ML20042C649

Annual Financial Rept,1981

ML20042C649
Person / Time
Site:	Peach Bottom, Salem, 05000000
Issue date:	03/04/1982
From:	Rich Smith, Sonn H Public Service Enterprise Group
To:
Shared Package
ML20042C647	List: ML20042C646 ML20042C648 ML20042C649 ML20050C839 ML20050C857
References
NUDOCS 8204090440
Download: ML20042C649 (48)

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1981 Annual Report s

contents 1 Fmancienmhhghts 2 ne.agetoshamhaders 5 FinancialResults

.:.g..g.g...g. Paterson 7 Construcuon Exiwnditures

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9 Production and Distribution 11 Computenzauon

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23 Attracung Busmons g.gg............

24 Community and Employee Belauons

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woodbridge 25 Fmancial Statement Responsibthty 25 Accounung Pohcies esses oggggggggggg,g

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27 Fmancialstatements

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, !.!!, l l l ; 3 31 Independent Accounumts' Opinion M,li,ggg.....g......g..

34 Notes to Emancial Statements 40 o eraang stausues

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42 FinancialStatistics 44 Management's D'iscussion and ggggggggggg.

Analysis of the Financial Condition und Bordentown nesults at operanons

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to improve ethciency and productivity is l'

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symbohzed in this computenza' ion of the photograph of an employee's hands at the g

console of a video terminal An ever-Increasing number of the Company's oper-attora involve use ct computer systems g.

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Public Service Electric and Gas Company 80 Park Plaza, f Jewark, New Jersey 07iOI (201)430 7000 4tockholder Information - Toll Free fJew Jercey resuk:nts (800n 242 0813 Outado New Jerser/

(800) 52G-P450 1

1 About the Company Pubhc Service Electnc and Gas Company, the largest utthty in New Jersey. serves M

some 5 4 milhon people, about three-The move into the new corpo-quarters of the state's population The rate headquarters at 80 Park Company's service area (shown m green Plaza Newark was completed I

on inap) stretches across the industnal in 1981. During the year the corridor runrung from the New York state work of razing the former line on the north to below Camden in the headquarters included demoli-i south The terntory. a center of transpor.

tion by an implosion in June.

tation. contiuns a weu bilanced rmxture 7

,m of industnal, commercial and residential l

j development included in the area are New i

Jersey s six largest cities and nearly 300 smaller suburban and rwal communities e

Annual Meeting

'S Please note that the Annual Meeting of Stockholders of the Company will be i

I held at the Govemor Morns Inn. Two Wtuppany lload. Mcrr' : town, New Jer sey. Tuesday. Apr1120.1982 at 2 Ou p m A summary of the meeting will be sent to au stot kholdets of record at a later date Financial Highlights g

Increase 1981 1980 (Decrease)

Earrnngs per average share of Common Stock

$2.63

$313 *

(16)

Shares of Common Stock l

Average 80,962,000 73.069.000 11 I

Year end 86,089,000 76,615.000 12 Dividends paid per sharo of Common Stock

$2.44

$2 29 7

look Va'oe per thate of Common Stock

$25.66

$26 38 (3)

Total Operatmg Ilevenues

$3,471,652,000 $2.994 054.000 16 Tota!O;rtating Expenses

$3,117,385,000 $2.616.902 000 19 Eanungs Available for Common Stock

$ 212,599,000 $ 229.060.000 (7)

Gross Additions to Utihty Plant

$ 683,849,000 $ 625.530.000 9

Total Utinty Plant

$7,320,764,000 $6.881.209.000 6

• Ex, tu.ics net exuaentnary a un of 56 3:6 thqual ta $ omr sham See 'i 'tes I and 5 page 35 1

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. m The year 1981 was difhcult - and, at

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times, discouraging - as weakness 9

y in the economy, accompanied by V

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high inflation and interest rates, con-l' 4.

l tinued to exact a toll on the utihty g

industry. Progress was made by your N.

Company, however, in a number of i

areas that hold promise for the future

A highlight of the year was the

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placing in service of the second nu-T clear unit at Salem Generating Sta-tion after two years of delays M

stemming from addiljonal regulre-R bert I. Smith, Chairman of the Board,(left) and Harold W. Sonn, President, reply to questions of monts of the Nuclear Regulatory shareholdersattheCompany's1981annualmeeting.

Conunission following the Three Mile Island accident in Pennsylvania. The unit will be a major asset in our effort to stabilize electne rates by reducing dependence on high-cost foreign oil for the production of electricity. :: Earnings Decline As a consequence f

of the bleak economic chmate and erosion of the rate relief received in 1980, earnings l

dochned in 1981 to $2.63 a Common Shme from $3.22 a share in 1980. The 1980 earnings had benefited by a net gain of 9 cents a share as a result of two extraordinary, non-recurnng items, and there were 7.9 milhon fewer average shares outstanding in 1980.

Revenues in 1981 increased to $3.47 bilhon from $2.99 bilhon, while expenses -

swelled by inflation - rose from $2.62 billion to $3.12 billion. :: The recessionary economy, conservation and cooler, less humid summer weather adversely affected our r

electric sales. 'Ibtal electric sales were down 0.8 per cent from 1980. Ample supphes of natural gas at a continuing pnce advantage over oil helped to increase overall gas sales by 4 4 per cent over the pnor year. :: Dividend Increased The quarterly dividend on Common Stock was increased in the first quarter of 1981 to 61 cents a share from 58 cents paid in the fourth quarter of 1980. The increase was in line with management's 2

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goal of raising the dividend on a regular basis to adequately compensate stockholders and to mainuun a competitive return in attracting new capital. This was the sixth con-

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secutive year m which the dividend was raised. :: Rate Relief Received The need 1

for additional rate relief was recognized early in the year and in February 1981 we filed a petition with the New Jersey Board of Public Utihties (BPU) requesting an increase of i

$536 million in annual revenues. Of this amount, S465 million was for electric service 1

I and $71 million for gas. :: Hearings were held on the request during the year and on i

February 11, 1982, the BPU granted an increase of $390 million. This included $338 million in electne revenues, and $52 million in gas revenues. :: Hope Creek No. 2 Cancelled One of the most significant actions taken by the Company in 1981 was the decision to cancel construction of the second of two nuclear units planned for Hope Creek Generating Station. The cancellation was approved at a meeting of the Board of Duectors on December 23. :: We had been evaluating the Hope Creek project, espe-cially the need for the second umt, for more than a year as part of the continuous review of our construction program The project also had been the subject of heanngs by the BPU. :: The mmn reasons for the cancellation were the lack of need for the unit in the I

1990's, due to lower than previously antici-view of nope creek oenerating Station shows in

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pated growth in electric demand, coupled with

, cti n nN it. At the stibstantial financial burden of raising the left are the domed containment structures of the necessary capital for construction. Further,,*"' *"*'""""***" "' _

even though our studies still showed this nu

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j clear unit to be economic in the long-run,,

j uncertainties with regard to future fuel costs,

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interest rates and inflation made it imprudent, !~

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in our judgment, to continue the project. ::

Cancellation of the unit does not indicate any l

change m our support of nuclear power as being essential to meet the nation's energy i

needs, but was based on today's economic reahties. :: The Company will recover tluough rates all abandonment costs relating to Hope Creek No. 2. The recovery, beginning I

in July 1982, was authonzed by the BPU in a i

decision on March 4,1982. :: Oil Usage i

Reduced Dunng the year we were able to re-duce our use of heavy oil for the generation of electncity by 28.2 per cent compared with 1980. This was accomphshed by increasing our nuclear power generation to a record level, and 3

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by purchasing lower-cost coal-generated power from neighboring utihties. O Salem No. 2 unit in the second half of the year was a significant factor in boosting nuclear power production to 25 percent of total output for 1981, up from 22 per cent in 1980. A full power operating license for the unit was received in May and, after extensive testing, commercial operation began on October 13. II Approximately 17 per cent of our elec-tric output was fueled by natural gas as we continue to be encouraged by the federal government to use gas and thereby reduce oil imports. II Nuclear Department Formed As a result of experience gained in the operation of the Salem station and in response to assessments of the nuclear industry, we announced in September plans to create a separate nuclear department headed by a vice president.

II Headquarters of the department will be in a facility adjacent to the Salem and Hope Creek generating stations. Approximately 200 employees will be transferred initially from the Newark corporate headquarters to the Salem site. II Research Continues A high point of our research and development program during 1981 was the completion and dedication of the Battery Energy Storage Test (BEST) facility in the Company's service area. At this national center large-scale advanced battery systems will be tested as energy storage devices. :: As a result of one facet of the Company's research program - a three-year solar demonstration project - it is planned in 1982 to begin offering to customers whose homes meet certain criteria an opportunity to purchase solar water heating systems.

The systems will use electricity or gas for backup service. II Computers Improving Productivity In attempting to cope with the continuing unfavorable economic atinos-phere, we have redoubled our efforts to curtail expenses and to improve operating efficiencies. II Improved productivity in practically all areas of the Company's opera-tions is being realized through the greater utilization of computers. Some of the ad-vances made in the computerization of operations during the year are discussed and illustrated in this report. II As we begin the new year, problems - especially high inflation and money costs - continue to plague the utility industry Any abatement in their intensity will have a beneficial effect on our Company's future. II We anticipate challenging problems in the future and we are optimistic about the ability of Company employees to meet and overcome them. In all our efforts, we appreciate the continuing support of the Company shareholders.

Robert I Smith at En t

Lm Harold W Sonn Ns+nt arJ a,rup % ng oe m March 4 1982 4

II Financial Results Prices paid pipehne supphers f r natural gas continued to nse be-Revenues in 1981 passed the $3 bij.

cause of escalations provided for in lion mark for the first time as they l

the Natura! Gas Pohcy Act of 1978 rose ny $478 milhon, or 16 0 per cent, and were mainly responsible for over the 1980 figure to $3 47 bilhon.

higher costs of gas production. The Electnc revenues mereased c sM raw mamnaMo madac-114 per cent to $2.32 bilhon, ac-mm g s abo wem Ngh counting for 67 per cent of the total Maintenance expenses Gas revenues went up 26.3 per cent mcreased by 13.5 per cent for the to $115 bilhon and made up the year The nse was largely attnbuta-other 33 per cent.

ble to major mhabihtation and over-A major part of the increase m haulwork at a number of generating revenues - $414 milhon - was at-stations.

tributable to mcreases m electric Labor costsincreased $15 8 energy adjustment and gas raw milhon, mainly because of wage in-matenals adjustment charges from us, e e

a uni e

e creases provided for in union con-l' 'I which earnings do not benefit. A j' 'l I,,,

i sueuI'"lseu nse m base rates m Apnl 1980 and tracts. Two-year labor agreements 1

ie I'"l improvement in gas sales were fac.

negotiated in 1980 provided for a wage mcmase of 9% effective May l

sus us, u,n es's tors to a lesser degree.

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1. 1981' The sources of 1981 mvenues by n'l New Jersey gross receipts us su 7

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'su customer classification were:

'. Inn 'in ou us taxes increased by 15.5 pei cent, l

from $400 milhon to $462 milhon, be-E> cme au ccmbm-1 Residential 31 % 53 % 38%

cause of the Company's higher Commercia:

38% 26% 34 %

revenues.

Industrial 29 % 21% 27 %

Street Lighting II Earnings Decline and other 2%

1%

Earmngs per share of Common Stock m 1981 dechned to $2 63 from Total 100 % 100 % 100 %

$3.22 in 1980. The dechne was at-tnbutablelargely to the croding Dividends and Earnings II Expenses Rise effect inflation had on the rate m-per Sharo Fueled by persistent high inflation, crease the Company was granted m operatmg expenses in 1981 chmbed Apnl 1980. Other factors were lower

$500 milhon, or 19.1 per cent. from electnc sales resultmg from the eco-4 oo

$2.6 bilhon in 1980.

nomic recession, cooler,less humid Expenses for production in-summer weather and conservation l

creased $418 milhon, a 26 9 per cent by customers.

nse Of this total, electnc costs rose The 1980 earnmgs included a

$227 milhon, equal to 218 per cent.

net gam of 9 cents a share as a result

-(;g, and gas expenses rose $192 milhon.

of two extraordinary, non-recurnng 3 oo or 37.1 per cent-items There was a gam of 27 cents di!

Power production costs in-a share that resultmi from the sale of creased but the amount was hmited Transport of New Jersey, which was somewhat by a reduction m the use partially offset by a wnte-off of 18 of oil as fuel for generation The cents a share representing unrecov-

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reduction was made possible by ered costs associated with abandon-2 2---

higher nuclear production partly as a ment of the Company's offshore result of Salem No 2 output, and generating project.

power purchases from other utihties in 1981 there were 810 milhon atlower costs than would have been average shares outstandtng com-available from the Pennsylvania New pared with 731 milhon in 1980, an Jersey-Maryland Interconnection-increase of 7 9 milhon, or 10.8 per Nuclear umts produced electn-cent.

cal energy more economically be-II Dividend Increased cause of lower fuel costs compared with conventional steam umts and The quarterly dividend on Common combustion tuli nes Comparative Stock was raised in the first quarter fuel costs in 1981 per million Bntish of 1981 by 3 cents a share to 61 cents Thermal Umts were nuclear 47 from the 58 cents paid m the fourth N77 78 79 80 81 cents, coal $192 and oil $5 81 quarter of 1980 The mcrease re-B Dmdends O Earnmgs

AdjustmentChargos for Funds Used During Construction.

Increased The decision to cancel was based largely on current estimates Effective August 1, the BPUap-of projected load growth, which indi-proved an increase in the Company.s cated a lack of need for the unit and levehzed energy adjustment charge the financial burden of construction.

for electncity to provide $160 5 mil-hon in additional annual revenues On March 4.1982, the BPU The amount is designed to cover approved recovery by the Company projected fuel and purchased energy through rates of all abandonment costs in the 11-month penod which c sts, amounting to $172 million.

began August 1.and to recover after tax considerations, over 15 under collections from previous years, begmnmg in July 1982.

penods.

The Company's latest forecast As part of the decision, the ind cates that electnc peak demand BPU also ruled that $5.78 milhon of w 11 increase at a 1.3 per cent annual culted in dividends paid in 1981 energy replacement costs associ-rate through 1995, a growth rate totalmg $2.44 compared with $2 29 ated with a prolonged outage of the below that of earher projections and in 1980, a 6 6 per cent increase.

Salem No.1 nuclear unit m the 12-f r below the rate expected when month penod ended June 30,1980.

the Hope Creek units were planned.

Rate Increase of should be shared equally by custom.

Mainly as a result of the can-11.5 Per Cent Received ers and stockholders. The Com.

cellation, the Company's construc-On Febt nary 11.1982, the New Jer, pany's portion. $2.89 milhon, or $1.6 tion expenditures are expected to be ib n. net of taxes, was wntten off reduced by $1 bilhon over the next sey Board of Pubhc Utihties(BPU)' d the state regulatory agency. grante m August 1981' nine years This amount does not re-i i

flect $68 milhon of estimated the Company an 115 per cent in.

The BPU also approved an cancellation and closecut costs It crease m revenues totahng $390 mil.

merease in the Company s levelized hon, effective February 14 Of the raw matenals adjustment charge for was doubtful that the Company amount. $338 mtlhon an increase of gas customers to provide additional could have raised the necessary 14 8 per cent, was for electnc ser.

annual revenues of $136 milhon. Th lembe m 'h vice and $52 nulhon. an increase of charge. effective November 16.1981 completion of Hope Creek No 1 umt 4 7 per cent, was for gas, through September 30,1982. is t alone as scheduled in 1986 will be difficult without substantial addi-Based on the 12-month penod cover projected increased costs of g g~

ended October 31,1981 as a test natural gas and the matenals to year, the Company was allowed a re.

m nufacture gas.

turn on rate base of 10 67 per cent In May the U S Supreme Court and on common equity of 16 per ruled as unconstitutional a tax by 300 l

cent This was an maease over the the State of Louisiana on natural gas l

rates of return authonzed in the produced in the Gulf of Mexico and l

previous rate case which were 9.46 transported through that state. The per cent on rate base and 13 75 per tax had been collected since Apnl 1.

cent on common equity 1979 As a result of this ruhng, the so The BPU also granted an in.

Company recovered and distnbuted crease of $125 milhon of Construc-t g s customers refunds related to the tax of $23 8 milhon.

tion Work in Progress that will earn a cunent return Theamount one half The Com;)any also refunded to l

of the Company's request, is in addt-electnc customers $5 5 milhon so tion to $250 milhon previous!v which resulted from a settlement be-

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tween the U S Department of authonzai The rate merease resulted from Energy and one of the Company's oil a petition filed on February 13.1981.

supphers for alleged over chargmg requestmg an overallincrease of These refunds in each case were 40

$536 nulhon in annual revenues. or made through adjustment charges.

abaut 15 per cent Of the amount.

Nuclear Unit Cancelled

$466 milhon was in electue reve-nues. an merease of 20 per cent, and The Company on December 23 can-

$71 milhon was m gas revenues, or 6 celled the No. 2 umt of the Hope 20 por cent.

Cmek Generating Station which had The New Jersey Pubhc Advo.

been schedukd for commercial cate, a particip mt in the rate case.

opeiation in 1989 The unit was has requested the BPU to reconsider bout 181s compkte and approxi-its rate order mately $335 nulhon had been ex-g pended by the Company on the unit.

1977 78 79 80 81 including $50 milhen of Allowance E Long Term Debt E Preferred stock E Common Egmty 1

f O C:nstruction The Company also raised $54 8 Expenditures Rise milhon through the sale of 317 mil-hon shares of Common Stock undet Construction expenditures in 1981 the Dividend Reinvestment and totaled $717 milhon, up $37 milhon, Stock Purchase Plan, and $5 3 mil-or 5 4 percent from $680 milhon in lion through ance of shares 1980 Included in the figures at under the Emplofee Stock Purchase Allowance for Funds Used Dunng Plan, the Tax Reduction Act Ett Construction (AFDC), nuclear ployee Stock Ownerstup Plan, and fuel payments, and advances t theThnft Plan subsidiane Proceeds from the sale of these In 1982 construction outlays secunties m 1981 were used to repay are estimated at $799 milhon and in short term debt incurred in con-the hve years through 1986 at $3.9 nection with the Company's bilhon. These amounts include construction program.

$92 rmlhon and $772 miUion of Short term needs were Although the Company's AFDC, respectively Dunng the five-fm need through the sale of com-studies indicate that the No 2 unit year pened spendmg for nuclear mercial papa Them was E07.6 mil-would have imen economic on the generatmg umts and the fuel to hon in shott-term commercial paper bams of fuel savmgs, they contam operate them wiu be about $2.6 bil.

utstanding at year end.

uncertainties These mclude the fu-hon,67 per cent of the five-year ture pnce of oil and coal, the rate of expenditure estimate.

33 Stockholders mflation, the cost of capital, load growth in the 1930's and 1990's, and Estimated Construction At the end of 1981, stockholders of future Fedent and state regulations.

Expenditures (Including AFDC) record totakxi 273,132. They in-Year 1982 1983 1984 1985 1986 Cluded 233,224 owners of Common The unceruunties also were factors (Millions)

Stock,12,299 holders of $1.40 Divi-in the decision to canc l Totals $799 $818 $835 $774 $644 dend Preference Common Stock, Cancellation of the No. 2 umt and 27.609 holders of Preferred does not mdicate that the Company

'I,he Company anticipates that Stock has changed its mmd about nuclear it will generate internally approxi-power as the best way to meet mately 50 per cent of its construc-33 Dividend Reinvestment energy needs in New Jersey The tion expenditures, exclading AFDC, Plan Qualifies for Tax Company n nuclear umts in opera-over the next five years This as-Benefits tion me savmg consumers hundreds sumes receipt of sufhcient rate rehef.

of milhons of dollars flowever, the Inadequate rate rehef would require The Company's Dividend Reinvest-Company could not afford to spend the deferral of various construction ment and Stock Purchase Plan quah-the funds which wouhl have been projects m order to reduce expendi-fies for tax deferred treatment requued to hnish the No 2 umt tures Mortgage Bonds, Preferred beginning in 1982 under the Eco-smce the capacity will not be Stock and Common Stock will be is-nomic Recovery Tax Act of 1981.

needed to meet customer demands.

sued to finance the balance-Under the Act, participants in Because of such lack of demand, the the Plan, other than non resident

• • Securities Sold Company has no present plans to abens, trusts, estates, partnerships construct additional nuclear capacity Dunng 1981 the Company raised and corporations, are ehgible for tax beyond flope Creek No 1 more than $320 milhon through the deferment on dividends reinvested The llope Creek statton was to sale of Mortgage Bonds, Preferred

.n shares of Common Stock for the have consisted of the two,1,067-Stock and Common Stock.

years 1982 through 1985.

megawatt, nuclear umts. The In March,500,000 shares of Those participating may elect Cornpany owns 95 per cent of the 13 44% Cumulative Preferred Stock, on their 1982 tax returns to exclude station. and Atlantic City Electne

$100 par value,were sold Net pro-from gross income, and therefore Company the other 5 per cent.

coeds to the Company from the sale defer Federalincome taxes on, up to f this stock totaled $49,569,500.

a total of $750 per year ;$1,500 on a O Taxability of Dividends Six milhon shmes of Common joint return) of their reinvested divi-As a consequence of the cancella-Stock were sold in June to a group of dends received from the Company tion of the llope Creek No 2 umt.

underwnters at $18 60 a share. Pro-and other quahfied pubhc utthties the Company esumates, subject to ceeds to the Company from this sale Federalincome taxes will be Intemal Revenue Service approval-rotakxi $1116 milhon deferred until the stock purchased that 88 3 per cent of the dividends In August. the Company sold with reinvested dividends is sold. If pmd on Common Stock m 1981 is 3100 milhon pnncipal amount of the stock is held more than one year, nontaxahle for cunent Federal m-1W per cent,10 year First and Re-any proceeds from the sale will be come tax purposes The nontaxable tundmg Mortgage Bonds at an treated as a long-term capital gain.

portion constitutes a return of capt-annualinterest cost to the Company tal which shoukt be apphed to re-of 15 968 per cent duce the cost of shares owned in computmg a gain or loss on a subse-quent disposition 7

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1982. In time for interested share-coverage to $450 m!!' ion, up from holders to enrou pnor to the March

$375 mihlon in 1980 l

1982 dividend Holders of record of In November. Nuclear Electnc

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$140 Dividend Preterence Common Insurance Limitec (NEIL), another j

Stock and Preferred Stock are now industry-owned orgaruzation of l

ehgible to participate in the Plan, as which the Company aho is a mem-weu as holders of record of Common ber, began providing excess nuclear i

Stock property insurance with initial At the end of 1981. 53,435, or coverage of $118 mtlhon As cf Janu-23 per cent of the holders of Com-ary 15.1982, this coverage was in-I mon Stock were participating in creased to $247 milhon This is in

)

either full or partial dividend rem-addition to the $450 milhon provided l

vestment, up from 47.780 at the by NML.

chse of 1980 Investments through The Company anticipates that i

optional cash payments also in-in the future NEIL wdiincreue its j

Proceeds from the dispositmn cre sed substantially dunng the excess coverage to $500 milhon l

I of any stock (mciudu4g stock ac.

year which wouk1 provide for total cover-quired through dividend remvest-II NuclearInsurance "U" P" ment)withm one year after such NEIL also provides insurance dividend will be taxd as ordinary Increased agamst the extra expense of obtam-income to the extent of the shams The Company in 1981 increased m-mg replacement power durmg pro-l acqinrod through tax-deferred divi-surance coverage for direct physical bnged outages of nuclear power dend reinvestment during the one damage to its nuclear facihties piants This coverage also was m-j year period Effective m August D81, creased dunng the year After the A prospectus descnbing the Nuclear Mutual Limited (NML), an first 26 weeks of an outage a weekly Dividend Heinvestment and Stock industry-owned mutual insurance mdemmty of up to $2 3 milhon is l

Ptuchase Plan and its tax deferrod firm of which the Company is a provided for 52 weeks. and $115 mil-i feature was distnbuted in February member. Increased nuclear property lion for an additional 52 weeks I

The l

1981 i

Income l

Dollar

[

I Where It Came From Where It Went j

I Electnc Revenues S.65 Fuel. Purchased Power i

cas Revenues

.32

& cas S.49 A0awance for Funds Usod Saanes & Wages

.07 Dunng Construction

.03 Matenals & services

.09 Ta m

.16

$1.00 Interest

.06 Dividends

.07 I

Bemvested m Business

.06 I

St.00 3 -

4 gi t I

i, 1

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8 l

,,n.,-,

Gen:rcting C pacity Foreccst Sigmficant steps mcluded m-stallationof thereactor pressure

[)akr$ab ha esSry]

vessel, completion of the turbme-par generator pedestaland enclosure of g,

the turbtne building.

1982 7135 8995 26 Only minimalwork was carned 1983 7285 8995 23 out on the No. 2 umt as its need was 1984 7440 8995 21 being evaluated. The unit, which 1985 7605 9115 20 was about 18 per cent completed, 1986 7690 9165 19 was cancelled in December and is 1987 7815 10004 28 discussed on Page 6.

1968 7930 9994 26 The Company owns 95 per i

1989 8045 9994 24 cent of the Hope Creek station and l

1990 8150 9994 23 Atlantic City Electric Company i

1991 8245 9488 21 holds the other 5 per cent.

j l

38 Construction Begun on l

I 1: Salem No. 2 Begins Training Center j

"T,,,,,,,,,,,,,,

Commercial Operation In Apn!, construction was started on I,3 '.

The full power operating hcense for the Nuclear Trainmg Center m Salem No. 2 unit was rer.elved on Salem, N.J. Included m the center II

=

• " g". " " ", " "*:

May 20 and after a power ascension willbe simulators to train contro!

l testing program,it was placed in room operating personnelfor the 3' " ":

• commercialoperation on October 13.

Salem and Hope Creek generating The Company's electr",; output Pnor to the receipt of the full stations. Site of the center is about dipped shghtly in 1981, the first de.

power heense. an emergency exer-eight twes from the stations.

chne smco 1975. The dechne was at.

cise with the states of Nevi Jersey An order for the Hope Creek tnbutable tolower sales caused by and Delaware was held on Apul8 as simulator was placed in June for the econormc recession, cooler required by the Nuclear Regulat:::y dehvery in mid-1984. A simulator for weather which reduced demand for Commission and the Federal Emer-Salem station training was ordered air-conditionmg and greater conser.

gency Management Agency The m 1980 and is scheduled to be deliv-exercise demonstrated the emer-ered m 1982.

vation by customers gency preparedness capabihties of The center will house class-Total megawatthours pro.

the Company as wellas those of the rooms, a shop andlaboratories for duced, purchased and interchanged two ttates-training, as well as other facthties.

for the year amounted to 32 2 mil, hon, a decrease of 1.5 per cent from Salem No. I was taken out of Courses willextend from a few days 1980 service for refuehng and mamte-to over a year.

n nee on January 1,1982. Dunng Construction of the center Peak demand of 7,034 mega.

watts occurred on July 9 which was the outage the three low pressure emphasizes the importance the turbine rotors willbe replaced by Company places on thoroughly 17 per cent below the all time mark thers of an advanced design.

trained and quahfied nuclear plant of 7.159 megawatts reache 1 on July 21, 1980 The maximum output of High density fuel rack installa-personnel.

136,133 megawatthours for a day tions in the spent fuei storage pools was on July 9, which was 3 2 per for both Salem units were completed

Nuclear Department I

cent less than the record figure of dunng the year. As a result, spent Created 140,591 megawatthours on July 21, fuel capacity at the station was m-A review of the Company's nuclear 1

l creased from 264 elements to 1.170 operations and support orgamza-1980 at each of the two pools. There now tions, together with the everience i

At the time of the system peak k)ad, the Compmy had an mstalled is sufficient spent fuel storage ca,

gained in the operation of the Salem pacity at Salem until the late 1990 s.

station, led to the formation m 1981 generating capacity of 9.023 mega.

f Nuclear Department. Consid-watts, or a capacity reserve o! 22 per

Hope Creek No.1 ered in the review were assessments cent Installed capacity was 9.101 megawatts at year end.

Work Progresses of the nuclear industry made follow-On the accompanying table are Constr uction work at the Hope ing the Tluee Mile Island accident m Creek Generating Station dunng the Pennsylvania. Requuements and shown the planning peak electnc year focused on the No.1 umt which recommendations of the Nuclear loads, installed generating capaci.

ties and per cent reser ves anucipated reached 38 per cent of completion Regulatory Commission and the for the next ten years by year end Efforts are being con-Institute of Nuclear Power Opera-centrated on achieving f aelloadmg tions, an industry orgamzation, also in early 1986 were taken into account.

9

Grt>und breaking ceremony Uranium mining operation at was held in April for the Nu.

Key Lake in Saskatchewan.

clear Training Center shown Canada. During 1981 the Company contracted for ura under construction at Salem

• nium from this de).osit which N J. At ceremony. Robert I is of extremely high grade Smith, Company chairman.

and at shallow depth. About Hanry.) Midura. generel man 425.000 pounds of uranium will y..

ager ~ nuclear operations and be received annually.

/

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H. Denin Hanson. manager -

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'... w_ ***r _,4 nuclear training displayed i, '.. -

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i uranium under a long term contract Kerr-McGee to the Company or with Kerr-McGee Nuclear Corpora-other buyers, or Kert-McGee's sale tion as a result of an amendment to of the project properties.

I the contract entered into in 1980 be-l cause of theavailabihty of uranium

Gas Sendout Higher concentrates in the open market at An improvement in gas supply and lower prices Under the contract additional customer connections with Kerr-McGee, $40.5 mdhon had helped to increase total sendout for 2

j been advanced as of December 31.

the year to 215 bdhon therms,3 3 1981 to imance mimng and millmg per cent higimr than the 2 08 bdhon j

1 facihties for this long-term project-therms m 1980

'lhe Company advanced 70 per cent An all time record peah day of this amount, and the co-owners of sendout of 14,812.000 therms was Salem and Hope Creek stations ad-set on January 12,1981 when the vanced the other 30 per cent.

average temperature was 6'F. This major contract for uranium from a Of these advances, $14 3 mil-surpassed the previous record of deposit of high grade ore at a shal-hon, including $4 7 mdhon of 14.444.000 therms set on December low depth at Key lake in Saskatche-mterest, has been recovered through 25.1980, when the average tem-w.m Canada Domestic supphes credits against the purchase pnce of peraturewas 2 F.

l also were obtained to provide diver-uramum concentrates dehvered by On January 17,1982 a new city for assurance of supply Kerr-McGee sendout record of 16.201,000 therms As a result of these efforts and Resumption of uranium was set when the average tempera-relatni ones for nuclear fuel ser-production under the V. err-McGee ture was -4' F.

vices. the Company's fueliepply has contract after November 1982 wdl be The number of interruptible I

been expanded to match the in-at the option of the Company Under customers served mereased by 22 to creased nuclear production capacity the contract, recovery of advance 110 and tnetr peak day consumption i

The Company is currently re-payments not already recouped wdl rose by 10.7 per cent to 1.1 mdhon ceiving rmluced dehvenes of depend upon the sale of uranium by thenns The number of days ofinter-ruption mereased to 22 from 11 days Gas Peak Sendout and Daily Electric Peak Load and Incalled in 1980 because of extremely cold Capacity at Time of Peak Capacity at Time of Peak weather durmg January 1981.

"""*""")

Improvement in Supply

[E ~ r~~9 Continues 2

'8 86 3 Theimproved supply situation i

18 90 which followed the passage of the 17 85 i

NaturalGas Pohey Act of 1978 con-tmued dunng 1981.

,g g_a The amountof naturalgas

'S 76 purchased for distnbution to cus-14 i'

70 tomers totaled 2.02 bdhon therms, 23 s5 compared to 197 bdhon therns m 1980.

i u

60 Dehvenes of pipehne cas by Interstate supphers were ctirtaded to 50 0 7 per cent or 17.2 milhon therms 9

45 Compared with 12 per cent or 29.5 rmllicn therms in 1980. The maxi-l 8

4o mum monthly cuttallment to the 7

35 Company was 3 0 per cent, whde 6

30 most of the year full contract amounts were dehvered. Curtad-5 25 ments have decreased markedly 4

2 smee 1976 when they peaked at 3

15 30.7 per cent 2

1.0 The cost of naturalgas m-creased by 19 per cent to $2.95 a t

os milhon BTU's m 1981 The higher g

a prices were attnbutable to allowable Heatug 1971 72 73 74 75 76 77 78 79 80 1972 73 74 75 76 77 78 79 80 81 Season 72 73 74 75 76 77 78 79 80 81 increases under Federal gas pncing O Huh t oad Factor Naturai Gas D instailed Capacity ties of higher-cost deregulated gas G Wtnter Storage NaturaiGas U Peak Load O ManufacturedGas and Canadian imports.

O 24 Hour Peak Sendout 11

Offshore drilling operations in The substantialincrease in the Gulf of Mexico make up a dehvenes by EDCin 1981 made the significant part of the explo-subsidiary the third largest source of j

ration program of Energy gas supply to the Company Development Corpcration, the Company's exploration EDC revenues and earnings l

subsidiary.

reached record levels in 1981. Reve-nues from the sale of gas and oil totaled

$75 2 milhon, compared with $44.1

'~ milhon in 1980 Net income was

(

$114 milhon in 1981, an increase of l

t Q

~....' 99 per cent over 1980 The mereases 1 - 45

- '41i for the year were due to greater gas

,f

.' e. ". and 43 per cent, respectively, and and oil production, up 65 per cent l

l

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higher paces for natural gas.

4 l

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l EDC continued its search for l

A.'

- ;P-natural gas in the Southwest and l

j theGulf of Mexico Exploration activity in 1981 was carned out i

i through five separate programs, four e o -

T i '

C' onshore and one offshore.

j Onshore operations involved j

the dnllmg of 11 successfulwells with 14 wells abandoned. At year

' k DD 8

end five wells were being dnlied.

Offshore dnlhng and leasing activity contmued to play the major role in EDC's exploration program.

/

j Dunng the year 33 wells were suc-w I Supplernental Gas cessfuuy completed, nine were

/

Supplies abandoned and four were bemg Natural gas supphes were supple-dnlled at year end.

mented with gas purchased from Two federallease sales were Exxon's Bayway Refmery as well as heH for Gulf of Mexico offshore

,u The fris-Stop, developed in with gas manufactured in Company-blocks during the year. EDC as part England, was utilized for first owned facihties.

of a group, bid $33 6 milhon on 32 time in U.S.to isolate a section Exxon supphed 92 3 milhon blocks and placed high bids on of 36. inch gas main during re-therms of refinery gas at an average seven blocks tatahng $9 6 milhon.

i location work.1nstalled under cost of $6 04 a miulon BTU's dunng EDC's interest m these blocks pressure so customer service the year compared with 84 3 milhon ranges from 15 per cent to 20 per i

l chanica ly opera ed teel shut-therms at an average cost of $513 a cent. Testing of the new blocks will l

ter expands to block gas flow.

million BTU's in 1980 begin in 1982.

During the coldest parts of the se

!! Daily CapacityIncreased wmter manufactured gas consisting ee LNG Applications i

The Company's etfective daily gas of synthetic natural gas produced Conferences were held in December capacity, exchidmg the effect of cur-from' naphtha, oil gas produced frorn t the Federal Energy Regulatory tailments. mereased by 571.000 kerosene and hquefied petroleum Commission (FERC) on apphcations therms dunng 1981 The increase gas produced from pmpane ware concernmg placing in use two lique-was made possible by the purchase supphed to Company customers hed natural gas tanks and related of a fitm transportation service for The total production of this gas facihties on Staten Island, New York.

storage gas from Texas Eastern amounted to 29 0 milhon therms The tanks. owned by Energy Transmission Corporation The daily compared with 22 7 milhon therms Terminal Services Corporation capacity of 19,010.000 ther ms on m 1980 (FTSC) a Company subsidiary.

December 31 was composed of would be used to store domestic 9

Y "Y

Type of Gas Theims per Day Energy Development Corpotation and others dunng periods of peak Natural Gas 1MG3.000 (EDC) the Company's exploration demand. Operation of the tanks will laquehod IVtroleum Gas 1981000 subsidiary. continued to shov'sub-require construction of a hquefac-Synth~c Natural Gas 1.125 000 stantial gains m natural gas deSv-tion umt and other facihties as well i

i od Gas 1.186.000 enes and earnings in 1981 Dehsenes as a pipehne under the Arthur Kill to Itet:nerv Gan 255 000 of gas totaled 186 milhon therms transport gas to and from New dunng 1981, an increase of 82 per Jersey rotal 19 010M cent over 1980

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tiomng dunng the following day est in energy matters, continued in Equipment for the cychng of cus-1981 to advise PSEsG Research tomer apphances such as air Corporation. Formed in 1979, the conditioners and electric water council reviews research and devel-heaters by remote controlalso is opment programs, including the be'ng investigated.

levelof funding, from an economic and social viewpoint. The council Is Solar Water Heating also serves as a communications Program Approved hnk with the public.

Among the components of the load SE Testing of Advanced management program is the Batteries Set Company's plan to offer residential customers an opportumty to pur-The Battery Energy Storage Test chase solar water heating systems.

(BEST) facthty was dedicated on in September the New Jersey May 14 as a national center for test-B rd f Pubhc Utihties and the ing large-scale advanced battery at Load Management and State Department of Energy ap.

systems and power conversion Conservation Planning proved a proposalunder which equipment for energy storage.

The Company has been in the fore-customers whose homes meet The projectis a cooperative front of the electric utthty mdustry in certain entena will be able to buy effort of the Company, the U.S. De-developmg methodologies for plan-systems installed under Com-partment of Energy (DOE), and the Electnc Power ResearchInstitute mng and assessmg customer pany supervision.

activities involvmg load manage-The umts will use either elec-(EPT), the research organization of the nation's electne utthtles.

ment and conservation tncity or gas for backup service.

Under study are options de-Those that use electncity will have The facihty was designed and signed to improve overall system available a newlower off peak solar built by the Company to support the ethciency to stabihze costs for the electric rate.

nationalload levehng battery devel-benefit of the Company and its cus-Approximately 1,000 custom.

opment program. At year end the tomers By influencmg customers' ers have expressed interest in the Company signed a modification to use of electucity by means of spe-units Installations in the homes an ongoing contract with DOE and ciahzed devices, control equipment which meet entena for the umts are EPRIwhich provides $2.3 milhon or new rates, it m possible to exer expected in mid-1982.

over a penod of 18 months for facthty cise beneficial management of elec-operation and installation of the first tocioads on the system A program advanced battery system.

PSE5G Research Corporation has been developed which could re-willoperate the facthty, as well as sult in an estimated reduction in plan and conduct tests for evaluat-peak electnc capacity requirements

= = -

of about 1.000 megawatts by 1995

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mg battery performance.

For several years the Company g gg g

T. I Development of such battenes has had an mten uptible service wouki permit power produced by electue rate available for large indus-In 1981 the Company's research and nuclear and coal generating units tnal and commercial customers development program continued to dunng mghttime penods of low de-Under this rate customets agree to seek solutions for near and long-mand to be stored and used dunng mluce theu electne use at times of ter m energy problems. The program, daytime hours of peak electnc load peak system demand when notified carned out by PSEsG Research Cor-This would mean fewer oil-burnmg to do so by the Company Thw has poration, a subsidiary, includes generating umts would be r.eeded resulted in nearly 200 megawatts of projects to reduce dependence on to meet peak electnc requuements.

controllable load conventional fuel sources, to de-In testing the advanced bat-Inad management through velop alternate energy techno ogies.

tones, which will be produced by rate provisions now includes a new to ccmserve energy, and to make several manufacturers, alternatmg voluntary rate schedule for storage mnovative use of wasted heat.

current from the Company system water heating with low otf peak The Company's total R&D will be converted to duect cunent mghtume pncing in addition.

expenditures m 1981 amounted to for storage at the facihty The power mandatory time of use pncing was

$14 5 milhon of which $3 7 milhon wal be subsequently discharged approved for an additional 900 lar9e was obtained fmm outside sources from the large battery modules and mdust nal and commercial custom-Actual cost :o the Company for converted back to alternating cur-cis and to residential customers internal R&D activities was $4 5 tent for transmission by the using more than 24,000 kilowatt-milhon and support of research per-Company system.

hours annually fonned by industry organizations Dunng initialoperation of the Studien are tving made of the was $6 3 milhon facihty a large 1.8 megawatthour hud management potentialof de-The Research Advisory Coun-lead acid battery was used to train vices which can store energy at cil. composed of promment citizens the operatmg staff and gain expert-mght fo* space heating or au condi-who represent a broad pubhc mter ence in the use of battenes as load-21

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Completion and opening in 1981 of the 20.000-seat indoor arena of the New Jersey Sports and Exposition Authority in the meadowlands in East Rutherford provided anotber at-traction for the public. The arena, home of the New Jersey Nets of the National Basketball Association complements Giants Stadium ar.d the Meadowlands Racetrack. Other sports events, as well as concerts, conventions and exposi-tions, are held at the arena Development of the complex has served as a catalyst in the commercial and residential growth of the n.eadowlands area that has meant millions of dollars in additional revenues for the Company.

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A new emploafee information program will provide monthly videotapes that will be shown on television sets installed at various locations throughout the Company. Employees will have an opportunity to view the tapes in small groups. A meeting of the Communica-tions Coordinating Committee is shown being videotaped.

...-g

,7

.~'*t survey The program proved effec-m

(,' 'hi h b, } tive and was expanded m the Fall to p e: include representatives of employ-g""

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"' 1,,1 "" g""

h 4

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ees throughout the Company 1

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3

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At the end of the year about

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n,1 -

Q..

~- - ;=~

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1,000 employees servmg in more

..1 1,,,

3" I,,,'

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than 100 Local Action Groups were i

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{; attemptmg to solve problems at all

- f

- E.

.. ' I.. p p :.

levels to make the Company a better e

j j m.

',.,.. j ',[%,a' place in which to work.

II Community

.5.L.

?jp A management succession I, ', ~ " ? s.R,? j,J t i 1 plannmg program was instituted on u-Involvement L -

a Company-wide basis to msure that As in the past, vanous departments More than 300 presentations quahfied replacements are available as well as individual employees par-attended by over 17,000 persons for key employees. Personnel devel-ticipated dunng 1981 in commumty were given by the Companys activities throughout the Company's Speakers' Bureau. Generating sta-opment activities, meludmg on-going traming sessions for all mana-service area Employees served m tion tours were held for over 3 900 geriallevels, were expanded.

voluntary positions in many civic, persons' Dunng the year 561 manage-cultural, chantable and educational Over 19,000 persons visited the ment employees attended supervi-organizations Second Sun, the Company's energy sory and managerialskills trainmg The Company maintamed its informauon center at the Salem programs. In addition,553 em-commitment to agencies that seek Generating Station.

ployees attended job-related college to improve the social, economic There were presentations on a courses under the Company's educational and hving conditions in wide vanety of timely energy-related tuition-aid plan.

the commumties and urban areas it topics and other subjects of com-serves The number of Company em-munity interest to civic, social and ployees at the end of 1981 was Urtun activities were focused school groups totahng more than 12,782 compared with 12.326 at the on strengthening ties with orgamza-198,000 persons A wide vanety of close of 1980. Wages and salaries for tions working on inner-city prob-aliences were reached through the year totaled $341 milhon, melud-lems. Part ;ular emphasis was film, shde and lecture programs.

ing $10 million for dicabihty benefits placed on increasmg educational Commumty concerns of many types and workers compensation.

and job opportumties for urban were reviewed and assistance pro-youth vided where appropriate.

Affirmative Action Programs contmued to be emphasized in the Company othciala blhxl key Company representatives employment of women and mem-roles in Renaissance Newark as it appeared on numerous television bers of mmonty groups. At the end sought to revitahze the city's com-and radio interview programs-of 1981 there were 1,924 female em-mercial distnct Company advert 1 sing empha-ployees and 1,859 minority group II Communications sized the neaMor conservation and employees nuclear power, and sought to en-mp aSize courage business and mdustry to 10-The Company participated as a corporate pa tner of the U S A broad-range commumcations pro-cate in the Company a service area Council for the International Year of gram was conducted that provided infonnation about the Company

Employee Relations Disabhxi Persons-and its activities to the pubhc, A pilot study in which employees stockholders and the hnancial com-participated was carned out dunng mumty Information was supphed to the year to help solve problems the media on a regular basis shown m the 1980 employee attitude 24

Financial Statement Responsibility The management of PSEs0 is responsible for the mtegnty Management beheves the effectiveness et this system and objectivity of the financial statements of the Com-ts enhanced by a program of contmucus and seh>ctive pany These statements are prepared by the Company tratmng of employees In addition. management has in accordance with generally accepted accountmg commumcated to all employees its Pohcies on Busmess pnnciples apphed on a consistent basis and include the Conduct. Company Assets and Internal Control.

use of informed estimates where appropnate. Manage-ment beheves that they present fauly the Company s The firm of Deloitte Haskins & Sells, mdependent certi-fmancialcondition Information m other parts of tlus fmd pubhc accountants, is erigaged to examme the Annual Report is consistent with these financial Company's fmancial statements and issue an epimon thereon Their exammation is conducted in accordance statements with generally accepted auditing standards and meludes The Company mamtams an accounting system estab-a review of internal controls and tests of transactions.

hshed with sound accounting and business pohcies which are communicated to the appropriate personnel The Board of Duectors carnes out its responsibihty of The system is designed to provide reasonable assurance fmancialdisclosure through he Audit Committee cut-that transactions are executed m accordance with man-rently consisting of five directors who are not employees

~

agement's authorizations and that assets are safe-of the Company The Audit Committee meets penodically guarded The concept of reasonable assurance recognizes with management as well as representatives of the inter-that the costs of internal controls should not exceed the nal auditors and mdependent certified pubhc account-related benehts The system. together with its related ants and reviews the work of each to ensure that their mter nal controls. Is continually reviewed by the Com-respective responsibthties are being carried out, and to 1

pany's staff cf mternal auditors discuss related matters. Both groups have full and free access to the Audit Committee.

Summary of Significant Amortization of Deferred items 7

Accounting Policies Deferred debits are amortized and recovered through rates as presenbed by the BPU, Pnor to 1981, portions of such amounts estimated to be recoverable within one Accounting Principles year, together with related taxes, were classified as cur-Financial statements are presental m accordance with rent items in the balance sheets. All financial statements

~

generally accepted accountmg pnnciples (G AAP) As a presented herem reflect appronnate reclassifications to result of accountmg requirements imposed under rate-conform with the current presentauon.

making decisions by the Board of Pubhc Utihties of the Stateof NewJersey(BPU), theapphcationsof GAAP FuelCosts by the Company differ in ret tain respects from apphea-The Company projects the costs of fuel for electnc genera-tions by non regulated businesses The Company is tion, purchased and trterchanged power, gas purchased under the junschction of the Federal Energy Regulatory and matenals for gas produced for twelve-month penods.

Commismon (FERC) and the BPU and mamtams its ac-Adjustment clauses in the Company's rate structure allow counts in accordance with theu presentni Umfonn the recovery of the excess of such projected costs over Systems of Accounta winch are the same those included in the Company's base rates through level-iz d m nWy charps over the penod of projection. Any Investruents in Subsidiaries under or overrecovenes are deferred and charged to The Compmy's mvestments tu its submdianes. which m sm % W b M W aw a h Pm o

the aggn gate are not signihcant as detmed by the Sec-to 1981, such under or overrecovenes were classified as unties and Exchange Commission. are repor ted in the cunent items in the balance sheets All f mancial state-accompmying f mancial statements on t he eqmty method ments presented herem reflect appropnate reclassifica-of accounting Under tlus method, mvestments m sub-tions to conform with the cur rent presentation sidianes are reported unde Other Property and Invest-ments tn the Balance Sheets. and eat nmgs or losses of In addition, the BPU has allowed the Company to amor-such submdianes are reported under Other Income m t h" tize and recover through base rates the balance of electnc Statements of Inconm energy costs which had not been recovermi pnot to July 1, 1977. The Commission has also authonzed the recow ry pgygggg through the levehzed electric energy adjustment clause of Hevenues me recordnt based on estimated ser vice ten undenecovered costs from the 1979-1980 levehzed penod dered. but a4e billed to customers through monthly cycl" over a penod endmg June 30.1982 btlhngs on the basis of actual usaqe

^

25

Utility Plant and Renated Depreciation and Deferred income taxes are provided for differences be-Arnortization tween book and taxable income to the extent permitted The cost of replacements of umts of property is charged to for rate-makmg purposes.

utihty plant The cost of maintenance, repairs and re' Inwistment tax credits are deferred and amortized over placernents of minor items of property is charged t the useful hfe of the related property including nuclear appropnato exp nse accounts At the time depreciable fuel.

propirties are retmxl or other wise disposmj of, the ongi-nal cost less net salvage value is chanyxl to the For rate-making and financial reporting purposes the appropnate provision for accumulated depreciation.

Company's tax normahzation practices are m comphance Depreciation and Amortization, for financial reporting with the mquirements of the Economic Recovery Tax Act gg39g7 purposes, are computed under the straight hne method.

Depreciauon is based on estimated average remaimng Allowance for Funds Used During Construction hves of the several classes of depreciable property Amor~

tiration of leasehold unprovements is based on the term Allowance for funds used dunng construction (AFDC) is a of the lease Depreciation apphcable to nuclear plant pro-cost accounting procedure whereby the cost of financing vides for estimated costs of dismar.thng or decommis-construction (interest and equity costs) is transferred from sionmg These estunates are reviewed continuously and the income statement to construction work in progress (CWIP) in the balance sheet. This results in treating such necessary adjustments are made as approved by the BPU cost in the same manner as construction labor and ma-Depreciation provisions stated in percentages of onginal cost of depreciable property are 3 49% for 1981 and 3 48%

terial costs. The rate used for calculating AFDC was 8%

for 1980 and 1979 for 1981,1980 and 1979 which was within the hmits set by the FERC Effective Febtuary 14,1982, the BPU has is-Arnot tization of Nuclear Fuel sued a new rate order which requires the Company to Nuclear energy burnup costs are charged to fuel expense rmse the rate used for calculating AFDC to 8% %, also on the basis of the number of umts of thermal energy pro-within the hmits set by FERC.

duced as they relate to total thermal units expected to be As a result of BPU rate orders the Company is allowed to produced over the hfe of the fuel The rate calculated for include $250,000,000 of CWIP m rate base on which a cut-f uel used at the Company's Salem Umt No 1 includes a rent return is permitted to be recovered through operatmg pcovision for estimated spent fuel disposal costs The revenues Therefore no AFDC has been accrued on that rates for fuel used at Salem Unit No 2 and the Peach Bot-amount for the years shown In addition, by onler effec-tom units do not include such a provision. By rate order tive February 14,1982, the BPUis allowmg the Company effectivo February 14,1982 such dispwal costs related to to include in rate base an additional $125.000,000 of CWIP these umts will be recovenxl througli the levehzed energy raising the total amount to $375,000,000.

adjustment clause Pension Plan Income Taxes Pension costs are determtned on the basis of an accept-The Company and its subsidianes file a consobdated able actuanal method and are charged to operating ex-Federal income tax return and income taxes are allocated, penses, utihty plant and other accounts. The Company's for reporting purposes, to the Company and its subsidi.

pohey is to fund pension costs accrued. Prior service anos based on taxable income or loss of each.

costs are bemg funded over a penod of 35 years which bvytn January 1,1967.

26

Stat:m nto ofIncomo For the Y, ors Ended Decemter 31.

1981 1980 1979 Operating Revenues crhousands of Donars)

Electnc

$2,322,042

$2,083,900

$1,689,857 Gas 1,149,610 910,154 726,850 Total Operating Revenues 3,471,652 2.994,054 2,416,707 Operating Expenses Operation Fuel for Electric Generation and Interchangal Power - net 1,059,539 866,802 620.546 Gas Purchased and Matenals for Gas Produced 692,319 513,988 384.759 Other 385,149 322.220 287,086 Maintenance 192.768 169,813 149,027 Depreciationand Amortization 178,532 169,987 162,989 Arnortization of Property Insses (note 5) 15,362 11.024 303 Taxes Other ihan Federal Income 'Ih,xes 474,979 431.890 364,411 Federalincome Taxes (note 1) 118,737 131,178 123,965 Total Operating Expenses 3,117,385 2.616,902 2,093,086 Operating Income 364,267 377,152 323.621 Other Incomo Allowance for Funds Used Dunng Construction - Equity 51,877 45,655 36.887 Earnings of Subsidianes - net (note 2) 9,490 4,831 1.721 Miscellaneous - not 6,290 5,428 4,542

'Ibtal Other income 67,657 55,914 43,150 Income Before Interest Charges 421,924 433,066 366,771 Interest Charges Inng@rm Debt 184,133 173,199 146,673 Short@rrn Debt 16,574 11,236 2,448 Other 882 5,127 4,027 Allowance fe' Funds Used Dunng Construction - Debt (43,802)

(31,897)

(19,706)

Net Intores:. Chanpm 157,787 157.665 133,442 Income Before Extraordinary items 264,137 275,401 233,329 Extraonhnary items, net of income tax Unrecoverable cocts of Atlantic Project (note 5)

(13,219)

Gain on sale of Transport of New Jersey (note 3) 19,535 Net Extraordinar y items 6.316 Net income 264.137 281,717 233,329 Dividends on Cumulative Preferred Stock and

$140 Dividend Preference Cornmon Stock 51,538 46,341 46,799 Earnings Available for Common Stock

$ 212,599

$ 235,376

$ 186,530 Shares of Common Stock Outstanding End of Year 86,089,491 76.614.995 68.914,349 Average for Year 80,962,344 73.068.848 65,409.325 Earnings per average sham of Common Stock tmfore Extrannhnary Items

$ 2.63

$ 313

$ 2.85 Extraonhnary items, net of income tax Unrecoverable costs of Atlantic Prrpct (note 5)

(.18)

Gain on sale of Transport of New Jersey (note 3) 27 Net Extraordinary items

.09 g

Earnings per average share of Common Stock

$ 2.63

$ 3 22

$ 2 85 Dividends paid per share of Common Stock

$ 2.44

$ 2 29

$ 2 20 s,v summmy of Synh ant Aucuntma fuce and Note to Emannai Statements 27

_ -. _ _ ~ -

Binca Sheet]

December 31, 1981 1980 Assets Utilit y Plant - onginal cost crhousands of Douars)

Electnc Plant

$4,459,245

$4,042,035 Gas Plant 1,020,236 963,876 Common Plant 126,561 101.111 Nuclear Fuel 55,445 26,473 Utihty Plant in Service 5,661,487 5,133,495 Less Accumulated Depreciationand Amortization 1,874.668 1,703,956 Net Utihty Plant in Service 3,'786.819 3.429,539 Construction Work in Progress 1,637,277 1,720.912 Plant Held for Future Use 21,997 26,798 Net Utihty Plant 5.446,093 5.177,249 Other Property nnd investments Nonutthty Property. net of accumulated depreciation - 1981, $204.1980, $199 8,408 8,245 Investments in and Advances to Subsidianes (note 2) 261,010 220,494

'Ibtal Other Property and Investments 269,418 228,739 Current Assets Cash (note 4) 5.595 3,751 Working Funds 10,665 9,377 Accounts Receivable, net of allowance for doubtful accounts -

1981, $12,663,1980, $10,678 377,924 351.995 Unbilkx1 Revenues 176,948 163.346 Fuel, at average cost 218,223 183.059 Matenals and Supphes, at average cost 40,071 30,424 Prepayments 8,646 6,704

%talCtirrent Assets 838,072 748,656 Deferred Debits (note 5).

Extraordinary Property Losses-Ilope Creek Unit 2 290,750 Atlantic Proymt 275,472 290,532 Other 3,632 3,934 l

Gross Rece pts Tax 31,867 48,915 l

Deferred Electric Energy and Gas Fuel Costs - net 98,146 202,345 l

Unamortized Debt Expense 23,639 24,490 l

%tal Deferra! Debits 723,506 570,216 l

Ltal

$7,277,089

$6,724.060 Cestain rectissahcations have tren mada of previously reponed j

190 nrnounts in order to conf 4in to cur rent classihcations 1

j See Smnmary of Signihcant Accounting luhei,s and Notes to haancui Statements l

l l

28

1981 1980 Liabilities C:pitalization (Thousands of Do!!ars)

Common Equity:

Common Stock (see statements, page 32)

$1,423,739

$1,252,103 Premium en Capital Stock 557 557 Paid In Capital 26,143 26,093 Retained Earnings (see statements, page 31) 827,497 813,181 TotalCommon Equity 2,277,936 2,091,934 Pr:ferred Stock without mandatory redemption (see statements, page 32) 554,994 554.994 Preferred Stock with mandatory redemption (see statements, page 32) 77,913 29,750 Long Term Debt Isee statements, page 33) 2,410,823 2,319,346 TotalCapitahzation 5,321,666 4.996,024 Cur rent Liabilities Long-Term Debt dae within one year 2,230 33,065 Preferred Stock to be redeemed within one year 930 Commercial Paper (note 6) 207,551 180,865 Accounts Payable 262,734 205.896 Taxes Accrued, including New Jersey gross receipts tax -

1981, $475,856,1980, $399.996 492,010 436,150 Defer red Income Taxes - Unbilled Revenues (note 1) 81,396 75,139 Interest Accrued 47,750 45,956 Gas Purchased 83,641 74.879 Other 45,111 44,294 TbtalCurrent L;abihJes 1,222,423 1,097,174 Deferred Credits Accumulated Deferred Income Taxes (note 1):

Deferred Electne Energy and Gas Fuel Costs - net 45,619 93,807 Extraordinary Property Losses:

llope Creek Unit 2 126,327 Atlantic Project 115,896 122,232 Depreciationand Amortization 312,595 274,879 Other 11,577 16,217 Accumulated Deferred Investment Tax Credits (note 1) 113,890 108,889 Other 7,096 15,638 Tbtal Deferred Credits 733,000 631,662 Commitments and Contingent Liabilities (note 8)

Tbtal

$7.277,089

$6,724,860 29 1

~

Statem:nts cf Chan~es in Financial Positi:n For the Years Ended December 31, 1981 1980 1979 Sourcea of Funds (husands of Donars)

Income before Extraordmary items

$264,137

$275.401

$233,329 Add (Drxiuct) Items not affecting %rking Capital:

Depreciation and Amortization of Utihty Plant 199,021 181,847 169,927 Amortization of Atlantic Project Abandonment 15,060 10,753 Amortization of Gross Receipts Taxes 17,048 14,747 11,872 Recovery (Deferral) of Electric Energy and Gas Fuel Costs - net 104,199 (28,068)

(123,626)

Provision for Deferred Income Taxes - Hope Creek Unit 2 (note 1) 126,327 Provision for Deferred Income Taxes - Other - net (note 1)

(21,448) 43,937 101,362 Investment Tax Credits - not 4,998 5,844 10,419 Allowance for Funds Used Dunng Construction (AFDC)

(95,679)

(77,552)

(56,593)

Equity in Not barnings of Subsidiaries (9,490)

(8.610)

(3,002)

Other (1,117) 444 147

'Ibtal Funds from Operations 603,056 418,743 343,835 Income from Extraordinary Items - not(notes 3 and 5) 6,316 Related Items not affecting Working Capital:

Sale of Transport of New Jersey (note 3) 18,155 Unrecoverable Costs of Atlantic Project (note 5) 13,219 htal Funds from Extraordinary Items 37,690

'Ibtal Funds from Internal Sources 603.056 456.433 343.835 Net proceeds from sales of.

Iong-Term Debt 99,320 99,042 268,073 Prefcrnxi Stock 49,456 Common Stock 171,420 144.839 92,459

%tal Secunty Sales 320,196 243,881 360,532 Tbtal Funds Provided

$923,252

$700,314

$704,367 Applications of Funds Additions to Utility Plant, excluding AFDC

$588,170

$547,978

$481,542 Cash Dmdends 249,061 215,158 190,981 Advances to Subsidianes 31,026 45,154 28,743 Reductions of Long%rm Debt 5.572 34.345 28,342 Hope Creek Unit 2 Abandonment (note 5)

%talConstruction Costs, including AFDC of $33,000 (223,000)

Recoverable Costs, including deferred cancellation costs 290,750 Miscellaneous 17,506 (6,011) 10,365 EtalFunds Applied 959,085 836,624 739,973 Changes in Working Capital - Increase (Decrease):

Short@rm Debt (26,686)

(85,990)

(94,875) long%rm Debt due within one year 30,835 (8,866) 32,888 i

Accounts Receivable 25,929 118,811 19,727 j

Unbilkx1 Revenues 13,602 49.469 (4,728)

Fuel 35,164 7,363 41,025 Accounts Ibyable (56,838)

(84.580) 10,281 Exes Accrued (55,860)

(73,500)

(28,927) l Daferred !ncome %xes(note l)

(6,257)

(22,756) 2,175 i

Gas Ihnchasmi (8.762)

(25.934)

(9.562)

Other 13,040 (10.327)

(3,610)

Net Decrease in Erktng Capital f35,833)

(136,310)

(35.606)

Total Funds Applialand Cnanges in %brking Capital 5923,252

$700,314

$704,367 i

Cortain reclassincauans have tren rnade of pnmously rep >rted 1979 and 19H0 amourFs m order to confoi m to cur rent classihcatioris See Summary of Sigmficant Accounting Pohcies and Notes to Fmancial Statements 30 1

Staternents of R tained Earnings For the Years Erided Demmirr 31.

1981 1980 1979 (Thousands of Douars)

Balance January 1

$ 813,181

$ 747.076

$704.909 Add Net Inr;ome 264.137 281,717 233.329 Total 1,077,318 1,028.793 938.238 Deduct Cash Dividends Profer trxl Stock. at reqmrod rates 49,657 44.414 44.954

$140 Dividend Preference Common Stock 1,881 1,881 1.881 Common Stock

• 197,523 168.863 144.146 Total Cash Dividends 249,061 215,158 190,981 Capital Stor k Expenses 760 454 181 Total Daluctions 249,821 215.612 191.162 Halance December 31

$ 827.497

$ 813,181

$747,076

• R",tnr tions on the payment of dividends are contatnut m the Charter. certain of the supplemental indentures to the Company's Mortgage and certain riebsnture bond indentures However. none of these restnctions presently hmits the payment of dividends out of

< ure nt earnings The amount of retamel oarmngs fm of these restnctions at December 31.1981 was $817.497.000 See Surnmary of Sigraficant Accounting polir;ios and Notes to Financial Statements Independent Accountants' Opinion Deloitte Haskins* Sells Cettified Public Accountants h!/) Nroad Sllet -t New:n k. New Jersey 07102 To the Stockholders and Board of Dnectors of Pubhc Service Electric and Gas Company:

We have exmninext the balance sheets and state ir our-non, such financial statements. appearmg on monts of uipitalstock and long term debt of Pubhc

, age a to 39. inclusive, present fauly the financial S":vice Ein tric and Gas Company as of December position of Public Service Electnc and Gas Company as of 31.1981 and 1980 and the related statements of in-December 31.1981 and 1980 and the results of its come, tetainmi earnings. and changes in fmancial operations and the changes m its fmancial position for i

pantion for each of the three years m the penod each of the three years m the pen (xl ended December 31, "nded December 3L 1981 Our examinations weie 1981, in conformity with generally accepted accountmg made in acconiance with generally accepted audit-pnnciples apphed on a consistent basis ing standards and, accordingly. included such tests of the accounting records and such other auditmq pnu<!urus as we considen d necessary in the nrcmnstances March 4.1982 31

Stat m:ntacf Cc:pital Stock Current Cert <un Ouvandmg Redemption Refundmgs Shares Pm:e Retncted Decemler 31 (note A)

Per Share Pnor to 1981 1980 Nonparticipating Cumulative Preferred Stock (note B) muusands of Donam With Mandatory f%femption (note C)

$100 par value Senes 12 25%

279.128

$112 00 2/1/85

$ 27.913

$ 30.680 13 44N (500 000 shares issued in 1981) 500.00G 113 44 4'1/86 50,000 Irss amount to be redeemni within one year 930 Prefern d Stock with Mandatory Rulemption

$ 77.913

$ 29.700 Without Mandatory kiemption (note D)

$25 par value-Senes 9.75%

1 600.000

$ 26 00

$ 40,000

$ 40.000 8 70 %

" " O 000 26 LO 50.000 50.000

$100 par value Si nes 4 08%

250.000 103 00 25.000 25 000 418 h 249.942 103 00 24,994 24.994 4 30 %

250.000 102 76 25,000 25.000 6 05%

250 000 103 00 25,000 25,000 5 28%

250.000 103 00 25,000 25.000 6 80 %

250.000 102 00 25,000 25 000 9 62%

350 000 107 00 35,000 35.000 7 40 %

!/R000 103 00 50.000 00 000 7bn 500 000 100 00 50.000 50.000 8 08N 160.000 106 00 15,000 15.000 7 00 %

700 000 100 00 75,000 75.000 l

7 70 %

600 000 106b6 60,000 60.000 8 16 %

300.000 108 90 10/1/82 30.000 30.000 heferred Stock without Mandatory h!"mption (no changes in 1980 and 1979)

$554.994

$554.994 Dividend Preferenco Common Stock and Common Stock

$140 Dividend Prefercur e Common Stock (no par) - 1.343.999 shares authonnd issued and outstandmg. runent redemption puce $35 00 per share (note E)

$1.423,739

$1.252.103 Common Sto, k (no par) - authonzni K10.000.000 shares (note F). Issued and outstanding as of December 31.1981. 86 OH9.491 shan s and as of Decemtvr 31.1980 76.614 995 shares (9.474 496 shares issued for $171636 in 1981. 7.700 646 sham >, issued for $145.279 m 1980.

and 4.793.916 shares issaed for $92 640 in 1979)

Notet A. In ad1: tion. them am 2 070 RU sh nes of $100 pu vAe and nundatory anmal otnking fund redemption of 25 000 stures (M10 000 shams ef $25 pu va!ue CumWatwe Pre!"trui Sim k wint h is cumu:a we plus redempuan of up to an addiurmal whh h are authorimt and untwu.x1 and wha h upon issant e 25 Ohhares at the cruon of the Compmy a!! at a ridemption may or may not provide foi m.mdatery annual smksno fund n-prim f $1W p r. share Both senes are sub;ect to upuonal re-dempuon pravwns dompton u;rn payment of the apphcable eptional 93femptron U As n! Decemter 31 W1 the annual dwidend rarcement pum A rnkinpt sen of stums t ' either senes also requaes pay-and emtutint dwi&nd cevs wn" $10 Uu 000 and 13 g/s g ment of ad accumulatni an j unpud dwidends to the date hxed spectwely. fer Preferral Sta k w ith mandatory rntempton ano for rntemptun

$4)(W 010 an,17 $J '. msp s tvely fer Pmferred Sta L with0ut D. Preft-tred Sta k without mandatery r@mption is subst to mandator y ru fempt ten rmemptson sde!y at trm opuon of the Company upcn payment of

!f dwk. da upm any shamm! sus h t ta k am ;n arrears ta an the appirabM r+dempton price p!u.s accumulated and unpud ameunt equal to the annual dwidend themon vot mg nghts tcr (hv&nds to the date txed !ct redemption the ektmn cf a ma enty of the fwrd of Dan iets becen e elvra E Ea< h share of $140 Dwaiend Preterence Cemmon Sto k is twe an ! contmue unul a3 ac umulatni and unpod dwatenA ennt>d ta cumulatwe dwWnda. to two votes and, en hqwda i

themen h.r.e b,an pr.d whomu;en a;l nuc h vetmg nghts ( case t;en er dLw rution ta twee as mu h as each share cf Common su!m t to leing sig un mvwe i hem t ce to tre Srat k Them wem no changes m outstand.ng sh.ms in 1081.

C. The 12 2% wnes is subn t te a mandaiory annu.c smang W)c IT9 i

fund n@mpten et 17 WO sha:es whn h u ( umubtn plus re F Includes ? S28 !El shams of Common Stock reserved for demptun ct up ta an aAttwnal F 500 dun, at the epucn of th.

poss;ble ssaance under the compmy s Dwtjend Remvestment Campmy a] at a rat"mwa pn, e et $103 p r shocr Ana; and Fu k Pmiise han Tax Fet;cten Act Empuvie Stmk gate ct 5 01' Mumw and 43 200 sh o 4 s t :he 12 O ew, +

Ownership Ran Emp.Uvee Sta k Purc hase Ran and Th:L*t P',an purcluei an,t rnh+m+11 m P ml and IN : 4;w t.v" < On S r, Emmm y i t $ 3;ni v,t A.

n m ma Pe.

.1 m 1 R% ta Mn h 31 tw7 the 13 41 -

m wi.i b ~ - wie t :a F.n m a ! m 4

32 s

St~t m:ntxiLong-Term D bt DwomNr 31.

1981 1980 1981 1980 Debenture Bonds unsecured (Thousands of Dollars)

First and Hefundmg mmme ot Dotus)

Mortgage Bonds (note A) 4% % October l.1981

$ 31.000 Senes 4% % October 1.1983 24,832 25.742 5% % June 1.1991 40,557 41 904 3% % October 1,1983

$ 21.204

$ 21.556 7% % December 1,1993 29,329 30,140 3h % May 1,1984 50,000 50.000 9 % November 1,1995 56,145 57.154 4% % Noverntrr 1,1986 50.000 50.000 7% % August 15,1996 59,040 60.046 45 % September 1.1987 60 000 60.000 8% % November 1,1996 43,059 45.103 4% % August 1,1988 60.000 60.000 6 % July 1,1998 18,195 18.195 bh % June 1,1989 50,000 50,000 Total Debenture Bonds 271,157 309.284 4% % September 1.1990 50.000 50.000 4%% August 1,1992 40,000 40.000 Other Long-Term Debt 6% % Note due senally to 4% % June 1.1993 40,000 40.000 November 15.1983 1,200 1.680 4% % September 1,1994 60,000 60,000 TotalLong-Term Debt 44 % September 1.1995 60,000 60.000 Rm p Iamountout-6% % June 1.1997 75.000 75.000 standing (notes B and C) 2,416,502 2.355.361 7 % June 1.1998 75.000 75.000 Less amount due within 7%% April 1,1999 75.000 75.000 one year (note D) 2,230 33.065 9% % March 1,2000 98.000 98.000 L ng Term Debt excluding 8% % A May 15,2001 69,300 69.300 amount due within one 7% % B November 15. 2001 80,000 80.000 year (note D) 2,414,272 2.322.296 7h % C Aprd 1,2002 125.000 125.000 Net Unamortized Discount (3,449)

(2.950) 8% % D March 1,2004 90,000 90 000 L ng-Term Debt less 12 % E Octotwr 1,2004 10,730 10'730 Net Unamortized 8% % F Apn11,2006 60,000 60'000 Discount

$2,410,823

$2.319.346 8 45% G Septemtwr 1,2006 60.000 60.000 8% % H June 1. 2007 125,000 125.000 quaed to pay commitment ' es of % of 1% per annum on any 8% % 1 Septomtrr 1. 2007 59,900 59.900 unused poruon. The compaay may at any time terminate the 9b% J November 1,2008 100.000 100.000 commitments, m whole or in part, without penalty or premium.

9% % K July 1,2009 100,000 100.000 The banks also agreed to make term kaans at the Compa.:y's opuon, on or about Apnl 1. M82 up to the commitment then in 12 % LNovemtwr 1,2009 125,000 125.000 effect. which term loans would be due Apnl 1.1985 12% N M June 1. 2010 100.000 100.000 lbh % N August 1.1991 100.000 D. The aggregate pnncipalamounts of requuements for sinking funds and maturines for each of the five years followmg Decem-8 % June 1,2037 7,463 7.463 Nr 31. B81is as fonows b % July 1,2037 7,538 7,538 Pollution Control Series Year Fur d Matunues Total 6 30% A October 1,200F 14.300 14.300 (Thousands of Dctrars) 1982 S 1,750 S

480

$ 2.230 6 90% B September 1. 2009 42.620 42,620 6 90% C Septemtwr 1,2009 2.990 2.990 000 Tbtal Fust and Refunding 1985 6.200 6.200 Mortgaqo Bonds

$2,144,145

$2.044.397 1986 6.200 50,000 56.200

$26.156

$147,300

$173.466 Notes A The Company s Mortoage, secunng the Fust and Refunding Mort;pge Honds. constitutes a dmrt fust mortg' age ben on For sinking iund purposes. certam First and Refunding substantia 3y au prepaty and franchtses Mortgage Bond issues require annua'!y the retuement of

$20.400 000 prmetpal amount of bonds or the utihzation of bond-H As ot December 31.1981 the annual mterest requuement on able property additions at 60% of cost The portion expected to Long Term Debt was $191902 000 of which $171.729 000 was the be met by property additions has been excluded from the tablu rmutwment for Fust and Rounding Mortgage Bonds The above Ab o the Company may. at its opuon. retne additional e mtx 4 tot inter"st cost on Long Arm Debt v as 8 08%

amounts up to $6.200.000 annuaUy through smking funds of cer-tam debenture bonds The election of any such option is C. As of DocemNr 31 1%1 the Company had unexercised included in long term debt duo within one ye mmmuments under a Caxht Agn ement with a group of banks lot issuatu e of up to an aggregato amount of $125 000 000 to tw see Summary of sign:twant Accountmg robc:e and Lies to outuanding at any timo to Apri: 1.1982 The Company is te Foun W Sta9ments 33 1

Not:3 tJ Fin:ncial Stat:rn:ntJ

1. FederalIncomeTax:s The balance of investment tax credits not utihzed as of A reconethation of reported Net Income with pre-tax m-December 31.1981 m the amount of $173 mdhon is avad-corno and of Federalincome tax expenso with the amount able as a carryover to future years and wdl expire as fol-computal by multiplying pre-tax income by the statutory lows: 1393 -$16 mdhon,199b$47 mdhon,1995-$42 Federal income tax rata of 46% is as follows-million. and 1996 -$68 mdlion. For the years 1979 and 1980 investment tax credits can De utthzed to offset 70% of tax 3933 39ao 379 habdity and for 1981,80% of tax habihty, before investment m.ousands of Donars) cm&L Net income

$264.137 $281.717 $233.329 Fuk ral mcome taxes The Company has a Tax Reduction Act Emrlayee Stock meluded m Ownership Plan (TRASOP) under provisions of the Inter-Operaung incomo nal Revenue Code. Such provtsions permit the Company Current provision 2.603 58.641 14.359 to elect an additional 1% mvestment tax credit if the provision for deforrel incomo Company transfers to the TRASOP an eqtuvalent amount utxes -~ not*

111,136 66.693 99.1 W of cash for the purchase of shares of Cornmon Stock. The invnstment tax cnxlits - net 4.998 5.844 10.419 Company may also claim an additional % % investment Totalincludalin operaung tax credit if it contnbutes an equivalent amount of cash to mcorno 118.737 131,178 123.965 the TRASOP. but only to the extent that such amount is Miscellaneous other matched by contnbutions by participants.

inmmo - net 3.586 1.703 1.952 Extraordinary items (54.885)

2. Investments in and Advances toSubsidiaries Total Feieralincome tax Investments in and advances to subsidianes (mcludmg provimons 122.323 77.996 125.917 the Company's equity m undistnbuted earnings or losses) am summanzed as foHows Subtotal 386.460 359.713 359.246 Earnmos of submdianes -

December 31.

tu81 1980 1979 ret (9.490)

(4.831)

(1.721)

M DM pio tax income

$376.970 $354.882 $357.525 Energy Development Corporauon Tax em:nco at the Investment S 25.663 $ 14.245 $ 8,514 statutory rate

$173.406 $163.246 $164.462 Advances 151.168 123.034 80.554 Adjur.tments to pre tax Transport of New Jersey

• mcome. computal at Investment 12.732 ntatutory rate, for which Other Subsidianos. pnmanly deferred taxes am not LNG Protect Advances 84.179 83.215 82.494 provided under curnsnt rato-Total

$261.010 $220.494 $184.294 makmg pubetes Tax depreciation under book

• On October 14.1980. the Company sold Transport of New Jersey d"precianon 18 608 16.161 11.357 See note 3 Anowance for funds umi The major subadtary included in 'Other Subsidianes" alx)ve is Energy Termmal Services Carporation (ETSC).

or 1

t hmt

)

l@traordinary items (32 543) hs puncW asset, which has not been placed in opera-Of her 445 (2.890)

(l.276) tion, is a Liquefied Natural Gas (LNG) terminal on Staten Island in the New York City harbor area. Annual expendi-tures for pmmenon and mammnance oNm wrmmat r t anon of def"rnwt tax noms (17.266)

(23.042)

(15.658) indudmg local mal estate taxes, are approximately

$3 5 milhon.

Subtotal (51.083)

(85.250)

(38h45)

Toral Federal incomo tax The Company had onginally intended to utthze the termi-prmanns

$122.323

$77.996 $125.917 nal for theimportation of LNG However, due to uncer-

• The provmton far defenal tainties and delays relating to the importation project.

inchiding lack of regulatory approvals which resulted in a

[$,

,[gl((.

k)ss of a supply of LNG, the terminal has not been placed g g, in operation ETSC is now pursuing the utdization of the cur rent inbihues two storage mnks at the terminal to provide an LNG peak-t inbdied n ven e s S 6.257

$22.756 $ (2.175)

Ing service for the Company and others This wdl necessi-D"fornst cndts tate the construction of a hquefacuan facihty at the site Ho;w Ctet k Alundonment 126.327 The additional construction will not proceed unul the Adantw Abandonment (6.336)

(4 SW) necessary permits are obtained from the appropnate Ad tiuonal tax dermciauon 41.479 31 799 32.287 federal. state and local regulatory agencies The proposed liepmr a'lowance prcoerty (5 236) 6.362 6.701 service wdl increase the Company's capabihty to store Gits reemMs tax (2,03J)

(985) 5.924 supphes of domestic nattual gas in order to meet the de-Deterrnt fuel costs - net (48.188) 12.634 56.859 mands of its customers for gas on the coldest winter days.

In.s on reacqmrmt debt (571)

(S70)

(572)

Of her (563)

(716) 163 If necessary permits are not received and the facihties are S4tmal 104 879 41937 101.362 not placed in service the Company would anticipate inm!

$111.136 StE 693 $ 99187 U'""Y which may occar. Any loss not provided for. In the op:nion 34

of management, would not have a material e2ect on the The BPU rendered a decision, effective April 17,1980, per-fmancial position or results of operations of the Company.

mitting the Company to recover, over a period of 20 years,

$174.5 mGion of the $187.7 milhon of net costs, after tax

3. Sale of Transport of New Jersey reduction, incurred pnor to the abandonment. Following On October 14,1980, the Company sold allof the out-this decision the Company recorded a loss of $18.6 million standing capital stock of Transport of New Jersey (TNJ) to

. which, after a related tax reduction of $5.4 milhon, re-New Jersey Transit Corporation (NHC), an agency of the sulted in a net extraordmary charge to income in 1980 of -

State of New Jersey, for $32.1 milhon incurring a pre-tax

$13.2 mililon or 180 per average share of Common Stock.

loss of $30 0 milhon. As a result of such sale, control of Maplewood Equipment Company (MEC), a wholly-owned Costs are being amortized in the amount of $15.1 milhon subsidiary of TNJ, was also transferred to NJTC. As re-annually, less related taxes of $6.3 milhon.

quued by the Stock Purchase Agreement between the Company and NJTC, the purchase price paid by NJTC, Gross Receipts Tax tcgether with pension fund assets of TNJ and MEC ano Effective January 1,1973, the Company began accruing other funds, were combined with a net contnbution by New Jersey gross receipts tax on current revenues rather the Company of $114 mdhon to purchase pension annui-than on the previous basis of taxes paid. The gross re-ties for employees and pensioners of TNJ and MEC to pro-ceipts tax on 1972 revenues was deferred and is being vide benefits accrued as of June 30,1980. The net cash charged to operations by an amount equivalent to % % of contnbution by the Company of $11.4 milhon was more revenues subject to the gross receipts tax and is currently -

than offset by income tax benefits to the Company of expected to become fully amortized during 1983. During

$49 5 mdhon ansmg from the immediate deductibdity of 1982 the Company expects to amortize approximately pcnsion contributions and by the deductibdity of the tax

$19.6 mdhon, less related taxes of $9.0 milhon.

basis of the TNJ stock which was in excess of the book in-vestment. Such tax benefits resulted in a non-recurnng Deferred Electric Energy and Gas Fuel Costs - not credit to earnings for 1980 of $19 5 milhon or 27C per aver-A substantial portion of deferred electric energy costs, age share of Commen Stock.

$58.3 milhon, wul be recovered during 1982 and an addi-tional $12.5 million will be recovered by February 1984.

4. Compensating Bahmces The remaimng costs are recoverable through the Com-Cash at Decembor 31,1981 and December 31.1980 pany's levelized electric energy and gas raw matenals consisted primanly of coi.pn'ating balances under adjustment clauses.

informal arrangements m_inanow banks to compensate them for services and to support hnes of credit of $178.2 Unamortized Debt Expense mdhon and $170.8 milhon, respectively There are no legal These costs, associated with the issuance or reacquisi-restuctions placed on the withdrawalor other use of these tion of debt, are deferred and amortized over the hves of bank balances In addiuon, as of both dates, the Company the related issues. Amounts shown in the Balance Sheets had $30 0 mdhon of credit hnes compensated by fees.

consist principally of costs associated with the Compa-ny's tender offer for its 12% Series E Mortgage Bonds

5. Deferred Debits which wdl mature in October 2004. The Company ex-Abandonment of Hope Creek Unit No. 2 pects to amortize $11 milhon of these costs in 1982.

On December 23,1981, the Company abandoned the con-struction of Hope Creek Generating Station Umt No 2 in

6. Bank Loans and Commercial Paper -

lower Alloways Creek Township, New Jersey. 'Ibtal un-Bank ioans represent the Compr y's unsecured promis-recovered costs of $290 8 milhon, including an estirnated sory notes issued under informal credit arrangements

$67 8 milhon of c.meellation and close-out costs, were with various banks and have a term of eleven months or charg(x1 to Extraordmary Property Losses and the associ-less. Such notes were issued to a hmited extent in 1981 ated tax reduction of $126 3 mdhon was included in Accu-and 1980.

mulated Deferred Income Taxes.

Commercial paper represents the Company's unsecured On March 4,1982, the BPU authonzed the transfer of $112 mdhon of Hope Creek 2 costs to Hope Creek 1 and recov-

""" " *9 ery of all after-tax abandonment costs for Hope Creek 2 ing short-term debt follows. '

from customers through rates The recovery will be over 1981 1980 15 years on an accelerated method commencing July 1, 1982 Dunng 1982 the amount of amortization will be (Thousandsof Dollars)

$16 2 milhon, less related taxes of $7.4 million.

Maximum amount outstandmg at any month end

$207,551 $180.865 Abandonmentof AtlanticProject Average dady outstanding (A) 5101,226 $ 79,516 In December 1978, the Company cancelled its floating We ghted average annualinterest rate (B) 16.27%

13 90%

Weighted average interest rate for nuclear plant project and terminated its contract with C mmercialpaperoutstandtng Offshore Power Systems for the construction of four generating umts. At the time of the Company's decision to abandon the Atlantic Project, total unrecovered costs of (A) Computedbydmdingthesumof thedadypnncipal

$319 9 mdlion, before tax reduction, was charged to Ex.

amounts outstandmg dunng the year by the total number of traordinary Property losses and the associated tax daysin the year.

reduction of $132 2 mdhon was included in Accumulated Q Computed by dmdmg short-term interest expense by the Deferred Income'Ihxes average dady short-term net proceeds 35 s

7. Pension Plan The Company has a non-contnbutory, trusteed plan Credits have been received amountmg to $14 3 milhon, covenng all employees who complete one year of service.

- including interest of $4.7 milhon. 'Ihe secoupment of As of December 31,1981, the unfunded prior service cost

$30 8 milhon, the balance of such advances, of which ap-was approximately $299.029.000. Information on proximately 30% is the responsibihty of the other m-acctimulated plan benehts and net assets follows:

owners, is dependent upon the sale of uranium concen-trates by Kerr-McGee to the Company or other buyers or December 31, 1981 1980 upon the sam by Kerr-McGee of the protect properties.

N*"d' "")

The Company cannot presently predict the extent to which such advance payments will ultimately be recov-ac b hts Vested

$326.343

$335.353 ered. For additional information see page 11 Nonvested 33.616 32.528 Compan/s msurance coverages for its nuclear opera-

$359.959 $367.881 tions are as followsf.

Maximum -

Market value of plan Net Assets

$282.991

$269.039 Retrospective Maximum Assessment for a Type and Source of Coverage Coverage - smgleincident The assumed rate of return used in determining the (Mdlions of Douars) actuanal present value of accumulated plan benefits was Public Liabihty:

10.5% for 1981 and 9% for 1980 The market value of the.

Pnvate

$160 None plan's net assets mereased dunng 1981 as a result of Federalgovemment (A) 400

~~ $ 8 5(B) contributions (net of pension payments) and net invest-

$560(C) _

ment mcome.

Property Damage:

Nuclear Mutual unuted(D)

$450

$26.7 The Company's annual contnbution is actuarially deter-Nudear Electnc Insurance mined to provide for full fundmg by December 31,2001-bmited(D)

$247

$ 7.0 Replacement Power; Pension costs for the past three years were charged Nuclear Electric Insurance as follows:

Umited(D)

$ 2.3 (E)

$13 9 -

1981 1980 1979 (A) Combmed retrospective prermum program under the Price-(Thousands of Douars)

Anders n habihty provisions of the Atomic Energy Act of 1954 Operatmg Expenses

$47.505 $38.042. $34.452

""U "9*"" *

• Comnussion. Wet to retrospecuve assessment wis'Y Utihty thnt and Other respect Accounts 10.954 10.284 9.662 to loss from incident at any hcensed nuclear reactor in the Total Pension Costs

$58.459 $48.326 $44.114 Umted States.

(B) Maximum assessment would be $170 milhon in the event of The Company offered a special early retirement program -

more than one meldent in any year.

dunng the period from June 1.1980 to October 1.1980 to (C) bmitof habihtyunderthe AtomicEnergy Actof1954for employees meeting certain age and service require-each nuclear meldent.

ments Under the program 1.367 employees retued.

(D) Utihty-owned mutual insurance company of which the Employees who retired under the program are paid an company is a member Subject to retrospective assessment with unreduced pension under the Company's Pension Plan respect to loss at any nudear generatmg station cove:ed by such and a special supplement, mitially $500 per month and in-msurance-creasing to $650 per month, payable out of the Company's (E) Maximum weekly indemnity for 52 weeks which general funds The special supplement ceases at age 65.

commences after the first 26 weeks of an outage. Also provides upon death, or upon re-employment by the Company It is

$115 milhon weekly for an addiuonal 52 weeks estimated that the special supplement will cost the Company $50 milhon over ten years beguunng 1980. The

9. Accountmg for Leases -

unreduced pension provision under the Plan requaes The Company has certain leases for property and equip-additional funding which is included in the unfunded ment which meet the entena for capitalization, but in ac-pnor service cost.

cordance with rate-making treatment are accounted for ~

as operating leases. The capitahzation of suchleases 8 Commitments and Contingent Liabilities would not have a sigmficant effect on assets, habthties The Company has substantial commitments as part of its or expenses construction ptogram as well as comtmtments to obtain sufhcient sources of fuel for electnc generation and ade-10 Supplementary Informatiui Concerning the Effects quate gas supphes. Construction expenditures of $3 9 bil-ofInflation (Unaudited) hon. meluding $772 milhon of AFDC, are expected to be The Company's financial statements are prepared in ac-meur red dunng the years 1982 through 1986 cordance with generally accepted accounting pnnciples and are stated on the basis of historical costs, namely, the h1 September 1980, a contract with Kerr-McGee Nuclear pnces that were in effect when the underlymg transac-Cotporation to supply uranium concentrates was tions occurred The !ollowing supplementary financial amendal to substantially ctutall open pit mine operations information. prepared in accordance with Financial Ac-until November 1.1982 As of December 31,1981, the counting Standards Board Statement No. 33 (FASB No.

Company and the co-owners of the Salem and Hope 33). is an estimate of the effects on the Company of Creek Generatmg Stations had advanced $40 4 milhon to general inflauon (Constant Dollar) and changes in specific Ken'McGee against dehvenes of umnium concentrates pnces(Current Cost) 36

l The Company advises readers of the imprecise nature of FASB No 33 requnes the disclosure of the amount re-this data anti of the many subjectivejudgments requm:d qumd to reflect Net Utdity Plant at nts Recoverable Cost ti m the resta tement o/ selected Instoncal costs to Constant that cost is lower than the inflation adjusted amounts Dollar and Current Cost Tins data shouldnot be used to Also required under Current Cost is the disclosum of the make adjustments to the Companys pnmary haancial increase m Current Cost of Net Utdity Plant held dunng statements and the related earnmgs per average share of the year and the related effect of generalinflation The Common Stock ottmr than those adjustments shown m amounts shown m the followmg table, which reflect the the following supplementary Imancialdata increase in general mflation over the increase in Current Cust of Net Utdity Plant and the adjustment to net recov-Constant Dollar costs were determmed by adjusting his-erable cost. Illustrate that durmg 1981 the rate of general toncal costs of Utdity Plant and certain other items into inflation was greater than the increase in the Current dollars of the same general purchasing power by using Cost of Net Utdity Plant. In addition. the amounts shown the Consumer Pnce Index for All Urhan Consumers as Adjustments of Net Utdity Plant to Recoverable Cost (CPIUL (both Constant Dollar and Current Cost) are adjustments to Histancal Cost m average 1981 dollars Huoncal Cost Current Cost data purports to show the estimated cost is the amour t permitted to be recovered under the rate of currently replacmg existing Utdity Plant and was mea-regulatory placess for utdities m New Jersey sured by applying primardy the Handy-Whitman Index of Public Utdity Construction Costs to the histoncal costs During inflationary periods, holders of Tronetary assets, of Utdity Plant such as cash and receivables, suffer losses of general pur-chasmg power whde holders of monetary habdities ex-Depreciation and Amortization expense, and /unortiza-perience gains In 1981 the Company's monetary tion of Nuclear Fuel (meluded in Electnc Fuel. Inter-liabihties, primardy long-term debt, exceeded its mone-changed Power and Gas) were adiusted for Constant Dollai tary assets resulting m a gain in purchasing power Sinco and Current Cost usmg the rates and methods for com.

this gain is primanly attributable to long-term debt which puttng book depreciation and amortization applied to the has been used to fmance Utdity Plant, it is netted agamst appropriate mflation adjusted Utdity Plant balances In the excess of the increase m generalinflation over the m-accordance with FASB No. 33, mcome tax expense was crease m Current Cost of Net Utihty Plant after not adjusted adjustment to recoverable cost in the following table.

Supplementary Financial Data Adjusted for the Effects of Changing Prices for the Yeat Ended Decernber 31,1981 (Unaudited) lbstorical Cost Constant Dollar Current Cost (Comiensed from the

( Avet age (Average Fmannal Statements) 19L1tkt us) 1981 Dollars)

(Thousands of Dollars)

Op ratmg Hevenues

$3 471652

$3 4716S2

$3.471652 Operating Exp utes Flectric Fuel. Interchangni Power and Gas 1751 Hb8 1.754 782 1.764 171 Other Operatmn and Maintenance L93 279 593 279 593 279 Depreaaton and Amot taation 178532 395 526 442,984 Taxes 593 716 593 716 593 716 Total Op>t atmg Expmes 3 117.385 3 337 303 3 3St 150 Opi eating Income n 4267 134 349 77M2 Othet undudmg Intenmt Exp ne)

(40 130) c0 130)

CIO 130)

Inmtne (Im) frotn Contmumg Op'tations (exi luang Aitnistment of Net Utahty Plant to Hrmverable Cmt)

$ 261137

$ 41219*

$ t12 628)

Im nwe m Curtent Cost of Net Utibt) PLmt hvU dunny the year * *

$6WI A4ustment of Net Utihty Plant to Hesuverable C st

$ (236 M8)

(113 074)

F.'fn t of the mi rease m Generaiinflation (762 71 H Exam of men'ar.c m genetal mflat en ow I mt n aw m Cur rent Cmt et Net Utihty Plant af'er a trustment ta He, overable (ht t179 N1) hm hamng Power Gam on Net Manetary 1.1.ibthties Owot Dutmg the Year 221 N7 221 fL7 Net

$ 05 Ull)

$ 41 776

• im bdng A t wament of N t l'taty Nt to N mb c.et beir a h% w i m ( w.a g aa a a!4m w M &otwinn5W Neo

1. 1. At [Mr:.ter 31 IW the th ramt Cea of Ni t t hi;t y Ibnt u 1 # /4 ' %. % w % ' at o t.

n191 rC etas

• i b f* l1 seO 37

Suppl:m:nt:ry FiveYr$ Comparicon of Selected Fin ncialD:tc Adjusted for Eff: cts of Changing Pric s (Unaudited)

M)O ornsttni where upphcabks and a2 adjustml1 gures are m ave tage 1961 daila:sl For the Yems Ermi Decemter 31.

1981 19EO 1979 1978 1977 Operatmg Hevenues Histoncal

$3.471 Cr2

$2.994 054

$2 416.707

$2.219.785

$2 032,795 Adjustw1for Gerwralinkoon

$3 471 C52

$33M 620

$3028109

$30%521

$3 050872 Inunne (land From Contmumg Operatvins (excludmg Adjustment r,f Net Ut hty Plant to Re<vverable Cut)

Hatonad

$ 2M 137

$ 275 401

$ 233 329 Adp3stedtot GeneralIrd:ation

$ 44 219

$ 108 882

$ 97.152 Ad;ustnitar Current Ccat

$ (12628)

$ 37.228

$ 18 991 Income (Ims) Frcm Continmng Operauons per Averag s Common Shans (exctuding Adsstment of Net Utihty Vant to Recoverable Cmt)

• Histor vid

$ 2 63

$ 313

$ 2 85 Adpe.tmlfor GeneralInkts,>n

$ (09)

$ 79

$ b8 Ad;ustalfor Cunent Cost

$ ( 73)

$ ( 19)

$ (61)

Exoss c1mctmse m generalmDtion over mcrease m Curn nt Cost of Net Uuhty 1%nt after adiummsnt ta ltecwrable Cust

$ (179 791)

$ (374 038)

$ (439 9929 l'urchiama Ibwcr Gam on Net Mwetary Liabihtws Own] Durmg the Ymt

$ 221.b67

$ 312,022

$ 341.415 Net Assets at Ymr End *

• lhst,n, at

$2.832 930

$2 M6.928

$2.435 516 Asusted for GeneralInthtwn and Carent Cust

$2.7413bo

$2190337

$2695 752 Cash Dmdenda [htaraf per Common Sham lhstoncal

$ 2 44

$ 2 29

$ 2 20

$ 2 08

$ 192 Ad ustoltor Generat int'atwn S 2 44

$ 2 S3

$ 2 76

$ 290

$ 288 i

Markt Pnce per Common Sham at Year End Histancal

$18 00

$17 CO

$19 25

$20 25

$22 88 Ad;ustni tor Generatinflanon * * *

$1800

$18 52

$2357

$2810

$34 61 Consumer Pnce Index (1967 -100)

Average 272 4 246 8 217 4 195 4 1815 Year End 281 5 258 4 229 9 202 9 1861

• Aner +1+ tay camutmve Iwn.ws s = k an. $14) Dct-mi : n forern v common SNx k &ntmis on a h+ tac al emu m I#1 mM in Ave y 1%1 r>%:s 6 4 pt)Df ymN

• blMJ ComCh 41 hpty.MN h+nW1 St A M wittWa MC1My t@rpion

• *

• Ymt emi tW1 D4m Inflation has been increasing over thelast five years The Market Pnce per Common Share at Year End from 1977 to average CPI-U Index mereased from 1815 m 1977 to 272 4 1981 had an average annual decrease of 5 8% or from m 1981, an everage annual increase of 10.7% The increase

$22 88 to $18 00 Restated in year-end 1981 dollars the inm 1980 to 1981 was 10 4%

Market Pnce would have been $34 61 instead of $18 00 re-flecting an average annual decrease of 151% for the same Revenues for the five-year penod mereased from $2 033 penod bilhon m 1977 to $3 472 bilhon m 1981. an average annual increase of 14 3h Restated in average 1981 dollars, reve-As shown m the tabks above. the purchasmg power gain nues for the same penod would have increased from on net monetary habihties was not enough to offset the

$3 051 bilhon to $3 472 btlhon, an average annualincrease sigmhcant effect of mflation on capital costs (utihty plant),

of only 3 3%

nuclear fuel costs and depectation Cash Dividends Deckued per Common Share went from Lack of adequate reccxJnition of mflation m rate-makmg

$192 in 197/ to $2 44 in R91 or an average annual in-fn addition to delayed rate rehef accelerates attntion.

crease of 6 2% However such dividends would have thereby contnbuting to poorer cash flow By the time decreased at an average annual rate of 41% or from S2 SS -

mereased costs are meluded in rates, the related funds in 1977 to $2 44 in 1981 when restated m average 1981 have already been expended.

dallars 38

11. Jointly-Owned Facihtie:

The Compan / has an ownership interest and is responsd the Company's share of each jomtly-owned project and ble for providing its chare of the necessary haancing for the correspondmg duect expenses are included in the the followmg jointly-owned fac1hties. Allamounts ref;ect Statements of Income as an operatmg expense Amount of Utihty Ibnt Accumuhital Provision Amount of Plar.t Hant Ownt:rship interest in Sorvv;e for Depreciation Under Construction (Thousands of Dollars)

Coal Generaung Conorr.augn 22 60 %

$ 65.304

$ 16.428 Keycone 22 84 %

53.516 17.031 N elf ar Ger.eraung Pe th Dottom 42 49 %

390.465 95 938 Morn 42 59 %

6 % 053 70 469 R ipe Upw 95 00 %

$1.349.598 Nuclear T ra.ning Center vanous 5 592 her:p<v1 Storage Generat mg Yar h Croek 50 00 %

16.293 3.171 Transme Fmahtms vanous 66 112 5.192 Merna Cre-. Peser vuir 13 90 %

2.319 Iar kn Syntheuc NaturalGas 90 00 %

65 538 29 443

12. FinancialInformation by Business Segments Electnc Gas 7btal F or t ha Y. ors En&l In-emler 31.

1981 1980 1979 1981 1980 1979 1981 1980 1979 (Thousands of Dollars)

( teraurel Pew nues

$2.322.042

$2 0H3.900

$1.W).857

$1 149.610

$910.1 A

$726.850 $3.471.652

$2 994 054

$2.416.707 b g.n" muon ami Amu t aanon 134 %0 127.655 122.953 44 482 42.332 40 036 178 532 161 987 162 989 0; eraum;im onm Before In. nn m Taxes J/8 082 407.fA2 369.409 94.937 101.147 78 468 4'/3 019 508.809 447.t 7/

Gr m A4!m.s to Unhty M.mt 615 976

%1.110 48I E6 67.873 74 420 53.779 683.849 625 530 538 135 1 o. ernher 31 iJet Utih y har;t

$4.813 875 $4 570.3%

$4.1%.122

$632.218

$606.8%

$579.862 $5 446 093

$5.171.249

$4.735 984 Gas Ex; loranon SulGiary a!c.1 IJJf1 hop t 261 000 220.484 171. % 2 261.000 220.484 171.% 2 Ofher D aporm.

A wts 15699%

1.327,127 1.181 230 Total Av.ris

$7.277.089

$6 724 860 $6 088 766

13. Selected Quarterly Data (Unaudited)

The informatiou shown below in the opinion of the the Atlantic Project and the sale of Transport of New Company includes all adjustments, consisting only Jersey) necessary to a fau presentation of such amounts.

of normal recurring accruals. (except for the extraordinary Due to the seasonal nature of the business, quarterly items mcurred in 1990 resulting from the abandonment of amounts vary significantly dunng the < ear.

Calenlar Quarter EnJai March 31.

June 30 September 30.

Decemter 31.

1981 1980 1981 1980 1981 1980 1981 1980 (Thousands where apphcable) geraur.g Revenues 5982 938 $7b7.530

$733.255 $611.087

$809 R05 $776.190

$945.654 $843.247 Oper a: mg Incomt 101 669 87.409 74 183 90 838 94 677 114 997 83.738 83 908 l a ome Det.re Exuac.rin,u v liem 7/ 404 59 465 52.911 68 181 71f45 88.7/8 62.127 58.977 Exua. reary !!em (13.219) 13.535 Net Inc ome 77 404 59.465 52.941 54 962 71165 88.778 62,127 78 512 Ecunmm Ava lable far Cemmon Stock Behte Exuaorthn.uy item 65Bf6 47.H37 33 339 56003 58 447 77.211 48 948 47 409 Eanunas AvEd3:e for Common Sim k

$ 65 865 $ 47A '

$ 39 339 $ 43.384

$ 58.447

$ 77.211

$ 48 949 $66M4 E.unmp p-r Awtw Sh<ue os Common Swk Defom F xuaerdm.uy item

$ 86

$ 69

$ 51

$ 78

$ 69

$103

$ 57

$ 62 E f'e st of Extraminary item (1K 26 Fan.mg a p'r Average Share of Cammon b ta k

$ 86

$ (B

$ 51

$ f0

$ 69

$103

$ 57

$ 68 Aarage i harm of commen Sto k

( Ni t an Lng 76 6W 68 945 77 b26 721H0 84 252 75 173 85261 75 917 39 t

Operating Statistics

% Annuc1 Increase -

1981 compared with (000 ormtted where appbcable) 1981 1980 1980 1971 Electric Revenues from Sales of Electricity (a)

Residential

$ 728,642

$ 684.343 6.47 12.74 Commercial 871,377 765.356 13.85 15.55 Industrial 684,976 598,716 14.41 14.76 Pubhc Street Lighting 33.249 32.693 1.70 8.32 Etal Revenues from Sales to Customers 2,318,244 2,081,108 11.39 14.23 Interdepartmental 1,612 1,720 (6.28) 10.30

'Ibtal Revenues from Sales of Electncity 2,319.856 2.082.828 11.38 14.23 Other Electric Revenues 2,186 1,072 103.92 5.74

%talOperating Ruenues

$2.322.042

$2,083,900 11.43 14.22 Sales of Electricity - kilowatthours (a)

Residential 7,795,988 8,129,198 (4.10)

.82 Commercial 10,940.009 10,726.086 2.00 3.67 Industrial 10,923,042 11.049.642 (1.15)

(.15)

Pubhc Street Lighting 275,489 265.126 3.91 1.33

%talSales to Customers 29,935,128 30,170,052

(,78) 1.36 Interdepartmental 25,567 27.684 (7.65)

.03

%talSales of Electricity 29,960,695 30,197.736

(.78) 1.36 Kuowatthours Produced. Purchased and Interchanged - net 32,204,191 32,703.504 (1.53) 1.39 Load Factor 52.3 %

52 0 %

Capacity Factor 33.2 %

35 6%

Heat Rate - Btu of fuel per net kwh generated 10,725 10.713

.11

.08 Net Installed Generating Capacity at December 31 - kilowatts 9,101 9.242 (1.53) 1.98 Net Peak Load - kilowatts (60-minute integrated) 7,034 7,159 (1.75) 1.73 Coohng Degme Hours 8,615 9,869 (12.71)

(.12)

Wmperatum Humidity Index Hours 15,494 16.526 (6.24)

(.81)

Average Annual Use per Residential Customer - kwh 5.261 5.443 (3.34)

,15 Meters m Semce at December 31 1,739 1,732

.40

.57 Gas Revenues from Sales of Gas (a)

Residential

$ 604,521

$ 515,013 17.38 13.50 Commercial 302,281 228,577 32.24 16.95 Industrial 240,711 164.762 46.10 20.65 Street Lighting 290 282 2.84 15.06 7btal Revenues from Sales to Customers 1,147,803 908.634 26.32 15.55 Interdepartmental 1.075 925 16.22 12.43

%tal Revenues hom Sales c' Gas 1,148.878 909,559 26.31 15.55 Other Gas Revenues 732 595 23.03 25.42

%talOperatmg Revenues

$1.149.610

$ 910,154 26.31 15.55 Sales of Gas - therms (a)

Restdential 993,527 1.023.027 (2.88)

(.21)

Commercial 555,806 506.550 9.72 2.04 Industnal 514,136 447,474 14.90

.55 Stnet Lighting 334 335

(.30)

(2.81)

Tbtal Sales to Customers 2,063.803 1,977,386 4.37

.54 hiterdepartmental 2.430 2.322 4.65 (2.08)

%tal Sales of Gas 2.066,233 1,979.708 4.37

.53 Gas Produced and Purchased - therms 2,145.326 2.077.653 3.26

.68 E"ective Daily Capacity at December 31 - therms 19.010 18.439 3.10 1.51 Maximum 24 hotar Gas Sendout - therms 14,812 14.444 2.55 1.41 Heatmg Degree Days (a) 5.082 5.256 (3.31)

.50 Average Annual Use per Residential Customer - therms 857 875 (2.06)

(.58)

Meters in Semce at December 31 1.378 1.370

.58

.36 (a) Starting in 1773. revenues and sak s by customer classication reCect temperatu:e eueet on these rarrdai sales heatmg degree indude accrunt and tutbh1 dollar amounts and sales volumes days are also reported on a calendar year tusts efective with 1773.

from meter nwitng date to the end of the calendar year 'Ib tetter For 1771. heatmg de(pe days remain an a sales year basis 40

T 1979 1778 1777 1976 1771

$ 545.049

$ 512.071

$ 492.473

$ 443,531

$ 219,614 625.596 574.557 531.118 474,791 205,318 484.037 444,595 414.058 367.470 172,902 31.437 29.925 27.622 25.863 14.947 1,686.119 1.561.148 1,465.271 1.311.655 612,781 1,559 1,670 1,916 1.585 605 1,687.678 1.562.818 1,467.187 1.313.240 613.386 2,179 2.016 2,931 2.837 1,251

$1.689.857

$1,564.834

$1.470,118

$1.316.077

$ 614.637 7.777.369 7,760,868 7.769.629 7,711,953 7,183,821 10,336.445 10,152,827 9,747.908 9.514.574 7.633,053 11,185.952 11,134.634 10,627,734 10.472.054 11.091,985 260,915 260,922 259.277 259.151 241.449 29.560.681 29.309.251 28,404.548 27,957,732 26,150,308 26.629 32.638 38.331 34,996 25.500 29.587.310 29.341.889 28.442,879 27.992,728 26,175.808 32.021.737 31,628.876 30,771.719 30.376,187 28.055,190 543%

54 6 %

509%

55 9 %

54 0 %

31 8 %

34.4 %

32.7 %

32.0 %

456%

10.566 10.599 10,677 10.593 10,642 9,023 9.061 9.247 8.741 7,483 6.736 6.615 6.895 6,190 5.925 7,201 7,188 8.269 6.51?

8,717 14.545 13.899 14.883 12,701 16.814 5.233 5.378 5.403 5.395 5.184 1,724 1,713 1.704 1.697 1,643

$ 415,157

$ 399.134

$ 344.444

$ 342.524

$ 170.380 179.970 163.931 137,811 140,809 63.164 129.665 90.240 78.474 68.341 36,831 274 248 178 159 85 725.066 653.553 560.907 551,833 270,160 790 802 572 476 333 725.856 654.355 561.479 552.309 270,793 994 596 1.198 1.149 76

$ 726.850

$ 654.951

$ 562.677

$ 553.458

$ 270,869 970.462 1.013,043 980,570 1,045.627 1.014.887 456.902 447.923 432.810 468.761 454.237 410.605 306,672 329.211 307.949 486.685 350 367 376 389 444 1,838.319 1.768.005 1,742.967 1.822.726 1.956.253 2.328 2.490 2.064 1,764 2.999 1.840.647 1.770.495 1.745.031 1.824.490 1.959,252 1.931.549 1.852.869 1.811.019 1.895.041 2.004.791 18.639 18 639 18.933 19.449 16.372 13,349 12.235 14.006 12.803 12.872 4 677 5.317 5.155 5.349 4.833 833 893 862 924 908 1.357 1.350 1.350 1.354 1.330 41

Financial Statistics (000 omittui where apphcable) 1981 1990 Dondensed Statements ofIncome(a)

Amount Amount Operating Revenues Electnc

$2,322,042 67

$2,083,900 70 Gas 1,149,610 33 910,154 30 Tbtal Operatmg Revenues 3,471,652 100 2.994,054 100 Operating Expenses Fuel for Electnc Generation and Interchanged Power - net 1,059,539 31 866,802 29 Gas Purchased and Matenals for Gas Produced 692,319 20 513,988 17 Other 385,149 11 322.220 11 Maintenance 192,768 6

169.813 6

Depreciationand Amortization 178,532 5

169,987 e

Amortization of Property Losses 15.362 11,024 Taxes Other than Federal Income 7hxes 474,979 14 431,890 14 Federal!ncome Taxes 118,737 3

131,178 4

lbtal Operating Expenses 3.117.385 90 2,616,902 87 Operating Income Electne 288,087 8

307,372 10 Gas 66,180 2

69,780 3

'Ibta! Operating Income 354,267 10 377,152 13 Allowance for Funds Used During Construction (Debt and Equity) 95,679 3

77,552 2

Other income - not 15,780 10,259 Interest Charges (201,589) (6)

(189,562) (6)

Income before Extraordmary items 264.137 7

275.401 9

Extraordinary Items, net of mcome tax:

Unrecoverable costs of Atlantic Project (13,219) l Gain on sale of Transport of New Jersey 19,535 Net Extraordinary items 6,316 Net income 264,137 7

281,717 9

Prefer nxl and Preference Stock Dividends 51,538 1

46,341 1

Farnings Avaliable for Common Stock

$ 212,599 6

$ 235,376 8

i Shares of Common Stock Outstanding End of Year 86,089 76,615 i

Average for Year 80,962 73.069 Earnings per average share of Common Stock

$2.63

$313 (b)

{

Dividends Paid per Share

$2.44

$2 29 Payout Ratio 93 %

73% (b)

Rate of Return on Average Common Equity (c) 9.82 %

11 95%

Ratio of Eunings to Fixed Charges Before Income Taxes (d) 2,95 3 19 Book Value per Common Share (e)

$25.66

$26 38 Utihty Plant

$7,320,764

$6,881.209 Accumulated Depreciation and Amortization

$1,874,668

$1,703,960 Tbtal Assets

$7,277,089

$6,724,860 Capitalizetion Mortgage Bonds

$2.140,835 40

$2,041,556 41 Debenture Bonds 269,268 5

276,500 5

Other long'Ibrm Debt 720 1,200 lbtal Long Term Debt 2,410,823 45 2,319.346 46 liefened Stock with Mandatory Redemption 77,913 2

29,750 1

i Prefernst Stock without Mandatory Redemption 554,994 10 SM,994 11

$140 Dividend Preference Common Stock r id Common Stock 1,423,739 27 1.252,103 25 l

Premium on ('apital Stock 557 557 Paid In Capital 26,143 26.093 1

Retainal Earnings 827,497 16 813,181 16 lbtal Common Equity 2.277,936 43 2.091.934 42 1htal Capitahzation

$5,321,666 100

$4,996.024 100 (a) See Summary of Sigmhcant Accountingpohcios. pme 25.

(b) Exdudes the not extraordinary ga:n of $6.316.000 or S 09 per share Nates to Emancui Statements. page 34. and Management's (c) Balance available for $140 Dmdend preference Common Discussion anil Anh. sis of Financial Condition and Results of Stock and Common Stock dmduf by the average of bannning Operatiomi. page 44 and end of year TbtalCommon Equity 42

I 1'r/9 1978 1977 1776 19k1 Amount Arnoont Amount Amount Amount

$1.689.857 70

$1.bG1.834 70

$1.470.118 72

$1.316.077 70

$ 614.637 69 i

726.8L0 30 654.951 30 562.677 28 553.458 30 270.869 31 2A16.707 100 2.219.785 100 2.032.795 100 1.869.535 100 885.506 100 620.516 26 541.802 24 538.916 27 484.194 26 171.963 19 384,759 16 32'7.9ro 15 257.897 13 261,190 14 100.296 11 287.086 12 267.731 12 250.531 12 226.175 12 151.952 17 149.027 6

127A23 6

124.876 6

99.617 5

66 789 8

162.989 7

158.248 7

147.652 7

133.087 7

84.474 10 303 1.038 1.185 1.200 774 364.411 15 328.216 15 293.796 14 275.254 15 112.576 13 123.965 5

146.937 7

120.969 6

100.380 6

18.166 2

2.093.086 87 1.899.385 86 1.735.822 86 1.581.097 85 706.990 80 269.443 11 266.513 12 250.395 13 236.359 12 142.585 16 51.178 2

53.887 2

46.588 2

52.079 3

35.931 4

323.621 13 320A00 14 296 573 15 288.438 15 178.516 20 56.b93 3

41.305 2

49.540 2

43.547 3

33A65 4

6.263 4.51b 1.447 2.654 (1.278)

(1b3148) (6)

(137A34) (6)

(13; 718) (7)

(130.615) (7)

(87.204) (10) 233,329 10 228.786 10 214.242 10 2M 024 11 123.499 14 233.329 10 228,786 10 214.242 10 204.024 11 123.499 14 46.799 2

46.799 2

45.065 2

41.267 2

15.445 2

$ 186.530 8

$ 181.987 8

$ 169.177 8

$ 162.767 9

$ 108.054 12 68.914 Gl.120 59.806 58576 39.475 65A09 61,783 59.243 58.308 36.876

$2 85

$2 95

$2 86

$2 79

$2.93

$2 20

$2 08

$192

$1.78

$164 77 %

71%

67 %

64 %

56 %

10 39 %

11 00%

10 96 %

11.18%

12 09 %

3 36 3 77 3 52 3 34 2 60

$26 26

$2613

$25 57

$24 71

$2314

$6.325.031

$5 810.329

$5.651.097

$5.255.286

$3.577.248

$1.689.049

$1.447.039

$1.314.916

$1.194 A67

$ 765.642

$6.088.766

$b.618.778

$5.130.399

$4.748.782

$3.016.585

$1310.513 41

$1.692.642 39

$1.647A45 40

$1.519.579 39

$1.116.127 40 314.726

'l 322.682 7

330.812 8

341.511 9

440.028 16 1.680 2 160 2.640 3 120 2.2!4.9 '.9 48 2.017A84 46 1.000 897 48 1.894.210 48 1.556.155 56 31.f00 35.000 1

35.000 1

35.000 1

551.994 12 551.941 13 551.941 13 524.994 13 234.994 9

1.106 824 23 1 014.184 23 919.752 22 900.384 22 528.577 19 557 557 557 Sto 252 26.065 1

26.065 1

26.065 26.065 t

26 065 1

747 076 16 704 909 16 651.885 16 5tE745 15 420.919 15 1.880.522 40 1.74b.71b 40 1.598.259 3?

1.523.744 38 975.813 35

$4.723.935 100

$4.353193 100

$4169.150 100

$3577.948 100

$2.766 462 100 he Net Inmme plus Inmme T:nes [Me:nti Inmmo TWs.

H 'Ibta! Common Eqmty dinini tr/ ymr end Comm-n Stock Investment Tax Cnstmnd Fani Charges dmded t>y Faed sh.ves pius dmido the $14d Dmdend Pp:ferenm Com:non Styk C!unnw Fant Chantes m !udo lnterest en irng Term and stun s Short Tetm Debt and Ottwr Interest Ex;vnse

Manag m:nttDiscus:irn Electnc revenues mereased 11 % in 1981 and 23% in cnd An:ly~ir cf 1980 The components of these changes are highhghted

'n the table below Financial Condition and Results of Operations 1981 vs 1980 1980 vs 1979 By order doctive February 14,1982. the BPU has granted M m SofDollatS) the Company a $389 9 m:lhon increase m 1ates Of this Changes m base rates

$ 36

$102 amount, $337 8 mdhon was for electne service and $521 Recovenes of higher energy e sts 218 354 rmlhon for gas (see page 6) However. certam problems Kdowatthour sales (16) 38 thscussed tMow will contmue to impact PSL.G as well as the utthty industry as a whole Additonal rate rehef will

$238 5394 be required from time to time to fmance construction, maintam rehat;ihty of service, keep pace with inflation.

In 1981. total electnc sales decreased 1% Despite an awl piy a fan rate of return to the shareholders increase m customers, Residential sak's decreased 4%

A more dotaded discussion of the Company's operat-pumar dy due to the cooler and less humid weather durmg my results. hquidity and capital r" sources fo!!ows the summet The 1% dochne m industnal sales was due to a drop m production levels as a result of the sluggish Earnings and Dividends economy dunng the year. Commercial sales mcreased Earnmgs per average sham of Common Stock were $2 63 2% pnncipally due to a shght merease m customers All for 1981. a dochne of LO: or 16% from 1980 before givmg ef-classes of saies contmue to reflect the overallimpact of fect to the net extraordmary gam of 9: m 1980 After the economic slump throughout the Company's service exuaordinary items, varrungs were lower by 59: per area dunng the year and the effect of contmued energy share Revenues did not keep pace with operatmg costs conservation as a result of contmumg mflation. mmimal sales growth in 1980alectnc sales increased 2% led by Residential due in cu:,tomer conservation and the sluggish economy, and Commercial sales which rose 5% and 4%, respec-and the lack of additional rate rehef tively Those gams were partially due to air cond.tionmg As a result of Sa!"m 2 bemg plamd m commercial demands dunng the hotter and more humid weather in oporation on October 13,1981. annual deprecation the summer of 1980. Also, the heatmg needs of these cus-( hargos wdl merease by approximately $10 9 milhon and tomers m the closmg months of 1980 contnbuted to the AFDC w1!! doc rease by approximately $20 3 milhon per mcreases for the year year-Gas revenues rose 26% m 1981 and 25% m 1980. The Earnings p?r share of S313 for 1980 betore the 9: gam prmeipal factors am shown below.

from extraordmary items improved 28: or 9 8% over 1979.

Incwaw or (Deemase) as rate mcreases and moderate sales growth outpaced 1981 vs 1980 1980 vs 19'9 inflation = record high money rates. and a sluggish eco-t%Inons of Donarsi nomic che ate The extraordmary gam in 1980 consisted Changes in base rates S 24

$ 34 of the ei'ects, after taxes, of the woto-off of unrecoverable Recoveries of higher gas costs 196 108 costs due to the abandonment of the Atlantic nuclear Therm sales 19 41 generatmg station project (see Note 5 of Notes to Fman-

$239

$183 cial Statements) which raiuced earnings by 18: per share. and the gam on dje sale of Transport of NewJersey In 1981, total gas sales mereawd 4% Commercial and (see Note 3 of Notes to F mancial Statementd wluch Industnalsales increased 10% and 15% respectively added 27: per sham These gams came about as the price advantage and Dividends per share p.ud to holders of Common Stock avadabihty of gas continued to spur conversions from od have grown over the last throe years using from $2 20, dunng the year Over 300 large Commercial and Industnal pud m 1979 to $2 29 m 1980 and then to thelevel of $2 44 customers were added in 1981 Despite an incmase m for 1981 Such amounts. compared to earnmgs befom ex-customers. Residential therm sales decreased 3% from traordinary items. resultni m plyout ratios of 77%. 73%

last year as wmter temperatures were k>ss severe and and 93;, resivetively Tbtal dividend pa'/ments m 1981 m-customers contmued to conserve-neased 37% over 1979 due in large part to the 24 N In 1980. sales of gas increased 8% as customer usage, increase m common shares outstandmg as we!1 as the especially m the fum classes of sales. mereased due to htgher dividend rates colder weather m the closing months of 1980 Also con-tnbutmg to the mcrease in sakts was the large number of Revenues and Sales conversions from oil to gas heat, particularly in the Resi-

.Ibtal rovenues mcreased in 1981 and 1980 due pumanly t dential class In addition. over 250 large Commercial and greater recovenes of electnc energy and gas fuel costs Inductnal customers were added dunng 1980 and lugher rates There is no ek: ment of profit on recov-Substantially all revenues are subject to New Jersey erles of "in tric energy and gas fuel costs, and hence the'/

Gross Receipts tax and as a result the amount of this tax do not attect eatnmys vanes in direct proportion to revenues The effective rate is approximately 13%

44 m

]

Energy Costs Energy costs continue to nse, and the Company is still not The costs of fuel for electnc generation as well as put able to benefit fully from the forward-lookmg, fuel-recov-chased and interchanged power continued to rise in 1981 ery mechanism built mto its rate structure. As of Decem-though somewhat less severely than n previous years ber 31,1981, underrecovered electne energy costs were The Company exerted successful efforts to counter the in-

$99 mdhon, shghtly more than half what they were a year creasing pnces of heavy oil by a 28% reduction in use, ago The reduction is due largely to recovenes allowed by thereby cutting expenditures for od by $38 milhon in 1981 the BPU of costs remaining from pnor penods.

The curta11 ment in oil-fued generation was compensated Dunng 1981. the BPU issued an order effective August for by a 9% increase in lower pnced nuclear generation 1,1981 designed to produce additional annual revenues of and a higher level of purchases of largely coal-fued gener-approximately $160 milhon through the levehzed energy ation from other utthties The Company anticipates that adjustment clause. Allestunated underrecovenes at July nuclear generation from Salem 2, which was placed in 31,1981 were included in the new levehzed charge. The commercial operation late m 1981, will further moderate gas raw matenals adjustment charge was also increased enerJy costs-in November 1981 to produce approximately $108 mdhon The Company is a member of the Pennsylvanta-New of addiuonal revenues over the next 10% month penod Jersey-Maryland Interconnection and is a party to several The Company anticipates that in 1982. In addition to agreements which provide for the purchase of avadable recovenes of its project ad current penod expenditures, it power from neighbonng utthties. These arrangements wdl recover $58 muhon of deferred energy costs plus $54 enable the Company to optimize its mix of internal and milhon of other deferred charges-external sources using the lowest cost energy available at The Company's average dady short-term debt dunng any given time. Energy costs are adjusted to match 1981 was $101 milhon - $21 milhon over last year's aver-amounts permitted to be recovered truough revenues age. At year end the Company had $208 milhon of short-and, to the extent so allowed, have no effect on earnings.

term debt outstanding.

Tbtal energy costs increased 22% and 40% in 1981 and The Company also needs to finance larger customer 1980, respectively, as desenbed below accounts receivable. As of the end of 1981 accounts increase or (Derease receivable includmg unbilled revenues approached $555 milhon and were $40 milhon more than at the end of 1980, 1981 vs 1980 two vs 1979 Customer payments have slowed as the amounts of bills enons at Duiars)

)

have increased Furthermore, net wnte-off of unco!!ectible Higher puces paid for fuel sup-phes and power purchases

$110

$103 accounts this year was $9 5 milhon greater than the $17.5 mdhon in 1980 The increases in accounts receivable and Kilowatthour output (13) 16 Adjustment of actualcosts to une llectible accounts also reflect a requnement of the match recovenes through BPU prohibiting the termmation of electnc and gas ser-revenues 93 127 vice m New Jersey dunng the wmter months with Replacement energy costs for respect to certain customers with financialneed who are which recovery was unable to pay utdity bills In an attempt to reverse these disallowed by BpU 3

trends, the Company has recently implemented a com-prehensive program designed to reduce the backlog of

$193

$246 unpaid customer ac counts In order to contmue its essential construction pro-Gas costs are adjusted to match amounts recovemd gram, the Company will requne sigmficant amounts of through revenues and do not affect eatmngs Costs were capital 0ee Construction Activities 35% higher in 1981 and 34% higher m 1980 Contnbutmg In additton to commitments for construction and fuel factors are shown below supphes over the coming years, the Company will be re-Increase or iDecrms*

quned to pay an estimated $68 mdhon of cancellation and 1981 vs 1980 1980 vs 1979 close-out costs related to the abandonment of Hope Creek au:mns of DollarM 2, pnncipally dunng 1982 Funds must also be provided in Higher paces pmd for gas the futum for bond matunues and sinking fund requne-supphes

$141

$132 ments It is anticipated that low mterest cost debt wdl Hefunds from pipehne supphers (17)

(2) have to be replaced at much higher current mterest rates Thenn sendout 18 30 Certam mortgage bond smking funds may be satisfied by Adpistment of actualcosts to the retuement of bonds or the utthzation of property addi-match recovenes through tions and are expected to be satisfmd by the latter The

tevenuet, 36 (31)_

annual smking funds for debenture bonds are met by the

$178

$129 retuement of bonds Construction Actwities Cash Position Utthty plant. by far the largest item on the bakince sheet.

Heavy demands upon the Company's cash position have contmues to increase as new construction, as well as been brought about by problems which confront the en-capitalimprovements reflect the spnalhng effects of infla-tuo utdity mdustry, includmg the slowmg of customer tion See Note 10 of Notes to Financial Statemen:s for the payments as electric and gas rates have increased effects of inflation 45

)

The Company mamtains a continuous construction In addition to periodic sintang fund redemption re-program, which includes payments for nuclear fuel and quirements, four bond issues aggregating $146 milhon investments in and advances to energy resources subsidt-wdl mature and wdl require rehnancmg by the end of anos Experidituns for construction were $717 mdion 1986 for 1981 and $G80 mdion for 1980 includmg AFDC of $96 For intenm fmancmg, the Company is authorized to mdhon and $78 rmlhon, respectively Ttus program is pen-have a total of $300 mWion of short-term obhgations out-cxhcaDy revised as a result of changes in economic condi-standing at any given time. The avadabihty of short-term tions, and the abihty of the Company to fmance construc-financing provides the Company greater timing flexibihty tion costs and to obtain timely rate rehef. Changes in the m the issuance of long term fmancing. At year end, the Company's plans and forecasts as well as price changes Company's Short-Term Debt balance was $208 milhon.

and cost escalation under construction contracts, and re-Under the terms of the Company's Mortgage and Re-quirements of regulatory authonties also result in revi-stated Certificate of Incorporation the Compary could sions of the construction program issue an addttional $478 milhon principal amount of Construction exp?nditures dunng the five years end-Mortgage Bonds or $263 milhon of Preferred Stock as of mg in 1986 are estimated at $3 9 bdhon including $772 December 31,1981. Present plans for 1982 call for the issu-nuthon of AFDC and reflect the recent ahmdonment of ance of Preferred Stock, Common Stock, and Mortgage liope Creek Umt 2 (see page 6) Wlule timse estunates are Bonds b,ised on cer tam expected completion dates and antici-In January 1982, the Company entered into a Irtter pate escalation due to mflation of approximately 9 5%

Agreement establishing a $75 milhon Two-Year Revolvmg any construction delays or tnordinate inflation levels Credit Facihty with a group of international banks. under could cause sigmficant increases in those amounts. The which the Banks have agreed to make revolving loans of Company expects to generate mtemally approximately one month, three months or six months for up to an aggre-50% of its construction expenditure requuements, exclud-gate amount of $75 milhon as requested by the Company ing AFDC Such expectation is based m put upon receiv-dunng the two-year penod ending January 1984 The ing future rate increases, as to which no nssurance can be Company has paid a one-time management fee o' W of given The balance wdl be provided by permanent financ-1% of $75 milhon and will pay a commitment cor,r"ission mg through the sale of secunties of % of 1% per annum of the datiy unused portica of the commitments. An/ drawings made by the Company Financing Activities would bear interest at a rate equal to % of 1% plus a rate The Company's interest rates and dividend requirements which approximates the London Interbank Offered Hate continue to chmb reflecting lugher rates for secunty issu-for deposits in Umted States Dollars ances in the capitrd market. In 1981, the Company issued

$50 milhon of 13 44% Preferred Stock and $100 rmthon of Effects ofInflation ten-year Mortgage Bonds at 15Fs %

lbgh inflation continues to gnp our national economy In Dunng the year, the Company also issued 9 5 milhon 1981 the Consumer Puce Index juraped over 10% the shares of Common Stock, mcludmg 6 milhon through an third consecutive year of double-digit inflation. As this re-underwritten offering The remamder was issued pri-lates to the Company. Inflation has evidenced itself in mardy under the Dividend Remvestment and Stock Pur-record interest charges and dividend requirements at a chase Plan.

time when hundreds of millions of dollars must be raised Book value per share of $25 66 at year end 1981 m the capital markets to finance needed construction, as dechned from $26 38 at December 31,1980 and $26 26 at well as m the effects of rising pnces on construction, fuel the end of 1979 The market value of common shares ex-and labor costs.

pressed as a percentat;e of book value was 701% 64 4%

For additionalinformation on the effects of changing and 73 3% at these respective dates puces, see Note 10 of Notes to Financial Statements The Company's expanston of the Dividend Remvest-ment and Stock Purchase Plan to tnclude holders of Prefet ted Stock and $ 140 Dividend Preference Common Stock, and the tax deferral avallable for reinvestment of utthty dividends under the new Economic Recovery Tax Act should help to bnng in much needed capital in the future 46

5tock Syrnbol PEG Forrn 10-K Available The Company's Common Stock and the $140 Stockholders or other mterested persons wishmq to Dividend Preference Cornmon Stock am tradal obtam a copy of the Company's 1981 Annual Report to on the New York Stock Exchange and the Phila-the Securities and Exchange Commission. filed on Form delphia Stock Exclumye 10 K. rnay obtain one without charge by writmg to the The !v::ow irc tab!n shows the quarterly divi-Vn:o President and Treasurer. Pubhc Service Electric and donds pud for the p'riods indicated and the Gas Company, PO Box 570. Newark, New Jersey 07101.

high and low sale prices of such stock as re The copy so provided will be without exhibits Exhibits p;rted m the consohdated transaction reporting may be purchased for a specified fee.

syr, tem Financialand StatisticalReview Cornrnon Stock A comprehenswe statistical supplement to this repart, containmg financial and operatmg data 1981 1980 r die yms M1981 wiu & avadaMus Dividend 61C 580 Spnng If you wish to receive a copy, please Pric" wnte to the Vice President and Treasurer.

First Ouarter 19 % -17 19 % -15 %

Pubhc Service Electne and Gas Compcmy, Socond Quarter 19 % - 17 21 -16%

PO. Box 570. Newark. N J 07101.

Thurf Guarter 19 % -16 %

21 -17%

Fourth Ouarter 20% -16%

18 % -16

$1.40 Div;dend Preference Cominon Stock 1981 1980 Dividena 35:

35:

Pure First Guarter 10% -10W 12 % -10 %

Second Quarter 10 % -10 12 % -10 %

Thmf 0uarter 10%- 9b 12 % -11 %

Fontth Guarter 11 - 9%

12 -10 w ro.uomorion'y Trnnsfer Agents AllStocks Morgan Guaranty Trust Company of New York, 30 West Broadway New Yark. N Y.10015 t/ >ckhokler Services.

Puhhc Service Electric and Gas Comptny, 80 Park PLiza, PO. Box 570 Newark, N J 07101 Registrars AllStocks Fidehty Union Bank, 765 Broad Street. Newark, N J 07101 Morgan Gu:uanty Trust Compmy of New York, 30 West Broadway. New Yor k. N Y 10015 1

47

______________-_____s

Oficers Robert 1. Smith Donald A. Anderson Chmrman of the Ibard and Chw l Executive OLcer We hesyknt -Computer Systems and Services Harold W. Sonn Frederick M. Broadfoot PresKhmt and ChwIOirtaung O!!n er Mte hmdent -Iaw Edward O. Outlaw Robert M. Crockett Execuuve Mce hemdent -Corporato fianrung Mee hesident -Fuel Supply and hesident of En<.gy Bgvine Corporaton and Energy Terminal William E. Scott Services Corporanon Executive Mce he.sident -Fmanco Fredrick R. DeSanti Stephen A. Mallard Mce hesident - Rates and tmd Manauement Seruct Mce hesident -l%nmng and Research and Preudent of PSD.Gibseatr h Corporatxin Carroll D. James Moe hesident - Admmisuauve Plannmq James B. Randel, Jr.

Semor Mcu headent of the Comany ann Edward J. Lenihan PDsklent of Enerry/ Ikvekspment Corporatson Wv Pwsident - Pubhc Re auons Richard M. Eckert Charles E. Maginn, Jr.

Senior We hesident - Energy Supply and Mce h<sident -Human Resources Enginwnny Wallace A. Maginn Robert W. Lockwood Mee hesident and Treasurer Senior Men hesvient - Admmistsauon Winthrop E. Mange, Jr.

John E Mcdonald Mce President. Corporato services Semor Mm hesident -Governmental Matra Thomas J. Martin Everett L. Morris Mee h.sident -Enginwrmg and Const uction Senior Mce hesident 4 Customer Ogerauons Parker C. Peterman Mce Resident and ComptsoDer Louis L. Rizzi Mce hesident -Customer and Marketmg Services Frederick W. Schneider Mce hesident -Pnxtucuon and Assistant to the Semor Mcu President -Energy Suppt/ and Engmeenng Robert J. Selbach We hesident -Transmission and Distubution Rudolph D. Stys We henident -System lianrung Richard A. Uderitz Mce hesident -Nuckw Robert S. Smith Settetary Changes in Organization In accordance with the Company's Malcolm Carnngton. Jr. Vice Effective October 1.1981. Rich-retirement ix>licy for Directors. John President and Secretary. retired ard A Udentz.GeneralManager -

F Betz, former President and Chief effective May 31.1981, after more Nuclear Production, was elected Operating Officer. Reynold E. Durch than 42 years of service. The Board Vice President - Nuclear.

and Nathan H. Wentworth retired as of Directors elected Robert S Smith.

In addition to being Vice Presi-Directors effective April 21.1981.

Secretary, effective June 1.1981.

dent - Production. Fredenck W James R. Cowan. Robert R Fer-Gifford Gnffin retired as Vice Schneider was also named Assis-guson, Jr and hwm Lerner were President - Interconnections on tant to the Semor Vice President -

elected Directors for the hrst time at July 20.1981. afte: 43 years of Energy Supply and Engmeering.

the Company's AnnualMeeting held setvice effective October 1.1981 on Apnl21.1981.

s 48 l

Directors James R. Cowan, M.D.

Irwin Lerner hm.ider4t tus! Cloof Executivo Of!ar, Urnted President. Clael Executwe Othcer arti dawtor.

Il< c:ptals Meda al 0 nter. Newark, New Jersey lic;ffmann la Hacho inc Unanufa'turer of fJerrdier of Audit O armattie phiamateuticab and fme chemicals), Nutley, fJew Jerwy W. Robert Davis Mendwr or Griansuron and Commen.ution Forn.or Chaum.m of the Board and Cinef Executivo Commstree O!!a et Itmahiuns of New Jorsey. Moorontown, Now Jerwy William E. Marfuggi Chauman rd Au< he O anmitim and Mende r of Ch,urm.m of the Board and daector, Victory Optical N amnwurfComnnum M'nufacMunng Compmy (manufacturer of ophthalmic fnunes) and Ch;urman of the Boar 1 and T.J. Derrnot Dunphy daector. niza sun @imes. Inc fm.inufacturor of Pre.adont. Chmf Exe< utivo O$cer and danctor.

sung!wsL in;th of Newark, New Jerwy l

Soale<1 Air Corporatson (manufactur"r of protectivo 1,f"trdu r of Fmance Commntee pu kauang systemn fLd !!" Hrwk. New Jersey Matilyn M. Pialtz Ma nd or of Nonanatsw1 Commsttee and l

Ovpotuson an<f Corn / vnsatson Cormmttm Pariner of Pand R Associates (pubhc relations and pubhcity spectahstd. Summit. New Jersey l

Robert R. Ferguson, Jr.

Mend >er of Aud,t Comnnttm l

hosi lent, Chief Exneutive Othcer and direttor.

First Natiorial State llaru oriciati. in. Now.uk. New James C. Pitney Jet wy Pariner in the law fitm of htrwy. Ilardm. Kipp &

Af"nder o/ Fueance Garumttoo Szuch. Newark and Mornstown. New Jermy Mend >er of Auda and Executive Comnnttws Margery Somers Foster 1% fema of D onome s En.entus, and fonner Dean Kenneth C. Rogers of Dou*;s Cou,qo, Putyen. Tho State Umversity hesident, Stevens Institute of Technology.

of New Jerscy New Brunswick New Jersey lloix; ken. New Jetwy hIend< r of Audn and Nonunutur; Corntnntuvs Chauman of Nonunatmq Comimitemmd ? %mber of Orjantzatson and Camp n.sation O >mmitten D. Wayne Hallstein Duoaor and fonner hesident. Inoorsoll Hand William E. Scott Company W.versihrd manufm turer of mm humey.

Execut ve Vice hesident - Fmance of the Compiny equ:prnent un t tools), W n1ehtt I ake, New JerwY Momiwr of Executive Comtmttee and Chamman of Mend vi ct Funance Cninnuttev and organization Fmance Commit tm an IComp nnation Comanttm Robert I. Smith Chaa rnan of the Ho.ud and Chief F.xecutive Othcer of the Company Chautnan of Exocutive Cormwitw and Mend >vt of Finance Comnuttee Harold W. Sonn hesident and Cluef 0;rratmg Officer of the Company Mvnd>cr of Executive and Fmance Commutetm Robert V. Van Fossan Chaaman of the Ibud. Crue! Executivo Off n er an t damtor. The Mutual Beneht Life Insurance Com;>any. New.uk. New Jersey M erdwr at I:xecuuve and Fmanw Comnnuws and Chaaman ot oppnization and Comp nsation Cornnuttm

j/"

4 4)

PSIEG Public Service Electric and Gas Company fr) Mirk liaza, Newark. New Jersey 07101 Mashng Addirnis:

PO. Box 570. Nowark, New Jersey 07101 i

_ _____ _ -