 3,228,647 shares issued for
$88,785,528 through Dividend Reinvestment and Stock Purchase Plan (DRIP) in 1991; 5.000.000 shares issued for $126,500,000 and 2,371,787 shares issued for
$59,277,802 through DRIP in 1990: 5.750.000 shares issued for $147,631,250 in 1989.)
Enterprise Preferred Stock (note B)
PSE&G Cumulative Preferred Stock (note C)
Without Mandatory Redemption (note D)
$100 par value -
Series 4.08%
4.1 8%
4.30%
5.05%
5.28%
6.80%
7.40%
52%
08%
80%
70%
- 8. 16%
250,000 249,942 250,000 250,000 250,000 250,000 500,000 500,000 150,000 750,000 600,000 300,000 Total Cumulative Preferred Stock
$ 103.00 103.00 102.75 103.00 103.00 102.00 10 1.00 10 1.00 101.00 10 1.00 100.79 104.82 Notes to Schedule of Consolidated Capital Stock December 31,
1991 1990
$3,262,138
$3,043.402 25,000 24,994 25,000 25,000 25,000 25,000 50,000 50,000 15,000
.75,000 60,000 30,000 25,000 24,994 25,000 25,000 25,000 25,000 50,000 50,000 15,000 75,000 60,000 30,000
$ 429,994
$ 429,994 (A) Total authorized and unissued shares include 5,719.389 shares of Enterprise Common Stock reserved for issuance through the Dividend Reinvestment and Stock Purchase Plan and various PSE&G employee benefit plans.
(8 ) Enterprise has authorized a class of 50 million shares of Preferred Stock without par value, none of which is outstanding.
(C) There are 3,200,058 shares of Cumulative Preferred Stock ($100 Par) and 10,000,000 shares of Cumulative Preferred Stock - $25 Par which are authorized and unissued, and which upon issuance may or may not provide for mandatory sinking fund redemption.
If dividends upon any shares of Cumulative Preferred Stock are in arrears in an amount equal to the annual dividend thereon. voting rights for the election of a majority of PSE&G's Board of Directors become operative and continue until all accumulated and unpaid dividends thereon have been paid, whereupon all such voting rights cease, subject to being again revived from time to time.
As of December 31, 1991 and 1990 there were no shares outstanding of Cumulative Preferred Stock ($100 Par) with mandatory redemption and no shares outstanding of Cumulative Preferred Stock - $25 Par.
(D) At December 31, 1991 the annual dividend requirement and embedded dividend cost for Preferred Stock without mandatory redemption were $29,012,000 and 6.75%,
respectively.
- 4. Deferred Items Statement of Financial Accounting Standards No. 90 mortization of Discount on Property Abandonments and owances was $6.8 million for 1991; $7.7 million for 1990 and illion for 1989 and includes the effect on income of Statement ancial Accounting Standards No. 90 (SFAS 90) "Regulated Enterprises -
Accounting for Abandonments and Disallowances of Plant Costs',' as amended by Technical Bulletin No. 87-2 (TB). The tax effects of discounting of abandonments were calculated using the tax rates applicable to related deferred tax balances.
37 Property Abandonments The BRC has authorized PSE&G to recover the after-tax abandon-ment costs from its customers. The following table reflects the appli-cation of SFAS 90 and the TB on property abandonments for which no return is earned. The discount rate range used to calculate the present value of the abandoned property under SFAS 90 was be-tween 8.545% and 14.446%. The net-of-tax discount rate used in accordance with the TB was between 4.443% and 7.801 %.
(Thousands of Dollars)
December 31, 1991 1990 Discounted Discounted Property Abandonments Cost Taxes Cost Taxes Atlantic Project
$102,576
$43,111
$ 11 2,382
$47,238 Hope Creek Unit 2 33,115 26,147 47,396 31,588 LNG Project 18,903 7,172 22,389 8,534 Uranium Projects 16,111 6,857 17,686 7,510 Other 581 85 1
$171,286
$83,287
$200,704
$94,870 Under(Over)recovered Electric Energy and Gas Costs - Net Recoveries of electric energy and gas costs are determined by the BRC under the LEAC and LGAC. (See Note 2 -
Rate Matters.)
PSE&G's deferred fuel balances as of December 31, 1991 and December 31, 1990, reflect an overrecovery of $1.4 million and
$37.5 million, respectively, resulting from overrecovered LGAC and LEAC costs, less unamortized deferred replacement power costs for Salem nuclear generating stations.
Unamortized Debt Expense Costs associated with the issuance of debt by PSE&G are deferred and amortized over the lives of the related issues. Amounts shown in the Consolidated Balance Sheets consist of costs associated with PSE&G's reacquisition of First and Refunding Mortgage Bonds. The redemption costs of the tendered or redeemed debt have been de-ferred and are being amortized over the lives of the new securities issued to replace higher-cost securities. PSE&G expects to amortize
$5.7 million of these costs in 1992.
Deferred Take*or*Pay Gas Costs On January 19, 1990, the BRC approved a Stipulation entered into by PSE&G, the BRC staff, and the New Jersey Industrial Energy Users Association resolving all take-or-pay issues. Under the terms Capitalization 1987* 1991 In Billions 87 88 89 90 91 12
- Common Equity Preferred Stock Long-Term Debt 4.8 9
0.4 6
5.1 3
of the Stipulation all take-or-pay charges already collected were no longer subject to refund. The BRC permitted PSE&G to recover all take-or-pay costs. A portion of the payment will be recovered over a nine-year period which began in October 1987, without recovery of related carrying charges. PSE&G estimates that it may incur approx-imately $2 million in carrying charges pertaining to the eight-year recovery period related to certain payments, since it is required to meet its take-or-pay obligations over the next five years.
Materials and Supplies Inventory In January 1989, PSE&G changed its method of accounting forcer-tain spare parts to the deferred (inventory) method, whereby all purchases of spare parts under inventory control are charged into the Materials and Supplies inventory account until such time that the items are used or consumed and are then charged to the appropriate expense or capital accounts. Prior to 1989, certain purchases of spare parts were being charged directly to expense at the time of purchase, with a current deduction being taken for tax purposes.
As of January 1, 1989, PSE&G recorded an increase in its Mate-rials and Supplies inventory account for the value placed on these spare parts. The reversal of such expenses was deferred and is being amortized over a six-year period which began January 1, 1989. As of December 31, 1991, the unamortized balance of this deferred credit was $36.2 million.
In October 1988, PSE&G filed a request with the Internal Revenue Service (IRS) for a tax ruling concerning this change of accounting for spare parts inventory. If PSE&G's request is approved as submit-ted, PSE&G would be permitted to account for the resulting tax adjustment over the six-year period beginning January 1989. Al-though PSE&G can neither predict the timing nor the nature of the IRS' final response to its request, it has received preliminary ap-proval of its request, subject to certain adjustments which are being reviewed.
- 5. Schedule of Consolidated Long* Term Debt (Thousands of Dollars)
December 31, Interest Rates Due 1991 1990 PSE&G First and Refunding Mortgage Bonds (note A) 43/so/o-8%%
1992
$ 240,000
$ 240,000 43/so/o-91/s'J'o 1993 190,000 190,000 45/so/o-8%%
1994 210,000 210,000 4%%
1995 60,000 60,000 71/2%-9%%
1996 325,000 325,000 6'1.'J'o-9Vs%
1997-2001 818,600 569,600 6.30%- 12%
2002-2006 625,930 477,530 6.90%-9%%
2007-2011 421,510 423,5 10 6.80%- IOWJ'o 2012-2016 815,500 943,500
- 8. 10%-9%%
2017-2021 498,750 150,000 5%-8%
2037 15,001 15,001 Total First and Refunding Mortgage Bonds 4,220,291 3,604, 141 Debenture Bonds Unsecured 53/.'J'o 1991 31, 199 71/.%
1993 21,419 21,923 9%
1995 40,330 41,814 7%%-8%%
1996 74,880 76,509 6%
1998 18,195 18, 195 Total Debenture Bonds 154,824 189,640 Principal Amount Outstanding 4,375,115 3,793,78 1 Amounts Due Within One Year (note B)
(418,109)
(38,274)
Net Unamortized Discount (23,617)
(22,063)
Total Long-Term Debt of PSE&G 3,933,389 3,733,444 Holdings Capital (note C) 8.65%-Q.12%
1991 80,000 8.95%-9.72%
1993 88,000 88,000 7.40%
1994 50,000 9.30%-9.55%
1995 82,000 82,000 9.00%
1996 20,000 20,000 8.95%-10.05%
1998-1999 480,000 480,000 Principal Amount Outstanding 720,000 750,000 Amounts Due Within One Year (note B)
(79,940)
Net Unamortized Discount (1,883)
(2,088)
Total Long-Term Debt of Capital 718,117 667,972 Funding (note D) 9.43%
1993 60,000 60,000 9.54%
1995 35,000 35,000 9.55%
1996 28,000 9.59%-9.95%
1997-1998 123,000 6.00%-6.0625% Bank Loans 1995 200,000 150,000 Total Long-Term Debt of Funding 446,000 245,000 EGDC Mortgage Notes 7.75%
1993 10,982 6.62%-7.736%
1994 14,718 14,606 10.625%-12.75%
2012 7,002 7,090 Principal Amount Outstanding 32,702 21,696 Amounts Due Within One Year (note B)
(l,835)
(88)
Total Long-Term Debt of EGDC 30,867 21,608 Total Long-Term Debt of Holdings 1,194,984 934,580 Consolidated Long-Term Debt (note E)
$5,128,373
$4,6 Notes:
(A) PSE&G's Mortgage, securing the First and Refunding Mortgage Bonds, consti-tutes a direct first mortgage lien on substantially all PSE&G property and franchises.
(B) The aggregate principal amounts of requirements for sinking funds and maturities for each of the five years following December 31, 1991 are as follows:
(Thousands of Dollars)
- Sinking Funds Maturities Year PSE&G Capital PSE&G Capital EGDC Funding Total 1992 $ 8,212 $
$ 409,897 $
$ 1,835 $
$ 419,944 1993 1,700 42,500 210,619 88,000 10,430 60,000 413,249 1994 1,700 42,500 210,000 50,000 13,762 100,000 417,962 1995 1,700 42,500 60,000 82,000 134 135,000 321,334 1996 200 42,500 363,043 20,000 149 28,000 453,892
$13,5 12 $170,000 $1,253,559 $240,000 $26,3 10 $323,000 $2,026,38 1 For sinking fund purposes, certain First and Refunding Mortgage Bond issues require annually the retirement of $18,200,000 principal amount of bonds or the utilization of bondable property additions at 60% of cost. The portion expected to be met by property additions has been excluded from the table above. Also, PSE&G may, at its option, retire additional amounts up to $5,000,000 annually through sinking funds of certain debenture bonds. Additional bonds, if any, resulting from the election of this option are included in long-term debt due within one year.
(C) Capital is providing up to $750 million debt financing for the nonutility businesses on the basis of a support agreement with Enterprise.
(D) Funding provides debt financing for the nonutility businesses on the basis of unconditional guarantees from Holdings.
(E) At December 31, 1991, the annual interest requirement on Long-Term Debt was
$477.5 million of which $358.6 million was the requirement for First and Refunding Mortgage Bonds. The embedded interest cost on long-term debt was 8.87%.
38
Long-Term Investments are primarily those of Enterprise's nonutility operating businesses: PSRC (diversified passive investments), CEA (cogeneration and small power production facilities) and EGDC (diversified non residential real estate development and invest-ments). A summary of long-term investments is as follows:
(Millions of Dollars) 1991 1990 Lease Agreements:
Leveraged Leases
$ 649
$ 517 Direct-Financing Leases 97 95 Other Leases 15 18 Total 761 630 Partnerships:
General Partnerships 144 11 7 Limited Partnerships 387 322 Total 531 439 Joint Ventures 11 II Marketable Securities 277 204 Valuation Allowances (15)
(9)
Corporate-owned Life Insurance (PSE&G) 52 20 Total Long-Term Investments
$1,617
$1,295 PSRC's leveraged leases are reported net of principal and interest on nonrecourse loans and unearned income, including deferred tax d.t Income and deferred tax credits are recognized at a level return from each lease during the periods in which the net ent is positive.
ership investments are those of PSRC, CEA and EGDC and are undertaken with other investors. PSRC is a limited partner in two leveraged buyout funds and is committed to make investments from time to time, upon the request of the general partner, in such amounts as the general partner may require up to an aggregate of
$250 million. As of December 31, 1991, $134 million had been invested in such funds and $116 million remained as PSRC's un-funded commitment subject to call.
PSRC has invested in marketable securities and limited partner-ships investing in securities, which are stated at fai r value. Realized investment gains and losses on the sale of investment securities are determined utilizing the specific cost identification method. (For additional information see Note 11 -
Commitments and Contingent Liabilities -
Public Service Resources Corporation.)
- 7. Cash and Cash Equivalents The December 31, 1991 and 1990 balances consist primarily of working funds and highly liquid marketable securities (commercial paper) with a maturity of three months or less.
39
- 8. Federal Income Taxes A reconciliation of reported Net Income with pretax income and of Federal income tax expense with the amount computed by multiply-ing pretax income by the statutory Federal income tax rate of 34% is as follows:
(Thousands of Dollars) 1991 1990 1989 Net Income
$544,251 $542,278 $542, 137 Preferred stock dividend requirements 29,012 29,012 29,012 Subtotal 573,263 571,290 571, 149 Federal income taxes:
Operating Income:
Current provision 146,409 141,342 112,046 Provision for deferred income taxes -
net (A) 138,554 86,461 11 9,606 lnve tment tax credits -
net (19,507)
(19,4 18)
(23,39 1)
Total included in operating income 265,456 208,385 208,261 Miscellaneous other income:
Current provision (11,397)
(11,480)
( 11,411)
Provision for deferred income taxes (A) 10,906 10,906 10,906 SFAS 90 deferred income tax (A) 4,967 5,850 6,773 Total Federal income tax provisions 269,932 213,661 214,529 Pretax income
$843,195 $784,951 $785,678 Adjustments to pretax income, computed at the statutory rate, for which deferred taxes are not provided under current ratemaking policies:
Tax expense at the statutory rate
$286,686 $266,883 $267, 131 Tax depreciation under book depreciation 9,229 9,534 17,82 1 Allowance for funds used during construction (10,191)
(11,635)
(10, 199)
Capitalized interest 12,770 9,954 7,6 15 Amortization of rate differential resulting from TRA-86 (23, 157)
(43,203)
Other (6,558)
(11,821)
(1,475)
Subtotal 5,250 (27, 125)
(29,441)
Amortization of investment tax credits (22,004)
(26,097)
(23, 161 )
Subtotal (16,754)
(53,222)
(52,602)
Total Federal income tax provisions
$269,932 $213,661 $2 14,529 Effective Federal income tax rate 32.0%
27.2%
27.3%
(A) The provision for deferred income taxes represents the tax effects of the following items:
Current Liabilities:
Unbilled revenues Other Subtotal Deferred Credits:
Additional tax depreciation and amortization Leasing Activities Property Abandonments Oil and Gas Property Write-Down Deferred fuel costs -
net Other Subtotal Total 123,721 41,741 (11,582)
(6,393) 9,285 (2,345)
$(15, 155) $(19,627) 150 1,05 1 (15,005)
(18,576) 133,08 1 43,301 (11,690)
(6,394)
(36,822)
(3,254) 109,024 85,641
( 11,825)
(6,393)
(22,414) 1,828 154,427 118,222 155,861
$154,427 $103,217 $137,285 Deferred income taxes are provided for differences between book and taxable income. For PSE&G the deferred income taxes are lim-ited to the extent permitted for ratemaking purposes. At December 31, 1991 the cumulative net amount of income tax timing differences
for which deferred income taxes have not been provided was $1 billion.
See Note I -
Organization and Summary of Significant Account-ing Policies for a discussion of the effect of SFAS 96, "Accounting for Income Taxes:' and Note 2 -
Rate Matters.
- 9. Capital Lease Obligations The Consolidated Balance Sheets include assets and related obliga-tions applicable to capital leases where PSE&G is a lessee. The total amortization of the leased assets and interest on the lease obligations equals the net minimum lease payments included in rent expense for capital leases.
Capital leases of PSE&G relate primarily to its corporate head-quarters and other capital equipment. Certain of the leases contain renewal and purchase options and also contain escalation clauses.
Enterprise and its other subsidiaries are not lessees in any capital-ized leases.
Utility plant includes the following amounts for capital leases at December 31:
(Thousands of Dollars) 1991 1990 Common Plant
$56,812
$57,226 Less Accumulated Amortization 2,738 2,714 Net Assets under Capital Leases
$54,074
$54,512 Future minimum lease payments for noncancelable capital and oper-ating leases at December 31, 1991 were:
(Thousands of Dollars) 1992 1993 1994 1995 1996 Later Years Minimum lease payments Less: Amount representing estimated executory costs, together with any profit thereon, included in minimum lease payments Net minimum lease payments Less: Amount representing interest Present value of net minimum lease payments (A)
Capital Leases
$ 13,014 13,014 13,015 13,016 13,016 238,623 303,698 151,723 151,975 97,901
$ 54,074 Operating Leases
$ 7,477 6,000 4,721 4,500 3,511 11,710
$37,919 (A) Reflected in the Consolidated Balance Sheets in Capital Lease Obligations of
$53,617,000 and in Long-Term Debt and Capital Lease Obligations due within one year of $457,000.
The following schedule shows the composition of rent expense included in Operating Expenses:
(Thousands of Dollars)
For the Years Ended December 31, 1991 1990 1989 Interest on Capital Lease Obligations
$ 6,205
$ 6,284
$ 6,322 Amortization of Utility Plant under Capital Leases 439 452 409 Net minimum lease payments relating to Capital Leases 6,644 6,736 6,731 Other lease payments 26,290 19,516 18,178 Total Rent Expense
$32,934
$26,252
$24,909
- 10. Short* Term Debt (Commercial Paper and Loans)
Commercial paper represents unsecured bearer promissory notes sold through dealers at a discount with a term of nine months or less. Certain information regarding commercial paper follows:
PSE&G (Thousands of Dollars) 1991 1990 1989 Principal amount outstanding at end of year
$165,857 $486.818 $328.000 Maximum principal amount outstanding at any month end
$499,171 $486.818 $328.000 Average daily outstanding
$400,000 $240.000 $113.900 Weighted average annual interest rate 5.98%
8.22%
9.04%
Weighted average interest rate for commercial paper outstanding at year-end 4.99%
8.34%
8.68%
At December 31, 1991, PSE&G had authorization from the BRC to issue and have outstanding not more than $500 million of its short-term obligations at any one time, consisting of commercial paper and other unsecured borrowings from banks and other lenders. In February 1992 the BRC increased the authorization to $800 million.
40 PSE&G has a $600 million revolving credit agreement with a group of banks which expires in 1992. As of December 31, 1991, there was no short-term debt outstanding under this agreement.
On June 28, 1990, Fuelco established a $200 million commercial paper program to finance its share of Peach Bottom nuclear fuel, supported by a $200 million revolving credit facility with a group of banks. PSE&G has guaranteed repayment of Fuelco's respectiv.e obligations. As of December 31, 1991and1990, Fuelco had $1 million and $148.8 million outstanding under such program.
Holdings (Thousands of Dollars) 1991 1990 1989 Amount outstanding at end of year
$223,193 $272,041
$110,939 Maximum amount outstanding at any month end
$326,537 $320,702 $110,939 Average daily outstanding
$243,700 $229,500 $ 18,800 Weighted average annual interest rate 5.92%
8.25%
8.68%
Weighted average interest rate for commercial paper outstanding at year-end 5.04%
8.31 %
8.61 %
Funding has a $241 million commercial paper program supported by a direct pay commercial bank letter of credit and a revolving credit facility which expires in August 1992.
The December 1989 balance includes $10.4 million related to an outstanding capital note of Resources Capital Management Corpora-tion, a subsidiary of PSRC, which was payable in installments through June 1990.
Enterprise At December 31, 1991, 1990 and 1989, Enterprise had $25 million,
$273 million and $295 million, respectively, of lines of credit sup-ported by compensating balances under informal arrangements with banks. At December 31, 1990 and 1989, $150 million and $55 mil-lion, respectively, of these lines of credit were compensated for by fees. At December 31, 1991, Enterprise had no such arrangements.
0111111itments and Contingent Liabilities Nuclear Perfor111ance Standard In 1987, the BRC issued an order establishing a performance stan-dard for nuclear generating stations owned by New Jersey electric utilities including the five nuclear units in which PSE&G has an ownership interest: Salem 1 and Salem 2-42.59% each; Hope Creek -
95%; and Peach Bottom 2 and 3 -
42.49% each. PSE&G operates Salem and Hope Creek while Peach Bottom is operated by Philadelphia Electric Company (PE). This nuclear performance standard (Standard) was revised by the BRC in June of 1990.
The penalty/reward under the Standard is a percentage of replace-ment power costs. (See table below.) The Standard provides that the penalties will be calculated to the edge of each capacity factor range.
For example, a 30% penalty applies to replacement power costs incurred in the 55% to 65% range and a 40% penalty applies to replacement power costs in the 45% to 55% range.
Capacity Factor Range Equal to or greater than 75%
Equal to or greater than 65% and less than 75%
Equal to or greater than 55% and less than 65%
Equal to or greater than 45% and less than 55%
Equal to or greater than 40% and less than 45%
Below40%
Reward 30%
None Penalty None 30%
40%
50%
BRC Intervenes d
the Standard, the capacity factor is calculated annually using um dependable capability of the five nuclear units in which G owns an interest. This method takes into account actual operating conditions of the units.
While the Standard does not specifically have a gross negligence provision, the BRC has indicated that it would consider allegations of gross negligence brought upon a sufficient factual basis. A finding of gross negligence could result in penalties other than those pre-scribed under the Standard.
During 1991, the five nuclear units in which PSE&G has an own-ership interest aggregated a 71 % combined capacity factor.
Nuclear Insurance Coverages and Assess111ents PSE&G's insurance coverages and maximum retrospective assess-ments for its nuclear operations are as follows:
Type and Source of Coverages Public Liability:
American Nuclear Insurers Indemnity (A)
Nuclear Worker Liability:
American Nuclear Insurers (C)
Property Damage:
Nuclear Mutual Limited erican Nuclear Insurers ar Electric Insurance Ltd.
Replacement Power:
Nuclear Electric Insurance Ltd.
PSE&G Maximum Retrospective Total Site Assessments for Coverages a Single Incident (Millions of Dollars)
$ 200.0
$None 7,607.0 175.4
$7,807.0(B)
$175.4
$ 200.0 8.4
$ 500.0
$ 15.4 700.0(D)
None 1,250.0(E) 11.6
$2,450.0
$ 27.0 3.5(F)
$ 11.7 41 (A) Retrospective premium program under the Price-Anderson Liability provisions of the Atomic Energy Act of 1954, as amended (AE Act). Subject to retrospective assessment with respect to loss from an incident at any licensed nuclear reactor in the United States.
(B) Limit of liability for each nuclear incident under the AE Act.
(C) Represents the potential liability from workers claiming exposure to the hazard of nuclear radiation. This does not increase PSE&G's obligation under the Price-Anderson Liability provisions of the AE Act.
(D) Increased to $765 million on January 1, 1992.
(E) Includes coverage for premature decommissioning of up to $200 million per site.
(F) Weekly indemnity for 52 weeks which commences after the first 21 weeks of an outage. Also provides $2.4 million weekly for a second 52-week period, and
$1.2 million weekly for a third 52-week period.
The Price-Anderson Amendments Act of 1988, as amended, (Price-Anderson Act) sets the "limit of liability" for claims that could arise from an incident involving any licensed nuclear facility in the nation. The "limit of liability" is based on the number of licensed nuclear reactors and is adjusted at least every five years based on the Consumer Price Index. The current "limit of liability" is $7.8 billion. All utilities owning a nuclear reactor, including PSE&G, have provided for this exposure through a combination of private insurance and mandatory participation in a financial protec-tion pool as established by the Price-Anderson Act. Under the Price-Anderson Act, each party with an ownership interest in a nuclear reactor can be assessed up to $66.2 million per reactor per incident, payable at $10 million per reactor per incident per year. If the dam-ages exceed the "limit of liability" the President is to submit to Congress a plan for providing additional compensation to the injured parties. Congress could impose further revenue raising measures on the nuclear industry to pay claims. PSE&G's maximum aggregate assessment per incident is $175 million (based on PSE&G's owner-ship interests in Hope Creek, Peach Bottom and Salem) and its maximum aggregate annual assessment per incident is $26.5 mil-lion. In 1984, in a case to which PSE&G was not a party, the Supreme Court of the United States held that the AE Act, the Price-Anderson Act limitation of liability and the extensive regulation of nuclear safety by the NRC do not preempt claims under state law for per-sonal, property or punitive damages related to radiation hazards.
PSE&G maintains property insurance, including decontamination expense coverage and premature decommissioning coverage, with respect to loss or damage to its nuclear facilities. The limit of these coverages is $2.450 billion per incident, per site. PE has advised PSE&G that it maintains similar insurance coverage with respect to Peach Bottom. Under the terms of the various insurance agreements, PSE&G could be subject to a maximum retrospective assessment for a single incident of up to $27.0 million. Certain of the policies also provide that the insurer may suspend coverage with respect to all nuclear units on a site without notice if the NRC suspends or revokes the operating license for any unit on the site, the NRC issues a shut-down order with respect to such unit, or the NRC issues a confirma-tory order keeping such unit shut down.
PSE&G is a member of an industry mutual insurance company, Nuclear Electric Insurance Limited, which provides replacement power cost coverage in the event of a major accidental outage at a nuclear station. The policies provide for a weekly indemnity payment of $3.5 million for 52 weeks, subject to a 21-week waiting period.
Thereafter, the policies provide for weekly indemnity payments of
$2.4 million for a second 52-week period, and $1.2 million weekly for a third 52-week period. The premium for this coverage is subject to retrospective assessment for adverse loss experience. Under the policies, PSE&G's present maximum share of any retrospective assessment in any year is $11.7 million.
Construction and Fuel Supplies PSE&G has substantial commitments as part of its construction program which includes capital requirements for nuclear fuel.
PSE&G's construction program is continuously reviewed and period-ically revised as a result of changes in economic conditions, revised load forecasts, changes in the scheduled retirement dates of existing facilities, changes in business plans, site changes, cost escalations under construction contracts, changes in the requirements of regula-tory authorities and Jaws, the timing of and amount of electric and gas rate changes and the ability of PSE&G to raise necessary capital.
PSE&G periodically reevaluates its forecasts of future customers, load and peak growth and sources of electric generating capacity to meet such projected growth, including the need to construct new electric generating capacity. Forecasts take into account assumptions concerning future demands of customers, effectiveness of conserva-tion and load management activities, the long-term condition of PSE&G's plants, capacity available from other electric utilities, and the amounts of cogeneration and other nonutility capacity projected to be available.
Construction expenditures of $4.8 billion, including $240 million of allowance for funds used during construction, are expected to be incurred by PSE&G during the years 1992 through 1996. This esti-mate of construction requirements is based on expected project completion dates and includes anticipated escalation due to inflation of approximately 4%, annually. Therefore, construction delays or higher inflation levels could cause significant increases in these amounts. PSE&G expects to generate internally a majority of the funds necessary to satisfy its construction expenditures over the next five years. In addition, PSE&G does not presently anticipate any difficulties in obtaining sufficient sources of fuel for electric genera-tion and adequate gas supplies during the years 1992 through 1996.
Oil and Gas Property Write-Down On October 31, 1986, the BRC approved agreements by PSE&G and the major parties in PSE&G's gas base rate case, which provided for an annual reduction in gas base revenues of $30 million, effective October 31, 1986, and for the removal of EDC, at that time a wholly-owned subsidiary of PSE&G, from inclusion in its gas rate base for ratemaking purposes. In the BRC-approved agreement, PSE&G was allowed to defer any loss on its investment in EDC as a result of any write-down of the value of reserves as of December 31, 1986, and to seek recovery of such loss over a period of not less than 10 years in its next gas base rate proceeding. On October 31, 1986, the price paid by PSE&G for natural gas from EDC was reduced as a result of a change in PSE&G's gas LGAC approved by the BRC. As a result of these regulatory actions, EDC wrote down the value of its reserves as of December 31, 1986 by $134.5 million, which amounted to $70.5 million after the tax effect, to reflect the then lower net realizable value of its oil and gas reserves. PSE&G deferred $58.8 million of the after-tax loss as of December 31, 1986. On July I, 1988, PSE&G began amortizing the $58.8 million deferred amount, absent regulatory approval, at the rate of 10% per year. As of Decem-ber 31, 1991, the balance remaining to be amortized was $34. 1 mil-lion. PSE&G is seeking recovery of the entire $70.5 million in its current gas base rate case. Denial of the recovery of any unamortized balance by the BRC would require an immediate write-off.
42 Environment General The Federal Comprehensive Environmental Response, Compensa-tion, and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986, and the Federal Resource Conservation and Recovery Act of 1976 authorize the United States Environmental Protection Agency to issue orders and/or to bring an enforcement action to compel responsible parties to take investigative and/or remedial actions at any site that is deter-mined to present an imminent and substantial danger to the public or to the environment because of an actual or threatened release of one or more hazardous substances. The New Jersey Spill Compensa-tion and Control Act and the New York Environmental Conservation Law provide similar authority to the New Jersey Department of Environmental Protection (now known as the Department of Envi-ronmental Protection and Energy) (NJDEPE) and the New York Attorney General, respectively. Because of the nature of PSE&G's business, including the production of electricity, the distribution of gas and, formerly, the manufacture of gas, various by-products and substances are or were produced or handled which contain constitu-ents classified as hazardous under one or more of the above Jaws.
PSE&G generally provides for the disposal or processing of such substances through licensed independent contractors. However, these statutory provisions impose joint and several responsibility without regard to fault on all responsible parties, including the generators of the hazardous substances, for certain investigative and remedia.
costs at sites where these substances were disposed or processe PSE&G has been notified with respect to a number of such sites a the remediation of these potentially hazardous sites is receiving greater attention from the government agencies involved. Generally, actions directed at funding such site investigations and remediation include all suspected or known responsible parties. PSE&G does not expect its expenditures for any such site to be material.
PSE&G Manufactured Gas Plant Remediation Program In March 1988, NJDEPE notified PSE&G that it had identified the need for PSE&G, pursuant to a formal arrangement, to systemati-cally investigate and, if necessary, resolve environmental concerns extant at PSE&G's former manufactured gas plant sites. To date, NJDEPE and PSE&G have identified 38 former gas plant sites. At a minimum, some form of investigation will be required at each of these sites. PSE&G is currently working with NJDEPE under its Remediation Program, pursuant to which PSE&G would undertake to investigate these sites. Upon completion of these investigations, some or all of these sites may require remedial action. PSE&G has completed a preliminary assessment of 28 of such sites. PSE&G anticipates that its Remediation Program, to assess, investigate and, if necessary, remediate environmental concerns at its former gas plant sites, will require a substantial effort and may take more than 20 years to complete. The overall cost of the investigation and reme-diation cannot be rea onably estimated, but experience to date indi-cates that costs of at least $20 million per year could be incurred over a period of more than 20 years and that the overall cost cou-be material.
As of December 31, 1991, PSE&G had incurred approximate!
$28 million of Remediation Program costs (Remediation Costs) and recorded a liability of $108 million for such estimated costs through 1995. Any reasonable estimate of Remediation Costs to be incurred beyond this time cannot be made. In accordance with a Stipulation
ved by the BRC on January 21, 1992, PSE&G will recover
$15.9 million of its Remediation Costs during the 1991-92 LGAC period and $7. 9 million in each of its next four LGAC periods ending in 1996, net of insurance recoveries. The base rate filing of No-vember 14, 1991, which is not expected to be effective until late 1992, at the earliest, will evaluate the reasonableness and regulatory treatment of the Remediation Costs covered by this Stipulation.
Absent insurance recovery, denial of the recovery of any unamor-tized balance of such costs by the BRC would require an immediate write-off. (See Note 2 -
Rate Matters -
Base Rates and LGAC.)
In November 1988, PSE&G filed suit against certain of its insurers to recover the costs associated with addressing and resolving envi-ronmental issues of the Remediation Program. The litigation is currently in the discovery phase with certain insurers and PSE&G has settled its claim with one insurer. Pending full recovery of Re-mediation Costs through rates or under its insurance policies, neither of which can be assured, PSE&G will be required to finance the unreimbursed costs of its Remediation Program.
Public Service Resources Corporation As of December 31, 1991, PSRC had an investment of $19 million in equity securities (primarily preferred stock) and $15 million in subordinated debt of Second National Federal Savings Bank of Salisbury, Maryland (SNFSB). On December 31, 1990, SNFSB failed to meet certain of the prescribed capital requirements of the Federal Office of Thrift Supervision (OTS). Subsequently, SNFSB with OTS and had received approval of a Capital Plan designed ng SNFSB back into compliance with OTS capital require-s by the third quarter of 1994. On November I, 1991, SNFSB announced that it had added $29.7 million to its loan loss reserves in the quarter ended September 30, 1991. Such additions were deter-mined by SNFSB in conjunction with a federal regulatory examina-tion of its major loans. These actions caused a $21 million loss for SNFSB 's quarter ended September 30, 1991 and a deficiency in its tangible capital requirements of approximately $500 thousand. In December 1991, SNFSB filed a revised Capital Plan (Plan) with OTS. The Plan showed capital compliance by December 31, 1994, the time period required by applicable law. The Plan reflects the exchange of PSRC's $15 million in subordinated debt for $15 million of preferred stock. Such exchange has been approved by OTS and was effective February 5, 1992. Enterprise cannot predict whether OTS will approve SNFSB's revised Capital Plan or what other action OTS may take. If, however, OTS were to take over SNFSB, Enter-prise could be required to write off its related investment, amounting to $22 million after the tax effect, or ten cents per share of Enterprise Common Stock.
43 Energy Development Corporation (EDC)
EDC is required to perform a full cost ceiling test with respect to the recorded cost of its oil and gas reserves, taking into account current market prices. Failure to satisfy the test requirements would require EDC to write down the capitalized costs of its reserves to current market prices. Any such write-down would directly affect net income and earnings per share after the tax effect. EDC satisfied the requirements of such test as of December 31, 1991. However, continuation of the soft natural gas market could result in EDC being required to write down a portion of the book cost of its re-serves in the future, which write-down could be material.
Enterprise Group Development Corporation (EGDC)
The current general deterioration of the real estate market and addi-tional funding of project loans to meet debt covenants, has reduced cash flows and returns from certain of EGDC's properties. Further, such factors will reduce future gains, if any, upon any ultimate sale of such properties.
One specific project being developed by a partnership in which EGDC has an indirect interest consists of a multiphase commercial office development, the first phase of which is complete and partially leased. Project financing has been provided by a nonrecourse con-struction loan, with a balance presently outstanding of approxi-mately $32 million. EGDC's partner has advised EGDC that it does not intend to make any further capital contributions to the project.
As of December 31, 1991, EGDC had invested approximately $26 million in the project. EGDC is currently evaluating its options with respect to this project and is exploring with the lender the potential for favorably restructuring the loan. On January 14, 1992, the part-nership was advised that the lender was accelerating the entire prin-cipal amount of the loan, with full payment required by January 30, 1992. The loan was accelerated due to the fa ilure of the partnership to make certain payments aggregating $5.2 million in satisfaction of covenants required by the loan agreement. In the event that EGDC determines not to make further capital contributions to this project and the lender elects to foreclose the loan, EGDC will be required to write off its investment, which based upon its current investment of approximately $26 million would result in an Enterprise loss, net of Federal income taxes, of approximately $17 million or approxi-mately eight cents per share of Enterprise Common Stock. No assur-ances can be given that Enterprise will not incur a loss with respect to this project or other projects in EGDC's portfolio.
- 12. Pension Plan and Other Post-Employment Benefits The discount rate, expected long-term return on assets and average compensation growth used in determining the plan's funded status as of December 31, 1991 and 1990, and net pension costs for 1991, 1990 and 1989, were as follows:
Discount Rate Used to Determine Pension Cost Discounted Rate Used to Detennine Benefit Obligations Expected Long-Term Return on Assets Average Compensation Growth 1991 1990 7'/*%
7V2%
9%
6%
7W1'o 73/*%
8%
6%
The following table shows the plan's funded status:
(Thousands of Dollars)
December 31, Actuarial present value of benefit obligations:
Accumulated benefit obligations, including vested benefits of $913,041 and $817,837 Effect of projected future compensation Projected benefit obligations Plan assets at fair value, primarily listed equity and debt securities Projected benefit obligations in excess of plan assets Unrecognized net gain (loss) from past experience and effects of changes in assumptions Prior service cost not yet recognized in net pension cost Unrecognized net obligations being recognized over 16.7 years Prepaid (accrued) pension expense 1991
$ (977,710)
(298,618)
(l,276,328) 1,140,660 (135,668)
(33,430) 75,411 93,687
$ 1990
$ (873,745)
(292,658)
(I, 166,403) 970,886 (195,517) 12,890 80,840 101,787
$ The net pension cost for the years ended December 31, 1991, 1990 and 1989, include the following components:
(Thousands of Dollars)
Service cost -
benefits earned during year Interest cost on projected benefit obligations Return on assets Net amortization and deferral Total 1991 1990 1989
$ 33,652 $ 34,323 $ 28, 185 89,324 83,930 74,997 (191,996) 41,425 (159,767) ll9,020 (109,678) 98,585
$ 50,000 $ 50,000 $ 42,000 Supplemental pension costs in 1991, 1990 and 1989, were $419,000,
$947,000 and $1,900,000, respectively.
In addition to the pension plan, Enterprise also provides certain health care and life insurance benefits to active and retired em-ployees. The cost of these benefits is charged to expense when paid.
(See Note I -
Organization and Summary of Significant Account-ing Policies.)
- 13. Financial Information by Business Segments Information related to the segments of Enterprise's business is detailed below:
For the Year Ended December 31, 1991 Nonutility (Thousands of Dollars)
Electric Gas Activities(A)
Total Operating Revenues
$ 3,500,043
$1,307,849 Eliminations (Interseg-ment Revenues)
Total Operating Revenues 3,500,043 1,307,849 Depreciation and Amortization Operating Income before Income Taxes Capital Expenditures December 31, 1991 Net Utility Plant Oil and Gas Property, Plant & Equipment Other Corporate Assets Total Assets 399,574 1,007,342 672,852 9,006,125 1,294,487
$10,300,612 For the Year Ended December 31, 1990 (Thousands of Dollars)
Electric Operating Revenues
$ 3,332,417 Eliminations (Interseg-ment Revenues)
Total Operating Revenues 3,332,417 Depreciation and Amortization Operating Income before Income Taxes Capital Expenditures December 31, 1990 Net Utility Plant Oil and Gas Property, Plant & Equipment Other Corporate Assets Total Assets 385,567 972,806 821,242 8,768,462 1,33 1,729
$10, 100, 191 For the Year Ended December 31, 1989 (Thousands of Dollars)
Operating Revenues Eliminations (lnterseg-ment Revenues)
Total Operating Revenues Depreciation and Amortization Operating Income before Income Taxes Capital Expenditures December 31, 1989 Net Utility Plant Oil and Gas Property, Plant & Equipment Other Corporate Assets Total Assets Electric
$3,279,913 3,279,913 374,086 925,209 552,603 8,3 14,861 1,377,649
$ 9,692,510 93,532 ll5,259 140,297 1,176,456 570,918
$1,747,374 Gas
$1,236,747 1,236,747 88,864 73,682 146,781 1,105,319 426,919
$1,532,238 Gas
$1,362,470 1,362,470 86,158 122,854 121,611 1,021,774 401,978
$1,423,752
$336,625
$5,144,517 (51,307)
(51,307) 285,318 5,093,210 ll9,723 146,039 221,695 895,066 1,881,317
$2,776,383 Nonutility Activities(A)
$ 281,250 (50,279) 230,97 1 87,053 137,778 298,366 794,979 1,595,902
$2,390,88 1 Nonutility Activities (A)
$ 207, 165 (44,696) 162,469 64,270 102,758 414,837 608,689 1,194,483
$1,803,172 612,820 1,268,640 1,304,844 10,182,581 895,066 3,746,722
$14,824,369 Total
$ 4,850,4 14 561,484 1,184,266 1,266,389 9,873,781 794,979 3,354,550
$14,023,310 Total
$4,849,548 (44,696) 4,804,852 524,514 1,150,821 1,089,05 1 9,336,635 608,689 2,97
$12,9 (A) The Nonutility Activities include amounts applicable to Enterprise, the parent corporation.
44
- Jointly-Owned Facilities - Utility Plant Enterprise's subsidiary, PSE&G, has ownership interests and is responsible for providing its share of the necessary financing for the following jointly-owned facilities. All amounts reflect the share of jointly-owned projects and the corresponding direct expenses are included in Con-solidated Statements of Income as an operating expense. (See Note 1 -
Organization and Summary of Significant Accounting Policies.)
(Thousands of Dollars)
December 31. 1991 Plant Coal Generating Conemaugh Keystone Nuclear Generating Peach Bottom Salem Hope Creek Nuclear Support Facilities Pumped Storage Generating Yards Creek Transmission Facilities Merri ll Creek Reservoir Linden Gas Plant (ceased the manufacture of S G effective July I. 1989)
- 15. Selected Quarterly Data (Unaudited)
Ownership Interest 22.50%
22.84 42.49 42.59 95.00 Various 50.00 Various 13.9 1 90.00 Plant Accumulated Plant Under In Service Depreciation Construct ion 97.015
$ 30.842
$ 3.928 92.347 27.257 3.205 672.393 239.927 22.757 9 18.309 317.347 53.78 1 4.072,705 584,850 2 1.849 122.765 17.302 4.804 20.554 7.358 5 13 11 9,90 1 27.623 8
36,832 5.664 15.927 16.202 The information shown below in the opinion of Enterprise includes all adjustments, consisting only of normal recurring accruals, necessary to a fair presentation of such amounts. Due to the seasonal nature of the utility business, quarterly amounts vary significantly during the year.
Calendar Quarter Ended March 31, June 30, September 30, December 31.
sands where applicable) 1991 1990 1991 1990 1991 1990 1991 1990 ing Revenues
$1,416,288
$ 1,325,210
$1, 150,995
$ 1.074,002
$1,258,553
$ 1. 190.032
$1,267,374
$ 1.2 10.89 1 erating Income
$ 275,432
$ 248,248
$ 226,470
$ 200,229
$ 292,882
$ 29 1.887
$ 203,586
$ 233. 11 6 Net Income
$ 160,781
$ 144,660
$ 122,241 98,292
$ 171,750
$ 181.898 89,479 11 7.428 Earnings Per Share of Common Stock 0.73 0.69 0.55 0.47 0.76 0.86 0.39 0.54 Average Shares of Common Stock Outstanding 218,789 2 11, 100 224,290 211, 11 6 225, 137 2 11.884 225,949 213.797 45
Consolidated Financial Statistics (A)
(Thousands of Dollars where applicable) 1991 1990 1989 1988 1987 Selected Income Information Operating Revenues Electric
$ 3,500,043
$ 3,332,417
$ 3,279,913
$ 3,090,609
$ 2,959,549 Gas 1,307,849 1,236,747 1,362,470 1,203,435 1,219,955 Nonutility Activities 285,318 230,971 162,469 100,648 31,551 Total Operating Revenues
$ 5,093,210
$ 4,800, 135
$ 4,804,852
$ 4,394,692
$ 4,211,055 Net Income 544,251 542,278 542,137 528,586 520,451 Earnings per average share of Common Stock
$ 2.43
$ 2.56
$ 2.62
$ 2.57
$ 2.55 Dividends Paid per Share
$ 2.13
$ 2.09
$ 2.05
$ 2.01
$ 1.99 Payout Ratio 88%
82%
78%
78%
78%
Rate of Return on Average Common Equity 11.67%
12.72%
13.41 %
13.60%
13.88%
Ratio of Earnings to Fixed Charges Before Income Taxes 2.54 2.50 2.66 2.81 3.03 Book Value per Common Share
$21.01
$20.44
$19.85
$19. 11
$18.54 Utility Plant
$14,426,560
$13,836,874
$12,960,093
$12,466,690
$11,998,816 Accumulated Depreciation and Amortization of Utility Plant
$ 4,243,979
$ 3,963,093
$ 3,623,458
$ 3,377,187
$ 3,028,712 Total Assets
$14,824,369
$14,023,310
$12,919,434
$11,690,369
$10,857,551 Consolidated Capitalization
- Common Stock
$ 3,262,138
$ 3,043,402
$ 2,857,974
$ 2,710,343
$ 2,710,343 Retained Earnings 1,501,085 1,421,611 1,332,739 1,213,260 1,09 Common Equity 4,763,223 4,465,013 4,190,713 3,923,603 3,80,
Long-Term Debt 5,128,373 4,668,024 4,293,578 3,944,776 3,287,039 Capital Lease Obligations 53,617 54,073 54,513 54,966 55,374 Preferred Stock with Mandatory Redemption 30,000 Prefeued Stock without Mandatory Redemption 429,994 429,994 429,994 429,994 429,994 Total Capitalization
$10,375,207
$ 9,617,104
$ 8,968,798
$ 8,353,339
$ 7,609,683 (A) See Management's Discussion and Analysis of Financial Condition and Results of Operations and Notes to Consolidated Financial Statements.
46
erating Statistics Public Service Electric and Gas Company (Thousands of Dollars where applicable) 1991 1990 1989 1988 1987 Electric Revenues from Sales of Electricity Residential
$1,116,699
$ 1,038,906
$ 1,0 15,065
$ 992,121
$ 940,915 Commercial 1,575,547 1,516,755 1,464,43 1 1,335, 158 1,273,819 Industrial 728,411 697,571 715,669 686,854 672, 104 Public Street Lighting 46,400 45,418 46,750 45,620 46,248 Total Revenues from Sales to Customers 3,467,057 3,298,650 3,24 1,9 15 3,059,753 2,933,086 Interdepartmental 1,599 1,652 1,843 1,643 1,896 Total Revenues from Sales of Electricity 3,468,656 3,300,302 3,243,758 3,06 1,396 2,934,982 Other Electric Revenues 31,387 32, 115 36, 155 29,213 24,567 Total Operating Revenues
$3,500,043
$3,332,4 17
$3,279,9 13
$3,090,609
$2,959,549 Sales of Electricity -
megawatthours Residential 10,505,547 9,875,569 9,950,773 9,94 1,003 9,299,490 Commercial 17,596,569 17,054,495 16,946,768 16,036,020 14,990,376 Industrial 9,406,109 9,457,985 10,039,9 13 10, 179,340 10, 11 9,6 14 Public Street Lighting 320,900 314,936 310,073 303,782 296,377 Total Sales to Customers 37,829,125 36,702,985 37,247,527 36,460, 145 34,705,857 departmental 19,719 19,822 23, 175 22,440 23,709 ales of Electricity 37,848,844 36,722,807 37,270,702 36,482,585 34,729,566 Gas Revenues from Sales of Gas Residential
$ 699,696
$ 667,077
$ 772,344
$ 695,9 18
$ 698,5 18 Commercial 426,110 406,577 436,349 366,776 360,834 Industrial 138,394 130,273 134,272 123,434 145,664 Street Lighting 468 385 358 359 363 Total Revenues from Sales to Customers 1,264,668 1,204,312 1,343,323 1, 186,487 1,205,379 I nterdepa rt men ta 1 2,689 2, 157 3,6 13 3,059 3,837 Total Revenues from Sales of Gas 1,267,357 1,206,469 1,346,936 I, 189,546 1,209,2 16 Transportation Service Gas Revenues 27,036 15,654 11,485 10,505 7,508 Other Gas Revenues 13,456 14,624 4,049 3,384 3,23 1 Total Operating Revenues
$1,307,849
$ 1,236,747
$ 1,362,470
$ 1,203,435
$ 1,2 19,955 Sales of Gas -
kilotherms Residential 1,140,887 1,097,034 1,253,800 1, 188,532 1, 11 8,609 Commercial 893,069 837,650 872,684 748,283 678,28 1 Industrial 399,385 341,467 342,928 332,970 373,947 Street Lighting 666 657 656 657 655 Total Sales to Customers 2,434,007 2,276,808 2,470,068 2,270,442 2,171,492 Interdepartmental 6,174 5,144 8,705 7,640 8,972 Total Sales of Gas 2,440,181 2,28 1,952 2,478,773 2,278,082 2, 180,464 Transportation Service 381,497 182,056 149,586 138,665 98, 121 Total Gas Sold or Transported 2,821,678 2,464,008 2,628,359 2,4 16,747 2,278,585 47
Officers and Directors Public Service Enterprise Group Incorporated Officers E. James Ferland Chairman of the Board, President and Chief Executive Officer Richard E. Hallett Vice President and Comptroller Robert C. Murray Vice President and Chief Financial Officer R. Edwin Selover Vice President and General Counsel Francis J. Riepl Treasurer Robert S. Smith Secretary Directors Lawrence R. Codey President, Chief Operating Officer and director. PSE&G.
Member of Execwive Committee and Finance Committee.
T.J. Dermot Dunphy President, Chief Executive Officer and director, Sealed Air Corporation (manufactures protective packaging products and systems).
Chairman of Audit Committee. Member of £recutive Committee and Organization and Compensation Committee.
Robert R. Ferguson, Jr.
Retired Chairman of the Board, President, Chief Execut ive Officer and director: First Fidelity Bancorporation; First Fidelity Bank, N.A.; and First Fidelity, Inc.
Chairman of Finance Committee. Member of Executive Committee, Nominating Committee and Organization and Compensation Committee.
E. James Ferland Chairman of the Board, President and Chief Executive Officer of the Corporal ion.
Chairman of Execwive Committee.
Shirley A. Jackson Professor of Physics, Rutgers University.
and Theoretical Physicist, AT&T Bell Laboratories (part-time).
Member of Audit Committee, Finance Committee and Nominating Committee.
Irwin Lerner President, Chief Executive Officer and director, Hoffmann-La Roche Inc.
(manufactures pharmaceuticals, vitamins, fine chemicals, and provides home health care and diagnostic products and services).
Chairman of Nominating Committee.
Member of Audit Committee and Organization and Compensation Committee.
William E. Marfuggi Chairman, Tri-Maintenance &
Contractors, Inc.
Member of Finance Commillee and Nominating Committee.
Everett L. Morris President of Enterprise Diversified Holdings Incorporated.
Member of £recwive Commillee and Finance Committee.
Marilyn M. Pfaltz Partner of P and R Associates (communication specialists).
Member of Audit Committee and Organization and Compensation Committee.
James C. Pitney Partner in the law firm of Pitney. Hardin, Kipp & Szuch.
Member of Audit Committee. Finance Committee and Organization and Compensation Committee.
Josh S. Weston Chairman of the Board and Chief Executive Officer, Automatic Data Processing, Inc.
Chairman of Organization and Compensation Committee. Member of Execwive Commi11ee and Finance Committee.
Public Service Electric and Gas Company Officers & Directors E. James Ferland Chairman of the Board and Chief Executive Officer Lawrence R. Codey President and Chief Operating Officer Harold W. Borden, Jr.
Senior Vice President - External Affairs Thomas M. Crimmins, Jr.
Senior Vice President - Customer Operations Robert J. Dougherty, Jr.
Senior Vice President - Electric Robert C. Murray Senior Vice President - Finance and Chief Financial Officer R. Edwin Selover Senior Vice President and General Counsel Rudolph D. Stys Senior Vice President - Gas PaulH. Way Senior Vice President - Corporate Performance Officers Donald A. Anderson Vice President - Information Systems and Corporate Services William J. Budney, Jr.
Vice President - Distribution Systems Frank Cassidy Vice President - Transmission Systems John A. Gartman Vice President - Gas Supply and Planning Curtis W. Grevenitz Vice President - Gas Operations Richard E. Hallett Vice President and Comptroller Stanley LaBruna Vice President - Nuclear Operations Pierre R.H. Landrieu Vice President - Fossil Production Frederick W. Lark Vice President - Marketing John H. Maddocks Vice President - Public Affairs Steven E. Miltenberger Vice President and Chief Nuclear Officer Francis J. Riepl Vice President and Treasurer Louis L. Rizzi Vice President - Customer Services Robert S. Smith Vice President and Secretary Gregory M. Thomson Vice President - Human Resources 48 Enterprise Diversified Holdings Incorporated Officers E. James Ferland Chairman of the Board and Chief Executive Officer Everett L. Morris President and Chief Operating Officer Directors T.J. Dermot Dunphy E. James Ferland William E. Marfuggi Marilyn M. Pfaltz Josh S. Weston (See biographical data under Ente.
Presidents of Subsidia Companies Arthur S. Nislick President - Community Energy Alti:rnatives Incorporated (CEA)
John F. Schwarz President - Energy Development Corporation (EDC)
Albert E. Booth, II President - Enterprise Group Development Corporation (EGDC)
Eileen A. Moran President - Public Service Resources Corporation (PSRC) 1991-92 Transition Directors-Enterprise Elected Lawrence R. Codey, 9/18191 Retired Harold W. Sonn, 4116191 Resigned Henry E. Kates, 1122192
- Retired Robert F. Steinke, 8/1191 Vice President - Business and Technical Support
orate and Stock Information Stockholder Information -Toll Free New Jersey residents 1-(800) 242-0813 Outside New Jersey 1-(800) 526-8050 TDD/Hearing Impaired 1-(800) 732-3241 Telephone Hours: JO a.m. to 12 p.m. and 1:30 to 3:30 p.m.
Monday-Friday (Eastern Time)
Security Analysts and Institutional Investors Director - Investor Relations (201) 430-6564 Dividend Reinvestment Plan Enterprise has a Dividend Reinvestment and Stock Purchase Plan under which all common and PSE&G preferred stockholders may reinvest dividends and/or make di rect cash investments to obtain Enterprise common stock. Purchases of common stock are made for the Plan directly from Enterprise, at its sole discretion, and/or in the open market. All brokerage and other fees to acquire shares are absorbed by Enterprise. To participate call the toll free number to obtain a prospectus and an authorization card.
-Trading Symbol: PEG 11Fua1Meeting Please note that the Annual Meeting of Stockholders of Public Service Enterprise Group Incorporated will be held at Newark Symphony Hall, 1020 Broad Street, Newark, N.J. on Tuesday, April 21, 1992 at 2:00 PM. A summary of the meeting will be sent to all stockholders of record at a later date.
Additional Reports Available-Form 10*K Stockholders or other interested persons wishing to obtain a copy of Enterprise's or PSE&G's 1991 Annual Report to the Securities and Exchange Commission, fi led on Form 10-K, may obtain one without PSE&G Territory Newark Trenton Camden
- charge by writing to the Director - Investor Relations, Public Service Electric and Gas Company, P.O. Box 570, T68, Newark, N.J. 07101 (telephone (201 ) 430-6503). The copy so provided will be without exhibits. Exhibits may be purchased for a specified fee.
Financial and Statistical Review A comprehensive statistical report containing fi nancial and operat-ing data will be available this spring. If you wish to receive a copy, please write to the Director - Investor Relations, Public Service Electric and Gas Company, P.O. Box 570, T6B, Newark, N.J. 07101 (telephone (201) 430-6503).
Transfer Agents All Stocks:
First Chicago Trust Company of New York 30 West Broadway, New York, N. Y. 10007 Stockholder Services, Public Service Electric and Gas Company 80 Park Plaza, P.O. Box 1171 Newark, N.J. 07101-1 171 Registrars All Stocks:
First Fidelity Bank, N.A., New Jersey 765 Broad Street, Newark, N.J. 07101 First Chicago Trust Company of New York 30 West Broadway, New York, N. Y. 10007 Stock Exchange Listings Common:
New York Stock Exchange Philadelphia Stock Exchange London Stock Exchange Preferred of PSE&G:
New York Stock Exchange Common Stock-Market Price and Dividends Per Share 49 1991 1990 High Low Div.
High Low Div.
First Quarter 2s11s 251/2
$.53 29%
251/2
$.52 Second Quarter 277/s 251/.
.53 271;.
243/s
.52 Third Quarter 28%
257/s
.53 261/s 221/2
.52 Fourth Quarter 293/s 26%
.54 27 23
.53 The number of holders of record of Public Service Enterprise Group Incorporated common shares as of December 31, 199 1 was 192, 165.
Design: Arnold Saks Associates Major Photography: Lee Youngblood
Public Service Enterprise Group Incorporated 80 Park Plaza PO. Box 1171 Newark, NJ 07101-1171