ML20100M311

Annual Rept,1984

ML20100M311
Person / Time
Site:	Peach Bottom
Issue date:	12/31/1984
From:	Sonn H Public Service Enterprise Group
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ML20100M290	List: ML20100M287 ML20100M311 ML20100M322 ML20100M325 ML20100M330
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NUDOCS 8504170451
Download: ML20100M311 (52)

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1984 Annual Report 1 O PSEG Public Service Electric and Gas Company 80 Park Plaza, Newark, NewJersey 07101 (201)430-7000 Stockholder Information-TollFree NewJersey residents (800) 242-0813 Outside NewJersey (800)526-8050 Annual Meeting Table of Contents Please note that the Annual Meeting of Stockholders

1. FinancialHighlights of the Company will be held in Newark Symphony

2. MessagetoShareholders IIall,1020 Broad Street, Newark, NewJersey Tues-

4. FinancialPicture day April 16,1985, at 2:00 p.m. A summary of the

5. Development Activity meeting will be sent to all stockholders of record at a

8. Reviewof Operations later date.

24. FinancialStatement Responsibility

25. FinancialStatements PSEaG Profile

29. Independent Accountants' Opinion 32.

ry o6Wicandccounting Public Service Electric and Gas Company is the larg-est utility in New Jersey and serves approximately 33. Notes to Financial Statements 5.4 milh,on people, nearly three-quarters of the 41. Management's Discussion and state',s population. The Company s service area, Analysis of FinancialCondition covenng some 2,600 square miles, runs diagonally and Results of Operations across the state's industiial and commercial corndor

44. OperatingStatistics from the New York state border on the north t

46. FinancialStatistics south of Camden. This highly diversified and heavily 48. OfficersandDirectors populated area mcludes the six major cities of New J:rsey as well as nearly 300 suburban and rural communities.

Additional Reports Available Transfer Agents A!! Stocks Form 10-K Morgan Guaranty Trust Company of New York, Stockholders or other interested persons wishing to 30 West Broadway New York, N.Y.10015 obtain a copy of the Company's 1984 Annual Report to the Securities and Exchange Commission, filed on S[ d[rSe E ecbc and Gas Company Form 10-K, may obtain one without charge by writ-80 Park Plaza, P.O. Box 570' ing to the Vice President and Treasurer, Public Ser-Newark, N.J. 07101 vice Electric and Gas Company P.O. Box 570, T6B, Newark, New Jersey 07101. The copy so provided Registrars AllStocks will be without exhibits. Exhibits may be purchased First Fidelity Bank, N. A., N.J. f ra speMee. 765 Broad Street, Newark, N.J. 07101 Financialand Statistical Review Morgan Guaranty Trust Company of New York, A comprehensive statistical supplement to this re-30 West Broadway New York, N.Y.10015 port, containing financial and operating data for the years 1974-1984 will be available this Spring. If you wish to receive a copy, please write to the Vice Pr:sident and Treasurer, Public Service Electric and Gas Company, P.O. Box 570, T6B, Newark, N.J. 07101.

i l Finzncial Highlights (000omitted where applicable) 1981 1983 Increase Electric Sales-Kilowatthours 31,597,401 30,769,701 3 Gas Sales-Therms 2,147,315 2,055.339 4 TotalOperating Revenues $1,196,121 $3,962,932 6 Total Operating Expenses $3,597,986 $3,468.982 - 4 Earnings Available for Common Stock $ 429,808 $ 331.545 30 Shares of Common Stock Average 108,913 97,467 12 Year-end 112,563 102,858 9 Earnings per Average Share of Common Stock $3.95 $3.40 16 Dividends Paid per Share of Common Stock $2.70 $2.62 3 Common Stockholders -Year-end 231,156 230.098 2 Coverage Ratios Fixed Charges 3.61 3.33 Fixed Charges and Preferred Dividends 2.76 2.49 Return cn Average Common Equity 14.13 % 12.66 % Book %Iue $27.17 $26.36 3 Year-end Market Price 26 % 22 % 18 Gross Additions to Utility Plant $ 967,365 $ 893,809* 8 Total Utility Plant $9,870,429 $9,017,951* 9 ' Restated to reflect capitalleases. See Note 8 of Notes to Financial Statements. Tho 1984 income Dollar PSEaG Territory Where it Came From ww---mm,~.,mm.e e[fElectricRevenues,

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L M:ssage to Shareholders A stringent cost control program was contin-ued during the year and produced substantial Adapting and contributing to a swiftly changing savings throughout the Company that contrib-and improving economic environment, the uted measurably to the financialimprovement. Company made excellent progress,in 1984. As The Company was granted a $286.4 million the NewJersey economy moved from recovery rate increase on an annual basis, effective to expansion, the commercial sector continued March 23, by the New Jersey Board of Public as the bellwether, reflecting the state's advanta-Utilities. The increase, composed of $246.7 geous location as a site for service-oriented million in electric revenues and $39.7 million in business. gas revenues, resulted from a petition filed by Earnings per share of Common Stock rose to the Company onJuly 1,1983. $3.95 per share from $3.40 in 1983, a 16.2 per Although the summer was cooler than in 1 cent increase. In the second quarter, the divi-1983, hot, humid weather in-June brought dend on Common Stock was increased to 68 record demand for electricity for air condition-cents per share from 66 cents. This was the ing. On June 11, system records were set for a .. ninth consecutive year in which the dividend day's output and peakload. ,was increased and raised the annual rate to Natural gas supplies were more than ample l $2.72. to meet the higher demand resulting from the Nowhere was the state's commercial attrac-upswing in the economy and colder weather in - tiveness more evident than in the burgeoning the heating season. During the year, the aver-redevelopment of the Hudson River waterfront age cost of gas the Company purchased de-t i and in the rapid growth in central New Jersey creased for the first time since 1968. The j along what has become widely known as the decrease resulted from a stabilization in prices Princeton Route 1 corridor. paid to pipeline suppliers and the purchase of While commercial activity heightened, New substantial quantities of lower-priced gas on the Jersey's commitment to high-technology indus. spot market. These cost reductions were re-try was accentuated with the approval by flected in credits on customer bills. voters of a $90-million bond issue for the en-Efforts to obtain required Federal Energy 4 i hancement of the state's already. well-estab-Regulatory Commission authorization to oper-lished scientific and research community. The - ate two liquefied natural gas storage tanks on funds will finance modernization of technical fa-Staten Island, New York, were discontinued in cilities in educational institutions as well as the December and the project was abandoned. A establishment of high technology centers that timely operational date could not be achieved will be supported by government, industry and because of inordinate delays. in the licensing ~ academia. process. The resurgence of the economy once again Substantial progress was realized during the pointed up the importance of electricity and year on Hope Creek Generating Station,- the natural gas as fuels vital to growth. As NewJer-Company's only major construction project. At sey's largest utility, serving approximately year end Hope Creek was more than 92 per three-quarters of the state's population, cent complete and the transition from a con-PSEaG not only is helping facilitate the eco-struction project to an operating plant was pro-nonuc expansion, but bolstering it through ag-ceeding smoothly. ~ gressive area development and marketing Once Hope Creek ls completed, the Compa-activities that encourage business and industry ny's financial burden should be lightened, and it - i

tolocate and expandin the state.

is expected that the major portion of future Buoyed by the rising economic tide and construction work will be financed with bene 6 ting from an increase in base rates, the internally-generated funds. ~ Company's financial results improved signifi-A disappointment in 1984 was the perfor-cantly in 1984.- Sales of electricity and gas mance of nuclear generating units. Although nu-showed modest gains over 1983, and projec-clear output was greater than in 1983, it was i tions of sales growth in the near term were in-below that which had been projected because of creased. The latest forecast indicates a lengthy outages of three of the four generating compound annual growth rate for the period units in which the Company shares ownership. through 1986 of 2.1 per cent for electric sales More costly replacement energy was required and 3.5 per cent for gas ries, and resulted in an underrecovery of $334 mil-lionin fuelcosts by yearend. i 2 _ _ - - ~

The two nuclear units at the Salem Generat-production facilities, transmission and distribu-ing Station were forced off line for extended tion upgrsding and nuclear fuel. periods by non-nuclear problems. In separate As a Company, we are continuously looking incidents, electrical faults in the generator of toward the future, studying our opportunities Mr.Sonn is chairman of each unit caused extensive damage. One of the and options. In September, a wholly-owned theNewJerseyLiberty ( two nuclear units at the Peach Bottom Station subsidiary, Community Energy Alternatives, c ntenniancampaign in Pennsylvania, in which PSE&G shares Inc., was established to participate in the devel com"Y*i. s nibI'n s ownership, was taken out of service in April and gment of energy supply projects, such as toaidintherestoration remained shut down for the rest of the year for cogeneration and small power production of th statu.of uh.rty """"**"d* replacement of piping to rectify a generic prob-facilities. lem. The unit is not expected to return to ser-As in the past, the dedication of vice until the second quarter of 198a. employees and the loyalty of you, in December, the Company filed two court the shareholders, during'the past suits against Westinghouse Electric Corpora-year has been of inestimable value. + y tion relating to failures of the Salem No. I reac-The Company has a challenging tor trip breakers in February 1983 and of the future. We ask a continuation of your l H p Salem No. 2 generator in October 1984. support as we look to that future V(N A new organization structure established in with confidence and optimism. ( 7.4 the Nuclear Department during the year im-j, N" g;I,Dg? proved management effectiveness and further y y b; i) assured safe and efficient operations. Safety of course, has the highest priority YC g y gj y The nuclear power industry has been going through a very difficult period. Fortunately, liarold W. Sonn IL d PSE&G has not been subjected to some of the chairman ofthe noard, more serious financial problems that have con-President and Chic /Executire Officer i fronted a number of other utilities. Ilowever, February 14,1985 x mdustry problems do have an indirect effect on A Company operations and performance because 'j j / -7 5 of common regulatory requirements and other ,/ / , ~~ factors. The Company is doing everything yj ty l possible to mu,unuze the impact on its opera-e w tions of these adverse industry conditions. j'. fr + PSE&G is well prepared to meet future de-E a N( 7 ' mand for electricity with generating capacity M-r d fueled by a diversified mixture of coal, nuclear, 'U M y //(! n{, oil and natural gas. In addition, the Company's 4 strong high-voltage transmission ties permit C delivery of large amounts of power, mainly coal / j[, ' { p fueled, from other areas. Use of oil, which prior to the Mideast embargo of 1973 accounted for the major part of the Company's generation, 3 continues to be muumized. Although a temporary worldwide surplus of ( oil has developed and prices have declined, the Company must be prepared for unforeseen events, such as another embargo or interna-l tional crisis. The llope Creek station, when it j begins operation in 1986, will reduce further the need of oil for electric generation. The Company has no plans at the present ) time to initiate any new major generating R projects. After llope Creek is in service, con-l struction expenditures will be targeted for im-1 provement and replacement of electric and gas f A o ir%. l

Financial Picture Showed Consistent with management's objective of improvementin Year raising dividends on a regular basis, the quar-An important accomplishment in 1984 by the terly dividend on Common Stock was increased Company was the significant improvement reaj. to 68 cents a share in the second quarter from ized in financial results. Total revenues passed 66 cents paid previously Total dividends paid the four billion dollar mark for the first time, for the year amounted to $2.70 a share, up from rising to $4.20 billion from $3.96 billion in 1983. $2.62 in 1983. Earnings and Electric revenues increased to $2.82 billion Dividends paid in 1984 on all classes of stock M*"d*s= from $2.57 billion, a rise of 9.6 per cent, and are fully taxable. The taxability of dividends is se accounted for 67 per cent of the overall total. governed by Internal Revenue Service rules Gas revenues declined to $1.38 billion from nd is based on the Company's estimated tax $1.39 billion, or 0.9 per cent, and made up the liabihty other33 per cent. The rate increase decision by the New Jer-The higher revenues were attributable to the sey Board of Public Utilities (BPU) in March a.00 $286.4 million rate increase in March and to an raised the amount of Construction Work in improvement in electric and gas sales. Electric Progress on which the Company earns a cash ~ sales were up 2.7 per cent and gas sales 4.5 per return from $375 million to $550.million, cent compared with 1983. The gains in sales strengthening cash flow. 7,g were mainly due to the improvement in the The order also specified that charges under economy the Company's 1983-84 electric Levelized Based on anticipated improved economic Energy Adjustment Clause remain unchanged conditions, estimates for growth in electric and through June 1985. Underrecovered electric = gas sales for the 1984-1986 period were in. energy costs at year end were $334 million. creased in the Company's latest financial fore. The amount was accumulated primanly because cast. Total electric sales were forecast to of the unavailability of nuclear generating units increase at a compound annual growth rate of that made it necessary to use replacement 2.1 per cent, up from 1.8 per cent. The fore. power at higher costs. "" a2 sa 84 cast for total gas sales was increased to 3.5 per OnJanuary 10,1985, the BPU ruled that the cent from 2.8 per cent. Company could not recover through rates $8.4 ZZ, Historically, the composition of overall reve, million of replacement energy costs associated nues has reflected the diversity in PSE&G's with a Salem No.1 outage following problems service territory and this was true again in ?Xperienced in February 1983. As a result, net 1984. The diversity, providing stability and mcome, after related taxes, was reduced by Elect"* strength, meant a balance in revenue sources $4.56 millionin 1984. g;;o,a thourSales among residential, commercial and industrial Underrecovered costs as of June 30, 1985, m,, i customers. have been estimated at $388 million. The Kdowatthours ~ Total operating expenses increased in 1984 Company on January 29,1985, filed a request so - by $129 million, or 3.7 per cent, to $3.60 billion with the BPU for an increase in the adjustment 7 ' ~ from$3.47 billionin 1983. charge of $323 million on an annua!ized basis to r mde nlul% 2s y :g y' W g' As a result of the Company's higher reve. nues, New Jersey gross receipts taxes in. The BPU in September approved a reduction ~ creased to $530 million from $514 million, a rise of $45 million in bills of customers under the 4 of 3.1 per cent. Company's gas levelized Raw Materials Adjust. 20 4 ment Clause. The reduction resulted mainly Ecrnings increased from an overrecovery of costs during the prior I velized period that was attributable primarily

l. i I l l

'S Reflecting the $286.4 million rate increase in to stabilized prices for pipeline gas and substan-March, higher electric and gas sales, and strin-tial purchases at lower pnces m the spot mar-gent control on costs, earnings available for ket. The Company anticipates relatively stable g l common stock increased to $429.8 million prices to contume because, of competitive pres-l7 p p y; [4 equal to $3.95 per share, compared with $331.5 l million, or $3.40 per share, in 1983. The aver- $glyder gu te 1 I k f; age number of common shares outstanding rose h3 y ? "j pi n 6 Y U $. O E Ei to 108.9 million during the year from 97.5 mil-U l lion in 1983, an 11.7 per cent increase. m om., n, mu.wo l = corneneros a n..e.nna l l 4

"NeteJerscy has a in'll-established scientific community that is sinmg in netc technohg A lame pool atjm>tessional specialists m allJichis and the close link trith academiafoster productive rCsCarCh and dCCClohnlCnt. " Robert R. Frederick President and Chief Operating Officer RCA l The RCA designed l weather satellite is f Q readied for pre Inunch testingin Astro-g 1-p Electromcs' new p - 1 Thermal Vacuum Satellite Test Chamber.The largest clean pumped test facility of its kind in -IY the free world, the i c " chamber enables l technicians to p' i evaluate satellites by subjecting them to extremesof pressure ,~,- - m?' and temperature. t -- 7 ,r r-l Iil p N. p~. l l i l sus.:Juzan 3 l High Technology Sparks state agencies. These co-operative efforts have Economic Growth brought excellent results. The impact of the age of high technology was The Princeton-Route I corridor, about seven felt in 1984 throughout the breadth and length of miles wide and stretching from South liruns-I PSEAG's service area - from the lludson wick to 1.awrence 'Ibwnship, is rapidly becom-River in the north to the Delaware River in the ing the nation'a newest high technology belt. l south. At year end some 300,000 persons were Princeton is its core and the main attraction for i employed in high technology and data process. high technology and research and development ing operations in New Jersey, the most dynamic tirms. Corporate headquarters and regional of-sector of the business community fices also are being established in this attractive locale. PSEAG has played a major role in bringing high technology industry as well as office, re. Overall, facilities in the corridor by 1992, search, light industrial and distnbution facilities according, to some projections, will begin to of national and international corporations to the approach those in Dallas and create more than j state, and particularly to its service territory 44,000 new jobs. Major projects completed and The Company continued to work closely with under construction have attracted numerous the New Jersey Department of Commerce and nationally-known corporations. Economic Development as well as with other 5 l ~ - -.

l l ' 55l$ 'l' Ih 'll l,HlHinituYlcS (h of)!t ' lllHl.\\i Ir li FSi T tl :'n 'd! l1ldt i ' to icoFlC HHil ll lib \\ \\ Y lllh' lts thii 35 l0 t Xti ll* HI St'IloolS dHil l(Hili YSltlO, t ifllHnll UHil n t 'n dtloHUl IdFllilit S. dHil 1 In/Hsl>ortalinH serrai S. lt'S lins rlinfate tilat has in lln tl .\\~en'Jcrsev ln come a lHgh tcchnolog state. [ "2

• l AT&T Ben L ahorator<es l

w-=-~m.,., Engineers at AT&T Bell Laboratories inspect a waferof 256K Dynamic r , g Random Access Mem-ory chips (DRAMS). -s These memories are among the most sophis-A d. ticated of their kind h* 8M now in production. ~WA g ~ } )Y a. n %4 - s M d er ,Z._ i ) 4 tt ;. -t ,,L) / l p *+, cM ~% NTjW small but remarkable R AT&T's latest coup: a 1 Is )(, p p-11arat w memory chip (shown on g " *3 w i face of a dime)that can j store over one minion [I bits of information and, /p! x of vitalimportance, / d fi scheduled for production. i

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a j -- k~f,^~ v Pnnecton l?niversity has served as a catalyst which has taken place in the Meadowlands, for nluch of the devehapnient in the area. The where con.struction c<>ntinued tinabated during proximity of Rutgers l'niversity at the northern the year. ()ver the next 20 years, millions of end of the corridor also has increased the area's square feet of office space, tens of thousand3 of ) attractiveness. The univer<ities are magnet > residential units. shopping center 3, hotels and for firms seeking association with educational recreational facilities are expected to be institutions. Completed. Princeton Forrestal Center, a pace 3ctter in The 18-nule stretch of waterfront. extending the corridor. is a prestigious 1.600-acre ottice from the George Washington liridge to and research park owned by Unnecton l'niver-Ilayonne, has been targeted for development sity The center contains 18 btaldmus, with four totaling more than $5 bilhon. more under con 3truction, and other3 planned. ,.\\ highhght of the year was a PSEx(i-spon-In the northern part of the state, the liudson noted media briefing held in ()ctober at Liberty l River waterfront, once the site of bustling rail-State Park in Jersey City The briefing wa., de-road and shipping activities but in recent years signed to focu3 attention on the watertront's I the scene of abandoned and ddapidated facih-potential. ties, began to develop into what some predict Representaris c3 of major developments will be called the "Gok! Coast" of the North-along the waterfront derenbed their projects. cast. The development could surpass that 6

" ThirtCCn major dCn'l0perS plun to inCCSt S5 billiim to dCn-lOp .YCIC)CTSCy'S llllllSHH lElCCY ICtllCYl' OHl. I}CCY lllr HCXl 2I) YCHTS, Y Hillll0HS Ol'StllidrC INCL Ol'01)lCC SpdCC, (CHS Ol'lllul(SdHilS HI TCSitlCHlidl llHilS, SllopplHj! CCHlCYS, llulClS UHil TCCYCall0Hu{ NIClllllCS LClll bC C0 Hip lClCll. 39 Borden R. Putnam Lommissioner. New Jersey Department of ( Commerce & Economic Development PSEaG sponsored a l news media confer-i ence at Liberty State Park, Jersey City, to announce plans by W developers for the revitalization of an +33 + '# M " j 18 mile Hudson River ' waterfront area f acing 4 - Manhattan. It has i N been labeled "the most valuable real estate in the cuuntry". The conference resulted in f a significant amount of f avorable publicity f or this growth area. 1 .- p 3 l ~ i y3 t X a e/ i l I f .J 7_a N. y They included private developers. the l' ort Au-was added or is being constructed in llurling-thonty of New York and New Jerrey and the ton. Camden and Gloucester counties. city of Jersey City, all with plans for deselop-There al3o are plans for a $200-million busi-ments on the more than 2.300 acres along the ness and recreational center on the Camden watertront. waterfront. 'Ihe plans are being reviewed by The brieting, one of the most succerful of the Cooper's Ferry Development Association l its kind. attracted some 50 media representa-Inc. a non-profit development group. l tives and resulted in extensive publicity about Rebuilding of the Garden State Race Track at the waterfront and its future. Cherry liill. including a five-> tory grandstand in southern New Jersey there was sub3 tan-and lighting for night racing. progressed in ti.d construction of new office butidings in 1981. 1981. The track. clo3ed since a fire destroyed I .\\ lore than one nullion square feet m liurlington the grandstand in 1977, i3 scheduled to open in County and 850.000 square feet in Camden 1985 and employ about 2.500 people with an County were completed or under construction. annual payroll of $20 nullion. In addition, con-This construction represent, a major addition cessionaires and subcontractors will employ to the existing 1.5 milhon square feet ot ottice 1.500 person 3 Cost of reconstruction has been space in the area. In addition, about two million estimated at $120 million. square feet of industnal and institutional space 7

i " Newport City represents a $2 billion investment inJersey City i I waterfront redevelopment. Significant siteworkfor this exciting i project was undertaken during 1984 and ice lookfoneard to its Colnpletion within the next decade. U Melvin Simon Chairmaqof theBoaro Melvin Simon & Associates,Inc. w.. Newport City calls for ~ theconstructionof a i ]=1 _3 = one million square }Ng foot shopping mall, ='

• +

over four million a. i'- square feet of offico M .g 3 space,9,000 + I [- .J ' ~ residential units and g 1,200 hotel rooms. g C re N? '7 (, . / ~& i

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5% l V,.,E &g [ } g ,.9 b y ;* g l. ' N )T W- %f- ' f f l kf %c ~ %g 4, / s., % e es W kw 1 During the year, revitalization of urban areas were pending. Requests for information indi-also progressed. In Newark, the Gateway 111 cate that many more customers will take advan-office building opened, bringing total space in tage of the rate m 1985. the complex, owned by The Prudential Insur-ance Company, to 2.1 million square feet. Use of Advariced Technology As an incentive for urban renewal, the increased in Operations Company established an area development in 1984 the Company continued to move electric rate which was approved by the New forward in applying advanced technology to its Jersey 130ard of Public Utilities in March. The operations by t-panding the use of computer j rate offers discounts to industrial and conuner-graphics. Applications span the Company's cial customers who k>cate or expand in any of operating departments -including transmis-i nine major municipalities. The Company bene-sion and distribution, production, nuclear, fits through the greater use of facilities that corporate services and mformation systems. A have become under-utilized because of plant major three-year pilot project was initiated to closings and relocations. Communities benefit develop a " Distribution Facilities Management by increased economic activity and the creation System" utilizing state of-the-art data manage-l ofjobs and expanded ser ices. ment systems and computer graphics for l At year end 19 customers had qualified for record keeping, for control of electric and gas the area development rate and 41 applications transmission and distribution facilities, and for 8 I

l l I l l i automated mapping. This sm m will provide e substantial cost savings by ucreasing produc-tivity facilitating communication of infonnation l and improving methods to identify location of 3 l plant and equipment. M l In order to provide a common mapping base for the Company, a consolidated surveying and J mapping function was established in real estate under the Corporate Services Department. This functional group supports various needs of the Company, from interim support of the pilot project to fulfilling complex mapping require-EPGPAPH 4 ments for nuclear exercises and timelv re-sponse to numerous governmental filings. t } In addition, a centralized corporate telecom-munications department was established under i I Infonnation Systems. The new department em-braces telephone services, communications l system planning and network control. Other w e,= ~ ~ telecommunications responsibilities, includmg fiber optics, also are being phased into the new w department. Centralization willimprove control x of future telecommunications facilities and costs while satisfying growing demands of operating \\- departments for such senices. A state-of-the-art computer system was de. vised to $3.757 billion due to a change in AFDC g Dena of thk 9,p, veloped and implemented in 1984 to monitor the ccrued on Lonstruction Work in Progress, m.,,,,,,,,,,i, Company's more than 3.2 million electric and Under the agreement, there would be a workstations which l gas meters. Utilizing bar code technology the penalty in the fonn of reduced earnings if Ilope 8uPPor' he a anced , pp ng. j system monitors and provides infonnation for Creek costs exceed the targeted cost, unless voying functions of the meter testing, repairs, inventory, productivity, overruns were due to extraordinary events be-Company. Shown on

• he s reen is a nuclear regulatory requirements and billing accuracy yond the Company's control.

,) e l At year end the Hope Creek project was Construction Expenditures to more than 92 per cent complete and construc-Construction Decline in Future tion was proceeding on a schedule which would Expenditures Construction expenditures, including Allowance permit nuclear fuel to be loaded about the onclud,ng Aroc; l for Funds Used During Construction (AFDC), begmnmg of 1986. If this can be achieved, com-

• ~*am payments for nuclear fuel and advances to sub-mercial operation of the unit could begin by mid-I sidiaries, increased to $964 million in 1984 from 1986, which is earlier than previously planned.

IL. While this schedule would allow the unit to be $902 million in 1983. Expenditures in 1985 are estimated to be $927 million, including $192 mil. ccmipleted within budget and the targeted cost, J. lionof AFDC. this cannot be assured. PSE&G owns 95 per a$l jll ? j 1 cent of Ilope Creek and Atlantic City Electric i in the five years through 1989, expenditures

• p { F !f1'y(4 mp ny holds the other 5 per cent.

I for all construction, including Hope Creek, are estimated at $3.4 billion, including approxi-During the next five years, the Company ex- 'r f'$a' .d mately $475 million of AFDC Outlays for pects, with adequate rate increases, to gener-d. nuclear generating facilities and fuel will be ate at least half of its construction expenditures approximately $1.7 billion, or 50 per cent of the internally, excluding AFDC. The balance will be ghe@j' 4 total. financed by the issuance of debt and equity se-cunties. Substantially lower construction re-L L gW Hope Creek has a targeted cost of $3.795 200 g # {. ~ f quirements, after llope treek is completed, 1F' _ ;g billion under a cost containment agreement should reduce the need for external financing. reached in 1982 by the Company with the Public HI hL^ Advocate of New Jersey and the state Depart-ment of Energy, and approved by the BPU in HR41 M i1 J. June 1983. The cost figure has since been re-1984 85 86 87 88 89 la Actual e Projected 9

Maintenance of Conservative dends under qualified public utility plans each Capital Structure Emphasized year. The law that allows these benefits expires One of the Company's main financial objectives at the end of 1985. is to maintain a conservative capital structure. At the end of 1984 the debt ratio was 45.8 per Profiles of Stockholders cent compared with a utility industry estimated Developed by Survey average of about 47.4 per cent. Capitalization A survey ofindividual holders of the Company's ratios are summarized on the accompanying Common Stock was conducted in 1984 by the chart. New York Stock Exchange. Telephone inter-hlore than $648.7 million in capital funds views of stockholders by Exchange representa-were raised in 1984 through the. sale of h! ort-tives were made on a statistical sampling basis. gage Bonds and Common Stock. In January, the The survey developed profiles of stock-Company sold through a public offering four mil-holders that are usefulin setting Company poli-tion shares of Common Stock for $88 million. cies and programs as well as in dealing with A total of $435 million principal amount of the public and regulatory agencies. The overall pollution control mortgage bonds were issued results of the survey approximated those of a during the year to finance certain facilities at nu-similar one in 1980. Findings of the 1984 survey clear plants. These included issues of $150 mil-included: lion of 10%%, 30-year bonds in July and $150 m The typical PSE&G stockholder is ap-million of 10%7c, 30-year bonds in September. proximately 66 years old, retired, and has In addition, $130.4 million of 10%7c, 30-year an annual income of about $34,000. h!ost bonds, and $4.6 million of 10%%, 28-year stockholders live in the hiiddle Atlantic re-bonds wereissuedin November. gion. The states with the highest concentra-The Company also raised $118.3 million tion of shareowners are New Jersey New through the sale of 5.4 million shares of Com-York, Pennsylvania and Florida. mon Stock under the Dividend Reinvestment a Dividend income and company profitabil-d and Stock Purchase Plan, and $7.4 million ity are important factors in investment deci-through the issuance of 321,000 shares under sions of stockholders. About 97 per cent of various employee stock plans. the stockholders who responded indicated In addition, on January 17, 1985, the they would either increase or maintain their Company sold seven million shares of Common holdingsin the Company Stock through a public offering for $177.8 m Company management, industry leader-million. ship and social responsibility were rated as Capitalization The proceeds from the sales of these securi. good to excellent by a majority of shareown-Ratios (year ene ties were used largely to finance the Company's ers. Company communications were rated construction program. similarly ,p@. R There were 91,633 participants in the Stockholders of record at the end of 1984 to-M d p y d Company's Dividend Reinvestment and Stock taled 267,904 compared with 266,008 at the ] j g i j Purchase Plan at the end of 1984. In addition to close of 1981. They included 234,156 holders of so % N q g j reinvestment of dividends, stockholders in the Common Stock; 10,730 holders of $1.40 Divi-di G ? 4E Plan may make optional cash investments at dend Preference Common Stock; and 12,830 M d f 4 any time of up to $20,000 a year. Common holders of Preferred Stock, $100 Par, and j M d O Stock dividends are reinvested at a 5 per cent 10,188 holders of Preferred Stock, $25 Par. h 1 h g discount from the market price average. h! ore than 35 million shares of the Common p' H g j change m,ere traded on the New York Stock Ex-7~ p St ck w lloiders of $1.40 Dividend Preference Com, 1984. 40 p" p mon Stock and Preferred Stock, both $100 and $25 par, also may participate in the Plan. Divi. The Company maintains an investor relations I

,> f dends on these issues are used to purchase program to keep stockholders and the financial r

y Common Stock at 100 per cent of the market community informed about developments at i r p' t + 3 price average. PSE&G. F c. [ F Under federal income tax law, individuals Company executives during the year ad-may defer taxes on up to $750 of reinvested dressed various meetings of financial analysts, M 'r;"y y y E divid:nds and those filing joint returns may stockbrokers and other members of the invest-defer taxes on up to $1,500 of reinvested divi. ment community og = tong re,m oeta a Ome, Long-Term Ot*gahans 10

"Use ofhelicopters makes possible the construction ofa 500,000 volt tmnsmission line ihmugh di(ticult marshland area. Scheduled for completion in April,1985 - at a cost of$33 million - the 43-mile project will link Hope Creek tvith the New Freedom-Deans line to)I)rni a nelU CirCilit 103 miles in length. ') stepnen p. nogean Overhead Transmission Engineer 1 The 500 MV Hope pn ? 4 Creek transmission f7

j line further expands i

t-. i ! and improwes system k reliability and t I-y - [.' d strengthens the [~ F - QU Pennsylvania New .d / ] Jersey Maryland .j power grid. t. ~~ ~ -E-41. -A W+ M ,,-is b ^9 ,..pt+%Nu ^ ~ ~ ) E l i l l l \\ Uh l 2 -s 4 \\'< j h, 4 !5 "h

Eronomic Upswing increases During the year,1.9 million tons of coal, and Electric Output 5.7 million barrels of oil were purchased for the A 2.4 per cent increase in electric output was NewJersey electric production facilities. A total recorded in 1984, mainly because of higher de. of 71.1 million therms of natural gas, equivalent mand resulting from the upswing in the to 11.7 million barrels of oil, was used at a cost economy. Ltal megawatthours produced, pur. savings of approximately $45.5 million. Addi-chased, and interchanged for the year tional savm, gs of about $3.2 million were real-Electric Generat,on i amounted to 34.2 million compared with 33.4 ized through spot market purchases of coal and FuelSources millionin 1983. 0 11-Abnormally hot, humid weather in June The average delivered price of coal pur-j i caused record demand for electricity An all. chased m 1984 to generate electricity was j time peak load of 7,422 megawatts occurred on $55.42 per ton, 0.1 per cent lower than 1983,s t 1 June 11, exceeding by 2.5 per cent the previous average pnce. Lower rates negotiated,n rail-so l i record peak of 7,244 megawatts set on Sep. road transportation contracts offset higher coal l tember 6,1983. A record maximum day's out-pnces at the mine. 5 put of 143,558 megawatthours also occurred on Oil prices increased slightly during 1984. The y 8 June 11. This was an increase of 2.1 per cent average price of low sulfur heavy oil purchased l over the previous high of 140,591 megawatt-to generate electricity was $30.81 per barrel,

s e:

hours onJuly 21,1980. The maximum day's out-2.2 per cent higher than in 1983. Stable prices put in 1983 was 135,775 megawatthours on were the result of a continued surplus in the 40 August 8. market. At the time of the system peak, the Comparative fuel costs in 1984 per million Company had an installed generating capacity of British thermal units were: Oil $5.14; coal 8,999 megawatts, and an installed reserve mar. $2.08; gas $4.35; and nuclear 84 cents. gin of 21 per cent. At year end. the installed The Company's electric output by sources in l generating capacity remained at 8,999 1984 reflected the diversity of PSE&G's fuel

• 6 i

I megawatts. supplies. Sources in 1984 compared with 1983 The accompanying table shows the planning are shown on the accompanying bar chart. , [,,,,[,,],,,, peak electric loads, installed generatmg capaci- . o. . u.., ocu ties, and per cent reserves anticipated for the Strong Interconnections Facilitate next 10 years. The only major capacity addition Deliveryof Energy during the period will be the Hope Creek gener-During 1984, 25 per cent of PSE&G's electric atmg umt. system output was obtained by the purchase of Electric Peak lead Generating Capacity Forecast energy mainly coal-fueled, from other utilities "".j 'fi,$""t Yime $Nad $a7aUry [ ggt and delivered through the Company's extensive orreak network of high-voltage interconnections. The w. =,e (Megawatts) interconnections have been strengthened to io o 1985 7.390 8,999 22 take maximum advantage of the energy avail-85 1986 7,470 8,999 20 h l l '@c able. Of the purchased energy, 48 per cent y came from the Pennsylvania New Jersey-Mary-N 1987 7,540 10,013 33 {i = l }b 1988 7,610 10,013 32 land Interconnection power pool; 48 per cent ts 1989 7,690 10.013 30

p'(k from Allegheny Power System, 2 per cent from n

1990 7,760 10.013 29 es.n-utilities in New York state,1 per cent from Northeast Utilities, and 1 per cent from cogen-U t Ah 1991 7,810 10,013 28 1992 7,870 10,013 27 I 6 fii eration. These purchases resulted in estimated so ) savings to the Company of $90 million. ' I f 1993 7,920 10,013 26 45 1994 7.980 10,013 25 4o L T Nuclear Generation Lower Than N I! .jy(( f ( Use of Oil Continues Had Been Projected as j i TJ Be Minimized Nuclear generation in 1984 was lower than had N [ i' The Company continued in 1984 to utilize a mix been anticipated because of outages of units io 9 of coal, oil and natural gas for the fossil produc-that required extensive maintenance and over-asdg tion of electricity Substantial quantities of natu-haul work. The Company shares ownership La = n = n.o./u n.1 ral gas were used to minimize the need for oil. with other utilities in four operating nuclear . e.~ e insm,dCapaoty 12

j 4 Q f. The first of two new I -] $ 8,000 ton barges I j carries coal from Balti- ' CJ more to the Hudson Generating Station, <; replacing six smaHer a gj vessels. Greater l

economy and reliability 1

for coal use at Hudson i . Station was also l achieved with the installation of new I - pulverizers. i H-t. j i l j m._ + l 3 x-8 o. I l i units. Two units are at the Salem station, which oil had been used to generate this electricity j the Company operates, and two a'e at the there would have been an additional cost to cus-Peach Ilottom station in Pennsylvarja, oper-tomers of more than $2.5 billion over the period j ated by Philadelphia Electric Comparr.. PSE&G that the nuclear units have been operating. has a 42.59 per cent interest in Salem and a 42.49 per cent interest in Peach llottom. Suits Filed Against Westinghouse In February. Salem No. I was shut down for The Company and the other three co-owners of I repairs following extensive damage to the non-the Salem Generating Station in December filed nuclear electric generator caused by an electri-two suits in the New Jersey Superior Court cal fault. While the repairs were being made the against Westinghouse Electric Comoration. the unit was refueled to minimize outage time. supplier of the nuclear steam supply system and After the refueling and generator repair work turbine-generators of the station. were completed, the unit was returned to ser-The suits relate to the failures of the Salem l vice on October 22. Salem No. 2 was taken out No. I reactor trip breakers in February 1983 of service in October because of failure of its and the failure of the Salem No. 2 generator in generator which also was damaged by an elec-October 1984. trical fault. The generator is bemg replaced One suit asserts that Westinghouse failed to with the one from the Hope t, reek No. 2 unit warn the station co owners that the instruc-which the C,ompany cancelled m December tions it provided for the maintenance of the trip 1981. Salem No. 2 is scheduled to return to ser-breakers were incorrect. The suit also asserts vice early m the second quarter of 1985. that Westinghouse learned that the instructions Peach llottom No. 2 was taken out of service were incorrect after they were furnished but I in April for refueling and correction of cracking failed to warn the co-owners that they should in piping, a generic problem. The unit is ex-be changed. Following the trip breaker failures. pected to retum in the second quarter of 1985. the No. I unit was shut down for more than two l Peach llottom No. 3, the other nuclear umt at months. that station, was available 85.9 per cent of the The other suit asserts that Westinghouse im-l tune m 1981. properly repaired the Salem No. 2 generator in Despite the nuclear unit outages, the late 1983 and early 1984, and, as a result, the Company's cumulative share of the output of generator failed in October 1984 and must be t the Salem and Peach llottom stations by year replaced. l end had exceeded 6.4 billion kilowatthours. If 13

The suits. seek recovery of compensatory upon the sale of uranium to the Company or and other damages, the extent of which has not other buyers, or sale of the project properties i been determined. PSE&G and Philadelphia by Kerr4fcGee. Electric Company each own 42.59 per cent of Under the provisions of the Nuclear Waste Salem, and Atlantic City Electric Company and Policy Act of 1982 the Company, along with Delmarva Power & Light Company each hold other operators of nuclear plants, has signed 7.41 per cent. fuel disposal contracts with the U.S. Depart-ment of Energy These contracts require the New Uranium Enrichment Contract Federal government to ultimately take title and A new uranium enrichment services contract provide necessary services to transport, pack-was signed by the Company with the U.S. De. age and place the spent fuelin underground re-partment of Energy that consolidates a number positories. Utilities are required to pay a fee of of existing agreements and provides for greater one mill per kilowatthour of nuclear energy pro-purchasing flexibility under more favorable duced to fund the disposalprogram. terms, conditions and prices. The savings in en-richment costs through 1990 are estimated at Hope Creek Construction On approximately $65 million. Schedule at Year End The Company has sufficient uranium supplies Major construction work on the llope Creek under contract with domestic and Canadian Generating Station was winding down as the producers to meet all requirements for the year ended with the project more than 92 per Salem and Ifope Creek units through 1990 and cent complete. The main work remaining in-over 60 per cent of estimated requirements be-volves startup testing of systems and compo-tween 1990 and 1995. The balance will be met nents which is being subjected to the same by increasing contract quantities, spot pur-team effort that has proven so successful in chases and short-term agreements. construction. The uranium market returned to a depressed The switching station was energized inJanu-state in 1984 as demand for uranium nationwide ary, permitting startup testing to begin. Among declined. Prices dropped from highs of $24 a other significant events during the year were pound in mid-1983 to about $17 a pound, which the completion of integrated testing of the sta-prevailed during the year. Domestic producers tion control room, the completion of the cooling continued to reduce operations as additional low tower, and the turnover of the diesel genera-cost, high-grade Canadian uranium became tors and the main steam system for startup. available. The administration building also was completed flope Creek Availability of lower-cost uranium has re-and occupied. Construction suited in continued deferment of deliveries llope Creek continued to receive close Progress under a long term contract with Sequoyah scrutiny by a number of independent outside s co, Fuels Corporation, a wholly-owned subsidiary organizations. Audits were conducted by the ion of Kerr4fcGee Corporation. The mine supply-Nuclear Regulatory Commission; the Institute l1 ing the uranium, under the contract, is ex-of Nuclear Power Operations, the industry 92s compiete pected to remain in standby condition until monitoring group, and Theodore Barry & As-January 1986. Resumption of production after sociates, a nationally recognized engineering so that date is at the option of the Company and consulting firm. All of the audits indicated Under this contract $40.8 million had been that ilope Creek is a well-managed nuclear con-i advanced as of December 31,1984 to finance struction project that compares favorably with ,o mining and milling facilities. The Company ad. others presently under construction. vanced 70 per cent of the amount and the co-owners of the Salem and flope Creek stations improvement in Electric and advanced the balance. Of these advances, $14.5 Gas Distribution Systems 40 million, including $4.7 millio* of interest, has During the year, the Company's distribution been recovered through cre(its against the pur-system was expanded with the installation of six chase price of uranium concentrates delivered new 13,000-volt circuits. Increased load growth ,o by Kerr McGee. also has required the design and construction of in the Company's most recent rate case, the three high voltage substations which are sched-HPU required that the Kerr-McGee investment uled for completionin 1985 and 1986. be treated as a non-earning asset. Recoupment In addition, a five year, $5.5 million program of unrecovered advance payments will depend was initiated to replace outdated 4,000-volt 14

1 i "PSE&G acticely recruits icomen tbr non traditionaljobs and complies with all equal opportunity requirements. Numerous arcards hace been bestateed on the CompanyJbr its promotional l materials and activities lofitrther this effort. nerman L.inwantes Dmsion Une Engineer l l Wendy Schneck, Line-woman - Grade 2, i J g'( rebuilds a pole top to j. \\ prepare for conver-1 A sion from 4KV to l 4 13MV. Higher voltage vf s win provide greater I j (t.,. b. ../ (- /( load capacity in the f area and increase / Pg system efficiency. u 1 j i 1 r s ~

4. -

(' [, .. M-( y i mm i ~ I \\ \\ c l t j [. 9 ll w' L.1 g substations. Some will be replaced with nmdem customers and for conversions from oil heat to equipment while others will be eliminated by gas. This was the largest amount of gas pipe converting the distribution system to 13,000- ever installed in one year to meet new business volt operation. requirements. In cooperation with the Electric Power Re-search Institute (EPRI), the electric industry New Production Department research organization, the Company installed Training Center Opened two prototype computerized relay systems on a A training center for production department 500,000-volt transmission line at its Ilranch-employees was opened in 1981 in Savreville burg Switching Station. This was the first step which is centrally located in the Compan' 's ser-y in a demonstration project of an all-computer-vice territory A two story 22,000-square-foot ized transnussion substatmn control system. building on a 12-acre site was purchased for the When they become commercially available, facility where training will be given in the opera-such systems will increase reliability at lower tion of PSExG's electric and gas production installed cost, and will provide improved infor-plants. About 65 employees will receive various mation and control. levels of training on a ilaily basis. Training, in-More than 200 miles of mains and 225 miles cluding advanced instruction, will focus on efti-of service line.: were added to the underground cient, reliable and safe operations. The existing gas distribution system in 1981 to serve new building was converted to house administrative 15

l i offices and classrooms. Construction of a new i f ["~. l.~ ? ~ ? 27,500 square foot building is planned for vari- L %( l i j ous shops and laboratories in which manual and (, f d, { other training will be provided. ~ , ad '! i l \\ W. ) V*I v.; Alternate Energy Subsidiary Formed j j' . j !{), k .t ] I E 1 A new subsidiary Community Energy Alterna- ,l ( M tives, Inc., was fonned by the Company in 1981 ~ .{g* to participate m future cogeneration projects .p n ; subsidiary was established in response to the ip and other small power production plants. The [lIl "g'Qh 8 '- growing activity and interest in the alternate H] energy supply area. <s During the year, PSE&G received inquiries f l l regarding purchase power rates, interconnec-yy l j tion requirements, and other information from a J l number of potential cogenerators and small a y power producers. g. ? There are several resource recovery facili-i ' ~ ~- _ j/ - ties planned within PSE&G's service area which \\ t t will burn solid waste and at the same time l generate electric power. American REF-Fuel, a 1 joint venture of Air Products, Inc., and Brown- . ~- f ing Ferris Industries plans to build a 79,000-kilowatt facility in Newark. The Company is re-Gas Sendout increased in Year JoshWeston(right), a gotiating an agreement to purchase the net out-memberof the PSEaC i put of the plant over a 30-year period. The Company's total gas sendout in 1984 was soardof oirectorsand Pr 1d nta d Ch f The Great Falls on the Passaic River at 2.25 billion therms, 4.6 per cent higher than the 9, Off,,, Paterson will again be harnessed to produce 2.15 billion thenns sent out dunng 1983 and re-Automatic Data Pro-electricity The Company has signed a memo-flective of the 4.5 per cent increase in gas sales. cessine,inc.,in P cts randum of understanding to purchase power A new all-time record 24-hour sendout of '*M'i,,,,$*,,C he from the falls hydroelectric plant which will be 17,994,000 therms was set on January 21 NaturalGasPlant. rebuilt by Great Falls flydro Company. The 1985, when the average temperature was 4 de-GasTherm Sales plant will have a capacity of 11,000 kilowatts. grees E This was 11.1 per cent above the Ftirther down the river, American Ilydro previous record of 16,201,000 therms set on sw Power Corp. is planning to install a 2,300-kilo-Jnuary 17, 1982 when the average tempera- [g, ture was 4 degrees F below zero. watt hydroelectric facility at the Dundee Dam in 20 Clifton. PSE&G is discussing the purchase of The Company's daily gas capacity increased i the power produced by the plant. by 727,000 therms in 1984. This increase was An agreement also was signed to purchase due to the purchase of an additional 280,000 t -,g g;g g electricity which will be produced by a turbine thenns of pipehne gas from two new suppliers, [.i..L. 7e] 147,000 therms of finn storage service, and j I fueled with methane gas created by the decom-J. 00,000 therms of peaking supply under a two-l position of solid waste in a landfill at Deptford j ye r c ntract. T,he purchases from new supph- [ , jj j Township, N.J. The agreement is with Kins-l as represented the first time in 14 years that

g".

ley's Landill, Inc., which will build the plant to the Company has been able to merease its firm io extract methane from its property for fueling a 2,600 kilowatt generating unit. 5"M*nn c ntract supply of natural gas. Dus diversification of sources also provides the ,The Trenton District Energy L,ompany.,a Company with greater reliability of supply and 12,000-kilowatt cogenerating facility located in purchasing flexibility' .5 h

g. 7 7

7 2 downtown Trenton, delivered 74,036,000 kilo-watthours of electricity for which PSE&G paid ,I.he daily gas capacity was 19,856,000 $5.2 million in 1984. @enns as of December 31, it was composed of, m thenns: Natural gas, 15,309,000; liquefied petroleum gas, 1,981,000; oilgas, 1,186,000; ,,,y synthetic natural gas, 1,125,000; and refinery ,c,,, m gas, 255,000. 16

Supplies of Natural Gas improved Onshore operations were conducted in the Natural gas supplies in 1984 were obtained Gulf Coast regions of Texas, Louisiana, Missis-under long-term contracts with interstate pipe. sippi, Alabama and Florida. The result of on-lines, from wells owned by Energy Develop. shore dnihng was 15 successful wells and 14 ment Corporation, a Company subsidiary, and that were abandoned. At year end nine onshore through a number of short-term arrangements wells were still bemg drilled. with other gas companies and producers. Offshore activity included exploratory drilling The amount of natural gas purchased in 1984 on six untested lease blocks and development for distribution to customers totaled 2.15 bihion dnihng to delineate prior discoveries. During therms, compared with 2.03 billion therms in the year 13 wells were classified as successful 1983. and ten were abandoned. There were four off-shore wells still being drilled at year end. The average cost of natural gas was $3.69 per million Btu in 1984, compared with $3.74 Liquefied Natural Gas Facility per million Btu in 1983. This decrease was due Abandoned by Company to stabilized pipeline prices as a consequence of incr;ased competition in the market place and The Company in December ended its efforts to the Company's ability to make substantial spot obtain required Federal Energy Regulatory market purchases at prices below firm contract Commission (FERC) approval to operate two rates. liquefied natural gas (LNG) storage tanks and The Company supplements its natural gas related facilities on Staten Island, New York. supplies with gas purchased from the Exxon The facilities, ov.ned by Energy Ternunal Ser-Bayway Refinery and, in the coldest periods of vices Corporation (ETSC), a subsidiary were the winter season, with gas manufactured in abandoned. A related pipeline project of Energy Company-owned facilities. Pipeline Corporation, another subsidiary, to c nnect the terminal to New Jersey also was R: finery gas purchased in 1984 amounted to 87.0 million therms, compared to 104.8 million abandoned. The, action had been recommended therms in 1983. The cost of this gas averaged by the subsidianes because of mordinate delays $4.04 per million Btu compared to $4.18 per in the licensing process with the result that a million Btu in 1983. The cost reduction was a timely perational date could not be achieved. result of renegotiating the Exxon contract pric. PSE&G's involvement with the facilities ing provisions. began in the early 1970's in conjunction with a The total production of manufactured gases project to import LNG for which the tanks were amounted to 8.5 million therms in 1984 com-ongmally built. At that time, the Company and Gas Peak Sendout pared to 11.1 million therms in 1983. ther utilities were expenenemg serious diffi-and naily capacity amnic of Peak culties in obtainmg additional domestic supplies Exploration Subsidiary improved f natural gas to meet future customer require- [**""*"* I6 Eesults in 1984 ments. PSE&G committed itself to partial fi-2o n "i

t nancing of the facility in 1973 after all necessary

!i The net income of the Company's exploration approvals had been obtained from local, state, L ', h :;l l subsidiary, Energy Development Corporation and federal agencies, including authorization to (EDC), rebounded from 1983 s depressed level import the LNG by the Federal Power Com-is result of increased natural gas sales and mission (FPC), predecessor of FERC. Ilow. 4 ? as a,ficantly higher oil production. sigm ever, later in 1973, despite the fact that 0 /b

I i}I Revenues from the sales of natural gas and construction was well advanced, the FPC re-si l

l oil totaled $78.8 million, an increase of 29 per versed an earlier decision in which it declined to S li cent from 1983. Net income rose 19.2 per cent assert jurisdiction over construction and opera-l

l i[ li to $10.3 million.

tion of the facility and required that such ap-r l f During the year EDC drilled a total of 52 proval be obtained. The FPC decision was 8 i wells, an increase of 58 per cent from 1983. Of ultimately sustained by the courts over the h, [ 5 3 y i' the total, 29 were onshore and 23 offshore. At objections of ETSC. p p l-l !' l 2 year end 13 wells were still being drilled. ci t a o "M#..U. MM ~ swfa ed

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% -* 19. l Since 1979, ETSC had been seeking author-processors for meter reading, additional office i ity to store domestic natural gas in the tanks for automation applications and the establishment use by PSE&G and other utilities to meet cus-of a state-of-the-art training center. In Novem-tomer needs during periods of peak demand in ber, the Company sponsored a utility confer-winter. Over 100 similar LNG storage facilities ence to enhance the use of microprocessor are operating safely in the nation, in urban and meter reading systems. suburban areas. The Company had continued to " CAMS Towne," a customer and marketing seek approval of the project because it repre-services training facility, was opened in 1984. sented the most cost-effective means of secur-The facility employs the latest in technology for ing gas needed during periods of high demand. training meter readers and other personnel. A PSE&G's investment in the facilities was sophisticated office automation system for com-approximately $69.6 million. As a result of the munication and controlling management infor-abandonment, the investment, net of related mation at all field and general office locations tax savings, is expected to be amortized over a also was instituted. i I seven year period, which began in 1984. The The " Challenge of Caring" program begun in action resulted in a reduction of $6 million in 1983 continued to accentuate the importance of 1984 net income. good customer relations for employees who are r in contact with customers. Three Consumer l Improvement Realized in Customer Advisory Panels, representing a cross-section I cnd Marketing ServlCes of customer and consumer groups, completed i As a result of the completion of the reorganiza. their second year of activity. Consumer com-tion of customer and marketing services over mcnts and advice have enabled the Company to the three prior years, improvements in effi. open new lines of communication with custom-ciency and quality of service to customers were ers and toimprove service. realized in 1984. An additional workload created Additional emphasis was placed in 1984 on a by the expanding economy was managed by bill collection improvement program. For the streamlining procedures. second consecutive year, timeliness of bill Continued emphasis on computerized opera. payments improved by nearly 10 per cent com-tions generated additional cost savings. Greater pared with the prior year. Efforts to prevent operating efficiencies and utilization of man. thefts of energy, employing computerized case power were accomplished by the use of micro. tracking and billing systems, were intensified, 18

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~ wSw + +,, .numid_,_ .h' g ; ,3 resulting in the completion of 1,414 cases pro-conservation, consumer advisers continued i ducing billings of $1,170,000. their efforts at a variety of forums. These in-j An aggressive marketing program was cluded 44 radio and television programs com-i carried out during the year to encourage con-pared with 24 in 1983. In all, a total of 2,587 i version from oil to gas heat. The program programs were conducted, reaching an audi-emphasized gas as premium heating fuel as well ence of 160,000 consumers. as its price advantage over oil. There were At the end of 1984, the Company had 11,160 residential conversions reported during 1,734,157 electric customers and 1,343,493 gas Raidential Energy the year compared with 13,189 in 1983. New customers. Gnmadon Audits residential gas heating installations totaled 12,190 compared with 7,038 in 1981. Conservation Program Wins Awards Homes Audited sized industrial and commercial customers ut,n The Company's energy conservation program , A campaign directed at small-to-mediur a0.000 won three major awards, including a Presiden-i- lizing gas for other than heating, coupled with tial citation, in 1984. The honors were from the r on-going activities, resulted in 1,731 conver-U.S. Department of Ilousing and Urban Devel-l sions to gas. opment (11UD), the Association of Energy 22.sm Electric heating was promoted for new con-Engineers, and the NewJersey Community Ac. struction. A total of 747 electric heating tion Program Executive Directors Association. ti i installations were made in the industrial and The Company received a Presidential Recogni-commercial sector. In the residential market, tion Award sponsored by IIUD which honors

,{

heat pumps were promoted and 1,769 installa-individuals, groups and companies for exhibiting 33,00o tions were made. Marketing efforts also re-a " spirit of voluntarism"in their conununities. sulted in the installation of 7,373 efficient high As the Company expanded its conservation i pressure sodium and vapor lights for dusk to-efforts during 1984, it was evident that the i dawnlighting. " Seal-Up and Save" program had caught on t I : '5 An estimated $44 million annually in addi with customers, and that more and more people l i tional electric and gas revenues will result from were becoming conscious of the value of energy installations related to these marketing savings. In all facets of the program, activity activities. increased markedly over that achieved during Addressing a wide range of subjects on home 1983, the first full year that the Conservation, a u4 energy management, appliance purchases and Cogeneration and Load Management Plan, as l')

ll 1 approved by the New J.rsey Board of Public pys Utilities, was in effect. Ifighlights of the pro-y % f. gramin 1984 included: e,bC, o Home Energy Audits increased to 27,250 E* in 1984 from 21,000 in 1983. I o In 1984, conservation loans totaling $3.8 million were granted to 1,400 customers, nearly three times the amounts requested in 1983. O The Customer Conservation Seal-Up i Program was utilized by more than 17,000 i customers. o In the low income program 6,000 f weatherization kits were provided, free weatherization installations were made for a 13,000 customers, and an additional Wk m 3 1 i $250,000 was given to community action my agencies in addition to the $250,000 granted ---= mWE in 1983 for low-income conservation efforts. L The Energy Conservation Center handled 130,000 telephone inquiries and 278,000 ~ i pieces of mailin 1984, up 217 per cent and 174 per cent, respectively over 1983. O The " Conservation on Wheels" mobile s I van traveled throughout PSE&G's territory l and was visited by 78,800 persons as com-The BPU approved the changes on January a new commercial pared to 34,000 in 1983. 17, 1985.

• ",$',$l",'ha[""'

o In the load management phase of the plan, b ninitiated. Tech-the promotion and customer acceptance of Solution to Energy Problems nicaicompetence and high efficiency heat pumps and air condition-SoughtThrough Research 7lh1sc ,,,ch ers continued unabated, spurred on by the Total research and development expenditures heid antra. red scanners Company's rebate program. Over 35,000 in 1984 were $20.5 million. Partially offsetting

• ,",d",'"d,l,*,Pu s,

rebates totahng approximately $4.3 milhon these costs were $4.3 million obtained from accurat. intormation were made to customers in 1984 compared sales and reimbursements. Of the balance, $5.0 and recommendations. to $1.7 millionin 1983. million were spent for internally-conducted ac-The Company in September requested BPU tivities, and $11.2 million went to support re-l approval to modify and expand the plan during search by industry-sponsored organizations. 1985. The rebate program would be enlarged t The Company's research activities are coor-include rebates on the purchase and installation dinated by the PSE&G Research Corporation of residential setback clock thermostats; re-and are directed toward solving present and bates to existing residential gas customers who future energy problems. During 1984 efforts i change the source of their domestic hot water were concentrated in these major areas: from a heating boiler to a high efficiency auto-m Support of industry research organiza-l matic gas water heater; rebates to any residen-tions including the Electric Power Research l tial customer who installs a high efficiency gas Institute and the Gas Research Institute. heating system, and rebates for the m, stallation a Support of research programs and joint of solar water heatmg umts. research with academic institutions, includ-In addition, the Company would provide ing Stevens Institute of Technology, Rut-workshops for low income customers to in-gers University Princeton University New crease their knowledge of energy conservation; Jersey Institute of Technology, Trenton and would co-fund with New Jersey's seven State College and Massachusetts Institute other utilities an independent study for conduct-ofTechnology ing cost-benefit analyses of energy conserva-a increased emphasis on transferring infor-tion programs and research by Princeton mation on technical advances to PSE&G University on the engineering and physical as-operating departments. pects of conservation measures. m Direct contracted research programs. 20

5 . Testing of 40-Kilowatt Fuel Cells Set In 1984 research and development activities I Dunng 1985, PSE&G will test 'two 40-kilowatt included initiation of a resiew of potential robot fu:1 cell powerplants, known as the GAS applications. A Company-wide survey was con-POWERCEL, a trademark of the American Gas ducted to identify possible uses of robots within Association. The fuel cells use natural gas as PSE&G. Some of the most useful applications fuel, and produce electncity through an electro. may be in nuclear power plants and in transmis-chemical process. The testing is part of a na. sion and distribution operations. PSE&G will continue robotics research utilizing the talents tionwide program sponsored by the Gas of an academic-industrial Robotics Consortium Rasearch Institute and the U.S. Department of established at the New Jersey Institute of Energy. Fuel cells manufactured by United Technologies Corporation will be tested at two Technology - separate sites. BatteryTesung Condnueci One of the fuel cells was installed late in 1984 During the Year l at a building products firm in Avenel, N.J. In addition to PSE&G, three other NewJersey gas Testing continued during 1984 at the Battery utilities are participating in the testing. The sec. Energy Storage Test (BEST) Facility. ond fuel cell will be installed and tested in 1985 Tests were successfully completed on a 1 by PSE&G alone at Princeton University. developmental version of a zinc-chloride bat-The field tests will provide critical data tery The 500-kilowatthour battery is the fore-needed to evaluate fuel cell technology as an runner of a much larger commercial battery on-site energy option. The electricity produced storage system of Energy Development As- - by the fuel cells will be fed into the PSE&G elec-sociates, a Gulf + Western company called l tric grid. Fuel cells also produce heat which can FLEXPOWER. The system wiii be built in the be used to heat water or to provide other on-2,000 to 6,000-kilowatthour size range. site thermal needs of customers. The units Testing of an advanced 500-kilowatthour 4 offer an attractive energy option for the future. lead-acid battery also continued in 1984. Tests 4 i on this battery system will conclude in 1985, l Cogeneration Unit InstaIIed and the complete battery energy system will become available to commercial users. The A 60-kilowatt cogeneration unit powered by a I gas-fired internal combustion engine was in. successful development of these advanced bat-stalled in 1984 at the Company's Spring 6 eld Gas teries would make possible the storage of less Meter Shop for a five-year test program. This expensive off-peak nuclear or coal generated l unit will produce useable heat for the Meter power. This stored electricity could then be Shop while generating e!ectricity. The elec. used during periods of high demand rather than i tricity will be used either on-site or fed into the generate that peak power using more expen-powergrid. sive od or gas fired plants. The testing will provide information on the Fuels Research Laboratory Set Up l technical and economic characteristics of modu-lar cogeneration systems. The data obtained, A new Fuels Research Laboratory which ini-combined with the results of the 40-kilowatt tially will specialize in coal analysis and fuel cell test, will provide additional information characterization, was set up in'1984 at the l on smallscale cogeneration. Harrison Gas Plant. Coal will be examined in great detail by utilizing advanced physical and ( l PotentialRobot Applications chemicaltechniques. Unaler Review Comparative data will be established for vari-l Robotics is a promising new industrial electri. ous types of power plant coal The data will help in the selection of coal and assist in determining fication option which is improving the productiv. ity of new and existing manufacturing facilities. the cause of boiler problems in fossil-fueled Robot technology could bene 6t electric utilities plants. through increased electricity sales and oppor. New sources of coal supply and preparation tunities for industrial and commercial load man-techniques will be investigated. Company costs agement. Utilities also are using robot tech-could be lowered if data gathered shows that nology themselves. more economicalcoalcan be used. l 21

"I'SE&G IS clit tiltilrjunt til flir tinnnlitility, Iriy filli>lirtl l}l illlHirnillS Cll'Ir tilltl Clltil'lltll1lC Ctll(SCS, (filtl lS n t'linlt1l t/S tl n'SlHHISll1lC nH'lHinllC (lllX11. ' John A.Sahlman Manager -- Commun.ty AHars 7]W The 1,000 seat Robert 1 K.

1. Smith amphitheater at Corporate Head-j quarters in Newark is

}y scene of fire safety demonstration f or school c hildren. Y PSEaG was com-l mended in a procla-mation by the mayor of Newark which reads: " Presented to l %x PSEaG for your com-munity participation j in an effort to help g j save young lives." i W _J ~ i j .h < %r g. - %s-r, l tN F y M 3w ,N \\k h* ry,, M., j e l j 7-i Laboratory Monitors Quality of internal needs, the 1.aboratory markets techni-Company Operations cal 3ervices outside the Company I'SEAG's Research and Testing Laboratorv dunng the year augmented and refined its test. PSEaG Working With Higher l ing and analysis programs. The I.aboratory a Education in New Jersey technical services group within PSE AG Re-For many years. l'SEAG has worked actively search Corporation. applies the latest method 3 with academic institutions. The work ranges and technology to the task of monitoring and from support of professional talents on staff or diagnosing tlle Qud!!!y of e({llipnlent and ina-sabbatical leave to direCl researCh Contracts terial used by the Company in its operations. and support of.icademic centers of excellence. j The first priority in these efforts is to evaluate The Company has been also involved in cooper-and improve the efficiency and rehability of sc-ative research programs with engineering col-j vices provided to customers. Changes in regu-leges in New Jersey and has broadened its l lations by government agencies. particularly involvement by instituting a new working rela-the Environmental Protection Agency and the tionship called the " Student Project Team Con-1 Niiclear Regulatory Commission, have also in-cept" The program builds upon exist ng utility-i crea3ed testing and analy3is need3 throughout academic research contacts. Senior undergrad-the Company. In addition to meeting these uate or graduate students perform research 1 .u

l work for PSE&G which satisfy the students' ) ( T j senior project credit requirements. In addition, 9 M the Company co-sponsors with numerous aca-q demic institutions, various energy programs. j Involvement in community [ 7 Activities Emphasized ( l As a Company whose operations are affected by the understanding of the communities it g. j i serves, PSE&G historically has been involved j l in the activities of numerous educational, civic and culturalorganizations. gl [ Wrious departments of the Company have initiated and participated in many programs de-signed to serve a broad range of community needs. Company personnel in 1984 filled g 4 numerous voluntary positions in community .i V l organizations. ~" i During the year community affairs represen-tatives made about 2,000 presentations on a wide variety of energy-related topics. j More than 325 talks were given before ap-p, g proximately 13,640 persons by the Company's f~ f f. l Speakers Bureau. The Second Sun, the energy j information center at the Salem Generating Sta-Keep ng pace with the changing needs of em. sob ciavagna,a pro-j tion, was visited by over 21,350 persons. Ap; ployees, while still containing costs, the g '" 8 * " '" he 1n n tion Sys-l proximately 2,260 persons toured PSE&G Company made several modifications to benefit tem. oepartment, generating stations. plans in 1984. These included the expansion of making atelevision Information was provided on a regular basis health :mi.itenance organizations OIMC's), and fl,*",*he disab[eI.hir-l about Company operations and pohcies to the the provision for flexible medical plans for cer-clavanilaispresident media, the financial conununity, and other inter-tain employees not previously covered. In addi. of DIAL,an organi-ested groups. tion, a payroll-based employee stock ownership ['jo"d*d3ll,Y,il,,, n, plan was initiated. for the disabled. Dedication of Employees In effort to promote a safer work environ-Continued in 1984 ment, a Company-wide program was imple-In 1984, as in the past, PSE&G's most impor-mented to combat employee drug and alcohol tant resource was its employees. Throughout abuse on and off the job. the year their loyalty and dedication made it Efforts to attract well-qualified individuals to possible for the Company to continue to provide meet ever-changing technical and professional dependable and reliable service to customers. needs included recruiting at 35 eastern collegi-l For the first time in the bargaining relation-ate institutions. ship new three-year firm agreements were The employee suggestion plan continued to reached in April with six unions representing produce new ideas, saving money and improv-approximately 7,900 employees. The agree-ing operations. During 1984 the Company bene-ments, also the first concluded before prior fitted by more than $500,000 from suggestions contracts expired, span the period of the sched-submitted by employees. uled completion and startup of the llope Creek Employee services, as well as other adminis-Generating Station. Provided for are wage in creases of 5.32 per cent in the first year, 5.0a; trative and personnel-related support to the Nuclear Department, were expanded at Salem. per cent,m the second, and 6 per cent m the New facilities included a modern, fully equipped third. medical unit, and an employment and placement The cost of improvements in benefits will office, average an additional 0.66 per cent each year. The Company modified its employee pay Several sigmficant contract modifications were practices to make them reflect more directly achieved designed to improve productivity and ndividual job performance. New elements were redute costs. 23

k. 1 3 4: included in pre-employment tests for certain Effective August 1,1984, Harold W. Sonn, manual positions to determine whether job ' President and Chief Executive Officer, was also 2 applicants possess necessary physical abilities. elected Chairman of the Board; William E. i j Affirmative Action Programs in the employ-Scott, Executive Vice President - Finance, i ment of women and minorities continued to be was elected Senior Executive Vice President;

emphasized. At the end of 1984 there were Everett L. Morris, Senior Vice President -

group employees. ' Customer Operations, was elected Executive 2,074 female employees and 1,951 minority Vice President - Finance; Frederick W. 4 i Company employees at the end of 1984 to. Schneider, Senior Vice President - Corporate i taled 13,706 compared with 13,283 at the close Planmng, was elected Executive Vice President i of 1983. Wages and salaries for the year were - Operations and Fredrick R. DeSanti, Vice more than $460 million, including $14.1 million President - Rates and Load Management, was j. of disability benefits and workers elected Senior Vice President - Customer compensation. Operations.- 1 Effective the same date Richard M. Eckert, Changesin Organization Senior Vice President - Energy Supply and j In accordance with the Company's retirement Engineering, was redesignated Senior Vice President-Nuclearand Engmeerm, g.

policy for Directors, Margery Somers Foster retired as a Director effective April 17, 1984.

Carroll D. James, Vice President - Admin-Josh S. Weston was elected a Director for the istrative Planning. retired October 19, 1984, first time at the Company's Annual Meeting aftermore than 44 years of service. held on April 17,1984. Effective December 17, 1984, Donald A. The Board of Directors elected Robert S. Anderson, Vice President - Computer Sys-i I Smith a Vice President, effective April 17, tems and Services, was redesignated Vice j

19g4, President-Information Systems.

t

)

i !; Fin:ncial Statement Responsibility employees. In addition, management has communicated to all l employees its Policies on Business Conduct, Company { The management of Public Service Electric and Gas Assets andIntemalControl. Company is responsible for the preparation, integrity and objectivity of the financial statements of the Company The The Internal Auditing Department of the Company conducts i financial statements are prepared in accordance with gener. audits and appraisals of accounting and other operations and i ally accepted accounting principles applied on a consistent evaluates the effectiveness of cost and other controls. 1 basis and reflect estimates based upon the judgement of man-l agement where appropriate. Management believes that they The firm of Deloitte Haskins & Sells, independent certified j present fairly and consistently the Company's financial posi-public accountants, is engaged to examine the Company's

tion and results of operations. Information in other parts of financial statements and issue an opinion thereon. Their j

this Annual Report is consistent with these financial exammation is conducted in accordance with generally ac-statements.

cepted auditing standards and includes a resiew of internal I accounting controls and tests of transactions. 1 The Company maintains a system of internal accounting con-trols to provide reasonable assurance that assets are safe-The Board of Directors carries out its responsibility of finan-i guarded and that transactions are executed in accordance cial overview through the Audit Committee, currently con- ! with management's authorization and recorded properly The sisting of five directors who are not employees of the system is designed to permit preparation of financial state-Company The Audit Committee meets periodically with man- ! ments in accordance with generally accepted accounting agement as well as with representatives of the internal audi-principles. The concept of reasonable assurance recognizes tors and independent certified public accountants and reviews - l that the costs of a system of internal controls should not ex-the work of each to ensure that their respective responsibil-i ceed the related benefits. ities are being carried out, and to discuss related matters. Both audit groups have full and free access to the Audit - f - Management believes the effectiveness of this system is en-Committee. l hanced by a program of continuous and selective training of

24 l.-

.. _.~ _ _.-.,.-_ _ _,

Statements of income For the Years Ended December 31, 1981 1983 1982 Operating Revenues (thousands ot oonars) Electric $2,816,211 $2,570,457 $2,543,191 Gas 1,379,883 1,392,475 1,330,785 TotalOperating Revenues 1,196,121 3,962,932 3,873,976 Operating Expenses Operation Fuel for Electric Generation and Interchanged Power - net 872,805 868,977 959,382 Gas Purchased and Materials for Gas Produced 822,583 858,018 821,479 Other 527,371 503,568 452,115 Maintenance 269,971 238,766 220,456 Depreciation and Amortization of Utility Plant 211,188 201,787 192,860 Amortization of Property Losses (note 4) 58,975 49,040 43,345 Taxes Federalincome Taxes (note 1) 255,301 191,033 176,639 NewJersey Gross Receipts Taxes 529,651 513,760 514,266 Other 50,132 44,033 38,975 TotalOperating Expenses 3,597,986 3,468,982 3,419,517 Operating li come 598.138 493,950 454,459 Other Ir.come Allowance for l'unds Used During Construction - Equity 101,803 85,591 58,367 Equity in Earnings of Subsidiaries (note 2) 9,098 7,061 10,460 Miscellaneous-net 3,768 5,544 7,118 TotalOtherIncome 117,669 98,196 75,945 Income Hefore Interest Charges 715,807 592,146 530,404 Interest Charges (note 8) Long-Term Debt 256,689 228,189 198,413 Short-Term Debt 5,128 3,480 13,978 Other 17,650 13,699 8,246 TotalInterest Charges 279,767 245,368 220,637 Allowance for Funds Used During Construction - Debt (53,989) (43,001) (33,060) Net Interest Charges 225,778 202,367 187,577 Net Income 190,029 389,779 342,827 Dividends on Cumulative Preferred Stock and $1.40 Dividend Preference Common Stock 60,221 58,234 53,865 Earnings Available for Common Stock $ 129,808 $ 331,545 $ 288,962 i Shares of Common Stock Outstanding End of Year 112,563,06S 102,857,989 94,844,5 % Average for Year 108,91:1,276 97,467,431 89,233,028 Earnings per Average share of Common Stock $ 3.95 $ 3.40 $ 3.24 Dividends paid per share of Common Stock $ 2.70 $ 2.62 $ 2.53 See Summary of Sigm6 cant Accounting Policies and Notes to Financial Statements. l 25

llanc3 Sheeta Assets December 31, 19&t 1983 Utility Plant-Originalcost ahousands of Donars) Electric Plant $1,991,717 $4,849,599 Gas Plant 1,222,46S 1,152,159 ) Common Plant (note 8) 250,372 222,402 Nuc! car Fuel 105.110 83,590 Utility Plantin Senice 6,572,697 6,307,750 Less Accumulated Depreciation and Amortization (note 8) 2,320,110 2,214,135 Net Utility Plantin Senice -1,252,557 4,093,615 Construction Workin Progress 3,255,911 2,689,082 PlantIIeld for Future Use 11,818 21,119 Net Utility Plant 7,550,289 6,803,816 Other Property and Investments Nonutility Property, net of accumulated depreciation-1981, $831; 1983, $2,711 12,859 10,574 investments in and Advances to Subsidiaries (note 2) 231,799 304,075 Total Other Property and Investments 217,688 314,649 Current Assets Cash (note 3) 1,702 7,277 Working Funds 27,181 21,668 Pollution ControlEscrow Funds 127,103 13,574 Accounts Receivable, net of allowance for doubtful accounts - 1984, $16,470; 1983, $15,578 361,850 368,232 Unbilled Revenues 165,529 200,399 Fuel, at average cost 276,206 221,762 Materials and Supplies, at average cost 57,611 55,313 Prepayments 11,415 9,529 TotalCurrent Assets 1,031,927 897,754 Deferred Debits (note 4) Property Losses Atlantic Project 230,292 245,352 Hope Creek Unit 2 197,206 229,468 1.NG Project 59,400 Other 5,605 3,027 Underrecovered Electric Energy and Gas Fuel Costs -net 307,461 96,125 l Unrecovered Nuclear Fuel Disposal Costs 3,656 13,424 Unamortized Debt Expense 21,120 22,731 TotalDeferred Debits 827,7to 610,127 Total $9,660,614 $8,626,346 See Summary of Significant Accounting Policies and Notes to Financial Statements. 26

Capitalization and Liabilities December 31. 1988 1983 Capitalization (see statements, pages 29-31) (Thousands of Donars) Common Equity Common Stock $2,005,923 $1,792,340 Premium on CapitalStock 557 557 Paid-In Capital 26,185 26,185 Retained Earmngs 1,098,219 963,617 TotalCommon Equity 3,130,881 2,782,699 Preferred Stock Without Mandatory Redemption 551,991 554,994 Preferred Stock With Mandatory Redemption 137,750 139,500 Long-Term Debt 3,103,313 2,684,899 Other Long-Term Obligations (note 8) 122,917 119,815 TotalCapitalization 7,019,918 6,281,907 Current Liabilities Preferred Stock to be redeemed within one year 1,750 1,750 Long-Term Debt and Other Obligations due within one year 3,0St 53,969 CommercialPaper(note 5) 185,000 153,000 Accounts Payabie 233,829 245,528 NewJersey Gross Receipts Taxes Accrued 517,311 510,590 - Deferred Income Taxes on Unbilled Revenues (note 1) 76,143 92,183 OtherTaxes Accrued 16,303 21,277 Interest Accrued 86,887 64,494 Gas Purchases Accrued 108,237 100,397 Other 65,007 56,631 TotalCurrent Liabilities 1,323,581 1,299,819 Deferred Credits Accumulated Deferred Income Taxes (note 1) Depreciation and Amortization 507,605 438,480 Property Losses - Atlantic Project 96,821 103,157 Hope Creek Unit 2 81,187 94,644 LNG Project 23,885 Deferred Electric Energy and Gas Fuel Costs - net 111,178 44,247 Other (14,775) (744) l Accumulated Deferred Investment Tax Credits (note 1) 417,978 335,196 Other 32, % 6 29,640 TotalDeferred Credits 1,287,115 1,044,620 i Commitments and Contingent Liabilities (note 7) Total $9,660,611 $8,626,346 l I 27

Statements of Changes in Financial Position For the Years Ended December 31, 1951 1983 1982 Funds Provided crhousands of Dollars) J Net Income $ 190,029 $ 389,779 $ 342,827 Add (Deduct) Items not affecting Working Capital Depreciation and Amortization 299,865 294,628 305,641 Recovery (Deferral) of Electric Energy and Gas Fuel Costs - net (211,336) (162,797) 164,818 Provision for Deferred Income Taxes - net (note 1) Depreciation and Amortization 69,12a e 9,935 45,950 Property Losses 1,392 (19,915) (24,507) Deferred Electric Energy and Gas Fuel Costs 96,931 76,842 (78,214) Other (l1,031) 6,107 (18,428) Investment Tax Credits-net 91,157 33,718 205,261 Allowance for Funds Used During Construction (AFDC) (158,792) (128,592) (91,427) Equityin Earmngs of Subsidiaries (9,098) (7,061) (10,400) Other 5,721 3,583 (963) Total Funds from Operations 667,266 566,227 840,498 Net funds from financings Long-Term Debt 421,610 161,081 221,022 Preferred Stock 29,739 34,616 Common Stock 213,192 181,276 186,883 Increase in Obligations Under Capital Leases (note 8) 5,910 2.924 Total Funds from Financings 611,012 375,020 442,551 TotalFunds Provided $1.308,278 $ 941,247 $1,283,049 Funds Applied Additions to Utility Plant, excluding AFDC $ 808,573 $ 765,217 $ 721,948 Cash Dividends 355,276 313,989 281,459 Investments in and Advances to Subsidiaries - net (9,061) 9,080 16,464 Reductions of Long-Term Debt and Other Obligations 7,051 58,002 52,650 LNG Project Abandonment (note 4) Reduction in Investments and Advances (69,313) Deferralof Loss 69,313 Miscellaneous 33,025 10,278 11,602 TotalFunds Applied 1,191,867 1,156,566 1,084,123 Changes in Working Capital-Increase (Decrease) Short-Term Debt (32,000) (153,000) 207,551 Long-Term Debt and Other Obligations due within one year 50,885 (3,630) (46,788) Cash (2,575) (2,704) 4,386 Working Funds 5,813 (2,640) 13,643 Pollution Control Escrow Funds 113,529 9,466 4,108 Temporary CashInvestments (49,900) 49,900 Accounts Receivable (3,382) (8,357) (1,335) Unbilled Revenues (31,870) 18,112 5,339 Fuel 51,111 (40,155) 43,694 Materials and Supplies 2,298 10,654 4,588 Accounts Payable 11,699 18,385 (1,179) NewJersey Gross Receipts Taxes Accrued (36,751) 3,788 (38,522) DeferredIncome Taxes 16,010 (8,331) (2,456) OtherTaxes Accrued 4,971 (337) (4,786) Interest Accrued (22,393) (6,569) (10,175) Gas Purchases Accrued (7,810) 7,186 (23,942) Other (6.160) (7,287) (5,100) Net Increase (Decrease) in Working Capital 113,111 (215.319) 198,926 Total Funds Applied and Changes in Working Capital $1.308,278 $ 941,247 $1,283,G19 See Summary of Significant Accounting Policies and Notes to Financial Statements. 28 l

Etatzm:nt3cf R trin d Errning2 For the Years Ended December 31, 19si 1983 1982 (Thousands of Dollars) Halance January 1 $ 963,617 $ 888,262 $ 827,497 Add Net Income 190,029 389,779 342,827 Total 1,153,616 1,278,041 1,170,324 Deduct Cash Disidends Preferred Stock, at required rates 58,317 56,353 51,984 $1.40 Dividend Preference Common Stock 1,881 1,881 1,881 l l Common Stock

• 293,078 255,755 227,594 TotalCash Dividends 335,276 313,989 281,459 CapitalStock Expenses 151 435 603 TotalDeductions 353,127 314,424 282,062 Halance December 31

$1,098,219 $ 963,617 $ 888,262 ' Restrictions on the payment of dividends are contained in the Charter, certain of the indentures supplemental to the Company's Mortgage, and certain debenture bond indentures. Ilowever, none of these restrictions presently limits the payment of dividends out of current earnings. The amount of retained earnings free of these restrictions at December 31,1961 was $1,088,219,000. See Summary of Significant Accounting Policies and Notes to Financial Statements. l l l l Independent Accountants' Opinion l l Deloitte l Haskins+ Sells l l Certified Public Accountants l Gateway One Newark, NewJersey 07102 To the Stockholders and Board of Directors of l Public Sen ice Electric and Gas Company: We have examined the balance sheets and statements In our opinion, such financial statements present fairly of capital stock and long-term debt of Public Senice the financial position of Public Senice Electric and Gas Electric and Gas Company as of December 31,1984 and Company as of December 31,1984 and 1983 and the 1983 and the related statements of income, retained results ofits operations and the changes in its financial earnings, and changes in financial position for each of position for each of the three years in the period ended the three years in the period ended December 31, December 31,1984, in conformity with generally 1984. Our exammations were made in accordance with accepted accounting principles applied on a consistent generally accepted auditing standards and, accordingly basis. included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances. i l February 14,1985 29

Statementscf C pitalEtock Current Certam Outstanding Redemption Refundmgs Shares Price Restricted December 31, (note A) Per Share Pnor to 19St 1983

• • "d*

Nonparticipating Cumulative Preferred Stock (note B) With Mandatory Redemption (note C) $100 par value-Series 12.25 % 245,000 $112.00 2/1/85 $ 21,500 $ 26,250 13.44 % 500,000 113.44 4/1/86 50,000 50,000 12.80% (350,000 shares issued in 1982) 350,000 112.80 10/1/87 35,000 35,000 11.62% (300,000 shares issued in 1983) 300,000 111.62 9/1/88 30,000 30,000 Less amount to be redeemed within one year 1,750 1,750 Preferred Stock with Mandatory Redemption $137,750 $139,500 Without Mandatory Redemption (note D) $25 par value-Series 9.75 % 1,600,000 $ 26.50 $ 40,000 $ 40,000 8.70% 2,000,000 26.50 50,000 50,000 $100 par value-Series 4.08 % 250,000 103.00 25,000 25,000 4.18 % 249,942 103.00 21,991 24,994 4.30% 250,000 102.75 25,000 25,000 5.05% 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 % 350,000 104.50 35,000 35,000 7.40% 500,000 101.00 50,000 50,000 7.52 % 500,000 103.00 50,000 50,000 8.08 % 150,000 103.00 15,000 15,000 7.80 % 750,000 103.00 75,000 75,000 7.70 % 600,000 104.64 60,000 60,000 8.16 % 300,000 106.86 30,000 30,000 Preferred Stock without Mandatory Redemption (no changesin 1983 and 1982) $551,991 $554,994 Dividend Preference Common Stock and Common Stock $1.40 Dividend Preference Common Stock (no par)- 1,343,999 shares authorized, issued and outstanding; current redemption price $35.00 per share (note E) Common Stock (no par)- authorized 150,000,000 shares (note F); issued and outstanding $2,005,923 $1,792,340 as of December 31,1984,112,563,068 shares and as of December 31,1983,102,857,989 shares (9,705,079 shares issued for $213,583,000 in 1984; 8,013,393 shares issued for $181,461,000 in 1983; and 8,755,105 shares issued for $187,140,000 in 1982) OnJanuary 24,1985, 7,000,000 shares were sold for $177,800,000. l Notes: Minimum Effective Aggregate Numberof A. In addition, there are 1.455,058 shares of $100 par value and Shares Date of Shares Purchased and l 6,400,000 shares of $25 par value Cumulative Preferred Stock which are Redeemable Mandatory Redeemed Duringthe Years authorized and unissued, and which upon issuance may or may not pro-Series Annually Redemption 1984 1983 1982 vide for mandatory sinking fund redemption. M 00 m M 00 1 806 W B. As of December 31,1984 the annual dividend requirement and 13.44 % 25,000 3/31/87 embedded dividend costs were $17,687,000 and 12.87%, respectively. 12.80 % 17,500 9/30,88 for Preferred Stock with mandatory redemption and $40,629,00J and 11.62 % 15,000 9/30/89 7.38%, respectively for Preferred Stock without mandatory redemption. p, g g If dividends upon any shares of such stock are in arrears in an amount tion solely at the option of the Company upon payment of the applicable equal to the annual dividend thereon, voting rights for the election of a redemption price plus accumulated and unpaid dividends to the date fixed majority of the Board of Directors become operative and continue until all for redemption. accumulated and unpaid dividends thereon have been paid, whereupon all such voting nghts cease, subject to being again revived from time t E. Each share of $1.40 Disidend Preference Common Stock is entitled dh h C. The Company is required to purchase or redeem a specified minimum ha sin g in 1 o 8 number of shares of Cumulative Preferred Stock with mandatory re-demption annually commencing on the effective dates shown below. Such F. Includes 7,154,990 shares of Common Stock reserved for possible redemptions are cumulative. The Company may annually redeem, at its issuance under the Company s Dividend Reinvestment and Stock Pur-option, an aggregate of up to twice the number of shares shown for each chase Plan, Tax Reduction Act Employee Stock Ownership Plan, such series. All such redemptions are at a redemption price of $100 per Employee Stock Purchase Plan, Thrift and Tax-Deferred Savings Plan share. A redemption of shares of any series also requires payment of all and Payroll-Based Employee Stock Ownership Plan. accumulated and unpaid dividends to the date fixed for redemption. See Summary of Significant Accounting Policies and Notes to Financial Statements. 30

Etatementscf Long T;rm D bt December 31, 1951 1983 1981 1983 First and Refunding Mortgnge llonds (note A) Debenture Honds unsecured Series Maturity Date Maturity Date 3%% May1,1984 $ 50,000 5%% June 1,1991 $ 36,778 $ 37,907 4%% November 1,1986 50,000 50,000 7%% December 1,1993 26,119 27,432 4%% September 1,1987 60,000 60,000 9 % November 1,1995 51,075 52,819 4%% August 1,1988 60,000 60,000 7%% August 15,1996 51,058 55,949 5%% Junel,1989 a0,000 50,000 8%% November 1,1996 39,721 40,827 4%% September 1,1990 50,000 50,000 6 % July 1,1998 18,195 18,195 4%% August 1,1992 10,000 40,000 TatalDebenture Bonds 226,279 233,129 4%% June 1,1993 -10,000 40,000 4%% September 1,1994 60,000 60,000 Total Long-Term Debt Principal amount out-4%% September 1,1995 60,000 60,000 standing (notes B and C) 3,121,620 2,743,470 6%% June 1,1997 75,000 75,000 Less amount due within 7 % June 1,1998 75,000 75,000 one year (note D) 306 51,027 7%% Aprill,1999 75,000 75,000 Long-Term Debt excluding 9%% March 1,2000 98,000 98,000 amount due within one 8%% A May 15,2001 69,300 69,300 year 3,121,311 2,692,443 7%% BNovember15,2001 80,000 80,000 Net Unamortized Discount (17,971) (7,544) 7%% C April 1,2002 125,000 125,000 Long-Term Debt less Net 8%% D March 1,2004 90,000 90,000 Unamortized Discount $3,103,313 $2,684,899 12 % E October 1,2004 10,730 10,730 8%% F April 1,2006 60,000 60,000 8.45% G September 1,2006 60,000 60,000 C. As of December 31,1984, the Company had unexercised commitments under a Credit Agreement with 12 domestic banks 8%% HJune1,2007 125,000 125,000 for issuance of revohing loans up to an aggregate amount of 8%% ISeptember1,2007 59,900 59,900 $200 000,000 at any time to May 1,1985. The Company may 9%% J November 1,2008 100,000 100,000 terminate the commitments, in whole or in part, without penalty Y premium. Under the agreement, any borrowings outstanding 9%% KJuly1,2009 100,000 100,000 at May 1,1985 are convertible, at the Company s option, mto 12 % L November 1,2009 125,000 125,000 three year term loans. The Company is required to pay a com-12%% MJune 1,2010 100,000 100,000 mitment fee on any unused portion. The Company has the right, 15%% N August 1,1991 100,000 100,000 with the consent,of the banks, to extend the agreement on a year-togear basis. 14%% 0 September 1,2012 100,000 100,000 D. The aggregate principal amounts of requirements for sinking 12%% P December 1,2012 100,000 100,000 funds and maturities for each of the five years fouowing Decem-12%% Q August 1,1993 100,000 100,000 ber 31,1984 are as follows: 8 % June 1,2037 7,163 7,463 S nking 5 % July 1,2037 7,538 7,538 Year Funds Maturities Total Pollution ControlSeries (Thousands of Dollars) 1985 $ 306 306 6.30% A October 1,2006 11,300 14,300 1986 5,778 50,000 55,778 6.90% B September 1,2009 42,620 42,620 1987 6,200 60,000 66,200 6.90% C September 1,2009 2,990 2,990 1988 6,200 60,000 66,200 12%% D April 1,2012 23,500 23,500 1989 6,200 50,000 56,200 9%% EJune1,2013 61,000 64,000 $24,684 $220,000 $m,6m 10%% FJuly1,2014 150,000 10%% GSeptember1,2014 150.000 For sinking fund purposes, certain First and Refunding Mortgage 10%% H November 1,2014 130,100 Bond issues require annually the retirement of $21,900,000 10%% INovember1,2012 1,600 principal amount of bonds or the utilization of bondable property additions at 60% of cost. The portion expected to be met by Total First and Refunding property additions has been excluded from the table above. Also, Mortgage Bonds $2.895,M1 S2,510,341 the Company ma); at its option, retire additional amounts up to $6,200,000 annually through sinking funds of certain debenture Notes: bonds. The election of any such option is included in long-term A. The Company's Mortgage, secunnge First and Refunding debt due within one year. Mortg::ge Bonds, constitutes a direct first mortgage tien on sub-See Summary of Significant Accounting Policies and Notes to stantiaLy all property and franchises. FinancialStatements. H. As of December 31,1984 the annualinterest requirement on Long-Term Debt was $280,662,000 of which $263,276,000 was the requirement for First and Refunding Mortgage Bonds. The embedded interest cost on Long-Term Debt was 9.16%. 31

Cumm rycf Cignificant R:vanu:s and Fu:1 C:sts Accounting Policies Revenues are recorded based on services rendered to customers during each accounting period. The Company Accounting Principles records unbilled revenues representing the amount cus-Financial statements are presented in accordance with tomers will be billed for services rendered from the time generally accepted accounting principles (GAAP). As a re-meters were last read to the end of the respective ac-sult of accounting requirements imposed under rate-mak. counting period. ing decisions by the Board of Public Utilities of the State of The Company projects the costs of fuel for electric gener-New Jersey (BPU) and the Federal Energy Regulatory ation, purchased and interchanged power, gas purchased Comadsion (FERC), the applications of GAAP by the and materials for gas produced for twelve month periods. Company differ in certain respects from applications by Adjustment clauses in the Company's rate structure allow non-regulated businesses. The Company is under the the recovery of fuel costs over those included in the junsdictio,n of the FERC and the BPU and mamtams its Company's base rates through levelized monthly charges. accounts m accordance with their prescribed Uniform Sys-Any under or over-recoveries, along with interest in the o tems of Accounts, which are the same. case of an overrecovery, are deferred and included in n pe M M & % are re W b Utility Plant and Related ra e ' Depreciation and Amortization Additions to utility plant and replacements of units of income Taxes property are capitalized at cost. The cost of maintenance, The Company and its subsidiaries file a consolidated repairs and replacements of mmor items of property is Federalincome tax return and income taxes are allocated, charged to appropriate expense accounts. At the time for repordng purposes, to the Company and its subsidi-units of depreciable properties are retired or otherwis,e aries based on taxable income or loss of each (except for disposed of, the original cost less net salvage value is the effects of the LNG abandonment discussed in note 4). charged to accumulated depreciation. Deferred income taxes are provided for differences be-For financial reporting purposes, depreciation is computed tween book and taxable income to the extent permitted for under the straight-line method. Depreciation is based on rate-making purposes. estimated average remaining lives of the several classes of Investment tax credits are deferred and amortized over depreciable property. Depreciation applicable to nuclear plant includes estimated costs of decommissioning. Amor-the useful lives of the related property mcluding nuclear fuel. tization of leasehold improvements and capital lease assets is based on the term of the lease. These estimates are Allowance for Funds reviewed on a regular bas,s and necessary adjustments i Used During Construction are made as approved by the BPU. Depreciation prosi-sions stated in percentages of original cost of depreciable Allowance for funds used during constiuction (AFDC) is a property are 3.53% in 1984 and 1983, and 3.52% in 1982. cost accounting procedure whereby the cost of financing construction (interest and equity costs) is transferred Amortization of Nuclear Fuel from the income statement to construction work in Nuclear energy burnup costs are charged to fuel expense progress (CWIP) in the balance sheet. The rate of 8%% on the basis of the number of units of thermal energy pro _ used for calculating AFDC was within the limits set by FERC. duced as they relate to total thermal urats expected to be produced over the life of the fuel. The rate calculated for As a result of BPU rate orders, the Company is allowed to fuel used at all of the Company's nuclear units includes a include a portion of CWIP in rate base on which a current provision of one mill per kilowatthour of nuclear generation return is permitted to be recovered through operating for spent fueldisposal costs. revenues. The amounts of CWIP included in rate base were $375 million at the end of 1982 and 1983 and $550 investments in Subsidiaries million at the end of 1984. No AFDC is accrued on the The Company's investments in its subsidiaries (all wholly. amounts of CWIP which are included in rate base. owned), which in the aggregate are not significant as de-fined by the Securities and Exchange Commission, are Pension Plan reported in the accompanying financial statements on the The Company has a non-contributory trusteed pension equity method of accounting. The carrying value ofinvest-plan covering substantially all employees completing one ments in subsidiaries is reported under Other Property year of service. The Company's policy is to fund pension and Investments in the Balance Sheets, and under the costs accrued. Company contributions include current ser-equity method of accounting is adjusted for earnings or vice costs and amounts required to fund prior service losses of such subsidiaries as reported under Other In-costs over a 35 year period beginningJanuary 1,1967. come in the Statements of Income. The Company believes that its financial position and results of operations are best reflected without consolidation of these subsidiaries. 32 L-e

N tra to Fin:ncirl Stttam:nta deferred income taxes have not been provided was $1.3 billion. The related deferred income taxes, at the current

1. FederalincomeTaxes statutory rate of 46%, would be $600 million. The A reconciliation of reported Net income with pre-tax in.

Company expects to continue to recover through rates the come and of Federal income tax expense with the amount taxes due as such timing differences reverse. As a result of Internal Revenue Service (IRS) audits for computed by multip!ying pre-tax income by the statutory Federalincome tax rate of 46% is as follows: taxable years 1976 through 1980, the IRS has proposed an increase in taxable income which would merease the cur-19st im 1982 rent tax liability by $72 million. The proposed liability is (Thousands of Dollars) primarily the result of including unbilled revenues as tax-Net income $190,029 $389.779 $342.827 able income in the year estimated services w ere provided. Federalincome taxes included in: The taxability of unbilled revenues is an industry issue. UrrInt oSion The Company has appealed the tax assessments related to 18,38: 6.015 34,762 unbilled revenues, and the IRS has suspended any action Provision for deferredincome taxes - net

• 110,378 151,300 (72.743) on the appeal pending the outcome of various court cases investment tax credits - net 96,512 33.718 214.620 invoking other utilities. Deferred taxes have been pro-Totalincludedin operatingincome 255,308 191,033 176,639 vided for such unbilled revenues and, if the Company is Miscellaaeous other income - net 3.216 4.825 3,265 unsuccessful in its appeal, there would be little effect on Total Federalincome tax provisions 258,550 195,858 179,904 earnings.

Subtotal 71s,579 585.637 522,731 The balance of investment tax credits not utilized as of Net Earnings of subsidiaries (9,098) (7,061) (10,460) December 31,1984, in the amount of $52 million, is avail-Pre-tax income $739,1s1 $578.576 $512,271 able as a carryover to future years and will expire in 1999. ps ad M bTshnt M cds can k Tax expense at the statutory rate $310,161 $266,145 $235,645 utilized to offset 85% of tax liability and for 1982, 90% of Adjustments to pre-tax income, computed at statutory rate, for which tax liability, before investment credit. deferred taxes are not provided under current rate-making policies: Tax depreciation under book depreciation 29,122 27,806 21,837

2. Investments in and AH w nce for funds used during Advances to Subsidiaries construction (73,011) (59,152) (42,056)

Overhead costs capitalized (15,992) (13.810) (11,500) Investments in and advances to subsidiaries are summar-Other 8,774 3.853 (277) ized as follows: Subtotal (51,110) (41,303) (31.996) Amortization of deferred tax items (30, til) (28,984) (23.745) December 31, 1981 1983 1982 (81,611) (70,287) (55.741) (Thousands of Douars) Subtotal Energy Development Corporation Tott Federalincome tax provisions $258,550 $195.858 $179.904 investment $ 56,639 $ 46,366 $ 37,628 Advances 173,865 183,737 172,368

• The prosision for deterred income taxes represents the tax effects of the followini items:

230,501 230.103 209,996 Current Liabilities Other Subsidiaries 1,295 73.972 77,938 (JnbiDed revenues $ (16,039) $ 8.331 $ 2,456 Total $231.799 $304,075 $287.934 Deferred Credits Atlantic Abandonment (6,336) (6,316) (6,403) Energy Development Corporation (EDC) is engaged in ex-llope Creek Abandonment (13,156) (13,579) (18,101) pioration activities to obtam supplies of natural gas. The LNG Project Abandonment 23,ssi Additionaltax depreciation 59,389 61,348 48,791 Company purchases natural gas from EDC generally at Repair allowance property 6.391 17,482 (4,524) FERC published ceiling prices. During 1984,1983 and NewJersey Gross Receipts 1982, EDC provided approximately 6%, 3% and 6%, re-DeIerr$ fuelcosts-net II ($,y spectively, of the total gas received by the Company. 96,931 Nudear Plant Decommissioning EDC's revenues from sales of gas to the Company Costs (5,587) (5,408) (4,651) amounted to $67.6 million, $45.0 million and $53.0 million, Nuclear Fuel DisposalCosts (7,213) 20,433 (10.150) respectively, for those years. Loss on reacquired debt (l15) (417) (415) Other 2,359 (1,558) 1,383 Other Subsidiaries consists principally of Energy Terminal Services Corporation (ETSC). On December 18, 1984, Subtotal 156,117 112,969 (75,199) the Company announced the abandonment of the unused Total $110,37s $151,300 $ (72,743) liquefied natural gas termmal in Rossville, Staten Island, New York, owned by this wholly-owned subsidiary See Deferred income taxes are provided for differences be-l tween book and taxable income to the extent permitted for rate-making purposes. At December 31,1984 the cumula-tive net amount of income tax timing differences for which l 33

3. C:mpen= ting Bil ncss Und:rrecov:r:d Electric En:rgy and Gas Fuel Costs-net Cash consists primarily of compensating balances under informal arrangements with various banks to compensate Recoveries of electric energy and gas fuel costs are deter-them for services and to support lines of credit of $202.4 mined by the BPU in proceedings to establish the Compa-million and $186.1 million at December 31,1984 and De-ny's electric Levelized Energy Adjustment Clause (LEAC) cember 31,1983, respectively There are no legal restric-and gas Raw Materials Adjustment Clause (RMAC). The tions placed on the withdrawal or other use of these bank LEAC adjustment is normally set effective July 1 to run for balances. In addition, at December 31,1984 and Decem-the succeeding 12 month period. However, in its Order of ber 31,1983, the Company had lines of credit of $35.0 March 23,1984 establishing new base rates, the BPU million which were compensated for by fees.

directed that the Company could not change the LEAC rate untilJuly 1,1985. Such rate had been put into effect

4. Deferreditems on March 1,1983.

Abandonment of Atlantic Project As of December 31,1984, the cumulative underrecoveries under the LEAC are approximately $334.2 million. This In December 1978, the Company cancelled the Atlantic balance is net of the $8.4 million of replacement energy nuclear plant project. The BPU authorized the Company costs, related to the reactor trip breaker outage of Salem 1 to recover a portion of the costs of the project over a in 1983, determined to be nonrecoverable by the BPU in a period of 20 years commencing in April 1980. Such costs January 1985 Order. The amount of the cumulative under-are being recovered at the rate of $15.1 million annually recovered balance is expected to increase byJuly 1,1985. less related taxes of $6.3 million. ho return is being earned on the unrecovered balance. On January 29,1985 the Company filed with the BPU its 'IY "b

1. 9#8 Abandonment of Hope Creek' Unit No. 2 to be effective July 2,1985. The Company s request asks In December 1981, the Company abandoned the construc-that the new rate be in effect for an eighteen month period tion of Hope Creek Nuclear Generating Station Unit No. 2.

running through December 31,1986 and is designed to in March 1982, the BPU authorized the transfer of $112 recover the LEAC underrecoveries as ofJune 30,1985. million of Ilope Creek 2 costs to llope Creek 1 and the A major factor contributing to the large underrecoveries recovery of all after-tax abandonment costs for llope Creek 2 from customers through the electric levelized during the present LEAC period is extended outages at the nuclear facilities owned by the Company These out-energy adjustment clause. The recovery is over 15 years on an accelerated method and commenced in June 1982. ages include the 1983 reactor trip breaker incident at Dunng 1985, the amount to be recovered is estimated t Salem 1, electric generator failures at both Salem 1 and 2, be $29.7 million, less related taxes of $12.1 million. h and pipe cracking problems (Intergranular Stress Corro-sion Cracking) at Peach Bottom 2 and 3, which is a generic return is being earned on the unrecovered balance. problem with boiling water reactors. Abandonment of LNG Project Extensive discovery has already taken place regarding the In December 1984, the Company abandoned its invest-Salem generator outages and the Peach Bottom pipe ment in certain facilities for the storage of liquefied natural cracking outages, and further detailed resiew of such out-gas of its wholly-owned subsidiaries Energy Terminal ages and of the Company's replacement energy costs will Senices Corporation and Energy Pipeline Corporation. be held prior to setting the LEAC rate to be effective in The abandonment had been recommended by those sub-July 1985. The Company cannot predict the outcome of sidiaries because of inordinate delays in the licensing pro-this proceeding but believes that its actions have been rea-cess with the result that a timely operational date could not sonable and that all costs should be permitted to be recov-be achieved. As a result of this abandonment and prior to ered. The Company further believes that any disallowance regulatory approval, PSE&G's investment of approxi. in the proceeding would not have a material adverse effect mately $69.3 million, less tax savings of $27.9 million, was on its financial position or results of operations. Under the deferred and is being amortized over a seven-year period LEAC presently in effect the Company is not allowed to commencing in 1984 at a rate which will reduce net income earn a return on the investment required to finance the by approximately $6 million per year during that period. In unrecovered balance. 1984, this resulted in a reduction in earnings per share of On September 26,1984, the BPU approved a reduction in Common Stock of approximately 5 cents. charges under the RMAC for the period October 1984 Future regulatory action may require a change in the level through September 1985. The reduction was implemented of annual amortization, or could require the immediate as a one-time credit to customers' bills and reflected a $37 write-off of any remaining unamortized balance existing at million reduction in gas costs. The reduction results pri-that time. Any amount not recovered, in the opinion of I management, would not have a material effect on the financial position or results of operations of the Company No return is being earned on the unrecovered balance. 34

marily from a decline in the relatively moderate increases Pension costs for the past three years were charged as in projected prices of pipeline gas, additional purchases of follows: lower-cost gas, the return of overrecovered costs for the 19st 1983 1982 twelve-month period, ended September 1984 and refunds g,,,gs g %,g received from pipehne supphers. Net overrecovenes Operating Expenses $55.298 $56.360 $50,317 under the RMAC amounted to $26.7 million at December Unlity Plant 13.296 12.109 10.344 31, 1984. Total Pension costs $68.590 $68.469 $60.661 Unrecovered Nuclear Fuel Disposal Costs The amounts in Deferred Debits represent the unrecov.

7. Commitments and Contingent Liabilities cred balance of nuclear fuel disposal costs incurred at Construction and Fuel Supplies Peach Bottom prior to April 7,1983. The balance at De-cember 31,1984 is expected to be fully recovered from The Company has substantial commitments as part of its customers during 1985, net of related taxes. No return is construction program. Construction expenditures of $3.4 billion, includmg about $475 million of AFDL, are expected being earned on the unrecovered balance.

to be incurred during the years 1985 through 1989. In addi-Unamortized Debt Expense tion, the Company has conunitments to obtain sufficient These costs, associated with the issuance or reacquisition sources of fuel for electric generation and adequate gas of debt, are deferred and amortized over the lives of the supplies. related issues. Amounts shown in the balance sheets con-Uranium Contracts sist principally of costs associated with the Company's ten-der offer for its 12% Series E Mortgage Bonds which A contract with Kerr-McGee Nuclear Corporation to sup-mature in October 2004. The Company expects to amor-ply uranium concentrates was amended in 1980 to substan-tize $1.5 million of these costs in 1985. tially curtail open-pit mine operations. In hovember 1982, an agreement was reached with Kerr-McGee which calls f r n extension of the curtailed operations untilJanuary 1,

5. Bank Loans and Commercial Paper 1986. Effective October 1,1983, the Lompany s conver-Bank loans represent the Company's unsecured promis-sion and uranium contracts are with Sequoyah Fuels Cor-sory notes issued under credit arrangements with various poration, a wholly-owned subsidiary of Kerr-McGee banks and have a term of eleven months or less.

Corporation and are guaranteed by Kerr-McGee Corpora-tion. As of December 31,1984, the Company and the co-Commercial paper represents the Company's unsecured wners of the Salem and liope Creek Generating Stations bearer promissory notes sold to dealers at a discount with had advanced $40.8 million to Kerr-McGee against deh,v-a term of nine months or less. Certain information regard, enes of uranium concentrates. ing short-term debt follows: 1981 1983 1982 Credits have been received amounting to $14.5 million, includinginterest of $4.7 million. The recoupment of $31.0 <hsaws d Dolla9 llalance at end of year $185,000 $153.000 million, the balance of such advances, is dependent upon Maximum amount outstanding the sale of uranium concentrates by Kerr-McGee to the at any month end $185.000 $161.900 $216.015 Company or other buyers or upon the sale by Kerr-Averagedailyoutstanding 6 55.300 $ 37.004 $107,950 McGee of the project properties. As of December 31. Weighted average annual 1984 the Company's share of such advances amounted to interest rate 9.80 9 9.404 12.959 Weighted average interest rate $21.3 million. The Company cannot presently predict the for commercialpaper extent to which such advance payments will ultimately be outstandmg at year end 8.269 9.879 recovered. Deferred items

6. Pension Plan See Note 4, Underrecovered Electric Energy and Gas Information on accumulated plan benefits and net assets of Fuel Costs - net and Abandonment of LNG Project.

the Company's pension plan are as follows: December 31 1981 1983 (Thousands of Dollars) Actuarial present value of accumulated plan benefits Vested $118.516 $401.095 Nonvested 61,632 56.066 $180.118 $457.161 l Assumed rate of return 9.59 9.0% Market value of Plan Net Assets $315.000 $159.285 t t 35

Nucle:rIn urznca Cov:rrgu pose potential joint and several responsibility on the The Company's insurance coverage for its nuclear opera-gener tors of the wastes for clean-up costs. The Company has been notified with respect to a number of such sites, tions are as follows: and the clean-up of hazardous wastes is receiving increas-Maximum ing attention from the governmental agencies involved. Re* g 1 This trend is expected to continue. The Company cannot y, 3 estimate the costs which may result from these matters, Type and Source of Coverage Coverage single incident but such costs could be substantial. (Mahons of Donars) Public Liabihty American Nuclear Insurers $ 160 $None

8. Other Long-Term Obligations FederalGovernment (A) 460 8.5 (B)

The amount of other long-term obligations consists of the $ 620 (C) $ 8.5 Property Damage following: Nuclear Mutual Linuted (D) $ 500 $21.6 1988 1983 Nuclear Electne Insurance Limited (D) 475 8.3 (Thousands of Dollars) American Nuclear Insurers 85 None Nuclear Fuel Disposal Cost Liability $61,811 $61,844 $1,060 _$29.9 Obugations under Capitalleases 61,103 57,971 Replacement Power Total $122,917 $119,815 Nuclear Electric Insurance Limited (D) $ 2.8 (E) $12.9 Nuclear Fuel Disposal Cost Liability ( A) Retrospective premium program under the Price-Anderson hability provisions of the Atomic Energy Act of 1954, as amended. Subject to in conformity with the Nuclear Waste Policy Act of 1982 renspective assessment with respect to loss from an incident at any (the Act), the Company entered into contracts with the ensed nuclear mact me Umted States. Department of Energy (DOE) on June 13, 1983 for the (ID Maximum assessment would be $17.0 million in the event of more disposal of spent nuclear fuel from the Salem and Hope

• " "* i"'id*"' i" ""Y Y'"'

Creek nuclear generating stations. Similarly Philadelphia (C) Limit of liability under the Atomic Energy Act of 1958, as amended, Electric Company contracted with the DOE in connection for each nuclearincident. with the Peach Bottom nuclear generating station. Under (D) Utility-owned mutual insurance companies of which the Company is these contracts, DOE will take title to the spent fuel at a membet Subject to retrospective assessment with respect to k>ss at the site, then transport and provide for its permanent any nuclear generating station covered by such msurance. (E) Maximum weekly indemnity for 52 weeks which commences after tions permitted by the Act for the payment of such costs u f an outage. Also provides $1.4 million weekly for an adlitiolal 2 incurred prior to April 7,1983. One of the options calls for the payment of the obligation in full by June 1985 with no Certain provisions (see Notes to Nuclear Insurance Coverages (A). (B) and (C)) of the Atomic Energy Act expire on August 1.1987, unless interest requirement. Pending a decision on the payrnent extended by Congress. In December 1983, the NRC submitted a report option to be selected interest expense of approxi-to Congress with respect to the continuation of the Price-Anderson mately $9.9 million has been recorded in connection with provisions which recommends that the $620 million hnut on liabihty be the liability for such costs and is accumulating in Deferred eliminated and that the present limits on retrospective ass (ssments Credits - Other. The latest available payment date is against owners of nuclear umts be replaced by an annuallimit of no more than $10 million per year for each licensed nuclear reactot The Company 1998. Under the Act, fees for nuclear fuel disposal costs cannot predict whether the Price-Anderson provisions will be extended incurred after April 6,1983 are paid quarterly or what provisions will be enacted if it is extended. On January 11,19&t, in a case to which the Company was not a party the United States Su-Lease Commitments preme Court held that the Atomic Energy Act, the Price-Anderson Emi-tation of liabihty provisions thereunder and the extensive regulation of Effective December 1984, the Company changed its nuclear safety by the NRC do not pre-empt claims under State law for method of accounting for leases that meet the criteria for personal, property or punitive damages related to radiation hazards. capitalization in accordance with Statement of Financial Environmental Controls Accounting Standards No. 71, " Accounting for the Effects of Certam Types of Regulation", and FERC accounting re-The Comprehensive Environmental Response, Compen-quirements. The Balance Sheets and Statements of sation and Liability Act of 1980 and certain similar State Changes in Financial Position for periods prior to Decem-statutes authorize various governmental authorities to ber 1984 have been restated to reflect the retroactive seek court orders compelling responsible parties to take capitalization of leases. Accordingly the Balance Sheets clean-up action at disposal sites determined to present an include assets and related obligations applicable to capital imminent and substantial danger to the public and to the leases. Since the total amortization of the leased assets environment because of an actual or threatened release of and interest on the lease obligations equals the net mini-hazardous substances. Because of the nature o'f the mum lease payments included in rent expense for capital Company's business, various by-products and substances leases, retroactive adoption had no effect on prior years' are produced or handled which are classified as hazardous Statements of Income or Statements of Retained under these laws. The Company generally provides for the Eamings. disposal of such substances through licensed individual contractors but these statutory provisions generally im-Capitalleases relate primarily to the Company's corporate headquarters and computer equipment. Certain of the leases contain renewal and purchase options and also con-tain escalation clauses. 36

Utility plant includes the following amounts for capital Current Cost data purports to show the estimated cost of leases at December 31: currently replacing existing Utility Plant and was generally measured by applying the llandy-Whitman Index of Public 19st 1983 y on Ms M h WM Ws d My (Thousands ofIMlars) Plant. Common Plant $71,531 $67,475 Less Accumulated Amortization 7,651 6.562 General Inflation amounts were determined by adjusting Net Assets under Capitalleases $63,881 $m.913 historical costs of certain items into dollars of the same general purchasing power by using the Consumer Price Future muumum lease payments for noncancelable capital Index for All Urban Consumers (CPI-U). and operating leases at December 31,19M are: Depreciation and Amortization expense, Amortization of Capnal operaung Nuclear Fuel (included in Electric Fuel, Interchanged Power and Gas), and Amortization of Capital Leases (in-cluded in rental expense in Other Operation and Mainte-1985 s 5 6 1986 16,610 2.348 nance) were adjusted for Current Cost usmg the rates and 1987 15,580 1,687 methods for computing book depreciation and amortization 1988 14,491 1,613 applied to the appropriate inflation adjusted Utility Plant $erYears balances. In accordance with FAS 33, income tax expense 3 2 was not adjusted. Minimumlease payments 430,100 $14.3e>l re@s b dscbsure d b a@med need Less: Amount representing estimated executory to reflect Net Utility Plant at its Net Recoverable Cost if costs, together with any profit thereon, included m minimum lease payments 214,117 that cost differs from the inflation adjusted amounts. Also Net minimumlease payments 215,983 required under Current Cost is the disclosure of the in-Less: Amountrepresentinginterest 152.102 crease in Current Cost of Net Utility Plant held during the Present valuc of net minimum lease payments (1) $ 63.881 year and the related effect of general inflation. The amounts shown in the following table ilhistrate that during (1) Reflected in the balance sheet in Other Long-Term Obligations of 1984 the increase in general intiation was less than the $61,103,000 and in Long-Term Debt and Other Obligations due within increase in the Current Cost of Net Utility Plant after ad-one year of $2,778,000, respectively justment to Net Recoverable Cost. The Adjustment of Net The following schedule shows the composition of rent ex-Utility Plant to Net Recoverable Cost is an adjustment of pense included in Operating Expenses: Utility Plant to IIistorical Cost in average 1984 dollars. IIistorical Cost is the amount permitted to be recovered For the Years Ended Dec. 31, 1988 1983 1982 under the rate regulatory process for utilities in New (1housands of Dollars) Interest on Obligations under Capital jersey. During inflationary periods, holders of monetary assets, Amortization of Utility Plant under such as cash and receivables, suffer losses of general pur-Capital Leases 2,912 2.096 1.322 chasing power while holders of monetary liabilities experi-Net minimum lease payments relating to capitalleases 10,175 9,100 8.209 ence gams. In 1984 the Company's monetary liabihties, other tease payments 16,51 19.397 20,992 primarily long-term debt, exceeded its monetary assets Total Rent Expense $26,989 $28.497 $29,191 resulting in a gain. Since this gain is primarily attributable to long-term debt which has been used to finance Utility Plant, it is added to the Amount by which the increase in

9. Supplementary Information Concerning the general inflation was lower than the increase in Current Effects of Changing Prices (Unaudited)

Cost of Net Utility Plant after adjustment to Net Recover-The Company's financial statements are prepared in ac-cordance with generally accepted accounting principles and are stated on the basis of historical costs, nameh the prices that were in effect when the underlying transactions occurred. The following supplementary financial infonna-tion, prepared in accordance with Financial Accounting Standards lloard Statement No. 33 (FAS 33), as amended by FAS 82, is an estimate of the effects on the Company of changes in specific prices (Current Cost) and General Intlation. The Company advises readers of the imprecise nature of this data and of the subjectivejudgments required in the restate-ment of selected historical costs to amounts adjusted for Current Cost and Generalinflation. This data should not be used to make adjustments to the Company's primary financial statements and the related earnings per accrage share ofCommon Stock other than those adjustments shoten in thefollotcingsupplementaryfinancialdata. 37

Supplem:nt:ry Fin:ncirl D:ta Adju:ted for tha Effects of Chinging Pricss for the Year Ended December 31,1984 (Unaudited) IIistoricalCost Current Cost (Condensed from the (Average Financial Statements) 1984 Dollars) (Millions of Dollars) Operating Revenues $4,196 $4,196 Operating Expenses Electric Fuel, Interchanged Power and Gas 1,695 1,695 Other Operation and Maintenance 857 857 Depreciation and Amortization of Utility Plant 211 547 Taxes 835 835 TotalOperating Expenses 3,598 3,934 OperatingIncome 598 262 Other (including Interest Expenses) (108) (108) Income from Continuing Operations (excluding Adjustment of Net Utility Plant to Net Recoverable Cost) $ 490 $ 154 Increase in Current Cost of Net Utility Plant held during the year * $ 246 Adjustment of Net Utility Plant to Net Recoverable Cost 252 Effect of the increase in General Inflation (437) Amount by which increase in general inflation was lower than increase in Current Cost of Net Utility Plant after adjustment to Net Recoverable Cost 61 Gain from decline in purchasing power of Net Monetary Liabilities 141 Net $ 202 'At December 31,1984, the Cerrent Cost of Net Utsty Plant was $11.637 bdlion, while historical (net recoverable) cost was $7.550 billion. 38

I Supplementary Five-Year Comparison cf Selected Fininci:1 Dit: Adjusted for Effects of Changing Prices (Unaudited) (Afillions ofDollars where atplicatle snd alladjustedfigures are in awrage 1984 dollars) For the Years Ended December 31, 19&l 1983 1982 1981 1980 Operating Revenues IIistorical $4,1% $3,963 $3,874 $3,472 $2,994 AdjustedforGenerallnflation $4,196 $4,132 $4,169 $3,965 $3,774 Income (Loss) from Continu.ng Operations (excluding Adjustment of Net Utility Plant to Net Rec overable Cost) llistorical $ 490 $ 390 $ 343 $ 264 $ 275 AdjustedforCurrentCut $ 154 $ 70 $ 32 $ (15) $ 43 income (Loss) from Conunuing Operations per Average Common Share (excluding Adjustment of Net Utility Plant to Net Recoverable Cost)* llistorical $ 3.95 $ 3.40 $ 3.24 $ 2.63 $ 3.13 AdjustedforCurrent Cost S.86 $.09 $ (.29) $ (.91) $ (.22) Amount by tchich increase in generalin)lation teas (higher) lotter than increase in Current Cost ofNet Utility Plant after adjustment to Net Recocerable Cost $ 61 $ 87 $ 103 $ (211) $ (431) Gainfrom decline in purchasingporcer ofNet Monetary Liabilities $ 141 $ 126 $ 115 $ 259 $ 360 Net Assets at Year End** llistorical $3,686 $3,338 $3,081 $2,833 $2,647 AdjustedforCurrent Cost $3,634 $3,421 $3,278 $3,131 $3,187 Cash Dividends Declared per Common Share llistorical $ 2.70 $ 2.62 $ 2.53 $ 2.44 $ 2.29 AdjustedforGeneralinflation $ 2.70 $ 2.73 $ 2.72 $ 2.79 $ 2.89 Market Price per Common Share at Year End IIistorical $26.75 $22.75 $23.25 $18.00 $17.00 AdjustedforGeneralinflation*** $26.75 $23.65 $25.09 $20.17 $20.76 Consumer PriceIndex(1967= 100) Average 311.1 298.4 289.1 272.4 246.8 Year End 315.5 303.5 292.4 281.5 258.4

• After deducting Cumulative Preferred Stock and $1.40 Dividend Preference Common Stock dividends on a historical basis in 1984 and in Average 1984 Dollars for prior years.

" Equals Common Equity and Preferred Stock without mandatory redemption.

• "Ywl1984 DoDars.

Prices have been increasing over the last five years. The Market price per common share at year end from 1980 to average CPI-U increased from 246.8 in 1980 to 311.1 in 1984 had an average annual increase of 12.0% or from 1981, an average annual increase of 6.0%. The increase $17.00 to $26.75. Restated in year-end 1984 dollars the from 1982 to 1983 was 3.2% and from 1983 to 1984 was 1980 market price would have been $20.76 instead cf 4.3%, an indication that the rate of inflation is continuing at $17.00 resulting in an average annual increase of 6.5% a slower pace. from 1980 to 1984. Revenues for the five-year period increased from $2.994 Lack of adequate recognition of inflation in rate-making in billion in 1980 to $4.196 billion in 19&t, an average annual addition to delayed rate relief accelerates attrition, increase of 8.8%. Restated in average 19&l dollars, reve-thereby contributing to poorer cash flow. nues for the same period would have increased from $3.774 billion to $4.196 billion, an average annual increase of only 2.7%. Cash dividends declared per common share increased from $2.29 in 1980 to $2.70 in 1984 or an average annual increase of 4.2%. Ilowever, such dividends would have decreased at an average annual rate of 1.7% or from $2.89 in 1980 to $2.70 in 1984 when restated in average 19&l dollars. 39

10, J:intly-Owned Facilitin The Company has an ownership interest and is responsi-the Company's share of each jointly-owned project and the ble for providing its share of the necessary financing for corresponding direct expenses are included in the State-the followingjointly-owned facilities, Allamounts reflect ments of Income as an operating expense. Amount of Utility [ht Accumulated Provision Amount ofIht Iht Ownership Interest in Service for Depreciation Under Construction (Thousands of Dollars) CoalGenerating Conemaugh 22,50 % $ 68,470 $ 19,714 Keystone 22,84 % 64,401 18,924 Nuclear Generating Peach Bottom 42.49% 448,846 142,241 Salem 42.59 % 753,593 149,370 llope Creek 95,00 % $2,935,887 Nuclear Support Facilities %rious 38,102 2,110 18,504 Pumped Storage Generating Yards Creek 50.00 % 18,187 4,271 Transmission Facilities Wrious 88,172 12,737 15,442 MerrillCreek Reservoir 13,906 % 4,998 Linden Synthetic NaturalGas 90.00 % 66,334 43,710

11. FinancialInformation by Business Segments Electric Gas Total For the Years Ended December 31, 19M 1983 1982 19M 1983 1982 1988 1983 1982 (Thousands ofIk>llars)

Operatmg Revenues $2,816,211 $2,570.457 $2,583,191 81,379,883 $1,392.475 $1,330,785 $8,196,128 $3,962,932 $3,873,976 Depreciation and Amortization 159,388 152,874 146,643 51,800 48,913 46,217 211,188 201,787 192,860 OperatingIncome Before Income Taxes 753,225 584,508 533.855 101,275 101,052 99,108 851,500 685,560 632,963 Gross Additions to Utihty Ibnt 879,158 815,919 735,997 87,907 77,890 77,378 967,36~> 893,809 813,375 December 31, Net Utihtyiht $6,797,809 $6,089,825 $5,435,595 $ 752,480 $ 713,991 $ 683,163 $7,5 30,289 $6,803,816 $6,118,758 Gas Exploration Subsidiary and LNG Project 231,601 304,052 287,911 231,601 3Gl.052 287,911 Other Corporate Assets 1,110,751 1,122,418 1.126,566 46~3,003 396,060 435,626 1.875,711 1.518,478 1,562,192 Total Assets $8,208,560 $7.212,243 $6.562.161 81,152,088 $1.414,103 $1.406,700 39,660,688 $8,626,346 $7,968.861

12. Selected Quarterly Data (Unaudited)

The information shown below in the opinion of the Company Due to the seasonal nature of the business, quarterly includes all adjustments, consisting only of normal recurring amounts vary significantly during the year. accruals, necessary to a fair presentation of such amounts, Calendar Quarter Ended March 31, . June 30, September 30, December 31, 1984 1983 19M 1983 19M 1983 19M 1983 (Thousands where applicable) Operating Revenues $1,198,151 $1,150,076 $969,474 $860,5M $1,009,999 $935,156 $1,018,500 $1,017,116 OperatingIncome 142,878 126,388 146,717 100,098 181,979 147,728 126,568 119,736 Net Income 119,924 101,772 121,483 75,377 151,576 119,899 97,486 92,731 Earnings Available for Common Stock $ 104,874 $ 87,540 $106,412 $ 61,146 $ 136,527 $105,231 $ 81,995 $ 77,628 Earnings per Share of Conunon Stock 8.99 $,92 8.98 $.68 $1.24 $1.08 $.74 $,76 Average Shares of Common Stock Outstanding 105,652 94.948 108.491 96,136 110,051 97,570 111,419 101,146 40

l Mznzg:m:ntb Di:2uri:n cnd Project and the related pipeline project of Energy Pipeline Analysis of Financial Condition Corporation (approximately 5e per share). (See Energy Costs below and Note 4 of Notes to Fmancial Statements.) cnd Results of Operations Earnings per share were $3 Eor M3, an inaease of W The Company's financial condition and results of opera-r 5% from 1982. Increased revenues reflecting the Feb-tions are affected by numerous factors, including the tim-ruary 1982 rate increase and greater sales explained ing and amount of rate relief, the extent of sales growth, below, outpaced the nse, operatmg costs. i m the levels of operating costs and carrying costs of both utility plant construction and underrecovered electric Dividends paid to the holders of Common Stock have in-energy costs. Effective March 23,1984 the Board of Pub-creased for the last three years, rising to $2.70 in 1984 lic Utilities of the State of NewJersey (BPU) authorized an from $2.62 in 1983 and $2.53 in 1982. Such amounts re-increase in the Company's base rates designed to produce sulted in payout ratios of 68%, 77% and 78%, respectively additional annual revenues of $286.4 million (Electric - Total Common Stock dividend payments in 1984 increased $246.7 million and Gas - $39.7 million). The rate Order 15% and 30% over 1983 and 1982, respectively due to the allows a cash return through current operating revenues increase in shares of Common Stock outstanding as well as on a total of $550 million of construction work in progress the higher dividend rate. to provide additional cash flow for the Company's con-struction program, the majority of which is for the comple. Revenues and Sales tion of Ilope Creek Generating Station, a 1,067 megawatt Electric revenues increased in 1984 due to the higher nuclear unit owned 95% by the Company The Company's rates and improved sales. The slight decline in gas reve-share of the cost of the project is estimated at approxi-nues was mainly attnbutable to the one-time refund to cus-mately $3.56 billion includmg approximately $840 million of tomers of $42.9 million ordered by the BPU during the last allowance for funds used during construction (AFDC), quarter of 1984, which was partially offset by higher sales. which is within the cost cap established under a cost con-The refund resulted mainly from an overrecovery of gas tamment incentive agreement approved by the BPU in July costs during the prior levelized period that was attribut-1983. As of December 31,19M, the unit was over 92% able primarily to stabilized prices for pipeline gas and sub-complete with Company expenditures of $2.936 billion, m-stantial purchases at lower prices on the spot market. In cluding $553 million of AFDC. Construction is proceeding 1983 the increases in Electric and Gas revenues were on a schedule which would permit nuclear fuel to be loaded principally due to improved sales. Electric energy and gas near the beginning of 1986. With a fuel load in early 1986, fuel costs follow amounts recovered through revenues, as commercial operation could begin by nud-1986 which is permitted by rate orders, and therefore have no effect on earlier than previously scheduled. While this fuel load and

• """E*'

commercial operation schedule would allow the plant to be completed within budget and the cost cap, no assurances Electric revenues increased 9.6% in 1984 and 1.1% in of such can be given. Successful completion of the project 1983. The components of these changes are highlighted in is of significant importance to the Company the table below: increase or mecrease) As a result of the construction of Ilope Creek, certain 1934 vs 1983 1983 vs 1982 problems experienced by other utilities which are con-structing nuclear generating units could have an indirect milions of Dottars) effect on the Company's operations and financial condition, Changesin base rates $210 $ 41 Recovenes of energy costs (25) (177) because of common regulatory requirements, such as those of the Nuclear Regulatory Commission, and because o$e$*[e"r"Nr'e* venues N) Ys industry events in some cases may affect the price of the $2'46 s 27 Company's securities in the capital markets, where the Company must compete for investors' funds. 1984 - Electric kilowatthour sales increased 2.7%. Resi-dential sales declined,slightly, primarily the result of the Earnings and Dividends cooler weather expenenced dunng the summer of 1984 Earnings per share of Common Stock were $3.95 for compared to 1983, while the improved economy during 1984, an increase of 55e or 16% from 1983. The increase is 1984 helped to increase sales in both the Commercial and primarily attributable to a $286.4 million annual base rate Industrial categories. Although the overall sumnner increase which went into effect on March 23,1984, higher weather was cooler when compared to 1983, on June 11, total kilowatthour and therm sales explained below, and 1984 records were set for a 60 minute net peak load of greater AFDC, principally due to the continuing construc-7.422 megawatts and the maximum day's output of tion of Ilope Creek Generating Station. Partially offsetting 143,558 megawatthours. A monthly record output of these increases were greater operating expenses (exclud-3.452 million megawatthours was attained in August. ing fuel costs), principally higher taxes, labor costs and 1983 - Electric kilowatthour sales increased 5.6%. Resi-maintenance expenses, as well as the increased carrymg ential, Commercial and Industrial sales increased 9.3%, costs of both utility plant construction and underrecovered 5.7G, and 2.7%, respectively. The warmer and more electric energy costs. Also, eanu,ngs were reduced ap-humid weather and the revival of the economy were the proximately 10e per share of Common Stock for charges main reasons for the improvement in sales. A record associated with replacement energy costs disallowed by the BPU relating to a 1983 Salem 1 outage (approximately Se per share) and the first year's amortization of the aban-donment of Energy Terminal Services Corporation's LNG 41

monthly output of 3.401 million megawatthours was at-Total electric energy costs turned slightly higher in 1984 tained in August, and on September 6th a record after a 9% decrease in 1983, as described below: 60-minute net peak load of 7,244 megawatts was reached. Increase or (Decrease) Gas revenues declined.9% in 1984 and rose 4.6% in 1983. 1984 vs.1983 1983 vs.1982 The principal factors are shown below: (Malions of Douars) Increase or(Decrease) Change in prices paid for fuel supplies and power purchases $(16) $ 176 19M vs.1983 1983 vs.1982 Kilowatthour output 25 N (Mdhons of Dollars) Adjustment of actual costs to match Changes in base rates $ 26 $12 recoveries through revenues * (13) (314) Recovenes of gas costs (63)* 31 Replacernent energy costs in 19M Therm sales 21 17 for which recovery was disallowed Other operating revenues 3 2 by the BPU 8 $<13) $62 84 $ (90)

• Includes the effect of the $42.9 million refund to customers.
• Reflects over (under) recovered energy costs, which in the years 1984, 1983 and 1982 amounted to $(198) million. $(190) million and $12 million.

1983. - Gas therm sales increased by 4.5%. Therm sales respectiveh as well as amortization of prior period unrecovered costs of improved over last year in all major customer categories. $1 million in 19M. $11 million in 1983 and $132 million in 1982. The generalimprovement in the economy during the year Gas costs were 4% lower in 1984 compared to a 4% in-and the colder weather early in 1984 favorably impacted all crease in 1983. Contributing factors are shown below: Increase or(Decrease) 1983 - Gas therm sales increased by.5%. Residential 1984 vs.1983 1983 vs.1982 sales remained relatively unchanged, increasing.19, the (Mdlions of Douars) result of the moderate weather conditions experienced Change in prices paid for gas supphes $(47) $ 39 earlier in the year. Commercial sales increased 2.6%, re-Refunds from pipeline suppliers 12 14 flecting an increase in customers. Industrial sales fell nerm sendout 40 1 1.1%, primarily the result of greater competition from oil Adj"5"",*No"de-I t tomatch causmg fuel switching by customers with dual-fuel g3g g capability

• Reflects over (under) recovered gas costs which in the years 19M.1983 Energy Costs and 1982 amounted to $(24) million. $16 million and $33 million, respec-Electric energy costs and gas fuel costs are adjusted to

$n)f theon -timer u d ocu sn ur t f 37 n match amounts recovered through revenues and have no effect on earnings. Ilowever, the carrying of underrecov-Liquidity and Capital Resources ered energy costs ultimately increases financmg costs. The Company's liquidity is affected principally by the con-A record total of 34.179 million megawatthours was gener-struction program, financing costs associated with under-ated, purchased and interchanged, a 2% increase over recovered electric energy costs and, to a lesser degree, 1983, reflecting an increase in customer demand. Higher by other capital requirements such as maturing debt and generation, mainly due to the better performance of Peach sinking fund requirements. The capital resources available Bottom station, accounted for most of the increase. to meet these requirements are funds from internal gener-a nan emma ndng Inkmah generadunh On January 10. 1985, the BPU determined that approxi-pend upon econos co@ons and be a%acy hely mately $8.4 million of replacement energy costs associ-Amss t,o the long-tenn and short term capital rm ated with the extension of a refueling outage of Salem 1 and credit markets is necessary for obtauung funds exter-from January 1983 through May 1983 should not be recov-nally The Company expects to generate approximately ered from customers (see table below and Note 4 of Notes half ofits capital requirements for 1985 from operations. to Financial Statements). As a member of the Pennsylvania-New Jersey-Maryland Construction Program Interconnection and as a party to several agreements which provide for the purchase of available power from The Company maintains a continuous construction pro-which includes payments for nuclear fuel and invest-neighbonng utilities, the Company is able to optimize its mix of internal and external sources using the lowest cost ments in and advances to an energy resource subsidiary This program is periodically resised as a result of changes energy available at any given time. n economic conditions, and depends on the ability of the Company to finance construction costs and to obtain timely rate relief. Changes in the Company's plans and forecasts, price changes, cost escalation under construc-tion contracts, and requirements of regulatory authorities may also result in revisions of the construction program. l Construction expenditures of $9M million in 1984 and $902 million in 1983 include AFDC of $159 million and $129 ~ million, respectively Construction expenditures are esti-i 42

l r mated at $3.4 billion for the five years ending in 1989 and As mentioned above, the Company has a Credit Agree-include AFDC of about $475 million. Approximately $625 ment with a group of domestic banks for the issuance of million of this amount, including about $285 million of revohing loans. Under the agreement, any borrowings AFDC, is required for the completion of Hope Creek. outstanding at hlay 1,1985 are convertible, at the Compa-ny s option, into three-year term loans. The Company has These estimates are based on certain expected comple-I be @, consent of 6e bads, m emend h tion dates and include anticipated escalation due to inflation a $75 milhon revolvm.-to-year basis. The Company also 8""**"f Y" # of approximately 7%. Therefore, construction delays or g credit agreement with a group of inordinate inflation levels could cause significant increases mtanauonal banks, under which the Banks have agreed to in these amounts. The Company expects that, with ade-make revolving loans for one month, three months or six quate rate relief, as to which no assurance can be given, it m nths at a rate based upon the London Interbank Offered will generate internally more than 50% of its construction Rate for deposits in United States Dollars. These agree-expenditure requirements, excluding AFDC, during the ments provide the Company with an intermediate-term next five years. The balance will be provided by financing s urce f funds. through the sale of securities as well as term bank loans. Cash Position Long Term Financing The Company's cash position increased $84.8 million since During 1984 and early 1985 the Company raised more than year-end 1983 as indicated by a higher level of pollution $813 million through the sale in 1984 of $435 million of control escrow funds and cash and working funds offset by Pollution Control Afortgage Bonds and $213 million of the increase in commercial paper outstanding. The 1984 Common Stock, and the sale early in 1985 of $178 million balance of Pollution Control Escrow Funds is to be used of Common Stock. As a result, the Company's interest and for the construction of po!!ution control facilities. dividend requirements have continued to increase. Customer Accounts Receivable At December 31,1984 book value per share amounted t At the end of 1984, customer accounts receivable approxi- $27.17 compared to $26.36 at December 31,1983. The mated $330 million (excluding unbilled revenues of $166 market value of common shares expressed as a percent-million). Although this is $10 million lower than last year, age of book value was 98.5% and 86.3% at year-end 1984 the Company is continuing to finance large receivables and 1983, respectivelF from its customers. Net write-off of uncollectible accounts In addition to periodic sinking fund redemption require. in 1984 was $40 million, unchanged from 1983. The aver-ments, four mortgage bond issues aggregating $220 mil-age write-off rate per $100 of revenues improved in 1984 lion will mature by the end of 1989. reflecting intensified collection procedures developed by the Company and an improvement in the economy These Under the terms of the Company's 51ortgage and matters are affected by the level of the Company's rates Restated Certificate of incorporation, at December 31, and a requirement of the BPU prohibiting the termination 19,84 the Lompany could issue an additional $1.643 bilhon of electric and gas service in winter months with respect principal amount of hlortgage Bonds at a rate of 12.75% or to certain customers with financial need. $1.343 billion of Preferred Stock at a rate of 11.75%. Present plans for the remainder of 1985 call for the issu-Effects of inflation ance of debt and equity securities. The effect ofinflation on the Company was severe during In hlarch 1984, the Company renewed its Credit Agree-the period 1979 through 1981 when the Average Consumer ment with 12 domestic banks to hlay 1,1985 for the Price Index (CPI-U) reflec ed increases of over 10%. issuance of revohing loans up to an aggiegate of $200 mil-Since 1981, the inflation rate has slowed down. The in-lion to be outstanding at any time. The agreement permits creases in the CPI-U in 1982,1983 a'ai 1984 were 6.1%, the Company to convert the outstanding balance at the 3.2%, and 4.3%, respectively Even though the rate of end of the period to three-year term loans. Also, the inflation has dropped below double digit rates, the cost of Company has the right, with the consent of the banks, to capital has remained relatively high during a time when extend the agreement on a year-to-year basis. substantial amounts must be raised in the capital markets In addition to the domestic capital markets described to finance construction. above, the Company lists its Common Stock on the 1.on-For additional information on the effects of changing prices don Exchange, London, England. see Note 9 of Notes Financial Statements. Short-Term Financing For interim financing, the Company is authorized by the BPU to have up to a total of $300 million of short-term obligations outstanding at any given time. The availability of short-term financing provides the Company flexibility in the issuance oflong-term securities. The Company's aver-age daily short-term debt during 1984 was $55 million - $18 million above last year's average. At year end the Company had $185 million of short-term debt outstanding. 43

Cper~. ting Et!.ti; tina 9 AnmalInc. (Dec.)- 1984 compared with (000omitted where applicable) 1941 1983 1983 1974 Electric Revenues from Sales of Electricity Residential $ SS3,652 $ 829,967 6.17 9.25 Commercial ' 111,175 984,499 12.87 11.11 Industrial 719,725 686,880 9.15 8.35 Public Streetlighting 12.161 38,672 9.03 7.19 Total Revenues from Sales to Customers 2,786,716 2,540,018 9.71 9.76 Interdepartmental 1,810 1,863 (2.81) 1.31 Total Revenues from Sales of Electricity 2,788,526 2,541,881 9.70 9.75 Other Electric Revenues 27,715 28,576 (3.01) 311.8 7 TotalOperating Revenues $2.816.211 $2,570,457 9.56 9.85 Sales of Electricity - kilowatthours Residential 8,373,171 8,402,397 (.31) 1.09 Commercial 12,152,020 11,753,667 5.91 3.67 Industrial 10,111,112 10,283,784 1.56 (.71) Public Street Lighting 301,702 302,053 (.12) 1.76 TotalSales to Customers 31,571,605 30,741,901 2.70 1.32 Interdepartmental 25,796 27,800 (7.21) (1.81) TotalSales of Electricity 31.597,101 30,769.701 2.69 1.31 Kilowatthours Produced, Purchased and Interchanged - net 31,178,S62 33,391,011 2.36 1.10 Load Factor 52.19 52.6 % Capacity Factor 32.69 31.6 % Ileat Rate - Btu oi fuel pc r net kwh generated 10,616 10,717 (.9 I) (.15) Net Installed Generating Capacity at December 31 - kilowatts 8,999 8,999 .12 Net Peak Load - kilowata (60-minute integrated) 7,122 7,244 2.16 1.63 Temperature ilumidityIndex Hours Ifi,677 17,262 (3.39) 2.10 Average Annual Use per Residential Customer-kwh 5,5 13 5,602 (1.05) .13 Metersin Senice at December 31 1,769 1,757 . tis .50 l Gas i Revenues from Sales of Gas Residential $ 717,286 $ 746,200 (3.87) 12.53 Commercial 393,197 396,159 (.75) 16.35 Industrial 263,080 246,408 6.77 18.80 Street Lighting 369 358 3.07 11.65 Total Revenues from Sales to Customers 1,373,' 32 1,389,125 (1.09) 14.53 Interdepartmental 1,682 1,011 66.37 13.31 Total Revenues from Sales of Gas 1,375,611 1,390,136 (1.0l) 11.53 Other Gas Revenues 1,269 2,339 82.51 23.08 TotalOperating Revenues $1,379,883 $1,392,475 (.90) 11.5i Sales of Gas-therms Residential 1,019,025 995,686 2.31 .11 Commercial 628,855 596,868 5.36 3.20 Industrial 195,719 460,601 7.62 1.97 j Street Lighting 339 327 3.67 (2.30) l TotalSales to Customers 2,113,938 2,053,482 1.11 1.51 Interdepartmental 3,1177 1,857 81.85 .90 TotalSales of Gas 2.117,315 2.055,339 1.17 1.51 Gas Producedand Purchased-therms 2,219,352 2,151,417 1.55 1,63 Effective Daily Capacity at December 31 - therms 19,856 19,129 3.80 .27 Maximum 24-hour Gas Sendout-therms 1 t,927 15,612 (1.39) 2.11 Ileating Degree Days -1,7-13 4,677 1.11 .21 Average Annual Use per Residential Customer - therms 863 850 1.53 (.10) Metersin Senice at December 31 1.101 1,392 .86 .38 44

19M 1981 1980 1979 1974 l 1 $ 791,279 $ 728,612 $ 684,343 $ 545,049 $ 361,674 981,795 871,377 765,356 625,596 377,184 716,662 684,976 598,716 484,037 336,250 37,809 33,249 32,693 31,437 20,473 2,527,545 2,318,244 2,081,108 1,686,119 1,098,581 1,709 1,612 1,720 1,559 1,183 2,529,254 2,319,856 2,082,828 1,687,678 1,099,764 13,937 2,186 1,072 2,179 1,201 $2,543,191 $2,322,042 $2,083,900 $1,689,857 $1,100,965 7,686,548 7,795,988 8,129,198 7,777,369 7,514,365 11,114,655 10,940,609 10,726,086 10,336,445 8,687,964 10,017,613 10,923,042 11,019,642 11,185,952 11,244,117 301,603 275,489 265,126 260,915 253,395 29,120,419 29,935,128 30,170,052 29,560,681 27,699,811 25,154 25,567 27,684 26,629 31.072 29,145,573 29,960,695 30,197,736 29.587,310 27,730,913 31,563,231 32,204,191 32,703,501 32,021,737 29,730,774 51.2 % 52.3 % 52.0 % 54.3 % 53.7 % 34.7 % 33.2 % 35.6 % 31.8 % 36.4% 10,677 10,725 10,713 10,566 10,779 8,995 9,101 9,242 9,023 8,892 7,042 7,034 7,159 6,736 6,316 12,155 15,494 16,526 14,545 13,154 5,156 5.261 5,443 5,233 5,312 1,746 1,739 1,732 1,724 1,683 $ 716,308 $ 604,521 $ 515,013 $ 415,157 $ 220,364 371,027 302,281 228,577 179,970 86,463 241,437 240,711 164,762 129,665 46,971 350 290 282 274 94 1,329,122 1,147,803 908,634 725,066 353,892 1,068 1,075 925 790 481 1,330,190 1,148,878 909,559 725,856 354,373 595 732 595 994 535 $1,330,785 $1,149,610 $ 910,154 $ 726,850 $ 354,908 994,617 993,527 1,023,027 970,462 977,994 581,739 555,806 506,550 456,902 459,074 465,835 514,136 447,474 410,605 407,840 331 334 335 350 428 2,042,552 2,063,803 1,977,386 1,838,319 1,845,336 2,090 2,430 2,322 2,328 3,088 2,044,642 2,066,233 1,979,708 1,840,647 1,848,424 2,148,839 2,145,325 2,077,653 1,931,549 1,913,826 19,139 19,010 18,439 18,639 19,324 16,201 14,812 14,444 13,349 11,763 4,820 5,082 5,256 4,677 4,629 853 857 875 833 872 1,384 1,378 1,370 1,357 1,352 45

Financial Statistics (000omitted where applicable) 1984 1983 Condensed Statements ofIncome (a) Amount Amount Operating Revenues Electric $2,816,211 67 $2,570,457 65 Gas 1,379.883 33 1,392,475 35 Total Operating Revenues 1,196,121 100 3, % 2,932 100 Operating Expenses Operation Fuel for Electric Generation and Interchanged Power-net 872,805 21 868,977 22 Gas Purchased and Materials for Gas Produced 822,583 20 858,018 22 Other 527,371 13 503,568 13 Maintenance 269,978 6 238,766 6 Depreciation and Amortization of Utility Plant 211,188 5 201,787 5 Amortization of Property Losses 58,975 1 49,040 1 Taxes Federallncome Taxes 255,301 6 191,033 5 NewJersey Gross Receipts Taxes 529,651 13 513,760 13 Other 50,132 1 44,033 1 TotalOperating Expenses 3,597,986 86 3.468,982 88 Operatingincome Electric 527,625 12 421,364 10 Gas 70,513 2 72,586 2 Total OperatingIncome 598.13S 11 493,950 12 Allowance for Funds Used During Construction (Debt and Equity) 158,792 1 128,592 3 Other Income-net 12,866 12,605 1 Interest Charges (279,7ti7) (6) (245,368) (6) Income before Extraordinary items 190,029 12 389,779 10 Extraordinary Items, net ofincome tax: Unrecoverable costs of Atlantic Project Gain on sale of'lYansport of NewJersey Net Extraordinary items Net income 190,029 12 389,779 10 Preferred and Preference Stock Dividends 60,221 2 58,234 2 Earnings Available for Common Stock $ 129,808 to S 331,545 8 Shares of Common Stock Outstanding End of Year 112,561 102,858 Average for Year 108,913 97,467 Earmngs per average share of Common Stock $3,95 $3,40 Dividends Paid per Share $2,70 $2.62 Payout llatio 68 % 77% Itate oflleturn on Average Common Equity (c) 11,13 % 12,66 % llatio of Earnings to Fixed Charges llefore income Taxes (d) 3.61 3.33 llook Value per Common Share (e) $27,17 $26.36 Utility Plant (f) $9,870,129 $9,017,951 Accumulated Depreciation and Amortization (f) $2,320,110 $2,214.135 Total Asseis(0 $9,660,611 $8,626,346 Capitalization Mortgage Bonds $2,877,518 11 $2,452,954 39 Debenture Bonds 225,825 3 231,945 4 Other Long-Term Debt Total Long-Term Debt 3,103,313 II 2,684,899 43 Other Long-Term Obligations (f) 122,917 2 119,815 2 Preferred Stock with Mandatory Redemption 137,750 2 139,500 2 Preferred Stock without Mandatory Redemption 551,991 8 554,994 9 $1,40 Dividend Preference Common Stock and Common Stock 2,005,923 28 1,792,340 29 Premium on CapitalStock 557 557 Paid la Capital 26,185 26,185 Retained Eamings 1,098,219 Ifi 963.617 15 Total Common Equity 3,130,881 il 2.782.699 44 TotalCapitalization $7,089,918 100 $6.281,907 100 (a) See Summary of Significant Accounting Polices Notes to Finan-share. cial Statements, and Management's thscussion and Analysis of Finan-(c) Italance avadable for $1.40 thvidend Preference Common Stock cial Conditxm and Results of Operations. and Common Stock dnided by the thirteen-month average of Com-(b) Excludes the net extraordmary gam of $6,316,000 or $.09 per nxm Equity

1982 1981 1980 1979 1974 Amount Amount Amount Amount Amount $2,543,191 66 $2.322,042 67 $2,683,900 70 $1,689,857 70 $1,100,965 76 1,330,785 34 1,149,610 33 910,154 30 726,850 30 354,908 24 3,873.976 100 3.471,652 100 2,994,054 100 2,416,707 100 1,455,873 100 t 959,382 25 1,059,539 31 866,802 29 620,516 26 458,572 32 821,479 21 692,319 20 513,988 17 384,759 16 144,020 10 452,115 12 385,149 11 322,220 11 287,086 12 189,199 13 220,456 6 192,768 6 169,813 6 149,027 6 91,467 6 192,860 5 178,532 5 169,987 6 162,989 7 107,220 8 43,345 1 15,362 1 11,024 303 299 176,639 4 118,737 3 131,178 4 123,965 5 21,061 1 514,266 13 462,095 13 400,040 13 322,013 13 193,896 13 38,975 1 12,884 31,850 1 42,398 2 19,680 1 3,419,517 88 3,117,385 90 2,616,902 87 2,093,086 87 1,225,414 84 383,213 10 288,087 8 307,372 10 269,443 11 187,593 13 71,246 2 66,180 2 69,780 3 54,178 2 42,866 3 458,459 12 354,267 10 377,152 13 323,621 13 230,459 16 91,427 2 95,679 3 77,552 2 56,593 3 56,027 4 17,578 1 15,780 10,259 6,263 (2,037) (220.637) (6) (201,589) (6) (189,562) (6) (153,148) (6) (130,609) (9) 312,827 9 261,137 7 275,401 9 233,329 10 153,&l0 11 (13,219) 19,535 6,316 342,827 9 261,137 7 281,717 9 233,329 10 153,840 11 53,865 2 51,538 1 46.311 1 46,799 2 31,813 3 $ 288,962 7 $ 212,599 6 $ 235,376 8 $ 186,530 8 $ 122,027 8 94,845 86,089 76,615 68,914 52,531 89,233 80, % 2 73,069 65,409 51,918 $3.24 $2.63 $3.13 (b) $2.85 $2.35 $2.53 $2.44 $2.29 $2.20 $1.72 78 % 93 % 73% (b) 77% 73 % 12.22 % 9.79 % 11.63 % 10.46% 9.68 % 3.32 2.87 3.14 3.36 ' 2.33 $25.90 $25.66 $26.38 $26.26 $24.25 $8,165,130 $7,385,315 $6,945,426 $6,325,033 $1.636,344 $2,416,372 $1,877,815 $1,705,912 $1,589,049 $ 9ti5,160 $7,968,861 $7,338,496 $6,787,125 $6,088.766 $4,331,261 $2.341,142 40 $2,140,835 40 $2,411,556 41 $1,940,513 41 $1,422,525 38 238,610 4 269,268 5 276,590 5 314,726 7 389,640 10 L 720 1,200 1,680 153,600 4 2.579.782 44 2,410,823 45 2,319,346 46 2,256,919 48 1,965,765 52 118,419 2 60,086 1 61,073 1 111,250 2 77,913 2 29,750 1 31,500 554,991 9 551,994 10 551,994 11 551,994 12 434,994 12 1,610,879 27 1,423,739 26 1,252,103 25 1,106,824 23 797,386 21 l 557 557 557 557 550 26,185 1 26,143 1 26,093 26,065 1 26,065 1 l 888,262 15 827,497 15 813,181 16 747,076 16 515,267 14 2,525,883 43 2,277,936 42 2,091,934 41 1,880,522 40 1,339,268 36 $5,890,328 100 $5,381,752 100 $5,057,097 100 $4,723,935 100 $3,740,027 100 t l (d) Net inenme plus hrome Taxes, Deferred Income Taxes, Invest. (e) Total Conmxm Equity dmded by yearend Comnxm Stack shares ment Tax Credits and Ftxed Charges dmded by Fixed Charges. Fixed plus double the $1. 40 Dink nd Prefererne Comnum Stock shares. l Charges include Interrst on Long-Term and Short. Term Debt Other (0 Years 19*)-1983 restated to cimkrm to current classificatuist l Interest Expense and, startmg in 19No, an mterest factor in rentals. i i i

Officers Robert H. Franklin Vice President-Public Relations Harold W. Sonn Frank R Librizzi Chairman of the !!aard, President and Chief Executive Officer Vice President - Production William E. Scott Charles E. Maginn, Jr. l Senior Executive Vice President Vice President -Iluman Resources Everett L. Morris Wallace A.Maginn Executive Vice President-Finance Vice President and Treasurer Frederick W.Schneider Winthrop E. Mange, Jr. Executive Vice President - Operations Vice President-Corporate Senices l Stephen A. Mallard Thomas J. Martin Senior Vice President - 11anning and Research and President of Vice President - Engineering and Construction PSEAG Research Corporation Parker C. Peterman James B. Randel, Jr. Vice President and Comptrouer Senior Vice President of the Company and President of Energy Louis L Rizzi Devekspment L.orporation Vice President - Customer and Marketing Services Fredrick R. DeSanti William Saller

wmor \\ ice President - Customer Operations Vice President-Govemmental Affairs Richard M. Eckert Robert J.Selbach Senior hce President - Nuclear and Engm.eenng Vice President - Transmission and Distribution Robert W. Lockwood R. Edwin Selover Senior bce President-Admu..ustration and Pres. dent of i

Vice President and GeneralCounsel Mulberry Street L rban Renewal Corporation Robert S. Smith Donald A. Anderson Vice President and Secretary Vice President - Information Systems Lawrence R. Codey Rudolph D. Stys Vice President -System 11anning Vice President and Corporate Rate Counsel Richard A. Uderitz Robert M. Crockett Vice President-Nuclear Vice President - Fuel Supply and President of Energy Pipehne Corporation and Energy Te rmmal Services Corporation l i . ; ~ p, m m~. The Management 't II.m.ty : ' ) p. N'. % Councilassists and ...u.- $MsA, '..[ 1 ' ~ i ]M, >.j. ---- ,z g f;.g.g'- $ f- ,..;m - 3. advises the Chief .s I;g)g; s . % b... ' ' g;. ., ~. y t~.< .? Executive Officer in the 1 development and e:,. s j .9 yaj. cT 3,'_ 'y; -~,. '.L implementation of gg q.

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Directors James C. Pitney Partner in the law firm of Pitney, liardin, Kipp & Szuch, Newark resid nt Chi x u Officer, United llospitals Medical m Center, Newark, NewJersey hkmber ofFinance Committee andNominating Committee. Kenneth C. Rogers President. Stevens Institute of Technology Iloboken New T.J. Dermot Dunphy Jersey President. Chief Executive Officer and director, Sealed Air Chairman ofNominating Committee and member oforganization Corporation (manufactures protective packaging products and andCompensation Committee. systems), Saddle Brook, NewJersey Ahmber o/ Nominating Committer and organization and Verdell L. Roundtree Compensation Commsttee. Vice President. National Programs. United Negro College Fund. New York. New York. ^" I r sid dC Ex tive fficer and director, First National State Bancorporation. Chauman of the Board and director, First William E. Scott Fidelity Bank, National Association. NewJersey both of Newark. Senior Executive Vice President of the Company NewJersey Chairman ofFinance Committee and member of Executwe Skmber ofFinance Committee and Organization and Committa. Compensation Committee. gag,7, g, gm;gg Irwin Lerner FormerChairmanof the Boardof the Company President Chief ExecutiveOfficeranddirector,lloffmann-3kmber ofExecutive Committee and Finance Committa. La Rcd 2 Inc. (manufactures pharmaceuticals and fine chemicals and provides diagnostic products and services), Nutley New Harold W. Sonn Jersey Chauman of the Board. President and Chief Executive Officer of Shmter ofExecutive Committee and Organization and the Company Compensation Committee. Chairman ofExecutive Committee and member ofFinance C"*""""' William E. Marfuggi Chairman of the Board and director, Victory Optical Robert V. Van Fossan Manufacturing Company (manufactures ophthahnic frames) and Chauman of the Board. Chief Executive Officer and director, The Chairman of the Board and director, Plaza Sunglasses, Inc. Mutual Benefit Life Insurance Company Newark, NewJersey (manufactures sunglasses), both of Newark. New Jersey Chairman ofOrganization and Compensation Committee and Ahmber ofAudit Committee and Finance Committee. member ofExeutive Committee and Finance Committa. Marilyn M.Pfaltz Josh S.Weston Partner of P and R Associates (public relations and publicity President, Automatic Data Processing, Roseland, NewJersey specnalists) Summit, NewJersey Ahmber ofA udit Committu and Orgamzation and Compensation Ahmber ofA udit Committu and Nominating Committee. Commsttee. Stock Symbol: PEG Common Stock The Company's Common Stock and $1.40 Dividend 1984 1983 Preference Common Stock are traded on the New Div dend 68e* 66e** York Stock Exchange and the Philadelphia Stock Ex-Price change. The Company's Common Stock was listed First Quarter 24 % -20 % 24 % -22 % and trading began February 3,1984 on the London SecondQuartcr 23 -20 % 24 % -21 % Stock Exchange. Third Quartcr 25 % -21 % 24 -21 % The table opposite shows the quarterly dividends Fourth Quarter 27 % -24 % 26 % -22 paid for the periods indicated and the high and low

• 66e First Quarter only NYSE Composite prices of such stocks.
  • 64e First Quarter only

$1.40 Dividend Preference Common Stock 1984 1983 Dividend 35e 35e Price First Quarter 12 -11 % 12 % -11 % SecondQuartcr 11 % -10 % 13 -11 % Third Quartcr 11 % -10 % 12 % -11 % Fourth Quarter 13%-10W 13 -11 %

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